Income Taxes

3 Months Ended

Apr. 02, 2021

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

	For the Three Months Ended
	April 2, 2021		April 3, 2020
Effective Income Tax Rate from continuing operations	2.5	%	52.1	%

The effective income tax rate represents the combined federal, state and foreign tax effects attributable to pretax earnings from continuing operations for the period. The decrease in the effective tax rate from continuing operations for the three-month fiscal period ended April 2, 2021, compared to the corresponding rate in the prior year was primarily caused by a discrete benefit received in the current period related to the sale of the Company's UK Composites business and the positive earnings in the current period versus a loss in the prior period.

A valuation allowance for deferred tax assets, including those associated with net operating loss carryforwards, is recognized when it is more likely than not that some or all of the benefit from the deferred tax asset will not be realized. To assess that likelihood, the Company uses estimates and judgment regarding future taxable income, and considers the tax consequences in the jurisdiction where such taxable income is generated, to determine whether a valuation allowance is required. Such evidence can include current financial position, results of operations, both actual and forecasted, the reversal of deferred tax liabilities, and tax planning strategies, as well as the current and forecasted business economics.

The Company has assessed both positive and negative evidence to estimate whether sufficient future taxable income will be generated to utilize the $35.1 million of deferred tax assets recorded as of April 2, 2021. Through the end of the first quarter of 2021, the Company believes it is more likely than not that only $30.3 million of these deferred tax assets will be realized and, as such, has recorded a valuation allowance of $4.8 million. Going forward, management will continue to assess the available positive and negative evidence to determine whether it is likely sufficient future taxable income will be generated to permit the use of these deferred tax assets. The amount of the deferred tax asset considered realizable could be adjusted if estimates of future taxable income are reduced or increased, or if additional weight is given to subjective evidence such as future expected growth because objective negative evidence in the form of cumulative losses is no longer present.