Rayovac 2015 Annual Report Download - page 124

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SPECTRUM BRANDS HOLDINGS, INC.
SB/RH HOLDINGS, LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
purposes. Goodwill was allocated to the Home & Garden 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 ................................ $ 5.1 Indefinite
Technology ................................ 20.5 17
Customer relationships ....................... 1.3 15
Total intangibles acquired ..................... $26.9
The Company performed a valuation of the acquired tradenames, technology and customer relationships.
The following is a summary of significant inputs to the valuation:
• Tradenames—The Company valued the tradename 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 name was not owned. Royalty rates were selected based on
consideration of several factors, including prior transactions, related trademarks and tradenames, other
similar trademark licensing and transaction agreements and the relative profitability and perceived
contribution of the trademarks and tradenames.
• Technology—The Company valued the technology assets related to formulas and processes using an
income approach, the excess earnings method. Under this method, the asset value was determined by
estimating the earnings attributable to the technology assets, adjusted for contributory asset charges. In
estimating the fair value of the technology, net sales and associated earnings were forecasted and
adjusted for a technical obsolescence factor to isolate the forecasted sales and earnings attributable to
the acquired technology assets. The forecasted technology earnings were discounted to present value to
arrive at the fair value. The useful life was determined by assessing the time period in which
substantially all of the discounted cash flows are expected to be generated.
• Customer relationships—The Company valued customer relationships using the distributor approach.
Under this method, the asset value was determined by estimating the hypothetical earnings before
interest and taxes (“EBIT”) that a comparable distributor would earn, further adjusted for contributory
asset charges. In determining the fair value of the customer relationships, the distributor approach
values the intangible asset at the present value of the incremental after-tax cash flows.
The Liquid Fence acquisition was not considered individually significant to the consolidated results of the
Company and therefore pro forma results are not presented.
110