Rayovac 2004 Annual Report Download - page 88

RAYOVAC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except per share amounts)
Undistributed earnings of the Company’s foreign operations amounting to approximately $129,245 and
$79,827 at September 30, 2004 and 2003, respectively, are intended to remain permanently invested to finance
future growth and expansion. Accordingly, no U.S. income taxes have been provided on those earnings at
September 30, 2004 and 2003.
The Company, as of September 30, 2004, has U.S. federal and state net operating loss carryforwards of
approximately $103,525 and $143,038, respectively, which will expire between 2009 and 2024. Annual
limitations apply to a portion of these net operating loss carryforwards. The Company has foreign net operating
loss carryforwards of approximately $75,840 which will expire between 2005 and 2013. At September 30, 2004,
the Company has recorded a deferred tax asset for the benefit of these losses.
A valuation allowance is recorded when it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of the deferred tax assets depends on the ability to generate
sufficient taxable income of the appropriate character in the future and in the appropriate taxing jurisdictions. As of
September 30, 2004, the Company’s valuation allowance, established for the tax benefit of U.S. domestic and
foreign net operating loss carryforwards that may not be realized, totaled $11,482. Changes in the allowance during
2004 were primarily due to the inclusion of $9,449 related to the tax benefit of acquired net operating loss
carryforwards of Microlite and Remington which, if subsequently realized, will reduce goodwill or other noncurrent
intangible assets of the acquired entity. In addition, the valuation allowance was reduced by $3,678 as tax benefits
of acquired Remington net operating loss carryforwards were realized and allocated to reduce goodwill.
During 2004, the Company recognized a deferred tax liability of $17,000 which was established for the
difference in the book basis and tax basis of the VARTA trade name. The establishment of this liability increased
the value of goodwill associated with the VARTA acquisition.
(10) Discontinued Operations
The Company has reflected Remington’s United States and United Kingdom Service Centers as discontinued
operations. The Company discontinued operations at these Service Centers during 2004 as part of the Remington
integration initiatives. See Note 15, Restructuring and Related Charges, for additional discussion of Remington
integration initiatives. The following amounts have been segregated from continuing operations and are reflected
as discontinued operations for the year ended September 30, 2004:
2004
Net sales .......................................................... $21,470
Loss from discontinued operations before income taxes ..................... $ 778
Provision for income tax benefits ...................................... (398)
Loss from discontinued operations, net of tax ............................. $ 380
Depreciation expense associated with discontinued operations ................ $ 263
(11) Employee Benefit Plans
Pension Benefits
The Company has various defined benefit pension plans covering some of its employees in the United States and
certain employees in other countries. Plans generally provide benefits of stated amounts for each year of service.
The Company’s practice is to fund pension costs at amounts within the acceptable ranges established by the
Employee Retirement Income Security Act of 1974, as amended.
The Company also sponsors or participates in a number of other non-U.S. pension arrangements, including
various retirement and termination benefit plans, some of which are covered by local law or coordinated with
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