Energizer 2005 Annual Report Download - page 20

18 ENR 2005 Annual Report
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. The Company 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 increases in overall battery consumption, the
impact of changes in the value of local currencies on segment
profitability, Energizer’s estimates of its share of total U.S. retail
battery market and SWS share of the wet shave category in various
markets, Energizer’spositioning to meet consumer demand and the
benefits of its portfolio of products, the Company’s assessment of
the wet shave products category and the ability of the SWS business
to increase sales and margins, the potential for future restructuring
activity,the unfavorability of product costs in the coming year,the
amount of future cost savings from the VERO program, the esti-
mates of the Company’sfuturetax rates, estimated capital expendi-
tures for fiscal 2006 and their source of financing, the likelihood of
acceleration of the Company’s debt covenants, the anticipated
adequacy of cash flows and the Company’sability to meet liquidity
requirements, the Company’s ability to mitigate future material, labor
and transportation cost increases, the materiality of future expenditures
for environmental matters and environmental control equipment, the
impact of adverse changes in interest rates, the market risk of foreign
currency derivatives, the mitigating impact of changes in value of
the prepaid share option on deferred compensation liabilities, the
impact of variations from assumptions on pension asset returns on
the Company’s pre-tax pension expense, and the potential initiation
of realignment activities and the anticipated amount of charges to
earnings associated therewith, may be considered forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. The Company cautions readers not to place
undue reliance on any forward-looking statements, which speak
only as of the date made.
The Company advises readers that various risks and uncertainties
could affect its financial performance and could cause the
Company’sactual results for future periods to differ materially from
those anticipated or projected. Battery consumption trends could
be negatively impacted by general economic conditions or product
innovations. Energizer’s estimates of its U.S. alkaline market share,
and estimates of SWS share of the wet shave category 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 the Company’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. Unforeseen fluctuations in levels of the Company’s
operating cash flows, or inability to maintain compliance with its
debt covenants, could limit the Company’s ability to meet future
operating expenses and liquidity requirements, fund capital expen-
ditures or service its debt as it becomes due. U.S. or international
political or economic crises, natural disasters, or increasing global
demands for raw materials and energy, could result in higher
product costs and higher levels of inflation in general than currently
anticipated, and the Company may not be able to realize cost
reductions, productivity 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 the Company’s financial position. Estimates of
environmental liabilities are based upon, among other things, the
Company’s payments and/or accruals with respect to each
remediation site; the number,ranking and financial strength of other
responsible parties (PRPs), the status of the proceedings, including
various settlement agreements, consent decrees or courtorders;
allocations of volumetric waste contributions and allocations of
relative responsibility among PRPs developed by regulatory agencies
and by private parties; remediation cost estimates prepared by
governmental authorities or private technical consultants; and the
Company’shistorical experience in negotiating and settling disputes
with respect to similar sites – and such estimates may prove to be
inaccurate. Anticipated long-termcost savings associated with job
eliminations or replacements with lower-priced workers as a result
of the VERO may not materialize, depending upon longer-term
production needs and the competitive job market in communities
where the Company’s facilities are located. The Company’s overall
tax rate in futureyears may be higher than anticipated 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 the Company’s risk from
unfavorable impact on variable-rate debt, currency derivatives
and other financial instruments. Deferred compensation liabilities
reflecting the value of the Common Stock may increase significantly,
depending on market fluctuation and employee elections, but such
increase may not be reflected in a comparable increase in the value
of the prepaid shareoption. The impact of decreases in the expected
returns from pension assets may have a greater than anticipated
impact on pension expenses. Management’s determination of the
relative value of potential savings opportunities versus expenses
associated with supply chain realignment activity may recommend
against the initiation of such activity. Current assumptions of associ-
ated charges are preliminary and may not reflect all termination or
distribution expenses or other charges which may actually be
incurred. Additional risks and uncertainties include those detailed
from time to time in the Company’spublicly filed documents, includ-
ing its Registration Statement on Form 10, as amended, and its
Current Report on Form 8-K dated April 25, 2000.
ENERGIZER HOLDINGS, INC.
Management’s Discussion and Analysis of Results of Operations and Financial Condition
(Dollars in millions, except per share and percentage data)