Energizer 2008 Annual Report Download - page 13

ENERGIZER HOLDINGS, INC. 2008 Annual Report 11
growth. The category is extremely competitive with competitors vying for
consumer loyalty and retail shelf space.
A significant portion of SWS’s product cost is closely tied to the U.S.
dollar and the euro. As such, SWS results are highly sensitive to fluctua-
tions in other currencies, particularly Japan, where the Company holds a
significant market share position. Strengthening of currencies compared
to the U.S. dollar, and to a lesser extent to the euro, improves margins
while weakening of such currencies reduces margins. This margin impact
coupled with the translation of foreign operating results to the U.S. dollar
for financial reporting purposes has an impact on reported operating
profits. At November 17, 2008 foreign currency exchange rates, we
estimate the impact to segment profit due to currency translation to be
approximately $25 to $30 unfavorable for Personal Care as compared
to the 2008 average currency translation rate. As with the Household
Products business, changes in the value of local currencies in relation to
the U.S. dollar and, to a lesser extent, the euro will continue to impact
reported sales and segment profitability in the future, and the Company
cannot predict the direction or magnitude of future changes.
ACQUISITION OF PLAYTEX PRODUCTS, INC. (PLAYTEX)
On October 1, 2007, the Company paid $1,875.7 for the acquisition
of all outstanding Playtex common stock, repayment or defeasance
of outstanding Playtex debt, and other transaction costs. Playtex
operates six manufacturing and packaging facilities in the U.S. Playtex
is a leading North American manufacturer and marketer in the skin,
feminine and infant care product categories, with a diversified portfolio
of well-recognized branded consumer products.
In Skin Care, Playtex markets and sells sun care products under two
well known brand names, Banana Boat and Hawaiian Tropic. Combin-
ing Banana Boat and Hawaiian Tropic, Playtex holds the number one
dollar market share position in the U.S. sun care category. The sun care
category in the U.S. is segmented by product type such as general
protection, tanning and babies; as well as by method of application
such as lotions and sprays. Playtex competes across this full spectrum
of sun care products. In addition, Playtex owns the number one market
share position in the U.S. hands and face wet wipes category with its
Wet Ones brand and the number one dollar market share position for
branded U.S. household gloves with its Playtex household gloves.
In Feminine Care, Playtex sells tampon products under the brand
names Playtex Gentle Glide and Playtex Sport, both of which are plas-
tic applicator tampons. In the tampon category, consumer purchases
are driven primarily by protection, comfort, quality and value. For more
than 20 years, Playtex has been the second largest selling tampon
brand in the U.S. and maintains a leadership position in the higher
growth plastic applicator segment. The tampon category in the U.S.
has become more competitive in recent years including substantial
new product innovation and increased levels of promotional activity.
The Infant Care product category includes U.S. dollar market share
leading infant feeding products marketed under the Playtex brand
name and the U.S. dollar market share leading diaper disposal system
marketed under the Playtex Diaper Genie brand name. Infant feeding
products include disposable feeding systems, plastic reusable hard
bottles, cups and a full line of mealtime products such as plates,
utensils and placemats. The Diaper Genie brand consists of the diaper
pail unit and refill liners. The refill liner individually seals diapers in an
odor-proof plastic film.
As noted previously, Playtex is primarily a North American business.
The Company intends to leverage its existing international selling and
distribution infrastructure to expand the international presence of cer-
tain Playtex brands, with initial efforts centered on sun care products.
FINANCIAL RESULTS
For the year ended September 30, 2008, net earnings were $329.3, or
$5.59 per diluted share, compared to net earnings of $321.4, or $5.51
per diluted share, in 2007 and net earnings of $260.9, or $4.14 per
diluted share in 2006.
Fiscal 2008 results included:
■ an after-tax expense of $16.5, or $0.28 per diluted share, related
to the write-up and subsequent sale of inventory purchased in the
Playtex acquisition,
■ integration and other realignment costs of $13.4, after-tax, or $0.22
per diluted share, and
■ a net, unfavorable prior year income tax accrual adjustment of $1.1,
or $0.02 per diluted share.
Fiscal 2007 results included:
■ favorable adjustments of $21.9, or $0.37 per diluted share, related
to a reduction of deferred tax balances and prior years’ tax accruals
and previously unrecognized tax benefits from prior years’ foreign
losses, and
■ charges of $12.2, after-tax, or $0.21 per diluted share, for the
company’s European restructuring projects.
Fiscal 2006 results included:
■ charges of $24.9, after-tax, or $0.39 per diluted share, related to
European restructuring programs,
■ a charge of $3.7, after-tax, or $0.06 per diluted share, to record the
cumulative amount of foreign pension costs that should have been
previously recognized, and
■ favorable adjustments to prior years’ tax accruals and previously
unrecognized tax benefits related to foreign losses of $16.6, or
$0.26 per diluted share.
For the fiscal year, the inclusion of Playtex’s results and incremental
interest expense associated with the financing of the acquisition reduced
diluted earnings per share by $0.24, which includes a charge of $0.28
related to the inventory write-up and $0.19 related to acquisition inte-
gration costs. Excluding these one-time costs, Playtex was accretive
to Energizer’s earnings in its first year post-acquisition.