Annual report [Section 13 and 15(d), not S-K Item 405]

INCOME TAXES

v3.25.4
INCOME TAXES
 12 Months Ended
Jan. 03, 2026
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The following table presents income before income taxes used to calculate the provision for income taxes:
Year Ended December
(In thousands) 2025 2024 2023
Domestic $ 104,272  $ 153,220  $ 128,026 
Foreign 188,989  148,203  143,873 
Income before income taxes $ 293,261  $ 301,423  $ 271,899 
The following table presents components of the provision for income taxes:
Year Ended December
(In thousands) 2025 2024 2023
Current:
Federal $ 11,748  $ 44,248  $ 26,290 
Foreign 24,548  12,793  16,950 
State 5,354  5,286  1,415 
Total current income taxes 41,650  62,327  44,655 
Deferred:
Federal and state 17,071  (6,838) 6,848 
Foreign 12,499  132  (10,598)
Total deferred income taxes 29,570  (6,706) (3,750)
Total provision for income taxes $ 71,220  $ 55,621  $ 40,905 
A reconciliation of the U.S. federal statutory income tax rate to our effective tax rate for the year ended December 2025 is as follows:
Year Ended December 2025
(In thousands)
  Total %
Earnings from continuing operations, before income tax expense $ 293,261 
U.S. Federal Statutory Tax Rate 61,585  21.0  %
State and Local Income Taxes1
3,586  1.2  %
Federal
Effect of Cross-Border Tax Laws
Global intangible low-taxed income, net of credits 4,659  1.6  %
Subpart F income, net of credits 4,606  1.6  %
Other foreign tax credits (5,105) (1.7) %
Other 712  0.2  %
Nontaxable or Nondeductible Items
Employee Compensation 4,678  1.6  %
Transaction costs 3,039  1.0  %
Other 517  0.2  %
Tax Credits (1,706) (0.6) %
Other Adjustments (343) (0.1) %
Foreign Tax Effects
China
Changes in Valuation Allowances 4,177  1.4  %
Other (773) (0.3) %
Hong Kong
Effect of Rates Different than Statutory (3,213) (1.1) %
Statutorily exempt income (8,344) (2.8) %
Nondeductible items 4,453  1.5  %
Panama
Effect of Rates Different than Statutory (9,288) (3.2) %
Other Foreign Jurisdictions 9,366  3.2  %
Changes in Unrecognized Tax Benefits (1,386) (0.5) %
Income Tax Expense $ 71,220  24.3  %
(1) The state and local jurisdictions that contribute to the majority (greater than 50%) of the tax effect in this category include California, Texas, and Virginia for 2025.
The following table presents a reconciliation of the differences between income taxes computed by applying the statutory federal income tax rate and "income taxes" recorded in the Company's statements of operations for the years ended December 2024 and 2023, respectively:
(In thousands) 2024 2023
Tax at federal statutory rate $ 63,299  $ 57,099 
State income tax, net of federal tax benefit 3,677  2,614 
Foreign rate differences (22,860) (20,354)
Employee compensation 2,169  1,216 
Change in valuation allowance 3,165  (5,089)
Global intangible low-tax income ("GILTI") 8,674  5,518 
Other (2,503) (99)
Income taxes $ 55,621  $ 40,905 
Foreign rate differences include tax benefits of $8.3 million, $7.2 million and $5.4 million in 2025, 2024 and 2023, respectively, from statutorily exempt foreign income.
During the year ended December 2023, the Company was granted local income tax credits in a foreign jurisdiction totaling $65.5 million that will expire in 2031. A full valuation allowance was recorded against these tax credits in the Company's financial statements and has been presented net in the table above.
The following table summarizes income taxes paid (net of refunds) exceeding 5 percent of total income taxes paid (net of refunds) in the following jurisdictions:
Year Ended December
(In thousands) 2025
U.S. Federal $ 33,000 
U.S. States and Local 5,132 
Foreign
Hong Kong 11,621 
Switzerland 4,885 
Mexico 4,457 
Other 8,238 
Total Foreign 29,201 
Total income taxes paid (net of refunds) $ 67,333 
The following table presents the components of "deferred income tax assets" and "deferred income tax liabilities" recorded in the Company's balance sheets:
(In thousands) December 2025 December 2024
Deferred income tax assets:
Inventories $ 19,256  $ 9,209 
Deferred compensation 11,414  11,133 
Other employee benefits 11,081  10,425 
Stock-based compensation 5,307  3,837 
Limited interest carryforwards 13,342  — 
Other accrued expenses 25,113  9,750 
Intangible assets 20,122  28,840 
Leases 12,976  12,059 
Operating loss carryforwards 52,171  33,275 
Tax credit carryforwards 71,032  65,563 
Gross deferred income tax assets 241,814  184,091 
Less: valuation allowance (128,686) (82,565)
Net deferred income tax assets 113,128  101,526 
Deferred income tax liabilities:
Leases 11,368  11,423 
Depreciation 16,027  17,102 
Intangible assets 101,729  — 
Taxes on unremitted earnings 2,649  2,658 
Deferred income tax liabilities 131,773  31,183 
Total net deferred income tax assets (liabilities) $ (18,645) $ 70,343 
Amounts included in the balance sheets:
Deferred income tax assets $ 74,515  $ 76,065 
Deferred income tax liabilities (93,160) (5,722)
$ (18,645) $ 70,343 
At the end of 2025, the Company is not asserting indefinite reinvestment with regard to short-term liquid assets of its foreign subsidiaries. All other foreign earnings, including basis differences of certain foreign subsidiaries, continue to be considered indefinitely reinvested. The Company has determined the unrecorded deferred tax liability on its indefinitely reinvested foreign earnings is approximately $0.9 million, primarily related to withholding taxes.
The Company has $69.5 million of local income tax credit carryforwards in a foreign jurisdiction that will expire in 2033, as well as $44.4 million of potential tax benefits for foreign operating loss and tax credit carryforwards, $23.1 million of which will expire between 2026 and 2035. In addition, there are potential tax benefits for domestic operating loss and foreign tax credit carryforwards of $2.7 million that will expire between 2027 and 2035, as well as $6.6 million of potential tax benefits for state operating loss and credit carryforwards, $5.4 million of which expire between 2026 and 2044.
A valuation allowance has been provided where it is more likely than not that deferred tax assets related to operating loss and tax credit carryforwards will not be realized. Valuation allowances totaled $69.5 million for local income tax credit carryforwards in a foreign jurisdiction, $34.7 million for foreign operating loss and tax credit carryforwards and $16.2 million for other foreign deferred income tax assets. In addition, there are valuation allowances of $2.7 million for domestic operating loss and foreign tax credit carryforwards, $1.4 million for other domestic deferred income taxes assets, as well as $4.2 million for state operating loss and credit carryforwards
During 2025, the Company recorded an $8.5 million increase in valuation allowances related to local income tax credits due to the impact of foreign currency effects. In addition, the Company recorded tax expense of $3.3 million due to a net increase in valuation allowances related to current year foreign operating losses and other deferred income tax assets, inclusive of foreign currency effects. The Company also recorded tax expense of $0.7 million due to an allowance booked against federal deferred income taxes, partially offset with a tax benefit due to a $0.4 million decrease in valuation allowances related to state operating loss and credit carryforwards as well as other state deferred income tax assets. Additionally, the Company recorded a $34.0 million increase in valuation allowance through purchase accounting.
The following table presents a reconciliation of the change in the accrual for unrecognized income tax benefits:
(In thousands) Unrecognized Income Tax Benefits Accrued Interest and Penalties Unrecognized Income Tax Benefits
Including Interest
and Penalties
Balance, December 2022 $ 12,602  $ 5,818  $ 18,420 
Additions for current year tax positions 248  —  248 
Additions for prior year tax positions 79  931  1,010 
Reductions for prior year tax positions (345) (140) (485)
Reductions due to statute expirations (2,249) (296) (2,545)
Balance, December 2023 10,335  6,313  16,648 
Additions for current year tax positions 245  —  245 
Additions for prior year tax positions 169  857  1,026 
Reductions due to statute expirations (1,775) (888) (2,663)
Balance, December 2024 8,974  6,282  15,256 
Additions for current year tax positions 248  —  248 
Additions for prior year tax positions 10  722  732 
Additions for current year acquisitions 3,208  —  3,208 
Reductions for prior year tax positions (1,935) (381) (2,316)
Reductions due to statute expirations 23  8  31 
Balance, December 2025 $ 10,528  $ 6,631  $ 17,159 
(In thousands) December 2025 December 2024
Amounts included in the balance sheets:
Unrecognized income tax benefits, including interest and penalties $ 17,159  $ 15,256 
Less: deferred tax benefits (2,807) (2,726)
Total unrecognized tax benefits $ 14,352  $ 12,530 
The unrecognized tax benefits of $14.4 million at the end of 2025, if recognized, would reduce tax expense and the annual effective tax rate.
The Company files a consolidated U.S. federal income tax return, as well as separate and combined income tax returns in numerous state and international jurisdictions. In the U.S., the IRS examinations for tax years through 2023 have been effectively settled. In addition, the Company is currently subject to examination by various state and international tax authorities. Management regularly assesses the potential outcomes of both ongoing and future examinations for the current and prior years and has concluded that the Company’s provision for income taxes is adequate. The outcome of any one examination is not expected to have a material impact on the Company’s financial statements.