Income Taxes

The Company regularly reviews its tax positions in each significant taxing jurisdiction in the process of evaluating its unrecognized tax benefits. The Company makes adjustments to its unrecognized tax benefits when: (i) facts and circumstances regarding a tax position change, causing a change in management’s judgment regarding that tax position; (ii) a tax position is effectively settled with a tax authority at a differing amount; and/or (iii) the statute of limitations expires regarding a tax position.

The tabular reconciliation of the total amounts of unrecognized tax benefits is as follows for the fiscal years ended:



	December 28, 2014			December 29, 2013			December 30, 2012
	(In thousands)
Unrecognized tax benefits, beginning of year	$	39,410		$	58,110		$	51,740
Gross increases—tax positions in prior periods	—			325			10,653
Gross decreases—tax positions in prior periods	(1,809		)	(10,539		)	(4,665		)
Gross increases—current-period tax positions	239			2,222			3,343
Settlements	(1,400		)	(3,643		)	(2,822		)
Lapse of statute of limitations	(4,129		)	(6,495		)	(595		)
Foreign currency translation adjustments	31			(570		)	456
Unrecognized tax benefits, end of year	$	32,342		$	39,410		$	58,110

The Company classifies interest and penalties as a component of income tax expense. At December 28, 2014, the Company had accrued interest and penalties of $3.4 million and $0.2 million, respectively. During fiscal year 2014, the Company recognized a net benefit of $0.7 million for interest and a benefit of $0.2 million for penalties in its total tax provision primarily due to settlements and statutes that had lapsed. During fiscal year 2013, the Company recognized a benefit of $3.9 million for interest and a benefit of $3.7 million for penalties in its total tax provision primarily due to settlements and statutes that had lapsed. During fiscal year 2012, the Company recognized a charge of $1.1 million for interest and a benefit of $2.2 million for penalties in its total tax provision. At December 28, 2014, the Company had gross tax effected unrecognized tax benefits of $32.3 million, of which $28.5 million, if recognized, would affect the continuing operations effective tax rate. The remaining amount, if recognized, would affect discontinued operations.

The Company believes that it is reasonably possible that approximately $5.3 million of its uncertain tax positions at December 28, 2014, including accrued interest and penalties, and net of tax benefits, may be resolved over the next twelve months as a result of lapses in applicable statutes of limitations and potential settlements. Various tax years after 2007 remain open to examination by certain jurisdictions in which the Company has significant business operations, such as China, Finland, Germany, Italy, Netherlands, Singapore, the United Kingdom and the United States. The tax years under examination vary by jurisdiction.

During fiscal years 2014, 2013, and 2012, the Company recorded net discrete income tax benefits of $7.0 million, $24.0 million and $7.0 million, respectively, primarily for reversals of uncertain tax position reserves and resolution of other tax matters.

The components of income (loss) from continuing operations before income taxes were as follows for the fiscal years ended:



	December 28, 2014			December 29, 2013			December 30, 2012
	(In thousands)
U.S.	$	(37,758	)	$	(71,901	)	$	(113,969	)
Non-U.S.	207,361			235,585			169,133
Total	$	169,603		$	163,684		$	55,164

On a U.S. income tax basis, the Company has reported significant taxable income over the three year period ended December 28, 2014. The Company has utilized tax attributes to minimize cash taxes paid on that taxable income.

The components of the provision for (benefit from) income taxes for continuing operations were as follows:



	Current Expense (Benefit)			Deferred Expense (Benefit)			Total
	(In thousands)
Fiscal year ended December 28, 2014
Federal	$	(262	)	$	(19,169	)	$	(19,431	)
State	2,416			(3,842		)	(1,426		)
Non-U.S.	39,634			(10,340		)	29,294
Total	$	41,788		$	(33,351	)	$	8,437
Fiscal year ended December 29, 2013
Federal	$	2,331		$	(29,961	)	$	(27,630	)
State	1,968			(2,147		)	(179		)
Non-U.S.	15,025			2,201			17,226
Total	$	19,324		$	(29,907	)	$	(10,583	)
Fiscal year ended December 30, 2012
Federal	$	(3,640	)	$	(34,920	)	$	(38,560	)
State	2,752			(2,794		)	(42		)
Non-U.S.	50,314			(27,837		)	22,477
Total	$	49,426		$	(65,551	)	$	(16,125	)

The total provision for (benefit from) income taxes included in the consolidated financial statements is as follows for the fiscal years ended:



	December 28, 2014			December 29, 2013			December 30, 2012
	(In thousands)
Continuing operations	$	8,437		$	(10,583	)	$	(16,125	)
Discontinued operations	(1,831		)	(5,107		)	(823		)
Total	$	6,606		$	(15,690	)	$	(16,948	)

A reconciliation of income tax expense at the U.S. federal statutory income tax rate to the recorded tax provision is as follows for the fiscal years ended:



	December 28, 2014			December 29, 2013			December 30, 2012
	(In thousands)
Tax at statutory rate	$	59,361		$	57,289		$	19,302
Non-U.S. rate differential, net	(36,616		)	(36,377		)	(26,652		)
U.S. taxation of multinational operations	2,367			3,658			1,727
State income taxes, net	1,970			(1,762		)	3,400
Prior year tax matters	(7,009		)	(23,534		)	3,389
Federal tax credits	(3,399		)	(5,452		)	(1,657		)
Change in valuation allowance	(7,679		)	(4,675		)	(14,446		)
Other, net	(558		)	270			(1,188		)
Total	$	8,437		$	(10,583	)	$	(16,125	)

The Company’s provision for (benefit from) income taxes for fiscal years 2014, 2013, and 2012 included $7.1 million, $7.4 million and $5.2 million, respectively, of benefits derived from tax holidays in China and Singapore. The tax holidays in China and Singapore are scheduled to expire in fiscal years 2017 and 2018, respectively.

The tax effects of temporary differences and attributes that gave rise to deferred income tax assets and liabilities as of December 28, 2014 and December 29, 2013 were as follows:



	December 28, 2014			December 29, 2013
	(In thousands)
Deferred tax assets:
Inventory	$	9,041		$	9,850
Reserves and accruals	30,641			30,269
Accrued compensation	22,915			15,920
Net operating loss and credit carryforwards	106,020			132,710
Accrued pension	44,342			23,353
Restructuring reserve	7,522			6,853
Deferred revenue	46,413			42,687
All other, net	824			1,666
Total deferred tax assets	267,718			263,308
Deferred tax liabilities:
Postretirement health benefits	(4,472		)	(3,894		)
Depreciation and amortization	(176,043		)	(163,269		)
Total deferred tax liabilities	(180,515		)	(167,163		)
Valuation allowance	(55,460		)	(63,139		)
Net deferred tax assets	$	31,743		$	33,006

At December 28, 2014, the Company had state net operating loss carryforwards of $197.4 million, foreign net operating loss carryforwards of $160.5 million, state tax credit carryforwards of $11.9 million, general business tax credit carryforwards of $30.8 million, and foreign tax credit carryforwards of $12.4 million. These are subject to expiration in years ranging from 2015 to 2033, and without expiration for certain foreign net operating loss carryforwards and certain state credit carryforwards. At December 28, 2014, the Company also had U.S. federal net operating loss carryforwards of $45.8 million as a result of acquisitions. The Company acquired estimated utilizable U.S. federal loss carryforwards of $223.4 million as a result of the Caliper acquisition during fiscal year 2011, of which $25.8 million remain at December 28, 2014. The utilization of these losses and credits is subject to annual limitations based on Section 382 of the Internal Revenue Code of 1986, as amended. These federal losses and credits will expire in fiscal years 2015 through 2031.

Valuation allowances take into consideration limitations imposed upon the use of the tax attributes and reduce the value of such items to the likely net realizable amount. The Company regularly evaluates positive and negative evidence available to determine if valuation allowances are required or if existing valuation allowances are no longer required. Valuation allowances have been provided on state net operating loss and state tax credit carryforwards and on certain foreign tax attributes that the Company has determined are not more likely than not to be realized. The decrease in the valuation allowance in fiscal years 2014 and 2013 is primarily due to the anticipated utilization of attributes in certain foreign and state jurisdictions. The valuation allowance at December 30, 2012 and January 1, 2012 was $67.8 million and $82.3 million, respectively, and the change in the valuation allowance during fiscal year 2012 was primarily due to the reversal of valuation allowances for two of the Company’s non-U.S. subsidiaries when it became more likely than not that the subsidiaries’ deferred tax assets would be realized.

Current deferred tax assets of $62.0 million and $78.3 million were included in other current assets at December 28, 2014 and December 29, 2013, respectively. Long-term deferred tax liabilities of $30.3 million and $45.3 million were included in other long-term liabilities at December 28, 2014 and December 29, 2013, respectively.

The components of net deferred tax assets (liabilities) as of December 28, 2014 and December 29, 2013 were as follows:



	December 28, 2014			December 29, 2013
	(In thousands)
U.S.	$	44,073		$	22,565
Non-U.S.	(12,330		)	10,441
Total	$	31,743		$	33,006

Taxes have not been provided on unremitted earnings of international subsidiaries that the Company considers indefinitely reinvested because the Company plans to keep these amounts indefinitely reinvested overseas except for instances where the Company can remit such earnings to the U.S. without an associated net tax cost. The Company's indefinite reinvestment determination is based on the future operational and capital requirements of its U.S. and non-U.S. operations. As of December 28, 2014, the amount of foreign earnings that the Company has the intent and ability to keep invested outside the U.S. indefinitely and for which no U.S. tax cost has been provided was approximately $675.0 million. It is not practical to calculate the unrecognized deferred tax liability on those earnings.