Rayovac 2006 Annual Report Download - page 92

80 SPECTRUM BRANDS | 2006 ANNUAL REPORT
The Company completed the acquisitions of United, Tetra
and Jungle during 2005 and the acquisitions of Ningbo and
Microlite during 2004. (See also Note 17, Acquisitions, for addi-
tional information on the Ningbo, Microlite, United, Tetra and
Jungle acquisitions).
The carrying value of technology assets was $37,305, net
of accumulated amortization of $7,126 at September 30, 2006
and $40,082, net of accumulated amortization of $3,524 at
September 30, 2005. The trade names subject to amortization relate
to United. The carrying value of these trade names was $5,359,
net of accumulated amortization of $5,338 at September 30,
2006 and $9,064, net of accumulated amortization of $1,886 at
September 30, 2005. Remaining intangible assets subject to amorti-
zation include customer relationship intangibles. Of the intangible
assets acquired in the United and Jungle acquisitions, customer
relationships and technology assets have been assigned a life of
approximately 12 years and other intangibles have been assigned
lives of one year to four years. Of the intangible assets acquired
in the Tetra acquisition, customer relationships have been assigned
a life of approximately 12 years and technology assets have been
assigned a 6 year life.
The additional goodwill recognized in the Latin America seg-
ment during fi scal 2006 principally related to incremental earn-
out payments associated with the Microlite acquisition in Brazil.
The additional goodwill recognized in the Global Pet segment dur-
ing fi scal 2006 principally related to the fi nalization of accruals for
shutdown reserve costs at certain facilities, acquired as part of the
United acquisition offset by deferred tax liability adjustments. The
additional goodwill recognized in the Europe/ROW segment dur-
ing fi scal 2006 related to deferred tax liability adjustments.
During 2005, the Company allocated a portion of the
Microlite, United, Tetra and Jungle purchase price to unamortiz-
able intangible assets. The allocation consisted of $21,685 to the
trade name in Brazil, $271,196 to United trade names, $175,500
to Tetra trade names, $26,100 to United license agreements and
$6,000 to Jungle trade names. The purchase price allocations for
United, Tetra, Jungle and Microlite have been fi nalized.
SFAS 142 requires companies to test goodwill and indefi nite-
lived intangible assets for impairment annually, or more often if
an event or circumstance indicates that an impairment loss may
have been incurred. In accordance with SFAS 142, the Company,
with the assistance of independent third party valuation special-
ists, conducted its annual impairment testing of goodwill and
indefi nite-lived intangible assets. As a result of these analyses the
Company recorded a non-cash pretax impairment charge of
approximately $432,978 in the fourth quarter of fi scal 2006.
Approximately $352,878 of the charge related to impaired good-
will and approximately $80,100 related to impaired trade name
intangible assets. See Note 2(i), Signifi cant Accounting Policies—
Intangible Assets, for further details on the impairment charge.
The amortization expense related to intangibles subject to
amortization for 2006, 2005 and 2004 is as follows:
2006 2005 2004
Proprietary technology amortization $ 3,600 $ 2,449 $736
Customer list amortization 16,421 9,693 219
Trade names amortization 3,452 1,886 –
$23,473 $14,028 $955
The Company estimates annual amortization expense for the
next fi ve fi scal years will approximate $21,300 per year.
(7) Debt
Debt consists of the following:
September 30,
2006 2005
Amount Rate(A) Amount Rate(A)
Senior Subordinated Notes,
due February 1, 2015 $ 700,000 7.4% $ 700,000 7.4%
Senior Subordinated Notes,
due October 1, 2013 350,000 8.5% 350,000 8.5%
Term Loan, US Dollar,
expiring February 6, 2012 604,827 8.6% 651,725 5.8%
Term Loan, Canadian Dollar,
expiring February 6, 2012 72,488 7.4% 74,081 4.9%
Term Loan, Euro, expiring
February 6, 2012 134,721 6.3% 137,142 4.7%
Term Loan, Euro Tranche B,
expiring February 6, 2012 332,315 6.2% 338,288 4.4%
Term C Loan, expiring
September 30, 2009 – – – –
Euro Term C Loan, expiring
September 30, 2009 – – – –
Revolving Credit Facility,
expiring February 6, 2011 26,200 10.3% – –
Revolving Credit Facility,
expiring September 30, 2008 – – – –
Euro Revolving Credit Facility,
expiring February 6, 2011 – – – –
Other notes and obligations 42,698 5.7% 38,701 –
Capitalized lease obligations 13,922 5.0% 17,396 –
2,277,171 2,307,333
Less current maturities 42,713 39,308
Long-term debt $2,234,458 $2,268,025
(A) Interest rates on senior credit facilities represent the period-end weighted-average
rates on balances outstanding exclusive of the effects of any interest rate swaps.
On January 25, 2006, the Company sold its fertilizer technol-
ogy and Canadian professional fertilizer products businesses of
Nu-Gro Pro and Tech to Agrium Inc. Proceeds from the sale totaled
approximately $83,000 after selling expenses and contractual work-
ing capital adjustments which were fi nalized on October 30, 2006.
Proceeds from the sale were used to reduce outstanding debt.
(See Note 11, Discontinued Operations, for further discussion).
2006 Form 10-K Annual Report
Spectrum Brands, Inc.