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Income Taxes | 12 Months Ended
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Oct. 31, 2020
Income Tax Disclosure [Abstract] |
Income taxes |
9 | Income Taxes
Earnings Before Income Taxes Earnings before income taxes were as follows (in thousands):
Fiscal Years Ended October 31 |  | 2020 |  | 2019 |  | 2018
Earnings before income taxes: |  |  |  |  |  |
U.S. |  | $ | 369,016 |  |  | $ | 283,730 |  |  | $ | 333,136 |
Foreign |  | 38,054 |  |  | 38,403 |  |  | 39,261 |
Total earnings before income taxes |  | $ | 407,070 |  |  | $ | 322,133 |  |  | $ | 372,397 |
Reconciliation of Effective Tax Rate A reconciliation of the statutory federal income tax rate to the company's effective tax rate is summarized as follows:
Fiscal Years Ended October 31 |  | 2020 |  | 2019 |  | 2018
Statutory federal income tax rate |  | 21.0 | % |  | 21.0 | % |  | 23.3 | %
Excess deduction for stock compensation |  | (1.7) |  |  | (3.7) |  |  | (3.5) |
Domestic manufacturer's deduction |  | — |  |  | 0.1 |  |  | (0.9) |
State and local income taxes, net of federal benefit |  | 2.4 |  |  | 1.1 |  |  | 1.3 |
Foreign operations |  | (0.6) |  |  | (0.3) |  |  | (0.5) |
Federal research tax credit |  | (1.7) |  |  | (1.5) |  |  | (1.2) |
Foreign-derived intangible income |  | — |  |  | (1.3) |  |  | — |
Remeasurement of deferred tax assets and liabilities |  | — |  |  | (0.1) |  |  | 5.2 |
Deemed repatriation tax |  | — |  |  | (0.2) |  |  | 3.6 |
Other, net |  | (0.4) |  |  | (0.2) |  |  | (0.3) |
Effective tax rate |  | 19.0 | % |  | 14.9 | % |  | 27.0 | %
On December 22, 2017, the U.S. enacted Public Law No. 115-97 ("Tax Act"), originally introduced as the Tax Cuts and Jobs Act, which significantly modified the Internal Revenue Code. The Tax Act reduced the U.S. federal corporate tax rate from 35.0 percent to 21.0 percent, created a territorial-type tax system with an exemption for foreign dividends, and imposed a one-time deemed repatriation tax on a U.S. company's historical undistributed earnings and profits of foreign affiliates. The tax rate change was effective January 1, 2018, which resulted in a blended statutory tax rate of 23.3 percent for the fiscal year ended October 31, 2018. The reduced tax rate of 21.0 percent was applicable to the fiscal years ended October 31, 2019 and 2020. Among other provisions, the Tax Act also increased expensing for certain business assets, created new taxes on certain foreign sourced earnings, provided an incentive on specified export activities, adopted limitations on business interest expense deductions, repealed deductions for income attributable to domestic production activities, and added other anti-base erosion rules. As of October 31, 2018, the company completed the accounting for the effects of the Tax Act. Included within the company's provision for income taxes in the Consolidated Statement of Earnings for the fiscal year ended October 31, 2018 are tax expense of $19.3 million for the remeasurement of deferred tax assets and liabilities, and tax expense of $13.4 million for the one-time transition tax on deemed repatriation tax of its non-U.S. subsidiaries. Included within the company's provision for income taxes in the Consolidated Statements of Earnings for the fiscal year ended October 31, 2019 are final adjustments related to the Tax Act, including a tax benefit of $0.3 million for the remeasurement of deferred tax assets and liabilities and a tax benefit of $0.7 million for the deemed repatriation. The Global Intangible Low-Taxed Income ("GILTI") provisions under the Tax Act requires the company to include in its U.S. income tax return any foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. The impact of GILTI is included in foreign operations in the company's reconciliation of the statutory federal income tax rate to the company's effective tax rate above. The Foreign-Derived Intangible Income ("FDII") provisions of the Tax Act provide an incentive to domestic corporations in the form of a lower tax rate on income derived from tangible and intangible products and services in foreign markets. This lower tax rate is accomplished through an additional tax deduction based on a percentage of qualifying sales. The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was signed into law on March 27, 2020. Among others, the CARES Act delayed payment of employer payroll taxes and modified net operating loss carryback provisions. The company has reflected the impact of the CARES Act for the fiscal year ended October 31, 2020 within its Consolidated Financial Statements and such impact was not material to the company's Consolidated Financial Statements. Provision for Income Taxes Components of the company's provision for income taxes were as follows (in thousands):
Fiscal Years Ended October 31 |  | 2020 |  | 2019 |  | 2018
Current provision: |  |  |  |  |  |
Federal |  | $ | 58,243 |  |  | $ | 37,415 |  |  | $ | 64,375 |
State |  | 11,322 |  |  | 7,495 |  |  | 6,192 |
Foreign |  | 5,534 |  |  | 6,846 |  |  | 7,087 |
Total current provision |  | $ | 75,099 |  |  | $ | 51,756 |  |  | $ | 77,654 |
Deferred provision (benefit): |  |  |  |  |  |
Federal |  | $ | 1,710 |  |  | $ | (37) |  |  | $ | 22,074 |
State |  | 634 |  |  | (3,205) |  |  | 308 |
Foreign |  | (74) |  |  | (364) |  |  | 422 |
Total deferred provision (benefit) |  | 2,270 |  |  | (3,606) |  |  | 22,804 |
Total provision for income taxes |  | $ | 77,369 |  |  | $ | 48,150 |  |  | $ | 100,458 |
Deferred Income Taxes The following table presents the tax effects of temporary differences that give rise to deferred income tax assets (liabilities), net (in thousands):
October 31 |  | 2020 |  | 2019
Deferred income tax assets: |  |  |  |
Compensation and benefits |  | $ | 30,363 |  |  | $ | 27,969 |
Warranty and insurance |  | 28,480 |  |  | 25,788 |
Lease liabilities |  | 20,843 |  |  | — |
Advertising and sales allowance |  | 6,937 |  |  | 8,866 |
Inventory |  | 4,937 |  |  | 4,005 |
Deferred revenue |  | 2,910 |  |  | 4,373 |
Other |  | 9,643 |  |  | 4,372 |
Valuation allowance |  | (3,570) |  |  | (3,199) |
Total deferred income tax assets |  | $ | 100,543 |  |  | $ | 72,174 |
Deferred income tax liabilities: |  |  |  |
Right-of-use assets |  | $ | (20,179) |  |  | $ | — |
Depreciation |  | (49,018) |  |  | (40,964) |
Amortization |  | (95,315) |  |  | (75,538) |
Total deferred income tax liabilities |  | (164,512) |  |  | (116,502) |
Deferred income tax liabilities, net |  | $ | (63,969) |  |  | $ | (44,328) |
The net change in the total valuation allowance between the fiscal years ended October 31, 2020 and 2019 was an increase of $0.4 million. The change in valuation allowance is related to branch foreign tax credits, state tax credits, net operating losses, and capital loss carryforwards that are expected to expire prior to utilization. As of October 31, 2020, the company had net operating loss carryforwards of approximately $3.7 million in foreign jurisdictions, which are comprised of $2.2 million that do not expire and $1.5 million that expire between fiscal 2020 and fiscal 2037. The company also had domestic credit carryforwards of $1.7 million that expires between fiscal 2024 and fiscal 2035. The company considers that $19.0 million of the total undistributed earnings of its foreign operations are intended to be indefinitely reinvested. Should these earnings be distributed in the future in the form of dividends or otherwise, the company may be subject to foreign withholding taxes, state income taxes, and/or additional federal taxes for currency fluctuations. As of October 31, 2020, the unrecognized deferred tax liabilities for temporary differences related to the company’s investment in non-U.S. subsidiaries, and any withholding, state, or additional federal taxes that may be applied upon any future repatriation, are expected to be immaterial and have not been recorded. Unrecognized Tax Benefits A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
Unrecognized tax benefits as of October 31, 2019 |  | $ | 2,673 |
Increase as a result of tax positions taken during a prior period |  | 166 |
Decrease as a result of tax positions taken during the current period |  | (183) |
Increase as a result of tax positions taken during the current period |  | 291 |
Reductions as a result of statute of limitations lapses |  | (87) |
Unrecognized tax benefits as of October 31, 2020 |  | $ | 2,860 |
The company recognizes interest and penalties related to unrecognized tax benefits as a component of the provision for income taxes within the Consolidated Statements of Earnings. In addition to the unrecognized tax benefits of $2.9 million, which have been recorded as an other accrued liability within the Consolidated Balance Sheets as of October 31, 2020, the company recorded $0.8 million of accrued interest and penalties as an other accrued liability within the Consolidated Balance Sheets as of October 31, 2020. Included in the balance of unrecognized tax benefits as of October 31, 2020 are potential benefits of $2.9 million that, if recognized, would affect the effective tax rate. The company and its wholly owned subsidiaries file income tax returns in the U.S. federal jurisdiction, and numerous state and foreign jurisdictions. With few exceptions, the company is no longer subject to U.S. federal, state and local, and foreign income tax examinations by tax authorities for taxable years before fiscal 2016. The company is under audit in certain state and foreign jurisdictions and expects various statutes of limitation to expire during the next 12 months. Due to the uncertainty related to the response of taxing authorities, a range of outcomes cannot be reasonably estimated at this time.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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