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Income Taxes | 12 Months Ended
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Dec. 28, 2020
Income Tax Disclosure [Abstract] |
Income Taxes |
(8) | Income Taxes
The components of (loss) income from continuing operations before income taxes for the years ended December 28, 2020, December 30, 2019 and December 31, 2018 are:
|  | For the Year Ended |
|  | December 28, 2020 |  |  | December 30, 2019 |  |  | December 31, 2018 |
|  | (In thousands) |
United States |  | $ | (84,582 | ) |  | $ | 16,066 |  |  | $ | 18,991 |
Foreign |  |  | 38,305 |  |  |  | 18,260 |  |  |  | 28,194 |
(Loss) income from continuing operations before income taxes |  | $ | (46,277 | ) |  | $ | 34,326 |  |  | $ | 47,185 |
The Company expects its earnings attributable to foreign subsidiaries will be indefinitely reinvested, except for its material Chinese and Canadian plants and the respective holding companies where a deferred tax liability of approximately $2,458 and $1,548 has been recorded for the foreign and U.S. federal/state impact, respectively. For those other companies with earnings currently being reinvested outside of the U.S., the undistributed earnings amounted to approximately $60,769 as of December 28, 2020. The determination of the unrecognized deferred tax liability related to these undistributed earnings is approximately $2,797. The components of income tax benefit (provision) for the years ended December 28, 2020, December 30, 2019 and December 31, 2018 are:
|  | For the Year Ended |
|  | December 28, 2020 |  |  | December 30, 2019 |  |  | December 31, 2018 |
|  | (In thousands) |
Current benefit (provision): |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (44 | ) |  | $ | 294 |  |  | $ | 381 |
State |  |  | (4,624 | ) |  |  | (2,922 | ) |  |  | (1,294 | )
Foreign |  |  | 27,902 |  |  |  | (12,748 | ) |  |  | (9,587 | )
Total current |  |  | 23,234 |  |  |  | (15,376 | ) |  |  | (10,500 | )
Deferred benefit (provision): |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 2,446 |  |  |  | 1,004 |  |  |  | 97,723 |
State |  |  | 4,498 |  |  |  | (1,076 | ) |  |  | 14,351 |
Foreign |  |  | (287 | ) |  |  | 13,043 |  |  |  | (13,367 | )
Total deferred |  |  | 6,657 |  |  |  | 12,971 |  |  |  | 98,707 |
Income tax benefit (provision) |  | $ | 29,891 |  |  | $ | (2,405 | ) |  | $ | 88,207 |
The following is a reconciliation of the provision for income taxes at the statutory federal income tax rate compared to the Company’s provision for income taxes for the years ended December 28, 2020, December 30, 2019 and December 31, 2018:
|  | For the Year Ended |
|  | December 28, 2020 |  |  | December 30, 2019 |  |  | December 31, 2018 |
|  | (In thousands) |
Statutory federal income tax benefit (provision) |  | $ | 9,718 |  |  | $ | (7,209 | ) |  | $ | (9,909 | )
State income taxes, net of federal benefit and state tax credits |  |  | (2,674 | ) |  |  | (3,163 | ) |  |  | (1,953 | )
Transfer pricing |  |  | — |  |  |  | — |  |  |  | 1,483 |
Acquisition related expenses |  |  | — |  |  |  | — |  |  |  | (1,737 | )
IRC Section 162(m) limitation |  |  | (712 | ) |  |  | (868 | ) |  |  | (3,702 | )
Stock options |  |  | (1,298 | ) |  |  | (252 | ) |  |  | 1,072 |
Global Intangible Low-Taxed Income |  |  | (1,300 | ) |  |  | — |  |  |  | — |
Permanently reinvested earnings assertion |  |  | (1,442 | ) |  |  | (1,765 | ) |  |  | (14,313 | )
Foreign tax differential on foreign earnings & other permanent items |  |  | 3,933 |  |  |  | 687 |  |  |  | (3,685 | )
Change in valuation allowance |  |  | (2,668 | ) |  |  | 2,127 |  |  |  | 118,451 |
Uncertain tax positions |  |  | 36,936 |  |  |  | 999 |  |  |  | (954 | )
Federal research and development credits |  |  | 4,250 |  |  |  | 4,582 |  |  |  | 2,996 |
Goodwill impairment |  |  | (14,532 | ) |  |  | — |  |  |  | — |
Other |  |  | (320 | ) |  |  | 2,457 |  |  |  | 458 |
Income tax benefit (provision) |  | $ | 29,891 |  |  | $ | (2,405 | ) |  | $ | 88,207 |
Deferred income taxes reflect the net tax 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 net deferred income tax assets (liabilities) as of December 28, 2020 and December 30, 2019 are as follows:
|  | As of |
|  | December 28, 2020 |  |  | December 30, 2019 |
|  | (In thousands) |
Deferred income tax assets: |  |  |  |  |  |  |  |
Net operating loss carryforwards |  | $ | 43,209 |  |  | $ | 78,774 |
Reserves and accruals |  |  | 29,429 |  |  |  | 24,765 |
Interest expense limitation |  |  | — |  |  |  | 13,102 |
Unrealized loss on cash flow hedge |  |  | 4,713 |  |  |  | 2,960 |
Tax credit carryforwards |  |  | 39,757 |  |  |  | 37,889 |
Stock-based compensation |  |  | 4,216 |  |  |  | 4,440 |
Original issue discount on Convertible Senior Notes |  |  | 90 |  |  |  | 870 |
Property, plant and equipment |  |  | 9,989 |  |  |  | 14,404 |
Other deferred income tax assets |  |  | 403 |  |  |  | 756 |
|  |  | 131,806 |  |  |  | 177,960 |
Less: valuation allowance |  |  | (15,322 | ) |  |  | (14,292 | )
|  |  | 116,484 |  |  |  | 163,668 |
Deferred income tax liabilities: |  |  |  |  |  |  |  |
Repatriation of foreign earnings |  |  | (4,006 | ) |  |  | (9,691 | )
Property, plant and equipment basis differences |  |  | (50,463 | ) |  |  | (56,476 | )
Goodwill and intangible amortization |  |  | (39,668 | ) |  |  | (73,263 | )
Other deferred income tax liabilities |  |  | (5,700 | ) |  |  | (102 | )
Net deferred income tax assets (included in Deposits and other non-current assets) |  | $ | 16,647 |  |  | $ | 24,136 |
As of December 28, 2020, the Company had the following net operating loss (NOL) carryforwards: $117,908 in the U.S. for federal, $25,723 in various U.S. states, $47,957 in China, and $26,940 in Hong Kong. The U.S. federal NOLs expire in 2027 through 2036, the various U.S. states’ NOLs expire in 2021 through 2036, the China NOLs expire in 2021 through 2027, and the Hong Kong NOLs carryforward indefinitely. Further, the Company’s tax credits were approximately $48,580, of which $6,233 carryforward indefinitely. In connection with the Company’s acquisition of Viasystems during 2015, there was more than a 50% change in ownership under Section 382 of the Internal Revenue Code of 1986, as amended, and regulations issued there under. As a consequence, the utilization of the acquired Viasystems U.S. NOLs is limited to approximately $9,826 per year. In addition, the Company recognized certain gains built in at the time of the ownership change, which increase the limitation by approximately $47,463 for each of the first 5 years after the acquisition. Any unused limitation in a year can be carried over to succeeding years. A valuation allowance is provided when it is more likely than not that all or some portion of the deferred income tax assets will not be realized. During the year ended December 31, 2018, the Company released a majority of its valuation allowance recorded on its U.S. net deferred tax assets due to a combination of the Company’s expectations for future U.S. taxable income improvement and to offset the net deferred tax liability acquired as a result of the Anaren acquisition. It continues to maintain a valuation allowance on certain of its U.S. net deferred tax assets represented by income tax attributes carried forward that are expected to expire unused. Certain subsidiaries within China continue to have NOL carryforwards in various tax jurisdictions that the Company has determined are not more likely than not to be utilized. As a result, a full valuation allowance has been recorded for these subsidiaries as of December 28, 2020. For the remaining net deferred income tax asset, management has determined that it is more likely than not that the results of future operations will generate sufficient taxable income to realize the net deferred tax asset. The following summarizes the activity in the Company’s valuation allowance for the years ended December 28, 2020, December 30, 2019 and December 31, 2018:
|  | For the Year Ended |
|  | December 28, 2020 |  |  | December 30, 2019 |  |  | December 31, 2018 |
|  | (In thousands) |
Balance at beginning of year |  | $ | 14,292 |  |  | $ | 16,635 |  |  | $ | 152,728 |
Reduction related to acquisition |  |  | — |  |  |  | — |  |  |  | (76,040 | )
Additions charged to expense |  |  | 3,904 |  |  |  | 1,526 |  |  |  | — |
Other reduction charged to expense |  |  | (2,874 | ) |  |  | (3,869 | ) |  |  | (60,053 | )
Balance at end of year |  | $ | 15,322 |  |  | $ | 14,292 |  |  | $ | 16,635 |
Certain entities within China qualified for the high and new technology enterprise (HNTE) status enabling those entities to enjoy certain benefits, which were effective for the years ended December 28, 2020, December 30, 2019 and December 31, 2018. The HNTE status as well as enhanced research and development (R&D) deductions decreased Chinese taxes. HNTE and R&D benefit and effect on earnings per share are as follows:
|  | For the Year Ended |
|  | December 28, 2020 |  |  | December 30, 2019 |  |  | December 31, 2018 |
|  | (In thousands, except per share data) |
HNTE and R&D benefits |  | $ | 4,235 |  |  | $ | 6,060 |  |  | $ | 7,277 |
Basic shares |  |  | 106,366 |  |  |  | 105,195 |  |  |  | 103,355 |
Diluted shares |  |  | 106,366 |  |  |  | 106,332 |  |  |  | 134,036 |
Increases earnings per share: |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.04 |  |  | $ | 0.06 |  |  | $ | 0.07 |
Diluted |  | $ | 0.04 |  |  | $ | 0.06 |  |  | $ | 0.05 |
HNTE status expires at various dates in 2020 through 2021, but the Company expects to continue to file for renewal of such HNTE status for the foreseeable future. A reconciliation of the beginning and ending amount of unrecognized tax benefits, exclusive of accrued interest and penalties, is as follows:
|  | For the Year Ended |
|  | December 28, 2020 |  |  | December 30, 2019 |  |  | December 31, 2018 |
|  | (In thousands) |
Balance at beginning of year |  | $ | 37,465 |  |  | $ | 30,284 |  |  | $ | 31,276 |
Additions related to acquisition |  |  | — |  |  |  | — |  |  |  | 903 |
Additions based on tax positions related to the current year |  |  | 839 |  |  |  | 3,553 |  |  |  | 856 |
Additions for tax positions of prior years |  |  | 202 |  |  |  | 4,952 |  |  |  | 117 |
Reductions for tax positions of prior years |  |  | (27,283 | ) |  |  | (103 | ) |  |  | (2,140 | )
Lapse of statute of limitations |  |  | (3,819 | ) |  |  | (1,221 | ) |  |  | (728 | )
Balance at end of year |  | $ | 7,404 |  |  | $ | 37,465 |  |  | $ | 30,284 |
In the quarter ended December 28, 2020, the Company reduced prior years’ uncertain tax positions by $27,283 due to (i) conclusion of an examination resulting in no adjustment with the Canadian tax authority related to the pre-acquisition tax years of a Canadian subsidiary; and (ii) change in U.S. tax law related to IRC Section 163(j) with respect to the adjusted taxable income calculation. As of December 28, 2020 and December 30, 2019, the Company recorded unrecognized tax benefits of $1,046 and $25,805, respectively, as well as interest and penalties of $1,566 and $13,531, respectively, to current and long-term liabilities. The Company has also recorded unrecognized tax benefits of $6,358 and $19,225 against certain deferred tax assets as of December 28, 2020 and December 30, 2019, respectively. The amount of unrecognized tax benefits that would, if recognized, reduce the Company’s effective income tax rate in any future periods is $2,612 including interest and penalties. The Company expects its unrecognized tax benefits to decrease by $384 along with related interest of $701 over the next twelve months due to expiring statutes. As of December 28, 2020, the Company is open for (i) U.S. federal income tax examination for the period from 2017 to 2020 and NOL and credit carryforwards are subject to adjustment for 3 years post utilization, (ii) state and local income tax examination for tax years 2016 to 2020 and NOL and credit carryforwards are subject to adjustment for 4 years post utilization; and (iii) foreign income tax examinations generally for tax years from 2010 to 2020.

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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