Income Taxes (Notes)

12 Months Ended

Dec. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

The geographic components of earnings (loss) before income taxes are as follows:

	Fiscal Year
(In millions)	2023		2022		2021
United States	$	(115.2)	$	(94.6)	$	22.7
Foreign	(19.0)		(158.3)		57.6
Earnings (loss) before income taxes	$	(134.2)	$	(252.9)	$	80.3

The provisions for income tax expense (benefit) consist of the following:

	Fiscal Year
(In millions)	2023		2022		2021
Current expense:
Federal	$	(0.6)	$	22.7	$	14.6
State	(1.7)		4.0		2.5
Foreign	1.3		28.2		15.0
Deferred expense (benefit):
Federal	(88.5)		(52.9)		(17.1)
State	0.1		(4.9)		(1.8)
Foreign	(5.6)		(60.9)		0.1
Income tax expense (benefit)	$	(95.0)	$	(63.8)	$	13.3

A reconciliation of the Company’s total income tax expense and the amount computed by applying the statutory federal income tax rate to earnings before income taxes is as follows:

	Fiscal Year
(In millions)	2023		2022		2021
Income taxes at U.S. statutory rate of 21%	$	(28.2)	$	(53.1)	$	16.9
State income taxes, net of federal income tax	(2.0)		(2.3)		(1.1)
Foreign earnings taxed at rates different from the U.S. statutory rate:
Hong Kong	(7.3)		(14.2)		(7.2)
Italy	(2.5)		0.3		1.1
United Kingdom	2.3		(1.1)		(0.5)
Other	3.9		2.9		2.5
Adjustments for uncertain tax positions	(1.3)		(0.9)		(1.3)
Change in valuation allowance	29.0		2.1		2.2
Tax impact of impairment in foreign jurisdiction	—		3.0		—
Global Intangible Low Tax Income tax	1.5		3.8		3.2
Foreign Derived Intangible Income tax benefit	—		(8.2)		(3.7)
Non-deductible executive compensation	(0.8)		3.3		5.2
Permanent adjustments related to employee share based compensation	4.2		1.6		(3.7)
Deferred tax on future cash dividends	—		(0.2)		(0.9)
Income tax audit adjustments	—		—		2.5
Permanent adjustment related to goodwill divested	4.3		—		—
Deferred adjustment for income tax audit	—		—		(1.2)
Capital loss from sale of subsidiary	(95.7)		—		—
Other Permanent adjustments and non-deductible expenses	(1.2)		(1.4)		(0.3)
Other	(1.2)		0.6		(0.4)
Income tax expense (benefit)	$	(95.0)	$	(63.8)	$	13.3

Significant components of the Company’s deferred income tax assets and liabilities are as follows:

(In millions)	December 30, 2023		December 31, 2022
Deferred income tax assets:
Accounts receivable and inventory valuation allowances	$	16.0	$	18.1
Deferred compensation accruals	6.1		4.3
Accrued pension expense	19.7		18.7
Stock-based compensation	7.0		9.1
Net operating loss and foreign tax credit carryforwards	56.6		19.9
Capital loss carryforwards	60.4		—
Book over tax depreciation and amortization	0.4		0.5
Tenant lease expenses	10.6		4.3
Environmental reserve	14.8		28.3
Intangible Assets	1.3		—
Other	8.3		6.5
Total gross deferred income tax assets	201.2		109.7
Less valuation allowance	(55.6)		(26.7)
Net deferred income tax assets	145.6		83.0
Deferred income tax liabilities:
Intangible assets	(48.9)		(76.2)
Tax over book depreciation and amortization	(3.4)		(9.4)
Other	(3.8)		(8.2)
Total deferred income tax liabilities	(56.1)		(93.8)
Net deferred income tax asset (liabilities)	$	89.5	$	(10.8)

The valuation allowance for deferred income tax assets as of December 30, 2023 and December 31, 2022 was $55.6 million and $26.7 million, respectively. The net increase in the total valuation allowance during fiscal 2023 was $28.9 million. The valuation allowance for both years is primarily related to U.S. state and local net operating loss carryforwards as well as a valuation allowance against state deferred tax assets for certain U.S. legal entities, foreign net operating loss carryforwards and tax credit carryforwards in foreign jurisdictions. The valuation allowance for fiscal 2023 is also related to U.S. federal capital loss carryforwards. The ultimate realization of the deferred tax assets depends on the generation of future taxable income in foreign jurisdictions as well as state and local tax jurisdictions, and capital gains in the U.S. tax jurisdiction. During 2023, the Company sold one of its foreign subsidiaries which generated a tax capital loss of $417.8 million on the divestiture of that entity's stock. That tax capital loss was used to offset taxable gains related to the divestiture of various brand and non-core assets between 2022 and 2024 in the amount of $312.5 million. The remaining capital loss of $105.3 million has no immediate use and therefore has a full valuation allowance resulting in an increase to the valuation allowance of $24.1 million as of December 30, 2023. The current year change in the valuation allowance results in a decrease against the state deferred tax assets of $0.8 million, an increase related to state net operating loss carryforward of $2.3 million, and a net increase relating to the foreign net operating losses and foreign tax credits and other deferred tax assets of $3.3 million.

At December 30, 2023, the Company had foreign net operating loss carryforwards of $43.5 million, which have expirations ranging from 2024 to an unlimited term during which they are available to offset future foreign taxable income. The Company had U.S. federal capital loss carryforwards, federal net operating loss carryforwards and Internal Revenue Code section 163(j) interest expense carryforwards of $263.8 million, $27.1 million, and $65.8 million respectively, which have expirations ranging from 2029 to an unlimited term during which they are available to offset future U.S. federal taxable income. The Company had state net operating loss carryforwards and Internal Revenue Code section 163(j) interest expense carryforwards of $234.4 million and $74.7 million respectively, which have expirations ranging from 2024 to an unlimited term during which they are available to offset future state taxable income. The Company also had tax credit carryforwards in foreign jurisdictions of $2.6 million, which are available for an unlimited carryforward period to offset future foreign taxes.

The following table summarizes the activity related to the Company’s unrecognized tax benefits:

	Fiscal Year
(In millions)	2023		2022
Unrecognized tax benefits at beginning of the year	$	9.0	$	10.9
Increases related to current year tax positions	0.3		0.2
Decreases related to prior year positions	(5.1)		(1.1)
Decreases relating to settlements with taxing authorities	(0.7)		(0.5)
Decrease due to lapse of statute	(0.9)		(0.5)
Unrecognized tax benefits at end of the year	$	2.6	$	9.0

The portion of the unrecognized tax benefits that, if recognized currently, would reduce the annual effective tax rate was $2.6 million and $9.0 million as of December 30, 2023 and December 31, 2022, respectively. During 2023, the Company released $5.1 million of unrecognized tax benefits related to net operating losses that were deemed to be fully limited based on the completion of a separate return loss year analysis. The release had no impact on the effective tax rate since the Company released both the deferred tax asset and contra deferred tax asset related to the net operating losses. The Company recognizes interest and penalties related to unrecognized tax benefits through interest expense and income tax expense, respectively. Interest accrued related to unrecognized tax benefits was $0.5 million and $0.5 million as of December 30, 2023 and December 31, 2022.

The Company is subject to periodic audits by domestic and foreign tax authorities. Currently, the Company is undergoing routine periodic audits in both domestic and foreign tax jurisdictions. It is reasonably possible that the amounts of unrecognized tax benefits could change in the next 12 months as a result of the audits. However, any payment of tax is not expected to be material to the consolidated financial statements. For the majority of tax jurisdictions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2017.

The Company intends to repatriate cash held in foreign jurisdictions and as such has recorded a deferred tax liability related to additional state taxes and foreign withholding taxes on the future dividends received in the U.S. from the foreign subsidiaries of $1.1 million and $1.1 million for fiscal years 2023 and 2022. The Company intends to permanently reinvest all non-cash undistributed earnings outside of the U.S. and has, therefore, not established a deferred tax liability on the amount of non-cash foreign undistributed earnings of $76.5 million at December 30, 2023. However, if these non-cash undistributed earnings were repatriated, the Company would be required to accrue and pay applicable U.S. taxes and withholding taxes payable to various countries. It is not practicable to estimate the amount of the deferred tax liability associated with these non-cash unremitted earnings due to the complexity of the hypothetical calculation.