Income Taxes

9 Months Ended

Sep. 28, 2025

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

The Company determines its provision for income taxes for interim periods using an estimate of its annual effective tax rate (“AETR”) and records any changes affecting the estimated AETR in the interim period in which the change occurs, including discrete tax items.

During the nine months ended September 28, 2025, the Company recorded a total income tax provision of $18.1 million on pre-tax income of $109.8 million resulting in an effective tax rate of 16.5%, as compared to a total income tax provision of $21.0 million on pre-tax income of $86.2 million resulting in an effective tax rate of 24.4% during the nine months ended September 29, 2024. The decrease in the effective tax rate for the nine months ended September 28, 2025 as compared to the nine months ended September 29, 2024, was primarily due to the remeasurement and adjustment of deferred taxes as discussed below and a favorable mix of geographic earnings.

In July 2025, Germany enacted tax legislation to gradually reduce the corporate income tax rate. The current income tax rate of 15% is set to decrease by 1% annually beginning in 2028 reaching 10% by 2032. As a result of this change to tax rates, deferred assets and liabilities were remeasured using the new rates applicable to the periods in which the underlying temporary differences are expected to reverse. The remeasurement of the Company’s German deferred tax positions and other deferred tax adjustments resulted in a favorable deferred income tax benefit of $10.4 million in the quarter ended September 28, 2025.

On July 4, 2025, the U.S. enacted H.R. 1, commonly referred to as the One Big Beautiful Bill Act (“OBBBA”). The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The OBBBA did not have a material impact on our estimated annual effective tax rate in 2025. As we continue to analyze the impact of the OBBBA, we expect it to reduce our cash taxes owed in the current year.

On December 20, 2021, the Organization for Economic Co-operation and Development (“OECD”) published Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large corporations at a minimum rate of 15%. The OECD has since issued administrative guidance providing transition and safe harbor rules around the implementation of the Pillar Two global minimum tax. Many non-U.S. tax jurisdictions have enacted legislation to adopt the Pillar Two Model Rules beginning in 2024 (including the European Union Member States) or announced plans to enact legislation in future years. For fiscal year 2025, we do not expect these provisions to have a material impact on the Company’s financial statements. We will continue to closely monitor ongoing developments and evaluate any potential impact on future periods.

In the first nine months of 2025, the Company increased its liability for unrecognized tax benefits by $0.3 million. As of September 28, 2025, the Company had accrued approximately $5.1 million for unrecognized tax benefits. The Company’s deferred tax asset as of September 28, 2025, reflects a reduction of $2.5 million of these unrecognized tax benefits.

Unrecognized tax benefits are reviewed on an ongoing basis and are adjusted for changing facts and circumstances, including the progress of tax audits and the closing of statutes of limitations. While it is reasonably possible that some of the unrecognized tax benefits will be recognized within the next 12 months, the Company does not expect the recognition of such amounts will have a material impact on the Company’s financial results.