Rayovac 2004 Annual Report Download - page 36

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a favorable product line mix and the favorable impacts of foreign currency movements. Profitability as a percent
of net sales increased to 15.5% in fiscal 2004 from 12.8% in fiscal 2003 due to improved gross profit margins
resulting from the impact of the VARTA integration initiatives implemented in 2003 and the higher margins
associated with our Remington product sales. These benefits were partially offset by a slight increase in
operating expenses as a percentage of sales reflecting higher selling and administrative expenses.
Our assets at September 30, 2004 increased to $599 million from $537 million at September 30, 2003. The
increase is due to the Ningbo acquisition, which added approximately $29 million in total assets and the impact
of foreign currency translation. Intangible assets are approximately $264 million and primarily relate to the
VARTA acquisition. The purchase price allocation for the Ningbo acquisition has not been finalized and future
allocations could impact the amount and segment allocation of goodwill and other intangible assets. The
Remington acquisition was completed on September 30, 2003; thus, the total assets for Remington are included
in the Consolidated Balance Sheets as of September 30, 2004 and 2003. The purchase price allocation for the
Remington acquisition was finalized in September 2004.
Latin America 2004 2003
(in millions)
Net sales from external customers ................................................. $145 $ 125
Segment profit ................................................................ $ 12 $ 18
Segment profit as a % of net sales ................................................. 8.3% 14.4%
Assets ....................................................................... $296 $ 204
Our sales to external customers in fiscal 2004 increased to $145 million from $125 million in the previous
year, a 16% increase. Sales increases reflect improvement in our general battery business, driven by the alkaline
and zinc carbon battery product lines, coupled with the impact of the Microlite acquisition which contributed $13
million in net sales for the year. Partially offsetting these increases was the unfavorable impact of foreign
currency exchange rates. The Remington acquisition did not have an impact on the Latin America segment.
Our profitability in fiscal 2004 decreased to $12 million from $18 million in the previous year. Our
profitability margin in fiscal 2004 decreased to 8.3% from 14.4% last year. These decreases primarily reflect
declining gross profit margins as a result of margin pressure in Mexico and the Andean region, which consists of
Colombia, Peru, Ecuador and Venezuela, and the inclusion of Microlite’s results.
Our assets at September 30, 2004 increased to $296 million from $204 million at September 30, 2003. The
increase is due primarily to the Microlite acquisition, which added approximately $80 million in assets. The
purchase price allocation for the Microlite acquisition has not been finalized and future allocations could impact
the amount and segment allocation of goodwill and other intangible assets.
Corporate Expenses. Our corporate expenses in fiscal 2004 increased to $71 million from $44 million in the
previous year. The increase in expense is primarily due to a general increase in expenses related to Remington,
increased investments in research and development of approximately $9 million, and increases in incentive
compensation, legal and professional fees. Our corporate expenses as a percentage of net sales in fiscal 2004
increased to 5.0% from 4.8% in the previous year.
Restructuring and Related Charges. In fiscal 2004, we recorded restructuring and related charges of $11.4
million associated with our cost reduction initiatives, as more fully described above under the heading “Cost
Reduction Initiatives”. This amount is comprised of a credit of approximately $0.8 million recorded in cost of sales
and approximately $12.2 million recorded in operating expenses. Fiscal 2004 net restructuring and related charges
include amounts related to: (i) North American termination benefits of approximately $4.9 million associated with
Remington integration initiatives, (ii) North American inventory impairments and related costs of approximately
$0.6 million associated with the combination of Remington and Rayovac distribution facilities (iii) certain pre-
acquisition executive compensation agreements with certain Remington employees of approximately $2.0 million,
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