Income Taxes (Tables)

12 Months Ended

Dec. 28, 2013

Income Tax Disclosure [Abstract]

Income (loss) before provision (benefit) for income taxes

Cadence's income before provision (benefit) for income taxes included income from the United States and from foreign subsidiaries for fiscal 2013, 2012 and 2011, is as follows:

	2013		2012		2011
	(In thousands)
United States	$	20,092	$	61,865	$	39,175
Foreign subsidiaries	138,904		126,406		56,251
Total income before provision (benefit) for income taxes	$	158,996	$	188,271	$	95,426

Components of income taxes provision (benefits)

Cadence's provision (benefit) for income taxes was comprised of the following items for fiscal 2013, 2012 and 2011:

	2013			2012			2011
	(In thousands)
Current:
Federal	$	(40,494	)	$	(588	)	$	(662	)
State and local	2,574			(36,650		)	1,363
Foreign	28,040			19,409			13,752
Total current	(9,880		)	(17,829		)	14,453
Deferred:
Federal	4,888			(203,731		)	(4,937		)
State and local	3,037			(28,894		)	(524		)
Foreign	(10,291		)	(7,799		)	(2,350		)
Total deferred	(2,366		)	(240,424		)	(7,811		)
Tax expense allocated to shareholders' equity	6,999			6,576			16,555
Total provision (benefit) for income taxes	$	(5,247	)	$	(251,677	)	$	23,197

Summary of income tax reconciliation

The provision (benefit) for income taxes differs from the amount estimated by applying the United States statutory federal income tax rate of 35% to income before provision (benefit) for income taxes for fiscal 2013, 2012 and 2011 as follows:

	2013			2012			2011
	(In thousands)
Provision computed at federal statutory income tax rate	$	55,648		$	65,895		$	33,400
State and local income tax, net of federal tax effect	4,085			3,626			6,493
Foreign income tax rate differential	(36,392		)	(39,308		)	(6,676		)
Non-deductible share-based compensation costs	2,053			7,785			1,651
Change in deferred tax asset valuation allowance	18,354			(301,542		)	(3,617		)
Tax credits	(18,372		)	(3,744		)	(12,588		)
Repatriation of foreign earnings	(2,116		)	(2,645		)	708
Non-deductible research and development expense	3,043			1,968			—
Domestic production activity deduction	(1,088		)	—			—
Withholding taxes	3,333			3,593			3,851
Tax settlements, domestic	—			(37,481		)	328
Tax settlements, foreign	680			(804		)	(2,451		)
Interest and penalties not included in tax settlements	1,701			2,552			1,840
Increase (decrease) in unrecognized tax benefits not included in tax settlements	(33,730		)	47,329			933
Other	(2,446		)	1,099			(675		)
Provision (benefit) for income taxes	$	(5,247	)	$	(251,677	)	$	23,197
Effective tax rate	(3		)%	(134		)%	24		%

Components of deferred tax assets and liabilities

The components of deferred tax assets and liabilities consisted of the following as of December 28, 2013 and December 29, 2012:

	As of
	December 28, 2013			December 29, 2012
	(In thousands)
Deferred tax assets:
Tax credit carryforwards	$	159,839		$	129,724
Reserves and accruals	49,450			50,960
Intangible assets	45,948			56,512
Capitalized research and development expense for income tax purposes	33,742			34,046
Operating loss carryforwards	27,205			24,429
Deferred income	25,420			27,237
Capital loss carryforwards	22,050			23,026
Share-based compensation costs	20,652			20,012
Depreciation and amortization	11,167			8,979
Investments	7,643			7,550
Other	4,911			4,185
Total deferred tax assets	408,027			386,660
Valuation allowance	(92,677		)	(74,323		)
Net deferred tax assets	315,350			312,337
Deferred tax liabilities:
Intangible assets	(66,775		)	(70,086		)
Undistributed foreign earnings	(17,301		)	(13,113		)
Other	(2,230		)	(965		)
Total deferred tax liabilities	(86,306		)	(84,164		)
Total net deferred tax assets	$	229,044		$	228,173

Unrealized share-based compensation deductions

As of December 28, 2013 and December 29, 2012, Cadence had unrealized share-based compensation deductions as follows:

	As of
	December 28, 2013		December 29, 2012
	(Tax Effected - In thousands)
Federal	$	—	$	2,170
California	457		457

Summary of operating loss carryforward

As of December 28, 2013, Cadence's operating loss carryforwards were as follows:

	Amount		Expiration Periods
	(in thousands)
Federal	$	5,394	from 2021 through 2029
California	256,393		from 2014 through 2031
Other states (tax effected, net of federal benefit)	3,265		from 2014 through 2031
Foreign (tax effected)	7,777		from 2021 through indefinite

Summary of tax credit carryforwards

As of December 28, 2013, Cadence had tax credit carryforwards of:

	Amount		Expiration Periods
	(in thousands)
Federal*	$	114,646	from 2015 through 2030
California	24,946		do not expire until utilized
Other states	5,572		from 2014 through 2027
Foreign	14,675		from 2017 through 2031

_____________

*Certain of Cadence's foreign tax credits are anticipated and as result do not yet have an expiration period.

Earliest tax years open to examination by jurisdiction

As of December 28, 2013, Cadence's earliest tax years that remain open to examination include:

Jurisdiction	Earliest Tax Year Open to Examination
United States - Federal	2010
United States - California	2009
Israel	2009
Hungary	2007

Unrecognized tax benefits roll forward

The changes in Cadence's gross amount of unrecognized tax benefits during fiscal 2013, 2012 and 2011 are as follows:

	2013			2012			2011
	(In thousands)
Unrecognized tax benefits at the beginning of the fiscal year	$	92,378		$	98,812		$	131,545
Gross amount of the increases (decreases) in unrecognized tax benefits of tax positions taken during a prior year*	6,196			2,194			(3,791		)
Gross amount of the increases in unrecognized tax benefits as a result of tax positions taken during the current year	5,119			3,082			1,588
Amount of decreases in unrecognized tax benefits relating to settlements with taxing authorities, including the utilization of tax attributes	(15,171		)	(11,768		)	(30,115		)
Reductions to unrecognized tax benefits resulting from the lapse of the applicable statute of limitations	(11,850		)	(189		)	(421		)
Effect of foreign currency translation	1,607			247			6
Unrecognized tax benefits at the end of the fiscal year	$	78,279		$	92,378		$	98,812
Total amounts of unrecognized tax benefits that, if upon resolution of the uncertain tax positions would reduce Cadence's effective tax rate	$	49,458		57,725			$	75,057

_________

* Includes unrecognized tax benefits of tax positions recorded in connection with acquisitions

Interest and penalties recognized in consolidated income statements and balance sheets

The total amounts of interest and penalties recognized in the consolidated income statements as provision (benefit) for income taxes for fiscal 2013, 2012 and 2011 were as follows:

	2013			2012			2011
	(In thousands)
Interest	$	(12,470	)	$	(11,184	)	$	2,173
Penalties	(7,698		)	(1,862		)	(1,495		)

The total amounts of gross accrued interest and penalties recognized in the consolidated balance sheets as of December 28, 2013 and December 29, 2012 were as follows:

	As of
	December 28, 2013		December 29, 2012
	(In thousands)
Interest	$	37	$	24,427
Penalties	1,227		8,953