Rayovac 2008 Annual Report Download - page 36

Table of Contents
Index to Financial Statements
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management’s discussion of the financial 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 reclassified to conform to the current year presentation. All references to Fiscal 2008, 2007 and 2006 refer to fiscal year
periods ended September 30, 2008, 2007 and 2006, 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.
During Fiscal 2007 we began managing our business in three reportable segments: (i) Global Batteries & Personal Care, which consists of our worldwide
battery, shaving and grooming, personal care and portable lighting business (“Global Batteries & Personal Care”); (ii) Global Pet Supplies, which consists of our
worldwide pet supplies business (“Global Pet Supplies”); and (iii) the Home and Garden Business, which consists of our lawn and garden and household insect
control product offerings (the “Home and Garden Business”).
We have retained financial advisors to assist us in exploring potential strategies which may be available to us to reduce or restructure our significant
outstanding indebtedness. In connection with this undertaking, during the first quarter of Fiscal 2007, we approved and initiated a plan to sell our “Home and
Garden Business,” which at the time was organized into United States (“U.S.”) and Canadian divisions. As a result of our decision to commence this process, we
determined that all the criteria set forth in paragraph 30 of Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets” (“SFAS 144”) were met and in the first quarter of Fiscal 2007, we designated certain assets and liabilities related to our Home
and Garden Business as held for sale and designated our Home and Garden Business as discontinued operations.
During the first and second quarters of Fiscal 2007, we engaged in substantive negotiations with a potential purchaser as to definitive terms for the
purchase of the Home and Garden Business; however, the potential purchaser ultimately determined not to pursue the acquisition. We continued to actively
market the Home and Garden Business after such time, however, the Fiscal 2007 selling season for our lawn and garden and household insect control product
offerings was significantly negatively impacted by extremely poor weather conditions throughout the United States, resulting in poor operating performance of
the Home and Garden Business. In addition, during the fourth quarter of Fiscal 2007 there was an unforeseen, rapid and significant tightening of liquidity in the
U.S. credit markets. We believe that this tightening of liquidity within the credit markets and the operating performance of the Home and Garden Business had a
direct impact on the expected proceeds that we would ultimately receive in connection with a sale of the Home and Garden Business. To address these issues,
during the fourth quarter of Fiscal 2007 we reassessed the value of the Home and Garden Business to take into account the changes in the credit markets and the
weaker than planned operating performance during the Fiscal 2007 selling season so as to ensure that the Home and Garden Business was being marketed at a
price that was reasonable in relation to its current fair value. Our reassessment produced a lower range of expected sales values than was previously determined.
As a result of the reassessment, we recorded an impairment charge against the Home and Garden Business during the fourth quarter of Fiscal 2007 to reflect its
fair value as determined by us. Subsequent to taking the impairment charge, and thereby revising our expectations of the proceeds that would ultimately be
received upon a sale of the Home and Garden Business, we continued to be in active discussions with various potential purchasers through December 30, 2007.
On November 1, 2007, we completed the sale of the Canadian division of our Home and Garden Business. See Note 11, Discontinued Operations, of Notes
to our Consolidated Financial Statements included in this
31
Source: Spectrum Brands, Inc, 10-K, December 10, 2008