See accompanying notes to financial statements.
RAYOVAC 401(k) SAVINGS PLAN FOR HOURLY EMPLOYEES
Notes to Financial Statements
December 31, 2004 and 2003
(1) Description of the Plan
The following description of the Rayovac 401(k) Savings Plan for Hourly Employees (the Plan) provides only general information. Participants should refer to the Plan document for a more complete description of the Plan’s provisions.
(a) General
The Plan is a defined contribution plan established January 1, 1998, covering hourly union employees, who have completed one hour of service, of Rayovac Corporation (“the Company” or “the Plan Sponsor”) represented by Local Union 1329 of the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (Local Union 1329), Local 695 of the International Brotherhood of Teamsters, and Badger Lodge 1406 of the International Association of Machinists (Badger Lodge 1406). The purpose of the Plan is to provide supplemental support for participants upon their retirement. It is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA). The Plan’s assets are included in the Master Trust for Rayovac Corporation (Master Trust). The Master Trust also includes the assets of the Rayovac 401(k) Retirement Savings Plan, which covers all domestic salaried and non-union hourly employees.
(b) Contributions
Active participants represented by Local Union 1329 and Badger Lodge 1406 are permitted to make contributions to the Plan in whole percentages of not more than 50% of their pretax annual compensation, as defined in the Plan document. All other participants are permitted to make contributions not exceeding 50% of their pre-tax annual compensation, as defined in the Plan document. Participant contributions are limited to the applicable limits of the Internal Revenue Code (the Code).
(c) Participant Accounts
Each participant’s account is credited with the participant’s contributions and an allocation of Plan earnings, and charged with an allocation of administrative expenses. Allocations are based on participant’s compensation or account balances, as defined in the Plan document.
(d) Vesting
A participant is fully vested in his or her entire account balance, including the balances attributable to both the employee contributions and employer contributions, at all times.
RAYOVAC 401(k) SAVINGS PLAN FOR HOURLY EMPLOYEES
Notes to Financial Statements
December 31, 2004 and 2003
(e) Investment Fund Options
Participant contributions and investment earnings were directed by the individual Plan participants to certain investment choices offered under the Plan through the Master Trust. Descriptions of the investment fund options for 2004 and 2003 are as follows:
Stable Value Fund
This fund, which seeks a reasonable level of income together with stability of principal, invests in Key Trust Company EB Managed GIC Funds, which invests primarily in various investment contracts. The fund may also invest a portion of its assets in cash or money market accounts for liquidity purposes only.
PIMCO Total Return Fund
This fund, an income oriented mutual fund which also seeks capital appreciation over time, invests in a range of bonds and equities resulting in an intermediate maturity portfolio with a duration between three and six years. Bonds may have variable, fixed or floating rates of interest. The fund seeks maximum total return consistent with preservation of capital and prudent investment management.
Vanguard Index Trust 500 Portfolio
This fund, a growth and income mutual fund, invests in all 500 stocks in the Standard & Poor’s Composite Stock Price Index (the S&P 500 Index), an index which emphasizes large-capitalization companies and is generally considered to be representative of the U.S. stock market, in approximately the same proportions as they are represented in the S&P 500 Index. The fund seeks to replicate the aggregate price and yield performance of the S&P 500 Index. Balances in this fund may also be invested in short-term money market instruments.
Rayovac Stock Fund
This fund invests in Rayovac Corporation common stock. The fund may also invest a portion of its assets in cash or money market accounts for liquidity purposes only.
AIM Small Cap Growth Fund
This fund, a growth mutual fund, invests in a portfolio which in turn invests at least 65% of its total assets in equity securities of U.S. issuers that have market capitalizations less than that of the largest company in the Russell 2000 Index. The fund’s investment objective is long-term growth of capital.
Oakmark Equity and Income Fund
Oakmark Equity and Income Fund seeks current income and preservation and growth of capital. The fund generally invests between 50% and 75% of assets in equities and between 25% and 50% of assets in U.S. government and corporate debt rated AA or higher. It may invest up to 20% of assets in unrated debt or debt rated below investment-grade. The fund may also invest up to 25% of assets in foreign securities.
RAYOVAC 401(k) SAVINGS PLAN FOR HOURLY EMPLOYEES
Notes to Financial Statements
December 31, 2004 and 2003
Van Kampen Growth and Income Fund
Van Kampen Growth and Income Fund seeks income and long-term growth of capital. The fund invests primarily in income-producing equities, including common stocks and convertible securities (although investments are also made in non-convertible preferred stocks and debt securities). It limits investments in foreign securities to 25% of assets.
American Funds Growth Fund of America Fund
American Funds Growth Fund of America Fund seeks capital growth. The fund invests primarily in common stocks. Management selects securities that it believes are reasonably priced and represent solid long-term investment opportunities. The fund may invest up to 15% of assets in securities of issuers domiciled outside of the U.S. and Canada, and not included in the S&P 500 Index. It may also invest up to 10% of assets in debt securities rated below investment-grade.
MainStay MAP Fund
MainStay MAP Fund seeks long-term growth of capital; current income is a secondary consideration. The fund normally invests at least 65% of assets in equity securities of domestic issuers. It may also invest in common and preferred stocks, convertible securities, ADRs, bonds, notes and debentures.
MFS International New Discovery
MFS International New Discovery Fund seeks capital appreciation. The fund normally invests at least 65% of assets in equity securities of companies with small market capitalizations, typically from at least three countries. It may invest in common stocks and related equity securities, such as preferred stock, convertible securities and depositary receipts of foreign issuers. The fund may also invest in foreign markets, emerging markets and over-the-counter markets. It may engage in active and frequent trading.
(f) Payment of Benefits
Upon retirement or termination of employment, the participant’s vested account balance is payable to him or her, or in the event of death, the participant’s beneficiary. Participants may be eligible for a hardship withdrawal from their pretax participant account under certain circumstances and with the Plan Administrator’s approval.
(2) Summary of Significant Accounting Policies
(a) Basis of Presentation
The accompanying financial statements have been prepared on the accrual basis and present the assets available for plan benefits and changes in those assets in accordance with accounting principles generally accepted in the United States of America.
RAYOVAC 401(k) SAVINGS PLAN FOR HOURLY EMPLOYEES
Notes to Financial Statements
December 31, 2004 and 2003
(b) Trust Fund Managed by New York Life Trust Company
Under the terms of a trust agreement between the New York Life Trust Company (the Trustee) and the Plan, the Trustee manages the Master Trust on behalf of the Plan.
(c) Valuation of Investments and Income Recognition
The fair value of the Plan’s interest in the Master Trust is based on the beginning of year value of the Plan’s interest in the Master Trust (based on the fair value of the respective investments, as described in the following paragraph) plus actual contributions and allocated investment income, including unrealized gains and losses, less actual distributions, and allocated administrative expenses.
Investments in shares of mutual funds are stated at quoted net asset values. Investments in shares of Rayovac Corporation common stock are stated at quoted market prices.
Purchases and sales of securities are reflected on a trade-date basis. The Plan reports realized and unrealized gains and losses for financial statement purposes based on revalued cost wherein cost is determined to be fair value at the end of the prior plan year, or historical cost if the investment was acquired since the beginning of the plan year, as required by the Department of Labor.
The Plan’s investments are exposed to various risks, such as interest rate, market, and credit risks. Due to the level of risk associated with certain investments and the level of uncertainty related to changes in the values of investments, it is at least reasonably possible that changes in risks in the near term would materially affect participants’ account balances and the amounts reported in the statement of assets available for plan benefits and the statement of changes in assets available for plan benefits.
(d) Benefits Paid
Benefits paid to participants are recorded upon distribution.
(e) Administrative Expenses
Expenses incurred in the administration of the Plan are paid both by the Plan and by the Company. Administrative expenses for 2004 and 2003 were approximately $8,000 and $14,000, respectively. The fees paid by the Company for 2004 and 2003 were approximately $5,000 and $10,000, respectively. The fees paid by the Plan for 2004 and 2003, which consist of management fees, were approximately $3,000 in 2004 and $4,000 in 2003 (See Note 4).
(f) Use of Estimates
The Plan Administrator has made a number of estimates and assumptions relating to the reporting of assets available for plan benefits and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of changes in assets available for plan benefits during the reporting period to prepare these financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates.
RAYOVAC 401(k) SAVINGS PLAN FOR HOURLY EMPLOYEES
Notes to Financial Statements
December 31, 2004 and 2003
(g) Participant Loans
Participants represented by Local Union 1329 and Badger Lodge 1406 may receive loans from their accounts up to the lesser of 50% of the individual participant’s vested account balance or $50,000. If the participant has received a loan in the past, however, the $50,000 limit is reduced by the highest outstanding loan balance during the preceding 12-month period. Loan terms must not exceed five years, except in the case of loans used for purchase of a primary residence, in which case the loan period must not exceed ten years. Loans are secured by the vested balance in the participant’s account and bear interest at the Prime Rate plus 150 basis points. Principal and interest payments are due on a quarterly basis or more often and are reinvested in the investment option(s) selected by the participant.
(3) Federal Income Tax Status
The Internal Revenue Service has determined and informed the Company by a letter dated March 19, 2002, that the Plan and related Trust are designed in accordance with applicable sections of the Internal Revenue Code. The Plan Administrator believes that the Plan is currently designed and being operated in compliance with the applicable requirements of the Internal Revenue Code and, therefore, the plan continues to qualify under Section 401(k) and the related trust continues to be tax-exempt as of December 31, 2004. Therefore, no provision for income taxes is included in the Plan’s financial statements.
(4) Party-in-interest Transactions
The Plan has not considered Company contributions to the Plan or benefits paid by the Plan for participants as party-in-interest transactions.
Fees incurred by the Plan for investment management services amounted to approximately $3,000 for the year ended December 31, 2004 and $4,000 for the year ended December 31, 2003.
Fees paid during the year for legal, accounting, actuarial and other professional services rendered by parties-in-interest were based on customary and reasonable rates for such services.
(5) Plan Termination
The Company has the right under the Plan agreement to reduce or cease contributions at the discretion of the Board of Directors, or to amend the Plan at any time and in any respect. However, no such action may deprive any participant or beneficiary under the Plan of any vested right. In the event the Plan is wholly or partially terminated, or upon the complete discontinuance of contributions under the Plan by any entity that is a part of the Company, each participant’s interest in their account shall be no forfeitable on the date of such termination or discontinuance.
RAYOVAC 401(k) SAVINGS PLAN FOR HOURLY EMPLOYEES
Notes to Financial Statements
December 31, 2004 and 2003
(6) | Master Trust for Rayovac Corporation |
At December 31, 2004 and 2003, the Plan’s investment assets were held in a trust account at New York Life and consist of an interest in a Master Trust. The Master Trust also includes the investment assets of the Rayovac 401(k) Retirement Savings Plan.
A summary of investments in the Master Trust as of December 31, 2004 and 2003, is as follows:
| | | 2004 | | 2003 | |
| Assets: | | | | | | | |
| Investments, at fair value: | | | | | | | |
| Mutual funds | | $ | 66,084,412 | | $ | 56,751,041 | |
| Participant loans, interest rates of Prime plus 150 basis | | | | | | | |
| points | | | 322,094 | | | 242,615 | |
| Rayovac Corporation common stock | | | 3,340,636 | | | 3,006,640 | |
| Accrued Receivable (Remington merger) | | | 2,735,304 | | | — | |
| Total assets | | $ | 72,482,446 | | $ | 60,000,296 | |
RAYOVAC 401(k) SAVINGS PLAN FOR HOURLY EMPLOYEES
Notes to Financial Statements
December 31, 2004 and 2003
The changes in assets of the Master Trust during the years ended December 31, 2004 and 2003 are as follows:
| | | 2004 | | 2003 | |
| Increases in assets: | | | | | | | |
| Investment income: | | | | | | | |
| Net appreciation in fair value of investments: | | | | | | | |
| Mutual funds | | $ | 4,543,119 | | $ | 8,864,775 | |
| Rayovac Corporation common stock | | | 1,261,284 | | | 1,220,182 | |
| Total appreciation in fair value of investments | | | 5,804,403 | | | 10,084,957 | |
| Interest and dividends | | | 1,118,150 | | | 813,908 | |
| Total investment income in Master Trust | | | 6,922,553 | | | 10,898,865 | |
| Participant contributions | | | 4,095,254 | | | 3,473,357 | |
| Employer contributions | | | 1,870,679 | | | 1,597,193 | |
| Rollovers | | | 250,745 | | | 160,536 | |
| Other Deposits (Remington Merger) | | | 4,675,865 | | | — | |
| Total increases | | | 17,815,096 | | | 16,129,951 | |
| Deductions from assets: | | | | | | | |
| Distributions and benefits paid | | | 5,318,038 | | | 6,708,473 | |
| Administrative expenses | | | 14,908 | | | 17,940 | |
| Total deductions | | | 5,332,946 | | | 6,726,413 | |
| Net increase (decrease) in assets | | | 12,482,150 | | | 9,403,538 | |
| Assets, beginning of year | | | 60,000,296 | | | 50,596,758 | |
| Assets, end of year | | $ | 72,482,446 | | $ | 60,000,296 | |
As of December 31, 2004 and 2003, the Plan has an allocated share of approximately 5.5% and 5.5% of the total Master Trust investments. The Plan has an allocated share of investment income (loss) of approximately 5.8% for 2004 and 5.9% for 2003.
Effective May 2, 2005, Rayovac Corporation, the Plan Sponsor changed its name to Spectrum Brands.
RAYOVAC 401(k) SAVINGS PLAN FOR HOURLY EMPLOYEES
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2004
Description | | Current value | |
| 5.5% interest in the Master Trust for Rayovac Corporation | | $ | 4,021,597 | |
See accompanying Report of Independent Registered Public Accounting Firm
