<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR FISCAL YEAR ENDED JUNE 30, 1994
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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FOR THE TRANSITION PERIOD FROM _______________ TO ________________ COMMISSION FILE NUMBER 001-10747
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DURACELL INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
DELAWARE 06-1240267
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
BERKSHIRE CORPORATE PARK, BETHEL, CT 06801
(Address of principal executive offices) (Zip Code)
(203) 796-4000
(Registrant's telephone number, including area code)
____________________
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF ACT:
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NAME OF EACH EXCHANGE
TITLE ON WHICH REGISTERED
_____ _____________________
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Common Stock New York Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF ACT:
NONE
______
Indicate by a check mark whether the 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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
_______ _______
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be contained to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / X /
The aggregate market value of voting stock held by non-affiliates of
the registrant as of September 13, 1994 was approximately $2,716 million.
Limited partnerships affiliated with Kohlberg Kravis Roberts & Co., L.P. and
directors and executive officers of the registrant are considered affiliates
for purposes of this calculation but should not necessarily be deemed
affiliates for any other purpose.
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Number of shares of Common Stock, par value $0.01,
outstanding as of September 13, 1994 . . . . . . . . . . . . . . . . . . . . 117,577,366
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the fiscal year
ended June 30, 1994 are incorporated by reference into Part I and Part II of
this Report.
Portions of the Proxy Statement relating to the registrant's Annual
Meeting of Stockholders to be held October 25, 1994 are incorporated by
reference into Part III of this Report.
<PAGE> 2
PART I
ITEM 1. BUSINESS
Duracell International Inc. ("Duracell" or the "Company")
manufactures and markets, primarily under the DURACELL(R) brand, high
performance alkaline batteries and other battery types and markets a lighting
products line. Duracell maintains a leading position in North American and
European consumer battery markets with its "copper and black" DURACELL brand
alkaline batteries. Alkaline batteries accounted for approximately 83% of
Duracell's sales during fiscal 1994. Duracell's batteries are sold worldwide
through consumer channels, to industrial users and to manufacturers of
battery-powered consumer, industrial, medical and military equipment.
Duracell has experienced 21 consecutive years of sales increases, due
in large part to the expanding market for its principal product, alkaline
batteries. Duracell markets consumer batteries worldwide under the DURACELL
brand.
The Company is a Delaware corporation organized in 1988 at the
direction of Kohlberg Kravis Roberts & Co., L.P. ("KKR") to effect the
acquisition of Duracell Inc., its battery-related subsidiaries and affiliates
and certain related assets from Kraft, Inc. (the "Acquisition"). The
Acquisition was completed on June 24, 1988. Most of the businesses of Duracell
are conducted under the same trade names used before the Acquisition.
In May 1991, the Company completed an initial public offering of
34,500,000 shares of its Common Stock and became a listed company on the New
York Stock Exchange. A second public offering of 5,000,000 shares of Common
Stock was completed in October 1991.
FINANCIAL INFORMATION ABOUT THE COMPANY'S GEOGRAPHIC AREAS OF OPERATION
Information about Duracell's geographic areas of operation is
incorporated by reference to Note 15, Geographic Area of Operations, which
appears on page 37 of Duracell's Annual Report to Stockholders for the fiscal
year ended June 30, 1994.
PRODUCTS
Duracell's battery line comprises alkaline, lithium, zinc air and
nickel metal hydride rechargeable batteries. Duracell also sells zinc carbon
type batteries. Alkaline batteries produce a far greater amount of energy
within any given battery size than is possible in zinc carbon batteries, the
dominant battery type throughout the world until the 1980s. This performance
superiority has resulted in alkaline batteries steadily displacing zinc carbon
batteries.
Duracell is at the forefront of lithium battery development and is a
leading lithium battery manufacturer for consumer devices. Lithium batteries
have performance advantages over conventional consumer batteries in certain
applications, their extremely high energy density and long shelf life being the
most notable advantages.
Duracell's line of zinc air batteries, most of which are "button
cells," are used principally in hearing aids and medical equipment.
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Over the past several years Duracell, Toshiba Battery Co., Ltd. of
Japan and Varta Batterie AG of Germany have engaged in joint research and
development of nickel metal hydride rechargeable cells. Nickel metal hydride
rechargeable batteries are rapidly becoming the battery of choice for use in
devices having high power requirements like portable computers. They are also
an environmentally attractive substitute for the nickel-cadmium batteries now
being used to power many such devices. Duracell expects that during fiscal
1995 all three companies will form a joint venture for the purpose of
constructing and operating a manufacturing facility in the United States to
produce nickel metal hydride cells for use in rechargeable batteries sold by
the three companies. Duracell is expected to have a 40% interest in the joint
venture, with Toshiba and Varta holding the remaining 40% and 20%,
respectively. In fiscal 1994, Duracell continued its efforts to convince the
leading manufacturers of portable computers and cellular telephones to
design-in standardized nickel metal hydride rechargeable batteries into their
devices. Duracell made its initial shipments of DURACELL brand nickel metal
hydride rechargeable batteries to equipment manufacturers in fiscal 1993.
Consumer sales were initiated during fiscal 1994.
Duracell also markets a line of lighting products under the DURABEAM(R)
trademark.
NORTH AMERICAN OPERATIONS
In North America, alkaline batteries account for a substantial
majority of household battery sales. Duracell's management estimates that in
fiscal 1994, alkaline batteries accounted for approximately 83% of the United
States consumer battery market. The DURACELL brand has the leading alkaline
market share.
Duracell competes with several major brands in the highly competitive
United States battery market. Eveready Battery Company, a subsidiary of
Ralston Purina Company, manufactures Energizer brand alkaline batteries and is
Duracell's primary U.S. competitor. Other U.S. competitors include Rayovac
Corporation and numerous imported brands.
In Canada, the DURACELL brand has the leading alkaline market share in
a market where Duracell's management estimates that alkaline batteries account
for approximately 78% of all household battery sales. Eveready Battery Company
is Duracell's primary Canadian competitor.
INTERNATIONAL OPERATIONS
Duracell's international operations are divided organizationally into
two groups: Europe and Other International Markets, consisting of Mexico, South
America, the Caribbean, the Middle East, India, Africa, China, the Pacific Rim
and various other developing alkaline markets.
The DURACELL brand is the leading alkaline battery brand in Europe.
Duracell also markets a series of national brands, most notably SUPERPILA
(Italy), DAIMON (Germany) and HELLESENS/TUDOR (Scandinavia). In Europe, the
DURACELL brand competes with the Energizer brand and numerous national alkaline
brands, several of which are important brands in the country of their
manufacture, but DURACELL is in most instances the leading alkaline brand. In
European markets, where zinc carbon batteries maintain a higher market share
than in North America, Duracell sells more zinc carbon batteries than it sells
in any other market.
The DURACELL brand competes with numerous brands in Other
International Markets. Almost all of the batteries sold by Duracell in Other
International Markets are alkaline batteries. Although Duracell has achieved a
high alkaline share in numerous countries included in Other International
Markets, overall alkaline sales as a percentage of total battery sales are low
as compared to zinc carbon battery sales. Duracell's management believes that
the countries comprising Duracell's Other International Markets have
significant potential for continued alkaline penetration.
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In fiscal 1994, Duracell formed joint venture companies in both China
and India to manufacture and distribute DURACELL brand alkaline batteries.
Duracell holds a controlling interest in each of these new companies. China
and India offer significant growth opportunities for Duracell due to the size
of these markets.
In fiscal 1994, Duracell also established a new South African
distribution company.
MARKETING AND DISTRIBUTION
Duracell promotes its batteries through a variety of means, including
television advertising, store displays and trade and consumer promotions.
Duracell's advertising emphasizes the long service life of DURACELL batteries
and product differentiation, such as the patented on-pack COPPER TOP(TM)
Tester. Duracell sponsors various trade and consumer promotions intended to
foster brand awareness and to maintain favorable, as well as multiple display
positions in retail stores. Duracell distributes its products principally
through retailers, ranging from mass merchandisers to sole proprietor outlets.
Each of Duracell's principal foreign subsidiaries has its own sales
and marketing staffs. Major accounts are serviced by the local sales force.
Smaller retail accounts are usually serviced through local distributors.
Although Duracell is truly a pan-European battery business, Duracell's
European operations concentrate on the largest markets, namely the United
Kingdom, Germany, France, Spain and Italy. Duracell Europe also has a strong
brand presence in Scandinavia, the Benelux countries, Portugal and Austria.
The Eastern European countries offer significant potential for growth.
Duracell marketing units have been established in Hungary, the Czech Republic
and, most recently, Poland.
Duracell works closely with many original equipment manufacturers in
their development of new battery-powered devices designed to be used with
Duracell's batteries. Such efforts have been instrumental in developing the
consumer lithium battery market, particularly Duracell's camera business, and
are essential to Duracell's success in selling nickel metal hydride
rechargeable batteries.
MANUFACTURING AND RAW MATERIALS
Duracell manufactures batteries in the United States, Canada, Mexico,
the United Kingdom and Belgium. Duracell's Aarschot, Belgium facility is
believed to be the largest alkaline battery plant in the world.
Duracell plants are modern and its manufacturing process is highly
automated. Labor costs represent a relatively small portion of product cost.
In the United States and Europe, Duracell manufactures many of the components
used in its assembly of alkaline batteries. The most significant raw materials
used by Duracell in its manufacture of alkaline batteries are steel, zinc and
electrolytic manganese dioxide powder. There is a variety of worldwide sources
for these raw materials and Duracell's management believes it will continue to
have access to adequate quantities of such materials at competitive prices.
Duracell is presently purchasing all of the cells used in its
production of rechargeable nickel metal hydride batteries from Toshiba Battery
Co., Ltd. In August, 1994, Ovonic Battery Company, Inc. filed a complaint with
the U.S. International Trade Commission wherein it alleges nickel metal hydride
cells made by Toshiba infringe upon one of its U.S. patents. Ovonic is seeking
an order barring the further entry of Toshiba nickel metal hydride cells into
the United States. While there can be no certainty about the outcome of such
case, Toshiba is expected to vigorously defend against such complaint.
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SEASONALITY
Worldwide battery sales are significantly greater in the second half
of the calendar year than the first half as a result of industry-wide marketing
programs and consumers' traditionally strong purchases of battery-powered
products during the holiday season.
BACKLOG
The vast majority of Duracell's sales are made through consumer sales
channels; therefore, most customer orders are satisfied within only a few
business days. Consequently, Duracell's order backlog is not significant.
CUSTOMERS
Duracell's business is not dependent on any single customer or limited
group of customers, the loss of which would have a material adverse effect on
its business. There is, however, a trend toward larger retailers, particularly
mass merchandisers, controlling an increasing share of the consumer battery
market in more developed markets such as the United States.
COMPETITION
The worldwide battery market is highly competitive, particularly as to
price and product performance.
PATENTS AND TRADEMARKS
As a result of continuous engineering, and research and development by
Duracell's engineers and scientists, Duracell has been issued a considerable
number of patents throughout the world. The Company also owns numerous
registered trademarks, including DURACELL, DYNACHARGE, COPPER TOP, ACTIVAIR,
SUPERPILA, DAIMON, HELLESENS, DURABEAM, PROCELL and MALLORY, which are used in
connection with the sale of its batteries and lighting products. Duracell's
management believes such patents and trademarks have considerable value,
particularly the DURACELL trademark.
RESEARCH AND DEVELOPMENT
Duracell's research and development staff is located in a modern
laboratory facility in Needham, Massachusetts. Duracell also operates
technical centers in the United Kingdom and in Connecticut.
Duracell's research and development efforts focus on the search for
new high-power batteries for the consumer market and on the improvement of its
existing products. In fiscal 1994, Duracell concentrated much of its research
and development efforts on enhancing the performance of its alkaline batteries
and its new line of nickel metal hydride rechargeable batteries, as well as the
development of other new high power batteries. Duracell will continue such
emphasis in fiscal 1995.
Duracell spent $29.6 million, $26.1 million and $21.1 million on
research and development and $22.8 million, $18.4 million and $15.2 million on
engineering activities in fiscal 1994, 1993 and 1992, respectively.
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EMPLOYEES
Duracell had approximately 7,700 employees at June 30, 1994.
Duracell's United States labor force is not unionized. Approximately 1,000
international employees are members of labor unions. Management believes that
Duracell's overall relations with its employees are good.
ITEM 2. PROPERTIES
Duracell has 9 manufacturing sites around the world and occupies
numerous warehouses and offices. The following table sets forth information
with respect to Duracell's manufacturing sites:
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Location of Plant Status
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North America
Cleveland, Tennessee Owned
Lancaster, South Carolina Owned
LaGrange, Georgia Owned
Lexington, North Carolina Owned
Waterbury, Connecticut Owned
Mississauga, Ontario, Canada Leased
International
Aarschot, Belgium Owned
Mexico City, Mexico Owned
Wrexham, Wales Leased
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Duracell leases its corporate headquarters facility in Bethel,
Connecticut. Duracell will consolidate its current multi-office headquarters
in a new leased office facility now under construction in the same Bethel,
Connecticut office park.
Duracell's management believes that Duracell's facilities are adequate
for its operations, are in good operating condition and that its alkaline
manufacturing plants have sufficient global capacity to meet foreseeable
production requirements. Duracell continues to add alkaline battery capacity
through the procurement of higher speed assembly equipment to meet growing
demand in the U.S. and throughout the world.
During fiscal 1994 Duracell formed joint venture companies in both
China and India. Duracell owns a controlling interest in each joint venture
and plans to construct alkaline battery manufacturing facilities in each
country.
ITEM 3. LEGAL PROCEEDINGS
Other than ordinary litigation incidental to the battery business,
such as product liability claims, and other than in the environmental and
income tax areas described below, there are no significant legal or
administrative proceedings to which Duracell is a party defendant.
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Duracell uses hazardous materials in its manufacture of batteries and,
consequently, is subject to numerous national, state and local laws and
regulations governing the use, discharge and disposal of such materials.
Certain jurisdictions have enacted or are considering legislation regulating
the heavy metal content of batteries. Duracell's manufacturing facilities are
believed to be in substantial compliance with current laws and regulations, and
Duracell has ongoing technical programs directed towards minimizing its use of
hazardous materials. Compliance with current laws and regulations has not had,
and is not expected to have, a material adverse effect on Duracell's financial
condition. Capital expenditures for Duracell's ongoing environmental
protection programs are not expected to be material to Duracell's financial
condition. It is impossible to predict the effect which future domestic or
foreign regulation (which could include regulation of the heavy metal content
of batteries or the disposal of batteries or of by-products of battery
production) could have on Duracell's business, earnings or cash flow.
Duracell's Lexington, North Carolina manufacturing site continues to
be under review by the U.S. Environmental Protection Agency ("EPA") for mercury
contamination, a process which is now expected to result in it being designated
a federal Superfund site. Duracell has signed a Consent Order with the EPA in
which it has agreed to perform a remedial investigation and feasibility study
with respect to the Lexington contamination. Comprehensive voluntary
remediation actions have taken place at the Lexington site over the past 10
years. Management believes those actions, combined with its current and
planned future remediation efforts, should adequately address the EPA's
concerns. Management estimates that future costs will not exceed $10 million,
for which the Company has reserved.
In addition to the Lexington site, Duracell is also involved in
several other environmental remediation programs. The future cost of these
remediations is not expected to be material to Duracell's financial condition.
The Company has received a settlement offer from the U. S. Internal
Revenue Service (the "IRS") to resolve all issues arising from the IRS's
recently completed audit of the Company's income tax returns for the years
ended June 30, 1988, 1989 and 1990. The IRS offer was made pursuant to its
Intangibles Settlement Initiative, a program designed by the IRS to allow an
early settlement of a large number of pending cases involving acquisitions that
included significant intangible assets. Management expects to settle pursuant
to the IRS offer. The settlement will reduce the U.S. net operating loss
carryforward for tax purposes at June 30, 1994 from $350 million to
approximately $130 million and will impact cash flows principally over three
years. Because the proposed settlement relates to assets acquired by the
Company in June 1988, the additional tax that will ultimately result from the
proposed settlement has been recorded as an increase to both goodwill and
deferred taxes of $105 million in the June 30, 1994 balance sheet. The
proposed settlement will not have a significant impact on the Company's future
earnings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the New York Stock Exchange
under the symbol DUR. The number of holders of record of Common Stock at
August 27, 1994 was 6,458. The Common Stock commenced public trading on May 2,
1991 at the time of the initial public offering. On August 19, 1992, the
Company declared its initial quarterly cash dividend on the Common Stock at the
rate of $.08 per share. The quarterly dividend was subsequently increased to
$.16 per share with the dividend paid in the third quarter of fiscal 1993 and
to $.22 per share with the dividend paid in the third quarter of fiscal 1994.
The closing price of the Common Stock on September 13, 1994 was $45 3/8 per
share.
The high, low and closing prices for a share of Duracell common stock on the
New York Stock Exchange for each fiscal quarter of 1994 and 1993 were as
follows (in dollars):
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1994 High Low Close
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Fourth Quarter 44 1/4 38 5/8 39
Third Quarter 44 1/4 35 3/8 41 1/8
Second Quarter 38 1/8 32 1/4 35 1/8
First Quarter 37 5/8 28 1/2 37 1/8
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1993
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Fourth Quarter 36 27 1/4 31
Third Quarter 36 1/4 29 7/8 35 1/2
Second Quarter 37 1/8 29 1/8 34
First Quarter 33 3/8 26 1/2 32 3/8
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ITEM 6. SELECTED FINANCIAL DATA
The information set forth in Note 19, Selected Financial Data, which
appears on page 39 of the Annual Report to Stockholders for the fiscal year
ended June 30, 1994 is incorporated into this Report by reference thereto.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information set forth under the heading "Financial Review" on
pages 18 to 26 of the Annual Report to Stockholders for the fiscal year ended
June 30, 1994 is incorporated into this Report by reference thereto.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements, independent auditors'
report thereon and supplementary data on pages 27 to 40 of the Annual Report to
Stockholders for the fiscal year ended June 30, 1994 are incorporated into this
Report by reference thereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS AND EXECUTIVE OFFICERS
The information as to the directors of the Company set forth under the
caption "Election of Directors" on pages 2 and 3 of the Proxy Statement
relating to the Annual Meeting of Stockholders to be held on October 25, 1994
is incorporated into this Report by reference thereto.
The executive officers of the Company, their ages and their employment
history are as follows:
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Present Principal Occupation
or Employment and Five-Year
Name Age Employment History
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C. Robert Kidder 50 Director of the Company since June, 1988; Chairman of the Board and
Chief Executive Officer of the Company and Duracell Inc. since April,
1992; Chairman of the Board, President and Chief Executive Officer of
the Company and Duracell Inc. from August, 1991 until April, 1992;
President and Chief Executive Officer of the Company and Duracell
Inc. from June, 1988 until August, 1991.
Charles R. Perrin 49 Director of the Company since June, 1988; President and Chief
Operating Officer of the Company and Duracell Inc. since April, 1992;
President, Duracell North America and International Development
Markets, from June, 1988 until April, 1992.
David G. Bluestein 48 Vice President of the Company since April, 1990; President,
Duracell's IDM Division since August, 1991; Vice President, Strategy
and Development of the Company from April, 1990 to August, 1991; Vice
President and General Manager U.S. Body Care Division of Colgate
Palmolive from 1988 to April, 1990; various executive positions,
Chesebrough-Pond's, Inc., prior thereto.
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Robert A. Burgholzer, Jr. 51 Vice President and Controller of the Company and Duracell Inc. since
April, 1990; Assistant Controller, Duracell Inc. from 1988 to April,
1990.
Gregg A. Dwyer 50 Senior Vice President, General Counsel and Secretary of the Company
and Duracell Inc. since June, 1988.
Barbara J. Johnson 43 Vice President, Taxes since November, 1993; Completion of Graduate
Studies and Other Academic Pursuits from October, 1990 until May,
1993; Partner, Deloitte & Touche, prior thereto.
Charles E. Kiernan 49 President, Duracell North America since September, 1993; President,
Duracell USA from April, 1992 until September, 1993; Senior Vice
President, Marketing and Manufacturing Operations, Duracell USA from
September, 1991 until April, 1992; Vice President, Marketing,
Duracell USA, prior thereto.
G. Wade Lewis 47 Director of the Company since October, 1993; Senior Vice President,
Finance and Chief Financial Officer of the Company since June, 1988.
Nancy A. Reardon 42 Senior Vice President, Human Resources of the Company and Duracell
Inc. since September, 1991; Vice President, Executive Resources,
American Express, from 1989 to August, 1991; Director, Human
Resources, Avon Products, prior thereto.
Christophe Ripert 42 President, Duracell Europe since July, 1992; Zone Manager, Duracell
Europe, prior thereto.
Walter B. Rogers 51 Vice President, Investor Relations since February, 1992; Vice
President, Communications, General Host Corp., prior thereto.
Michel J. Vernhes 55 President, Duracell's New Products and Technology Division since
February, 1994; Senior Vice President, New Products and Technology of
the Company and Duracell Inc. prior thereto.
</TABLE>
Effective October 1, 1994, Mr. Perrin will become Chief Executive
Officer of the Company and Duracell, Inc. succeeding Mr. Kidder in such
position. Mr. Kidder will remain Chairman of the Board of both companies. On
the same date, Mr. Kiernan will become Chief Operating Officer of the Company
and Mr. Bluestein will become President, Duracell North America.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the caption "Executive Compensation"
appearing on pages 5 through 8 of the Proxy Statement relating to the Company's
Annual Meeting of Stockholders to be held October 25, 1994 is incorporated into
this Report by reference thereto.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the caption "Beneficial Ownership of
Securities" on pages 3 and 4 of the Proxy Statement relating to the Company's
Annual Meeting of Stockholders to be held on October 25, 1994 is incorporated
into this Report by reference thereto. There are no arrangements known to the
Company, the operation of which may at a subsequent date result in a change in
control of the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Certain Interests and
Transactions" on pages 8 and 9 of the Proxy Statement relating to the Company's
Annual Meeting of Stockholders to be held on October 25, 1994 is incorporated
into this Report by reference thereto.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) List of documents filed as part of this Annual Report:
(1) The following consolidated financial statements of
Duracell International Inc. and the independent
auditors' report are incorporated by reference in
Part II, Item 8.
- Consolidated Income Statement for the years
ended June 30, 1994, 1993 and 1992
- Consolidated Balance Sheet as of June 30,
1994 and 1993
- Statement of Consolidated Cash Flows for the
years ended June 30, 1994, 1993 and 1992
- Statement of Consolidated Equity for the
years ended June 30, 1994, 1993 and 1992
- Notes to Consolidated Financial Statements
- Independent Auditors' Report
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(2) The following Financial Statement Schedules are
included herein:
- Schedule VIII Valuation and Qualifying
Accounts for the years ended June 30, 1994,
1993 and 1992 . . . . . . . . . Page 20
- Schedule IX Short-Term Borrowings as of June
30, 1994, 1993 and 1992 . . . . . . Page 21
- Schedule X Supplemental Income Statement
Information for the years ended June 30,
1994, 1993 and 1992 . . . . . . . . Page 22
Schedules other than those listed above have
been omitted from this Report because they
are either not required, not applicable, or
the required information is included in the
Consolidated Financial Statements or the
Notes thereto.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the last quarter
of the period covered by this report.
(c) Exhibits
Exhibit
Number
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3.1 Restated Certificate of Incorporation of Duracell
International Inc. (incorporated herein by reference
to Exhibit 3.1 to Form S-1 [No. 33-39301] of Duracell
International Inc.).
3.2 By-laws of Duracell International Inc. (incorporated
herein by reference to Exhibit 3.2 to Form S-1 [No.
33-39301] of Duracell International Inc.).
3.3 Amendment adopted April 29, 1991, to the By-laws of
Duracell International Inc. (incorporated herein by
reference to Exhibit 3.3 to Form S-1 [No. 33-39301]
of Duracell International Inc.).
10.1 Form of Common Stock Subscription Agreement entered
into between Duracell Holdings Corporation and
certain executives as of June 24, 1988, including
form of Option Agreement attached thereto as Exhibit
A (incorporated herein by reference to Exhibit 10.1
to Form S-1 [No. 33-23528] of Duracell Holdings
Corporation).
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10.2 Stock Option Plan for Key Employees of Duracell
International Inc. and Subsidiaries (incorporated
herein by reference to Exhibit 4.4 to Form S-8 [No.
33-39817] of Duracell International Inc.).
10.3 Duracell Shares Plan (incorporated herein by
reference to Exhibit A to Duracell International Inc.
Proxy Statement relating to the Annual Meeting of
Stockholders held on October 27, 1992).
10.4 Amended and Restated Credit Agreement, dated as of
March 29, 1991, among Duracell International Inc. and
certain of its affiliates and the Banks listed
therein, including The First National Bank of Chicago
as agent (incorporated herein by reference to Exhibit
10.3 to Form S-1 [No. 33-39301] of Duracell
International Inc.).
10.5 First Amendment, dated as of June 24, 1991, to the
Second Amended and Restated Credit Agreement, dated
as of March 29, 1991, among Duracell International
Inc. and certain of its affiliates and the Banks
listed therein, including The First National Bank of
Chicago, as agent (incorporated herein by reference
to Exhibit 10.4 to Duracell International Inc. Annual
Report on Form 10-K for the year ended June 30,
1991).
10.6 Second Amendment, dated as of August 23, 1991, to the
Second Amended and Restated Credit Agreement, dated
as of March 29, 1991, among Duracell International
Inc. and certain of its affiliates and the Banks
listed therein, including The First National Bank of
Chicago, as agent (incorporated herein by reference
to Exhibit 10.5 to Duracell International Inc. Annual
Report on Form 10-K for the year ended June 30,
1991).
10.7 Third Amendment, dated as of December 13, 1991, to
the Second Amended and Restated Credit Agreement,
dated as of March 29, 1991, among Duracell
International Inc. and certain of its affiliates and
the Banks listed therein, including The First
National Bank of Chicago, as agent (incorporated
herein by reference to Exhibit 10.7 to Duracell
International Inc. Annual Report on Form 10-K for the
year ended June 30, 1992).
Page 14
<PAGE> 15
10.8 Waiver dated as of May 12, 1992, with respect to the
Second Amended and Restated Credit Agreement, dated
as of March 29, 1991, among Duracell International
Inc. and certain of its affiliates and the Banks
listed therein, including The First National Bank of
Chicago, as agent (incorporated herein by reference
to Exhibit 10.8 to Duracell International Inc.
Annual Report on Form 10-K for the year ended June
30, 1992).
10.9 Fourth Amendment, dated as of October 16, 1992, to
the Second Amended and Restated Credit Agreement,
dated as of March 29, 1991, among Duracell
International Inc. and certain of its affiliates and
the Banks listed therein, including The First
National Bank of Chicago, as agent (incorporated
herein by reference to Exhibit (i) to Duracell
International Inc. report on Form 10-Q for the
quarter ended September 26, 1992).
10.10 Fifth Amendment, dated as of December 22, 1993, to
the Second Amended and Restated Credit Agreement,
dated as of March 29, 1991, among Duracell
International Inc. and certain of its affiliates and
the Banks listed therein, including The First
National Bank of Chicago, as agent (incorporated
herein by reference to Exhibit (ii) to Duracell
International Inc. report on Form 10-Q for the
quarter ended December 25, 1993).
10.11 Amended and Restated Multi-Option Financing Facility
Agreement, dated as of November 16, 1990, among
Duracell Holdings Corporation and certain of its
affiliates, and the Financial Institutions listed
therein, including Bank of America International
Limited as facility agent and The First National Bank
of Chicago as documentation agent (incorporated
herein by reference to Exhibit to Duracell Holdings
Corporation's report on Form 10-Q for the quarter
ended December 29, 1990).
10.12 First Amendment, dated as of March 19, 1991, to the
Amended and Restated Multi-Option Financing Facility
Agreement, dated as of November 16, 1990, among
Duracell International Inc. and certain affiliates
and the Financial Institutions listed therein,
including Bank of America International Limited as
facility agent and The First National Bank of Chicago
as documentation agent (incorporated herein by
reference to Exhibit 10.6 to Form S-1 [No. 33-39301]
of Duracell International Inc.).
10.13 Second Amendment, dated as of June 24, 1991, to the
Amended and Restated Multi-Option Financing Facility
Agreement, dated as of November 16, 1990 among
Duracell International Inc. and certain of its
affiliates, the Financial Institutions listed
therein, including Bank of America International
Limited as facility agent and The First Bank of
Chicago as documentation agent (incorporated herein
by reference to Exhibit 10.8 to Duracell
International Inc. Annual Report on Form 10-K for the
year ended June 30, 1991).
Page 15
<PAGE> 16
10.14 Third Amendment, dated as of August 23, 1991, to the
Amended and Restated Multi-Option Financing Facility
Agreement, dated as of November 16, 1990 among
Duracell International Inc. and certain of its
affiliates, the Financial Institutions listed
therein, including Bank of America International
Limited as facility agent and The First Bank of
Chicago as documentation agent (incorporated herein
by reference to Exhibit 10.9 to Duracell
International Inc. Annual Report on Form 10-K for the
year ended June 30, 1991).
10.15 Fourth Amendment, dated as of December 13, 1991, to
the Amended and Restated Multi-Option Financing
Facility Agreement, dated as of November 16, 1990,
among Duracell International Inc. and certain
affiliates and the Financial Institutions listed
therein, including Bank of America International
Limited as facility agent and The First National Bank
of Chicago as documentation agent (incorporated
herein by reference to Exhibit 10.13 to Duracell
International Inc. Annual Report on Form 10-K for the
year ended June 30, 1992).
10.16 Fifth Amendment and Waiver, dated as of May 15, 1992,
to the Amended and Restated Multi-Option Financing
Facility Agreement, dated as of November 16, 1990
among Duracell International Inc. and certain of its
affiliates, the Financial Institutions listed
therein, including Bank of America International
Limited as facility agent and The First National Bank
of Chicago as documentation agent (incorporated
herein by reference to Exhibit 10.14 to Duracell
International Inc. Annual Report on Form 10-K for the
year ended June 30, 1992).
10.17 Sixth Amendment, dated as of October 16, 1992, to the
Amended and Restated Multi-Option Financing Facility
Agreement, dated as of November 16, 1990 among
Duracell International Inc. and certain of its
affiliates, the Financial Institutions listed
therein, including Bank of America International
Limited as facility agent and The First National Bank
of Chicago as documentation agent (incorporated
herein by reference to Exhibit (ii) to Duracell
International Inc. report on Form 10-Q for the
quarter ended September 26, 1992).
Page 16
<PAGE> 17
10.18 Seventh Amendment, dated as of August 30, 1993, to
the Amended and Restated Multi-Option Financing
Facility Agreement, dated as of November 16, 1990
among Duracell International Inc. and certain of its
affiliates, the Financial Institutions listed
therein, including Bank of America International
Limited as facility agent and The First National Bank
of Chicago as documentation agent (incorporated
herein by reference to Exhibit 10.17 to Duracell
International Inc. Annual Report on Form 10-K for the
year ended June 30, 1993).
10.19 Eighth Amendment, dated as of December 22, 1993, to
the Amended and Restated Multi-Option Financing
Facility Agreement, dated as of November 16, 1990
among Duracell International Inc. and certain of its
affiliates, the Financial Institutions listed
therein, including Bank of America International
Limited as facility agent and The First National Bank
of Chicago as documentation agent (incorporated
herein by reference to Exhibit (iii) to Duracell
International Inc. report on Form 10-Q for the
quarter ended December 25, 1993).
10.20 Stock Purchase Agreement, dated as of May 4, 1988, as
amended and restated as of June 23, 1988, by and
between Duracell International Inc. and Kraft, Inc.,
including list of omitted schedules (incorporated
herein by reference to Exhibit 21 to Form S-1 [No.
33-23528] of Duracell Holdings Corporation).
11.1 Duracell International Inc. computation of earnings
per share of Common Stock for the years ended June
30, 1994, 1993 and 1992.
13.2 Pages 18 through 40 of the Company's Annual Report to
Stockholders for the year ended June 30, 1994.
21.1 Active Subsidiaries and Branches of Duracell
International Inc.
23.0 Consent of Deloitte & Touche LLP.
24.0 Powers of Attorney.
27.0 Financial Data Schedule (as required by the SEC for
EDGAR filers).
(d) The Company has no unconsolidated subsidiaries.
Page 17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
DURACELL INTERNATIONAL INC.
Date: September 23, 1994 By /s/ ROBERT A. BURGHOLZER, JR.
------------------------- --------------------------------
Robert A. Burgholzer, Jr.
Vice President and Controller
(Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated this 23rd day of September, 1994
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ C. ROBERT KIDDER Chairman of the Board and Chief
- - ---------------------------------- Executive Officer
C. Robert Kidder
/s/ G. WADE LEWIS Director, Senior Vice President, Finance
- - ---------------------------------- and Chief Financial Officer
G. Wade Lewis
/s/ CHARLES R. PERRIN Director, President and Chief Operating
- - ---------------------------------- Officer
Charles R. Perrin *
/s/ THOMAS W. HUDSON, JR. Director
- - ----------------------------------
Thomas W. Hudson, Jr. *
/s/ ROBERT M. KAVNER Director
- - ----------------------------------
Robert M. Kavner *
/s/ HENRY R. KRAVIS Director
- - ----------------------------------
Henry R. Kravis *
/s/ PAUL E. RAETHER Director
- - ----------------------------------
Paul E. Raether *
/s/ GEORGE R. ROBERTS Director
- - ----------------------------------
George R. Roberts *
/s/ SCOTT M. STUART Director
- - ----------------------------------
Scott M. Stuart *
*By /s/ C. ROBERT KIDDER
---------------------------------
C. Robert Kidder
Attorney-In-Fact
</TABLE>
Page 18
<PAGE> 19
INDEPENDENT AUDITORS' REPORT
Duracell International Inc.:
We have audited the consolidated financial statements of Duracell
International Inc. and its subsidiaries as of June 30, 1994 and 1993, and for
each of the three years in the period ended June 30, 1994, and have issued our
report thereon dated August 10, 1994; such consolidated financial statements
and report are included in your 1994 Annual Report to Stockholders and are
incorporated herein by reference. Our audits also included the consolidated
financial statement schedules of Duracell International Inc. and its
subsidiaries, listed in Item 14(a)(2). These consolidated financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such consolidated financial statement schedules, when considered in relation to
the basic consolidated financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Hartford, Connecticut
August 10, 1994
Page 19
<PAGE> 20
SCHEDULE VIII
DURACELL INTERNATIONAL INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND 1992
(IN MILLIONS)
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
Additions
----------------------
Balance at Charged to Charged to Balance
Beginning Costs and Other at End of
Description of Year Expenses Accounts(1) Deductions(2) Year
------------------------------------ ---------- --------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful
Accounts
1994 . . . . . . . . . . . . . . . . . $ 18.1 $ 9.0 $ 0.4 $ (4.3) $ 23.2
1993 . . . . . . . . . . . . . . . . . $ 21.7 $ 5.6 $(1.5) $ (7.7) $ 18.1
1992 . . . . . . . . . . . . . . . . . $ 15.6 $ 8.7 $ 0.3 $ (2.9) $ 21.7
-------------------
<FN>
Notes: (1) Principally foreign exchange.
(2) Principally write-offs.
</TABLE>
Page 20
<PAGE> 21
SCHEDULE IX
DURACELL INTERNATIONAL INC.
SHORT-TERM BORROWINGS
JUNE 30, 1994, 1993, 1992
(IN MILLIONS)
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E) (F)
Weighted
Maximum Amount Average Amount Average
Weighted Average Outstanding Outstanding Interest Rate
Category of Aggregate Balance at Interest Rate at Any During During
Short-Term Borrowings June 30 at June 30 Month End the Year(2) the Period(2)
- - ---------------------- ----------- -------------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C>
1994
Foreign Borrowings(1) $ 51.0 7.33% $ 64.6 $ 42.5 7.45%
1993
Foreign Borrowings(1) $ 30.7 8.00% $ 41.1 $ 30.9 7.96%
1992
Foreign Borrowings(1) $ 37.6 9.63% $ 42.9 $ 34.3 10.29%
- - --------------------------------
<FN>
Notes: (1) Consists of debt instruments with maturities of less than one year.
(2) The average amounts outstanding and weighted average interest
rates are based on average month-end balances.
</TABLE>
Page 21
<PAGE> 22
SCHEDULE X
DURACELL INTERNATIONAL INC.
SUPPLEMENTAL INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND 1992
(IN MILLIONS)
<TABLE>
<CAPTION>
1994 1993 1992
--------------- ---------------- --------------
<S> <C> <C> <C>
Advertising . . . . . . . . . . . . . . . . . . $ 97.4 $ 80.2 $ 76.5
Maintenance and repairs . . . . . . . . . . . . $ 19.7 $ 20.0 $ 20.2
Taxes, other than payroll and
income taxes . . . . . . . . . . . . . . . . . $ 10.2 $ 9.1 $ 8.4
</TABLE>
Page 22
<PAGE> 23
EXHIBIT INDEX
--------------
Exhibit
Number Description
------ -----------
3.1 Restated Certificate of Incorporation of Duracell
International Inc. (incorporated herein by reference
to Exhibit 3.1 to Form S-1 [No. 33-39301] of Duracell
International Inc.).
3.2 By-laws of Duracell International Inc. (incorporated
herein by reference to Exhibit 3.2 to Form S-1 [No.
33-39301] of Duracell International Inc.).
3.3 Amendment adopted April 29, 1991, to the By-laws of
Duracell International Inc. (incorporated herein by
reference to Exhibit 3.3 to Form S-1 [No. 33-39301]
of Duracell International Inc.).
10.1 Form of Common Stock Subscription Agreement entered
into between Duracell Holdings Corporation and
certain executives as of June 24, 1988, including
form of Option Agreement attached thereto as Exhibit
A (incorporated herein by reference to Exhibit 10.1
to Form S-1 [No. 33-23528] of Duracell Holdings
Corporation).
10.2 Stock Option Plan for Key Employees of Duracell
International Inc. and Subsidiaries (incorporated
herein by reference to Exhibit 4.4 to Form S-8 [No.
33-39817] of Duracell International Inc.).
10.3 Duracell Shares Plan (incorporated herein by
reference to Exhibit A to Duracell International Inc.
Proxy Statement relating to the Annual Meeting of
Stockholders held on October 27, 1992).
10.4 Amended and Restated Credit Agreement, dated as of
March 29, 1991, among Duracell International Inc. and
certain of its affiliates and the Banks listed
therein, including The First National Bank of Chicago
as agent (incorporated herein by reference to Exhibit
10.3 to Form S-1 [No. 33-39301] of Duracell
International Inc.).
10.5 First Amendment, dated as of June 24, 1991, to the
Second Amended and Restated Credit Agreement, dated
as of March 29, 1991, among Duracell International
Inc. and certain of its affiliates and the Banks
listed therein, including The First National Bank of
Chicago, as agent (incorporated herein by reference
to Exhibit 10.4 to Duracell International Inc. Annual
Report on Form 10-K for the year ended June 30,
1991).
10.6 Second Amendment, dated as of August 23, 1991, to the
Second Amended and Restated Credit Agreement, dated
as of March 29, 1991, among Duracell International
Inc. and certain of its affiliates and the Banks
listed therein, including The First National Bank of
Chicago, as agent (incorporated herein by reference
to Exhibit 10.5 to Duracell International Inc. Annual
Report on Form 10-K for the year ended June 30,
1991).
10.7 Third Amendment, dated as of December 13, 1991, to
the Second Amended and Restated Credit Agreement,
dated as of March 29, 1991, among Duracell
International Inc. and certain of its affiliates and
the Banks listed therein, including The First
National Bank of Chicago, as agent (incorporated
herein by reference to Exhibit 10.7 to Duracell
International Inc. Annual Report on Form 10-K for the
year ended June 30, 1992).
10.8 Waiver dated as of May 12, 1992, with respect to the
Second Amended and Restated Credit Agreement, dated
as of March 29, 1991, among Duracell International
Inc. and certain of its affiliates and the Banks
listed therein, including The First National Bank of
Chicago, as agent (incorporated herein by reference
to Exhibit 10.8 to Duracell International Inc.
Annual Report on Form 10-K for the year ended June
30, 1992).
10.9 Fourth Amendment, dated as of October 16, 1992, to
the Second Amended and Restated Credit Agreement,
dated as of March 29, 1991, among Duracell
International Inc. and certain of its affiliates and
the Banks listed therein, including The First
National Bank of Chicago, as agent (incorporated
herein by reference to Exhibit (i) to Duracell
International Inc. report on Form 10-Q for the
quarter ended September 26, 1992).
10.10 Fifth Amendment, dated as of December 22, 1993, to
the Second Amended and Restated Credit Agreement,
dated as of March 29, 1991, among Duracell
International Inc. and certain of its affiliates and
the Banks listed therein, including The First
National Bank of Chicago, as agent (incorporated
herein by reference to Exhibit (ii) to Duracell
International Inc. report on Form 10-Q for the
quarter ended December 25, 1993).
10.11 Amended and Restated Multi-Option Financing Facility
Agreement, dated as of November 16, 1990, among
Duracell Holdings Corporation and certain of its
affiliates, and the Financial Institutions listed
therein, including Bank of America International
Limited as facility agent and The First National Bank
of Chicago as documentation agent (incorporated
herein by reference to Exhibit to Duracell Holdings
Corporation's report on Form 10-Q for the quarter
ended December 29, 1990).
10.12 First Amendment, dated as of March 19, 1991, to the
Amended and Restated Multi-Option Financing Facility
Agreement, dated as of November 16, 1990, among
Duracell International Inc. and certain affiliates
and the Financial Institutions listed therein,
including Bank of America International Limited as
facility agent and The First National Bank of Chicago
as documentation agent (incorporated herein by
reference to Exhibit 10.6 to Form S-1 [No. 33-39301]
of Duracell International Inc.).
10.13 Second Amendment, dated as of June 24, 1991, to the
Amended and Restated Multi-Option Financing Facility
Agreement, dated as of November 16, 1990 among
Duracell International Inc. and certain of its
affiliates, the Financial Institutions listed
therein, including Bank of America International
Limited as facility agent and The First Bank of
Chicago as documentation agent (incorporated herein
by reference to Exhibit 10.8 to Duracell
International Inc. Annual Report on Form 10-K for the
year ended June 30, 1991).
10.14 Third Amendment, dated as of August 23, 1991, to the
Amended and Restated Multi-Option Financing Facility
Agreement, dated as of November 16, 1990 among
Duracell International Inc. and certain of its
affiliates, the Financial Institutions listed
therein, including Bank of America International
Limited as facility agent and The First Bank of
Chicago as documentation agent (incorporated herein
by reference to Exhibit 10.9 to Duracell
International Inc. Annual Report on Form 10-K for the
year ended June 30, 1991).
10.15 Fourth Amendment, dated as of December 13, 1991, to
the Amended and Restated Multi-Option Financing
Facility Agreement, dated as of November 16, 1990,
among Duracell International Inc. and certain
affiliates and the Financial Institutions listed
therein, including Bank of America International
Limited as facility agent and The First National Bank
of Chicago as documentation agent (incorporated
herein by reference to Exhibit 10.13 to Duracell
International Inc. Annual Report on Form 10-K for the
year ended June 30, 1992).
10.16 Fifth Amendment and Waiver, dated as of May 15, 1992,
to the Amended and Restated Multi-Option Financing
Facility Agreement, dated as of November 16, 1990
among Duracell International Inc. and certain of its
affiliates, the Financial Institutions listed
therein, including Bank of America International
Limited as facility agent and The First National Bank
of Chicago as documentation agent (incorporated
herein by reference to Exhibit 10.14 to Duracell
International Inc. Annual Report on Form 10-K for the
year ended June 30, 1992).
10.17 Sixth Amendment, dated as of October 16, 1992, to the
Amended and Restated Multi-Option Financing Facility
Agreement, dated as of November 16, 1990 among
Duracell International Inc. and certain of its
affiliates, the Financial Institutions listed
therein, including Bank of America International
Limited as facility agent and The First National Bank
of Chicago as documentation agent (incorporated
herein by reference to Exhibit (ii) to Duracell
International Inc. report on Form 10-Q for the
quarter ended September 26, 1992).
10.18 Seventh Amendment, dated as of August 30, 1993, to
the Amended and Restated Multi-Option Financing
Facility Agreement, dated as of November 16, 1990
among Duracell International Inc. and certain of its
affiliates, the Financial Institutions listed
therein, including Bank of America International
Limited as facility agent and The First National Bank
of Chicago as documentation agent (incorporated
herein by reference to Exhibit 10.17 to Duracell
International Inc. Annual Report on Form 10-K for the
year ended June 30, 1993).
10.19 Eighth Amendment, dated as of December 22, 1993, to
the Amended and Restated Multi-Option Financing
Facility Agreement, dated as of November 16, 1990
among Duracell International Inc. and certain of its
affiliates, the Financial Institutions listed
therein, including Bank of America International
Limited as facility agent and The First National Bank
of Chicago as documentation agent (incorporated
herein by reference to Exhibit (iii) to Duracell
International Inc. report on Form 10-Q for the
quarter ended December 25, 1993).
10.20 Stock Purchase Agreement, dated as of May 4, 1988, as
amended and restated as of June 23, 1988, by and
between Duracell International Inc. and Kraft, Inc.,
including list of omitted schedules (incorporated
herein by reference to Exhibit 21 to Form S-1 [No.
33-23528] of Duracell Holdings Corporation).
11.1 Duracell International Inc. computation of earnings
per share of Common Stock for the years ended June
30, 1994, 1993 and 1992.
13.2 Pages 18 through 40 of the Company's Annual Report to
Stockholders for the year ended June 30, 1994.
21.1 Active Subsidiaries and Branches of Duracell
International Inc.
23.0 Consent of Deloitte & Touche LLP.
24.0 Powers of Attorney.
27.0 Financial Data Schedule (as required by the SEC for
EDGAR filers).
<PAGE> 1
EXHIBIT 11.1
DURACELL INTERNATIONAL INC.
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
FOR FISCAL YEARS ENDED JUNE 30, 1994, 1993 AND 1992
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Primary Computations:
Weighted average number of shares outstanding 116.4 113.9 110.0
Effect of outstanding stock options 2.8 4.9 6.9
------- ------- -------
Weighted average number of shares and share
equivalents outstanding 119.2 118.8 116.9
======= ======= =======
Per share amounts:
Income before extraordinary items and accounting change $ 1.68 $ 1.04 $ 1.43
Extraordinary items - - (.34)
Cumulative effect of accounting change - (.63) -
------- ------- -------
Net income (a)(b) $ 1.68 $ .41 $ 1.09
======= ======= =======
Fully Diluted Computations:
Weighted average number of shares outstanding 116.4 113.9 110.0
Effect of outstanding stock options 3.2 4.5 6.9
------- ------- -------
Weighted average number of shares and share equivalents
outstanding 119.6 118.4 116.9
======= ======= =======
Per share amounts:
Income before extraordinary items and accounting change $ 1.67 $ 1.05 $ 1.43
Extraordinary items - - (.34)
Cumulative effect of accounting change - (.64) -
------- ------- -------
Net income (a)(b) $ 1.67 $ .41 $ 1.09
======= ======= =======
- - ---------------------------
<FN>
(a) These calculations are submitted in accordance with Regulation S-K item
601 (b)(11).
(b) Calculated by dividing the following by the weighted average number of
shares and share equivalents:
</TABLE>
<TABLE>
<S> <C> <C> <C>
Income before extraordinary items and accounting change $ 200.2 $ 123.9 $ 166.8
Extraordinary items - - (39.0)
Cumulative effect of accounting change - (75.4) -
------- ------- -------
Net income $ 200.2 $ 48.5 $ 127.8
======= ======= =======
</TABLE>
<PAGE> 1
FINANCIAL REVIEW
Results of Operations
In 1994 Duracell once again achieved records in:
Worldwide Alkaline Volume
Revenue
Operating Income and
Net Income and Earnings Per Share
At the same time, Duracell invested at record levels in growth drivers such as:
Advertising and Promotion behind the DURACELL brand
Research and Development in Alkaline and High Power Rechargeables, including
Nickel Metal Hydride and Lithium Ion, and
Geographic Expansion
Following is a summary of Duracell's financial achievements over the last five
years:
<TABLE>
<CAPTION>
(Units/$ in millions, except per share amounts) 1994 1993 1992 1991 1990
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alkaline Volume 2,437 2,196 1,978 1,842 1,706
Revenue $1,871 $1,742 $1,617 $1,524 $1,335
Gross Profit 1,224 1,102 1,026 939 813
Advertising and Promotion 428 357 327 305 265
R&D/Engineering 52 45 36 31 27
Other Operating Expenses 388 393 378 347 295
- - -----------------------------------------------------------------------------------------------------------------------------------
Operating Income Before Restructuring 356 307 285 256 226
Operating Margin Before Restructuring 19.0% 17.6% 17.6% 16.8% 16.9%
Restructuring -- 65 -- -- --
- - -----------------------------------------------------------------------------------------------------------------------------------
Operating Income 356 242 285 256 226
Interest Expense 30 46 80 186 204
Tax Expense 120 59 44 24 13
Effective Tax Rate 37.5% 32.2% 20.9% 36.4% 69.1%
Income Before Extraordinary Items
and Accounting Change $200 $124 $167 $41 $6
Per Share Summary:
Before Restructuring $1.68 $ 1.44 $1.43 $0.50 $0.08
Restructuring -- (0.40) -- -- --
- - -----------------------------------------------------------------------------------------------------------------------------------
Income Before Extraordinary Items
and Accounting Change $1.68 $ 1.04 $1.43 $0.50 $0.08
- - -----------------------------------------------------------------------------------------------------------------------------------
Weighted Average Shares and Share Equivalents 119 119 117 82 73
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[GRAPHS]
<TABLE>
<CAPTION>
ALKALINE UNIT VOLUME GROWTH REVENUE GROWTH
(units in millions) ($ in millions)
--------------------------------------- ------------------------------------------
<S> <C> <C> <C> <C> <S> <C> <C> <C> <C>
90 91 92 93 94 90 91 92 93 94
1,706 1,842 1,978 2,196 2,437 1,335 1,524 1,617 1,742 1,871
</TABLE>
18
<PAGE> 2
FINANCIAL REVIEW
Results of Operations
Key drivers contributing to 1994's results are as follows:
Alkaline Volume Improved 11%
Unit gains were driven by market growth, share gains, geographic expansion,
expanded customer base and strong customer alliances.
Revenue Increased 7% (12% Performance*)
Driven by increased alkaline volume, geographic expansion and pricing, 1994 was
the twenty-first consecutive year of revenue growth.
Advertising and Promotion Increased to Record Level--23% of Revenue
Record investments were made in innovative new programs to support brand
awareness, premium positioning, and volume growth.
Research & Development/Engineering Increased 16%
Record investments were made to support the development of new high power
products such as rechargeable nickel metal hydride and lithium ion batteries
and to further enhance the performance of DURACELL alkaline batteries.
Other Operating Expenses Leveraged
Despite spending in support of geographic expansion, other operating expenses
declined as a percentage of revenue.
Operating Income Before 1993's Restructuring Charge Grew 16% (22% Performance*)
Operating income grew as a result of improved gross profit, benefits from the
1993 restructuring and continued leveraging of other operating expenses.
Interest Expense Reduced by $16 million
Debt was reduced using funds generated from operations.
Tax Expense Increased Due to Higher Pre-Tax Income and Higher Effective Tax
Rate
Increase in effective tax rate reflects the full utilization of U.S. net
operating loss carryforwards for book purposes in 1993.
Income Before Extraordinary Items and Accounting Change Reached $200 million
Healthy operating income growth falls to the bottom line.
Record EPS of $1.68--Rose 17% (21% Performance*) Absent 1993's
Restructuring Charge
* "Performance"--excludes the impact of foreign currency translation (i.e.,
the impact of translating the income statement from local currency into U.S.
dollars).
[GRAPHS]
<TABLE>
<CAPTION>
OPERATING INCOME GROWTH IMPROVEMENTS IN EARNINGS PER SHARE
($ in millions) (in dollars)
------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <S> <C> <C> <C> <C>
90 91 92 93 94 90 91 92 93 94
226 256 285 242(1) 356 .08 .50 1.43 1.04(1) 1.68
<FN>
(1) Restructuring $65 (1) Restructuring $.40
</TABLE>
19
<PAGE> 3
FINANCIAL REVIEW
Results of Operations
Fiscal Year 1994 Versus Fiscal Year 1993
North America
<TABLE>
<CAPTION>
% Increase
----------
1994 1993 Rpt. Perf.
- - ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alkaline Unit Volume 1,182 1,036 14 14
Revenue $1,009 $897 13 13
Operating Income:
Before Restructuring $ 279 $234 20 20
Restructuring -- (15) -- --
- - ----------------------------------------------------------------------
$ 279 $219 28 28
======================================================================
</TABLE>
North America's double-digit growth in volume, revenue and operating
income was a key driver of Duracell's record year. Alkaline volume growth was
driven by strong market and share growth in the mass merchandiser trade class
in the United States and distribution gains in the warehouse club market
segment. Revenue increased reflecting the higher alkaline volumes and generally
higher prices, partially offset by $6 million of unfavorable foreign currency
translation in Canada. Higher lithium and nickel metal hydride battery sales
were also contributors.
Operating income (excluding the 1993 restructuring) reflects higher gross
profit, primarily volume driven. Operating expense leverage of non-advertising
and promotion expenses more than offset the increased investments in
advertising and promotion, resulting in operating income growing faster than
revenue.
Europe
<TABLE>
<CAPTION>
% Increase
----------
1994 1993 Rpt. Perf.
- - ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alkaline Unit Volume 683 658 4 4
Revenue $576 $606 (5) 6
Operating Income:
Before Restructuring $120 $121 (2) 10
Restructuring -- (32) -- --
- - ----------------------------------------------------------------------
$120 $ 89 34 55
======================================================================
</TABLE>
European alkaline volume growth was achieved despite weak economies in key
markets and sharp competition. Distribution was added in Hungary and the Czech
Republic, which--combined with increased shipments to industrial, military and
other battery manufacturers--more than off-set the impact of the economic and
competitive pressures. Private label in the U.K., which benefited from the
economic squeeze on consumers, impacted Duracell share. Excluding the $61
million impact of unfavorable currency translation, revenue rose 6% due to
alkaline volume growth and higher prices partially offset by unfavorable
country mix.
Operating income on a performance basis (excluding the 1993 restructuring
and $12 million of unfavorable currency translation) increased 10% as a result
of revenue growth, restructuring related savings and leveraging of
non-advertising and promotion expenses.
[PHOTO]
"This year's success can be attributed in part to our customer
service initiatives. At the same time, the Duracell U.S.A. Sales
and Distribution organization has continued to advance our customer
alliances. This has resulted in strong account growth and new
distribution in the wholesale clubs."
Bruce Travis
Sr. Vice President, Sales & Distribution
Duracell U.S.A.
[GRAPH]
<TABLE>
<CAPTION>
INVESTMENT IN ADVERTISING AND PROMOTION
($ in miliions)
----------------------------------------
<S> <C> <C> <C> <C>
90 91 92 93 94
265 305 327 357 428
</TABLE>
20
<PAGE> 4
FINANCIAL REVIEW
Results of Operations
Other International Markets
<TABLE>
<CAPTION>
% Increase
----------------
1994 1993 Rpt. Perf.
- - ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alkaline Unit Volume 572 502 14 14
Revenue $287 $240 20 19
Operating Income:
Before Restructuring $ 42 $ 33 27 30
Restructuring -- (18) -- --
- - ----------------------------------------------------------------------
$ 42 $ 15 179 191
======================================================================
</TABLE>
Other International Markets' unit volume improved through expanded
distribution and alkaline penetration in Latin America, Africa and the Middle
East, as well as increased distribution into China. The growth in Latin America
was led by Argentina, Venezuela and Chile. Excluding Brazil and Mexico, where
growth was not as healthy, alkaline volume increased 23%. Revenue increased
primarily from alkaline volume growth and higher prices.
Operating income (excluding the 1993 restructuring) increased as a result
of higher revenue, closure of the Brazilian manufacturing facility (which
resulted in sourcing of lower cost U.S. and European product) and duty
reductions in Latin American countries. These benefits were offset by increased
advertising and promotion expenses behind the DURACELL brand and higher
spending on geographic expansion to support future growth.
Fiscal Year 1993 vs. Fiscal Year 1992
North America
<TABLE>
<CAPTION>
% Increase
----------------
1993 1992 Rpt. Perf.
- - ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alkaline Unit Volume 1,036 915 13 13
Revenue $897 $821 9 10
Operating Income:
Before Restructuring $234 $220 6 6
Restructuring (15) -- -- --
- - ----------------------------------------------------------------------
$219 $220 (1) --
======================================================================
</TABLE>
North American alkaline unit volume grew as a result of market growth and
share gains in the United States and expansion of the customer base. Revenue
increased primarily from alkaline volume growth; however, revenue grew slower
than the alkaline volume due to sales mix, product mix and $6 million of
unfavorable Canadian currency translation.
Operating income before restructuring increased, reflecting higher
alkaline volume driven gross profit, leveraging of fixed expenses and lower bad
debt costs. Partially offsetting these benefits was an $8 million charge for
the annual operating cost of Statement of Financial Accounting Standards
("FAS") No. 106, "Employers' Accounting for Postretirement
[GRAPH]
<TABLE>
<CAPTION>
INVESTMENT IN CAPITAL EXPENDITURES
($ in millions)
- - ----------------------------------
<S> <C> <C> <C> <C>
90 91 92 93 94
32 38 54 42 69
</TABLE>
[PHOTO]
"Duracell has paved the way for alkaline penetration in the Middle
East and Africa by increasing consumer awareness through heavy
advertising and promotion investments. We've also appointed
multiple distributors to reach all trade channels in the existing
markets and Duracell has significant room for growth in these
markets."
Claude Azrak
Managing Director, North Africa & Middle East
Duracell International Development Markets
21
<PAGE> 5
FINANCIAL REVIEW
Results of Operations
[GRAPH]
<TABLE>
<CAPTION>
Improving Earnings Before Taxes
($ in millions)
- - --------------------------------
<S> <C> <C> <C> <C>
90 91 92 93 94
19 65 211 183(1) 320
<FN>
(1) Restructuring $65
</TABLE>
[PHOTO]
"In Spain, advertising investments have resulted in increased brand
awareness, which has in turn led to volume growth. Our DURACELL
bunny campaign has been a great success."
Carmina Gonzalez
Marketing Manager
Duracell Spain
[GRAPH]
<TABLE>
<CAPTION>
GROWTH IN INCOME
($ in millions)
- - --------------------------------
<S> <C> <C> <C> <C>
90 91 92 93 94
6 41 167 124(1) 200
<FN>
(1) Restructuring $47
</TABLE>
Benefits Other Than Pensions" which was not required in 1992, increased
advertising and promotional spending to support the DURACELL brand, and higher
selling and marketing costs relating to the launch of Duracell's high power
nickel metal hydride rechargeable batteries to original equipment
manufacturers. In line with Duracell's global manufacturing strategy,
restructuring costs of $15 million were incurred.
Europe
<TABLE>
<CAPTION>
% Increase
----------------
1993 1992 Rpt. Perf.
- - ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alkaline Unit Volume 658 633 4 4
Revenue $606 $598 1 6
Operating Income:
Before Restructuring $121 $118 3 10
Restructuring (32) -- -- --
- - ----------------------------------------------------------------------
$ 89 $118 (25) (19)
======================================================================
</TABLE>
Alkaline unit volume growth was achieved despite recessionary economic
conditions throughout much of Europe. Key growth areas included the U.K.,
reflecting promotional successes, as well as Italy and Spain where volume
growth benefited from alkaline penetration, increased distribution and
successful promotions. Shipments to original equipment manufacturers, military
and other battery manufacturers also supported unit growth. After excluding $27
million of unfavorable currency translation, revenue increased 6% versus the
prior year, driven by alkaline volume growth and higher prices.
Operating income before restructuring improved reflecting the benefits of
alkaline volume growth and improved margins associated with higher prices and
manufacturing efficiencies. These improvements were partially offset by
increased product costs due to adverse currency exchange movements and higher
operating expenses, primarily stemming from increased advertising and promotion
to support the DURACELL brand. Operating income before restructuring,
excluding $8 million of unfavorable currency translation, increased 10%. This
rate of growth exceeded revenue gains due to the absence of losses in 1993 from
the closure of a small manufacturing plant in the prior year. Restructuring
costs of $32 million reflect actions associated with the integration and
streamlining of sales, marketing, distribution and administrative functions
throughout Duracell's European division. These actions were taken to create a
leaner and more versatile organization and to improve both operating efficiency
and customer service.
22
<PAGE> 6
FINANCIAL REVIEW
Results of Operations
[GRAPH]
<TABLE>
<CAPTION>
INVESTMENT IN R&D/ENGINEERING
($ in millions)
- - -----------------------------
<S> <C> <C> <C> <C>
90 91 92 93 94
27 31 36 45 52
</TABLE>
[PHOTO]
"Duracell is developing the first generation of smart,
standard-size, nickel metal hydride battery packs. These packs will
power portable computers and other consumer electronic devices."
Donald Barber, Jr.
Senior Engineer
Duracell New Products
& Technology Division
Other International Markets
<TABLE>
<CAPTION>
% Increase
----------
1993 1992 Rpt. Perf.
- - ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alkaline Unit Volume 502 430 17 17
Revenue $240 $198 21 22
Operating Income:
Before Restructuring $ 33 $ 20 65 66
Restructuring (18) -- -- --
- - ----------------------------------------------------------------------
$ 15 $ 20 (25) (24)
- - ----------------------------------------------------------------------
</TABLE>
Alkaline unit volume growth in Other International Markets was driven by
continued alkaline penetration and expansion of distribution into new and
growing markets. Growth occurred in Latin America, the Pacific Rim and the
Middle East/Africa. Duracell also expanded successfully into Venezuela,
Colombia, and a number of smaller markets in Africa and Central America.
Revenue increased, reflecting the alkaline volume growth and higher prices.
Operating income before restructuring increased on a percentage basis
significantly faster than revenue, reflecting improved gross margins,
leveraging of operating expenses and the non-recurrence of fiscal 1992 charges
for closing the Australian manufacturing facility. Margin improvement was
driven by pricing, closure of the Australian plant and sourcing of lower cost
U.S. product into Australia and other Pacific Rim markets. Higher advertising,
promotion, selling and marketing investments were made to support double-digit
alkaline volume and revenue growth. In addition, a $2 million charge for the
annual operating cost of FAS No. 106 was incurred which was not required in
1992. A restructuring charge of $18 million reflects costs primarily associated
with closure of the Brazilian manufacturing plant. This action was taken to
create a lower cost structure through a comprehensive use of global
manufacturing resources.
Corporate/Research & Development
<TABLE>
<CAPTION>
1994 1993 1992
- - ----------------------------------------------------------
<S> <C> <C> <C>
Operating Expenses $85 $81 $73
- - ----------------------------------------------------------
</TABLE>
Record investments in research continue to be made to further the
development of new high power products, such as nickel metal hydride and
lithium ion rechargeable batteries, and to further enhance the performance and
quality of DURACELL alkaline batteries. Corporate expenses increased when
comparing 1993 to 1992 reflecting the costs of initiatives such as the
establishment of "Duracell Shares," a worldwide stock option plan available to
all employees.
23
<PAGE> 7
FINANCIAL REVIEW
Results of Operations
Interest Expense
<TABLE>
<CAPTION>
1994 1993 1992
- - ----------------------------------------------------------
<S> <C> <C> <C>
Interest Expense $30 $46 $80
- - ----------------------------------------------------------
</TABLE>
The decreases in interest expense were primarily attributable to debt
reductions using excess cash generated from operations after funding all
operational needs.
Tax Expense
<TABLE>
<CAPTION>
1994 1993 1992
- - ----------------------------------------------------------
<S> <C> <C> <C>
Earnings Before Taxes $320 $183 $211
Tax Expense 120 59 44
Effective Tax Rate 38% 32% 21%
- - ----------------------------------------------------------
</TABLE>
Significantly higher tax expense was incurred in 1994 as a result of
increased earnings before taxes and a higher effective tax rate. The effective
tax rate rose due to the full utilization of U.S. net operating loss
carryforwards for book purposes in 1993. The increase in tax expense in 1993
when compared to 1992 reflects higher effective tax rates partially offset by
lower earnings before taxes (as a result of restructuring). In addition to the
full utilization of U.S. net operating loss carryforwards in 1993, increased
European rates generated higher taxes than in 1992.
Restructuring
During 1994 Duracell began realizing the benefits of the restructuring actions
taken in 1993. In North America, the implementation of Duracell's global
manufacturing strategy resulted in providing Latin America and Asia Pacific
operating units with lower cost, no added mercury alkaline batteries.
Streamlining in Europe resulted in cost savings from the integration of sales,
marketing, distribution and administrative functions. The closure of the
Brazilian manufacturing facility contributed to the increased profitability of
Other International Markets since lower cost product is now sourced from the
United States and Europe. Overall, cash outlays and equipment-related
write-offs related to the restructuring are substantially complete.
Foreign Exchange
International operations accounted for approximately one-half of Duracell's
revenue and operating income in 1994. Duracell closely monitors its cash flow
transactions and executes forward contracts to minimize its foreign exchange
exposures. At June 30, 1994, $86 million of forward contracts were outstanding,
all of which have maturities of less than one year.
[GRAPHS]
<TABLE>
<CAPTION>
DECREASING TOTAL DEBT INCOME TAX EXPENSE
($ in millions) ($ in millions)
- - ------------------------------- -------------------------------
<S> <C> <C> <C> <C> <S> <C> <C> <C> <C>
90 91 92 93 94 90 91 92 93 94
1,449 923 734 505 406 13 24 44 59(1) 120
<FN>
(1) Restructuring $18
</TABLE>
[PHOTO]
"Over the past 10 years, Duracell's international markets have been
a significant contributor to the Company's growth. Large untapped
markets in China, India, Russia and other countries provide a
platform for further growth. As these markets open their doors,
Duracell will be well positioned to capitalize on these
opportunities."
Dotti Schultz
Assistant Product Manager
Duracell International Development Markets
24
<PAGE> 8
FINANCIAL REVIEW
Financial Condition
In 1994 Duracell continued to generate significant cash flow which provides
funds for:
Working Capital to Support Growth
Capital Expenditures for Manufacturing Capacity and
Geographic Expansion
Cash generated also allowed for continued:
Dividend Increases and
Debt Reduction
Following is a summary of Duracell's key cash flow components:
<TABLE>
<CAPTION>
(Dollars in millions) 1994 1993 1992
- - ------------------------------------------------------------------
<S> <C> <C> <C>
Cash provided by operating activities $245 $ 297 $ 188
Capital expenditures (69) (42) (54)
Dividends paid (89) (55) --
Debt reduction (94) (192) (244)
- - ------------------------------------------------------------------
</TABLE>
Cash Provided by Operating Activities Remains Strong
Cash from operations of $245 million provided funds for record levels of
investment in the business, continued debt reduction and increased payment of
dividends. Increased working capital requirements due to growth of the business
and geographic expansion resulted in a reduction from the 1993 record level.
Capital Spending Up $27 million to Support Growth
Capital investments of $69 million provided capacity for growth and
manufacturing productivity gains.
Dividends Paid of $89 million--44% of Earnings
Quarterly dividends were increased 38% in March 1994 to $.22 per share.
Debt Repayments of $94 million/Debt-to-Capital Ratio Reduced to 26%
Debt levels were reduced to all-time lows using funds from operations.
[GRAPHS]
<TABLE>
<CAPTION>
IMPROVING TOTAL PER SHARE QUARTERLY
DEBT-TO-CAPITAL RATIO DIVIDEND GROWTH
(in percent) (in dollars)
- - ------------------------------ -------------------------------
<S> <C> <C> <C> <C> <S> <C> <C>
90 91 92 93 94 8/92 2/93 2/94
85 56 42 34 26 .08 .16 .22
</TABLE>
25
<PAGE> 9
FINANCIAL REVIEW
Financial Condition
Cash Flow
Cash provided by operations remained strong at $245 million in 1994, down
slightly from 1993 because of the need to invest in working capital to fund
growth in the business, geographic expansion and the new high power battery
product line. Capital investments reflect spending for capacity expansion and
manufacturing process improvements. Capital expenditures are expected to
continue to increase over the next several years to fund capacity expansion,
manufacturing efficiencies and construction of alkaline manufacturing plants in
China and India beginning in 1995.
Over the past two years Duracell, Toshiba Battery Co. Ltd. of Japan and
Varta Batterie AG of Germany have engaged in joint research and development of
nickel metal hydride rechargeable batteries. Duracell expects that during
fiscal 1995 all three companies will form a joint venture for the purpose of
constructing and operating a manufacturing facility in the United States to
produce rechargeable nickel metal hydride batteries. Duracell is expected to
have a 40% interest in the joint venture, with Toshiba and Varta holding the
remaining 40% and 20%, respectively. The joint venture's capital expenditures
will be funded through either partner contributions or third party borrowings,
or a combination of both.
Duracell will rely on cash generated from operations to fund future
working capital, capital expenditures and joint venture investments needed to
support continued alkaline growth, geographic expansion and investment in high
power products. Funds available from unused bank credit facilities will be used
primarily to fund working capital during the fiscal year when receivables and
inventories rise to meet operating requirements.
Interest payments continued to decrease, reaching a record low of $31
million in 1994; a decrease of 32% from 1993. Duracell's outstanding debt
levels were reduced using cash generated from operations. Significant
reductions in interest expense are not expected in the future.
Cash taxes remained relatively low as taxable income was shielded by
accelerated deductions for amortization and depreciation for tax purposes,
principally in the United States. The increase in taxes paid reflects country
mix of income, as a greater portion of income was earned in countries that are
required to pay taxes currently. On July 8, 1994, Duracell received a
settlement offer from the U.S. Internal Revenue Service (the "IRS") to resolve
all issues arising from the IRS's recently completed audit of the Company's
income tax returns for the years ended June 30, 1988, 1989 and 1990. The IRS
offer was made pursuant to its Intangibles Settlement Initiative, a program
designed by the IRS to allow an early settlement of a large number of pending
cases involving acquisitions that included significant intangible assets.
Management expects to settle pursuant to the IRS offer. The settlement will
reduce the U.S. net operating loss carryforward for tax purposes at June 30,
1994 from $350 million to approximately $130 million and will impact cash flows
principally over three years. Because the proposed settlement relates to
deductions claimed in connection with assets acquired by Duracell in June 1988,
the additional tax that will ultimately result from the proposed settlement has
been recorded as an increase to both goodwill and deferred taxes of $105
million in the June 30, 1994 balance sheet. The proposed settlement will not
have a significant impact on Duracell's future earnings.
Liquidity and Capital Resources
As of June 30, 1994, Duracell had $811 million in contractually committed lines
of credit from long-term bank credit facilities under which $296 million was
outstanding. Commitments under the facilities are used to support issuance of
commercial paper, of which $121 million was outstanding. Duracell's commercial
paper program is rated investment grade. Unused borrowing capacity at June 30,
1994 was $515 million.
To mitigate the effects of changes in interest rates, Duracell has
entered into interest rate swap contracts totaling $175 million. As a result,
43% of total debt was fixed at June 30, 1994 at an average interest rate of
7.34%. These contracts mature in 1998 and 1999.
Duracell's Lexington, North Carolina manufacturing site continues to be
under review by the U.S. Environmental Protection Agency ("EPA") for mercury
contamination, a process which is now expected to result in it being designated
a federal Superfund site. Comprehensive remediation actions have taken place at
the Lexington site over the past 10 years. Management believes those actions,
combined with its current and planned future remediation efforts, should
adequately address the EPA's concerns. Management estimates that future costs
will not exceed $10 million, for which the Company has reserved.
Financial Strategy
After fully funding investments in its core business and key strategic
initiatives, and maintaining the capital structure necessary to sustain an
investment grade credit rating, Duracell returned a portion of cash flow to
shareholders by paying cash dividends of $89 million or $.76 per common share
during 1994. This return amounted to 44% of income before extraordinary items
and accounting changes compared with 31% in 1993 (excluding restructuring).
Duracell expects to continue paying cash dividends with a payout ratio in line
with comparable consumer product companies. Any excess cash may be used to
repurchase shares of Duracell's common stock depending upon prevailing market
conditions.
26
<PAGE> 10
CONSOLIDATED INCOME STATEMENT
For the Years Ended June 30, 1994, 1993 and 1992
(in millions, except per share amounts)
<TABLE>
<CAPTION>
1994 1993 1992
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE $1,871.3 $1,742.2 $1,616.7
Cost of products sold 647.6 640.4 590.4
- - ----------------------------------------------------------------------------------------------------------------------
GROSS PROFIT 1,223.7 1,101.8 1,026.3
Selling, general and administrative expense 867.5 795.2 741.0
Restructuring -- 65.0 --
- - ----------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 356.2 241.6 285.3
Interest expense 29.6 45.6 80.3
Other income (expense) (6.4) (13.2) 6.0
- - ----------------------------------------------------------------------------------------------------------------------
Income before extraordinary items, accounting change and income taxes 320.2 182.8 211.0
Provision for income taxes 120.0 58.9 44.2
- - ----------------------------------------------------------------------------------------------------------------------
INCOME BEFORE EXTRAORDINARY ITEMS AND ACCOUNTING CHANGE 200.2 123.9 166.8
Extraordinary items, net of income tax benefit -- -- (39.0)
Cumulative effect of accounting change, net of income tax benefit -- (75.4) --
- - ----------------------------------------------------------------------------------------------------------------------
NET INCOME $ 200.2 $ 48.5 $ 127.8
- - ----------------------------------------------------------------------------------------------------------------------
PER SHARE DATA:
Income before extraordinary items and accounting change $ 1.68 $ 1.04 $ 1.43
Extraordinary items -- -- (.34)
Cumulative effect of accounting change -- (.63) --
- - ----------------------------------------------------------------------------------------------------------------------
NET INCOME $ 1.68 $ .41 $ 1.09
======================================================================================================================
Weighted average shares and share equivalents outstanding 119.2 118.8 116.9
======================================================================================================================
<FN>
See notes to consolidated financial statements.
</TABLE>
27
<PAGE> 11
CONSOLIDATED BALANCE SHEET
June 30, 1994 and 1993 (dollar amounts in millions, except per share amounts)
<TABLE>
<CAPTION>
1994 1993
- - ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 36.1 $ 25.9
Accounts receivable, less allowance of $23.2 and $18.1 322.8 270.6
Inventories 229.9 194.9
Deferred income taxes 80.3 --
Prepaid and other current assets 51.4 34.6
- - ---------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 720.5 526.0
Property, plant and equipment, net 313.2 294.2
Intangibles, net 1,235.4 1,165.2
Other assets 17.2 12.2
- - ---------------------------------------------------------------------------------------------------------
TOTAL ASSETS $2,286.3 $1,997.6
=========================================================================================================
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 107.3 $ 90.1
Short-term borrowings 51.0 30.7
Accrued liabilities 183.2 202.7
- - ---------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 341.5 323.5
Long-term debt 355.0 473.8
Postretirement benefits other than pensions 95.3 91.2
Deferred income taxes 280.9 62.2
Other non-current liabilities 60.1 65.1
- - ---------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,132.8 1,015.8
- - ---------------------------------------------------------------------------------------------------------
Commitments and contingencies
Equity:
Preferred stock--100 million shares authorized and unissued;
par value per share $.01; none outstanding -- --
Common stock--150 million shares authorized; 117.4 million and 114.9 million
shares issued and outstanding; par value per share $.01 1.2 1.2
Capital surplus 1,069.7 1,015.0
Retained earnings (accumulated deficit) 98.7 (12.9)
Accumulated translation adjustment (16.1) (21.5)
- - ---------------------------------------------------------------------------------------------------------
TOTAL EQUITY 1,153.5 981.8
- - ---------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND EQUITY $2,286.3 $1,997.6
=========================================================================================================
<FN>
See notes to consolidated financial statements.
</TABLE>
28
<PAGE> 12
STATEMENT OF CONSOLIDATED CASH FLOWS
For the Years Ended June 30, 1994, 1993 and 1992 (in millions)
<TABLE>
<CAPTION>
1994 1993 1992
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Income before extraordinary items and accounting change $ 200.2 $ 123.9 $ 166.8
Adjustments to reconcile income before extraordinary items and accounting
change to net cash provided by operating activities:
Restructuring -- 65.0 --
Amortization of intangibles 43.1 47.8 48.4
Depreciation 40.2 39.6 35.8
Provision for losses on accounts receivable 6.6 5.6 8.7
Provision for deferred taxes 71.8 12.7 16.5
Other noncash items 1.8 21.4 (.3)
Changes in assets and liabilities:
Accounts receivable (60.4) (34.9) (36.6)
Inventories (35.3) 14.3 (29.1)
Other assets (16.0) (8.5) (5.7)
Accrued interest and taxes (7.2) 13.6 (5.4)
Other liabilities -- (3.8) (11.0)
- - ----------------------------------------------------------------------------------------------------------------------
CASH PROVIDED BY OPERATING ACTIVITIES 244.8 296.7 188.1
- - ----------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of property, plant and equipment (69.0) (41.7) (53.7)
Proceeds from sale of assets and other 1.9 4.0 3.5
- - ----------------------------------------------------------------------------------------------------------------------
CASH USED BY INVESTING ACTIVITIES (67.1) (37.7) (50.2)
- - ----------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Issuance of common stock 15.9 13.6 144.1
Dividends paid (88.6) (54.9) --
Issuance (repayment) of revolving credit borrowings, net (176.7) (191.1) 198.7
Issuance (repayment) of commercial paper, net 56.2 (6.5) (79.1)
Repurchase of subordinated notes and debentures -- -- (370.2)
Premium on repurchase of subordinated notes and debentures -- -- (32.0)
Net changes in other borrowings and other 25.0 (3.8) 3.1
- - ----------------------------------------------------------------------------------------------------------------------
CASH USED BY FINANCING ACTIVITIES (168.2) (242.7) (135.4)
- - ----------------------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 0.7 1.7 (.1)
- - ----------------------------------------------------------------------------------------------------------------------
INCREASE IN CASH AND CASH EQUIVALENTS 10.2 18.0 2.4
- - ----------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 25.9 7.9 5.5
- - ----------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 36.1 $ 25.9 $ 7.9
- - ----------------------------------------------------------------------------------------------------------------------
CASH PAID DURING THE YEAR FOR:
Interest $ 30.6 $ 45.3 $ 83.4
Taxes $ 54.9 $ 32.8 $ 24.6
======================================================================================================================
<FN>
See notes to consolidated financial statements.
</TABLE>
29
<PAGE> 13
STATEMENT OF CONSOLIDATED EQUITY
For the Years Ended June 30, 1994, 1993 and 1992
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Retained
Earnings Accumulated
Common Common Capital (Accumulated Translation Total
Shares Stock Surplus Deficit) Adjustment Equity
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JUNE 30, 1991 106.0 $1.0 $ 845.3 $(134.3) $ 4.1 $ 716.1
Net income 127.8 127.8
Translation adjustment 18.4 18.4
Public stock offering 5.0 .1 137.3 137.4
Exercise of stock options 1.3 8.3 8.3
- - -------------------------------------------------------------------------------------------------------------------------------
BALANCE AT JUNE 30, 1992 112.3 1.1 990.9 (6.5) 22.5 1,008.0
Net income 48.5 48.5
Translation adjustment (44.0) (44.0)
Exercise of stock options 2.6 .1 13.5 13.6
Dividends paid ($.48 per share) (54.9) (54.9)
Tax benefit related to stock options 10.6 10.6
- - -------------------------------------------------------------------------------------------------------------------------------
BALANCE AT JUNE 30, 1993 114.9 1.2 1,015.0 (12.9) (21.5) 981.8
Net income 200.2 200.2
Translation adjustment 5.4 5.4
Exercise of stock options 2.5 15.9 15.9
Dividends paid ($.76 per share) (88.6) (88.6)
Tax benefit related to stock options 38.8 38.8
- - -------------------------------------------------------------------------------------------------------------------------------
BALANCE AT JUNE 30, 1994 117.4 $1.2 $1,069.7 $ 98.7 $(16.1) $1,153.5
===============================================================================================================================
<FN>
See notes to consolidated financial statements.
</TABLE>
30
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in millions, except per share amounts)
1. BACKGROUND
Duracell International Inc. (the "Company") manufactures and markets high
performance alkaline batteries and other battery types, including rechargeable
nickel metal hydride batteries and primary lithium batteries, and markets a
lighting products line. The Company's batteries are sold worldwide, under the
DURACELL trademark and other Company brand names, through consumer channels, to
industrial users, and to manufacturers of battery-powered consumer, industrial,
medical, and military equipment.
During 1992, the Company entered into agreements with Toshiba Battery Co.
Ltd. of Japan and Varta Batterie AG of Germany for the purpose of engaging in
joint research and development of nickel metal hydride rechargeable batteries.
Nickel metal hydride batteries are used in new high power devices, such as
cellular phones, laptop computers and consumer electronics. Consumer sales of
nickel metal hydride rechargeable batteries were initiated during the fiscal
year ended June 30, 1994. Nonconsumer sales commenced in fiscal 1993.
During fiscal 1994 the Company formed subsidiaries in both China and
India. The Company owns a controlling interest in each of these subsidiaries
and plans to construct manufacturing facilities in each country. Each
subsidiary will be responsible for manufacturing and marketing high performance
alkaline batteries.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the Company and majority-owned
companies. All significant intercompany accounts and transactions are
eliminated in consolidation. The Company's fiscal year ends June 30.
Cash and Cash Equivalents
Cash and cash equivalents for the purpose of reporting cash flows for all
periods presented include cash on deposit and amounts due from banks maturing
within 90 days of purchase.
Inventories
Inventories are valued at the lower of cost or market using the first-in,
first-out method.
Property, Plant and Equipment
Depreciation is determined on a straight-line basis over the estimated useful
lives of the assets. The estimated useful lives are principally 10 to 40 years
for buildings and improvements and 5 to 15 years for machinery and equipment.
Interest costs aggregating $2.1, $2.1 and $2.7 during the fiscal years ended
June 30, 1994, 1993 and 1992, respectively, for the purchase and construction
of long-term assets were capitalized and are being amortized over the related
assets' estimated useful lives.
Intangibles
Patents are amortized on a straight-line basis over periods ranging up to 15
years and computer software is amortized over 5 years. All other intangibles
are amortized on a straight-line basis over 40 years. The Company periodically
evaluates the recoverability of goodwill and other intangible assets by
assessing whether the unamortized intangible asset can be recovered over its
remaining life through cash flows.
Income Taxes
Income tax expense is based on reported results of operations before
extraordinary items, accounting change and income taxes. Deferred income taxes
reflect the impact of temporary differences between the amount of assets and
liabilities recognized for financial reporting purposes and such amounts
recognized for tax purposes. Deferred tax balances are adjusted to reflect tax
rates, based on current tax laws, that will be in effect in the years in which
the temporary differences are expected to reverse. The Company adopted
Statement of Financial Accounting Standards ("FAS") No. 109, "Accounting for
Income Taxes" effective July 1, 1993. Adoption of FAS No. 109 did not have a
material effect on the results of operations.
Translation of Foreign Currencies
Assets and liabilities of subsidiaries, other than those located in highly
inflationary countries, are translated at the rate of exchange in effect on the
balance sheet date; income and expenses are translated at the average rates of
exchange prevailing during the year. The related translation adjustments are
reflected in the accumulated translation adjustment section of the consolidated
balance sheet. Foreign currency gains and losses resulting from transactions
and the translation of financial statements of subsidiaries in highly
inflationary countries are included in results of operations.
Earnings Per Share
Per share amounts are calculated by dividing income before extraordinary items
and accounting change, extraordinary items, the cumulative effect of the
accounting change, and net income, respectively, by the weighted average of
common shares and common share equivalents outstanding during the period.
31
<PAGE> 15
3. ACCOUNTING CHANGE
During the fiscal year ended June 30, 1993, the Company adopted FAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" which
requires accrual of the expected cost of providing postretirement health care
benefits during the years that employees provide service. Previously, retiree
health care and life insurance benefits were expensed as incurred.
Implementation of the standard has no effect on the Company's cash outlays,
which are negligible. In adopting FAS No. 106, the Company elected to fully
recognize the accumulated postretirement benefit obligation as of July 1, 1992.
The cumulative effect of adoption resulted in a noncash charge to earnings of
$75.4, net of $4.7 income tax benefit, which reduced earnings per share $.63.
Results for years preceding 1993 were not restated for the adoption of this
standard. The tax benefit on the cumulative effect of accounting change was not
recorded at the U.S. statutory rate due to the impact of U.S. book federal net
operating loss carryforwards existing at the beginning of the fiscal year.
4. RESTRUCTURING
During the fiscal year ended June 30, 1993 organizational and manufacturing
restructuring actions were taken designed to capitalize on opportunities to
create a lower cost structure through functional efficiencies and optimal use
of global manufacturing resources. As a result, the Company recorded a pre-tax
charge of $65.0 ($47.4 after tax or $.40 per share). During 1994 the Company
began realizing the benefits of the actions taken. In North America, the
Company's global manufacturing strategy has been implemented, resulting in
providing Latin America and Asia Pacific operating units with lower cost, no
added mercury alkaline batteries. Streamlining in Europe resulted in cost
savings from the integration of sales, marketing, distribution and
administrative functions. The closure of the Brazilian manufacturing facility
contributed to the increased profitability of Other International Markets since
lower cost product is now sourced from the United States and Europe. Overall,
cash outlays and equipment-related write-offs related to the restructuring are
substantially complete.
5. EXTRAORDINARY ITEMS
During the fiscal year ended June 30, 1992, the Company recorded extraordinary
losses of $39.0 (net of income tax benefits of $.9). The extraordinary losses
related to the Company's subordinated debt repurchase program which was
completed in September 1991. The components of the extraordinary losses consist
of premiums paid on the repurchases, as well as write-offs of deferred
financing costs associated with the repaid debt.
6. INVENTORIES
The cost of inventories by stage of manufacture was:
<TABLE>
<CAPTION>
1994 1993
- - ---------------------------------------------------------------------------------
<S> <C> <C>
Finished goods $141.0 $132.4
Work in process 66.3 43.2
Raw materials and supplies 22.6 19.3
- - ---------------------------------------------------------------------------------
$229.9 $194.9
=================================================================================
</TABLE>
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of:
<TABLE>
<CAPTION>
1994 1993
- - ---------------------------------------------------------------------------------
<S> <C> <C>
Land $ 12.3 $ 12.1
Buildings and improvements 92.3 83.9
Machinery and equipment 362.3 340.2
Construction in progress 51.1 28.1
- - ---------------------------------------------------------------------------------
518.0 464.3
Less accumulated depreciation (204.8) (170.1)
- - ----------------------------------------------------------------------------------
$313.2 $294.2
=================================================================================
</TABLE>
8. INTANGIBLES
The following summarizes intangible assets, net of accumulated amortization of
$277.0 and $233.0 at June 30, 1994 and 1993, respectively:
<TABLE>
<CAPTION>
1994 1993
- - ---------------------------------------------------------------------------------
<S> <C> <C>
Goodwill $ 504.1 $ 405.4
Trademarks and tradenames 425.5 435.6
Patents and computer software 58.6 69.8
Other 247.2 254.4
- - ---------------------------------------------------------------------------------
$1,235.4 $1,165.2
=================================================================================
</TABLE>
See Note 13 for an explanation of the increase in Goodwill.
9. ACCRUED LIABILITIES
Accrued liabilities were as follows:
<TABLE>
<CAPTION>
1994 1993
- - ---------------------------------------------------------------------------------
<S> <C> <C>
Compensation $ 53.4 $ 44.8
Advertising and promotion 39.3 34.3
Restructuring 2.2 28.6
Income taxes 21.9 27.8
Other 66.4 67.2
- - ---------------------------------------------------------------------------------
$183.2 $202.7
=================================================================================
</TABLE>
32
<PAGE> 16
10. DEBT
The following summarizes the debt structure of the Company:
<TABLE>
<CAPTION>
1994 1993
- - ---------------------------------------------------------------------------------
<S> <C> <C>
Short-term borrowings $ 51.0 $ 30.7
- - ---------------------------------------------------------------------------------
Long-term debt:
Commercial paper 121.5 65.3
Revolving credit loans:
Domestic 72.0 241.0
Foreign 146.1 153.5
Other 15.4 14.0
- - ---------------------------------------------------------------------------------
Total long-term debt 355.0 473.8
- - ---------------------------------------------------------------------------------
$406.0 $504.5
=================================================================================
</TABLE>
Short-term borrowings
The weighted average interest rate for all short-term borrowings was 7.3% and
8.0% at June 30, 1994 and 1993, respectively.
Long-term debt
At June 30, 1994, the Company had long-term bank credit facilities totaling
$811 which expire on August 31, 1996, December 30, 1996 and 1997. Availability
under these credit agreements at June 30, 1994 was $515. In addition, the
Company has other international credit arrangements with banks totaling $219 of
which $148 was available at June 30, 1994. Several of the Company's
subsidiaries have the ability to borrow from a long-term bank credit facility
and the other international credit arrangements. Absent the effects of interest
rate swap agreements, the effective interest rates at June 30, 1994 were 4.6%
on commercial paper, and 4.5% and 5.6% on the domestic and foreign revolving
credit loans, respectively. Incorporating the effects of the interest rate swap
agreements discussed in Note 11, the effective interest rate on $194 of
domestic borrowings was 7.1%.
The Company is required to repay under its long-term bank credit
facilities $47 and $241 in fiscal 1997 and 1998, respectively. Commercial
paper and revolving credit loans are classified as noncurrent as the Company
has the intent and ability to refinance these borrowings on a long-term basis.
The credit facilities require, under some conditions, that a portion of
the net proceeds from the sale of assets be applied to reduce commitments or
repay advances under the credit facilities. These facilities also contain
financial and other restrictive covenants, including limitations on
indebtedness and liens.
11. FINANCIAL INSTRUMENTS
The Company uses financial instruments, including forward contracts, interest
rate swaps and commodity swaps, in its management of foreign currency, interest
rate and commodity exposures. While these instruments are subject to the risk
of loss from changes in exchange and interest rates, and commodity prices,
those losses would generally be offset by gains on the related exposures.
Realized and unrealized gains and losses on forward contracts which hedge firm
third party commitments and commodity swaps are deferred and recognized in
income in the same period as the underlying transaction. Net interest paid or
received on the interest rate swap contracts is included in interest expense.
The forward contracts are used to hedge existing and identified future
foreign currency firm commitments. At June 30, 1994 and 1993 the Company had
$85.8 and $191.9 of forward contracts outstanding, respectively. All contracts
mature within one year.
The interest rate swap agreements effectively convert a portion of the
Company's floating rate debt to a fixed rate basis, thus reducing the impact of
changes in interest rates. No funds under the swap contracts were actually
borrowed or are to be repaid. The Company had at June 30, 1994 and 1993
interest rate swap contracts outstanding with a total notional principal amount
equivalent to $175 maturing in 1998 and 1999.The weighted average interest rate
on the swap contracts is 7.34%. The Company is subject to market risk to the
extent that interest rates on the swapped portion of the outstanding debt
decrease below 7.34%.
The commodity swap contracts are used to hedge existing and identified
future commodity requirements, effectively fixing the price the Company will
pay for the underlying commodity. No commodities are actually purchased or
sold. At June 30, 1994 the Company had $22.9 of commodity swap contracts
outstanding. These contracts mature between 1994 and 1996. The Company is
subject to market risk to the extent that commodity prices decrease below the
contract prices.
Several major international financial institutions are counterparties to
the Company's financial instruments; it is Company practice to monitor the
financial standing of these counterparties on an ongoing basis. The Company is
exposed to credit loss in the event of nonperformance by the counterparties to
these contracts, but does not anticipate such nonperformance.
With respect to trade receivables, concentration of credit risk is
limited, due to the diverse geographic areas covered by Company operations. Any
probable bad debt loss has been provided for in the allowance for doubtful
accounts.
The carrying amounts for cash, receivables, accounts payable and accrued
liabilities, and short-term borrowings approximate fair value because of the
short maturity of these instruments. The fair value of long-term debt is
estimated based on current rates offered to the Company for debt of like
maturities, and approximates its carrying value.
33
<PAGE> 17
The fair value as of June 30, 1994 of forward contracts is $2.0 unfavorable, of
interest rate swaps is $3.3 unfavorable and of commodity swaps is $.9
unfavorable. The amounts are estimated based on dealer quotes. These values
represent the estimated amount the Company would receive or pay to terminate
agreements, taking into consideration current exchange rates, interest rates
and commodity prices.
12. CAPITAL STOCK AND STOCK OPTIONS
The Company maintains two stock option plans. The Duracell Shares Plan provides
options to all employees to purchase up to 8,000,000 shares of common stock.
Options become exercisable either (i) upon the attainment of specified
appreciation levels in the market value of the Company's common stock or (ii)
one half on the fifth anniversary of the grant date and the balance on the
sixth anniversary. At June 30, 1994, exercise prices ranged from $30.50 to
$40.31 per share. The options expire seven years from the date of grant or
earlier in certain circumstances. The Stock Option Plan for Key Employees
provides options to key employees to purchase up to 10,000,000 shares.
Substantially all of the outstanding options under such plan are fully
exercisable. At June 30, 1994, exercise prices ranged from $5.00 to $33.94 per
share. The options expire 10 years from the date of grant or earlier in certain
circumstances.
Information regarding the Company's two option plans is summarized below
(options in thousands):
<TABLE>
<CAPTION>
Stock Price
Options Per Share
- - ------------------------------------------------------------------------------------------
<S> <C> <C>
OUTSTANDING AT JUNE 30, 1991 8,997 $ 5.00- 8.50
Granted 105 21.56-32.56
Exercised (1,307) 5.00- 8.50
Canceled (40) 21.56
- - ------------------------------------------------------------------------------------------
OUTSTANDING AT JUNE 30, 1992 7,755 $ 5.00-32.56
Granted 7,186 33.88-35.63
Exercised (2,631) 5.00-28.31
Canceled (246) 5.00-35.63
- - ------------------------------------------------------------------------------------------
OUTSTANDING AT JUNE 30, 1993 12,064 $ 5.00-35.63
Granted 601 30.50-40.31
Exercised (2,463) 5.00-39.06
Canceled (690) 5.00-39.06
- - ------------------------------------------------------------------------------------------
OUTSTANDING AT JUNE 30, 1994 9,512 $ 5.00-40.31
- - ------------------------------------------------------------------------------------------
EXERCISABLE AT JUNE 30, 1994 4,331 $ 5.00-40.31
==========================================================================================
</TABLE>
At June 30, 1994, limited partnerships in which Kohlberg Kravis Roberts &
Co. is the general partner owned an aggregate of 57,200,000 shares of the
Company's common stock.
13. INCOME TAXES
The provision for income taxes consisted of:
<TABLE>
<CAPTION>
1994 1993 1992
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
U.S. federal $ 2.9 $ 1.3 $ .9
State .8 5.2 2.0
Foreign 44.5 39.7 24.8
- - --------------------------------------------------------------------------------------------------------------
48.2 46.2 27.7
- - --------------------------------------------------------------------------------------------------------------
Deferred:
U.S. federal 72.4 6.7 2.0
State 7.1 2.4 3.6
Foreign (7.7) 3.6 10.9
- - --------------------------------------------------------------------------------------------------------------
71.8 12.7 16.5
- - --------------------------------------------------------------------------------------------------------------
$120.0 $58.9 $44.2
==============================================================================================================
</TABLE>
The domestic and foreign components of income before income taxes were as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $224.6 $101.4 $125.1
Foreign 95.6 81.4 85.9
- - --------------------------------------------------------------------------------------------------------------
$320.2 $182.8 $211.0
==============================================================================================================
</TABLE>
Deferred tax assets and liabilities arise from the impact of temporary
differences between the amount of assets and liabilities recognized for
financial reporting purposes and such amounts recognized for tax purposes and
resulted from:
<TABLE>
<CAPTION>
1994 1993
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Operating loss and other carryforwards $118.5 $292.4
Postretirement benefit obligation 52.2 34.1
Other 56.6 36.4
- - --------------------------------------------------------------------------------------------------------------
227.3 362.9
- - --------------------------------------------------------------------------------------------------------------
Deferred tax liabilities:
Intangibles 298.8 285.2
Property, plant and equipment 57.0 41.1
Other 47.7 34.0
- - --------------------------------------------------------------------------------------------------------------
403.5 360.3
- - --------------------------------------------------------------------------------------------------------------
Valuation allowance (30.1) (46.9)
- - --------------------------------------------------------------------------------------------------------------
$206.3 $ 44.3
==============================================================================================================
</TABLE>
The change in the valuation allowance for deferred tax assets resulted
from management's evaluation of the utilization of state and certain foreign
operating loss carryforwards.
The Company did not recognize deferred tax benefits for losses incurred
in certain countries. It provides for deferred state and foreign income taxes
primarily for temporary differences, which result from recording certain
transactions in different years for income tax purposes than for financial
34
<PAGE> 18
reporting purposes. A summary of the components included in the provision for
deferred income taxes follows:
<TABLE>
<CAPTION>
1994 1993 1992
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Inventory $ (7.5) $ 5.1 $ 1.1
Amortization of identifiable
intangibles 81.4 23.8 7.7
Restructuring reserves .1 (17.1) 6.1
Postretirement benefits (2.1) (4.3) --
Changes in tax laws (.7) .8 --
Other .6 4.4 1.6
- - --------------------------------------------------------------------------------------------------------------
$ 71.8 $ 12.7 $16.5
==============================================================================================================
</TABLE>
The reconciliation between the actual provision for income taxes and the
provision for income taxes at the U.S. federal statutory rate (35% for 1994,
34% for 1993 and 1992) is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income before extraordinary
items, accounting change
and income taxes $320.2 $182.8 $211.0
- - --------------------------------------------------------------------------------------------------------------
Income tax expense at U.S.
federal statutory rate $112.1 $ 62.2 $ 71.7
Tax benefit not currently utilizable 4.0 14.7 6.1
Utilization of net operating
loss carryforwards (5.6) (42.0) (41.6)
Goodwill amortization 3.8 3.5 3.9
Changes in tax laws (.7) 1.0 --
Foreign earnings taxed at
different rates 6.7 6.8 3.6
State, local, and withholding tax
net of federal income tax benefit 4.5 6.6 4.7
Other (4.8) 6.1 (4.2)
- - --------------------------------------------------------------------------------------------------------------
$120.0 $ 58.9 $ 44.2
==============================================================================================================
</TABLE>
Upon adoption of FAS No. 109, $22.4 of previously unrecorded tax benefits
arising from stock option exercises were recognized in capital surplus.
On July 8, 1994, the Company received a settlement offer from the U.S.
Internal Revenue Service (the "IRS") to resolve all issues arising from the
IRS's recently completed audit of the Company's income tax returns for the
years ended June 30, 1988, 1989 and 1990. The IRS offer was made pursuant to
its Intangibles Settlement Initiative, a program designed by the IRS to allow
an early settlement of a large number of pending cases involving acquisitions
that included significant intangible assets. Management expects to settle
pursuant to the IRS offer. The settlement will reduce the U.S. net operating
loss carryforward for tax purposes at June 30, 1994 from $350 to approximately
$130 and will impact cash flows principally over three years. Because the
proposed settlement relates to deductions claimed in connection with assets
acquired by the Company in June 1988, the additional tax that will ultimately
result from the proposed settlement has been recorded as an increase to both
deferred tax liabilities and goodwill of $105 on the June 30, 1994 balance
sheet. The proposed settlement will not have a significant impact on the
Company's future earnings.
No provision was made in 1994 for U.S. income taxes on the undistributed
earnings of the foreign subsidiaries as it is the Company's intention to
utilize those earnings in the foreign operations for an indefinite period of
time or repatriate such earnings only when tax effective to do so. At June 30,
1994 undistributed earnings of the foreign subsidiaries amounted to $250. It is
not practicable to determine the amount of income or withholding tax that would
be payable upon the remittance of those earnings.
At June 30, 1994, the Company had U.S. federal net operating loss
carryforwards of approximately $130 for tax purposes which do not begin to
expire until 2004. The Company also had U.S. foreign tax credit and alternative
minimum tax credit carryforwards for tax purposes of $12 and $5, respectively,
at June 30, 1994. The foreign tax credits expire in 1999. There were no U.S.
carryforwards for book purposes. Foreign net operating loss carryforwards which
expire beginning in 1995 are $55 for tax purposes and $50 for book purposes.
14. PENSION AND OTHER POSTRETIREMENT BENEFITS
Retirement Health Care and Life Insurance Plan
The Company provides certain postretirement health care and life insurance
benefits for qualifying retired employees in the United States. Substantially
all of these employees may become eligible for coverage. Most retirees outside
the United States are covered by government-sponsored and administered
programs.
The net postretirement benefits expense for the fiscal years ended June
30, 1994 and 1993 include the following components:
<TABLE>
<CAPTION>
1994 1993
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Benefits earned during the year $ 3.8 $ 5.4
Interest cost on the unfunded benefit obligation 4.6 6.3
Other (2.3) --
- - --------------------------------------------------------------------------------------------------------------
$ 6.1 $11.7
==============================================================================================================
</TABLE>
Postretirement benefits are paid by the Company as incurred. The
following table summarizes the actuarially determined status of these benefits
at June 30, 1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees $ 8.0 $ 8.3
Fully eligible active participants 8.2 26.1
Other active participants 32.9 57.1
- - --------------------------------------------------------------------------------------------------------------
49.1 91.5
Unrecognized prior service gain 11.6 --
Unrecognized net gain 35.8 --
- - --------------------------------------------------------------------------------------------------------------
Accrued postretirement benefit costs $96.5 $91.5
==============================================================================================================
</TABLE>
35
<PAGE> 19
This obligation was determined by application of the terms of the
postretirement health care and life insurance plan together with relevant
actuarial assumptions. The assumptions used were as follows:
<TABLE>
<CAPTION>
1994 1993
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Discount rate 8.0% 8.0%
Initial health care cost trend rate 10.6% 13.0%
Ultimate health care cost trend rate 5.4% 7.2%
Year in which ultimate trend rate achieved 2002 2007
==============================================================================================================
</TABLE>
An increase in the assumed health care trend rates of 1% in each year
would increase the aggregate of service and interest cost for 1994 by $1.7 and
would increase the June 30, 1994 accumulated postretirement benefit obligation
by $12.3.
During 1994, the Company made certain changes to its postretirement
health care and life insurance benefits that are effective January 1, 1995.
These changes include, among others, contributions on the part of retirees as
well as sharing costs of medical inflation above defined parameters, and
reduced the Company's 1994 expense by $2.9.
Retirement Income Plans
All eligible U.S. employees of the Company are covered under a noncontributory
defined benefit pension plan (the "Cash Balance Plan"). Certain employees in
other countries are covered under contributory and noncontributory defined
benefit pension plans. The Cash Balance Plan provides benefits that are
generally based on years of credited service with the Company and a percentage
of the employees' eligible compensation. The Company's funding policy for the
Cash Balance Plan is to contribute annually the amount necessary to satisfy the
funding standards under the Employee Retirement Income Security Act of 1974.
The net pension expense for the fiscal years ended June 30, 1994, 1993
and 1992 includes the following components:
<TABLE>
<CAPTION>
Domestic International
----------------------------------------------------------------------------------
1994 1993 1992 1994 1993 1992
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Benefits earned during the year $ 7.8 $ 7.3 $ 6.2 $ 2.3 $ 2.3 $ 2.8
Interest cost on projected benefit obligation 2.0 1.3 .8 2.8 2.7 3.1
Actual return on plan assets (.6) (2.1) (.3) (5.4) (5.3) (1.7)
Other (2.1) .1 (.8) 3.1 3.2 (1.1)
- - ---------------------------------------------------------------------------------------------------------------------------------
$ 7.1 $ 6.6 $ 5.9 $ 2.8 $ 2.9 $ 3.1
=================================================================================================================================
</TABLE>
The following table summarizes amounts included in the Company's
consolidated balance sheets and the funded status of Duracell's domestic and
international pension plans at June 30, 1994 and 1993:
<TABLE>
<CAPTION>
International
----------------------------------------------------
1994 1993
- - -------------------------------------------------------------------------------------------------------------------------------
Assets Accum. Assets Accum.
Domestic exceed benefits exceed benefits
------------------ accum. exceed accum. exceed
1994 1993 benefits assets benefits assets
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $30.1 $19.7 $22.5 $ 8.6 $21.2 $7.7
- - -------------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation $35.9 $24.9 $22.5 $ 8.9 $21.2 $8.1
- - -------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation $35.9 $24.9 $30.2 $ 9.2 $29.7 $8.5
Plan assets at fair value 28.7 23.0 33.5 -- 27.5 --
- - -------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation in excess of
(less than) fair value of plan assets 7.2 1.9 (3.3) 9.2 2.2 8.5
Unrecognized prior service cost 4.1 4.7 (1.1) -- (1.4) --
Unrecognized net gain (loss) (3.8) (.2) 6.9 1.8 1.1 1.4
- - -------------------------------------------------------------------------------------------------------------------------------
Accrued pension cost $ 7.5 $ 6.4 $ 2.5 $11.0 $ 1.9 $9.9
===============================================================================================================================
</TABLE>
36
<PAGE> 20
The assumptions used in determining pension costs and funded status
information shown above were:
<TABLE>
<CAPTION>
Domestic International
---------------------------------------------------------------------
1994 1993 1994 1993
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Weighted average of increase in compensation levels 6.5% 6.5% 4.0%-6.5% 4.0%-6.5%
Discount rate 7.5% 8.0% 7.0%-8.5% 7.0%-8.5%
Expected long-term rate of return on plan assets 9.0% 9.0% 7.0%-9.0% 7.0%-9.0%
===================================================================================================================================
</TABLE>
Plan assets consist primarily of marketable securities and fixed interest
bonds.
The Company sponsors a defined contribution 401(k) thrift plan for
domestic employees. The Company matches 50% of employee contributions up to 3%
of eligible compensation subject to certain limitations. Total Company
contributions to the plan were $3.2, $2.8 and $2.6 for the fiscal years ended
June 30, 1994, 1993 and 1992, respectively.
15. GEOGRAPHIC AREAS OF OPERATIONS
The Company operates manufacturing facilities and distribution and sales
offices worldwide. Manufacturing is conducted in the United States, Canada,
Mexico, the United Kingdom, and Belgium.
Information concerning geographic areas is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
- - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE:
North America(1) $1,008.8 $ 896.7 $ 821.0
Europe 575.9 605.8 597.9
Other International Markets 286.6 239.7 197.8
- - ---------------------------------------------------------------------------------------------------------------
$1,871.3 $1,742.2 $1,616.7
===============================================================================================================
OPERATING INCOME(2):
North America $ 279.1 $ 218.4 $ 220.3
Europe 119.6 89.3 118.1
Other International Markets 42.2 15.1 20.3
- - ---------------------------------------------------------------------------------------------------------------
440.9 322.8 358.7
Corporate/Research &
Development (84.7) (81.2) (73.4)
- - ---------------------------------------------------------------------------------------------------------------
$ 356.2 $ 241.6 $ 285.3
===============================================================================================================
IDENTIFIABLE ASSETS:
North America $ 837.3 $ 795.4
Europe 608.5 596.7
Other International Markets 193.2 139.8
- - -------------------------------------------------------------------------------------------
1,639.0 1,531.9
Corporate/Research &
Development 647.3 465.7
- - -------------------------------------------------------------------------------------------
$2,286.3 $1,997.6
===========================================================================================
<FN>
(1) Does not include sales to affiliated companies of $99.9, $76.5 and $60.6
for the fiscal years ended June 30, 1994, 1993, and 1992, respectively.
(2) Includes restructuring charges of $65.0 for the fiscal year ended June 30,
1993. Restructuring costs by geographic segment were $15.1, $31.9 and $18.0 for
North America, Europe, and Other International Markets, respectively.
</TABLE>
North America includes the United States and Canada. Other International
Markets include Argentina, Brazil, Chile, Mexico, Australia, China, India,
Japan, other Latin American and Pacific Rim countries, and markets in the
Middle East and Africa. Included in operating income for the fiscal year ended
June 30, 1992 of Other International Markets is a $10.5 charge related to the
closure of the Australian manufacturing facility which is partially offset by
$9.0 related to the refinement of reserve estimates.
Corporate/Research & Development expenses include worldwide headquarters'
administrative costs, amortization of intangibles, research and development,
and other unallocable expenses.
16. SUPPLEMENTAL INCOME STATEMENT INFORMATION
Following is other supplemental income statement information:
<TABLE>
<CAPTION>
1994 1993 1992
- - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Advertising and promotion $427.9 $356.9 $327.0
Research and development 29.6 26.1 21.1
Foreign exchange gains (losses) (6.7) (8.7) 2.6
===============================================================================================================
</TABLE>
17. COMMITMENTS AND CONTINGENCIES
At June 30, 1994, the Company had various noncancellable operating leases for
distribution centers, office buildings, transportation, computer, and other
equipment. Certain leases contain escalation clauses based upon increases in
the consumer price index. Capital leases as of June 30, 1994 and 1993 were not
significant.
Rental expense for all operating leases was $19.0, $19.2 and $19.5 for
the fiscal years ended June 30, 1994, 1993 and 1992, respectively. Future
minimum payments under noncancellable operating leases at June 30, 1994 are:
<TABLE>
<S> <C>
1995 $16.8
1996 14.7
1997 13.5
1998 10.9
1999 9.7
2000 and thereafter 17.0
- - ------------------------------------------------------------------
$82.6
==================================================================
</TABLE>
37
<PAGE> 21
At June 30, 1994, the Company had legally binding commitments to purchase
materials aggregating $90 which expire during 1995 and 1996. In addition, the
Company expects its capital expenditures to increase above their current levels
over the next several years, although at June 30, 1994 legally binding
commitments were not material.
The Company is involved in legal proceedings related to product liability
and other matters, which are incidental to the business, as well as
environmental remediation programs at several manufacturing sites. In the
opinion of management, the outcome of such proceedings and programs will not
materially affect the Company's consolidated financial position.
The Company's Lexington, North Carolina manufacturing site continues to
be under review by the U.S. Environmental Protection Agency ("EPA") for mercury
contamination, a process which is now expected to result in it being designated
a federal Superfund site. Comprehensive remediation actions have taken place at
the Lexington site over the past 10 years. Management believes those actions,
combined with its current and planned future remediation efforts, should
adequately address the EPA's concerns. Management estimates that future costs
will not exceed $10, for which the Company has reserved.
Kraft, Inc. has agreed to indemnify the Company for certain environmental
and workplace liabilities arising out of discontinued non-battery operations of
the Company and for certain taxes arising prior to June 24, 1988--the date on
which the Company acquired the assets of the battery businesses from Kraft,
Inc.
18. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized below are quarterly financial data for the fiscal years ended June
30, 1994 and 1993. The results of operations for each quarter are not
necessarily comparable to the results of other quarters or the full year.
Worldwide battery sales are significantly greater in the first half of the
Company's fiscal year than the second half due to consumers' traditionally
strong purchases during the holiday season.
<TABLE>
<CAPTION>
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
--------------- --------------- --------------- ---------------
1994 1993 1994 1993 1994 1993 1994 1993
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue $437.5 $430.5 $660.6 $622.3 $337.9 $313.2 $435.3 $376.2
Restructuring -- -- -- -- -- -- -- (65.0)
Operating income (loss) 81.8 75.6 173.4 155.0 30.5 19.7 70.5 (8.7)
Income (loss) before extraordinary items
and accounting change 44.4 39.8 99.1 95.4 14.9 3.9 41.8 (15.2)
Net income (loss) 44.4 (35.6) 99.1 95.4 14.9 3.9 41.8 (15.2)
Per share data(1):
Income (loss) before extraordinary items
and accounting change(2) .37 .34 .83 .80 .12 .03 .35 (.13)
Net income (loss)(2) .37 (.29) .83 .80 .12 .03 .35 (.13)
Cash dividends .16 .08 .16 .08 .22 .16 .22 .16
Weighted average shares and share
equivalents outstanding 118.4 118.6 119.6 118.9 120.4 119.1 120.8 114.8
===============================================================================================================================
<FN>
(1) Quarterly per share data may not equal the annual amounts due to changes in
the weighted average shares and share equivalents outstanding.
(2) Includes a reduction of fourth quarter per share earnings of $.40 in the
fiscal year ended June 30, 1993 relating to the restructuring charge.
</TABLE>
38
<PAGE> 22
19. SELECTED FINANCIAL DATA
Set forth below is selected consolidated financial data of the Company at and
for each of the five fiscal years in the period ended June 30, 1994.
<TABLE>
<CAPTION>
Fiscal Year Ended June 30, 1994 1993 1992 1991 1990
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenue $1,871.3 $1,742.2 $1,616.7 $1,524.1 $1,334.6
Restructuring -- (65.0) -- -- --
Operating income 356.2 (1)241.6 285.3 256.1 225.6
Interest expense 29.6 45.6 80.3 186.3 203.9
Income before extraordinary items
and accounting change 200.2 (2)123.9 166.8 41.2 5.8
Extraordinary items, net of income tax benefit -- -- (39.0) (75.4) --
Accounting change, net of income tax benefit -- (75.4) -- -- --
Net income (loss) 200.2 48.5 127.8 (34.2) 5.8
Per share data:
Income before extraordinary items
and accounting change 1.68 (3)1.04 1.43 .50 .08
Extraordinary items -- -- (.34) (.92) --
Accounting change -- (.63) -- -- --
Net income (loss) 1.68 .41 1.09 (.42) .08
Dividends .76 .48 -- -- --
Weighted average shares and share
equivalents outstanding 119.2 118.8 116.9 82.3 72.8
BALANCE SHEET DATA:
Total assets $2,286.3 $1,997.6 $2,156.6 $2,054.1 $2,111.3
Working capital 379.0 202.5 215.8 148.4 141.4
Total debt 406.0 504.5 734.1 923.3 1,448.7
Stockholders' equity 1,153.5 981.8 1,008.0 716.1 263.9
===================================================================================================================================
<FN>
(1) Operating income was $306.6 before the restructuring charge.
(2) Income before extraordinary items and accounting change was $171.3 before
the impact of restructuring costs.
(3) Income before extraordinary items and accounting change per share was $1.44
before the impact of restructuring costs.
</TABLE>
39
<PAGE> 23
REPORT OF MANAGEMENT
Management of Duracell is responsible for the preparation, integrity, and
objectivity of the financial information presented in this Annual Report. The
accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, and include amounts that are based
upon management's best estimates and judgments as required.
The Company maintains a system of internal accounting control designed to
provide reasonable assurance of the reliability of financial records and the
proper safeguarding of assets. Such controls are based on established policies
and procedures, are implemented by trained, skilled personnel, and provide for
appropriate division of responsibility. The internal control system is
monitored through a comprehensive internal audit program.
The financial statements have been audited by the independent accounting
firm, Deloitte & Touche LLP, whose appointment is ratified annually by
shareholders. The independent auditors conduct a review of internal accounting
controls to the extent required by generally accepted auditing standards and
perform such tests and related procedures as they deem necessary to arrive at
an opinion on the fairness of the financial statements.
The Board of Directors, through its Audit Committee composed solely of
nonmanagement directors, meets periodically with management, the internal
auditors, and the independent auditors to review accounting principles,
internal accounting controls, and financial reporting practices of the Company.
Both the internal auditors and the independent auditors have free access to the
Audit Committee with or without the presence of management.
/S/ C. ROBERT KIDDER
- - ---------------------
C. Robert Kidder
Chairman and Chief Executive Officer
/S/ G. WADE LEWIS
- - ------------------
G. Wade Lewis
Senior Vice President, Finance and
Chief Financial Officer
/S/ ROBERT A. BURGHOLZER, JR.
- - ------------------------------
Robert A. Burgholzer, Jr.
Vice President and Controller
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheet of Duracell
International Inc. and its subsidiaries as of June 30, 1994 and 1993, and the
related consolidated statements of income, equity, and cash flows for each of
the three years in the period ended June 30, 1994. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of Duracell
International Inc. and its subsidiaries at June 30, 1994 and 1993, and the
results of their operations and their cash flows for each of the three years in
the period ended June 30, 1994 in conformity with generally accepted accounting
principles.
As discussed in Note 3 to the consolidated financial statements, in 1993
the Company changed its method of accounting for postretirement benefits other
than pensions to conform with Statement of Financial Accounting Standards No.
106.
/S/ DELOITTE & TOUCHE LLP
- - --------------------------
Hartford, Connecticut
August 10, 1994
40
<PAGE> 24
Appendix to Electronic Format Document
Pursuant to Reg 232.304 of Regulation S-T this appendix describes all
graphic and image information in the foregoing document which will appear in
the paper format of such document:
1. Photographs of employees appear next to their quotes
on pages 20-24 on Exhibit 13.2.
2. A bar graph presenting Duracell's alkaline volume
over the five years from F'90 to F'94 appears on p. 18.
3. A bar graph presenting Duracell's revenue over the
five years from F'90 to F'94 appears on p. 18.
4. A bar graph presenting Duracell's operating income over
the five years from F'90 to F'94 appears on p. 19.
5. A bar graph presenting Duracell's earnings per share over the
five years from F'90 to F'94 appears on p. 19.
6. A bar graph presenting Duracell's advertising and promotion
expense over the five years from F'90 to F'94 appears on p. 20.
7. A bar graph presenting Duracell's capital expenditures over
the five years from F'90 to F'94 appears on p. 21.
8. A bar graph presenting Duracell's earnings before taxes over
the five years from F'90 to F'94 appears on p. 22.
9. A bar graph presenting Duracell's income over
the five years from F'90 to F'94 appears on p. 22.
10. A bar graph presenting Duracell's investment in R&D/Engineering over
the five years from F'90 to F'94 appears on p. 23.
11. A bar graph presenting Duracell's total debt over
the five years from F'90 to F'94 appears on p. 24.
12. A bar graph presenting Duracell's income tax expense over
the five years from F'90 to F'94 appears on p. 24.
13. A bar graph presenting Duracell's debt to capital ratio over
the five years from F'90 to F'94 appears on p. 25.
14. A bar graph presenting Duracell's quarterly dividends
per share at 8/92, 2/93 and 2/94 appears on p. 25.
<PAGE> 1
DURACELL INTERNATIONAL INC. EXHIBIT 21.1
ACTIVE SUBSIDIARIES AND BRANCHES
<TABLE>
<CAPTION>
NAME STATE/COUNTRY
- - ---- -------------
<S> <C>
Duracell Canada Inc. Canada
Duraname Corp. USA (Delaware)
Duracell Danmark A/S Denmark
Duracell Finland OY Finland
Duracell Holdings (UK) Limited United Kingdom
Duracell Batteries Limited United Kingdom
Duracell Overseas Trading Limited United Kingdom
Duracell Italia Holdings SpA Italy
SpA Superpila Italy
Pile Superpila SRL Italy
Tudor Hellesens AB Sweden
Duracell SARL France
Duracell France SNC France
Duracell SpA Italy
NV Duracell Belgium SA Belgium
NV Duracell Batteries SA Belgium
SA Duracell Benelux NV Belgium
Duracell Batteries Sucursal en Espana (Branch) Spain
Duracell Inc. USA (Delaware)
Duracell GmbH Germany
Duracell Nederland BV Netherlands
Duracell-Hellesens Inc. Switzerland
Duracell Asia Limited Hong Kong
Duracell (SEA) Pte. Limited Singapore
Duracell Battery Japan Ltd. Japan
Duracell New Zealand Limited New Zealand
Duracell Australia Pty. Limited Australia
Duracell Caribbean, Inc. Puerto Rico
Duracell SA de CV Mexico
Duracell do Brazil Industria E Comercio Ltda. Brazil
Duracell Argentina SA Argentina
Duracell Chile Sociedad Comercial Limitada Chile
Duracell Colombia Ltda. Colombia
Duracellven CA Venezuela
Daimon-Duracell (Pilhas) Limitada Portugal
Duracell Norge A/S Norway
Duracell International GmbH Austria
Duracell Svenska AB Sweden
Duracell International Trading KFT Hungary
Duracell International Spol. s.r.o. Czech Republic
Duracell Poland S. P. Zoo Poland
Duracell (China) Limited China
Duracell India Private Limited India
Duracell Atlantic, Inc. USA (Delaware)
Duracell South Africa (Branch) South Africa
</TABLE>
<PAGE> 1
EXHIBIT 23.0
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Post-Effective
Amendment No. 1 to Registration Statement No. 33-39817 of Duracell
International Inc. on Form S-8 of our report dated August 10, 1994, appearing
and incorporated by reference in this Annual Report on Form 10-K of Duracell
International Inc. for the year ended June 30, 1994.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Hartford, Connecticut
September 22, 1994
<PAGE> 1
EXHIBIT 24.0
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Directors of
Duracell International Inc. constitute and appoint C. Robert Kidder as their
true and lawful attorney-in-fact and agent, with full power of substitution,
for him and in his name, place and stead, to sign Duracell International Inc.'s
Form 10-K Annual Report for the year ended June 30, 1994, and to file the same
with all exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the udnersigned have hereunto set their hands as
of the 22 day of September, 1994.
/s/ CHARLES R. PERRIN
- - --------------------------------- ---------------------------------
Charles R. Perrin George R. Roberts
/s/ G. WADE LEWIS
- - --------------------------------- ---------------------------------
G. Wade Lewis Robert M. Kavner
- - --------------------------------- ---------------------------------
Henry R. Kravis Scott M. Stuart
- - --------------------------------- ---------------------------------
Paul E. Raether Thomas W. Hudson, Jr.
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Directors of
Duracell International Inc. constitute and appoint C. Robert Kidder as their
true and lawful attorney-in-fact and agent, with full power of substitution,
for him and in his name, place and stead, to sign Duracell International Inc.'s
Form 10-K Annual Report for the year ended June 30, 1994, and to file the same
with all exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the udnersigned have hereunto set their hands as
of the 22 day of September, 1994.
/s/ GEORGE R. ROBERTS
- - --------------------------------- ---------------------------------
Charles R. Perrin George R. Roberts
- - --------------------------------- ---------------------------------
G. Wade Lewis Robert M. Kavner
- - --------------------------------- ---------------------------------
Henry R. Kravis Scott M. Stuart
- - --------------------------------- ---------------------------------
Paul E. Raether Thomas W. Hudson, Jr.
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Directors of
Duracell International Inc. constitute and appoint C. Robert Kidder as their
true and lawful attorney-in-fact and agent, with full power of substitution,
for him and in his name, place and stead, to sign Duracell International Inc.'s
Form 10-K Annual Report for the year ended June 30, 1994, and to file the same
with all exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the udnersigned have hereunto set their hands as
of the 22 day of September, 1994.
- - --------------------------------- ---------------------------------
Charles R. Perrin George R. Roberts
/s/ ROBERT M. KAVNER
- - --------------------------------- ---------------------------------
G. Wade Lewis Robert M. Kavner
- - --------------------------------- ---------------------------------
Henry R. Kravis Scott M. Stuart
- - --------------------------------- ---------------------------------
Paul E. Raether Thomas W. Hudson, Jr.
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Directors of
Duracell International Inc. constitute and appoint C. Robert Kidder as their
true and lawful attorney-in-fact and agent, with full power of substitution,
for him and in his name, place and stead, to sign Duracell International Inc.'s
Form 10-K Annual Report for the year ended June 30, 1994, and to file the same
with all exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the udnersigned have hereunto set their hands as
of the 22 day of September, 1994.
- - --------------------------------- ---------------------------------
Charles R. Perrin George R. Roberts
- - --------------------------------- ---------------------------------
G. Wade Lewis Robert M. Kavner
/s/ Henry R. Kravis /s/ Scott M. Stuart
- - --------------------------------- ---------------------------------
Henry R. Kravis Scott M. Stuart
/s/ PAUL E. RAETHER
- - --------------------------------- ---------------------------------
Paul E. Raether Thomas W. Hudson, Jr.
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Directors of
Duracell International Inc. constitute and appoint C. Robert Kidder as their
true and lawful attorney-in-fact and agent, with full power of substitution,
for him and in his name, place and stead, to sign Duracell International Inc.'s
Form 10-K Annual Report for the year ended June 30, 1994, and to file the same
with all exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the udnersigned have hereunto set their hands as
of the 22 day of September, 1994.
- - --------------------------------- ---------------------------------
Charles R. Perrin George R. Roberts
- - --------------------------------- ---------------------------------
G. Wade Lewis Robert M. Kavner
- - --------------------------------- ---------------------------------
Henry R. Kravis Scott M. Stuart
/s/ THOMAS W. HUDSON, Jr.
- - --------------------------------- ---------------------------------
Paul E. Raether Thomas W. Hudson, Jr.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Duracell International Inc.
Financial Data Schedule for FYE 6/30/94
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-END> JUN-30-1994
<CASH> 36
<SECURITIES> 0
<RECEIVABLES> 323<F1>
<ALLOWANCES> 23
<INVENTORY> 230
<CURRENT-ASSETS> 721
<PP&E> 518<F2>
<DEPRECIATION> 205
<TOTAL-ASSETS> 2,286
<CURRENT-LIABILITIES> 342
<BONDS> 355
<COMMON> 1
0
0
<OTHER-SE> 1,152
<TOTAL-LIABILITY-AND-EQUITY> 2,286
<SALES> 1,871
<TOTAL-REVENUES> 1,871
<CGS> 648
<TOTAL-COSTS> 648
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 9
<INTEREST-EXPENSE> 30
<INCOME-PRETAX> 320
<INCOME-TAX> 120
<INCOME-CONTINUING> 200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 200
<EPS-PRIMARY> 1.68
<EPS-DILUTED> 1.67
<FN>
<F1>Represents receivables net of allowance
<F2>Represents gross PP&E per note #7 to the consolidated financial statements as
incorporated by reference in this Form 10-K.
</TABLE>
