Income Taxes (Notes) |
3 Months Ended |
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Apr. 01, 2023 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company’s interim provision for income taxes is determined using an estimate of the annual effective tax rate. The Company records any changes affecting the estimated annual effective tax rate in the interim period in which the change occurs. The Company also records the tax effects of certain discrete items during the interim period in which they occur. For the three months ended April 1, 2023 and April 2, 2022, the Company recorded an income tax benefit of $1.3 million and $9.6 million, respectively. The Company’s effective income tax rates were 1.5% and 24.0% for the three months ended April 1, 2023 and April 2, 2022, respectively. For the three months ended April 1, 2023, the effective income tax rate reflected the mix of geographic earnings as well as the impact of full valuation allowance against the Company's U.S. net deferred tax assets, which was initially established during the third quarter of 2022. In assessing the realizability of its U.S. deferred tax assets, the key factors used to determine positive and negative evidence included its recent losses resulting in cumulative loss for the three-year period ended December 31, 2022, current macroeconomic trends, and expected future reversals of existing taxable temporary differences. Such objective negative evidence limits the Company's ability to consider other subjective evidence, such as its projections for future growth. Given the weight of objectively verifiable historical losses from the Company's U.S. operations, the Company established a full valuation reserve against its net U.S. federal and state deferred tax assets and recorded a valuation allowance of $57.5 million in the third quarter of fiscal 2022. During the three months ended April 1, 2023, the Company determined that this conclusion continued to be appropriate. A valuation allowance is a non-cash charge, and does not limit the Company’s ability to utilize its deferred tax assets, including its ability to utilize tax loss and credit carryforward amounts, against future taxable income. The amount of the deferred tax assets considered realizable, and the associated valuation allowance, could be adjusted in a future period if estimates of future taxable income change or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as projections for future growth.
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