v3.25.4
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Taxes [Abstract]  
Income Taxes
11. Income Taxes

Earnings before income taxes were as follows:

(In thousands)
  
2025
    
2024
    
2023
  
United States
  
$
66,358
    
$
57,318
    
$
45,900
  
Foreign
    
111,189
      
105,480
      
83,951
  
Total
  
$
177,547
    
$
162,798
    
$
129,851
  

The provision for income taxes was as follows:

(In thousands)
  
2025
    
2024
    
2023
  
Current income tax expense:
                  
Federal
  
$
13,395
    
$
20,307
    
$
11,153
  
State
    
1,936
      
3,375
      
2,814
  
Foreign
    
30,432
      
33,048
      
27,590
  
 
    
45,763
      
56,730
      
41,557
  
Deferred expense (benefit):
                        
Federal
    
46
   
(12,743
)
    
(4,656
)
State
    
(1,338
)
    
(581
)
    
(813
)
Foreign
    
(1,413
)
    
(5,274
)
    
369
 
    
(2,705
)
    
(18,598
)
    
(5,100
)
Income taxes
  
$
43,058
    
$
38,132
    
$
36,457
  

Payments of income taxes were as follows:

(In thousands)
  
2025
  
Federal
   $ 13,686  
State
     3,211  
Germany
     7,389  
Thailand     4,904  
Mexico     3,846  
China
     3,141  
France
     2,408  
Foreign - Other
     10,221  
Total
   $ 48,806  

The company adopted ASU 2023-09 prospectively in 2025. The 2025 reconciliation between the U.S. Federal tax rate and the actual effective tax rate under ASU 2023-09 is below. The reconciliation for 2024 and 2023 under the prior guidance follows.


  
2025
  

  Amount     Percent  
Taxes at statutory rate
   $ 37,285       21.0 %
State income taxes, net of federal income tax benefit
                
Wisconsin1
     (1,053 )     (0.6 )
Other state income taxes1
    
1,140
       0.6  
Tax credits
                
Research and Development tax credits
     (3,674 )     (2.1 )
Foreign tax effects
                
Germany
                
Foreign statutory tax rate difference
     (1,622 )     (0.9 )
Enacted change in tax rate impact on deferred items
     (1,726 )     (1.0 )
Local taxes
     4,039       2.3  
Other foreign jurisdictions
     6,823       3.9  
Effect of cross-border taxes
                
Global intangible low-taxed income
     474       0.3  
Foreign derived intangible income
     (2,175 )     (1.2 )
Other effects of cross-border taxes
     733       0.4  
Nontaxable or nondeductible items
                
Nondeductible compensation
     2,452       1.4  
Other nontaxable or nondeductible items
     (155 )     (0.1 )
Changes in unrecognized benefits
     198       0.1  
Other reconciling items
     319       0.2  
Effective taxes and tax rate
   $ 43,058       24.3 %

1 Wisconsin had a release of a valuation allowance related to its net operating loss. The states that make up the majority of the Other state income taxes category are California and Illinois.

 
  
2024
    
2023
  
Taxes at statutory rate
    
21.0
%
    
21.0
%
State income taxes, net of federal income tax benefit
    
1.0
      
1.1
  
Tax credits
    
(1.6
)
    
(1.9
)
Taxes on foreign earnings
    
4.1
      
4.8
  
Global Intangible Low-Taxed Income
    
0.5
      
0.6
  
Foreign Derived Intangible Income
    
(1.2
)
    
(1.3
)
Resolution of prior years’ tax matters
    
0.6
      
0.3
  
Valuation allowance adjustments
    
(1.4
)
    
2.8
  
Nondeductible compensation
     0.9       1.2  
Other, net
    
(0.5
)
    
(0.5
)
Effective tax rate
    
23.4
%
    
28.1
%

For 2024 and 2023, taxes on foreign tax effects include the difference between the tax rates applied to foreign earnings relative to the U.S. statutory tax rate, accruals for foreign unrecognized tax benefits, and the impact of the U.S. foreign tax credit, not including the impact from Global Intangible Low-Taxed Income (GILTI). The impact on the Company’s effective tax rate varies from year to year based on the finalization of prior year foreign and domestic tax items, audit settlements, and mix of foreign earnings. The effective tax rates in 2025, 2024, and 2023 were all impacted by the release of valuation allowances related to net operating losses (NOLs) and the limited deductibility of costs related to the Portfolio Optimization Plan. See Note 14, Portfolio Optimization Plan. The effective tax rate in 2025 was also impacted by the change in the German tax rate. The effective tax rate in 2023 was also impacted by the release of valuation allowances related to the foreign tax credit carryover.

The Company’s valuation allowance at December 31, 2025 and 2024 was $29.1 million and $29.7 million, respectively. In 2025, the valuation allowance related to foreign NOLs was increased, and the valuation allowance related to state NOLs was reduced. In 2024, the valuation allowance related to foreign NOLs was reduced, and the valuation allowance related to state NOLs was increased.

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities consisted of the following:

(In thousands)
  
2025
    
2024
  
Deferred tax assets:
            
Benefit plans
  
$
10,859
    
$
8,123
  
Liabilities and reserves
    
20,886
      
20,322
  
Operating loss and credit carryovers
    
58,598
      
59,834
  
Capitalized research and development costs
     22,745       18,666  
Other
    
20,788
      
5,355
  
Gross deferred tax assets
    
133,876
      
112,300
  
Valuation allowance
    
(29,053
)
    
(29,743
)
Deferred tax assets
    
104,823
      
82,557
  
Deferred tax liabilities:
                
Property, plant, and equipment
    
(28,265
)
    
(26,092
)
Goodwill
    
(19,005
)
    
(20,685
)
Deferred tax liabilities
    
(47,270
)
    
(46,777
)
Net deferred tax assets
  
$
57,553
    
$
35,780
  

At December 31, 2025, foreign tax credit carryovers were $27.3 million, all of which expire before 2040. At December 31, 2025, foreign operating loss carryovers were $90.5 million. Included in the foreign operating loss carryovers are losses of $16.5 million that expire through 2040 and $74.0 million that expire after 2040 or do not have an expiration date. At December 31, 2025, state operating loss carryovers were $110.0 million, which expire prior to 2040.

The Company is electing to recognize GILTI as a period expense in the period the tax is incurred.

The Organisation for Economic Co-operation and Development has issued Pillar Two model rules imposing a global minimum corporate tax rate of 15%. The Pillar Two model rules have not had a material impact on the Company, and we will continue to monitor U.S. and global legislative action related to Pillar Two for potential impacts.

Federal and state income taxes are provided on international subsidiary income distributed to or taxable in the U.S. during the year. At December 31, 2025, no additional income or withholding taxes have been provided for the $920.0 million of undistributed earnings or any additional outside basis differences inherent in these entities, as these amounts are considered to be invested indefinitely. If the undistributed earnings were repatriated, the Company estimates it would have a withholding tax liability of $45.8 million. The determination of the tax liability for any outside basis differences is not practicable.

A reconciliation of the change in the liability for unrecognized tax benefits for 2025 and 2024 is as follows:

(In thousands)
  
2025
    
2024
  
Balance at beginning of year
  
$
4,391
    
$
4,251
  
Increases for tax positions taken in the current year
    
840
      
865
  
Increases for tax positions taken in prior years     130       422  
Decreases related to settlements with tax authorities
    
(736
)
    
-
  
Decreases as a result of lapse of the applicable statutes of limitations
    
(952
)
    
(765
)
Foreign currency exchange rate changes
    
457
      
(382
)
Balance at the end of year
  
$
4,130
    
$
4,391
  

The amount of the unrecognized tax benefits that would affect the effective tax rate, if recognized, was approximately $4.1 million. The Company recognizes interest and penalties related to the unrecognized tax benefits in income tax expense. $0.5 million of accrued interest and penalties were reported as an income tax liability as of both December 31, 2025 and 2024. The liability for unrecognized tax benefits relates to multiple jurisdictions and is reported in Other Liabilities on the Company’s Consolidated Balance Sheet at December 31, 2025.

With limited exceptions, the Company is no longer subject to federal, state, and local, or non-U.S. income tax examinations by tax authorities for years before 2021.