Income Taxes

6 Months Ended

Jul. 02, 2022

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 12. Income Taxes

The following table provides details of income taxes:

	Three Months Ended						Six Months Ended
	July 2,			June 26,			July 2,			June 26,
	2022			2021			2022			2021
Income before income taxes	$	57,253		$	35,956		$	116,170		$	62,558
Provision for income taxes	$	5,678		$	905		$	11,265		$	3,394
Effective tax rate		10	%		3	%		10	%		5	%

The income tax provision for the three and six months ended July 2, 2022 was computed based on the Company’s annual forecast of profit by jurisdiction and forecasted effective tax rate for the year.  The income tax provision in the 2022 periods reflected the impact of a change in U.S. tax law effective January 1, 2022, which requires the capitalization and amortization of research and development expenditures incurred after December 31, 2021.  The increase in the Company’s income tax provision for the three and six months ended July 2, 2022 as compared to the three and six months ended June 26, 2021 is primarily due to an increase in quarterly earnings, offset by an increase in the Foreign Derived Intangible Income (“FDII”) deduction, and a one-time benefit recorded for the six months ended June 26, 2021 for a release of reserves due to expiration of the applicable statute of limitations.  The Company’s recorded effective tax rate is less than the U.S. statutory rate primarily due to projected FDII deductions, federal research and development tax credits, and excess tax benefits associated with equity compensation.

The Company currently has a partial valuation allowance recorded against certain foreign and state net operating loss and credit carryforwards where the realizability of such deferred tax assets is substantially in doubt.  Each quarter, the Company assesses the likelihood that it will be able to recover its deferred tax assets. The Company considers available evidence, both positive and negative, including forecasted earnings, in assessing its need for a valuation allowance.  As a result of the Company’s analysis, it concluded that it is more likely than not that a portion of its deferred tax assets will not be realized. Therefore, the Company continues to provide a valuation allowance against certain deferred tax assets.  The Company continues to monitor available evidence and may reverse some or all of its remaining valuation allowance in future periods, if appropriate.  The Company has a recorded valuation allowance against a certain portion of its deferred tax assets of $10,948 for both July 2, 2022 and January 1, 2022.