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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): November 13, 2003
Rayovac Corporation
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(Exact Name of Registrant as Specified in its Charter)
Wisconsin 001-13615 22-2423556
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
601 Rayovac Drive Madison, WI 53711
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(Address of Principal Executive Offices) (Zip Code)
(608) 275-3340
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Registrant's telephone number,
including area code
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits.
99.1 Press Release dated November 13, 2003 issued by Rayovac Corporation.
Item 12. Results of Operations and Financial Condition.
The following information, including the Exhibit attached hereto, is being
furnished pursuant to this Item 12 and shall not be deemed "filed" for purposes
of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it
be deemed incorporated by reference in any filing under the Securities Act of
1933, as amended, except as shall be expressly set forth by specific reference
in such filing.
On November 13, 2003, Rayovac Corporation issued a press release announcing its
financial results for its fourth fiscal quarter and fiscal year ended September
30, 2003. A copy of the press release is furnished as Exhibit 99.1 to this
report.
2
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: November 13, 2003 By: /s/ Randall J. Steward
--------------------------------
Name: Randall J. Steward
Title: Executive Vice President and
Chief Financial Officer
3
EXHIBIT INDEX
Exhibit Description
- ------- -----------
99.1 Press Release dated November 13, 2003 issued by Rayovac Corporation.
4
Exhibit 99.1
Rayovac Announces Fourth Quarter and Fiscal 2003 Results
-- Remington Transaction closed September 30
-- FY2004 EPS Guidance of $1.60 to $1.70
MADISON, Wis., Nov. 13 /PRNewswire-FirstCall/ -- Rayovac Corp. (NYSE: ROV)
announced today Fiscal 2003 fourth quarter diluted earnings per share of 39
cents and pro forma diluted earnings per share of 49 cents, meeting First Call
Consensus estimates. This compares to diluted earnings per share of 41 cents
and pro forma diluted earnings per share of 38 cents for the comparable prior
year period. The pro forma diluted EPS excludes the impact of certain charges
described in further detail in the release and in the attached Table 3,
"Reconciliation of GAAP to Pro Forma Financial Data."
(Logo: http://www.newscom.com/cgi-bin/prnh/20020716/ROVLOGO )
"In fiscal 2003, Rayovac transformed itself through the acquisition of
both VARTA Consumer Batteries and Remington Products to become a larger global
consumer products company with a portfolio of world-class brands," said David
Jones, chairman and CEO. "During this year, we diversified our product
portfolio, strengthened our position in international markets and introduced
revolutionary new products, which are all significant accomplishments
contributing to this transformation."
Fourth Quarter Results
Results for the fourth quarter and Fiscal 2003 year-end include those of
the consumer battery business of VARTA, acquired on October 1, 2002.
Quarterly comparative historical data for the acquired operations is not
available in U.S. Generally Accepted Accounting Principles (GAAP) format. All
comparisons to Fiscal 2002 exclude VARTA consumer battery business data in the
prior year.
For the fourth quarter, sales were $252.0 million, compared to
$154.3 million for the same period last year. Most of the sales increase was
attributable to the VARTA acquisition. Operating income was $28.3 million, up
from the $25.5 million for the same period last year. Fiscal 2003 operating
income benefited from the VARTA acquisition offset by $0.9 million of special
charges and $3.9 million of retailer inventory repricing programs. Fiscal
2002 benefited from a $1.4 million change in estimate to 2001 restructuring
initiatives.
Pro forma operating income was $33.1 million, up from $24.1 million last
year. The pro forma operating income increase was attributable to the sales
growth and integration synergies from the VARTA acquisition partially offset
by the impacts of lower sales in North America.
Interest expense increased to $9.1 million from $3.8 million last year,
the result of higher debt levels associated with the VARTA acquisition. Other
(income) expense improved $1.3 million versus last year, the result of
favorable foreign currency transaction gains.
Diluted earnings per share were 39 cents compared to 41 cents last year.
Pro forma diluted earnings per share were 49 cents, an increase of 29 percent
over pro forma diluted earnings per share of 38 cents last year. See attached
Table 3, "Reconciliation of GAAP to Pro Forma Financial Data," for a complete
reconciliation of operating income and net income, on a GAAP basis, to pro
forma operating income and net income for the fourth quarter and the
comparable period last year.
North America sales for the fourth quarter were $108.8 million, down
$13.8 million from the $122.6 million reported last year. This decline is
reflected in part by the anticipated impact of retailer transition to the new
alkaline ("50 percent more") program as the company completes SKU conversions
in preparation for the important October through December selling period.
Despite this decline in alkaline sales, three of the other product categories
showed sales gains during the quarter; hearing aid battery sales were up six
percent, lighting products increased 13 percent, and rechargeable battery and
charger sales increased 20 percent during the quarter, the result of a
successful retail sell-in of the Company's revolutionary new 15 Minute I-C3
rechargeable battery system. This new system will recharge the Company's I-C3
Nickel Metal Hydride (NiMH) batteries in as little as 15 minutes or less,
setting a new standard for the category.
North America segment profitability was $19.8 million, as compared to
$33.0 million reported last year. The decrease in profitability was the
result of the revenue shortfall, plus gross profit margin reduction due to
product and customer mix changes and the impact of retailer inventory
repricing programs.
The Europe/Rest of World results reflect the benefits of the VARTA
acquisition where sales were $108.7 million, up from $14.1 million last year.
The continued strength of hearing aid battery sales and Rayovac branded
general battery business also contributed to these favorable results. The
region's segment profitability increased to $14.0 million from $2.0 million
last year, largely due to the benefits of the VARTA acquisition.
In Latin America, sales increased to $34.5 million, up $16.9 million from
the same period last year. The sales improvement was attributable to the
VARTA acquisition partially offset by economic weakness in the region. Latin
America segment profitability was $6.8 million, an improvement of $8.0 million
versus last year. This improvement was the result of stronger sales of
alkaline and zinc carbon batteries, increased gross profit margins and lower
operating expenses as a percent of sales, reflecting our leverage of fixed
operating costs.
12 Month Results
Sales for the 12 months ending September 30, 2003 were $922.1 million,
compared to $572.7 million for the prior year. Operating income was
$59.6 million, a decrease of five percent over last year. Fiscal 2003 year-
to-date results include $32.6 million in special charges, and a $6.2 million
reduction in net sales reflecting retailer inventory repricing programs. In
Fiscal 2002, operating income included a $12.0 million bad debt expenses
related to the Kmart bankruptcy and $1.2 million of special charges related to
the closing of a manufacturing facility in Latin America.
Pro forma operating income was $98.4 million versus $76.2 million last
year, an increase of 29 percent. The increase was attributable to the benefit
of the VARTA acquisition, partially offset by a decrease in North America
segment profitability after excluding the impact of the Kmart bad debt expense
in last year's results.
Interest expense rose to $37.2 million from $16.0 million last year, the
result of higher debt levels associated with the additional borrowing on the
Company's amended credit facility to finance the VARTA acquisition. Non-
operating expense includes the write-off of $3.1 million of unamortized debt
issuance costs associated with our previous credit facility, which was
replaced as part of the VARTA acquisition. Other (income) expense improved
$5.0 million versus last year, the result of favorable foreign currency
exchange rates.
Diluted earnings per share for the 12-month period were 48 cents compared
to 90 cents last year. Pro forma diluted earnings per share for the full
Fiscal 2003 were $1.27, a nine percent increase compared to pro forma diluted
earnings per share of $1.16 for the same period last year. See attached Table
3, "Reconciliation of GAAP to Pro Forma Financial Data," for a complete
reconciliation of operating income and net income, on a GAAP basis, to pro
forma operating income and net income for the twelve-month period and the
comparable period last year.
North America sales were $376.0 million, down 14 percent from the
$435.5 million reported last year. This decline was primarily driven by a
decline in alkaline sales due to lower volume resulting from the intense
competitive environment and to pricing adjustments made during the year.
North America segment profitability was $64.8 million, a decrease from
$85.5 million reported last year. The profitability decline is due mainly to
the sales decline and changes in the sales mix. Last year's results included
the Kmart bad debt expense of $12.0 million.
The Europe/Rest of World results were significantly improved, reflecting
the benefits of the VARTA acquisition. Sales in the region were
$421.1 million, up from $52.5 million last year. Hearing aid battery sales
and Rayovac branded battery sales also contributed to these favorable results.
The region's segment profitability increased to $49.7 million from
$5.1 million for the comparable period last year.
In Latin America, sales increased to $125.0 million from $84.7 million in
the same period last year. The sales improvement was attributable to the
VARTA acquisition offset by continuing economic weakness and political
instability in the region. Latin America segment profitability was
$17.7 million versus $5.3 million last year. This improvement was the result
of improved sales and gross profit margins, somewhat offset by increased
operating expenses.
Remington Acquisition
On September 30, 2003, the Company closed the acquisition of Remington
Products LLC., which was originally announced on August 22, 2003. Remington
is a leading marketer of foil and rotary electric shavers, personal care and
grooming products for men and women. Remington's core North American shaving
and grooming products business has grown an average of 18 percent per year
from 1998 through 2002. Internationally, Remington products are sold through
a network of subsidiaries and distributors in more than 85 countries.
Remington is the number one selling brand of men's and women's foil electric
shavers in North America.
To finance the transaction, Rayovac sold $350 million of 8.5 percent
senior subordinated notes due 2013 and added $50.0 million to the term loan
portion of the Company's senior credit facility. On October 29, 2003, Rayovac
also successfully completed the redemption of the remaining Series B and
Series D Senior Subordinated Notes issued by Remington Products Company and
Remington Capital Corp that were not tendered at the time of the closing of
the Remington transaction.
Restructuring Initiatives
On October 10, 2002, the Company announced and committed to a series of
restructuring initiatives designed to optimize the global resources of the
combined VARTA and Rayovac organizations, eliminate surplus manufacturing
capacity and functional overhead, and to rationalize its main North America
packaging and distribution facilities into a single modern facility. As part
of this restructuring, the Company took additional actions in North America to
relaunch its alkaline products, simplify its consumer product pricing and
reduce its cost structure to align with its new pricing strategy. Total
charges for all of the restructuring initiatives were $38.8 million of which
$4.8 million occurred in the fourth quarter. Total cash costs of the program
were $25.2 million for the fiscal year. There will be no additional charges
for these initiatives.
Fiscal Year 2004 Outlook
For the fiscal year ending September 30, 2004 the Company expects diluted
earnings per share to be approximately $1.60 to $1.70 based upon current
business condition assumptions. This is an increase of approximately 26
percent to 34 percent over Fiscal 2003 and is based on expectations of the
Remington acquisition, continued synergy benefits of the VARTA acquisition and
internal earnings growth. Organic sales growth for the combined Company is
estimated in the 3 to 4 percent range. Taking the Remington acquisition into
account, we expect combined sales should total approximately $1.3 billion.
Non-GAAP Measurements
To assist investors in the reconciliation of GAAP financial reporting to
pro forma results, which present operating results on a basis excluding
restructuring items, the Company has placed a financial model on its website
detailing all of the items that historically reconcile the GAAP vs. pro forma
income statements. The model can be found at www.rayovac.com under About
Rayovac/Investor Resources. A reconciliation is also attached as Table 3 to
this press release.
Management, as well as certain investors, use these results of operations
(excluding restructuring items) to help measure the Company's current and
future financial performance and to identify trends in its financial condition
and results of operations. We believe these measurements provide supplemental
and useful information to assist management and investors in analyzing the
Company's financial position and results of operations, but do not replace the
presentation of the Company's GAAP financial results and should be read in
conjunction with those GAAP results. The Company has chosen to provide this
information to investors to enable them to perform meaningful comparisons of
past, present and future operating results; and as a means to identify the
results of on-going core operations.
Rayovac Corporation is a global consumer products company with a diverse
portfolio of world-class brands, including Rayovac, VARTA and Remington. The
Company holds many leading market positions including: the world's leader in
hearing aid batteries; the top selling rechargeable battery brand in North
America and Europe; and the number one selling brand of men's and women's foil
electric razors in North America. Rayovac markets its products in more than
100 countries and trades on the New York Stock Exchange under the ROV symbol.
Certain matters discussed in this news release, with the exception of
historical matters, are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements are
subject to a number of risks, uncertainties and other factors that could cause
results to differ materially from those anticipated as of the date of this
release. Actual results may differ materially from these statements as a
result of (1) changes in external competitive market factors, such as
introduction of new product features or technological developments,
development of new competitors or competitive brands or competitive
promotional activity or spending, (2) changes in consumer demand for the
various types of consumer batteries, (3) changes in the general economic
conditions where we do business, such as stock market prices, interest rates,
currency exchange rates, inflation and raw material costs, (4) our ability to
successfully implement manufacturing and distribution cost efficiencies and
(5) various other factors, including those discussed herein and those set
forth in the Company's most recent Form 10-Q, Annual Report on Form 10-K and
the S-4 Registration statement filed November 6, 2003 in connection with the
Company's most recent bond offering.
RAYOVAC CORPORATION
Condensed Consolidated Statements of Operations
For the three and twelve month periods ended September 30, 2003 and
September 30, 2002
(Unaudited)
(In millions, except per share amounts)
THREE MONTHS TWELVE MONTHS
INC INC
F2003 F2002 (DEC) % F2003 F2002 (DEC) %
Net sales $252.0 $154.3 63.3% $922.1 $572.7 61.0%
Cost of goods sold 154.1 85.4 549.5 334.1
Special charges (0.7) (1.4) 21.1 1.2
Gross profit 98.6 70.3 40.3% 351.5 237.4 48.1%
Selling 47.4 27.6 185.2 104.4
General and
administrative 18.5 13.9 80.9 56.9(a)
Research and
development 2.8 3.3 14.3 13.1
Special charges 1.6 -- 11.5 --
Total operating
expenses 70.3 44.8 291.9 174.4
Operating income 28.3 25.5 11.0% 59.6 63.0 (5.4%)
Interest expense 9.1 3.8 37.2 16.0
Non-operating
expense -- -- 3.1(b) --
Other (income)
expense, net (0.1) 1.2 (3.7) 1.3
Income before
income taxes 19.3 20.5 (5.9%) 23.0 45.7 (49.7%)
Income tax expense 6.4 7.4 7.5 16.5
Net income $12.9 $13.1 (1.5%) $15.5 $29.2 (46.9%)
Average shares
outstanding 31.9 31.8 31.8 31.8
Basic earnings per
share $0.40 $0.41 $0.49 $0.92
Average shares and
common stock
equivalents
outstanding 32.7 32.3 32.6 32.4
Diluted earnings
per share $0.39 $0.41 $0.48 $0.90
(a) The twelve month period ending September 30, 2002 reflects a bad debt
expense of $12.0 million attributable to the Kmart bankruptcy.
(b) The twelve month period ending September 30, 2003 reflects the write-
off of unamortized debt issuance costs of $3.1 million attributable to
the refinancing of the Company's credit facility as part of the VARTA
acquisition.
RAYOVAC CORPORATION
Supplemental Financial Data
For the three and twelve month periods ended September 30, 2003 and
September 30, 2002
(Unaudited)
(In millions, except per share amounts)
Supplemental Financial Data F2003 F2002
Cash (a) $107.8 $9.9
Total Debt (a) $942.1 $201.9
Business Segment Sales & THREE MONTHS TWELVE MONTHS
Profitability F2003 F2002 F2003 F2002
Net Sales
Europe/ROW $108.7 $14.1 $421.1 $52.5
North America 108.8 122.6 376.0 435.5
Latin America 34.5 17.6 125.0 84.7
Total net sales $252.0 $154.3 $922.1 $572.7
Segment Profit
Europe/ROW $14.0 $ 2.0 $49.7 $5.1
North America 19.8 33.0 64.8 85.5(b)
Latin America 6.8 (1.2) 17.7 5.3
Total segment profit 40.6 33.8 132.2 95.9
Corporate 11.4 9.7 40.0 31.7
Special charges 0.9 (1.4) 32.6 1.2
Interest expense 9.1 3.8 37.2 16.0
Non-operating expense -- -- 3.1 --
Other (income) expense,
net (0.1) 1.2 (3.7) 1.3
Income before income
taxes $19.3 $20.5 $23.0 $45.7
(a) Cash and Total Debt includes the impact of the Remington acquisition
and related financing activities and are reconciled to pre-acquisition
operating levels as follows:
Cash
Base Rayovac cash $12.9
Cash for retirement of remaining
Remington notes 56.0
Remington cash on hand 15.9
Cash to fund incremental working
capital requirements 23.0
Cash at September 30, 2003 $107.8
Total Debt
Base Rayovac debt $489.3
Net debt increase to fund Remington
acquisition 396.8
Remaining Remington notes outstanding 56.0
Total debt at September 30, 2003 $942.1
(b) The twelve month period ending September 30, 2002 reflects a bad debt
expense of $12.0 million attributable to the Kmart bankruptcy.
RAYOVAC CORPORATION
Reconciliation of GAAP to Pro Forma Financial Data
For the twelve month periods ended September 30, 2003 and 2002
(Unaudited)
(In millions, except per share amounts)
THREE MONTHS
2003 2002
Excluding Excluding
As Non- Non- As Non- Non-
reported recurring recurring reported recurring recurring
Net sales (a) $ 252.0 $ 3.9 $255.9 $154.3 $-- $154.3
Gross profit
(b),(c) 98.6 3.2 101.8 70.3 (1.4) 68.9
Gross profit
% of sales 39.1% 39.8% 45.6% 44.7%
Operating
expenses (d) 70.3 1.6 68.7 44.8 -- 44.8
Operating income 28.3 4.8 33.1 25.5 (1.4) 24.1
Operating income
% of sales 11.2% 12.9% 16.5% 15.6%
Income before
income taxes 19.3 4.8 24.1 20.5 (1.4) 19.1
Net income 12.9 3.0 15.9 13.1 (0.9) 12.2
Basic earnings
per share $0.40 $0.10 $0.50 $0.41 $(0.03) $0.38
Diluted earnings
per share $0.39 $0.10 $0.49 $0.41 $(0.03) $0.38
(a) Reflects the impact of North America retailer inventory repricing
programs of approximately $3.9 million associated with the Company's
new alkaline pricing program announced in the second quarter of Fiscal
2003.
(b) Fiscal 2003 reflects the impact of (i) North America retailer
inventory repricing programs of approximately $3.9 million, (ii) North
America restructuring initiatives of approximately ($1.0) million
primarily reflecting inventory and fixed asset impairment change in
estimates of ($1.8) million, a change in estimate associated with our
closure of our Wonewoc, Wisconsin manufacturing facility closed during
2001 of approximately ($0.3) million, termination benefits of
approximately $0.2 million, and relocation and other expenses of
approximately $0.9 million associated with the relocation of the
Company's Madison, Wisconsin packaging facility to the Company's new
leased distribution and packaging facility in Dixon, Illinois, and
(iii) European restructuring initiatives of approximately
$0.3 million.
(c) Fiscal 2002 reflects a change in estimate associated with the
completion of the Company's 2001 restructuring initiatives and its
closure of its Santo Domingo, Dominican Republic plant in July 2002.
(d) Fiscal 2003 reflects restructuring initiatives of approximately
$1.6 million primarily reflecting (i) termination benefits and exit
costs of approximately $0.9 million associated with the relocation of
the Company's Middleton, Wisconsin distribution facility to the
Company's new leased distribution and packaging facility in Dixon,
Illinois and (ii) distributor termination costs of approximately
$0.7 million associated with our European operations.
TWELVE MONTHS
2003 2002
Excluding Excluding
As Non- Non- As Non- Non-
reported recurring recurring reported recurring recurring
Net sales (a) $ 922.1 $6.2 $928.3 $572.7 $ -- $572.7
Gross profit
(b),(c) 351.5 27.3 378.8 237.4 1.2 238.6
Gross profit
% of sales 38.1% 40.8% 41.5% 41.7%
Operating
expenses (d),(e) 291.9 11.5 280.4 174.4 12.0 162.4
Operating income 59.6 38.8 98.4 63.0 13.2 76.2
Operating income
% of sales 6.5% 10.6% 11.0% 13.3%
Income before income
taxes (f) 23.0 41.9 64.9 45.7 13.2 58.9
Net income 15.5 26.0 41.5 29.2 8.3 37.5
Basic earnings per
share $0.49 $0.82 $1.31 $ 0.92 $0.26 $1.18
Diluted earnings
per share $0.48 $0.79 $1.27 $ 0.90 $0.26 $1.16
(a) Reflects the impact of North America retailer inventory repricing
programs of approximately $6.2 million associated with the Company's
new alkaline pricing program announced in the second quarter of Fiscal
2003.
(b) Fiscal 2003 reflects the impact of (i) North America retailer
inventory repricing programs of approximately $6.2 million, (ii)
European integration initiatives of approximately $2.3 million
primarily reflecting termination benefits of approximately
$1.2 million and inventory and asset impairments of approximately
$1.1 million, (iii) North America restructuring initiatives of
approximately $12.5 million, including fixed asset and inventory
impairments of approximately $6.7 million, pension and termination
costs of approximately $3.4 million, and relocation expenses and other
expenses of approximately $2.4 million associated with the relocation
of the Company's Madison, Wisconsin packaging facility to the
Company's new leased distribution and packaging facility in Dixon,
Illinois, and (iv) Latin America restructuring initiatives of
approximately $6.3 million reflecting the closure of the Company's
Mexico City, Mexico manufacturing location, including termination
payments of approximately $1.4 million, fixed asset and inventory
impairments of approximately $4.1 million, and other shutdown related
expenses of approximately $0.8 million.
(c) Fiscal 2002 reflects (i) the Company's closure of its Santo Domingo,
Dominican Republic plant and outsourcing of certain zinc carbon
production at its Mexico City, Mexico manufacturing location,
including approximately $1.2 million of termination benefits and
approximately $1.0 million of equipment, inventory, and other asset
impairments and (ii) a change in estimate associated with the
completion of the Company's 2001 restructuring initiatives.
(d) Fiscal 2003 reflects (i) North America and Corporate restructuring
initiatives of approximately $7.7 million, including approximately
$5.5 million of termination benefits, research and development
contract termination costs of approximately $0.5 million, fixed asset
impairments of approximately $0.3 million associated with the
relocation to the Company's new leased distribution and packaging
facility in Dixon, Illinois, and other expenses of approximately
$1.4 million, (ii) European integration initiatives of approximately
$2.3 million, including approximately $0.9 million of distributor
termination costs, approximately $0.6 million of termination benefits,
asset impairments of approximately $0.2 million, and other expenses of
approximately $0.6 million, and (iii) Latin America integration
initiatives of approximately $1.5 million, primarily reflecting
termination benefits associated with the integration of our Mexico and
Colombia businesses.
(e) Fiscal 2002 reflects a bad debt expense of approximately $12.0 million
attributable to the Kmart bankruptcy.
(f) Includes the non-recurring items discussed in footnotes (a) through
(e) and, in Fiscal 2003, the write-off of unamortized debt issuance
costs of approximately $3.1 million attributable to the refinancing of
the Company's credit facility as part of the VARTA acquisition.
SOURCE Rayovac Corp.
-0- 11/13/2003
/NOTE TO EDITORS: The '3' in 'I-C3' should be written in superscript
form./
/CONTACT: John Daggett of Rayovac Corp., +1-608-275-4912/
/Photo: http://www.newscom.com/cgi-bin/prnh/20020716/ROVLOGO
AP Archive: http://photoarchive.ap.org
PRN Photo Desk, 888-776-6555 or 212-782-2840/
/Web site: www.rayovac.com /
(ROV)
CO: Rayovac Corp.
ST: Wisconsin
IN: CHM
SU: ERN