INCOME TAXES | INCOME TAXES Income (loss) before income taxes consists of the following components (in thousands): Fiscal Year 2024 2023 2022 United States $ (281,790) $ (466,070) $ 69,938 Foreign 355,350 590,699 1,111,146 Total $ 73,560 $ 124,629 $ 1,181,084 The components of the income tax provision are as follows (in thousands): Fiscal Year 2024 2023 2022 Current tax expense: Federal $ (36,155) $ (21,704) $ (16,886) State (232) (488) (274) Foreign (88,090) (65,430) (98,696) (124,477) (87,622) (115,856) Deferred tax (expense) benefit: Federal (6,532) 60,351 (18,398) State 1,090 2,371 (2,762) Foreign (13,963) 3,423 (10,715) (19,405) 66,145 (31,875) Total $ (143,882) $ (21,477) $ (147,731) A reconciliation of the provision for income taxes to income tax expense computed by applying the statutory federal income tax rate to pre-tax income for fiscal years 2024, 2023 and 2022 is as follows (dollars in thousands): Fiscal Year 2024 2023 2022 Amount Percentage Amount Percentage Amount Percentage Income tax expense at statutory federal rate $ (15,448) 21.0 % $ (26,172) 21.0 % $ (248,028) 21.0 % (Increase) decrease resulting from: State (expense) benefit, net of federal impact (1,028) 1.4 2,259 (1.8) (1,888) 0.2 Tax credits 67,726 (92.1) 97,809 (78.5) 118,877 (10.1) Effect of changes in income tax rate applied to net deferred tax assets (1) (150) 0.2 (950) 0.8 (25,679) 2.2 Foreign tax rate difference 46,102 (62.7) 73,491 (59.0) 148,932 (12.6) Foreign permanent differences and related items (5,540) 7.5 (10,852) 8.7 786 (0.1) Change in valuation allowance (7,537) 10.2 385 (0.3) 231 (0.1) Expiration of state and foreign attributes (1,947) 2.6 (1,962) 1.6 (3,048) 0.3 Stock-based compensation (10,696) 14.5 (9,036) 7.2 11,148 (0.9) Tax reserve adjustments (8,451) 11.5 (9,437) 7.6 (3,262) 0.3 U.S. tax on foreign earnings, including GILTI & FDII (2) (3) (129,692) 176.4 (128,708) 103.3 (130,874) 11.1 Tax on unremitted foreign earnings (3,283) 4.5 (402) 0.3 (1,033) 0.1 2024 Restructuring Initiative related adjustments (42,715) 58.1 — — — — Impairments and acquisition related adjustments (31,717) 43.2 (5,695) 4.5 (12,198) 1.0 Other income tax benefit (expense) 494 (0.7) (2,207) 1.8 (1,695) 0.1 $ (143,882) 195.6 % $ (21,477) 17.2 % $ (147,731) 12.5 % (1) In fiscal 2022, the Company negotiated an extension to its tax holiday in Singapore, resulting in the revaluation of its deferred tax assets. As a result, the Company recognized an income tax expense of $26.4 million due to the reduced tax rate. (2) The Global Intangible Low-Taxed Income ("GILTI") and Foreign-Derived Intangible Income ("FDII") provisions became effective for the Company in fiscal 2019, at which time the Company elected to treat taxes due on future GILTI inclusions in U.S. taxable income as a period cost. (3) Beginning in fiscal 2023 and as required by the Tax Cuts and Jobs Act, the Company was required to capitalize and amortize research and development expenses which were previously expensed for U.S. tax purposes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the basis used for income tax purposes. The deferred income tax assets and liabilities are measured in each taxing jurisdiction using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Significant components of the Company’s net deferred income taxes are as follows (in thousands): March 30, 2024 April 1, 2023 Deferred income tax assets: Capitalized research and development expenses $ 60,875 $ 13,794 Research and other tax credits 54,681 57,048 Employee benefits 28,225 30,309 Net operating loss carryforwards 25,563 22,189 Inventories 16,290 24,374 Lease liabilities 14,395 18,768 Deferred revenue 153 14,475 Prepaid expenses 9 17,360 Other 12,736 15,898 Total deferred income tax assets 212,927 214,215 Valuation allowance (43,636) (35,896) Total deferred income tax assets, net of valuation allowance $ 169,291 $ 178,319 Deferred income tax liabilities: Intangible assets $ (71,912) $ (69,050) Property and equipment (48,139) (39,806) Accrued tax on unremitted foreign earnings (40,912) (25,948) Right-of-use assets (13,301) (17,457) Other (3,834) (2,645) Total deferred income tax liabilities (178,098) (154,906) Net deferred income tax (liability) asset $ (8,807) $ 23,413 Amounts included in the Consolidated Balance Sheets: Other non-current assets $ 25,400 $ 38,060 Other long-term liabilities (34,207) (14,647) Net deferred income tax (liability) asset $ (8,807) $ 23,413 The Company has recorded a valuation allowance against certain U.S. and foreign deferred tax assets as of March 30, 2024 and April 1, 2023. These valuation allowances were established based upon management's opinion that it is more likely than not (a likelihood of more than 50 percent) that the benefit of these deferred tax assets will not be realized. The valuation allowance against deferred tax assets increased in fiscal 2024 by $7.7 million and decreased in fiscal years 2023 and 2022 by $0.4 million and $0.2 million, respectively. The components of the change in valuation allowances and ending balances are as follows (in thousands): Fiscal Year 2024 2023 2022 Beginning valuation allowance $ 35,896 $ 36,281 $ 36,512 Domestic net operating losses and credits (3,164) 583 1,339 Foreign net operating losses and other deferred tax assets 10,904 (968) (1,570) Ending valuation allowance $ 43,636 $ 35,896 $ 36,281 Components of ending valuation allowance: Domestic deferred tax assets $ 32,406 $ 35,570 $ 34,987 Foreign deferred tax assets 11,230 326 1,294 Valuation allowance $ 43,636 $ 35,896 $ 36,281 As of March 30, 2024, the Company had federal tax loss carryforwards of approximately $37.3 million, some of which expire in fiscal years 2025 to 2038, and state tax loss carryforwards of approximately $127.0 million that expire in fiscal years 2025 to 2044. Federal research credits of $89.5 million expire in fiscal years 2039 to 2044 and federal foreign tax credits of $8.9 million expire in fiscal 2034. A portion of the Company's state research credits of $70.0 million expire in fiscal years 2025 to 2039, while the remainder carry forward indefinitely. The Company had foreign tax loss carryforwards of $101.0 million, some of which expire in fiscal years 2025 to 2034. Each tax loss carryforward and tax credit expire only if unused prior to their respective expiration date. The utilization of acquired domestic tax assets is subject to certain annual limitations as required under Section 382 of the Internal Revenue Code of 1986, as amended, and similar state income tax provisions. The Company currently operates in numerous international jurisdictions, which expose the Company to taxation in various regions. The Company continually evaluates its global cash needs and has historically asserted that some of its unremitted earnings were permanently reinvested. During the third quarter of fiscal 2024, the Company entered into a definitive agreement to divest its assembly and test operations in China (refer to Note 4 for additional information), and it was determined the Company could no longer support its permanent reinvestment assertion on related, unremitted earnings. As a result, the Company is not permanently reinvested on earnings of its foreign subsidiaries which have been subject to U.S. federal taxation and has recognized a corresponding deferred tax liability for the estimated tax that would be incurred upon repatriation. The Company has foreign subsidiaries with tax holiday agreements in Costa Rica and Singapore. These tax holiday agreements have varying rates and expire in December 2027 and December 2031, respectively. Incentives from these countries are subject to the Company meeting certain employment and investment requirements. Relative to the statutory tax rate, income tax expense decreased by $57.2 million (an impact of approximately $0.59 per basic and diluted share) in fiscal 2024 and $65.5 million (an impact of approximately $0.64 per basic and diluted share) in fiscal 2023 as a result of these agreements. The Company’s gross unrecognized tax benefits totaled $158.9 million, $152.3 million and $144.1 million as of March 30, 2024, April 1, 2023 and April 2, 2022, respectively. Of these amounts, $152.6 million, $145.9 million and $137.5 million as of March 30, 2024, April 1, 2023 and April 2, 2022, respectively, represent the amounts of unrecognized tax benefits that, if recognized, would impact the effective tax rate in each of the fiscal years. The Company’s gross unrecognized tax benefits increased from $152.3 million as of April 1, 2023 to $158.9 million as of March 30, 2024, primarily due to current year tax positions, positions related to business combinations recognized as part of the purchase accounting and the effect of adjustments to prior year positions. A summary of the changes in the amount of gross unrecognized tax benefits is as follows (in thousands): Fiscal Year 2024 2023 2022 Beginning balance $ 152,331 $ 144,055 $ 134,068 Additions based on positions related to current year 5,298 9,718 11,826 Additions for tax positions in prior years 4,122 2,467 3,049 Reductions for tax positions in prior years (2,416) (363) (1,669) Expiration of statute of limitations (436) (3,546) (3,219) Ending balance $ 158,899 $ 152,331 $ 144,055 It is the Company’s policy to recognize interest and penalties related to uncertain tax positions as a component of income tax expense. During fiscal years 2024, 2023 and 2022, the Company recognized $3.5 million, $0.9 million and $(5.1) million, respectively, of interest and penalties related to uncertain tax positions. Accrued interest and penalties related to unrecognized tax benefits totaled $5.3 million, $1.9 million and $1.0 million as of March 30, 2024, April 1, 2023 and April 2, 2022, respectively. The unrecognized tax benefits of $158.9 million and accrued interest and penalties of $5.3 million at the end of fiscal 2024 are recorded on the Consolidated Balance Sheet as a $43.9 million other long-term liability, with the balance reducing the carrying value of the gross deferred tax assets. Due to uncertainties regarding the timing of examinations and the amount of settlements that may be paid, if any, to tax authorities, the Company believes it is reasonably possible that $24.9 million of gross unrecognized tax benefits will be reduced within the next 12 months. The Company files a consolidated U.S. federal income tax return, as well as separate and combined income tax returns in numerous state and international jurisdictions. The Company’s fiscal 2017 U.S. federal and state tax returns and subsequent tax years remain open for examination, as well as all attributes brought forward into those years. The Company is also subject to examination by various international tax authorities. The tax years subject to examination vary by jurisdiction. |