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Energizer Holdings, Inc.
2005 Annual Report
Structured
for Success
Our Culture. Our Brands. Our Operations.

Table of contents

  • Page 1
    Structured for Success Our Culture. Our Brands. Our Operations. Energizer Holdings, Inc. 2005 Annual Report

  • 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. In addition, Energizer is the parent company of Schick-Wilkinson Sword (SWS), the...

  • Page 3
    ... by universally recognized, world-class brands - Energizer ® and Eveready ® primary batteries and flashlights, and Schick-Wilkinson Sword shaving systems for men and women. Batteries and Lighting Products Razors and Blades Page 4 Page 6 Marketing products that make life more livable for consumers...

  • Page 4
    ...cash flows, and Razors and Blades focuses on delivering organic top-line growth through innovation and the opportunity for margin improvement. Batteries and Lighting Products. Capitalizing on the industry's most comprehensive product line with two world-class brands - Energizer® and Eveready® - we...

  • Page 5
    ... Vice President Chief Financial Officer Ward M. Klein Chief Executive Officer Joseph E. Lynch President and Chief Executive Officer, Schick-Wilkinson Sword Gayle G. Stratmann Vice President and General Counsel Joseph W. McClanathan President and Chief Executive Officer, Energizer Battery Peter...

  • Page 6
    ... alkaline and rechargeable round cells specifically designed for today's emerging digital devices. Energizer leads growth in this sub-segment with performance brand sales up 44 percent at year-end. Energizer® e2® Lithium is the world's longest lasting AA and AAA battery in high-tech devices...

  • Page 7
    ...vary by camera. Lighting Products Under the Energizer® and Eveready® brands, we offer a full line of flashlights and lanterns for home, work and outdoor use. In 2005, we successfully launched an innovative six-LED headlight with multiple light output and sleek design. Through our Disney licensing...

  • Page 8
    ...dark razor design and soft, ripple grip, was followed by the launch of the new QUATTRO® Power™ in September 2005. The battery-operated QUATTRO® Power™ combines our proven four-blade technology with a vibrating head and added high-tech benefits to deliver a close, comfortable shave. SWS markets...

  • Page 9
    ... and Marketing The "Day & Night" TV campaign launched in December 2004 introduced the QUATTRO® Midnight® razor. The true test of a great shave is how smooth a man is at the end of the day. The advertising brought this insight to life by presenting QUATTRO® Midnight™ as the razor that keeps guys...

  • Page 10
    ...Schick-Wilkinson Sword David P. Hatfield* Executive Vice President Chief Marketing Officer Peter J. Conrad* Vice President, Human Resources Corporate Information Corporate Headquarters Energizer Holdings, Inc. 533 Maryville University Dr. St. Louis, Missouri 63141 (314) 985-2000 www.energizer.com...

  • Page 11
    ...Discussion and Analysis of Results of Operations and Financial Condition Summary Selected Historical Financial Information Responsibility for Financial Statements Report of Independent Registered Public Accounting Firm Consolidated Financial Statements Notes to Consolidated Financial Statements Page...

  • Page 12
    .... The Company includes the battery business (Energizer) and the razors and blades business (Schick-Wilkinson Sword, or SWS). This discussion should be read in conjunction with the Consolidated Financial Statements and related notes. Battery Business Overview Energizer is one of the world's largest...

  • Page 13
    ... Operations for the Company are managed via three major segments - North America Battery (U.S. and Canada battery and lighting products), International Battery (rest of world battery and lighting products) and Razors and Blades (global razors, blades, and related products). The Company reports...

  • Page 14
    ... Report ENERGIZER HOLDINGS, INC. Management's Discussion and Analysis of Results of Operations and Financial Condition (Dollars in millions, except per share and percentage data) battery and razor and blades businesses, varying by country and region of the world. Shared functions include product...

  • Page 15
    .... A charge of $15.2, pre-tax, was recorded in fiscal 2004 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 shown in Note 10 to the Consolidated Financial Statements. Future cost savings...

  • Page 16
    ... Annual Report ENERGIZER HOLDINGS, INC. Management's Discussion and Analysis of Results of Operations and Financial Condition (Dollars in millions, except per share and percentage data) In 2005, 2004 and 2003, $14.7, $16.2 and $12.2, respectively, of tax benefits related to prior years' losses...

  • Page 17
    ... portable power and spike battery sales. Environmental Matters The operations of the Company, like those of other companies engaged in the battery and shaving products businesses, are subject to various federal, state, foreign and local laws and regulations intended to protect the public health and...

  • Page 18
    16 ENR 2005 Annual Report ENERGIZER HOLDINGS, INC. Management's Discussion and Analysis of Results of Operations and Financial Condition (Dollars in millions, except per share and percentage data) The Nestle Corporation, Ralston's successor is obligated to indemnify the Company for 50% of any ...

  • Page 19
    ... in fair value of the prepaid share option for the year ended September 30, 2005 and 2004 resulted in income of $5.4 and $8.8, respectively. Business Realignment Energizer continually reviews its battery and razor and blades business model, including its product supply chain, sales, marketing and...

  • Page 20
    ... to meet consumer demand and the benefits of its portfolio of products, the Company's assessment of the wet shave products category and the ability of the SWS business to increase sales and margins, the potential for future restructuring activity, the unfavorability of product costs in the...

  • Page 21
    ... 40.7 57.4 1,588.1 160.0 $ 288.1 476.1 77.9 58.6 1,497.6 225.0 (a) Schick-Wilkinson Sword was acquired March 28, 2003. See Note 3 to the Consolidated Financial Statements. (b) Energizer adopted Statement of Financial Accounting Standards 142 at the beginning of fiscal year 2002, which eliminated...

  • Page 22
    ... Energizer Holdings, Inc. are the responsibility of its management. These statements have been prepared in conformance with generally accepted accounting principles in the United States of America, and in the opinion of management, fairly present Energizer's financial position, results of operations...

  • Page 23
    ... of their operations and their cash flows for each of the three years in the period ended September 30, 2005 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management. Our responsibility...

  • Page 24
    ... millions, except per share data) Statement of Earnings YEAR ENDED SEPTEMBER 30, 2005 2004 2003 Net sales Cost of products sold Selling, general and administrative expense Advertising and promotion expense Research and development expense Intellectual property rights income Interest expense Other...

  • Page 25
    ENR 2005 Annual Report 23 ENERGIZER HOLDINGS, INC. Consolidated Balance Sheet (Dollars in millions, except per share data) SEPTEMBER 30, 2005 2004 Assets Current assets Cash and cash equivalents Trade receivables, net Inventories Other current assets Total current assets Property, plant and ...

  • 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
    ENR 2005 Annual Report 25 ENERGIZER HOLDINGS, INC. Consolidated Statement of Shareholders Equity (Dollars in millions, shares in thousands) Dollars Shares 2005 2004 2003 2005 2004 2003 Common stock: Balance at beginning of year Activity under stock plans Ending balance Additional paid-in ...

  • Page 28
    ... in earnings. Gains and losses from foreign currency transactions are generally included in earnings. Financial Instruments and Derivative Securities The Company Other Assets. These costs are amortized using the straight-line method over periods of related benefit ranging from three to seven...

  • Page 29
    ...less costs of disposal. Share-Based Payments The Company accounts for stock options using the intrinsic value method as prescribed by Accounting Principles Board Opinion (APB 25). Pro forma disclosures required under Statement of Financial Accounting Standards (SFAS) 123, "Accounting for Stock-Based...

  • Page 30
    ... ENERGIZER HOLDINGS, INC. Notes to Consolidated Financial Statements (Dollars in millions, except per share and percentage data) FASB Staff Position 109-1 (FSP 109-1), "Application of FASB Statement No. 109, Accounting for Income Taxes, to the Tax Deduction on Qualified Production Activities...

  • Page 31
    ...and 2003. Separate impairment testing of the Company's reporting units was performed at the area level (North America, Europe, Asia Pacific and Latin America) within each reporting segment of the Company. The fair value of each area reporting unit was estimated using the discounted cash flow method...

  • Page 32
    30 ENR 2005 Annual Report ENERGIZER HOLDINGS, INC. Notes to Consolidated Financial Statements (Dollars in millions, except per share and percentage data) The American Jobs Creation Act of 2004 (the Act) introduces a special one-time dividends received deduction on the repatriation of certain ...

  • Page 33
    ... years from the date of initial crediting for employees. Amounts deferred into the Energizer Common Stock Unit Fund, and vested company matching deferrals, may be transferred to other investment options offered under the plan. At the time of termination of employment, or for directors, at the time...

  • Page 34
    ... 2005 Annual Report ENERGIZER HOLDINGS, INC. Notes to Consolidated Financial Statements (Dollars in millions, except per share and percentage data) A summary of nonqualified ENR stock options outstanding is as follows (shares in millions): 2005 Shares Weighted-Average Exercise Price Shares 2004...

  • Page 35
    ...cost Plan participants' contributions Actuarial loss Benefits paid Special termination benefits Plan amendments Foreign currency exchange rate changes Projected benefit obligation at end of year Change in Plan Assets Fair value of plan assets at beginning of year Actual return on plan assets Company...

  • Page 36
    ...2005 Annual Report ENERGIZER HOLDINGS, INC. Notes to Consolidated Financial Statements (Dollars in millions, except per share and percentage data) The funded status presented above consists of the following over and (under) funded plans: SEPTEMBER 30, 2005 2004 The accumulated benefit obligation...

  • Page 37
    ...325% Company contribution to the participant's pension plan. Amounts charged to expense during fiscal 2005, 2004 and 2003 were $5.2, $5.4 and $4.4, respectively, and are reflected in SG&A and cost of products sold in the Consolidated Statement of Earnings. As of March 29, 2003, U.S. employees of the...

  • Page 38
    ... of its thencurrent market price. If the Company merges with 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 surviving entity having a value equal to twice the exercise price. If the Company transfers 50% or...

  • Page 39
    ... value. of the Company, like those of other companies engaged in the battery and shaving products businesses, are subject to various federal, state, foreign and local laws and regulations intended to protect the public health and the environment. These regulations primarily relate to worker safety...

  • Page 40
    ...ENR 2005 Annual Report ENERGIZER HOLDINGS, INC. Notes to Consolidated Financial Statements (Dollars in millions, except per share and percentage data) In addition, the Company undertook certain programs to reduce or eliminate the environmental contamination at the rechargeable battery facility in...

  • Page 41
    ... suits against Wilkinson Sword in Düsseldorf, Germany, but did not seek preliminary relief. The Intuition suits are currently on hold pursuant to a standdown agreement with Gillette, and Gillette has dismissed the third suit relating to QUATTRO and Gillette's razor handle patent. The Company and...

  • Page 42
    ... Annual Report ENERGIZER HOLDINGS, INC. Notes to Consolidated Financial Statements (Dollars in millions, except per share and percentage data) 18. Supplemental Financial Statement Information SUPPLEMENTAL BALANCE SHEET INFORMATION 2005 2004 Inventories Raw materials and supplies Work in process...

  • Page 43
    ... Information The Company's operations are managed via three major segments - North America Battery (U.S. and Canada battery and lighting products), International Battery (rest of world battery and lighting products) and Razors and Blades (global razors, blades and related products). The Company...

  • Page 44
    42 ENR 2005 Annual Report ENERGIZER HOLDINGS, INC. Notes to Consolidated Financial Statements (Dollars in millions, except per share and percentage data) 2005 2004 2003 Net Sales North America Battery International Battery Total Battery Razors and Blades Total net sales Profitability North ...

  • Page 45
    ... Sales Alkaline batteries Carbon zinc batteries Other batteries and lighting products Razors and blades Total net sales $ 1,330.0 254.0 475.0 930.8 $ 2,989.8 $ 1,284.0 247.9 412.7 868.1 $ 2,812.7 $ 1,202.4 237.4 359.7 433.0 $ 2,232.5 The Company's international net sales are derived from customers...

  • Page 46
    ...0.72 21. Business Realignment Energizer continually reviews its battery and razor and blades business model, including its product supply chain, sales, marketing and administrative organizations. Such reviews may trigger business realignment activities with potentially significant future charges to...

  • Page 47
    Energizer Holdings, Inc. 533 Maryville University Dr. St. Louis, Missouri 63141 314.985.2000 www.energizer.com © 2005 Energizer Energizer, Schick, the Energizer Bunny design and other marks are trademarks of Eveready Battery.