Rayovac 2013 Annual Report Download - page 140

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SPECTRUM BRANDS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
(Amounts in thousands, except per share figures)
The fair values recorded for the assets acquired and liabilities assumed for Shaser, including a reconciliation
to the preliminary valuation reported as of December 30, 2012, are as follows:
Preliminary
Valuation
December 30, 2012
Adjustments /
reclassifications
Final Valuation
September 30, 2013
Cash ............................................ $ 870 $ — $ 870
Intangible asset ................................... 35,500 (6,200) 29,300
Other assets ...................................... 2,679 (2,531) 148
Total assets acquired ............................... $39,049 $(8,731) $ 30,318
Total liabilities assumed ............................ 14,398 (5,566) 8,832
Total identifiable net assets .......................... 24,651 (3,165) 21,486
Noncontrolling interest ............................. (38,954) (46) (39,000)
Goodwill ........................................ 63,880 3,269 67,149
Total identifiable net assets .......................... $49,577 $ 58 $ 49,635
Subsequent to the preliminary purchase accounting, the Company recorded adjustments to the preliminary
valuation of assets and liabilities resulting in a net increase to goodwill of $3,269. Goodwill increased as a result
of further information to support a key valuation factor that impacted the valuation of the technology asset
acquired, and the resulting changes to the deferred tax asset and liabilities. This revised information was provided
by Shaser during the period.
Pre-Acquisition Contingencies Assumed
The Company has evaluated pre-acquisition contingencies relating to Shaser that existed as of the
acquisition date. Based on the evaluation, the Company has determined that certain pre-acquisition contingencies
are probable in nature and estimable as of the acquisition date. Accordingly, the Company has recorded its best
estimates for these contingencies as part of the purchase accounting for Shaser.
Valuation Adjustments
The Company performed a valuation of the acquired proprietary technology assets, the non-controlling
interest and the Call Option related to Shaser at November 8, 2012. A summary of the significant key inputs is as
follows:
• The Company valued the technology assets 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 Shaser, related licensing
agreements and the importance of the technology and profit levels, among other considerations. The
royalty rate used in the determination of the fair value of the technology asset was 10.5% of expected
Net sales related to the technology. The Company anticipates using the technology through the legal
life of the underlying patent and therefore the expected life of the technology was equal to the
remaining legal life of the underlying patent which was 13 years. In estimating the fair value of the
technology, Net sales were estimated to grow at a long-term rate of 3% annually. Income taxes were
estimated at 35% and amounts were discounted using the rate of 11%. The technology asset was valued
at approximately $29,300 under this approach.
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