Energizer 2005 Annual Report Download - page 4

While it was a year marked by a change in
leadership, our basic approach to business
and underlying management philosophy
remain constant. We are structured for
success – financially,operationally,organi-
zationally – and well positioned to execute
our business strategies going forward.
Financial Performance
For our fiscal year ended September 30,
2005, Energizer’s net earnings grew 7
percent to $286.4 million compared to
$267.4 million the prior year,and earnings
per share climbed 21 percent to $3.90
compared to $3.21 the year before. Net
sales for the year reached nearly $3.0 bil-
lion, an increase of 6 percent over sales
of $2.8 billion in fiscal 2004.
Energizer remains cash-flow driven. Since
our spin-off as an independent company,
Energizer has generated nearly $1.5 billion
of free cash flow.* Cash flow provides the
resources to build our brands and develop
new products, to maintain a strong balance
sheet and take advantage of opportunities.
The opportunities we have focused on
in recent years have been the acquisition
of Schick-Wilkinson Sword and share
repurchase – and both have proven highly
successful and rewarding for shareholders.
SWS Acquisition
The performance of Schick-Wilkinson
Sword(SWS) has greatly exceeded our
expectations. This business was stagnant
and sales had slipped to $625 million in
2002, the year beforeour acquisition.
Fueled by the successful launch of several
new products, this business has achieved
impressive sales growth – $745 million in
fiscal 2003, $868 million in fiscal 2004 and
$931 this year, representing compound
annual growth of 12 percent.
Based on the success of this acquisition,
we continue to exploreopportunities to add
acomplementary consumer packaged
goods business to our operations.
Share Repurchase
During fiscal 2005, the company repur-
chased 8.1 million shares of common
stock, and in early November, the Board
approved a new authorization for up to
10 million shares. Over the past five fiscal
years, share repurchases have exceeded
$1.3 billion and total morethan 34 million
shares at an average purchase price of
$38.72, well below current market price.
While we believe investing in our company
is a sound financial strategy that rewards
long-term shareholders, the use of cash
flow for share repurchase remains situa-
tional and opportunistic.
Sound Business Strategies
Today, the environment in which we com-
pete is increasingly challenging – challenges
that include competitor consolidation,
retailer consolidation, rising raw material
costs and more.
In response, Energizer remains highly focused
on the businesses in which we choose to
compete – the portable power and wet
shave arenas. We define success as provid-
ing solutions to our trade customers and
consumers better than anyone else.
We believe in the power of the brand, and
we understand that building healthy brands
requires constant innovation and continued
investment. The results of our emphasis on
innovation are evident throughout this report.
Energizer boasts an international footprint
that provides broad geographic diversifica-
tion, with approximately half of our sales
generated outside of North America. As a
result, we are able to operate on a global
scale with a few large, high-output produc-
tion facilities and to lessen our dependency
on any one market, customer or currency.
Successful Brand Strategies
Energizer competes in the consumer
packaged goods market in two distinct
categories with two strong, complementary
business units, each with clearly defined
objectives. Batteries and Lighting
Products focuses on consistently generat-
ing strong, stable 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 compre-
hensive product line with two world-class
brands – Energizer®and Eveready®–we
remain focused on generating healthy mar-
gins in the premium segment and growing
through innovation in the performance and
specialty segments.
We hold a significant share of the profitable
premium battery market with our flagship
Energizer®MAX®alkaline. While aggressively
defending our U.S. market share, we are
focused on building brand equity and grow-
ing volume that is not sold on promotion.
As a result, the portion of non-promoted
premium volume has steadily increased
over the past year.
To Our Shareholders
2ENR 2005 Annual Report
Fiscal 2005 was another excellent year for Energizer, boldly underscored
by a substantial double-digit earnings increase, improved operating margin
and healthy top-line growth – plus the continued strengthening of our
widely recognized, world-class brands and innovative product offerings.
Ward M. Klein
Chief Executive Officer
*See financial highlights on the inside front cover for a definition of Free Cash Flow and a reconciliation to reported GAAP financial measures.