Energizer 2001 Annual Report Download - page 17

Segment proÑt for South and Central America decreased $2.4, or 17%, in 2000 as higher marketing,
distribution and management costs were partially oÅset by the gross margin increase.
General Corporate Expenses
General corporate expenses decreased $16.2 in 2001 compared to 2000 due to lower incentive and stock
compensation costs, higher pension income, and favorable proÑt-in-inventory adjustments associated with
decreased intercompany inventory levels, partially oÅset by higher management costs, including the incremen-
tal costs of operating as a stand-alone company for a full year, compared to six months in Ñscal 2000. General
corporate expenses decreased $16.6 in 2000 due to higher pension income and lower consulting, reorganization
and information systems costs, as well as a lighting product recall charge in 1999. These costs were partially
oÅset by additional costs of operating as a stand-alone company for the last six months of Ñscal 2000. As a
percent of sales, general corporate expenses were 1.2% in 2001, 1.9% in 2000 and 2.9% in 1999.
Research and Development Expense
Research and development expense was $46.4 in 2001, $49.9 in 2000 and $48.5 in 1999. Energizer strives
to maintain technological leadership in the primary battery business. Research and development costs were
slightly higher in 2000 and 1999 due to increased activity related to Energizer e2. As a percent of sales,
research and development expense was 2.7% in 2001 and 2.6% in 2000 and 1999.
Goodwill Impairment Charge
Energizer monitors changing business conditions, which may indicate that the remaining useful life of
goodwill and other intangible assets may warrant revision, or carrying amounts may require adjustment.
Continuing unfavorable business trends in Europe, and the unfavorable costs of U.S. dollar-based products
resulting from currency declines, represent such conditions. As part of its annual business planning cycle,
Energizer performed a thorough evaluation of its European business in the fourth quarter of Ñscal 2001, which
resulted in an impairment charge for $119.0 of related goodwill. At September 30, 2001, the carrying amount
of goodwill related to Energizer's European business was $8.5.
Restructuring Charges
Energizer recorded restructuring charges each year from 1994 through 1999, and in 2001. These charges
included 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 eÇcient locations in
an eÅort to achieve lower product costs, and staÇng reorganizations and reductions in various world areas to
enhance management eÅectiveness and reduce overhead costs. A detailed discussion of such charges and
expenditures during 1999 through 2001 follows.
Because there continues to be a migration 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 Ñscal 2001. Energizer also reviewed its worldwide
operations in light of competitive market conditions and available technologies and techniques, and is
adjusting its organization accordingly. As a result, Energizer adopted restructuring plans to eliminate carbon
zinc capacity, and to reduce and realign certain selling, production, research and administrative functions. The
total cost associated with this plan is expected to be $35.6 before taxes, of which $29.8 ($19.4 after-taxes, or
$.21 per share) was recorded in the fourth quarter, with the remainder expected to be recorded in the Ñrst
quarter of Ñscal 2002.
These restructuring activities are expected to improve the Company's operating eÇciency, downsize and
centralize corporate functions, and decrease costs. The plans will result in the closure of one carbon zinc
production facility in South and Central America, and the severance of 570 employees, consisting of 375
production and 195 sales, research and administrative employees, primarily in the United States and South
and Central America.
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