Rayovac 2009 Annual Report Download - page 160

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 above impairments of goodwill and trade name intangible assets is primarily attributed to lower current and forecasted profits, reflecting more
conservative growth rates versus those assumed by the Company at the time of acquisition, as well as due to a sustained decline in the total market
capitalization of the Company.
During the third quarter of Fiscal 2008, the Company developed and initiated a plan to phase down, and ultimately curtail, manufacturing operations
at its Ningbo, China battery manufacturing facility. The Company completed the shutdown of Ningbo during the fourth quarter of Fiscal 2008. In
connection with the Company’s strategy to exit operations in Ningbo, China, the Predecessor Company recorded a non−cash pretax charge of $16,193 to
reduce the carrying value of goodwill related to the Ningbo, China battery manufacturing facility.
The recognition of the $34,391, $861,234 and $362,452 non−cash impairment of goodwill and trade name intangible assets during the eleven month
period ended August 30, 2009, Fiscal 2008 and Fiscal 2007, respectively, has been recorded as a separate component of Operating expenses and has had a
material negative effect on the Predecessor Company’s financial condition and results of operations during the eleven month period ended August 30, 2009,
Fiscal 2008 and Fiscal 2007. These impairments will not result in future cash expenditures.
Intangibles with Definite or Estimable Useful Lives
The triggering events discussed above under ASC 350 also indicate a triggering event in accordance with ASC 360. Management conducted an
analysis in accordance with ASC 360 of intangibles with definite or estimable useful lives in conjunction with the ASC 350 testing of intangibles with
indefinite lives.
The Company assesses the recoverability of intangible assets with definite or estimable useful lives in accordance with ASC 360 by determining
whether the carrying value can be recovered through projected undiscounted future cash flows. If projected undiscounted future cash flows indicate that the
unamortized carrying value of intangible assets with finite useful lives will not be recovered, an adjustment would be made to reduce the carrying value to
an amount equal to projected future cash flows discounted at the Company’s incremental borrowing rate. The cash flow projections used are based on trends
of historical performance and management’s estimate of future performance, giving consideration to existing and anticipated competitive and economic
conditions.
Impairment reviews are conducted at the judgment of management when it believes that a change in circumstances in the business or external factors
warrants a review. Circumstances such as the discontinuation of a product or product line, a sudden or consistent decline in the sales forecast for a product,
changes in technology or in the way an asset is being used, a history of operating or cash flow losses, or an adverse change in legal factors or in the business
climate, among others, may trigger an impairment review. The Company’s initial impairment review to determine if an impairment test is required is based
on an undiscounted cash flow analysis for asset groups at the lowest level for which identifiable cash flows exist. The analysis requires management
judgment with respect to changes in technology, the continued success of product lines and future volume, revenue and expense growth rates, and discount
rates.
In accordance with ASC 360, long−lived assets to be disposed of are recorded at the lower of their carrying value or fair value less costs to sell.
During Fiscal 2008, the Predecessor Company recorded a non−cash pretax charge of $5,700 in discontinued operations to reduce the carrying value of
intangible assets related to the growing products portion of the Home and Garden Business in order to reflect the estimated fair value of this business. (See
also Note 10, Discontinued Operations, for additional information regarding this impairment charge). During Fiscal 2007, the Predecessor Company
recorded a non−cash pretax charge of $44,507 in
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