Rayovac 2004 Annual Report Download - page 53

• changes in U.S. and foreign laws regarding trade and investment;
• changes in the economic conditions in these markets; and
• difficulty in obtaining distribution and support.
In many of the developing countries in which we operate, there has not been significant governmental
regulation relating to the environment, occupational safety, employment practices or other business matters
routinely regulated in the U.S. As such economies develop, it is possible that new regulations may increase the
expense and risk of doing business in such countries. In addition, social legislation in many countries in which
our business operates may result in significantly higher expenses associated with labor costs, terminating
employees or distributors and with closing manufacturing facilities.
We may face a number of risks related to foreign currencies.
Our foreign sales and certain of our expenses are transacted in foreign currencies. With the exception of
purchases of Remington products, which are denominated entirely in U.S. dollars, substantially all third-party
materials purchases are transacted in the currency of the local operating unit. In fiscal 2004, approximately 54%
of our revenues and 52% of our operating expenses were denominated in currencies other than U.S. dollars.
Significant increases in the value of the U.S. dollar in relation to foreign currencies could have a material adverse
effect on our business, financial condition and results of operations. While we generally hedge a portion of our
foreign currency exposure, we are still vulnerable to the effects of currency exchange rate fluctuations. Changes
in currency exchange rates may also affect our sales to, purchases from and loans to our subsidiaries as well as
sales to, purchases from and bank lines of credit with our customers, suppliers and creditors that are denominated
in foreign currencies. We expect that the amount of our revenues and expenses transacted in foreign currencies
will increase as our Latin American, European and Asian operations grow and our exposure to risks associated
with foreign currencies could increase accordingly.
Sales of our products are seasonal and may cause our quarterly operating results and working capital
requirements to fluctuate.
Sales of our products are seasonal, with a large percentage of net sales occurring during the fiscal quarter
ending on or about December 31, due to the impact of the December holiday season. As a result of this
seasonality, our inventory and working capital needs fluctuate significantly during the year. In addition, orders
from retailers are often made late in the year, making forecasting of production schedules and inventory
purchases difficult. Furthermore, adverse business or economic conditions during these quarters could materially
adversely affect results of operations for the full year. As a result, the market price of our common stock could
fluctuate substantially. For a more detailed discussion of the seasonality of our product sales, see “Management’s
Discussion and Analysis of Financial Condition and Results of Operations—Seasonal Product Sales.”
We may not be able to adequately protect our intellectual property.
To establish and protect our technology and other intellectual property rights, we rely upon a combination of
patent, trademark and trade secret laws, together with licenses, confidentiality agreements and other contractual
covenants. The measures we take to protect our technology and other intellectual property rights may prove
inadequate to prevent misappropriation of our technology or other intellectual property. In addition, our
competitors may independently develop technologies that are substantially equivalent or superior to our
technology. Moreover, the laws of certain foreign countries in which we operate or may operate in the future do
not protect intellectual property rights to the same extent as do the laws of the U.S. which may negate our
competitive or technological advantages in such markets. Also, some of the technology underlying our products
is the subject of nonexclusive licenses from third parties. As a result, this technology could be made available to
our competitors at any time. If this technology were licensed to a competitor, it could have a material adverse
effect on our business, financial condition and results of operations.
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