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INCOME TAXES | 12 Months Ended
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Dec. 31, 2016
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
| 2016 |  | 2015 |  | 2014
| (in thousands)
Income from continuing operations before income taxes: |  |  |  |  |  |
U.S. | $ | 59,255 |  |  | $ | 76,157 |  |  | $ | 71,002 |
Non-U.S. | 163,666 |  |  | 119,271 |  |  | 106,593 |
| $ | 222,921 |  |  | $ | 195,428 |  |  | $ | 177,595 |
Income tax provision: |  |  |  |  |  |
Current: |  |  |  |  |  |
Federal | $ | 18,592 |  |  | $ | 23,687 |  |  | $ | 13,733 |
Foreign | 39,829 |  |  | 8,572 |  |  | 20,364 |
State | 5,263 |  |  | 6,819 |  |  | 4,746 |
Total current | 63,684 |  |  | 39,078 |  |  | 38,843 |
Deferred: |  |  |  |  |  |
Federal | 7,206 |  |  | 1,790 |  |  | 12,982 |
Foreign | (4,024 | ) |  | 3,064 |  |  | (4,672 | )
State | (31 | ) |  | (541 | ) |  | 518 |
Total deferred | 3,151 |  |  | 4,313 |  |  | 8,828 |
| $ | 66,835 |  |  | $ | 43,391 |  |  | $ | 47,671 |
The components of deferred tax assets and liabilities are as follows:
| December 31, 2016 |  | December 26, 2015
| (in thousands)
Deferred tax assets: |  |  |
Compensation | $ | 70,863 |  |  | $ | 55,259 |
Accruals and reserves | 8,103 |  |  | 8,941 |
Inventory reserves and valuations | 3,447 |  |  | 2,022 |
Financing related | — |  |  | 902 |
Net operating loss and credit carryforwards | 58,081 |  |  | 35,233 |
Other | 2,921 |  |  | 2,593 |
Valuation allowance | (10,101 | ) |  | (6,112 | )
Total deferred tax assets | 133,314 |  |  | 98,838 |
Deferred tax liabilities: |  |  |
Goodwill and other intangibles | (121,256 | ) |  | (73,208 | )
Financing related | (854 | ) |  | — |
Depreciation related | (32,271 | ) |  | (23,664 | )
Venture capital investments | (5,084 | ) |  | (3,570 | )
Foreign withholding taxes | (821 | ) |  | (6,590 | )
Total deferred tax liabilities | (160,286 | ) |  | (107,032 | )
Net deferred taxes | $ | (26,972 | ) |  | $ | (8,194 | )
Reconciliations of the statutory U.S. Federal income tax rate to effective tax rates are as follows:
| Fiscal Year
| 2016 |  | 2015 |  | 2014
U.S. statutory income tax rate | 35.0 | % |  | 35.0 | % |  | 35.0 | %
Foreign tax rate differences | (10.3 | )% |  | (8.6 | )% |  | (9.4 | )%
State income taxes, net of Federal tax benefit | 1.6 | % |  | 1.9 | % |  | 1.9 | %
Research tax credits and enhanced deductions | (3.5 | )% |  | (2.6 | )% |  | (4.1 | )%
Enacted tax rate changes | (0.8 | )% |  | (1.5 | )% |  | — | %
Impact of tax uncertainties | 0.2 | % |  | (5.2 | )% |  | (0.7 | )%
Foreign withholding taxes | 2.0 | % |  | 3.4 | % |  | — | %
Impact of acquisitions and restructuring | 1.8 | % |  | (2.0 | )% |  | 1.6 | %
Other | 4.0 | % |  | 1.8 | % |  | 2.5 | %
Effective income tax rate | 30.0 | % |  | 22.2 | % |  | 26.8 | %
The tax rate benefit for enacted tax rate changes is primarily associated with a reduction in the U.K.’s statutory tax rates. As of December 31, 2016, the Company had foreign net operating loss and tax credit carryforwards of $58.5 million, as compared to $34.6 million as of December 26, 2015. Of this amount, $5.2 million will expire beginning after 2016, $40.5 million will begin to expire in 2028 and beyond, and the remainder of $12.8 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 $16.8 million in credit carryforwards, which will begin to expire in 2033. 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 France, Hong Kong, Luxembourg, the Netherlands and Germany, capital losses in the U.S., and fixed assets in the U.K. The valuation allowance increased by $4.0 million from $6.1 million as of December 26, 2015 to $10.1 million as of December 31, 2016. A reconciliation of the Company’s beginning and ending unrecognized income tax benefits is as follows:
| Fiscal Year
| 2016 |  | 2015 |  | 2014
| (in thousands)
Beginning balance | $ | 23,338 |  |  | $ | 34,627 |  |  | $ | 18,475 |
Additions to tax positions for current year | 2,194 |  |  | 2,362 |  |  | 1,700 |
Additions to tax positions for prior years | 2,035 |  |  | 3,028 |  |  | 18,502 |
Reductions to tax positions for current year | — |  |  | — |  |  | — |
Reductions to tax positions for prior years | (1,866 | ) |  | (3,991 | ) |  | (3,722 | )
Settlements | (918 | ) |  | (1,946 | ) |  | (308 | )
Expiration of statute of limitations | (597 | ) |  | (10,742 | ) |  | (20 | )
Ending balance | $ | 24,186 |  |  | $ | 23,338 |  |  | $ | 34,627 |
The $0.8 million increase in unrecognized income tax benefits during fiscal year 2016 is primarily attributable to pre-acquisition tax positions taken by WIL Research, as well as an additional year of Canadian SR&ED credit, offset by a settlement related to the tax year ended 2014 for Canadian SR&ED credits and favorable foreign exchange movement. The amount of unrecognized income tax benefits that, if recognized, would favorably impact the effective tax rate was $21.4 million as of December 31, 2016 and $20.1 million as of December 26, 2015. The $1.3 million increase is primarily pre-acquisition tax positions taken by WIL Research, as well as an additional year of Canadian SR&ED credit, offset by favorable foreign exchange movement. It is reasonably possible as of December 31, 2016 that the liability for unrecognized tax benefits for the uncertain tax position will decrease by $4.6 million over the next twelve month period, primarily as a result of the outcome of a pending tax ruling and competent authority proceedings. 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 31, 2016 and December 26, 2015 was $1.7 million and $1.0 million, respectively. The total amount of accrued penalties related to unrecognized income tax benefits as of December 31, 2016 was $0.2 million. 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., China, Japan, France, Germany, and Canada. With few exceptions, the Company is no longer subject to U.S. and international income tax examinations for years before 2013. The Company and certain of its subsidiaries have ongoing tax controversies in the U.S., Canada, Germany, 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. 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 2016 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 31, 2016, the earnings of non-U.S. subsidiaries considered to be indefinitely reinvested totaled $704.6 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 2016 the Company accrued $4.5 million of foreign withholding taxes.

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