Annual report pursuant to Section 13 and 15(d)

Goodwill

v2.3.0.15
Goodwill
12 Months Ended
Sep. 24, 2011
Goodwill [Abstract]  
Goodwill

7. Goodwill

Changes in the carrying amount of goodwill for the fiscal years ended September 24, 2011, September 25, 2010 and September 26, 2009 are as follows (in thousands):

 

     Garden Products
Segment
    Pet Products
Segment
    Total  

Balance as of September 27, 2008

      

Goodwill

   $ 205,874      $ 397,477      $ 603,351   

Accumulated impairment losses

     (205,874     (195,978     (401,852
  

 

 

   

 

 

   

 

 

 
     0        201,499        201,499   
  

 

 

   

 

 

   

 

 

 

Additions in fiscal 2009

     4,799        1,451        6,250   

Balance as of September 26, 2009

      

Goodwill

     210,673        398,928        609,601   

Accumulated impairment losses

     (205,874     (195,978     (401,852
  

 

 

   

 

 

   

 

 

 
     4,799        202,950        207,749   
  

 

 

   

 

 

   

 

 

 

Additions (reductions) in fiscal 2010

     881        (1,311     (430

Balance as of September 25, 2010

      

Goodwill

     211,554        397,617        609,171   

Accumulated impairment losses

     (205,874     (195,978     (401,852
  

 

 

   

 

 

   

 

 

 
     5,680        201,639        207,319   
  

 

 

   

 

 

   

 

 

 

Additions in fiscal 2011

     2,029        875        2,904   

Balance as of September 24, 2011

      

Goodwill

     213,583        398,492        612,075   

Accumulated impairment losses

     (205,874     (195,978     (401,852
  

 

 

   

 

 

   

 

 

 
   $ 7,709      $ 202,514      $ 210,223   
  

 

 

   

 

 

   

 

 

 

Additions or reductions to goodwill include acquisitions, purchase price adjustments and adjustments of amounts upon finalization of purchase accounting.

The Company tests goodwill for impairment annually (on the first day of the fourth fiscal quarter), or whenever events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount, by initially comparing the fair value of each of the Company's four reporting units to their related carrying values. If the fair value of the reporting unit is less than its carrying value, the Company performs an additional step to determine the implied fair value of goodwill associated with that reporting unit. The implied fair value of goodwill is determined by first allocating the fair value of the reporting unit to all of its assets and liabilities and then computing the excess of the reporting unit's fair value over the amounts assigned to the assets and liabilities. If the carrying value of goodwill exceeds the implied fair value of goodwill, such excess represents the amount of goodwill impairment, and, accordingly, the Company recognizes such impairment. The Company's goodwill impairment analysis also includes a comparison of the aggregate estimated fair value of all four reporting units to the Company's total market capitalization.

Determining the fair value of a reporting unit involves the use of significant estimates and assumptions. The estimate of fair value of each of the Company's reporting units is based on the Company's projection of revenues, gross margin, operating costs and cash flows considering historical and estimated future results, general economic and market conditions as well as the impact of planned business and operational strategies. The Company bases its fair value estimates on assumptions the Company believes to be reasonable at the time, but such assumptions are subject to inherent uncertainty. Actual results may differ from those estimates. The valuations employ present value techniques to measure fair value and consider market factors.

The Company performed its fiscal 2009 annual goodwill impairment test as of June 27, 2009. Key assumptions used to determine the fair value of each reporting unit as of our fiscal 2009 annual testing date were: (a) expected cash flow for the period from 2010 to 2015; and (b) a discount rate of 10%, which was based on management's best estimate of the after-tax weighted average cost of capital. Based on the Company's analysis, it concluded there was no impairment of goodwill.

The Company performed its fiscal 2010 annual goodwill impairment test as of June 27, 2010. Key assumptions used to determine the fair value of each reporting unit as of the fiscal 2010 annual testing date were: (a) expected cash flow for the period from 2011 to 2016; and (b) a discount rate of 10%, which was based on management's best estimate of the after-tax weighted average cost of capital. Based on the Company's analysis, it concluded there was no impairment of goodwill.

As of June 27, 2010, if forecasted cash flows had been 10% lower than estimated, the resulting goodwill impairment, if any, would not have changed. As of June 27, 2010, if the discount rate applied in the Company's analysis had been 100 basis points higher than estimated, the resulting goodwill impairment, if any, would not have changed.

The Company performed its fiscal 2011 annual goodwill impairment test as of June 26, 2011. Key assumptions used to determine the fair value of each reporting unit as of the fiscal 2011 annual testing date were: (a) expected cash flow for the period from 2012 to 2017; and (b) a discount rate of 10%, which was based on management's best estimate of the after-tax weighted average cost of capital. Based on the Company's analysis, it concluded there was no impairment of goodwill.

As of June 26, 2011, if forecasted cash flows had been 10% lower than estimated, the resulting goodwill impairment, if any, would not have changed. As of June 26, 2011, if the discount rate applied in the Company's analysis had been 100 basis points higher than estimated, the resulting goodwill impairment, if any, would not have changed.

Changes in the judgments and estimates underlying our analysis of goodwill for possible impairment, including expected future cash flows and discount rate, could result in a significantly different estimate of the fair value of the reporting units in the future and could result in additional impairment of goodwill.

The Company will need to assess goodwill for further impairment in the future if indicators are present.