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Income Taxes | 12 Months Ended
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Dec. 28, 2019
Income Tax Disclosure [Abstract] |
Income Taxes |
1 3. | Income Taxes
In December 2017, the Tax Cuts and Jobs Act (the “2017 Tax Act”) was enacted. The 2017 Tax Act included a number of changes to previous U.S. tax laws that impacted 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 included foreign provisions that tax global intangible low-taxed income (“GILTI”) of foreign subsidiaries and provide a special 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 Company’s estimates concerning the impact of the 2017 Tax Act on its accounting and business remain subject to developing interpretations of the provisions of the 2017 Tax Act. U.S. Treasury regulations, administrative interpretations or court decisions interpreting the 2017 Tax Act may require further adjustments and changes in the Company’s estimates as new guidance is issued. The following tables summarize the Company’s consolidated provision for U.S. federal, state and foreign taxes on income:
|  | December 28, |  |  | December 29, |  |  | December 30, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
U.S. federal |  | $ | 20,900 |  |  | $ | 1,235 |  |  | $ | 9,224 |
State |  |  | 1,873 |  |  |  | 5,918 |  |  |  | 1,993 |
Foreign |  |  | 18,164 |  |  |  | 27,013 |  |  |  | 18,762 |
|  | $ | 40,937 |  |  | $ | 34,166 |  |  | $ | 29,979 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
U.S. federal |  | $ | (9,137 | ) |  | $ | (10,367 | ) |  | $ | (51,788 | )
State |  |  | (2,434 | ) |  |  | (2,566 | ) |  |  | 481 |
Foreign |  |  | 2,147 |  |  |  | (740 | ) |  |  | 3,091 |
|  | $ | (9,424 | ) |  | $ | (13,673 | ) |  | $ | (48,216 | )
Total tax provision (benefit) |  | $ | 31,513 |  |  | $ | 20,493 |  |  | $ | (18,237 | )
The components of the Company’s consolidated income before income taxes consist of the following:
|  | December 28, |  |  | December 29, |  |  | December 30, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Domestic |  | $ | 75,932 |  |  | $ | 126,171 |  |  | $ | 53,045 |
Foreign |  |  | 75,028 |  |  |  | 117,890 |  |  |  | 92,035 |
|  | $ | 150,960 |  |  | $ | 244,061 |  |  | $ | 145,080 |
The effective tax rates for the fiscal years ended December 28, 2019, December 29, 2018 and December 30, 2017 were 20.9%, 8.4% and (12.6%), 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 28, 2019 was impacted by the following items: (i) a $5,148 tax expense related to income earned in foreign jurisdictions and (ii) a $3,524 tax expense related to GILTI. In addition, the effective tax rate for fiscal 2019 was impacted by the following: (i) a $5,650 tax benefit related to FDII, (ii) a $1,375 tax benefit related to the reversal of tax reserves no longer needed, and (iii) a $746 tax benefit related to the cessation of certain publishing operations. 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 that have been fully 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.
|  | December 28, |  |  | December 29, |  |  | December 30, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
U.S. federal statutory tax rate |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 35.0 | %
State income taxes (net of federal benefit) |  |  | (0.3 | %) |  |  | 1.1 | % |  |  | 2.5 | %
Cessation of operations |  |  | (0.5 | %) |  |  | (0.8 | %) |  |  | (8.0 | %)
Research and development credit |  |  | (1.2 | %) |  |  | (0.5 | %) |  |  | (1.3 | %)
Tax windfall on share-based awards |  |  | (0.1 | %) |  |  | (8.6 | %) |  |  | (1.1 | %)
Reserves for uncertain tax positions |  |  | (0.9 | %) |  |  | (1.4 | %) |  |  | (0.2 | %)
Tax rate changes |  |  | 0.0 | % |  |  | 0.3 | % |  |  | (49.6 | %)
(Decrease) increase in valuation adjustment related to foreign tax credits |  |  | 0.0 | % |  |  | (3.5 | %) |  |  | 3.5 | %
GILTI |  |  | 2.3 | % |  |  | 1.5 | % |  |  | 0.0 | %
FDII |  |  | (3.7 | %) |  |  | (1.9 | %) |  |  | 0.0 | %
Increase (decrease) in valuation allowance due to net operating loss |  |  | 0.4 | % |  |  | (0.7 | %) |  |  | 3.0 | %
Goodwill impairment |  |  | 0.0 | % |  |  | 0.0 | % |  |  | 3.2 | %
Tax return adjustments related to the 2017 Tax Act |  |  | (0.7 | %) |  |  | (1.1 | %) |  |  | 0.0 | %
Impact of foreign operations |  |  | 3.4 | % |  |  | 3.2 | % |  |  | (0.7 | %)
Other |  |  | 1.2 | % |  |  | (0.2 | %) |  |  | 1.1 | %
Total effective tax rate |  |  | 20.9 | % |  |  | 8.4 | % |  |  | (12.6 | %)
The deferred tax assets and liabilities recorded on the Company’s consolidated balance sheets are as follows:
|  | December 28, |  |  | December 29, |
|  | 2019 |  |  | 2018 |
Interest expense disallowance |  | $ | 38,396 |  |  | $ | 22,418 |
Operating lease liabilities |  |  | 39,095 |  |  |  | 0 |
Operating loss carryforwards |  |  | 9,375 |  |  |  | 9,862 |
Provision for estimated expenses |  |  | 2,578 |  |  |  | 2,320 |
Salaries and wages |  |  | 2,037 |  |  |  | 2,518 |
Share-based compensation |  |  | 7,533 |  |  |  | 7,666 |
Other comprehensive income |  |  | 9,816 |  |  |  | 5,877 |
Other |  |  | 4,125 |  |  |  | 7,481 |
Less: valuation allowance |  |  | (6,760 | ) |  |  | (6,191 | )
Total deferred tax assets |  | $ | 106,195 |  |  | $ | 51,951 |
Goodwill and intangible assets |  | $ | (228,048 | ) |  | $ | (223,938 | )
Operating lease assets |  |  | (36,670 | ) |  |  | 0 |
Depreciation |  |  | (1,082 | ) |  |  | (1,149 | )
Prepaid expenses |  |  | (1,311 | ) |  |  | (886 | )
Total deferred tax liabilities |  | $ | (267,111 | ) |  | $ | (225,973 | )
Net deferred tax liabilities |  | $ | (160,916 | ) |  | $ | (174,022 | )
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 28, 2019 and December 29, 2018, various foreign subsidiaries had net operating loss carryforwards of approximately $35,534 and $38,098, respectively, some of which have an unlimited carryforward period, while others will begin to expire in fiscal 2020. 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 $19,124 of undistributed foreign earnings as of December 28, 2019 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 28, |  |  | December 29, |  |  | December 30, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Balance at beginning of year |  | $ | 3,665 |  |  | $ | 15,173 |  |  | $ | 10,297 |
Increases related to tax positions taken in current year |  |  | 0 |  |  |  | 60 |  |  |  | 266 |
Increases related to tax positions taken in prior years |  |  | 264 |  |  |  | 1,207 |  |  |  | 7,246 |
Reductions related to tax positions taken in prior years |  |  | (2,731 | ) |  |  | (10,560 | ) |  |  | (1,268 | )
Reductions related to settlements with tax authorities |  |  | (992 | ) |  |  | (2,215 | ) |  |  | 0 |
Reductions related to the expiration of statutes of limitations |  |  | 0 |  |  |  | 0 |  |  |  | (1,369 | )
Balance at end of year |  | $ | 206 |  |  | $ | 3,665 |  |  | $ | 15,173 |
At December 28, 2019, the total amount of unrecognized tax benefits that, if recognized, would affect the Company’s effective tax rate is $206. 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 2019, the Company reached favorable settlements with the IRS for the 2016 tax year, which resulted in a tax benefit of $485, and with South Carolina for tax years 2012 to 2017, which resulted in a tax benefit of $756. The Company files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. At December 28, 2019, 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 2017, or non-U.S. income tax examinations by tax authorities for years prior to 2014. The Company is subject to audits in certain non-U.S. jurisdictions for tax years 2014 to 2017. The resolution of these audits is not expected to be material. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. The Company had $6 and $186 of accrued interest and penalties at December 28, 2019 and December 29, 2018, respectively. The Company recognized $(257), $(65) and $63 in interest and penalties during the fiscal years ended December 28, 2019, December 29, 2018 and December 30, 2017, 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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