View:
[Letterhead
of Spectrum Brands, Inc.]
March 11,
2008
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Ms.
Kate Tillan
Division
of Corporation Finance
Securities
and Exchange Commission
450
Fifth Street, N.W.
Washington,
D.C. 20549-7010
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RE:
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Spectrum
Brands, Inc.
Form
10-K for the fiscal year ended September 30, 2007
Filed
December 14, 2007
Form
10-Q for the fiscal quarter ended December 30, 2007
Form
8-K dated February 7, 2008
File No.
001-13615_________________________________
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Dear Ms.
Tillan:
Set forth
below are the responses of Spectrum Brands, Inc. (the "Company") to the comments
raised by the staff of the Securities and Exchange Commission (the "Staff") in a
letter to the Company dated February 22, 2008 (the "Comment
Letter"). For your convenience, the text of each of the numbered
comments in the Comment Letter has been duplicated in bold type to precede each
of the Company's responses.
Ms. Kate
Tillan
March 11,
2008
Page
2
Form 10-K for the fiscal
year ended September 30, 2007
Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations, Page
31
Introduction, Page
31
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1.
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We note the
disclosure on Pages 32, 57 and 58 and elsewhere that the fair value of
your Home and Garden Business, the impairment of your goodwill and
indefinite-lived intangible assets, the discount rate for your
pension liability, and the expected return of your pension plan assets
were valued by independent third party valuation
specialists. While in future filings management may elect to
take full responsibility for the valuations, if you choose to continue to
refer to the expert in any capacity, please revise future filings,
beginning with your next 10-Q, to name the independent valuation
firm. In addition, please note that if you intend to
incorporate your Form 10-K by reference into any registration statement,
you will be required to include the consent of the independent valuation
firm as an exhibit to the registration
statement.
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Response
In
response to the Staff’s comment, please note that in future filings the Company
expects that it will take full responsibility for the valuations performed by
independent third party valuation specialists. The Company acknowledges the
Staff’s comment with respect to the incorporation of its Form 10-K into any
registration statement.
Fiscal Year Ended September
30, 2007 Compared to Fiscal Year Ended September 30, 2006, Page
36
-Income Taxes, Page
42
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2.
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We
note that you significantly increased your valuation allowance for your
deferred tax assets during fiscal 2007. We note similar disclosures on
Page 50. With a view towards disclosure, please tell us the
facts and circumstances that led you to increase your valuation
allowance.
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Response
The
Company notes that SFAS 109 requires an entity to reduce deferred tax assets by
a valuation allowance if, based on the weight of available evidence, it is more
likely than
Ms. Kate
Tillan
March 11,
2008
Page
3
not that
some portion or all of the deferred tax assets will not be realized. Future
realization of deferred tax assets depends on the existence of sufficient
taxable income of the appropriate character. One source of possible
taxable income is tax planning strategies. The Company had a tax
planning strategy in place premised upon the ability to utilize a significant
portion of its U.S. deferred tax assets to offset a gain on the expected sale of
certain strategic assets.
After
reviewing all evidence available to management, both positive and negative, the
Company determined that as of the fourth quarter of the Company’s fiscal year
ended September 30, 2007 (“Fiscal 2007”) the weight of evidence supported a
conclusion that an increase in the valuation allowance was necessary for the
Company’s deferred tax assets generated in certain jurisdictions. The
Company believed that two key pieces of evidence supported its conclusion to
increase the valuation allowance for its deferred tax assets. First,
the Company was experiencing continued negative operating results in these
jurisdictions. Second, the Company’s outlook for a tax planning strategy
premised upon the ability to utilize a significant portion of its U.S. deferred
tax assets changed. Specifically, as noted in the Company’s response
to comments 7 and 8 below, during the fourth quarter of Fiscal 2007 there was an
unforeseen, rapid and significant tightening of liquidity in the U.S. credit
markets. This tightening of liquidity within the U.S. credit markets
added uncertainty about the timing of any strategic asset sales and the ability
to consummate an asset sale in an amount that would produce sufficient taxable
income to allow the Company to utilize its net operating loss carryovers in the
United States.
Consolidated Financial
Statements, Page 120.
Consolidated Statements of
Cash Flows, page 126.
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3.
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You
present cash flows under the indirect method and begin your reconciliation
with (loss) income from continuing operations. We note a
similar presentation within your December 30, 2007 Form
10-Q. Please revise future filings to be consistent with the
paragraph 28 of SFAS 95 which states that companies should adjust, and
therefore begin with “net income” in presenting operating cash flows under
the indirect method.
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Response
In
response to the Staff’s comment, consistent with Paragraph 28 of SFAS 95, the
Company in future filings will begin the consolidated statements of cash flows
with “net income” when presenting operating cash flows under the indirect
method.
Note
2. Significant Accounting Policies and Practices, Page
128
Ms. Kate
Tillan
March 11,
2008
Page
4
-(b) Revenue Recognition,
Page 128
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4.
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We
note here and within your critical accounting policies in MD&A that
you enter into promotional arrangements that target the ultimate customer
and that you record the costs associated with these arrangements as a
reduction of net sales or an increase of cost of goods sold based upon the
type of promotional program. We further note that you use
various measures, including past experience, to determine the amounts to
be recorded for the estimate of earned, but unpaid, promotional
costs. Please tell us and revise future filings to explain the
nature of the significant promotional programs that you offer to your
ultimate customer and how you determine if the costs associated with these
arrangements should be recorded as a reduction of net sales or an increase
of cost of goods sold. Within your discussion, please explain
the “various measures” that you use to estimate the costs associated with
these arrangements.
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Response
In
response to the Staff’s comment, the Company notes that it enters into
promotional arrangements that target the ultimate customer. The Company follows
the guidance provided by EITF 01-09 “Accounting for Consideration Given by a
Vendor to a Customer (Including a Reseller of the Vendor’s Products),” to
determine whether consideration given to customers in connection with the
Company’s promotional activities should be recorded as a reduction of revenue
rather than an increase in cost of goods sold. In light of the
guidance provided by EITF 01-09, the Company characterizes costs from
promotional programs that provide “cash” consideration as a reduction in revenue
and characterize costs from promotional programs that provide “free products” to
consumers as an increase in cost of goods sold. For “cash
consideration” promotional activities, which include back-by-mail rebates to end
consumers, manufacturer direct coupons and markdown money, the Company
recognizes a liability and reduction in revenue on the date at which the sales
incentive is offered to the consumer per the guidelines in EITF No.
01-09. For “free products” promotional activities, the Company
recognizes an increase in cost of sales at the time the corresponding sales
revenue is recognized. The cost associated with each “cash
consideration” promotion is based on estimates developed using historical
promotional information along with specific estimates provided by the Company’s
promotional clearing houses. The cost of products distributed in
“free products” promotions is the standard cost of the Company’s products and
the actual cost of non-Company products. In future filings, the
Company will explain the nature of the significant promotional programs that it
offers to its ultimate customers and how it determines if the costs associated
with these arrangements should be recorded as a reduction of net sales or an
increase of cost of sales.
Ms. Kate
Tillan
March 11,
2008
Page
5
-(i) Intangibles Assets,
Page 130
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5.
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We
note here and throughout the filing that you disclose that you recorded
impairment charges for goodwill and trade name intangibles in connection
with your annual testing for impairment in fiscal 2006 and
2007. We further note that you recorded impairment charges
within discontinued operations related to your Home and Garden Business
segment that principally consisted of goodwill and intangible
assets. Please revise your future filings to include all the
disclosures required by paragraphs 46 and 47 of SFAS 142 related to these
impairment charges. For instance, please revise future filings
to explain the facts and circumstances leading to these significant
impairments during each reporting period
presented.
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Response
In
response to the Staff’s comments, in future filings the Company will expand the
footnote disclosure to address all the disclosures required by paragraphs 46 and
47 of SFAS 142 for any future impairment charges of goodwill and intangible
assets as well as when discussing previously recorded impairment charges in
comparative financial statements.
Note 5. Assets Held for
Sale, Page 144.
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6.
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We
note your disclosures here and on Page 155 that you approved and initiated
a plan to sell the assets related to your Home and Garden Business segment
during the first quarter of fiscal 2007 and that you classified these
assets as held for sale and reflected the associated operations as
discontinued operations for each reporting period
presented. Please tell us how you considered the requirements
in paragraphs 30 of SFAS 144 in determining that the disposal group
qualified as an asset held for
sale.
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Response
Please be
advised that the Company considered the requirements in paragraph 30 of SFAS 144
in determining that the disposal group qualified as an asset held for sale as
follows:
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·
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Criteria - Management, having
the authority to approve the action, commits to a plan to sell the asset
(disposal group).
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Company’s
consideration - The Company’s Board of Directors, in the first quarter of Fiscal
2007, authorized the Company to proceed towards a sale of the
Ms. Kate
Tillan
March 11,
2008
Page
6
Company’s
lawn and garden and household insect control product offerings (the “Home and
Garden Business”).
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·
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Criteria - The asset (disposal group) is
available for immediate sale in its present condition subject only to terms that
are usual and customary for sales of such assets (disposal
groups).
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Company’s
consideration – The Company identified specific assets and liabilities
related to the Home and Garden Business, which were available for immediate sale
in their present condition and subject only to terms that were usual and
customary for sales of such assets.
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·
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Criteria - An active program to locate a
buyer and other actions required to complete the plan to sell the asset
(disposal group) have been
initiated.
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Company’s
consideration – The Company, with the assistance of third party investment
advisors had engaged in an active sales process to identify potential interested
buyers for the Home and Garden Business.
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·
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Criteria - The sale of the asset
(disposal group) is probable, and transfer of the asset (disposal group)
is expected to qualify for recognition as a completed sale, within
one year.
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Company’s
consideration - In the first quarter of Fiscal 2007, the Company believed that a
sale of the Home and Garden Business was likely to occur, intended to sell the
Home and Garden Business as soon as practicable and expected such sale to
be completed within one year. As noted in the Company’s response to
comments 7 and 8 below, during the first and second quarters of Fiscal 2007, the
Company engaged in substantive negotiations with a potential purchaser as to
definitive terms for the purchase of the Home and Garden Business; however, the
potential purchaser ultimately determined not to proceed with the acquisition
and, as a result, the Company continued to actively market the Home and Garden
Business.
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·
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Criteria - The asset (disposal group) is
being actively marketed for sale at a price that is reasonable in relation
to its current fair value.
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Company’s
consideration – Independent investment advisors assisted the Company in
determining a range of potential expected sales proceeds for the Home and Garden
Business and the Company intended to sell the Home and Garden Business within
the range of the anticipated proceeds.
Ms. Kate
Tillan
March 11,
2008
Page
7
· Criteria - Actions required to complete the
plan indicate that it is unlikely that significant changes to the plan will be
made or that the plan will be withdrawn.
Company’s
consideration – The Company did not expect to make significant changes to
the plan to dispose of the Home and Garden Business or that the plan would be
withdrawn.
In light
of the Company’s consideration of the requirements set forth in Paragraph 30 of
SFAS 144, for the reasons set forth above the Company determined that the Home
and Garden Business appropriately qualified as an asset held for
sale.
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7.
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Please
tell us and in future filings disclose the facts and circumstances that
led to the expected disposal of the Home and Garden business and the
expected manner and timing of the disposal of this business as required by
paragraph 47(a) of SFAS 144.
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Response
In
response to the Staff’s comment, and as disclosed in the Company’s Form 10-K for
Fiscal 2007 on pages 1, 31, 43, 127 and 155, and in the Company’s Form 10-Q for
the three months ended December 30, 2007 on pages 6, 7, 32 and 39, in the third
quarter of the Company’s fiscal year ended September 30, 2006, the Company
engaged independent investment advisors to assist it in exploring possible
strategic options, including divesting certain assets, in order to sharpen the
Company’s focus on strategic growth businesses, reduce outstanding indebtedness
and maximize long-term shareholder value. In connection with this
undertaking, during the first quarter of Fiscal 2007 the Company approved and
initiated a plan to sell the Home and Garden Business. In connection with that
plan, the Company determined that all the criteria set forth in paragraph 30 of
SFAS 144 were met and continued to be met through the filing of the Company’s
Form 10-Q for the three months ended December 30, 2007. Accordingly,
beginning in the first quarter of Fiscal 2007, the Home and Garden Business was
designated as an asset held for sale and accounted for as discontinued
operations.
As
background and as more fully discussed in the Company’s response to comment
number 8 below, during the first quarter of Fiscal 2007 the Company engaged in
an auction process in an effort to sell the Home and Garden Business. During the
first and second quarters of Fiscal 2007, the Company engaged in substantive
negotiations with a potential purchaser as to definitive terms for the purchase
of the Home and Garden Business; however, the potential purchaser ultimately
determined not to pursue the acquisition.
The
Company continued to actively market the Home and Garden Business after such
time, however, the Fiscal 2007 selling season for lawn and garden and household
insect
Ms. Kate
Tillan
March 11,
2008
Page
8
control
product offerings was significantly negatively impacted by extremely poor
weather conditions throughout the United States, resulting in poor operating
performance of the Home and Garden Business. In addition, during the
fourth quarter of Fiscal 2007 there was an unforeseen, rapid and significant
tightening of liquidity in the U.S. credit markets. This tightening
of liquidity within the credit markets had a direct impact on the expected
proceeds that the Company would ultimately receive in connection with a sale of
the Home and Garden Business.
To
address these issues, during the fourth quarter of Fiscal 2007, the Company,
with assistance from its independent investment advisors, reassessed the value
of the Home and Garden Business to take into account the changes in the credit
markets and the weaker than planned operating performance during the Fiscal 2007
selling season so as to ensure that the Home and Garden Business was being
marketed at a price that was reasonable in relation to its current fair
value. The reassessment by the Company, with assistance from its
independent investment advisors, produced a lower range of expected sales values
than was previously determined. As a result of the reassessment, the
Company recorded an impairment charge against the Home and Garden Business
during the fourth quarter of Fiscal 2007 to reflect its fair value as determined
by the Company with assistance from its independent investment
advisors. Subsequent to taking the impairment charge, and thereby
revising expectations of the proceeds that will ultimately be received upon a
sale of the Home and Garden Business, the Company continued to be in active
discussions with various potential purchasers through the filing of its Form
10-Q for the three months ended December 30, 2007.
The
Company notes for the information of the Staff that there are currently no
on-going discussions with potential purchasers of the Home and Garden
Business. As a result, the Company expects to engage in further
analysis as to whether it continues to meet all the requirements in paragraph 30
of SFAS 144 in connection with the preparation of the Company's financial
statements for the second quarter of its fiscal year ending September 30,
2008.
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8.
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Further
to the above, we note from your disclosures within your December 30, 2007
Form 10-Q that you have not yet sold your Home and Garden Business
segment. Please tell us how you considered the guidance in
paragraph 30(d) and 31 of SFAS 114 since it has been more than one year
since you classified these assets as held
sale.
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Response
The
Company notes for the information of the Staff that, paragraph 31 of SFAS 144
provides that events or circumstances beyond an entity’s control may extend the
period required to complete the sale of a long-lived asset (disposal group)
beyond one year. Specifically, paragraph 31 provides that an
exception to the one-year requirement in
Ms. Kate
Tillan
March 11,
2008
Page
9
paragraph
30(d) shall apply if during the initial one-year period, circumstances arise
that previously were considered unlikely and, as a result, a long-lived asset
(disposal group) previously classified as held for sale is not sold by the end
of that period and (1) during the initial one-year period the entity initiated
actions necessary to respond to the change in circumstances, (2) the asset
(group) is being actively marketed at a price that is reasonable given the
change in circumstances, and (3) the criteria in paragraph 30 are
met.
As noted
in the Company’s response to comment 7 above, when the Home and Garden Business
was designated as discontinued operations during the first quarter of Fiscal
2007, the Company, with assistance from its independent investment advisors,
determined a range of potential proceeds expected from the sale of this
business. At that time, as the auction process for the Home and
Garden Business progressed, the preliminary bids received from potential
purchasers were in the estimated ranges determined by the Company, with
assistance from its independent investment advisors. The Company
engaged in substantive negotiations with a potential purchaser as to definitive
terms for the purchase of the Home and Garden Business; however, the potential
purchaser ultimately determined not to pursue the acquisition.
As also
noted above, the Company continued to actively market the Home and Garden
Business after such time, however, the Fiscal 2007 selling season for lawn and
garden and household insect control product offerings was significantly
negatively impacted by extremely poor weather conditions throughout the United
States, resulting in poor operating performance of the Home and Garden
Business. In addition, during the fourth quarter of Fiscal 2007 there
was an unforeseen, rapid and significant tightening of liquidity in the U.S.
credit markets. This tightening of liquidity within the credit
markets had a direct impact on the expected proceeds that the Company would
ultimately receive in connection with a sale of the Home and Garden
Business.
To
address these issues, during the fourth quarter of Fiscal 2007, the Company,
with assistance from its independent investment advisors, reassessed the value
of the Home and Garden Business to take into account the changes in the credit
markets and the weaker than planned operating performance during the Fiscal 2007
selling season so as to ensure that the Home and Garden Business was being
marketed at a price that was reasonable in relation to its current fair
value. The reassessment by the Company, with assistance from its
independent investment advisors, produced a lower range of expected sales values
than was previously determined. As a result of the reassessment, the
Company recorded an impairment charge against the Home and Garden Business
during the fourth quarter of Fiscal 2007 to reflect its fair value as determined
by the Company, with assistance from its independent investment
advisors. Subsequent to taking the impairment charge, and thereby
revising expectations of the proceeds that will ultimately be received upon a
sale of the Home and Garden Business, the Company continued to
be
Ms. Kate
Tillan
March 11,
2008
Page
10
in active
discussions with various potential purchasers through the filing of its Form
10-Q for the three months ended December 30, 2007.
Accordingly,
considering that:
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·
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during
the initial one-year period the Company encountered weaker than expected
operating performance of the Home and Garden Business due to exceptionally
poor weather related conditions and an unforeseen, rapid and
significant tightening of liquidity within the U.S. credit
markets,
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·
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the
Company responded to the above by recording an impairment charge that
provided a revised fair market value of the Home and Garden Business to
ensure that the Home and Garden Business was being marketed at a price
that was reasonable in relation to its current fair value and was
consistent with the expected sales values that was determined by the
Company with assistance from its independent investment
advisors,
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·
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the
Home and Garden Business continued to be actively marketed through the
filing of the Company’s Form 10-Q for the three months ended December 30,
2007, and
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·
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all
the criteria of SFAS 144, paragraph 30 continued to be met through the
filing of the Company’s Form 10-Q for the three months ended December 30,
2007,
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the
Company concluded that the Home and Garden Business should continue to be
designated and accounted for as discontinued operations through the filing of
the Company’s Form 10-Q for the three months ended December 30,
2007.
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9.
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We
note your disclosures on Pages 2, 14 and 31 that you announced plans to
pursue the potential sale of another strategic asset during the fourth
quarter of fiscal 2007 and that you subsequently determined after year end
to postpone this sale. Please tell us the facts and
circumstances which resulted in you classifying this strategic asset as
held for use as compared to held for
sale.
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Response
In
response to the Staff’s comment, the Company notes that during the fourth
quarter of Fiscal 2007, the Company did announce plans to pursue the potential
sale of another strategic asset and, subsequent to its fiscal year end,
determined to postpone this potential sale. The potential sale of
this strategic asset was postponed due to an unforeseen, rapid and significant
tightening of liquidity in the U.S. credit markets that occurred during the
fourth quarter of Fiscal 2007. This strategic asset was classified as held for
use as compared to held for sale because at no time were all the criteria in
paragraph 30 of SFAS 144 that would require the Company to classify this asset
as held for sale satisfied. Specifically, in connection with the
pursuit of this potential sale the Company’s Board of Directors did not make any
determination to commit to a sale of this strategic asset but,
Ms. Kate
Tillan
March 11,
2008
Page
11
instead,
authorized management of the Company to determine the level of interest any
potential purchasers would have in acquiring this strategic asset and the
valuation such potential purchasers would attach to it so as to permit the Board
to determine whether the Company should pursue a sale of this strategic
asset.
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10.
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Further
to the above, please explain to us how you considered paragraphs 8(f) and
38 of SFAS 144 related to the postponement of the sale of your strategic
asset at September 30, 2007.
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Response
In
response to the Staff’s comment, the Company, upon postponement of the potential
sale of the strategic asset, considered the guidance of paragraph 8(f) of SFAS
144 and tested such strategic asset for recoverability. Based on such
evaluation the Company determined that the sum of the undiscounted cash flows
expected to result form the use of this strategic asset as well as the range of
values received from potential purchasers were in excess of the carrying value
of the strategic asset. In addition, in accordance with SFAS 142, the
Company tested the goodwill and indefinite-lived intangible assets related to
this strategic asset for impairment as of the Company’s August financial period
end, which is the Company’s annual test date for goodwill and indefinite-lived
intangible assets. As a result of such testing the Company did not
record an impairment of goodwill related to the strategic asset but did record a
$1 million impairment charge against the indefinite-lived intangible assets
related to the strategic asset. The impairment charge to
the indefinite-lived intangible assets was disclosed in Note 6, Intangible
Assets, of Notes to Consolidated Financial Statements included in the Company’s
Form 10-K for Fiscal 2007. The Company did not consider the guidance
in paragraph 38 of SFAS 144 as the strategic asset was not classified as an
asset held for sale since, as noted in the Company’s response to the Staff’s
comment number 9 above, all the criteria in paragraph 30 of SFAS 144 that would
require the Company to classify the this asset as held for sale were not
satisfied.
Note 7. Debt, Page
147
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11.
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We
note on Pages 149-150 that you issued Variable Rate Toggle Senior
Subordinated Notes due 2013 and that these notes contain certain
provisions that require the company to make an offer to repurchase the
notes for a specified redemption price upon the occurrence of a change
control. We note from Page 18 of your December 31, 2007 Form
10-Q that all of your senior subordinated notes contain this
provision. Please tell us how you evaluated the redemption
feature contained within the notes under SFAS 133 and EITF
00-19
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Ms. Kate
Tillan
March 11,
2008
Page
12
Response
In
response to the Staff’s comment, the Company notes that the Company’s Variable
Rate Toggle Senior Subordinated Notes due October 2, 2013, as well as the
Company’s Senior Subordinated Notes due February 1, 2015 and its Senior
Subordinated Notes due October 1, 2013 contain certain provisions that require
the Company to make an offer to repurchase the notes for a specified redemption
price upon the occurrence of a change in control. In connection with
the redemption features contained in these Subordinated Notes, the Company
evaluated the guidance of SFAS 133 and EITF 00-19 and determined it to be not
applicable because such redemption provisions provide for settlement solely in
cash.
The
Company further notes that following the Company’s offer to exchange the entire
$350 million of outstanding principal amount of the Company’s 8 1/2% Senior
Subordinated Notes due 2013 for the same aggregate principal amount of Variable
Rate Toggle Senior Subordinated Notes due 2013 pursuant to the terms of an
exchange offer which expired on April 13, 2007 (the “Exchange Offer”)
approximately $3 million aggregate principal amount of the Company’s 8 1/2%
Senior Subordinated Notes due 2013 remained outstanding and that substantially
all of the restrictive covenants contained in the Indenture that governs the
Company’s remaining 8 1/2% Senior Subordinated Notes due 2013 were
removed. As a result, the Indenture governing the Company’s 8 1/2%
Senior Subordinated Notes due 2013 no longer contains a provision that requires
the Company to make an offer to repurchase the notes for a specified redemption
price upon the occurrence of a change in control. The Company will clarify this
fact in its future filings.
Note
11. Discontinued Operations, 155
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12.
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We
note that you allocated interest expense to your Home and Garden Business
income (loss) from discontinued operations before income taxes for each
reporting period presented and that you based this allocation for interest
expense upon the company’s debt that would be reduced as a result of your
sale of this segment for each reporting period
represented. Please tell us how you considered the guidance in
EITF 87-24 to allocate interest expense to your (loss) income from
discontinued operations before income taxes for this
segment. Within your discussion, please discuss your method of
allocation in more detail and the amount allocated to and included in
discontinued operations for each reporting period
presented.
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Response
In
response to the Staff’s comments, the Company notes that EITF 87-24 provides the
following guidance with respect to whether interest expense may be allocated to
discontinued operations: “Prior to the issuance of Statement 144, this Issue
permitted, but
Ms. Kate
Tillan
March 11,
2008
Page
13
did not
require, the allocation of interest to discontinued operations and provided a
limit as to the maximum amount of that allocation. However, at the June 19–20,
2002 meeting, the Task Force modified its original consensus on this Issue to
indicate that (a) interest on debt that is to be assumed by the buyer and
interest on debt that is required to be repaid as a result of the disposal
transaction should be allocated to discontinued operations and (b) the
allocation to discontinued operations of other consolidated interest that is not
directly attributable to or related to other operations of the enterprise is
permitted but not required.” In accordance with EITF 87-24, the
Company allocated interest expense to discontinued operations based on the
amount of debt that would be required to be repaid as a result of the disposal
of the Home and Garden Business. The methodology used to allocate
interest expense to discontinued operations was based on the estimated amount of
debt to be repaid as a result of disposing the Home and Garden Business
multiplied by the interest rate of the debt required to be
repaid. The estimated amount of debt to be repaid was calculated
based on the gross proceeds expected to be received, as determined by the
Company, with assistance from its independent investment advisors, less
estimated selling expenses. The amount of interest expense allocated
to and included in discontinued operations for each reporting period presented
was $61.9 million, $54.0 million and $26.4 million for the fiscal years ended
September 30, 2007, 2006 and 2005, respectively. The amount of
interest expense allocated to and included in discontinued operations for the
fiscal year ended September 30, 2005 represents the period from February 2005
thru September 2005 as the Home and Garden Business was acquired by the Company
on February 7, 2005.
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13.
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Further
to the above, we note from Page 161 that you included certain of your
expenses from your global operation groups and certain general and
administrative expenses, which were previously reflected in corporate
expenses, within your operating segments for each reporting period
presented. Pease tell us if you allocated any of the
aforementioned expenses that were previously disclosed as corporate
overhead expense within your segment disclosures to your Home and Garden
Business income (loss) from discontinued operations before income
taxes. If you have allocated these aforementioned expenses to
income (loss) from discontinued operations before income taxes related to
the Home and Garden Business Segment, please provide us with your
consideration of EITF 87-24 as it relates to general corporate overhead
expenses.
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Response
In
response to the Staff’s comment, the Company advises the Staff that while the
Company allocates general corporate expenses to its operating segments reflected
in continuing operations, in accordance with EITF 87-24, general corporate
expenses were not allocated to the Home and Garden Business as such business was
designated as discontinued operations.
Ms. Kate
Tillan
March 11,
2008
Page
14
Note 13. Segments, Page
161
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14.
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Please
revise this note in future filings to disclose the basis for attributing
revenues from external customers to individual countries. Refer
to paragraph 38(a) of SFAS 131.
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Response
In
response to the Staff’s comment, in future filings the Company will disclose the
basis for attributing revenues from external customers to individual countries
in accordance with paragraph 38(a) of SFAS 131.
Note
16. Restructuring and Related Charges, Page 166.
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15.
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We
note your disclosures here and on page 41 related to your restructuring
activities. Please address the following
comments:
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·
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Please revise future filings to
include a more detailed description of each of your exit or disposal
activities, including the facts and circumstance leading to the expected
activities and the expected completion date, consistent with paragraph
20(a) of SFAS 146.
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·
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Please tell us how you
considered footnote 1 of SFAS
146
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·
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Please revise future filings to
provide the disclosures required by paragraph 20(b) and (d) of SFAS 146
and SAB Topic SAB Topic 5.P.4 for each restructuring activity for all
reporting periods presented until the activities are
completed. For instance, we note that you aggregate the Latin
America Initiative and Global Realignment Initiative liabilities and
provide summary disclosures for this liability balance rather than
providing the disclosures required by paragraph 20(b)(2) for your
beginning and ending restructuring liability balances for each
activity.
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|
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·
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Please revise your MD&A in
future filings to include all of the disclosures required by SAB Topic
5.P.4.
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Response
In
response to the Staff’s comments, in future filings the Company will expand the
disclosure to provide a more detailed description of each of its exit or
disposal activities,
Ms. Kate
Tillan
March 11,
2008
Page
15
including
the facts and circumstances leading to each activity and the expected completion
date.
In the
preparation of its Form 10-K for Fiscal 2007 the Company considered the guidance
of Footnote 1 of SFAS 146 with respect to the restructuring and related
activities presented in Note 16. The Company considers these
activities to be material changes in the manner in which its business is
conducted. These activities include: changes in management structure,
closure of business activities in a particular location and the relocation of
business activities from one location to another location.
The
Company will revise financial statement footnote disclosures and MD&A in
future filings to include all the disclosures required by paragraph 20(b) and
(d) of SFAS 146 and SAB 103, Topic 5.P.4, for each restructuring activity for
all reporting periods presented, until the activities are
completed.
Exhibits 31.1 and Exhibits
31.2
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16.
|
We
note that the certifications filed pursuant to Exchange Act Rule 13a-14(a)
are not in the exact form prescribed by Item 601(b)(31) of Regulation
S-K. We note similar modifications within your December 30,
2007 Form 10-Q. Specifically, we note that you include the
title of the certifying official in the introduction of your
certification. Please revise the certifications in future
filings to conform to the exact wording required by Item 601(b)(31) of
Regulation S-K.
|
Response
In
response to the Staff’s comment, in future filings the Company will not include
the title of the certifying official in the introduction of the certifications
filed pursuant to Exchange Act Rule 13a-14(a) and will otherwise conform the
certifications to the exact wording and form required by Item 601(b)(31) of
Regulation S-K .
Form 10-Q for the Quarter
Ended December 30, 2007
Note
14. Condensed Consolidating Financial Statements, Page
28
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17.
|
We
note that you present condensed consolidating financial statements
pursuant to Rule 3-10(f) of Regulation S-X. Please revise
future filings to include the comparative condensed consolidating
financial statements for the preceding year. Refer to the
guidance in Rule 3-10(f)(4) of Regulation
S-X.
|
Response
Ms. Kate
Tillan
March 11,
2008
Page
16
In
response to the Staff’s comment, in future filings the Company will include
comparative condensed consolidating financial statements pursuant to Rule
3-10(f) of Regulation S-X.
Form 8-K Dated February 7,
2008
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18.
|
We
note that you discuss adjusted EBITDA from continuing operations, gross
margin excluding restructuring and related charges, and operating expenses
excluding restructuring and related charges. In future filings
please label these items as non-GAAP measures and provide all of the
disclosures required by Regulation G and Question 8 of Frequently Asked
Questions Regarding the Use of Non-GAAP Financial
Measures. Please note that under Instruction 2 of Item 2.02 of
Form 8-K, the requirements of paragraph (e)(1)(8) of Item 10 of Regulation
S-K apply to disclosures under Item
2.02.
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Response
In
response to the Staff’s comment, please be advised that the Company when
discussing EBITDA from continuing operations, gross margin excluding
restructuring and related charges, and operating expenses excluding
restructuring and related charges in future filings will label all such items as
non-GAAP measures and provide all the disclosures required by Regulation G and
Question 8 of Frequently Asked Questions Regarding the Use of Non-GAAP Financial
Measures.
As also requested by the Comment
Letter, the Company acknowledges that:
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·
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the
Company is responsible for the adequacy and accuracy of the disclosure in
the filing;
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|
·
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staff
comments or changes to disclosure in response to staff comments do not
foreclose the Commission from taking any action with respect to the
filing; and
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|
·
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the
Company may not assert staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities
laws of the United States.
|
Ms. Kate
Tillan
March 11,
2008
Page
17
Please
feel free to call Anthony L. Genito, Chief Financial Officer, at (770) 829-6240
or John Wilson, General Counsel, at (770) 829-6240 should you have any further
questions regarding this matter.
Sincerely,
/s/ Anthony L.
Genito
Anthony L. Genito
Chief Financial Officer