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INCOME TAXES | 12 Months Ended
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Oct. 30, 2016
INCOME TAXES [Abstract] |
INCOME TAXES | NOTE 11 - INCOME TAXES Income before the income tax provisions consist of the following:
|  | Year Ended |
|  | October 30, 2016 |  |  | November 1, 2015 |  |  | November 2, 2014 |
United States |  | $ | 6,270 |  |  | $ | 6,646 |  |  | $ | (23,083 | )
Foreign |  |  | 54,204 |  |  |  | 63,394 |  |  |  | 64,413 |
|  | $ | 60,474 |  |  | $ | 70,040 |  |  | $ | 41,330 |
The income tax provisions consist of the following:
|  | Year Ended |
|  | October 30, 2016 |  |  | November 1, 2015 |  |  | November 2, 2014 |
Current: |  |  |  |  |  |  |  |  |
Federal |  | $ | 492 |  |  | $ | 160 |  |  | $ | 354 |
State |  |  | (2 | ) |  |  | (109 | ) |  |  | - |
Foreign |  |  | 8,115 |  |  |  | 9,729 |  |  |  | 4,726 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | - |  |  |  | - |  |  |  | - |
State |  |  | 10 |  |  |  | 7 |  |  |  | (5 | )
Foreign |  |  | (3,817 | ) |  |  | 3,394 |  |  |  | 4,220 |
Total |  | $ | 4,798 |  |  | $ | 13,181 |  |  | $ | 9,295 |
The income tax provisions differ from the amount computed by applying the statutory U.S. federal income tax rate to income before income taxes as a result of the following:
|  | Year Ended |
|  | October 30, 2016 |  |  | November 1, 2015 |  |  | November 2, 2014 |
U.S. federal income tax at statutory rate |  | $ | 21,166 |  |  | $ | 24,514 |  |  | $ | 14,465 |
Changes in valuation allowances |  |  | (9,516 | ) |  |  | (11,471 | ) |  |  | (7,575 | )
Distributions from foreign subsidiaries |  |  | 3,438 |  |  |  | 448 |  |  |  | 12,674 |
Foreign tax rate differentials |  |  | (9,620 | ) |  |  | (4,356 | ) |  |  | (4,864 | )
Tax credits |  |  | (944 | ) |  |  | (2,729 | ) |  |  | (2,847 | )
Uncertain tax positions, including reserves, settlements and resolutions |  |  | 134 |  |  |  | (175 | ) |  |  | (2,255 | )
Gain on acquisition of DPTT |  |  | - |  |  |  | - |  |  |  | (5,748 | )
Intercompany gain elimination |  |  | - |  |  |  | - |  |  |  | 4,759 |
Tax on foreign subsidiary earnings |  |  | 225 |  |  |  | 6,589 |  |  |  | - |
Other, net |  |  | (85 | ) |  |  | 361 |  |  |  | 686 |
|  | $ | 4,798 |  |  | $ | 13,181 |  |  | $ | 9,295 |
The effective tax rates differ from the U.S. statutory rate of 35% in fiscal years 2016, 2015 and 2014 primarily due to earnings, including the fiscal year 2014 gain on acquisition of DPTT, being taxed at lower statutory rates in foreign jurisdictions, changes in deferred tax asset valuation allowances, including the reversals noted below, combined with the benefit of various investment credits in a foreign jurisdiction. In addition, the lower rate in fiscal year 2016 was partially driven by a benefit that resulted from the reversal of a previously recorded undistributed earnings tax liability in a foreign jurisdiction for which the Company is no longer liable. Five year tax holidays in Taiwan, that expire in 2017 and 2019, decreased foreign taxes by $0.5 million and $0.2 million in the years ended October 30, 2016 and November 1, 2015, respectively, and had no dollar benefit for the year ended November 2, 2014. The tax holidays had no per share effect on the Company’s financial results of the years ended October 30, 2016, November 1, 2015 and November 2, 2014. The net deferred income tax assets consist of the following:
|  | As of |
|  | October 30, 2016 |  |  | November 1, 2015 |
Deferred income tax assets: |  |  |  |  |  |
Net operating losses |  | $ | 46,158 |  |  | $ | 56,582 |
Reserves not currently deductible |  |  | 7,876 |  |  |  | 8,158 |
Alternative minimum tax credits |  |  | 3,772 |  |  |  | 3,281 |
Tax credit carryforwards |  |  | 8,814 |  |  |  | 8,809 |
Other |  |  | 1,719 |  |  |  | 1,782 |
|  |  | 68,339 |  |  |  | 78,612 |
Valuation allowances |  |  | (29,315 | ) |  |  | (38,763 | )
|  |  | 39,024 |  |  |  | 39,849 |
Deferred income tax liabilities: |  |  |  |  |  |  |  |
Undistributed earnings of foreign subsidiaries |  |  | (3,962 | ) |  |  | (5,953 | )
Property, plant and equipment |  |  | (19,977 | ) |  |  | (17,874 | )
Investments |  |  | 74 |  |  |  | (4,596 | )
Other |  |  | (328 | ) |  |  | (552 | )
|  |  | (24,193 | ) |  |  | (28,975 | )
Net deferred income tax assets |  | $ | 14,831 |  |  | $ | 10,874 |
Reported per adoption of new accounting standard (see below): |  |  |  |  |  |  |  |
Deferred income tax assets |  | $ | 16,322 |  |  | $ | 13,083 |
Deferred income tax liabilities |  |  | (1,491 | ) |  |  | (2,209 | )
|  | $ | 14,831 |  |  | $ | 10,874 |
The Company has established a valuation allowance for a portion of its deferred tax assets because it believes, based on the weight of all available evidence, that it is more likely than not that a portion of its net operating loss carryforwards will expire prior to utilization. During fiscal years 2016 and 2015 the Company determined that sufficient positive evidence existed in certain foreign jurisdictions that it was more likely than not that additional deferred tax assets were realizable and, therefore, reduced the valuation allowance $4.3 million and $1.5 million respectively. In addition, the valuation allowance decreased in fiscal years 2016, 2015 and 2014 as a result of loss utilizations and deferred tax liability changes of $5.2 million, $9.3 million and $7.1 million respectively. As of October 30, 2016, the undistributed earnings of foreign subsidiaries included in consolidated retained earnings amounted to $176.6 million, of which $11.3 million is not considered to be permanently invested. No provision has been made for future U.S. taxes payable on the remaining undistributed earnings of $165.3 million, as they are expected to be indefinitely invested in foreign jurisdictions and, therefore, are not anticipated to be subject to U.S. tax. Should the Company elect in the future to repatriate the foreign earnings so invested, it may incur additional income tax expense on those foreign earnings, the amount of which is not practicable to compute. The following tables present the Company’s available operating loss and credit carryforwards at October 30, 2016, and their related expiration periods:
Operating Loss Carryforwards |  | Amount |  |  | Expiration Periods |
Federal |  | $ | 98,525 |  |  |  | 2025-2033 |
State |  |  | 211,665 |  |  |  | 2017-2036 |
Foreign |  |  | 27,403 |  |  |  | 2018-2023 |
Tax Credit Carryforwards |  | Amount |  |  | Expiration Period |
Federal research and development |  | $ | 5,121 |  |  |  | 2019-2036 |
Federal alternative minimum tax |  |  | 3,772 |  |  | Indefinite |
State tax |  |  | 5,681 |  |  |  | 2017-2030 |
A reconciliation of the beginning and ending amounts of unrecognized tax benefits, excluding interest and penalties, is as follows:
|  | Year Ended |
|  | October 30, 2016 |  |  | November 1, 2015 |  |  | November 2, 2014 |
Balance at beginning of year |  | $ | 4,029 |  |  | $ | 4,993 |  |  | $ | 4,757 |
Additions (reductions) for tax positions in prior years |  |  | 744 |  |  |  | (212 | ) |  |  | 3,437 |
Additions based on current year tax positions |  |  | 268 |  |  |  | 318 |  |  |  | 272 |
Settlements |  |  | (378 | ) |  |  | (720 | ) |  |  | (3,155 | )
Lapses of statutes of limitations |  |  | (57 | ) |  |  | (350 | ) |  |  | (318 | )
Balance at end of year |  | $ | 4,606 |  |  | $ | 4,029 |  |  | $ | 4,993 |
Included in the balance of unrecognized tax benefits as of October 30, 2016, November 1, 2015 and November 2, 2014, are $4.6 million, $4.1 million and $5.0 million recorded in other liabilities in the consolidated balance sheets that, if recognized, would impact the effective tax rate. Also included in the balance as of November 2, 2014, is $0.1 million of tax benefit that, if recognized, would result in adjustment to deferred tax accounts. Included in these amounts in fiscal years 2016, 2015 and 2014 were $0.1 million of interest and penalties. The Company includes any applicable interest and penalties related to uncertain tax positions in its income tax provision. The fiscal years 2016 and 2015 tables include the settlement of non-US audits. The fiscal year 2014 table includes the recognition of previously unrecognized tax benefits that resulted from the lapse of their assessment periods, the increase for uncertain tax positions related to the acquisition of DPTT (as discussed in Note 2) and the settlement of an Internal Revenue Service (“IRS”) income tax examination of the Company’s 2012 and 2011 federal income tax returns. The IRS income tax settlement had limited impact on fiscal year 2014 income tax expense, as the changes that resulted from the examination were offset by loss carryforwards for which the related deferred tax assets were subject to valuation allowances. As of October 30, 2016, the Company does not believe it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease in the next twelve months. The Company is no longer subject to examination by the U.S. for years prior to and including fiscal year 2012. With respect to major foreign and state tax jurisdictions, the Company is no longer subject to tax authority examinations for years prior to and including fiscal year 2011. Income tax payments were $11.4 million, $4.9 million and $5.2 million in fiscal years 2016, 2015 and 2014, respectively. Cash received for refunds of income taxes paid in prior years amounted to $0.2 million, $0.1 million and $1.4 million in fiscal years 2016, 2015 and 2014, respectively. Adoption of New Accounting Standard The Company adopted Accounting Standards Update (“ASU”) 2015-17 – “Balance Sheet Classification of Deferred Taxes” in the fourth quarter of its 2016 fiscal year. This ASU requires that deferred tax assets and liabilities be classified as noncurrent on a classified balance sheet. The Company adopted this ASU on a retrospective basis, as a result of which our prior year financial statements and related notes have been adjusted, as necessary, to show its effects on those periods. The effect on our fiscal year 2015 financial statement deferred income taxes line items of adopting ASU 2015-17 is presented below.
Classification |  | Previously Reported |  |  | Change Due to Adoption |  |  | Retrospectively Adjusted |
Current assets |  | $ | 3,354 |  |  | $ | (3,354 | ) |  | $ | - |
Noncurrent assets |  |  | 11,908 |  |  |  | 1,175 |  |  |  | 13,083 |
Noncurrent liabilities |  |  | 4,388 |  |  |  | (2,179 | ) |  |  | 2,209 |

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