Energizer 2004 Annual Report Download - page 32

ENR 2004 Annual Report
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5. Accounts Receivable Write-down
On January 23, 2002, Kmart filed for Chapter 11 bankruptcy protection.
The Company’s Special Purpose Entity (SPE) (see Note 15) had pre-
petition accounts receivable from Kmart of $20.0. In the year ended
September 30, 2002, the Company recorded total charges related to
such receivables of $15.0 pre-tax, or $9.3 after-tax.
In 2004, the Company received shares of Kmart stock with a market
value at the date of receipt of $4.3 as part of a settlement agreement
related to the Kmart bankruptcy. All such stock was sold by September 30,
2004. Future additional settlements are possible in 2005 or upon final
settlement, which has not yet occurred.
6. I ntellectual Property Rights Income
The Company entered into agreements to license certain intellectual
property to other parties in separate transactions. Such agreements do
not require any future performance by the Company, thus all committed
consideration was recorded as income at the time each agreement was
executed. The Company recorded income related to such agreements of
$1.5 pre-tax, or $0.9 after-tax, and $8.5 pre-tax, or $5.2 after-tax, in
the years ended September 30, 2004 and 2003, respectively.
7. Fixed Asset Impairment
The Company recorded a pre-tax charge in 2004 for asset impairment
of $4.2 in research and development expense. The charge was to write
down to disposition value certain long-lived assets following a decision
to discontinue a project to develop alternative manufacturing methods.
Additionally, the Company recorded a $1.9 pre-tax asset impairment
charge in 2004 in cost of products sold for impaired assets used to
produce products that have been discontinued. The impaired long-lived
assets had been carried in the North America Battery segment.
8. Goodwill and Intangible Assets and Amortization
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.
Goodwill and intangible assets deemed to have an indefinite life are not
amortized, but tested at least annually for impairment of value. The
Company had indefinite-lived trademarks and tradenames of $263.1 at
September 30, 2004. Intangible assets with finite lives are amortized
over those useful lives.
As battery businesses have been acquired in the past, the Company has
allocated goodwill and other intangible assets to individual countries or
areas. The battery business intangible assets are comprised of trademarks
primarily related to the Energizer brand. Such intangible assets are
deemed indefinite-lived.
With the acquisition of SWS, additional indefinite-lived trademarks
and additional tradenames, technology, patents and customer-related
intangibles with lives ranging from five to 15 years were incorporated
into the Company’s financial statements.
As part of its business planning cycle, the Company performed its annual
impairment test in the fourth quarter of fiscal 2004, 2003 and 2002.
Separate impairment testing of the Company’s reporting units was performed
at the area level (North America, Europe, Asia Pacific and Latin America)
within each reporting segment of the Company. The fair value of each area
reporting unit was estimated using the discounted cash flow method.
ENERGI ZER HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCI AL STATEMENTS Continued
(Dollars in millions, except per share data)
The following table presents, by major cost component and by year of provision, activity related to the restructuring charges discussed above during
fiscal years 2004, 2003 and 2002, including any adjustments to the original charges:
2002 Rollforward 2003 Rollforward 2004 Rollforward
Beginning Provision/ Ending Beginning Provision/ Ending Beginning Provision/ Ending
Balance (Reversals) Activity Balance Balance (Reversals) Activity Balance Balance (Reversals) Activity Balance
2001 PLAN
Termination benefits $ 5.3 $ 1.3 $ (5.7) $ 0.9 $ 0.9 $ – $ (0.9) $ – $ – $ – $ – $ –
Other cash costs 3.9 0.1 (3.8) 0.2 0.2 – (0.2) – ––––
Fixed asset impairments – (0.4) 0.4–––––––––
Total 9.2 1.0 (9.1) 1.1 1.1 – (1.1) – ––––
ALL OTHER PLANS
Termination benefits – 5.7 (0.3) 5.4 5.4 0.1 (3.2) 2.3 2.3 – (2.3) –
Other cash costs – 1.0 (0.2) 0.8 0.8 0.1 (0.8) 0.1 0.1 – (0.1) –
Total – 6.7 (0.5) 6.2 6.2 0.2 (4.0) 2.4 2.4 – (2.4) –
Grand Total $ 9.2 $ 7.7 $ (9.6) $ 7.3 $ 7.3 $ 0.2 $ (5.1) $ 2.4 $ 2.4 $ – $ (2.4) $ –