Income Taxes

9 Months Ended

Sep. 29, 2024

Income Taxes [Abstract]

Income Taxes

Note 6.  Income Taxes

Provision for taxes was $13.7 million and $43.2 million during the three-month and nine-month periods ended September 29, 2024.  Provision (benefit) for taxes was $(3.5) million and $14.5 million during the three-month and nine-month periods ended October 1, 2023.  The effective tax rate was 23.0% for the three-month period ended September 29, 2024, as compared with a tax benefit for the three-month period ended October 1, 2023 due to non-cash impairment of assets in the prior year. The effective tax rate was 28.0% for the nine-month period ended September 29, 2024, as compared with 24.5% for the nine-month period ended October 1, 2023.  The higher tax rate for the current year was primarily due to the expected credit loss in connection with the Debtor-in-Possession Credit Agreement that the Company entered into with its subsidiary Oldco (see Note 13 to the Condensed Consolidated Financial Statements). Such credit loss is not currently deductible as the loans under such agreement are treated as an equity contribution for tax purposes. The current expected credit loss may become fully deductible in a future period. The timing of such deductibility is dependent on developments in the bankruptcy proceedings.

As of September 29, 2024, the Company had approximately $3.0 million of total unrecognized income tax benefits. Included in this amount were a total of $2.2 million of unrecognized income tax benefits that, if recognized, would affect the Company’s effective tax rate.  While it is expected that the amount of unrecognized tax benefits will change in the next 12 months, the Company does not expect the change to have a significant impact on the results of operations or the financial position of the Company.

The Company’s accounting policy is to recognize interest and penalties accrued relating to unrecognized income tax or benefit as part of its provision for income taxes. The Company had a net addition of approximately $0.1 million during the three-month period ended September 29, 2024 and had an accrued balance of $0.7 million of interest and penalties as of September 29, 2024.

The Company operates in multiple taxing jurisdictions, both within and outside the U.S.  In certain situations, a taxing authority may challenge positions that the Company has adopted in its income tax filings. The Company, with a few exceptions (none of which are material), is no longer subject to U.S. federal, state, local, and international income tax examinations by tax authorities for years prior to 2017.

In December 2021, the Organization for Economic Co-operation and Development (“OECD”) released the Pillar Two Model Rules which aim to reform international corporate taxation rules, including the implementation of a global minimum tax rate. The Company began implementation of the Pillar Two Model Rules in the first quarter of 2024. The Company continues to assess the rules in all jurisdictions and does not anticipate a material impact to its financial statements.