Rayovac 2002 Annual Report Download - page 32

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Rayovac Corporation and Subsidiaries
Fiscal Year Ended September 30, 2001 Compared to Fiscal Year Ended September 30, 2000
Highlights of consolidated operating results
Net Sales. Our net sales decreased $14.7 million, or 2.3%, to $616.2 million in fiscal 2001 from $630.9 million the previous year. Increases in alkaline
and hearing aid battery sales were offset by decreased specialty battery sales and lighting products sales.
Net Income. Our net income for fiscal 2001 decreased $26.9 million, or 70.0%, to $11.5 million from $38.4 million the previous year. The decrease
reflects the impact of a $22.3 million pretax restructuring charge, a $5.4 million extraordinary loss, net of tax, and sales softness in North America and
Europe/ROW.
North America
2000 2001
Revenue from external customers $468.2 $448.8
Segment profit 95.3 80.8
Segment profit as a % of net sales 20.4% 18.0%
Our revenue from external customers decreased $19.4 million, or 4.1%, to $448.8 million in fiscal 2001 from $468.2 million the previous year due
primarily to increased sales of alkaline batteries and hearing aid batteries offset by decreased sales of lighting products and specialty batteries.
Alkaline sales increases of $15.1 million, or 5.9%, were driven by distribution gains, product line expansion, and strong sales in the mass merchandiser
and OEM trade channels partially offset by the impacts of Y2K on sales volumes and lower promotional activity at certain food retailers this year.
Hearing aid battery sales increases of $4.7 million, or 13.0%, were driven by strength in the professional channel and expanded retail distribution in fis-
cal 2001. Lighting product sales decreases of $14.9 million, or 20.9%, were driven by weakness in the lights and lantern battery category reflecting the
lingering impact of the Y2K phenomenon and our inability to anniversary a strong hurricane season in the previous year. Specialty battery sales decreases
versus last year primarily reflect softness in camcorder and lithium battery sales reflecting general softness in lithium battery demand from OEM cus-
tomers in the PC, telecommunications, and electronics industries and the transition to a camcorder battery licensing agreement.
Our profitability decreased $14.5 million, or 15.2%, to $80.8 million in fiscal 2001 from $95.3 million the previous year. This decrease was primarily
attributable to sales volume decreases and operating expense increases partially offset by improved gross profit margins. The operating expense increases
were primarily driven by increased distribution costs reflecting fuel surcharges, higher shipping and handling costs and bad debt write-offs due to cus-
tomer bankruptcies. The improvement in gross profit margins was primarily the result of previously announced cost rationalization initiatives and a
favorable shift in product mix away from lower margin lithium, camcorder, and lighting products to more profitable alkaline and hearing aid batteries.
Latin America
2000 2001
Revenue from external customers $112.2 $118.7
Segment profit 20.3 16.9
Segment profit as a % of net sales 18.1% 14.2%