UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2002
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ________ to ________
Commission File Number 001-13615
---------
Rayovac Corporation
--------------------------
(Exact name of registrant as specified in its charter)
Wisconsin 22-2423556
----------------------- -------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
601 Rayovac Drive, Madison, Wisconsin 53711
-----------------------------------------
(Address of principal executive offices) (Zip Code)
(608) 275-3340
--------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
--------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report.)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes ( X ) No ( )
The number of shares outstanding of the Registrant's common stock, $.01
par value, as of May 7, 2002, was 32,030,105.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RAYOVAC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2002 and September 30, 2001
(Unaudited)
(In thousands)
-ASSETS-
MARCH 31, SEPTEMBER 30,
2002 2001
------------ -------------
Current assets:
Cash and cash equivalents $ 9,482 $ 11,358
Receivables 116,305 168,745
Inventories 81,016 91,311
Prepaid expenses and other 32,922 31,674
--------- ---------
Total current assets 239,725 303,088
Property, plant and equipment, net 105,610 107,257
Deferred charges and other, net 43,399 37,080
Intangible assets, net 118,903 119,074
--------- ---------
Total assets $ 507,637 $ 566,499
========= =========
-LIABILITIES AND SHAREHOLDERS' EQUITY -
Current liabilities:
Current maturities of long-term debt $ 25,465 $ 24,436
Accounts payable 45,868 81,990
Accrued liabilities:
Wages and benefits and other 29,695 32,232
Other special charges 2,794 5,883
--------- ---------
Total current liabilities 103,822 144,541
Long-term debt, net of current maturities 208,016 233,541
Employee benefit obligations, net of current portion 20,821 19,648
Other 12,588 11,184
--------- ---------
Total liabilities 345,247 408,914
Shareholders' equity:
Commonstock, $.01 par value, authorized 150,000 shares; issued 61,564
and 61,579 shares, respectively; outstanding 32,028 and
and 32,043 shares, respectively 616 616
Additional paid-in capital 180,421 180,752
Retained earnings 125,766 119,984
Accumulated other comprehensive loss (8,311) (6,868)
Notes receivable from officers/shareholders (3,865) (3,665)
--------- ---------
294,627 290,819
Less: Treasury stock, at cost, 29,536 shares (130,070) (130,070)
Less: Unearned restricted stock compensation (2,167) (3,164)
--------- ---------
Total shareholders' equity 162,390 157,585
--------- ---------
Total liabilities and shareholders' equity $ 507,637 $ 566,499
========= =========
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THESE STATEMENTS.
2
RAYOVAC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three and six month periods ended March 31, 2002 and April 1, 2001
(Unaudited)
(In thousands)
THREE MONTHS SIX MONTHS
----------------------------- ----------------------------------
2002 2001 2002 2001
----------------------------- -------------- ---------------
Net sales $ 121,153 $ 134,679 $ 283,036 $ 298,986
Cost of goods sold 71,203 78,507 170,354 174,793
Special charges 16 230 16 16,260
--------- --------- --------- ---------
Gross profit 49,934 55,942 112,666 107,933
Selling 24,612 28,011 52,019 58,366
General and administrative 9,067 11,117 37,634 23,110
Research and development 3,412 3,005 6,630 6,020
--------- --------- --------- ---------
Total operating expenses 37,091 42,133 96,283 87,496
Income from operations 12,843 13,809 16,383 20,437
Interest expense 4,057 7,182 8,226 15,374
Other expense (income), net 397 181 (385) 1,133
--------- --------- --------- ---------
Income before income taxes 8,389 6,446 8,542 3,930
Income tax expense 3,009 2,321 2,760 1,571
--------- --------- --------- ---------
Net income $ 5,380 $ 4,125 $ 5,782 $ 2,359
========= ========= ========= =========
BASIC EARNINGS PER SHARE
Weighted average shares
and equivalents outstanding 31,767 27,578 31,773 27,575
Net income $ 0.17 $ 0.15 $ 0.18 $ 0.09
========= ========= ========= =========
DILUTED EARNINGS PER SHARE
Weighted average shares
and equivalents outstanding 32,344 28,719 32,378 28,602
Net income $ 0.17 $ 0.14 $ 0.18 $ 0.08
========= ========= ========= =========
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THESE STATEMENTS.
3
RAYOVAC CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six month periods ended March 31, 2002 and April 1, 2001
(Unaudited)
(In thousands)
SIX MONTHS
-----------------------------
2002 2001
------------- ----------
Cash flows from operating activities:
Net income $ 5,782 $ 2,359
Non-cash adjustments to net income:
Amortization 930 2,895
Depreciation 9,436 8,706
Other non-cash adjustments (1,340) 5,233
Net changes in assets and liabilities 16,073 (8,097)
--------- ---------
Net cash provided by operating activities 30,881 11,096
Cash flows from investing activities:
Purchases of property, plant and equipment (7,685) (4,193)
--------- ---------
Net cash used by investing activities (7,685) (4,193)
Cash flows from financing activities:
Reduction of debt (118,868) (197,175)
Proceeds from debt financing 94,200 190,686
Issuance of common stock 82 --
Other (769) (1,040)
--------- ---------
Net cash used by financing activities (25,355) (7,529)
Effect of exchange rate changes on cash and cash
equivalents 283 1,432
--------- ---------
Net (decrease) increase in cash and cash equivalents (1,876) 806
Cash and cash equivalents, beginning of period 11,358 9,757
--------- ---------
Cash and cash equivalents, end of period $ 9,482 $ 10,563
========= =========
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THESE STATEMENTS.
4
RAYOVAC CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1 SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION: These financial statements have been prepared by
Rayovac Corporation (the "Company"), without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission (the
"SEC") and, in the opinion of the Company, include all adjustments
(which are normal and recurring in nature) necessary to present fairly
the financial position of the Company at March 31, 2002, results of
operations and cash flows for the three and six month periods ended
March 31, 2002, and April 1, 2001. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United
States of America have been condensed or omitted pursuant to such SEC
rules and regulations. These condensed consolidated financial
statements should be read in conjunction with the audited financial
statements and notes thereto as of September 30, 2001. Certain prior
year amounts have been reclassified to conform with the current year
presentation.
SHIPPING AND HANDLING COSTS: The Company incurred shipping and handling
costs of $5,394 and $6,612 and $12,390 and $13,931 for the three and
six months ended March 31, 2002 and April 1, 2001, respectively, which
are included in selling expense.
CONCENTRATION OF CREDIT RISK: Trade receivables potentially subject the
Company to credit risk. The Company extends credit to its customers
based upon an evaluation of the customer's financial condition and
credit history and generally does not require collateral. The Company
monitors its customer's credit and financial conditions based on
changing economic conditions and will make adjustments to credit
policies as required. The Company has historically incurred minimal
credit losses but in the six months ending March 31, 2002 experienced a
significant loss resulting from the bankruptcy filing of a major
retailer in the United States.
The Company has a broad range of customers including many large retail
outlet chains, one of which accounts for a significant percentage of
our sales volume. This major customer represented approximately 22% and
20%, respectively, of receivables as of March 31, 2002 and September
30, 2001.
Approximately 25% of the Company's sales occur outside of North
America, and these sales and related receivables are subject to varying
degrees of credit, currency, political and economic risk. The Company
monitors these risks and makes appropriate provisions for
collectability based on an assessment of the risks present. The
Argentine Peso and Venezuelan Bolivars devaluation did not have a
significant impact on the Company's estimate of collectability.
ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS: In May 2000, the Emerging
Issues Task Force (EITF) reached a consensus on Issue No. 00-14,
"Accounting for Certain Sales Incentives". This Issue addresses the
recognition, measurement, and income statement classification for
various types of sales incentives including discounts, coupons, rebates
and free products. In April 2001, the EITF reached a consensus on Issue
No. 00-25, "Vendor Income Statement Characterization of Consideration
to a Purchaser of the Vendor's Products or Services". This Issue
addresses when consideration from a vendor to a retailer or distributor
in connection with the purchase of the vendor's products to promote
sales of the vendor's products should be classified in the vendor's
income statement as a reduction of revenue or expense. The Company
adopted EITF 00-14 and EITF 00-25 in the second fiscal quarter of 2002.
The adoption resulted in the following reclassifications for the three
and six month periods ended March 31, 2002 and April 1, 2001 in the
Company's results of operations. For the three months ended March 31,
2002 and April 1, 2001, net sales were reduced by $8,823 and $10,513,
respectively; cost of sales were increased by $2,705 and $2,415,
respectively; and selling expenses were reduced by $11,528 and $12,928,
respectively. For the six months ended March 31, 2002 and April 1,
2001, net sales were reduced by $29,290 and $29,765, respectively;
5
cost of sales were increased by $7,947 and $6,969, respectively; and
selling expenses were reduced by $37,237 and $36,734, respectively.
Concurrent with the adoption of EITF 00-25, the Company reclassified
certain accrued trade incentives as a contra receivable versus the
Company's previous presentation as a component of accounts payable.
Historically, customers offset earned trade incentives when making
payments on account. Therefore, the Company believes the
reclassification of these accrued trade incentives as a contra
receivable better reflects the underlying economics of the Company's
net receivable due from trade customers.
The reclassification results in a reduction in accounts receivable and
accounts payable in our Consolidated Balance Sheets of $22,163 and
$21,383 at March 31, 2002 and September 30, 2001, respectively.
Effective October 1, 2001, the Company adopted Statement of Financial
Accounting Standards (SFAS) 141, BUSINESS COMBINATIONS, and SFAS 142,
GOODWILL AND OTHER INTANGIBLE ASSETS.
Statement 141 requires that the purchase method of accounting be used
for all business combinations initiated or completed after June 30,
2001. Statement 141 also specifies criteria that intangible assets
acquired in a purchase method business combination must meet to be
recognized and reported apart from goodwill. Statement 142 requires
that goodwill and intangible assets with indefinite useful lives no
longer be amortized, but instead tested for impairment at least
annually in accordance with the provisions of Statement 142. Statement
142 also requires that intangible assets with estimable useful lives be
amortized over their respective estimated useful lives to their
estimated residual values, and reviewed for impairment in accordance
with Statement 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. Upon the transition to
Statement 142, no goodwill was deemed to be impaired.
An identification of the impacts to date of adopting Statement 142
follows:
THREE MONTHS ENDING SIX MONTHS ENDING
-------------------- -----------------
MARCH 31, APRIL 1, MARCH 31, APRIL 1,
---------- -------- ---------- --------
2002 2001 2002 2001
---- ---- ---- ----
Reported net income............................ $5,380 $4,125 $5,782 $2,359
Add back: Goodwill amortization, net of tax of
$0............................................. -- 258 -- 536
Add back: Trade name amortization, net of tax
of $213 and $427, respectively................. -- 349 -- 698
------ ------ ------ ------
Adjusted net income............................ $5,380 $4,732 $5,782 $3,593
====== ====== ====== ======
BASIC EARNINGS PER SHARE:
------------------------
Reported net income............................ $0.17 $0.15 $0.18 $0.09
Goodwill amortization.......................... -- 0.01 -- 0.02
Trade name amortization........................ -- 0.01 -- 0.03
------ ------ ------ ------
Adjusted net income............................ $0.17 $0.17 $0.18 $0.14
====== ====== ====== ======
DILUTED EARNINGS PER SHARE:
--------------------------
Reported net income............................ $0.17 $0.14 $0.18 $0.08
Goodwill amortization.......................... -- 0.01 -- 0.02
Trade name amortization........................ -- 0.01 -- 0.02
------ ------ ------ ------
Adjusted net income............................ $0.17 $0.16 $0.18 $0.12
====== ====== ====== ======
6
DERIVATIVE FINANCIAL INSTRUMENTS:
Derivative financial instruments are used by the Company principally in
the management of its interest rate, foreign currency and raw material
price exposures. The Company does not hold or issue derivative
financial instruments for trading purposes.
The Company uses interest rate swaps to manage its interest rate risk.
The swaps are designated as cash flow hedges with the fair value
recorded in Other Comprehensive Income ("OCI") and as a hedge asset or
liability, as applicable. The swaps settle periodically in arrears with
the related amounts for the current settlement period payable to, or
receivable from, the counter-parties included in accrued liabilities or
accounts receivable and recognized in earnings as an adjustment to
interest expense from the underlying debt to which the swap is
designated. During the three and six month periods ended March 31,
2002, $1,273 and $2,348, respectively, of pretax derivative losses from
such hedges were recorded as an adjustment to interest expense. At
March 31, 2002, the Company had a portfolio of interest rate swaps
outstanding which effectively fixes the interest rates on floating rate
debt at rates as follows: 6.404% for a notional principal amount of
$75,000 through October 2002, 4.458% for a notional principal amount of
$70,000 from October 2002 through July 2004 and 3.769% for a notional
principal amount of $100,000 through August 2004. The derivative net
gains on these contracts recorded in OCI at March 31, 2002 was an
after-tax gain of $57.
The Company enters into forward and swap foreign exchange contracts, to
hedge the risk from forecasted settlement in local currencies of
inter-company purchases and sales, trade sales, and trade purchases.
These contracts generally require the Company to exchange foreign
currencies for U.S. dollars or Pounds Sterling. These contracts are
designated as cash flow hedges with the fair value recorded in OCI and
as a hedge asset or liability, as applicable. Once the forecasted
transaction has been recognized as a purchase or sale and a related
liability or asset recorded in the balance sheet, the gain or loss on
the related derivative hedge contract is reclassified from OCI into
earnings as an offset to the change in value of the liability or asset.
During the three and six month periods ended March 31, 2002, $0 and
$17, respectively, of pretax derivative losses were recorded as an
adjustment to earnings for cash flow hedges related to an asset or
liability. During the three and six month periods ended March 31, 2002,
$9 and $66, respectively, of pretax derivative gains were recorded as
an adjustment to earnings for forward and swap contracts settled at
maturity. At March 31, 2002, the Company had a series of swap contracts
outstanding with a contract value of $740. The derivative net gain on
these contracts recorded in OCI at March 31, 2002 was an after-tax gain
of $22.
The Company periodically enters into forward foreign exchange
contracts, to hedge the risk from changes in fair value from
unrecognized firm purchase commitments. These firm purchase commitments
generally require the Company to exchange U.S. dollars for foreign
currencies. These hedge contracts are designated as fair value hedges
with the fair value recorded in earnings on a pretax basis and as a
hedge asset or liability, as applicable. To the extent effective,
changes in the value of the forward contracts recorded in earnings will
be offset by changes in the value of the hedged item, also recorded in
earnings on a pretax basis and as an asset or liability, as applicable.
Once the firm purchase commitment has been consummated, the firm
commitment asset or liability balance will be reclassified as an
addition to or subtraction from, the carrying value of the purchased
asset. The Company previously entered into a series of forward
contracts through October 2001 to hedge the exposure from a firm
commitment to purchase certain battery manufacturing equipment
denominated in Japanese Yen. During the three and six month periods
ended March 31, 2002, $0 and $63, respectively, of pretax derivative
gains were recorded as an adjustment to earnings for fair value hedges
of this firm purchase commitment and $0 and $63, respectively, of
pretax losses were recorded as an adjustment to earnings for changes in
fair value of this firm purchase commitment. During the three and six
month periods ended March 31, 2002, $0 and $78, respectively, of pretax
derivative losses were recorded as an adjustment to earnings for fair
value hedges of this firm purchase commitment that were settled at
maturity and $0 and $78, respectively, of pretax gains were recorded as
an adjustment to earnings for payments made against this firm purchase
commitment.
The Company is exposed to risk from fluctuating prices for zinc used in
the manufacturing process. The Company hedges a portion of this risk
through the use of commodity swaps. The swaps are designated as cash
flow hedges with the fair value recorded in OCI and as a hedge asset or
liability, as applicable. The fair value of the swaps is reclassified
from OCI into earnings when the hedged purchase of zinc metal-based
items also affects
7
earnings. The swaps effectively fix the floating price on a specified
quantity of zinc through a specified date. During the three and six
month periods ended March 31, 2002, $699 and $1,576, respectively, of
pretax derivative losses were recorded as an adjustment to cost of
sales for swap contracts settled at maturity. At March 31, 2002, the
Company had a series of swap contracts outstanding through August 2003
with a contract value of $9,470. The derivative net losses on these
contracts recorded in OCI at March 31, 2002 was an after-tax loss of
$301.
2 INVENTORIES
Inventories consist of the following:
MARCH 31, 2002 SEPTEMBER 30, 2001
-------------- ------------------
Raw material........................................ $21,480 $24,271
Work-in-process..................................... 20,153 14,015
Finished goods...................................... 39,383 53,025
------- -------
$81,016 $91,311
======= =======
3 ACQUIRED INTANGIBLE ASSETS AND GOODWILL
MARCH 31, 2002 SEPTEMBER 30, 2001
-------------- ------------------
GROSS GROSS
CARRYING ACCUMULATED NET CARRYING ACCUMULATED NET
AMOUNT AMORTIZATION INTANGIBLE AMOUNT AMORTIZATION INTANGIBLE
------ ------------ ---------- ------ ------------ ----------
AMORTIZED INTANGIBLE ASSETS
Non-compete agreement ......... $ 700 $ 560 $ 140 $ 700 $ 490 $ 210
Proprietary technology ........ 525 291 234 525 275 250
------- ------- ------- ------- ------- -------
$ 1,225 $ 851 $ 374 $ 1,225 $ 765 $ 460
======= ======= ======= ======= ======= =======
PENSION INTANGIBLES
Under-funded pension .......... $ 3,081 $-- $ 3,081 $ 3,081 $-- $ 3,081
======= ======= ======= ======= ======= =======
UNAMORTIZED INTANGIBLE ASSETS
Trade name .................... $90,000 $ 4,875 $85,125 $90,000 $ 4,875 $85,125
======= ======= ======= ======= ======= =======
NORTH LATIN
GOODWILL AMERICA AMERICA EUROPE/ROW TOTAL
-------- -------- ------- ---------- -----
Balance as of October 1, 2001, net............ $1,035 $26,884 $2,489 $30,408
Effect of translation......................... -- -- (85) (85)
------ ------- ------ -------
Balance as of March 31, 2002, net............. $1,035 $26,884 $2,404 $30,323
====== ======= ====== =======
The non-compete agreement is being amortized on a straight-line basis
over 5 years. The proprietary technology assets are being amortized on
a straight-line basis over 15 to 17 years.
The trade name and Latin America segment goodwill are associated with
the 1999 acquisition of ROV Limited and were being amortized on a
straight-line basis over 40 years. The North America segment goodwill
is associated with the 1998 acquisition of Best Labs and was being
amortized on a straight-line basis over 15 years. The Europe/ROW
segment goodwill is associated with the 1998 acquisition of Brisco GmbH
in Germany and was being amortized on a straight-line basis over 15
years.
Pursuant to Statement 142, the Company ceased amortizing goodwill
assets on October 1, 2001. Upon initial application of Statement 142,
the Company reassessed the useful lives of its intangible assets and
deemed only the trade name asset to have an indefinite useful life
because it is expected to generate cash flows indefinitely. Based on
this, the Company ceased amortizing the trade name on October 1, 2001
also.
8
The amortization expense for the three and six months ended March 31,
2002 and April 1, 2001 are as follows:
THREE MONTHS ENDING SIX MONTHS ENDING
------------------- -----------------
MARCH 31, 2002 APRIL 1, 2001 MARCH 31, 2002 APRIL 1, 2001
-------------- ------------- -------------- -------------
AMORTIZATION EXPENSE
Goodwill amortization......................... $-- $258 $-- $536
Trade name amortization....................... -- $562 -- 1,125
Non-compete and proprietary technology........ 43 43 86 86
--- ---- --- ------
$43 $863 $86 $1,747
=== ==== === ======
4 OTHER COMPREHENSIVE INCOME
Comprehensive income and the components of other comprehensive income
for the three and six months ended March 31, 2002 and April 1, 2001 are
as follows:
THREE MONTHS ENDING SIX MONTHS ENDING
------------------- -----------------
MARCH 31, 2002 APRIL 1, 2001 MARCH 31, 2002 APRIL 1, 2001
-------------- ------------- -------------- -------------
Net income .................................... $ 5,380 $ 4,125 $ 5,782 $ 2,359
Other comprehensive income (loss):
Foreign currency translation ............... (4,589) (663) (4,209) (356)
Net unrealized loss on available for sale
securities ................................. (6) -- (105) --
Cumulative effect of change in accounting
principle .................................. -- -- -- (150)
Net unrealized gain (loss) on derivative
instruments ................................ 1,574 (981) 2,871 (1,692)
------- ------- ------- -------
Comprehensive income .......................... $ 2,359 $ 2,481 $ 4,339 $ 161
======= ======= ======= =======
Net exchange gains or losses resulting from the translation of assets
and liabilities of foreign subsidiaries are accumulated in a separate
section of stockholder's equity. Also included are the effects of
exchange rate changes of intercompany balances of a long-term nature
and transactions designated as hedges of net foreign investments. The
changes in accumulated foreign currency translation for the three and
six months ended March 31, 2002 were primarily attributable to currency
devaluation in Argentina, $2,381 and $2,383, respectively, and in
Venezuela, $1,672 and $1,718, respectively.
5 NET INCOME PER COMMON SHARE
Net income per common share for the three and six months ended March
31, 2002 and April 1, 2001 is calculated based upon the following
shares:
THREE MONTHS ENDING SIX MONTHS ENDING
-------------------------------- --------------------------------------
MARCH 31, 2002 APRIL 1, 2001 MARCH 31, 2002 APRIL 1, 2001
-------------- ------------- -------------- -------------
Basic............................................... 31,767 27,578 31,773 27,575
Effect of restricted stock and assumed
conversion of options............................... 577 1,141 605 1,027
------ ------ ------ ------
Diluted............................................. 32,344 28,719 32,378 28,602
====== ====== ====== ======
9
6 COMMITMENTS AND CONTINGENCIES
In March 1998, the Company entered into an agreement to purchase
certain equipment and to pay annual royalties. In connection with this
1998 agreement, which supersedes previous agreements dated December
1991, and March 1994, the Company committed to pay royalties of $2,000
in 1998 and 1999, $3,000 in 2000 through 2002, and $500 in each year
thereafter, as long as the related equipment patents are enforceable
(2022). The Company incurred royalty expenses of $2,000 for 1999,
$2,250 for 2000 and $3,000 for 2001. At March 31, 2002, the Company had
commitments of approximately $1,004 for the acquisition of inventory
and manufacturing equipment, all of which are expected to be incurred
in calendar 2002.
The Company has provided for the estimated costs associated with
environmental remediation activities at some of its current and former
manufacturing sites. In addition, the Company, together with other
parties, has been designated a potentially responsible party of various
third-party sites on the United States EPA National Priorities List
(Superfund). The Company provides for the estimated costs of
investigation and remediation of these sites when such losses are
probable and the amounts can be reasonably estimated. The actual cost
incurred may vary from these estimates due to the inherent
uncertainties involved. The Company believes that any additional
liability in excess of the amounts provided of $1,598, which may
result from resolution of these matters, will not have a material
adverse effect on the financial condition, liquidity, or cash flow of
the Company.
The Company has certain other contingent liabilities with respect to
litigation, claims and contractual agreements arising in the ordinary
course of business. In the opinion of management, it is either not
likely or premature to determine whether such contingent liabilities
will have a material adverse effect on the financial condition,
liquidity or cash flow of the Company.
7 OTHER
During Fiscal 2001, the Company recorded special charges related to:
(i) an organizational restructuring in the U.S, (ii) manufacturing and
distribution cost rationalization initiatives in the Company's
Tegucigalpa, Honduras and Mexico City, Mexico manufacturing facilities
and in the Company's European operations, (iii) the closure of the
Company's Wonewoc, Wisconsin, manufacturing facility, (iv) the
rationalization of uneconomic manufacturing processes at the Company's
Fennimore, Wisconsin, manufacturing facility, and rationalization of
packaging operations and product lines, and (v) costs associated with
the Company's June 2001 secondary offering. The amount recorded
includes $10,100 of employee termination benefits for approximately 570
employees, $10,200 of equipment, inventory, and other asset write-offs,
and $2,000 of other expenses. A summary of the 2001 restructuring
activities follows:
2001 RESTRUCTURING SUMMARY
TERMINATION OTHER
BENEFITS COSTS TOTAL
-------- ------ -----
Expense accrued $ 5,000 $ 11,000 $ 16,000
Change in estimate 4,400 100 4,500
Expense as incurred 700 1,100 1,800
Cash expenditures (5,800) (1,300) (7,100)
Non-cash charges -- (9,300) (9,300)
-------- -------- --------
Balance September 30, 2001 $ 4,300 $ 1,600 $ 5,900
Cash expenditures (1,300) (100) (1,400)
Non-cash charges -- (100) (100)
-------- -------- --------
Balance December 30, 2001 $ 3,000 $ 1,400 $ 4,400
Cash expenditures (1,500) (100) (1,600)
Non-cash charges -- (200) (200)
-------- -------- --------
Balance March 31, 2002 $ 1,500 $ 1,100 $ 2,600
======== ======== ========
10
8 SEGMENT INFORMATION
The Company manages operations in three reportable segments based upon
geographic area. North America includes the United States and Canada;
Latin America includes Mexico, Central America, and South America;
Europe/Rest of World ("Europe/ROW") includes the United Kingdom, Europe
and all other countries in which the Company does business.
The Company manufactures and markets dry cell batteries including
alkaline, zinc carbon, alkaline rechargeable, hearing aid, and other
specialty batteries and lighting products throughout the world.
Net sales and cost of sales to other segments have been eliminated. The
gross contribution of inter segment sales is included in the segment
selling the product to the external customer. Segment revenues are
based upon the geographic area in which the product is sold.
The reportable segment profits do not include interest expense,
interest income, and income tax expense. Also, not included in the
reportable segments, are corporate expenses including corporate
purchasing expense, general and administrative expense and research and
development expense. All depreciation and amortization included in
income from operations is related to corporate or reportable segments.
Costs are identified to reportable segments or corporate, according to
the function of each cost center.
The reportable segment assets do not include cash, deferred tax
benefits, investments, long-term intercompany receivables, most
deferred charges, and miscellaneous assets. Capital expenditures are
related to reportable segments or corporate. Variable allocations of
assets are not made for segment reporting.
REVENUES FROM EXTERNAL CUSTOMERS THREE MONTHS ENDING SIX MONTHS ENDING
------------------- -----------------
MARCH 31, 2002 APRIL 1, 2001 MARCH 31, 2002 APRIL 1, 2001
-------------- ------------- -------------- -------------
North America................................. $89,752 $96,527 $212,117 $215,755
Latin America................................. 18,378 26,498 44,367 60,017
Europe/ROW.................................... 13,023 11,654 26,552 23,214
-------- -------- -------- --------
Total segments................................ $121,153 $134,679 $283,036 $298,986
======== ======== ======== ========
INTER SEGMENT REVENUES THREE MONTHS ENDING SIX MONTHS ENDING
------------------- -----------------
MARCH 31, 2002 APRIL 1, 2001 MARCH 31, 2002 APRIL 1, 2001
-------------- ------------- -------------- -------------
North America................................. $7,695 $8,728 $17,872 $16,940
Latin America................................. 1,972 2,965 3,749 4,456
Europe/ROW.................................... 730 582 1,172 1,181
-------- -------- -------- --------
Total segments................................ $10,397 $12,275 $22,793 $22,577
======== ======== ======== ========
SEGMENT PROFIT THREE MONTHS ENDING SIX MONTHS ENDING
------------------- -----------------
MARCH 31, 2002 APRIL 1, 2001 MARCH 31, 2002 APRIL 1, 2001
-------------- ------------- -------------- -------------
North America................................. $17,752 $15,192 $25,107 $37,619
Latin America................................. 504 4,510 4,146 11,419
Europe/ROW.................................... 1,108 1,118 2,252 1,293
-------- -------- -------- --------
Total segments................................ 19,364 20,820 31,505 50,331
Corporate..................................... 6,505 6,781 15,106 13,634
Special charges............................... 16 230 16 16,260
Interest expense.............................. 4,057 7,182 8,226 15,374
Other expense (income), net................... 397 181 (385) 1,133
-------- -------- -------- --------
Income before income taxes.................... $8,389 $6,446 $8,542 $3,930
======== ======== ======== ========
11
SIX MONTHS ENDED
---------------------------------
SEGMENT ASSETS MARCH 31, 2002 APRIL 1, 2001
-------------- -------------
North America................................. $232,287 $233,699
Latin America................................. 202,054 206,227
Europe/ROW.................................... 29,305 26,690
-------- --------
Total segments................................ $463,646 $466,616
Corporate..................................... 43,991 50,805
-------- --------
Total assets at period end.................... $507,637 $517,421
======== ========
9 GUARANTOR SUBSIDIARIES (ROV HOLDING, INC. AND ROVCAL, INC.)
The following condensed consolidating financial data illustrate the
composition of the consolidated financial statements. Investments in
subsidiaries are accounted for by the Company and the Guarantor
Subsidiaries using the equity method for purposes of the consolidating
presentation. Earnings of subsidiaries are therefore reflected in the
Company's and Guarantor Subsidiary's' investment accounts and earnings.
The principal elimination entries eliminate investments in subsidiaries
and inter-company balances and transactions. Separate financial
statements of the Guarantor Subsidiaries are not presented because
management has determined that such financial statements would not be
material to investors.
12
RAYOVAC CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
As of March 31, 2002
(Unaudited)
(In thousands)
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
--------- ------------ ------------ ------------ ------------
-ASSETS-
Current assets:
Cash and cash equivalents $ 3,256 $ 47 $ 6,179 $ -- $ 9,482
Receivables 20,151 54,875 59,697 (18,418) 116,305
Inventories 54,770 -- 28,201 (1,955) 81,016
Prepaid expenses and other 23,188 497 9,237 -- 32,922
--------- --------- --------- --------- ---------
Total current assets 101,365 55,419 103,314 (20,373) 239,725
Property, plant and equipment, net 77,781 27 27,802 -- 105,610
Deferred charges and other, net 64,999 631 3,429 (25,660) 43,399
Intangible assets, net 89,802 -- 29,289 (188) 118,903
Investments in subsidiaries 146,689 91,263 -- (237,952) --
--------- --------- --------- --------- ---------
Total assets $ 480,636 $ 147,340 $ 163,834 $(284,173) $ 507,637
========= ========= ========= ========= =========
-LIABILITIES AND SHAREHOLDERS' EQUITY-
Current liabilities:
Current maturities of long-term debt $ 22,935 $ -- $ 9,969 $ (7,439) $ 25,465
Accounts payable 34,503 5 21,668 (10,308) 45,868
Accrued liabilities:
Wages and benefits and other 22,153 406 7,136 -- 29,695
Other special charges 2,526 -- 268 -- 2,794
--------- --------- --------- --------- ---------
Total current liabilities 82,117 411 39,041 (17,747) 103,822
Long term debt, net of current maturities 208,004 -- 25,679 (25,667) 208,016
Employee benefit obligations, net of current portion 20,271 -- 550 -- 20,821
Other 4,796 240 7,552 -- 12,588
--------- --------- --------- --------- ---------
Total liabilities 315,188 651 72,822 (43,414) 345,247
Shareholders' equity:
Common stock 615 1 12,072 (12,072) 616
Additional paid-in capital 180,303 62,788 54,154 (116,824) 180,421
Retained earnings 128,978 90,855 31,439 (125,506) 125,766
Accumulated other comprehensive loss (8,346) (6,955) (6,653) 13,643 (8,311)
Notes receivable from officers/shareholders (3,865) -- -- -- (3,865)
--------- --------- --------- --------- ---------
297,685 146,689 91,012 (240,759) 294,627
Less: Treasury stock, at cost (130,070) -- -- -- (130,070)
Less: Unearned restricted stock compensation (2,167) -- -- -- (2,167)
--------- --------- --------- --------- ---------
Total shareholders' equity 165,448 146,689 91,012 (240,759) 162,390
--------- --------- --------- --------- ---------
Total liabilities & shareholders' equity $ 480,636 $ 147,340 $ 163,834 $(284,173) $ 507,637
========= ========= ========= ========= =========
13
RAYOVAC CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the three month period ended March 31, 2002
(Unaudited)
(In thousands)
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
--------- ------------ ------------ ------------ ------------
Net sales $ 87,759 $ 8,159 $ 37,435 $(12,200) $121,153
Cost of goods sold 49,438 7,914 25,967 (12,116) 71,203
Special charges (149) -- 165 -- 16
-------- -------- -------- -------- --------
Gross profit 38,470 245 11,303 (84) 49,934
Selling expense 16,195 194 8,300 (77) 24,612
General and administrative 8,305 (2,723) 3,485 -- 9,067
Research and development 3,412 -- -- -- 3,412
-------- -------- -------- -------- --------
Total operating expenses 27,912 (2,529) 11,785 (77) 37,091
Income (loss) from operations 10,558 2,774 (482) (7) 12,843
Interest expense 3,836 -- 605 (384) 4,057
Equity (income) loss (739) 2,008 -- (1,269) --
Other (income) expense, net (466) (111) 590 384 397
-------- -------- -------- -------- --------
Income (loss) before income taxes 7,927 877 (1,677) 1,262 8,389
Income tax expense 2,540 138 331 -- 3,009
-------- -------- -------- -------- --------
Net income (loss) $ 5,387 $ 739 $ (2,008) $ 1,262 $ 5,380
======== ======== ======== ======== ========
14
RAYOVAC CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the six month period ended March 31, 2002
(Unaudited)
(In thousands)
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
--------- ------------ ------------ ------------ ------------
Net sales $ 208,727 $ 19,540 $ 83,245 $ (28,476) $ 283,036
Cost of goods sold 122,490 18,954 56,260 (27,350) 170,354
Special charges (68) -- 84 -- 16
--------- --------- --------- --------- ---------
Gross profit 86,305 586 26,901 (1,126) 112,666
Selling expense 35,586 357 16,279 (203) 52,019
General and administrative 35,963 (5,655) 7,326 -- 37,634
Research and development 6,630 -- -- -- 6,630
--------- --------- --------- --------- ---------
Total operating expenses 78,179 (5,298) 23,605 (203) 96,283
Income from operations 8,126 5,884 3,296 (923) 16,383
Interest expense 7,840 -- 1,309 (923) 8,226
Equity income (6,702) (601) -- 7,303 --
Other (income) expense, net (1,303) (468) 213 1,173 (385)
--------- --------- --------- --------- ---------
Income before income taxes 8,291 6,953 1,774 (8,476) 8,542
Income tax expense 1,336 251 1,173 -- 2,760
--------- --------- --------- --------- ---------
Net income $ 6,955 $ 6,702 $ 601 $ (8,476) $ 5,782
========= ========= ========= ========= =========
15
RAYOVAC CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the six month period ended March 31, 2002
(Unaudited)
(In thousands)
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
--------- ------------ ------------ ------------ ---------
Net cash provided (used) by operating activities $ 32,922 $ 1 $ (1,306) $ (736) $ 30,881
Cash flows from investing activities:
Purchases of property, plant and equipment (6,962) -- (723) -- (7,685)
--------- --------- --------- --------- ---------
Net cash used by investing activities (6,962) -- (723) -- (7,685)
Cash flows from financing activities:
Reduction of debt (119,171) -- 303 -- (118,868)
Proceeds from debt financing 94,200 -- -- -- 94,200
Issuance of stock 82 -- -- -- 82
Other (664) -- (356) 251 (769)
--------- --------- --------- --------- ---------
Net cash used by financing activities (25,553) -- (53) 251 (25,355)
Effect of exchange rate changes on cash and cash
equivalents -- -- (202) 485 283
--------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash equivalents 407 1 (2,284) -- (1,876)
Cash and cash equivalents, beginning of period 2,849 46 8,463 -- 11,358
--------- --------- --------- --------- ---------
Cash and cash equivalents, end of period $ 3,256 $ 47 $ 6,179 $ -- $ 9,482
========= ========= ========= ========= =========
16
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FISCAL QUARTER AND SIX MONTHS ENDED MARCH 31, 2002 COMPARED TO
FISCAL QUARTER AND SIX MONTHS ENDED APRIL 1, 2001
NET SALES. Net sales for the three months ended March 31, 2002 (the
"Fiscal 2002 Quarter") decreased $13.5 million, or 10.0%, to $121.2 million from
$134.7 million in the three months ended April 1, 2001 (the "Fiscal 2001
Quarter"). The sales decline reflects continued economic weakness in Latin
America and continued high levels of industry promotional activity in North
America partially offset by increased volume in Europe/ROW.
Net sales for the six months ended March 31, 2002 (the "Fiscal 2002 Six
Months") decreased $16.0 million, or 5.4%, to $283.0 million from $299.0 million
in the six months ended April 1, 2001 (the "Fiscal 2001 Six Months"). The sales
decline reflects continued economic weakness in the Latin America region
partially offset by product line extension gains in North America and volume
increases in Europe/ROW.
NET INCOME. Net income for the Fiscal 2002 Quarter increased $1.3
million to $5.4 million from $4.1 million in the Fiscal 2001 Quarter. The
increase reflects a reduction in interest expense primarily attributable to the
retirement of $65.0 million in Senior Subordinated Notes following the June 2001
stock offering.
Net income for the Fiscal 2002 Six Months increased $3.4 million to
$5.8 million from $2.4 million in the Fiscal 2001 Six Months. The increase
reflects a reduction in interest expense primarily attributable to the
retirement of $65.0 million in Senior Subordinated Notes following the June 2001
stock offering. In addition, a bad debt reserve of $10.0 million, net of tax,
related to the bankruptcy filing of a major customer was recognized in the
Fiscal 2002 Six Months, while the Fiscal 2001 Six Month's results reflected a
special charge reserve of $10.7 million, net of tax.
SEGMENT RESULTS. The Company manages operations in three reportable
segments based upon geographic area. North America includes the United States
and Canada; Latin America includes Mexico, Central America, and South America;
Europe/ROW includes the United Kingdom, Europe and all other countries in which
the company does business. We evaluate segment profitability based on income
from operations before corporate expense. Corporate expense includes corporate
purchasing expense, general and administrative expense and research and
development expense.
FISCAL QUARTER SIX MONTHS
---------------------- ----------------------
NORTH AMERICA 2002 2001 2002 2001
---- ---- ---- ----
Revenue from external customers..................... $ 89.8 $ 96.5 $212.1 $215.8
Profitability....................................... 17.8 15.2 25.1 37.6
Profitability as a % of net sales................... 19.8% 15.8% 11.8% 17.4%
Assets.............................................. $232.3 $233.7 $232.3 $233.7
Our sales to external customers decreased $6.7 million, or 6.9%, to
$89.8 million in the Fiscal 2002 Quarter from $96.5 million the previous year
due primarily to weakness in alkaline, hearing aid, and heavy duty batteries.
Alkaline sales decreases were primarily attributable to new distribution which
was offset by the sluggish economy, increased promotional activity, and our
inablility to anniversary an order from an OEM customer in the prior year. Heavy
duty sales decreases reflect a discontinuation of certain products at certain
stores of a major retailer and general industry trends. The hearing aid softness
is primarily attributable to timing of promotional shipments to key customers.
In the Fiscal 2002 Six Months, our sales to external customers
decreased $3.7 million, or 1.7%, to $212.1 million in the Fiscal 2002 Six Months
from $215.8 million the previous year as a result of strong sales of alkaline
batteries and lighting products offset by weakness in heavy duty and specialty
batteries. Alkaline sales increases were primarily attributable to new
distribution, while lighting products increases were primarily attributable to
product line extension and the introduction of new products. Heavy duty sales
decreases reflect the trend in the industry
17
toward alkaline in place of heavy duty and the discontinuation of certain
products at certain stores of a major retailer. Specialty batteries sales
decreases versus last year primarily reflect a decline in camcorder battery
sales, as well as a reduction of lithium battery sales due to softness in demand
from OEM customers in the PC, telecommunications and electronics industries.
Our profitability increased $2.6 million, or 17.1%, to $17.8 million in
the Fiscal 2002 Quarter from $15.2 million in the Fiscal 2001 Quarter. The
increase in profitability in the Fiscal 2002 Quarter was attributable to lower
selling expenses primarily reflecting lower advertising and other selling
expenses in addition to favorable distribution expenses reflecting favorable
freight rates. Our profitability margins increased 400 basis points to 19.8%
from 15.8% in the same quarter last year. The increase primarily reflects lower
operating expenses as a percentage of sales in addition to favorable gross
profit margins.
In the Fiscal 2002 Six Months, our profitability decreased $12.5
million, or 33.2%, to $25.1 million in the Fiscal 2002 Six Months from $37.6
million in the Fiscal 2001 Six Months. The decrease in profitability in the
Fiscal 2002 Six Months was primarily attributable to a $16.1 million bad debt
reserve attributable to the bankruptcy filing of a major customer. Excluding the
impact of this reserve, profitability increased $3.6 million, or 9.6%, versus
the same period last year due to lower advertising, promotional, and
distribution expenses. Our profitability margins, excluding the bad debt
reserve, increased 200 basis points to 19.4% from 17.4% in the previous year.
The increase primarily reflects lower operating expenses as a percentage of
sales partially offset by a reduction in gross profit margins reflecting a shift
in customer mix and increased promotional activity.
Our assets decreased $1.4 million, or 0.6%, to $232.3 million in the
Fiscal 2002 Quarter from $233.7 million the previous year. The decrease was
primarily attributable to a decrease in receivables and inventory partially
offset by increased capital investment.
FISCAL QUARTER SIX MONTHS
---------------------- ----------------------
LATIN AMERICA 2002 2001 2002 2001
---- ---- ---- ----
Revenue from external customers..................... $ 18.4 $ 26.5 $ 44.4 $ 60.0
Profitability....................................... 0.5 4.5 4.1 11.4
Profitability as a % of net sales................... 2.7% 17.0% 9.2% 19.0%
Assets.............................................. $202.1 $206.2 $202.1 $206.2
Our sales to external customers decreased $8.1 million, or 30.6% to
$18.4 million in the Fiscal 2002 Quarter from $26.5 million in the same
period last year, and decreased $15.6 million, or 26.0%, to $44.4 million in
the Fiscal 2002 Six Months from $60.0 million the same period last year due
primarily to decreased sales of zinc carbon and alkaline batteries. Net sales
were impacted by unfavorable economic conditions, planned curtailment of
shipments to certain distributors and wholesalers who were delinquent in
payments, political uncertainties in Argentina and Venezuela, and the
unfavarable impacts of currency devaluation which contributed approximately
6.3% and 4.3%, respectively, to the sales decline versus the prior year
periods.
Our profitability declined $4.0 million in the Fiscal 2002 Quarter and
$7.3 million in the Fiscal 2002 Six Months. The decrease in profitability versus
the same period last year was primarily attributable to the sales and gross
profit margin decline, partially offset by a reduction in operating expenses
primarily reflecting the adoption of SFAS 142 which resulted in a reduction of
amortization expense. The Venezuelan Bolivars devaluation did not have a
significant impact on the operating results for the Fiscal 2002 Quarter.
Our profitability margins in the Fiscal 2002 Quarter and Fiscal 2002
Six Months decreased primarily due to an unfavorable product line mix compounded
by our relatively fixed operating expenses spread over lower sales.
Our assets decreased $4.1 million, or 2.0%, to $202.1 million in the
Fiscal 2002 Quarter from $206.2 million the previous year. Increases in accounts
receivable, reflecting longer terms associated with distribution at larger
retail accounts and general economic weakness, were offset by decreases in
inventory throughout the region and lower advertising and other prepaid assets.
18
FISCAL QUARTER SIX MONTHS
---------------------- ----------------------
EUROPE/ROW 2002 2001 2002 2001
---- ---- ---- ----
Revenue from external customers..................... $13.0 $11.7 $26.5 $23.2
Profitability....................................... 1.1 1.1 2.2 1.3
Profitability as a % of net sales................... 8.5% 9.4% 8.3% 5.6%
Assets.............................................. $29.3 $26.7 $29.3 $26.7
Our sales to external customers increased $1.3 million, or 11.1%, to
$13.0 million in the Fiscal 2002 Quarter from $11.7 million the same period last
year and increased $3.3 million, or 14.2%, to $26.5 million in the Fiscal 2002
Six Months from $23.2 million the same period last year primarily reflecting
strong sales of alkaline and hearing aid batteries attributable to distribution
gains partially offset by the unfavorable impacts of currency devaluation.
Our profitability was flat in the Fiscal 2002 Quarter and increased
$0.9 million, or 69.2%, to $2.2 million in the Fiscal 2002 Six Months.
Profitability in the Fiscal 2002 Quarter was impacted by unfavorable gross
profit margins which offset the favorable impacts of volume gains. The increase
in profitability in the Fiscal 2002 Six Months primarily reflects the benefits
of volume gains compounded by a reduction in operating expenses reflecting the
adoption of SFAS 142, which resulted in lower amoritzation expense. Our
profitability margin increase, as a percentage of sales, in the Fiscal 2002 Six
Months is primarily driven by lower general and administrative expenses.
Our assets increased $2.6 million, or 9.7%, to $29.3 million from $26.7
million the previous year due primarily to an increase in inventory and
receivables reflecting the sales growth.
CORPORATE EXPENSE. Our corporate expense decreased $0.3 million, or
4.4%, to $6.5 million in the Fiscal 2002 Quarter from $6.8 million in the Fiscal
2001 Quarter and increased $1.5 million, or 11.0%, to $15.1 million in the
Fiscal 2002 Six Months from $13.6 million the same period last year. The
increase in the Fiscal 2002 Six Months was attributable to increased technology
spending and the accrual of management incentives, which were unearned in the
previous year. As a percentage of total sales, our corporate expense was 5.4%
and 5.1% in the Fiscal 2002 and Fiscal 2001 Quarters, respectively, and 5.3% and
4.6% in the Fiscal 2002 and Fiscal 2001 Six Months, respectively.
SPECIAL CHARGES. The Company incurred minimal special charges in the
Fiscal 2002 Quarter and Six Months. The Fiscal 2001 Six Months reflects $16.3
million in special charges primarily associated with expenses for the shutdown
of our Wonewoc, Wisconsin, manufacturing facility and restructuring initiatives
in Latin America and North America.
INCOME FROM OPERATIONS. Our income from operations decreased $1.0
million, or 7.3%, to $12.8 million in the Fiscal 2002 Quarter from $13.8 million
the same period last year. The decrease was primarily attributable to the
profitability decline in Latin America partially offset by increased
profitability in North America.
In the Fiscal 2002 Six Months, our income from operations decreased
$4.0 million, or 19.6%, to $16.4 million from $20.4 million the previous year.
The decrease was primarily attributable to the profitability decline in Latin
America. A bad debt reserve associated with the bankruptcy filing of a major
customer was recognized in the Fiscal 2002 Six Months, while the Fiscal 2001 Six
Month's reflects the special charge reserve.
INTEREST EXPENSE. Interest expense decreased $3.1 million to $4.1
million in the Fiscal 2002 Quarter and decreased $7.2 million to $8.2 million in
the Fiscal 2002 Six Months due to the retirement of $65.0 million in Senior
Subordinated Notes following the June 2001 stock offering combined with lower
effective interest rates.
OTHER EXPENSE (INCOME). Other expense increased $0.2 million to $0.4
million in the Fiscal 2002 Quarter. The increase in the Fiscal 2002 Quarter was
attributable to foreign exchange losses reflecting the unfavorable impacts of
currency devaluations in Argentina and Venezuela.
Other income increased $1.5 million to income of $0.4 million in the
Fiscal 2002 Six Months. The increase in the Fiscal 2002 Six Months was
attributable to foreign exchange gains versus foreign exchange losses in the
same period last year, primarily Mexico, partially offset by the unfavorable
impacts of currency devaluations in Venezuela and Argentina.
19
INCOME TAX EXPENSE. Our effective tax rate was 35.8% and 36.0% for the
Fiscal 2002 Quarter and the Fiscal 2001 Quarter, respectively. Our effective tax
rate was 32.3% for the Fiscal 2002 Six Months compared to 40.0% for the Fiscal
2001 Six Months. The effective tax rate for the prior year reflects a larger
percentage of our income being derived from foreign jurisdictions.
ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS
Effective October 1, 2001, the Company adopted Statement of Financial
Accounting Standards (SFAS) 141, BUSINESS COMBINATIONS, and SFAS 142, GOODWILL
AND OTHER INTANGIBLE ASSETS. Statement 141 requires that the purchase method of
accounting be used for all business combinations initiated or completed after
June 30, 2001. Statement 141 also specifies criteria that intangible assets
acquired in a purchase method business combination must meet to be recognized
and reported apart from goodwill. Statement 142 requires that goodwill and
intangible assets with indefinite useful lives no longer be amortized, but
instead be tested for impairment at least annually in accordance with the
provisions of Statement 142. Statement 142 also requires that intangible assets
with estimable useful lives be amortized over their respective estimated useful
lives to their estimated residual values, and reviewed for impairment in
accordance with Statement 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED
ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF.
The adoption of Statement 142 resulted in an increase to pre-tax income
of $0.8 million ($0.6 million after-tax) versus the previous year's quarter and
$1.6 million ($1.2 million after-tax) versus the Fiscal 2001 Six Months. The
increase is attributable to the discontinuation of amortization of the trade
name and Latin America, North America, and Europe/ROW segment goodwill. These
assets were being amortized on a straight line basis over 15 to 40 years. Upon
initial application of Statement 142, the Company reassessed the useful lives of
its intangible assets and deemed only the trade name to have an indefinite
useful life because it is expected to generate cash flows indefinitely. The
unamortized book value of these assets is $115.4 million. Upon the transition to
Statement 142, no goodwill was deemed to be impaired.
Effective January 1, 2002, the Company adopted Emerging Issues Task
Force (EITF) Issue No. 00-14, "Accounting for Certain Sales Incentives" and
Issue No. 00-25, "Vendor Income Statement Characterization of Consideration to a
Purchaser of the Vendor's Products or Services". These Issues address the
recognition, measurement, and income statement classification for various types
of sales incentives including discounts, coupons, rebates and free products and
when consideration from a vendor to a retailer or distributor in connection with
the purchase of the vendor's products to promote sales of the vendor's products
should be classified in the vendor's income statement as a reduction of revenue
or expense.
The adoption of these EITF's resulted in the following
reclassifications in the Company's results of operations. For the three months
ended March 31, 2002 and April 1, 2001, net sales were reduced by $8.8 and $10.5
million, respectively; cost of sales were increased by $2.7 and $2.4 million,
respectively; and selling expenses were reduced by $11.5 and $12.9 million,
respectively. For the six months ended March 31, 2002 and April 1, 2001, net
sales were reduced by $29.3 and $29.8 million, respectively; cost of sales were
increased by $7.9 and $7.0 million, respectively; and selling expenses were
reduced by $37.2 and $36.8 million, respectively.
Concurrent with the adoption of EITF 00-25, the Company reclassified
certain accrued trade incentives as a contra receivable versus the Company's
previous presentation as a component of accounts payable. Historically,
customers offset earned trade incentives when making payments on account.
Therefore, the Company believes the reclassification of these accrued trade
incentives as a contra receivable better reflects the underlying economics of
the Company's net receivable due from out trade customers.
The reclassification results in a reduction in accounts receivable and
accounts payable in our Consolidated Balance Sheets of $22.2 million and $21.4
million at March 31, 2002 and September 30, 2001, respectively.
LIQUIDITY AND CAPITAL RESOURCES
For the Fiscal 2002 Six Months, operating activities provided $30.9
million in net cash compared with $11.1 million the previous year. Operating
cash flow increases versus the previous year primarily reflect the reduction of
20
interest payments due to the retirement of $65.0 million in Senior Subordinated
Notes following the June 2001 stock offering as well as a lower investment in
working capital.
Net cash used by investing activities increased $3.5 million versus the
same period a year ago reflecting an increase in capital expenditures.
Expenditures in the Fiscal 2002 Six Months were primarily for improvements to
alkaline battery manufacturing. Capital expenditures for fiscal 2002 are
expected to be approximately $20.0 million which will include continued
performance upgrades to our alkaline and zinc air manufacturing and packaging
operations and continued investment in technology.
During the Fiscal 2002 Six Months we granted approximately 0.9 million
options to purchase shares of common stock to various employees of the company.
All grants have been at an exercise price equal to the market price of the
common stock on the date of the grant.
As a result of the bad debt reserve for Kmart receivables in the
quarter ended December 30, 2001, the Company was out of compliance with the
leverage ratio covenant of its senior bank credit agreement ("Second Amended
Restated Credit Agreement"). On February 12, 2002, the Company amended the
Second Amended Restated Credit Agreement ("Fourth Amendment") which placed it in
compliance with an amended leverage ratio based on an amended definition of
EBITDA (see Exhibit 4.11). The Company recorded $0.3 million of fees paid as a
result of the amendment as a debt issuance cost which will be amortized over the
remaining life of the agreement.
The Company believes that cash flow from operating activities and
periodic borrowings under its amended credit facilities will be adequate to meet
the Company's short-term and long-term liquidity requirements prior to the
maturity of those credit facilities, although no guarantee can be given in this
regard. The Company's current credit facilities include a revolving credit
facility of $250.0 million and term loan of $75.0 million. As of March 31, 2002,
$28.3 million of the term loan remained outstanding and $194.5 million was
outstanding under the revolving facility with approximately $10.7 million of the
remaining availability utilized for outstanding letters of credit.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
MARKET RISK FACTORS
We have market risk exposure from changes in interest rates, foreign
currency exchange rates and commodity prices. We use derivative financial
instruments for purposes other than trading to mitigate the risk from such
exposures.
A discussion of our accounting policies for derivative financial
instruments is included in Note 1 "Significant Accounting Policies" in Notes to
our consolidated financial statements.
INTEREST RATE RISK
We have bank lines of credit at variable interest rates. The general
level of U.S. interest rates, LIBOR, IBOR, and to a lesser extent European Base
rates, primarily affects interest expense. We use interest rate swaps to manage
such risk. The net amounts to be paid or received under interest rate swap
agreements are accrued as interest rates change, and are recognized over the
life of the swap agreements, as an adjustment to interest expense from the
underlying debt to which the swap is designated. The related amounts payable to,
or receivable from, the contract counter-parties are included in accrued
liabilities or accounts receivable.
FOREIGN EXCHANGE RISK
We are subject to risk from sales and loans to our subsidiaries as well
as sales to, purchases from and bank lines of credit with, third-party
customers, suppliers and creditors, respectively, denominated in foreign
currencies. Foreign currency sales are made primarily in Pounds Sterling,
Canadian Dollars, Euro, German Marks, French Francs, Italian Lira, Spanish
Pesetas, Dutch Guilders, Mexican Pesos, Guatemalan Quetzals, Dominican Pesos,
Venezuelan Bolivars, Argentine Pesos, Chilean Pesos and Honduran Lempira.
Foreign currency purchases are made primarily in Pounds Sterling, German Marks,
French Francs, Mexican Pesos, Dominican Pesos, Guatemalan Quetzals and Honduran
Lempira. We manage our foreign exchange exposure from anticipated sales,
accounts receivable,
21
intercompany loans, firm purchase commitments and credit obligations through the
use of naturally occurring offsetting positions (borrowing in local currency),
forward foreign exchange contracts, foreign exchange rate swaps and foreign
exchange options. The related amounts payable to, or receivable from, the
contract counter parties are included in accounts payable or accounts
receivable.
COMMODITY PRICE RISK
We are exposed to fluctuation in market prices for purchases of zinc
used in the manufacturing process. We use commodity swaps, calls and puts to
manage such risk. The maturity of, and the quantities covered by, the contracts
are closely correlated to our anticipated purchases of the commodities. The cost
of calls, and the premiums received from the puts, are amortized over the life
of the contracts and are recorded in cost of goods sold, along with the effects
of the swap, put and call contracts. The related amounts payable to, or
receivable from, the counterparties are included in accounts payable or accounts
receivable.
SENSITIVITY ANALYSIS
The analysis below is hypothetical and should not be considered a
projection of future risks. Earnings projections are before tax.
As of March 31, 2002, the potential change in fair value of outstanding
interest rate derivative instruments, assuming a 1% unfavorable shift in the
underlying interest rates would be a loss of $4.2 million. The net impact on
reported earnings, after also including the reduction in one year's interest
expense on the related debt due to the same shift in interest rates, would be a
net loss of $1.9 million.
As of March 31, 2002, the potential change in fair value of outstanding
foreign exchange rate derivative instruments, assuming a 10% unfavorable change
in the underlying foreign exchange rates would be a loss of $0.1 million. The
net impact on future cash flows, after also including the gain in value on the
related accounts receivable and contractual payment obligations outstanding at
March 31, 2002 due to the same change in exchange rates, would be a net gain of
$0.5 million.
As of March 31, 2002, the potential change in fair value of outstanding
commodity price derivative instruments, assuming a 10% unfavorable change in the
underlying commodity prices would be a loss of $0.9 million. The net impact on
reported earnings, after also including the reduction in cost of one year's
purchases of the related commodities due to the same change in commodity prices,
would be immaterial.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In August 2001, FASB issued Statement No. 143, ACCOUNTING FOR ASSET
RETIREMENT OBLIGATIONS. Statement No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. The Company is required to
adopt no later than its fiscal year beginning October 1, 2002. Management is
currently evaluating the impact of adoption on the consolidated financial
statements.
In October 2001, the FASB Issued Statement No. 144, ACCOUNTING FOR THE
IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS. This statement supersedes FASB
Statement No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR
LONG-LIVED ASSETS TO BE DISPOSED OF, and the accounting and reporting provisions
of APB Opinion No. 30, REPORTING THE RESULTS OF OPERATIONS - REPORTING THE
EFFECTS OF DISPOSAL OF A SEGMENT OF A BUSINESS, AND EXTRAORDINARY, UNUSUAL AND
INFREQUENTLY OCCURRING EVENTS AND TRANSACTIONS, for the disposal of a segment of
a business. The Company is required to adopt no later than its fiscal year
beginning October 1, 2002. Management is currently evaluating the impact of
adoption on the consolidated financial statements
FORWARD LOOKING STATEMENTS
Certain of the information contained in this Form 10-Q, including
without limitation statements made under Part I, Item 1, "Financial Statements"
and Part I, Item 2, "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and Part I, Item 3, "Quantitative and Qualitative
Disclosures about Market Risk"
22
which are not historical facts, may include "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act, as amended. In
reviewing such information, you should note that our actual results may differ
materially from those set forth in such forward-looking statements.
Important factors that could cause our actual results to differ
materially from those included in the forward-looking statements made herein
include, without limitation, (1) significant changes in consumer demand and
buying practices for household batteries, hearing aid batteries or other
products we manufacture or sell in North America, Latin America or Europe/ROW;
(2) the loss of, or a significant reduction in, sales through a significant
retail customer; (3) the successful introduction or expansion of competitive
brands into the marketplace, including private label offerings; (4) the
introduction of new product features or new battery technologies by a
competitor; (5) promotional campaigns and spending by a competitor; (6)
difficulties or delays in the integration of operations of acquired companies;
(7) our ability to successfully implement manufacturing and distribution cost
efficiencies and improvements; (8) delays in manufacturing or distribution due
to work stoppages, problems with suppliers, natural causes or other factors; (9)
the enactment or imposition of unexpected environmental regulations negatively
impacting consumer demand for certain of our battery products or increasing our
cost of manufacture or distribution; (10) the costs and effects of unanticipated
legal, tax or regulatory proceedings; (11) the effects of competitors' patents
or other intellectual property rights; (12) interest rate, exchange rate and raw
material price fluctuations; (13) impact of unusual items resulting from
evaluation of business strategies, acquisitions and divestitures and
organizational structure; (14) changes in accounting standards applicable to our
business; and (15) the effects of changes in trade, monetary or fiscal policies
and regulations by governments in countries where we do business.
Additional factors and assumptions that could generally cause our
actual results to differ materially from those included in the forward-looking
statements made herein include, without limitation, (1) our ability to develop
and introduce new products; (2) the effects of general economic conditions in
North America, Europe, Latin America or other countries where we do business,
including inflation, labor costs and stock market volatility; (3) the effects of
political or economic conditions, unrest or volatility in Latin America and
other international markets; (4) the sufficiency of our production and
distribution capacity to meet future demand for our products; (5) our ability to
keep pace with the product and manufacturing technological standards in our
industry; (6) our ability to continue to penetrate and develop new distribution
channels for our products; and (7) various other factors, including those
discussed herein and those set forth in our most recent Annual Report on Form
10-K and the prospectus supplement for our most recent public offering of common
stock. Other factors and assumptions not identified above were also involved in
the derivation of the forward-looking statements contained in this Form 10-Q and
the failure of such other assumptions to be realized, as well as other factors,
may also cause actual results to differ materially from those projected. We
assume no obligations to update these forward-looking statements to reflect
actual results or changes in factors or assumptions affecting such
forward-looking statements.
23
Part II. Other Information
Item 1: Legal Proceedings
There have been no significant changes in the status of Rayovac's legal
proceedings since the filing of Rayovac's Annual Report on Form 10-K for its
fiscal year ended September 30, 2001.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
2.1++++ Share Purchase Agreement made as of June 11, 1999, by and
among the Company, Vidor Battery Company, Rayovac Latin
America, Ltd., the shareholders of ROV Limited, ROV Limited,
ESB ROV Ltd., Duranmas, S.A., certain second-tier
subsidiaries of ROV Limited, Ray-O-Vac Overseas Corporation,
and Alfredo J. Diez and Richard T. Doyle, Jr., as selling
group representatives.
2.2++++ Form of Stock Purchase Agreement entered into on or around
June 11, 1999, by and among the Company, Rayovac Latin
America, Ltd. and certain persons who hold minority
interests in certain of the operating subsidiaries of
Ray-O-Vac Overseas Corporation.
3.1+ Amended and Restated Articles of Incorporation of the
Company.
3.2****** Amended and Restated By-laws of the Company, as amended
through May 17, 1999.
4.1** Indenture, dated as of October 22, 1996, by and among the
Company, ROV Holding, Inc. and Marine Midland Bank, as
trustee, relating to the Company's 10 1/4% Senior
Subordinated Notes due 2006.
4.2****** First Supplemental Indenture, dated as of February 26, 1999,
by and among the Company, ROV Holding, Inc. and HSBC Bank
USA (formerly known as Marine Midland Bank) as trustee,
relating to the Company's 10 1/4% Senior Subordinated Notes
due 2006.
4.3++++ Second Supplemental Indenture, dated as of August 6, 1999,
by and among the Company, ROV Holding, Inc. and HSBC Bank
USA (formerly known as Marine Midland Bank) as trustee,
relating to the Company's 10 1/4% Senior Subordinated Notes
due 2006.
4.4******* Third Supplemental Indenture, dated as of June 13, 2001, by
and among the Company, ROV Holding, Inc., ROVCAL, Inc. and
HSBC Bank USA (formerly known as Marine Midland Bank) as
trustee, relating to the Company's 101/4% Senior
Subordinated Notes due 2006.
4.5** Specimen of the Notes (included as an exhibit to Exhibit
4.1)
4.6**** Amended and Restated Credit Agreement, dated as of December
30, 1997, by and among the Company, the lenders party
thereto and Bank of America National Trust and Savings
Association ("BofA"), as Administrative Agent.
4.7++++ Second Amended and Restated Credit Agreement, dated as of
August 9, 1999, by and among the Company, the lenders party
thereto and Bank of America, NA as Administrative Agent.
4.8+++++ The First Amendment dated as of July 28, 2000 to the Second
Amended and Restated Credit Agreement, dated as of August 9,
1999, by and among the Company, the lenders party thereto
and Bank of America, NA as Administrative Agent.
4.9+++++++ The Second Amendment dated as of December 31, 2000 to the
Second Amended and Restated Credit Agreement, dated as of
August 9, 1999, by and among the Company, various financial
institutions, and Bank of America, NA as Administrative
Agent.
4.10++++++++ The Third Amendment dated as of June 11, 2001, to the Second
Amended and Restated Credit Agreement, dated as of August 9,
1999, by and among the Company, various financial
institutions, and Bank of America, NA as Administrative
Agent.
4.11+++++++++ The Fourth Amendment dated as of February 12, 2002, to the
Second Amended and Restated Credit Agreement, dated as of
August 9, 1999, by and among the Company, various financial
institutions, and Bank of America, NA as Administrative
Agent.
4.12** The Security Agreement, dated as of September 12, 1996, by
and among the Company, ROV Holding, Inc. and Bank of
America, NA.
25
4.13** The Company Pledge Agreement, dated as of September 12,
1996, by and between the Company and Bank of America, NA.
4.14*** Shareholders Agreement, dated as of September 12, 1996, by
and among the Company and the shareholders of the Company
referred to therein.
4.15*** Amendment No. 1 to Rayovac Shareholders Agreement dated
August 1, 1997, by and among the Company and the
shareholders of the Company referred to therein.
4.16***** Amendment No. 2 to Rayovac Shareholders Agreement, dated as
of January 8, 1999, by and among the Company and the
Shareholders of the Company referred to therein.
4.17++++++ Amendment No. 3 to Rayovac Shareholders Agreement dated
January 1, 2001, by and among the Company and the
shareholders of the Company referred to therein.
4.18+++++++++ Amendment No. 4 to Rayovac Shareholders Agreement dated
February 8, 2002, by and among the Company and the
Shareholders of the Company referred to therein.
4.19* Specimen certificate representing the Common Stock.
10.1** Management Agreement, dated as of September 12, 1996, by and
between the Company and Thomas H. Lee Company.
10.2** Confidentiality, Non-Competition and No-Hire Agreement,
dated as of September 12, 1996, by and between the Company
and Thomas F. Pyle.
10.3+++++ Amended and Restated Employment Agreement, dated as of
October 1, 2000, by and between the Company and David A.
Jones.
10.4+++++ Amended and Restated Employment Agreement, dated as of
October 1, 2000, by and between the Company and Kent J.
Hussey.
10.5+++++ Employment Agreement, dated as of October 1, 2000, by and
between the Company and Kenneth V. Biller.
10.6+++++ Employment Agreement, dated as of October 1, 2000, by and
between the Company and Stephen P. Shanesy.
10.7+++++ Employment Agreement, dated as of October 1, 2000, by and
between the Company and Merrell M. Tomlin.
10.8+++++ Employment Agreement, dated as of October 1, 2000, by and
between the Company and Luis A. Cancio.
10.9** Technology, License and Service Agreement between Battery
Technologies (International) Limited and the Company, dated
June 1, 1991, as amended April 19, 1993, and December 31,
1995.
10.10** Building Lease between the Company and SPG Partners dated
May 14, 1985, as amended June 24, 1986, and June 10, 1987.
10.11***** Amendment, dated December 31, 1998, between the Company and
SPG Partners, to the Building Lease, between the Company and
SPG Partners, dated May 14, 1985.
10.12*** Rayovac Corporation 1996 Stock Option Plan.
10.13* 1997 Rayovac Incentive Plan.
10.14* Rayovac Profit Sharing and Savings Plan.
10.15+++ Technical Collaboration, Sale and Supply Agreement, dated as
of March 5, 1998, by and among the Company. Matsushita
Battery Industrial Co., Ltd. and Matsushita Electric
Industrial Co., Ltd.
--------------
* Incorporated by reference to the Company's Registration Statement on
Form S-1 (Registration No. 333-35181) filed with the Commission.
26
** Incorporated by reference to the Company's Registration Statement on
Form S-1 (Registration No. 333-17895) filed with the Commission.
*** Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarterly period ended June 29, 1997, filed with the
Commission on August 13, 1997.
**** Incorporated by reference to the Company's Registration Statement on
Form S-3 (Registration No. 333-49281) filed with the Commission.
***** Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarterly period ended January 3, 1999, filed with the
Commission on February 17, 1999.
****** Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarterly period ended April 4, 1999, filed with the
Commission on May 17, 1999.
******* Incorporated by reference to the Company's Report on Form 8-K filed
with the Commission on June 19, 2001.
+ Incorporated by reference to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1997, filed with the
Commission on December 23, 1997.
++ Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the Quarterly period ended June 27, 1998, filed with the
Commission on August 4, 1998.
+++ Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarterly period ended March 28, 1998, filed with the
Commission on May 5, 1998.
++++ Incorporated by reference to the Company's Current Report on Form
8-K filed with the Commission on August 24, 1999, as subsequently
amended on October 26, 1999.
+++++ Incorporated by reference to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 2000, filed with the
Commission on December 19, 2000.
++++++ Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarterly period ended December 31, 2000, filed with
the Commission on February 14, 2001.
+++++++ Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarterly period ended March 31, 2001, filed with the
Commission on May 14, 2001.
++++++++ Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarterly period ended July 1, 2001, filed with the
Commission on August 9, 2001.
+++++++++ Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarterly period ended December 30, 2001, filed with
the Commission on February 13, 2002.
(b) Reports on Form 8-K. The Company has not filed any reports on Form 8-K
during the three month period ended March 31, 2002.
27
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATE: May 14, 2002
RAYOVAC CORPORATION
By: /s/ Kent J. Hussey
--------------------------------------
Kent J. Hussey
President and Chief Financial Officer
28