Rayovac 2003 Annual Report Download - page 38

For all types of promotional arrangements and programs, the Company monitors its commitments and uses statistical measures
and past experience to determine amounts to be recorded for the estimate of the earned, but unpaid, promotional costs. The terms
of the Company’s customer-related promotional arrangements and programs are individualized to each customer and are generally
documented through written contracts, correspondence or other communications with the individual customers.
The Company also enters into various contractual arrangements, primarily with retail customers, which require the Company
to make upfront cash, or “slotting” payments, to secure the right to distribute through such customer. The Company capitalizes
slotting payments, provided the payments are supported by a time or volume based contractual arrangement with the retailer,
and will amortize the associated payment over the appropriate time or volume based term of the contractual arrangement. The
amortization of the slotting payment is treated as a reduction in net sales and the corresponding asset is included in Deferred
charges and other in the Consolidated Balance Sheets.
(c) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contin-
gent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(d) Cash Equivalents For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments
purchased with original maturities of three months or less to be cash equivalents.
(e) Concentrations of Credit Risk, Major Customers and Employees Trade receivables potentially subject the Company to credit
risk. The Company extends credit to its customers based upon an evaluation of the customer’s financial condition and credit history
and generally does not require collateral. The Company monitors its customers’ credit and financial condition based on changing
economic conditions and will make adjustments to credit policies as required. The Company has historically incurred minimal
credit losses, but in 2002 experienced a significant loss resulting from the bankruptcy filing of a large retailer in the United States.
The Company has a broad range of customers including many large retail outlet chains, one of which accounts for a significant
percentage of its sales volume. This major customer represented approximately 27%, 26%, and 13% of its net sales during 2001, 2002,
and 2003, respectively. This major customer also represented approximately 23% and 13%, respectively, of trade account receivables
as of September 30, 2002 and 2003.
Excluding the impacts of the Remington acquisition, approximately 59% of the Company’s sales occur outside of North America.
These sales and related receivables are subject to varying degrees of credit, currency, and political and economic risk. The Company
monitors these risks and makes appropriate provisions for collectibility based on an assessment of the risks present.
Approximately 16% of the total labor force is covered by collective bargaining agreements. The Company believes its relationship
with its employees is good and none of our facilities has experienced a work stoppage in the last ten years.
The Company has entered into collective bargaining agreements with expiration dates as follows:
Location Expiration Date
Guatemala City, Guatemala March 2004
Washington, UK December 2004
Fennimore, WI March 2005
Portage, WI June 2006
Bargaining agreements that expire by the end of fiscal 2004 represent approximately 5% of the total labor force.
(f ) Displays and Fixtures Temporary displays are generally disposable cardboard displays shipped to customers to facilitate display of
the Company’s products. Temporary displays are generally disposed after a single use by the customer.
Permanent fixtures are permanent in nature, generally made from wire or other permanent racking, which are shipped to customers
for display of the Company’s products. These permanent fixtures are restocked with the Company’s product multiple times over
the fixture’s useful life.
Notes to Consolidated Financial Statements
Rayovac Corporation and Subsidiaries
(In thousands, except per share amounts)
Page 34/35