Income Taxes
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Dec. 29, 2013
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Text Block] | Income Taxes The income (loss) before income taxes summarized by region is as follows (in thousands):
The provision for income taxes consists of the following (in thousands):
The provision for income taxes reconciles to the amount computed by applying the federal statutory rate to income before taxes as follows (in thousands):
Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):
A valuation allowance is established when it is more likely than not the future realization of all or some of the deferred tax assets will not be achieved. The evaluation of the need for a valuation allowance is performed on a jurisdiction-by-jurisdiction basis, and includes a review of all available positive and negative evidence. Based on the available evidence as of December 29, 2013, the Company was not able to conclude it is more likely than not certain U.S. deferred tax assets will be realized. Therefore, the Company recorded a valuation allowance of $19.1 million against certain U.S. deferred tax assets. During the year ended December 29, 2013, the valuation allowance increased by $17.4 million, primarily due to a $10.5 million increase in the provision for income taxes as a result of the estimated limitation on foreign tax credit utilization in the United States, and a $6.8 million increase in goodwill related to pre-acquisition deferred tax assets from entities acquired during the year. As of December 29, 2013, the Company had net operating loss carryforwards for federal and state tax purposes of $164.2 million and $228.1 million, respectively, which will begin to expire in 2020 and 2014, respectively, unless utilized prior. In addition, the Company also had federal and state tax credit carryforwards of $16.1 million and $51.5 million, respectively, which will begin to expire in 2023 and 2019, respectively, unless utilized prior. Pursuant to Section 382 and 383 of the Internal Revenue Code, utilization of the Company’s net operating loss and credits may be subject to annual limitations in the event of any significant future changes in its ownership structure. These annual limitations may result in the expiration of net operating losses and credits prior to utilization. The deferred tax assets as of December 29, 2013 are net of any previous limitations due to Section 382 and 383. The Company recognizes excess tax benefits associated with share-based compensation to stockholders’ equity only when realized. When assessing whether excess tax benefits relating to share-based compensation have been realized, the Company follows the with-and-without approach excluding any indirect effects of the excess tax deductions. Under this approach, excess tax benefits related to share-based compensation are not deemed to be realized until after the utilization of all other tax benefits available to the Company. During the year ended December 29, 2013, the Company realized $53.0 million of such excess tax benefits, and recorded a corresponding credit to additional paid in capital. As of December 29, 2013, the Company has $3.6 million of unrealized excess tax benefits associated with share-based compensation. These tax benefits will be accounted for as a credit to additional paid-in capital, if and when realized, rather than a reduction of the provision for income taxes. The Company’s manufacturing operations in Singapore operate under various tax holidays and incentives that will expire in 2018. For the year ended December 29, 2013, these tax holidays and incentives resulted in a $7.5 million decrease to the provision for income taxes and an increase in net income per diluted share of $0.05. It is the Company’s intention to indefinitely reinvest all current and future foreign earnings in order to ensure sufficient working capital to support and expand existing operations outside the United States. Accordingly, residual U.S. income taxes have not been provided on $235.1 million of undistributed earnings of foreign subsidiaries as of December 29, 2013. In the event the Company was required to repatriate funds from outside of the United States, such repatriation would be subject to local laws, customs, and tax consequences. The following table summarizes the gross amount of the Company’s uncertain tax positions (in thousands):
Included in the balance of uncertain tax positions as of December 29, 2013, and December 30, 2012, are $40.1 million and $29.9 million, respectively, of net unrecognized tax benefits that, if recognized, would reduce the Company’s effective income tax rate in future periods. Any interest and penalties related to uncertain tax positions are reflected in the provision for income taxes. The Company recognized expense of $1.0 million, $0.8 million, and $1.1 million, related to potential interest penalties on uncertain tax positions during the years ended December 29, 2013, December 30, 2012, and January 1, 2012, respectively. The Company recorded a liability for potential interest and penalties of $3.5 million and $2.1 million as of December 29, 2013 and December 30, 2012, respectively. The Company is currently under examination by the IRS for tax year 2011. The IRS continues to gather information regarding the 2011 federal tax return and has not yet proposed any adjustments to the filed return. Tax years 1997 to 2013 remain subject to future examination by the major tax jurisdictions in which the Company is subject to tax. Given the uncertainty of potential adjustments from the current examination as well as the impact of the current examination on the potential expiration of the statute of limitations, it is reasonably possible that the balance of unrecognized tax benefits could change significantly over the next 12 months. However, at this time, an estimate of the range of reasonably possible adjustments to the balance of unrecognized tax benefits cannot be determined given the number of matters being examined and the number of years that are potentially subject to examination. |