Energizer 2002 Annual Report Download - page 13

The impact of the synchronization on fiscal 2000 results was to
decrease sales by $28.4 to $1,899.3 and net earnings by $9.0 to
$171.2. The impact of the synchronization on fiscal 2000 reported
earnings per share was a decrease of $.09 per share.
Highlights
Net earnings for the year ended September 30, 2002 were $186.4 com-
pared to a loss of $39.0 in 2001 and net earnings of $181.4 in 2000.
Basic and diluted earnings per share in 2002 were $2.05 and $2.01,
respectively, compared to a loss of $.42 per share in 2001 and basic
and diluted earnings per share of $1.89 and $1.88 in 2000, respectively.
Current year net earnings include the following items, stated on an
after-tax basis: accounts receivable write-off associated with the bank-
ruptcy of Kmart of $9.3, provisions for restructuring and related costs of
$7.8, tax benefits related to prior years’ losses of $6.7 and a gain on the
sale of property of $5.0. Fiscal 2001 results included the following after-
tax items: a provision for goodwill impairment of $119.0, restructuring of
$19.4 and amortization of goodwill and other intangible assets of $15.1,
which is no longer required under accounting rules adopted in fiscal
2002, as well as intellectual property rights income of $12.3. Fiscal
2000 results include after-tax charges of $3.3 related to the spin-off,
$15.7 loss on the disposition of Energizer’s Spanish affiliate and amorti-
zation of goodwill and other intangible assets of $16.6, which is no
longer required under accounting rules adopted in fiscal 2002, as well
as capital loss tax benefits of $24.4.
Fiscal 2000 results include a net gain on disposition of discontinued
operations of $1.2, or $.01 per share, related to the final settlement of
the sale of discontinued operations.
All statement of earnings-related discussions comparing fiscal 2001
to fiscal 2000 below refer to comparisons using synchronized fiscal
2000 results.
Operating Results
Net Sales
Net sales increased $45.5, or 3%, in 2002 compared to 2001 on higher
volume. Favorable pricing and product mix was substantially offset by
currency devaluation. Net sales decreased $205.1, or 11%, in 2001
compared to 2000 with unfavorable pricing and product mix, lower vol-
umes and currency devaluation each accounting for about one-third of
the decline. See comments on sales changes by region in the Segment
Results section below.
Gross Margin
Gross margin dollars increased $80.8, or 12%, in 2002 on lower
product costs and higher sales. Gross margin percentage improved
3.6 percentage points in 2002 to 44.6% of sales. Gross margin percent-
age increased in all segments due to lower product cost. Gross margin
dollars decreased $172.0, or 20%, in 2001 primarily on lower sales in
North America and Asia Pacific. Gross margin percentage declined
4.7 percentage points in 2001 to 41.0% on lower sales.
All geographic segments benefited in 2002 from lower material and
variable costs, the impact of restructuring activities undertaken in 2001
and improved plant operating levels. In 2001, product costs were unfa-
vorable compared to 2000, primarily due to lower plant operating levels.
Selling, General and Administrative
Selling, general and administrative expense decreased $13.3, or 4%, in
2002 on lower overhead costs in North America, Asia Pacific, and South
and Central America and the absence of goodwill and intangible amorti-
zation, which is no longer amortized as of 2002 due to the adoption of
new accounting rules, partially offset by higher corporate expenses and
a $15.0 write-off of Kmart pre-bankruptcy accounts receivable. Selling,
general and administrative expense decreased $24.5, or 7%, in 2001
compared to 2000 on lower corporate, Asia Pacific and Europe
expenses. Selling, general and administrative expenses were 17.6%,
18.9% and 18.2% of sales in 2002, 2001 and 2000, respectively.
Advertising and Promotion
Advertising and promotion expense decreased $9.1 in 2002 and $31.1
in 2001 on lower spending in all regions. Advertising and promotion as
a percent of sales was 7.2%, 7.9% and 8.7% in 2002, 2001 and 2000,
respectively.
Segment Results
Energizer’s operations are managed via four major geographic areas –
North America (the United States, Canada and Caribbean), Asia Pacific,
Europe, and South and Central America (including Mexico). Prior to fiscal
2002, each segment reported profit from its intersegment sales in its own
segment results. Changes in intersegment profit captured in inventory and
not yet sold to outside customers were recorded in general corporate
expenses. Due to increased levels of intersegment sales related to produc-
tion consolidation and in light of Energizer’s current management objectives
and structure, Energizer believes the exclusion of intersegment profit in
segment results is a more appropriate view of its operating segments.
Beginning in fiscal 2002, Energizer reported segment results reflecting
all profit derived from each outside customer sale in the region in which
the customer is located. Profit on sales to other segments will no longer
be reported in the selling region. As a result, segments with manufac-
turing capacity that are net exporters to other segments will show
lower segment profit than in the past. Segments that are net importers
of Energizer-manufactured product will show higher segment profit than
in the past.
ENR 2002 Annual Report Page 11