INCOME TAXES

9 Months Ended

Jan. 01, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The Company and its subsidiaries are subject to taxation in the U.S. and in various foreign and state jurisdictions. The Company's income tax benefit is determined using an estimated annual effective tax rate, adjusted for discrete items arising during the period. The effective tax rates for the three and nine months ended January 1, 2022 were 46.2% and 172.2%, respectively. The effective tax rates for the three and nine months ended December 26, 2020 were (53.9)% and 9.6%, respectively.

Income tax benefit for the three and nine months ended January 1, 2022 was $(9.6) million and $(116.4) million, respectively. Income tax benefit for the three and nine months ended December 26, 2020 was $(7.0) million and $(7.2) million, respectively. During the three months ended October 2, 2021, the Company transferred certain non-Americas intellectual property (“IP”) rights between our wholly-owned subsidiaries ("IP transfer") to align with our evolving business operations, resulting in the derecognition of a deferred tax asset of $91.1 million and the recognition of a new deferred tax asset of $204.3 million, which represents the book and tax basis difference in the IP and was based on the fair value of the IP, in the respective subsidiaries. This results in a net discrete deferred tax benefit of $113.2 million. The impact of the IP transfer to net cash flows on the condensed consolidated statements of cash flows during the nine months ended January 1, 2022 was not material.

The difference between the effective tax rate and the U.S. federal statutory rate primarily relates to the changes in uncertain tax positions, U.S. and foreign income mix, and the valuation allowance on the U.S. federal and state deferred tax assets (DTAs) that continues to be maintained as of January 1, 2022.

A significant portion of the Company's DTAs relate to the IP transfer between wholly-owned subsidiaries. At this time, based on evidence currently available, the Company considers it more likely than not that it will have sufficient taxable income in the future that will allow the Company to realize the DTAs; however, failure to generate sufficient future taxable income could result in some or all DTAs not being utilized in the future. If the Company is unable to generate sufficient future taxable income, a substantial valuation allowance to reduce the Company's DTAs may be required.

The Company is subject to the examination of its income tax returns by the Internal Revenue Service and other tax authorities. Significant judgment is required in evaluating our uncertain tax positions and determining the Company's provision for income taxes. During the three months ended January 1, 2022, the amount of gross unrecognized tax benefits decreased by $3.6 million. As of January 1, 2022, the Company has $17.9 million of unrecognized tax benefits, all of which could result in a reduction of the Company’s effective tax rate if recognized. The reduction in gross unrecognized tax benefits is primarily attributable to the lapse of applicable statute of limitations.