Energizer 2000 Annual Report Download - page 16

ENERGIZER 2000 ANNUAL REPORT
14
sale of $24.4, which are reflected in Energizer’s historical financial
statements and resulted in a net after-tax gain of $8.7 on the
Spanish transaction. Such capital loss benefits would not have
been realized by Energizer on a stand-alone basis, thus are not
included in the Pro Forma Statement of Earnings for the year ended
September 30, 2000 as presented in Note 23 to the Consolidated
Financial Statements.
Restructuring Charges
Competition in the primary battery business has intensified in recent
years, and there continues to be a migration of demand from carbon
zinc to alkaline batteries. In response to these changes, Energizer has
recorded restructuring charges each year from 1994 through 1999.
These charges include a reduction in carbon zinc plant capacity as
demand for this type of battery continues to decline, plant closures
for the movement and consolidation of alkaline production to new or
more efficient locations in an effort to achieve lower product costs,
and staffing reorganizations and reductions in various world areas
to enhance management effectiveness and reduce overhead costs.
A detailed discussion of such charges and expenditures during 1998
through 2000 follows.
During 1999, Energizer recorded net provisions for restructuring of
$8.3 after-tax, or $9.9 pre-tax, $2.1 of which represented inventory
write-downs and is classified as cost of products sold in the
Consolidated Statement of Earnings. Of the net pre-tax charge, $7.4
relates to 1999 restructuring plans for the elimination of certain
production capacity in North America and in Asia.
The pre-tax charge of $7.4 for 1999 plans consisted of termination
benefits of $3.2, other cash costs of $.2 and fixed asset impairments
of $4.0. The fixed asset impairments primarily relate to assets used
for the production of lithium coin cells in North America. These
assets were idled and scrapped in 1999.
The 1999 restructuring plan provided for the termination of approxi-
mately 170 production and administrative employees and the closure
of one plant in Asia. This plant closure was precipitated by the finan-
cial problems in the Asian market, which resulted in contractions in
battery markets in this area. Substantially all actions associated with
these charges were completed as of September 30, 2000.
The remaining $2.5 represents additional net provisions related
to prior years’ restructuring plans. Additional termination benefits
of $5.5 related to the 1997 restructuring plan primarily represent
enhanced severance related to a European plant closing. Additional
provisions for other cash costs of $1.8 were recorded for fixed asset
disposition costs for previously held for use assets related to the
1997 restructuring plan that were idled and held for disposal. Other
non-cash charges of $2.1 relate to inventory write-offs, which were
more than offset by a reclassification of $4.5 from other comprehen-
sive income to net income of cumulative translation adjustment for a
subsidiary sold in connection with the 1997 plan. Also recorded in
1999 were asset proceeds greater than anticipated of $5.4 related to
1994, 1995 and 1997 restructuring plans.
During 1998, Energizer recorded net after-tax provisions for restruc-
turing of $12.8, or $21.3 on a pre-tax basis, of which $.3 represents
inventory write-downs and is classified as 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 restructuring, primarily a reorganization of
European sales forces and related employee reductions.
The total 1998 pre-tax charge of $36.5 consisted of termination
benefits of $29.3, which provided for the termination or early retire-
ment of approximately 420 sales and administrative employees,
other cash costs of $4.6, fixed asset impairments of $1.1 and a
non-cash investment write-off of $1.5. The other cash costs of $4.6
consisted of demolition costs of $1.5 and environmental exit costs
of $.8, both relating to assets held for disposal, lease termination
costs of $1.6 and other exit costs of $.7. Except for disposition of
certain assets held for disposal, substantially all actions associated
with the 1998 charges were complete as of September 30, 2000.
In addition, net reversals of $15.2, related to prior years’ restructur-
ing plans, were recorded in 1998, comprised of $3.7 of additional
charges offset by $18.9 of reversals of prior years’ charges. The
additional charges primarily related to asset disposition costs of
$2.6 for previously held for use assets that were idled and held for
disposal. The reversals included $9.4 of greater than anticipated
proceeds from asset sales related to the 1994, 1995 and 1996