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Income Taxes | 12 Months Ended
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Jan. 01, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | 13.Income Taxes On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act (the “CARES Act”) was signed into law. The CARES Act includes provisions relating to modifications to the net interest deduction limitation, net operating loss carryforward rules, refundable payroll tax credits and deferment of the employer portion of certain payroll taxes. On July 20, 2020, the U.S. Treasury Department released final regulations under Internal Revenue Code Section 951A (TD 9902) permitting a taxpayer to elect to exclude from its global intangible low-taxed income (“GILTI”) inclusion items of income subject to a high effective rate of foreign tax. As a result of the final regulations, the Company recorded a $7,566 tax benefit in fiscal 2020 related to the fiscal 2018 and fiscal 2019 taxes previously accrued attributable to GILTI. The following tables summarize the Company’s consolidated provision for U.S. federal, state and foreign taxes on income:
|  | Fiscal Year Ended |
|  | January 1, |  |  | January 2, |  |  | December 28, |
|  | 2022 |  |  | 2021 |  |  | 2019 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
U.S. federal |  | $ | 38 |  |  | $ | (14,052 | ) |  | $ | 20,900 |
State |  |  | 1,055 |  |  |  | 4,421 |  |  |  | 1,873 |
Foreign |  |  | 24,245 |  |  |  | 28,533 |  |  |  | 18,164 |
|  | $ | 25,338 |  |  | $ | 18,902 |  |  | $ | 40,937 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
U.S. federal |  | $ | (8,510 | ) |  | $ | 94 |  |  | $ | (9,137 | )
State |  |  | (9,589 | ) |  |  | (2,835 | ) |  |  | (2,434 | )
Foreign |  |  | 2,534 |  |  |  | 1,301 |  |  |  | 2,147 |
|  | $ | (15,565 | ) |  | $ | (1,440 | ) |  | $ | (9,424 | )
Total tax provision |  | $ | 9,773 |  |  | $ | 17,462 |  |  | $ | 31,513 |
The components of the Company’s consolidated income before income taxes consist of the following:
|  | Fiscal Year Ended |
|  | January 1, |  |  | January 2, |  |  | December 28, |
|  | 2022 |  |  | 2021 |  |  | 2019 |
Domestic |  | $ | (27,763 | ) |  | $ | (10,467 | ) |  | $ | 75,932 |
Foreign |  |  | 104,428 |  |  |  | 102,970 |  |  |  | 75,028 |
|  | $ | 76,665 |  |  | $ | 92,503 |  |  | $ | 150,960 |
The effective tax rates for the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019 were 12.7%, 18.9% and 20.9%, 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 January 1, 2022 was impacted by the following items: (i) a $6,347 tax benefit related to a decrease in the applicable state tax rate on certain deferred income, (ii) a $3,548 tax benefit related to tax windfalls from stock compensation and (iii) a $1,560 a tax benefit due to the reversal of a valuation allowance related to certain non-U.S. net operating losses that are now expected to be realized. These benefits were partially offset by $6,888 of tax expense related to income earned in foreign jurisdictions at rates higher than the U.S. The Company’s effective tax rate for the fiscal year ended January 2, 2021 was impacted by the following items: (i) a $7,566 tax benefit related to the reversal of the tax impact of GILTI, (ii) a $4,714 tax benefit related to tax windfalls from stock compensation and (iii) a $1,401 tax benefit related to f oreign-derived intangible income (“FDII”). These benefits were partially offset by (i) a $8,056 tax expense related to income earned in foreign jurisdictions at rates higher than the U.S. and (ii) a $2,278 tax expense for out-of-period income tax adjustments. 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.
|  | Fiscal Year Ended |
|  | January 1, |  |  | January 2, |  |  | December 28, |
|  | 2022 |  |  | 2021 |  |  | 2019 |
U.S. federal statutory tax rate |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 21.0 | %
State income taxes (net of federal benefit) |  |  | (1.8 | %) |  |  | 1.0 | % |  |  | (0.3 | %)
Cessation of operations |  |  | 0.0 | % |  |  | 0.0 | % |  |  | (0.5 | %)
Research and development credit |  |  | (1.8 | %) |  |  | (2.2 | %) |  |  | (1.2 | %)
Tax windfall on share-based awards |  |  | (4.6 | %) |  |  | (4.3 | %) |  |  | (0.1 | %)
Reserves for uncertain tax positions |  |  | 0.2 | % |  |  | 0.9 | % |  |  | (0.9 | %)
Tax rate changes |  |  | (8.2 | %) |  |  | (1.2 | %) |  |  | 0.0 | %
Executive compensation limitation |  |  | 1.8 | % |  |  | 1.2 | % |  |  | 0.5 | %
GILTI |  |  | 0.0 | % |  |  | (8.2 | %) |  |  | 2.3 | %
FDII |  |  | 0.0 | % |  |  | (1.5 | %) |  |  | (3.7 | %)
(Decrease) increase in valuation allowance due to net operating loss |  |  | (2.0 | %) |  |  | 0.0 | % |  |  | 0.4 | %
Out-of-period adjustments |  |  | 0.0 | % |  |  | 2.5 | % |  |  | 0.0 | %
Tax return adjustments related to the 2017 Tax Act |  |  | 0.0 | % |  |  | 0.0 | % |  |  | (0.7 | %)
Impact of foreign operations |  |  | 9.0 | % |  |  | 8.7 | % |  |  | 3.4 | %
Other |  |  | (0.9 | %) |  |  | 1.0 | % |  |  | 0.7 | %
Total effective tax rate |  |  | 12.7 | % |  |  | 18.9 | % |  |  | 20.9 | %
The deferred tax assets and liabilities recorded on the Company’s consolidated balance sheets are as follows:
|  | January 1, 2022 |  |  | January 2, 2021 |
Interest expense disallowance |  | $ | 44,598 |  |  | $ | 32,971 |
Operating lease liabilities |  |  | 22,901 |  |  |  | 31,108 |
Operating loss carryforwards |  |  | 14,172 |  |  |  | 8,780 |
Provision for estimated expenses |  |  | 2,128 |  |  |  | 1,643 |
Salaries and wages |  |  | 2,710 |  |  |  | 3,875 |
Share-based compensation |  |  | 15,707 |  |  |  | 14,747 |
Other comprehensive income |  |  | 6,306 |  |  |  | 8,525 |
Other |  |  | 5,927 |  |  |  | 6,320 |
Less: valuation allowance |  |  | (10,083 | ) |  |  | (7,190 | )
Total deferred tax assets |  | $ | 104,366 |  |  | $ | 100,779 |
Goodwill and intangible assets |  | $ | (224,548 | ) |  | $ | (227,198 | )
Operating lease assets |  |  | (20,794 | ) |  |  | (28,378 | )
Depreciation |  |  | (4,044 | ) |  |  | (3,912 | )
Prepaid expenses |  |  | (1,433 | ) |  |  | (1,379 | )
Total deferred tax liabilities |  | $ | (250,819 | ) |  | $ | (260,867 | )
Net deferred tax liabilities |  | $ | (146,453 | ) |  | $ | (160,088 | )
As of January 1, 2022 and January 2, 2021, the Company had primarily foreign and state net operating loss carryforwards of approximately $111,432 and $110,039, respectively, some of which have an unlimited carryforward period, while others expire in various years beginning in fiscal 2022. The Company maintains a full valuation allowance on its state and certain foreign net operating loss carryforwards as it is deemed more likely than not that such losses will not be realized. In fiscal 2021, the Company recorded a $1,560 income tax benefit for the release in the valuation allowance related to its operations in Switzerland. As a result of the Tax Cuts and Jobs Act (the “2017 Tax Act”) changing the U.S. to a modified territorial tax system, the Company will no longer assert its $80,892 of undistributed foreign earnings as of January 1, 2022 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:
|  | Fiscal Year Ended |
|  | January 1, |  |  | January 2, |  |  | December 28, |
|  | 2022 |  |  | 2021 |  |  | 2019 |
Balance at beginning of year |  | $ | 851 |  |  | $ | 206 |  |  | $ | 3,665 |
Increases related to tax positions taken in current year |  |  | 196 |  |  |  | — |  |  |  | — |
Increases related to tax positions taken in prior years |  |  | 260 |  |  |  | 605 |  |  |  | 264 |
Reductions related to tax positions taken in prior years |  |  | (199 | ) |  |  | — |  |  |  | (2,731 | )
Reductions related to settlements with tax authorities |  |  | — |  |  |  | — |  |  |  | (992 | )
Effects of foreign currency translation |  |  | (53 | ) |  |  | 40 |  |  |  | — |
Balance at end of year |  | $ | 1,055 |  |  | $ | 851 |  |  | $ | 206 |
At January 1, 2022, the total amount of unrecognized tax benefits that, if recognized, would affect the Company’s effective tax rate is $985. In fiscal 2021, the Company reached a favorable settlement with the IRS for the 2018 tax year, which resulted in no adjustment, and closed an audit in Germany for tax years 2013 to 2016, which resulted in an assessment of $529. The Company files income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. At January 1, 2022, 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 2018, or non-U.S. income tax examinations by tax authorities for years prior to 2016. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. The Company had $(54) and $196 of accrued interest and penalties at January 1, 2022 and January 2, 2021, respectively. The Company recognized $142, $190 and $(257) of an income tax expense (benefit) in interest and penalties during the fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019, respectively.

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