Rayovac 2008 Annual Report Download - page 160

Table of Contents
Index to Financial Statements
SPECTRUM BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except per share amounts)
Company’s fiscal year ended September 30, 2004 are closed. However, the federal net operating loss carryforward from the Company’s fiscal year ended
September 30, 2004 is subject to Internal Revenue Service (“IRS”) examination until the year that such net operating loss carryforward is utilized and that year is
closed for audit. The Company’s fiscal years ended September 30, 2005, 2006 and 2007 remain open to examination by the IRS. Filings in various U.S. state and
local jurisdictions are also subject to audit and to date no significant audit matters have arisen.
During Fiscal 2008, certain of the German legal entities acquired by the Company in April, 2005 settled German tax audits for the fiscal years ended 2001
through 2004. As a result of the settlement, the Company reduced its unrecognized tax benefits by approximately $734, resulting in a reduction of goodwill of
approximately $379 and the remainder of which was reclassified as a current tax liability.
The Company cannot predict the ultimate outcome of its current tax examinations. However, it is reasonably possible that during the next 12 months some
portion of previously unrecognized tax benefits could be recognized.
SFAS 142 requires companies to test goodwill and indefinite-lived intangible assets for impairment annually, or more often if an event or circumstance
indicates that an impairment loss may have been incurred. During 2008 and 2007, the Company, as a result of its testing, recorded non-cash pre tax impairment
charges of $866,934 and $362,452, respectively. The tax impact, prior to consideration of the current year valuation allowance, of the impairment charges was a
deferred tax benefit of $145,059 and $76,500 in Fiscal 2008 and 2007, respectively, as a result of a significant portion of the impaired assets not being deductible
for tax purposes.
(11) Discontinued Operations
In the third quarter of the Company’s fiscal year ended September 30, 2006, the Company engaged advisors to assist it in exploring possible strategic options,
including divesting certain assets, in order to reduce its outstanding indebtedness. In connection with this undertaking, during the first quarter of the Company’s
fiscal year ended September 30, 2007 the Company approved and initiated a plan to sell the Home and Garden Business, which at the time was comprised of
United States (“U.S.”) and Canadian divisions. As a result, the Company designated certain assets and liabilities related to the Home and Garden Business as
held for sale and designated the Home and Garden Business as discontinued operations.
On November 1, 2007, the Company sold the Canadian division of the Home and Garden Business, which operated under the name Nu-Gro, to a new
company formed by RoyCap Merchant Banking Group and Clarke Inc. Cash proceeds received at closing, net of selling expenses, totaled $14,931 and were used
to reduce outstanding debt. These proceeds are included in net cash provided by investing activities of discontinued operations in the Consolidated Statements of
Cash Flows included in this Annual Report on Form 10-K. On February 5, 2008, the Company finalized the contractual working capital adjustment in connection
with this sale which increased proceeds received by the Company by $500. As a result of the finalization of the contractual working capital adjustments the
Company recorded a loss on disposal of $1,087, net of tax benefit.
During the second quarter of the Company’s fiscal year ended September 30, 2008 the Company determined that in view of the difficulty in predicting the
timing or probability of a sale of the Home and Garden Business, the requirements of SFAS 144, necessary to classify the Home and Garden Business as
discontinued operations were no longer met. As a result, effective December 31, 2007, the Company reclassified the Home and Garden Business, which had been
designated as a discontinued operation since October 1, 2006, as a continuing
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Source: Spectrum Brands, Inc, 10-K, December 10, 2008