Rayovac 2007 Annual Report Download - page 67

SPECTRUM BRANDS | 2007 ANNUAL REPORT 65
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Spectrum Brands, Inc.
On February 7, 2005, the Company entered into a registration
rights agreement (the “Registration Rights Agreement”) with
certain former stockholders of United, including certain affi liates
of Thomas H. Lee Partners, L.P. and an affi liate of Banc of Amer-
ica Securities LLC, pursuant to which the Company agreed to
prepare and fi le with the SEC, not later than nine months follow-
ing the consummation of the acquisition of United on February 7,
2005, a registration statement to permit the public offering and
resale under the Securities Act of 1933 on a continuous basis of
shares of Common Stock issued in connection with its acquisition
of United (the “Shelf Registration Statement”). As of December 4,
2007, the Company has not so registered these shares. Pursuant
to the Registration Rights Agreement, the Company also granted
to the former stockholders of United certain rights to require the
Company, on not more than three occasions, to amend the Shelf
Registration Statement or prepare and fi le a new registration
statement to permit an underwritten offering of shares of the
Company’s stock received by them in the acquisition of United as
well as certain rights to include those shares in any registration
statement proposed to be fi led by the Company.
On February 7, 2005, the Company entered into a standstill
agreement (the “Standstill Agreement”) with Thomas H. Lee
Equity Fund IV, L.P., THL Equity Advisors IV, LLC, Thomas H.
Lee Partners, L.P. and Thomas H. Lee Advisors, L.L.C. (the
“Restricted Parties”). Pursuant to the Standstill Agreement, the
Restricted Parties are prohibited until February 7, 2010 from
acquiring ownership in excess of 28% of the Company’s outstand-
ing voting capital stock, on a fully-diluted basis, soliciting proxies
or consents with respect to the Company’s voting capital stock,
soliciting or encouraging third parties to acquire or seek to
acquire the Company, a signifi cant portion of the Company’s
assets or more than 5% of the Company’s outstanding voting
capital stock or joining or participating in a pooling agreement,
syndicate, voting trust or other similar arrangement with respect
to the Company’s voting capital stock for the purpose of acquir-
ing, holding, voting or disposing of such voting capital stock.
The Company is the lessee of several operating facilities from
Rex Realty, Inc., a company owned by certain of the Company’s
stockholders and operated by a former United executive and past
member of United’s Board of Directors. These affi liate leases
expire at various dates through December 31, 2010. The Com-
pany has options to terminate the leases by giving advance notice
of at least one year. The Company also leases a portion of its oper-
ating facilities from the same company under a sublease agree-
ment expiring on December 31 each year with minimum annual
rentals of $700. The term of the sublease agreement shall auto-
matically be extended on a year-to-year basis from January 1
through December 31 of each year through and until December 31,
2010, unless either party elects to terminate such year-to-year
extension by giving termination notice in which case, the term
shall terminate at the end of the year following the year during
which such termination notice is given.
(16) Restructuring and Related Charges
The Company reports restructuring and related charges associated
with manufacturing and related initiatives in Cost of goods sold.
Restructuring and related charges refl ected in Cost of goods sold
include, but are not limited to, termination and related costs asso-
ciated with manufacturing employees, asset impairments relating
to manufacturing initiatives, and other costs directly related to the
restructuring or integration initiatives implemented.
The Company reports restructuring and related charges relating
to administrative functions in Operating expenses, such as initia-
tives impacting sales, marketing, distribution, or other non-manu-
facturing-related functions. Restructuring and related charges
refl ected in Operating expenses include, but are not limited to,
termination and related costs, any asset impairments relating to
the functional areas described above, and other costs directly
related to the initiatives implemented.
The following table summarizes restructuring and related
charges incurred by segment:
2007 2006 2005
Cost of goods sold:
Global Batteries &
Personal Care $ 18,126 $ 16,597 $ 10,241
Global Pet Supplies 13,154 5,855 255
Corporate 35 – –
Total restructuring and related
charges in cost of goods sold 31,315 22,452 10,496
Operating expense:
Global Batteries & Personal Care 29,600 9,452 6,045
Global Pet Supplies 9,292 2,766 198
Corporate 20,833 – –
Total restructuring and related
charges in operating expense 59,725 12,218 6,243
Total restructuring and
related charges $ 91,040 $ 34,670 $ 16,739