Energizer 2001 Annual Report Download

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MANAGING
reality
adapting to change through innovation
ENERGIZER HOLDINGS, INC.
2001 ANNUAL REPORT

Table of contents

  • Page 1
    M ANAGI NG reality adapting to chang e through innovation EN ER GI Z ER H OL D I N GS , I N C. 2 0 0 1 AN N U AL R EP OR T

  • Page 2
    ... FLASHLIGHTS AND LIGHTING | page 8 WORLD M ARKETS AND GLOBAL OPERATIONS page 9 FINANCIAL REVIEW | inside back cover CORPORATE INFORM ATION Copyright © Eveready Battery Company, Inc. Energizer, e2, Energizer M AX, Eveready, Eveready Super Heavy Duty, Cat & Nine Design, E-SNAP , EZChange, Folding LED...

  • Page 3
    ... surge. Sales fell from $1.9 billion 4. Reinvesting some of these savings to strengthen the Energizer consumer franchise through increased advertising. 2. Streamlining our global operations to reduce costs and rationalize capacity. TA K I N G T H E I N I T I AT I V E Since we cannot control external...

  • Page 4
    ... to deliver innovative answers to consumer needs for portable power. As we manage the new realities, one reality is certain - we can respond and adapt ...we can compete and win ...and we will make our own future. J. Patrick M ulcahy Chief Executive Officer Energizer Holdings, Inc. November 20...

  • Page 5
    ... our scope in meeting consumer needs for portable power and lighting products. This extensive portfolio includes carbon zinc; value, premium and super-premium alkaline; lithium AA super-premium; photo lithium; watch/coin cells; hearing aid; rechargeable NiMH cells; and flashlights and lanterns. This...

  • Page 6
    ... new packaging and create excitement with bold use of the Energizer Bunny. Our popular Eveready value brand continues to offer consumers economy plus a reliable brand name and dependable performance in both alkaline and carbon zinc batteries. global sales. For fiscal 2001, our share of the global...

  • Page 7
    ...restaged flagship premium alkaline brand, brings long-lasting power to the devices consumers depend on and enjoy - flashlights, smoke detectors, toys, radios, remotes and electronic games. Energizer e2, our advanced super-premium product, delivers exceptional power for the most demanding high-drain...

  • Page 8
    ... silver oxide, zinc air, lithium and manganese dioxide, our miniature batteries provide long-lasting power for personal organizers, keyless car remotes, handheld electronic games, watches, hearing aids, electronic thermometers and many other devices. Energizer's line of miniature batteries accounts...

  • Page 9
    ... flashlights and lanterns for home, work and outdoors. Energizer's lighting products account for 7 percent of overall company sales. During the year, we introduced a number of new lighting products that have proven to be a hit with our retail customers and consumers alike. The Energizer Pocket LED...

  • Page 10
    ... and category management. Our customer support extends to developing unique product and packaging options that help retailers differentiate their stores from competitors. Last year, we developed an Energizer 48 AA Pack and an Energizer Rechargeable Pack for a major wholesale club, plus new lines...

  • Page 11
    ... free of charge by writing or calling the Investor Relations Department at Energizer's corporate headquarters, as listed above or by retrieving this information from the company's Web site, www.energizer.com. Transfer Agent and Registrar Continental Stock Transfer and Trust Company 17 Battery Place...

  • Page 12
    2001 FINANCIAL REVIEW TABLE OF CONTENTS Management's Discussion and Analysis of Results of Operations and Financial Condition Summary Selected Historical Financial Information Responsibility for Financial Statements Report of Independent Accountants Consolidated Financial Statements Notes to ...

  • Page 13
    .... Energizer manufactures and markets a complete line of primary alkaline and carbon zinc batteries primarily under the brands Energizer e2, Energizer and Eveready, as well as miniature and rechargeable batteries, and Ã-ashlights and other lighting products. Energizer and its subsidiaries operate 22...

  • Page 14
    ...'s sales to the trade have been further reduced as retail inventory levels have declined. Currency devaluation, relative to the U.S. dollar, in Australia, New Zealand, the Philippines and other countries in the Asia PaciÃ'c region has been unfavorable to Energizer during 2000 and 2001. The Euro and...

  • Page 15
    ... States, Canada and Caribbean), Asia PaciÃ'c, Europe, and South and Central America (including Mexico). This structure is the basis for Energizer's reportable operating segment information presented in Note 20 to the Consolidated Financial Statements. Energizer evaluates segment proÃ'tability based...

  • Page 16
    ... pricing and product mix. Segment proÃ't increased $20.5, or 7%, as higher gross margin was partially oÃ...set by increased advertising and promotion expense, primarily related to the Energizer e2 launch, as well as higher marketing and distribution expenses. Asia PaciÃ'c Net sales to customers...

  • Page 17
    ... of consumer demand from carbon zinc to alkaline batteries, a comprehensive study of Energizer's carbon zinc facilities to determine the optimum number of carbon zinc manufacturing plants was completed in the fourth quarter of Ã'scal 2001. Energizer also reviewed its worldwide operations in light of...

  • Page 18
    ... related 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 approximately 170 production and administrative employees, and the closure of one plant in Asia. This plant...

  • Page 19
    ... average borrowings and lower interest rates. Other Ã'nancing-related costs increased $5.9 in 2001, reÃ-ecting the discount on the sale of accounts receivable under a Ã'nancing arrangement and lower net exchange gains. Other Ã'nancing-related costs decreased $4.3 in 2000 compared to 1999, primarily...

  • Page 20
    ... 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, air and...

  • Page 21
    ... and technology to be used. In addition, Energizer undertook certain programs to reduce or eliminate the environmental contamination at the rechargeable battery facility in Gainesville, Florida, which was divested in November 1999. In 2001, the buyer, as well as its operating subsidiary which owns...

  • Page 22
    ... or projected. The high cost of research and development activities, shifts in consumer demand from higher quality to lower-priced batteries, and patented innovations by competitors, could aÃ...ect the Company's commitment or ability to maintain its technological leadership. Severance costs and other...

  • Page 23
    ... meet future operating expenses and liquidity requirements, fund capital expenditures or service its debt as it becomes due. The current political and economic crisis could result in higher levels of inÃ-ation than anticipated, and the Company may not be able to realize cost reductions, productivity...

  • Page 24
    SUMMARY SELECTED HISTORICAL FINANCIAL INFORMATION (Dollars in millions except per share data) 2001 For the Year Ended September 30, 2000 1999 1998 1997 Statement of Earnings Data Net sales (a Depreciation and amortization Earnings from continuing operations before income taxes (b Income taxes ...

  • Page 25
    ...Ã'scal years are based on the weighted-average number of shares outstanding of Ralston common stock prior to the spin-oÃ..., adjusted in Ã'scal 2000 for the distribution of one share of Energizer stock for each three shares of Ralston stock. In Ã'scal 2001, the potentially dilutive securities were not...

  • Page 26
    ... its Audit Committee consisting solely of nonmanagement directors, meets periodically with management, internal audit and the independent accountants to discuss audit and Ã'nancial reporting matters. To assure independence, PricewaterhouseCoopers LLP has direct access to the Audit Committee. 23

  • Page 27
    REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Board of Directors of Energizer Holdings, Inc. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings and comprehensive income, of cash Ã-ows and of shareholders equity present fairly,...

  • Page 28
    ... AND COMPREHENSIVE INCOME (Dollars in millions except per share data) Year Ended September 30, 2001 2000 1999 Statement of Earnings: Net sales Cost of products sold Selling, general and administrative expense Advertising and promotion expense Research and development expense Provision for...

  • Page 29
    CONSOLIDATED BALANCE SHEET (Dollars in millions except per share data) September 30, 2001 2000 ASSETS Current assets Cash and cash equivalents Trade receivables, net Inventories Other current assets Total current assets Property, plant and equipment, net Other assets Total LIABILITIES AND ...

  • Page 30
    .../(decrease) in notes payable with maturities of 90 days or less Purchase of treasury stock Other, net Net transactions with Ralston prior to spin-o Net cash used by Ã'nancing activities EÃ...ect of exchange rate changes on cash Net increase/(decrease) in cash and cash equivalents Cash and cash...

  • Page 31
    ... shares in thousands) 2001 Dollars Shares 2000 1999 2001 2000 (Dollars in millions, shares in thousands) 1999 Ralston's net investment Net earnings Net transactions with Ralston Foreign currency translation adjustment Distribution to Ralston's shareholders at spin-o Ending balance Common Stock...

  • Page 32
    ... markets a complete line of primary alkaline and carbon zinc batteries under the brands Energizer e2, Energizer and Eveready, as well as miniature and rechargeable batteries, and Ã-ashlights and other lighting products. Energizer and its subsidiaries operate 22 manufacturing and packaging facilities...

  • Page 33
    ... method over periods of related beneÃ't ranging from two to seven years. Property at Cost Ã" Expenditures for new facilities and expenditures that substantially increase the useful life of property, including interest during construction, are capitalized. Maintenance, repairs and minor renewals are...

  • Page 34
    ... in price paid by either a retail customer, distributor, wholesaler or ultimate consumer are recorded in net sales. The provision for doubtful accounts is included in selling, general and administrative expenses in the Consolidated Statement of Earnings. Advertising and Promotion Costs Ã" Energizer...

  • Page 35
    ...guidance on accounting for discounts, coupons, rebates and free product. EITF 00-25, ""Vendor Income Statement Characterization of Consideration from a Vendor to a Retailer,'' provides guidance on accounting for considerations other than those directly addressed in EITF 00-14. Energizer adopted EITF...

  • Page 36
    ... of consumer demand from carbon zinc to alkaline batteries, a comprehensive study of Energizer's carbon zinc facilities to determine the optimum number of carbon zinc manufacturing plants was completed in the fourth quarter of Ã'scal 2001. Energizer also reviewed its worldwide operations in light of...

  • Page 37
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ÃŒ (Continued) (Dollars in millions except per share data) The following table presents, by major cost component and by year of provision, activity related to the restructuring charges discussed above during Ã'scal years 2001, 2000 and 1999, including any ...

  • Page 38
    ...Dollars in millions except per share data) (7) Income Taxes Prior to spin-oÃ..., U.S. income tax payments, refunds, credits, provision and deferred tax components have been allocated to Energizer...September 30: 2001 Consolidated 2000 Continuing Operations 1999 Continuing Operations Total Total ...

  • Page 39
    ... operations is higher than the federal statutory rate in 1999 due to state income taxes. The deferred tax assets and deferred tax liabilities recorded on the balance sheet as of September 30 are as follows: 2001 2000 Deferred tax liabilities: Depreciation and property diÃ...erences Pension plans...

  • Page 40
    ...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 the distribution of one share of Energizer stock for each three shares of Ralston stock) and the...

  • Page 41
    ... which may be granted under the Plan, at the 2001 Annual Meeting of Shareholders. Under the Plan, awards to purchase shares of Energizer's common stock (ENR stock) may be granted to directors, oÇcers and key employees. A maximum of 15.0 million shares of ENR stock was approved to be issued under...

  • Page 42
    ... crediting for employees. Amounts deferred into the Energizer Common Stock Unit Fund, and vested company matching deferrals, may be transferred to other investment options oÃ...ered under the plan. At the time of termination of employment, or for directors, at the time of termination of service on the...

  • Page 43
    ... weighted-average remaining contractual life for both the shares outstanding and exercisable at September 30, 2001 was 8.7 years. (10) Pension Plans and Other Postretirement BeneÃ'ts Energizer has several deÃ'ned beneÃ't pension plans covering substantially all of its employees in the United States...

  • Page 44
    ... share data) The following tables present the beneÃ't obligation and funded status of the plans for the periods subsequent to the spin-oÃ.... September 30, Pension Postretirement 2001 2000 2001 2000 Change in BeneÃ't Obligation: BeneÃ't obligation at beginning of year (1 Service cost Interest cost...

  • Page 45
    ... in the table below. Prior to the spin-oÃ..., Ralston provided health care and life insurance beneÃ'ts for certain groups of retired Energizer employees. The cost of these beneÃ'ts was allocated to Energizer based on Energizer's percentage of the total liability related to these beneÃ'ts. Ralston also...

  • Page 46
    ..., participants can make after-tax contributions of 1% of compensation into the savings plan. This participant after-tax contribution is matched within the pension plan at 325%. Amounts charged to expense during Ã'scal 2001 were $3.8. Subsequent to the spin-oÃ... from Ralston, Energizer charged $1.8 to...

  • Page 47
    ... entity having a value equal to twice the exercise price. If Energizer transfers 50% or more of its assets or earnings power to any other person or group after the Rights become exercisable, a holder of a Right may purchase, at the exercise price, common stock of the acquiring entity having a value...

  • Page 48
    ... not anticipated due to the control features mentioned. Energizer sells to a large number of customers primarily in the retail trade, including those in mass merchandising, drugstore, supermarket and other channels of distribution throughout the world. Energizer performs ongoing evaluations of its...

  • Page 49
    ... Ã" 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, air and water...

  • Page 50
    ... Proceedings Ã" Energizer previously disclosed that Zinc Products Company, a division of Alltrista Corp., a supplier of zinc cans used in the manufacture of batteries, Ã'led suit against Energizer, claiming breach of contract when Energizer closed its Fremont, Ohio plant. In January of 2001, the...

  • Page 51
    ... FINANCIAL STATEMENTS Ì (Continued) (Dollars in millions except per share data) (19) Supplemental Financial Statement Information 2001 2000 Supplemental Balance Sheet Information: Inventories Raw materials and supplies Work in process Finished products Total Inventories Other Current Assets...

  • Page 52
    ... taxes paid 20) Segment Information $36.1 83.1 $19.5 86.5 $11.7 44.0 Energizer manufactures and markets dry cell batteries including alkaline, carbon zinc, miniature and specialty batteries, and Ã-ashlights and other lighting products throughout the world. Operations are managed via four major...

  • Page 53
    ...) (Dollars in millions except per share data) 2001 2000 1999 Operating ProÃ't before Restructuring Charges, Amortization and Unusual Items North America Asia PaciÃ'c Europe South and Central America Total segment proÃ'tability General corporate expenses Research and development expense...

  • Page 54
    ... $ 863.2 $ 972.4 906.1 $1,878.5 $ 404.6 387.9 $ 792.5 Supplemental product information is presented below for revenues from external customers. 2001 2000 1999 Net Sales Alkaline Batteries Carbon Zinc Batteries Lighting Products Miniature Batteries Other Total Net Sales $1,124.5 263.4 114...

  • Page 55
    ... FINANCIAL STATEMENTS ÃŒ (Continued) (Dollars in millions except per share data) (21) Quarterly Financial Information ÃŒ (Unaudited) The results of any single quarter are not necessarily indicative of Energizer's results for the full year. Net earnings of Energizer are signiÃ'cantly impacted in the...

  • Page 56
    ... prior to the spin-oÃ..., 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. (22) Pro Forma Financial Results...

  • Page 57
    ... of Director costs, stock exchange registration fees, shareholder record keeping services, external Ã'nancial reporting, treasury services, tax planning and compliance, certain legal expenses, and compensation planning and administration. (b) To adjust pension income on plan assets transferred to...

  • Page 58
    ... of Director costs, stock exchange registration fees, shareholder record keeping services, external Ã'nancial reporting, treasury services, tax planning and compliance, certain legal expenses, and compensation planning and administration. (b) To adjust pension income on plan assets transferred to...

  • Page 59
    ... share data) (g) To reÃ-ect tax eÃ...ect of the above pro forma adjustments. (h) The number of shares used to compute earnings per share is based on the weighted-average number of basic shares of Ralston stock outstanding during the period adjusted for the distribution of one share of Energizer stock...

  • Page 60
    Energizer Holdings, Inc. 533 Maryville University Dr. St. Louis, Missouri 63141 (314) 985-2000 www.energizer.com