Energizer 2009 Annual Report Download - page 41

ENERGIZER HOLDINGS INC. 2009 ANNUAL REPORT PAGE 39
10. Defined Contribution Plan
The Company sponsors a defined contribution plan, which extends
participation eligibility to substantially all U.S. employees. The
Company matches 50% of participants’ before-tax contributions
up to 6% of eligible compensation. In addition, participants can
make after-tax contributions into the plan. The participant’s after-tax
contribution of 1% of eligible compensation is matched with a 325%
Company contribution to the participant’s pension plan account.
Effective January 1, 2010, the Company will no longer match the
1% after tax contribution with a 325% Company contribution to the
participant’s pension plan account. Amounts charged to expense
during fiscal 2009, 2008, and 2007 were $8.1, $8.5, and $5.6,
respectively, and are reflected in SG&A and cost of products sold
in the Consolidated Statements of Earnings. The increase in
expense for 2008 was due primarily to the addition of Playtex.
11. Debt
Notes payable at September 30, 2009 and 2008 consisted of notes
payable to financial institutions with original maturities of less than one
year of $169.1 and $264.4, respectively, and had a weighted-average
interest rate of 3.5% and 4.7%, respectively.
The detail of long-term debt at September 30 for the year indicated is
as follows:
2009 2008
Private Placement, fixed interest rates ranging
from 3.6% to 6.6%, due 2010 to 2017 $1,930.0
$2,230.0
Term Loan, variable interest at LIBOR + 75
basis points, or 1.0%, due 2012 459.5 465.5
Total long-term debt, including current maturities 2,389.5 2,695.5
Less current portion 101.0 106.0
Total long-term debt $2,288.5 $2,589.5
The Company maintains total committed debt facilities of $3,048.6, of
which $477.4 remained available as of September 30, 2009.
During the second quarter of fiscal 2009, the Company entered into
interest rate swap agreements with two major multinational financial
institutions that fixed the variable benchmark component (LIBOR) of
the Company’s interest rate on $300 of the Company’s variable rate
debt through December 2012 at an interest rate of 1.9%.
Under the terms of the Company’s credit agreements, the ratio of the
Company’s indebtedness to its EBITDA, as defined in the agreements,
cannot be greater than 4.00 to 1, and may not remain above 3.50 to
1 for more than four consecutive quarters. If and so long as the ratio
is above 3.50 to 1 for any period, the Company is required to pay
additional interest expense for the period in which the ratio exceeds
3.50 to 1. The interest rate margin and certain fees vary depending
on the indebtedness to EBITDA ratio. Under the Company’s private
placement note agreements, the ratio of indebtedness to EBITDA
may not exceed 4.0 to 1. However, if the ratio is above 3.50 to 1, the
Company is required to pay an additional 75 basis points in interest
for the period in which the ratio exceeds 3.50 to 1. In addition, under
the credit agreements, the ratio of its current year EBIT, as defined
in the agreements, to total interest expense must exceed 3.00 to 1.
The Company’s ratio of indebtedness to its EBITDA was 3.14 to 1,
and the ratio of its EBIT to total interest expense was 4.40 to 1, as of
September 30, 2009. Each of the calculations at September 30, 2009
was pro forma for the shave preparation acquisition. The Company
anticipates that it will remain in compliance with its debt covenants for
the foreseeable future. The impact on EBITDA resulting from the VERO
and RIF charges in the fourth quarter of 2009 had a negative impact on
the ratio of indebtedness to EBITDA as such charges are not excluded
from the calculation of EBITDA under the terms of the agreements.
The VERO and RIF charges will negatively impact trailing twelve month
EBITDA, which is used in the ratio, through the third quarter of fiscal
2010, after which it will roll out of the calculation. Savings from the
VERO and RIF programs will somewhat mitigate the negative EBITDA
impact of the restructuring charges as they are realized during this time
frame, and will remain a positive impact on the ratio going forward. If
the Company fails to comply with the financial covenants referred to
above or with other requirements of the credit agreements or private
placement note agreements, the lenders would have the right to accel-
erate the maturity of the debt. Acceleration under one of these facilities
would trigger cross defaults on other borrowings.
On May 5, 2009, the Company amended and renewed its existing
receivables securitization program, under which the Company sells
interests in certain accounts receivable, and which provides funding
to the Company of up to $200 with two large financial institutions.
The sales of the receivables are affected through a bankruptcy remote
special purpose subsidiary of the Company, Energizer Receivables
Funding Corporation (ERFC). Funds received under this financ-
ing arrangement are treated as borrowings rather than proceeds
of accounts receivables sold for accounting purposes. However,
borrowings under the program are not considered debt for covenant
compliance purposes under the Company’s credit agreements and
private placement note agreements. The program is subject to renewal
annually on the anniversary date. At September 30, 2009, a total of
$147.5 was outstanding under this financing arrangement.