Rayovac 2015 Annual Report Download - page 149

SPECTRUM BRANDS HOLDINGS, INC.
SB/RH HOLDINGS, LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
$2.7 million related to an increase in the valuation allowance against foreign net deferred tax asset. As a result of
the AAG acquisition, the Company reversed $22.8 million of U.S. valuation allowance during the year ended
September 30, 2015. The reversal was attributable to $22.8 million of net deferred tax liabilities recorded on the
AAG acquisition balance sheet which offset other U.S net deferred tax assets. During the year ended
September 30, 2015, the Company recorded valuation allowances of $17.0 million against the deferred tax assets
of various Latin America entities as it is more likely than not that the Company will not obtain tax benefits from
these assets. During the year ended September 30, 2014, the Company decreased its valuation allowance for
deferred tax assets by $121.5 million, of which $122.6 million related to a decrease in the valuation allowance
against U.S. net deferred tax assets and $1.1 million related to an increase in the valuation allowance against
foreign net deferred tax assets. As a result of the one time internal restructuring and debt refinancing activities,
the Company reversed $62.6 million of U.S. valuation allowance during the year ended September 30, 2014. As
a result of the purchase of HHI Business, the Company reversed $49.8 million of U.S. valuation allowance
during the year ended September 30, 2013. The reversal was attributable to $49.8 million of net deferred tax
liabilities recorded on the HHI Business purchase accounting balance sheet which offset other U.S. net deferred
tax assets.
The total amount of unrecognized tax benefits at September 30, 2015 and 2014 are $14.1 million and
$11.3 million, respectively. If recognized in the future, $11.4 million of the unrecognized tax benefits as of
September 30, 2015 will impact the effective tax rate and $2.7 million of unrecognized tax benefits would create
deferred tax assets against which the Company would have a full valuation allowance. The Company recognizes
interest and penalties related to uncertain tax positions in income tax expense. As of September 30, 2015 and
2014 the Company had $2.8 million and $3.5 million, respectively, of accrued interest and penalties related to
uncertain tax positions. The impact on income tax expense related to interest and penalties for the years ended
September 30, 2015, 2014 and 2013 was a net increase of $0.9 million, a net increase of $1.1 million and a net
decrease of less than $0.1 million, respectively. The following table summarizes the changes to the amount of
unrecognized tax benefits for the years ended September 30, 2015, 2014 and 2013:
2015 2014 2013
(in millions)
Unrecognized tax benefits, beginning of year ................ $11.3 $13.8 $ 5.9
Gross increase—tax positions in prior period ............ 4.1 1.5 9.1
Gross decrease—tax positions in prior period ............ (1.9) (1.4) (0.3)
Gross increase—tax positions in current period .......... 1.8 0.7 0.5
Settlements ....................................... (0.9) (2.5) (0.1)
Lapse of statutes of limitations ....................... (0.3) (0.8) (1.3)
Unrecognized tax benefits, end of year ..................... $14.1 $11.3 $13.8
The Company files income tax returns in the U.S. federal jurisdiction and various state, local and foreign
jurisdictions and is subject to ongoing examination by the various taxing authorities. The Company’s major
taxing jurisdictions are the U.S., United Kingdom and Germany. In the U.S., federal tax filings for years prior to
and including the Company’s fiscal year ended September 30, 2011 are closed. However, the federal NOLs from
the Company’s fiscal years ended September 30, 2011 and prior are subject to Internal Revenue Service (“IRS”)
examination until the year that such net operating loss carryforwards are utilized and those years are closed for
audit. Filings in various U.S. state and local jurisdictions are also subject to audit and to date no significant audit
matters have arisen. As of September 30, 2015, certain of the Company’s legal entities are undergoing income
tax audits. The Company cannot predict the ultimate outcome of the examinations; however, it is reasonably
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