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`
end
EX-10
5
exhibit10.htm
ENERGIZER HOLDINGS, INC. DEFERRED COMPENSATION PLAN
Exhibit 10
2009 RESTATEMENT
OF
ENERGIZER HOLDINGS,
INC.
DEFERRED COMPENSATION
PLAN
|
|
|
TABLE
OF CONTENTS ARTICLE |
PAGE |
|
|
ARTICLE I Introduction |
1 |
|
1.1 |
|
Name of Plan/Purpose |
1 |
|
1.2 |
|
Top Hat Retirement Benefit Plan |
1 |
|
1.3 |
|
Effective Date |
1 |
|
1.4 |
|
Administration |
1 |
|
|
ARTICLE II Definitions and
Construction |
2 |
|
2.1 |
|
Definitions |
2 |
|
2.2 |
|
Number and Gender |
9 |
|
2.3 |
|
Headings |
9 |
|
|
ARTICLE III Participation and
Eligibility |
10 |
|
3.1 |
|
Eligibility |
10 |
|
3.2 |
|
Participation |
10 |
|
3.3 |
|
Duration of Participation |
10 |
|
|
ARTICLE IV Deferral and Matching
Contributions |
11 |
|
4.1 |
|
Deferrals by Participants |
11 |
|
4.2 |
|
Effective Date of Deferred Compensation
Agreement |
11 |
|
4.3 |
|
Modification or Revocation of Election of Participant |
11 |
|
4.4 |
|
Matching Contributions |
12 |
|
4.5 |
|
Mandated Deferrals |
12 |
|
4.6 |
|
Deferral Periods |
12 |
|
|
ARTICLE V Vesting |
13 |
|
5.1 |
|
Vesting in Base Salary Deferrals, Bonus Deferrals, and Director Fee
Deferrals |
13 |
|
5.2 |
|
Vesting in Matching Contributions |
13 |
|
|
ARTICLE VI Accounts |
13 |
|
6.1 |
|
Establishment of Bookkeeping Account |
13 |
|
6.2 |
|
Subaccounts |
14 |
|
6.3 |
|
Investment of Account |
14 |
|
6.4 |
|
Hypothetical Nature of Account |
15 |
|
|
ARTICLE VII Payment of
Account |
15 |
|
7.1 |
|
Timing of Distribution of Benefits; Designated Payment
Date |
15 |
|
7.2 |
|
Adjustment of Account Upon a Distribution |
15 |
|
7.3 |
|
Form of Payment or Payments |
16 |
|
7.4 |
|
Death Benefits |
17 |
|
7.5 |
|
Designation of Beneficiaries |
17 |
|
7.6 |
|
Unclaimed Benefits |
17 |
|
7.7 |
|
Withdrawal |
17 |
|
7.8 |
|
Offset of Benefit By Certain Amounts |
18 |
|
|
ARTICLE VIII
Administration |
19 |
ARTICLE IX
Amendment and Termination |
19 |
|
|
ARTICLE X General
Provisions |
20 |
|
10.1 |
|
Non-Alienation of Benefits |
20 |
|
10.2 |
|
Contractual Right to Benefits Funding |
20 |
|
10.3 |
|
Indemnification and Exculpation |
21 |
|
10.4 |
|
No Employment Agreement |
21 |
|
10.5 |
|
Claims and Appeals Procedures |
21 |
|
10.6 |
|
Disability Claims and Appeals Procedures |
22 |
|
10.7 |
|
Limitation of Action and Choice of Venue |
24 |
|
10.8 |
|
Successor to Company |
24 |
|
10.9 |
|
Severability |
24 |
|
10.10 |
|
Transfer Among Affiliates |
24 |
|
10.11 |
|
Entire Plan |
24 |
|
10.12 |
|
Payee Not Competent |
24 |
|
10.13 |
|
Tax Withholding |
25 |
|
10.14 |
|
Governing Law |
25 |
|
10.15 |
|
Compliance with Code Section 409A |
25 |
- ii -
2009 RESTATEMENT OF
ENERGIZER
HOLDINGS, INC.
DEFERRED
COMPENSATION PLAN
ARTICLE I
INTRODUCTION
1.1 Name of
Plan/Purpose.
ENERGIZER HOLDINGS, INC. (Company) established the ENERGIZER HOLDINGS,
INC. DEFERRED COMPENSATION PLAN (Grandfathered Plan), effective as of April 1,
2000, to provide, in part, certain eligible employees and Directors of the
Company and its Subsidiaries the opportunity to defer elements of their
compensation or fees and to receive the benefit of additions to their deferrals.
The Company amended and completely restated the Grandfathered Plan effective as
of November 1, 2003.
In connection with complying with
Section 409A of the Internal Revenue Code of 1986, as amended (Code), the
portion of each Participants Account that was earned and vested as of December
31, 2004, was frozen, except for adjustments for earnings and losses, and
credited to a separate subaccount (the Grandfathered Account) and will be
administered in accordance with the terms of the Grandfathered Plan as in effect
on October 3, 2004 and the federal income tax law in effect prior to the
enactment of Section 409A. The portion of each Participants Account earned or
vested on or after January 1, 2005 was credited to a separated subaccount (the
Non-Grandfathered Account). Pursuant to Notice 2007-86, with respect to the
period from January 1, 2005 through December 31, 2008, all Non-Grandfathered
Accounts will be administered in accordance with Notice 2005-1, other generally
applicable Section 409A guidance, and the Companys good faith interpretation of
compliance with Code Section 409A, as documented, in part, in draft plan
documents, forms, or communications. Effective January 1, 2009, all
Non-Grandfathered Accounts will be administered in accordance with the 2009
Restatement of the Energizer Holdings, Inc. Deferred Compensation Plan (Plan).
A Participants benefit will be comprised of his or her Grandfathered Account
under the Grandfathered Plan and his or her Non-Grandfathered Accounts under the
Plan.
1.2 Top Hat Retirement Benefit
Plan.
The
Plan is intended to be a nonqualified unfunded deferred compensation plan. The
Plan is maintained for Directors and for a select group of management or highly
compensated employees and, therefore, it is intended that the Plan will be
exempt from Parts 2, 3 and 4 of Title I of ERISA. The Plan is not intended to
qualify under Code Section 401. The Plan is intended to comply with the
requirements of Section 409A of the Code.
1.3 Effective Date.
This
amendment and restatement of the Plan is effective as of January 1, 2009, except
as otherwise provided.
1.4 Administration.
The Plan shall be administered by the Committee described in Article
VIII.
1
ARTICLE II
Definitions and
Construction
2.1 Definitions.
For
purposes of the Plan, the following words and phrases, whether or not
capitalized, shall have the respective meanings set forth below, unless the
context clearly requires a different meaning:
(a) Account means the bookkeeping
account maintained on behalf of each Participant pursuant to Article VI that is
credited with Base Salary Deferrals, Bonus Deferrals, Matching Contributions,
and Director Fee Deferrals pursuant to Article IV, amounts allocated to the
Participants dividend equivalents as described in Section 6.3, interest
equivalents, if applicable, and equivalents of earnings, if any, distributed
with respect to other investment funds whose results are reflected in
measurement funds offered pursuant to the Plan. Statements of Accounts issued to
Participants also will reflect the market value of investment funds selected by
the Participants for their Accounts, as of the appropriate Valuation Date. The
market value of a particular investment fund in a Participants Account will be
determined as of the appropriate Valuation Date at the time of distribution or
transfer to another investment fund in the Plan, notwithstanding that the market
value attributed to such investment funds may vary from day to day. For purposes
of the 2009 Restatement of the Plan, Account means a Participants
Non-Grandfathered Account.
(b) Acquiring Person means any
person or group of Affiliates or Associates who is or becomes the beneficial
owner, directly or indirectly, of shares representing 20% or more of the total
votes of the outstanding stock entitled to vote at a meeting of
shareholders.
(c) Affiliate or Associate shall
have the meanings set forth in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended.
(d) Base Salary means, with
respect to an Employee, the annual cash compensation relating to services
performed during any calendar year, whether or not actually paid in such
calendar year or included on the Federal Income Tax Form W-2 for such calendar
year, excluding bonuses, commissions, overtime, fringe benefits, stock options,
relocation expenses, incentive payments, non-monetary awards, and other fees,
automobile and other allowances paid to a Participant for employment services
rendered (whether or not such allowances are included in the Employees gross
income). Base Salary shall be calculated before reduction for compensation
voluntarily or mandatorily deferred or contributed by the Participant pursuant
to all qualified or non-qualified plans of the Company and any Subsidiary and
shall be calculated to include amounts not otherwise included in the
Participants gross income under Code Sections 125, 132(f)(4), 402(e)(3), 402(h)
or 403(b) pursuant to plans established by the Company or Subsidiary; provided
however, that all such amounts will be included in compensation only to the
extent that, had there been no such plan, the amount would have been payable in
cash to the Employee.
2
(e) Base Salary Deferral means the
amount of a Participants Base Salary that the Participant elects to have
withheld on a pre-tax basis from his or her Base Salary and credited to his or
her Account pursuant to Section 4.1. Effective January 1, 2009, Base Salary
Deferrals will no longer be permitted under the Plan.
(f) Beneficial Owner shall mean a
person who shall be deemed to have acquired beneficial ownership of, or to
beneficially own, any securities:
(i)
which such person or any of such persons Affiliates or Associates beneficially
owns, directly or indirectly;
(ii)
which such person or any of such persons Affiliates or Associates has (a) the
right to acquire (whether such right is exercisable immediately or only after
the passage of time) pursuant to any agreement, arrangement or understanding
(other than customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities), or upon the
exercise of currently exercisable conversion or exchange rights, warrants or
options, or otherwise; provided, however, that a person shall not be deemed the
Beneficial Owner of, or to beneficially own, securities tendered pursuant to a
tender or exchange offer made by or on behalf of such person or any of such
persons Affiliates or Associates until such tendered securities are accepted
for purchase or exchange; or (b) the right to vote pursuant to any agreement,
arrangement or understanding; provided, however, that a person shall not be
deemed the Beneficial Owner of, or to beneficially own, any security if the
agreement, arrangement or understanding to vote such security (1) arises solely
from a revocable proxy or consent given to such person in response to a public
proxy or consent solicitation made pursuant to, and in accordance with, the
applicable rules and regulations promulgated under the Exchange Act and (2) is
not also then reportable on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(iii)
which are beneficially owned, directly or indirectly, by any other person with
which such person or any of such persons Affiliates or Associates has any
agreement, arrangement or understanding (other than customary agreements with
and between underwriters and selling group members with respect to a bona fide
public offering of securities) for the purpose of acquiring, holding, voting or
disposing of any securities of Company.
Notwithstanding anything in this definition of Beneficial Owner to the
contrary, the phrase then outstanding, when used with reference to a persons
beneficial ownership of securities of Company, shall mean the number of such
securities then issued and outstanding together with the number of such
securities not then actually issued and outstanding which such person would be
deemed to own beneficially hereunder.
3
(g) Beneficiary means the person
or entity designated by the Participant to receive benefits which may be payable
on or after the Participants death in accordance with Section 7.4.
(h) Board means the Board of
Directors of the Company.
(i) Bonus Compensation means the
amount awarded to a Participant for a Plan Year under any bonus plan maintained
by the Company and/or a Subsidiary which the Committee permits to be deferred
under the Plan.
(j) Bonus Deferral means the
amount of a Participants Bonus Compensation that the Participant elects to have
withheld on a pre-tax basis from his or her Bonus Compensation and credited to
his or her Account pursuant to Section 4.1.
(k) Cause means willful breach or
failure by the Participant to perform his or her employment duties.
(l) Change of Control means a
change of control of a nature that would be required to be reported in response
to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended (the Exchange Act), whether or not the
Company is then subject to such reporting requirement; provided that, without
limitation, such a Change of Control shall be deemed to have occurred
if:
(i)
any person (as such term is used in Sections 13(d) and 14(d)(2) as currently
in effect, of the Exchange Act) is or becomes a beneficial owner (as
determined for purposes of Regulation 13D-G, as currently in effect, of the
Exchange Act), directly or indirectly, of securities representing 20% or more of
the total voting power of all of the Companys then outstanding voting
securities. For purposes of this Plan, the term person shall not include: (A)
the Company or any corporation of which 50% or more of the voting stock is
owned, directly or indirectly, by the Company (individually, a "Subsidiary" and
collectively "Subsidiaries"), (B) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
Subsidiaries, or (C) an underwriter temporarily holding securities pursuant to
an offering of said securities;
(ii)
during any period of two (2) consecutive calendar years, individuals who at the
beginning of such period constitute the Board and any new director(s) whose
election by the Board or nomination for election by the Companys stockholders
was approved by a vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of such period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute a majority of the Board;
4
(iii)
the stockholders of the Company approve a merger, consolidation or sale or other
disposition of all or substantially all of the assets of the Company (a
Business Combination), in each case, unless following such Business
Combination: (i) all or substantially all of the individuals and entities who
were the beneficial owners (as determined for purposes of Regulation 13D-G, as
currently in effect, of the Exchange Act) of the outstanding voting securities
of the Company immediately prior to such Business Combination beneficially own,
directly or indirectly, securities representing more than 50% of the total
voting power of the then outstanding voting securities of the corporation
resulting from such Business Combination or the parent of such corporation (the
Resulting Corporation); (ii) no person (as such term is used in Section
13(d) and 14(d)(2), as currently in effect, of the Exchange Act), other than a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or the Resulting Corporation, is the beneficial owner (as
determined for purposes of Regulation 13D-G, as currently in effect, of the
Exchange Act), directly or indirectly, of voting securities representing 20% or
more of the total voting power of then outstanding voting securities of the
Resulting Corporation; and (iii) at least a majority of the members of the board
of directors of the Resulting Corporation were members of the Board at the time
of the execution of the initial agreement, or at the time of the action of the
Board, providing for such Business Combination;
(iv)
the stockholders of the Company approve a plan of complete liquidation or
dissolution of the Company; or
(v)
any other event that a simple majority of the Board, in its sole discretion,
shall determine constitutes a Change of Control.
(m) Code means the Internal
Revenue Code of 1986, as amended, and all valid regulations
thereunder.
(n) Committee means the Energizer
Plans Administrative Committee which administers the Plan in accordance with
Article VIII.
(o) Company means Energizer
Holdings, Inc. and any successor thereto.
(p) Continuing Director means any
member of the Board, while such person is a member of such Board, who is not an
Affiliate or Associate of an Acquiring Person or of any such Acquiring Persons
Affiliate or Associate and was a member of such Board prior to the time when
such Acquiring Person became an Acquiring Person, and any successor of a
Continuing Director, while such successor is a member of such Board, who is not
an Acquiring Person or an Affiliate or Associate of an Acquiring Person or a
representative or nominee of an Acquiring Person or of any Affiliate or
Associate of such Acquiring Person and is recommended or elected to succeed the
Continuing Director by a majority of the Continuing Directors.
(q) Controlled Group means all
corporations or business entities that are, along with the Company, members of a
controlled group of corporations or businesses, as defined in Sections 414(b)
and 414(c) of the Code, or a member of an affiliated service group, as defined
in Section 414(m) of the Code, except that the language at least 50 percent is
used instead of at least 80 percent in applying the rules of Sections 414(b)
and 414(c).
5
(r) Deferral Period means the
period of time for which a Participant elects to defer receipt of his or her
Base Salary Deferrals and Bonus Deferrals credited to such Participants Account
for a Plan Year. A Participants election of a Deferral Period made with respect
to such Base Salary Deferrals and Bonus Deferrals for a Plan Year shall apply to
Matching Contributions with respect to such Bonus Deferrals for such Plan Year.
A Participant who is a Director may not elect a Deferral Period with respect to
Director Fee Deferrals.
(s) Deferrals means (i) with
respect to a Participant who is an Employee, Base Salary Deferrals and/or Bonus
Deferrals, and (ii) with respect to a Participant who is a Director, Director
Fee Deferrals.
(t) Deferred Compensation
Agreement means the written agreement or electronic means by which a
Participant elects the amount of Deferrals for a Plan Year, the Deferral Period,
the deemed investment and the form of payment for the Deferrals and Matching
Contributions, allocated to such Participants Account for a Plan Year. A
Participants election with respect to the deemed investment and form of payment
of Salary Deferrals and Bonus Deferrals shall apply to the Matching
Contributions with respect to such Bonus Deferrals for such Plan Year. A
Participant who is a Director may not elect a form of payment or Deferral Period
with respect to his or her Director Fee Deferrals.
(u) Director means any member of
the Board or any member of the board of directors of a Subsidiary who is not an
officer or Employee of the Company and/or a Subsidiary.
(v) Director Fee Deferrals means
the amount of Director Fees which a Participant elects to have withheld or which
the Company mandatorily withholds on a pre-tax basis from his or her Director
Fees and credited to his or her Account pursuant to Section 4.1.
(w) Director Fees means the amount
of cash paid to a Director, including but not limited to board of director fees,
committee fees, annual retainer director fees and such other amounts paid to a
Director, for services as a Director of the Company or a Subsidiary.
(x) Disability means the inability
of the Participant to perform the duties of his or her own occupation because of
illness or injury of unavoidable cause.
(y) Effective Date means January
1, 2009, the effective date of this amendment and restatement of the Plan,
except as otherwise provided.
(z) Employee means any individual
who is classified by the Company or a Subsidiary, and reported on the payroll
records of the Company or a Subsidiary, as a common law employee of the Company
or a Subsidiary, regardless of such individuals status under common law,
including whether such individual is or has been determined by a third party
(including, without limitation, a government agency or board or court or
arbitrator) to be an employee of the Company or any Subsidiary for any purpose,
including, for purposes of any employee benefit plan of the Company or any
Subsidiary (including this Plan) or for purposes of federal, state, or local tax
withholding, employment tax, or employment law. No individual shall be
retroactively reclassified as an Employee.
6
(aa) ERISA means the Employee
Retirement Income Security Act of 1974, as amended.
(bb) Good Reason means any of the
following: assignment of duties inconsistent with the Employees status or
diminution in status or responsibilities from that which existed prior to the
Change of Control; reduction in the Employees annual salary; failure of the
acquiror to pay any bonus award to which the Employee was otherwise entitled, or
to offer the Employee incentive compensation, stock options or other benefits or
perquisites which are offered to similarly situated employees of the acquiror;
relocation of the Employees primary office to a location greater than fifty
(50) miles from his or her existing office; any attempt by the acquiror to
terminate the Employees employment in a manner other than as expressly
permitted by the Change of Control agreement(s); or the failure by the acquiror
to expressly assume the Companys obligations under the Change of Control
agreement(s).
(cc) Grandfathered Account means
the vested portion of a Participants Account as of December 31, 2004, as
adjusted for earnings or losses.
(dd) Market Value means the closing
price of the Stock as reported by the New York Stock Exchange on the date in
question, or, if the Stock is not quoted or if the Stock is not listed on such
exchange, on the principal United States securities exchange registered under
the Securities Exchange Act of 1934, as amended, on which the Stock is listed,
or if the Stock is not listed on any such exchange, the closing bid quotation
with respect to a share of Stock on the date in question on the NASDAQ Stock
Market National Market System or any system then in use, or if no such quotation
is available, the fair market value on the date in question of a share of Stock
as determined by a majority of the Continuing Directors in accordance with
regulations under Code Section 409A; provided, however, that the date in
question for purposes of crediting Bonus Deferrals of Incentive Plan bonus
payments and Company Matching Contributions thereon will be November 15, that
the date in question for purposes of crediting Salary Deferrals will be the date
the salary would otherwise have been paid, that the date in question for
purposes of crediting Director Fee Deferrals will be the date the Director Fee
would otherwise have been paid, and that the date in question for purposes of
crediting Company Matching Contributions on Director Fee Deferrals will be the
last day of the calendar year.
(ee) Matching Contribution means
the amount of the contributions made by the Company and/or a Subsidiary on
behalf of a Participant who elects to make Bonus Deferrals to the Plan for a
Plan Year, subject to the provisions of Section 4.4.
(ff) Non-Grandfathered Account
means (i) the portion of a Participants Account that became vested on or after
January 1, 2005, as adjusted for earnings and losses, and (ii) contributions for
periods on or after January 1, 2005, as adjusted for earnings and
losses.
7
(gg) Participant means each
Employee who has been selected for participation in the Plan and each Director
who has become a Participant pursuant to Article III.
(hh) Plan means the 2009
RESTATEMENT OF ENERGIZER HOLDINGS, INC. DEFERRED COMPENSATION PLAN, as amended
from time to time.
(ii) Plan Year means the
twelve-consecutive month period commencing January 1 of each year and ending on
December 31, except that the first Plan Year shall be the period beginning on
April l, 2000 and ending on December 31, 2000.
(jj) Retirement means (i) with
respect to a Participant who is an Employee, the date such Participant incurs a
voluntary Termination of Employment on or after attaining age 55 and 10 years of
service (as determined under the terms of the Energizer Holdings, Inc.
Retirement Plan), and (ii) with respect to a Participant who is a Director, the
date such Director resigns or is removed as a Director of the Company and
Subsidiaries following attainment of age 70.
(kk) Stock means shares of the
Companys common stock, par value $.0l per share, which consists of shares of a
class of common stock designated as Energizer Common Stock (ENR Stock) or any
such other security outstanding upon the reclassification or redesignation of
the Companys ENR Stock or any other outstanding class or series of common stock
of the Company, including, without limitation, any stock split-up, stock
dividend, creation of tracking stock, or other distributions of stock in respect
of stock, or any reverse stock split-up, or recapitalization of the Company or
any merger or consolidation of the Company with any Affiliate, or any other
transaction, whether or not with or into or otherwise involving an Acquiring
Person.
(ll) Stock Unit means a stock unit
that is equivalent to one share of Stock.
(mm) Stock Unit Fund means the
Energizer Common Stock Unit Fund.
(nn) Subsidiary means any domestic
corporation in which the Company owns, directly or indirectly, 50% or more of
the voting stock.
(oo) Termination for Cause means a
Participants termination of employment with the Company and its Subsidiaries
because the Participant willfully engaged in gross misconduct; provided,
however, that a Termination for Cause shall not include a termination
attributable to: (i) poor work performance, bad judgment or negligence on the
part of the Participant; or (ii) an act or omission reasonably believed by the
Participant in good faith to have been in or not opposed to the best interests
of his or her employer and reasonably believed by the Participant to be
lawful.
(pp) Termination of Employment
means termination of employment from the Controlled Group, as determined in
accordance with rules set forth in IRS regulations under Code Section 409A
(generally a decrease in the performance of services to no more than 20% of the
average for the preceding 36-month period); provided, however, to the extent
permitted by the regulations issued under Code Section 409A, a Termination of
Employment does not occur if a Participant is on a military leave, sick leave
or other bona fide leave of absence granted by the Company or a
Subsidiary.
8
(qq) Termination of Service means
termination of service as a Director with respect to all entities in the
Controlled Group, as determined in accordance with rules set forth in IRS
regulations under Code Section 409A.
(rr) Trust means the fund, if any,
established in consequence of and for the purpose of the Plan, to be held in
trust by the Trustee, from which Trust benefits under the Plan may be
paid.
(ss) Trust Agreement means the
Trust under the Energizer Holdings, Inc. Deferred Compensation Plan made and
entered into by the Company with the Trustee pursuant to the Plan, as said Trust
Agreement may be amended from time to time.
(tt) Trustee means any person,
persons or corporation designated by the Company from time to time to hold,
invest and disburse, in accordance with the Plan and Trust Agreement, the assets
of the Plan.
(uu) Valuation Date means each
business day that the New York Stock Exchange is open for business, unless
changed by the Committee, and each special valuation date designated by the
Committee.
2.2 Number and Gender.
Wherever appropriate herein, words used in the singular shall be
considered to include the plural and words used in the plural shall be
considered to include the singular. The masculine gender, where appearing in the
Plan, shall be deemed to include the feminine gender.
2.3 Headings.
The
headings of Articles and Sections herein are included solely for convenience and
do not bear on the interpretation of the text. If there is any conflict between
such headings and the text of the Plan, the text shall control. As used in the
Plan, the terms Article and Section mean the text that accompanies the
specified Article or Section of the Plan.
9
ARTICLE III
Participation and
Eligibility
3.1 Eligibility.
(a) Employees - The Committee shall
select who is eligible to participate in the Plan from among the management or
highly compensated Employees of the Company and its Subsidiaries who are subject
to the income tax laws of the United States. In making its selections hereunder,
the Committee shall take into consideration the nature of the services rendered
or to be rendered to the Company and its Subsidiaries by an Employee, his or her
present and potential contribution to the success of the Company and its
Subsidiaries, and such other factors as the Committee deems relevant in
accomplishing the purposes of the Plan. The Committee shall notify each
Participant of his or her selection as a Participant.
(b) Directors - A Director is
eligible to participate in the Plan.
3.2 Participation.
An
Employee or Director shall become a Participant effective as of the January 1
following the date the Committee determines his or her eligibility. Subject to
the provisions of Section 3.3, a Participant shall remain eligible to continue
participation in the Plan for each Plan Year following his or her initial year
of participation in the Plan. The terms of the Plan shall govern the benefits,
if any, payable to the Participant or his or her Beneficiary, except as
otherwise provided in the Participants Deferred Compensation
Agreement.
3.3 Duration of
Participation.
(a) Employee - A Participant who is
an Employee shall cease to be a Participant as of the date on which he or she
incurs a Termination of Employment or the last day of the Plan Year in which the
Committee terminates such Participants participation in the Plan, whichever
date is earliest.
If the Committee determines in good
faith that a Participant no longer qualifies as a member of a select group of
management or highly compensated employees, as membership in such group is
determined in accordance with the provisions of Sections 201(2), 301(a)(3) and
401(a)(1) of ERISA, the Committee shall have the right, in its sole discretion
to prevent the Participant from making future deferral elections in future Plan
Years.
(b) Director - A Participant who is
a Director shall cease to be a Participant as of the date on which he or she
incurs a Termination of Service or the last day of the Plan Year in which the
Committee terminates such Participants participation in the Plan, whichever
date is earliest.
10
ARTICLE IV
Deferral and Matching
Contributions
4.1 Deferrals by
Participants.
(a) Deferral Elections by
Participants Except as provided in Section 4.3, before the first day of each
Plan Year, a Participant may file with the Committee a Deferred Compensation
Agreement pursuant to which such Participant elects to make Deferrals for such
Plan Year. Any such Participant election shall be subject to any maximum or
minimum percentage or dollar amount limitations and to any other rules
prescribed by the Committee in its sole discretion prior to the commencement of
such Plan Year; provided however, that the Nominating and Executive Compensation
Committee of the Board shall approve the deferral elections made each year by a
Participant who is an executive officer as defined in the Securities Exchange
Act of 1934 and regulations promulgated thereunder.
(b) Crediting of Deferral Amounts -
Bonus Deferrals will be credited to the Account of each Participant as soon as
administratively feasible after such Bonus Compensation otherwise would have
been paid to the Participant in cash, provided that the Participant is an
Employee as of such date. A Participant who incurs a Termination of Employment
before his or her Bonus Compensation would have been paid in cash will be paid
his or her Bonus Deferral in cash. Director Fee Deferrals will be credited to
the Account of each Participant as soon as administratively feasible after such
Director Fees otherwise would have been paid to the Participant in cash,
provided that the Participant is a Director as of such date. A Participant who
incurs a Termination of Service before his or her Director Fees would have been
paid in cash will be paid his or her Director Fee Deferrals in cash.
(c) Cessation of Base Salary
Deferrals Effective January 1, 2009, Base Salary Deferrals will no longer be
permitted under the Plan.
4.2 Effective Date of Deferred
Compensation Agreement.
Except
as provided in Section 4.3, a Participants Deferred Compensation Agreement
shall be effective as of the first day of the Plan Year to which it relates. If
a Participant fails to complete a Deferred Compensation Agreement on or before
the date the Participant commences participation in the Plan or the first day of
any Plan Year, the Participant shall be deemed to have elected not to make
Deferrals for such Plan Year (or remaining portion thereof if the Participant
enters the Plan other than on the first day of a Plan Year).
4.3 Modification or Revocation of
Election of Participant.
Except
as otherwise provided in this Section 4.3, a Participant may not discontinue or
change the amount of his or her Deferrals during a Plan Year and may not make,
modify, or revoke a Deferral Election retroactively. A Participant may, however,
cancel a deferral election because of a hardship distribution from the Energizer
Holdings, Inc. Savings Investment Plan pursuant to Treas. Reg.
§1.401(k)-1(d)(3).
11
4.4 Matching
Contributions.
For
each Plan Year, the Company and/or its Subsidiaries shall make a Matching
Contribution with respect to the Bonus Deferrals of a Participant; provided
however, that (i) the amount of such Matching Contributions for each Plan Year
shall be an amount equal to 25% of the Participants Bonus Deferrals for such
Plan Year; (ii) no Matching Contribution shall be made with respect to a
Participants Bonus Deferral if such Participant incurs a Termination of
Employment before the Bonus Compensation which he or she elected to defer would
have been paid in cash, and (iii) such Bonus Deferrals by Employees for such
Plan Year must be invested in the Stock Unit Fund as provided in Section 6.3 for
a period of not less than twelve (12) months beginning on the date such Bonus
Deferrals are credited to such Participants Account in order to be entitled to
such Matching Contribution as described below. Matching Contributions with
respect to Bonus Deferrals invested in the Stock Unit Fund shall be credited to
the Account of a Participant as of the date such Bonus Deferrals are credited to
the Participants Account; provided however, Matching Contributions
proportionately attributable to Bonus Deferrals that are withdrawn by a
Participant from the Stock Unit Fund within twelve (12) months beginning on the
date such Bonus Deferrals are credited to such Participants Account, shall be
forfeited by such Participant. Anything contained herein to the contrary
notwithstanding, the Nominating and Executive Compensation Committee of the
Board shall approve the Matching Contribution, if any, made with respect to a
Participant who is an executive officer as defined in the Securities Exchange
Act of 1934 and regulations promulgated thereunder.
For each Plan Year, the Company
shall make a Matching Contribution with respect to a Participants Director Fee
Deferrals for such Plan Year. Effective January 1, 2004, the amount of such
Matching Contribution shall be an amount equal to 33 1/3% of the Director Fee
Deferrals for such Plan Year. The Matching Contribution made with respect to a
Participants Director Fee Deferrals for a Plan Year shall be made as of
December 31st of such year.
4.5 Mandated Deferrals.
If the Committee mandates the
deferral of any compensation in order to preserve the deductibility of such
compensation when paid, under Code Section 162(m), such amounts shall remain
deferred until the first calendar year in which the Committee reasonably
anticipates that the deduction of such payment will not be barred by application
of Code Section 162(m). Such mandated deferrals shall not be entitled to a
Matching Contribution and shall be paid in a lump sum.
4.6 Deferral
Periods.
(a) Employees - A Participant who is
an Employee must specify on the Deferred Compensation Agreement, the Deferral
Period for the Deferrals for the Plan Year to which the Deferred Compensation
Agreement relates. A Participant shall elect one of the Deferral Period options
as follows: (1) a Deferral Period of at least three (3) years pursuant to which
a distribution is made within sixty (60) days of the January 1 immediately
following the end of the Deferral Period, or (2) a Deferral Period ending on the
sixth month anniversary of the date of the Participants Termination of
Employment.
12
(b) Directors - A Participant
who is a Director may not elect a Deferral Period with respect to Director Fee
Deferrals. Payment of such Director Fee Deferrals shall be made in accordance
with the provisions of Section 7.1.
ARTICLE V
Vesting
5.1 Vesting in Base Salary Deferrals,
Bonus Deferrals, and Director Fee Deferrals.
A Participant shall always be 100%
vested in the amounts allocated to his or her Account attributable to his or her
Base Salary Deferrals, Bonus Deferrals and Director Fee Deferrals.
5.2 Vesting in Matching
Contributions.
(a) Employees - A Participant who is
an Employee shall become 100% vested in the amounts allocated to his or her
Account attributable to his or her Matching Contributions for a Plan Year, upon
the expiration of thirty-six (36) months beginning on the first day of the first
full month following the date such Matching Contributions are credited to his or
her Account. In the event such Participant incurs a Termination of Employment,
the amounts allocated to his or her Account attributable to his or her Matching
Contributions in which such Participant is vested shall be determined as of the
date of such Termination of Employment unless otherwise provided in paragraph
(b) of this Section 5.2.
(b) Notwithstanding the foregoing, a
Participant who is an Employee shall become 100% vested in the amounts allocated
to his or her Account attributable to his or her Matching Contributions upon the
Participants Retirement, death, Disability, involuntary Termination of
Employment (other than Termination for Cause) or upon a Change of Control if the
Participant incurs a Termination of Employment within twelve (12) months
following such Change of Control, and if such Termination of Employment is by
the Participant for Good Reason, or such Termination of Employment is by the
Company or a Subsidiary, for any reason other than for Cause.
(c) Directors - A Participant who is
a Director, shall always be 100% vested in the amounts allocated to his or her
Account attributable to his or her Matching Contributions.
ARTICLE VI
Accounts
6.1 Establishment of Bookkeeping
Account.
Separate bookkeeping Accounts shall be maintained for each Participant.
For a Participant with benefits under the Grandfathered Plan, the Account shall
be referred to as the Grandfathered Account. For a Participant with benefits
under the Plan, the Account shall be referred to as the Non-Grandfathered
Account. Each Non-Grandfathered Account shall be credited with the Deferrals
made by the Participant pursuant to Section 4.1 and the Matching Contributions
made by the Company or a Subsidiary
13
pursuant to Section 4.4.
Grandfathered and Non-Grandfathered Accounts also shall reflect the investment
results described in Section 6.3.
6.2 Subaccounts.
Within
each Participants bookkeeping Accounts, separate subaccounts may be maintained
to the extent necessary for the administration of the Plan. For example, it may
be necessary to maintain separate subaccounts where the Participant has
specified different Deferral Periods, methods of payment or investment
directions with respect to his or her Deferrals for different Plan
Years.
6.3 Investment of Account.
A
Participant shall elect to invest the amounts credited to his or her Account in
such measurement funds as are selected by the Committee in its sole discretion,
including but not limited to the Stock Unit Fund. The Committee may change or
eliminate such measurement funds from time to time. The investment of such
funds, or change in such investments, shall be made in accordance with such
rules and procedures established by the Committee.
A
Participants Account shall consist of a cash subaccount and a stock subaccount.
Amounts allocated to the cash subaccount shall be invested in investments other
than Stock Units. Amounts allocated to the stock subaccount shall be maintained
as Stock Units. A Participant shall elect on his or her Deferred Compensation
Agreement the portion of his or her Deferrals for a Plan Year that will be
allocated to a cash subaccount and to the stock subaccount. The balance of a
Participants Account as of any date is the aggregate of the cash subaccount and
the stock subaccount as of such date. The balance of each cash subaccount shall
be expressed in United States dollars. The balance of each stock subaccount
shall be expressed in the numbers of shares of Stock deemed allocated to such
subaccount, with fractional shares of Stock calculated to three decimal places.
The number of Stock Units allocated to the stock subaccount as of any date shall
be equal to the quotient of the amount allocated to the stock subaccount divided
by the Market Value on such date. Upon the occurrence of any stock split-up,
stock dividend, issuance of any tracking stock, combination or reclassification
with respect to any outstanding series or class of Stock, or consolidation,
merger or sale of all or substantially all of the assets of the Company, the
number of Stock Units in each stock subaccount shall, to the extent appropriate
as determined by the Committee in its sole discretion, be adjusted accordingly.
To the extent dividends on any class or series of outstanding Stock are paid,
dividend equivalents and fractions thereof shall be calculated with respect to
balances of such Stock equivalents in the Participants stock subaccount,
converted to additional equivalents of such Stock and credited to the
Participants stock subaccount as of the dividend payment dates. The number of
Stock equivalents to be credited as of each such date shall be determined by
dividing the amount of the dividend equivalent by the Market Value of the
relevant Stock on the dividend payment date. The Participants stock subaccount
shall continue to earn such dividend equivalents until fully
distributed.
Matching Contributions must be invested in the Stock Unit Fund for a
period of not less than thirty-six (36) months beginning on the date such
Matching Contributions are credited to a Participants Account.
14
Director Fee Deferrals for a Plan Year must be invested in the Stock Unit
Fund for the balance of such Plan Year or, if less, for the portion of the Plan
Year during which the Participant serves as a Director.
As of
each Valuation Date, a Participants Account shall be valued in accordance with
this Section and any rules and procedures established by the Committee.
6.4 Hypothetical Nature of Account.
The
Account established under this Article VI shall be hypothetical in nature and
shall be maintained for bookkeeping purposes only. Neither the Plan nor any of
the Accounts (or subaccounts) established hereunder shall hold any actual funds
or assets. The right of any person to receive one or more payments under the
Plan shall be an unsecured claim against the general assets of the Company or
Subsidiary for which the Participant worked when the Deferrals or Matching
Contributions were made. Any liability of the Company or Subsidiary to any
Participant, former Participant, or Beneficiary with respect to a right to
payment shall be based solely upon contractual obligations created by the Plan.
Neither the Company and/or any Subsidiary, the Board, nor any other person shall
be deemed to be a trustee of any amounts to be paid under the Plan. Nothing
contained in the Plan, and no action taken pursuant to its provisions, shall
create or be construed to create a trust of any kind, or a fiduciary
relationship, between the Company and/or any Subsidiary and a Participant or any
other person.
ARTICLE VII
Payment of Account
7.1 Timing of Distribution of
Benefits; Designated Payment Date.
(a) Employees - With respect to a
Participant who is an Employee, the amounts allocated to a Participants Account
attributable to Deferrals and vested Matching Contributions for a Plan Year
shall be distributed (or begin to be distributed, in the case of annual
installment payments) to such Participant on the earlier of (i) a date within
sixty (60) days of the January 1 immediately following the last day of the
Deferral Period for such Plan Year, or (ii) the sixth month anniversary of the
Participants Termination of Employment.
(b) Directors - With respect to a
Participant who is a Director, distribution of the Participants Account shall
be made within sixty (60) days after the date the Participant incurs a
Termination of Service, provided that the Director may not specify the calendar
year of payment.
7.2 Adjustment of Account Upon a
Distribution.
Upon a
distribution pursuant to this Article VII, the distributable portion of a
Participants Account shall be determined as of the Valuation Date immediately
preceding the date of the distribution to be made and shall be credited with
declared dividends, if any, and adjusted for investment results which have
accrued to the date of distribution but which have not been allocated to his or
her Account.
15
7.3 Form of Payment or Payments.
The
amounts allocated to a Participants Account attributable to Deferrals and
vested Matching Contributions, made to the Plan for a Plan Year, shall be
distributed to the Participant specified as follows:
(a) Lump Sum Payment A Participant
who is an Employee may elect to have his or her benefit paid in a lump sum
payment as elected in his or her Deferred Compensation Agreement at the time
specified in Section 7.1(a). A Participant who is a Director shall receive
payment of his or her Account in a lump sum payment at the time specified in
Section 7.1(b).
(b) Annual Installment Payment A
Participant who is an Employee may elect in his or her Deferred Compensation
Agreement to have his or her benefit paid in a series of annual installment
payments. For purposes of Section 409A and the regulations thereunder, annual
installment payments made pursuant to a Participants election in a Deferred
Compensation Agreement shall be treated as a single payment. If a benefit is to
be paid in a series of annual installment payments, the annual installment
payments may be made for a period equal to five (5) or ten (10) years, as
elected by the Participant in his or her Deferred Compensation Agreement. The
first installment will be paid at the time specified in Section 7.1(a).
Subsequent annual installment payments shall be paid on January 1 of each year.
The amount of each annual installment payment shall be calculated by multiplying
the total amount to be distributed to such Participant by a fraction, the
numerator of which is one, and the denominator of which is the remaining number
of annual installment payments to be made to the Participant.
(c) Change in Election of Method of Payment. Anything contained herein to the contrary
notwithstanding, a Participant shall be permitted to change the form of payment
initially elected in a Deferred Compensation Agreement provided that (i) such
election will not take effect until 12 months after the date on which the
election is made; (ii) the payment with respect to which such election is made
will be deferred for an additional 5 years after the date such payment would
otherwise have been made; and (iii) such election must be made at least 12
months before the date the payment would otherwise have been made. No
Participant may change the form of payment initially elected more than once.
(d) Failure to Elect. If a
Participant does not elect the form of payment in his or her Deferred
Compensation Agreement, his or her benefit shall be paid in the form of a lump
sum payment.
16
7.4 Death Benefits
(a) Employees Notwithstanding any
other provision of this Article VII, in the event a Participant who is an
Employee dies before his or her benefit commences to be paid to him or her, the
total amount allocated to the Participants Account shall be paid in a lump sum
to the Participants Beneficiary. In the event a Participant who is an Employee
or who was an Employee and who has terminated employment, dies after his or her
benefit commences to be paid to him or her, the remainder of his or her vested
Account shall be paid in a lump sum to the Participants Beneficiary. If no
Beneficiary is designated, then benefits shall be paid in a lump sum within
ninety (90) days following the date of death as provided in Section 7.5,
provided that the Beneficiary may not specify the calendar year of payment.
(b) Directors - In the event a
Participant who is a Director dies, the amount credited to the Participants
Account shall be paid to the Participants Beneficiary in a lump sum within
ninety (90) days following the date of death, provided that the Beneficiary may
not specify the calendar year of payment.
(c) Distribution pursuant to this
Section 7.4 shall be made within ninety (90) days following the date of death.
7.5 Designation of Beneficiaries.
A
Participant may designate the Beneficiary or Beneficiaries to whom his or her
benefit under the Plan shall be paid if he or she dies before receiving complete
payment of such benefit. A Beneficiary designation (i) must be made on a
beneficiary designation form provided by the Committee, (ii) shall be effective
on the date such designation form is actually received by the Committee, and
(iii) shall revoke all prior designations made by the Participant. A Beneficiary
designation form received by the Committee after the date of the Participants
death shall be null and void. If a Participant has not designated a Beneficiary,
if no designated Beneficiary survives the Participant or if the Beneficiary
designation is legally invalid for any reason, then, the Participants
Beneficiary shall be the Participants executor or administrator, or his or her
heirs at law if there is no administration of such Participants estate. If the
Committee is in doubt as to the right of any such Beneficiary to receive any
benefits under the Plan, it may pay such benefits, in its sole and absolute
discretion, to the legal representative of the Participants estate, and upon
such payment neither the Committee, the Company, nor the Plan shall have further
liability for such payment.
7.6 Unclaimed Benefits.
In the
case of a benefit payable on behalf of such Participant, if the Committee is
unable to locate the Participant or Beneficiary to whom such benefit is payable,
such benefit may be forfeited to the Company, upon the Committees
determination. Notwithstanding the foregoing, if subsequent to any such
forfeiture the Participant or Beneficiary to whom such benefit is payable makes
a valid claim for such benefit, such forfeited benefit shall be paid by the
Company or restored to the Plan by the Company.
7.7 Withdrawal.
(a) A Participant (or, after a
Participants death, his or her Beneficiary) may request a withdrawal of all or
a portion of his or her vested Account on account of a
17
severe financial hardship in
accordance with such rules and procedures prescribed by the Committee. The
Participant (or his or her Beneficiary) shall be paid the withdrawal amount as
soon as practicable after the Committee approves his or her request. The payment
of this withdrawal amount shall not be subject to the deduction limitation under
Code Section 162(m).
(b) If
the Committee determines that a Participant has incurred a severe financial
hardship, the Committee may make a cash distribution to the Participant of the
portion of the vested balance of his or her Account needed to satisfy the severe
financial hardship (including taxes reasonably anticipated as a result of such
distribution), to the extent that the severe financial hardship may not be
relieved:
(1)
Through reimbursement or compensation by insurance or otherwise; or
(2) By
liquidation of the Participants assets, to the extent the liquidation of such
assets would not itself cause severe financial hardship.
(c) A
severe financial hardship is a Participants need for a distribution, as
determined by the Committee, resulting from:
(1) A
sudden and unexpected illness or accident of the Participant or of a dependent
or close family member of the Participant;
(2)
Loss of the Participants property due to casualty;
(3)
Any other events specified as unforeseeable emergencies under Code Section
409A and the regulations and guidance thereunder;
(4)
Other extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant as permitted under Code Section
409A.
The Committee shall determine
whether the Participant has satisfied the requirements of this Section 7.7. The
Committee may decline a request for a distribution under this Section 7.7 if the
Committee determines that such distribution is not in the best interests of the
Company. All determinations made by the Committee pursuant to this Section 7.7
shall be binding on all parties.
7.8 Offset of Benefit By Certain
Amounts
The Committee, in its sole and
absolute discretion, may offset any benefit payable to a Participant or
Beneficiary pursuant to this Article VII by any amounts the Participant or
Beneficiary may owe the Company and/or any Subsidiary or any amounts the
Participant or Beneficiary may owe any employee benefit plan maintained by the
Company and/or Subsidiary, provided that such debt is incurred in the ordinary
course of the employment or service relationship between the Participant and the
Company or any Subsidiary and the entire amount of reduction in any calendar
year does not exceed $5,000.
18
ARTICLE VIII
Administration
The
Plan shall be administered by the Committee. The Committee shall have all powers
necessary or appropriate to enable it to carry out its administrative duties.
Not in limitation, but in application of the foregoing, the Committee shall have
the duty and power to interpret the Plan and determine all questions that may
arise hereunder as to the status and rights of Employees, Directors,
Participants, and Beneficiaries. The Committee shall also have the duty and
power to interpret the Plan to determine all questions that may arise hereunder
as to the determination of whether the individual is an Employee. The Committee
may exercise the powers hereby granted in its sole and absolute discretion. The
interpretation of the Plan or other action of the Committee made in good faith
in its sole discretion shall be subject to review only if such an interpretation
or other action is without a rational basis. Any review of a final decision or
action of the Committee shall be based only on such evidence presented to or
considered by the Committee at the time it made the decision that is the subject
of the review. The Company and any Subsidiary whose Employees are covered by the
Plan and any Employee or Director who is or may be covered by the Plan hereby
consent to actions of the Committee made in its sole discretion and agree to be
bound by the narrow standard of review prescribed in this Section. No member of
the Committee shall be personally liable for any actions taken by the Committee
unless the members action involves willful misconduct. The Committee may
delegate its administrative responsibilities to any Employee of the Company
provided such designation is in writing.
ARTICLE IX
Amendment and
Termination
The power to amend, modify or
terminate the Plan in whole or in part and at any time is reserved to the
Committee and to the Board or its delegate. Notwithstanding the foregoing, (a)
no amendment or modification which would reasonably be considered to be adverse
to a Participant or Beneficiary may apply to or affect the terms of any deferral
of compensation that was approved prior to the effective date of such amendment
or modification without the consent of the Participant or Beneficiary affected
thereby, and (b) the termination of the Plan shall not affect the Deferred
Compensation Agreements then in effect, except that no additional amounts may be
deferred by Participants to the Plan after the date of termination of the Plan.
The Committee may terminate the
Plan, and distribute all vested accrued benefits, subject to the restrictions
set forth in Treas. Reg. §1.409A-3(j)(4). A termination of the Plan must comply
with the provisions of Code Section 409A and the regulations and guidance
promulgated thereunder, including, but not limited to, restrictions on the
timing of final distributions and the adoption of future deferred compensation
arrangements.
19
ARTICLE X
General Provisions
10.1 Non-Alienation of Benefits.
No
right or benefit under the Plan shall be subject to anticipation, alienation,
sale, assignment, pledge, encumbrance, or charge, and any attempt to anticipate,
alienate, sell, assign, pledge, encumber, or change any right or benefit under
this Plan shall be void. No right or benefit hereunder shall in any manner be
liable for or subject to the debts, contracts, liabilities or torts of the
person entitled to such benefits. If the Participant or Beneficiary becomes
bankrupt, or attempts to anticipate, alienate, sell, assign, pledge, encumber,
or change any right hereunder, then such right or benefit shall, in the
discretion of the Committee, cease and terminate, and in such event, the
Committee may hold or apply the same or any part thereof for the benefit of the
Participant or Beneficiary, spouse, children, or other dependents, or any of
them in such manner and in such amounts and proportions as the Committee may
deem proper. Notwithstanding anything in this Section to the contrary, the
Committee may comply with a qualified domestic relations order as defined in
Code section 414(p); provided however, that for purposes of this Section 10.1,
(i) the provisions of Code section 414(p)(9) shall be disregarded and shall have
no force and effect in applying the provisions of Code section 414(p), and (ii)
the provisions of Code section 414(p)(4) shall be disregarded when making a
determination whether a domestic relations order is a qualified domestic
relations order so that no order shall be considered to be a qualified domestic
relations order if it requires an amount to be paid to an alternate payee before
the earlier of (A) the date the Participant begins to receive benefits under the
Plan, or (B) the date of the Participants death. Anything contained herein to
the contrary notwithstanding, benefits payable from the Plan under this Section
10.1 to an alternate payee pursuant to a qualified domestic relations order
shall be paid only in the form of a lump sum payment. The Committee may
establish procedures similar to those described in Code sections 414(p)(6) and
(7), in lieu of the procedures set forth in Code sections 414(p)(6) and (7), for
evaluating domestic relations orders and for handling benefits while domestic
relations orders are being evaluated.
10.2 Contractual Right to Benefits
Funding.
The
Plan creates and vests in each Participant a contractual right to the benefits
to which he or she is entitled hereunder, enforceable by the Participant against
the Company. The benefits to which a Participant is entitled under the Plan
shall be paid from the general assets of the Company or from the Trust that may
be established or maintained to provide such benefits.
If a
Trust is established and maintained, amounts deposited with the Trustee shall be
held and disposed of in accordance with the terms of the Trust Agreement and
payments made under the terms of the Trust Agreement shall be in satisfaction of
claims against the Company under the Plan. Nothing in the Plan or Trust
Agreement shall relieve the Company of its liabilities to pay amounts under the
Plan except to the extent that such liabilities are met from the use of the
assets held in Trust.
20
10.3 Indemnification and Exculpation.
The
members of the Committee and their agents, and the officers, directors and
employees of the Company and any Subsidiary shall be indemnified and held
harmless by the Company against and from any and all loss, cost, liability, or
expense that may be imposed upon or reasonably incurred by them in connection
with or resulting from any claim, action, suit, or proceeding to which they may
be a party or in which they may be involved by reason of any action taken or
failure to act under this Plan and against and from any and all amounts paid by
them in settlement (with the Companys written approval) or paid by them in
satisfaction of a judgment in any such action, suit, or proceeding. The
foregoing provision shall not be applicable to any person if the loss, cost,
liability, or expense is due to such persons gross negligence or willful
misconduct.
10.4 No Employment Agreement.
The Plan is not a contract of
employment, and participation in the Plan shall not confer on any Employee the
right to be retained in the employ of the Company and/or any Subsidiary.
10.5 Claims and Appeals Procedures.
A
Participant or Beneficiary may claim any benefit to which he or she is entitled
under this Plan by a written notice to the Committee. If a claim is denied, it
must be denied within ninety (90) days after receipt of the claim, unless
special circumstances require an extension. If an extension is necessary, the
extension shall not be longer than an additional ninety (90) days. Any denial
shall be in a written notice stating the following:
(a) The specific reason for the
denial.
(b) Specific reference to the Plan
provision on which the denial is based.
(c) Description of additional
information necessary for the claimant to present his or her claim, if any, and
an explanation of why such material is necessary.
(d) An explanation of the Plans
claims review procedures, and the time limits applicable to such procedures,
including a statement of the claimants right to bring a civil action under
Section 502(a) of ERISA following an adverse benefit determination on review.
If the Committee does not deny the
claim within the time specified above, the claimant may commence action in state
or federal court.
The
claimant will have sixty (60) days to request a review of the denial by the
Committee, which will provide a full and fair review. The request for review
must be in writing delivered to the Committee. The claimant may review pertinent
documents, and he or she may submit issues and comments in writing. The decision
by the Committee with respect to the review must be given within sixty (60) days
after receipt of the request, unless special circumstances require an extension
(such as for a hearing). In no event shall the decision be delayed beyond one
hundred and twenty (120) days after receipt of the request for review. The
decision shall be written in a manner calculated to be understood by the
claimant, shall include specific reasons and refer to specific Plan provisions
as to its effect, state that the claimant is entitled to receive upon request
and free of charge, reasonable access to and copies of, all documents, records
and other
21
information relevant to the claim,
and state that the claimant has a right to bring a civil action under Section
502(a) of ERISA.
Anything contained herein to the contrary notwithstanding, any claim
filed under the Plan and any action brought in state or federal court by or on
behalf of a Participant, a Beneficiary or alternate payee for the alleged
wrongful denial of Plan benefits or for the alleged interference with
ERISA-protected rights must be brought within one (1) year of the date of the
Participants, the Beneficiarys or alternate payees cause of action first
accrues. Failure to bring any such cause of action within this one (1) year time
frame shall preclude a Participant, a Beneficiary or alternate payee, or any
representative of the Participant, the Beneficiary or alternate payee, from
bringing the claim or cause of action. Correspondence or other communications
following the mandatory appeals process described in this Section 10.5 shall
have no effect on this one (1) year time frame.
10.6 Disability Claims and Appeals
Procedures.
Notwithstanding anything to the
contrary in Section 10.5 above, if a determination of Disability must be made in
order to decide a claim, the claim shall be considered a Disability claim and
shall be subject to the following procedures.
The
Committee shall process each Disability claim and make an initial decision as to
the validity of the claim within a reasonable period of time, but no later than
forty-five (45) days after receipt of the claim. If the Committee determines
that an extension to process the Disability claim is necessary due to matters
beyond the control of the Committee, the Committee may extend the 45-day
response period for up to thirty (30) days by notifying the claimant, prior to
the termination of the initial 45-day period, of the circumstances requiring the
extension of time and the date by which it expects to render a decision. If the
Committee determines that an additional extension to process the Disability
claim is necessary due to matters beyond the control of the Committee, the
Committee may extend the response period for up to an additional thirty (30)
days by notifying the claimant, prior to the termination of the first 30-day
extension period, of the circumstances requiring the extension of time and the
date by which it expects to render a decision. An extension notice shall
specifically explain the standards on which entitlement to a benefit is based,
the unresolved issues that prevent a decision on the claim, and the additional
information needed to resolve those issues. If the reason for the extension is
the claimants failure to provide necessary information to decide the claim, the
determination period shall be tolled from the date notice of insufficiency is
given, until the claimant responds to the notice. The claimant shall have
forty-five (45) days within which to provide the specified information.
A claim
denial shall be furnished in writing or electronically. The denial shall inform
the claimant of the specific reason or reasons for the denial, refer to the
specific Plan provisions on which the denial is based, describe any additional
material or information necessary to perfect the claim and explain why the
material is necessary, describe the Plans review procedures and the time limits
applicable to such procedures, including a statement of the claimants right to
bring a civil action under Section 502(a) of ERISA following a denial of an
appeal, refer to any specific guidelines that were relied upon in issuing the
denial, or state that such guidelines will be provided to the claimant free of
charge upon request.
If a
claimant receives notice from the Committee that a claim for benefits has been
denied in whole or in part, the claimant or the claimants duly authorized
representative may, within one hundred and eighty (180) days after receipt of
notice of such denial:
22
(a)
Make written application to the Committee for a review of the decision. Such
application shall be made on a form specified by the Committee and submitted
with such documentation as the Committee shall prescribe.
(b)
Review, upon request and free of charge, all documents, records and other
information in the possession of the Committee or the Committee which are
relevant to the Disability claim.
(c)
Submit written comments, documents, records and other information relating to
the claim.
If
review of a decision is requested, such review shall be made by the Committee,
which shall review all comments, documents, records, and other information
submitted by the claimant relating to the Disability claim, without regard to
whether such information was submitted or considered in the initial benefit
determination. The Committees review shall not afford deference to the initial
adverse benefit determination. The individual(s) conducting the decision on
review shall not be the individual(s) who made the initial adverse decision, nor
the subordinates of such individual(s).
In the
case of an appeal involving medical judgment, the Committee shall consult with a
health care professional who has appropriate training and experience in the
field of medicine involved in the medical judgment. The health care professional
consulted shall be an individual who is neither an individual who was consulted
in connection with the initial denial, nor the subordinate of any such
individual.
The
decision on review shall be made within forty-five (45) days after the receipt
by the Committee of the request for review. If the Committee determines that an
extension to process the appeal is necessary due to special circumstances, the
Committee may extend the 45-day response period for up to 45 days by notifying
the claimant, prior to the termination of the initial 45-day period, of the
circumstances requiring the extension of time and the date by which it expects
to render a decision. If the reason for the extension is the claimants failure
to provide necessary information to decide the appeal, the determination period
shall be tolled from the date notice of insufficiency is given, until the
claimant responds to the notice.
Any
denial of an appeal shall be furnished in writing or electronically. The denial
shall inform the claimant of the specific reason or reasons for the denial,
refer to the specific Plan provisions on which the denial is based, state that
the claimant is entitled to receive, upon request and free of charge, reasonable
access to, and copies of, all documents, records, and other information relevant
to the claim, state the claimants right to bring a civil action under Section
502(a) of ERISA, and refer to any specific guidelines that were relied upon in
issuing the denial, or state that such guidelines will be provided to the
claimant free of charge upon request.
Anything contained herein to the contrary notwithstanding, any claim
filed under the Plan and any action brought in state or federal court by or on
behalf of a Participant, a Beneficiary or alternate payee for the alleged
wrongful denial of Plan benefits or for the alleged interference with
ERISA-protected rights must be brought within one (1) year of the date of the
Participants, the Beneficiarys or alternate payees cause of action first
accrues. Failure to bring any such cause of action within this one (1) year time
frame shall preclude a Participant, a Beneficiary or alternate payee, or any
representative of the Participant, the Beneficiary or alternate payee, from
bringing the claim or cause of action. Correspondence or other communications
following the mandatory appeals process described in this Section 10.5 shall
have no effect on this one (1) year time frame.
23
10.7 Limitation of Action and Choice
of Venue
Before a claimant may bring a legal
action against the Plan, the Company, a Subsidiary, or the Committee, the
claimant must first complete all steps of the claims and review procedures
contained in Sections 10.5 and 10.6, as applicable. After completing all steps
of the claims and review procedures contained in Sections 10.5 and 10.6, as
applicable, a claimant has one (1) year from the date he or she is notified of
the Committees final decision to bring such legal action or the right to bring
such legal action is lost. Any legal action against the Plan, the Company, a
Subsidiary, or the Committee may only be brought in the United States District
Court for the Eastern District of Missouri.
10.8 Successor to Company.
The
Company shall require any successor or assignee, whether direct or indirect, by
purchase, merger, consolidation or otherwise, to all or substantially all the
business or assets of the Company, expressly and unconditionally to assume and
agree to perform the Companys obligations under this Plan, in the same manner
and to the same extent that the Company would be required to perform.
Accordingly, this Plan and the related Deferred Compensation Agreements shall be
binding upon, and the term Company shall include any successor or assignee to
the business or assets of the Company.
10.9 Severability.
In the
event any provision of the Plan shall be held invalid or illegal for any reason,
any illegality or invalidity shall not affect the remaining parts of the Plan,
but the Plan shall be construed and enforced as if the illegal or invalid
provision had never been inserted, and the Company shall have the privilege and
opportunity to correct and remedy such questions of illegality or invalidity by
amendment as provided in the Plan.
10.10 Transfer Among Affiliates.
In the
event the employment of a Participant is transferred from the Company to any
corporation or other entity that is an affiliate of the Company and that adopts
this Plan, or is transferred from one such affiliate to another, the benefits
attributable to compensation deferred with respect to each such entity shall be
credited to a separate bookkeeping account. Each such entity shall pay the
benefit that is reflected in the Participant accounts established with respect
to such entity. The Company hereby guarantees payment of the total benefit,
regardless of which entity is primarily liable for payment of any portion of
such benefit.
10.11 Entire Plan.
This document and any amendments
contain all the terms and provisions of the Plan and shall constitute the entire
Plan, any other alleged terms or provisions being of no effect.
10.12 Payee Not Competent.
In the
event that the Committee shall find that the Participant is unable to care for
his or her affairs because of illness or accident, the Committee may direct that
any benefit payment due him or her, unless claim shall have been made therefor
by a duly appointed legal representative, be paid to his nor her spouse, a
child, a parent or other blood relative, or to a person with whom he or she
resides, and any such payment so made shall be a complete discharge of the
liabilities of the Plan therefor.
24
10.13 Tax Withholding.
The
Company shall satisfy any federal, state or local tax withholding obligations
(including income taxes and the employee portion of employment taxes) resulting
from the payment or vesting of amounts credited to the Participants cash
subaccount through the reduction of the cash subaccount of the Participant in an
amount necessary to satisfy such tax obligations. The Company shall satisfy any
federal, state or local tax withholding obligations (including income taxes and
the employee portion of employment taxes) resulting from the payment or vesting
of amounts credited to the Participants stock subaccount through the reduction
of the stock subaccount by the number of Stock Units necessary to satisfy such
tax obligations.
In the
event the Stock Units credited to a Participants stock subaccount are reduced
in satisfaction of tax obligations, the number of shares reduced shall be
calculated by reference to the Market Value of the Common Stock on the date that
such taxes are determined.
10.14 Governing Law.
To the
extent not superseded by the laws of the United States, this Plan shall be
construed and governed in accordance with the laws of the state of Missouri.
Except where otherwise specifically required by the provisions of ERISA, the
Plan, Trustee, Committee, Company or Subsidiary shall be liable to account only
in the courts of the State of Missouri.
10.15 Compliance with Code Section
409A.
No
provision of this Plan shall be operative to the extent that it will result in
the imposition of the additional tax described in Code Section
409A(a)(1)(B)(i)(II) because of failure to satisfy the requirements of Code
Section 409A and the regulations and guidance issued thereunder.
IN
WITNESS WHEREOF, the Company has caused this 2009 Restatement of the Plan to be
executed as of __________________________, 2008.
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ENERGIZER HOLDINGS, INC. |
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By: |
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Its: |
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25
EX-13
6
exhibit13.htm
THE INFORMATION SET FORTH UNDER THE CAPTIONS
Exhibit 13
ENERGIZER HOLDINGS,
INC.
(Dollars in millions,
except per share and percentage data)
Managements Discussion and
Analysis of Results of Operations and Financial Condition
(Dollars in
millions, except per share and percentage data)
The following discussion is a summary
of the key factors management considers necessary in reviewing Energizer
Holdings, Inc.'s (the Company) historical basis results of operations, operating
segment results, and liquidity and capital resources. The Company reports
results in two segments: Household Products, which includes batteries and
lighting products and Personal Care, which includes wet shave, skin care,
feminine care and infant care products. This discussion should be read in
conjunction with the Consolidated Financial Statements and related
notes.
Household Products
Overview
Energizer is one of the
world's largest manufacturers and marketers of batteries and lighting products,
competing primarily in the retail battery and the battery-operated lights
categories. We define the retail battery category as household batteries
(alkaline, carbon zinc, lithium and consumer replaceable rechargeable) and
specialty batteries (miniature and photo). We market a complete line of
household batteries with two primary brands, Energizer and Eveready, which
are well known throughout the world.
Alkaline batteries are the
predominant household battery chemistry in developed parts of the world, while
carbon zinc batteries continue to play a significant yet declining role in less
developed countries throughout the world. Recently, higher power, higher priced
lithium and rechargeable batteries have grown in response to more demanding
power needs of more advanced devices. The Company is well positioned to meet
consumers household battery needs with a comprehensive portfolio of battery
technology to meet a wide variety of device power requirements. In less
developed markets, the Company encourages trade-up from value priced batteries
to premium batteries; in more developed markets, where power needs are greater,
consumers are increasingly trading-up from premium batteries to performance
batteries.
Battery-operated flashlights and
lanterns are increasingly migrating from traditional incandescent bulbs to LED
technology, a shift that has been led by Energizer. The Company offers a full
range of lighting solutions, including the headlight line, which allows users to
keep their hands free and focused on their activity. As with batteries, the
Company has focused on a trade-up strategy to migrate consumers to higher
performance lights with higher retail price points.
Energizer operates 19 manufacturing
and packaging facilities in 12 countries on four continents. Its products are
marketed and sold in more than 165 countries, primarily through a direct sales
force, and also through distributors and wholesalers.
The battery category is highly
competitive as brands compete for consumer acceptance and retail shelf space.
Unit growth had been positive for many years, but unit volume declined on a year
over year basis in 2008 coincident with a slowdown in consumer spending in most
developed markets. We believe household battery volume growth has also been
dampened by an increasing number of new devices powered by built in rechargeable
battery systems. Despite these factors, category value has grown faster than
units in recent years as consumers trade up to higher performing batteries, at
the expense of lower value batteries. Additionally, pricing actions in response
to rising material costs has raised retail prices. Pricing actions are not
always available to fully offset material cost increases, especially in highly
competitive markets.
Offsetting trade-up and pricing has
been a shift by consumers to larger package sizes, which sell at lower per unit
prices. The impact of current economic conditions, new device trends and
migration to larger package sizes on overall category value is difficult to
predict at this time.
ENERGIZER HOLDINGS,
INC.
(Dollars in millions,
except per share and percentage data)
Energizer is well positioned to meet
the needs of customer and consumer demands, leveraging category expertise,
retail understanding and its portfolio of products to give Energizer a strong
presence across the retail channels. Energizer estimates its share of the total
U.S. retail battery category was approximately 39% in 2008 and 2007 and 37% in
2006.
A significant portion of Energizers
product cost is more closely tied to the U.S. dollar than to the local
currencies in which the product is sold. As such, a weakening of currencies
relative to the U.S. dollar results in margin declines unless mitigated through
pricing actions, which are not always available due to the competitive
environment. Conversely, strengthening of currencies relative to the U.S. dollar
can improve margins. This margin impact coupled with the translation of foreign
operating results to the U.S. dollar for financial reporting purposes has an
impact on reported operating profits. In the last few months, the U.S. dollar
has strengthened considerably versus most foreign currencies. At November 17,
2008 foreign currency exchange rates, we estimate the impact to segment profit
due to currency translation to be approximately $100 to $110 unfavorable for
Household Products as compared to the 2008 average currency translation rate.
Changes in the value of local currencies in relation to the U.S. dollar will
continue to impact reported sales and segment profitability in the future, and
the Company cannot predict the direction or magnitude of future
changes.
Personal Care
Overview
The Personal Care segment
includes wet shave products sold under the Schick and Wilkinson Sword brand
names, skin care products sold under the Banana Boat, Hawaiian Tropic, Wet Ones and Playtex brand names, and Feminine Care and Infant Care products
sold under the Playtex and Diaper
Genie brand names.
Schick-Wilkinson
Sword
Schick-Wilkinson Sword (SWS) is
the second largest manufacturer and marketer of mens and womens wet shave
products in the world. SWS operates four manufacturing facilities worldwide and
its products are sold in more than 140 countries. Its primary markets are the
U.S., Canada, Japan and the larger countries of Western Europe. SWS estimates
its overall share of the wet shave category for these major markets at
approximately 20% in 2008 and 2007 and 21% in 2006.
Globally, SWS products hold the
number two market position in the wet shave products category, with one
competitor accounting for a substantial majority of global wet shave sales. All
other competitors constitute a small minority of category sales. Category blade
unit consumption has been relatively flat for a number of years. However,
product innovations and corresponding increased per unit prices have accounted
for category growth. The category is extremely competitive with competitors
vying for consumer loyalty and retail shelf space.
A significant portion of SWSs
product cost is closely tied to the U.S. dollar and the euro. As such, SWS
results are highly sensitive to fluctuations in other currencies, particularly
Japan, where the Company holds a significant market share position.
Strengthening of currencies compared to the U.S. dollar, and to a lesser extent
to the euro, improves margins while weakening of such currencies reduces
margins. This margin impact coupled with the translation of foreign operating
results to the U.S. dollar for financial reporting purposes has an impact on
reported operating profits. At November 17, 2008 foreign currency exchange
rates, we estimate the impact to segment profit due to currency translation to
be approximately $25 to $30 unfavorable for Personal Care as compared to the
2008 average currency translation rate. As with the Household Products business,
changes in the value of local currencies in relation to the U.S. dollar and, to
a lesser extent, the euro will continue to impact reported sales and segment
profitability in the future, and the Company cannot predict the direction or
magnitude of future changes.
ENERGIZER HOLDINGS,
INC.
(Dollars in
millions, except per share and percentage data)
Acquisition of Playtex Products,
Inc. (Playtex)
On October 1, 2007,
the Company paid $1,875.7 for the acquisition of all outstanding Playtex common
stock, repayment or defeasance of outstanding Playtex debt, and other
transaction costs. Playtex operates six manufacturing and packaging facilities
in the U.S. Playtex is a leading North American manufacturer and marketer in the
skin, feminine and infant care product categories, with a diversified portfolio
of well-recognized branded consumer products.
In Skin Care, Playtex markets and
sells sun care products under two well known brand names, Banana Boat and
Hawaiian Tropic. Combining Banana
Boat and Hawaiian Tropic, Playtex holds
the number one dollar market share position in the U.S. sun care category. The
sun care category in the U.S. is segmented by product type such as general
protection, tanning and babies; as well as by method of application such as
lotions and sprays. Playtex competes across this full spectrum of sun care
products. In addition, Playtex owns the number one market share position in the
U.S. hands and face wet wipes category with its Wet Ones brand and the number one
dollar market share position for branded U.S. household gloves with its
Playtex household gloves.
In Feminine Care, Playtex sells
tampon products under the brand names Playtex Gentle Glide and
Playtex Sport, both of which are plastic applicator tampons. In the
tampon category, consumer purchases are driven primarily by protection, comfort,
quality and value. For more than 20 years, Playtex has been the second largest
selling tampon brand in the U.S. and maintains a leadership position in the
higher growth plastic applicator segment. The tampon category in the U.S. has
become more competitive in recent years including substantial new product
innovation and increased levels of promotional activity.
The Infant Care product category
includes U.S. dollar market share leading infant feeding products marketed under
the Playtex brand name and the U.S. dollar market share leading
diaper disposal system marketed under the Playtex Diaper Genie brand name.
Infant feeding products include disposable feeding systems, plastic reusable
hard bottles, cups and a full line of mealtime products such as plates, utensils
and placemats. The Diaper
Genie brand consists of the diaper pail
unit and refill liners. The refill liner individually seals diapers in an
odor-proof plastic film.
As noted previously, Playtex is
primarily a North American business. The Company intends to leverage its
existing international selling and distribution infrastructure to expand the
international presence of certain Playtex brands, with initial efforts centered
on sun care products.
Financial
Results
For the year ended September
30, 2008, net earnings were $329.3, or $5.59 per diluted share, compared to net
earnings of $321.4, or $5.51 per diluted share, in 2007 and net earnings of
$260.9, or $4.14 per diluted share in 2006.
Fiscal 2008 results
included:
- an after-tax expense of $16.5, or $0.28 per
diluted share, related to the write-up and subsequent sale of inventory
purchased in the Playtex acquisition,
- integration and other realignment costs of
$13.4, after-tax, or $0.22 per diluted share, and
- a net, unfavorable prior year income tax
accrual adjustment of $1.1, or $0.02 per diluted share.
ENERGIZER HOLDINGS,
INC.
(Dollars in millions,
except per share and percentage data)
Fiscal 2007 results
included:
- favorable adjustments of $21.9, or $0.37 per
diluted share, related to a reduction of deferred tax balances and prior
years tax accruals and previously unrecognized tax benefits from prior years
foreign losses, and
- charges of $12.2, after-tax, or $0.21 per
diluted share, for the companys European restructuring projects.
Fiscal 2006 results
included:
- charges of $24.9, after-tax, or $0.39 per
diluted share, related to European restructuring programs,
- a charge of $3.7, after-tax, or $0.06 per
diluted share, to record the cumulative amount of foreign pension costs that
should have been previously recognized, and
- favorable adjustments to prior years tax
accruals and previously unrecognized tax benefits related to foreign losses of
$16.6, or $0.26 per diluted share.
For the fiscal year, the inclusion of
Playtexs results and incremental interest expense associated with the financing
of the acquisition reduced diluted earnings per share by $0.24, which includes a
charge of $0.28 related to the inventory write-up and $0.19 related to
acquisition integration costs. Excluding these one-time costs, Playtex was
accretive to Energizers earnings in its first year post-acquisition.
Operating Results
Net Sales
Total net sales for fiscal 2008 were $4,331.0, an
increase of $965.9, or 29%, due primarily to the acquisition of Playtex, which
added $771.7 to net sales for the year. Net sales increased $98.0 in Household
Products and $96.2 in SWS. On a constant currency basis, net sales increased
$811.0 as compared to 2007, again due to the acquisition of Playtex. Net sales
in 2007 increased $288.2, or 9%, in absolute dollars and $212.7, or 7%, on a
constant currency basis compared to 2006.
Gross Profit
Gross profit dollars were $2,037.7 in 2008, an increase
of $433.0, or 27% due primarily to the addition of Playtex, which added $375.2
to gross profit. The 2008 increase includes favorable currency of $121.6. In
2007, gross profit dollars increased $123.9 with increases in both businesses.
Gross margin percentage was 47.0% of
sales in 2008, 47.7% in 2007 and 48.1% in 2006. The margin percentage decline in
2008 is due primarily to higher year over year product costs. The margin
percentage decline in 2007 is due primarily to lower margin in our Household
Products segment, also driven by higher material costs. See Segment Results for
further discussion.
Selling, General and
Administrative
Selling, general and
administrative expenses (SG&A) were $794.0 for 2008, an increase of $166.1
due primarily to the acquisition of Playtex. As a percent of net sales, SG&A
was 18.3%, down 0.4 percentage points from the 2007 total. SG&A increased
$26.0 in 2007 due to currency impacts of $15.0 and higher spending in Household
Products, partially offset by lower restructuring charges as compared to 2006.
As a percent of net sales, SG&A was 18.7% for 2007 as compared to 19.6% in
2006.
ENERGIZER HOLDINGS,
INC.
(Dollars in millions,
except per share and percentage data)
Advertising and
Promotion
Advertising and promotion
(A&P) increased $91.6 in 2008 due to the acquisition of Playtex, which added
$112.3 to A&P for 2008. A&P increased $26.3 in 2007 with increased
spending in the Household Products segment and currency impacts of
$9.6.
A&P expense was 11.2%, 11.7% and
12.0% of sales for 2008, 2007 and 2006, respectively. In addition to the impact
that accompanies a major acquisition, A&P expense may vary from year to year
with new product launches, strategic brand support initiatives and the overall
competitive environment.
Research and
Development
Research and development
(R&D) expense was $91.7 in 2008, $70.7 in 2007 and $74.2 in 2006. The
expense in 2008 includes $19.9 for Playtex, which represents the majority of the
increase. As a percent of sales, R&D expense was 2.1% in 2008 and 2007 and
2.4% in 2006.
Segment
Results
In the first quarter of
fiscal 2008, the Company revised its operating segment presentation. Operations
for the Company are managed via two segments - Household Products (battery and
lighting products) and Personal Care (wet shave, skin, feminine and infant
care). Segment performance is evaluated based on segment operating profit,
exclusive of general corporate expenses, share-based compensation costs, costs
associated with most restructuring, integration or business realignment
activities and amortization of intangible assets. Financial items, such as
interest income and expense, are managed on a global basis at the corporate
level. This structure is the basis for the Companys reportable operating
segment information presented in Note 18 to the Consolidated Financial
Statements.
The reduction in gross profit
associated with the write-up and subsequent sale of the inventory acquired in
the Playtex acquisition and the acquisition integration costs for the Playtex
acquisition are not reflected in the Personal Care segment, but rather presented
below segment profit, as they are non-recurring items directly associated with
the Playtex acquisition. Such presentation reflects managements view on how it
evaluates segment performance.
The Companys operating model
includes a combination of stand-alone and combined business functions between
Household Products and Personal Care, varying by country and region of the
world. Shared functions include product warehousing and distribution, various
transaction processing functions, and, in some countries, a combined sales force
and management. Such allocations do not represent the costs of such services if
performed on a stand-alone basis. The Company applies a fully allocated cost
basis, in which shared business functions are allocated between the
businesses.
HOUSEHOLD PRODUCTS
|
2008 |
2007 |
2006
|
Net sales |
$2,474.3 |
$2,376.3 |
$2,147.1 |
Segment
profit |
$489.1 |
$472.3 |
$442.3
|
For the year, sales increased $98.0,
inclusive of $88.1 favorable currency translation. Absent currencies, sales
increased $9.9, as favorable pricing and product mix were partially offset by
lower sales volume. Soft overall category demand in most of the developed world
was nearly offset by sales to meet hurricane demand and early holiday season
buy-in within the U.S. and
ENERGIZER HOLDINGS, INC.
(Dollars in millions, except per share and percentage
data)
volume growth in Central and Eastern
Europe and Latin America. Overall pricing and price mix was favorable $15.8 as
list price increases taken to offset rising material costs were partially offset
by sales shifting to larger pack sizes, which sell at lower per unit
prices.
Gross margin increased $40.2 for the
year, but declined $34.7 absent the favorable impact of currencies. The benefit
of higher pricing was more than offset by unfavorable product cost of $63.2, due
primarily to higher commodity material costs and unfavorable production
volumes.
Segment profit increased $16.8 but
declined $34.8 due to the lower gross margin noted above after excluding
favorable currency impacts. Excluding currency impacts, higher SG&A expenses
were nearly offset by lower A&P spending.
For the year ended September 30,
2007, sales increased $229.2, or 11%, due primarily to favorable pricing and
product mix of $68.5 and higher sales volume of $111.5. In addition, currency
was favorable by $49.2 as compared to the prior year. Fiscal 2007 benefited from
price increases implemented in both 2006 and 2007 in response to significant
increases in material costs. Energizer
MAX unit sales were flat in North
America, which reflected soft volume in the overall premium alkaline battery
segment of the category, partially due to virtually no hurricane-related
consumption. Volume growth reflected increased unit shipments in lithium and
rechargeable batteries primarily in the more developed markets.
Gross profit dollars increased $82.8
in 2007 as higher sales and favorable currency were partially offset by higher
product costs, due primarily to the increased cost of zinc. Currency contributed
$41.6 of favorability to gross profit as compared to the prior year. Product
cost in 2007 was unfavorable $83.3 compared to 2006, as material cost increases
exceeded the favorable impact of other cost reductions.
Segment profit increased $30.0, or 7%
in 2007, but was essentially flat on a constant currency basis as higher gross
profit was partially offset by higher advertising, promotion and selling
expenses.
Looking forward, the battery category
continues to be soft in the U.S. and other developed markets. In addition, we
estimate residual U.S. retail inventory from hurricane-related shipments
combined with the level of early holiday shipments will dampen the Companys
sales by an additional $30 in fiscal 2009 beyond any negative underlying retail
consumption or competitive activity. By comparison, sales in last years
December quarter were unusually high relative to retail consumption, which
resulted in a significant retail inventory reduction in the March 2008
quarter.
Commodities, raw materials and other
inflationary input costs are estimated to be unfavorable $35 to $40 in 2009
compared to 2008 average costs based on current market conditions. Pricing
actions already initiated together with manufacturing cost reduction programs
should offset these increases.
Finally, as mentioned previously, the
U.S. dollar has recently strengthened against most other currencies, which will
negatively impact reported sales and profits in Household Products. At November
17, 2008 foreign currency exchange rates, we estimate the impact on segment
profit due to currency translation to be approximately $100 to $110 unfavorable
for Household Products as compared to the 2008 average currency translation
rate.
ENERGIZER HOLDINGS,
INC.
(Dollars in millions,
except per share and percentage data)
PERSONAL CARE
|
2008 |
2007 pro forma
|
Net sales |
$1,856.7 |
$1,694.1 |
Segment
profit |
$322.5 |
$271.2
|
As noted in Energizers quarterly
filings during 2008, Energizers acquisition of Playtex was completed on October
1, 2007; therefore, Playtex is not included in the attached historical financial
statements prior to the current fiscal year. To provide a clearer understanding
of the impact of the acquisition on results, the comparison of the 2008 results
for the Personal Care segment are versus unaudited pro forma results for the
year ended September 30, 2007 as shown in Note 3 of the Consolidated Financial
Statements. Hawaiian Tropic results are included in the pro forma results in
Note 3 beginning on April 18, 2007, the date at which Playtex acquired the
business. The comparative for fiscal 2007 versus fiscal 2006 remains a
historical comparison of the SWS wet shave business, which constituted the
Personal Care business prior to the addition of Playtex in 2008.
Net sales for the fiscal year were
$1,856.7, an increase of $162.6, with Hawaiian Tropic and favorable
currency accounting for $54.6 and $66.8, respectively, of the increase. As noted
above, Hawaiian Tropic is not included for the full year in the 2007 pro forma
comparison. On a constant currency basis, net sales increased 6% due primarily
to Wet Shave and the acquisition of Hawaiian Tropic. Wet Shave sales increased
3% as higher volumes in disposable razors and the Quattro family of
products more than offset declines in older technology products and unfavorable
pricing and product mix due to higher promotional spending in all categories.
Skin Care net sales increased 22% due to the inclusion of Hawaiian Tropic.
Excluding the impact of Hawaiian
Tropic, Skin Care net sales increased 5%
driven by growth in Banana
Boat. Feminine Care net sales decreased
1% due to the discontinuation of the Beyond cardboard applicator
tampon in 2007 partially offset by growth in plastic applicator tampons. Sales
of plastic applicator tampons increased 3% for the year. Infant Care net sales
were essentially flat as higher sales of Diaper Genie and the disposable
Drop-In product were offset by a decline in sales of reusable infant bottles as
the company transitioned to BPA-free products.
Segment profit increased $51.3 for
the fiscal year due, in part, to $22.0 in favorable currency. The prior year
includes the impact of the write off of Beyond fixed assets of $10.4.
Excluding this write off and the impact of currencies, segment profit increased
$18.9 as gross margin on higher sales and lower A&P were offset by higher
overheads and product costs. The Company estimates that segment profit was
favorably impacted by approximately $17 of synergies related to the Playtex
acquisition.
Wet Shave sales in 2007 increased
$59.0, including $26.3 of favorable currency impacts. Initial launch sales of
new products in the prior year were approximately $26 compared to approximately
$52 in the same period in 2006. Absent currency and initial product launches,
sales increased 6%, as Quattro
branded system products contributed $40
of sales growth, disposables contributed $32 and Intuition contributed $14
partially offset by lower sales of older technology products.
Segment profit for Wet Shave
increased $27.8 in 2007, on $16.4 of contribution from higher sales, favorable
currency of $3.8, and lower SG&A and R&D expenses. Lower SG&A
reflects the cost savings from the European restructuring. R&D expense
declined $3.7 due to the inclusion of a large, discrete R&D project expense
in 2006.
ENERGIZER HOLDINGS,
INC.
(Dollars in millions,
except per share and percentage data)
Looking forward, similar to Household
Products, commodities, raw materials and other inflationary input costs for
Personal Care are estimated to be unfavorable $35 to $40 in 2009 compared to
2008 average costs based on current market conditions. Pricing actions already
initiated together with manufacturing cost reduction programs and incremental
synergies of approximately $32 from the Playtex acquisition should more than
offset these increases.
Finally, as noted previously, the
U.S. dollar has recently strengthened against most other currencies, which will
negatively impact reported sales and profits in Personal Care. At November 17,
2008 foreign currency exchange rates, we estimate the impact on segment
profit due to currency translation to be approximately $25 to $30 unfavorable
for Personal Care as compared to the 2008 average currency translation
rate.
GENERAL CORPORATE AND OTHER
EXPENSES
|
2008 |
2007 |
2006 |
General Corporate
Expenses |
$83.8 |
$93.3 |
$87.0 |
Integration |
17.9 |
- |
- |
General Corporate
Expenses with Integration |
101.7 |
93.3 |
87.0 |
Restructuring and Related Charges |
3.2
|
18.2
|
37.4 |
Foreign Pension
Charge |
- |
- |
4.5 |
General Corporate and Other
Expenses |
$104.9 |
$111.5 |
$128.9
|
% of total net sales |
2.4% |
3.3% |
4.2% |
General Corporate and Other
Expenses
For the year, general
corporate expenses, including integration costs increased $8.4, as $17.9 of
Playtex integration costs were partially offset by lower compensation expenses.
The Company estimates that approximately $14 of favorable synergies were
achieved at, or shortly after, the acquisition date via a reduction of
Playtex corporate expenses including executive and stock-related compensation
and public company costs. However, the savings had no impact on the year over
year comparative as the costs were not included in the Companys current year or
historical results. The Playtex integration efforts will continue into 2009, but
integration costs are expected to be much lower than in 2008. Fiscal 2008, 2007
and 2006 included $3.2, $18.2 and $37.4, respectively, of restructuring and
realignment costs associated with a project to improve the effectiveness and
reduce costs of the Companys European packaging, warehousing and distribution
activities.
General corporate expenses increased
in 2007 compared to 2006 due to higher stock-based compensation, partially
offset by lower project related costs.
See Note 6 to the Consolidated
Financial Statements for further information on restructuring activities.
Interest and Other Financing
Items
Interest expense for the fiscal
year increased $90.1 on higher average borrowings resulting from the Playtex
acquisition. Other financing items, which includes interest income and foreign
exchange gains and losses from the Companys worldwide affiliates, were
unfavorable $25.2 for the fiscal year due primarily to exchange losses in the
current period compared to exchange gains last year and lower interest income of
$8.4. These exchange losses were offset by currency gains in segment
profit.
Interest expense increased $13.3 in
2007 as compared to 2006 due to higher average borrowings resulting from share
repurchases and higher interest rates. Other financing expense was favorable
$15.8 in 2007 compared to 2006, due to higher interest income of $11.0 and
currency exchange gains in 2007 compared to currency exchange losses in
2006.
ENERGIZER HOLDINGS,
INC.
(Dollars in millions,
except per share and percentage data)
Income Taxes
Income taxes, which include federal, state and foreign
taxes, were 30.4%, 26.0% and 26.8% of earnings before income taxes in 2008, 2007
and 2006, respectively. Income taxes include the following items which impact
the overall tax rate:
-
Adjustments were recorded in each
of the three years to revise previously recorded tax accruals to reflect
refinement of estimates of tax attributes to amounts in filed returns,
settlement of tax audits and certain other tax adjustments in a number of
jurisdictions. Such adjustments increased
the income tax provision by $1.1 in 2008 and decreased the income tax
provision by $7.9 and $10.9 in 2007 and 2006, respectively.
-
A tax benefit of $11.0 was recorded
in 2008 associated with the write-up and subsequent sale of inventory acquired
in the Playtex acquisition.
-
In 2007 and 2006, $4.3 and $5.7,
respectively, of tax benefits related to prior years losses were recorded.
These benefits related to foreign countries where our subsidiary subsequently
began to generate earnings and could reasonably expect future profitability
sufficient to utilize tax loss carry-forwards prior to expiration. Improved
profitability in Mexico in 2007 and 2006
account for the bulk of the benefits recognized.
-
Legislation enacted in Germany in
August 2007 reduced the tax rate applicable to the Companys subsidiaries in
Germany for fiscal 2008 and beyond. Thus, an adjustment of $9.7 was made to
reduce deferred tax liabilities in fiscal 2007.
Excluding the items discussed above,
the income tax percentage was 30.9% in 2008, 31.0% in 2007 and 31.5% in
2006.
The Company's effective tax rate is
highly sensitive to country mix, from which earnings or losses are derived.
Declines in earnings in lower tax rate countries, earnings increases in higher
tax rate countries, increases in repatriation of foreign earnings or operating
losses in the future could increase future tax rates. Additionally, adjustments
to prior year tax accrual estimates could increase or decrease future tax
provisions.
Liquidity and Capital Resources
Operating
Activities
Cash flow from operations
is the primary funding source for operating needs and capital investments. Cash
flow from operations was $466.5 in 2008, an increase of $21.2 from 2007. Cash
flow from operations was $445.3 in 2007, an increase of $72.3 from 2006. Each of
these year over year changes was due to improved operating cash flow before
changes in working capital.
Working capital, which is defined as
current assets less current liabilities was $665.1 and $888.5 at September 30,
2008 and 2007, respectively. The year over year working capital change reflects
the use of $261.0 of cash to complete the Playtex acquisition. As adjusted to
reflect the Playtex acquisition, accounts receivable increased $39.4 at
September 30, 2008 due to higher sales in the fourth quarter of 2008.
Inventories decreased $29.5 as the inventory step-up related to the Playtex
acquisition flowed through earnings as the inventory was sold. Current
liabilities decreased $22.8 due primarily to payments related to exit and
contract termination costs for Playtex as part of the integration
plan.
ENERGIZER HOLDINGS,
INC.
(Dollars in millions,
except per share and percentage data)
Investing
Activities
Net cash used by investing
activities was $1,994.5, $82.3 and $115.6 in 2008, 2007 and 2006, respectively.
Capital expenditures were $160.0, $88.6 and $94.9 in 2008, 2007 and 2006,
respectively. These expenditures were funded by cash flow from operations.
Capital expenditures increased in 2008 due to production related spending and
Playtex related spending. See Note 18 of the Consolidated Financial Statements
for capital expenditures by segment. On October 1, 2007, the Company paid
$1,875.7 for the acquisition of all outstanding Playtex common stock, repayment
or defeasance of outstanding Playtex debt, and other transaction costs. See
Financing Activities below for discussion of the financing of the transaction.
At September 30, 2007, the Company held a net-cash settled prepaid share option
with a major multinational financial institution to mitigate the impact of
changes in the Companys deferred compensation liabilities. In December 2007,
the prepaid feature was removed from the transaction and the Company received
cash of $60.5, which was used to repay existing debt. Of the $60.5 received,
$46.0 was a return of investment and was classified within investing activities
on the Statement of Cash Flows. The remaining $14.5 was a return on investment
and was classified as a cash inflow from operating activities on the Statement
of Cash Flows.
Capital expenditures of approximately
$150 are anticipated in 2009 with increases in production related capital for
existing businesses and planned spending for Playtex. Such capital expenditures
are expected to be financed with funds generated from operations.
Financing
Activities
The Companys total
borrowings were $2,959.9 at September 30, 2008. The Company maintained total
committed debt facilities of $3,449.9, of which $479.0 was available as of
September 30, 2008.
In October 2007, the Company borrowed
approximately $1,500 under a bridge loan facility which, together with cash on
hand was used to acquire Playtex. The Company subsequently refinanced the bridge
loan with $890 of long-term debt financing, with maturities ranging from three
to ten years and fixed rates ranging from 5.71% to 6.55% and $600 of long-term
bank financing priced at LIBOR plus 100 basis points.
Under the terms of the Companys debt
facilities, the ratio of the Companys indebtedness to its Earnings Before
Interest, Taxes, Depreciation and Amortization (EBITDA) cannot be greater than
4.00 to 1, and may not remain above 3.50 to 1 for more than four consecutive
quarters. If the ratio is above 3.50 to 1, the Company is required to pay an
additional 75 basis points in interest for the period in which the ratio
exceeded 3.50 to 1. In addition, the ratio of its current year Earnings Before
Interest and Taxes (EBIT) to total interest expense must exceed 3.00 to 1. The
Companys ratio of indebtedness to its pro forma EBITDA, as defined in the
agreements, was 3.25 to 1, and the ratio of its pro forma EBIT, as defined in
the agreements, to total interest expense was 3.91 to 1 as of September 30,
2008. As a result of the ratio of indebtedness to pro forma EBITDA during fiscal
2008, which was above 3.50 to 1 for the period from January 1, 2008 through
September 30, 2008, at which time the ratio reduced to 3.25 to 1, the Company
had higher pre-tax interest expense on fixed borrowings of approximately $13.0
for the current year. Failure to comply with the above ratios or other covenants
could result in acceleration of maturity, which could trigger cross defaults on
other borrowings. The Company believes that covenant violations, which may
result in acceleration of maturity, are unlikely. The Companys fixed rate debt
is callable by the Company, subject to a make whole premium, which would be
required to the extent the underlying benchmark U.S. treasury yield has declined
since issuance.
The Company routinely sells a pool of
U.S. accounts receivable through a financing arrangement between Energizer
Receivables Funding Corporation (the SPE), which is a bankruptcy-remote special
purpose entity subsidiary of the Company, and outside parties (the Conduits).
Under the current structure, funds received from the Conduit are treated as
borrowings rather than proceeds of accounts receivables sold for accounting
purposes. Borrowings under this program receive favorable treatment in the
Companys debt compliance covenants. The program renews annually in May. Further
deterioration in credit markets could result in an inability to renew the
program or renewal on less favorable terms, which may negatively impact
compliance reported Debt-to-EBITDA and may require the Company to draw on other
available committed debt facilities.
ENERGIZER HOLDINGS, INC.
(Dollars in millions, except per share and percentage
data)
The counterparties to long-term
committed borrowings consist of a number of major multinational and
international financial institutions. The Company continually monitors positions
with, and credit ratings of, counterparties both internally and by using outside
ratings agencies. The Company has staggered long-term borrowing maturities
through 2017 to minimize refinancing risk in any single year and to optimize the
use of free cash flow for repayment. See the contractual obligations table
provided below.
The Company purchased shares of its
common stock as follows (shares in millions):
|
|
|
|
|
|
Total
Average |
Fiscal Year |
|
Shares |
|
Cost |
|
Price |
2008 |
|
0.0 |
|
$0.0 |
|
$0.00 |
2007 |
|
0.8 |
|
$53.0 |
|
$67.67 |
2006 |
|
11.3 |
|
$600.7 |
|
$53.02 |
The Company has 8 million shares
remaining on the current authorization from its Board of Directors to repurchase
its common stock in the future. Future purchases may be made from time to time
on the open market or through privately negotiated transactions, subject to
corporate objectives and the discretion of management.
A summary of the Companys
significant contractual obligations at September 30, 2008 is shown
below:
|
|
|
|
|
Less than |
|
|
|
|
|
|
|
More than |
|
|
Total |
|
1 year |
|
1-3 years |
|
3-5 years |
|
5 years |
Long-term debt, including current maturities |
|
$ |
2,695.5 |
|
$
|
106.0 |
|
$ |
567.0 |
|
$ |
932.5 |
|
$ |
1,090.0 |
Interest on long-term debt |
|
|
805.4 |
|
|
151.1 |
|
|
264.2 |
|
|
194.1 |
|
|
196.0 |
Operating leases |
|
|
62.0 |
|
|
18.5 |
|
|
25.4 |
|
|
10.9 |
|
|
7.2 |
Purchase obligations and other (1) |
|
|
65.0 |
|
|
59.8 |
|
|
5.2 |
|
|
- |
|
|
- |
Total |
|
$ |
3,627.9 |
|
$ |
335.4 |
|
$ |
861.8 |
|
$ |
1,137.5 |
|
$ |
1,293.2
|
1 |
|
The Company has estimated
approximately $1.5 of cash settlements associated with unrecognized tax
benefits within the next year, which are included in the table above. As
of September 30, 2008, the Companys Consolidated Balance Sheet reflects a
liability for unrecognized tax benefits of $47.0, excluding $6.5 of
interest and penalties. The contractual obligations table above does not
include this liability. Due to the high degree of uncertainty regarding
the timing of future cash outflows of liabilities for unrecognized tax
benefits beyond one year, a reasonable estimate of the period of cash
settlement for periods beyond the next twelve months cannot be made, and
thus is not included in this table. |
The Company has contractual purchase
obligations for future purchases, which generally extend one to three months.
These obligations are primarily purchase orders at fair value that are part of
normal operations and are reflected in historical operating cash flow trends. In
addition, the Company has various commitments related to service and supply
contracts that contain penalty
ENERGIZER HOLDINGS, INC.
(Dollars in millions, except per share and percentage
data)
provisions for early termination. As
of September 30, 2008, we do not believe such purchase obligations or
termination penalties will have a significant effect on our results of
operations, financial position or liquidity position in the future.
The Company believes cash flows from
operating activities and periodic borrowings will be adequate to meet short-term
and long-term liquidity requirements prior to the maturity of the Company's
credit facilities, although no guarantee can be given in this regard.
Market Risk Sensitive Instruments
and Positions
The market risk inherent in the Companys financial
instruments and positions represents the potential loss arising from adverse
changes in currency rates, commodity prices, interest rates and stock price. The
following risk management discussion and the estimated amounts generated from
the sensitivity analyses are forward-looking statements of market risk assuming
certain adverse market conditions occur. Company policy allows derivatives to be
used only for identifiable exposures and, therefore, the Company does not enter
into hedges for trading purposes where the sole objective is to generate
profits.
Currency Rate
Exposure
A significant portion of
Energizers product cost is more closely tied to the U.S. dollar than to the
local currencies in which the product is sold. As such, a weakening of
currencies relative to the U.S. dollar results in margin declines unless
mitigated through pricing actions, which are not always available due to the
competitive environment. Conversely, a strengthening in currencies relative to
the U.S. dollar can improve margins. This margin impact coupled with the
translation of foreign operating results to the U.S. dollar for financial
reporting purposes may have an impact on reported operating profits. In the last
few months, the U.S. dollar has strengthened considerably versus most foreign
currencies. At November 17, 2008 foreign currency exchange rates, we estimate
the impact on segment profit due to currency translation to be
approximately $125 to $140 unfavorable for the Company as compared to the 2008
average currency translation rate. Changes in the value of local currencies in
relation to the U.S. dollar will continue to impact segment profitability in the
future, and the Company cannot predict the direction or magnitude of future
changes.
The Company generally views its
investments in foreign subsidiaries with a functional currency other than the
U.S. dollar as long-term. As a result, the Company does not generally hedge
these net investments. Capital structuring techniques are used to manage the net
investment in foreign currencies, as necessary. Additionally, the Company
attempts to limit its U.S. dollar net monetary liabilities in countries with
unstable currencies.
From time to time the Company may
employ foreign currency hedging techniques to mitigate potential losses in
earnings or cash flows on foreign currency transactions, which primarily consist
of anticipated intercompany purchase transactions and intercompany borrowings.
External purchase transactions and intercompany dividends and service fees with
foreign currency risk may also be hedged. The primary currencies to which the
Companys foreign affiliates are exposed include the U.S. dollar, the euro, the
yen, the British pound, the Canadian dollar and the Australian dollar.
The Company uses natural hedging
techniques, such as offsetting like foreign currency cash flows, foreign
currency derivatives with durations of generally one year or less including
forward exchange contracts, purchased put and call options and zero-cost option
collars. The Company has not designated any of these types of financial
instruments as hedges for accounting purposes in the three years ended September
30, 2008.
ENERGIZER HOLDINGS,
INC.
(Dollars in millions,
except per share and percentage data)
The Companys foreign currency
derivative contracts outstanding at year-end hedge existing balance sheet
exposures. Any losses on these contracts would be fully offset by exchange gains
on the underlying exposures, thus they are not subject to significant market
risk. The contractual amounts of the Company's forward exchange contracts and
purchased currency options in U.S. dollar equivalents were $71.1 and $67.1 at
September 30, 2008 and 2007, respectively.
In addition, the Company has
investments in Venezuela, which currently require government approval to convert
local currency to U.S. dollars at official government rates. Recently,
government approval for currency conversion to satisfy U.S. dollar liabilities
to foreign suppliers has been delayed, resulting in higher cash balances and
higher past due U.S. dollar payables within our Venezuelan subsidiary. If the
Company was forced to settle its Venezuelan subsidiarys U.S. dollar liabilities
using unofficial, parallel currency exchange mechanisms as of September 30,
2008, it would result in a currency exchange loss of approximately $13.
Commodity Price
Exposure
The Company uses raw
materials that are subject to price volatility. The Company will use hedging
instruments as it desires to reduce exposure to variability in cash flows
associated with future purchases of zinc or other commodities. These hedging
instruments are accounted for as cash flow hedges. At September 30, 2008, the
fair market value of the Company's outstanding hedging instruments was an
unrealized pre-tax loss of $9.8. Contract maturities for these hedges extend
into fiscal year 2010.
Interest Rate
Exposure
At September 30, 2008 and
2007, the fair market value of the Company's fixed rate debt is estimated at
$2,078.5 and $1,423.1, respectively, using yields obtained from independent
pricing sources for similar types of borrowing arrangements. The year over year
increase in fixed rate debt is due primarily to borrowings related to the
Playtex acquisition. The fair value of debt is lower than the carrying value of
the Company's debt at September 30, 2008 and 2007 by $151.5 and $51.9,
respectively. A 10% decrease in interest rates on fixed-rate debt would have
increased the fair market value by $90.0 and $40.4 at September 30, 2008 and
2007, respectively. See Note 11 to the Consolidated Financial Statements for
additional information regarding the Companys debt.
The Company has interest rate risk
with respect to interest expense on variable rate debt. At September 30, 2008
and 2007, the Company had $729.9 and $150.0 variable rate debt outstanding,
respectively. The book value of the Companys variable rate debt approximates
fair value. A hypothetical 10% increase in variable interest rates would have
had an annual unfavorable impact of $3.5 and $0.9 in 2008 and 2007,
respectively, on the Companys earnings before taxes and cash flows, based upon
these year-end debt levels. The increase in the potential impact of a 10%
increase in variable interest rates for 2008 as compared to 2007 is the result
of the increased debt level due to the purchase of Playtex.
Stock Price Exposure
At
September 30, 2007, the Company held a net-cash settled prepaid share option
with a major multinational financial institution to mitigate the impact of
changes in the Companys deferred compensation liabilities. In December 2007,
the prepaid feature was removed from the transaction and the Company received
cash of $60.5, which was used to repay existing debt. Of the $60.5 received,
$46.0 was a return of investment and was classified within investing activities
on the Statement of Cash Flows. The remaining $14.5 was a return on investment
and was classified as a cash inflow from operating activities on the Statement
of Cash Flows. As a result of this change in the share option, the Company will
incur yearly fees at LIBOR plus 230 basis
ENERGIZER HOLDINGS, INC.
(Dollars in millions, except per share and percentage
data)
points until the contract is settled.
The fair market value of the share option was $2.4, as included in other current
liabilities, and $59.3, as included in other current assets, at September 30,
2008 and 2007, respectively. The change in fair value of the total share option
for the twelve months ended September 30, 2008 and 2007 resulted in expense of
$16.2 and income of $23.2, respectively, and was recorded in
SG&A.
Seasonal
Factors
The Company's Household Products segment results are
significantly impacted in the first quarter of the fiscal year by the additional
sales volume associated with the December holiday season, particularly in North
America. First quarter sales accounted for 32%, 30% and 31% of total Household
Products net sales in 2008, 2007 and 2006, respectively. In addition, natural
disasters, such as hurricanes, can create conditions that drive exceptional
needs for portable power and spike battery and lighting products sales.
Customer orders for the Companys Sun
Care products are highly seasonal, which has historically resulted in higher Sun
Care sales in the second and third quarters of the fiscal year and lower sales
in the first and fourth quarters of the fiscal year. As a result, sales,
operating income, working capital and cash flows for the Personal Care segment
can vary significantly between quarters of the same and different years due to
the seasonality of orders for Sun Care products.
Other factors may also have an impact
on the timing and amounts of sales, operating income, working capital and cash
flows. They include: the timing of new product launches by competitors or by the
Company, the timing of advertising, promotional, merchandising or other
marketing activities by competitors or by the Company, and the timing of
retailer merchandising decisions and actions.
Environmental
Matters
The operations of the
Company, like those of other companies are subject to various federal, state,
foreign and local laws and regulations intended to protect the public health and
the environment. These regulations relate primarily to worker safety, air and
water quality, underground fuel storage tanks and waste handling and disposal.
The Company has received notices from the U.S. Environmental Protection Agency,
state agencies and/or private parties seeking contribution, that it has been
identified as a potentially responsible party (PRP) under the Comprehensive
Environmental Response, Compensation and Liability Act, and may be required to
share in the cost of cleanup with respect to seven federal Superfund sites. It
may also be required to share in the cost of cleanup with respect to two
state-designated sites or other sites outside of the U.S.
Accrued environmental costs at
September 30, 2008 were $11.8, of which $1.7 is expected to be spent in fiscal
2009. This accrual is not measured on a discounted basis. It is difficult to
quantify with certainty the cost of environmental matters, particularly
remediation and future capital expenditures for environmental control equipment.
Nevertheless, based on information currently available, the Company believes the
possibility of material environmental costs in excess of the accrued amount is
remote.
Inflation
Management recognizes that inflationary pressures may
have an adverse effect on the Company,
through higher material, labor and transportation costs, asset replacement costs
and related depreciation, and other costs. In general, the Company has been able
to offset or minimize inflation effects through other cost reductions and
productivity improvements through mid-2005, thus inflation was not a significant
factor to that point. In recent years, the cost of zinc,
ENERGIZER HOLDINGS, INC.
(Dollars in millions, except per share and percentage
data)
nickel, steel, oil and other
commodities used in the Companys production and distribution have increased to
levels well above those of prior years. Looking forward, we expect commodities,
raw materials and other inflationary input costs for Household Products and
Personal Care to be unfavorable in 2009 as compared to average costs paid in
2008 by an amount ranging from $65 to $75 based on current market conditions.
Implemented price increases, other product cost savings and incremental
synergies from the Playtex acquisition are expected to offset this estimated
increase.
Critical Accounting
Policies
The Company identified the policies below as critical to
its business operations and the understanding of its results of operations. The
impact and any associated risks related to these policies on its business
operations is discussed throughout Managements Discussion and Analysis of
Results of Operations and Financial Condition, where such policies affect the
reported and expected financial results.
Preparation of the financial
statements in conformity with generally accepted accounting principles (GAAP) in
the U.S. requires the Company to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities and the reported amounts of revenues and expenses. On an ongoing
basis, the Company evaluates its estimates, including those related to customer
programs and incentives, product returns, inventories, intangible assets and
other long-lived assets, income taxes, financing, pensions and other
postretirement benefits, and contingencies. Actual results could differ from
those estimates. This listing is not intended to be a comprehensive list of all
of the Companys accounting policies.
-
Revenue Recognition The
Company's revenue is from the sale of its products. Revenue is recognized when
title, ownership and risk of loss pass to the customer. When discounts are
offered to customers for early payment, an estimate of such discounts is
recorded as a reduction of net sales in the same period as the sale. Standard
sales terms are final and, except for seasonal sun care returns which is
discussed in detail in the next paragraph, returns or exchanges are not
permitted unless a special exception is made; reserves are established and
recorded in cases where the right of return does exist for a particular
sale.
Under certain circumstances, we
allow customers to return Sun Care products that have not been sold by the end
of the sun care season, which is normal practice in the sun care industry. We
record sales at the time the title, ownership and risk of loss pass to the
customer. The terms of these sales vary but, in all instances, the following
conditions are met: the sales arrangement is evidenced by purchase orders
submitted by customers; the selling price is fixed or determinable; title to
the product has transferred; there is an obligation to pay at a specified date
without any additional conditions or actions required by the Company; and
collectability is reasonably assured. Simultaneous with the sale, we reduce
sales and cost of sales, and reserve amounts on our consolidated balance sheet
for anticipated returns based upon an estimated return level, in accordance
with GAAP. Customers are required to pay for the Sun Care product purchased
during the season under the required terms. Due to the seasonal nature of sun
care, we offer a limited extension of terms to certain qualified customers.
This limited extension requires substantial cash payments prior to or during
the sun care season. We generally receive returns of U.S. Sun Care products
from September through January following the summer sun care season. We
estimate the level of sun care returns using a variety of inputs including
historical experience, consumption trends during the sun care season and
inventory positions at key retailers as the sun care season progresses. We
monitor shipment activity and inventory levels at key retailers during the
season in an effort to gauge potential returns issues. This allows the Company
to manage shipment activity to our customers, especially in the latter stages
of the
ENERGIZER HOLDINGS,
INC.
(Dollars in millions, except per share
and percentage data)
sun care
season, to reduce the potential for returned product. The level of returns may
fluctuate from our estimates due to several factors including weather
conditions, customer inventory levels, and competitive conditions. Based on our
2008 Sun Care shipments, each percentage point change in our returns rate would
have impacted our reported net sales by $2.8 and our reported operating income
by $2.3.
The
Company offers a variety of programs, primarily to its retail customers,
designed to promote sales of its products. Such programs require periodic
payments and allowances based on estimated results of specific programs and are
recorded as a reduction to net sales. The Company accrues, at the time of sale,
the estimated total payments and allowances associated with each transaction.
Additionally, the Company offers programs directly to consumers to promote the
sale of its products. Promotions which reduce the ultimate consumer sale prices
are recorded as a reduction of net sales at the time the promotional offer is
made, generally using estimated redemption and participation levels. Taxes we
collect on behalf of governmental authorities, which are generally included in
the price to the customer, are also recorded as a reduction of net
sales.
The
Company continually assesses the adequacy of accruals for customer and consumer
promotional program costs not yet paid. To the extent total program payments
differ from estimates, adjustments may be necessary. Historically, these
adjustments have not been material to annual results.
-
Pension Plans and Other
Postretirement Benefits The
determination of the Companys obligation and expense for pension and other
postretirement benefits is dependent on certain assumptions developed by the
Company and used by actuaries in calculating such amounts. Assumptions
include, among others, the discount rate, future salary increases and the
expected long-term rate of return on plan assets. Actual results that differ
from assumptions made are recognized on the balance sheet and subsequently
amortized to earnings over future periods. Significant differences in actual
experience or significant changes in assumptions may materially affect pension
and other postretirement obligations. In determining the discount rate, the
Company uses the yield on high-quality bonds that coincide with the cash flows
of its plans estimated payouts. For the U.S. plans, which represent the
Companys most significant obligations, the CitiGroup yield curve is used in
determining the discount rates.
Of the assumptions listed above,
changes in the expected assets return have the most significant impact on the
Companys annual earnings prospectively. A one percentage point decrease or
increase in expected assets return would decrease or increase the Companys
pre-tax pension expense by approximately $7. In addition, it may increase and
accelerate the rate of required pension contributions in the future.
As of the measurement date,
uncertainty in economic markets and the credit crisis produced an increase in
yields in corporate bonds rated as high-quality. Discount rates based on
high-quality corporate bonds increased as well, leading to decreases in
obligations reported at year end. A one percentage point decrease in the
discount rate would increase obligations by $65 at September 30, 2008.
As allowed under GAAP, the
Companys U.S. qualified pension plan uses Market Related Value, which
recognizes market appreciation or depreciation in the portfolio over five
years so it reduces the short-term impact of market fluctuations.
-
Valuation of Long-Lived
Assets The Company periodically evaluates its long-lived assets,
including goodwill and intangible assets, for potential impairment indicators.
As a result of
ENERGIZER HOLDINGS,
INC.
(Dollars in millions,
except per share and percentage data)
the
Playtex acquisition, total intangible assets, including goodwill, increased to
$2,869.6 at September 30, 2008. Judgments regarding the existence of impairment
indicators, including lower than expected cash flows from acquired businesses,
are based on legal factors, market conditions and operational performance.
Future events could cause the Company to conclude that impairment indicators
exist. The Company estimates fair value using valuation techniques such as
EBITDA multiples and discounted cash flows. This requires management to make
assumptions regarding future income, working capital and discount rates, which
would affect the impairment calculation.
-
Income Taxes
The Company estimates income taxes and
the income tax rate in each jurisdiction that it operates. This involves
estimating taxable earnings, specific taxable and deductible items, the
likelihood of generating sufficient future taxable income to utilize deferred
tax assets and possible exposures related to future tax audits. Deferred tax
assets are evaluated on a subsidiary by subsidiary basis for realizability.
Valuation allowances are established when the realization is not deemed to be
more likely than not. Future performance is monitored, and when objectively
measurable operating trends change, adjustments are made to the valuation
allowances accordingly. To the extent the estimates described above change,
adjustments to income taxes are made in the period in which the estimate is
changed.
The Company operates in multiple
jurisdictions with complex tax and regulatory environments, which are subject
to differing interpretations by the taxpayer and the taxing authorities. At
times, we may take positions that management believes are supportable, but are
potentially subject to successful challenges by the appropriate taxing
authority. The Company evaluates its tax positions and establishes liabilities
in accordance with Financial Accounting Standards Board Interpretation No. 48,
Accounting for Uncertainty in Income Taxes. The Company reviews these tax
uncertainties in light of the changing facts and circumstances, such as
progress of tax audits, and adjusts them accordingly.
-
Acquisitions The Company uses
the purchase method, which requires the allocation of the cost of an acquired
business to the assets acquired and liabilities assumed based on their
estimated fair values at the date of acquisition. The excess value of the cost
of an acquired business over the fair value of the assets acquired and
liabilities assumed is recognized as goodwill. The valuation of the acquired
assets and liabilities will impact the determination of future operating
results. The Company uses a variety of information sources to determine the
value of acquired assets and liabilities including: third-party appraisers for
the values and lives of property, identifiable intangibles and inventories;
actuaries for defined benefit retirement plans and legal counsel or other
experts to assess the obligations associated with legal, environmental or
other claims.
Accounting
Standards
See discussion in Note 2 to
the Consolidated Financial Statements related to recently issued accounting
standards.
Forward-Looking
Information
Statements in the Managements Discussion and Analysis of
Results of Operations and Financial Condition and other sections of this Annual
Report to Shareholders that are not historical, particularly statements
regarding estimated synergies related to the Playtex acquisition; the
international expansion of the Playtex product line; the anticipated continuing
success of the Companys trade-up strategy for batteries and lighting products;
battery category softness on a global basis; the existence and impact of excess
battery inventory going into the first quarter; the anticipated impact of
inflationary commodity and other material input costs, as well as our ability to
increase prices, cost reduction programs and incremental synergies to
offset
ENERGIZER HOLDINGS, INC.
(Dollars in millions, except per share and percentage
data)
such increases; the estimated impact
of foreign currency devaluation on the Companys profitability in 2009 and the
likelihood of attaining targeted or flat earnings per share (EPS) growth for the
year; the Companys estimates of its share of total U.S. retail battery market
and share of the wet shave category in major markets; estimated capital
expenditures for fiscal year 2009 and their source of financing; the likelihood
of acceleration of the Companys debt maturities, the impact of further
deterioration in credit markets on the Companys ability to renew its accounts
receivable financing program, the anticipated adequacy of cash flows and the
Companys ability to meet liquidity requirements; the impact of adverse changes
in interest rates, currency exchange losses in Venezuela and the market risk of
foreign currency derivatives; the mitigating impact of changes in value of the
share option on deferred compensation liabilities; the materiality of future
expenditures for environmental matters and environmental control equipment;
potential adjustments to accruals for promotional program costs; the impact of
variations from assumptions on pension asset returns and discount rates on the
Companys pre-tax pension expense and benefit obligations; and the valuation of
long-lived assets, may be considered forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. The Company
cautions readers not to place undue reliance on any forward-looking statements,
which speak only as of the date made.
The Company advises readers that
various risks and uncertainties could affect its financial performance and could
cause the Companys actual results for future periods to differ materially from
those anticipated or projected. Continuing negative economic conditions
associated with the global credit crisis, global stock market declines, and
economic deterioration, as well as competitive activity, could significantly and
negatively impact future growth and performance of the Companys businesses,
including the Companys trade-up strategy for batteries and lighting products
and the international expansion of the Playtex product lines. Continued EPS
growth in fiscal 2009, as well as the Companys long-term growth positioning,
will depend not only on improvement in the global macroeconomic conditions
described above, but also on the Companys ability to continue operating its
businesses profitably in the face of declines in consumer spending, potential
retailer consolidation, material cost increases, limits on availability of
credit, and competitive activity, particularly in light of the vastly greater
size and market strength of the Companys primary competitor. The extent of
future synergies related to the Playtex acquisition may be significantly
different from current expectations due to changes in market or competitive
conditions, systems or personnel issues, or other operational factors.
Anticipated category growth, if any, for the Companys businesses is difficult
to quantify or estimate given the current volatile global economic situation.
The Companys broad diversified portfolio of battery products across a wide
range of consumer price points and service demands provides some measure of
protection against softness in various ranges of the battery category spectrum.
On the other hand, the overall category could be significantly negatively
impacted by continuing economic distress and accompanying declines in consumer
spending, as well as declines in the proliferation or consumption of
battery-powered devices or the development of alternative power sources.
Moreover, product placement and shelf-space and facings available to our
portfolio of products are solely at the discretion of our retailer customers,
which can limit visibility or availability to the ultimate consumers. The
Companys estimates of its U.S. market share and estimates of share of the wet
shave category, as well as estimates of excess retailer inventory levels of
battery products resulting from hurricane-related shipments and early holiday
shipments are based solely on limited data available to it and managements
reasonable assumptions about market conditions, and consequently may be
inaccurate, or may not reflect significant segments of the retail market.
Consequently, sales volumes for 2009 may be impacted more than currently
estimated by actual current inventory levels. The impact of material and other
inflationary input cost increases could be more significant than anticipated, as
it is difficult to predict with any accuracy whether raw material, energy and
other input costs will stabilize or continue to increase, since such costs are
impacted by multiple economic, political
ENERGIZER HOLDINGS, INC.
(Dollars in millions, except per share and percentage
data)
and other factors outside of the
Companys control. The anticipated benefits of the Companys pricing actions,
cost reduction programs and incremental synergies from the Playtex acquisition
may not be realized to the extent anticipated, or may not be sufficient to
offset greater than anticipated increases in supply costs. The benefits of price
increases may not be realized in the event of consumer resistance or a
significant decline in consumer demand, if competitive activity mandates
additional promotional spending or a revamping of the pricing structure, or if
other operating costs increase unexpectedly. The estimated future impact of
foreign currency devaluations on the Companys profitability is also difficult
to estimate with any degree of certainty. Prolonged recessionary conditions in
key global markets where the Company competes could result in significantly
greater local currency devaluation and correspondingly greater negative impact
on the Company than what can be anticipated from current spot rates. On the
other hand, if concerted global stabilization measures achieve some degree of
economic recovery, local currencies could be significantly strengthened relative
to the dollar. Liquidity issues or alternative cash flow uses, competitive
activity or general economic changes could impact the amount and timing of
capital expenditures. Continued compliance with debt covenants providing for a
required debt to EBITDA ratio can be impacted by higher than anticipated debt
levels as a result of greater than anticipated cash needs or by lower than
anticipated cash flows necessary for debt service. Compliance can also be
impacted by earnings declines over the measurement period, either as a result of
challenges faced specifically by the Companys businesses, or as a result of
general economic conditions and rising unemployment. Unforeseen fluctuations in
levels of the Companys operating cash flows, or inability to maintain
compliance with its debt covenants, could limit the Companys ability to meet
future operating expenses and liquidity requirements, fund capital expenditures
or service its debt as it becomes due. Economic turmoil and currency
fluctuations could increase the Companys risk from unfavorable impact on
variable-rate debt, currency derivatives and other financial instruments.
Deferred compensation liabilities reflecting the value of ENR Common Stock may
increase significantly, depending on market fluctuation and employee elections,
but such increase may not be reflected in a comparable increase in the value of
the share option. Unknown environmental liabilities and greater than anticipated
remediation expenses or environmental control expenditures could have a material
impact on the Companys financial position. Estimates of environmental
liabilities are based upon, among other things, the Companys payments and/or
accruals with respect to each remediation site; the number, ranking and
financial strength of other responsible parties (PRPs); the status of the
proceedings, including various settlement agreements, consent decrees or court
orders; allocations of volumetric waste contributions and allocations of
relative responsibility among PRPs developed by regulatory agencies and by
private parties; remediation cost estimates prepared by governmental authorities
or private technical consultants; and the Companys historical experience in
negotiating and settling disputes with respect to similar sites and such
estimates may prove to be inaccurate. Adjustments to accruals for promotional
programs and calculations of impairment of long-lived assets may be more
significant than anticipated. The impact of decreases in the expected returns
from pension assets may have a greater than anticipated impact on pension
expenses and required cash contributions. In addition, other risks and
uncertainties not presently known to us or that we consider immaterial could
affect the accuracy of any such forward-looking statements. The Company does not
undertake any obligation to update any forward-looking statements to reflect
events that occur or circumstances that exist after the date on which they were
made. Additional risks and uncertainties include those detailed from time to
time in the Companys publicly filed documents.
Summary Selected Historical
Financial Information
(Dollars in
millions, except per share data)
Statement of Earnings Data |
FOR THE YEARS ENDED SEPTEMBER 30, |
|
|
|
2008 (a) |
|
2007 |
|
2006 |
|
2005 |
|
2004 |
Net sales |
$ |
4,331.0 |
|
|
$ |
3,365.1 |
|
|
$ |
3,076.9 |
|
|
$ |
2,989.8 |
|
|
$ |
2,812.7 |
|
Depreciation and amortization |
|
141.3 |
|
|
|
115.0 |
|
|
|
117.5 |
|
|
|
116.3 |
|
|
|
115.8 |
|
Earnings before income taxes (b) |
|
473.2 |
|
|
|
434.2 |
|
|
|
356.6 |
|
|
|
388.7 |
|
|
|
347.8 |
|
Income taxes |
|
143.9 |
|
|
|
112.8 |
|
|
|
95.7 |
|
|
|
108.0 |
|
|
|
86.8 |
|
Net earnings (c) |
$ |
329.3 |
|
|
$ |
321.4 |
|
|
$ |
260.9 |
|
|
$ |
280.7 |
|
|
$ |
261.0 |
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
5.71 |
|
|
$ |
5.67 |
|
|
$ |
4.26 |
|
|
$ |
3.95 |
|
|
$ |
3.24 |
|
Diluted |
$ |
5.59 |
|
|
$ |
5.51 |
|
|
$ |
4.14 |
|
|
$ |
3.82 |
|
|
$ |
3.13 |
|
Average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
57.6 |
|
|
|
56.7 |
|
|
|
61.2 |
|
|
|
71.0 |
|
|
|
80.6 |
|
Diluted |
|
58.9 |
|
|
|
58.3 |
|
|
|
63.1 |
|
|
|
73.5 |
|
|
|
83.4 |
|
|
Balance Sheet Data |
AT SEPTEMBER 30, |
|
|
|
2008 (a) |
|
2007 |
|
2006 |
|
2005 |
|
2004 |
Working capital |
$ |
665.1 |
|
|
$ |
888.5 |
|
|
$ |
708.2 |
|
|
$ |
626.4 |
|
|
$ |
469.2 |
|
Property, plant and equipment, net |
|
835.5 |
|
|
|
649.9 |
|
|
|
659.9 |
|
|
|
682.5 |
|
|
|
705.6 |
|
Total assets |
|
5,816.7 |
|
|
|
3,525.7 |
|
|
|
3,132.6 |
|
|
|
2,973.8 |
|
|
|
2,931.7 |
|
Long-term debt |
|
2,589.5 |
|
|
|
1,372.0 |
|
|
|
1,625.0 |
|
|
|
1,295.0 |
|
|
|
1,059.6 |
|
|
(a) |
|
Playtex Products, Inc. was acquired October 1, 2007 |
|
(b) |
|
Earnings before income taxes were (reduced)/increased by the
following items: |
|
|
|
|
|
|
FOR THE YEARS ENDED SEPTEMBER 30, |
|
|
|
2008 |
|
2007 |
|
2006 |
|
2005 |
|
2004 |
|
|
Acquisition inventory valuation |
$ |
(27.5 |
) |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
Integration
costs |
|
(17.9 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
Provisions for restructuring and related costs |
|
(3.2 |
) |
|
|
(18.2 |
) |
|
|
(37.4 |
) |
|
|
(5.7 |
) |
|
|
(5.2 |
) |
|
|
Foreign
pension charge |
|
- |
|
|
|
- |
|
|
|
(4.5 |
) |
|
|
- |
|
|
|
- |
|
|
|
Special termination benefits |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(15.2 |
) |
|
|
Intellectual property rights
income |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1.5 |
|
|
|
Total |
$ |
(48.6 |
) |
|
$ |
(18.2 |
) |
|
$ |
(41.9 |
) |
|
$ |
(5.7 |
) |
|
$ |
(18.9 |
) |
|
(c) |
|
Net
earnings were (reduced)/increased by the following items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR THE YEARS ENDED SEPTEMBER 30, |
|
|
|
2008 |
|
2007 |
|
2006 |
|
2005 |
|
2004 |
|
|
Acquisition inventory valuation, net of tax |
$ |
(16.5 |
) |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
Integration
costs, net of tax |
|
(11.4 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
Provisions for restructuring and related costs, net of
tax |
|
(2.0 |
) |
|
|
(12.2 |
) |
|
|
(24.9 |
) |
|
|
(3.7 |
) |
|
|
(3.8 |
) |
|
|
Foreign
pension charge, net of tax |
|
- |
|
|
|
- |
|
|
|
(3.7 |
) |
|
|
- |
|
|
|
- |
|
|
|
Special termination benefits, net of tax |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(9.6 |
) |
|
|
Adjustments
to prior years' tax accruals |
|
(1.1 |
) |
|
|
7.9 |
|
|
|
10.9 |
|
|
|
10.6 |
|
|
|
8.5 |
|
|
|
Tax benefits recognized related to prior years'
losses |
|
- |
|
|
|
4.3 |
|
|
|
5.7 |
|
|
|
14.7 |
|
|
|
16.2 |
|
|
|
Deferred
tax benefit due to statutory rate change |
|
- |
|
|
|
9.7 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
Repatriation under the American Jobs Creation Act |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(9.0 |
) |
|
|
- |
|
|
|
Intellectual property rights
income, net of tax |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
0.9 |
|
|
|
Total |
$ |
(31.0 |
) |
|
$ |
9.7 |
|
|
$ |
(12.0 |
) |
|
$ |
12.6 |
|
|
$ |
12.2 |
|
Responsibility for Financial
Statements
The preparation and integrity of the financial statements
of Energizer Holdings, Inc. (the Company) are the responsibility of its
management. These statements have been prepared in conformance with generally
accepted accounting principles in the United States of America, and in the
opinion of management, fairly present the Companys financial position, results
of operations and cash flows.
The Company maintains accounting and
internal control systems, which it believes are adequate to provide reasonable
assurance that assets are safeguarded against loss from unauthorized use or
disposition and that the financial records are reliable for preparing financial
statements. The selection and training of qualified personnel, the establishment
and communication of accounting and administrative policies and procedures, and
an extensive program of internal audits are important elements of these control
systems.
The report of PricewaterhouseCoopers
LLP, independent registered public accounting firm, on their audits of the
accompanying financial statements that appears herein. This report states that
the audits were made in accordance with the standards of the Public Company
Accounting Oversight Board (United States). These standards include a study and
evaluation of internal control for the purpose of establishing a basis for
reliance thereon relative to the scope of their audits of the financial
statements.
The Board of Directors, through its
Audit Committee consisting solely of non-management directors, meets
periodically with management, internal audit and the independent auditors to
discuss audit and financial reporting matters. To assure independence,
PricewaterhouseCoopers LLP has direct access to the Audit Committee.
Managements Report on Internal
Control over Financial Reporting
The
management of the Company is responsible for establishing and maintaining
internal control over financial reporting. The Companys internal control over
financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements in accordance with generally accepted accounting principles
for external purposes. The Companys internal control over financial reporting
includes those policies and procedures that: (i) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the Company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the Company are
being made only in accordance with authorizations of management and directors of
the Company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the
Companys assets that could have a material effect on the financial statements.
Internal control over financial reporting, because of its inherent limitations,
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate. Management conducted an
assessment of the effectiveness of the Companys internal control over financial
reporting based on the framework set forth in Internal Control Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on the Companys assessment, management has concluded that
internal control over financial reporting as of September 30, 2008 was
effective. The Companys internal control over financial reporting as of
September 30, 2008 has been audited by PricewaterhouseCoopers LLP, an
independent registered public accounting firm, as stated in their report that
appears herein.
Report of Independent Registered
Public Accounting Firm
To the Shareholders and Board of
Directors of Energizer Holdings, Inc.:
In our opinion, the accompanying
consolidated balance sheets and the related consolidated statements of earnings
and comprehensive income, of cash flows and of shareholders equity present
fairly, in all material respects, the financial position of Energizer Holdings,
Inc. and its subsidiaries at September 30, 2008 and 2007 and the results of
their operations and their cash flows for each of the three years in the period
ended September 30, 2008 in conformity with accounting principles generally
accepted in the United States of America. Also in our opinion, the Company
maintained, in all material respects, effective internal control over financial
reporting as of September 30, 2008, based on criteria established in
Internal Control - Integrated
Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). The Company's
management is responsible for these financial statements, for maintaining
effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting, included in the
accompanying Management's Report on Internal Control over Financial Reporting.
Our responsibility is to express opinions on these financial statements and on
the Company's internal control over financial reporting based on our integrated
audits. We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement and whether effective
internal control over financial reporting was maintained in all material
respects. Our audits of the financial statements included examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary
in the circumstances. We believe that our audits provide a reasonable basis for
our opinions.
As discussed in Note 9 to the
consolidated financial statements, the Company adopted Statement of Financial
Accounting Standard No. 158, Employers'
Accounting for Defined Benefit Pension and Other Postretirement Plans - an
Amendment to FASB Statements No. 87, 88, 106, and 132(R), as of September 30, 2007.
A companys internal control over
financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles. A companys internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the financial statements.
Because of its inherent limitations,
internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
St. Louis, Missouri
November 26,
2008
ENERGIZER HOLDINGS,
INC.
CONSOLIDATED STATEMENTS OF
EARNINGS AND COMPREHENSIVE INCOME
(Dollars in millions, except per share data)
|
YEARS ENDED SEPTEMBER 30, |
Statement of
Earnings |
2008 |
|
2007 |
|
2006 |
Net sales |
$ |
4,331.0 |
|
|
$ |
3,365.1 |
|
|
$ |
3,076.9 |
Cost of
products sold |
|
2,293.3 |
|
|
|
1,760.4 |
|
|
|
1,596.1 |
Gross profit |
|
2,037.7 |
|
|
|
1,604.7 |
|
|
|
1,480.8 |
Selling,
general and administrative expense |
|
794.0 |
|
|
|
627.9 |
|
|
|
601.9 |
Advertising and promotion expense |
|
486.8 |
|
|
|
395.2 |
|
|
|
368.9 |
Research
and development expense |
|
91.7 |
|
|
|
70.7
|
|
|
|
74.2 |
Interest expense |
|
181.3 |
|
|
|
91.2 |
|
|
|
77.9 |
Other financing expense/(income),
net |
|
10.7 |
|
|
|
(14.5 |
) |
|
|
1.3 |
Earnings before income taxes |
|
473.2 |
|
|
|
434.2 |
|
|
|
356.6 |
Income taxes |
|
143.9 |
|
|
|
112.8 |
|
|
|
95.7 |
Net
earnings |
$ |
329.3 |
|
|
$ |
321.4 |
|
|
$ |
260.9 |
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net earnings per share |
$ |
5.71 |
|
|
$ |
5.67 |
|
|
$ |
4.26 |
Diluted net earnings per share |
$ |
5.59 |
|
|
$ |
5.51
|
|
|
$ |
4.14 |
|
|
|
|
|
|
|
|
|
|
|
Statement of Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
$ |
329.3 |
|
|
$ |
321.4 |
|
|
$ |
260.9 |
Other
comprehensive income, net of tax |
|
|
|
|
|
|
|
|
|
|
Foreign currency
translation adjustments |
|
3.8 |
|
|
|
73.9 |
|
|
|
29.4 |
Pension/Postretirement
activity, net of tax of $(17.8) in 2008, |
|
(46.5 |
) |
|
|
20.5
|
|
|
|
1.7 |
$8.9 in 2007 and $1.3 in
2006 |
|
|
|
|
|
|
|
|
|
|
Deferred gain/(loss) on
hedging activity, net of tax of $1.7 in |
|
3.8 |
|
|
|
(10.6 |
) |
|
|
- |
2008 and $(4.7) in
2007 |
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
$ |
290.4 |
|
|
$ |
405.2 |
|
|
$ |
292.0
|
The above financial statements should
be read in conjunction with the Notes To Consolidated Financial
Statements.
ENERGIZER HOLDINGS,
INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in millions, except par values)
|
SEPTEMBER 30, |
|
2008 |
|
2007 |
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
171.2 |
|
|
$ |
363.2 |
|
Trade receivables, net |
|
923.2 |
|
|
|
788.3 |
|
Inventories |
|
674.6 |
|
|
|
582.3 |
|
Other
current assets |
|
257.8 |
|
|
|
270.5 |
|
Total current assets |
|
2,026.8 |
|
|
|
2,004.3 |
|
Property, plant and equipment, net |
|
835.5 |
|
|
|
649.9 |
|
Goodwill |
|
1,206.4 |
|
|
|
380.1 |
|
Other intangible assets |
|
1,663.2 |
|
|
|
310.4 |
|
Other assets |
|
84.8 |
|
|
|
181.0 |
|
Total assets |
$ |
5,816.7 |
|
|
$ |
3,525.7 |
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
Current maturities of long-term debt
|
$ |
106.0 |
|
|
$ |
210.0 |
|
Notes payable |
|
264.4 |
|
|
|
43.0 |
|
Accounts payable |
|
262.4 |
|
|
|
255.6 |
|
Other
current liabilities |
|
728.9 |
|
|
|
607.2 |
|
Total current liabilities |
|
1,361.7 |
|
|
|
1,115.8 |
|
Long-term debt |
|
2,589.5 |
|
|
|
1,372.0 |
|
Other
liabilities |
|
869.2 |
|
|
|
384.0 |
|
Shareholders' equity |
|
|
|
|
|
|
|
Preferred stock, $.01 par value, none
outstanding |
|
- |
|
|
|
-
|
|
Common stock, $.01 par value, issued 97,083,682 at
2008 |
|
|
|
|
|
|
|
and 2007, respectively |
|
1.0 |
|
|
|
1.0 |
|
Additional paid-in capital |
|
1,034.9 |
|
|
|
999.0 |
|
Retained earnings |
|
1,671.8 |
|
|
|
1,362.7 |
|
Common stock in treasury, at cost, 38,900,801
shares at 2008 |
|
|
|
|
|
|
|
39,772,001 shares at 2007 |
|
(1,719.3 |
) |
|
|
(1,755.6 |
)
|
Accumulated other comprehensive income |
|
7.9 |
|
|
|
46.8 |
|
Total shareholders' equity |
|
996.3 |
|
|
|
653.9 |
|
Total liabilities and shareholders'
equity |
$ |
5,816.7 |
|
|
$ |
3,525.7 |
|
The above financial statements should
be read in conjunction with the Notes To Consolidated Financial
Statements.
ENERGIZER HOLDINGS,
INC.
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Dollars in
millions)
|
|
YEARS ENDED SEPTEMBER 30, |
|
|
2008 |
|
2007 |
|
2006 |
Cash Flow from Operations |
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
329.3 |
|
|
$ |
321.4 |
|
|
$ |
260.9 |
|
Adjustments to reconcile net earnings
to net cash flow from operations: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
141.3 |
|
|
|
115.0 |
|
|
|
117.5 |
|
Deferred income taxes |
|
|
27.0 |
|
|
|
(28.6 |
) |
|
|
(23.3 |
) |
Other non-cash charges |
|
|
39.2 |
|
|
|
41.8
|
|
|
|
25.4
|
|
Other,
net |
|
|
(25.0 |
) |
|
|
7.7 |
|
|
|
11.0 |
|
Operating cash flow before changes in working
capital |
|
|
511.8 |
|
|
|
457.3 |
|
|
|
391.5 |
|
Changes in assets and liabilities used
in operations, net of effects of |
|
|
|
|
|
|
|
|
|
|
|
|
business acquisitions: |
|
|
|
|
|
|
|
|
|
|
|
|
Increase in accounts receivable, net
|
|
|
(39.4 |
) |
|
|
(41.6 |
) |
|
|
(15.0 |
) |
Decrease/(increase) in
inventories |
|
|
29.5 |
|
|
|
(7.1 |
) |
|
|
(54.2 |
) |
(Increase)/decrease in other current
assets |
|
|
(2.8 |
) |
|
|
5.9
|
|
|
|
5.8
|
|
(Decrease)/increase in accounts
payable |
|
|
(9.8 |
) |
|
|
4.2 |
|
|
|
11.5 |
|
(Decrease)/increase in other current
liabilities |
|
|
(22.8 |
) |
|
|
26.6 |
|
|
|
33.4 |
|
Net cash flow from operations |
|
|
466.5 |
|
|
|
445.3 |
|
|
|
373.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow from Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(160.0 |
) |
|
|
(88.6 |
) |
|
|
(94.9 |
) |
Proceeds from sale of
assets |
|
|
1.2 |
|
|
|
3.6 |
|
|
|
6.6 |
|
Acquisitions, net of cash acquired |
|
|
(1,882.1 |
) |
|
|
-
|
|
|
|
-
|
|
Proceeds from/(Investment) in share
options |
|
|
46.0 |
|
|
|
- |
|
|
|
(19.6 |
) |
Other,
net |
|
|
0.4 |
|
|
|
2.7 |
|
|
|
(7.7 |
) |
Net cash used by investing activities
|
|
|
(1,994.5 |
) |
|
|
(82.3 |
) |
|
|
(115.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow from Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
Cash proceeds from issuance of debt with original
maturities greater |
|
|
|
|
|
|
|
|
|
|
|
|
than 90 days |
|
|
1,482.8 |
|
|
|
- |
|
|
|
497.8 |
|
Cash payments on debt with original maturities greater than 90
days |
|
|
(269.5 |
) |
|
|
(10.0 |
) |
|
|
(15.0 |
) |
Net increase/(decrease) in debt with original
maturities of 90 days or less |
|
|
97.4 |
|
|
|
(146.3 |
) |
|
|
(123.2 |
) |
Common stock purchased |
|
|
- |
|
|
|
(53.0 |
) |
|
|
(600.7 |
) |
Proceeds from issuance of common stock
|
|
|
12.9 |
|
|
|
35.7
|
|
|
|
21.4
|
|
Excess tax benefits from share-based payments |
|
|
16.5 |
|
|
|
36.2 |
|
|
|
8.2 |
|
Net cash from/(used) by financing
activities |
|
|
1,340.1 |
|
|
|
(137.4 |
) |
|
|
(211.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate
changes on cash |
|
|
(4.1 |
) |
|
|
3.3 |
|
|
|
3.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease)/increase in cash and cash equivalents
|
|
|
(192.0 |
) |
|
|
228.9 |
|
|
|
49.8 |
|
Cash and cash equivalents,
beginning of period |
|
|
363.2 |
|
|
|
134.3 |
|
|
|
84.5 |
|
Cash and cash equivalents,
end of period |
|
$ |
171.2 |
|
|
$ |
363.2 |
|
|
$ |
134.3 |
|
The above financial statements should
be read in conjunction with the Notes To Consolidated Financial
Statements.
ENERGIZER HOLDINGS,
INC.
CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY
(Dollars in
millions, shares in thousands)
|
|
Dollars |
|
Shares |
|
|
2008 |
|
2007 |
|
2006 |
|
2008 |
|
2007 |
|
2006 |
Common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year |
|
$ |
1.0 |
|
|
$ |
1.0
|
|
|
$ |
1.0
|
|
|
97,084 |
|
|
97,084 |
|
|
97,084 |
|
Activity under stock plans |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Ending balance |
|
|
1.0 |
|
|
|
1.0
|
|
|
|
1.0
|
|
|
97,084 |
|
|
97,084 |
|
|
97,084 |
|
|
Additional paid-in capital: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year |
|
|
999.0 |
|
|
|
950.2 |
|
|
|
929.6 |
|
|
|
|
|
|
|
|
|
|
Activity under stock plans |
|
|
35.9 |
|
|
|
48.8 |
|
|
|
20.6 |
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
|
1,034.9 |
|
|
|
999.0 |
|
|
|
950.2 |
|
|
|
|
|
|
|
|
|
|
|
Retained earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year |
|
|
1,362.7 |
|
|
|
1,073.2 |
|
|
|
832.7 |
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
329.3 |
|
|
|
321.4 |
|
|
|
260.9 |
|
|
|
|
|
|
|
|
|
|
Activity under stock plans |
|
|
(20.2 |
) |
|
|
(31.9 |
) |
|
|
(20.4 |
) |
|
|
|
|
|
|
|
|
|
Ending balance |
|
|
1,671.8 |
|
|
|
1,362.7 |
|
|
|
1,073.2 |
|
|
|
|
|
|
|
|
|
|
|
Common stock in treasury: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year |
|
|
(1,755.6 |
) |
|
|
(1,754.2 |
) |
|
|
(1,193.9 |
) |
|
(39,772 |
) |
|
(40,410 |
) |
|
(30,044 |
) |
Treasury stock purchased |
|
|
- |
|
|
|
(53.0 |
) |
|
|
(600.7 |
) |
|
- |
|
|
(783 |
) |
|
(11,331 |
) |
Activity under stock plans |
|
|
36.3 |
|
|
|
51.6 |
|
|
|
40.4 |
|
|
871 |
|
|
1,421 |
|
|
965 |
|
Ending balance |
|
|
(1,719.3 |
) |
|
|
(1,755.6 |
) |
|
|
(1,754.2 |
) |
|
(38,901 |
) |
|
(39,772 |
) |
|
(40,410 |
) |
|
Accumulated other comprehensive income/(loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative translation adjustment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year |
|
|
47.5 |
|
|
|
(26.4 |
) |
|
|
(55.8 |
) |
|
|
|
|
|
|
|
|
|
Foreign currency translation
adjustment |
|
|
3.8 |
|
|
|
73.9 |
|
|
|
29.4 |
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
|
51.3 |
|
|
|
47.5 |
|
|
|
(26.4 |
) |
|
|
|
|
|
|
|
|
|
Pension liability: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year |
|
|
9.9 |
|
|
|
(31.4 |
) |
|
|
(33.1 |
) |
|
|
|
|
|
|
|
|
|
Pension/Postretirement activity |
|
|
(46.5 |
) |
|
|
20.5
|
|
|
|
1.7
|
|
|
|
|
|
|
|
|
|
|
Adjustment to initially apply SFAS 158 |
|
|
- |
|
|
|
20.8 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Ending balance, net of tax of $(8.0) in
2008, |
|
|
(36.6 |
) |
|
|
9.9
|
|
|
|
(31.4 |
) |
|
|
|
|
|
|
|
|
|
$9.8 in 2007 and $(15.0) in 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred loss on hedging activity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year |
|
|
(10.6 |
) |
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Activity |
|
|
3.8 |
|
|
|
(10.6 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
Ending balance, net of tax of $(3.0) in
2008, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$(4.7) in 2007 |
|
|
(6.8 |
) |
|
|
(10.6 |
) |
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Total accumulated other comprehensive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
income/(loss) |
|
|
7.9 |
|
|
|
46.8 |
|
|
|
(57.8 |
) |
|
|
|
|
|
|
|
|
|
|
Total shareholders' equity |
|
$ |
996.3 |
|
|
$ |
653.9 |
|
|
$ |
212.4 |
|
|
|
|
|
|
|
|
|
|
The above financial statements should
be read in conjunction with the Notes To Consolidated Financial
Statements.
ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in
millions, except per share and percentage data)
(1) Basis of Presentation
Preparation of the financial statements in conformity
with generally accepted accounting principles in the U.S. (GAAP) requires
Energizer Holdings, Inc. and its subsidiaries (the Company) to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities and the reported amounts of
revenues and expenses. On an ongoing basis, the Company evaluates its estimates,
including those related to customer programs and incentives, product returns,
bad debts, inventories, intangible and other long-lived assets, income taxes,
financing, pensions and other postretirement benefits, contingencies and
acquisitions. Actual results could differ from those estimates.
(2) Summary of Significant Accounting
Policies
The Company's significant
accounting policies, which conform to GAAP and are applied on a consistent basis
among all years presented, except as indicated, are described below.
Principles of
Consolidation - The financial statements include the accounts of the
Company and its majority-owned subsidiaries. All significant intercompany
transactions are eliminated. Investments in affiliated companies, 20% through
50% owned, are accounted for under the equity method.
Foreign Currency
Translation - Financial statements
of foreign operations where the local currency is the functional currency are
translated using end-of-period exchange rates for assets and liabilities, and
average exchange rates during the period for results of operations. Related
translation adjustments are reported as a component within accumulated other
comprehensive income in the shareholders equity section of the Consolidated
Balance Sheets.
For foreign operations where the U.S.
dollar is the functional currency and for countries that are considered highly
inflationary, translation practices differ in that inventories, properties,
accumulated depreciation and depreciation expense are translated at historical
rates of exchange, and related translation adjustments are included in earnings.
Gains and losses from foreign currency transactions are generally included in
earnings.
Financial Instruments and
Derivative Securities - The Company
uses financial instruments, from time to time, in the management of foreign
currency, interest rate and other risks that are inherent to its business
operations. Such instruments are not held or issued for trading
purposes.
Foreign exchange (F/X) instruments,
including currency forwards, purchased options and zero-cost option collars, are
used primarily to reduce transaction exposures and, to a lesser extent, to
manage other translation exposures. F/X instruments used are selected based on
their risk reduction attributes and the related market conditions. The Company
also holds a contract with an embedded derivative instrument to mitigate the
risk of its deferred compensation liabilities, as discussed further in Note 14.
The Company has not designated these financial instruments as hedges for
accounting purposes in the three years ended September 30, 2008.
The Company uses raw materials that
are subject to price volatility. The Company uses hedging instruments as it
desires to reduce exposure to variability in cash flows associated with future
purchases of zinc or other commodities. For further discussion of such
instruments, see Note 14.
Cash
Equivalents - For purposes of the Consolidated Statements of Cash
Flows, cash equivalents are all considered to be highly liquid investments with
a maturity of three months or less when purchased.
ENERGIZER HOLDINGS,
INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in
millions, except per share and percentage data)
Accounts Receivable
Valuation Accounts receivable are
stated at their net realizable value. The allowance for doubtful accounts
reflects the Companys best estimate of probable losses inherent in the
receivables portfolio determined on the basis of historical experience, specific
allowances for known troubled accounts and other currently available
information. Bad debt expense is included in selling, general and administrative
(SG&A) expense in the Consolidated Statements of Earnings.
Inventories
- Inventories are valued at the lower of
cost or market, with cost generally being determined using average cost or the
first-in, first-out (FIFO) method.
As part of the Playtex acquisition,
the Company recorded a fair value adjustment of $27.5 to bring the carrying
value of the inventory purchased in the Playtex acquisition to an amount which
approximated the estimated selling price of the finished goods on hand at the
closing date less the sum of (a) costs of disposal and (b) a reasonable profit
allowance for the selling effort of the acquiring entity. As the inventory was
sold during the first and second quarters of fiscal 2008, the $27.5 adjustment
was charged to cost of products sold.
Capitalized Software
Costs - Capitalized software costs
are included in Other Assets. These costs are amortized using the straight-line
method over periods of related benefit ranging from three to seven years.
Expenditures related to capitalized software are included in the capital
expenditures caption in the Consolidated Statements of Cash Flows.
Property, Plant and
Equipment Property, plant and
equipment is stated at historical costs. Property, plant and equipment acquired
as part of the Playtex acquisition was recorded at fair value on the date of
acquisition. Fair value was established using a cost approach for the operating
fixed assets and comparable sales and property assessment data for the valuation
of land. Expenditures for new facilities and expenditures that substantially
increase the useful life of property, including interest during construction,
are capitalized and reported in the capital expenditures caption in the
Consolidated Statements of Cash Flows. Maintenance, repairs and minor renewals
are expensed as incurred. When property is retired or otherwise disposed of, the
related cost and accumulated depreciation are removed from the accounts, and
gains or losses on the disposition are reflected in earnings. Depreciation is
generally provided on the straight-line basis by charges to costs or expenses at
rates based on estimated useful lives. Estimated useful lives range from two to
25 years for machinery and equipment and three to 30 years for buildings.
Depreciation expense was $121.4, $104.6 and $109.1 in 2008, 2007 and 2006,
respectively.
Estimated useful lives are
periodically reviewed and, when appropriate, changes are made prospectively.
When certain events or changes in operating conditions occur, asset lives may be
adjusted and an impairment assessment may be performed on the recoverability of
the carrying amounts.
Goodwill and Other Intangible
Assets - Goodwill and
indefinite-lived intangibles are not amortized, but are evaluated annually for
impairment as part of the Company's annual business planning cycle in the fourth
quarter. The fair value of each reporting unit is estimated using valuation
techniques such as Earnings Before Interest, Taxes, Depreciation and
Amortization (EBITDA) multiples and discounted cash flows. Intangible assets
with finite lives, and a remaining weighted average life of approximately seven
years, are amortized on a straight-line basis over expected lives of 18 months
to 15 years. Such intangibles are also evaluated for impairment including
on-going monitoring of potential impairment indicators.
Impairment of Long-Lived
Assets The Company reviews
long-lived assets, other than goodwill and other intangible assets for
impairment, when events or changes in business circumstances indicate that the
remaining useful life may warrant revision or that the carrying amount of the
long-
ENERGIZER HOLDINGS,
INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in
millions, except per share and percentage data)
lived asset may not be fully
recoverable. The Company performs undiscounted cash flow analyses to determine
if impairment exists. If impairment is determined to exist, any related
impairment loss is calculated based on fair value. Impairment losses on assets
to be disposed of, if any, are based on the estimated proceeds to be received,
less cost of disposal.
Revenue
Recognition - The Company's revenue
is from the sale of its products. Revenue is recognized when title, ownership
and risk of loss pass to the customer. Discounts are offered to customers for
early payment and an estimate of such discounts is recorded as a reduction of
net sales in the same period as the sale. Our standard sales terms are final and
returns or exchanges are not permitted unless a special exception is made;
reserves are established and recorded in cases where the right of return does
exist for a particular sale. Under certain circumstances, we authorize customers
to return Sun Care products that have not been sold by the end of the sun care
season, which is normal practice in the sun care industry. We record sun care
sales at the time the products are shipped and title transfers. Simultaneously
with the time of the shipment, we reduce sun care sales and cost of sales, and
record an accrued liability on our Consolidated Balance Sheet for anticipated
returns based upon an estimated return level. Customers are required to pay for
the sun care product purchased under the required terms. Due to the seasonal
nature of sun care, we offer a limited extension of terms to certain qualified
customers. This limited extension requires substantial cash payments prior to or
during the sun care season. We generally receive returns of our U.S. Sun Care
products from September through January following the summer sun care
season.
The Company offers a variety of
programs, primarily to its retail customers, designed to promote sales of its
products. Such programs require periodic payments and allowances based on
estimated results of specific programs and are recorded as a reduction to net
sales. The Company accrues, at the time of sale, the estimated total payments
and allowances associated with each transaction. Additionally, the Company
offers programs directly to consumers to promote the sale of its products.
Promotions which reduce the ultimate consumer sale prices are recorded as a
reduction of net sales at the time the promotional offer is made, generally
using estimated redemption and participation levels. Taxes we collect on behalf
of governmental authorities, which are generally included in the price to the
customer, are also recorded as a reduction of net sales. The Company continually
assesses the adequacy of accruals for customer and consumer promotional program
costs not yet paid. To the extent total program payments differ from estimates,
adjustments may be necessary. Historically, these adjustments have not been
material.
Advertising and Promotion
Costs The Company advertises and
promotes its products through national and regional media and expenses such
activities in the year incurred.
Reclassifications
- Certain reclassifications have
been made to the prior year financial statements to conform to the current
presentation.
Recently Issued Accounting
Pronouncements Other than as described below, no new accounting
pronouncement issued or effective during the fiscal year has had or is expected
to have a material impact on the consolidated financial statements.
Adoption of FIN 48, Accounting
for Uncertainty in Income Taxes An Interpretation of FASB Statement No. 109
On October 1, 2007, the Company
adopted Financial Accounting Standards Board (FASB) Interpretation No. 48,
Accounting for Uncertainty in Income Taxes an Interpretation of FASB
Statement No. 109 (FIN 48). FIN 48 addresses the accounting and disclosure of
uncertain tax positions. FIN 48 prescribes a recognition threshold and
measurement attributes for the financial
ENERGIZER HOLDINGS,
INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in
millions, except per share and percentage data)
statement recognition and measurement
of a tax position taken or expected to be taken in a tax return. The difference
between the tax benefit recognized in the financial statements for a position in
accordance with FIN 48 and the tax benefit claimed in the tax return is referred
to as an unrecognized tax benefit.
At October 1, 2007, the adoption
date, the Company had $34.5 of unrecognized tax benefits in the financial
statements exclusive of the Playtex acquisition. Of this amount, the change to
the October 1, 2007 balance sheet resulting from the cumulative effect of the
change in accounting principle was immaterial. Included in the unrecognized tax
benefits at September 30, 2008 is $43.5 of uncertain tax positions that would
affect the Companys effective tax rate, if recognized. The Company does not
expect any significant increases or decreases to the unrecognized tax benefits
within the next twelve months of this reporting date. Unrecognized tax benefits
are classified as other liabilities (non-current) to the extent that payment is
not anticipated within one year.
Prior to the adoption of FIN 48, only
interest expense on underpayments of income taxes was included in the income tax
provision. Penalties were classified as an operating expense in arriving at
pretax income. Upon adoption of FIN 48, the Company elected a new accounting
policy, as permitted by FIN 48, to also classify accrued penalties related to
unrecognized tax benefits in the income tax provision. The Company has accrued
approximately $5.8 of interest and $0.7 in penalties in the income tax
provision. Interest was computed on the difference between the tax position
recognized in accordance with FIN 48 and the amount previously taken or expected
to be taken in the Companys tax returns.
Statement of Financial Accounting
Standards (SFAS) No. 141(R), Business Combinations
In December 2007, the FASB issued a
revised standard, SFAS No. 141, Business Combinations (SFAS No. 141(R)), which
improves the relevance, representational faithfulness and comparability of the
financial information that is disclosed on business combinations and its
effects. In addition, it revises the method of accounting for a number of
aspects of business combinations including acquisition costs, contingent
liabilities, contingent purchase price and post-acquisition exit activities of
the acquired business. SFAS No. 141(R) is effective for business combinations
entered into in fiscal years beginning on or after December 15, 2008, which
would be as of October 1, 2009 for Energizer. Early adoption is prohibited. The
Company believes that the adoption of SFAS No. 141(R) will not have a material
effect on its financial position, results of operations or cash flows.
SFAS No. 160, Non-Controlling
Interests in Consolidated Financial Statements - An Amendment to ARB No. 51
In December 2007, the FASB issued
SFAS 160, Non-Controlling Interests in Consolidated Financial Statements an
Amendment to ARB No. 51 (SFAS 160), which improves the relevance, comparability
and transparency of the financial information that is disclosed for minority
interests. SFAS No. 160 is effective for fiscal years beginning on or after
December 15, 2008, which would be October 1, 2009 for Energizer. Early adoption
is prohibited. The Company believes that the adoption of SFAS No. 160 will not
have a material effect on its financial position, results of operations or cash
flows.
ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in
millions, except per share and percentage data)
SFAS Standard No. 161, Disclosures
About Derivative Instruments And Hedging Activities - An Amendment of FASB
Statement No. 133
In March 2008, the FASB issued SFAS
No. 161, Disclosures about Derivative Instruments and Hedging Activities (SFAS
No. 161). SFAS No. 161 is intended to help investors better understand how
derivative instruments and hedging activities affect an entitys financial
position, financial performance and cash flows through enhanced disclosure
requirements. SFAS No. 161 is effective for financial statements issued for
fiscal years and interim periods beginning after November 15,
2008.
(3) Playtex acquisition
On
October 1, 2007, the Company acquired all of the issued and outstanding shares
of common stock of Playtex at $18.30 per share in cash and simultaneously repaid
all of Playtexs outstanding debt as of that date (the Acquisition) for
consideration totaling $1,875.7. The Company acquired all assets and assumed all
liabilities of Playtex. There are no contingent payments, options or commitments
associated with the Acquisition. In a separate transaction, for consideration
totaling $19.5, the Company acquired certain intangible assets related to the
Wet Ones brand in the United Kingdom. Playtex owns the Wet Ones trademark in the
U.S. and Canada. This is included with the Acquisition in the presentation of
the financial impact of the Acquisition presented below. A summary of
consideration paid is as follows:
Short-term borrowings |
|
$ |
175.0 |
|
Long-term
borrowings |
|
|
880.2 |
|
Borrowing to repay outstanding Playtex debt |
|
|
590.9 |
|
Total consideration from borrowings
|
|
|
1,646.1 |
|
|
Cash used - gross |
|
|
261.0 |
|
Less:
Amount paid for deferred financing fees |
|
|
(7.5
|
)
|
Less: Amount paid on deposit to collateralize open letters of
credit |
|
|
|
|
issued under the terminated Playtex credit
agreement |
|
|
(4.4 |
) |
Total consideration from available
cash |
|
|
249.1 |
|
Total consideration |
|
$ |
1,895.2 |
|
Playtex is a leading North American
manufacturer and marketer in the Skin, Feminine and Infant Care product
categories, with a diversified portfolio of well-recognized branded consumer
products including Banana Boat, Hawaiian
Tropic, Wet Ones, Playtex tampons,
Playtex infant feeding products, Playtex
household gloves, and Playtex Diaper Genie. Playtex operates six facilities in the U.S. The Acquisition will allow
the Company to expand its product portfolio and presence in the Personal Care
business, including achieving economies of scale in selling and distribution. In
addition, the Acquisition further diversifies the Companys product portfolio.
The fair values of assets and
liabilities acquired for purposes of allocating the purchase price were
determined in accordance with SFAS No. 141, Business Combinations. The Company
estimated a fair value adjustment for inventory based on the estimated selling
price of finished goods on hand at the closing date less the sum of (a) costs of
disposal and (b) a reasonable profit allowance for the selling effort of the
acquiring entity. The fair value adjustment for Playtexs property, plant and
equipment was established using a cost approach for the operating fixed assets
and comparable sales and property assessment data for the valuation of land. The
fair values of Playtexs identifiable intangible assets were estimated using
various valuation methods including discounted cash flows using both an income
and cost approach. Estimated deferred income tax impacts as a result of purchase
accounting adjustments are reflected using the best estimate of the applicable
statutory income tax rates.
ENERGIZER HOLDINGS,
INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in
millions, except per share and percentage data)
The Company developed an integration
plan, pursuant to which the Company will incur costs related primarily to
involuntary severance costs, exit plans and contractual obligations with no
future economic benefit. The estimates of liabilities assumed were determined in
accordance with Emerging Issues Task Force 95-3 Recognition of Liabilities in
Connection with a Purchase Business Combination (EITF 95-3). The Company has
combined certain SG&A functions, and is pursuing purchasing, manufacturing
and logistics savings through increased scale and coordination. The allocation
of the purchase price reflects estimated additional liabilities associated with
employee termination and relocation totaling $35.3, of which $31.0 has been
spent as of September 30, 2008 with the remaining $4.3 classified as a current
liability at September 30, 2008. Additional estimated liabilities assumed
include contract termination and other exit costs totaling $18.5, of which $8.0
has been spent as of September 30, 2008 with the remaining $8.5 and $2.0
classified as current liabilities and other liabilities, respectively, at
September 30, 2008.
The allocation of the purchase price
is as follows:
Cash |
|
$ |
13.1 |
|
Trade
receivables, net |
|
|
102.9 |
|
Inventories |
|
|
124.0 |
|
Other
current assets |
|
|
37.0
|
|
Goodwill |
|
|
826.2 |
|
Other
intangible assets |
|
|
1,367.9 |
|
Other assets |
|
|
0.3 |
|
Property,
plant and equipment, net |
|
|
152.1 |
|
Accounts payable |
|
|
(33.9 |
) |
Other
current liabilities |
|
|
(169.0 |
)
|
Other liabilities |
|
|
(525.4 |
) |
Net assets
acquired |
|
$ |
1,895.2 |
|
Goodwill is not deductible for tax
purposes. The purchased identifiable intangible assets of $1,367.9 as of the
October 1, 2007 acquisition date, is included in the table below. Long-term
deferred tax liabilities related to identifiable intangible assets are
approximately $484 as of the October 1, 2007 acquisition date, and are included
in other liabilities in the table above.
|
|
|
|
Amortization |
|
|
Total |
|
Period |
Trademarks |
|
$ |
1,313.9 |
|
indefinite-lived |
Customer
Relationships |
|
|
43.9
|
|
10
years |
Patents |
|
|
5.1 |
|
7 years |
Non-Compete |
|
|
5.0 |
|
18
months |
Total other intangible assets
|
|
$ |
1,367.9 |
|
|
The Companys results of operations
include Playtex as of the date of acquisition, or beginning October 1, 2007. In
accordance with GAAP, Playtex inventory acquired in the Acquisition was valued
at its estimated fair value on the date of acquisition. As a result, the fair
value of inventory was $27.5 greater than the historical cost basis of such
inventory prior to the Acquisition. This required accounting treatment reduced
gross profit in the twelve months ended September 30, 2008 by $27.5 compared to
the historical Playtex cost basis.
Playtex acquired Tiki Hut Holding
Company (Hawaiian Tropic), owner of the Hawaiian Tropic brand on April
18, 2007. The pro forma results below, reflect results for Hawaiian Tropic only
from the acquisition date of April 18, 2007. They include incremental interest
and financing costs related to the
ENERGIZER HOLDINGS,
INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in
millions, except per share and percentage data)
Acquisition and purchase accounting
adjustments including the impact of increased depreciation and amortization
expense. The unaudited pro forma earnings statement is based on, and should be
read in conjunction with the Company's historical consolidated financial
statements and related notes, as well as Playtex historical consolidated
financial statements and related notes included in the Form 8-K filing of
October 1, 2007, as amended on December 17, 2007.
The impacts of any revenue or cost
synergies that may result from the Acquisition are not included in the pro forma
results. The Company has generated cost synergies by combining certain SG&A
functions, and continues pursuing purchasing, manufacturing and logistics
savings through increased scale and coordination. Additional costs may be
incurred that will impact the Companys Consolidated Statements of Earnings. The magnitude and timing of such
synergies and costs are still not fully known. Benefits from cost synergies
began in fiscal year 2008, with total savings building throughout fiscal 2009
and 2010.
The following table represents the
Companys Unaudited Pro Forma Condensed Combined Statement of Earnings as if the
Acquisition occurred at the beginning of fiscal 2007.
Unaudited Pro Forma |
|
|
|
|
Twelve Months Ended |
|
|
September 30, |
|
Net
Sales |
2007 |
|
Household
Products |
$ |
2,376.3 |
|
|
Personal
Care |
|
1,694.1 |
|
|
Total net sales |
$
|
4,070.4 |
|
|
|
|
Profitability |
|
|
|
|
Household Products |
$ |
472.3 |
|
|
Personal Care |
|
271.2 |
|
|
Total segment profitability |
$ |
743.5 |
|
|
General corporate and other expenses |
|
(138.3 |
) |
|
Acquisition inventory valuation |
|
(29.4 |
) |
|
Amortization |
|
(12.5 |
) |
|
Interest
and other financial items |
|
(192.2 |
) |
|
Earnings before income taxes |
$ |
371.1 |
|
|
Income tax provision |
|
88.1 |
|
|
Net earnings |
$
|
283.0 |
|
|
|
|
Basic EPS |
$ |
4.99 |
|
|
Diluted
EPS |
$ |
4.85
|
|
|
|
|
Weighted-Average Shares - Basic |
|
56.7 |
|
|
Weighted-Average Shares - Diluted |
|
58.3 |
|
|
(4) Goodwill and Intangible Assets and Amortization
Goodwill and intangible assets deemed to have an
indefinite life are not amortized, but reviewed annually for impairment of
value. The Company monitors changing business conditions, which may indicate
that the remaining useful life of goodwill and other intangible assets may
warrant revision or carrying amounts may require adjustment. As part of its
business planning cycle, the Company performed its annual impairment test in the
fourth quarter of fiscal 2008, 2007 and 2006. Impairment
ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in
millions, except per share and percentage data)
testing was performed for each of the
Companys reporting units, Household Products, Wet Shave and Playtex. No
impairments were identified and no adjustments were deemed necessary.
The following table represents the
carrying amount of goodwill by segment at September 30, 2008:
|
|
Household |
|
Personal |
|
|
|
|
Products |
|
Care |
|
Total |
Balance at October 1, 2007 |
|
$ |
40.1 |
|
|
$ |
340.0 |
|
$ |
380.1 |
Acquisition
of Playtex |
|
|
-
|
|
|
|
826.2 |
|
|
826.2 |
Cumulative translation adjustment |
|
|
(1.3 |
) |
|
|
1.4 |
|
|
0.1 |
Balance at
September 30, 2008 |
|
$ |
38.8 |
|
|
$ |
1,167.6 |
|
$ |
1,206.4
|
The Company had indefinite-lived
trademarks and tradenames of $1,591.0 at September 30, 2008 and $277.9 at
September 30, 2007. Changes in indefinite-lived trademarks and tradenames are
due primarily to the valuation of assets acquired in the Playtex acquisition and
changes in foreign currency exchange rates.
Total amortizable intangible assets
at September 30, 2008 are as follows:
|
|
Gross |
|
Accumulated |
|
|
|
|
Carrying Amount |
|
Amortization |
|
Net |
Tradenames |
|
$ |
11.7 |
|
$ |
(6.7 |
) |
|
$ |
5.0 |
Technology
and patents |
|
|
41.7
|
|
|
(19.7 |
) |
|
|
22.0
|
Customer-related |
|
|
54.7 |
|
|
(11.1 |
) |
|
|
43.6 |
Non-compete
agreements |
|
|
5.0 |
|
|
(3.4 |
) |
|
|
1.6 |
Total amortizable intangible assets |
|
$ |
113.1 |
|
$ |
(40.9 |
) |
|
$ |
72.2
|
The increase in the gross amortizable
intangible assets during fiscal 2008 is primarily due to the valuation of assets
acquired in the Playtex acquisition. Amortizable intangible assets, with a
weighted average remaining life of approximately seven years, are amortized on a
straight line basis over expected lives of 18 months to 15 years.
Amortization expense for intangible
assets totaled $14.6 for the current year. Estimated amortization expense for
amortized intangible assets for the year ended September 30, 2009 is
approximately $12.4, $10.4 for the years ended September 30, 2010 through 2012,
and $7.9 for the year ended September 30, 2013.
ENERGIZER HOLDINGS,
INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in
millions, except per share and percentage data)
(5) Income Taxes
The provisions for income taxes consisted of the following for the years
ended September 30:
|
|
2008 |
|
2007 |
|
2006 |
Currently payable: |
|
|
|
|
|
|
|
|
|
|
|
|
United States - Federal |
|
$ |
47.7 |
|
|
$ |
86.4
|
|
|
$ |
63.7
|
|
State |
|
|
5.0 |
|
|
|
5.0 |
|
|
|
3.6 |
|
Foreign |
|
|
64.2 |
|
|
|
50.0 |
|
|
|
51.7 |
|
Total current |
|
|
116.9 |
|
|
|
141.4 |
|
|
|
119.0 |
|
Deferred: |
|
|
|
|
|
|
|
|
|
|
|
|
United States - Federal |
|
|
29.0 |
|
|
|
(25.3 |
) |
|
|
(15.8 |
) |
State |
|
|
1.1 |
|
|
|
(0.9
|
) |
|
|
(0.6
|
) |
Foreign |
|
|
(3.1 |
) |
|
|
(2.4 |
) |
|
|
(6.9 |
) |
Total deferred |
|
|
27.0 |
|
|
|
(28.6 |
) |
|
|
(23.3 |
) |
Provision for income
taxes |
|
$ |
143.9 |
|
|
$ |
112.8 |
|
|
$ |
95.7 |
|
The source of pre-tax earnings was:
|
|
2008 |
|
2007 |
|
2006 |
United States |
|
$
|
197.9 |
|
$ |
183.1 |
|
$ |
160.2 |
Foreign |
|
|
275.3 |
|
|
251.1 |
|
|
196.4 |
Pre-tax earnings
|
|
$ |
473.2
|
|
$ |
434.2 |
|
$ |
356.6
|
A reconciliation of income taxes with
the amounts computed at the statutory federal rate follows:
|
|
2008 |
|
2007 |
|
2006 |
Computed tax at federal statutory rate |
|
$ |
165.6 |
|
|
35.0 |
% |
|
$ |
152.0 |
|
|
35.0 |
% |
|
$ |
124.8 |
|
|
35.0 |
% |
State
income taxes, net of federal tax benefit |
|
|
2.6 |
|
|
0.6 |
|
|
|
2.7
|
|
|
0.6
|
|
|
|
1.9
|
|
|
0.5
|
|
Foreign tax less than the federal rate |
|
|
(33.1 |
) |
|
(7.0 |
) |
|
|
(22.7 |
) |
|
(5.2 |
) |
|
|
(17.7 |
) |
|
(5.0 |
) |
Foreign benefits recognized related to prior years'
losses |
|
|
- |
|
|
- |
|
|
|
(4.3 |
) |
|
(1.0 |
) |
|
|
(5.7 |
) |
|
(1.6 |
) |
Adjustments to prior years' tax accruals |
|
|
1.1 |
|
|
0.2 |
|
|
|
(7.9 |
) |
|
(1.8 |
) |
|
|
(10.9 |
) |
|
(3.1 |
) |
Deferred tax benefit due to statutory rate change |
|
|
- |
|
|
- |
|
|
|
(9.7 |
) |
|
(2.2 |
) |
|
|
- |
|
|
- |
|
Other taxes on repatriation of foreign earnings |
|
|
1.5 |
|
|
0.3 |
|
|
|
11.3 |
|
|
2.6 |
|
|
|
4.5 |
|
|
1.3 |
|
Nontaxable share option |
|
|
5.7 |
|
|
1.2 |
|
|
|
(8.1 |
) |
|
(1.9 |
) |
|
|
(3.8 |
) |
|
(1.0 |
) |
Other, net |
|
|
0.5 |
|
|
0.1 |
|
|
|
(0.5 |
) |
|
(0.1 |
) |
|
|
2.6 |
|
|
0.7 |
|
Total |
|
$ |
143.9 |
|
|
30.4 |
% |
|
$ |
112.8 |
|
|
26.0 |
% |
|
$ |
95.7 |
|
|
26.8 |
%
|
In 2007 and 2006, $4.3 and $5.7,
respectively, of tax benefits related to prior years losses were recorded.
These benefits related to foreign countries where our subsidiary subsequently
began to generate earnings and could reasonably expect future profitability
sufficient to utilize tax loss carryforwards prior to expiration. Improved
profitability in Mexico in 2007 and 2006 account for the bulk of the benefits
recognized.
Adjustments were recorded in each of
the three years to revise previously recorded tax accruals to reflect refinement
of tax attribute estimates to amounts in filed returns, settlement of tax audits
and changes in estimates related to uncertain tax positions in a number of
jurisdictions. Such adjustments increased the income tax provision by $1.1 in
2008 and decreased the income tax provision by $7.9 and $10.9 in 2007 and 2006,
respectively. Also, legislation enacted in Germany reduced the tax rate
applicable to the Companys subsidiaries in Germany for fiscal 2008 and beyond.
Thus, an adjustment of $9.7 was made to reduce deferred tax liabilities in
fiscal 2007.
ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in
millions, except per share and percentage data)
The deferred tax assets and deferred
tax liabilities recorded on the balance sheet as of September 30 for the years
indicated are as follows and include current and noncurrent amounts:
|
|
2008 |
|
2007 |
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
Depreciation and property differences
|
|
$ |
(108.1 |
) |
|
$ |
(71.0 |
) |
Intangible assets |
|
|
(528.4 |
) |
|
|
(39.4 |
) |
Pension plans |
|
|
(11.3 |
) |
|
|
(33.8 |
) |
Other tax liabilities |
|
|
(16.3 |
) |
|
|
(9.8 |
) |
Gross deferred tax liabilities |
|
|
(664.1 |
) |
|
|
(154.0 |
) |
|
|
|
|
|
|
|
|
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
Accrued liabilities |
|
|
119.0 |
|
|
|
73.3
|
|
Deferred and stock-related compensation |
|
|
89.2 |
|
|
|
92.3 |
|
Tax loss carryforwards and tax credits
|
|
|
15.2 |
|
|
|
21.2
|
|
Intangible assets |
|
|
32.4 |
|
|
|
35.3 |
|
Postretirement benefits other than
pensions |
|
|
5.4 |
|
|
|
10.6
|
|
Inventory differences |
|
|
23.7 |
|
|
|
19.4 |
|
Other tax assets |
|
|
18.1 |
|
|
|
19.0 |
|
Gross deferred tax assets |
|
|
303.0 |
|
|
|
271.1 |
|
Valuation allowance |
|
|
(9.1 |
) |
|
|
(4.9 |
) |
Net deferred tax
(liabilities)/assets |
|
$ |
(370.2 |
) |
|
$ |
112.2 |
|
There were no material tax loss
carryforwards that expired in 2008. Future expirations of tax loss carryforwards
and tax credits, if not utilized, are as follows: 2009, $0; 2010, $0.2; 2011,
$0.2; 2012, $1.3; thereafter or no expiration, $13.5. The valuation allowance is
attributed to tax loss carryforwards and tax credits outside the U.S. The
valuation allowance increased $4.2 in 2008 due primarily to the Playtex
acquisition.
At September 30, 2008, approximately
$650 of foreign subsidiary retained earnings was considered indefinitely
invested in those businesses. U.S. income taxes have not been provided for such
earnings. It is not practicable to determine the amount of unrecognized deferred
tax liabilities associated with such earnings.
The Company adopted the provisions of
FIN 48 on October 1, 2007. At the date of adoption of FIN 48, the Company had
$34.5 of unrecognized tax benefits in the financial statements, excluding the
unrecognized tax benefit from the Playtex acquisition. Of this amount, the
impact of the cumulative change in accounting principle at adoption of FIN 48
was immaterial.
ENERGIZER HOLDINGS,
INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in
millions, except per share and percentage data)
Unrecognized tax benefits activity
for the year ended September 30, 2008 is summarized below:
|
2008 |
Unrecognized tax benefits, beginning of year |
$ |
34.5 |
|
Additions
based on current year tax positions and acquisitions |
|
14.3 |
|
Reductions for prior year tax
positions |
|
(1.8 |
) |
Unrecognized tax benefits, end of
year |
$ |
47.0 |
|
Included in the unrecognized tax
benefits noted above are $43.5 of uncertain tax positions that would affect the
Companys effective tax rate, if recognized. The Company does not expect any
significant increases or decreases to their unrecognized tax benefits within
twelve months of this reporting date. In the Consolidated Balance Sheets,
unrecognized tax benefits are classified as other liabilities (non-current) to
the extent that payment is not anticipated within one year.
Prior to the adoption of FIN 48, only
interest expense on underpayments of income taxes was included in the income tax
provision. Penalties were classified as an operating expense in arriving at
pre-tax income. Upon adoption of FIN 48, the Company elected a new accounting
policy, as permitted by FIN 48, to also classify accrued penalties related to
unrecognized tax benefits in the income tax provision. The Company has accrued
approximately $5.8 of interest and $0.7 of penalties in the income tax
provision. Interest was computed on the difference between the tax position
recognized in accordance with FIN 48 and the amount previously taken or expected
to be taken in the Companys tax returns.
The Company files income tax returns
in the U.S. federal jurisdiction, various city, state, and more than 40 foreign
jurisdictions where the Company has operations. U.S. federal income tax returns
for tax years ended September 30, 2003 and after remain subject to examination
by the Internal Revenue Service. With few exceptions, the Company is no longer
subject to state and local income tax examinations for years before September
30, 2002. The status of international income tax examinations varies by
jurisdiction. The Company does not anticipate any material adjustments to its
financial statements resulting from tax examinations currently in progress.
(6) Restructuring and Related Charges
The Company continually reviews its Household Products and Personal Care
business models to identify potential improvements and cost savings. A project
commenced in 2006 to improve effectiveness and reduce costs of European
packaging, warehouse and distribution activities, including the closing of the
Company's battery packaging facility in Caudebec, France, as well as
consolidation of warehouse and distribution activities. The Company also
commenced a project to integrate Household Products and Personal Care commercial
management, sales and administrative functions in certain European countries. In
2008, 2007 and 2006, total pre-tax charges related to these projects were $3.2,
$18.2 and $37.4, respectively. Virtually all of the costs in 2008 and 2007 were
reflected in SG&A expense. Total pre-tax charges related to the projects
were $37.4 in fiscal 2006, and include exit costs of $28.2 which represented
employee severance, contract terminations and other exit costs, as well as $9.2
for other costs related to the project. In 2006, $8.0 of these costs were
reflected in cost of products sold and $29.4 in SG&A expense. The remaining
exit cost liability for these projects at September 30, 2008 is immaterial.
ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in
millions, except per share and percentage data)
(7) Earnings Per Share
For each
period presented below, basic earnings per share is based on the average number
of 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.
The following table sets forth the
computation of basic and diluted earnings per share (shares in
millions):
|
|
FOR THE YEARS ENDED SEPTEMBER 30, |
|
|
2008 |
|
2007 |
|
2006 |
Numerator: |
|
|
|
|
|
|
|
|
|
Net earnings for basic and dilutive
earnings per share |
|
$ |
329.3
|
|
$ |
321.4 |
|
$ |
260.9 |
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
Weighted-average shares -
basic |
|
|
57.6 |
|
|
56.7 |
|
|
61.2 |
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
Stock options |
|
|
0.7 |
|
|
1.0 |
|
|
1.4 |
Restricted stock
equivalents |
|
|
0.6 |
|
|
0.6 |
|
|
0.5 |
Total
dilutive securities |
|
|
1.3 |
|
|
1.6 |
|
|
1.9 |
|
|
|
|
|
|
|
|
|
|
Weighted-average shares - diluted |
|
|
58.9 |
|
|
58.3 |
|
|
63.1 |
|
|
|
|
|
|
|
|
|
|
Basic net earnings per share |
|
$ |
5.71
|
|
$ |
5.67 |
|
$ |
4.26 |
|
|
|
|
|
|
|
|
|
|
Diluted net earnings per share |
|
$ |
5.59 |
|
$ |
5.51 |
|
$ |
4.14 |
At September 30, 2008, approximately
0.4 million of the Companys outstanding restricted stock equivalents were not
included in the diluted net earnings per share calculation because to do so
would have been anti-dilutive. In the event the potentially dilutive securities
are anti-dilutive on net earnings per share (i.e., have the effect of increasing
EPS), the impact of the potentially dilutive securities is not included in the
computation. There were no anti-dilutive securities for the years ended
September 30, 2007 or 2006.
(8) Share-Based Payments
The
Company's 2000 Incentive Stock Plan (the Plan) was adopted by the Board of
Directors in March 2000 and approved by shareholders, with respect to future
awards, which may be granted under the Plan, at the 2001 Annual Meeting of
Shareholders. Under the Plan, awards of restricted stock, restricted stock
equivalents or options to purchase the Company's common stock (ENR stock) may be
granted to directors, officers and key employees. A maximum of 15.0 million
shares of ENR stock was approved to be issued under the Plan. At September 30,
2008, 2007 and 2006, respectively, there were 2.8 million, 3.3 million and 3.7
million shares available for future awards.
Options under the Plan have been
granted at the market price on the grant date and generally vest ratably over
four to seven years. These awards have a maximum term of 10 years. Restricted
stock and restricted stock equivalent awards may also be granted under the Plan.
Under the terms of the Plan, option shares and prices, and restricted stock and
stock equivalent awards, are adjusted in conjunction with stock splits and other
recapitalizations so that the holder is in the same economic position before and
after these equity transactions.
The Company permits deferrals of
bonus and salary and for directors, retainers and fees, under the terms of its
Deferred Compensation Plan. Under this plan, employees or directors deferring
amounts
ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in
millions, except per share and percentage data)
into the Energizer Common Stock Unit
Fund are credited with a number of stock equivalents based on the fair value of
ENR stock at the time of deferral. In addition, the participants are credited
with an additional number of stock equivalents, equal to 25% for employees and
33 1/3% for directors, of the amount deferred. This additional company match
vests immediately for directors and three years from the date of initial
crediting for employees. Amounts deferred into the Energizer Common Stock Unit
Fund, and vested company matching deferrals, may be transferred to other
investment options offered under the plan after specified restriction periods.
At the time of termination of employment, or for directors, at the time of
termination of service on the Board, or at such other time for distribution
which may be elected in advance by the participant, the number of equivalents
then vested and credited to the participant's account is determined and then an
amount in cash equal to the fair value of an equivalent number of shares of ENR
stock is paid to the participant. This plan is reflected in Other Liabilities on
the Consolidated Balance Sheet.
The Company uses the straight-line
method of recognizing compensation cost. Total compensation cost charged against
income for the Companys share-based compensation arrangements was $26.4, $25.3
and $16.0 for the years ended September 30, 2008, 2007 and 2006, respectively,
and was recorded in SG&A expense. The total income tax benefit recognized in
the Consolidated Statements of Earnings for share-based compensation
arrangements was $9.6, $9.2 and $5.9 for the years ended September 30, 2008,
2007 and 2006, respectively. Restricted stock issuance and shares issued for
stock option exercises under the Companys share-based compensation program are
generally issued from treasury shares.
Options
As of September 30, 2008, the aggregate intrinsic value
of stock options outstanding and stock options exercisable was $77.5 and $74.0,
respectively. The aggregate intrinsic value of stock options exercised for the
years ended September 30, 2008, 2007 and 2006 was $36.7, $107.8 and $34.0,
respectively. When valuing new grants, Energizer uses an implied volatility,
which reflects the expected volatility for a period equal to the expected life
of the option. No new option awards were granted in the years ended September
30, 2008, 2007 and 2006.
As of September 30, 2008, there was
no unrecognized compensation costs related to stock options granted. For
outstanding nonqualified stock options, the weighted average remaining
contractual life is 3.8 years.
The following table summarizes
nonqualified ENR stock option activity during the current year (shares in
millions):
|
|
|
|
|
Weighted-Average |
|
|
|
Shares |
|
|
Exercise Price |
|
Outstanding on October 1, 2007 |
|
2.24 |
|
|
$ |
27.74 |
|
Exercised |
|
(0.66 |
) |
|
|
19.45 |
|
Cancelled |
|
(0.01 |
) |
|
|
26.70 |
|
Outstanding on September 30,
2008 |
|
1.57 |
|
|
|
31.24 |
|
|
|
|
|
|
|
|
|
Exercisable on September 30, 2008 |
|
1.47 |
|
|
$ |
30.14 |
|
Restricted Stock Equivalents
(RSE)
In October 2005, the Board of
Directors approved two different grants of RSE. First, a grant to key employees,
included approximately 73,000 shares that vest ratably over four years. The
second
ENERGIZER HOLDINGS,
INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in
millions, except per share and percentage data)
grant for 80,000 shares was awarded
to a group of key senior executives and consists of two pieces: 1) 25% of the total restricted stock equivalents granted
vest on the third anniversary of the date of grant; 2) the remainder vests on
the date that the Company publicly releases its earnings for its 2008 fiscal
year, which was October 30, 2008, contingent upon the Companys compound annual
growth in earnings per share (CAGR) for the three year period ending on
September 30, 2008. If a CAGR of 10% is achieved, an additional 25% of the grant
vests. The remaining 50% vests in its entirety only if the Company achieves a
CAGR at or above 15%, with smaller percentages of that remaining 50% vesting if
the Company achieves a CAGR between 11% and 15%. The Company achieved a CAGR in
excess of the 15% target for the three year period ended September 30, 2008.
Thus, all performance shares for this particular portion of the October 2005
grant vested on October 30, 2008.
In October 2006, the Board of
Directors approved two grants of RSE. First, a grant to key employees included
112,350 shares that vest ratably over four years. The second grant for 303,000
shares was awarded to key senior executives with similar performance and vesting
requirements to the RSE award granted in 2005, as described above. The total
award expected to vest is amortized over the vesting period.
In October 2007, the Company granted
RSE awards to key employees which included approximately 219,800 shares that
vest ratably over four years and 11,000 that vest ratably over two years. At the
same time, the Company granted RSE awards to key senior executives totaling
approximately 267,000 shares which vest as follows: 1) 25% of the total
restricted stock equivalents granted vest on the third anniversary of the date
of grant; 2) the remainder vests on the date that the Company publicly releases
its earnings for its 2010 fiscal year contingent upon the Companys CAGR for the
three year period ending on September 30, 2010. If a CAGR of 15% is achieved,
the remaining 75% of the grant vests, with smaller percentages of the remaining
75% vesting if the Company achieves a CAGR between 8% and 15%. The total award
expected to vest is amortized over the vesting period.
The Company records estimated expense
for the performance based grants based on the cumulative program-to-date CAGR
for each respective program unless evidence exists that a different ultimate
CAGR is likely to occur.
ENERGIZER HOLDINGS,
INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in
millions, except per share and percentage data)
The following table summarizes RSE
activity during the current year (shares in millions):
|
|
|
|
|
Weighted- |
|
|
|
|
|
Average Grant |
|
|
Shares |
|
Date Fair Value |
Nonvested RSE at October 1, 2007 |
|
0.79 |
|
|
$ |
57.34 |
Granted |
|
0.53 |
|
|
|
116.08 |
Vested |
|
(0.10 |
) |
|
|
59.19 |
Cancelled |
|
(0.02 |
) |
|
|
96.07 |
Nonvested RSE at September 30, 2008 |
|
1.20 |
|
|
$ |
82.24 |
As of September 30, 2008, there was
an estimated $44.3 of total unrecognized compensation costs related to RSE
granted under the Plan, which will be recognized over a weighted-average period
of approximately 1.4 years. The actual amount recognized may vary depending on
the actual CAGR achieved. The weighted-average fair value for RSE granted in
2008, 2007 and 2006 was $116.08, $73.68 and $52.81, respectively. The fair value
of RSE vested in 2008, 2007 and 2006 was $10.4, $9.2 and $6.9,
respectively.
In October 2008, the Company granted
RSE awards to key employees which included approximately 265,200 shares that
vest ratably over four years. At the same time, the Company granted RSE awards
to key senior executives totaling approximately 374,600 which vest as follows:
1) 25% of the total restricted stock equivalents granted vest on the third
anniversary of the date of grant; 2) the remainder vests on the date that the
Company publicly releases its earnings for its 2011 fiscal year contingent upon
the Companys CAGR for the three year period ending on September 30, 2011. If a
CAGR of 15% is achieved, the remaining 75% of the grant vests, with smaller
percentages of the remaining 75% vesting if the Company achieves a CAGR between
8% and 15%. The total award expected to vest will be amortized over the vesting
period.
Other Share-Based
Compensation
During the quarter ended
December 31, 2005, the Board of Directors approved an award for officers of the
Company. This award totaled 196,800 share equivalents and has the same features
as the restricted stock award granted to senior executives in October 2005 as
discussed above, but will be settled in cash and mandatorily deferred until the
individuals retirement or other termination of employment. During 2007, 20,000
shares were forfeited. All remaining 176,800 share equivalents fully vested as
of October 30, 2008 and the Company recorded pre-tax income of $4.4 in the first
quarter of fiscal 2009 to reflect the mark to market for this grant from October
1, 2008 through the October 30, 2008 vesting date.
(9) Pension Plans and Other Postretirement Benefits
The Company has several defined benefit pension plans
covering substantially all of its employees in the U.S. and certain employees in
other countries. The plans provide retirement benefits based on years of service
and earnings.
The Company also sponsors or
participates in a number of other non-U.S. pension arrangements, including
various retirement and termination benefit plans, some of which are required by
local law or coordinated with government-sponsored plans, which are not
significant in the aggregate and therefore are not included in the information
presented in the following tables.
ENERGIZER HOLDINGS,
INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in
millions, except per share and percentage data)
The Company currently provides other
postretirement benefits, consisting of health care and life insurance benefits
for certain groups of retired employees. Certain retirees are eligible for a
fixed subsidy, provided by the Company, toward their total cost of health care
benefits. Retiree contributions for health care benefits are adjusted
periodically to cover the entire increase in total plan costs. Cost trend rates
no longer materially impact the Companys future cost of the plan.
The Company adopted SFAS 158 on
September 30, 2007, on the required prospective basis. We use a September 30
measurement date for our defined benefit pension and postretirement plans.
The following tables present the
benefit obligation, plan assets and funded status of the plans:
|
September 30, |
|
Pension |
|
Postretirement |
|
2008 |
2007 |
|
2008 |
2007 |
Change in Projected Benefit Obligation |
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit
obligation at beginning of year |
$ |
815.4 |
|
$ |
790.9 |
|
|
$ |
35.5 |
|
$ |
51.6
|
|
Impact of Playtex acquisition |
|
69.6 |
|
|
- |
|
|
|
8.1 |
|
|
- |
|
Service cost |
|
33.9 |
|
|
29.9
|
|
|
|
0.4 |
|
|
0.4
|
|
Interest cost |
|
50.6 |
|
|
41.3 |
|
|
|
2.5 |
|
|
2.9 |
|
Plan participants' contributions |
|
1.1 |
|
|
1.2
|
|
|
|
- |
|
|
-
|
|
Actuarial gain |
|
(107.7 |
) |
|
(28.8 |
) |
|
|
(2.9 |
) |
|
(17.6 |
) |
Benefits paid |
|
(48.5 |
) |
|
(42.3 |
) |
|
|
(2.7 |
) |
|
(2.5
|
) |
Plan amendments |
|
(2.6 |
) |
|
- |
|
|
|
(2.9 |
) |
|
- |
|
Plan settlements |
|
(6.8 |
) |
|
-
|
|
|
|
- |
|
|
-
|
|
Foreign currency exchange rate changes |
|
(5.0 |
) |
|
23.2 |
|
|
|
(0.3 |
) |
|
0.7 |
|
Projected Benefit Obligation at end
of year |
$ |
800.0 |
|
$ |
815.4 |
|
|
$ |
37.7 |
|
$ |
35.5 |
|
Change in Plan Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of
year |
$ |
795.2 |
|
$
|
704.8 |
|
|
$ |
2.0 |
|
$ |
2.4
|
|
Impact of Playtex acquisition |
|
61.4 |
|
|
- |
|
|
|
- |
|
|
- |
|
Actual return on plan assets |
|
(118.7 |
) |
|
100.0 |
|
|
|
0.1 |
|
|
0.1
|
|
Company contributions |
|
18.7 |
|
|
18.2 |
|
|
|
2.3 |
|
|
2.0 |
|
Plan participants' contributions |
|
1.1 |
|
|
1.2
|
|
|
|
4.0 |
|
|
4.1
|
|
Benefits paid |
|
(48.5 |
) |
|
(42.3 |
) |
|
|
(6.7 |
) |
|
(6.6 |
) |
Plan settlements |
|
(6.8 |
) |
|
-
|
|
|
|
- |
|
|
-
|
|
Foreign currency exchange rate changes |
|
(6.4 |
) |
|
13.3 |
|
|
|
- |
|
|
- |
|
Fair
value of plan assets at end of year |
$ |
696.0 |
|
$ |
795.2 |
|
|
$ |
1.7 |
|
$ |
2.0 |
|
Funded status at end of
year |
$ |
(104.0 |
) |
$ |
(20.2 |
) |
|
$ |
(36.0 |
) |
$ |
(33.5 |
) |
ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in
millions, except per share and percentage data)
The following table presents the
amounts recognized in the Consolidated Balance Sheets and Consolidated
Statements of Shareholders Equity.
|
Pension |
|
Postretirement |
|
2008 |
2007 |
|
2008 |
2007 |
Amounts
Recognized in the Consolidated Balance Sheets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent assets |
$ |
42.5 |
|
$
|
125.2 |
|
|
$ |
- |
|
$
|
- |
|
Current liabilities |
|
(6.5 |
) |
|
(6.2 |
) |
|
|
(1.9 |
) |
|
(0.9 |
) |
Noncurrent liabilities |
|
(140.0 |
) |
|
(139.2 |
) |
|
|
(34.1 |
) |
|
(32.6 |
) |
Net amount
recognized |
$ |
(104.0 |
) |
$ |
(20.2 |
) |
|
$ |
(36.0 |
) |
$
|
(33.5 |
) |
Amounts Recognized in
Accumulated Other Comprehensive Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss/(gain) |
|
106.6 |
|
|
38.2 |
|
|
|
(27.0 |
) |
|
(26.4 |
) |
Prior
service cost (credit) |
|
(9.7 |
) |
|
(7.4 |
) |
|
|
(26.7 |
) |
|
(25.9 |
) |
Transition
obligation |
|
1.4 |
|
|
1.8 |
|
|
|
- |
|
|
- |
|
Net amount recognized, pre-tax |
$ |
98.3 |
|
$ |
32.6 |
|
|
$ |
(53.7 |
) |
$ |
(52.3 |
) |
Changes recognized in other
comprehensive income for the year ended September 30, 2008 are as follows:
Changes
in plan assets and benefit obligations |
|
Pension |
|
Postretirement |
recognized in other comprehensive income |
|
|
|
|
|
|
|
|
New prior service cost |
|
$ |
(2.6 |
) |
|
|
$ (2.9 |
) |
Net
loss/(gain) arising during the year |
|
|
74.3 |
|
|
|
(2.8 |
) |
Effect of exchange rates on amounts included in AOCI |
|
|
(2.3 |
) |
|
|
0.1 |
|
Amounts
recognized as a component of net periodic benefit cost |
|
|
|
|
|
|
|
|
Amortization, settlement or curtailment recognition of net
transition |
|
|
|
|
|
|
|
|
asset (obligation) |
|
|
(0.5 |
) |
|
|
- |
|
Amortization or curtailment recognition of prior service credit
(cost) |
|
|
0.6 |
|
|
|
2.1 |
|
Amortization or settlement recognition of net gain/(loss) |
|
|
(3.8 |
) |
|
|
2.1 |
|
Total
recognized in other comprehensive loss/(income) |
|
$ |
65.7 |
|
|
|
$
(1.4 |
) |
On September 30, 2007, the Company
adopted SFAS No. 158, Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans an amendment of FASB Statements No. 87, 88, 106 and
132(R). The table below reflects the impact of adopting the provisions of SFAS
No. 158 on the components of the Consolidated Balance Sheet as of September 30,
2007:
ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in
millions, except per share and percentage data)
|
|
Before |
|
|
|
|
|
After |
|
|
Application of |
|
SFAS 158 |
|
Application of |
|
|
SFAS 158 |
|
Adjustments |
|
SFAS 158 |
Other Assets |
|
$ |
194.7 |
|
$ |
6.5 |
|
|
$ |
201.2 |
TOTAL ASSETS |
|
|
3,546.5 |
|
|
6.5 |
|
|
|
3,553.0 |
Other Current Liabilities |
|
|
608.9 |
|
|
5.4 |
|
|
|
614.3 |
Other
Liabilities * |
|
|
423.9 |
|
|
(19.7 |
) |
|
|
404.2 |
TOTAL LIABILITIES |
|
|
2,913.4 |
|
|
(14.3 |
) |
|
|
2,899.1 |
Accumulated
Other Comprehensive Income |
|
|
26.0 |
|
|
20.8 |
|
|
|
46.8 |
TOTAL SHAREHOLDERS' EQUITY |
|
|
633.1 |
|
|
20.8 |
|
|
|
653.9 |
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY |
|
$ |
3,546.5 |
|
$ |
6.5 |
|
|
$ |
3,553.0 |
*Includes Deferred Income Tax
liability adjustment of $15.7.
The Company expects to contribute
$16.5 to its pension plans in 2009. The Companys expected future benefit
payments are as follows:
|
September 30, |
|
Pension |
Postretirement |
2009 |
$ |
45.9 |
$ |
3.6
|
2010 |
|
46.8 |
|
3.6
|
2011 |
|
50.1 |
|
3.4
|
2012 |
|
54.3 |
|
3.3
|
2013 |
|
59.4 |
|
3.2
|
2014 to 2018 |
|
368.5 |
|
14.0 |
The accumulated benefit obligation
for defined benefit pension plans was $716.8 and $727.2 at September 30, 2008
and 2007, respectively. The information for pension plans with an accumulated
benefit obligation in excess of plan assets is as follows:
|
September 30, |
|
2008 |
2007 |
Projected benefit obligation |
$ |
189.2 |
$ |
200.8
|
Accumulated benefit obligation |
|
162.9 |
|
169.7
|
Fair
value of plan assets |
|
45.8
|
|
53.5 |
Pension plan assets in the U.S. plan
represent 79% of assets in all of the Companys defined benefit pension plans.
Investment policy for the U.S. plan includes a mandate to diversify assets and
invest in a variety of asset classes to achieve that goal. The U.S. plan's
assets are currently invested in several funds representing most standard equity
and debt security classes. The broad target allocations are: (a) equities,
including U.S. and foreign: 54%, (b) debt securities, including U.S. bonds: 41%
and (c) other: 5%. The U.S. plan held no shares of ENR stock at September 30,
2008. Investment objectives are similar for non-U.S. pension arrangements,
subject to local regulations.
ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in
millions, except per share and percentage data)
The following table presents pension
and postretirement expense:
|
September 30, |
|
Pension |
|
Postretirement |
|
2008 |
2007 |
2006 |
|
2008 |
2007 |
2006 |
Service cost |
$ |
33.9 |
|
$ |
29.9 |
|
$ |
26.3 |
|
|
$ |
0.4 |
|
$ |
0.4 |
|
$ |
0.3 |
|
Interest cost |
|
50.6 |
|
|
41.3 |
|
|
38.4 |
|
|
|
2.5 |
|
|
2.8 |
|
|
3.3 |
|
Expected return on plan assets |
|
(63.3 |
) |
|
(53.2 |
) |
|
(49.8 |
) |
|
|
(0.1 |
) |
|
(0.1 |
) |
|
(0.1 |
) |
Amortization of unrecognized prior service
cost |
|
(0.6 |
) |
|
(1.1 |
) |
|
(0.2 |
) |
|
|
(2.1 |
) |
|
(2.2 |
) |
|
(2.2 |
) |
Amortization of unrecognized transition
asset |
|
0.5 |
|
|
0.4 |
|
|
0.7 |
|
|
|
- |
|
|
- |
|
|
- |
|
Recognized net actuarial loss/(gain) |
|
3.8 |
|
|
6.9 |
|
|
6.2 |
|
|
|
(2.1 |
) |
|
(0.3 |
) |
|
0.1 |
|
Net
periodic benefit cost |
$ |
24.9 |
|
$ |
24.2 |
|
$ |
21.6 |
|
|
$ |
(1.4 |
) |
$ |
0.6 |
|
$ |
1.4 |
|
Amounts expected to be amortized from
accumulated other comprehensive income into net period benefit cost during the
year ending September 30, 2009, are as follows:
|
Pension |
|
Postretirement |
Net actuarial (loss)/gain |
(2.8 |
)
|
|
2.1 |
Prior
service credit |
1.5 |
|
|
2.3 |
Initial net obligation |
(0.4 |
) |
|
- |
The following table presents
assumptions, which reflect weighted-averages for the component plans, used in
determining the above information:
|
September 30, |
|
Pension |
|
Postretirement |
|
2008 |
2007 |
|
2008 |
2007 |
Plan obligations: |
|
|
|
|
|
Discount rate |
7.0% |
5.8% |
|
7.5% |
6.0%
|
Compensation increase rate |
4.2% |
3.9% |
|
3.9% |
3.5% |
Net
periodic benefit cost: |
|
|
|
|
|
Discount rate |
5.9% |
5.3% |
|
6.0% |
5.7% |
Expected long-term rate of return on plan
assets |
8.0% |
8.0% |
|
3.7% |
5.5% |
Compensation increase rate |
4.0% |
3.8% |
|
3.5% |
3.6%
|
The expected return on plan assets
was determined based on historical and expected future returns of the various
asset classes, using the target allocations described below. Specifically, the
expected return on equities (U.S. and foreign combined) is 9.5%, and the
expected return on debt securities (including higher-quality and lower-quality
bonds) is 5.5%.
(10) Defined Contribution Plan
The
Company sponsors a defined contribution plan, which extends participation
eligibility to substantially all U.S. employees. The Company matches 50% of
participants' before-tax contributions up to 6% of eligible compensation. In
addition, participants can make after-tax contributions into the plan. The
participants after-tax contribution of 1% of eligible compensation is matched
with a 325% Company contribution to the participants pension plan account.
Amounts charged to expense during fiscal 2008, 2007 and 2006 were $8.5, $5.6 and
$5.4, respectively, and are reflected in SG&A and cost of products sold in
the Consolidated Statements of Earnings. The increase in expense for 2008 was
due primarily to the addition of Playtex.
ENERGIZER HOLDINGS,
INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in
millions, except per share and percentage data)
(11) Debt
Notes payable at
September 30, 2008 and 2007 consisted of notes payable to financial institutions
with original maturities of less than one year of $264.4 and $43.0,
respectively, and had a weighted-average interest rate of 4.7% and 6.7%,
respectively.
The detail of long-term debt at
September 30 for the year indicated is as follows:
|
|
2008 |
|
2007 |
Private Placement, fixed interest rates ranging from 4.2% to 7.3%,
due 2009 to 2017 |
|
$
|
2,230.0 |
|
$
|
1,475.0 |
|
|
|
|
|
|
|
Term Loan, variable interest at LIBOR + 100 basis points, or 5.05%,
due 2012 |
|
|
465.5 |
|
|
- |
|
|
|
|
|
|
|
Singapore Bank Syndication, multi-currency facility, variable
interest at |
|
|
- |
|
|
107.0 |
LIBOR + 80 basis points, or 4.85%, due 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt, including current maturities |
|
|
2,695.5 |
|
|
1,582.0 |
Less current portion |
|
|
106.0 |
|
|
210.0 |
Total long-term debt |
|
$ |
2,589.5 |
|
$ |
1,372.0 |
The Company maintains total committed
debt facilities of $3,449.9, of which $479.0 remained available as of September
30, 2008.
Under the terms of the Companys debt
facilities, the ratio of the Companys indebtedness to its EBITDA cannot be
greater than 4.00 to 1, and may not remain above 3.50 to 1 for more than four
consecutive quarters. If the ratio is above 3.50 to 1, the Company is required
to pay an additional 75 basis points in interest for the period in which the
ratio exceeded 3.50 to 1. In addition, the ratio of its current year Earnings
Before Interest and Taxes (EBIT) to total interest expense must exceed 3.00 to
1. The Companys ratio of indebtedness to its pro forma EBITDA, as defined in
the agreements, was 3.25 to 1, and the ratio of its pro forma EBIT, as defined
in the agreements, to total interest expense was 3.91 to 1 as of September 30,
2008. As a result of the ratio of indebtedness to pro forma EBITDA during fiscal
2008, which was above 3.50 to 1 for the period from January 1, 2008 through
September 30, 2008, at which time the ratio reduced to 3.25 to 1, the Company
had higher pre-tax interest expense on fixed borrowings of approximately $13.0
for the current year. Failure to comply with the above ratios or other covenants
could result in acceleration of maturity, which could trigger cross defaults on
other borrowings. The Company believes that covenant violations, which may
result in acceleration of maturity, are unlikely. The Companys fixed rate debt
is callable by the Company, subject to a make whole premium, which would be
required to the extent the underlying benchmark U.S. treasury yield has declined
since issuance.
The Company routinely sells a pool of
U.S. accounts receivable through a financing arrangement between Energizer
Receivables Funding Corporation (the SPE), which is a bankruptcy-remote special
purpose entity subsidiary of the Company, and outside parties (the Conduits).
Under the current structure, funds received from the Conduit are treated as
borrowings rather than proceeds of accounts receivables sold for accounting
purposes. Borrowings under this program receive favorable treatment in the
Companys debt compliance covenants. The program renews annually in May. Further
ENERGIZER HOLDINGS,
INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in
millions, except per share and percentage data)
deterioration in credit markets could
result in an inability to renew the program or renewal on less favorable terms,
which may negatively impact compliance reported Debt-to-EBITDA and may require
the Company to draw on other available committed debt facilities.
The counterparties to long-term
committed borrowings consist of a number of major international financial
institutions. The Company continually monitors positions with, and credit
ratings of, counterparties both internally and by using outside ratings
agencies. The Company has staggered long-term borrowing maturities through 2017
to minimize refinancing risk in any single year and to optimize the use of free
cash flow for repayment.
Aggregate maturities on long-term
debt at September 30, 2008 are as follows: $106.0 in 2009, $301.0 in 2010,
$266.0 in 2011, $231.0 in 2012, $701.5 in 2013 and $1,090.0 thereafter.
(12) Preferred Stock
The Companys
Articles of Incorporation authorize the Company to issue up to 10 million shares
of $0.01 par value of preferred stock. During the three years ended September
30, 2008, there were no shares of preferred stock outstanding.
(13) Shareholders' Equity
On March
16, 2000, the Board of Directors declared a dividend of one share purchase right
(Right) for each outstanding share of ENR common stock. Each Right entitles a
shareholder of ENR stock to purchase an additional share of ENR stock at an
exercise price of $150.00, which price is subject to anti-dilution adjustments.
Rights, however, may only be exercised if a person or group has acquired, or
commenced a public tender for 20% or more of the outstanding ENR stock, unless
the acquisition is pursuant to a tender or exchange offer for all outstanding
shares of ENR stock and a majority of the Board of Directors determines that the
price and terms of the offer are adequate and in the best interests of
shareholders (a Permitted Offer). At the time that 20% or more of the
outstanding ENR stock is actually acquired (other than in connection with a
Permitted Offer), the exercise price of each Right will be adjusted so that the
holder (other than the person or member of the group that made the acquisition)
may then purchase a share of ENR stock at one-third of its then-current market
price. If the Company merges with any other person or group after the Rights
become exercisable, a holder of a Right may purchase, at the exercise price,
common stock of the surviving entity having a value equal to twice the exercise
price. If the Company transfers 50% or more of its assets or earnings power to
any other person or group after the Rights become exercisable, a holder of a
Right may purchase, at the exercise price, common stock of the acquiring entity
having a value equal to twice the exercise price.
The Company can redeem the Rights at
a price of $0.01 per Right at any time prior to the time a person or group
actually acquires 20% or more of the outstanding ENR stock (other than in
connection with a Permitted Offer). In addition, following the acquisition by a
person or group of at least 20%, but not more than 50% of the outstanding ENR
stock (other than in connection with a Permitted Offer), the Company may
exchange each Right for one share of ENR stock. The Company's Board of Directors
may amend the terms of the Rights at any time prior to the time a person or
group acquires 20% or more of the outstanding ENR stock (other than in
connection with a Permitted Offer) and may amend the terms to lower the
threshold for exercise of the Rights. If the threshold is reduced, it cannot be
lowered to a percentage that is less than 10% or, if any shareholder holds 10%
or more of the outstanding ENR stock at that time, the reduced threshold must be
greater than the percentage held by that shareholder. The Rights will expire on
April 1, 2010.
ENERGIZER HOLDINGS,
INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in
millions, except per share and percentage data)
At September 30, 2008, there were 300
million shares of ENR stock authorized, of which approximately 3.0 million
shares were reserved for issuance under the 2000 Incentive Stock Plan.
Beginning in September 2000, the
Companys Board of Directors has approved a series of resolutions authorizing
the repurchase of shares of ENR common stock, with no commitments by the Company
to repurchase such shares. On July 24, 2006, the Board of Directors approved the
repurchase of up to an additional 10 million shares and 8 million shares remain
under such authorization as of September 30, 2008. There were no shares
repurchased during fiscal year 2008.
(14) Financial Instruments and Risk Management
Foreign Currency Contracts At times, the Company enters into foreign exchange
forward contracts and, to a lesser extent, purchases options and enters into
zero-cost option collars to mitigate potential losses in earnings or cash flows
on foreign currency transactions. The Company has not designated these financial
instruments as hedges for accounting purposes for the year ended September 30,
2008. The Company recorded a pre-tax loss of $1.3 associated with the foreign
currency contracts. Foreign currency exposures are primarily related to
anticipated intercompany purchase transactions and intercompany borrowings.
Other foreign currency transactions to which the Company is exposed include
external purchase transactions and intercompany receivables, dividends and
service fees.
The contractual amounts of the
Company's forward exchange contracts were $71.1 and $67.1 in 2008 and 2007,
respectively. These contractual amounts represent transaction volume outstanding
and do not represent the amount of the Company's exposure to credit or market
loss. Foreign currency contracts are generally for one year or less.
Derivative
Securities The Company uses raw
materials that are subject to price volatility. Hedging instruments are used by
the Company as it desires to reduce exposure to variability in cash flows
associated with future purchases of zinc or other commodities. These hedging
instruments are accounted for under SFAS No. 133 Accounting for Derivative
Instruments and Hedging Activities, as cash flow hedges. To qualify for hedge
accounting, the Company uses a regression model to determine effectiveness and
expects there to be a high correlation between the hedging instruments and raw
material purchases. At September 30, 2008, the fair market value of the
Companys outstanding hedging instruments was an unrealized pre-tax loss of
$9.8. Realized gains and losses are reflected as adjustments to the cost of the
raw materials. Over the next twelve months, approximately $9.2 of the loss
recognized in Accumulated Other Comprehensive Income will be recognized in
earnings. The impact of hedge ineffectiveness was immaterial in 2008. Contract
maturities for these hedges extend into fiscal year 2010.
Share Options A portion of the Companys deferred compensation
liabilities is based on Company stock price and is subject to market
risk.
At September 30, 2007, the Company
held a net-cash settled prepaid share option with a major multinational
financial institution to mitigate the impact of changes in the Companys
deferred compensation liabilities. In December 2007, the prepaid feature was
removed from the transaction and the Company received cash of $60.5, which was
used to repay existing debt. Of the $60.5 received, $46.0 was a return of
investment and was classified within investing activities on the Statement of
Cash Flows. The remaining $14.5 was a return on investment and was classified as
a cash inflow from operating activities on the Statement of Cash Flows. As a
result of this change in the share option, the Company will incur yearly fees at
LIBOR plus 230 basis points until the contract is settled. The fair market value
of the share option was $2.4, as included in other current liabilities, and
$59.3, as included in other current assets, at September 30, 2008 and 2007,
respectively, with
ENERGIZER HOLDINGS,
INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in
millions, except per share and percentage data)
approximately 0.5 million share
options outstanding at September 30, 2008 and 2007. The change in fair value of
the total share option for the twelve months ended September 30, 2008 and 2007
resulted in expense of $16.2 and income of $23.2, respectively, and was recorded
in SG&A.
Concentration of Credit
Risk The counterparties to foreign
currency contracts consist of a number of major multinational and international
financial institutions and are generally institutions with which the Company
maintains lines of credit. The Company does not enter into foreign exchange
contracts through brokers nor does it trade foreign exchange contracts on any
other exchange or over-the-counter markets. Risk of currency positions and
mark-to-market valuation of positions are strictly monitored at all
times.
The Company continually monitors
positions with, and credit ratings of, counterparties both internally and by
using outside rating agencies. The Company has implemented policies that limit
the amount of agreements it enters into with any one party. While nonperformance
by these counterparties exposes the Company to potential credit losses, such
losses are not anticipated although the current economic environment makes such
assessments more challenging.
The Company sells to a large number
of customers primarily in the retail trade, including those in mass
merchandising, drugstore, supermarket and other channels of distribution
throughout the world. The Company performs ongoing evaluations of its customers'
financial condition and creditworthiness, but does not generally require
collateral. The Companys largest customer had obligations to the Company with a
carrying value of $122.3 at September 30, 2008. While the competitiveness of the
retail industry presents an inherent uncertainty, the Company does not believe a
significant risk of loss from a concentration of credit risk exists with respect
to accounts receivable.
Financial
Instruments The Companys financial
instruments include cash and cash equivalents, short-term and long-term debt and
foreign currency contracts. Due to the nature of cash and cash equivalents and
short-term borrowings, including notes payable, carrying amounts on the balance
sheet approximate fair value.
At September 30, 2008 and 2007, the
fair market value of fixed rate long-term debt was $2,078.5 and $1,423.1,
respectively, compared to its carrying value of $2,230.0 and $1,475.0,
respectively. The increase in fixed rate debt at September 30, 2008 was due to
borrowings to complete the Playtex acquisition. The book value of the Companys
variable rate debt approximates fair value. The fair value of the long-term debt
is estimated using yields obtained from independent pricing sources for similar
types of borrowing arrangements.
The fair value of foreign currency
contracts is the amount that the Company would receive or pay to terminate the
contracts, considering first, quoted market prices of comparable agreements, or
in the absence of quoted market prices, such factors as interest rates, currency
exchange rates and remaining maturities. Based on these considerations, the
Company would make an insignificant payment for outstanding foreign currency
contracts at September 30, 2008 and 2007. However, these payments are unlikely
due to the fact that the Company enters into foreign currency contracts to hedge
identifiable foreign currency exposures, and as such would generally not
terminate such contracts.
(15) Environmental and Legal Matters
Government Regulation and Environmental Matters The operations of the Company, like those of other
companies engaged in the Household Products and Personal Care businesses, are
subject to various federal, state, foreign and local laws and regulations
intended to protect the public health and the environment. These regulations
primarily relate to worker safety, air and water quality, underground fuel
storage tanks and waste handling and disposal. The Company has received notices
from the U.S. Environmental Protection Agency, state agencies and/or private
parties seeking contribution, that it has been identified as a potentially
responsible party (PRP) under the Comprehensive Environmental Response,
Compensation and Liability Act, and may be required to share in the cost of
cleanup with respect to seven federal Superfund sites. It may also be required
to share in the cost of cleanup with respect to two state-designated sites or
other sites outside of the U.S.
ENERGIZER HOLDINGS,
INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in
millions, except per share and percentage data)
Accrued environmental costs at
September 30, 2008 were $11.8, of which $1.7 is expected to be spent in fiscal
2009. This accrual is not measured on a discounted basis. It is difficult to
quantify with certainty the cost of environmental matters, particularly
remediation and future capital expenditures for environmental control equipment.
Nevertheless, based on information currently available, the Company believes the possibility of material
environmental costs in excess of the accrued amount is remote.
As a result of the Playtex
acquisition certain of the Companys products are subject to regulation by the
United States Food and Drug Administration (FDA).
Legal Proceedings The Company and its subsidiaries are parties to a
number of legal proceedings in various jurisdictions arising out of the
operations of its businesses. Many of these legal matters are in preliminary
stages and involve complex issues of law and fact, and may proceed for
protracted periods of time. The amount of liability, if any, from these
proceedings cannot be determined with certainty. However, based upon present
information, the Company believes that its ultimate liability, if any, arising
from pending legal proceedings, asserted legal claims and known potential legal
claims which are likely to be asserted, should not be material to the Companys
financial position, taking into account established accruals for estimated
liabilities.
(16) Other Commitments and Contingencies
An international affiliate of the Company has $7.9 of funds deposited in
a bank account that is acting as collateral for a bank loan. The Company has
reflected this bank deposit as restricted cash, which is included in other
current assets on the Consolidated Balance Sheets. The loan was initiated in
June 2004 for a three month period. At each maturity, the Company renewed the
agreement. As the loan amount changes, the funds on deposit will be required to
increase or decrease with the loan amount. The impact of this transaction is
reflected in the investing section of the Consolidated Statements of Cash Flows.
Total rental expense for all
operating leases was $28.9, $28.0 and $27.1 in 2008, 2007 and 2006,
respectively. Future minimum rental commitments under noncancellable operating
leases in effect as of September 30, 2008, were $18.5 in 2009, $14.7 in 2010,
$10.7 in 2011, $6.3 in 2012, $4.6 in 2013 and $7.2 thereafter. These leases are
primarily for office facilities.
ENERGIZER HOLDINGS,
INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in
millions, except per share and percentage data)
(17) Supplemental Financial Statement
Information
The components of certain
balance sheet accounts at September 30 for the years indicated are as follows:
|
|
2008 |
|
2007 |
Inventories |
|
|
|
|
|
|
Raw materials and supplies |
|
$ |
77.7 |
|
$ |
65.1 |
Work in process |
|
|
137.9 |
|
|
109.4 |
Finished products |
|
|
459.0 |
|
|
407.8 |
Total inventories |
|
$ |
674.6 |
|
$ |
582.3 |
Other Current
Assets |
|
|
|
|
|
|
Miscellaneous receivables |
|
$
|
47.1 |
|
$ |
41.1 |
Deferred income tax benefits |
|
|
119.7 |
|
|
91.2 |
Prepaid expenses |
|
|
75.7 |
|
|
68.1 |
Share option |
|
|
- |
|
|
59.3 |
Other |
|
|
15.3 |
|
|
10.8 |
Total other current assets |
|
$
|
257.8 |
|
$ |
270.5 |
Property at Cost |
|
|
|
|
|
|
Land |
|
$ |
37.3 |
|
$
|
25.3 |
Buildings |
|
|
251.9 |
|
|
206.7 |
Machinery and equipment |
|
|
1,459.0 |
|
|
1,294.0 |
Construction in progress |
|
|
115.4 |
|
|
54.5 |
Total gross property |
|
|
1,863.6 |
|
|
1,580.5 |
Accumulated depreciation |
|
|
1,028.1 |
|
|
930.6 |
Total property, plant and equipment, net |
|
$
|
835.5 |
|
$ |
649.9 |
Other Assets |
|
|
|
|
|
|
Pension asset |
|
$ |
42.5 |
|
$
|
125.2 |
Deferred income tax benefits |
|
|
- |
|
|
21.0 |
Deferred charges and other
assets |
|
|
42.3 |
|
|
34.8 |
Total other assets |
|
$ |
84.8 |
|
$ |
181.0 |
Other Current
Liabilities |
|
|
|
|
|
|
Accrued advertising, promotion and
allowances |
|
$
|
324.3 |
|
$ |
306.8 |
Accrued salaries, vacations and incentive compensation |
|
|
123.0 |
|
|
112.1 |
Returns reserve |
|
|
47.8 |
|
|
- |
Other |
|
|
233.8 |
|
|
188.3 |
Total other current liabilities |
|
$ |
728.9 |
|
$ |
607.2 |
Other
Liabilities |
|
|
|
|
|
|
Pensions and other retirement benefits |
|
$
|
176.7 |
|
$ |
175.3 |
Deferred compensation |
|
|
138.8 |
|
|
161.6 |
Deferred income tax liabilities |
|
|
489.9 |
|
|
- |
Other noncurrent
liabilities |
|
|
63.8 |
|
|
47.1 |
Total other liabilities |
|
$ |
869.2 |
|
$ |
384.0 |
ENERGIZER HOLDINGS,
INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in
millions, except per share and percentage data)
ALLOWANCE FOR DOUBTFUL
ACCOUNTS |
|
2008 |
|
2007 |
|
2006 |
Balance at beginning of year |
|
$ |
9.8 |
|
|
$ |
10.9 |
|
|
$ |
12.5 |
|
Impact of Playtex
acquisition |
|
|
4.0 |
|
|
|
- |
|
|
|
- |
|
Provision charged to expense, net of reversals |
|
|
(0.2 |
) |
|
|
(0.2 |
) |
|
|
- |
|
Write-offs, less recoveries, translation,
other |
|
|
(2.4 |
) |
|
|
(0.9 |
) |
|
|
(1.6 |
) |
Balance at end of
year |
|
$ |
11.2 |
|
|
$ |
9.8 |
|
|
$ |
10.9 |
|
|
|
INCOME TAX VALUATION
ALLOWANCE |
|
2008 |
|
2007 |
|
2006 |
Balance at beginning of year |
|
$ |
4.9 |
|
|
$ |
10.7 |
|
|
$ |
15.1 |
|
Impact of Playtex
acquisition |
|
|
5.0 |
|
|
|
- |
|
|
|
- |
|
Provision charged to expense |
|
|
0.1 |
|
|
|
0.5 |
|
|
|
1.8 |
|
Reversal of
provision charged to expense |
|
|
(0.4 |
) |
|
|
(4.3 |
) |
|
|
(5.7 |
) |
Write-offs, translation,
other |
|
|
(0.5 |
) |
|
|
(2.0 |
) |
|
|
(0.5 |
) |
Balance at end of year |
|
$ |
9.1 |
|
|
$ |
4.9 |
|
|
$ |
10.7 |
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
|
|
|
2008 |
|
2007 |
|
2006 |
Interest paid |
|
$ |
143.6 |
|
|
$ |
90.4 |
|
|
$ |
66.7 |
|
Income taxes paid |
|
|
90.6 |
|
|
|
108.5 |
|
|
|
113.3 |
|
(18) Segment Information
In the
first quarter of fiscal 2008, the Company revised its operating segment
presentation. Operations for the Company are managed via two segments -
Household Products (Battery and Lighting Products) and Personal Care (wet shave,
skin, feminine and infant care). Segment performance is evaluated based on
segment operating profit, exclusive of general corporate expenses, share-based
compensation costs, costs associated with most restructuring, integration or
business realignment activities and amortization of intangible assets. Financial
items, such as interest income and expense, are managed on a global basis at the
corporate level.
The reduction in gross profit
associated with the write-up and subsequent sale of the inventory acquired in
the Playtex acquisition and the acquisition integration costs for the Playtex
acquisition are not reflected in the Personal Care segment, but rather presented
as a separate line item below segment profit, as it is a non-recurring item
directly associated with the Playtex acquisition. Such presentation reflects
managements view on how it evaluates segment performance.
The Companys operating model
includes a combination of stand-alone and combined business functions between
the Household Products and Personal Care businesses, varying by country and
region of the world. Shared functions include product warehousing and
distribution, various transaction processing functions, and in some countries,
combined sales forces and management. The Company applies a fully allocated cost
basis, in which shared business functions are allocated between the businesses.
Such allocations do not represent the costs of such services if performed on a
stand-alone basis. The Company applies a fully allocated cost basis in which
shared business functions are allocated between the businesses.
Wal-Mart Stores, Inc. and its
subsidiaries accounted for 20.8%, 18.8% and 18.5% of total net sales in 2008,
2007 and 2006, respectively, primarily in North America. Corporate assets shown
in the following table include all cash and cash equivalents, financial
instruments, pension assets and deferred tax assets that are managed outside of
operating segments.
ENERGIZER HOLDINGS,
INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Dollars
in millions, except per share and percentage data)
Net Sales |
|
2008 |
|
2007 |
|
2006 |
Household Products |
|
$ |
2,474.3 |
|
|
$ |
2,376.3 |
|
|
$ |
2,147.1 |
|
Personal Care |
|
|
1,856.7 |
|
|
|
988.8 |
|
|
|
929.8 |
|
Total
net sales |
|
$ |
4,331.0 |
|
|
$ |
3,365.1 |
|
|
$ |
3,076.9 |
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
2007 |
|
2006 |
Profitability |
|
|
|
|
|
|
|
|
|
|
|
|
Household Products |
|
$ |
489.1 |
|
|
$ |
472.3 |
|
|
$ |
442.3 |
|
Personal Care |
|
|
322.5 |
|
|
|
155.5 |
|
|
|
127.7 |
|
Total segment profitability |
|
|
811.6 |
|
|
|
627.8 |
|
|
|
570.0 |
|
General corporate and other expenses
|
|
|
(104.9 |
)
|
|
|
(111.5 |
) |
|
|
(128.9 |
) |
Acquisition inventory valuation |
|
|
(27.5 |
) |
|
|
- |
|
|
|
- |
|
Amortization of intangibles |
|
|
(14.0 |
) |
|
|
(5.4 |
) |
|
|
(5.3 |
) |
Interest and other financial
items |
|
|
(192.0 |
) |
|
|
(76.7 |
) |
|
|
(79.2 |
) |
Total earnings before income taxes |
|
$ |
473.2 |
|
|
$ |
434.2 |
|
|
$ |
356.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization |
|
|
|
|
|
|
|
|
|
|
|
|
Household Products |
|
$ |
67.0 |
|
|
$ |
66.5 |
|
|
$ |
65.8 |
|
Personal Care |
|
|
59.4 |
|
|
|
42.2 |
|
|
|
43.0 |
|
Total segment depreciation |
|
|
126.4 |
|
|
|
108.7 |
|
|
|
108.8 |
|
Corporate |
|
|
14.9 |
|
|
|
6.3 |
|
|
|
8.7 |
|
Total depreciation and amortization |
|
$ |
141.3 |
|
|
$ |
115.0 |
|
|
$ |
117.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Household Products |
|
$ |
1,505.5 |
|
|
$ |
1,474.4 |
|
|
|
|
|
Personal
Care |
|
|
1,066.3 |
|
|
|
664.1 |
|
|
|
|
|
Total segment assets |
|
|
2,571.8 |
|
|
|
2,138.5 |
|
|
|
|
|
Corporate |
|
|
375.3 |
|
|
|
724.0 |
|
|
|
|
|
Goodwill and other intangible
assets |
|
|
2,869.6 |
|
|
|
663.2 |
|
|
|
|
|
Total assets |
|
$ |
5,816.7 |
|
|
$ |
3,525.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
Household Products |
|
$ |
79.3 |
|
|
$ |
54.2 |
|
|
$ |
48.7 |
|
Personal Care |
|
|
78.9 |
|
|
|
34.1 |
|
|
|
37.5 |
|
Total segment capital expenditures |
|
|
158.2 |
|
|
|
88.3 |
|
|
|
86.2 |
|
Corporate |
|
|
1.8 |
|
|
|
0.3 |
|
|
|
8.7 |
|
Total capital expenditures |
|
$ |
160.0 |
|
|
$ |
88.6 |
|
|
$ |
94.9 |
|
|
Geographic
segment information on a legal entity basis: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
2007 |
|
2006 |
Net Sales to Customers |
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
2,207.8 |
|
|
$ |
1,561.4 |
|
|
$ |
1,474.5 |
|
International |
|
|
2,123.2 |
|
|
|
1,803.7 |
|
|
|
1,602.4 |
|
Total net sales |
|
$ |
4,331.0 |
|
|
$ |
3,365.1 |
|
|
$ |
3,076.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Lived Assets |
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
591.8 |
|
|
$ |
541.4 |
|
|
|
|
|
Germany |
|
|
136.8 |
|
|
|
137.9 |
|
|
|
|
|
Other International |
|
|
191.7 |
|
|
|
151.6 |
|
|
|
|
|
Total long-lived assets |
|
$ |
920.3 |
|
|
$ |
830.9 |
|
|
|
|
|
ENERGIZER HOLDINGS,
INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in
millions, except per share and percentage data)
The Companys international net sales
are derived from customers in numerous countries, with sales to customers in
Canada representing 5.4%, 4.5% and 4.5% and sales to customers in Japan
representing 3.4%, 4.4% and 5.0% of the Companys total sales in 2008, 2007 and
2006, respectively. Sales to customers in all other single foreign countries
represented less than 5% of the Companys total sales for each of the three
years ended September 30.
Supplemental product information is
presented below for net sales:
|
|
2008 |
|
2007 |
|
2006 |
Net Sales |
|
|
|
|
|
|
|
|
|
Alkaline batteries |
|
$ |
1,490.1 |
|
$ |
1,461.9 |
|
$ |
1,338.0 |
Carbon zinc batteries |
|
|
225.2 |
|
|
249.9 |
|
|
242.2 |
Other batteries and lighting products |
|
|
759.0 |
|
|
664.5 |
|
|
566.9 |
Wet Shave |
|
|
1,085.0 |
|
|
988.8 |
|
|
929.8 |
Skin Care |
|
|
364.1 |
|
|
- |
|
|
- |
Feminine Care |
|
|
222.6 |
|
|
- |
|
|
- |
Infant Care |
|
|
185.0 |
|
|
- |
|
|
- |
Total
net sales |
|
$ |
4,331.0 |
|
$ |
3,365.1 |
|
$ |
3,076.9 |
ENERGIZER HOLDINGS,
INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Dollars in
millions, except per share and percentage data)
(19) Quarterly Financial Information (Unaudited)
The results of any single quarter are not necessarily
indicative of the Companys results for the full year. Net earnings of the
Company are significantly impacted in the first quarter by the additional
battery product sales volume associated with the December holiday season, and
for fiscal 2008 and beyond, in the second and third quarters by seasonal sun
care shipments. The fourth quarter of 2008 also included higher
hurricane-related shipments and early holiday season buy-in as discussed in
Managements Discussion and Analysis of Results of Operations and Financial
Conditions.
|
|
First |
|
Second |
|
Third |
|
Fourth |
Fiscal 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
1,189.9 |
|
|
$ |
951.0 |
|
|
$ |
1,066.7 |
|
|
$ |
1,123.4 |
|
Gross
profit |
|
|
536.2 |
|
|
|
457.8 |
|
|
|
509.0 |
|
|
|
534.7 |
|
Net earnings |
|
|
102.6 |
|
|
|
60.9 |
|
|
|
66.7 |
|
|
|
99.1 |
|
|
Basic earnings per share |
|
$ |
1.79 |
|
|
$ |
1.06 |
|
|
$ |
1.16 |
|
|
$ |
1.71 |
|
Diluted
earnings per share |
|
$ |
1.74 |
|
|
$ |
1.03 |
|
|
$ |
1.13 |
|
|
$ |
1.67 |
|
|
Items increasing/(decreasing) net earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition inventory valuation, net of
tax |
|
$ |
(15.5 |
) |
|
$ |
(1.0 |
) |
|
$ |
- |
|
|
$ |
- |
|
Integration costs, net of
tax |
|
|
(3.7 |
) |
|
|
(2.7 |
) |
|
|
(1.9 |
) |
|
|
(3.1 |
) |
Provisions for restructuring and related
costs, net of tax |
|
|
(1.5 |
) |
|
|
(0.2 |
) |
|
|
- |
|
|
|
(0.3 |
) |
Adjustments to prior years' tax accruals |
|
|
- |
|
|
|
- |
|
|
|
(4.0 |
) |
|
|
2.9 |
|
|
|
|
First |
|
Second |
|
Third |
|
Fourth |
Fiscal 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
959.2 |
|
|
$ |
730.9 |
|
|
$ |
800.0 |
|
|
$ |
875.0 |
|
Gross
profit |
|
|
454.2 |
|
|
|
346.3 |
|
|
|
378.5 |
|
|
|
425.7 |
|
Net earnings |
|
|
122.3 |
|
|
|
66.6 |
|
|
|
62.5 |
|
|
|
70.0 |
|
|
Basic earnings per share |
|
$ |
2.16 |
|
|
$ |
1.18 |
|
|
$ |
1.10 |
|
|
$ |
1.23 |
|
Diluted earnings
per share |
|
$ |
2.08 |
|
|
$ |
1.14 |
|
|
$ |
1.06 |
|
|
$ |
1.19 |
|
|
Items increasing/(decreasing) net earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provisions for
restructuring and related costs, net of tax |
|
$ |
(2.3 |
) |
|
$ |
(3.0 |
) |
|
$ |
(2.3 |
) |
|
$ |
(4.6 |
) |
Adjustments to prior
years' tax accruals |
|
|
- |
|
|
|
- |
|
|
|
3.5 |
|
|
|
4.4 |
|
Tax benefits recognized
related to prior years' losses |
|
|
- |
|
|
|
- |
|
|
|
4.3 |
|
|
|
- |
|
Deferred tax benefit due to statutory rate
change |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
9.7 |
|
GRAPHIC
7
notes1x4x1.jpg
GRAPHIC
begin 644 notes1x4x1.jpg
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`
end
EX-21
8
exhibit21.htm
SUBSIDIARIES OF REGISTRANT
Exhibit 21
|
|
Jurisdictions
of |
|
|
Subsidiary
Name |
Incorporation |
Percentage of
Control |
|
Energizer Argentina
S.A. |
Argentina |
100% |
|
Energizer Australia
Pty. Ltd. |
Australia |
100% |
* |
Playtex Products
(Australia) Pty. Ltd. |
Australia |
100% |
|
Energizer Group
Austria Handels GmbH |
Austria |
100% |
|
Energizer Sales
Ltd. |
Barbados |
100% |
|
Energizer Group
Belgium S.A. |
Belgium |
100% |
|
Energizer Insurance
Company Ltd. |
Bermuda |
100% |
|
Energizer Group do
Brasil Imp.Exp.Com.Ltd. |
Brazil |
100% |
* |
Energizer do Brasil
Ltda. |
Brazil |
100% |
|
Smile-Tote, Inc. |
California |
100% |
|
Energizer Canada
Inc. |
Canada |
100% |
* |
Playtex
Limited |
Canada |
100% |
|
Energizer Cayman
Islands Limited |
Cayman
Islands |
100% |
|
Schick Cayman Islands
Limited |
Cayman
Islands |
100% |
|
Eveready de Chile
S.A. |
Chile |
100% |
|
Energizer (China) Co.,
Ltd. |
China |
100% |
|
Schick (Guangzhou)
Company Ltd. |
China |
100% |
|
Eveready de Colombia,
S.A. |
Colombia |
100% |
+ |
ECOBAT
s.r.o. |
Czech
Republic |
16.66% |
|
Energizer Czech
spol.sr.o. |
Czech
Republic |
100% |
|
EBC Batteries,
Inc. |
Delaware |
100% |
|
Energizer Asia
Pacific, Inc. |
Delaware |
100% |
|
Energizer Battery,
Inc. |
Delaware |
100% |
|
Energizer
International, Inc. |
Delaware |
100% |
|
Energizer Middle East
and Africa Limited |
Delaware |
100% |
|
Energizer Personal
Care, Inc. |
Delaware |
100% |
|
Energizer (South
Africa) Ltd. |
Delaware |
100% |
|
Eveready Battery
Company, Inc. |
Delaware |
100% |
|
Energizer Battery
Manufacturing, Inc. |
Delaware |
100% |
|
Energizer Receivables
Funding Corporation |
Delaware |
100% |
|
Energizer Group,
Inc. |
Delaware |
100% |
|
Energizer-Schick
Taiwan Ltd. |
Delaware |
100% |
|
Personal Care Group,
Inc. |
Delaware |
100% |
|
Personal Care
Holdings, Inc. |
Delaware |
100% |
|
Playtex Products,
Inc. |
Delaware |
100% |
|
Playtex Sales &
Services, Inc. |
Delaware |
100% |
|
Playtex Manufacturing,
Inc. |
Delaware |
100% |
|
Playtex Investment
Corp. |
Delaware |
100% |
|
Playtex International
Corp. |
Delaware |
100% |
|
Playtex Marketing
Corp. |
Delaware |
50% |
|
Schick Manufacturing,
Inc. |
Delaware |
100% |
|
Sun Pharm,
LLC |
Delaware |
100% |
|
Sun Pharmaceuticals
Corp. |
Delaware |
100% |
|
Tanning Research
Laboratories, LLC |
Delaware |
100% |
|
TH Marketing
Corp. |
Delaware |
100% |
|
Energizer Group
Dominican Republic S.A |
Dominican
Republic |
100% |
|
Eveready Ecuador
C.A. |
Ecuador |
100% |
|
Energizer Egypt
S.A.E. |
Egypt |
70.02% |
|
Schick Egypt
LLC |
Egypt |
100% |
|
Tiki Hut Holding
Company, Inc. |
Florida |
100% |
|
Tanning Research
Laboratories, Inc. |
Florida |
100% |
|
Hawaiian Tropic
Europe, Inc. |
Florida |
100% |
+ |
COREPILE |
France |
20% |
|
Energizer Group France
SAS |
France |
100% |
|
Energizer Deutschland
G.m.b.H. & Co. KG |
Germany |
100% Partnership |
|
Energizer
Finanzierungs GbR |
Germany |
100% Partnership |
|
Energizer Management
Holding Verwaltungs mbH |
Germany |
100% |
|
Wilkinson Sword
GmbH |
Germany |
100% |
|
Energizer Hellas
A.E. |
Greece |
100% |
|
Energizer Hong Kong
Limited |
Hong Kong |
100% |
|
Eveready Hong Kong
Company |
Hong Kong |
100% Partnership |
* |
Playtex Products (Hong
Kong) Ltd. |
Hong Kong |
100% |
|
Schick Asia
Limited |
Hong Kong |
100% |
|
Sonca Products
Limited |
Hong Kong |
100% |
|
Energizer Hungary
Trading Ltd. |
Hungary |
100% |
+ |
RE'LEM Public Benefit
Company |
Hungary |
33.3% |
* |
EBC (India) Company
Private Limited |
India |
100% |
* |
Energizer India
Private Limited |
India |
100% |
|
PT Energizer
Indonesia |
Indonesia |
100% |
|
Energizer Ireland
Limited |
Ireland |
100% |
|
Energizer Group Italia
S.p.A. |
Italy |
100% |
|
Schick Japan
K.K. |
Japan |
100% |
|
Eveready East Africa
Limited |
Kenya |
10.73%
(Public) |
|
Energizer Korea
Ltd. |
Korea |
100% |
|
Energizer Malaysia
SDN.BHD. |
Malaysia |
80% |
|
Eveready de Mexico
S.A. de C.V. |
Mexico |
100% |
|
Energizer Group
Holland B.V. |
Netherlands |
100% |
|
Tropria Holding
B.V. |
Netherlands |
100% |
|
Energizer NZ
Limited |
New Zealand |
100% |
|
Carewell Industries,
Inc. |
New York |
100% |
|
Schick & Energizer
Peru S.A. |
Peru |
100% |
|
Energizer Philippines,
Inc. |
Philippines |
100% |
|
Energizer Polska Sp.
zo.o |
Poland |
100% |
+ |
REBA Organizacja
Odzysku S.A. |
Poland |
20% |
+ |
ECOPILHAS
LDA. |
Portugal |
16.66% |
|
Energizer Group Portugal Unipessoal, Lda. (formerly Wilkinson Sword Artigos de Higiene Unipessoal Ltda.) |
Portugal |
100% |
|
Energizer Puerto Rico,
Inc. |
Puerto Rico |
100% |
|
Energizer
LLC |
Russia |
100% |
|
Energizer Asia
Investments Pte. Ltd. |
Singapore |
100% |
|
Energizer Singapore
Pte. Ltd. |
Singapore |
100% |
|
Energizer Slovakia,
Spol.Sr.O. |
Slovak
Republic |
100% |
|
Energizer
Group España S.A. (Formerly Wilkinson Sword S.A.E.) |
Spain |
100% |
|
Energizer Lanka
Limited |
Sri Lanka |
69.91%
(Public) |
|
Energizer Group Sweden
AB |
Sweden |
100% |
|
Energizer
SA |
Switzerland |
100% |
|
Energizer (Thailand)
Limited |
Thailand |
100% |
|
Wilkinson Sword Tras
Urunleri Ticaret Limited Sirketi |
Turkey |
100% |
|
Berec Overseas
Investments Limited |
United
Kingdom |
100% |
|
Energizer Financial
Service Centre Ltd. |
United
Kingdom |
100% |
|
Energizer Holdings UK
Co. Limited |
United
Kingdom |
100% |
|
Energizer Investments
UK Limited |
United
Kingdom |
100% |
|
Energizer Group
Limited |
United
Kingdom |
100% |
|
Energizer Trust
Limited |
United
Kingdom |
100% |
|
Ever Ready
Limited |
United
Kingdom |
100% |
|
Wilkinson Sword
Limited |
United
Kingdom |
100% |
* |
Wilkinson Sword (1999)
Limited |
United
Kingdom |
100% |
* |
EBC Uruguay, S.
A. |
Uruguay |
100% |
|
Eveready de Venezuela,
C.A. |
Venezuela |
100% |
|
Energizer Group
Venezuela C.A. |
Venezuela |
100% |
* |
|
In
liquidation/amalgamation |
+ |
|
Non-profit corporation |
EX-23
9
exhibit23.htm
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
CONSENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by
reference in the Registration Statements on Form S-8 (Nos. 333-33690, 333-33676 and 333-35116) of Energizer Holdings,
Inc. of our report dated November 26, 2008 relating to the financial statements and the
effectiveness of internal control over financial reporting, which appears in the 2008 Annual
Report to Shareholders, which is incorporated in this Annual Report on Form 10-K.
|
|
St. Louis, Missouri
November 26, 2008 |
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EX-31.I
11
exhibit31-i.htm
SECTION 302 CERTIFICATION OF CHIEF EXECUTIVE OFFICER
Certification of Chief
Executive Officer
I, Ward M. Klein, certify
that:
1. |
|
I have reviewed this annual
report on Form 10-K of Energizer Holdings, Inc.; |
|
|
|
2. |
|
Based on my knowledge, this
annual report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report; |
|
3. |
|
Based on my knowledge, the
financial statements, and other financial information included in this
annual report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report; |
|
4. |
|
The registrant's other
certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-
15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant
and have: |
|
|
|
a) designed such disclosure
controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the
period in which this annual report is being prepared; |
|
|
|
|
|
b) designed such internal
control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles; |
|
|
|
c) evaluated the
effectiveness of the registrant's disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedure, as of the end of the period covered by
this report based on such evaluation; and |
|
|
|
d) disclosed in this report
any change in the registrants internal control over financial reporting
that occurred during the registrants fourth fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the
registrants internal control over financial reporting; and |
|
5. |
|
The registrant's other
certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions): |
|
|
|
a) all significant
deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record, process, summarize
and report financial information; and |
|
|
|
b) any fraud, whether or not
material, that involves management or other employees who have a
significant role in the registrant's internal control over financial
reporting. |
Date: November 26,
2008 |
|
Ward M.
Klein |
Chief Executive
Officer |
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EX-31.II
13
exhibit31-ii.htm
SECTION 302 CERTIFICATION OF EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
Certification of Executive
Vice President and Chief Financial Officer
I, Daniel Sescleifer, certify
that:
1. |
|
I have reviewed this annual
report on Form 10-K of Energizer Holdings, Inc.; |
|
|
|
2. |
|
Based on my knowledge, this
annual report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report; |
|
3. |
|
Based on my knowledge, the
financial statements, and other financial information included in this
annual report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report; |
|
4. |
|
The registrant's other
certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-
15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant
and have: |
|
|
|
a) designed such disclosure
controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the
period in which this annual report is being prepared; |
|
|
|
|
|
b) designed such internal
control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles; |
|
|
|
c) evaluated the
effectiveness of the registrant's disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the
disclosure controls and procedure, as of the end of the period covered by
this report based on such evaluation; and |
|
|
|
d) disclosed in this report
any change in the registrants internal control over financial reporting
that occurred during the registrants fourth fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the
registrants internal control over financial reporting; and |
|
5. |
|
The registrant's other
certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions): |
|
|
|
a) all significant
deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record, process, summarize
and report financial information; and |
|
|
|
b) any fraud, whether or not
material, that involves management or other employees who have a
significant role in the registrant's internal control over financial
reporting. |
Date: November 26,
2008 |
|
Daniel J.
Sescleifer |
Executive Vice
President and Chief Financial Officer
|
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14
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end
EX-32.I
15
exhibit32-i.htm
SECTION 1350 CERTIFICATION OF CHIEF EXECUTIVE OFFICER
Exhibit 32(i)
CERTIFICATION PURSUANT TO
18
U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002
In connection with the Annual Report
of Energizer Holdings, Inc. (the "Company") on Form 10-K for the year ending
September 30, 2008 as filed with the Securities and Exchange Commission on the
date hereof (the "Report"), I, Ward M. Klein, Chief Executive Officer of the
Company, certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of
the Sarbanes-Oxley Act of 2002, that, to my best knowledge:
(1)
The Report fully complies with the
requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
(2)
The information contained in the Report
fairly presents, in all material respects, the financial condition and result of
operations of the Company.
Dated: November 26, 2008
|
|
|
|
Ward M. Klein |
Chief Executive
Officer |
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16
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EX-32.II
17
exhibit32-ii.htm
SECTION 1350 CERTIFICATION OF EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
Exhibit 32(ii)
CERTIFICATION PURSUANT TO
18
U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002
In connection with the Annual Report
of Energizer Holdings, Inc. (the "Company") on Form 10-K for the year ending
September 30, 2007 as filed with the Securities and Exchange Commission on the
date hereof (the "Report"), I, Daniel J. Sescleifer, Executive Vice President
and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §
1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to
my best knowledge:
(1)
The Report fully complies with the
requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
(2)
The information contained in the Report
fairly presents, in all material respects, the financial condition and result of
operations of the Company.
Dated: November 26, 2008
|
|
|
Daniel J.
Sescleifer |
Executive Vice President and
Chief Financial Officer
|
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18
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end
-----END PRIVACY-ENHANCED MESSAGE-----