Income Taxes

3 Months Ended

Mar. 27, 2020

Income Tax Disclosure [Abstract]

Income Taxes

8. Income Taxes

The Company’s effective tax rate (“ETR”) is calculated quarterly based upon current assumptions relating to the full year’s estimated operating results and various tax-related items. The 2020 and 2019 first quarter ETR was 39.0% and 33.3%, respectively.

The ETR was higher in the 2020 first quarter as compared with the corresponding 2019 period primarily due to the full valuation allowance against the U.S. deferred tax assets, and taxable income in the Company’s European operations where the ETR is generally higher than that of the United States.

The Company elected to use the incremental cash tax savings approach when considering GILTI in its assessment of the realizability of its U.S. deferred tax assets. Based upon the Company’s recent history of U.S. losses for tax purposes, including a cumulative three-year loss in the U.S. as of March 27, 2020, and uncertain profitability in future years, management has determined that it is likely that it will not realize the U.S. deferred tax assets, and a full valuation allowance against these assets continues to be recorded.

 The Company has not recorded a U.S. deferred tax liability for the excess book basis over the tax basis of its investments in foreign subsidiaries as these amounts continue to be indefinitely reinvested in foreign operations. The Company does not anticipate repatriating any funds from its foreign operations, as they are needed in the local operations to meet working capital demands.