Rayovac 2010 Annual Report Download - page 69

During Fiscal 2009, we implemented a series of initiatives within the Global Batteries & Personal Care
segment and the Global Pet Supplies segment to reduce operating costs as well as evaluate our opportunities to
improve our capital structure (the “Global Cost Reduction Initiatives”). These initiatives include headcount
reductions within all our segments and the exit of certain facilities in the U.S. related to the Global Pet Supplies
segment. These initiatives also included consultation, legal and accounting fees related to the evaluation of our
capital structure. We recorded $18 million and $20 million of pretax restructuring and related charges during
Fiscal 2010 and Fiscal 2009, respectively, related to the Global Cost Reduction Initiatives. Costs associated with
these initiatives, which are expected to be incurred through March 31, 2014, are projected at approximately $65
million.
Acquisition and integration related charges. Acquisition and integration related charges reflected in
Operating expenses include, but are not limited to transaction costs such as banking, legal and accounting
professional fees directly related to the acquisition, termination and related costs for transitional and certain other
employees, integration related professional fees and other post business combination related expenses associated
with the Merger of Russell Hobbs. We incurred $38 million of Acquisition and integration related charges during
Fiscal 2010, which consisted of the following: (i) $25 million of legal and professional fees; (ii) $10 million of
employee termination charges; and (iii) $4 million of integration costs.
Goodwill and Intangibles Impairment. ASC 350 requires companies to test goodwill and indefinite-lived
intangible assets for impairment annually, or more often if an event or circumstance indicates that an impairment
loss may have been incurred. In Fiscal 2010 and 2009, we tested our goodwill and indefinite-lived intangible
assets. As a result of this testing, we recorded a non-cash pretax impairment charge of $34 million in Fiscal 2009.
The $34 million non-cash pretax impairment charge incurred in Fiscal 2009 reflects trade name intangible asset
impairments of the following: $18 million related to Global Pet Supplies; $15 million related to the Global
Batteries and Personal Care segment; and $1 million related to the Home and Garden Business. See Note 3(i),
Significant Accounting Policies and Practices—Intangible Assets, of Notes to Consolidated Financial Statements
included in this Annual Report on Form 10-K for further details on this impairment charge.
Interest Expense. Interest expense in Fiscal 2010 increased to $277 million from $190 million in Fiscal
2009. The increase was driven primarily by the following unusual items: (i) $55 million representing the
write-off of the unamortized portion of discounts and premiums related to debt that was paid off in conjunction
with our refinancing, a non-cash charge; (ii) $13 million related to bridge commitment fees while we were
refinancing our debt; (iii) $7 million representing the write-off of the unamortized debt issuance costs related to
debt that was paid off, a non-cash charge; (iv) $4 million related to a prepayment premium; and (v) $3 million
related to the termination of a Euro-denominated interest rate swap.
Reorganization Items. During Fiscal 2010, we, in connection with our reorganization under Chapter 11 of
the Bankruptcy Code, recorded Reorganization items expense (income), net of approximately $4 million, which
primarily consisted of legal and professional fees. During Fiscal 2009 Old Spectrum recorded Reorganization
items expense (income), net, which represents a gain of approximately $(1,143) million. Reorganization items
expense (income), net included the following: (i) gain on cancellation of debt of $(147) million; (ii) gains in
connection with fresh-start reporting adjustments of $(1,088) million; (iii) legal and professional fees of $75
million; (iv) write off deferred financing costs related to the Senior Subordinated Notes of $11 million; and (v) a
provision for rejected leases of $6 million. During Fiscal 2009, New Spectrum recorded Reorganization items
expense (income), net which represents expense of $4 million related to professional fees. See Note 2, Voluntary
Reorganization Under Chapter 11, of Notes to Consolidated Financial Statements included in this Annual Report
on Form 10-K for more information related to our reorganization under Chapter 11 of the Bankruptcy Code.
Income Taxes. Our effective tax rate on income from continuing operations was approximately (50.9)% for
Fiscal 2010. Our effective tax rate on losses from continuing operations is approximately 2.0% for Old Spectrum
and (256)% for New Spectrum during Fiscal 2009. The primary drivers of the effective rate as compared to the
U.S. statutory rate of 35% for Fiscal 2010 include tax expense recorded for an increase in the valuation
allowance associated with our net U.S. deferred tax asset.
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