Energizer 2005 Annual Report Download - page 40

38 ENR 2005 Annual Report
In addition, the Company undertook certain programs to reduce
or eliminate the environmental contamination at the rechargeable
battery facility in Gainesville, Florida, which was divested in
November 1999. Responsibility for those programs was assumed
by the buyer at the time of the divestiture. In 2001, the buyer, as
well as its operating subsidiary which owned and operated the
Gainesville facility, filed petitions in bankruptcy. In the event that
the buyer and its affiliates become unable to continue the programs
to reduce or eliminate contamination, the Company could be
required to bear financial responsibility for such programs as well
as for other known and unknown environmental conditions at the
site. Under the terms of the Reorganization Agreement between
the Company and Ralston Purina Company, however, which has
been assumed by an affiliate of The Nestle Corporation, Ralston’s
successor is obligated to indemnify the Company for 50% of any
such liabilities in excess of $3.0.
Under the terms of the Stock and Asset Purchase Agreement
between Pfizer, Inc. and the Company, relating to the acquisition
of the SWS business, environmental liabilities related to pre-closing
operations of that business, or associated with properties acquired,
are generally retained by Pfizer, subject to time limitations varying
from two years to 10 years following closing with respect to various
classes or types of liabilities, minimum thresholds for indemnification
by Pfizer and maximum limitations on Pfizer’s liability, which thresh-
olds and limitations also vary with respect to various classes or
types of liabilities.
Many European countries, as well as the European Union,
have been veryactive in adopting and enforcing environmental
regulations. In many developing countries in which the Company
operates, therehas not been significant governmental regulation
relating to the environment, occupational safety, employment
practices or other business matters routinely regulated in the
U.S. As such economies develop, it is possible that new regula-
tions 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 information becomes available.
Accrued environmental costs at September 30, 2005 were $7.2,
of which $1.1 is expected to be spent in fiscal 2006. This accrual is
not measured on a discounted basis. It is difficult to quantify with
certainty the cost of environmental matters, particularly remediation
and future capital expenditures for environmental control equipment.
Nevertheless, based on information currently available, the Company
believes the possibility of material environmental costs in excess of
the accrued amount is remote.
Legal Proceedings The Company 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 the Company’s QUATTRO men’s shaving
system infringes one of Gillette’spatents with respect to a specific
progressive geometric blade configuration, and petitions the court
for injunctive relief as well as monetarydamages. Gillette filed a
motion for a preliminary injunction in the matter, which was denied
by the Court in an order issued January 15, 2004. The Court held
that Gillette’s patent claims were limited to razors with three blades,
and so could not cover the four-bladed QUATTRO razor design.
Thereafter,Gillette appealed that decision to the U.S. Courtof
Appeals for the Federal Circuit. In June 2004, the Company filed
acounterclaim 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. In November
2004, the Company added another counterclaim against Gillette,
alleging breach of contract under a 1989 Agreement that gave the
Company’s predecessor, Warner Lambert, immunity from suit under
the patent at issue. On April 29, 2005, the U.S. Court of Appeals
ENERGIZER HOLDINGS, INC.
Notes to Consolidated Financial Statements
(Dollars in millions, except per share and percentage data)