UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 2003
Commission File No. 001-15401
ENERGIZER HOLDINGS, INC.
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(Exact name of registrant as specified in its charter)
MISSOURI 43-1863181
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(State of Incorporation) (I.R.S. Employer Identification No.)
533 MARYVILLE UNIVERSITY DRIVE, ST. LOUIS MISSOURI 63141
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(Address of principal executive offices) (Zip Code)
(314) 985-2000
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(Registrant's telephone number, including area code)
Registrant (1) 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 (2)
has been subject to such filing requirements for the past 90 days.
YES: X NO: _____
---
Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange
Act).
YES: X NO: _____
---
Number of shares of Energizer Holdings, Inc. common stock, $.01 par value,
outstanding as of the close of business on May 9, 2003: 83,872,534.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
----------------------
ENERGIZER HOLDINGS, INC.
CONSOLIDATED STATEMENT OF EARNINGS
(CONDENSED)
(DOLLARS IN MILLIONS--UNAUDITED)
QUARTER ENDED SIX MONTHS
MARCH 31, ENDED MARCH 31,
2003 2002 2003 2002
---- ---- ---- ----
Net sales . . . . . . . . . . . . . . . . . $362.6 $339.7 $935.0 $907.4
Cost of products sold . . . . . . . . . . . 207.3 189.8 515.0 494.8
Selling, general and administrative expense 69.4 79.6 145.0 161.0
Advertising and promotion expense . . . . . 26.8 24.4 74.0 70.4
Research and development expense. . . . . . 9.3 9.1 18.1 18.3
Provisions for restructuring. . . . . . . . - 4.5 - 5.9
Intellectual property rights income . . . . - - (6.0) -
Interest expense. . . . . . . . . . . . . . 4.7 5.3 9.1 11.5
Other financing items, net. . . . . . . . . (0.8) 0.2 (1.1) 1.5
------- ------- ------- -------
Earnings before income taxes. . . . . . . . 45.9 26.8 180.9 144.0
Income taxes. . . . . . . . . . . . . . . . (12.9) (6.8) (61.5) (53.6)
------- ------- ------- -------
Net earnings. . . . . . . . . . . . . . . . $ 33.0 $ 20.0 $119.4 $ 90.4
======= ======= ======= =======
Basic earnings per share. . . . . . . . . . $ 0.38 $ 0.22 $ 1.36 $ 0.99
Diluted earnings per share. . . . . . . . . $ 0.37 $ 0.21 $ 1.33 $ 0.98
<FN>
See accompanying Notes to Condensed Financial Statements
ENERGIZER HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
(CONDENSED)
(DOLLARS IN MILLIONS--UNAUDITED)
MARCH 31, SEPTEMBER 30, MARCH 31,
2003 2002 2002
---- ---- ----
ASSETS
Current assets
Cash and cash equivalents . . . . . . . . . . . . $ 34.1 $ 33.9 $ 34.6
Trade receivables, less allowance for doubtful
accounts of $12.8, $6.9 and $8.0, respectively 325.6 189.0 179.2
Inventories
Raw materials and supplies . . . . . . . . . . . 59.5 44.5 42.2
Work in process . . . . . . . . . . . . . . . . 138.4 98.6 104.7
Finished products. . . . . . . . . . . . . . . 322.7 215.9 173.0
--------- --------- ---------
Total Inventory. . . . . . . . . . . . . . . . 520.6 359.0 319.9
Other current assets . . . . . . . . . . . . . . 248.9 306.0 237.9
--------- --------- ---------
Total current assets . . . . . . . . . . . . . 1,129.2 887.9 771.6
--------- --------- ---------
Property at cost. . . . . . . . . . . . . . . . . . . 1,313.4 1,040.3 1,032.3
Accumulated depreciation. . . . . . . . . . . . . . . (613.3) (584.6) (570.6)
--------- --------- ---------
700.1 455.7 461.7
Other assets. . . . . . . . . . . . . . . . . . . . . 778.0 244.5 241.3
--------- --------- ---------
Total . . . . . . . . . . . . . . . . . . . $2,607.3 $1,588.1 $1,474.6
========= ========= =========
LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities
Current maturities of long-term debt. . . . . . . $ 15.0 $ 15.0 $ -
Notes payable . . . . . . . . . . . . . . . . . . 706.3 94.6 85.4
Accounts payable. . . . . . . . . . . . . . . . . 160.9 119.4 88.9
Other current liabilities . . . . . . . . . . . . 382.8 305.6 275.8
--------- --------- ---------
Total current liabilities . . . . . . . . . . 1,265.0 534.6 450.1
Long-term debt. . . . . . . . . . . . . . . . . . . . 375.0 160.0 175.0
Other liabilities . . . . . . . . . . . . . . . . . . 268.4 188.7 171.9
Shareholders equity
Common stock. . . . . . . . . . . . . . . . . . . 1.0 1.0 1.0
Additional paid in capital. . . . . . . . . . . . 791.9 789.8 784.4
Retained earnings . . . . . . . . . . . . . . . . 320.7 202.4 107.8
Treasury stock. . . . . . . . . . . . . . . . . . (303.1) (176.0) (86.8)
Accumulated other comprehensive income. . . . . . (111.6) (112.4) (128.8)
--------- --------- ---------
Total shareholders equity. . . . . . . . . . . 698.9 704.8 677.6
--------- --------- ---------
Total . . . . . . . . . . . . . . . . . . $2,607.3 $1,588.1 $1,474.6
========= ========= =========
<FN>
See accompanying Notes to Condensed Financial Statements
ENERGIZER HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(CONDENSED)
(DOLLARS IN MILLIONS - UNAUDITED)
SIX MONTHS ENDED MARCH 31,
2003 2002
---- ----
CASH FLOW FROM OPERATIONS
Net earnings. . . . . . . . . . . . . . . . . . . . . $ 119.4 $ 90.4
Non-cash items included in income . . . . . . . . . . 34.5 33.6
Sale of accounts receivable, net. . . . . . . . . . . 50.0 (86.2)
Changes in assets and liabilities used in operations. 41.0 72.8
Other, net. . . . . . . . . . . . . . . . . . . . . . 0.7 2.0
-------- -------
Net cash flow from operations . . . . . . . . . . 245.6 112.6
CASH FLOW FROM INVESTING ACTIVITIES
Property additions. . . . . . . . . . . . . . . . . . (14.1) (20.0)
Proceeds from sale of property. . . . . . . . . . . . 1.0 0.2
Purchase of Schick-Wilkinson Sword. . . . . . . . . . (932.2) -
Other, net. . . . . . . . . . . . . . . . . . . . . . - 0.3
-------- -------
Net cash used by investing activities . . . . . . (945.3) (19.5)
CASH FLOW FROM FINANCING ACTIVITIES
Net cash proceeds from issuance of long-term debt . . 215.0 -
Principal payments on long-term debt (including
current maturities) . . . . . . . . . . . . . . . . - (50.0)
Net increase/(decrease) in notes payable. . . . . . . 608.9 (22.9)
Treasury stock purchases. . . . . . . . . . . . . . . (128.9) (7.2)
Proceeds from issuance of common stock. . . . . . . . 4.2 0.3
-------- -------
Net cash used by financing activities . . . . . . . 699.2 (79.8)
-------- -------
Effect of exchange rate changes on cash. . . . . . . . . 0.7 (1.7)
-------- -------
Net increase in cash and cash equivalents. . . . . . . . 0.2 11.6
Cash and cash equivalents, beginning of period . . . . . 33.9 23.0
-------- -------
Cash and cash equivalents, end of period . . . . . . . . $ 34.1 $ 34.6
======== =======
<FN>
See accompanying Notes to Condensed Financial Statements
ENERGIZER HOLDINGS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2003
(DOLLARS IN MILLIONS - UNAUDITED)
NOTE 1 - The accompanying unaudited financial statements have been prepared in
accordance with Article 10 of Regulation S-X and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments considered necessary for a fair presentation have been included.
Operating results for any quarter are not necessarily indicative of the results
for any other quarter or for the full year. These statements should be read in
conjunction with the financial statements and notes thereto for Energizer
Holdings, Inc. (Energizer) for the year ended September 30, 2002.
NOTE 2 - On March 28, 2003, Energizer completed its previously announced
acquisition of the worldwide Schick-Wilkinson Sword (SWS) business from Pfizer,
Inc. for approximately $930.0 plus costs of executing the acquisition and
subject to adjustments based on acquired working capital level. SWS is the
second largest manufacturer and marketer of men's and women's wet shave products
in the world. Energizer has arranged for a $550.0, 364-day bridge loan which,
together with currently existing available credit facilities and cash, was used
to fund the acquisition. Energizer is in the process of refinancing the bridge
loan.
The following reflects the estimated asset and liabilities acquired by Energizer
in the SWS acquisition and included in the accompanying condensed balance sheet.
Such estimated asset and liability amounts are based on preliminary valuation
information and will be adjusted upon completion of a final appraisal.
MARCH 31,
ACQUIRED SWS ASSETS AND LIABILITIES 2003
----
Trade receivables $ 133.5
Inventories 194.5
Other current assets 14.5
--------
Total current assets 342.5
Property, plant and equipment 256.9
Goodwill 405.7
Other intangible assets 117.0
Other assets 3.6
--------
Total assets acquired 1,125.7
Accounts payable 50.4
Other current liabilities 83.7
--------
Total current liabilities 134.1
Other liabilities 61.6
--------
Total liabilities 195.7
--------
Net assets acquired $ 930.0
========
Energizer's results of operations and cash flow for the periods through March
31, 2003 do not reflect results from the SWS business. Beginning April 1, 2003,
Energizer will include SWS results of operations and cash flows.
The following table represents Energizer's unaudited pro forma consolidated
results of operations as if the acquisition of SWS had occurred at the beginning
of each period presented. Such results have been prepared by adjusting the
historical Energizer results to include SWS results of operations and
incremental interest and other expenses related to acquisition debt. The pro
forma results may not necessarily reflect the consolidated operations that would
have existed had the acquisition been completed at the beginning of such periods
nor are they necessarily indicative of future results.
FOR THE QUARTER ENDED FOR THE SIX MONTHS
MARCH 31, ENDED MARCH 31,
2003 2002 2003 2002
------ ------ ------- --------
Net sales. . . . . . . . . $ 490.6 $ 483.8 $ 1,247.0 $ 1,210.3
Net earnings . . . . . . . 18.9 24.6 117.3 96.2
Basic earnings per share . $ 0.22 $ 0.27 $ 1.34 $ 1.05
Diluted earnings per share $ 0.21 $ 0.26 $ 1.31 $ 1.04
SWS results for the quarter ended March 31, 2003 include manufacturing startup
and advertising and promotion expenses associated with the launch of the
Intuition women's shaving system beginning in April 2003 and enhanced support
for existing product lines. Such costs reduced net earnings and earnings per
share by $7.4 and $.08, respectively. SWS results for the quarter ended March
31, 2002, include incremental sales related to the launch of the Xtreme 3 men's
shaving system. The Xtreme 3 launch contributed $8.0, $3.1 and $.03 of sales,
net earnings and earnings per share to the March 2002 quarter, representing
non-recurring sales to fill the retail inventory pipeline.
NOTE 3 - Energizer operations are managed via four geographic segments.
Energizer reports segment results reflecting all profit derived from each
outside customer sale in the region in which the customer is located. Segment
performance is evaluated based on operating profit, exclusive of general
corporate expenses, research and development expenses, and restructuring and
related charges. Financial items, such as interest income and expense, are
managed on a global basis at the corporate level.
FOR THE QUARTER ENDED FOR THE SIX MONTHS ENDED
MARCH 31, MARCH 31,
2003 2002 2003 2002
------ ------ ------ ------
NET SALES
North America . . . . . . $197.2 $184.2 $548.6 $536.1
Asia Pacific. . . . . . . 78.6 75.3 165.2 158.3
Europe. . . . . . . . . . 66.3 58.5 167.6 153.6
South & Central America . 20.5 21.7 53.6 59.4
------ ------ ------ ------
TOTAL NET SALES $362.6 $339.7 $935.0 $907.4
====== ====== ====== ======
FOR THE QUARTER FOR THE SIX MONTHS
ENDED MARCH 31, ENDED MARCH 31,
2003 2002 2003 2002
------- ------- ------- -------
PROFITABILITY
North America . . . . . . . . . . . . . . . . . . . . $ 47.0 $ 43.2 $159.9 $160.9
Asia Pacific. . . . . . . . . . . . . . . . . . . . . 19.3 15.0 40.9 36.6
Europe. . . . . . . . . . . . . . . . . . . . . . . . 5.3 (0.8) 20.9 7.4
South and Central America . . . . . . . . . . . . . . 0.1 1.8 3.7 7.4
------- ------- ------- -------
TOTAL SEGMENT PROFITABILITY . . . . . . . . . . . $ 71.7 $ 59.2 $225.4 $212.3
General corporate and other expenses. . . . . . . . . (12.6) (13.3) (24.4) (28.5)
Research and development expense. . . . . . . . . . . (9.3) (9.1) (18.1) (18.3)
------- ------- ------- -------
Operating profit before interest, financing items
and unusual items . . . . . . . . . . . . . . . 49.8 36.8 182.9 165.5
Intellectual property rights income . . . . . . . . . - - 6.0 -
Provisions for restructuring and other related costs. - (4.5) - (8.5)
Interest and other financial items. . . . . . . . . . (3.9) (5.5) (8.0) (13.0)
------- ------- ------- -------
TOTAL EARNINGS BEFORE INCOME TAXES. . . . . . . . $ 45.9 $ 26.8 $180.9 $144.0
======= ======= ======= =======
FOR THE QUARTER FOR THE SIX MONTHS
ENDED MARCH 31, ENDED MARCH 31,
2003 2002 2003 2002
------ ------ ------ ------
NET SALES BY PRODUCT LINE
Alkaline Batteries . . $232.6 $211.6 $643.0 $632.2
Carbon Zinc Batteries. 54.6 58.4 120.9 125.0
Lighting Products. . . 25.8 22.8 61.3 55.0
Miniature Batteries. . 17.4 18.3 36.1 34.9
Other. . . . . . . . . 32.2 28.6 73.7 60.3
------ ------ ------ ------
TOTAL NET SALES $362.6 $339.7 $935.0 $907.4
====== ====== ====== ======
Beginning in the June, 2003 quarter, Energizer will revise its operating segment
presentation to conform to its revised organizational structure following the
Schick-Wilkinson Sword acquisition. Energizer will have three segments: North
America Battery, International Battery, and Razors and Blades.
NOTE 4 - 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.
The following table sets forth the computation of basic and diluted earnings per
share for the quarter and six months ended March 31, 2003, and 2002,
respectively.
Quarter Ended Six Months Ended
March 31, March 31,
2003 2002 2003 2002
----- ----- ------ -----
Numerator:
Net earnings for basic and dilutive earnings per share $33.0 $20.0 $119.4 $90.4
Denominator:
Weighted-average shares for basic earnings per share . 86.5 91.4 87.5 91.5
Effect of dilutive securities:
Stock options . . . . . . . . . . . . . . . . . 1.4 0.8 1.7 0.5
Restricted stock equivalents. . . . . . . . . . 0.6 0.6 0.6 0.6
----- ----- ------ -----
Total dilutive securities . . . . . . . . . . 2.0 1.4 2.3 1.1
----- ----- ------ -----
Weighted-average shares for diluted earnings per share 88.5 92.8 89.8 92.6
===== ===== ====== =====
Basic earnings per share. . . . . . . . . . . . . . . . . . $0.38 $0.22 $ 1.36 $0.99
Diluted earnings per share. . . . . . . . . . . . . . . . . $0.37 $0.21 $ 1.33 $0.98
NOTE 5 - Energizer applies Accounting Principles Board (APB) No. 25 and related
interpretations in accounting for its stock-based compensation. Charges to net
earnings for stock-based compensation under APB 25 were $0.6 for each of the
quarters ending March 31, 2003 and 2002, and $1.2 for each of the six months
ended March 31, 2003 and 2002. Had cost for stock-based compensation been
determined based on the fair value method set forth under SFAS 123, charges to
net earnings would have been an additional $1.6 and $2.4 for the quarters ended
March 31, 2003 and 2002, respectively, and $3.1 and $4.7 for the six months
ended March 31, 2003 and 2002, respectively. Pro forma amounts shown below are
for disclosure purposes only and may not be representative of future
calculations.
Quarter Ended Six Months Ended
March 31, March 31,
2003 2002 2003 2002
---- ---- ---- ----
Net earnings:
As reported. . . . . . . . . . $33.0 $20.0 $119.4 $90.4
Pro forma. . . . . . . . . . . $31.4 $17.6 $116.3 $85.7
Basic earnings per share:
As reported. . . . . . . . . . $0.38 $0.22 $ 1.36 $0.99
Pro forma. . . . . . . . . . . $0.36 $0.19 $ 1.33 $0.94
Diluted earnings per share:
As reported. . . . . . . . . . $0.37 $0.21 $ 1.33 $0.98
Pro forma. . . . . . . . . . . $0.35 $0.19 $ 1.30 $0.93
NOTE 6 - In the six months ended March 31, 2003, Energizer recorded income of
$6.0 pre-tax, or $3.7 after-tax, related to the licensing of intellectual
property rights.
NOTE 7 - In March 2002, Energizer adopted a restructuring plan to reorganize
certain European selling affiliates. The plan involved terminating up to 64
sales and administrative employees resulting in a provision for restructuring of
$6.7 pre-tax. During the quarter ended March 31, 2002, Energizer recorded a
provision for restructuring related to the plan described above of $4.5 pre-tax
or $2.9 after-tax. The remaining cost of the plan was recorded in the second
half of fiscal 2002.
As part of restructuring plans announced in the fourth quarter of fiscal 2001,
Energizer ceased production and terminated substantially all of its employees at
its Mexican carbon zinc production facility in the quarter ended December 31,
2001. Energizer recorded provisions for restructuring of $1.4 pre-tax, as well
as related costs for accelerated depreciation and inventory obsolescence of $2.6
pre-tax, which was recorded in cost of products sold in the first quarter of
fiscal 2002. Total provisions for restructuring and costs related to this plan
were $4.0 pre-tax, or $2.9 after-tax, in the six months ended March 31, 2002.
As of December 31, 2002, all activities associated with 2001 restructuring plans
had been completed, except for the disposition of certain assets held for
disposal.
As of March 31, 2003, 27 of a total of 64 employees have been terminated in
connection with the 2002 Plan, with 8 terminated in the current quarter.
Activities impacting the restructuring reserve during the six months ended March
31, 2003, which are recorded in other current liabilities on the Consolidated
Balance Sheet are presented in the following table:
Beginning Ending
Balance Provision Activity Balance
-------- ---------- ---------- --------
Termination benefits $ 6.3 $ - $ (2.6) $ 3.7
Other cash costs . . 1.0 - (0.5) 0.5
-------- ---------- ---------- --------
Total. . . . . . . . $ 7.3 $ - $ (3.1) $ 4.2
======== ========== ========== ========
NOTE 8 - The components of total comprehensive income for the quarter and six
months ended March 31, 2003, and 2002, respectively, are shown in the following
tables:
For the quarter ended
March 31,
2003 2002
------ ------
Net earnings . . . . . . . . . . . . . . . $33.0 $20.0
Other comprehensive income items:
- - Foreign currency translation adjustments (0.7) (5.4)
- - Minimum pension liability adjustment . . (0.1) -
------ ------
Total comprehensive income . . . . . . . . $32.2 $14.6
====== ======
For the six months ended
March 31,
2003 2002
------- -------
Net earnings. . . . . . . . . .. . . . . $119.4 $ 90.4
Other comprehensive income items:
- - Foreign currency translation adjustments 6.8 (13.1)
- - Minimum pension liability adjustment,
net of taxes of $1.8 in fiscal 2003
and $0.3 in fiscal 2002 (6.0) (0.3)
------- -------
Total comprehensive income. . . . .. . . . $120.2 $ 77.0
======= =======
NOTE 9 - Energizer participates in an ongoing Asset Securitization Program
(Program) which results in attractive short-term rates and provides financing
diversification. Under the structure of the Program, Energizer sells
substantially all of its U.S. accounts receivable to its wholly owned,
bankruptcy remote subsidiary, Energizer Receivables Funding Corporation (ERFC).
ERFC then sells such accounts receivables to an outside party for a fraction of
face value and retains a subordinated interest for the remaining value, less the
financing cost.
Under accounting rules prescribed by SFAS No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities", ERFC meets the
definition of a Special Purpose Entity (SPE) and the sales of accounts
receivable from Energizer to ERFC must be recorded as an "off balance sheet"
sales transaction. As a result of such accounting, ERFC's retained interest in
accounts receivable is classified in Other Current Assets on the Consolidated
Balance Sheet (see Note 11). The following table details the balances related
to the Program:
March 31, September 30, March 31,
2003 2002 2002
--------- ------------ ---------
Total outstanding accounts receivable sold to SPE. . $138.8 $164.6 $134.5
Cash received by SPE from sale of receivables to
a third party 50.0 - -
Subordinated retained interest . . . . . . . . .. . . 88.8 164.6 134.5
Energizer's investment in SPE. . . . . . . . . . . .. 88.8 164.6 134.5
If the Program was structured as a borrowing secured by accounts receivable
rather than sales of accounts receivable, Energizer's balance sheet would
reflect additional accounts receivable, notes payable and lower other current
assets as follows:
March 31, September 30, March 31,
2003 2002 2002
-------- ------------ --------
Additional accounts receivable $138.8 $164.6 $134.5
Additional notes payable . . . 50.0 - -
Lower other current assets . . 88.8 164.6 134.5
NOTE 10- Energizer has certain guarantees that are required to be disclosed
under FASB Interpretation No. 45. Energizer has arranged for letters of credit
to be supplied by financial institutions to meet regulatory requirements for
certain workers compensation and environmental obligations. Total letters of
credit posted were $1.7 million at March 31, 2003 and such letters expire
annually, however will likely be renewed upon expiration in support of
Energizer's ongoing operations.
Energizer guaranteed loans for certain common stock purchases made by certain
executive officers and other key executives of Energizer. With respect to the
executive officers, these guarantees were amended in June of 2002 to apply only
to the outstanding loan balances as of June 30, 2002. The aggregate loan
balances guaranteed total approximately $2.4. The maximum term of each
individual loan guarantee is 3 years, and Energizer may offset any losses it may
incur under an individual loan guarantee against any amounts owed by it to the
individual officer or executive.
Energizer also has certain guarantees for the purchase of goods used in the
production of its product with terms ranging from 4 to 8 years with a maximum
amount of potential future payments of approximately $1.5.
NOTE 11- Other Current Assets consist of the following:
March 31, 2003 September 30, 2002 March 31, 2002
--------------- ------------------- ---------------
Investment in SPE. . . . . . $ 88.8 $ 164.6 $ 134.5
Miscellaneous receivables. . 27.9 21.3 22.1
Deferred income tax benefits 59.8 56.6 44.9
Prepaid expenses . . . . . . 72.4 63.5 36.3
Other current assets . . . . - - 0.1
--------- --------- --------
$ 248.9 $ 306.0 $ 237.9
========= ========= ========
NOTE 12- Other Assets consist of the following:
March 31, 2003 September 30, 2002 March 31, 2002
--------------- ------------------- ---------------
Goodwill. . . . . . . . . . . . . $ 443.1 $ 37.4 $ 36.9
Other intangible assets . . . . . 192.4 73.9 73.4
Pension asset . . . . . . . . . . 114.0 117.9 111.6
Other assets and deferred charges 28.5 15.3 19.4
--------- --------- --------
$ 778.0 $ 244.5 $ 241.3
========= ========= ========
NOTE 13 - During the quarter ended March 31, 2003, Energizer recorded an
estimate of goodwill related to the SWS acquisition of $405.7. Such amount is
an estimate as of March 31, 2003 and will be subsequently adjusted after
appraisal of acquired assets and assumed liabilities. The portion of goodwill
allocated to the U.S. and certain other countries will be deductible for tax
purposes, with the amount to be determined upon final appraisal of net assets
acquired.
The carrying amount of intangible assets acquired from the acquisition is as
follows:
Wtd-Average
As of Amortization
March 31, 2003 Period (in years)
-------------- -----------------
To be amortized:
Tradenames . . . . . . . . . . . $ 10.5 9.8
Technology and patents . . . . . 34.3 11.1
Customer-related . . . . . . . . 11.5 10.0
----------
56.3
Indefinite lived:
Tradenames . . . . . . . . . . . 60.7
----------
Total acquired intangible assets $117.0
===========
Total intangible assets at March 31, 2003, are as follows:
Gross Accumulated
Carrying Amount Amortization Net
--------------- ------------ ---
To be amortized:
Tradenames. . . . . . . $ 10.5 $ - $ 10.5
Technology and patents. 34.3 - 34.3
Customer-related. . . . 11.5 - 11.5
------ ------- ------
56.3 - 56.3
Indefinite lived:
Tradenames. . . . . . . 501.0 (364.9) 136.1
------ ------- ------
Total intangible assets $557.3 $(364.9) $192.4
====== ======== ======
Estimated amortization expense for amortized intangible assets is as follows:
For the year ended September 30, 2003 $ 2.7
For each year ended September 30, 2004 through 2008 5.6
NOTE 14- Other Liabilities consist of the following:
March 31, 2003 September 30, 2002 March 31, 2002
--------------- ------------------- ---------------
Postretirement benefits liability $ 90.6 $ 90.3 $ 92.2
Other non-current liabilities . . 177.8 98.4 79.7
-------- ---------- --------
$ 268.4 $ 188.7 $ 171.9
======== ========== ========
NOTE 15- In May 2002, Energizer's Board of Directors approved a plan authorizing
the repurchase of up to 5.0 million shares of Energizer's common stock. In the
six months ended March 31, 2003, approximately 5.0 million shares were
purchased.
NOTE 16-The Financial Accounting Standards Board (FASB) issued SFAS No. 143,
"Accounting for Asset Retirement Obligations." 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
adopted SFAS 143 as of the beginning of the current fiscal year, which did not
have a material effect on its financial statements.
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. Energizer adopted SFAS 144 as of the beginning
of the current fiscal year, which did not have a material effect on its
financial statements.
The FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical Corrections." SFAS 145
updates, clarifies and simplifies existing accounting pronouncements. Energizer
adopted SFAS 145 as of the beginning of the current fiscal year, which did not
have a material effect on its financial statements.
The FASB issued SFAS No. 146, "Accounting for Exit or Disposal Activities."
SFAS 146 provides direction for accounting and disclosure regarding specific
costs related to an exit or disposal activity. These include, but are not
limited to, costs to terminate a contract that is not a capital lease, costs to
consolidate facilities or relocate employees, and certain termination benefits
provided to employees that are involuntarily terminated under the terms of a
one-time benefit arrangement. Energizer adopted SFAS 146 as of the beginning of
the current fiscal year, which did not have a material effect on its financial
statements, but it may change the period in which future restructuring
provisions are recorded.
The FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation -
Transition and Disclosure, an amendment of FAS 123." SFAS 148 provides
alternative methods of transition for a voluntary change to the fair-value based
method of accounting for stock-based compensation. In addition, SFAS 148 amends
the disclosure requirements of SFAS 123 to require certain disclosures in both
annual and interim financial statements about the method of accounting for
stock-based compensation and the effect on reported results. Energizer applies
ABP 25 at this time and adopted the disclosure provisions of this statement in
the beginning of the current fiscal year, as found in Note 5 above.
The FASB issued Interpretation No. 45 (FIN 45), "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others." FIN 45 clarifies the disclosures about certain
guarantees to be made by a guarantor in its interim and annual financial
statements. Also, FIN 45 clarifies that a guarantor is required to recognize,
at the inception of certain guarantees, a liability for the fair value of the
obligation undertaken in issuing the guarantee, but does not prescribe a
specific approach for subsequently measuring the liability over its life.
Recognition provisions of FIN 45 are to be applied prospectively for guarantees
issued or modified after December 31, 2002. The disclosure requirements are
effective for financial statements ending after December 15, 2002. Energizer
adopted FIN 45 as of the beginning of the current fiscal year, as found in Note
10 above, which did not have a material effect on its financial statements.
ITEMS 2. AND 3. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS, QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
- --------------------------------------------------------------------------------
RISK. (DOLLARS IN MILLIONS)
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HIGHLIGHTS / OPERATING RESULTS
Net earnings for the six months ended March 31, 2003 were $119.4 or $1.36
per basic share and $1.33 per diluted share compared to $90.4, or $.99 per basic
share and $.98 per diluted share for the same six month period last year. The
current six-month period included intellectual property rights income of $3.7
after taxes. Included in the prior six month net earnings are restructuring
provisions and related costs of $5.8 after taxes and a charge related to Kmart
accounts receivable of $6.1 after taxes.
For the quarter ended March 31, 2003, net earnings were $33.0 or $.38 per
basic share and $.37 per diluted share compared to $20.0, or $.22 per basic
share and $.21 per diluted share for the quarter ended March 31, 2002. Included
in the prior quarter net earnings are restructuring provisions of $2.9 after
taxes and a charge related to Kmart accounts receivable of $6.1 after taxes.
Net sales increased $27.6, or 3% for the six-month period and $22.9, or 7%
for the quarter as increases in North America, Europe and Asia Pacific were
partially offset by declines in South and Central America. See the following
section for comments on sales changes by segment.
Gross margin increased $7.4, or 2% for the six months as improvements in
Europe and Asia Pacific were partially offset by declines in South and Central
America and North America. For the quarter, gross margin improved $5.4, or 4%
as improvements in Europe and Asia Pacific were partially offset by declines in
North America and South and Central America. Gross margin percentage declined
0.6 percentage points to 44.9% for the current six months and 1.3 percentage
points to 42.8% for the quarter.
Selling, general and administrative expenses declined $16.0, or 10% in the
six months and $10.2, or 13% for the quarter, mainly due to the $10.0 charge
related to Kmart accounts receivable in the prior quarter and, in the six
months, lower general corporate expenses. Selling, general and administrative
expenses as a percent of sales were 15.5% and 19.1% in the current six months
and quarter, respectively, compared to 17.7% and 23.4% in the prior six months
and quarter, respectively.
Advertising and promotion expense increased $3.6, or 5% and $2.4, or 10% in
the current six months and quarter, respectively, primarily in North America.
Advertising and promotion as a percent of sales was 7.9% and 7.4% in the current
six months and quarter, respectively, compared to 7.8% and 7.2% in the prior six
months and quarter, respectively.
SEGMENT RESULTS
Energizer Holdings, Inc. (Energizer) operations are currently managed via
four geographic segments. Energizer reports segment results reflecting all
profit derived from each outside customer sale in the region in which the
customer is located. 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 the Company's reportable operating segment
information, as included in the tables in Note 3 to the Condensed Financial
Statements for the quarters and six months ended March 31, 2003 and 2002.
Beginning in the June 2003 quarter, Energizer will revise its operating segment
presentation to conform to its revised organizational structure following the
Schick-Wilkinson Sword acquisition. Energizer will have three segments: North
America Battery, International Battery, and Razors and Blades.
North America
Net sales for North America were $548.6 for the current six months, up
$12.5 or 2% due to improved non-alkaline product volume, partially offset by
unfavorable pricing and product mix. North America sales for the quarter
increased $13.0 or 7% on higher volume partially offset by unfavorable pricing
and product mix. The volume increase in the quarter was primarily driven by
large cell size alkaline and lighting products units, which increased 58% and
38%, respectively, reflecting increased demand from government agencies and
consumers due to terrorism and security concerns. Smaller alkaline cell size
units volume, which account for the majority of alkaline sales, increased 4%;
however, price per unit declined due to residual holiday promotional pack sales
and other promotional discounting in response to recent competitive activity.
In the U.S., retail alkaline category units grew an estimated 12% compared
to the same quarter last year, while category value increased 3%, reflecting
continued promotions and lower everyday pricing by retailers. Retailer
consumption of Energizer's alkaline products increased an estimated 5% in units
and 1% in value for the quarter. Energizer estimates its share of the alkaline
battery market at approximately 30% for the quarter, a loss of approximately one
share point compared to the same quarter last year. Energizer estimates that
overall retail inventory levels at March 31, 2003, are at, or slightly below,
seasonal normal levels.
Gross margin declined $6.4 for the current six months as higher volume was
more than offset by unfavorable pricing and product mix. Segment profit
declined $1.0 for the current six months on lower gross margin and higher
advertising and promotion expense, partially offset by a $10.0 provision for
doubtful accounts receivable from Kmart in the prior six-month period.
Gross margin for the quarter decreased $3.8 or 4% as the margin
contribution of incremental volume was more than offset by lower net pricing
after promotional discounts and higher product cost. The most significant
volume increases were in the lower margin product lines. Segment profit
increased $3.8. The prior quarter included a $10.0 write-off of accounts
receivable from Kmart in response to its bankruptcy filing. Excluding this
write-off, operating profit declined $6.2 or 12% on lower gross margin and
higher advertising and promotion expense.
Effective April 14, 2003, Energizer adjusted its U.S. pricing and
promotional structure in response to similar changes by its primary competitor.
The result of the changes will be lower average pricing to customers and a
decrease in the frequency and depth of customer promotions funded by Energizer.
Energizer does not expect such changes to have an unfavorable impact on its
pricing or overall business going forward.
Asia Pacific
Net sales for Asia Pacific were $165.2 for the current six months, an
increase of $6.9, or 4% due to higher alkaline volume and favorable currency
impacts of $5.8, partially offset by unfavorable pricing and product mix.
Alkaline unit volume to retail channels increased 7% while carbon zinc unit
volume declined 1%. For the quarter, sales were $78.6, an increase of $3.3, or
4% as favorable currency impacts of $3.4 and higher volume through retail
channels were partially offset by lower pricing and product mix. Alkaline
volume to retail channels increased 8% while carbon zinc volume declined 1%.
Segment profit increased $4.3, or 12% for the current six months and $4.3,
or 29% for the quarter, on higher sales, favorable currency impacts and lower
overheads.
Energizer's Asia Pacific region results are influenced by its sales in
certain Asian countries which have had Severe Acute Respiratory Syndrome (SARS)
outbreaks. While Energizer's sales in those countries have not yet been
significantly impacted, a continued or worsening SARS situation could have an
adverse impact on the overall economies of, and the battery category in, those
countries, and consequently, on Energizer's results. It is not currently
possible to accurately predict the impact of the SARS situation on future
results.
Europe
Net sales for Europe were $167.6 for the current six months, an increase of
$14.0, or 9%. Favorable currency impacts of $18.8 and improved pricing and
product mix were partially offset by lower unit volume, primarily carbon zinc.
For the quarter, sales were $66.3, an increase of $7.8, or 13% due to favorable
currency impacts of $10.6, partially offset by lower volume.
Segment results improved $13.5 for the current six months primarily on
favorable currency impacts of $9.4 and favorable pricing and product mix. For
the quarter, segment results improved $6.1 as favorable currency impacts of $5.3
and favorable pricing and product mix, were partially offset by lower volume.
South and Central America
Net sales for South and Central America for the current six months were
$53.6, a decrease of $5.8, or 10% on unfavorable currency impacts of $16.1,
partially offset by pricing actions and higher volumes in lower margin markets.
For the quarter, sales of $20.5 declined $1.2, or 6% as unfavorable currency
impacts of $4.8 and higher volumes in lower margin markets were partially offset
by pricing actions.
Segment profit decreased for the current six months and quarter $3.7 and
$1.7, respectively. Unfavorable currency impacts of $9.0 for the six months and
$3.0 for the quarter were partially offset by higher prices.
OTHER COSTS AND EXPENSES
General Corporate and Other Expenses
Corporate and other expenses decreased $4.1 to $24.4 for the current six
months and for the quarter decreased $0.7 to $12.6 reflecting lower compensation
costs related to incentive plans and stock price, partially offset by lower
pension income.
Research and Development Expenses
Research and development expenses decreased $0.2, or 1% for the current six
months and increased $0.2 or 2% for the current quarter, representing 1.9% and
2.6% of sales for the current six months and quarter, respectively, while the
prior six months and quarter represented 2.0% and 2.7% of sales, respectively.
Restructuring Activity
In March 2002, Energizer adopted a restructuring plan to reorganize certain
European selling affiliates. The plan involved terminating up to 64 sales
and administrative employees resulting in a provision for restructuring of $6.7
pre-tax. During the quarter ended March 31, 2002, Energizer recorded a pre-tax
provision for restructuring related to the plan described above of $4.5.
As part of the restructuring plans announced in the fourth quarter of
fiscal 2001, Energizer recorded provisions for restructuring of $1.4, pre-tax,
as well as related costs for accelerated depreciation and inventory obsolescence
of $2.6, pre-tax in the prior six months, which are reflected in cost of
products sold.
Total provisions for restructuring and related costs were $8.5 pre-tax,
$5.8 after-tax and $.06 per share in the prior six months. Total provisions for
restructuring for the prior quarter were $4.5 pre-tax, $2.9 after-tax and $.03
per share.
Activities impacting the restructuring reserve during the quarter ended
March 31, 2002 are presented in Note 7 to the Condensed Financial Statements.
Intellectual Property Rights Income
In the quarter ended December 31, 2002, Energizer recorded income of $6.0
pre-tax, or $3.7 after-tax, related to the licensing of intellectual property
rights.
Interest Expense and Other Financing Costs
Interest expense decreased $2.4, or 21% and $0.6, or 11% for the current
six months and quarter, respectively, reflecting lower average borrowings.
Energizer's interest expense will increase in future quarters due to incremental
debt related to the acquisition of Schick-Wilkinson Sword. See
discussion below
and Note 2 of the Condensed Financial Statements.
Other financing costs were favorable $2.6 and $1.0 for the current six
months and quarter, respectively, on lower exchange losses and for the six
months, lower discounts on the sale of accounts receivable under a financing
arrangement.
Income Taxes
Income taxes, which include federal, state and foreign taxes, were 34% for
the current six months, compared to a tax rate of 37.2% for the same period last
year. The improvement in the tax rate is primarily due to improved foreign
operating results.
For the current quarter, income taxes were 28.1% compared to 25.4% for the
same period last year. The change in tax rates for both the current and prior
quarter included the reductions necessary to bring the tax rate for the six
months in line with expectations of the tax rate for the full year.
SCHICK-WILKINSON SWORD ACQUISITION
On March 28, 2003, Energizer completed its previously announced acquisition
of the worldwide Schick-Wilkinson Sword (SWS) business from Pfizer, Inc. for
approximately $930.0 plus costs of executing the acquisition and subject to
adjustments based on acquired working capital level. SWS is the second largest
manufacturer and marketer of men's and women's wet shave products in the world.
SWS products are marketed in over 80 countries, accounting for an estimated 18%
market share of the global wet shaving business. Its primary markets are
Europe, the United States and Japan.
Energizer views the wet shave products category as attractive within the
consumer products industry due to the limited number of manufacturers, the high
degree of consumer loyalty, and the ability to improve pricing through
innovation. Energizer believes SWS has high quality products, a defensible
market position and the opportunity to grow sales and margins. The SWS business
is compatible with Energizer's business in terms of common customers,
distribution channels, and geographic presence, which should provide
opportunities to leverage Energizer's marketing expertise, business organization
and scale globally.
SWS' results of operations will begin to be reflected in Energizer's
results as of April 1, 2003. See Note 2 to the Condensed Financial Statements
for pro forma results of operations as if SWS had been part of Energizer's
results for the current and prior six months and quarter.
In accordance with generally accepted accounting principles, SWS inventory
acquired in the acquisition was valued at its estimated fair value on
Energizer's March 31, 2003 balance sheet. Such fair value of inventory is
approximately $80.0 greater than historical cost basis of such inventory prior
to the acquisition. This required accounting treatment will reduce gross margin
by approximately $80.0 (compared to historical SWS cost basis) as the product is
sold following the acquisition. Energizer expects the majority of the acquired
inventory will be sold in the June, 2003 quarter and will result in a reported
operating loss for the SWS business and overall Energizer loss for that quarter.
Any remaining acquired inventory at June 30, 2003, will be sold early in
Energizer's fourth fiscal quarter and will also have an unfavorable impact on
that quarter's results, which is expected to be far less than the impact on the
third quarter.
Financial Condition
At March 31, 2003, current liabilities exceeded current assets by $135.8,
compared to current assets in excess of current liabilities of $353.3 at
September 30, 2002, and $321.5 at March 31, 2002. Primarily as a result of the
acquisition of SWS, March 31, 2003, short-term borrowings increased $611.7 since
September 30, 2002. Additionally, the SWS acquisition added net working capital
of $208.4. Absent these items, Energizer's working capital was $362.1.
Energizer funded the SWS acquisition using a $550.0, 364-day bridge loan,
its existing available credit facilities and cash. Energizer's total short-term
borrowings were $721.3 at March 31, 2003. Because anticipated cash flows over
the next year will be insufficient to repay such borrowings, Energizer will be
required to refinance the bridge loan into longer term financing, or else risk
default on the bridge loan and consequent cross defaults on other borrowing
facilities. Energizer is currently in the process of procuring longer term
financing and expects to be successful in this process. However, Energizer
cannot guarantee that refinancing will be achieved, or achieved at rates it
currently expects if unfavorable general economic or Energizer specific factors
occur prior to commitments for refinancing.
A summary of Energizer's significant contractual obligations is shown
below. See Note 10 to the Condensed Financial Statements for discussion of
letters of credit, loan guarantees and guarantees for the purchase of goods used
in the production.
Less than More than
Total 1 year 1-3 years 3-5 years 5 years
------- -------- --------- --------- ----------
Notes payable. . . . . . . . . . . . . . . . $ 706.3 $ 706.3
Long-term debt, including current maturities 390.0 15.0 110.0 240.0 25.0
Operating leases . . . . . . . . . . . . . . 86.9 14.1 32.2 10.2 30.4
-------- -------- --------- -------- ----------
Total. . . . . . . . . . . . . . . . . . . . $1,183.2 $ 735.4 $ 142.2 $ 250.2 $ 55.4
======== ======== ========= ======== =========
Cash flow from operations were $245.6 for the six months ended March 31,
2003, up $133.0 from the same period a year ago primarily due to sales of
accounts receivable under a financing arrangement. Cash used in investing
activities includes the $930.0 acquisition of SWS, as well as capital
expenditures of $14.1 in the current six-months compared to capital expenditures
of $20.0 in the same six-month period last year. Cash flow from financing
activities includes financing described above related to the SWS acquisition and
purchase of $128.9 of treasury stock in the current six months. Energizer
purchased approximately 4.3 million shares in the current quarter, for a total
of approximately 5 million shares for the current six-month period.
Energizer's borrowing facilities require it to maintain a debt to earnings
before interest, taxes, depreciation and amortization (EBITDA) ratio of no more
than 3.0 to 1.0. As of March 31, 2003, such ratio is 2.5 to 1.0. This ratio
could increase if EBITDA earnings levels decline or if cash flow needs are
greater than anticipated, which could result in a breach of the ratio covenant
and consequent default on its borrowing facilities.
Assuming successful refinancing of the facilities described above,
Energizer believes that cash flows from operating activities and periodic
borrowings under available credit facilities will be adequate to meet short-term
and long-term liquidity requirements prior to the maturity of Energizer's credit
facilities, and that it will be able to maintain all of its borrowing covenants,
including the debt to EBITDA ratio, although no guarantee can be given in this
regard.
Special Purpose Entity
Energizer generates accounts receivable from its customers through its
ordinary course of business. Substantially all accounts receivable in the U.S.
are routinely sold to Energizer Receivables Funding Corporation (the SPE), which
is a wholly owned, bankruptcy remote subsidiary of Energizer. The SPE's only
business activities relate to acquiring and selling interests in Energizer's
receivables, which transactions are used as an additional source of liquidity.
The SPE sells an undivided percentage ownership interest in each individual
receivable to an unrelated party (the Conduit) and uses the cash collected on
these receivables to purchase additional receivables from Energizer.
The trade receivables sale facility represents "off-balance sheet
financing," since the Conduit's ownership interest in the SPE's accounts
receivable results in assets being removed from Energizer's balance sheet,
rather than resulting in a liability to the Conduit. Upon the facility's
termination, the Conduit would be entitled to all cash collections on the SPE's
accounts receivable until its purchased interest was repaid.
The terms of the agreements governing this facility qualify trade
receivables sale transactions for "sale treatment" under generally accepted
accounting principles. As such, Energizer is required to account for the SPE's
transactions with the Conduit as a sale of accounts receivable instead of
reflecting the Conduit's net investment as short-term debt with a pledge of
accounts receivable as collateral. Absent this "sale treatment," Energizer's
balance sheet would reflect additional accounts receivable and short-term debt
and lower other current assets. See further discussion in Note 9.
Recently Issued Accounting Standards
See discussion in Note 16 to the Condensed Financial Statements.
Forward-Looking Statements
Statements in this document that are not historical, particularly
statements regarding estimates of category growth, retailer consumption of
Energizer's products, Energizer's market share, and retailer inventory levels,
the impact of adjustments to Energizer's U.S. pricing and promotional structure,
the economic impact of the SARS outbreaks, Energizer's anticipated full-year tax
rate, the attractiveness of the wet shave products category, Energizer's
assessment of the SWS business, the sale of acquired SWS inventories,
Energizer's ability to refinance existing debt at reasonable interest rates,
Energizer's compliance with debt covenants regarding its debt to EBITDA ratio,
and its continuing ability to meet liquidity requirements, may be considered
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Energizer cautions readers not to place undue
reliance on any forward-looking statements, which speak only as of the date
made.
Energizer advises readers that various risks and uncertainties could affect
its financial performance and could cause Energizer's actual results for future
periods to differ materially from those anticipated or projected. Energizer's
estimates of battery category unit and value growth, retailer consumption of its
battery products, Energizer market share and retailer inventory levels may be
inaccurate, or may not reflect significant segments of the retail market.
Moreover, Energizer sales volumes in future quarters may lag unit consumption if
retailers are currently carrying inventories in excess of Energizer's estimates,
or if those retailers elect to further contract their inventory levels. The
adverse impact of competitors' pricing and promotional activities may be more
significant than anticipated, and Energizer's adjusted pricing and promotional
structure may not be effective in protecting its competitive position. At the
present time it is impossible to predict the economic impact of the SARS
outbreaks which, if severe in any major markets, could have a significant
negative effect on Energizer's results. Energizer's overall tax rate for the
year may be higher or lower than anticipated because of unforeseen changes in
the tax laws or applicable rates, higher taxes on repatriated earnings, or
changes in foreign loss estimates. General economic conditions, retailer
pressure, and competitive activity may negatively impact the outlook for the wet
shave products category. Because of that competitive activity, the SWS business
may not be able to grow sales or margins, and could lose current market
position. Opportunities to integrate SWS activities with Energizer's, and to
leverage Energizer operating strengths, may be limited. Sales of acquired SWS
inventories may be slower than anticipated and, as a result, the negative impact
of the accounting treatment of such sales could occur in future quarters. In
the event that interest rates rise significantly in the near term, Energizer may
not be able to refinance its existing debt at reasonable rates. Its ability to
refinance, as well as the interest rate(s) it can obtain, may be negatively
impacted by political events or general economic decline, by currently
unanticipated declines in Energizer's cash flows or liquidity, or by other
events with significant negative impact on its operating results, including
retailer decisions on inventory levels, the success of cost-containment efforts,
unforeseen increases or decreases in Energizer's cost structures, competitive
pressure, adverse governmental regulation and currency rates. Inability to
refinance Energizer's new 364-day bridge loan could, if cash flows over the next
year are insufficient for debt service and repayment, cause default on such loan
and consequent cross-default on Energizer's other debt facilities. Energizer's
debt to EBITDA ratio could increase beyond acceptable levels if EBITDA earnings
levels decrease or if cash flow needs are greater than anticipated, resulting in
a breach of the ratio covenant and consequent default on its existing debt
facilities. Unforeseen fluctuations in levels of Energizer's operating cash
flows, or inability to maintain compliance with its debt covenants could also
limit Energizer's ability to meet future operating expenses and liquidity
requirements, fund capital expenditures, or service its debt as it becomes due.
Additional risks and uncertainties include those detailed from time to time in
Energizer's publicly filed documents, including Energizer's Registration
Statement on Form 10, its Annual Report on Form 10-K for the Year ended
September 30, 2002, its quarterly report on Form 10Q for the period ended
December 31, 2002, and its Current Reports on Form 8-K dated April 25, 2000,
January 21, 2003, January 27, 2003, and April 23, 2003.
ITEM 4. CONTROLS AND PROCEDURES
-------------------------
J. Patrick Mulcahy, Energizer's Chief Executive Officer, and Daniel J.
Sescleifer, Energizer's Executive Vice President and Chief Financial Officer,
evaluated Energizer's disclosure controls and procedures within 90 days of the
filing date of this Quarterly Report on Form 10-Q, and determined that such
controls and procedures were effective and sufficient to ensure compliance with
applicable laws and regulations regarding appropriate disclosure in the
Quarterly Report, and that there were no material weaknesses in those disclosure
controls and procedures. They have also indicated that there were no
significant changes in internal controls or other factors that could
significantly affect internal controls subsequent to the date of their most
recent evaluation of disclosure controls and procedures, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
PART II - OTHER INFORMATION
------------------
There is no information required to be reported under any items except those
indicated below.
Item 6-Exhibits and Reports on Form 8-K
(a) 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) Form of Non-Qualified Stock Option dated March 17, 2003*
10(ii) Form of Non-Qualified Stock Option dated March 28, 2003*
10(iii) Form of Change of Control Employment Agreement dated March 28, 2003*
99.1 Section 1350 Certification of Chief Executive Officer
99.2 Section 1350 Certification of Executive Vice President and Chief
Financial Officer
*Denotes a management contract or compensatory plan or arrangement.
(b) (i) On April 4, 2003, registrant filed a Current Report on Form 8-K
to disclose the completion of the acquisition of the worldwide Schick-Wilkinson
Sword business.
(ii) On April 23, 2003, Energizer filed a Current Report on Form 8-K
incorporating its press release of the same date relating to earnings results
for the second quarter of fiscal 2003, which Current Report was amended and
refiled on April 25, 2003. A Statement of Earnings for the quarter and six
months ended March 31, 2003 was filed with the Current Report on Form 8-K.
SIGNATURES
Pursuant to the requirements 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.
- -----------------------------------------
Registrant
By:/s/ Daniel J. Sescleifer
Daniel J. Sescleifer
Executive Vice President and
Chief Financial Officer
Date: May 15, 2003
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
- --------------------------------------------
I, J. Patrick Mulcahy, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Energizer Holdings,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 15, 2003
/s/ J. Patrick Mulcahy
J. Patrick Mulcahy
Chief Executive Officer
CERTIFICATION OF EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
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I, Daniel Sescleifer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Energizer Holdings,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 15, 2003
/s/ Daniel J. Sescleifer
Daniel J. Sescleifer
Executive Vice President and Chief Financial Officer