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) Wisconsin 001-13615 22-2423556 - -------------------------- ---------------------------- ------------------------ (State of (Commission File No.) (IRS Employer Incorporation) Identification No.) 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
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
(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 EXHIBIT NUMBER DESCRIPTION 2.1 Share Purchase Agreement made as of June 11, 1999, by and among the Company, Vidor Battery Company, Rayovac Latin America, Ltd., 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. Page 3 of 4
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
EXHIBIT 99.1 ROV LIMITED AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS for the years ended December 31, 1998, 1997 and 1996
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
[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
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
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
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) Common Stock ----------------------------------------- Class A Class E ------------------- ------------------- Retained Shares Amount Shares Amount Earnings Totals -------- -------- -------- -------- -------- -------- 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 ======== ======== ======== ======== ======== ======== The accompanying notes are an integral part of the consolidated financial statements. 4
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) 1998 1997 1996 -------- -------- -------- 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 ======== ======== ======== The accompanying notes are an integral part of the consolidated financial statements. 5
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
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
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
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
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
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
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
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
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
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
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
EXHIBIT 99.2 ROV LIMITED AND SUBSIDIARIES CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) INDEX Pages 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
ROV LIMITED AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET (In thousands of U.S. dollars, except par value and share amounts) June 25, December 31, 1999 1998 --------------- ---------------- (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 --------------- ---------------- --------------- ---------------- The accompanying notes are an integral part of the condensed consolidated financial statements. F-2
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) 1999 1998 --------------- -------------- 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 --------------- -------------- --------------- -------------- The accompanying notes are an integral part of the condensed consolidated financial statements. F-3
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) 1999 1998 --------------- -------------- 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 --------------- -------------- --------------- -------------- The accompanying notes are an integral part of the condensed consolidated financial statements. F-4
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) 1999 1998 ------------- ------------ 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 ------------- ------------ ------------- ------------ The accompanying notes are an integral part of the condensed consolidated financial statements. F-5
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) 1999 1998 ------------- ------------ 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 ------------- ------------ ------------- ------------ The accompanying notes are an integral part of the condensed consolidated financial statements. F-6
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
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: For the six months ended (unaudited): June 25, June 26, 1999 1998 ------------ ------------ Net Income $ 4,477 $ 4,000 Dividends on preferred shares - (229) ------------ ------------ Income available to common stock shareholders $ 4,477 $ 3,771 ------------ ------------ ------------ ------------ For the nine months ended (unaudited): June 25, June 26, 1999 1998 ------------ ------------ Net Income $ 7,822 $ 7,154 Dividends on preferred shares (166) (229) ------------ ------------ Income available to common stock shareholders $ 7,656 $ 6,925 ------------ ------------ ------------ ------------ 4. INVENTORIES Inventories consisted of the following: June 25, 1999 Dec 31, (Unaudited) 1998 ---------------- --------------- Raw materials $ 6,264 $ 7,713 Work-in-process 1,195 1,092 Finished goods 7,452 5,910 ---------------- --------------- $ 14,911 $ 14,715 ---------------- --------------- ---------------- --------------- F-8
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: For the six months ended (unaudited): June 25, June 26, 1999 1998 ------------ ------------ 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 ------------ ------------ ------------ ------------ For the nine months ended (unaudited): June 25, June 26, 1999 1998 ------------ ------------ 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 ------------ ------------ ------------ ------------ 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
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: Net Sales $29,652 Gross Profit 12,474 Total Operating Expenses 6,350 Income from Operations 6,124 Net Income 4,916 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
RAYOVAC CORPORATION Unaudited Pro Forma Condensed Consolidated Balance Sheet as of July 4, 1999 (In thousands, except per share amounts) Historical ------------------------------------------ Rayovac ROV LTD Corporation and Subsidiaries As of As of 7/4/99 6/25/99 ------ ------- -ASSETS- 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 ------------------------------------------ ------------------------------------------ --------------------- Pro Forma Pro Forma Eliminations (A) Adjustments(b) Consolidated) ---------------- -------------- ------------- 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 --------------------------------------------------------------- --------------------------------------------------------------- SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THESE STATEMENTS. 2
RAYOVAC CORPORATION Unaudited Pro Forma Condensed Consolidated Statement of Operations (In thousands, except per share amounts) Historical --------------------------------------- Rayovac ROV LTD Corporation and Subsidiaries 9 Months 9 Months Ended 7/4/99 Ended 6/25/99 ------------------ -------------------- 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 ------------------- ------------------- Pro Forma Pro Forma Adjustments Consolidated --------------- ------------------- 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 ------------------- ------------------- 3[caad 234]I
RAYOVAC CORPORATION Unaudited Pro Forma Condensed Consolidated Statement of Operations (In thousands, except per share amounts) Historical ---------------------------------------- Rayovac ROV LTD Corporation and Subsidiaries 12 Months 12 Months Pro Forma Ended 9/30/98 Ended 12/31/98 Adjustments ------------------ -------------------- --------------- 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 ------------------- ------------------- Pro Forma Consolidated ------------------- 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 ------------------- ------------------- 4
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: 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 (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
(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