Income Taxes

12 Months Ended

Dec. 31, 2025

Income Taxes

Income Taxes

Note 10 Income Taxes

Income (loss) before income taxes consisted of the following:

	Year Ended December 31,
	2025		2024		2023
	(In thousands)
Bermuda (Domestic)	$	(149,154)	$	—	$	—
Foreign
United States		462,873		33,302		215,306
Other jurisdictions		223,809		(64,342)		(86,182)
Income (loss) before income taxes	$	537,528	$	(31,040)	$	129,124

The Company has elected to prospectively adopt the guidance in ASU 2023-09. Prior to the adoption of ASU 2023-09, the Company disaggregated income (loss) between the United States and other jurisdictions. For the years ending December 31, 2024 and 2023, Bermuda is presented in Other foreign jurisdictions.

Income tax expense (benefit) consisted of the following:

	Year Ended December 31,
	2025		2024		2023
	(In thousands)
Current:
Bermuda (Domestic)	$	—	$	—	$	—
Foreign
United States - Federal		(3,696)		1,175		4,783
United States - State		8,818		32,326		55,769
Other foreign jurisdictions		60,829		1,762		2,787
Total current	$	65,951	$	35,263	$	63,339
Deferred:
Bermuda (Domestic)	$	—	$	—	$	—
Foreign
United States - Federal		91,884		6,408		16,886
United States - State		11,586		13,854		(1,898)
Other foreign jurisdictions		(6,326)		1,422		893
Total deferred	$	97,144	$	21,684	$	15,881
Income tax expense (benefit)	$	163,095	$	56,947	$	79,220

The Company has elected to prospectively adopt the guidance in ASU 2023-09. Prior to the adoption of ASU No. 2023-09, the Company disaggregated income tax expense (benefit) between the United States, U.S. states and other jurisdictions. For the 2024 and 2023 years, Bermuda is presented in Other foreign jurisdictions.

The following table is a reconciliation of the Bermuda national statutory tax rate of 15%, that became effective on January 1, 2025, to the Company’s effective rate for the year ended December 31, 2025 in accordance with the guidance in ASU 2023-09:

	Year Ended December 31,
	2025
	(In thousands, except percentages)
	Amount		Percent
Bermuda national statutory tax rate	$	80,629	15.0%
Foreign tax effects:
Argentina
Effect of rates different than statutory		4,182	0.8%
Foreign withholding tax		4,774	0.9%
Valuation allowance		(5,940)	(1.1%)
Other reconciling items		(1,372)	(0.3%)
Luxembourg
Internal restructuring		(26,502)	(4.9%)
Valuation allowance		26,722	5.0%
Other reconciling items		1,260	0.2%
Netherlands
Tax credits		(3,960)	(0.7%)
Other reconciling items		2,009	0.4%
Russia
Valuation allowance		5,638	1.0%
Other reconciling items		(2,375)	(0.4%)
Saudi Arabia
Foreign withholding tax		3,722	0.7%
Effect of rates different than statutory		7,787	1.4%
Interest on shareholder loan		(5,834)	(1.1%)
Other reconciling items		(2,646)	(0.5%)
United States
State and local income taxes		16,120	3.0%
Effect of rates different than statutory		28,233	5.3%
Nontaxable or nondeductible items		3,194	0.6%
Other reconciling items		205	0.0%
Other jurisdictions		11,018	2.0%
Valuation allowance		21,518	4.0%
Other reconciling items		855	0.2%
Changes in unrecognized tax benefits		(6,142)	(1.1%)
Income tax expense (benefit)	$	163,095	30.3%

The following table is a reconciliation of the Bermuda national statutory tax rate of 0% to our worldwide effective tax rate for the years ended December 31, 2024 and 2023 in accordance with the guidance prior to the adoption of ASU 2023-09:

	Year Ended December 31,
	2024		2023
	(In thousands)
Income tax provision at statutory (Bermuda rate of 0%)	$	—	$	—
Taxes (benefit) on U.S. and other international earnings (losses) at greater than the Bermuda rate		51,433		74,581
Increase (decrease) in valuation allowance		10,094		22,533
Impact of foreign exchange rates		(9,145)		(28,484)
Prior year adjustments to provision		2,540		(3,513)
Uncertain tax positions		(1,828)		5,854
Audit settlements		(646)		12,464
State income taxes (benefit)		1,698		3,838
Other		2,801		(8,053)
Income tax expense (benefit)	$	56,947	$	79,220
Effective tax rate		(183.5%)		61.4%

Our worldwide income tax expense for 2025 was $163.1 million compared to $56.9 million for 2024. The increase in tax expense was primarily attributable to the Parker acquisition and sale of Quail Tools, as well as the change in amount and geographic mix of our pre-tax earnings (losses).

The following table lists the components of the income taxes paid (net of refunds received):

	Year Ended December 31,
	2025
	(In thousands)
Bermuda (Domestic)	$	—
Foreign
Argentina		8,130
Colombia		6,939
Mexico		6,199
Saudi Arabia		26,351
United States - Federal		7,185
United States - State		4,795
Foreign Other		14,139
Net cash paid (refunds received) for income taxes	$	73,738

The components of our net deferred taxes consisted of the following:

	December 31,
	2025		2024
	(In thousands)
Deferred tax assets:
Net operating loss carryforwards	$	3,934,828	$	3,870,614
Tax credit and other attribute carryforwards		76,314		86,188
Disallowed interest carryforward		16,642		33,907
Property, plant and equipment		11,798		—
Other		93,287		88,644
Subtotal		4,132,869		4,079,353
Valuation allowance		(3,944,634)		(3,825,551)
Deferred tax assets:	$	188,235	$	253,802
Deferred tax liabilities:
Property, plant and equipment	$	—	$	34,089
Other		6,137		5,903
Deferred tax liability	$	6,137	$	39,992
Net deferred tax assets (liabilities)	$	182,098	$	213,810
Balance Sheet Summary:
Net noncurrent deferred tax asset	$	189,224	$	216,296
Net noncurrent deferred tax liability		(7,126)		(2,486)
Net deferred tax asset (liability)	$	182,098	$	213,810

As of December 31, 2025, we had U.S. federal, U.S. state, and non-US net operating loss (“NOL”) carryforwards of approximately $355.4 million, $937.6 million and $16.9 billion, respectively. Of those amounts, $8.3 billion will expire between 2026 and 2046 if not utilized. We provide a valuation allowance against NOL carryforwards in various tax jurisdictions based on our consideration of existing temporary differences and expected future earning levels in those jurisdictions. A valuation allowance of approximately $3.8 billion as of December 31, 2025 has been recognized related to certain NOL carryforwards as we believe it is more likely than not that the benefit of these NOL carryforwards will not be realized.

The following is a reconciliation of our uncertain tax positions:

	2025		2024		2023
	(In thousands)
Balance as of January 1	$	23,324	$	34,016	$	45,452
Additions for tax positions of prior years		2,745		322		2,207
Reductions for tax positions for prior years		—		(1,046)		(256)
Settlements		(8,781)		(9,968)		(13,387)
Balance as of December 31	$	17,288	$	23,324	$	34,016

If the unrecognized tax positions of $17.3 million are realized, this would favorably impact the worldwide effective tax rate by $15.9 million. As of December 31, 2025, 2024 and 2023, we had approximately $9.5 million, $8.2 million and $11.1 million, respectively, of interest and penalties related to uncertain tax positions. During 2025, 2024 and 2023, we accrued and recognized estimated interest and penalties related to uncertain tax positions of approximately $1.3 million, $(2.9) million and $(6.0) million, respectively. During the fourth quarter of 2025, we settled tax audits for which we had accrued an uncertain tax position of $8.8 million with no interest and penalties. Upon settlement, we reversed the uncertain tax position accrual. We include potential interest and penalties related to uncertain tax positions within our global operations in the income tax expense (benefit) line item in our consolidated statements of income (loss).

We conduct business globally and, as a result, we file numerous income tax returns in the U.S. and non-U.S. jurisdictions. In the normal course of business, we are subject to examination by taxing authorities throughout the world, including major jurisdictions such as Colombia, Mexico, Saudi Arabia, and the United States. We are no longer subject to U.S. Federal income tax examinations for years before 2022 and non-U.S. income tax examinations for years before 2007.

On August 16, 2022, the Inflation Reduction Act (“IRA”) was signed into law in the United States. Among other provisions, the IRA includes a 15% corporate minimum tax rate applied to certain large corporations and a 1% excise tax on corporate stock repurchases made after December 31, 2022. We do not expect the IRA to have a material impact to the Company.

The Organization Economic Co-operation and Development (“OECD”) introduced Base Erosion and Profit Shifting (“BEPS”) Pillar 2 rules that impose a global minimum tax rate of 15%. Numerous countries, including European Union member states, have enacted or are expected to enact legislation. Pillar 2 did not have a material impact to our consolidated financial statements for the year ended December 31, 2025.

On December 18, 2023, Bermuda enacted a 15% corporate income tax regime (the “Bermuda CIT”) that applies to Bermuda businesses that are part of multinational enterprise groups with annual revenue of €750 million or more and is effective for tax years beginning on or after January 1, 2025. As a result of the Bermuda CIT, the Company’s exemption from Bermuda corporate income taxes ceased in 2025. With the enactment of the Bermuda CIT in 2023, the Company underwent an analysis to determine the tax impacts to its consolidated financial statements. Bermuda CIT allows for a beginning net operating loss balance related to the five years preceding the effective date of Bermuda CIT. As of December 31, 2025, we have recorded a deferred tax asset of $206.9 million for the Bermuda net operating losses generated from 2020 through 2024 with an offsetting valuation allowance of $206.9 million.

The One Big Beautiful Bill Act (“OBBBA”) was signed into law on July 4, 2025. OBBBA included many provisions such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modification to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions already in effect and others implemented through fiscal year 2027. We do not expect the legislation to have a material impact on our effective tax rate.