Rayovac 2010 Annual Report Download - page 124

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except per share amounts)
fertilizer and growing media products manufactured by the Company at that time 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 than the carrying amounts of those assets and, accordingly, during Fiscal 2008
recorded a non-cash pretax impairment charge of $12,400.
The above impairments of goodwill and trade name intangible assets was primarily attributed to lower
current and forecasted profits, reflecting more conservative growth rates versus those assumed by the Company
at the time of acquisition, as well as due to a sustained decline in the total market capitalization of the Company.
During the third quarter of Fiscal 2008, the Company developed and initiated a plan to phase down, and
ultimately curtail, manufacturing operations at its Ningbo, China battery manufacturing facility. The Company
completed the shutdown of Ningbo during the fourth quarter of Fiscal 2008. In connection with the Company’s
strategy to exit operations in Ningbo, China, the Predecessor Company recorded a non-cash pretax charge of
$16,193 to reduce the carrying value of goodwill related to the Ningbo, China battery manufacturing facility.
The recognition of the $34,391 and $861,234 non-cash impairment of goodwill and trade name intangible
assets during the period from October 1, 2008 through August 30, 2009 and Fiscal 2008, respectively, has been
recorded as a separate component of Operating expenses and has had a material negative effect on the
Predecessor Company’s financial condition and results of operations during the period from October 1, 2008
through August 30, 2009 and Fiscal 2008. These impairments will not result in future cash expenditures.
Intangibles with Definite or Estimable Useful Lives
The triggering events discussed above under ASC 350 also indicated a triggering event in accordance with
ASC 360. Management conducted an analysis in accordance with ASC 360 of intangibles with definite or
estimable useful lives in conjunction with the ASC 350 testing of intangibles with indefinite lives.
The Company assesses the recoverability of intangible assets with definite or estimable useful lives in
accordance with ASC 360 by determining whether the carrying value can be recovered through projected
undiscounted future cash flows. If projected undiscounted future cash flows indicate that the unamortized
carrying value of intangible assets with finite useful lives will not be recovered, an adjustment would be made to
reduce the carrying value to an amount equal to projected future cash flows discounted at the Company’s
114