Rayovac 2006 Annual Report Download - page 44

32 SPECTRUM BRANDS | 2006 ANNUAL REPORT
The following table summarizes restructuring and related
charges we incurred in 2006 and 2005 (in millions):
2006 2005
Costs included in cost of goods sold:
Breitenbach, France facility closure:
Termination benefits $ 0.3 $ 8.3
Other associated costs – 1.9
United & Tetra integration:
Termination benefits 5.4 0.3
Other associated costs 1.8 –
European initiatives:
Termination benefits 15.0 –
Total included in cost of goods sold $22.5 $10.5
Costs included in operating expenses:
United & Tetra integration:
Termination benefits $23.9 $12.7
Other associated costs 1.8 4.5
European initiatives:
Termination benefits 7.9 –
Other initiatives:
Termination benefits – 0.2
Other associated costs – (1.6)
Total included in operating expenses $33.6 $15.8
Total restructuring and related charges $56.1 $26.3
Goodwill and Intangibles Impairment
SFAS 142 requires companies to test goodwill and indefi nite-
lived intangible assets for impairment annually, or more often if an
event or circumstance indicates that an impairment loss may have
been incurred. In accordance with SFAS 142, we, with the assis-
tance of independent third party valuation specialists, conducted
our annual impairment testing of goodwill and indefi nite-lived
intangible assets. As a result of these analyses we recorded a non-
cash pretax impairment charge of approximately $433 million in
the fourth quarter of fi scal 2006. The impairments will not result
in future cash expenditures. See “Critical Accounting Policies—
Valuation of Assets and Asset Impairment” below as well as Note 2(i),
Signifi cant Accounting Policies—Intangible Assets, of Notes to
Consolidated Financial Statements of this Annual Report on Form
10-K for additional information on the impairment charge.
Interest Expense
Interest expense in fi scal 2006 increased to $177 million from
$134 million in fi scal 2005. This increase was primarily due to the
timing of debt incurred in connection with the United and Tetra
acquisitions as well as an increase in LIBOR (which affected the
interest rate on term loans denominated in Euros under our Senior
Credit Facilities) and an increase in the interest rate spread on loans
under our Senior Credit Facilities. Interest expense in fi scal 2005
included $12 million of debt issuance costs written off in connec-
tion with our acquisitions and related debt fi nancings.
Other Income, net
Other income, net for 2006 includes the benefi t of two asset
sales which occurred during the fi scal year. We recognized a net
gain of approximately $8 million on the sale of our Bridgeport,
Connecticut manufacturing facility, acquired as part of the
Remington acquisition and subsequently closed in fi scal 2004,
and our Madison, Wisconsin packaging facility, which was closed
in fi scal 2003. Prior to these sales, these assets were included in
assets held for sale in our Consolidated Balance Sheets. Fiscal
2005 other income, net of $0.9 million was related primarily to
foreign currency exchange rate gains.
Income Tax (Benefit) Expense
Our full-year effective tax rate was approximately 6% in
2006 as compared with approximately 34% in 2005. The reduc-
tion in the tax rate as compared with last year is a result of a sig-
nifi cant portion of the $433 million impairment charge not being
deductible for tax purposes as well as approximately $29 million
of increased valuation allowances. We expect our effective tax
rate in fi scal 2007 to be consistent with our historical rates.
Discontinued Operations
Our fi scal 2006 loss from discontinued operations of $5.5 million,
net of tax, refl ects the operating results of Nu-Gro Pro and Tech, as
well as the loss on the sale of these businesses. The transaction closed
in January 2006. Proceeds from the sale totaled approximately $83
million after selling expenses and contractual working capital adjust-
ments which were fi nalized on October 30, 2006. The total loss on
the sale of these businesses of approximately $3.9 million, net of tax,
is included in the total loss from discontinued operations in 2006.
Our income from discontinued operations for fi scal 2005 was
$5.5 million and refl ects the operating results of Nu-Gro Pro and
Tech from February 7, 2005, the date of acquisition. Net sales and
operating income from these discontinued operations, excluded
from reported fi scal 2005 net sales and operating income, were
approximately $52 million and $8 million, respectively.
Fiscal Year Ended September 30, 2005 Compared to
Fiscal Year Ended September 30, 2004
Highlights of Consolidated Operating Results
Year-over-year historical comparisons are affected by our
acquisitions of United and Tetra, acquired on February 7, 2005
and April 29, 2005, respectively. These acquisitions are included
in our current year Consolidated Statement of Operations but
not in prior year results. Year-over-year historical comparisons
are also affected by our acquisitions of Microlite, acquired on
May 28, 2004, and Ningbo, acquired on March 31, 2004. These
acquisitions are refl ected in our fi scal 2006 Consolidated Statements
of Operations for the full fi scal year but are only included in prior
year results after the date of acquisition. See Note 17, Acquisitions,
of Notes to Consolidated Financial Statements of this Annual
Report on Form 10-K for additional information regarding these
2006 Form 10-K Annual Report
Spectrum Brands, Inc.