Rayovac 2008 Annual Report Download - page 25

Table of Contents
Index to Financial Statements
Our international operations may expose us to a number of risks related to conducting business in foreign countries.
Our international operations and exports and imports to and from international markets are subject to a number of special risks which could have a material
adverse effect on our business, financial condition and results of operations. These risks include, but are not limited to:
• changes in the economic conditions or consumer preferences or demand for our products in these markets;
• economic and political destabilization, governmental corruption and civil and labor unrest;
• restrictive actions by multi-national governing bodies, foreign governments or subdivisions thereof (e.g., duties, quotas and restrictions on transfer
of funds);
• changes in foreign labor laws and regulations affecting our ability to hire and retain employees;
• changes in U.S. and foreign laws regarding trade and investment;
• noncompliance by our business partners with, or a failure by our business partners to enforce, rules and regulations targeting fraudulent conduct; and
• difficulty in obtaining distribution and support for our products.
There are three particular EU Directives, RoHS, WEEE and the Battery Directive, that may have a material impact on our business. RoHS requires us to
eliminate specified hazardous materials from products we sell in EU member states. WEEE requires us to collect and treat, dispose of or recycle certain products
we manufacture or import into the EU at our own expense The Battery Directive bans heavy metals in batteries by establishing maximum quantities of heavy
metals in batteries and mandates waste management of these batteries, including collection, recycling and disposal systems, with the costs imposed upon
producers and importers such as the Company. Complying or failing to comply with the EU directives may harm our business. For example:
• Although contractually assured with our suppliers, we may be unable to procure appropriate RoHS compliant material in sufficient quantity and
quality and/or be able to incorporate it into our product procurement processes without compromising quality and/or harming our cost structure.
• We may face excess and obsolete inventory risk related to non-compliant inventory that we may continue to hold in Fiscal 2009 for which there is
reduced demand and we may need to write down the carrying value of such inventories.
• We may be unable to sell certain existing inventories of our batteries in Europe.
Many of the developing countries in which we operate do not have significant governmental regulation relating to environmental safety, occupational
safety, employment practices or other business matters routinely regulated in the United States or may not rigorously enforce such regulation. As these countries
and their economies develop, it is possible that new regulations or increased enforcement of existing regulations may increase the expense of doing business in
these countries. In addition, social legislation in many countries in which we operate may result in significantly higher expenses associated with labor costs,
terminating employees or distributors and closing manufacturing facilities. Increases in our costs as a result of increased regulation, legislation or enforcement
could materially and adversely affect our business, results of operations and financial condition.
Sales of certain of our products are seasonal and may cause our quarterly operating results and working capital requirements to fluctuate.
Sales of our battery and electric shaving and grooming and personal care products are seasonal. A large percentage of sales for these products generally
occur during our first fiscal quarter that ends on or about December 31, due to the impact of the December holiday season. Sales of our lawn and garden and
household
20
Source: Spectrum Brands, Inc, 10-K, December 10, 2008