Rayovac 2010 Annual Report Download - page 40

using actuarial valuations. These valuations reflect assumptions about financial market and other economic
conditions, which may change based on changes in key economic indicators. The most significant year-end
assumptions we used to estimate pension income or expense are the discount rate and the expected long-term rate
of return on plan assets. In addition, we are required to make an annual measurement of plan assets and
liabilities, which may result in a significant change to equity. Although pension expense and pension funding
contributions are not directly related, key economic factors that affect pension expense would also likely affect
the amount of cash we would contribute to pension plans as required under the Employee Retirement Income
Security Act of 1974, as amended.
If our goodwill, indefinite-lived intangible assets or other long-term assets become impaired, we will be
required to record additional impairment charges, which may be significant.
A significant portion of our long-term assets consist of goodwill, other indefinite-lived intangible assets and
finite-lived intangible assets recorded as a result of past acquisitions. We do not amortize goodwill and
indefinite-lived intangible assets, but rather review them for impairment on a periodic basis or whenever events
or changes in circumstances indicate that their carrying value may not be recoverable. We consider whether
circumstances or conditions exist which suggest that the carrying value of our goodwill and other long-lived
assets might be impaired. If such circumstances or conditions exist, further steps are required in order to
determine whether the carrying value of each of the individual assets exceeds its fair market value. If analysis
indicates that an individual asset’s carrying value does exceed its fair market value, the next step is to record a
loss equal to the excess of the individual asset’s carrying value over its fair value.
The steps required by GAAP entail significant amounts of judgment and subjectivity. Events and changes in
circumstances that may indicate that there is impairment and which may indicate that interim impairment testing
is necessary include, but are not limited to: strategic decisions to exit a business or dispose of an asset made in
response to changes in economic; political and competitive conditions; the impact of the economic environment
on the customer base and on broad market conditions that drive valuation considerations by market participants;
our internal expectations with regard to future revenue growth and the assumptions we make when performing
impairment reviews; a significant decrease in the market price of our assets; a significant adverse change in the
extent or manner in which our assets are used; a significant adverse change in legal factors or the business
climate that could affect our assets; an accumulation of costs significantly in excess of the amount originally
expected for the acquisition of an asset; and significant changes in the cash flows associated with an asset. As a
result of such circumstances, we may be required to record a significant charge to earnings in our financial
statements during the period in which any impairment of our goodwill, indefinite-lived intangible assets or other
long-term assets is determined. Any such impairment charges could have a material adverse effect on our
business, financial condition and operating results.
Risks Related to SB Holdings’ Common Stock
The Harbinger Parties and, following the Share Exchange, HRG, will exercise significant influence over us
and their interests in our business may be different from the interests of our stockholders.
As a result of the consummation of the Merger and other transactions, as of the date hereof, the Harbinger
Parties beneficially owned approximately 67% of our outstanding common stock. Upon consummation of the
Share Exchange, HRG will own approximately 54% of our outstanding common stock and the remaining
Harbinger Parties will own approximately 13% of our outstanding common stock. The Harbinger Parties will
own approximately 93% of the outstanding common stock of HRG. The Harbinger Parties and, assuming the
consummation of the Share Exchange, HRG, both separately and in conjunction with the Harbinger Parties, will
have the ability to influence the outcome of any corporate action by us, which requires stockholder approval,
including, but not limited to, the election of directors, approval of merger transactions and the sale of all or
substantially all of our assets. In addition, we are a party to a stockholder agreement with HRG and the Harbinger
Parties.
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