XML 41 R17.htm IDEA: XBRL DOCUMENT
v3.10.0.1

INCOME TAXES | 12 Months Ended
--- | ---
Oct. 31, 2018
INCOME TAXES [Abstract] |
INCOME TAXES | NOTE 10 - INCOME TAXES On December 22, 2017, the U.S. Tax Cuts and Jobs Act (the “Act”), was signed into law, enacting significant changes to the United States Internal Revenue Code of 1986, as amended. For fiscal 2018, the most significant impacts include: the reduction of the U.S. federal corporate income tax rate; remeasurement of certain net deferred tax assets; phased refund of alternative minimum tax credit carryforward and requirement of a transition tax on the deemed repatriation of certain foreign earnings. The phase-in of the lower corporate income tax rate resulted in a blended income tax rate of 23.42% for fiscal 2018, as compared to the previous rate of 35%. The tax rate has been reduced to 21% for subsequent fiscal years, which impacted the remeasurement of our year end deferred tax balances. In December 2017, in response to the Act, the Securities and Exchange Commission released Staff Accounting Bulletin No. 118 (“SAB 118”) to address situations in which the accounting under ASC 740 is incomplete for certain income tax effects of the Act. We adopted SAB 118 in our first quarter of fiscal year 2018. SAB 118 summarizes a three-step process to be applied at each reporting period to account for and qualitatively disclose: (1) the effects of the change in tax law for which accounting is complete; (2) provisional amounts (or adjustments to provisional amounts) for the effects of the tax law where accounting is not complete, but for which reasonable estimates have been determined; and (3) reasonable estimates cannot yet be made and, therefore, taxes are reflected in accordance with law prior to the enactment of the Act. The effects of the Act provisions and the application of SAB 118 included in the fiscal 2018 results are summarized as follows:
| · | The accounting for the net income tax change for the remeasurement of certain deferred taxes is complete, and resulted in an increase of $1.6 million (provisional estimate of $2.5 million) reflecting the remeasurement of the final year end deferred taxes to the fiscal 2019 tax rate, all of which was offset by the remeasurement adjustment of $1.6 million (provisional estimate of $2.5 million) of the related valuation allowance, resulting in a net zero change in the income tax provision.
| · | As a result of the Act our determination regarding the realization of the benefit of the alternative minimum tax credit carryforwards changed; accordingly, the related valuation allowance has been reversed, and a $3.7 million, net of sequestration, tax benefit has been recorded (our original provisional estimate of $3.9 million, was reduced to $3.7 million in FY 2018 Q3 to reflect sequestration). The accounting for this item is now complete.
| · | Additionally, the accounting of the transition tax, for the year ended October 31, 2018 is complete. We recorded income tax expense of $29.6 million (provisional estimate of $28.4 million reported in the previous three quarters of FY 2018, changed based on the most current available information). The entire amount of transition tax was offset by the current year loss, current year credits and available credit carryforwards.
Based on our current interpretation of the Act, we have completed the accounting for all items that impact our fiscal 2018 financial statements. Collectively, these items and the changes in measurement did not have a material impact to our consolidated effective tax rate or financial statements. On January 18, 2018, the Taiwan Legislature Yuan approved amendments to the Income Tax Act, enacting an increase in the corporate tax rate from 17% to 20%. Under generally accepted accounting principles, we are required to revalue our deferred tax assets and liabilities, utilizing the rate applicable to the period, when a temporary difference will reverse. Our analysis indicates that our Taiwan deferred tax asset will be increased and, accordingly, we have recognized a net benefit of $0.2 million. Income before the income tax provisions consists of the following:
|  | Year Ended |
|  | October 31, 2018 |  |  | October 29, 2017 |  |  | October 30, 2016 |
United States |  | $ | (9,859 | ) |  | $ | (11,544 | ) |  | $ | 6,270 |
Foreign |  |  | 78,430 |  |  |  | 38,109 |  |  |  | 54,204 |
|  | $ | 68,571 |  |  | $ | 26,565 |  |  | $ | 60,474 |
The income tax provisions consist of the following:
|  | Year Ended |
|  | October 31, 2018 |  |  | October 29, 2017 |  |  | October 30, 2016 |
Current: |  |  |  |  |  |  |  |  |
Federal |  | $ | (30 | ) |  | $ | 173 |  |  | $ | 492 |
State |  |  | (0 | ) |  |  | (4 | ) |  |  | (2 | )
Foreign |  |  | 11,584 |  |  |  | 3,474 |  |  |  | 8,115 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (3,673 | ) |  |  | - |  |  |  | - |
State |  |  | (24 | ) |  |  | 15 |  |  |  | 10 |
Foreign |  |  | (522 | ) |  |  | 1,618 |  |  |  | (3,817 | )
Total |  | $ | 7,335 |  |  | $ | 5,276 |  |  | $ | 4,798 |
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 31, 2018 |  |  | October 29, 2017 |  |  | October 30, 2016 |
U.S. federal income tax at statutory rate |  | $ | 16,059 |  |  | $ | 9,298 |  |  | $ | 21,166 |
Changes in valuation allowances |  |  | 4,554 |  |  |  | (3,632 | ) |  |  | (9,516 | )
Distributions from foreign subsidiaries |  |  | - |  |  |  | 6,471 |  |  |  | 3,438 |
Foreign tax rate differentials |  |  | (2,078 | ) |  |  | (5,230 | ) |  |  | (9,620 | )
Tax credits |  |  | (1,530 | ) |  |  | (1,925 | ) |  |  | (944 | )
Uncertain tax positions, including reserves, settlements and resolutions |  |  | (1,791 | ) |  |  | (932 | ) |  |  | 134 |
Employee stock option |  |  | (1,433 | ) |  |  | 512 |  |  |  | 452 |
Income tax holiday |  |  | (2,648 | ) |  |  | (743 | ) |  |  | (507 | )
Tax reform |  |  | (3,736 | ) |  |  | - |  |  |  | - |
Tax on foreign subsidiary earnings |  |  | - |  |  |  | 1,712 |  |  |  | 225 |
Other, net |  |  | (62 | ) |  |  | (255 | ) |  |  | (30 | )
|  | $ | 7,335 |  |  | $ | 5,276 |  |  | $ | 4,798 |
The fiscal year 2018 effective tax rate differs from the U.S. federal blended rate of 23.42% primarily due to the impact of the Act allowing for the refund of AMT credits that caused a corresponding reversal of the related valuation allowance, the recognition of a benefit related to previously unrecognized tax positions, earnings being taxed at lower statutory rates in foreign jurisdictions, the benefits of tax holiday, and investment credits in foreign jurisdictions. The fiscal years 2017 and 2016 effective tax rates differ from the U.S. statutory rate of 35% primarily due to earnings being taxed at lower statutory rates in foreign jurisdictions, changes in deferred tax asset valuation allowances, including the reversals noted below, together 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 we are no longer liable. We were granted two five-year tax holidays in Taiwan, one that expired unused in 2017 and the other that expires in 2019. The latter tax holiday reduced foreign taxes by $2.6 million, $0.7 million and $0.5 million in fiscal years 2018, 2017 and 2016, respectively, with a $0.035 cents per share impact in fiscal 2018 and a de minimis per share effect in the fiscal 2017 and 2016 periods. The net deferred income tax assets consist of the following:
|  | As of |
|  | October 31, 2018 |  |  | October 29, 2017 |
Deferred income tax assets: |  |  |  |  |  |
Net operating losses |  | $ | 30,805 |  |  | $ | 40,942 |
Reserves not currently deductible |  |  | 4,703 |  |  |  | 4,196 |
Alternative minimum tax credits |  |  | 3,673 |  |  |  | 3,946 |
Tax credit carryforwards |  |  | 9,159 |  |  |  | 10,037 |
Share-based compensation |  |  | 767 |  |  |  | 2,335 |
Other |  |  | 1,210 |  |  |  | 1,503 |
|  |  | 50,317 |  |  |  | 62,959 |
Valuation allowances |  |  | (24,383 | ) |  |  | (25,590 | )
|  |  | 25,934 |  |  |  | 37,369 |
Deferred income tax liabilities: |  |  |  |  |  |  |  |
Undistributed earnings of foreign subsidiaries |  |  | (0 | ) |  |  | (4,335 | )
Property, plant and equipment |  |  | (8,020 | ) |  |  | (19,280 | )
Other |  |  | (448 | ) |  |  | (322 | )
|  |  | (8,468 | ) |  |  | (23,937 | )
Net deferred income tax assets |  | $ | 17,466 |  |  | $ | 13,432 |
Reported as: |  |  |  |  |  |  |  |
Deferred income tax assets |  | $ | 18,109 |  |  | $ | 15,481 |
Deferred income tax liabilities |  |  | (643 | ) |  |  | (2,049 | )
|  | $ | 17,466 |  |  | $ | 13,432 |
We have established a valuation allowance for a portion of our deferred tax assets because we believe, based on the weight of all available evidence, that it is more likely than not that a portion of our net operating loss carryforwards will expire prior to utilization. During fiscal year 2018, the valuation allowance decrease primarily resulted from the reversal of the valuation allowance related to alternative minimum tax credits of $(3.9) million as the result of the Act, prior year additional NOL utilization of $(1.8) million, credit utilization of $(1.3) million, other impacts of $(0.4) million, changes in the deferred tax liability of $2.8 million, $1.8 million from the adoption of ASU 2016-09 related to stock compensation, and $1.6 million from the corporate tax rate reduction. During fiscal year 2016, we 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, we reduced the valuation allowance by $4.3 million. Fiscal years 2017 and 2016 also changed as a result of loss utilizations and deferred tax liability changes of $3.7 million and $5.2 million, respectively. Due to the Act, as of fiscal year end 2018, U.S. deferred taxes are no longer provided on the undistributed earnings of non-U.S. subsidiaries. Our policy to indefinitely reinvest these earnings in non-U.S. operations remains unchanged for the purpose of determining deferred tax liabilities for U.S. state and foreign withholding taxes. During fiscal year 2017, the permanent reinvestment assertion was partially changed due to changes in circumstances within one of our non-U.S. subsidiary entities, and a U.S. tax liability was recognized for the related undistributed earnings. Outside of the Act, should we elect in the future to repatriate the remaining foreign earnings deemed to be indefinitely reinvested, we may incur additional state and withholding tax expense on those foreign earnings, the amount of which is not practicable to compute. The following tables present our available operating loss and credit carryforwards at October 31, 2018, and their related expiration periods:
Operating Loss Carryforwards |  | Amount |  |  | Expiration Periods |
Federal |  | $ | 78,902 |  |  |  | 2028-2033 |
State |  |  | 208,411 |  |  |  | 2018-2038 |
Foreign |  |  | 9,761 |  |  |  | 2021-2027 |
Tax Credit Carryforwards |  | Amount |  |  | Expiration Period |
Federal research and development |  | $ | 4,314 |  |  |  | 2019-2038 |
Federal alternative minimum |  |  | 3,673 |  |  | Refundable |
State |  |  | 5,819 |  |  |  | 2020-2032 |
Foreign |  |  | 246 |  |  |  | 2019-2020 |
A reconciliation of the beginning and ending amounts of unrecognized tax benefits, excluding interest and penalties, is as follows:
|  | Year Ended |
|  | October 31, 2018 |  |  | October 29, 2017 |  |  | October 30, 2016 |
Balance at beginning of year |  | $ | 3,384 |  |  | $ | 4,606 |  |  | $ | 4,029 |
Additions (reductions) for tax positions in prior years |  |  | (44 | ) |  |  | 207 |  |  |  | 744 |
Additions based on current year tax positions |  |  | 498 |  |  |  | 323 |  |  |  | 268 |
Settlements |  |  | (56 | ) |  |  | (922 | ) |  |  | (378 | )
Lapses of statutes of limitations |  |  | (2,007 | ) |  |  | (830 | ) |  |  | (57 | )
Balance at end of year |  | $ | 1,775 |  |  | $ | 3,384 |  |  | $ | 4,606 |
As of October 31, 2018, October 29, 2017 and October 30, 2016, the balance of unrecognized tax benefits includes $1.9 million, $3.4 million, and $4.6 million, respectively, recorded in other liabilities in the consolidated balance sheets that, if recognized, would impact the effective tax rate. Included in these amounts in each of fiscal years 2018, 2017 and 2016 were $0.1 million of interest and penalties. We include any applicable interest and penalties related to uncertain tax positions in our income tax provision. The amounts reflected in the table above for the fiscal years 2018, 2017 and 2016 include settlements of non-U.S. audits. Although the timing of the expirations of statutes of limitations may be uncertain, as they can be dependent upon the settlement of tax audits, the Company believes that it is reasonably possible that up to $0.9 million of its uncertain tax positions (including accrued interest and penalties, and net of tax benefits) may be resolved over the next twelve months. Resolution of these uncertain tax positions may result from either or both of the lapses of statutes of limitations and tax settlements. The Company is no longer subject to tax authority examinations in the U.S., major foreign, or state tax jurisdictions for years prior to fiscal year 2014. Income tax payments were $6.1 million, $9.3 million and $11.4 million in fiscal years 2018, 2017 and 2016, respectively. Cash received as refunds of income taxes paid in prior years amounted to $1.1 million, $0.1 million and $0.2 million in fiscal years 2018, 2017 and 2016, respectively.

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