Income Taxes

12 Months Ended

Jan. 01, 2022

Income Tax Disclosure [Abstract]

Income Taxes

13. Income Taxes:

The components of income tax expense are as follows:

	Year Ended
	January 1, 2022			December 26, 2020			December 31, 2019
Current:
Federal	$	21,791		$	1,466		$	(27	)
State		1,007			371			88
Foreign		3,153			5,637			1,548
		25,951			7,474			1,609
Deferred:
Federal		(9,475	)		(10,355	)		(4,730	)
State		(540	)		(1,036	)		506
Foreign		(2,603	)		(240	)		108
		(12,618	)		(11,631	)		(4,116	)
Total income tax expense (benefit)	$	13,333		$	(4,157	)	$	(2,507	)

The income before tax is comprised of the following:

	Year Ended
	January 1, 2022		December 26, 2020			December 31, 2019
Domestic operations	$	136,143	$	(120	)	$	(7,087	)
Foreign operations	$	19,539	$	26,988		$	6,490

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 January 1, 2022, December 26, 2020 and December 31, 2019, to income before provision for income taxes as follows:

	Year Ended
	January 1, 2022			December 26, 2020			December 31, 2019
Federal income tax provision (benefit) at statutory rate	$	32,693		$	5,642		$	(125	)
State taxes, net of federal effect		1,066			126			113
Foreign taxes, net of federal effect		(3,817	)		596			(1,277	)
Foreign Derived Intangible Income ("FDII") Deduction		(11,061	)		(4,262	)		(2,278	)
Global Intangible Low-Taxes Income ("GILTI") inclusion		1,721			2,013			1,786
Non-deductible officer's compensation		689			213			826
Research & development tax credit		(3,607	)		(4,858	)		(2,126	)
Tax impact of audit and statue closures		(1,987	)		(2,905	)		—
Impact of the CARES Act		(732	)		(1,141	)		—
Other		(1,632	)		419			574
Provision (benefit) for income taxes	$	13,333		$	(4,157	)	$	(2,507	)
Effective tax rate		9	%		(16	)%		(420	)%

Deferred tax assets and liabilities are comprised of the following:

	January 1, 2022			December 26, 2020
Deferred tax assets:
Reserves and accruals	$	15,084		$	13,874
Deferred revenue		4,729			1,648
Share-based compensation		3,023			2,556
Tax credit carryforward		10,339			10,801
Net operating losses		3,254			4,849
Depreciation and amortization		368			687
Operating lease liabilities		3,575			4,261
Other		2,364			1,877
Gross deferred tax assets		42,736			40,553
Less: valuation allowance		(10,948	)		(14,238	)
Total deferred tax assets after valuation allowance		31,788			26,315
Deferred tax liabilities:
Depreciation and amortization		(63,554	)		(75,608	)
Operating lease right of use assets		(3,469	)		(3,960	)
Other		(224	)		(135	)
Gross deferred tax liabilities		(67,247	)		(79,703	)
Net deferred tax liabilities	$	(35,459	)	$	(53,388	)

At January 1, 2022 and December 26, 2020, the Company had recorded valuation allowances of $10,948 and $14,238, 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 a portion of its federal, California and foreign deferred tax assets of $3,232, $7,547, and $169, respectively.

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 January 1, 2022, the Company relied primarily on the reversal of deferred tax liabilities as well as projected future taxable income.

At January 1, 2022, the Company had tax effected state and foreign net operating loss carryforwards of $1,732 and $1,522, respectively. The federal, state and foreign net operating loss carryforwards expire on various dates beginning in 2022 through 2037.

At January 1, 2022, the Company had foreign tax credit carryforwards and state research & development credits of $3,232, and $10,672, respectively.  The foreign tax credit is set to expire at various dates beginning at December 31, 2029.  The state research & development credits have no expiration dates.

As of January 1, 2022, the Company has 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.  Accordingly, no additional foreign withholding taxes that may be required from certain jurisdictions in the event of a cash distribution have been provided for.  

The total amount of unrecognized tax benefits are as follows:

	January 1, 2022			December 26, 2020			December 31, 2019
Balance, beginning of the period	$	13,486		$	15,143		$	5,528
Gross increases—tax positions in prior period		156			347			9,989
Gross decreases—tax positions in prior period		(204	)		—			(932	)
Gross increases—current-period tax positions		1,193			1,048			558
Closure of audit/statute limitation		(2,258	)		(3,052	)		—
Balance, end of the period	$	12,373		$	13,486		$	15,143

The unrecognized tax benefits at January 1, 2022 and December 26, 2020 were $12,373 and $13,486, respectively, of which $7,832 and $8,863, respectively, would be reflected as an adjustment to income tax expense if recognized.  The year over year decrease from 2020 to 2021 is primarily due to expiring tax statutes, offset by additional unrecognized tax benefits related to federal tax exposures.  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 January 1, 2022, December 26, 2020 and December 31, 2019, the Company recognized approximately $(814), $(193) and $236, respectively, in interest and penalties (benefit) expense associated with uncertain tax positions. As of January 1, 2022 and December 26, 2020, the Company had accrued interest and penalties expense included in the table of unrecognized tax benefits of $430 and $1,487, 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 2003 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 2002 forward with respect to carryforward amounts.  The Company is subject to examination for tax years 2011 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.