INCOME TAXES

6 Months Ended

Jun. 27, 2020

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act did not have a material impact on the Company's consolidated financial statements in the first or second quarter of 2020. The Company continues to evaluate the potential impacts the CARES Act may have on its operations and consolidated financial statements in future periods.

The Company recognized income tax benefits of $117.3 million and $104.4 million for the three and six months ended June 27, 2020, respectively, resulting in effective tax rates of (105.6)% and (40.6)%. In the second quarter of 2020, as a result of initiating a supply chain reorganization, the Company recorded a one-time benefit of $118.8 million to reverse a deferred tax liability previously established related to certain unremitted earnings of foreign subsidiaries not permanently reinvested. Excluding the impacts of this one-time benefit and acquisition-related and other charges, the effective tax rates were 15.0% and 13.9% for the three and six months ended June 27, 2020, respectively. These effective tax rates differ from the U.S. statutory

tax rate primarily due to tax on foreign earnings, the re-measurement of uncertain tax position reserves, an intra-entity transfer of certain intellectual property rights, and the tax benefit of equity compensation.

The Company recognized income tax expense of $51.6 million and $76.3 million for the three and six months ended June 29, 2019, respectively, resulting in an effective tax rate of 12.8% for both periods. Excluding the impacts of the acquisition-related and other charges and the Sargent & Greenleaf divestiture in the second quarter of 2019, the effective tax rates were 11.6% and 12.8% for the three and six months ended June 29, 2019, respectively. These effective tax rates differed from the U.S. statutory tax rate primarily due to tax on foreign earnings and the effective settlements of income tax audits.

The Company considers many factors when evaluating and estimating its tax positions and the impact on income tax expense, which may require periodic adjustments, and which may not accurately anticipate actual outcomes. It is reasonably possible that the amount of the unrecognized benefit with respect to certain of the Company's unrecognized tax positions will significantly increase or decrease within the next twelve months. However, based on the uncertainties associated with finalizing audits with the relevant tax authorities including formal legal proceedings, it is not possible to reasonably estimate the impact of any such change.