Energizer 2012 Annual Report Download - page 91

ENERGIZER HOLDINGS, INC.
(Dollars in millions, except per share and percentage data)
Effective January 1, 2012, the Company adopted an ASU related to estimated fair value measurements. The new guidance
results in a consistent definition of estimated fair value and common requirements for measurement of and disclosure about
estimated fair value between U.S. GAAP and IFRS. These disclosures were applied on a prospective basis.
At September 30, 2012 and 2011, the fair market value of fixed rate long-term debt was $2,438.0 and $1,969.3, respectively,
compared to its carrying value of $2,263.6 and $1,865.0, respectively. The book value of the Company’s variable rate debt
approximates estimated fair value. The estimated fair value of the long-term debt is estimated using yields obtained from
independent pricing sources for similar types of borrowing arrangements. The estimated fair value of fixed rate long-term debt
has been determined based on level 2 inputs.
Due to the nature of cash and cash equivalents and short-term borrowings, including notes payable, carrying amounts on the
balance sheets approximate estimated fair value. The estimated fair value of cash and cash equivalents and short-term
borrowings have been determined based on level 2 inputs.
At September 30, 2012, the estimated fair value of foreign currency, interest rate swap and commodity contracts is the amount
that the Company would receive or pay to terminate the contracts, considering first, quoted market prices of comparable
agreements, or in the absence of quoted market prices, such factors as interest rates, currency exchange rates and remaining
maturities. The estimated fair value of the deferred compensation liability is determined based upon the quoted market prices of
the Energizer Common Stock Unit Fund as well as other investment options that are offered under the plan.
Venezuela Currency Risk The Company has investments in Venezuelan affiliates. Venezuela has been considered highly
inflationary under GAAP since January 1, 2010. In addition, the conversion of local monetary assets to U.S. dollars is restricted
by the Venezuelan government. We continue to monitor this situation including the impact such restrictions may have on our
future business operations. At this time, we are unable to predict with any degree of certainty how recent and future
developments in Venezuela will affect our Venezuela operations, if at all. At September 30, 2012, the Company had
approximately $40 in net monetary assets in Venezuela. Due to the level of uncertainty in Venezuela, we cannot predict the
exchange rate that will ultimately be used to convert our local currency net monetary assets to U.S. dollars in the future.
(14) Environmental and Legal Matters
Government Regulation and Environmental Matters – The operations of the Company, like those of other companies engaged
in the Household Products and Personal Care businesses, 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. Nevertheless, based on information currently available, the Company believes the
possibility of material environmental costs in excess of the accrued amount is remote.
Certain of the Company’s products are subject to regulation by the United States Food and Drug Administration (FDA),
including tampons and sun care products.
Legal Proceedings – The Company and its subsidiaries are parties to a number of legal proceedings in various jurisdictions
arising out of the operations of the Company's businesses. Many of these legal matters are in preliminary stages and involve
complex issues of law and fact, and may proceed for protracted periods of time. The amount of liability, if any, from these
proceedings cannot be determined with certainty. However, based upon present information, the Company believes that its
liability, if any, arising from such pending legal proceedings, asserted legal claims and known potential legal claims which are
likely to be asserted, are not reasonably likely to be material to the Company's financial position, results of operations, or cash
flows, taking into account established accruals for estimated liabilities.
In January 2011, Munchkin, Inc. commenced an action against a subsidiary of the Company in the United States District Court
for the Central District of California seeking a declaration that certain Munchkin, Inc. advertising claims were valid and
alleging false advertising claims by the Company. A jury trial resulted in an adverse verdict in July 2012 in the amount of
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