Rayovac 2008 Annual Report Download - page 135

Table of Contents
Index to Financial Statements
SPECTRUM BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except per share amounts)
The Company also enters into various arrangements, primarily with retail customers, which require the Company to make upfront cash, or “slotting”
payments, to secure the right to distribute through such customers. The Company capitalizes slotting payments, provided the payments are supported by a time or
volume based arrangement with the retailer, and amortizes the associated payment over the appropriate time or volume based term of the arrangement. The
amortization of slotting payments is treated as a reduction in Net sales and a corresponding asset is reported in Deferred charges and other in the accompanying
Consolidated Balance Sheets.
(c) Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
(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, Major Customers and Employees
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 customer’s financial condition and credit history, but generally does not require collateral. The Company monitors its customers’
credit and financial condition based on changing economic conditions and will make adjustments to credit policies as required. Provision for losses on
uncollectible trade receivables 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 significant percentage of its sales
volume. This major customer represented approximately 19%, 19% and 20%, of net sales during 2008, 2007 and 2006, respectively. This major customer also
represented approximately 22% and 11%, respectively, of Trade account receivables, net as of September 30, 2008 and 2007.
Approximately 43% of the Company’s sales occur outside of the United States. 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 appropriate 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 facilitate display of the Company’s products. Temporary displays are
generally disposed of after a single use by the customer.
Permanent fixtures are permanent in nature, generally made from wire or other permanent racking, which are shipped to customers for display of the
Company’s products. These permanent fixtures are restocked with the Company’s product multiple times over the fixture’s useful life.
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Source: Spectrum Brands, Inc, 10-K, December 10, 2008