Rayovac 2003 Annual Report Download - page 57

Product line net sales 2001 2002 2003
Alkaline $302,900 $295,700 $454,900
Zinc carbon 139,100 96,500 152,500
Rechargeables 29,800 31,800 69,700
Hearing aid batteries 65,300 67,600 80,600
Specialty batteries 17,800 15,300 74,600
Lighting products 61,300 65,800 89,800
Total revenues from external customers $616,200 $572,700 $922,100
(13) COMMITMENTS AND CONTINGENCIES
In March 1998, the Company entered into an agreement to purchase certain equipment and to pay annual royalties. In connection
with this 1998 agreement, which supersedes previous agreements dated December 1991, and March 1994, the Company committed to
pay royalties of $2,000 in 1998 and 1999, $3,000 in 2000 through 2002, and $500 in each year thereafter, as long as the related equipment
patents are enforceable (until 2022). In December 2002, this agreement was modified such that royalty payments in 2003 through
2022 will be $250.
The Company has provided for the estimated costs associated with environmental remediation activities at some of its current and
former manufacturing sites. The Company believes that any additional liability in excess of the amounts provided of approximately
$5,500, which may result from resolution of these matters, will not have a material adverse effect on the financial condition, results
of operations, or cash flow of the Company.
The Company has certain other contingent liabilities with respect to litigation, claims and contractual agreements arising in the
ordinary course of business. Such litigation includes shareholder lawsuits, patent infringement claims by the Gillette Company and
its subsidiary Braun Gmbh, and a lawsuit alleging misleading advertising, filed by Norelco Consumer Products Company against the
Company’s subsidiary, Remington Products Company, L.L.C. In the opinion of management, it is either not likely or premature to
determine whether such contingent liabilities will have a material adverse effect on the financial condition, liquidity or cash flow of
the Company.
The suit filed against the Company by Eveready Battery Company was settled in December 2002, and the impact of such settlement
is included in results of operations for the year ended September 30, 2003. The net settlement, of $1.5 million, did not materially
impact the financial condition, results of operations, or cash flow of the Company.
(14) RELATED PARTY TRANSACTIONS
The Company and Thomas H. Lee Company (THL Co.) were parties to a Management Agreement pursuant to which the Company
engaged THL Co. to provide consulting and management advisory services for an initial period of five years through September
2001. The agreement was renewed for another year through 2002. The agreement was not renewed upon expiration in September
2002. The Company paid THL Co. aggregate fees and expenses of $473 and $364 for 2001 and 2002, respectively.
The Company has notes receivable from officers/shareholders in the amount of $4,205 and $3,605 at September 30, 2002 and 2003,
respectively, payable in fiscal 2005, which bear interest at 3.5%. Since the officers utilized the proceeds of the notes to purchase
common stock of the Company, directly or through the exercise of stock options, the notes have been recorded as a reduction of
shareholders’ equity.
Notes to Consolidated Financial Statements
Rayovac Corporation and Subsidiaries
(In thousands, except per share amounts)