Rayovac 2005 Annual Report Download - page 65

products. If we fail to successfully introduce, market
and manufacture new products or product innova-
tions, our ability to maintain or grow our market
share may be adversely affected, which in turn could
materially adversely affect our business, fi nancial
condition and results of operations.
Both we and our competitors make signifi cant
investments in research and development. If our
competitors successfully introduce new or enhanced
products that eliminate technological advantages
our products may have in a certain market segment
or otherwise outperform our products, or are per-
ceived by consumers as doing so, we may be unable
to compete successfully in market segments affected
by these changes. In addition, we may be unable to
compete if our competitors develop or apply technol-
ogy which permits them to manufacture products at
a lower relative cost. The fact that many of our prin-
cipal competitors have substantially greater resources
than us increases this risk. The patent rights or other
intellectual property rights of third parties, restrictions
on our ability to expand or modify manufacturing
capacity or constraints on our research and develop-
ment activity may also limit our ability to introduce
products that are competitive on a performance basis.
Our foreign operations may expose us to a
number of risks related to conducting business
in foreign countries.
Our international operations and exports and
imports to and from foreign markets are subject to a
number of special risks. These risks include, but are
not limited to:
• economic and political destabilization,
governmental corruption and civil unrest;
• restrictive actions by foreign governments
(e.g., duties, quotas and restrictions on transfer
of funds);
• changes in foreign labor laws and regulations
affecting our ability to hire and retain employees;
• changes in U.S. and foreign laws regarding
trade and investment;
• changes in the economic conditions in these
markets; and
• diffi culty in obtaining distribution and support.
In many of the developing countries in which we
operate, there has not been signifi cant governmental
regulation relating to the environment, occupational
safety, employment practices or other business
matters routinely regulated in the United States.
As such economies develop, it is possible that new
regulations may increase the expense of doing busi-
ness in such countries. In addition, social legislation
in many countries in which we operate may result in
signifi cantly higher expenses associated with labor
costs, terminating employees or distributors and
with closing manufacturing facilities.
There are two particular EU Directives, RoHS
and WEEE, that may have a material impact on our
business. RoHS, effective July 1, 2006, requires us
to eliminate and/or reduce the level of specifi ed
hazardous materials from our products. WEEE,
which became effective in August 2005 (but in most
European markets postponed), requires us to collect
and treat, dispose, or recycle all products we manu-
facture or import into the EU at our own expense.
Complying or failing to comply with the EU directives
may harm our business. For example:
• Although contractually assured with our suppli-
ers, we may be unable to procure appropriate
RoHS compliant material in suffi cient quantity
and quality and/or be able to incorporate it into
our product procurement processes without
compromising quality and/or harming our cost
structure.
• We may face excess and obsolete inventory
risk related to non-compliant inventory that we
may continue to hold in 2006 for which there
is reduced demand and we may need to
write down.
We may face a number of risks related
to foreign currencies.
Our foreign sales and certain of our expenses are
transacted in foreign currencies. With the exception
of purchases of Remington products, which are
denominated entirely in U.S. dollars, substantially all
third party materials purchases are transacted in the
currency of the local operating unit. In fi scal 2005
approximately 45% of our net sales and 43% of our
operating expenses were denominated in currencies
other than U.S. dollars. Our recent results benefi ted
from increases in the value of the Euro against the
U.S. dollar. Signifi cant increases in the value of the
U.S. dollar in relation to foreign currencies could
have a material adverse effect on our business,
fi nancial condition and results of operations. Changes
in currency exchange rates may also affect our sales
to, purchases from and loans to our subsidiaries as
2005 Form 10-K Annual Report
Spectrum Brands, Inc.
2005 ANNUAL REPORT 45