INCOME TAXES

12 Months Ended

Dec. 31, 2025

INCOME TAXES

INCOME TAXES

10. INCOME TAXES

Income Taxes: Income taxes consist of the following for the years ended December 31, 2025, 2024 and 2023:

	Years Ended December 31,
(In millions)	2025		2024		2023
Current:
Federal	$	70.6	$	86.8	$	44.0
State		7.8		12.4		9.2
Foreign		3.8		3.5		3.0
Total current tax expense		82.2		102.7		56.2
Deferred:
Federal		7.9		17.9		18.2
State		(1.3)		2.8		—
Foreign		0.2		(0.4)		1.5
Total deferred tax expense		6.8		20.3		19.7
Total income taxes	$	89.0	$	123.0	$	75.9

Income taxes for the years ended December 31, 2025, 2024 and 2023 vary from amounts computed by applying the statutory U.S. federal income tax rate due to the following:

	Years Ended December 31,
Income Taxes and Effective Income Tax Rate (Dollars in millions)	2025				2024				2023
U.S. federal statutory tax and rate	$	112.1	21.0	%	$	125.9	21.0	%	$	78.3	21.0	%
State and local taxes, net of federal income tax effect (1)(2)		(8.7)	(1.6)	%		13.4	2.2	%		4.5	1.2	%
Foreign tax effects		2.9	0.5	%		2.0	0.3	%		2.7	0.7	%
Enactment of new tax laws or rates enacted in the current period		—	—	%		—	—	%		—	—	%
Effect of cross-border tax laws:
Foreign-derived intangible income (“FDII”)		(13.1)	(2.5)	%		(18.5)	(3.1)	%		(17.9)	(4.8)	%
Tax credits		(0.1)	—	%		(0.1)	—	%		(0.1)	—	%
Valuation allowances		—	—	%		—	—	%		—	—	%
Nontaxable or nondeductible items:
Share-based payment awards		1.0	0.3	%		1.3	0.2	%		2.0	0.5	%
Other		0.1	—	%		0.1	0.1	%		3.3	0.9	%
Changes in unrecognized tax benefits		(2.5)	(0.5)	%		(1.0)	(0.2)	%		3.1	0.8	%
Other adjustments		(2.7)	(0.5)	%		(0.1)	—	%		—	—	%
Income taxes and effective income tax rate (3)	$	89.0	16.7	%	$	123.0	20.5	%	$	75.9	20.3	%

(1) In 2025, State and local income taxes in California and Alaska comprise the majority of this category. In 2024 and 2023, State and local income taxes in California and Hawaii comprise the majority of this category.

(2) State and local taxes, net of federal income tax effect for the year ended December 31, 2025 is presented net of the impact of a one-time positive tax adjustment of approximately $18.5 million or 3.5 percent.

(3) Excluding the one-time positive tax adjustment described above, the effective income tax rate would have been 20.1 percent for the year ended December 31, 2025.

The tax effects of temporary differences that gave rise to significant positions of deferred tax assets and deferred tax liabilities at December 31, 2025 and 2024, were as follows:

	As of December 31,
(In millions)	2025		2024
Deferred tax assets:
Operating lease liabilities	$	86.9	$	84.0
Multi-employer withdrawal liabilities		10.2		11.4
Deferred compensation		10.0		12.1
Insurance reserves		6.3		7.8
Other		15.5		21.7
Total deferred tax assets		128.9		137.0
Valuation allowance		(4.5)		(5.0)
Total deferred tax assets, net of valuation allowance		124.4		132.0
Deferred tax liabilities:
Basis differences for property and equipment		528.8		482.7
Capital Construction Fund		142.0		192.1
Operating lease right-of-use assets		85.5		83.8
Intangibles		40.8		40.3
Other		29.2		26.5
Total deferred tax liabilities		826.3		825.4
Deferred income taxes, net	$	701.9	$	693.4

Income Taxes Paid, Net of Income Tax Refunds: Income tax paid, net of income tax refunds by jurisdiction for the years ended December 31, 2025, 2024 and 2023 consist of the following:

Income Taxes Paid, Net of Income Tax Refunds by Jurisdiction (in millions)	2025		2024		2023
Federal income taxes (1)	$	72.0	$	(40.9)	$	31.3
State income taxes
California (2)		4.0		5.9		(14.9)
Hawaii (2)		3.2		2.8		(6.4)
Alaska (2)		2.9		2.4		(4.5)
Wisconsin (2)		—		0.1		(0.6)
Other		1.4		1.4		1.8
Foreign income taxes
New Zealand		1.9		1.2		0.5
China		0.7		0.6		0.3
Total income taxes paid, net (1)	$	86.1	$	(26.5)	$	7.5

(1) Federal income taxes paid, net of income tax refunds includes a 2021 federal income tax refund of $118.6 million received during the year ended December 31, 2024.

(2) California, Hawaii, Alaska and Wisconsin state income taxes paid, net of income tax refunds, include state income tax refunds of $14.9 million, $7.5 million, $4.5 million, and $0.7 million received, respectively, during the year ended December 31, 2023.

State Income Tax Operating Losses, State Tax Credit and Valuation Allowance: The Company’s U.S. state income tax net operating losses (“NOLs”) and U.S. state tax credit carryforwards consist of the following at December 31, 2025 and 2024:

(In millions)	Expiration Date	2025		2024
U.S. state income tax NOLs (1)	Various dates beginning in 2032	$	111.4	$	136.5
U.S. state alternative minimum tax credits	No expiration date	$	5.4	$	5.9

(1) U.S. State income tax NOLs are presented on a gross basis and represent U.S. State income tax NOLs acquired as part of the Horizon acquisition. The Company has recorded a full valuation allowance against these U.S. State income tax NOLs as the Company does not expect to benefit from any of these deferred tax assets.

The Company recorded a valuation allowance against its unusable portion of U.S. state income tax NOLs of $4.5 million and $5.0 million as of December 31, 2025 and 2024, respectively, as the Company believes that it is more likely than not that the benefit from these deferred assets will not be realized.

Unrecognized Tax Benefits: Total unrecognized benefits represent the amount that, if recognized, would favorably affect the Company’s income taxes and effective tax rate in future periods. The Company does not expect a material change in gross unrecognized benefits in the next twelve months. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:

	Years Ended December 31,
Unrecognized Tax Benefits (in millions)	2025		2024		2023
Balance at beginning of year	$	26.7	$	28.4	$	25.1
Tax position changes in current year		1.1		(0.7)		3.6
Tax position changes in prior years		—		(0.1)		(0.1)
Reductions for lapse of statute of limitations		(3.3)		(0.9)		(0.2)
Balance at end of year	$	24.5	$	26.7	$	28.4

Included in the balance of unrecognized tax benefits at December 31, 2025 are potential benefits of $21.1 million that, if recognized, would affect the Company’s income taxes and effective tax rate. The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits in income taxes. To the extent interest and penalties are not ultimately assessed with respect to the settlement of uncertain tax positions, amounts accrued will be reduced and reflected as a reduction of the Company’s income taxes. Interest and penalties accrued related to the balance of unrecognized tax benefits were $0.8 million and $0.3 million as of December 31, 2025, and $1.2 million and $1.4 million as of December 31, 2024, respectively. During the years ended December 31, 2025 and 2024, the Company recognized $(0.8) million and $0.4 million, respectively, in income taxes related to interest and penalties.

The Company is no longer subject to U.S. federal income tax audits for years before 2018. The Company is routinely involved in federal, state, local income and excise tax audits, and foreign tax audits.