Energizer 2008 Annual Report Download - page 33

ENERGIZER HOLDINGS, INC. 2008 Annual Report 31
The allocation of the purchase price is as follows:
Cash $13.1
Trade receivables, net 102.9
Inventories 124.0
Other current assets 37.0
Goodwill 826.2
Other intangible assets 1,367.9
Other assets 0.3
Property, plant and equipment, net 152.1
Accounts payable (33.9)
Other current liabilities (169.0)
Other liabilities (525.4)
Net assets acquired $1,895.2
Goodwill is not deductible for tax purposes. The purchased identifiable
intangible assets of $1,367.9 as of the October 1, 2007 acquisition date,
is included in the table below. Long-term deferred tax liabilities related
to identifiable intangible assets are approximately $484 as of the
October 1, 2007 acquisition date, and are included in other liabilities
in the table above.
Total
Amortization
Period
Trademarks $1,313.9 indefinite-lived
Customer Relationships 43.9 10 years
Patents 5.1 7 years
Non-Compete 5.0 18 months
Total other intangible assets $1,367.9
The Company’s results of operations include Playtex as of the date
of acquisition, or beginning October 1, 2007. In accordance with
GAAP, Playtex inventory acquired in the Acquisition was valued at its
estimated fair value on the date of acquisition. As a result, the fair value
of inventory was $27.5 greater than the historical cost basis of such
inventory prior to the Acquisition. This required accounting treatment
reduced gross profit in the twelve months ended September 30, 2008
by $27.5 compared to the historical Playtex cost basis.
Playtex acquired Tiki Hut Holding Company (“Hawaiian Tropic”), owner
of the Hawaiian Tropic brand on April 18, 2007. The pro forma results
below, reflect results for Hawaiian Tropic only from the acquisition date
of April 18, 2007. They include incremental interest and financing costs
related to the Acquisition and purchase accounting adjustments includ-
ing the impact of increased depreciation and amortization expense. The
unaudited pro forma earnings statement is based on, and should be
read in conjunction with the Company’s historical consolidated financial
statements and related notes, as well as Playtex historical consolidated
financial statements and related notes included in the Form 8-K filing of
October 1, 2007, as amended on December 17, 2007.
The impacts of any revenue or cost synergies that may result from the
Acquisition are not included in the pro forma results. The Company has
generated cost synergies by combining certain SG&A functions, and
continues pursuing purchasing, manufacturing and logistics savings
through increased scale and coordination. Additional costs may be
incurred that will impact the Company’s Consolidated Statements of
Earnings. The magnitude and timing of such synergies and costs are
still not fully known. Benefits from cost synergies began in fiscal year
2008, with total savings building throughout fiscal 2009 and 2010.
The following table represents the Company’s Unaudited Pro Forma
Condensed Combined Statement of Earnings as if the Acquisition
occurred at the beginning of fiscal 2007.
UNAUDITED PRO FORMA
Twelve Months Ended
September 30, 2007
Net Sales
Household Products $2,376.3
Personal Care 1,694.1
Total net sales $4,070.4
Profitability
Household Products $ 472.3
Personal Care 271.2
Total segment profitability $ 743.5
General corporate and other expenses (138.3)
Acquisition inventory valuation (29.4)
Amortization (12.5)
Interest and other financial items (192.2)
Earnings before income taxes $ 371.1
Income tax provision 88.1
Net earnings $ 283.0
Basic EPS $ 4.99
Diluted EPS $ 4.85
Weighted-Average Shares - Basic 56.7
Weighted-Average Shares - Diluted 58.3
4. GOODWILL AND INTANGIBLE ASSETS AND AMORTIZATION
Goodwill and intangible assets deemed to have an indefinite life are
not amortized, but reviewed annually for impairment of value. The
Company monitors changing business conditions, which may indicate
that the remaining useful life of goodwill and other intangible assets
may warrant revision or carrying amounts may require adjustment. As
part of its business planning cycle, the Company performed its annual
impairment test in the fourth quarter of fiscal 2008, 2007 and 2006.
Impairment testing was performed for each of the Company’s reporting
units, Household Products, Wet Shave and Playtex. No impairments
were identified and no adjustments were deemed necessary.
The following table represents the carrying amount of goodwill by
segment at September 30, 2008:
Household
Products
Personal
Care Total
Balance at October 1, 2007 $40.1 $ 340.0 $ 380.1
Acquisition of Playtex – 826.2 826.2
Cumulative translation
adjustment (1.3) 1.4 0.1
Balance at September 30,
2008 $38.8 $1,167.6 $1,206.4