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Income Taxes
 12 Months Ended
Sep. 28, 2019
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The domestic and foreign components of income (loss) before income tax expense for fiscal 2019, 2018 and 2017 were as follows (in thousands): 
 
 
2019
 
2018
 
2017
U.S. (1)
 
$
(42,806
)
 
$
(53,243
)
 
$
(35,209
)
Foreign (1)
 
168,761

 
160,853

 
157,032

 
 
$
125,955

 
$
107,610

 
$
121,823


(1) The U.S. and Foreign components of income (loss) before income tax expense include the elimination of intercompany foreign dividends paid to the Company's U.S. operations.
Income tax expense (benefit) for fiscal 2019, 2018 and 2017 were as follows (in thousands): 
 
 
2019
 
2018
 
2017
Current:
 
 
 
 
 
 
Federal
 
$
15,160

 
$
63,814

 
$
78

State
 
—

 
234

 
33

Foreign
 
11,943

 
10,134

 
10,016

 
 
27,103

 
74,182

 
10,127

Deferred:
 
 
 
 
 
 
Federal
 
(3,498
)
 
(2,958
)
 
77

State
 
827

 
(447
)
 
38

Foreign
 
(7,093
)
 
23,793

 
(481
)
 
 
(9,764
)
 
20,388

 
(366
)
 
 
$
17,339

 
$
94,570

 
$
9,761



The following is a reconciliation of the federal statutory income tax rate to the effective income tax rates reflected in the Consolidated Statements of Comprehensive Income for fiscal 2019, 2018 and 2017: 
 
 
2019
 
2018
 
2017
Federal statutory income tax rate
 
21.0
 %
 
24.5
 %
 
35.0
 %
Increase (decrease) resulting from:
 
 
 
 
 
 
Foreign tax rate differences
 
(21.0
)
 
(30.2
)
 
(39.9
)
Withholding tax on dividends
 
(5.4
)
 
23.7

 
—

Permanent differences
 
(1.3
)
 
0.8

 
3.0

Excess tax benefits related to share-based compensation
 
(1.3
)
 
(2.7
)
 
(2.0
)
Global intangible low-taxed income ("GILTI")
 
11.7

 
—

 
—

Deemed repatriation tax
 
5.6

 
92.2

 
—

Non-deductible compensation
 
1.5

 
0.2

 
0.2

Valuation allowances
 
1.5

 
(30.6
)
 
12.2

Rate changes
 
—

 
9.0

 
—

Other, net
 
1.5

 
1.0

 
(0.5
)
Effective income tax rate
 
13.8
 %
 
87.9
 %
 
8.0
 %

The effective tax rate for fiscal 2019 was lower than the effective tax rate for fiscal 2018 primarily due to the impact of the U.S. Tax Cuts and Jobs Act (“Tax Reform”) that was recorded in fiscal 2018. During fiscal 2019, the Company reasserted that certain historical undistributed earnings of two foreign subsidiaries will be permanently reinvested which provided a $10.5 million benefit to the effective tax rate. The impact of the changes in the Company's assertion has been included in "Withholding tax on dividends" in the effective income tax reconciliation above. The reduction to the effective tax rate compared to fiscal 2018 was offset by an increase due to the GILTI provisions of Tax Reform in fiscal 2019. The GILTI impact in the table above includes the deduction allowed by the regulations as well as the foreign tax credits attributed to GILTI. The Company has elected to treat the income tax effects of GILTI as a period cost. The effective tax rate for fiscal 2018 was higher than the effective tax rate for fiscal 2017 primarily due to expenses related to Tax Reform.
During fiscal 2019, the Company recorded a $1.9 million increase to its valuation allowance due to continuing losses in certain jurisdictions within the AMER and EMEA segments, partially offset by an expiration of net operating losses that had a valuation allowance recorded.
During fiscal 2018, the Company recorded a $32.9 million reduction to its valuation allowance which includes $9.7 million related to the U.S. federal tax rate change as part of Tax Reform from 35% to 21%, $21.0 million of carryforward credits and net operating losses utilized against the deemed repatriation of undistributed foreign earnings and $3.6 million for the release of the U.S. valuation allowance due to the expected future U.S. taxable income related to the GILTI provisions of Tax Reform. These benefits were partially offset by a $1.4 million increase in foreign valuation allowances in the EMEA segment.
During fiscal 2017, the Company recorded a $14.9 million addition to its valuation allowance relating to continuing losses in certain jurisdictions within the AMER and EMEA segments.

The components of the net deferred income tax assets as of September 28, 2019 and September 29, 2018, were as follows (in thousands):
 
 
2019
 
2018
Deferred income tax assets:
 
 
 
 
Loss/credit carryforwards
 
$
28,391

 
$
27,915

Inventories
 
16,809

 
6,459

Accrued benefits
 
15,834

 
14,459

Other
 
3,353

 
3,450

Total gross deferred income tax assets
 
64,387

 
52,283

Less valuation allowances
 
(29,170
)
 
(28,369
)
Deferred income tax assets
 
35,217

 
23,914

Deferred income tax liabilities:
 
 
 
 
Property, plant and equipment
 
15,621

 
12,530

Tax on unremitted earnings
 
5,192

 
14,935

Acceleration of revenue under Topic 606
 
6,055

 
—

Deferred income tax liabilities
 
26,868

 
27,465

 Net deferred income tax assets/(liabilities)
 
$
8,349

 
$
(3,551
)

During fiscal 2019, the Company’s valuation allowance increased by $0.8 million. This increase is the result of increases to the valuation allowances against the net deferred tax assets in the AMER region of $1.7 million, partially offset by a decrease in net deferred tax assets in the EMEA region of $0.9 million.
As of September 28, 2019, the Company had approximately $189.2 million of pre-tax state net operating loss carryforwards that expire between fiscal 2020 and 2040. Certain state net operating losses have a full valuation allowance against them. The Company also had approximately $79.6 million of pre-tax foreign net operating loss carryforwards that expire between fiscal 2019 and 2025 or are indefinitely carried forward. These foreign net operating losses have a full valuation allowance against them.
During fiscal 2019, proposed and final regulations were issued and tax legislation was adopted in various jurisdictions. The impacts of these regulations and legislation on the Company’s consolidated financial condition, results of operations and cash flows are included above.
The Company has been granted a tax holiday for a foreign subsidiary in the APAC segment. This tax holiday will expire on December 31, 2024, and is subject to certain conditions with which the Company expects to continue to comply. During fiscal 2019, 2018 and 2017, the tax holiday resulted in tax reductions of approximately $23.9 million net of the impact of the GILTI provisions of Tax Reform ($0.79 per basic share, $0.77 per diluted share), $39.1 million ($1.19 per basic share, $1.15 per diluted share) and $37.5 million ($1.11 per basic share, $1.08 per diluted share), respectively.
The Company does not provide for taxes that would be payable if certain undistributed earnings of foreign subsidiaries were remitted because the Company considers these earnings to be permanently reinvested. The deferred tax liability that has not been recorded for these earnings was approximately $10.5 million as of September 28, 2019.
The Company has approximately $2.3 million of uncertain tax benefits as of September 28, 2019. The Company has classified these amounts in the Consolidated Balance Sheets as "Other liabilities" (noncurrent) in the amount of $1.5 million and an offset to "Deferred income taxes" (noncurrent asset) in the amount of $0.8 million. The Company has classified these amounts as "Other liabilities" (noncurrent) and "Deferred income taxes" (noncurrent asset) to the extent that payment is not anticipated within one year.






The following is a reconciliation of the beginning and ending amounts of unrecognized income tax benefits (in thousands):
 
 
2019
 
2018
 
2017
Balance at beginning of fiscal year
 
$
5,841

 
$
3,115

 
$
2,799

Gross increases for tax positions of prior years
 
62

 
21

 
184

Gross increases for tax positions of the current year
 
39

 
2,893

 
163

Gross decreases for tax positions of prior years
 
(3,672
)
 
(188
)
 
(31
)
Balance at end of fiscal year
 
$
2,270

 
$
5,841

 
$
3,115


The amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate is $1.5 million and $4.6 million for the fiscal years ended September 28, 2019 and September 29, 2018, respectively.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. The total accrued penalties and net accrued interest with respect to income taxes was approximately $0.2 million for each of the fiscal years ended September 28, 2019, September 29, 2018 and September 30, 2017. The Company recognized less than $0.1 million of expense for accrued penalties and net accrued interest in the Consolidated Statements of Comprehensive Income for each of the fiscal years ended September 28, 2019, September 29, 2018 and September 30, 2017.
It is possible that a number of uncertain tax positions may be settled within the next 12 months. Settlement of these matters is not expected to have a material effect on the Company’s consolidated results of operations, financial position and cash flows.
The Company files income tax returns, including returns for its subsidiaries, with federal, state, local and foreign taxing jurisdictions. The following tax years remain subject to examination by the respective major tax jurisdictions:
Jurisdiction
  
Fiscal Years
China
 
2014-2019
Germany
 
2014-2019
Malaysia
 
2015-2019
Mexico
 
2014-2019
Romania
 
2013-2019
United Kingdom
 
2016-2019
United States
 
 
  Federal
 
2011, 2013-2019
       State
 
2003-2006, 2009-2019