Rayovac 2007 Annual Report Download - page 14

12 SPECTRUM BRANDS | 2007 ANNUAL REPORT
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 included in this Annual Report on Form 10-K.
Certain prior year amounts have been reclassifi ed to conform to
the current year presentation. All references to 2007, 2006 and
2005 refer to fi scal year periods ended September 30, 2007,
2006 and 2005, respectively.
Introduction
We are a global branded consumer products company with
positions in seven major product categories: consumer batteries;
pet supplies; electric shaving and grooming; electric personal
care; portable lighting; lawn and garden; and household insect
control. In the third quarter of Fiscal 2006, we engaged advisors
to assist us in exploring possible strategic options, including
divesting certain assets, in order to sharpen our focus on strate-
gic growth businesses, reduce our outstanding indebtedness and
maximize long-term shareholder value. In connection with this
undertaking, during the fi rst quarter of Fiscal 2007 we approved
and initiated a plan to sell our Home and Garden Business. As a
result, we have designated certain assets and liabilities related to
our Home and Garden Business as held for sale and have desig-
nated our Home and Garden Business as discontinued operations.
Therefore, the presentation herein of the results of continuing
operations has been changed to exclude the Home and Garden
Business for all periods presented. See Note 5, Assets Held for
Sale, and Note 11, Discontinued Operations, of Notes to Consoli-
dated Financial Statements included in this Annual Report on
Form 10-K for additional information on our assets held for sale
and discontinued operations. We remain committed to selling
our Home and Garden Business.
In August 2007, we announced plans to pursue the potential
sale of another strategic asset; however, we subsequently deter-
mined to postpone the sale process due to recent challenging
conditions in the credit markets.
In Fiscal 2007, we began managing our business in three
reportable segments: (i) Global Batteries & Personal Care; (ii)
Global Pet Supplies; and (iii) our Home and Garden Business.
The presentation of all historical segment reporting herein has
been reclassifi ed to conform to this segment structure.
Our continuing operations include the worldwide manufac-
turing and marketing of alkaline, zinc carbon and hearing aid
batteries, as well as aquariums and aquatic supplies, and the
designing and marketing of rechargeable batteries, battery-
powered lighting products, electric shavers and accessories,
grooming products and hair care appliances. Our continuing
operations utilize manufacturing and product development
facilities located in the United States, Europe, China and
Latin America. Our continuing operations also include the
manufacturing and marketing of specialty pet supplies in
North America. Through our Home and Garden Business,
which we have designated as discontinued operations, we
manufacture and market lawn fertilizers, herbicides, insecti-
cides and repellents in North America.
We sell our products in approximately 120 countries through a
variety of trade channels, including retailers, wholesalers and
distributors, hearing aid professionals, industrial distributors
and OEMs and 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 Tetra, 8 in 1 and various other brands. Our Home and Garden
Business enjoys strong name recognition under the Spectracide
and Cutter brands, among others.
In accordance with SFAS No. 144, “Accounting for the Impair-
ment or Disposal of Long-Lived Assets” (“SFAS 144”), long-lived
assets to be disposed of by sale are recorded at the lower of their
carrying value or fair value less costs to sell. During Fiscal 2007,
we recorded a non-cash pretax charge of $169 million in discon-
tinued operations to reduce the carrying value of certain assets,
principally consisting of goodwill and intangible assets, related
to the Home and Garden Business in order to refl ect the esti-
mated net proceeds to be realized from selling this business.
Such estimated net proceeds were based on a range of estimated
sales values, taking into account current market conditions,
provided by independent third-party advisors. Actual proceeds
received, if and when a sale is consummated, may vary from the
estimated net proceeds.
On January 25, 2006, we sold the fertilizer technology and
professional fertilizer products businesses of Nu-Gro, the Canadian
division of our Home and Garden Business (“Nu-Gro Pro and
Tech”), to Agrium Inc. for net proceeds of approximately $83 mil-
lion. Proceeds from the sale were used to reduce outstanding debt.
As a result of the sale, effective as of October 1, 2005, we began
reporting the results of operations of Nu-Gro Pro and Tech as
discontinued operations. The presentation herein of the results of
continuing operations has been changed to exclude Nu-Gro Pro
and Tech for all periods presented. See Note 11, Discontinued
Operations, of Notes to Consolidated Financial Statements
included in this Annual Report on Form 10-K for additional
information regarding this divestiture.
On September 27, 2007, we signed a defi nitive agreement to
sell the remainder of Nu-Gro to a new company formed by Roy-
Cap Merchant Banking Group and Clarke Inc. The transaction
closed on November 1, 2007. We estimate that our Fiscal 2008
peak seasonal borrowing needs will be reduced by approximately
$45 million as a result of cash proceeds from the transaction and
the elimination of the working capital requirement for Nu-Gro
in the 2008 lawn and garden selling season.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Spectrum Brands, Inc.