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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended January 2, 2005

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number 001-13615

Rayovac Corporation

(Exact name of registrant as specified in its charter)

(770) 829-6200

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report.)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes  x    No  ¨

The number of shares outstanding of the Registrant’s common stock, $.01 par value, as of February 7, 2005, was 49,682,854.

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RAYOVAC CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR QUARTER ENDED JANUARY 2, 2005

INDEX

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

RAYOVAC CORPORATION

Condensed Consolidated Balance Sheets

January 2, 2005 and September 30, 2004

(Unaudited)

(Amounts in thousands, except per share figures)

See accompanying notes which are an integral part of these condensed consolidated financial statements (unaudited).

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RAYOVAC CORPORATION

Condensed Consolidated Statements of Operations

For the three month periods ended January 2, 2005 and December 28, 2003

(Unaudited)

(Amounts in thousands, except per share figures)

See accompanying notes which are an integral part of these condensed consolidated financial statements (unaudited).

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RAYOVAC CORPORATION

Condensed Consolidated Statements of Cash Flows

For the three month periods ended January 2, 2005 and December 28, 2003

(Unaudited)

(Amounts in thousands)

See accompanying notes which are an integral part of these condensed consolidated financial statements (unaudited).

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RAYOVAC CORPORATION

Notes to Condensed Consolidated Financial Statements (Unaudited)

(Amounts in thousands, except per share figures)

1 SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation: These condensed consolidated financial statements have been prepared by Rayovac Corporation (the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and, in the opinion of the Company, include all adjustments (which are normal and recurring in nature) necessary to present fairly the financial position of the Company at January 2, 2005, and the results of operations and cash flows for the three month periods ended January 2, 2005 and December 28, 2003. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such SEC rules and regulations. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of September 30, 2004. Certain prior amounts have been reclassified to conform with the current presentation.

Significant Accounting Policies and Practices: The condensed consolidated financial statements include the consolidated financial statements of Rayovac Corporation and its subsidiaries and are prepared in accordance with U.S. generally accepted accounting principles. All intercompany transactions have been eliminated. The Company’s fiscal year ends September 30. References herein to 2005 and 2004 refer to the fiscal years ended September 30, 2005 and 2004, respectively.

The Company’s Condensed Consolidated Balance Sheets (Unaudited) as of January 2, 2005 and September 30, 2004 and Condensed Consolidated Statements of Operations (Unaudited) for the three month periods ended January 2, 2005 and December 28, 2003 give effect to the acquisition of Remington Products Company, L.L.C., (“Remington”), which occurred on September 30, 2003. In addition, the Company’s Condensed Balance Sheet (Unaudited) as of January 2, 2005 gives effect to the acquisitions of Ningbo Baowang Battery Company, Ltd. (“Ningbo”), which occurred on March 31, 2004, and Microlite S.A. (“Microlite”), which occurred on May 28, 2004. The Company’s Condensed Consolidated Statement of Operations (Unaudited) for the three months ended January 2, 2005 include the results of Ningbo and Microlite as of their respective acquisition dates. The Company’s Condensed Consolidated Statements of Operations (Unaudited) for the three months ended December 28, 2003, include only the results attributable to Rayovac and its subsidiaries prior to the Ningbo and Microlite acquisitions. Consequently, all Condensed Consolidated Statements of Operations (Unaudited) footnote disclosures exclude the results of Ningbo and Microlite for the three months ended December 28, 2003. See footnote 10, “Acquisitions,” for additional information on the Ningbo and Microlite acquisitions.

Discontinued Operations: The Company has reflected Remington’s United States and United Kingdom Service Centers as discontinued operations. The Company discontinued operations at these Service Centers during 2004 as part of the Remington integration initiatives. See footnote 11, “Restructuring and Related Charges,” for additional discussion of Remington integration initiatives. The following amounts have been segregated from continuing operations and are reflected as discontinued operations for the three months ended December 28, 2003:

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RAYOVAC CORPORATION

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

(Amounts in thousands, except per share figures)

Revenue Recognition: The Company recognizes revenue from product sales upon shipment to the customer which is the point at which all risks and rewards of ownership of the product is passed, provided that: there are no uncertainties regarding customer acceptance; persuasive evidence of an arrangement exists; the price to the buyer is fixed or determinable; and collectibility is deemed reasonably assured. The Company is not obligated to allow for, and the Company’s general policy is not to accept, product returns associated with battery sales. The Company does accept returns in specific instances related to its shaving, grooming and personal care products. The Company estimates and accrues the cost of these returns, which are treated as a reduction of Net sales.

The Company enters into various promotional arrangements, primarily with retail customers, including arrangements entitling such retailers to cash rebates from the Company based on the level of their purchases, which require the Company to estimate and accrue the estimated costs of the promotional programs. These costs are generally treated as a reduction of Net sales.

The Company also enters into promotional arrangements targeted to the ultimate consumer. Such arrangements are treated as either a reduction of Net sales or an increase of Cost of goods sold, based on the type of promotional program. The income statement characterization of the Company’s promotional arrangements complies with the Emerging Issues Task Force (“EITF”) No. 01-09, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products).

For all types of promotional arrangements and programs, the Company monitors its commitments and uses statistical measures and past experience to determine amounts to be recorded for the estimate of the earned, but unpaid, promotional costs. The terms of the Company’s customer-related promotional arrangements and programs are individualized to each customer and are generally documented through written contracts, correspondence or other communications with the individual customers.

The Company also enters into various contractual arrangements, primarily with retail customers, which require the Company to make upfront cash, or “slotting” payments, to secure the right to distribute through such customers. The Company capitalizes slotting payments, provided the payments are supported by a time or volume based contractual arrangement with the retailer, and will amortize the associated payment over the appropriate time or volume based term of the contractual arrangement. The amortization of the slotting payment is treated as a reduction in Net sales and the corresponding asset is included in Deferred charges and other in the Condensed Consolidated Balance Sheets (Unaudited).

Shipping and Handling Costs: The Company incurred shipping and handling costs of $20,025 and $18,288 for the three months ended January 2, 2005 and December 28, 2003, respectively. These costs are included in Selling expense. Shipping and handling costs include costs incurred with third-party carriers to transport products to customers as well as salaries and overhead costs related to activities to prepare the Company’s products for shipment at the Company’s distribution facilities.

Concentrations of Credit Risk: Trade receivables subject the Company to credit risk. The Company extends credit to its customers based upon an evaluation of the customer’s financial condition and credit history and generally does not require collateral. The Company monitors its customers’ credit and financial condition based on changing economic conditions and will make adjustments to credit policies as required. Provision for losses on uncollectible trade receivables are determined principally on the basis of past collection experience applied to ongoing evaluations of the Company’s receivables and evaluations of the risks of repayment.

The Company has a broad range of customers including many large retail outlet chains, one of which accounts for a significant percentage of its sales volume. This customer represented approximately 21% and 28%

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RAYOVAC CORPORATION

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

(Amounts in thousands, except per share figures)

of its Net sales during the three month periods ended January 2, 2005 and December 28, 2003, respectively. This major customer also represented approximately 16% of its trade accounts receivable, net as of January 2, 2005 and September 30, 2004.

Approximately 56% of the Company’s sales occur outside of North America. These sales and related receivables are subject to varying degrees of credit, currency, and political and economic risk. The Company monitors these risks and makes appropriate provisions for collectibility based on an assessment of the risks present.

Stock Based Compensation: The Company has stock option and other stock-based compensation plans, which are fully described in the Company’s consolidated financial statements and notes thereto as of September 30, 2004. The Company accounts for its stock-based compensation plans using the intrinsic value method, under the principles prescribed by APB No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. For stock options granted, no employee compensation cost is reflected in the Company’s results of operations, as all options granted under the plans have an exercise price equal to the market value of the underlying common stock at the grant date.

The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock Based Compensation, as amended by SFAS Statement No. 148, Accounting for Stock-Based Compensation—Transition and Disclosure”. Accordingly, no compensation cost has been recognized in the results of operations for the stock option plans. Had compensation cost for stock options granted been determined based on the fair value at the grant date for such awards consistent with an alternative method prescribed by SFAS No. 123, the Company’s net income and earnings per share would have reflected the pro forma amounts indicated below:

The effect of restricted stock and unexercised stock options of approximately 10 shares outstanding for the three months ended January 2, 2005 were excluded from the diluted EPS calculation, as their effect was anti-dilutive.

In December 2004, SFAS No. 123 (Revised 2004), “Share-Based Payment” was issued. SFAS No. 123(R) provides investors and other users of financial statements with more complete and neutral financial information by requiring that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. SFAS

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RAYOVAC CORPORATION

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

(Amounts in thousands, except per share figures)

No. 123(R) covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. SFAS No. 123(R) replaces SFAS No. 123, and supersedes APB 25. SFAS No. 123, as originally issued in 1995, established as preferable a fair-value-based method of accounting for share-based payment transactions with employees. However, that statement permitted entities the option of continuing to apply the guidance in APB No. 25, as long as the footnotes to financial statements disclosed what net income would have been had the preferable fair-value-based method been used.

The Company is required to apply SFAS No. 123(R) in its fiscal 2005 fourth quarter ending September 30, 2005. Beginning in the fourth quarter of fiscal 2004, the Company ceased issuing stock options to employees. Restricted stock, the cost of which is currently required to be recognized as expense, is now issued to employees. As a result, the adoption of SFAS No. 123(R) is not expected to have a significant impact on the Company’s overall results of operations or financial position. The impact on earnings in the fiscal 2005 fourth quarter is expected to be approximately $416, net of tax, or $0.01 per diluted common share, and the impact on all of fiscal year 2006 is expected to be approximately $450, net of tax, or $0.01 per diluted common share.

Derivative Financial Instruments: Derivative financial instruments are used by the Company principally in the management of its interest rate, foreign currency and raw material price exposures. The Company does not hold or issue derivative financial instruments for trading purposes.

The Company uses interest rate swaps to manage its interest rate risk. The swaps are designated as cash flow hedges with the changes in fair value recorded in Accumulated other comprehensive income (loss) (“AOCI”) and as a hedge asset or liability, as applicable. The swaps settle periodically in arrears with the related amounts for the current settlement period payable to, or receivable from, the counter-parties included in accrued liabilities or receivables and recognized in earnings as an adjustment to interest expense from the underlying debt to which the swap is designated. Pretax derivative losses of $826 and $1,220 from such hedges were recorded as an adjustment to Interest expense during the three month periods ended January 2, 2005 and December 28, 2003, respectively. The pretax adjustment to interest expense for ineffectiveness from such hedges included in the amounts above, was a loss of $98 and a gain of $4 during the three month periods ended January 2, 2005 and December 28, 2003, respectively. At January 2, 2005 and September 30, 2004, the Company had a portfolio of interest rate swaps outstanding which effectively fixes the interest rates on floating rate debt at rates as follows: 3.974% for a notional principal amount of $70,000 through October 2005 and 3.799% for a notional principal amount of $100,000 through November 2005. The derivative net loss on these contracts recorded in AOCI at January 2, 2005 was $592, net of tax benefit of $347. The derivative net loss on these contracts recorded in AOCI at September 30, 2004 was $1,375, net of tax benefit of $843.

The Company periodically enters into forward and swap foreign exchange contracts to hedge the risk from third party and intercompany payments. These obligations generally require the Company to exchange foreign currencies for U.S. Dollars, Euros, Pounds Sterling or Canadian Dollars. These foreign exchange contracts are fair value hedges of a related liability or asset recorded in the Consolidated Balance Sheet (Unaudited). The gain or loss on the derivative hedge contracts is recorded in earnings as an offset to the change in value of the related liability or asset. Pretax derivative losses of $62 and pretax gains of $94 from such hedges were recorded as an adjustment to earnings in Other income, net during the three month periods ended January 2, 2005 and December 28, 2003, respectively. At January 2, 2005 and September 30, 2004, the Company had $1,273 and $480, respectively, of such foreign exchange derivative contracts outstanding. The pretax derivative adjustment to earnings for ineffectiveness from these contracts at January 2, 2005 and September 30, 2004 was immaterial.

The Company is exposed to risk from fluctuating prices for zinc used in the manufacturing process. The Company hedges a portion of this risk through the use of commodity swaps. The swaps are designated as cash

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RAYOVAC CORPORATION

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

(Amounts in thousands, except per share figures)

flow hedges with the fair value changes recorded in AOCI and as a hedge asset or liability, as applicable. The fair unrecognized changes in value of the swaps is reclassified from AOCI into earnings when the hedged purchase of zinc metal-based items also affects earnings. The swaps effectively fix the floating price on a specified quantity of zinc through a specified date. Pretax derivative gains of $206 and $232 were recorded as an adjustment to Cost of goods sold for swap contracts settled at maturity during the three month periods ended January 2, 2005 and December 28, 2003, respectively. The hedges are highly effective, therefore, no ineffectiveness was recorded as an adjustment to Cost of goods sold for three month periods ended January 2, 2005 or December 28, 2003. At January 2, 2005 and September 30, 2004, the Company had a series of such swap contracts outstanding through October 2005 with a contract value of $11,848 and $15,234, respectively. The derivative net gain on these contracts recorded in AOCI at January 2, 2005 was $1,720, net of tax expense of $998. The derivative net gain on these contracts recorded in AOCI at September 30, 2004 was $1,109, net of tax expense of $655.

2 OTHER COMPREHENSIVE INCOME

Comprehensive income and the components of other comprehensive income for the three months ended January 2, 2005 and December 28, 2003 are as follows, net of tax:

Net exchange gains or losses resulting from the translation of assets and liabilities of foreign subsidiaries are accumulated in a separate section of Shareholders’ equity. Also included are the effects of exchange rate changes on intercompany balances of a long-term nature and transactions designated as hedges of net foreign investments. The changes in accumulated foreign currency translation for the three months ended January 2, 2005 and December 28, 2003 were primarily attributable to the impact of translation of the net assets of our European operations, primarily denominated in Euros and Pounds Sterling.

3 NET INCOME PER COMMON SHARE

Net income per common share for the three months ended January 2, 2005 and December 28, 2003 is calculated based upon the following number of shares:

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RAYOVAC CORPORATION

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

(Amounts in thousands, except per share figures)

4 INVENTORIES

Inventories consist of the following:

5 ACQUIRED INTANGIBLE ASSETS AND GOODWILL

Intangible assets consist of the following:

The carrying value of technology assets was $12,149, net of accumulated amortization of $1,076, at September 30, 2004 and $13,032, net of accumulated amortization of $1,261, at January 2, 2005. All remaining intangible assets subject to amortization consist of customer related intangibles. The pension intangible totaled $2,288 at September 30, 2004.

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RAYOVAC CORPORATION

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

(Amounts in thousands, except per share figures)

During 2004, the Company completed the acquisitions of Ningbo and Microlite. During 2005, the Company allocated a portion of the Microlite purchase price to unamortizable intangible assets. The allocation consisted of $21,685 (using exchange rates in effect as of September 30, 2004) to the Rayovac trade name in Brazil.

The purchase price allocations for the Ningbo and Microlite acquisitions are not yet finalized as the Company is finalizing valuations of property, plant and equipment, inventory, and intangibles. Future allocations of the Ningbo and Microlite purchase prices may impact the amount and segment allocation of goodwill. See also footnote 10, “Acquisitions,” for additional discussion of the Ningbo and Microlite acquisitions.

The amortization expense for the three months ended January 2, 2005 and December 28, 2003 is as follows:

The Company estimates annual amortization expense for the next five fiscal years will approximate $950 per year.

6 DEBT

Debt consists of the following:

The Company’s Senior Credit Facilities include a term loan of $257,000, the “Term C loan facility”; a Euro denominated term loan of €114,000 ($155,482 at January 2, 2005), the “Euro term C loan facility”; a revolving credit facility of $120,000, the “Revolving credit facility”; and a Euro denominated revolving credit facility of €40,000 ($54,555 at January 2, 2005), the “Euro revolving credit facility”.

As of January 2, 2005, the following amounts were outstanding under these facilities: $256,344 under the Term C loan facility, $155,482 under the Euro term C facility, and $26,000 under the Revolving credit facility.

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RAYOVAC CORPORATION

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

(Amounts in thousands, except per share figures)

No borrowings were outstanding under the Euro revolving credit facility. In addition, approximately $19,000 of the remaining availability under the Revolving credit facility was utilized for outstanding letters of credit. Approximately $129,000 remains available under these revolving credit facilities as of January 2, 2005.

The interest on dollar-denominated borrowings is computed, at the Company’s option, based on the base rate, as defined (“Base Rate”), or the London Interbank Offered Rate (“LIBOR”) for Dollar-denominated deposits. The interest on Euro-denominated borrowings is computed on LIBOR for Euro-denominated deposits. The fees associated with these facilities were capitalized and are being amortized over the term of the facilities.

In addition to principal payments, the Company has annual interest payment obligations of approximately $30,000 associated with its debt offering of the $350,000 8.5% Senior Subordinated Notes due in 2013. The Company also incurs interest on its borrowings associated with the Senior Credit Facilities, and such interest would increase borrowings under the Revolving credit facilities if cash were not otherwise available for such payments. Based on amounts currently outstanding under the Senior Credit Facilities, and using market interest rates and foreign exchange rates in effect as of January 2, 2005, the Company estimates annual interest payments of approximately $22,000 would be required assuming no further principal payments were to occur and excluding any payments associated with outstanding interest rate swaps.

The Third Restated Agreement, as amended, to the Senior Credit Facilities (“the Third Agreement”) contains financial covenants with respect to borrowings, which include maintaining minimum interest and fixed charge and maximum leverage ratios. In accordance with the Third Agreement, the limits imposed by such ratios become more restrictive over time. In addition, the Third Agreement restricts the Company’s ability to incur additional indebtedness, create liens, make investments or specified payments, give guarantees, pay dividends, make capital expenditures, and enter into a merger or acquisition or sell assets. Indebtedness under these facilities (i) is secured by substantially all of the assets of the Company, (ii) is guaranteed by certain of the Company’s subsidiaries, and (iii) the Euro revolving credit facility is subject to a borrowing base of certain European assets.

The terms of the $350,000 8.5% Senior Subordinated Notes permit the holders to require the Company to repurchase all or a portion of the notes in the event of a change of control. In addition, the terms of the notes restrict or limit the ability of the Company and its subsidiaries to, among other things: (i) pay dividends or make other restricted payments, (ii) incur additional indebtedness and issue preferred stock, (iii) create liens, (iv) incur dividend and other restrictions affecting subsidiaries, (v) enter into mergers, consolidations, or sales of all or substantially all of the assets of the Company, (vi) make asset sales, (vii) enter into transactions with affiliates, and (viii) issue or sell capital stock of wholly owned subsidiaries of the Company. Payment obligations of the notes are fully and unconditionally guaranteed on a joint and several basis by all of the Company’s domestic subsidiaries, including ROV Holding, Inc. The foreign subsidiaries of the Company, which do not guarantee the payment obligations under the notes, are directly and wholly owned by ROV Holding, Inc., with the exception of Ningbo, which is 85% owned by the Company.

As of January 2, 2005, the Company was in compliance with all covenants associated with the Senior Credit Facilities and Senior Subordinated Notes.

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RAYOVAC CORPORATION

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

(Amounts in thousands, except per share figures)

On February 7, 2005, in connection with the acquisition of United Industries, discussed further in footnote 13, “Subsequent Events”, the Company entered into a new credit agreement consisting of a total of $1,030,000 in senior secured credit facilities, made up of aggregate term loan facilities of $730,000, of which $540,000 is denominated in dollars, $140,000 is denominated in Euros and $50,000 is denominated in Canadian dollars, and a multicurrency revolving credit facility of $300,000 denominated primarily in dollars. The Company also issued $700,000 of 7.375% Senior Subordinated Notes due 2015. Proceeds from the new credit facility and the senior subordinated notes were used primarily to pay off the existing indebtedness of United Industries and to refinance the Company’s existing senior credit facilities.

7 EMPLOYEE BENEFIT PLANS

The Company has various defined benefit pension plans covering some of its employees in the United States and certain employees in other countries. Plans generally provide benefits of stated amounts for each year of service. The Company’s practice is to fund pension costs at amounts within the acceptable ranges established by the Employee Retirement Income Security Act of 1974, as amended.

The Company also sponsors or participates in a number of other non-U.S. pension arrangements, including various retirement and termination benefit plans, some of which are covered by local law or coordinated with government-sponsored plans, which are not significant in the aggregate and therefore are not included in the information presented below.

The Company also has various nonqualified deferred compensation agreements with certain of its employees. Under certain of these agreements, the Company has agreed to pay certain amounts annually for the first 15 years subsequent to retirement or to a designated beneficiary upon death. It is management’s intent that life insurance contracts owned by the Company will fund these agreements. Under the remaining agreements, the Company has agreed to pay such deferral amounts in up to 15 annual installments beginning on a date specified by the employee, subsequent to retirement or disability, or to a designated beneficiary upon death. The Company established a rabbi trust to fund these agreements.

The Company also provides certain health care and life insurance benefits to eligible retired employees. Participants earn retiree health care benefits after reaching age 45 over the next 10 succeeding years of service and remain eligible until reaching age 65. The plan is contributory; retiree contributions have been established as a flat dollar amount with contribution rates expected to increase at the active medical trend rate. The plan is unfunded. The Company is amortizing the transition obligation over a 20-year period.

The Company has adopted the interim-period disclosure requirements of SFAS No. 132 (Revised 2003), “Employer’s Disclosures about Pension and Other Post Retirement Benefits.” The provisions of SFAS No. 132, as revised, require additional disclosures to those in the original SFAS No. 132 regarding assets, obligations, cash flows, and net periodic pension benefit cost of defined benefit plans and other defined benefit post retirement plans.

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RAYOVAC CORPORATION

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

(Amounts in thousands, except per share figures)

The Company’s results of operations for the three months ended January 2, 2005 and December 28, 2003, respectively, reflect the following pension and deferred compensation benefit costs.

8 SHAREHOLDERS’ EQUITY

The Company granted approximately 581 shares of restricted stock during the three months ended January 2, 2005. There were no forfeitures of restricted stock during the three months ended January 2, 2005. Of the restricted shares granted, approximately 409 shares will vest over the three-year period ending December 1, 2007, provided the recipient is still employed by the Company, with fifty percent of the shares vesting on a pro rata basis over the three-year period and the remaining fifty percent vesting based on the Company’s performance during the three-year period. Eighty percent of the remaining 172 shares granted are scheduled to vest on September 30, 2008 and the remaining 20% are scheduled to vest on September 30, 2009.

The total market value of the restricted shares on date of grant was approximately $15,218 and has been recorded as unearned restricted stock compensation, a separate component of Shareholders’ equity. Unearned compensation is being amortized to expense over the appropriate vesting period.

Also during the three months ended January 2, 2005, the Company issued approximately 232 shares of common stock resulting from the exercise of stock options with an aggregate cash exercise value of approximately $3,525. The Company also recognized a tax benefit of approximately $1,217 associated with the exercise of these stock options, which was accounted for as an increase in Additional paid-in capital.

9 SEGMENT RESULTS

The Company manages operations in three reportable segments based upon geographic area. North America includes the United States and Canada; Latin America includes Mexico, Central America, South America and the Caribbean; Europe/Rest of World (“Europe/ROW”) includes the United Kingdom, continental Europe, China, Australia and all other countries in which the Company does business.

The Company manufactures and markets dry cell batteries including alkaline, zinc carbon, alkaline rechargeable, hearing aid, other specialty batteries and lighting products throughout the world. These product lines are sold in all geographic areas. Beginning in 2005, electric shaving and grooming products and personal care products are sold in all segments. Prior to 2005, electric shaving and grooming products and personal care products were sold in the North America and Europe/ROW geographies.

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RAYOVAC CORPORATION

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

(Amounts in thousands, except per share figures)

Net sales and Cost of goods sold to other segments have been eliminated. The gross contribution of intersegment sales is included in the segment selling the product to the external customer. Segment net sales are based upon the geographic area from which the product is shipped.

The reportable segment profits do not include interest expense, interest income, and income tax expense. Also not included in the reportable segments are corporate expenses including purchasing expense, corporate general and administrative expense, certain research and development expense, and restructuring and related charges. All depreciation and amortization included in Operating income is related to reportable segments or corporate. Costs are identified to reportable segments or corporate, according to the function of each cost center.

The reportable segment assets do not include cash, deferred tax benefits, investments, long-term intercompany receivables, most deferred charges, and miscellaneous assets. All capital expenditures are related to reportable segments. Variable allocations of assets are not made for segment reporting.

Segment information for the three months ended January 2, 2005 and December 28, 2003, and at January 2, 2005 and September 30, 2004 is as follows:

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RAYOVAC CORPORATION

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

(Amounts in thousands, except per share figures)

10 ACQUISITIONS

Acquisition of Microlite

On May 28, 2004, the Company completed the acquisition of 90.1% of the outstanding capital stock, including all voting stock, of Microlite, a Brazilian battery company, from VARTA AG of Germany and Tabriza Brasil Empreendimentos Ltda. of Brazil. Microlite operates two battery-manufacturing facilities in Recife, Brazil and has several sales and distribution centers located throughout Brazil. Microlite manufactures and sells both alkaline and zinc carbon batteries as well as battery-operated lighting products. Microlite has operated as an independent company since 1982. The acquisition of Microlite consolidates the Company’s rights to the Rayovac brand name in Latin America.

The results of Microlite’s operations are included in the Company’s Condensed Consolidated Statement of Operations (Unaudited) for the three months ended January 2, 2005. The financial results of the Microlite acquisition are reported as part of the Latin America segment. Microlite contributed $14,495 in net sales, and recorded operating income of $803 for the three months ended January 2, 2005.

The total cash paid for Microlite was approximately $30,000, which includes approximately $21,100 in purchase price, acquisition related expenditures of approximately $1,900, plus approximately $8,000 of assumed debt. Cash acquired totaled approximately $200. Prepaid contingent consideration totaling $7,000 (recorded in Prepaid expenses and other in the Condensed Consolidated Balance Sheet (Unaudited) as of January 2, 2005) is included in the $30,000 cash paid. This consideration will be earned by the seller, Tabriza, upon the attainment by Microlite of certain earnings targets to be achieved through June 30, 2005. During 2005, the Company completed the valuation of the Microlite trade name. Approximately $21,685 (using exchange rates in effect as of September 30, 2004) was assigned to the value of this trade name in Brazil. Goodwill was reduced by the same amount in fiscal 2005. The Company is currently finalizing the valuation of assets acquired, which may impact the Company’s estimates of the net assets acquired in the transaction.

Acquisition of Ningbo

On March 31, 2004, the Company acquired an 85% equity interest in Ningbo. The remaining 15% equity interest will continue to be held by Ningbo Baowang Investment Company and the founder/general manager of Ningbo. Ningbo, founded in 1995, produces alkaline and zinc carbon batteries for retail, OEM, and private label customers.

The results of Ningbo’s operations are included in the Company’s Condensed Consolidated Statements of Operations (Unaudited) for the three months ended January 2, 2005. The financial results of the Ningbo acquisition are reported as part of Europe/ROW segment. Ningbo contributed $6,354 in net sales for the three months ended January 2, 2005, and recorded an operating loss of $130 for the quarter.

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RAYOVAC CORPORATION

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

(Amounts in thousands, except per share figures)

The total cash paid for Ningbo was approximately $17,000, which includes approximately $16,000 in purchase price, acquisition related expenditures of approximately $600, plus approximately $14,000 of assumed debt. Cash acquired totaled approximately $5,500. The Company is currently finalizing the valuation of assets acquired, which may impact the Company’s estimates of the net assets acquired in the transaction.

Supplemental Pro Forma information: The following reflects the Company’s pro forma results had the results of the Microlite business been included for all periods beginning after September 30, 2003. The results of Ningbo are not included in the pro forma results as the acquisition is not material.

Pro forma adjustments to net income include certain charges not expected to recur. These charges include interest expense which will be reduced as a result of the Company’s recapitalization of assumed debt, and lowered interest rates and hedging costs as a result of the recapitalized debt and access to more efficient capital markets. In addition, the pro forma results include charges related to the establishment of valuation allowances for certain deferred tax assets prior to acquisition.

11 RESTRUCTURING AND RELATED CHARGES

The Company reports restructuring and related charges associated with manufacturing and related initiatives in Cost of goods sold. Restructuring and related charges reflected in Cost of goods sold include, but are not limited to, termination and related costs associated with manufacturing employees, asset impairments relating to manufacturing initiatives, and other costs directly related to the restructuring initiatives implemented.

The Company reports restructuring and related charges relating to administrative functions in Operating expenses, such as initiatives impacting sales, marketing, distribution, or other non-manufacturing related functions. Restructuring and related charges reflected in Operating expenses include, but are not limited to, termination and related costs, any asset impairments relating to the functional areas described above, and other costs directly related to the initiatives implemented.

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RAYOVAC CORPORATION

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

(Amounts in thousands, except per share figures)

Restructuring and related charges incurred in fiscal 2004 are not reflected in the segment disclosures included in footnote 9, “Segment Information.” No restructuring and related charges were incurred during the three months ended January 2, 2005.

The Company currently has assets held for sale totaling approximately $6,100 included in Prepaid expenses and other in the Condensed Consolidated Balance Sheet (Unaudited). Assets included in this balance include the Madison, Wisconsin manufacturing facility, the Remington facility in Bridgeport, Connecticut and various properties held for sale in the Dominican Republic and Venezuela.

2004 Restructuring and Related Charges

In 2004, in connection with the September 2003 acquisition of Remington, the Company committed to and announced a series of initiatives to position itself for future growth opportunities and to optimize the global resources of the combined Remington and Rayovac companies. These initiatives include: integrating all of Remington’s North America administrative services, marketing, sales, and customer service functions into the Company’s North America headquarters in Madison, Wisconsin; moving Remington’s Bridgeport, Connecticut manufacturing operations to the Company’s Portage, Wisconsin manufacturing location; creation of a global product development group in the Company’s technology center in Madison, Wisconsin; closing Remington’s Service Centers in the United States and the United Kingdom; consolidating distribution centers; and moving the Company’s corporate headquarters to Atlanta, Georgia. The Company also announced the integration of its sales and marketing organizations throughout continental Europe. The following table summarizes the remaining accrual balance associated with the 2004 initiatives and activity that occurred during fiscal 2005:

2004 Restructuring Initiatives Summary

All activities associated with the 2004 restructuring activities have been completed, and the remaining cash payments and the disposition of impaired assets will be substantially completed in the current fiscal year.

12 COMMITMENTS AND CONTINGENCIES

The Company has provided for the estimated costs associated with environmental remediation activities at some of its current and former manufacturing sites. The Company believes that any additional liability in excess of the amounts provided of approximately $5,233 which may result from resolution of these matters, will not have a material adverse effect on the financial condition, results of operations, or cash flow of the Company.

The Company has certain other contingent liabilities with respect to litigation, claims and contractual agreements arising in the ordinary course of business. Such litigation includes legal proceedings with Philips in Europe with respect to trademark or other intellectual property rights, patent infringement claims by the Gillette Company and its subsidiary Braun Gmbh, and a lawsuit alleging misleading advertising filed by Norelco Consumer Products Company against the Company’s subsidiary, Remington Products Company, L.L.C. In the opinion of management, it is either not likely or premature to determine whether such contingent liabilities will have a material adverse effect on the financial condition, liquidity or cash flow of the Company.

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RAYOVAC CORPORATION

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

(Amounts in thousands, except per share figures)

13 SUBSEQUENT EVENTS

On January 3, 2005, the Company entered into an agreement to acquire all of the equity interests of United Industries Corporation (United). United, based in St. Louis, is a privately-held, leading manufacturer and marketer of consumer products for lawn and garden care and household insect control, operating as Spectrum Brands in the United States and NuGro in Canada. United also holds a leading position in the fragmented U.S. pet supply market, manufacturing and marketing premium branded specialty pet supplies through its United Pet Group. Among United’s brands are Spectracide(R), Vigoro(R), Sta-Green(R), Schultz(TM) and C.I.L(R) in the lawn and garden market; Hot Shot(R), Cutter(R) and Repel(R) in the household insect control market; and Marineland(R), Perfecto(R) and Eight in One(R) among pet supply products.

In connection with the acquisition, the Company issued 13,750 shares of common stock from treasury shares and paid cash consideration of $70,000 to United Industries’ current shareholders. The Company also assumed all outstanding United debt, which totaled approximately $890,000 as of February 7, 2005. In connection with the acquisition of United, the Company entered into a new credit agreement consisting of a total of $1,030,000 in senior secured credit facilities, made up of aggregate term loan facilities of $730,000, of which $540,000 is denominated in dollars, $140,000 is denominated in Euros and $50,000 is denominated in Canadian dollars, and a multicurrency revolving credit facility of $300,000 denominated primarily in dollars. The Company also issued $700,000 of 7.375% senior subordinated notes due 2015. Proceeds from the new credit facility and the senior subordinated notes were used primarily to pay off United’s existing indebtedness and refinance the Company’s existing senior credit facilities. The Company will expense approximately $12,000 of debt issuance costs associated with the previous credit agreement. These costs will be replaced by debt issuance costs, of approximately the same amount, incurred in connection with the new credit agreement.

14 CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

In connection with the acquisition of Remington, the Company completed a debt offering of $350,000 of 8.5% Senior Subordinated Notes due in 2013. Payment obligations of the Senior Subordinated Notes were fully and unconditionally guaranteed on a joint and several basis by all of the Company’s domestic subsidiaries, including ROV Holding, Inc. The foreign subsidiaries of the Company, which do not guarantee the payment obligations under the notes, are directly and wholly owned by ROV Holding, Inc., with the exception of Ningbo, which is 85% owned by the Company.

The following condensed consolidating financial data (unaudited) illustrates the components of the condensed consolidated financial statements (unaudited). Investments in subsidiaries are accounted for using the equity method for purposes of illustrating the consolidating presentation. Earnings of subsidiaries are therefore reflected in the Company’s and Guarantor Subsidiaries’ investment accounts and earnings. The elimination entries eliminate investments in subsidiaries and intercompany balances and transactions. Separate condensed consolidated financial statements of the Guarantor Subsidiaries are not presented because management has determined that such financial statements would not be material to investors.

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RAYOVAC CORPORATION AND SUBSIDIARIES

Condensed Consolidating Balance Sheets

January 2, 2005

(Unaudited)

(Amounts in thousands)