Energizer 2005 Annual Report Download - page 29

ENR 2005 Annual Report 27
circumstances indicate that the remaining useful life may warrant
revision or that the carrying amount of the long-lived asset may
not be fully recoverable. The Company performs undiscounted
cash flow analyses to determine if impairment exists. If impairment
is determined to exist, any related impairment loss is calculated
based on fair value. Impairment losses on assets to be disposed
of, if any, are based on the estimated proceeds to be received,
less costs of disposal.
Share-Based Payments The Company accounts for stock options
using the intrinsic value method as prescribed by Accounting
Principles Board Opinion (APB 25). Pro forma disclosures required
under Statement of Financial Accounting Standards (SFAS) 123,
“Accounting for Stock-Based Compensation,” as if the Company
had adopted the fair value-based method of accounting for stock
options, are presented below. See Note 9 for additional details.
Charges to net earnings for stock-based compensation under
APB 25 were $3.3, $1.8 and $1.9 for 2005, 2004 and 2003, respec-
tively. Had cost for stock-based compensation been determined
based on the fair value method set forth under SFAS 123, charges
to net earnings would have been an additional $5.7 in 2005 and
$6.4 in both 2004 and 2003. Pro forma amounts shown below
arefor disclosurepurposes only and may not be representative
of futurecalculations.
2005 2004 2003
Net earnings:
As reported $286.4 $267.4 $ 169.9
Proforma adjustments (5.7) (6.4) (6.4)
Pro forma $280.7 $261.0 $ 163.5
Basic earnings per share:
As reported $4.03 $3.32 $ 1.98
Proforma adjustments (0.08) (0.08) (0.08)
Pro forma $3.95 $3.24 $ 1.90
Diluted earnings per share:
As reported $3.90 $3.21 $ 1.93
Pro forma adjustments (0.08) (0.08) (0.08)
Proforma $3.82 $3.13 $ 1.85
On December 16, 2004, the FASB issued SFAS 123 (revised 2004),
“Share-Based Payment” (SFAS 123R), which requires compensation
cost relating to share-based payment transactions be recognized
in financial statements. Such cost will be measured based on the
fair value of the equity or liability instruments issued. This statement
eliminates the alternative to use the intrinsic value method of
accounting per APB 25 and is effective for the Company no later
than the first quarter of fiscal 2006. SFAS 123R may be adopted
prospectively or retrospectively.
Revenue Recognition The Company’s revenue is from the sale of
its products. Revenue is recognized when title, ownership and risk
of loss passes to the customer. Discounts are offered to customers
for early payment and an estimate of such discounts is recorded
as a reduction of net sales in the same period as the sale. Our
standard sales terms are final and returns or exchanges are not
permitted unless a special exception is made; reserves are estab-
lished and recorded in cases where the right of return does exist
for a particular sale. The Company offers a variety of programs,
primarily to its retail customers, designed to promote sales of its
products. Such programs require periodic payments and allowances
based on estimated results of specific programs and are recorded
as a reduction to net sales. The Company accrues at the time of
sale the estimated total payments and allowances associated with
each transaction. Additionally, the Company offers programs
directly to consumers to promote the sale of its products. Promotions
which reduce the ultimate consumer sale prices are recorded as
areduction of net sales at the time the promotional offer is made,
generally using estimated redemption and participation levels.
The Company continually assesses the adequacy of accruals for
customer and consumer promotional program costs not yet paid.
To the extent total program payments differ from estimates, adjust-
ments may be necessary.Historically,these adjustments have
not been material.
Advertising and Promotion Costs The Company advertises and
promotes its products through national and regional media and
expenses such activities in the year incurred. Through fiscal 2004,
the Company recorded advertising and promotion expense
(A&P) ratably to revenues in interim periods. General A&P costs
wereexpensed over the full year while product launch activities
wereexpensed over the launch period. When forecasts of A&P or
revenues changed during the year, rates were changed to reflect
the new forecasts. Effective October 1, 2004, the Company began
to expense A&P in the quarter incurred. The new method of
accounting was adopted as it reduces the level of estimation in
recording interim results and improves transparency of timing of
A&P spending. The change in method had no impact on the total
results for the year.
Reclassifications Certain reclassifications have been made to the
prior year financial statements to conform to the current presentation.
Recently Adopted or Issued Accounting Pronouncements On
November 24, 2004, the FASB issued SFAS 151, “Inventory Costs –
an amendment of ARB No. 43, Chapter 4.” SFAS 151 seeks to clarify
the accounting for abnormal amounts of idle facility expense, freight,
handling costs and wasted material (spoilage) in the determination
of inventory carrying costs. The statement requires such costs to
be treated as a current period expense. This statement is effective
October 1, 2006 for the Company. The Company does not believe
that the adoption of SFAS 151 will have a material impact on the
Consolidated Financial Statements of the Company.