Rayovac 2006 Annual Report Download - page 21

SPECTRUM BRANDS | 2006 ANNUAL REPORT 9
on Form 10-K is accurate only as of September 30, 2006 or as oth-
erwise specifi ed, as our business, fi nancial condition, results of
operations and prospects may have changed since that date. Except
as required by applicable law, including the securities laws of the
United States and the rules and regulations of the SEC, we under-
take no obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or
otherwise to refl ect actual results or changes in factors or assump-
tions affecting such forward-looking statement.
Risk Factors
Any of the following factors could materially and adversely affect
our business, fi nancial condition and results of operations, and the risks
described below are not the only risks that we may face. Additional risks
and uncertainties not currently known to us or that we currently view
as immaterial may also materially and adversely affect our business,
fi nancial condition or results of operations.
Our substantial indebtedness could adversely affect our
business, fi nancial condition and results of operations
and prevent us from fulfi lling 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, 2006, 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 cap-
ital, capital expenditures, research and development expen-
ditures 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 acquisitions or exploit-
ing business opportunities;
• placing us at a competitive disadvantage compared to our
competitors that have less debt; or
• 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 protection from this risk.
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 facilities (the “Senior
Credit Facilities”) and the indentures governing our outstanding
8½% Senior Subordinated Notes and 7 3
/
8% Senior Subordinated
Notes (together, the “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.
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 inter-
est. These covenants may also restrict our ability to expand or
pursue our business strategies. Our ability to generate cash fl ow
to make payments on and to refi nance our debt, and to comply
with these covenants, may be affected by a number of factors and
events, including factors and events beyond our control, such as
prevailing economic, fi nancial and competitive conditions and
changes in regulations, and we cannot be sure that we will be able
to comply with our covenants and obligations in all our debt
instruments. A breach of our 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 to repay the debt under the Senior Credit
Facilities when it becomes due, the lenders under the Senior
Credit Facilities could proceed against certain of our assets and
capital stock which we have pledged to them as security. If the
senior lenders caused all amounts borrowed under these instru-
ments to be due and payable immediately, amounts outstanding
under both our 81
/
2% Senior Subordinated Notes due 2013 and
73
/
8% Senior Subordinated Notes due 2015 would be subject to
acceleration by action of the trustee under the respective inden-
tures governing those notes or the respective holders of at least
25% in principal amount of the respective notes outstanding. We
cannot assure you that our assets or cash fl ow will be suffi cient to
repay borrowings under our outstanding debt instruments in the
event of a default thereunder.
2006 Form 10-K Annual Report
Spectrum Brands, Inc.