Energizer 2004 Annual Report Download - page 42

In June 2004, the Company filed a counterclaim against Gillette alleging
that Gillette committed fraud against the Patent Office when it obtained
its three-blade progressive geometry patent and, therefore, that Gillette’s
attempts to enforce the patent violate U.S. antitrust laws. Trial on Gillette’s
claims is expected in 2005, with trial on the Company’s counterclaims
thereafter. The Company believes that it has meritorious defenses to
Gillette’s allegations.
On December 19, 2003, Gillette filed suit against the Company’s
Wilkinson Sword subsidiary in Germany alleging that QUATTRO infringes
Gillette’s European patent which is equivalent to the three-blade pro-
gressive geometry patent at issue in the Massachusetts District Court.
The Company separately challenged the validity of Gillette’s European
progressive geometry patent in a European Patent Office action, but, at
a hearing held in March, 2004, its challenge was denied. The Company
has filed an appeal of this decision. Gillette’s lawsuit against the
Company’s subsidiary will proceed to trial in December of 2004.
On February 13, 2004, the Company filed a patent infringement suit
against Gillette in federal district court in Connecticut. The complaint
alleges that Gillette is infringing three Schick patents concerning the
connection of the blade cartridge to the razor handle. At the time the
suit was filed, these three patents covered Gillette’s Mach3, Mach3
Turbo and Venus product lines. Since the filing of the suit, however,
Gillette has introduced a new product, Mach3 Power. On July 15,
2004, the Company amended its suit, adding an allegation that Mach3
Power infringes the Schick patents.
In May 2004, Gillette filed three suits against Wilkinson Sword in
Hamburg, Germany seeking preliminary injunctions. The first suit alleges
that sale of the Wilkinson Sword Intuition razor in Germany infringes a
Gillette patent covering the Intuition shower caddy. The second suit
alleges that the sale of the Wilkinson Sword Intuition razor in Germany
infringes a Gillette patent covering the Intuition cartridge container. The
third suit alleges that the manufacture and sale of the Wilkinson Sword
QUATTRO razor in Germany infringes a Gillette patent covering the razor
handle. A hearing was held on these three preliminary injunction
requests on June 16, 2004 and, when the judge indicated that he was
going to deny the injunctions, Gillette withdrew its requests. Gillette filed
the same suits against Wilkinson Sword in Düsseldorf, Germany, but did
not seek preliminary relief. Those suits are in a preliminary stage and
hearings are scheduled during 2005.
The Company and its subsidiaries are parties to a number of other legal
proceedings in various jurisdictions arising out of the operations of the
Company 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, 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 Company’s financial position,
taking into account established accruals for estimated liabilities.
20. Other Commitments and Contingencies
The Company has certain guarantees that are required to be disclosed
under FASB Interpretation 45. The Company guaranteed loans for
certain common stock purchases made by certain executive officers and
other key executives of the Company. 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 maximum term of
each individual loan guarantee is three years, and the Company may
offset any losses it may incur under an individual loan guarantee against
any amounts owed by it to the individual officer or executive.
An international affiliate of the Company has $3.6 of funds deposited
in a bank account that is acting as collateral for a certain bank loan.
The Company has reflected this bank deposit as Restricted Cash on its
balance sheet. The loan was initiated in June 2004 for a three-month
period. At 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 financing section of the Statement of Cash Flows.
Future minimum rental commitments under noncancellable operating
leases in effect as of September 30, 2004 were $15.7 in 2005,
$12.2 in 2006, $10.3 in 2007, $9.0 in 2008, $7.5 in 2009 and
$12.3 thereafter. These leases are primarily for office facilities.
Total rental expense for all operating leases was $22.9, $22.2 and
$17.3 in 2004, 2003 and 2002, respectively.
ENR 2004 Annual Report
40
ENERGI ZER HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCI AL STATEMENTS Continued
(Dollars in millions, except per share data)