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Income Taxes | 12 Months Ended
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Dec. 29, 2018
Income Tax Disclosure [Abstract] |
Income Taxes |
12. | Income Taxes
In December 2017, the 2017 Tax Act was enacted. The 2017 Tax Act includes a number of changes to previous U.S. tax laws that impact the Company, most notably a reduction of the U.S. corporate income tax rate from 35% to 21% for tax years beginning after December 31, 2017. The 2017 Tax Act also provides for a one-time transition tax on certain foreign earnings and the acceleration of depreciation for certain assets placed into service after September 27, 2017 as well as prospective changes which began in 2018, including repeal of the domestic manufacturing deduction and additional limitations on the deductibility of executive compensation and interest. The 2017 Tax Act also includes foreign provisions that taxes global intangible low-taxed income (“GILTI”) of foreign subsidiaries and provides a special tax deduction for foreign-derived intangible income (“FDII”). Certain impacts of the 2017 Tax Act generally would have been required to be completed and incorporated into the Company’s fiscal 2017 year-end financial statements. However, due to the complexity of the 2017 Tax Act, the staff of the U.S. Securities and Exchange Commission issued guidance that provided companies with up to a one-year window to finalize the 2017 impact of this new legislation. The Company finalized its accounting related to the 2017 Tax Act during the fourth quarter of fiscal 2018. The impact on the Company’s fiscal 2018 results was a net tax benefit of $2,678, which is related to finalizing the provisional transition tax, and related foreign tax credits, originally recorded as of December 31, 2017. Additionally, proposed regulations were issued by the IRS throughout 2018. The Company expects these regulations to be finalized in 2019 and such updates, as well as the issuance of future regulations or notices by the IRS, may have an impact on the Company’s fiscal 2018 income tax provision. The Company will assess the impact of any additional guidance when it is issued. As of December 29, 2018, the Company has made a policy decision to elect to treat taxes due from GILTI as a current period expense. The following tables summarize the Company’s consolidated provision for U.S. federal, state and foreign taxes on income:
|  | December 29, |  |  | December 30, |  |  | December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
U.S. federal |  | $ | 1,235 |  |  | $ | 9,224 |  |  | $ | (15,254 | )
State |  |  | 5,918 |  |  |  | 1,993 |  |  |  | 604 |
Foreign |  |  | 27,013 |  |  |  | 18,762 |  |  |  | 20,191 |
|  | $ | 34,166 |  |  | $ | 29,979 |  |  | $ | 5,541 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
U.S. federal |  | $ | (10,367 | ) |  | $ | (51,788 | ) |  | $ | 10,980 |
State |  |  | (2,566 | ) |  |  | 481 |  |  |  | 1,877 |
Foreign |  |  | (740 | ) |  |  | 3,091 |  |  |  | (1,764 | )
|  | $ | (13,673 | ) |  | $ | (48,216 | ) |  | $ | 11,093 |
Total tax provision (benefit) |  | $ | 20,493 |  |  | $ | (18,237 | ) |  | $ | 16,634 |
The components of the Company’s consolidated income before income taxes consist of the following:
|  | December 29, |  |  | December 30, |  |  | December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Domestic |  | $ | 126,171 |  |  | $ | 53,045 |  |  | $ | 26,367 |
Foreign |  |  | 117,890 |  |  |  | 92,035 |  |  |  | 57,760 |
|  | $ | 244,061 |  |  | $ | 145,080 |  |  | $ | 84,127 |
The effective tax rates for the fiscal years ended December 29, 2018, December 30, 2017 and December 31, 2016 were 8.4%, (12.6%) and 19.8%, respectively. The difference between the U.S. federal statutory tax rate and the Company’s consolidated effective tax rate is as follows: The Company’s effective tax rate for the fiscal year ended December 29, 2018 was affected by the following items: (i) a $25,353 tax benefit related to tax windfalls from stock compensation, (ii) a $8,535 tax benefit due to the reversal of a valuation allowance on foreign tax credit carryforwards now expected to be utilized, (iii) a $3,435 tax benefit due to the reversal of a valuation allowance on certain net operating losses that are now expected to be realized, (iv) a $3,430 tax benefit primarily related to the reversal of tax reserves resulting from the closure of various tax audits, (v) a $2,678 tax benefit related to favorable tax return adjustments due to the 2017 Tax Act, and (vi) a $1,858 tax benefit related to the cessation of operations of the Company’s Mexican subsidiary. The Company’s effective tax rate for the fiscal year ended December 30, 2017 was impacted by the 2017 Tax Act which benefited its tax expense by $56,560 and was comprised of the following items: (i) a $68,654 tax benefit related to the revaluation of deferred tax liabilities to reflect the decrease in the corporate tax rate from 35% to 21%, (ii) a $8,964 charge to record a valuation allowance against foreign tax credit carryforwards that as a result of the 2017 Tax Act are no longer expected to be realized, and (iii) a net charge of $3,130 related to other 2017 Tax Act items, which includes the transition tax on foreign earnings. In addition, the effective tax rate for fiscal 2017 was impacted by the following one-time discrete items (i) an $11,633 tax benefit related to the cessation of operations of the Company’s Spanish subsidiary, (ii) a $3,735 tax benefit due to a change in estimate related to the availability of certain foreign tax credits, and (iii) a $2,255 tax benefit related to the reversal of tax reserves resulting from an updated transfer pricing study. The Company’s effective tax rate for the fiscal year ended December 31, 2016 was affected by a net tax benefit arising from a research and development tax credit and a Section 199 deduction for the tax years 2012 through 2016 and the reversal of a valuation allowance related to tax benefits for foreign losses that are now expected to be realized. These benefits were partially offset by income tax expenses recorded for out-of-period adjustments.
|  | December 29, |  |  | December 30, |  |  | December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
U.S. federal statutory tax rate |  |  | 21.0 | % |  |  | 35.0 | % |  |  | 35.0 | %
State income taxes (net of federal benefit) |  |  | 1.1 | % |  |  | 2.5 | % |  |  | 2.0 | %
Cessation of operations |  |  | (0.8 | %) |  |  | (8.0 | %) |  |  | 0.0 | %
Research and development credit |  |  | (0.5 | %) |  |  | (1.3 | %) |  |  | (19.5 | %)
Tax windfall on share-based awards |  |  | (8.6 | %) |  |  | (1.1 | %) |  |  | 0.0 | %
Reserves for uncertain tax positions |  |  | (1.4 | %) |  |  | (0.2 | %) |  |  | 2.9 | %
Tax rate changes |  |  | 0.3 | % |  |  | (49.6 | %) |  |  | 0.0 | %
(Decrease) increase in valuation adjustment related to foreign tax credits |  |  | (3.5 | %) |  |  | 3.5 | % |  |  | (2.3 | %)
GILTI |  |  | 1.5 | % |  |  | 0.0 | % |  |  | 0.0 | %
FDII |  |  | (1.9 | %) |  |  | 0.0 | % |  |  | 0.0 | %
(Decrease) increase in valuation allowance due to net operating loss |  |  | (0.7 | %) |  |  | 3.0 | % |  |  | 0.0 | %
Goodwill impairment |  |  | 0.0 | % |  |  | 3.2 | % |  |  | 0.0 | %
Tax return adjustments related to 2017 Tax Act |  |  | (1.1 | %) |  |  | 0.0 | % |  |  | 0.0 | %
Impact of foreign operations |  |  | 3.2 | % |  |  | (0.7 | %) |  |  | 0.0 | %
Out-of-period adjustments |  |  | 0.0 | % |  |  | 0.0 | % |  |  | 2.6 | %
Other |  |  | (0.2 | %) |  |  | 1.1 | % |  |  | (0.9 | %)
Total effective tax rate |  |  | 8.4 | % |  |  | (12.6 | %) |  |  | 19.8 | %
The deferred tax assets and liabilities recorded on the Company’s consolidated balance sheets are as follows:
|  | December 29, |  |  | December 30, |
|  | 2018 |  |  | 2017 |
Interest expense disallowance |  | $ | 22,418 |  |  | $ | 2,452 |
Operating loss carryforwards |  |  | 9,862 |  |  |  | 17,424 |
Provision for estimated expenses |  |  | 2,320 |  |  |  | 2,307 |
Depreciation |  |  | 0 |  |  |  | 1,005 |
Salaries and wages |  |  | 2,518 |  |  |  | 1,579 |
Share-based compensation |  |  | 7,666 |  |  |  | 8,016 |
Foreign tax credit carryforwards |  |  | 0 |  |  |  | 8,964 |
Other comprehensive income |  |  | 5,877 |  |  |  | 4,797 |
Other |  |  | 7,481 |  |  |  | 6,539 |
Less: valuation allowance |  |  | (6,191 | ) |  |  | (22,760 | )
Total deferred tax assets |  | $ | 51,951 |  |  | $ | 30,323 |
Goodwill and intangible assets |  | $ | (223,938 | ) |  | $ | (166,257 | )
Depreciation |  |  | (1,149 | ) |  |  | 0 |
Other |  |  | (886 | ) |  |  | (1,025 | )
Total deferred tax liabilities |  | $ | (225,973 | ) |  | $ | (167,282 | )
Net deferred tax liabilities |  | $ | (174,022 | ) |  | $ | (136,959 | )
Certain foreign operations of the Company have generated net operating loss carryforwards. If it has been determined that it is more-likely-than-not that the deferred tax assets associated with these net operating loss carryforwards will not be utilized, a valuation allowance has been recorded. As of December 29, 2018 and December 30, 2017, various foreign subsidiaries had net operating loss carryforwards of approximately $38,098 and $69,359, respectively, some of which have an unlimited carryforward period, while others will begin to expire in fiscal 2019. As a result of the 2017 Tax Act changing the U.S. to a modified territorial tax system, the Company will no longer assert its $5,190 of undistributed foreign earnings as of December 29, 2018 are permanently reinvested. The Company has considered whether there would be any potential future costs of not asserting indefinite reinvestment and does not expect such costs to be significant. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|  | December 29, |  |  | December 30, |  |  | December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Balance at beginning of year |  | $ | 15,173 |  |  | $ | 10,297 |  |  | $ | 8,261 |
Increases related to tax positions taken in current year |  |  | 60 |  |  |  | 266 |  |  |  | 1,291 |
Increases related to tax positions taken in prior years |  |  | 1,207 |  |  |  | 7,246 |  |  |  | 5,508 |
Reductions related to tax positions taken in prior years |  |  | (10,560 | ) |  |  | (1,268 | ) |  |  | (840 | )
Reductions related to settlements with tax authorities |  |  | (2,215 | ) |  |  | 0 |  |  |  | (1,700 | )
Reductions related to the expiration of statutes of limitations |  |  | 0 |  |  |  | (1,369 | ) |  |  | (2,223 | )
Balance at end of year |  | $ | 3,665 |  |  | $ | 15,173 |  |  | $ | 10,297 |
The above reconciliation relating to prior years has been revised to reflect gross amounts. At December 29, 2018, the total amount of unrecognized tax benefits that, if recognized, would affect the Company’s effective tax rate is $2,319. Given the potential outcome of current examinations, it is reasonably possible that the balance of unrecognized tax benefits could significantly change within the next twelve months. However, an estimate of the range of reasonably possible adjustments cannot be made at this time. In 2018, the Company reached favorable settlements with the IRS for tax years 2012 and 2013, which resulted in a tax benefit of $1,890, and the Netherlands, which resulted in the release of a valuation allowance in the amount of $3,434. The Company files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. At December 29, 2018, with few exceptions, the Company was no longer subject to U.S. federal, state or local income tax examinations by tax authorities for years prior to 2016, or non-U.S. income tax examinations by tax authorities for years prior to 2014. The Company has no significant non-U.S. jurisdiction audits underway. The tax years 2013 through 2017 remain subject to examination by foreign tax authorities. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. The Company had $186 and $515 of accrued interest and penalties at December 29, 2018 and December 30, 2017, respectively. The Company recognized $(65), $63 and $(777) in interest and penalties during the fiscal years ended December 29, 2018, December 30, 2017 and December 31, 2016, 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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