Income Taxes

12 Months Ended

Sep. 29, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income before income taxes, by geographic area, was as follows (in thousands):

	Fiscal Year Ended
	September 29, 2024		October 1, 2023		October 2, 2022
Income before income taxes:
United States	$	294,401	$	287,295	$	262,428
Foreign	169,065		113,683		86,338
Total income before income taxes	$	463,466	$	400,978	$	348,766

Income tax expense consisted of the following (in thousands):

	Fiscal Year Ended
	September 29, 2024		October 1, 2023		October 2, 2022
Current:
Federal	$	76,851	$	110,371	$	47,447
State	20,997		16,025		9,613
Foreign	44,402		28,970		26,332
Total current income tax expense	142,250		155,366		83,392
Deferred:
Federal	(18,734)		(18,062)		(424)
State	(6,747)		(4,976)		(382)
Foreign	13,254		(4,802)		3,016
Total deferred income tax (benefit) expense	(12,227)		(27,840)		2,210
Total income tax expense	$	130,023	$	127,526	$	85,602

Total income tax expense was different from the amount computed by applying the U.S. federal statutory rate to pre-tax income as follows:

	Fiscal Year Ended
	September 29, 2024	October 1, 2023	October 2, 2022
Tax at federal statutory rate	21.0%	21.0%	21.0%
State taxes, net of federal benefit	2.4	2.2	2.1
Research and Development ("R&D") credits	(1.2)	(0.5)	(1.0)
Tax differential on foreign earnings	2.0	1.5	1.0
Stock compensation	(0.4)	(0.4)	(2.0)
Valuation allowance	(0.1)	1.3	0.2
Change in uncertain tax positions	1.3	11.6	(1.1)
Return to provision	(1.0)	1.1	1.4
Disallowed officer compensation	0.9	1.2	1.9
Unremitted earnings	0.4	0.2	(0.2)
Hedging gain	—	(5.7)	—
Deferred tax adjustments	0.8	(2.3)	0.1
Audit settlements	0.9	—	—
Other	1.1	0.6	1.1
Total income tax expense	28.1%	31.8%	24.5%

The effective tax rates for fiscal 2024, 2023 and 2022 were 28.1%, 31.8% and 24.5%, respectively. The fiscal 2024 income tax expense included $4.2 million of expense for the settlement of various tax positions that were under audit for fiscal years 2011 through 2021. The fiscal 2023 income tax expense included non-operating income tax expenses totaling $20.6 million to (i) increase the tax liability for uncertain tax positions related to certain U.S. tax credits and an intercompany financing transaction, (ii) recognize the tax liability for foreign earnings, primarily in the United Kingdom and Australia, that are no longer indefinitely reinvested. Also, income tax expense was reduced by $4.5 million, $4.6 million and $10.3 million of excess tax benefits on share-based payments in fiscal 2024, 2023 and 2022, respectively.

Excluding the impact of the excess tax benefits on share-based payments in all years, the settlement amount in fiscal 2024, and the non-operating tax expenses in fiscal 2023, our effective tax rates for fiscal 2024, 2023 and 2022 were 28.1%, 27.8% and 27.5%, respectively.

Temporary differences comprising the net deferred income tax asset shown on the accompanying consolidated balance sheets were as follows (in thousands):

	Fiscal Year Ended
	September 29, 2024		October 1, 2023
Deferred Tax Assets:
State taxes	$	3,916	$	2,686
Reserves and contingent liabilities	—		2,849
Accounts receivable including the allowance for doubtful accounts	5,315		5,323
Accrued liabilities	64,929		64,155
Lease liabilities, operating leases	51,841		53,437
Stock-based compensation	1,923		1,900
Unbilled revenue	9,273		3,090
Loss and other carry-forwards	48,256		67,673
Property and equipment	—		552
Capitalized research and development	37,417		17,778
Capped call transactions	10,311		12,696
Valuation allowance	(16,841)		(16,559)
Total deferred tax assets	216,340		215,580
Deferred Tax Liabilities:
Prepaid expense	(3,065)		(2,702)
Reserves and contingent liabilities	(153)		—
Right-of-use assets, operating leases	(51,841)		(53,437)
Intangibles	(81,623)		(83,242)
Undistributed earnings	(2,708)		(1,453)
Property and equipment	(1,583)		—
Total deferred tax liabilities	(140,973)		(140,834)
Net deferred tax assets	$	75,367	$	74,746

Our foreign earnings are not considered indefinitely reinvested and any potential tax liability that would be incurred upon repatriation is recognized currently with the related income.

At September 29, 2024, we had available state net operating loss carry forwards of $26.6 million that expire at various dates from 2025 to 2043; and available foreign NOL carry forwards of $123.9 million, of which $15.0 million expire at various dates from 2025 to 2044, and $108.9 million have no expiration date. In addition, we had foreign capital loss carryforwards of $41.4 million, foreign corporate interest restriction allowances of $7.5 million, and foreign research and development credits of $4.2 million that do not have expiration dates. We have performed an assessment of positive and negative evidence regarding the realization of the deferred tax assets. This assessment included the evaluation of scheduled reversals of deferred tax liabilities, availability of carrybacks, cumulative losses in recent years, estimates of projected future taxable income and tax planning strategies. Although realization is not assured, based on our assessment, we have concluded that it is more likely than not that the assets will be realized except for the deferred tax assets related to certain loss carry-forwards for which a valuation allowance of $16.8 million has been provided.

At September 29, 2024, we had $41.4 million of unrecognized tax benefits, all of which, if recognized, would affect our effective tax rate. It is reasonably possible that the amount of the unrecognized tax benefits with respect to certain of our unrecognized tax positions may not significantly decrease in the next 12 months. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

	Fiscal Year Ended
	September 29, 2024		October 1, 2023		October 2, 2022
Beginning balance	$	53,619	$	8,908	$	12,899
Acquisition of RPS Group	—		6,012		—
Additions for current fiscal year tax positions	1,000		27,272		—
Additions for prior fiscal year tax positions	1,000		14,602		—
Reductions for prior fiscal year tax positions	—		(1,358)		(3,014)
Settlements	(14,179)		(1,817)		(977)
Ending balance	$	41,440	$	53,619	$	8,908

We recognize potential interest and penalties related to unrecognized tax benefits in income tax expense. During fiscal 2024, 2023 and 2022, we accrued additional interest and penalties of $3.8 million, $4.6 million and $0.5 million, respectively, and recorded reductions in accrued interest and penalties of $3.2 million, $2.0 million and $0.4 million, respectively, as a result of audit settlements and other prior-year adjustments. The amount of interest and penalties accrued at September 29, 2024, October 1, 2023 and October 2, 2022 was $8.6 million, $8.0 million and $5.3 million, respectively.