Sunbeam 2012 Annual Report Download - page 59

Jarden Corporation Annual Report 2012 57
Notes to Consolidated Financial Statements
Jarden Corporation Annual Report 2012 (Dollars in millions, except per share data and unless otherwise indicated)
During 2012 and 2011, the change in the unrecognized tax benefits primarily relates to the expiration of certain statutes of
limitations, tax positions taken during the current period, and tax settlements made during the year. At December 31, 2012, the
amount of gross unrecognized tax benefits that, if recognized, would affect the reported tax rate is $72.6. The Company has
indemnification for $1.4 of the gross unrecognized tax benefit from the sellers of acquired companies.
(In millions) 2012 2011
Unrecognized tax benefits, January 1, $ 57.8 $ 55.7
Increases (decreases):
Acquisitions 0.6 —
Tax positions taken during the current period 18.7 3.4
Tax positions taken during a prior period — (0.1)
Settlements with taxing authorities (3.8) (0.2)
Other 1.8 (1.0)
Unrecognized tax benefits, December 31, $ 75.1 $ 57.8
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 2012, the Company’s valuation
allowance increased by $1.2 principally due to the Company’s inability to recognize certain current year foreign losses. During 2011,
the Company’s valuation allowance decreased by $8.4 principally due to the ability to recognize certain foreign losses for which a
valuation allowance was previously established. During 2010, the Company’s valuation allowance was increased by $3.2 principally
due to the inability to benefit from certain foreign losses attributable to the Company’s 2010 acquisitions.
The NOLs reflected on the deferred tax asset table consist of state and foreign net operating loss carryforwards. At December 31,
2012, the Company had net U.S. federal operating losses (“NOLs”) of approximately $804, none of which are reflected in the
consolidated financial statements. In 2012, the Company utilized approximately $33 of these previously unrecognized U.S. federal
NOLs in its consolidated financial statements. Additionally, approximately $721 of these U.S. federal NOLs are subject to varying
limitations on their use under Section 382 of the Internal Revenue Code of 1986, as amended. Included in the total NOLs reported
on the financial statement are $121 of foreign NOLs which the Company has accumulated or acquired through acquisitions. Of the
total foreign NOLs, approximately $1 will expire in 2013. Approximately $35 of the foreign NOLs will expire in years subsequent to
2013, and approximately $85 have an unlimited life.
In 2011, deferred tax assets relating to tax benefits of employee equity compensation awards were reduced by $1.2 to reflect
exercises whereby the book expenses exceed tax deductions that can be claimed. Certain vested and exercised employee equity
compensation awards have resulted in tax deductions in excess of previously recorded tax benefits based on the value of such
equity compensation awards at the time of grant (“windfalls”). The additional tax benefit associated with the windfalls is not
recognized for financial statement purposes until the deduction reduces taxes payable as recorded on the Company’s financial
statements with an offset to additional paid-in-capital. Windfall tax benefits of $41.8 and $3.0 were recognized in 2012 and 2011,
respectively. All previously unrecognized windfall tax benefits were recognized in 2012.
Generally, the Company intends to indefinitely reinvest undistributed earnings of certain of its foreign subsidiaries outside the U.S.
in the future growth of its foreign businesses. As a result, the Company has not provided for U.S. income taxes on undistributed
foreign earnings of approximately $1.1 billion at December 31, 2012. Determination of the amount of unrecognized deferred U.S.
income liability is not practicable, in part, because of the complexities associated with its hypothetical calculation, which include
the impact of complex foreign and domestic tax laws with respect to dividend remittances, remittance requirements imposed by
certain of the Company’s debt agreements and the impact of foreign laws restricting such remittances. In 2012, 2011 and 2010, the
Company recorded a deferred tax charge (benefit) of $2.2, $7.5 and ($2.4), respectively, related to profits that were deemed not to
be permanently reinvested outside of the United States.
The following table sets forth the details and the activity related to unrecognized tax benefit as of and for the years ended
December 31, 2012 and 2011: