Energizer 2014 Annual Report Download - page 37

ENERGIZER HOLDINGS, INC.
(Dollars in millions, except per share data)
Pension and Post-Retirement Benefit Changes
In the first fiscal quarter of 2013, the Company approved and communicated changes to its U.S. pension plan, which is the most
significant of the Company's pension obligations. Effective January 1, 2014, the pension benefit earned to date by active
participants under the legacy Energizer U.S. pension plans was frozen and future service benefits are no longer being accrued
under this retirement program. As a result of this plan change, the Company recorded a pre-tax curtailment gain of $37.4 in the
first fiscal quarter of 2013.
In July 2013, the Company finalized and communicated a decision to discontinue certain post-retirement benefits. The
communication was provided to all eligible participants of the impacted plans in late July 2013. The communication advised the
impacted participants that the Company would discontinue all benefits associated with the impacted plans effective December
31, 2013. As a result of this action, the Company recorded a gain of approximately $70 in the fourth fiscal quarter of 2013.
Collectively, the non-cash pension and post-retirement gains totaled approximately $108, pre-tax, for fiscal 2013, and were
included on a separate line item in the Consolidated Statements of Earnings and Comprehensive Income.
Proposed Spin-off Transaction
On April 28, 2014, the Board of Directors authorized management to pursue a plan to separate the Company’s Household
Products and Personal Care divisions into two independent, publicly traded companies. The spin-off is planned as a tax-free
spin-off to the Company’s shareholders and is expected to be completed by July 1, 2015. The proposed spin-off is subject to
further due diligence as appropriate and customary conditions, including receipt of regulatory approvals, an opinion of counsel
regarding the tax-free nature of the spin-off, the effectiveness of a Form 10 filing with the Securities and Exchange
Commission, and final approval by the Company's Board of Directors.
We expect to file a Form 10 registration statement with the SEC in early calendar year 2015.
The Company is incurring incremental costs to evaluate, plan and execute the transaction. For the twelve months ended
September 30, 2014, approximately $44.7 of pre-tax charges were incurred and recorded in SG&A on the Consolidated
Statement of Earnings and Comprehensive Income. The Company will incur additional costs to execute the transaction which
will be significant and will have a material impact on our results of operations, balance sheet and cash flow.
Refer to Item 1A. Risk Factors for additional disclosure on the potential impacts of our proposed spin-off transaction.
Venezuela Devaluation and Economic Uncertainty
Effective January 1, 2010 and continuing through September 30, 2014, the financial statements for our Venezuela subsidiary are
consolidated under the rules governing the translation of financial information in a highly inflationary economy based on the
use of the blended National Consumer Price Index in Venezuela. Under GAAP, an economy is considered highly inflationary if
the cumulative inflation rate for a three year period meets or exceeds 100 percent. If a subsidiary is considered to be in a highly
inflationary economy, the financial statements of the subsidiary must be re-measured into our reporting currency (U.S. dollar)
and future exchange gains and losses from the re-measurement of monetary assets and liabilities are reflected in current
earnings, rather than exclusively in the equity section of the balance sheet, until such times as the economy is no longer
considered highly inflationary.
On February 13, 2013, the Venezuela government devalued the Bolivar Fuerte relative to the U.S. dollar. The revised official
exchange rate moved from 4.30 bolivars per U.S. dollar to an exchange rate of 6.30 bolivars per U.S. dollar. The Central
Government also suspended the alternate currency market administered by the central bank known as SITME that made U.S.
dollars available at a rate higher than the previous official rate, generally in the range of 5.50 bolivars per U.S. dollar. As a
result of the devaluation noted above and the elimination of the SITME market, the Company revalued its net monetary assets
at March 31, 2013 using the revised official rate of 6.30 bolivars per U.S. dollar. Thus, the Company recorded a devaluation
charge of approximately $6 during the second fiscal quarter of fiscal 2013, due primarily to the devaluation of local currency
cash balances. This charge was included in Other financing items, net on the Consolidated Statements of Earnings and
Comprehensive Income. The official exchange rate is determined and administered by the Cadivi/Cencoex System (the
National Center for International Trade who administers the authorization for the acquisition and the actual payment of foreign
currency conducted for essential imports).
On January 24, 2014, the Venezuelan government issued Exchange Agreement No. 25, which stated the rate of exchange established
in the most recent SICAD I auction will be used for payments related to international investments, royalties and the use and
exploitation of patents, trademarks, licenses, franchises and technology.
33