INCOME TAXES

3 Months Ended

Apr. 03, 2021

The Company’s income tax (benefit) expense and related effective rates were as follows (in thousands, except percentage data):


	For the 13 Weeks Ended April 3, 2021			For the 14 Weeks Ended April 4, 2020
Income tax (benefit) expense	$	2,117		$	(63,651)
Effective tax rate	(9.5)		%	42.7		%

The effective tax rate in the First Quarter was unfavorable as compared to the Prior Year Quarter since no tax benefit was accrued on the U.S. net operating loss ("NOL"), unlike in the Prior Year Quarter. The Global Intangible Low-Taxed Income (“GILTI”) provision of the Tax Cuts and Jobs Act requires the inclusion of certain foreign income in the tax return which will absorb most of the U.S. NOL. Foreign income taxes are also paid on this same foreign income, resulting in double taxation. The remaining U.S. NOL is offset with a valuation allowance since there is no certainty of any future tax benefit. The First Quarter rate is negative because foreign income tax expense is accrued on certain foreign entities with positive taxable income when the consolidated operating results are a loss. The Prior Year Quarter tax rate benefited from the enactment of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), which was signed into law on March 27, 2020. The CARES Act provided many beneficial income tax changes including a provision allowing net operating losses arising in tax years 2018, 2019 and 2020 to be carried back to prior years when the U.S. tax rate was 35%, which accounts for most of the Prior Year Quarter benefit.

The effective tax rate can vary from quarter-to-quarter due to changes in the Company's global mix of earnings, the resolution of income tax audits and changes in tax law.

As of April 3, 2021, the Company's total amount of unrecognized tax benefits, excluding interest and penalties, was $31.4 million, of which $25.0 million would favorably impact the effective tax rate in future periods, if recognized. The Company is subject to examinations in various state and foreign jurisdictions for its 2012-2019 tax years, none of which the Company

believes are significant, individually or in the aggregate. Tax audit outcomes and timing of tax audit settlements are subject to significant uncertainty.

The Company has classified uncertain tax positions as long-term income taxes payable, unless such amounts are expected to be settled within twelve months of the condensed consolidated balance sheet date. As of April 3, 2021, the Company had recorded $16.2 million of unrecognized tax benefits, excluding interest and penalties, for positions that are expected to be settled within the next twelve months. Consistent with its past practice, the Company recognizes interest and/or penalties related to income tax overpayments and income tax underpayments in income tax expense and income taxes receivable/payable. At April 3, 2021, the total amount of accrued income tax-related interest and penalties included in the condensed consolidated balance sheets was $7.1 million and $0.8 million, respectively. For the First Quarter, the Company accrued income tax related interest expense of $0.4 million.

- 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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