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Income Taxes
6 Months Ended
Jul. 02, 2016
Income Tax Disclosure [Abstract]  
Income Taxes
INCOME TAXES
As of July 2, 2016, we recorded gross unrecognized tax benefits for uncertain tax positions totaling $4.5 million and related interest and penalties of $1.2 million. Of the gross unrecognized benefits, $1.4 million are recorded net with the tax attributes that would be offset. The remainder are recorded in other noncurrent liabilities in the Condensed Consolidated Balance Sheets. Of this total amount, $3.6 million, which includes interest and penalties, would affect the effective tax rate if subsequently recognized. As of January 2, 2016, we recorded gross unrecognized tax benefits totaling $2.7 million and related interest and penalties of $0.9 million in other noncurrent liabilities on the Condensed Consolidated Balance Sheets. We expect certain income tax audits will be settled, positions will be resolved through administrative procedures or statutes of limitations will expire for various tax authorities during the next twelve months, resulting in a potential $0.7 million reduction of the unrecognized tax benefit amount. We classify interest and penalties associated with uncertain tax positions within income tax expense.

Our effective tax rate increased from 35.9% for the second quarter of 2015 to 37.6% for the second quarter of 2016. The increase in our effective income tax rate was due primarily to the transaction costs incurred in 2016 which are not deductible for tax purposes. Our effective tax rate decreased from 35.9% expense for the first six months of 2015 to 35.4% benefit for the first six months of 2016. The difference in the effective income tax rate for the first six months of 2016 compared to the first six months of 2015 was due primarily to the transaction costs incurred in the first six months of 2016 which are not deductible for tax purposes, as well as discrete items recognized in the second quarters of 2016.

We recorded interim tax expense for the second quarter of 2016 using a forecasted annual effective tax rate applied to ordinary income. Certain non-deductible transaction costs and other items related to the acquisition discussed in Note 3 have been included in the forecasted effective tax rate. The effects of changes in anticipated rates applicable to existing deferred tax liabilities have been recorded discretely in the first and second quarter of 2016.