Rayovac Restructures In Wake Of Lower Sales, Earnings
By Jeff Malester -- TWICE, 3/12/2001
MADISON, WIS. -In line with revised projections made in December, battery maker Rayovac reported lower sales and earnings in its first quarter of fiscal 2001.
Sales were down 13.5 percent to $185.9 million in the first fiscal quarter ended Dec. 31, compared with $214.8 million in the first quarter of last year.
Operating income, before special charges, dropped 23.1 percent to $22.7 million, compared with $29.5 million in the year-ago three months. Pro forma net income declined 37 percent to $8.7 million, compared with $13.9 million in the first quarter last year.
Rayovac, which blamed a tough year-over-year comparison resulting from last year's Y2K buying binge, said it remains confident that beginning in the second fiscal quarter, it will return to its history of strong growth. Recent introductions in rechargeable batteries are expected to help this surge.
North American sales at Rayovac in the first quarter were $138.5 million, down 17 percent from last year's first quarter. This was due to an 18 percent decrease in alkaline battery sales and a 33 percent drop in lighting products sales.
Both product lines were impacted by retailer inventory adjustments, not being able to anniversary the Y2K buying binge, and the lack of adverse weather conditions leading into the holiday buying season.
Rayovac's total general battery dollar market share stood at 14.5 percent for the 12-week period ending Dec. 10, compared with 14.9 percent a year ago, according to ACNielsen data. Alkaline types held a 12.3 percent dollar market share for the period, down from 12.9 percent last year.
For the 52 weeks ended Dec. 30, Rayovac's total general battery dollar market share rose to 13.8 percent, compared with 13.5 percent last year, according to ACNielsen. Alkaline batteries held an 11.4 percent dollar market share for the current year, down from 11.5 percent last year.
In the all-important mass-merchant channel, Nielsen data put Rayovac's dollar market share up 1.3 percentage points in the past year, to reach a 24.4 percent share.
To improve overall operating efficiencies, match manufacturing capacity to market demands and better utilize its resources, Rayovac said, it will undertake a series of restructuring initiatives over the next six to eight months. In the process, about 280 employees in the United States, or 8 percent of the company's global work force, will lose their jobs.
Rayovac will lay off 40 employees at its Fennimore, Wis., plant, while certain manufacturing functions are outsourced and the plant's manufacturing space is reconfigured to accommodate the installation of a new high-speed AA-size alkaline battery line. The company also will close a lantern battery and flashlight assembling plant in Wonewoc, Wis.
Rayovac, as previously announced, recorded a charge of about $18 million pre-tax to cover the costs of global restructuring. Of that amount, $16 million was incurred in the first fiscal quarter of 2001, with the remainder set for the balance of 2001.
Cash costs for restructuring are expected to account for about $8 million. Savings are estimated at $8 million to $9 million annually, beginning in late 2001, and fully realized in fiscal 2002, said the company.
These changes will allow Rayovac to remain the fastest growing battery operation in the United Sates, said chairman/ CEO Dave Jones. "Streamlining our manufacturing operations will reduce costs, maximize asset utilization, improve operating efficiencies, and enhance our growth prospects and performance over the long term."
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