Rayovac 2006 Annual Report Download - page 35

SPECTRUM BRANDS | 2006 ANNUAL REPORT 23
ITEM 7. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is management’s discussion of the fi nancial
results, liquidity and other key items related to our performance.
This section should be read in conjunction with the “Selected
Financial Data” and our Consolidated Financial Statements and
related notes included in this Annual Report on Form 10-K.
Certain prior year amounts have been reclassifi ed to conform to
the current year presentation. All references to 2006, 2005 and
2004 refer to fi scal year periods ended September 30, 2006,
2005 and 2004, respectively.
Introduction
We are a global branded consumer products company with
positions in seven major product categories: consumer batteries;
lawn and garden; pet supplies; electric shaving and grooming;
household insect control; electric personal care products; and
portable lighting. We are a manufacturer and marketer of alka-
line, zinc carbon and hearing aid batteries, as well as aquariums
and aquatic health supplies and a designer and marketer of
rechargeable batteries, battery-powered lighting products, elec-
tric shavers and accessories, grooming products and hair care
appliances. We are also a North American manufacturer and mar-
keter of lawn fertilizers, herbicides, insecticides and repellents
and specialty pet supplies.
We sell our products in approximately 120 countries
through a variety of trade channels, including retailers, whole-
salers and distributors, hearing aid professionals, industrial dis-
tributors and OEMs. We enjoy strong name recognition in our
markets under the Rayovac, VARTA and Remington brands,
each of which has been in existence for more than 80 years, and
under the Spectracide, Cutter, Tetra, 8in1 and various other
brands. Our manufacturing and product development facilities
are located in the United States, Europe, China and Latin
America. We manufacture alkaline and zinc carbon batteries,
zinc air hearing aid batteries, lawn fertilizers, herbicides, insec-
ticides and repellents, and specialty pet supplies in our
Company-operated manufacturing facilities. Substantially all of
our rechargeable batteries and chargers, electric shaving and
grooming products, electric personal care products and porta-
ble lighting products are manufactured by third party suppliers,
primarily located in Asia.
As mentioned above in Item 1, Business, as of October 1, 2005,
we began managing our business in four reportable segments: (i)
North America; (ii) Latin America; (iii) Europe/ROW; and (iv)
Global Pet. The presentation of all historical segment reporting
herein has been changed to conform to this segment reporting.
We made two signifi cant acquisitions in 2005 designed to diver-
sify our business and leverage our distribution strengths. On
February 7, 2005, we completed the acquisition of all of the out-
standing equity interests of United, a leading manufacturer and
marketer of products for the consumer lawn and garden and house-
hold insect control markets in North America and a leading supplier
of specialty pet supplies in the United States. The aggregate pur-
chase price was approximately $1,490 million, net of cash acquired
of approximately $14 million. The purchase price consisted of cash
consideration of approximately $1,051 million and common stock
totaling approximately $439 million. The aggregate purchase price
included acquisition related expenditures of approximately
$22 million. Subsequent to the acquisition, the fi nancial results of
the lawn and garden and household insect control business of United
are included in the North America business segment, and the fi nan-
cial results of the pet business of United are included in the Global
Pet business segment within our consolidated results.
On April 29, 2005, we acquired all of the outstanding equity
interests of Tetra for a purchase price of approximately $550 mil-
lion, net of cash acquired of approximately $13 million and inclu-
sive of a fi nal working capital payment of $2.4 million, paid in
July 2005. The aggregate purchase price also included acquisition
related expenditures of approximately $16 million. The acquisi-
tion was fi nanced with borrowings under an Incremental Term
Loan Facility and existing Revolving Credit Facility (each as
defi ned in Note 7, Debt, of Notes to Consolidated Financial
Statements included in this Annual Report on Form 10-K). Tetra
manufactures, distributes and markets a comprehensive line of
foods, equipment and care products for fi sh and reptiles, along
with accessories for home aquariums and ponds. This acquisition
provides us a global brand and distribution network, to extend
our North American pet supplies business. Subsequent to the
acquisition, the fi nancial results of Tetra are included in the Global
Pet business segment within our consolidated results.
In the fourth quarter of 2005, we completed a third acquisi-
tion, Jungle Labs, which was inconsequential to the period. See
Note 17, Acquisitions, of Notes to Consolidated Financial
Statements included in this Annual Report on Form 10-K for fur-
ther discussion of the Jungle Labs acquisition.
On January 25, 2006, we sold Nu-Gro Pro and Tech to
Agrium Inc. for net proceeds of approximately $83 million.
Proceeds from the sale were used to reduce outstanding debt. As
part of the transaction, we signed strategic multi-year reciprocal
supply agreements with Agrium. See Note 11, Discontinued
Operations, of Notes to Consolidated Financial Statements of
this Annual Report on Form 10-K for additional information
regarding this divestiture. Effective October 1, 2005, we began
reporting the results of operations of Nu-Gro Pro and Tech as
discontinued operations. Therefore, the presentation herein of
the results of continuing operations has been changed to exclude
Nu-Gro Pro and Tech for all periods presented.
2006 Form 10-K Annual Report
Spectrum Brands, Inc.