<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
August 9, 1999
--------------------------------------------------
(Date of earliest event reported)
Rayovac Corporation
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Wisconsin 001-13615 22-2423556
- -------------------------- ---------------------------- ------------------------
(State of (Commission File No.) (IRS Employer
Incorporation) Identification No.)
</TABLE>
601 Rayovac Drive, Madison, Wisconsin 53711
- --------------------------------------------------------------------------------
(Address of principal executive offices, including zip code)
(608) 275-3340
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
Page 1 of 4
<PAGE>
In this first amendment to the Company's Form 8-K, the Company is providing the
information required by Item 7 of that form.
Item 7. FINANCIAL STATEMENTS, PRO FORMA INFORMATION AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED. The following financial
statements are included as Exhibit 99.1 and 99.2 to this report:
Audited Consolidated Financial Statements of ROV Limited and
Subsidiaries:
Report of Independent Certified Public Accountants
Consolidated Balance Sheets at December 31, 1998 and 1997
Consolidated Statements of Operations for the years ended
December 31, 1998, 1997 and 1996
Consolidated Statements of Changes in Shareholders' Equity
for the years ended December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996.
Notes to Consolidated Financial Statements
Unaudited Condensed Consolidated Financial Statements of ROV
Limited and Subsidiaries:
Condensed Consolidated Balance Sheets at June 25, 1999 and
December 31, 1998
Condensed Consolidated Statements of Operations for the
periods from January 1, 1999 through June 25, 1999 and
from January 1, 1998 through June 26, 1998
Condensed Consolidated Statements of Operations for the
periods from September 25, 1998 through June 25, 1999 and
from September 26, 1997 through June 26, 1998
Condensed Consolidated Statements of Cash Flows for the
periods from January 1, 1999 through June 25, 1999 and
from January 1, 1998 through June 26, 1998
Condensed Consolidated Statements of Cash Flows for the
periods from September 25, 1998 through June 25, 1999 and
from September 26, 1997 through June 26, 1998
Notes to Condensed Consolidated Financial Statements
Page 2 of 4
<PAGE>
(b) PRO FORMA FINANCIAL INFORMATION. The following unaudited pro forma
financial information with respect to the Registrant is included as
Exhibit 99.3 to this report:
Unaudited Pro Forma Condensed Consolidated Balance Sheet
as of July 4, 1999
Unaudited Pro Forma Condensed Consolidated Statements of
Operations for the Nine Months Ended July 4, 1999 and Year
Ended September 30, 1998
c) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
<S> <C>
2.1 Share Purchase Agreement made as of June 11, 1999, by
and among the Company, Vidor Battery Company, Rayovac
Latin America, Ltd., substantially all 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
(previously filed).
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
(previously filed).
4.11 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, N.A. as
Administrative Agent (previously filed).
4.12 Second Supplemental Indenture dated as August 6, 1999
by and among the Company, ROV Holding Inc., Rovcal,
Inc., Vidor Battery Company and HSBC Bank USA
(previously filed).
99.1 Consolidated Financial Statements of ROV Limited and
Subsidiaries (with report of independent certified
public accountants thereon).
99.2 Unaudited Condensed Consolidated Financial Statements
of ROV Limited and Subsidiaries.
99.3 Unaudited Pro Forma Condensed Consolidated Financial
Statements.
</TABLE>
Page 3 of 4
<PAGE>
SIGNATURE
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 hereunto duly authorized.
RAYOVAC CORPORATION
Date: October 25, 1999 By:
/S/ Randall J. Steward
------------------------
Name: Randall J. Steward
Title: Executive Vice President of
Administration and Chief Financial
Officer
Page 4 of 4
<PAGE>
EXHIBIT 99.1
ROV LIMITED AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 1998, 1997 and 1996
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Pages
Report of Independent Certified Public Accountants 1
Financial Statements:
Consolidated Balance Sheets 2
Consolidated Statements of Operations 3
Consolidated Statements of Changes in Shareholders' Equity 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6-16
<PAGE>
[LETTERHEAD OF PRICEWATERHOUSECOOPERS]
Report of Independent Certified Public Accountants
To the Board of Directors and Shareholders
of ROV Limited
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, changes in shareholders' equity and cash
flows present fairly, in all material respects, the financial position of ROV
Limited and its subsidiaries at December 31, 1998 and 1997, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
March 31, 1999, except for Notes 6 and 13,
as to which the date is June 11, 1999
1
<PAGE>
ROV LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1998 and 1997
(in thousands of U.S. dollars, except par value and share amounts)
1998 1997
------- -------
ASSETS
Current assets:
Cash and cash equivalents $12,125 $ 6,961
Short-term investments 1,500 1,604
Accounts receivable, net of allowances of $1,044 in
1998 and $637 in 1997 18,380 20,058
Inventories 14,715 11,617
Prepaid expenses and other current assets 968 1,384
------- -------
Total current assets 47,688 41,624
Property, plant and equipment, net 14,011 12,969
Other assets 1,359 1,256
------- -------
Total assets $63,058 $55,849
======= =======
LIABILITIES, PREFERRED STOCK AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,002 $ 9,135
Accrued expenses and other current liabilities 5,885 3,438
Loans payable, current portion 7,658 4,672
Deferred income taxes, current 566 703
------- -------
Total current liabilities 22,111 17,948
Accrued service and severance indemnities 3,255 2,859
Loans payable, long term 19 43
Deferred income taxes, noncurrent 130 270
Other liabilities 479 813
Minority interest in subsidiaries 3,877 3,282
------- -------
Total liabilities 29,871 25,215
------- -------
Mandatorily redeemable preferred stock 2,759 3,128
------- -------
Commitments and contingencies (Notes 8, 9, 11 and 13)
Shareholders' equity:
Common stock:
Class A; $66.67 par value; 90,000 shares authorized;
79,200 shares issued and outstanding 5,280 5,280
Class E; $5.00 par value; 1,200,000 shares authorized;
706,757 shares issued and outstanding 3,534 3,534
Retained earnings 21,614 18,692
------- -------
Total shareholders' equity 30,428 27,506
------- -------
Total liabilities, preferred stock and
shareholders' equity $63,058 $55,849
======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
2
<PAGE>
ROV LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended December 31, 1998, 1997 and 1996
(in thousands of U.S. dollars, except share and per share amounts)
1998 1997 1996
-------- -------- --------
Net sales $ 97,057 $ 83,842 $ 70,177
-------- -------- --------
Cost and operating expenses:
Cost of sales 58,515 50,311 43,469
Selling and distribution 10,784 10,424 8,157
Advertising and promotion 2,905 1,740 1,629
Administrative and general 10,432 8,639 8,249
-------- -------- --------
Total costs and operating expenses 82,636 71,114 61,504
-------- -------- --------
Operating income 14,421 12,728 8,673
-------- -------- --------
Other income (expenses):
Interest income 942 286 482
Interest expense (1,213) (600) (885)
Commission, royalty and technical assistance 171 491 653
Currency translation and devaluation (1,583) (14) (693)
Other (525) (471) (178)
-------- -------- --------
Total other income (expenses), net (2,208) (308) (621)
-------- -------- --------
Income before income taxes and minority
interest in earnings of subsidiaries 12,213 12,420 8,052
Provision for income taxes 3,131 3,027 2,373
-------- -------- --------
Income before minority interest in earnings
of subsidiaries 9,082 9,393 5,679
Minority interest in earnings of subsidiaries (1,878) (1,585) (1,201)
-------- -------- --------
Net income $ 7,204 $ 7,808 $ 4,478
======== ======== ========
Basic and diluted earnings par share $ 8.66 $ 9.51 $ 5.14
-------- -------- --------
Weighted average common shares outstanding -
basic and diluted 785,957 785,957 785,957
======== ======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
ROV LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
for the years ended December 31, 1998, 1997 and 1996
(in thousands of U.S. dollars, except share and per share amounts)
<TABLE>
<CAPTION>
Common Stock
-----------------------------------------
Class A Class E
------------------- ------------------- Retained
Shares Amount Shares Amount Earnings Totals
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1995 79,200 $ 5,280 706,757 $ 3,534 $ 11,702 $ 20,516
Net income -- -- -- -- 4,478 4,478
Dividends:
Preferred stock - Class G -- -- -- -- (437) (437)
Common stock ($2.88 per share):
Class A -- -- -- -- (228) (228)
Class E -- -- -- -- (2,036) (2,036)
-------- -------- -------- -------- -------- --------
Balances at December 31, 1996 79,200 5,280 706,757 3,534 13,479 22,293
Net income -- -- -- -- 7,808 7,808
Dividends:
Preferred stock - Class G -- -- -- -- (333) (333)
Common stock ($2.88 per share):
Class A -- -- -- -- (228) (228)
Class E -- -- -- -- (2,034) (2,034)
-------- -------- -------- -------- -------- --------
Balances at December 31, 1997 79,200 5,280 706,757 3,534 18,692 27,506
Net income -- -- -- -- 7,204 7,204
Dividends:
Preferred stock - Class G -- -- -- -- (395) (395)
Common stock ($4.95 per share):
Class A -- -- -- -- (392) (392)
Class E -- -- -- -- (3,495) (3,495)
-------- -------- -------- -------- -------- --------
Balances at December 31, 1998 79,200 $ 5,280 706,757 $ 3,534 $ 21,614 $ 30,428
======== ======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
ROV LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the year's ended December 31, 1998, 1997 and 1996
(in thousands of U.S. dollars)
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 7,204 $ 7,808 $ 4,478
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,588 2,032 1,789
Gain on sale of property and equipment (114) (75) (123)
Loss from currency translation and devaluation 1,583 14 693
(Decrease) increase in deferred income taxes (277) 351 (284)
Minority interest in earnings of subsidiaries 1,878 1,585 1,201
Change in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable, net 1,049 (2,750) (963)
Inventories (3,594) (1,110) 1,550
Prepaid expenses and other current assets 415 (894) (590)
Other assets (103) 152 (140)
(Decrease) increase in:
Accounts payable (1,424) 2,920 (1,120)
Accrued expenses and other current liabilities 2,280 (49) (20)
Other liabilities 63 1,266 (148)
-------- -------- --------
Net cash provided by operating activities 11,548 11,250 6,323
-------- -------- --------
Cash flows from investing activities:
Decrease (increase) in short-term investments, net 104 (1,604) --
Purchases of property, plant and equipment (4,112) (4,132) (2,911)
Proceeds from sales of property, plant and equipment 596 767 620
-------- -------- --------
Net cash used in investing activities (3,412) (4,969) (2,291)
-------- -------- --------
Cash flows from financing activities:
Proceeds from loans 4,540 2,198 3,459
Repayment of loans (1,578) (2,411) (2,114)
Distribution to minority shareholders of subsidiaries (1,283) (1,248) (605)
Preferred stock redemptions (369) (1,931) (1,632)
Dividends paid (4,282) (2,595) (2,701)
-------- -------- --------
Cash flows used in financing activities (2,972) (5,987) (3,593)
-------- -------- --------
Net increase in cash and cash equivalents 5,164 294 439
Cash and cash equivalents at beginning of year 6,961 6,667 6,228
-------- -------- --------
Cash and cash equivalents at end of year $ 12,125 $ 6,961 $ 6,667
======== ======== ========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 997 $ 800 $ 769
======== ======== ========
Income taxes $ 2,508 $ 2,594 $ 2,057
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE>
ROV LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of U.S. dollars)
1. Operations and Organization:
ROV Limited was incorporated in 1982 under the laws of the Cayman Islands
and has investments in various companies (collectively called the
"Company"), most of which were acquired from Ray-O-Vac International
Corporation. ROV Limited's subsidiaries, which operate principally in
Mexico, Central America, South America and the Caribbean, are engaged
primarily in the manufacturing and distribution of batteries and lighting
devices. Substantially all revenues are derived from and substantially all
assets are resident in countries in which the subsidiaries operate.
2. Significant Accounting Policies:
The consolidated financial statements of the Company have been prepared in
accordance with accounting principles generally accepted in the United
States of America.
Basis of Consolidation
The consolidated financial statements include the accounts of ROV Limited
and all of its subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
Management Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting periods. The Company's management uses estimates
primarily with respect to the allowance for doubtful accounts and the
useful lives of property, plant and equipment. Actual results could differ
from those estimates.
Currency Translation
The Company considers the U.S. dollar to be the functional currency for
all of the Company's operations. Accordingly, entities which maintain
their accounting records in currencies other than the U.S. dollar,
remeasure monetary assets and liabilities at exchange rates as of the end
of the year, and non-monetary items at historical rates. Income and
expense accounts are remeasured at the average rates in effect during the
year, except for depreciation which is reported at historical rates.
Currency translation adjustments and transaction gains or losses are
recognized in consolidated income in the year of occurrence.
6
<PAGE>
ROV LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(in thousands of U.S. dollars)
2. Significant Accounting Policies, Continued:
Cash and Cash Equivalents
The Company considers all highly liquid investments with original
maturities of three months or less when purchased to be cash equivalents.
The Company maintains cash and investments at various financial
institutions in the United States, the United Kingdom and in various other
countries where the Company's subsidiaries operate. At times, balances
maintained at these institutions may exceed their respective insured
limits.
Short-Term Investments
Short-term investments consist of time deposits and commercial paper
issued by financial institutions, maturing within one year. These
investments are classified as held-to-maturity, and are stated at cost
plus accrued income, which approximates market value.
Inventories
Inventories are stated at the lower of cost or net realizable value. Cost
is determined primarily using the average method.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Additions, renewals and
improvements are capitalized, while routine repair and maintenance costs
are expensed. Upon retirement or sale, the cost of the disposed assets and
the related accumulated depreciation are removed from the accounts and any
resulting gain or loss is included in the determination of net income.
Depreciation and amortization are provided utilizing the straight-line
method over the estimated useful lives of the assets as follows:
Buildings and improvements 20 to 30 years
Plant, machinery and equipment 5 to 15 years
Furniture and fixtures 3 to 10 years
The Company evaluates recoverability of assets to be held and used by
comparing the carrying amount of an asset to future undiscounted net cash
flows expected to be generated by the asset. If such assets are considered
to be impaired, the impairment to be recognized is measured by the amount
by which the carrying amount of the assets exceeds the fair value of the
assets. As of December 31, 1998 and 1997, no impairment charges were
considered necessary.
7
<PAGE>
ROV LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(in thousands of U.S. dollars)
2. Significant Accounting Policies, Continued:
Income Taxes
Substantially all income taxes of the Company are generated in and are
payable to the tax jurisdictions in which it does business.
The Company utilizes the asset and liability method of accounting for
income taxes. Under this method, deferred tax assets and liabilities are
determined based on the differences between the financial reporting and
tax bases of assets and liabilities and are measured using the enacted tax
laws and rates that will be in effect when the differences are expected to
reverse.
The Company's subsidiaries compute income taxes at rates in effect in the
various countries in which they operate. Earnings of these subsidiaries
may also be subject to additional income and withholding taxes when
distributed as dividends. These additional taxes are accrued currently,
except with respect to earnings which are not expected to be remitted
because they are deemed to be permanently invested.
Earnings Per Share
Earnings per share have been calculated in accordance with Statement of
Financial Accounting (SFAS) No. 128, "Earnings per Share". Basic earnings
per share are computed by dividing the earnings available to common stock
shareholders by the weighted average number of common shares outstanding.
For the years ended December 31, 1998, 1997 and 1996, there were no common
stock equivalents. Accordingly, basic and diluted earnings per share are
equivalent.
Service and Severance Indemnities
The Company fully accrues for employee service and severance indemnities
over the employment terms, as required by law in the countries in which
the Company operates.
Advertising and Promotion
All advertising and promotion costs are expensed when incurred.
Revenue Recognition
The Company recognizes revenue from product sales at the time of shipment.
Reclassifications
Certain reclassifications have been made to the prior years financial
statements to conform with the 1998 presentation.
8
<PAGE>
ROV LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(in thousands of U.S. dollars)
3. Allowance for Doubtful Accounts:
Activity in the allowance for doubtful accounts for the years ended
December 31 was as follows:
1998 1997 1996
Balance, beginning of year $ 637 $ 566 $ 326
Provision 557 394 338
Write offs (150) (336) (98)
Recoveries -- 13 --
------- ------- -------
Balance, end of year $ 1,044 $ 637 $ 566
======= ======= =======
4. Inventories:
Inventories at December 31 consisted of the following:
1998 1997
Raw materials $ 7,713 $ 7,104
Work-in-process 1,092 1,164
Finished goods 5,910 3,349
------- -------
$14,715 $11,617
======= =======
5. Property, Plant and Equipment:
Property, plant and equipment at December 31 consisted of the following:
1998 1997
Land $ 253 $ 253
Buildings and improvements 3,109 2,732
Machinery and equipment 19,623 17,533
Furniture and fixtures 2,352 2,209
Construction in progress 2,622 2,474
-------- --------
27,959 25,201
Less accumulated depreciation (13,948) (12,232)
-------- --------
$ 14,011 $ 12,969
======== ========
9
<PAGE>
ROV LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(in thousands of U.S. dollars)
6. Loans Payable:
Loans payable at December 31 are due to financial institutions by
subsidiaries, in various currencies, as follows:
1998 1997
Uncollateralized line of credit with a Mexican
bank for a total of $1,500, interest at rates
ranging from 12.4% to 13.4% per annum, maturing
from January 1999 through February 1999,
principal and interest is payable at maturity in
US dollars, maturity dates extended through July
and August 1999. $ 970 $ 500
Uncollateralized line of credit with a Mexican
bank for a total of $4,000, $2,717 payable in US
dollars at interest rates ranging from 11.4% to
12.7% per annum, maturing from January 1999
through March 1999 (extended to July through
September 1999), principal and interest payable
at maturity; $304 payable in Mexican pesos,
interest at 45.8% per annum, maturing January
1999, principal and interest due at maturity,
maturity date extended through July 1999. 3,021 2,486
Uncollateralized line of credit with a Mexican
bank for a total of $2,500, $2,050 payable in US
dollars at interest rates ranging from 11.1% to
12.4% per annum, maturing from January 1999
through March 1999 (extended to July through
September 1999), principal and interest payable
at maturity; $203 payable in Mexican pesos, at
interest rates ranging from 39.5% to 40.0% per
annum, maturing in February 1999, principal and
interest due at maturity, maturity date extended
through August 1999. 2,253 1,174
Uncollateralized line of credit with a Guatemalan
bank for a total of $292, interest at 16.0% per
annum, principal and interest payable at maturity
in Guatemalan quetzales, paid in April 1999. 249 32
Uncollateralized line of credit with a Guatemalan
bank for a total of $380, interest at 14.5% per
annum, principal and interest payable at maturity
in Guatemalan quetzales, paid in February 1999. 380 --
Uncollateralized line of credit with a Guatemalan
bank for a total of $800, interest at 10.5% per
annum, principal and interest payable at maturity
in US dollars, paid in May 1999. 146 --
10
<PAGE>
ROV LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(in thousands of U.S. dollars)
6. Loans Payable, Continued:
1998 1997
Uncollateralized line of credit with a Guatemalan
bank for a total of $400, interest at 10.5% per
annum, principal and interest payable at maturity
in US dollars, paid in January 1999. 400 200
Uncollateralized line of credit with a Salvadoran
bank for a total of $171, interest at 15.5% per
annum, principal and interest payable at maturity
in Salvadoran colones, paid in January 1999. $ 171 $ 171
Uncollateralized line of credit with a Salvadoran
bank for a total of $82, interest at 16.5% per
annum, principal and interest payable monthly in
Salvadoran colones, paid in June 1999. 22 64
Uncollateralized line of credit with a Salvadoran
bank for a total of $171, interest at 15.5% to
18.0% per annum, paid during 1998. -- 57
Automobile loans with various financial
institutions in Mexico, Venezuela and Colombia at
rates ranging from 10.7% to 37.0%, collateralized
by automobiles, payable in monthly installments
through May 2001. 65 31
------- -------
7,677 4,715
Less current portion (7,658) (4,672)
------- -------
Loans payable, long term $ 19 $ 43
======= =======
The Company's credit lines and term loan agreements contain certain
restrictive financial covenants.
7. Income Taxes:
The provision for income taxes at December 31 consisted of the following:
1998 1997 1996
Current $ 3,408 $ 2,676 $ 2,657
Deferred (277) 351 (284)
------- ------- -------
$ 3,131 $ 3,027 $ 2,373
======= ======= =======
11
<PAGE>
ROV LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(in thousands of U.S. dollars)
7. Income Taxes, Continued:
ROV Limited is a Cayman Islands company whose subsidiaries operate in
countries throughout the world, primarily in Mexico, Central America and
South America and the Caribbean. Each country has its own tax rates and
regulations. The provision for income taxes on continuing operations
differs from the amount of income tax determined by applying the
applicable U.S. statutory federal income tax rate (35%) to income before
income taxes as a result of the following differences:
1998 1997 1996
Provision for income taxes at
statutory U.S. tax rate $ 4,275 $ 4,347 $ 2,818
State income taxes (net of federal benefit) 4 4 2
Foreign taxes (statutory rate differential) (1,008) (1,324) (447)
Change in foreign tax rate applicable to
unremitted earnings (140) -- --
------- ------- -------
Provision for income taxes $ 3,131 $ 3,027 $ 2,373
======= ======= =======
Significant components of deferred tax assets (liabilities) at December
31, are as follows:
1998 1997
Current:
Allowance for doubtful accounts $ 221 $ 66
Inventories (967) (904)
Accrued expenses 180 135
----- -----
$(566) $(703)
===== =====
Noncurrent:
Undistributed earnings of foreign subsidiaries $(130) $(270)
===== =====
8. Commitments and Contingencies:
In the ordinary course of business, the Company is subject to certain
legal matters, which in the opinion of management, and based on the advice
of its legal counsel, should not have a material adverse effect on the
financial position, results of operations or cash flows of the Company.
The Company is also committed under various purchase contracts, each under
one year in duration, arising in the ordinary course of business.
Management does not anticipate any material losses as a result of these
commitments.
12
<PAGE>
ROV LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(in thousands of U.S. dollars)
8. Commitments and Contingencies, Continued;
On December 9, 1998, the Directors of ROV Limited approved severance
agreements for the benefit of certain officers, key employees and
independent contractors of the Company, whereby such individuals would
receive severance pay and other benefits in the combined amount of
approximately $4,700 upon meeting certain conditions after any change in
control of ROV Limited and/or subsidiaries.
9. Mandatorily Redeemable Preferred Stock:
Preferred stock at December 31 consisted of the following (in thousands of
U.S. dollars, except for share amounts and par value):
1998 1997
Class G, preferred shares, 341,962 shares
authorized, 91,962 and 104,267 issued and
outstanding in 1998 and 1997, respectively,
6% cumulative dividend and redeemable,
$30 par value $ 2,759 $ 3,128
======= =======
Class G preferred shares are non-voting and are entitled to a 6%
cumulative preferred dividend.
The balance of $2,759 is subject to redemption in four equal installments
commencing on April 1 following any fiscal year in which the following
cumulative earnings since December 1, 1986 are reached: 1999 - $60,420,
2000 - $65,420 and 2001 - $70,420. If these cumulative earnings triggers
have not been reached by December 31, 2001, and the Company has complied
with all material obligations (consisting primarily of scheduled
redemptions and dividend payments) to its Class G shareholders, the
remaining existing outstanding Class G preferred shares will be cancelled.
At December 31, 1998, the cumulative earnings since December 1, 1986
approximated $51,000. See Note 13.
The Company made scheduled redemptions of $369 and $1,000 in January 1998
and 1997, respectively. Also, the Company made additional mandatory
redemptions in the amount of $931, in 1997. The Company may redeem the
outstanding Class G shares at par value at any time.
13
<PAGE>
ROV LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(in thousands of U.S. dollars)
10. Earnings Per Share:
Dividends on preferred stock reduced the income available to common
shareholders by $395, $333 and $437 for the years ended December 31, 1998,
1997 and 1996, respectively. A reconciliation of the Company's net income
to income available to common shareholders follows:
1998 1997 1996
Net Income: $ 7,204 $ 7,808 $ 4,478
Dividends on preferred shares (395) (333) (437)
------- ------- -------
Income available to common stock shareholders $ 6,809 $ 7,475 $ 4,041
======= ======= =======
11. Concentrations of Credit and Business Risk:
The Company sells its products primarily to customers in Mexico, Central
America, South America and the Caribbean. The Company performs ongoing
credit evaluations of its customers' financial condition, reviews credit
histories before extending new credit and establishes an allowance for
doubtful accounts based upon factors surrounding the credit risk of
specific customers, historical trends and other information. Historically,
the Company has not incurred any significant credit related losses.
Certain raw materials, which are essential to the production process, are
purchased from a limited number of suppliers. Should the supply of these
raw materials be interrupted, management believes that alternate sources
of supply are available. However, such interruption could cause delays in
production.
14
<PAGE>
ROV LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(in thousands of U.S. dollars)
12. Geographical Information
The Company's management assesses its operations according to geographic
areas. Included in Central America are the Company's operations in
Guatemala, Honduras, El Salvador and Costa Rica. The following represents
geographic information of the Company as of December 31, 1998 and 1997 and
for the three years in the period ended December 31, 1998:
Year Ended December 31,
Revenues from external customers: 1998 1997 1996
------- ------- -------
Mexico $20,933 $21,873 $15,624
Dominican Republic 15,535 11,593 11,679
Central America 42,454 39,829 35,720
Other 18,135 10,547 7,154
------- ------- -------
$97,057 $83,842 $70,177
======= ======= =======
December 31,
Total assets: 1998 1997
------- -------
Mexico $16,768 $16,236
Dominican Republic 8,370 6,426
Central America 21,839 20,366
Other 16,091 12,821
------- -------
$63,058 $55,849
======= =======
December 31,
Long-lived assets: 1998 1997
------- -------
Mexico $ 4,468 $ 3,463
Dominican Republic 1,996 1,871
Central America 6,628 6,610
Other 919 1,025
------- -------
$14,011 $12,969
======= =======
15
<PAGE>
ROV LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(in thousands of U.S. dollars)
13. Subsequent Event:
On June 11, 1999, the Company entered into the "Share Purchase Agreement"
to sell substantially all of its operational entities and its rights to
use the "Ray 0 Vac" trademark for approximately $140,000. This amount will
be either increased by the amount that the Company's net book value, as
defined, at the closing date exceeds the targeted net book value specified
in the Share Purchase Agreement, or decreased by the amount that the
closing date net book value falls below the targeted net book value. In
addition, this amount will be reduced by the combined net book value of
ROV Limited and all subsidiaries not purchased as of the closing date.
On the closing date, the Company is obligated to pay the shareholder of
the Class G preferred shares (Note 9) $3,250 in consideration for its
consent to and approval of the sale. In addition, the redemption schedule
for the outstanding Class G shares would be as follows:
Date Shares Amount
April 30, 2000 22,990 $ 689
April 30, 2001 22,990 690
April 30, 2002 22,990 690
April 30, 2003 22,992 690
------ -------
91,962 $ 2,759
====== =======
16
<PAGE>
EXHIBIT 99.2
ROV LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
INDEX
<TABLE>
<CAPTION>
Pages
<S> <C>
Financial Statements:
Condensed Consolidated Balance Sheets
June 25, 1999 (Unaudited) and December 31, 1998 F-2
Condensed Consolidated Statements of Operations
Six Months Ended June 25, 1999 and
June 26, 1998 (Unaudited) F-3
Condensed Consolidated Statements of Operations
Nine Months Ended June 25, 1999 and
June 26, 1998 (Unaudited) F-4
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 25, 1999 and
June 26, 1998 (Unaudited) F-5
Condensed Consolidated Statements of Cash Flows
Nine Months Ended June 25, 1999 and
June 26, 1998 (Unaudited) F-6
Notes to Condensed Consolidated Financial Statements
(Unaudited) F-7 to F-9
</TABLE>
<PAGE>
ROV LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands of U.S. dollars, except par value and share amounts)
<TABLE>
<CAPTION>
June 25, December 31,
1999 1998
--------------- ----------------
<S> <C> <C>
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 12,596 $ 12,125
Short-term investments 500 1,500
Accounts receivable, net 14,561 18,380
Inventories 14,911 14,715
Prepaid expenses and other current assets 1,172 968
--------------- ----------------
Total current assets 43,740 47,688
--------------- ----------------
Property, plant and equipment, net 16,059 14,011
Other assets 1,150 1,359
--------------- ----------------
Total assets $ 60,949 $ 63,058
--------------- ----------------
--------------- ----------------
LIABILITIES, PREFERRED STOCK AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,988 $ 8,002
Accrued expenses and other current liabilities 6,078 5,885
Loans payable, current portion 6,294 7,658
Deferred income taxes, 240 566
current
--------------- ----------------
Total current liabilities 17,600 22,111
--------------- ----------------
Accrued service and severance indemnities 3,374 3,255
Loans payable, long term 9 19
Deferred income taxes, noncurrent 75 130
Other liabilities 433 479
Minority interest in subsidiaries 3,681 3,877
--------------- ----------------
Total liabilities 25,172 29,871
--------------- ----------------
Mandatorily redeemable preferred stock 2,759 2,759
--------------- ----------------
Shareholders' equity:
Common stock:
Class A; $66.67 par value; 90,000 shares authorized;
79,200 shares issued and outstanding 5,280 5,280
Class E; $5.00 par value; 1,200,000 shares authorized;
706,757 shares issued and outstanding 3,534 3,534
Retained earnings 24,204 21,614
--------------- ----------------
Total shareholders' equity 33,018 30,428
--------------- ----------------
Total liabilities, preferred stock and shareholders' equity $ 60,949 $ 63,058
--------------- ----------------
--------------- ----------------
</TABLE>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
F-2
<PAGE>
ROV LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIODS FROM JANUARY 1, 1999 THROUGH JUNE 25, 1999 AND
FROM JANUARY 1, 1998 THROUGH JUNE 26, 1998
(In thousands of U.S. dollars, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
--------------- --------------
<S> <C> <C>
Net sales $ 43,687 $ 45,869
--------------- --------------
Cost and operating expenses:
Cost of sales 25,081 27,377
Selling and distribution 4,922 5,113
Advertising and promotion 1,483 1,374
Administrative and general 5,074 4,998
--------------- --------------
Total costs and operating expenses 36,560 38,862
--------------- --------------
Operating income 7,127 7,007
--------------- --------------
Other income (expenses):
Interest income 359 368
Interest expense (599) (498)
Commission, royalty and technical assistance (28) 101
Currency translation 92 (557)
Other 242 (57)
--------------- --------------
Total other income (expenses), net 66 (643)
--------------- --------------
Income before income taxes and minority interest
in earnings of subsidiaries 7,193 6,364
Provision for income taxes (1,718) (1,441)
--------------- --------------
Income before minority interest in earnings of subsidiaries 5,475 4,923
Minority interest in earnings of subsidiaries (998) (923)
--------------- --------------
Net income $ 4,477 $ 4,000
--------------- --------------
--------------- --------------
Basic and diluted earnings per share $ 5.70 $ 4.80
--------------- --------------
Weighted average common shares outstanding - basic and diluted 785,957 785,957
--------------- --------------
--------------- --------------
</TABLE>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
F-3
<PAGE>
ROV LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIODS FROM SEPTEMBER 25, 1998 THROUGH JUNE 25, 1999 AND
FROM SEPTEMBER 26, 1997 THROUGH JUNE 26, 1998
(In thousands of U.S. dollars, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
--------------- --------------
<S> <C> <C>
Net sales $ 73,339 $ 72,699
--------------- --------------
Cost and operating expenses:
Cost of sales 42,504 43,746
Selling and distribution 8,196 8,106
Advertising and promotion 2,260 1,936
Administrative and general 8,240 7,145
--------------- --------------
Total costs and operating expenses 61,200 60,933
--------------- --------------
Operating income 12,139 11,766
--------------- --------------
Other income (expenses):
Interest income 736 471
Interest expense (990) (723)
Commission, royalty and technical assistance 47 366
Currency translation 260 (524)
Other 134 (622)
--------------- --------------
Total other income (expenses), net 187 (1,032)
--------------- --------------
Income before income taxes and minority interest
in earnings of subsidiaries 12,326 10,734
Provision for income taxes (2,732) (2,144)
--------------- --------------
Income before minority interest in earnings of subsidiaries 9,594 8,590
Minority interest in earnings of subsidiaries (1,772) (1,436)
--------------- --------------
Net income $ 7,822 $ 7,154
--------------- --------------
--------------- --------------
Basic and diluted earnings per share $ 9.74 $ 8.81
--------------- --------------
Weighted average common shares outstanding - basic and diluted 785,957 785,957
--------------- --------------
--------------- --------------
</TABLE>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
F-4
<PAGE>
ROV LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS FROM JANUARY 1, 1999 THROUGH JUNE 25, 1999 AND
FROM JANUARY 1, 1998 THROUGH JUNE 26, 1998
(In thousands of U.S. dollars)
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,477 $ 4,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 867 959
Gain on sale of property and equipment (31) (120)
(Gain) loss from currency translation and devaluation (92) 557
Decrease in deferred income taxes (381) (125)
Minority interest in earnings of subsidiaries 998 923
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable, net 3,870 1,518
Inventories (174) (4,651)
Prepaid expenses and other current assets (204) 189
Other assets 209 8
(Decrease) increase in:
Accounts payable (2,990) (1,299)
Accrued expenses and other current liabilities 353 947
Other liabilities 73 (118)
------------- ------------
Net cash provided by operating activities 6,975 2,788
------------- ------------
Cash flows from investing activities:
Decrease (increase) in short-term investments, net 1,000 (147)
Purchases of property, plant and equipment (3,440) (1,386)
Proceeds from sales of property, plant and equipment 556 277
------------- ------------
Net cash used in investing activities (1,884) (1,256)
------------- ------------
Cash flows from financing activities:
Proceeds from loans 657 2,026
Repayment of loans (2,031) (274)
Distribution to minority shareholders of subsidiaries (1,194) (284)
Preferred stock redemptions 0 (369)
Dividends paid (2,052) (1,569)
------------- ------------
Cash flows used in financing activities (4,620) (470)
------------- ------------
Net increase in cash and cash equivalents 471 1,062
Cash and cash equivalents at beginning of period 12,125 6,961
------------- ------------
Cash and cash equivalents at end of period 12,596 $ 8,023
------------- ------------
------------- ------------
</TABLE>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
F-5
<PAGE>
ROV LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS FROM SEPTEMBER 25, 1998 THROUGH JUNE 25, 1999 AND
FROM SEPTEMBER 26, 1997 THROUGH JUNE 26, 1998
(In thousands of U.S. dollars)
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 7,822 $ 7,154
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 2,020 1,537
Gain on sale of property and equipment (8) (114)
(Gain) loss from currency translation and devaluation (260) 524
(Decrease) increase in deferred income taxes (412) 227
Minority interest in earnings of subsidiaries 1,772 1,436
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable, net 2,439 (2,426)
Inventories 1,029 (3,454)
Prepaid expenses and other current assets (179) (78)
Other assets 183 (49)
(Decrease) increase in:
Accounts payable (2,169) (908)
Accrued expenses and other current liabilities 748 117
Other liabilities 350 1,087
------------- ------------
Net cash provided by operating activities 13,335 5,053
------------- ------------
Cash flows from investing activities:
Decrease (increase) in short-term investments, net 1,245 (751)
Purchases of property, plant and equipment (5,373) (2,013)
Proceeds from sales of property, plant and equipment 758 600
------------- ------------
Net cash used in investing activities (3,370) (2,164)
------------- ------------
Cash flows from financing activities:
Proceeds from loans 1,831 2,493
Repayment of loans (2,413) (605)
Distribution to minority shareholders of subsidiaries (1,338) (554)
Preferred stock redemptions 0 (935)
Dividends paid (4,103) (2,134)
------------- ------------
Cash flows used in financing activities (6,023) (1,735)
------------- ------------
Net increase in cash and cash equivalents 3,942 1,154
Cash and cash equivalents at beginning of period 8,654 6,869
------------- ------------
Cash and cash equivalents at end of period $ 12,596 $ 8,023
------------- ------------
------------- ------------
</TABLE>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
F-6
<PAGE>
ROV LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF FINANCIAL STATEMENT PRESENTATION
In management's opinion, the accompanying unaudited interim condensed
consolidated financial statements of ROV Limited and Subsidiaries (the
"Company") contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the Company's financial
position, the results of its operations and its cash flows.
The accompanying unaudited interim condensed consolidated financial
statements have been prepared pursuant to the rules and regulations of
the Securities and Exchange Commission. Pursuant to such rules and
regulations, certain information and disclosures normally included in the
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The interim
condensed consolidated financial statements should be read in conjunction
with the Consolidated Financial Statements and the Notes to the
Consolidated Financial Statements for the years ended December 31, 1998,
1997 and 1996.
The accounting policies followed for interim financial reporting are the
same as those disclosed in Note 2 of the Notes to Consolidated Financial
Statements for the years ended December 31, 1998, 1997 and 1996.
2. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting periods. The Company's management uses estimates
primarily with respect to the allowance for doubtful accounts and the
useful lives of property, plant and equipment. Actual results could
differ from those estimates.
3. EARNINGS PER SHARE
Earnings per share have been calculated in accordance with Statement of
Financial Accounting (SFAS) No. 128, "Earnings per share". Basic earnings
per share is computed by dividing the earnings available to common
stockholders by the weighted average number of common shares outstanding.
For the nine months ended June 25, 1999 and June 26, 1998, there were no
common stock equivalents. Accordingly, basic and diluted earnings per
share are equivalent.
F-7
<PAGE>
ROV LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(UNAUDITED)
3. EARNINGS PER SHARE, CONTINUED
A reconciliation of the Company's net income to income available to
common shareholders follows:
<TABLE>
<CAPTION>
For the six months ended (unaudited): June 25, June 26,
1999 1998
------------ ------------
<S> <C> <C>
Net Income $ 4,477 $ 4,000
Dividends on preferred shares - (229)
------------ ------------
Income available to common stock shareholders $ 4,477 $ 3,771
------------ ------------
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
For the nine months ended (unaudited): June 25, June 26,
1999 1998
------------ ------------
<S> <C> <C>
Net Income $ 7,822 $ 7,154
Dividends on preferred shares (166) (229)
------------ ------------
Income available to common stock shareholders $ 7,656 $ 6,925
------------ ------------
------------ ------------
</TABLE>
4. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
June 25,
1999 Dec 31,
(Unaudited) 1998
---------------- ---------------
<S> <C> <C>
Raw materials $ 6,264 $ 7,713
Work-in-process 1,195 1,092
Finished goods 7,452 5,910
---------------- ---------------
$ 14,911 $ 14,715
---------------- ---------------
---------------- ---------------
</TABLE>
F-8
<PAGE>
5. GEOGRAPHICAL INFORMATION
The Company's management assesses its operations according to geographic
areas. Included in Central America are the Company's operations in
Guatemala, Honduras, El Salvador and Costa Rica. The following represents
geographic information of the Company for the six and nine month periods
ended June 25, 1999 and June 26, 1998:
Revenues from external customers:
<TABLE>
<CAPTION>
For the six months ended (unaudited): June 25, June 26,
1999 1998
------------ ------------
<S> <C> <C>
Mexico $ 8,679 $ 10,171
Dominican Republic 6,654 7,477
Central America 20,566 20,083
Other 7,788 8,138
------------ ------------
$ 43,687 $ 45,869
------------ ------------
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
For the nine months ended (unaudited): June 25, June 26,
1999 1998
------------ ------------
<S> <C> <C>
Mexico $ 14,763 $ 17,842
Dominican Republic 11,322 11,152
Central America 33,809 32,223
Other 13,445 11,482
------------ ------------
$ 73,339 $ 72,699
------------ ------------
------------ ------------
</TABLE>
6. SUBSEQUENT EVENT
On August 9, 1999, ROV Limited sold to Rayovac Corporation, for
approximately $140 million, substantially all of its business and its
rights to use the "Ray-O-Vac" trademark.
In connection with the sale, on August 10, 1999, ROV Limited paid $3,250
to the shareholder of the Class G preferred shares for its consent to and
approval of the sale. On August 12, 1999, ROV Limited repurchased all of
the outstanding Class G preferred shares for $2,759, of which $1,379 was
paid in cash and the balance of $1,380 is payable in two equal
installments on April 30, 2002 and October 31, 2003. Interest, at 6% per
annum, is payable quarterly.
On August 13, 1999, the Class A and Class E Common Shareholders resolved
to liquidate and dissolve the Company by April 15, 2000.
F-9
<PAGE>
Exhibit 99.3
Unaudited Pro Forma Condensed Consolidated Financial Statements
The accompanying unaudited pro forma condensed consolidated balance sheet as of
July 4, 1999 reflects the combined financial position of Rayovac Corporation
(the "Company"), after giving effect to the acquisition of (1) the consumer
battery business of ROV Limited and Subsidiaries ("ROV Limited") and (2) the
license held by ROV Limited to use the "Rayovac" trade name and trademark
(collectively the "Acquisition"), as if the transaction had been consummated as
of July 4, 1999. The unaudited pro forma condensed consolidated statements of
operations reflect the Company's historical operating results for the nine
months ended July 4, 1999 and fiscal year ended September 30, 1998 with ROV
Limited's historical results for the nine months ended June 25, 1999 and fiscal
year ended December 31, 1998, respectively, and include pro forma adjustments as
if the transaction had been consummated at October 1, 1997. The unaudited pro
forma statements of operations for the nine months ended June 25, 1999, include
the three month period ended December 31, 1998, which also was included in the
fiscal year ended December 31, 1998. Summarized operating information about the
duplicate quarter is as follows:
<TABLE>
<CAPTION>
<S> <C>
Net Sales $29,652
Gross Profit 12,474
Total Operating Expenses 6,350
Income from Operations 6,124
Net Income 4,916
</TABLE>
Acquisition related expenditures, which the Company estimates will be
approximately $4.1 million on a pre-tax basis, were included in the unaudited
pro forma condensed consolidated balance sheet. The Company anticipates that
approximately $0.4 million of non-recurring acquisition related expense on a
pretax basis and an extraordinary item of approximately $3.8 million
(approximately $2.4 million net of tax) related to the write-off of unamortized
debt finance fees will be recognized within the twelve months succeeding the
transaction. These charges are not reflected in the unaudited pro forma
condensed consolidated statements of operations. The pro forma adjustments,
which are described in the accompanying notes, are based on available
information and certain assumptions that management of the Company believe are
reasonable.
The unaudited pro forma condensed consolidated financial statements are
presented for illustrative purposes only and are not necessarily indicative of
the operating results or financial position that would have been achieved if the
Acquisition had been consummated on the dates indicated, nor are they
necessarily indicative of the future operating results or financial position of
the combined company. The unaudited pro forma condensed consolidated financial
statements do not give effect to any cost savings or integration costs which may
result from the combination of the Company's and ROV Limited's operations.
These unaudited pro forma condensed consolidated financial statements are based
on, and should be read in conjunction with, the historical consolidated
financial statements and related notes thereto of the Company (previously filed)
and ROV Limited (included herein).
1
<PAGE>
RAYOVAC CORPORATION
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of July 4, 1999
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Historical
------------------------------------------
Rayovac ROV LTD
Corporation and Subsidiaries
As of As of
7/4/99 6/25/99
------ -------
-ASSETS-
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,384 $ 13,096
Receivables 90,391 14,561
Inventories 66,053 14,911
Prepaid expenses and other 20,046 1,172
------------------------------------------
Total current assets 177,874 43,740
Property, plant and equipment, net 79,202 16,059
Investments - 50
Goodwill 7,183 -
Tradename - -
Deferred charges and other 35,298 1,100
------------------------------------------
Total assets $ 299,557 $ 60,949
------------------------------------------
------------------------------------------
-LIABILITIES AND SHAREHOLDERS' EQUITY -
Current liabilities:
Current maturities of long-term debt $ 7,485 $ 6,294
Accounts payable 56,967 4,988
Accrued liabilities:
Wages and benefits and other 24,273 6,318
Recapitalization and other special charges 2,384 -
------------------------------------------
------------------------------------------
Total current liabilities 91,109 17,600
Long-term debt, net of current maturities 151,660 9
Employee benefit obligations, net of current portion 12,279 3,374
Minority Interest - 3,681
Other 3,975 508
------------------------------------------
Total liabilities 259,023 25,172
Shareholders' equity 40,534 35,777
------------------------------------------
Total liabilities and shareholders' equity $ 299,557 $ 60,949
------------------------------------------
------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------
Pro Forma Pro Forma
Eliminations (A) Adjustments(b) Consolidated)
---------------- -------------- -------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ (9,234) $ - $ 5,246
Receivables (4,860) (39) 100,053
Inventories (7) (448) 80,509
Prepaid expenses and other (158) (2,804) 18,256
---------------------------------------------------------------
Total current assets (14,259) (3,291) 204,064
Property, plant and equipment, net (82) 12,732 107,911
Investments - - 50
Goodwill - 28,196 35,379
Tradename - 90,000 90,000
Deferred charges and other (150) - 36,248
---------------------------------------------------------------
Total assets $ (14,491) $ 127,637 $ 473,652
---------------------------------------------------------------
---------------------------------------------------------------
-LIABILITIES AND SHAREHOLDERS' EQUITY -
Current liabilities:
Current maturities of long-term debt $ - $ - $ 13,779
Accounts payable (2,610) - 59,345
Accrued liabilities:
Wages and benefits and other (956.0) 7,025 36,660
Recapitalization and other special charges - - 2,384
---------------------------------------------------------------
---------------------------------------------------------------
Total current liabilities (3,566) 7,025 112,168
Long-term debt, net of current maturities - 149,145 300,814
Employee benefit obligations, net of current portion - - 15,653
Minority Interest (3,681) -
Other - - 4,483
---------------------------------------------------------------
Total liabilities (7,247) 156,10 433,118
Shareholders' equity (7,244) (28,533) 40,534
---------------------------------------------------------------
Total liabilities and shareholders' equity $ (14,491) $ 127,637 $ 473,652
---------------------------------------------------------------
---------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THESE STATEMENTS.
2
<PAGE>
RAYOVAC CORPORATION
Unaudited Pro Forma Condensed Consolidated Statement of Operations
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Historical
---------------------------------------
Rayovac ROV LTD
Corporation and Subsidiaries
9 Months 9 Months
Ended 7/4/99 Ended 6/25/99
------------------ --------------------
<S> <S> <C>
Net sales $ 391,951 $ 73,339
Cost of goods sold 203,883 42,504
-----------------------------------------
Gross profit 188,068 30,835
Selling 113,148 10,456
General and administrative 25,971 8,240
Research and development 6,408 -
Other special charges 2,220 -
-----------------------------------------
Total operating expenses 147,747 18,696
Income from operations 40,321 12,139
Other expense (income):
Interest expense 10,778 990
Other expense (income) (452) (1,177)
-----------------------------------------
10,326 (187)
Income before income taxes and extraordinary item 29,995 12,326
Income tax expense 10,789 2,732
-----------------------------------------
Income before extraordinary item 19,206 9,594
Extraordinary item - -
-----------------------------------------
Net Income $ 19,206 $ 9,594
-----------------------------------------
-----------------------------------------
BASIC EARNINGS PER SHARE
Average shares outstanding 27,485
Income before extraordinary item $ 0.70
Extraordinary item
-------------------
-------------------
Net income $ 0.70
-------------------
-------------------
DILUTED EARNINGS PER SHARE
Average shares outstanding and common stock equivalents 29,262
Income before extraordinary item $ 0.66
Extraordinary item
-------------------
-------------------
Net income $ 0.66
-------------------
-------------------
</TABLE>
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Adjustments Consolidated
--------------- -------------------
<S> <C> <C>
Net sales $ (2,761) (A) $ 462,529
Cost of goods sold (2,178) (A) 244,209
---------------- -------------------
Gross profit (583) 218,320
Selling - 123,604
General and administrative 1,338 (A)(C) 35,549
Research and development - 6,408
Other special charges - 2,220
---------------- -------------------
Total operating expenses 1,338 167,781
Income from operations (1,921) 50,539
Other expense (income):
Interest expense 8,949 (D) 20,717
Other expense (income) - (1,629)
---------------- -------------------
8,949 19,088
Income before income taxes and extraordinary item (10,870) 31,451
Income tax expense (2,833) (E) 10,688
---------------- -------------------
Income before extraordinary item (8,036) 20,764
Extraordinary item - -
---------------- -------------------
Net Income $ (8,036) $ 20,764
---------------- -------------------
---------------- -------------------
BASIC EARNINGS PER SHARE
Average shares outstanding 27,485
Income before extraordinary item $ 0.76
Extraordinary item
-------------------
-------------------
Net income $ 0.76
-------------------
-------------------
DILUTED EARNINGS PER SHARE
Average shares outstanding and common stock equivalents 29,262
Income before extraordinary item $ 0.71
Extraordinary item
-------------------
-------------------
Net income $ 0.71
-------------------
-------------------
</TABLE>
3[caad 234]I
<PAGE>
RAYOVAC CORPORATION
Unaudited Pro Forma Condensed Consolidated Statement of Operations
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Historical
----------------------------------------
Rayovac ROV LTD
Corporation and Subsidiaries
12 Months 12 Months Pro Forma
Ended 9/30/98 Ended 12/31/98 Adjustments
------------------ -------------------- ---------------
<S> <C> <C> <C>
Net sales $ 495,733 $ 97,057 $ (5,456)
Cost of goods sold 258,027 58,515 (3,819)
-----------------------------------------------------------
Gross profit 237,706 38,542 (1,637)
Selling 148,875 13,689 -
General and administrative 35,877 10,432 2,940
Research and development 6,226 - -
Other special charges 6,183 - -
-----------------------------------------------------------
Total operating expenses 197,161 24,121 2,940
Income from operations 40,545 14,421 (4,577)
Other expense (income):
Interest expense 15,670 1,213 11,931
Other expense (income) (155) 995 -
-----------------------------------------------------------
15,515 2,208 11,931
Income before income taxes and extraordinary item 25,030 12,213 (16,508)
Income tax expense 8,660 3,131 (4,390)
-----------------------------------------------------------
Income before extraordinary item 16,370 9,082 (12,119)
Extraordinary item (1,975) - -
-----------------------------------------------------------
Net Income $ 14,395 $ 9,082 $ (12,119)
-----------------------------------------------------------
-----------------------------------------------------------
BASIC EARNINGS PER SHARE
Average shares outstanding 26,477
Income before extraordinary item $ 0.62
Extraordinary item (0.08)
-------------------
-------------------
Net income $ 0.54
-------------------
-------------------
DILUTED EARNINGS PER SHARE
Average shares outstanding and common stock equivalents 28,091
Income before extraordinary item $ 0.58
Extraordinary item (0.07)
-------------------
-------------------
Net income $ 0.51
-------------------
-------------------
</TABLE>
<TABLE>
<CAPTION>
Pro Forma
Consolidated
-------------------
<S> <C>
Net sales (A) $ 587,334
Cost of goods sold (A) 312,723
-------------------
Gross profit 274,611
Selling 162,564
General and administrative (A)(C) 49,249
Research and development 6,226
Other special charges 6,183
-------------------
Total operating expenses 224,222
Income from operations 50,389
Other expense (income):
Interest expense (D) 28,814
Other expense (income) 840
-------------------
29,654
Income before income taxes and extraordinary item 20,735
Income tax expense (E) 7,401
-------------------
Income before extraordinary item 13,333
Extraordinary item (1,975)
-------------------
Net Income $ 11,358
-------------------
-------------------
BASIC EARNINGS PER SHARE
Average shares outstanding 26,477
Income before extraordinary item $ 0.50
Extraordinary item (0.08)
-------------------
-------------------
Net income $ 0.42
-------------------
-------------------
DILUTED EARNINGS PER SHARE
Average shares outstanding and common stock equivalents 28,091
Income before extraordinary item $ 0.47
Extraordinary item (0.07)
-------------------
-------------------
Net income $ 0.40
-------------------
-------------------
</TABLE>
4
<PAGE>
Notes to unaudited pro forma condensed consolidated financial statements.
(A) To reflect elimination of (1) sales and cost of goods sold for
shipments from the Company to ROV Limited (2) receivables and payables
between the Company and ROV Limited and (3) removal of assets and
liabilities of ROV Limited subsidiaries not purchased by Rayovac.
(B) To reflect the excess of acquisition cost over the estimated fair value
of net assets acquired (goodwill). The purchase price, purchase-price
allocation, and financing of the transaction are summarized as follows:
Acquisition Price:
<TABLE>
<CAPTION>
<S> <C>
Purchased price paid through additional borrowings $149,145
Other 2,804
--------------------
$151,949
Allocated to:
Historical book value of acquired assets and liabilities $28,533
Adjustments to reflect assets and liabilities at fair value
Receivables (39)
Inventory (448)
Property, plant, & equip. (primarily land) 12,732
Trade name 90,000
Liabilities and restructuring accruals to eliminate excess
capacities at the acquired entity (7,025)
--------------------
Total allocation $123,753
--------------------
Excess purchase price over allocation to identifiable assets and
liabilities (goodwill) at July 4, 1999 $28,196
Adjustment (610)
--------------------
Goodwill at acquisition date $27,586
</TABLE>
(C) To reflect the amortization of goodwill and trade name on a straight
line basis over 40 years. The principle factors considered in
determining the use of a 40 year amortization period include; (1) the
Rayovac trade name has been in existence for approximately 80 years and
is considered viable indefinitely and (2) the existing and projected
cash flows are adequate to support the carrying value of the intangible
assets to be recorded.
(D) To reflect the increase in interest expense resulting from the amended
senior credit facilities to finance the purchase price. The interest
rate on the amended senior credit facilities is assumed to be 7.43
percent. A change of 1/8 percent in the interest rate would result in a
change in annual interest expense and net income of $293 and $187
before and after taxes, respectively.
5
<PAGE>
(E) To reflect the income tax effect of (1) increased interest and
amortization of a portion of the trade name and (2) the margin
eliminated on sales between the Company and Rayovac Limited assuming a
tax rate of 36 percent. The remaining portion of the trade name and all
the goodwill is in a non taxed entity.
6
