TAXES BASED ON INCOME

12 Months Ended

Dec. 31, 2025

Income Tax Disclosure [Abstract]

TAXES BASED ON INCOME

TAXES BASED ON INCOME

Taxes based on income were as follows:

(In millions)	2025		2024		2023
Current:
U.S. federal tax	$	45.9	$	36.0	$	42.5
State taxes	11.0		10.6		9.0
Foreign taxes	205.3		214.9		160.8
	262.2		261.5		212.3
Deferred:
U.S. federal tax	(17.2)		(8.7)		(29.0)
State taxes	(1.3)		(3.3)		(3.5)
Foreign taxes	(6.6)		(.9)		11.9
	(25.1)		(12.9)		(20.6)
Provision for income taxes	$	237.1	$	248.6	$	191.7

A reconciliation of our provision for income taxes to the amount computed by multiplying the U.S. federal statutory tax rate to income before taxes for the year ended December 31, 2025 is provided below:

	2025
(In millions, except percentages)	Amount		Percent
U.S. federal statutory tax rate	$	194.3	21.0	%
State and local income taxes, net of federal income tax effect(1)	7.7		.8	%
Foreign tax effects
China	18.0		1.9	%
The Netherlands
Nontaxable or nondeductible items	(9.9)		(1.1)	%
Other	5.4		.6	%
Germany
Changes in valuation allowances	(10.6)		(1.1)	%
Other	2.5		.3	%
Other foreign jurisdictions	44.9		4.9	%
Effect of cross-border tax laws	(18.1)		(2.0)	%
Tax credits	(8.8)		(1.0)	%
Changes in valuation allowances	8.3		.9	%
Nontaxable or nondeductible items	2.9		.3	%
Changes in unrecognized tax benefits	.5		.1	%
Provision for income taxes and effective tax rate	$	237.1	25.6	%

(1) State taxes in California, Illinois, Pennsylvania, Wisconsin, New York and New Jersey made up the majority of the tax effect in this category.

A reconciliation of our provision for income taxes to the amount computed by multiplying the U.S. federal statutory tax rate to income before taxes previously disclosed for the years ended December 28, 2024 and December 30, 2023 is provided below:

(In millions)	2024		2023
Tax provision computed at U.S. federal statutory rate(1)	$	200.2	$	145.9
Increase (decrease) in taxes resulting from:
State taxes, net of federal tax benefit	2.7		2.6
Foreign earnings taxed at different rates(1)	49.5		50.4
Global intangible low-taxed income high-tax exclusion election, net(2)	(6.2)		(10.0)
Valuation allowances	15.9		2.6
U.S. federal research and development tax credits	(7.7)		(8.3)
Tax contingencies and audit settlements	1.9		11.9
Other items, net	(7.7)		(3.4)
Provision for income taxes	$	248.6	$	191.7

(1) Both years included certain U.S. international tax provisions and foreign earnings taxed in the U.S., net of credits.

(2) In 2024, we recognized $6.2 million from our current year global intangible low-taxed income exclusion election. In 2023, we recognized $4.4 million from our 2023 exclusion election and $5.6 million related to the exclusion election made on our 2022 U.S. federal tax return.

Income before taxes from our U.S. and foreign operations was as follows:

(In millions)	2025		2024		2023
U.S.	$	160.4	$	211.4	$	187.2
Foreign	764.7		742.1		507.5
Income before taxes	$	925.1	$	953.5	$	694.7

Our effective tax rate was 25.6%, 26.1% and 27.6% for fiscal years 2025, 2024 and 2023, respectively.

Our 2025 provision for income taxes included (i) $15.4 million of net tax charge related to the tax on global intangible low-taxed income ("GILTI") of our foreign subsidiaries and the recognition of foreign withholding taxes on current year earnings, partially offset by the benefit from foreign-derived intangible income (“FDII”); (ii) $10.6 million of tax benefit from the release of valuation allowance as a result of completing a foreign restructuring transaction; and (iii) net tax benefit from a favorable ruling related to deductibility of interest expense.

Our 2024 provision for income taxes included (i) $15.9 million of net tax charge related to the tax on GILTI of our foreign subsidiaries and the recognition of foreign withholding taxes on current year earnings, partially offset by the benefit from FDII; (ii) $15.9 million of tax charge from valuation allowances due to the uncertainty of the realization of certain deferred tax assets; and (iii) excess tax benefits associated with stock-based payments, and return-to-provision benefits related to our 2023 U.S. federal tax return, partially offset by net tax charge primarily from the recognition of uncertain tax positions and tax audit settlements in certain foreign jurisdictions.

Our 2023 provision for income taxes included (i) $16.4 million of net tax charge related to the tax on GILTI of our foreign subsidiaries and the recognition of foreign withholding taxes on current year earnings, partially offset by the benefit from FDII; (ii) $14.7 million of return-to-provision benefit primarily related to our GILTI exclusion election and benefits from additional foreign tax credits recognized under temporary relief granted by the Internal Revenue Service ("IRS") in July 2023, related to our 2022 U.S. federal tax return, (iii) $10.5 million of tax charge related to non-deductible expenses resulting from the impact of the Argentine peso remeasurement loss; and (iv) $9.5 million of net tax charge primarily from the recognition of uncertain tax positions in certain foreign jurisdictions, partially offset by decreases in tax reserves as a result of closing tax years.

Deferred Taxes

Deferred taxes reflect the temporary differences between the amounts at which assets and liabilities are recorded for financial reporting purposes and the amounts utilized for tax purposes. The primary components of the temporary differences that gave rise to our deferred tax assets and liabilities were as follows:

(In millions)	2025		2024
Accrued expenses not currently deductible	$	32.2	$	29.8
Net operating loss carryforwards	144.7		137.9
Tax credit carryforwards	24.3		14.8
Capitalized research expenses	94.0		81.7
Stock-based compensation	9.0		8.8
Pension and other postretirement benefits	13.7		31.1
Inventory reserve	19.7		19.2
Lease liabilities	44.8		44.7
Other assets	38.8		31.6
Valuation allowances	(77.5)		(72.7)
Total deferred tax assets(1)	343.7		326.9
Depreciation and amortization	(335.9)		(306.0)
Repatriation accrual	(33.0)		(24.2)
Foreign operating loss recapture	—		(3.1)
Lease assets	(44.5)		(44.3)
Total deferred tax liabilities(1)	(413.4)		(377.6)
Total net deferred tax assets (liabilities)	$	(69.7)	$	(50.7)

(1) Reflect gross amounts before jurisdictional netting of deferred tax assets and liabilities.

We assess available positive and negative evidence to estimate if sufficient future taxable income is expected to be generated to use existing deferred tax assets. On the basis of our assessment, we record valuation allowances only with respect to the portion of the deferred tax asset that is not more-likely-than-not to be realized. Our assessment of the future realizability of our deferred tax assets relies heavily on our forecasted earnings in certain jurisdictions determined by the manner in which we operate our business and the relevant carryforward periods. Any changes to our operations may affect our assessment of deferred tax assets considered realizable if the positive evidence no longer outweighs the negative evidence.

Net operating loss carryforwards of foreign subsidiaries at December 31, 2025 and December 28, 2024 were approximately $495 million and $466 million, respectively. Tax credit carryforwards of both domestic and foreign subsidiaries at December 31, 2025 and December 28, 2024 totaled approximately $24 million and $15 million, respectively. If unused, foreign net operating losses and tax credit carryforwards will expire as follows:

(In millions)	Net Operating Losses(1)		Tax Credits
Year of Expiry
2026	$	2.3	$	.2
2027	3.2		.3
2028	5.7		.7
2029	21.4		.4
2030	13.7		1.4
2031-2045	24.9		20.3
Indefinite life/no expiry	423.4		1.0
Total	$	494.6	$	24.3

(1) Net operating losses are presented before tax effects and valuation allowances.

Certain indefinite-lived foreign net operating losses may require decades to be fully utilized under our current business model.

At December 31, 2025, we had net operating loss carryforwards in certain states of approximately $681 million before tax effects. Based on our estimates of future state taxable income, it is more-likely-than-not that the majority of these carryforwards will not be realized before they expire. Accordingly, a valuation allowance has been recorded on approximately $660 million of these carryforwards.

As of December 31, 2025, our provision for income taxes did not materially benefit from applicable tax holidays in foreign jurisdictions.

Unrecognized Tax Benefits

As of December 31, 2025, our unrecognized tax benefits totaled approximately $81 million, $73 million of which, if recognized, would reduce our annual effective income tax rate. As of December 28, 2024, our unrecognized tax benefits totaled approximately $81 million, $74 million of which, if recognized, would reduce our annual effective income tax rate.

Where applicable, we accrue potential interest and penalties related to unrecognized tax benefits in income tax expense. The interest and penalties we recognized during fiscal years 2025, 2024 and 2023 were not material, individually or in aggregate, to the Consolidated Statements of Income. We have approximately $18 million and $17 million of accrued interest and penalties, net of tax benefit, in the Consolidated Balance Sheets at December 31, 2025 and December 28, 2024, respectively.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is provided below.

(In millions)	2025		2024
Balance at beginning of year	$	81.1	$	88.0
Additions for tax positions of current year	9.4		11.4
Additions (reductions) for tax positions of prior years, net	(8.2)		(7.2)
Settlements with tax authorities	(.2)		(4.6)
Expirations of statutes of limitations	(4.7)		(3.7)
Changes due to foreign currency translation	3.5		(2.8)
Balance at end of year	$	80.9	$	81.1

The amount of income taxes we pay is subject to ongoing audits by taxing jurisdictions around the world. Our estimate of the potential outcome of any uncertain tax issue is subject to our assessment of the relevant risks, facts, and circumstances existing at the time. We believe we have adequately provided for reasonably foreseeable outcomes related to these matters. However, our future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments are made or resolved, which may impact our effective tax rate. The final determination of tax audits and any related legal proceedings could materially differ from amounts reflected in our tax provision for income taxes and the related liabilities. To date, we and our U.S. subsidiaries have completed the IRS’ Compliance Assurance Process through 2023. With limited exceptions, we are no longer subject to income tax examinations by tax authorities for years prior to 2010.

Cash Paid for Income Taxes (Net of Refunds Received)

Cash paid for income taxes, net of refunds received, for the year ended December 31, 2025 was as follows:

(In millions)	2025
U.S. federal	$	35.7
State	10.4
Foreign
China	58.3
The Netherlands	18.6
India	16.4
Other	125.6
Cash paid for income taxes (net of refunds received)	$	265.0

Cash paid for income taxes, net of refunds received, for the years ended December 28, 2024 and December 30, 2023 was $226.8 million and $234.9 million, respectively.