SEC Filings
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| 10-Q | |
| HRG GROUP, INC. filed this Form 10-Q on 05/09/2016 | |
| Entire Document | |
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and six months ended March 31, 2015, respectively. The 529 thousand restricted stock units granted during the six months ended March 31, 2015 included 133 thousand restricted stock units vested immediately and 132 thousand restricted stock units are time-based and vest over a period of 1 to 3 years. The remaining 264 thousand restricted stock units are performance and time-based and vest over a period of up to 2 years. The total market value of the restricted shares on the date of the grant was approximately $47.8. The remaining unrecognized pre-tax compensation cost related to restricted stock units at March 31, 2015 was $48.6. The fair value of restricted stock units are determined based on the market price of Spectrum Brands’ common stock on the grant date. (11) Income Taxes For the three and six months ended March 31, 2016, the Company’s effective tax rate of 43.4% and 16.6%, respectively, differed from the expected U.S. statutory tax rate of 35% and was impacted by the change in judgement in the realizability on a portion of Spectrum Brand’s U.S. net operating loss carryforwards that were previously recorded with valuation allowance and recognition of tax benefits on current year losses from the Energy and Corporate and Other segments in the U.S. The Company determined that a portion of the current year losses related to the Energy and Corporate and Other segments are more likely than not to be realized based on the expected taxable gain from the FGL Merger. The increase in tax expense for the three months ended March 31, 2016 was principally due to an increase in current year losses from our Corporate and Other segments in the U.S. that are not more likely than not to be realized. In December 2015, Spectrum Brands received a ruling from the Internal Revenue Service which resulted in approximately $88.0 of U.S. net operating losses (“NOL”) being restored. The ruling created additional U.S. deferred tax assets and valuation allowance during the three and six months ended March 31, 2016. During the three months ended March 31, 2016, Spectrum Brands determined it is more likely than not its U.S. deferred tax assets will be used to reduce taxable income, except for tax attributes subject to ownership change limitations, capital losses, and certain state operating losses and credits that will expire unused. Spectrum Brands estimates the total unused tax benefits are approximately $209.0 and has projected to release approximately $84.0 of valuation allowance during the year ending September 30, 2016. Since the release is expected to be realized as a result of ordinary income in the fiscal year ending September 30, 2016, the entire $84.0 is included in the calculation of the estimated annual effective tax rate for the current year. For the three and six months ended March 31, 2015, the Company’s effective tax rate of 0.3% and (1.4)%, respectively, differed from the expected U.S. statutory tax rate of 35% and was impacted by pretax losses including book valuation impairments and bad debt expense in our Energy and Asset Management segments in the U.S. and certain pretax losses from foreign jurisdictions for which the Company concluded that the tax benefits are not more-likely-than-not to be realized, resulting in the recording of valuation allowances. The six months ended March 31, 2015 included recognition of a nonrecurring net income tax benefit of $12.3 attributable to tax impact related to the impairment of certain Frederick’s of Hollywood Inc. (“FOH”) indefinite lived intangible assets. Due to the indefinite life of these assets for book purposes, the related deferred tax liability was not regarded as a source of taxable income to support the realization of deferred tax assets. Consequently, the impairment recorded resulted in a reduction to the deferred tax liability previously recorded. The majority of NOL, capital loss and tax credit carryforwards of HRG and Spectrum Brands have historically been subject to valuation allowances, as the Company concluded that all or a portion of the related tax benefits are not more-likely-than-not to be realized. Utilization of a portion of the NOL, capital loss and tax credit carryforwards of HRG and Spectrum Brands are subject to limitations under Internal Revenue Code (“IRC”) Sections 382 and 383. Such limitations resulted from ownership changes of more than 50 percentage points over a three-year period. The consummation of the FGL Merger is expected to result in the reversal of a significant portion of the Company’s valuation allowance previously recorded against tax attribute carryforwards that are expected to be realized against the taxable gain. 31 | |
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