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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in capital when those carryforwards are used. These NOLs expire through years ending in 2036. As of September 30, 2016, Spectrum Brands had foreign NOLs of $136.3 and tax benefits of $38.4, which will expire beginning in Fiscal 2017. Certain of the foreign NOLs have indefinite carryforward periods. Spectrum Brands is subject to an annual limitation on use of its NOL carryforwards that arose prior to its emergence from bankruptcy in the fiscal year ended September 30, 2009. Spectrum Brands has had multiple changes of ownership, as defined under IRC Section 382 of the Internal Revenue Code of 1986 as amended, that limits the utilization of Spectrum Brands’ U.S. federal and state net operating losses and other tax attributes. The annual limitation is based on a number of factors, including the value of the Spectrum Brands’ stock (as defined for tax purposes) on the date of the ownership change, its net unrealized gain position on that date, the occurrence of realized gains in years subsequent to the ownership change, and the effects of subsequent ownership changes (as defined for tax purposes), if any. In addition, separate return year limitations apply to limit Spectrum Brands’ utilization of the acquired Russell Hobbs U.S. federal and state NOLs to future income of the Russell Hobbs subgroup. Due to these limitations, Spectrum Brands estimates, as of September 30, 2016, that $460.4 of U.S. federal NOLs with a federal tax benefit of $161.1 and $16.7 of the tax benefit related to state NOLs will expire unused even if Spectrum Brands generates sufficient income to otherwise use all of its NOLs. Spectrum Brands also projects, as of September 30, 2016, that $35.4 of tax benefits related to its foreign NOLs will not be used. Spectrum Brands has provided a full valuation allowance against these deferred tax assets. A valuation allowance is recorded when it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets depends on the ability of Spectrum Brands to generate sufficient taxable income of the appropriate character in the future and in the appropriate taxing jurisdictions. Spectrum Brands has earned pretax profits in the U.S. each of the last three years. Large, profitable U.S. businesses were acquired in Fiscal 2015 and Fiscal 2013, and Spectrum Brands debt levels and blended interest rates have decreased over time. The combination of U.S. operating results and the changes in Spectrum Brands U.S. operating profits led Spectrum Brands to conclude during Fiscal 2016 that 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 released $111.1 of domestic valuation allowance during Fiscal 2016. Approximately $25.1 of the domestic valuation allowance released by Spectrum Brands resulted from additional deferred tax assets created by the adoption of ASU No. 2016-09, effective as of October 1, 2015. In December 2015, the Company received a ruling from the Internal Revenue Service (“IRS”) which resulted in $87.8 of U.S. NOLs being restored and a release of $16.2 of domestic valuation allowance from additional deferred tax assets created by the December 2015 IRS ruling. Spectrum Brands recorded tax expense of $3.1 related to additional foreign valuation allowance during Fiscal 2016. As of September 30, 2016, Spectrum Brands’ valuation allowance was $245.7, of which $203.7 was related to U.S. net deferred tax assets and $42.0 is related to foreign net deferred tax assets. As of September 30, 2015, Spectrum brands’ valuation allowance was $305.4, of which $268.7 was related to the U.S. net deferred tax assets and $36.7 was related to foreign net deferred tax assets. During Fiscal 2016, Spectrum Brands decreased its valuation allowance for deferred tax assets by $59.7, of which $65.0 related to a decrease in valuation allowance against U.S. net deferred tax assets and $5.3 related to an increase in the valuation allowance against foreign net deferred tax assets. During Fiscal 2015, Spectrum Brands decreased its valuation allowance for deferred tax assets by $27.7, of which $30.4 was related to a decrease in the valuation allowance against U.S. net deferred tax assets and $2.7 was related to an increase in the valuation allowance against foreign net deferred tax assets. As a result of the AAG acquisition, Spectrum Brands reversed $22.8 of U.S. valuation allowance during Fiscal 2015. The reversal was attributable to $22.8 of net deferred tax liabilities recorded on the AAG acquisition balance sheet which offset other U.S. net deferred tax assets. During Fiscal 2015, Spectrum Brands recorded valuation allowances of $17.0 against the deferred tax assets of various Latin America entities as it is more-likely-than-not that Spectrum Brands will not obtain tax benefits from these assets. During Fiscal 2014, Spectrum Brands decreased its valuation allowance for deferred tax assets by $121.5, of which $122.6 related to a decrease in the valuation allowance against U.S. net deferred tax assets and $1.1 related to an increase in the valuation allowance against foreign net deferred tax assets. As a result of a one-time internal restructuring and debt refinancing activity, Spectrum Brands reversed $62.6 of U.S. valuation allowance during Fiscal 2014. Uncertain Tax Positions The total amount of unrecognized tax benefits (“UTBs”) at September 30, 2016 and 2015 were $47.9 and $16.1, respectively. If recognized in the future, $47.9 of UTBs would impact the effective tax rate. Consistent with the Company’s accounting policy election, when applicable the Company records interest and penalties related to uncertain tax positions in income tax expense. At September 30, 2016 and 2015, the Company’s accrued balances of interest and penalties on uncertain tax positions totaled $3.2 and $2.8, respectively. For Fiscal 2016 and 2015, interest and penalties increased income tax expense by $0.4 and $0.9, respectively. HRG files U.S. federal consolidated and state and local combined and separate income tax returns. HRG’s consolidated and combined income tax returns do not include Spectrum Brands, Front Street, or FGL (life insurance subsidiaries), each of which files their own consolidated federal, and combined and separate state and local income tax returns. Spectrum Brands, Front Street and FGL life insurance subsidiaries are consolidated with the Company only for financial reporting. F-68 | |
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