Energizer 2014 Annual Report Download - page 41

ENERGIZER HOLDINGS, INC.
(Dollars in millions, except per share data)
was favorably impacted by the mix of countries from which earnings were derived as foreign earnings increased in lower tax
rate countries.
For fiscal 2013, the effective tax rate was 28.3%, which was favorably impacted by costs associated with our 2013 restructuring
project that have been primarily incurred in the U.S., which has resulted in a higher tax benefit as compared to our overall
global effective tax rate, and to a lesser extent, the favorable impact of items such as the retroactive reinstatement of the
Research and Development (R&D) credit. Offsetting a portion of this favorability was the income tax provision associated with
the net pension and postretirement gains recorded in fiscal 2013, as the tax provision related to the gains was recorded at the
higher U.S. rate.
For fiscal 2012, adjustments were recorded to reflect refinement of estimates of tax attributes to amounts in filed returns,
settlement of tax audits and other tax adjustments. These fiscal 2012 adjustments decreased the income tax provision by 120
basis points.
The Company's effective tax rate is highly sensitive to the mix of countries, from which earnings or losses are derived.
Declines in earnings in lower tax rate countries, earnings increases in higher tax rate countries, repatriation of foreign earnings
or operating losses in the future could increase future tax rates. Additionally, adjustments to prior year tax provision estimates
could increase or decrease future tax provisions.
Segment Results
Operations for the Company are managed via two segments - Personal Care (wet shave, skin care, feminine care and infant
care) and Household Products (battery and portable lighting products). Segment performance is evaluated based on segment
operating profit, exclusive of general corporate expenses, share-based compensation costs, costs associated with most
restructuring initiatives including the 2013 restructuring project detailed below, acquisition integration or business realignment
activities, amortization of intangible assets and other items determined to be corporate in nature. Financial items, such as
interest income and expense, are managed on a global basis at the corporate level. The exclusion from segment results of
charges such as other acquisition transaction and integration costs, and substantially all restructuring and realignment costs,
reflects management's view on how it evaluates segment performance.
The Company's operating model includes a combination of stand-alone and combined business functions between the Personal
Care and Household Products businesses, varying by country and region of the world. Shared functions include product
warehousing and distribution, various transaction processing functions, and in some countries, a combined sales force and
management. The Company applies a fully allocated cost basis, in which shared business functions are allocated between the
segments. Such allocations are estimates, and also do not represent the costs of such services if performed on a stand-alone
basis.
Effective October 1, 2013, the Company centralized certain corporate administrative functions across the organization as part of
the 2013 restructuring project. A portion of these costs were previously reported at the segment level, but are now reported
within General corporate and other expenses. Periods prior to this change have not been adjusted to conform to this current
presentation.
This structure is the basis for the Company’s reportable operating segment information, as included in the tables in Note 21 of
the Notes to Consolidated Financial Statements for the fiscal years ended September 30, 2014, 2013 and 2012.
For the fiscal years ended September 30, 2014 and September 30, 2013, the Company recorded $92.6 and $139.3, respectively,
in pre-tax restructuring charges related to its 2013 restructuring project. Restructuring charges are reported on a separate line in
the Consolidated Statements of Earnings and Comprehensive Income. In addition, pre-tax costs of $11.8 were recorded for the
twelve months ended September 30, 2014 and $5.2 for the twelve months ended September 30, 2013 associated with certain
information technology enablement activities related to our restructuring project and were included in Selling, general and
administrative expense (SG&A) on the Consolidated Statements of Earnings and Comprehensive Income. Additionally, pre-tax
costs of $1.0 for the twelve months ended September 30, 2014, and $6.1 for twelve months ended September 30, 2013,
associated with obsolescence charges related to our restructuring, were included in Cost of products sold on the Consolidated
Statements of Earnings and Comprehensive Income. These information technology and inventory obsolescence costs are
considered part of the total project costs incurred for the restructuring project. In fiscal 2012, the Company recorded $7.3 of
charges for the 2013 restructuring project related to consulting costs. See Note 5 of the Notes to Consolidated Financial
Statements.
As announced in April, 2014, the Company is pursuing a plan to spin off the Household Products business and thereby create
two independent, publicly traded companies. As a result, the Company is incurring incremental costs to evaluate, plan and
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