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ENERGIZER HOLDI NGS, INC.
2004 Annual Report

Table of contents

  • Page 1
    ...2004 Annual Repor t Keep going and keep growing. Keep going and keep growing. Keep going and keep growing.Keep going and keep growing.Keep going and keep growing. Keep going and keep growing. Keep going and keep growing. Keep going and keep growing. Keep going and keep growing. Keep going and keep...

  • Page 2
    ... on the New York Stock Exchange under the ENR symbol. Energizer is one of the world's largest manufacturers of primary batteries and flashlights and a global leader in the dynamic business of providing portable power. I n addition, Energizer is the parent company of SchickWilkinson Sword (SWS), the...

  • Page 3
    ... customers proven category management solutions to build their businesses and maximize profitability. And to keep rewarding shareholders with sustained earnings growth and steadily improved value. Batteries and Lighting Products PAGE 4 Razors and Blades PAGE 6 Directors, Officers and Corporate...

  • Page 4
    ... of Schick-Wilkinson Sword (SWS) in March 2003, Energizer today operates two strong, complementary global businesses, each boasting a pair of widely recognized, world-class brands and comprehensive product portfolios. While solidly positioned in separate categories of consumer packaged goods, our...

  • Page 5
    ..., and Joe Lynch, who remains president and chief executive officer of SWS worldwide. These seasoned, highly successful executives, together with our proven team of officers and senior managers, will keep this company going and growing well into the future. I n Conclusion We have world class brands...

  • Page 6
    ... and price segments; specialty batteries; and lighting products. Household Batteries. Energizer ® MAX® , our premium battery offering, is for today's high-drain devices. During 2004, we introduced 2500 mAh NiMH AA batteries, the hardest-working rechargeable in high-tech devices, packaged with...

  • Page 7
    ... packaging and national television spots. Household Specialty Lighting Products Visit www.energizer.com Premium Performance Price Photo for product details, plus battery/flashlight facts, history and more. Quick Switch Flashlight Performance Performance Price Hearing Aid Batteries ENR 2004...

  • Page 8
    ... Women's Systems Disposables QUATTRO® Xtreme 3 ® I ntuition® Lady Protector ™ Xtreme 3 ® Disposable Visit www.shaving.com for product details, plus shaving tips, facts and history. Protector ™ I ntuition® Refills Silk Effects® Plus Schick® ST ® 6 ENR 2004 Annual Repor t

  • Page 9
    Razors and Blades Schick-Wilkinson Sword (SWS), acquired by Energizer in March 2003, ranks as the world's second largest manufacturer and marketer of wet shave products for men and women with two globally recognized brands. Among the fastestgrowing consumer product segments, the wet shave market is ...

  • Page 10
    ... University Dr. St. Louis, Missouri 63141 (314) 985-2000 www.energizer.com Common Stock I nformation The table below sets for the fiscal quarter indicated the repor ted high and low sale prices of the Company's common stock, as repor ted on the New York Stock Exchange. Fiscal 2004 First Quar ter...

  • Page 11
    ...I ON S A N D F I N A N CI A L CON DI T I ON | 2 0 SU M M A RY SE L E CT E D H I ST ORI CA L F I N A N CI A L I N F ORM AT I ON | 2 1 RE SP ON SI B I L I T... A N CI A L STAT E M E N T S | 2 6 N OT E S T O CON SOL I DAT E D F I N A N CI A L STAT E M E N T S Financial Results ENR 2004 Annual Repor t 9

  • Page 12
    ... continue to play a major role in less developed countries throughout the world and offer Energizer market position in those countries. Energizer uses its full portfolio of products to meet consumer needs. Energizer operates 2 0 manufacturing and packaging facilities in 1 4 countries on four...

  • Page 13
    ...of world battery and lighting products) and Razors and Blades (global razors, blades and related products). The Company reports segment results reflecting all profit derived from each outside customer sale in the region in which the customer is located. Research and development costs for the battery...

  • Page 14
    ...&A, advertising and promotion, and product costs. Net sales in 2 0 0 3 increased $ 2 0 .7 , or 2 %, versus 2 0 0 2 on higher volume, much of which is attributable to previously mentioned hurricane and blackout, partially offset by unfavorable pricing and product mix. Small cell size alkaline volume...

  • Page 15
    ... certain European selling, management, administrative and packaging activities. The total cost of this plan was $6.7 before taxes. These restructuring charges consist of $5.2 for cash severance payments, $1.0 of other 2003 2002 PRO FORMA cash charges and $0.5 in enhanced pension benefits. As of...

  • Page 16
    ... in the U.S., of which 3 2 1 employees accepted. A charge of $ 1 5 .2 , pre-tax, was recorded during the fourth quarter of fiscal 2 0 0 4 related to the VERO and certain other special pension benefits and the estimated impact of such benefits on the Company's pension plan is reflected in the amounts...

  • Page 17
    ... yield has declined since issuance. The Company purchased shares of its common stock under various Board of Director approved repurchase plans as follows (shares in millions): FI SCAL YEAR SHARES COST 2004 2003 2002 2001 13.4 5.0 3.8 3.8 $ 546.7 $ 131.4 $ 103.3 $ 79.6 ENR 2004 Annual Repor t 15

  • Page 18
    ...used in the Company's products has increased to levels well above those of 2 0 0 4 . The Company's ability to fully mitigate such cost increases through cost cutting and productivity or to raise prices in the future are not certain. tion of the costs of such activities among the PRPs and other site...

  • Page 19
    ...subsidiary sufficient to repay all U.S. dollar liabilities in order to mitigate exposure to currency exchange losses. Stock Price A portion of the Company's deferred compensation liabilities is based on the Company's stock price and is subject to market risk. The Company ENR 2004 Annual Repor t 17

  • Page 20
    ... reduce the ultimate consumer sale prices are recorded as a reduction of net sales at the time the promotional offer is made, generally using estimated redemption and participation levels. The Company continually assesses the adequacy of accruals for customer and consumer 18 ENR 2004 Annual Repor t

  • Page 21
    ... in various markets, Energizer's positioning to meet consumer demand and the benefits of its portfolio of products, the Company's assessment of the wet shave products category and the SWS business, the potential for future restructuring activity, the timing and amount of future cost savings from...

  • Page 22
    ... 77.9 58.6 1,497.6 225.0 $ 401.7 485.4 72.8 57.9 1,793.5 370.0 (a) Schick-Wilkinson Sword was acquired March 2 8 , 2 0 0 3 . See Note 3 to the Consolidated Financial Statements. (b) Energizer adopted Statement of Financial Accounting Standards 1 4 2 at the beginning of fiscal year 2 0 0 2 , which...

  • Page 23
    ... the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP St. Louis, Missouri November 1 5 , 2 0 0 4 ENR 2004 Annual...

  • Page 24
    ...D COM PRE H E N SI V E I N COM E (Dollars in millions, except per share data) STAT E M E N T OF E ARN I N GS Y E AR E N DE D SE P T E M BE R 3 0 , 2004 2003 2002 Net sales Cost of products sold Selling, general and administrative expense Advertising and promotion expense Research and development...

  • Page 25
    ... par value, none outstanding Common stock $.01 par value, issued 97,048,682 and 96,570,557 at 2004 and 2003, respectively Additional paid-in capital Retained earnings Common stock in treasury, at cost, 24,146,236 shares at 2004 and 11,492,798 shares at 2003 Accumulated other comprehensive loss Total...

  • Page 26
    ...: Depreciation and amortization Translation and exchange (gain)/loss Deferred income taxes Other non-cash charges Other, net Operating cash flow before changes in working capital Changes in assets and liabilities used in operations: Increase in accounts receivable, net (Increase)/decrease in...

  • Page 27
    ...stock purchased Activity under stock plans Ending balance Accumulated other comprehensive (loss)/income: Cumulative translation adjustment: Balance at beginning of year Foreign currency translation adjustment Ending Balance Minimum pension... Financial Statements. ENR 2004 Annual Repor t 25

  • Page 28
    ... and, to a lesser extent, to manage other transla- intangibles are not amortized, but are evaluated annually for impairment as part of the Company's annual business planning cycle in the fourth quarter. The fair value of each reporting unit is estimated using the 26 ENR 2004 Annual Repor t

  • Page 29
    ... of future calculations. 2004 its products through national and regional media and expenses such activities in the year incurred. Due to seasonality in the battery business and heavy product launches in the razors and blade business, advertising and promotion costs are expensed ratably to...

  • Page 30
    ...price and acquisition costs totaled $ 9 7 5 .8 . A $ 5 5 0 .0 bridge loan together with existing available credit facilities and cash were used to fund the acquisition. In 2 0 0 3 , the Company refinanced the bridge loan into longer term financing. SWS is the second largest manufacturer and marketer...

  • Page 31
    ... recorded restructuring charges of $ 0 .4 . The 2 0 0 1 restructuring plans improved the Company's operating efficiency, downsized and centralized corporate functions, and decreased costs. One carbon zinc production facility in Mexico was closed in early 2 0 0 2 . A total of 5 3 9 employees...

  • Page 32
    ...to develop alternative manufacturing methods. Additionally, the Company recorded a $ 1 .9 pre-tax asset impairment charge in 2 0 0 4 in cost of products sold for impaired assets used to into the Company's financial statements. As part of its business planning cycle, the Company performed its annual...

  • Page 33
    During 2 0 0 3 , the Company recorded goodwill related to the SWS acquisition of $ 2 8 1 .6 . The following table represents the carrying amount of goodwill by segment at September 3 0 , 2 0 0 4 : North America Battery I nternational Battery Razors and Blades Total Balance at October 1, 2003 ...

  • Page 34
    ... which may be granted under the Plan, at the 2 0 0 1 Annual Meeting of Shareholders. Under the Plan, awards to purchase shares of the Company's common stock (ENR stock) may be granted to directors, officers and key employees. A maximum of 1 5 .0 million shares of ENR stock was approved to be issued...

  • Page 35
    ... and salary and, for directors, retainers and fees, under the terms of its Deferred Compensation Plan. Under this plan, employees or directors deferring amounts into the Energizer Common Stock Unit Fund are credited with a number of stock equivalents based on the fair value of ENR stock at the time...

  • Page 36
    ..., plan assets and funded status of the plans: Pension Postretirement SEPTEM BER 30, 2004 2003 2004 2003 CH AN GE I N PROJE CT E D BE N E F I T OBL I GAT I ON Benefit obligation at beginning of year Service cost Interest cost Plan participants' contributions Actuarial (gain)/loss Benefit...

  • Page 37
    ...assets in all of the Company's defined benefit pension plans. Investment policy for the U.S. plan includes a mandate to diversify assets and invest in a variety of asset classes to achieve that goal. The U.S. plan's assets are currently invested in several funds representing most standard equity and...

  • Page 38
    ...Company prepaid $ 1 6 0 .0 in long-term debt with interest rates ranging from 7 .8 % to 8 .0 % and maturity dates in 2 0 0 5 , 2 0 0 7 and 2 0 1 0 . The payment of the debt was funded with short-term borrowings and available cash. In September 2 0 0 3 , the Company recorded a $ 2 0 .0 pre-tax charge...

  • Page 39
    ... equal to twice the exercise price. If the Company transfers 5 0 % 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 equal to twice the...

  • Page 40
    ... the long-term debt is estimated using yields obtained from independent pricing sources for similar types of borrowing arrangements. The fair value of foreign currency contracts is the amount that the Company would receive or pay to terminate the contracts, considering first, quoted market prices of...

  • Page 41
    ...appealed this decision to the U.S. Court of Appeals for the Federal Circuit. In December 2 0 0 3 , the Gillette Company amended its original complaint to add allegations that QUATTRO infringes three additional Gillette patents involving the system's tray and handle grips. ENR 2004 Annual Repor t 39

  • Page 42
    ... suit alleges that the manufacture and sale of the Wilkinson Sword QUATTRO razor in Germany infringes a Gillette patent covering the razor described above, are in preliminary stages and involve complex issues of law and fact, and may proceed for protracted periods of time. The amount of liability...

  • Page 43
    ....1 637.9 $ 701.2 OT H E R ASSE T S Pension asset Deferred charges and other assets Total other assets $ $ 1 0 9 .5 5 4 .5 1 6 4 .0 $ 117.3 31.5 $ 148.8 OT H E R CU RRE N T L I ABI L I T I E S Accrued advertising, promotion and allowances Accrued salaries, vacations and incentive compensation...

  • Page 44
    ...of world battery and lighting products) and Razors and Blades (global razors, blades and related products). The Company reports segment results reflecting all profit derived from each outside customer sale in the region in which the customer is located. Research and development costs for the battery...

  • Page 45
    ...P ROF I TABI L I T Y North America Battery International Battery R&D Battery Total Battery Razors and Blades Total segment profitability General corporate and other expenses Provisions for restructuring and other related costs Special pension termination benefits Acquisition inventory valuation Gain...

  • Page 46
    ... States Germany Other International Total long-lived assets $ $ 5 4 8 .2 1 2 1 .0 2 0 0 .4 8 9 6 .6 $ 1 ,3 3 8 .1 1 ,4 7 4 .6 $ 2 ,8 1 2 .7 Net Sales $ 1,159.7 1,072.8 $ 2,232.5 $ 963.8 775.9 $ 1,739.7 Alkaline batteries Carbon zinc batteries Other batteries and lighting products Razors and blades...

  • Page 47
    ...nc. © 2004 Energizer 533 M aryville University Dr. St. Louis, M issouri 63141 314.985.2000 www.energizer.com Energizer, Schick, the Energizer Bunny design and other marks are trademarks of Eveready Battery. growing. Keep going and keep growing. Keep going and keep growing. Keep going and keep...