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Income Taxes
 12 Months Ended
Oct. 01, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The domestic and foreign components of income (loss) before income tax expense for fiscal 2022, 2021 and 2020 were as follows (in thousands): 
202220212020
U.S.$(64,267)$(33,409)$(69,102)
Foreign222,570 193,820 204,499 
$158,303 $160,411 $135,397 
Income tax expense (benefit) for fiscal 2022, 2021 and 2020 were as follows (in thousands): 
202220212020
Current:
Federal$12,506 $9,217 $8,779 
State386 524 23 
Foreign17,968 15,146 12,699 
30,860 24,887 21,501 
Deferred:
Federal(9,931)(1,153)(6,498)
State(315)1 3 
Foreign(554)(2,236)2,912 
(10,800)(3,388)(3,583)
$20,060 $21,499 $17,918 
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 2022, 2021 and 2020: 
202220212020
Federal statutory income tax rate21.0 %21.0 %21.0 %
(Decrease) increase resulting from:
Foreign tax rate differences(23.2)(20.3)(24.0)
Withholding tax on dividends2.2 2.9 1.9 
Permanent differences(0.8)(0.6)(2.6)
Excess tax benefits related to share-based compensation(1.4)(0.9)(3.0)
Global intangible low-taxed income ("GILTI")10.4 6.4 13.8 
Audit settlements3.7 5.0 — 
Non-deductible compensation2.5 3.8 2.2 
Valuation allowances(1.7)(3.7)3.6 
Tax credits, net(1.9)— — 
Other, net1.9 (0.2)0.3 
Effective income tax rate12.7 %13.4 %13.2 %
The effective tax rate for fiscal 2022 was lower than the effective tax rate for fiscal 2021 primarily due to claiming a U.S. Research & Development tax credit and the geographic distribution of worldwide earnings. The effective tax rate for fiscal 2021 was relatively consistent compared to the effective tax rate for fiscal 2020.
During fiscal 2022, the Company recorded a $2.8 million decrease to its valuation allowance primarily due to a net decrease of the valuation allowance in the EMEA segment driven by the release of the valuation allowance against the net deferred tax assets of a foreign subsidiary. This is partially offset by continuing losses in certain jurisdictions within the AMER segment.
During fiscal 2021, the Company recorded a $5.9 million decrease to its valuation allowance primarily due to a net decrease of the valuation allowance in the EMEA segment driven by the release of the valuation allowance against the net deferred tax assets of a foreign subsidiary. This is partially offset by continuing losses in certain jurisdictions within the AMER segment.
During fiscal 2020, the Company recorded a $4.8 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.
The components of the net deferred income tax assets as of October 1, 2022 and October 2, 2021, were as follows (in thousands):
20222021
Deferred income tax assets:
Loss/credit carryforwards$24,575 $28,234 
Inventories21,869 15,231 
Accrued employee benefits17,224 14,488 
Accrued liabilities7,129 6,410 
Lease obligation17,427 18,977 
Other6,536 6,719 
Total gross deferred income tax assets94,760 90,059 
Less valuation allowances(25,562)(30,321)
Deferred income tax assets69,198 59,738 
Deferred income tax liabilities:
Property, plant and equipment19,878 19,055 
Right-of-use asset10,538 12,279 
Tax on unremitted earnings6,034 4,654 
Acceleration of revenue under Topic 606— 2,042 
Deferred income tax liabilities36,450 38,030 
 Net deferred income tax assets/(liabilities)$32,748 $21,708 
During fiscal 2022, the Company’s valuation allowance decreased by $4.8 million, including the impact of foreign exchange movement. This decrease is the result of decreases to the valuation allowances against the net deferred tax assets in the EMEA region of $6.1 million, partially offset by increases to the valuation allowances in the AMER region of $1.2 million.
As of October 1, 2022, the Company had approximately $198.7 million of pre-tax state net operating loss carryforwards that expire between fiscal 2023 and 2043. Certain state net operating losses have a full valuation allowance against them. The Company also had approximately $46.5 million of pre-tax foreign net operating loss carryforwards that expire between fiscal 2025 and 2034 or are indefinitely carried forward. Certain foreign net operating losses have a full valuation allowance against them.
The Company has been granted a tax holiday for a foreign subsidiary in the APAC segment. This tax holiday will expire on December 31, 2034, and is subject to certain conditions with which the Company expects to continue to comply. During fiscal 2022, 2021 and 2020, the tax holiday resulted in tax reductions, net of the impact of the GILTI provisions of U.S. Tax Reform, of approximately $35.3 million ($1.27 per basic share, $1.24 per diluted share), $34.4 million ($1.20 per basic share, $1.18 per diluted share) and $28.3 million ($0.97 per basic share, $0.95 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 October 1, 2022.
The Company has approximately $9.0 million of uncertain tax benefits as of October 1, 2022. The Company has classified these amounts in the Consolidated Balance Sheets as "Other liabilities" (non-current) in the amount of $8.6 million and an offset to "Deferred income taxes" (non-current asset) in the amount of $0.4 million as the payment is not anticipated within one year.
The following is a reconciliation of the beginning and ending amounts of unrecognized income tax benefits for the indicated fiscal years (in thousands):
202220212020
Balance at beginning of fiscal year$4,635 $2,096 $2,270 
Gross increases for tax positions of prior years2,421 623 509 
Gross increases for tax positions of the current year2,531 2,161 465 
Gross decreases for tax positions of prior years(589)(245)(1,148)
Balance at end of fiscal year$8,998 $4,635 $2,096 
The amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate is $8.6 million and $3.9 million for the fiscal years ended October 1, 2022 and October 2, 2021, 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 $0.5 million for fiscal 2022 and approximately $0.1 million for fiscal 2021 and 2020. The Company recognized $0.3 million of expense for accrued penalties and net accrued interest in the Consolidated Statements of Comprehensive Income for fiscal 2022, and less than $0.1 million in fiscal 2021 and 2020.
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
China2018-2022
Germany2019-2022
Malaysia2018-2022
Mexico2018-2022
Romania2020-2022
United Kingdom2019-2022
United States
  Federal2015, 2017-2022
  State2003-2006, 2009-2022