Rayovac 2011 Annual Report Download - page 72

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Segment profitability during Fiscal 2010 decreased slightly to $171 million from $172 million in Fiscal
2009. Segment profitability as a percentage of net sales decreased to 10.3% in Fiscal 2010 compared to 12.8% in
Fiscal 2009. The decrease in segment profitability during Fiscal 2010 was mainly attributable to a $19 million
increase in cost of goods sold due to the sale of inventory that was revalued in fresh-start accounting coupled
with approximately a $16 million increase in intangible asset amortization also due to our adoption of fresh-start
reporting upon our emergence from Chapter 11 of the Bankruptcy Code. Offsetting these decreases to segment
profitability was additional segment profit realized from the Merger of $11 million, higher sales, as discussed
above, and savings from our restructuring and related initiatives announced 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.
Segment Adjusted EBITDA in Fiscal 2010 was $297 million compared to $274 million in Fiscal 2009. The
increase in Adjusted EBITDA is mainly driven by the efficient cost structure now in place from our cost
reduction initiatives announced in Fiscal 2009 coupled with increases in market share in certain of our product
categories.
Segment assets increased to $2,477 million at September 30, 2010 from $1,608 million at September 30,
2009. The increase in assets is directly related to the Merger. Goodwill and intangible assets, which are directly a
result of the revaluation impacts of fresh-start reporting and the Merger, increased to $1,355 million at
September 30, 2010 from $909 million at September 30, 2009. The increase is mainly due to goodwill and
intangible assets of $468 million related to the Merger, which was partially offset by amortization of definite
lived intangible assets of $22 million.
Foreign Currency Translation—Venezuela Impacts
The Global Batteries & Appliances segment does business in Venezuela through a Venezuelan subsidiary. At
January 4, 2010, the beginning of our second quarter of Fiscal 2010, we determined that Venezuela meets the
definition of a highly inflationary economy under GAAP. As a result, beginning January 4, 2010, the U.S. dollar is
the functional currency for our Venezuelan subsidiary. Accordingly, going forward, currency remeasurement
adjustments for this subsidiary’s financial statements and other transactional foreign exchange gains and losses are
reflected in earnings. Through January 3, 2010, prior to being designated as highly inflationary, translation
adjustments related to the Venezuelan subsidiary were reflected in Shareholders’ equity as a component of AOCI.
The designation of our Venezuela entity as a highly inflationary economy and the devaluation of the Bolivar
fuerte resulted in a $1 million reduction to our operating income during Fiscal 2010. We also reported a foreign
exchange loss in Other expense (income), net, of $10 million during Fiscal 2010 related to transactions in the
Bolivar fuerte.
Global Pet Supplies
2010 2009
(in millions)
Net sales to external customers ................................................... $566 $574
Segment profit ................................................................ $ 58 $ 66
Segment profit as a % of net sales ................................................ 10.2% 11.5%
Segment Adjusted EBITDA ..................................................... $104 $ 97
Assets as of September 30, ...................................................... $839 $867
Segment net sales to external customers in Fiscal 2010 decreased to $566 million from $574 million in
Fiscal 2009, representing a decrease of $8 million or 1%. The $8 million decrease was attributable to lower
aquatics sales of $11 million and lower specialty pet product sales of $6 million, which were offset by favorable
foreign exchange impacts of $3 million. The decrease in aquatics sales was primarily due to general softness in
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