Energizer 2003 Annual Report Download - page 30

Page 28 ENR 2003 ANNUAL REPORT
Energizer adopted the FASB Interpretation No. 45 (FIN 45),
“Guarantor’s Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others” as of the
beginning of fiscal 2003. FIN 45 clarifies the disclosures about certain
guarantees to be made by a guarantor in its interim and annual financial
statements. Also, FIN 45 clarifies that a guarantor is required to recog-
nize, at the inception of certain guarantees, a liability for the fair value
of the obligation undertaken in issuing the guarantee, but does not
prescribe a specific approach for subsequently measuring the liability
over its life. The adoption of FIN 45 did not have a material effect on
Energizer’s financial statements. Note 19 contains disclosures related
to FIN 45.
Energizer adopted SFAS 149, “Amendment of Statement 133 on
Derivative Instruments and Hedging Activities,” SFAS 150, “Accounting
for Certain Financial Instruments with Characteristics of both Liabilities
and Equity” and FASB Interpretation No. 46 (FIN 46), “Consolidation of
Variable Interest Entities, an Interpretation of ARB 51” in fiscal 2003.
Energizer had no interests, instruments or transactions governed by
these pronouncements as of and for the three years ended
September 30, 2003.
3. ACQUISITION OF SWS
On March 28, 2003, Energizer acquired the worldwide Schick-Wilkinson
Sword (SWS) business from Pfizer, Inc. for $930 plus acquisition costs
and subject to adjustment based on acquired working capital level. The
final purchase price and acquisition costs totaled $975.8. A $550.0
bridge loan which, together with existing available credit facilities and
cash, were used to fund the acquisition. In June and July of 2003,
Energizer refinanced the bridge loan into longer term financing.
SWS is the second largest manufacturer and marketer of men’s and
women’s wet shave products in the world, and its products are market-
ed in over 80 countries. Its primary markets are Europe, the United
States and Japan.
Energizer views the wet shave products category as attractive within
the consumer products industry due to the limited number of manufac-
turers, the high degree of consumer loyalty and the ability to improve
pricing through innovation. Energizer believes SWS has high-quality
products, a defensible market position and the opportunity to grow sales
and margins. The SWS business is compatible with Energizer’s business
in terms of common customers, distribution channels and geographic
presence, which should provide opportunities to leverage Energizer’s
marketing expertise, business organization and scale globally.
The following reflects the assets and liabilities acquired by Energizer in
the SWS acquisition. Such asset and liability amounts are based on final
appraisal information.
ACQUIRED SWS ASSETS AND LIABILITIES
AT MARCH 28, 2003
Cash $ 14.9
Receivables 139.4
Inventories 201.9
Other current assets 50.0
Total current assets 406.2
Property, plant and equipment 247.0
Goodwill 281.6
Other intangible assets 233.4
Other assets 6.6
Total assets acquired 1,174.8
Accounts payable 47.7
Other current liabilities 88.5
Total current liabilities 136.2
Other liabilities 62.8
Total liabilities 199.0
Net assets acquired $ 975.8
Energizer engaged an independent appraiser to assist in valuation of
acquired intangible assets. Preliminary estimated values published in
Energizer’s June 30, 2003 10-Q filing with the SEC for intangible
assets other than goodwill were $116.4. Subsequent to publishing
such financial statements, the final appraisal was completed and intan-
gible assets other than goodwill were valued at $233.4, an increase
of $117.0 over the previously published value. Such change in value
resulted in a corresponding decrease in valuation assigned to goodwill
of $117.0.
The final assumed liabilities may be adjusted upon completion of a
specific evaluation and development of definitive exit plans for certain
acquired business activities. Such plan will be complete no later than
March 2004.
SWS inventory acquired in the acquisition was valued as if Energizer
was a distributor purchasing the inventory. This resulted in a one-time
allocation of purchase price to acquired inventory which was $89.7
higher than the historical manufacturing costs of SWS (the SWS inven-
tory write-up). Inventory value and cost of products sold will be based
on post-acquisition SWS production costs for all product manufactured
after the acquisition date. The entire $89.7 of the SWS inventory
write-up was recognized in cost of products sold in 2003, reducing
net earnings by $58.3, after taxes.
ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollars in millions, except per share data)