Rayovac 2004 Annual Report Download - page 21

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Latin America
We align our internal sales force by distribution channel or geographic territory. We sell primarily to large
retailers, wholesalers, distributors, food and drug chains, and retail outlets in both urban and rural areas. In some
countries where we do not maintain a separate internal sales force, we sell to distributors who sell our products to
all channels in their particular market.
Manufacturing, Raw Materials and Suppliers
We manufacture alkaline batteries, zinc carbon batteries and zinc air hearing aid batteries. Raw materials
comprise a significant portion of our cost of goods sold. Zinc powder, electrolytic manganese dioxide powder
and steel are the most significant raw materials we use to manufacture batteries. A number of worldwide sources
of such materials exist. We believe we will continue to have access to adequate quantities of these materials. We
use commodity swaps, calls and puts in an attempt to manage risks associated with fluctuations in market prices
for purchases of zinc used in the manufacturing process.
Substantially all of our rechargeable batteries and chargers, lighting products and hair care, wellness and
other personal care products, and our electric shaving and grooming products are manufactured by third party
suppliers, primarily located in China and Japan. We maintain ownership of tooling and molds used by many of
our suppliers.
We continually evaluate our facilities’ capacity and related utilization. As a result of such analyses, we have
closed a number of manufacturing facilities during the past five years. In general, we believe our existing
facilities are adequate for our present and currently foreseeable needs.
Research and Development
Our research and development strategy is to direct resources toward performance improvements of our
existing products, cost reduction initiatives and new product development. Our battery research and development
strategy is focused on alkaline, zinc air and NiMH rechargeable battery systems. Our alkaline product
development groups in Madison, Wisconsin and Ellwangen, Germany work closely with both our alkaline
manufacturing plants in Fennimore, Wisconsin and Dischingen, Germany. Our zinc air product development
group is also located in Madison, Wisconsin and works closely with our zinc air plants in Portage, Wisconsin and
Washington, U.K. Our rechargeable NiMH program has been enhanced by our strong working relationships with
suppliers based in China and Japan. Foil and rotary cutting system development groups work closely with our
Asian suppliers to develop new features and innovative electric shaving products.
In fiscal years 2004, 2003 and 2002, Rayovac invested $23.2 million, $14.4 million and $13.1 million,
respectively, in product research and development. These investments were supplemented by funds received
from U.S. government contracts. These contracts enable us to investigate additional development opportunities.
Patents and Trademarks
We own or license from third parties a considerable number of patents and patent applications throughout
the world for battery and electronic personal care product improvements, additional features and manufacturing
equipment. We have a license through March 2022 to certain alkaline battery designs, technology and
manufacturing equipment from Matsushita to whom we pay a royalty.
We also use and maintain a number of trademarks in our business, including Rayovac®, VARTA®,
Remington®, Maximum®, Maximum Plus™, I-C3™, Renewal®, Loud ‘n Clear®, Pro Line®, Prodigy®,
Microscreen®, Microflex®, Precision®, Remington Titanium™and Smooth & Silky®. We rely on both registered
and common law trademarks worldwide to protect our trademark rights. The Rayovac, VARTA and Remington
trademarks are also registered in countries outside of the U.S., including countries in Europe, Latin America and
Asia. As a result of our acquisition of Microlite S.A. in May 2004, we now own the Rayovac trademark in Brazil.
As a result of the October 2002 sale by VARTA AG of substantially all of its consumer battery business to
Rayovac and VARTA AG’s subsequent sale of its automotive battery business to Johnson Controls, Inc., we
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