UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 29, 1997
---------------------
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
----------------------- -------------
(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
----------------------------------------------------
(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 May 12, 1997, the most recent practicable date, was 20,581,431.
<PAGE>
PART I. FINANCIAL INFORMATION
-----------------------------
Item 1. Financial Statements
- -----------------------------
RAYOVAC CORPORATION
Condensed Consolidated Balance Sheets
As of March 29, 1997 and September 30, 1996
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
-ASSETS-
March 29, 1997 September 30, 1996
-------------- ------------------
(Unaudited) (Audited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $9,150 $4,255
Receivables 55,162 66,476
Inventories 51,539 70,121
Prepaid expenses and other 13,292 14,822
-------- --------
Total current assets 129,143 155,674
Property, plant and equipment, net 64,681 69,397
Deferred charges and other 17,435 20,177
-------- --------
Total assets $211,259 $245,248
======== ========
-LIABILITIES AND SHAREHOLDERS' DEFICIT-
Current liabilities:
Current maturities of long-term debt $6,990 $8,818
Accounts payable 32,965 46,921
Accrued liabilities:
Wages and benefits and other 32,967 21,798
Recapitalization and other
special charges 7,874 14,942
-------- --------
Total current liabilities 80,796 92,479
Long-term debt, net of current maturities 199,525 224,845
Employee benefit obligations, net of
current portion 13,562 12,138
Other 1,461 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 2,392 1,689
Note receivable officer/shareholder (715) (500)
Retained earnings 25,803 25,143
-------- --------
43,954 42,802
Less treasury stock, at cost, 29,419 shares and
29,530 shares, respectively (128,039) (128,522)
-------- --------
Total shareholders' deficit (84,085) (85,720)
-------- --------
Total liabilities and
shareholders' deficit $211,259 $245,248
======== ========
</TABLE>
See accompanying notes which are an integral part of these statements.
<PAGE>
RAYOVAC CORPORATION
Condensed Consolidated Statements of Operations
For the three-month and six month periods ended March 29, 1997 and
March 30, 1996 (Unaudited)
(In thousands, except per share amounts)
THREE MONTHS SIX MONTHS
------------ ----------
1997 1996 1997 1996
---- ---- ---- ----
Net sales $80,140 $76,924 $210,144 $206,876
Cost of goods sold 47,123 45,891 126,142 123,379
------- ------- -------- --------
Gross profit 33,017 31,033 84,002 83,497
Selling 19,100 19,370 45,862 50,174
General and administrative 7,663 8,126 15,267 16,806
Research and development 1,520 1,320 3,430 2,649
Other special charges 1,751 -- 4,714 --
------- ------- -------- --------
Total operating expenses 30,034 28,816 69,273 69,629
Income from operations 2,983 2,217 14,729 13,868
Other expense:
Interest expense 5,472 1,946 13,446 4,112
Other expense 300 171 314 399
------- ------- -------- --------
5,772 2,117 13,760 4,511
Income (loss) before income taxes (2,789) 100 969 9,357
Income tax (benefit) expense (1,069) (210) 309 2,988
------- ------- -------- --------
Net income (loss) ($1,720) $310 $660 $6,369
======= ==== ==== ======
Net income (loss) per share ($0.08) $0.01 $0.03 $0.13
======= ==== ==== ======
Weighted average shares of
common stock outstanding 20,485 49,500 20,478 49,536
======= ==== ==== ======
See accompanying notes which are an integral part of these statements.
<PAGE>
RAYOVAC CORPORATION
Condensed Consolidated Statements of Cash Flows
For the six month periods ended March 29, 1997 and March 30, 1996
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
SIX MONTHS
----------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $660 $6,368
Non-cash adjustments to net income:
Amortization 2,772 28
Depreciation 5,892 6,247
Net changes in other assets and liabilities 25,904 11,783
------- -------
Net cash provided by operating
activities 35,228 24,426
Cash flows from investing activities:
Purchases of property, plant and equipment (2,625) (4,335)
Other (215) --
------- -------
Net cash used in investing activities (2,840) (4,335)
Cash flows from financing activities:
Reduction of debt (140,004) (68,817)
Proceeds from debt financing 112,243 52,600
Distribution from Rayovac International Corporation,
a domestic international sales company -- (3,587)
Other 265 (533)
------- -------
Net cash used in financing
activities (27,496) (20,337)
------- -------
Effect of exchange rate changes on cash and cash
equivalents 3 (9)
------- -------
Net increase (decrease) in cash
equivalents 4,895 (255)
Cash and cash equivalents, beginning of period 4,255 2,431
------- -------
Cash and cash equivalents, end of period $9,150 $2,176
======= =======
</TABLE>
See accompanying notes which are an integral part of these statements.
<PAGE>
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 March 29, 1997, results of operations for the
three month and six month periods ended March 29, 1997, and March 30, 1996,
and cash flows for the six month periods ended March 29, 1997, and March
30, 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.
2 INVENTORIES
Inventories consist of the following (in thousands):
Mar. 29,1997 Sept. 30, 1996
------------ --------------
Raw material $17,083 $21,325
Work-in-process 18,028 19,622
Finished goods 16,428 29,174
------- -------
$51,539 $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 $3,010,000 related to this equipment at an unspecified
date in the future and $290,000 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 $1.8 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.
<PAGE>
4 RELATED PARTY TRANSACTIONS
On March 17, 1997, the Company sold 97,951 shares of Common Stock from
treasury at $4.39 per share to certain officers of the Company. The
purchase price of approximately $430,000 was satisfied equally in cash and
notes receivable. The notes which are payable in 5 years, bear an interest
rate of 8%. Since the proceeds were used to purchase common stock of the
Company, the notes have been recorded as a reduction in shareholders'
equity. The Company also sold 13,000 shares of common stock from treasury
at $4.39 per share to other members of management for cash.
5 OTHER SPECIAL CHARGES
During the 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.
6 STOCK OPTION PLANS
Pursuant to the provision of the Rayovac Corporation Stock Option Plan (the
"Plan"), the Company granted options to purchase 835,788 shares of common
stock at $4.39 per share to certain employees.
7 GUARANTOR SUBSIDIARY
The following condensed consolidating financial data illustrates the
composition of the consolidated financial statements. Investments in
subsidiaries are accounted for by the Company on an unconsolidated basis
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 intercompany 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.
<PAGE>
RAYOVAC CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
As of March 29, 1997
(Unaudited)
(In thousands, except per sahre amounts)
<TABLE>
<CAPTION>
-ASSETS-
Guarantor Nonguarantor Consolidated
Parent Subsidiary Subsidiaries Eliminations Total
------ ---------- ------------------------- -----
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $8,202 $49 $899 -- $9,150
Receivables 47,691 298 15,405 (8,232) 55,162
Inventories 39,958 -- 12,458 (877) 51,539
Prepaid expenses and other 11,968 179 1,145 -- 13,292
-------- ------- ------- -------- --------
Total current assets 107,819 526 29,907 (9,109) 129,143
Property, plant and equipment, net 60,145 -- 5,047 (511) 64,681
Deferred charges and other 18,142 -- 648 (1,355) 17,435
Investment in subsidiaries 14,286 14,063 -- (28,348) --
-------- ------- ------- -------- --------
Total assets $200,392 $14,589 $35,602 ($39,324) $211,259
======== ======= ======= ======== ========
-LIABILITIES AND SHAREHOLDERS' DEFICIT-
Current liabilities:
Current maturities of long-term debt $5,000 -- $1,990 -- $6,990
Accounts payable 27,154 53 13,854 (8,096) 32,965
Accrued liabilities:
Wages and benefits and other 29,443 44 4,133 (653) 32,967
Recapitalization and other
special charges 6,962 -- 912 -- 7,874
-------- ------- ------- -------- --------
Total current liabilities 68,559 97 20,889 (8,749) 80,796
Long-term debt, net of current maturities 198,875 -- 650 -- 199,525
Employee benefit obligations, net of
current portion 13,562 -- -- -- 13,562
Other 1,255 206 -- -- 1,461
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 2,392 2,392 2,392 (4,784) 2,392
Note receivable officer/shareholder (715) (715)
Retained earnings 28,029 8,369 (1,152) (9,444) 25,803
-------- ------- ------- -------- --------
Less treasury stock (128,039) -- -- -- (128,039)
-------- ------- ------- -------- --------
Total shareholders'
deficit (81,859) 14,286 14,063 (30,575) (84,085)
-------- ------- ------- -------- --------
Total liabilities and
shareholders'
deficit $200,392 $14,589 $35,602 ($39,324) $211,259
======== ======= ======= ======== ========
</TABLE>
<PAGE>
RAYOVAC CORPORATION
Condensed Consolidating Statements of Operations
For the three-month period ended March 29, 1997
(Unaudited)
(In thousands, except as per share amount)
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiary Subsidiaries Eliminations Total
------ ---------- ------------ ------------ -----
<S> <C> <C> <C> <C> <C>
Net sales $67,545 -- $17,379 ($4,784) $80,140
Cost of goods sold 40,126 -- 11,785 (4,788) 47,123
------- ------ ------- -------- -------
Gross profit 27,419 -- 5,594 4 33,017
Selling 16,000 -- 3,100 -- 19,100
General and administrative 6,038 (217) (28) 1,870 7,663
Research and development 1,520 -- -- -- 1,520
Other special charges 1,751 -- -- -- 1,751
------- ------ ------- -------- -------
Total operating expenses 25,309 (217) 3,072 1,870 30,034
Income from operations 2,110 217 2,522 (1,866) 2,983
Other expense:
Interest expense 5,334 -- 138 -- 5,472
Equity in profit of
subsidiary (1,378) (1,247) -- 2,625 --
Other expense (187) 14 473 -- 300
------- ------ ------- -------- -------
Income before income taxes (1,659) 1,450 1,911 (4,491) (2,789)
Income taxes (1,152) 72 665 (653) (1,069)
------- ------ ------- -------- -------
Net income ($507) $1,378 $1,247 ($3,838) ($1,720)
======= ====== ====== ======= ======
</TABLE>
<PAGE>
RAYOVAC CORPORATION
Condensed Consolidating Statements of Operations
For the six-month period ended March 29, 1997
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiary Subsidiaries Eliminations Total
------ ---------- ------------ ------------ -----
<S> <C> <C> <C> <C> <C>
Net sales $181,649 $-- $41,056 ($12,561) $210,144
Cost of goods sold 110,561 -- 28,151 (12,570) 126,142
-------- ------ ------ ------- -------
Gross profit 71,088 -- 12,905 9 84,002
Selling 39,124 -- 6,738 -- 45,862
General and administrative 12,041 (407) 1,758 1,875 15,267
Research and development 3,430 -- -- -- 3,430
Other special charges 3,251 -- 1,463 -- 4,714
-------- ------ ------ ------- -------
Total operating expenses 57,846 (407) 9,959 1,875 69,273
Income from operations 13,242 407 2,946 (1,866) 14,729
Other expense:
Interest expense 13,139 -- 307 -- 13,446
Equity in profit of
subsidiary (1,528) (1,262) -- 2,790 --
Other expense (527) (3) 844 -- 314
-------- ------ ------ ------- -------
Income before income taxes 2,158 1,672 1,795 (4,656) 969
Income taxes 285 144 534 (653) 309
-------- ------ ------ ------- -------
Net income $1,873 $1,528 $1,262 ($4,003) $660
======== ====== ====== ======= =======
</TABLE>
<PAGE>
RAYOVAC CORPORATION AND SUBSIDIARIES
Condensed Consolidating Statements of Cash Flows
For the six-month period ended March 29, 1997
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiary Subsidiaries Eliminations Total
------ ---------- ------------ ------------ -----
<S> <C> <C> <C> <C> <C>
Net cash provided by operating activities $32,960 ($8) $2,787 ($511) $35,228
Cash flows from investing activities:
Purchases of property, plant and equipment (2,814) -- (322) 511 (2,625)
Other (215) -- (215)
------- --- ------ ----- -------
Net cash used in investing activities (3,029) -- (322) 511 (2,840)
Cash flows from financing activities:
Reduction of debt (134,098) -- (5,906) -- (140,004)
Proceeds from debt financing 108,900 -- 3,343 -- 112,243
Other 486 -- (221) -- 265
------- --- ------ ----- -------
Net cash used in financing activities (24,712) -- (2,784) -- (27,496)
------- --- ------ ----- -------
Effect of exchange rate changes on cash and cash
equivalents -- -- 3 -- 3
------- --- ------ ----- -------
Net increase in cash and cash
equivalents 5,219 (8) (316) -- 4,895
Cash and cash equivalents, beginning of period 2,983 57 1,215 -- 4,255
------- --- ------ ----- -------
Cash and cash equivalents, end of period $ 8,202 $49 $899 -- $9,150
======= === ====== ===== =======
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------- -----------------------------------------------------------------------
Results of Operation
--------------------
Fiscal Quarter and Six Months Ended March 29, 1997 Compared to
Fiscal Quarter and Six Months Ended March 30, 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
$80.1 million in the fiscal quarter ended March 29, 1997, (the "1997 Fiscal
Quarter"), an increase of $3.2 million, or 4.2%, from approximately $76.9
million in the fiscal quarter ended March 30, 1996 (the "1996 Fiscal Quarter"),
primarily due to increased sales of general battery products and battery powered
lighting devices.
For the six months ended March 29, 1997, net sales were approximately $210.1
million, an increase of $3.2 million, or 1.5%, from approximately $206.9 million
for the six months ended March 30, 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 $2.0 million, or 6.5%, to
approximately $33.0 million in the 1997 Fiscal Quarter, from approximately $31.0
million in the 1996 Fiscal Quarter, primarily as a result of the increased sales
of battery powered lighting devices and general battery products mentioned above
and a favorable effect on margins from sales of higher margin general battery
products. Gross profit increased as a percentage of net sales to 41.2% in the
1997 Fiscal Quarter from 40.3% in the 1996 Fiscal Quarter.
For the six months ended March 29, 1997, gross profit increased approximately
$0.5 million, or 0.6%, to approximately $84.0 million from approximately $83.5
million for the six months ended March 30, 1996. Gross profit decreased as a
percentage of net sales to 40.0% in the six months ended 1997 from 40.4% in the
six months ended 1996, primarily due to decreased sales of general battery
products which were offset by increased sales of lower margin battery powered
lighting devices.
Selling Expense. Selling expense decreased $0.3 million, or 1.5%, to
approximately $19.1 million in the 1997 Fiscal Quarter from approximately $19.4
<PAGE>
million in the 1996 Fiscal Quarter due primarily to decreased advertising
expense. Selling expense decreased as a percent of net sales to 23.8% in the
1997 Fiscal Quarter from 25.2% in the 1996 Fiscal Quarter.
For the six months ended March 29, 1997, selling expense decreased $4.3 million,
or 8.5%, to approximately $45.9 million from approximately $50.2 million for the
six months ended March 30, 1996, due primarily to decreased advertising expense.
Selling expense decreased as a percentage of net sales to 21.8% in the six
months ended 1997 from 24.3% in the six months ended 1996.
General and Administrative Expense. General and administrative expense
decreased $0.4 million, or 4.9%, to approximately $7.7 million in the 1997
Fiscal Quarter from approximately $8.1 million in the 1996 Fiscal Quarter,
partially due to the reduction in work force in the previous fiscal quarter.
For the six months ended March 28, 1997, general and administrative expense
decreased $1.5 million, or 8.9%, to approximately $15.3 million from
approximately $16.8 million for the six months ended March 30, 1996. This
decrease occurred primarily as a result of the settlement of a law suit for
which the Company had accrued approximately $0.8 million in the six months ended
1996.
Research and Development Expense. Research and development expense
increased $0.2 million, or 15.4%, to approximately $1.5 million in the 1997
Fiscal Quarter from approximately $1.3 million in the 1996 Fiscal Quarter. For
the six months ended March 29, 1997, research and development expense increased
$0.8 million, or 30.8%, to approximately $3.4 million from approximately $2.6
million for the six months ended March 30, 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
charges of approximately $1.8 million in connection with the discontinuation of
certain manufacturing and distribution operations at its North Carolina
facility. For the six months ended March 29, 1997 the Company recorded charges
of approximately $4.7 million for organizational restructuring in the United
States and the discontinuation of certain manufacturing operations in the United
Kingdom in addition to the charges for North Carolina.
Income From Operations. Income from operations in the 1997 Fiscal
Quarter increased $0.8 million, or 36.4%, to approximately $3.0 million from
approximately $2.2 million due to increased gross profit partially offset by
special charges discussed above.
<PAGE>
For the six months ended March 29, 1997, income from operations increased $0.8
million, or 5.8%, to approximately $14.7 million from approximately $13.9
million for the six months ended March 30, 1996. The Company's increased gross
profit and lower operating expenses were partially offset by the special charges
discussed above.
Interest Expense. Interest expense in the 1997 Fiscal Quarter increased
$3.6 million to approximately $5.5 million from approximately $1.9 million in
the 1996 Fiscal Quarter as a result of increased indebtedness incurred in
connection with the recent recapitalization of the Company.
For the six months ended March 29, 1997, interest expense increased $9.3 million
to approximately $13.4 million from approximately $4.1 million for the six
months ended March 30, 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. The Company recorded a loss of
approximately $2.8 million for the 1997 Fiscal Quarter compared to a gain of
approximately $0.1 million for the 1996 Fiscal Quarter as a result of increased
gross margin, and lower operating costs which were offset by higher interest
expense and the other special charges discussed above.
For the six months ended March 29, 1997, income before income taxes decreased
$8.4 million to approximately $1.0 million from approximately $9.4 million for
the six months ended March 30, 1996. Higher interest expense and special charges
were partially offset by increased income from operations.
Net Income. For the 1997 Fiscal Quarter the Company recorded a net loss
of approximately $1.7 million, or 8 cents per share, compared to net income of
approximately $0.3 million, or 1 cent per share, for the 1996 Fiscal Quarter.
For the six months ended March 29, 1997, net income decreased $5.7 million to
approximately $0.7 million, or 3 cents per share, from approximately $6.4
million, or 13 cents per share, for the six months ended March 30, 1996,
primarily as a result of increased interest expense and special charges
discussed above. The Company's effective tax rate for the six months ended March
29, 1997 was 31.9% or approximately equal to the effective rate for the six
months ended March 30, 1996.
Liquidity and Capital Resources
For the six months ended March 29, 1997, net cash provided by operating
activities increased $10.8 million to approximately $35.2 million from
<PAGE>
approximately $24.4 million for the six months ended March 30, 1996, primarily
as a result of reductions in inventory.
Capital expenditures during the six months ended March 29, 1997, were
approximately $2.6 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.
On October 22, 1996 the Company issued $100.0 million aggregate
principal amount of its 10-1/4% Senior Subordinated Notes due 2006 (the
"Notes"), the proceeds of which were used to repay the Bridge Notes. On March
11, 1997, the Company consummated an offer to exchange its registered 10-1/4%
Series B Senior Subordinated Notes due 2006 for the Notes.
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 March 30, 1997, and approximately $0.6
million was utilized for outstanding letters of credit.
The Company entered into an interest rate swap agreement with a
notional amount of $62.5 million, effective October 9, 1996. This agreement
terminates on October 12, 1999, and fixes the rate on such notional amount at
6.16%. The floating rate for the initial period was approximately 5.5%. During
the 1997 Fiscal Quarter the Company incurred approximately $0.1 million of
interest expense in connection with this agreement.
On March 17, 1997, the Company sold 97,951 shares of Common Stock from
treasury at $4.39 per share to certain officers of the Company. The purchase
price of approximately $0.4 million was satisfied equally in cash and notes
receivable. The notes which are payable in 5 years, bear an interest rate of 8%.
Since the proceeds were used to purchase common stock of the Company, the notes
have been recorded as a reduction in shareholders' equity. The Company also sold
13,000 shares of common stock from treasury at $4.39 per share to other members
of management for cash.
Impact of Recently Issued Accounting Standards
In October 1996 the American Institute of Certified Public Accountants
issued Statement of Position 96-1, "Environmental Remediation Liabilities" (the
"Statement"), effective for fiscal years beginning after December 15, 1996. The
<PAGE>
Statement provides additional guidance on the measurement and accounting for the
costs associated with environmental remediation. Adoption of the accounting
standard is not expected to have a material effect on the Company's financial
position.
In February 1997 the Financial Accounting Standards Board issued
Financial Accounting Standard No. 128, Earnings Per Share ("FAS 128"). FAS 128
will be effective for periods ending after December 15, 1997, and specifies the
computation, presentation , and disclosure requirements for earnings per share.
Adoption of this accounting standard is not expected to have a material effect
on the earnings per share computations of the Company assuming the current
capital structure.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
<S> <C>
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").*
<PAGE>
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.*
27 Financial Data Schedule
</TABLE>
* Incorporated by reference from Amendment No. 3 to the Company's
Registration Statement on Form S-1 (Registration No. 333-17895) filed with
the Securities and Exchange Commission on February 7, 1997.
(b) Reports on Form 8-K. The Company did not file any reports on Form 8-K
during the 1997 Fiscal Quarter.
<PAGE>
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 12, 1997
RAYOVAC CORPORATION
By /s/ Kent J. Hussey
-----------------------------
Kent J. Hussey
Chief Financial Officer
By /s/ James A. Broderick
-----------------------------
James A. Broderick
Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-1996
<PERIOD-END> MAR-29-1997
<CASH> 9,150
<SECURITIES> 0
<RECEIVABLES> 56,012
<ALLOWANCES> 850
<INVENTORY> 51,539
<CURRENT-ASSETS> 129,143
<PP&E> 140,258
<DEPRECIATION> 75,577
<TOTAL-ASSETS> 211,259
<CURRENT-LIABILITIES> 80,796
<BONDS> 206,515
0
0
<COMMON> 500
<OTHER-SE> (84,585)
<TOTAL-LIABILITY-AND-EQUITY> (211,259)
<SALES> 80,140
<TOTAL-REVENUES> 80,140
<CGS> 0
<TOTAL-COSTS> 47,123
<OTHER-EXPENSES> 30,247
<LOSS-PROVISION> 87
<INTEREST-EXPENSE> 5,472
<INCOME-PRETAX> (2,789)
<INCOME-TAX> (1,069)
<INCOME-CONTINUING> (1,720)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,720)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> 0
</TABLE>
