Energizer 2008 Annual Report Download - page 32

30 ENERGIZER HOLDINGS, INC. 2008 Annual Report
Notes to Consolidated Financial Statements
(Dollars in millions, except per share and percentage data)
Statement of Financial Accounting Standards (SFAS) No. 141(R),
“Business Combinations”
In December 2007, the FASB issued a revised standard, SFAS
No. 141, “Business Combinations” (SFAS No. 141(R)), which improves
the relevance, representational faithfulness and comparability of the
financial information that is disclosed on business combinations and its
effects. In addition, it revises the method of accounting for a number
of aspects of business combinations including acquisition costs,
contingent liabilities, contingent purchase price and post-acquisition
exit activities of the acquired business. SFAS No. 141(R) is effective
for business combinations entered into in fiscal years beginning on or
after December 15, 2008, which would be as of October 1, 2009 for
Energizer. Early adoption is prohibited. The Company believes that
the adoption of SFAS No. 141(R) will not have a material effect on its
financial position, results of operations or cash flows.
SFAS No.160, “Non-Controlling Interests in Consolidated Financial
Statements - An Amendment to ARB No. 51”
In December 2007, the FASB issued SFAS 160, “Non-Controlling
Interests in Consolidated Financial Statements – An Amendment to
ARB No. 51” (SFAS 160), which improves the relevance, comparabil-
ity and transparency of the financial information that is disclosed for
minority interests. SFAS No. 160 is effective for fiscal years beginning
on or after December 15, 2008, which would be October 1, 2009 for
Energizer. Early adoption is prohibited. The Company believes that the
adoption of SFAS No. 160 will not have a material effect on its financial
position, results of operations or cash flows.
SFAS Standard No. 161, “Disclosures About Derivative Instruments
And Hedging Activities-An Amendment of FASB Statement No. 133”
In March 2008, the FASB issued SFAS No. 161, “Disclosures About
Derivative Instruments And Hedging Activities” (SFAS No. 161). SFAS
No. 161 is intended to help investors better understand how derivative
instruments and hedging activities affect an entity’s financial position,
financial performance and cash flows through enhanced disclosure
requirements. SFAS No. 161 is effective for financial statements issued
for fiscal years and interim periods beginning after November 15, 2008.
3. PLAYTEX ACQUISITION
On October 1, 2007, the Company acquired all of the issued and
outstanding shares of common stock of Playtex at $18.30 per share
in cash and simultaneously repaid all of Playtex’s outstanding debt as
of that date (the Acquisition) for consideration totaling $1,875.7. The
Company acquired all assets and assumed all liabilities of Playtex.
There are no contingent payments, options or commitments associ-
ated with the Acquisition. In a separate transaction, for consideration
totaling $19.5, the Company acquired certain intangible assets related
to the Wet Ones brand in the United Kingdom. Playtex owns the Wet
Ones trademark in the U.S. and Canada. This is included with the
Acquisition in the presentation of the financial impact of the Acquisition
presented below. A summary of consideration paid is as follows:
Short-term borrowings $ 175.0
Long-term borrowings 880.2
Borrowing to repay outstanding Playtex debt 590.9
Total consideration from borrowings 1,646.1
Cash used - gross 261.0
Less: Amount paid for deferred financing fees (7.5)
Less: Amount paid on deposit to collateralize open letters of
credit issued under the terminated Playtex credit agreement (4.4)
Total consideration from available cash 249.1
Total consideration $1,895.2
Playtex is a leading North American manufacturer and marketer in the
Skin, Feminine and Infant Care product categories, with a diversified
portfolio of well-recognized branded consumer products including
Banana Boat, Hawaiian Tropic, Wet Ones, Playtex tampons, Playtex
infant feeding products, Playtex household gloves, and Playtex Diaper
Genie. Playtex operates six facilities in the U.S. The Acquisition will
allow the Company to expand its product portfolio and presence in
the Personal Care business, including achieving economies of scale in
selling and distribution. In addition, the Acquisition further diversifies the
Company’s product portfolio.
The fair values of assets and liabilities acquired for purposes of allocat-
ing the purchase price were determined in accordance with SFAS
No. 141, “Business Combinations”. The Company estimated a fair
value adjustment for inventory based on the estimated selling price of
finished goods on hand at the closing date less the sum of (a) costs
of disposal and (b) a reasonable profit allowance for the selling effort
of the acquiring entity. The fair value adjustment for Playtex’s property,
plant and equipment was established using a cost approach for the
operating fixed assets and comparable sales and property assessment
data for the valuation of land. The fair values of Playtex’s identifiable
intangible assets were estimated using various valuation methods includ-
ing discounted cash flows using both an income and cost approach.
Estimated deferred income tax impacts as a result of purchase
accounting adjustments are reflected using the best estimate of the
applicable statutory income tax rates.
The Company developed an integration plan, pursuant to which the
Company will incur costs related primarily to involuntary severance
costs, exit plans and contractual obligations with no future economic
benefit. The estimates of liabilities assumed were determined in accor-
dance with Emerging Issues Task Force 95-3 “Recognition of Liabilities
in Connection with a Purchase Business Combination” (EITF 95-3).
The Company has combined certain SG&A functions, and is pursuing
purchasing, manufacturing and logistics savings through increased
scale and coordination. The allocation of the purchase price reflects
estimated additional liabilities associated with employee termination
and relocation totaling $35.3, of which $31.0 has been spent as of
September 30, 2008 with the remaining $4.3 classified as a current
liability at September 30, 2008. Additional estimated liabilities assumed
include contract termination and other exit costs totaling $18.5, of
which $8.0 has been spent as of September 30, 2008 with the remain-
ing $8.5 and $2.0 classified as current liabilities and other liabilities,
respectively, at September 30, 2008.