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Income Taxes | 12 Months Ended
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Jan. 01, 2016
Income Taxes [Abstract] |
Income Taxes | 9. Income Taxes The Company files federal income tax returns, as well as multiple state, local and foreign jurisdiction tax returns. A number of years may elapse before an uncertain tax position is audited and finally resolved. While it is often difficult to predict the final outcome or the timing of resolution on any particular uncertain tax position, the Company believes that its reserves for income taxes reflect the most probable outcome. The Company adjusts these reserves, as well as the related interest, in light of changing facts and circumstances. The resolution of a matter would be recognized as an adjustment to the provision for income taxes and the effective tax rate in the period of resolution. The Company is no longer subject to examinations of its federal income tax returns by the Internal Revenue Service for years through 2011 and all significant state, local and foreign matters have been concluded for years through 2011. The components of income before income taxes are as follows (in thousands):
|  | Year Ended
|  | January 1, |  | January 2, |  | December 27,
|  | 2016 |  | 2015 |  | 2013
Domestic |  | $ | 16,249 |  | $ | 6,549 |  | $ | 15,823
Foreign |  |  | 5,267 |  |  | 5,417 |  |  | (696)
Income before income taxes |  | $ | 21,516 |  | $ | 11,966 |  | $ | 15,127
The components of income tax expense (benefit) are as follows (in thousands):
|  | Year Ended
|  | January 1, |  | January 2, |  | December 27,
|  | 2016 |  | 2015 |  | 2013
Current tax expense (benefit) |  |  |  |  |  |  |  |  |
Federal |  | $ | 2,042 |  | $ | 155 |  | $ | 10
State |  |  | 463 |  |  | 131 |  |  | 530
Foreign |  |  | 224 |  |  | 132 |  |  | 103
|  |  | 2,729 |  |  | 418 |  |  | 643
Deferred tax expense (benefit) |  |  |  |  |  |  |  |  |
Federal |  |  | 3,566 |  |  | 200 |  |  | 6,450
State |  |  | 529 |  |  | (238) |  |  | 394
Foreign |  |  | 883 |  |  | 1,875 |  |  | (1,089)
|  |  | 4,978 |  |  | 1,837 |  |  | 5,755
Income tax expense |  | $ | 7,707 |  | $ | 2,255 |  | $ | 6,398
A reconciliation of the federal statutory tax rate with the effective tax rate is as follows:
|  | Year Ended
|  | January 1, |  | January 2, |  | December 27,
|  | 2016 |  | 2015 |  | 2013
U.S statutory income tax expense rate |  | 35.0 | % |  | 35.0 | % |  | 35.0 | %
State income taxes, net of federal income tax expense |  | 3.0 |  |  | (0.6) |  |  | 4.0 |
Valuation reduction |  | (0.8) |  |  | (1.0) |  |  | (0.5) |
Meals and entertainment |  | 1.2 |  |  | 2.0 |  |  | 1.7 |
Foreign rate differential |  | (3.1) |  |  | (10.6) |  |  | 1.0 |
Bargain purchase gain |  | — |  |  | (8.7) |  |  | — |
Foreign exchange loss |  | (0.2) |  |  | 0.1 |  |  | 0.4 |
Other, net |  | 0.7 |  |  | 2.6 |  |  | 0.7 |
Effective tax rate |  | 35.8 | % |  | 18.8 | % |  | 42.3 | %
The components of the net deferred income tax asset (liability) are as follows (in thousands):
|  |  |  |  | Year Ended
|  |  |  |  | January 1, |  | January 2,
|  |  |  |  | 2016 |  | 2015
Deferred income tax assets: |  |  |  |  |  |  |  |  |
Allowance for doubtful accounts |  |  |  |  | $ | 436 |  | $ | 518
Net operating loss and tax credits carryforward |  |  |  |  |  | 3,229 |  |  | 9,283
Accrued expenses and other liabilities |  |  |  |  |  | 4,943 |  |  | 3,160
|  |  |  |  |  | 8,608 |  |  | 12,961
Valuation allowance |  |  |  |  |  | (1,287) |  |  | (1,452)
|  |  |  |  |  | 7,321 |  |  | 11,509
Deferred income tax liabilities: |  |  |  |  |  |  |  |  |
Depreciation |  |  |  |  |  | (4,929) |  |  | (4,628)
Tax over book amortization on goodwill and intangibles |  |  |  |  |  | (10,204) |  |  | (9,872)
Other items |  |  |  |  |  | (311) |  |  | (106)
|  |  |  |  |  | (15,444) |  |  | (14,606)
Net deferred income tax liability |  |  |  |  | $ | (8,123) |  | $ | (3,097)
As of January 1, 2016, the Company had $2.3 million of U.S. state net operating loss carryforwards. Additionally, at January 1, 2016, the Company had $7.6 million of foreign net operating loss carryforwards, of which $3.1 million related to operations in the U.K., $1.1 million related to operations in France and $0.5 million related to operations in Germany. A significant amount of the foreign net operating losses may be carried forward indefinitely. The liability method of accounting for deferred income taxes requires a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. In determining the need for valuation allowances the Company considers evidence such as history of losses and general economic conditions. At January 1, 2016 and January 2, 2015, the Company had a valuation allowance of $1.3 million and $1.5 million, respectively, to reduce deferred income tax assets primarily related to foreign and state net operating loss and tax credit carryforwards. The undistributed earnings in foreign subsidiaries of approximately $2.5 million are permanently invested abroad and will not be repatriated to the U.S. in the foreseeable future. Because they are considered to be indefinitely reinvested, no U.S. federal or state deferred income taxes have been provided on these earnings. Upon distribution of those earnings, in the form of dividends or otherwise, the Company would be subject to both U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to the various foreign countries in which it operates. Because of the availability of U.S. foreign tax credits, it is not practicable to determine the U.S. foreign income tax liability that would be payable if such earnings were not reinvested indefinitely. Penalties and tax-related interest expense are reported as a component of income tax expense. For the years ended January 1, 2016 and January 2, 2015 the total amount of accrued income tax-related interest and penalties was $202 thousand and $357 thousand, respectively. The Company prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This interpretation also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods and income tax disclosures. The following table sets forth the detail and activity of the ASC 740-10 liability during the years ended January 1, 2016 and January 2, 2015 (in thousands):
|  |  |  |  | Year Ended
|  |  |  |  | January 1, |  | January 2,
|  |  |  |  | 2016 |  | 2015
Beginning balance |  |  |  |  | $ | 792 |  | $ | 716
Additions based on tax positions |  |  |  |  |  | 15 |  |  | 76
Reduction for prior year tax deductions |  |  |  |  |  | (95) |  |  | —
Ending balance |  |  |  |  | $ | 712 |  | $ | 792
As of January 1, 2016 and January 2, 2015, the ASC 740-10 liability of $0.7 million and $0.8 million, respectively, was classified as a current liability and included in the current portion of the accrued expenses and other liabilities in the accompanying consolidated balance sheets. The Company does not believe there will be any material changes in its unrecognized tax positions over the next twelve months. The reversal of ASC 740-10 tax liabilities as of January 1, 2016 and January 2, 2015 would have a favorable impact on the effective tax rate in future period.

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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=6907707&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=6907707&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=6907707&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=6907707&loc=d3e32537-109319 + Details
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