Income Taxes

12 Months Ended

Jan. 03, 2022

Income Tax Disclosure [Abstract]

Income Taxes

(8) Income Taxes

The components of income (loss) from continuing operations before income taxes for the years ended January 3, 2022, December 28, 2020 and December 30, 2019 are:

	For the Year Ended
	January 3, 2022			December 28, 2020			December 30, 2019
	(In thousands)
United States	$	(28,057	)	$	(84,582	)	$	16,066
Foreign		98,110			38,305			18,260
Income (loss) from continuing operations before income taxes	$	70,053		$	(46,277	)	$	34,326

The Company expects its earnings attributable to foreign subsidiaries will not be indefinitely reinvested, except for certain circumstances where we have established a deferred tax liability of approximately $2,816 and $1,666 for the foreign and U.S. federal/state impact, respectively. For those other companies with earnings currently being reinvested outside of the U.S., the undistributed earnings amounted to approximately $60,769 as of January 3, 2022. The determination of the unrecognized deferred tax liability related to these undistributed earnings is approximately $2,642.

The components of income tax (provision) benefit for the years ended January 3, 2022, December 28, 2020
and December 30, 2019 are:

	For the Year Ended
	January 3, 2022			December 28, 2020			December 30, 2019
	(In thousands)
Current (provision) benefit:
Federal	$	(1,125	)	$	(44	)	$	294
State		547			(4,624	)		(2,922	)
Foreign		(9,211	)		27,902			(12,748	)
Total current		(9,789	)		23,234			(15,376	)
Deferred (provision) benefit:
Federal		2,889			2,446			1,004
State		(1,492	)		4,498			(1,076	)
Foreign		(7,247	)		(287	)		13,043
Total deferred		(5,850	)		6,657			12,971
Income tax (provision) benefit	$	(15,639	)	$	29,891		$	(2,405	)

The following is a reconciliation of the provision for income taxes at the statutory federal income tax rate compared to the Company’s provision for income taxes for the years ended January 3, 2022, December 28, 2020 and December 30, 2019:

	For the Year Ended
	January 3, 2022			December 28, 2020			December 30, 2019
	(In thousands)
Statutory federal income tax (provision) benefit	$	(14,711	)	$	9,718		$	(7,209	)
State income taxes, net of federal benefit and state tax credits		1,815			(2,674	)		(3,163	)
IRC Section 162(m) limitation		(725	)		(712	)		(868	)
Stock options		89			(1,298	)		(252	)
Global Intangible Low-Taxed Income		(9,824	)		(1,300	)		—
Permanently reinvested earnings assertion		(1,392	)		(1,442	)		(1,765	)
Foreign tax differential on foreign earnings & other permanent items		3,917			3,933			687
Change in valuation allowance		(1,139	)		(2,668	)		2,127
Uncertain tax positions		(642	)		36,936			999
Foreign tax credits		3,028			4,250			4,582
Federal research and development credits		3,400			—			—
Goodwill impairment		—			(14,532	)		—
Other		545			(320	)		2,457
Income tax (provision) benefit	$	(15,639	)	$	29,891		$	(2,405	)

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of the net deferred income tax assets (liabilities) as of January 3, 2022 and December 28, 2020 are as follows:

	As of
	January 3, 2022			December 28, 2020
	(In thousands)
Deferred income tax assets:
Net operating loss carryforwards	$	41,354		$	43,209
Reserves and accruals		30,944			29,429
Interest expense limitation		2,826			—
Unrealized loss on cash flow hedge		1,128			4,713
Tax credit carryforwards		38,890			39,757
Stock-based compensation		4,724			4,216
Property, plant and equipment		7,665			9,989
Other deferred income tax assets		707			493
		128,238			131,806
Less: valuation allowance		(16,541	)		(15,322	)
		111,697			116,484
Deferred income tax liabilities:
Repatriation of foreign earnings		(4,482	)		(4,006	)
Property, plant and equipment basis differences		(62,791	)		(50,463	)
Goodwill and intangible amortization		(33,318	)		(39,668	)
Other deferred income tax liabilities		(4,203	)		(5,700	)
Net deferred income tax assets (included in       Deposits and other non-current assets)	$	6,903		$	16,647

As of January 3, 2022, the Company had the following net operating loss (NOL) carryforwards: $107,969 in the U.S. for federal, $28,427 in various U.S. states, $62,909 in China, and $18,034 in Hong Kong. The U.S. federal NOLs expire in 2028 through 2032, the various U.S. states’ NOLs expire in 2022 through 2037, the China NOLs expire in 2025 through 2031, and the Hong Kong NOLs carryforward indefinitely. Further, the Company’s tax credits were approximately $48,150, of which $5,777 carryforward indefinitely.

In connection with the Company’s acquisition of Viasystems during 2015, there was more than a 50% change in ownership under Section 382 of the Internal Revenue Code of 1986, as amended, and regulations issued there under. As a consequence, the utilization of the acquired Viasystems U.S. NOLs is limited to approximately $9,826 per year. In addition, the Company recognized certain gains built in at the time of the ownership change, which increase the limitation by approximately $47,463 for each of the first 5 years after the acquisition. Any unused limitation in a year can be carried over to succeeding years. The Company has fully utilized the portion of the NOL carryforward that included the $47,463 per year and so the only remaining NOL available is the $9,826 per year, the total of which is $107,969.

A valuation allowance is provided when it is more likely than not that all or some portion of the deferred income tax assets will not be realized. The Company maintains a valuation allowance on certain of its U.S. net deferred tax assets represented by income tax attributes carried forward that are expected to expire unused. Certain subsidiaries within China continue to have NOL carryforwards in various tax jurisdictions that the Company has determined are not more likely than not to be utilized. As a result, a full valuation allowance has been recorded for these subsidiaries as of January 3, 2022. For the remaining net deferred income tax assets, management has determined that it is more likely than not that the results of future operations will generate sufficient taxable income to realize the net deferred tax assets.

The following summarizes the activity in the Company’s valuation allowance for the years ended January 3, 2022, December 28, 2020 and December 30, 2019:

	For the Year Ended
	January 3, 2022			December 28, 2020			December 30, 2019
	(In thousands)
Balance at beginning of year	$	15,322		$	14,292		$	16,635
Additions charged to expense		2,330			3,904			1,526
Other reduction charged to expense		(1,111	)		(2,874	)		(3,869	)
Balance at end of year	$	16,541		$	15,322		$	14,292

Certain entities within China qualified for the high and new technology enterprise (HNTE) status enabling those entities to enjoy certain benefits, which were effective for the years ended January 3, 2022, December 28, 2020 and December 30, 2019. The HNTE status as well as enhanced research and development (R&D) deductions decreased Chinese taxes. HNTE and R&D benefit and effect on earnings per share are as follows:

	For the Year Ended
	January 3, 2022		December 28, 2020		December 30, 2019
	(In thousands, except per share data)
HNTE and R&D benefits	$	5,611	$	4,235	$	6,060
Basic shares		106,314		106,366		105,195
Diluted shares		108,153		106,366		106,332
Increases earnings per share:
Basic	$	0.05	$	0.04	$	0.06
Diluted	$	0.05	$	0.04	$	0.06

HNTE status expires at various dates in 2022, but the Company expects to continue to file for renewal of such HNTE status for the foreseeable future.

A reconciliation of the beginning and ending amount of unrecognized tax benefits, exclusive of accrued interest and penalties, is as follows:

	For the Year Ended
	January 3, 2022			December 28, 2020			December 30, 2019
	(In thousands)
Balance at beginning of year	$	7,404		$	37,465		$	30,284
Additions based on tax positions related to the current year		2,749			839			3,553
Additions for tax positions of prior years		41			202			4,952
Reductions for tax positions of prior years		(357	)		(27,283	)		(103	)
Lapse of statute of limitations		(395	)		(3,819	)		(1,221	)
Balance at end of year	$	9,442		$	7,404		$	37,465

During the year ended January 3, 2022, the Company increased current years’ uncertain tax positions by $2,038 due to (i) amortization of certain capitalized research expenditures; and (ii) U.S. R&D credit generated in 2021.

As of January 3, 2022 and December 28, 2020, the Company recorded unrecognized tax benefits of $804 and $1,046, respectively, as well as interest and penalties of $1,026 and $1,566, respectively, to current and long-term liabilities. The Company has also recorded unrecognized tax benefits of $8,638 and $6,358 against certain deferred tax assets as of January 3, 2022 and December 28, 2020, respectively. The amount of unrecognized tax benefits that would, if recognized, reduce the Company’s effective income tax rate in any future periods is $1,830 including interest and penalties. The Company expects no change to its unrecognized tax benefits over the next twelve months due to expiring statutes.

As of January 3, 2022, the Company is open for (i) U.S. federal income tax examination for the period from 2019 to 2021 and NOL and credit carryforwards are subject to adjustment for 3 years post utilization, (ii) state and local income tax examination for tax years 2018 to 2021 and NOL and credit carryforwards are subject to adjustment for 4 years post utilization; and (iii) foreign income tax examinations generally for tax years from 2011 to 2021.