Harbinger Group Inc.
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SEC Filings

10-K
HRG GROUP, INC. filed this Form 10-K on 11/23/2016
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The components of income tax expense (benefit) were as follows:
 
 
Fiscal
 
 
2016
 
2015
 
2014
Current:
 
 
 
 
 
 
Federal
 
$
(16.3
)
 
$
(14.7
)
 
$
13.4

Foreign
 
60.2

 
40.4

 
46.6

State
 
2.4

 
4.5

 
6.2

Total current
 
46.3

 
30.2

 
66.2

Deferred:
 
 
 
 
 
 
Federal
 
(6.5
)
 
(54.1
)
 
41.3

Foreign
 
(1.1
)
 
11.2

 
(8.3
)
State
 
2.8

 
(3.5
)
 
(9.6
)
Total deferred
 
(4.8
)
 
(46.4
)
 
23.4

Income tax expense (benefit)
 
$
41.5

 
$
(16.2
)
 
$
89.6

The differences between income taxes expected at the U.S. Federal statutory income tax rate of 35.0% and reported income tax expense (benefit) are summarized as follows:
 
 
Fiscal
 
 
2016
 
2015
 
2014
Expected income tax expense at Federal statutory rate
 
$
81.2

 
$
(107.5
)
 
$
36.4

State and local income taxes
 
12.3

 
(5.1
)
 
1.5

Valuation allowance for deferred tax assets
 
(42.3
)
 
190.8

 
(31.8
)
Preferred stock equity conversion feature
 

 

 
4.4

Residual tax on foreign earnings
 
19.7

 
24.8

 
90.9

Foreign rate differential
 
(38.9
)
 
(29.0
)
 
(23.1
)
Foreign tax law changes
 
(3.7
)
 

 
(7.7
)
Impact of IRC Section 9100 relief
 
(16.4
)
 

 

Share based compensation adjustments
 
(3.4
)
 

 

Benefit from adjustment to tax basis in assets
 
(8.4
)
 

 

Provision to return adjustment
 
4.9

 

 

Permanent items
 
12.9

 
14.4

 
7.9

Exempt foreign income
 

 
(4.7
)
 
(5.7
)
Unrecognized tax benefits
 
33.0

 
(1.5
)
 
2.2

State tax law and rate changes
 

 
(54.5
)
 

NOL adjustments
 

 
9.2

 

Gain on deconsolidation
 

 
(23.3
)
 

Non-deductible goodwill impairment
 

 
9.9

 

Purchase accounting benefit
 

 
(22.8
)
 

Outside basis difference
 
(5.1
)
 
(16.2
)
 

Other
 
(4.3
)
 
(0.7
)
 
14.6

Reported income tax expense (benefit)
 
$
41.5

 
$
(16.2
)
 
$
89.6

Effective tax rate
 
17.9
%
 
5.3
%
 
86.2
%
For Fiscal 2016, the Company’s effective tax rate of 17.9% differed from the expected U.S. statutory tax rate of 35.0%. The Company’s tax rate was reduced by the change in judgement in the realizability on a portion of Spectrum Brands’ U.S. net operating loss (“NOL”) carryforwards that were previously recorded with valuation allowance. This reduction was offset by an increase in valuation allowance needed for current year losses from the Corporate and Other segment in the U.S. that are not more-likely-than-not to be realized. The effective tax rate for Fiscal 2016 also included the tax effects related to the adoption of ASU 2016-09 which resulted in the recognition of excess tax benefits in the Company’s provision for income taxes rather than paid-in capital of $25.6, and $5.9 of excess tax benefits that were recognized in (Loss) income from discontinued operations, net of tax as the excess tax benefits increased net operating loss carryforwards that are expected to offset the tax effects of the FGL Merger. See Note 2, Significant Accounting Policies and Practices and Recent Accounting Pronouncements, for the adoption of ASU 2016-09.
For Fiscal 2015, the Company’s effective tax rate of 5.3% differed from the expected U.S. statutory tax rate of 35.0%. This difference was primarily driven by pretax losses in certain foreign and U.S. entities and jurisdictions, book valuations and

F-65

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