Income Taxes

3 Months Ended

Apr. 03, 2022

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

The Company determines its provision for income taxes for interim periods using an estimate of its annual effective tax rate and records any changes affecting the estimated annual effective tax rate in the interim period in which the change occurs, including discrete tax items.

During the three months ended April 3, 2022, the Company recorded a total income tax provision of $7.1 million on pre-tax income of $20.4 million resulting in an effective tax rate of 34.8%, as compared to a total income tax provision of $2.0 million on pre-tax income of $8.9 million resulting in an effective tax rate of 22.0% during the three months ended April 4, 2021. The increase in the effective tax rate for the period ended April 3, 2022 as compared to the period ended April 4, 2021 was primarily due to a non-recurring favorable change to unrecognized tax benefits in the period ended April 4, 2021, unfavorable changes related to company-owned life insurance, an increase in non-deductible executive compensation, and non-deductible charges related to the closure of the Company’s manufacturing facility in Thailand in the first quarter of 2022.

In the first three months of 2022, the Company increased its liability for unrecognized tax benefits by $0.3 million. As of April 3, 2022, the Company had accrued approximately $8.5 million for unrecognized tax benefits. In accordance with applicable accounting standards, the Company’s deferred tax asset as of April 3, 2022 reflects a reduction for $2.8 million of these unrecognized tax benefits.

Unrecognized tax benefits are reviewed on an ongoing basis and are adjusted for changing facts and circumstances, including the progress of tax audits and the closing of statutes of limitations. Based on information currently available, it is reasonably possible that approximately $2.6 million of unrecognized tax benefits may be recognized within the next 12 months due to a lapse of statute of limitations.