Rayovac 2005 Annual Report Download - page 63

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Our substantial indebtedness could adversely
affect our business, financial condition and results
of operations and prevent us from fulfilling our
obligations under the terms of our indebtedness.
We have, and we will continue to have, a signifi -
cant amount of indebtedness. As of September 30,
2005, we had total indebtedness of approximately
$2.3 billion.
Our substantial indebtedness could have material
adverse consequences for our business, including:
• making it more diffi cult for us to satisfy our
obligations with respect to the terms of our
indebtedness;
• requiring us to dedicate a large portion of our
cash fl ow to pay principal and interest on our
indebtedness, which will reduce the availability
of our cash fl ow to fund working capital, capital
expenditures, research and development
expenditures and other business activities;
• increasing our vulnerability to general adverse
economic and industry conditions;
• limiting our fl exibility in planning for, or reacting
to, changes in our business and the industry in
which we operate;
• restricting us from making strategic acquisi-
tions or exploiting business opportunities;
• placing us at a competitive disadvantage
compared to our competitors that have less
debt; and
• limiting our ability to borrow additional funds
(even when necessary to maintain adequate
liquidity) or dispose of assets.
In addition, a portion of our debt bears interest
at variable rates. If market interest rates increase,
variable-rate debt will create higher debt service
requirements, which would adversely affect our cash
fl ow. While we may enter into agreements limiting
our exposure to higher debt service requirements,
any such agreements may not offer complete
pro tection from this risk.
Although the terms governing our Senior Credit
Facilities and the indentures governing our outstand-
ing Senior Subordinated Notes contain restrictions
on the incurrence of additional indebtedness, new
debt incurred in compliance with these restrictions
could be substantial. If new indebtedness is added
to our and our subsidiaries’ current indebtedness
levels, the related risks that we face would
be magnifi ed.
The terms of our indebtedness impose restrictions
on us that may affect our ability to successfully
operate our business.
The agreement governing our Senior Credit Facili-
ties and the indentures governing our outstanding
Senior Subordinated Notes each contain covenants
that, among other things, limit our ability to:
• borrow money or sell preferred stock;
• create liens;
• pay dividends on or redeem or repurchase
stock;
• make certain types of investments;
• sell stock in our restricted subsidiaries;
• restrict dividends or other payments from
restricted subsidiaries;
• enter into transactions with affi liates;
• issue guarantees of debt; and
• sell assets or merge with other companies.
Our Senior Credit Facilities also require us to
comply with specifi ed fi nancial ratios and tests,
including, but not limited to, minimum interest cov-
erage ratio, maximum leverage ratio and minimum
fi xed charge coverage ratio.
These covenants could materially and adversely
affect our ability to fi nance our future operations
or capital needs and to engage in other business
activities that may be in our best interest. These
covenants may also restrict our ability to expand or
pursue our business strategies. Our ability to gener-
ate cash fl ow to make payments on and to refi nance
our debt, and to comply with these covenants may
be affected by events beyond our control, such as
prevailing economic, fi nancial and competitive condi-
tions and changes in regulations, and if such events
occur, we cannot be sure that we will be able to
comply. A breach of these covenants could result in
a default under the indentures governing our Senior
Subordinated Notes and/or the agreement governing
our Senior Credit Facilities. If there were an event of
default under the indentures for the notes and/or
the agreement governing our Senior Credit Facilities,
holders of such defaulted debt could cause all
amounts borrowed under these instruments to be
due and payable immediately. Additionally, if we fail
2005 Form 10-K Annual Report
Spectrum Brands, Inc.
2005 ANNUAL REPORT 43