Rayovac 2009 Annual Report Download - page 156

Table of Contents
Index to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except per share amounts)
(e) Concentrations of Credit Risk, Major Customers and Employees
Trade receivables subject the Company to credit risk. Trade accounts receivable are carried at net realizable value. The Company extends credit to its
customers based upon an evaluation of the customer’s financial condition and credit history, but 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 nonpayment for a given customer.
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 23% of the Successor Company’s Net sales during the one month ended September 30, 2009 and
approximately 23%, 20% and 20%, of Net sales during the Predecessor Company’s eleven months ended August 30, 2009, Fiscal 2008 and 2007,
respectively. This major customer also represented approximately 14% of the Successor Company’s Trade account receivables, net as of September 30,
2009 and 22% of the Predecessor Company’s Trade account receivables, net as of September 30, 2008.
Approximately 48% of the Successor Company’s Net sales during the one month period ended September 30, 2009 occurred outside of the United
States and approximately 42%, 48% and 51% of the Predecessor’s Company’s Net sales during the eleven month period ended August 30, 2009, Fiscal
2008 and 2007, respectively, occur outside of the United States. 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 of 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
accompanying Consolidated Statements of Financial Position. 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 accompanying Consolidated Statements of Financial Position.
(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.
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