<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, 1995
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 1-10747
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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:
NAME OF EACH EXCHANGE
TITLE ON WHICH REGISTERED
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Common Stock New York Stock Exchange
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, 1995 was approximately $5,056 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.
Number of shares of Common Stock , par value $0.01,
outstanding as of September 13, 1995 . . . . . . . . . 117,915,239
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the fiscal year ended
June 30, 1995 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 26, 1995 are incorporated by reference into
Part III of this Report.
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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, primary lithium batteries and other battery types. Duracell also
markets rechargeable nickel metal hydride batteries and 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 1995. 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 22 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 44
of Duracell's Annual Report to Shareholders for the fiscal year ended June 30,
1995.
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 primary 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 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. During fiscal 1995 affiliates of the three companies formed
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 has a 40% interest
in the joint venture, with Toshiba and Varta holding the remaining 40% and 20%,
respectively. In fiscal 1995, Duracell continued its efforts to convince the
leading manufacturers of portable computers and cellular telephones to design-in
standardized nickel metal hydride rechargeable batteries as the power source for
their devices. Duracell made its initial shipments of DURACELL brand nickel
metal hydride rechargeable batteries to original equipment manufacturers in
fiscal 1993. Consumer sales of rechargeable batteries were initiated during
fiscal 1994. Duracell also plans to begin manufacturing lithium ion high power
rechargeable batteries in the United States during fiscal 1997.
NORTH AMERICAN OPERATIONS
In North America, alkaline batteries account for a substantial majority of
household battery sales. Duracell's management estimates that in fiscal 1995,
alkaline batteries accounted for approximately 85% 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 75% of the consumer battery market. 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.
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
business units have recently been established in Hungary, Czechia, Poland and
Russia. 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.
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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. In fiscal 1995, Duracell's Other International
Markets Division established a business presence in South Africa, Dubai,
Morocco, Malaysia and Thailand.
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 companies. China and India offer
significant growth opportunities for Duracell due to the size of these markets.
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, multiple display positions in retail
stores. Duracell distributes its products principally through retailers,
ranging from mass merchandisers and warehouse clubs 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.
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
primary lithium battery market and are essential to Duracell's success in
selling standard size 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. Alkaline Manufacturing
facilities are currently under construction in China and India.
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. The
joint venture formed by affiliates of Duracell, Toshiba and Varta is currently
building a plant in the United States and will commence manufacturing of
rechargeable nickel metal hydride cells in the U.S. during fiscal 1997. See
Note 2 to the Consolidated Financial Statements.
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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 and warehouse clubs, 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 1995, Duracell concentrated much of its research
and development efforts on enhancing the performance of its alkaline and nickel
metal hydride rechargeable batteries, and the development of a line of lithium
ion rechargeable batteries. Duracell will continue such emphasis in fiscal
1996.
Duracell spent $34.7 million, $29.6 million and $26.1 million on research
and development and $22.9 million, $22.8 million and $18.4 million on
engineering activities in fiscal 1995, 1994 and 1993, respectively.
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EMPLOYEES
Duracell had approximately 8,100 employees at June 30, 1995. Duracell's
United States labor force is not unionized. Approximately 1,000 international
employees are members of national 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:
<TABLE>
<CAPTION>
Location of Plant Status
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<S> <C>
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
</TABLE>
Duracell leases its corporate headquarters facility in Bethel, Connecticut.
In late 1995, Duracell will consolidate its current Bethel offices in a new
leased single office facility currently 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 market
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
construction of alkaline battery manufacturing facilities in each country is
under way.
ITEM 3. LEGAL PROCEEDINGS
Other than ordinary litigation incidental to the battery business, such as
product liability claims, and other than in the environmental 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.
In September, 1994, Duracell, Inc. (the Company's U.S. operating
subsidiary) entered into an Administrative Order by Consent with the U.S.
Environmental Protection Agency ("EPA") whereunder Duracell has submitted to the
EPA a plan for a complete remedial investigation and feasibility study relating
to mercury and volatile organic compounds contamination at the Company's
Lexington, North Carolina manufacturing site. The Company has also agreed to
implement such plan following the EPA's approval of it. Comprehensive
remediation actions have taken place at the Lexington site over many years, but
additional remediation work is proposed in the plan submitted to the EPA. As of
June 30, 1995, Duracell estimates that future investigatory and remediation
costs will be approximately $4 million, the cost of which the Company has fully
reserved. The Company believes that the amount reserved is sufficient to
remediate the property; however, the final remediation plan has not been agreed
to by the EPA. The Company believes that if additional remedial work is
required by the EPA beyond the work planned by the Company, such additional
remediation would not likely exceed an additional $6 million.
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 results of operations or financial
condition.
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 26,
1995 was 5,987. 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, to $.22 per share with
the dividend paid in the third quarter of fiscal 1994 and to $.26 per share with
the dividend paid in the third quarter of fiscal 1995. The closing price of the
Common Stock on September 13, 1995 was $42 7/8 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 1995 and 1994 were as
follows (in dollars):
<TABLE>
<CAPTION>
High Low Close
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<S> <C> <C> <C>
1995
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Fourth Quarter 47 41 7/8 43 1/4
Third Quarter 45 3/8 36 3/4 44 3/4
Second Quarter 46 40 3/4 43 3/8
First Quarter 47 1/4 39 45 5/8
1994
----
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
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
The information set forth in Note 19, Selected Financial Data, which
appears on page 46 of the Annual Report to Shareholders for the fiscal year
ended June 30, 1995 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 22
to 31 of the Annual Report to Shareholders for the fiscal year ended June 30,
1995 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 32 to 47 of the Annual Report to
Shareholders for the fiscal year ended June 30, 1995 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 through 5 of the Proxy Statement
relating to the Annual Meeting of Stockholders to be held on October 26, 1995
is incorporated into this Report by reference thereto.
The executive officers of the Company, their ages and their employment
history are as follows:
<TABLE>
<CAPTION>
Present Principal Occupation
or Employment and Five-Year
Name Age Employment History
---- --- ----------------------------
<S> <C> <C>
Charles R. Perrin 50 Director of the Company since June, 1988; Chairman of the Board since January,
1995; Chief Executive Officer of the Company and Duracell Inc. since October,
1994; President and Chief Operating Officer of the Company and Duracell Inc. from
April, 1992 to October, 1994; President, Duracell North America and International
Development Markets, prior thereto.
Charles E. Kiernan 50 Director of the Company since October, 1994; President and Chief Operating
Officer of the Company and Duracell Inc. since January, 1995 and October, 1994,
respectively; President, Duracell North America from September, 1993 to October,
1994; President, Duracell USA from April, 1992 to September, 1993; Senior Vice
President, Marketing and Manufacturing Operations, Duracell USA from September,
1991 to April, 1992; Vice President, Marketing, Duracell USA, prior thereto.
J. Norman Allen 45 President, New Products and Technology ("NPT") Division since February, 1995;
Senior Vice President, NPT Division from February, 1994 to February, 1995; Vice
President, NPT Division, prior thereto.
David G. Bluestein 49 President, Duracell North America since October, 1994; President, Duracell's
International Development Markets ("IDM") Division from August, 1991 to October,
1994; 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 prior thereto.
</TABLE>
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<TABLE>
<S> <C> <C>
Robert A. Burgholzer, Jr. 52 Vice President and Controller of the Company since April, 1990.
Gregg A. Dwyer 51 Senior Vice President, General Counsel and Secretary of the Company since June,
1988.
Barbara J. Johnson 44 Vice President, Taxes of the Company since November, 1993; Completion of Graduate
Studies and Other Academic Pursuits from October, 1990 until May, 1993; Partner,
Deloitte & Touche, prior thereto.
G. Wade Lewis 48 Director of the Company since October, 1993; Senior Vice President, Finance and
Chief Financial Officer of the Company since June, 1988.
Nancy A. Reardon 43 Senior Vice President, Human Resources of the Company since September, 1991; Vice
President, Executive Resources, American Express prior thereto.
Christophe Ripert 43 President, Duracell Europe Division since July, 1992; Zone Manager, Duracell
Europe, prior thereto.
Walter B. Rogers 52 Vice President, Investor Relations of the Company since February, 1992; Vice
President, Communications, General Host Corp., prior thereto.
Steven G. Staves 43 President, IDM Division since February, 1995; Various Executive Positions,
Sterling-Winthrop, Inc., prior thereto.
Somerset R. Waters 48 Vice President and Treasurer of the Company since December, 1994; Assistant
Treasurer, Black & Decker Corporation prior thereto.
</TABLE>
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the caption "Executive Compensation"
appearing on pages 7 through 10 of the Proxy Statement relating to the
Company's Annual Meeting of Stockholders to be held October 26, 1995 is
incorporated into this Report by reference thereto.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the caption "Beneficial Ownership of
Securities" on pages 5 and 6 of the Proxy Statement relating to the Company's
Annual Meeting of Stockholders to be held on October 26, 1995 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.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Certain Interests and
Transactions" on page 10 of the Proxy Statement relating to the Company's Annual
Meeting of Stockholders to be held on October 26, 1995 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, 1995, 1994 and 1993
- Consolidated Balance Sheet as of June 30, 1995
and 1994
- Statement of Consolidated Cash Flows for the
years ended June 30, 1995, 1994 and 1993
- Statement of Consolidated Equity for the years
ended June 30, 1995, 1994 and 1993
- Notes to Consolidated Financial Statements
- Independent Auditors' Report
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(2) The following Financial Statement Schedule is included
herein:
- Schedule V - Valuation and Qualifying Accounts for the
years ended June 30, 1995, 1994 and 1993 . . . Page 20
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).
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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 Sixth Amendment, dated as of October 28, 1994, 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 31,
1994).
10.12 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).
10.13 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.).
Page 15
<PAGE> 16
10.14 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).
10.15 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).
10.16 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).
10.17 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).
10.18 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
10.19 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).
10.20 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).
10.21 Ninth Amendment, dated as of October 28, 1994, 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 31, 1994).
10.22 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, 1995,
1994 and 1993.
13.2 Pages 22 through 47 of the Company's Annual Report to
Shareholders for the year ended June 30, 1995.
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 22, 1995 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 22nd day of September, 1995
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ CHARLES R. PERRIN Chairman of the Board and Chief
-------------------------------- Executive Officer
Charles R. Perrin *
/s/ G. WADE LEWIS Director, Senior Vice President, Finance
-------------------------------- and Chief Financial Officer
G. Wade Lewis *
/s/ CHARLES E. KIERNAN Director, President and Chief Operating
-------------------------------- Officer
Charles E. Kiernan *
/s/ ROBERT M. KAVNER Director
--------------------------------
Robert M. Kavner *
/s/ C. ROBERT KIDDER Director
--------------------------------
C. Robert Kidder *
/s/ HENRY R. KRAVIS Director
--------------------------------
Henry R. Kravis *
/s/ ARNO A. PENZIAS Director
--------------------------------
Arno A. Penzias*
/s/ PAUL E. RAETHER Director
--------------------------------
Paul E. Raether *
/s/ GEORGE R. ROBERTS Director
--------------------------------
George R. Roberts *
/s/ PAULA STERN Director
--------------------------------
Paula Stern*
/s/ SCOTT M. STUART Director
--------------------------------
Scott M. Stuart *
*By /s/ GREGG A. DWYER
--------------------------------
Gregg A. Dwyer
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, 1995 and 1994, and for
each of the three years in the period ended June 30, 1995, and have issued our
report thereon dated August 10, 1995; such consolidated financial statements and
report are included in your 1995 Annual Report to Stockholders and are
incorporated herein by reference. Our audits also included the consolidated
financial statement schedule of Duracell International Inc. and its
subsidiaries, listed in Item 14(a)(2). This consolidated financial statement
schedule is 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 schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Stamford, Connecticut
August 10, 1995
Page 19
<PAGE> 20
SCHEDULE V
DURACELL INTERNATIONAL INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JUNE 30, 1995, 1994 AND 1993
(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
1995 .............................. $23.2 $6.3 $(0.9) $(9.5) $19.1
1994 .............................. $18.1 $9.0 $ 0.4 $(4.3) $23.2
1993 .............................. $21.7 $5.6 $(1.5) $(7.7) $18.1
</TABLE>
---------------------
Notes: (1) Principally foreign exchange.
(2) Principally write-offs.
Page 20
<PAGE> 21
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 Sixth Amendment, dated as of October 28, 1994, 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 31,
1994).
10.12 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).
10.13 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.).
10.14 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).
10.15 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).
10.16 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).
10.17 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).
10.18 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).
10.19 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).
10.20 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).
10.21 Ninth Amendment, dated as of October 28, 1994, 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 31, 1994).
10.22 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, 1995,
1994 and 1993.
13.2 Pages 22 through 47 of the Company's Annual Report to
Stockholders for the year ended June 30, 1995.
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, 1995, 1994 AND 1993
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Primary Computations:
Weighted average number of shares outstanding 117.4 116.4 113.9
Effect of outstanding stock options 3.3 2.8 4.9
------- ------- -------
Weighted average number of shares and share
equivalents outstanding 120.7 119.2 118.8
======= ======= =======
Per share amounts:
Income before accounting change $ 1.95 $ 1.68 $ 1.04
Cumulative effect of accounting change -- -- (.63)
------- ------- -------
Net income (a) (b) $ 1.95 $ 1.68 $ .41
======= ======= =======
Fully Diluted Computations:
Weighted average number of shares outstanding 117.4 116.4 113.9
Effect of outstanding stock options 3.3 3.2 4.5
------- ------- -------
Weighted average number of shares and share equivalents
outstanding 120.7 119.6 118.4
======= ======= =======
Per share amounts:
Income before accounting change $ 1.95 $ 1.67 $ 1.05
Cumulative effect of accounting change -- -- (.64)
------- ------- -------
Net income (a) (b) $ 1.95 $ 1.67 $ .41
======= ======= =======
</TABLE>
-------------------------------
(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>
<S> <C> <C> <C>
Income before accounting change $ 235.8 $ 200.2 $ 123.9
Cumulative effect of accounting change -- -- (75.4)
------- ------- -------
Net income $ 235.8 $ 200.2 $ 48.5
======= ======= =======
</TABLE>
<PAGE> 1
Financial Review
RESULTS OF OPERATIONS
1995 was another year of record results for Duracell. Revenue broke through the
$2 billion level for the first time, driven by alkaline volume growth in
Duracell's established markets and continued geographic expansion. Earnings per
share increased 15% to $1.93 (before an unrealized gain on forward foreign
currency contracts), largely as a result of the record level of operating
income. Inclusive of the unrealized gain, which resulted from "marking to
market" Duracell's forward foreign currency contracts for hedging intercompany
purchases, earnings per share totaled $1.95.
At the same time these strong financial results were achieved, Duracell
continued to invest at record levels in programs that will enhance its future
growth, including:
- Spending Behind the DURACELL Brand
- Research and Development for Nickel Metal Hydride and Lithium Ion Batteries
- Geographic Expansion into New and Developing Markets
- Capital Spending for New Manufacturing Facilities and Expanded Capacity
Following is a summary of Duracell's financial achievements over the last
five years:
<TABLE>
<CAPTION>
(Units/$ in millions, except per share amounts) 1995 1994 1993 1992 1991
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alkaline Volume 2,726 2,437 2,196 1,978 1,842
Revenue $2,079 $1,871 $ 1,742 $1,617 $1,524
Gross Profit 1,352 1,224 1,102 1,026 939
Advertising and Promotion 464 428 357 327 305
Research and Development 35 30 26 21 17
Other Operating Expenses 443 410 412 393 361
--------------------------------------------------------------------------------------------------------------
Operating Income Before Restructuring 410 356 307 285 256
Operating Margin Before Restructuring 19.7% 19.0% 17.6% 17.6% 16.8%
Restructuring -- -- 65 -- --
--------------------------------------------------------------------------------------------------------------
Operating Income 410 356 242 285 256
Interest Expense 27 30 46 80 186
Tax Expense 152 120 59 44 24
Effective Tax Rate 39.2% 37.5% 32.2% 20.9% 36.4%
Income Before Extraordinary Items and Accounting Change $ 236 $ 200 $ 124 $ 167 $ 41
Per Share Data:
Income Before Restructuring $ 1.95(1) $ 1.68 $ 1.44 $ 1.43 $ 0.50
Restructuring -- -- (0.40) -- --
--------------------------------------------------------------------------------------------------------------
Income Before Extraordinary Items and Accounting Change $ 1.95(1) $ 1.68 $ 1.04 $ 1.43 $ 0.50
==============================================================================================================
Weighted Average Shares and Share Equivalents 121 119 119 117 82
==============================================================================================================
</TABLE>
(1) Income per share, before extraordinary items and accounting change, was
$1.93 before the impact of marking to market forward foreign currency
contracts. See Note 11 to the Consolidated Financial Statements.
22
<PAGE> 2
Key measures of 1995's results are as follows:
Alkaline Volume Improved 12%
Unit gains were driven by continued market growth (i.e., device growth),
geographic expansion and strong customer alliances.
Revenue Increased 11% (9% Performance*)
Increased alkaline volume and pricing actions, together with higher sales of
lithium and rechargeable nickel metal hydride batteries, made 1995 the
twenty-second consecutive year of revenue growth.
Investment in Advertising and Promotion Continued
Record levels of promotional activity and effective advertising supported the
DURACELL brand in established markets and provided increased recognition in new
markets such as China.
Research & Development Increased 17%
Enhanced performance of DURACELL alkaline batteries and the further development
of new high-power products such as rechargeable nickel metal hydride and lithium
ion batteries resulted from the record investment in this area.
Other Operating Expenses Leveraged
Despite spending in support of geographic expansion, other operating expenses
declined as a percentage of revenue.
Operating Income Grew 15% (14% Performance*)
Operating income grew as a result of the revenue increase and continued
leveraging of other operating expenses. Operating margin increased 0.7pp to an
all-time high of 19.7%.
EPS Rose 15% (14% Performance*) to $1.93 -- Exclusive of Mark-to-Market Gain
* "Performance" -- excludes the impact of foreign currency translation (i.e.,
the impact of translating the income statement from local currency into
U.S. dollars).
[GRAPH 1]
[GRAPH 2]
[GRAPH 3]
23
<PAGE> 3
FISCAL YEAR 1995 VERSUS FISCAL YEAR 1994
North America
<TABLE>
<CAPTION>
% Increase
--------------
1995 1994 Rpt. Perf.
----------------------------------------------------------
<S> <C> <C> <C> <C>
Alkaline Unit Volume 1,349 1,182 14 14
Revenue $1,119 $1,009 11 11
Operating Income $ 327 $ 279 17 17
----------------------------------------------------------
</TABLE>
North America's growth led the way for Duracell's record results. For the
second consecutive year, North America experienced double-digit gains in
alkaline volume, revenue and operating income. Alkaline volume growth was driven
by market growth (i.e. device growth) in the mass merchandise outlets in the
United States, expansion of warehouse club volumes and increased shipments to
Original Equipment Manufacturers ("OEM's"). Revenue increased as a result of the
higher alkaline volume and increased primary lithium sales, although the revenue
growth rate was tempered by a higher mix of lower priced alkaline volume
(multi-packs; OEM sales). An alkaline price increase was implemented during the
fourth quarter of fiscal 1995, which will benefit revenues for fiscal 1996.
Operating income growth reflects the revenue increase and the improved
leverage of non-advertising and promotion expenses.
[PICTURE 1]
Europe
<TABLE>
<CAPTION>
% Increase
-------------
1995 1994 Rpt. Perf.
----------------------------------------------------------
<S> <C> <C> <C> <C>
Alkaline Unit Volume 704 683 3 3
Revenue $614 $576 7 (1)
Operating Income $128 $120 7 --
----------------------------------------------------------
</TABLE>
Although hindered by ongoing economic weakness throughout Europe, alkaline
volume growth was achieved through continued expansion into Eastern Europe and
the launch of improved product during fiscal 1995. The ongoing economic weakness
has resulted in consumers trading down to lower priced, lower performing
batteries. Increased shipments to non-traditional customers, such as industrial
and military business in the U.K., also contributed to the volume growth.
Reported revenue benefited from $44 million of favorable currency
translation, while on a performance basis revenue was down slightly, as volume
growth was offset by unfavorable product and country mix. Operating income grew
in line with revenues, as the costs associated with geographic expansion offset
leveraging of other operating expenses.
[GRAPH 4]
24
<PAGE> 4
Other International Markets
<TABLE>
<CAPTION>
% Increase
-------------
1995 1994 Rpt. Perf.
---------------------------------------------------------
<S> <C> <C> <C> <C>
Alkaline Unit Volume 673 572 18 18
Revenue $346 $287 21 25
Operating Income $ 52 $ 42 23 33
---------------------------------------------------------
</TABLE>
[GRAPH 5]
Alkaline volume growth in Other International Markets was driven by the
benefits of geographic expansion, highlighted by China and other Asian markets
including Taiwan and Hong Kong. Additionally, economic stability and recovery in
Brazil and Australia contributed to strong volume growth in those markets. The
economic turmoil in Mexico which followed the December 1994 peso devaluation
hindered results in the second half of the fiscal year, although Mexico's
alkaline volume did increase 10% for the full year. Other parts of Latin America
also suffered some economic weakness, and consumer offtake in India was
disappointing.
Revenue increased as a result of the volume growth and higher prices,
although reported results were hindered by $17 million of negative translation
effects from the Mexican peso devaluation. Operating income growth reflects the
revenue increase and improved operating leverage, mitigated by higher spending
in support of geographic expansion.
[PICTURE 2]
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. The
revenue increase reflected the higher alkaline volumes and generally higher
prices, partially offset by $6 million of unfavorable foreign currency
translation in Canada. Higher lithium and rechargeable nickel metal hydride
battery sales also contributed to the revenue growth.
Operating income (excluding the 1993 restructuring) reflects higher gross
profit, primarily volume driven. Operating expense leverage more than offset the
increased investments in advertising and promotion, resulting in operating
income growing faster than revenue.
25
<PAGE> 5
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>
[GRAPH 6]
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 offset 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.
[PICTURE 3]
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 driven 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.
[GRAPH 7]
Operating income (excluding the 1993 restructuring) increased as a result of
higher revenue,
26
<PAGE> 6
closure of the Brazilian manufacturing facility (which resulted in sourcing
Other International Markets with 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.
[PICTURE 4]
CORPORATE/RESEARCH & DEVELOPMENT
<TABLE>
<CAPTION>
1995 1994 1993
-----------------------------------------------------
<S> <C> <C> <C>
Operating Expenses $97 $85 $81
-----------------------------------------------------
</TABLE>
Record investments in research and development were made in fiscal 1995 to
further the development of new high-power products, such as rechargeable nickel
metal hydride and lithium ion batteries, and to further enhance the performance
and quality of DURACELL alkaline batteries. Increased amortization of goodwill
as a result of the IRS settlement (discussed in Note 13 to the Consolidated
Financial Statements) also led to higher corporate expenses in fiscal 1995.
INTEREST EXPENSE
<TABLE>
<CAPTION>
1995 1994 1993
-----------------------------------------------------
<S> <C> <C> <C>
Interest Expense $27 $30 $46
-----------------------------------------------------
</TABLE>
The decreases in interest expense were primarily attributable to lower
average debt levels. Partially offsetting the effect of lower debt levels during
fiscal 1995 was the impact of higher interest rates in North America and Mexico.
TAX EXPENSE
<TABLE>
<CAPTION>
1995 1994 1993
-----------------------------------------------------
<S> <C> <C> <C>
Earnings Before Taxes $388 $320 $183
Tax Expense 152 120 59
Effective Tax Rate 39% 38% 32%
-----------------------------------------------------
</TABLE>
Higher tax expense was incurred as a result of increased earnings before
taxes and a higher effective tax rate. The increase in the effective tax rate
from fiscal 1993 to fiscal 1994 was due to the full utilization of U.S. net
operating loss carryforwards for book purposes in fiscal 1993.
[GRAPH 8]
[GRAPH 9]
27
<PAGE> 7
FINANCIAL CONDITION
Following is a summary of Duracell's key cash flow components:
<TABLE>
<CAPTION>
(Dollars in millions) 1995 1994 1993
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash provided by operating activities $ 225 $ 245 $ 297
Capital expenditures (108) (69) (42)
Dividends paid (113) (89) (55)
Purchases of treasury stock (41) -- --
Debt increase (reduction) 23 (94) (192)
-------------------------------------------------------------------------------
</TABLE>
Cash Provided by Operating Activities Remains Strong
Cash from operations of $225 million provided funds for record levels of
investment to support future growth and for the return of cash to shareholders
(through increased dividends and share repurchases). Increased working capital
requirements to support growth of the business and geographic expansion over the
past two years resulted in a reduction from the 1993 record level of cash
provided by operating activities.
Capital Spending Increased Dramatically
Capital investments provided added manufacturing capacity to support growth,
including the commencement of construction of new alkaline plants in China and
India, as well as implementing manufacturing productivity gains in existing
alkaline plants. Capital spending will increase further over the next several
years, as investments in high-power rechargeable batteries continue.
Cash Returned to Shareholders Totaled $154 Million
The quarterly cash dividend was increased for the third straight year, to $0.26
per share, with total cash dividends paid representing 48% of earnings. One
million shares of common stock were bought back in open market purchases.
[GRAPH 10]
[GRAPH 11]
28
<PAGE> 8
CASH FLOW
Cash provided by operating activities was used principally for continued
investment in the business through capital expenditures and returned to
shareholders through the payment of dividends and repurchase of common stock.
Capital expenditures are expected to increase over the next several years for
capacity expansion in existing manufacturing sites, construction of new alkaline
manufacturing facilities in China and India, implementing efficiencies in the
manufacturing process, and investments to manufacture new high-power nickel
metal hydride and lithium ion rechargeable batteries.
In August 1992, Duracell, Toshiba Battery Co., Ltd. and Varta Batterie A.G.
(the "Alliance members") signed a Technical Cooperation Agreement whereunder
they agreed to engage in joint research and development of superior performing,
cadmium-free nickel metal hydride rechargeable cells. These cells are used in
powering high-power devices with rapidly growing markets, such as laptop
computers, cellular phones and other consumer electronic devices. Nickel metal
hydride batteries last longer on a single charge than conventional nickel
cadmium rechargeable batteries and are environmentally safer. The Agreement has
a five year term. Each of the Alliance members has the right to use any
technological developments emanating from their joint efforts, as well as the
right to license the other members' pre-existing nickel metal hydride technology
on commercially reasonable terms. The Alliance members remain in active
technical collaboration.
In October 1994, affiliated companies of the Alliance members formed a joint
venture for the purpose of manufacturing nickel metal hydride cells in the
United States. Duracell's and Toshiba's affiliates each hold a forty percent
(40%) interest in the joint venture and Varta's affiliate has a twenty percent
(20%) stake. A joint venture manufacturing facility is currently under
construction in Mebane, North Carolina. The cells made by the joint venture will
be sold to the Alliance members. The duration of the joint venture is indefinite
and Duracell's initial capital contribution is expected to be $20 million, which
will be paid into the joint venture over several years beginning in fiscal 1995.
In addition to the equity contributions for the three partners, the joint
venture will utilize third party borrowings to fund capital expenditure and
working capital requirements. See Note 2 to the Consolidated Financial
Statements for a discussion of Duracell's guarantee of a portion of the joint
venture's debt.
The Company will rely on cash generated from operations to fund future
working capital and capital expenditure requirements needed to support continued
alkaline growth, geographic expansion and investment in high-power rechargeable
batteries. Funds available from unused bank credit facilities will be used
primarily to fund seasonal working capital during the year when receivables and
inventories rise to meet operating requirements.
Dividends paid totaled $113 million, up from $89 million in fiscal 1994 and
$55 million in fiscal 1993. The significant dividend increases reflect
Duracell's higher earnings and the increase in the dividend pay-out ratio to 48%
of earnings before mark-to-market.
Taxes paid for fiscal 1995 of $105 million increased as a result of higher
earnings and the full utilization of domestic net operating loss carryforwards.
Tax payments have remained low in relation to the tax provision of $152 million
as taxable income was shielded by deductions for amortization and depreciation
recognized earlier for tax purposes than for book purposes, principally in the
United States. No U.S. tax net operating loss carryforward remains at June 30,
1995. During fiscal 1995 Duracell formally resolved all issues arising from the
IRS's audit of Duracell's income tax returns for the years ended June 30, 1988,
1989 and 1990. The settlement was made pursuant to the IRS's 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. The settlement, recorded in fiscal 1994,
reduced 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 settlement relates to deductions
claimed in connection with assets acquired by Duracell in June 1988, the
additional tax that will result from the settlement has been recorded as an
increase to both deferred tax liabilities and goodwill of $105 million on the
June 30, 1994 balance sheet. The settlement will not have a significant impact
on Duracell's future earnings.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1995, Duracell had $815 million in contractually committed lines
of credit from long-term bank credit facilities under which $365 million was
outstanding. Commitments under the facilities are used to support commercial
paper, of which $225 million was outstanding at June 30, 1995. Duracell's
commercial paper program is rated investment grade. Unused borrowing capacity
under its principal bank credit facilities at June 30, 1995 was $450 million.
29
<PAGE> 9
In September 1994, Duracell Inc. entered into an Administrative Order by
Consent with the U.S. Environmental Protection Agency ("EPA") whereunder it has
submitted to the EPA a plan for a complete remedial investigation and
feasibility study relating to mercury and volatile organic compounds
contamination at its Lexington, North Carolina manufacturing site. Duracell has
also agreed to implement such plan following the EPA's approval of it.
Comprehensive remediation actions have taken place at the Lexington site over
many years, but additional remediation work is proposed in the plan submitted to
the EPA. As of June 30, 1995, Duracell estimates that future investigatory and
remediation costs will be approximately $4 million, which has been fully
reserved. The Company believes that the amount reserved is sufficient to
remediate the property; however, the final remediation plan has not been agreed
to by the EPA. Duracell believes that if additional remedial work is required by
the EPA beyond the work planned by Duracell, such additional remediation would
not likely exceed an additional $6 million.
FINANCIAL STRATEGY
After fully funding investments in its core alkaline 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 $113 million, or $.96 per common share,
during the fiscal year ended June 30, 1995. This return amounted to 48% of
income before accounting changes compared with 44% in 1994 and 31% in 1993
(excluding restructuring). Duracell expects to continue paying cash dividends
with a payout ratio in line with comparable consumer product companies.
During fiscal 1995 Duracell repurchased 1,000,000 shares of its common stock
in open market purchases at a total cost of $41 million. Future excess cash may
be used to repurchase shares of Duracell's common stock depending upon
prevailing market conditions. Duracell has the authorization to purchase up to
3,000,000 shares of its common stock, reflecting the original 4,000,000 share
authorization by the Board of Directors less the 1,000,000 shares purchased
through June 1995.
RISK MANAGEMENT
Foreign Exchange
International operations account for approximately half of Duracell's revenue
and operating income. Duracell is exposed to foreign exchange risk on
transactions which are denominated in a currency other than the operating unit's
functional currency. Such transactions include foreign currency denominated
imports and exports of raw materials and finished goods (both intercompany and
third party), loan payments and dividend payments. In almost all cases the
functional currency is the unit's local currency.
It is Duracell's policy to reduce foreign currency cash flow exposure due to
exchange rate fluctuations by hedging anticipated and firmly committed foreign
currency transactions wherever economically feasible. Duracell does not
speculate in foreign currencies. Duracell does not hedge foreign currency income
translation or foreign currency net assets or liabilities unless such net
amounts are expected to be remitted in the form of dividends or payment of
intercompany loans. The counterparties to the forward contracts are financial
institutions with investment grade credit ratings.
Duracell closely monitors its foreign currency cash flow transactions and
executes forward contracts to reduce its foreign exchange exposures. The use of
forward contracts effectively protects Duracell's cash flows against unfavorable
movements in exchange rates, to the extent of the amount under the contracts.
The use of forward contracts also effectively prevents Duracell from benefiting
in the event of favorable movements in exchange rates, to the extent of the
amount under the contracts.
As of June 30, 1995, forward exchange contracts outstanding totaled $388
million and mature within one year. In accordance with current accounting
standards, the Company defers unrealized gains and losses arising from contracts
that hedge existing and identified foreign currency firm third party commitments
until the related transaction occurs. Unrealized gains and losses arising from
contracts that hedge anticipated intercompany transactions are recorded
currently in income. These unrealized gains and losses will fluctuate from
quarter to quarter and represent timing issues only, with no economic benefit or
cost to the Company until realized. Upon realization, the gains or losses
arising on the forward contracts are offset by gains or losses on the related
foreign currency exposures.
Interest Rate Swaps
Duracell utilizes interest rate swaps to reduce the impact on interest expense
of fluctuating rates on variable rate debt. Swaps or other financial instruments
that are speculative are not permitted by Duracell's internal policies. As of
June 30, 1995, $150 million notional amount of interest rate swaps were
outstanding, effectively fixing that amount
30
<PAGE> 10
of variable-rate U.S. dollar debt to an average 7.44% fixed-rate U.S. dollar
debt. No funds under the swap contracts were actually borrowed or are to be
repaid. As of June 30, 1995 Duracell had an additional $50 million notional
amount interest rate swap related to an operating lease. Under the terms of the
lease, the Company's rental expense fluctuates with interest rates. The interest
rate swap effectively fixes a portion of this variable rental expense, through
fiscal 1998. Under interest rate swaps, Duracell agrees with the other parties
to exchange, at specified intervals, the difference between the fixed-rate and
floating-rate interest amounts calculated by reference to the agreed notional
principal amount. These swaps mature on various dates beginning June 1998 and
ending May 1999. Duracell is exposed to credit-related losses in the event of
nonperformance by the counterparties to these swaps, although no such losses are
expected as the counterparties are commercial banks having an investment grade
credit rating.
[GRAPH 12]
[GRAPH 13]
Commodity Swaps
Duracell is exposed to risk from fluctuating prices for commodities used in the
manufacture of batteries. Some of this risk is hedged through commodity swaps
executed over the counter with a commercial bank. Duracell utilizes commodity
swaps to effectively fix the price the Company will pay for zinc, which is a
principal component in the manufacturing process, over the life of the swap.
Swaps or other financial instruments that are speculative are not permitted by
Duracell's internal policies. Costs of products sold reflects the commodity cost
including the effects of the commodity swaps. As of June 30, 1995, $27 million
of commodity swaps were outstanding, maturing through June 30, 1997. Under such
contracts Duracell pays the counterparty at a fixed rate, and receives from the
counterparty a floating rate per pound of zinc; only the net differential is
actually paid or received. The amounts paid or received are calculated based on
the notional amounts under the contracts. The use of such commodity swaps
effectively protects Duracell against an increase in the price of the commodity,
to the extent of the notional amount under the contract. This also effectively
prevents Duracell from benefiting in the event of a decrease in the price of the
commodity. Duracell is exposed to credit-related losses in the event of
nonperformance by the counterparty to these swaps, although no such losses are
expected as the counterparty is a commercial bank having an investment grade
credit rating.
See Note 11 to the Consolidated Financial Statements for more detail
regarding Duracell's use of derivatives.
31
<PAGE> 11
Consolidated Income Statement
<TABLE>
<CAPTION>
For the Years Ended June 30, 1995, 1994 and 1993 (in millions, except per share amounts) 1995 1994 1993
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE $2,079.0 $1,871.3 $1,742.2
Cost of products sold 727.3 647.6 640.4
---------------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT 1,351.7 1,223.7 1,101.8
Selling, general and administrative expense 942.0 867.5 795.2
Restructuring -- -- 65.0
---------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 409.7 356.2 241.6
Interest expense 27.0 29.6 45.6
Other income (expense) 5.4 (6.4) (13.2)
---------------------------------------------------------------------------------------------------------------------------------
Income before accounting change and income taxes 388.1 320.2 182.8
Provision for income taxes 152.3 120.0 58.9
---------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE ACCOUNTING CHANGE 235.8 200.2 123.9
Cumulative effect of accounting change, net of income tax benefit -- -- (75.4)
---------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 235.8 $ 200.2 $ 48.5
---------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA:
Income before accounting change $ 1.95 $ 1.68 $ 1.04
Cumulative effect of accounting change -- -- (.63)
---------------------------------------------------------------------------------------------------------------------------------
Net income $ 1.95 $ 1.68 $ .41
=================================================================================================================================
Weighted average shares and share equivalents outstanding 120.7 119.2 118.8
=================================================================================================================================
</TABLE>
See notes to consolidated financial statements.
32
<PAGE> 12
Consolidated Balance Sheet
<TABLE>
<CAPTION>
June 30, 1995 and 1994 (dollar amounts in millions, except per share amounts) 1995 1994
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 35.0 $ 36.1
Accounts receivable, less allowance of $19.1 and $23.2 390.0 322.8
Inventories 284.4 229.9
Deferred income taxes 41.1 80.3
Prepaid and other current assets 61.3 51.4
-----------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 811.8 720.5
Property, plant and equipment, net 378.3 313.2
Intangibles, net 1,208.9 1,235.4
Other assets 20.8 17.2
-----------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 2,419.8 $ 2,286.3
-----------------------------------------------------------------------------------------------------------------
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 117.8 $ 107.3
Short-term borrowings 59.0 51.0
Accrued liabilities 195.6 183.2
-----------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 372.4 341.5
Long-term debt 364.5 355.0
Postretirement benefits other than pensions 98.4 95.3
Deferred income taxes 269.1 280.9
Other non-current liabilities 52.0 60.1
-----------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,156.4 1,132.8
-----------------------------------------------------------------------------------------------------------------
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; 118.7 million and 117.4 million shares
issued, 117.7 million and 117.4 million shares outstanding; par value per share $.01 1.2 1.2
Capital surplus 1,094.6 1,069.7
Retained earnings 221.7 98.7
Accumulated translation adjustment (12.9) (16.1)
Treasury stock (41.2) --
-----------------------------------------------------------------------------------------------------------------
TOTAL EQUITY 1,263.4 1,153.5
-----------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND EQUITY $ 2,419.8 $ 2,286.3
-----------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
33
<PAGE> 13
Statement of Consolidated Cash Flows
<TABLE>
<CAPTION>
For the Years Ended June 30, 1995, 1994 and 1993 (in millions) 1995 1994 1993
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Income before accounting change $ 235.8 $ 200.2 $ 123.9
Adjustments to reconcile income before accounting change to
net cash provided by operating activities:
Restructuring -- -- 65.0
Amortization of intangibles 46.3 43.1 47.8
Depreciation 45.8 40.2 39.6
Provision for deferred taxes 44.6 71.8 12.7
Other noncash items (2.6) 1.8 21.4
Changes in assets and liabilities:
Accounts receivable (79.0) (53.8) (29.3)
Inventories (55.4) (35.3) 14.3
Other assets (9.0) (16.0) (8.5)
Accrued interest and taxes 3.2 (7.2) 13.6
Other liabilities (5.2) -- (3.8)
------------------------------------------------------------------------------------------------------------------
CASH PROVIDED BY OPERATING ACTIVITIES 224.5 244.8 296.7
------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of property, plant and equipment (108.1) (69.0) (41.7)
Proceeds from sale of assets and other (7.5) 1.9 4.0
------------------------------------------------------------------------------------------------------------------
CASH USED BY INVESTING ACTIVITIES (115.6) (67.1) (37.7)
------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Issuance of common stock 16.1 15.9 13.6
Dividends paid (112.8) (88.6) (54.9)
Purchases of treasury stock (41.2) -- --
Repayment of revolving credit borrowings, net (96.7) (176.7) (191.1)
Issuance (repayment) of commercial paper, net 103.8 56.2 (6.5)
Net changes in other borrowings and other 17.7 25.0 (3.8)
------------------------------------------------------------------------------------------------------------------
CASH USED BY FINANCING ACTIVITIES (113.1) (168.2) (242.7)
------------------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 3.1 0.7 1.7
------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1.1) 10.2 18.0
------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 36.1 25.9 7.9
------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 35.0 $ 36.1 $ 25.9
------------------------------------------------------------------------------------------------------------------
CASH PAID DURING THE YEAR FOR:
Interest $ 30.6 $ 30.6 $ 45.3
Taxes $ 104.6 $ 54.9 $ 32.8
------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
34
<PAGE> 14
Statement of Consolidated Equity
<TABLE>
<CAPTION>
Retained
Earnings Accumulated
For the Years Ended June 30, 1995, 1994 and 1993 Common Common Capital (Accumulated Translation Treasury Total
(in millions, except per share amounts) Shares Stock Surplus Deficit) Adjustment Stock Equity
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
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 ($.76 per share) (88.6) (88.6)
Tax benefit related to stock options 38.8 38.8
----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT JUNE 30, 1994 117.4 1.2 1,069.7 98.7 (16.1) 1,153.5
Net income 235.8 235.8
Translation adjustment 3.2 3.2
Exercise of stock options 1.3 16.1 16.1
Dividends paid ($.96 per share) (112.8) (112.8)
Treasury shares repurchased (1.0) (41.2) (41.2)
Tax benefit related to stock options 8.8 8.8
----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT JUNE 30, 1995 117.7 $1.2 $1,094.6 $ 221.7 $(12.9) $(41.2) $1,263.4
==================================================================================================================================
</TABLE>
See notes to consolidated financial statements.
35
<PAGE> 15
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. 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.
2. JOINT VENTURE
In August 1992, the Company, Toshiba Battery Co., Ltd. and Varta Batterie A.G.
(the "Alliance members") signed a Technical Cooperation Agreement whereunder
they agreed to engage in joint research and development of superior performing,
cadmium-free nickel metal hydride rechargeable cells. These cells are used in
powering high-power devices with rapidly growing markets, such as laptop
computers, cellular phones and other consumer electronic devices. The Agreement
has a five year term. Each of the Alliance members has the right to use any
technological developments emanating from their joint efforts, as well as the
right to license the other members' pre-existing nickel metal hydride technology
on commercially reasonable terms. The Alliance members remain in active
technical collaboration.
In October 1994, affiliated companies of the Alliance members formed a joint
venture for the purpose of manufacturing nickel metal hydride cells in the
United States. Duracell's and Toshiba's affiliates each hold a forty percent
interest in the joint venture and Varta's affiliate has a twenty percent stake.
The joint venture's manufacturing facility is currently under construction in
Mebane, North Carolina. The cells made by the joint venture will be sold to the
Alliance members and will supplement the parties' cell needs now being satisfied
by production at Toshiba's existing nickel metal hydride plant in Japan. The
duration of the joint venture is indefinite and Duracell's initial capital
contribution is expected to be $20 million, which will be paid into the joint
venture over several years beginning in fiscal 1995.
In addition to the equity contributions from the three partners, the joint
venture will utilize third party borrowings to fund its capital expenditure and
working capital requirements. In August 1995 the joint venture issued $75 of
industrial development bonds to fund the construction and outfitting of the
Mebane manufacturing facility. The bonds are secured by the assets of the joint
venture, and each of the three partners has severally guaranteed their
proportionate share of the principal, interest and other bond obligations.
The joint venture is accounted for using the equity method of accounting.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the Company and majority-owned
subsidiaries. All significant intercompany accounts and transactions are
eliminated in consolidation. Certain amounts in the consolidated financial
statements for periods prior to June 30, 1995 have been reclassified to conform
to the current presentation. 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 $4.8, $2.1 and $2.1 during the fiscal years ended
June 30, 1995, 1994 and 1993, respectively, for the purchase and construction of
long-term assets were capitalized and are being amortized over the related
assets' estimated useful lives. Incremental start-up costs directly associated
with major new facilities which are incurred prior to such facilities becoming
operational are deferred and amortized on a straight-line basis over a
relatively short period after production commences. Costs deferred as of June
30, 1995 were immaterial.
Intangibles
Patents are amortized on a straight-line basis over periods ranging up to 15
years and computer software is amortized over 3 to 5 years. All other
intangibles are amortized on a straight-line basis over 40 years. The Company
periodically evaluates the recoverability of intangible assets by assessing
whether the unamortized intangible asset can be recovered over its remaining
life through expected future undiscounted operating cash flows. Any impairment
loss required would be determined by comparing the carrying value of the asset
to its current market value, or a discounted cash flow calculation if no market
value were readily available.
Income Taxes
Income tax expense is based on reported earnings before 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
36
<PAGE> 16
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.
Derivative Financial Instruments
The Company does not speculate in derivatives. The Company uses three principal
types of derivatives: foreign exchange contracts (which reduce the Company's
cash flow exposures to changes in currency exchange rates); commodity swap
contracts (which effectively fix the commodity price to the Company); and
interest rate swaps (which effectively convert a portion of the Company's
variable rate obligations to a fixed rate). The fair value of forward contracts
which hedge firm third party commitments is deferred and recognized as part of
the related foreign currency transactions as they occur. Forward contracts
related to anticipated intercompany purchases and sales are marked to market
through other income (expense). Commodity swap contracts are accounted for on a
settlement basis, with the net amounts paid or received under such contracts
included in the cost of the commodity acquired. Interest rate swaps are also
accounted for on a settlement basis, with net interest paid or received on the
swaps included in interest expense. See Note 11 for more information regarding
the Company's derivative financial instruments.
Earnings Per Share
Per share amounts are calculated by dividing net income by the weighted average
number of common shares and common share equivalents outstanding during the
period.
4. 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.
5. 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. Cash
payments and equipment-related write-offs related to the restructuring were
substantially completed during fiscal 1994.
6. INVENTORIES
The cost of inventories by stage of manufacture was:
<TABLE>
<CAPTION>
1995 1994
-------------------------------------------------------
<S> <C> <C>
Finished goods $171.3 $141.0
Work in process 75.4 66.3
Raw materials and supplies 37.7 22.6
-------------------------------------------------------
$284.4 $229.9
=======================================================
</TABLE>
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of:
<TABLE>
<CAPTION>
1995 1994
--------------------------------------------------------
<S> <C> <C>
Land $ 13.8 $ 12.3
Buildings and improvements 107.8 92.3
Machinery and equipment 410.2 362.3
Construction in progress 95.2 51.1
--------------------------------------------------------
627.0 518.0
Less accumulated depreciation (248.7) (204.8)
--------------------------------------------------------
$ 378.3 $ 313.2
========================================================
</TABLE>
37
<PAGE> 17
8. INTANGIBLES
The following summarizes intangible assets, net of accumulated amortization of
$328.5 and $277.0 at June 30, 1995 and 1994, respectively:
<TABLE>
<CAPTION>
1995 1994
-----------------------------------------------------------
<S> <C> <C>
Goodwill $ 499.2 $ 504.1
Trademarks and tradenames 417.4 425.5
Patents and computer software 50.4 58.6
Other 241.9 247.2
-----------------------------------------------------------
$1,208.9 $1,235.4
===========================================================
</TABLE>
9. ACCRUED LIABILITIES
Accrued liabilities were as follows:
<TABLE>
<CAPTION>
1995 1994
----------------------------------------------------------
<S> <C> <C>
Compensation $ 52.9 $ 53.4
Advertising and promotion 44.8 39.3
Income taxes 25.9 21.9
Other 72.0 68.6
----------------------------------------------------------
$195.6 $183.2
==========================================================
</TABLE>
10. DEBT
The following summarizes the debt structure of the Company:
<TABLE>
<CAPTION>
1995 1994
----------------------------------------------------------
<S> <C> <C>
Short-term borrowings $ 59.0 $ 51.0
----------------------------------------------------------
Long-term debt:
Commercial paper 225.2 121.5
Revolving credit loans:
Domestic -- 72.0
Foreign 126.9 146.1
Other 12.4 15.4
----------------------------------------------------------
Total long-term debt 364.5 355.0
----------------------------------------------------------
$423.5 $406.0
==========================================================
</TABLE>
Short-term borrowings
The weighted average interest rate for all short-term borrowings was 5.1% and
7.3% at June 30, 1995 and 1994, respectively.
Long-term debt
At June 30, 1995, the Company had long-term bank credit facilities totaling $815
which expire on December 30, 1997 and 1999. Availability under these credit
agreements at June 30, 1995 was $450. In addition, the Company has other
international credit arrangements with banks totaling $264 of which $199 was
available at June 30, 1995. 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, 1995 were 6.3% on commercial paper and 7.4% on foreign
revolving credit loans, respectively. Incorporating the effects of the interest
rate swap agreements discussed in Note 11, the effective interest rate on $225
of domestic borrowings was 7.1%.
The Company is required to repay under its long-term bank credit facilities
$25 and $340 in 1997 and 1999, 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 derivative financial instruments to reduce its exposures to
changes in interest rates, commodity prices and foreign exchange rates. The
Company does not hold or issue financial instruments for trading or speculative
purposes. The notional amounts of derivatives summarized in this Note do not
represent amounts actually exchanged by the parties. The amounts exchanged are
calculated on the basis of the notional amounts and the other terms of the
derivatives, which relate to interest rates, commodity prices and exchange
rates. 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.
The Company is exposed to credit-related losses in the event of nonperformance
by counterparties to financial instruments, but it does not expect any
counterparties to fail as all counterparties have investment grade credit
ratings.
Foreign exchange
International operations account for approximately half of the Company's revenue
and operating income. The Company is exposed to foreign exchange risk on
transactions which are denominated in a currency other than the operating unit's
functional currency. Such transactions include foreign currency denominated
imports and exports of raw materials and finished goods (both intercompany and
third party), loan payments and dividend payments. In almost all cases the
functional currency is the unit's local currency.
It is the Company's policy to reduce foreign currency cash flow exposure due
to exchange rate fluctuations by
38
<PAGE> 18
hedging anticipated and firmly committed foreign currency transactions wherever
possible. The Company does not hedge foreign currency translation or foreign
currency net assets or liabilities unless such net amounts are expected to be
remitted in the form of dividends or payment of intercompany loans.
The Company closely monitors its foreign currency cash flow transactions and
executes forward contracts to reduce its foreign exchange exposures. The use of
forward contracts effectively protects the cash flows of the Company against
unfavorable movements in exchange rates, to the extent of the amount under the
contracts. The use of forward contracts also effectively prevents the Company
from benefiting in the event of favorable movements in exchange rates, to the
extent of the amount under the contracts.
In accordance with current accounting standards, the Company defers unrealized
gains and losses arising from contracts that hedge existing and identified
foreign currency firm third party commitments until the related transaction
occurs. Unrealized gains and losses arising from contracts that hedge
anticipated intercompany transactions are recorded currently in income. These
unrealized gains and losses will fluctuate from quarter to quarter and represent
timing issues only, with no economic benefit or cost to the Company until
realized. Upon realization, the gains or losses arising on the forward contracts
are offset by gains or losses on the related foreign currency exposures.
As of June 30, 1995, forward exchange contracts outstanding totaled $388 and
generally mature within one year. The fair value of the forward contracts at
June 30, 1995 was favorable $4.2 (contracts with favorable values totaling $9.8,
partially offset by contracts with unfavorable values totaling $5.6) based on
dealer quotes. Of this fair value, $5.3 arose from forward contracts related to
anticipated intercompany transactions, and is reflected in other income. The
remaining fair value of ($1.1) arose from forward contracts which hedge existing
and identified future foreign currency firm third party commitments and has been
deferred, and will be included in the value of the related foreign currency
transactions as they occur.
The following table summarizes by major currency the contractual amounts of
the Company's forward exchange contracts in U.S. dollars. Foreign currency
amounts are translated at year-end rates. The "buy" amounts represent the U.S.
dollar equivalent of commitments to purchase currencies, and the "sell" amounts
represent the U.S. dollar equivalent of commitments to sell currencies.
<TABLE>
<CAPTION>
JUNE 30, 1995 JUNE 30, 1994
--------------------------------
BUY SELL BUY SELL
-------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Dollar $107.0 $ 19.1 $67.1 $ 2.8
Belgian Franc 206.4 65.2 3.6 39.2
Swedish Krona 13.9 21.0 12.3 2.1
Spanish Peseta 13.0 14.0
German Mark 10.7 28.3
Japanese Yen 18.2 2.8
British Pound 4.0 38.5
Italian Lira 63.6
Canadian Dollar 30.1 15.6
Mexican Peso 35.2 14.5
French Franc 28.7
Australian Dollar 8.5
Austrian Schilling 10.7
Dutch Guilder 10.0 10.4
Other 5.1 19.3 13.8
-------------------------------------------------------
$388.3 $392.6 $85.8 $88.0
=======================================================
</TABLE>
Interest rate swaps
The Company utilizes interest rate swaps to reduce the impact on interest
expense of fluctuating rates on variable rate debt. Swaps or other financial
instruments that are speculative are not permitted by the Company's internal
policies. As of June 30, 1995, $150 notional amount of interest rate swaps were
outstanding, effectively fixing that amount (35% of total debt) of variable-rate
U.S. dollar debt to an average 7.44% fixed-rate U.S. dollar debt. As of June 30,
1994, $175 notional amount of interest rate swaps were outstanding, with a
weighted average interest rate of 7.34%. No funds under the swap contracts were
actually borrowed or are to be repaid. Under interest rate swaps, the Company
agrees with the other parties to exchange, at specified intervals, the
difference between the fixed-rate and floating-rate interest amounts calculated
by reference to the agreed notional principal amount. The Company is the payor
at a fixed rate (7.44% as of June 30, 1995) and receives a variable rate which
is the flat rate for commercial paper as published by the Federal Reserve (6.1%
as of June 30, 1995). Amounts due to or from the counterparties to interest rate
swaps are reflected in interest expense in the periods in which they accrue.
Interest expense reflects the effective interest rate which is fixed through the
interest rate swaps. The fair value of interest rate swaps as of June 30, 1995
and 1994 was unfavorable $6.8 and $3.3, respectively, based on dealer quotes.
These swaps mature on various dates beginning November 1998 and ending May 1999.
As of June 30, 1995 the Company had an additional $50 notional amount interest
rate swap related to an operating lease. Under the terms of the lease, the
Company's rental expense fluctuates with interest rates. The interest rate swap
effectively fixes a portion of this variable rental
39
<PAGE> 19
expense, through fiscal 1998. The fair value of this interest rate swap as of
June 30, 1995 was insignificant.
Commodity swaps
The Company is exposed to risk from fluctuating prices for commodities used in
the manufacture of batteries. Some of this risk is hedged through commodity
swaps executed over the counter with a commercial bank. The Company utilizes
commodity swaps to effectively fix the price the Company will pay for zinc,
which is a principal component in the manufacturing process, over the life of
the swap. Cost of products sold reflects the commodity cost including the
effects of the commodity swaps. As of June 30, 1995 and 1994 $26.6 and $22.9,
respectively, of commodity swaps were outstanding, maturing through June 30,
1997. The maturity of the contracts highly correlates to the actual purchases of
the commodity. Under such contracts the Company pays the counterparty at a fixed
rate, and receives from the counterparty a floating rate per pound of zinc; only
the net differential is actually paid or received. The amounts paid or received
are calculated based on the notional amounts under the contracts. The use of
such commodity swaps effectively protects the Company against an increase in the
price of the commodity, to the extent of the notional amount under the contract.
This also effectively prevents the Company from benefiting in the event of a
decrease in the price of the commodity, to the extent of the notional amount
under the contract. The fair value of commodity swaps as of June 30, 1995 and
1994 was unfavorable $0.5 and $0.9, respectively, based on dealer quotes. This
fair value has not been recorded by the Company as of June 30, 1995, and will be
reflected in the cost of the commodity as it is actually purchased.
The carrying amounts for cash, receivables, accounts payable, 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.
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 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, 1995 exercise prices ranged from $30.50 to $45.63 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, 1995,
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 Options Price Per Share
----------------------------------------------------------------
<S> <C> <C>
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
Granted 714 30.50 - 45.63
Exercised (1,329) 5.00 - 39.13
Canceled (511) 8.50 - 45.63
----------------------------------------------------------------
OUTSTANDING AT JUNE 30, 1995 8,386 $ 5.00 - 45.63
----------------------------------------------------------------
EXERCISABLE AT JUNE 30, 1995 2,946 $ 5.00 - 39.13
================================================================
</TABLE>
At June 30, 1995, limited partnerships in which Kohlberg Kravis Roberts & Co.,
L.P. is the general partner owned an aggregate of 41,100,000 shares of the
Company's common stock.
13. INCOME TAXES
The provision for income taxes consisted of:
<TABLE>
<CAPTION>
1995 1994 1993
-------------------------------------------------------
<S> <C> <C> <C>
Current:
U.S. federal $ 46.0 $ 2.9 $ 1.3
State 8.4 .8 5.2
Foreign 53.4 44.5 39.7
-------------------------------------------------------
107.8 48.2 46.2
-------------------------------------------------------
Deferred:
U.S. federal 33.7 72.4 6.7
State 12.1 7.1 2.4
Foreign (1.3) (7.7) 3.6
-------------------------------------------------------
44.5 71.8 12.7
-------------------------------------------------------
$152.3 $120.0 $58.9
=======================================================
</TABLE>
The domestic and foreign components of income before income taxes were as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------------------------------------------------------
<S> <C> <C> <C>
Domestic $262.4 $224.6 $101.4
Foreign 125.7 95.6 81.4
-------------------------------------------------------
$388.1 $320.2 $182.8
=======================================================
</TABLE>
40
<PAGE> 20
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>
1995 1994
-------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Operating loss carryforwards $ 73.2 $118.5
Postretirement benefit obligation 40.0 39.8
Other 46.2 45.3
-------------------------------------------------------
159.4 203.6
-------------------------------------------------------
Deferred tax liabilities:
Intangibles 265.9 284.9
Property, plant and equipment 48.3 47.6
Other 60.0 47.3
-------------------------------------------------------
374.2 379.8
-------------------------------------------------------
Valuation allowance (23.6) (30.1)
-------------------------------------------------------
$238.4 $206.3
-------------------------------------------------------
</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
reporting purposes.
The reconciliation between the actual provision for income taxes and the
provision for income taxes at the U.S. federal statutory rate (35% for 1995 and
1994, 34% for 1993) is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------------------------------------------------------------------
<S> <C> <C> <C>
Income before accounting change
and income taxes $388.1 $320.2 $182.8
------------------------------------------------------------------
Income tax expense at U.S. federal
statutory rate 135.8 112.1 62.2
Tax benefit not currently utilizable 5.7 4.0 14.7
Utilization of net operating
loss carryforwards (6.4) (5.6) (42.0)
Goodwill amortization 4.9 3.8 3.5
Changes in tax laws .4 (.7) 1.0
Foreign earnings taxed at
different rates 8.2 6.7 6.8
State, local, and withholding tax
net of federal income tax benefit 11.0 4.5 6.6
Other (7.3) (4.8) 6.1
------------------------------------------------------------------
$152.3 $120.0 $ 58.9
------------------------------------------------------------------
</TABLE>
Upon adoption of FAS No. 109 in 1994, $22.4 of previously unrecorded tax
benefits arising from stock option exercises were recognized in capital surplus.
During fiscal 1995 the Company formally resolved all issues arising from the
U.S. Internal Revenue Service's (the "IRS") audit of the Company's income tax
returns for the years ended June 30, 1988, 1989 and 1990. The settlement was
made pursuant to the IRS's 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. The
settlement, recorded in fiscal 1994, reduced 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 settlement
relates to deductions claimed in connection with assets acquired by the Company
in June 1988, the additional tax that will result from the settlement has been
recorded as an increase to both deferred tax liabilities and goodwill of $105 on
the June 30, 1994 balance sheet. The settlement will not have a significant
impact on the Company's future earnings.
No provision was made in 1995 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, 1995
undistributed earnings of the foreign subsidiaries amounted to $300. 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, 1995, the Company had U.S. foreign tax credit carryforwards for
tax purposes of $23, which expire in 1997 - 2000. There were no U.S.
carryforwards for book or tax purposes. Foreign net operating loss carryforwards
which expire beginning in 1996 are $50 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.
41
<PAGE> 21
The net postretirement benefits expense for the fiscal years ended June 30,
1995, 1994 and 1993 include the following components:
<TABLE>
<CAPTION>
1995 1994 1993
------------------------------------------------------------------
<S> <C> <C> <C>
Benefits earned during the year $ 3.1 $ 3.8 $ 5.4
Interest cost on the unfunded
benefit obligation 3.9 4.6 6.3
Other (3.4) (2.3) --
------------------------------------------------------------------
$ 3.6 $ 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,
1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 8.6 $ 8.0
Fully eligible active participants 8.8 8.2
Other active participants 38.2 32.9
------------------------------------------------------------------
55.6 49.1
Unrecognized prior service gain 8.9 11.6
Unrecognized net gain 34.3 35.8
------------------------------------------------------------------
Accrued postretirement benefit costs $98.8 $96.5
==================================================================
</TABLE>
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>
1995 1994
------------------------------------------------------------------
<S> <C> <C>
Discount rate 8.0% 8.0%
Initial health care cost trend rate 10.0% 10.6%
Ultimate health care cost trend rate 5.4% 5.4%
Year in which ultimate trend rate achieved 2002 2002
==================================================================
</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 1995 by $1.6 and would
increase the June 30, 1995 accumulated postretirement benefit obligation by
$10.2.
During 1994, the Company made certain changes to its postretirement health
care and life insurance benefits that became 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, 1995, 1994 and
1993 includes the following components:
<TABLE>
<CAPTION>
Domestic International
-----------------------------------------------------------------
1995 1994 1993 1995 1994 1993
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Benefits earned during the year $ 8.6 $ 7.8 $ 7.3 $ 2.4 $ 2.3 $ 2.3
Interest cost on projected benefit obligation 2.6 2.0 1.3 3.2 2.8 2.7
Actual return on plan assets (5.7) (.6) (2.1) (1.5) (5.4) (5.3)
Other 2.2 (2.1) .1 (1.3) 3.1 3.2
------------------------------------------------------------------------------------------------------------------
$ 7.7 $ 7.1 $ 6.6 $ 2.8 $ 2.8 $ 2.9
==================================================================================================================
</TABLE>
42
<PAGE> 22
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, 1995 and 1994:
<TABLE>
<CAPTION>
International
---------------------------------------------
1995 1994
------------------------------------------------------------------------------------------------------------------
Assets Accum. Assets Accum.
exceed benefits exceed benefits
Domestic accum. exceed accum. exceed
------------------
1995 1994 benefits assets benefits assets
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $39.3 $30.1 $21.7 $ 8.2 $22.5 $ 8.6
------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation $45.6 $35.9 $21.7 $11.9 $22.5 $ 8.9
------------------------------------------------------------------------------------------------------------------
Projected benefit obligation $45.6 $35.9 $25.0 $18.0 $30.2 $ 9.2
Plan assets at fair value 40.7 28.7 30.7 6.4 33.5 --
------------------------------------------------------------------------------------------------------------------
Projected benefit obligation in excess
of (less than) fair value of
plan assets 4.9 7.2 (5.7) 11.6 (3.3) 9.2
Unrecognized prior service cost 3.5 4.1 (1.2) 1.4 (1.1) --
Unrecognized net gain (loss) (1.4) (3.8) 6.8 2.1 6.9 1.8
------------------------------------------------------------------------------------------------------------------
Accrued pension cost $ 7.0 $ 7.5 $ (.1) $15.1 $ 2.5 $11.0
==================================================================================================================
</TABLE>
The assumptions used in determining pension costs and funded status
information shown above were:
<TABLE>
<CAPTION>
Domestic International
--------------------------------------------------
1995 1994 1995 1994
------------------------------------------------------------------------------------------------------------------------------
<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% 7.5% 7.0% - 9.0% 7.0% - 8.5%
Expected long-term rate of return on plan assets 9.0% 9.0% 7.0% - 9.5% 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 $3.6, $3.2 and $2.8 for fiscal years ended June
30, 1995, 1994 and 1993, respectively.
43
<PAGE> 23
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. Alkaline manufacturing facilities are currently
under construction in China and India.
Information concerning geographic areas is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------------------------------------------------------------
<S> <C> <C> <C>
SALES:
North America(1) $1,119.2 $1,008.8 $ 896.7
Europe 614.2 575.9 605.8
Other International Markets 345.6 286.6 239.7
--------------------------------------------------------------
$2,079.0 $1,871.3 $1,742.2
==============================================================
OPERATING INCOME:(2)
North America $ 327.2 $ 279.1 $ 218.4
Europe 127.4 119.6 89.3
Other International Markets 51.9 42.2 15.1
--------------------------------------------------------------
506.5 440.9 322.8
Corporate/Research & Development (96.8) (84.7) (81.2)
--------------------------------------------------------------
$ 409.7 $ 356.2 $ 241.6
==============================================================
IDENTIFIABLE ASSETS:
North America $ 917.6 $ 837.3
Europe 664.1 608.5
Other International Markets 241.8 193.2
----------------------------------------------------
1,823.5 1,639.0
Corporate/Research & Development 596.3 647.3
----------------------------------------------------
$2,419.8 $2,286.3
====================================================
</TABLE>
(1) Does not include sales to affiliated companies of $142.7, $99.9 and $76.5
for the fiscal years ended June 30, 1995, 1994 and 1993, 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.
North America includes the United States and Canada. Other International
Markets includes Mexico, Brazil, China, Australia, India and Japan, as well as
other countries within South America, Latin America, the Pacific Rim, the Middle
East and Africa.
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>
1995 1994 1993
--------------------------------------------------------
<S> <C> <C> <C>
Advertising and promotion $464.2 $427.9 $356.9
Research and development 34.7 29.6 26.1
Foreign exchange gains (losses)
excluding mark-to-market 1.0 (6.7) (8.7)
========================================================
</TABLE>
17. COMMITMENTS AND CONTINGENCIES
At June 30, 1995, the Company had various noncancelable 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, 1995 and 1994 were not
significant.
Rental expense for all operating leases was $23.7, $19.0 and $19.2 for the
fiscal years ended June 30, 1995, 1994 and 1993, respectively. Future minimum
payments under noncancelable operating leases at June 30, 1995 are:
<TABLE>
<S> <C>
1996 $20.1
1997 18.2
1998 14.5
1999 11.6
2000 9.9
2001 and thereafter 14.2
-------------------------------------------------------
$88.5
=======================================================
</TABLE>
During fiscal 1996 the Company will move into a new headquarters facility
under an operating lease. Under the terms of that lease, the Company is
obligated to either purchase the building prior to fiscal 2003 for approximately
$70 (the estimated fair value of the building upon its completion) or make a
payment to the lessor at that time of as much as $60, depending on the facts and
circumstances at the conclusion of the lease. Neither of these amounts has been
included in the preceding table.
At June 30, 1995, the Company had legally binding commitments to purchase
materials aggregating $190 which expire during 1996. In addition, the Company
expects its capital expenditures to increase above their current levels over the
next several years. At June 30, 1995 legally binding commitments to purchase
machinery and equipment totaled $30 and expire during 1996.
44
<PAGE> 24
See Note 2 for a discussion of the Company's contingent liability regarding
obligations of its joint venture with Toshiba and Varta.
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 results of operations or financial position.
In September 1994, Duracell, Inc. (the Company's U.S. operating subsidiary)
entered into an Administrative Order By Consent with the U.S. Environmental
Protection Agency ("EPA") whereunder Duracell has submitted to the EPA a plan
for a complete remedial investigation and feasibility study relating to mercury
and volatile organic compounds contamination at the Company's Lexington, North
Carolina manufacturing site. The Company has also agreed to implement such plan
following the EPA's approval of it. Comprehensive remediation actions have taken
place at the Lexington site over many years, but additional remediation work is
proposed in the plan submitted to the EPA. As of June 30, 1995, Duracell
estimates that future investigatory and remediation costs will be approximately
$4 million, the cost of which the Company has fully reserved. The Company
believes that the amount reserved is sufficient to remediate the property;
however, the final remediation plan has not been agreed to by the EPA. The
Company believes that if additional remedial work is required by the EPA beyond
the work planned by the Company, such additional remediation would not likely
exceed an additional $6 million.
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, 1995, and 1994. 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
----------------------------------------------------------------------------------------
1995 1994 1995 1994 1995 1994 1995 1994
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue $492.1 $437.5 $730.2 $660.6 $369.2 $337.9 $487.5 $435.3
Operating income 95.4 81.8 191.6 173.4 33.5 30.5 89.3 70.5
Mark-to-market, net of tax effect (0.4) (0.5) 0.6 0.1 6.4 (0.1) (3.5) --
Net income 53.0 44.4 111.1 99.1 25.3 14.9 46.3 41.8
Per share data:(1)
Mark-to-market -- -- -- -- .05 -- (.03) --
Net income .44 .37 .92 .83 .21 .12 .38 .35
Cash dividends .22 .16 .22 .16 .26 .22 .26 .22
Weighted average shares and
share equivalents outstanding 121.2 118.4 121.1 119.6 120.1 120.4 120.5 120.8
============================================================================================================================
</TABLE>
(1) Quarterly per share data may not equal the annual amounts due to changes in
the weighted average shares and share equivalents outstanding.
45
<PAGE> 25
19. SELECTED FINANCIAL DATA (UNAUDITED)
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, 1995.
<TABLE>
<CAPTION>
Fiscal Year Ended June 30, 1995 1994 1993 1992 1991
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenue $2,079.0 $1,871.3 $1,742.2 $1,616.7 $1,524.1
Restructuring -- -- (65.0) -- --
Operating income 409.7 356.2 241.6(1) 285.3 256.1
Interest expense 27.0 29.6 45.6 80.3 186.3
Income before extraordinary items and accounting change 235.8(4) 200.2 123.9(2) 166.8 41.2
Extraordinary items, net of income tax benefit -- -- -- (39.0) (75.4)
Accounting change, net of income tax benefit -- -- (75.4) -- --
Net income (loss) 235.8 200.2 48.5 127.8 (34.2)
Per share data:
Income before extraordinary items and accounting change 1.95(5) 1.68 1.04(3) 1.43 .50
Extraordinary items -- -- -- (.34) (.92)
Accounting change -- -- (.63) -- --
Net income (loss) 1.95 1.68 .41 1.09 (.42)
Dividends .96 .76 .48 -- --
Weighted average shares and share equivalents outstanding 120.7 119.2 118.8 116.9 82.3
BALANCE SHEET DATA:
Total assets $2,419.8 $2,286.3 $1,997.6 $2,156.6 $2,054.1
Working capital 439.4 379.0 202.5 215.8 148.4
Total debt 423.5 406.0 504.5 734.1 923.3
Stockholders' equity 1,263.4 1,153.5 981.8 1,008.0 716.1
===========================================================================================================================
</TABLE>
(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.
(4) Income before extraordinary items and accounting change was $232.7 before
the impact of marking to market forward contracts, as discussed in Note 11.
(5) Income before extraordinary items and accounting change per share was $1.93
before the impact of marking to market forward contracts, as discussed in
Note 11.
46
<PAGE> 26
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 judgements.
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 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 accountants 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 accountants to review accounting principles,
internal accounting controls, and financial reporting practices of the Company.
Both the internal auditors and the independent accountants have free access to
the Audit Committee with or without the presence of management.
/S/CHARLES R. PERRIN
CHARLES R. PERRIN
Chairman and Chief Executive Officer
/s/ G. WADE LEWIS
Senior Vice President and Chief Financial Officer
/s/ 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, 1995 and 1994, and the
related statements of consolidated operations, equity, and cash flows for each
of the three years in the period ended June 30, 1995. 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, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
June 30, 1995 in conformity with generally accepted accounting principles.
As discussed in Note 4 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
Stamford, Connecticut
August 10, 1995
47
<PAGE> 1
EXHIBIT 21.1
DURACELL INTERNATIONAL INC.
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
ARO Moscow (Branch) Russia
Duracell Inc. USA (Delaware)
Duracell High Power Inc. USA (Delaware)
Duracell GmbH Germany
Duracell Nederland BV Netherlands
Duracell-Hellesens Inc. Switzerland
Duracell Asia Limited Hong Kong
Taiwan Branch Taiwan
Hong Kong Branch Hong Kong
Korean Branch Korea
Duracell (SEA) Pte. Limited Singapore
Duracell Battery Japan Ltd. Japan
Duracell Mideast and Africa LLC Dubai
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
</TABLE>
<PAGE> 2
EXHIBIT 21.1
DURACELL INTERNATIONAL INC.
ACTIVE SUBSIDIARIES AND BRANCHES
<TABLE>
<CAPTION>
NAME STATE/COUNTRY
------ -------------
<S> <C>
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 Mauritius Mauritius
Duracell India Private Limited India
Duracell Atlantic, Inc. USA (Delaware)
Duracell South Africa (Branch) South Africa
Duracell Morocco (Branch) Morocco
Duracell Caribbean (Branch) Puerto Rico
Duracell SDN BHD Malaysia
Duracell Thailand Ltd. Thailand
</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, 1995, appearing in the Company's
Annual Report to Shareholders for the year ended June 30, 1995 and incorporated
by reference in this Annual Report on Form 10-K of Duracell International Inc.
for the year ended June 30, 1995.
DELOITTE & TOUCHE LLP
Stamford, Connecticut
September 13, 1995
<PAGE> 1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned directors of Duracell
International Inc. constitute and appoint Robert A. Burgholzer, G. Wade Lewis
or Gregg A. Dwyer 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, 1995, 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 undersigned have hereunto set their hands as of
the 7 day of September, 1995.
/s/ ARNO A. PENZIAS /s/ CHARLES R. PERRIN
------------------------------ -----------------------------
Arno A. Penzias Charles R. Perrin
/s/ ROBERT M. KAVNER /s/ PAUL E. RAETHER
------------------------------ -----------------------------
Robert M. Kavner Paul E. Raether
/s/ C. ROBERT KIDDER /s/ GEORGE R. ROBERTS
------------------------------ -----------------------------
C. Robert Kidder George R. Roberts
/s/ CHARLES E. KIERNAN /s/ PAULA STERN
------------------------------ -----------------------------
Charles E. Kiernan Paula Stern
/s/ HENRY R. KRAVIS /s/ SCOTT M. STUART
------------------------------ -----------------------------
Henry R. Kravis Scott M. Stuart
/s/ G. WADE LEWIS
------------------------------
G. Wade Lewis
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 35
<SECURITIES> 0
<RECEIVABLES> 409
<ALLOWANCES> 19
<INVENTORY> 284
<CURRENT-ASSETS> 812
<PP&E> 627
<DEPRECIATION> 249
<TOTAL-ASSETS> 2,420
<CURRENT-LIABILITIES> 372
<BONDS> 365
<COMMON> 1
0
0
<OTHER-SE> 1,262
<TOTAL-LIABILITY-AND-EQUITY> 2,420
<SALES> 2,079
<TOTAL-REVENUES> 2,079
<CGS> 727
<TOTAL-COSTS> 727
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27
<INCOME-PRETAX> 388
<INCOME-TAX> 152
<INCOME-CONTINUING> 236
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 236
<EPS-PRIMARY> 1.95
<EPS-DILUTED> 1.95
</TABLE>
