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Income Taxes
6 Months Ended
Jul. 01, 2017
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
  
The Company is subject to income tax in the United States as well as other tax jurisdictions in which it conducts business. Earnings from non-U.S. activities are subject to local country income tax.

For the three and six months ended July 1, 2017, the Company recorded a benefit for income taxes of $(4.7) million and $(34.3) million, respectively, for an effective tax rate of 7.4% and 22.5%, respectively. The effective tax rate for the six months ended July 1, 2017 was different than the statutory federal tax rate, primarily due to research and development credits, non-deductible stock-based compensation expense, unrecognized tax benefits, the reduction in the domestic production activities deduction in prior periods on account of current year operating losses carried back to refund prior period taxes, the impact of a valuation allowance of approximately $10.5 million recorded against certain of the Company’s deferred tax assets, and the mix of income between U.S. and foreign jurisdictions.

The Company regularly assesses whether it is more likely than not that it will realize its deferred tax assets in each jurisdiction in which it operates. In performing this assessment, the Company reviews all available evidence, including recent cumulative earnings experience and expectations of future earnings, the carryforward periods available to it for tax reporting purposes, and other relevant factors.

As of July 1, 2017, the Company has net deferred tax assets of $163 million. At this time, the Company believes it is more likely than not that it will realize these deferred tax assets; however, if the Company is not able to generate sufficient taxable income from its operations, a substantial valuation allowance to reduce its deferred tax assets may be required, which would materially affect its operating results. Specifically, unless the Company is able to generate sufficient taxable income from its U.S. operations, a substantial valuation allowance to reduce its U.S. deferred tax assets may be required, which would materially increase its tax expense in the period the allowance is recognized and materially adversely affect its results of operations and statement of financial condition. The Company’s judgment regarding future profitability may change due to future market conditions, changes in U.S. or international tax laws and other factors. These changes, if any, may require possible material adjustments to these deferred tax assets, resulting in a reduction in net income or an increase in net loss in the period when such determinations are made. The actual amount of any valuation allowance will depend on the value of the Company’s deferred tax assets at that time, and its ability to monetize these assets through loss carry-back claims or other strategies.

For the three and six months ended July 2, 2016, the Company recorded an expense for income taxes of $3.7 million and $13.6 million, respectively, for an effective tax rate of 36.8% and 43.8%, respectively. The effective tax rate for the six months ended July 2, 2016 was higher than the statutory federal tax rate due to the effect of an out-of-period adjustment recorded in the three months ended April 2, 2016, a change in mix of income between U.S. and foreign jurisdictions, and unrecognized tax benefits.

As of July 1, 2017, the total amount of gross unrecognized tax benefits was $37.3 million, of which $32.3 million would affect the effective tax rate if recognized. The Company does not have any tax positions as of July 1, 2017 for which it is reasonably possible that the total amount of gross unrecognized tax benefits will increase or decrease within the following 12 months.

The Company adopted ASU 2016-09 effective January 1, 2017. Adoption of ASU 2016-09 resulted in the recognition of net stock compensation shortfalls in the Company’s provision for income taxes rather than paid-in capital of $1.2 million and $4.0 million for the three and six months ended July 1, 2017, respectively. These expenses are recorded discretely in the quarter.  The Company’s effective tax rate will fluctuate based upon its stock price and the amount of stock options exercised and equity awards vested in a particular quarter.