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Income Taxes | 12 Months Ended
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Dec. 29, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES Income before taxes and the provision for taxes consisted of the following:
Fiscal Years | 2017 |  | 2016 |  | 2015
(In millions) |  |  |  |  |
Income before taxes: |  |  |  |  |
United States | $ | 38.0 |  |  | $ | 68.4 |  |  | $ | 55.6 |
Foreign | 221.1 |  |  | 108.3 |  |  | 96.2 |
Total | $ | 259.1 |  |  | $ | 176.7 |  |  | $ | 151.8 |
Provision for taxes: |  |  |  |  |
US Federal: |  |  |  |  |
Current | $ | 98.6 |  |  | $ | 34.0 |  |  | $ | 47.5 |
Deferred | 0.8 |  |  | (14.3 | ) |  | (23.0 | )
| 99.4 |  |  | 19.7 |  |  | 24.5 |
US State: |  |  |  |  |
Current | 4.5 |  |  | 3.5 |  |  | 5.7 |
Deferred | (1.1 | ) |  | 0.6 |  |  | (2.8 | )
| 3.4 |  |  | 4.1 |  |  | 2.9 |
Foreign: |  |  |  |  |
Current | 42.7 |  |  | 28.8 |  |  | 25.4 |
Deferred | (7.6 | ) |  | (8.1 | ) |  | (21.7 | )
| 35.1 |  |  | 20.7 |  |  | 3.7 |
Income tax provision | $ | 137.9 |  |  | $ | 44.5 |  |  | $ | 31.1 |
Effective tax rate | 53 | % |  | 25 | % |  | 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 | 2017 |  | 2016 |  | 2015
Statutory federal income tax rate | 35 | % |  | 35 | % |  | 35 | %
Increase (reduction) in tax rate resulting from: |  |  |  |  |
Foreign income taxed at lower rates | (15 | )% |  | (10 | )% |  | (11 | )%
US State income taxes | 1 | % |  | 2 | % |  | 1 | %
US Federal research and development credits | (3 | )% |  | (3 | )% |  | (3 | )%
Stock-based compensation | 2 | % |  | 3 | % |  | 1 | %
Excess tax benefit related to stock-based compensation | (3 | )% |  | — | % |  | — | %
Effect of U.S. tax law change | 33 | % |  | — | % |  | — | %
Foreign audit reserve release | — | % |  | — | % |  | (2 | )%
Divestiture | — | % |  | (5 | )% |  | — | %
Valuation allowance release - foreign | — | % |  | — | % |  | (3 | )%
Other | 3 | % |  | 3 | % |  | 2 | %
Effective tax rate | 53 | % |  | 25 | % |  | 20 | %
On December 22, 2017, the U.S. government enacted the 2017 Tax Cuts and Jobs Act (the "Tax Act"). The effective tax rate in fiscal 2017 increased compared to 2016 primarily due to the impact of Tax Act as discussed below and a tax benefit from a divestiture of a non-strategic business in 2016, partially offset by a favorable change in the geographic mix of pretax income and stock-based compensation tax benefits resulting from the adoption of FASB guidance for stock-based compensation. 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 Tax Act imposes a one-time mandatory transition tax on accumulated foreign earnings, which resulted a provisional amount of $126.0 million for the Company. In accordance with 2017 Tax Act taxation of foreign accumulated earnings and profits, the Company reversed its deferred tax liabilities associated with foreign earnings and made appropriate adjustments to certain tax reserves. This resulted in a provisional tax benefit of $46.7 million. The Tax Act reduces the corporate tax rate from 35% to 21% effective January 1, 2018. Since the reduced tax rate has been enacted in 2017, the Company re-measured its ending deferred tax assets and liabilities to reflect the realization at the new 21% corporate tax rate. The re-measurement resulted in a provisional $3.3 million charge to reduce its U.S. deferred tax assets. Finally, a provisional amount of $2.4 million in expense was recorded for state tax and foreign withholding taxes. In addition, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Act (“SAB 118”), which allows the Company to record provisional amounts during a measurement period not to extend beyond one year from the enactment date. Since the Tax Act was passed late in the fourth quarter of 2017, ongoing guidance and accounting interpretation are expected over the next year, and significant data and analysis is required to finalize amounts recorded pursuant to the Tax Act, the Company considers the accounting of the transition tax, deferred tax re-measurements, indefinite reinvestment assertion, and other items to be incomplete due to the forthcoming guidance and its ongoing analysis of final year-end data and tax positions. Also, the Company has not yet determined its policy election as to whether it will recognize deferred taxes for basis differences expected to reverse as Global Intangible Low Taxed Income (“GILTI”) or whether GILTI will be accounted for as a period cost if and when incurred. The Company expects to complete its analysis within the measurement period in accordance with SAB 118. 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 | 2017 |  | 2016
(In millions) |  |  |
Deferred tax liabilities: |  |  |
Purchased intangibles | $ | 69.8 |  |  | $ | 91.9 |
Depreciation and amortization | 13.1 |  |  | 11.7 |
US residual tax on foreign earnings | — |  |  | 11.3 |
Total deferred tax liabilities | 82.9 |  |  | 114.9 |
Deferred tax assets: |  |  |
Inventory valuation differences | 4.6 |  |  | 12.9 |
Expenses not currently deductible | 18.1 |  |  | 27.7 |
US federal tax credit carryforwards | 0.2 |  |  | 0.3 |
Deferred revenue | 5.8 |  |  | 6.9 |
US state tax credit carryforwards | 21.7 |  |  | 15.1 |
Accrued warranty | 2.0 |  |  | 3.1 |
US federal net operating loss carryforwards | 6.4 |  |  | 3.8 |
Foreign net operating loss carryforwards | 20.2 |  |  | 31.2 |
Stock-based compensation | 21.5 |  |  | 31.9 |
Other | (4.4 | ) |  | 4.1 |
Total deferred tax assets | 96.1 |  |  | 137.0 |
Valuation allowance | (25.2 | ) |  | (30.6 | )
Total deferred tax assets | 70.9 |  |  | 106.4 |
Total net deferred tax liabilities | $ | (12.0 | ) |  | $ | (8.5 | )
Reported as: |  |  |
Non-current deferred income tax assets | 28.4 |  |  | 30.3 |
Non-current deferred income tax liabilities | (40.4 | ) |  | (38.8 | )
Net deferred tax liabilities | $ | (12.0 | ) |  | $ | (8.5 | )
At the end of fiscal 2017, the Company has federal and foreign net operating loss carryforwards, or NOLs, of approximately $31.3 million and $100.2 million, respectively. The federal NOLs will begin to expire in 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 after federal tax benefit of approximately $0.4 million and $24.2 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. The total amount of the unrecognized tax benefits at the end of fiscal 2017 was $82.4 million. A reconciliation of gross unrecognized tax benefit is as follows:
Fiscal Years | 2017 |  | 2016 |  | 2015
(In millions) |  |  |  |  |
Beginning gross balance | $ | 72.9 |  |  | $ | 59.0 |  |  | $ | 51.4 |
Increase (decrease) related to prior years' tax positions | (0.6 | ) |  | 7.5 |  |  | 6.0 |
Increase related to current year tax positions | 12.1 |  |  | 9.9 |  |  | 6.2 |
Lapse of statute of limitations | (1.6 | ) |  | (1.4 | ) |  | (1.5 | )
Settlement with taxing authorities | (0.4 | ) |  | (2.1 | ) |  | (3.1 | )
Ending gross balance | $ | 82.4 |  |  | $ | 72.9 |  |  | $ | 59.0 |
The Company's total unrecognized tax benefits that, if recognized, would affect its effective tax rate were $68.5 million and $60.5 million at the end of fiscal 2017 and 2016, 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. In January 2018, the Company and IRS reached agreement to settle certain aspects of the assessments constituting $15.8 million of the total $67.0 million assessment. The Company’s reserves were adequate to cover the agreement. The Company does not agree with the IRS position on the remaining issues, intends to vigorously contest the IRS position, 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 year 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 2017 and 2016, the Company had accrued $12.7 million and $9.3 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 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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