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Taxes | 12 Months Ended
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Jan. 01, 2022
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 | 2021 |  | 2020
Deferred income tax assets: |  |  |
Inventory | 3,348 |  |  | 4,095 |
Compensation | 12,977 |  |  | 14,028 |
Property, plant and equipment | 319 |  |  | — |
Trade names and customer lists | 4,243 |  |  | 5,163 |
Goodwill | 11,096 |  |  | 13,189 |
Undistributed earnings of certain foreign subsidiaries | 57 |  |  | — |
Foreign accruals | 11,446 |  |  | 12,582 |
Loss carryforwards | 57,264 |  |  | 54,112 |
Tax credit carryforwards | 5,715 |  |  | 2,771 |
Interest disallowance | 8,977 |  |  | 9,604 |
Lease liabilities | 32,830 |  |  | 54,857 |
Other | 18,979 |  |  | 19,042 |
Deferred income tax assets total | $ | 167,251 |  |  | $ | 189,443 |
Deferred income tax liabilities: |  |  |
Property, plant and equipment | — |  |  | (5,807) |
Undistributed earnings of certain foreign subsidiaries | — |  |  | (3,076) |
Right-of-use assets | (19,469) |  |  | (36,584) |
Other | (780) |  |  | (1,327) |
Deferred income tax liabilities total | $ | (20,249) |  |  | $ | (46,794) |
Valuation allowance | (122,953) |  |  | (109,250) |
Net deferred income tax assets | $ | 24,049 |  |  | $ | 33,399 |
Net deferred income tax assets | $ | 24,553 |  |  | $ | 33,894 |
Net deferred income tax liabilities | (504) |  |  | (495) |
Net deferred income tax assets | $ | 24,049 |  |  | $ | 33,399 |
Operating Loss Carryforwards. At January 2, 2021, the consolidated balance sheets included $47.6 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 2022 through 2026 | $ | 22,053 |
Expires 2027 through 2031 | 50,906 |
Expires 2032 through 2036 | 15,770 |
Expires 2037 through 2041 | 85,586 |
Indefinite | 31,443 |
Total loss carryforwards | $ | 205,758 |
At January 2, 2021, the consolidated balance sheets included $9.7 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 2022 through 2026 | $ | 5,817 |
Expires 2027 through 2031 | 17,219 |
Expires 2032 through 2036 | 22,358 |
Expires 2037 through 2041 | 67,583 |
Indefinite | 59,178 |
Total loss carryforwards | $ | 172,155 |
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 | 2021 |  | 2020 |  | 2019
U.S. | $ | (32,423) |  |  | $ | (163,331) |  |  | $ | (142,141) |
Non-U.S. | 85,474 |  |  | (8,652) |  |  | 110,810 |
Total | $ | 53,051 |  |  | $ | (171,983) |  |  | $ | (31,331) |
The Company's provision for income taxes consisted of the following for the fiscal years indicated (in thousands):
Fiscal Year | 2021 |  | 2020 |  | 2019
Current provision: |  |  |  |  |
U.S. federal | $ | 1,714 |  |  | $ | (96,224) |  |  | $ | 2,338 |
Non-U.S | 17,027 |  |  | 16,522 |  |  | 28,109 |
State and local | (274) |  |  | (681) |  |  | (2,330) |
Total current | 18,467 |  |  | (80,383) |  |  | 28,117 |
Deferred provision (benefit): |  |  |  |  |
U.S. federal | — |  |  | — |  |  | — |
Non-U.S | 7,960 |  |  | 4,340 |  |  | (9,436) |
State and local | — |  |  | — |  |  | — |
Total deferred | 7,960 |  |  | 4,340 |  |  | (9,436) |
Provision for income taxes | $ | 26,427 |  |  | $ | (76,043) |  |  | $ | 18,681 |
A reconciliation of the U.S. federal statutory income tax rates to the Company's effective tax rate is as follows:
Fiscal Year | 2021 |  | 2020 |  | 2019
Tax at statutory rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Permanent differences | (2.5) |  |  | (4.5) |  |  | (2.0) |
State, net of federal tax benefit | (2.0) |  |  | (0.1) |  |  | 17.6 |
Foreign rate differential | (3.8) |  |  | 1.2 |  |  | 12.8 |
Withholding taxes | 7.5 |  |  | (1.2) |  |  | (11.1) |
GILTI tax-net of foreign tax credits | 5.7 |  |  | 2.1 |  |  | (24.2) |
U.S. tax on foreign income-net of foreign tax credits | — |  |  | 3.9 |  |  | 0.3 |
Income tax contingencies | 3.9 |  |  | 1.6 |  |  | 3.2 |
Valuation allowances | 31.9 |  |  | (0.4) |  |  | (53.2) |
R&D/Foreign Tax Credits | (5.6) |  |  | — |  |  | — |
Deficiencies (Benefits) on employee stock awards | (0.3) |  |  | (1.4) |  |  | (10.9) |
APB23 Assertion | (6.9) |  |  | — |  |  | — |
Foreign deferred tax rate change | (1.1) |  |  | — |  |  | (4.5) |
Non deductible foreign equity awards | 0.8 |  |  | (0.4) |  |  | (3.2) |
Non deductible officer compensation | 1.0 |  |  | 0.7 |  |  | (3.7) |
Tax exempt foreign capital gain income | — |  |  | — |  |  | 6.3 |
Deferred adjustment | — |  |  | — |  |  | (8.0) |
CARES Act Rate Benefit | — |  |  | 21.7 |  |  | — |
Other | 0.2 |  |  | — |  |  | — |
Provision for income taxes | 49.8 | % |  | 44.2 | % |  | (59.6) | %
The fiscal year 2021 effective tax rate was negatively impacted by the GILTI inclusion in the U.S. tax return absorbing the net operating loss (“NOL”), increased valuation allowances on foreign NOLs and other deferred tax assets and increased accruals for tax contingency reserves. The fiscal year 2020 effective tax rate benefited from the U.S. government’s enactment of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) which included many beneficial income tax provisions including carryback of U.S. NOLs and temporary changes to the limitation on interest deductions. These provisions no longer apply in fiscal year 2021. 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 received the income tax refund for the 2019 U.S. tax NOL carryback and expects to receive the refund for the 2020 U.S. tax NOL carryback refund in 2022. 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. The Company's U.S. valuation allowance analysis was increased by $9.9 million and the foreign valuation allowance on NOL's and deferred tax assets was increased by $3.8 million as compared to January 2, 2021. The total valuation allowance of $123.0 million at January 1, 2022 was comprised of $65.9 million and $57.1 million attributable to the U.S. and foreign operations, respectively. The Company will not indefinitely reinvest $156.7 million of previously taxed but undistributed earnings of its foreign subsidiaries as of January 1, 2022. Since there will be no additional federal income tax when these amounts are repatriated, the Company has only accrued tax on foreign exchange gains 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 $562.0 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 $24.8 million, $31.5 million and $35.7 million for fiscal years 2021, 2020 and 2019, respectively. The U.S. Internal Revenue Service has completed examinations of the Company's federal income tax returns through 2013. Fiscal years 2014 through 2017 could be examined in conjunction with the amended returns filed as a result of the NOL carryback claim. Fiscal years 2017-2020 remain open for federal income tax examination. The Company is also subject to examinations in various state and foreign jurisdictions for its 2011-2020 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 1, 2022. As of January 1, 2022, the Company had recorded $14.2 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 $8.2 million and $6.7 million at January 1, 2022 and January 2, 2021, respectively. The Company accrued no income tax-related penalties in the Company's consolidated balance sheets at January 1, 2022 and accrued $0.8 million of income tax-related penalties at January 2, 2021. The Company accrued income tax-related interest expense of $1.5 million, $1.9 million and $1.2 million in fiscal years 2021, 2020 and 2019, respectively. The following is a tabular reconciliation of the total amounts of unrecognized tax benefits for the fiscal years indicated (in thousands):
Fiscal Year | 2021 |  | 2020 |  | 2019
Balance at beginning of year | $ | 31,540 |  |  | $ | 35,676 |  |  | $ | 39,909 |
Gross increases—tax positions in prior years | 2,266 |  |  | 1,241 |  |  | 6,639 |
Gross decreases—tax positions in prior years | (3,016) |  |  | (4,281) |  |  | (4) |
Gross increases—tax positions in current year | 1,120 |  |  | 857 |  |  | 184 |
Settlements | (630) |  |  | — |  |  | (1,901) |
Lapse in statute of limitations | (1,188) |  |  | (2,255) |  |  | (8,912) |
Change due to currency revaluation | (259) |  |  | 302 |  |  | (239) |
Balance at end of year | $ | 29,833 |  |  | $ | 31,540 |  |  | $ | 35,676 |

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