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Income Taxes
 9 Months Ended
Jul. 02, 2022
Income Tax Disclosure [Abstract]  
Income Taxes

10. Income Taxes

 

The Company’s tax provision and the resulting effective tax rate for interim periods is determined based upon its estimated annual effective tax rate ("AETR"), adjusted for the effect of discrete items arising in that quarter. The impact of such inclusions could result in a higher or lower effective tax rate during a quarter, based upon the mix and timing of actual earnings or losses versus annual projections. In each quarter, the Company updates its estimate of the AETR, and if the estimated AETR changes, a cumulative adjustment is made in that quarter.

 

The Company recorded a benefit from income taxes of $2.1 million and a provision for income taxes of $0.9 million for the three months ended July 2, 2022, and July 3, 2021, respectively, related to U.S. and non-U.S. income taxes. The Company recorded a provision for income taxes of $4.8 million and $3.4 million for the nine months ended July 2, 2022, and July 3, 2021, respectively. For the three months ended July 2, 2022, the Company's tax benefit includes the impact from excess U.S. share-based compensation and a benefit from the release of a non-U.S. valuation allowance. For the three months ended July 3, 2021, the Company's tax provision includes a discrete benefit from U.S. share-based compensation. For the nine months ended July 2, 2022, the Company's tax provision includes discrete income tax benefits from the release of a portion of our U.S. valuation allowance resulting from an acquisition in the first quarter, U.S. share-based compensation, and a non-U.S. valuation allowance release in the current quarter. For the nine months ended July 3, 2021, the Company’s tax provision includes a discrete income tax benefit for U.S. share-based compensation.

 

For the three and nine months ended July 2, 2022, the Company maintained a full valuation allowance on its deferred tax assets in the U.S. and certain other non-US entities due to a history of operating losses. It is possible that within the next 12 months there may be sufficient positive evidence to release a portion or all of the valuation allowance. Release of the valuation allowance in the U.S. and certain other non-US entities would result in a benefit to income tax expense for the period the release is recorded, which could have a material impact on net earnings. The timing and amount of the potential valuation allowance release are subject to significant management judgment, as well as prospective earnings in the U.S. and certain other non-US entities.