Energizer 2014 Annual Report Download - page 67

ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)
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, 2014, the Company had a reserve for returns of $45.4 and $49.8 at September 30, 2013.
The Company offers a variety of programs, such as consumer coupons and similar consumer rebate programs, primarily to its
retail customers, designed to promote sales of its products. Such programs require periodic payments and allowances based on
estimated results of specific programs and are recorded as a reduction to net sales. The Company accrues, at the time of sale,
the estimated total payments and allowances associated with each transaction. Additionally, the Company offers programs
directly to consumers to promote the sale of its products. Promotions which reduce the ultimate consumer sale prices are
recorded as a reduction of net sales at the time the promotional offer is made, generally using estimated redemption and
participation levels. Taxes we collect on behalf of governmental authorities, which are generally included in the price to the
customer, are also recorded as a reduction of net sales. The Company continually assesses the adequacy of accruals for
customer and consumer promotional program costs not yet paid. To the extent total program payments differ from estimates,
adjustments may be necessary. Historically, these adjustments have not been material.
Advertising and Sales Promotion Costs – The Company advertises and promotes its products through national and regional
media and expenses such activities as incurred.
Share-Based Payments – The Company grants restricted stock equivalents, which generally vest over two to four years. A
portion of the restricted stock equivalents granted provide for the issuance of common stock to certain 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 targets will be achieved. If such targets 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 in the period
the determination is made. If it is determined that the performance targets will be exceeded, additional compensation expense is
recognized.
Estimated Fair Values of Financial Instruments – Certain financial instruments are required to be recorded at the estimated
fair value. Changes in assumptions or estimation methods could affect the fair value estimates; however, we do not believe any
such changes would have a material impact on our financial condition, results of operations or cash flows. Other financial
instruments including cash and cash equivalents and short-term borrowings, including notes payable, are recorded at cost,
which approximates estimated fair value. The estimated fair values of long-term debt and financial instruments are disclosed in
Note 16 of the Notes to Consolidated Financial Statements.
Reclassifications – Certain reclassifications have been made to the prior year financial statements to conform to the current
presentation.
Recently Issued Accounting Pronouncements – No new accounting pronouncements issued or effective during the fiscal year
have had a material impact on the consolidated financial statements.
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