FOR IMMEDIATE RELEASE | Company Contact: |
November 11, 2003 | Jacqueline E. Burwitz |
Vice President, | |
Investor Relations | |
314-985-2169 |
ENERGIZER HOLDINGS, INC. | |||||||||||||
STATEMENT OF EARNINGS | |||||||||||||
(Condensed) | |||||||||||||
(Dollars in millions, except per share data - Unaudited) | |||||||||||||
Quarter ended September 30, |
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| Year ended September 30, |
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| 2003 |
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| 2002 |
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| 2003 |
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| 2002 | ||
Net sales | $ | 703.5 | $ | 442.4 | $ | 2,232.5 | $ | 1,739.7 | |||||
Cost of products sold | 400.2 | 248.5 | 1,274.2 | 963.8 | |||||||||
Selling, general and administrative expense | 129.7 | 74.2 | 382.6 | 307.0 | |||||||||
Advertising and promotion expense | 86.8 | 27.3 | 251.0 | 124.5 | |||||||||
Research and development expense | 17.4 | 9.9 | 51.5 | 37.1 | |||||||||
Provisions for restructuring | 0.2 | 1.8 | 0.2 | 7.7 | |||||||||
Intellectual property rights income | - | - | (8.5 | ) | - | ||||||||
Interest expense | 8.9 | 4.9 | 28.2 | 21.1 | |||||||||
Other financing items, net | 16.8 | (0.7 | ) | 15.7 | 0.1 | ||||||||
Earnings before income taxes | 43.5 | 76.5 | 237.6 | 278.4 | |||||||||
Income taxes benefit/(provision) | (10.5 | ) | (20.3 | ) | (67.7 | ) | (92.0 | ) | |||||
Net earnings | $ | 33.0 | $ | 56.2 | $ | 169.9 | $ | 186.4 | |||||
Earnings per share | |||||||||||||
Basic | $ | 0.39 | $ | 0.62 | $ | 1.98 | $ | 2.05 | |||||
Diluted | $ | 0.38 | $ | 0.61 | $ | 1.93 | $ | 2.01 | |||||
Weighted average shares of common stock - Basic | 84.7 | 90.1 | 85.9 | 91.0 | |||||||||
Weighted average shares of common stock - Diluted | 87.6 | 92.5 | 88.2 | 92.8 | |||||||||
See Accompanying Notes to Condensed Financial Statements. |
- Operating results for any quarter are not necessarily indicative of the results for any other quarter or the full year.
- On March 28, 2003, Energizer acquired the worldwide Schick-Wilkinson Sword (SWS) business from Pfizer, Inc. for $930.0 plus acquisition costs and subject to adjustment based on the acquired working capital level. Operating results for SWS are reported in Energizer's earnings commencing with the quarter ended June 30, 2003.
- SWS inventory acquired in the acquisition was valued as if Energizer were a distributor purchasing the inventory. This resulted in a one-time allocation of purchase price to acquired inventory which was $89.7 million higher than the historical manufacturing cost of SWS (the Write-Up). Inventory value and cost of products sold was based on post acquisition SWS production costs for all product manufactured after the acquisition date. During the June 30, 2003 quarter, $56.2 of the Write-Up was recognized in cost of products sold, reducing net earnings by $35.9, after taxes. During the current quarter, $33.5 of the Write-Up was recognized in cost of products sold, reducing net earnings by $22.4, after taxes.
- In the year ended September 30, 2003, Energizer recorded a gain on sale of an international property of $5.7 before and after taxes, which is reflected in selling, general and administrative expense. In the quarter and year ended September 30, 2002, Energizer recorded the gain on sale of an international property of $6.3 pre-tax, or $5.0 after-tax, which is reflected in selling, general and administrative expense.
- In the year ended September 30, 2003, Energizer recorded income of $8.5 pre-tax, $5.2 after-tax, related to the licensing of intellectual property rights.
- During the quarter ended September 30, 2003, Energizer recorded net restructuring provision of $0.2 pre-tax. In 2002 Energizer recorded restructuring provisions and related costs $1.8 pre-tax and $2.0 after taxes in the September quarter and $10.3 before taxes, $7.8 after taxes in the year ended September 30, 2002.
- In the quarter ended September 30, 2003, Energizer retired $160.0 of private placement long-term debt with fixed interest rates ranging from 7.8% to 8.0%. Included in other financing items, net for the quarter and year is $20.0 pre-tax, $12.4 after-tax, which was incurred with regard to this transaction.
- In the quarter ended September 30, 2002, Energizer recorded a bad debt reserve of $5.0 pre-tax, or $3.2 after-tax associated with the bankruptcy filing of Kmart. For the year ended September 30, 2002, these charges were $15.0 pre-tax or $9.3 after tax.
- Basic earnings per share is based on the average number of common 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.
- Prior to the acquisition of SWS, Energizer's operations were managed via four battery geographic segments. Beginning in the June 30, 2003 quarter, Energizer revised its operating segment presentation to conform to its revised organizational structure following the SWS acquisition. Energizer now has three reporting segments: North America Battery, Inter-national Battery, and Razors and Blades. Energizer continues to report segment results reflecting all profit derived from each outside customer sale in the region in which the customer is located. Energizer's operations are now managed via three major segments - North America Battery (United States and Canada battery and lighting products), International Battery (rest of world battery and lighting products) and Razors and Blades (global razors, blades, and related products). Research and development costs for the battery segments are combined and included in the Total Battery segment results. Research and development costs for Razors and Blades are included in that segment's results. Also, certain costs previously reported in General Corporate Expense which primarily support the battery business have been allocated to the North America Battery and International Battery segments.
The reduction in gross margin associated with the Write-Up discussed in Note 3 is not reflected in the Razors and Blades segment, but rather presented as a separate line item below segment profit, as it is a non-recurring item directly associated with the SWS acquisition. Such presentation reflects managements' view of the segment's results. Historical segment sales and profitability for the quarter and year ended September 30, 2003 and 2002, respectively, are presented below. All prior periods have been restated to conform with the current presentation.Historical segment sales and profitability for the quarter and year ended September 30, 2003 and 2002, respectively, are presented below. All prior periods have been restated to conform with the current presentation.
Historical | Historical | ||||||||||||
Quarter Ended September 30, | Year Ended September 30, | ||||||||||||
Net Sales | 2003 | 2002 | 2003 | 2002 | |||||||||
North America Battery | $ | 289.1 | $ | 267.7 | $ | 1,054.7 | $ | 1,035.0 | |||||
International Battery | 187.3 | 174.7 | 744.8 | 704.7 | |||||||||
Total Battery | 476.4 | 442.4 | 1,799.5 | 1,739.7 | |||||||||
Razors and Blades | 227.1 | - | 433.0 | - | |||||||||
Total net sales | $ | 703.5 | $ | 442.4 | $ | 2,232.5 | $ | 1,739.7 | |||||
Profitability | |||||||||||||
North America Battery | $ | 78.7 | $ | 62.9 | $ | 285.5 | $ | 277.7 | |||||
International Battery | 32.9 | 31.7 | 120.4 | 98.4 | |||||||||
R&D Battery | (9.1 | ) | (9.9 | ) | (36.0 | ) | (37.1 | ) | |||||
Total Battery | 102.5 | 84.7 | 369.9 | 339.0 | |||||||||
Razors and Blades | 23.5 | - | 40.1 | - | |||||||||
Total segment profitability | $ | 126.0 | $ | 84.7 | $ | 410.0 | $ | 339.0 | |||||
General corporate and other expenses | (21.8 | ) | (8.5 | ) | (50.1 | ) | (35.4 | ) | |||||
Additional cost - acquisition inventory valuation | (33.5 | ) | - | (89.7 | ) | - | |||||||
Intellectual property rights income | - | - | 8.5 | - | |||||||||
Provisions for restructuring and related costs | (0.2 | ) | (1.8 | ) | (0.2 | ) | (10.3 | ) | |||||
Gain on sale of property | - | 6.3 | 5.7 | 6.3 | |||||||||
Amortization | (1.3 | ) | - | (2.7 | ) | - | |||||||
Interest and other financial items | (25.7 | ) | (4.2 | ) | (43.9 | ) | (21.2 | ) | |||||
Earnings before income taxes | $ | 43.5 | $ | 76.5 | $ | 237.6 | $ | 278.4 | |||||
Supplemental product information is presented below for revenues from external customers:
Quarter Ended September 30, | Year Ended September 30, | ||||||||||||
Net Sales | 2003 | 2002 | 2003 | 2002 | |||||||||
Alkaline batteries | $ | 316.7 | $ | 301.4 | $ | 1,202.4 | $ | 1,189.0 | |||||
Carbon zinc batteries | 59.7 | 60.5 | 237.4 | 243.2 | |||||||||
Other batteries and lighting products | 100.0 | 80.5 | 359.7 | 307.5 | |||||||||
Razors and blades | 227.1 | - | 433.0 | - | |||||||||
Total net sales | $ | 703.5 | $ | 442.4 | $ | 2,232.5 | $ | 1,739.7 |
11. Unaudited pro forma statement of earnings and segment sales and profitability for the quarter ended September 30, 2002 and the year ended September 30, 2003 and 2002, respectively, are presented below. These statements represent Energizer's results as if the acquisition of SWS had occurred on October 1, 2001. Such results have been prepared by adjusting the historical Energizer results to include SWS results of operations and incremental interest, amortization of acquired finite-lived intangibles and other expenses related to acquisition debt. The unaudited pro forma statements do not include any cost savings that may result from the combination of Energizer and SWS operations, nor one-time items related to acqui sition accounting, including the Write-Up discussed in Note 3. These unaudited pro forma earnings statements are based on, and should be read in conjunction with Energizer's historical consolidated financial statements and related notes, as well as SWS historical consolidated financial statements and notes included in the Form 8-K filing of May 30, 2003.
Unaudited | |||||||||||||||
Historical | Pro Forma | ||||||||||||||
Quarter Ended | Quarter Ended | Unaudited Pro Forma | |||||||||||||
September 30, | September 30, | Year Ended September 30, | |||||||||||||
2003 | 2002 | 2003 2002 | |||||||||||||
Net sales | $ | 703.5 | $ | 602.6 | $ | 2,544.5 | $ | 2,364.8 | |||||||
Cost of products sold | 400.2 | * | 322.8 | 1,338.2 | 1,264.0 | ||||||||||
Selling, general and administrative expense | 129.7 | 109.6 | 455.6 | 442.6 | |||||||||||
Advertising and promotion expense | 86.8 | 55.1 | 307.6 | 238.3 | |||||||||||
Research and development expense | 17.4 | 15.7 | 66.2 | 64.9 | |||||||||||
Provisions for restructuring | 0.2 | 1.8 | 0.2 | 7.7 | |||||||||||
Intellectual property rights income | - | - | (8.5 | ) | - | ||||||||||
Interest expense | 8.9 | 12.2 | 42.7 | 50.2 | |||||||||||
Other financing items, net | 16.8 | 0.7 | 17.7 | 0.8 | |||||||||||
Earnings before income taxes | 43.5 | * | 84.7 | 324.8 | 296.3 | ||||||||||
Income taxes | (10.5 | ) | (24.0 | ) | (98.6 | ) | (100.9 | ) | |||||||
Net earnings | $ | 33.0 | * | $ | 60.7 | $ | 226.2 | $ | 195.4 | ||||||
Earnings per share | |||||||||||||||
Basic | $ | 0.39 | * | $ | 0.67 | $ | 2.63 | $ | 2.15 | ||||||
Diluted | $ | 0.38 | * | $ | 0.66 | $ | 2.56 | $ | 2.11 | ||||||
Weighted average shares of common stock - Basic | 84.7 | 90.1 | 85.9 | 91.0 | |||||||||||
Weighted average shares of common stock - Diluted | 87.6 | 92.5 | 88.2 | 92.8 | |||||||||||
*Results for the quarter ended September 30, 2003 include $33.5 pre-tax, or $22.4 after-tax, or $0.26 per basic and $0.25 per diluted share related to the SWS acquired inventory Write-Up. |
Unaudited | ||||||||||||||
Historical | Pro Forma | |||||||||||||
Quarter Ended | Quarter Ended | Unaudited Pro Forma | ||||||||||||
September 30, | September 30, | Year Ended September 30, | ||||||||||||
2003 | 2002 | 2003 | 2002 | |||||||||||
Net Sales | ||||||||||||||
North America Battery | $ | 289.1 | $ | 267.7 | $ | 1,054.7 | $ | 1,035.0 | ||||||
International Battery | 187.3 | 174.7 | 744.8 | 704.7 | ||||||||||
Total Battery | 476.4 | 442.4 | 1,799.5 | 1,739.7 | ||||||||||
Razors and Blades | 227.1 | 160.2 | 745.0 | 625.1 | ||||||||||
Total net sales | $ | 703.5 | $ | 602.6 | $ | 2,544.5 | $ | 2,364.8 | ||||||
Profitability | ||||||||||||||
North America Battery | $ | 78.7 | $ | 62.9 | $ | 285.5 | $ | 277.7 | ||||||
International Battery | 32.9 | 31.7 | 120.4 | 98.4 | ||||||||||
R&D Battery | (9.1 | ) | (9.9 | ) | (36.0 | ) | (37.1 | ) | ||||||
Total Battery | 102.5 | 84.7 | 369.9 | 339.0 | ||||||||||
Razors and Blades | 23.5 | 18.3 | 56.9 | 53.3 | ||||||||||
Total segment profitability | $ | 126.0 | $ | 103.0 | $ | 426.8 | $ | 392.3 | ||||||
General corporate and other expenses | (21.8 | ) | (8.5 | ) | (50.1 | ) | (35.4 | ) | ||||||
Additional cost - acquisition inventory valuation | (33.5 | ) | - | - | - | |||||||||
Intellectual property rights income | - | - | 8.5 | - | ||||||||||
Provisions for restructuring and related costs | (0.2 | ) | (1.8 | ) | (0.2 | ) | (10.3 | ) | ||||||
Gain on sale of property | - | 6.3 | 5.7 | 6.3 | ||||||||||
Amortization | (1.3 | ) | (1.4 | ) | (5.5 | ) | (5.6 | ) | ||||||
Interest and other financial items | (25.7 | ) | (12.9 | ) | (60.4 | ) | (51.0 | ) | ||||||
Earnings before income taxes | $ | 43.5 | $ | 84.7 | $ | 324.8 | $ | 296.3 |
The following shows the Razor & Blades segment sales and profit for the six months since acquisition of SWS, compared to pro forma results of last year.
Historical |
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| Pro Forma |
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| Six Months Ended |
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| Six Months Ended |
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| September 30, 2003 |
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| September 30, 2002 | |
Net Sales | $ | 433.0 | $ | 322.2 | |||
Segment profit | $ | 40.1 | $ | 26.0 |