Rayovac 2012 Annual Report Download - page 23

RISK FACTORS
Any of the following factors could materially and adversely affect our business, financial condition and
results of operations and the risks described below are not the only risks that we may face. Additional risks and
uncertainties not currently known to us or that we currently view as immaterial may also materially and
adversely affect our business, financial condition or results of operations.
Risks Related To Our Business
We are a parent company and our primary source of cash is and will be distributions from our subsidiaries.
We are a parent company with limited business operations of our own. Our main asset is the capital stock of
our subsidiaries. We conduct most of our business operations through our direct and indirect subsidiaries.
Accordingly, our primary sources of cash are dividends and distributions with respect to our ownership interests
in our subsidiaries that are derived from their earnings and cash flow. Our subsidiaries might not generate
sufficient earnings and cash flow to pay dividends or distributions in the future. Our subsidiaries’ payments to us
will be contingent upon their earnings and upon other business considerations. In addition, our senior credit
facilities, the indentures governing our notes and other agreements limit or prohibit certain payments of
dividends or other distributions to us. We expect that future credit facilities will contain similar restrictions.
Our substantial indebtedness may limit our financial and operating flexibility, and we may incur additional
debt, which could increase the risks associated with our substantial indebtedness.
We have, and we expect to continue to have, a significant amount of indebtedness. As of September 30,
2012, we had total indebtedness under our Term Loan, 9.5% Notes and ABL Facility (together the “Senior
Secured Facilities”), the 6.75% Notes and other debt of approximately $1.7 billion. Our substantial indebtedness
has had, and could continue to have, material adverse consequences for our business, and may:
• require us to dedicate a large portion of our cash flow to pay principal and interest on our indebtedness,
which will reduce the availability of our cash flow to fund working capital, capital expenditures,
research and development expenditures and other business activities;
• increase our vulnerability to general adverse economic and industry conditions;
• limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we
operate;
• restrict our ability to make strategic acquisitions, dispositions or to exploit business opportunities;
• place us at a competitive disadvantage compared to our competitors that have less debt; and
• limit our ability to borrow additional funds (even when necessary to maintain adequate liquidity) or
dispose of assets.
Under the Senior Secured Facilities and the indenture governing the 6.75% Notes (the “2020 Indenture”),
we may incur additional indebtedness. If new debt is added to our existing debt levels, the related risks that we
now face would increase.
Furthermore, a portion of our debt bears interest at variable rates. If market interest rates increase, the
interest rate on our variable rate debt will increase and will create higher debt service requirements, which would
adversely affect our cash flow and could adversely impact our results of operations. While we may enter into
agreements limiting our exposure to higher debt service requirements, any such agreements may not offer
complete protection from this risk.
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