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Rayovac Q1 U.S. Sales Drop 12%

1/22/2003 09:21:00 AM Eastern

Madison, Wis. - Rayovac, reporting its first quarter sales since its Oct. 1, 2002 purchase of the consumer battery business of European maker Varta, recorded a 12 percent drop in U.S. segment sales in its first fiscal quarter, down to $107.2 million, from the $122.4 million reported in the year-ago period.

The decline reflected lower alkaline battery sales and continued intense promotional activity, among others.

North American segment profitability improved to $19.7 million in the first quarter, ended Dec. 29, up from $7.4 million in the first three months in 2001. The increase was due mainly to a bad debt reserve of $16.1 million related to the Kmart bankruptcy in the same period a year ago and improved gross margin.

Consolidated Rayovac sales in the first quarter reached $260.2 million, a 60.7 percent increase over the $161.9 million recorded in the first quarter of 2001. The rise was due mainly to the Varta acquisition. Pro forma operating income for the three months hit $26 million, compared with $19.6 million in the year-ago period. Pro forma net loss for the quarter was $600,000, compared with a gain of $400,000 year over year.

Rayovac incurred a special charge in the first quarter of $15.4 million, to reflect the costs of restructuring, and expects total charges to be $25 million to $30 million, with the balance incurred over the next year. Cash costs of the program will be about $15 million to $20 million, with $35 million to $40 million of annual savings when fully implemented in fiscal year 2005.