Rayovac 2010 Annual Report Download - page 30

future minimum royalty payments. There is no guarantee that we will acquire businesses or product distribution
rights that will contribute positively to our earnings. Anticipated synergies may not materialize, cost savings may
be less than expected, sales of products may not meet expectations, and acquired businesses may carry
unexpected liabilities.
Sales of certain of our products are seasonal and may cause our operating results and working capital
requirements to fluctuate.
On a consolidated basis our financial results are approximately equally weighted between quarters, however,
sales of certain product categories tend to be seasonal. Sales in the consumer battery, electric shaving and
grooming and electric personal care product categories, particularly in North America, tend to be concentrated in
the December holiday season (Spectrum’s first fiscal quarter). Demand for pet supplies products remains fairly
constant throughout the year. Demand for home and garden control products sold though the Home and Garden
Business typically peaks during the first six months of the calendar year (Spectrum’s second and third fiscal
quarters). Small Appliances peaks from July through December primarily due to the increased demand by
customers in the late summer for “back-to-school” sales and in the fall for the holiday season. As a result of this
seasonality, our inventory and working capital needs fluctuate significantly 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 purchases difficult. If we are unable to accurately forecast and prepare for
customer orders or our working capital needs, or there is a general downturn in business or economic conditions
during these periods, our business, financial condition and results of operations could be materially and adversely
affected.
We are subject to significant international business risks that could hurt our business and cause our results
of operations to fluctuate.
Approximately 44% of our net sales for the fiscal year ended September 30, 2010 were from customers
outside of the U.S. Our pursuit of international growth opportunities may require significant investments for an
extended period before returns on these investments, if any, are realized. Our international operations are subject
to risks including, among others:
• currency fluctuations, including, without limitation, fluctuations in the foreign exchange rate of the
Euro;
• changes in the economic conditions or consumer preferences or demand for our products in these
markets;
• the risk that because our brand names may not be locally recognized, we must spend significant
amounts of time and money to build brand recognition without certainty that we will be successful;
• labor unrest;
• political and economic instability, as a result of terrorist attacks, natural disasters or otherwise;
• lack of developed infrastructure;
• longer payment cycles and greater difficulty in collecting accounts;
• restrictions on transfers of funds;
• import and export duties and quotas, as well as general transportation costs;
• changes in domestic and international customs and tariffs;
• changes in foreign labor laws and regulations affecting our ability to hire and retain employees;
• inadequate protection of intellectual property in foreign countries;
• unexpected changes in regulatory environments;
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