Energizer 2014 Annual Report Download - page 3

Fiscal 2014 was a successful and transformative year for
Energizer Holdings. We met a number of challenges head-on and
achieved a third consecutive year of record adjusted earnings per
share – delivering a three year compounded annual growth rate
of 12 percent. We also set into motion comprehensive action
plans to create additional shareholder value by separating into
two strong and successful stand-alone companies.
I am proud of Energizer and our colleagues for what was
accomplished this past year. I am even more excited for our
customers and shareholders for the opportunities ahead.
Through innovation, we simplify and enhance the lives of
customers and consumers. Every day our family of brands
connects with households around the world.
As we approached scal 2014, we knew our businesses would
be tested by several headwinds. We continued to operate in a
hypercompetitive environment while contending with a consumer-
spending environment that has yet to fully recover. In addition,
we realized the majority of the impact of the shelf space lost at
two major Household Products customers in the previous year.
And nally, economies around the world remained weak and
currency uctuations adversely affected the bottom line.
Yet, in this environment, we realized record adjusted earnings
per share of $7.32, an increase over the year before of more than
5 percent. In addition, gross margin improved by 90 basis points.
We delivered these results while increasing Advertising &
Promotion support for our brands, up $53 million or 130 basis
points as a percent of net sales. At the same time, we kept a tight
rein on SG&A expense, which decreased 50 basis points* as a
percent of net sales. We continued to execute our restructuring
program to identify cost savings in both the Household Products
and Personal Care businesses and made great progress on our
working capital reduction initiative. At the same time, we
strengthened our Personal Care portfolio with the strategic
acquisition of Johnson & Johnson’s Stayfree, Carefree and o.b.
feminine care business, which added $0.45 to our adjusted
earnings per share in scal 2014, exceeding our expectations.
RESTRUCTURING PROGRAM
Our restructuring program continues to deliver meaningful savings,
with approximately $255 million in savings realized since the
inception of the project in 2012. We are on track to deliver
$300 million in savings by July 1, 2015, the expected date for
separating into two stand-alone companies. Our original target
was $200 million, but we are now estimating total project savings
of $330 million, a portion of which will be achieved following
July 1, 2015. Looking ahead, this focus on cost savings has been
ingrained in our culture and will serve Household Products and
Personal Care well after they split into two companies.
WORKING CAPITAL INITIATIVE
Maximizing free cash ow is critical to any business, providing
nancial exibility and enabling us to return cash to shareholders,
reduce debt levels and invest in the business. In scal 2014,
free cash ow was $487 million. We also reduced working capital
as a percentage of net sales by 790 basis points since the
baseline of scal 2011, which further contributed to an
approximately $350 million reduction in average managed
working capital.
FISCAL 2014 SEGMENT RESULTS
Personal Care Organic sales declined 1.4 percent for the year,
primarily attributable to the ongoing sluggish economic
environment. Category performance improved in the fourth quarter
versus recent trends, but even so, still trailed prior-year levels.
Segment prot for scal 2014 was up nearly 12 percent to $531
million including approximately $25 million of unfavorable currency
uctuations. This increase was driven by the incremental
impact of the acquisition of the Stayfree, Carefree and o.b.
brands and improved margins primarily resulting from our
2013 restructuring program.
Household Products Segment prot decreased 9.6 percent to
$398 million, as organic sales declined more than 7 percent,
mainly reecting the loss of two major customer accounts.
The impact of the loss of the two accounts was annualized in the
fourth quarter. The impact from lower net sales and approximately
$25 million of unfavorable currency uctuations were partially
offset by improved margins primarily resulting from our 2013
restructuring project.
SEPARATION
The Energizer Board of Directors and management team
have continually explored opportunities to improve performance
and increase long-term shareholder value. We have taken
meaningful steps to enhance shareholder value over the last
three years including the restructuring program, working
capital initiative, initiation of a dividend and opportunistic
share repurchases. These efforts also include investments
that have built two successful businesses in Household
Products and Personal Care. Our initiatives were designed
to position each company to compete, grow and create value
for all stakeholders.
Having successfully grown the Personal Care business to
more than $2.6 billion in sales, we knew the time was right
to launch two strong consumer goods companies. This separation
underscores our long-term commitment to driving shareholder
value. We believe there are several benets to creating two
public companies, as each business should be able to:
To Our Shareholders,
ENERGIZER HOLDINGS, INC. 2014 ANNUAL REPORT
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*excludes acquisitions, integration, spin-off transaction and restructuring related charges.