Energizer Holdings, Inc. Announces Fiscal 2018 Fourth Quarter and Full Year Results and Provides Financial Outlook for the Fiscal Year 2019
ST. LOUIS, Nov. 15, 2018 /PRNewswire/ -- Energizer Holdings, Inc. (NYSE: ENR) today announced results for the fourth fiscal quarter and full fiscal year, which ended September 30, 2018. For the fourth fiscal quarter, net earnings were $1.5 million, or $0.02 per diluted share, compared to net earnings of $34.1 million, or $0.55 per diluted share, in the prior year fourth quarter. Adjusted net earnings in the fourth quarter were $50.8 million, or $0.83 per diluted share, compared to adjusted net earnings of $33.6 million, or $0.54 per diluted share.
For the year, the Company reported net earnings of $93.5 million, or $1.52 per diluted share, compared with net earnings of $201.5 million, or $3.22 per diluted share, in the prior year. Adjusted net earnings for the current fiscal year were $207.1 million, or $3.37 per diluted share, compared to $186.8 million in the prior fiscal year, or $2.98 per diluted share.
"In our third full year as a stand-alone company, we continued to deliver strong results across a number of key metrics, including organic revenue, adjusted earnings per share and adjusted free cash flow growth," said Alan Hoskins, Chief Executive Officer. "Our strong performance continues to be powered by our focus on our strategic priorities: lead with innovation, operate with excellence and drive productivity gains. Looking forward, our unrelenting focus on these priorities will drive our Fiscal 2019 outlook including our fourth consecutive year of expected organic revenue growth and $3.40 to $3.50 of adjusted diluted earnings per share."
Fourth Fiscal Quarter Financial Highlights (Unaudited)
The following is a summary of key fourth fiscal quarter results. All comparisons are with the fourth quarter of fiscal 2017 unless otherwise stated.
-- Net sales were $457.2 million, down 1.7%: (a)
-- Organic net sales decreased 0.6% primarily due to the lapping of
prior year hurricane activity in the U.S. offset by distribution
gains, the favorable impact of pricing initiatives and the timing of
holiday activity. Excluding the year over year impact of
hurricanes, organic sales increased 2.3%;
-- The impact of the Nu Finish acquisition resulted in increased sales
of $2.3 million, or 0.5%;
-- Our Argentina operations, deemed to be highly inflationary, had an
unfavorable impact on net sales of $2.0 million, or 0.4%; and
-- Unfavorable movement in foreign currencies, excluding Argentina,
resulted in decreased sales of $5.2 million, or 1.2%.
-- Gross margin percentage was 45.5%, down 50 basis points from the prior
year driven primarily by the unfavorable movement in foreign currencies.
(a)
-- A&P spending was 7.0% of sales, a decrease of 270 basis points, or $13.2
million. Spending in fiscal 2018 was more normalized throughout the
fiscal year, while spending in fiscal 2017 was more heavily weighted in
the fourth quarter in support of our portfolio optimization and the
launch of our improved Energizer Max offering.
-- SG&A spending, excluding acquisition and integration costs, was
approximately $88.1 million, a decrease of $10.6 million over the prior
year due to lower compensation and broker commission costs driven by
lower sales in the current quarter as well as savings from our
continuous improvement initiatives. SG&A, excluding acquisition and
integration costs, was 19.3% compared to 21.2%, as a percentage of sales
in the prior year. (a) (b)
-- Earnings before income taxes was negatively impacted by the movement in
foreign currencies by approximately $8.4 million in the fourth fiscal
quarter, net of hedge impact. This includes $5.6 million from our
Argentina operations.
-- Diluted EPS was $0.02 in the fourth quarter and Adjusted Diluted EPS was
$0.83. (a)
-- Dividend payments in the quarter were approximately $17 million, or
$0.29 per share.
-- Repurchased approximately 313,000 shares of common stock for $20.0
million.
Fiscal 2018 Full Year Financial Highlights (Unaudited)
The following is a summary of key fiscal 2018 full year results. All comparisons are with fiscal 2017 unless otherwise stated.
-- Net sales were $1,797.7 million, up 2.4%: (a)
-- Organic net sales increased 1.3% reflecting favorable pricing,
distribution gains and benefits from our portfolio optimization,
slightly offset by the lapping of prior year hurricane activity in
the U.S. Excluding the year over year impact of hurricanes, organic
sales increased 2.2%;
-- The impact of the Nu Finish acquisition resulted in increased sales
of $2.3 million, or 0.1%;
-- Our Argentina operations had an unfavorable impact on net sales of
$1.9 million, or 0.1%; and
-- Favorable movement in foreign currencies, primarily generated in the
first half of the fiscal year, had a positive impact on net sales of
$19.1 million, or 1.1%.
-- Gross margin percentage was 46.2%, essentially flat to the prior year,
as the net favorable currency impact for the fiscal year was fully
offset by higher commodity costs. (a)
-- A&P spending was 6.3% of sales, a decrease of 30 basis points, or $3.2
million, due to slightly higher investments in the prior year to support
our portfolio optimization and the launch of our improved Energizer Max
offering.
-- SG&A spending, excluding acquisition and integration costs, was
approximately $358.8 million, or 20.0% of net sales as compared to
$357.3 million, or 20.4% of net sales in the prior year. The improved
percentage comparison versus the prior year reflects the improved
top-line performance due to organic sales growth, as well as cost
savings from our continuous improvement initiatives and focus on
managing costs. (a) (b)
-- Earnings before income taxes was negatively impacted by the movement in
foreign currencies by approximately $5.3 million, net of hedge impact.
This was driven largely by a negative $11.1 million full year impact
from Argentina.
-- Income tax rate on a year to date basis was 46.6%. The current year
rate includes a $39.1 million charge for the one-time impact of the new
U.S. tax legislation passed in December 2017 as well as the impact of
$6.0 million related to tax withholding expense for cash movement to
fund the acquisition of Spectrum Brands Holdings' global battery and
portable lighting business (Spectrum acquisition). Excluding the impact
of our Non-GAAP adjustments, the year to date tax rate was 23.1% as
compared to 28.4% in the prior year. The decrease in the current year
is driven primarily by the lower statutory U.S. rate that is now
effective for fiscal year 2018 brought about by the tax legislation
passed at the end of the calendar year 2017. (a)
-- Diluted EPS was $1.52 and Adjusted Diluted EPS was $3.37. (a)
-- Net cash from operating activities was $228.7 million and Adjusted Free
Cash Flow was $237.8 million. (a)
-- Dividend payments were approximately $70 million, or $1.16 per share.
-- Repurchased approximately 1,439,000 shares of common stock for $70.0
million.
(a) See Press Release attachments for additional information as well as the GAAP to Non-GAAP reconciliations.
(b) The first quarter 2018 adoption of ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Costs (ASU 2017-07) requires pension financing costs to be recorded in Other items, net. The 2017 results reflect this reclassification which caused a net pension benefit of $2.4 and $11.7 million to be reclassified out of SG&A for the quarter and twelve months ended September 30, 2017, respectively.
Total Net Sales (In millions - Unaudited)
Quarter and Twelve Months Ended September 30, 2018
Q4 % Chg Twelve % Chg
Months
Net Sales -FY'17 $
465.1 $
1,755.7
Organic (3.0) (0.6) 22.5 1.3
% %
Impact of acquisition 2.3 0.5 2.3 0.1
% %
Argentina operations (2.0) (0.4) (1.9) (0.1)
% %
Impact of currency (5.2) (1.2) 19.1 1.1
% %
Net Sales -FY'18 $
457.2 (1.7) $
1,797.7 2.4
% %
**Refer to the Reconciliation of
GAAP and Non-GAAP Financial
Measures attached. The Company is
presenting separately all changes
in sales from our Argentina
affiliate due to the designation
of the economy as highly
inflationary as of July 1, 2018.
For presentation purposes, the
Company has recast Argentina's
prior period operations as well.
Total net sales in the fourth fiscal quarter decreased 1.7%, or $7.9 million:
-- Organic net sales decreased 0.6% in the quarter due to the following
items:
-- The lapping of prior year U.S. hurricane volume in the fourth fiscal
quarter decreased sales by 2.9%;
-- Distribution gains and phasing of holiday activity at certain U.S.
retailers increased net sales by 1.3%; and
-- Favorable pricing initiatives across several markets increased net
sales by 1.0%.
-- The Nu Finish acquisition had a favorable impact on net sales of $2.3
million, or 0.5%.
-- Our Argentina operations had an unfavorable impact on net sales of $2.0
million, or 0.4%. Our pricing actions in market could not fully overcome
the negative inflationary impacts.
-- Unfavorable movement in foreign currencies resulted in decreased sales
of $5.2 million, or 1.2%.
Total Segment Profit (In millions - Unaudited)
Quarter and Twelve Months Ended September 30, 2018
Q4 % Chg Twelve % Chg
Months
Segment Profit -
FY'17 $
106.0 $
453.0
Organic 18.3 17.3 10.0 2.2
% %
Impact of acquisition 0.9 0.8 0.9 0.2
% %
Argentina operations (0.7) (0.7) (0.6) (0.1)
% %
Impact of currency (3.9) (3.6) 12.4 2.7
% %
Segment Profit - $
120.6 13.8 $
475.7 5.0
FY'18
% %
** Refer to the Reconciliation of
GAAP and Non-GAAP Financial
Measures attached. The Company is
presenting separately all changes
in segment profit from our
Argentina affiliate due to the
designation of the economy as
highly inflationary as of July 1,
2018. For presentation purposes,
the Company has recast Argentina's
prior period operations as well.
Total Segment Profit in the fourth fiscal quarter increased $14.6 million, or 13.8%. Organic growth of $18.3 million, or 17.3%, was primarily driven by lower A&P and SG&A spending in the quarter slightly offset by lower top-line growth as a result of the lapping of U.S. hurricane volume in the prior year. Adding to the segment profit increase for the quarter was the favorable impact of our Nu Finish acquisition of $0.9 million, or 0.8%. Our Argentina operations had an unfavorable impact on segment profit of $0.7 million, or 0.7%. In addition, foreign currency impacts were unfavorable by $3.9 million, or 3.6%.
Financial Outlook Assumptions for Fiscal Year 2019
The Company is providing the below assumptions related to its financial outlook for fiscal year 2019 and excludes operational results from the Spectrum acquisition. All comparisons are with the fiscal year ended September 30, 2018 unless otherwise stated. The outlook provided below takes into account our lapping of hurricane activity in fiscal 2018 that contributed approximately $8 million of net sales and $0.04 to adjusted earnings per share. Our outlook assumes that activity is not expected to repeat.
Net Sales on a reported basis are expected to be up low single digits:
-- Organic net sales are expected to be up low single digits;
-- Nu Finish acquisition is expected to contribute 30 to 40 basis points of
net sales growth;
-- Argentina is expected to be a headwind of 30 basis points due to the
high inflation;
-- Unfavorable movements in foreign currency, excluding Argentina, are
expected to negatively impact net sales by 1.0% to 1.5% based on current
rates.
Gross margin rates, excluding acquisition and integration costs, are expected to be down approximately 30 to 70 basis points to the current year; primarily the result of currency headwinds.
A&P spending is expected to be at the lower end of our long term outlook range of 6% to 7% of net sales.
SG&A, as a percent of net sales, excluding acquisition and integration costs, is expected to decline on a year over year basis as we continue to recognize the benefits from our continuous improvement initiatives and is expected to be down 20 to 50 basis points.
Earnings before income taxes is expected to be unfavorably impacted by foreign currency headwinds of roughly $25 to $30 million, net of hedge impacts, based on current rates, including $15 million associated with Argentina, which was deemed highly inflationary as of July 1, 2018.
Ex-unusual income tax rate is expected to be in the range of 23% to 25% based on the current expected country mix of earnings and the new tax law changes.
Adjusted Diluted earnings per share for the full fiscal year is expected to be in the range of $3.40 to $3.50.
Capital spending is expected to be in the range of $30 to $35 million.
Adjusted Free cash flow is expected to be roughly flat reflecting the expected foreign currency headwinds and lapping the benefits of hurricanes and asset sales in fiscal year 2018 that are not expected to repeat.
Dividends, as previously announced, increased 3.5% beginning in the first quarter of fiscal 2019.
Webcast Information
In conjunction with this announcement, the Company will hold an investor conference call beginning at 10:00 a.m. eastern time today. The call will focus on fourth quarter earnings and the financial outlook for fiscal 2019. All interested parties may access a live webcast of this conference call at www.energizerholdings.com, under "Investors" and "Events and Presentations" tabs or by using the following link:
https://www.webcaster4.com/Webcast/Page/1192/27872
For those unable to participate during the live webcast, a replay will be available on www.energizerholdings.com, under "Investors," "Events and Presentations," and "Past Events" tabs.
Forward-Looking Statements.
This document contains both historical and forward-looking statements. Forward-looking statements are not based on historical facts but instead reflect our expectations, estimates or projections concerning future results or events, including, without limitation, the future sales, gross margins, costs, earnings, cash flows, tax rates and performance of the Company. These statements generally can be identified by the use of forward-looking words or phrases such as "believe," "expect," "expectation," "anticipate," "may," "could," "intend," "belief," "estimate," "plan," "target," "predict," "likely," "should," "forecast," "outlook," or other similar words or phrases. These statements are not guarantees of performance and are inherently subject to known and unknown risks, uncertainties and assumptions that are difficult to predict and could cause our actual results to differ materially from those indicated by those statements. We cannot assure you that any of our expectations, estimates or projections will be achieved. The forward-looking statements included in this document are only made as of the date of this document and we disclaim any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances. Numerous factors could cause our actual results and events to differ materially from those expressed or implied by forward-looking statements, including, without limitation:
-- market and economic conditions;
-- market trends in the categories in which we compete;
-- the success of new products and the ability to continually develop and
market new products;
-- our ability to attract, retain and improve distribution with key
customers;
-- our ability to continue planned advertising and other promotional
spending;
-- our ability to timely execute strategic initiatives, including
restructurings, and international go-to-market changes in a manner that
will positively impact our financial condition and results of operations
and does not disrupt our business operations;
-- the impact of strategic initiatives, including restructurings, on our
relationships with employees, customers and vendors;
-- our ability to maintain and improve market share in the categories in
which we operate despite heightened competitive pressure;
-- our ability to improve operations and realize cost savings;
-- our ability to acquire and integrate businesses, and to realize the
projected results of acquisitions, including our ability to integrate
the Nu Finish operations successfully and to achieve the anticipated
cost savings, synergies, and other anticipated benefits;
-- the impact of foreign currency exchange rates and currency controls, as
well as offsetting hedges, including the impact of the United Kingdom's
intention to exit the European Union;
-- the impact of raw materials and other commodity costs;
-- the impact of legislative changes or regulatory determinations or
changes by federal, state and local, and foreign authorities, as well as
the impact of potential changes to tax laws, policies and regulations;
-- costs and reputational damage associated with cyber-attacks or
information security breaches or other events;
-- the impact of advertising and product liability claims and other
litigation; and
-- compliance with debt covenants and maintenance of credit ratings as well
as the impact of interest and principal repayment of our existing and
any future debt.
In addition, other risks and uncertainties not presently known to us or that we consider immaterial could affect the accuracy of any such forward-looking statements. The list of factors above is illustrative, but by no means exhaustive. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. Additional risks and uncertainties include those detailed from time to time in our publicly filed documents, including those described under the heading "Risk Factors" in our Form 10-K filed with the Securities and Exchange Commission on November 14, 2017 as well as our Form 10-Q filed on Aug 1, 2018.
ENERGIZER HOLDINGS, INC.
CONSOLIDATED STATEMENT OF EARNINGS
(Condensed)
(In millions, except per share data - Unaudited)
Quarter Ended Twelve Months Ended
September 30, September 30,
2018 2017 2018 2017
---
Net sales $
457.2 $
465.1 $
1,797.7 $
1,755.7
Cost of products
sold (1) 249.2 251.3 966.8 944.4
Gross profit 208.0 213.8 830.9 811.3
Selling, general and
administrative
expense (1) (2) 106.4 97.9 421.7 361.3
Advertising and
promotion expense 31.8 45.0 112.9 116.1
Research and
development expense 6.5 6.0 22.4 22.0
Amortization of
intangible assets 3.1 2.8 11.5 11.2
Spin restructuring - (3.8)
Gain on sale of real
estate - (4.6) (16.9)
Interest expense (1)
(3) 50.8 13.4 98.4 53.1
Other items, net (1)
(2) 2.5 (0.7) (6.6) (5.0)
Earnings before
income taxes 6.9 49.4 175.2 273.3
Income tax provision
(4) 5.4 15.3 81.7 71.8
Net earnings $
1.5 $
34.1 $
93.5 $
201.5
Earnings per share
Basic $
0.03 $
0.56 $
1.56 $
3.27
Diluted $
0.02 $
0.55 $
1.52 $
3.22
Dividend per common
share $
0.29 $
0.275 $
1.16 $
1.10
Weighted average
shares of common
stock -Basic 59.7 61.3 59.8 61.7
Weighted average
shares of common
stock -Diluted 61.2 62.0 61.4 62.6
(1) See the Supplemental Schedules -
Non-GAAP Reconciliation attached
which breaks out the Acquisition
and integration related items
included within these lines.
(2) As a result of the adoption of
ASU 2017-07 in the first fiscal
quarter of 2018, the pension
components other than service costs
are recorded in Other items, net.
This resulted in a reclassification
of the $2.4 and $11.7 million
pension benefit from SG&A to Other
items, net for the quarter and
twelve months ended September 30,
2017, respectively. The current
year pension components other than
service costs recorded in Other
items, net was $12.9 and $7.8
million of pension expense for the
quarter and twelve months ended
September 30, 2018, respectively.
The current year amounts include a
$14.1 million settlement loss on
the Canadian pension plan
termination in the fourth quarter.
(3) Includes Acquisition debt
commitment fees, interest, and
ticking fees of $35.6 and $41.9 for
the quarter and twelve months ended
September 30, 2018, respectively,
associated with the Spectrum
acquisition.
(4) Income tax provision for the
quarter and twelve months ended
September 30, 2018, includes $8.5
and $39.1 million of one-time
expense related to the enactment of
the Tax Cuts and Jobs Act of 2017
(U.S. Tax Legislation) and includes
$6.0 million of tax withholding
expense in the twelve months ended
September 30, 2018 related to cash
movement to fund the Spectrum
acquisition.
ENERGIZER HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Condensed)
(In millions - Unaudited)
SEPTEMBER 30,
2018 2017
Assets
Current assets
Cash and cash equivalents $
522.1 $
378.0
Trade receivables, net 230.4 230.2
Inventories 323.1 317.1
Other current assets 95.5 94.9
Total current assets $
1,171.1 $
1,020.2
Restricted cash 1,246.2
Property, plant and equipment, net 166.7 176.5
Goodwill 244.2 230.0
Other intangible assets, net 232.7 223.8
Deferred tax asset 36.9 47.7
Other assets 81.0 125.4
Total assets $
3,178.8 $
1,823.6
Liabilities and Shareholders' Equity
Current liabilities
Current maturities of long-term debt $
4.0 $
4.0
Notes payable 247.3 104.1
Accounts payable 228.9 219.3
Other current liabilities 271.0 254.6
Total current liabilities $
751.2 $
582.0
Long-term debt 976.1 978.5
Long-term debt held in escrow 1,230.7
Other liabilities 196.3 178.0
Total liabilities $
3,154.3 $
1,738.5
Shareholders' equity
Common stock 0.6 0.6
Additional paid-in capital 217.8 196.7
Retained earnings 177.3 198.7
Treasury stock (129.4) (72.1)
Accumulated other comprehensive loss (241.8) (238.8)
Total shareholders' equity $
24.5 $
85.1
Total liabilities and shareholders' equity $
3,178.8 $
1,823.6
ENERGIZER HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Condensed)
(In millions - Unaudited)
FOR THE YEARS ENDED
SEPTEMBER 30,
2018 2017
Cash Flow from Operating Activities
Net earnings $
93.5 $
201.5
Non-cash restructuring income (2.5)
Depreciation and amortization 45.1 50.2
Deferred income taxes 1.8 (4.4)
Share-based compensation expense 28.2 24.3
Gain on sale of real estate (4.6) (16.9)
Mandatory transition tax 33.1
Settlement loss on the Canadian pension plan
termination 14.1
Other non-cash charges 7.8 6.2
Other, net (4.7) (28.7)
Changes in assets and liabilities used in
operations, net of acquisitions
Increase in accounts receivable, net (1.1) (43.7)
Increase in inventories (12.1) (30.7)
Decrease in other current assets 2.8 20.8
Increase in accounts payable 4.4 13.4
Increase in other current liabilities 20.4 7.7
Net cash flow from operating activities 228.7 197.2
Cash Flow from Investing Activities
Capital expenditures (24.2) (25.2)
Proceeds from sale of assets 6.1 27.2
Acquisitions, net of cash acquired (38.1)
Net cash (used by)/from investing activities (56.2) 2.0
Cash Flow from Financing Activities
Cash proceeds from issuance of debt with original
maturities greater than 90 days 1,259.9
Payments on debt with maturities greater than 90
days (4.0) (4.0)
Net increase in debt with maturities 90 days or
less 143.4 36.5
Dividends paid (70.0) (69.1)
Debt issuance costs (22.6) (0.8)
Common stock repurchased (70.0) (59.5)
Taxes paid for withheld share-based payments (10.4) (10.0)
Net cash from/(used by) financing activities 1,226.3 (106.9)
Effect of exchange rate changes on cash, cash
equivalents and restricted cash (8.5) (1.6)
Net increase in cash, cash equivalents and
restricted cash 1,390.3 90.7
Cash, cash equivalents and restricted cash,
beginning of period 378.0 287.3
Cash, cash equivalents and restricted cash, end of
period $
1,768.3 $
378.0
Cash and cash equivalents $
522.1 $
378.0
Restricted cash 1,246.2
Total cash, cash equivalents and restricted cash $
1,768.3 $
378.0
ENERGIZER HOLDINGS, INC.
Supplemental Schedules
Introduction to the Reconciliation of GAAP and Non-GAAP Measures
For the Quarter and Twelve Months ended September 30, 2018
The Company reports its financial results in accordance with accounting principles generally accepted in the U.S. ("GAAP"). However, management believes that certain non-GAAP financial measures provide users with additional meaningful comparisons to the corresponding historical or future period. These non-GAAP financial measures exclude items that are not reflective of the Company's on-going operating performance, such as acquisition and integration costs and related items, settlement loss on pension plan termination, gains on sale of real estate and related to the spin, and the one-time impact of the new U.S. tax legislation. In addition, these measures help investors to analyze year over year comparability when excluding currency fluctuations, acquisition activity as well as other company initiatives that are not on-going. We believe these non-GAAP financial measures are an enhancement to assist investors in understanding our business and in performing analysis consistent with financial models developed by research analysts. Investors should consider non-GAAP measures in addition to, not as a substitute for, or superior to, the comparable GAAP measures. In addition, these non-GAAP measures may not be the same as similar measures used by other companies due to possible differences in method and in the items being adjusted.
We provide the following non-GAAP measures and calculations, as well as the corresponding reconciliation to the closest GAAP measure in the following supplemental schedules:
Segment Profit. This amount represents the operations of our two reportable segments including allocations for shared support functions. General corporate and other expenses, global marketing expenses, R&D expenses, amortization expense, interest expense, other items, net, and charges related to acquisition and integration, settlement loss on pension plan termination, gains on sale of real estate and the spin-off have all been excluded from segment profit.
Adjusted Earnings Before Taxes, Adjusted Net Earnings and Adjusted Diluted EPS. These measures exclude the impact of the costs related to acquisition and integration, settlement loss on pension plan termination, gains on sale of real estate and the spin-off and the one-time impact of the new U.S. tax legislation.
Ex-unusual Tax Rate. This is the tax rate when excluding the pre-tax impact of acquisition and integration, settlement loss on pension plan termination and gains on sale of real estate and the spin-off, as well as the related tax impact for these items, calculated utilizing the statutory rate for where the costs were incurred, as well as the one-time impact of the new U.S. tax legislation.
Organic. This is the non-GAAP financial measurement of the change in revenue, segment profit or other margins that excludes or otherwise adjusts for the impact of acquisitions, operations in Argentina, and the impact of currency from the changes in foreign currency exchange rates as defined below:
Impact of acquisition. The Company acquired the Nu Finish business on July 2, 2018. This includes the impact of the Nu Finish on-going operations contributed to each respective income statement caption. This does not include the impact of acquisition and integration costs associated with the Nu Finish acquisition or the anticipated Spectrum acquisition.
Change in Argentina operations. The Company is presenting separately all changes in sales and segment profit from our Argentina affiliate due to the designation of the economy as highly inflationary as of July 1, 2018. For presentation purposes, the Company has recast Argentina's prior period operations as well.
Impact of currency. The Company evaluates the operating performance of our Company on a currency neutral basis. The impact of currency is the difference between the value of current year foreign operations at the current period ending USD exchange rate, compared to the value of the current year foreign operations at the prior period ending USD exchange rate.
Adjusted Comparisons. Detail for adjusted gross profit, adjusted gross margin, and adjusted SG&A as a percent of sales are also supplemental non-GAAP measure disclosures. These measures exclude the impact of costs related to acquisition and integration.
Free Cash Flow. Free Cash Flow is defined as net cash provided by operating activities reduced by capital expenditures, net of the proceeds from asset sales. Adjusted Free Cash Flow is defined as Free Cash Flow excluding the cash payments for acquisition and integration costs. These cash payments are net of the statutory tax benefit associated with the payment.
Non-GAAP Outlook. For our fiscal year 2019 outlook, the Company is unable to provide reconciliation to the full year Adjusted EPS range of $3.40 to $3.50 and Adjusted Free Cash flow of approximately $238 million to comparable GAAP measures due to the uncertainty regarding the timing and amount of future acquisition and integration costs and related cash payments. Given the uncertainty of the exact closing date, we are unable to forecast the amount of acquisition and integration costs that will be incurred in fiscal 2019.
Energizer Holdings, Inc.
Supplemental Schedules - Segment Information and Supplemental Sales Data
For the Quarter and Twelve Months ended September 30, 2018
Operations for Energizer are managed via two major geographic reportable segments: Americas and International. Prior to January 1, 2018, the International segment was reported as two separate geographic reportable segments: Europe, Middle East and Africa (EMEA) and Asia Pacific. The Company changed its reporting structure to reflect how the Company is managing the operations as well as what the chief operating decision maker is reviewing to make organizational decisions about resource allocation. The prior period segment information has been recast to reflect the current reportable segment structure of the Company.
Energizer's operating model includes a combination of standalone and shared business functions between the geographic segments, varying by country and region of the world. Shared functions include IT and finance shared service costs. Energizer applies a fully allocated cost basis, in which shared business functions are allocated between segments. Such allocations are estimates, and do not represent the costs of such services if performed on a standalone basis.
Segment sales and profitability for the quarter and twelve months ended September 30, 2018 and 2017, respectively, are presented below:
For the Quarter Ended For the Twelve Months Ended
September 30, September 30,
2018 2017 2018 2017
Net Sales
Americas $
297.1 $
299.6 $
1,135.6 $
1,111.8
International 160.1 165.5 662.1 643.9
Total net sales $
457.2 $
465.1 $
1,797.7 $
1,755.7
Segment Profit
Americas $
86.9 $
72.8 $
326.1 $
310.0
International 33.7 33.2 149.6 143.0
Total segment profit $
120.6 $
106.0 $
475.7 $
453.0
General corporate and
other expenses (1) (2) $
(26.3) $
(26.4) $
(97.3) $
(92.5)
Global marketing expense
(1) (6.0) (9.5) (19.0) (21.5)
Research and development
expense (6.5) (6.0) (22.4) (22.0)
Amortization of
intangible assets (3.1) (2.8) (11.5) (11.2)
Acquisition and
integration costs (3)
(4) (5) (43.6) 0.8 (84.6) (8.4)
Spin restructuring 3.8
Settlement loss on
Canadian pension plan
termination (4) (14.1) (14.1)
Gain on sale of real
estate 4.6 16.9
Interest expense (5) (15.2) (13.4) (56.5) (53.1)
Other items, net (2)(4) 1.1 0.7 0.3 8.3
Total earnings before
income taxes $
6.9 $
49.4 $
175.2 $
273.3
(1) Recorded in SG&A in the unaudited
Consolidated Statement of
Earnings.
(2) As a result of the adoption of ASU
2017-07 in the first fiscal
quarter of 2018, a $2.4 and $11.7
million benefit was reclassified
from SG&A to Other items, net for
the quarter and twelve months
ended September 30, 2017,
respectively.
(3) See the Supplemental Schedules -
Non-GAAP Reconciliation for where
these charges are recorded in
unaudited Consolidated Statement
of Earnings.
(4) The quarter and twelve months ended
September 30, 2018 on the
unaudited Consolidated Statement
of Earnings for Other items, net,
included income of $10.5 million
and $20.4 million, respectively,
and the twelve months ended
September 30, 2017 included
expense of $3.3 million of
acquisition and integration costs,
which have been reclassified for
purposes of the reconciliation
above. The quarter and twelve
months ended September 30, 2018
Other items, net also included the
$14.1 million settlement loss on
Canadian pension plan termination,
which has been reclassified for
the reconciliation above.
(5) The quarter and twelve months ended
September 30, 2018 on the
unaudited Consolidated Statement
of Earnings for Interest expense,
included $35.6 million and $41.9
million, respectively, of
acquisition debt commitment fees,
ticking fees and interest expense
which have been reclassified for
purposes of the reconciliation
above.
Supplemental product information is presented below for revenues from external customers:
For the Quarter Ended For the Twelve Months Ended
September 30, September 30,
Net Sales 2018 2017 2018 2017
Batteries $
407.8 $
409.4 $
1,612.7 $
1,548.2
Other 49.4 55.7 185.0 207.5
Total net sales $
457.2 $
465.1 $
1,797.7 $
1,755.7
Energizer Holdings, Inc.
Supplemental Schedules - GAAP EPS to Adjusted EPS Reconciliation
For the Quarter and Twelve Months ended September 30, 2018
(In millions, except for per share data- Unaudited)
The following tables provide a reconciliation of earnings before income taxes, net earnings and net earnings per diluted share to adjusted earnings before income taxes, adjusted net earnings and adjusted net earnings per diluted share, which are non-GAAP measures.
Quarter Ended September 30,
(in millions,
except per
share data) Earnings Before Net Earnings Diluted EPS
Income Taxes
2018 2017 2018 2017 2018 2017
Reported -
GAAP $
6.9 $
49.4 $
1.5 $
34.1 $
0.02 $
0.55
Impacts:
Expense
(Income)
Acquisition
and
integration
costs (1) 43.6 (0.8) 30.4 (0.5) 0.50 (0.01)
Settlement
loss on
Canadian
pension plan
termination
(2) 14.1 10.4 0.17
One-time
impact of the
new U.S. Tax
Legislation 8.5 0.14
Adjusted -
Non-GAAP (3) $
64.6 $
48.6 $
50.8 $
33.6 $
0.83 $
0.54
Weighted
average
shares -
Diluted 61.2 62.0
Twelve Months Ended September 30,
(in millions,
except per share
data) Earnings Before Net Earnings Diluted EPS
Income Taxes
2018 2017 2018 2017 2018 2017
Reported -GAAP $
175.2 $
273.3 $
93.5 $
201.5 $
1.52 $
3.22
Impacts: Expense
(Income)
Acquisition and
integration
costs (1) 84.6 8.4 61.6 4.2 1.00 0.06
Acquisition
withholding tax
(4) 6.0 0.10
Settlement loss
on Canadian
pension plan
termination (2) 14.1 10.4 0.17
Gain on sale of
real estate (4.6) (16.9) (3.5) (16.5) (0.06) (0.26)
Spin
restructuring (3.8) (2.4) (0.04)
One-time impact
of the new U.S.
Tax Legislation 39.1 0.64
Adjusted - Non-
GAAP (5) $
269.3 $
261.0 $
207.1 $
186.8 $
3.37 $
2.98
Weighted average
shares -Diluted 61.4 62.6
(1) See Supplemental Schedules -
Statement of Earnings Reconciliation
for where these costs are recorded
on the unaudited Consolidated
Statement of Earnings.
(2) Represents the actuarial losses
that were previously recorded to
other comprehensive income, and then
recognized to Other items, net upon
the termination of our Canadian
pension plans.
(3) The effective tax rate for the
three months ended September 30,
2018 and 2017 for the Adjusted -
Non-GAAP Net Earnings and Diluted
EPS was 21.4% and 30.9%,
respectively, as calculated
utilizing the statutory rate for
where the costs were incurred. The
net tax impact associated with the
non-GAAP adjustments highlighted in
the table was expense of $8.4
million and a benefit of $0.3
million, respectively, for the
quarters ended September 30, 2018
and 2017.
(4) Represents the tax withholding
expense related to cash movement to
fund the Spectrum acquisition.
(5) The effective tax rate for the
twelve months ended September 30,
2018 and 2017 for the Adjusted -
Non-GAAP Net Earnings and Diluted
EPS was 23.1% and 28.4%,
respectively, as calculated
utilizing the statutory rate for
where the costs were incurred. The
net tax impact associated with the
non-GAAP adjustments highlighted in
the table was a benefit of $19.5
million and expense of $2.4 million,
respectively, for the years ended
September 30, 2018 and 2017.
Energizer Holdings, Inc.
Supplemental Schedules - Segment Sales
For the Quarter and Twelve Months Ended September 30, 2018
(In millions, except per share data - Unaudited)
Net Sales
Americas Q1'18 % Chg Q2'18 % Chg Q3'18 % Chg Q4'18 % Chg FY '18 % Chg
---
Net sales -prior
year $
365.1 $
218.5 $
228.6 $
299.6 $
1,111.8
Organic 5.8 1.6 4.1 1.9 12.3 5.4 (1.7) (0.6) 20.5 1.8
% % % % %
Impact of - % % % 2.2 0.7 2.2 0.2
acquisition
% %
Change in Argentina 0.3 0.1 % (0.2) (0.1) (2.0) (0.7) (1.9) (0.2)
operations *
% % % %
Impact of currency 1.9 0.5 1.5 0.7 0.6 0.3 (1.0) (0.2) 3.0 0.3
% % % % %
---
Net sales -current 2.2 2.6
year
% % % %
$
373.1 $
224.1 % $
241.3 5.6 $
297.1 (0.8) $
1,135.6 2.1
---
International
Net sales -prior
year $
194.5 $
140.5 $
143.4 $
165.5 $
643.9
Organic (1.3) (0.7) 0.3 0.2 4.3 3.0 (1.3) (0.8) 2.0 0.3
% % % % %
Impact of - % % % 0.1 0.1
acquisition
% 0.1 %
Impact of currency 7.0 3.6 9.5 6.8 3.8 2.6 (4.2) (2.6) 16.1 2.5
% % % % %
---
Net sales -current 2.9 7.0
year
% % % %
$
200.2 $
150.3 % $
151.5 5.6 $
160.1 (3.3) $
662.1 2.8
---
Total Net Sales
Net sales -prior
year $
559.6 $
359.0 $
372.0 $
465.1 $
1,755.7
Organic 4.5 0.8 4.4 1.2 16.6 4.5 (3.0) (0.6) 22.5 1.3
% % % % %
Impact of - % % % 2.3 0.5 2.3 0.1
acquisition
% %
Change in Argentina 0.3 0.1 % (0.2) (0.1) (2.0) (0.4) (1.9) (0.1)
operations *
% % % %
Impact of currency 8.9 1.5 11.0 3.1 4.4 1.2 (5.2) (1.2) 19.1 1.1
% % % % %
Net sales -current 2.4 4.3
year
% % % %
$
573.3 $
374.4 % $
392.8 5.6 $
457.2 (1.7) $
1,797.7 2.4
---
Segment Profit
Americas Q1'18 % Chg Q2'18 % Chg Q3'18 % Chg Q4'18 % Chg FY '18 % Chg
Segment Profit -
prior year $
123.1 $
60.5 $
53.6 $
72.8 $
310.0
Organic (1.8) (1.5) (5.6) (9.3) 6.6 12.3 14.5 19.9 13.7 4.4
% % % % %
Impact of % % % 0.9 1.2 0.9 0.3
acquisition
% %
Change in Argentina 0.4 0.3 (0.2) (0.3) (0.1) (0.2) (0.7) (1.0) (0.6) (0.2)
operations * %
% % % %
Impact of currency 1.4 1.2 1.0 1.7 0.3 0.6 (0.6) (0.7) 2.1 0.7
% %
% % %
Segment Profit - (7.9) 12.7 19.4
current year
% %
$
123.1 % $
55.7 $
60.4 % $
86.9 % $
326.1 5.2
International
Segment Profit -
prior year $
50.8 $
33.3 $
25.7 $
33.2 $
143.0
Organic (6.0) (11.8) (5.5) (16.5) 4.0 15.6 3.8 11.4 (3.7) (2.6)
% %
% % %
Impact of
acquisition % % % % %
Impact of currency 4.4 8.7 6.3 18.9 2.9 11.2 (3.3) (9.9) 10.3 7.2
% %
% % %
Segment Profit - 2.4 26.8
current year
% % %
$
49.2 (3.1)% $
34.1 $
32.6 % $
33.7 1.5 $
149.6 4.6
Total Segment Profit
Segment Profit -
prior year $
173.9 $
93.8 $
79.3 $
106.0 $
453.0
Organic (7.8) (4.5) (11.1) (11.8) 10.6 13.4 18.3 17.3 10.0 2.2
%
% % % %
Impact of % % % 0.9 0.8 0.9 0.2
acquisition
% %
Change in Argentina 0.4 0.2 (0.2) (0.2) (0.1) (0.1) (0.7) (0.7) (0.6) (0.1)
operations* %
% % % %
Impact of currency 5.8 3.4 7.3 7.7 3.2 4.0 (3.9) (3.6) 12.4 2.7
% %
% % %
Segment Profit - (0.9) (4.3) 17.3 13.8
current year
% % %
$
172.3 $
89.8 $
93.0 % $
120.6 % $
475.7 5.0
* Prior periods have been
recast to remove the Impact of
Argentina operations from the
previously reported Organic or
Impact of currency amounts for
comparative purposes due to
its designation as a highly
inflationary economy as of
July 1, 2018.
Energizer Holdings, Inc.
Supplemental Schedules - Statement of Earnings Reconciliation
For the Quarter and Twelve Months Ended September 30, 2018
(In millions, except per share data - Unaudited)
Gross Profit Q1'18 Q2'18 Q3'18 Q4'18 Q1'17 Q2'17 Q3'17 Q4'17 2018 2017
---
Net Sales $
573.3 $
374.4 $
392.8 $
457.2 $
559.6 $
359.0 $
372.0 $
465.1 $
1,797.7 $
1,755.7
Cost of products
sold -adjusted 295.0 205.9 216.7 249.0 288.0 190.9 213.1 251.3 966.6 943.3
Adjusted Gross
Profit $
278.3 $
168.5 $
176.1 $
208.2 $
271.6 $
168.1 $
158.9 $
213.8 $
831.1 $
812.4
Adjusted Gross 48.5 45.0 44.8 45.5 48.5 46.8 42.7 46.0 46.2 46.3
Margin % % % % % % % % % %
Acquisition and
integration
costs - 0.2 0.2 0.9 0.2 1.1
Reported Cost of
products sold 295.0 205.9 216.7 249.2 288.0 191.1 214.0 251.3 966.8 944.4
Reported Gross
Profit $
278.3 $
168.5 $
176.1 $
208.0 $
271.6 $
167.9 $
158.0 $
213.8 $
830.9 $
811.3
Reported Gross 48.5 45.0 44.8 45.5 48.5 46.8 42.5 46.0 46.2 46.2
Margin % % % % % % % % % %
---
SG&A Q1'18 Q2'18 Q3'18 Q4'18 Q1'17 Q2'17 Q3'17 Q4'17 2018 2017
---
Segment SG&A $
71.2 $
61.6 $
63.2 $
60.7 $
65.0 $
60.1 $
62.4 $
69.0 $
256.7 $
256.5
Corporate SG&A 21.8 24.8 24.6 26.1 17.2 29.5 19.6 26.1 97.3 92.4
Global Marketing 0.5 1.3 1.7 1.3 1.4 1.6 1.8 3.6 4.8 8.4
SG&A Adjusted -
subtotal $
93.5 $
87.7 $
89.5 $
88.1 $
83.6 $
91.2 $
83.8 $
98.7 $
358.8 $
357.3
SG&A Adjusted % 16.3 23.4 22.8 19.3 14.9 25.4 22.5 21.2 20.0 20.4
of Net Sales % % % % % % % % % %
Acquisition and
integration
costs 5.7 16.5 22.4 18.3 0.8 1.5 2.5 (0.8) 62.9 4.0
Reported SG&A $
99.2 $
104.2 $
111.9 $
106.4 $
84.4 $
92.7 $
86.3 $
97.9 $
421.7 $
361.3
Reported SG&A % 17.3 27.8 28.5 23.3 15.1 25.8 23.2 21.0
of Net Sales
%
%
% % % % % % % % 23.5 20.6
---
Acquisition and
integration Q1'18 Q2'18 Q3'18 Q4'18 Q1'17 Q2'17 Q3'17 Q4'17 2018 2017
---
Cost of products
sold
$
$
$ $
0.2
$ $
0.2 $
0.9
$ $
0.2 $
1.1
SG&A 5.7 16.5 22.4 18.3 0.8 1.5 2.5 (0.8) 62.9 4.0
Interest expense - 2.9 3.4 35.6 41.9
Other items, net - 3.3 3.3
Acquisition and
integration
costs-
subtotal $
5.7 $
19.4 $
25.8 $
54.1 $
0.8 $
1.7 $
6.7 $
(0.8) $
105.0 $
8.4
Interest income
(Other items,
net) - (5.2) (5.2)
Acquisition
foreign
currency gains
(Other items,
net) - (9.9) (5.3) (15.2)
Acquisition and
integration
related items $
5.7 $
19.4 $
15.9 $
43.6 $
0.8 $
1.7 $
6.7 $
(0.8) $
84.6 $
8.4
Other items, net Q1'18 Q2'18 Q3'18 Q4'18 Q1'17 Q2'17 Q3'17 Q4'17 2018 2017
---
Interest income $
(0.5) $
(0.3) $
(0.4) $
(0.2) $
(0.4) $
(0.6) $
(0.5) $
(0.5) $
(1.4) $
(2.0)
Interest income
on restricted
cash - (5.2) (5.2)
Foreign currency
exchange loss 4.1 2.9 0.7 0.4 1.9 (0.5) 1.1 2.2 8.1 4.7
Pension benefit
other than
service costs (1.7) (1.7) (1.7) (1.2) (3.1) (3.1) (3.1) (2.4) (6.3) (11.7)
Settlement loss
on the Canadian
pension plan
termination - 14.1 14.1
Acquisition
foreign
currency gains - (9.9) (5.3) (15.2)
Loss on sale of
promotional
business - 3.3 3.3
Other (0.6) (0.1)
$
$ $
0.7
$ (0.7) 0.7
Total Other
items, net $
1.3 $
0.9 $
(11.3) $
2.5 $
(1.6) $
(4.2) $
1.5 $
(0.7) $
(6.6) $
(5.0)
Energizer Holdings, Inc.
Supplemental Schedules - Statement of Earnings Reconciliation
For the Quarter and Twelve Months Ended September 30, 2018
(In millions, except per share data - Unaudited)
Free Cash Flow 2018 2017
---
Net cash from
operating
activities $
228.7 $
197.2
Capital
expenditures (24.2) (25.2)
Proceeds from sale
of assets 6.1 27.2
Free Cash Flow -
subtotal $
210.6 $
199.2
Acquisition and
integration
related payments 27.2 4.3
Adjusted Free Cash
Flow $
237.8 $
203.5
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SOURCE Energizer Holdings, Inc.
