Energizer 2009 Annual Report Download - page 4

our Household Products division by right-sizing our manufacturing
and sales operations through a voluntary early retirement program
at our North American facilities, followed by a limited involuntary
reduction in force. We also extended this cost reduction program
on a more selective basis to our corporate and Personal Care
Division operations. The cost of these programs was $38.6 million,
recorded in fiscal 2009, with anticipated annualized savings of
$20 million, with approximately $14 million in savings to be
realized in fiscal 2010.
We reduced our advertising and promotion spending and
selling, general and administrative expense by almost $140 million
compared to our fiscal 2009 plan and trimmed capital expendi-
tures. In our U.S. operations, we also altered our vacation accrual
policy, resulting in a $24 million favorable adjustment this year,
and made changes to the U.S. defined benefit pension program
to reduce our future liability. In addition, we began hedging
currencies in an effort to reduce volatility as we move forward.
Equity offering. In May 2009, the company successfully
completed an equity offering of 10.9 million shares of common
stock at $49.00 per share. The offering was three times over-
subscribed at 32 million shares, reflecting strong investor interest
in Energizer. The offering resulted in higher shares outstanding
and a $0.34 reduction in diluted earnings per share in fiscal 2009.
Net proceeds of $510.2 million were used to acquire the shave
preparation brands from S.C. Johnson & Son, Inc. for $275 mil-
lion and strengthen our balance sheet in order to preserve our
investment-grade debt structure.
Using part of the equity proceeds, we accelerated
repayment of $200 million of debt due in November 2009 to
September 30. By year-end, we had reduced our debt to EBITDA
to 3.14 to 1, despite the negative impact of the restructuring
charge, increasing our financial flexibility going forward.
Shareholder value. At Energizer, we are fully committed to
enhancing long-term shareholder value and have a history of
delivering consistent double-digit earnings per share growth.
Despite last year’s disappointing results due to the factors already
cited, our compounded annual EPS growth since our 2000
spin-off is 11 percent.
Over that same nine and a half year period, we generated
strong, stable cash flow of $2.7 billion, including $350 million in
fiscal 2009. Our priorities for the use of cash continue to focus on
funding product innovation, investing in existing brands, acquiring
companies that complement our existing businesses, servicing
debt and opportunistically repurchasing shares.
Since our spin-off, we have invested $3.1 billion in several
key transformative acquisitions, including last year’s purchase of
the Edge/Skintimate shaving preparation brands. Over the same
timeframe, we have invested approximately $2 billion to
repurchase 48 percent of the original shares outstanding at
an average price of under $43.
Focus on Strategic Acquisitions
In nine-plus years as a stand-alone company, Energizer has steadily
driven growth both organically and through strategic acquisitions.
With the 2003 acquisition of Schick-Wilkinson Sword, we moved
beyond a singular concentration on batteries and flashlights and
added a wet shave and personal grooming business. The 2008
acquisition of Playtex expanded our personal care segment into
new areas of skin care, feminine care and infant care.
While acquisitions are opportunistic by nature, we have
been highly successful by adhering to a stringent set of criteria
when evaluating and pursuing potential acquisitions. We seek
fast-moving consumer goods with high value density, ideally in a
space close to where we currently operate and are comfortable
competing. We look for categories with relatively low private label
penetration, where brand matters and innovation helps brands
thrive. We seek strong share positions where a brand is No. 1
or No. 2 in the category or we see a way to get there. Finally,
there needs to be the potential for organic growth as well as
global expansion.
Edge/Skintimate acquisition. No previous acquisition aligns
as completely with our criteria as the June 2009 purchase of
the Edge and Skintimate shave preparation brands from
S.C. Johnson & Son, Inc. for an aggregate purchase price of
$275 million. In North America, Edge is a leader in men’s shave
preparation and Skintimate is the market share leader in the
women’s shave preparation category.
A logical adjunct and natural fit with our men’s and
women’s wet shave business, combining the Edge® and
Skintimate® brands with our Schick-Wilkinson Sword shaving
business strengthens both – and unveils exciting opportunities
for cross-marketing. In conjunction with our due diligence, we
discovered that a large number of Edge users do not use Schick
products and a great many Schick users do not use Edge
products. So we see tremendous marketing synergies by
targeting each respective user base, with Edge becoming a
platform to generate awareness and trial of Schick products
and vice versa.
Focus on Operational Results
Energizer today is a global, diversified consumer products com-
pany with strong, iconic brands across a number of categories.
Specializing in the household and personal products spaces,
we boast market-leading positions in the categories where we
choose to compete. Both in the United States and globally, we
PAGE 2 ENERGIZER HOLDINGS INC. 2009 ANNUAL REPORT