Annual report [Section 13 and 15(d), not S-K Item 405]

Income Taxes

v3.25.4
Income Taxes
 12 Months Ended
Jan. 03, 2026
Income Tax Disclosure [Abstract]  
INCOME TAXES

12. INCOME TAXES

For financial reporting purposes, income before income taxes includes the following components:

 

 

For the year ended

 

 

 

January 3, 2026

 

 

December 28, 2024

 

 

December 30, 2023

 

United States

 

$

17.2

 

 

$

10.8

 

 

$

12.8

 

Foreign

 

 

45.2

 

 

 

39.7

 

 

 

36.4

 

Total

 

$

62.4

 

 

$

50.5

 

 

$

49.2

 

The components of the income tax provision (benefit) are as follows:

 

 

For the year ended

 

 

 

January 3, 2026

 

 

December 28, 2024

 

 

December 30, 2023

 

Current tax expense (benefit):

 

 

 

 

 

 

 

 

 

United States

 

$

0.2

 

 

$

6.7

 

 

$

6.7

 

State and local

 

 

1.1

 

 

 

0.5

 

 

 

1.5

 

Foreign

 

 

13.5

 

 

 

12.9

 

 

 

11.4

 

Total current

 

 

14.8

 

 

 

20.1

 

 

 

19.6

 

Deferred tax expense (benefit):

 

 

 

 

 

 

 

 

 

United States

 

 

—

 

 

 

(6.5

)

 

 

(3.6

)

State and local

 

 

0.2

 

 

 

—

 

 

 

(1.4

)

Foreign

 

 

(1.0

)

 

 

(2.1

)

 

 

(2.9

)

Total deferred

 

 

(0.8

)

 

 

(8.6

)

 

 

(7.9

)

Total income tax provision

 

$

14.0

 

 

$

11.5

 

 

$

11.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A reconciliation of the provision for the income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to income before income taxes after the adoption of ASU 2023-09 is as follows:

 

 

 

For the year ended

 

 

 

January 3, 2026

 

 

Percent

 

Tax at U.S. statutory rate

 

$

13.1

 

 

 

21.0

%

State and local income taxes(1)

 

 

1.1

 

 

 

1.7

%

Foreign tax effects

 

 

 

 

 

 

       Italy

 

 

 

 

 

 

              Regional tax

 

 

0.8

 

 

 

1.3

%

              Other

 

 

(0.4

)

 

 

-0.6

%

       China

 

 

 

 

 

 

              Effect of rates different than statutory

 

 

0.8

 

 

 

1.2

%

              Other

 

 

(0.6

)

 

 

-0.9

%

       Canada

 

 

 

 

 

 

              Changes in valuation allowance

 

 

0.9

 

 

 

1.4

%

              Other

 

 

(0.1

)

 

 

-0.1

%

       Other foreign jurisdictions

 

 

0.3

 

 

 

0.5

%

Effects of cross-border tax laws

 

 

 

 

 

 

       Foreign-derived intangible income

 

 

(1.0

)

 

 

-1.5

%

       Foreign tax credits

 

 

(1.2

)

 

 

-2.0

%

       Global intangible low-taxed Income

 

 

1.4

 

 

 

2.3

%

       Other

 

 

0.9

 

 

 

1.4

%

Tax credits

 

 

 

 

 

 

       Research and development tax credits

 

 

(0.6

)

 

 

-1.0

%

Changes in valuation allowance

 

 

(0.4

)

 

 

-0.7

%

Nontaxable and nondeductible items

 

 

 

 

 

 

       Executive compensation - 162(m)

 

 

0.3

 

 

 

0.5

%

       Stock-based compensation

 

 

0.3

 

 

 

0.4

%

Changes in unrecognized tax benefits

 

 

(0.4

)

 

 

-0.6

%

Other

 

 

 

 

 

 

       Gain on divestiture

 

 

(1.1

)

 

 

-1.7

%

       Other adjustments

 

 

(0.1

)

 

 

-0.2

%

Effective tax rate

 

$

14.0

 

 

 

22.5

%

(1) The states and local jurisdictions that contribute to the majority (greater than 50%) of the tax effect in this category include Florida and Oklahoma.

 

 

 

 

 

 

 

 

 

 

 

 

 

A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to income before income taxes before the adoption of ASU 2023-09 is as follows:

 

 

 

For the year ended

 

 

 

December 28, 2024

 

 

December 30, 2023

 

U.S. federal taxes at statutory rate

 

$

10.6

 

 

$

10.3

 

  Increase(decrease)

 

 

 

 

 

 

    Foreign withholding tax

 

 

0.1

 

 

 

—

 

    Capitalized transaction costs

 

 

—

 

 

 

0.2

 

    Foreign income taxed at different rate

 

 

1.5

 

 

 

1.4

 

    FDII deduction

 

 

(1.1

)

 

 

(1.2

)

    Changes in estimates related to prior years including foreign

 

 

0.8

 

 

 

0.7

 

    Goodwill impairment

 

 

—

 

 

 

—

 

    State and local taxes, net

 

 

0.5

 

 

 

(0.3

)

    Foreign tax expense

 

 

0.7

 

 

 

0.7

 

    Current year tax credits

 

 

(1.1

)

 

 

(1.0

)

    Foreign permanent items

 

 

(0.5

)

 

 

(1.8

)

    Change in reserve

 

 

0.2

 

 

 

0.2

 

    Executive comp - 162m

 

 

(0.3

)

 

 

1.3

 

    Valuation allowance

 

 

(0.7

)

 

 

0.7

 

    Stock-based compensation

 

 

0.5

 

 

 

—

 

    Other

 

 

0.3

 

 

 

0.5

 

Income tax provision

 

$

11.5

 

 

$

11.7

 

 

Deferred income tax assets and liabilities are provided to reflect the future tax consequences of differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. The temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of January 3, 2026 and December 28, 2024, are presented below:

 

 

 

 

For the year ended

 

 

 

January 3, 2026

 

 

December 28, 2024

 

Deferred tax assets:

 

 

 

 

 

 

    Foreign tax benefit of US reserves

 

$

0.8

 

 

$

1.0

 

    Net operating losses

 

 

6.1

 

 

 

6.2

 

    Inventory

 

 

2.8

 

 

 

3.0

 

    Intangible assets and goodwill DTA

 

 

1.2

 

 

 

0.7

 

    Lease liability

 

 

3.3

 

 

 

3.9

 

    Capitalized research expenditures

 

 

4.3

 

 

 

8.1

 

    Interest expense limitation carryforward

 

 

8.2

 

 

 

8.6

 

    Accrued compensation

 

 

2.6

 

 

 

3.0

 

    Accrued expenses and other

 

 

3.3

 

 

 

3.8

 

    Other comprehensive income -DTA

 

 

1.2

 

 

 

8.9

 

Total deferred tax assets

 

 

33.8

 

 

 

47.2

 

Less: valuation allowance

 

 

(3.2

)

 

 

(2.3

)

Net deferred tax assets

 

 

30.6

 

 

 

44.9

 

Deferred tax liabilities:

 

 

 

 

 

 

Depreciation

 

 

(3.6

)

 

 

(3.8

)

Right of use asset

 

 

(3.1

)

 

 

(3.7

)

Intangible assets and goodwill

 

 

(73.3

)

 

 

(76.3

)

Other deferred tax liabilities

 

 

(0.7

)

 

 

(0.1

)

Other comprehensive income

 

 

(0.4

)

 

 

—

 

Total deferred tax liabilities

 

 

(81.1

)

 

 

(83.9

)

Net deferred tax liabilities

 

$

(50.5

)

 

$

(39.0

)

 

As of January 3, 2026, the Company has federal net operating loss (“NOL”) carryforwards of approximately $3.5 that will expire between 2031 and 2032, state net operating loss carryforwards of $38.1 that will expire between 2026 and 2045 and foreign net operating loss carryforwards of $12.0, of which $7.3 are indefinite-lived and the remaining will expire between 2027 and 2045. The federal and California NOLs were generated by Balboa Water Group during pre-acquisition tax years 2011-2019 and are subject to a 20-year carryforward period. As a result of the acquisition, both the federal and the California NOLs are subject to various limitations under Internal Revenue Code (“IRC”) Section 382. IRC Section 382 limits the use of NOLs to the extent there has been an ownership change of more than 50 percent. Despite these limitations, the Company expects to fully utilize the federal and California NOLs by 2027. The Company has foreign NOL carryforwards of $11.5 that it does not anticipate utilizing. Consequently, it has fully reserved against the deferred tax asset related to these NOLs.

A valuation allowance to reduce the deferred tax assets reported is required if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The valuation allowance for deferred tax assets as of January 3, 2026 and December 28, 2024 was $3.2 and $2.3, respectively. The portion of valuation allowance related to capital losses was $0.6 and foreign loss carryforward was $2.6 as of January 3, 2026. The net change in total valuation was a decrease of $0.9 in 2025 and was primarily related to the valuation allowance for Faster Canada net operating losses.

The Company prescribes a recognition threshold and measurement attribute for an uncertain tax position taken or expected to be taken in a tax return.

The following is a roll-forward of the Company’s unrecognized tax benefits:

Unrecognized tax benefits - January 1, 2023

 

$

7.9

 

Increases from positions taken during prior periods

 

 

1.1

 

Increases from positions taken during current period

 

 

0.2

 

Settled positions

 

 

(2.7

)

Lapse of statute of limitations

 

 

(0.4

)

Unrecognized tax benefits - December 30, 2023

 

$

6.1

 

Increases from positions taken during prior periods

 

 

(0.5

)

Increases from positions taken during current period

 

 

0.2

 

Settled positions

 

 

—

 

Lapse of statute of limitations

 

 

(0.4

)

Unrecognized tax benefits - December 28, 2024

 

$

5.4

 

Increases from positions taken during prior periods

 

 

1.1

 

Increases from positions taken during current period

 

 

0.1

 

Settled positions

 

 

—

 

Lapse of statute of limitations

 

 

(0.8

)

Unrecognized tax benefits - January 3, 2026

 

$

5.8

 

 

At January 3, 2026, the Company had unrecognized tax benefits of $5.8 including accrued interest. If recognized, $0.6 of unrecognized tax benefits would reduce the effective tax rate in future periods. The Company recognizes interest and penalties related to income tax matters in income tax expense. Interest related to the unrecognized tax benefit has been recognized and included in income tax expense. Interest accrued as of January 3, 2026, is not considered material to the Company’s Consolidated Financial Statements.

As of January 3, 2026, the Company had approximately $52.6 million of undistributed earnings in certain non-U.S. subsidiaries for which no deferred income taxes have been recorded. These earnings are intended to be indefinitely reinvested in the Company’s international operations. Accordingly, no deferred tax liability has been recognized for potential foreign withholding or U.S. state income taxes that would apply upon distribution.

The Company remains subject to income tax examinations in the U.S. and various state and foreign jurisdictions for tax years 2020-2025. The Company believes it has adequately reserved for income taxes that could result from any audit adjustments.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. 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 legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. While we expect certain provisions of the OBBBA to change the timing of cash payments in the current fiscal year and future periods, we do not currently expect the legislation to have a material impact on our consolidated financial statements.