Income Taxes |
6 Months Ended | ||
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Jun. 28, 2025 | |||
| Income Taxes | |||
| Income Taxes |
Income tax provisions for interim periods are based on an estimated annual income tax rate, adjusted for discrete tax items, with any changes affecting the estimated annual effective tax rate recorded in the interim period in which the change occurs. We determined that the estimated annual effective tax rate method would provide a reliable estimate of our overall annual effective tax rate. Our effective tax rate was 22.1% and 32.9% for the second quarter and first two quarters of 2025, respectively, and 44.0% and 19.9% for the second quarter and first two quarters of 2024, respectively. Our effective tax rate of 32.9% for the first two quarters of 2025 is primarily due to lower pre-tax loss relative to the tax benefit received during the first two quarters of 2025. This was primarily driven by non-recurring net discrete tax benefits totaling $4.1 million, which includes a $2.1 million discrete tax benefit recognized during the first quarter of 2025 for the pre-transition loss related to Section 987 of the Internal Revenue Code of 1986 for the cumulative unrecognized foreign exchange loss relating to our primary operating subsidiary in Canada, which is a qualified business unit for purposes of Section 987, and a $3.1 million discrete tax benefit recognized during the second quarter of 2025 due to the loss on the Don Pepino divestiture. These discrete tax benefits were partially offset by discrete tax expenses totaling $1.1 million, which includes discrete tax expenses of $0.7 million incurred during the first quarter of 2025 related to stock-based compensation and rate changes, and discrete tax expenses of $0.4 million incurred during the second quarter of 2025 related to a settlement for FASB Interpretation No. 48: Managing Uncertain Tax Positions (FIN 48). See Note 18, “Subsequent Events—New U.S. Tax Legislation.”
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