Energizer 2013 Annual Report Download - page 53

ENERGIZER HOLDINGS, INC.
(Dollars in millions, except per share data)
Under the terms of the Company’s credit agreement, the ratio of the Company’s indebtedness to its earnings before interest
taxes depreciation and amortization (EBITDA), as defined in the agreement and detailed below, cannot be greater than 4.0 to 1,
and may not remain above 3.5 to 1 for more than four consecutive quarters. If and so long as the ratio is above 3.5 to 1 for any
period, the Company is required to pay additional interest expense for the period in which the ratio exceeds 3.5 to 1. The
interest rate margin and certain fees vary depending on the indebtedness to EBITDA ratio. Under the Company’s private
placement note agreements, indebtedness to EBITDA may not be greater than 4.0 to 1; if the ratio is above 3.5 to 1, for any
quarter, the Company is required to pay additional interest on the private placement notes of 0.75% per annum for each quarter
until the ratio is reduced to not more than 3.5 to 1. In addition, under the credit agreement, the ratio of its current year earnings
before interest and taxes (EBIT), as defined in the agreement, to total interest expense must exceed 3.0 to 1. The Company’s
ratio of indebtedness to its EBITDA was 2.3 to 1, and the ratio of its EBIT to total interest expense was 5.7 to 1, as of
September 30, 2013. The calculation of these ratios is impacted by pre-tax cash charges associated with restructuring activities
as such charges reduce both EBITDA and EBIT as defined in the agreement. The ratios at September 30, 2013 were somewhat
negatively impacted by a portion of the pre-tax charges associated with the 2013 restructuring as such charges, exclusive of
those considered non-cash, reduced EBITDA as defined in the agreement. We expect the ratios to continue to be somewhat
negatively impacted in the near term due to anticipated restructuring charges in fiscal 2014, but we expect to remain in full
compliance with the debt covenant ratios. In addition to the financial covenants described above, the credit agreement and the
note agreements contain customary representations and affirmative and negative covenants, including limitations on liens, sales
of assets, subsidiary indebtedness, mergers and similar transactions, changes in the nature of the business of the Company and
transactions with affiliates. If the Company fails to comply with the financial covenants referred to above or with other
requirements of the credit agreement or private placement note agreements, the lenders would have the right to accelerate the
maturity of the debt. Acceleration under one of these facilities could trigger cross defaults on other borrowings.
Under the credit agreement, 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 including, but not limited to, the impairment and
accelerated depreciation associated with the 2013 restructuring, 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, 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.
The counterparties to long-term committed borrowings consist of a number of major financial institutions. The Company
consistently monitors positions with, and credit ratings of, counterparties both internally and by using outside ratings agencies.
Beginning in September 2000, the Company’s Board of Directors has approved a series of resolutions authorizing the
repurchase of shares of Energizer common stock, with no commitments by the Company to repurchase such shares. In April
2012, the Board of Directors approved the repurchase of up to ten million shares. This authorization replaced a prior stock
repurchase authorization, which was approved in July 2006. The Company did not repurchase any shares of the Company's
common stock, other than a small number of shares related to the net settlement of certain stock awards for tax withholding
purposes, during the twelve months ended September 30, 2013. The Company has approximately six million shares remaining
under the above noted Board authorization to repurchase its common stock in the future. Future share repurchases, if any,
would be made on the open market, privately negotiated transactions or otherwise, in such amounts and at such times as the
Company deems appropriate based upon prevailing market conditions, business needs and other factors.
Subsequent to the fiscal year end, on November 4, 2013, the Company's Board of Directors declared a dividend for the first
quarter of fiscal 2014 of $0.50 per share of Common Stock, which will be paid on December 17, 2013 and is expected to be
approximately $31.
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