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Income Taxes (Tables) | 12 Months Ended
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Dec. 29, 2018
Income Tax Disclosure [Abstract] |
Income before provision for income taxes | Cadence’s income before provision for income taxes included income from the United States and from foreign subsidiaries for fiscal 2018, 2017 and 2016, was as follows:
| 2018 |  | 2017 |  | 2016
| (In thousands)
United States | $ | 58,963 |  |  | $ | 81,619 |  |  | $ | 84,694 |
Foreign subsidiaries | 317,427 |  |  | 233,427 |  |  | 152,459 |
Total income before provision for income taxes | $ | 376,390 |  |  | $ | 315,046 |  |  | $ | 237,153 |
Components of income taxes provision | Cadence’s provision for income taxes was comprised of the following items for fiscal 2018, 2017 and 2016:
| 2018 |  | 2017 |  | 2016
| (In thousands)
Current: |  |  |  |  |
Federal | $ | 902 |  |  | $ | (2,193 | ) |  | $ | 4,839 |
State and local | (1,270 | ) |  | (2,097 | ) |  | 50 |
Foreign | 42,657 |  |  | 35,301 |  |  | 34,047 |
Total current | 42,289 |  |  | 31,011 |  |  | 38,936 |
Deferred: |  |  |  |  |
Federal | (10,324 | ) |  | 76,494 |  |  | (5,291 | )
State and local | 886 |  |  | 5,571 |  |  | 6,006 |
Foreign | (2,238 | ) |  | (2,131 | ) |  | (5,584 | )
Total deferred | (11,676 | ) |  | 79,934 |  |  | (4,869 | )
Total provision for income taxes | $ | 30,613 |  |  | $ | 110,945 |  |  | $ | 34,067 |
Summary of income tax reconciliation | The provision for income taxes differs from the amount estimated by applying the United States statutory federal income tax rates of 21% to income before provision for income taxes for fiscal 2018 and of 35% to income before provision for income taxes for fiscal 2017 and 2016 as follows:
| 2018 |  | 2017 |  | 2016
| (In thousands)
Provision computed at federal statutory income tax rate | $ | 79,042 |  |  | $ | 110,266 |  |  | $ | 83,003 |
State and local income tax, net of federal tax effect | 15,540 |  |  | 5,867 |  |  | 5,534 |
Foreign income tax rate differential | (37,031 | ) |  | (65,296 | ) |  | (36,098 | )
Deemed repatriation transition tax | (1,409 | ) |  | 67,188 |  |  | — |
Remeasurement of U.S. deferred tax assets and liabilities | — |  |  | 25,200 |  |  | — |
U.S. tax on foreign entities | 28,846 |  |  | — |  |  | — |
Stock-based compensation | (13,539 | ) |  | (24,455 | ) |  | (13,132 | )
Change in deferred tax asset valuation allowance | 13,234 |  |  | 4,689 |  |  | 1,243 |
Tax credits | (72,815 | ) |  | (26,789 | ) |  | (39,765 | )
Repatriation of foreign earnings | — |  |  | — |  |  | 25,145 |
Non-deductible research and development expense | 4,700 |  |  | — |  |  | — |
Tax effects of intra-entity transfer of assets | 79 |  |  | (8,450 | ) |  | (7,661 | )
Domestic production activity deduction | — |  |  | (2,474 | ) |  | (2,826 | )
Withholding taxes | 11,535 |  |  | 11,225 |  |  | 9,870 |
Tax settlements, foreign | — |  |  | 3,086 |  |  | 5,620 |
Increase in unrecognized tax benefits not included in tax settlements | (1,545 | ) |  | 4,054 |  |  | 614 |
Other | 3,976 |  |  | 6,834 |  |  | 2,520 |
Provision for income taxes | $ | 30,613 |  |  | $ | 110,945 |  |  | $ | 34,067 |
Effective tax rate | 8 | % |  | 35 | % |  | 14 | %
Components of deferred tax assets and liabilities | The components of deferred tax assets and liabilities consisted of the following as of December 29, 2018 and December 30, 2017:
| As of
| December 29, 2018 |  | December 30, 2017
| (In thousands)
Deferred tax assets: |  |  |
Tax credit carryforwards | $ | 197,524 |  |  | $ | 164,687 |
Reserves and accruals | 43,522 |  |  | 42,357 |
Intangible assets | 12,096 |  |  | 13,112 |
Capitalized research and development expense for income tax purposes | 6,975 |  |  | 10,621 |
Operating loss carryforwards | 15,347 |  |  | 20,650 |
Deferred income | 6,580 |  |  | 12,178 |
Capital loss carryforwards | 20,342 |  |  | 20,266 |
Stock-based compensation costs | 15,329 |  |  | 15,782 |
Depreciation and amortization | 8,759 |  |  | 7,665 |
Investments | 2,900 |  |  | 3,201 |
Total deferred tax assets | 329,374 |  |  | 310,519 |
Valuation allowance | (108,724 | ) |  | (95,491 | )
Net deferred tax assets | 220,650 |  |  | 215,028 |
Deferred tax liabilities: |  |  |
Intangible assets | (36,194 | ) |  | (36,683 | )
Undistributed foreign earnings | (27,627 | ) |  | (23,563 | )
Other | (2,497 | ) |  | (2,730 | )
Total deferred tax liabilities | (66,318 | ) |  | (62,976 | )
Total net deferred tax assets | $ | 154,332 |  |  | $ | 152,052 |
Summary of operating loss carryforward | As of December 29, 2018, Cadence’s operating loss carryforwards were as follows:
| Amount |  | Expiration Periods
| (In thousands) |  |
Federal | $ | 1,374 |  |  | from 2021 through 2029
California | 175,541 |  |  | from 2019 through 2037
Other states (tax effected, net of federal benefit) | 2,333 |  |  | from 2019 through 2037
Foreign (tax effected) | 293 |  |  | from 2025 through indefinite
Summary of tax credit carryforwards | As of December 29, 2018, Cadence had tax credit carryforwards of:
| Amount |  | Expiration Periods
| (In thousands) |  |
Federal* | $ | 108,934 |  |  | from 2023 through 2038
California | 61,473 |  |  | indefinite
Other states | 10,445 |  |  | from 2019 through 2038
Foreign | 16,672 |  |  | from 2019 through 2038
_____________ *Certain of Cadence’s foreign tax credits have yet to be realized and as a result do not yet have an expiration period.
Earliest tax years open to examination by jurisdiction | As of December 29, 2018 Cadence’s earliest tax years that remain open to examination and the assessment of additional tax include:
Jurisdiction |  | Earliest Tax Year Open to Examination
United States - Federal |  | 2015
United States - California |  | 2014
Unrecognized tax benefits roll forward | The changes in Cadence’s gross amount of unrecognized tax benefits during fiscal 2018, 2017 and 2016 are as follows:
| 2018 |  | 2017 |  | 2016
| (In thousands)
Unrecognized tax benefits at the beginning of the fiscal year | $ | 110,179 |  |  | $ | 98,540 |  |  | $ | 87,820 |
Gross amount of the increases (decreases) in unrecognized tax benefits of tax positions taken during a prior year* | (4,183 | ) |  | 688 |  |  | (155 | )
Gross amount of the increases in unrecognized tax benefits as a result of tax positions taken during the current year | 2,370 |  |  | 13,141 |  |  | 11,342 |
Reductions to unrecognized tax benefits resulting from the lapse of the applicable statute of limitations | (5,179 | ) |  | (3,028 | ) |  | (149 | )
Effect of foreign currency translation | (1,330 | ) |  | 838 |  |  | (318 | )
Unrecognized tax benefits at the end of the fiscal year | $ | 101,857 |  |  | $ | 110,179 |  |  | $ | 98,540 |
Total amounts of unrecognized tax benefits that, if upon resolution of the uncertain tax positions would reduce Cadence’s effective tax rate | $ | 58,022 |  |  | $ | 63,108 |  |  | $ | 56,248 |
_____________ * Includes unrecognized tax benefits of tax positions recorded in connection with acquisitions
Interest and penalties recognized in consolidated income statements and balance sheets | The total amounts of interest, net of tax, and penalties recognized in the consolidated income statements as provision for income taxes for fiscal 2018, 2017 and 2016 were as follows:
| 2018 |  | 2017 |  | 2016
| (In thousands)
Interest | $ | 585 |  |  | $ | 1,865 |  |  | $ | 1,166 |
Penalties | 342 |  |  | 218 |  |  | 3 |
The total amounts of gross accrued interest and penalties recognized in the consolidated balance sheets as of December 29, 2018 and December 30, 2017 were as follows:
| As of
| December 29, 2018 |  | December 30, 2017
| (In thousands)
Interest | $ | 2,699 |  |  | $ | 2,511 |
Penalties | 10 |  |  | 151 |

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