Note 11 - Income Taxes

9 Months Ended

Oct. 02, 2021

Notes to Financial Statements

Income Tax Disclosure [Text Block]

We are subject to federal and state income tax as well as income tax in the foreign jurisdictions in which we operate. For the third quarter of fiscal 2021 and 2020, we recorded income tax benefits of approximately $0.5 million and $0.7 million, respectively. For the first nine months of fiscal 2021 and 2020, we recorded income tax expense of approximately $1.1 million and $0.6 million, respectively. Income taxes for the three and nine month periods ended October 2, 2021 and September 26, 2020 represent tax at the federal, state, and foreign statutory tax rates in addition to withholding taxes, changes in uncertain tax positions, as well as other non-deductible items in foreign jurisdictions. The difference between the U.S. federal statutory tax rate of 21% and our effective tax rates for the three and nine months ended October 2, 2021 and for the three and nine months ended September 26, 2020 resulted primarily from U.S. valuation allowance, foreign withholding taxes, foreign rate differentials, and the discrete impacts of uncertain tax positions due to lapsing of the statute of limitations.

We updated our evaluation of the valuation allowance position in the United States through October 2, 2021 and concluded that we should continue to maintain a full valuation allowance against the net federal and state deferred tax assets. In making this evaluation, we exercised significant judgment and considered estimates about our ability to generate revenue and taxable profits sufficient to offset expenditures in future periods within the U.S. We will continue to evaluate both positive and negative evidence in future periods to determine if we will realize the deferred tax assets. We do not have a valuation allowance in any foreign jurisdictions as we have concluded it is more likely than not that we will realize the net deferred tax assets in future periods.

Our liability recorded for uncertain tax positions (including penalties and interest) was $20.9 million and $22.3 million at October 2, 2021 and January 2, 2021, respectively, and is included as a component of Other long-term liabilities on our Consolidated Balance Sheets.