Rayovac 2004 Annual Report Download - page 73

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RAYOVAC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except per share amounts)
(d) Cash Equivalents
For purposes of the Consolidated Statements of Cash Flows, the Company considers all highly liquid debt
instruments purchased with original maturities of three months or less to be cash equivalents.
(e) Concentrations of Credit Risk, Major Customers and Employees
Trade receivables subject the Company to credit risk. The Company extends credit to its customers based upon
an evaluation of the customer’s financial condition and credit history and generally does not require collateral.
The Company monitors its customers’ credit and financial condition based on changing economic conditions and
will make adjustments to credit policies as required. Provision for losses on uncollectible trade receivables are
determined principally on the basis of past collection experience applied to ongoing evaluations of the
Company’s receivables and evaluations of the risks of repayment. The Company has historically incurred
minimal credit losses, but in 2002 experienced a significant loss resulting from the bankruptcy filing of a large
retailer in the United States.
The Company has a broad range of customers including many large retail outlet chains, one of which
accounts for a significant percentage of its sales volume. This major customer represented approximately 19%,
13% and 26% of its net sales during 2004, 2003 and 2002, respectively. This major customer also represented
approximately 16% and 13%, respectively, of Trade account receivables, net as of September 30, 2004 and 2003.
Approximately 54% of the Company’s sales occur outside of North America. These sales and related
receivables are subject to varying degrees of credit, currency, and political and economic risk. The Company
monitors these risks and makes appropriate provisions for collectibility based on an assessment of the risks
present.
(f) Displays and Fixtures
Temporary displays are generally disposable cardboard displays shipped to customers to facilitate display of the
Company’s products. Temporary displays are generally disposed after a single use by the customer.
Permanent fixtures are permanent in nature, generally made from wire or other permanent racking, which
are shipped to customers for display of the Company’s products. These permanent fixtures are restocked with the
Company’s product multiple times over the fixture’s useful life.
The costs of both temporary and permanent displays are capitalized as a prepaid asset and are included in
Prepaid expenses and other in the Consolidated Balance Sheets. The costs of temporary displays are expensed in
the period in which they are shipped to customers and the costs of permanent fixtures are amortized over an
estimated useful life of one to two years once they are shipped to customers and are reflected in Deferred charges
and other in the Consolidated Balance Sheets.
(g) Inventories
The Company’s inventories are valued at the lower of cost or market. Cost of inventories is determined using the
first-in, first-out (FIFO) method.
(h) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation on plant and equipment is calculated on the
straight-line method over the estimated useful lives of the assets. Depreciable lives by major classification are as
follows:
Building and improvements ........................................ 20-30 years
Machinery, equipment and other .................................... 2-15 years
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