Income Taxes

12 Months Ended

Dec. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

8. INCOME TAXES

Income before provision for income taxes was generated from the following geographic areas:

	Year Ended
	December 30,			December 31,			December 25,
(In millions)	2022			2021			2020
United States	$	(61.9	)	$	(42.1	)	$	(24.5	)
Foreign		150.2			196.4			124.2
Total pretax income	$	88.3		$	154.3		$	99.7

The provision for income taxes consisted of the following:

	Year Ended
	December 30,			December 31,			December 25,
(In millions)	2022			2021			2020
Current:
Federal	$	(0.8	)	$	-		$	(0.1	)
State		1.1			1.0			0.9
Foreign		37.5			30.0			18.1
Total current		37.8			31.0			18.9
Deferred:
Federal		0.3			0.3			0.3
State		0.2			0.4			0.5
Foreign		(0.4	)		(3.8	)		(0.4	)
Total deferred		0.1			(3.1	)		0.4
Total provision	$	37.9		$	27.9		$	19.3

The effective tax rate differs from the U.S. federal statutory tax rate as follows:

	Year Ended
	December 30,				December 31,				December 25,
	2022				2021				2020
Federal income tax provision at    statutory rate		21.0		%		21.0		%		21.0		%
State income taxes, net of federal    benefit		(1.6	)	%		(0.1	)	%		0.6		%
Effect of foreign operations		(6.7	)	%		(10.3	)	%		(8.3	)	%
Change in valuation allowance		24.3		%		2.9		%		(0.1	)	%
Foreign income inclusions		4.0		%		4.9		%		4.6		%
Nondeductible executive compensation		1.8		%		1.8		%		-		%
Excess tax benefits related to stock-based compensation		(0.3	)	%		(3.1	)	%		-		%
Other		0.4		%		1.0		%		1.5		%
Effective Tax Rate		42.9		%		18.1		%		19.3		%

Significant components of deferred tax assets and liabilities are as follows:

	Year Ended
	December 30,			December 31,
(In millions)	2022			2021
Deferred tax assets:
Interest expense limitation	$	19.1		$	13.0
Operating lease liabilities		14.7			11.4
Intangibles		13.1			12.9
Tax loss carryforwards		15.4			11.2
Capitalized research and development costs		7.0			—
Inventory valuation and basis difference		4.0			7.4
Accruals		5.9			3.7
Tax credits		4.9			4.2
Other timing differences		5.0			4.7
		89.1			68.5
Valuation allowance		(53.1	)		(30.9	)
Total deferred tax assets		36.0			37.6
Deferred tax liabilities:
Goodwill		(17.4	)		(15.2	)
Operating lease right-of-use assets		(14.5	)		(10.8	)
Intangibles		(10.9	)		(19.7	)
Depreciation		(7.1	)		(8.7	)
Other		(2.3	)		(0.5	)
Total deferred tax liabilities		(52.2	)		(54.9	)
Net deferred tax liabilities	$	(16.2	)	$	(17.3	)

As of December 30, 2022, the Company had undistributed earnings of certain foreign subsidiaries of approximately $512.0 million that are considered indefinitely reinvested and on which we have not recognized deferred taxes. It is not practicable to determine the tax liability that might be incurred if these earnings were to be distributed. For undistributed earnings of foreign subsidiaries which are not considered indefinitely reinvested deferred taxes have been accrued.

As of December 30, 2022, a valuation allowance of $53.1 million was established for deferred tax assets related to U.S. federal and state assets and certain foreign assets. For fiscal 2022, the increase in the valuation allowance was $22.2 million.

The Company’s gross liability for unrecognized tax benefits as of December 30, 2022 and December 31, 2021 was $2.7 million and $1.6 million, respectively. If the remaining balance of unrecognized tax benefits were recognized in a future period, it would result in a tax benefit of $2.2 million as of December 30, 2022 ($1.3 million as of December 31, 2021) and a reduction in the effective tax rate. Increases or decreases to interest and penalties on uncertain tax positions are included in the income tax provision in the Consolidated Statements of Operations. Interest related to uncertain tax positions for the periods ended December 30, 2022, December 31, 2021 and December 25, 2020, were $0.3 million, $0.2 million, and $0.3 million, respectively. There are no penalties accrued within the liability for unrecognized benefits. Although it is possible some of the unrecognized tax benefits could be settled within the next twelve months, the Company cannot reasonably estimate the outcome at this time.

The following table summarizes the activity related to the Company’s unrecognized tax benefits (in millions):

Balance as of December 27, 2019	$	1.0
Expiration of the statute of limitations for the assessment of taxes		(0.1	)
Balance at December 25, 2020	$	0.9
Increases related to prior year tax positions		0.2
Increases related to current year tax positions		0.7
Expiration of the statute of limitations for the assessment of taxes		(0.2	)
Balance at December 31, 2021	$	1.6
Increases related to prior year tax positions		0.1
Increases related to current year tax positions		1.0
Balance at December 30, 2022	$	2.7

As of December 30, 2022, the Company had California and foreign net operating loss carryforwards (“NOLs”) of approximately $51.8 million and $17.4 million, respectively. The California NOLs begin expiring after 2031 and the foreign NOLs begin expiring after 2026. The Company also had federal tax credit carryforwards of approximately $4.7 million which expire in various years from fiscal 2028 through 2042.

The Company files federal, state and foreign income tax returns in several U.S. and foreign jurisdictions. The federal statute of limitation has closed for years prior to 2019. State statutes of limitation are generally closed for years prior to 2018. The statute of limitation for significant foreign jurisdictions has closed for years prior to 2019.

The Company is operating under a Development and Expansion Incentive (“DEI”) in Singapore which is effective through 2023. The DEI reduces the local tax on certain Singapore income from a statutory rate of 17.0% to 5.0%. The Company has also been granted a tax holiday in Malaysia, subject to certain conditions. The Malaysia tax holiday period commenced in fiscal year 2022.