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 June 29, 1997
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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 333-17895
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Rayovac Corporation
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(Exact name of registrant as specified in its charter)
Wisconsin 22-2423556
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
601 Rayovac Drive, Madison, Wisconsin 53711
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(Address of principal executive offices) (Zip Code)
(608) 275-3340
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(Registrant's telephone number, including area code)
(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 August 12, 1997, the most recent practicable date, was 20,581,431.
Item 1. Financial Statements
--------------------
RAYOVAC CORPORATION
Condensed Consolidated Balance Sheets
As of June 29, 1997 and September 30, 1996
(In thousands, except per share amounts)
-ASSETS-
June 28, 1997 September 30, 1996
(Unaudited) (Audited)
Current assets:
Cash and cash equivalents $4,756 $4,255
Receivables 66,293 66,476
Inventories 52,116 70,121
Prepaid expenses and other 12,975 14,822
-------- --------
Total current assets 136,140 155,674
Property, plant and equipment, net 64,407 69,397
Deferred charges and other 17,493 20,177
-------- --------
Total assets $218,040 $245,248
======== ========
-LIABILITIES AND SHAREHOLDER'S DEFICIT-
Current liabilities:
Current maturities of long-term debt $8,806 $8,818
Accounts payable 37,839 46,921
Accrued liabilities:
Wages, benefits and other 33,294 21,798
Recapitalization and other special charges 5,744 14,942
-------- --------
Total current liabilities 85,683 92,479
Long-term debt, net of current maturities 197,809 224,845
Employee benefit obligations, net of current portion 14,268 12,138
Other 1,497 1,506
Shareholders' deficit
Common stock, $.01 par value, authorized 90,000
shares; issued 50,000 shares; outstanding 20,581
shares and 20,470 shares, respectively 500 500
Additional paid-in capital 15,974 15,970
Foreign currency translation adjustment 2,608 1,689
Note receivable officer/shareholder (715) (500)
Retained earnings 28,455 25,143
-------- --------
46,822 42,802
Less treasury stock, at cost, 29,419 shares and 29,530
shares, respectively (128,039) (128,522)
-------- --------
Total shareholders' deficit (81,217) (85,720)
-------- --------
Total liabilities and shareholders' deficit $218,040 $245,248
======== ========
See accompanying notes which are an integral part of these
financial statements.
RAYOVAC CORPORATION
Condensed Consolidated Statements of Operations
For the three month and nine month periods ended June 29, 1997 and June 29, 1996
(Unaudited)
(In thousands, except per share amounts)
THREE MONTHS NINE MONTHS
----------------- ------------------
1997 1996 1997 1996
------- ------- -------- --------
Net sales $89,007 $91,882 $299,151 $298,758
Cost of goods sold 52,217 55,236 178,359 178,615
------- ------- -------- --------
Gross profit 36,790 36,646 120,792 120,143
Selling 19,378 19,165 65,240 69,339
General and administrative 7,332 7,582 22,599 24,388
Research and development 1,351 1,432 4,781 4,081
Other special charges 226 - 4,940 -
------ ------ ------- -------
Total operating expenses 28,287 28,179 97,560 97,808
Income from operations 8,503 8,467 23,232 22,335
Other expense:
Interest expense 5,438 1,911 18,884 6,023
Other expense (income) (107) 115 207 514
------ ------ ------- -------
5,331 2,026 19,091 6,537
Income before income taxes 3,172 6,441 4,141 15,798
Income tax expense 520 2,080 829 5,068
------ ------ ------- -------
Net income $2,652 $4,361 $3,312 $10,730
====== ====== ======= =======
Net income per share $0.13 $0.09 $0.16 $0.22
====== ====== ======= =======
Weighted average shares of
common stock outstanding 20,581 49,500 20,513 49,524
====== ====== ======= =======
See accompanying notes which are an integral part of these
financial statements.
RAYOVAC CORPORATION
Condensed Consolidated Statements of Cash Flows
For the nine month periods ended June 29, 1997 and June 29, 1996
(Unaudited)
(In thousands, except per share amounts)
NINE MONTHS
---------------------
1997 1996
------- --------
Cash flows from operating activities:
Net income $3,312 $10,730
Non-cash adjustments to net income:
Amortization 3,171 40
Depreciation 8,678 8,744
Net changes in other assets and liabilities 17,465 8,658
-------- --------
Net cash provided by operating
activities 32,626 28,172
Cash flows from investing activities:
Purchases of property, plant and equipment (5,074) (7,151)
Other (165) 298
-------- --------
Net cash used in investing activities (5,239) (6,853)
Cash flows from financing activities:
Reduction of debt (140,624) (87,778)
Proceeds from debt financing 113,573 70,350
Distribution from Rayovac International
Corporation, a domestic international
sales company -- (3,587)
Other 161 (533)
-------- --------
Net cash used in financing activities (26,890) (21,548)
-------- --------
Effect of exchange rate changes on cash and
cash equivalents 4 (12)
-------- --------
Net increase (decrease) in cash and
cash equivalents 501 (241)
Cash and cash equivalents, beginning of period 4,255 2,431
-------- --------
Cash and cash equivalents, end of period $4,756 $2,190
======== ========
See accompanying notes which are an integral part of these
financial statements.
RAYOVAC CORPORATION
Notes to Condensed Consolidated Financial Statements (Unaudited)
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 (all of which are
normal and recurring in nature) necessary to present fairly the financial
position of the Company at June 29, 1997, results of operations for the
three month and nine month periods ended June 29, 1997, and June 29, 1996,
and cash flows for the nine month periods ended June 29, 1997, and June 29,
1996. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such SEC
rules and regulations.
The condensed consolidated balance sheet at September 30, 1996, has been
derived from the annual audited financial statements. These condensed
consolidated financial statements should be read in conjunction with the
audited financial statements and notes thereto as of September 30, 1996,
and interim financial statements filed.
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 uses interest rate swaps to manage its interest rate risk. The
net amounts to be paid or received under interest rate swap agreements
designated as hedges 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 counter-parties are
included in accrued liabilities or accounts receivable.
The Company enters into forward foreign exchange contracts relating to the
anticipated settlement in local currencies of intercompany purchases and
sales. The contracts are marked to market, and the related adjustment is
recognized in other (income) expense. The related amounts payable to, or
receivable from, the counter-parties are included in accounts payable or
accounts receivable.
The Company is exposed to risk from fluctuating prices for commodities used
in the manufacturing process. The Company hedges some of this risk through
the use of commodity calls and puts. The Company is buying calls, which
allow the Company to purchase a specified quantity of zinc through a
specified date for a fixed price, and writing puts, which allow the buyer
to sell to the Company a specified quantity of zinc through a specified
date at a fixed price. The maturity of, and the quantities covered by, the
contracts highly correlate to the Company's anticipated purchases of the
commodity. The cost of the calls, and the premiums received from the puts,
are amortized over the life of the agreements and are recorded in cost of
goods sold, along with the effect of the put and call agreements.
2 INVENTORIES
Inventories consist of the following (in thousands):
June 29,1997 Sept. 30, 1996
Raw material $16,735 $21,325
Work-in-process 16,627 19,622
Finished goods 18,754 29,174
-------- --------
$52,116 $70,121
======= =======
3 COMMITMENTS AND CONTINGENCIES
The Company has entered into agreements to purchase certain equipment and
to pay annual royalties. In a December 1991 agreement, the Company
committed to pay annual royalties of $1,500,000 for the first five years,
beginning in 1993, plus $500,000 for each year thereafter, as long as the
related equipment patents are enforceable (2012). In a March 1994
agreement, the Company committed to pay annual royalties of $500,000 for
five years beginning in 1995. Additionally, the Company has committed to
purchase tooling of $2,539,000 related to this equipment, $345,000 for
other tooling at unspecified dates in the future, and $200,000 of manganese
ore by March 1998.
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 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 $1.7 million, which may result from
resolution of these matters, will not have a material adverse effect on the
financial condition, liquidity or cash flows of the Company.
4 OTHER SPECIAL CHARGES
During the previous quarter, the Company recorded a pre-tax charge of
$1,751,000 related to the closing of certain manufacturing and distribution
operations. The charge includes severance, out-placement services, other
employee benefits and the reduction in carrying value of certain equipment.
Additional expenses of $226,000 related to these closings were recognized
in the current quarter.
5 SUBSEQUENT EVENTS
On August 1, 1997, the Company issued 340,819 shares of Common Stock, $0.01
par value for $6.01 per share, to certain members of management pursuant to
the exercise of option granted under the 1997 Stock Option Plan. In
addition, on the same date, the Company funded a rabbi trust under its
Deferred Compensation Plan with an aggregate of 160,049 shares of the $0.01
par value Common Stock. The proceeds of the exercise of the options were
used to redeem a like number of shares from existing shareholders at $6.01
per share.
6 GUARANTOR SUBSIDIARY
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 Subsidiary
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
Subsidiary are not presented because management has determined that such
financial statements would not be material to investors.
RAYOVAC CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
As of June 29, 1997
(Unaudited)
(In thousands)
-ASSETS-
Current assets:
Cash and cash equivalents $4,111 $49 $596 $ -- $4,756
Receivables 56,874 501 16,324 (7,406) 66,293
Inventories 40,704 -- 12,360 (948) 52,116
Prepaid expenses and other 11,373 179 1,423 -- 12,975
-------- ------- ------- -------- --------
Total current assets 113,062 729 30,703 (8,354) 136,140
Property, plant and equipment, net 59,423 -- 4,984 -- 64,407
Deferred charges and other 18,182 -- 643 (1,332) 17,493
Investment in subsidiaries 15,140 14,785 -- (29,925) --
-------- ------- ------- -------- --------
Total assets $205,807 $15,514 $36,330 $(39,611) $218,040
======== ======= ======= ======== ========
-LIABILITIES AND SHAREHOLDERS' DEFICIT-
Current liabilities:
Current maturities of long-term debt $5,500 $ -- $3,306 $ -- $8,806
Accounts payable 32,139 163 12,877 (7,340) 37,839
Accrued liabilities:
Wages, benefits and other 29,392 5 4,550 (653) 33,294
Recapitalization and other special
charges 5,491 -- 253 -- 5,744
-------- ------- ------- -------- --------
Total current liabilities 72,522 168 20,986 (7,993) 85,683
Long-term debt, net of current maturities 197,250 -- 559 -- 197,809
Employee benefit obligations, net of
current portion 14,268 -- -- -- 14,268
Other 1,291 206 -- -- 1,497
Shareholders' deficit:
Common stock 500 -- 12,072 (12,072) 500
Additional paid-in capital 15,974 3,525 750 (4,275) 15,974
Foreign currency translation adjustment 2,608 2,608 2,608 (5,216) 2,608
Note receivable officer/shareholder (715) -- -- -- (715)
Retained earnings 30,148 9,007 (645) (10,055) 28,455
-------- ------- ------- -------- --------
Less treasury stock (128,039) -- -- -- (128,039)
-------- ------- ------- -------- --------
Total shareholders' deficit (79,524) 15,140 14,785 (31,618) (81,217)
-------- ------- ------- -------- --------
Total liabilities and
shareholders' deficit $205,807 $15,514 $36,330 $(39,611) $218,040
======== ======= ======= ======== ========
RAYOVAC CORPORATION
Condensed Consolidated Statements of Operations
For the three-month period ended June 29, 1997
(Unaudited)
(In thousands)
Guarantor Nonguarantor Consolidated
Parent Subsidiary Subsidiaries Eliminations Total
------ ---------- ------------ ------------ -----
Net sales $79,017 $ -- $17,190 $(7,200) $89,007
Cost of goods sold 47,745 -- 11,676 (7,204) 52,217
------- ---- ------- ------- -------
Gross profit 31,272 -- 5,514 4 36,790
Selling 16,178 -- 3,200 -- 19,378
General and administrative 6,279 (188) 1,770 (529) 7,332
Research and development 1,351 -- -- -- 1,351
Other special charges 226 -- -- -- 226
------- ---- ------- ------- -------
Total operating expenses 24,034 (188) 4,970 (529) 28,287
Income from operations 7,238 188 544 533 8,503
Other expense:
Interest expense 5,345 -- 93 -- 5,438
Equity in profit of subsidiary (638) (507) -- 1,145 --
Other expense (124) (14) 31 -- (107)
------- ---- ------- ------- -------
4,583 (521) 124 1,145 5,331
Income before income taxes 2,655 709 420 (612) 3,172
Income taxes 536 71 (87) -- 520
------- ---- ------- ------- -------
Net income $2,119 $638 $507 $(612) $2,652
======= ==== ======= ======= =======
RAYOVAC CORPORATION
Condensed Consolidated Statements of Operations
For the nine-month period ended June 29, 1997
(Unaudited)
(In thousands)
Guarantor Nonguarantor Consolidated
Parent Subsidiary Subsidiaries Eliminations Total
------ ---------- ------------ ------------ -----
Net sales $260,666 $ -- $58,246 $(19,761) $299,151
Cost of goods sold 158,306 -- 39,827 (19,774) 178,359
-------- ------ ------- -------- --------
Gross profit 102,360 -- 18,419 13 120,792
Selling 55,302 -- 9,938 -- 65,240
General and administrative 18,320 (595) 3,528 1,346 22,599
Research and development 4,781 -- -- -- 4,781
Other special charges 3,477 -- 1,463 -- 4,940
-------- ------ ------- -------- --------
Total operating expenses 81,880 (595) 14,929 1,346 97,560
Income from operations 20,480 595 3,490 (1,333) 23,232
Other expense:
Interest expense 18,484 -- 400 -- 18,884
Equity in profit of subsidiary (2,166) (1,768) -- 3,934 --
Other expense (651) (17) 875 -- 207
-------- ------ ------- -------- --------
15,667 (1,785) 1,275 3,934 19,091
Income before income taxes 4,813 2,380 2,215 (5,267) 4,141
Income taxes 821 214 447 (653) 829
-------- ------ ------- -------- --------
Net income $3,992 $2,166 $1,768 $(4,614) $3,312
======== ====== ======= ======== ========
RAYOVAC CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the nine-month period ended June 29, 1997
(Unaudited)
(In thousands)
Guarantor Nonguarantor Consolidated
Parent Subsidiary Subsidiaries Eliminations Total
------ ---------- ------------ ------------ -----
Net cash provided by operating activities $31,134 $(8) $1,500 $ -- $32,626
Cash flows from investing activities:
Purchases of property, plant and equipment (4,585) -- (489) -- (5,074)
Other (165) -- -- -- (165)
-------- ---- ------ ----- --------
Net cash used in investing activities (4,750) -- (489) -- (5,239)
Cash flows from financing activities:
Reduction of debt (134,639) -- (5,985) -- (140,624)
Proceeds from debt financing 108,900 -- 4,673 -- 113,573
Other 483 -- (322) -- 161
-------- ---- ------ ----- --------
Net cash used in financing activities (25,256) -- (1,634) -- (26,890)
-------- ---- ------ ----- --------
Effect of exchange rate changes on cash and
cash equivalents -- -- 4 -- 4
-------- ---- ------ ----- --------
Net increase (decrease) in cash and
cash equivalents 1,128 (8) (619) -- 501
Cash and cash equivalents, beginning of period 2,983 57 1,215 -- 4,255
-------- ---- ------ ----- --------
Cash and cash equivalents, end of period $4,111 $49 $596 $ -- $4,756
======== ==== ====== ===== ========
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Fiscal Quarter and Nine Months Ended June 29, 1997 Compared to
Fiscal Quarter and Nine Months Ended June 29, 1996
Management's Discussion and Analysis of Financial Condition and Results of
Operations, with the exception of historical matters, contains forward-looking
statements (such as statements including the terms "believe," "expect,"
"anticipate," and similar concepts) which involve risks and uncertainties.
Actual results may differ materially from these statements as a result of
various factors, including those discussed herein.
Net Sales. The net sales of Rayovac Corporation (the "Company") were $89.0
million in the fiscal quarter ended June 29, 1997, (the "1997 Fiscal Quarter"),
a decrease of $2.9 million, or 3.2%, from approximately $91.9 million in the
fiscal quarter ended June 29, 1996 (the "1996 Fiscal Quarter"), primarily due to
decreased sales of general battery products.
For the nine months ended June 29, 1997, net sales were approximately $299.2
million, an increase of $0.4 million, or 0.1%, from approximately $298.8 million
for the nine months ended June 29, 1996. Decreases in sales of general battery
products were offset by increased sales of battery powered lighting devices and
specialty battery products.
Gross Profit. Gross profit increased $0.2 million, or 0.5%, to
approximately $36.8 million in the 1997 Fiscal Quarter, from approximately $36.6
million in the 1996 Fiscal Quarter, primarily as a result of increased sales of
hearing aid batteries and a favorable effect on margins from a May price
increase on the alkaline segment of general battery products. Gross profit
increased as a percentage of net sales to 41.3% in the 1997 Fiscal Quarter from
39.9% in the 1996 Fiscal Quarter.
For the nine months ended June 29, 1997, gross profit increased approximately
$0.7 million, or 0.6%, to approximately $120.8 million from approximately $120.1
million for the nine months ended June 29, 1996. Gross profit increased as a
percentage of net sales to 40.4% in the nine months ended 1997 from 40.2% in the
nine months ended 1996, primarily due to improved margins on general battery
products.
Selling Expense. Selling expense increased $0.2 million, or 1.0%, to
approximately $19.4 million in the 1997 Fiscal Quarter from approximately $19.2
million in the 1996 Fiscal Quarter. Selling expense increased as a percent of
net sales to 21.8% in the 1997 Fiscal Quarter from 20.9% in the 1996 Fiscal
Quarter.
For the nine months ended June 29, 1997, selling expense decreased $4.1 million,
or 5.9%, to approximately $65.2 million from approximately $69.3 million for the
nine months ended June 29, 1996, due primarily to decreased advertising expense
partially offset by increased marketing expense. Selling expense decreased as a
percentage of net sales to 21.8% in the nine months ended 1997 from 23.2% in the
nine months ended 1996.
General and Administrative Expense.General and administrative expense
decreased $0.3 million, or 3.9%, to approximately $7.3 million in the 1997
Fiscal Quarter from approximately $7.6 million in the 1996 Fiscal Quarter,
primarily due to a gain on the sale of excess manufacturing equipment in the
1997 Fiscal Quarter.
For the nine months ended June 29, 1997, general and administrative expense
decreased $1.8 million, or 7.4%, to approximately $22.6 million from
approximately $24.4 million for the nine months ended June 29, 1996. This
decrease occurred primarily as a result of the settlement of a lawsuit for which
the Company had accrued approximately $0.8 million in 1996 and as a result of
the equipment sale mentioned above.
Research and Development Expense. Research and development expense was
approximately $1.4 million in the 1997 Fiscal Quarter approximately equal to the
1996 Fiscal Quarter. For the nine months ended June 29, 1997, research and
development expense increased $0.7 million, or 17.1%, to approximately $4.8
million from approximately $4.1 million for the nine months ended June 29, 1996.
This increase was primarily a result of the assignment of increased development
resources to the development of an on-the-label battery tester which management
has now decided to discontinue.
Other Special Charges. In the 1997 Fiscal Quarter the Company recorded
additional charges of approximately $0.2 million in connection with the
discontinuation of certain manufacturing and distribution operations at its
North Carolina facility. For the nine months ended June 29, 1997, the Company
recorded charges of approximately $4.9 million for organizational restructuring
in the United States, the discontinuation of certain manufacturing operations in
the United Kingdom, and the discontinuation of operations in North Carolina.
Income from Operations. Income from operations was approximately $8.5
million in the 1997 Fiscal Quarter, approximately equal to the 1996 Fiscal
Quarter.
For the nine months ended June 29, 1997, income from operations increased $0.9
million, or 4.0%, to approximately $23.2 million from approximately $22.3
million for the nine months ended June 29, 1996. The Company's increased
gross profit and lower operating expenses were partially offset by the special
charges discussed under other special charges above.
Interest Expense. Interest expense in the 1997 Fiscal Quarter increased
$3.5 million to approximately $5.4 million from approximately $1.9 million in
the 1996 Fiscal Quarter as a result of increased indebtedness incurred in
connection with the recapitalization of the Company.
For the nine months ended June 29, 1997, interest expense increased $12.9
million to approximately $18.9 million from approximately $6.0 million for the
nine months ended June 29, 1996, due primarily to increased indebtedness
associated with the recapitalization and a write-off of $2.0 million of
unamortized debt issuance costs related to the senior subordinated increasing
rate notes of the Company issued in September 1996 (the "Bridge Notes").
Income before Income Taxes. Income before income taxes decreased $3.2
million, or 50.0%, to approximately $3.2 million in the 1997 Fiscal Quarter from
approximately $6.4 million in the 1996 Fiscal Quarter primarily as a result of
the increased interest expense discussed above.
For the nine months ended June 29, 1997, income before income taxes decreased
$11.7 million to approximately $4.1 million from approximately $15.8 million for
the nine months ended June 29, 1996. Higher interest expense and special charges
were partially offset by increased income from operations.
Net Income. Net income for the 1997 Fiscal Quarter decreased $1.7 million,
or 38.6%, to approximately $2.7 million from approximately $4.4 million in the
1996 Fiscal Quarter while net income per share increased 4 cents per share to 13
cents per share. The Company's effective tax rate for the 1997 Fiscal Quarter
was 16.4% compared to 32.3% for the 1996 Fiscal Quarter due primarily to an
adjustment to the tax provision related to the 1996 tax return.
For the nine months ended June 29, 1997, net income decreased $7.4 million to
approximately $3.3 million, or 16 cents per share, from approximately $10.7
million, or 22 cents per share, for the nine months ended June 29, 1996,
primarily as a result of increased interest expense and special charges
discussed above. The Company's effective tax rate for the nine months ended June
29, 1997 was 20.0% compared to 32.1% for the nine months ended June 29, 1996 due
primarily to the tax provision adjustment discussed above.
Liquidity and Capital Resources
For the nine months ended June 29, 1997, net cash provided by operating
activities increased $4.4 million to approximately $32.6 million from
approximately $28.2 million for the nine months ended June 29, 1996, primarily
as a result of reductions in working capital.
Capital expenditures during the nine months ended June 29, 1997, were
approximately $5.1 million, reflecting maintenance level spending, which allowed
the Company to use the majority of cash provided by operating activities to
reduce borrowings under its revolving credit facility.
The Company currently expects that capital expenditures for the remainder
of fiscal 1997 will be consistent with historical levels. The Company believes
that cash flow from operating activities and periodic borrowings under its
existing 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 assurance can be given in this regard. The Company's
current credit facilities include a revolving credit facility of $65.0 million
of which no amounts were borrowed at June 29, 1997, and approximately $0.6
million was utilized for outstanding letters of credit.
Impact of Recently Issued Accounting Standards
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Financial Accounting Standards No. 130, Reporting Comprehensive Income ("FAS
130"), which establishes standards for reporting and display of comprehensive
income and its components in a full set of general purpose financial statements.
All items that are required to be recognized under accounting standards as
components of comprehensive income are to be reported in a financial statement
that is displayed with the same prominence as other financial statements. FAS
130 requires that an enterprise (a) classify items of other comprehensive income
by their nature in a financial statement and (b) display the accumulated balance
of other comprehensive income separately from retained earnings and additional
paid-in-capital in the equity section of the balance sheet. FAS 130 is effective
for fiscal years beginning after December 15, 1997. Reclassification of
financial statements for earlier periods provided for comparative purposes is
required.
In June 1997, the FASB issued Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise and Related Information ("FAS 131"),
which is effective for financial statements for periods beginning after December
15, 1997. FAS 131 establishes standards for the way public business enterprises
are to report information about operating segments in annual financial
statements and requires those enterprises to report selected information about
operating segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a)Exhibits
Exhibit Description
------- -----------
3.1* Restated Articles of Incorporation of the Company
3.2* Restated By-Laws of the Company
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* Registration Rights Agreement, dated as of October 17,
1996, by and among the Company, Donaldson, Lufkin &
Jenrette Securities Corporation and BA Securities, Inc.
4.3* Specimen of the Notes (included as an exhibit to Exhibit 4.1)
4.4* Credit Agreement, dated as of September 12, 1996 by and among the
Company, the lenders party thereto, Bank of America National Trust and
Savings Association ("BofA") and DLJ Capital Funding, Inc. (the "Credit
Agreement").
4.5* Amendment No. 1 to the Credit Agreement dated as of October 23, 1996.
4.6* The Security Agreement dated as of September 12, 1996 by and among
the Company, ROV Holding, Inc. and BofA.
4.7* The Company Pledge Agreement dated as of September 12, 1996 by and
between the Company and BofA.
4.8 Shareholders Agreement dated as of September 12, 1996,
by and among the Company and the shareholders of the
Company referred to therein.
4.9 Amendment to Rayovac Shareholders Agreement dated 1 August 1997 by
and among the Company and the shareholders of the Company referred
to therein.
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* Employment Agreement, dated as of September 12, 1996, by
and between the Company and David A. Jones, including
the Full Recourse Promissory Note, dated September 12,
1996 by David A. Jones in favor of the Company.
10.4* Severance Agreement by and between Company and Trygve Lonnebotn.
10.5* Severance Agreement by and between Company and Kent J. Hussey.
10.6* Severance Agreement by and between Company and Roger F. Warren.
10.7 Severance Agreement by and between Company and Stephen P. Shanesy.
10.8 Severance Agreement by and between Company and Merrell M. Tomlin.
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 Rayovac Corporation 1996 Stock Option Plan.
10.12 Rayovac Corporation 1997 Stock Option Plan.
27 Financial Data Schedule
* Incorporated by reference to the Company's Registration Statement on
Form S-1 (Registration No. 333-17895) filed with the Securities and
Exchange Commission.
(b) The following reports on Form 8-K were filed during the fiscal quarter
ended June 29, 1997:
Form 8-K regarding change in registrant's certifying accountant filed with
the Securities and Exchange Commission on June 11, 1997.
Form 8-K/A regarding change in registrant's certifying accountant filed
with the Securities and Exchange Commission on June 20, 1997.
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: August 13, 1997
RAYOVAC CORPORATION
By /s/ Kent J. Hussey
__________________________
Kent J. Hussey
Chief Financial Officer
By /s/ James A. Broderick
__________________________
James A. Broderick
Vice President