Rayovac 2006 Annual Report Download - page 95

SPECTRUM BRANDS | 2006 ANNUAL REPORT 83
See Note 2(w), Signifi cant Accounting Policies—Stock
Compensation for additional information on grants and forfei-
tures of restricted shares during 2006, 2005 and 2004.
(9) Stock Option Plans
In 1996, the Company’s Board of Directors (“Board”)
approved the Rayovac Corporation 1996 Stock Option Plan
(“1996 Plan”). Under the 1996 Plan, stock options to acquire up
to 2,318 shares of common stock, in the aggregate, may be
granted to select employees and directors of the Company under
either or both a time-vesting or a performance-vesting formula
at an exercise price equal to the market price of the common
stock on the date of grant. The time-vesting options become
exercisable primarily in equal 20% increments over a fi ve-year
period. The performance-vesting options become exercisable at
the end of ten years with accelerated vesting over each of the fi rst
fi ve years if the Company achieves certain performance goals.
Accelerated vesting may occur upon sale of the Company, as
defi ned in the 1996 Plan. As of September 30, 2006, there were
options with respect to 380 shares of common stock outstanding
under the 1996 Plan.
In 1997, the Board adopted the 1997 Rayovac Incentive Plan
(“1997 Plan”). The Incentive Plan replaces the 1996 Plan and no
further awards will be granted under the 1996 Plan other than
awards of options for shares up to an amount equal to the num-
ber of shares covered by options that terminate or expire prior to
being exercised. Under the 1997 Plan, the Company may grant
to employees and non-employee directors stock options, stock
appreciation rights (“SARs”), restricted stock, and other stock-
based awards, as well as cash-based annual and long-term incen-
tive awards. Accelerated vesting will occur in the event of a
change in control, as defi ned in the 1997 Plan. Up to 5,000 shares
of Common stock may be issued under the 1997 Plan. The 1997
Plan expires in August 2007. As of September 30, 2006, there
were options with respect to 1,531 shares of common stock out-
standing under the 1997 Plan.
In 2004, the Board adopted the 2004 Rayovac Incentive Plan
(“2004 Plan”). The 2004 Plan supplements the 1997 Plan. Under
the 2004 Plan, the Company may grant to employees and non-
employee directors stock options, SARs, restricted stock, and
other stock-based awards, as well as cash-based annual and long-
term incentive awards. Accelerated vesting will occur in the
event of a change in control, as defi ned in the 2004 Plan. Up to
3,500 shares of common stock may be issued under the 2004
Plan. At September 30, 2006, 2,207 restricted shares had been
granted under the 2004 Plan. No options have been granted
under the 2004 Plan. The 2004 Plan expires on July 31, 2014.
See Note 2(w), Signifi cant Accounting Policies—Stock
Compensation and Note 8, Shareholders’ Equity, for information
on grants and forfeitures of restricted shares during 2006, 2005
and 2004.
(10) Income Taxes
Income tax expense was calculated based upon the following
components of income from continuing operations before
income tax:
2006 2005 2004
Pretax (loss) income:
United States $(241,030) $ (9,275) $(10,365)
Outside the United States (215,056) 72,151 100,897
Total pretax (loss) income $(456,086) $62,876 $ 90,532
The components of income tax expense (benefi t) are as follows:
2006 2005 2004
Current:
Federal $ 819 $ – $ (2,827)
Foreign 23,678 35,152 30,300
State 450 1,700 174
Total current 24,947 33,852 27,647
Deferred:
Federal (48,514) (6,330) 8,522
Foreign 3,374 (3,775) 1,106
State (7,441) (2,234) (2,903)
Total deferred (52,581) (12,339) 6,725
Income tax (benefit) expense $(27,634) $24,513 $34,372
The following reconciles the Federal statutory income tax
rate with the Company’s effective tax rate:
2006 2005 2004
Statutory federal income tax rate 35.0% 35.0% 35.0%
Foreign Sales Corporation/
Extraterritorial Income
Exclusion benefit 0.1 (0.4) (0.2)
Non U.S. permanent items (1.2) 3.0 1.7
Foreign statutory rate
vs. U.S. statutory rate 0.5 (1.4) (0.9)
State income taxes and other 1.5 (1.8) (3.3)
R&D credit, current and prior years – (1.2) (0.6)
Net nondeductible (deductible)
interest expense 1.5 (4.3) 1.2
Adjustment of prior year taxes – (0.2) 3.0
SFAS 142 Impairment (23.7) – –
Valuation allowance (6.5) 2.3 2.0
Other (1.3) 3.2 0.1
5.9% 34.2% 38.0%
2006 Form 10-K Annual Report
Spectrum Brands, Inc.