10.

Income

Taxes

December 22, 2017,

the U.S. enacted legislation commonly referred to as t

he Tax Cuts and Jobs Act (the "Tax Act"). Among other things, the Tax Act reduces the U.S. corporate federal income tax rate from

35%

21%,

adds base broadening provisions which limit deductions and address excessive international tax planning, imposes a

one

-time tax (the “Toll Charge”) on accumulated earnings of certain non-U.S. subsidiaries and enables repatriation of earnings of non-U.S. subsidiaries free of U.S. federal income tax. Other than the Toll Charge (which is applicable to the Company for

2017

), the provisions will generally be applicable to the Company in

2018

and beyond.

In accordance with the guidance provided in SEC Staff Accounting Bulletin (“SAB”)

No.

118,

in the

fourth

quarter of

2017

the Company recorded a charge of

$47

million as a provisional reasonable estimate of the impact of the Tax Act, including

$49

million for the Toll Charge net of

million for other net tax benefits. The Company is continuing to analyze the Tax Act and plans to finalize the estimate within the measurement period outlined in SAB

No.

118.

The final charge

may

differ from the provisional reasonable estimate if provisions of the Tax Act, and their interaction with other provisions of the U.S. Internal Revenue Code, are interpreted differently than interpretations made by the Company in determining the estimate, whether through issuance of administrative guidance, or through further review of the Tax Act by the Company and its advisors. Aside from these interpretation issues, the final charge

may

differ from the provisional reasonable estimate due to refinements of accumulated non-U.S. earnings and tax pool data.

One of the base broadening provisions of the Tax Act is commonly referred to as the “GILTI” provisions. In accordance with guidance issued by the FASB staff, the Company has

not

adopted an accounting policy for GILTI. Thus, the U.S. balance sheet tax accounts, notably deferred taxes, were computed without consideration of the possible future impact of the GILTI provisions. The Company intends to adopt an accounting policy for GILTI within the measurement period outlined in SAB

118.

Domestic and foreign income (loss) before income taxes is as follows:

(in thousands )	201 7			201 6			201 5
Domestic	$	(20,496	)	$	(9,563	)	$	1,313
Foreign		224,533			132,837			105,635
Income before income taxes	$	204,037		$	123,274		$	106,948

Federal, state and foreign income tax expense (benefit) consists of the following:

(in thousands )	201 7		201 6			201 5
Current:
Federal	$	34,060	$	(3,992	)	$	(6,686	)
State		450		(648	)		2,078
Foreign		32,945		28,695			19,211
Subtotal		67,455		24,055			14,603
Deferred:
Federal and State		16,562		(1,594	)		11,330
Foreign		501		(3,675	)		149
Subtotal		17,063		(5,269	)		11,479
Provision for income taxes	$	84,518	$	18,786		$	26,082

The current federal and state income tax expense for

2017

includes the preliminary estimate of

$49

million

for the Toll Charge as discussed above, partially offset by

$13

million of foreign tax credits. The Company will elect to pay the

2017

current federal income tax over the

eight

-year period prescribed by the Tax Act. The long-term portion of the

2017

current federal income tax (approximately

$32

million) is recorded in the

ther long-term liabilit

ies

on the Consolidated Balance Sheets as of

December 30, 2017.

The current federal tax benefit for

2016

includes an estimated

million benefit as a result of the carry-back of the

2016

U.S. federal net operating loss to the

2014

tax year.

The current federal tax benefit for

2015

includes an

$11.7

million benefit reclassified from accumulated other comprehensive income as a result of the company

’s termination of the U.S. defined benefit pension plan as described in Note

Benefit Plans

A reconciliation between income taxes computed on income before income taxes at the federal statutory rate and the provision for income taxes is provided below:

(in thousands )	201 7			201 6			201 5
Tax expense at statutory rate of 35%	$	71,413		$	43,146		$	37,432
Provisional amount of the Toll charge		49,000			—			—
Provisional Tax Act impact other than the Toll charge		(1,962	)		—			—
State and local taxes, net of federal tax benefit		292			(415	)		1,907
Non-U.S. income tax rate differential		(47,077	)		(25,471	)		(18,253	)
Impairment of goodwill without tax benefit		—			3,088			—
Tax on unremitted earnings		12,202			2,747			—
Mexico manufacturing operations restructuring		—			—			4,841
Nondeductible professional fees		1,240			313			1,011
Tax deduction for stock of foreign subsidiary		—			(3,896	)		—
Other, net		(590	)		(726	)		(856	)
Provision for income taxes	$	84,518		$	18,786		$	26,082

Deferred income taxes are provided for the tax effects of temporary differences between the financial reporting bases and the tax bases of the company

’s assets and liabilities. Significant components of the company’s deferred tax assets and liabilities at

December 30, 2017

and

December 31, 2016,

are as follows:

(in thousands)	2017			2016
Deferred tax assets:
Accrued expenses	$	24,094		$	31,770
Foreign tax credit carryforwards		1,053			6,472
Accrued restructuring		156			456
Capital losses		3,165			4,557
Domestic and foreign net operating loss carryforwards		5,778			2,223
Gross deferred tax assets		34,246			45,478
Less: Valuation allowance		(6,203	)		(6,738	)
Total deferred tax assets		28,043			38,740

Deferred tax liabilities:
Tax depreciation and amortization in excess of book		21,254			23,471
T ax on unremitted earnings		12,000			1,750
Total deferred tax liabilities		33,254			25,221
Net deferred tax (liabilities) assets	$	(5,211	)	$	13,519

The deferred tax asset valuation allowance is related to a U.S. capital loss carryover (which expire in

2018

) and tax attributes of certain non-US subsidiaries which are

not

expected to be realized. The remaining net operating losses either have

expira

tion date or are expected to be utilized prior to expiration (which begin expiring in

2021

). The Company paid income taxes of

$31.8

million,

$35.6

million, and

$23.3

million in

2017,

2016,

and

2015,

respectively, and received income tax refunds of

$13.7

million in

2017.

Deferred income taxes are

not

provided on the excess of the investment value for financial reporting over the tax basis of investments in those non-U.S. subsidiaries for which such excess is considered to be permanently reinvested in those operations. As of

December 30, 2017,

unremitted earnings of the Company

’s non-U.S. subsidiaries was approximately

$680

million. The Company recognized deferred tax liabilities of

$12.0

million (

$11.8

million for non-U.S. taxes and

$0.2

million for U.S. state taxes) as of

December 30, 2017

and

$1.8

million as of

December 31, 2016,

related to taxes on certain non-U.S. earnings which are

not

considered to be permanently reinvested. Some of these taxes

may

provide a U.S. federal income tax benefit as a foreign tax credit. However, due to uncertainty in regard to the Tax Act’s provisions,

such tax benefit was recorded. The Company will reconsider this provisional conclusion when it finalizes its preliminary reasonable estimate of the impact of the Tax Act, based upon interpretations and administrative guidance as of that time.

The

Company has

three

subsidiaries in China which benefit from lowered income tax rates due to “tax holidays” which apply for

three

-year periods, subject to extension. One such tax holiday expires in

2018,

and the Company expects to be granted an extension. Such tax holidays contributed

$5.7

million in tax benefits, or

$0.25

per diluted share, during

2017,

with similar amounts expected in future years while such tax holidays are in effect.

A reconciliation of the beginning and ending amount of unrecognized tax benefits as of

December 30, 2017,

December 31, 2016,

and

January 2, 2016

is as follows:

(in thousands, except per share amounts )	Unrecognized Tax Benefits
Balance at January 2, 2016	$	3,532
Additions for tax positions taken in the current year		2,696
Additions for tax positions taken in the pre-acquisition periods of acquired subsidiaries		2,491
Settlements		(102	)
Balance at December 31, 2016	$	8,617
Additions for tax positions taken in the current year		370
Other		(1,327	)
Balance at December 30, 2017	$	7,660

The company recognizes accrued interest and penalties associated with uncertain tax positions as part of income tax expense. The company recognized interest expense of

$0.9

million,

$0.9

million, and

$0.2

million in

2017,

2016,

and

2015,

respectively. Accrued interest was

$3.3

million,

$2.4

million, and

$1.5

million as of

December 30, 2017,

December 31, 2016,

and

January 2, 2016,

respectively.

The amount of unrecognized tax benefits at

December 30, 2017

was $

7.7

million. This total represents the net amount of tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods. The company does

not

expect any material decrease in unrecognized tax benefits in the next

months.

None

of the positions included in unrecognized tax benefits are related to tax positions for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility.

The U.S. federal statute of limitations remains open for

201

onward although the company has been audited for

2014

(during

2016

) and the audit concluded with

additional tax due. In late

2017,

the U.S. Internal Revenue Service began an examination of the Company’s federal income tax returns for

2015

and

2016

(with certain aspects of

2014

also subject to review as a consequence of a carryback of tax attributes from

2016

). Foreign and U.S. state statute of limitations generally range from

three

seven

years. The German tax authority is currently conducting its examination for tax years

2011

through

2014.

Other non-U.S. tax examinations occur from time to time, including

one

which is currently in process in Italy. The company does

not

expect to recognize a significant amount of additional tax expense as a result of concluding any of these examinations.