Rayovac 2006 Annual Report Download - page 49

SPECTRUM BRANDS | 2006 ANNUAL REPORT 37
Interest Expense
Interest expense in fi scal 2005 increased to $134 million from
$66 million in fi scal 2004. This increase was primarily due to
increased debt levels associated with the Tetra and United acqui-
sitions and the $12 million write-off of debt issuance costs related
to the refi nancing of our credit facility in connection with the
United acquisition.
Other Income, net
Other income, net of $0.9 million in fi scal 2005 was related
primarily to foreign currency exchange rate gains. Other income,
net was not signifi cant in fi scal 2004.
Income Tax Expense
As a result of the implementation of tax reduction strategies
related to our recent acquisitions, we were able to reduce our
full-year effective tax rate to approximately 34% in 2005. Our
effective tax rate was 38% for fi scal 2004.
Discontinued Operations
Our income from discontinued operations of $5.5 million for
fi scal 2005 refl ects the operating results of Nu-Gro Pro and Tech
from the February 7, 2005 date of acquisition. Nu-Gro Pro and
Tech were sold by the Company in January 2006. Net sales and
operating income from these discontinued operations, excluded
from reported fi scal 2005 net sales and operating income, were
approximately $52 million and $8 million, respectively. Our loss
from discontinued operations of $0.4 million for fi scal 2004
refl ects the operating results of our Remington Service Centers.
Net sales from discontinued operations were approximately $21
million for fi scal 2004 prior to closing of the Service Centers in the
United States and United Kingdom.
Liquidity and Capital Resources
Operating Activities
For fi scal 2006, operating activities provided $45 million in net
cash as compared to $217 million provided during the same period
last year. This change is primarily due to the timing of the United
acquisition in 2005 and the resulting working capital increase after
consideration for the seasonality of the United acquisition, driven
by an increase in inventory. Cash restructuring costs were approxi-
mately $43 million during fi scal 2006 as compared to only $14 mil-
lion during fi scal 2005.
Investing Activities
Net cash provided by investing activities was $22 million for
fi scal 2006 as compared to $1,694 million used in fi scal 2005.
The amount used in fi scal 2005 is directly attributable to the cash
investment of approximately $1,600 million associated with the
acquisitions of United and Tetra. The amount provided in fi scal
2006 is primarily due to the sale of discontinued operations as
well as proceeds from the sale of certain assets during fi scal 2006.
We generated approximately $100 million of cash fl ow from the
sale of Nu-Gro Pro and Tech and other surplus assets during fi scal
2006. Capital expenditures during fi scal 2006 were approxi-
mately $60 million versus $63 million in fi scal 2005. Capital
expenditures for fi scal 2007 are expected to be approximately
$40 million.
Debt Financing Activities
We believe our cash fl ow from operating activities and peri-
odic borrowings under our credit facilities will be adequate to
meet the short-term and long-term liquidity requirements of
our existing business prior to the expiration of those credit facili-
ties, although no assurance can be given in this regard.
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.
Our Senior Credit Facilities include aggregate facilities of
$1,444 million consisting of a $605 million U.S. Dollar Term Loan,
a €114 million Term Loan (USD $135 million at September 30,
2006), a Tranche B €261 million Term Loan (USD $332 million at
September 30, 2006), a Canadian Dollar $81 million Term Loan
(USD $72 million at September 30, 2006) and a revolving credit
facility of $300 million (the “Revolving Credit Facility”).
Approximately $26 million was outstanding under the Revolving
Credit Facility at September 30, 2006. The Revolving Credit
Facility includes foreign currency sublimits equal to the U.S. Dollar
equivalent of €25 million for borrowings in Euros, the U.S. Dollar
equivalent of £10 million for borrowings in Pounds Sterling and
the equivalent of borrowings in Chinese Yuan of $35 million.
Approximately $221 million remains available under our
Revolving Credit Facility as of September 30, 2006, net of
approximately $53 million of outstanding letters of credit.
In addition to principal payments, we have annual interest
payment obligations of approximately $30 million associated
with our $350 million principal amount of 81
/
2% Senior
Subordinated Notes due in 2013 and annual interest payment
obligations of approximately $52 million associated with our
debt offering of the $700 million principal amount of 73
/
8%
Senior Subordinated Notes due in 2015. We also incur interest on
our borrowings associated with the Senior Credit Facilities, and
such interest would increase borrowings under the Revolving
Credit Facility if cash were not otherwise available for such pay-
ments. Based on amounts currently outstanding under the Senior
Credit Facilities, and using market interest rates and foreign
exchange rates in effect as of September 30, 2006, we estimate
annual interest payments of approximately $89 million would be
required assuming no further principal payments were to occur
and excluding any payments associated with outstanding interest
rate swaps. In addition, we are required to pay a quarterly com-
mitment fee of 0.50% on the unused portion of the Revolving
Credit Facility.
2006 Form 10-K Annual Report
Spectrum Brands, Inc.