Energizer 2012 Annual Report Download - page 55

ENERGIZER HOLDINGS, INC.
(Dollars in millions, except per share and percentage data)
The Company has interest rate risk with respect to interest expense on variable rate debt. At September 30, 2012, the Company
has a remaining variable rate term loan outstanding of $106.5, which will mature in December 2012. The Company remains
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 of the Company’s remaining variable rate term loan debt through December
2012. Given the fact that the remaining portion of the term loan matures in December 2012, the Company's outstanding debt at
September 30, 2012 was not subject to material interest rate risk.
At September 30, 2012 and 2011, respectively, the Company had an unrealized pre-tax loss on interest rate swap agreements of
$0.3 and $4.7 included in Accumulated other comprehensive loss on the Consolidated Balance Sheets. Over the next three
months the interest rate swap agreement will be fully settled and the total $0.3 pre-tax loss included in Accumulated other
comprehensive loss is expected to be included in earnings, based on current market conditions.
Stock Price Exposure
At September 30, 2012, the Company held a share option with a major financial institution to mitigate the impact of changes in
certain of the Company’s unfunded deferred compensation liabilities, which are tied to the Company’s common stock price.
The fair market value of the share option was $2.5 as included in other current assets and $3.4 as included in other current
liabilities at September 30, 2012 and 2011, respectively. The change in estimated fair value of the total share option for fiscal
2012 and 2011 resulted in income of $6.1 and expense of $0.6 respectively, and was recorded in SG&A. Period activity related
to the share option is classified in the same category in the Consolidated Statements of Cash Flows as the period activity
associated with the Company’s deferred compensation liability, which was in cash flow from operations.
Seasonal Factors
The Company's Household Products segment results are typically impacted in the first quarter of the fiscal year by the
additional sales volume associated with the December holiday season, particularly in North America. First quarter sales
accounted for 30% of total Household Products net sales in fiscal 2012 and 2011 and 32% in fiscal 2010. In addition, natural
disasters, such as hurricanes, can create conditions that drive exceptional needs for portable power and spike battery and
lighting products sales.
Customer orders for the Company’s sun care products are highly seasonal, which has historically resulted in higher sun care
sales in the second and third quarters of our fiscal year and lower sales in the first and fourth quarters of our fiscal year. As a
result, sales, operating income, working capital and cash flows for the Personal Care segment can vary significantly between
quarters of the same and different years due to the seasonality and timing of orders for sun care products.
Other factors may also have an impact on the timing and amounts of sales, operating income, working capital and cash flows.
They include: the timing of new product launches by competitors or by the Company, the timing of advertising, promotional,
merchandising or other marketing activities by competitors or by the Company, and the timing of retailer merchandising
decisions and actions.
Other Matters
Environmental Matters
The operations of the Company, like those of other companies, are subject to various federal, state, foreign and local laws and
regulations intended to protect the public health and the environment. These regulations relate primarily to worker safety, air
and water quality, underground fuel storage tanks and waste handling and disposal. The Company has received notices from the
U.S. Environmental Protection Agency, state agencies and/or private parties seeking contribution, that it has been identified as a
“potentially responsible party” (PRP) under the Comprehensive Environmental Response, Compensation and Liability Act, and
may be required to share in the cost of cleanup with respect to eight federal “Superfund” sites. It may also be required to share
in the cost of cleanup with respect to state-designated sites or other sites outside of the U.S.
Accrued environmental costs at September 30, 2012 were $19.9, of which $4.5 is expected to be spent in fiscal 2013. It is
difficult to quantify with certainty the cost of environmental matters, particularly remediation and future capital expenditures
for environmental control equipment. Total environmental capital expenditures and operating expenses are not expected to
have a material effect on our total capital and operating expenditures, consolidated earnings or competitive position. However,
current environmental spending estimates could be modified as a result of changes in our plans, changes in legal requirements,
including any requirements related to global climate change, or other factors.
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