Rayovac 2010 Annual Report Download - page 123

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except per share amounts)
In connection with the Company’s annual goodwill impairment testing performed during Fiscal 2010 the
first step of such testing indicated that the fair value of the Company’s reporting segments were in excess of their
carrying amounts and, accordingly, no further testing of goodwill was required.
In connection with the Predecessor Company’s annual goodwill impairment testing performed during Fiscal
2009, which was completed on the Predecessor Company before applying fresh-start reporting, the first step of
such testing indicated that the fair value of the Predecessor Company’s reporting segments were in excess of
their carrying amounts and, accordingly, no further testing of goodwill was required.
In connection with its annual goodwill impairment testing in Fiscal 2008 the Predecessor Company first
compared the fair value of its reporting units with their carrying amounts, including goodwill. This first step
indicated that the fair value of the Predecessor Company’s Global Pet Supplies and Home and Garden Business
was less than the Predecessor Company’s carrying amount of those reporting units and, accordingly, further
testing of goodwill was required to determine the impairment charge required by ASC 350. Accordingly, the
Predecessor Company then compared the carrying amount of the Global Pet Supplies and the Home and Garden
Business goodwill to the respective implied fair value of their goodwill. The carrying amounts of the Global Pet
Supplies and the Home and Garden Business goodwill exceeded their implied fair values and, therefore, during
Fiscal 2008 the Predecessor Company recorded a non-cash pretax impairment charge equal to the excess of the
carrying amount of the respective reporting unit’s goodwill over the implied fair value of such goodwill of which
$270,811 related to Global Pet Supplies and $49,801 related to the Home and Garden Business.
Furthermore, during Fiscal 2010 the Company, in connection with its annual impairment testing, concluded
that the fair value of its intangible assets exceeded is carrying value. During the period from October 1, 2008
through August 30, 2009 and Fiscal 2008, in connection with its annual impairment testing, the Company
concluded that the fair values of certain trade name intangible assets were less than the carrying amounts of those
assets. As a result, during the period from October 1, 2008 through August 30, 2009 and Fiscal 2008 the
Company recorded non-cash pretax impairment charges of approximately $34,391 and $224,100, respectively,
equal to the excess of the carrying amounts of the intangible assets over the fair value of such assets.
In accordance with ASC 360, “Property, Plant and Equipment” (“ASC 360”) and ASC 350, in addition to
its annual impairment testing the Company conducts goodwill and trade name intangible asset impairment testing
if an event or circumstance (“triggering event”) occurs that indicates an impairment loss may have been incurred.
The Company’s management uses its judgment in assessing whether assets may have become impaired between
annual impairment tests. Indicators 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
which required the Company to test its indefinite-lived intangible assets for impairment between annual
impairment test dates. On May 20, 2008, the Predecessor Company entered into a definitive agreement for the
sale of Global Pet Supplies, 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
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