Rayovac 2009 Annual Report Download - page 64

Table of Contents
Index to Financial Statements
Gross Profit. Gross profit for Fiscal 2008 was $920 million versus $877 million for Fiscal 2007. Our gross profit margin for Fiscal 2008 increased
slightly to 37.9% from 37.6% in Fiscal 2007. As a result of our reclassification of the Home and Garden business from discontinued operations to
continuing operations, and hence our reclassification of the Home and Garden Business assets from assets held for sale to assets held and used, during Fiscal
2008 we recorded a charge in Cost of goods sold of $4 million associated with depreciation expense for the production related assets of that business. From
October 1, 2006 through September 30, 2007, the U.S. division of the Home and Garden Business was designated as discontinued operations. In accordance
with generally accepted accounting principles, while designated as discontinued operations we ceased recording depreciation and amortization expense
associated with the assets of this business. See “Introduction” above and “Segment Results—Home and Garden” below, as well as Note 1, Description of
Business, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10−K for additional information regarding the
reclassification of the Home and Garden Business. Cost of goods sold during Fiscal 2008 also included $16 million in restructuring and related charges,
primarily attributable to the Ningbo Exit Plan. The restructuring and related charges incurred in Fiscal 2007 were $31 million which were associated with
various cost cutting initiatives in connection with the integration activities in our Global Pet Supplies business, which are substantially complete, and the
rationalization of our Global Batteries & Personal Care European and Latin American manufacturing organizations. 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 2008 totaled $1,605 million versus $1,128 million for Fiscal 2007. This $475 million increase in
operating expenses for Fiscal 2008 versus Fiscal 2007 was primarily driven by an increase of $497 million in impairment charges. Impairment charges in
Fiscal 2008 were $861 million versus $362 million in Fiscal 2007. In both Fiscal 2008 and Fiscal 2007 the impairment charges were non−cash charges and
related to the write down of the carrying value of goodwill and indefinite−lived intangible assets to fair value in accordance with both ASC 350 and ASC
360. See “Goodwill and Intangibles Impairment” below, as well as Note 3(c), Significant Accounting Policies and Practices—Intangible Assets, of Notes to
Consolidated Financial Statements included in this Annual Report on Form 10−K for additional information regarding these non−cash impairment charges.
The increase in operating expenses in Fiscal 2008 versus Fiscal 2007 is also attributable to the negative impact related to foreign exchange of approximately
$36 million and a $18 million charge associated with the depreciation and amortization related to the assets of the Home and Garden Business incurred as a
result of our reclassification of the Home and Garden Business from discontinued operations to continuing operations. See “Introduction” above and
“Segment Results—Home and Garden” below, as well as Note 1, Description of Business, of Notes to Consolidated Financial Statements included in this
Annual Report on Form 10−K for additional information regarding the reclassification of the Home and Garden Business. The increases noted above were
partially offset by the decrease of $44 million of restructuring and related charges in Fiscal 2008 compared to Fiscal 2007. The restructuring and related
charges incurred in Fiscal 2008 of $23 million are primarily attributable to various cost reduction initiatives in connection with our global realignment
announced in January 2007. The restructuring and related charges incurred in Fiscal 2007 of $67 million were primarily attributable to the ongoing
integration of our Global Pet Supplies business, rationalization of the sales and marketing organizations of the European and Latin American divisions of
Global Batteries & Personal Care and various cost reduction initiatives in connection with our global realignment announced in January 2007 to reduce
general and administrative expenses. 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 Loss. An operating loss of approximately $685 million was recognized in Fiscal 2008 compared to an operating loss in Fiscal 2007 of $252
million. The Fiscal 2008 operating loss is directly attributable to the impact of the previously discussed non−cash impairment charge of $861 million,
coupled with restructuring and related charges of $39 million. The Fiscal 2007 operating loss is directly attributable to the previously discussed non−cash
impairment charge of approximately $362 million coupled with restructuring and related charges of $98 million.
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