Rayovac 2007 Annual Report Download - page 48

46 SPECTRUM BRANDS | 2007 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Spectrum Brands, Inc.
(u) Reclassifications
In Fiscal 2007, the Company began managing its business in
three reportable segments: (i) Global Batteries & Personal Care,
which consists of the Company’s worldwide battery, shaving and
grooming, personal care and portable lighting business (“Global
Batteries & Personal Care”); (ii) Global Pet Supplies, which con-
sists of the Company’s worldwide pet supplies business (“Global
Pet Supplies”); and (iii) the Home and Garden Business, which
is refl ected as discontinued operations. The presentation of all
historical segment reporting herein has been reclassifi ed to con-
form to this segment structure.
Effective October 1, 2006, the Company refl ected the opera-
tions of its Home and Garden Business as discontinued opera-
tions. In addition, as of October 1, 2005, the Company began
reporting the results of operations of its fertilizer technology and
Canadian professional fertilizer products businesses of Nu-Gro
(“Nu-Gro Pro and Tech”) as discontinued operations. The presen-
tation of continuing operations has been reclassifi ed to exclude
the Home and Garden Business and Nu-Gro Pro and Tech.
On October 1, 2005, the Company adopted SFAS No. 123
(Revised 2004), “Share-Based Payment” (“SFAS 123(R)”) requir-
ing the Company to recognize expense related to the fair value of
its employee stock option awards. Prior to the adoption of SFAS
123(R), the Company presented all tax benefi ts of deductions
resulting from the exercise of stock options as operating cash
fl ows in the statement of cash fl ows. Beginning on October 1,
2005, the Company changed its cash fl ow presentation in accor-
dance with SFAS 123(R) and Financial Accounting Standards
Board (“FASB”) Staff Position (“FSP”) FAS 123(R)-3, “Transition
Election Related to Accounting for Tax Effects of Share-Based
Payment Awards” (“FSP FAS 123(R)-3”) which require the cash
fl ows resulting from the tax benefi ts for these options to be classi-
fi ed as fi nancing cash fl ows. The Company has reclassifi ed the
benefi t of deductions resulting from the exercise of stock options
from operating cash fl ows to fi nancing cash fl ows to conform to
this presentation.
Certain prior year amounts have been reclassifi ed to conform
to the current year presentation. These reclassifi cations had no
effect on previously reported results of operations or accumu-
lated defi cit.
(v) Comprehensive Income
Comprehensive income includes foreign currency translation
of assets and liabilities of foreign subsidiaries, effects of exchange
rate changes on intercompany balances of a long-term nature
and transactions designated as a hedge of net foreign invest-
ments, derivative fi nancial instruments designated as cash fl ow
hedges and additional minimum pension liabilities associated
with the Company’s pension. Except for the currency translation
impact of the Company’s intercompany debt of a long-term
nature, the Company does not provide income taxes on currency
translation adjustments, as earnings from international subsid-
iaries are considered to be indefi nitely reinvested.
Amounts recorded in AOCI on the Consolidated Statements
of Shareholders’ Equity (Defi cit) and Comprehensive Income
for the years ended September 30, 2007, 2006 and 2005 are net
of the following tax expense (benefi t) amounts:
Pension Cash Adjustment to Translation
Adjustment Flow Hedges Adopt SFAS 158 Adjustments Total
2007 $(1,307) $(3,747) $431 $1,217 $(3,406)
2006 2,791 6,091 – 266 9,148
2005 (5,968) 1,119 – (559) (5,408)
(w) Stock Compensation
In connection with the adoption of SFAS 123(R), the Company
is required to recognize expense related to the fair value of its
employee stock option awards. Total stock compensation
expense associated with both stock options and restricted stock
awards recognized by the Company during Fiscal 2007 and
2006 was $21,329 and $13,168 or $14,290 and $10,650, net of
taxes, respectively. The amounts before tax are included in Gen-
eral and administrative expenses and Restructuring and related
charges in the Consolidated Statements of Operations, of which
$7,788 or $5,218, net of taxes, was included in Restructuring
and related charges during Fiscal 2007 for the accelerated vest-
ing of certain awards. The Company expects that total stock
compensation expense for 2008 will be approximately $6,887
before the effect of income taxes. As of September 30, 2007,
there was $15,286 of unrecognized compensation cost related to
restricted stock that is expected to be recognized over a weighted
average period of approximately three years.
The Company uses or has used two forms of stock-based com-
pensation. Shares of restricted stock have been awarded to certain
employees and members of management since Fiscal 2001. Prior
to the fourth quarter of Fiscal 2004, the Company also issued
stock options to employees, some of which remained unvested at
the adoption date of SFAS 123(R). Restricted stock is now the
only form of stock-based compensation used by the Company.
Stock options previously awarded generally vest under a com-
bination of time-based and performance-based vesting criteria.
Under the time-based vesting, the stock options become exercis-
able primarily in equal increments over a three year period,
while under the performance-based vesting such options become
exercisable over the same time period or one day prior to the end
of the exercise period, if certain performance criteria are not
met. The period during which such options, if vested, may be
exercised generally extends ten years from the date of grant.