Rayovac 2004 Annual Report Download - page 50

Download and view the complete annual report

Please find page 50 of the 2004 Rayovac annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 115

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115

RISK FACTORS
Any of the following factors could materially and adversely affect our business, financial condition and
results of operations and the risks described below are not the only risks that we may face. Additional risks and
uncertainties not currently known to us or that we currently view as immaterial may also materially and
adversely affect our business, financial condition or results of operations.
We participate in very competitive markets and we may not be able to compete successfully.
The consumer battery and electric personal care product markets in which we participate are very
competitive. In the consumer battery market, our primary competitors are Duracell (a brand of Gillette),
Energizer and Panasonic (a brand of Matsushita). In the electric personal care products market, our primary
competitors are Braun (a brand of Gillette) and Norelco (a brand of Philips). We and our competitors compete for
consumer acceptance and limited shelf space based upon brand name recognition, perceived quality, price,
performance, product packaging and design innovation, as well as creative marketing, promotion and distribution
strategies. Our ability to compete in these consumer product markets may be adversely affected by a number of
factors, including, but not limited to, the following:
• Our primary competitors in both the battery markets and electric personal care product markets are well
established companies that have substantially greater financial and other resources and greater overall
market share than we do.
• In some key product lines, our competitors may have lower production costs and higher profit margins
than we do, which may enable them to compete more aggressively in offering retail discounts and other
promotional incentives.
• Product improvements or effective advertising campaigns by competitors may weaken consumer
demand for our products.
• Consumer preferences may change to products other than those we market.
Consolidation of retailers and our dependence on a small number of key customers for a significant
percentage of our sales may negatively affect our profits.
During the past decade, retail sales of consumer products, including battery, electric shaving and lighting
products, have been increasingly consolidated into a small number of regional and national mass merchandisers
and warehouse clubs. This trend towards consolidation is occurring on a worldwide basis. As a result of this
consolidation, a significant percentage of our sales are attributable to a very limited group of retailer customers.
Wal-Mart Stores, Inc. our largest retailer customer, alone accounted for approximately 19% of our consolidated
net sales in fiscal 2004. Our sales generally are made through the use of individual purchase orders, consistent
with industry practice. Because of the importance of these key customers, price or promotional demands by such
customers, reductions in their purchases, change in their financial condition or loss of their accounts could have a
material adverse effect on our business, financial condition and results of operations. Furthermore, we primarily
sell branded products and a move by one of our customers to sell significant quantities of private label products
which compete with products that we sell could have a material adverse effect on our business, financial
condition and results of operations.
Our substantial indebtedness could adversely affect our business, financial condition and results of
operations and prevent us from fulfilling our obligations under the terms of our indebtedness.
We have, and we will continue to have, a significant amount of indebtedness. As of September 30, 2004, we
had total indebtedness of $829.9 million.
Our substantial indebtedness could have material adverse consequences for our business, including:
• make it more difficult for us to satisfy our obligations with respect to the terms of our indebtedness;
35