Rayovac 2005 Annual Report Download - page 49

Download and view the complete annual report

Please find page 49 of the 2005 Rayovac annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 134

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134

Fiscal Year Ended September 30, 2004
Compared to Fiscal Year Ended
September 30, 2003
Highlights of Consolidated Operating Results
Year over year historical comparisons are infl u-
enced by our acquisitions of Remington, acquired on
September 30, 2003, Ningbo, acquired on March
31, 2004, and Microlite, acquired on May 28, 2004,
which are included in our current year Consolidated
Statement of Operations but not in prior year
results. See Note 16, Acquisitions, of the Notes to
Consolidated Financial Statements of this Annual
Report on Form 10-K for additional information
regarding these acquisitions.
Net Sales. Net sales for fi scal 2004 increased
to $1,417 million from $922 million in fi scal 2003,
a 54% increase. Acquisitions contributed approxi-
mately $409 million to the sales increase in fi scal
2004, with $388 million contributed by Remington,
$13 million contributed by Microlite and $8 million
contributed by Ningbo. Favorable foreign exchange
rates contributed approximately $40 million to the
increase during the year. The remaining sales
increase was primarily a result of increased general
battery sales. Sales increases occurred in all
geographic segments.
Gross Profi t. Our gross profi t margins for fi scal
2004 improved to 42.8% from 38.1% in fi scal 2003.
Excluding the impacts of restructuring and related
charges, our gross profi t margins were 42.7% in fi s-
cal 2004 and 40.4% in the previous year. The
improvement versus the previous year was primarily
attributable to the impact of the Remington acqui-
sition and lower alkaline promotional spending in
North America. Sales of Remington products in
fi scal 2004 were at higher gross profi t margins than
our general battery and lighting products. In addi-
tion, our margins benefi ted from favorable foreign
currency exchange rates on worldwide purchases of
outsourced Remington products, all of which are
denominated in U.S. dollars. Excluding the impacts
of the Remington, Ningbo and Microlite acquisitions
and restructuring and related charges, our gross
profi t margins improved to 41.3% in fi scal 2004
from 40.4% in fi scal 2003.
Operating Income. Our operating income for fi scal
2004 increased to $156 million from $60 million in
fi scal 2003. The increase was primarily attributable
to the impacts of the Remington acquisition, approxi-
mately $21 million less in restructuring and related
charges in fi scal 2004 versus the prior year and
favorable foreign currency movements of approxi-
mately $14 million. These improvements in operat-
ing income were partially offset by increases in cor-
porate expenses driven primarily by the inclusion of
Remington costs, an increased investment in
research and development and increases in incen-
tive compensation, legal and professional fees.
Net Income. Our net income for fi scal 2004
increased to $56 million from income of $15 million
in fi scal 2003. The increase was due to the improve-
ments in operating income partially offset by an
increase in interest expense of $29 million, refl ect-
ing the fi nancing costs associated with the Reming-
ton acquisition, and the impact of increased income
tax expense driven by improvements in operating
income and the non-recurrence of tax credits recog-
nized in the previous year.
Discontinued Operations. Our loss from discontin-
ued operations of $0.4 million for fi scal 2004
refl ects the operating results of our Remington Ser-
vice Centers. Net sales from discontinued opera-
tions were approximately $21 million for the current
year. Service Centers in the United States and
United Kingdom were closed during fi scal 2004.
North America
(in millions) 2004 2003
Net sales from external customers $654 $376
Segment profit $131 $ 65
Segment profit as a % of net sales 20.0% 17.3%
Assets as of September 30, $685 $881
Our net sales to external customers in fi scal
2004 increased to $654 million from $376 million
the previous year, a 74% increase. This increase was
primarily due to the impact of the Remington acqui-
sition, which contributed approximately $241 million,
and a 16% increase in alkaline battery sales.
Our profi tability in fi scal 2004 increased to
$131 million from $65 million the previous year. The
increase in profi tability primarily refl ects the impact
of the Remington acquisition and sales increases
associated with our battery business. Our profi tabil-
ity margin increased to 20.0% from 17.3% last year,
primarily due to the benefi ts of Remington’s higher
margin products, offset by higher advertising
expenses as a percentage of sales.
Our assets at September 30, 2004 decreased to
$685 million from $881 million at September 30,
2003. The decrease in assets was primarily attribut-
able to reductions in cash and deferred charges,
2005 Form 10-K Annual Report
Spectrum Brands, Inc.
2005 ANNUAL REPORT 29