Rayovac 2010 Annual Report Download - page 81

reductions within all our segments and the exit of certain facilities in the U.S. related to the Global Pet Supplies
segment. These initiatives also included consultation, legal and accounting fees related to the evaluation of our
capital structure.
Goodwill and Intangibles Impairment. ASC 350 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 2009 and 2008, we tested our goodwill and indefinite-lived intangible
assets. As a result of this testing, we recorded a non-cash pretax impairment charge of $34 million and $861
million in Fiscal 2009 and Fiscal 2008, respectively. The $34 million non-cash pretax impairment charge
incurred in Fiscal 2009 reflects trade name intangible asset impairments of the following: $18 million related to
Global Pet Supplies; $15 million related to the Global Batteries and Personal Care segment; and $1 million
related to the Home and Garden Business. The $861 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 the Home and Garden
Business and $16 million was associated with our Global Batteries and Personal Care segment. Of the $265
million trade name intangible assets impairment; $98 million was within our Global Pet Supplies segment, $86
million was within our Global Batteries and Personal Care segment and $81 million was within the Home and
Garden segment. See Note 3(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 2009 decreased to $190 million from $229 million in Fiscal
2008. The decrease in Fiscal 2009 is primarily due to ceasing the accrual of interest on Old Spectrum’s Senior
Subordinated Notes, partially offset by the accrual of the default interest on our U.S. Dollar Term B Loan and
Euro facility and ineffectiveness related to interest rate derivative contracts. Contractual interest not accrued on
the Senior Subordinated Notes during Fiscal 2009 was $56 million. See Liquidity and Capital Resources—Debt
Financing Activities and Note 8, Debt, of Notes to Consolidated Financial Statements included in this Annual
Report on Form 10-K for additional information regarding our outstanding debt.
Reorganization Items. During Fiscal 2009, Old Spectrum, in connection with our reorganization under
Chapter 11 of the Bankruptcy Code, recorded Reorganization items expense (income), net, which represents a
gain of approximately $(1,143) million. Reorganization items expense (income), net included the following:
(i) gain on cancellation of debt of $(147) million; (ii) gains in connection with fresh-start reporting adjustments
of $(1,088) million; (iii) legal and professional fees of $75 million; (iv) write off deferred financing costs related
to the Senior Subordinated Notes of $11 million; and (v) a provision for rejected leases of $6 million. During
Fiscal 2009, New Spectrum recorded Reorganization items expense (income), net which represents expense of $4
million related to professional fees. See Note 2, Voluntary Reorganization Under Chapter 11, of Notes to
Consolidated Financial Statements included in this Annual Report on Form 10-K for more information related to
our reorganization under Chapter 11 of the Bankruptcy Code.
Income Taxes. Our effective tax rate on losses from continuing operations is approximately 2.0% for Old
Spectrum and (256)% for New Spectrum during Fiscal 2009. Our effective tax rate on income from continuing
operations was approximately 1.0% for Fiscal 2008. The primary drivers of the change in our effective rate for
New Spectrum for Fiscal 2009 as compared to Fiscal 2008 relate to residual income taxes recorded on the actual
and deemed distribution of foreign earnings in Fiscal 2009. The change in the valuation allowance related to
these dividends was recorded against goodwill as an adjustment for release of valuation allowance. The primary
drivers for Fiscal 2008 include tax expense recorded for an increase in the valuation allowance associated with
our net U.S. deferred tax asset and the tax impact of the impairment charges.
As of September 30, 2009, we had U.S. federal and state net operating loss carryforwards of approximately
$598 and $643 million, respectively, which will expire between 2010 and 2029, and we have foreign net
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