Rayovac 2006 Annual Report Download - page 6

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To Our Fellow Shareholders
(continued)
by a compound annual growth rate of 8 percent, largely driven by leverag-
ing our European and Latin American infrastructure to expand distribution.
Reinvigorating sales growth and generating future global market share gains
will require investment in marketing and product innovation. To this end,
Remington recently welcomed Cindy Crawford as the brand’s global spokes-
person. She is featured in a new advertising and marketing communication
campaign that supports the entire Remington line, including our new men’s
shaving platform, designed and engineered by BMW Design Works USA.
Remington is the model for our strategy of acquiring strong brands in growth
categories, then deploying our global technology, supply chain and market-
ing platforms to expand distribution and grow market share. This strategy
was top-of-mind when we acquired United and Tetra in 2005. These acquisi-
tions gave us immediate leading positions in the lawn and garden, household
insect control and specialty pet supply categories. During our fi rst full year
in these new categories, we encountered both challenges and successes. In
the lawn and garden and household insect control categories, point-of-sale
performance was good, but increased fuel and distribution expenses affected
overall profi tability. In specialty pet supplies, Spectrum Brands, along with
the pet industry as a whole, experienced slower growth in the early part of
our fi scal year. However, our sales results improved sequentially throughout
fi scal year 2006, ending on a strong note with fourth quarter sales up 7 percent.
We continue to be excited about the long-term growth potential of these
product categories.
LONG-TERM GROWTH STRATEGY
There is no question that our portfolio of brands and products possesses the
right criteria for long-term growth. Our 2005 acquisitions, however, resulted
in a highly leveraged balance sheet. Given the recent underperformance in our
legacy businesses, it has been necessary to take action to signifi cantly reduce
leverage and improve effi ciencies in a timely manner. As this report goes to
press, we have announced our intention to divest our Home & Garden busi-
ness, and to consider further asset sales as well. Proceeds from any future asset
sales will be used to strengthen our capital structure so that we have the fl ex-
ibility necessary to invest in our brands to ensure future growth. In addition,
we are consolidating our four geography-based operating segments into three
vertically integrated, product-focused operating segments – Global Batteries
& Personal Care, Home & Garden and Global Pet Supplies. This streamlin-
ing will enhance our competitive focus and improve our cost structure. We
are very optimistic that these actions will enable us to focus more intently
on positioning these business units for future growth and creating value for
our shareholders.
Remington is the model for our strategy
of acquiring strong brands in growth
categories, then deploying our global
technology, supply chain and marketing
platforms to expand distribution and
grow market share.
4 SPECTRUM BRANDS | 2006 ANNUAL REPORT