ST. LOUIS, Jan. 29 /PRNewswire-FirstCall/ -- Energizer Holdings, Inc.,
(NYSE: ENR), today announced results of its first quarter ended December 31,
2007. Net earnings for the quarter were $102.6 million, or $1.74 per diluted
share, versus net earnings of $122.3 million, or $2.08 per diluted share in
the first fiscal quarter of 2007. The current quarter includes an after-tax
expense of $15.5 million, or $0.26 per diluted share, related to the write-up
and subsequent sale of inventory purchased in the Playtex Products, Inc.
acquisition as well as integration and other realignment costs of $5.2
million, after-tax, or $0.09 per diluted share. Included in the prior year
quarter were charges of $2.3 million, after tax, or $0.04 per diluted share
for restructuring projects in Europe.
As previously noted, Energizer's business and financial results are now
reported in two segments: Household Products and Personal Care. For the
current quarter, net sales increased $230.7 million, or 24%, to $1,189.9
million, due primarily to the acquisition of Playtex Products, Inc. on October
1, 2007, which added $148.5 million to net sales for the quarter, and
increased sales in Household Products and the legacy Personal Care businesses.
Segment profit increased $29.5 million, or 13%, to $255.6 million. On a
constant currency basis, sales increased $183.2 million and operating profit
increased $3.5 million. General corporate and other expenses increased $4.7
million and interest and other financing costs increased $25.6 million.
The inclusion of Playtex's results and the incremental interest expense
associated with the financing of the acquisition reduced diluted earnings per
share by $0.39 in the quarter, including $0.26 related to the inventory
write-up charge and $0.06 related to integration costs. Absent the inventory
write-up and the integration costs, Playtex was $0.07 dilutive for the quarter
as incremental financing costs exceeded Playtex operating income for the
quarter due in part to the fact that the first quarter is an "off-season"
quarter for Sun Care, and Energizer is in the early stages of the Playtex
integration.
"I am pleased with our performance during the quarter, as momentum
continued in our Household Products segment and we focused our efforts on
building a new Personal Care division, consisting of the Schick
Wilkinson-Sword and Playtex Products businesses," said Ward Klein, Chief
Executive Officer. "Within Personal Care, we were able to maintain sales
growth while focusing on substantial integration efforts. The Playtex
acquisition was dilutive for the quarter, partially due to acquisition related
charges and partially because the December quarter is the slow season for
Playtex sun care. In addition, material costs in Household Products were a
significant headwind but have now peaked and will moderate going forward.
Finally, we increased our advertising in both of our legacy businesses,
accelerating our long-term brand building activities."
Mr. Klein continued, "I am optimistic about the outlook for all of our
businesses, but fiscal 2008 will be a transition year as we integrate Playtex
into Energizer Personal Care while we strive to minimize disruption and
continue to support brand building initiatives across all categories."
Household Products
The Household Products segment, which consists of our global battery and
lighting products businesses, had net sales for the first quarter of $789.8
million, an increase of $66.1 million, or 9%. On a constant currency basis,
sales increased $33.1 million, or 4.6%, due to improved pricing and product
mix and higher volumes. Overall pricing and product mix were favorable as
price increases in the United States (U.S.) and other markets as well as
favorable product mix in lighting products were partially offset by
unfavorable package size mix, as growth in larger packs, which sell at lower
per unit prices, exceeded smaller pack growth.
Gross profit increased $29.2 million for the quarter due primarily to
favorable currency. On a constant currency basis, gross profit was virtually
flat as the contribution of higher sales was offset by higher product costs.
Overall, product cost was unfavorable $38.0 million, primarily on higher
material costs. Segment profit increased $12.4 million, reflecting a $21.7
million currency benefit. Absent currency, segment profit declined $9.3
million, primarily on higher advertising and promotion.
The United States (U.S.) retail battery category is defined as household
batteries (alkaline, carbon zinc, lithium and rechargeable) and specialty
batteries. Consumption in the U.S. retail battery category increased by 5% in
dollars for the 12 weeks ending December 29, 2007, versus the same period last
year, primarily due to price increases and consumers trading up to performance
brands. Retail consumption of Energizer's products increased 5% in dollars
for the same period. Retail sales of Energizer MAX grew 4% in the quarter,
slightly lower than the overall category, in the face of a sharp increase in
competitive activity. Retail sales of Energizer's lithium and rechargeable
products increased 22% in the quarter while our price-oriented product sales
declined 12%. We experienced similar product mix shift in international
markets, reflecting a global movement of consumers trading up to higher
performing battery products.
Looking forward, U.S. retail inventories at December 31, 2007, were
modestly higher than normal seasonal levels, which we expect to correct in the
coming months. In addition, sales in the March 2007 quarter benefitted from
unusually low U.S. retail inventory levels at December 31, 2006, setting up a
difficult sales comparison in the March 2008 quarter. With respect to
material costs, zinc costs have peaked and should decline throughout the
remainder of the year, however, nickel and certain other commodity costs will
remain unfavorable for the next two quarters. At current forecast levels, we
expect total material costs to be unfavorable $10 to $15 million for the
remainder of the fiscal year, with comparisons improving as the year
progresses. In addition, we recently announced a 8.5% price increase on our
rechargeable products in the U.S. to help offset some higher costs associated
with these product lines.
Personal Care
As previously mentioned, Energizer's acquisition of Playtex was completed
on October 1, 2007; therefore, Playtex is not included in the attached
historical financial statements prior to the current quarter. To provide a
clearer understanding of the impact of the acquisition on results, the
comparison of the current year amounts for the Personal Care segment are
versus pro forma results for the quarter ended December 31, 2006 as shown in
Note 5 of the Condensed Financial Statements. Since Playtex acquired Hawaiian
Tropic in April 2007, the results for Hawaiian Tropic are not included in the
pro forma results in Note 5.
Net sales for the quarter were $400.1 million, an increase of $27.2
million, with currency accounting for $14.6 million of the increase. On a
constant currency basis, sales increased 3% due to increases in all four
product categories. Wet Shave sales increased 1% as higher volumes in
disposable razors, Quattro for Women, and Intuition were partially offset by
declines in older technology shaving systems and unfavorable price mix due to
higher promotional spending on men's systems. Quattro Disposable was launched
in North America in February 2007 and other markets throughout the remainder
of the year. Skin Care sales increased 20% due to the inclusion of Hawaiian
Tropic. Excluding Hawaiian Tropic, sales declined 7% due to a favorable
returns adjustment in the prior year and a continued shift of early season
shipments from the December quarter to the March quarter, closer to the sun
care season. Feminine Care sales increased 2% due to growth in plastic
applicator tampons, offset by declines in cardboard applicator tampons,
reflecting the discontinuation of Beyond. Within the plastic applicator
sub-segment, Sport continued to grow, partially offset by an expected decline
in Gentle Glide, as a portion of these consumers shifted to Sport. Infant
Care increased 6% due primarily to improved sales of both disposable and
reusable bottles due, in part, to the new Playtex Drop-Ins expandable liners,
which launched in August 2007.
Gross profit on a constant currency basis was down slightly, despite
higher sales volume, due primarily to the impact of higher promotional
spending on men's systems and, to a lesser extent, unfavorable product mix.
The increase in gross profit resulting from the addition of Hawaiian Tropic in
the quarter was offset by a prior year favorable returns provision adjustment
in Banana Boat. The first quarter is a historically low volume quarter for
Sun Care. As a result, adjustments of this nature have a greater impact on
the comparative. Segment profit decreased $10.3 million to $72.7 million for
the quarter. On a constant currency basis, segment profit decreased $14.6
million due primarily to higher advertising and promotional spending primarily
behind the Quattro Disposables. In addition, overheads were up for the
quarter due largely to increased costs due to the inclusion of the Hawaiian
Tropic business and prior year non-recurring gains of more than $3.0 million,
including certain property sales, which impacted the comparative.
In the second quarter, Quattro Trimmer will be launching in several
markets. Total advertising and promotion for the Personal Care segment will
increase as we support this launch and continue to invest in our categories.
Integration of the Playtex business into the Personal Care division will be a
major focal point throughout 2008. While achievement of some synergies is
expected in 2008, we will incur integration costs and, more importantly, our
first priority will remain the long-term health of the business. As noted
previously, we anticipate accretion from the acquisition to be modest at first
and growing during the latter half of 2008 and 2009.
Other Items
Corporate and other expenses increased $4.7 million as the current quarter
included charges of $7.9 million related to the integration of Playtex and
other realignment projects versus European restructuring charges of $3.4
million included in the prior year December quarter.
Interest expense increased $22.9 million on higher average borrowings
resulting from the Playtex acquisition. Looking forward, Energizer's
weighted-average interest rate will be 5.9% resulting from higher borrowing
spreads partially offset by declining variable interest rate debt. Other net
financing items were unfavorable $2.7 million for the quarter primarily due to
exchange losses in the current period compared to exchange gains included in
last year's first quarter.
Amortization expense was $3.5 million, up $2.2 million versus the same
quarter in fiscal 2007 as a result of amortization on certain identifiable
intangible assets noted in the preliminary asset valuation for the Playtex
acquisition.
The income tax rate for the current quarter was down slightly to 30.8% as
compared to 31.0% in the corresponding quarter for fiscal 2007. The current
quarter's tax provision of $45.7 million includes a benefit of $10.4 million
associated with the write-up and subsequent sale of inventory acquired in the
Playtex acquisition. Excluding the inventory write-up charge, the current
quarter's tax rate was 32.2%. The higher tax rate for the quarter is
primarily due to a higher mix of earnings from the U.S. with the addition of
Playtex.
Capital expenditures and depreciation expense for the quarter were $21.0
million and $32.4 million, respectively.
Statements in this press release that are not historical, particularly
statements regarding anticipated moderation of material costs in Energizer
Household Products, the outlook for Energizer's businesses, estimates of
battery category growth, retail consumption and sales of Energizer products
and retailer inventory levels, anticipated commodity and material costs for
the remainder of the year, the impact of price increases on rechargeable
products as an offset to higher costs associated with those products,
increases in advertising and promotion expenses for Energizer Personal Care
products, timing and extent of synergies and earnings accretion related to the
Playtex acquisition, and Energizer's anticipated weighted average interest
rate, may be considered forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Energizer cautions readers
not to place undue reliance on any forward-looking statements, which speak
only as of the date made.
Energizer advises readers that various risks and uncertainties could
affect its financial performance and could cause Energizer's actual results
for future periods to differ materially from those anticipated or projected.
General economic conditions, competitive activity and higher than anticipated
cost increases could negatively impact results of Energizer's businesses going
forward. The impact of material and other commodity costs could be more
significant than anticipated, as it is difficult to predict with any accuracy
whether raw material, energy and other input costs will stabilize or continue
to increase, since such costs are impacted by multiple economic, political and
other factors outside of the Company's control. Energizer's estimates of
battery category value growth, retailer inventory levels and retail
consumption of its battery products are based solely on limited data available
to Energizer and management's reasonable assumptions about market conditions,
and consequently may be inaccurate, or may not reflect significant segments of
the retail market. Moreover, Energizer sales volumes in future quarters may
lag unit consumption if retailers are currently carrying inventories in excess
of the Company's estimates, or if those retailers elect to further contract
their inventory levels. The anticipated benefits of Energizer's price
increases on rechargeable products may not be sufficient to offset greater
than anticipated increases in supply costs, and the benefits of such increases
may not be realized in the event of consumer resistance, if competitive
activity mandates additional promotional spending or a revamping of the
pricing structure, or if other operating costs increase unexpectedly.
Advertising and promotional spending for Energizer Personal Care could be
curtailed in the event of unexpected declines in cash flows, competitive
activity, a reconsideration of marketing and promotional objectives for the
division, and general economic conditions. The timing and extent of potential
synergies and earnings accretion related to the Playtex acquisition may be
significantly different from current expectations due to changes in market or
competitive conditions, systems or personnel issues, or other operational
reasons. Energizer's anticipated weighted-average borrowing rate could be
impacted by increased variable interest rates, or greater than anticipated
borrowing spreads for its privately placed notes. 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. Energizer
does not undertake any obligation to update any forward-looking statements to
reflect events that occur or circumstances that exist after the date on which
they were made. Additional risks and uncertainties include those detailed
from time to time in Energizer's publicly filed documents; including its
annual report on Form 10-K for the Year ended September 30, 2007.
ENERGIZER HOLDINGS, INC.
STATEMENTS OF EARNINGS
(Condensed)
(Dollars in millions, except per share data - Unaudited)
Quarter Ended December 31,
2007 2006
Net sales $1,189.9 $959.2
Cost of products sold 653.7 505.0
Gross profit 536.2 454.2
Selling, general and administrative
expense 195.7 152.5
Advertising and promotion expense 123.7 87.0
Research and development expense 21.4 16.0
Interest expense 46.7 23.8
Other financing items, net 0.4 (2.3)
Earnings before income taxes 148.3 177.2
Income tax provision 45.7 54.9
Net earnings $102.6 $122.3
Earnings per share
Basic $1.79 $2.16
Diluted $1.74 $2.08
Weighted average shares of common
stock - Basic 57.4 56.6
Weighted average shares of common
stock - Diluted 59.0 58.7
See Accompanying Notes to Condensed Financial Statements
Energizer Holdings, Inc.
Notes to Condensed Financial Statements
Quarter ending December 31, 2007
(Dollars in millions, except per share data)
1. Operating results for any quarter are not necessarily indicative of
the results for any other quarter or the full year.
2. Prior to the acquisition of Playtex, the Company's operations were
managed via three major segments; North America Battery (U.S. and
Canada battery and lighting products), International Battery (rest of
world battery and lighting products) and Razors and Blades (global
razors, blades and related products). During the current quarter,
the Company has revised its operating segment presentation.
Operations for the Company are managed via two major segments --
Household Products (battery and lighting products) and Personal
Care (Wet Shave, Skin Care, Feminine Care and Infant Care). Segment
performance is evaluated based on segment operating profit,
exclusive of general corporate expenses, share-based compensation
costs, costs associated with most restructuring, integration or
business realignment activities and amortization of intangible
assets. Financial items, such as interest income and expense, are
managed on a global basis at the corporate level.
In accordance with generally accepted accounting principles, Playtex
inventory acquired in the Acquisition was valued at its estimated
fair value on the Company's September 30, 2007 balance sheet. Such
fair value of inventory is $27 greater than the historical cost basis
of such inventory prior to the Acquisition. This required accounting
treatment will reduce gross margin by approximately $27 (compared to
historical Playtex cost basis) as the product is sold following the
Acquisition. During the quarter ended December 31, 2007, Cost of
Products Sold reflected a $25.9 charge related to the amortization of
the inventory write up. The remaining charge is expected to occur in
the second quarter of fiscal 2008. The reduction in gross margin
associated with the write-up and subsequent sale of inventory
acquired in the Acquisition is not reflected in the Personal Care
segment, but rather presented as a separate line item below segment
profit, as it is a non-recurring item directly associated with the
Playtex acquisition. Such presentation reflects management's view on
how it evaluates segment performance.
The Company's operating model includes a combination of stand-alone
and combined business functions between the Household Products
and Personal Care businesses, varying by country and region of the
world. Shared functions include product warehousing and
distribution, various transaction processing functions, certain
environmental activities, and, in some countries, a combined sales
force and management.
Historical segment sales and profitability for the quarter ended
December 31, 2007 and 2006, respectively, are presented below. All
prior periods have been restated to conform with the current segment
presentation.
Quarter Ended December 31,
Net Sales 2007 2006
Household Products $789.8 $723.7
Personal Care 400.1 235.5
Total net sales $1,189.9 $959.2
Profitability
Household Products $182.9 $170.5
Personal Care 72.7 55.6
Total segment profitability $255.6 $226.1
General corporate and other
expenses (30.8) (26.1)
Acquisition inventory
valuation (25.9) -
Amortization (3.5) (1.3)
Interest and other financial items (47.1) (21.5)
Earnings before income taxes $148.3 $177.2
Supplemental product information is presented below for revenues
from external customers:
Quarter Ended December 31,
Net Sales 2007 2006
Alkaline batteries $497.4 $460.7
Carbon zinc batteries 67.3 74.8
Other batteries and lighting products 225.1 188.2
Wet Shave 251.6 235.5
Skin Care 45.1 -
Feminine Care 56.8 -
Infant Care 46.6 -
Total net sales $1,189.9 $959.2
3. Basic earnings per share is based on the average number of common
shares during the period. Diluted earnings per share is based on the
average number of shares used for the basic earnings per share
calculation, adjusted for the dilutive effect of stock options and
restricted stock equivalents.
4. The current and prior year quarters include charges of $2.1 and $3.4,
respectively, related to European restructuring projects. These
are included in General corporate and other expenses in Note 2 above.
5. The following table represents the Company's Unaudited Pro Forma
Condensed Combined Statement of Earnings as if the Acquisition
occurred at the beginning of each period presented. Playtex acquired
Tiki Hut Holding Company ("Hawaiian Tropic"), owner of the Hawaiian
Tropic brand on April 18, 2007. The Playtex financial statements,
and thus, the pro forma results below, reflect the results of
Hawaiian Tropic since April 18, 2007. It includes incremental
interest and financing costs related to the Acquisition and purchase
accounting adjustments, which are expected to have continuing impact
on the combined results, such as depreciation and amortization expense
on estimated acquired tangible and intangible assets. These unaudited
pro forma quarterly earnings statements are based on, and should be
read in conjunction with the Company's historical consolidated
financial statements and related notes, as well as Playtex historical
consolidated financial statements and related notes included in the
Form 8-K filing of October 1, 2007, as amended on December 17,
2007.
Unaudited Unaudited Unaudited Unaudited
Pro Forma Pro Forma Pro Forma Pro Forma
Quarter Quarter Quarter Quarter
Ended Ended Ended Ended
December March June September
31, 31, 30, 30,
2006 2007 2007 2007
Net Customer Sales
Household Products $723.7 $496.5 $547.8 $608.3
Personal Care 372.9 415.3 487.9 418.0
Total net customer sales $1,096.6 $911.8 $1,035.7 $1,026.3
Household Products $170.5 $92.4 $102.3 $107.1
Personal Care 83.0 88.9 68.0 31.3
Total segment profitability $253.5 $181.3 $170.3 $138.4
General corporate expenses (31.4) (30.1) (33.9) (42.9)
Acquisition inventory valuation - - (1.5) (0.4)
Amortization (3.0) (3.2) (3.1) (3.2)
Interest and other financial
items (50.8) (48.7) (46.3) (46.6)
Total earnings before income
taxes $168.3 $99.3 $85.5 $45.3
Tax provision 51.0 30.9 17.4 (0.2)
Net earnings $117.3 $68.4 $68.1 $45.5
Basic EPS $2.07 $1.22 $1.20 $0.80
Diluted EPS $2.00 $1.17 $1.16 $0.77
Weighted-Average Shares - Basic 56.6 56.3 56.7 57.1
Weighted-Average Shares - Diluted 58.7 58.4 58.7 58.9
SOURCE Energizer Holdings, Inc.
CONTACT: Jacqueline E. Burwitz, Vice President, Investor Relations of
Energizer Holdings, Inc., +1-314-985-2169
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