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Income Taxes
 6 Months Ended
Jun. 28, 2025
Income Tax Disclosure [Abstract]  
Income Taxes

NOTE 12. Income Taxes

The following table provides details of income taxes:

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 28,

 

 

June 29,

 

June 28,

 

 

June 29,

 

 

 

2025

 

 

2024

 

2025

 

 

2024

 

 

 

(in thousands)

 

Income before income taxes

 

$

39,741

 

 

$

57,269

 

$

111,398

 

 

$

108,161

 

Provision for income taxes

 

$

5,830

 

 

$

4,320

 

$

13,392

 

 

$

8,359

 

Effective tax rate

 

 

15

%

 

 

8

%

 

12

%

 

 

8

%

The income tax provision for the three and six months ended June 28, 2025 was computed based on the Company’s annual forecast of profit by jurisdiction and forecasted effective tax rate for the year. The increase in the Company’s income tax provision for the three and six months ended June 28, 2025 as compared to the three and six months ended June 29, 2024 was primarily due to fewer excess benefits associated with equity compensation. The Company’s recorded effective tax rate for the periods presented is less than the U.S. statutory rate primarily due to projected Foreign Derived Intangible Income deductions, federal research and development tax credits, and excess tax benefits associated with equity compensation.

The Company currently has a partial valuation allowance recorded against certain foreign and state net operating loss and credit carryforwards where the unrealizability of such deferred tax assets is more likely than not. Each quarter, the Company assesses the likelihood that it will be able to recover its deferred tax assets. The Company considers available evidence, both positive and negative, including forecasted earnings, in assessing its need for a valuation allowance. As a result of the Company’s analysis, it concluded that it is more likely than not that a portion of its deferred tax assets will not be realized. Therefore, the Company continues to provide a valuation allowance against certain deferred tax assets. The Company continues to monitor available evidence and may reverse some or all of its remaining valuation allowance in future periods, if appropriate. The Company has a recorded valuation allowance against a certain portion of its deferred tax assets of $12.2 million at each of June 28, 2025 and December 28, 2024.

The Organization for Economic Co-operation and Development (“OECD”) has been working on a Base Erosion and Profits Shifting (“BEPS”) project that would change various aspects of the existing framework under which the Company’s tax obligations are determined in many of the countries in which we operate. As part of the BEPS project, the OECD issued policies aimed to modernize global tax systems, including a country-by-country 15% minimum effective tax rate (“Pillar Two”) for multinational companies. Numerous countries have enacted, or are in the process of enacting, legislation to implement the Pillar Two model rules with a subset of the rules becoming effective during the current year, and the remaining rules becoming effective in later periods. At this point in time, the Company does not expect any material tax impact associated with Pillar Two rules in the countries where it operates. As these rules continue to evolve with new legislation and guidance, the Company will continue to monitor and account for the enactment of Pillar Two and the potential impacts such rules may have on its effective tax rate and cash flows in future years.

On July 4, 2025, the United States enacted tax reform legislation through the One Big Beautiful Bill Act. Included in this legislation are provisions that allow for the immediate expensing of domestic United States research and development expenses, immediate expensing of certain capital expenditures, and other changes to the U.S. taxation of profits derived from foreign

operations. As a result of the enactment of the legislation, the Company expects an increase to tax expense during the third and fourth quarters of 2025, primarily related to changes in the taxation of profits derived from foreign operations, and more specifically, the foreign-derived intangible income deduction. The Company continues to evaluate the impact the new legislation will have on the Consolidated Financial Statements. However, as the assessment is ongoing, the Company is not able to quantify the impact on the Consolidated Financial Statements at this time.