Rayovac 2009 Annual Report Download - page 51

Table of Contents
Index to Financial Statements
of our fiscal year. We anticipate the first quarter sales of our fiscal year ending September 30, 2010 (“Fiscal 2010”) to be positively impacted versus our
historical results due to this delay. The increases within Europe and Latin America were driven by new product launches, pricing and promotions.
Electronic personal care product sales during Fiscal 2009 decreased $20 million, or 9%, when compared to Fiscal 2008. The decrease of $20 million
during Fiscal 2009 was attributable to unfavorable foreign exchange impacts of $24 million and declines in North America of $7 million. These decreases
were partially offset by increases within Europe and Latin America of $8 million and $3 million, respectively. Similar to our electric shaving and grooming
products sales, the decreased sales of electric personal care products within North America was a result of delayed holiday inventory stocking by our
customers which has in turn resulted in a delay of our product shipments that historically would have been recorded during the fourth quarter of our fiscal
year. We expect the first quarter sales of Fiscal 2010 to be positively impacted versus our historical results due to this delay. The increased sales within
Europe and Latin America were a result of successful product launches, mainly in women’s hair care.
Sales of portable lighting products in Fiscal 2009 decreased $20 million, or 20%, compared to Fiscal 2008 as a result of unfavorable foreign exchange
impacts of $5 million coupled with declines in North America, Latin America and Europe of $9 million, $3 million and $1 million, respectively. The
decreases across all regions are a result of the slowdown in economic conditions and decreased market demand.
Gross Profit. Gross profit for Fiscal 2009 was $817 million versus $920 million for Fiscal 2008. Our gross profit margin for Fiscal 2009 decreased
slightly to 36.6% from 37.9% in Fiscal 2008. Gross profit was lower in Fiscal 2009 due to unfavorable foreign exchange impacts of $58 million. As a result
of our adoption of fresh−start reporting upon emergence from Chapter 11 of the Bankruptcy Code, in accordance with SFAS No. 141, “Business
Combinations,” (“SFAS 141”), inventory balances were revalued as of August 30, 2009 resulting in an increase in such inventory balances of $49 million.
As a result of the inventory revaluation, New Spectrum recognized $16 million in additional cost of goods sold in Fiscal 2009. The remaining $33 million of
the inventory revaluation will be recorded during the first quarter of Fiscal 2010. These inventory revaluation adjustments are non−cash charges. In
addition, in connection with our adoption of fresh−start reporting, and in accordance with ASC 852, we revalued our property, plant and equipment as of
August 30, 2009 which resulted in an increase to such assets of $34 million. As a result of the revaluation of property, plant and equipment, during Fiscal
2009 we incurred an additional $2 million of depreciation charges within cost of goods sold. We anticipate higher cost of goods sold in future years as a
result of the revaluation of our property, plant and equipment. Furthermore, as a result of emergence from Chapter 11 of the Bankruptcy Code, we anticipate
lower interest costs in future years which should enable us to invest more in capital expenditures into our business and, as a result, such higher future capital
spending would also increase our depreciation expense in future years. See Note 2, Voluntary Reorganization Under Chapter 11, of Notes to Consolidated
Financial Statements included in this Annual Report on Form 10−K for more information related to our reorganization under Chapter 11 of the Bankruptcy
Code and fresh−start reporting. Offsetting the unfavorable impacts to our gross margin, we incurred $13 million of Restructuring and related charges, within
Costs of goods sold, during Fiscal 2009, compared to $16 million in Fiscal 2008. The $13 million in Fiscal 2009 primarily related to the 2009 Cost
Reduction Initiatives and the Ningbo Exit Plan, while the Fiscal 2008 charges were primarily related to the Ningbo Exit Plan. See “Restructuring and
Related Charges” below, as well as Note 15, Restructuring and Related Charges, of Notes to Consolidated Financial Statements included in this Annual
Report on Form 10−K for additional information regarding our restructuring and related charges.
Operating Expense. Operating expenses for Fiscal 2009 totaled $659 million versus $1,605 million for Fiscal 2008. This $946 million decrease in
operating expenses for Fiscal 2009 versus Fiscal 2008 was primarily driven by lower impairment charges recorded in Fiscal 2009 versus Fiscal 2008.
During Fiscal 2009 we recorded non−cash impairment charges of $34 million versus $861 million of non−cash impairment charges recorded in Fiscal 2008.
The Fiscal 2009 impairment charges related to the write down of the carrying value of indefinite−lived intangible assets to fair value while the Fiscal 2008
impairment charges related to the write down of the
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