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Income Tax
6 Months Ended
Jun. 30, 2017
Income Tax Disclosure [Abstract]  
Income Tax

7. Income Tax

 

The Company’s income tax provision and effective tax rates for the three and six months ended June 30, 2017 were $3.1 million and 13.3% and $7.6 million and 18.0%, respectively compared to $2.2 million and 75.1% and $3.6 million and 330.2%, respectively for the three and six months ended June 24, 2016. The change in respective rates reflects, primarily, changes in the geographic mix of worldwide earnings and financial results, including the impact of income and losses in jurisdictions with full federal and state valuation allowances for the three and six months ended June 30, 2017 compared to the impact of losses in jurisdictions with full state valuation allowances for the three and six months ended June 24, 2016.

 

Company management continuously evaluates the need for a valuation allowance and, as of June 30, 2017, concluded that a full valuation allowance on its federal and state deferred tax assets as well as the deferred tax assets of one its Singapore subsidiaries was still appropriate.

 

The Company adopted ASU No. 2016-09 in the first quarter of 2017. Prior to the adoption of ASU 2016-09, tax attributes related to stock option windfall deductions were not recorded until they resulted in a reduction of cash tax payable. As of December 30, 2016, the excluded windfall deductions for federal and state purposes were $1.6 million and $0.2 million (tax effected), respectively. Upon adoption of ASU 2016-09, the Company recognized the excluded windfall deductions as a deferred tax asset with a corresponding offset to a valuation allowance.

 

The Company does not provide for U.S. taxes on its undistributed earnings of foreign subsidiaries that it intends to invest indefinitely outside the U.S., unless such taxes are otherwise required under U.S. tax law. In 2016, the Company determined that a portion of the current year earnings of one of its China subsidiaries may be remitted in the future to one of its foreign subsidiaries outside of mainland China and, accordingly, the Company provided for the related withholding taxes in its condensed consolidated financial statements. If the Company changes its intent to reinvest its undistributed foreign earnings indefinitely or if a greater amount of undistributed earnings are needed than the previous anticipated remaining unremitted foreign earnings, the Company could be required to accrue or pay U.S. taxes on some or all of these undistributed earnings. As of June 30, 2017, the Company had undistributed earnings of foreign subsidiaries that are indefinitely invested outside of the U.S. of approximately $139.7 million. It is not practicable to determine the income tax liability that might be incurred if these earnings were to be distributed.

 

The Company’s gross liability for unrecognized tax benefits as of June 30, 2017 and June 24, 2016 was $0.3 million and $0.3 million, respectively. 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.