Income Taxes

12 Months Ended

Oct. 01, 2022

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:

	2022			2021			2020
Earnings before income taxes:
Domestic	$	151,870		$	141,665		$	1,126
Foreign	51,109			62,109			4,291
Total	$	202,979		$	203,774		$	5,417
Federal statutory income tax rate	21.0		%	21.0		%	21.0		%
Increase (decrease) in income taxes resulting from:
Impacts of Tax Act	(0.4)		%	(1.2)		%	(96.4)		%
Revaluation of deferred taxes	—		%	1.6		%	(21.6)		%
Withholding taxes	0.6		%	0.4		%	27.5		%
Reversal of indefinite reinvestment assertion	—		%	0.2		%	(2.9)		%
R&D and foreign tax credits	(5.4)		%	(4.6)		%	(102.8)		%
Divestiture impacts	2.3		%	—		%	—		%
Foreign tax rates	4.5		%	4.4		%	76.0		%
Equity-based compensation	(0.2)		%	(0.1)		%	(6.5)		%
Change in valuation allowance for deferred taxes	(2.3)		%	(1.6)		%	21.1		%
State taxes, net of federal benefit	1.9		%	2.1		%	(1.9)		%
Other	1.6		%	0.6		%	16.6		%
Effective income tax rate	23.6		%	22.8		%	(69.9)		%

Our accounting policy is to treat tax on the Global Intangible Low-Tax Income ("GILTI") as a current period cost included in tax expenses the year incurred. As such, we don't measure the impact of the GILTI in our determination of deferred taxes. In 2022, we recorded $443 of GILTI tax and received a benefit of $646 related to the Foreign-Derived Intangible Income deduction. In 2022, we also recorded a tax benefit for provision to return adjustments of $4,871 primarily related to domestic research and development tax credits. In addition, we recorded a current year expense of $1,700 for a total accrual of $9,283 for taxes on undistributed earnings not considered permanently reinvested.

During 2022, 2021 and 2020, we repatriated available unremitted earnings from various foreign subsidiaries that were previously taxed under the Tax Act of $37,986, $41,987 and $23,001, respectively. We no longer indefinitely reinvest unremitted earnings and therefore we record a liability related to the remaining 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:

	2022		2021		2020
Current:
Federal	$	6,270	$	9,907	$	14,789
Foreign	26,730		23,801		18,997
State	3,063		4,684		3,271
Total current	36,063		38,392		37,057
Deferred:
Federal	8,076		4,625		(35,603)
Foreign	1,742		2,898		(1,843)
State	1,921		639		(3,399)
Total deferred	11,739		8,162		(40,845)
Income taxes (benefit)	$	47,802	$	46,554	$	(3,788)

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, tax planning strategies, carryback opportunities and reversal of existing deferred tax liabilities 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 1, 2022		October 2, 2021
Deferred tax assets:
Benefit accruals	$	65,863	$	68,657
Inventory reserves	30,053		31,900
Tax benefit carryforwards	10,885		15,434
Contract reserves not currently deductible	10,447		13,294
Lease liability	18,473		16,997
Other accrued expenses	14,824		10,983
Total gross deferred tax assets	150,545		157,265
Less valuation allowance	(8,650)		(13,896)
Total net deferred tax assets	$	141,895	$	143,369
Deferred tax liabilities:
Differences in bases and depreciation of property, plant and equipment	$	167,990	$	164,591
Pension	28,802		25,661
Total gross deferred tax liabilities	196,792		190,252
Net deferred tax liabilities	$	(54,897)	$	(46,883)

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

At October 2, 2022, foreign tax loss carryforwards total $19,953 with expirations ranging from 2023 to indefinite life. We have $245 and $5,988 of federal and state tax credit carryforward with expirations of 2031 and 2027 to indefinite life, respectively. The change in the valuation allowance primarily relates to tax benefit carryforwards that were utilized during 2022.

We record unrecognized tax benefits as liabilities and we adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available. Further, we record interest and penalties related to unrecognized tax benefits in income tax expense. We expensed interest and penalties of $43 related to $848 of unrecognized tax benefits in 2022.

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 tax years before 2020. 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.

The Inflation Reduction Act ("the Act") was signed into law on August 16, 2022. We evaluated the Act and have determined the we do not expect it to have a material impact on our financial statements and related disclosures.