Energizer 2003 Annual Report Download - page 21

ENR 2003 ANNUAL REPORT Page 19
of impairment indicators are based on legal factors, market condi-
tions and operational performance. Future events could cause
Energizer to conclude that impairment indicators exist. Energizer
uses the discounted cash flows method to determine if impairment
exists. This requires management to make assumptions regarding
future income, working capital and discount rates, which would
affect the impairment calculation.
■ Income Taxes Energizer estimates income taxes and the income tax
rate in each jurisdiction where it operates. This involves estimating
taxable earnings, specific taxable and deductible items, the likeli-
hood of generating sufficient future taxable income to utilize deferred
tax assets, and possible exposures related to future tax audits. To the
extent these estimates change, adjustments to income taxes are
made in the period in which the estimate is changed.
■ Acquisitions Energizer uses the purchase method that 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 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.
Energizer uses a variety of information sources to determine the
value of acquired assets and liabilities including: third-party
appraisers for the value 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 and other claims.
RECENTLY ISSUED ACCOUNTING STANDARDS
See discussion in Note 2 to the Consolidated Financial Statements.
FORWARD-LOOKING INFORMATION
Statements in the Management’s 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 the potential for strategic synergies and related cost reductions
between Energizer and the SWS business, and the potential for leverag-
ing Energizer’s operating strengths to grow SWS sales and margins,
future pricing volatility in the battery category, Energizer’s estimates of its
share of total United States retail alkaline market, its positioning to meet
consumer demand and the benefits of its portfolio of products,
Energizer’s assessment of the wet shave products category and the SWS
business, the impact of new shaving product introductions on older prod-
uct sales, the potential for future restructuring activity, the estimates of
Energizer’s future tax rates, estimated capital expenditures for fiscal
2004, the likelihood of acceleration of its debt covenants, the anticipated
adequacy of cash flows and Energizer’s ability to meet liquidity require-
ments, the impact of future expenditures for environmental matters and
environmental control equipment, the impact of adverse changes in inter-
est rates, the market risk of foreign currency derivatives, and the potential
loss in value of Energizer’s net foreign currency investment in foreign
subsidiaries may be considered forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
Energizer cautions readers not to place undue reliance on any
forward-looking statements, which speak only as of the date made.
Energizer advises readers that various risks and uncertainties could affect
its financial performance and could cause Energizer’s actual results for
future periods to differ materially from those anticipated or projected.
Opportunities to integrate SWS activities with Energizer’s, and to leverage
Energizer operating strengths, may be limited, and may not result in sig-
nificant cost savings or growth in SWS sales. Energizer’s estimates of its
United States alkaline market share may be inaccurate, or may not
reflect segments of the retail market. Shifts in consumer demands or
needs, competitive activity or product improvements, or further retailer
consolidations may dilute or defeat the benefits of Energizer’s consumer
positioning and strategy. General economic conditions, retailer pressure
and competitive activity may negatively impact the outlook for the wet
shave products category. Because of that competitive activity, the SWS
business may not be able to increase sales or margins, and could lose
current market position. The migration of demand from carbon zinc to
alkaline or from alkaline to other technologies may increase the likelihood
of future restructuring activities and charges. Unforeseen fluctuations in
levels of Energizer’s operating cash flows, or inability to maintain compli-
ance with its debt covenants, could limit Energizer’s ability to meet future
operating expenses and liquidity requirements, fund capital expenditures
or service its debt as it becomes due. United States or international politi-
cal or economic crises could result in higher levels of inflation than antici-
pated, and Energizer may not be able to realize cost reductions, produc-
tivity improvements or price increases which are substantial enough to
counter the inflationary impact. Unknown environmental liabilities and
greater than anticipated remediation expenses or environmental control
expenditures could have a material impact on Energizer’s financial posi-
tion. Energizer’s overall tax rate in future years may be higher than antici-
pated because of unforeseen changes in the tax laws or applicable rates,
higher taxes on repatriated earnings or increased foreign losses.
Economic turmoil and currency fluctuations could increase Energizer’s
risk from unfavorable impacts on variable-rate debt, currency derivatives
and other financial instruments, as well as increase the potential loss in
value of its net foreign currency investment in foreign subsidiaries.
Additional risks and uncertainties include those detailed from time to
time in Energizer’s publicly filed documents, including its Registration
Statement on Form 10, as amended, and its Current Report on Form 8-K
dated April 25, 2000.