SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended December 31, 2000 Commission File No. 001-15401 ENERGIZER HOLDINGS, INC. ----------------------------------------------------------- (Exact name of registrant as specified in its charter) MISSOURI 43-1863181 ------------------------------------------------------------ (State of Incorporation) (I.R.S. Employer Identification No.) 800 CHOUTEAU, ST. LOUIS MISSOURI 63102 ------------------------------------------------------------ (Address of principal executive offices) (Zip Code) (314) 982-2000 ------------------------------------------------------------ (Registrant's telephone number, including area code) Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. YES: X NO: _____ ------ Number of shares of Energizer Holdings, Inc. common stock, $.01 par value, outstanding as of the close of business on February 2, 2001. 91,708,011 ---------------- PART I - FINANCIAL INFORMATION <TABLE> <CAPTION> ENERGIZER HOLDINGS, INC. CONSOLIDATED STATEMENT OF EARNINGS (CONDENSED) (DOLLARS IN MILLIONS--UNAUDITED) QUARTER ENDED DECEMBER 31, 2000 1999 ---- ---- <S> <C> <C> Net Sales $558.7 $673.6 ------- ------- Costs and Expenses Cost of products sold 292.0 322.2 Selling, general and administrative 92.3 97.2 Advertising and promotion 59.2 67.6 Research and development 11.5 11.9 Interest expense 9.9 2.6 Other financing items, net 1.1 (1.6) ------- ------- 466.0 499.9 ------- ------- Earnings from Continuing Operations before Income Taxes 92.7 173.7 Income Taxes (38.5) (69.0) ------- ------- Net Earnings $ 54.2 $104.7 ======= ======= Basic and Diluted Earnings Per Share $ 0.57 $ 1.07 ======= ======= <FN> See accompanying Notes to Condensed Financial Statements. </TABLE> <TABLE> <CAPTION> ENERGIZER HOLDINGS, INC. CONSOLIDATED BALANCE SHEET (CONDENSED) (DOLLARS IN MILLIONS - UNAUDITED) DECEMBER 31, SEPTEMBER 30, <S> <C> <C> 2000 2000 --------- --------- ASSETS Current Assets Cash and cash equivalents $ 28.3 $ 11.9 Trade receivables, less allowance for doubtful accounts of $12.7 and $12.5, respectively 268.6 180.6 Inventories Raw materials and supplies 56.3 64.0 Work in process 83.5 87.0 Finished products 245.7 308.1 --------- --------- Total Inventory 385.5 459.1 Other current assets 211.6 278.7 --------- --------- Total Current Assets 894.0 930.3 --------- --------- Investments and Other Assets 377.6 377.8 Property at Cost 1,030.3 1,019.8 Accumulated depreciation 550.2 534.4 --------- --------- 480.1 485.4 --------- --------- Total $1,751.7 $1,793.5 ========= ========= LIABILITIES AND SHAREHOLDERS EQUITY Current Liabilities Notes payable $ 139.1 $ 135.0 Accounts payable 91.5 145.0 Other current liabilities 340.3 248.6 --------- --------- Total Current Liabilities 570.9 528.6 Long-Term Debt 275.0 370.0 Other Liabilities 160.7 156.7 Shareholders Equity Common Stock 1.0 1.0 Additional Paid in Capital 783.9 783.9 Retained Earnings 110.7 59.8 Treasury Stock (41.9) - Accumulated Other Comprehensive Income (108.6) (106.5) --------- --------- Total Shareholders Equity 745.1 738.2 Total $1,751.7 $1,793.5 ========= ========= <FN> See accompanying Notes to Condensed Financial Statements. </TABLE> <TABLE> <CAPTION> ENERGIZER HOLDINGS, INC. CONSOLIDATED STATEMENT OF CASH FLOWS THREE MONTHS ENDED DECEMBER 31, 2000 AND 1999 (CONDENSED) (DOLLARS IN MILLIONS - UNAUDITED) THREE MONTHS ENDED DECEMBER 31, <S> <C> <C> 2000 1999 -------- -------- CASH FLOW FROM OPERATIONS Net earnings $ 54.2 $ 104.7 Non-cash items included in income 23.0 23.3 Sale of accounts receivable 50.0 - Changes in assets and liabilities used in operations 22.9 (65.8) Other, net 0.1 (1.6) -------- -------- Cash flow from continuing operations 150.2 60.6 Cash flow from discontinued operations - 53.5 -------- -------- Net cash flow from operations 150.2 114.1 -------- -------- CASH FLOW FROM INVESTING ACTIVITIES Property additions (17.2) (11.0) Proceeds from sale of OEM business - 20.0 Proceeds from sale of property 5.3 1.1 Other, net 2.1 0.5 -------- -------- Cash used by investing activities - continuing operations (9.8) 10.6 Cash used by investing activities - discontinued operations - (0.7) -------- -------- Net cash used by investing activities (9.8) 9.9 -------- -------- CASH FLOW FROM FINANCING ACTIVITIES Net cash proceeds from issuance of long-term debt - - Principal payments on long-term debt (including current maturities) (95.0) (0.5) Net (decrease)increase in notes payable 8.4 12.4 Treasury stock purchases (41.9) - Net transactions with Ralston - (143.6) -------- -------- Net cash used by financing activities (128.5) (131.7) -------- -------- Effect of Exchange Rate Changes on Cash 0.4 (0.2) -------- -------- Net Decrease in Cash and Cash Equivalents 12.3 (7.9) Cash and Cash Equivalents, Beginning of Period (1) 16.0 27.8 Cash and Cash Equivalents, End of Period $ 28.3 $ 19.9 ======== ======== <FN> (1) The cash and cash equivalents balance at the beginning of the current quarter has been adjusted by $4.1 to reflect the elimination of the one month reporting lag used by the international operations as discussed in Note 3 to the Condensed Financial Statements. See accompanying Notes to Condensed Financial Statements. </TABLE> ENERGIZER HOLDINGS, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS DECEMBER 31, 2000 (DOLLARS IN MILLIONS - UNAUDITED) NOTE 1 - The accompanying unaudited financial statements have been prepared in accordance with Article 10 of Regulation S-X and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for any quarter are not necessarily indicative of the results for any other quarter or for the full year. These statements should be read in conjunction with the financial statements and notes thereto for Energizer for the year ended September 30, 2000. NOTE 2 - On April 1, 2000, Ralston Purina Company (Ralston) distributed the common stock of its wholly owned subsidiary, Energizer Holdings, Inc. (Energizer), to the shareholders of Ralston's common stock through a tax-free spin-off. Following the spin-off, Energizer has conducted its business as a separate public company. NOTE 3 - Prior to fiscal 2001, Energizer's international operations reported their results of operations on a one month lag, which allowed more time to compile results. Energizer has taken steps to improve its internal reporting procedures that has allowed for more timely reporting of these operations. Beginning in the first quarter of fiscal year 2001, the one month lag was eliminated. As a result, the September 2000 loss from international operations of $3.3 was recorded directly to retained earnings. The effects of the change on the first quarter of fiscal 2000 are presented in Note 14. The effect of the change is not significant to the balance sheet or cash flow, and as a result, the September 30, 2000 balance sheet and the historical basis cash flow for the quarter ended December 31, 1999 have not been adjusted. NOTE 4 - Energizer's operations are managed via four major geographic areas - North America (which includes the U.S. and Canada), Asia Pacific, Europe, and South and Central America (including Mexico). This structure is the basis for the Company's reportable operating segment information disclosed below. Segment performance is evaluated based on operating profit, exclusive of general corporate expenses, research and development expenses, restructuring charges and amortization of goodwill and intangibles. Financial items, such as interest income and expense, are managed on a global basis at the corporate level. Intersegment sales are generally valued at market-based prices and represent the difference between total sales and external sales as presented in the table below. Segment profitability includes profit on these intersegment sales. <TABLE> <CAPTION> FOR THE QUARTER ENDED DECEMBER 31, <S> <C> <C> <C> <C> <C> <C> 2000 1999 ------ ------ TOTAL EXTERNAL TOTAL EXTERNAL Net Sales SALES SALES SALES SALES -------- ----- -------- ------ North America $357.7 $328.4 $448.9 $420.4 Asia Pacific 112.0 100.9 138.4 119.1 Europe 87.3 86.2 92.5 92.0 South and Central America 45.1 43.2 46.7 42.1 ------ ------ Total Net Sales $558.7 $673.6 ====== ====== </TABLE> <TABLE> <CAPTION> FOR THE QUARTER ENDED DECEMBER 31, <S> <C> <C> 2000 1999 ------- ------- OPERATING PROFIT BEFORE AMORTIZATION North America $ 90.9 $145.5 Asia Pacific 27.1 38.0 Europe 1.1 7.9 South and Central America 5.7 6.7 ------- ------- TOTAL SEGMENT PROFITABILITY 124.8 198.1 General Corporate Expenses (4.0) (5.4) Research and Development Expense (11.5) (11.9) ------- ------- Operating Profit before Amortization 109.3 180.8 Amortization of Intangibles (5.6) (6.1) Interest and Other Financial Items (11.0) (1.0) ------- ------- Total Earnings Before Income Taxes $ 92.7 $173.7 ======= ======= </TABLE> Supplemental product information is presented below for revenues from external customers. <TABLE> <CAPTION> FOR THE QUARTER ENDED DECEMBER 31, <S> <C> <C> NET SALES 2000 1999 - --------------------- ------ ------ Alkaline Batteries $398.2 $486.0 Carbon Zinc Batteries 81.4 98.7 Lighting Products 31.5 41.2 Miniature Batteries 16.5 17.8 Other 31.1 29.9 ------ ------ Total Net Sales $558.7 $673.6 ====== ====== </TABLE> NOTE 5 - Basic earnings per share is based on the average number of common shares outstanding during the period. Diluted earnings per share is based on the average number of shares used for the basic earnings per share calculation, adjusted for the dilutive effect of stock options and restricted stock equivalents. For the quarter ended December 31, 1999, shares used in the earnings per share calculation are based on the weighted average number of shares of Ralston common stock outstanding adjusted for the distribution of one share of Energizer stock for each three shares of Ralston stock.
The following table sets forth the computation of basic and diluted earnings per share for the quarter ended December 31, 2000 and 1999, respectively. <TABLE> <CAPTION> Quarter Ended December 31, 2000 1999 ---- ---- <S> <C> <C> Numerator Numerator for basic earnings per share - Net earnings $54.2 $104.7 Effect of dilutive securities - - ----- ------ Numerator for dilutive earnings per share - Net earnings $54.2 $104.7 ===== ====== Denominator Denominator for basic earnings per share - Weighted average shares 94.7 97.4 ===== ====== Effect of dilutive securities Stock Options 0.7 - Restricted Stock Equivalents 0.5 - ----- ------ 1.2 - Denominator for dilutive earnings per share - Weighted-average shares and assumed conversions 95.9 97.4 ===== ====== Basic and Diluted earnings per share $0.57 $ 1.07 ===== ====== </TABLE> NOTE 6 - As of December 31, 2000, except for the disposition of certain assets held for disposal, substantially all actions associated with restructuring plans have been completed. Activities impacting the restructuring reserve during the quarter ended December 31, 2000, are presented in the following table: Balance at September 30, 2000 $ 3.9 Provisions/Reversals - Activity (.8) ------ Balance at December 31, 2000 $ 3.1 ====== NOTE 7 - The components of total comprehensive income for the quarter December 31, 2000 and 1999 are shown in the following table: <TABLE> <CAPTION> Quarter Ended December 31, <S> <C> <C> 2000 1999 ------ ------- Net earnings $54.2 $104.7 Other comprehensive income items: Foreign currency translation adjustments related to - elimination of one month reporting lag (see note 3) (4.4) Foreign currency translation adjustments 2.3 (3.0) ------ ------- Total comprehensive income $52.1 $101.7 ====== ======= </TABLE> NOTE 8 - Energizer has an agreement to sell, on an ongoing basis, a pool of domestic trade accounts receivable to a wholly owned bankruptcy-remote subsidiary of Energizer. The subsidiary qualifies as a Special Purpose Entity (SPE), under SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." The SPE's sole purpose is the acquisition of receivables from Energizer and the sale of its interests in the receivables to a multi-seller receivables securitization company. The SPE is not consolidated for financial reporting purposes. Energizer's investment in the SPE is classified as Other Current Assets on the Consolidated Balance Sheet as disclosed in Note 9 below. As of December 31, 2000, Energizer has sold $251.1 of outstanding accounts receivable to the SPE. The SPE has sold the receivables to an unrelated third party for $150.0 in cash, an increase of $50.0 from the accounts receivable sold as of September 30, 2000. Energizer's SPE retains a subordinated retained interest in the remaining $101.1 of receivables. The net proceeds of the transaction were used to reduce various debt instruments. The net increase in proceeds received in the quarter is reflected as operating cash flows in the Consolidated Statement of Cash Flows. NOTE 9 - Other Current Assets consist of the following: <TABLE> <CAPTION> December 31, September 30, <S> <C> <C> 2000 2000 ------ ------ Investment in SPE $101.1 $157.1 Miscellaneous receivables 38.7 36.6 Deferred income tax benefits 39.0 38.9 Prepaid expenses 32.6 44.1 Other current assets .2 2.0 ------ ------ $211.6 $278.7 ====== ====== </TABLE>
NOTE 10 - Investments and Other Assets consist of the following: <TABLE> <CAPTION> December 31, September 30, <S> <C> <C> 2000 2000 ------ ------ Goodwill $168.5 $168.0 Other intangible assets 79.4 82.4 Pension asset 105.3 102.0 Deferred charges and other assets 24.4 25.4 ------ ------ $377.6 $377.8 ====== ====== </TABLE> NOTE 11 - Other Liabilities consist of the following: <TABLE> <CAPTION> December 31, September 30, <S> <C> <C> 2000 2000 ------ ------ Postretirement benefits liability $ 88.7 $ 87.7 Other non-current liabilities 72.0 69.0 ------ ------ $160.7 $156.7 ====== ====== </TABLE> NOTE 12 - In September 2000, Energizer's Board of Directors approved a share repurchase plan authorizing the repurchase of up to 5 million shares of Energizer's common stock. As of December 31, 2000, Energizer had purchased approximately 2.3 million shares under the authorization. NOTE 13 - In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133) and in June 2000, issued Statement of Financial Accounting Standards No. 138 (SFAS 138), an amendment of SFAS 133. These statements are effective for all fiscal quarters of fiscal years beginning after June 15, 2000. The statements require the recognition of derivative financial instruments on the balance sheet as assets or liabilities, at fair value. Gains or losses resulting from changes in the value of derivatives are accounted for depending on the intended use of the derivative and whether it qualifies for hedge accounting. Energizer adopted the provisions of SFAS 133 in the first quarter of fiscal 2001. The implementation of this standard did not have a material effect on its consolidated financial position or results of operations. In December 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) 101, "Revenue Recognition in Financial Statements." SAB 101 provides guidance on recognition, presentation and disclosure of revenue in financial statements. In addition, the Emerging Issues Task Force (EITF) issued EITF 00-10 and 00-14. EITF 00-10, "Accounting for Shipping and Handling Fees and Costs," provides guidance on earnings statement classification of amounts billed to customers for shipping and handling. EITF 00-14, "Accounting for Certain Sales Incentives," provides guidance on accounting for discounts, coupon, rebates and free product. Energizer will be required to adopt SAB 101, EITF 00-10 and EITF 00-14 no later than the fourth quarter of fiscal year 2001. Energizer does not expect the adoption of these statements to have a material effect on its results of operations, however, certain reclassifications may be necessary. NOTE 14 - The pro forma consolidated statement of earnings for the quarter ended December 31, 1999, presents the consolidated results of Energizer's operations assuming the spin-off and the synchronization of the international reporting periods (as discussed in Note 3 above) had occurred as of October 1, 1999. Such statement of earnings has been prepared by adjusting the historical statement of earnings to indicate the effect of estimated costs and expenses and the recapitalization associated with the spin-off. The pro forma statement of earnings may not necessarily reflect the combined results of operations that would have existed had the spin-off been effected on the date specified nor are they necessarily indicative of future results.
<TABLE> <CAPTION> ENERGIZER HOLDINGS, INC. PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS THREE MONTHS ENDED DECEMBER 31, 1999 (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA - UNAUDITED) PRO FORMA REPORTING HISTORICAL ADJUSTMENTS SYNCHRONIZATION PRO FORMA 12/31/99 SPIN-OFF ADJUSTMENTS (h) 12/31/99 -------- -------- --------------- -------- <S> <C> <C> <C> <C> Net Sales $673.6 $ - $ 5.7 $679.3 ------- ---------- ---------- ------- Costs and Expenses Cost of products sold 322.2 - 4.6 326.8 Selling, general and administrative 97.2 2.0 (a) 0.5 99.7 - 0.4 (b) - (0.4)(c) Advertising and promotion 67.6 - 0.4 68.0 Research and development 11.9 - 0.2 12.1 Interest expense 2.6 8.9 (d) 11.5 Other financing items, net (1.6) - (0.9) (2.5) ------- ------- ------- ------- 499.9 10.9 4.8 515.6 ------- ------- ------- ------- Earnings from Cont'g Ops Before Taxes 173.7 (10.9) 0.9 163.7 Income Taxes (69.0) 3.3 (e) (0.6) (64.2) - 2.1 (f) - ------- ------- ------- ------- Earnings from Continuing Operations $104.7 $ (5.5) $ 0.3 $ 99.5 ======= ======= ========== ======= Basic and Diluted Earnings Per Share From Continuing Operations (g) $ 1.07 $ 1.02 ======= ======= Weighted average shares of common stock (g) 97.4 97.4 ======= ======= <FN> (a) To reflect the incremental costs associated with becoming a stand-alone company including board of director costs, stock exchange registration fees, shareholder record keeping services, external financial reporting, treasury services, tax planning and compliance, certain legal expenses and compensation planning and administration. (b) To adjust pension income on plan assets transferred to Energizer plans upon Distribution. (c) To eliminate expense of certain post retirement benefits to be retained by Ralston. (d) To reflect the increase in interest expense associated with debt levels to be assumed at Distribution Date. The adjustment reflects an interest rate of 7.0% for $150.0 of incremental notes payable and 7.7% for $324.1 of incremental long-term debt. The incremental notes payable will have a variable interest rate. A 1/8% variation in the interest rate would change interest expense by $.1 (e) To reflect taxes as if Energizer was a single, stand-alone U.S. taxpayer. (f) To reflect tax effect of the above pro forma adjustments. (g) The number of shares used to compute earnings per share is based on the weighted average number of basic shares of Ralston stock outstanding during the period adjusted for the distribution of one share of Energizer stock for each three shares of Ralston stock. (h) To reflect adjustments related to the synchronization of international reporting as discussed in Note 3 to the Condensed Financial Statements. </TABLE> ENERGIZER HOLDINGS INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL INFORMATION (DOLLARS IN MILLIONS) BUSINESS OVERVIEW Primary battery category sales declined for the quarter ended December 31, 2000, compared to the same quarter last year which experienced increased demand from retail customers and consumers in anticipation of potential disruptions related to the year 2000 date change. This was particularly significant in the U.S. According to A.C. Nielsen, the U.S. alkaline category declined 6% in October through December period compared to the same quarter last year, which had increased 28% over the prior year. HIGHLIGHTS / OPERATING RESULTS Net earnings for the quarter ended December 31, 2000 were $54.2 or $.57 per basic and diluted share compared to $104.7 or $1.07 per share for the quarter ended December 31, 1999. Net earnings decreased 48% primarily on significantly lower segment profit compared to heavy Y2K-driven sales demand in the first quarter last year. In addition, net financing costs increased reflecting debt assigned to Energizer in connection with the spin-off. Net sales for the quarter ended December 31, 2000 decreased $114.9 or 17% with declines in all geographic segments except South and Central America. Gross margin for the quarter decreased $84.7 or 24% on the lower sales. Gross margin percentage decreased from 52.2% in the quarter last year to 47.7% this year with declines in all segments reflecting lower sales. Selling, general and administrative expenses decreased $4.9, or 5%, on lower general corporate expenses and lower marketing and distribution costs in North America and Asia. Selling, general and administrative expenses as a percent of sales increased 2.1% to 16.5% in the current quarter due to lower sales. Advertising and promotion decreased $8.4 or 12% with declines in North America, Asia and Europe. Advertising and promotion as a percent of sales was 10.6% and 10.0% for the quarter ended December 31, 2000 and 1999, respectively. Energizer has historically reported results of international operations on a one-month lag. As such, prior year amounts represent results of international operations for September through November combined with the U.S. results for October through December. Beginning in fiscal 2001, Energizer has synchronized international operations' reporting to be consistent with U.S. reporting. The impact of the synchronization on the prior year first quarter results was to increase sales by $5.7 to $679.3 and net earnings by $.3 to $99.5. There was no impact on the reported pro forma earnings per share for the quarter. Pro forma results restated for the synchronization of the first quarter of fiscal 2000 are presented in Note 14 to the Condensed Financial Statements. SEGMENT RESULTS Operations are managed via four major geographic areas - North America (which includes the U.S. and Canada), Asia Pacific, Europe, and South and Central America (including Mexico). This structure is the basis for the Company's reportable operating segment information, as included in the tables in Note 4 to the Condensed Financial Statements for the quarters ended December 31, 2000 and December 31, 1999, respectively. North America Net sales to customers for North America decreased $92.0, or 22%, for the current quarter. Volume decreases accounted for $68.5 of the decline as compared to the heavy Y2K demand last year and reflecting retail inventory reductions in the current quarter. Unfavorable pricing and product mix also effected the quarter, driven primarily by increased promotional spending. At the consumer level, Energizer's alkaline share, as measured by A. C. Nielsen, increased 1.0 share point to 34.4 compared to the same quarter last year. Energizer's alkaline sales decreased 3%, as measured by A. C. Nielsen, compared to overall alkaline battery category decline of 6%. Segment profit decreased $54.6 for the quarter, a decrease of 38%. Gross margin decreased $59.3 for the quarter, with lower volume accounting for $38.5 of the decline and pricing and product mix the primary factor for the balance of the decline. Advertising and promotion and marketing and distribution expense decreased in the quarter. Asia Pacific Net sales to customers for Asia Pacific were $100.9 for the current quarter, a decrease of $18.2 from reported sales in last year's first quarter. Adjusting for the impact of synchronizing reporting periods, sales declined $15.7 or 14% compared to the same quarter last year. Unfavorable currency effects accounted for $8.9 of the decline. Lower volume versus the Y2K driven demand last year and unfavorable pricing and product mix accounted for the remaining decline. Segment profit for the quarter decreased $10.9 compared to reported results last year. Adjusting for the impact of synchronizing reporting periods, segment profit declined $9.1 or 25% with unfavorable currency effects accounting for $5.2 of the decrease. Absent currency effects, segment profit fell $3.9 on lower customer sales and lower intercompany sales, partially offset by lower advertising and promotion expenses. South and Central America Net sales to customers for South and Central America for the current quarter were $43.2, an increase of $1.1 from reported sales in last year's first quarter. Adjusting for the impact of synchronizing reporting periods, sales declined $.3 or 1% as unfavorable currency effects of $1.7 were partially offset by higher volume. Segment profit for the quarter decreased $1.3 or 19% compared to the synchronized quarter last year, primarily on unfavorable currency effect. Europe Net sales to customers for Europe decreased $5.8, or 6%, compared to results reported for the prior year quarter. Adjusting for the impact of synchronizing reporting periods, sales declined $11.6, or 12%, for the quarter. Absent the impact of currency devaluation of $15.1, sales increased 4% on higher alkaline volume from distribution gains in key customers and increased promotional activity. Segment profit for the quarter decreased $7.5 compared to the synchronized quarter last year, primarily on unfavorable currency effect. Absent currency effects, higher sales volumes were offset by increased promotional costs. CORPORATE EXPENSES Corporate expenses decreased $1.4 in the quarter on higher pension and royalty income partially offset by higher management expenses reflecting higher costs of operating as a stand-alone company. RESTRUCTURING ACTIVITY As of December 31, 2000, except for disposition of certain assets held for disposal, substantially all actions associated with the restructuring plans have been completed. Activities impacting the restructuring reserve during the quarter ended December 31, 2000 are presented in Note 6 to the Condensed Financial Statements. INTEREST EXPENSE AND OTHER FINANCING COSTS Interest expense increased $7.3 for the quarter reflecting incremental debt assumed by Energizer immediately prior to the spin-off. Other financing costs increased $2.7 reflecting the discount on the sale of accounts receivable under the financing arrangement, lower foreign exchange gains and lower investment income. INCOME TAXES Income taxes, which include federal, state and foreign taxes, were 41.5% of pre tax earnings in the current quarter, compared to 39.7% in the prior year quarter. The increase in the tax rate is due primarily to an unfavorable mix of U.S. and foreign earnings. FINANCIAL CONDITION Cash flow from continuing operations was $150.2 for the quarter ended December 31, 2000 compared to $60.6 for the same period in fiscal 2000. The increase in cash flow from continuing operations is due primarily to an additional $50.0 in cash received from the sale of accounts receivable, as discussed in Note 8 to the Condensed Financial Statements, and decreases in working capital during the quarter. Capital expenditures totaled $17.2 and $11.0 for the quarter ended December 31, 2000 and 1999, respectively. Energizer purchased approximately 2.3 million shares of treasury stock in the quarter ended December 31, 2000 for approximately $41.9. Working capital was $323.1 at December 31, 2000 compared to $401.7 at September 30, 2000, reflecting seasonal reductions in operating working capital. Energizer's total debt decreased from $505.0 at September 30, 2000 to $414.1 at December 31, 2000 as the excess cash generated from operations was used to pay down long-term debt. Energizer believes that cash flows from operating activities and periodic borrowings under existing credit facilities will be adequate to meet short-term and long-term liquidity requirements prior to the maturity of Energizer's credit facilities, although no guarantee can be given in this regard. MARKET RISK Energizer has interest rate risk with respect to interest expense on variable rate debt. A hypothetical 10% adverse change in all interest rates would have an annual unfavorable impact of $1.3 on Energizer's net earnings and cash flows based on current debt levels. RECENTLY ISSUED ACCOUNTING STANDARDS See discussion in Note 13 to the Condensed Financial Statements. FORWARD-LOOKING STATEMENTS Statements in this document that are not historical, particularly statements regarding the continued availability of credit facilities, the ability to meet liquidity requirements, and the impact of changes in interest rates, may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Energizer cautions readers not to place undue reliance on any forward-looking statements, which speak only as of the date made. Energizer advises readers that various risks and uncertainties could affect its financial performance and could cause Energizer's actual results for future periods to differ materially from those anticipated or projected. Energizer's ability to maintain compliance with its debt covenants, as well as changes in its operating cash flows, could limit its ability to meet future operating expenses and such liquidity requirements, fund capital expenditures, and service its debt as it becomes due. The impact of adverse interest rate changes could be more significant than anticipated, particularly if general economic conditions in the countries in which Energizer operates deteriorate as well. Additional risks and uncertainties include those detailed from time to time in Energizer's publicly filed documents, including Energizer's Registration Statement on Form 10, as amended, its Annual Report on Form 10-K for the Year ended September 30, 2000, and its Current Report on From 8-K dated April 25, 2000. PART II - OTHER INFORMATION ------------------ There is no information required to be reported under any items except those indicated below. Item 4 -- Submission of Matter to a Vote of Security Holders The Company held its Annual Meeting of Shareholders on January 29, 2001, for the purpose of electing three directors to serve three-year terms ending at the Annual Meeting held in 2004 and one director to serve a two-year term ending at the Annual Meeting held in 2003, and to approve the adoption of the Energizer Holdings, Inc. 2000 Incentive Stock Plan. The number of votes cast, and the number of shares voting for or against each candidate and the number of votes cast for the other matters submitted for approval, as well as the number of abstentions with respect thereto, is as follows: <TABLE> <CAPTION> VOTES VOTES FOR WITHHELD <S> <C> <C> Robert A. Pruzan 79,812,745 1,708,298 F. Sheridan Garrison 79,177,685 2,343,358 R. David Hoover 77,778,243 3,742,800 H. Fisk Johnson 79,314,581 2,206,462 </TABLE> <TABLE> <CAPTION> VOTES VOTES VOTES FOR AGAINST ABSTAINED <S> <C> <C> <C> Adoption of the Energizer Holdings, Inc. 2000 Incentive Stock Plan 70,096,069 10,981,435 443,539 </TABLE> Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits Required by Item 601 of Regulation S-K The following exhibits (listed by numbers corresponding to the Exhibit Table of Item 601 in Regulation S-K) are filed with this report: 10(i) Form of Non-Qualified Stock Option dated November 20, 2000* 10(ii) Form of 2000 Restricted Stock Equivalent Agreement dated November 20, 2000* 10(iii) Form of Change of Control Employment Agreement dated November 20, 2000* *Denotes a management contract or compensatory plan or arrangement. (b) Reports on Form 8-K A Current Report on Form 8-K dated October 31, 2000 was filed to set forth Energizer's press release of its fourth quarter and fiscal 2000 results. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ENERGIZER HOLDINGS, INC. ----------------------------------------- Registrant By: /s/ Daniel J. Sescleifer Daniel J. Sescleifer Executive Vice President, Finance and Control Date: February 9, 2001 EXHIBIT INDEX - ---------------------- 10(i) Form of Non-Qualified Stock Option dated November 20, 2000 10(ii) Form of 2000 Restricted Stock Equivalent Agreement dated November 20, 2000 10(iii) Form of Change of Control Employment Agreement dated November 20, 2000