Rayovac 2005 Annual Report Download - page 89

(d) Cash Equivalents
For purposes of the Consolidated Statements of
Cash Flows, the Company considers all highly liquid
debt instruments purchased with original maturities
of three months or less to be cash equivalents.
(e) Concentrations of Credit Risk
and Major Customers
Trade receivables subject the Company to credit
risk. Trade accounts receivable are carried at net
realizable value. The Company extends credit to its
customers based upon an evaluation of the custom-
er’s fi nancial condition and credit history, but gener-
ally does not require collateral. The Company moni-
tors its customers’ credit and fi nancial condition
based on changing economic conditions and will
make adjustments to credit policies as required.
Provision for losses on uncollectible trade receiv-
ables are determined principally on the basis of past
collection experience applied to ongoing evaluations
of the Company’s receivables and evaluations of the
risks of nonpayment for a given customer.
The Company has a broad range of customers
including many large retail outlet chains, one of
which accounts for a signifi cant percentage of its
sales volume. This major customer represented
approximately 18%, 19% and 13% across all seg-
ments of its net sales during 2005, 2004 and 2003,
respectively. This major customer also represented
approximately 12% and 16%, respectively, of Trade
account receivables, net as of September 30, 2005
and 2004.
Approximately 39% of the Company’s sales occur
outside of North America. These sales and related
receivables are subject to varying degrees of credit,
currency, and political and economic risk. The
Company monitors these risks and makes appro-
priate provisions for collectibility based on an
assessment of the risks present.
(f) Displays and Fixtures
Temporary displays are generally disposable
cardboard displays shipped to customers to facili-
tate display of the Company’s products. Temporary
displays are generally disposed after a single use
by the customer.
Permanent fi xtures are permanent in nature,
generally made from wire or other permanent rack-
ing, which are shipped to customers for display of
the Company’s products. These permanent fi xtures
are restocked with the Company’s product multiple
times over the fi xture’s useful life.
The costs of both temporary and permanent
displays are capitalized as a prepaid asset and are
included in Prepaid expenses and other in the
Consolidated Balance Sheets. The costs of tempo-
rary displays are expensed in the period in which
they are shipped to customers and the costs of per-
manent fi xtures are amortized over an estimated
useful life of one to two years once they are shipped
to customers and are refl ected in Deferred charges
and other in the Consolidated Balance Sheets.
(g) Inventories
The Company’s inventories are valued at the
lower of cost or market. Cost of inventories is deter-
mined using the fi rst-in, fi rst-out (FIFO) method.
(h) Property, Plant and Equipment
Property, plant and equipment are stated at cost
or at fair value if acquired in a purchase business
combination. Depreciation on plant and equipment
is calculated on the straight-line method over the
estimated useful lives of the assets. Depreciable
lives by major classifi cation are as follows:
Building and improvements 20-30 years
Machinery, equipment and other 2-15 years
The Company reviews long-lived assets for impair-
ment whenever events or changes in circumstances
indicate that the carrying amount of an asset may
not be recoverable. The Company evaluates recover-
ability of assets to be held and used by comparing
the carrying amount of an asset to future net cash
fl ows expected to be generated by the asset. If such
assets are considered to be impaired, the impair-
ment to be recognized is measured by the amount
by which the carrying amount of the assets exceeds
the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount
or fair value less costs to sell.
(i) Intangible Assets
Intangible assets are recorded at cost or at fair
value if acquired in a purchase business combina-
tion. Customer lists and proprietary technology
intangibles are amortized, using the straight-line
method, over their estimated useful lives of approxi-
mately 5 to 19 years. Excess of cost over fair value
of net assets acquired (goodwill) and trade name
intangibles are not amortized. Goodwill is tested for
2005 Form 10-K Annual Report
Spectrum Brands, Inc.
2005 ANNUAL REPORT 69