Rayovac 2015 Annual Report Download - page 64

sales increase for all categories within home and garden was a result of distribution gains, strong point of sale
activity driving replenishment orders at existing customers and market share gains on certain brands.
Net sales from auto care products relate to the acquired AAG business subsequent to the acquisition date of
May 21, 2015. The results of AAG’s operations since the acquisition date are reported as a separate segment,
Global Auto Care.
Gross Profit. Gross profit and gross profit margin for the year ended September 30, 2015 were $1,670.3
million and 35.6%, respectively, compared to the year ended September 30, 2014 of $1,568.9 million and 35.4%,
respectively. The increase in gross profit was attributable to an increase in sales and the improvement in gross
profit margin was primarily attributable to a shift towards higher margin sales and continuing cost improvements.
Operating Expenses. Operating expenses for the year ended September 30, 2015 were $1,196.2 million
compared to $1,087.0 million for the year ended September 30, 2014. The $109.2 million increase in operating
expenses during the year ended September 30, 2015 was primarily attributable to an increase of $59.7 million in
selling and general and administrative expenses as a result of increased sales and increased acquisition and
integration costs of $38.7 million as a result of the acquisitions of AAG, Salix, European IAMS and Eukanuba,
and Tell during the year ended September 30, 2015. Acquisition and integration related charges include, but are
not limited to, transaction costs such as banking, legal and accounting professional fees directly related to
acquisitions, termination and related costs for transitional and certain other employees, integration related
professional fees and other post business combination related expenses associated with our acquisitions. See
Note 3, “Acquisitions” in Notes to Consolidated Financial Statements included elsewhere in this Annual Report
for additional information regarding our acquisition and integration related charges.
Restructuring and Related Charges. See Note 4, “Restructuring and Related Charges,” of Notes to
Consolidated Financial Statements included elsewhere in this Annual Report for information regarding our
restructuring and related charges.
Interest Expense. Interest expense for the year ended September 30, 2015 was $271.9 million compared to
$202.1 million for the year ended September 30, 2014. The increase of $69.8 million is primarily attributable to
$58.8 million of non-recurring costs incurred related to the financing of the acquisition of AAG and the
refinancing activity previously discussed, plus additional interest expense on debt issued in conjunction with the
acquisitions of Tell, European IAMS and Eukanuba and Salix during the year ended September 30, 2015. Interest
expense incurred in conjunction with the AAG acquisition included $14.1 million of costs related to bridge
financing commitments and $4.5 million of costs related to interest on the assumed AAG senior notes from the
date of the acquisition through the time of payoff in June 2015. Interest expense related to the refinancing of
certain debt instruments included the following: (i) $16.9 million of cash expense related to the call premium
upon the repayment of 6.75% senior unsecured notes; (ii) $4.1 million of non-cash expense for the write-off of
debt issuance costs associated with the repayment of 6.75% senior unsecured notes; (iii) $10.4 million cash
expense related to fees associated with refinancing of the then-existing senior term credit facility; and
(iv) $8.8 million of non-cash expense for the write-off of unamortized deferred financing fees and unamortized
discounts on the then-existing senior credit facility and asset based revolving loan facility. See Note 9, “Debt” in
the Notes to the Consolidated Financial Statements, included elsewhere within this Annual Report, for additional
information regarding our outstanding debt.
Income Taxes. During the year ended September 30, 2015, we recorded income tax expense of $43.9 million
on pre-tax income from continuing operations of $193.3 million, compared to the income tax expense of $59.0
million recorded on pre-tax income of $273.5 million for the year ended September 30, 2014. Our effective tax
rate was 22.7% for the year ended September 30, 2015 compared to 21.6% for the year ended September 30,
2014. Our effective tax rate differs from the U.S. federal statutory rate of 35% primarily due to (i) income earned
outside the U.S. that is subject to statutory rates lower than 35%; (ii) the release of valuation allowance on U.S.
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