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INCOME TAXES | 12 Months Ended
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Dec. 30, 2018
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Income before income taxes by jurisdiction is as follows:
| 2018 |  | 2017 |  | 2016
| (In thousands)
U.S. | $ | 175,805 |  |  | $ | 773,160 |  |  | $ | 532,853 |
Foreign | 156,422 |  |  | 208,906 |  |  | 191,183 |
Total | $ | 332,227 |  |  | $ | 982,066 |  |  | $ | 724,036 |
The components of income tax expense (benefit) are set forth below:
| 2018 |  | 2017 |  | 2016
| (In thousands)
Current: |  |  |
Federal | $ | 8,835 |  |  | $ | 213,146 |  |  | $ | 165,989 |
Foreign | 45,311 |  |  | 65,100 |  |  | 62,753 |
State and other | (1,263 | ) |  | 35,614 |  |  | 20,211 |
Total current | 52,883 |  |  | 313,860 |  |  | 248,953 |
Deferred: |  |  |  |  |
Federal | 41,104 |  |  | (19,434 | ) |  | (3,529 | )
Foreign | (17,160 | ) |  | (34,264 | ) |  | (2,490 | )
State and other | 8,596 |  |  | 3,737 |  |  | 985 |
Total deferred | 32,540 |  |  | (49,961 | ) |  | (5,034 | )
| $ | 85,423 |  |  | $ | 263,899 |  |  | $ | 243,919 |
The effective tax rate for 2018 was 25.7% compared to 26.9% for 2017 and 33.7% for 2016. The following table reconciles the statutory U.S. federal income tax rate to the Company’s effective income tax rate:
| 2018 |  | 2017 |  | 2016 |
Federal income tax rate | 21.0 |  | % | 35.0 |  | % | 35.0 |  | %
State tax rate, net | 3.6 |  |  | 2.6 |  |  | 2.2 |  |
One-time transition tax | 7.9 |  |  | — |  |  | — |  |
Permanent items | 1.4 |  |  | — |  |  | 0.8 |  |
Domestic production activity | — |  |  | (1.6 | ) |  | (1.2 | ) |
Difference in U.S. statutory tax rate and foreign country effective tax rate | 2.3 |  |  | (1.4 | ) |  | (2.8 | ) |
Rate change | (2.5 | ) |  | (5.3 | ) |  | — |  |
Tax credits | (7.9 | ) |  | (0.5 | ) |  | (0.6 | ) |
Change in reserve for unrecognized tax benefits | (1.7 | ) |  | (0.7 | ) |  | (0.2 | ) |
Change in valuation allowance | 2.7 |  |  | (1.2 | ) |  | (0.1 | ) |
Other | (1.1 | ) |  | — |  |  | 0.6 |  |
Total | 25.7 |  | % | 26.9 |  | % | 33.7 |  | %
On December 22, 2017, the U.S. government enacted comprehensive tax legislation (the “Tax Act”), which significantly revises the ongoing U.S. corporate income tax law by lowering the U.S. federal corporate income tax rate from 35.0% to 21.0%, implementing a territorial tax system, imposing one-time tax on foreign unremitted earnings and setting limitations on deductibility of certain costs (e.g., interest expense), among other things. The Company applied the guidance in Staff Accounting Bulletin (“SAB”) 118 when accounting for the enactment date effects of the Tax Act. As of December 30, 2018, the Company has completed its accounting for all of the tax effects of the Tax Act. As further discussed below, during 2018, the Company recognized adjustments of $18.2 million to the provisional amounts recorded at December 31, 2017 and included these adjustments as a component of income tax expense. As of December 31, 2017, the Company estimated no tax liability on foreign unremitted earnings due to a net earnings and profits (“E&P”) deficit on accumulated post-1986 deferred foreign income. Therefore, the Company did not accrue any amount of tax expense for the Tax Act’s one-time transition tax on the foreign subsidiaries’ accumulated, unremitted earnings going back to 1986 for the year ended December 31, 2017. Upon further analysis of certain aspects of the Tax Act and a refinement of the historical calculation of E&P on accumulated post-1986 deferred foreign income during 2018, the Company finalized the E&P analysis of its foreign subsidiaries and recalculated significant overall positive E&P. Therefore, due to this recalculation, the Company recorded a $26.4 million tax liability for the one-time transition tax. This one-time transition tax adjustment increased the 2018 effective tax rate by approximately 7.9%. The Company has elected to pay this liability over the eight-year period provided in the Tax Act. As of December 30, 2018, the remaining balance of the Company’s transition tax obligation is $7.7 million, which will be paid over the next seven years. No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the one-time transition tax or any additional outside basis difference inherent in these foreign subsidiaries, as these amounts continue to be permanently reinvested in foreign operations. The undistributed earnings of our Mexico, Puerto Rico and U.K. subsidiaries totaled $683.0 million, $13.2 million and $2.2 million, respectively, at December 30, 2018. As of December 31, 2017, the Company accrued $41.5 million in provisional tax benefit related to the net change in deferred tax liabilities stemming from the Tax Act’s reduction of the U.S. federal tax rate from 35% to 21% for the year ended December 31, 2017. Due to return to provision adjustments which resulted from the filing of the Company’s 2017 federal income tax return, the Company recorded an additional $8.2 million tax benefit resulting from the Tax Act’s rate reduction. This benefit reduced the 2018 effective tax rate by approximately 2.5%. The Tax Act subjects a U.S. shareholder to tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for GILTI, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. The Company has elected to account for GILTI in the year the tax is incurred. As of December 30, 2018, the Company recorded a $5.4 million federal GILTI tax liability, which increased the 2018 effective tax rate by approximately 1.6%. The Tax Act provides for a foreign-derived intangible income (“FDII”) deduction, which is available to domestic C corporations that derive income from the export of property and services. As of December 30, 2018, the Company recorded a $0.1 million federal FDII benefit, which decreased the 2018 effective tax rate by an immaterial amount. Significant components of the Company’s deferred tax liabilities and assets are as follows:
| December 30, 2018 |  | December 31, 2017
| (In thousands)
Deferred tax liabilities: |  |  |
PP&E and identified intangible assets | $ | 217,353 |  |  | $ | 213,500 |
Inventories | 69,464 |  |  | 57,641 |
Insurance claims and losses | 29,964 |  |  | 29,253 |
Business combinations | 46,779 |  |  | 50,695 |
Other | 23,434 |  |  | 18,519 |
Total deferred tax liabilities | 386,994 |  |  | 369,608 |
Deferred tax assets: |  |  |
Net operating losses | 2,923 |  |  | 3,276 |
Foreign net operating losses | 38,531 |  |  | 26,934 |
Credit carry forwards | 14,461 |  |  | 2,425 |
Allowance for doubtful accounts | 6,788 |  |  | 1,767 |
Deferred revenue | 1,860 |  |  | — |
Accrued liabilities | 52,181 |  |  | 50,389 |
Workers compensation | — |  |  | 26,119 |
Pension and other postretirement benefits | — |  |  | 13,379 |
Other | 63,227 |  |  | 51,306 |
Total deferred tax assets | 179,971 |  |  | 175,595 |
Valuation allowance | (26,150 | ) |  | (14,479 | )
Net deferred tax assets | 153,821 |  |  | 161,116 |
Net deferred tax liabilities | $ | 233,173 |  |  | $ | 208,492 |
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 December 30, 2018, the Company believes it has sufficient positive evidence to conclude that realization of its federal, state and foreign net deferred tax assets are more likely than not to be realized. The increase in valuation allowance of $11.7 million during 2018 was primarily due to U.S. foreign tax credits. As of December 30, 2018, the Company’s valuation allowance is $26.1 million, of which $13.9 million relates to U.K. operations, $11.8 million relates to U.S. foreign tax credits and $0.5 million relates to state net operating losses. As of December 30, 2018, the Company had state net operating loss carry forwards of approximately $87.5 million that begin to expire in 2019. The Company also had Mexico net operating loss carry forwards at December 30, 2018 of approximately $17.2 million that begin to expire in 2019. As of December 30, 2018, the Company had approximately $2.6 million of state tax credit carry forwards that begin to expire in 2019. For the fifty-two weeks ended December 30, 2018 and fifty-three weeks ended December 31, 2017, there is a tax effect of $1.6 million and $4.0 million, respectively, reflected in other comprehensive income. For the fifty-two weeks ended December 30, 2018, there is a tax effect of ($0.8) million reflected in income tax expense due to excess tax benefits related to share-based compensation. For the fifty-three weeks ended December 31, 2017, there is a tax effect of $1.1 million reflected in income tax expense due to excess tax benefits related to share-based compensation. See “Note 1. Business and Summary of Significant Accounting Policies” for additional information. A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
| December 30, 2018 |  | December 31, 2017
| (In thousands)
Unrecognized tax benefits, beginning of year | $ | 11,866 |  |  | $ | 16,813 |
Increase as a result of tax positions taken during the current year | 261 |  |  | 1,163 |
Increase as a result of tax positions taken during prior years | 1,152 |  |  | 60 |
Decrease as a result of tax positions taken during prior years | — |  |  | (892 | )
Decrease for lapse in statute of limitations | (867 | ) |  | (4,123 | )
Decrease relating to settlements with taxing authorities | — |  |  | (1,155 | )
Unrecognized tax benefits, end of year | $ | 12,412 |  |  | $ | 11,866 |
Included in unrecognized tax benefits of $12.4 million at December 30, 2018, was $1.4 million of tax benefits that, if recognized, would reduce the Company’s effective tax rate. It is not practicable at this time to estimate the amount of unrecognized tax benefits that will change in the next twelve months. The Company recognizes interest and penalties related to unrecognized tax benefits in its provision for income taxes. As of December 30, 2018, the Company had recorded a liability of $1.5 million for interest and penalties. During 2018, accrued interest and penalty amounts related to uncertain tax positions decreased by $5.6 million. The Company operates in the U.S. (including multiple state jurisdictions), Puerto Rico and several foreign locations including Mexico and the U.K. With few exceptions, the Company is no longer subject to examinations by taxing authorities for years prior to 2014 in U.S. federal, state and local jurisdictions, for years prior to 2011 in Mexico, and for years prior to 2016 in the U.K. The Company has a tax sharing agreement with JBS USA Company Holdings effective for tax years beginning 2010. The net tax payable for tax year 2018 of $0.5 million was accrued in 2018 as a capital distribution and an account payable to a related party in our Consolidated Balance Sheet.

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- 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. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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