Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.21.4
Income Taxes
12 Months Ended
Oct. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income (loss) before income taxes is derived from (in thousands):
  Year Ended
  October 31, 2021 November 1, 2020
U.S. Domestic $ (2,193) $ (34,889)
International 4,970  2,347 
Income (loss) before income tax $ 2,777  $ (32,542)

Income tax provision (benefit) by taxing jurisdiction consists of (in thousands):
  Year Ended
  October 31, 2021 November 1, 2020
Current:
U.S. State and local $ 117  $ 118 
International 1,207  938 
Total current $ 1,324  $ 1,056 
Deferred:
International $ 79  $ (11)
Total deferred 79  (11)
Income tax provision $ 1,403  $ 1,045 
The difference between the income tax provision on income (loss) and the amount computed at the U.S. federal statutory rate is due to (in thousands):
   Year Ended
  October 31, 2021 November 1, 2020
U.S. Federal statutory rate $ 586  $ (6,834)
U.S. State income tax, net of U.S. Federal tax benefits 262  (1,235)
International permanent differences 15  91 
International tax rate differentials 508  232 
U.S. tax on international income (173) (705)
General business credits (351) (999)
Foreign tax credit, net 1,558  — 
Non-deductible compensation 529  — 
Non-deductible expenses 92  66 
Capital loss —  3,357 
Change in valuation allowance for deferred tax assets (1,623) 7,072 
Income tax provision $ 1,403  $ 1,045 

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 amounts used for income tax purposes and also include operating loss carryforwards. The significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):
October 31, 2021 November 1, 2020
Deferred tax assets:
Net operating loss carryforwards $ 60,559  $ 61,723 
Interest carryforward 896  1,345 
U.S. federal tax credit carryforwards 53,317  54,727 
Operating lease liabilities 10,189  11,477 
Deferred withholding tax 3,435  5,385 
Compensation accruals 3,341  1,639 
Other, net 8,005  5,366 
Total deferred tax assets 139,742  141,662 
Less valuation allowance (123,792) (125,396)
Deferred tax assets, net 15,950  16,266 
Deferred tax liabilities:
Un-remitted earnings from foreign subsidiaries 1,518  1,725 
Software development costs 8,453  7,914 
Right-of-use assets - operating leases 5,530  6,178 
Other, net 450  452 
Total deferred tax liabilities 15,951  16,269 
Net deferred tax liabilities $ (1) $ (3)
Balance sheet classification
Non-current assets $ —  $ — 
Non-current liabilities (1) (3)
Net deferred tax liability $ (1) $ (3)
At October 31, 2021, the Company has available unused U.S. federal net operating loss (“NOL”) carryforwards of $210.0 million, U.S. state NOL carryforwards of $226.3 million, international NOL carryforwards of $8.3 million and federal tax credits of $53.3 million. As of October 31, 2021, the U.S. federal NOL carryforwards expire at various dates between 2031 and 2038 (with some indefinite), the U.S. state NOL carryforwards expire at various dates beginning in 2022 (with some indefinite), the international NOL carryforwards expire at various dates beginning in 2022 (with some indefinite) and federal tax credits expire between 2022 and 2040. At October 31, 2021, the undistributed earnings of the Company’s non-U.S. subsidiaries are not intended to be permanently invested outside of the U.S. and therefore U.S. deferred taxes have been provided.
A valuation allowance has been recognized due to the uncertainty of realization of the loss carryforwards and other deferred tax assets. Beginning in fiscal 2010, the Company’s cumulative U.S. domestic and certain non-U.S. results for each three-year period were a loss. Accordingly, the Company recorded a full valuation allowance against its net U.S. domestic and certain net non-U.S. deferred tax assets as a non-cash charge to income tax expense. The three-year cumulative loss continued in fiscal 2021 so the Company maintained a full valuation allowance against its net U.S. domestic and certain net non-U.S. deferred tax assets resulting in a total valuation allowance of $123.8 million and $125.4 million for fiscal 2021 and 2020, respectively. In reaching this conclusion, the Company considered the U.S. domestic demand and recent operating losses causing the Company to be in a three-year cumulative loss position. Management believes that the remaining deferred tax assets are more likely than not to be realized based upon consideration of all positive and negative evidence, including scheduled reversal of deferred tax liabilities and tax planning strategies determined on a jurisdiction-by-jurisdiction basis.

The Company recognizes income tax benefits for tax positions determined more likely than not to be sustained upon examination based on the technical merits of the positions. The following table sets forth the change in the accrual for uncertain tax positions, excluding interest and penalties (in thousands):
October 31, 2021 November 1, 2020
Balance, beginning of year $ 85  $ 283 
Decrease relating to tax positions taken in a prior period —  (3)
Settlements —  (195)
Lapse of statute of limitations (20) — 
Total $ 65  $ 85 
Of the total unrecognized tax benefits at October 31, 2021 and November 1, 2020, approximately $0.1 million and $0.1 million, respectively, would affect the Company’s effective income tax rate, if and when recognized in future years. There was no amount accrued for related potential interest and penalties at October 31, 2021. The income tax provision for the fiscal years ended October 31, 2021 and November 1, 2020 included a reversal of reserves on uncertain tax provisions of less than $0.1 million and $0.2 million, respectively.
The Company is subject to taxation at the federal, state and local levels in the U.S. and in various international jurisdictions. With few exceptions, the Company is generally no longer subject to examination by the U.S. federal, state, local or non-U.S. income tax authorities for years before fiscal 2008.