Rayovac 2007 Annual Report Download - page 23

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Spectrum Brands, Inc.
SPECTRUM BRANDS | 2007 ANNUAL REPORT 21
to our Home and Garden Business, coupled with an income tax
benefi t of $53 million, which was recorded in connection with
the non-cash impairment charge to reduce the carrying value of
certain assets, principally goodwill and intangible assets related
to the Home and Garden Business. See Note 11, Discontinued
Operations, of Notes to Consolidated Financial Statements
included in this Annual Report of Form 10-K for additional
information regarding the income tax benefi t.
Our loss from discontinued operations of approximately $19 mil-
lion, net of tax, for Fiscal 2006 refl ects (i) a loss from discontinued
operations of $6 million, net of tax, relating to the sale of Nu-Gro
Pro and Tech, which closed in January 2006, and includes a loss
on sale of $4 million, and (ii) a loss from discontinued operations
of $13 million, net of tax, relating to our Home and Garden
Business. Net sales related to discontinued operations totaled
$673 million in Fiscal 2006. See Note 11, Discontinued Opera-
tions, of Notes to Consolidated Financial Statements included in
this Annual Report on Form 10-K for additional information
regarding these discontinued operations.
Fiscal Year Ended September 30, 2006, Compared to
Fiscal Year Ended September 30, 2005
Highlights Of Consolidated Operating Results
Year-over-year historical comparisons are infl uenced by our
acquisitions of United, Tetra and Jungle Labs acquired on
February 7, 2005, April 29, 2005 and September 1, 2005,
respectively. The results of these acquisitions are included in
our Fiscal 2006 Consolidated Statement of Operations for the
full fi scal year but only in prior year results for the period sub-
sequent to their respective dates of acquisition. See Note 17,
Acquisitions, of Notes to Consolidated Financial Statements
included in this Annual Report on Form 10-K for additional
information regarding these acquisitions.
During Fiscal 2007, we designated our Home and Garden
Business as discontinued operations consistent with our plan to
sell the business. Consequently, the results of operations of our
Home and Garden Business are refl ected in our Consolidated
Statements of Operations as discontinued operations. The
results of our Home and Garden Business in Fiscal 2006 and
Fiscal 2005 have been reclassifi ed to conform to the Fiscal 2007
classifi cation. In addition, during Fiscal 2006, Nu-Gro Pro and
Tech was presented as discontinued operations consistent with
our decision to sell this business. Consequently, the results of
these operations are refl ected in our Consolidated Statements of
Operations as discontinued operations. The results of Nu-Gro
Pro and Tech in Fiscal 2005 have been reclassifi ed to conform to
the Fiscal 2006 classifi cation. As a result, and unless specifi cally
stated otherwise, all discussions regarding Fiscal 2006 and Fis-
cal 2005 operating results refl ect results from our continuing
operations. See Note 11, Discontinued Operations, of Notes to
Consolidated Financial Statements included in this Annual
Report on Form 10-K for additional information on our discon-
tinued Home and Garden Business and Nu-Gro Pro and Tech.
Net Sales. Net sales for Fiscal 2006 increased to $1,895 million
from $1,762 million in Fiscal 2005, refl ecting an 8% increase.
Businesses acquired in Fiscal 2005 contributed $244 million to
2006 net sales during the months these businesses were included
in Fiscal 2006 but not included in Fiscal 2005 net sales. The fol-
lowing table details the principal components of the change in
net sales from Fiscal 2005 to Fisca1 2006 (in millions):
Net Sales
Fiscal 2005 Net Sales $ 1,762
Impact of United acquisition from
October 2005 – January 2006 100
Impact of Tetra acquisition from
October 2005 – April 2006 132
Impact of Jungle Labs acquisition from
October 2005 – August 2006 12
Increase in Pet products sales, excluding
impact of Tetra, United and Jungle Labs acquisitions 14
Decline in Global Batteries & Personal Care
Remington branded product sales (14)
Decline in Global Batteries & Personal Care battery sales (107)
Foreign currency impact, net (3)
Other, net (1)
Fiscal 2006 Net Sales $ 1,895
Consolidated net sales by product line for Fiscal 2006 and
Fiscal 2005 are as follows (in millions):
Fiscal Year
2006 2005
Product Line Net Sales
Consumer batteries $ 861 $ 968
Pet supplies 543 286
Electric shaving and grooming 252 273
Electric personal care 151 141
Portable lighting 88 94
Total net sales to external customers $ 1,895 $ 1,762
Segment net sales to external customers in Fiscal 2006
increased to $1,895 million from $1,762 million during Fiscal
2005. Consumer battery sales for Fiscal 2006 were down to $861
million when compared to Fiscal 2005 sales of $968 million.
The decline in consolidated consumer battery sales was due pri-
marily to an $89 million decline in Europe/ROW battery sales
and an $18 million decline in North America alkaline battery
sales. Europe/ROW battery sales declined in Fiscal 2006 as we
experienced a product mix shift from branded batteries to lower-
priced private label batteries and exited some low-margin private
label alkaline business. In addition, in Fiscal 2006 European
consumers began to shift their purchasing habits from high-end
electronic specialty stores and photo stores, where we enjoy
strong market shares, to deep discount and food retail channels
where we do not have as strong a presence. The decline in our
North America alkaline battery sales was driven by a number of