INCOME TAXES

3 Months Ended

Mar. 26, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The Company recorded an income tax benefit of $8.8 million, a 275.5% effective tax rate, for the three months ended March 26, 2023 compared to income tax expense of $75.2 million, a 21.1% effective tax rate, for the three months ended March 27, 2022. The decrease in income tax expense in 2023 resulted primarily from the decrease in profit before income taxes.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carry back and carry forward periods), projected future taxable income and tax-planning strategies in making this assessment. As of March 26, 2023, the Company did not believe it had sufficient positive evidence to conclude that realization of a portion of its foreign net deferred tax assets are more likely than not to be realized.

For the three months ended March 26, 2023 and March 27, 2022, there is a tax effect of $(0.7) million and $(2.3) million, respectively, reflected in other comprehensive income.

For the three months ended March 26, 2023 and March 27, 2022, there are immaterial tax effects reflected in income tax expense due to excess tax windfalls and shortfalls related to stock-based compensation.

The Company and its subsidiaries file a variety of consolidated and standalone income tax returns in various jurisdictions. In the normal course of business, our income tax filings are subject to review by various taxing authorities. In general, tax returns filed by the Company and its subsidiaries for years prior to 2011 are no longer subject to examination by tax authorities.

As of July 27, 2020, JBS owns in excess of 80% of Pilgrim’s. JBS has a federal tax election to file a consolidated tax return with subsidiaries in which it holds an ownership of at least 80%.