Income Taxes

12 Months Ended

Jan. 02, 2021

U.S. and foreign income from operations before income taxes are as follows (in thousands):


	January 2, 2021		December 28, 2019		December 29, 2018
United States	$	265,950	$	260,867	$	82,146
Foreign	87,669		119,567		35,829
Income from operations before income taxes	$	353,619	$	380,434	$	117,975

Income tax expense attributable to income from operations before income taxes consists of the following (in thousands):


	January 2, 2021		December 28, 2019		December 29, 2018
Current:
Federal	$	(72)	$	(162)	$	(330)
State	1,595		341		(3)
Foreign	36,453		37,117		27,935
Total current	37,976		37,296		27,602
Deferred:
Federal	20,827		13,465		4,803
State	840		11,804		(2,216)
Foreign	(6,354)		(3,098)		(18,158)
Total deferred	15,313		22,171		(15,571)
	$	53,289	$	59,467	$	12,031

Income tax expense for the years ended January 2, 2021, December 28, 2019 and December 29, 2018, differed from the amount computed by applying the statutory U.S. federal income tax rate to income from continuing operations before income taxes as a result of the following (in thousands):


	January 2, 2021		December 28, 2019		December 29, 2018
Computed "expected" tax expense	$	74,260	$	79,891	$	24,775

Change in valuation allowance	(522)		38		9,700
Non-deductible compensation expenses	4,723		3,950		2,305
Deferred tax on unremitted foreign earnings	(548)		1,505		(31)
Sub-Part F income	45		1,122		3,361
Foreign rate differential	7,077		7,246		658
Change in uncertain tax positions	(4,650)		1,736		3,419
State income taxes, net of federal benefit	2,702		5,686		(1,813)
Biofuel tax incentives	(31,725)		(46,007)		(18,489)
Change in tax law	3,699		1,352		(10,017)

Other, net	(1,772)		2,948		(1,837)
	$	53,289	$	59,467	$	12,031

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at January 2, 2021 and December 28, 2019 are presented below (in thousands):


	January 2, 2021		December 28, 2019
Deferred tax assets:
Loss contingency reserves	$	9,805	$	11,193
Employee benefits	13,027		12,236
Pension liability	13,053		13,049
Intangible assets amortization, including taxable goodwill	1,474		1,485
Interest expense carryforwards	402		12,361
Tax loss carryforwards	68,730		80,195
Tax credit carryforwards	6,610		5,653
Operating lease liabilities	38,930		33,549
Inventory	5,935		5,185
Accrued liabilities and other	12,925		13,677
Total gross deferred tax assets	170,891		188,583
Less valuation allowance	(24,228)		(24,759)
Net deferred tax assets	146,663		163,824

Deferred tax liabilities:
Intangible assets amortization, including taxable goodwill	(169,277)		(157,332)
Property, plant and equipment depreciation	(133,712)		(144,911)
Investment in DGD Joint Venture	(52,238)		(54,287)
Operating lease assets	(38,049)		(32,233)
Tax on unremitted foreign earnings	(10,234)		(6,139)
Other	(2,685)		(2,459)
Total gross deferred tax liabilities	(406,195)		(397,361)
Net deferred tax liability	$	(259,532)	$	(233,537)

Amounts reported on Consolidated Balance Sheets:
Non-current deferred tax asset	$	16,676	$	14,394
Non-current deferred tax liability	(276,208)		(247,931)
Net deferred tax liability	$	(259,532)	$	(233,537)

At January 2, 2021, the Company had net operating loss carryforwards for federal income tax purposes of approximately $56.7 million which can be carried forward indefinitely. The Company had a capital loss carry forward for federal income tax purposes of approximately $21.1 million, which expires in 2023 and can only be used in future years in which the Company recognizes capital gains. The Company had approximately $274.4 million of net operating loss carryforwards for state income tax purposes, $257.9 million of which expire in 2021 through 2040 and $16.5 million of which can be carried forward indefinitely. The Company had foreign net operating loss carryforwards of about $144.0 million, $57.8 million of which expire in 2021 through 2037 and $86.2 million of which can be carried forward indefinitely. Also at January 2, 2021, the Company had U.S. federal and state tax credit carryforwards of approximately $1.3 million, and tax credit carryforwards with respect to its foreign tax jurisdictions of approximately $5.3 million. As of January 2, 2021, the Company had a valuation allowance of $7.1 million due to uncertainties in respect to its ability to utilize its U.S. (federal and state) net operating loss, capital loss and tax credit carryforwards. The Company also had a valuation allowance of $17.1 million due to uncertainties in its ability to utilize foreign net operating loss carryforwards, tax credit carryforwards and other foreign deferred tax assets.

At January 2, 2021, the Company had unrecognized tax benefits of approximately $5.0 million. All of the unrecognized tax benefits would favorably impact the Company's effective tax rate if recognized. The Company believes it is reasonably possible that unrecognized tax benefits could change by $0.2 million in the next twelve months. The possible change in unrecognized tax benefits relates to expiration of certain statutes of limitation. The Company recognizes accrued interest and penalties, as appropriate, related to unrecognized tax benefits as a

component of income tax expense. As of January 2, 2021, interest and penalties related to unrecognized tax benefits were $0.4 million.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows (in thousands):


	January 2, 2021		December 28, 2019
Balance at beginning of Year	$	7,810	$	5,777
Change in tax positions related to current year	9		3,887
Change in tax positions related to prior years	(2,780)		(233)
Change in tax positions due to settlement with tax authorities	—		(1,354)
Expiration of the Statute of Limitations	—		(267)
Balance at end of year	$	5,039	$	7,810

In fiscal 2020, the Company's major taxing jurisdictions are U.S. (federal and state), Belgium, Brazil, Canada, China, France, Germany and the Netherlands. The Company is subject to regular examination by various tax authorities. Although the final outcome of these examinations is not yet determinable, the Company does not anticipate that any of the examinations will have a significant impact on the Company's results of operations or financial position. The statute of limitations for the Company's major jurisdictions is open for varying periods, but is generally closed through the 2013 tax year.

The Company expects to have access to its offshore earnings with minimal to no additional U.S. tax impact. Therefore, the Company does not consider these earnings to be permanently reinvested offshore. As of January 2, 2021, a deferred tax liability of approximately $10.2 million has been recorded for any incremental taxes, including foreign withholding taxes, that are estimated to be incurred when those earnings are distributed to the U.S. in future years.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was enacted in response to the COVID-19 pandemic. The US Congress approved an additional relief package in December 2020 that extended and/or enhanced certain provisions of the CARES Act as well as certain sunsetting corporate tax provisions. In addition, governments around the world have enacted or implemented various forms of tax relief measures in response to the economic conditions in the wake of COVID-19. These COVID-19 tax relief measures have limited applicability and no material impact to the Company. The Company will continue to monitor legislative and regulatory developments related to COVID-19 tax relief.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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