Scotts Company (SMG)

 

We have significant investments in intangible assets and goodwill. Whenever changing conditions warrant, we review the assets that may be affected for recoverability. At least annually, we review goodwill and indefinite-lived intangible assets for impairment. As discussed in the Results of Operations section of this MD&A, during the third quarter of fiscal 2007, the Company changed the timing of its annual goodwill impairment testing from the last day of our first fiscal quarter to the first day of our fourth fiscal quarter. The review for impairment of intangibles and goodwill is primarily based on our estimates of discounted future cash flows, which are based upon budgets and longer-range strategic plans. These budgets and plans are used for internal purposes and are also the basis for communication with outside parties about future business trends. While we believe the assumptions we use to estimate future cash flows are reasonable, there can be no assurance that the expected future cash flows will be realized. As a result, impairment charges that possibly should have been recognized in earlier periods may not be recognized until later periods if actual results deviate unfavorably from earlier estimates. An asset’s value is deemed impaired if the discounted cash flows or earnings projections generated do not substantiate the carrying value of the asset. The estimation of such amounts requires management to exercise judgment with respect to revenue and expense growth rates, changes in working capital and selection of an appropriate discount rate, as applicable. The use of different assumptions would increase or decrease discounted future operating cash flows or earnings projections and could, therefore, change impairment determinations.

 

Fair values related to our annual impairment review of indefinite-lived tradenames and goodwill were determined using discounted cash flow models involving several assumptions. Changes in our assumptions could materially impact our fair value estimates. Assumptions critical to our fair value estimates were: (i) present value factors used in determining the fair value of the reporting units and tradenames; (ii) royalty rates used in our tradename valuations; (iii) projected average revenue growth rates used in the reporting unit and tradename models; and (iv) projected long-term growth rates used in the derivation of terminal year values. These and other assumptions are impacted by economic conditions and expectations of management and will change in the future based on period specific facts and circumstances.

 

 

We have significant investments in intangible assets and
goodwill. Whenever changing conditions warrant, we review the
assets that may be affected for recoverability. At least
annually, we review goodwill and indefinite-lived intangible
assets for impairment. As discussed in the Results of Operations
section of this MD&A, during the third quarter of fiscal
2007, the Company changed the timing of its annual goodwill
impairment testing from the last day of our first fiscal quarter
to the first day of our fourth fiscal quarter. The review for
impairment of intangibles and goodwill is primarily based on our
estimates of discounted future cash flows, which are based upon
budgets and longer-range strategic plans. These budgets and
plans are used for internal purposes and are also the basis for
communication with outside parties about future business trends.
While we believe the assumptions we use to estimate future cash
flows are reasonable, there can be no assurance that the
expected future cash flows will be realized. As a result,
impairment charges that possibly should have been recognized in
earlier periods may not be recognized until later periods if
actual results deviate unfavorably from earlier estimates. An
asset’s value is deemed impaired if the discounted cash
flows or earnings projections generated do not substantiate the
carrying value of the asset. The estimation of such amounts
requires management to exercise judgment with respect to revenue
and expense growth rates, changes in working capital and
selection of an appropriate discount rate, as applicable. The
use of different assumptions would increase or decrease
discounted future operating cash flows or earnings projections
and could, therefore, change impairment determinations.

 

Fair values related to our annual impairment review of
indefinite-lived tradenames and goodwill were determined using
discounted cash flow models involving several assumptions.
Changes in our assumptions could materially impact our fair
value estimates. Assumptions critical to our fair value
estimates were: (i) present value factors used in
determining the fair value of the reporting units and
tradenames; (ii) royalty rates used in our tradename
valuations; (iii) projected average revenue growth rates
used in the reporting unit and tradename models; and
(iv) projected long-term growth rates used in the
derivation of terminal year values. These and other assumptions
are impacted by economic conditions and expectations of
management and will change in the future based on period
specific facts and circumstances.

 

 

We have significant investments in intangible assets and goodwill. Whenever changing conditions warrant, we review the assets that may be affected for recoverability. At least annually, we review goodwill and indefinite-lived intangible assets for impairment. As discussed in the Results of Operations section of this MD&A, during the third quarter of fiscal 2007, the Company changed the timing of its annual goodwill impairment testing from the last day of our first fiscal quarter to the first day of our fourth fiscal quarter. The review for impairment of intangibles and goodwill is primarily based on our

 

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We have significant investments in intangible assets and goodwill. Whenever changing conditions warrant, we review the assets that may be affected for realization. At least annually, we review goodwill and indefinite-lived intangible assets for impairment. As discussed in the Results of Operations section of this MD&A, during the third quarter of fiscal 2007, the Company changed the timing of its annual goodwill impairment testing from the last day of our fiscal first quarter to the first day of our fiscal fourth quarter. The review for impairment of intangibles and goodwill is primarily based on our estimates of discounted future cash flows, which are based upon budgets and longer-range strategic plans. These budgets and plans are used for internal purposes and are also the basis for communication with outside parties about future business trends. While we believe the assumptions we use to estimate future cash flows are reasonable, there can be no assurance that the expected future cash flows will be realized. As a result, impairment charges that possibly should have been recognized in earlier periods may not be recognized until later periods if actual results deviate unfavorably from earlier estimates. An asset’s value is deemed impaired if the discounted cash flows or earnings projections generated do not substantiate the carrying value of the asset. The estimation of such amounts requires management judgment with respect to revenue and expense growth rates, changes in working capital and selection of an appropriate discount rate, as applicable. The use of different assumptions would increase or decrease discounted future operating cash flows or earnings projections and could, therefore, change impairment determinations.

 

Related to our annual impairment review of indefinite-lived trade names and goodwill, fair values were determined using discounted cash flow models involving several assumptions. Changes in our assumptions could materially impact our fair value estimates. Assumptions critical to our fair value estimates were: (i) present value factors used in determining the fair value of the reporting units and trade names; (ii) royalty rates used in our trade name valuations; (iii) projected average revenue growth rates used in the reporting unit and trade name models; and (iv) projected long-term growth rates used in the derivation of terminal year values. These and other assumptions are impacted by economic

 

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