Rayovac 2009 Annual Report Download - page 152

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 pre−tax gain on the cancellation of debt was calculated as follows:
Extinguishment of Predecessor Company senior subordinated notes $1,049,885
Extinguishment of Predecessor Company accrued interest on senior subordinated notes 40,497
Issuance of Successor Company 12% Notes (fair value) (218,731)
Issuance of Successor Company common stock (725,096)
Pre−tax gain on the cancellation of debt $ 146,555
(l) Pursuant to the Plan, the adjustment eliminates treasury stock of $76,891 of the Predecessor Company.
Fresh−Start Valuation Adjustments
(m) Reflects the adjustment of assets and liabilities to estimated fair value, or other measurement specified by SFAS 141, in conjunction with the adoption
of fresh−start reporting. Significant adjustments are summarized as followed:
•Inventories – An adjustment of $48,762 was recorded to adjust inventory to fair value. Raw materials were valued at current replacement cost,
work−in−process was valued at estimated selling prices of finished goods less the sum of costs to complete, cost of disposal and a reasonable
profit allowance for completing and selling effort based on profit for similar finished goods. Finished goods were valued at estimated selling
prices less the sum of costs of disposal and a reasonable profit allowance for the selling effort.
•Property, plant and equipment, net – An adjustment of $34,699 was recorded to adjust the net book value of property, plant and equipment to
fair value giving consideration to their highest and best use. Key assumptions used in the valuation of the Company’s property, plant and
equipment were based on a combination of the cost or market approach, depending on whether market data was available.
•Current maturities of long−term debt and Long−term debt, net of current maturities – An adjustment of $79,658 ($4,329 to Current maturities
of long−term debt and $75,329 to Long−term debt, net of current maturities) was recorded to adjust the book value of debt to fair value. This
adjustment included a decrease of $84,001 which was based on quoted market prices of certain debt instruments as of the Effective Date, offset
by an increase of $4,343 related to debt instruments not traded which was calculated giving consideration to the terms of the underlying
agreements, using a risk adjusted interest rate of 12%.
•Employee benefit obligations, net of current portion – An adjustment of $18,712 was recorded to measure the employee benefit obligations as
of the Effective Date. This adjustment primarily reflects the difference between the expected return on plan assets as compared to the fair value
of the plan assets as of the Effective Date and the change in the duration weighted discount rate associated with the payment of the benefit
obligations from the prior measurement date and the Effective Date. The weighted average discount rate change from 6.75% at September 30,
2008 to 5.75% at August 30, 2009.
(n) Reflects the tax effects of the fresh−start adjustments at statutory tax rates applicable to such adjustments, net of adjustments to the valuation
allowance.
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