Energizer 2000 Annual Report Download

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2000
ANNUAL REPORT
YEAR
ENERGIZER
HOLDINGS, INC.
power
FULL POWER ENERGIZER HOLDINGS, INC. 2000 ANNUAL REPORT

Table of contents

  • Page 1
    2000 F U L L P O W E R I N C . R power H O L D I N G S , G E N E R G I Z E R H O L D I N G S , A N N U A L E N E R R E P O R T I Z E Y E A R I N C . 2 0 0 0 A N N U A L R E P O R T

  • Page 2
    ... lighting devices for use at home, work and recreation, for novelty uses and industrial applications. The company successfully introduced several new products during the year including the Rubber Two Way lantern, Folding Fluorescent lantern, Swivel Head industrial flashlight and Energizer Arc White...

  • Page 3
    ... 1 spin-off from Ralston Purina Company. The new Energizer ranks as the largest independent, publicly traded primary battery and flashlight company in the world and boasts two of the world's most recognized brand names - Eveready ® and Energizer®. We sell products in virtually every market around...

  • Page 4
    ... Eveready® Alkaline to customers seeking to carry a value brand. Additionally, we continued to upgrade our lighting products and miniature battery lines with new products such as the Energizer® Arc R E P O R T White Hi Intensity Fluorescent flashlight and Energizer e2 Photo Lithium batteries...

  • Page 5
    ... THE NEW ENERGIZER IS AN EXCITING NEW CORPORATE CULTURE - A CULTURE BASED ON EMPLOYEE OWNERSHIP AND INDIVIDUAL ACCOUNTABILITY. ASSOCIATES ARE ABLE TO SHARE IN THE PERFORMANCE OF THE COMPANY AND, INCREASINGLY, THEIR INTERESTS ARE TIED DIRECTLY TO THE INTERESTS OF SHAREHOLDERS. accountable key tenet...

  • Page 6
    ...fortified our product lineup with the introduction of Eveready Alkaline, giving value-conscious consumers reliable performance at an economic price from a recognizable, trusted name. Miniatures Energizer's complete line of miniature batteries, accounting for 3 percent of net sales, utilizes various...

  • Page 7
    POWER FOR EVERY NEED WITH THE INDUSTRY'S MOST COMPREHENSIVE PRODUCT PORTFOLIO, ENERGIZER HELPS CONSUMERS IN EVERY CORNER OF THE WORLD USE PORTABLE POWER TO ENJOY BETTER LIVES - FROM A SIMPLE, BASIC FLASHLIGHT TO HIGH-END APPLICATIONS SUCH AS PERSONAL ORGANIZERS AND PORTABLE CD PLAYERS. variety ...

  • Page 8
    ...recently named one of the Top 10 Advertising Icons of the Century by Advertising Age ® magazine. E N E R G I Z E R GLOBAL MARKETS Energizer markets batteries and lighting products in over 140 countries, with strong share positions in nearly every major market. The company's operations are managed...

  • Page 9
    ... EUROPE 14% Net Sales powering the world CUSTOMERS AND CONSUMERS IN 140 COUNTRIES. SOUTH AND CENTRAL AMERICA 7% Net Sales with strategic manufacturing and distribution FROM PRODUCTION PLANTS ON FOUR CONTINENTS - IN THE UNITED STATES AND IN LOCALES WITH EXOTIC NAMES LIKE TECAMEC, MANDAUE CEBU...

  • Page 10
    ... miniature silver oxide batteries, the first lithium iron disulfide button cell and the first on-label tester for alkaline batteries. Our leadership in innovation is reflected as well by the more than 800 U.S. and foreign patents owned by Energizer and the more than 800 patent applications currently...

  • Page 11
    ... review TA B L E O F C O N T E N T S 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION 19 SUMMARY SELECTED HISTORICAL FINANCIAL INFORMATION 20 RESPONSIBILITY FOR FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT ACCOUNTANTS 21 CONSOLIDATED FINANCIAL STATEMENTS 25...

  • Page 12
    ... Pacific regions, related to increased demand from retail customers and consumers in anticipation of potential disruptions related to the date change on January 1, 2000. BUSINESS OVERVIEW Energizer is the world's largest publicly traded manufacturer of primary batteries and flashlights and a global...

  • Page 13
    ... the U.S. dollar. Currency devaluation was a significant unfavorable factor in 2000 and continues into 2001. Discontinued operations consist of Energizer's worldwide rechargeable Original Equipment Manufacturers' (OEM) battery business. In March 1999, the Board of Directors of Ralston announced its...

  • Page 14
    ...increased $23.3 due to lower production costs, higher customer sales and Segment Results Energizer's operations are managed via four major geographic areas - North America (including the United States and Canada), Asia Pacific, Europe and South and Central America (including Mexico). This structure...

  • Page 15
    ...due to higher pension income and lower consulting, reorganization and information systems costs as well as a lighting product recall charge in 1999. These costs were partially offset by additional costs associated with operating as a stand-alone company for the last six months of fiscal 2000. Fiscal...

  • Page 16
    ..., 2000. The 1999 restructuring plan provided for the termination of approximately 170 production and administrative employees and the closure of one plant in Asia. This plant closure was precipitated by the financial problems in the Asian market, which resulted in contractions in battery markets in...

  • Page 17
    ... 1997 restructuring plans have been or are expected to be as follows: 1998 - $9.0; 1999 - $19.0; 2000 and thereafter - $23.0. • In 2000, the income tax percentage was favorably impacted by the recognition of $24.4 of U.S. capital loss tax benefits related to the disposition of Energizer's Spanish...

  • Page 18
    ... the sale of accounts receivable. Energizer has received notices from the U.S. Environmental Protection Agency, state agencies, and/or private parties seeking In September 2000, Energizer's Board of Directors approved a share repurchase plan authorizing the repurchase of up to 5 million shares of...

  • Page 19
    ...its financial position. Such liability could, however, be material to results of operations or cash flows for a particular quarter or annual period. Energizer's hedging strategy involves the use of natural hedging techniques, where possible, such as the offsetting or netting of like foreign currency...

  • Page 20
    ... category, Energizer's sales and market share may be negatively affected by competitive activity, including new product introductions or advertising campaigns, retail discounts and other promotional activities. Competition for key retail customers and growth of the lower-price private-label battery...

  • Page 21
    ... 543.2 95.7 81.4 2,146.9 43.1 FOR THE YEAR ENDED SEPTEMBER 30, 2000 1999 1998 1997 1996 After-tax restructuring charges Capital loss tax benefits Foreign tax credit refunds Loss on disposition of Spanish affiliate After-tax costs related to spin-off Total $ - 24.4 - (15.7) (3.3) $ (8.3) 16...

  • Page 22
    ... with generally accepted R E P O R T REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Board of Directors of Energizer Holdings, Inc. accounting principles in the United States, and in the opinion of management, fairly present Energizer's financial position, results of operations and...

  • Page 23
    ... M E (Dollars in millions except per share data) YEAR ENDED SEPTEMBER 30, 2000 1999 1998 Statement of Earnings: Net Sales Costs and Expenses Cost of products sold Selling, general and administrative Advertising and promotion Research and development Costs related to spin-off Loss on disposition...

  • Page 24
    ...except per share data) SEPTEMBER 30, R E P O R T 2000 1999 Assets Current Assets Cash and cash equivalents Trade receivables, net Inventories Other current assets Total Current Assets Investments and Other Assets Net Investment in Discontinued Operations Property at Cost Land Buildings Machinery...

  • Page 25
    ... payable with maturities of 90 days or less Net transactions with Ralston prior to spin-off Net cash used by financing activities Effect of Exchange Rate Changes on Cash Net Increase/(Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents, Beginning of Period Cash and Cash Equivalents, End...

  • Page 26
    ... Foreign currency translation adjustment Balance at March 31, 2000 Distribution to Ralston's shareholders Net earnings Foreign currency translation adjustment Minimum pension liability adjustment Balance at September 30, 2000 $ 1,548.2 164.7 (151.2) (30.4) $ 1,531.3 80.0 (301.7) 3.3 $ 1,312.9 121...

  • Page 27
    ... power. Energizer manufactures and markets a complete line of primary alkaline and carbon zinc batteries under the brands Energizer e 2, Energizer and Eveready, as well as miniature and rechargeable batteries, and flashlights and other lighting products. Energizer and its subsidiaries operate 22...

  • Page 28
    ... - Energizer uses financial derivatives in the management of foreign currency and interest-rate risks that are inherent to its business operations. Such instruments are not held or issued for trading purposes. 2 0 0 0 Inventories - Inventories are valued at the lower of cost or market, with...

  • Page 29
    ... of one share of Energizer stock for each three shares of Ralston stock. Revenue Recognition - Revenue is recognized upon shipment of product to customers. Sales discounts, returns and allowances are included in net sales, and the provision for doubtful accounts is included in selling, general and...

  • Page 30
    ... Energizer, including systems, benefits, advertising and facilities for Energizer's headquarters. Prior to the spin-off, the expenses related to shared services listed above, as well as legal and financial support services, were allocated to Energizer generally based on utilization, which management...

  • Page 31
    (4) DISCONTINUED OPERATIONS In March 1999, the Board of Directors of Ralston announced its intention to exit Energizer's worldwide rechargeable Original Equipment Manufacturers' (OEM) battery business to allow Energizer to focus on its primary battery business. On November 1, 1999, the OEM business ...

  • Page 32
    ... cost of products sold in the Consolidated Statement of Earnings. Of the net pre-tax charge, $36.5 related to 1998 restructuring plans, including a voluntary early retirement option offered to most U.S. Energizer employees meeting certain age and service requirements and European business operations...

  • Page 33
    ... Beginning Balance 2000 Rollforward Provision/ Reversals Activity Ending Balance 1994 Plan Termination benefits Other cash costs Fixed asset impairments Total 1995 Plan Termination benefits Other cash costs Fixed asset impairments Other non-cash charges Total 1996 Plan Termination benefits Other...

  • Page 34
    ...) (Dollars in millions except per share data) The provisions for income taxes consisted of the following for the years ended September 30: 2000 Continuing Operations R E P O R T 1999 Consolidated Continuing Operations Consolidated Continuing Operations 1998 Consolidated Currently payable: United...

  • Page 35
    .... The capital loss benefits are not recognized in Energizer's pro forma financial results (see Note 23) as Energizer would not have been able to realize these benefits on a stand-alone basis. Tax loss carryforwards of $11.0 expired in 2000, primarily due to the sale of Energizer's Spanish affiliate...

  • Page 36
    ... of one share of Energizer stock for each three shares of Ralston stock. ended September 30, 2000, the number of shares used to compute basic earnings per share is based on the weighted-average number of shares of Ralston stock outstanding during the six months ended March 31, 2000 (adjusted for...

  • Page 37
    ... under the Plan. During 2000, the Board of Directors approved the grants of up to 635,000 restricted stock equivalents to a group of key employees and directors upon their purchase of an equal number of shares of ENR stock within a specified period. The restricted stock equivalents will vest three...

  • Page 38
    ... to the spin-off, Energizer employees participated in Ralston's defined benefit plans. In addition, certain groups of retirees and management employees were eligible for certain postretirement benefits provided by Ralston. See further discussion of pre-spin pension and postretirement benefits below...

  • Page 39
    ...of Energizer common stock at September 30, 2000, with a market value of $42.4. Pre-Spin Pension Plans and Other Postretirement Benefits Prior to the spin-off, Energizer participated in Ralston's noncontributory defined benefit pension plans (Plans), which covered substantially all regular employees...

  • Page 40
    ... within the pension plan at 300%. Amounts charged to expense are shown in the table below. Prior to the spin-off, Energizer recorded costs as allocated by Ralston. The amount of such costs was $1.2 for the six months ended March 31, 2000, $3.0 in 1999 and $8.2 in 1998. Private Placement, interest...

  • Page 41
    ... exchange each Right for one share of ENR stock. Energizer's Board of Directors may amend the terms of the Rights at any time prior to the time a person or group acquires 20% or (14) SHAREHOLDERS EQUITY On March 16, 2000, the Board of Directors declared a dividend of one share purchase right (Right...

  • Page 42
    ... Energizer's forward exchange contracts and purchased currency options in U.S. dollar equivalents at year-end. These contractual amounts represent transaction volume outstanding and do not represent the amount of Energizer's exposure to credit or market loss. Foreign currency contracts are generally...

  • Page 43
    ... Matters - The operations of Energizer, like those of other companies engaged in the battery business, are subject to various federal, state, foreign and local laws and regulations intended to protect the public health and the environment. These regulations primarily relate to worker safety...

  • Page 44
    ... CONSOLIDATED FINANCIAL STATEMENTS - (continued) (Dollars in millions except per share data) The U.S. Patent Office continues to review the interference claims between Strategic Electronics (Energizer's licensor) and Duracell relating to use of the on-battery tester. A decision is not expected for...

  • Page 45
    (18) SUPPLEMENTAL BALANCE SHEET INFORMATION 2000 1999 Inventories Raw materials and supplies Work in process Finished products Total Inventories Other Current Assets Investment in SPE (see Note 12) Miscellaneous receivables Deferred income tax benefits Prepaid expenses Other Total Other Current ...

  • Page 46
    .... lights and other lighting products throughout the world. Operations are managed via four major geographic areas - North America (including the United States and Canada), Asia Pacific, Europe, and South and Central America (including Mexico). This structure is the basis for Energizer's reportable...

  • Page 47
    ... 1999 1998 Assets at Year End North America Asia Pacific Europe South and Central America Subtotal Goodwill and other intangible assets Investment in discontinued operations Total Assets Capital Expenditures North America Asia Pacific Europe South and Central America Total Capital Expenditures...

  • Page 48
    ... 3.3 6.3 13.3 (b) For all periods prior to the spin-off, shares used in the earnings per share calculation are based on the weighted-average number of shares of Ralston common stock outstanding adjusted for the distribution of one share of Energizer stock for each three shares of Ralston stock.

  • Page 49
    ...reflect the incremental costs associated with becoming a stand-alone company including Board of Director costs, stock exchange registration fees, shareholder record keeping services, external financial reporting, treasury services, tax planning and compliance, certain legal expenses and compensation...

  • Page 50
    ...reflect the incremental costs associated with becoming a stand-alone company including Board of Director costs, stock exchange registration fees, shareholder record keeping services, external financial reporting, treasury services, tax planning and compliance, certain legal expenses and compensation...

  • Page 51
    ... the company's Web site, www.energizer.com. COMMON STOCK INFORMATION On April 1, 2000, Ralston Purina Company distributed the outstanding capital stock of Energizer Holdings, Inc. in a tax-free spinoff to shareholders. Energizer began trading on the New York Stock Exchange under the ticker symbol...

  • Page 52
    Energizer Holdings, Inc. 800 Chouteau Avenue St. Louis, Missouri 63102 314.982.2000 www.energizer.com