Rayovac 2003 Annual Report Download - page 22

Within North America and Europe, the rechargeable battery business has experienced dramatic changes over the past three years.
Primary rechargeable alkaline sales have declined over this period with a shift towards rechargeable batteries, such as NiMH, which
are higher performing in high drain devices. Our development of a one-hour charger and an innovative 15-minute rechargeable
battery technology help us maintain the number one market position within the rechargeable category in the United States, as
estimated by management.
Within the hearing aid battery category, we continue to hold the number one global market position based on management estimates.
We believe that our close relationship with hearing aid manufacturers and other customers, as well as our product performance
improvements and packaging innovations, position us for continued success in this category.
Seasonal Product Sales Our quarterly results are impacted by our seasonal sales. Sales during the first and fourth fiscal quarters
of the year are generally higher than other quarters due to the impact of the December holiday season. The seasonality of our sales
during the last three fiscal years is as follows:
Percentage of Annual Sales
Fiscal Year Ended September 30,
Fiscal Quarter Ended 2001 2002 2003
December 27% 28% 28%
March 22% 21% 22%
June 24% 24% 23%
September 27% 27% 27%
Remington also experiences seasonal sales. During calendar 2002, Remington’s sales for the quarters ended March 31, June 30,
September 30, and December 31 were 15%, 19%, 22%, and 44%, respectively. We anticipate our sales for the fiscal quarter ending
in December will be a larger portion of our annual sales going forward.
Fiscal Year Ended September 30, 2003 Compared to Fiscal Year Ended September 30, 2002
Highlights of consolidated operating results
Year over year historical comparisons are influenced by our October 1, 2002 acquisition of substantially all of the consumer battery
business of VARTA AG, which is included in our current year but not prior year results. See Note 16, Acquisitions and Divestitures,
of Notes to the Consolidated Financial Statements for additional information regarding the VARTA acquisition. The acquisition
of Remington, had no effect on fiscal 2003 operating results, as the transaction was completed after the close of business on
September 30, 2003.
Net Sales. Our net sales increased $349.4 million to $922.1 million in fiscal 2003 from $572.7 million the previous year. The sales
increase is attributable to the VARTA acquisition partially offset by sales decreases in the North America segment.
Operating Income. Our income from operations decreased $3.4 million to $59.6 million in fiscal 2003 from $63.0 million the
previous year. The decrease was primarily attributable to $32.6 million in restructuring charges reflecting a series of restructuring
initiatives announced and implemented during fiscal 2003 and a $20.7 million decrease in North America segment profitability dis-
cussed below. These decreases were mostly offset by the profitability associated with the VARTA acquisition. For further discussion of
restructuring and related charges see Note 15, Restructuring and Related Charges, of Notes to the Consolidated Financial Statements.
Net Income. Our net income in fiscal 2003 decreased $13.7 million to $15.5 million from $29.2 million the previous year. The
decrease was due to restructuring and related charges of $20.2 million, after tax, an increase in interest expense of $13.1 million,
after tax, North America retailer markdown programs of $3.8 million, after tax, non-operating expense of $1.9 million, after tax,
reflecting the write-off of unamortized debt issuance costs associated with the replacement of our previous credit facility, and the
decline in North America profitability, partially offset by the profitability of the VARTA acquisition. Fiscal 2002 includes a $7.5 mil-
lion, after tax, net bad debt expense related to the bankruptcy filing of a North America segment customer.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Rayovac Corporation and Subsidiaries
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