Sunbeam 2005 Annual Report Download - page 69

Jarden Corporation
Notes to Consolidated Financial Statements (cont’d)
December 31, 2005
Foreign pre-tax income was $77.1 million, $5.1 million, and $3.2 million for the years ended
December 31, 2005, 2004, and 2003, respectively.
Deferred tax (liabilities) assets are comprised of the following:
As of December 31,
(millions of dollars) 2005 2004
Property and equipment ................................................... $ (2.9) $ (1.9)
Intangibles .............................................................. (126.3) (15.7)
Goodwill ................................................................ (66.3) (20.5)
Financial reporting amount of a subsidiary in excess of tax basis .................. (67.9) —
Other .................................................................. (8.5) (2.7)
Gross deferred tax liabilities ........................................... (271.9) (40.8)
Net operating loss ........................................................ 103.0 3.4
Accounts receivable allowances ............................................. 15.6 3.3
Inventory valuation ....................................................... 24.7 4.6
Pension and OPEB ....................................................... 31.2 3.9
Stock-based compensation ................................................. 11.6 —
Other compensation and benefits ........................................... 14.5 1.1
Operating reserves ....................................................... 78.3 0.2
Other .................................................................. 18.5 4.0
Gross deferred tax assets .............................................. 297.4 20.5
Valuation allowance ...................................................... (62.3) (1.0)
Net deferred tax liability .................................................. $ (36.8) $(21.3)
Due to the issuance of legislative regulations in 2004, and prior to its acquisition by the Company (see
Note 3), AHI undertook an analysis of the tax laws applicable to the forgiveness of debt upon the
confirmation of the Sunbeam Corporation’s Third Amended Plan of Reorganization, effective as of
December 18, 2002. Such analysis resulted in adjustments to certain deferred tax assets and liabilities. The
following adjustments are reflected in the deferred tax asset (liability) schedule above:
‰The deferred tax asset associated with net operating losses (“NOLs”) and tax credits of the
Company accumulated by American Household, Inc. through 2002 and a corresponding amount of
valuation allowance have both been reduced by $390 million.
‰A deferred tax liability of $67.9 million has been recorded for the difference between the financial
reporting amount and the tax basis of stock in a wholly-owned subsidiary held by the Company.
The Company continually reviews the adequacy of the valuation allowance. A valuation allowance is
recorded if, based on the weight of available evidence, it is more likely than not that a deferred tax asset
will not be realized. This assessment is based on an evaluation of the level of historical taxable income and
projections for future taxable income. During 2005, the Company’s valuation allowance increased from $1.0
million to $62.3 million primarily due to the AHI Acquisition. The portion of the valuation allowance for
which subsequently recognized tax benefits will be allocated to reduce goodwill or non-current intangible
assets resulting from the acquisition of AHI is $61 million.
At December 31, 2005, the reserve for tax contingencies related to issues in the United States and
foreign locations was $27.0 million, of which $25.0 million of that increase resulted from the AHI
Acquisition and the THG Acquisition.
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