UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report:
January 28, 2005
---------------------------------
(Date of earliest event reported)
RAYOVAC CORPORATION
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(Exact Name of Registrant as Specified in Charter)
Wisconsin 001-13615 22-2423556
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(State or other Jurisdiction of (Commission File No.) (IRS Employer
Incorporation) Identification No.)
Six Concourse Parkway, Suite 3300, Atlanta, Georgia 30328
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(Address of principal executive offices, including zip code)
(770) 829-6200
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(Registrant's telephone number, including area code)
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the Registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 7.01. REGULATION FD DISCLOSURE.
The following information is being furnished pursuant to this Item 7.01 and
shall not be deemed "filed" for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to
the liabilities of that section, nor shall it be deemed incorporated by
reference in any filing under the Securities Act of 1933, as amended, or the
Exchange Act except as shall be expressly set forth by specific reference in
such filing.
In connection with a proposed financing to be undertaken by Rayovac in
connection with the proposed acquisition of United Industries Corporation,
certain financial data was provided to potential financing sources. The Company
is furnishing the information by attaching it as Exhibits 99.1 through 99.4
hereto.
As used in the attached Exhibits 99.1 through 99.4, unless the context
indicates otherwise, "Rayovac" refers to Rayovac Corporation together with its
subsidiaries, "United" refers to United Industries Corporation together with
its subsidiaries, "Microlite" refers to Microlite S.A. together with its
subsidiaries, "Nu-Gro" refers to The Nu-Gro Corporation together with its
subsidiaries and "United Pet Group" refers to United Pet Group, Inc. together
with its subsidiaries.
Item 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
Exhibit
Number Description of Exhibit
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99.1 United Industries Corporation Unaudited Pro
Forma Condensed Combined Financial Information
for the Nine Months Ended September 30, 2004
and the Year Ended December 31, 2003
99.2 Summary Unaudited Pro Forma Condensed
Consolidated Financial Data as of and for the
Fiscal Year Ended September 30, 2004
99.3 Summary Financial Data - United, as of and for
the Fiscal Years Ended December 31, 2001, 2002
and 2003 and as of and for the Nine Months
Ended September 30, 2003 (as Restated) and 2004
99.4 Unaudited Pro Forma Condensed Consolidated
Financial Data as of and for the Fiscal Year
Ended September 30, 2004
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: January 28, 2005 RAYOVAC CORPORATION
By: /s/ Randall J. Steward
-----------------------------------
Name: Randall J. Steward
Title: Executive Vice President and
Chief Financial Officer
3
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
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99.1 United Industries Corporation Unaudited Pro
Forma Condensed Combined Financial Information
for the Nine Months Ended September 30, 2004
and the Year Ended December 31, 2003
99.2 Summary Unaudited Pro Forma Condensed
Consolidated Financial Data as of and for the
Fiscal Year Ended September 30, 2004
99.3 Summary Financial Data - United, as of and for
the Fiscal Years Ended December 31, 2001, 2002
and 2003 and as of and for the Nine Months
Ended September 30, 2003 (as Restated) and 2004
99.4 Unaudited Pro Forma Condensed Consolidated
Financial Data as of and for the Fiscal Year
Ended September 30, 2004
4
EXHIBIT 99.1
United Industries Corporation
Unaudited Pro Forma Condensed Combined Financial Information
For the Nine Months Ended September 30, 2004 and
For the Year Ended December 31, 2003
(Dollars in thousands, except where indicated)
The following unaudited pro forma condensed combined financial
information related to United Industries Corporation (United Industries or the
Company) and its acquisition of The Nu-Gro Corporation (Nu-Gro) and its merger
with and into United Pet Group, Inc. (UPG) is included for the nine months
ended September 30, 2004 and for the year ended December 31, 2003.
The acquisition of Nu-Gro closed on April 30, 2004 and the acquisition
of UPG closed on July 30, 2004; the information regarding the transactions,
including required financial and pro forma financial information has been
previously filed with the U.S. Securities and Exchange Commission. The
respective purchase price allocations ascribed to the Nu-Gro and UPG
acquisitions have been presented in the Company's Form 10-Q for the third
quarter of 2004, previously filed with the U.S. Securities and Exchange
Commission. The pro forma information contained herein includes the required
pro forma operating results of Nu-Gro and UPG.
The unaudited pro forma condensed combined financial information
presents how the combined financial statements of (1) United Industries, a
manufacturer and marketer of value-oriented products for the consumer lawn and
garden care and household insect control markets in the United States, (2)
Nu-Gro, a manufacturer and marketer of consumer lawn and garden products and
supplier of controlled release nitrogen and other fertilizer technologies in
Canada, and (3) UPG, a privately held marketer and manufacturer of premium
branded pet supplies, may have appeared had the businesses actually been
combined at the beginning of the periods presented herein. The unaudited pro
forma condensed combined financial information shows the impact of the
acquisitions of Nu-Gro and UPG on the Company's historical results of
operations under the purchase method of accounting with United Industries
treated as the acquirer. Under this method of accounting, United Industries
recorded the assets and liabilities of Nu-Gro and UPG at their estimated fair
values as of April 30, 2004 and July 30, 2004, respectively, the respective
dates the acquisitions were completed.
The unaudited pro forma condensed combined income statements
present the historical financial information of United Industries, Nu-Gro, and
UPG for the nine months ended September 30, 2004 and the year ended December
31, 2003 and give effect to the acquisitions as if they had been completed at
the beginning of the periods presented.
The unaudited pro forma condensed combined financial information has
been derived from and should be read in conjunction with the historical
consolidated financial statements and the related notes of United Industries,
as filed in its quarterly and annual reports with the U.S. Securities and
Exchange Commission, and the historical consolidated financial statements and
the related notes of Nu-Gro and UPG. The unaudited pro forma condensed combined
financial information includes estimated adjustments to record the assets and
liabilities of Nu-Gro and UPG at their respective fair values and represents
management's estimates based on available information. The final allocation of
the purchase price will be determined upon completion of a final valuation,
from an independent third-party valuation firm, to determine the fair values of
Nu-Gro's and UPG's tangible and identifiable intangible assets and liabilities
as of the acquisition date. Increases or decreases in the fair value of the net
assets, commitments, executory contracts and other items of Nu-Gro and UPG may
change the amount of the purchase price allocated to goodwill and other assets
and liabilities and may impact the income statements due to adjustments in
yield or amortization of the adjusted assets or liabilities.
The unaudited pro forma condensed combined financial information is
not necessarily indicative of the results of operations that would have
resulted had the acquisitions been completed at the beginning of the periods
presented, nor is it indicative of the results of operations in future periods
of the combined companies. In addition, the allocations of the purchase prices
which impact the income statements are subject to adjustment and may vary
materially from the actual purchase price allocations that will be recorded
upon receipt of a final independent third-party valuation report.
United Industries Corporation Pro Forma Condensed Combined Income Statement
Nine Months Ended September 30, 2004
($ in Thousands)
United
United United Pet The Nu-Gro Pro Forma Industries
Industries(1) Group(2) Corporation(3) Adjustments Combined
---------- ---------- ------------ ----------- -----------
Net sales.......................... $ 593,578 $ 142,333 $ 67,234 $ - $ 803,145
Cost of goods sold................. 392,776 96,366 51,443 5,904 (4) 546,489
---------- ---------- ------------ ----------- -----------
Gross profit....................... 200,802 45,967 15,791 (5,904) 256,656
Operating expenses................. 138,152 41,992 7,375 208 (5) 187,727
---------- ---------- ------------ ----------- -----------
Income from operations............. 62,650 3,975 8,416 (6,112) 68,929
Interest expense, net.............. 33,940 5,020 413 320 (6) 39,693
---------- ---------- ------------ ----------- -----------
Income (loss) before income taxes.. 28,710 (1,045) 8,003 (6,432) 29,236
Income tax expense (benefit)....... 7,447 2,694 2,937 (2,444) (7) 10,634
---------- ---------- ------------ ----------- -----------
Net income (loss).................. $ 21,263 $ (3,739) $ 5,066 $ (3,988) $ 18,602
========== ========== ============ =========== ===========
United Industries Corporation Pro Forma Condensed Combined Income Statement
Year Ended December 31, 2003
($ in Thousands)
United
United United Pet The Nu-Gro Pro Forma Industries
Industries(1) Group(2) Corporation(3) Adjustments Combined
---------- ---------- ------------ ----------- -----------
Net sales.......................... $ 536,146 $ 231,974 $ 155,193 $ - $ 923,313
Cost of goods sold................. 328,238 155,748 117,293 7,918 (4) 609,197
----------- ---------- ------------ ----------- -----------
Gross profit....................... 207,908 76,226 37,900 (7,918) 314,116
Operating expenses................. 139,042 43,351 22,866 3,760 (5) 209,019
----------- ---------- ------------ ----------- -----------
Income from operations............. 68,866 32,875 15,034 (11,678) 105,097
Interest expense, net.............. 36,213 7,412 1,121 3,632 (6) 48,378
----------- ---------- ------------ ----------- -----------
Income before income taxes......... 32,653 25,463 13,913 (15,310) 56,719
Income tax (benefit) expense....... (82,851) 8,752 4,904 (5,818) (7) (75,013)
----------- ---------- ------------ ----------- -----------
Net income......................... $ 115,504 $ 16,711 $ 9,009 $ (9,492) $ 131,732
=========== ========== ============ =========== ===========
Pro Forma Footnotes
Nine months ended September 30, 2004:
(1) Represents the historical operating results for United Industries for
the nine months ended September 30, 2004, including the results of
United Pet Group from July 30, 2004, its date of acquisition, through
September 30, 2004, and Nu-Gro from April 30, 2004, its date of
acquisition, through September 30, 2004.
(2) Represents the historical operating results for United Pet Group for
the period from January 1, 2004 to July 30, 2004.
(3) Represents the historical operating results for Nu-Gro for the period
from January 1, 2004 to April 30, 2004.
(4) Represents an adjustment to record incremental depreciation expense
related to property and equipment acquired in the United Pet Group
acquisition based on estimated fair values. Such property and
equipment is being depreciated using the straight-line method over
varying periods, the average of which is approximately 10 years. The
adjustment also includes a reclassification of $5.8 million from
selling, general and administrative expenses related to freight costs
to conform with the accounting treatment for such costs by United
Industries.
(5) Represents an adjustment to record incremental amortization expense
related to intangible assets (other than goodwill) acquired in the
United Pet Group and Nu-Gro acquisitions, based on estimated fair
values. Intangible assets acquired included trade names, patents and
customer relationships. The majority of acquired trade names are being
amortized using the straight-line method over periods ranging from 5
to 40 years, while several trade names have been determined to have
indefinite lives. Patents acquired and customer relationships are
being amortized using the straight-line method over 15 years and 5
years, respectively.
(6) Represents the change in interest expense related to the new senior
credit facility executed by United Industries on April 30, 2004, a
portion of the proceeds of which were used to finance the Nu-Gro
acquisition, and the amendment of such senior credit facility on July
30, 2004, a portion of the proceeds of which were used to finance the
United Pet Group acquisition.
(7) Represents the income tax benefit associated with the adjustments
described herein to arrive at an estimated pro forma 2004 statutory
tax rate of 38%.
Twelve months ended December 31, 2003:
(1) Represents the historical operating results for United Industries for
the twelve-month period ended December 31, 2003.
(2) Represents the historical operating results for United Pet Group for
the twelve-month period ended December 31, 2003.
(3) Represents the operating results for Nu-Gro for the twelve-month
period ended December 31, 2003 giving pro forma effect to the
acquisition of Greenleaf Group.
(4) Represents an adjustment to record incremental depreciation expense
related to property and equipment acquired in the United Pet Group
acquisition based on estimated fair values. Such property and
equipment is being depreciated using the straight-line method over
varying periods, the average of which is approximately 10 years. The
adjustment also includes a reclassification of $7.7 million from
selling, general and administrative expenses related to freight costs
to conform with the accounting treatment for such costs by United
Industries.
(5) Represents an adjustment to record incremental amortization expense
related to intangible assets (other than goodwill) acquired in the
United Pet Group and Nu-Gro acquisitions, based on estimated fair
values. Intangible assets acquired included trade names, patents and
customer relationships. The majority of acquired trade names are being
amortized using the straight-line method over periods ranging from 5
to 40 years, while several trade names have been determined to have
indefinite lives. Patents acquired and customer relationships are
being amortized using the straight-line method over 15 years and 5
years, respectively.
(6) Represents the change in interest expense related to the new senior
credit facility executed by United Industries on April 30, 2004, a
portion of the proceeds of which were used to finance the Nu-Gro
acquisition, and the amendment of such senior credit facility on July
30, 2004, a portion of the proceeds of which were used to finance the
United Pet Group acquisition, as if the acquisitions and related
financing activities had occurred on January 1, 2003.
(7) Represents the income tax benefit associated with the adjustments
described herein to arrive at an estimated pro forma 2004 statutory
tax rate of 38%.
EXHIBIT 99.2
Summary Unaudited Pro Forma Condensed Consolidated Financial Data
The following table sets forth certain summary unaudited pro forma
condensed consolidated financial data for Rayovac. The unaudited pro forma
condensed consolidated statement of operations data for the fiscal year ended
September 30, 2004 has been derived from Rayovac's audited statement of
operations for the fiscal year ended September 30, 2004 and United's unaudited
statement of operations for the nine months ended September 30, 2004 and the
three months ended December 31, 2003, and gives effect to the acquisition by
Rayovac of United, the acquisition by United of United Pet Group and Nu-Gro,
the acquisition by Rayovac of Microlite, and related transactions, as if all
such transactions had occurred on October 1, 2003. The unaudited pro forma
condensed consolidated balance sheet data as of September 30, 2004 has been
derived from Rayovac's audited balance sheet as of September 30, 2004 and
United's unaudited balance sheet as of September 30, 2004, and gives effect to
the acquisition of United and related transactions as if they occurred on
September 30, 2004.
The pro forma adjustments are based upon available information and
certain assumptions that we consider reasonable. The pro forma results of
operations are not necessarily indicative of the results of operations that
would have been achieved had the transactions reflected therein been
consummated on the dates indicated or that will be achieved in the future. The
unaudited pro forma condensed consolidated financial data is only a summary and
should be read in conjunction with "Capitalization," "Unaudited Pro Forma
Condensed Consolidated Financial Data," "Selected Financial Data--Rayovac,"
"Selected Financial Data--United," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Rayovac's, United's,
Microlite's, United Pet Group's and Nu-Gro's consolidated financial statements
and the notes thereto included elsewhere in this offering memorandum.
Fiscal Year Ended
September 30, 2004(1)
---------------------
($ in millions)
Statement of Operations Data:
Net sales $ 2,392.3
Cost of goods sold 1,422.7
Restructuring and related charges-cost of goods sold (0.8)
Gross profit 970.4
Operating expenses 746.0
Restructuring and related charges-operating expenses 12.2
Operating income 212.2
Income before income taxes 83.3
Net income from continuing operations(2) 144.0
Other Financial Data:
EBITDA(3) $ 295.2
Adjusted EBITDA(3) 365.5
Net cash provided by operating activities 180.7
Capital expenditures 50.6
Depreciation and amortization (excluding amortization
of debt issuance costs) 82.0
Ratio of total net debt to Adjusted EBITDA(4) 5.0x
Ratio of Adjusted EBITDA to interest expense 2.8x
Balance Sheet Data (at fiscal year end):
Cash and cash equivalents $ 24.1
Working capital(5) 463.8
Total assets 3,161.4
Total debt 1,836.6
Total shareholders' equity 727.2
Notes to Summary Unaudited Pro Forma Condensed Consolidated Financial Data
(1) A final determination of fair values and useful lives of certain assets,
which cannot be made prior to the completion of the acquisition of
United, may differ from preliminary estimates made by management. Any
final adjustments may change the allocation of purchase price, which
could affect the fair values assigned to the assets and liabilities, and
could result in a change to the unaudited pro forma condensed
consolidated financial data.
(2) Includes an income tax benefit as a result of United's reversal of a tax
valuation allowance of $104.1 million.
(3) EBITDA represents net income from continuing operations plus interest
expense, income tax expense, and depreciation and amortization (excluding
amortization of debt issuance costs). Adjusted EBITDA consists of EBITDA
plus restructuring and related charges of Rayovac included within cost of
goods sold and operating expenses, management's estimates of first year
synergies related to the acquisition of United, the normalization of
Microlite's results and other adjustments described below. Rayovac
management believes that the negative EBITDA recognized by Microlite for
the period from October 1, 2003 until May 28, 2004, which period was
prior to the acquisition of Microlite by Rayovac, is not indicative of
normalized results due to the significance of certain changes to
Microlite's business implemented by Rayovac. These changes include price
increases across all battery product lines; rationalization of
Microlite's product lines, resulting in the discontinuance of certain low
margin products; and the implementation of operational improvements which
Rayovac management expects to generate manufacturing efficiencies.
EBITDA and Adjusted EBITDA are measures commonly used by financial
analysts in evaluating operating performance. Accordingly, management
believes that EBITDA and Adjusted EBITDA may be useful for potential
purchasers of notes in assessing our operating performance and our
ability to meet our debt service requirements. EBITDA and Adjusted
EBITDA, as used herein, are not necessarily comparable to similarly
titled measures of other companies. The items excluded from EBITDA and
Adjusted EBITDA are significant in assessing our operating results and
liquidity. EBITDA and Adjusted EBITDA should not be considered in
isolation from, or as an alternative to, operating income, cash flow or
other combined income or cash flow data prepared in accordance with U.S.
GAAP.
EBITDA and Adjusted EBITDA are calculated from net income from continuing
operations and reconciled to net cash provided by operating activities as
follows:
Fiscal Year Ended
September 30, 2004
------------------
($ in millions)
Net income from continuing operations $ 144.0
Interest expense 129.9
Income tax benefit (60.7)
Depreciation and Amortization 82.0
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EBITDA 295.2
Rayovac adjustments(a) 28.7
United adjustments(b) 31.1
Management's preliminary estimate of first year synergies 10.5
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Adjusted EBITDA 365.5
Interest expense, less amortization (118.8)
Other non-cash adjustments 22.1
Changes in assets and liabilities, net of acquisitions 2.0
Current income taxes, cash special charges and other (90.1)
-------------
Net cash provided by operating activities 180.7
=============
(a) Rayovac's adjustments to arrive at Adjusted EBITDA
include the following ($ in millions):
Restructuring and related charges $ 11.4
Normalization of Microlite results 8.1
Costs associated with Remington integration 4.0
Costs and expenses related to defense and
settlement of class action lawsuit, preparation
for abandoned capital transaction, resolution
of certain state tax matters and tax consulting
services 3.2
Costs associated with corporate relocation to Atlanta 2.0
-------
$ 28.7
=======
(b) United's adjustments to arrive at Adjusted EBITDA include
the following ($ in millions):
Fair value increase to acquired value of inventory of
United Pet Group and Nu-Gro $ 9.3
United Pet Group warrant interest incurred prior to
the acquisition by United 6.9
Restructuring and integration costs associated with
the United Pet Group and Nu-Gro acquisitions 5.6
United Pet Group transaction costs incurred in
conjunction with its sale to United 7.3
United Pet Group debt issuance costs written off in
conjunction with its sale to United 1.5
Non-cash stock based compensation 0.5
--------
$ 31.1
========
(4) Total net debt is defined as total debt, less cash and cash equivalents.
(5) Working capital is defined as current assets less current liabilities.
EXHIBIT 99.3
Summary Financial Data--United
The following table sets forth United's summary financial data. The
condensed consolidated financial data of United as of December 31, 2002 and
December 31, 2003 and for each of the years ended December 31, 2001, 2002 and
2003 have been derived from United's audited consolidated financial statements
included elsewhere in this offering memorandum. The condensed consolidated
financial data as of and for the nine months ended September 30, 2003 and
September 30, 2004 have been derived from United's unaudited consolidated
financial statements included elsewhere in this offering memorandum. The
summary financial data for the nine months ended September 30, 2004 includes
the results of Nu-Gro from the date United acquired it on April 30, 2004 and
the results of United Pet Group from the date United acquired it on July 30,
2004. The unaudited condensed consolidated pro forma statements of operations
for United for the year ended December 31, 2003 and for the nine months ended
September 30, 2004 have been derived from United's unaudited pro forma
condensed consolidated financial information for the year ended December 31,
2003 and the nine months ended September 30, 2004, respectively, included
elsewhere in this offering memorandum, which unaudited pro forma condensed
consolidated financial information gives effect to the acquisition of Nu-Gro
and United Pet Group at the beginning of the periods presented. The unaudited
condensed consolidated financial data as of and for the nine months ended
September 30, 2003 and September 30, 2004 and the unaudited pro forma condensed
consolidated financial information for the nine months ended September 30, 2004
reflect all adjustments (consisting of normal, recurring adjustments) which
are, in the opinion of United's management, necessary for a fair presentation
of United's financial statements, results of operations and cash flows as of
and for the periods presented. The pro forma results are not necessarily
indicative of United's results had the acquisitions reflected therein been
consummated on the dates indicated and the results included below and elsewhere
in this offering memorandum are not necessarily indicative of United's future
performance, and results of operations for the nine months ended September 30,
2004 are not necessarily indicative of the results of United's operations for
the full year. This information is only a summary and should be read in
conjunction with "Selected Financial Data--United," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and United's,
United Pet Group's and Nu-Gro's consolidated financial statements and United's
unaudited pro forma condensed consolidated financial information and the notes
thereto included elsewhere in this offering memorandum. A final determination
of fair values and useful lives of certain assets of United Pet Group and
Nu-Gro may differ from preliminary estimates made by United's management. Any
final adjustments may change the allocation of purchase price, which could
affect the fair values assigned to the assets and liabilities, and could result
in a change to the unaudited pro forma condensed consolidated financial data.
Fiscal Year Ended December 31, Nine Months Ended September 30,
---------------------------------------------- ---------------------------------------
Pro Forma (As Restated) Pro Forma
2001 2002(1) 2003 2003 2003(2) 2004 2004
------- ------- ------ --------- ------------ -------- ----------
($ in millions)
Statement of Operations Data:
Net sales $ 273.3 $ 480.0 $ 536.1 $ 923.3 $ 488.8 $ 593.6 $ 803.1
Cost of goods sold(3)(4) 148.4 305.6 328.2 609.2 297.3 392.8 546.5
Gross profit 124.9 174.4 207.9 314.1 191.5 200.8 256.6
Operating expenses 80.2 113.2 139.0 209.0 111.5 138.2 187.7
Income from operations 44.7 61.2 68.9 105.1 80.0 62.7 68.9
Income before income taxes 8.9 28.8 32.7 56.7 52.4 28.7 29.2
Net income(5) 6.7 25.3 115.5 131.7 31.6 21.3 18.6
Other Financial Data:
EBITDA(6) $ 49.7 $ 71.4 $ 85.5 $ 142.0 $ 92.2 $ 86.8 $ 104.2
Adjusted EBITDA(6) 58.2 72.9 86.8 145.1 93.4 96.5 135.3
Net cash provided by operating
activities 25.4 38.2 17.3 47.0 86.4
Capital expenditures 7.9 10.5 11.7 6.7 12.0
Depreciation and amortization
(excluding amortization of
debt issuance costs)(7) 4.9 10.2 16.6 36.9 12.1 24.1 35.3
Balance Sheet Data (at period
end):
Cash and cash equivalents $ -- $ 10.3 $ 11.4 $ 44.1 $ 8.3
Working capital (9.5) 50.8 82.5 101.6 180.1
Total assets 272.6 386.0 479.9 403.6 1,054.7
Total debt, including capital
lease obligation 351.8 404.9 392.2 392.8 872.3
Total shareholders' equity
(deficit) (144.4) (96.2) 15.1 (67.7) 68.2
- -----------------------------------------------
(1) United's historical operating results for the year ended December 31,
2002 include the operating results of Schultz from May 9, 2002, the date
of merger, and WPC Brands from December 6, 2002, the date of acquisition.
(2) United had initially reflected the guidance outlined in EITF 02-17,
"Recognition of Customer Relationship Intangible Assets Acquired in a
Business Combination" as of the date United finalized the allocation of
the purchase price in connection with its acquisition of Schultz, in the
first quarter of 2003, and began amortizing the customer relationship
intangible asset over its remaining useful life. In March 2004, United
determined that the effect of the application of EITF 02-17 should have
been applied from the date of acquisition and, as such should have
resulted in a $2.4 million non-cash charge for the additional
amortization related to the final valuation of the $24.6 million customer
relationship intangible asset. Accordingly, United restated the March 31,
2003 quarterly financial information to include the non-cash adjustment,
which has increased first quarter 2003 selling, general and
administrative expenses by $2.4 million and decreased income before
income tax expense and net income by $2.4 million, as the intangible
assets are not deductible for tax purposes.
(3) Cost of goods sold for the nine months ended September 30, 2004 includes
a $9.3 million inventory write-up for inventory recorded at fair value in
connection with the Nu-Gro and United Pet Group acquisitions in April
2004 and July 2004, respectively. Cost of goods sold for the year ended
December 31, 2003 includes a $1.3 million inventory write-up for
inventory recorded at fair value in connection with the WPC Brands
acquisition in December 2002. Cost of goods sold for the year ended
December 31, 2002 includes a $1.5 million inventory write-up for
inventory recorded at fair value in connection with the Schultz merger in
May 2002.
(4) During the year ended December 31, 2001, United recorded an $8.5 million
charge, of which $5.6 million was recorded in facilities and
organizational rationalization related to a warehouse consolidation
project and severance costs associated with an early voluntary retirement
program, $2.7 million was recorded in cost of goods sold as a result of
obsolete inventory related to the discontinuance of a product, and $0.2
million was recorded in selling, general and administrative expenses. In
addition, selling, general and administrative expenses for the year ended
December 31, 2003 includes a $2.4 million non-cash charge for additional
amortization related to the final valuation of the $24.6 million customer
relationship intangible asset acquired in United's merger with Schultz as
previously described in note (2) above. For more information, see
"Management's Discussion and Analysis of Financial Condition and Results
of Operations--United--Other Events and Recent Strategic Transactions."
(5) During the year ended December 31, 2003, United determined it was more
likely than not that it would fully utilize its deferred tax assets and,
accordingly, it fully reversed the valuation allowance of $104.1 million
resulting in an income tax benefit for the year ended December 31, 2003.
(6) EBITDA represents net income plus interest expense, income tax expense,
depreciation and amortization (excluding amortization or write-off of
debt issuance costs). Adjusted EBITDA consists of EBITDA plus non-cash
charges included within operating expenses, such as depreciation and
amortization expense associated with the write-up of fixed assets and
intangible assets acquired from Nu-Gro and United Pet Group to estimated
fair value on their acquisition dates, as required by purchase
accounting, and other non-cash expenses, and nonrecurring charges
included within operating expenses, such as rationalization of certain
facilities and organizational activities in 2001.
EBITDA and Adjusted EBITDA are measures commonly used by financial
analysts in evaluating performance. Accordingly, management believes that
EBITDA and Adjusted EBITDA may be useful for potential purchasers of
notes in assessing our operating performance and our ability to meet our
debt service requirements. EBITDA and Adjusted EBITDA, as used herein,
are not necessarily comparable to similarly titled measures of other
companies. The items excluded from EBITDA and Adjusted EBITDA are
significant in assessing our operating results and liquidity. EBITDA and
Adjusted EBITDA should not be considered in isolation from, or as an
alternative to, operating income, cash flow or other combined income or
cash flow data prepared in accordance with U.S. GAAP.
EBITDA and Adjusted EBITDA are calculated from net income and reconciled
to operating income as follows:
Fiscal Year Ended Nine Months Ended
December 31, September 30,
---------------------------------- ---------------------------
Pro (As Pro
Forma Restated) Forma
2001 2002 2003 2003 2003 2004 2004
------ ------ ------ -------- --------- ------- -------
($ in millions)
Net income $ 6.7 $ 25.3 $ 115.5 $ 131.7 $ 31.6 $ 21.3 $ 18.6
Interest expense, net 35.8 32.4 36.2 48.4 27.6 33.9 39.7
Income tax expense (benefit) 2.2 3.4 (82.9) (75.0) 20.8 7.5 10.6
------ ------ ------ -------- --------- ------- -------
Operating income 44.7 61.2 68.9 105.1 80.0 62.7 68.9
Depreciation and amortization 4.9 10.2 16.6 36.9 12.1 24.1 35.3
------ ------ ------ -------- --------- ------- -------
EBITDA 49.7 71.4 85.5 142.0 92.2 86.8 104.2
Fair value increase to acquired inventory -- 1.5 1.3 3.1 1.3 9.3 9.3
Non-cash stock based compensation -- -- -- -- -- 0.5 0.5
Nonrecurring expenses:
United Pet Group warrant interest incurred prior to the
acquisition by United -- -- -- -- -- -- 6.9
Restructuring and integration costs associated with the
United Pet Group and Nu-Gro acquisitions -- -- -- -- -- -- 5.6
United Pet Group transaction costs incurred in
conjunction with its sale to United -- -- -- -- -- -- 7.3
United Pet Group deferred financing costs write-off -- -- -- -- -- -- 1.5
Facilities and organizational rationalization 8.5 -- -- -- -- -- --
------ ------ ------ -------- -------- ------- ------
Adjusted EBITDA $ 58.2 $ 72.9 $ 86.8 $ 145.1 $ 93.4 $ 96.5 $135.3
====== ====== ======= ========= ======== ======= ======
(7) In accordance with current accounting standards, depreciation and
amortization for the years ended December 31, 2003 and 2002 does not
include amortization of goodwill. The year ended December 31, 2001
includes amortization expense related to goodwill of less than $0.1
million. Depreciation and amortization for the year ended December 31,
2003 includes a $2.4 million non-cash charge for additional amortization
related to the final valuation of the $24.6 million customer relationship
intangible asset acquired in United's merger with Schultz. For more
information, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations--United--Other Events and Recent
Strategic Transactions."
EXHIBIT 99.4
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma condensed consolidated balance sheet as
of September 30, 2004 and the unaudited pro forma condensed consolidated
statement of operations for the fiscal year ended September 30, 2004 are based
on the consolidated financial statements of Rayovac and United after giving
effect to Rayovac's acquisition of Microlite, United's acquisitions of Nu-Gro
and United Pet Group and consummation of the respective transactions, including
the acquisition of United, and the assumptions and adjustments described in the
accompanying notes to the unaudited pro forma condensed consolidated financial
data.
The unaudited pro forma condensed consolidated balance sheet as of
September 30, 2004 has been derived from Rayovac's condensed consolidated
balance sheet as of September 30, 2004 and United's unaudited consolidated
balance sheet as of September 30, 2004, adjusted to give effect to the
transactions as if they had occurred on September 30, 2004. The unaudited pro
forma condensed consolidated statement of operations data for the fiscal year
ended September 30, 2004 has been derived from Rayovac's audited statement of
operations data for the fiscal year ended September 30, 2004 and United's
unaudited statement of operations data for the nine months ended September 30,
2004 and the three months ended December 31, 2003. The unaudited pro forma
condensed consolidated statement of operations for the fiscal year ended
September 30, 2004 gives effect to the transactions as if they occurred at the
beginning of the period presented. The unaudited pro forma condensed
consolidated statement of operations for the fiscal year ended September 30,
2004 gives effect to United's acquisition of Nu-Gro, which occurred on April
30, 2004, Rayovac's acquisition of Microlite, which occurred on May 28, 2004,
and United's acquisition of United Pet Group, which occurred on July 30, 2004,
and the acquisition of United by Rayovac as if each acquisition occurred at the
beginning of the period presented. The unaudited pro forma condensed
consolidated statement of operations excludes non-recurring items directly
attributable to the transactions.
The unaudited pro forma condensed consolidated financial data are based
on preliminary estimates and assumptions set forth in the notes to such
information. Pro forma adjustments are necessary to reflect the estimated
purchase price for the respective transactions, the new debt and equity
structure and to adjust amounts related to United's assets and liabilities to a
preliminary estimate of their fair values. Pro forma adjustments are also
necessary to reflect interest expense and the income tax effect related to the
pro forma adjustments.
The pro forma adjustments and allocation of purchase price are
preliminary and are based on management's estimates of the fair value of the
assets acquired and liabilities assumed. The final purchase price allocation
will be completed after asset and liability valuations are finalized. This
final valuation will be based on the actual assets and liabilities of United
that exist as of the date of the completion of the transactions as well as the
actual assets and liabilities of Microlite that existed as of the date Rayovac
acquired it and the actual assets and liabilities of Nu-Gro and United Pet
Group as of the respective dates United acquired them. Any final adjustments
may change the allocation of purchase price which could affect the fair value
assigned to the assets and liabilities and could result in a change to the
unaudited pro forma condensed consolidated financial data, including pro forma
net income. In addition, the impact of integration activities, the timing of
the completion of the transactions and other changes in United's assets and
liabilities prior to completion of the transactions could cause material
differences in the information presented.
The unaudited pro forma condensed consolidated financial data are
presented for informational purposes only and have been derived from, and
should be read in conjunction with, "Selected Financial Data--Rayovac",
"Selected Financial Data--United" and the consolidated financial statements of
Rayovac and United, including the notes thereto. The pro forma adjustments, as
described in the notes to the unaudited pro forma condensed consolidated
financial data, are based on currently available information and certain
adjustments that we believe are reasonable. They are not necessarily indicative
of our consolidated financial position or results of operations that would have
occurred had the transactions taken place on the dates indicated, nor are they
necessarily indicative of future consolidated financial position or results of
operations.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of September 30, 2004
Rayovac &
United Pro
Rayovac United Pro Forma Forma
Corporation Industries Adjustments(1) Combined
------------ ---------- ------------- -------------
($ in millions)
ASSETS
Current assets:
Cash and cash equivalents $ 15.8 $ 8.3 $ -- $ 24.1
Accounts receivable, net 289.6 107.5 -- 397.1
Inventories 264.7 160.0 15.0 (2) 439.7
Deferred income taxes 19.2 -- 6.7 (3) 26.0
Other current assets 61.1 19.9 -- 81.0
------------- ----------- ------------- ------------
Total current assets 650.5 295.7 21.7 967.9
Property, plant and equipment, net 182.4 99.4 -- 281.8
Goodwill 320.6 247.4 456.7 (4) 1,024.7
Intangible assets, net 422.1 310.9 -- 733.0
Deferred income taxes -- 78.5 -- 78.5
Other assets 60.4 22.8 (7.7)(5) 75.5
------------- ----------- ------------- ------------
Total assets $ 1,636.0 $ 1,054.7 $ 470.7 $ 3,161.4
============= =========== ============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 23.9 $ 6.7 $ (3.5)(6) $ 27.1
Accounts payable 228.0 41.7 -- 269.7
Accrued liabilities 146.7 67.2 (6.6)(6) 207.3
------------- ----------- ------------- ------------
Total current liabilities 398.7 115.5 (10.0) 504.1
Long term debt, net of current maturity 806.0 865.7 137.8 (6) 1,809.5
Deferred income taxes 7.3 -- -- 7.3
Other non-current liabilities 106.6 5.3 -- 111.9
------------- ----------- ------------- ------------
Total liabilities $ 1,318.5 $ 986.5 $ 127.8 $ 2,432.8
------------- ----------- ------------- ------------
Minority interest in equity of consolidated
subsidiary 1.4 -- -- 1.4
Total shareholders' equity 316.0 68.2 342.9 (7) 727.2
------------- ----------- ------------- ------------
Total liabilities and shareholders' equity $ 1,636.0 $ 1,054.7 $ 470.7 $ 3,161.4
============= =========== ============= ============
Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
(1) The total estimated consideration as shown in the table below is allocated to the assets and liabilities of United
as if the transactions had occurred on September 30, 2004. The allocation set forth below is preliminary. The
unaudited pro forma condensed consolidated financial information assumes that the historical values of United's
current assets, current liabilities and property plant and equipment approximate fair value, except as adjusted,
pending forthcoming appraisals and other financial information.
The allocation of consideration to acquired intangible assets is subject to the outcome of independent appraisals
to be conducted after the completion of the transactions. A pro forma allocation of the consideration to the
identifiable intangible assets of United has not been performed below, instead all residual consideration has been
allocated to goodwill. The actual amounts recorded when the combination transactions are completed may differ
materially from the pro forma amounts presented below.
Total purchase price ($ in millions):
Issuance of Rayovac common stock $ 439.2
Cash consideration 70.0
Assumption of United debt 871.4
Acquisition related costs 33.7
---------
$ 1,414.3
=========
Preliminary allocation of purchase price, reflecting the transactions ($ in millions):
Estimated adjustments to reflect assets and liabilities at fair value:
Historical value of assets acquired, excluding goodwill, as of September 30, 2004 $ 807.3
Historical values of liabilities assumed (986.5)
Write-off of United deferred financing fees (19.9)
Adjustment to eliminate United bond premium 1.0
Current deferred tax asset recognized in association
with the write-off of United deferred financing fees 7.5
Inventory valuation 15.0
Current deferred tax liability recognized on inventory valuation (5.7)
Assumption of United debt 871.4
Direct acquisition costs 20.0
Goodwill acquired (including $247.4 million of pre-acquisition goodwill) 704.2
---------
$ 1,414.3
=========
(2) Adjustment to the estimated purchase accounting valuation related to inventory.
(3) Tax benefits associated with the anticipated write-off of Rayovac and United unamortized debt issuance costs and
purchase accounting adjustments to inventory.
(4) Estimated preliminary fair market value of incremental goodwill associated with the transactions.
(5) Write-off of United unamortized debt issuance costs of approximately $19.9 million and Rayovac unamortized debt
issuance costs of $12.9 million related to debt to be refinanced less the estimated $25.0 million of deferred
financing costs to be incurred in connection with the transactions.
(6) Net additional debt incurred after repayment of United debt, $868.8 million, and accrued interest, $4.7 million,
at September 30, 2004.
(7) Reflects the following adjustments affecting equity ($ in millions except per share data):
Issuance of common stock (13.75 million shares at $31.94) $ 439.2
Direct acquisition costs (20.0)
Historical value of United net assets acquired (68.2)
Rayovac debt financing cost write-off, net of tax (8.0)
--------
$ 342.9
========
Note: The stock price of $31.94 used in the calculation of the purchase price is
based on a five day closing price average beginning on December 30, 2004.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Fiscal Year Ended September 30, 2004
($ in millions)
Rayovac Pro Forma Rayovac United United Pet
Corporation Microlite(1) Adjustments Combined Industries(5) Group(6) Nu-Gro(7)
----------- ---------- ----------- ---------- ----------- ---------- ---------
Consolidated Statement of
Operations
Net sales $ 1,417.2 $ 37.6 $ -- $ 1,454.8 $ 640.9 $ 206.8 $ 89.8
Cost of goods sold 811.9 28.3 -- 840.2 423.7 136.6 69.8
Restructuring and related charges (0.8) -- -- (0.8) -- -- --
----------- ----------- ----------- ---------- ----------- ---------- ---------
Gross profit 606.1 9.3 -- 615.4 217.2 70.3 20.0
Operating expenses:
Selling, general and
administrative expenses 437.7 15.7 3.2 (2) 456.6 165.7 55.3 11.8
Restructuring and related
charges 12.2 -- -- 12.2 -- -- --
----------- ----------- ----------- ---------- ----------- ---------- ---------
449.9 15.7 3.2 468.8 165.7 55.3 11.8
Operating income (loss) 156.2 (6.4) (3.2) 146.6 51.5 15.0 8.2
Interest expense 65.7 4.4 (2.2)(3) 67.8 42.5 7.3 0.6
Other expense (income), net 0.1 (0.1) -- -- -- -- --
Minority interest (0.1) -- -- (0.1) -- -- --
----------- ---------- ----------- ---------- ----------- ---------- ---------
Income (loss) from continuing
operations before income taxes 90.5 (10.7) (1.0) 78.9 9.0 7.7 7.6
Income tax expense (benefit) 34.4 -- -- (4) 34.4 (96.2) 5.9 2.8
Net income from continuing
operations $ 56.2 $ (10.7) $ (1.0) $ 44.5 $ 105.2 $ 1.8 $ 4.8
=========== =========== =========== ========== =========== ========== =========
Basic net income per common share $ 1.68
===========
Weighted average shares of
common stock outstanding 33,433,000
===========
Diluted net income per common
share $ 1.62
===========
Weighted average shares of
common stock outstanding 34,620,000
===========
[Table continued]
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Fiscal Year Ended September 30, 2004
($ in millions)
Rayovac &
United
United Pro
Pro Forma Industries Pro Forma Forma
Adjustments Combined Adjustments Combined
----------- ----------- ----------- ------------
Consolidated Statement of
Operations
Net sales $ -- $ 937.5 $ -- $ 2,392.3
Cost of goods sold 7.9 (8) 638.0 (55.5)(12) 1,422.7
Restructuring and related charges -- -- -- (0.8)
----------- ----------- ----------- ------------
Gross profit (7.9) 299.5 55.5 970.4
Operating expenses:
Selling, general and
administrative expenses 1.1 (9) 233.9 55.5 (12) 746.0
Restructuring and related
charges -- -- -- 12.2
----------- ----------- ----------- ------------
1.1 233.9 55.5 758.2
Operating income (loss) (9.0) 65.6 -- 212.2
Interest expense 1.2 (10) 51.6 10.4 (13) 129.9
Other expense (income), net -- -- (0.9)(14) (0.9)
Minority interest -- -- -- (0.1)
----------- ----------- ----------- ------------
Income (loss) from continuing
operations before income taxes (10.3) 14.0 (9.5) 83.3
Income tax expense (benefit) (3.9)(11) (91.5) (3.6)(15) (60.7) (16)
Net income from continuing
operations $ (6.4) $ 105.5 $ (5.9) 144.0
=========== =========== =========== ============
Basic net income per common share $ 3.05
============
Weighted average shares of
common stock outstanding 47,183,000 (17)
============
Diluted net income per common
share 2.98
============
Weighted average shares of
common stock outstanding 48,370,000 (17)
============
Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations
(1) Represents the unaudited historical operating results for Microlite for
the period from October 1, 2003 to May 28, 2004.
(2) Reclassification of Microlite expenses from interest expense to selling,
general and administrative expenses to conform to the Rayovac
presentation.
(3) Reclassification of Microlite expenses to conform to Rayovac's
presentation, net of additional interest expense of $0.9 million incurred
in connection with the acquisition of Microlite.
(4) No net income tax benefit has been recognized in connection with
Microlite's operating loss for the period from October 1, 2003 to May 28,
2004. Based on historical levels of income and the length of time required
to utilize its deferred tax assets, Rayovac determined that it was more
likely than not that it would not fully utilize its Microlite deferred tax
assets and therefore recorded a valuation allowance against the benefit of
such losses.
(5) Represents the historical operating results for United for the
twelve-month period ended September 30, 2004, including the results of
United Pet Group from July 30, 2004, its date of acquisition, through
September 30, 2004, and Nu-Gro from April 30, 2004, its date of
acquisition, through September 30, 2004.
(6) Represents the historical operating results for United Pet Group for the
period from October 1, 2003 to July 30, 2004.
(7) Represents the historical operating results for Nu-Gro for the period from
October 1, 2003 to April 30, 2004.
(8) Represents a reclassification of $7.7 million of United Pet Group freight
costs from selling, general and administrative expenses to conform with
the accounting treatment for such costs by United. The adjustment also
includes an adjustment to record incremental depreciation expense related
to property and equipment acquired in the United Pet Group acquisition
based on estimated fair values. Such property and equipment is being
depreciated using the straight-line method over varying periods, the
average of which is approximately 10 years.
(9) Represents an adjustment to record approximately $8.8 million of
incremental amortization expense related to intangible assets (other than
goodwill) acquired in the United Pet Group and Nu-Gro acquisitions, based
on estimated fair values. Intangible assets acquired included trade
names, patents and customer relationships. The majority of acquired trade
names are being amortized using the straight-line method over periods
ranging from 5 to 40 years, while several trade names have been
determined to have indefinite lives. Patents acquired and customer
relationships are being amortized using the straight-line method over 15
years and 5 years, respectively. This adjustment is partially offset by
the reclassification of $7.7 million of United Pet Group freight costs
from selling, general and administrative expenses to cost of goods sold
to conform with the accounting treatment for such costs by United.
(10) Represents the change in interest expense related to the senior credit
facility executed by United on April 30, 2004, a portion of the proceeds
of which were used to finance the Nu-Gro acquisition, and the amendment
of such senior credit facility on July 30, 2004, a portion of the
proceeds of which were used to finance the United Pet Group acquisition.
(11) Represents the income tax benefit associated with the adjustments
described herein to arrive at an estimated pro forma 2004 statutory tax
rate of 38%.
(12) Represents a reclassification of freight costs from cost of goods sold to
selling, general and administrative expenses to conform with the
accounting treatment for such costs by Rayovac.
(13) Represents increased interest expense, net of a reclassification of
interest income, associated with the debt issued and refinanced in
connection with the transactions. The effect of a 0.125% change in the
expected interest rate on the approximately $739 million of variable rate
debt to be incurred in connection with the transactions is approximately
$0.9 million.
(14) Represents a reclassification of interest income from interest expense,
net, to conform to Rayovac's presentation.
(15) Represents the income tax benefit associated with the adjustments
described herein to arrive at an estimated pro forma 2004 statutory tax
rate of 38%.
(16) Includes a reduction of income tax expense of $104.1 million, reflecting
a full reversal of United's valuation allowance originally established
against the tax deductible goodwill deduction and certain net operating
loss carryforwards that were generated in 1999 through 2003. Based on
historical levels of income and the length of time required to utilize
its deferred tax assets, Rayovac determined that it was more likely than
not that it would fully utilize its deferred tax assets and that it was
no longer necessary to maintain a valuation allowance. The following
table excludes this one-time adjustment from income tax expense in
arriving at net income ($ in millions):
Rayovac &
United Pro
Forma Tax Pro Forma
Combined Adjustment Adjusted
------------- -------------- -----------
Income from continuing operations before income taxes $ 83.3 $ -- $ 83.3
Income tax expense (benefit) (60.7) 104.1 43.4
------------- -------------- -----------
Income from continuing operations $ 144.0 $ (104.1) $ 39.9
------------- -------------- -----------
(17) Increase to weighted average shares outstanding due to the assumed
issuance of 13.75 million shares of Rayovac common stock on
October 1, 2003.