Rayovac 2005 Annual Report Download - page 66

well as sales to, purchases from and bank lines of
credit with our customers, suppliers and creditors
that are denominated in foreign currencies. We expect
that the amount of our revenues and expenses
transacted in foreign currencies will increase as our
Latin American, European and Asian operations grow
and our exposure to risks associated with foreign
currencies could increase accordingly.
Sales of our products are seasonal and may
cause our quarterly operating results and working
capital requirements to fluctuate; adverse
business or economic conditions could adversely
affect our business.
Sales of our battery, electric shaving and groom-
ing, lawn and garden and household insect control
products are seasonal. A large percentage of net
sales for our battery and electric personal care
products occur during the fi scal quarter ending on
or about December 31, due to the impact of the
December holiday season, and a large percentage of
our net sales for our lawn and garden and household
insect control products occur during the spring and
summer. As a result of this seasonality, our inventory
and working capital needs relating to these busi-
nesses fl uctuate signifi cantly during the year. In addi-
tion, orders from retailers are often made late in the
period preceding the applicable peak season, making
forecasting of production schedules and inventory
purchases diffi cult. Furthermore, adverse business
or economic conditions during those applicable peri-
ods could materially adversely affect our business,
fi nancial condition and results of operations.
We may not be able to adequately establish and
protect our intellectual property rights.
To establish and protect our intellectual property
rights, we rely upon a combination of patent, trade-
mark and trade secret laws, together with licenses,
confi dentiality agreements and other contractual
covenants. The measures we take to protect our
intellectual property rights may prove inadequate to
prevent misappropriation of our technology or other
intellectual property. We may need to resort to liti-
gation to enforce or defend our intellectual property
rights. If a competitor or collaborator fi les a patent
application claiming technology also invented by us,
or a trademark application claiming a trademark,
service mark, or trade dress also used by us, in
order to protect our rights, we may have to participate
in an expensive and time consuming interference
proceeding before the United States Patent and
Trademark Offi ce or any similar foreign agency. In
addition, our intellectual property rights may be
challenged by third parties. Even if our intellectual
property rights are not directly challenged, disputes
among third parties could lead to the weakening
or invalidation of our intellectual property rights.
Furthermore, competitors may independently develop
technologies that are substantially equivalent or
superior to our technology. Obtaining, protecting and
defending intellectual property rights can be time
consuming and expensive, and may require us to
incur substantial costs, including the diversion of
management and technical personnel. Moreover, the
laws of certain foreign countries in which we operate
or may operate in the future do not protect intellec-
tual property rights to the same extent as do the
laws of the U.S. which may negate our competitive
or technological advantages in such markets. Also,
some of the technology underlying our products is
the subject of nonexclusive licenses from third par-
ties. As a result, this technology could be made
available to our competitors at any time. If this tech-
nology were licensed to a competitor, it could have
a material adverse effect on our business, fi nancial
condition and results of operations.
Third party intellectual property infringement
claims against us could adversely affect
our business.
From time to time we have been subject to claims
that we are infringing upon the intellectual property
of others and it is possible that third parties will
assert infringement claims against us in the future.
For example, we are a defendant in a patent infringe-
ment lawsuit in which Braun, a subsidiary of Gillette/
Procter & Gamble, has alleged our “Smart System”
shaving system infringes two of Braun’s U.S. patents
and we are also involved in a number of legal pro-
ceedings with Philips with respect to trademarks
owned by Philips relating to the shape of the head
portion of Philips’ three-head rotary shaver. An
adverse fi nding against us in these or similar trade-
mark or other intellectual property litigations may
have a material adverse effect on our business,
fi nancial condition and results of operations. For
more information, see “Business – Legal Proceed-
ings.” Any such claims, with or without merit, could
be time consuming and expensive, and may require
us to incur substantial costs, including the diversion
of management and technical personnel, cause
product delays, or require us to enter into licensing
or other agreements in order to secure continued
access to necessary or desirable intellectual prop-
erty. Our business will be harmed if we cannot
2005 Form 10-K Annual Report
Spectrum Brands, Inc.
SPECTRUM BRANDS, INC.46