v3.6.0.2

Income Taxes | 12 Months Ended
--- | ---
Dec. 30, 2016
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES Income before taxes and the provision for taxes consisted of the following:
Fiscal Years | 2016 |  | 2015 |  | 2014
(In millions) |  |  |  |  |
Income before taxes: |  |  |  |  |
United States | $ | 68.4 |  |  | $ | 55.6 |  |  | $ | 99.3 |
Foreign | 108.3 |  |  | 96.2 |  |  | 166.7 |
Total | $ | 176.7 |  |  | $ | 151.8 |  |  | $ | 266.0 |
Provision for taxes: |  |  |  |  |
US Federal: |  |  |  |  |
Current | $ | 34.0 |  |  | $ | 47.5 |  |  | $ | 45.7 |
Deferred | (14.3 | ) |  | (23.0 | ) |  | (11.7 | )
| 19.7 |  |  | 24.5 |  |  | 34.0 |
US State: |  |  |  |  |
Current | 3.5 |  |  | 5.7 |  |  | 7.7 |
Deferred | 0.6 |  |  | (2.8 | ) |  | (0.9 | )
| 4.1 |  |  | 2.9 |  |  | 6.8 |
Foreign: |  |  |  |  |
Current | 28.8 |  |  | 25.4 |  |  | 25.3 |
Deferred | (8.1 | ) |  | (21.7 | ) |  | (14.0 | )
| 20.7 |  |  | 3.7 |  |  | 11.3 |
Income tax provision | $ | 44.5 |  |  | $ | 31.1 |  |  | $ | 52.1 |
Effective tax rate | 25 | % |  | 20 | % |  | 20 | %
The difference between the tax provision at the statutory federal income tax rate and the tax provision as a percentage of income before taxes (effective tax rate) was as follows:
Fiscal Years | 2016 |  | 2015 |  | 2014
Statutory federal income tax rate | 35 | % |  | 35 | % |  | 35 | %
Increase (reduction) in tax rate resulting from: |  |  |  |  |
Foreign income taxed at lower rates | (10 | )% |  | (11 | )% |  | (18 | )%
US State income taxes | 2 | % |  | 1 | % |  | 2 | %
US Federal research and development credits | (3 | )% |  | (3 | )% |  | (1 | )%
Stock-based compensation | 3 | % |  | 1 | % |  | 1 | %
Foreign audit reserve release | — | % |  | (2 | )% |  | — | %
Divestiture | (5 | )% |  | — | % |  | — | %
Valuation allowance release - foreign | — | % |  | (3 | )% |  | — | %
Other | 3 | % |  | 2 | % |  | 1 | %
Effective tax rate | 25 | % |  | 20 | % |  | 20 | %
The effective tax rate in fiscal 2016 increased compared to 2015 primarily due to the closing of a foreign audit and valuation allowance release in 2015, increase in nondeductible expense, and a change in the geographic mix of pretax income, partially offset by a tax benefit from a divestiture of a non-strategic business. The effective tax rate in fiscal 2015 remained consistent with 2014. However, certain specific items affecting the effective tax rate did change. These included a change in geographic mix of pretax income, which was partially offset by tax benefits resulting from the closing of a foreign tax audit, valuation allowance releases and an increase in federal research and development credit. Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of the Company’s deferred tax assets and liabilities are as follows:
At the End of Fiscal Year | 2016 |  | 2015
(In millions) |  |  |
Deferred tax liabilities: |  |  |
Purchased intangibles | $ | 91.9 |  |  | $ | 122.6 |
Depreciation and amortization | 11.7 |  |  | 11.0 |
US residual tax on foreign earnings | 11.3 |  |  | 12.2 |
Total deferred tax liabilities | 114.9 |  |  | 145.8 |
Deferred tax assets: |  |  |
Inventory valuation differences | 12.9 |  |  | 11.5 |
Expenses not currently deductible | 27.7 |  |  | 26.2 |
US federal tax credit carryforwards | 0.3 |  |  | 0.6 |
Deferred revenue | 6.9 |  |  | 6.6 |
US state tax credit carryforwards | 15.1 |  |  | 16.4 |
Accrued warranty | 3.1 |  |  | 3.4 |
US federal net operating loss carryforwards | 3.8 |  |  | 5.5 |
Foreign net operating loss carryforwards | 31.2 |  |  | 41.7 |
Stock-based compensation | 31.9 |  |  | 29.6 |
Other | 4.1 |  |  | 9.0 |
Total deferred tax assets | 137.0 |  |  | 150.5 |
Valuation allowance | (30.6 | ) |  | (34.9 | )
Total deferred tax assets | 106.4 |  |  | 115.6 |
Total net deferred tax liabilities | $ | (8.5 | ) |  | $ | (30.2 | )
Reported as: |  |  |
Non-current deferred income tax assets | 30.3 |  |  | 21.5 |
Non-current deferred income tax liabilities | (38.8 | ) |  | (51.7 | )
Net deferred tax liabilities | $ | (8.5 | ) |  | $ | (30.2 | )
In the fourth quarter of 2015, the Company adopted new accounting guidance for balance sheet classification of deferred taxes, which requires that all deferred income tax assets and liabilities be classified as non-current in the balance sheet. The guidance was adopted on a prospective basis and, therefore, prior periods were not retrospectively adjusted. At the end of fiscal 2016, the Company has federal and foreign net operating loss carryforwards, or NOLs, of approximately $13.6 million and $147.6 million, respectively. The federal NOLs expire beginning year 2021. There is, generally, no expiration for the foreign NOLs. Utilization of the Company’s federal and state NOLs is subject to annual limitations in accordance with the applicable tax code. The Company has determined that it is more likely than not that the Company will not realize a portion of the foreign NOLs and, accordingly, a valuation allowance has been established for such amount. The Company has Federal and California research and development credit carryforwards of approximately $0.3 million and $17.1 million, respectively. The federal tax credit carryforwards will expire beginning 2030. The California research tax credits have indefinite carryforward period. The Company believes that it is more likely than not that the Company will not realize a portion of the California research and development credit carryforwards and, accordingly, a valuation allowance has been established for such amount. At the end of fiscal 2016, the Company’s foreign subsidiaries had approximately $869.7 million of accumulated undistributed earnings that are intended to be indefinitely reinvested outside the U.S. and, accordingly, no provision for U.S. federal and state income taxes have been provided thereon. If such earnings were to be distributed in the form of dividends or otherwise, the Company would have to recognize additional tax liability of approximately $258.5 million. The total amount of the unrecognized tax benefits at the end of fiscal 2016 was $72.9 million. A reconciliation of gross unrecognized tax benefit is as follows:
At the End of Fiscal Year | 2016 |  | 2015 |  | 2014
(In millions) |  |  |  |  |
Beginning gross balance | $ | 59.0 |  |  | $ | 51.4 |  |  | $ | 44.1 |
Increase related to prior years' tax positions | 7.5 |  |  | 6.0 |  |  | 0.8 |
Increase related to current year tax positions | 9.9 |  |  | 6.2 |  |  | 7.5 |
Lapse of statute of limitations | (1.4 | ) |  | (1.5 | ) |  | (1.0 | )
Settlement with taxing authorities | (2.1 | ) |  | (3.1 | ) |  | — |
Ending gross balance | $ | 72.9 |  |  | $ | 59.0 |  |  | $ | 51.4 |
The Company's total unrecognized tax benefits that, if recognized, would affect its effective tax rate were $60.5 million and $52.7 million at the end of fiscal 2016 and 2015, respectively. The Company and its subsidiaries are subject to U.S. federal, state, and foreign income taxes. The Company has substantially concluded all U.S. federal income tax audits for years through 2009. State income tax matters have been concluded for years through 2009 and non-U.S. income tax matters have been concluded for years through 2005. The Company is currently in various stages of multiple year examinations by federal, state, and foreign (multiple jurisdictions) taxing authorities. While the Company generally believes it is more likely than not that its tax positions will be sustained, it is reasonably possible that future obligations related to these matters could arise. The Company believes that its reserves are adequate to cover any potential assessments that may result from the examinations and negotiations. In the first quarter of fiscal 2015, the Company received a Notice of Proposed Adjustment from the IRS for the fiscal years 2010 and 2011. The proposed adjustments primarily relate to the valuations of intercompany transfers of acquired intellectual property. The assessments of tax and penalties for the years in question total $67.0 million. The Company does not agree with the IRS position and has filed a protest with the IRS Appeals Office in April 2015. The IRS appeals process commenced in March 2016. Although the Company continues to believe in the merits of its positions, during the fourth quarter of fiscal 2016, the Company submitted a written proposal to the IRS to settle certain aspects of the assessments constituting $15.8 million of the total $67.0 million assessment. The Company intends to vigorously contest the IRS position on the remaining items, and believes that its reserves are adequate to cover any potential assessments. Although timing of the resolution and/or closure of audits is not certain, the Company believes it is reasonably possible that its gross unrecognized tax benefits could decrease (whether by payment, release or a combination of both) in the next 12 months by up to $6.2 million primarily related to the IRS partial settlement discussed above. The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company’s liability for unrecognized tax benefits including interest and penalties was recorded in Other non-current liabilities in the accompanying Consolidated Balance Sheets. At the end of fiscal 2016 and 2015, the Company had accrued $9.3 million and $6.7 million, respectively, for payment of interest and penalties.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32537-109319 + Details
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