Energizer 2003 Annual Report Download - page 4

Our focus remains on maximizing operating cash flow and delivering
consistent year-over-year EPS gains. We believe in maintaining a strong
balance sheet, but as in the case of the SWS acquisition, we are
willing to invest in opportunities that promise a good return.
FY 2003 FINANCIAL RESULTS
For our fiscal year ended September 30, 2003, net earnings, excluding
the SWS inventory write-up, climbed 22 percent to $228.2 million
compared to $186.4 million the prior year with earnings per share for
the year rising 29 percent to $2.59 from $2.01 the year before.
*Our
initiatives to improve performance have resulted in eight quarters of
year-over-year EPS improvements.*
SWS ACQUISITION
On March 28, 2003, we acquired the worldwide Schick-Wilkinson
Sword (SWS) business from Pfizer Inc. for $930 million, plus acquisi-
tion costs and certain adjustments. We financed the purchase using
available credit facilities and cash, plus a $550 million bridge loan
which we subsequently refinanced to longer-term vehicles which pro-
vide significant flexibility to our operations in the future. For our fiscal
2003, SWS sales totaled $745 million with segment operating profit of
$57 million on a pro forma basis. Since we were able to finance the
transaction at historically low interest rates, the acquisition was imme-
diately accretive to fiscal 2003 results, adding 15 cents per share,
excluding the impact of the inventory write-up.
Simply put, the acquisition gives us two world-class brands that fit
perfectly into Energizer Holdings, Inc. and two strong, complementary
businesses as illustrated in the accompanying table. We saw SWS as a
highly attractive business in a category with stable margins and growing
sales, as well as a limited number of manufacturers and a high degree of
consumer loyalty. Of course, we were also very excited about the two
new products SWS launched in 2003 – Intuition™, the world’s first
all-in-one shaving system for women, and QUATTRO™, the world’s first
four-bladed razor providing an incredibly close and smooth shave.
The similarities between our two companies are striking – we have like
cultures, deal in consumer packaged goods and operate globally. The
potential for strategic synergies is significant, including common purchas-
ing and shared management initiatives, moving selected SWS products
through the Energizer distribution system and leveraging our top-to-top
industry relationships. Similarities and common characteristics should
provide the potential to leverage Energizer’s marketing expertise, business
Batteries and Razors and
(fiscal 2003, pro forma) Lighting Products Blades
Sales $1.8 billion $745 million
Global Market Share No. 2 No. 2
Segment Operating Margins 21% 8%
Distribution Over 150 countries Over 80 countries
Key Strengths Strong, stable Opportunity for
cash flows sales/margin
improvement
Page 2 ENR 2003 ANNUAL REPORT
LETTER TO OUR SHAREHOLDERS …
FISCAL 2003 WAS A GOOD YEAR AT ENERGIZER. THE
COMPANY CONTINUED TO GROW PROFITS IN BATTERIES,
MAINTAINING THE EARNINGS MOMENTUM ESTABLISHED
IN 2002 … AND IN MARCH, THE COMPANY ACQUIRED THE
SCHICK-WILKINSON SWORD (SWS) RAZOR AND BLADE
BUSINESS. WE BELIEVE THE ACQUISITION OF SWS ADDS
ASUBSTANTIAL GROWTH VEHICLE FOR THE COMPANY.
STRONG, COMPLEMENTARY BUSINESSES
J. PATRICK MULCAHY, Chief Executive Officer
*Net earnings and earnings per share exclude the SWS inventory write-up as noted on the inside front cover.