Rayovac 2003 Annual Report Download - page 24

Our profitability increased $12.4 million to $17.7 million and was primarily the result of the VARTA acquisition, improved profit-
ability in Central America partially offset by profit declines in Venezuela and Dominican Republic.
Our assets increased $12.9 million, or 6.8%, to $203.9 million from $191.0 million the previous year. The acquisition of the VARTA
business in Latin America resulted in asset increases across all asset categories, except for a reduction in accounts receivable reflect-
ing improvements in collections, a decrease in property, plant and equipment reflecting the closure of the Mexico manufacturing
facility. The closure and subsequent write-off of the Mexico manufacturing related assets are included in restructuring and related
charges in our Consolidated Statement of Operations (see Note 15, Restructuring and Related Charges, of Notes to the Consolidated
Financial Statements) and are not included in our Latin America segment results. The Remington acquisition had no effect on Latin
America segment assets.
Corporate Expense. Our corporate expenses increased $8.3 million to $40.0 million from $31.7 million in the previous year. As a
percentage of sales, our corporate expense was 4.3% in fiscal 2003, compared with 5.5% in the previous year. Fiscal 2003 corporate
expense includes higher legal expense associated with patent infringement litigation, a $1.5 million net charge associated with the
settlement of such litigation, generally higher costs associated with the integration of the VARTA businesses and other increases
in compensation expense, primarily reflecting an increase in unearned restricted stock compensation of $2.1 million. Fiscal 2002
included a loss of $1.5 million related to the bankruptcy filing of a freight payment service provider.
Restructuring and Related Charges. In fiscal 2003, we recorded restructuring and related charges of $32.6 million associated with
our cost reduction initiatives, as more fully described above under the heading “Cost Reduction Initiatives—Fiscal 2003,” relating
to: (i) approximately $13.0 million of employee termination benefits for approximately 650 notified employees and non cash costs
of approximately $0.7 million associated with the write-off of pension intangible assets reflecting the curtailment of our Madison,
Wisconsin packaging facility pension plan, (ii) approximately $12.8 million of equipment, inventory and other asset write-offs pri-
marily reflecting the abandonment of equipment and inventory associated with the closure of our Mexico City, Mexico plant and
inventory and fixed asset impairments related to the closure of our Wisconsin packaging and distribution locations, (iii) approxi-
mately $6.1 million of other expenses which include, distributor termination costs of approximately $0.9 million, research and
development contract termination costs of approximately $0.5 million, and other legal and facility shutdown expenses of approxi-
mately $4.7 million, net of a $0.3 million change in estimate reducing our anticipated costs to close our Wonewoc, Wisconsin facility.
In fiscal 2003, we recorded restructuring and related charges in cost of goods sold of approximately $21.1 million including amounts
related to: (i) the closure in October 2002 of our Mexico City, Mexico plant and integration of production into our Guatemala
City, Guatemala manufacturing location, resulting in charges of approximately $6.2 million, including termination payments of
approximately $1.4 million, fixed asset and inventory impairments of approximately $4.3 million, and other shutdown related
expenses of approximately $0.5 million, (ii) the closure of operations at our Madison, Wisconsin packaging facility and combination
with the Company’s Middleton, Wisconsin distribution center into a new leased complex in Dixon, Illinois resulting in charges of
approximately $12.4 million, including termination costs of approximately $2.4 million and non cash pension curtailment costs of
approximately $0.7 million, fixed asset and inventory impairments of approximately $6.9 million, and relocation expenses and other
shutdown related expenses of approximately $2.4 million, (iii) a series of restructuring initiatives impacting our manufacturing
functions in Europe, North America, and Latin America resulting in charges of approximately $2.8 million, including termination
benefits of approximately $1.8 million and inventory and asset impairments of approximately $1.0 million, and (iv) a change in
estimate relating to our anticipated costs to close our Wonewoc, Wisconsin facility resulting in a credit of $0.3 million.
In fiscal 2003, we recorded restructuring and related charges in operating expenses of approximately $11.5 million including amounts
related to: (i) the closure of operations at our Middleton, Wisconsin distribution center and combination with our Madison,
Wisconsin packaging facility into a new leased complex in Dixon, Illinois resulting in charges of approximately $1.4 million, includ-
ing termination costs of approximately $0.3 million, fixed asset impairments of approximately $0.3 million, and relocation expenses
and other shutdown related expenses of approximately $0.8 million, and (ii) a series of restructuring initiatives impacting our sales,
marketing, and administrative functions in Europe, North America, and Latin America resulting in charges of approximately $10.1
million, including termination costs of approximately $7.1 million, distributor termination costs of approximately $0.9 million,
research and development contract termination costs of approximately $0.5 million, fixed asset impairments of $0.3 million, and
legal and other expenses of approximately $1.3 million. The carrying value of assets held for sale under restructuring plans is
approximately $8.7 million, and is included in Prepaid expense and other in our Consolidated Balance Sheets.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Rayovac Corporation and Subsidiaries
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