SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDED
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
Date of Original Report: April 4, 2003
Date of Amendment: May 30, 2003
ENERGIZER HOLDINGS, INC.
----------------------------------------------------
(Exact name of Registrant as specified in its charter)
MISSOURI 1-15401 No. 43-1863181
-------------------------------------------------------------------------------
(State or Other
Jurisdiction of (IRS Employer
Incorporation) (Commission File Number) Identification Number)
533 MARYVILLE UNIVERSITY DRIVE, ST. LOUIS, MO 63141
-------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(314) 985-2000
-------------------
(Registrant's telephone number, including area code)
Item 2. Acquisition or Disposition of Assets.
On March 28, 2003, the registrant and its affiliated subsidiaries completed the
acquisition of the worldwide Schick Wilkinson-Sword business (the "SWS
Business") of Pfizer, Inc. The SWS Business is engaged in the business of
researching, developing, manufacturing, marketing, distributing and selling
men's and women's shaving products and systems, as well as manicure, toiletry
and sword products. The assets acquired included the capital stock of
approximately 10 Pfizer subsidiaries engaged in the SWS Business, as well as
manufacturing and other operating assets of the SWS Business in approximately 30
other countries worldwide, for an aggregate purchase price of Nine Hundred and
Thirty Million Dollars ($930,000,000), subject to adjustment to reflect working
capital of the SWS Business as of closing. Following the acquisition,
registrant intends to continue the operation of the SWS Business. Registrant
obtained the funds for the acquisition through a combination of borrowings or
receipts under (i) a 364-Day Bridge Term Loan Credit Agreement, (ii) a 5-Year
Revolving Credit Agreement, (iii) a 364-Day Credit Agreement, and (iv) an Asset
Securitization Receivable Purchase Agreement, as well as through cash on hand.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired
AUDITED ANNUAL COMBINED FINANCIAL STATEMENTS OF SCHICK-WILKINSON SWORD:
Independent Auditors' Report
Combined Balance Sheets as of December 31, 2002 and 2001
Combined Statements of Income for the years ended
December 31, 2002, 2001 and 2000
Combined Statements of Business Unit Equity for the years ended
December 31, 2002, 2001 and 2000
Combined Statements of Cash Flows for the years ended
December 31, 2002, 2001 and 2000
Notes to Combined Financial Statements
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Pfizer Inc:
We have audited the accompanying combined balance sheets of Schick (a business
unit of Pfizer Inc) as of December 31, 2002 and 2001, and the related combined
statements of income, business unit equity, and cash flows for each of the years
in the three-year period ended December 31, 2002. These combined financial
statements are the responsibility of Pfizer Inc.'s management. Our
responsibility is to express an opinion on these combined financial statements
based on our audit.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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, the financial statements referred to above present fairly, in
all material respects, the financial position of Schick (a business unit of
Pfizer Inc) as of December 31, 2002 and 2001, and the results of its operations
and its cash flows for each of the years in the three-year period ended December
31, 2002 in conformity with accounting principles generally accepted in the
United States of America.
As discussed in Note 2 to the combined financial statements, effective January
1, 2002, Schick (a business unit of Pfizer Inc) adopted the provisions of
Statement of Financial Accounting Standards (SFAS) 142, Goodwill and Other
Intangible Assets.
/s/ KPMG LLP
New York, New York
May 9, 2003
SCHICK-WILKINSON SWORD
(A BUSINESS UNIT OF PFIZER INC)
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
December 31,
------------------------
2002 2001
---- ----
ASSETS
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . $ 1,493 $ 8,733
Accounts receivable, less allowance for doubtful
accounts: 2002- $1,708; 2001 - $3,059 . . . . 169,613 150,254
Inventories. . . . . . . . . . . . . . . . . . . 98,024 84,851
Deferred income taxes. . . . . . . . . . . . . . 12,328 11,745
Prepaid expenses and other current assets. . . . 16,912 11,467
--------- ---------
Total current assets. . . . . . . . . . . . . 298,370 267,050
Property, plant and equipment, net. . . . . . . . . 210,954 186,293
Goodwill. . . . . . . . . . . . . . . . . . . . . . 47,957 43,744
Other intangible assets, net. . . . . . . . . . . . 41,806 38,620
Deferred income taxes . . . . . . . . . . . . . . . 7,938 2,382
Other noncurrent assets . . . . . . . . . . . . . . 4,219 3,343
--------- ---------
Total assets. . . . . . . . . . . . . . . . . $611,244 $541,432
========= =========
LIABILITIES AND BUSINESS UNIT EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . $ 47,191 $ 38,069
Income taxes payable . . . . . . . . . . . . . . 35,819 32,079
Deferred income taxes. . . . . . . . . . . . . . 2,017 --
Accrued compensation and related items . . . . . 12,759 9,831
Other current liabilities. . . . . . . . . . . . 68,087 66,941
--------- ---------
Total current liabilities . . . . . . . . . . 165,873 146,920
Deferred income taxes . . . . . . . . . . . . . . . 24,476 20,471
Other noncurrent liabilities. . . . . . . . . . . . 46,163 27,419
--------- ---------
Total liabilities . . . . . . . . . . . . . . 236,512 194,810
--------- ---------
Business unit equity. . . . . . . . . . . . . . . . 423,662 397,255
Accumulated other comprehensive expense . . . . . . (48,930) (50,633)
--------- ---------
Total business unit equity. . . . . . . . . . 374,732 346,622
--------- ---------
Total liabilities and business unit equity. . $611,244 $541,432
========= =========
See accompanying notes to combined financial statements.
SCHICK-WILKINSON SWORD
(A BUSINESS UNIT OF PFIZER INC)
COMBINED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
Years ended December 31,
--------------------------
2002 2001 2000
---- ---- ----
Net sales . . . . . . . . . . . . . . . . . $651,666 $624,758 $678,341
Cost of sales . . . . . . . . . . . . . . . 269,689 252,124 266,389
-------- --------- ---------
Gross Profit. . . . . . . . . . . . . . . . 381,977 372,634 411,952
Costs and expenses:
Marketing and distribution expenses. . . 244,634 242,723 263,319
Research and development expenses. . . . 27,100 25,814 20,166
General and administrative expenses. . . 35,502 30,914 30,696
Corporate overhead costs . . . . . . . . 11,021 5,360 7,189
Merger-related costs . . . . . . . . . . 1,496 7,956 1,653
Other (income) / deductions --net. . . . 675 (1,898) (1,367)
-------- --------- ---------
Income before provision for taxes on income 61,549 61,765 90,296
Provision for taxes on income . . . . . . . 23,269 23,050 33,684
-------- --------- ---------
Net income. . . . . . . . . . . . . . . . . $ 38,280 $ 38,715 $ 56,612
======== ========= =========
See accompanying notes to combined financial statements.
SCHICK-WILKINSON SWORD
(A BUSINESS UNIT OF PFIZER INC)
COMBINED STATEMENTS OF BUSINESS UNIT EQUITY
(DOLLARS IN THOUSANDS)
Accumulated
Other
Business Unit Comprehensive
Equity Inc/(Exp) Total
--------- ------------ ---------
Balance January 1, 2000. . . . . . . . . . . . . $411,800 $ (13,613) $398,187
---------
Comprehensive income:
Net income. . . . . . . . . . . . . . . . . . 56,612 56,612
Other comprehensive inc / (exp) - net of tax:
currency translation adjustment (22,871) (22,871)
---------
Total comprehensive income 33,741
Other activity with Pfizer . . . . . . . . . . . (48,882) (48,882)
--------- ----------- ---------
Balance December 31, 2000. . . . . . . . . . . . 419,530 (36,484) 383,046
---------
Comprehensive income:
Net income. . . . . . . . . . . . . . . . . . 38,715 38,715
Other comprehensive inc / (exp) - net of tax:
minimum pension liability (13,254) (13,254)
currency translation adjustment (895) (895)
---------
Total comprehensive income 24,566
Cash dividends paid to Pfizer. . . . . . . . . . (19,000) (19,000)
Other activity with Pfizer . . . . . . . . . . . (41,990) (41,990)
--------- ----------- ---------
Balance December 31, 2001. . . . . . . . . . . . 397,255 (50,633) 346,622
---------
Comprehensive income:
Net income. . . . . . . . . . . . . . . . . . 38,280 38,280
Other comprehensive inc / (exp) - net of tax:
minimum pension liability (12,692) (12,692)
currency translation adjustment 14,395 14,395
---------
Total comprehensive income 39,983
Cash dividends paid to Pfizer. . . . . . . . . . (24,986) (24,986)
Other activity with Pfizer . . . . . . . . . . . 13,113 13,113
--------- ----------- ---------
Balance December 31, 2002. . . . . . . . . . . . $423,662 $ (48,930) $374,732
========= ============ =========
See accompanying notes to combined financial statements.
SCHICK-WILKINSON SWORD
(A BUSINESS UNIT OF PFIZER INC)
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
Years ended December 31,
------------------------
2002 2001 2000
---- ---- ----
OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 38,280 $ 38,715 $ 56,612
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation . . . . . . . . . . . . . . . . . . . . 32,454 28,084 26,100
Amortization of goodwill . . . . . . . . . . . . . . -- 1,394 1,339
Amortization of other intangible assets. . . . . . . 719 1,764 1,625
Loss on disposals of property, plant and equipment . 32 4,044 3,996
Deferred taxes . . . . . . . . . . . . . . . . . . . (1,938) 3,925 1,165
Changes in assets and liabilities:
Accounts receivable. . . . . . . . . . . . . . . . (13,132) 22,271 (7,795)
Inventories. . . . . . . . . . . . . . . . . . . . (9,101) (4,206) (3,911)
Prepaid expenses and other current assets. . . . . (4,903) (6) (2,761)
Other noncurrent assets. . . . . . . . . . . . . . (707) (2,250) (3,715)
Accounts payable and accrued liabilities . . . . . 5,507 (2,751) (1,911)
Income taxes payable . . . . . . . . . . . . . . . 3,659 (22,450) (15,807)
Other noncurrent liabilities . . . . . . . . . . . 3,554 1,661 303
--------- --------- ---------
Net cash provided by operating activities. . . . . . . . . 54,424 70,195 55,240
--------- --------- ---------
INVESTING ACTIVITIES
Purchases of property, plant and equipment . . . . . . (49,892) (19,204) (43,400)
--------- --------- ---------
Net cash used in investing activities. . . . . . . . . . . (49,892) (19,204) (43,400)
--------- --------- ---------
FINANCING ACTIVITIES
Proceeds from borrowings, net. . . . . . . . . . . . . 2,104 961 111
Cash dividends paid to Pfizer. . . . . . . . . . . . . (24,986) (19,000) --
Other activity with Pfizer . . . . . . . . . . . . . . 11,110 (36,148) (43,682)
--------- --------- ---------
Net cash used in financing activities. . . . . . . . . . . (11,772) (54,187) (43,571)
--------- --------- ---------
Net decrease in cash . . . . . . . . . . . . . . . . . . . (7,240) (3,196) (31,731)
Cash at beginning of year. . . . . . . . . . . . . . . . . 8,733 11,929 43,660
--------- --------- ---------
Cash at end of year. . . . . . . . . . . . . . . . . . . . $ 1,493 $ 8,733 $ 11,929
========= ========= =========
NON-CASH ITEMS:
Minimum pension liability. . . . . . . . . . . . . . . $ 12,692 $ 13,254 $ --
========= ========= =========
See accompanying notes to combined financial statements.
SCHICK-WILKINSON SWORD
(A BUSINESS UNIT OF PFIZER INC)
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. ORGANIZATION AND BUSINESS DESCRIPTION
ORGANIZATION
Schick-Wilkinson Sword ("SWS") is a business unit within the Consumer Products
segment of Pfizer Inc ("Pfizer"). SWS is comprised of over forty (40)
wholly-owned Pfizer subsidiaries that are either completely dedicated to SWS or
contain certain assets and operations that are dedicated to the business.
Collectively these entities constitute the business unit Schick-Wilkinson Sword.
BUSINESS DESCRIPTION
SWS manufactures, markets, sells and distributes a comprehensive range of wet
shave products. The Company's razors and blades are sold in most major
countries around the world and appear in a variety of channels including mass
merchandisers, chain food, drug, convenience, hospitality and wholesale outlets.
The raw materials for its products are readily available and SWS is not
dependent on a single supplier or only a few suppliers for its raw materials.
2. SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
The accompanying combined financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
(GAAP) and present the financial position, results of operations and cash flows
for SWS. All intercompany transactions and balances have been eliminated.
Operations outside of the U.S. are included on a fiscal year basis ending
November 30. Following the merger of Pfizer and Warner-Lambert Company in June
2000, which included SWS, the non- U.S. operations changed their year end from
December 31 to November 30 in 2000 or 2001, to conform with Pfizer's accounting
policies. In the year of change, the income statement includes the 11 months
ended November 30 plus the month of December from the prior year. Net income
related to the month of December from the prior year is deducted from business
unit equity as a component of "Other activity with Pfizer".
The combined financial statements include the accounts specifically attributed
to SWS and allocations of expenses relating to shared services and
administrative functions incurred at the corporate and division operating levels
of Pfizer. Generally, cash from SWS's operations is not included in "Cash" in
the accompanying combined balance sheets at December 31, 2002 and 2001 since
this cash is included in Pfizer's centralized cash management systems.
Accordingly, SWS's cash at December 31, 2002 and 2001 may not be representative
of an independent company. There has been no direct interest income or expense
allocated to SWS by Pfizer with respect to cash and debt balances as the impact
is immaterial.
The preparation of financial statements in accordance with GAAP requires
management to make estimates and assumptions that affect the amounts reported in
the combined financial statements and disclosure of contingent assets and
liabilities in the accompanying notes. Actual results could differ from those
estimates. Significant accounting estimates used include estimates for sales
returns and allowances, advertising and promotional accruals, sales rebates and
discounts, depreciation, amortization, employee benefits, impairment testing and
asset valuation allowances. Management believes that it exercised
reasonableness in deriving these amounts.
(B) NEW ACCOUNTING STANDARDS
On January 1, 2002, SWS adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets".
Under the provisions of SFAS No. 142, intangible assets with indefinite lives
and goodwill are no longer amortized but are subject to annual impairment tests.
Separable intangible assets with determinable lives continue to be amortized
over their useful lives.
In 2002, SWS adopted the disclosure provisions of SFAS No.148, "Accounting for
Stock-Based Compensation - Transition and Disclosure (an amendment to FASB
Statement No. 123)". SFAS No. 148 amends the disclosure requirements of SFAS
No. 123 to require prominent disclosures in the financial statements about the
method of stock-based employee compensation and the effect of the method used on
reported results.
(C) REVENUE RECOGNITION
SWS records revenue from product sales when the goods are shipped and title
passes to the customer. The cost of certain sales incentives is reflected as a
reduction of revenue.
(D) ADVERTISING AND PROMOTION EXPENSE
Advertising and promotion costs are expensed as incurred. Advertising and
promotion expenses were $117,671, $120,044 and $149,438 for 2002, 2001 and 2000,
respectively and are included in "Marketing and distribution expenses" in the
accompanying combined statements of income.
(E) SHIPPING AND HANDLING EXPENSE
Shipping and handling costs are expensed as incurred. Shipping and handling
expenses were $13,846, $11,475 and $10,167 for 2002, 2001 and 2000, respectively
and are included in "Marketing and distribution expenses" in the accompanying
combined statements of income.
(F) INCOME TAXES
As an operating unit of Pfizer, SWS-U.S. does not file separate U.S. Federal tax
returns but rather is included as part of the various returns filed by Pfizer or
its subsidiaries. For the purpose of these financial statements, SWS's tax
provision was computed as if it were a separate company. The provision for
foreign taxes is based upon the effective tax rate in the country where the
earnings were recorded. Deferred tax assets and liabilities are recognized for
the expected future tax consequences of differences between the financial
reporting and tax bases of assets and liabilities using enacted tax rates and
laws. No provision is made for taxes on overseas retained earnings that are
deemed to be permanently reinvested.
(G) STOCK-BASED COMPENSATION
In accordance with SFAS No. 123, "Accounting for Stock-Based Compensation",
Pfizer elected to account for its stock-based compensation under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees".
The exercise price of stock options granted equals the market price on the date
of grant. There is no recorded expense related to grants of stock options in
the accompanying combined statements of income.
The fair value of employee stock options was estimated using the Black-Scholes
option-pricing model, modified for dividends and using the following
assumptions, as required under GAAP:
2002 2001 2000
---- ---- ----
Expected dividend yield 1.44% 1.41% 1.54%
Risk-free interest rate 3.01% 5.00% 6.65%
Expected stock price volatility 29.79% 31.45% 30.68%
Expected term until exercise (years) 2.13 5.50 5.35
If Pfizer had recorded compensation expense for option grants, SWS' pro forma
net income for 2002, 2001 and 2000 reflecting the compensation cost for the fair
value of stock options awarded to SWS employees would have been as follows:
Year Ended December 31,
--------------------------
2002 2001 2000
------- ----- -----
Net income:
As reported under GAAP $ 38,280 $ 38,715 $ 56,612
Compensation expense (5,374) (3,059) (15,881)
------ ------- -------
Pro forma $ 32,906 $ 35,656 $ 40,731
========= ========= =========
(H) INVENTORIES
Inventories are valued at the lower of cost or market, with cost determined for
finished goods and work-in-process at average actual cost and raw materials and
supplies at average or latest actual cost.
(I) LONG-LIVED ASSETS INCLUDE:
- PROPERTY, PLANT AND EQUIPMENT, NET - these assets are carried at
cost less accumulated depreciation. Major improvements are
capitalized while maintenance and repairs are expensed when
incurred. Depreciation is computed generally on a straight-line
basis over the following estimated useful lives:
Buildings and building improvements 33 1/3 years
Machinery and equipment 8-12 years
Furniture, fixtures and other 3-12 years
- GOODWILL - Goodwill represents the difference between the
purchase price of acquired businesses and the fair value of their
net assets.
- OTHER INTANGIBLE ASSETS, NET - Other intangible assets with
determinable lives are amortized evenly over their estimated
useful lives, which average approximately 16 years. Intangible
assets with indefinite useful lives are not amortized.
At least annually, SWS reviews all long-lived assets for impairment. When
necessary, SWS records charges for impairments of long-lived assets for the
amount by which the present value of future cash flows, or some other fair value
measure, is less than the carrying value of these assets.
(J) BUSINESS UNIT EQUITY
Business unit equity includes balances and transactions among SWS, Pfizer and
other Pfizer subsidiaries. SWS participates in Pfizer's centralized cash
management systems and generally all excess cash is transferred to Pfizer. In
addition, SWS entities will occasionally declare and pay dividends to their
parent.
(K) FINANCIAL INSTRUMENTS
The carrying values of SWS's financial instruments approximate their estimated
fair values. At December 31, 2002 and 2001, the cost of each type of financial
instrument, primarily accounts receivable and accounts payable, approximates
fair value because of the short term nature of these instruments.
(L) CONCENTRATION OF CREDIT RISK
SWS does not have significant concentrations of credit risk from its customers,
except for its sales to one customer, which represented 13.6% , 13.0% and 12.4%
of total sales in 2002, 2001 and 2000, respectively. Periodically, SWS reviews
the credit quality of its customers' financial condition. In general, there is
no requirement for collateral from customers.
(M) FOREIGN CURRENCY TRANSLATION
For most international operations, local currencies have been determined to be
their functional currencies. SWS translates assets and liabilities to their
U.S. dollar equivalents at rates in effect at the balance sheet date and record
translation adjustments in "Business unit equity". Income and expense items are
translated into their U.S. dollar equivalents at average rates of exchange for
the period. Gains and losses on foreign currency transactions are included in
earnings. The translation impact on cash from changes in foreign currency
exchange rates was immaterial.
For operations in highly inflationary economies, SWS translates the balance
sheet items as follows:
- Monetary items (that is, assets and liabilities that will be
settled for cash) at rates in effect at the balance sheet date,
with translation adjustments recorded in earnings.
- Nonmonetary items at historical rates (that is, those rates in
effect when the items were first recorded).
(N) BENEFIT PLANS
Substantially all active non-union SWS employees, except for those in Germany,
participate in Pfizer or legacy Warner-Lambert benefit plans. In addition,
there is a pension plan maintained by the SWS subsidiary in the United Kingdom
solely for the benefit of certain Wilkinson employees. No assets and
liabilities related to the shared Pfizer/Warner Lambert benefit plans have been
reflected in the accompanying combined balance sheets since it is not
practicable to segregate these amounts. The combined statements of income
include an allocation from Pfizer for the costs associated with SWS employees
who participate in these plans.
(O) ENVIRONMENTAL /REMEDIATION COSTS
Costs associated with environmental remediation obligations are accrued when
such costs are probable and reasonably estimated. Such accruals are adjusted as
further information develops or circumstances change. Costs of future
expenditures for environmental remediation obligations are discounted to their
present value when the expected cash flows are reliably determinable.
(P) DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
SWS uses forward contracts to hedge against its exposures to fluctuations in
Japanese Yen. These derivative contracts are reported at fair value, with
changes in fair value reported in earnings. SWS recognizes the earnings impact
of foreign currency forward-exchange contracts during the terms of the
contracts, along with the earnings impact of the items they generally offset.
3. ALLOCATIONS OF EXPENSES
Pfizer operating divisions perform certain administrative and logistical
services for SWS. The cost of these services is charged to SWS on the basis of
number of personnel utilized, occupied office space and third party sales.
Pfizer does not routinely allocate various other corporate overhead expenses to
its operating divisions. However, for purposes of the accompanying combined
financial statements, an allocation of such expenses has been included in
"Corporate overhead costs" in the accompanying combined statements of income.
Pfizer corporate overhead costs represent a portion of corporate functions such
as personnel, legal, accounting, treasury and IT systems, which are primarily
allocated based on sales of SWS compared to total Pfizer revenues.
4. GOODWILL AND INTANGIBLE ASSETS
The components of identifiable intangible assets follow:
Gross Carrying Accumulated
Amount Amortization
------ ------------
2002 2001 2002 2001
------- ------- -------- --------
Amortized identifiable
intangible assets:
Patents . . . . . . . . . $ 9,978 $ 9,353 $(6,108) $(5,134)
License agreements. . . . 386 375 (381) (357)
------- ------- -------- --------
Total amortized
intangible assets. . . . . . 10,364 9,728 (6,489) (5,491)
------- ------- -------- --------
Unamortized identifiable
intangible assets:
Trademarks. . . . . . . . 37,828 34,383 -- --
Pension asset. . . . . . 103 -- -- --
------- ------- -------- --------
Total unamortized identifiable
intangible assets. . . . . . 37,931 34,383 -- --
------- ------- -------- --------
Total identifiable intangible
assets . . . . . . . . . . . $48,295 $44,111 $(6,489) $(5,491)
======= ======= ======== ========
The change in the carrying amount of intangibles was primarily due to the impact
of foreign exchange.
Total amortization expense for intangible assets was $719, $1,764 and $1,625 for
the years ended December 31, 2002, 2001 and 2000. Amortization expense for
intangible assets is recorded in "Other (income)/deductions--net" in the
accompanying combined statements of income. The annual amortization expense
expected for the years 2003 through 2007 is as follows:
2003 $816
2004 $496
2005 $285
2006 $112
2007 $112
The change in the carrying amount of goodwill for the year ended December 31,
2002 was as follows:
Balance, December 31, 2001 $ 43,744
Change during the period* 4,213
--------
$ 47,957
Balance, December, 2002 ========
* The change in goodwill was primarily attributable to the impact of foreign
exchange.
Prior to the adoption of SFAS No. 142, amortization of goodwill and
indefinite-lived intangibles had the following impact on net income:
2002 2001 2000
------- -------- --------
Reported net income $ 38,280 $ 38,715 $ 56,612
Addback:
Amortization of goodwill - net of tax -- 874 840
Amortization of indefinite-lived
intangible assets - net of tax -- 702 702
-------- -------- --------
Adjusted net income $ 38,280 $ 40,291 $ 58,154
======== ======== ========
5. MERGER-RELATED COSTS
On June 19, 2000, Pfizer completed its merger with Warner-Lambert Company
(Warner-Lambert) under the pooling-of-interests method of accounting. SWS had
been a part of the legacy Warner-Lambert organization. SWS incurred the
following costs related to the integration of its operations with Pfizer:
2002 2001 2000
------- ------- -------
Integration costs $ 2,778 $ 3,463 $ 733
Restructuring costs (1,282) 4,493 920
-------- ------- -------
Total merger-related costs $ 1,496 $ 7,956 $ 1,653
======= ======= =======
- Integration costs represent external, incremental costs directly related to
integrating SWS' operations into various Pfizer systems.
- The restructuring charges associated with the integration of SWS'
operations with Pfizer's pertain to employee termination costs as follows:
Provisions
---------- Utilization
Through Reserve
Dec. 31, Dec. 31,
2002 2001 2000 Total 2002 2002
---- ---- ---- ----- ---- ----
($1,282) $4,493 $920 $4,131 $(3,648) $483
Through December 31, 2002, the charges for employee termination costs represent
the approved reduction of SWS' workforce by 21 people comprising manufacturing,
distribution, and sales and marketing functions. As of December 31, 2002, 20
people were terminated. Employee termination costs include accrued severance
benefits.
6. INVENTORIES
2002 2001
--------- ---------
Finished goods $ 54,569 $ 51,267
Work in process 23,860 16,070
Raw materials 19,595 17,514
-------- --------
Total inventories $ 98,024 $ 84,851
========= =========
7. PROPERTY, PLANT AND EQUIPMENT
2002 2001
--------- ---------
Land, buildings and building improvements $ 57,983 $ 52,680
Machinery and equipment 287,064 270,178
Furniture, fixtures and other 45,107 26,399
Construction in progress 29,392 15,441
--------- --------
419,546 364,698
Less: accumulated depreciation (208,592) (178,405)
-------- --------
Net property, plant and equipment $210,954 $186,293
======== ========
Depreciation expense totaled $32,454, $28,084 and $26,100 for the years ended
December 31, 2002, 2001 and 2000, respectively.
8. OTHER CURRENT LIABILITIES
2002 2001
------- -------
Advertising and promotional accruals $28,141 $36,121
Rebates and discounts. . . . . . . . 15,771 9,425
Sales returns. . . . . . . . . . . . 1,271 1,124
Customs and supply accruals. . . . . 2,924 3,133
Facility expenses. . . . . . . . . . 1,830 2,084
Personnel costs. . . . . . . . . . . 2,632 560
Restructuring reserve . . . . . . . 483 3,183
Environmental accruals . . . . . . . 5,000 4,269
Short term debt. . . . . . . . . . . 4,149 1,885
Professional services. . . . . . . . 678 925
Other taxes. . . . . . . . . . . . . 2,464 2,418
Other. . . . . . . . . . . . . . . . 2,744 1,814
------- -------
Total. . . . . . . . . . . . . . . . $68,087 $66,941
======= =======
Short term debt represents working capital lines of credit primarily with local
banks that are utilized by several of the SWS companies.
9. OTHER (INCOME)/DEDUCTIONS -- NET
2002 2001 2000
-------- -------- --------
Amortization of goodwill and other intangibles $ 719 $ 3,158 $ 2,964
Net foreign exchange (gains)/losses. . . . . . 2,405 (3,558) (5,017)
Cash discounts on purchases. . . . . . . . . . (704) (587) --
Royalty income . . . . . . . . . . . . . . . . (455) (431) (453)
Other, net . . . . . . . . . . . . . . . . . . (1,290) (480) 1,139
-------- -------- --------
Total other (income)/deductions - net. . . . . $ 675 $(1,898) $(1,367)
======== ======== ========
10. INCOME TAXES
The components of the income tax provision/(benefit) are:
2002 2001 2000
-------- -------- --------
Current:
Federal . . . . $ 2,782 $(2,999) $ 2,430
State and local 171 (811) 453
Foreign taxes . 20,433 22,687 32,636
-------- -------- --------
Total current . 23,386 18,877 35,519
-------- ------- --------
Deferred:
Federal . . . . 731 5,242 2,119
State and local 456 1,130 199
Foreign taxes . (1,304) (2,199) (4,153)
-------- -------- --------
Total deferred. (117) 4,173 (1,835)
-------- -------- --------
Total . . . . . . . $23,269 $23,050 $33,684
======== ======== ========
Reconciliation of the U.S. income tax rate to SWS' effective rate is as follows:
2002 2001 2000
------ ------ ------
Federal statutory income tax rate 35.0 % 35.0 % 35.0 %
U.S. state and local taxes. . . . 1.0 % .5 % .7 %
Effect of foreign operations. . . 1.8 % 1.8 % 1.6 %
------ ------ ------
Effective income tax rate . . . . 37.8 % 37.3 % 37.3 %
====== ====== ======
Deferred income taxes are provided for the temporary differences between the
financial reporting basis and the tax basis of SWS' assets and liabilities. The
tax effects of the major items recorded as deferred tax assets and liabilities
are:
2002 2001
------------- -------------
Assets Assets
(Liabilities) (Liabilities)
-------------- --------------
Inventories . . . . . . . . . $ 8,101 $ 4,629
Intangibles . . . . . . . . . (11,532) (9,042)
Pension costs . . . . . . . . 7,878 2,005
Property, plant and equipment (11,301) (9,909)
Accruals. . . . . . . . . . . (887) 5,830
Other . . . . . . . . . . . . 1,514 143
-------------- --------------
Net deferred tax liability. . $ (6,227) $ (6,344)
============== ==============
11. PENSION AND POSTRETIREMENT BENEFITS
The SWS subsidiaries in Germany and the United Kingdom sponsor their own pension
plan. At other locations, SWS employees participate in Pfizer's pension plans
for employees worldwide. For all the plans, plan benefits depend on years of
service and employee final average earnings. Participants vest in their
benefits after as few as five years of service. The U.S. portion of the pension
cost allocated to SWS was approximately $1,527, $1,877 and $1,819 for the years
ended December 31, 2002, 2001 and 2000, respectively. SWS employees participate
in Pfizer's postretirement benefit plans for employees worldwide. Pfizer does
not fund postretirement plans, but contributes to the plans as benefits are
paid. Postretirement benefit cost of approximately $806, $2,145 and $2,079 for
the years ended December 31, 2002, 2001 and 2000, respectively was allocated to
SWS.
The following tables present the benefit obligation and the funded status as
well as the assumptions used by the pension plans sponsored by the SWS
subsidiaries in Germany and the United Kingdom which excludes the SWS employees
who participate in Pfizer's plans:
2002 2002 2001 2001 2000 2000
----- -------- ----- -------- ----- --------
UK Germany UK Germany UK Germany
ASSUMPTIONS:
Discount rate . . . . . 5.75% 5.50% 6.00% 6.50% 6.00% 7.00%
Expected return on
plan assets . . . . . .7.00% -- 7.00% -- 7.75% --
Rate of compensation
increase. . . . . . . . 3.60% 2.50% 3.75% 4.00% 3.75% 2.50%
2002 2001 2000
--------- --------- ---------
Service cost . . . . . . . . . . . . . . . . . . . $ 1,077 $ 974 $ 1,221
Interest cost. . . . . . . . . . . . . . . . . . . 10,785 9,948 10,341
Expected return on plan assets . . . . . . . . . . (11,088) (9,655) (9,724)
Amortization of:
Prior service costs . . . . . . . . . . . . . . 8 8 8
Plan net losses . . . . . . . . . . . . . . . . 480 -- 518
Curtailments and settlements. . . . . . . . . . 295 569 --
--------- --------- ---------
Net periodic pension cost. . . . . . . . . . . . . $ 1,557 $ 1,844 $ 2,364
========= ========= =========
CHANGE IN PROJECTED BENEFIT OBLIGATION:. . . . . . 2002 2001
--------- ---------
Balance beginning of year. . . . . . . . . . . . . $174,467 $175,170
Service costs for benefits earned. . . . . . . . . 1,077 974
Interest cost on benefit obligation. . . . . . . . 10,785 9,948
Employee contributions . . . . . . . . . . . . . . 67 68
Plan net losses. . . . . . . . . . . . . . . . . . 8,300 6,264
Foreign exchange impact. . . . . . . . . . . . . . 16,483 (7,602)
Benefits paid. . . . . . . . . . . . . . . . . . . (11,449) (10,355)
--------- ---------
Projected benefit obligation at end of year. . . . $199,730 $174,467
========= =========
Change in plan assets: . . . . . . . . . . . . . . 2002 2001
--------- ---------
Fair value of plan assets at beginning of year . . $148,747 $157,836
Actual gain / (loss) on plan assets. . . . . . . . (2,430) 5,711
Company contributions. . . . . . . . . . . . . . . 4,315 1,621
Employee contributions . . . . . . . . . . . . . . 67 68
Foreign exchange impact. . . . . . . . . . . . . . 13,239 (6,978)
Benefits paid. . . . . . . . . . . . . . . . . . . (10,553) (9,511)
--------- ---------
Fair value of plan assets at end of year . . . . . $153,385 $148,747
========= =========
Funded status: . . . . . . . . . . . . . . . . . . 2002 2001
--------- ---------
Plan assets less than projected benefit obligation $(46,345) $(25,720)
Unrecognized losses. . . . . . . . . . . . . . . . 42,416 19,315
Prior service costs. . . . . . . . . . . . . . . . 103 --
--------- ---------
Net amount recognized in combined balance
sheets $ (3,826) $ (6,405)
========= =========
THE COMPONENTS IN THE BALANCE SHEETS CONSIST OF:
2002 2001
---------- ----------
Accrued benefit liability (included in
"Other noncurrent liabilities") $ (42,928) $ (25,455)
Intangible asset 103 --
Accumulated other comprehensive expense 38,999 19,050
---------- ----------
Net amount recognized in combined balance sheets $ (3,826) $ (6,405)
========= =========
As of year end 2002 the pension plans in the United Kingdom and Germany have an
accumulated benefit obligation of $196,313 and plan assets of $153,385. The
minimum pension liability of $42,928 is included in "Other noncurrent
liabilities" in the accompanying combined balance sheet.
12. STOCK OPTION AWARDS
Stock options are granted to SWS employees under the Pfizer Inc. Stock and
Incentive Plan. Options are exercisable after three years, subject to
continuous employment and certain other conditions and expire 10 years after the
grant date. Once exercisable, the employee can purchase shares of Pfizer common
stock at the market price on the date the option was granted. At the time of
the Pfizer/Warner-Lambert merger, stock options that had been granted under the
legacy Warner-Lambert stock plan became exercisable immediately.
The number of options granted to SWS employees in 2002, 2001 and 2000 were
1,052,533, 1,347,764 and 1,125,332. The weighted average exercise price of
these options was $41.30, $45.33 and $31.99, respectively.
The weighted-average fair value per stock option granted was $7.40, $15.12 and
$11.12 for the options granted in 2002, 2001 and 2000, respectively. The fair
values were estimated using the Black-Scholes option pricing model, modified for
dividends and using the following assumptions:
2002 2001 2000
------ ------ ------
Expected dividend yield. . . . . . . 1.44% 1.41% 1.54%
Risk-free interest rate. . . . . . . 3.01% 5.00% 6.65%
Expected stock price volatility. . . 29.79% 31.45% 30.68%
Expected term until exercise (years) 2.13 5.50 5.35
13. CONTINGENT LIABILITIES AND COMMITMENTS
SWS leases facilities, vehicles and office equipment under various
noncancellable operating leases. Total rent expense under operating leases
was approximately $5,312, $5,089 and $5,092 for the years ended December 31,
2002, 2001 and 2000, respectively. Future minimum lease payments under
noncancellable operating leases at December 31, 2002 are:
2003 . . . . . . . . . . . . $ 4,302
2004 . . . . . . . . . . . . 3,547
2005 . . . . . . . . . . . . 2,978
2006 . . . . . . . . . . . . 2,269
2007 . . . . . . . . . . . . 2,257
After 2007 . . . . . . . . . 650
-------
Total minimum lease payments $16,003
=======
Additionally, in 1971, SWS entered into a 128 year lease for a building in the
United Kingdom. The current rent is $661 per annum and is subject to increase
every seven years. SWS United Kingdom receives $412 per annum under two sublease
agreements related to this building. The sublease agreements expire in 2006 and
2099, respectively. The lease is accounted for as a capital lease and the
related capital lease liability of $1,813 is included in other noncurrent
liabilities in the combined balance sheets.
14. LEGAL PROCEEDINGS AND CONTINGENCIES
SWS is involved in various patent, product liability, consumer, environmental
and tax claims and litigations that arise from time to time in the ordinary
course of business. SWS believes that it has a valid defense with respect to
the legal matters pending against it and, taking into account insurance and
reserves, it believes that the ultimate resolution of these matters will not
have a material adverse impact on its financial condition, results of
operations, or cash flows. It is possible, however, that cash flows or results
of operations could be affected in any particular period by the resolution of
one or more of these contingencies.
SWS is currently involved in the remediation of groundwater contamination at
their Milford, CT facility. It is difficult to estimate with certainty the total
cost of remediating, the timing and extent of remedial actions, which may be
required by governmental authorities, or the amount of liability of SWS. During
2000 SWS recorded $2.5 million for potential environmental remediation costs.
During 2002, SWS increased its estimated liability to $5.0 million as a result
of further testing performed on the contaminated facility. These expenses are
included in "Cost of Sales" in the accompanying combined statements of income.
Based on information currently available, management believes that the accrual
is adequate to cover SWS' exposure in the foreseeable future.
15. SEGMENT, GEOGRAPHIC AND REVENUE INFORMATION
SWS operates in one business segment. We primarily sell our products to
customers in the retail sector. In 2002, 2001 and 2000 sales to our largest
customer represented 13.6%, 13.0% and 12.4% of total sales, respectively. The
three markets listed below were the only countries to contribute more than 10%
of sales. The following table presents revenue and geographic information:
UNITED ALL OTHER
STATES JAPAN GERMANY COUNTRIES CONSOLIDATED
------- ------- ------- --------- ------------
Revenues. . . . . 2002 211,202 119,663 81,996 238,805 651,666
. . . . . . . . 2001 187,928 118,710 89,130 228,990 624,758
. . . . . . . . 2000 216,890 139,744 83,583 238,124 678,341
Long-lived assets 2002 104,497 554 157,919 37,747 300,717
. . . . . . . . 2001 104,806 687 134,282 28,882 268,657
16. SUBSEQUENT EVENTS
In January 2003, Pfizer announced that it had agreed to sell SWS to Energizer
Holdings, Inc. The sale was completed in March 2003.
(b) Pro Forma Financial Information.
Introduction
Unaudited Pro Forma Combined Statements of Earnings and related Notes for the
following periods:
Six months ended March 31, 2003
Year ended September 30, 2002
Quarter ended March 31, 2003
Quarter ended December 31, 2002
Quarter ended September 30, 2002
Quarter ended June 30, 2002
UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS
(Dollars in millions)
On March 28, 2003, Energizer Holdings, Inc. (Energizer) completed its previously
announced acquisition of the worldwide Schick-Wilkinson Sword (SWS) business
from Pfizer, Inc. for $930.0 plus costs of executing the acquisition and subject
to adjustments based on acquired working capital level. SWS is the second
largest manufacturer and marketer of men's and women's wet shave products in the
world.
The following reflects the estimated assets and liabilities acquired by
Energizer in the SWS acquisition. Such estimated asset and liability amounts
are based on preliminary valuation information and will be adjusted upon
completion of a final appraisal. The amounts shown below are included in
Energizer's balance sheet as of March 31, 2003, as filed in its Form 10Q on May
15, 2003.
MARCH 31,
ACQUIRED SWS ASSETS AND LIABILITIES 2003
----
Trade receivables $ 133.5
Inventories 194.5
Other current assets 14.5
--------
Total current assets 342.5
Property, plant and equipment 256.9
Goodwill 405.7
Other intangible assets 117.0
Other assets 3.6
--------
Total assets acquired 1,125.7
Accounts payable 50.4
Other current liabilities 83.7
--------
Total current liabilities 134.1
Other liabilities 61.6
--------
Total liabilities 195.7
--------
Net assets acquired $ 930.0
========
In accordance with generally accepted accounting principles, SWS inventory
acquired in the acquisition was valued at its estimated fair value on
Energizer's March 31, 2003 balance sheet. Such fair value of inventory is
approximately $80 greater than historical cost basis of such inventory prior to
the acquisition. This required accounting treatment will reduce gross margin by
approximately $80 (compared to historical SWS cost basis) as the product is sold
following the acquisition. The impact of such adjustment is not included in the
Unaudited Pro Forma Combined Statements of Earnings presented below.
The following Unaudited Pro Forma Combined Statements of Earnings (pro forma
earnings statements) represents Energizer's pro forma earnings statements as if
the acquisition of SWS had occurred on October 1, 2001. Such results have been
prepared by adjusting the historical Energizer results to include SWS results of
operations and incremental interest, amortization of acquired finite-lived
intangibles and other expenses related to acquisition debt. The pro forma
earnings statements do not include any cost savings that may result from the
combination of Energizer and SWS operations, nor one-time items related to
acquisition accounting, including the inventory adjustment discussed above.
These pro forma earnings statements are based on, and should be read in
conjunction with Energizer's previously filed historical consolidated financial
statements and related notes, as well as SWS historical consolidated financial
statements and notes included in this filing.
The pro forma adjustments, which are described in the accompanying notes, are
based on information available at the time of this filing. Included in the pro
forma earnings statements are certain assumptions and estimates that management
of Energizer believes are reasonable, but may change as additional information
becomes available and valuations of the acquired assets are finalized.
The pro forma earnings statements may not necessarily reflect the consolidated
operations that would have existed had the acquisition been completed at the
beginning of such periods nor are they necessarily indicative of future results.
ENERGIZER HOLDINGS, INC.
PRO FORMA COMBINED STATEMENT OF EARNINGS
(DOLLARS IN MILLIONS--UNAUDITED)
HISTORICAL
------------------------
ENERGIZER SWS PRO FORMA
SIX MONTHS ENDED SIX MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31, PRO FORMA MARCH 31,
2003 2003 (a) ADJUSTMENTS 2003
---- -------- ----------- ----
Net sales . . . . . . . . . . . . . . . . . $935.0 $312.0 $ - $1,247.0
Cost of products sold . . . . . . . . . . . 515.0 149.7 4.0 (b) 668.7
Selling, general and administrative expense 145.0 85.0 (12.0)(c)(d) 218.0
Advertising and promotion expense . . . . . 74.0 56.6 - 130.6
Research and development expense. . . . . . 18.1 14.7 - 32.8
Intellectual property rights income . . . . (6.0) - - (6.0)
Interest expense. . . . . . . . . . . . . . 9.1 - 14.5 (e) 23.6
Other financing items, net. . . . . . . . . (1.1) 2.0 - 0.9
------- ------- --------- ---------
Earnings before income taxes. . . . . . . . 180.9 4.0 (6.5) 178.4
Income taxes. . . . . . . . . . . . . . . . (61.5) (1.4) 1.8 (f) (61.1)
------- ------- --------- ---------
Net earnings. . . . . . . . . . . . . . . . $119.4 $ 2.6 $ (4.7) $ 117.3
======= ======= ========= =========
Basic earnings per share. . . . . . . . . . $ 1.36 - - $ 1.34
Diluted earnings per share. . . . . . . . . $ 1.33 - - $ 1.31
Weighted-Average Shares - Basic . . . . . . 87.5 - - 87.5
Weighted-Average Shares - Diluted . . . . . 89.8 - - 89.8
(a) Represents SWS on a stand alone basis, with amounts adjusted to conform to
Energizer's Statement of Earnings captions, the most significant of which
are Advertising and promotion expense (A&P), corporate overhead costs and
warehousing and distribution expenses. In SWS stand alone statements, A&P
and warehousing and distribution expenses are included in Marketing and
distribution expense. In the above format, warehousing and distribution is
included in Cost of products sold and corporate overhead costs are included
in Selling, general and administrative expense.
(b) Includes additional depreciation on write up of fixed assets $4.0.
(c) Includes incremental amortization for trademarks/tradenames, technology and
customer related intangibles totaling $2.5
(d) To remove allocation of corporate and other costs from Pfizer of $7.2,
certain environmental expenses not assumed as a part of the acquisition of
$2.8, and certain expenses triggered as a result of the acquisition of
$4.5.
(e) Represents incremental interest expense and reduced interest income as a
result of the $930.0 acquisition of SWS. Incremental debt is computed at a
weighted average annual interest rate of 3.1%, reflecting a combination of
floating and fixed rate debt, with fixed rates for up to 10 years. A change
in the weighted average annual interest rate of 1/8 of a percent would
change interest expense by $0.4.
(f) Represents income tax impact of pro forma adjustments above.
ENERGIZER HOLDINGS, INC.
PRO FORMA COMBINED STATEMENT OF EARNINGS
(DOLLARS IN MILLIONS--UNAUDITED)
HISTORICAL
----------
ENERGIZER SWS PRO FORMA
YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, PRO FORMA SEPTEMBER 30,
2002 2002 (a) ADJUSTMENTS 2002
---- -------- ----------- ----
Net sales . . . . . . . . . . . . . . . . . $1,739.7 $625.1 $ - $2,364.8
Cost of products sold . . . . . . . . . . . 963.8 292.2 8.0 (b) 1,264.0
Selling, general and administrative expense 307.0 142.2 (6.6)(c)(d) 442.6
Advertising and promotion expense . . . . . 124.5 113.8 - 238.3
Research and development expense. . . . . . 37.1 27.8 - 64.9
Provisions for restructuring. . . . . . . . 7.7 - - 7.7
Interest expense. . . . . . . . . . . . . . 21.1 - 29.1 (e) 50.2
Other financing items, net. . . . . . . . . 0.1 0.7 - 0.8
--------- ------- ------ ---------
Earnings before income taxes. . . . . . . . 278.4 48.4 (30.5) 296.3
Income taxes. . . . . . . . . . . . . . . . (92.0) (18.3) 9.4 (f) (100.9)
--------- ------- ------- ---------
Net earnings. . . . . . . . . . . . . . . . $ 186.4 $ 30.1 $(21.1) $ 195.4
========= ======= ======= =========
Basic earnings per share. . . . . . . . . . $ 2.05 $ 2.15
Diluted earnings per share. . . . . . . . . $ 2.01 $ 2.11
Weighted-Average Shares - Basic . . . . . . 91.0 91.0
Weighted-Average Shares - Diluted . . . . . 92.8 92.8
(a) Represents SWS on a stand alone basis, with amounts adjusted to conform to
Energizer's Statement of Earnings captions, the most significant of which
are Advertising and promotion expense (A&P), corporate overhead costs and
warehousing and distribution expenses. In SWS stand alone statements, A&P
and warehousing and distribution expenses are included in Marketing and
distribution expense. In the above format, warehousing and distribution is
included in Cost of products sold and corporate overhead costs are included
in Selling, general and administrative expense.
(b) Includes additional depreciation on write up of fixed assets $8.0.
(c) Includes incremental amortization for trademarks/tradenames, technology and
customer related intangibles totaling $4.7.
(d) To remove allocation of corporate and other costs from Pfizer of $11.3.
(e) Represents incremental interest expense and reduced interest income as a
result of the $930.0 acquisition of SWS. Incremental debt is computed at a
weighted average annual interest rate of 3.1%, reflecting a combination of
floating and fixed rate debt, with fixed rates for up to 10 years. A change
in the weighted average annual interest rate of 1/8 of a percent would
change interest expense by $0.8.
(f) Represents income tax impact of pro forma adjustments above.
ENERGIZER HOLDINGS, INC.
PRO FORMA COMBINED STATEMENT OF EARNINGS
(DOLLARS IN MILLIONS--UNAUDITED)
HISTORICAL
----------
ENERGIZER SWS PRO FORMA
QUARTER ENDED QUARTER ENDED QUARTER ENDED
MARCH 31, MARCH 31 PRO FORMA MARCH 31,
2003 2003 (a) ADJUSTMENTS 2003
---- -------- ----------- ----
Net sales . . . . . . . . . . . . . . . . . $362.6 $128.0 $ - $490.6
Cost of products sold . . . . . . . . . . . 207.3 63.9 2.0 (b) 273.2
Selling, general and administrative expense 69.4 42.4 (6.0)(c)(d) 105.8
Advertising and promotion expense . . . . . 26.8 32.3 - 59.1
Research and development expense. . . . . . 9.3 7.1 - 16.4
Interest expense. . . . . . . . . . . . . . 4.7 - 7.3 (e) 12.0
Other financing items, net. . . . . . . . . (0.8) 1.0 - 0.2
------- ------- ------ -------
Earnings before income taxes. . . . . . . . 45.9 (18.7) (3.3) 23.9
Income taxes. . . . . . . . . . . . . . . . (12.9) 7.1 0.8 (f) (5.0)
------- ------- ------ -------
Net earnings. . . . . . . . . . . . . . . . $ 33.0 $(11.6) $(2.5) $ 18.9
======= ======= ======= =======
Basic earnings per share. . . . . . . . . . $ 0.38 $ 0.22
Diluted earnings per share. . . . . . . . . $ 0.37 $ 0.21
Weighted-Average Shares - Basic . . . . . . 86.5 86.5
Weighted-Average Shares - Diluted . . . . . 88.6 88.6
(a) Represents SWS on a stand alone basis, with amounts adjusted to conform to
Energizer's Statement of Earnings captions, the most significant of which
are Advertising and promotion expense (A&P), corporate overhead costs and
warehousing and distribution expenses. In SWS stand alone statements, A&P
and warehousing and distribution expenses are included in Marketing and
distribution expense. In the above format, warehousing and distribution is
included in Cost of products sold and corporate overhead costs are included
in Selling, general and administrative expense.
(b) Includes additional depreciation on write up of fixed assets $2.0.
(c) Includes incremental amortization for trademarks/tradenames, technology and
customer related intangibles totaling $1.2.
(d) To remove allocation of corporate and other costs from Pfizer of $2.7, and
certain expenses triggered as a result of the acquisition of $4.5.
(e) Represents incremental interest expense and reduced interest income as a
result of the $930.0 acquisition of SWS. Incremental debt is computed at a
weighted average annual interest rate of 3.1%, reflecting a combination of
floating and fixed rate debt, with fixed rates for up to 10 years. A change
in the weighted average annual interest rate of 1/8 of a percent would
change interest expense by $0.2.
(f) Represents income tax impact of pro forma adjustments above.
ENERGIZER HOLDINGS, INC.
PRO FORMA COMBINED STATEMENT OF EARNINGS
(DOLLARS IN MILLIONS--UNAUDITED)
HISTORICAL
---------------------
ENERGIZER SWS PRO FORMA
QUARTER ENDED QUARTER ENDED QUARTER ENDED
DECEMBER 31, DECEMBER 31, PRO FORMA DECEMBER 31,
2002 2002 (a) ADJUSTMENTS 2002
---- -------- ----------- ----
Net sales . . . . . . . . . . . . . . . . . $572.4 $184.0 $ - $756.4
Cost of products sold . . . . . . . . . . . 307.7 85.8 2.0 (b) 395.5
Selling, general and administrative expense 75.6 42.6 (6.0)(c)(d) 112.2
Advertising and promotion expense . . . . . 47.2 24.3 - 71.5
Research and development expense. . . . . . 8.8 7.6 - 16.4
Intellectual property rights income . . . . (6.0) - - (6.0)
Interest expense. . . . . . . . . . . . . . 4.4 - 7.2 (e) 11.6
Other financing items, net. . . . . . . . . (0.3) 1.0 - 0.7
------- ------- ------ -------
Earnings before income taxes. . . . . . . . 135.0 22.7 (3.2) 154.5
Income taxes. . . . . . . . . . . . . . . . (48.6) (8.5) 1.0 (f) (56.1)
------- ------- ------ -------
Net earnings. . . . . . . . . . . . . . . . $ 86.4 $ 14.2 $(2.2) $ 98.4
======= ======= ====== =======
Basic earnings per share. . . . . . . . . . $ 0.98 $ 1.11
Diluted earnings per share. . . . . . . . . $ 0.95 $ 1.08
Weighted-Average Shares - Basic . . . . . . 88.5 88.5
Weighted-Average Shares - Diluted . . . . . 91.0 91.0
(a) Represents SWS on a stand alone basis, with amounts adjusted to conform to
Energizer's Statement of Earnings captions, the most significant of which
are Advertising and promotion expense (A&P), corporate overhead costs and
warehousing and distribution expenses. In SWS stand alone statements, A&P
and warehousing and distribution expenses are included in Marketing and
distribution expense. In the above format, warehousing and distribution is
included in Cost of products sold and corporate overhead costs are included
in Selling, general and administrative expense.
(b) Includes additional depreciation on write up of fixed assets $2.0.
(c) Includes incremental amortization for trademarks/tradenames, technology and
customer related intangibles totaling $1.3.
(d) To remove allocation of corporate and other costs from Pfizer of $4.5, and
certain environmental expenses not assumed as part of the acquisition of
$2.8.
(e) Represents incremental interest expense and reduced interest income as a
result of the $930.0 acquisition of SWS. Incremental debt is computed at a
weighted average annual interest rate of 3.1%, reflecting a combination of
floating and fixed rate debt, with fixed rates for up to 10 years. A change
in the weighted average annual interest rate of 1/8 of a percent would
change interest expense by $0.2.
(f) Represents income tax impact of pro forma adjustments above.
ENERGIZER HOLDINGS, INC.
PRO FORMA COMBINED STATEMENT OF EARNINGS
(DOLLARS IN MILLIONS--UNAUDITED)
HISTORICAL
--------------------------
ENERGIZER SWS PRO FORMA
QUARTER ENDED QUARTER ENDED QUARTER ENDED
SEPTEMBER 30, SEPTEMBER 30, PRO FORMA SEPTEMBER 30,
2002 2002 (a) ADJUSTMENTS 2002
---- -------- ----------- ----
Net sales . . . . . . . . . . . . . . . . . $442.4 $160.2 $ - $602.6
Cost of products sold . . . . . . . . . . . 248.5 72.3 2.0 (b) 322.8
Selling, general and administrative expense 74.2 37.6 (2.2)(c)(d) 109.6
Advertising and promotion expense . . . . . 27.3 27.8 - 55.1
Research and development expense. . . . . . 9.9 5.8 - 15.7
Provisions for restructuring. . . . . . . . 1.8 - - 1.8
Interest expense. . . . . . . . . . . . . . 4.9 - 7.3 (e) 12.2
Other financing items, net. . . . . . . . . (0.7) 1.4 - 0.7
------- ------- ------ -------
Earnings before income taxes. . . . . . . . 76.5 15.3 (7.1) 84.7
Income taxes. . . . . . . . . . . . . . . . (20.3) (5.9) 2.2 (f) (24.0)
------- ------- ------ -------
Net earnings. . . . . . . . . . . . . . . . $ 56.2 $ 9.4 $(4.9) $ 60.7
======= ======= ======= =======
Basic earnings per share. . . . . . . . . . $ 0.62 $ 0.67
Diluted earnings per share. . . . . . . . . $ 0.61 $ 0.66
Weighted-Average Shares - Basic . . . . . . 90.1 90.1
Weighted-Average Shares - Diluted . . . . . 92.5 92.5
(a) Represents SWS on a stand alone basis, with amounts adjusted to conform to
Energizer's Statement of Earnings captions, the most significant of which
are Advertising and promotion expense (A&P), corporate overhead costs and
warehousing and distribution expenses. In SWS stand alone statements, A&P
and warehousing and distribution expenses are included in Marketing and
distribution expense. In the above format, warehousing and distribution is
included in Cost of products sold and corporate overhead costs are included
in Selling, general and administrative expense.
(b) Includes additional depreciation on write up of fixed assets $2.0.
(c) Includes incremental amortization for trademarks/tradenames, technology and
customer related intangibles totaling $1.2.
(d) To remove allocation of corporate and other costs from Pfizer of $3.4.
(e) Represents incremental interest expense and reduced interest income as a
result of the $930.0 acquisition of SWS. Incremental debt is computed at a
weighted average annual interest rate of 3.1%, reflecting a combination of
floating and fixed rate debt, with fixed rates for up to 10 years. A change
in the weighted average annual interest rate of 1/8 of a percent would
change interest expense by $0.2.
(f) Represents income tax impact of pro forma adjustments above.
ENERGIZER HOLDINGS, INC.
PRO FORMA COMBINED STATEMENT OF EARNINGS
(DOLLARS IN MILLIONS--UNAUDITED)
HISTORICAL
----------
ENERGIZER SWS PRO FORMA
QUARTER ENDED QUARTER ENDED QUARTER ENDED
JUNE 30, JUNE 30, PRO FORMA JUNE 30,
2002 2002 (a) ADJUSTMENTS 2002
---- -------- --------- ----
Net sales . . . . . . . . . . . . . . . . . $389.9 $162.0 $ - $551.9
Cost of products sold . . . . . . . . . . . 220.5 72.4 2.0 (b) 294.9
Selling, general and administrative expense 71.8 33.5 (1.6)(c)(d) 103.7
Advertising and promotion expense . . . . . 26.8 42.8 - 69.6
Research and development expense. . . . . . 8.9 6.6 - 15.5
Interest expense. . . . . . . . . . . . . . 4.7 - 7.3 (e) 12.0
Other financing items, net. . . . . . . . . (0.7) 0.3 - (0.4)
------- ------- ------ -------
Earnings before income taxes. . . . . . . . 57.9 6.4 (7.7) 56.6
Income taxes. . . . . . . . . . . . . . . . (18.1) (2.3) 2.3 (f) (18.1)
------- ------- ------ -------
Net earnings. . . . . . . . . . . . . . . . $ 39.8 $ 4.1 $(5.4) $ 38.5
======= ======= ====== =======
Basic earnings per share. . . . . . . . . . $ 0.44 $ 0.42
Diluted earnings per share. . . . . . . . . $ 0.43 $ 0.41
Weighted-Average Shares - Basic . . . . . . 91.1 91.1
Weighted-Average Shares - Diluted . . . . . 93.3 93.3
(a) Represents SWS on a stand alone basis, with amounts adjusted to conform to
Energizer's Statement of Earnings captions, the most significant of which
are Advertising and promotion expense (A&P), corporate overhead costs and
warehousing and distribution expenses. In SWS stand alone statements, A&P
and warehousing and distribution expenses are included in Marketing and
distribution expense. In the above format, warehousing and distribution is
included in Cost of products sold and corporate overhead costs are included
in Selling, general and administrative expense.
(b) Includes additional depreciation on write up of fixed assets $2.0.
(c) Includes incremental amortization for trademarks/tradenames, technology and
customer related intangibles totaling $1.2.
(d) To remove allocation of corporate and other costs from Pfizer of $2.8.
(e) Represents incremental interest expense and reduced interest income as a
result of the $930.0 acquisition of SWS. Incremental debt is computed at a
weighted average annual interest rate of 3.1%, reflecting a combination of
floating and fixed rate debt, with fixed rates for up to 10 years. A change
in the weighted average annual interest rate of 1/8 of a percent would
change interest expense by $0.2.
(f) Represents income tax impact of pro forma adjustments above.
(c)(i) The following exhibits (listed by numbers corresponding to the Exhibit
Table of Item 601 in Regulation S-K) are hereby incorporated by reference
to registrant's Post-Effective Amendment No. 1 to Form 10, filed April 19,
2000.
99(i) Debt Assignment, Assumption and Release Agreement by and among
Ralston Purina Company, Energizer Holdings, Inc. and Bank One, N.A.
99(ii) 5-Year Revolving Credit Agreement between Ralston Purina Company and
Bank One, N.A.
99(iii) 364-Day Credit Agreement between Ralston Purina Company and Bank
One, N.A.
99(iv) Asset Securitization Receivable Purchase Agreement between Energizer
Holdings, Inc., Falcon Asset Securitization Corporation and Bank One,
N.A.
(c)(ii) The following exhibits (listed by numbers corresponding to the Exhibit
Table of Item 601 in Regulation S-K) are hereby incorporated by reference
to registrant's Quarterly Report on Form 10Q for the Quarter Ended December
31, 2002.
2 Stock and Asset Purchase Agreement between Pfizer Inc. and Energizer
Holdings, Inc.
99(v) 364-Day Bridge Term Loan Credit Agreement among Energizer Holdings,
Inc., various lenders, Bank One, N.A. as Administrative Agent, and
Bank of America, N.A. as Syndication Agent.
(c)(iii) The following exhibits (listed by numbers corresponding to the Exhibit
Table of Item 601 in Regulation S-K) are filed with this report.
23 Consent of Independent Accountants
SIGNATURES:
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amended report to be signed on its behalf by the
undersigned hereunto duly authorized.
ENERGIZER HOLDINGS, INC.
By: /s/ Daniel J. Sescleifer
Daniel J. Sescleifer
Executive Vice President and Chief Financial Officer
Dated: May 30, 2003