Rayovac 2008 Annual Report Download - page 60

Table of Contents
Index to Financial Statements
the fourth quarter of Fiscal 2007. In addition, we recorded a non-cash deferred income tax charge of approximately $7 million in the fourth quarter of Fiscal 2007
related to an increase in the valuation allowance against our net deferred tax assets in Mexico. In addition to these valuation allowances, we have also recorded
valuation allowances, primarily related to net operating loss carryforwards, in Brazil, Argentina, Chile and Canada. Our total valuation allowance, established for
the tax benefit of deferred tax assets that may not be realized, is approximately $307 million at September 30, 2007. Of this amount, approximately $235 million
relates to U.S. net deferred tax assets and approximately $72 million relates to foreign net deferred tax assets.
SFAS 142 requires companies to test goodwill and indefinite-lived assets for impairment annually, or more often if an event or circumstance indicates that
an impairment loss may have been incurred. During Fiscal 2007 and 2006, the Company recorded non-cash pretax impairment charges of approximately $362
million and $433 million, respectively. The tax impact, prior to consideration of the current year valuation allowance, of the impairment charges was limited to a
deferred tax benefit of approximately $77 million and $43 million respectively, because a significant portion of the impaired assets are not deductible for tax
purposes. See “Goodwill and Intangibles Impairment” above, as well as Note 2(c), Significant Accounting Policies and Practices—Intangible Assets, of Notes to
Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information regarding these non-cash impairment charges.
Discontinued Operations. On November 1, 2007, we sold the Canadian division of the Home and Garden Business, which operated under the name
Nu-Gro, to a new company formed by RoyCap Merchant Banking Group and Clarke Inc. Cash proceeds received at closing, net of selling expenses, totaled
approximately $15 million and were used to reduce outstanding debt. These proceeds are included in net cash provided by investing activities of discontinued
operations in our Consolidated Statements of Cash Flows included in this Annual Report on Form 10-K. On February 5, 2008, we finalized the contractual
working capital adjustment in connection with this sale which increased our proceeds received by approximately $1 million. As a result of the finalization of the
contractual working capital adjustments we recorded a loss on disposal of approximately $1 million, net of tax benefit.
The following amounts related to the Canadian division of the Home and Garden Business have been segregated from continuing operations and are
reflected as discontinued operations during Fiscal 2007 and Fiscal 2006, respectively:
2007 2006
Net sales $ 88.7 $ 89.5
Loss from discontinued operations before income taxes $ (46.3) $ (0.4)
Provision for income tax benefit (6.3) (0.1)
Loss from discontinued operations, net of tax $ (40.0) $ (0.3)
In accordance with SFAS 144, long-lived assets to be disposed of by sale are recorded at the lower of their carrying value or fair value less costs to sell.
During Fiscal 2007, we recorded a non-cash pretax charge of $45 million in discontinued operations to reduce the carrying value of certain assets, principally
consisting of goodwill and intangible assets, related to the Canadian Home and Garden Business in order to reflect the estimated fair value of this business.
On January 25, 2006, we sold Nu-Gro Pro and Tech to Agrium Inc. As part of the transaction, we signed strategic multi-year reciprocal supply agreements
with Agrium. Proceeds from the sale totaled approximately $83 million after selling expenses and contractual working capital adjustments which were finalized
on October 30, 2006. Proceeds from the sale were used to reduce outstanding debt.
Effective October 1, 2005, we reflected the operations of Nu-Gro Pro and Tech as discontinued operations. The Company discontinued these operations as
part of the United integration initiatives. See Note 16, Restructuring and Related Charges, of Notes to Consolidated Financial Statements included in this Annual
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Source: Spectrum Brands, Inc, 10-K, December 10, 2008