Rayovac 2010 Annual Report Download - page 60

successfully leveraging our value proposition, that is, products that work as well as or better than our
competitors, at a lower price. These gains were partially offset by decreased consumer battery sales of $22
million in Europe, primarily due to our continued exit of low margin private label battery sales.
Pet product sales during Fiscal 2010 decreased $13 million, or 2%, compared to Fiscal 2009. The decrease
of $13 million is attributable to decreased aquatics sales of $11 million and decreased specialty pet products of
$6 million. These decreases were partially offset by favorable foreign exchange impacts of $3 million. The $11
million decrease in aquatic sales is due to decreases within the United States and Pacific Rim of $6 million and
$5 million, respectively, as a result of reduction in demand in this product category due to the macroeconomic
slowdown as we maintained our market share in the category. The $6 million decrease in companion animal sales
is due to $9 million decline in the United States, primarily driven by a distribution loss of at a major retailer of
certain dog shampoo products and the impact of a product recall, which was tempered by increases of $3 million
in Europe.
Sales of home and garden control products during Fiscal 2010 versus Fiscal 2009 increased $19 million, or
6%. This increase is a result of additional sales to major customers that was driven by incentives to retailers and
promotional campaigns during the year in both lawn and garden control products and household control products.
Electric shaving and grooming product sales during Fiscal 2010 increased $32 million, or 14%, compared to
Fiscal 2009 primarily due to increased sales within Europe of $25 million coupled with favorable foreign
exchange translation of $5 million. The increase in Europe sales is a result of new product launches, pricing and
promotions.
Electric personal care product sales during Fiscal 2010 increased $5 million, or 2%, when compared to
Fiscal 2009. The increase of $5 million during Fiscal 2010 was attributable to favorable foreign exchange
impacts of $2 million coupled with modest sales increases within Latin America and North America of $3
million and $1 million, respectively. These sales increases were partially offset by modest declines in Europe of
$2 million.
Sales of portable lighting products in Fiscal 2010 increased $8 million, or 10%, compared to Fiscal 2009 as
a result of increases in North America of $3 million coupled with favorable foreign exchange translation of $2
million. Sales of portable lighting products also increased modestly in both Europe and Latin America.
Small appliances contributed $238 million or 9% of total net sales for Fiscal 2010. This represents sales
related to Russell Hobbs from the date of the consummation of the merger, June 16, 2010 through the close of the
Fiscal 2010.
Gross Profit. Gross profit for Fiscal 2010 was $921 million versus $816 million for Fiscal 2009. Our gross
profit margin for Fiscal 2010 decreased to 35.9% from 36.6% in Fiscal 2009. The decrease in our gross profit
margin is primarily a result of our adoption of fresh-start reporting upon emergence from Chapter 11 of the
Bankruptcy Code. Upon the adoption of fresh-start reporting, in accordance with Statement of Financial
Accounting Standards No. 141, “Business Combinations,” (“SFAS 141”), inventory balances were revalued at
August 30, 2009 resulting in an increase in such inventory balances of $49 million. As a result of the inventory
revaluation, we recognized $34 million in additional cost of goods sold during Fiscal 2010 compared to $15
million of additional cost of goods sold recognized in Fiscal 2009. The impact of the inventory revaluation was
offset by lower Restructuring and related charges in Cost of goods sold during Fiscal 2010, which included $7
million of Restructuring and related charges whereas Fiscal 2009 included $13 million of Restructuring and
related charges. The Restructuring and related charges incurred in Fiscal 2010 were primarily associated with
cost reduction initiatives announced in 2009. The $13 million of Restructuring and related charges incurred in
Fiscal 2009 primarily related to the shutdown of our Ningbo, China battery manufacturing facility. See
“Restructuring and Related Charges” below, as well as Note 14, Restructuring and Related Charges, to our
Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information
regarding our restructuring and related charges.
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