Income Taxes |
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Dec. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes |
The determination of the Company’s overall effective tax rate requires significant judgment, the use of estimates and the interpretation and application of complex tax laws. The effective tax rate reflects the income earned and taxed in various United States federal and state jurisdictions. Tax law changes, increases and decreases in temporary and permanent differences between book and tax items, tax credits and the Company’s change in income in each jurisdiction all affect the overall effective tax rate. It is the Company’s practice to recognize interest and penalties related to uncertain tax positions in income tax expense. On December 22, 2017, H.R.1, known as the “Tax Cuts and Jobs Act,” (the “Act”) was signed into law. The Act makes broad and complex changes to the U.S. Internal Revenue Code including, but not limited to: reducing the U.S. federal corporate tax rate from 35% to 21%; creating a new limitation on deductible interest expense; repealing the domestic production activity deduction, providing for bonus depreciation that will allow for full expensing of certain qualified property; and limiting other deductions. The Company’s net deferred tax liability of $103.0 million as of July 1, 2017 was determined using the federal corporate tax rate of 35% prior to the passage of the Act. The Act reduces the federal corporate tax rate to 21%, effective January 1, 2018. Consequently, we have recorded a $10.2 million decrease in deferred tax assets and a $47.6 million decrease in deferred tax liabilities with a corresponding net benefit to deferred income tax expense of $37.4 million for the three and six months ended December 30, 2017. The SEC staff issued Staff Accounting Bulletin 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the Act. SAB 118 provides a measurement period that should not extend beyond one year from the Act enactment date for companies to complete the accounting under FASB ASC 740 – Income Taxes. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Act. The Company has not identified any items for which the income tax effects of the Act have not been substantially completed. The Company’s effective tax rate was -128.3% for the three months ended December 30, 2017 and 40.1% for the three months ended December 31, 2016. The Company’s effective tax rate was -43.1% for the six months ended December 30, 2017 and 39.2% for the six months ended December 31, 2016. As a result in the reduction in the federal corporate income tax rate to 21% from 35% under the Act, the Company has a blended statutory rate of 28% for the three and six months ended December 30, 2017. For the three and six months ended December 30, 2016, the statutory rate was 35%. Additionally, during the three months ended December 30, 2017, performance vesting criteria for certain stock-based compensation awards was met resulting in a significant permanent tax deduction difference. The impact to the provision for stock-based compensation and the impact of the reduction in tax rate under the Act are summarized as follows:
As of December 30, 2017 and July 1, 2017, the Company had net deferred tax assets of $28.4 million and $43.1 million, respectively, and deferred tax liabilities of $94.4 million and $146.1 million, respectively. The Company believes that it is more likely than not that the remaining deferred tax assets will be realized. The Company records a liability for Uncertain Tax Positions in accordance with FASB ASC 740-10-25, Income Taxes – General - Recognition. As of December 30, 2017 and July 1, 2017, the Company had approximately $1.4 million and $1.3 million of unrecognized tax benefits, respectively. It is reasonably possible that a decrease of approximately $0.1 million in the balance of unrecognized tax benefits may occur within the next twelve months because of statute of limitations expirations, that, if recognized, would affect the effective tax rate. |