Rayovac 2015 Annual Report Download - page 67

attributable to an increase in sales, particularly the shift towards higher margin sales, and continuing cost
improvements. In addition, the increase in gross profit margin was driven by the non-recurrence of a
$30.5 million increase to cost of goods sold due to the sale of inventory that was revalued in connection with the
acquisition of the HHI Business during the year ended September 30, 2013.
Operating Expenses. Operating expenses for the year ended September 30, 2014 were $1,087.0 million
compared to $1,039.1 million for the year ended September 30, 2013. The $47.9 million increase in operating
expenses during the year ended September 30, 2014 is primarily attributable to an increase of $76.4 million in
selling and general and administrative expenses as a result of increased sales partially offset by a $28.3 million
decrease in acquisition and integration related charges as a result of the HHI Business acquisition during the year
ended September 30, 2013. 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 the Notes
to the Consolidated Financial Statements included in this elsewhere in this Annual Report for additional
information regarding our acquisition and integration 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, 2014 was $202.1 million compared to
$375.6 million for the year ended September 30, 2013. The decrease in interest expense of $173.5 million is
primarily due to a non-recurrence of $122.2 million of costs related to extinguishment of our 9.5% senior
unsecured notes in the year ended September 30, 2013 coupled with ongoing interest cost savings of
$56.1 million from the refinancing of those notes, non-recurrence of expenses of $28.8 million related to
financing for the HHI Business acquisition in the year ended September 30, 2013. These savings are partially
offset by $11.3 million in costs related to the refinancing of our then-existing senior term loan facility in the year
ended September 30, 2014, consisting of the write off of unamortized deferred financing fees and original issue
discount, and the inclusion of a full year of interest related to the HHI Business acquisition financing during the
year ended September 30, 2014. See Note 9, “Debt,” of Notes to the Consolidated Financial Statements included
in this Annual Report on Form 10-K.
Income Taxes. During the year ended September 30, 2014, we recorded income tax expense of
$59.0 million on pre-tax income from continuing operations of $273.5 million, compared to income tax expense
of $27.4 million on pre-tax loss from continuing operations of $27.9 million for the year ended September 30,
2013. Our effective tax rate was 21.6% for the year ended September 30, 2014 compared to (98.2)% for the year
ended September 30, 2013. During 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. net operating loss deferred tax assets
offsetting tax expense on both U.S. pretax income and foreign income not permanently reinvested; and
(iii) deferred income tax expense related to the change in book versus tax basis of indefinite-lived intangibles,
which are amortized for tax purposes but not for book purposes. During the year ended September 30, 2013, our
effective tax rate differed from the U.S. federal statutory rate of 35% principally due to: (i) losses in the U.S. and
certain foreign jurisdictions for which no tax benefit can be recognized due to full valuation allowances that have
been provided on our net operating loss carryforward tax benefits and other deferred tax assets; (ii) deferred
income tax expense related to the change in book versus tax basis of indefinite lived intangibles, which are
amortized for tax purposes but not for book purposes and (iii) the reversal of U.S. valuation allowances of
$49.8 million on deferred tax assets as a result of the acquisition of the HHI Business. Additionally, in the year
ended September 30, 2013, the consolidated pretax income was close to break even, resulting in a higher
effective tax rate. See Note 13, “Income Taxes” of Notes to the Consolidated Financial Statements included
elsewhere in this Annual Report for additional information regarding income taxes.
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