Rayovac 2011 Annual Report Download - page 68

Sales of home and garden control products during Fiscal 2010 increased $21 million, or 6% versus Fiscal
2009. This increase is a result of additional sales to major customers that were driven by incentives to retailers
and promotional campaigns during the year in both home and garden control products and household control
products.
Electric shaving and grooming product sales during Fiscal 2010 increased $32 million, or 14%, compared to
Fiscal 2009 primarily due to increased sales within Europe of $25 million coupled with favorable foreign exchange
translation of $5 million. The increase in Europe sales is a result of new product launches, pricing and promotions.
Electric personal care product sales during Fiscal 2010 increased $5 million, or 2%, when compared to
Fiscal 2009. The increase of $5 million during Fiscal 2010 was attributable to favorable foreign exchange
impacts of $2 million coupled with modest sales increases within Latin America and North America of $3
million and $1 million, respectively. These sales increases were partially offset by modest declines in Europe of
$2 million.
Sales of portable lighting products in Fiscal 2010 increased $8 million, or 10%, compared to Fiscal 2009 as
a result of increases in North America of $3 million coupled with favorable foreign exchange translation of $2
million. Sales of portable lighting products also increased modestly in both Europe and Latin America.
Small appliances contributed $231 million or 9% of total net sales for Fiscal 2010. This represents sales
related to Russell Hobbs from the date of the consummation of the Merger, June 16, 2010, through the close of
the Fiscal 2010.
Gross Profit. Gross profit for Fiscal 2010 was $921 million versus $816 million for Fiscal 2009. Our gross
profit margin for Fiscal 2010 decreased to 35.9% from 36.6% in Fiscal 2009. The decrease in our gross profit
margin is primarily a result of our adoption of fresh-start reporting upon emergence from Chapter 11 of the
Bankruptcy Code. Upon the adoption of fresh-start reporting, inventory balances were revalued to fair value at
August 30, 2009 resulting in an increase in such inventory balances of $49 million. As a result of the inventory
revaluation, we recognized additional cost of goods sold as these inventory items were sold in Fiscal 2009 and
2010, which increased cost of goods sold by $34 million during Fiscal 2010 compared to $15 million of
additional cost of goods sold recognized in Fiscal 2009. The impact of the inventory revaluation was offset by
lower Restructuring and related charges in Cost of goods sold during Fiscal 2010 of $7 million whereas Fiscal
2009 included $13 million of Restructuring and related charges. The Restructuring and related charges incurred
in Fiscal 2010 were primarily associated with cost reduction initiatives announced in 2009. The $13 million of
Restructuring and related charges incurred in Fiscal 2009 primarily related to the shutdown of our Ningbo, China
battery manufacturing facility. See “Restructuring and Related Charges” below, as well as Note 14,
Restructuring and Related Charges, to our Consolidated Financial Statements included in this Annual Report on
Form 10-K for additional information regarding our restructuring and related charges.
Operating Expense. Operating expenses for Fiscal 2010 totaled $753 million versus $659 million for Fiscal
2009. The $94 million increase in operating expenses for Fiscal 2010 versus Fiscal 2009 was partially driven by
$38 million of Acquisition and integration related charges as a result of our combination with Russell Hobbs
pursuant to the Merger. During Fiscal 2010, we also incurred $36 million of additional selling expense and $16
million of additional general and administrative expense related to Russell Hobbs subsequent to the acquisition
on June 16, 2010. Also included in Operating expenses for Fiscal 2010 was additional depreciation and
amortization as a result of the revaluation of our long lived assets in connection with our adoption of fresh-start
reporting upon emergence from Chapter 11 of the Bankruptcy Code and unfavorable foreign exchange
translation of $7 million. These increases were partially offset by the non-recurrence of the non-cash impairment
charge related to certain long lived intangible assets of $34 million in Fiscal 2009 and lower Restructuring and
related charges of approximately $15 million as $17 million of such charges were incurred in Fiscal 2010
compared to $32 million in Fiscal 2009. See “ Restructuring and Related Charges” below, as well as Note 14,
Restructuring and Related Charges, to our Consolidated Financial Statements included in this Annual Report on
Form 10-K for additional information regarding our restructuring and related charges.
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