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Note 13 - Taxes on Income | 12 Months Ended
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Jan. 01, 2017
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | NOTE 13 – TAXES ON INCOME Provisions for federal, foreign and state income taxes in the consolidated statements of operations consisted of the following components:
|  | FISCAL YEAR |
|  | 2016 |  |  | 2015 |  |  | 2014 |
|  | (in thousands) |
Current expense/(benefit): |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 6,886 |  |  | $ | 1,524 |  |  | $ | 224 |
Foreign |  |  | 12,934 |  |  |  | 9,279 |  |  |  | 5,555 |
State |  |  | 1,633 |  |  |  | 1,403 |  |  |  | 712 |
|  |  | 21,453 |  |  |  | 12,206 |  |  |  | 6,491 |
Deferred expense/(benefit): |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 6,186 |  |  |  | 19,971 |  |  |  | 3,856 |
Foreign |  |  | (1,937 | ) |  |  | 3,795 |  |  |  | 493 |
State |  |  | (728 | ) |  |  | (2,624 | ) |  |  | 94 |
|  |  | 3,521 |  |  |  | 21,142 |  |  |  | 4,443 |
|  | $ | 24,974 |  |  | $ | 33,348 |  |  | $ | 10,934 |
Income before taxes on income consisted of the following:
|  | FISCAL YEAR |
|  | 2016 |  |  | 2015 |  |  | 2014 |
|  | (in thousands) |
U.S. operations |  | $ | 38,357 |  |  | $ | 58,318 |  |  | $ | 10,345 |
Foreign operations |  |  | 40,779 |  |  |  | 47,448 |  |  |  | 25,397 |
|  | $ | 79,136 |  |  | $ | 105,766 |  |  | $ | 35,742 |
Deferred income taxes for the years ended January 1, 2017, and January 3, 2016, 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 Company expects to utilize in its 2016 U.S. federal tax return $18.0 million of its federal net operating loss carryforwards from share-based payment awards and has recorded a related tax benefit of $6.3 million to additional paid-in capital in accordance with applicable accounting standards. At January 1, 2017, the Company had approximately $14 million in U.S. federal net operating loss carryforwards with expiration dates through 2032, of which $14 million is from share-based payment awards. In accordance with applicable accounting standards, a financial statement benefit has not been recorded for the net operating loss carryforward related to the share-based payment awards. The Company’s foreign subsidiaries had approximately $3.8 million in net operating loss carryforwards, the majority of which is available for an unlimited carryforward period. The Company expects to utilize all of its U.S. federal and foreign carryforwards prior to their expiration. The Company had approximately $108.9 million in state net operating loss carryforwards relating to continuing operations with expiration dates through 2035. The Company has provided a valuation allowance against $40.2 million of such losses, which the Company does not expect to utilize. In addition, the Company has approximately $58.7 million in state net operating loss carryforwards relating to discontinued operations against which a full valuation allowance has been provided. The sources of the temporary differences and their effect on the net deferred tax asset are as follows:
|  | 2016 |  |  | 2015 |
|  | ASSETS |  |  | LIABILITIES |  |  | ASSETS |  |  | LIABILITIES |
|  | (in thousands) |
Basis differences of property and equipment |  | $ | 0 |  |  | $ | 14,419 |  |  | $ | 0 |  |  | $ | 16,254 |
Basis difference of intangible assets |  |  | 978 |  |  |  | 0 |  |  |  | 0 |  |  |  | 368 |
Foreign currency |  |  | 0 |  |  |  | 3,216 |  |  |  | 0 |  |  |  | 5,375 |
Net operating loss carryforwards |  |  | 3,627 |  |  |  | 0 |  |  |  | 5,575 |  |  |  | 0 |
Valuation allowances on net operating loss carryforwards |  |  | (2,500 | ) |  |  | 0 |  |  |  | (4,457 | ) |  |  | 0 |
Federal tax credits |  |  | 5,711 |  |  |  | 0 |  |  |  | 4,580 |  |  |  | 0 |
Deferred compensation |  |  | 26,546 |  |  |  | 0 |  |  |  | 26,352 |  |  |  | 0 |
Basis difference of inventory |  |  | 4,009 |  |  |  | 0 |  |  |  | 2,390 |  |  |  | 0 |
Basis difference of prepaids, accruals and reserves |  |  | 6,273 |  |  |  | 0 |  |  |  | 6,556 |  |  |  | 0 |
Pensions |  |  | 3,435 |  |  |  | 0 |  |  |  | 1,075 |  |  |  | 0 |
Undistributed earnings from foreign subsidiaries not deemed to be indefinitely reinvested |  |  | 0 |  |  |  | 1,704 |  |  |  | 0 |  |  |  | 1,226 |
Basis difference of other assets and liabilities |  |  | 0 |  |  |  | 351 |  |  |  | 0 |  |  |  | 517 |
|  | $ | 48,079 |  |  | $ | 19,690 |  |  | $ | 42,071 |  |  | $ | 23,740 |
Deferred tax assets and liabilities are included in the accompanying balance sheets as follows:
|  | FISCAL YEAR |
|  | 2016 |  |  | 2015 |
|  | (in thousands) |
Deferred income taxes (current asset) |  | $ | 10,030 |  |  | $ | 8,726 |
Deferred tax asset (non-current asset) |  |  | 27,221 |  |  |  | 20,110 |
Deferred income taxes (non-current liabilities) |  |  | (8,862 | ) |  |  | (10,505 | )
|  | $ | 28,389 |  |  | $ | 18,331 |
Management believes, based on the Company’s history of taxable income and expectations for the future, that it is more likely than not that future taxable income will be sufficient to fully utilize the federal deferred tax assets at January 1, 2017. As of January 1, 2017, and January 3, 2016, non-current deferred tax assets were reduced by approximately $5.0 million and $14.2 million, respectively, of unrecognized tax benefits. The Company’s effective tax rate was 31.6%, 31.5% and 30.6% for fiscal years 2016, 2015 and 2014, respectively. The following summary reconciles income taxes at the U.S. federal statutory rate of 35% to the Company’s actual income tax expense:
|  | FISCAL YEAR |
|  | 2016 |  |  | 2015 |  |  | 2014 |
|  | (in thousands) |
Income taxes at U.S federal statutory rate |  | $ | 27,698 |  |  | $ | 37,018 |  |  | $ | 12,510 |
Increase (decrease) in taxes resulting from: |  |  |  |  |  |  |  |  |  |  |  |
State income taxes, net of federal tax effect |  |  | 1,861 |  |  |  | 3,003 |  |  |  | 57 |
Non-deductible business expenses |  |  | 538 |  |  |  | 614 |  |  |  | 570 |
Non-deductible employee compensation |  |  | 361 |  |  |  | 168 |  |  |  | 491 |
Tax effects of Company owned life insurance |  |  | (199 | ) |  |  | 128 |  |  |  | (395 | )
Tax effects of undistributed earnings from foreign subsidiaries not deemed to be indefinitely reinvested |  |  | 463 |  |  |  | 458 |  |  |  | 362 |
Foreign and U.S. tax effects attributable to foreign operations |  |  | (3,963 | ) |  |  | (3,347 | ) |  |  | (3,021 | )
Valuation allowance effect – State NOL |  |  | (1,272 | ) |  |  | (3,797 | ) |  |  | 468 |
Federal tax credits |  |  | (494 | ) |  |  | (352 | ) |  |  | 0 |
Other |  |  | (19 | ) |  |  | (545 | ) |  |  | (108 | )
Income tax expense |  | $ | 24,974 |  |  | $ | 33,348 |  |  | $ | 10,934 |
The Company does not provide for deferred U.S. income taxes on the undistributed earnings of its foreign subsidiaries that are considered to be indefinitely reinvested outside of the U.S. as determination of the amount of unrecognized deferred U.S. income tax liability related to the indefinitely reinvested earnings is not practicable because of the complexities associated with its hypothetical calculation. At January 1, 2017, approximately $279 million of undistributed earnings of the Company’s foreign subsidiaries are deemed to be indefinitely reinvested outside of the U.S., on which foreign withholding taxes of approximately $5.9 million would be payable upon remittance. This amount represents the estimated accumulated earnings and profits for all foreign subsidiaries excluding subsidiaries within Canada. Any future dividend distributions of these foreign earnings may be subject to both U.S. federal and state income taxes, as adjusted for foreign tax credits, and withholding taxes payable. At January 1, 2017, the Company has provided for approximately $1.6 million in U.S. federal income taxes and approximately $0.2 million in foreign withholding taxes on approximately $4.8 million of undistributed earnings from foreign subsidiaries within Canada that are not deemed to be indefinitely reinvested outside of the U.S. The Company’s federal income tax returns are subject to examination for the years 2003 to the present. The Company files returns in numerous state and local jurisdictions and in general it is subject to examination by the state tax authorities for the years 2011 to the present. The Company files returns in numerous foreign jurisdictions and in general it is subject to examination by the foreign tax authorities for the years 2006 to the present. As of January 1, 2017 and January 3, 2016, the Company had $27.9 million and $28.3 million, respectively, of unrecognized tax benefits. If the $27.9 million of unrecognized tax benefits as of January 1, 2017 are recognized, there would be a favorable impact on the Company’s effective tax rate in future periods. If the unrecognized tax benefits are not favorably settled, $18.3 million of the total amount of unrecognized tax benefits would require the use of cash in future periods. The Company recognizes accrued interest and income tax penalties related to unrecognized tax benefits as a component of income tax expense. As of January 1, 2017, the Company had accrued interest and penalties of $1.4 million, which is included in the total unrecognized tax benefit noted above. Management believes changes to our unrecognized tax benefits that are reasonably possible in the next 12 months will not have a significant impact on our financial positions or results of operations. The timing of the ultimate resolution of the Company’s tax matters and the payment and receipt of related cash is dependent on a number of factors, many of which are outside the Company’s control. A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits is as follows:
|  | FISCAL YEAR |
|  | 201 6 |  |  | 201 5 |  |  | 201 4 |
|  | (in thousands) |
Balance at beginning of year |  | $ | 28,271 |  |  | $ | 27,301 |  |  | $ | 27,361 |
Increases related to tax positions taken during the current year |  |  | 690 |  |  |  | 641 |  |  |  | 875 |
Increases related to tax positions taken during the prior years |  |  | 148 |  |  |  | 1,230 |  |  |  | 1,157 |
Decreases related to tax positions taken during the prior years |  |  | (695 | ) |  |  | (194 | ) |  |  | (697 | )
Decreases related to settlements with taxing authorities |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Decreases related to lapse of applicable statute of limitations |  |  | (403 | ) |  |  | (367 | ) |  |  | (919 | )
Changes due to foreign currency translation |  |  | (123 | ) |  |  | ( 340 | ) |  |  | (476 | )
Balance at end of year |  | $ | 27,888 |  |  | $ | 28,271 |  |  | $ | 27,301 |

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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 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32537-109319 + Details
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