v3.25.2
Income Taxes
 6 Months Ended
Jun. 28, 2025
Income Tax Disclosure [Abstract]  
Income Taxes
16. Income Taxes
Effective Tax Rate
The Company’s effective tax rates were as follows:
Three Months EndedSix Months Ended
June 28, 2025June 29, 2024June 28, 2025June 29, 2024
Income (loss) from continuing operations before income tax
$(26,160)$7,775 $(63,332)$6,185 
Effective tax rate(1296.6)%(10.9)%(526.8)%(21.4)%
The effective tax rates for the quarter and six months ended June 28, 2025 differed from the federal statutory rate of 21 percent primarily due to the full write-off of the Company’s Canadian DTAs. See Deferred Taxes below. Also driving the differences were different statutory tax rates in foreign jurisdictions, valuation allowances on nondeductible U.S. interest expense, U.S. tax credits and nondeductible executive compensation.
The effective tax rates for the quarter and six months ended June 29, 2024 differed from the federal statutory rate of 21 percent primarily due to the release of certain tax reserves, return-to-accrual adjustments, excess deficit on vested stock compensation and changes in the valuation allowance on disallowed interest deductions.
Deferred Taxes
The Company assesses the realizability of its DTAs to determine if a valuation allowance is required based on the consideration of all available evidence using a “more-likely-than-not” standard, with significant weight being given to evidence that can be objectively verified. Since the Company operates in multiple jurisdictions, it assesses the need for a valuation allowance on a jurisdiction-by-jurisdiction basis, considering local earnings and effects of local tax law.
As of December 31, 2024, the Company evaluated realizability of its significant Canadian DTAs using the framework of ASC 740 and concluded that a valuation allowance was not required. The Company acknowledged, however, that difficult market conditions could result in the materialization of a cumulative three-year loss, which would constitute significant negative evidence under ASC 740 and likely necessitate a valuation allowance.
As of June 28, 2025, the Company now expects to incur a cumulative adjusted pre-tax loss in Canada over the three most recent fiscal years ending in 2025. As a result of the significant weight of this negative evidence under ASC 740, the Company believes it is more likely than not that its Canadian DTAs will not be fully realizable and have therefore provided for a full valuation allowance against these assets. This results in a current quarter tax expense to write off the previously recognized net DTA of $337 million and current quarter Canadian pretax losses providing zero tax benefit on the financial statements. Barring positive evidence that changes this conclusion, future Canadian earnings will not result in tax expense or benefits on the Company’s financial statements. The valuation allowance does not impact the Company’s legal right to use the deferred tax assets against cash taxes and future recognition will continue to be evaluated as market conditions evolve.
As of June 28, 2025 and December 31, 2024, the Company’s net DTA included $13 million and $15 million, respectively, of disallowed U.S. interest deductions that the Company does not believe will be realized. The decrease in this asset was a result of a $2 million tax expense recognized in the current year. In strict compliance with the American Institute of Certified Public Accountants’ Technical Questions and Answers 3300.01-02, which asserts that certain material evidence regarding the realizability of disallowed U.S. interest deductions should be ignored when assessing the need for a valuation allowance, the Company has not recognized a valuation allowance on this portion of the net DTA generated from disallowed interest.