Hayward Holdings, Inc.HAYW
Hayward Holdings, Inc. Income Taxes Disclosure
Income Taxes
The components of income from operations before income taxes by jurisdiction are as follows (in thousands):
| December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| United States | $ | 174,896 | $ | 148,371 | $ | 89,461 | |||||||||||
| International | 9,741 | (4,189) | 11,626 | ||||||||||||||
| Total | $ | 184,637 | $ | 144,182 | $ | 101,087 | |||||||||||
The provision for income taxes is comprised of the following (in thousands):
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | 27,700 | $ | 29,166 | $ | 21,697 | |||||||||||
| State | 9,650 | 7,183 | 6,575 | ||||||||||||||
| International | 3,492 | (308) | 4,914 | ||||||||||||||
| 40,842 | 36,041 | 33,186 | |||||||||||||||
| Deferred | |||||||||||||||||
| Federal | 4,553 | (4,800) | (10,455) | ||||||||||||||
| State | (11,633) | (4,579) | (2,894) | ||||||||||||||
| International | (695) | (1,135) | 563 | ||||||||||||||
| (7,775) | (10,514) | (12,786) | |||||||||||||||
| Provision for income taxes | $ | 33,067 | $ | 25,527 | $ | 20,400 | |||||||||||
Reconciliation between the effective tax rate on income from operations and the statutory tax rate is as follows (in thousands):
| December, 31 | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| U.S. federal statutory income tax rate | $ | 38,774 | 21.0 | % | $ | 30,278 | 21.0 | % | $ | 21,228 | 21.0 | % | |||||||||||||||||||||||
| Domestic federal | |||||||||||||||||||||||||||||||||||
| Tax credits | |||||||||||||||||||||||||||||||||||
| Research & development tax credit | (1,206) | (0.7) | (1,222) | (0.8) | (1,480) | (1.5) | |||||||||||||||||||||||||||||
| Nontaxable or nondeductible items | |||||||||||||||||||||||||||||||||||
| Nondeductible compensation subject to 162(m) limitation | 1,307 | 0.7 | 946 | 0.7 | 1,027 | 1.0 | |||||||||||||||||||||||||||||
| Permanent items | 384 | 0.2 | 288 | 0.2 | 106 | 0.1 | |||||||||||||||||||||||||||||
| Cross-border tax laws | |||||||||||||||||||||||||||||||||||
| Foreign derived intangible income (“FDII”) deduction | (2,723) | (1.5) | (4,538) | (3.1) | (3,183) | (3.1) | |||||||||||||||||||||||||||||
| Other | 702 | 0.4 | 255 | 0.2 | 202 | 0.2 | |||||||||||||||||||||||||||||
| Changes in valuation allowances | |||||||||||||||||||||||||||||||||||
| Valuation allowance | — | — | — | — | (1,572) | (1.6) | |||||||||||||||||||||||||||||
| Excess tax benefits on share-based payments | (1,575) | (0.9) | (1,220) | (0.8) | (3,044) | (3.0) | |||||||||||||||||||||||||||||
| Other | (530) | (0.3) | (2,457) | (1.9) | 10 | — | |||||||||||||||||||||||||||||
| Domestic state and local income taxes, net of federal effect | (1,566) | (0.8) | 2,057 | 1.4 | 2,908 | 2.9 | |||||||||||||||||||||||||||||
| Foreign tax effects | |||||||||||||||||||||||||||||||||||
| Canada | |||||||||||||||||||||||||||||||||||
| Provincial taxes | 469 | 0.3 | 434 | 0.3 | 1,508 | 1.5 | |||||||||||||||||||||||||||||
| Foreign withholding taxes imposed by foreign jurisdiction | 306 | 0.2 | 249 | 0.2 | 3,768 | 3.7 | |||||||||||||||||||||||||||||
| Other | (353) | (0.2) | (692) | (0.5) | (831) | (0.8) | |||||||||||||||||||||||||||||
| Other foreign jurisdictions | (203) | (0.1) | 430 | 0.3 | (247) | (0.2) | |||||||||||||||||||||||||||||
| Worldwide changes in unrecognized tax benefits | (719) | (0.4) | 719 | 0.5 | — | — | |||||||||||||||||||||||||||||
| Total worldwide | $ | 33,067 | 17.9 | % | $ | 25,527 | 17.7 | % | $ | 20,400 | 20.2 | % | |||||||||||||||||||||||
The increase in the Company’s effective tax rate from 17.7% for the year ended December 31, 2024 to 17.9% for the year ended December 31, 2025 was primarily due to higher foreign derived intangible income deductions during the prior year, partially offset by lower state and local income taxes.
For the year ended December 31, 2025, the state income tax benefit included in the rate reconciliation was approximately $1.6 million. More than 50% of the state income tax effect was attributable to Florida.
The tax effects of temporary differences that give rise to significant components of the deferred tax assets and liabilities are as follows (in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax asset | |||||||||||
| Lease liabilities | $ | 13,344 | $ | 13,512 | |||||||
| Inventory | 9,280 | 9,311 | |||||||||
| Warranty reserve | 6,309 | 5,923 | |||||||||
| Research and development capitalization | 560 | 8,826 | |||||||||
| Accrued liabilities | 8,858 | 6,506 | |||||||||
| Net operating loss carryforwards | 2,649 | 3,052 | |||||||||
| Deferred compensation and stock options | 4,728 | 3,851 | |||||||||
| Insurance reserve | 1,076 | 1,313 | |||||||||
| Interest expense | 160 | 443 | |||||||||
| Tax credits | 748 | 164 | |||||||||
| Other | 136 | 624 | |||||||||
| Total deferred tax asset | 47,848 | 53,525 | |||||||||
| Deferred tax liability | |||||||||||
| Intangible assets | (227,895) | (241,213) | |||||||||
| Property, plant & equipment | (21,029) | (21,310) | |||||||||
| Right of use assets | (11,713) | (11,658) | |||||||||
| Other current assets | (3,747) | (4,245) | |||||||||
| Derivatives | (1,094) | (4,408) | |||||||||
| Foreign withholding tax accrual | (2,452) | (2,146) | |||||||||
| Net investment in lease | (2,018) | (1,864) | |||||||||
| Deferred financing costs | (584) | (894) | |||||||||
| Unrealized foreign exchange (gain) | (634) | (881) | |||||||||
| Total deferred tax liability | (271,166) | (288,619) | |||||||||
| Subtotal | (223,318) | (235,094) | |||||||||
| Valuation allowance | (3,397) | (2,813) | |||||||||
| Net deferred tax liability | $ | (226,715) | $ | (237,907) | |||||||
Deferred taxes are reflected in the Company’s consolidated balance sheet based on tax jurisdiction as follows (in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax asset | $ | 734 | $ | 1,204 | |||||||
| Deferred tax liability | (227,449) | (239,111) | |||||||||
| Net deferred tax liability | $ | (226,715) | $ | (237,907) | |||||||
The Company has U.S. federal net operating loss (“NOL”) carryforwards in the amount of $12.6 million as of both December 31, 2025 and 2024 from historical acquisitions. The NOL carryforwards expire between 2035 and 2037. The Internal Revenue Code of 1986 contains certain provisions that can limit a taxpayer’s ability to utilize net operating loss and tax credit carryforwards in any given year resulting from ownership changes in excess of 50 percent over a three-year period. The Company estimates that all of these NOL carryforwards may be subject to limitation and potentially expire prior to their utilization. The Company maintains a $12.6 million valuation allowance on these NOL carryforwards.
In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities and projected future taxable income in making this assessment. Management evaluates the need for valuation allowances on the deferred tax assets according to the provisions of ASC 740, Income Taxes. In making this determination, the Company assesses all available evidence (positive and negative) including recent earnings, internally-prepared income projections, and historical financial performance.
The Company’s total valuation allowance of $3.4 million and $2.8 million as of December 31, 2025 and 2024, respectively, consists of U.S. NOL carryforwards and U.S. tax credits.
The following table is a roll forward of the valuation allowance applied against certain deferred tax assets (in thousands):
| Balance at Beginning of Period | Provision for Income Taxes | Deductions | Balance at End of Period | ||||||||||||||||||||
| 2023 | $ | 3,770 | $ | 767 | $ | (1,573) | $ | 2,964 | |||||||||||||||
| 2024 | 2,964 | — | (151) | 2,813 | |||||||||||||||||||
| 2025 | 2,813 | 584 | — | 3,397 | |||||||||||||||||||
As of 2023, the Company no longer asserts that its undistributed earnings in one jurisdiction are permanently reinvested. Accordingly, the Company recorded a deferred tax liability of $2.5 million for the estimated taxes associated with the repatriation of the undistributed earnings in that jurisdiction. The Company will continue its practice and intention to reinvest the earnings of certain non-U.S. subsidiaries in those operations. As of December 31, 2025 and 2024, the Company has not recorded a provision for U.S. state tax or foreign withholding taxes on undistributed earnings that are indefinitely reinvested. The determination of the deferred tax liability, if any, is not practicable.
The Company will recognize a tax benefit in the financial statements for an uncertain tax position only if the Company’s assessment is that the position is “more likely than not” (i.e., a likelihood greater than 50 percent) to be allowed by the tax jurisdiction based solely on the technical merits of the position. The term “tax position” refers to a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for financial reporting purposes.
The following table is a reconciliation of unrecognized tax benefits including any interest and penalties (in thousands):
Balance at January 1, 2023 | $ | — | |||
| Currency | — | ||||
| Balance at December 31, 2023 | — | ||||
| Additions based on tax positions related to current year | 68 | ||||
| Additions based on tax positions related to prior year | 1,255 | ||||
| Balance at December 31, 2024 | 1,323 | ||||
| Reductions based on statute expirations | (837) | ||||
| Balance at December 31, 2025 | $ | 486 | |||
The Company files tax returns in various global jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, examinations for years before 2022. The statute of limitations in foreign jurisdictions generally ranges between three to four years. The Company’s policy is to record estimated interest and penalties related to uncertain tax positions in income tax expense, which as of December 31, 2025 and 2024 was zero.
The following table represents cash paid for income taxes, net of refunds received (in thousands):
| December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| U.S. federal | $ | 17,778 | $ | 30,931 | $ | 3,232 | |||||||||||
| U.S. state and local | 8,268 | 6,345 | 3,656 | ||||||||||||||
| Total U.S. | 26,046 | 37,276 | 6,888 | ||||||||||||||
| Foreign | |||||||||||||||||
| Canada federal | * | * | 6,023 | ||||||||||||||
| Quebec | * | * | 1,860 | ||||||||||||||
| Spain | * | * | 1,439 | ||||||||||||||
| Other | 367 | (1,338) | 210 | ||||||||||||||
| Total foreign | 367 | (1,338) | 9,532 | ||||||||||||||
| Total | $ | 26,413 | $ | 35,938 | $ | 16,420 | |||||||||||
* The amount of income taxes paid during the year does not meet the 5% disaggregation threshold.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Mar 9, 2022 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.