Rayovac 2003 Annual Report Download - page 23

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Segment Results. We evaluate segment profitability based on income from operations before corporate expense and restructuring
and related charges. Corporate expense includes corporate purchasing expense, general and administrative expense, and certain
research and development expenses.
Europe/ROW 2002 2003
Net sales from external customers $ 52.5 $421.1
Segment profit 5.1 49.7
Segment profit as a % of net sales 9.7% 11.8%
Assets $ 31.4 $537.4
The Europe/ROW segment was the segment most dramatically impacted by the VARTA acquisition. Increases in sales, segment prof-
itability and assets all reflect the significance of VARTA within the region and the favorable impact of foreign currency movements.
Intense sales, marketing, operational and administrative integration activities were implemented and substantially completed within
the region making identification of factors causing year-over-year variation difficult.
Profitability as a percent of net sales increased to 11.8% in fiscal 2003 from 9.7% in the previous year primarily reflecting the impact of
the VARTA acquisition and improved gross profit margins.
Intangible assets of $240.6 million, primarily related to the VARTA acquisition, now make up a substantial portion of the asset base
within the segment. The segment’s asset base as of September 30, 2003, includes the international operations of Remington.
North America 2002 2003
Net sales from external customers $435.6 $376.0
Segment profit 85.5 64.8
Segment profit as a % of net sales 19.6% 17.2%
Assets $256.4 $625.5
Our sales to external customers decreased $59.6 million, or 13.7%, to $376.0 million in fiscal 2003 from $435.6 million the previous
year due primarily to weakness in alkaline, zinc carbon, and rechargeable product line sales. Alkaline sales decreases of $54.3 million
were caused by intense competitive promotional pricing activity in this battery category, a $9.7 million decline in post-bankruptcy
sales to a customer, approximately $6.2 million in retailer markdown programs associated with the Company’s new alkaline pricing
program, and our inability to replace $4.0 million in sales to a discontinued low-margin OEM customer in the prior year. Zinc carbon
sales decreased $9.6 million compared to last year due to reduced distribution and general marketplace trends away from the use of
this type of battery. Rechargeable battery sales also decreased $2.6 million compared to last year due to lower sales in advance of the
I-C3 rechargeable battery system launched in the fourth quarter of fiscal 2003. Hearing aid battery sales increased $3.7 million, or
9.0% due to overall category strength.
Our profitability decreased $20.7 million to $64.8 million from $85.5 million the previous year. The decrease in profitability was
primarily attributable to lower gross profit due to the current year sales decrease partially offset by a $12.0 million net bad debt
expense related to the bankruptcy filing of a key customer recorded in the prior year. Due to the reasons mentioned above, our
profitability margins decreased 240 basis points to 17.2% from 19.6% the previous year.
Our assets increased to $625.5 million from $256.4 million the previous year primarily reflecting the impacts of the Remington
acquisition and intangible assets of approximately $283.0 million attributable to the transaction. The purchase price allocation for
the Remington acquisition is not yet final.
Latin America 2002 2003
Net sales from external customers $ 84.7 $125.0
Segment profit 5.3 17.7
Segment profit as a % of net sales 6.3% 14.2%
Assets $191.0 $203.9
Our sales to external customers increased $40.3 million, or 47.6% to $125.0 million in fiscal 2003 from $84.7 million the previous
year. The increase in sales is due to the impact of the VARTA acquisition and sales increases within Central America of $7.6 million
primarily reflecting improvements in our wholesaler and distributor channels. These increases were partially offset by currency
devaluations in the Dominican Republic contributing to a sales decrease of $4.3 million, declines caused by unfavorable economic
conditions and political uncertainties in Venezuela resulting in a sales decline of $2.3 million, and the unfavorable impacts of foreign
currency movements impacting other geographies within the region.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Rayovac Corporation and Subsidiaries