Note 12 - Income Taxes

12 Months Ended

Dec. 28, 2024

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note 12 - Income Taxes

We are subject to federal and state income tax as well as income tax in the various foreign jurisdictions in which we operate.

The domestic and foreign components of Income before income taxes were as follows:

	Year Ended
	December 28,		December 30,		December 31,
(In thousands)	2024		2023		2022
Domestic	$	2,595	$	55,069	$	30,362
Foreign		33,634		159,787		151,750
Income before taxes	$	36,229	$	214,856	$	182,112

The components of Income tax (benefit) expense are as follows:

	Year Ended
	December 28,			December 30,			December 31,
(In thousands)	2024			2023			2022
Current:
Federal	$	(15,866	)	$	10,331		$	748
State		460			1,059			265
Foreign		2,573			3,019			3,637
		(12,833	)		14,409			4,650
Deferred:
Federal		(7,530	)		(56,323	)		—
State		—			—			—
Foreign		(4,539	)		(2,291	)		(1,420	)
		(12,069	)		(58,614	)		(1,420	)
Income tax (benefit) expense	$	(24,902	)	$	(44,205	)	$	3,230

Income tax (benefit) expense differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to pretax income as a result of the following differences:

	Year Ended
	December 28,	December 30,	December 31,
	2024	2023	2022
	%	%	%
Statutory federal rate	21	21	21
Adjustments for tax effects of:
State taxes, net	(8)	(1)	(2)
Federal tax credits	(16)	(4)	(1)
Stock-based compensation	9	(2)	—
Foreign rate differential	(25)	(15)	(16)
U.S. tax on foreign operations	18	9	33
Capital loss expiration	—	—	1
Valuation allowance	10	(29)	(33)
Change in uncertain tax benefit accrual	(75)	—	(2)
Other	(3)	—	1
Effective income tax rate	(69)	(21)	2

The decrease in provision for income taxes in fiscal year 2024 compared to fiscal year 2023 was primarily due to the release of the US federal valuation allowance in the prior year and the recognition of uncertain tax benefits in the current year.

We updated our evaluation of the valuation allowance position in the United States through December 28, 2024 and concluded that we should continue to maintain a full valuation allowance against our state deferred tax assets due to insufficient income sources. We will continue to evaluate both positive and negative evidence in future periods to determine if we will realize the deferred tax assets. The amount of the deferred tax asset considered realizable could be adjusted if sufficient positive evidence exists. We don't have a valuation allowance on a significant portion of our U.S. Federal deferred tax assets or in any foreign jurisdictions as we have concluded that it is more likely than not that we will realize the net deferred tax assets in the future periods.

The components of our net deferred tax assets and liabilities are as follows:

(In thousands)	December 28, 2024			December 30, 2023
Deferred tax assets:
Intangible assets	$	2,523		$	4,274
Net operating loss carry forwards		13,332			13,829
Tax credit carry forwards		100,820			87,955
Accrued liabilities and reserves		26,638			23,249
Stock-based and deferred compensation		2,238			5,199
Other		6,791			5,162
Total deferred tax assets		152,342			139,668
Less: valuation allowance		(82,684	)		(79,100	)
Net deferred tax assets		69,658			60,568
Deferred tax liabilities:
Fixed assets		826			1,475
Unremitted earnings		720			620
Other		3,486			6,889
Total deferred tax liabilities		5,032			8,984
Net deferred taxes	$	64,626		$	51,584
Reported as:
Deferred tax assets	$	66,980		$	57,762
Deferred tax liabilities (included in Other long-term liabilities)		(2,354	)		(6,178	)
Net deferred taxes	$	64,626		$	51,584

The following table displays the activity related to changes in our valuation allowance for deferred tax assets:

Fiscal Years Ended	Balance at beginning		Charged (Credit) to costs and			Charged (credit) to other		Balance at end of
(In thousands)	of period		expenses			accounts		period
December 28, 2024	$	79,100	$	3,584		$	—	$	82,684
December 30, 2023	$	140,533	$	(61,433	)	$	—	$	79,100
December 31, 2022	$	200,438	$	(59,905	)	$	—	$	140,533

At December 28, 2024, we had U.S. federal net operating loss ("NOL") carryforwards (pretax) of approximately $6.8 million which will expire between 2027 and 2031. We had state NOL carryforwards (pretax) of approximately $132.3 million that substantially all expire at various dates from 2025 through 2041. We also had federal credit carryforwards of $47.2 million that expire at various dates from 2035 through 2044, and $84.0 million state credit carryforwards, of which substantially all do not expire.

Future utilization of federal and state net operating losses and tax credit carryforwards may be limited if cumulative changes to ownership exceed 50% within any three-year period, which has not occurred through fiscal 2024. However, if there is a significant change in ownership, future tax attribute utilization may be limited and NOL carryforwards and/or R&D credits will be reduced to reflect the limitation.

Foreign earnings may be subject to withholding taxes in local jurisdictions if they are distributed. At December 28, 2024, U.S. income taxes and foreign withholding taxes were not provided for on a cumulative total of approximately $3.0 million of the undistributed earnings of our foreign subsidiaries. We intend to reinvest these earnings indefinitely.

At December 28, 2024 and December 30, 2023, our unrecognized tax benefits associated with uncertain tax positions were $29.3 million and $61.4 million, respectively, of which $26.3 million and $58.7 million, respectively, if recognized, would affect the effective tax rate, subject to valuation allowance. As of December 28, 2024 and December 30, 2023, interest and penalties associated with unrecognized tax benefits were $0.4 million and $11.3 million, respectively, which are not reflected in the table below. We accrue interest and penalties related to uncertain tax positions in Income tax expense.

The following table summarizes the changes to unrecognized tax benefits for the fiscal years presented:

	(In thousands)
Balance at January 1, 2022	$	56,231
Additions based on tax positions related to the current year		1,594
Additions based on tax positions of prior years		2,798
Settlements		(148	)
Reduction as a result of lapse of applicable statute of limitations		(1,586	)
Balance at December 31, 2022		58,889
Additions based on tax positions related to the current year		2,247
Additions based on tax positions of prior years		1,128
Reductions for tax positions of prior years		(156	)
Reduction as a result of lapse of applicable statute of limitations		(696	)
Balance at December 30, 2023		61,412
Additions based on tax positions related to the current year		3,362
Additions based on tax positions of prior years		552
Reduction as a result of lapse of applicable statute of limitations		(36,028	)
Balance at December 28, 2024	$	29,298

Our liability for uncertain tax positions (including penalties and interest) was $2.5 million and $21.9 million at December 28, 2024 and December 30, 2023, respectively, and is recorded as a component of Other long-term liabilities on our Consolidated Balance Sheets.

At December 28, 2024, it is reasonably possible that $0.3 million of unrecognized tax benefits and less than $0.1 million of associated interest and penalties could be recognized during the next twelve months.

The years that remain subject to examination are 2021 for federal income taxes, 2020 for state income taxes, and 2018 for foreign income taxes, including years ending thereafter. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses or tax credits were generated and carried forward, and make adjustments up to the amount of the net operating losses or credit carryforward amount.