EFTA01381291.pdf

Form S-1 Table of Contrail In the normal course of business, we use trade promotions to support our business. Trade promotions. consisting primarily of temporary• price reductions. consumer coupons, product placement fees. advertising allowances and other rebates arc offered through various programs to customers and consumers. Sales arc recorded net of trade promotion :pending, which is recognized at the later of the date on which the Company recognizes the related revenue or the date on which the Company offers the incentive. Most of these arrangements have terms of approximately one year. Accruals for expected payouts under these programs are included in other current liabilities on the consolidated balance sheet. We also maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make payments and other actual and estimated deductions. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments. an additional allowance could be required. Past due balances are reviewed individually for collectability. Account balances are charged off against the allowance when we believe it is probable the receivable will not be recovered. Inventories We provide reserves for estimated obsolescence bawd on specific identification. If assumptions about future demand change or actual market conditions arc less favorable than those projected by management, we may require additional reserves. Loss Contingencies We record accruals for various contingencies including legal exposures as they arise in the normal course of business. We determine whether to disclose and accrue for loss contingencies based on an assessment of whether the risk of loss is remote, reasonably possible. or probable. Our assessment is developed in consultation with our internal and external counsel and other advisors and is based on an analysis of possible outcomes under various strategies. Loss contingency assumptions involve judgments that are inherently subjective and can involve matters that are in litigation, which, by its nature is unpredictable. We believe that our assessment of the probability of loss contingencies is reasonable, but because of the subjectivity involved and the unpredictable nature of the subject matter at issue, our assessment may prove ultimately to be incarat, which could materially impact our consolidated financial statements. Accountingfor Income Taxes As part of the process of preparing our consolidated financial statements, we are required to estimate our actual current tax exposure (state, federal and foreign). We assess our income tax positions and record tax benefits for all yeas subject to examination based upon management's evaluation of the facts, circumstances and information available at the reporting dates. We determine whether it is "more likely than not" that a tax position will be sustained upon the examination by the appropriate taxing authorities before any part of the benefit can be recorded in the financial statements. For those income tax positions where it is not "more likely than not" that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements. Where applicable, associated interest and penalties arc also recognized. We also assess permanent and temporary differences resulting from differing bases and treatment of items for tax and accounting pwµoses, such as the carrying value of intangibles, deductibility of expenses, depreciation of property, plant and equipment. stock-basal compensation expense and valuation of inventories. Temporary differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be =oared from future taxable income. Actual results could differ from this assessment if sufficient taxable income is not generated in future periods. To the extent we determine the need to establish a valuation allowance or increase such allowance in a period, we must include an expense within the tax provision in the accompanying consolidated statements of operations. 59 httrussw.see.gov/Avehi vestedgar/datatl 609989/000119312515218883/d734898dsl.htm(7/20/2015 10:30:13 AM) CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0080146 CONFIDENTIAL SDNY GM_00226330 EFTA01381291