Rayovac 2003 Annual Report Download - page 28

During fiscal 2003 we granted approximately 1.2 million options to purchase shares of common stock to various employees of the
company. All grants have been at an exercise price equal to the market price of the common stock on the date of the grant. We also
granted approximately 0.4 million shares of restricted stock on October 1, 2002, from the 1997 incentive plan, to certain members
of management. The majority of these shares will vest on September 30, 2005, with the remainder vesting on September 30, 2006,
provided the recipient is still employed by us. The total market value of the restricted shares on date of grant totaled approximately
$4.8 million and has been recorded as unearned restricted stock compensation as a separate component of shareholders’ equity.
Unearned compensation is being amortized to expense over the vesting period. During fiscal 2003, restricted shares with a value
of approximately $0.3 million on the grant date were forfeited.
The Third Amended and Restated Credit Agreement (“Third Restated Agreement”), undertaken to acquire substantially all of the
consumer battery business of VARTA AG, and subsequently amended on January 29, 2003 (“First Amendment”), required, among
other provisions, that the recording and incurrence of restructuring charges meet certain definitions and time constraints to qualify
as additions in calculating Adjusted EBITDA, as defined, that we were to transform the German subsidiary acquired from VARTA
AG from a GmbH legal structure to a KGaA legal structure (the “Transformation”) on or before June 30, 2003, and that we obtain
consent of the Required Lenders to effect releases or substitutions of collateral pledges. Effective June 27, 2003, the Third Restated
Agreement was amended (“Second Amendment”): (i) to re-define and permit acceleration, recording, and incurrence of certain
Restructuring Charges, as defined in the Third Restated Agreement, (ii) to extend the deadline for the Transformation to on or
before March 31, 2004, and (iii) to consent to certain organizational restructurings (“Restructurings”), including releases and sub-
stitutions of collateral pledges, and disregarding application of certain basket amounts as necessary to effect the Restructurings.
Effective September 30, 2003, the Third Restated Agreement was amended (“Third Amendment”) to (i) permit the Remington
acquisition (the “Acquisition”) including issuance of $350.0 million of senior subordinated debt, increase the Dollar-denominated
revolver by $20.0 million, decrease the Euro-denominated revolver by €10.0 million and increase the Dollar-denominated Term B
facility by $50.0 million, (ii) permit incurrence of certain Restructuring Charges related to the Acquisition, (iii) amend certain
covenant ratios to allow for the effect of financing of the Acquisition, (iv) allow for organizational restructurings related to the
Acquisition including necessary releases and substitutions of collateral pledges, and (v) increase certain covenant basket amounts
to allow for operation of the resulting larger business entity.
We believe our cash flow from operating activities and periodic 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 facilities, although
no assurance can be given in this regard. Our current senior secured credit facilities include a revolving credit facility of $120.0
million, a revolving credit facility of €40.0 million, a term loan of $350.0 million, a term loan of €125.0 million and a term loan of
€50.0 million. As of September 30, 2003, the following amounts were outstanding under the senior secured facilities: $317.0 million
of the term loan and, €119.3 million and €42.5 million, respectively, of the Euro term loans. Approximately $6.0 million of the
availability under the U.S. Dollar revolver was utilized for outstanding letters of credit. As of September 30, 2003, our senior sub-
ordinated debt issued and outstanding includes $350.0 million of 8.5% notes issued by Rayovac and $56.0 million of 11.0% notes
issued by Remington (the “Remington Notes”). The Remington Notes were called for redemption, effective September 30, 2003,
and redeemed effective October 29, 2003, and consequently were reflected as current obligations at September 30, 2003. As of
September 30, 2003, we were in compliance with the provisions of our senior loan covenants and respective subordinated debt
indentures. We believe our future results from operations will be adequate to maintain compliance with such provisions although
no assurance can be given in this regard.
Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures, or capital resources that are material to investors.
Critical Accounting Policies Our Consolidated Financial Statements have been prepared in accordance with accounting
principles generally accepted in the United States and fairly present our financial position and results of operations. We believe the
following accounting policies are critical to an understanding of our financial statements. The application of these policies requires
management judgment and estimates in areas that are inherently uncertain.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Rayovac Corporation and Subsidiaries
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