Rayovac 2011 Annual Report Download - page 38

labor force. While we currently expect to negotiate continuations to the terms of these agreements, there can be
no assurances that we will be able to obtain terms that are satisfactory to us or otherwise to reach agreement at all
with the applicable parties. In addition, in the course of our business, we may also become subject to additional
collective bargaining agreements. These agreements may be on terms that are less favorable than those under our
current collective bargaining agreements. Increased exposure to collective bargaining agreements, whether on
terms more or less favorable than our existing collective bargaining agreements, could adversely affect the
operation of our business, including through increased labor expenses. While we intend to comply with all
collective bargaining agreements to which we are subject, there can be no assurances that we will be able to do so
and any noncompliance could subject us to disruptions in our operations and materially and adversely affect our
results of operations and financial condition.
Significant changes in actual investment return on pension assets, discount rates and other factors could
affect our results of operations, equity and pension contributions in future periods.
Our results of operations may be positively or negatively affected by the amount of income or expense we
record for our defined benefit pension plans. U.S. Generally Accepted Accounting Principles (“GAAP”) requires
that we calculate income or expense for the plans using actuarial valuations. These valuations reflect assumptions
about financial market and other economic conditions, which may change based on changes in key economic
indicators. The most significant year-end assumptions we used to estimate pension income or expense are the
discount rate and the expected long-term rate of return on plan assets. In addition, we are required to make an
annual measurement of plan assets and liabilities, which may result in a significant change to equity. Although
pension expense and pension funding contributions are not directly related, key economic factors that affect
pension expense would also likely affect the amount of cash we would contribute to pension plans as required
under the Employee Retirement Income Security Act of 1974, as amended.
If our goodwill, indefinite-lived intangible assets or other long-term assets become impaired, we will be
required to record additional impairment charges, which may be significant.
A significant portion of our long-term assets consist of goodwill, other indefinite-lived intangible assets and
finite-lived intangible assets recorded as a result of past acquisitions as well as through fresh start reporting. We
do not amortize goodwill and indefinite-lived intangible assets, but rather review them for impairment on a
periodic basis or whenever events or changes in circumstances indicate that their carrying value may not be
recoverable. We consider whether circumstances or conditions exist which suggest that the carrying value of our
goodwill and other long-lived intangible assets might be impaired. If such circumstances or conditions exist,
further steps are required in order to determine whether the carrying value of each of the individual assets
exceeds its fair value. If analysis indicates that an individual asset’s carrying value does exceed its fair value, the
next step is to record a loss equal to the excess of the individual asset’s carrying value over its fair value.
The steps required by GAAP entail significant amounts of judgment and subjectivity. Events and changes in
circumstances that may indicate that there may be an impairment and which may indicate that interim
impairment testing is necessary include, but are not limited to: strategic decisions to exit a business or dispose of
an asset made in response to changes in economic, political and competitive conditions; the impact of the
economic environment on the customer base and on broad market conditions that drive valuation considerations
by market participants; our internal expectations with regard to future revenue growth and the assumptions we
make when performing impairment reviews; a significant decrease in the market price of our assets; a significant
adverse change in the extent or manner in which our assets are used; a significant adverse change in legal factors
or the business climate that could affect our assets; an accumulation of costs significantly in excess of the amount
originally expected for the acquisition of an asset; and significant changes in the cash flows associated with an
asset. As a result of such circumstances, we may be required to record a significant charge to earnings in our
financial statements during the period in which any impairment of our goodwill, indefinite-lived intangible assets
or other long-term assets is determined. Any such impairment charges could have a material adverse effect on
our business, financial condition and operating results.
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