Income Taxes

12 Months Ended

Oct. 03, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The reconciliation of the provision for income taxes to the amount computed by applying the U.S. federal statutory tax rate to earnings before income taxes is as follows:

	2020			2019			2018
Earnings before income taxes:
Domestic	$	1,126		$	136,308		$	135,589
Foreign	4,291			90,644			46,590
Total	$	5,417		$	226,952		$	182,179
Federal statutory income tax rate	21.0		%	21.0		%	24.5		%
Increase (decrease) in income taxes resulting from:
Impacts of Tax Act	(96.4		)%	0.4		%	16.9		%
Revaluation of deferred taxes	(21.6		)%	(0.2		)%	(6.0		)%
Withholding taxes	27.5		%	1.0		%	4.1		%
Reversal of indefinite reinvestment assertion	(2.9		)%	0.6		%	5.7		%
R&D and foreign tax credits	(102.8		)%	(2.1		)%	(4.3		)%
Foreign tax rates	76.0		%	2.3		%	(0.7		)%
Equity-based compensation	(6.5		)%	(0.7		)%	(0.7		)%
Change in valuation allowance for deferred taxes	21.1		%	(0.7		)%	5.7		%
State taxes, net of federal benefit	(1.9		)%	1.4		%	1.9		%
Other	16.6		%	0.1		%	0.6		%
Effective income tax rate	(69.9		)%	23.1		%	47.7		%

The Tax Cuts and Jobs Act (the "Tax Act") of 2017 was enacted on December 22, 2017. It reduced the U.S. federal corporate tax rate from 35% to 21%, required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and created new taxes on certain foreign sourced earnings. As of December 29, 2018, we completed the accounting for the tax effects of enactment of the one-time transition tax liability. The Tax Act also includes a Global Intangible Low-Tax Income (GILTI) provision that imposes U.S. tax on certain foreign subsidiary income in the year it is earned. This provision became effective beginning in 2019. Our accounting policy is to treat tax on GILTI as a current period cost included in tax expenses the year incurred. As such, we will not be measuring the impact of the GILTI in our determination of deferred taxes.

During 2018, we recorded a $30,795 one-time transition tax on undistributed foreign earnings deemed to be repatriated and a tax charge of $10,383 as an additional provision for taxes on undistributed earnings not considered to be permanently reinvested. These charges were partially offset by a $10,946 benefit due to the remeasurement of deferred tax assets and liabilities arising from a lower U.S. corporate tax rate. In 2019, we recorded $3,325 of GILTI tax and received a benefit of $2,495 related to the Foreign-Derived Intangible Income deduction. In addition, we recorded $1,317 of expense as an accrual for taxes on undistributed earnings not considered permanently reinvested. In 2020, we recorded $1,620 of GILTI tax and received a benefit of $3,394 related to the Foreign-Derived Intangible Income deduction. In 2020, we also recorded a tax benefit associated with an increase in foreign tax credit utilization applied against GILTI taxes of $3,749. In addition, we recorded $1,513 of expense as an accrual for taxes on undistributed earnings not considered permanently reinvested.

During 2020, 2019 and 2018, we repatriated available unremitted earnings from various foreign subsidiaries that were previously taxed under the Tax Act of $23,001, $103,227, $235,263, respectively. Due to the Tax Act, we are no longer indefinitely reinvesting unremitted earnings effective December 30, 2017 and therefore we have recorded a liability for withholding taxes related to the remaining accumulated unremitted earnings generated by the foreign subsidiaries in the current year. We continue to be permanently invested in outside basis differences other than the unremitted earnings as we have no plans to liquidate or sell those foreign subsidiaries.

The components of income taxes are as follows:

	2020			2019			2018
Current:
Federal	$	14,789		$	23,302		$	19,985
Foreign	18,997			29,460			35,515
State	3,271			4,240			705
Total current	37,057			57,002			56,205
Deferred:
Federal	(35,603		)	(5,666		)	23,229
Foreign	(1,843		)	1,413			3,354
State	(3,399		)	(345		)	4,030
Total deferred	(40,845		)	(4,598		)	30,613
Income taxes (benefit)	$	(3,788	)	$	52,404		$	86,818

Realization of deferred tax assets is dependent, in part, upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers projected future taxable income and tax planning strategies in making its assessment of the recoverability of deferred tax assets.

The tax effects of temporary differences that generated deferred tax assets and liabilities are as follows:

	October 3, 2020			September 28, 2019
Deferred tax assets:
Benefit accruals	$	78,703		$	114,077
Inventory reserves	31,571			26,364
Tax benefit carryforwards	14,146			14,196
Contract reserves not currently deductible	16,418			15,382
Lease liability	17,622			—
Other accrued expenses	12,510			4,918
Total gross deferred tax assets	170,970			174,937
Less valuation allowance	(14,784		)	(13,137		)
Total net deferred tax assets	$	156,186		$	161,800
Deferred tax liabilities:
Differences in bases and depreciation of property, plant and equipment	$	152,926		$	121,353
Pension	24,810			60,983
Total gross deferred tax liabilities	177,736			182,336
Net deferred tax assets (liabilities)	$	(21,550	)	$	(20,536	)

Deferred tax assets and liabilities are reported in separate captions on the Consolidated Balance Sheets.

At October 3, 2020 foreign tax benefit carryforwards total $30,517. Domestic benefit carryforwards include capital loss of $5,000 and state tax losses of $9,728. We also have $1,184 and $3,764 of federal and state tax credit carryforwards. Some of these tax benefit carryforwards do not expire and can be used to reduce current taxes otherwise due on future earnings. The change in the valuation allowance relates to tax benefit carryforwards reflecting recent and projected financial performance, tax planning strategies and statutory tax carryforward periods.

We have no material unrecognized tax benefits which, if ultimately recognized, will reduce our annual effective tax rate.

We are subject to income taxes in the U.S. and in various states and foreign jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require the application of significant judgment. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities in significant jurisdictions for years before 2016. The statute of limitations in several jurisdictions will expire in the next twelve months and we will have no unrecognized tax benefits recognized if the statute of limitations expires without the relevant taxing authority examining the applicable returns.

We continue to record additional interest and penalties related to historical unrecognized tax benefits in income tax expense. We had accrued interest and penalties of $961 and $843 at October 3, 2020 and September 28, 2019, respectively. We expensed interest of $117 and $134 for 2020 and 2019, respectively.