Energizer 2000 Annual Report Download - page 31

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(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 was sold to Moltech Corporation for approximately
$20.0. This segment is accounted for as a discontinued operation
in Energizer’s consolidated financial statements.
In fiscal 2000, Energizer recognized an after-tax gain of $1.2 on the
disposition of discontinued operations related to the final settlement
of the sale transaction.
Included in the fiscal year 1999 Net Loss on Disposition of
Discontinued Operations are estimated operating losses during
the divestment period of $15.0 pre-tax, or $9.6 after-tax, and a
loss on disposition of $95.6 pre-tax, or $64.6 after-tax. Actual
pre-tax operating losses during the divestment period through
September 30, 1999, totaled $12.5.
The net loss for 1998 includes an after-tax provision of $42.7,
primarily representing an impairment write-down of lithium ion
rechargeable battery assets of the OEM business. Fair value of
those assets was primarily determined based upon estimates of
recovery value for unique manufacturing equipment. Due to rapid
changes in the business environment since the beginning of the
lithium ion project in 1996, it became more economical to source
lithium ion cells from other manufacturers.
The Investment in Discontinued Operations at September 30, 1999
was primarily comprised of fixed assets, inventory and accounts
receivable and payable. Results for discontinued operations are
presented in the following table.
1999 1998
Net sales $ 64.2 $ 149.4
Earnings/(loss) before
income taxes $ (9.0) $ (70.6)
Income taxes benefit/(provision) 3.4 27.1
Net earnings/(loss) from
discontinued operations $ (5.6) $ (43.5)
(5) RESTRUCTURING ACTIVITIES
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 effective-
ness 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 the 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.