Rayovac 2010 Annual Report Download - page 116

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except per share amounts)
(g) The adjustment to long-term debt represents the issuance of the 12% Notes at a fair value of $218,731 (face
value of $218,076) used, in part, to extinguish the Senior Subordinated Notes of the debtors that were
recorded in liabilities subject to compromise (see note (i)), the issuance of the new supplemental loan in the
amount of $45,000, offset by the payment of the non-current portion of the term loan in the amount of
$3,440 (see note (a)). The excess of fair value over face value of the 12% Notes is recorded in long-term
debt and will be accreted as a reduction to interest expense over the life of the note.
Issuance of the 12% Notes (fair value) ................................. $218,731
Amounts borrowed under the new supplemental loan agreement ............. 45,000
Accrued default interest ............................................. 11,515
Repayment of certain amounts under the term loan agreement, net of current
portion ........................................................ (3,440)
$271,806
(h) Gain on the cancellation of debt from the extinguishment of the senior subordinated notes as well as the
modification of the senior term credit facility, for tax purposes, resulted in a $124,054 reduction in the U.S.
net deferred tax asset, exclusive of indefinite-lived intangibles. Due to the Company’s full valuation
allowance position as of August 30, 2009 on the U.S. net deferred tax asset, exclusive of indefinite-lived
intangibles, the tax effect of these items is offset by a corresponding adjustment to the valuation allowance
of $124,054. Due to changes in the relative current versus non-current deferred tax asset balances and the
corresponding allocation of the domestic valuation allowance, a net $1,707 deferred tax balance
reclassification occurred between current and non-current as a result of the effects of the Plan.
(i) The adjustment to liabilities subject to compromise relates to the extinguishment of the Senior Subordinated
Notes balance of $1,049,885 and the accrued interest of $40,497 associated with the Senior Subordinated
Notes. Additionally, rejected lease obligations of $15,580 were reclassified to other current liabilities (see
note (f)).
(j) Pursuant to the Plan, the debtor’s common stock was canceled and new common stock of the reorganized
debtors was issued. The adjustments eliminated Predecessor Company’s common stock and additional
paid-in capital of $691 and $677,007, respectively, and recorded Successor Company’s common stock and
additional paid-in capital of $300 and $724,796, respectively, which represents the fair value of the newly
issued common stock. The fair value of the newly issued common stock was not separately valued. A fair
value of $725,096 was determined by subtracting the fair value of net debt (total debt less cash and cash
equivalents), or $1,549,904 from the enterprise value of $2,275,000. The Company issued 30,000 shares at
emergence, consisting of 27,030 shares to holders of the Senior Subordinated Notes allowed note holder
claims and 2,970 shares in accordance with the terms of the Debtors’ debtor-in-possession credit facility.
(k) As a result of the Plan, the adjustment to accumulated (deficit) equity recorded the elimination of the
Predecessor Company’s common stock, additional paid in capital and treasury stock in the amount of
$600,807 and recorded the pre-tax gain on the cancellation of debt in the amount of $146,555. The
elimination of the Predecessor Company’s common stock, additional paid in capital and treasury stock was
calculated as follows:
Elimination of Predecessor Company’s common stock (see note (j)) ........... $ 691
Elimination of Predecessor Company’s additional paid in capital (see note (j)) . . . 677,007
Elimination of Predecessor Company’s treasury stock (see note (l)) ........... (76,891)
Elimination of Predecessor Company’s common stock ...................... $600,807
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