Rayovac 2011 Annual Report Download - page 75

In Fiscal 2007, we began managing our business in three vertically integrated, product-focused reporting
segments; Global Batteries & Personal Care (which, effective October 1, 2010, includes the appliance portion of
Russell Hobbs, collectively, Global Batteries & Appliances), Global Pet Supplies and the Home and Garden
Business. As part of this realignment, our global operations organization, consisting of research and
development, manufacturing management, global purchasing, quality operations and inbound supply chain, was
transferred to the operating segments in order to move these important activities closer to the customer. In
connection with these changes we undertook a number of cost reduction initiatives, primarily headcount
reductions at the corporate and operating segment levels (the “Global Realignment Initiatives”). We recorded
approximately $4 million and $11 million of pretax restructuring and related charges during Fiscal 2010 and
Fiscal 2009, respectively, in connection with the Global Realignment Initiatives. Costs associated with these
initiatives, which are expected to be incurred through June 30, 2011, relate primarily to severance and are
projected at approximately $89 million.
During Fiscal 2008, we implemented an initiative within the Global Batteries & Appliances segment to
reduce operating costs and rationalize our manufacturing structure. These initiatives, which are substantially
complete, include the exit of our battery manufacturing facility in Ningbo Baowang China (“Ningbo”) (the
“Ningbo Exit Plan”). We recorded approximately $2 million and $11 million of pretax restructuring and related
charges during Fiscal 2010 and Fiscal 2009, respectively, in connection with the Ningbo Exit Plan. We have
recorded pretax and restructuring and related charges of approximately $29 million since the inception of the
Ningbo Exit Plan.
During Fiscal 2009, we implemented a series of initiatives within the Global Batteries & Appliances
segment and the Global Pet Supplies segment to reduce operating costs as well as evaluate our opportunities to
improve our capital structure (the “Global Cost Reduction Initiatives”). These initiatives included headcount
reductions within all our segments and the exit of certain facilities in the U.S. related to the Global Pet Supplies
segment. These initiatives also included expenditures for banking and legal and accounting consultation fees
related to the evaluation of our capital structure. We recorded $18 million and $20 million of pretax restructuring
and related charges during Fiscal 2010 and Fiscal 2009, respectively, related to the Global Cost Reduction
Initiatives. Costs associated with these initiatives, which are expected to be incurred through March 31, 2014, are
projected at approximately $65 million.
Acquisition and integration related charges. Acquisition and integration related charges reflected in
Operating expenses include, but are not limited to, transaction costs such as banking, legal and accounting
professional fees directly related to the acquisition, termination and related costs for transitional and certain other
employees, integration related professional fees and other post business combination related expenses associated
with the Merger with Russell Hobbs. We incurred $38 million of Acquisition and integration related charges
during Fiscal 2010, which consisted of the following: (i) $25 million of legal and professional fees; (ii) $10
million of employee termination charges; and (iii) $4 million of integration costs.
Goodwill and Intangibles Impairment. Current accounting standards require companies to test goodwill
and indefinite-lived intangible assets for impairment annually, or more often if an event or circumstance indicates
that an impairment loss may have been incurred. In Fiscal 2010 and 2009, we tested our goodwill and indefinite-
lived intangible assets as required. As a result of this testing, we recorded a non-cash pretax impairment charge
of $34 million in Fiscal 2009. The $34 million non-cash pretax impairment charge incurred in Fiscal 2009
reflects trade name intangible asset impairments of the following: $18 million related to Global Pet Supplies; $15
million related to the Global Batteries and Appliances segment; and $1 million related to the Home and Garden
Business. See Note 2(i), Significant Accounting Policies and Practices—Intangible Assets, of Notes to
Consolidated Financial Statements included in this Annual Report on Form 10-K for further details on this
impairment charge.
Interest Expense. Interest expense in Fiscal 2010 increased to $277 million from $190 million in Fiscal
2009. The increase was driven primarily by the following unusual items: (i) $55 million representing the
write-off of the unamortized portion of discounts and premiums related to debt that was paid off in conjunction
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