Energizer 2013 Annual Report Download - page 59

ENERGIZER HOLDINGS, INC.
(Dollars in millions, except per share data)
managerial staff and executive management, if the Company achieves specified performance targets. The estimated
fair value of each grant issued is estimated on the date of grant based on the current market price of the stock, as
adjusted for the impact to the grant date fair value of the inclusion of a total shareholder return modifier for those
performance awards containing such a provision. The total amount of compensation expense recognized reflects the
initial assumption that target performance goals will be achieved. Compensation expense may be adjusted during the
life of the performance grant based on management’s assessment of the probability that performance goals will be
achieved. If such goals are not met or it is determined that achievement of performance goals is not probable,
compensation expense is adjusted to reflect the reduced expected payout level. If it is determined that the performance
goals will be exceeded, additional compensation expense is recognized.
• Valuation of Long-Lived Assets The Company periodically evaluates its long-lived assets, including property, plant
and equipment, goodwill and intangible assets, for potential impairment indicators. Judgments regarding the existence
of impairment indicators, including lower than expected cash flows from acquired businesses, are based on legal
factors, market conditions and operational performance. Future events could cause the Company to conclude that
impairment indicators exist. The Company estimates fair value using valuation techniques such as discounted cash
flows. This requires management to make assumptions regarding future income, working capital and discount rates,
which would affect the impairment calculation. See the discussion on “Acquisitions, Goodwill and Intangible Assets”
included later in this section for further information.
In November 2012, which was the first quarter of fiscal 2013, the Company's Board of Directors authorized an
enterprise-wide restructuring plan. The Company recorded non-cash asset impairment charges of $19.3 and
accelerated depreciation charges of $23.6 for the year ended September 30, 2013 (collectively for the fiscal 2013,
$42.9) related primarily to certain manufacturing assets including property, plant and equipment located at facilities to
be closed or streamlined as part of our restructuring initiatives. We do not believe our restructuring plan will result in
the impairment of any other material long-lived assets, other than the identified property, plant and equipment. See
Note 3 of the Notes to Consolidated Financial Statements for further details.
• Income Taxes Our annual effective income tax rate is determined based on our income, statutory tax rates and the tax
impacts of items treated differently for tax purposes than for financial reporting purposes. Tax law requires certain
items be included in the tax return at different times than the items are reflected in the financial statements. Some of
these differences are permanent, such as expenses that are not deductible in our tax return, and some differences are
temporary, reversing over time, such as depreciation expense. These temporary differences create deferred tax assets
and liabilities.
Deferred tax assets generally represent the tax effect of items that can be used as a tax deduction or credit in future
years for which we have already recorded the tax benefit in our income statement. Deferred tax liabilities generally
represent tax expense recognized in our financial statements for which payment has been deferred, the tax effect of
expenditures for which a deduction has already been taken in our tax return but has not yet been recognized in our
financial statements or assets recorded at estimated fair value in business combinations for which there was no
corresponding tax basis adjustment.
We regularly repatriate a portion of current year earnings from select non U.S. subsidiaries. Generally, these non-U.S.
subsidiaries are in tax jurisdictions with effective tax rates that do not result in materially higher U.S. tax provisions
related to the repatriated earnings. No provision is made for additional taxes on undistributed earnings of foreign
affiliates that are intended and planned to be indefinitely invested in foreign affiliates. We intend to, and have plans to,
reinvest these earnings indefinitely in our foreign subsidiaries to fund local operations, fund strategic growth
objectives, fund pension and other post retirement obligations and fund capital projects. See Note 6 of the Notes to
Consolidated Financial Statements for further discussion.
The Company estimates income taxes and the effective income tax rate in each jurisdiction that it operates. This
involves estimating taxable earnings, specific taxable and deductible items, the likelihood of generating sufficient
future taxable income to utilize deferred tax assets, the portion of the income of foreign subsidiaries that is expected to
be remitted to the U.S. and be taxable and possible exposures related to future tax audits. Deferred tax assets are
evaluated on a subsidiary by subsidiary basis to ensure that the asset will be realized. Valuation allowances are
established when the realization is not deemed to be more likely than not. Future performance is monitored, and when
objectively measurable operating trends change, adjustments are made to the valuation allowances accordingly. To the
extent the estimates described above change, adjustments to income taxes are made in the period in which the estimate
is changed.
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