Rayovac 2005 Annual Report Download - page 38

ITEM 7. MANAGEMENT’S
DISCUSSION AND
ANALYSIS OF FINANCIAL
CONDITION AND
RESULTS OF OPERATIONS
The following is management’s discussion of the
fi nancial results, liquidity, and other key items
related to our performance. This section should be
read in conjunction with the “Selected Financial
Data” and our Consolidated Financial Statements
and related Notes in the Financial Statements sec-
tion of this Annual Report on Form 10-K. Certain
prior year amounts have been reclassifi ed to con-
form to current year presentation. All references to
2005, 2004 and 2003 refer to fi scal year periods
ended September 30, 2005, 2004 and 2003,
respectively.
INTRODUCTION
We are a global branded consumer products com-
pany with leading market positions in seven major
product categories: consumer batteries; lawn and
garden; pet supplies; electric shaving and grooming;
household insect control; electric personal care
products; and portable lighting. We are a leading
worldwide manufacturer and marketer of alkaline,
zinc carbon and hearing aid batteries, as well as
aquariums and aquatic health supplies and a lead-
ing worldwide designer and marketer of rechargeable
batteries, battery-powered lighting products, electric
shavers and accessories, grooming products and
hair care appliances. We are also a leading North
American manufacturer and marketer of lawn fer-
tilizers, herbicides, pet supplies and specialty food
products, and insecticides and repellents.
We sell our products in approximately 120 coun-
tries through a variety of trade channels, including
retailers, wholesalers and distributors, hearing aid
professionals, industrial distributors and OEMs. We
enjoy strong name recognition in our markets under
the Rayovac, VARTA and Remington brands, each of
which has been in existence for more than 80 years,
and under the Spectracide, Cutter, Tetra, 8-in-1 and
various other brands. We have manufacturing and
product development facilities located in the United
States, Europe, China and Latin America. We manu-
facture alkaline and zinc carbon batteries, zinc air
hearing aid batteries, lawn fertilizers, herbicides,
pet supplies and specialty food products and
insecticides and repellents in our company-operated
manufacturing facilities. Substantially all of our
rechargeable batteries and chargers, electric shaving
and grooming products, electric personal care prod-
ucts and portable lighting products are manufactured
by third party suppliers, primarily located in Asia.
We made two signifi cant acquisitions in 2005
designed to diversify our business and leverage our
distribution strengths. A third acquisition of Jungle
Labs, completed in the fourth quarter, was inconse-
quential to the period. (See Note 16, Acquisitions,
of the Notes to Consolidated Financial Statements
included in this Annual Report on Form 10-K for fur-
ther discussion of the Jungle Labs acquisition). On
February 7, 2005, we completed the acquisition of
all of the outstanding equity interests of United, a
leading manufacturer and marketer of products for
the consumer lawn and garden and household insect
control markets in North America and a leading
supplier of quality pet supplies in the United States.
The aggregate purchase price was approximately
$1,490 million, net of cash acquired of approxi-
mately $14 million. The purchase price consisted
of cash consideration of approximately $1,051 mil-
lion and our common stock totaling approximately
$439 million. The aggregate purchase price included
acquisition related expenditures of approximately
$22 million. At the time of the acquisition, United
had approximately 2,800 employees throughout
North America and was organized under three
operating divisions: U.S. Home & Garden, Nu-Gro
Corporation and United Pet Group. The acquisition
of United gives us a signifi cant presence in several
new consumer product categories that will signifi -
cantly diversify our revenue base. The fi nancial
results of United subsequent to the acquisition
are reported as a separate business segment
within our consolidated results. United contributed
approximately $787 million to our 2005 net sales,
and recorded operating income of approximately
$79 million.
On April 29, 2005, we acquired all of the outstand-
ing equity interests of Tetra for a purchase price of
approximately $550 million, net of cash acquired of
approximately $13 million and inclusive of a fi nal
working capital payment of $2.4 million, paid in July
2005. The aggregate purchase price also included
acquisition related expenditures of approximately
$16 million. The acquisition was fi nanced with addi-
tional borrowings under an Incremental Term Loan
Facility and existing Revolving Credit Facility (each as
2005 Form 10-K Annual Report
Spectrum Brands, Inc.
SPECTRUM BRANDS, INC.18