Rayovac 2003 Annual Report Download - page 43

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(x) Adoption of New Accounting Pronouncements Effective October 1, 2000, the Company adopted Financial Accounting Standards
Board (FASB) Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities.
All derivatives, whether designated in hedging relationships or not, are required to be recorded on the balance sheet at fair value.
If the derivative is designated as a fair value hedge, the change in the fair value of the derivative and of the hedged item attributable
to the hedged risk are recognized in earnings. If the derivative is designated as a cash flow hedge, the effective portions of changes
in the fair value of the derivative are recorded in Other Comprehensive Income (OCI) and are recognized in the income statement
when the hedged item affects earnings. Ineffective portions of changes in the fair value of cash flow hedges are recognized in earnings.
The adoption of Statement No. 133 resulted in a pretax reduction to OCI of $317 ($150 after tax) in 2001. The reduction of OCI was
primarily attributable to losses of approximately $500 for foreign exchange forward cash flow hedges partially offset by gains of
approximately $200 on interest rate swap cash flow hedges. (See also footnote 2(r), Derivative Financial Instruments.)
Effective July 1, 2001, the Company adopted Statement No. 141, Business Combinations, and effective October 1, 2001, Statement No. 142,
Goodwill and Other Intangible Assets.
Statement No. 141 requires that the purchase method of accounting be used for all business combinations initiated or completed
on or after July 1, 2001. Statement No. 141 also specifies criteria that intangible assets acquired in a purchase method business com-
bination must meet to be recognized and reported apart from goodwill. Statement No. 142 requires that goodwill and intangible
assets with indefinite useful lives no longer be amortized, but instead be tested for impairment at least annually in accordance with
the provisions of Statement No. 142. Statement No. 142 also requires that intangible assets with estimable useful lives be amortized
over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with
Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Upon the transition to Statement No. 142, no goodwill
was deemed to be impaired. (See also footnote 2(i), Intangible Assets.)
The table below presents net income and earnings per share information as if Statement No. 142 had been adopted at the beginning
of the periods presented:
2001 2002 2003
Reported net income $11,534 $29,237 $15,482
Add back: Goodwill amortization, net of tax of $0 1,050 ——
Add back: Trade name amortization, net of tax of $855 1,395 ——
Adjusted net income $13,979 $29,237 $15,482
Basic Earnings Per Share:
Reported net income $ 0.40 $ 0.92 $ 0.49
Goodwill amortization 0.04 ——
Trade name amortization 0.05 ——
Adjusted net income $ 0.49 $ 0.92 $ 0.49
Diluted Earnings Per Share:
Reported net income $ 0.39 $ 0.90 $ 0.48
Goodwill amortization 0.03 ——
Trade name amortization 0.05 ——
Adjusted net income $ 0.47 $ 0.90 $ 0.48
In August 2001, the FASB issued Statement No. 143, Accounting for Asset Retirement Obligations. Statement No. 143 addresses financial
accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retire-
ment costs. The Company adopted the Statement on October 1, 2002. Adoption did not have a material effect on the consolidated
financial statements of the Company.
In October 2001, the FASB issued Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. This statement supersedes
FASB Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of, and the accounting and
reporting provisions of APB Opinion No. 30, Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for the disposal of a segment of a business. The Company adopted the
Statement on October 1, 2002. Adoption did not have a material effect on the consolidated financial statements of the Company.
Notes to Consolidated Financial Statements
Rayovac Corporation and Subsidiaries
(In thousands, except per share amounts)