Energizer 2000 Annual Report Download - page 12

ENERGIZER 2000 ANNUAL REPORT
10
MANAGEMENT’S DISCUSSION AND
ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
(Dollars in millions except per share and percentage data)
The following discussion is a summary of the key factors manage-
ment considers necessary in reviewing Energizer Holdings Inc.’s
(Energizer) historical basis results of operations, operating segment
results, liquidity and capital resources. This discussion should be
read in conjunction with the Consolidated Financial Statements
and related notes.
BASIS OF PRESENTATION
Prior to April 1, 2000, Energizer was a wholly owned subsidiary
of Ralston Purina Company (Ralston). On that date, Ralston
distributed the common stock of Energizer to its shareholders
in a tax-free spin-off.
The Balance Sheet as of September 30, 2000 is presented on a
consolidated basis. The Statement of Earnings and Statement of
Cash Flows for the year ended September 30, 2000 include the
combined results of operations of the Energizer businesses under
Ralston for the six months prior to the spin-off and the consolidated
results of operations of Energizer on a stand-alone basis for the
six months ended September 30, 2000. The financial statements for
all periods prior to the spin-off are presented on a combined basis
and reflect periods during which the Energizer businesses operated
as wholly owned subsidiaries of Ralston. The financial information
in these financial statements does not include certain expenses
and adjustments that would have been incurred had Energizer been
a separate, independent company, and may not necessarily be
indicative of results that would have occurred had Energizer been
a separate, independent company during the periods presented
or of future results of Energizer. See Pro Forma Statement of
Earnings for the years ended September 30, 2000 and 1999 in
Note 23 to the Consolidated Financial Statements.
BUSINESS OVERVIEW
Energizer is the world’s largest publicly traded manufacturer of
primary batteries and flashlights and a global leader in the dynamic
business of providing portable power. Energizer manufactures and
markets a complete line of primary alkaline and carbon zinc batteries
primarily 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
manufacturing facilities in 15 countries on four continents. Its prod-
ucts are marketed and sold in more than 140 countries primarily
through a direct sales force, and also through distributors, to mass
merchandisers, wholesalers and other customers.
There has been a continuing shift within primary battery products
from carbon zinc batteries to alkaline batteries. As such, Energizer
has recorded provisions related to restructuring its worldwide battery
production capacity and certain administrative functions in 1998
and 1999. Alkaline batteries are now the dominant primary battery
in all world areas with the exception of Asia and Africa. Energizer
continues to review its battery production capacity and its business
structure in light of pervasive global trends, including the evolution
of technology.
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). Segment profit and sales are concentrated in the North
America and Asia Pacific areas which together account for 97%
and 79%, respectively, of 2000 segment profit and sales.
The battery business is highly competitive, both in the United States
and on a global basis, as a number of large battery manufacturers
compete for consumer acceptance and limited retail shelf space.
According to A.C. Nielsen, Energizer’s dollar share of the U.S.
alkaline battery market was 34.0% in 1998, 31.2% in 1999 and
32.9% in 2000.
The primary battery category experienced unprecedented growth
levels in the first quarter of fiscal 2000, particularly in the North
America and Asia 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.
According to A. C. Nielsen, the alkaline dollar sales for October
through December in the United States increased 28% over the
same quarter last year, compared to historical growth trends in the
high single digits. As the category returns to normal growth trends,
consumer take away will likely decline in the first quarter of fiscal