Anixter International Inc. Financial Statement Analysis
ANIXTER INTERNATIONAL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Reconciliations of income tax expense to the statutory corporate federal tax rate of 21% were as follows:
(In millions)
Statutory tax expense
Increase (reduction) in taxes resulting from:
State income taxes, net
Foreign tax effects
Change in valuation allowance
Impact of tax legislation
Foreign derived intangible income deduction
Other, net
Income tax expense
Years Ended
January 3,
2020
December 28,
2018
December 29,
2017
$
61.6
$
46.9
$
83.2
9.7
7.9
4.4
3.5
11.9
2.0
(42.3)
(0.6)
(0.3)
(2.1)
35.6
(4.5)
2.5
2.9
3.7
$
30.5 $
66.9 $
128.6
Impact of Tax Legislation: On December 22, 2017, the Tax Cuts and Jobs Act (the "Act") was signed into law. The Act
made significant changes to the U.S. tax code. The changes impacting the Company beginning in the fourth quarter of 2017, the
period of enactment, include:
The reduction of the U.S. corporate tax rate to 21% results in an adjustment to the Company's U.S. deferred tax assets
and liabilities to the lower rate. The impact of the deferred tax adjustment was measured and recorded as an increase in
earnings for the quarter ending December 29, 2017, of $14.4 million. The impact was revised and a deferred tax
adjustment of $0.7 million was recorded as a decrease in earnings for the quarter ending December 28, 2018; and
The tax reform legislation will subject the earnings of the Company's cumulative foreign earnings and profits to U.S.
income taxes as a deemed repatriation. The estimated provisional impact of the deemed repatriation decreased earnings
for the quarter ending December 29, 2017 by $50.0 million. The tax impact was revised to $47.2 million and finalized
in 2018.
The Act subjects U.S. shareholders to tax on Global Intangible Low-Taxed Income ("GILTI") earned by certain foreign
subsidiaries. The Company is electing to recognize the tax on GILTI as a period expense in the period tax is incurred. Under
this policy, the Company has not provided deferred taxes related to temporary differences that upon their reversal will affect the
amount of income subject to GILTI in the period.
Tax Payments: The Company made net payments for income taxes in 2019, 2018 and 2017 of $87.1 million, $88.4
million and $76.4 million, respectively.
Net Operating Losses: Anixter International Inc. and its U.S. subsidiaries file a U.S. federal corporate income tax return
on a consolidated basis. At January 3, 2020, various of Anixter's foreign subsidiaries had aggregate cumulative net operating
loss ("NOL") carryforwards for foreign income tax purposes of approximately $89.7 million which are subject to various
provisions of each respective country. Approximately $71.9 million of the NOL carryforwards may be carried forward
indefinitely. The remaining NOL carryforwards expire at various times between 2020 and 2028.
Foreign Tax Credit Carryforwards: At January 3, 2020, the Company estimated and accrued provisional transition taxes.
As a result of the transition tax, the Company estimates that it will also have foreign tax credit carryforwards of $41.7 million.
At December 28, 2018, a full valuation allowance was recorded against the deferred tax asset related to foreign tax credits as
there was not sufficient foreign-source income projected to utilize the foreign tax credits. After considering the relevant
evidence in assessing the realizability of the deferred tax asset related to foreign tax credits, in particular the effects of changing
to a U.S.-center-led business model during 2019, the Company reversed its valuation allowance in the amount of $41.7 million
in 2019.
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