Rayovac 2004 Annual Report Download - page 38

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Non-Operating expense. There were no non-operating expenses in fiscal 2004. Non-operating expense of
approximately $3 million in fiscal 2003 relates to the write-off of unamortized debt fees associated with the
credit facility which was replaced in conjunction with the VARTA acquisition.
Other Expense (Income). Other expense (income), net was not significant in fiscal 2004. Other income of $4
million recognized in fiscal 2003 was primarily attributable to foreign exchange transaction gains.
Income Tax Expense. Our effective tax rate on income from continuing operations was 38% for fiscal 2004,
compared to approximately 33% in fiscal 2003. Our effective tax rate increased primarily as a result of the
benefit of tax credits recognized in fiscal 2003 that did not recur in fiscal 2004.
Subsequent to September 30, 2004, the President signed into law both the American Jobs Creation Act of
2004 and the Working Families Tax Relief Act of 2004. This legislation contains numerous corporate tax
changes, including eliminating a tax benefit relating to U.S. product exports, a new deduction relating to U.S.
manufacturing, a lower U.S. tax rate on non-U.S. dividends and an extension of the research and experimentation
credit. This new legislation is not anticipated to materially affect our results of operations or our financial
condition.
Fiscal Year Ended September 30, 2003 Compared to Fiscal Year Ended September 30, 2002
Highlights of consolidated operating results
Year over year historical comparisons are influenced by our October 1, 2002 acquisition of substantially all
of the consumer battery business of VARTA AG, which is included in our fiscal 2003 but not fiscal 2002 results.
See Note 16, Acquisitions, of Notes to the Consolidated Financial Statements of this Annual Report on
Form 10-K for additional information regarding the VARTA acquisition. The acquisition of Remington had no
effect on fiscal 2003 operating results, as the transaction was completed after the close of business on September
30, 2003.
Net Sales. Our net sales for fiscal 2003 increased to $922 million from $573 million the previous year, reflecting
a 61% increase. The sales increase is attributable to the VARTA acquisition partially offset by sales decreases in
the North America segment.
Operating Income. Our fiscal 2003 operating income decreased to $60 million from $63 million in fiscal 2002,
representing a 5% decrease. The decrease was primarily attributable to $33 million in restructuring and related
charges reflecting a series of restructuring initiatives announced and implemented during fiscal 2003, and a $21
million decrease in North America segment profitability discussed below. These decreases were mostly offset by
the profitability associated with the VARTA acquisition. For further discussion of restructuring and related
charges see Note 15, Restructuring and Related Charges, of Notes to the Consolidated Financial Statements of
this Annual Report on Form 10-K.
Net Income. Our net income in fiscal 2003 decreased to $15 million from $29 million the previous year. The
decrease was due to restructuring and related charges, net of tax of $20 million, an increase in interest expense of
$13 million, net of tax, North America retailer markdown programs of $4 million, non-operating expense of $2
million reflecting the write-off of unamortized debt issuance costs associated with the replacement of our
previous credit facility, and the decline in North America profitability, partially offset by the profitability of the
VARTA acquisition. Fiscal 2002 includes an $8 million bad debt expense related to the bankruptcy filing of a
North America segment customer.
North America 2003 2002
(in millions)
Net sales from external customers ................................................ $376 $436
Segment profit ................................................................ $ 65 $ 85
Segment profit as a % of net sales ................................................ 17.3% 19.5%
Assets ...................................................................... $625 $256
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