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v3.21.1

Income Taxes (Tables) | 12 Months Ended
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Jan. 02, 2021
Income Tax Disclosure [Abstract] |
Income before provision for income taxes | Cadence’s income before provision (benefit) for income taxes included income from the United States and from foreign subsidiaries for fiscal 2020, 2019 and 2018, was as follows:
| 2020 |  | 2019 |  | 2018
| (In thousands)
United States | $ | 256,032 |  |  | $ | 139,306 |  |  | $ | 58,963 |
Foreign subsidiaries | 376,716 |  |  | 339,662 |  |  | 317,427 |
Total income before provision (benefit) for income taxes | $ | 632,748 |  |  | $ | 478,968 |  |  | $ | 376,390 |
Components of income taxes provision | Cadence’s provision (benefit) for income taxes was comprised of the following items for fiscal 2020, 2019 and 2018:
| 2020 |  | 2019 |  | 2018
| (In thousands)
Current: |  |  |  |  |
Federal | $ | 15,083 |  |  | $ | 15,282 |  |  | $ | 902 |
State and local | 6,401 |  |  | 2,716 |  |  | (1,270) |
Foreign | 46,737 |  |  | 48,729 |  |  | 42,657 |
Total current | 68,221 |  |  | 66,727 |  |  | 42,289 |
Deferred: |  |  |  |  |
Federal | (11,155) |  |  | (9,001) |  |  | (10,324) |
State and local | (24,186) |  |  | 6,593 |  |  | 886 |
Foreign | 9,224 |  |  | (574,330) |  |  | (2,238) |
Total deferred | (26,117) |  |  | (576,738) |  |  | (11,676) |
Total provision (benefit) for income taxes | $ | 42,104 |  |  | $ | (510,011) |  |  | $ | 30,613 |
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 (benefit) for income taxes for fiscal 2020, 2019, and 2018 as follows:
| 2020 |  | 2019 |  | 2018
| (In thousands)
Provision computed at federal statutory income tax rate | $ | 132,877 |  |  | $ | 100,583 |  |  | $ | 79,042 |
State and local income tax, net of federal tax effect | 20,936 |  |  | 23,221 |  |  | 15,540 |
Intercompany transfers of intangible property rights | — |  |  | (575,618) |  |  | — |
Foreign income tax rate differential | (32,589) |  |  | (37,786) |  |  | (37,031) |
Deemed repatriation transition tax | — |  |  | — |  |  | (1,409) |
U.S. tax on foreign entities | 43,615 |  |  | 57,225 |  |  | 28,846 |
Stock-based compensation | (51,226) |  |  | (29,785) |  |  | (13,539) |
Change in deferred tax asset valuation allowance | (9,101) |  |  | 16,796 |  |  | 13,234 |
Tax credits | (89,684) |  |  | (87,793) |  |  | (72,815) |
Non-deductible research and development expense | 5,163 |  |  | 4,363 |  |  | 4,700 |
Tax effects of intra-entity transfer of assets | 392 |  |  | 895 |  |  | 79 |
Withholding taxes | 17,189 |  |  | 15,865 |  |  | 11,535 |
Tax settlements, foreign | 1,193 |  |  | 458 |  |  | — |
Increase (decrease) in unrecognized tax benefits | 159 |  |  | (1,303) |  |  | (1,545) |
Other | 3,180 |  |  | 2,868 |  |  | 3,976 |
Provision (benefit) for income taxes | $ | 42,104 |  |  | $ | (510,011) |  |  | $ | 30,613 |
Effective tax rate | 7 | % |  | (106) | % |  | 8 | %
Components of deferred tax assets and liabilities | The components of deferred tax assets and liabilities consisted of the following as of January 2, 2021 and December 28, 2019:
| As of
| January 2, 2021 |  | December 28, 2019
| (In thousands)
Deferred tax assets: |  |  |
Tax credit carryforwards | $ | 197,436 |  |  | $ | 206,008 |
Reserves and accruals | 60,272 |  |  | 47,562 |
Intangible assets | 578,267 |  |  | 583,323 |
Capitalized research and development expense for income tax purposes | 39,427 |  |  | 18,477 |
Operating loss carryforwards | 5,935 |  |  | 6,201 |
Deferred income | 21,170 |  |  | 16,704 |
Capital loss carryforwards | 16,944 |  |  | 17,320 |
Stock-based compensation costs | 14,656 |  |  | 15,097 |
Depreciation and amortization | 4,402 |  |  | 8,721 |
Investments | 2,521 |  |  | 2,459 |
Lease liability | 31,278 |  |  | 25,016 |
Total deferred tax assets | 972,308 |  |  | 946,888 |
Valuation allowance | (116,419) |  |  | (125,520) |
Net deferred tax assets | 855,889 |  |  | 821,368 |
Deferred tax liabilities: |  |  |
Intangible assets | (44,549) |  |  | (24,907) |
Undistributed foreign earnings | (41,957) |  |  | (31,916) |
ROU assets | (31,278) |  |  | (25,016) |
Other | (10,749) |  |  | (8,350) |
Total deferred tax liabilities | (128,533) |  |  | (90,189) |
Total net deferred tax assets | $ | 727,356 |  |  | $ | 731,179 |
Summary of operating loss carryforward | As of January 2, 2021, Cadence’s operating loss carryforwards were as follows:
| Amount |  | Expiration Periods
| (In thousands) |  |
Federal | $ | 743 |  |  | from 2021 through 2029
California | 27,093 |  |  | from 2030 through 2039
Other states (tax effected, net of federal benefit) | 1,564 |  |  | from 2021 through 2037
Foreign (tax effected) | 2,322 |  |  | from 2025 through indefinite
Summary of tax credit carryforwards | As of January 2, 2021, Cadence had tax credit carryforwards of:
| Amount |  | Expiration Periods
| (In thousands) |  |
Federal* | $ | 96,417 |  |  | from 2038 through 2040
California | 63,130 |  |  | indefinite
Other states | 12,023 |  |  | from 2021 through indefinite
Foreign | 25,866 |  |  | from 2035 through indefinite
_____________ *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 January 2, 2021, 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 |  | 2016
Ireland |  | 2016
Unrecognized tax benefits roll forward | The changes in Cadence’s gross amount of unrecognized tax benefits during fiscal 2020, 2019 and 2018 are as follows:
| 2020 |  | 2019 |  | 2018
| (In thousands)
Unrecognized tax benefits at the beginning of the fiscal year | $ | 106,041 |  |  | $ | 101,857 |  |  | $ | 110,179 |
Gross amount of the increases (decreases) in unrecognized tax benefits of tax positions taken during a prior year* | 5,037 |  |  | (3,143) |  |  | (4,183) |
Gross amount of the increases in unrecognized tax benefits as a result of tax positions taken during the current year | 3,344 |  |  | 8,951 |  |  | 2,370 |
Amount of decreases in unrecognized tax benefits relating to settlements with taxing authorities, including the utilization of tax attributes | (1,316) |  |  | (380) |  |  | — |
Reductions to unrecognized tax benefits resulting from the lapse of the applicable statute of limitations | (676) |  |  | (1,692) |  |  | (5,179) |
Effect of foreign currency translation | 591 |  |  | 448 |  |  | (1,330) |
Unrecognized tax benefits at the end of the fiscal year | $ | 113,021 |  |  | $ | 106,041 |  |  | $ | 101,857 |
Total amounts of unrecognized tax benefits that, if upon resolution of the uncertain tax positions would reduce Cadence’s effective tax rate | $ | 66,010 |  |  | $ | 61,527 |  |  | $ | 58,022 |
_____________ * 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 (benefit) for income taxes for fiscal 2020, 2019 and 2018 were as follows:
| 2020 |  | 2019 |  | 2018
| (In thousands)
Interest | $ | 473 |  |  | $ | 490 |  |  | $ | 585 |
Penalties | (3) |  |  | 19 |  |  | 342 |
The total amounts of gross accrued interest and penalties recognized in the consolidated balance sheets as of January 2, 2021 and December 28, 2019 were as follows:
| As of
| January 2, 2021 |  | December 28, 2019
| (In thousands)
Interest | $ | 3,555 |  |  | $ | 3,500 |
Penalties | 12 |  |  | 12 |

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