Income Taxes

6 Months Ended

Jun. 27, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company and its subsidiaries file income tax returns in the United States and various state and international jurisdictions. In the normal course of business, the Company is regularly audited by U.S. federal, state and local, and international tax authorities in various tax jurisdictions.

Our effective tax rate ("ETR") from continuing operations was 43.9% for the six months ended June 27, 2021 and 12.9% for the six months ended June 28, 2020.

The following items caused the year-to-date ETR to be significantly different from the prior year ETR:

•during the six months ended June 27, 2021, the Company recorded a net discrete tax expense of $17.4 million primarily associated with the revaluation of net deferred tax liabilities as a result of the United Kingdom's ("UK") enactment of Finance Act 2021 during the second quarter, which increases the UK corporate income tax rate from 19% to 25% as of April 1, 2023. This is reduced by the release of a valuation allowance on net operating losses that offsets income received from a one-time legal settlement and certain benefits associated with normal business activities, including the reversal of uncertain tax positions that resulted from statutes of limitations expiring in certain jurisdictions and operational tax planning; and

•The year-to-date ETR also includes a one-time impairment expense on assets held for sale from which there is no corresponding tax benefit;

•during the six months ended June 28, 2020, the Company recorded a discrete net tax benefit of $24.0 million, of which $24.1 million is a result of the eOne acquisition and related costs incurred.

In May 2019, a public referendum held in Switzerland approved the Swiss Federal Act on Tax Reform and AHV Financing ("TRAF") proposals previously approved by the Swiss Parliament. The Swiss tax reform measures were effective on January 1, 2020. Changes in tax reform include the abolishment of preferential tax regimes for holding companies, domicile companies and mixed companies at the cantonal level. The enacted changes in Swiss federal tax were not material to the Company’s financial statements. Swiss cantonal tax was enacted in December 2019. The Company is still assessing the transitional provision options it may elect; however, the legislation is not expected to have a material effect on the Company’s financial statements.

The Company is no longer subject to U.S. federal income tax examinations for years before 2012. With few exceptions, the Company is no longer subject to U.S. state or local and non-U.S. income tax examinations by tax authorities in its major jurisdictions for years before 2015. The Company is currently under income tax examination by the Internal Revenue Service and in several U.S. state and local and non-U.S. jurisdictions.