Kontoor Brands Inc

For the period ended Dec 28, 2024. Filed Feb 25, 2025.

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FY2024 · Filed Feb 25, 2025

KTB$82.79+1.0%Stored close · as of Nov 10, 2026

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Income Taxes

NOTE 18 —INCOME TAXES

The following table presents income before income taxes used to calculate the provision for income taxes:

	Year Ended December
(In thousands)	2024	2023	2022
Domestic	$153,220	$128,026	$153,936
Foreign	148,203	143,873	165,200
Income before income taxes	$301,423	$271,899	$319,136

The following table presents components of the provision for income taxes:

	Year Ended December
(In thousands)	2024	2023	2022
Current:
Federal	$44,248	$26,290	$53,990
Foreign	12,793	16,950	12,397
State	5,286	1,415	7,129
Total current income taxes	62,327	44,655	73,516
Deferred:
Federal and state	(6,838)	6,848	(9,828)
Foreign	132	(10,598)	9,955
Total deferred income taxes	(6,706)	(3,750)	127
Total provision for income taxes	$55,621	$40,905	$73,643

76 Kontoor Brands, Inc. 2024 Form 10-K

The following table presents a reconciliation of the differences between income taxes computed by applying the statutory federal income tax rate and "income taxes" recorded in the Company's statements of operations:

	Year Ended December
(In thousands)	2024	2023	2022
Tax at federal statutory rate	$63,299	$57,099	$67,019
State income tax, net of federal tax benefit	3,677	2,614	4,542
Foreign rate differences	(22,860)	(20,354)	(9,849)
Employee compensation	2,169	1,216	2,121
Change in valuation allowance	3,165	(5,089)	4,881
Global intangible low-tax income ("GILTI")	8,674	5,518	3,586
Other	(2,503)	(99)	1,343
Income taxes	$55,621	$40,905	$73,643

Foreign rate differences include tax benefits of $7.2 million, $5.4 million and $10.3 million in 2024, 2023 and 2022, respectively, from statutorily exempt foreign income.

During the year ended December 2023, the Company was granted local income tax credits in a foreign jurisdiction totaling $65.5 million that will expire in 2031. A full valuation allowance was recorded against these tax credits in the Company's financial statements and has been presented net in the table above.

The following table presents the components of "deferred income tax assets" and "deferred income tax liabilities" recorded in the Company's balance sheets:

(In thousands)	December 2024	December 2023
Deferred income tax assets:
Inventories	$9,209	$11,592
Deferred compensation	11,133	10,290
Other employee benefits	10,425	7,989
Stock-based compensation	3,837	4,139
Other accrued expenses	9,750	16,741
Intangible assets	28,840	29,232
Leases	12,059	12,055
Operating loss carryforwards	33,275	30,871
Tax credit carryforwards	65,563	69,221
Gross deferred income tax assets	184,091	192,130
Less: valuation allowance	(82,565)	(86,213)
Net deferred income tax assets	101,526	105,917
Deferred income tax liabilities:
Leases	11,423	11,595
Depreciation	17,102	20,929
Taxes on unremitted earnings	2,658	3,923
Deferred income tax liabilities	31,183	36,447
Total net deferred income tax assets	$70,343	$69,470
Amounts included in the balance sheets:
Deferred income tax assets	$76,065	$75,081
Deferred income tax liabilities	(5,722)	(5,611)
	$70,343	$69,470

Kontoor Brands, Inc. 2024 Form 10-K 77

At the end of 2024, the Company is asserting indefinite reinvestment on foreign earnings totaling $139.0 million. The Company has determined the unrecorded deferred tax liability associated with the $139.0 million basis difference is approximately $1.0 million, primarily related to withholding taxes.

The Company has $60.9 million of local income tax credit carryforwards in a foreign jurisdiction that will expire in 2031, $27.1 million of potential tax benefits for foreign operating loss carryforwards, $24.0 million of which will expire between 2025 and 2034, and $4.4 million of foreign tax credit carryforwards that will expire between 2030 and 2034. In addition, there are $6.4 million of potential tax benefits for state operating loss and credit carryforwards, $5.0 million of which expire between 2025 and 2044.

A valuation allowance has been provided where it is more likely than not that deferred tax assets related to operating loss and tax credit carryforwards will not be realized. Valuation allowances totaled $60.9 million for local income tax credit carryforwards, $13.0 million for foreign operating loss carryforwards, $4.6 million for state operating loss and credit carryforwards, $2.7 million for other foreign deferred income tax assets and $1.4 million for other federal deferred income tax assets.

During 2024, the Company recorded a $4.6 million decrease in valuation allowances related to local income tax credits due to the impact of foreign currency effects. In addition, the Company recorded tax expense of $2.5 million due to a net increase in valuation allowances related to current year foreign operating losses and other deferred income tax assets, inclusive of foreign currency effects. The Company also recorded a tax benefit due to a $1.5 million decrease in valuation allowances related to state operating loss and credit carryforwards as well as other state deferred income tax assets.

The following table presents a reconciliation of the change in the accrual for unrecognized income tax benefits:

(In thousands)	Unrecognized Income Tax Benefits	Accrued Interest and Penalties	Unrecognized Income Tax BenefitsIncluding Interestand Penalties
Balance, December 2021	$11,717	$5,049	$16,766
Additions for current year tax positions	169	—	169
Additions for prior year tax positions	853	857	1,710
Reductions for prior year tax positions	—	(30)	(30)
Reductions due to statute expirations	(137)	(58)	(195)
Balance, December 2022	12,602	5,818	18,420
Additions for current year tax positions	248	—	248
Additions for prior year tax positions	79	931	1,010
Reductions for prior year tax positions	(345)	(140)	(485)
Reductions due to statute expirations	(2,249)	(296)	(2,545)
Balance, December 2023	10,335	6,313	16,648
Additions for current year tax positions	245	—	245
Additions for prior year tax positions	169	857	1,026
Reductions due to statute expirations	(1,775)	(888)	(2,663)
Balance, December 2024	$8,974	$6,282	$15,256

(In thousands)	December 2024	December 2023
Amounts included in the balance sheets:
Unrecognized income tax benefits, including interest and penalties	$15,256	$16,648
Less: deferred tax benefits	(2,726)	(3,035)
Total unrecognized tax benefits	$12,530	$13,613

The unrecognized tax benefits of $12.5 million at the end of 2024, if recognized, would reduce tax expense and the annual effective tax rate.

78 Kontoor Brands, Inc. 2024 Form 10-K

The Company files a consolidated U.S. federal income tax return, as well as separate and combined income tax returns in numerous state and international jurisdictions. In the U.S., the Company’s 2021 through 2023 tax years are currently under examination by the Internal Revenue Service. In addition, the Company is currently subject to examination by various state and international tax authorities. Management regularly assesses the potential outcomes of both ongoing and future examinations for the current and prior years and has concluded that the Company’s provision for income taxes is adequate. The outcome of any one examination is not expected to have a material impact on the Company’s financial statements. Management does not believe that the amount of unrecognized tax benefits will materially decrease within the next 12 months.

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