Rayovac 2005 Annual Report Download - page 46

assets are approximately $272 million and primarily
relate to the VARTA and Ningbo acquisitions. The
purchase price allocation for the Ningbo acquisition
was fi nalized in 2005.
Latin America
(in millions)
2005 2004
Net sales to external customers $208 $145
Segment profit $ 19 $ 12
Segment profit as a % of net sales 9.1% 8.3%
Assets as of September 30, $368 $322
Our net sales to external customers in fi scal
2005 increased to $208 million from $145 million
in the previous year, a 43% increase. The Microlite
acquisition contributed $39 million in net sales for
the eight months not included in the comparable
prior fi scal year, while the favorable impact of foreign
currency exchange rates was approximately $14 mil-
lion. In addition, sales in our Andean region, consist-
ing of Colombia and Venezuela, were up approximately
$4 million and sales in the Dominican Republic were
up approximately $3 million. Sales increases in
2005 refl ect the introduction of Remington branded
products throughout the region. Sales of Remington
products totaled approximately $3 million in 2005
and are expected to continue to grow in fi scal 2006,
the result of geographic expansion.
Our profi tability in fi scal 2005 increased to
$19 million from $12 million in the previous year.
The increase was driven by Microlite, which contrib-
uted approximately $5 million. Our profi tability mar-
gin in fi scal 2005 increased to 9.1% from 8.3% last
year as we realized higher battery gross margins and
incremental margins due to the Remington product
sales, while, as a percentage of sales, operating
expenses remained constant as compared to 2004.
Our assets at September 30, 2005 increased to
$368 million from $322 million at September 30,
2004. The increase in assets is primarily attribut-
able to additions to goodwill and the impact of for-
eign currency translation. Intangible assets total
approximately $225 million and primarily relate to
the ROV LTD acquisition completed in 1999 and the
2004 Microlite acquisition. The purchase price allo-
cation for the Microlite acquisition was fi nalized in
2005.
Included in long-term liabilities assumed in con-
nection with the acquisition of Microlite is a provi-
sion for “presumed” credits applied to the Brazilian
excise tax on Manufactured Products, or “IPI taxes.”
Although a previous ruling by the Brazilian Federal
Supreme Court has been issued in favor of a spe-
cifi c Brazilian taxpayer with similar tax credits, the
legality and constitutionality of the IPI “presumed”
credits is currently being revisited by the Brazilian
Federal Supreme Court and it is not certain when a
fi nal ruling will be issued. At September 30, 2005,
these amounts totaled approximately $41.4 million
and are included in Other long-term liabilities in the
Consolidated Balance Sheets.
United
(in millions)
2005
Net sales to external customers $ 787
Segment profit $ 79
Segment profit as a % of net sales 10.0%
Assets as of September 30, $1,718
Our net sales to external customers in the eight
months subsequent to acquisition were $787 million
representing growth of 6% from United’s 2004 results
assuming the businesses of Nu-Gro Corporation and
United Pet Group were included in the comparable
prior fi scal period. Contributing to the fi scal 2005
growth was a 9% growth in our lawn and garden busi-
ness and an 8% growth in the United Pet Group.
Somewhat offsetting this increase was a 3% decline
in our household insect control business.
Our operating profi tability in fi scal 2005 was
$79 million and segment profi tability as a percentage
of sales for fi scal 2005 was 10.0%. Our profi tability
was negatively impacted by the previously dis-
cussed inventory valuation charges of approximately
$29 million in fi scal 2005. In addition, our profi tabil-
ity was impacted as a result of higher raw material
costs, particularly for urea, a major component in
fertilizers, and fuel surcharges, passed on to us
from our freight carriers. We recently announced
price increases across a number of products in the
lawn and garden category which we believe will miti-
gate a substantial portion of these cost pressures
incurred in 2005. Profi tability was also negatively
impacted by shifts in our product mix away from
household insect controls, which have higher gross
margins than the lawn and garden business.
As previously discussed, during 2005, we com-
pleted the fi rst phase of our integration initiatives
related to the United and Tetra acquisitions. Effec-
tive October 1, 2005, the United Industries U.S.
Home & Garden organization has been combined
with the legacy Spectrum North American business
segment and will be reported together as part of our
North America business segment. We have also
reorganized our pet businesses that were acquired
2005 Form 10-K Annual Report
Spectrum Brands, Inc.
SPECTRUM BRANDS, INC.26