Rayovac 2006 Annual Report Download - page 102

90 SPECTRUM BRANDS | 2006 ANNUAL REPORT
(14) Commitments and Contingencies
The Company has provided for the estimated costs associated
with environmental remediation activities at some of its current
and former manufacturing sites. The Company believes that any
additional liability in excess of the amounts provided of approxi-
mately $3,001, which may result from resolution of these mat-
ters, will not have a material adverse effect on the fi nancial
condition, results of operations, or cash fl ow of the Company.
On December 12, 2005, the Company received a request for
information from the Atlanta District Offi ce of the SEC which is
investigating the Company’s July 28, 2005 disclosure regarding
its results for the third quarter ended July 3, 2005 and the
Company’s revised guidance issued September 7, 2005 as to
earnings for the fourth quarter of fi scal year 2005 and fi scal year
2006. Spectrum Brands continues to cooperate with the Atlanta
District Offi ce of the SEC’s investigation into such matters. The
Company is unable to predict the outcome of the SEC’s investiga-
tion or the timing of its resolution at this time.
The Company, along with certain Executive Offi cers, are defen-
dants in a purported class action lawsuit, fi led in the U.S. District
Court for the Northern District of Georgia (the “Georgia Action”).
The lawsuit generally alleges that the Company and the individually
named defendants made materially false and misleading public state-
ments concerning the Company’s operational and fi nancial condi-
tion, thereby allegedly causing the plaintiff to purchase Company
securities at artifi cially infl ated prices. The plaintiff seeks unspecifi ed
damages, as well as interest, costs and attorneys’ fees.
On October 27, 2006, the Court granted the Defendants’
motion to dismiss the consolidated amended complaint, but the
Court granted the plaintiffs 30 days to re-plead the complaint. On
November 22, 2006, the plaintiffs fi led a motion seeking an exten-
sion of time to fi le an amended complaint and a partial lift of the
stay of discovery. The defendants have opposed this motion. The
Company believes that this action is without merit and is contest-
ing it vigorously. At this stage of the litigation, the Company cannot
make any estimate of a potential loss or range of loss.
On November 6, 2006, a purported shareholder derivative
action was fi led in the Superior Court of Fulton County for the
State of Georgia, on the Company’s behalf, against the Company as
nominal defendant, our Board of Directors, Chairman and Chief
Executive Offi cer David A. Jones and Executive Vice President and
Chief Financial Offi cer Randall J. Steward. The plaintiff deriva-
tively claims breaches of fi duciary duty, abuse of control, gross mis-
management and waste against all of the individually named
defendants. The plaintiff also derivatively claims that the Company’s
Chief Executive Offi cer and Chief Financial Offi cer misappropri-
ated confi dential company information for personal profi t by sell-
ing the Company’s stock while in possession of material, non-public
information regarding the Company’s fi nancial condition and
future business prospects. The plaintiff seeks unspecifi ed damages,
profits, the return of all compensation paid by us, costs and
attorneys’ fees. This purported derivative action does not seek
affi rmative relief from the Company. The Company believes that
there are substantial legal and factual defenses to the claims and
intend to defend them vigorously.
The Company is a defendant in various other matters of liti-
gation generally arising out of the normal course of business.
Such litigation includes legal proceedings with Philips in Europe
with respect to trademark or other intellectual property rights.
The Company does not believe that any other matters or pro-
ceedings presently pending will have a material adverse effect on
the results of operations, fi nancial condition, liquidity or cash
fl ow of the Company.
Future minimum rental commitments under non-cancelable
operating leases, principally pertaining to land, buildings and
equipment, are as follows:
2007 $ 29,141
2008 25,171
2009 21,415
2010 19,237
2011 16,659
Thereafter 57,601
Total minimum lease payments $169,224
All of the leases expire during the years 2007 through 2018.
Total rental expenses were $29,468, $17,267 and $16,344 for
2006, 2005 and 2004, respectively.
(15) Related Party Transactions
The Company’s previous employment agreement with its
Chief Executive Offi cer (“CEO”), granted him the right to pur-
chase his Spectrum-owned home for one dollar. In April 2004, the
CEO waived such right in exchange for the Company paying him
the fair market value of the property, $993, plus an amount equal
to 50% of leasehold improvements to the property of $38.
On February 7, 2005, the Company acquired all of the equity
interests of United pursuant to the Agreement and Plan of
Merger (as amended, the “Merger Agreement”) by and among
the Company, Lindbergh Corporation and United dated as of
January 3, 2005 fi led as an exhibit to the Current Report on
Form 8-K fi led by the Company on January 4, 2005. Pursuant to
the terms of the Merger Agreement, Lindbergh Corporation
merged with and into United, with United continuing as the sur-
viving corporation (the “Merger”). The purchase price for the
acquisition, excluding fees and expenses, consisted of $70,000 in
cash, 13,750 shares of the Company’s Common Stock and the
assumption of outstanding United indebtedness, which was
$911,500 as of January 21, 2005. The purchase price was deter-
mined through negotiations between representatives of the
Company, who were operating under supervision and direction
of an acquisition committee of the Board of Directors of the
Company, and representatives of United.
2006 Form 10-K Annual Report
Spectrum Brands, Inc.