Rayovac 2014 Annual Report Download - page 119

SPECTRUM BRANDS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(Amounts in thousands, except per share figures)
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 the Company’s non-U.S. subsidiaries are generally not
considered to be permanently reinvested, except in jurisdictions where repatriation is either precluded or
restricted by law. The Company 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 the Company does business. Accordingly, the Company is providing residual U.S. and
foreign deferred taxes on these earnings to the extent they cannot be repatriated in a tax-free manner. As of
September 30, 2014, the Company has provided residual taxes on approximately $190,497 of Fiscal 2014
distributions of foreign earnings, and $3,059 of earnings not yet taxed in the U.S. resulting in a Fiscal 2014
increase in tax expense, net of a corresponding adjustment to the Company’s domestic valuation allowance, of
approximately $74. As of September 30, 2013, the Company had recorded residual U.S. and foreign taxes on
approximately $12,506 of Fiscal 2013 distributions and $45,735 of earnings not yet taxed in the U.S., resulting in
a Fiscal 2013 increase in tax expense, net of a corresponding adjustment to the Company’s domestic valuation
allowance, of approximately $109. As of September 30, 2012, the Company recorded residual U.S. and foreign
taxes on approximately $21,163 of Fiscal 2012 distributions of foreign earnings and $76,574 of earnings not yet
taxed in the U.S. resulting in a Fiscal 2012 increase in tax expense, net of a corresponding adjustment to the
Company’s domestic valuation allowance, of approximately $3,278. During Fiscal 2014, $178,716 of the
distributions related to one-time internal restructuring and external debt refinancing activities. Due to the U.S.
valuation allowance, these activities did not result in a Fiscal 2014 tax increase. Fiscal 2013 and 2012
distributions were primarily non-cash deemed distributions under U.S. tax law.
Remaining undistributed earnings of the Company’s foreign operations are approximately $351,483 at
September 30, 2014, and are intended to remain permanently invested. Accordingly, no residual income taxes
have been provided on those earnings at September 30, 2014. If at some future date these earnings cease to be
permanently invested, the Company 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.
As of September 30, 2014, the Company has U.S. federal net operating loss carryforwards (“NOLs”) of
approximately $1,087,769 with a federal tax benefit of $380,719, and tax benefits related to state NOLs of
$70,285. The Company has an additional $45,539 of federal and state NOLs for which benefits will be recorded
to Additional paid-in capital when these carryforwards are used. These net operating loss carryforwards expire
through years ending in 2034. As of September 30, 2014, the Company has foreign NOLs of approximately
$106,496 which will expire beginning in the Company’s fiscal year ending September 30, 2015. Certain of the
foreign NOLs have indefinite carryforward periods. The Company is subject to an annual limitation on the use of
its NOLs that arose prior to its emergence from bankruptcy in the fiscal year ended September 30, 2009. The
Company has had multiple changes of ownership, as defined under Section 382 of the Internal Revenue Code of
1986, as amended, that subject the Company’s U.S. federal and state NOLs and other tax attributes to certain
limitations. The annual limitation is based on a number of factors including the value of the Company’s 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. Due to these limitations, the Company estimates, as of
September 30, 2014, that $301,749 of the total U.S. federal NOLs with a federal tax benefit of $105,612 and
$16,812 of the tax benefit related to state NOLs will expire unused even if the Company generates sufficient
income to otherwise use all of its NOLs. In addition, separate return year limitations apply to limit the
Company’s utilization of the acquired Russell Hobbs U.S. federal and state NOLs to future income of the Russell
Hobbs subgroup. The Company also projects, as of September 30, 2014, that $88,769 of foreign NOLs will not
be used. The Company has provided a full valuation allowance against these deferred tax assets.
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