CASE: Rayovac Corporation

In September 1997, Rayovac’s CEO, David Jones, sat down to review the progress that he and his management team had achieved since the
leveraged buyout. The stock market was red hot, and Thomas H. Lee, a leveraged buyout firm, was considering ways of realising some of the
gains on their investment. Although the company was performing ahead of expectations, it had only been 12 months since Thomas H. Lee
completed the leveraged buyout, and Jones and the new management team had not implemented all of the improvements they identified at
the time of the transaction. Moreover, he was concerned that the market might not value the progress made to date without a longer and more
proven track record.
Thomas H. Lee recruited Jones to lead Rayovac while they were negotiating the acquisition in September 1996. Jones found the opportunity
attractive for a number of reasons. First, the battery market was growing rapidly relative to other consumer products due to technological
advancements and the proliferation of electronic devices. Second, Rayovac was the sleepy player in the industry with an underexploited brand
and excellent manufacturing capabilities and technology. Finally, Jones believed that Rayovac presented a unique turnaround opportunity. This
belief had been borne out as changes executed by Jones and the management team had reduced operating costs substantially while growing
the top line. However, Jones felt as though there was still more work to be done and wondered how to deal with Thomas H. Lee’s desire to
realise value so soon.

THE COMPANY

Founded in 1906, as the French Battery Company, Rayovac is the third largest manufacturer and marketer of batteries in the United States. The
company is headquartered in Madison, Wisconsin, and as of July 1996, Rayovac employed 2,480 people. In 1996, Thomas Pyle, chairman and
chief executive officer of the company, together with his family owned 91.3% of Rayovac’s capital stock. The remainder was owned by the
officers of the company.
Within the general battery market, the company is the leader in a number of areas, including (1) the household rechargeable and heavy-
duty battery segments, (2) hearing aid batteries, (3) lantern batteries, and (4) lithium batteries for personal computer memory back-up. In
addition, Rayovac is one of the leading marketers of flashlights and other battery-powered lighting products in the United States. The company
markets and sells its products in the United States, Europe, Canada and the Far East through a variety of distribution channels, including retail,
industrial, professional, and OEMs. By positioning its products as a value brand in the early 1980s the company became the leader in mass

TM:Page 1 of 16
merchandise retail channel, a rapidly growing retail segment in the United States and Canada. Rayovac offers batteries of substantially the same
quality and performance, but at lower price points than those of its competitors.

THE BATTERY INDUSTRY

In 1995, the U.S. battery industry generated $4.1 billion is sales, of which approximately $2.3 billion took place through retail channels. Between
1986 and 1995, the retail segment experienced compound annual unit sales growth in excess of 5%. This growth was driven by (1) the popularity
of battery-powered devices, (2) the miniaturisation of such devices, and (3) increased purchases of multiple battery packages for household use.
This growth continued, and in 1997 the U.S. battery industry generated $4.3 billion in sales.
The U.S battery industry is dominated by Duracell and Energizer, with Rayovac in third position. The three companies account for over 90%
of the sales in the U.S. general retail battery market. Analysts note that the competitive structure of the battery industry will only support three
manufacturers in a specific battery market. Although new players sometimes seek to enter, the substantial capital expenditures required make
successful new competition difficult. In 1995, Rayovac estimated that it would require an initial investment of $120 million to build a battery
manufacturing facility with five production lines. In addition to high fixed costs, industry players are heavily dependent on strong distribution
channels, product differentiation, brand awareness, and access to retail shelf space.
The battery market has three submarkets: general retail, industrial, and hearing aids. The retail market is the broadest category and includes
alkaline, reusable/rechargeable, and heavy-duty batteries. The segment accounted for 56% of all battery sales in 1995 and 1997. Zinc carbon,
known as “heavy-duty” batteries were forerunners to the alkaline technology with which most consumers are currently familiar. Though heavy-
duty batteries continue to be manufactured for low- and medium-drain devices (i.e., lanterns and flashlights), sales have been declining. Alkaline
batteries last four to five times longer. In the 1980s alkaline batteries gained wide acceptance; by 1996 they accounted for approximately 86%
of the general retail battery market. Rechargeable batteries have also increased in availability. Though they have yet to catch on, rechargeable
batteries have increased in quality, offering consumers a good value in terms of cost and power.
In line with other retail trends, mass merchandisers and warehouse clubs have recorded rapid growth in battery sales in recent years. Mass
merchandisers accounted for 66% of the total increase in general battery retail sales from 1993 to 1997. Batteries are popular with retailers
because they offer attractive profit margins and consume little shelf or warehouse space.
The industrial battery market accounted for 10% of total U.S. sales in 1994 and 19% in 1997. Products in this segment include alkaline, heavy-
duty, and lantern batteries sold to such consumers as government agencies, maintenance repair operations, and office product supply
companies.
The hearing aid market accounted for 5% of the total U.S. battery market in 1997, and it has grown at a 5% annual rate since 1992. The U.S.
hearing aid battery industry had aggregate sales of approximately $205 million in 1996 ($530 million worldwide). Rayovac estimates that there

TM:Page 2 of 16
are 26 million hearing impaired individuals in the United States, but only 5.5 million hearing aid users. The trend is miniaturisation. As hearing
aids become smaller, they gain wider acceptance and create demand for smaller batteries that must be changed more frequently. The
combination of increasing demand and technological innovation will continue to fuel growth in this segment for years to come.
The top competitors in the U.S. battery market are Duracell and Eveready.

Duracell
Duracell is the top manufacturer of batteries in the United States with 45% of alkaline market in 1996. After its buyout by Kohlberg, Kravis,
Roberts and Co. (KKR) in 1988, the company led the industry in an attempt to change perceptions of the consumer battery market from a
commodity to a highly differentiated product. In the late 1980s, the company spent record amounts to promote its differentiated brand of
battery. After rising to the top of the consumer segment in 1992, Duracell began to look abroad to generate additional growth.
In 1996, KKR began to consider exit strategies for its investment in Duracell. Recognising the strength of batteries in the retail segment,
Gillette agreed to buy Duracell for $7.8 billion. In a conference call to announce the deal Gillette CEO Alfred Zeien described Gillette’s reasoning
with the following: “At the checkout counter, there’s going to be nobody who can touch the magnitude of what we’re going to be able to do.
This isn’t diversification, but an additional leg of our tightly focussed strategy.”

Eveready
The second major player in the U.S. battery market is Energizer/Eveready division of Ralston Purina. Eveready controlled approximately 37% of
the alkaline market in 1996. Eveready and Duracell are archrivals. With its now famous Energizer bunny, Eveready began an all-out war with
Duracell for market share in 1988. Since then the two companies have battled each other in terms of technical innovation, pricing strategy,
advertising dollars, and most important, market share.

THE BATTERY MANUFACTURING PROCESS

A battery consisting of three parts: (1) a negative portion or anode, (2) a positive portion or cathode, and (3) an electrolyte, the liquid solution
that aids in the flow of energy. The energy flow from the anode to the cathode continues until the anode can no longer give up electrons and
the cathode can no longer accept electrons. The life of a battery depends on a number of factors, including the size and type of battery, the
power demands of the device, and the frequency and length of battery use. The battery development and manufacturing process involves
considerable trial and error as companies attempt to increase power while decreasing size and production costs. The key trade-off for
manufacturers is between cost and battery performance. While battery companies may be able to develop the ultimate product in terms of size,
power, and reliability in the laboratory, transferring a concept to the production line is a difficult step and the point where most new battery
projects fail.

TM:Page 3 of 16
 In terms of costs associated with battery production, the process is material intensive. Rayovac spends 63% on materials (alkaline cans that
form the casing for the most common batteries, zinc and zinc cans, etc.), 29% on overhead (allocation to manufacturing), and 8% on direct
labour. The manufacturing process can be made less costly through the introduction of capital equipment. However, the combination of
technological change (which has driven battery sizes smaller and power needs higher), production difficulties, and price competition has driven
most manufacturers to focus on specific battery types to allow them to maintain profitability.

PAYOVAC’S PRODUCT LINE

General Batteries
General batteries encompass alkaline, heavy-duty, and rechargeable products. Rayovac produces a full line of alkaline batteries, including D, C,
AA, AAA and nine-volt sizes for the consumer and industrial markets. Although the company does produce some batteries for private labels,
they are primarily sold under the Rayovac name. For the fiscal year ending June 30, 1995 and 1996, general batteries comprised 61.9% and 62.3%
of total sales, respectively. In fiscal 1996, Rayovac held 11.2% of the alkaline battery market and, within the mass merchandise retail channel,
the company had a 19.9% alkaline battery market share. In addition to alkaline batteries, Rayovac manufactures heavy-duty (non-alkaline)
batteries in the same sizes but sells these batteries at a lower price point. In 1996, Rayovac’s market share was 44.5% in the heavy-duty segment.
Overall heavy-duty battery sales are shrinking as consumers switch to alkaline and rechargeable batteries.
Rayovac is the only domestic manufacturer of alkaline rechargeable batteries. This technology, which was introduced by the company under
the Renewal name in 1993, allows consumers to reuse batteries up to 25 times for an aggregate electrical charge of 10 regular alkaline batteries.
In addition to cost benefits, Rayovac’s batteries retain their charge substantially longer than standard nickel-cadmium rechargeable batteries.
Because the Renewal system does not require mercury or cadmium, it is exempt from collection and disposal legislation. The Renewal system is
the highest quality, most cost-effective, and most environmentally responsible rechargeable battery for household use on the market. In 1996,
Rayovac dominated the rechargeable battery segment with 64.2% of the market.

Specialty Batteries
For the fiscal years ending June 30, 1995 and 1996, specialty batteries comprised 29.5% and 28.6% of total sales, respectively. Rayovac is the
only producer of the smallest hearing aid battery and one of only two companies manufacturing the next smallest size. Hearing aid battery
consumption has grown dramatically from 134.5 million units in 1992 to 193.4 million in 1996. The company expects this growth to continue as
the decreasing size of hearing aids broadens its appeal and U.S. and western Europeans populations grow older. Rayovac holds the number one
position in hearing aid battery market with over 40% market share in 1996. The company produces five sizes sold under the Loud n’ Clear and
ProLine brand names and under several private labels, including Beltone and Miracle Ear.

TM:Page 4 of 16
 Other specialty batteries include no-hearing aid button-cell and lithium coin-cell batteries. The button- and coin-cell batteries are used in a
variety of electronic products, including watches, cameras, calculators, personal computers, and communication equipment. Rayovac also
produces a wide range of consumer and industrial lantern batteries, and in 1996, the company held a 47.2% market share of the retail lantern
battery market.

Battery-Powered Lighting Devices

For the fiscal years ending June 30, 1995 and 1996, battery-powered lighting devises accounted for 8.6% and 9.1% of total sales, respectively.
Rayovac is the leading marketer of battery-powered lighting devices, including flashlights, lanterns, and similar portable products for the retail
and industrial market. In 1996, the company’s products accounted for 9.9% of aggregate lighting product retail sales in the mass merchandiser
market segment.

HISTORICAL PERFORMANCE THROUGH 1996

Rayovac’s financial performance depends on a number of factors, including general retail trends, the company’s product mix, and the company’s
relative market position, which is affected by the behaviour of its competitors. Its performance through fiscal 1996 was affected by (1) the
expansion of production facilities, (2) the Renewal product line, and (3) seasonality. Historical financial statements are shown in Exhibits 1 and
2.
1. In 1994 and 1995 the company completed the modernisation and expansion of its production lines at its Fennimore, Wisconsin,
facility. The expansion more than doubled Rayovac’s aggregate capacity for AA and AAA batteries and included complete
renovation of existing capacity of C and D alkaline batteries. Between 1992 and 1995, the company invested $36.7 million in new
production lines that not only increased capacity but also resulted in better-performing and higher-quality alkaline batteries.
2. In connection with the introduction of the Renewal rechargeable battery in 1994, the company dramatically increased its
advertising and promotional expenses to $26.0 million. By comparison, the company spent $15.7 million in fiscal 1995 and $20.3
million in fiscal 1996, with the increase in 1996 largely attributable to the new Renewal advertising campaign featuring Michael
Jordan. The Renewal introduction was also responsible for the significant increase in receivables and inventories from 1993 to
1994.
3. The company’s revenues are seasonal, with the highest sales occurring in its second fiscal quarter (during the Christmas holiday
season). During the past four years, second quarter sales averaged 33% of annual net sales. As a result of this seasonality, the
company’s working capital requirements and revolving credit borrowings are typically high in the first and second quarters of
each year.

TM:Page 5 of 16
 In addition to these specific developments, the company’s recent financial performance has been affected by other factors. Net sales
increased from $332.2 million in 1992 to $399.4 million in 1996, a compound annual growth rate of 4.7%. The increase in sales is largely
attributable to growth in the company’s alkaline, rechargeable, and hearing aid battery products, offset slightly by declines in heavy-duty
batteries and lighting products. Management attributes higher gross margins in 1995 and 1996 to the renovation and expansion of the Fennimore
facility. The company believes further efficiencies will be realised from this investment over the next several years. The increase in selling
expenses, which peaked in 1994 at $103.8 million, is largely attributable to marketing and advertising costs related to the rollout of Renewal
rechargeable battery system.

MR. PYLE EXAMINES HIS OPTIONS

In late 1995, Rayovac’s principal owner and chief executive officer, Thomas Pyle, contacted Merrill Lynch to discuss the company’s strategic
alternatives. As Mr. Pyle edged closer to retirement, he wished to consider the possibility of liquidating all or part of his investment in the
company. When Merrill Lynch and Pyle discussed the company’s options, they narrowed their search to two alternatives: a private sale to a
financial buyer or a sale to a competitor, such as Duracell or Energizer. Each option had a number of implications.
• A sale to a competitor could result in a higher price, as the buyer would benefit from substantial cost savings from the elimination of
redundant overhead costs and capacity rationalisation. However, the likelihood that a competitor would realise these cost savings
through large scale layoffs of Rayovac employees concerned Pyle.
• Given the large market shares of Rayovac’s competitors it appeared likely that any transaction would attract the attention of Federal
Trade Commission.
• A cash offer from Duracell was unlikely, as the company already carried a large debt burden, preventing it from raising additional debt
to finance the transaction. A stock offer from Ralston Purina was less attractive because Pyle and other Rayovac shareholders would be
subject to certain lockout provisions that limited their liquidity.
• Rayovac represented a relatively large transaction for financial buyers, limiting the number of parties that might be involved in a bidding
process.

As the Merrill Lynch descriptive memorandum made its way into the hands of a number of different potential suitors, few bids were offered.
Despite the fact that the deal had begun to appear as if it had been excessively “shopped,” Thomas H. Lee (THL) decided that it was worth careful
consideration. THL’s interest was driven by a number of factors:

• The overall growth of the battery market – the U.S. retail market had grown at an average rate of 5% over the past 5 years and was
expected to continue to grow at or above this pace over the short term.

TM:Page 6 of 16
 • Despite trailing other competitors in the alkaline battery market, Rayovac had superior positions in the hearing aid, rechargeable, and
lithium battery markets.
• Rayovac had invested considerably over the past 3 years to modernise its production facilities.
• The existing management team offered strong experience in the battery market.
• The company generated strong and steady cash flow.
• There was potential for significant cost savings. The expense structure of Rayovac had grown to include the company’s leased aircraft,
two sponsored race cars, and excess compensation.

THL also had a number of concerns, not the least of which was the business deteriorated during the time the company was up for sale. In
addition, Mr. Pyle made it clear that he planned to step aside under any deal scenario. As a result, a top priority for THL was finding the right
management team to take over in the event they were successful in their bid for the company.

THE MANAGEMENT
THL recruited David Jones to manage the company. Prior to the Rayovac opportunity, Jones was chief operating officer, chief executive officer,
and chairman of Thermoscan, Inc., a manufacturer and marketer of infrared ear thermometers, also controlled by THL. From 1989 to 1994, Jones
was president and CEO of The Regina Company, a manufacturer of vacuum cleaners and other floor care equipment. Jones had over 25 years of
experience working in consumer durables, involving positions in operations, manufacturing, and marketing. Merrell Tomlin and Randall Steward
were also invited to leave Thermoscan and join Jones as senior vice president of sales and senior vice president and chief financial officer,
respectively.

THE LEVERAGED BUYOUT

On September 12, 1996, THL came to terms with Mr. Pyle on a deal to buy a majority of Rayovac’s common stock. The transaction valued at
$326 million or approximately 7.5x trailing 12 months EBITDA, a sharp discount to the 15x multiple Gillette had paid for Duracell just weeks
earlier. In addition, it represented a deep discount from the $500 million valuation that Rayovac and Merrill Lynch had considered at the start of
the process.

TM:Page 7 of 16
 Simultaneous with the acquisition of the company, THL recapitalised Rayovac. As a result of the recapitalisation, THL, together with David
Jones, owned 80.2%, Pyle owned 9.9%, and existing management owned 9.9% of Rayovac’s common stock. The sources and uses of funds in
connection with the recapitalisation are outlined below.
SOURCES
Revolving credit facility $26.0
Term loan facility 105.0
Bridge notes 100.0
Equity investment by THL 72.0
Continuing shareholders’ equity investment 18.0
Foreign debt and capital leases 5.5
Total sources $326.5
USES
Retirement of Rayovac common stock $127.4
Purchase of newly issued common stock by THL 72.0
Continuing shareholders’ equity investment 18.0
Repay existing debt 85.2
Fees and expenses related to the recapitalisation 18.4
Foreign debt and capital leases 5.5
Total uses $326.5

AFTER THE LBO

The new management team immediately went to work implementing the plan to reduce costs and grow revenues formulated during the due
diligence period. The plan focused on the following: (1) reinvigorating the Rayovac brand name through increased advertising; (2) growing market
share by expanding Rayovac’s presence in underrepresented retail channels, such as food stores, drugstores, and warehouse clubs; (3) reducing
costs by rationalising manufacturing and distribution, improving plant utilisation, and reducing overhead; and (4) increasing worker productivity
through the installation of new information systems and training. In total, Jones’s near-term targets were 10% top-line growth and 20% EBIT
growth per annum.
For David Jones, the most challenging assignment was reshaping the culture of Rayovac. There was a lack of effective communication among
headquarters, functional heads, and manufacturing divisions as well as a management group with little experience making decisions. This

TM:Page 8 of 16
complacency was also evidenced by the “womb to tomb” employment philosophy at the company. Few employees ever left Rayovac for
performance reasons, and the company’s employee review process was ineffective. Jones and his management team worked hard to push
decision making lower into the organisation and expected employees to accept responsibility. This initiative was aided by the introduction of a
new incentive structure that encouraged communication across divisions, risk taking, and continuous improvement. Although many Rayovac
employees prospered in the new performance-based culture, the company lost 30 to 40% of its corporate staff in the first year after buyout.
In addition to cultural difficulties, Rayovac’s antiquated information technology systems made it difficult for management to access required
data in a timely way. This made it hard to analyse the company’s operations and nearly impossible to forecast performance. Jones replaced
nearly 75% of the company’s ITS staff and began an extensive overhaul of Rayovac’s computing infrastructure, including installation of SAP, and
inventory and material forecasting system and sales automation program.
Simultaneous with the changes noted above, Jones aggressively rationalised the company’s manufacturing facilities. Through the installation
of high speed equipment and advanced computer systems, Rayovac was able increase capacity while decreasing brick and mortar investments.
In 12 months, the number of factories was reduced from eight to four while simultaneously increasing the company’s total capacity. These
closures resulted in a substantial reduction in overhead and working capital requirements. Jones also centralised certain functions that had
previously been performed independently by each factory. For example, the adoption of a centralised purchasing strategy resulted in annual
savings of 5%.
Jones was also focused on growing the top line. Consistent with its strategy of avoiding direct, head-to-head competition with Duracell and
Energiser, Rayovac worked to expand its presence in the niche markets of hearing aid, rechargeable, lantern, and heavy-duty batteries. These
markets offer higher margins than those available in the general retail category. In terms of rechargeable batteries, Rayovac focused on the
promotion of its Renewal product. As the holder of the leading share in this market, management hoped to build on this position by convincing
consumers of the benefits of rechargeable batteries.
Recognising the crucial nature of the company’s relationship with distributors, Jones and his team reorganised sales, marketing, and
administration by distribution channel. The goal of the reorganisation was to place and increased focus on Rayovac’s underserved customer
population through channel-specific strategies and regain the trust of distributors who felt Rayovac had overpromised and underdelivered in
the past.
To revive the business and its brand recognition, Rayovac devised a new marketing strategy. The plan included the introduction of a new
and improved alkaline product called the MAXIMUM and the redesign of all product graphics and packaging to convey a high-quality image with
the Rayovac brand name emphasized. In addition, the company extended Michael Jordan’s contract to continue as a spokesman for Rayovac
products.
At an early stage, the plan began to show results. The cost reduction plan resulted in cash cost saving of $6.3 million for fiscal 1997 and was
projected to yield $8.6 million in savings on an ongoing basis. Rayovac’s gross margins increased from 43.1% in 1996 to 45.8% in 1997, reflecting

TM:Page 9 of 16
not only its cost reductions but also its marketing efforts and greater focus on higher-margin products. In terms of market share, Rayovac
continued its domination of the rechargeable and hearing aid battery segments, in addition to achieving gains in alkaline battery sales.

EXIT ALTERNATIVES
At the inception of the Rayovac acquisition, THL’s expected investment horizon was 3 to 6 years. However, in the summer of 1997 (less than 12
months after acquisition), THL and Jones began to consider the long-term investment strategy. Among the possibilities was partial or total
liquidation of their investment. A number of factors drove this consideration. First, the management team had made substantial improvements
to operating performance in a short period of time. Although Jones remained enthusiastic about Rayovac’s prospects, THL believed that the
steps taken to date represented much of the low-hanging fruit and that future operating gains would be more difficult to identify and execute.
Second, the equity investment by THL was relatively large, and there was interest in reducing its exposure to the business or in applying additional
leverage to boost potential returns. Third, the run-up to the U.S. equity markets had expanded valuation multiples for public offerings as well as
private acquisitions. THL was anxious to lock in some of these gains. Finally, the ability to realise value in so short a period of time would increase
the funds internal rate of return.
THL and Jones considered the following alternatives:
• Stay the Course. Although future operating improvements could prove more difficult, THL remained committed to the management
team and believed in the company’s long-term prospects. The value of the company was likely to benefit from a longer operating
history, validating management’s early cost-reduction and revenue-enhancement initiatives. Moreover, by remaining independent
and private, Jones would avoid intrusions by outside investors and research analysts. Accordingly, the management team could
focus on the long-term prospects of the company rather than quarter-to-quarter results. Jones believed that more predictable
earnings could be demonstrated within 12 to 24 months.
• Leveraged Build-up. A number of private equity firms had converted their investments into leveraged build-up (LBU) platforms.
Though it was unlikely that THL would use Rayovac to acquire another battery business, given the size of its competitors, Rayovac
could be used as a vehicle to make additional purchases of companies that would benefit from Rayovac’s strategic assets and market
position. For example, THL considered the possibility of targeting other consumer products companies that could benefit from
Rayovac’s value reputation and mass-retailer distribution power. Unfortunately, without a public currency, rising multiples would
make it difficult for Rayovac to complete acquisitions.
• IPO. In 1997, the IPO market continued to rebound from the doldrums of the early 1990s; the general stock market’s expansion had
been especially dramatic. While an IPO was attractive for a number of reasons, THL and Jones also considered the costs associated
with being a public company. There were a number of considerations. First, an IPO would only provide limited liability for THL and
management, due to lock-up requirements. Second, a public offering was expensive. The cost of filing and navigating the regulatory

TM:Page 10 of 16
 process as well as investment banking fees were significantly higher than costs of a private transaction. Third, there were operating
costs associated with becoming public, such as the establishment of an investor relations department and annual regulatory filing
fees. Fourth, a public offering would allow investors (including THL and management) to retain a substantial portion of their
ownership and, consequently, to participate in the upside potential of the market and the company. Finally, an IPO would provide
Rayovac with an acquisition currency. (See Exhibits 4 and 5 for relevant comparable company information and recent stock market
performance.)
• Strategic Buyer. In 1996 and 1997, a consolidation wave began to sweep across consumer products companies. Many of these
companies used acquisitions to expand their product offerings and leverage their relationship with retailers and existing distribution
channels. By selling the company to a strategic buyer, THL would benefit from the recent run-up in multiples while also achieving
total or near-total liquidity. In addition, Rayovac would avoid some of the recurring costs associated with a public offering. (See
comparable companies and transactions in Exhibits 4 and 5.)

THE DECISION
THL, along with Jones, needed to decide on the best course of action.

TM:Page 11 of 16
Exhibit 1
Rayovac Corporation: Balance Sheets
(Dollars in millions)
FY ENDED
FY ENDED JUNE 30 SEPTEMBER 30
1993 1994 1995 1996 1997
Assets
Cash $2.8 $2.5 $2.6 $2.2 $1.1
Accounts receivable 41.6 50.2 52.7 55.8 79.7
Inventory 54.6 74.5 65.6 66.9 58.6
Other current assets 9.1 11.8 11.3 13.2 15.0
Total current assets 108.1 139.0 132.2 138.1 154.4
Property, plant, and equipment 70.1 72.1 78.0 73.9 65.5
Other assets 10.1 11.3 10.4 9.8 17.0
Total assets $188.3 $222.4 $220.6 $221.9 $236.9
Liabilities and equity
Accounts payable $38.3 $35.0 $39.2 $38.7 $57.3
Current portion of Long Term Debt * * 11.9 11.6 23.9
Other current liabilities 29.0 27.8 25.2 25.3 39.4
Total current liabilities 67.3 62.8 76.3 75.7 120.6
Long-term debt 71.9 108.0 76.4 69.7 183.4
Other liabilities 10.7 12.6 14.3 14.9 13.5
Total liabilities 149.9 183.4 167.0 160.3 317.5
Shareholders’ equity 38.4 39.0 53.6 61.6 (80.6)
Total liabilities and equity $188.3 $222.4 $220.6 $221.9 $236.9
*Current portion of long-term debt were not available for 1993 and 1994.
Fiscal year changed from June 30 to September 30.

TM:Page 12 of 16
Exhibit 2
Rayovac Corporation: Statements of Income
(Dollars in millions)
FY ENDED JUNE 30 FY ENDED
SEPTEMBER 30
1993 1994 1995 1996 1997
Net sales $372.4 $403.7 $415.2 $423.4 $432.6
Cost of goods sold 202.1 234.9 237.1 239.4 234.6
Gross profit 170.3 168.8 178.1 184.0 198.0
Selling expense 98.8 121.3 108.7 116.5 122.1
General and administrative,
other 31.7 30.9 32.9 31.8 35.2
Research and development 5.6 5.7 5.0 5.4 6.2
Income from operations 34.2 10.9 31.5 30.3 34.5
Interest expense 6.0 7.7 8.6 8.4 24.5
Other (income) expense, net 2.2 (0.6) 0.3 0.6 0.4
Income before taxes and
cumulative effect for change in
accounting 26.0 3.8 22.6 21.3 9.6
Income tax expense 10.1 (0.6) 6.2 7.0 3.4
Net income $15.9 $4.4 $16.4 $14.3 $6.2

Other financial data

Depreciation and
amortisation $7.4 $10.3 $11.0 $11.9 $11.3
Capital expenditures 30.1 12.5 16.9 6.6 10.9
EBITDA 41.6 21.2 42.5 42.2 45.8

TM:Page 13 of 16
Exhibit 3
Rayovac Corporation:
Product Types as Percent of Sales
FY ENDED JUNE 30 FY ENDED
SEPTEMBER 30
PRODUCT TYPE 1995 1996 1997
General Batteries
Alkaline 43.4% 43.6% 45.0%
Heavy-duty 14.1% 12.2% 10.4%
Rechargeable 5.6% 7.1% 5.5%
Total 63.1% 62.9% 60.9%
Specialty Batteries
Hearing aid 12.7% 14.6% 14.8%
Other 10.0% 8.6% 9.8%
Total 22.7% 23.2% 24.6%
Lighting products and lantern batteries 14.2% 13.9% 14.5%
Total 100.0% 100.0% 100.0%

TM:Page 14 of 16
Exhibit 4
Rayovac Corporation: Comparable Companies
(Dollars in millions, except per share amounts)
EPS ESTIMATES STOCK PRICES P/E 1998E
COMPANY 1996A 1997E 1998E 8/15/97 8/15/96 1997 1998 EQUITY DEBT ENTERPRISE SALES EBITDA
VALUE
Sunbeam $(0.10) $1.41 $2.05 $41.38 $19.95 29.3x 20.2x $3,682.4 $200.6 $3,883.0 $1,427.1 $335.6
Revlon 0.49 1.14 1.90 53.13 28.63 46.6x 28.0x 2,735.9 1,506.9 4,242.8 2,631.5 361.2
Samsonite 0.96 2.05 2.65 38.88 18.50 19.0x 14.7x 820.3 185.7 1,006.0 818.3 134.5
Gillette 2.22 2.55 3.00 85.88 63.63 33.7x 28.6x 47,832.4 2,212.7 50,045.1 11,105.8 3,160.9
Ralston-Purina n/a n/a 3.91 87.56 66.25 n/a 22.4x 9,342.9 2,412.9 11,755.8 5,898.3 989.9
Colgate-
Palmolive 1.96 2.27 2.60 63.76 39.25 28.1x 24.5x 18,828.3 2,867.7 21,696.0 9,501.2 1,796.4
Clorox 2.24 2.51 2.82 64.34 44.04 25.6x 22.8x 6,781.6 702.2 7,483.8 2,933.0 705.2

S&P 500 41.02 45.34 48.40 900.81 662.28 19.9x 18.6x

DJIA 353.88 403.33 428.33 7694.70 5665.80 19.1x 18.0x
*Stock prices adjusted for splits. All P/E and equity value information based on stock prices as of 8/15/97.

TM:Page 15 of 16
Exhibit 5
Rayovac Corporation: Comparable Transactions
(Dollars in millions, except per share amounts)
BUSINESS SOLD MENNEN NEUTROGENA GERBER SCOTT ARMOR ALL DURACELL KIRSCH ROLODEX ELDON
PAPER
Date of sale Apr-92 Aug-94 Jul-94 Dec-95 Dec-96 Dec-96 Jan-97 Mar-97 May-97
Seller Mennen Neutrogena Gerber Scott Paper McKesson KKR Cooper Insilco Rubbermaid
Purchaser Colgate Johnson & Sandoz Kimberly- Clorox Gillette Newell Newell Newell
Johnson Clark
Major brands Mennen Neutrogena Gerber Scott Armor All Duracell Kirsch Rolodex Eldon,
Micro-
Computer

Price 35.25 53.00 61.23 19.09 66.88

Shares 25.9 69.6 151.5 21.3 121.4

Equity $650.0 $913.0 $3,668.8 $9,276.3 $406.6 $8,118.6 $200.0 $117.0 $246.0
Debt n/a - n/a 1,190.9 - 575.1 - - -
Enterprise value 650.0 913.0 3,668.8 10,467.2 406.6 8,693.7 200.0 117.0 246.0

P&L
Sales $550.0 $229.5 $1,200.0 $4,309.2 $189.0 $2,474.6 $250.0 $58.0 $162.0
EBIT 60.5 41.6 212.0 818.1 14.7 475.6 7.5 9.0 18.0
EBITDA n/a 48.1 238.9 1,035.1 18.7 575.6 n/a 11.5 24.6
Net 39.3 27.1 113.6 508.1 10.0 272.1 n/a n/a n/a

Date: December 23, 2022

---------- XX ----------

TM:Page 16 of 16