Income Taxes |
6 Months Ended | ||
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Jul. 04, 2026 | |||
| 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 a tax benefit of 68.1% and a tax expense of 23.3% for the second quarter and first two quarters of 2026, respectively. During the first two quarters of 2026, we recognized a net discrete tax expense totaling $1.5 million. During the first quarter of 2026, we recognized a net discrete tax expense totaling $1.6 million, primarily related to a discrete tax expense related to stock-based compensation, partially offset by a discrete tax benefit related to a return-to-provision adjustment in Mexico. During the second quarter of 2026, we recognized a net discrete tax benefit of $0.1 million, primarily related to miscellaneous tax true-ups. We recognized approximately $0.8 million and $2.3 million of an increased valuation allowance during the second quarter and first two quarters of 2026, respectively, and we expect to recognize approximately $11.7 million in total during full year fiscal 2026. Our effective tax rate was 22.1% and 32.9% for the second quarter and first two quarters of 2025. During the first quarter of 2025, we recognized a net discrete tax benefit of $1.4 million, primarily related to a discrete tax benefit of $2.1 million for the tax effect of a 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, partially offset by discrete tax expenses of $0.7 million related to stock-based compensation and rate changes. During the second quarter of 2025, we recorded a net discrete tax expense of $0.4 million, primarily related to a settlement for FASB Interpretation No. 48: Managing Uncertain Tax Positions (FIN 48).
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