-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A3Brf0+3a2xl09OUg/7zJjcTXm8ZQFmKsRhCMBg62XVYZV79J9zCaq2P2h7+wLjU ETkwwrCm79hzdWZnuhVPZg== 0001096752-01-500015.txt : 20020413 0001096752-01-500015.hdr.sgml : 20020413 ACCESSION NUMBER: 0001096752-01-500015 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENERGIZER HOLDINGS INC CENTRAL INDEX KEY: 0001096752 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 431863181 STATE OF INCORPORATION: MO FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-15401 FILM NUMBER: 1813470 BUSINESS ADDRESS: STREET 1: 533 MARYVILLE UNIVERSITY DRIVE CITY: ST LOUIS STATE: MO ZIP: 63141 BUSINESS PHONE: 3149852161 MAIL ADDRESS: STREET 1: 533 MARYVILLE UNIVERSITY DRIVE CITY: ST LOUIS STATE: MO ZIP: 63141 10-K 1 doc1.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------------------------------- FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 2001 Commission File No. 001-15401 ENERGIZER HOLDINGS, INC. Incorporated in Missouri IRS Employer Identification No. 43-1863181 533 Maryville University Drive, St. Louis, Missouri 63141 Registrant's telephone number, including area code: 314-985-2000 ----------------------------------------------- Securities registered pursuant to Section 12(b) of the Act: TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED - ---------------------- ----------------------------------------- Energizer Holdings, Inc. New York Stock Exchange, Inc. Common Stock, par value $.01 per share Energizer Holdings, Inc. New York Stock Exchange, Inc. Common Stock Purchase Rights Registrant has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and has been subject to such filing requirements for the past 90 days. Yes: X No: Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of registrant's knowledge, in the definitive proxy statement incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes: X No: Aggregate market value of the voting stock held by nonaffiliates of the Registrant as of the close of business on November 1, 2001: $1,441,634,536 (Excluded from this figure is the voting stock held by Registrant's Directors and Executive Officers, who are the only persons known to Registrant who may be considered to be its "affiliates" as defined under Rule 12b-2.) Number of shares of Energizer Holdings, Inc. Common Stock ("ENR Stock"), $.01 par value, outstanding as of close of business on December 1, 2001: 91,718,811 DOCUMENTS INCORPORATED BY REFERENCE 1. Portions of Energizer Holdings, Inc. Year 2001 Annual Report (Parts I and II of Form 10-K). 2. Portions of Energizer Holdings, Inc. Notice of Annual Meeting and Proxy Statement dated December 10, 2001 (Part III of Form 10-K). PART I ITEM 1. BUSINESS. GENERAL Energizer Holdings, Inc., incorporated in Missouri in 1999, is the world's largest manufacturer of primary batteries and flashlights and a global leader in the dynamic business of providing portable power. On April 1, 2000, all of the outstanding shares of common stock of Energizer were distributed in a tax-free spinoff to shareholders of Ralston Purina Company. Energizer is the successor to over 100 years of expertise in the battery and lighting products industry. Its brand names "Eveready" and "Energizer" have worldwide recognition for quality and dependability, and are marketed and sold in more than 140 countries. Energizer's subsidiaries operate 22 manufacturing and packaging facilities in 15 countries on four continents, and employ 3,525 employees in the United States and 6,306 in foreign jurisdictions. PRINCIPAL PRODUCTS Energizer's subsidiaries manufacture and market a complete line of primary alkaline and carbon zinc batteries, miniature batteries and flashlights and other lighting products. Although Energizer, in November of 1999, sold its rechargeable battery manufacturing and assembly business, which produced rechargeable batteries for sale to manufacturers of rechargeable equipment, Energizer continues to market a line of rechargeable batteries for retail sale to consumers. Energizer believes it has one of the industry's most extensive product lines. "Energizer" brand alkaline batteries are the most popular and widely used in the array of Energizer products. The batteries are offered in 1.5 volt, 4.5 volt, 6 volt and 9 volt configurations, and are available in the standard selection of sizes, including AA, AAA, AAAA, C, D and 9 volt sizes. In the summer of 2000, Energizer introduced a super-premium alkaline battery under the brand name "Energizer e2", as well as a value-priced alkaline battery under the name "Eveready Alkaline". In 2001, it relaunched its base alkaline brand as "Energizer Max". Energizer also produces or distributes: - - "Energizer Industrial" batteries in three models targeted for non-consumer industrial applications; - - lithium batteries, available in AA, miniature and cylindrical sizes, for use in high-performance applications such as cameras, camcorders, memory backup, CD players and portable computers; - - a line of miniature batteries, available in several chemistries, including silver oxide, zinc-air and manganese dioxide systems, for use in electronic watches, calculators, hearing aids, cameras, miniature radios, remote controls and electronic thermometers; - - the "Eveready" brand "Super Heavy Duty" and "Classic" lines of carbon zinc batteries for economy applications; and - - a line of rechargeable batteries and battery packs under the "Energizer" brand name. Energizer is also the world's largest manufacturer of portable lighting devices, offering more than 60 different lighting products for consumer and industrial use. SOURCES AND AVAILABILITY OF RAW MATERIALS The principal raw materials used in the Energizer business - electrolytic manganese dioxide, zinc, acetylene black, graphite, steel cans, nylon, brass wire, separator paper, and potassium hydroxide -- are sourced on a regional or global basis. Energizer believes that adequate supplies of the raw materials required for its operations are available at the present time, but cannot predict the future availability or prices of such materials. These raw materials are generally available from a number of different sources, and the prices of those raw materials are susceptible to currency fluctuations and price fluctuations due to transportation, government regulations, price controls, economic climate, or other unforeseen circumstances. In the past, Energizer has not experienced any significant interruption in availability of raw materials. Energizer's management has extensive experience in purchasing raw materials in the commodity markets. From time to time, management has taken positions in various ingredients to assure supply and to protect margins on anticipated sales volume. SALES AND DISTRIBUTION Energizer's battery and lighting products are marketed primarily through a direct sales force to mass merchandisers, wholesalers and other customers, but also through exclusive and non-exclusive distributors and rack jobbers of consumer packaged goods products. Third party food brokers may be used to make headquarters contacts in the retail food industry and to merchandise Energizer's products at retail locations. In the United States, the direct sales team has been reorganized into a Customer Management Team focused on key business accounts in several categories, including food, mass merchandise and specialty. Energizer distributes its products to consumers through numerous retail locations worldwide, including mass merchandisers and warehouse clubs, food, drug and convenience stores, electronics specialty stores and department stores, hardware and automotive centers and military stores. Although a large percentage of Energizer's sales are attributable to a relatively small number of retail customers, only Wal-Mart Stores, Inc. and its subsidiaries, as a group, account for more than ten percent of Energizer's sales. For fiscal year 2001, those customers accounted for, in the aggregate, approximately 16.6% of Energizer's sales. PATENTS, TECHNOLOGY AND TRADEMARKS Energizer's operating subsidiaries own a number of trademarks which Energizer considers of substantial importance and which are used individually or in conjunction with other Energizer trademarks. These include "Eveready", "Energizer", "Energizer Advanced Formula", "Energizer e2", "Energizer Max", the Energizer Bunny and the Energizer Man character. Energizer's ability to compete effectively in the battery industry depends in part on its ability to maintain the proprietary nature of its technology and manufacturing processes through a combination of patent and trade secret protection, non-disclosure agreements, licensing, and cross-licensing agreements. Energizer's subsidiaries own or license from third parties a considerable number of patents, patent applications and other technology which Energizer believes are extremely significant to its business. These primarily relate to battery product and lighting device improvements, additional battery product features, and manufacturing processes. As of September 30, 2001, Eveready Battery Company, Inc., a subsidiary of Energizer, owned approximately 255 unexpired United States patents which have a range of expiration dates from January, 2002 to April, 2020, and had approximately 111 United States patent applications pending. It routinely prepares additional patent applications for filing in the United States. Eveready also actively pursues foreign patent protection in a number of foreign countries. As of September 30, 2001, Eveready owned approximately 787 foreign patents and had approximately 602 patent applications pending in foreign countries. Since publications of discoveries in the scientific or patent literature tends to lag behind actual discoveries by several months, Eveready cannot be certain that it was the first creator of inventions covered by pending patent applications or the first to file patent applications on such inventions. SEASONALITY The battery business, particularly in North America, tends to be seasonal, with large purchases of batteries by consumers during the December holiday season, and increases in retailer inventories during late summer and autumn. COMPETITION The battery business is highly competitive, both in the United States and on a global basis, as a number of large battery manufacturers compete for consumer acceptance and, increasingly, limited retail shelf space. Competition is based upon brand perceptions, product performance, customer service and price. Energizer competes in the domestic and global battery markets which have been, in the past, high growth markets. The alkaline battery segment, both in the United States and worldwide, has been the fastest growing segment of the primary battery market. More recently, growth of the battery market, as well as the alkaline segment, has moderated and in some instances declined, primarily because of local economic conditions. Energizer's principal competitors in the United States are Duracell International, Inc., a subsidiary of The Gillette Company, and Rayovac Corporation. Private-label sales by large retailers have also been growing in significance. Duracell is also a significant competitor in South and Central America and Asia and Europe, and local and regional battery manufacturers in Asia and Europe also compete for battery sales. Energizer has a significant market position in most geographic markets in which it competes. According to A.C. Nielsen, Energizer's primary battery market share in the United States for the 52 weeks ended September 30, 2001 was 32.4%. GOVERNMENTAL REGULATION AND ENVIRONMENTAL MATTERS The operations of Energizer, like those of other companies engaged in the battery business, 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 storage tanks and waste handling and disposal. Energizer has received notices from the U.S. Environmental Protection Agency, state agencies, and/or private parties seeking contribution, that it has been identified as a "potentially responsible party" (PRP) under the Comprehensive Environmental Response, Compensation and Liability Act, and may be required to share in the cost of cleanup with respect to nine federal "Superfund" sites. It may also be required to share in the cost of cleanup with respect to a state-designated site. Liability under the applicable federal and state statutes which mandate cleanup is strict, meaning that liability may attach regardless of lack of fault, and joint and several, meaning that a liable party may be responsible for all of the costs incurred in investigating and cleaning up contamination at a site. However, liability in such matters is typically shared by all of the financially viable responsible parties, through negotiated agreements. Negotiations with the U.S. Environmental Protection Agency, the state agency that is involved on the state-designated site, and other PRP's are at various stages with respect to the sites. Negotiations involve determinations of - - the actual responsibility of Energizer and the other PRP's at the site, - - appropriate investigatory and/or remedial actions, and - - allocation of the costs of such activities among the PRP's and other site users. The amount of Energizer's ultimate liability in connection with those sites may depend on many factors, including: - - the volume and toxicity of material contributed to the site, - - the number of other PRP's and their financial viability, and - - the remediation methods and technology to be used. In addition, Energizer undertook certain programs to reduce or eliminate the environmental contamination at the rechargeable battery facility in Gainesville, Florida, which was divested in November, 1999. In 2001, the buyer, as well as its operating subsidiary which owns and operates the Gainesville facility, filed petitions in bankruptcy. In the event that they would become unable to continue the programs to reduce or eliminate contamination, Energizer could be required to bear financial responsibility for such programs as well as for other known and unknown environmental conditions at the site. Many European countries, as well as the European Union, have been very active in adopting and enforcing environmental regulations. In many developing countries in which Energizer operates, there has not been significant governmental regulation relating to the environment, occupational safety, employment practices or other business matters routinely regulated in the United States. As such economies develop, it is possible that new regulations may increase the risk and expense of doing business in such countries. It is difficult to quantify with certainty the potential financial impact of actions regarding expenditures for environmental matters, particularly remediation, and future capital expenditures for environmental control equipment. Nevertheless, based upon the information currently available, Energizer believes that its ultimate liability arising from such environmental matters, taking into account established accruals of $5.9 million for estimated liabilities at September 30, 2001, should not be material to its financial position. Such liability could, however, be material to results of operations or cash flows for a particular quarter or annual period. OTHER MATTERS The descriptions of the business of, and the summary of selected financial data regarding Energizer appearing under "ENERGIZER HOLDINGS, INC. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - BUSINESS OVERVIEW" on pages 10 through 11, "ENERGIZER HOLDINGS, INC. - - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - HIGHLIGHTS" on page 11, "ENERGIZER HOLDINGS, INC. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - LIQUIDITY AND CAPITAL RESOURCES" on pages 16 through 17, "ENERGIZER HOLDINGS, INC. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - OPERATING RESULTS - Segment Results" on pages 12 through 14, "ENERGIZER HOLDINGS, INC. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - OPERATING RESULTS - Research and Development Expense" on page 14, "ENERGIZER HOLDINGS, INC. - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Segment Information" on pages 49 through 51, of the Energizer Holdings, Inc. Year 2001 Annual Report to Shareholders, are hereby incorporated by reference. ITEM 2. PROPERTIES A list of Energizer's principal plants and facilities as of the date of filing follows. Energizer believes that such plants and facilities, in the aggregate, are adequate, suitable and of sufficient capacity for purposes of conducting its current business. During the fiscal year ended September 30, 2001, Energizer's alkaline manufacturing facilities were utilized, on average, at approximately 70% of capacity, and its carbon zinc facilities were utilized, on average, at approximately 47% of capacity.
NORTH AMERICA EUROPE Asheboro, NC (2) Caudebec Les Elbeuf, France (1)(5) Bennington, VT La Chaux-de-Fonds, Switzerland Garretsville, OH Slany, Czech Republic (1) Marietta, OH Tanfield Lea, U.K. (1) Maryville, MO St. Albans, VT AFRICA Tecamec, Mexico (6) Alexandria, Egypt Walkerton, Ontario, Canada (5) Nakuru, Kenya (4) Westlake, OH (3) ADMINISTRATIVE AND ASIA EXECUTIVE OFFICES Bogang, People's Republic of China (1) St. Louis, Missouri (1) Mandaue Cebu, Philippines Ekala, Sri Lanka Cimanggis, Indonesia Johor, Malaysia Jurong, Singapore Tianjin, People's Republic of China
In addition to the properties identified above, Energizer and its subsidiaries own and/or operate sales offices, regional offices, storage facilities, distribution centers and terminals and related properties. (1) Leased (2) Two plants (3)Research facility (4) Less than 20% owned interest (5) Bulk packaging or labeling (6) To be closed ITEM 3. LEGAL PROCEEDINGS LEGAL PROCEEDINGS - - - Energizer previously disclosed that Zinc Products Company, a division of Alltrista Corp., a supplier of zinc cans used in the manufacture of batteries, filed suit against Energizer, claiming breach of contract when Energizer closed its Fremont, Ohio plant. In January of 2001, the suit was dismissed upon a settlement payment, in an immaterial amount, by Energizer. - - In October of 2001, Energizer entered into separate settlement agreements with Strategic Electronics and Duracell related to outstanding contract claims associated with Duracell's and Energizer's on-label battery testers. Under the terms of the agreements, mutual releases of all outstanding claims were given, and Energizer was licensed to utilize any applicable patents related to its on-label battery tester. Energizer is a party to a number of other legal proceedings in various state, federal and foreign jurisdictions. Many of these legal matters are in preliminary stages, involve complex issues of law and fact and may proceed for protracted periods of time. The amount of alleged liability, if any, from these proceedings cannot be determined with certainty. However, based upon present information, Energizer believes that its ultimate liability, if any, arising from - - pending legal proceedings, - - asserted legal claims and - - known potential legal claims which are likely to be asserted, should not be material to Energizer's financial position, taking into account established accruals for estimated liabilities. These liabilities, however, could be material to results of operations or cash flows for a particular quarter or annual period. See also the discussion captioned "Governmental Regulation and Environmental Matters" under Item 1 above. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. ITEM 4A EXECUTIVE OFFICERS OF THE REGISTRANT. A list of the executive officers of Energizer and their business experience follows. Ages shown are as of December 31, 2001. J. Patrick Mulcahy - Chief Executive Officer of Energizer since March 2000. Mr. Mulcahy joined Ralston in 1968 and has served as Chairman of the Board and Chief Executive Officer of Eveready Battery Company, Inc. since 1987. Mr. Mulcahy served as co-Chief Executive Officer and co-President of Ralston from October, 1997 to June, 1999. He served as Ralston's Vice President and Director, Corporate Strategic Planning and Administration 1984-86; Division Vice President, Strategic Planning 1981-84; and Division Vice President, Director of Marketing, Grocery Products Group, 1980-81. Age: 57. William P. Stiritz - Chairman of the Board of Directors of Energizer and Chairman of the Management Strategy and Finance Committee since March 2000. Mr. Stiritz joined Ralston in 1963 and served as Chief Executive Officer and President of Ralston from 1982 until his retirement in 1997. He has served since 1982 as Chairman of the Board of Directors of Ralston. From 1998 to 2001, he also served as Chief Executive Officer, President and Chairman of the Board of Agribrands International, Inc. Age: 67. Patrick C. Mannix - President of Energizer since March 2000. Mr. Mannix joined the Eveready Battery Division of Union Carbide Corporation in 1963, and has served as President of Eveready Battery Company, Inc. since 1998. Mr. Mannix served as President of Eveready Battery Company, Inc., Specialty Business from 1995-98, as Executive Vice President, Eveready Battery Company, International from 1991-95, and as Area Chairman, Asia Pacific operations, Eveready Battery Company from 1985-91. Age: 56. Randy J. Rose - President and Chief Operating Officer - North America and Europe since September of 2000. Mr. Rose served as Executive Vice President, Worldwide Sales and Marketing of Energizer from March to September, 2000. Mr. Rose joined Ralston in 1986 and served as Executive Vice President, Golden Products Division of Ralston from 1997 until April 1998, then served as Vice President, Worldwide Sales and Asia Pacific Operating Officer of the Pet Products International Division of Ralston until May, 1999, when he joined Eveready Battery Company, Inc., serving as Executive Vice President, Sales and Marketing. Mr. Rose served as Vice President and Director of the Customer Development Group of Ralston's Pet Products Group from 1993-97. Age: 47. Ward M. Klein - President and Chief Operating Officer - Asia Pacific and PanAm since September, 2000. Mr. Klein served as Vice President - Asia Pacific for Energizer from March to September, 2000. Mr. Klein joined Ralston Purina Company in 1979 and served as Vice President and Area Chairman, Asia Pacific, Africa and Middle East for battery operations from 1998 to 2000, as Area Chairman, Latin America from 1996-98, as Vice President, General Manager Global Lighting Products, 1994-96 and as Vice President of Marketing, 1992-94. Age: 46. Daniel J. Sescleifer - Executive Vice President, Finance and Control of Energizer since October, 2000. Mr. Sescleifer served as Vice President and Treasurer of Solutia Inc. from July-October, 2000, as Vice President and Treasurer of Ralcorp Holdings, Inc, from 1996 to 2000, and as Director, Corporate Finance of Ralcorp Holdings, Inc. from 1994 to 1996. Age: 39. Harry L. Strachan - Vice President and General Counsel of Energizer since March, 2000. Mr. Strachan joined Eveready Battery Company, Inc. in 1987, and has served as Vice President, General Counsel and Secretary of that subsidiary since 1987. Age: 60. Peter J. Conrad - Vice President, Human Resources of Energizer since March, 2000. Mr. Conrad joined Eveready Battery Company, Inc. in 1997 and served as Vice President, Human Resources from 1997 to 2000. Mr. Conrad served as Vice President, Human Resources for Protein Technologies International, Inc., a former subsidiary of Ralston Purina Company, from 1995-97. Age: 41. Joseph McClanathan - Vice President, North America of Energizer since March, 2000. Mr. McClanathan joined the Eveready Battery division of Union Carbide Corporation in 1974 and served as Vice President and Chairman, North America of Eveready Battery Company, Inc. from 1999 to 2000, as Vice President, Chief Technology Officer from 1996 to 1999, and as Vice President, General Manager, Energizer Power Systems division from 1993 to 1996. Age: 49. ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS. Energizer's common stock ("ENR Stock") is listed on the New York Stock Exchange. As of November 30, 2001, there were 19,418 shareholders of record of the ENR Stock. The following table sets forth range of market prices for the ENR Stock for the period from September 30, 2000 to September 30, 2001. No dividends were declared or paid on the ENR Stock during that period, and the Company does not currently intend to pay dividends during fiscal year 2002.
MARKET PRICE RANGE First Quarter. $ 17.0625 - $24.375 Second Quarter $ 20.125 - $27.55 Third Quarter. $ 20.80 - $25.39 Fourth Quarter $ 15.00 - $23.35
There have been no unregistered offerings of registrant's equity securities during the period covered by this Annual Report on Form 10-K. ITEM 6. SELECTED FINANCIAL DATA. The "ENERGIZER HOLDINGS, INC. - SUMMARY SELECTED HISTORICAL FINANCIAL INFORMATION" appearing on pages 21 through 22 of the Energizer Holdings, Inc. Year 2001 Annual Report is hereby incorporated by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Information appearing under "ENERGIZER HOLDINGS, INC. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION" on pages 10 through 20 and the information appearing under "ENERGIZER HOLDINGS, INC - - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Segment Information" on pages 49 through 51 of the Energizer Holdings, Inc. Year 2001 Annual Report is hereby incorporated by reference. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK. Information appearing under "ENERGIZER HOLDINGS, INC. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION - MARKET RISK SENSITIVE INSTRUMENTS AND POSITIONS" on pages 18 through 19 of the Energizer Holdings, Inc. Year 2001 Annual Report is hereby incorporated by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The consolidated financial statements of Energizer and its subsidiaries appearing on pages 25 through 28, together with the report thereon of PricewaterhouseCoopers LLP on page 24, and the supplementary data under "ENERGIZER HOLDINGS, INC. - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Quarterly Financial Information (Unaudited)" on pages 52 through 53 of the Energizer Holdings, Inc. Year 2001 Annual Report are hereby incorporated by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable. PART III ITEM 10. DIRECTORS OF THE REGISTRANT. The information regarding directors on pages 3 through 6, and information appearing under "Compliance With Section 16(a) Reporting" on page 2, of the Energizer Holdings, Inc. Notice of Annual Meeting and Proxy Statement dated December 10, 2001 is hereby incorporated by reference. ITEM 11. EXECUTIVE COMPENSATION. Information appearing under "Executive Compensation" on pages 13 through 21, "Nominating and Executive Compensation Committee Report on Executive Compensation" on pages 21 through 24, "Performance Graph" on page 26, "Common Stock Ownership of Directors and Executive Officers" on pages 11 through 12, and the remuneration information under "Board of Directors Standing Committees" on pages 4 through 5 and "Director Compensation" on pages 5 through 6 of the Energizer Holdings, Inc. Company Notice of Annual Meeting and Proxy Statement dated December 10, 2001 is hereby incorporated by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The discussion of the security ownership of certain beneficial owners and management appearing under "Stock Ownership Information" on page 10 and "Common Stock Ownership of Directors and Executive Officers" on pages 11 through 12 of the Energizer Holdings, Inc. Notice of Annual Meeting and Proxy Statement dated December 10, 2001 is hereby incorporated by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Information appearing under "Certain Relationships and Related Transactions" on pages 6 through 8 of the Energizer Holdings, Inc. Notice of Annual Meeting and Proxy Statement dated December 10, 2001, is hereby incorporated by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. 1. Documents filed with this report: a. Financial statements previously incorporated by reference under Item 8 herein. - Report of Independent Accountants. - Consolidated Statement of Earnings -- for years ended September 30, 2001, 2000 and 1999. - Consolidated Balance Sheet -- for years ended September 30, 2001 and 2000. - Consolidated Statement of Cash Flows -- for years ended September 30, 2001, 2000, and 1999. - Consolidated Statement of Shareholders Equity -- for years ended September 30, 2001, 2000, 1999 and 1998. - Notes to Financial Statements. b. Reports on Form 8-K. On July 26, 2001, a Current Report on Form 8-K was filed disclosing the Company's press release concerning its third quarter earnings. c. Exhibits Required by Item 601 of Regulation S-K (i) The following exhibits (listed by numbers corresponding to the Exhibit Table of Item 601 in Regulation S-K) are hereby incorporated by reference to Energizer's Post-Effective Amendment No. 1 to Form 10, filed April 19, 2000. 2 Agreement and Plan of Reorganization 3(i) Articles of Incorporation of Energizer Holdings, Inc. 3(ii) By-Laws of Energizer Holdings, Inc. 4 Rights Agreement between Energizer Holdings, Inc. and Continental Stock Transfer & Trust Company, as Rights Agent 10(i) Debt Assignment, Assumption and Release Agreement by and among Ralston Purina Co., Energizer Holdings, Inc. and Bank One, N.A. 10(ii) 364-Day Credit Agreement between Ralston Purina Company and Bank One, N.A. 10(iii) 5-Year Revolving Credit Agreement between Ralston Purina Company and Bank One, N.A. 10(iv) Energizer Holdings, Inc. Private Placement Note Purchase Agreement 10(v) Asset Securitization Receivable Purchase Agreement between Energizer Holdings, Inc., Falcon Asset Securitization Corporation and Bank One, N.A. 10(vi) Bridge Loan Agreement No. 1 10(vii) Bridge Loan Agreement No. 2 10(viii) Tax Sharing Agreement 10(ix) Bridging Agreement 10(x) Intellectual Property Agreement 10(xi) Energizer Holdings, Inc. Incentive Stock Plan* 10(xii) Form of Indemnification Agreements with Executive Officers and Directors * 10(xiii) Executive Savings Investment Plan* 10(xiv) Executive Health Insurance Plan* 10(xv) Executive Long Term Disability Plan* 10(xvi) Financial Planning Plan* 10(xvii) Executive Group Personal Excess Liability Insurance Plan* 10(xviii) Executive Retiree Life Plan* 10(xix) Supplemental Executive Retirement Plan* (ii) The following exhibits (listed by numbers corresponding to the Exhibit Table of Item 601 in Regulation S-K) are hereby incorporated by reference to Energizer's Quarterly Report on Form 10Q for the Quarter Ended June 30, 2000. 10(i) Form of Non-Qualified Stock Option dated May 8, 2000* 10(ii) Form of Non-Qualified Stock Option dated May 8, 2000* 10(iii) Form of Non-Qualified Stock Option dated May 8, 2000* 10(iv) Form of 2000 Restricted Stock Equivalent Award Agreement dated May 8, 2000* 10(v) Form of 2000 Restricted Stock Equivalent Award Agreement dated May 8, 2000* 10(vi) Form of 2000 Restricted Stock Equivalent Award Agreement dated May 8, 2000* (iii) The following exhibits (listed by numbers corresponding to the Exhibit Table of Item 601 in Regulation S-K) are hereby Incorporated by reference to Energizer's Annual Report on Form 10K for the Year Ended September 30, 2000. 10(i) Form of Non-Qualified Stock Option dated September 18, 2000* 10(ii) Form of 2000 Restricted Stock Equivalent Award Agreement dated September 18, 2000* 10(iii) Energizer Holdings, Inc. Non-Qualified Deferred Compensation Plan, as amended September 18, 2000* 10(iv) Form of Letter for Deferral of 2000 Bonus Award dated 3/30/00* 10(v) Form of Letter for Deferral of 2000 Bonus Award dated 12/6/00* 10(vi) Form of Indemnification Agreement* (iv) The following exhibits (listed by numbers corresponding to the Exhibit Table of Item 601 in Regulation S-K) are hereby incorporated by reference to Energizer's Quarterly Report on Form 10Q for the Quarter Ended December 31, 2000. 10(i) Form of Non-Qualified Stock Option dated November 20, 2000* 10(ii) Form of 2000 Restricted Stock Equivalent Agreement dated November 20, 2000* (v) The following exhibits (listed by numbers corresponding to the Exhibit Table of Item 601 in Regulation S-K) are filed with this report. 10(i) Amended Change of Control Employment Agreement dated November 19, 2001* 10(ii) Revised Negotiated Employment Agreement and General Release* 10(iii) Form of Energizer Holdings, Inc. Deferred Compensation Plan 2001 Election Form* 10(iv) Form of Acknowledgement for Deferral of Fiscal Year 2001 Incentive Plan Bonus* 13 Pages 10 to 56 of the Energizer Holdings, Inc. Year 2001 Annual Report, which are incorporated herein by reference, are filed herewith. 21 Subsidiaries of Registrant 23 Consent of Independent Accountants *Denotes a management contract or compensatory plan or arrangement. FINANCIAL STATEMENT AND SCHEDULES The consolidated financial statements of the Registrant have been incorporated by reference under Item 8. Financial statements of the Registrant's 50% or less owned companies have been omitted because, in the aggregate, they are not significant. Schedules not included have been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ENERGIZER HOLDINGS, INC. By /s/ J. Patrick Mulcahy ---------------------------------- J. Patrick Mulcahy Chief Executive Officer Date: December 14, 2001 SIGNATURE TITLE - --------- ----- /s/ Daniel J. Sescleifer - --------------------------- Daniel J. Sescleifer Executive Vice President and Chief Financial Officer /s/ Mark A. Schafale - ----------------------- Mark A. Schafale Vice President and Controller /s/ William P. Stiritz - ------------------------- William P. Stiritz Chairman of the Board of Directors /s/ William H. Danforth - -------------------------- Dr. William H. Danforth Director /s/ F. Sheridan Garrison - --------------------------- F. Sheridan Garrison Director /s/ R. David Hoover - ---------------------- R. David Hoover Director /s/ H. Fisk Johnson - ---------------------- H. Fisk Johnson Director /s/ Richard A. Liddy - ----------------------- Richard A. Liddy Director /s/ Joe R. Micheletto - ------------------------ Joe R. Micheletto Director /s/ Robert A. Pruzan - ----------------------- Robert A. Pruzan Director EX-10 3 doc2.txt AMENDED CHANGE OF CONTROL AGMT 11/19/01 AMENDED CHANGE OF CONTROL ------------------------- EMPLOYMENT AGREEMENT -------------------- This Amended Change of Control Employment Agreement (the "Amended Agreement") by and between Energizer Holdings, Inc. (the "Company"), a Missouri corporation, and ___________________ ("Executive"), WITNESSETH: WHEREAS, the Company, on behalf of itself, its subsidiaries and its stockholders, and any successor or surviving entity, wishes to encourage Executive's continued service and dedication in the performance of his duties, notwithstanding the possibility, threat or occurrence of a Change of Control of the Company; and WHEREAS, the Board of Directors of the Company (the "Board") believes that the prospect of a pending or threatened Change of Control inevitably creates distractions and personal risks and uncertainties for its executives, and that it is in the best interests of Company and its stockholders to minimize such distractions to certain executives, and the Board further believes that it is in the best interests of the Company to encourage its executives' full attention and dedication to their duties, both currently and in the event of any threatened or pending Change of Control; and WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued retention of certain members of the Company's management, including Executive, and the attention and dedication of management to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change of Control. NOW, THEREFORE, in order to induce Executive to remain in the employ of the Company and in consideration of his continued service to the Company, the Company agrees that Executive shall receive the benefits set forth in this Amended Agreement in the event that Executive's employment with the Company is terminated subsequent to a Change of Control in the circumstances described herein, and the parties further agree as follows: I. Definitions. ----------- The meaning of each defined term that is used in this Amended Agreement is set forth below. (a) AAA. The American Arbitration Association. --- (b) Accounting Firm. The meaning of this term is set forth in ---------------- Subsection IV(e)(ii). (c) Additional Pay. The meaning of this term is set forth in --------------- Subsection IV(b). (d) Agreement Payments. The meaning of this term is set forth in ------------------- Subsection IV(e). (e) Beneficiaries. The meaning of this term is set forth in Subsection ------------- VI(b). (f) Board. The meaning of this term is set forth in the second WHEREAS ----- clause of this Amended Agreement. (g) Business Combination. The meaning of this term is set forth in --------------------- Subsection I(i)(iii). (h) Cause. For purposes of this Amended Agreement, "Cause" shall mean ----- Executive's willful breach or failure to perform his/her employment duties. For purposes of this Subsection I(h), no act, or failure to act, on the part of Executive shall be deemed "willful" unless done, or omitted to be done, by Executive not in good faith and without reasonable belief that such action or omission was in the best interest of the Company. Notwithstanding the foregoing, Executive's employment shall not be deemed to have been terminated for Cause unless and until the Company delivers to Executive a certificate of a resolution duly adopted by the affirmative vote of not less than seventy-five percent (75%) of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to Executive and an opportunity for Executive, together with Executive's counsel, to be heard before the Board), finding that in the good faith opinion of the Board, Executive has engaged in such willful conduct and specifying the details of such willful conduct. (i) Change of Control. For purposes of this Amended Agreement, a ------------------- "Change of Control" shall be deemed to have occurred if there is a change of control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not the Company is then subject to such reporting requirement; provided that, without limitation, such a Change of Control shall be deemed to have occurred if: (i) any "person" (as such term is used in Sections 13(d) and 14(d)(2) as currently in effect, of the Exchange Act) is or becomes a "beneficial owner" (as determined for purposes of Regulation 13D-G, as currently in effect, of the Exchange Act), directly or indirectly, of securities representing twenty percent (20%) or more of the total voting power of all of the Company's then outstanding voting securities. For purposes of this Amended Agreement, the term "person" shall not include: (A) the Company or any of its Subsidiaries, (B) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Subsidiaries, or (C) an underwriter temporarily holding securities pursuant to an offering of said securities; (ii) during any period of two (2) consecutive calendar years, individuals who at the beginning of such period constitute the Board and any new director(s) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board; (iii) the stockholders of the Company approve a merger, consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless following such Business Combination: (i) all or substantially all of the individuals and entities who were the "beneficial owners" (as determined for purposes of Regulation 13D-G, as currently in effect, of the Exchange Act) of the outstanding voting securities of the Company immediately prior to such Business Combination beneficially own, directly or indirectly, securities representing more than fifty percent (50%) of the total voting power of the then outstanding voting securities of the corporation resulting from such Business Combination or the parent of such corporation (the "Resulting Corporation"); (ii) no "person" (as such term is used in Section 13(d) and 14(d)(2), as currently in effect, of the Exchange Act), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or the Resulting Corporation, is the "beneficial owner" (as determined for purposes of Regulation 13D-G, as currently in effect, of the Exchange Act), directly or indirectly, of voting securities representing twenty percent (20%) or more of the total voting power of then outstanding voting securities of the Resulting Corporation; and (iii) at least a majority of the members of the board of directors of the Resulting Corporation were members of the Board at the time of the execution of the initial agreement, or at the time of the action of the Board, providing for such Business Combination; (iv) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company; or (v) any other event that a simple majority of the Board, in its sole discretion, shall determine constitutes a Change of Control. (j) Code. For purposes of this Amended Agreement, "Code" shall mean ---- the Internal Revenue Code of 1986, as amended. (k) Company. The meaning of this term is set forth in the first ------- paragraph of this Amended Agreement and in Subsection VI(a). (l) Controlled Group. For purposes of this Amended Agreement, ----------------- "Controlled Group" shall mean the Company and all of the Company's Subsidiaries. (m) Disability. For purposes of this Amended Agreement, "Disability" ---------- shall mean an illness, injury or similar incapacity which 52 weeks after its commencement, continues to render Executive unable to perform the material and substantial duties of Executive's position or any substantially similar occupation or substantially similar employment for which Executive is qualified or may reasonably become qualified by training, education or experience. Any question as to the existence of a Disability upon which Executive and the Company cannot agree shall be determined by a qualified independent physician selected by Executive (or, if Executive is unable to make such selection, by any adult member of Executive's immediate family or Executive's legal representative), and approved by the Company, such approval not to be unreasonably withheld. The determination of such physician made in writing to both the Company and Executive shall be final and conclusive for all purposes of this Amended Agreement. (n) Employer. For purposes of this Amended Agreement, "Employer" shall -------- mean the Company or the Subsidiary, as the case may be, with which Executive has an employment relationship. (o) Exchange Act. This term shall have the meaning set forth in ------------- Subsection I(i). (p) Executive. This term shall have the meaning set forth in the first --------- paragraph of this Amended Agreement. (q) Excise Tax. This term shall have the meaning set forth in ----------- Subsection IV(e)(i). (r) Good Reason. For purposes of this Amended Agreement, "Good Reason" ----------- shall mean the occurrence, without Executive's prior express written consent, of any of the following circumstances: (i) The assignment to Executive of any duties inconsistent with Executive's status or responsibilities as in effect immediately prior to a Change of Control, including imposition of travel obligations which differ materially from required business travel immediately prior to the Change of Control; (ii) Any diminution in the status or responsibilities of Executive's position from that which existed immediately prior to the Change of Control, whether by reason of the Company ceasing to be a public company under the Exchange Act, becoming a subsidiary of a successor public company, or otherwise; (iii) (A) A reduction in Executive's annual base salary as in effect immediately before the Change of Control; or (B) the failure to pay a bonus award to which Executive is entitled under any short-term incentive plan(s) or program(s), any long-term incentive plan(s) or program(s), or any other incentive compensation plan(s) or program(s) of Company in which Executive participated immediately prior to the time of the Change of Control; (iv) A change in the principal place of Executive's employment, as in effect immediately prior to the Change of Control to a location more than fifty (50) miles distant from the location of such principal place at such time; (v) The failure by the Company to offer Executive participation in incentive compensation or stock or stock option plans on at least a substantially equivalent basis, both in terms of the nature and amount of benefits provided and the level of Executive's participation, as is then being provided by the Company to similarly situated peer executives of the Company; (vi) (A) Except as required by law, the failure by the Company to offer Executive benefits on at least a substantially equivalent basis, in the aggregate, to those then being provided by the Company to similarly situated peer executives of the Company under the qualified and non-qualified employee benefit and welfare plans of the Company, including, without limitation, any pension, deferred compensation, life insurance, medical, dental, health and accident, disability, retirement or savings plan(s) or program(s) offered by the Company; (B) the taking of any action by the Company that would, directly or indirectly, materially reduce or deprive Executive of any other perquisite or benefit then being offered by the Company to similarly situated peer executives of the Company (including, without limitation, Company-paid and/or reimbursed club memberships, financial counseling fees and the like); or (C) the failure by the Company to treat Executive under the Company's vacation policy, past practice or special agreement in the same manner and to the same extent as then being provided by the Company to similarly situated peer executives of the Company; (vii) The failure of the Company to obtain a satisfactory written agreement from any successor prior to consummation of the Change of Control to assume and agree to perform this Amended Agreement, as contemplated in Subsection VI(a); or (viii) Any purported termination by the Company of Executive's employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Subsection III(d) or, if applicable, Subsection I(h). For purposes of this Amended Agreement, no such purported termination shall be effective except as constituting Good Reason. Executive's continued employment with the Company or any Subsidiary shall not constitute a consent to, or a waiver of rights with respect to, any circumstances constituting Good Reason hereunder. Any good faith determination of "Good Reason" made by the Executive shall be conclusive for purposes of this Amended Agreement. (s) Gross-Up Payment. The meaning of this term is set forth in ----------------- Subsection IV(e)(i). (t) Notice of Termination. The meaning of this term is set forth in ----------------------- Subsection III(d). (u) Other Payments. The meaning of this term is set forth in --------------- Subsection IV(e)(i). (v) Payments. The meaning of this term is set forth in Subsection IV(e)(i). -------- (w) Resulting Corporation. The meaning of this term is set forth in ---------------------- Subsection I(i)(iii). (x) Retirement. For purposes of this Amended Agreement, "Retirement" ---------- shall mean Executive's voluntary termination of employment with the Company, other than for Good Reason, and in accordance with the Company's retirement policy generally applicable to its employees or in accordance with any prior or contemporaneous retirement agreement or arrangement between Executive and the Company. (y) Severance Bonus Amount. For purposes of this Amended Agreement, ------------------------ "Severance Bonus Amount" means the greatest of (i) an amount determined by averaging the percentages of Executive's base salary which were actually awarded to Executive as incentive bonuses under short-term incentive plans of the Company or any of its Subsidiaries for the five most recently completed fiscal years prior to the fiscal year in which the Change of Control occurs, and multiplying such average percentage by the greater of (A) Executive's annual base salary in effect immediately prior to the Termination Date, or (B) Executive's annual base salary in effect as of the date of the Change of Control; (ii) Executive's Target Bonus for the fiscal year in which the Change of Control occurs, or (iii) the Executive's Target Bonus for the fiscal year in which the Termination Date occurs. For purposes of the calculation in (i) above, if the five most recently completed fiscal years include any periods during which Executive was awarded an incentive bonus under any short-term incentive plans of Ralston Purina Company, such bonuses shall be included in determining the average percentage of base salary. If Executive was not employed by the Company or any of its Subsidiaries, or by Ralston Purina Company, for the entire five-year period, the average shall be determined only for those years during which Executive was so employed. (z) Subsidiary. For purposes of this Amended Agreement, "Subsidiary" ---------- shall mean any corporation of which fifty percent (50%) or more of the voting stock is owned, directly or indirectly, by the Company. (aa) Target Bonus. For purposes of this Amended Agreement, "Target ------------- Bonus" means the assigned bonus target for the Executive under any short-term incentive plan(s) of the Company, multiplied by his or her base salary, for the relevant fiscal year. If the Executive's base salary is changed during the relevant fiscal year, the Target Bonus shall be calculated by multiplying the Executive's assigned bonus target by the highest base salary in effect during that fiscal year. (bb) Terminate(d) or Termination. The meaning of this term is set ----------------------------- forth in Subsection III(c). (cc) Termination Date. For purposes of this Amended Agreement, ----------------- "Termination Date" shall mean: (i) If Executive's employment is terminated for Disability, thirty (30) calendar days after Notice of Termination is given (provided that Executive shall not have returned to the full-time performance of his/her duties during such thirty-day period); and (ii) If Executive's employment is terminated for Cause or Good Reason or for any reason other than death or Disability, the date specified in the Notice of Termination (which in the case of a termination for Cause shall not be less than thirty (30) calendar days and in the case of a termination for Good Reason shall not be less than thirty (30) calendar days nor more than sixty (60) calendar days, respectively, from the date such Notice of Termination is given). II. Term of Agreement. ------------------- (a) General. Upon execution by Executive, this Amended Agreement shall ------- commence effective as of November 19, 2001. This Amended Agreement shall continue in effect through April 1, 2002; provided, however, that commencing on April 1, 2002, and every second April 1 thereafter, the term of this Amended Agreement shall automatically be extended for two (2) additional years unless, not later than ninety (90) calendar days prior to the date on which this Amended Agreement otherwise automatically would be extended, the Company shall have given notice to Executive that it does not wish to extend this Amended Agreement; provided further, however, that if a Change of Control shall have occurred during the original or any extended term of this Amended Agreement, this Amended Agreement shall continue in effect for a period of twenty-four (24) months beyond the month in which the Change of Control occurred. The term of this Amended Agreement automatically shall be extended for two (2) additional years from the date of any public announcement of an event that would constitute a Change of Control as defined in this Amended Agreement; provided, however, that if any such announced event is not consummated within that two (2) year period, the original extended term thereafter shall apply. (b) Disposition of Employer. In the event Executive is employed by a ------------------------- Subsidiary, the terms of this Amended Agreement shall expire if such Subsidiary is sold or otherwise disposed of prior to the date on which a Change of Control occurs, unless Executive continues in employment with the Controlled Group after such sale or other disposition. If Executive's Employer is sold or disposed of on or after the date on which a Change of Control occurs, this Amended Agreement shall continue through its original term or any extended term then in effect. (c) Deemed Change of Control. If Executive's employment with Employer ------------------------- is terminated prior to the date on which a Change of Control occurs, and such termination was at the request of a third party who has taken steps to effect a Change of Control, or otherwise was in connection with the Change of Control, then for all purposes of this Amended Agreement, a Change of Control shall be deemed to have occurred prior to such termination. (d) Expiration of Agreement. No termination or expiration of this ------------------------- Amended Agreement shall affect any rights, obligations or liabilities of either party that shall have accrued on or prior to the date of such termination or expiration. III. Benefits Following Change of Control. ---------------------------------------- (a) Accelerated Vesting in All Equity. If a Change of Control shall ------------------------------------- have occurred, Executive shall be entitled to, immediately upon the date of the Change of Control, accelerated vesting of all unvested stock options and restricted stock that have been granted or sold to the Executive by the Company under any restricted terms, such that following said acceleration, all restrictions as to the sale and ownership of this equity, as imposed by the Company, shall have lapsed. (b) Prorated Payout of Short Term Bonus. If a Change of Control shall ------------------------------------ have occurred, Executive shall be entitled to, immediately upon the date of the Change of Control, payment in full of Executive's prorated bonus for the fiscal year in which the Change of Control occurs. The prorated bonus amount shall be calculated as Executive's Target Bonus for the fiscal year in which the Change of Control occurs, or, if greater, the actual bonus awarded to Executive under any short-term incentive plan(s) of the Company for the fiscal year immediately preceding the fiscal year in which the Change of Control occurs, divided by 365 and multiplied by the number of calendar days in said year immediately up to the day on which the Change of Control occurs. (c) Entitlement to Benefits Upon Termination. If a Change of Control ------------------------------------------ shall have occurred, Executive shall be entitled to, in addition to the benefits described in Subsections III(a) and (b), the benefits provided in Section IV hereof upon the subsequent termination of his/her employment with the Company within two (2) years after the date of the Change of Control unless such termination is (i) a result of Executive's death or Retirement, (ii) for Cause, (iii) a result of Executive's Disability, or (iv) by Executive other than for Good Reason. For purposes of this Amended Agreement, "Termination" shall mean a termination of Executive's employment that is not as a result of Executive's death, Retirement or Disability and (x) if by the Company, is not for Cause, or (y) if by Executive, is for Good Reason. (d) Notice of Termination. Any purported termination of Executive's ----------------------- employment by either the Company or Executive shall be communicated by written Notice of Termination to the other party hereto in accordance with Section VIII. For purposes of this Amended Agreement, a "Notice of Termination" shall mean a written notice that indicates the specific provision(s) of this Amended Agreement relied upon and sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision(s) so indicated. If Executive's employment shall be terminated by the Company for Cause or by Executive for other than Good Reason, the Company shall pay Executive his/her full base salary through the Termination Date at the salary level in effect at the time Notice of Termination is given and shall pay any amounts to be paid to Executive pursuant to any other compensation or stock or stock option plan(s), program(s) or employment agreement(s) then in effect, and the Company shall have no further obligations to Executive under this Amended Agreement. If within thirty (30) calendar days after any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the grounds for termination, then, notwithstanding the meaning of "Termination Date" set forth in Subsection I(aa), the Termination Date shall be the date on which the dispute is finally resolved, whether by mutual written agreement of the parties or by a decision rendered pursuant to Section XI; provided that the Termination Date shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, the Company will continue to pay Executive his/her full compensation including, without limitation, base salary, bonus, incentive pay and equity grants, in effect when the notice of the dispute was given, and continue Executive's participation in all benefits plans or other perquisites in which Executive was participating, or which Executive was enjoying, when the Notice of Termination giving rise to the dispute was given, until the dispute is finally resolved. Amounts paid under this Subsection III(d) are in addition to and not in lieu of all other amounts due to Executive under this Amended Agreement and shall not be offset against or reduce any other amounts due to Executive under this Amended Agreement. IV. Compensation Upon a Termination. ---------------------------------- Following a Change of Control, upon Executive's Termination, Executive shall be entitled to the following benefits, provided that such Termination occurs during the two (2) year period immediately following the date of the Change of Control: (a) Standard Benefits. The Company shall pay Executive his/her full ------------------ base salary through the Termination Date at the rate in effect at the time the Notice of Termination is given, no later than the second business day following the Termination Date, plus all other amounts to which Executive is entitled under any compensation plan(s) or program(s) of the Company applicable to Executive at the time such payments are due. Without limitation, amounts payable pursuant to this Subsection IV(a) shall include, pursuant to the express terms of any short-term incentive plan(s) in which Executive participates or otherwise, Executive's Target Bonus for the then-current fiscal year, pro-rated to the Termination Date. If the Termination Date shall fall within the same short-term incentive period, as set forth by the express terms of any of the short-term incentive plan(s) in which Executive participates or otherwise, as of the Change of Control Date, and Executive has previously received the prorated bonus amount as described in Subsection III(b), then Executive shall be paid the difference between the prorated bonus amount as described here in Subsection IV(a) and the prorated bonus amount described in Subsection III(b). (b) Additional Benefits. The Company shall pay to Executive as -------------------- additional pay ("Additional Pay"), the product of two (2) multiplied by the sum of (x) the greater of (i) Executive's annual base salary in effect immediately prior to the Termination Date, or (ii) Executive's annual base salary in effect as of the date of the Change of Control, and (y) Executive's Severance Bonus Amount. The Company shall pay the Additional Pay to Executive in a lump sum, in cash, not later than the fifteenth calendar day following the Termination Date. The Company shall maintain for Executive all such perquisites and fringe benefits enjoyed by Executive immediately prior to the Termination Date as are approved in writing by the Company's Chief Executive Officer for such period as is specified in such writing. (c) Retirement Plan Benefits. If not already vested, Executive shall -------------------------- be deemed fully vested as of the Termination Date in any Company retirement plan(s) or other written agreement(s) between Executive and the Company relating to pay or other benefits upon retirement in which Executive was a participant, party or beneficiary immediately prior to the Change of Control, and any additional plan(s) or agreement(s) in which such Executive became a participant, party or beneficiary thereafter. In addition to the foregoing, for purposes of determining the amounts to be paid to Executive under such plan(s) or agreement(s), the years of service with the Company and the age of Executive under all such plans and agreements shall be deemed increased by twenty-four months (24). For purposes of this Subsection IV(c), the term "plan(s)" includes, without limitation, the Company's qualified pension plan, non-qualified pension plans, and any companion, successor or amended plan(s), and the term "agreement(s)" encompasses, without limitation, the terms of any offer letter(s) leading to Executive's employment with the Company where Executive was a signatory thereto, any written amendment(s) to the foregoing and any subsequent agreements on such matters. In the event the terms of the plans referenced in this Subsection IV(c) do not for any reason coincide with the provisions of this Subsection IV(c) (e.g., if plan amendments would cause disqualification of qualified plans), Executive shall be entitled to receive from the Company, under the terms of this Amended Agreement, an amount equal to all amounts Executive would have received, at the time Executive would have received such amounts, had all such plans continued in existence as in effect on the date of this Amended Agreement after being amended to coincide with the terms of this Subsection IV(c). (d) Health and Other Benefits. Following the Termination Date, the ---------------------------- Company shall continue to provide, for a period of twenty-four (24) months, substantially the same level of health, vision and dental benefits to Executive and Executive's eligible dependents that the Company would provide to Executive and Executive's eligible dependents if Executive were first eligible for retiree health, vision and dental benefits immediately prior to the Change of Control. The eligibility of Executive's dependents shall be determined by the terms of any retiree health, vision and dental benefit plan(s) or program(s) in effect immediately prior to the Change of Control. (e) Gross-Up Payments. ------------------- (i) In the event any payment(s) or the value of any benefit(s) received or to be received by Executive in connection with Executive's Termination or contingent upon a Change of Control (whether received or to be received pursuant to the terms of this Amended Agreement (the "Agreement Payments") or of any other plan, arrangement or agreement of the Company, its successors, any person whose actions result in a Change of Control, or any person affiliated with any of them (or which, as a result of the completion of the transaction(s) causing a Change of Control, will become affiliated with any of them) ("Other Payments" and, together with the Amended Agreement Payments, the "Payments")), are determined, under the provisions of Subsection IV(e)(ii), to be subject to an excise tax imposed by Section 4999 of the Code (any such excise tax, together with any interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), as determined in this Subsection IV(e), the Company shall pay to Executive an additional amount such that the net amount retained by Executive, after any federal, state, and local income and employment tax and Excise Tax payable by Executive upon the Payment(s) provided for by this Subsection IV(e)(i), and any interest, penalties or additions to tax payable by Executive with respect thereto shall be equal to the Excise Tax imposed on the Payments (the "Gross-Up Payment(s)"). The intent of the parties is that the Company shall be responsible in full for, and shall pay, any and all Excise Tax on any Payments and Gross-Up Payment(s) and any income and all excise and employment taxes (including, without limitation, penalties and interest) imposed on any Gross-Up Payment(s) as well as any loss of deduction caused by or related to the Gross-Up Payment(s). (ii) All determinations required to be made under this Subsection IV(e), including, without limitation, whether and when a Gross-Up Payment is required, and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determinations, unless otherwise set forth in this Amended Agreement, shall be made by a nationally recognized certified public accounting firm selected by the Company and reasonably acceptable to Executive (the "Accounting Firm"). For purposes of determining the amount of any Gross-Up Payment, Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made, and state and local income taxes at the highest marginal rate of taxation in the state and locality of Executive's residence on the Termination Date, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. The Company shall cause the Accounting Firm to provide detailed supporting calculations to the Company and Executive within fifteen (15) business days after notice is given by Executive to the Company that any or all of the Payments have occurred, or such earlier time as is requested by the Company. Within two (2) business days after such notice is given to the Company, the Company shall instruct the Accounting Firm to timely provide the data required by this Subsection IV(e)(ii) to Executive. All fees and expenses of the Accounting Firm shall be paid in full by the Company. Any Gross-Up Payment as determined pursuant to this Subsection IV(e)(ii) shall be paid by the Company to the Executive within five (5) business days after receipt of the Accounting Firm's determination, net of applicable withholding taxes. If the Accounting Firm determines that there is substantial authority (within the meaning of Section 6662 of the Code) that no Excise Tax is payable by Executive, the Accounting Firm shall furnish Executive with a written opinion that failure to disclose or report the Excise Tax on Executive's federal income tax return will not constitute a substantial understatement of tax or be reasonably likely to result in the imposition of a negligence or any other penalty. Any determination by the Accounting Firm shall be binding upon the Company and Executive in the absence of material mathematical or legal error. As a result of the uncertainty in the application of Section 4999 of the Code at the time the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments will not have been made by the Company that should have been made or that Gross-Up Payments will have been made that should not have been made, in each case, consistent with the calculations required to be made hereunder. In the event the Company exhausts its remedies pursuant to Subsection IV(e)(iii) below and Executive is thereafter required to make a payment of any Excise Tax or any interest, penalties or addition to tax related thereto, the Accounting Firm shall determine the amount of underpayment of Excise Taxes that has occurred and any such underpayment and interest, penalties or addition to tax shall be promptly paid by the Company to Executive along with such additional amounts described in Section (IV)(e)(i). In the event the Accounting Firm determines that an overpayment of Gross-Up Payment(s) has occurred, any such overpayment shall be treated for all purposes as a loan to Executive with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code, due and payable within ninety (90) days after written demand to Executive by the Company; provided, however, that Executive shall have no duty or obligation whatsoever to repay such loan if Executive's receipt of the overpayment, or any portion thereof, is included in Executive's income and Executive's repayment of the same is not deductible by Executive for federal and state income tax purposes. (iii) Executive shall notify the Company in writing of any claim of which Executive is aware by the Internal Revenue Service or state or local taxing authority, that, if successful, would result in any Excise Tax or an underpayment of any Gross-Up Payment(s). Such notice shall be given as soon as practicable but no later than fifteen (15) business days after Executive is informed in writing of the claim by the taxing authority and Executive shall provide written notice of the Company of the nature of the claim, the administrative or judicial appeal period, and the date on which any payment of the claim must be paid. Executive shall not pay any portion of the claim prior to the expiration of the thirty (30) day period following the date on which Executive gives such notice to the Company (or such shorter period ending on the date that any amount under the claim is due). If the Company notifies Executive in writing prior to the expiration of such thirty (30) day period that it desires to contest the claim, Executive shall: (A) give the Company any information reasonably requested by the Company relating to the claim; (B) take such action in connection with contesting the claim as the Company shall reasonably request in writing from time to time, including without limitation, accepting legal representation concerning the claim by an attorney selected by the Company who is reasonably acceptable to Executive; and (C) cooperate with the Company in good faith in order to effectively contest the claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including, without limitation, additional interest and penalties and attorneys' fees) incurred in such contests and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including, without limitation, interest and penalties thereon) imposed as a result of such representation. Without limitation upon the foregoing provisions of this Subsection IV(e)(iii), except as provided below, the Company shall control all proceedings concerning such contest and, in its sole opinion, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority pertaining to the claim. At the written request of the Company and upon payment to Executive of an amount at least equal to any amount necessary to obtain the jurisdiction of the appropriate taxing authority and sue for a refund, Executive agrees to prosecute in cooperation with the Company any contest of a claim to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company requests Executive to pay the claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an interest-free basis, and shall indemnify and hold Executive harmless on an after-tax basis, from any Excise Tax or income tax (including, without limitation, interest and penalties thereon) imposed on such advance or for any imputed income on such advance. Any extension of the statute of limitations relating to assessment of any Excise Tax for the taxable year of Executive which is the subject of the claim is to be limited solely to the claim. Furthermore, the Company's control of the contest shall be limited to issues for which a Gross-Up Payment would be payable hereunder. Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (iv) If after the receipt by Executive of an amount advanced by the Company pursuant to Subsection IV(e)(iii) above, Executive receives any refund of a claim or any additional amount that was necessary to obtain jurisdiction, Executive shall promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Subsection IV(e)(iii) above, a determination is made that Executive shall not be entitled to any refund of the claim, and the Company does not notify Executive in writing of its intent to contest such denial of refund of a claim prior to the expiration of thirty (30) calendar days after such determination, then the portion of such advance attributable to a claim shall be forgiven by the Company and shall not be required to be repaid by Executive. The amount of such advance attributable to a claim shall offset, to the extent thereof, the amount of the underpayment required to be paid by the Company to Executive. (f) Legal Fees and Expenses. The Company shall pay to Executive all -------------------------- legal fees and expenses as and when incurred by Executive in connection with this Amended Agreement, including all such fees and expenses, if any, incurred in contesting or disputing any Termination or in seeking to obtain or enforce any right or benefit provided by this Amended Agreement, regardless of the outcome, unless, in the case of a legal action brought by or in the name of Executive, a decision is rendered pursuant to Section XI, or in any other proper legal proceeding, that such action was not brought by Executive in good faith. (g) No Mitigation. Executive shall not be required to mitigate the -------------- amount of any payment provided for in this Section IV by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section IV be reduced by any compensation earned by Executive as the result of employment by another employer or by retirement or other benefits received from whatever source after the Termination Date or otherwise, except as specifically provided in this Section IV. The Company's obligation to make payments to Executive provided for in this Amended Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action that the Company or Employer may have against Executive or other parties. V. Death and Disability Benefits. -------------------------------- In the event of the death or Disability of Executive after a Change of Control, Executive, or in the case of death, Executive's Beneficiaries (as defined below in Subsection VI(b)), shall receive the benefits to which Executive or his/her Beneficiaries are entitled under this Amended Agreement and any and all retirement plans, pension plans, disability policies and other applicable plans, programs, policies, agreements or arrangements of the Company. VI. Successors; Binding Agreement. ------------------------------- (a) Obligations of Successors. The Company will require any successor -------------------------- (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Amended Agreement in the same manner and to the same extent that the Company is required to perform it. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Amended Agreement and shall entitle Executive to compensation from the Company in the same amount and on the same terms as Executive would be entitled hereunder if Executive had terminated employment for Good Reason following a Change of Control, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Termination Date. As used in this Amended Agreement, the term "Company" shall mean Company, including any surviving entity or successor to all or substantially all of its business and/or assets and the parent of any such surviving entity or successor. (b) Enforceable by Beneficiaries. This Amended Agreement shall inure ------------------------------ to the benefit of and be enforceable by Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees (the "Beneficiaries"). In the event of the death of Executive while any amount would still be payable hereunder if such death had not occurred, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Amended Agreement to Executive's Beneficiaries. (c) Employment. Except in the event of a Change of Control and, ---------- thereafter, only as specifically set forth in this Amended Agreement, nothing in this Amended Agreement shall be construed to (i) limit in any way the right of the Company or a Subsidiary to terminate Executive's employment at any time for any reason or for no reason; or (ii) be evidence of any agreement or understanding, expressed or implied, that the Company or a Subsidiary will employ Executive in any particular position, on any particular terms or at any particular rate of remuneration. VII. Confidential Information. ------------------------- Executive shall hold in fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company, the Subsidiaries and their respective businesses, which shall have been obtained during Executive's employment with the Employer and which shall not be public knowledge (other than by acts by Executive or his/her representatives in violation of this Amended Agreement). After termination of Executive's employment with the Company or any Employer within the Controlled Group, Executive shall not, without prior written consent of the Company or the Employer, communicate or divulge any such information, knowledge or data to anyone other than the Company, the Employer or those designated by them. In no event shall an asserted violation of this Section VII constitute a basis for deferring or withholding any amounts otherwise payable to Executive under this Amended Agreement. VIII. Notice. ------ All notices and communications including, without limitation, any Notice of Termination hereunder, shall be in writing and shall be given by hand delivery to the other party, by registered or certified mail, return receipt requested, postage prepaid, or by overnight delivery service, addressed as follows: If to Executive: Name Title Company Address Address If to the Company: Energizer Holdings, Inc. 533 Maryville University Drive St. Louis, MO 63141 Attn: General Counsel or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be deemed given and effective when actually received by the addressee. IX. Miscellaneous. ------------- No provision of this Amended Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Executive and the Company's Chief Executive Officer or other authorized officer designated by the Board or an appropriate committee of the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any conditions or provision of this Amended Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Amended Agreement. The validity, interpretation, construction and performance of this Amended Agreement shall be governed by the laws of the State of Missouri. All references to sections of the Code or the Exchange Act shall be deemed also to refer to any successor provisions of such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law. The obligations of the Company under Sections IV and V shall survive the expiration of the term of this Amended Agreement. X. Validity. -------- The invalidity or unenforceability of any provision of this Amended Agreement shall not affect the validity or enforceability of any other provision of this Amended Agreement, which shall remain in full force and effect. XI. Arbitration. ----------- Executive may agree in writing with the Company (in which case this Article XI shall have effect but not otherwise) that any dispute that may arise directly or indirectly in connection with this Amended Agreement, Executive's employment or the termination of Executive's employment, whether arising in contract, statute, tort, fraud, misrepresentation, discrimination or other legal theory, shall be resolved by arbitration in City, State under the applicable rules and procedures of the AAA. The only legal claims between Executive and the Company or any Subsidiary that would not be included in this agreement to arbitration are claims by Executive for workers' compensation or unemployment compensation benefits, claims for benefits under a Company or Subsidiary benefit plan if the plan does not provide for arbitration of such disputes, and claims by Executive that seek judicial relief in the form of specific performance of the right to be paid until the Termination Date during the pendency of any applicable dispute or controversy. If this Article XI is in effect, any claim with respect to this Amended Agreement, Executive's employment or the termination of Executive's employment must be established by a preponderance of the evidence submitted to an impartial arbitrator. A single arbitrator engaged in the practice of law shall conduct any arbitration under the applicable rules and procedures of the AAA. The arbitrator shall have the authority to order a pre-hearing exchange of information by the parties including, without limitation, production of requested documents, and examination by deposition of parties and their authorized agents. If this Article XI is in effect, the decision of the arbitrator: (i) shall be final and binding, (ii) shall be rendered within ninety (90) days after the impanelment of the arbitrator, and (iii) shall be kept confidential by the parties to such arbitration. The arbitration award may be enforced in any court of competent jurisdiction. The Federal Arbitration Act, 9 U.S.C. 1 et seq., not state law, shall govern the arbitrability of all claims. XII. Entire Agreement. This Amended Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof, and supercedes and replaces, in its entirety, the [Amended Change of Control Employment Agreement dated as of February 1, 2001] [Change of Control Employment Agreement dated as of September 17, 2001]. Upon the execution of this Amended Agreement by the Executive and the Company, said prior agreement shall be considered null and void and of no further effect. IN WITNESS WHEREOF, the Company and Executive have executed this Amended Agreement effective as of the 19th day of November, 2001. Energizer Holdings, Inc. Attest: By:___________________________________ By:_____________________ J. Patrick Mulcahy Timothy L. Grosch Chief Executive Officer Secretary ______________________________________ ______________________ Executive Witness RECIPIENTS J. P. Mulcahy P. C. Mannix W. M. Klein R. J. Rose D. J. Sescleifer H. L. Strachan P. J. Conrad J. W. McClanathan EX-10 4 doc3.txt REV. NEG. EMPLOY AGMT & RELEASE REVISED NEGOTIATED EMPLOYMENT AGREEMENTAND GENERAL RELEASE ---------------------------------------------------------- This Revised Negotiated Employment Agreement and General Release (referred to as "Revised Negotiated Employment Agreement") is entered into this ____ day of ________________, 2000, by and between Daniel E. Corbin, (referred to as "MR. CORBIN") and Eveready Battery Company, Inc. (as defined in Paragraph 22 and referred to as "COMPANY"). WHEREAS, MR. CORBIN is a long-term employee of the COMPANY in a key position; and WHEREAS, COMPANY has decided to make management changes in response to business developments, but would benefit from MR. CORBIN's assistance in transitioning to these changes; and WHEREAS, MR. CORBIN and COMPANY are amicably limiting and concluding their employment relationship and wish to enter into this Agreement; NOW THEREFORE, in consideration of the mutual promises contained in this Revised Negotiated Employment Agreement, the parties agree as follows: 1. Employment Terms, subject to Paragraphs 4, 5 and 6 below: ----------------------------------------------------------------- a. MR. CORBIN shall execute a written resignation from his position as an officer of Energizer Holdings, Inc. and also as an officer and/or director of Eveready Battery Company, Inc. and any affiliates or subsidiaries of Energizer Holdings, Inc. effective upon execution of this Revised Negotiated Agreement. This resignation letter shall be in line with COMPANY's specifications and submitted to the Chief Executive Officer of COMPANY upon execution of this Revised Negotiated Employment Agreement. b. Upon the effective date of the resignation set out in Paragraph 1(a) above, through January 1, 2003, MR. CORBIN will be employed by COMPANY in the position of Vice President, Special Projects, for Eveready Battery Company, Inc. MR. CORBIN will be paid the base monthly salary he earned as of October 1, 2000. MR. CORBIN will perform those duties or special projects that are specifically requested by the Chief Executive Officer of the Company or his designee. MR. CORBIN shall make arrangements to be available for questions and/or special projects, as assigned at COMPANY's discretion, on business days, except scheduled COMPANY holidays and the periods of November 22, 2000 through December 31, 2000; January 2, 2001 through February 6, 2001; and January 2, 2002 through February 6, 2002, which time periods shall constitute and be deemed MR. CORBIN's remaining 2000 paid time off allotment and the full annual allotment of paid time off (PTO) for 2001 and 2002. MR. CORBIN may perform such duties and projects from his residence or any other location, except when MR. CORBIN and COMPANY mutually agree that to do so would negatively impact COMPANY's operations. c. MR. CORBIN agrees satisfactorily to perform his duties as assigned without disruption to COMPANY operations or injury to COMPANY's business operations or reputation. d. MR. CORBIN will receive a bonus payment of one hundred twenty-five thousand ($125,000), less legally required deductions, for Fiscal Year 2001 and a bonus payment of one hundred twenty-five thousand ($125,000), less legally required deductions, for Fiscal Year 2002. MR. CORBIN will not be eligible for or receive a bonus payment for Fiscal Year 2003. MR. CORBIN will receive the payments set out in this subparagraph on November 30, 2001 and November 30, 2002. This Revised Negotiated Agreement will not be deemed to prohibit or affect Mr. CORBIN's eligibility for or receipt of a bonus payment, pursuant to the COMPANY's Incentive Pay Program, for Fiscal Year 2000. e. The terms of the Retention Agreement entered into by COMPANY with MR. CORBIN on September 17, 1999, will remain in full effect and nothing in this Revised Negotiated Employment Agreement will be deemed to affect MR. CORBIN's eligibility for any payment pursuant to that Retention Agreement. f. Effective January 4, 2002, MR. CORBIN no longer will be required to be available for work or to perform any further duties for COMPANY, except as may be specifically requested by the Chief Executive Officer of COMPANY, so that MR. CORBIN may begin to seek opportunities for employment elsewhere. g. Effective January 1, 2003, MR. CORBIN's employment will be terminated, he will be removed from the active payroll and may, if he so chooses, transfer to retiree status at that time. h. MR. CORBIN may retain possession of the COMPANY-provided cellular phone in his possession as of October 1, 2000. MR. CORBIN will switch the mailing address for the bill to his home and, as needed, will submit an expense report to COMPANY for all charges related to COMPANY's business. The COMPANY agrees that the cellular telephone number shall be transferred to MR. CORBIN and the parties agree to execute any documents required to complete such transfer. i. No later than January 3, 2001, MR. CORBIN may elect to keep the office furniture assigned to him as of October 1, 2000. It is understood and agreed that the fair market value of said furnishings shall be reflected in MR. CORBIN's W-2 as income to MR. CORBIN and that MR. CORBIN shall be solely responsible for arranging to have such furniture moved to whatever location is selected by MR. CORBIN. j. Benefit Plan Participation. i. While he is on the payroll, MR. CORBIN shall continue to be able to participate in the benefit plans offered to other salaried employees of COMPANY and to other executives at MR. CORBIN's job grade and title. It is understood and agreed that nothing in this paragraph shall be construed to prevent COMPANY, its affiliates or its subsidiaries from terminating, modifying or reducing any of the benefit plans or incentive programs offered to employees of COMPANY during the course of this Revised Negotiated Employment Agreement, as long as such action is not directed solely at MR. CORBIN. ii. MR. CORBIN is not entitled to and will not receive any other payments, including, but not limited to, severance, incentive or termination payments, from COMPANY or its affiliates or subsidiaries and will be deemed ineligible to participate in any such programs except as specifically identified in this Agreement. k. Within two weeks after his removal from the payroll, MR. CORBIN will be paid for any unused, banked, or carryover paid time off (PTO) days, in accordance with Eveready policy in effect at the time. MR. CORBIN will not earn or be entitled to any paid time off otherwise allocated on January 1, 2003, for time on the payroll in 2002. 2. Deferred Compensation, Stock Awards, Restricted Stock Equivalent -------------------------------------------------------------------- Award: -- a. The terms of COMPANY's Deferred Compensation Plan will apply to MR. CORBIN's termination of employment and retirement in 2003, or earlier date pursuant to Paragraphs 4, 5 or 6 below, in accordance with that status as of his payroll removal date. It is understood that nothing in this paragraph shall be construed to prevent COMPANY from terminating, modifying or reducing the terms of its Deferred Compensation Plan during the course of this Revised Negotiated Employment Agreement, as long as such action is not directed solely at MR. CORBIN. b. MR. CORBIN previously was granted certain non-qualified stock options. The terms of those stock option agreements will continue to apply, in accordance with MR. CORBIN's status as of his payroll removal date. c. COMPANY and MR. CORBIN hereby mutually agree that the Restricted Stock Equivalent Award Agreement previously entered into on May 8, 2000, between COMPANY and MR. CORBIN is, upon mutual execution of this Negotiated Employment Agreement, void and of no further effect, that MR. CORBIN shall have no further rights under that Restricted Stock Equivalent Award Agreement, and that MR. CORBIN's deferral into COMPANY's Deferred Compensation Plan of his payment pursuant to the Retention Agreement entered into by COMPANY with MR. CORBIN on September 17, 1999, shall be subject solely to the terms of COMPANY's Deferred Compensation Plan, specifically including, but not limited to, those provision establishing and governing matching contributions by COMPANY. The parties acknowledge that the matching contribution rate under the terms of the Deferred Compensation Plan as of the execution of this Revised Negotiated Employment Agreement is 25% of eligible deferred compensation, subject to all other plan provisions, and also acknowledge that the COMPANY may amend this or any other provision of the Deferred Compensation Plan from time to time, in its business discretion and in accordance with plan procedures. 3. Pension Benefit: ---------------- MR. CORBIN's retirement benefits under the Energizer Holdings, Inc. Retirement Plan and the Supplemental Retirement Plan, or any successor plans, will be calculated in accordance with the terms of each plan taking into account all relevant terms of such plans including, but not limited to, reduction factors for early retirement and social security offsets. It is understood that nothing in this paragraph shall be construed to prevent COMPANY or its affiliates and subsidiaries from reducing the rate of future accruals or terminating or modifying the terms of such retirement plans or successor plans, as long as such action is not directed solely at MR. CORBIN. 4. MR. CORBIN and COMPANY understand and agree that, if MR. CORBIN resigns or obtains and begins employment with another company on or prior to -------------------- January 1, 2003, COMPANY will terminate MR. CORBIN immediately by removing MR. CORBIN from COMPANY's payroll. Upon termination, MR. CORBIN's benefits as an active employee will cease. Any remaining salary continuation through January 1, 2003, and bonus payment provided for in Paragraph 1(d), will be paid to MR. CORBIN in a lump sum, less legally required deductions, within two weeks of MR. CORBIN's last day on the payroll. Part-time employment or self-employment or occasional consultation shall not constitute beginning employment under this Paragraph, subject to the confidentiality and non-competition obligations set out in Paragraphs 8, 9, 10 and 11 below. 5. MR. CORBIN and COMPANY understand and agree that, if MR. CORBIN obtains and begins employment within COMPANY or any of its affiliates or --------------- subsidiaries prior to January 1, 2003 in another position, this Revised Negotiated Employment Agreement will become null and void and, unless a new employment contract is executed in writing, COMPANY no longer will be obligated in any way to provide employment MR. CORBIN on its payroll for any specific amount of time in the future or to pay the bonus payments set out in Paragraph 1(d) or any bonus payment. 6. In the event of MR. CORBIN's death prior to January 1, 2003, the COMPANY agrees to the following: a. to pay a lump sum payment equivalent to the amount of any remaining salary continuation through January 1, 2003, pursuant to Paragraph 1(b, f, and g) above, payable to MR. CORBIN's designated beneficiary, or in lieu of designated beneficiary, to MR. Corbin's estate within thirty days of notification of MR. Corbin's death. b. to pay the bonus payments provided for in paragraph 1(d) above, payable to MR. CORBIN's designated beneficiary, or in lieu of designated beneficiary, to MR. CORBIN's estate within thirty days of notification of MR. CORBIN's death. 7. Obligation of MR. CORBIN: --------------------------- a. MR. CORBIN shall notify COMPANY within two days of being offered and accepting another position, if MR. CORBIN accepts a position to commence before January 1, 2003; b. MR. CORBIN waives all claims to future employment with COMPANY except as provided in this Revised Negotiated Employment Agreement. MR. CORBIN will not seek re-employment with COMPANY and, if a third party identifies MR. CORBIN as a candidate, COMPANY may reject such application. c. MR. CORBIN shall cooperate with and assist COMPANY whenever reasonably possible, so that all of his duties, responsibilities and pending matters can be transferred in an orderly way; d. MR. CORBIN shall provide COMPANY with full cooperation and assistance, upon COMPANY's request, including testifying at all trials, when MR. CORBIN might have relevant information. COMPANY shall pay MR. CORBIN, at an hourly rate derived from MR. CORBIN's base monthly salary during the term of this Revised Negotiated Employment Agreement, for time expended in preparation of trial, including but not limited to review of records and files, attendance at and review of depositions, attendance at conferences with counsel, attendance at trial and assistance with post trial and appeal issues and matters and for any reasonable and necessary expenses because of his requested cooperation with and assistance to COMPANY. 8. Confidentiality of Information: -------------------------------- MR. CORBIN acknowledges that the information, observations and data relating to the formulation, processing, manufacturing, sale and marketing of COMPANY's battery and battery related products obtained by MR. CORBIN during the course of MR. CORBIN's employment with COMPANY, its subsidiaries and affiliated companies and its predecessors (the "Confidential Information") are confidential and the exclusive property of COMPANY/or such companies. MR. CORBIN agrees that he will not disclose to any unauthorized persons or use for MR. CORBIN's own account or for the benefit of any third party (other than COMPANY) any of such "Information" without COMPANY's prior written consent, unless and to the extent that such "Confidential Information" became generally known to and available for use by the public other than as a result of MR. CORBIN's acts or omissions to act. Such "Confidential Information", observations and data shall include, but not be limited to, COMPANY's and its affiliates current and planned information systems, the names, addresses or particular desires or needs of its customers, the bounds of its markets, the prices charged for its services or products, its market share, marketing strategies and promotional efforts in any market, information concerning product development, manufacturing processes, research and development projects, formulas, inventions and compilations of information, records or specifications, information concerning future product or market developments, financial information, information regarding suppliers and costs of raw materials and other supplies, financing programs, overhead distribution and other expenses, or conversion costs. MR. CORBIN understands and agrees that such "Confidential Information" is important, material and confidential, and that disclosure would gravely affect the successful conduct of COMPANY's and its affiliates' businesses. The obligation to protect confidential Information is ------------------------------------------------------ on-going and does not expire upon the termination of the Parties' contractual ------------------------------------------------------------------------------- relationship. ------------ 9. Subject to Paragraph 1(h and i) above, by January 2, 2002, or mutually agreed earlier date, MR. CORBIN warrants and represents that he will return and deliver to COMPANY's designated representative all memoranda, notes, plans, programs, records, reports, and other documentation (and copies thereof) relating to the business of COMPANY, its affiliates, and its predecessors which MR. CORBIN possesses or has under his possession now or in the future, including, but not limited to, computer hardware, software, data and disks, draft books, memoranda, notes, plans, programs, records, reports, and other documentation (and copies thereof) relating to COMPANY, a Company provided car, office equipment and supplies, credit cards, cash advances and, if applicable, any outstanding final expense report. 10. Non-Interference and Related Agreements: ------------------------------------------ For the duration of this Revised Negotiated Employment Agreement and a period of twelve (12) months after MR. CORBIN is removed from COMPANY's payroll, MR. CORBIN shall not (i) induce or attempt to induce any employee of COMPANY to leave the employ of COMPANY or in any way interfere with the relationship between COMPANY and its employees or (ii) induce or attempt to induce any customer, supplier, distributor, broker or other business relation of COMPANY to cease doing business with the COMPANY, or in any way interfere with the relationship between any customer, supplier, distributor, broker or other business relation and COMPANY. 11. Non Competition ---------------- a. For the duration of this Revised Negotiated Employment Agreement and a period of twelve (12) months after MR. CORBIN is removed from COMPANY's payroll, MR. CORBIN will not compete against COMPANY in COMPANY business. b. Definition of "COMPANY Business" ----------------------------------- For purposes of this Revised Negotiated Employment Agreement, the term "COMPANY Business" shall mean any company that owns or operates a business or facility that engages in any of the following business activities: (i) manufacturing, marketing, distributing and/or consulting on and or operating a facility for, the manufacturing, processing, marketing or distributing of batteries, lighting products, rechargeable batteries and related battery and lighting products; (ii) purchasing or producing materials for use as, and marketing and distributing and/or consulting on the purchasing, producing or marketing or distributing of such products or materials; and (iii) marketing and distributing, and/or consulting regarding the marketing or distributing, of such related products or materials. This obligation extends to the products and/or methods that presently are used, or were used, or are or were under development or consideration, whether or not completed, for use in COMPANY Business as of the date MR. CORBIN's employment ends for any reason. MR. CORBIN understands that this definition applies only to this Revised Negotiated Employment Agreement. Any other restrictions on competition in other plan, policies or arrangements, including, but not limited to, those restrictions in the Fixed Benefit Option of the Deferred Compensation Plan for Key Employees, shall continue to apply as they exist now or may be modified by COMPANY in the future, as long as such modifications are not directed solely at MR. CORBIN. c. For the purpose of this Revised Negotiated Employment Agreement, to "compete" means to accept or begin employment with, advise, finance, own (partially or in whole), consult with, or accept an assignment through an employer with any third party worldwide in a position involving or relating to COMPANY Business. d. This Revised Negotiated Employment Agreement does not prevent MR. CORBIN from buying or selling stock in any company that is publicly listed and traded in any stock exchange or the over-the-counter market. However, MR. CORBIN may not use Confidential Information to engage in, or induce others to engage in, insider trading as prohibited by federal and state securities laws. 12. Release and Waiver: -------------------- The promises and payments contained in this Agreement, including Paragraphs 1 (except 1(k)), 4, and 6 above, are in addition to any wages to which MR. CORBIN already is entitled because of his work for COMPANY. MR. CORBIN agrees to accept the promises and terms in these Paragraphs in consideration for the settlement, waiver and release and discharge of any and all claims or actions against COMPANY arising under any federal, state, or local statute, law, or regulation pertaining to employment discrimination on the basis of age, religion, disability, marital status, or any other reason established by law, including any claim of actual or constructive wrongful discharge. 13. Promise Not to Sue: --------------------- a. MR. CORBIN makes the following promises not to sue: i. MR. CORBIN releases, settles and forever discharges COMPANY, including its agents and Employees, from any and all claims, causes of action, rights, demands, debts, or damages of whatever nature, whether or not MR. CORBIN currently knows of them, which might have arisen from MR. CORBIN's employment with and retirement from COMPANY and which may be brought by MR. CORBIN or another person or agency on MR. CORBIN's behalf. This includes, but is not limited to, any claim MR. CORBIN might raise under contract or tort law for actual or constructive wrongful discharge, except those claims which the ------ parties specifically have excluded from this release and identified in Paragraph 15 below and except for a breach by COMPANY of a material provision of this Agreement. ii MR. CORBIN expressly releases COMPANY from any and all legal liability and waives all claims, demands, or causes of action which MR. CORBIN, or any person or agency acting on MR. CORBIN's behalf, may have against COMPANY, its agents, representatives, and employees under all federal, state, and/or local laws regulating employment, including but not limited to, all discrimination claims under the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act, the Americans with Disabilities Act, Civil Rights Act known as 42 USC 1981, the Handicap Discrimination Act, the Missouri Human Rights Act, as amended, Section 213.010 et seq., the Missouri Service Letter Statute, as amended, Section 290.140 R.S.Mo., the Family and Medical Leave Act of 1994, and the Older Worker Benefit Protection Act. b. The COMPANY releases, settles, and forever discharges MR. CORBIN from any and all claims, causes of actions, rights demands, debts, or damages of whatever nature, whether or not COMPANY currently knows them, which might have arisen from MR. CORBIN's actions or omissions within the scope of his duties during his employment with the COMPANY and retirement from COMPANY and which may be brought by the COMPANY or another person or agency on the COMPANY's behalf. This includes, but is not limited to, any claim COMPANY might raise under contract or tort law and also includes any claims arising under federal, state, and/or local laws regulating employment. 14. Penalty for Violation: ----------------------- In the event that MR. CORBIN brings a cause of action against COMPANY in violation of Paragraph 17, 10, 12, or 13 above, MR. CORBIN understands and agrees to repay to COMPANY with interest the value of the salary continuation and benefits paid to him under Paragraph 1 (except 1(k)) of this Revised Negotiated Employment Agreement which are paid to MR. CORBIN as consideration for the promises made by MR. CORBIN in this Agreement as well as the costs of any attorney fees to recover such. 15. Excluded Claims: ---------------- This Agreement shall not affect MR. CORBIN's right to raise any claims based on any Social Security, or Workers' Compensation laws, or based on the terms in effect at the time the claim is raised of the Energizer Holdings, Inc. Retirement Plan, Supplemental Retirement Plan, Deferred Compensation Plan, Savings Investment Plan, Executive Savings Investment Plan, Executive Life and Health Plans, retiree benefits under the Energizer Medical Plan, and any and all other executive or employee benefit plans or programs through which he may be legally entitled to benefits as a result of his employment with COMPANY or subsequent retirement. 16. Benefit Earnings: ----------------- It is understood and agreed that only the salary continuation and payments identified in Paragraphs 1(b), (d), (e), (f) and (k) will be considered benefit earnings for applicable benefit plans maintained by COMPANY. Any other monies paid to MR. CORBIN pursuant to this Revised Negotiated Employment Agreement shall not constitute earnings for benefit plan purposes. 17. Confidentiality: --------------- MR. CORBIN agrees not to talk about, write about, or otherwise disclose the existence of this Revised Negotiated Employment Agreement, the terms of this Revised Negotiated Employment Agreement, or any fact concerning its negotiation, execution, or implementation to any person, firm, or corporation, other than to MR. CORBIN's spouse, financial advisor or attorney, unless MR. CORBIN is required to do so by federal, state, or local law, or by a court of competent jurisdiction. If MR. CORBIN discloses the terms of this Revised Negotiated Employment Agreement to MR. CORBIN's spouse, financial advisor or attorney, MR. CORBIN shall advise that confidentiality is an essential part of this Revised Negotiated Employment Agreement and advise each that they are bound by the confidentiality clause. MR. CORBIN understands that COMPANY will only disclose the terms of this Revised Negotiated Employment Agreement if it reasonably concludes that it is legally bound to do so. 18. Full Revised Negotiated Employment Agreement: ------------------------------------------------ This Revised Negotiated Employment Agreement is intended to finally and fully define and conclude the employment relationship between MR. CORBIN and COMPANY and may be amended only by an agreement in writing signed by the parties hereto. This Revised Negotiated Employment Agreement shall not be interpreted as an admission by COMPANY, its affiliates or its subsidiaries or MR. CORBIN of any wrongdoing or any violation of federal, state or local law, regulation, or ordinance. The COMPANY specifically denies that it, or its agents, supervisors, representatives, or employees of COMPANY, its affiliates or subsidiaries, have ever committed any wrongdoing whatsoever against MR. CORBIN. 19. Effect in the Event of Unenforceability: -------------------------------------------- If, at the time of enforcement of any of the provisions of this Revised Negotiated Employment Agreement, but particularly Paragraphs 8, 9, 10, and 11 above, a court holds that the restrictions stated herein are unreasonable under the circumstances then existing, the parties agree that the maximum period, scope or geographical area reasonable under the circumstances will be substituted for the stated period, scope or area. 20. Severability: ------------ In the event that any provision shall be held to be invalid or unenforceable for any reason whatsoever by a court of competent jurisdiction it is agreed such invalidity or unenforceability shall not affect any other provision of this Revised Negotiated Employment Agreement and the remaining covenants, restrictions and provisions hereof shall remain in full force and effect, and any court of competent jurisdiction may so modify the objectionable provision as to make it valid, reasonable and enforceable. 21. Governing Law: -------------- This Revised Negotiated Employment Agreement will be governed by the internal law of the State of Missouri and not the law of conflicts. 22. Definition of Company: ----------------------- For purposes of this Revised Negotiated Employment Agreement, references to COMPANY shall include all affiliates, subsidiaries, and parent holding companies of Eveready Battery Company and also shall be deemed to include all of the officers, directors, agents, and employees of those business entities. 23. Voluntary Nature of Revised Negotiated Employment Agreement: ----------------------------------------------------------------- MR. CORBIN expressly acknowledges that he understands all the terms and effects of this Revised Negotiated Employment Agreement and is entering voluntarily into this Revised Negotiated Employment Agreement. MR. CORBIN expressly acknowledges that the COMPANY has given him at least twenty-one (21) days to consider this Employment Agreement as originally presented and that the COMPANY also has given him the opportunity to discuss all aspects of this Revised Negotiated Employment Agreement with an attorney before signing this Revised Negotiated Employment Agreement. MR. CORBIN states that he has discussed this Revised Negotiated Employment Agreement or, in the alternative, has freely elected to waive any remaining part of the twenty-one (21) calendar days and any further opportunity to discuss this Revised Negotiated Employment Agreement with an attorney before signing it. 24. Right of Revocation: --------------------- MR. CORBIN may revoke his acceptance within seven (7) calendar days after signing this Revised Negotiated Employment Agreement. MR. CORBIN's notice of revocation must be given to the Vice President, Human Resources, of the COMPANY in writing within seven (7) calendar days after signing this Revised Negotiated Employment Agreement in order to be valid and effective. If MR. CORBIN does revoke this Revised Negotiated Employment Agreement, neither MR. CORBIN nor COMPANY will be required to satisfy any of the terms of this Revised Negotiated Employment Agreement. If MR. CORBIN has not revoked his acceptance --- within seven (7) calendar days, this Revised Negotiated Employment Agreement's effectiveness will become final. EVEREADY BATTERY COMPANY, INC. By: ----------------------------- Peter J. Conrad Vice President, Human Resources Eveready Battery Company, Inc. - --------------------------------- Signed this _________ day of Daniel E. Corbin ___________________, 2000. Signed this _____ day of _____, 2000. Witness: Dated: EX-10 5 doc4.txt DEF. COMP. PLAN ELECTION FORM ENERGIZER HOLDINGS, INC. Deferred Compensation Plan 2001 Election Form - -------------------- - --------------------------------------------- ---------------------------- Participant Name (Last, First, Middle Initial) Social Security Number I have been offered an opportunity to participate in the Energizer Holdings, Inc., Deferred Compensation Plan (the "Plan"). I hereby elect to participate in the Plan and irrevocably authorize the Company to deduct from my compensation the amounts specified below: ================================================================================ DEFERRAL ELECTION PLEASE COMPLETE THE DEFERRAL ELECTION BELOW. YOU MUST DEFER A TOTAL OF AT LEAST $1,000 TO PARTICIPATE IN THE PLAN. ================================================================================ BASE SALARY I elect to defer _______% of my calendar 2001 Base Salary (maximum deferral is 75%). ================================================================================ INCENTIVE PLAN BONUS I elect to defer _______%, OR all up to $_______, OR defer all in excess of $_______ of my Year 2001 Incentive Plan Bonus. ================================================================================ NON-PARTICIPATION I elect not to defer calendar 2001 Base Salary or Fiscal Year Incentive Plan Bonus. ================================================================================ ================================================================================ CALENDAR 2001 BASE SALARY INVESTMENT ELECTION (PLEASE SELECT IN WHOLE PERCENTAGE INCREMENTS; TOTAL MUST EQUAL 100%) ================================================================================ I elect to invest my calendar 2001 Base Salary deferrals in the following Measurement Funds: ================================================================================ CALENDAR 2001 BASE SALARY INVESTMENT ELECTION (PLEASE SELECT IN WHOLE PERCENTAGE INCREMENTS; TOTAL MUST EQUAL 100%)
I elect to invest my calendar 2001 Base Salary deferrals in the following Measurement Funds: Energizer Holdings, Inc. Common Stock ____% Vanguard International Growth Fund ____% Prime Rate Fund ____% Vanguard Life Strategy Income Fund ____% Vanguard Wellington Fund ____% Vanguard Life Strategy Conservative Vanguard 500 Index ____% Growth Fund ____% Vanguard Windsor II Fund ____% Vanguard Life Strategy Moderate Growth ____% Vanguard Small-Cap Index ____% Vanguard Life Strategy Growth Fund ____%
================================================================================ FISCAL YEAR 2001 INCENTIVE PLAN BONUS INVESTMENT ELECTION (PLEASE SELECT IN WHOLE PERCENTAGE INCREMENTS; TOTAL MUST EQUAL 100%) ================================================================================
I elect to invest my Fiscal Year 2001 Incentive Plan Bonus deferrals in the following Measurement Funds: Energizer Holdings, Inc. Common Stock ____% Vanguard International Growth Fund ____% Prime Rate Fund ____% Vanguard Life Strategy Income Fund ____% Vanguard Wellington Fund ____% Vanguard Life Strategy Conservative Vanguard 500 Index ____% Growth Fund ____% Vanguard Windsor II Fund ____% Vanguard Life Strategy Moderate Growth ____% Vanguard Small-Cap Index ____% Vanguard Life Strategy Growth Fund ____%
(OVER) ELECTION OF DATE AND FORM OF PAYMENT FOR 2001 DEFERRALS (PLEASE SELECT A DATE AND FORM OF PAYMENT) ================================================================================ I elect to receive _______% of my calendar 2001 Base Salary Deferrals and/or my Fiscal Year 2001 Incentive Plan Bonus Deferrals and the associated earnings, on ___________________(cannot be sooner than January 1, 2005). I understand that if my employment terminates for any reason prior to the date I elected above, my benefit will be paid to me upon my termination of employment. I elect to receive my calendar 2001 Base Salary Deferrals and/or my Fiscal Year 2001 Incentive Plan Bonus Deferrals upon the termination of my employment for any reason. ================================================================================ Upon termination of my employment for any reason, I elect to receive payment of my entire Account Balance in the following form (check one below): ________ Lump Sum ________ 5 Annual Payments ________ 10 Annual Payments I understand that if my vested account balance is less than $50,000 my account will be paid to me in a lump sum. ================================================================================ ACCEPTED AND ACKNOWLEDGED: - ----------------------------- ------------------------------------------------- SIGNATURE OF PARTICIPANT DATE FOR ENERGIZER PLANS ADMINISTRATIVE COMMITTEE DATE MAIL OR FAX TO: CLARK/BARDES CONSULTING - COMPENSATION RESOURCE GROUP ATTN: LAURA POPE 633 WEST FIFTH STREET, 52ND FLOOR LOS ANGELES, CA 90071 FAX (213) 438-6600 ENERGIZER HOLDINGS, INC. Deferred Compensation Plan 2001 Election Form for Directors - ------------------------------------ - ------------------------------------------------ --------------------------- Participant's Name (Last, First, Middle Initial) Social Security Number I have been offered an opportunity to participate in the Energizer Holdings, Inc., Deferred Compensation Plan (the "Plan"). I hereby elect to participate in the Plan and irrevocably authorize the Company to deduct from my calendar 2001 Director's Fees the amount specified below: ================================================================================ DIRECTOR'S FEE DEFERRAL ELECTION PLEASE COMPLETE THE DEFERRAL ELECTION BELOW. YOU MUST DEFER A TOTAL OF AT LEAST $ 1,000 TO PARTICIPATE IN THE PLAN. ================================================================================ FEES I elect to defer _______%, or all up to $____________, or all in excess of $____________, or _____% in excess of $____________ of my remaining calendar 2001 Director's Fees ================================================================================ NON-PARTICIPATION I elect not to defer my remaining calendar 2001 Director's Fees ================================================================================ DIRECTOR'S FEE INVESTMENT ELECTION (PLEASE SELECT IN WHOLE PERCENTAGE INCREMENTS; TOTAL MUST EQUAL 100%) ================================================================================
I elect to invest my calendar 2001 Director's Fee Deferrals in the following Measurement Funds: Energizer Holdings, Inc. Common Stock ____% Vanguard International Growth Fund ____% Prime Rate Fund ____% Vanguard LifeStrategy Income Fund ____% Vanguard Wellington Fund ____% Vanguard LifeStrategy Conservative Vanguard 500 Index ____% Growth Fund ____% Vanguard Windsor II Fund ____% Vanguard LifeStrategy Moderate Growth ____% Vanguard Small-Cap Index ____% Vanguard LifeStrategy Growth Fund ____%
ACCEPTED AND ACKNOWLEDGED: - ------------------------------ -------------------------------------------- Signature of Participant Date for the Nominating and Executive Date Compensation Committee PLEASE COMPLETE AND RETURN FORMS TO: CLARK/BARDES CONSULTING - COMPENSATION RESOURCE GROUP ATTN: LAURA POPE 633 WEST FIFTH STREET, 52ND FLOOR LOS ANGELES, CA 90071 FAX: (213) 438-6600 EX-10 6 doc5.txt ACKNOW. FOR DEFERRAL OF BONUS FORM ACKNOWLEDGMENT FOR DEFERRAL OF FISCAL YEAR 2001 INCENTIVE PLAN BONUS Energizer Holdings, Inc. and acknowledge that, of the ------------ ------- FY2001 Bonus awarded to Participant under the Fiscal Year 2001 Incentive Bonus Program, shall be deferred, effective November 15, 2001, as previously requested by Participant, into the Measurement Fund(s) available under the Energizer Holdings, Inc. Deferred Compenstaion Plan (the "Plan"). Pursuant to Participant's request, the following amounts have been deferred for Participant in the manner set forth below: (1) ENERGIZER HOLDINGS, INC. COMMON STOCK MEASUREMENT FUND - (a) in Energizer common stock equivalents and ------------ (b) in Energizer common stock equivalents, ------------ representing the Company Matching Contribution (25% of amount listed in 1(a) above). (2) OTHER MEASUREMENT FUNDS - $0 in other Measurement Funds as previously selected by Participant. Participant's deferral as described hereunder is pursuant to the Plan and is Subject in all respects to the terms and conditions of the Plan. THIS AGREEMENT SUPERCEDES ANY PREVIOUS AGREEMENT FOR DEFERRAL OF 2001 ANNUAL CASH BONUS. ACKNOWLEDGED: ENERGIZER HOLDINGS, INC. By: - ---------------------------- -------------------- Peter Conrad Vice President Human Resources - ---------------------------- Date EX-13 7 doc6.txt FINANCIAL PAGES FROM 2001 ANNUAL REPORT 2001 FINANCIAL REVIEW TABLE OF CONTENTS
Management's Discussion and Analysis of Results of Operations and Financial Condition........................ 10 Summary Selected Historical Financial Information........... 21 Responsibility for Financial Statements..................... 23 Report of Independent Accountants........................... 24 Consolidated Financial Statements........................... 25 Notes to Consolidated Financial Statements.................. 29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (DOLLARS IN MILLIONS EXCEPT PER SHARE AND PERCENTAGE DATA) The following discussion is a summary of the key factors management considers necessary in reviewing Energizer Holdings, Inc.'s (Energizer) historical basis results of operations, operating segment results, liquidity and capital resources. This discussion should be read in conjunction with the Consolidated Financial Statements and related notes. BASIS OF PRESENTATION Prior to April 1, 2000, Energizer was a wholly owned subsidiary of Ralston Purina Company (Ralston). On that date, Ralston distributed the common stock of Energizer to its shareholders in a tax-free spin-off. Financial statements as of and for periods after the spin-off are presented on a consolidated basis. The Statement of Earnings and Statement of Cash Flows for the year ended September 30, 2000 include the combined results of operations of the Energizer businesses under Ralston for the six months prior to the spin- off and the consolidated results of operations of Energizer on a stand-alone basis for the six months ended September 30, 2000. The financial statements for 1999 are presented on a combined basis and reflect periods during which the Energizer businesses operated as wholly owned subsidiaries of Ralston. Financial statements for periods prior to the spin-off do not include certain expenses and adjustments that would have been incurred had Energizer been a separate, independent company, and may not necessarily be indicative of results that would have occurred had Energizer been a separate, independent company during the periods presented, or of future results of Energizer. See the Pro Forma Statement of Earnings for the years ended September 30, 2000 and 1999 in Note 22 to the Consolidated Financial Statements. BUSINESS OVERVIEW Energizer is the world's largest publicly traded manufacturer of primary batteries and flashlights and a global leader in the dynamic business of providing portable power. Energizer manufactures and markets a complete line of primary alkaline and carbon zinc batteries primarily under the brands Energizer e(2), Energizer and Eveready, as well as miniature and rechargeable batteries, and flashlights and other lighting products. Energizer and its subsidiaries operate 22 manufacturing and packaging facilities in 15 countries on four continents. Its products are marketed and sold in more than 140 countries primarily through a direct sales force, and also through distributors, to mass merchandisers, wholesalers and other customers. There has been a continuing shift in consumer preference from carbon zinc batteries to alkaline batteries. As a result, Energizer has continually reassessed its production capacity with respect to both types of batteries and has recorded provisions related to restructuring its worldwide battery production capacity and certain administrative functions in 2001 and 1999. Alkaline batteries are now the dominant primary battery in all world areas with the exception of Asia and Africa. Energizer will continue to review its battery production capacity and its business structure in light of pervasive global trends, including the evolution of technology. Energizer's operations are managed via four major geographic areas - North America (the United States, Canada and Caribbean), Asia Pacific, Europe and South and Central America (including Mexico). Segment profit and sales are concentrated in the North America and Asia Pacific areas which together account for 98% and 77%, respectively, of 2001 segment profit and sales. The battery business is highly competitive, both in the United States and on a global basis, as a number of large battery manufacturers compete for consumer acceptance and limited retail shelf space. As measured by A.C. Nielsen, Energizer's dollar share of the U.S. primary battery market was 32.4% in 2001, 33.5% in 2000 and 32.0% in 1999. However share for the fourth quarter of 2001 declined to 30.0% as competition in the United States has intensified. The primary battery category declined in calendar 2000 and 2001 after unprecedented growth levels immediately prior to the January 1, 2000 date change due to increased demand from retail customers and consumers in anticipation of potential disruptions related to the date change. Retail inventory levels at 10 December 31, 1999 were above historical norms due to Y2K-driven ordering. Following January 1, 2000, consumer demand for batteries has generally lagged behind historical growth rates, reflecting economic slowdown in much of the world, and Energizer's sales to the trade have been further reduced as retail inventory levels have declined. Currency devaluation, relative to the U.S. dollar, in Australia, New Zealand, the Philippines and other countries in the Asia Pacific region has been unfavorable to Energizer during 2000 and 2001. The Euro and certain other European currencies have also been unfavorable to Energizer in 2000 and most of 2001. A significant portion of Energizer's product cost is more closely tied to the U.S. dollar than to the local currencies in which the product is sold. As such, currency devaluation relative to the U.S. dollar reduces margins to the extent increased costs in local currency terms are not offset by local currency price increases. Changes in the value of local currencies may continue to impact segment profitability. REPORTING PERIOD SYNCHRONIZATION Energizer historically reported results of international operations on a one-month lag. As a result, prior year amounts represent results of international operations for September through August combined with the U.S. results for October through September. Beginning in fiscal 2001, Energizer has synchronized international operations' reporting to be consistent with U.S. reporting. The impact of the synchronization on the prior year results was to decrease sales by $28.4 to $1,899.3 and net earnings by $9.0 to $171.2. The impact of the synchronization on the prior year reported earnings per share was a decrease of $.09 per share. All statement of earnings-related discussions comparing 2001 to 2000 below refer to comparisons of current period results to synchronized 2000 results. Synchronization adjustments to reported results for fiscal 2000 are presented in the Note 22 to the Consolidated Financial Statements. HIGHLIGHTS Energizer recorded a net loss of $39.0 for the year ended September 30, 2001, compared to net earnings of $181.4 in 2000. The loss per share was $.42, compared to earnings per basic share of $1.89 and per diluted share of $1.88 in the prior year. Included in fiscal 2000 results are earnings from continuing operations of $180.2. Prior year net earnings include a net gain on disposition of discontinued operations of $1.2, or $.01 per share, related to the final settlement of the sale of discontinued operations. Net earnings were $80.0, or $.78 per share, for the year ended September 30, 1999. Included in 1999 net earnings are earnings from continuing operations of $159.8, a net loss from discontinued operations of $5.6 and a net loss on disposition of discontinued operations of $74.2. Earnings from continuing operations decreased $210.2, or $2.21 and $2.20 per basic and diluted share, respectively, in 2001. Current year earnings include a provision for goodwill impairment of $119.0, provisions for restructuring of $29.8, or $19.4 after-tax, and income associated with the licensing of intellectual property rights of $20.0, or $12.3 after-tax. Included in 2000 results were costs related to the spin-off of $5.5 pre-tax, or $3.3 after-tax, loss on disposition of Spanish affiliate of $15.7, and capital loss tax benefits of $24.4. Excluding these items, earnings from continuing operations decreased $78.7, or $.80 per share, in 2001. This decrease was primarily attributable to lower operating results in the North America and Asia regions and higher tax rate, partially offset by lower general corporate expenses and interest. Earnings from continuing operations increased $20.4, or $.32 and $.31 per basic and diluted share, respectively, in 2000. Included in 2000 results are the items listed in the previous paragraph. Fiscal 1999 results included provisions for restructuring of $9.9 pre-tax, or $8.3 after-tax, and capital loss tax benefits of $16.6. Excluding these items, earnings from continuing operations increased $23.3, or $.35 and $.34 per basic and diluted share, respectively, in 2000. This increase was primarily attributable to improved operating results in North America and Asia Pacific and lower corporate overhead, partially offset by higher interest expense on the debt assumed as part of the spin-off from Ralston. 11 Discontinued operations consist of Energizer's worldwide rechargeable Original Equipment Manufacturers' (OEM) battery business. On November 1, 1999, that business was sold to Moltech Corporation for approximately $20.0. OPERATING RESULTS NET SALES Net sales to customers decreased $205.1, or 11%, in 2001 compared to 2000 with unfavorable pricing and product mix, lower volumes and currency devaluation each accounting for about one-third of the decline. In 2000, net sales to customers increased $49.2, or 3%, primarily on growth in North America, partially offset by declines in Europe. See comments on sales changes by region in the Segment Results section below. GROSS MARGIN Gross margin dollars decreased $172.0, or 20%, in 2001 primarily on lower sales in North America and Asia Pacific. Gross margin percentage declined 4.7 percentage points in 2001 to 41.0% on lower sales. Gross margin dollars increased $64.7, or 8%, in 2000 on increases in North America and Asia Pacific, partially offset by declines in Europe. The margin percentage in 2000 improved 2.2 percentage points to 45.8% compared to 1999 on higher volume and lower production costs in North America and Asia Pacific as well as lower costs in South and Central America. SELLING, GENERAL AND ADMINISTRATIVE Selling, general and administrative expense decreased $24.5, or 7%, in 2001 on lower corporate, Asia Pacific and Europe expenses. In 2000, selling, general and administrative expense decreased $23.6, or 6%, on lower corporate and Europe expenses, partially offset by increases in North America. Selling, general and administrative expenses were 18.9%, 17.9% and 19.6% of sales in 2001, 2000 and 1999, respectively. ADVERTISING AND PROMOTION Advertising and promotion decreased $31.1, or 19%, in 2001 on lower spending in all world areas. In 2000, advertising and promotion increased $26.9, or 20%, on higher spending in North America, partially offset by decreases in Europe. Advertising and promotion as a percent of sales was 7.9%, 8.5% and 7.3% in 2001, 2000 and 1999, respectively. SEGMENT RESULTS Energizer's operations are managed via four major geographic areas -- North America (the United States, Canada and Caribbean), Asia Pacific, Europe, and South and Central America (including Mexico). This structure is the basis for Energizer's reportable operating segment information presented in Note 20 to the Consolidated Financial Statements. Energizer evaluates segment profitability based on operating profit before general corporate expenses, research and development expenses, restructuring charges, and amortization of goodwill and intangibles. Intersegment sales are generally valued at market-based prices, and represent the difference between total sales and external sales, as presented in Note 20 to the Consolidated Financial Statements. Segment profitability includes profit on these intersegment sales. NORTH AMERICA Net sales to customers decreased $152.9, or 14%, in 2001 with lower volume accounting for slightly more than half of the decline. Alkaline, carbon zinc and lighting products unit volume decreased 5%, 4% and 17%, respectively, from 2000, compared to heavy Y2K demand last year, reflecting retail inventory reductions this year. Unfavorable pricing and product mix accounted for the remainder of the sales decline, reflecting increased promotional spending. Gross margin decreased $120.8 in 2001 on unfavorable pricing and product mix, lower volume and higher product cost rates associated with lower production levels. Segment profit decreased $106.2, or 34%, as lower gross margin was partially offset by lower advertising and promotion expense. 12 Net sales to customers increased $92.8, or 9%, in 2000 on higher volume, partially offset by unfavorable pricing and product mix. Alkaline unit volume increased 11% over 1999. Strong Y2K-driven demand early in the fiscal year, and incremental Energizer e(2) sales in the last four months of the year, accounted for the increased volume. Gross margin increased $54.1, with volume contributing $45.8. In addition, favorable production costs were partially offset by unfavorable pricing and product mix. Segment profit increased $20.5, or 7%, as higher gross margin was partially offset by increased advertising and promotion expense, primarily related to the Energizer e(2) launch, as well as higher marketing and distribution expenses. ASIA PACIFIC Net sales to customers decreased $47.9, or 13%, in 2001. Excluding currency devaluation of $30.3, net sales decreased $17.6, or 6%, on lower volume reflecting unfavorable economic conditions in the region. Alkaline, carbon zinc and lighting products unit volume decreased 6%, 9% and 7%, respectively, from 2000. Segment profit for Asia Pacific decreased $28.2, or 27%, in 2001 with unfavorable currency effects accounting for $19.0 of the decline. Absent currencies, segment profit decreased $9.2, or 9%, on lower volume and higher product cost, partially offset by lower advertising and promotion and overhead expenses. Net sales to customers increased $8.7, or 2%, in 2000. Excluding currency devaluation of $4.3, net sales increased $13.0, or 3%. Alkaline volume increases of 8% were partially offset by a 2% decline in carbon zinc volume. Segment profit for Asia Pacific increased $22.7, or 25%, in 2000 on lower production costs, higher customer sales and higher intersegment sales. Lower production costs reflect a variety of factors including higher production facility utilization and lower costs resulting from a plant closing in 1999. EUROPE Net sales to customers for Europe decreased $10.8, or 4%, in 2001, which included currency devaluation of $24.2. Absent currency effect, sales increased $13.4, or 5%, on higher volume, partially offset by unfavorable pricing and product mix in the first three quarters of the year. Alkaline unit volume increased 19% during 2001 while carbon zinc volume declined 9%. Much of the volume increase and unfavorable pricing was due to heavy promotional activity early in the year. Segment results for Europe improved $1.6 for the year to a loss of $2.6 and included unfavorable currency effects of $13.4. Absent currencies, segment profit increased $15.0, with higher sales, lower advertising and promotion expense, and lower product cost accounting for $8.7 of the increase. In addition, prior year results included an unfavorable adjustment related to estimates for promotional and rebate programs, as well as costs related to reorganization activities, improving the year over year comparison by approximately $6.3. Net sales to customers for Europe decreased $44.2, or 14%, in 2000 reflecting currency devaluation of $28.2, lower carbon zinc volume of $11.8, and unfavorable pricing and product mix of $6.9, partially offset by a 1% alkaline volume gain. For the year, carbon zinc unit volume declined 14%. Segment results for Europe improved $1.0 to a loss of $.2. Net currency impacts in 2000 were unfavorable $6.8 compared to 1999. Absent currency impacts, segment results improved $7.8, as lower sales were partially offset by lower product and overhead costs. Lower costs reflected increased efficiencies following a plant closing and sales and administrative realignment completed in 1999 and early 2000. SOUTH AND CENTRAL AMERICA Net sales to customers increased $6.5, or 5%, in 2001 primarily on higher volume, partially offset by currency devaluation. Alkaline volume increased 5% in 2001 while carbon zinc volume declined 2%. Segment profit decreased $2.5, or 26%, virtually all on currency impacts. Higher sales volumes were offset by higher product costs. Net sales to customers decreased $8.1, or 6%, in 2000 primarily on lower volume and on currency devaluation, which could not be mitigated through pricing actions. Carbon zinc volume declined 6% while alkaline increased 1%. Despite the sales decrease, gross margin increased $.6, or 2%, as unfavorable currency impacts of $7.2 were more than offset by lower production costs and favorable pricing and product mix. Segment profit for South and Central America decreased $2.4, or 17%, in 2000 as higher marketing, distribution and management costs were partially offset by the gross margin increase. GENERAL CORPORATE EXPENSES General corporate expenses decreased $16.2 in 2001 compared to 2000 due to lower incentive and stock compensation costs, higher pension income, and favorable profit-in-inventory adjustments associated with decreased intercompany inventory levels, partially offset by higher management costs, including the incremental costs of operating as a stand-alone company for a full year, compared to six months in fiscal 2000. General corporate expenses decreased $16.6 in 2000 due to higher pension income and lower consulting, reorganization and information systems costs, as well as a lighting product recall charge in 1999. These costs were partially offset by additional costs of operating as a stand-alone company for the last six months of fiscal 2000. As a percent of sales, general corporate expenses were 1.2% in 2001, 1.9% in 2000 and 2.9% in 1999. RESEARCH AND DEVELOPMENT EXPENSE Research and development expense was $46.4 in 2001, $49.9 in 2000 and $48.5 in 1999. Energizer strives to maintain technological leadership in the primary battery business. Research and development costs were slightly higher in 2000 and 1999 due to increased activity related to Energizer e(2). As a percent of sales, research and development expense was 2.7% in 2001 and 2.6% in 2000 and 1999. GOODWILL IMPAIRMENT CHARGE Energizer monitors changing business conditions, which may indicate that the remaining useful life of goodwill and other intangible assets may warrant revision, or carrying amounts may require adjustment. Continuing unfavorable business trends in Europe, and the unfavorable costs of U.S. dollar-based products resulting from currency declines, represent such conditions. As part of its annual business planning cycle, Energizer performed a thorough evaluation of its European business in the fourth quarter of fiscal 2001, which resulted in an impairment charge for $119.0 of related goodwill. At September 30, 2001, the carrying amount of goodwill related to Energizer's European business was $8.5. RESTRUCTURING CHARGES Energizer recorded restructuring charges each year from 1994 through 1999, and in 2001. These charges included a reduction in carbon zinc plant capacity as demand for this type of battery continues to decline, plant closures for the movement and consolidation of alkaline production to new or more efficient locations in an effort to achieve lower product costs, and staffing reorganizations and reductions in various world areas to enhance management effectiveness and reduce overhead costs. A detailed discussion of such charges and expenditures during 1999 through 2001 follows. Because there continues to be a migration of consumer demand from carbon zinc to alkaline batteries, a comprehensive study of Energizer's carbon zinc facilities to determine the optimum number of carbon zinc manufacturing plants was completed in the fourth quarter of fiscal 2001. Energizer also reviewed its worldwide operations in light of competitive market conditions and available technologies and techniques, and is adjusting its organization accordingly. As a result, Energizer adopted restructuring plans to eliminate carbon zinc capacity, and to reduce and realign certain selling, production, research and administrative functions. The total cost associated with this plan is expected to be $35.6 before taxes, of which $29.8 ($19.4 after-taxes, or $.21 per share) was recorded in the fourth quarter, with the remainder expected to be recorded in the first quarter of fiscal 2002. These restructuring activities are expected to improve the Company's operating efficiency, downsize and centralize corporate functions, and decrease costs. The plans will result in the closure of one carbon zinc production facility in South and Central America, and the severance of 570 employees, consisting of 375 production and 195 sales, research and administrative employees, primarily in the United States and South and Central America. 14 The program commenced in the fourth quarter of 2001 and is expected to be completed during the second quarter of fiscal year 2002. When the program is fully implemented, the annual pre-tax savings is estimated to be $16.5, in fiscal year 2002, the pre-tax savings is estimated to be $14.3. The restructuring charges consist of non-cash fixed asset impairment charges of $11.1 for the closed carbon zinc plant and production equipment, enhanced pension benefits for certain terminated U.S. employees of $8.3, cash severance payments of $6.3, and other cash charges of $4.1. During 1999, Energizer recorded net provisions for restructuring of $8.3 after-tax, or $9.9 pre-tax, $2.1 of which represented inventory write-downs and is classified as cost of products sold in the Consolidated Statement of Earnings. Of the net pre-tax charge, $7.4 relates to the 1999 restructuring plans for the elimination of certain production capacity in North America and in Asia. The pre-tax charge of $7.4 for 1999 plans consisted of termination benefits of $3.2, other cash costs of $.2 and fixed asset impairments of $4.0. The fixed asset impairments primarily related to assets used for the production of lithium coin cells in North America. These assets were idled and scrapped in 1999. The 1999 restructuring plan provided for the termination of approximately 170 production and administrative employees, and the closure of one plant in Asia. This plant closure was precipitated by the financial problems in the Asian market, which resulted in contractions in battery markets in this area. All actions associated with these charges were completed as of September 30, 2000. The remaining $2.5 represented additional net provisions related to prior years' restructuring plans. Additional termination benefits of $5.5 primarily represent enhanced severance related to a European plant closing in the 1997 restructuring plan. Additional provisions for other cash costs of $1.8 were recorded for fixed asset disposition costs for previously held-for-use assets related to the 1997 restructuring plan that were idled and held for disposal. Other non-cash charges of $2.1 relate to inventory write-offs, which were more than offset by a reclassification of $4.5 from other comprehensive income to net income of cumulative translation adjustment for a subsidiary sold in connection with the 1997 plan. Also recorded in 1999 were asset proceeds greater than anticipated of $5.4, related to 1994, 1995 and 1997 restructuring plans. Annual pre-tax cost savings from the 1999 restructuring plans are as follows: $.3 in 2000 and $1.4 thereafter. Annual pre-tax cost savings from prior restructuring plans have been or are expected to be as follows: $31.0 in 1999 and $36.0 thereafter. As of September 30, 2001, except for the disposition of certain assets held for disposal, all activities associated with the 1994 through 1999 restructuring plans are complete. The carrying value of assets held for disposal under all restructuring plans was $2.6 at September 30, 2001. Energizer expects to fund the remaining costs of these restructuring actions with funds generated from operations. See Note 5 to the Consolidated Financial Statements for a table that presents, by major cost component and by year of provision, activity related to the restructuring charges discussed above during fiscal years 2001, 2000 and 1999 including any adjustments to the original charges. INTELLECTUAL PROPERTY RIGHTS INCOME In fiscal 2001, Energizer recorded income of $20.0 pre-tax, or $12.3 after-tax, related to the licensing of intellectual property rights. COSTS RELATED TO SPIN-OFF In fiscal 2000, Energizer recorded one-time spin-related costs of $5.5 pre-tax, or $3.3 after-tax. These costs include legal fees, charges related to the vesting of certain compensation benefits, and other costs triggered by, or associated with, the spin-off. 15 LOSS ON DISPOSITION OF SPANISH AFFILIATE In fiscal 2000, Energizer recorded a $15.7 pre-tax loss on the sale of its Spanish affiliate prior to the spin-off. The loss was a non-cash write-off of goodwill and cumulative translation accounts of the Spanish affiliate. Ralston recognized capital loss tax benefits related to the Spanish sale of $24.4, which are reflected in Energizer's historical financial statements and resulted in a net after-tax gain of $8.7 on the Spanish transaction. Such capital loss benefits would not have been realized by Energizer on a stand-alone basis, thus are not included in the Pro Forma Statement of Earnings for the year ended September 30, 2000, as presented in Note 22 to the Consolidated Financial Statements. INTEREST AND OTHER FINANCIAL ITEMS Interest expense increased $5.9 in 2001 and $19.9 in 2000, reflecting the cost of incremental debt assumed by Energizer immediately prior to the spin-off for a full year and for six months, respectively. Interest expense for the last six months of 2001 declined $7.6 compared to the same six-month period in 2000, due to lower average borrowings and lower interest rates. Other financing-related costs increased $5.9 in 2001, reflecting the discount on the sale of accounts receivable under a financing arrangement and lower net exchange gains. Other financing-related costs decreased $4.3 in 2000 compared to 1999, primarily due to lower foreign exchange losses, partially offset by accounts receivable sales discounts. INCOME TAXES Income taxes, which include federal, state and foreign taxes, were 223.8%, 35.5% and 35.6% of earnings from continuing operations before income taxes in 2001, 2000 and 1999, respectively. Earnings before income taxes and income taxes include certain unusual items in all years, the most significant of which are described below: - In 2001, the provision for goodwill impairment of $119.0 has no associated tax benefit as the charge is not deductible for tax purposes. The provisions for restructuring of $29.8 have an associated tax rate of 34.9%. - In 2000, the income tax percentage was favorably impacted by the recognition of $24.4 U.S. capital loss tax benefits related to the disposition of Energizer's Spanish affiliate. - Capital loss tax benefits of $16.6 were recognized in 1999 and were primarily related to prior years' restructuring actions. - In 1999, the income tax percentage was unfavorably impacted by pre-tax restructuring provisions that did not result in tax benefits due to tax loss situations or particular statutes of a country. Excluding unusual items, the income tax percentage was 45.7% in 2001, 41.8% in 2000 and 41.3% in 1999. The higher effective tax rate in 2001 reflects pre-tax losses in foreign tax jurisdictions for which no tax benefits were realized and goodwill charges for which there is no tax deduction. The year-over-year increase was the result of the fixed dollar impact of these items being spread over a smaller earnings base. LIQUIDITY AND CAPITAL RESOURCES Cash flows from continuing operations totaled $318.1 in 2001, $289.6 in 2000 and $337.2 in 1999. The increase in cash flows from continuing operations in 2001 was due primarily to significant inventory reduction in 2001 compared to a significant inventory increase in 2000, and other working capital improvements in 2001, partially offset by substantially lower cash earnings in 2001 and proceeds from sale of accounts receivable in 2000. The decrease in cash flows from continuing operations in 2000 compared to 1999 was due primarily to increased inventory levels and the realization of capital loss tax benefits in fiscal 1999, partially offset by higher cash earnings and proceeds from the sale of accounts receivable. 16 Working capital was $288.1 and $401.7 at September 30, 2001 and 2000, respectively. Capital expenditures totaled $77.9, $72.8 and $69.2 in 2001, 2000 and 1999, respectively. These expenditures were funded by cash flow from operations. Capital expenditures of approximately $50.0 are anticipated in 2002 and are expected to be financed with funds generated from operations. Net transactions with Ralston, prior to the spin-off, resulted in cash usage of $210.7 and $293.7 in 2000 and 1999, respectively. Immediately prior to the spin-off, Ralston borrowed $478.0 through several interim-funding facilities and assigned all repayment obligations of those facilities to Energizer. In April and May of 2000, Energizer entered into separate financing agreements and repaid the interim funding facilities. Total long-term debt outstanding of $225.0 at September 30, 2001 includes $50.0 of borrowings with a variable interest rate. Energizer maintains total committed debt facilities of $625.0, of which $400.0 remained available as of September 30, 2001. Under the terms of the facilities, the ratio of Energizer's total indebtedness to its EBITDA cannot be greater than 3-to-1 and the ratio of its EBIT to total interest expense must exceed 3-to-1. Energizer's ratio of total indebtedness to EBITDA was 1.5-to-1 and the ratio of EBIT to total interest expense was 5-to-1 as of September 30, 2001. In fiscal 2000, Energizer entered into an agreement to sell, on an ongoing basis, a pool of domestic trade accounts receivable to a wholly owned bankruptcy-remote subsidiary of Energizer. Energizer received $100.0 of net proceeds from this arrangement in fiscal 2000, which was used to repay interim funding facilities as discussed above. Net proceeds received from this arrangement declined $13.8 in 2001 as a result of lower qualifying accounts receivable. See Note 13 to the Consolidated Financial Statements for further discussion regarding the sale of accounts receivable. In September 2000, Energizer's Board of Directors approved a share repurchase plan authorizing the repurchase of up to 5 million shares of Energizer's common stock. As of September 30, 2001, approximately 3.8 million shares, or $79.6, of Energizer common stock had been purchased under the authorization. No shares were purchased after fiscal 2001 year-end. Energizer believes that cash flows from operating activities and periodic borrowings under existing credit facilities will be adequate to meet short-term and long-term liquidity requirements prior to the maturity of Energizer's credit facilities, although no guarantee can be given in this regard. INFLATION Management recognizes that inflationary pressures may have an adverse effect on Energizer through higher asset replacement costs and related depreciation, and higher material, labor and other costs. Energizer tries to minimize these effects through cost reductions and productivity improvements as well as price increases to maintain reasonable profit margins. It is management's view, however, that inflation has not had a significant impact on operations in the three years ended September 30, 2001. SEASONAL FACTORS Energizer's results are significantly impacted in the first quarter of the fiscal year by the additional sales volume associated with the December holiday season, particularly in North America. First quarter sales accounted for 33%, 35% and 31% of total net sales in 2001, 2000 and 1999, respectively. The first quarter percentage in 2000 was also higher due to Y2K-driven demand. ENVIRONMENTAL MATTERS The operations of Energizer, like those of other companies engaged in the battery business, 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 storage tanks, and waste handling and disposal. 17 Energizer has received notices from the U.S. Environmental Protection Agency, state agencies and/or private parties seeking contribution, that it has been identified as a "potentially responsible party" (PRP) under the Comprehensive Environmental Response, Compensation and Liability Act and may be required to share in the cost of cleanup with respect to nine federal "Superfund" sites. It may also be required to share in the cost of cleanup with respect to a state-designated site. Liability under the applicable federal and state statutes which mandate cleanup is strict, meaning that liability may attach regardless of lack of fault, and joint and several, meaning that a liable party may be responsible for all of the costs incurred in investigating and cleaning up contamination at a site. However, liability in such matters is typically shared by all of the financially viable responsible parties. The amount of Energizer's ultimate liability in connection with those sites may depend on many factors, including the volume and toxicity of material contributed to the site, the number of other PRPs and their financial viability, and the remediation methods and technology to be used. In addition, Energizer undertook certain programs to reduce or eliminate the environmental contamination at the rechargeable battery facility in Gainesville, Florida, which was divested in November 1999. In 2001, the buyer, as well as its operating subsidiary which owns and operates the Gainesville facility, filed petitions in bankruptcy court. In the event that the buyer would become unable to continue such programs, Energizer could be required to bear financial responsibility for such programs as well as for other known and unknown environmental conditions at the site. Many European countries, as well as the European Union, have been very active in adopting and enforcing environmental regulations. In many developing countries in which Energizer operates, there has not been significant governmental regulation relating to the environment, occupational safety, employment practices or other business matters routinely regulated in the United States. As such economies develop, it is possible that new regulations may increase the risk and expense of doing business in such countries. It is difficult to quantify with certainty the potential financial impact of actions regarding expenditures for environmental matters, particularly remediation, and future capital expenditures for environmental control equipment. Nevertheless, based upon the information currently available, Energizer believes that its ultimate liability arising from such environmental matters, taking into account established accruals of $5.9 at September 30, 2001 for estimated liabilities, should not be material to its financial position. Such liability could, however, be material to results of operations or cash flows for a particular quarter or year. MARKET RISK SENSITIVE INSTRUMENTS AND POSITIONS The market risk inherent in Energizer's financial instruments and positions represents the potential loss arising from adverse changes in interest rates and foreign currency exchange rates. The following risk management discussion and the estimated amounts generated from the sensitivity analyses are forward- looking statements of market risk assuming certain adverse market conditions occur. INTEREST RATES Energizer has interest rate risk with respect to interest expense on variable rate debt. At September 30, 2001 and 2000, Energizer had $160.3 and $330.0 variable rate debt outstanding. A hypothetical 10% adverse change in all interest rates would have had an annual unfavorable impact of $.9 and $2.6 in 2001 and 2000, respectively, on Energizer's earnings and cash flows, based upon these year-end debt levels. The primary interest rate exposures on variable rate debt are with respect to short-term local currency rates in certain Asian and Latin American countries. FOREIGN CURRENCY EXCHANGE RATES Energizer employs a foreign currency hedging strategy which focuses on mitigating potential losses in earnings or cash flows on foreign currency transactions, which primarily consist of anticipated intercompany purchase transactions and intercompany borrowings. External purchase transactions and intercompany dividends and service fees with foreign currency risk are also hedged from time to time. The primary currencies to which Energizer's foreign affiliates are exposed include the U.S. dollar, the Euro and the British pound, while domestic affiliates are primarily exposed to the Swiss franc. Energizer's hedging strategy involves the use of natural hedging techniques, where possible, such as the offsetting or netting of like foreign currency cash flows. Where natural hedging techniques are not possible, foreign currency derivatives with a duration of generally one year or less may be used, including forward exchange contracts, purchased put and call options, and zero-cost option collars. Energizer policy allows foreign currency derivatives to be used only for identifiable foreign currency exposures and, therefore, Energizer does not enter into foreign currency contracts for trading purposes where the sole objective is to generate profits. Energizer has not designated any financial instruments as hedges for accounting purposes in the three years ended September 30, 2001. Market risk of foreign currency derivatives is the potential loss in fair value of net currency positions for outstanding foreign currency contracts at fiscal year-end, resulting from a hypothetical 10% adverse change in all foreign currency exchange rates. Market risk does not include foreign currency derivatives that hedge existing balance sheet exposures, as any losses on these contracts would be fully offset by exchange gains on the underlying exposures for which the contracts are designated as hedges. Accordingly, the market risk of Energizer's foreign currency derivatives at September 30, 2001 and 2000 amounts to $1.9 and $2.6, respectively. Energizer generally views as long-term its investments in foreign subsidiaries with a functional currency other than the U.S. dollar. As a result, Energizer does not generally hedge these net investments. Capital structuring techniques are used to manage the net investment in foreign currencies as considered necessary. Additionally, Energizer attempts to limit its U.S. dollar net monetary liabilities in currencies of hyperinflationary countries, primarily in Latin America. In terms of foreign currency translation risk, Energizer is exposed to the Swiss franc and other European currencies; the Mexican and Argentine peso and other Latin American currencies; and the Singapore dollar, Chinese renminbi, Australian and Hong Kong dollars, and other Asian currencies. Energizer's net foreign currency investment in foreign subsidiaries and affiliates translated into U.S. dollars using year-end exchange rates was $329.2 and $515.1 at September 30, 2001 and 2000, respectively. The potential loss in value of Energizer's net foreign currency investment in foreign subsidiaries resulting from a hypothetical 10% adverse change in quoted foreign currency exchange rates at September 30, 2001 and 2000 amounts to $32.9 and $51.5, respectively. RECENTLY ISSUED ACCOUNTING STANDARDS See discussion in Note 2 to the Consolidated Financial Statements. FORWARD-LOOKING INFORMATION Statements in the Management's Discussion and Analysis of Results of Operations and Financial Condition and other sections of this Annual Report to Shareholders that are not historical, particularly statements regarding Energizer's commitment to maintaining technological leadership, the impact of Energizer's restructuring activity, the future adequacy of cash flows and Energizer's ability to meet liquidity requirements, the impact of inflationary pressures, the impact of future expenditures for environmental matters and equipment, the impact of adverse changes in interest rates, the market risk of foreign currency derivatives, and the potential loss in value of Energizer's net foreign currency investment in foreign subsidiaries, may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Company cautions readers not to place undue reliance on any forward-looking statements, which speak only as of the date made. The Company advises readers that various risks and uncertainties could affect its financial performance and could cause the Company's actual results for future periods to differ materially from those anticipated or projected. The high cost of research and development activities, shifts in consumer demand from higher quality to lower-priced batteries, and patented innovations by competitors, could affect the Company's commitment or ability to maintain its technological leadership. Severance costs and other expenses associated with current and proposed restructuring activity may be higher than anticipated, and there may be unknown expenses associated with these activities. In addition, expected improvements in operating efficiency may not materialize, and the cost reductions actually realized as a result of restructuring activity may be less significant than anticipated. Unforeseen fluctuations in levels of the Company's operating cash flows, or inability to maintain compliance with its debt covenants, could limit the Company's ability to meet future operating expenses and liquidity requirements, fund capital expenditures or service its debt as it becomes due. The current political and economic crisis could result in higher levels of inflation than anticipated, and the Company may not be able to realize cost reductions, productivity improvements or price increases which are substantial enough to counter the inflationary impact. Unknown environmental liabilities and greater than anticipated remediation expenses or environmental control expenditures could have a material impact on the Company's financial position. Economic turmoil and currency fluctuations could increase the Company's risk from unfavorable impacts on variable-rate debt, currency derivatives and other financial instruments, as well as increase the potential loss in value of its net foreign currency investment in foreign subsidiaries. Additional risks and uncertainties include those detailed from time to time in the Company's publicly filed documents, including its Registration Statement on Form 10, as amended, and its Current Report on Form 8-K dated April 25, 2000. 20 SUMMARY SELECTED HISTORICAL FINANCIAL INFORMATION (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
FOR THE YEAR ENDED SEPTEMBER 30, ---------------------------------------------------- 2001 2000 1999 1998 1997 -------- -------- -------- -------- -------- STATEMENT OF EARNINGS DATA Net sales (a).............................. $1,694.2 $1,927.7 $1,878.5 $1,930.7 $2,015.2 Depreciation and amortization.............. 79.8 82.0 94.9 101.2 112.3 Earnings from continuing operations before income taxes (b)......................... 31.5 279.2 248.2 262.5 203.9 Income taxes............................... 70.5 99.0 88.4 54.3 44.6 Earnings/(loss) from continuing operations (c)...................................... (39.0) 180.2 159.8 208.2 159.3 Net earnings/(loss)........................ (39.0) 181.4 80.0 164.7 159.8 Earnings/(loss) per share from continuing operations: Basic.................................... $ (0.42) $ 1.88 $ 1.56 $ 2.05 $ 1.56 Diluted.................................. $ (0.42) $ 1.87 $ 1.56 $ 2.05 $ 1.56 Average shares outstanding (d) Basic.................................... 92.6 96.1 102.6 101.6 102.1 Diluted.................................. 94.1 96.3 102.6 101.6 102.1
SEPTEMBER 30, ---------------------------------------------------- 2001 2000 1999 1998 1997 -------- -------- -------- -------- -------- BALANCE SHEET DATA Working capital............................ $ 288.1 $ 401.7 $ 478.1 $ 478.5 $ 489.6 Property at cost, net...................... 476.1 485.4 472.8 476.9 494.2 Additions (during the period)............ 77.9 72.8 69.2 102.8 98.8 Depreciation (during the period)......... 58.6 57.9 68.4 74.1 79.5 Total assets............................... 1,497.6 1,793.5 1,833.7 2,077.6 2,113.6 Long-term debt............................. 225.0 370.0 1.9 1.3 21.3
(a) Certain reclassifications have been made to comply with EITF 00-10, 00-14 and 00-25. See Note 2 for further information. (b) Earnings/(loss) from continuing operations before income taxes were (reduced)/increased due to the following unusual items:
FOR THE YEAR ENDED SEPTEMBER 30, ---------------------------------------------------- 2001 2000 1999 1998 1997 -------- -------- -------- -------- -------- Intellectual property rights income.... $ 20.0 $ -- $ -- $ -- $ -- Provision for goodwill impairment...... (119.0) -- -- -- -- Provisions for restructuring........... (29.8) -- (9.9) (21.3) (83.7) Loss on disposition of Spanish affiliate............................ -- (15.7) -- -- -- Costs related to spin-off.............. -- (5.5) -- -- -- -------- -------- -------- -------- -------- Total................................ $ (128.8) $ (21.2) $ (9.9) $ (21.3) $ (83.7) ======== ======== ======== ======== ========
21 (c) Earnings/(loss) from continuing operations were (reduced)/increased due to the following unusual items:
FOR THE YEAR ENDED SEPTEMBER 30, ---------------------------------------------------- 2001 2000 1999 1998 1997 -------- -------- -------- -------- -------- Intellectual property rights income, net of tax........................... $ 12.3 $ -- $ -- $ -- $ -- Provision for goodwill impairment, net of tax............................... (119.0) -- -- -- -- Provisions for restructuring, net of tax.................................. (19.4) -- (8.3) (12.8) (72.0) Capital loss tax benefits.............. -- 24.4 16.6 48.4 35.9 Foreign tax credit refunds............. -- -- -- -- 20.5 Loss on disposition of Spanish affiliate, net of tax................ -- (15.7) -- -- -- Costs related to spin-off, net of tax.................................. -- (3.3) -- -- -- -------- -------- -------- -------- -------- Total................................ $ (126.1) $ 5.4 $ 8.3 $ 35.6 $ (15.6) ======== ======== ======== ======== ========
(d) Basic earnings per share for the current year is based on the weighted-average number of shares outstanding during the period. Diluted earnings per share for the current year is based on the weighted-average number of shares used in the basic earnings per share calculation, adjusted for the dilutive effect of stock options and restricted stock equivalents. Prior fiscal years are based on the weighted-average number of shares outstanding of Ralston common stock prior to the spin-off, adjusted in fiscal 2000 for the distribution of one share of Energizer stock for each three shares of Ralston stock. In fiscal 2001, the potentially dilutive securities were not included in the dilutive earnings per share calculation due to their anti-dilutive effect. 22 RESPONSIBILITY FOR FINANCIAL STATEMENTS The preparation and integrity of the financial statements of Energizer Holdings, Inc. are the responsibility of its management. These statements have been prepared in conformance with generally accepted accounting principles in the United States, and in the opinion of management, fairly present Energizer's financial position, results of operations and cash flows. Energizer maintains accounting and internal control systems, which it believes are adequate to provide reasonable assurance that assets are safeguarded against loss from unauthorized use or disposition and that the financial records are reliable for preparing financial statements. The selection and training of qualified personnel, the establishment and communication of accounting and administrative policies and procedures, and an extensive program of internal audits are important elements of these control systems. The report of PricewaterhouseCoopers LLP, independent accountants, on their audits of the accompanying financial statements is shown below. This report states that the audits were made in accordance with generally accepted auditing standards in the United States. These standards include a study and evaluation of internal control for the purpose of establishing a basis for reliance thereon relative to the scope of their audits of the financial statements. The Board of Directors, through its Audit Committee consisting solely of nonmanagement directors, meets periodically with management, internal audit and the independent accountants to discuss audit and financial reporting matters. To assure independence, PricewaterhouseCoopers LLP has direct access to the Audit Committee. 23 REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Board of Directors of Energizer Holdings, Inc. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings and comprehensive income, of cash flows and of shareholders equity present fairly, in all material respects, the financial position of Energizer Holdings, Inc. and its subsidiaries at September 30, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2001, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of Energizer's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. /s/ PRICEWATERHOUSECOOPERS LLP St. Louis, Missouri October 30, 2001 24 CONSOLIDATED STATEMENT OF EARNINGS AND COMPREHENSIVE INCOME (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
YEAR ENDED SEPTEMBER 30, ------------------------------ 2001 2000 1999 -------- -------- -------- STATEMENT OF EARNINGS: Net sales................................................... $1,694.2 $1,927.7 $1,878.5 Cost of products sold....................................... 999.1 1,044.0 1,059.5 Selling, general and administrative expense................. 320.3 344.8 368.4 Advertising and promotion expense........................... 133.6 164.7 137.8 Research and development expense............................ 46.4 49.9 48.5 Provision for goodwill impairment........................... 119.0 -- -- Provisions for restructuring................................ 29.8 -- 7.8 Intellectual property rights income......................... (20.0) -- -- Costs related to spin-off................................... -- 5.5 -- Loss on disposition of Spanish affiliate.................... -- 15.7 -- Interest expense............................................ 33.2 27.5 7.6 Other financing items, net (income)/expense................. 1.3 (3.6) 0.7 -------- -------- -------- Earnings from continuing operations before income taxes..... 31.5 279.2 248.2 Income taxes................................................ (70.5) (99.0) (88.4) -------- -------- -------- Earnings/(loss) from continuing operations.................. (39.0) 180.2 159.8 Net loss from discontinued operations....................... -- -- (5.6) Net gain/(loss) on disposition of discontinued operations... -- 1.2 (74.2) -------- -------- -------- NET EARNINGS/(LOSS)......................................... $ (39.0) $ 181.4 $ 80.0 ======== ======== ======== EARNINGS PER SHARE: Basic Earnings/(loss) from continuing operations............. $ (0.42) $ 1.88 $ 1.56 Net loss from discontinued operations.................. -- -- (0.06) Net gain/(loss) on disposition of discontinued operations........................................... -- 0.01 (0.72) -------- -------- -------- Net earnings/(loss).................................... $ (0.42) $ 1.89 $ 0.78 ======== ======== ======== Diluted Earnings/(loss) from continuing operations............. $ (0.42) $ 1.87 $ 1.56 Net loss from discontinued operations.................. -- -- (0.06) Net gain/(loss) on disposition of discontinued operations........................................... -- 0.01 (0.72) -------- -------- -------- Net earnings/(loss).................................... $ (0.42) $ 1.88 $ 0.78 ======== ======== ======== STATEMENT OF COMPREHENSIVE INCOME: Net earnings/(loss)......................................... $ (39.0) $ 181.4 $ 80.0 Other comprehensive income, net of tax Foreign currency translation adjustments.................. (8.6) (31.9) 7.8 Foreign currency reclassification adjustments............. -- 9.7 (4.5) Minimum pension liability adjustment, net of tax of $.7... -- (1.1) -- -------- -------- -------- Comprehensive income/(loss)................................. $ (47.6) $ 158.1 $ 83.3 ======== ======== ========
The above financial statement should be read in conjunction with the Notes to Consolidated Financial Statements. 25 CONSOLIDATED BALANCE SHEET (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
SEPTEMBER 30, ------------------- 2001 2000 -------- -------- ASSETS Current assets Cash and cash equivalents................................. $ 23.0 $ 11.9 Trade receivables, net.................................... 189.1 180.6 Inventories............................................... 361.3 459.1 Other current assets...................................... 209.9 278.7 -------- -------- Total current assets................................... 783.3 930.3 Property, plant and equipment, net.......................... 476.1 485.4 Other assets................................................ 238.2 377.8 -------- -------- Total................................................ $1,497.6 $1,793.5 ======== ======== LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities Notes payable............................................. $ 110.3 $ 135.0 Accounts payable.......................................... 109.2 145.0 Other current liabilities................................. 275.7 248.6 -------- -------- Total current liabilities.............................. 495.2 528.6 Long-term debt.............................................. 225.0 370.0 Other liabilities........................................... 169.5 156.7 Shareholders equity Preferred stock - $.01 par value, none outstanding........ -- -- Common stock $.01 par value, issued 95,563,511 and 95,552,711 at 2001 and 2000, respectively.............. 1.0 1.0 Additional paid-in capital................................ 784.1 783.9 Retained earnings......................................... 17.5 59.8 Common stock in treasury, at cost, 3,844,700 shares at 2001................................................... (79.6) -- Accumulated other comprehensive income.................... (115.1) (106.5) -------- -------- Total shareholders equity.............................. 607.9 738.2 -------- -------- Total................................................ $1,497.6 $1,793.5 ======== ========
The above financial statement should be read in conjunction with the Notes to Consolidated Financial Statements. 26 CONSOLIDATED STATEMENT OF CASH FLOWS (DOLLARS IN MILLIONS)
YEAR ENDED SEPTEMBER 30, --------------------------- 2001 2000 1999 ------- ------- ------- CASH FLOW FROM OPERATIONS Net earnings/(loss)....................................... $ (39.0) $ 181.4 $ 80.0 Adjustments to reconcile net earnings to net cash flow from operations: Other non-cash charges.................................... 139.3 15.7 (2.2) Depreciation and amortization............................. 79.8 82.0 94.9 Translation and exchange loss............................. 6.1 1.9 9.0 Deferred income taxes..................................... 0.3 5.9 70.4 Net (earnings)/loss from discontinued operations.......... -- (1.2) 79.8 Sale of accounts receivable............................... (13.8) 100.0 -- Changes in assets and liabilities used in operations: (Increase)/decrease in accounts receivable, net......... (2.7) (25.3) (6.4) (Increase)/decrease in inventories...................... 90.2 (90.8) 22.1 (Increase)/decrease in other current assets............. 70.3 18.7 (13.9) Increase/(decrease) in accounts payable................. (27.3) 24.2 (21.3) Increase/(decrease) in other current liabilities........ 11.2 (16.8) 16.2 Other, net.................................................. 3.7 (6.1) 8.6 ------- ------- ------- Cash flow from continuing operations...................... 318.1 289.6 337.2 Cash flow from discontinued operations.................... -- 54.7 15.1 ------- ------- ------- Net cash flow from operations........................... 318.1 344.3 352.3 ------- ------- ------- CASH FLOW FROM INVESTING ACTIVITIES Property additions........................................ (77.9) (72.8) (69.2) Proceeds from sale of OEM business........................ -- 20.0 -- Proceeds from sale of assets.............................. 10.8 3.2 1.4 Other, net................................................ 1.8 (8.7) (0.5) ------- ------- ------- Cash used by investing activities from continuing operations............................................. (65.3) (58.3) (68.3) Cash used by investing activities from discontinued operations............................................. -- (0.7) (3.7) ------- ------- ------- Net cash used by investing activities................. (65.3) (59.0) (72.0) ------- ------- ------- CASH FLOW FROM FINANCING ACTIVITIES Net cash proceeds from issuance of long-term debt......... -- 407.0 1.0 Principal payments on long-term debt (including current maturities)............................................. (145.0) (449.5) (13.3) Cash proceeds from issuance of notes payables with maturities greater than 90 days......................... 19.4 6.1 14.7 Cash payments on notes payables with maturities greater than 90 days............................................ (19.4) (3.7) (0.1) Net increase/(decrease) in notes payable with maturities of 90 days or less...................................... (20.1) (50.2) (12.0) Purchase of treasury stock................................ (79.6) -- -- Other, net................................................ 0.2 -- -- Net transactions with Ralston prior to spin-off........... -- (210.7) (293.7) ------- ------- ------- Net cash used by financing activities................... (244.5) (301.0) (303.4) ------- ------- ------- Effect of exchange rate changes on cash..................... (1.2) (0.2) 1.8 ------- ------- ------- Net increase/(decrease) in cash and cash equivalents........ 7.1 (15.9) (21.3) Cash and cash equivalents, beginning of period.............. 11.9 27.8 49.1 Cash and cash equivalents, international month-lag elimination (Note 2)...................................... 4.0 -- -- ------- ------- ------- Cash and cash equivalents, end of period.................... $ 23.0 $ 11.9 $ 27.8 ======= ======= ======= Non-cash transactions: Debt assigned by Ralston................................ $ -- $ 478.0 $ -- ======= ======= =======
The above financial statement should be read in conjunction with the Notes to Consolidated Financial Statements. 27 CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY (DOLLARS IN MILLIONS, SHARES IN THOUSANDS)
DOLLARS SHARES ----------------------------- ------------------------ 2001 2000 1999 2001 2000 1999 ------- -------- -------- ------ ------ ------ Ralston's net investment:............. $ -- $1,312.9 $1,531.3 Net earnings........................ -- 121.6 80.0 Net transactions with Ralston....... -- (732.8) (301.7) Foreign currency translation adjustment....................... -- (1.4) 3.3 Distribution to Ralston's shareholders at spin-off......... -- (700.3) -- ------- -------- -------- Ending balance...................... $ -- $ -- $1,312.9 Common Stock:......................... $ 1.0 $ -- $ -- 95,553 -- -- Distribution to Ralston's shareholders at spin-off......... -- 1.0 -- -- 95,553 -- Shares issued under stock plan activity......................... -- -- -- 11 -- -- ------- -------- -------- ------ ------ ------ Ending balance...................... $ 1.0 $ 1.0 $ -- 95,564 95,553 -- Additional paid in capital:........... $ 783.9 $ -- $ -- Distribution to Ralston's shareholders at spin-off......... -- 783.9 -- Shares issued under stock plan activity......................... 0.2 -- -- ------- -------- -------- Ending balance...................... $ 784.1 $ 783.9 $ -- Retained earnings:.................... $ 59.8 $ -- $ -- Net earnings........................ (39.0) 59.8 -- Elimination of international one-month lag (Note 2)........... (3.3) -- -- ------- -------- -------- Ending balance...................... $ 17.5 $ 59.8 $ -- Common stock in treasury:............. $ -- $ -- $ -- -- -- -- Treasury stock purchased............ (79.6) -- -- (3,845) -- -- ------- -------- -------- ------ ------ ------ Ending balance...................... $ (79.6) $ -- $ -- (3,845) -- -- Accumulated other comprehensive income: Cumulative translation adjustment:...................... $(105.4) $ -- $ -- Distribution to Ralston's shareholders at spin-off....... -- (84.6) -- Foreign currency translation adjustment..................... (8.6) (20.8) -- ------- -------- -------- Ending balance................... $(114.0) $ (105.4) $ -- Minimum pension liability adjustment:...................... $ (1.1) $ -- $ -- Adjustment....................... -- (1.1) -- ------- -------- -------- Ending balance................... $ (1.1) $ (1.1) $ -- ------- -------- -------- Total accumulated other comprehensive income............. $(115.1) $ (106.5) $ -- ------- -------- -------- Total shareholders equity... $ 607.9 $ 738.2 $1,312.9 ======= ======== ========
The above financial statement should be read in conjunction with the Notes to Consolidated Financial Statements. 28 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA) (1) BASIS OF PRESENTATION On June 10, 1999, the Board of Directors of Ralston approved in principle a plan to spin off its battery business to the Ralston stockholders. In September 1999, Energizer Holdings, Inc. ("Energizer") was incorporated in Missouri as an indirect subsidiary of Ralston. Effective April 1, 2000, Energizer became an independent, publicly owned company as a result of the distribution by Ralston of Energizer's $.01 par value common stock to the Ralston stockholders at a distribution ratio of one for three (the spin-off). Prior to the spin-off, Energizer operated as a wholly owned subsidiary of Ralston. Ralston received a ruling from the Internal Revenue Service stating the distribution qualified as a tax-free spin-off. Energizer is the world's largest publicly traded manufacturer of primary batteries and flashlights and a global leader in the dynamic business of providing portable power. Energizer manufactures and markets a complete line of primary alkaline and carbon zinc batteries under the brands Energizer e(2), Energizer and Eveready, as well as miniature and rechargeable batteries, and flashlights and other lighting products. Energizer and its subsidiaries operate 22 manufacturing and packaging facilities in 15 countries on four continents. Its products are marketed and sold in more than 140 countries primarily through a direct sales force, and also through distributors, to mass merchandisers, wholesalers and other customers. Financial statements as of and for periods after the spin-off are presented on a consolidated basis. The Statement of Earnings and Statement of Cash Flows for the year ended September 30, 2000 include the combined results of operations of the Energizer businesses under Ralston for the six months prior to the spin- off and the consolidated results of operations of Energizer on a stand-alone basis for the six months ended September 30, 2000. The financial statements for all periods prior to the spin-off are presented on a combined basis and reflect periods during which the Energizer businesses operated as wholly owned subsidiaries of Ralston. The financial information in these financial statements does not include certain expenses and adjustments that would have been incurred had Energizer been a separate, independent company, and may not necessarily be indicative of results that would have occurred had Energizer been a separate, independent company during the periods presented or of future results of Energizer. See the pro forma statement of earnings for the years ended September 30, 2000 and 1999 in Note 22. (2) SUMMARY OF ACCOUNTING POLICIES Energizer's significant accounting policies, which conform to generally accepted accounting principles in the United States and are applied on a consistent basis among all years presented, except as indicated, are described below. Principles of Consolidation - These financial statements include the accounts of Energizer and its majority-owned subsidiaries. All significant intercompany transactions are eliminated. Investments in affiliated companies, 20% through 50% owned, are carried at equity. Energizer historically reported results of international operations on a one-month lag. As such, prior year amounts represent results of international operations for September through August combined with the U.S. results for October through September. Beginning in fiscal 2001, Energizer synchronized international operations' reporting to be consistent with U.S. reporting. As a result, the fiscal 2000 loss from international operations of $3.3 was recorded directly to retained earnings. The effects of the change on the year ended September 30, 2000 are presented in Note 22. The effect of the change is not significant to the balance sheet or cash flow, and as a result, the September 30, 2000 balance sheet and the cash flow have not been adjusted. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Foreign Currency Translation - Financial statements of foreign operations where the local currency is the functional currency are translated using end-of-period exchange rates for assets and liabilities and average exchange rates during the period for results of operations. Related translation adjustments are reported as a component within accumulated other comprehensive income in the shareholders equity section of the Consolidated Balance Sheet. For foreign operations where the U.S. dollar is the functional currency and for countries that are considered highly inflationary, translation practices differ in that inventories, properties, accumulated depreciation and depreciation expense are translated at historical rates of exchange, and related translation adjustments are included in earnings. Gains and losses from foreign currency transactions are generally included in earnings. Financial Instruments and Derivative Securities - Energizer uses financial instruments in the management of foreign currency and interest rate risks that are inherent to its business operations. Such instruments are not held or issued for trading purposes. Foreign exchange (F/X) instruments, including currency forwards, purchased options and zero-cost option collars, are used primarily to reduce transaction exposures associated with anticipated intercompany purchases and intercompany borrowings and, to a lesser extent, to manage other transaction and translation exposures. F/X instruments used are selected based on their risk reduction attributes and the related market conditions. The terms of such instruments are generally 12 months or less. For derivatives not designated as hedging instruments for accounting purposes, realized and unrealized gains or losses from F/X instruments are recognized currently in selling, general and administrative expenses or other financing items, net in the Consolidated Statement of Earnings. Energizer has not designated any financial instruments as hedges for accounting purposes in the three years ended September 30, 2001. Energizer adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133), and Statement of Financial Accounting Standards No. 138, an amendment of SFAS 133, in the first quarter of fiscal 2001. The implementation of this standard did not have a material effect on its consolidated financial position or results of operations. Cash Equivalents - For purposes of the Consolidated Statement of Cash Flows, cash equivalents are considered to be all highly liquid investments with a maturity of three months or less when purchased. Inventories - Inventories are valued at the lower of cost or market, with cost generally being determined using average cost or the first-in, first-out (FIFO) method. Capitalized Software Costs - Capitalized software costs are included in Other Assets. These costs are amortized using the straight-line method over periods of related benefit ranging from two to seven years. Property at Cost - Expenditures for new facilities and expenditures that substantially increase the useful life of property, including interest during construction, are capitalized. Maintenance, repairs and minor renewals are expensed as incurred. When property is retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts, and gains or losses on the disposition are reflected in earnings. Depreciation - Depreciation is generally provided on the straight-line basis by charges to costs or expenses at rates based on the estimated useful lives. Estimated useful lives range from three to 30 years for machinery and equipment and three to 50 years for buildings. Depreciation expense was $58.6, $57.9 and $68.4 in 2001, 2000 and 1999, respectively. 30 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA) Goodwill and Other Intangible Assets - Amortization of goodwill, representing the excess of cost over the net tangible assets of acquired businesses, is recorded on a straight-line basis primarily over a period of 25 years, with some amounts being amortized over 40 years. The cost to purchase or develop other intangible assets, which consist primarily of patents, tradenames and trademarks, is amortized on a straight-line basis over estimated periods of related benefit ranging from seven to 40 years. Impairment of Long-Lived Assets - Energizer reviews long-lived assets, including goodwill and other intangible assets, for impairment whenever events or changes in business circumstances indicate that the remaining useful life may warrant revision or that the carrying amount of the long-lived asset may not be fully recoverable. Energizer performs undiscounted cash flow analyses to determine if impairment exists. If impairment is determined to exist, any related impairment loss is calculated based on fair value. Impairment losses on assets to be disposed of, if any, are based on the estimated proceeds to be received, less costs of disposal. Revenue Recognition - Revenue is recognized in accordance with terms of sale, which is generally upon shipment of product to or upon receipt of product by customers. Energizer provides its customers a variety of programs designed to promote sales of its products. Promotional payments and allowances that represent primarily a reduction in price paid by either a retail customer, distributor, wholesaler or ultimate consumer are recorded in net sales. The provision for doubtful accounts is included in selling, general and administrative expenses in the Consolidated Statement of Earnings. Advertising and Promotion Costs - Energizer advertises and promotes its products through national and regional media. Energizer expenses advertising and promotion in the year such costs are incurred. Due to the seasonality of the business, with typically higher sales and volume during the holidays in the first quarter, advertising and promotion costs incurred during interim periods are generally expensed ratably in relation to revenues. Reclassifications - Certain reclassifications have been made to the prior year financial statements to conform to the current presentation. Recently Issued Accounting Pronouncements - In 2001, the FASB issued Statement of Financial Accounting Standards No. 141 (SFAS 141), "Business Combinations." SFAS 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 and establishes specific criteria for recognition of intangible assets separately from goodwill. For business combinations initiated after June 30, 2001, SFAS 141 also requires that unallocated negative goodwill be written off immediately as an extraordinary gain. Energizer is currently evaluating the impact of SFAS 141 on its financial statements. Also in 2001, the FASB issued Statement of Financial Accounting Standards No. 142 (SFAS 142), "Goodwill and Other Intangible Assets." SFAS 142 eliminates the amortization of goodwill and instead requires goodwill be tested for impairment annually at the reporting unit level. Also, intangible assets are required to be amortized over their useful lives and reviewed for impairment in accordance with Statement of Financial Accounting Standards 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." Under SFAS 142, if the intangible asset has an indefinite useful life, it is not amortized until its life is determined to be finite. Energizer is required to adopt SFAS 142 no later than the first quarter of fiscal 2003, but is permitted to adopt as of the first quarter of fiscal 2002. Energizer is currently evaluating the impact of SFAS 142 on its financial statements. The FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations" (SFAS 143) in 2001. SFAS 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. Energizer is required to adopt SFAS 143 no later than the first quarter of fiscal 2003, but is permitted to adopt earlier. Energizer is currently evaluating the impact of SFAS 143 on its financial statements. 31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA) The FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which provides guidance on the accounting for the impairment or disposal of long-lived assets. The provisions of this statement are effective for financial statements issued for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years, although early adoption is allowed. Energizer is currently evaluating the impact of SFAS 144 on its financial statements. The Emerging Issues Task Force (EITF) issued EITF 00-10, "Accounting for Shipping and Handling Fees and Costs," which provides guidance on earnings statement classification of amounts billed to customers for shipping and handling. Energizer adopted EITF 00-10 in its fourth quarter of fiscal 2001. Reclassifications were necessary from net sales to cost of products sold and were $34.4, $36.1 and $32.7 for 2001, 2000 and 1999, respectively. In addition, warehousing costs in selling, general and administrative expense of $31.1, $33.2 and $28.9 in 2001, 2000 and 1999, respectively, were reclassified to cost of products sold. There was no impact to net earnings. The EITF also issued EITF 00-14 and 00-25. EITF 00-14, "Accounting for Certain Sales Incentives," provides guidance on accounting for discounts, coupons, rebates and free product. EITF 00-25, "Vendor Income Statement Characterization of Consideration from a Vendor to a Retailer," provides guidance on accounting for considerations other than those directly addressed in EITF 00-14. Energizer adopted EITF 00-14 and 00-25 in its fourth quarter of fiscal 2001. Reclassifications were necessary from advertising and promotion expense to net sales and were $28.3, $22.7 and $26.5 for 2001, 2000 and 1999, respectively. There was no impact to net earnings. (3) RELATED PARTY ACTIVITY Cash Management - Prior to the spin-off, Energizer participated in a centralized cash management system administered by Ralston. Cash deposits from Energizer were transferred to Ralston on a daily basis and Ralston funded Energizer's disbursement bank accounts as required. Unpaid balances of checks were included in accounts payable. No interest was charged or credited on transactions with Ralston. Shared Services - Energizer and Ralston have entered into a Bridging Agreement under which Ralston has continued to provide certain general and administrative services to Energizer, including systems, benefits and advertising. Ralston also provided facilities for Energizer's headquarters through July 31, 2001, when Energizer relocated its headquarters. Prior to the spin-off, the expenses related to shared services listed above, as well as legal and financial support services, were allocated to Energizer generally based on utilization, which management believes to be reasonable. Costs of these shared services charged to Energizer were $9.6 and $20.0 for the six months ended March 31, 2000, and year ended September 30, 1999, respectively. Ralston's Net Investment - Included in Ralston's Net Investment are cumulative translation adjustments for non-hyperinflationary countries of $84.6 as of March 31, 2000 representing net devaluation of currencies relative to the U.S. dollar over the period of investment. Also included in Ralston's Net Investment are accounts payable and receivable between Energizer and Ralston. (4) DISCONTINUED OPERATIONS On November 1, 1999, the OEM business was sold to Moltech Corporation for approximately $20.0. This segment is accounted for as a discontinued operation in Energizer's consolidated financial statements. In fiscal 2000, Energizer recognized an after-tax gain of $1.2 on the disposition of discontinued operations related to the final settlement of the sale transaction. Included in the fiscal year 1999 Net Loss on Disposition of Discontinued Operations are estimated operating losses during the divestment period of $15.0 pre-tax, or $9.6 after-tax, and a loss on disposition of $95.6 pre-tax, or $64.6 after-tax. Actual pre-tax operating losses during the divestment period through September 30, 1999 totaled $12.5. 32 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA) The Investment in Discontinued Operations at September 30, 1999 was primarily comprised of fixed assets, inventory and accounts receivable and payable. Results for discontinued operations for 1999 were as follows: net sales, $64.2; loss before income taxes, $9.0; income tax benefit, $3.4; and net loss from discontinued operations, $5.6. (5) RESTRUCTURING ACTIVITIES Because there continues to be a migration of consumer demand from carbon zinc to alkaline batteries, a comprehensive study of Energizer's carbon zinc facilities to determine the optimum number of carbon zinc manufacturing plants was completed in the fourth quarter of fiscal 2001. Energizer also reviewed its worldwide operations in light of competitive market conditions and available technologies and techniques, and is adjusting its organization accordingly. As a result, Energizer adopted restructuring plans to eliminate carbon zinc capacity, and to reduce and realign certain selling, production, research and administrative functions. The total cost associated with this plan is expected to be $35.6 before taxes, of which $29.8, or $19.4 after-tax, was recorded in the fourth quarter, with the remainder expected to be recorded in the first quarter of fiscal 2002. These restructuring activities are expected to improve the Company's operating efficiency, downsize and centralize corporate functions, and decrease costs. The plans will result in the closure of one carbon zinc production facility in South and Central America, and the severance of 570 employees, consisting of 375 production and 195 sales, research and administrative employees, primarily in the United States and South and Central America. The restructuring charges consist of non-cash fixed asset impairment charges of $11.1 for the closed carbon zinc plant and production equipment, enhanced pension benefits for certain terminated U.S. employees of $8.3, cash severance payments of $6.3, and other cash charges of $4.1. During 1999, Energizer recorded net provisions for restructuring of $8.3 after-tax, or $9.9 pre-tax, $2.1 of which represented inventory write-downs and is classified as cost of products sold in the Consolidated Statement of Earnings. Of the net pre-tax charge, $7.4 relates to the 1999 restructuring plans for the elimination of certain production capacity in North America and in Asia. The pre-tax charge of $7.4 for 1999 plans consisted of termination benefits of $3.2, other cash costs of $.2 and fixed asset impairments of $4.0. The fixed asset impairments primarily relate to assets used for the production of lithium coin cells in North America. These assets were idled and scrapped in 1999. The 1999 restructuring plan provided for the termination of approximately 170 production and administrative employees and the closure of one plant in Asia. This plant closure was precipitated by the financial problems in the Asian market, which resulted in contractions in battery markets in this area. All actions associated with these charges were completed as of September 30, 2000. The remaining $2.5 represented additional net provisions related to prior years' restructuring plans. Additional termination benefits of $5.5 primarily represent enhanced severance related to a European plant closing in the 1997 restructuring plan. Additional provisions for other cash costs of $1.8 were recorded for fixed asset disposition costs for previously held-for-use assets related to the 1997 restructuring plan that were idled and held for disposal. Other non-cash charges of $2.1 relate to inventory write-offs, which were more than offset by a reclassification of $4.5 from other comprehensive income to net income of cumulative translation adjustment for a subsidiary sold in connection with the 1997 plan. Also recorded in 1999 were asset proceeds greater than anticipated of $5.4, related to 1994, 1995 and 1997 restructuring plans. As of September 30, 2001, except for the disposition of certain assets held for disposal, all activities associated with the 1994 through 1999 restructuring plans are complete. The carrying value of assets held for disposal under all restructuring plans was $2.6 at September 30, 2001. 33 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA) The following table presents, by major cost component and by year of provision, activity related to the restructuring charges discussed above during fiscal years 2001, 2000 and 1999, including any adjustments to the original charges.
1999 ROLLFORWARD 2000 ROLLFORWARD -------------------------------------------- -------------------------------------------- BEGINNING PROVISION/ ENDING BEGINNING PROVISION/ ENDING BALANCE (REVERSALS) ACTIVITY BALANCE BALANCE (REVERSALS) ACTIVITY BALANCE --------- ----------- -------- ------- --------- ----------- -------- ------- PRIOR PLANS Termination benefits........... $33.9 $ 6.4 $(34.6) $ 5.7 $ 5.7 $ -- $(5.7) $ -- Other cash costs..... 7.1 2.3 (4.5) 4.9 4.9 -- (1.0) 3.9 Fixed asset impairments........ -- (5.4) 5.4 -- -- -- -- -- Other non-cash charges............ -- (0.8) 0.8 -- -- -- -- -- ----- ----- ------ ----- ----- ---- ----- ---- Total.............. 41.0 2.5 (32.9) 10.6 10.6 -- (6.7) 3.9 ----- ----- ------ ----- ----- ---- ----- ---- 1999 PLAN Termination benefits........... -- 3.2 (2.5) 0.7 0.7 -- (0.7) -- Other cash costs..... -- 0.2 (0.2) -- -- -- -- -- Fixed asset impairments........ -- 4.0 (4.0) -- -- -- -- -- ----- ----- ------ ----- ----- ---- ----- ---- Total.............. -- 7.4 (6.7) 0.7 0.7 -- (0.7) -- ----- ----- ------ ----- ----- ---- ----- ---- 2001 PLAN Termination benefits........... -- -- -- -- -- -- -- -- Other cash costs..... -- -- -- -- -- -- -- -- Fixed asset impairments........ -- -- -- -- -- -- -- -- ----- ----- ------ ----- ----- ---- ----- ---- Total.............. -- -- -- -- -- -- -- -- ----- ----- ------ ----- ----- ---- ----- ---- GRAND TOTAL...... $41.0 $ 9.9 $(39.6) $11.3 $11.3 $ -- $(7.4) $3.9 ===== ===== ====== ===== ===== ==== ===== ====
2001 ROLLFORWARD -------------------------------------------- BEGINNING PROVISION/ ENDING BALANCE (REVERSALS) ACTIVITY BALANCE --------- ----------- -------- ------- PRIOR PLANS Termination benefits........... $ -- $ -- $ -- $ -- Other cash costs..... 3.9 -- (3.9) -- Fixed asset impairments........ -- -- -- -- Other non-cash charges............ -- -- -- -- ---- ----- ------ ---- Total.............. 3.9 -- (3.9) -- ---- ----- ------ ---- 1999 PLAN Termination benefits........... -- -- -- -- Other cash costs..... -- -- -- -- Fixed asset impairments........ -- -- -- -- ---- ----- ------ ---- Total.............. -- -- -- -- ---- ----- ------ ---- 2001 PLAN Termination benefits........... -- 14.6 (9.3) 5.3 Other cash costs..... -- 4.1 (0.2) 3.9 Fixed asset impairments........ -- 11.1 (11.1) -- ---- ----- ------ ---- Total.............. -- 29.8 (20.6) 9.2 ---- ----- ------ ---- GRAND TOTAL...... $3.9 $29.8 $(24.5) $9.2 ==== ===== ====== ====
(6) EUROPE GOODWILL Energizer monitors changing business conditions, which may indicate that the remaining useful life of goodwill and other intangible assets may warrant revision or carrying amounts may require adjustment. Continuing unfavorable business trends in Europe, and the unfavorable costs of U.S. dollar-based products resulting from currency declines, represent such conditions. As part of its annual business planning cycle, Energizer performed a thorough evaluation of its European business in the fourth quarter of fiscal 2001, which resulted in a provision for goodwill impairment of $119.0. As of September 30, 2001, the remaining carrying amount of goodwill related to Energizer's European business after the provision for impairment was $8.5. 34 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA) (7) INCOME TAXES Prior to spin-off, U.S. income tax payments, refunds, credits, provision and deferred tax components have been allocated to Energizer in accordance with Ralston's tax allocation policy. Such policy allocates tax components included in the consolidated income tax return of Ralston to Energizer to the extent such components were generated by or related to Energizer. Subsequent to the spin-off, taxes are provided on a stand-alone basis. Had the Energizer tax provision been calculated as if Energizer was a separate, independent U.S. taxpayer, the income tax provision would have been higher by approximately $23.4 in 2000. The higher provision is due primarily to the $24.4 of capital loss benefits that would not be realized on a stand-alone basis. The provisions for income taxes consisted of the following for the years ended September 30:
2001 2000 1999 ------------ ------------------ ------------------- CONTINUING CONTINUING CONSOLIDATED OPERATIONS TOTAL OPERATIONS TOTAL ------------ ---------- ----- ---------- ------ Currently payable: United States..................... $42.8 $47.5 $45.2 $(17.5) $(27.0) State............................. 5.4 9.0 8.7 7.9 8.6 Foreign........................... 22.0 36.6 36.6 27.6 27.8 ----- ----- ----- ------ ------ Total current.................. 70.2 93.1 90.5 18.0 9.4 ----- ----- ----- ------ ------ Deferred: United States..................... 1.2 1.2 1.2 68.6 39.1 State............................. 0.1 0.2 0.2 (0.5) (2.2) Foreign........................... (1.0) 4.5 4.5 2.3 2.3 ----- ----- ----- ------ ------ Total deferred................. 0.3 5.9 5.9 70.4 39.2 ----- ----- ----- ------ ------ Provision for income taxes.......... $70.5 $99.0 $96.4 $ 88.4 $ 48.6 ===== ===== ===== ====== ======
The source of pre-tax earnings was:
2001 2000 1999 ------------ ------------------- ------------------- CONTINUING CONTINUING CONSOLIDATED OPERATIONS TOTAL OPERATIONS TOTAL ------------ ---------- ------ ---------- ------ United States...................... $118.2 $201.9 $200.5 $197.2 $ 75.4 Foreign............................ (86.7) 77.3 77.3 51.0 53.3 ------ ------ ------ ------ ------ Pre-tax earnings................... $ 31.5 $279.2 $277.8 $248.2 $128.7 ====== ====== ====== ====== ======
35 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA) A reconciliation of income taxes with the amounts computed at the statutory federal rate follows:
2001 2000 1999 -------------- ------------- ------------- Computed tax at federal statutory rate................................. $ 11.0 35.0% $ 97.7 35.0% $ 86.9 35.0% State income taxes, net of federal tax benefit.............................. 3.9 12.4 6.0 2.1 4.8 1.9 Foreign tax in excess of domestic rate................................. 5.9 18.6 3.8 1.4 3.3 1.3 Taxes on repatriation of foreign earnings............................. 5.2 16.5 6.4 2.3 7.8 3.1 Foreign sales corporation benefit...... (1.2) (3.8) (2.0) (0.7) (1.7) (0.7) Nondeductible goodwill................. 4.1 13.0 5.2 1.9 5.5 2.2 Provision for goodwill impairment...... 41.7 132.4 -- -- -- -- Net tax benefit on sale of Spanish affiliate in excess of federal rate................................. -- -- (18.9) (6.7) -- -- Recognition of U.S. capital losses..... -- -- -- -- (16.6) (6.6) Other, net............................. (0.1) (0.3) 0.8 0.2 (1.6) (0.6) ------ ----- ------ ---- ------ ---- $ 70.5 223.8% $ 99.0 35.5% $ 88.4 35.6% ====== ===== ====== ==== ====== ====
In 2001, Energizer recorded a provision for goodwill impairment of $119.0, for which there is no associated tax provision or benefit. See further discussion in Note 6. In 2000, Energizer recorded U.S. capital loss tax benefits of $24.4 related to the sale of Energizer's Spanish affiliate. Energizer recognized capital loss tax benefits of $16.6 in 1999, primarily related to past restructuring actions. The capital loss benefits are not recognized in Energizer's pro forma financial results (see Note 22), as Energizer would not have been able to realize these benefits on a stand-alone basis. The effective tax rate for discontinued operations is higher than the federal statutory rate in 1999 due to state income taxes. The deferred tax assets and deferred tax liabilities recorded on the balance sheet as of September 30 are as follows:
2001 2000 ------- ------ Deferred tax liabilities: Depreciation and property differences..................... $ (61.1) $(61.1) Pension plans............................................. (38.4) (31.9) Other tax liabilities, non-current........................ (10.3) (6.1) ------- ------ Gross deferred tax liabilities......................... (109.8) (99.1) ------- ------ Deferred tax assets: Accrued liabilities....................................... 58.8 51.8 Tax loss carryforwards and tax credits.................... 28.6 25.6 Intangible assets......................................... 42.7 42.6 Postretirement benefits other than pensions............... 35.3 28.8 Inventory differences..................................... 4.0 5.2 Other tax assets, non-current............................. 7.5 8.8 ------- ------ Gross deferred tax assets.............................. 176.9 162.8 ------- ------ Valuation allowance....................................... (35.1) (31.1) ------- ------ Net deferred tax assets..................................... $ 32.0 $ 32.6 ======= ======
36 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA) Total deferred tax assets and liabilities shown above include current and non-current amounts. Tax loss carryforwards of $1.4 expired in 2001. Future expiration of tax loss carryforwards and tax credits, if not utilized, are as follows: 2002, $1.6; 2003, $4.2; 2004, $4.6; 2005, $3.5; 2006, $2.2; thereafter or no expiration, $12.5. The valuation allowance is primarily attributed to certain accrued liabilities, tax loss carryforwards and tax credits outside the United States. The valuation allowance increased $4.0 in 2001 primarily due to losses in certain foreign subsidiaries for which no tax benefit is expected to be realized. At September 30, 2001, approximately $52.8 of foreign subsidiary net earnings was considered permanently invested in those businesses. Accordingly, U.S. income taxes have not been provided for such earnings. It is not practicable to determine the amount of unrecognized deferred tax liabilities associated with such earnings. (8) EARNINGS PER SHARE For fiscal 2001, basic earnings per share is based on the average number of shares outstanding during the period. Diluted earnings per share is based on the average number of shares used for the basic earnings per share calculation, adjusted for the dilutive effect of stock options and restricted stock equivalents. In fiscal 2001, the potentially dilutive securities were not included in the dilutive earnings per share calculation due to their anti-dilutive effect. Earnings per share has been calculated using Energizer's historical basis earnings for the fiscal 2000 and 1999. For the year ended September 30, 2000, the number of shares used to compute basic earnings per share is based on the weighted-average number of shares of Ralston stock outstanding during the six months ended March 31, 2000 (adjusted for the distribution of one share of Energizer stock for each three shares of Ralston stock) and the weighted-average number of shares of Energizer stock outstanding from April 1, 2000 to September 30, 2000. For the year ended September 30, 1999, the number of shares used to compute earnings per share is based on the weighted-average number of shares of Ralston stock outstanding during the period, adjusted for the distribution of one share of Energizer stock for each three shares of Ralston stock. 37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA) The following table sets forth the computation of basic and diluted earnings per share.
FOR THE YEAR ENDED SEPTEMBER 30, ------------------------ 2001 2000 1999 ------ ------ ------ Numerator Numerator for basic and dilutive earnings per share - Earnings/(loss) from continuing operations............. $(39.0) $180.2 $159.8 Net loss from discontinued operations.................. -- -- (5.6) Net gain/(loss) on disposition of discontinued operations............................................ -- 1.2 (74.2) ------ ------ ------ Net earnings/(loss).................................... $(39.0) $181.4 $ 80.0 ====== ====== ====== Denominator Denominator for basic earnings per share - Weighted-average shares................................ 92.6 96.1 102.6 ------ ------ ------ Effect of dilutive securities Stock options.......................................... 1.0 0.1 -- Restricted stock equivalents........................... 0.5 0.1 -- ------ ------ ------ 1.5 0.2 -- Denominator for dilutive earnings per share - Weighted-average shares and assumed conversions........ 94.1 96.3 102.6 ====== ====== ====== Basic earnings per share Earnings/(loss) from continuing operations................ $(0.42) $ 1.88 $ 1.56 Net loss from discontinued operations..................... -- -- (0.06) Net gain/(loss) on disposition of discontinued operations............................................. -- 0.01 (0.72) ------ ------ ------ Net earnings/(loss)....................................... $(0.42) $ 1.89 $ 0.78 ====== ====== ====== Diluted earnings per share Earnings/(loss) from continuing operations................ $(0.42) $ 1.87 $ 1.56 Net loss from discontinued operations..................... -- -- (0.06) Net gain/(loss) on disposition of discontinued operations............................................. -- 0.01 (0.72) ------ ------ ------ Net earnings/(loss)....................................... $(0.42) $ 1.88 $ 0.78 ====== ====== ======
(9) STOCK-BASED COMPENSATION Energizer's 2000 Incentive Stock Plan (the Plan) was adopted by the Board of Directors in March 2000 and approved by shareholders, with respect to future awards which may be granted under the Plan, at the 2001 Annual Meeting of Shareholders. Under the Plan, awards to purchase shares of Energizer's common stock (ENR stock) may be granted to directors, officers and key employees. A maximum of 15.0 million shares of ENR stock was approved to be issued under the Plan. At September 30, 2001 and 2000, respectively, there were 6.6 million and 7.0 million shares available for future awards. Options which have been granted under the Plan have been granted at the market price on the grant date and generally vest ratably over four or five years. Awards have a maximum term of 10 years. Restricted stock and restricted stock equivalent awards may also be granted under the Plan. During 2000, the Board of Directors approved the grants of up to 635,000 restricted stock equivalents to a group of key employees and directors upon their purchase of an equal number of shares of Energizer (ENR) stock within a specified period. The restricted stock equivalents will vest three years from their respective dates of grant and will convert into unrestricted shares of ENR stock at that time or, at the recipient's election, will convert at the time of the recipient's retirement or other termination of employment. During fiscal 2001 and 2000, respectively, 120,885 and 488,415 restricted stock equivalents had been granted. The weighted-average fair value for restricted stock equivalents granted in 2001 and 2000 was $19.94 and $18.30, respectively. Under the terms of the Plan, option shares and prices, and restricted stock and stock equivalent awards, are adjusted in conjunction with stock splits and other recapitalizations so that the holder is in the same economic position before and after these equity transactions. Energizer also permits deferrals of bonus and salary, and, for directors, retainers and fees, under the terms of its Deferred Compensation Plan. Under this plan, employees or directors deferring amounts into the Energizer Common Stock Unit Fund are credited with a number of stock equivalents based on the fair value of ENR stock at the time of deferral. In addition, during 2000, they were credited with an additional number of stock equivalents equal to 25% for employees, and 33 1/3% for directors, of the amount deferred. This additional company match vests immediately for directors and three years from the date of initial crediting for employees. Amounts deferred into the Energizer Common Stock Unit Fund, and vested company matching deferrals, may be transferred to other investment options offered under the plan. At the time of termination of employment, or for directors, at the time of termination of service on the Board, or at such other time for distribution which may be elected in advance by the participant, the number of equivalents then credited to the participant's account is determined and then an amount in cash equal to the fair value of an equivalent number of shares of ENR stock is paid to the participant. Energizer applies APB 25 and related interpretations in accounting for its stock-based compensation. Accordingly, charges to earnings for stock-based compensation were $4.1 and $4.8 in 2001 and 2000, respectively. Had cost for stock-based compensation been determined based on the fair value method set forth under SFAS 123, Energizer's net earnings and earnings per share would have been reduced to the pro forma amounts indicated in the table below. Pro forma amounts are for disclosure purposes only and may not be representative of future calculations.
2001 2000 ------ ------ Net earnings/(loss): As reported............................................... $(39.0) $181.4 Pro forma................................................. $(45.7) $176.1 Basic earnings/(loss) per share: As reported............................................... $(0.42) $ 1.89 Pro forma................................................. $(0.49) $ 1.83 Diluted earnings/(loss) per share: As reported............................................... $(0.42) $ 1.88 Pro forma................................................. $(0.49) $ 1.83
The weighted-average fair value from options granted in fiscal 2001 and 2000 was $7.51 and $7.13 per option, respectively. This was estimated at the grant date using the Black-Scholes option-pricing model with the following weighted-average assumptions:
2001 2000 --------- --------- Risk-free interest rate..................................... 4.90% 5.85% Expected life of option..................................... 7.5 years 7.5 years Expected volatility of ENR stock............................ 19.28% 20.30% Expected dividend yield on ENR stock........................ --% --%
39 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA) A summary of nonqualified ENR stock options outstanding is as follows (shares in millions):
2001 2000 ------------------------- ------------------------- WEIGHTED-AVERAGE WEIGHTED-AVERAGE SHARES EXERCISE PRICE SHARES EXERCISE PRICE ------ ---------------- ------ ---------------- Outstanding on October 1, ..................... 7.37 $17.41 -- $ -- Granted........................................ 0.38 20.30 7.37 17.41 Exercised...................................... (0.01) 17.00 -- -- Cancelled...................................... (0.03) 20.00 -- -- ----- ---- Outstanding on September 30, .................. 7.71 17.54 7.37 17.41 ----- ---- Exercisable on September 30,................... 1.62 $17.43 -- $ --
The weighted-average remaining contractual life for both the shares outstanding and exercisable at September 30, 2001 was 8.7 years. (10) PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS Energizer has several defined benefit pension plans covering substantially all of its employees in the United States and certain employees in other countries. The plans provide retirement benefits based on years of service and earnings. Energizer also sponsors or participates in a number of other non-U.S. pension arrangements, including various retirement and termination benefit plans, some of which are required by local law or coordinated with government-sponsored plans, which are not significant in the aggregate and therefore are not included in the information presented below. Energizer currently provides other postretirement benefits, consisting of health care and life insurance benefits for certain groups of retired employees. Retiree contributions for health care benefits are adjusted periodically, as total costs of the program change. In prior years, Energizer has increased its contributions for health care benefits to partially mitigate the impact of increased medical costs to eligible retirees, although there is no requirement in Energizer's retiree health plan to do so. The benefit obligation as of the beginning of 2001 and prior is computed assuming such increases continue in the future. In 2001, the plan was amended such that there will not be an increase in the Energizer's contribution rate beyond the level of subsidy to be provided for calendar 2002. The impact of this amendment was a reduction of the projected benefit obligation of $39.4. Prior to the spin-off, Energizer employees participated in Ralston's defined benefit plans. In addition, certain groups of retirees and management employees were eligible for certain postretirement benefits provided by Ralston. 40 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA) The following tables present the benefit obligation and funded status of the plans for the periods subsequent to the spin-off.
SEPTEMBER 30, -------------------------------- PENSION POSTRETIREMENT --------------- -------------- 2001 2000 2001 2000 ------ ------ ------ ----- CHANGE IN BENEFIT OBLIGATION: Benefit obligation at beginning of year (1)............... $351.6 $345.6 $ 83.7 $77.6 Service cost.............................................. 16.6 7.8 0.2 0.1 Interest cost............................................. 24.5 11.8 6.1 2.8 Plan participants' contributions.......................... 0.5 0.2 -- -- Actuarial (gain)/loss..................................... 20.3 (1.3) 5.8 4.2 Benefits paid............................................. (18.4) (10.0) (1.8) (1.0) Foreign currency exchange rate changes.................... 2.0 (7.0) (0.2) -- Special termination benefits.............................. 8.3 -- -- -- Amendments................................................ -- 4.5 (39.4) -- ------ ------ ------ ----- Benefit obligation at end of year......................... $405.4 $351.6 $ 54.4 $83.7 ====== ====== ====== ===== CHANGE IN PLAN ASSETS: Fair value of plan assets at beginning of year (1)........ $557.7 $558.9 $ 1.9 $ 1.7 Actual return on plan assets.............................. (49.0) 16.6 0.4 0.2 Company contributions..................................... 2.6 1.2 1.8 1.0 Plan participants' contributions.......................... 0.5 0.2 2.0 1.0 Benefits paid............................................. (18.4) (10.0) (3.8) (2.0) Foreign currency exchange rate changes.................... 2.0 (9.2) -- -- ------ ------ ------ ----- Fair value of plan assets at end of year.................. $495.4 $557.7 $ 2.3 $ 1.9 ====== ====== ====== =====
- --------------- (1) For fiscal 2000, the benefit obligation and fair value of plan assets are as of April 1, 2000, the date of the spin-off from Ralston.
SEPTEMBER 30, --------------------------------- PENSION POSTRETIREMENT --------------- --------------- 2001 2000 2001 2000 ------ ------ ------ ------ FUNDED STATUS: Funded status of the plan................................ $ 90.0 $206.1 $(52.1) $(81.8) Unrecognized net loss/(gain)............................. 6.7 (113.0) 3.1 (2.3) Unrecognized prior service cost.......................... 0.2 0.4 (42.7) (3.6) Unrecognized net transition asset........................ 1.3 1.1 -- -- ------ ------ ------ ------ Prepaid/(accrued) benefit cost........................... $ 98.2 $ 94.6 $(91.7) $(87.7) ------ ------ ------ ------ AMOUNTS RECOGNIZED IN THE CONSOLIDATED BALANCE SHEET: Prepaid benefit cost..................................... $106.2 $102.0 $ -- $ -- Accrued benefit liability................................ (10.0) (9.4) (91.7) (87.7) Intangible asset......................................... 0.2 0.2 -- -- Accumulated other comprehensive income................... 1.8 1.8 -- -- ------ ------ ------ ------ Net amount recognized.................................... $ 98.2 $ 94.6 $(91.7) $(87.7) ====== ====== ====== ======
41 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA) For pension plans with accumulated benefit obligations in excess of plan assets, the projected benefit obligation was $10.0 and $9.4 at September 30, 2001 and 2000, respectively. There are no plan assets for these nonqualified plans as of September 30, 2001. Pension assets consist primarily of listed common stocks and bonds. The U.S. plan held 1.7 million shares of ENR stock in both 2001 and 2000. The market values of such stock was $28.8 and $42.4, at September 30, 2001 and 2000, respectively. The following table presents pension and postretirement expense for fiscal 2001 and the period subsequent to the spin-off (six months ended September 30, 2000).
SEPTEMBER 30, ---------------------------------- PENSION POSTRETIREMENT ---------------- -------------- 2001 2000 2001 2000 ------ ------ ----- ----- Service cost.............................................. $ 16.6 $ 7.8 $ 0.2 $ 0.1 Interest cost............................................. 24.5 11.8 6.1 2.8 Expected return on plan assets............................ (46.9) (22.4) -- -- Amortization of unrecognized prior service cost........... -- -- (0.3) (0.1) Amortization of unrecognized transition asset............. 0.3 0.1 -- -- Recognized net actuarial/(gain) loss...................... (3.3) (1.5) -- -- ------ ------ ----- ----- Net periodic benefit cost/(income)........................ $ (8.8) $ (4.2) $ 6.0 $ 2.8 ====== ====== ===== =====
The following table presents assumptions, which reflect weighted-averages for the component plans, used in determining the above information.
PENSION POSTRETIREMENT ------------ -------------- 2001 2000 2001 2000 ---- ---- ----- ----- Discount rate............................................... 6.6% 6.7% 7.0% 7.0% Expected return on plan assets.............................. 8.7% 8.7% -- -- Compensation increase rate.................................. 5.2% 5.2% -- --
Assumed health care cost trend rates have been used in the valuation of postretirement health insurance benefits as of 2000 and for the beginning of the 2001 valuation. The trend rate used for those periods was 6.5%. As of September 30, 2001, cost trend rates will no longer materially impact the plan. PRE-SPIN PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS Prior to the spin-off, Energizer participated in Ralston's noncontributory defined benefit pension plans (Plans), which covered substantially all regular employees in the United States and certain employees in other countries. In fiscal 1999, Ralston amended the qualified U.S. Pension Plan to allow employees to make an irrevocable election effective January 1, 1999 between two pension benefit formulas. Prior to this time, one benefit formula was used. Also effective January 1, 1999, assets of the Plan provide employee benefits in addition to normal retirement benefits. The additional benefit was equal to a 300% match on participants' after-tax contributions of 1% or 1.75% to the Savings Investment Plan. The cost of the Plans allocated to Energizer was based on Energizer's percentage of the total liability of the Plans, as shown in the table below. Prior to the spin-off, Ralston provided health care and life insurance benefits for certain groups of retired Energizer employees. The cost of these benefits was allocated to Energizer based on Energizer's percentage of the total liability related to these benefits. Ralston also sponsored plans whereby certain management employees could defer compensation for cash benefits after retirement. The cost of these postretirement benefits is shown in the table below. 42 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA) The following table presents the net expense/(income) allocated to Energizer for the respective plans prior to the spin-off.
2000 1999 ----- ---- Defined benefit plans....................................... $(2.1) $5.2 Postretirement benefits..................................... 3.3 5.8
(11) DEFINED CONTRIBUTION PLAN Energizer sponsors employee savings plans, which cover substantially all U.S. employees. Energizer matches 50% of participants' before-tax contributions up to 6% of compensation. In addition, participants can make after-tax contributions of 1% of compensation into the savings plan. This participant after-tax contribution is matched within the pension plan at 325%. Amounts charged to expense during fiscal 2001 were $3.8. Subsequent to the spin-off from Ralston, Energizer charged $1.8 to expense in fiscal 2000. Prior to the spin-off, substantially all regular Energizer employees in the United States were eligible to participate in the Ralston-sponsored defined contribution plans. Participant contributions were matched in accordance with Ralston's plan terms. Prior to the spin-off, Energizer recorded costs as allocated by Ralston. The amount of such costs was $1.2 for the six months ended March 31, 2000 and $3.0 in 1999. (12) DEBT Immediately prior to the spin-off, Ralston borrowed $478.0 through several interim-funding facilities and assigned all repayment obligations of those facilities to Energizer. In April and May 2000, Energizer entered into separate financing agreements, including an agreement to sell domestic trade receivables as discussed in Note 13 below, and repaid the interim-funding facilities. Notes payable at September 30, 2001 and 2000 consisted of notes payable to financial institutions with original maturities of less than one year of $110.3 and $135.0, respectively, and had a weighted-average interest rate of 6.9% and 7.9%, respectively. The detail of long-term debt at September 30 is as follows.
2001 2000 ------ ------ Private Placement, interest rates ranging from 7.8% to 8.0%, due 2003 to 2010.......................................... $175.0 $175.0 Revolving Credit Facility, interest rate 3.7%, due 2006..... 50.0 195.0 ------ ------ 225.0 370.0 Less current portion........................................ -- -- ------ ------ Total long-term debt...................................... $225.0 $370.0 ====== ======
Energizer maintains total committed long-term debt facilities of $625.0, of which $400.0 remained available as of September 30, 2001. Under the terms of the facilities, the ratio of Energizer's total indebtedness to its EBITDA cannot be greater than 3-to-1 and the ratio of its EBIT to total interest expense must exceed 3-to-1. Aggregate maturities on all long-term debt are as follows: $15.0 in 2003, $160.0 in 2005 and $50.0 thereafter. (13) SALE OF ACCOUNTS RECEIVABLE Energizer entered into an agreement to sell, on an ongoing basis, a pool of domestic trade accounts receivable to a wholly owned bankruptcy-remote subsidiary of Energizer. The subsidiary qualifies as a Special Purpose Entity (SPE) for accounting purposes and is therefore not consolidated for financial reporting purposes. The SPE's sole purpose is the acquisition of receivables from Energizer and the sale of its interests in the receivables to a multi-seller receivables securitization company. Energizer's investment in the SPE is classified as Other Current Assets on the Consolidated Balance Sheet as disclosed below. The activity related to the SPE at September 30, is presented in the table below. The net proceeds of the transaction were used to reduce various debt instruments. The proceeds are reflected as operating cash flows in Energizer's Consolidated Statement of Cash Flows.
AS OF SEPTEMBER 30, ------------------- 2001 2000 -------- -------- Total outstanding accounts receivable sold to SPE........... $184.1 $257.1 Cash received by SPE from sale of receivables to a third party..................................................... 86.2 100.0 Subordinated retained interest.............................. 97.9 157.1 Energizer's investment in SPE............................... 97.9 157.1
(14) PREFERRED STOCK Energizer's Articles of Incorporation authorize Energizer to issue up to 10 million shares of $.01 par value of preferred stock. As of September 30, 2001, there were no shares of preferred stock outstanding. (15) SHAREHOLDERS EQUITY On March 16, 2000, the Board of Directors declared a dividend of one share purchase right (Right) for each outstanding share of ENR common stock. Each Right entitles a shareholder of ENR stock to purchase an additional share of ENR stock at an exercise price of $150, which price is subject to antidilution adjustments. Rights, however, may only be exercised if a person or group has acquired, or commenced a public tender for 20% or more of the outstanding ENR stock, unless the acquisition is pursuant to a tender or exchange offer for all outstanding shares of ENR stock and a majority of the Board of Directors determines that the price and terms of the offer are adequate and in the best interests of shareholders (a Permitted Offer). At the time that 20% or more of the outstanding ENR stock is actually acquired (other than in connection with a Permitted Offer), the exercise price of each Right will be adjusted so that the holder (other than the person or member of the group that made the acquisition) may then purchase a share of ENR stock at one-third of its then-current market price. If Energizer 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 Energizer transfers 50% or more of its assets or earnings power to 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 acquiring entity having a value equal to twice the exercise price. Energizer can redeem the Rights at a price of $.01 per Right at any time prior to the time a person or group actually acquires 20% or more of the outstanding ENR stock (other than in connection with a Permitted Offer). In addition, following the acquisition by a person or group of at least 20%, but not more than 50% of the outstanding ENR stock (other than in connection with a Permitted Offer), Energizer may exchange each Right for one share of ENR stock. Energizer's Board of Directors may amend the terms of the Rights at any time prior to the time a person or group acquires 20% or more of the outstanding ENR stock (other than in connection with a Permitted Offer) and may amend the terms to lower the threshold for exercise of the Rights. If the threshold is reduced it cannot be lowered to a percentage which is less than 10%, or, if any shareholder holds 10% or more of the outstanding ENR stock at that time, the reduced threshold must be greater than the percentage held by that shareholder. The Rights will expire on April 1, 2010. 44 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA) At September 30, 2001, there were 300 million shares of ENR stock authorized, of which approximately 8.4 million shares were reserved for issuance under the 2000 Incentive Stock Plan. In September 2000, Energizer's Board of Directors approved a share repurchase plan authorizing the repurchase of up to 5 million shares of Energizer's common stock, of which approximately 3.8 million shares have been repurchased. (16) FINANCIAL INSTRUMENTS AND RISK MANAGEMENT Foreign currency contracts - Energizer enters into foreign exchange forward contracts and, to a lesser extent, purchases options and enters into zero-cost option collars to mitigate potential losses in earnings or cash flows on foreign currency transactions. Energizer has not designated any financial instruments as hedges for accounting purposes. Foreign currency exposures are primarily related to anticipated intercompany purchase transactions and intercompany borrowings. Other foreign currency transactions to which Energizer is exposed include external purchase transactions and intercompany receivables, dividends and service fees. The table below summarizes, by instrument and by major currency, the contractual amounts of Energizer's forward exchange contracts and purchased currency options in U.S. dollar equivalents at year-end. These contractual amounts represent transaction volume outstanding and do not represent the amount of Energizer's exposure to credit or market loss. Foreign currency contracts are generally for one year or less.
2001 2000 ------ ------ INSTRUMENT Forwards.................................................. $121.3 $122.5 Options................................................... 16.0 25.0 CURRENCY Swiss franc............................................... 105.7 117.2 Canadian dollar........................................... -- 25.0 Euro...................................................... 27.5 -- Other currencies.......................................... 4.1 5.3
Concentration of Credit Risk - The counterparties to foreign currency contracts consist of a number of major international financial institutions and are generally institutions with which Energizer maintains lines of credit. Energizer does not enter into foreign exchange contracts through brokers nor does it trade foreign exchange contracts on any other exchange or over-the-counter markets. Risk of currency positions and market-to-market valuation of positions are strictly monitored at all times. Energizer continually monitors positions with, and credit ratings of, counterparties both internally and by using outside rating agencies. Energizer has implemented policies that limit the amount of agreements it enters into with any one party. While nonperformance by these counterparties exposes Energizer to potential credit losses, such losses are not anticipated due to the control features mentioned. Energizer sells to a large number of customers primarily in the retail trade, including those in mass merchandising, drugstore, supermarket and other channels of distribution throughout the world. Energizer performs ongoing evaluations of its customers' financial condition and creditworthiness, but does not generally require collateral. While the competitiveness of the retail industry presents an inherent uncertainty, Energizer does not believe a significant risk of loss from a concentration of credit risk exists with respect to accounts receivable. Financial Instruments - Energizer's financial instruments include cash and cash equivalents, short-term and long-term debt, foreign currency contracts, and interest rate swap agreements. Due to the nature of cash and cash equivalents and short-term borrowings, including notes payable, carrying amounts on the balance sheet approximate fair value. At September 30, 2001 and 2000, the fair market value of long-term debt was $242.2 and $371.9, respectively, compared to its carrying value of $225.0 and $370.0, respectively. The fair value of the long-term debt is estimated using yields obtained from independent pricing sources for similar types of borrowing arrangements. The fair value of foreign currency contracts is the amount that Energizer 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 maturities. Based on these considerations, Energizer would receive a total net payment of $6.7 and would be required to make a payment of $2.4 to counterparties for outstanding foreign currency contracts at September 30, 2001 and 2000, respectively. However, these payments are unlikely due to the fact that Energizer enters into foreign currency contracts to hedge identifiable foreign currency exposures, and as such would generally not terminate such contracts. (17) ENVIRONMENTAL AND LEGAL MATTERS Government Regulation and Environmental Matters - The operations of Energizer, like those of other companies engaged in the battery business, 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 storage tanks, and waste handling and disposal. Energizer has received notices from the U.S. Environmental Protection Agency, state agencies and/or private parties seeking contribution, that it has been identified as a "potentially responsible party" (PRP) under the Comprehensive Environmental Response, Compensation and Liability Act and may be required to share in the cost of cleanup with respect to nine federal "Superfund" sites. It may also be required to share in the cost of cleanup with respect to a state-designated site. Liability under the applicable federal and state statutes which mandate cleanup is strict, meaning that liability may attach regardless of lack of fault, and joint and several, meaning that a liable party may be responsible for all of the costs incurred in investigating and cleaning up contamination at a site. However, liability in such matters is typically shared by all of the financially viable responsible parties. The amount of Energizer's ultimate liability in connection with those sites may depend on many factors, including the volume and toxicity of material contributed to the site, the number of other PRPs and their financial viability, and the remediation methods and technology to be used. In addition, Energizer undertook certain programs to reduce or eliminate the environmental contamination at the rechargeable battery facility in Gainesville, Florida, which was divested in November 1999. In 2001, the buyer, as well as its operating subsidiary which owns and operates the Gainesville facility, filed petitions in bankruptcy court. In the event that the buyer would become unable to continue such programs, Energizer could be required to bear financial responsibility for such programs as well as for other known and unknown environmental conditions at the site. Many European countries, as well as the European Union, have been very active in adopting and enforcing environmental regulations. In many developing countries in which Energizer operates, there has not been significant governmental regulation relating to the environment, occupational safety, employment practices or other business matters routinely regulated in the United States. As such economies develop, it is possible that new regulations may increase the risk and expense of doing business in such countries. Accruals for environmental remediation are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, based on current law and existing technologies. These accruals are adjusted periodically as assessments take place and remediation efforts progress, or as additional technical or legal information becomes available. It is difficult to quantify with certainty the potential financial impact of actions regarding expenditures for environmental matters, particularly remediation, and future capital expenditures for environmental control equipment. Nevertheless, based upon the information currently available, Energizer believes that its ultimate liability arising from such environmental matters, taking into account established accruals of $5.9 at September 30, 2001 for estimated liabilities, should not be material to its financial position. Such liability could, however, be material to results of operations or cash flows for a particular quarter or year. Legal Proceedings - Energizer previously disclosed that Zinc Products Company, a division of Alltrista Corp., a supplier of zinc cans used in the manufacture of batteries, filed suit against Energizer, claiming breach of contract when Energizer closed its Fremont, Ohio plant. In January of 2001, the suit was dismissed upon a settlement payment, in an immaterial amount, by Energizer. In October of 2001, Energizer entered into separate settlement agreements with Strategic Electronics and Duracell related to outstanding contract claims associated with Duracell's and Energizer's on-label battery testers. Under the terms of the agreements, mutual releases of all outstanding claims were given, and Energizer was licensed to utilize any applicable patents related to its on-label battery tester. Energizer and its subsidiaries are parties to a number of other legal proceedings in various jurisdictions arising out of the operations of the Energizer business. Many of these legal matters are in preliminary stages and involve complex issues of law and fact, and may proceed for protracted periods of time. The amount of liability, if any, from these proceedings cannot be determined with certainty. However, based upon present information, Energizer believes that its ultimate liability, if any, arising from pending legal proceedings, asserted legal claims and known potential legal claims which are likely to be asserted, should not be material to Energizer's financial position, taking into account established accruals for estimated liabilities. These liabilities, however, could be material to results of operations or cash flows for a particular quarter or year. (18) OTHER COMMITMENTS AND CONTINGENCIES Future minimum rental commitments under noncancellable operating leases in effect as of September 30, 2001 were: 2002 - $15.7, 2003 - $9.9, 2004 - $8.5, 2005 - $7.8, 2006 - $7.7 and thereafter - $31.7. These leases are primarily for office facilities. Total rental expense for all operating leases was $17.9, $17.5 and $21.5 in 2001, 2000 and 1999, respectively. 47 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA) (19) SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION SUPPLEMENTAL BALANCE SHEET INFORMATION:
2001 2000 -------- -------- INVENTORIES Raw materials and supplies................................ $ 47.0 $ 64.0 Work in process........................................... 91.4 87.0 Finished products......................................... 222.9 308.1 -------- -------- Total Inventories...................................... $ 361.3 $ 459.1 ======== ======== OTHER CURRENT ASSETS Investment in SPE (see Note 13)........................... $ 97.9 $ 157.1 Miscellaneous receivables................................. 25.3 36.6 Deferred income tax benefits.............................. 46.3 38.9 Prepaid expenses.......................................... 39.8 44.1 Other..................................................... 0.6 2.0 -------- -------- Total Other Current Assets............................. $ 209.9 $ 278.7 ======== ======== PROPERTY AT COST Land...................................................... $ 10.1 $ 14.6 Buildings................................................. 147.6 140.6 Machinery and equipment................................... 834.5 816.9 Construction in progress.................................. 37.8 47.7 -------- -------- Total gross property................................... 1,030.0 1,019.8 Accumulated depreciation.................................. 553.9 534.4 -------- -------- Total Net Property..................................... $ 476.1 $ 485.4 ======== ======== OTHER ASSETS Goodwill (net of accumulated amortization: 2001 - $32.7, 2000 - $117.0)......................................... $ 38.1 $ 168.0 Other intangible assets (net of accumulated amortization: 2001 - $364.7, 2000 - $356.1).......................... 72.7 82.4 Pension asset............................................. 106.2 102.0 Deferred charges and other assets......................... 21.2 25.4 -------- -------- Total Other Assets..................................... $ 238.2 $ 377.8 ======== ======== OTHER CURRENT LIABILITIES Accrued advertising, promotion and allowances............. $ 143.2 $ 123.2 Accrued salaries, vacations and incentive compensation.... 47.2 47.4 Restructuring reserves.................................... 0.6 3.9 Other..................................................... 84.7 74.1 -------- -------- Total Other Current Liabilities........................ $ 275.7 $ 248.6 ======== ======== OTHER NON-CURRENT LIABILITIES Postretirement benefit liability.......................... $ 91.7 $ 87.7 Other non-current liability............................... 77.8 69.0 -------- -------- Total Other Non-current Liabilities.................... $ 169.5 $ 156.7 ======== ========
48 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA) ALLOWANCE FOR DOUBTFUL ACCOUNTS:
2001 2000 1999 ----- ----- ----- Balance at beginning of year................................ $12.5 $19.3 $19.6 Provision charged to expense................................ 2.8 5.1 6.7 Write-offs, less recoveries................................. (3.9) (5.9) (7.0) Transfer to SPE (see Note 13)............................... 0.4 (6.0) -- ----- ----- ----- Balance at end of year...................................... $11.8 $12.5 $19.3 ===== ===== =====
SUPPLEMENTAL CASH FLOW STATEMENT INFORMATION:
2001 2000 1999 ----- ----- ----- Interest paid............................................... $36.1 $19.5 $11.7 Income taxes paid........................................... 83.1 86.5 44.0
(20) SEGMENT INFORMATION Energizer manufactures and markets dry cell batteries including alkaline, carbon zinc, miniature and specialty batteries, and flashlights and other lighting products throughout the world. Operations are managed via four major geographic areas -- North America (the United States, Canada and Caribbean), Asia Pacific, Europe, and South and Central America (including Mexico). This structure is the basis for Energizer's reportable operating segment information disclosed below. Segment performance is evaluated based on operating profit, exclusive of general corporate expenses, restructuring charges and amortization of goodwill and intangibles. Financial items, such as interest income and expense, are managed on a global basis at the corporate level. Intersegment sales are generally valued at market-based prices and represent the difference between total sales and external sales as presented in the table below. Segment profitability includes profit on these intersegment sales. One single mass merchandiser accounted for 16.6%, 15.3% and 13.5% of total net sales in 2001, 2000 and 1999, respectively, primarily in North America.
2001 2000 1999 ------------------- ------------------- ------------------- TOTAL EXTERNAL TOTAL EXTERNAL TOTAL EXTERNAL NET SALES SALES SALES SALES SALES SALES SALES - --------- -------- -------- -------- -------- -------- -------- North America.................... $1,068.8 $ 970.6 $1,228.2 $1,123.9 $1,131.1 $1,031.1 Asia Pacific..................... 373.8 329.0 465.2 395.5 432.0 386.8 Europe........................... 264.1 261.4 287.1 278.6 326.1 322.8 South and Central America........ 143.2 133.2 147.5 129.7 154.4 137.8 -------- -------- -------- -------- -------- -------- Total Net Sales............. $1,694.2 $1,927.7 $1,878.5 ======== ======== ========
49 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
2001 2000 1999 ------- ------ ------ OPERATING PROFIT BEFORE RESTRUCTURING CHARGES, AMORTIZATION AND UNUSUAL ITEMS North America........................................... $ 203.0 $311.9 $291.4 Asia Pacific............................................ 75.8 111.9 89.2 Europe.................................................. (2.6) (0.2) (1.2) South and Central America............................... 7.1 12.1 14.5 ------- ------ ------ Total segment profitability.......................... 283.3 435.7 393.9 General corporate expenses.............................. (20.9) (37.4) (54.0) Research and development expense........................ (46.4) (49.9) (48.5) ------- ------ ------ Operating Profit before Restructuring Charges, Amortization and Unusual Items..................... 216.0 348.4 291.4 Provision for goodwill impairment....................... (119.0) -- -- Provisions for restructuring............................ (29.8) -- (9.9) Intellectual property rights income..................... 20.0 -- -- Costs related to spin-off............................... -- (5.5) -- Loss on disposition of Spanish affiliate................ -- (15.7) -- Amortization............................................ (21.2) (24.1) (25.0) Interest and other financial items...................... (34.5) (23.9) (8.3) ------- ------ ------ Total Earnings from Continuing Operations Before Income Taxes....................................... $ 31.5 $279.2 $248.2 ======= ====== ====== DEPRECIATION North America........................................... $ 38.1 $ 34.8 $ 45.0 Asia Pacific............................................ 11.5 12.4 11.1 Europe.................................................. 6.4 7.7 10.3 South and Central America............................... 2.6 3.0 2.0 ------- ------ ------ Total Depreciation Expense........................... $ 58.6 $ 57.9 $ 68.4 ======= ====== ======
50 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
2001 2000 1999 -------- -------- -------- ASSETS AT YEAR-END North America........................................ $ 851.7 $ 956.5 $ 815.5 Asia Pacific......................................... 195.7 245.7 271.4 Europe............................................... 259.2 244.7 282.2 South and Central America............................ 80.2 96.2 98.0 -------- -------- -------- Total segment assets.............................. 1,386.8 1,543.1 1,467.1 Goodwill and other intangible assets................. 110.8 250.4 299.4 Investment in discontinued operations................ -- -- 67.2 -------- -------- -------- Total Assets...................................... $1,497.6 $1,793.5 $1,833.7 ======== ======== ======== CAPITAL EXPENDITURES North America........................................ $ 69.0 $ 56.0 $ 39.6 Asia Pacific......................................... 4.6 8.4 18.4 Europe............................................... 2.6 6.0 8.9 South and Central America............................ 1.7 2.4 2.3 -------- -------- -------- Total Capital Expenditures........................ $ 77.9 $ 72.8 $ 69.2 ======== ======== ========
GEOGRAPHIC SEGMENT INFORMATION:
2001 2000 1999 -------- -------- -------- NET SALES United States........................................ $ 903.4 $1,053.5 $ 972.4 International........................................ 790.8 874.2 906.1 -------- -------- -------- Total Net Sales................................... $1,694.2 $1,927.7 $1,878.5 ======== ======== ======== LONG-LIVED ASSETS United States........................................ $ 527.1 $ 517.9 $ 404.6 International........................................ 187.2 345.3 387.9 -------- -------- -------- Total Long Lived-Assets........................... $ 714.3 $ 863.2 $ 792.5 ======== ======== ========
Supplemental product information is presented below for revenues from external customers.
2001 2000 1999 -------- -------- -------- NET SALES Alkaline Batteries................................... $1,124.5 $1,282.3 $1,205.5 Carbon Zinc Batteries................................ 263.4 324.3 366.7 Lighting Products.................................... 114.0 130.4 131.1 Miniature Batteries.................................. 67.2 64.9 65.7 Other................................................ 125.1 125.8 109.5 -------- -------- -------- Total Net Sales................................... $1,694.2 $1,927.7 $1,878.5 ======== ======== ========
51 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA) (21) QUARTERLY FINANCIAL INFORMATION -- (UNAUDITED) The results of any single quarter are not necessarily indicative of Energizer's results for the full year. Net earnings of Energizer are significantly impacted in the first quarter by the additional sales volume associated with the December holiday season.
FIRST SECOND THIRD FOURTH ------ ------ ------ ------- FISCAL 2001 Net sales (a)..................................... $559.3 $355.0 $347.2 $ 432.7 Gross profit (a).................................. 247.7 150.4 131.4 165.6 Net earnings/(loss)............................... 54.2 5.6 15.7 (114.5) Basic and diluted earnings/(loss) per share....... $ 0.57 $ 0.06 $ 0.17 $ (1.25)
FIRST SECOND THIRD FOURTH ------ ------ ------ ------ FISCAL 2000 Net sales (a)...................................... $678.2 $364.0 $404.3 $481.2 Gross profit (a)................................... 334.6 155.4 184.2 209.5 Earnings from continuing operations (b)............ 104.7 15.7 23.2 36.6 Gain on disposition of discontinued operations..... -- 1.2 -- -- ------ ------ ------ ------ Net earnings....................................... $104.7 $ 16.9 $ 23.2 $ 36.6 Basic and Diluted Earnings Per Share (c) Earnings from continuing operations................ $ 1.07 $ 0.17 $ 0.24 $ 0.38 Net gain on discontinued operations................ -- 0.01 -- -- ------ ------ ------ ------ Net earnings....................................... $ 1.07 $ 0.18 $ 0.24 $ 0.38
(a) Certain reclassifications have been made to comply with EITF 00-10, 00-14 and 00-25. See Note 2 for further discussion.
FIRST SECOND THIRD ------ ------ ------ FISCAL 2001 Net sales as disclosed in 10Q.............................. $558.7 $351.9 $346.6 Reclassifications, net..................................... 0.6 3.1 0.6 ------ ------ ------ Reclassified net sales..................................... $559.3 $355.0 $347.2 Gross profit as disclosed in 10Q........................... $266.7 $162.3 $145.0 Reclassifications, net..................................... (19.0) (11.9) (13.6) ------ ------ ------ Reclassified gross profit.................................. $247.7 $150.4 $131.4
52 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
FIRST SECOND THIRD FOURTH ------ ------ ------ ------ FISCAL 2000 Net sales as disclosed in 10K...................... $673.6 $359.9 $402.8 $478.0 Reclassifications, net............................. 4.6 4.1 1.5 3.2 ------ ------ ------ ------ Reclassified net sales............................. $678.2 $364.0 $404.3 $481.2 Gross profit as disclosed in 10K................... $351.4 $167.3 $196.9 $224.0 Reclassifications, net............................. (16.8) (11.9) (12.7) (14.5) ------ ------ ------ ------ Reclassified gross profit.......................... $334.6 $155.4 $184.2 $209.5
(b) Earnings from continuing operations include the following items:
2001 2000 ------ ----- Second quarter Costs related to spin-off................................. (3.3) Loss on disposition of Spanish affiliate.................. -- (15.7) Capital loss tax benefits................................. -- 24.4 Third quarter Intellectual property rights income....................... 12.3 -- Fourth quarter Provision for goodwill impairment......................... (119.0) -- Provisions for restructuring.............................. (19.4) --
(c) For the periods prior to the spin-off, shares used in the earnings per share calculation are based on the weighted-average number of shares of Ralston common stock outstanding adjusted for the distribution of one share of Energizer stock for each three shares of Ralston stock. (22) PRO FORMA FINANCIAL RESULTS The pro forma consolidated statements of earnings for the year ended September 30, 2000 and 1999 present the consolidated results of Energizer's operations assuming the spin-off had occurred as of October 1, 1999. Such statements of earnings has been prepared by adjusting the historical statement of earnings to indicate the effect of estimated costs and expenses, the recapitalization associated with the spin-off and the synchronization of international operations' reporting. The pro forma results from September 30, 2000 also reflect the synchronization of international operations' reporting (see Note 2). The pro forma statement of earnings may not necessarily reflect the consolidated results of operations that would have existed had the spin-off been effected on the dates specified nor are they necessarily indicative of future results. 53 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA) UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS:
YEAR ENDED SEPTEMBER 30, 2000 ------------------------------------------------------ PRO FORMA REPORTING HISTORICAL ADJUSTMENTS SYNCHRONIZATION PRO FORMA 9/30/00 SPIN-OFF ADJUSTMENTS (H) 9/30/00 ---------- ----------- --------------- --------- Net sales..................................... $1,927.7 $ -- $(28.4) $1,899.3 Cost of products sold......................... 1,044.0 -- (11.8) 1,032.2 Selling, general and administrative expense... 344.8 4.0(a) -- 348.8 -- 0.8(b) -- -- -- (0.8)(c) -- -- Advertising and promotion expense............. 164.7 -- -- 164.7 Research and development expense.............. 49.9 -- -- 49.9 Costs related to spin-off..................... 5.5 -- -- 5.5 Loss on disposition of Spanish affiliate...... 15.7 -- -- 15.7 Interest expense.............................. 27.5 17.1(d) (0.2) 44.4 Other financing items, net.................... (3.6) -- (1.0) (4.6) -------- ------ ------ -------- Earnings/(loss) from continuing operations before taxes................................ 279.2 (21.1) (15.4) 242.7 Income taxes.................................. (99.0) (23.4)(e) 6.4 (107.6) -- 8.4(f) -- -- -------- ------ ------ -------- Earnings/(loss) from continuing operations.... $ 180.2 $(36.1) $ (9.0) $ 135.1 ======== ====== ====== ======== Earnings per share from continuing operations (g) Basic....................................... $ 1.88 $ 1.41 Diluted..................................... $ 1.87 $ 1.40 Weighted-average shares of common stock (g) Basic.................................... 96.1 96.1 Diluted.................................. 96.3 96.3
(a) To reflect the incremental costs associated with becoming a stand-alone company including Board of Director costs, stock exchange registration fees, shareholder record keeping services, external financial reporting, treasury services, tax planning and compliance, certain legal expenses, and compensation planning and administration. (b) To adjust pension income on plan assets transferred to Energizer plans upon the spin-off. (c) To eliminate expense of certain postretirement benefits retained by Ralston. (d) To reflect the increase in interest expense associated with debt levels to be assumed at spin-off. The adjustment reflects an average interest rate of 6.7% for $67.0 of incremental notes payable and 7.2% for $411.0 of incremental long-term debt. Approximately $303.0 of the incremental debt has a variable interest rate. A 1/8% variation in the interest rate would change interest expense by $.4. (e) To reflect taxes as if Energizer was a single, stand-alone U.S. taxpayer. (f) To reflect tax effect of the above pro forma adjustments. (g) The number of shares used to compute earnings per share is based on the weighted-average number of basic shares of Ralston stock outstanding during the period adjusted for the distribution of one share of Energizer stock for each three shares of Ralston stock and the weighted-average number of shares of Energizer shares outstanding from April 1, 2000 to September 30, 2000. 54 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA) (h) To reflect adjustments related to the synchronization of international reporting as discussed in Note 2 to the Consolidated Financial Statements. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS:
YEAR ENDED SEPTEMBER 30, 1999 -------------------------------------- PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA 9/30/99 SPIN-OFF 9/30/99 ---------- ----------- --------- Net sales.................................................. $1,878.5 $ -- $1,878.5 Cost of products sold...................................... 1,059.5 -- 1,059.5 Selling, general and administrative expense................ 368.4 8.0(a) 371.3 -- (3.3)(b) -- -- (1.8)(c)(d) -- Advertising and promotion expense.......................... 137.8 -- 137.8 Research and development expense........................... 48.5 -- 48.5 Provisions for restructuring............................... 7.8 -- 7.8 Interest expense........................................... 7.6 36.9(e) 44.5 Other financing items, net................................. 0.7 -- 0.7 -------- ------ -------- Earnings/(loss) from continuing operations before taxes.... 248.2 (39.8) 208.4 Income taxes............................................... (88.4) (11.2)(f) (91.5) -- 8.1(g) -------- ------ -------- Earnings/(loss) from continuing operations................. $ 159.8 $(42.9) $ 116.9 ======== ====== ======== Earnings per share from continuing operations (h) Basic and diluted........................................ $ 1.56 $ 1.14 Weighted-average shares of common stock (h) Basic and diluted........................................ 102.6 102.6
(a) To reflect the incremental costs associated with becoming a stand-alone company including Board of Director costs, stock exchange registration fees, shareholder record keeping services, external financial reporting, treasury services, tax planning and compliance, certain legal expenses, and compensation planning and administration. (b) To adjust pension income on plan assets transferred to Energizer plans upon the spin-off. (c) To eliminate expense of certain postretirement benefits retained by Ralston. (d) In addition to costs described above, compensation for certain executive officers will be higher than the costs included in the historical financial statements. The amount of the increase cannot be determined at this time. (e) To reflect the increase in interest expense associated with debt levels to be assumed at spin-off. The adjustment reflects an average interest rate of 7.0% for $150.0 of incremental notes payable and 7.7% for $343.9 of incremental long-term debt. The incremental notes payable will have a variable interest rate. A 1/8% variation in the interest rate would change interest expense by $.4. (f) To reflect taxes as if Energizer was a single, stand-alone U.S. taxpayer. 55 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA) (g) To reflect tax effect of the above pro forma adjustments. (h) The number of shares used to compute earnings per share is based on the weighted-average number of basic shares of Ralston stock outstanding during the period adjusted for the distribution of one share of Energizer stock for each three shares of Ralston stock. 56 EX-21 8 doc7.txt SUBSIDIARIES OF REGISTRANT
ENERGIZER SUBSIDIARIES 11/1/01 -------------------------------------- Jurisdictions of Percentage Subsidiary Name . . . . . . . . . . . . . Incorporation of Control ----------------------------------------- --------------- ---------------------- Energizer Argentina S.A.. . . . . . . . . Argentina 100% ----------------------------------------- --------------- ---------------------- Energizer Australia Pty. Ltd. . . . . . . Australia 100% ----------------------------------------- --------------- ---------------------- Energizer Austria Ges.m.b.H.. . . . . . . Austria 100% ----------------------------------------- --------------- ---------------------- Energizer Sales Ltd.. . . . . . . . . . . Barbados 100% ----------------------------------------- --------------- ---------------------- Energizer Belgium . . . . . . . . . . . . Belgium 100% ----------------------------------------- --------------- ---------------------- Energizer Insurance Company Ltd.. . . . . Bermuda 100% ----------------------------------------- --------------- ---------------------- Energizer do Brasil Ltda. . . . . . . . . Brazil 100% ----------------------------------------- --------------- ---------------------- Energizer Canada Inc. . . . . . . . . . . Canada 100% ----------------------------------------- --------------- ---------------------- Eveready de Chile S.A.. . . . . . . . . . Chile 100% ----------------------------------------- --------------- ---------------------- Energizer (China) Co., Ltd. . . . . . . . China 100% ----------------------------------------- --------------- ---------------------- Eveready de Colombia, S.A.. . . . . . . . Colombia 100% ----------------------------------------- --------------- ---------------------- Energizer Czech spol.sr.o.. . . . . . . . Czech Republic 100% ----------------------------------------- --------------- ---------------------- EBC Batteries, Inc. . . . . . . . . . . . Delaware 100% ----------------------------------------- --------------- ---------------------- Energizer Asia Pacific, Inc.. . . . . . . Delaware 100% ----------------------------------------- --------------- ---------------------- ** Energizer International, Inc. . . . . . . Delaware 100% ----------------------------------------- --------------- ---------------------- Energizer Japan, Inc. . . . . . . . . . . Delaware 100% ----------------------------------------- --------------- ---------------------- Energizer Middle East and Africa Limited. Delaware 100% ----------------------------------------- --------------- ---------------------- Energizer (South Africa) Ltd. . . . . . . Delaware 100% ----------------------------------------- --------------- ---------------------- Eveready Battery Company, Inc.. . . . . . Delaware 100% ----------------------------------------- --------------- ---------------------- ** MKTE, Inc.. . . . . . . . . . . . . . . . Delaware 100% ----------------------------------------- --------------- ---------------------- Energizer Receivables Funding Corporation Delaware 100% ----------------------------------------- --------------- ---------------------- Eveready Ecuador C.A. . . . . . . . . . . Ecuador 100% ----------------------------------------- --------------- ---------------------- Energizer Egypt S.A.E.. . . . . . . . . . Egypt 51% ----------------------------------------- --------------- ---------------------- Energizer France. . . . . . . . . . . . . France 100% ----------------------------------------- --------------- ---------------------- Fibat S.A.. . . . . . . . . . . . . . . . France 20% ----------------------------------------- --------------- ---------------------- Energizer Deutschland G.m.b.H.. . . . . . Germany 100% ----------------------------------------- --------------- ---------------------- * Eveready Ghana Limited. . . . . . . . . . Ghana 66.6% ----------------------------------------- --------------- ---------------------- Energizer Hellas A.E. . . . . . . . . . . Greece 100% ----------------------------------------- --------------- ---------------------- Energizer Hong Kong Limited . . . . . . . Hong Kong 100% ----------------------------------------- --------------- ---------------------- Eveready Hong Kong Company. . . . . . . . Hong Kong 100% Partnership ----------------------------------------- --------------- ---------------------- Sonca Products Limited. . . . . . . . . . Hong Kong 100% ----------------------------------------- --------------- ---------------------- Energizer Hungary Trading Ltd.. . . . . . Hungary 100% ----------------------------------------- --------------- ---------------------- EBC (India) Company Ltd.. . . . . . . . . India 100% ----------------------------------------- --------------- ---------------------- Energizer India Limited . . . . . . . . . India 100% ----------------------------------------- --------------- ---------------------- * Eveready Energizer Miniatures Limited . . India 49% Joint Venture ----------------------------------------- --------------- ---------------------- PT Energizer Indonesia. . . . . . . . . . Indonesia 100% ----------------------------------------- --------------- ---------------------- PT Energizer Trading Indonesia. . . . . . Indonesia 100% ----------------------------------------- --------------- ---------------------- Energizer Ireland Limited . . . . . . . . Ireland 100% ----------------------------------------- --------------- ---------------------- Energizer Italia S.p.A. . . . . . . . . . Italy 100% ----------------------------------------- --------------- ---------------------- Eveready Batteries Kenya Ltd. . . . . . . Kenya 14% ----------------------------------------- --------------- ---------------------- Energizer Korea Ltd.. . . . . . . . . . . Korea 100% ----------------------------------------- --------------- ---------------------- Energizer Malaysia SDN.BHD. . . . . . . . Malaysia 80% ----------------------------------------- --------------- ---------------------- Eveready de Mexico S.A. de C.V. . . . . . Mexico 100% ----------------------------------------- --------------- ---------------------- Energizer Holdings, Inc.. . . . . . . . . Missouri 100% ----------------------------------------- --------------- ---------------------- Energizer NZ Limited. . . . . . . . . . . New Zealand 100% ----------------------------------------- --------------- ---------------------- Eveready NZ Limited . . . . . . . . . . . New Zealand 100% ----------------------------------------- --------------- ---------------------- Energizer Philippines, Inc. . . . . . . . Philippines 100% ----------------------------------------- --------------- ---------------------- Energizer Polska Sp. zo.o . . . . . . . . Poland 100% ----------------------------------------- --------------- ---------------------- Energizer Puerto Rico, Inc. . . . . . . . Puerto Rico 100% ----------------------------------------- --------------- ---------------------- Energizer LLC . . . . . . . . . . . . . . Russia 100% ----------------------------------------- --------------- ---------------------- Energizer Singapore Pte. Ltd. . . . . . . Singapore 100% ----------------------------------------- --------------- ---------------------- Energizer Slovakia, Spol.Sr.O.. . . . . . Slovak Republic 100% ----------------------------------------- --------------- ---------------------- Energizer Lanka Limited . . . . . . . . . Sri Lanka 60.67% ----------------------------------------- --------------- ---------------------- Energizer SA. . . . . . . . . . . . . . . Switzerland 100% ----------------------------------------- --------------- ---------------------- Energizer (Thailand) Limited. . . . . . . Thailand 100% ----------------------------------------- --------------- ---------------------- * BCL (MVL) Limited. . . . . . . . . . . . UK 100% ----------------------------------------- --------------- ---------------------- Berec Overseas Investments Limited. . . . UK 100% ----------------------------------------- --------------- ---------------------- Energizer Financial Service Centre Ltd. . UK 100% ----------------------------------------- --------------- ---------------------- Energizer Holdings UK Company . . . . . . UK 100% ----------------------------------------- --------------- ---------------------- Ever Ready Limited. . . . . . . . . . . . UK 100% ----------------------------------------- --------------- ---------------------- Energizer Limited . . . . . . . . . . . . UK 100% ----------------------------------------- --------------- ---------------------- Energizer Trust Limited . . . . . . . . . UK 100% ----------------------------------------- --------------- ---------------------- * WER (MVL) 1998 Limited. . . . . . . . . . UK 100% -- ----------------------------------------- --------------- ---------------------- EBC Uruguay, S. A.. . . . . . . . . . . . Uruguay 100% ----------------------------------------- --------------- ---------------------- Eveready de Venezuela, C.A. . . . . . . . Venezuela 100% ----------------------------------------- --------------- ---------------------- * In liquidation ** "Delaware Holding Company"
EX-23 9 doc8.txt CONSENT OF INDEPENDENT ACCOUNTANTS CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (Nos. 333-33690, 333-33676 and 333-35116) of Energizer Holdings, Inc. of our report dated October 30, 2001 relating to the financial statements, which appears in the Annual Report to Shareholders 2001, which is incorporated in this Annual Report on Form 10-K. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP St. Louis, Missouri December 14, 2001 -----END PRIVACY-ENHANCED MESSAGE-----