Rayovac 2002 Annual Report Download - page 33

Our revenue from external customers increased $6.5 million, or 5.8%, to $118.7 million in fiscal 2001 from $112.2 million the previous year due primarily
to increased sales of alkaline batteries partially offset by lower sales of zinc carbon batteries and unfavorable impacts of currency devaluation of $1.7 million.
The alkaline sales growth in Latin America primarily reflects new distribution in mass merchandiser chains compounded by the expansion into the
Southern region of South America. Heavy duty sales were affected by a slowing economic environment and the impact of currency devaluation.
Our profitability decreased $3.4 million, or 16.8%, to $16.9 million in fiscal 2001 from $20.3 million the previous year. This decrease was primarily
attributable to operating expense increases partially offset by improved gross profit margins. The operating expense increases were primarily driven by
increased promotional and marketing support associated with new distribution initiatives in the Southern region and higher operating expenses associ-
ated with our expansion at larger mass merchandiser chains in Mexico.
Europe/ROW
2000 2001
Revenue from external customers $50.6 $48.7
Segment profit 6.1 4.1
Segment profit as a % of net sales 12.1% 8.4%
Our revenue from external customers decreased $1.9 million, or 3.8%, to $48.7 million in fiscal 2001 from $50.6 million the previous year, due
primarily to the unfavorable impacts of currency devaluation of $3.4 million. Excluding the negative impact of currency devaluation net sales increased
3.0% reflecting sales increases in hearing aid and alkaline batteries. Alkaline battery sales increases were driven primarily by new distribution.
Our profitability decreased $2.0 million, or 32.8%, due primarily to lower gross profit margins attributable to an unfavorable product mix and increased
operating expenses attributable to our new distribution.
Corporate Expenses. Our corporate expenses decreased $7.3 million, or 22.5%, to $25.1 million in fiscal 2001 from $32.4 million the previous year.
As a percentage of total sales, our corporate expense was 4.1% compared to 5.1% in the previous year. These decreases were primarily due to lower man-
agement incentives and legal expenses partially offset by higher research and development expenses reflecting an increase in technology spending.
Special Charges. We recorded special charges of $22.3 million related to: (i) an organizational restructuring in the U.S., (ii) manufacturing and distribution
cost rationalization initiatives in the Company’s Tegucigalpa, Honduras and Mexico City, Mexico manufacturing facilities and in our European operations,
(iii) the closure of the Company’s Wonewoc, Wisconsin, manufacturing facility, (iv) the rationalization of uneconomic manufacturing processes at the
Company’s Fennimore, Wisconsin, manufacturing facility, and rationalization of packaging operations and product lines, and (v) costs associated with
our secondary offering in June 2001. The amount recorded includes $10.1 million of employee termination benefits for approximately 570 employees,
$10.2 million of equipment, inventory, and other asset write-offs, and $2.0 million of other expenses.
Income from Operations. Our income from operations decreased $34.9 million, or 39.1%, to $54.4 million in fiscal 2001 from $89.3 million the pre-
vious year. This decrease was primarily due to special charges of $22.3 million and decreased profitability attributable to sales volume decreases.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Rayovac Corporation and Subsidiaries