Energizer 2013 Annual Report Download - page 91

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ENERGIZER HOLDINGS, INC.
(Dollars in millions, except per share data)
Interest Rate Risk Through December 2012, the Company had specific interest rate risk with respect to interest expense on the
Company's term loan, which was repaid in full by the end of the first quarter of fiscal 2013. As a result, the interest rate swap
agreement in place to hedge this specific risk was settled on November 30, 2012 at a $0.3 loss. This loss was included in
interest expense in the Consolidated Statements of Earnings and Comprehensive Income. At September 30, 2013, the
Company had $99.0 of variable rate debt outstanding, which was primarily outstanding borrowings under the Company's
receivable securitization program.
Cash Flow Hedges The Company maintains a number of cash flow hedging programs, as discussed above, to reduce risks
related to foreign currency and interest rate risk. Each of these derivative instruments have a high correlation to the underlying
exposure being hedged and have been deemed highly effective for accounting purposes in offsetting the associated risk.
Derivatives not Designated in Hedging Relationships The Company holds 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. Period activity related to the share option is classified in the same category in the cash flow
statement as the period activity associated with the Company’s deferred compensation liability, which was cash flow from
operations.
In addition, the Company enters into foreign currency derivative contracts which are not designated as cash flow hedges for
accounting purposes to hedge existing balance sheet exposures. Any gains or losses on these contracts would be offset by
corresponding exchange losses or gains on the underlying exposures; thus, they are not subject to significant market risk. There
were 13 open foreign currency derivative contracts which are not designated as cash flow hedges at September 30, 2013 with a
total notional value of approximately $118.
The following table provides estimated fair values as of September 30, 2013 and 2012, and the amounts of gains and losses on
derivative instruments classified as cash flow hedges as of and for the twelve months ended September 30, 2013 and 2012,
respectively.
At September 30, 2013 For the Year Ended September 30, 2013
Derivatives designated as Cash Flow Hedging
Relationships
Estimated Fair Value Asset
(Liability) (1) (2)
Gain/(Loss) Recognized in
OCI(3)
Gain/(Loss)
Reclassified From OCI into
Income (Effective Portion)
(4) (5)
Foreign currency contracts $ 1.5 $ 18.1 $ 10.7
Interest rate contracts — — (0.3)
Total $ 1.5 $ 18.1 $ 10.4
At September 30, 2012 For the Year Ended September 30, 2012
Derivatives designated as Cash Flow Hedging
Relationships
Estimated Fair Value Asset
(Liability) (1) (2)
Gain/(Loss) Recognized in
OCI(3)
Gain/(Loss)
Reclassified From OCI into
Income (Effective Portion)
(4) (5)
Foreign currency contracts $ (5.9) $ (10.0) $ (0.8)
Commodity contracts — — (6.0)
Interest rate contracts (0.3) 2.7 (1.7)
Total $ (6.2) $ (7.3) $ (8.5)
(1) All derivative assets are presented in other current assets or other assets.
(2) All derivative liabilities are presented in other current liabilities or other liabilities.
(3) OCI is defined as other comprehensive income.
(4) Gain/(Loss) reclassified to Income was recorded as follows: Foreign currency contracts and ineffective commodity contract in other financing items, net,
effective commodity contracts in Cost of products sold.
(5) Each of these derivative instruments has a high correlation to the underlying exposure being hedged and has been deemed highly effective in offsetting
associated risk. The ineffective portion for foreign currency and interest rate contracts recognized in income was insignificant to the twelve months ended
September 30, 2013. In September 2012, the Company discontinued hedge accounting treatment for its zinc contracts as the contracts no longer
correlated to the underlying zinc exposure being hedged. Included within the net loss above is a $1.6 gain for the ineffective portion that was de-
designated and reclassified from OCI into income at September 30, 2012. This gain has been included in the table below for derivatives not designated as
cash flow hedges.
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