Energizer 2010 Annual Report Download - page 106

Download and view the complete annual report

Please find page 106 of the 2010 Energizer annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 124

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124

Exhibit 13
ENERGIZER HOLDINGS, INC.
(Dollars in millions, except per share and percentage data)
96
repurchase of up to an additional 10 million shares and 8 million shares remain under such
authorization as of September 30, 2010. There were no shares repurchased during fiscal year
2010 other than a small number of shares related to the net settlement of certain stock awards
for tax withholding purposes.
(13) Financial Instruments and Risk Management
The market risk inherent in the Company’s financial instruments and positions represents the
potential loss arising from adverse changes in currency rates, commodity prices, interest rates
and the Company’s stock price. Company policy allows derivatives to be used only for
identifiable exposures and, therefore, the Company does not enter into hedges for trading
purposes where the sole objective is to generate profits.
Concentration of Credit Risk The counterparties to derivative contracts consist of a number of
major financial institutions and are generally institutions with which the Company maintains lines
of credit. The Company does not enter into derivative contracts through brokers nor does it
trade derivative contracts on any other exchange or over-the-counter markets. Risk of currency
positions and mark-to-market valuation of positions are strictly monitored at all times.
The Company continually monitors positions with, and credit ratings of, counterparties both
internally and by using outside rating agencies. The Company has implemented policies that
limit the amount of agreements it enters into with any one party. While nonperformance by these
counterparties exposes the Company to potential credit losses, such losses are not anticipated.
The Company sells to a large number of customers primarily in the retail trade, including those in
mass merchandising, drugstore, supermarket and other channels of distribution throughout the
world. The Company performs ongoing evaluations of its customers' financial condition and
creditworthiness, but does not generally require collateral. The Company’s largest customer had
obligations to the Company with a carrying value of $128.6 at September 30, 2010. While the
competitiveness of the retail industry presents an inherent uncertainty, the Company does not
believe a significant risk of loss from a concentration of credit risk exists with respect to accounts
receivable.
In the ordinary course of business, the Company enters into contractual arrangements
(derivatives) to reduce its exposure to foreign currency, interest rate and commodity price risks.
The section below outlines the types of derivatives that existed at September 30, 2010 and 2009
as well as the Company’s objectives and strategies for holding these derivative instruments.
Commodity Price Risk The Company uses raw materials that are subject to price volatility. At
times, hedging instruments are used by the Company to reduce exposure to variability in cash
flows associated with future purchases of zinc or other commodities. The fair market value of
the Company's outstanding hedging instruments included in Accumulated other comprehensive
loss on the Consolidated Balance Sheets was an unrealized pre-tax gain of $1.0 and $6.1 at
September 30, 2010 and 2009, respectively. Over the next twelve months, approximately $0.3 of
the loss included in Accumulated other comprehensive loss will be recognized in earnings.
Contract maturities for these hedges extend into fiscal year 2012. There were 14 open contracts
at September 30, 2010.
Foreign Currency Risk A significant portion of Energizer’s product cost is more closely tied to
the U.S. dollar than to the local currencies in which the product is sold. As such, a weakening of
currencies relative to the U.S. dollar results in margin declines unless mitigated through pricing
actions, which are not always available due to the competitive environment. Conversely, a
strengthening in currencies relative to the U.S. dollar can improve margins. As a result, the