Rayovac 2007 Annual Report Download - page 61

SPECTRUM BRANDS | 2007 ANNUAL REPORT 59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Spectrum Brands, Inc.
(12) Employee Benefit Plans
Pension Benefits
The Company has various defi ned benefi t pension plans
covering some of its employees in the United States and certain
employees in other countries, primarily the United Kingdom and
Germany. Plans generally provide benefi ts of stated amounts for
each year of service. The Company funds its U.S. pension plans at
a level to maintain, within established guidelines, the IRS-
defi ned 90% current liability funded status. At January 1, 2007,
the date of the most recent calculation, all U.S. funded defi ned
benefi t pension plans refl ected a current liability funded status
equal to or greater than 90%. Additionally, in compliance with
the Company’s funding policy, annual contributions to non-U.S.
defi ned benefi t plans are equal to the actuarial recommendations
or statutory requirements in their respective countries.
The Company also sponsors or participates in a number of
other non-U.S. pension arrangements, including various retire-
ment and termination benefi t plans, some of which are covered
by local law or coordinated with government-sponsored plans,
which are not signifi cant in the aggregate and therefore are not
included in the information presented below. The Company also
has various nonqualifi ed deferred compensation agreements
with certain of its employees. Under certain of these agreements,
the Company has agreed to pay certain amounts annually for the
fi rst 15 years subsequent to retirement or to a designated benefi -
ciary upon death. It is management’s intent that life insurance
contracts owned by the Company will fund these agreements.
Under the remaining agreements, the Company has agreed to
pay such deferred amounts in up to 15 annual installments begin-
ning on a date specifi ed by the employee, subsequent to retire-
ment or disability, or to a designated benefi ciary upon death.
Other Benefits
Under the Rayovac postretirement plan the Company provides
certain health care and life insurance benefi ts to eligible retired
employees. Participants earn retiree health care benefi ts after
reaching age 45 over the next 10 succeeding years of service and
remain eligible until reaching age 65. The plan is contributory;
retiree contributions have been established as a fl at dollar amount
with contribution rates expected to increase at the active medical
trend rate. The plan is unfunded. The Company is amortizing the
transition obligation over a 20-year period. During Fiscal 2007,
the Company recognized a curtailment gain of approximately
$2,417 associated with this plan as retirees now pay the full actu-
arial cost for health care benefi ts offered under this plan.
Under the Tetra U.S. postretirement plan, the Company provides
postretirement medical benefi ts to full-time employees who meet
minimum age and service requirements. The plan is contributory
with retiree contributions adjusted annually and contains other
cost-sharing features such as deductibles, coinsurance and copay-
ments. During Fiscal 2007 the Company terminated this plan,
which resulted in a gain of approximately $2,730.
For measurement purposes, the Rayovac and Tetra U.S. post-
retirement plans assumed annual rates of increase of 10.0% in
the per capita costs of covered health care benefi ts for Fiscal 2006
and 2005. The projected annual rates of increase were assumed
to decline incrementally in future years from 11.0% to 4.0% in
Fiscal 2006 and 10.0% to 3.5% in Fiscal 2005.
Effective September 30, 2007, the Company adopted SFAS
No. 158, “Employers’ Accounting for Defi ned Benefi t Pension and
Other Postretirement Plans–an amendment of FASB Statements
No. 87, 88, 106, and 132(R)” (“SFAS 158”). The recognition and
disclosure provisions of this statement requires recognition of
the overfunded or underfunded status of defi ned benefi t pension
and postretirement plans as an asset or liability in the statement
of fi nancial position, and to recognize changes in that funded
status in AOCI in the year in which the adoption occurs. The
Company measures plan assets and obligations of its domestic
pension plans as of June 30 each year and September 30 each
year for its foreign pension plans and its domestic other postre-
tirement plans. The measurement date provisions of SFAS 158,
which for the Company become effective Fiscal 2009, will
require the Company to measure all of its defi ned benefi t pen-
sion and postretirement plan assets and obligations as of Sep-
tember 30, its fi scal yearend.
The adoption of SFAS 158 had no impact on the Company’s
results of operations or its cash fl ows. SFAS 158 did have an
incremental effect on individual line items in the Company’s
Consolidated Balance Sheet as of September 30, 2007, as
refl ected in the following table. Had the Company not been
required to adopt SFAS 158 at September, 30, 2007, an addi-
tional minimum liability would have been recognized pursuant
to the provisions SFAS No. 87, “Employers’ Accounting for Pen-
sions.” The effect of recognizing the additional minimum liabil-
ity is included in the table below in the column labeled “Prior to
Adopting SFAS 158.”
At September 30, 2007
Prior to Effect of As Reported
Adopting Adopting at Sept 30,
SFAS 158 SFAS 158 2007
Deferred Tax Asset-Long-term $ 431 $ (431) $ –
Intangible Assets 831,122 (1,824) 829,297
Other Assets 1,967,986 319 1,968,305
Total Employee
Benefit Obligation (58,306) 3,836 (54,469)
AOCI (62,764) (1,900) (64,664)