XML 39 R24.htm IDEA: XBRL DOCUMENT v3.25.0.1
Income Taxes
 12 Months Ended
Dec. 29, 2024
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES
 
Income before income taxes consisted of the following:
 
 Fiscal Year
 202420232022
 (in thousands)
U.S. operations$37,060 $3,611 $11,758 
Foreign operations76,494 60,043 30,159 
Income before income taxes
$113,554 $63,654 $41,917 

Provisions for federal, foreign and state income taxes in the consolidated statements of operations consisted of the following components:

 Fiscal Year
 202420232022
 (in thousands)
Current expense:
   
Federal$7,599 $5,523 $1,624 
Foreign20,982 18,330 20,903 
State2,481 2,167 1,307 
Current expense
31,062 26,020 23,834 
 
Deferred (benefit) expense:
   
Federal(3,279)(4,810)346 
Foreign(841)(1,212)(2,053)
State(334)(861)230 
Deferred benefit
(4,454)(6,883)(1,477)
 
Total income tax expense
$26,608 $19,137 $22,357 
 
The Company’s effective tax rate was 23.4%, 30.1% and 53.3% for fiscal years 2024, 2023 and 2022, respectively. The following summary reconciles income taxes at the U.S. federal statutory rate of 21% applicable for all periods presented to the Company’s actual income tax expense:
 
 Fiscal Year
 202420232022
 (in thousands)
Income taxes at U.S. federal statutory rate$23,846 $13,367 $8,803 
Increase (decrease) in taxes resulting from:   
State income taxes, net of federal tax effect2,319 (432)817 
Non-deductible business expenses940 747 237 
Non-deductible employee compensation1,587 1,681 1,678 
Tax effects of Company-owned life insurance(576)(587)612 
Tax effects of undistributed earnings from foreign subsidiaries not deemed to be indefinitely reinvested443 779 1,123 
Foreign and U.S. tax effects attributable to foreign operations4,532 1,537 3,528 
Expiring tax attributes
4,125 3,780 — 
Valuation allowance effect(7,330)(879)2,898 
Research and development tax credits(703)(820)(917)
Goodwill impairment— — 6,171 
Foreign tax rate change related to UK pension
(2,493)— — 
Unrecognized tax benefits(135)(79)(2,463)
Other53 43 (130)
Income tax expense
$26,608 $19,137 $22,357 

On August 16, 2022, the Inflation Reduction Act of 2022 (“Inflation Reduction Act”) was signed into law, with tax provisions primarily focused on implementing a 15% minimum tax on global adjusted financial statement income (“AFSI”) for corporations with average AFSI exceeding $1 billion over a three-year period, a 1% excise tax on share repurchases and various climate and clean energy tax incentives. The Inflation Reduction Act did not have a material impact on the Company’s financial statements for the year ended December 29, 2024.

On December 20, 2021, the Organization for Economic Co-operation and Development (“OECD”) published Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large corporations at a minimum rate of 15%. The OECD has since issued administrative guidance providing transition and safe harbor rules around the implementation of the Pillar Two global minimum tax. Many non-U.S. tax jurisdictions have either recently enacted legislation to adopt certain components of the Pillar Two Model Rules beginning in 2024 (including the European Union Member States) with the adoption of additional components in later years or announced their plans to enact legislation in future years. For fiscal year 2024, we expect to meet the Transitional Country-by-Country (CbCR) Safe Harbor rules for most if not all jurisdictions and do not expect these provisions to have a material impact on the Company’s financial statements. We will continue to closely monitor ongoing developments and evaluate any potential impact on future periods.

Deferred income taxes for the years ended December 29, 2024 and December 31, 2023, reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
The temporary differences that give rise to significant portions of the deferred tax assets and liabilities are as follows:
 
 End of Fiscal Year
 20242023
 (in thousands)
Deferred tax assets(1)
Lease liability$22,329 $25,164 
Net operating loss and interest carryforwards7,964 9,587 
Federal tax credit carryforwards4,036 7,876 
Deferred compensation16,521 16,517 
Pensions
4,982 6,304 
Property and equipment
438 554 
Inventory3,121 6,657 
Prepaids, accruals and reserves9,235 8,147 
Capitalized costs10,327 9,442 
Deferred tax asset, gross78,953 90,248 
Valuation allowance(10,028)(17,357)
Deferred tax asset, net$68,925 $72,891 
 
Deferred tax liabilities(1)
Property and equipment$24,899 $25,216 
Inventory
4,014 3,616 
Intangible assets20,970 24,411 
Lease asset20,887 23,868 
Pensions3,866 6,309 
Foreign currency556 686 
Foreign withholding and U.S. state taxes on unremitted earnings773 725 
Other
158 171 
Deferred tax liabilities76,123 85,002 
 
Net deferred tax liabilities$7,198 $12,111 

(1) In prior year, certain deferred tax asset and deferred tax liability balances by jurisdiction were presented as a net position. In the current period presentation, deferred tax assets and deferred tax liabilities are presented gross. Amounts above for 2023 have been recast to conform to the current period presentation. These reclassifications change the previously disclosed gross deferred tax asset and gross deferred tax liability positions. However, the net deferred tax liability position presented in the prior year remains unchanged.

Management believes, based on the Company’s history of taxable income and expectations for the future, that it is more likely than not that future taxable income will be sufficient to fully utilize the federal deferred tax assets at December 29, 2024.

As of December 29, 2024, the Company has approximately $4.0 million of foreign tax credit carryforwards with expiration dates through 2033. A full valuation allowance has been provided as the Company does not expect to utilize these foreign tax credits before the expiration dates. As of December 29, 2024, the Company has approximately $190.1 million in state net operating loss carryforwards relating to continuing operations with expiration dates through 2044 and has provided a valuation allowance against $127.6 million of such losses, which the Company does not expect to utilize. In addition, as of December 29, 2024, the Company has approximately $11.0 million in state net operating loss carryforwards relating to discontinued operations against which a full valuation allowance has been provided.

During fiscal year 2024, the Company had approximately $4.1 million in tax attributes related to foreign tax credit carryovers that expired. The expiring foreign tax credit carryover attributes had a full valuation allowance, as a result, the expiration of these tax attributed did not have an impact on the Company’s effective tax rate for fiscal year 2024.
As of December 29, 2024, and December 31, 2023, non-current deferred tax assets were reduced by approximately $2.6 million and $2.8 million of unrecognized tax benefits, respectively.
 
Historically, the Company has not provided for U.S. income taxes and foreign withholding taxes on the undistributed accumulated earnings of its foreign subsidiaries, with the exception of its Canada and Thailand subsidiaries and a specific portion of the undistributed earnings of foreign subsidiaries outside of Canada and Thailand, because such earnings were deemed to be permanently reinvested. The Company provided for U.S. income taxes and foreign withholding taxes on the undistributed earnings that were not permanently reinvested at December 29, 2024 and December 31, 2023.

Although the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) created a dividends received deduction that generally eliminates additional U.S. federal income taxes on dividends from our foreign subsidiaries, the Company continues to assert that all of its undistributed earnings in its non-U.S. subsidiaries, excluding undistributed earnings for which U.S. income taxes and foreign withholding taxes have been provided, are indefinitely reinvested outside of the U.S. The Company expects that domestic cash resources will be sufficient to fund its domestic operations and cash commitments in the future. In the event the Company determines not to continue to assert that all or part of its undistributed earnings in its non-U.S. subsidiaries are permanently reinvested, an actual repatriation of earnings from its non-U.S. subsidiaries could still be subject to additional foreign withholding and U.S. state taxes, the determination of which is not practicable.

The Company’s federal income tax returns are subject to examination for the years 2021 to the present. The Company files returns in numerous state and local jurisdictions and in general it is subject to examination by the state tax authorities for the years 2019 to the present. The Company files returns in numerous foreign jurisdictions and in general it is subject to examination by the foreign tax authorities for the years 2013 to the present.

In 2023, the Company filed requests with both the Competent Authority in the Netherlands and in the U.K. to initiate a MAP for tax years 2018 through 2020 related to the double taxation arising from Her Majesty’s Revenue & Customs (“HMRC”) adjusting the interest rate applied in the intra-group financing arrangement between the Company’s subsidiary in the U.K. and another in the Netherlands. During 2023, the MAP was concluded, and the Company recognized the related adjustments in its 2023 financial results. The recognition of the adjustments did not have a material impact on the Company’s effective tax rate or its financial position.

As of December 29, 2024, and December 31, 2023, the Company had $4.8 million and $4.9 million, respectively, of unrecognized tax benefits, including accrued interest and penalties. While it is reasonably possible that some of the unrecognized tax benefits will be recognized within the next 12 months, the Company does not expect the recognition of such amounts will have a material impact on the Company’s financial results.

If the Company were to prevail on all uncertain tax positions, there would be a favorable impact on the Company’s effective tax rate of approximately $4.8 million in future periods. If the unrecognized tax positions are not favorably settled, $2.2 million of the total amount of unrecognized tax benefits would require the use of cash in future periods. The timing of the ultimate resolution of the Company’s tax matters and the payment and receipt of related cash is dependent on a number of factors, many of which are outside the Company’s control.

The Company recognizes accrued interest and income tax penalties related to unrecognized tax benefits as a component of income tax expense. As of December 29, 2024 and December 31, 2023, the Company had accrued interest and penalties of $0.4 million for both periods, which are included in the total unrecognized tax benefit noted above.
 
A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits is as follows:
 
 Fiscal Year
 202420232022
 (in thousands)
Balance at beginning of year(1)
$4,532 $5,352 $7,360 
Increases related to tax positions taken during the current year316 320 342 
Increases related to tax positions taken during the prior years— 19 109 
Decreases related to tax positions taken during the prior years(208)(30)(233)
Decreases related to lapse of applicable statute of limitations(289)(1,142)(2,225)
Changes due to foreign currency translation— 13 (1)
Balance at end of year(1)
$4,351 $4,532 $5,352 
(1) In prior years, interest and penalties were included in the reconciliation of the beginning and ending amounts of gross unrecognized tax benefits. In the current period, interest and penalties are excluded from the reconciliation of the beginning and ending amounts of gross unrecognized tax benefits. Amounts for fiscal years 2023 and 2022 above have been recast to conform to the current period presentation. These reclassifications to the reconciliation of the beginning and ending amounts of gross unrecognized tax benefits do not impact the accrual as recorded in the consolidated balance sheets.