Income Taxes

9 Months Ended

Oct. 02, 2026

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 13. INCOME TAXES

For the third quarter of 2026, our effective income tax rate was 51.3%, as compared to 10.9% in the corresponding period in 2025. The increase was primarily driven by a one-time tax reserve charge, partially offset by a one-time deferred tax benefit from an internal restructuring during the third quarter of 2026, and a one-time benefit from the revaluation of deferred tax liabilities due to a German tax rate decrease in the prior year.

For the first three quarters, our effective income tax rate was (63.2)%, as compared to 17.7% in the prior year. The negative effective income tax rate was due to an income tax expense, including the additional one-time tax charge described above, against a pre-tax loss that primarily resulted from a non-deductible goodwill impairment recognized during the second quarter of 2026.

Unrecognized tax benefits of $147.7 million and $40.0 million at the end of the third quarter of 2026 and the end of 2025, if recognized, would favorably affect the effective income tax rate in future periods. We recorded a one-time unrecognized tax benefit of $107.6 million related to the internal restructuring during the third quarter of 2026. At the end of the third quarter of 2026 and at the end of 2025, we accrued interest and penalties of $15.5 million and $9.3 million.

We accounted for the tax implications of the enacted OBBBA, and the impact to our 2026 tax rate is immaterial. The OBBBA permanently repeals the domestic R&D capitalization requirement. As a result, we expect cash tax reductions of approximately $53.0 million in 2026.