Rayovac 2015 Annual Report Download - page 116

SPECTRUM BRANDS HOLDINGS, INC.
SB/RH HOLDINGS, LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
Appliances segment. The remaining $933.2 million of goodwill is allocated to the Global Auto Care segment.
The values allocated to intangible assets and the weighted average useful lives are as follows:
Carrying
Amount
Weighted Average
Useful Life (Years)
(in millions)
Tradenames ................................ $295.0 Indefinite
Technology ................................ 41.0 10
Licensing agreements ........................ 19.0 10
Customer relationships ....................... 63.0 15
Total intangibles acquired ..................... $418.0
The fair values recorded were determined based upon a valuation and the estimates and assumptions used in
such valuation are subject to change, which could be significant, within the measurement period (up to one year
from the May 21, 2015 acquisition date). The primary areas of acquisition accounting that are not yet finalized
relate to amounts for intangible assets, residual goodwill and income taxes. The following is a summary of
significant inputs to the valuation:
• Inventories—The replacement cost approach was applied to estimate the fair value of the raw materials
and unbranded finished goods inventory. Branded finished goods were valued based on the
comparative sales method, which estimates the expected sales price of the finished goods inventory,
reduced for all costs expected to be incurred in its completion or disposition and a profit on those costs.
• Property, plant and equipment—The market approach was used to estimate the fair value of land. The
direct cost approach was used to estimate the fair value of property, plant and equipment.
• Tradenames—The Company valued indefinite-lived trade names using an income approach, the relief
from royalty method. Under this method, the asset value was determined by estimating the hypothetical
royalties that would have to be paid if the trade names were not owned. Royalty rates were selected
based on consideration of several factors, including prior transactions, related trademarks and trade
names, other similar trademark licensing and transaction agreements and the relative profitability and
perceived contribution of the trade names.
• Technology—The Company valued technology using an income approach, the relief from royalty
method. Under this method, the asset value was determined by estimating the hypothetical royalties
that would have to be paid if the technology was not owned. Royalty rates were selected based on
consideration of several factors, including prior transactions, related licensing agreements and the
importance of the technology and profit levels, among other considerations. The Company anticipates
using these technologies through the legal life of the underlying patents; therefore, the expected useful
life of these technologies is based on the remaining life of the underlying patents.
• Licensing Agreements—The Company valued licensing agreements using the income approach. Under
this method, the asset value was determined by estimating the revenue stream over the implied life of
the agreements.
• Customer relationships—The Company valued customer relationships using an income approach, the
multi-period excess earnings method. In determining the fair value of the customer relationships, the
multi-period excess earnings approach values the intangible asset at the present value of the
incremental after-tax cash flows attributable only to the customer relationship after deducting
contributory asset charges. The incremental after-tax cash flows attributable to the subject intangible
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