Sunbeam 2007 Annual Report Download - page 97

Deferred tax (liabilities) assets are comprised of the following (in millions):
As of December 31,
2007 2006
Property and equipment ............................................. $ — $ (3.2)
Intangibles ....................................................... (374.6) (207.1)
Goodwill ......................................................... (78.2) (68.9)
Financial reporting amount of a subsidiary in excess of tax basis ............. (72.5) (72.5)
Foreign earnings not permanently reinvested ............................. (9.6) —
Other ............................................................ (18.0) (3.3)
Gross deferred tax liabilities ...................................... (552.9) (355.0)
Net operating loss .................................................. 138.9 89.4
Accounts receivable allowances ....................................... 16.7 7.2
Inventory valuation ................................................. 36.0 23.2
Pension and postretirement ........................................... 24.3 31.3
Stock-based compensation ........................................... 14.5 14.1
Other compensation and benefits ...................................... 13.2 5.4
Operating reserves ................................................. 95.1 78.1
Property and equipment ............................................. 11.1 —
Other ............................................................ 44.1 24.0
Gross deferred tax assets ........................................ 393.9 272.7
Valuation allowance ................................................ (35.7) (28.8)
Net deferred tax liability ............................................. $(194.7) $(111.1)
In 2006, the Company internally reorganized its Consumer Solutions segment, which resulted in a $13.6 tax
charge.
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 2007, the Company’s valuation allowance increased by $6.9 principally due to
pre-acquisition operating losses for which a valuation allowance is required. The portion of the valuation
allowance for which subsequently recognized tax benefits will be allocated to reduce goodwill or non-current
intangible assets is $32.6.
At December 31, 2007, the Company had net operating losses (“NOLs”) of approximately $1.2 billion for
domestic tax purposes. Of this amount, $1.05 billion were acquired through acquisitions, of which approximately
$849 are not reflected on the financial statements. Additionally, $1.05 billion of these domestic NOLs are subject
to varying limitations on their use under Section 382 of the Internal Revenue Code.
The Company has also accumulated or acquired through acquisition approximately $106 of foreign NOLs.
Of the total foreign NOLs, approximately $7 will expire in years ending December 31, 2008 through 2010. Of
the remaining foreign NOLs, approximately $6 will expire in years subsequent to 2010, and approximately $93
have an unlimited life.
The Internal Revenue Service (“IRS”) audit of the Company’s federal income tax returns for its fiscal years
ended December 31, 2003 and 2004 was closed in the fourth quarter of 2007. Adjustments have been fully
recorded in the Company’s tax contingency account. Additionally, IRS audits of two of the Company’s acquired
subsidiaries for tax years prior to the Company’s acquisition of those subsidiaries, were also closed in 2007 with
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