Income Taxes

3 Months Ended

Mar. 31, 2026

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

	Three Months Ended March 31,
	2026	2025
	(In percentages)
Effective income tax rate	40	(150)

The effective income tax rate for the three months ended March 31, 2026, was higher compared to the same period in 2025, primarily due to increased earnings in the current year, as well as changes in uncertain tax benefits related to prior year tax examinations in various foreign jurisdictions and differences in functional currency for tax purposes in certain jurisdictions, partially offset by favorable changes in the geographic mix of earnings in the current year.

The effective tax rate for the three months ended March 31, 2025, was unfavorable on a loss from continuing operations, primarily due to an unfavorable tax impact from an increase in valuation allowance on U.S. foreign tax credit carryforwards due to revised forecasts of foreign sourced income and expenses throughout the carryforward period during the three months ended March 31, 2025.

In July 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into law. Key provisions of the OBBBA include the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act (the "TCJA"), impacting the period of cost recovery for capital expenditures, the calculation of allowable business interest expense and the timing of deductions for domestic research and development expenses. The OBBBA also modifies international tax provisions to adjust tax rate increases scheduled for January 2026, the amount of allowable foreign tax credits to offset deemed income inclusions in the U.S. and the required allocation of U.S. expenses such as interest and stewardship to specific categories of international income. Although the Company is still actively evaluating the entire impact of the OBBBA on its operations, it does not currently expect the OBBBA to have a material impact on its effective tax rate and cash taxes.

Due to the 2017 TCJA and the resulting uncertainty as to future foreign source income, the Company previously recorded a valuation allowance on its foreign tax credit carryforwards. The Company is currently evaluating tax planning strategies to enable the use of its foreign tax credit carryforwards that may decrease the Company's effective tax rate in future periods as the valuation allowance is reversed.

In December 2021, the Organization for Economic Co-operation and Development ("OECD") issued final Model Rules for Pillars One and Two of its Base Erosion and Profit Shifting ("BEPS") project. In general, Pillar One addresses nexus concerns and the allocation of profits among companies in which a multinational enterprise ("MNE") conducts its business. Pillar Two aims to ensure that all MNEs pay an effective tax rate of no less than 15% on their adjusted net income in each of the jurisdictions in which they have operations. Pillar Two is more impactful to the Company as it allows for assessment even if the individual countries do not enact its minimum tax provisions. In effect, Pillar Two allows any country within which an MNE operates to levy tax upon that MNE to the extent it determines that the MNE is paying less than a 15% effective tax rate on its adjusted net income. The taxes levied may then be allocated among the jurisdictions that conform to the OECD rules.

In December 2022, the member states of the European Union ("EU") unanimously voted to adopt the OECD's minimum tax, which was agreed to by consensus of the BEPS 2.0 (Pillars One and Two) signatory jurisdictions. Under the EU's minimum tax directive, member states are to adopt domestic legislation implementing the minimum tax rules effective for periods beginning on or after December 31, 2023, with Pillar Two's "under-taxed profit rule" to take effect for periods beginning on or after December 31, 2024. The EU effective dates are January 1, 2024, and January 1, 2025, for different aspects of the directive.

Legislatures in multiple countries outside of the EU have also enacted or drafted legislation to implement the OECD's minimum tax proposals.

In July 2023, the OECD published Administrative Guidance proposing certain safe harbor provisions, including an effective rate test and a routine profits test, which, if satisfied, effectively delay the effective dates of Pillar Two to January 1, 2027. The EU and a significant number of other countries have or are expected to implement the safe harbor in local legislation. Based on these safe harbor provisions, the Company currently expects that several material jurisdictions, including the U.S., Netherlands, Switzerland, Germany, China, Singapore and Canada, will qualify for the safe harbor, effectively delaying the application of the global minimum tax until January 1, 2027.

On January 5, 2026, the OECD issued administrative guidance that establishes an exemption from the income inclusion rule and the undertaxed profits rule for MNE groups whose ultimate parent entity is located in a jurisdiction with a qualified side by side regime. Upon initial review, the U.S. would appear to qualify because it has a qualified domestic tax system and a qualified worldwide tax system. As a result, U.S. based groups could potentially be exempt from the OECD Pillar Two requirements other than for domestic top-up taxes and for certain reporting requirements. The Company will actively monitor the local country implementation of the new administrative guidance to determine the impact of the side by side system on its future filing positions.

The Company will continue to monitor the developments and implementation of the OECD BEPS projects. Currently the Company does not meet the requirements for the application of Pillar One. After an initial assessment of the application of the safe harbor provisions on a global basis, the Company determined that there was not a material impact from the local adoption of the OECD Pillar Two proposals in 2026, but is continuing to model the effect of these provisions, as well as the impact of the January 2026 administrative guidance, on its future effective tax rate and cash taxes.

The Company's tax returns for the years 2013 through 2015 have been subject to audit by the tax authorities in the United States, the Netherlands and Germany (collectively, the "Tax Authorities"). The Company and the Tax Authorities did not reach a joint resolution, and the audits proceeded on a jurisdiction by jurisdiction basis.

The Company has concluded settlement discussions with the Dutch and German tax authorities related to transfer pricing matters for the applicable periods. During the first quarter of 2026, the Company reached a resolution with the U.S. Internal Revenue Service (the "IRS") with respect to joint audit matters, as well as certain other transfer pricing issues for subsequent years through 2020. The Company expects to finalize the administrative resolution with the IRS prior to the end of 2026.

In addition, the Company's income tax returns are under examination by the tax authorities in Mexico for the years 2018 through 2020, in Canada for the years 2016 through 2022, in the United States for the years 2016 through 2020 and in Germany for periods after 2012.

In August 2023, the Company entered into a partial settlement with the Mexican tax authorities with respect to the audit for the 2018 tax year. The partial settlement did not have a material impact on income tax expense in the unaudited interim consolidated statements of operations. The Company is currently engaged in discussions with the Mexican tax authorities regarding preliminary audit findings for the 2019 and 2020 tax years.

The Company has concluded the audit for the 2019 through 2022 tax years with the Canadian tax authorities, which resulted in an immaterial adjustment. The Company remains in discussions with the Canadian tax authorities regarding audit findings for the 2016 through 2018 tax years and currently does not expect those audits to have a material impact on income tax expense.

The audit by the U.S. tax authorities for the years 2016 through 2020 is in the data gathering phase.

During the first quarter of 2025, the Company initiated settlement discussions with the German tax authorities regarding certain matters related to the audit for periods after 2007. In the second quarter of 2025, the Company concluded settlement discussions with respect to the 2008 through 2012 tax years.

The Company will record the impacts of any additional audit settlements in income tax expense in the period in which such settlements are finalized. Based on information currently available, the Company does not expect any additional material impacts to the unaudited interim consolidated statements of operations.

As of March 31, 2026, the Company believes that an adequate provision for income taxes has been made for all open tax years related to the examinations by governmental authorities. However, the outcome of tax audits cannot be predicted with certainty. If any issues raised by the governmental authorities are resolved in a manner inconsistent with the Company's expectations or the Company is unsuccessful in defending its position, the Company could be required to adjust its provision for income taxes in the period such resolution occurs. If required, any such adjustments could be material to the statements of operations and cash flows in the period(s) recorded.