Rayovac 2006 Annual Report Download - page 37

SPECTRUM BRANDS | 2006 ANNUAL REPORT 25
to employee retention payment arrangements which were accrued
over the retention period and paid primarily in the fi rst half of
fi scal 2006. In fi scal 2006, we incurred approximately $33 mil-
lion of costs associated with the integration. Cash costs of these
integration initiatives incurred in 2006 were approximately $31
million, which include approximately $17 million of cash pay
downs on previously established accruals for employee retention
payment arrangements. In fi scal 2007, we expect to incur $30
million to $35 million of costs associated with the integration,
which includes $20 million to $25 million of cash costs. The suc-
cessful integration of these acquisitions is critical to the achieve-
ment of our fi nancial goals, which include increasing our
operating margins and improving our operating cash fl ow.
In 2005, we also announced the closure of a zinc carbon man-
ufacturing facility in France. Costs associated with this initiative
totaled approximately $11 million. We incurred approximately
$10 million of pretax restructuring and related charges in 2005,
with the remainder incurred during fi scal 2006.
Fiscal 2004
In connection with our acquisition of Remington, in January 2004
we announced a series of initiatives to position us for future growth
opportunities and to optimize the global resources of the com-
bined Remington and Spectrum companies. As of September 30,
2004, the following global integration initiatives were completed:
• Remington’s North American operations were integrated
into Spectrum’s existing business structure.
• Remington’s European operations were consolidated into
Spectrum’s European business segment.
• Remington’s and Spectrum’s North American and European
distribution facilities were consolidated.
• Spectrum’s and Remington’s research and development
functions were merged into a single corporate research
facility in Madison, Wisconsin.
• Remington’s manufacturing operations in Bridgeport,
Connecticut were consolidated into Spectrum’s manufactur-
ing facility in Portage, Wisconsin.
• All operations at Remington’s United Kingdom and
United States Service Centers were discontinued.
• Spectrum’s corporate headquarters was moved to
Atlanta, Georgia.
We recorded pretax restructuring and related charges of
$11 million in 2004. Cash costs of the integration program,
including those recorded as additional acquisition costs, totaled
approximately $30 million. Annual savings related to these costs
totaled approximately $35 million. As a result of these initiatives
we reduced headcount by approximately 500 positions, or
approximately 10% of the combined organization at that time.
Meeting Consumer Needs through
Technology and Development
We continue to focus our efforts on meeting consumer needs
for our products through new product development and technol-
ogy innovations. Research and development efforts associated
with our electric shaving and grooming products allow us to
maintain our unique manufacturing process in cutting systems
for electric shavers. We are continuously pursuing new innova-
tions for our line of shavers including foil and rotary improve-
ments and new cutting and trimmer confi gurations.
During fi scal 2006, we introduced a new men’s shaving plat-
form, including such new features as ComfortSelect and improved
ComfortFlex, designed to improve the comfort and closeness of
the shaving experience. In the lawn and garden category, we intro-
duced Mulch with Weed Stop, the fi rst premium landscape mulch
with weed preventer, the Smart Seeder, the fi rst ready-to-use com-
bination grass seed container and spreader, and the only termite
killing stakes product for the do-it-yourself market.
During fi scal 2005, we launched a new self-cleaning women’s
shaver, the world’s fi rst vacuuming haircut kit with a built-in vac-
uum and a new product line-up of hair dryers, setters and stylers
under the “All-That” platform. Also, during fi scal 2005, we
brought to market a new self-repairing, self-spreading grass seed
using RTF (Rhizomatous Tall Fescue) technology under the
Vigoro and Expert Gardener brands. In the household insect
control category, we introduced a new product during fi scal
2005 called Cutter Advanced™ Insect repellent. Cutter Advanced
introduced Picaridin as an active ingredient, the only non-DEET
alternative recommended by the Centers for Disease Control
and Prevention.
During fi scal 2004, the Remington Titanium™ line was
expanded to include shavers with automatic cleaning systems. We
also introduced the “Wet 2 Straight Professional Straightener,” a
ceramic hair straightener that dries and straightens hair in one step.
Competitive Landscape
We compete in seven major product categories within the con-
sumer products industry: consumer batteries; pet supplies; lawn
and garden; electric shaving and grooming; household insect con-
trol; electric personal care products; and portable lighting.
The consumer battery product category has two major seg-
ments: general and specialty. General batteries consist of non-
rechargeable alkaline or zinc carbon batteries in cell sizes of AA,
AAA, C, D and 9-volt. Specialty batteries include rechargeable
batteries, hearing aid batteries, photo batteries and watch/calcu-
lator batteries. Most consumer batteries are marketed under one
of the following brands: Rayovac/VARTA, Duracell, Energizer
or Panasonic. In addition, some retailers market private label bat-
teries, particularly in Europe.
2006 Form 10-K Annual Report
Spectrum Brands, Inc.