Rayovac 2003 Annual Report Download - page 26

Our revenue from external customers decreased $13.2 million, or 2.9%, to $435.6 million in fiscal 2002 from $448.8 million the pre-
vious year. Zinc carbon sales decreases of $12.3 million reflect the trend in the industry toward alkaline and the discontinuation of
certain products at selected stores of a major retailer. Alkaline sales decreases of $4.8 million were attributable to the decline in sales
to a key customer in bankruptcy, a cautious retail inventory environment and continued promotional activity, and our inability to
replace sales to an OEM customer in the previous year. Increases in lighting products of $4.3 million resulted from new product
launches and distribution gains.
Our profitability increased $4.7 million to $85.5 million in fiscal 2002 from $80.8 million the previous year. This increase was prima-
rily attributable to the benefits of the 2001 plant closures and organizational restructurings as more fully described under the head-
ing “Cost Reduction Initiatives,” that lowered operating expenses and improved gross profit margins. This was partially offset by a
$12.0 million bad debt reserve, net of recoveries, resulting from the bankruptcy filing of a North America segment customer.
Latin America 2001 2002
Net sales from external customers $118.7 $84.7
Segment profit 16.9 5.3
Segment profit as a % of net sales 14.2% 6.3%
Our revenue from external customers decreased $34.0 million, or 28.6%, to $84.7 million in fiscal 2002 from $118.7 million the pre-
vious year due primarily to decreased sales of zinc carbon batteries. Net sales were impacted by unfavorable economic conditions
in Mexico, Argentina, and Venezuela, primarily due to general weakened market conditions. Also impacting net sales were curtail-
ments of shipments to certain distributors and wholesalers who were delinquent on payments, general political uncertainties and
instability in Argentina and Venezuela, and the unfavorable impacts of currency devaluation which contributed approximately
$9.3 million of the sales decline versus fiscal 2001.
We have a business presence in approximately 100 countries throughout the world, all of which are subject to varying degrees of
political and economic risk. In fiscal 2002, changes in the economic and political environments in Mexico, Argentina and Venezuela
subjected us to varying degrees of political and economic risks. While these markets collectively represent approximately 40.0% and
23.3% of our Latin America segment revenue and total assets, respectively, they collectively represent approximately 6.0% and 8.4%
of our consolidated revenue and total assets, respectively.
In spite of the sales decline, the segment remained profitable, with profit of $5.3 million in fiscal 2002. However, this was a decrease
of $11.6 million from the previous year. This decrease was primarily attributable to the impact of the sales decline, partially offset
by lower advertising expenses and a reduction in other operating expenses in the region. As of October 1, 2001, we adopted FASB
Statement No. 142 and were no longer required to amortize goodwill and certain intangibles with indefinite lives. This resulted in
a reduction of amortization expense of $3.0 million, within the segment, for the year. Segment profit margins decreased primarily
due to an unfavorable customer mix compounded by relatively fixed operating expenses spread over lower sales.
Europe/ROW 2001 2002
Net sales from external customers $48.7 $52.5
Segment profit 4.1 5.1
Segment profit as a % of net sales 8.4% 9.7%
Our revenue from external customers increased $3.8 million, or 7.8%, to $52.5 million in fiscal 2002 from $48.7 million the previous
year, primarily reflecting increased sales of alkaline and hearing aid batteries, and favorable impacts of foreign currency movements.
Our profitability increased $1.0 million, or 24.4%, due primarily to sales gains and a reduction in operating expenses due to the
cost reduction initiatives described above under the heading “Cost Reduction Initiatives—Fiscal 2001” and the adoption of FASB
Statement No. 142, which resulted in lower amortization expense.
Corporate Expenses. Our corporate expenses increased $6.6 million, or 26.3%, to $31.7 million in fiscal 2002 from $25.1 million the
previous year. The increase was primarily due to higher legal expenses, technology spending, and compensation expense.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Rayovac Corporation and Subsidiaries
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