Energizer 2003 Annual Report Download - page 42

occupational safety, employment practices or other business matters
routinely regulated in the United States. As such economies develop, it
is possible that new regulations may increase the risk and expense of
doing business in such countries.
Accruals for environmental remediation are recorded when it is probable
that a liability has been incurred and the amount of the liability can be
reasonably estimated, based on current law and existing technologies.
These accruals are adjusted periodically as assessments take place and
remediation efforts progress, or as additional technical or legal informa-
tion becomes available.
It is difficult to quantify with certainty the potential financial impact of
actions regarding expenditures for environmental matters, particularly
remediation, and future capital expenditures for environmental control
equipment. Nevertheless, based upon the information currently avail-
able, Energizer believes that its ultimate liability arising from such
environmental matters, taking into account established accruals of $9.7
for estimated liabilities at September 30, 2003, should not be material
to its financial position. Such liability could, however, be material to
results of operations or cash flows for a particular quarter or year.
Legal Proceedings Energizer was served with a lawsuit filed on August 12,
2003 in the U.S. District Court for the District of Massachusetts in Boston,
Massachusetts by the Gillette Company. The lawsuit alleges that SWS’ new
QUATTRO™ men’s shaving system infringes one of Gillette’s patents with
respect to a specific progressive geometric blade configuration, and peti-
tions the court for injunctive relief as well as monetary damages. On August
29, 2003, the Gillette Company filed a motion for a preliminary injunction.
Energizer believes that it has meritorious defenses to the action, and has
filed a response to the lawsuit denying Gillette’s allegations and asserting
several affirmative defenses, including that Gillette’s patent is invalid and
unenforceable. Energizer has also filed a motion opposing the request for
preliminary injunction, which was argued at a hearing in early November.
Energizer and its wholly owned subsidiary, Eveready Battery, Inc., were
served with a lawsuit filed on May 19, 2003 in the Circuit Court for the
20th Judicial Circuit in St. Clair County, Illinois by Amy Lynn Niehaus,
individually and on behalf of all others similarly situated. The lawsuit
petitions the court to order that it be maintained as a class action on
behalf of all present and past customers of the defendants that acquired
Eveready’s “Heavy Duty” or “Super Heavy Duty” carbon zinc batteries.
The lawsuit alleges that the labeling of carbon zinc batteries in such
manner was false and misleading and in violation of various state con-
sumer protection statutes, and seeks compensatory and punitive dam-
ages, costs and attorneys’ fees in an amount less than $0.1 per plaintiff
or class member. Energizer and Eveready believe that they have merito-
rious defenses to the complaint, and have jointly filed a Motion to
Dismiss, as well as a Motion to Transfer Venue.
Energizer and its subsidiaries are parties to a number of other legal
proceedings in various jurisdictions arising out of the operations of
the Energizer business. Many of these legal matters, including those
described above, 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, Energizer
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 Energizer’s
financial position, taking into account established accruals for estimated
liabilities. These liabilities, however, could be material to results of
operations or cash flows for a particular quarter or year.
19. OTHER COMMITMENTS AND CONTINGENCIES
Energizer has certain guarantees that are required to be disclosed under
FASB Interpretation 45. Energizer has arranged for letters of credit to be
supplied by financial institutions to meet regulatory requirements for
certain workers compensation and environmental obligations. Total let-
ters of credit posted were $0.5 at September 30, 2003 and such letters
expire annually, however they will likely be renewed upon expiration in
support of Energizer’s ongoing operations.
Energizer guaranteed loans for certain common stock purchases made by
certain executive officers and other key executives of Energizer. With respect
to the executive officers, these guarantees were amended in June 2002 to
apply only to the outstanding loan balances as of June 30, 2002. The
aggregate loan balances guaranteed total approximately $1.5. The maxi-
mum term of each individual loan guarantee is three years, and Energizer
may offset any losses it may incur under an individual loan guarantee
against any amounts owed by it to the individual officer or executive.
Energizer also has certain guarantees for the purchase of goods used in
the production of its product with terms ranging from four to eight years
with a maximum of potential future payments of approximately $0.5.
Future minimum rental commitments under noncancellable operating
leases in effect as of September 30, 2003, were $14.5 in 2004, $11.8
in 2005, $10.6 in 2006, $8.5 in 2007, $6.6 in 2008 and $45.3
thereafter. These leases are primarily for office facilities.
Total rental expense for all operating leases was $22.2, $17.3
and $17.9 in 2003, 2002 and 2001, respectively.
Page 40 ENR 2003 ANNUAL REPORT
ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollars in millions, except per share data)