Energizer 2001 Annual Report Download - page 13

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 management 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-oÅ.
Financial statements as of and for periods after the spin-oÅ are 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-
oÅ and the consolidated results of operations of Energizer on a stand-alone basis for the six months ended
September 30, 2000. The Ñnancial statements for 1999 are presented on a combined basis and reÖect periods
during which the Energizer businesses operated as wholly owned subsidiaries of Ralston. Financial statements
for periods prior to the spin-oÅ do 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 the Pro Forma Statement of Earnings for the years ended September 30, 2000
and 1999 in Note 22 to the Consolidated Financial Statements.
BUSINESS OVERVIEW
Energizer is the world's largest publicly traded manufacturer of primary batteries and Öashlights 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 e2, Energizer
and Eveready, as well as miniature and rechargeable batteries, and Öashlights and other lighting products.
Energizer and its subsidiaries operate 22 manufacturing and packaging facilities in 15 countries on four
continents. Its products 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 in consumer preference from carbon zinc batteries to alkaline batteries.
As a result, Energizer has continually reassessed its production capacity with respect to both types of batteries
and has recorded provisions related to restructuring its worldwide battery production capacity and certain
administrative functions in 2001 and 1999. Alkaline batteries are now the dominant primary battery in all
world areas with the exception of Asia and Africa. Energizer will continue 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 Ó North America (the United States,
Canada and Caribbean), Asia PaciÑc, Europe, and South and Central America (including Mexico). Segment
proÑt and sales are concentrated in the North America and Asia PaciÑc areas which together account for 98%
and 77%, respectively, of 2001 segment proÑt 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. As measured by
A.C. Nielsen, Energizer's dollar share of the U.S. primary battery market was 32.4% in 2001, 33.5% in 2000
and 32.0% in 1999. However share for the fourth quarter of 2001 declined to 30.0% as competition in the
United States has intensiÑed.
The primary battery category declined in calendar 2000 and 2001 after unprecedented growth levels
immediately prior to the January 1, 2000 date change due to increased demand from retail customers and
consumers in anticipation of potential disruptions related to the date change. Retail inventory levels at
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