Income Taxes

6 Months Ended

Jun. 29, 2019

Income Taxes [Abstract]

Income Taxes

Note 5 – Income Taxes

The provision for income taxes consists of provisions for federal, state, and foreign income taxes.  The effective tax rates for the periods ended June 29, 2019 and June 30, 2018 reflect the Company’s expected tax rate on reported income from continuing operations before income tax and tax adjustments. The Company operates in a global environment with significant operations in various jurisdictions outside the United States.  Accordingly, the consolidated income tax rate is a composite rate reflecting the Company’s earnings and the applicable tax rates in the various jurisdictions where the Company operates.

During the second fiscal quarter of 2019, the Company repatriated approximately $73,590 to the United States, and paid withholding and foreign taxes of $20,479.  The Company expects to repatriate an additional approximately $104,000 to the United States in the third fiscal quarter of 2019, net of withholding and foreign taxes of about $15,000.  Substantially all of these amounts will be used to repay certain intercompany indebtedness, to pay the U.S. transition tax, and to fund capital expansion projects.

After completing these phases of cash repatriation, there will be approximately $100,000 of unremitted foreign earnings remaining that the Company has deemed not permanently reinvested and thus has accrued foreign withholding and other taxes.   The Company continues to evaluate the timing of the reparation of these remaining amounts, and may decide to ultimately not repatriate some of these amounts. 

As part of the Company’s cash repatriation activity, the Company settled an intercompany loan, which previously had been accounted for at the historical foreign exchange rate (akin to an equity contribution) because the debtor entity did not have the intent or ability to repay such intercompany loan.   Currency translation adjustments were recorded in accumulated other comprehensive income, and were not included in U.S. GAAP pre-tax income.  The Company’s cash repatriation activity resulted in the ability to repay such intercompany loan.  Upon settlement of this intercompany loan, the foreign entity realized a taxable gain.  Income tax expense for the fiscal quarter and six fiscal months ended June 29, 2019 includes tax expense of $7,554 related to this tax-basis foreign exchange gain.

The Company’s repurchase of a portion of the outstanding convertible debentures in the first fiscal quarter of 2019 (see Note 6) slightly reduced the Company’s expected 2019 tax rate.  The Company recognized a tax benefit on the pre-tax loss on early extinguishment of debt.  The Company also recognized a tax benefit of $1,312, reflecting the reduction in deferred tax liabilities related to the special tax attributes of the extinguished debentures.

Income tax expense for the fiscal quarter and six fiscal months ended June 29, 2019, includes tax benefit of $48 and $633, respectively, for the periodic remeasurement of the deferred tax liability recorded for the foreign taxes associated with the Company's cash repatriation program.

During the six fiscal months ended June 29, 2019, the liabilities for unrecognized tax benefits increased by $4,784 on a net basis, principally due to increases for tax positions taken in the current and prior periods and interest, offset by expiration of a statute and payments.

Income tax expense for the fiscal quarter and six fiscal months ended June 30, 2018 includes additional tax expense of $12,000 recognized as a result of additional analysis of the impact of the Tax Cuts and Jobs Act completed in the second fiscal quarter of 2018.

The Company recognized a tax benefit on the pre-tax loss on early extinguishment of debt in the second fiscal quarter of 2018.  The Company also recognized a tax benefit of $33,963, reflecting the reduction in deferred tax liabilities related to the special tax attributes of the extinguished debentures.

Income tax expense for the fiscal quarter and six fiscal months ended June 30, 2018 also included tax benefits of $9,006 and $7,690, respectively for the periodic remeasurement of the deferred tax liability recorded for the Company's cash repatriation program.