Energizer 2011 Annual Report Download - page 47

ENERGIZER HOLDINGS, INC.
(Dollars in millions, except per share and percentage data)
the Household Products restructuring, which is included on a separate line in the above table. In fiscal 2011, the Company
incurred approximately $13 of ASR transaction and integration expenses and $7 of costs associated with the write-up and
subsequent sale of the acquired ASR inventory.
For fiscal 2010, general corporate expenses, including integration/other realignment, increased $11.2 as compared to fiscal
2009 due primarily to higher corporate compensation expenses including higher annual incentive bonuses and stock award
amortization.
In the fourth quarter of fiscal 2009, the Company implemented a voluntary early retirement option (VERO) for eligible U.S.
colleagues. The decision to accept the cash benefits offered under the VERO was at the election of the colleague and was
irrevocable. Payments under the VERO were cash only, and did not include any enhancement to pension or retirement benefits.
In addition, the Company implemented a reduction in force (RIF) program primarily in the U.S., to further adjust the
organizational structure. The total charge for the VERO and RIF in the fourth quarter of fiscal 2009 was $38.6 and was
included in SG&A.
Also in fiscal 2009, we recorded a favorable adjustment of $24.1, pre-tax, resulting from a change in the policy under which
colleagues earn and vest in the Company’s paid time off (PTO) benefit. Prior to the change, colleagues were granted and vested
in their total PTO days at the beginning of the calendar year, and received a cash payment for unused days in the event of
termination during the year. As such, the value of a full year of PTO, net of days used, was accrued at any given balance sheet
date. As part of a review of certain benefit programs, this policy was revised in fiscal 2009 to a more “market” policy for PTO.
The revised policy utilizes an “earn as you go” approach, under which colleagues earn current-year PTO on a pro-rata basis as
they work during the year. As a result of this change, any previously earned and vested benefit under the prior policy was
forfeited, and the required liability at the date of the policy change was adjusted to reflect the revised benefit.
Liquidity and Capital Resources
At September 30, 2011, the Company had $471.2 in available cash, the vast majority of which was outside of the U.S. and
$438.2 available under its committed debt facilities, exclusive of available borrowings under the receivables securitization
program.
On May 2, 2011, the Company amended and renewed, for a three year term, its existing receivables securitization program.
Borrowings under this program, which may not exceed $200, receive favorable treatment in the Company's debt compliance
covenants. At September 30, 2011, $35.0 was outstanding under this facility.
On May 6, 2011, the Company’s $450 U.S. revolving credit facility was renewed for a five year term. This renewal represents
an increase in the amount available under this revolving line of credit as compared to the $275 available under the facility prior
to the renewal. At September 30, 2011, there were no outstanding borrowings under this facility.
As discussed previously, on May 19, 2011, the Company issued $600.0 principal amount of 4.70% Senior Notes due May 2021,
with interest payable semi-annually beginning November 2011. From a liquidity perspective, the use of proceeds from this
issuance for the early redemption of certain private placement notes, with scheduled maturities through 2013, reduces the
amount of contractual principal repayments required over the next two fiscal years.
Operating Activities
Cash flow from operations is the primary funding source for operating needs and capital investments. Cash flow from
operations was $412.5 in fiscal 2011, a decrease of $239.9 as compared to fiscal 2010. Cash flow from operations was $652.4
in fiscal 2010, an increase of $163.2 as compared to $489.2 for fiscal 2009. The decrease in cash flow from operations in fiscal
2011 was due primarily to lower operating cash flow before changes in working capital due primarily to increased investments
in support of the Hydro launch and the negative impact of the Household Products restructuring. The increase in cash flow from
operations in fiscal 2010 as compared to fiscal 2009 was due primarily to higher operating cash flow before changes in working
capital.
From a working capital perspective, changes in assets and liabilities used in operations (working capital) resulted in a negative
cash flow of approximately $110 in fiscal 2011. The most significant impact was in accounts payable and other current
liabilities, which decreased collectively by approximately $120 in fiscal 2011 due primarily to the level of promotional
activities and the timing of payments. The unfavorable cash flow impact due to a lower levels of accounts payable and other
current liabilities at the end of fiscal 2011 was partially offset by lower inventory of approximately $65 due primarily to
reductions in wet shave as we anniversary the Schick Hydro launch and the impact of hurricane-related inventory reduction in
the fourth quarter of fiscal 2011.
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