Income Taxes

12 Months Ended

Dec. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

12.Income Taxes:

The components of income tax expense are as follows:

	Year Ended
	December 30, 2023			December 31, 2022			January 1, 2022
Current:
Federal	$	28,326		$	47,963		$	21,791
State		879			987			1,007
Foreign		4,647			2,901			3,153
		33,852			51,851			25,951
Deferred:
Federal		(22,429	)		(31,622	)		(9,475	)
State		242			(1,506	)		(540	)
Foreign		(242	)		(473	)		(2,603	)
		(22,429	)		(33,601	)		(12,618	)
Total income tax expense	$	11,423		$	18,250		$	13,333

The income before tax is comprised of the following:

	Year Ended
	December 30, 2023		December 31, 2022		January 1, 2022
Domestic operations	$	107,640	$	239,527	$	136,143
Foreign operations	$	24,942	$	2,057	$	19,539

The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. federal income tax rate of 21% for the years ended December 30, 2023, December 31, 2022 and January 1, 2022, to income before provision for income taxes as follows:

	Year Ended
	December 30, 2023			December 31, 2022			January 1, 2022
Federal income tax provision at statutory rate	$	27,842		$	50,732		$	32,693
State taxes, net of federal effect		942			467			1,066
Foreign taxes, net of federal effect		(2,323	)		(481	)		(3,817	)
Foreign Derived Intangible Income (“FDII”) Deduction		(12,958	)		(25,445	)		(11,061	)
US tax on foreign source income		513			1,423			1,721
Non-deductible officer's compensation		2,301			1,910			689
Research and development tax credit		(6,430	)		(7,146	)		(3,607	)
Tax impact of audit and statute closures		(1,563	)		(1,526	)		(1,987	)
Change in valuation allowance		2,180			(276	)		(178	)
Impact of the CARES Act		—			—			(732	)
Other		919			(1,408	)		(1,454	)
Provision for income taxes	$	11,423		$	18,250		$	13,333
Effective tax rate		9	%		8	%		9	%

Deferred tax assets and liabilities are comprised of the following:

	December 30, 2023			December 31, 2022
Deferred tax assets:
Reserves and accruals	$	16,658		$	17,231
Deferred revenue		4,082			3,512
Share-based compensation		3,495			3,942
Tax credit carryforward		13,960			12,197
Net operating losses		1,088			1,643
Depreciation and amortization		156			125
Capitalized research and development		34,165			20,234
Operating lease liabilities		3,744			4,162
Other		2,875			4,044
Gross deferred tax assets		80,223			67,090
Less: valuation allowance		(13,960	)		(11,772	)
Total deferred tax assets after valuation allowance		66,263			55,318
Deferred tax liabilities:
Depreciation and amortization		(43,908	)		(52,927	)
Operating lease right of use assets		(3,519	)		(4,890	)
Other		—			(89	)
Gross deferred tax liabilities		(47,427	)		(57,906	)
Net deferred tax assets (liabilities)	$	18,836		$	(2,588	)

At December 30, 2023 and December 31, 2022, the Company had recorded valuation allowances of $13,960 and $11,772, respectively, on a certain portion of the Company’s deferred tax assets to reflect the deferred tax assets at the net amount that is more likely than not to be realized. The Company maintains a valuation allowance against its federal foreign tax credit carryforwards of $2,317 and state research and development credits of $11,644.

In assessing the realizability of deferred tax assets, the Company uses a more likely than not standard. If it is determined that it is more-likely-than-not that deferred tax assets will not be realized, a valuation allowance must be established against the deferred tax assets. The ultimate realization of the assets is dependent on the generation of future taxable income during the periods in which the associated temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income and tax planning strategies when making this assessment. In making the determination that it is more likely than not that the Company’s deferred tax assets will be realized as of December 30, 2023, the Company relied primarily on the reversal of deferred tax liabilities as well as projected future taxable income.

At December 30, 2023, the Company had tax effected state and foreign net operating loss carryforwards of $860 and $228, respectively. The federal, state and foreign net operating loss carryforwards expire on various dates beginning in 2023 through 2037.

At December 30, 2023, the Company had foreign tax credit carryforwards and state research & development credits of $2,317, and $16,213, respectively. The foreign tax credit carryforwards are set to expire at various dates beginning December 31, 2029. The state research & development credits have no expiration dates.

As of December 30, 2023, the Company has not provided U.S. income taxes on all its foreign earnings. The Company continues to permanently reinvest the cash held offshore to support its working capital needs.

The total amount of unrecognized tax benefits are as follows:

	Year Ended
	December 30, 2023			December 31, 2022			January 1, 2022
Balance, beginning of the period	$	13,010		$	12,373		$	13,486
Gross increases—tax positions in prior period		29			456			156
Gross decreases—tax positions in prior period		(100	)		—			(204	)
Gross increases—current-period tax positions		1,785			1,729			1,193
Closure of audit/statute limitation		(1,582	)		(1,548	)		(2,258	)
Balance, end of the period	$	13,142		$	13,010		$	12,373

The unrecognized tax benefits at December 30, 2023 and December 31, 2022 were $13,142 and $13,010, respectively, of which $7,231 and $7,614, respectively, would be reflected as an adjustment to income tax expense if recognized. The year over year increase from 2022 to 2023 is primarily due to additional unrecognized tax benefits related to federal and state tax exposures, offset by expiring tax statutes. It is reasonably possible that certain amounts of unrecognized tax benefits may reverse in the next 12 months; however, the Company does not expect such reversals to have a significant impact on its results of operations or financial position.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. During the years ended December 30, 2023, December 31, 2022 and January 1, 2022, the Company recognized approximately $146, $149 and $(814), respectively, in interest and penalties (benefit) expense associated with uncertain tax positions. As of December 30, 2023 and December 31, 2022, the Company had accrued interest and penalties expense included in the table of unrecognized tax benefits of $823 and $628, respectively.

The Company is subject to U.S. federal income tax as well as income tax in multiple state and foreign jurisdictions. The Company is subject to ordinary statute of limitation rules of three and four years for federal and state returns, respectively. However, due to tax attribute carryforwards, the Company is subject to examination for tax years 2015 forward for U.S. federal tax purposes with respect to carryforward amounts. The Company is also subject to examination in various states for tax years 2003 forward with respect to carryforward amounts. The Company is subject to examination for tax years 2016 forward for various foreign jurisdictions. The Company believes that adequate amounts have been reserved for any adjustments that may ultimately result from any future examinations of these years.

In the normal course of business, the Company is subject to tax audits in various jurisdictions, and such jurisdictions may assess additional income taxes or other taxes against it. Although the Company believes its tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different from the Company’s historical income tax provisions and accruals. The results of an audit or litigation could have a material adverse effect on the Company’s results of operations or cash flows in the period or periods for which that determination is made.