Energizer Holdings, Inc. Announces Fiscal 2019 Third Quarter Results
ST. LOUIS, Aug. 6, 2019 /PRNewswire/ -- Energizer Holdings, Inc. (NYSE: ENR) today announced results for the third fiscal quarter, which ended June 30, 2019. For the third fiscal quarter, net earnings from continuing operations were $9.2 million, or $0.07 per diluted common share, compared to net earnings of $23.8 million, or $0.39 per diluted common share, in the prior year third quarter. Adjusted net earnings from continuing operations in the third quarter were $30.5 million, or $0.37 per diluted common share, compared to adjusted net earnings from continuing operations of $33.2 million, or $0.54 per diluted common share, in the prior year third quarter.
"Our third quarter results reflect the strength of our brands and growth within our combined battery and lighting business, as well as the continued progress we are making in our transformative efforts across the company," said Alan Hoskins, Chief Executive Officer. "During the quarter, we delivered organic revenue growth, which drove strong overall profitability and cash flow generation in our legacy business while partially offsetting the negative impact of weather on our auto refrigerant business."
"We remain on track to deliver our full year fiscal 2019 outlook for adjusted earnings per share, EBITDA and free cash flow, and are adjusting our expectation for Net sales to reflect performance of our acquired businesses in the quarter and expectations for the balance of the year," continued Hoskins. "We continue to make progress integrating both acquisitions with synergies to date tracking ahead of our original synergy target for the first full year. Additionally, we have increased our expected synergy realization to approximately $100 million, which we expect to benefit our bottom line results. Separately, we have line of sight to incremental synergies above this amount, which will allow us to invest in these businesses to drive growth and profitability over the long-term."
Third Quarter 2019 Financial Highlights (Unaudited)
The following is a summary of key results for the third quarter of fiscal 2019. All comparisons are with the third quarter of fiscal 2018 and represent continuing operations unless otherwise stated.
-- Net sales were $647.2 million, an increase of 64.8%: (a)
-- Organic net sales increased $14.2 million, or 3.6%, due to favorable
pricing and distribution gains;
-- The impact of the acquisitions increased net sales by $247.7
million, or 63.1%;
(1 )See Supplemental Schedules - Non-GAAP Reconciliations regarding non-GAAP financial measures.
-- Our Argentina operations, deemed to be highly inflationary, had an unfavorable impact on net sales of $0.1 million; and -- Unfavorable movement in foreign currencies, excluding Argentina, resulted in decreased sales of $7.4 million, or 1.9%.
-- Gross margin percentage on a reported basis was 38.1% versus 44.8% in
the prior year. Excluding the current year inventory step up resulting
from purchase accounting and the current year acquisition and
integration costs, gross margin was 40.0%, down 480 basis points from
prior year, largely driven by the lower margin rate profile of the
acquired businesses. Unfavorable movement in foreign currencies and
material pricing also contributed to the decrease but was offset by
improved pricing realized across both of our segments. (a)
-- A&P was 5.3% of net sales, a decrease of 50 basis points versus the
prior year. Excluding the $11.0 million of A&P from from the acquired
businesses, the legacy business A&P was $23.3 million, or 5.8% of net
sales, essentially flat compared to the prior year.
-- SG&A, excluding acquisition and integration costs, was 17.4% of net
sales, or $112.5 million, an increase of $23.0 million versus the prior
year, with acquired business adding $30.8 million of SG&A. The legacy
business as a percent of net sales was 20.4%, or $81.7 million, down 240
basis points to prior year third quarter. The benefit of our continuous
improvement initiatives as well as lapping prior year investments in
those initiatives, lower compensation expense, favorable impacts of
foreign currency and lapping prior year unfavorable legal costs were
slightly offset by the licensing revenue reclassification to net sales.
(a)
-- Interest expense was $51.9 million compared to $17.7 million for the
prior year comparative period. Excluding the prior year acquisition
costs of $3.4 million, the current year interest expense increased $37.6
million attributed to higher debt associated with the acquisitions. (a)
-- Income tax rate on a year to date basis was 30.3% as compared to 45.3%
in the prior year. The current rate includes $0.7 million for the
one-time impact of U.S. tax legislation passed in December 2017 and the
impact of disallowed transaction costs resulting from the acquisitions,
which drove a higher tax rate. The prior year rate includes $30.6
million for the one-time impact of the new U.S. tax legislation passed
in December 2017 and the impact of tax withholding expense related to
the cash movement that occurred to fund the Spectrum battery
acquisition. Excluding the impact of our Non-GAAP adjustments, the year
to date tax rate was 20.4% as compared to 23.6% in the prior year. The
decrease in the rate is driven by the new 21% statutory U.S. rate
effective for all of fiscal year 2019 compared to the statutory rate of
24.5% in fiscal year 2018. (a)
-- Diluted net earnings from continuing operations per common share for the
quarter was $0.07 and Adjusted diluted net earnings from continuing
operations per common share for the quarter was $0.37. (a)
-- Net cash from operating activities from continuing operations on a year
to date basis was $30.4 million and Adjusted free cash flow from
continuing operations on a year to date basis was $137.6 million, or
7.7% of net sales. (a)
-- Dividend payments in the quarter were approximately $21 million, or
$0.30 per common share, and $4.0 million, or $1.8333 per mandatory
preferred convertible stock.
-- Discontinued operations reported a loss of $1.8 million for the quarter,
or $0.03 per common share. Included in these results are costs related
to divesting the business of $3.7 million after tax.
(a) See Press Release attachments for additional information as well as the GAAP to Non-GAAP reconciliations.
Total Net Sales (In millions - Unaudited)
For the Quarter and Nine Months Ended June 30, 2019
Q3 % Chg Nine Months % Chg
Net Sales - FY'18 $
392.8 $
1,340.5
Organic 14.2 3.6 31.2 2.3
% %
Impact of Battery Acquisition 109.1 27.8 209.0 15.6
% %
Impact of Auto Care Acquisition 135.6 34.5 220.1 16.4
% %
Impact of Nu Finish Acquisition 3.0 0.8 5.9 0.4
% %
Change in Argentina operations (0.1)
% (4.3) (0.3)
%
Impact of currency (7.4) (1.9) (26.9) (1.9)
% %
Net sales - FY'19 $
647.2 64.8 $
1,775.5 32.5
% %
Total Net sales increased 64.8%, or $254.4 million:
-- Organic net sales were up 3.6%, or $14.2 million, in the third fiscal
quarter due to the following items:
-- Favorable pricing across both segments contributed 1.8% to the
organic increase;
-- Distribution gains contributed 1.3% to the organic increase; and
-- The impact of the reclassification of licensing revenues contributed
0.5%.
-- The acquisitions positively impacted net sales by 63.1%, or $247.7
million.
-- Our Argentina operations' unfavorable impact on net sales was $0.1
million as our pricing actions in the market were able to offset the
negative inflationary impacts.
-- Unfavorable currency impacts were $7.4 million, or 1.9%.
Total Segment Profit (In millions - Unaudited)
For the Quarter and Nine Months Ended June 30, 2019
Q3 % Chg Nine Months % Chg
Segment Profit - FY'18 $
93.0 $
355.1
Organic 8.0 8.6 18.5 5.2
% %
Impact of Battery Acquisition 19.3 20.8 32.4 9.1
% %
Impact of Auto Care Acquisition 30.2 32.5 54.9 15.5
% %
Impact of Nu Finish Acquisition % 2.0 0.6
%
Change in Argentina operations (0.6) (0.6) (2.9) (0.8)
% %
Impact of currency (5.1) (5.6) (19.4) (5.5)
% %
Segment Profit - FY'19 $
144.8 55.7 $
440.6 24.1
% %
Total Segment profit in the third fiscal quarter increased $51.8 million, or 55.7%. Excluding the unfavorable movement in foreign currencies of $5.1 million, impact of the acquisitions of $49.5 million, and decline due to Argentina operations of $0.6 million, organic segment profit increased $8.0 million, or 8.6%, in the current fiscal quarter. The increase in the quarter was driven by top-line organic growth and lower overhead spending, slightly offset by higher A&P driven by the brand refresh in our international markets.
Refer to the Reconciliation of GAAP and Non-GAAP Financial Measures attached for further information on our above breakouts.
Financial Outlook for Fiscal Year 2019
The company is confirming its outlook for adjusted earnings per share from continuing operations to be between $2.90 to $3.00. This does not assume any benefit from storm activity in the current year, which is difficult to predict. Any storm activity that may occur over the balance of the year would be incremental to this guidance. In addition to confirming its outlook for adjusted earnings per share from continuing operations, the company is also confirming its outlook for adjusted EBITDA to be between $540 to $560 million and adjusted free cash flow to be between $220 to $250 million.
Note that all comparisons are with the fiscal year ended September 30, 2018 unless otherwise stated.
With the net sales performance of the acquired businesses in the third quarter and expectations for the balance of the fiscal year, we are revising our full year net sales outlook as follows:
-- Total global net sales on a reported basis to be in the range of $2.48
to $2.50 billion;
-- Acquired auto care net sales to be in the range of $310 to $320 million;
and
-- Acquired battery net sales to be at the low end of the previously guided
range of $350 to $370 million.
Our outlook for organic net sales growth of 3% to 3.5%, foreign currency headwinds 1.5% to 2% and Argentina's negative highly inflationary impact of 30 basis points remain unchanged from our previous outlook.
Our outlook for gross margin rate improves the mid-point of our range by 70 basis points to be in the range of 42.5% to 42.9%.
Interest expense for the full year is now expected to be approximately $160 million reflecting an update to the purchase accounting allocation of interest expense between continuing and discontinued operations.
Due to revised timing of the Varta business divestiture, which is now expected to close during the first quarter of fiscal year 2020, we are on track to achieve our net leverage target of 4.7 times on a credit defined basis during the first quarter of fiscal year 2020.
The remainder of the outlook provided in our second quarter earnings release remains unchanged from our prior outlook.
In addition to the outlook for fiscal year 2019, we are also increasing the range of our expectation for synergies by $25 million as we expect to realize synergies of approximately $100 million during the first three years of ownership ending with the first quarter of fiscal year 2022, which we expect to benefit our bottom line results. Separately, we also have line of sight to incremental synergies, which we expect to invest back in the auto care business to increase the scale of innovation, accelerate the timing of innovation to market, improve brand awareness and accelerate international expansion. Over the long term we would expect these increased auto care investments will achieve similar benefits experienced on the legacy battery business through expanded distribution and increased value share.
Financial Outlook for Fiscal Year 2020
The combined battery and lighting business, which represents approximately eighty percent of our total business, is stable and growing and we would expect our November outlook related to this business for fiscal year 2020 to be in line with the prior outlook. However, based upon the revised auto care outlook for fiscal year 2019 and current trends in that business, we will be revising our outlook for auto care sales to be in the range of $510 to $525 million. We also expect the marginal impact of these lower sales to flow through to our adjusted EBITDA, adjusted free cash flow and adjusted earnings per share, although offset in part by approximately $10 to $12 million of increased synergy benefits. As we are currently in the midst of our annual planning process, we will provide full updated guidance for fiscal year 2020 during our fourth quarter earnings release.
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 third fiscal 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/1192/31113
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 within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as "anticipates," "targets," "expects," "hopes," "estimates," "intends," "plans," "goals," "believes," "continue" and other similar expressions or future or conditional verbs such as "will," "may," "might," "should," "would" and "could." Forward-looking statements represent the Company's current expectations, plans or forecasts of its future results, revenues, expenses, capital measures, strategy, and future business and economic conditions more generally, and other future matters. These statements are not guarantees of future results or performance and involve certain known and unknown risks, uncertainties and assumptions that are difficult to predict and are often beyond the Company's control. Actual outcomes and results may differ materially from those expressed in, or Factors that could cause actual results or events to differ materially from those anticipated include, without limitation, the matters implied by, any of these forward-looking statements. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update any forward-looking statement to reflect the impact of circumstances or events that arise after the date the forward-looking statement was made. 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;
-- our ability to integrate businesses, to realize the projected results of
acquisitions of the acquired businesses, and to obtain expected cost
savings, synergies and other anticipated benefits of the acquired
businesses within the expected timeframe, or at all;
-- the impact of the acquired businesses on our business operations;
-- our ability to close the divestiture of the Europe-based Varta®
consumer battery, chargers, portable power and portable lighting
business which serves the Europe, the Middle East and Africa markets;
-- 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;
-- the impact of foreign currency exchange rates and currency controls, as
well as offsetting hedges;
-- the impact of the United Kingdom's announced intention to exit the
European Union;
-- uncertainty from the expected discontinuance of LIBOR and the transition
to any other interest rate benchmark;
-- 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, including
customs and tariff determinations, 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 and Form 10-Q filed with the Securities and Exchange Commission on November 16, 2018 and May 8, 2019, respectively.
ENERGIZER HOLDINGS, INC.
CONSOLIDATED STATEMENT OF EARNINGS
(Condensed)
(In millions, except per share data - Unaudited)
For the Quarter Ended For the Nine Months
June 30, Ended June 30,
2019 2018 2019 2018
---
Net sales $
647.2 $
392.8 $
1,775.5 $
1,340.5
Cost of products
sold (1) 400.9 216.7 1,059.5 717.6
Gross profit 246.3 176.1 716.0 622.9
Selling, general
and administrative
expense (1) 127.6 111.9 373.5 315.3
Advertising and
sales promotion
expense 34.3 22.9 99.9 81.1
Research and
development
expense (1) 9.5 5.2 23.7 15.9
Amortization of
intangible assets 14.4 2.8 30.1 8.4
Gain on sale of
real estate - (4.6) (4.6)
Interest expense
(1) (2) 51.9 17.7 177.3 47.6
Other items, net
(1) (0.8) (11.3) (13.9) (9.1)
Earnings before
income taxes 9.4 31.5 25.4 168.3
Income tax
provision (3) 0.2 7.7 7.7 76.3
Earnings from
continuing
operations $
9.2 $
23.8 $
17.7 $
92.0
Net loss from
discontinued
operations (4) (1.8) (12.8)
Net earnings 7.4 23.8 4.9 92.0
Mandatory preferred
stock dividends (4.4) (7.7)
Net earnings/
(loss)
attributable to
common
shareholders $
3.0 $
23.8 $
(2.8) $
92.0
Basic net earnings
per common share -
continuing
operations $
0.07 $
0.40 $
0.15 $
1.54
Basic net loss per
common share -
discontinued
operations (0.03) (0.19)
Basic net earnings/
(loss) per common
share $
0.04 $
0.40 $
(0.04) $
1.54
Diluted net
earnings per
common share -
continuing
operations $
0.07 $
0.39 $
0.15 $
1.50
Diluted net loss
per common share -
discontinued
operations (0.03) (0.19)
Diluted net
earnings/(loss)
per common share $
0.04 $
0.39 $
(0.04) $
1.50
Weighted average
shares of common
stock -Basic 69.6 59.7 65.5 59.9
Weighted average
shares of common
stock -Diluted 70.6 61.4 66.5 61.4
(1) See the Non-GAAP Reconciliations
attached which break out the
Acquisition and integration costs
included within these lines.
(2) Includes Acquisition debt commitment
fees, interest and ticking fees of
$65.6 million for the nine months
ended June 30, 2019 and $3.4 million
and $6.3 million for the quarter and
nine months ended June 30, 2018,
respectively, associated with the
Battery and Auto Care acquisitions.
(3) Income tax provision for the nine
months ended June 30, 2019 and 2018
includes $0.7 million and $30.6
million, respectively, of one-time
expense related to the enactment of
the Tax Cuts and Jobs Act of 2017
(U.S. Tax Legislation). The income
tax provision for the nine months
ended June 30, 2018 also includes
$6.0 million of tax withholding
expense related to the cash movement
to fund the Battery acquisition.
(4) Net of an income tax expense of $0.4
million and benefit of $2.5 million
for the quarter and nine months
ended June 30, 2019, respectively.
ENERGIZER HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Condensed)
(In millions - Unaudited)
Assets June 30, September 30,
2019 2018
---
Current assets
Cash and cash equivalents $
206.4 $
522.1
Trade receivables, less
allowance for doubtful
accounts of $6.1 and $4.0,
respectively 341.1 230.4
Inventories 524.3 323.1
Other current assets 196.0 95.5
Assets held for sale 807.6
Total current assets $
2,075.4 $
1,171.1
Restricted cash - 1,246.2
Property, plant and equipment,
net 361.0 166.7
Goodwill 1,062.4 244.2
Other intangible assets, net 1,922.2 232.7
Deferred tax asset 52.9 36.9
Other assets 103.8 81.0
Total assets $
5,577.7 $
3,178.8
Liabilities and Shareholders' Equity
Current liabilities
Current maturities of long-
term debt $
10.0 $
4.0
Current portion of capital
leases 1.6
Notes payable 41.5 247.3
Accounts payable 308.4 228.9
Other current liabilities 359.2 271.0
Liabilities held for sale 384.9
Total current liabilities $
1,105.6 $
751.2
Long-term debt 3,493.2 976.1
Long-term debt held in escrow - 1,230.7
Other liabilities 408.2 196.3
Total liabilities $
5,007.0 $
3,154.3
Shareholders' equity
Common stock 0.7 0.6
Mandatory convertible
preferred stock -
Additional paid-in capital 867.2 217.8
Retained earnings 109.5 177.3
Treasury stock (161.4) (129.4)
Accumulated other
comprehensive loss (245.3) (241.8)
Total shareholders' equity $
570.7 $
24.5
Total liabilities and
shareholders' equity $
5,577.7 $
3,178.8
ENERGIZER HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Condensed)
(In millions - Unaudited)
For the Nine Months Ended June 30,
2019 2018
---
Cash Flow from Operating Activities
Net earnings $
4.9 $
92.0
Loss from discontinued operations,
net of tax (12.8)
Net earnings from continuing
operations 17.7 92.0
Depreciation and amortization 70.8 33.8
Deferred income taxes (1.2) 11.1
Share-based compensation expense 20.8 21.0
Gain on sale of real estate - (4.6)
Mandatory transition tax 0.7 28.2
Inventory step up 33.7
Non-cash items included in income,
net (3.0) (2.1)
Other, net (16.7) (7.8)
Changes in current assets and
liabilities used in operations (92.4) 16.4
Net cash from operating activities
from continuing operations 30.4 188.0
Net cash used by operating activities
from discontinued operations (23.4)
Net cash from operating activities 7.0 188.0
Cash Flow from Investing Activities
Capital expenditures (36.4) (17.2)
Proceeds from sale of assets 0.1 6.1
Acquisitions, net of cash acquired (2,453.8)
Net cash used by investing activities
from continuing operations (2,490.1) (11.1)
Net cash used by investing activities
from discontinued operations (403.1)
Net cash used by investing activities (2,893.2) (11.1)
Cash Flow from Financing Activities
Cash proceeds from issuance of debt
with original maturities greater
than 90 days 1,800.0
Payments on debt with maturities
greater than 90 days (513.8) (3.0)
Net (decrease)/increase in debt with
original maturities of 90 days or
less (204.5) 70.6
Debt issuance costs (40.1) (1.4)
Net proceeds from issuance of
mandatory convertible preferred
shares 199.5
Net proceeds from issuance of common
stock 205.3
Dividends paid on common stock (61.7) (52.3)
Dividends paid on mandatory
convertible preferred stock (4.0)
Common stock purchased (45.0) (50.0)
Taxes paid for withheld share-based
payments (7.2) (1.8)
Net cash from/(used by) financing
activities from continuing
operations 1,328.5 (37.9)
Net cash used by financing activities
from discontinued operations (2.9)
Net cash from/(used by) financing
activities 1,325.6 (37.9)
Effect of exchange rate changes on
cash (1.3) (6.1)
Net (decrease)/increase in cash, cash
equivalents, and restricted cash
from continuing operations (1,132.5) 132.9
Net decrease in cash, cash
equivalents, and restricted cash
from discontinued operations (429.4)
Net (decrease)/increase in cash, cash
equivalents, and restricted cash (1,561.9) 132.9
Cash, cash equivalents, and
restricted cash, beginning of period 1,768.3 378.0
Cash, cash equivalents, and
restricted cash, end of period $
206.4 $
510.9
ENERGIZER HOLDINGS, INC.
Reconciliation of GAAP and Non-GAAP Measures
For the Quarter and Nine Months Ended June 30, 2019
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, gain on sale of real estate, settlement loss on the Canadian pension plan termination, 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, gain on sale of real estate, interest expense, other items, net, and charges related to acquisition and integration have all been excluded from segment profit.
Adjusted Net Earnings From Continuing Operations and Adjusted Diluted Net Earnings Per Common Share - Continuing Operations (EPS). These measures exclude the impact of the costs related to acquisition and integration, the gain on the sale of real estate and the one-time impact of the new U.S. income tax legislation.
Non-GAAP Tax Rate. This is the tax rate when excluding the pre-tax impact of acquisition and integration and the gain on sale of real estate, as well as the related tax impact for these items, calculated utilizing the statutory rate for where the impact was 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 or segment profit that excludes or otherwise adjusts for the impact of acquisitions, change in Argentina operations and impact of currency from the changes in foreign currency exchange rates as defined below:
Impact of acquisitions. Energizer completed the Auto Care Acquisition on January 28, 2019, Battery Acquisition on January 2, 2019, and Nu Finish Acquisition on July 2, 2018. These adjustments include the impact of the acquisitions' ongoing operations contributed to each respective income statement caption for the first year's operations directly after the acquisition date. This does not include the impact of acquisition and integration costs associated with any 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 Margin and 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 and Adjusted 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.
EBITDA and Adjusted EBITDA. EBITDA is defined as net earnings before income tax provision, interest and depreciation and amortization. Adjusted EBITDA further excludes the impact of the costs related to acquisition and integration, settlement loss on the Canadian pension plan termination, gain on sale of real estate, and share-based payments.
Energizer Holdings, Inc.
Supplemental Schedules - Segment Information and Supplemental Sales Data
For the Quarter and Nine Months Ended June 30, 2019
(In millions, except per share data - Unaudited)
Operations for Energizer are managed via two major geographic reportable segments: Americas and International. 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. 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, as well as the reconciliation to earnings before tax, for the quarter and nine months ended June 30, 2019 and 2018, respectively, are presented below:
Quarter Ended June 30, Nine Months Ended June 30,
2019 2018 2019 2018
Net Sales
Americas $
465.1 $
241.3 $
1,220.2 $
838.5
International 182.1 151.5 555.3 502.0
Total net sales $
647.2 $
392.8 $
1,775.5 $
1,340.5
Segment Profit
Americas $
103.8 $
60.4 $
308.6 $
239.2
International 41.0 32.6 132.0 115.9
Total segment profit $
144.8 $
93.0 $
440.6 $
355.1
General corporate and
other expenses (1) (29.9) (24.7) (78.3) (71.0)
Global marketing
expense (2) (3.0) (4.6) (12.5) (13.0)
Research and
development expense
(3) (9.2) (5.2) (23.4) (15.9)
Amortization of
intangible assets (14.4) (2.8) (30.1) (8.4)
Acquisition and
integration costs (4) (28.0) (15.9) (159.9) (41.0)
Gain on sale of real
estate 4.6 4.6
Interest expense (5) (51.9) (14.3) (111.7) (41.3)
Other items, net (6) 1.0 1.4 0.7 (0.8)
Total earnings before
income taxes $
9.4 $
31.5 $
25.4 $
168.3
(1) Recorded in SG&A on the unaudited
Consolidated (Condensed) Statement of
Earnings.
(2) The quarter and nine months ended June
30, 2019 includes $0.6 and $4.0
recorded in SG&A, respectively, and
$2.4 and $8.5 recorded in Advertising
and sales promotion expense,
respectively, in the Consolidated
(Condensed) Statement of Earnings and
Comprehensive Income. The quarter and
nine months ended June 30, 2018
includes $1.6 and $3.4 recorded in
SG&A, respectively, and $3.0 and $9.6
recorded in Advertising and sales
promotion expense, respectively, in
the Consolidated (Condensed)
Statement of Earnings and
Comprehensive Income.
(3) Research and development expense for
the quarter and nine months ended
June 30, 2019 included $0.3 million
of acquisition and integration costs
which have been reclassified for
purposes of the reconciliation above.
(4) See the Supplemental Schedules - Non-
GAAP Reconciliations for where these
charges are recorded in the unaudited
Consolidated (Condensed) Statement of
Earnings.
(5) Interest expense for the nine months
ended June 30, 2019 included $65.6
million and for the quarter and nine
months ended June 30, 2018 included
$3.4 million and $6.3 million,
respectively, of acquisition
commitment fees, debt ticking fees,
and interest expense on escrowed debt
which have been reclassified for
purposes of the reconciliation above.
(6) Other items, net for the quarter and
nine months ended June 30, 2019 on
the Consolidated (Condensed)
Statement of Earnings included
acquisition related net expense of
$0.2 million and income of $13.2
million, respectively, which have
been reclassified for purposes of the
reconciliation above. Other items,
net for both the quarter and nine
months ended June 30, 2018, included
acquisition related income of $9.9
which has been reclassified for
purposes of the reconciliation above.
Supplemental product information is presented below for revenues from external customers:
Quarter Ended June 30, Nine Months Ended June 30,
Net Sales 2019 2018 2019 2018
Batteries $
457.2 $
350.1 $
1,398.5 $
1,204.9
Auto Care 160.8 24.1 289.9 68.9
Lights and
Licensing 29.2 18.6 87.1 66.7
Total net sales $
647.2 $
392.8 $
1,775.5 $
1,340.5
Energizer Holdings, Inc.
Supplemental Schedules - GAAP EPS to Adjusted EPS Reconciliation
For the Quarter and Nine Months Ended June 30, 2019
(In millions, except per share data - Unaudited)
The following tables provide a reconciliation of Net earnings from continuing operations and Diluted net earnings per common share - continuing operations to Adjusted net earnings from continuing operations and Adjusted diluted net earnings per share - continuing operations, which are non-GAAP measures.
For the Quarter For the Nine Months
Ended June 30, Ended June 30,
2019 2018 2019 2018
Net earnings/
(loss)
attributable to
common
shareholders $
3.0 $
23.8 $
(2.8) $
92.0
Mandatory
preferred stock
dividends (4.4) (7.7)
Net earnings 7.4 23.8 4.9 92.0
Net loss from
discontinued
operations, net
of income tax
benefit (1.8) (12.8)
Net earnings from
continuing
operations $
9.2 $
23.8 $
17.7 $
92.0
Adjustments
---
Pre-tax
acquisition and
integration (1) 28.0 15.9 159.9 41.0
Tax impact of
acquisition and
integration
charges (5.9) (2.9) (30.8) (9.8)
Gain on sale of
real estate (3.5) (3.5)
Acquisition
withholding tax
(2) 0.5 6.0
One-time impact
of the new U.S.
Tax Legislation (0.8) (0.6) 0.7 30.6
Adjusted net
earnings from
continuing
operations (3) $
30.5 $
33.2 $
147.5 $
156.3
For the Quarter For the Nine Months
Ended June 30, Ended June 30,
2019 2018 2019 2018
Diluted net
earnings per
common share -
continuing
operations $
0.07 $
0.39 $
0.15 $
1.50
Adjustments
---
Pre-tax
acquisition and
integration (1) 0.40 0.26 2.25 0.67
Tax impact of
acquisition and
integration
charges (0.09) (0.05) (0.43) (0.16)
Gain on sale of
real estate (0.06) (0.06)
Acquisition
withholding tax
(2) 0.01 0.10
One-time impact
of the new U.S.
Tax Legislation (0.01) (0.01) 0.01 0.50
Impact for
diluted share
calculation (4) 0.10
$
Adjusted diluted
net earnings per
diluted share -
continuing
operations $
0.37 $
0.54 $
2.07 $
2.55
Weighted average
shares of common
stock -Diluted 70.6 61.4 66.5 61.4
Adjusted Weighted
average shares
of common stock
-Diluted (4) 70.6 61.4 71.2 61.4
(1) See Supplemental Schedules - Non-
GAAP Reconciliations for where these
costs are recorded on the unaudited
Consolidated (Condensed) Statement
of Earnings.
(2) This represents the prior year tax
withholding expense related to cash
movement to fund the Battery
acquisition.
(3) The effective tax rate for the
quarter ended June 30, 2019 and 2018
for the Adjusted - Non-GAAP Net
Earnings and Diluted EPS was 18.4%
and 22.4%, respectively, as
calculated utilizing the statutory
rate for where the costs were
incurred. The effective tax rate for
the nine months ended June 30, 2019
and 2018 for the Adjusted - Non-
GAAP Net Earnings and Diluted EPS
was 20.4% and 23.6%, respectively,
as calculated utilizing the
statutory rate for where the costs
were incurred.
(4) For the nine month calculation, the
Adjusted Weighted average shares of
common stock -Diluted is assuming
conversion of the preferred shares
as those results are more dilutive.
The shares have been adjusted for
the 4.7 million share conversion and
the preferred dividend has been
adjusted out of the Adjusted net
earnings.
Energizer Holdings, Inc.
Supplemental Schedules - Segment Sales
For the Quarter and Nine Months Ended June 30, 2019
(In millions, except per share data - Unaudited)
Net Sales Q1'19 % Chg Q2'19 % Chg Q3'19 % Chg Nine % Chg
Months
'19
Americas
Net Sales -prior year $
373.1 $
224.1 $
241.3 $
838.5
Organic 4.7 1.3 2.0 0.9 7.2 3.0 13.9 1.7
% % % %
Impact of Battery Acquisition % 78.1 34.9 89.9 37.3 168.0 20.0
% % %
Impact of Auto Care % 77.9 34.8 124.7 51.7 202.6 24.2
Acquisition
% % %
Impact of Nu Finish 1.0 0.3 1.8 0.8 2.9 1.2 5.7 0.7
Acquisition
% % % %
Change in Argentina (3.3) (0.9) (0.9) (0.4) (0.1) % (4.3) (0.5)
% % %
Impact of currency (2.0) (0.6) (1.4) (0.7) (0.8) (0.5) (4.2) (0.6)
% % % %
0.1 70.3 92.7 45.5
%
Net Sales -current year $
373.5 $
381.6 % 465.1 % $
1,220.2 %
International
Net Sales -prior year $
200.2 $
150.3 $
151.5 $
502.0
Organic 5.2 2.6 5.1 3.4 7.0 4.6 17.3 3.4
% % % %
Impact of Battery Acquisition % 21.8 14.5 19.2 12.7 41.0 8.2
% % %
Impact of Auto Care % 6.6 4.4 10.9 7.2 17.5 3.5
Acquisition
% % %
Impact of Nu Finish % 0.1 0.1 0.1 0.1
Acquisition
% % 0.2 %
Impact of currency (7.0) (3.5) (9.1) (6.1) (6.6) (4.4) (22.7) (4.5)
% % % %
(0.9) 16.3 20.2 10.6
%
Net Sales -current year $
198.4 $
174.8 % $
182.1 % $
555.3 %
Net Sales
Net Sales -prior year $
573.3 $
374.4 $
392.8 $
1,340.5
Organic 9.9 1.7 7.1 1.9 14.2 3.6 31.2 2.3
% % % %
Impact of Battery Acquisition % 99.9 26.7 109.1 27.8 209.0 15.6
% % %
Impact of Auto Care % 84.5 22.6 135.6 34.5 220.1 16.4
Acquisition
% % %
Impact of Nu Finish 1.0 0.2 1.9 0.5 3.0 0.8 5.9 0.4
Acquisition
% % % %
Change in Argentina (3.3) (0.6) (0.9) (0.2) (0.1) % (4.3) (0.3)
% % %
Impact of currency (9.0) (1.5) (10.5) (2.9) (7.4) (1.9) (26.9) (1.9)
% % % %
(0.2) 48.6 64.8 32.5
%
Net Sales -current year $
571.9 $
556.4 % 647.2 % $
1,775.5 %
Energizer Holdings, Inc.
Supplemental Schedules - Segment Profit
For the Quarter and Nine Months Ended June 30, 2019
(In millions, except per share data - Unaudited)
Segment Profit Q1'19 % Chg Q2'19 % Chg Q3'19 % Chg Nine % Chg
Months
'19
Americas
Segment Profit -prior year $
123.1 $
55.7 $
60.4 239.2
Organic (4.2) (3.4)
% % %
% 1.7 3.1 2.8 4.6 0.3 0.1
Impact of Battery Acquisition % 7.1 12.7 13.0 21.5 20.1 8.4
% % %
Impact of Auto Care Acquisition % 24.0 43.1 28.8 47.7 52.8 22.1
% % %
Impact of Nu Finish Acquisition 0.5 0.4 1.5 2.7 (0.1) (0.2)
% % %
% 1.9 0.8
Change in Argentina (1.9) (1.5) (0.4) (0.7) (0.6) (1.0) (2.9) (1.2)
% % % %
Impact of currency (1.4) (1.2) (0.9) (1.7) (0.5) (0.7) (2.8) (1.2)
% % % %
Segment Profit -current year $
116.1 (5.7) $
88.7 59.2 $
103.8 71.9 $
308.6 29.0
% % % %
International
Segment Profit -prior year $
49.2 $
34.1 $
32.6 115.9
Organic 11.1 22.6 1.9 5.6 5.2 16.0 18.2 15.7
% % % %
Impact of Battery Acquisition % 6.0 17.6 6.3 19.3 12.3 10.6
% % %
Impact of Auto Care Acquisition % 0.7 2.1 1.4 4.3 2.1 1.8
% % %
Impact of Nu Finish Acquisition % % 0.1 0.3 0.1 0.1
% %
Impact of currency (5.7) (11.6) (6.3) (18.6) (4.6) (14.1) (16.6) (14.3)
% % % %
Segment Profit -current year $
54.6 11.0 $
36.4 6.7 $
41.0 25.8 $
132.0 13.9
% % % %
Total Segment Profit
Segment Profit -prior year $
172.3 $
89.8 $
93.0 $
355.1
Organic 6.9 4.0 3.6 4.0 8.0 8.6 18.5 5.2
% % % %
Impact of Battery Acquisition % 13.1 14.6 19.3 20.8 32.4 9.1
% % %
Impact of Auto Care Acquisition % 24.7 27.5 30.2 32.5 54.9 15.5
% % %
Impact of Nu Finish Acquisition 0.5 0.3 1.5 1.7 % 2.0 0.6
% % %
Change in Argentina (1.9) (1.1) (0.4) (0.4) (0.6) (0.6) (2.9) (0.8)
% % % %
Impact of currency (7.1) (4.1) (7.2) (8.1) (5.1) (5.6) (19.4) (5.5)
% % % %
Segment Profit -current year $
170.7 (0.9) $
125.1 39.3 $
144.8 55.7 $
440.6 24.1
% % % %
Energizer Holdings, Inc.
Supplemental Schedules - Non-GAAP Reconciliations
For the Quarter and Nine Months Ended June 30, 2019
(In millions, except per share data - Unaudited)
FY19 Non-GAAP Reconciliations
Gross Profit Q1'19 Q2'19 Q3'19 Q1'18 Q2'18 Q3'18 Q3'19 YTD Q3'18 YTD
---
Net Sales $
571.9 $
556.4 $
647.2 $
573.3 $
374.4 $
392.8 $
1,775.5 $
1,340.5
Cost of products
sold -adjusted 296.4 330.5 388.5 295.0 205.9 216.7 1,015.4 717.6
Adjusted Gross
Profit $
275.5 $
225.9 $
258.7 $
278.3 $
168.5 $
176.1 $
760.1 $
622.9
Adjusted Gross 48.2 40.6 40.0 48.5 45.0 44.8
Margin
%
%
% % % % % % 42.8 46.5
Acquisition and
integration costs - 4.5 5.9 10.4
Inventory step up - 27.2 6.5 33.7
Cost of products
sold 296.4 362.2 400.9 295.0 205.9 216.7 1,059.5 717.6
Gross Profit $
275.5 $
194.2 $
246.3 $
278.3 $
168.5 $
176.1 $
716.0 $
622.9
Gross Margin 48.2 34.9 38.1 48.5 45.0 44.8
%
%
% % % % % % 40.3 46.5
---
SG&A Q1'19 Q2'19 Q3'19 Q1'18 Q2'18 Q3'18 Q3'19 YTD Q3'18 YTD
---
Segment SG&A $
65.8 $
81.4 $
82.8 $
71.2 $
61.6 $
63.2 $
230.0 $
196.0
Corporate SG&A 18.7 28.6 29.1 21.8 24.8 24.6 76.4 71.2
Global Marketing 1.2 2.2 0.6 0.5 1.3 1.7 4.0 3.5
SG&A Adjusted -
subtotal $
85.7 $
112.2 $
112.5 $
93.5 $
87.7 $
89.5 $
310.4 $
270.7
SG&A Adjusted % of 15.0 20.2 17.4 16.3 23.4 22.8
Net Sales
%
%
% % % % % % 17.5 20.2
Acquisition and
integration costs 18.9 29.1 15.1 5.7 16.5 22.4 63.1 44.6
Reported SG&A $
104.6 $
141.3 $
127.6 $
99.2 $
104.2 $
111.9 $
373.5 $
315.3
Reported SG&A % of 18.3 25.4 19.7 17.3 27.8 28.5
Net Sales
%
%
% % % % % % 21.0 23.5
---
Other items, net Q1'19 Q2'19 Q3'19 Q1'18 Q2'18 Q3'18 Q3'19 YTD Q3'18 YTD
---
Interest income $
(0.3) $
(0.7) $
(0.3) $
(0.5) $
(0.3) $
(0.4) $
(1.3) $
(1.2)
Interest income on
restricted cash (5.8) (5.8)
Foreign currency
exchange
(gain)/loss (1.1) 3.8 (0.3) 4.1 2.9 0.7 2.4 7.7
Pension benefit
other than
service costs (0.7) (0.7) (0.7) (1.7) (1.7) (1.7) (2.1) (5.1)
Acquisition
foreign currency
(gain)/loss (9.0) 0.9 (9.9) (8.1) (9.9)
Settlement of
acquired business
hedging contracts - 1.5 1.5
Transition
services
agreement income - (0.1) (0.7) (0.8)
Other - 0.3 (0.6) 0.3 (0.6)
Total Other items,
net $
(16.9) $
3.8 $
(0.8) $
1.3 $
0.9 $
(11.3) $
(13.9) $
(9.1)
Acquisition and
integration Q1'19 Q2'19 Q3'19 Q1'18 Q2'18 Q3'18 Q3'19 YTD Q3'18 YTD
---
Inventory step up
(COGS)
$ $
27.2 $
6.5
$
$
$ $
33.7
$
Cost of products
sold - 4.5 5.9 10.4
SG&A 18.9 29.1 15.1 5.7 16.5 22.4 63.1 44.6
Research and
development - 0.3 0.3
Interest expense 32.4 33.2 2.9 3.4 65.6 6.3
Interest income (5.8) (5.8)
Acquisition
foreign currency
(gain)/loss (9.0) 0.9 (9.9) (8.1) (9.9)
Settlement of
acquired business
hedging contracts - 1.5 1.5
Transition
services
agreement income - (0.1) (0.7) (0.8)
Acquisition and
integration
related items $
36.5 $
95.4 $
28.0 $
5.7 $
19.4 $
15.9 $
159.9 $
41.0
Energizer Holdings, Inc.
Supplemental Schedules - Non-GAAP Reconciliations cont.
For the Quarter and Nine Months Ended June 30, 2019
(In millions, except per share data - Unaudited)
Q3'19 Q2'19 Q1'19 Q4'18 LTM Q3'18
6/30/19 (1)
---
Net earnings/(loss)
from continuing
operations $
9.2 $
(62.3) $
70.8 $
1.5 $
19.2 $
23.8
Income tax
provision/
(benefit) 0.2 (11.7) 19.2 5.4 13.1 7.7
Earnings/(loss)
before income taxes $
9.4 $
(74.0) $
90.0 $
6.9 $
32.3 $
31.5
Interest expense 51.9 77.2 48.2 50.8 228.1 17.7
Depreciation &
Amortization 30.8 28.4 11.6 11.3 82.1 11.4
EBITDA $
92.1 $
31.6 $
149.8 $
69.0 $
342.5 $
60.6
Adjustments:
Acquisition and
integration costs 28.0 62.2 4.1 8.0 102.3 12.5
Settlement loss on
the Canadian
pension plan
termination - 14.1 14.1
Gain on sale of real
estate - (4.6)
Share-based
payments 6.7 7.6 6.5 7.2 28.0 7.0
Adjusted EBITDA $
126.8 $
101.4 $
160.4 $
98.3 $
486.9 $
75.5
(1) LTM defined as
the latest 12 months
for the period
ending June 30, 2019
Free
Cash
Flow Q3'19 YTD Q3'18 YTD
Net
cash
from
operating
activities
from
continuing
operations $
30.4 $
188.0
Capital
expenditures (36.4) (17.2)
Proceeds
from
sale
of
assets 0.1 6.1
Free
cash
flow
from
continuing
operations
-
subtotal $
(5.9) $
176.9
Acquisition
and
integration
related
payments 143.5 16.6
Adjusted
free
cash
flow $
137.6 $
193.5
Energizer Holdings, Inc.
Supplemental Schedules - Non-GAAP Reconciliations cont.
FY 2019 Outlook
(In millions, except per share data - Unaudited)
Fiscal Year 2019 Outlook Reconciliation - Adjusted earnings from continuing operations and Adjusted diluted net
earnings per common share - continuing operations (EPS)
(in millions, except per share data) Net earnings
EPS
Fiscal Year 2019 - GAAP Outlook $49
to $79 $0.68
to $1.10
Impacts:
Acquisition and integration costs, net of tax benefit 161
to 138 2.23
to 1.90
Fiscal Year 2019 - Adjusted Outlook $210
to $217 $2.90
to $3.00
===
Weighted average shares - Diluted 72.1 72.1
Fiscal Year 2019 Outlook Reconciliation - Adjusted EBITDA
(in millions, except per share data)
Earnings before income taxes $64 to $103
Interest expense 160
Depreciation & Amortization 103
to 99
EBITDA $327 to $362
Adjustments:
Integration costs 55
to 45
Acquisition costs 130
to 125
Share-based payments 28
Adjusted EBITDA $540 to $560
Adjusted Free Cash Flow Outlook. The Company is unable to provide a reconciliation to the full year 2019 Adjusted free cash flow range of approximately $220 to $250 million due to uncertainty regarding the timing and amount of future acquisition and integration costs and related payments.
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SOURCE Energizer Holdings, Inc.
