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INCOME TAXES | 12 Months Ended
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Sep. 29, 2018
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The following table reflects income or losses from continuing operations by location, the provision for income taxes and the effective tax rate for fiscal 2018, 2017, and 2016:
| Fiscal
(dollar amounts in thousands) | 2018 |  | 2017 |  | 2016
United States operations | $ | 25,211 |  |  | $ | (4,114 | ) |  | $ | (12,600 | )
Foreign operations | 152,338 |  |  | 122,629 |  |  | 68,764 |
Income from operations before tax | 177,549 |  |  | 118,515 |  |  | 56,164 |
Income tax expenses / (benefit) | $ | 120,744 |  |  | $ | (7,394 | ) |  | $ | 7,709 |
Effective tax rate | 68.0 | % |  | (6.2 | )% |  | 13.7 | %
The following table reflects the provision for income taxes from continuing operations for fiscal 2018, 2017, and 2016:
| Fiscal
(in thousands) | 2018 |  | 2017 |  | 2016
Current: |  |  |  |  |
Federal | $ | 83,159 |  |  | $ | (3,975 | ) |  | $ | 871 |
State | 58 |  |  | 64 |  |  | 53 |
Foreign | 16,980 |  |  | 13,290 |  |  | 21,841 |
Deferred: |  |  |  |  |
Federal | 23,346 |  |  | (15,374 | ) |  | (13,423 | )
State | (2 | ) |  | 40 |  |  | 12 |
Foreign | (2,797 | ) |  | (1,439 | ) |  | (1,645 | )
Provision for income taxes | $ | 120,744 |  |  | $ | (7,394 | ) |  | $ | 7,709 |
The following table reflects the difference between the provision for income taxes and the amount computed by applying the statutory federal income tax rate for fiscal 2018, 2017, and 2016:
| Fiscal
(in thousands) | 2018 |  | 2017 |  | 2016
Computed income tax expense based on U.S. statutory rate | $ | 43,568 |  |  | $ | 41,358 |  |  | $ | 19,658 |
Effect of earnings of foreign subsidiaries subject to different tax rates | (12,947 | ) |  | (22,832 | ) |  | (7,584 | )
Benefits from foreign approved enterprise zones | (20,429 | ) |  | (23,294 | ) |  | (8,701 | )
Benefits from research and development tax credits | (2,785 | ) |  | (1,859 | ) |  | (2,839 | )
Benefits from foreign tax credits | (3,939 | ) |  | (26,119 | ) |  | — |
Provisional estimate for the one-time U.S. transition tax, net of uncertain tax positions and foreign tax credits | 101,854 |  |  | — |  |  | — |
Remeasurement of net U.S. deferred tax assets to reflect a reduction in the U.S. federal corporate tax rate | 2,760 |  |  | — |  |  | — |
Change in permanent reinvestment assertion | — |  |  | — |  |  | (9,696 | )
Tax impact on restructuring | — |  |  | — |  |  | 4,238 |
Tax audit settlement | — |  |  | — |  |  | 4,889 |
Effect of permanent items | (758 | ) |  | 778 |  |  | (2,274 | )
Non-deductible goodwill impairment | — |  |  | 8,805 |  |  | — |
Deferred taxes not benefited | 7,366 |  |  | 6,458 |  |  | 3,585 |
Foreign operations (withholding taxes, deferred taxes on unremitted earnings, US taxation of foreign earnings) | 5,746 |  |  | 6,039 |  |  | 4,981 |
Reserve for uncertain tax positions | 530 |  |  | 2,936 |  |  | 208 |
State income tax expense (net of federal benefit) | 56 |  |  | 60 |  |  | 996 |
Other, net | (278 | ) |  | 276 |  |  | 248 |
Provision for income taxes | $ | 120,744 |  |  | $ | (7,394 | ) |  | $ | 7,709 |
2017 Tax Cuts and Jobs Act On December 22, 2017, the Tax Cuts and Jobs Act (the "Act") was signed into law. The Act, among other changes, reduces the U.S. federal corporate tax rate from 35% to 21%, implements a modified territorial tax system that includes a one-time transition tax on deemed repatriation of previously untaxed accumulated earnings and profits of certain foreign subsidiaries, and creates new taxes on certain foreign-sourced earnings. The Company has reflected the income tax effects of the Act for which the accounting under Accounting Standards Codification Topic 740, Income Taxes is complete. For those items for which the accounting is not yet complete, but for which a reasonable estimate could be made, we have recorded the provisional income tax expense in the Statement of Operations. As of September 29, 2018, there are no material items for which a reasonable estimate of the impact could not be made. Due to the enactment of this legislation, we recognized a net income tax provision of $104.6 million, comprised primarily of approximately $2.8 million from the remeasurement of U.S. deferred tax assets and liabilities using the relevant tax rate at which we expect them to reverse (with a blended U.S. federal corporate tax rate of 24.5% applicable for reversals in fiscal 2018 and 21% applicable for reversals in fiscal 2019 and beyond) and approximately $101.9 million from the one-time transition tax on deemed repatriation of previously untaxed accumulated earnings and profits of certain foreign subsidiaries, net of uncertain tax positions and foreign tax credits. In addition, beginning in the first quarter of fiscal 2019, we will record the income tax effects of GILTI, as well as all other tax law changes enacted by the Act. Provisional estimate for the one-time U.S. transition tax, net of uncertain tax positions and foreign tax credits (“one-time transition tax”): The one-time transition tax is estimated based on our accumulated post-1986 deferred foreign income not previously subject to U.S. federal and state income tax. Because the accounting and our analysis are not yet complete, the provisional income tax expense of $101.9 million represents a reasonable estimate of the potential impact of the one-time transition tax. We have elected to pay the one-time transition tax in eight annual, interest-free, installments as allowed under the Act, beginning in January 2019. This provisional estimate relies on assumptions made based upon our current interpretation of the Act, proposed regulations, and information available through October 30, 2018. The final impact of the Act may differ significantly from this estimate, due to, among other things, changes in interpretations and assumptions made by the Company as a result of the enactment of final regulations differing from proposed regulations, as well as, additional information and guidance being made available by the IRS, U.S. Department of the Treasury, FASB or other relevant governing body. The accounting for the tax effects for the Act will be completed during our financial statement period ending December 29, 2018 in accordance with Staff Accounting Bulletin No. 118 (“SAB 118”). During fiscal 2017, the Company elected to adopt the foreign tax credit for its U.S. federal tax return filings. As a result of this election, the Company has amended its U.S. tax returns from 2006 through 2015, filed its 2016 return on the same basis, and accrued the benefit for 2017. While the Company may repatriate up to $100 million of cash held by foreign subsidiaries that has already been subject to U.S. tax to facilitate the repurchase of the Company’s common stock under the share repurchase program, we continue to consider the remainder of the earnings of certain foreign subsidiaries to be permanently reinvested outside the United States. As of September 30, 2017, we had not recorded a deferred tax liability for U.S. federal income taxes of approximately $627.0 million of undistributed foreign earnings. During fiscal 2018, as a result of the one-time transition tax, we have included approximately $496.8 million of undistributed foreign earnings as net “deemed” dividends in the United States as required by the Act. Determination of the amount of unrecognized deferred tax liability related to the remaining untaxed foreign earnings is not practicable, with the exception of certain foreign subsidiaries where we continue to retain a deferred tax liability for foreign withholding taxes of approximately $21.0 million, as those earnings may be distributed to its foreign parent company. The following table reflects the net deferred tax balance, composed of the tax effects of cumulative temporary differences for fiscal 2018 and 2017:
| Fiscal
(in thousands) | 2018 |  | 2017
Inventory reserves | $ | 424 |  |  | $ | 589 |
Stock options | 301 |  |  | 422 |
Other accruals and reserves | 5,927 |  |  | 7,857 |
Domestic tax credit carryforwards | 4,532 |  |  | 17,635 |
Net operating loss carryforwards | 39,856 |  |  | 35,937 |
| $ | 51,040 |  |  | $ | 62,440 |
Valuation allowance | $ | (37,249 | ) |  | $ | (29,614 | )
Total long-term deferred tax asset | $ | 13,791 |  |  | $ | 32,826 |
Foreign withholding tax on undistributed earnings | $ | 21,988 |  |  | $ | 20,945 |
Fixed and intangible assets | 8,377 |  |  | 11,262 |
Total long-term deferred tax liability | $ | 30,365 |  |  | $ | 32,207 |
Total net deferred tax (liability) / asset | $ | (16,574 | ) |  | $ | 619 |
Reported as |  |  |
Deferred tax asset | $ | 9,017 |  |  | $ | 27,771 |
Deferred tax liability | 25,591 |  |  | 27,152 |
Total net deferred tax (liability) / asset | $ | (16,574 | ) |  | $ | 619 |
As of September 29, 2018, the Company has foreign net operating loss carryforwards of $102.9 million, domestic state net operating loss carryforwards of $163.8 million, federal tax credit carryforwards of $1.2 million, and state tax credit carryforwards of $5.9 million that can reduce future taxable income. These carryforwards can be utilized in the future, prior to expiration of certain carryforwards in fiscal years 2017 through 2035 with the exception of certain credits and foreign net operating losses that have no expiration date. Pennsylvania tax law limits the time during which carryforwards may be applied against future taxes and also limits the utilization of domestic state net operating loss carryforwards to $5.0 million annually, but recent developments may change this amount in future years. The Company has recorded a valuation allowance against domestic state tax attributes and certain foreign tax attributes. The Company continues to evaluate the realizability of all of its net deferred tax assets at each reporting date and records a benefit for deferred tax assets to the extent it has projected future taxable income or deferred tax liabilities that provide a source of future income to benefit the deferred tax asset. As a result of this analysis, the Company continues to maintain a valuation allowance against a majority of its state deferred tax assets as the realization of these assets is not more likely than not given uncertainty of future apportioned earnings in these jurisdictions. The beginning and ending balances of the Company's unrecognized tax benefits are reconciled below for fiscal 2018, 2017, and 2016:
|  | Fiscal
(in thousands) |  | 2017 |  | 2016 |  | 2015
Unrecognized tax benefit, beginning of year |  | $ | 12,062 |  |  | $ | 7,453 |  |  | $ | 7,101 |
Additions for tax positions, current year |  | 1,482 |  |  | 3,657 |  |  | 519 |
Additions for tax positions, prior year |  | — |  |  | 1,834 |  |  | 827 |
Reductions for tax positions, prior year |  | (506 | ) |  | (882 | ) |  | (994 | )
Unrecognized tax benefit, end of year |  | $ | 13,038 |  |  | $ | 12,062 |  |  | $ | 7,453 |
Approximately $12.0 million of the $13.0 million of unrecognized tax benefit as of September 29, 2018, if recognized, would impact the Company's effective tax rate. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense. The Company's future effective tax rate would be affected if earnings were lower than anticipated in countries where it is subjected to lower statutory rates and higher than anticipated in countries where it is subjected to higher statutory rates, by changes in the valuation of its deferred tax assets and liabilities, or by changes in tax laws, regulations, accounting principles, or interpretations thereof. In addition, changes in assertion for foreign earnings permanently or non-permanently reinvested as a result of changes in facts and circumstances could significantly impact the effective tax rate. The Company regularly assesses the effects resulting from these factors to determine the adequacy of its provision for income taxes. It is reasonably possible that the amount of the unrecognized tax benefit with respect to certain unrecognized tax positions will increase or decrease during the next 12 months due to the expected lapse of statutes of limitation and/ or settlements of tax examinations. We cannot practicably estimate the financial outcomes of these examinations. The Company files U.S. federal income tax return, as well as income tax returns in various state and foreign jurisdictions. The Company recently completed an income tax examination by the U.S. Internal Revenue Service which resulted in an insignificant impact to the financial statements. For most state tax returns, tax years following fiscal 2001 remain subject to examination as a result of the generation of net operating loss carry-forwards. In the foreign jurisdictions where the Company files income tax returns, the statutes of limitations with respect to these jurisdictions vary from jurisdiction to jurisdiction and range from 4 to 6 years. The Company is currently under income tax examination by tax authorities in certain foreign jurisdictions. The Company believes that adequate provisions have been made for any adjustments that may result from these tax examinations. As a result of committing to certain capital investments and employment levels, income from operations in Singapore and Malaysia is subject to reduced tax rates. In connection with Singapore operations, the Company has been granted a decreased effective tax rate of five percent in that jurisdiction until February 1, 2020 subject to the fulfillment of certain continuing conditions. In fiscal 2018, 2017, and 2016, the preferential rate reduced income tax expense by approximately $20.4 million or $0.29 per share, $23.3 million or $0.32 per share and $8.7 million or $0.12 per share, respectively.

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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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