Rayovac 2007 Annual Report Download - page 30

28 SPECTRUM BRANDS | 2007 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Spectrum Brands, Inc.
liens on assets, merge or consolidate with another company,
transfer or sell all or substantially all of our assets, and enter into
transactions with affi liates. Upon the occurrence of a “change of
control,” as defi ned in the Indenture, we are required to make an
offer to repurchase the outstanding New Notes for a specifi ed
redemption price, beginning at 110% of the principal amount
being repurchased and declining to 100% on October 1, 2010, in
each case plus accrued and unpaid interest on such principal.
We may redeem all or a part of the New Notes upon not less
than 30 nor more than 60 days notice, at specifi ed redemption
prices beginning at 110% of the principal amount being redeemed
and declining to 100% on October 1, 2010, in each case plus
accrued and unpaid interest on such principal.
In addition, the Indenture is subject to customary events of
default, including failure to make required payments, failure to
comply with certain agreements or covenants, failure to make
payments on or acceleration of certain other indebtedness, and
certain events of bankruptcy and insolvency. Events of default
under the Indenture arising from certain events of bankruptcy
or insolvency will automatically cause the acceleration of the
amounts due under the New Notes. If any other event of default
under the Indenture occurs and is continuing, the Trustee, or
the registered holders of at least 25% in aggregate principal
amount of the then outstanding New Notes, may declare the
acceleration of the amounts due under the New Notes.
We were in compliance with all covenants associated with our
$347 million principal amount of New Notes, our $3 million
principal amount of Existing Notes that remain outstanding
and our $700 million principal amount of 7 3
_
8% Senior Subordi-
nated Notes due 2015 (collectively referred to as the “Senior
Subordinated Notes”), with the exception of the Fixed Charge
Coverage Ratio test relating to the indebtedness under the
Senior Subordinated Notes, that were in effect as of and during
the fi scal year ended September 30, 2007. Due to signifi cant
restructuring charges and reduced business performance, we
have not met the minimum requirement of 2:1 for the Fixed
Charge Coverage Ratio test under the indentures governing our
Senior Subordinated Notes. Until we satisfy such test, we are
limited in our ability to make signifi cant acquisitions or incur
signifi cant additional senior debt beyond our Senior Credit
Facilities. We do not expect our inability to meet the Fixed
Charge Coverage Ratio test to impair our ability to provide ade-
quate liquidity to meet the short-term and long-term liquidity
requirements of our existing businesses, although no assurance
can be given in this regard.
Equity Financing Activities
During Fiscal 2007, we granted approximately 1.7 million
shares of restricted stock. Of these grants, approximately 0.2
million shares are time-based and vest on a pro rata basis over a
three year period and 1.5 million shares are performance-based
and vest upon achievement of certain performance goals. All
vesting dates are subject to the recipient’s continued employ-
ment with us. The total market value of the restricted shares on
the date of grant was approximately $12.8 million which has
been recorded as unearned restricted stock compensation.
Unearned compensation is amortized to expense over the appro-
priate vesting period.
During Fiscal 2007, we also issued a minimal number of shares
of Common Stock associated with the exercise of stock options with
an aggregate cash exercise value of approximately $0.7 million.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on our
fi nancial condition, changes in fi nancial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or
capital resources that are material to investors.
Contractual Obligations & Other Commercial Commitments
Contractual Obligations
The following table summarizes our contractual obligations
as of September 30, 2007 and the effect such obligations are
expected to have on our liquidity and cash fl ow in future periods.
The table excludes other obligations we have refl ected on our
Consolidated Balance Sheets included in this Annual Report on
Form 10-K, such as pension obligations. See Note 12, Employee
Benefi t Plans, of Notes to Consolidated Financial Statements
included in this Annual Report on Form 10-K for a more com-
plete discussion of our employee benefi t plans. (in millions):
Contractual Obligations
Payments due by Fiscal Year
2008 2009 2010 2011 2012 Thereafter Total
Debt:
Debt, excluding capital lease obligations $ 42 $ 14 $ 14 $ 14 $ 14 $ 2,348 $ 2,446
Capital lease obligations(1) 2 2 1 1 1 14 21
44 16 15 15 15 2,362 2,467
Operating lease obligations 22 20 17 15 15 54 143
Purchase obligations/other(2) 198 – – – – – 198
Total Contractual Obligations $ 264 $ 36 $ 32 $ 30 $ 30 $ 2,416 $ 2,808
(1) Capital lease payments due by fi scal year include executory costs and imputed interest not refl ected in the Consolidated Balance Sheets included in this Annual Report on Form 10-K.
(2) Primarily represents obligations to purchase specifi ed quantities of raw materials and fi nished products.