Rayovac 2008 Annual Report Download - page 52

Table of Contents
Index to Financial Statements
Consolidated net sales by product line for Fiscal 2007 and 2006 are as follows (in millions):
Fiscal Year
2007 2006
Product line net sales
Consumer batteries $ 882 $ 861
Pet supplies 563 543
Lawn and garden products 408 416
Electric shaving and grooming products 268 252
Electric personal care products 187 151
Household insect control products 162 151
Portable lighting products 95 88
Total net sales to external customers $ 2,565 $ 2,462
Global consumer battery sales increased $21 million, or 2%, primarily driven by a favorable foreign exchange impact of $37 million coupled with growth
in Latin America due to favorable pricing, volume growth and product mix. This increase was tempered by declines in alkaline battery sales in North America, as
a result of lost distribution, coupled with declines in alkaline battery sales in Europe which were driven by (i) the continued shift in distribution channels from
electronic specialty and photo stores to deep discount and food retail channels and (ii) the continued shift in product mix due to consumer preferences for
lower-priced private label batteries. Both issues are more fully discussed in “Segment Results” below. Sales of portable lighting products in Fiscal 2007 increased
$7 million, or 8%, driven by new product launches. The increase in electric shaving and grooming sales of $16 million, or 6%, is primarily attributable to
distribution expansion in our Latin America and European markets. The strong increase in electric personal care sales of $36 million, or 24%, was due to our
increased market share. We experienced double digit percentage growth in electric personal care sales in all geographic regions. The $20 million, or 4%, increase
in pet supplies sales was primarily due to growth in companion animal sales, driven by our Dingo brand, coupled with the introduction of companion animal
products to the European market.
Sales of lawn and garden products during Fiscal 2007 versus Fiscal 2006 decreased $8 million, or 2%, primarily due to growing media volume shortfalls.
Household insect control sales for Fiscal 2007 versus Fiscal 2006 increased by $11 million, or 7%, driven by expanded distribution in insect repellants.
Gross Profit. Gross profit for Fiscal 2007 was $934 million versus $932 million for Fiscal 2006. Our gross profit margin for Fiscal 2007 decreased to
36.4% from 37.9% in Fiscal 2006. Higher zinc prices, a key raw material in the production of our batteries, reduced Fiscal 2007 gross profit by approximately
$13 million, net of our hedges. Furthermore, Fiscal 2007 included unfavorable manufacturing variances of approximately $26 million within the Home and
Garden Business when compared to Fiscal 2006. Included in Fiscal 2007 and Fiscal 2006 were restructuring and related charges of approximately $31 million,
and $21 million, respectively. These restructuring and related charges were associated with the various cost cutting initiatives in connection with our global
realignment announced in January 2007, ongoing integration activities of our Global Pet Supplies, which are substantially complete, and the rationalization of
our Global Batteries & Personal Care European and Latin American manufacturing organizations. See “Restructuring and Related Charges” below, as well as
Note 16, Restructuring and Related Charges, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional
information regarding our restructuring and related charges. Higher battery pricing in North America and Latin America contributed positively to gross profit
margin but was off-set by higher commodity costs.
Operating Expense. Operating expenses for Fiscal 2007 totaled $1,179 million versus $1,216 million for Fiscal 2006. This $37 million decrease in
operating expenses for Fiscal 2007 versus Fiscal 2006 was primarily driven by a decrease of $71 million in impairment charges. Impairment charges in Fiscal
2007 were $362 million versus $433 million in Fiscal 2006. In both Fiscal 2007 and Fiscal 2006 the impairment charges were non-cash
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Source: Spectrum Brands, Inc, 10-K, December 10, 2008