Note 13 - Income Taxes

3 Months Ended

Apr. 01, 2017

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note

13

– Income Taxes

In

November

2015,

the FASB issued ASU

2015

-

17,

Balance Sheet Classification of Deferred Taxes

to simplify the presentation of deferred income taxes. The amendments in this update require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The Company adopted ASU

2015

-

17

as of

January

1,

2017

and retrospectively applied ASU

2015

-

17

to all periods presented. As of

January

1,

2017

the Company reclassified

$2,173

of deferred tax assets from "Current assets" to "Non-current liabilities" on the Consolidated Balance Sheets. As of

April

1,

2017

and

December

31,

2016,

the Company had net non-current deferred tax liabilities of

$6,338

and

$6,197,

respectively.

No

valuation allowance against the Company’s deferred income tax assets is needed as of

April

1,

2017

and

December

31,

2016

as it is more-likely-than-not that the positions will be realized upon settlement. Deferred income tax liabilities primarily relate to intangible assets and accounting basis adjustments where the Company has a future obligation for tax purposes.

The Company’s consolidated effective income tax rate was

32.2%

and

36.8%

for the

three

months ended

April

1,

2017

and

March

31,

2016,

respectively. The difference between the effective income tax rate and the combined statutory federal and state income tax rate of approximately

39.0%

is principally due to the federal domestic production activities deduction and research and development credits. Furthermore, during the

three

months ended

April

1,

2017,

the Company recorded a reduction in income tax expense of

$722

relating to the income tax benefit received in conjunction with the vesting of restricted stock during the period. Also contributing to the decrease in the effective tax rate for the

three

months ended

April

1,

2017,

is the lower effective tax rate applied to the Asia operations from our recently acquired JBA acquisition in

2016.

The Company evaluates tax positions for recognition using a more-likely-than-not recognition threshold, and those tax positions eligible for recognition are measured as the largest amount of tax benefit that is greater than

50%

likely of being realized upon the effective settlement with a taxing authority that has full knowledge of all relevant information. The California Franchise Tax Board (“CFTB”) is challenging the use of certain research and development tax credits generated for the years

2005

to

2014.

Fiscal years

2005

through

2016

are considered open tax years in the State of California and

2013

through

2016

in the U.S. federal jurisdiction and other state jurisdictions. During

2016,

the Internal Revenue Service informed the Company of its interest to examine the income tax return for the tax year

2014.

 At

April

1,

2017

and

December

31,

2016,

the Company had

$770

of unrecognized tax benefits. Included in the balance of unrecognized tax benefits at

April

1,

2017

and

December

31,

2016

were

$770

of tax benefits that, if recognized, would affect our effective tax rate. It is not expected that there will be a significant change in the unrecognized tax benefits in the next

12

 months.