Rayovac 2008 Annual Report Download - page 24

Table of Contents
Index to Financial Statements
Consolidation of retailers and our dependence on a small number of key customers for a significant percentage of our sales may negatively affect our
business, financial condition and profits.
As a result of consolidation of national mass merchandisers, a significant percentage of our sales are attributable to a very limited group of retailer
customers. Because of the importance of these key customers, demands for price reductions or promotions by such customers, reductions in their purchases,
changes in their financial condition or loss of their accounts could have a material adverse effect on our business, financial condition and results of operations. In
addition, as a result of the desire of retailers to more closely manage inventory levels, there is a growing trend among them to purchase our products on a
“just-in-time” basis. This requires us to shorten our lead-time for production in certain cases and more closely anticipate their demand, which could in the future
require us to carry additional inventories, increase our working capital and related financing requirements or result in excess inventory becoming unusable or
obsolete. Furthermore, we primarily sell branded products and a move by one or more of our large customers to sell significant quantities of private label
products, which we do not produce on their behalf and which directly compete with our products, could have a material adverse effect on our business, financial
condition and results of operations.
If we are unable to improve existing products and develop new, innovative products, or if our competitors introduce new or enhanced products, our
sales and market share may suffer.
Both we and our competitors make significant investments in research and development. If our competitors successfully introduce new or enhanced
products that present technological advantages over or otherwise outperform our products, or are perceived by consumers as doing so, we may be unable to
compete successfully in market segments affected by these changes. In addition, we may be unable to compete if our competitors develop or apply technology
which permits them to manufacture products at a lower relative cost. The fact that many of our principal competitors have substantially greater resources than we
do increases this risk. The patent rights or other intellectual property rights of third parties, restrictions on our ability to expand or modify manufacturing capacity
or financial and other constraints on our research and development activity may also limit our ability to introduce products that are competitive on a performance
basis.
Our future success will depend, in part, upon our ability to improve our existing products and to develop, manufacture and market new, innovative
products. If we fail to successfully develop, manufacture and market new or enhanced products or develop product innovations, our ability to maintain or grow
our market share may be adversely affected, which in turn could materially adversely affect our business, financial condition and results of operations.
As a result of our international operations, we face a number of risks related to exchange rates and foreign currencies.
Our international sales and certain of our expenses are transacted in foreign currencies. During Fiscal 2008 approximately 43% of our net sales and 42% of
our operating expenses were denominated in currencies other than U.S. dollars. 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, as a result, our exposure to risks associated with foreign currencies
could increase accordingly. Significant changes in the value of the U.S. dollar in relation to foreign currencies could have a material effect on our business,
financial condition and results of operations. 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.
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Source: Spectrum Brands, Inc, 10-K, December 10, 2008