Income Taxes

6 Months Ended

Jul. 02, 2021

INCOME TAXES


	For the Three Months Ended				For the Six Months Ended
	July 2, 2021		July 3, 2020		July 2, 2021		July 3, 2020

Effective Income Tax Rate from continuing operations	31.7	%	92.6	%	22.3	%	77.0	%

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 variation in the effective tax rate for the current periods compared to the corresponding periods in the prior year was primarily attributable to positive earnings in the current period versus certain discrete provision to return benefits and the relatively small pretax loss in the prior periods. Additionally, in the three-month period ended July 2, 2021, the effective tax rate was impacted by discrete charges related to the sale of the Company's UK Composites business.

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.

18. INCOME TAXES (CONTINUED)

The Company has assessed both positive and negative evidence to estimate whether sufficient future taxable income will be generated to utilize the $32.4 million of deferred tax assets recorded as of July 2, 2021. Through the end of the second quarter of 2021, the Company believes it is more likely than not that only $28.8 million of these deferred tax assets will be realized and, as such, has recorded a valuation allowance of $3.6 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.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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