Income Taxes

3 Months Ended

Jan. 01, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company’s tax provision and the resulting effective tax rate for interim periods is determined based upon its estimated annual effective tax rate ("AETR"), adjusted for the effect of discrete items arising in that quarter. The impact of such inclusions could result in a higher or lower effective tax rate during a quarter, based upon the mix and timing of actual earnings or losses versus annual projections. In each quarter, the Company updates its estimate of the AETR, and if the estimated AETR changes, a cumulative adjustment is made in that quarter.

The Company recorded a provision for income taxes of $7.6 million and $9.1 million for the three months ended January 1, 2022, and January 2, 2021, respectively, related to U.S. and non-U.S. income taxes. For the three months ended January 1, 2022, the Company excluded certain foreign jurisdictions from the calculation of the estimated AETR as the Company anticipates an overall ordinary loss for which no tax benefit can be recognized. For the three months ended January 1, 2022, the Company's tax provision includes a discrete income tax benefit of $3.2 million for the release of a portion of our U.S. valuation allowance as a result of an acquisition in the quarter and U.S. share-based compensation. For the three months ended January 2, 2021, the Company's tax provision includes a discrete income tax benefit of $10.2 million for U.S. share-based compensation.

For the three months ended January 1, 2022, the Company maintained a full valuation allowance on its deferred tax assets in the U.S. and certain other non-US entities due to a history of operating losses. It is possible that within the next 12 months there may be sufficient positive evidence to release a portion or all of the valuation allowance. Release of the valuation allowance in the U.S. and certain other non-US entities would result in a benefit to income tax expense for the period the release is recorded, which could have a material impact on net earnings. The timing and amount of the potential valuation allowance release are subject to significant management judgment, as well as prospective earnings in the U.S. and certain other non-US entities.