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, 2000
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.)
CHECKERBOARD SQUARE, ST. LOUIS MISSOURI 63164
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(Address of principal executive offices) (Zip Code)
(314) 982-2000
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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: _____
----
Number of shares of Energizer Holdings, Inc. common stock, $.01 par value,
outstanding as of the close of business on May 8, 2000.
95,552,711
------------------
PART I - FINANCIAL INFORMATION
ENERGIZER HOLDINGS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL INFORMATION
(DOLLARS IN MILLIONS)
BUSINESS OVERVIEW
Primary battery market sales increased for the six months ended March 31,
2000, particularly in the U.S., reflecting continuing electronic device growth,
retail promotional emphasis and Y2K preparedness demand. Primary battery market
sales in the three months ended March 31, 2000 were up slightly, but reflect the
overall category adjustment in growth rates due to consumer stockpiling in late
1999. A.C. Nielsen measured the U.S. primary battery market up 16% for the six
months and 2% for the three months ended April 1, 2000. Other world areas
experienced similar volume trends.
OPERATING RESULTS
Net earnings for the six months ended March 31, 2000 were $121.6 compared
to a loss of $3.0 for the six months ended March 31, 1999. Current year net
earnings include a net gain on disposition of discontinued operations of $1.2
related to the final settlement of the sale of discontinued operations. Prior
year results include a net loss from discontinued operations of $5.6 and a net
loss on disposition of discontinued operations of $74.2. Discontinued operations
results are related to the Original Equipment Manufacturers' (OEM) rechargeable
battery business sold on November 1, 1999, as discussed below.
Earnings from continuing operations were $120.4 for the current six months
compared to $76.8 in the prior year six months. Included in the current six
months earnings from continuing operations are one-time after-tax spin-off costs
of $3.3, a pre-tax loss of $15.7 on the disposition of Energizer's Spanish
affiliate and related capital loss tax benefits of $24.4. Earnings from
continuing operations for the six months last year include pre-tax and after-tax
provisions for restructuring of $6.0 and $6.1, respectively. Excluding these
items, earnings from continuing operations would have been $115.0 compared to
$82.9 last year, an increase of 39%.
For the quarter ended March 31, 2000, net earnings were $16.9 compared to a
net loss of $55.0 for the same quarter in 1999. Net earnings for the current
quarter include the aforementioned $1.2 net gain on the disposition of
discontinued operations, $3.3 after-tax spin-off costs, $15.7 loss on the
disposition of Energizer's Spanish affiliate and $24.4 of capital loss tax
benefits. Net earnings for the prior year second quarter include a net loss
from discontinued operations of $2.8 and a net loss on disposition of
discontinued operations of $74.2. Earnings from continuing operations, before
the unusual items discussed above, decreased $11.6, or 53%, for the quarter to
$10.3, compared to $21.9 in the prior year second quarter.
Net sales for the six months ended March 31, 2000 increased $45.4, or 5%.
Increased volumes, especially in Energizer brand products, contributed $93.6 in
sales, partially offset by unfavorable pricing and product mix of $30.6 and
unfavorable currency impacts of $17.7. Strong sales in the North America and
Asia Pacific segments for the quarter ended December 31, 1999 benefited from
significantly higher demand driven by Y2K preparedness concerns and increased
market share in key countries. For the quarter ended March 31, 2000, sales
decreased $45.8, or 11%, with North America, Europe and South and Central
America all declining as described in the Segment Results section below.
Gross margin for the current six months increased $57.4 leveraging higher
volumes and benefiting from lower production costs after the closure of two
plants in 1999. Gross margin percentage increased from 46.7% in the six months
last year to 50.2% this year. For the quarter, gross profit declined $16.7 on
lower sales. Gross margin percentage improved from 45.4% to 46.5% on the lower
production costs discussed above.
SEGMENT RESULTS
Operations are managed via four major geographic areas--North America
(which includes the U.S. and Canada), 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 7 to the Combined Financial Statements for the period ended March 31, 2000.
North America
Net sales to customers for North America increased $56.3, or 11%, for the
current six months. Volume increases accounted for $88.0 of the sales increase,
partially offset by unfavorable pricing and product mix. For the quarter, sales
decreased $34.2, or 17%, with volume accounting for $29.7 of the decline.
Significant volume gains in the first quarter driven by strong Y2K preparedness
buying and retail promotional emphasis were eroded by soft volumes in the second
quarter as retail customers worked through remaining stocks from accelerated
first quarter buying.
The second quarter comparison was also negatively impacted by unusually
high promotional activity at the wholesale level in the second quarter last
year. At the consumer level, sales remained strong in the quarter as Energizer
brand product sales increased 9%, as measured by A. C. Nielsen, compared to
overall alkaline battery market growth of 3%. Energizer share, as measured by
A. C. Nielsen, increased 1.6 share points to 32.4 during the quarter.
Segment profit for the six months increased $22.8, or 16%. Gross margin
increased $37.0, benefiting from higher sales and leveraging of fixed costs.
For the quarter, segment profit decreased $22.2, or 47%. Gross margin declined
$20.0 on lower sales. Marketing and distribution costs increased $8.7 and $3.7
in the six months and quarter, respectively, in support of enhanced focus on
share growth. Advertising and promotion expense increased $10.0 and $1.9 in the
six months and quarter, respectively.
Asia Pacific
Net sales to customers for Asia Pacific increased $13.7, or 7%, for the
current six months. Increased volume contributed $12.4 of the increase. Sales
for the quarter were flat as volume increases of $4.3 were offset by unfavorable
pricing and mix and currency exchange rates.
Segment profit for the six months increased $12.7, or 26%. Gross margin
increased $16.3 on higher sales and lower production costs. Other costs were
favorable compared to the prior six months which contained plant start up costs.
Advertising and promotion expenses increased $3.5, primarily in the first
quarter. For the current quarter, segment profit increased $.6, or 3%. Lower
product cost contributed $4.1, partially offset by higher management costs.
South and Central America
Net sales to customers for South and Central America decreased $2.5 or 3%
for the current six months. Unfavorable currency effects of $4.5 were partially
offset by favorable pricing and product mix. Sales for the quarter declined
$4.0, or 12% on unfavorable currency effects of $2.4 and volume decreases of
$1.8.
Segment profit for the six months increased $1.2 or 15%. Favorable pricing
and product mix of $2.4 and lower product costs of $3.4 were partially offset by
unfavorable currency impact of $3.4 and higher management costs. For the
quarter, segment profit increased $1.3, or 93% as lower product costs of $3.8
were partially offset by unfavorable currency impact of $1.8 and higher
management costs.
Europe
Net sales to customers for Europe decreased $22.1, or 12% for the six
months and $7.8, or 10% for the quarter. Currency devaluation accounted for
$16.5 and $9.1 of the decline in the six months and quarter, respectively. The
remainder of the decrease in the six months resulted from lower volume in the
first quarter.
Segment profit for the six months and quarter increased $8.6 and $2.8,
respectively, primarily related to lower costs associated with plant closing and
other business realignment activities. Unfavorable impacts of currency
devaluation were substantially offset by lower overhead costs.
CORPORATE EXPENSES
Corporate expenses decreased $4.3 in the six months on higher pension
income and lower information systems spending, partially offset by higher
management costs. In the quarter, corporate costs increased $3.1 on higher
management costs and unfavorable comparisons on mark-to-market adjustments of
liabilities denominated in Ralston share equivalents, partially offset by higher
pension income.
COSTS RELATED TO SPIN OFF
During the quarter and six months ended March 31, 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.
LOSS ON DISPOSITION OF SPANISH AFFILIATE
During the quarter and six months ended March 31, 2000, Energizer recorded
a $15.7 pre-tax loss on the sale of its Spanish affiliate. 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.
RESTRUCTURING CHARGES
During the six-month period ended March 31, 1999, Energizer recorded net
after-tax and pre-tax provisions for restructuring of $6.1 and $6.0,
respectively. The charges were primarily termination benefits associated with
the 1997 alkaline and carbon zinc production restructuring plan for Europe.
During the six month period ended March 31, 2000, approximately 160
employees were terminated in connection with restructuring accruals established
in prior years. Except for disposition of certain assets held for disposal,
substantially all actions associated with the 1997 and 1999 restructuring plans
have been completed as of March 31, 2000. Activities impacting the
restructuring reserve during the six months are presented in Note 6 to the
Combined Financial Statements.
INCOME TAXES
Income taxes, which include federal, state and foreign taxes, were 29.0% of
earnings from continuing operations in the current six months, compared to 43.0%
in the six months last year. Income taxes for the current six months includes
capital loss benefits related to the sale of the Spanish affiliate discussed
above of $24.4. The prior six months includes restructuring provisions of $6.0,
which reflect no tax benefit due to particular tax statutes in those countries.
Absent these unusual items, the tax rate for the current and prior six-month
periods would have been 39.7% and 41.1%, respectively. The decrease in the tax
rate is due primarily to a favorable mix of foreign and domestic earnings.
DISCONTINUED RECHARGEABLE OEM BATTERY BUSINESS
Discontinued operations consist of Energizer's worldwide rechargeable
Original Equipment Manufacturers' (OEM) battery business. In March 1999, the
Board of Directors of Ralston Purina Company announced its intention to exit
this business to allow Energizer to focus on its primary battery business. On
November 1, 1999, this business was sold to Moltech Corporation for
approximately $20.0. Actual pretax operating losses during the divestment
period through the sale date totaled $15.9.
FINANCIAL CONDITION
Cash flow from continuing operations was $178.4 for the six months ended
March 31, 2000 compared to $169.5 for the same period in fiscal 1999. The
increase in cash flows is attributable to higher cash earnings partially offset
by lower cash flows from seasonal reductions of operating working capital.
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. Subsequent to March 31, 2000, Energizer replaced the
interim funding facilities with the following: private placement notes of
$175.0 with maturities of 3 to 10 years; borrowings of $225.0 under a five-year
revolving credit facility; a $65.0 receivable securitization program; and $13.0
of other borrowings. The average interest rate on the short-term and long-term
debt is approximately 6.7% and 7.2%, respectively. Approximately $236.0 of the
long-term debt has a variable interest rate. The interest rates on the long-term
debt range from 6.7% up to 8%. Energizer maintains total committed debt
facilities of $834.0, of which $358.0 remained available following the
transactions described above. Under the terms of the facilities, the ratio of
Energizer's total indebtedness to its EBITDA cannot be greater than 3:1 and the
ratio of its EBIT to total interest expense must exceed 3:1.
Capital expenditures totaled $30.7 and $33.3 for the six months ended March
31, 2000 and 1999, respectively. Net transactions with Ralston resulted in cash
usage of $230.2 and $153.9 in the six months ended March 31, 2000 and 1999,
respectively. Working capital was $355.5 at March 31, 2000 compared to $478.1 at
September 30, 1999, reflecting seasonal reductions in operating working capital
and higher debt levels.
MARKET RISK
Energizer has interest rate risk with respect to interest expense on
variable rate debt. A hypothetical 10% adverse change in all interest rates
would have an annual unfavorable impact of $1.6 on Energizer's net earnings and
cash flows based on current debt levels.
FORWARD-LOOKING STATEMENTS
Statements in this document that are not historical, including statements
as to the continuing availability of credit facilities, are 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
ability to maintain compliance with its debt covenants, including the ratios
described under "Financial Condition", as well as changes in its operating cash
flows, could limit its ability to meet future operating expenses, fund capital
expenditures and 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, as
amended, and its current report on Form 8-K dated April 25, 2000.
<TABLE>
<CAPTION>
ENERGIZER HOLDINGS, INC.
COMBINED STATEMENT OF EARNINGS
(CONDENSED)
(DOLLARS IN MILLIONS--UNAUDITED)
QUARTER ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $359.9 $405.7 $1,033.5 $988.1
------- ------- --------- -------
Costs and Expenses
Cost of products sold 192.6 221.7 514.8 526.8
Selling, general and administrative 99.2 100.1 194.8 201.1
Advertising and promotion 33.9 33.3 101.5 92.3
Research and development 14.2 12.6 26.1 23.6
Costs related to spin-off 5.5 - 5.5 -
Loss on disposition of Spanish affiliate 15.7 - 15.7 -
Restructuring provisions (reversals) - (0.1) - 6.0
Interest expense 2.9 0.7 5.5 3.5
------- ------- --------- -------
364.0 368.3 863.9 853.3
------- ------- --------- -------
Earnings (loss) from Continuing Operations
before Income Taxes (4.1) 37.4 169.6 134.8
Income Taxes 19.8 (15.4) (49.2) (58.0)
------- ------- --------- -------
Earnings from Continuing Operations 15.7 22.0 120.4 76.8
Net Loss from Discontinued Operations - (2.8) - (5.6)
Net Gain (Loss) on Disposition of
Discontinued Operations 1.2 (74.2) 1.2 (74.2)
------- ------- --------- -------
Net Earnings (Loss) $ 16.9 $(55.0) $ 121.6 $ (3.0)
======= ======= ========= =======
<FN>
See accompanying Notes to Condensed Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
ENERGIZER HOLDINGS, INC.
COMBINED BALANCE SHEET
(CONDENSED)
(DOLLARS IN MILLIONS - UNAUDITED)
MARCH 31, SEPTEMBER 30,
2000 1999
---- ----
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 18.1 $ 27.8
Trade receivables, less allowance for doubtful
accounts of $20.6 and $19.3, respectively 356.7 441.9
Inventories
Raw materials and supplies 65.4 74.0
Work in process 89.4 80.5
Finished products 257.1 228.5
-------- --------
Total Inventory 411.9 383.0
Other current assets 93.3 121.3
-------- --------
Total Current Assets 880.0 974.0
-------- --------
Investments and Other Assets 326.3 319.7
Net Investment in Discontinued Operations - 67.2
Property at Cost 1,005.9 1,010.1
Accumulated depreciation 536.2 537.3
-------- --------
469.7 472.8
-------- --------
Total $1,676.0 $1,833.7
======== ========
LIABILITIES AND NET INVESTMENT IN ENERGIZER
Current Liabilities
Current maturities of long-term debt $ 0.3 $ 0.3
Notes payable 185.8 118.5
Accounts payable 123.8 128.6
Other current liabilities 214.6 248.5
-------- --------
Total Current Liabilities 524.5 495.9
Long-Term Debt 412.4 1.9
Other Liabilities 20.9 23.0
Net Investment in Energizer 718.2 1,312.9
-------- --------
Total $1,676.0 $1,833.7
======== ========
<FN>
See accompanying Notes to Condensed Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
ENERGIZER HOLDINGS, INC.
COMBINED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 2000 AND 1999
(CONDENSED)
(DOLLARS IN MILLIONS - UNAUDITED)
SIX MONTHS ENDED MARCH 31,
<S> <C> <C>
2000 1999
-------- --------
CASH FLOW FROM OPERATIONS
Net earnings (loss) $ 121.6 $ (3.0)
Net (income) loss from discontinued operations (1.2) 79.8
Loss on disposition of Spanish affiliate 15.7 -
Non-cash items included in income 30.9 53.9
Changes in assets and liabilities used in operations 15.7 36.6
Other, net (4.3) 2.2
-------- --------
Cash flow from continuing operations 178.4 169.5
Cash flow from discontinued operations 54.7 (1.0)
-------- --------
Net cash flow from operations 233.1 168.5
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES
Property additions (30.7) (33.3)
Proceeds from sale of OEM business 20.0 -
Proceeds from sale of Spanish affiliate 1.4
Proceeds from sale of property 1.5 0.5
Other, net (2.6) (0.7)
-------- --------
Cash used by investing activities - continuing operations (10.4) (33.5)
Cash used by investing activities - discontinued operations (0.7) (1.7)
-------- --------
Net cash used by investing activities (11.1) (35.2)
-------- --------
CASH FLOW FROM FINANCING ACTIVITIES
Net cash proceeds from issuance of long-term debt - 1.0
Principal payments on long-term debt (including current
maturities) (1.3) (13.1)
Net increase in notes payable (0.3) 10.0
Net transactions with Ralston (230.2) (153.9)
-------- --------
Net cash used by financing activities (231.8) (156.0)
-------- --------
Effect of Exchange Rate Changes on Cash 0.1 1.2
Net Decrease in Cash and Cash Equivalents (9.7) (21.5)
Cash and Cash Equivalents, Beginning of Period 27.8 49.1
-------- --------
Cash and Cash Equivalents, End of Period $ 18.1 $ 27.6
======== ========
Non-Cash Transactions:
Debt assigned by Ralston $ 478.0 $ -
======== ========
<FN>
See accompanying Notes to Condensed Financial Statements.
</TABLE>
ENERGIZER HOLDINGS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2000
(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 for
the year ended September 30, 1999.
NOTE 2 - On April 1, 2000, Ralston Purina Company (Ralston) distributed the
common stock of its wholly owned subsidiary, Energizer Holdings, Inc.
(Energizer), to the shareholders of Ralston's common stock through a tax-free
spin-off. Following the spin-off, Energizer has conducted its business as a
separate public company.
NOTE 3 - The accompanying historical basis financial statements of Energizer
reflects periods during which its business was operated as a business segment of
Ralston. As such, historical earnings per share data does not provide
meaningful information about the results of operations of Energizer.
NOTE 4 - The current quarter and six-month results include pre-tax spin costs of
$5.5 related to one-time costs incurred by Energizer as a result of the
spin-off. These costs include legal fees, charges related to vesting of certain
compensation benefits, expenses incurred to separate certain employee benefit
plans, etc. Total spin related costs were $3.3 on an after-tax basis.
NOTE 5 - The current quarter and six-month results include a non-cash loss of
$15.7 related to sale of Energizer's Spanish affiliate. Capital loss tax
benefits recognized by Ralston related to the Spanish sale were $24.4 and are
included in the historical basis financial statements.
NOTE 6 - During the six-month period ended March 31, 1999, Energizer recorded
net after-tax and pre-tax provisions for restructuring of $6.1 and $6.0,
respectively. The charges were primarily termination benefits associated with a
1997 alkaline and carbon zinc production restructuring plan for Europe.
During the six month period ended March 31, 2000, approximately 160 employees
were terminated in connection with restructuring accruals established in prior
years. Except for disposition of certain assets held for disposal,
substantially all actions associated with the 1997 and 1999 restructuring plans
have been completed as of March 31, 2000. Activities impacting the
restructuring reserve during the six month period ended March 31, 2000, are
presented in the following table:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Beginning Provision/ Ending
Balance Reversals Activity Balance
-------- ---------- ---------- --------
1995 PLAN
Other Cash Costs $ .8 $ - $ (0.8) $ -
-------- ---------- ---------- --------
Total .8 - (0.8) -
-------- ---------- ---------- --------
1996 PLAN
Other Cash Costs .8 - - .8
-------- ---------- ---------- --------
Total .8 - - .8
-------- ---------- ---------- --------
1997 PLAN
Termination Benefits 4.1 - (3.3) .8
Other Cash Costs 1.3 - - 1.3
-------- ---------- ---------- --------
Total 5.4 - (3.3) 2.1
-------- ---------- ---------- --------
1998 PLAN
Termination Benefits 1.6 - (1.0) 0.6
Other Cash Costs 2.0 - (0.2) 1.8
-------- ---------- ---------- --------
Total 3.6 - (1.2) 2.4
-------- ---------- ---------- --------
1999 PLAN
Termination Benefits .7 - (0.7) -
-------- ---------- ---------- --------
Total .7 - (0.7) -
-------- ---------- ---------- --------
Grand Total $ 11.3 $ - $ (6.0) $ 5.3
======== ========== ========== ========
</TABLE>
NOTE 7 - Energizer's operations are managed via four major geographic areas -
North America (which includes the U.S. and Canada), Asia Pacific, Europe, and
South and Central America (including Mexico). This structure is the basis for
the Company's reportable operating segment information disclosed below. Segment
performance is evaluated based on operating profit, exclusive of general
corporate expenses, research and development 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.
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED MARCH 31,
<S> <C> <C> <C> <C>
2000 1999
------ ------
TOTAL EXTERNAL TOTAL EXTERNAL
NET SALES SALES SALES SALES SALES
----- ----- ----- -----
North America $182.8 $162.8 $218.6 $197.0
Asia Pacific 108.2 95.8 103.8 95.6
Europe 73.5 73.1 81.4 80.9
South and Central America 32.6 28.2 35.6 32.2
------ ------
Total Net Sales $359.9 $405.7
====== ======
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED MARCH 31,
<S> <C> <C> <C> <C>
2000 1999
------ ------
TOTAL EXTERNAL TOTAL EXTERNAL
NET SALES SALES SALES SALES SALES
----- ----- ----- -----
North America $631.7 $ 583.2 $576.8 $526.9
Asia Pacific 246.6 214.9 222.3 201.2
Europe 166.0 165.1 188.3 187.2
South and Central America 79.3 70.3 83.5 72.8
------- ------
Total Net Sales $1,033.5 $988.1
======== ======
</TABLE>
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED MARCH 31,
<S> <C> <C>
2000 1999
------- -------
OPERATING PROFIT BEFORE UNUSUAL ITEMS AND
AMORTIZATION
North America $ 24.8 $ 47.0
Asia Pacific 22.7 22.1
Europe 1.0 (1.8)
South and Central America 2.7 1.4
------- -------
TOTAL SEGMENT PROFITABILITY 51.2 68.7
General Corporate Expenses (12.7) (9.6)
Research and Development Expense (14.2) (12.6)
------- -------
Operating Profit before Unusual Items and
Amortization 24.3 46.5
Costs related to spin-off (5.5) -
Loss on disposition of Spanish affiliate (15.7) -
Restructuring Reversals - .1
Amortization (6.2) (6.2)
Interest and Other Financial Items (1.0) (3.0)
------- -------
Total (Loss) Earnings from Continuing Operations
Before Income Taxes $ (4.1) $ 37.4
======= =======
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED MARCH 31,
<S> <C> <C>
2000 1999
-------- -------
OPERATING PROFIT BEFORE UNUSUAL ITEMS AND
AMORTIZATION
North America $ 170.3 $147.5
Asia Pacific 60.7 48.0
Europe 8.9 .3
South and Central America 9.4 8.2
-------- -------
TOTAL SEGMENT PROFITABILITY 249.3 204.0
General Corporate Expenses (18.1) (22.4)
Research and Development Expense (26.1) (23.6)
-------- -------
Operating Profit before Unusual Items and
Amortization 205.1 158.0
Costs related to spin-off (5.5) -
Loss on disposition of Spanish affiliate (15.7) -
Restructuring Charges - (6.0)
Amortization (12.3) (12.5)
Interest and Other Financial Items (2.0) (4.7)
-------- -------
Total Earnings from Continuing Operations Before
Income Taxes $ 169.6 $134.8
======== =======
</TABLE>
NOTE 8 - In 1999, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income". Accumulated other
comprehensive income is included in Net Investment in Energizer in the combined
balance sheet. The components of total comprehensive income for the quarter
ended March 31, 2000 and 1999 are shown in the following table:
<TABLE>
<CAPTION>
Quarter Ended March 31,
<S> <C> <C>
2000 1999
------ -------
Net earnings (loss) $16.9 $(55.0)
Other comprehensive income items:
Foreign currency translation adjustments (8.1) (13.4)
Write-off translation balance of disposed affiliate 9.7 -
------ -------
Total comprehensive income $18.5 $(68.4)
====== =======
</TABLE>
The components of total comprehensive income for the six months ended March 31,
2000 and 1999 are shown in the following table:
<TABLE>
<CAPTION>
Six Months Ended March 31,
<S> <C> <C>
2000 1999
------- ------
Net earnings (loss) $121.6 $(3.0)
Other comprehensive income items:
Foreign currency translation adjustments (11.1) 2.1
Write-off translation balance of disposed affiliate 9.7 -
------- ------
Total comprehensive income $120.2 $ (.9)
======= ======
</TABLE>
NOTE 9 - Discontinued operations consist of Energizer's worldwide rechargeable
Original Equipment Manufacturers' (OEM) business, which was sold to Moltech
Corporation for approximately $20.0 on November 1, 1999. The OEM business is
accounted for as a discontinued operation in Energizer's combined financial
statements. The current quarter and six-month results include after-tax income
of $1.2 related to the final settlement of the sale transaction. The prior year
quarter results include a net loss from discontinued operations of $2.8 and a
net loss on disposition of discontinued operations of $74.2. The prior year six
month results include a net loss from discontinued operations of $5.6 and a net
loss on disposition of discontinued operations of $74.2.
NOTE 10 - 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. Subsequent to March 31, 2000, Energizer replaced
the interim funding facilities with the following: private placement notes of
$175.0 with maturities of 3 to 10 years; borrowings of $225.0 under a five-year
revolving credit facility; a $65.0 receivable securitization program; and $13.0
of other borrowings. The average interest rate on the short-term and long-term
debt is approximately 6.7% and 7.2%, respectively. Approximately $236.0 of the
long-term debt has a variable interest rate. The interest rates on the long-term
debt range from 6.7% up to 8%. Energizer maintains total committed debt
facilities of $834.0, of which $358.0 remained available following the
transactions described above. Under the terms of the facilities, the ratio of
Energizer's total indebtedness to its EBITDA cannot be greater than 3:1 and the
ratio of its EBIT to total interest expense must exceed 3:1.
NOTE 11 - Investments and Other Assets consist of the following:
<TABLE>
<CAPTION>
March 31, September 30,
<S> <C> <C>
2000 1999
------ ------
Goodwill $187.2 $205.0
Other intangible assets 90.7 94.4
Deferred charges and other assets 48.4 20.3
------ ------
$326.3 $319.7
====== ======
</TABLE>
NOTE 12 - On May 8, 2000, Energizer's Board of Directors approved the grant of a
total of 6,365,000 non-qualified stock options to key employees and directors of
the Company, under the terms of the 2000 Incentive Stock Plan. The options,
which vest periodically over the next five years, were granted with an exercise
price of $17 per share, the closing price of the Energizer common stock on the
date of grant. In addition, the Board of Directors approved the grant of up to
625,000 restricted stock equivalents to a group of key employees and directors
upon their purchase of an equal number of shares of Energizer common stock
within a specified period. Such grants, when made, will also be pursuant to the
terms of the 2000 Incentive Stock Plan. The restricted stock equivalents will
vest three years from their respective dates of grant and will convert into
unrestricted shares of Energizer common 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.
NOTE 13 - The pro forma combined statement of earnings for the six months ended
March 31, 2000 presents the combined results of Energizer's operations assuming
the spin-off had occurred as of October 1, 1999. Such statement of earnings has
been prepared by adjusting the historical statement of earnings to indicate the
effect of estimated costs and expenses and the recapitalization associated with
the spin-off.
The pro forma combined balance sheet at March 31, 2000 presents the combined
financial position of Energizer, assuming the distribution had occurred at that
date. Such balance sheet has been prepared by adjusting the historical balance
sheet for the effect of changes in assets, liabilities and capital structure
associated with the distribution.
The pro forma financial statements may not necessarily reflect the combined
results of operations or financial position that would have existed had the
spin-off been effected on the dates specified nor are they necessarily
indicative of future results.
<TABLE>
<CAPTION>
ENERGIZER HOLDINGS, INC.
------------------------
Pro Forma Combined Statement of Earnings
----------------------------------------
Six Months Ended March 31, 2000
-------------------------------
(In millions except per share data - unaudited)
------------------------------------------------------
ADJUSTMENTS
RELATED TO
HISTORICAL DISTRIBUTION PRO FORMA
------------ -------------- -----------
<S> <C> <C> <C>
Net Sales $ 1,033.5 $1,033.5
Costs and Expenses
Cost of products sold 514.8 514.8
Selling, general and administrative 194.8 4.0 (a) 198.8
- 0.8 (b)
- (0.8)(c)
Advertising and promotion 101.5 101.5
Research and development 26.1 26.1
Costs related to spin-off 5.5 5.5
Loss on disposition of Spanish affiliate 15.7 15.7
Provisions for restructuring - -
Interest 5.5 17.1 (d) 22.6
------------ -------------- -----------
863.9 21.1 885.0
------------ -------------- -----------
Earnings from continuing operations
before income taxes 169.6 (21.1) 148.5
Income taxes (49.2) (23.4)(e) (64.2)
- 8.4 (f) -
------------ -------------- ---------
Earnings from continuing operations $ 120.4 $ (36.1) $ 84.3
============ ============== =========
Earnings per share from continuing operations (g) $ 0.87
=========
Weighted average shares of common stock (g) 96.7
=========
<FN>
(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 post retirement benefits to be retained by Ralston.
(d) To reflect the increase in interest expense associated with debt levels assigned to Energizer upon
the 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 $.2.
(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 six months ended March 31, 2000, adjusted
for the distribution of one share of Energizer stock for each three shares of Ralston stock.
</TABLE>
ENERGIZER HOLDINGS, INC.
------------------------
Pro Forma Combined Balance Sheet
--------------------------------
As of March 31, 2000
--------------------
(Dollars in millions - unaudited)
-------------------------------------
<TABLE>
<CAPTION>
ADJUSTMENTS
RELATED TO
HISTORICAL DISTRIBUTION PRO FORMA
------------ -------------- -----------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 18.1 $ $ 18.1
Trade receivables, net 356.7 356.7
Inventories 411.9 411.9
Other current assets 93.3 93.3
------------ -------------- -----------
Total Current Assets 880.0 880.0
------------ -------------- -----------
Investments and Other Assets 326.3 91.1 (a) 402.9
(14.5)(b)
Net Investment in Discontinued Operations - -
Property at Cost 1,005.9 - 1,005.9
Accumulated Depreciation 536.2 - 536.2
------------ -------------- -----------
469.7 - 469.7
------------ -------------- -----------
Total $ 1,676.0 $ 76.6 $ 1,752.6
============ ============== ===========
LIABILITIES AND NET INVESTMENT
IN ENERGIZER
Current Liabilites
Current maturities of long-term debt 0.3 - 0.3
Notes payable 185.8 - 185.8
Accounts payable 123.8 - 123.8
Other current liabilities 214.6 - 214.6
------------ -------------- -----------
Total Current Liabilities 524.5 0.0 524.5
------------ -------------- -----------
Long-Term Debt 412.4 (3.5)(c) 408.9
Other Liabilities 20.9 111.0 (d) 131.9
Net Investment in Energizer 718.2 (718.2)(e) -
Shareholders Equity 687.3 (e) 687.3
------------ -------------- -----------
Total $ 1,676.0 $ 76.6 $ 1,752.6
============ ============== ==========
<FN>
(a) To reflect net pension asset to be included in Energizer Pension Plans following the
spin-off.
(b) To reflect deferred tax effect of other pro forma adjustments.
(c) To reflect debt level immediately following the spin-off.
(d) To reflect post-retirement benefit and deferred compensation liabilities immediately after
the spin-off.
(e) To reflect the elimination of Ralston's investment in Energizer and the issuance of
Energizer stock.
</TABLE>
NOTE 14 - The following table summarizes the pro forma results of operations for
the most recent six quarters as if the spin-off had occurred at the beginning of
such periods. Such statements have been prepared by adjusting the historical
statements for the effect of costs, expenses, assets and liabilities and the
recapitalization which might have occurred had the spin-off been effected as of
the dates indicated. These pro forma financial statements may not necessarily
reflect the consolidated results of operations that would have existed had the
spin-off occurred on the dates indicated. The sum of earnings per share by
quarter, which is calculated on average shares outstanding for each quarter, may
not equal the year-to-date total, which is calculated on average shares
outstanding for the year-to-date period.
<TABLE>
<CAPTION>
PRO FORMA RESULTS OF OPERATIONS
FISCAL 2000 QTR 1 QTR 2
<S> <C> <C>
2000 2000
------- -------
Net sales $673.6 $359.9
Cost of products sold 322.2 192.6
Selling, general and administrative 97.6 101.2
Advertising and promotion 67.6 33.9
Research and development 11.9 14.2
Costs related to spin-off - 5.5
Loss on disposition of Spanish
affiliate - 15.7
Interest Expense 11.5 11.1
------- -------
510.8 374.2
Earnings (loss) from continuing
operations before income taxes 162.8 (14.3)
Income Taxes (63.6) (0.6)
------- -------
Earnings (loss)from continuing
operations (a) $ 99.2 $(14.9)
======= =======
Earnings per share:
Earnings (loss) from continuing operations $ 1.02 $(0.16)
======= =======
<FN>
(a) Earnings (loss) from continuing operations include the following after-tax
unusual items:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
After-tax unusual items
Costs related to spin-off $ - $ (3.3)
---- -------
Loss on disposition of Spanish
affiliate $ - $(15.7)
---- -------
Earnings per share
Costs related to spin-off $ - $(0.04)
---- -------
Loss on disposition of Spanish
affiliate $ - $(0.16)
---- -------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FISCAL 1999 QTR 1 QTR 2 QTR 3 QTR 4 YEAR
1999 1999 1999 1999 1999
------- ------- ------- ------- ---------
Net sales $582.4 $405.7 $399.2 $485.0 $1,872.3
Cost of products sold 305.1 221.7 216.1 255.0 997.9
Selling, general and administrative 101.7 100.8 91.3 107.1 400.9
Advertising and promotion 59.0 33.3 34.5 37.5 164.3
Research and development 11.0 12.6 12.3 12.6 48.5
Restructuring provisions (reversals) 6.1 (0.1) 8.9 (7.1) 7.8
Interest expense 12.0 9.9 11.4 11.2 44.5
------- ------- ------- ------- ---------
494.9 378.2 374.5 416.3 1,663.9
Earnings from continuing operations
before taxes 87.5 27.5 24.7 68.7 208.4
Income taxes (39.2) (12.0) (12.9) (27.4) (91.5)
------- ------- ------- ------- ---------
Earnings from continuing operations
(b) $ 48.3 $ 15.5 $ 11.8 $ 41.3 $ 116.9
======= ======= ======= ======= =========
Earnings per share:
Earnings from continuing operations $ 0.49 $ 0.15 $ 0.12 $ 0.40 $ 1.14
======= ======= ======= ======= =========
<FN>
(b) Earnings from continuing operations include the following after-tax unusual
items:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Restructuring reversals (provisions) $ (6.2) $ 0.1 $ (8.5) $ 6.3 $ (8.3)
======= ==== ======= ===== =========
Earnings per share $(0.06) $ - $ (0.08) $0.06 $ (0.08)
======= ==== ======= ===== =========
</TABLE>
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) 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 the Company'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) Lease Agreement
10(xi) Intellectual Property Agreement
10(xii) Energizer Holdings, Inc. Incentive Stock Plan
10(xiii) Energizer Holdings, Inc. Non-Qualified Deferred Compensation
Plan
10(xiv) Form of Change of Control Employment Agreements
10(xv) Form of Indemnification Agreements with Executive Officers
and Directors
10(xvi) Executive Savings Investment Plan
10(xvii) Executive Health Insurance Plan
10(xviii) Executive Long Term Disability Plan
10(xix) Financial Planning Plan
10(xx) Executive Group Personal Excess Liability Insurance Plan
10(xxi) Executive Retiree Life Plan
10(xxii) Supplemental Executive Retirement Plan
10(xxiii) Form of Retention Letter
(ii) The following exhibits (listed by numbers corresponding to the Exhibit
Table of Item 601 in Regulation S-K) are filed with this report.
27 Financial Data Schedule
(b) Reports on Form 8-K
A Current Report on Form 8-K dated April 25, 2000, was filed to set forth a
cautionary statement for purposes of the "Safe Harbor" provisions of the Private
Securities Litigation Reform Act of 1995, with respect to forward-looking
statements which may be made by the Company.
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 E. Corbin, Jr.
Daniel E. Corbin, Jr.
Executive Vice President, Finance
and Control
Date: May 15, 2000
<PAGE>
EXHIBIT INDEX
- ----------------------
EX-27 Financial Data Schedule for Second Quarter 2000
(provided electronically)
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
3/31/2000 ENERGIZER HOLDINGS, INC. COMBINED BALANCE SHEET AND 3/31/2000 AND
3/31/99 COMBINED STATEMENTS OF EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> SEP-30-2000 SEP-30-1999
<PERIOD-END> MAR-31-2000 MAR-31-2000
<CASH> 18,100 0<F4>
<SECURITIES> 0 0<F4>
<RECEIVABLES> 377,300 0<F4>
<ALLOWANCES> 20,600 0<F4>
<INVENTORY> 411,900 0<F4>
<CURRENT-ASSETS> 880,000 0<F4>
<PP&E> 1,005,900 0<F4>
<DEPRECIATION> 536,200 0<F4>
<TOTAL-ASSETS> 1,676,000 0<F4>
<CURRENT-LIABILITIES> 524,500 0<F4>
<BONDS> 412,400 0<F4>
0 0<F4>
0 0<F4>
<COMMON> 0 0<F4>
<OTHER-SE> 718,200<F1> 0<F4>
<TOTAL-LIABILITY-AND-EQUITY> 1,676,000 0<F4>
<SALES> 1,033,500 988,100
<TOTAL-REVENUES> 1,033,500 988,100
<CGS> 514,800 526,800
<TOTAL-COSTS> 514,800 526,800
<OTHER-EXPENSES> 343,600 323,000
<LOSS-PROVISION> 0<F2> 0<F2>
<INTEREST-EXPENSE> 5,500 3,500
<INCOME-PRETAX> 169,600 134,800
<INCOME-TAX> 49,200 58,000
<INCOME-CONTINUING> 120,400 76,800
<DISCONTINUED> 1,200 (79,800)<F5>
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 121,600 (3,000)
<EPS-BASIC> 0<F3> 0<F3>
<EPS-DILUTED> 0<F3> 0<F3>
<FN>
<F1>REPRESENTS RALSTON PURINA COMPANY'S NET INVESTMENT IN ENERGIZER.
<F2>LOSS-PROVISION INCLUDED IN OTHER-EXPENSES ABOVE.
<F3>EARNINGS PER SHARE ARE NOT CALCULATED ON HISTORICAL FINANCIAL INFORMATION FOR
FORM 10Q.
<F4>INFORMATION NOT FILED AS PART OF FORM 10Q.
<F5>INCLUDES LOSS ON DISPOSITION OF DISCONTINUED OPERATONS OF $74,200.
</FN>
</TABLE>
