Rayovac 2009 Annual Report Download - page 147

Table of Contents
Index to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except per share amounts)
assumptions are inherently subject to uncertainties and contingencies beyond the control of the Company. Accordingly, there can be no assurance that the
estimates, assumptions, and values reflected in the valuations will be realized, and actual results could vary materially.
The publicly traded company analysis identified a group of comparable companies giving consideration to lines of business, business risk, scale and
capitalization and leverage. This analysis involved the selection of the appropriate earnings before interest, taxes, depreciation and amortization
(“EBITDA”) market multiples by segment deemed to be the most relevant when analyzing the peer group. A range of valuation multiples was then
identified and applied to the Company’s Fiscal 2009 and the fiscal year ending September 30, 2010 (“Fiscal 2010”) projections by segment to determine an
estimate of reorganization values. The market multiple ranges used by segment were as follows: (i) Global Batteries and Personal Care used a range of
7.0x−8.0x for Fiscal 2009 and 6.5x−7.5x for Fiscal 2010; (ii) Global Pet Supplies used a range of 7.5x−8.5x for Fiscal 2009 and 7.0x−8.0x for Fiscal 2010;
and (iii) the Home and Garden Business used a range of 9.0x−10.0x for Fiscal 2009 and 8.0x−9.0x for Fiscal 2010. Theses multiples were based on
estimated EBITDA adjusted for certain non−recurring initiatives, as mentioned above.
The recent transactions of companies in similar industries analysis identified transactions of similar companies giving consideration to lines of
business, business risk, scale and capitalization and leverage. The analysis considered the business, financial and market environment for which the
transactions took place, circumstances surrounding the transaction including the financial position of the buyers and the perceived synergies and benefits
that the buyers could obtain from the transaction. This analysis involved the determination of historical acquisition EBITDA multiples by examining public
merger and acquisition transactions. A range of valuation multiples was then identified and applied to historical EBITDA by segment to determine an
estimate of reorganization values. The multiple ranges used by segment were as follows: (i) Global Batteries and Personal Care used a range of 6.5x – 7.5x;
(ii) Global Pet Supplies used a range of 9.5x−10.5x; and (iii) the Home and Garden Business used a range of 8.0x−9.0x. These multiples were based on
Fiscal 2009 estimated EBITDA adjusted for certain non−recurring initiatives, as mentioned above.
Fresh−start adjustments reflect the allocation of fair value to the Successor Company’s long−lived assets and the present value of liabilities to be paid
as calculated by the Company.
These estimates of fair values of assets and liabilities have been reflected in the Successor Company’s consolidated statement of financial position as
of August 30, 2009. However, as these estimates are finalized, the allocations of fair value in the Successor’s statement of financial position could result in
additional adjustments to the fair value of assets or present value of estimated liabilities during the allocation period while the Company continues to obtain
information necessary to complete its final allocation. These adjustments could result from additional information related to the assumptions and estimates
used in determining the fair value of long−lived assets and liabilities.
In applying fresh−start reporting, the Company followed these principles:
• The reorganization value of the entity was allocated to the entity’s assets in conformity with the procedures specified by SFAS No. 141,
“Business Combinations” (“SFAS 141”). The reorganization value exceeded the sum of the amounts assigned to assets and liabilities. This
excess was recorded as Successor Company goodwill as of August 30, 2009.
• Each liability existing as of the fresh−start reporting date, other than deferred taxes, has been stated at the present value of the amounts to be
paid, determined at appropriate risk adjusted interest rates.
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