Rayovac 2010 Annual Report Download - page 110

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except per share amounts)
Successor Company issued a total of 2,970 shares of common stock to supplemental and sub-supplemental
debtor-in-possession facility participants in respect of the equity fee earned under the Debtors’
debtor-in-possession credit facility.
Accounting for Reorganization
Subsequent to the date of the Bankruptcy Filing (the “Petition Date”), the Company’s financial statements
are prepared in accordance with ASC 852. ASC 852 does not change the application of U.S. Generally Accepted
Accounting Principles (“GAAP”) in the preparation of the Company’s consolidated financial statements.
However, ASC 852 does require that financial statements, for periods including and subsequent to the filing of a
Chapter 11 petition, distinguish transactions and events that are directly associated with the reorganization from
the ongoing operations of the business. In accordance with ASC 852 the Company has done the following:
• On the four column consolidated statement of financial position as of August 30, 2009, which is
included in this Note 2, Voluntary Reorganization Under Chapter 11, separated liabilities that are
subject to compromise from liabilities that are not subject to compromise;
• On the accompanying Consolidated Statements of Operations, distinguished transactions and events
that are directly associated with the reorganization from the ongoing operations of the business;
• On the accompanying Consolidated Statements of Cash Flows, separately disclosed Reorganization
items expense (income), net, consisting of the following: (i) Fresh-start reporting adjustments; (ii) Gain
on cancelation of debt; and (iii) Administrative related reorganization items; and
• Ceased accruing interest on the Predecessor Company’s then outstanding senior subordinated notes.
Liabilities Subject to Compromise
Liabilities subject to compromise refer to known liabilities incurred prior to the Bankruptcy Filing by those
entities that filed for Chapter 11 bankruptcy. These liabilities are considered by the Bankruptcy Court to be
pre-petition claims. However, liabilities subject to compromise exclude pre-petition claims for which the
Company has received the Bankruptcy Court’s approval to pay, such as claims related to active employees and
retirees and claims related to certain critical service vendors. Liabilities subject to compromise are subject to
future adjustments that may result from negotiations, actions by the Bankruptcy Court and developments with
respect to disputed claims or matters arising out of the proof of claims process whereby a creditor may prove that
the amount of a claim differs from the amount that the Company has recorded.
Since the Petition Date, and in accordance with ASC 852, the Company ceased accruing interest on its
senior subordinated notes, as such debt and interest would be an allowed claim by the Bankruptcy Court. The
Predecessor Company’s contractual interest on the Senior Subordinated Notes in excess of reported interest was
approximately $55,654 for the period from October 1, 2008 through August 30, 2009.
Liabilities subject to compromise as of August 30, 2009 for the Predecessor Company were as follows:
August 30,
2009
Senior Subordinated Notes ........................................ $1,049,885
Accrued interest on Senior Subordinated Notes ........................ 40,497
Other accrued liabilities ........................................... 15,580(A)
Predecessor Company Balance ................................. $1,105,962
Effects of Plan .................................................. (1,105,962)
Successor Company Balance ................................... $ —
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