Income Taxes

9 Months Ended

Oct. 02, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

At the end of each interim reporting period, the Company makes an estimate of its annual effective income tax rate. Tax expense in interim periods is calculated at the estimated annual effective tax rate plus or minus the tax effects of items of income and expense that are discrete to the period. The estimate used in providing for income taxes on a year-to-date basis may change in subsequent interim periods.

The following table provides details of income taxes:

	Three Months Ended						Nine Months Ended
	October 2, 2021			September 26, 2020			October 2, 2021			September 26, 2020
Net earnings before income taxes	$	405		$	251		$	1,034		$	652
Income tax expense	97			45			186			112
Effective tax rate	24		%	18		%	18		%	17		%

The effective tax rate for the three months ended October 2, 2021 of 24% was higher than the U.S. federal statutory tax rate of 21% due to state tax expense, offset by the recognition of excess tax benefits of share-based compensation. The effective tax rate for the nine months ended October 2, 2021 of 18% was lower than the U.S. federal statutory tax rate of 21% due to state tax expense, offset by a tax benefit related to a partial release of $33 million of a valuation allowance recorded on the U.S foreign tax credit carryforward and the recognition of excess tax benefits of share-based compensation.

The effective tax rates for the three and nine months ended September 26, 2020 of 18% and 17%, respectively, were lower than the U.S. federal statutory tax rate of 21% due to state tax expense, offset by excess tax benefits on share-based compensation and favorable U.S. return-to-provision adjustments.

The effective tax rate for the three months ended October 2, 2021 of 24% was higher than the effective tax rate for the three months ended September 26, 2020 of 18%, primarily due to favorable U.S. return-to-provision adjustments and higher tax benefits from share-based compensation in 2020 compared to 2021. The effective tax rate for the nine months ended October 2, 2021 of 18% was higher than the effective tax rate for the nine months ended September 26, 2020 of 17%, primarily due to favorable U.S. return-to-provision adjustments and excess share-based compensation in 2020, which exceeded the tax benefit realized in 2021 related to a partial release of a valuation allowance of $33 million.