Rayovac 2004 Annual Report Download - page 39

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Our sales to external customers decreased in fiscal 2003 to $376 million from $436 million the previous
year, a 14% decrease. Alkaline sales decreases of $54 million were caused by intense competitive promotional
pricing activity in this battery category, a $10 million decline in post-bankruptcy sales to a customer,
approximately $6 million in retailer markdown programs associated with our new alkaline pricing program, and
our inability to replace $4 million in sales to a discontinued low-margin OEM customer in the prior year. Fiscal
2003 zinc carbon sales decreased $10 million compared to fiscal 2002 due to reduced distribution and general
marketplace trends away from the use of this type of battery. Rechargeable battery sales also decreased $3
million compared to the previous year due to lower sales in advance of the I-C3rechargeable battery system
which was launched in the fourth quarter of fiscal 2003. Hearing aid battery sales increased $4 million, or 9.0%
due to overall category strength.
Fiscal 2003 profitability decreased to $65 million from $85 million the previous year. The decrease in
profitability was primarily attributable to a decline in sales partially offset by a $12 million bad debt expense
related to the bankruptcy filing of a key customer recorded in the prior year. Fiscal 2003 profitability margins
decreased to 17.3% from 19.5% in fiscal 2002.
Our assets increased in fiscal 2003 to $625 million from $256 million in fiscal 2002 primarily reflecting the
impact of the Remington acquisition. Intangible assets of approximately $283 million were attributable to the
transaction. The purchase price allocation for the Remington acquisition was finalized in September 2004.
Europe/ROW 2003 2002
(in millions)
Net sales from external customers ......................................... $422 $52
Segment profit ......................................................... $ 54 $ 5
Segment profit as a % of net sales ......................................... 12.8% 9.6%
Assets ............................................................... $537 $31
The Europe/ROW segment was the segment most dramatically impacted by the VARTA acquisition.
Increases in sales, segment profitability and assets within the region are primarily driven by the VARTA
acquisition and the favorable impact of foreign currency movements. Significant 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 in fiscal 2003 to 12.8% from 9.6% in fiscal 2002 primarily
reflecting the impact of the VARTA acquisition and improved gross profit margins.
Intangible assets of $241 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.
Latin America 2003 2002
(in millions)
Net sales from external customers ......................................... $125 $ 85
Segment profit ........................................................ $ 18 $ 5
Segment profit as a % of net sales ......................................... 14.4% 5.9%
Assets ............................................................... $204 $191
Our sales to external customers increased to $125 million in fiscal 2003 from $85 million in fiscal 2002,
reflecting a 47% increase. The increase in sales is due to the impact of the VARTA acquisition and sales
increases within Central America of $8 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 million, declines caused by unfavorable economic conditions and political
uncertainties in Venezuela resulting in a sales decline of $2 million, and the unfavorable impacts of foreign
currency movements impacting other geographies within the region.
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