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Note 6 - Income Taxes
 6 Months Ended
Jun. 28, 2025
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

Note 6 – Income Taxes

 

For the fiscal quarter ended June 28, 2025, the Company reported tax expenses, and its effective tax rate was 66.0% compared to the fiscal quarter ended June 29, 2024, where the Company reported income taxes, and its effective tax rate was 33.3%.

 

The effective tax rate for the fiscal quarter ended June 28, 2025 resulted primarily from our foreign income being taxed at varying tax rates and changes in our valuation allowance on deferred tax assets. The effective tax rate for the fiscal quarter ended June 29, 2024 resulted primarily from our foreign income being taxed at varying tax rates and changes in our valuation allowance on deferred tax assets.

 

For the six months ended June 28, 2025, the Company reported income taxes at an effective tax rate of (66.5)%, compared to the six months ended June 29, 2024, where the Company reported income taxes at an effective tax rate of 30.7%.

 

The change in effective tax rate in the six months ended June 28, 2025 compared to the corresponding period in the prior fiscal year is mainly due to fiscal year 2025 second quarter profits that increased the Company’s tax expenses, in addition to the effect of foreign currency exchange rates on tax provisions in our non-US entities, and the valuation allowance on part of our deferred tax assets.

 

On July 4, 2025, the One Big Beautiful Bill Act (the “OBBBA”) was enacted into law, extending key provisions of the 2017 Tax Cuts and Jobs Act. The OBBBA provides for accelerated depreciation for property acquired and placed in service after January 19, 2025, and restores expensing of domestic research expenditures for years beginning after December 31, 2024. Additionally, the OBBBA restores the EBITDA-based interest expense limitation and includes changes related to the U.S. taxation of the income of our foreign subsidiaries and certain foreign derived income, and the base erosion and anti-abuse tax. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The Company is continuing to evaluate the impact of the OBBBA on the consolidated financial statements.

 

The Company and its subsidiaries are subject to income taxes imposed by the U.S., various states, and the foreign jurisdictions in which we operate. Each jurisdiction establishes rules that set forth the years which are subject to examination by its tax authorities. While the Company believes the tax positions taken on its tax returns for each jurisdiction are supportable, they may still be challenged by the jurisdiction's tax authorities. In anticipation of such challenges, the Company has established reserves for tax-related uncertainties. These liabilities are based on the Company’s best estimate of the potential tax exposures in each respective jurisdiction. It may take a number of years for a final tax liability in a jurisdiction to be determined, particularly in the event of an audit. If an uncertain matter is determined favorably, there could be a reduction in the Company’s tax expense. An unfavorable determination could increase tax expense and could require a cash payment, including interest and penalties.