Energizer 2010 Annual Report Download - page 31

ENERGIZER HOLDINGS, INC.
(Dollars in millions, except per share and percentage data)
21
Energizer’s business involves the potential for product liability and other claims against
us, which could affect our results of operations and financial condition.
We face exposure to product liability claims in the event that one of our products is alleged to
have resulted in property damage, bodily injury or other adverse effects. Although we maintain
product liability insurance in amounts that we believe are reasonable, we cannot assure you
that we will be able to maintain such insurance on acceptable terms, if at all, in the future or
that product liability claims will not exceed the amount of insurance coverage. Additionally, we
do not maintain product recall insurance. As a result, product recalls or product liability claims
could have a material adverse effect on our business, results of operations and financial
condition.
In addition, we face potential exposure to unusual or significant litigation arising out of alleged
defects in our products or otherwise. We spend substantial resources ensuring compliance with
governmental and other applicable standards. However, compliance with these standards does
not necessarily prevent individual or class action lawsuits, which can entail significant cost and
risk. We do not maintain insurance against many types of claims involving alleged defects in
our products that do not involve personal injury or property damage. As a result, these types of
claims could have a material adverse effect on our business, results of operations and financial
condition.
The level of returns on pension plan assets and the actuarial assumptions used for
valuation purposes could affect Energizer’s earnings and cash flows, and changes in
government regulations could impact expenses and funding requirements of such
plans.
The funding obligations for Energizer’s pension and postretirement plans are impacted by the
performance of the financial markets, particularly the equity and debt markets, and interest
rates. Funding obligations are determined under government regulations and are measured
each year based on the market value of assets and liabilities based on the interest rate
environment on a specific date. If the financial markets do not provide the expected long-term
returns on invested assets, we could be required to make significant pension contributions. The
equity and debt markets can be very volatile, and therefore our estimate of future contribution
requirements can change dramatically in relatively short periods of time. Similarly, changes in
interest rates and legislation enacted by governmental authorities can impact the timing and
amounts of contribution requirements by adding volatility to the calculation of the pension
liability. An adverse change in the funded status of the plans could significantly increase our
required contributions in the future and adversely impact our liquidity.
Assumptions used in determining benefit liabilities and the fair value of plan assets for our
pension and other postretirement benefit plans are evaluated by Energizer in consultations with
outside actuaries. In the event that we determine that changes are warranted in the
assumptions used, such as the discount rate and the expected long-term rate of return on
assets, our future pension and postretirement benefit expenses could increase or decrease.
Due to changing market conditions or changes in the participant population, the assumptions
we use may differ from actual results, which could have a significant impact on our pension and
postretirement liabilities and related costs and funding requirements.