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Income Taxes | 12 Months Ended
--- | ---
Oct. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes |
8 | Income Taxes
Earnings Before Income Taxes Earnings before income taxes were as follows (dollars in millions):
Fiscal Years Ended October 31 |  | 2023 |  | 2022 |  | 2021
Earnings before income taxes: |  |  |  |  |  |
United States |  | $ | 345.0 |  |  | $ | 491.3 |  |  | $ | 446.2 |
Foreign |  | 55.5 |  |  | 61.2 |  |  | 53.6 |
Total earnings before income taxes |  | $ | 400.5 |  |  | $ | 552.5 |  |  | $ | 499.8 |
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 |  | 2023 |  | 2022 |  | 2021
Statutory federal income tax rate |  | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Excess deduction for stock-based compensation |  | (1.1) |  |  | (0.4) |  |  | (1.5) |
State and local income taxes, net of federal benefit |  | 1.8 |  |  | 2.0 |  |  | 1.4 |
Foreign operations |  | (0.7) |  |  | (0.7) |  |  | (0.5) |
Federal research tax credit |  | (2.3) |  |  | (1.3) |  |  | (1.4) |
Foreign-derived intangible income |  | (1.1) |  |  | (0.7) |  |  | (0.9) |
Other, net |  | 0.1 |  |  | (0.1) |  |  | (0.1) |
Effective tax rate |  | 17.7 | % |  | 19.8 | % |  | 18.0 | %
The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was signed into law on March 27, 2020 and allowed for 100% deduction of meals expense, delayed payment of employer payroll taxes, among other items. The company has reflected the impact of the CARES Act for the fiscal years ended October 31, 2023, 2022, and 2021 within its Consolidated Financial Statements and such impact was not material to the company's Consolidated Financial Statements. The Inflation Reduction Act ("IRA") was signed into law on August 16, 2022. Among other provisions, the IRA includes a 15% corporate minimum tax applied to large corporations, a 1% excise tax on corporate stock repurchases made after December 31, 2022 and various energy tax credits. There are no material impacts from the IRA within the Consolidated Financial Statements for the fiscal years ended October 31, 2023 and 2022. On December 22, 2017, the U.S enacted Public Lax No. 115-97 ("Tax Act"), originally introduced as the Tax Cuts and Jobs Act, which significantly modified the Internal Revenue Code. The Tax Act introduced the capitalization and amortization of research and experimentation expenditures for taxable years beginning after December 31, 2021. The company has reflected the impact for the fiscal year ended October 31, 2023. Provision for Income Taxes Components of the company's provision for income taxes were as follows (dollars in millions):
Fiscal Years Ended October 31 |  | 2023 |  | 2022 |  | 2021
Current provision: |  |  |  |  |  |
Federal |  | $ | 94.4 |  |  | $ | 94.7 |  |  | $ | 90.2 |
State |  | 17.0 |  |  | 19.1 |  |  | 16.0 |
Foreign |  | 7.3 |  |  | 7.7 |  |  | 9.2 |
Total current provision |  | $ | 118.7 |  |  | $ | 121.5 |  |  | $ | 115.4 |
Deferred (benefit) provision: |  |  |  |  |  |
Federal |  | $ | (37.8) |  |  | $ | (7.4) |  |  | $ | (18.4) |
State |  | (10.3) |  |  | (4.9) |  |  | (6.5) |
Foreign |  | 0.2 |  |  | — |  |  | (0.6) |
Total deferred benefit |  | (47.9) |  |  | (12.3) |  |  | (25.5) |
Total provision for income taxes |  | $ | 70.8 |  |  | $ | 109.2 |  |  | $ | 89.9 |
Deferred Income Taxes The components of the company's deferred income tax assets and liabilities were as follows (dollars in millions):
Fiscal Years Ended October 31 |  | 2023 |  | 2022
Deferred income tax assets: |  |  |  |
Compensation and benefits |  | $ | 32.5 |  |  | $ | 32.9 |
Warranty and insurance |  | 37.6 |  |  | 35.4 |
Lease liabilities |  | 35.3 |  |  | 20.2 |
Advertising and sales promotions and incentives |  | 16.5 |  |  | 7.2 |
Inventory |  | 14.4 |  |  | 36.4 |
Deferred revenue |  | 0.3 |  |  | 3.3 |
Other |  | 3.0 |  |  | — |
Net operating losses and other carryforwards |  | 5.3 |  |  | 6.4 |
Research and Experimentation |  | 35.4 |  |  | — |
Valuation allowance |  | (3.3) |  |  | (3.2) |
Deferred income tax assets |  | $ | 177.0 |  |  | $ | 138.6 |
Deferred income tax liabilities: |  |  |  |
Right-of-use assets |  | $ | (34.8) |  |  | $ | (19.5) |
Depreciation |  | (60.0) |  |  | (51.9) |
Amortization |  | (68.4) |  |  | (102.4) |
Other |  | — |  |  | (3.8) |
Deferred income tax liabilities |  | (163.2) |  |  | (177.6) |
Deferred income tax assets (liabilities), net |  | $ | 13.8 |  |  | $ | (39.0) |
As of October 31, 2023, the company has domestic net operating loss carryforwards of $4.1 million for both federal and state income tax purposes that does not expire. As of October 31, 2023, the company has net operating loss carryforwards of approximately $5.1 million in foreign jurisdictions, which are comprised of $5.0 million that do not expire and $0.1 million that expires between fiscal 2035 and fiscal 2040. The company also has domestic credit carryforwards of $1.9 million that expire between fiscal 2027 and fiscal 2043. The net change in the total valuation allowance between the fiscal years ended October 31, 2023 and 2022 was an increase of $0.1 million. The change in valuation allowance is related to domestic tax credits, capital loss carryforwards, and net operating losses that are expected to expire prior to utilization. The company expects that $41.8 million of the total undistributed earnings of its foreign operations will 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, 2023, 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. Unrecognized Tax Benefits A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (dollars in millions):
Unrecognized tax benefits as of October 31, 2022 |  | $ | 3.3 |
Increase as a result of tax positions taken during a prior period |  | 0.2 |
Increase as a result of tax positions taken during the current period |  | 0.6 |
Reductions as a result of statute of limitations lapses |  | (0.4) |
Unrecognized tax benefits as of October 31, 2023 |  | $ | 3.7 |
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 $3.7 million, which have been recorded as an other accrued liability within the Consolidated Balance Sheets as of October 31, 2023, the company recorded $1.0 million of accrued interest and penalties as an other accrued liability within the Consolidated Balance Sheets as of October 31, 2023. Included in the balance of unrecognized tax benefits as of October 31, 2023 are potential benefits of $3.8 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 2019. The company is under audit in certain state 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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