XML 37 R24.htm IDEA: XBRL DOCUMENT
v3.10.0.1

Income Taxes | 12 Months Ended
--- | ---
Dec. 29, 2018
Income Taxes |
Income Taxes | 17. Income Taxes The Tax Cuts and Jobs Act (the Act) was enacted in the U.S. on December 22, 2017. The Act reduced the U.S. federal corporate income tax rate to 21% from 35%, required companies to pay a one-time Transition Tax on earnings of certain foreign subsidiaries that were previously tax deferred and created new taxes on certain foreign-sourced earnings. In 2017 and the first nine months of 2018, the Company recorded provisional amounts for certain enactment-date effects of the Act by applying the guidance in Staff Accounting Bulletin No. 118 or "SAB 118" because it had not yet completed the enactment-date accounting for these effects. In 2017, the Company recorded tax expense related to the enactment-date effects of the Act that included recording the one-time Transition Tax liability related to undistributed earnings of certain foreign subsidiaries that were not previously taxed, the revaluation of deferred tax assets and liabilities and other deferred tax impacts. In 2018, certain discrete adjustments to provisional amounts were recorded. The changes to the 2017 enactment-date provisional amounts decreased the effective tax rate in 2018 by (6.2)%. SAB 118 measurement period The Company applied the guidance in SAB 118 when accounting for the enactment-date effects of the Act in 2017 and throughout 2018. At December 30, 2017, the Company had not completed its accounting for the enactment-date income tax effects of the Act under ASC 740, Income Taxes, specifically for the following aspects: remeasurement of deferred tax assets and liabilities, one-time Transition Tax, its indefinite reinvestment assertion and its accounting policy for global intangible low-taxed income. As of December 29, 2018, the Company has now completed its accounting for all of the enactment-date income tax effects of the Act. As further discussed below, during 2018, the Company recognized a benefit of $4.5 million to the provisional amounts recorded at December 30, 2017 and included these adjustments as a component of income tax expense from continuing operations. One-time Transition Tax The one-time Transition Tax is based on the Company's total post-1986 earnings and profits (E&P), which were previously deferred from U.S. income tax under U.S. tax law. The Company recorded a provisional amount for its one-time Transition Tax liability for each of its foreign subsidiaries, resulting in a Transition Tax cost of $54.4 million, which after offset by tax attributes resulted in a total provisional Transition Tax liability of $42.6 million at December 30, 2017. Upon further analysis of the Act, Notices and Regulations issued and proposed by the U.S. Department of the Treasury and the Internal Revenue Service, the Company finalized its calculations of the Transition Tax liability during 2018. The Company decreased its December 30, 2017 provisional amount by $6.1 million, which is included as a component of income tax expense from continuing operations. The Company elected to pay the Transition Tax over the eight-year period provided in the Act. As of December 29, 2018, the unpaid balance of its Transition Tax obligation is $21.6 million, which is payable between April 2022 and April 2025. Deferred tax assets and liabilities As of December 30, 2017, the Company remeasured certain deferred tax assets and liabilities based on the tax rates at which they were expected to reverse in the future (which was generally 21%), by recording a net provisional benefit of $28.1 million. This included the release of a deferred tax liability for future foreign earnings generated by one of the Company's foreign subsidiaries upon resolution of the Altera case of $39.4 million as well as the release of approximately $10.5 million of valuation allowances with corresponding deferred tax benefits. These benefits were offset by the revaluation of the Company's net deferred tax asset and a corresponding increase to deferred tax expense of $21.8 million. Upon further analysis of certain aspects of the Act and refinement of its calculations during the 12 months ended December 29, 2018, the Company reduced its provisional benefit by $1.0 million, which is included as a component of income tax expense from continuing operations. Global intangible low-taxed income (GILTI) The Act subjects a U.S. shareholder to tax on GILTI earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense. Because the Company was still evaluating the GILTI provisions as of December 30, 2017, no GILTI-related deferred amounts were recorded in 2017. After further consideration in the current year, the Company has elected to account for GILTI as a period cost in the year the tax is incurred. Indefinite reinvestment assertion Beginning in 2018, the Act provides for a 100% dividends received deduction for dividends received from 10-percent owned foreign corporations by U.S. corporate shareholders, subject to a one-year holding period. Although dividend income is now generally exempt from U.S. federal income tax in the hands of U.S. corporate shareholders, companies must still apply the guidance of ASC 740-30-25-18 to account for the tax consequences of outside basis differences and other tax impacts of their investments in non-U.S. subsidiaries. As the Company was still evaluating how the Act would impact the Company's existing indefinite reinvestment assertion as of December 30, 2017, no deferred tax impacts for this item were recorded. Upon further analysis, the Company has modified its unremitted earnings assertion both historically and on a go-forward basis to exclude the net book income of its Singapore subsidiary from the indefinite reinvestment assertion. As a result, the Company has accrued a deferred tax liability of $0.6 million associated with the state tax cost of remitting these earnings which is included as a component of income tax expense from continuing operations. Income before income taxes includes the following components (in thousands):
|  | Year Ended |
--- | --- | --- | ---
|  | December 29, 2018 |  | December 30, 2017 |  | December 31, 2016 |
Domestic |  | $ | 19,777 |  | $ | 9,700 |  | $ | 4,313 |
Foreign |  |  | 52,384 |  |  | 67,203 |  |  | 60,183 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
|  | $ | 72,161 |  | $ | 76,903 |  | $ | 64,496 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
The provision (benefit) for income taxes consists of the following (in thousands):
|  | Year Ended |
--- | --- | --- | ---
|  | December 29, 2018 |  | December 30, 2017 |  | December 31, 2016 |
Current: |  |  |  |  |  |  |  |  |  |
Domestic |  | $ | (8,843 | ) | $ | 48,947 |  | $ | 2,639 |
Foreign |  |  | 5,888 |  |  | 7,077 |  |  | 4,421 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total Current |  |  | (2,955 | ) |  | 56,024 |  |  | 7,060 |
Deferred: |  |  |  |  |  |  |  |  |  |
Domestic |  |  | (8,978 | ) |  | (25,760 | ) |  | (2,430 | )
Foreign |  |  | 503 |  |  | (453 | ) |  | (1,628 | )
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total Deferred |  |  | (8,475 | ) |  | (26,213 | ) |  | (4,058 | )
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Provision (benefit) for income taxes |  | $ | (11,430 | ) | $ | 29,811 |  | $ | 3,002 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
The reconciliation of the federal statutory tax rate to the Company's effective tax rate is as follows:
|  | Year Ended |
--- | --- | --- | ---
|  | December 29, 2018 |  | December 30, 2017 |  | December 31, 2016 |
Federal statutory rate |  |  | 21.0 | % |  | 35.0 | % |  | 35.0 | %
Foreign tax rate benefit |  |  | (12.9 | ) |  | (25.4 | ) |  | (22.6 | )
Research and development tax credits |  |  | (9.8 | ) |  | (4.5 | ) |  | (4.1 | )
GILTI and Subpart F income |  |  | 4.3 |  |  | 1.4 |  |  | 1.4 |
Nondeductible (nontaxable) foreign expenses |  |  | 3.9 |  |  | 1.1 |  |  | (4.0 | )
State tax expense |  |  | 1.5 |  |  | 0.9 |  |  | 0.6 |
Release of prior year unrecognized tax benefits |  |  | (2.7 | ) |  | (0.6 | ) |  | (1.7 | )
Excess officer compensation |  |  | 2.4 |  |  | 1.5 |  |  | 1.4 |
Other tax effects of equity compensation |  |  | (0.4 | ) |  | (2.2 | ) |  | (1.5 | )
Change in cost-sharing treatment of stock-based compensation |  |  | (2.2 | ) |  | 5.2 |  |  | (0.5 | )
Excess tax benefit of stock-based compensation |  |  | (5.9 | ) |  | (5.6 | ) |  | — |
Change in prior period valuation allowance |  |  | (2.5 | ) |  | (1.3 | ) |  | (0.6 | )
Transition tax on unremitted foreign earnings |  |  | (8.4 | ) |  | 70.8 |  |  | — |
Revaluation of deferred tax balances |  |  | 0.3 |  |  | 28.2 |  |  | — |
Other deferred tax impacts of tax reform |  |  | (3.1 | ) |  | (64.8 | ) |  | — |
Other |  |  | (1.3 | ) |  | (0.9 | ) |  | 1.3 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Effective Tax Rate |  |  | (15.8 | )% |  | 38.8 | % |  | 4.7 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
The effective tax rate for fiscal 2018 decreased from fiscal 2017 primarily due to the reduction in the U.S. federal statutory rate as well as the inclusion of one-time tax impacts recorded in 2017 from the enactment of the Act. This decrease in the effective tax rate was offset by a decrease in the Company's foreign tax rate benefit. The effective tax rate for fiscal 2017 increased from fiscal 2016 primarily due to the one-time Transition Tax on unrepatriated earnings of certain foreign subsidiaries as a result of the enactment of the Act. Additional tax expense was also recognized for the revaluation of the Company's deferred tax assets and liabilities due to the change in the federal tax rate from 35% to 21%. These increases in tax expense were partially offset by the release of a deferred tax liability related to future foreign earnings expected under the Company's intercompany cost-sharing arrangement, as well as a decrease in the valuation allowance established on federal research and development tax credits. On July 27, 2015, the U.S. Tax Court issued an opinion in Altera Corp. v. Commissioner which concluded that related parties in an intercompany cost-sharing arrangement are not required to share expenses related to stock-based compensation. In February 2016, the U.S. Internal Revenue Service appealed the decision to the U.S Court of Appeals for the Ninth Circuit (the "Ninth Circuit"). On July 24, 2018, the Ninth Circuit reversed the 2015 decision of the U.S. Tax Court; however, on August 7, 2018, the Ninth Circuit withdrew its July 2018 decision to allow time for a reconstituted panel to confer on the appeal. On October 16, 2018, a rehearing was held, however, no decision has been made by the Ninth Circuit. Although the U.S. Treasury has not withdrawn the requirement to include stock-based compensation from its regulations, based on the facts and circumstances of the Tax Court Case, the Company continues to reflect a tax benefit in its financial statements based on the expectation that the Tax Court decision will be upheld on appeal. As of the end of fiscal 2018, the Company's financial statements reflect a net deferred tax asset of $27.2 million for this position. The Company will continue to monitor ongoing developments and potential impacts to its Consolidated Financial Statements. The Company's operations in Singapore are subject to reduced tax rates through June 30, 2024, as long as certain conditions are met. Without the impact of the one-time Transition Tax, the income tax benefit from the reduced Singapore tax rate reflected in earnings was approximately $5.4 million (representing $0.12 per diluted share) in fiscal 2018, approximately $11.0 million (representing $0.25 per diluted share) in fiscal 2017 and approximately $7.7 million (representing $0.18 per diluted share) in fiscal 2016. Deferred Income Taxes Deferred tax assets and liabilities are recorded for the estimated tax impact of temporary differences between the tax basis and book basis of assets and liabilities. Significant components of the Company's deferred taxes as of December 29, 2018 and December 30, 2017 are as follows (in thousands):
|  | December 29, 2018 |  | December 30, 2017 |
--- | --- | --- | --- | --- | ---
Deferred tax assets: |  |  |  |  |  |  |
Net operating loss carryforwards |  | $ | 9,973 |  | $ | 12,925 |
Research and development tax credit carryforwards |  |  | 12,500 |  |  | 12,322 |
Stock-based compensation |  |  | 4,360 |  |  | 5,256 |
Depreciation and amortization |  |  | 7,799 |  |  | — |
Capitalized research and development |  |  | 2,521 |  |  | 3,468 |
Deferred income on shipments to distributors |  |  | 5,824 |  |  | 7,070 |
Expected future cost-sharing adjustment |  |  | 25,257 |  |  | 21,582 |
Accrued liabilities and other |  |  | 7,737 |  |  | 6,999 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
|  |  | 75,971 |  |  | 69,622 |
Less: Valuation allowance |  |  | (4,975 | ) |  | (6,518 | )
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
|  |  | 70,996 |  |  | 63,104 |
Deferred tax liabilities: |  |  |  |  |  |  |
Acquired intangible assets |  |  | 20,656 |  |  | 13,884 |
Depreciation and amortization |  |  | 4,604 |  |  | 1,274 |
Convertible debt |  |  | 8,080 |  |  | 10,351 |
Prepaid expenses and other |  |  | 2,142 |  |  | 1,421 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
|  |  | 35,482 |  |  | 26,930 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net deferred tax assets |  | $ | 35,514 |  | $ | 36,174 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
As of December 29, 2018, the Company had federal net operating loss and research and development tax credit carryforwards of approximately $32.7 million and $1.9 million, respectively, as a result of the Silicon Clocks, Spectra Linear and Ember acquisitions. These carryforwards expire in fiscal years 2020 through 2031. Recognition of these loss and credit carryforwards is subject to an annual limit, which may cause them to expire before they are used. As of December 29, 2018, the Company had foreign net operating loss carryforwards of approximately $1.9 million as a result of the Energy Micro acquisition. These loss carryforwards do not expire and recognition is not subject to an annual limit. The Company also had state loss, state tentative minimum tax credit, and state research and development tax credit carryforwards of approximately $43.8 million, $0.1 million, and $13.5 million, respectively. A portion of these loss and credit carryforwards was generated by the Company and a portion was acquired through the Integration Associates, Silicon Clocks, Spectra Linear, Ember and Zentri acquisitions. Certain of these carryforwards expire in fiscal years 2019 through 2036, and others do not expire. Recognition of some of these loss and credit carryforwards is subject to an annual limit, which may cause them to expire before they are used. A valuation allowance is established against a deferred tax asset when it is more likely than not that the deferred tax asset will not be realized. As of December 29, 2018, the Company maintains a valuation allowance with respect to certain deferred tax assets relating to state research and development tax credit and state net operating loss carryforwards. At the end of fiscal 2018, undistributed earnings of certain of the Company's foreign subsidiaries of approximately $105 million are intended to be permanently reinvested outside the U.S. Accordingly, no provision for foreign withholding tax and state income taxes associated with a distribution of these earnings has been made. Determination of the amount of the unrecognized deferred tax liability on these unremitted earnings is not practicable. Uncertain Tax Positions The following table summarizes the activity related to gross unrecognized tax benefits (in thousands):
|  | Year Ended |
--- | --- | --- | ---
|  | December 29, 2018 |  | December 30, 2017 |  | December 31, 2016 |
Beginning balance |  | $ | 3,187 |  | $ | 3,054 |  | $ | 3,610 |
Additions based on tax positions related to current year |  |  | 630 |  |  | 456 |  |  | 439 |
Additions based on tax positions related to prior years |  |  | 115 |  |  | 114 |  |  | 99 |
Reductions for tax positions as a result of a lapse of the applicable statute of limitations |  |  | (1,896 | ) |  | (437 | ) |  | (1,094 | )
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Ending balance |  | $ | 2,036 |  | $ | 3,187 |  | $ | 3,054 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
As of December 29, 2018, December 30, 2017 and December 31, 2016, the Company had gross unrecognized tax benefits, inclusive of interest, of $2.1 million, $3.2 million and $3.0 million, respectively, of which $2.1 million, $3.2 million and $2.2 million, respectively, would affect the effective tax rate if recognized. The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes. These amounts were not material for fiscal years 2018, 2017 and 2016. The Norwegian Tax Administration ("NTA") has completed its examination of the Company's Norwegian subsidiary for income tax matters relating to fiscal years 2013, 2014, 2015 and 2016. The Company received a final assessment from the NTA in December 2017 concerning an adjustment to its 2013 taxable income related to the pricing of an intercompany transaction. The Company is currently appealing the assessment. Since the original assessment was issued, the NTA has reduced its assessment. The revised adjustment to the pricing of the intercompany transaction results in approximately $16.2 million additional Norwegian income tax. The Company disagrees with the NTA's assessment and believes the Company's position on this matter is more likely than not to be sustained. The Company plans to exhaust all available administrative remedies, and if unable to resolve this matter through administrative remedies with the NTA, the Company plans to pursue judicial remedies. The NTA may request an advance payment of approximately $9 million during the appeal process. The Company believes that it has accrued adequate reserves related to all matters contained in tax periods open to examination. Should the Company experience an unfavorable outcome in the NTA matter, however, such an outcome could have a material impact on its financial statements. Tax years 2014 through 2018 remain open to examination by the major taxing jurisdictions in which the Company operates. The Company is not currently under audit in any major taxing jurisdiction. The Company believes it is reasonably possible that the gross unrecognized tax benefits will not decrease in the next 12 months.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration