Energizer 2008 Annual Report Download - page 22

20 ENERGIZER HOLDINGS, INC. 2008 Annual Report
The Company advises readers that various risks and uncertainties
could affect its financial performance and could cause the Company’s
actual results for future periods to differ materially from those antici-
pated or projected. Continuing negative economic conditions
associated with the global credit crisis, global stock market declines,
and economic deterioration, as well as competitive activity, could
significantly and negatively impact future growth and performance of
the Company’s businesses, including the Company’s trade-up strategy
for batteries and lighting products and the international expansion of
the Playtex product lines. Continued EPS growth in fiscal 2009, as well
as the Company’s long-term growth positioning, will depend not only
on improvement in the global macroeconomic conditions described
above, but also on the Company’s ability to continue operating its
businesses profitably in the face of declines in consumer spending,
potential retailer consolidation, material cost increases, limits on
availability of credit, and competitive activity, particularly in light of the
vastly greater size and market strength of the Company’s primary
competitor. The extent of future synergies related to the Playtex
acquisition may be significantly different from current expectations due
to changes in market or competitive conditions, systems or personnel
issues, or other operational factors. Anticipated category growth, if any,
for the Company’s businesses is difficult to quantify or estimate given
the current volatile global economic situation. The Company’s broad
diversified portfolio of battery products across a wide range of
consumer price points and service demands provides some measure
of protection against softness in various ranges of the battery category
spectrum. On the other hand, the overall category could be signifi-
cantly negatively impacted by continuing economic distress and
accompanying declines in consumer spending, as well as declines
in the proliferation or consumption of battery-powered devices or
the development of alternative power sources. Moreover, product
placement and shelf-space and facings available to our portfolio of
products are solely at the discretion of our retailer customers, which
can limit visibility or availability to the ultimate consumers. The
Company’s estimates of its U.S. market share and estimates of share
of the wet shave category, as well as estimates of excess retailer
inventory levels of battery products resulting from hurricane-related
shipments and early holiday shipments are based solely on limited
data available to it and management’s reasonable assumptions about
market conditions, and consequently may be inaccurate, or may not
reflect significant segments of the retail market. Consequently, sales
volumes for 2009 may be impacted more than currently estimated by
actual current inventory levels. The impact of material and other
inflationary input cost increases could be more significant than
anticipated, as it is difficult to predict with any accuracy whether raw
material, energy and other input costs will stabilize or continue to
increase, since such costs are impacted by multiple economic, political
and other factors outside of the Company’s control. The anticipated
benefits of the Company’s pricing actions, cost reduction programs
and incremental synergies from the Playtex acquisition may not be
realized to the extent anticipated, or may not be sufficient to offset
greater than anticipated increases in supply costs. The benefits of price
increases may not be realized in the event of consumer resistance
or a significant decline in consumer demand, if competitive activity
mandates additional promotional spending or a revamping of the
pricing structure, or if other operating costs increase unexpectedly.
The estimated future impact of foreign currency devaluations on the
Company’s profitability is also difficult to estimate with any degree of
certainty. Prolonged recessionary conditions in key global markets
where the Company competes could result in significantly greater local
currency devaluation and correspondingly greater negative impact on
the Company than what can be anticipated from current spot rates.
On the other hand, if concerted global stabilization measures achieve
some degree of economic recovery, local currencies could be
significantly strengthened relative to the dollar. Liquidity issues or
alternative cash flow uses, competitive activity or general economic
changes could impact the amount and timing of capital expenditures.
Continued compliance with debt covenants providing for a required
debt to EBITDA ratio can be impacted by higher than anticipated debt
levels as a result of greater than anticipated cash needs or by lower
than anticipated cash flows necessary for debt service. Compliance
can also be impacted by earnings declines over the measurement
period, either as a result of challenges faced specifically by the Compa-
ny’s businesses, or as a result of general economic conditions and rising
unemployment. 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 expenditures or
service its debt as it becomes due. 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
ENR 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 share option.
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 court orders;
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’s
historical experience in negotiating and settling disputes with respect
to similar sites – and such estimates may prove to be inaccurate.
Adjustments to accruals for promotional programs and calculations of
impairment of long-lived assets may be more significant than antici-
pated. The impact of decreases in the expected returns from pension
assets may have a greater than anticipated impact on pension
expenses and required cash contributions. In addition, other risks and
uncertainties not presently known to us or that we consider immaterial
could affect the accuracy of any such forward-looking statements. The
Company does not undertake any obligation to update any forward-
looking statements to reflect events that occur or circumstances that
exist after the date on which they were made. Additional risks and
uncertainties include those detailed from time to time in the Company’s
publicly filed documents.