Energizer 2013 Annual Report Download - page 72

ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)
depreciation are removed from the accounts, and gains or losses on the disposition are reflected in earnings. Depreciation is
generally provided on the straight-line basis by charges to pre-tax earnings at rates based on estimated useful lives. Estimated
useful lives range from two to 25 years for machinery and equipment and three to 30 years for buildings and building
improvements. Depreciation expense was $164.7 in fiscal 2013, including non-cash asset impairment charges of $19.3 and
accelerated depreciation charges of $23.6, collectively $42.9, related primarily to certain manufacturing assets including
property, plant and equipment located at the facilities to be closed or streamlined, and $136.7, and $154.5 in fiscal 2012 and
2011, respectively. See Note 3 of the Notes to Consolidated Financial Statements.
Estimated useful lives are periodically reviewed and, when appropriate, changes are made prospectively. When certain events
or changes in operating conditions occur, asset lives may be adjusted and an impairment assessment may be performed on the
recoverability of the carrying amounts.
Goodwill and Other Intangible Assets – Goodwill and indefinite-lived intangibles are not amortized, but are evaluated
annually for impairment as part of the Company's annual business planning cycle in the fourth fiscal quarter, or when indicators
of a potential impairment are present. The estimated fair value of each reporting unit (Household Products and Personal Care)
is estimated using valuation models that incorporate assumptions and projections of expected future cash flows and operating
plans. Intangible assets with finite lives, and a remaining weighted average life of approximately thirteen years, are amortized
on a straight-line basis over expected lives of 5 years to 20 years. Such intangibles are also evaluated for impairment including
ongoing monitoring of potential impairment indicators.
Impairment of Long-Lived Assets – The Company reviews long-lived assets, other than goodwill and other intangible assets
for impairment, when events or changes in business circumstances indicate that the remaining useful life may warrant revision
or that the carrying amount of the long-lived asset may not be fully recoverable. The Company performs undiscounted cash
flow analysis to determine if impairment exists. If impairment is determined to exist, any related impairment loss is calculated
based on estimated fair value. Impairment losses on assets to be disposed of, if any, are based on the estimated proceeds to be
received, less cost of disposal.
In November 2012, which was the first quarter of fiscal 2013, the Company's Board of Directors authorized an enterprise-wide
restructuring plan, which included the closure of certain Company facilities in fiscal 2013 and 2014. The Company recorded
non-cash asset impairment charges of $19.3 and accelerated depreciation charges of $23.6 for the twelve months ended
September 30, 2013 (collectively $42.9) related primarily to certain manufacturing assets including property, plant and
equipment located at the facilities to be closed or streamlined. We do not believe our restructuring plan is likely to result in the
impairment of any other material long-lived assets, other than this identified property, plant and equipment. See Note 3 of the
Notes to Consolidated Financial Statements.
Revenue Recognition – The Company's revenue is from the sale of its products. Revenue is recognized when title, ownership
and risk of loss pass to the customer. Discounts are offered to customers for early payment and an estimate of the discounts is
recorded as a reduction of net sales in the same period as the sale. Our standard sales terms are final and returns or exchanges
are not permitted unless a special exception is made; reserves are established and recorded in cases where the right of return
does exist for a particular sale.
Under certain circumstances, we allow customers to return sun care products that have not been sold by the end of the sun care
season, which is normal practice in the sun care industry. We record sales at the time the title, ownership and risk of loss pass to
the customer. The terms of these sales vary but, in all instances, the following conditions are met: the sales arrangement is
evidenced by purchase orders submitted by customers; the selling price is fixed or determinable; title to the product has
transferred; there is an obligation to pay at a specified date without any additional conditions or actions required by the
Company; and collectability is reasonably assured. Simultaneous with the sale, we reduce sales and cost of sales, and reserve
amounts on our consolidated balance sheet for anticipated returns based upon an estimated return level, in accordance with
GAAP. Customers are required to pay for the sun care product purchased during the season under the required terms. We
generally receive returns of U.S. sun care products from September through January following the summer sun care season. We
estimate the level of sun care returns using a variety of inputs including historical experience, consumption trends during the
sun care season and inventory positions at key retailers as the sun care season progresses. We monitor shipment activity and
inventory levels at key retailers during the season in an effort to identify potential returns issues. This allows the Company to
manage shipment activity to our customers, especially in the latter stages of the sun care season, to reduce the potential for
returned product. At September 30, 2013, the Company had a reserve for returns of $49.8.
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