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Vision Focus Insight
COMMITTED TO OUR MISSION, STRATEGIES AND PERFORMANCE
ENERGIZER HOLDINGS, INC. 2006 ANNUAL REPORT

Table of contents

  • Page 1
    Vision Focus Insight C O M M I T T E D T O O U R M I S S I O N , S T R AT E G I E S A N D P E R F O R M A N C E ENERGIZER HOLDINGS, INC. 2006 ANNUAL REPORT

  • Page 2
    ... of providing portable power, ranks among the world's largest manufacturers of primary batteries and flashlights. Energizer is also the parent company of Schick-Wilkinson Sword, the second largest manufacturer of wet shave products in the world. Energizer trades on the New York Stock Exchange under...

  • Page 3
    ... and flashlights, and Schick® and Wilkinson Sword® shaving systems for men and women. Letter to Our Shareholders | p2 Batteries and Lighting Products | p4 Razors and Blades | p6 Directors, Officers and Corporate Information | p8 Financial Results | p9 We concentrate on product innovation and cost...

  • Page 4
    ... annual growth rate of 21 percent, one of $2.00 a pound in November 2006, making the cost the best growth rates in the U.S. household products challenge significant. The 6.7 percent price increase group. And since our spin-off in 2000, our share price previously implemented in U.S. and other markets...

  • Page 5
    ... to advanced titanium blade-coating technology, from the world's only hearing aid battery dispenser to the proprietary intelligent power management technology in our new cell phone charger. Stock Price Performance Comparison of Cumulative Total Return on $100 invested in Energizer Holdings, Inc...

  • Page 6
    ... Energi To Go â„¢ portfolio: performance, premium and price; carbon zinc, alkaline and lithium; miniatures and rechargeables; flashlights and lanterns. Visit www.energizer.com for product details, plus battery/flashlight facts, Performance Performance Price Photo Lighting Products history...

  • Page 7
    ... Cell Phone Charger, launched in mid-2006 to address today's on-the-go Global Markets and Sales consumer lifestyles and the increasing power demands of Energizer manufactures over 6 billion batteries annually at cell phones, provides power to operate a wireless phone in 19 production and packaging...

  • Page 8
    ...C H President and Chief Executive Officer Schick-Wilkinson Sword Focus: Razors & Blades Schick-Wilkinson Sword offers leading global brands in all three segments of the wet shave category - men's Quattro Titanium ® Quattro Power ® ® Quattro For Women ® ® Intuition Plus ® ™ Xtreme...

  • Page 9
    ... new Quattro® Titanium and the power of four blades deliver the less irritating shave our target ful products. consumer is seeking vs. the leading brand. Building on the momentum of Schick® Intuition®, the all in one razor that lathers, shaves and lubricates in one easy Global Markets and Sales...

  • Page 10
    ... is Energizer's stock transfer agent and registrar and maintains the Company's shareholder records. Shareholders needing information about account records, stock certificates and change of address should contact: Continental Stock Transfer & Trust Company 17 Battery Place South, 8th Floor New York...

  • Page 11
    ...: Financial Results Management's Discussion and Analysis of Results of Operations and Financial Condition | p10 Summary Selected Historical Financial Information | p19 Responsibility for Financial Statements | p20 Report of Independent Registered Public Accounting Firm | p21 Consolidated Financial...

  • Page 12
    ... key factors management considers necessary in reviewing Energizer Holdings, Inc.'s (the Company) historical basis results of operations, operating segment results, and liquidity and capital resources. The Company includes the battery business (Energizer) and the razors and blades business (Schick...

  • 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
    ... and percentage data) than 40%. Battery charger sales were up more than 50%, including the launch of our new Energi To Go cell phone charger line. The price portfolio, which includes carbon zinc and Eveready Gold alkaline batteries, volume declined 2% in 2006. Overall pricing and product mix were...

  • Page 15
    ... and Related Charges The Company continually reviews its battery and razor and blades business models to identify potential improvements and cost savings. A project commenced in 2006 to improve effectiveness and lower costs of European packaging, warehouse and distribution activities, including...

  • Page 16
    ... higher sales volume. Inventory additionally increased on higher material cost in the battery segments and an increase in intercontinental product sourcing. Investing Activities Total long-term debt outstanding, including current maturities, was $1,710.0 at September 30, 2006. The Company maintains...

  • Page 17
    ... in interest rates on fixed-rate debt would have increased the fair market value by $46.2 and $30.1 at September 30, 2006 and 2005, respectively. See Note 10 to the Consolidated Financial Statements for additional information regarding the Company's debt. The Company has interest rate risk with...

  • Page 18
    ...expense for pension and other postretirement benefits is dependent on certain assumptions developed by the Company and used by actuaries in calculating such amounts. Assumptions include, among others, the discount rate, future salary increases and the expected long-term rate of return on plan assets...

  • Page 19
    ... activity or product improvements, or further retailer consolidations may dilute or defeat the benefits of the Company's consumer positioning and strategy. Competitive promotional activity, or pricing or promotional demands from retailer customers, could limit the efficacy of battery price increases...

  • Page 20
    ENERGIZER HOLDINGS, INC. Management's Discussion and Analysis of Results of Operations and Financial Condition (Dollars in millions, except per share and percentage data) limit the Company's ability to meet future operating expenses and liquidity requirements, fund capital expenditures or service ...

  • Page 21
    ENERGIZER HOLDINGS, INC. Summary Selected Historical Financial Information (Dollars in millions, except per share data) Statement of Earnings Data FOR TH E YEAR E N DE D S E PTE M B E R 30, 2006 2005 2004 2003( a ) 2002 Net sales Depreciation and amortization Earnings before income taxes (b) ...

  • Page 22
    ... 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 the Company's financial position, results of operations and cash flows. The Company maintains accounting...

  • Page 23
    ...have completed integrated audits of Energizer Holdings, Inc.'s 2006 and 2005 consolidated financial statements and of its internal control over financial reporting as of September 30, 2006 and an audit of its 2004 financial statements in accordance with the standards of the Public Company Accounting...

  • Page 24
    ... HOLDINGS, INC. Consolidated Statements of Earnings and Comprehensive Income (Dollars in millions, except per share data) Statement of Earnings YEAR E N DE D S E PTE M B E R 30, 2006 2005 2004 Net sales Cost of products sold Selling, general and administrative expense Advertising and promotion...

  • Page 25
    ... value, issued 97,083,682 at 2006 and 2005, respectively Additional paid-in capital Retained earnings Common stock in treasury, at cost, 40,410,791 shares at 2006 and 30,044,578 shares at 2005 Accumulated other comprehensive loss Total shareholders equity Total The above financial statement should...

  • Page 26
    ...tax benefits from share-based payments Other Net cash used by financing activities Effect of exchange rate changes on cash Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period The above financial statement should...

  • Page 27
    ENERGIZER HOLDINGS, INC. Consolidated Statements of Shareholders Equity (Dollars in millions, shares in thousands) Dollars 2006 2005 2004 2006 Shares 2005 2004 Common stock: Balance at beginning of year Activity under stock plans Ending balance Additional paid-in capital: Balance at beginning of...

  • Page 28
    ... Financial Statements (Dollars in millions, except per share and percentage data) 1. Basis of Presentation Preparation of the financial statements in conformity with generally accepted accounting principles in the U.S. (GAAP) requires Energizer Holdings, Inc. and its subsidiaries (the Company...

  • Page 29
    ... 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 promotional program costs not yet...

  • Page 30
    ENERGIZER HOLDINGS, INC. Notes to Consolidated Financial Statements (Dollars in millions, except per share and percentage data) 3. Goodwill and Intangible Assets and Amortization The Company has allocated goodwill and other intangible assets to individual countries or areas for battery businesses....

  • Page 31
    ...121.7 3.0 (26.1) (16.2) (8.5) - 10.7 2.2 $ 86.8 35.0% 0.9 (7.5) (4.7) (2.4) - 3.1 0.6 25.0% In 2006, 2005 and 2004, $5.7, $14.7 and $16.2, respectively, of tax benefits related to prior years' losses were recorded. These benefits related to foreign countries where our subsidiary subsequently began...

  • Page 32
    ... and Related Charges The Company continually reviews its battery and razor and blades business models to identify potential improvements and cost savings. A project commenced in 2006 to improve effectiveness and lower costs of European packaging, warehouse and distribution activities, including...

  • Page 33
    ... restricted stock equivalents of $13.9. The Statements of Cash Flows for fiscal years prior to 2006 was adjusted in accordance with SFAS 123R to reflect excess tax benefits as an inflow from financing activities as reflected in Note 19. Beginning with new grants in fiscal 2006, the Company used the...

  • Page 34
    ... is recorded at the closing market price of Energizer stock at each period end. As of September 30, 2006, there was $9.4 of total unrecognized compensation costs related to this award. The related liability is reflected in Other Liabilities in the Company's Consolidated Balance Sheet. 32 E NR 2006...

  • Page 35
    ... by the Company, toward their total cost of health care benefits. Retiree contributions for health care benefits are adjusted periodically to cover the increase in total plan costs of the plan cost. Cost trend rates no longer materially impact the Company's future cost of the plan. E NR 2006 AN...

  • Page 36
    ENERGIZER HOLDINGS, INC. Notes to Consolidated Financial Statements (Dollars in millions, except per share and percentage data) The following tables present the benefit obligation, plan assets and funded status of the plans: Pension S E PTE M B E R 30, 2006 2005 Postretirement 2006 2005 Change in...

  • Page 37
    ... plans, used in determining the above information: Pension S E PTE M B E R 30, 2006 2005 2006 Postretirement 2005 Discount rate Expected long-term rate of return on plan assets Compensation increase rate 5.2% 8.0% 3.8% 5.2% 8.0% 3.7% 5.7% - - 5.5% - - The expected return on plan assets...

  • Page 38
    ... of its then-current 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
    ... 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 comparable agreements, or in the absence of quoted market prices, such factors as interest rates, currency exchange rates and remaining...

  • Page 40
    ... 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, air and water quality, underground fuel...

  • Page 41
    16. Supplemental Financial Statement Information S U P P L E M E N TA L B A L A N C E S H E E T I N F O R M AT I O N 2006 2005 Inventories Raw materials and supplies Work in process Finished products Total inventories $ 75.4 117.8 360.7 $ 553.9 $ 75.5 89.2 326.3 $ 491.0 Other Current Assets ...

  • Page 42
    ... Battery (rest 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...

  • Page 43
    ...Battery Razors and Blades Total net sales $ 1,233.8 913.3 2,147.1 929.8 $ 3,076.9 $ 1,173.1 885.9 2,059.0 930.8 $ 2,989.8 $ 1,117.6 827.0 1,944.6 868.1 $ 2,812.7 Profitability North America Battery International Battery R&D Battery Total Battery Razors and Blades Total segment profitability General...

  • Page 44
    ... 5% of the Company's total sales for each of the three years ended September 30. Supplemental product information is presented below for net sales: 2006 2005 2004 Net Sales Alkaline batteries Carbon zinc batteries Other batteries and lighting products Razors and Blades Total net sales $ 1,338.0 242...

  • Page 45
    ... 30, 2004 As Reported Fully Allocated Adjustment FAS 123R Adjusted Profitability North America Battery International Battery R&D Battery Total Battery Razors and Blades Total segment profitability Corporate expense Amortization expense Interest and other financial items Total earnings before income...

  • Page 46
    ...Company are significantly impacted in the first quarter by the additional battery product sales volume associated with the December holiday season. F I R ST S ECON D TH I R D FOU RTH Fiscal 2006 Net sales Gross profit Net earnings Basic earnings per share Diluted earnings per share Items increasing...

  • Page 47
    ENERGIZER HOLDINGS, INC. 533 MARYVILLE UNIVERSITY DRIVE ST. LOUIS, MISSOURI 63141 314.985.2000 WWW.ENERGIZER.COM