Rayovac 2009 Annual Report Download - page 72

Table of Contents
Index to Financial Statements
On November 1, 2007, we sold the Canadian division of the Home and Garden Business, which operated under the name Nu−Gro, to a new company
formed by RoyCap Merchant Banking Group and Clarke Inc. Cash proceeds received at closing, net of selling expenses, totaled approximately $15 million
and were used to reduce outstanding debt. These proceeds are included in net cash provided by investing activities of discontinued operations in our
Consolidated Statements of Cash Flows included in this Annual Report on Form 10−K. On February 5, 2008, we finalized the contractual working capital
adjustment in connection with this sale which increased our received proceeds by approximately $1 million. As a result of the finalization of the contractual
working capital adjustments we recorded a loss on disposal of approximately $1 million, net of tax benefit. Accordingly, the presentation herein of the
results of continuing operations excludes the Canadian division of its Home and Garden Business for all periods presented. See Note 10, Discontinued
Operations, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10−K for further details on the sale of the Canadian
division of the Home and Garden Business.
The following amounts related to the Canadian division of the Home and Garden Business have been segregated from continuing operations and are
reflected as discontinued operations during Fiscal 2008 and Fiscal 2007, respectively:
2008(A) 2007
Net sales $ 4.7 $ 88.7
Loss from discontinued operations before income taxes $ (1.9) $(46.3)
Provision for income tax benefit (0.7) (6.3)
Loss from discontinued operations, net of tax $ (1.2) $(40.0)
(A) Fiscal 2008 represents results from discontinued operations from October 1, 2007 through November 1, 2007, the date of sale. Included in the Fiscal
2008 loss is a loss on disposal of approximately $1 million, net of tax benefit.
In accordance with ASC 360, 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 $45 million in discontinued operations to reduce the carrying value of certain assets,
principally consisting of goodwill and intangible assets, related to the Canadian Home and Garden Business in order to reflect the estimated fair value of
this business.
Liquidity and Capital Resources
Operating Activities. Net cash provided by operating activities was $77 million during Fiscal 2009 compared to a cash use of $10 million during
Fiscal 2008. The $87 million increase in cash provided by operating activities was primarily due to favorable changes in accounts receivable and inventories
of $94 million (net of the inventory fair value adjustment reflected in fresh−start reporting), lower cash interest payments of $63 million, primarily related to
the exchange of our Senior Subordinated Notes in accordance with the Plan, partially offset by unfavorable payments for fees and expenses related to the
Bankruptcy Filing of $46 million and a use of cash from operating losses related to discontinued operations of $17 million.
We expect to fund our cash requirements, including capital expenditures, interest and principal payments due in Fiscal 2010 through a combination of
cash on hand and cash flows from operations and available borrowings under our ABL Revolving Credit Facility. Going forward our ability to satisfy
financial and other covenants in our senior credit agreements and senior subordinated indenture and to make scheduled payments or prepayments on our
debt and other financial obligations will depend on our future financial and operating performance. There can be no assurances that our business will
generate sufficient cash flows from operations or that future borrowings under the ABL Revolving Credit Facility will be available in an amount sufficient
to satisfy our debt maturities or to fund our other liquidity needs. In addition, the current economic crisis could have a further negative impact on our
financial position, results of operations or cash flows. See Item 1A. Risk Factors, for further discussion of the risks associated with our ability to service all
of our existing indebtedness, our ability to maintain compliance with financial and other covenants related to our indebtedness and the impact of the current
economic crisis.
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