Rayovac 2002 Annual Report Download - page 30

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Rayovac Corporation and Subsidiaries
Net Income. Our net income for fiscal 2002 increased $17.7 million, or 153.9%, to $29.2 million from $11.5 million the previous year. The increase
reflects a reduction in interest expense attributable to the retirement of $65.0 million in Senior Subordinated Notes following the June 2001 stock offering,
plus a $56.1 million reduction in debt during fiscal 2002 due to strong cash flow from operations. In addition, fiscal 2001 results reflect a $22.3 million
pretax restructuring charge, and a $5.4 million extraordinary loss, net of tax. These improvements were partially offset by a bad debt reserve of $7.5 mil-
lion, net of tax, recognized in fiscal 2002 related to the bankruptcy filing of a key customer.
Segment Results. We evaluate segment profitability based on income from operations before special charges and corporate expenses, which includes cor-
porate purchasing expense, general and administrative expense and research and development expense. All depreciation and amortization included in
income from operations is related to a segment. Total segment assets are set forth in Note 12 of Notes to Consolidated Financial Statements filed herewith.
North America
2001 2002
Revenue from external customers $448.8 $435.6
Segment profit 80.8 85.5
Segment profit as a % of net sales 18.0% 19.6%
Our revenue from external customers decreased $13.2 million, or 2.9%, to $435.6 million in fiscal 2002 from $448.8 million the previous year. Heavy
duty sales decreases of $12.3 million, or 33.8%, reflect the trend in the industry toward alkaline and the discontinuation of certain products at selected
stores of a major retailer. Alkaline sales decreases of $4.8 million, or 1.8%, were attributable to the decline in sales to a key customer in bankruptcy, a
cautious retail inventory environment and continued promotional activity, and our inability to anniversary sales to an OEM customer in the previous
year. Increases in lighting products of $4.3 million, or 7.6%, resulted from new product launches and distribution gains.
Our profitability increased $4.7 million, or 5.8%, to $85.5 million in fiscal 2002 from $80.8 million the previous year. This increase was primarily
attributable to cost containment programs that lowered operating expenses, and improved gross profit margins reflecting the benefits of the 2001 plant
closures and other cost improvement initiatives. This was partially offset by a $12.0 million bad debt reserve, net of recoveries, resulting from the bank-
ruptcy filing of a key customer.
Latin America
2001 2002
Revenue from external customers $118.7 $84.7
Segment profit 16.9 5.3
Segment profit as a % of net sales 14.2% 6.3%
Our revenue from external customers decreased $34.0 million, or 28.6%, to $84.7 million in fiscal 2002 from $118.7 million the previous year due
primarily to decreased sales of zinc carbon batteries. Net sales were impacted by unfavorable economic conditions, curtailment of shipments to certain
distributors and wholesalers who were delinquent on payments, political uncertainties in Argentina and Venezuela, and the unfavorable impacts of currency
devaluation which contributed approximately $9.3 million of the sales decline versus fiscal 2001.