Energizer 2012 Annual Report Download - page 51

ENERGIZER HOLDINGS, INC.
(Dollars in millions, except per share and percentage data)
On May 24, 2012, the Company issued $500.0 aggregate principal amount of 4.70% Senior Notes due in May 2022, with
interest paid semi-annually each May and November. The net proceeds of $495 were used to repay existing indebtedness,
including approximately $335 of the Company's term loan, which matures in December 2012, $100 of private placement notes,
which matured in June 2012 and a portion of the then-outstanding balance under the Company's receivables securitization
program.
At this time, the Company has a remaining term loan outstanding of $106.5, which will mature in December 2012. We expect
to fund this repayment with available cash and other borrowing capacity.
As a result of the permanent repayment of $335 of our existing term loan, the Company terminated a then-existing interest rate
swap agreement, which previously hedged our interest rate exposure on $200 of our then-existing term loan balance. The
interest rate swap agreement was terminated following repayment of the debt associated with the interest rate swap derivative.
A charge of $1.7 was included in interest expense in fiscal 2012 related to the early termination of this hedging instrument. The
Company remains a party to an interest rate swap agreement with one major financial institution that fixes the variable
benchmark component (LIBOR) of the Company’s interest rate on $100.0 of the Company’s remaining variable rate term loan
debt through December 2012 at an interest rate of 1.9%.
Operating Activities
Cash flow from operating activities is the primary funding source for operating needs and capital investments. Cash flow from
operating activities was $631.6 in fiscal 2012, an increase of $219.1, or 53%, as compared to fiscal 2011. Cash flow from
operating activities was $412.5 in fiscal 2011, a decrease of $239.9 as compared to $652.4 for fiscal 2010. The increase in cash
flow from operating activities in fiscal 2012 was due primarily to higher operating cash flow before changes in working capital
as fiscal 2011 included significant costs in support of the continued Schick Hydro launch as well as the 2011 Household
Products restructuring. These same factors were the drivers for the decrease in fiscal 2011 as compared to fiscal 2010.
From a working capital perspective, changes in assets and liabilities used in operations (working capital) resulted in a positive
cash flow of approximately $45 in fiscal 2012 as compared to fiscal 2011. The most significant impact was in accounts
payable due to an improvement in year over year days payable outstanding during fiscal 2012. The changes in the remaining
components of working capital essentially offset, with lower accounts receivable offset by slightly higher inventory and other
current assets.
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 as compared to fiscal 2010. 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 lower levels of accounts
payable and other current liabilities at the end of fiscal 2011 was partially offset by lower inventory of approximately $65 as we
anniversary the inventory build to support the initial Schick Hydro launch and the impact of hurricane-related inventory
reduction in the fourth quarter of fiscal 2011.
Investing Activities
Net cash used by investing activities was $94.9, $363.5 and $113.3 in fiscal 2012, 2011 and 2010, respectively. Capital
expenditures were $111.0, $98.0 and $108.7 in fiscal 2012, 2011 and 2010, respectively. These capital expenditures were
funded by cash flow from operations. In addition to cash outflows related to capital expenditures, the most significant impact
to cash flow used by investing activities in fiscal 2011 was the acquisition of ASR for net cash of $267, which reflects a cash
purchase price of $301, net of $34 of acquired cash. The Company financed this acquisition with available cash of
approximately $129 and borrowings from our receivables securitization program. See Note 17 to the Consolidated Financial
Statements for capital expenditures by segment.
Exclusive of our recently announced restructuring plan, capital expenditures of approximately $90 to $100 are anticipated in
fiscal 2013 with disbursements for new product and cost reduction-related capital driving the largest components of projected
capital spending. Also, we expect to incur additional capital expenditures of approximately $50 over the next two years to
enable certain aspects of our restructuring plan. This will include certain manufacturing and packaging investments as well as
improvements in our information technology platform. Total capital expenditures, including incremental investments related to
our restructuring plan, are expected to be financed with funds generated from operations.
Financing Activities
The Company’s total borrowings were $2,532.5 at September 30, 2012, including $268.9 tied to variable interest rates, of
which $100 is hedged via the interest rate swap discussed above. The Company maintains total debt facilities of $2,982.5. The
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