Rayovac 2013 Annual Report Download - page 138

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SPECTRUM BRANDS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(Amounts in thousands, except per share figures)
• The Company valued technology using the income approach, specifically the relief from royalty
method. Under this method, the asset value was determined by estimating the hypothetical
royalties that would have to be paid if the technology was not owned. Royalty rates were selected
based on consideration of several factors, including prior transactions of the HHI Business, related
licensing agreements and the importance of the technology and profit levels, among other
considerations. Royalty rates used in the determination of the fair values of technologies ranged
from 4%-5% of expected Net sales related to the respective technology. The Company anticipates
using these technologies through the legal life of the underlying patent; therefore, the expected life
of these technologies was equal to the remaining legal life of the underlying patents which was 10
years. In estimating the fair value of the technologies, Net sales were estimated to grow at a rate of
2.5%-31% annually. Income taxes were estimated at 35% and amounts were discounted using the
rate of 12%. The technology assets were valued at $51,000 under this approach.
• Deferred tax liabilities, net- An adjustment of $123,593 was recorded to adjust deferred taxes for the
preliminary fair value adjustments made in accounting for the purchase.
Supplemental Pro Forma Information (Unaudited)
The following reflects the Company’s pro forma results had the results of the HHI Business been included
for all periods presented.
2013 2012 2011
Net sales:
Reported Net sales ........................................... $4,085,581 $3,252,435 $3,186,916
HHI Business adjustment(1) ................................... 191,777 973,648 975,096
Pro forma Net sales .......................................... $4,277,358 $4,226,083 $4,162,012
Net (loss) income:
Reported Net (loss) income(2)(3) ............................... $ (55,313) $ 48,572 $ (75,171)
HHI Business adjustment(1) ................................... 4,942 76,120 77,035
Pro forma Net (loss) income ................................... $ (50,371) $ 124,692 $ 1,864
Basic (loss) income per share:
Reported Basic (loss) income per share .......................... $ (1.06) $ 0.94 $ (1.47)
HHI Business adjustment(1) ................................... 0.09 1.47 1.51
Pro forma Basic (loss) income per share .......................... $ (0.97) $ 2.41 $ 0.04
Diluted (loss) income per share(4):
Reported Diluted (loss) income per share ......................... $ (1.06) $ 0.91 $ (1.47)
HHI Business adjustment(1) ................................... 0.09 1.43 1.51
Pro forma Diluted (loss) income per share ........................ $ (0.97) $ 2.34 $ 0.04
(1) The results related to the HHI Business adjustment do not reflect the TLM Taiwan business as stand alone
financial data is not available for the periods presented. The TLM Taiwan business is not deemed material
to the operating results of the Company.
(2) Included in Reported Net (loss) income for Fiscal 2013, is an adjustment of $49,848 to record the income
tax benefit resulting from the reversal of U.S. valuation allowances on deferred tax assets as a result of the
HHI Business acquisition. For information pertaining to the income tax benefit, see Note 9, “Income
Taxes.”
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