Energizer 2010 Annual Report Download - page 32

ENERGIZER HOLDINGS, INC.
(Dollars in millions, except per share and percentage data)
22
The resolution of Energizer’s tax contingencies may result in additional tax liabilities,
and/or tax rates may increase, which could adversely impact our cash flows and results
of operations.
Energizer is subject to income tax in the U.S. and numerous jurisdictions outside the U.S.
Significant estimation and judgment is required in determining our worldwide provisions for
income taxes. In the ordinary course of our business, there are many transactions and
calculations in which the ultimate tax determination is uncertain. We are regularly under audit
by tax authorities, and although we believe our tax estimates are reasonable, the final outcome
of tax audits and related litigation could be materially different than that reflected in our
historical income tax provisions and accruals. There can be no assurance that the resolution of
any audits or litigation will not have an adverse impact on future operating results.
Our effective tax rate in any year can be significantly impacted by legislative or regulatory
changes by taxing authorities, as well as by the profitability or losses of Energizer's various
subsidiary operations in both high-tax and low-tax countries.
If Energizer fails to adequately protect its intellectual property rights, competitors may
manufacture and market similar products, which could adversely affect our market
share and results of operations.
Energizer relies on trademark, trade secret, patent and copyright laws to protect our intellectual
property rights. In particular, our trademarks are of material importance to our business and are
among our most important assets. In fiscal 2010, substantially all of our total revenues were
from products bearing proprietary trademarks and brand names. Accordingly, our future
success may depend, in part, upon the goodwill associated with our trademarks and brand
names. In addition, Energizer owns or licenses from third parties a considerable number of
patents, patent applications and other technology which Energizer believes are significant to
our business.
We cannot be sure that these intellectual property rights will be maximized or that they can be
successfully asserted. There is a risk that Energizer will not be able to obtain and perfect or
maintain our own intellectual property rights or, where appropriate, license intellectual property
rights necessary to support new product introductions. We cannot be certain that these rights, if
obtained, will not be invalidated, circumvented or challenged in the future, and Energizer could
incur significant costs in connection with legal actions to defend our intellectual property rights.
In addition, even if such rights are obtained in the United States, the laws of some of the other
countries in which Energizer’s products are or may be sold do not protect intellectual property
rights to the same extent as the laws of the United States. If other parties infringe our
intellectual property rights, they may dilute the value of our brands in the marketplace, which
could diminish the value that consumers associate with our brands and harm our sales. The
failure to perfect or successfully assert our intellectual property rights could make Energizer
less competitive and could have a material adverse effect on our business, operating results
and financial condition.
We may not be able to continue to identify and complete strategic acquisitions and
effectively integrate acquired companies to achieve desired financial benefits.
We have completed four significant acquisitions since becoming an independent company in
2000. We expect to continue making acquisitions if appropriate opportunities arise. However,