Rayovac 2006 Annual Report Download - page 48

36 SPECTRUM BRANDS | 2006 ANNUAL REPORT
As previously discussed, during 2005 we completed the fi rst
phase of our integration initiatives related to the United and Tetra
acquisitions. We have reorganized the pet businesses acquired as
part of the United and Tetra acquisitions. These businesses now
operate as the Global Pet business segment, headquartered in
Cincinnati, Ohio.
Segment assets as of September 30, 2005 were $791 million.
Of this amount, goodwill and intangible assets totaling $576 mil-
lion arose from the acquisition of the United Pet Group as part of
the United acquisition on February 7, 2005 and the acquisition of
Tetra on April 29, 2005. The purchase price allocations for the
United Pet Group and Tetra acquisitions were fi nalized in 2006.
See Note 17, Acquisitions, of the Notes to Consolidated Financial
Statements included in this Annual Report on Form 10-K for
additional information on these acquisitions.
Corporate Expense
Our corporate expense in fi scal 2005 increased to $85 mil-
lion from $71 million in fi scal 2004. The increase in expense was
primarily due to increased research and development costs of
approximately $6 million and increased costs of global opera-
tions of approximately $6 million, primarily attributable to the
acquisitions of United and Tetra. In addition, we realized a net
increase of approximately $3 million in corporate general and
administrative expenses primarily related to the costs of Sarbanes-
Oxley compliance, increased costs associated with amortization
of restricted stock and increased legal expenses. These increases
were partially offset by a reduction in incentive compensation
costs due to non-achievement of fi nancial goals for 2005.
Corporate expense as a percentage of net sales in fi scal 2005
decreased to 3.7% from 5.0% in fi scal 2004.
Restructuring and Related Charges
In April 2005, we announced that we closed our Breitenbach,
France zinc carbon manufacturing facility. Costs associated with
this initiative totaled approximately $11 million. We incurred
approximately $10 million of pretax restructuring and related
charges in 2005.
In connection with the February 7, 2005 acquisitions of United
and the April 29, 2005 acquisition of Tetra, we announced a series of
initiatives to optimize the global resources of the combined United
and Spectrum companies. These initiatives included: integrating all
of United’s Home & Garden administrative services, sales and cus-
tomer service functions into our North America headquarters in
Madison, Wisconsin; converting all information systems to SAP;
consolidating United’s manufacturing and distribution locations
in North America; rationalizing the North America supply chain;
and consolidating United Pet Group’s and Tetra’s administrative,
manufacturing and distribution facilities. These restructuring initia-
tives are ongoing and are expected to continue through fi scal 2008.
As part of this reorganization, Spectrum’s and United’s sales
management, fi eld sales operations and marketing teams (includ-
ing customer teams located in Atlanta, Bentonville and Charlotte)
were merged into a single North American sales and marketing
organization reporting to Spectrum’s North American manage-
ment team located in Madison, Wisconsin. United’s accounting,
information services, customer service and other administrative
functions were combined with existing counterpart organizations
in Madison. Legal and certain corporate fi nance functions were
combined directly into Spectrum’s global headquarters in Atlanta.
Canadian Consumer Product sales and marketing teams have been
merged as well and report to a single country manager. Purchasing
and sourcing have been completely integrated on a global basis,
with an expanded product sourcing offi ce in Asia serving all parts
of the Company. In addition, as we began to optimize our Global
Pet operations, two pet supplies facilities in Brea, California and
Hazleton, Pennsylvania were closed in 2005.
We recorded approximately $18 million of pretax restructur-
ing and related charges in 2005 in connection with our integra-
tion of businesses acquired in 2005. Cash costs of these integration
initiatives incurred in 2005 were approximately $5 million. The
remaining $12 million of costs incurred relate primarily to
employee retention payment arrangements which are being
accrued over the retention period.
We recorded various other restructuring and related charge
accrual reversals in operating expenses including a $1 million
reduction of an existing environmental accrual for Remington’s
Bridgeport, Connecticut facility, which was sold in fi scal 2006.
This accrual was originally established in purchase accounting as
an adjustment to goodwill.
The following table summarizes restructuring and related
charges we incurred in 2005 (in millions):
Costs included in cost of goods sold:
Breitenbach, France facility closure:
Termination benefits $ 8.3
Other associated costs 1.9
United & Tetra integration:
Termination benefits 0.3
Total included in cost of goods sold $10.5
Costs included in operating expenses:
United & Tetra integration:
Termination benefits $12.7
Other associated costs 4.5
Other initiatives:
Termination benefits 0.2
Other associated costs (1.6)
Total included in operating expenses $15.8
Total restructuring and related charges $26.3
2006 Form 10-K Annual Report
Spectrum Brands, Inc.