Sunbeam 2008 Annual Report Download - page 56

Notes to Consolidated Financial Statements
Jarden Corporation Annual Report 2008 (Dollars in millions, except per share data and unless otherwise indicated)
At December 31, 2008, the Company had net operating losses (“NOLs”) of approximately $1.2 billion for domestic tax purposes. Of
this amount, approximately $1.0 billion were acquired through acquisitions, of which approximately $849 are not reflected on the financial
statements. Additionally, approximately $1.0 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 $116 of foreign NOLs. Of the total foreign NOLs,
none will expire in years ending December 31, 2009 through 2010. Approximately $22 of the foreign NOLs will expire in years subsequent to
2010, and approximately $94 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 and payment of assessments was made by the Company in 2008. Additionally, the IRS
audits of two of the Company’s acquired subsidiaries for tax years prior to the Company’s acquisition of those subsidiaries (fiscal tax years
ending December 31, 2004 and January 24, 2005, and tax years 2001 through 2004) were also closed in 2008. Adjustments have been fully
recorded in the Company’s tax accounts as appropriate. The Company and/or its subsidiaries are also subject to state and foreign income
tax audits. The Company believes that adequate amounts have been reserved for any adjustments that may ultimately result from
these examinations.
Generally, the Company intends to indefinitely reinvest undistributed earnings of certain of its foreign subsidiaries outside the
United States. As a result the Company has not provided for U.S. income taxes on undistributed foreign earnings of approximately $625 at
December 31, 2008. The Company intends to permanently reinvest these earnings in the future growth of its foreign businesses under the
guidance provided in APB Opinion No. 23, “ Accounting for Income Taxes—Special Areas”. Determination of the amount of unrecognized
deferred U.S. income liability is not practicable because of the complexities associated with its hypothetical calculation. In 2008 and 2007,
the Company recorded a $7.9 and $9.7, respectively, deferred tax charge related to profits that were deemed not to be permanently
reinvested outside of the United States.
Effective January 1, 2007, the Companyadopted the provisions of FIN 48. As a result, the Company now applies a more-likely-than-
not recognition threshold for all tax uncertainties. The Company measures and recognizes a benefit for tax positions that meet the more-
likely-than-not recognition threshold. For tax uncertainties that have a greater than 50% likelihood of being sustained upon examination,
the benefit is measured based upon the likely amount to be realized upon ultimate settlement. As a result of the adoption of FIN 48 the
Company recognized a $0.6 decrease in retained earnings as of January 1, 2007.
The following table sets forth the details and the activity related to unrecognized tax benefit of and for the years ended
December 31, 2008 and 2007:
(In millions) 2008 2007
Unrecognized tax benefits, January 1, $96.7 $ 68.0
Increases (decreases):
Acquisitions (22.6) 28.9
Tax positions taken during the current period 2.7 2.4
Tax positions taken during a prior period (0.6) 5.8
Settlements with taxing authorities (2.8) (9.5)
Other (0.4) 1.1
Unrecognized tax benefits, December 31, $ 73.0 $ 96.7
The Company’s gross unrecognized tax benefit at the date of adoption of FIN 48 was approximately $68. During 2008, the change
in the unrecognized tax benefits primarily relates to the adjustment of acquired unrecognized tax benefits and the settlement of the
Company’s 2003 and 2004 domestic audits. The amount of gross unrecognized tax benefits recorded at the date of acquisition of K2 and
Pure Fishing were approximately $7.1 and $4.4, respectively. During 2008, the Company paid federal income tax of approximately $3.3 and
interest of approximately $0.7 attributable to a recently agreed upon IRS audit. Additionally, the Company received refunds of approximately
$1.1 from the settlement of an audit of a subsidiary. At December 31, 2008, the amount of gross unrecognized tax benefits that, if
recognized, would affect the reported tax rate is approximately $73.0. The Company is indemnified for approximately $10.8 of the gross
unrecognized tax benefit from the sellers of acquired companies.
The Company conducts business globally and, as a result, the Company or its subsidiaries file income tax returns in the U.S. federal
jurisdiction and various states, local, and foreign jurisdictions. In the normal course of business, the Company or its subsidiaries are subject to
examination bytax authorities throughout the world, including such major jurisdictions as Canada, France, Germany, Hong Kong, Japan,
Mexico, Venezuela, and the United States. The Company is currently under examination for the income tax filings in various state and
foreign jurisdictions.
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