Rayovac 2005 Annual Report Download - page 39

defi ned in Note 6, Debt, of Notes to Consolidated
Financial Statements included in this Annual Report
on Form 10-K). Headquartered in Melle, Germany,
Tetra manufactures, distributes and markets a com-
prehensive line of foods, equipment and care prod-
ucts for fi sh and reptiles, along with accessories for
home aquariums and ponds. This acquisition pro-
vides us a global brand and distribution to extend
our North American pet supplies business. At the
time of the acquisition, Tetra had approximately
700 employees. Tetra operates in over 90 countries
and holds leading market positions in Europe, North
America and Japan. Subsequent to the acquisition,
the fi nancial results of Tetra are reported as a sepa-
rate business segment within our consolidated
results. Tetra contributed approximately $96 million
to our 2005 net sales, and recorded operating
income of approximately $10 million.
On November 23, 2005, we entered into an
agreement with Agrium Inc. to sell our fertilizer tech-
nology and Canadian professional fertilizer products
business to Agrium for $86 million. This divestiture
is expected to reinforce our ability to focus on our
primary growth strategy of marketing branded con-
sumer products to retailers and, subject to certain
regulatory approvals and closing conditions, is
expected to close in January, 2006. Proceeds from
the sale will be used to reduce our outstanding debt.
As part of the transaction, we have signed strategic
multi-year reciprocal supply agreements with Agrium.
We expect the transaction to be slightly dilutive to
fi scal 2006 earnings. The transaction and the
assumed dilution were incorporated into our previ-
ous earnings guidance for fi scal 2006. See Note 17,
Subsequent Events, of Notes to Consolidated Finan-
cial Statements of this Annual Report on Form 10-K
for additional information regarding this divestiture.
Our fi nancial performance is infl uenced by a
number of factors, including: general economic con-
ditions, foreign exchange fl uctuations, and trends
in consumer markets; our overall product line mix,
including sales prices and gross margins which vary
by product line and geographic market; pricing of
certain raw materials and commodities; fuel prices
and our general competitive position, especially as
impacted by our competitors’ promotional activities
and pricing strategies.
During 2005, we managed operations in fi ve
reportable business segments, including three based
primarily upon geographic area (North America, Latin
America and Europe/ROW), a fourth (United) based
on our acquisition of United and a fi fth (Tetra) based
on our acquisition of Tetra. North America includes
the legacy business (battery, shaving and grooming,
personal care and portable lighting) in the United
States and Canada; Latin America includes the leg-
acy business in Mexico, Central America, South
America and the Caribbean; Europe/ROW includes
the legacy business in the United Kingdom, continen-
tal Europe, China, Australia and all other countries in
which we conduct business. The United business
segment includes the acquired lawn and garden,
household insect control and United Pet Group busi-
ness in the United States and Canada. The Tetra
business segment includes the acquired global
Tetra business, primarily in Europe, North America
and Japan.
In connection with and as a result of our cost
reduction initiatives discussed below, we will man-
age operations in four reportable business seg-
ments in fi scal 2006: North America, which will con-
sist of the legacy business (battery, shaving and
grooming, personal care and portable lighting) in the
United States and Canada and the acquired United
lawn and garden and household insect control busi-
ness; Latin America; Europe/ROW and Global Pet,
which will consist of the acquired United Pet Group
business and the acquired global Tetra business.
Cost Reduction Initiatives
We continually seek to improve our operational
effi ciency, match our manufacturing capacity and
product costs to market demand and better utilize
our manufacturing resources. We have undertaken
various initiatives to reduce manufacturing and
operating costs. We believe that we can continue to
drive down our costs with continued focus on cost
reduction initiatives.
Fiscal 2005. During 2005, we completed the
fi rst phase of our integration initiatives related to
the United and Tetra acquisitions. As more fully
discussed below, beginning October 1, 2005, the
United U.S. Home & Garden organization has been
combined with the legacy Spectrum North American
business segment. Also effective October 1, 2005,
the Global Pet business unit, which encompasses
both United Pet Group and Tetra, operates as a sep-
arate business segment headquartered in Cincin-
nati, Ohio. Accordingly, going forward, we will manage
operations in four reportable business segments:
North America, Latin America, Europe/ROW and
Global Pet.
2005 Form 10-K Annual Report
Spectrum Brands, Inc.
2005 ANNUAL REPORT 19