XML 33 R20.htm IDEA: XBRL DOCUMENT v3.22.4
INCOME TAXES
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The components of income before income taxes were as follows for the periods indicated (in thousands):
Fiscal Year Ended
December 31,
2022		January 1,
2022		January 2,
2021
Domestic
$107,578 $262,182 $201,919 
Foreign
8,599 6,228 3,282 
Income before income taxes
$116,177 $268,410 $205,201 

The components of income tax expense were as follows for the periods indicated (in thousands):
Fiscal Year Ended
December 31,
2022		January 1,
2022		January 2,
2021
Current tax expense:
U.S. federal
$43,967 $37,963 $41,884 
State
11,761 11,018 10,619 
Foreign
3,372 1,726 829 
Total current tax expense
59,100 50,707 53,332 
Deferred tax expense (benefit):
U.S. federal
(26,783)4,770 (3,332)
State
(4,499)540 (538)
Foreign
(1,334)(209)(62)
Total deferred tax expense (benefit)(32,616)5,101 (3,932)
Total income tax expense
$26,484 $55,808 $49,400 

A reconciliation of income taxes computed at the federal statutory income tax rate of 21% to the effective income tax rate is as follows for the periods indicated (in thousands):
Fiscal Year Ended
December 31,
2022		January 1,
2022		January 2,
2021
Income taxes at the statutory rate
$24,397 $56,366 $43,092 
Increase (decrease) resulting from:
State income taxes, net of federal tax effect4,454 8,562 7,816 
Foreign-derived intangible income(2,878)(3,056)(1,046)
Research and development tax credits
(742)(630)(580)
Tax benefit related to stock-based compensation(472)(7,259)(611)
Other
1,725 1,825 729 
Income tax expense
$26,484 $55,808 $49,400 
Deferred tax assets and liabilities consisted of the following for the periods indicated (in thousands):
Fiscal Year Ended
December 31,
2022		January 1,
2022
Deferred tax assets:
Accrued liabilities
$24,339 $7,188 
Allowances and other reserves
3,510 3,350 
Inventory
13,022 4,990 
Stock-based compensation
5,410 4,298 
Operating lease liabilities16,817 16,201 
Capitalized research and development expenditures7,921 — 
Other
4,520 3,225 
Total deferred tax assets
$75,539 $39,252 
Deferred tax liabilities:
Operating lease assets$(13,828)$(13,516)
Prepaid expenses
(1,286)(1,602)
Property and equipment
(15,734)(15,180)
Intangible assets
(21,346)(18,180)
Other
(112)(92)
Total deferred tax liabilities
(52,306)(48,570)
Net deferred tax liabilities$23,233 $(9,318)
Amounts included in the Consolidated Balance Sheets:
Deferred income taxes$23,233 $1,602 
Other liabilities— (10,920)
Net deferred income tax liabilities$23,233 $(9,318)

We consider the undistributed earnings of our foreign subsidiaries to be indefinitely reinvested, and, accordingly, no taxes have been recognized on such earnings except for the transition tax recognized as part of the Tax Cuts and Jobs Act (“the Tax Act”) during 2017. We continue to evaluate our plans for reinvestment or repatriation of unremitted foreign earnings. If we determine that all or a portion of our foreign earnings are no longer indefinitely reinvested, we may be subject to additional foreign withholding taxes and U.S. state income taxes. We believe it is not practicable to estimate the amount of additional taxes, which may be payable upon distribution of these earnings. At December 31, 2022, we had unremitted earnings of foreign subsidiaries of $30.2 million.

The Tax Act introduced new provisions for U.S. taxation of certain global intangible low-taxed income (“GILTI”). We elected to account for the tax on GILTI as a period cost and therefore have not recorded deferred taxes related to GILTI on our foreign subsidiaries.

As of December 31, 2022, we had Texas research and development tax credit carryforwards of approximately $1.9 million, which if not utilized, will expire beginning in 2037.
The following table summarizes the activity related to our unrecognized tax benefits for the periods indicated (excluding interest and penalties) (in thousands):
Fiscal Year Ended
December 31,
2022		January 1,
2022
Balance, beginning of year
$11,113 $7,250 
Gross increases related to current year tax positions2,270 4,070 
Gross increases related to prior year tax positions36 — 
Gross decreases related to prior year tax positions(68)(100)
Decreases as a result of settlements during the current period(260)— 
Lapse of statute of limitations(500)(107)
Balance, end of year
$12,591 $11,113 

If our positions are sustained by the relevant taxing authorities, approximately $12.6 million (excluding interest and penalties) of uncertain tax position liabilities as of December 31, 2022 would favorably impact our effective tax rate in future periods. We do not anticipate that the balance of gross unrecognized tax benefits will change significantly during the next twelve months.

We include interest and penalties related to unrecognized tax benefits in our current provision for income taxes in the accompanying consolidated statements of operations. As of December 31, 2022, we had recognized a liability of $2.0 million for interest and penalties related to unrecognized tax benefits.

We file income tax returns in the United States and various state and foreign jurisdictions. The tax years 2019 through 2022 remain open to examination in the United States, and the tax years 2016 through 2022 remain open to examination in Texas. The tax years 2018 through 2022 remain open to examination in most other state and foreign jurisdictions.