Energizer 2010 Annual Report Download - page 66

Exhibit 13
ENERGIZER HOLDINGS, INC.
(Dollars in millions, except per share and percentage data)
56
the foreseeable future. The negative impact on EBITDA resulting primarily from the Venezuela
devaluation of $18.3, pre-tax, is included in the trailing twelve month EBITDA calculation at
September 30, 2010, and negatively impacted the ratio of indebtedness to EBITDA at
September 30, 2010. 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 accelerate the maturity of the debt.
Acceleration under one of these facilities would trigger cross defaults on other borrowings.
Under the credit agreements, EBITDA is defined as net earnings, as adjusted to add-back
interest expense, income taxes, depreciation and amortization, all of which are determined in
accordance with GAAP. In addition, the credit agreement allows certain non-cash charges
such as stock award amortization and asset write-offs or impairments to be “added-back” in
determining EBITDA for purposes of the indebtedness ratio. Severance and other cash
charges incurred as a result of restructuring and realignment activities as well as expenses
incurred in acquisition integration activities are included as reductions in EBITDA for calculation
of the indebtedness ratio. In the event of an acquisition, the EBITDA is calculated on a pro
forma basis to include the trailing twelve-month EBITDA of the acquired company or brands.
Total debt is calculated in accordance with GAAP, but excludes outstanding borrowings under
the receivable securitization program. EBIT is calculated in a fashion identical to EBITDA
except that depreciation and amortization are not “added-back”. Total interest expense is
calculated in accordance with GAAP.
On May 3, 2010, the Company amended and renewed its existing receivables securitization
program, under which the Company routinely sells a pool of U.S. accounts receivable through a
financing arrangement between Energizer Receivables Funding Corporation, which is a
bankruptcy-remote special purpose entity subsidiary of the Company, and outside parties (the
Conduits). Under the current structure, funds received from the Conduit are treated as
borrowings rather than proceeds of accounts receivables sold for accounting purposes.
Borrowings under this program, which may not exceed $200, receive favorable treatment in the
Company’s debt compliance covenants. The program renews annually in May. We can
provide no assurance that the facility will be renewable on an annual basis, or if renewed, it
may be done so on less favorable terms. At September 30, 2010, there were no borrowings
outstanding under this facility. However, on November 23, 2010, the Company borrowed
approximately $150 under this facility to partially finance the ASR acquisition with the balance
of the acquisition funded with available cash.
The counterparties to long-term committed borrowings consist of a number of major
international financial institutions. The Company continually monitors positions with, and credit
ratings of, counterparties both internally and by using outside ratings agencies. The Company
has staggered long-term borrowing maturities through 2017 to reduce refinancing risk in any
single year and to optimize the use of cash flow for repayment.
No shares of Energizer common stock were repurchased by the Company in fiscal 2008
through 2010 other than a small number of shares related to the net settlement of certain stock
awards for tax withholding purposes. The Company has 8 million shares remaining on the
current authorization from its Board of Directors to repurchase its common stock in the future.
Future purchases may be made from time to time on the open market or through privately
negotiated transactions, subject to corporate objectives and the discretion of management.