SEC Filings
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| 10-K | |
| HRG GROUP, INC. filed this Form 10-K on 11/23/2016 | |
| Entire Document | |
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allowance against the remaining deferred tax assets at September 30, 2016 was appropriate. HRG’s valuation allowance at September 30, 2016 and 2015 totaled $266.4 and $594.5, respectively. This resulted from the Company’s conclusion that tax benefits on its NOLs are not more-likely-than-not realizable. At September 30, 2016 and 2015, HRG had approximately $1,170.5 and $815.3, respectively, of gross U.S. Federal NOL carryforwards, which, if unused, will expire in years 2028 through 2036. HRG had approximately $322.4 and $77.8 of gross U.S. federal capital loss carryforwards at September 30, 2016 and 2015, respectively, which, if unused, will expire in the tax years ended December 31, 2016 through 2021. The increase in capital loss carryforwards in Fiscal 2016 was due to the Compass Sale. At September 30, 2016 and 2015, HRG had approximately $93.9 and $109.8, respectively, of tax benefits related to U.S. state NOL carryforwards at September 30, 2016, which, if unused, will expire in the tax years ended December 31, 2028 through 2036. During Fiscal 2016, HRG decreased its net valuation allowance for deferred tax assets by $331.6, of which $373.8 was primarily related to the reversal of valuation allowance against certain U.S. federal net deferred tax assets as a result of recognizing a deferred tax liability on HRG’s investment in FGL and was included in Net (loss) income from discontinued operations. Partially offset by an increase of $145.3, which was allocated to accumulated other comprehensive income consistent with the source of taxable income available for realization. See Note 4, Divestitures for discussion of the FGL Merger. Included in the net decrease in valuation allowance was an increase of $89.5 which resulted from the tax effect related to current year losses from the Corporate and Other segment. During Fiscal 2015, HRG increased its valuation allowance for deferred tax assets by $309.0, of which $248.6 was related to an increase in valuation allowance against U.S. net deferred taxes and $60.4 was related to an increase in valuation allowance against state net deferred taxes. On September 30, 2013, HRG triggered a change of ownership, as defined under Internal Revenue Code (the “IRC”) Section 382 which limits the utilization of HRG’s U.S. federal and state NOLs and other tax attributes. The amount of the limitation is based on a number of factors, including the value of HRG’s stock (as defined for tax purposes) on the date of the ownership change, its net unrealized gain position on that date (as defined for tax purposes), the occurrence of realized gains in years subsequent to the ownership change, and the effects of subsequent changes in ownership, if any. Such factors, including the recognition of unrealized gains, may not be relied upon when assessing the realizability of HRG’s deferred tax assets on its U.S. federal and state net operating losses. The majority of NOL, capital loss and tax credit carryforwards of HRG was historically 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 is subject to limitations under Sections 382 and 383 of IRC. Such limitations resulted from ownership changes of more than 50 percentage points over a three-year period. When consummated, the FGL Merger is expected to result in a significant amount of tax attribute carryforwards to be realized. As a result, in Fiscal 2016, we reversed a significant portion of the Company’s valuation allowance previously recorded against tax attribute carryforwards that are expected to be realized against the tax effects of the FGL Merger. HRG has considered the impact of the 2013 Section 382 ownership change and the related limitations in assessing its need for a valuation allowance. There has been no further ownership change since the September 30, 2013 ownership change. Spectrum Brands During the fourth quarter of Fiscal 2015, Spectrum Brands recognized $23.3 of deferred tax assets related to its investment in one of its foreign subsidiaries because it was expected to reverse in the foreseeable future. The deferred tax asset reversed during Fiscal 2016. Spectrum Brands also recorded $14.4 reduction in its NOL deferred tax assets, with a corresponding reduction in the valuation allowance, to reflect losses used as a result of prior year adjustments. To the extent necessary, Spectrum Brands intends to utilize earnings of foreign subsidiaries in order to support management’s plans to voluntarily accelerate pay down of U.S. debt, fund distributions to shareholders, fund U.S. acquisitions and satisfy ongoing U.S. operational cash flow requirements. As a result, current and certain prior period earnings of Spectrum Brands’ non-U.S. subsidiaries are generally not considered to be permanently reinvested, except in jurisdictions where repatriation is either precluded or restricted by law. Spectrum Brands annually estimates the available earnings, permanent reinvestment classification and the availability of and management’s intent to use alternative mechanisms for repatriation for each jurisdiction in which Spectrum Brands does business. Accordingly, Spectrum Brands is providing residual U.S. and foreign deferred taxes on these earnings to the extent they cannot be repatriated in a tax-free manner. Spectrum Brands has provided residual taxes on $102.0 of distributions from foreign earnings for Fiscal 2016 with $93.6 of earnings not yet taxed in the U.S. resulting in an increase in income tax expense of $36.7. The residual domestic taxes from foreign earnings are recognized as a reduction to NOL and credit carryforwards deferred tax assets and taxes on unremitted foreign earnings are recognized as a deferred tax liability. Spectrum Brands has provided residual taxes on $37.5 of distributions from foreign earnings for Fiscal 2015 with no earnings not yet taxed in the U.S. resulting in a decrease in income tax expense of $0.3. Remaining undistributed earnings of Spectrum Brands’ foreign operations are $219.4 at September 30, 2016, and are intended to remain permanently invested. Accordingly, no residual income taxes have been provided on those earnings. If at some future date these earnings cease to be permanently invested, Spectrum Brands may be subject to U.S. income taxes and foreign withholding and other taxes on such amounts, which cannot be reasonably estimated at this time. At September 30, 2016, Spectrum Brands had U.S. federal NOL carryforwards of $758.9 with a federal tax benefit of $265.6 and tax benefits related to state NOLs of $60.6 and capital loss carryforwards of $19.8 with a federal and state tax benefit of $7.6. Spectrum Brands has an additional $4.3 of federal and state NOLs for which benefits will be recorded to additional paid- F-67 | |
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