Rayovac 2006 Annual Report Download - page 25

SPECTRUM BRANDS | 2006 ANNUAL REPORT 13
Sales of certain of our products are seasonal and may
cause our quarterly operating results and working capi-
tal requirements to fl uctuate; adverse business or eco-
nomic conditions could adversely affect our business.
Sales of our battery, electric shaving and grooming, lawn and
garden and household insect control products are seasonal. A
large percentage of sales for our battery and electric personal
care products occur during the fi scal quarter ending on or about
December 31, due to the impact of the December holiday sea-
son, and a large percentage of our sales for our lawn and garden
and household insect control products occur during the spring
and summer. As a result of this seasonality, our inventory and
working capital needs relating to these products fl uctuate signifi -
cantly during the year. In addition, orders from retailers are often
made late in the period preceding the applicable peak season,
making forecasting of production schedules and inventory pur-
chases diffi cult. Furthermore, adverse business or economic con-
ditions during the periods mentioned above could materially
adversely affect our business, fi nancial condition and results of
operations.
We may not be able to adequately establish and protect
our intellectual property rights.
To establish and protect our intellectual property rights, we
rely upon a combination of patent, trademark and trade secret
laws, together with licenses, confi dentiality agreements and
other contractual covenants. The measures we take to protect
our intellectual property rights may prove inadequate to pre-
vent misappropriation of our technology or other intellectual
property. We may need to resort to litigation to enforce or
defend our intellectual property rights. If a competitor or col-
laborator fi les a patent application claiming technology also
invented by us, or a trademark application claiming a trade-
mark, service mark or trade dress also used by us, in order to
protect our rights, we may have to participate in an expensive
and time consuming interference proceeding before the United
States Patent and Trademark Offi ce or any similar foreign
agency. In addition, our intellectual property rights may be
challenged by third parties. Even if our intellectual property
rights are not directly challenged, disputes among third parties
could lead to the weakening or invalidation of our intellectual
property rights. Furthermore, competitors may independently
develop technologies that are substantially equivalent or supe-
rior to our technology. Obtaining, protecting and defending
intellectual property rights can be time consuming and expen-
sive, and may require us to incur substantial costs, including the
diversion of management and technical personnel. 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 competi-
tors at any time. If this technology were licensed to a competi-
tor, it could have a material adverse effect on our business,
fi nancial condition and results of operations.
Third party intellectual property infringement claims
against us could adversely affect our business.
From time to time we have been subject to claims that we are
infringing upon the intellectual property of others, and it is possi-
ble that third parties will assert infringement claims against us in
the future. For example, we are involved in a number of legal pro-
ceedings with Philips with respect to trademarks owned by Philips
relating to the shape of the head portion of Philips’ three-head
rotary shaver. An adverse fi nding against us in these or similar
trademark or other intellectual property litigations may have a
material adverse effect on our business, fi nancial condition and
results of operations. Any such claims, with or without merit,
could be time consuming and expensive, and may require us to
incur substantial costs (including the diversion of management and
technical personnel) cause product delays or require us to enter
into licensing or other agreements in order to secure continued
access to necessary or desirable intellectual property. Our business
will be harmed if we cannot obtain a necessary or desirable license,
can obtain such a license only on terms we consider to be unat-
tractive or unacceptable or if we are unable to redesign or re-brand
our products or redesign our processes to avoid actual or potential
intellectual property infringement. In addition, an unfavorable rul-
ing in an intellectual property litigation could subject us to signifi -
cant liability, as well as require us to cease developing, manufacturing
or selling the affected products or using the affected processes or
trademarks. There can be no assurance that we would prevail in any
intellectual property infringement action, will be able to obtain a
license to any third party intellectual property on commercially
reasonable terms, successfully develop non-infringing alternative
technology, trademarks or trade dress on a timely basis or license
non-infringing alternatives, if any exist, on commercially reason-
able terms. Any signifi cant intellectual property impediment to
our ability to develop and commercialize our products could have
a material adverse effect on our business, fi nancial condition and
results of operations.
Our dependence on a few suppliers and one of our U.S.
facilities for certain of our products makes us vulnerable
to a disruption in the supply of our products.
2006 Form 10-K Annual Report
Spectrum Brands, Inc.