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Taxes | 12 Months Ended
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Jan. 02, 2021
Income Tax Disclosure [Abstract] |
Taxes | Taxes Income Taxes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the consolidated deferred tax assets and liabilities were (in thousands):
Fiscal Year | 2020 |  | 2019
Deferred income tax assets: |  |  |
Inventory | 4,095 |  |  | 6,856 |
Compensation | 14,028 |  |  | 11,998 |
Property, plant and equipment | — |  |  | 220 |
Trade names and customer lists | 5,163 |  |  | 4,345 |
Goodwill | 13,189 |  |  | 14,947 |
Foreign accruals | 12,582 |  |  | 10,446 |
Loss carryforwards | 54,112 |  |  | 32,158 |
Tax credit carryforwards | 2,771 |  |  | 4,281 |
Interest disallowance | 9,604 |  |  | 16,683 |
Lease liabilities | 54,857 |  |  | 82,511 |
Other | 19,042 |  |  | 36,302 |
Deferred income tax assets total | $ | 189,443 |  |  | $ | 220,747 |
Deferred income tax liabilities: |  |  |
Property, plant and equipment | (5,807) |  |  | — |
Undistributed earnings of certain foreign subsidiaries | (3,076) |  |  | (329) |
Right-of-use assets | (36,584) |  |  | (65,070) |
Other | (1,327) |  |  | (1,081) |
Deferred income tax liabilities total | $ | (46,794) |  |  | $ | (66,480) |
Valuation allowance | (109,250) |  |  | (118,089) |
Net deferred income tax assets | $ | 33,399 |  |  | $ | 36,178 |
Net deferred income tax assets | $ | 33,894 |  |  | $ | 38,275 |
Net deferred income tax liabilities | (495) |  |  | (2,097) |
Net deferred income tax assets | $ | 33,399 |  |  | $ | 36,178 |
Operating Loss Carryforwards. At January 2, 2021, the consolidated balance sheets included $45.3 million of deferred tax assets for net operating losses of foreign subsidiaries. The amounts and the fiscal year of expiration of the loss carryforwards are (in thousands):
Expires 2021 through 2025 | $ | 29,990 |
Expires 2026 through 2030 | 58,328 |
Expires 2031 through 2035 | — |
Expires 2036 through 2040 | 74,314 |
Indefinite | 21,828 |
Total loss carryforwards | $ | 184,460 |
At January 2, 2021, the consolidated balance sheets included $8.8 million of deferred tax assets for state income tax net operating losses. The state apportioned amounts and the fiscal year of expiration of the loss carryforwards are (in thousands):
Expires 2021 through 2025 | $ | 2,567 |
Expires 2026 through 2030 | 13,677 |
Expires 2031 through 2035 | 16,545 |
Expires 2036 through 2040 | 80,377 |
Indefinite | 49,292 |
Total loss carryforwards | $ | 162,458 |
The following table identifies income (loss) before income taxes for the Company's U.S. and non-U.S. based operations for the fiscal years indicated (in thousands):
Fiscal Year | 2020 |  | 2019 |  | 2018
U.S | $ | (163,331) |  |  | $ | (142,141) |  |  | $ | (102,810) |
Non-U.S | (8,652) |  |  | 110,810 |  |  | 122,980 |
Total | $ | (171,983) |  |  | $ | (31,331) |  |  | $ | 20,170 |
The Company's provision for income taxes consisted of the following for the fiscal years indicated (in thousands):
Fiscal Year | 2020 |  | 2019 |  | 2018
Current provision: |  |  |  |  |
U.S. federal | $ | (96,224) |  |  | $ | 2,338 |  |  | $ | (14,386) |
Non-U.S | 16,522 |  |  | 28,109 |  |  | 35,854 |
State and local | (681) |  |  | (2,330) |  |  | (2,056) |
Total current | (80,383) |  |  | 28,117 |  |  | 19,412 |
Deferred provision (benefit): |  |  |  |  |
U.S. federal | — |  |  | — |  |  | — |
Non-U.S | 4,340 |  |  | (9,436) |  |  | 1,696 |
State and local | — |  |  | — |  |  | — |
Total deferred | 4,340 |  |  | (9,436) |  |  | 1,696 |
Provision for income taxes | $ | (76,043) |  |  | $ | 18,681 |  |  | $ | 21,108 |
A reconciliation of the U.S. federal statutory income tax rates to the Company's effective tax rate is as follows:
Fiscal Year | 2020 |  | 2019 |  | 2018
Tax at statutory rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Permanent differences | (4.5) |  |  | (2.0) |  |  | (0.2) |
State, net of federal tax benefit | (0.1) |  |  | 17.6 |  |  | (3.8) |
Foreign rate differential | 1.2 |  |  | 12.8 |  |  | (12.3) |
Withholding taxes | (1.2) |  |  | (11.1) |  |  | 16.3 |
GILTI tax-net of foreign tax credits | 2.1 |  |  | (24.2) |  |  | 11.8 |
U.S. tax on foreign income-net of foreign tax credits | 3.9 |  |  | 0.3 |  |  | 6.4 |
Income tax contingencies | 1.6 |  |  | 3.2 |  |  | (5.0) |
Valuation allowances | (0.4) |  |  | (53.2) |  |  | 65.0 |
Repatriation tax - net impact | — |  |  | — |  |  | 5.9 |
Deficiencies on employee stock awards | (1.4) |  |  | (10.9) |  |  | 10.1 |
Tax reform rate reduction impact on deferred tax assets | — |  |  | — |  |  | (15.8) |
Foreign deferred tax rate change | — |  |  | (4.5) |  |  | — |
Non deductible foreign equity awards | (0.4) |  |  | (3.2) |  |  | 5.3 |
Non deductible officer compensation | 0.7 |  |  | (3.7) |  |  | — |
Tax exempt foreign capital gain income | — |  |  | 6.3 |  |  | — |
Deferred adjustment | — |  |  | (8.0) |  |  | — |
CARES Act Rate Benefit | 21.7 |  |  | — |  |  | — |
Provision for income taxes | 44.2 | % |  | (59.6) | % |  | 104.7 | %
On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) which included many beneficial income tax provisions including utilization of net operating losses (“NOLs”), temporary changes to the limitation on interest deductions, and technical corrections to tax depreciation for qualified improvement property. The Tax Act had eliminated the option for most taxpayers to carryback a NOL after 2017. A NOL could only be carried forward and was limited to 80% of taxable income. The CARES Act now allows U.S. taxpayers to carryback a NOL arising in tax years 2018, 2019 and 2020 to prior years when the statutory tax rate was 35%. The ability to file for refunds of prior year U.S. tax liabilities and the release of U.S. valuation allowances were the main drivers of the favorable tax rate in 2020. These favorable impacts were partially offset by foreign valuation allowances on NOLs and deferred tax assets. The Company has recorded a short-term tax receivable of $37.7 million for the 2019 tax NOL carryback refund. A long-term tax receivable of $52.3 million was recorded for the 2020 tax NOL carryback refund. The Company records a valuation allowance against its deferred tax assets when recovery of those amounts on a jurisdictional basis is not more likely than not. In addition, the Company's U.S. valuation allowance analysis was reduced by $24.4 million due to the use of deferred tax assets in the NOL carryback as compared to fiscal year 2019 and $4.5 million for the use of deferred tax assets in fiscal year 2020. The Company’s foreign valuation allowance on NOLs and deferred tax assets was increased by $20.2 million as compared to fiscal year 2019. The total valuation allowance of $109.3 million at January 2, 2021 was comprised of $56.0 million and $53.3 million attributable to the U.S. and foreign operations, respectively. The Company will not indefinitely reinvest $260.6 million of previously taxed but undistributed earnings of its foreign subsidiaries as of January 2, 2021. Since under the Tax Act there will be no additional federal income tax when these amounts are repatriated, the Company has only accrued foreign withholding tax and U.S. state income taxes on these earnings with an offsetting valuation allowance. Deferred U.S. federal and state income taxes and foreign taxes are not recorded on the remaining $417.0 million of undistributed earnings of foreign subsidiaries where management plans to continue reinvesting these earnings outside the U.S. As the majority of these earnings have previously been taxed in the U.S., the distribution of the earnings considered indefinitely reinvested would generally be subject only to local country withholding and U.S. state income taxes when distributed, the amount of which is not material. The total amount of unrecognized tax benefits, excluding interest and penalties that would favorably impact the effective tax rate in future periods if recognized, was $31.5 million, $35.7 million and $33.5 million for fiscal years 2020, 2019 and 2018, respectively. The U.S. Internal Revenue Service has completed examinations of the Company's federal income tax returns through 2013. Fiscal years 2016-2019 remain open for federal income tax examination. The Company is also subject to examinations in various state and foreign jurisdictions for its 2011-2019 tax years, none of which the Company believes are significant, individually or in the aggregate. Tax audit outcomes and timing of tax audit settlements are subject to significant uncertainty. The Company has classified uncertain tax positions as long-term income taxes payable unless such amounts are expected to be paid within twelve months from January 2, 2021. As of January 2, 2021, the Company had recorded $15.4 million of unrecognized tax benefits, excluding interest and penalties, for positions that could be settled or not assessed within the next twelve months. Consistent with its past practice, the Company recognizes interest and/or penalties related to income tax overpayments and income tax underpayments in income tax expense and income taxes receivable/payable, respectively. The total amount of accrued income tax-related interest in the Company's consolidated balance sheets was $6.7 million and $4.8 million at January 2, 2021 and December 28, 2019, respectively. The total amount of accrued income tax-related penalties in the Company's consolidated balance sheets was $0.8 million and $1.0 million at January 2, 2021 and December 28, 2019, respectively. The Company accrued income tax-related interest expense of $1.9 million, $1.2 million and $0.8 million in fiscal years 2020, 2019 and 2018, respectively. The following is a tabular reconciliation of the total amounts of unrecognized tax benefits for the fiscal years indicated (in thousands):
Fiscal Year | 2020 |  | 2019 |  | 2018
Balance at beginning of year | $ | 35,676 |  |  | $ | 39,909 |  |  | $ | 35,355 |
Gross increases—tax positions in prior years | 1,241 |  |  | 6,639 |  |  | 7,183 |
Gross decreases—tax positions in prior years | (4,281) |  |  | (4) |  |  | (124) |
Gross increases—tax positions in current year | 857 |  |  | 184 |  |  | 576 |
Settlements | — |  |  | (1,901) |  |  | — |
Lapse in statute of limitations | (2,255) |  |  | (8,912) |  |  | (2,980) |
Change due to currency revaluation | 302 |  |  | (239) |  |  | (101) |
Balance at end of year | $ | 31,540 |  |  | $ | 35,676 |  |  | $ | 39,909 |

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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