Rayovac 2007 Annual Report Download - page 5

“ Debt reduction remains a key priority in order to strengthen our
capital structure and achieve more fl exibility to invest long-term
in our businesses.”
SPECTRUM BRANDS | 2007 ANNUAL REPORT 3
exception of outdoor lawn and garden
products, which experienced one of the
worst weather-related seasons in years.
Equally as important, EBITDA, during
the second half of fi scal 2007, improved
by $40 million, or 28 percent, over the
previous year. This improvement was
driven by sales volume growth as well
as the benefi ts from our restructuring
initiatives. Though full-year results
(highlighted on the inside front cover
of this report) were not acceptable, we
believe results in the second half of the
year are more indicative of our true busi-
ness potential for the foreseeable future
and we see many encouraging trends.
After several years of losing market
share to private label products, our
European battery business appears to
be stabilizing, with a cost structure and
a distribution system better aligned with
the retail marketplace. In Latin America,
we remain the market leader in batteries
with strong double-digit sales growth
in 2007. And in North America, the
Rayovac brand is on the move again,
with numerous exciting marketing ini-
tiatives, including an exclusive three-year
license with the Walt Disney Company.
Under this agreement, Rayovac will be
the exclusive battery sold in all Disney
parks and resorts, and gains the right
to use Disney characters on package
and in advertising, merchandising and
promotions – a strong validation of
Rayovac’s quality from one of the world’s
best-known consumer brands.
Our Global Pet Supplies business
continues to demonstrate good momen-
tum. Companion pet care product sales
generated double-digit growth in 2007,
driven by successful brand extensions
and increased distribution of key brands.
Aquatic products continue to enjoy
strong growth in Europe and Asia.
Our strategy of expanding our diverse
portfolio of brands across our existing
global distribution footprint is working
well. Remington personal care products
generated year-over-year sales growth
of 13 percent in 2007, largely fueled by
strong sales across Europe and Latin
America. We also launched a limited
lineup of companion animal pet supply
products across our international Tetra
customer base, mirroring our successful
Remington strategy, and we expect signif-
icant growth from this initiative in the
next several years.
Despite a wet spring and dry summer
that adversely impacted top-line growth,
operational execution within our Home &
Garden business improved dramatically
during fi scal 2007 and, in fact, Spectrum
Brands was recognized by Lowe’s as the
most improved vendor in the category for
the year. We believe we are positioned
for signifi cant profi tability improvement
in fi scal 2008 if weather trends return
to more normal patterns.
Capital Structure
Remains a Priority
While we are pleased with our progress
in the marketplace, our signifi cant debt
level remains a challenge. In March 2007,
we successfully negotiated a $1.6 billion
senior credit facility and refi nanced
$350 million in senior subordinated
debt. Later in the year we retired $200
million of senior term debt and closed
a $225 million asset-based revolving
credit facility for working capital needs.
These refi nancing efforts resulted in a
more fl exible debt structure that we
believe will meet our liquidity needs for
the foreseeable future.
However, our Company is still highly
leveraged. Debt reduction remains a key
priority in order to strengthen our capital
structure and achieve more fl exibility to
invest long-term in our businesses.
To this end, we divested the Canadian
division of our Home & Garden business
in November and used the proceeds to
pay down debt.