Rayovac 2008 Annual Report Download - page 49

Table of Contents
Index to Financial Statements
battery manufacturing facility in Ningbo Baowang China (“Ningbo”) (the “Ningbo Exit Plan”). We recorded approximately $16 million of pretax restructuring
and related charges during Fiscal 2008 in connection with the Ningbo Exit Plan. Costs associated with these initiatives, which are expected to be incurred
through September 30, 2009, are projected at approximately $22 million.
Goodwill and Intangibles Impairment. SFAS 142 requires companies to test goodwill and indefinite-lived intangible assets for impairment annually, or
more often if an event or circumstance indicates that an impairment loss may have been incurred. In Fiscal 2008 and 2007, we tested our goodwill and
indefinite-lived intangible assets. As a result of this testing, we recorded a non-cash pretax impairment charge of $867 million and $362 million in Fiscal 2008
and 2007, respectively. The $867 million non-cash pretax impairment charge incurred in Fiscal 2008 reflects $602 million related to the impairment of goodwill
and $265 million related to the impairment of trade name intangible assets. Of the $602 million goodwill impairment; $426 million was associated with our
Global Pet Supplies segment, $160 million was associated with our Home and Garden Business, $16 million was associated with our Global Batteries and
Personal Care reportable segment. Of the $265 million trade name intangible assets impairment; $98 million was within our Global Pet Supplies reportable
segment, $86 million was within our Global Batteries and Personal Care reportable segment and $81 million was within our Home and Garden reportable
segment. The $362 million impairment charge incurred in Fiscal 2007 reflects the impairment of goodwill associated with our U.S. Home and Garden Business
and our North America reporting unit, which is now included as part of our Global Batteries & Personal Care reportable segment, coupled with an impairment of
trade name intangible assets primarily associated with our Global Batteries & Personal Care business segment. Future cash expenditures will not result from
these impairment charges. See Note 2(i), Significant Accounting Policies and Practices—Intangible Assets, of Notes to Consolidated Financial Statements
included in this Annual Report on Form 10-K for further details on these impairment charges.
Interest Expense. Interest expense in Fiscal 2008 decreased to $229 million from $256 million in Fiscal 2007. The decrease in Fiscal 2008 was primarily
due to the non recurrence of the write off of debt issuance costs and prepayment premiums related to our debt refinancing in March 2007. See “Liquidity and
Capital Resources—Debt Financing Activities” below, as well as, Note 7, Debt, of Notes to Consolidated Financial Statements included in this Annual Report on
Form 10-K for additional information regarding our outstanding debt.
Income Taxes. Our effective tax rate on losses from continuing operations is approximately 1.2% for Fiscal 2008. Our effective tax rate on income from
continuing operations was approximately (11.1)% for Fiscal 2007. The primary drivers of the change in our effective tax rate relate to tax expense recorded for
an increase in the valuation allowance associated with our net U.S. deferred tax asset, the tax impact of the impairment charges recorded in Fiscal 2008 and
Fiscal 2007 related to non-deductible goodwill and to changes in the mix of our taxable income between U.S. and foreign sources.
As of September 30, 2008, we have U.S. federal and state net operating loss carryforwards of approximately $1,009 and $1,832 million, respectively,
which will expire between 2009 and 2028, and we have foreign net operating loss carryforwards of approximately $142 million, which will expire beginning in
2009. Certain of the foreign net operating losses have indefinite carryforward periods. As of September 30, 2007 we had U.S. federal, foreign and state net
operating loss carryforwards of approximately $763, $117 and $1,141 million, respectively, which, at that time, were scheduled to expire between 2008 and
2027. Certain of the foreign net operating losses have indefinite carryforward periods. Limitations apply to a portion of these net operating loss carryforwards in
accordance with Internal Revenue Code Section 382.
The ultimate realization of our deferred tax assets depends on our ability to generate sufficient taxable income of the appropriate character in the future and
in the appropriate taxing jurisdictions. We establish valuation allowances for deferred tax assets when we estimate it is more likely than not that the tax assets
will not be realized. We base these estimates on projections of future income, including tax planning strategies, in certain jurisdictions. Changes in industry
conditions and other economic conditions may impact our ability to project future income. SFAS No. 109 “Accounting for Income Taxes” (“SFAS 109”)
requires the establishment
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Source: Spectrum Brands, Inc, 10-K, December 10, 2008