Rayovac 2009 Annual Report Download - page 159

Table of Contents
Index to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except per share amounts)
such as unexpected adverse business conditions, economic factors, unanticipated technological change or competitive activities, loss of key personnel, and
acts by governments and courts may signal that an asset has become impaired. Several triggering events occurred during Fiscal 2008 and Fiscal 2007 which
required the Company to test its indefinite−lived intangible assets for impairment between annual impairment test dates. As more fully discussed above in
Note 1, Description of Business, on May 20, 2008, the Company entered into a definitive agreement for the sale of Global Pet Supplies with Salton and
Applica, which was subsequently terminated. The Company’s intent to dispose of Global Pet Supplies constituted a triggering event for impairment testing.
The Company estimated the fair value of Global Pet Supplies, and the resultant estimated impairment charge of goodwill, based on the negotiated sales
price of Global Pet Supplies, which management deemed the best indication of fair value at that time. Accordingly, the Company recorded a non−cash
pretax charge of $154,916 to reduce the carrying value of goodwill related to Global Pet Supplies to reflect the estimated fair value of the business during
the third quarter of Fiscal 2008. Goodwill and trade name intangible assets of the Home and Garden Business were tested during the third quarter of Fiscal
2008, as a result of lower forecasted profits from this business. This decrease in profitability was primarily due to significant cost increases in certain raw
materials used in the production of many of the lawn fertilizer and growing media products manufactured by the Company as well as more conservative
growth rates to reflect the current and expected future economic conditions for this business. The Company first compared the fair value of this reporting
unit with its carrying amounts, including goodwill. This first step indicated that the fair value of the Home and Garden Business was less than the
Company’s carrying amount of this reporting unit and, accordingly, further testing of goodwill was required to determine the impairment charge.
Accordingly, the Company then compared the carrying amount of the Home and Garden Business goodwill against the implied fair value of such goodwill.
The carrying amount of the Home and Garden Business goodwill exceeded its implied fair value and, therefore, during Fiscal 2008 the Company recorded a
non−cash pretax impairment charge equal to the excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of such goodwill
of approximately $110,213. In addition, during the third quarter of Fiscal 2008, the Company concluded that the implied fair values of certain trade name
intangible assets related to the Home and Garden Business were less that the carrying amounts of those assets and, accordingly, during Fiscal 2008 recorded
a non−cash pretax impairment charge of $22,000. Goodwill and trade name intangibles of the Home and Garden Business were tested during the first
quarter of Fiscal 2008 in conjunction with the Company’s reclassification of that business from an asset held for sale to an asset held and used. The
Company first compared the fair value of this reporting unit with its carrying amounts, including goodwill. This first step indicated that the fair value of the
Home and Garden Business was in excess of its carrying amounts and, accordingly, no further testing of goodwill was required. In addition, during the first
quarter of Fiscal 2008, the Company concluded that the implied fair values of certain trade name intangible assets related to the Home and Garden Business
were less that the carrying amounts of those assets and, accordingly, during Fiscal 2008 recorded a non−cash pretax impairment charge of $12,400. All of
the Company’s goodwill and trade name intangibles were tested during the second quarter of Fiscal 2007 in conjunction with the Company’s realignment of
reportable segments which occurred in January 2007. The Company first compared the fair value of its reporting units with the respective carrying amounts,
including goodwill. This first step indicated that the fair value of the Company’s North America geographic reporting unit, which is now included in the
Global Batteries & Personal Care reportable segment, was less than the Company’s North America reporting unit’s carrying amount and, accordingly,
further testing of goodwill was required to determine the impairment charge. Accordingly, the Company then compared the carrying amount of the North
America reporting unit’s goodwill against the implied fair value of such goodwill. The carrying amount of the North America reporting unit’s goodwill
exceeded its implied fair value and, therefore, during Fiscal 2007 the Company recorded a non−cash pretax impairment charge equal to the excess of the
carrying amount of the reporting unit’s goodwill over the implied fair value of such goodwill of approximately $214,039. In addition, during the second
quarter of Fiscal 2007, the Company concluded that the implied fair values of its trade name intangible assets were in excess of the carrying amounts of
those assets and, accordingly, no impairment of trade name intangibles was recorded.
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