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Income Taxes | 12 Months Ended
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Dec. 26, 2015
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The components of income from continuing operations before income taxes and the related provision for income taxes are presented below:
| Fiscal Year
| 2015 |  | 2014 |  | 2013
| (in thousands)
Income from continuing operations before income taxes: |  |  |  |  |  |
U.S. | $ | 76,157 |  |  | $ | 71,002 |  |  | $ | 39,900 |
Non-U.S. | 119,271 |  |  | 106,593 |  |  | 98,427 |
| $ | 195,428 |  |  | $ | 177,595 |  |  | $ | 138,327 |
Income tax provision: |  |  |  |  |  |
Current: |  |  |  |  |  |
Federal | 23,687 |  |  | 13,733 |  |  | 10,832 |
Foreign | 8,572 |  |  | 20,364 |  |  | 18,370 |
State | 6,819 |  |  | 4,746 |  |  | 4,240 |
Total current | 39,078 |  |  | 38,843 |  |  | 33,442 |
Deferred: |  |  |  |  |  |
Federal | 1,790 |  |  | 12,982 |  |  | 5,468 |
Foreign | 3,064 |  |  | (4,672 | ) |  | (6,431 | )
State | (541 | ) |  | 518 |  |  | 432 |
Total deferred | 4,313 |  |  | 8,828 |  |  | (531 | )
| $ | 43,391 |  |  | $ | 47,671 |  |  | $ | 32,911 |
The components of deferred tax assets and liabilities are as follows:
| December 26, 2015 |  | December 27, 2014
| (in thousands)
Deferred tax assets: |  |  |
Compensation | $ | 55,259 |  |  | $ | 49,702 |
Accruals and reserves | 8,941 |  |  | 7,061 |
Inventory reserves and valuations | 2,022 |  |  | 1,940 |
Financing related | 902 |  |  | 993 |
Net operating loss and credit carryforwards | 35,233 |  |  | 39,927 |
Other | 2,593 |  |  | 4,426 |
Valuation allowance | (6,112 | ) |  | (5,866 | )
Total deferred tax assets: | 98,838 |  |  | 98,183 |
Deferred tax liabilities: |  |  |
Goodwill and other intangibles | (73,208 | ) |  | (52,029 | )
Depreciation related | (23,664 | ) |  | (23,549 | )
Investments in limited partnerships | (3,570 | ) |  | (4,067 | )
Foreign withholding taxes | (6,590 | ) |  | — |
Total deferred tax liabilities: | (107,032 | ) |  | (79,645 | )
Net deferred taxes | $ | (8,194 | ) |  | $ | 18,538 |
Reconciliations of the statutory U.S. Federal income tax rate to effective tax rates are as follows:
| Fiscal Year
| 2015 |  | 2014 |  | 2013
U.S. statutory income tax rate | 35.0 | % |  | 35.0 | % |  | 35.0 | %
Foreign tax rate differences | (8.6 | )% |  | (9.4 | )% |  | (8.0 | )%
State income taxes, net of Federal tax benefit | 1.9 | % |  | 1.9 | % |  | 1.6 | %
Research tax credits and enhanced deductions | (2.6 | )% |  | (4.1 | )% |  | (6.6 | )%
Enacted tax rate changes | (1.5 | )% |  | — | % |  | (0.4 | )%
Impact of tax uncertainties | (5.2 | )% |  | (0.7 | )% |  | 1.0 | %
Foreign withholding taxes | 3.4 | % |  | — | % |  | — | %
Impact of acquisitions and restructuring | (2.0 | )% |  | 1.6 | % |  | 0.2 | %
Other | 1.8 | % |  | 2.5 | % |  | 1.0 | %
| 22.2 | % |  | 26.8 | % |  | 23.8 | %
The tax rate benefit for the impact of tax uncertainties is primarily related to a $10.4 million reduction in unrecognized tax benefits and related interest due to the expiration of the statute of limitations associated with pre-acquisition tax positions on the forgiveness of debt. The tax rate benefit for enacted tax rate changes is primarily associated with a reduction in the U.K.’s statutory tax rates. The tax benefit associated with a $9.8 million non-taxable bargain purchase gain related to the acquisition of Sunrise is included within the impact of acquisitions and restructuring line of the rate reconciliation above. As of December 26, 2015, the Company had foreign net operating loss and tax credit carryforwards of $34.6 million, as compared to $39.8 million as of December 27, 2014. Of this amount, $4.3 million will expire beginning after 2015, $18.7 million will begin to expire in 2032 and beyond, and the remainder of $11.6 million can be carried forward indefinitely. In accordance with Canadian Federal tax law, the Company claims Scientific Research and Experimental Development (SR&ED) credits on qualified research and development costs incurred in its Safety Assessment facility in Montreal, and currently maintains $18.7 million in credit carryforwards, which will begin to expire in 2032. Additionally, the Company records a benefit to operating income for research and development credits in both Quebec and the U.K. related to its Safety Assessment and Early Discovery facilities. The Company has fully recognized its deferred tax assets on the belief that it is more likely than not that they will be realized. The only exceptions relate to deferred tax assets primarily for net operating losses in Hong Kong, Luxembourg and the Netherlands, capital losses in the U.S. and Canada, and fixed assets in the U.K. The valuation allowance increased by $0.2 million from $5.9 million as of December 27, 2014 to $6.1 million as of December 26, 2015. A reconciliation of the Company’s beginning and ending unrecognized income tax benefits is as follows:
| Fiscal Year
| 2015 |  | 2014 |  | 2013
| (in thousands)
Beginning balance | $ | 34,627 |  |  | $ | 18,475 |  |  | $ | 30,996 |
Additions to tax positions for current year | 2,362 |  |  | 1,700 |  |  | 2,009 |
Additions to tax positions for prior years | 3,028 |  |  | 18,502 |  |  | 1,709 |
Reductions to tax positions for current year | — |  |  | — |  |  | — |
Reductions to tax positions for prior years | (3,991 | ) |  | (3,722 | ) |  | (732 | )
Settlements | (1,946 | ) |  | (308 | ) |  | (15,246 | )
Expiration of statute of limitations | (10,742 | ) |  | (20 | ) |  | (261 | )
Ending balance | $ | 23,338 |  |  | $ | 34,627 |  |  | $ | 18,475 |
The $11.3 million decrease in unrecognized income tax benefits during the fiscal year 2015 is primarily attributable to the expiration of the statute of limitations associated with pre-acquisition tax positions on forgiveness of debt. The amount of unrecognized income tax benefits that, if recognized, would favorably impact the effective tax rate was $20.1 million as of December 26, 2015 and $32.3 million as of December 27, 2014. The $12.2 million decrease is primarily attributable to the expiration of the statute of limitations associated with pre-acquisition tax positions on forgiveness of debt. It is reasonably possible as of December 26, 2015 that the liability for unrecognized tax benefits for the uncertain tax position will decrease by $1.9 million, primarily as a result of the outcome of a pending tax ruling. The Company continues to recognize interest and penalties related to unrecognized income tax benefits in income tax expense. The total amount of accrued interest related to unrecognized income tax benefits as of December 26, 2015 and December 27, 2014 was $1.0 million and $1.4 million, respectively. The Company conducts business in a number of tax jurisdictions. As a result, it is subject to tax audits on a regular basis including, but not limited to, such major jurisdictions as the U.S., the U.K., France, Japan, Germany and Canada. With few exceptions, the Company is no longer subject to U.S. and international income tax examinations for years before 2012. The Company and certain of its subsidiaries are currently under audit by various tax authorities in the U.S. and France. The Company does not anticipate resolution of these audits will have a material impact on its financial statements. During 2015, the Company applied with the Internal Revenue Service (IRS) and Canadian Revenue Authority (CRA) for relief pursuant to the competent authority procedure provided in the tax treaty between the U.S. and Canada for transfer pricing tax assessments related to the tax years 2008 through 2012. The Company believes that the controversy will likely be ultimately settled via the competent authority process and accordingly have recorded both a Canadian liability and a U.S. receivable. The actual amounts of the liability for Canadian taxes and the asset for the correlative relief in the U.S. could be different based upon the agreement reached between the IRS and the CRA. On October 21, 2015, the Quebec government enacted Bill 13, which provides for a one-time retroactive benefit to operating income in the fourth quarter of 2015 related to tax years 2012 through 2014 and provides for a corresponding increase to the Company’s effective tax rate. Additionally, the tax law change provides for an ongoing reduction in benefit to operating income and an additional corresponding increase to the Company’s effective tax rate beginning in 2015 and beyond. The cumulative impact of this law change has been reflected in the fourth quarter results. In accordance with the Company’s policy, the undistributed earnings of the Company’s non-U.S. subsidiaries remain indefinitely reinvested outside of the U.S. as of the end of 2015 as they are required to fund needs outside the U.S. and cannot be repatriated in a manner that is substantially tax free. As of December 26, 2015, the earnings of non-U.S. subsidiaries considered to be indefinitely reinvested totaled $547.6 million. No provision for U.S. income taxes has been provided herein. Determination of the amount of unrecognized deferred income tax liabilities on these earnings is not practicable because of the complexities with the hypothetical calculation. Additionally, the amount of liability is dependent on circumstances existing if and when remittance occurs. On December 18, 2015, the U.S. enacted the Consolidated Appropriations Act, which provides for a reinstatement and extension of the controlled foreign corporation look-through rules. This rule allows the Company to access Chinese and Canadian cash in a more tax-efficient manner and utilize the cash outside of the U.S. without triggering residual U.S. tax. As such, in 2015 the Company accrued $6.6 million of foreign withholding taxes to reflect this change.

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