Rayovac 2015 Annual Report Download - page 118

SPECTRUM BRANDS HOLDINGS, INC.
SB/RH HOLDINGS, LLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(CONTINUED)
Purchase Price
Allocation
(in millions)
Cash and cash equivalents ........................ $ 0.5
Receivables .................................... 10.7
Inventories .................................... 17.0
Prepaid expenses and other current assets ............ 2.5
Property, plant and equipment, net .................. 1.2
Goodwill ...................................... 71.5
Intangible assets ................................ 55.5
Accounts payable and accrued liabilities ............. (8.5)
Other long term liabilities ......................... (2.1)
Net assets acquired .............................. $148.3
The purchase price allocation resulted in goodwill of $71.5 million of which $24.7 million is deductible for
tax purposes. Goodwill was allocated to the Global Pet Supplies segment. The values allocated to intangible
assets and the weighted average useful lives are as follows:
Carrying
Amount
Weighted Average
Useful Life (Years)
(in millions)
Tradenames ................................ $17.0 Indefinite
Definite-lived tradenames ..................... 1.0 13
Technology ................................ 2.1 17
Customer relationships ....................... 35.4 13
Total intangibles acquired ..................... $55.5
The fair values were determined based upon a valuation and the estimates and assumptions used in such
valuation are subject to change, which could be significant, within the measurement period (up to one year from
the January 16, 2015 acquisition date). The Company performed a valuation of the acquired inventories,
property, plant and equipment, tradenames, customer relationships and non-compete agreement. A summary of
the significant inputs to the valuation is as follows:
• Inventories—The replacement cost approach was applied to estimate the fair value of the raw materials
and unbranded finished goods inventory. Branded finished goods were valued based on the
comparative sales method, which estimates the expected sales price of the finished goods inventory,
reduced for all costs expected to be incurred in its completion or disposition and a profit on those costs.
• Property, plant and equipment—The cost approach was utilized to estimate the fair value of
approximately 98% of the property, plant and equipment. The sales comparison approach was used to
estimate the fair value of the remaining 2% of the property, plant and equipment.
• Tradenames—The Company valued indefinite-lived trade names using an income approach, 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 trade names were not owned. Royalty rates were selected
based on consideration of several factors, including prior transactions, related trademarks and trade
names, other similar trademark licensing and transaction agreements and the relative profitability and
perceived contribution of the trade names.
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