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Rayovac Q3 Segment Sales Drop 20%

7/24/2003 11:03:00 AM Eastern

Madison, Wis. - Battery maker Rayovac turned in a weak sales and earning performance in North America in its fiscal third quarter due in large part to 'significant transitional issues surrounding the launch of a new alkaline line that began shipping to major retailers in early July.'

North American sales reached $81.2 million for the three months, ended June 29, down 20 percent from the $100.9 million recorded in 2002. This decline reflects lower alkaline battery sales due to lower alkaline retail category sales during the quarter and to the impact of store inventory reduction programs as retailers made the transition to the new alkaline program.

North American segment profitability was $14.3 million, nearly cut by half from the $27.4 million reported last year. The profitability decrease reflects the impact of lower sales volumes, the impact of retailer markdown monies and increased distribution expenses. Fiscal third quarter results in 2002 benefited from a $4.1 million bad debt recovery attributable to the Kmart bankruptcy.

Sales in North America for the six months hit $267.3 million, down 15 percent from the $312.9 million recorded in the first half of 2002. This decline reflected lower alkaline, heavy duty and rechargeable battery and charger sales.

Profitability in North America dropped to $45 million in the first half, down from $52.5 million year-on-year, mainly due to the result of the sales decline. Last year's results included the Kmart bad debt reserve of $12 million.

'We are optimistic of improving North American performance in future quarters as the impact of this initiative [shipping a new alkaline line] is fully rolled out to our retail customers,' said David Jones, Rayovac chairman/CEO.

Consolidated Rayovac sales were $207.7 million in the fiscal third quarter, up 53.4 percent from the $135.4 million reported in the same three months a year ago. Most of the sales increase was attributed to the acquisition of European battery maker Varta.

Operating income in the third quarter was $12 million, a 43.1 percent increase, compared with $21.1 million the previous year. This benefited from the Varta acquisition, offset by $11.1 million in special charges. Pro forma operating income was $23.8 million, up from $19.6 million the previous year.

Net income reached $2.9 million in the third quarter, up 71.8 percent, compared with $10.3 million in the same three months in 2002.

Consolidated sales for the nine months hit $670.2 million, an increase of 60.2 percent from the $418.4 million reported in the same period a year ago.

Operating income reached $31.3 million for the nine months, a decrease of 16.5 percent, compared with the $37.5 million recorded year-on-year. Pro forma operating income for the period was $65.2 million, 25 percent better than the $52.1 million taken in a year ago.

Net income for the nine months took an 83.9 percent drop, to $2.6 million, down from $16.1 million in the same time frame in 2002.