Energizer Holdings, Inc. (NYSE:ENR) Q2 2023 Earnings Conference Call May 8, 2023 10:00 AM ET Company Participants Jon Poldan - Vice President, Treasurer & Investor Relations Mark LaVigne - President & Chief Executive Officer John Drabik - Executive Vice President & Chief Financial Officer Conference Call Participants Kevin Grundy - Jefferies Bill Chappell - Truist Securities Andrea Teixeira - JPMorgan Robert Ottenstein - Evercore Hale Holden - Barclays Carla Casella - JPMorgan Kevin Grundy - Jefferies Willi ...

PART I — FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) This section presents the unaudited condensed consolidated financial statements for Energizer Holdings, Inc., including statements of earnings and comprehensive income, balance sheets, cash flows, and shareholders' equity, along with detailed notes explaining the company's business, accounting policies, segment information, debt, equity, and risk management strategies for the periods ended March 31, 2023 and 2022 [Consolidated Statements of Earnings and Comprehensive Income (Condensed)](index=4&type=section&id=Consolidated%20Statements%20of%20Earnings%20and%20Comprehensive%20Income%20%28Condensed%29) Consolidated Statements of Earnings and Comprehensive Income (Condensed) | Metric | Q2 2023 (Millions) | Q2 2022 (Millions) | 6M 2023 (Millions) | 6M 2022 (Millions) | | :-------------------------------- | :----------------: | :----------------: | :----------------: | :----------------: | | Net sales | $684.1 | $685.4 | $1,449.2 | $1,531.7 | | Gross profit | $253.3 | $238.4 | $551.6 | $550.0 | | Earnings before income taxes | $50.4 | $28.0 | $112.7 | $104.5 | | Net earnings | $40.0 | $19.0 | $89.0 | $79.0 | | Net earnings attributable to common shareholders | $40.0 | $19.0 | $89.0 | $75.0 | | Basic net earnings per common share | $0.56 | $0.27 | $1.25 | $1.09 | | Diluted net earnings per common share | $0.55 | $0.27 | $1.23 | $1.09 | | Total comprehensive income | $31.3 | $68.7 | $50.7 | $147.4 | - Net earnings attributable to common shareholders increased significantly by **110.5%** to **$40.0 million** in Q2 2023 from **$19.0 million** in Q2 2022. Diluted EPS also rose by **103.7%** to **$0.55** in Q2 2023 from **$0.27** in Q2 2022[9](index=9&type=chunk) - For the six months ended March 31, 2023, net earnings attributable to common shareholders increased by **18.7%** to **$89.0 million** from **$75.0 million** in the prior year, with diluted EPS increasing by **12.8%** to **$1.23**[9](index=9&type=chunk) [Consolidated Balance Sheets (Condensed)](index=5&type=section&id=Consolidated%20Balance%20Sheets%20%28Condensed%29) Consolidated Balance Sheets (Condensed) | Metric | March 31, 2023 (Millions) | September 30, 2022 (Millions) | | :-------------------------------- | :------------------------: | :------------------------: | | Total current assets | $1,488.1 | $1,590.0 | | Total assets | $4,436.0 | $4,572.1 | | Total current liabilities | $636.9 | $697.9 | | Long-term debt | $3,414.6 | $3,499.4 | | Total liabilities | $4,287.6 | $4,441.5 | | Total shareholders' equity | $148.4 | $130.6 | - Total assets decreased by **$136.1 million** from **$4,572.1 million** at September 30, 2022, to **$4,436.0 million** at March 31, 2023. Total liabilities also decreased by **$153.9 million**, while total shareholders' equity increased by **$17.8 million**[12](index=12&type=chunk) - Cash and cash equivalents decreased from **$205.3 million** to **$193.7 million**, and inventories decreased from **$771.6 million** to **$746.7 million**[12](index=12&type=chunk) [Consolidated Statements of Cash Flows (Condensed)](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20%28Condensed%29) Consolidated Statements of Cash Flows (Condensed) | Metric | 6M 2023 (Millions) | 6M 2022 (Millions) | | :-------------------------------- | :----------------: | :----------------: | | Net cash from/(used by) operating activities | $210.2 | $(108.7) | | Net cash used by investing activities | $(18.0) | $(45.4) | | Net cash (used by)/from financing activities | $(203.4) | $130.2 | | Net decrease in cash, cash equivalents, and restricted cash | $(11.6) | $(25.7) | - Net cash from operating activities significantly improved, moving from a use of **$108.7 million** in the six months ended March 31, 2022, to a generation of **$210.2 million** in the same period of 2023[14](index=14&type=chunk) - Net cash used by financing activities shifted from a generation of **$130.2 million** in 2022 to a use of **$203.4 million** in 2023, primarily due to debt payments[14](index=14&type=chunk) [Consolidated Statements of Shareholders' Equity (Condensed)](index=7&type=section&id=Consolidated%20Statements%20of%20Shareholders%27%20Equity%20%28Condensed%29) Consolidated Statements of Shareholders' Equity (Condensed) | Metric | September 30, 2022 (Millions) | March 31, 2023 (Millions) | | :-------------------------------- | :------------------------: | :------------------------: | | Total Shareholders' Equity | $130.6 | $148.4 | | Retained (Losses)/Earnings | $(304.7) | $(216.0) | | Accumulated Other Comprehensive Loss | $(145.3) | $(183.6) | - Total shareholders' equity increased from **$130.6 million** at September 30, 2022, to **$148.4 million** at March 31, 2023, driven by net earnings and share-based payments, partially offset by dividends and other comprehensive loss[17](index=17&type=chunk) - Retained losses improved from **$(304.7) million** to **$(216.0) million**, reflecting positive net earnings during the period[17](index=17&type=chunk) [Notes to Consolidated (Condensed) Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20%28Condensed%29%20Financial%20Statements) [ (1) Description of Business and Basis of Presentation](index=8&type=section&id=%281%29%20Description%20of%20Business%20and%20Basis%20of%20Presentation) - Energizer Holdings, Inc. is a global manufacturer, marketer, and distributor of primary batteries, portable lights (under brands like Energizer®, Eveready®, Rayovac®, Varta®), and auto care products (under brands like Refresh Your Car!®, Armor All®, STP®, A/C PRO®)[19](index=19&type=chunk)[20](index=20&type=chunk)[21](index=21&type=chunk) - The company adopted ASU 2020-04 (Reference Rate Reform) on October 1, 2022, applying it prospectively to contract modifications for establishing new reference rates, which did not materially impact financial statements[24](index=24&type=chunk) [ (2) Revenue Recognition](index=8&type=section&id=%282%29%20Revenue%20Recognition) - Revenue is primarily generated from finished product sales, recognized when title, ownership, and risk of loss pass to the customer, typically upon delivery or carrier pickup[26](index=26&type=chunk)[28](index=28&type=chunk) Net Sales by Products (Millions) | Product | Q2 2023 | Q2 2022 | 6M 2023 | 6M 2022 | | :-------- | :------: | :------: | :------: | :------: | | Batteries | $480.1 | $488.5 | $1,119.6 | $1,190.2 | | Auto Care | $178.2 | $168.9 | $271.7 | $275.0 | | Lights | $25.8 | $28.0 | $57.9 | $66.5 | | **Total** | **$684.1** | **$685.4** | **$1,449.2** | **$1,531.7** | Net Sales by Markets (Millions) | Market | Q2 2023 | Q2 2022 | 6M 2023 | 6M 2022 | | :------------- | :------: | :------: | :------: | :------: | | North America | $430.9 | $417.7 | $887.2 | $926.6 | | Modern Markets | $111.7 | $115.2 | $265.3 | $280.5 | | Developing Markets | $96.3 | $99.9 | $204.8 | $215.3 | | Distributors Markets | $45.2 | $52.6 | $91.9 | $109.3 | | **Total** | **$684.1** | **$685.4** | **$1,449.2** | **$1,531.7** | - For Q2 2023, Batteries sales decreased by **$8.4 million** YoY, while Auto Care sales increased by **$9.3 million** YoY. For the six months, Batteries sales decreased by **$70.6 million**, and Auto Care sales decreased by **$3.3 million**[31](index=31&type=chunk) [ (3) Acquisitions](index=9&type=section&id=%283%29%20Acquisitions) - The Formulations Acquisition, completed in Q1 FY2021 for **$51.2 million** cash, was finalized in Q1 FY2022 with a **$1.0 million** purchase price reduction. The acquisition included proprietary technology (**$19.5M**) and customer relationships (**$1.0M**)[32](index=32&type=chunk)[35](index=35&type=chunk) - Goodwill of **$28.7 million** from the Formulations Acquisition was allocated to the Americas segment and is deductible for tax purposes[35](index=35&type=chunk) - No acquisition and integration costs were incurred in the six months ended March 31, 2023, compared to **$16.5 million** in the prior year period, which included costs related to facility exit, IT integration, and retention compensation[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk) [ (4) Restructuring](index=11&type=section&id=%284%29%20Restructuring) - In November 2022, the Board approved 'Project Momentum,' a profit recovery program expected to incur **$40-50 million** in cash operating costs, **$10 million** in non-cash costs, and **$35-45 million** in capital expenditures through FY2024[42](index=42&type=chunk) Restructuring Program Expenses (Millions) | Program | Q2 2023 | Q2 2022 | 6M 2023 | 6M 2022 | | :-------------------------- | :------: | :------: | :------: | :------: | | 2019 Restructuring Program | $— | $— | $— | $3.9 | | 2020 Restructuring Program | $— | $— | $— | $1.4 | | Project Momentum Restructuring | $7.5 | $— | $14.1 | $— | | **Total** | **$7.5** | **$—** | **$14.1** | **$5.3** | - Project Momentum restructuring costs for the six months ended March 31, 2023, totaled **$14.1 million**, primarily severance (**$5.5M**), accelerated depreciation (**$0.9M**), and other costs (**$7.7M**). These costs were mainly allocated to the Battery & Lights segment (**$12.6M**) and Auto Care segment (**$1.5M**)[46](index=46&type=chunk)[48](index=48&type=chunk)[50](index=50&type=chunk) [ (5) Earnings per share](index=14&type=section&id=%285%29%20Earnings%20per%20share) Basic and Diluted Earnings Per Share (Millions, except per share data) | Metric | Q2 2023 | Q2 2022 | 6M 2023 | 6M 2022 | | :-------------------------------- | :------: | :------: | :------: | :------: | | Net earnings attributable to common shareholders | $40.0 | $19.0 | $89.0 | $75.0 | | Basic net earnings per common share | $0.56 | $0.27 | $1.25 | $1.09 | | Diluted net earnings per common share | $0.55 | $0.27 | $1.23 | $1.09 | | Weighted average common shares outstanding - Diluted | 72.4 | 71.6 | 72.3 | 69.0 | - Diluted EPS increased from **$0.27** in Q2 2022 to **$0.55** in Q2 2023, and from **$1.09** to **$1.23** for the six months ended March 31, 2023[56](index=56&type=chunk) - The mandatory convertible preferred stock (MCPS) converted to approximately **4.7 million** common shares in Q2 FY2022, impacting diluted share calculations for the prior year but no longer outstanding in FY2023[55](index=55&type=chunk) [ (6) Segments](index=15&type=section&id=%286%29%20Segments) - Energizer manages operations through two product segments: Batteries & Lights and Auto Care. Segment performance is evaluated based on segment operating profit, excluding corporate expenses, amortization, restructuring, acquisition/integration costs, and other corporate items[59](index=59&type=chunk) Segment Sales and Profitability (Millions) | Metric | Q2 2023 | Q2 2022 | 6M 2023 | 6M 2022 | | :---------------------- | :------: | :------: | :------: | :------: | | **Net Sales** | | | | | | Batteries & Lights | $505.9 | $516.5 | $1,177.5 | $1,256.7 | | Auto Care | $178.2 | $168.9 | $271.7 | $275.0 | | **Total Net Sales** | **$684.1** | **$685.4** | **$1,449.2** | **$1,531.7** | | **Segment Profit** | | | | | | Batteries & Lights | $114.5 | $95.3 | $252.8 | $263.7 | | Auto Care | $29.4 | $24.3 | $40.0 | $24.1 | | **Total Segment Profit** | **$143.9** | **$119.6** | **$292.8** | **$287.8** | - Total segment profit increased by **20.3%** to **$143.9 million** in Q2 2023 and by **1.7%** to **$292.8 million** for the six months ended March 31, 2023, compared to the prior year[63](index=63&type=chunk) [ (7) Goodwill and intangible assets](index=17&type=section&id=%287%29%20Goodwill%20and%20intangible%20assets) Goodwill by Segment (Millions) | Segment | October 1, 2022 | March 31, 2023 | | :-------------- | :--------------: | :------------: | | Batteries & Lights | $868.9 | $885.3 | | Auto Care | $134.2 | $134.2 | | **Total** | **$1,003.1** | **$1,019.5** | - Goodwill increased by **$16.4 million** to **$1,019.5 million** at March 31, 2023, primarily due to cumulative translation adjustments in the Batteries & Lights segment[70](index=70&type=chunk) Other Intangible Assets, Net (Millions) | Asset Type | March 31, 2023 | September 30, 2022 | | :-------------------------------- | :--------------: | :----------------: | | Total Amortizable intangible assets | $503.9 | $533.3 | | Trademarks and trade names - indefinite lived | $763.4 | $762.5 | | **Total Other intangible assets, net** | **$1,267.3** | **$1,295.8** | [ (8) Debt](index=18&type=section&id=%288%29%20Debt) Long-Term Debt (Millions) | Debt Type | March 31, 2023 | September 30, 2022 | | :-------------------------------- | :--------------: | :----------------: | | Senior Secured Term Loan Facility due 2027 | $1,051.0 | $1,182.0 | | 6.500% Senior Notes due 2027 | $300.0 | $300.0 | | 4.750% Senior Notes due 2028 | $583.7 | $600.0 | | 4.375% Senior Notes due 2029 | $791.3 | $800.0 | | 3.50% Senior Notes due 2029 (Euro Notes) | $704.5 | $637.1 | | Capital lease obligations | $32.1 | $32.3 | | **Total long-term debt, including current maturities** | **$3,462.6** | **$3,551.4** | | Less current portion | $(12.3) | $(12.4) | | Less unamortized debt premium and debt issuance fees | $(35.7) | $(39.6) | | **Total long-term debt** | **$3,414.6** | **$3,499.4** | - The company prepaid **$125.0 million** of the Senior Secured Term Loan in Q1 and Q2 FY2023, and retired **$25.0 million** of Senior Notes, resulting in a net gain on extinguishment of debt of **$2.0 million** for the six months ended March 31, 2023[75](index=75&type=chunk)[80](index=80&type=chunk)[81](index=81&type=chunk) - In February 2023, the Credit Agreement and interest rate swap were amended to transition the interest reference rate from LIBOR to SOFR, with no material impact on financial statements[76](index=76&type=chunk)[83](index=83&type=chunk) [ (9) Pension Plans](index=21&type=section&id=%289%29%20Pension%20Plans) Net Periodic Pension Cost/(Benefit) (Millions) | Component | Q2 2023 (U.S.) | Q2 2022 (U.S.) | Q2 2023 (Intl.) | Q2 2022 (Intl.) | 6M 2023 (U.S.) | 6M 2022 (U.S.) | 6M 2023 (Intl.) | 6M 2022 (Intl.) | | :------------------------------ | :------------: | :------------: | :-------------: | :-------------: | :------------: | :------------: | :-------------: | :-------------: | | Service cost | $— | $— | $0.1 | $0.2 | $— | $— | $0.2 | $0.4 | | Interest cost | $5.1 | $3.2 | $0.9 | $0.4 | $10.2 | $6.4 | $1.7 | $0.9 | | Expected return on plan assets | $(5.3) | $(5.7) | $(0.7) | $(0.9) | $(10.5) | $(11.4) | $(1.4) | $(1.7) | | Amortization of unrecognized net losses | $0.5 | $1.6 | $0.1 | $0.3 | $1.1 | $3.2 | $0.2 | $0.4 | | **Net periodic cost/(benefit)** | **$0.3** | **$(0.9)** | **$0.4** | **$—** | **$0.8** | **$(1.8)** | **$0.7** | **$—** | - For the six months ended March 31, 2023, U.S. net periodic pension cost was **$0.8 million** (vs. benefit of **$1.8 million** in 2022), and International net periodic pension cost was **$0.7 million** (vs. **$0** in 2022)[93](index=93&type=chunk) [ (10) Shareholders' Equity](index=22&type=section&id=%2810%29%20Shareholders%27%20Equity) - All outstanding Mandatory Convertible Preferred Stock (MCPS) converted to approximately **4.7 million** shares of common stock in Q2 FY2022[95](index=95&type=chunk) - The company has a share repurchase program authorized for up to **7.5 million** shares, with **5.0 million** shares remaining under authorization as of March 31, 2023[96](index=96&type=chunk)[224](index=224&type=chunk) - Cash dividends of **$0.30** per share of common stock were declared for Q1, Q2, and Q3 of fiscal 2023. Total dividends declared to common shareholders were **$43.9 million** for the six months ended March 31, 2023, up from **$42.0 million** in the prior year[99](index=99&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk) [ (11) Financial Instruments and Risk Management](index=23&type=section&id=%2811%29%20Financial%20Instruments%20and%20Risk%20Management) - The company uses derivatives (forward currency contracts, interest rate swaps, zinc contracts) to manage exposure to currency rates, interest rates, and commodity prices, not for speculative purposes[102](index=102&type=chunk)[105](index=105&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk)[111](index=111&type=chunk) Estimated Fair Values of Derivatives Designated as Cash Flow Hedges (Millions) | Derivative Type | March 31, 2023 (Liability)/Asset | September 30, 2022 (Liability)/Asset | | :---------------------- | :------------------------------: | :------------------------------: | | Foreign currency contracts | $(0.7) | $16.3 | | Interest rate swap | $68.5 | $86.4 | | Zinc contracts | $(3.5) | $(6.1) | | **Total** | **$64.3** | **$96.6** | - The interest rate swap, with a notional value of **$700.0 million**, was amended in February 2023 to fix the variable benchmark component (SOFR) at **1.042%**, transitioning from LIBOR[112](index=112&type=chunk)[113](index=113&type=chunk) [ (12) Accumulated Other Comprehensive (Loss)/Income](index=27&type=section&id=%2812%29%20Accumulated%20Other%20Comprehensive%20%28Loss%29%2FIncome) Changes in Accumulated Other Comprehensive (Loss)/Income (AOCI), Net of Tax (Millions) | Component | September 30, 2022 | OCI before reclassifications | Reclassifications to earnings | March 31, 2023 | | :---------------------- | :----------------: | :--------------------------: | :--------------------------: | :------------: | | Foreign Currency Translation Adjustments | $(77.7) | $(17.2) | $— | $(94.9) | | Pension Activity | $(140.5) | $2.1 | $1.0 | $(137.4) | | Zinc Contracts | $(4.6) | $2.1 | $(0.2) | $(2.7) | | Foreign Currency Contracts | $11.7 | $(6.9) | $(5.6) | $(0.8) | | Interest Rate Contracts | $65.8 | $(5.1) | $(8.5) | $52.2 | | **Total** | **$(145.3)** | **$(25.0)** | **$(13.3)** | **$(183.6)** | - AOCI increased from a loss of **$145.3 million** at September 30, 2022, to a loss of **$183.6 million** at March 31, 2023, primarily due to foreign currency translation adjustments and reclassifications to earnings[135](index=135&type=chunk) - Reclassifications from AOCI to earnings for the six months ended March 31, 2023, totaled a net loss of **$13.3 million**, impacting cost of products sold and interest expense[137](index=137&type=chunk) [ (13) Supplemental Financial Statement Information](index=28&type=section&id=%2813%29%20Supplemental%20Financial%20Statement%20Information) Other Items, Net (Millions) | Component | Q2 2023 | Q2 2022 | 6M 2023 | 6M 2022 | | :------------------------------ | :------: | :------: | :------: | :------: | | Interest income | $(1.1) | $(0.3) | $(1.3) | $(0.5) | | Foreign currency exchange loss/(gain) | $4.5 | $(0.1) | $3.5 | $1.2 | | Pension cost/(benefit) other than service costs | $0.6 | $(1.1) | $1.3 | $(2.2) | | Exit of Russian market | $— | $7.5 | $— | $7.5 | | Other | $(3.2) | $— | $(4.1) | $0.2 | | **Total Other items, net** | **$0.8** | **$6.0** | **$(0.6)** | **$6.2** | Inventories (Millions) | Component | March 31, 2023 | September 30, 2022 | | :-------------------- | :--------------: | :----------------: | | Raw materials and supplies | $148.4 | $115.9 | | Work in process | $224.0 | $201.6 | | Finished products | $374.3 | $454.1 | | **Total inventories** | **$746.7** | **$771.6** | Other Current Liabilities (Millions) | Component | March 31, 2023 | September 30, 2022 | | :-------------------------------- | :--------------: | :----------------: | | Accrued advertising, sales promotion and allowances | $10.9 | $13.4 | | Accrued trade allowances | $43.0 | $57.7 | | Accrued freight and warehousing | $29.7 | $37.2 | | Accrued salaries, vacations and incentive compensation | $39.6 | $60.6 | | Accrued interest expense | $20.7 | $20.5 | | Restructuring reserve | $1.9 | $1.7 | | Income taxes payable | $46.1 | $36.7 | | Other | $85.1 | $106.1 | | **Total other current liabilities** | **$277.0** | **$333.9** | [ (14) Legal proceedings/contingencies and other obligations](index=29&type=section&id=%2814%29%20Legal%20proceedings%2Fcontingencies%20and%20other%20obligations) - The company is involved in various legal proceedings but believes that any resulting liability is not reasonably likely to be material to its financial position, results of operations, or cash flows, considering established accruals[142](index=142&type=chunk)[144](index=144&type=chunk) - As of March 31, 2023, the company had approximately **$14.2 million** in purchase obligations under supply and service contracts[145](index=145&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Energizer's financial performance, including a detailed analysis of operating results, segment performance, and liquidity and capital resources for the periods ended March 31, 2023 and 2022 [Forward-Looking Statements](index=31&type=section&id=Forward-Looking%20Statements) - The document contains forward-looking statements reflecting expectations, estimates, or projections concerning future results, which are subject to known and unknown risks and uncertainties[149](index=149&type=chunk) - Key risk factors include global economic conditions, competition, changes in retail environment, COVID-19 impacts, brand reputation, loss of principal customers, innovation challenges, international operations (currency fluctuations), intellectual property protection, production costs (inflation), reliance on suppliers, supply chain disruptions, operational execution, goodwill impairment, IT system failures, significant debt obligations, and increasing government regulations[150](index=150&type=chunk) [Non-GAAP Financial Measures](index=32&type=section&id=Non-GAAP%20Financial%20Measures) - Management uses non-GAAP financial measures to provide additional meaningful comparisons by excluding items not reflective of ongoing operating performance, such as restructuring costs, acquisition and integration costs, acquisition earn-out, costs of exiting the Russian market, and loss/(gain) on extinguishment of debt[152](index=152&type=chunk) - Non-GAAP measures include Segment Profit, Adjusted Net Earnings and Adjusted Diluted Net Earnings Per Common Share (EPS), Non-GAAP Tax Rate, and Organic metrics (excluding Russia/Argentina operations and currency impact)[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk)[156](index=156&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk)[159](index=159&type=chunk) [Coronavirus (COVID-19)](index=33&type=section&id=Coronavirus%20%28COVID-19%29) - COVID-19 continued to impact the company in the first half of fiscal 2023, primarily through disruptions in the global supply chain and changes in product demand[160](index=160&type=chunk) - An inflationary environment with higher manufacturing and commodity costs is expected to continue in fiscal 2023, leading to incremental costs and gross margin pressures[161](index=161&type=chunk) [Exit of Russian Market](index=33&type=section&id=Exit%20of%20Russian%20Market) - The company exited the Russian market in Q2 FY2022 due to global economic and political uncertainty, resulting in a pre-tax impact of **$14.0 million**[163](index=163&type=chunk)[165](index=165&type=chunk) - The financial impact included **$0.7 million** in inventory impairment (Cost of products sold), **$5.8 million** in asset impairment and severance (SG&A), and **$7.5 million** in currency impacts (Other items, net)[165](index=165&type=chunk) - The Russian subsidiary comprised approximately **one percent** of the company's business[164](index=164&type=chunk) [Restructuring Costs](index=34&type=section&id=Restructuring%20Costs) - Project Momentum, approved in November 2022, aims for **$65-80 million** in annual pre-tax savings from restructuring and an additional **$15-20 million** from continuous improvement, totaling **$80-100 million** in annual pre-tax savings[166](index=166&type=chunk) - For the six months ended March 31, 2023, Project Momentum incurred **$14.1 million** in pre-tax expenses, primarily severance, accelerated depreciation, and consulting costs, and realized **$17.6 million** in savings[167](index=167&type=chunk)[169](index=169&type=chunk) - The 2019 and 2020 restructuring programs were substantially completed by December 31, 2021, generating approximately **$55-60 million** in annual run-rate cost savings, primarily in Cost of products sold[170](index=170&type=chunk)[171](index=171&type=chunk)[174](index=174&type=chunk) [Acquisition and Integration Costs](index=35&type=section&id=Acquisition%20and%20Integration%20Costs) - No acquisition and integration costs were incurred in the six months ended March 31, 2023. In contrast, **$16.5 million** was incurred in the prior year period (FY2022) related to the Formulations, Battery, and Auto Care Acquisitions[176](index=176&type=chunk) - FY2022 costs included **$6.0 million** in Cost of products sold (facility exit/restructuring), **$9.4 million** in SG&A (IT integration, consulting, retention), and **$1.1 million** in R&D (severance, asset write-offs)[177](index=177&type=chunk)[178](index=178&type=chunk) [Highlights / Operating Results](index=35&type=section&id=Highlights%20%2F%20Operating%20Results) [ Financial Results](index=35&type=section&id=Financial%20Results) Adjusted Net Earnings and EPS (Millions, except per share data) | Metric | Q2 2023 | Q2 2022 | 6M 2023 | 6M 2022 | | :-------------------------------- | :------: | :------: | :------: | :------: | | Net earnings attributable to common shareholders | $40.0 | $19.0 | $89.0 | $75.0 | | Total adjustments, after tax | $6.5 | $14.3 | $9.3 | $28.1 | | **Adjusted net earnings** | **$46.5** | **$33.3** | **$98.3** | **$107.1** | | Diluted net earnings per common share | $0.55 | $0.27 | $1.23 | $1.09 | | Adjustments (per common share) | $0.09 | $0.20 | $0.13 | $0.40 | | **Adjusted diluted net earnings per diluted common share** | **$0.64** | **$0.47** | **$1.36** | **$1.49** | - Adjusted diluted EPS increased by **36%** to **$0.64** in Q2 FY2023 from **$0.47** in Q2 FY2022. For the six months, adjusted diluted EPS decreased to **$1.36** from **$1.49** in the prior year[179](index=179&type=chunk)[180](index=180&type=chunk) - Currency had an adverse impact of **$10.4 million** (**$0.11** per share) on Earnings before income tax in Q2 FY2023 and **$20.4 million** (**$0.22** per share) for the six months ended March 31, 2023[182](index=182&type=chunk) [ Total Net Sales](index=37&type=section&id=Total%20Net%20Sales) Total Net Sales Performance (Millions, % Change) | Metric | Q2 2023 $ Change | Q2 2023 % Chg | 6M 2023 $ Change | 6M 2023 % Chg | | :-------------------------- | :--------------: | :-------------: | :--------------: | :-------------: | | Net sales - prior year | $685.4 | | $1,531.7 | | | Organic | $17.5 | 2.6% | $(28.1) | (1.8)% | | Change in Argentina Operations | $0.7 | 0.1% | $2.0 | 0.1% | | Change in Russia Operations | $(5.1) | (0.7)% | $(12.6) | (0.8)% | | Impact of currency | $(14.4) | (2.2)% | $(43.8) | (2.9)% | | **Net Sales - current year** | **$684.1** | **(0.2)%** | **$1,449.2** | **(5.4)%** | - Q2 FY2023 Net sales decreased by **0.2%** YoY to **$684.1 million**, with organic net sales increasing by **2.6%** due to global pricing actions (**13.0%**) partially offset by volume declines (**9.5%**) and exit of lower margin products (**1.0%**)[189](index=189&type=chunk)[190](index=190&type=chunk) - For the six months, Net sales decreased by **5.4%** YoY to **$1,449.2 million**, with organic net sales declining by **1.8%** due to lower volumes (**11.5%**) and lower margin exits (**1.5%**), partially offset by pricing actions (**11.0%**)[189](index=189&type=chunk)[190](index=190&type=chunk) [ Gross Margin](index=37&type=section&id=Gross%20Margin) Gross Margin Percentage | Metric | Q2 2023 | Q2 2022 | | :------------------------------------------ | :------: | :------: | | Gross margin - Reported | 37.0% | 34.8% | | Gross margin - Adjusted | 37.9% | 34.9% | | **6M 2023** | **6M 2022** | | Gross margin - Reported | 38.1% | 35.9% | | Gross margin - Adjusted | 38.5% | 36.3% | - Adjusted gross margin increased by **300 basis points** to **37.9%** in Q2 FY2023 and by **220 basis points** to **38.5%** for the six months, driven by pricing initiatives and Project Momentum savings (**$10.7M** in Q2, **$17.2M** in 6M)[189](index=189&type=chunk)[191](index=191&type=chunk) - These benefits were partially offset by higher operating costs, raw material costs due to inflation, and adverse currency impacts[191](index=191&type=chunk) [ Selling, General, and Administrative Expense (SG&A)](index=38&type=section&id=Selling%2C%20General%2C%20and%20Administrative%20Expense%20%28SG%26A%29) SG&A Expense (Millions, % of Net Sales) | Metric | Q2 2023 | Q2 2022 | 6M 2023 | 6M 2022 | | :-------------------------------- | :------: | :------: | :------: | :------: | | SG&A - Reported | $118.3 | $123.4 | $238.7 | $245.5 | | SG&A - Reported (% of Net Sales) | 17.3% | 18.0% | 16.5% | 16.0% | | SG&A - Adjusted | $116.5 | $117.6 | $230.6 | $229.2 | | SG&A - Adjusted (% of Net Sales) | 17.0% | 17.2% | 15.9% | 15.0% | - Adjusted SG&A decreased in Q2 FY2023 due to Project Momentum savings and favorable currency movement, but increased for the six months due to higher stock compensation and factoring fees, partially offset by savings[192](index=192&type=chunk)[193](index=193&type=chunk) [ Advertising and Sales Promotion Expense (A&P)](index=38&type=section&id=Advertising%20and%20Sales%20Promotion%20Expense%20%28A%26P%29) A&P Expense (Millions, % of Net Sales) | Metric | Q2 2023 | Q2 2022 | 6M 2023 | 6M 2022 | | :-------------------------------- | :------: | :------: | :------: | :------: | | A&P Expense | $18.4 | $19.6 | $71.8 | $71.3 | | A&P Expense (% of Net Sales) | 2.7% | 2.9% | 5.0% | 4.7% | - A&P expense decreased by **$1.2 million** in Q2 FY2023 but increased by **$0.5 million** for the six months ended March 31, 2023[194](index=194&type=chunk) [ Research and Development (R&D)](index=38&type=section&id=Research%20and%20Development%20%28R%26D%29) R&D Expense (Millions, % of Net Sales) | Metric | Q2 2023 | Q2 2022 | 6M 2023 | 6M 2022 | | :-------------------------------- | :------: | :------: | :------: | :------: | | R&D Expense | $8.0 | $7.9 | $15.6 | $16.8 | | R&D Expense (% of Net Sales) | 1.2% | 1.2% | 1.1% | 1.1% | - R&D expense remained stable at **$8.0 million** in Q2 FY2023 but decreased to **$15.6 million** for the six months ended March 31, 2023, compared to **$16.8 million** in the prior year, which included **$1.1 million** in integration costs[195](index=195&type=chunk) [ Interest Expense](index=38&type=section&id=Interest%20Expense) Interest Expense (Millions) | Metric | Q2 2023 | Q2 2022 | 6M 2023 | 6M 2022 | | :------------- | :------: | :------: | :------: | :------: | | Interest expense | $42.0 | $38.3 | $84.9 | $75.3 | - Interest expense increased to **$42.0 million** in Q2 FY2023 and **$84.9 million** for the six months, primarily due to higher interest rates in fiscal 2023, partially offset by lower average outstanding debt[196](index=196&type=chunk) [ Loss/(gain) on extinguishment of debt](index=38&type=section&id=Loss%2F%28gain%29%20on%20extinguishment%20of%20debt) - A loss of **$0.9 million** on extinguishment of debt was recorded in Q2 FY2023 due to the repayment of **$100.0 million** on the term loan[197](index=197&type=chunk) - For the six months ended March 31, 2023, a gain of **$2.0 million** was recorded, related to the retirement of **$25.0 million** of Senior Notes at a discount and the repayment of **$125.0 million** on the term loan[198](index=198&type=chunk) [ Other items, net](index=39&type=section&id=Other%20items%2C%20net) Other Items, Net (Millions) | Component | Q2 2023 | Q2 2022 | 6M 2023 | 6M 2022 | | :------------------------------ | :------: | :------: | :------: | :------: | | Interest income | $(1.1) | $(0.3) | $(1.3) | $(0.5) | | Foreign currency exchange (gain)/loss | $4.5 | $(0.1) | $3.5 | $1.2 | | Pension cost/(benefit) other than service costs | $0.6 | $(1.1) | $1.3 | $(2.2) | | Exit of the Russian market | $— | $7.5 | $— | $7.5 | | Other | $(3.2) | $— | $(4.1) | $0.2 | | **Total Other items, net** | **$0.8** | **$6.0** | **$(0.6)** | **$6.2** | - Other items, net, was an expense of **$0.8 million** in Q2 FY2023 (down from **$6.0 million** expense in Q2 FY2022) and a benefit of **$0.6 million** for the six months (up from **$6.2 million** expense in 6M FY2022)[198](index=198&type=chunk) [ Effective Tax Rate](index=39&type=section&id=Effective%20Tax%20Rate) - The reported effective tax rate for the six months ended March 31, 2023, was **21.0%**, down from **24.4%** in the prior year[199](index=199&type=chunk) - The adjusted effective tax rate for the six months was **21.2%**, compared to **21.3%** in the prior year, after excluding the impact of restructuring, acquisition/integration costs, Russia exit, earn-out, and debt extinguishment[199](index=199&type=chunk) [Segment Results](index=39&type=section&id=Segment%20Results) [ Segment Net Sales](index=40&type=section&id=Segment%20Net%20Sales) Segment Net Sales Performance (Millions, % Change) | Segment | Q2 2023 $ Change | Q2 2023 % Chg | 6M 2023 $ Change | 6M 2023 % Chg | | :------------------ | :--------------: | :-------------: | :--------------: | :-------------: | | **Batteries & Lights** | | | | | | Organic | $7.3 | 1.4% | $(27.5) | (2.2)% | | Net sales - current year | $505.9 | (2.1)% | $1,177.5 | (6.3)% | | **Auto Care** | | | | | | Organic | $10.2 | 6.0% | $(0.6) | (0.2)% | | Net sales - current year | $178.2 | 5.5% | $271.7 | (1.2)% | - Batteries & Lights organic net sales increased by **1.4%** in Q2 FY2023 due to pricing actions (**13.5%**), but decreased by **2.2%** for the six months due to lower volumes (**11.5%**) and lower margin exits (**2%**)[203](index=203&type=chunk)[205](index=205&type=chunk) - Auto Care organic net sales increased by **6.0%** in Q2 FY2023 due to pricing (**12.5%**) and increased international distribution (**1%**), but decreased by **0.2%** for the six months due to lower volumes (**11%**) partially offset by pricing (**10.5%**)[204](index=204&type=chunk)[206](index=206&type=chunk) [ Segment Profit](index=41&type=section&id=Segment%20Profit) Segment Profit Performance (Millions, % Change) | Segment | Q2 2023 $ Change | Q2 2023 % Chg | 6M 2023 $ Change | 6M 2023 % Chg | | :------------------ | :--------------: | :-------------: | :--------------: | :-------------: | | **Batteries & Lights** | | | | | | Organic | $27.5 | 28.9% | $11.9 | 4.5% | | Segment profit - current year | $114.5 | 20.1% | $252.8 | (4.1)% | | **Auto Care** | | | | | | Organic | $5.6 | 23.0% | $17.9 | 74.3% | | Segment profit - current year | $29.4 | 21.0% | $40.0 | 66.0% | | **Total Segment Profit** | | | | | | Organic | $33.1 | 27.7% | $29.8 | 10.4% | | Segment profit - current year | $143.9 | 20.3% | $292.8 | 1.7% | - Total organic segment profit increased by **27.7%** in Q2 FY2023 and **10.4%** for the six months, driven by higher gross margin from Project Momentum and pricing initiatives, and reduced SG&A/A&P spend[208](index=208&type=chunk)[210](index=210&type=chunk) - Batteries & Lights organic segment profit increased by **28.9%** in Q2 FY2023 and **4.5%** for the six months, despite a reported decrease for the six months, due to gross margin improvements[208](index=208&type=chunk)[211](index=211&type=chunk) - Auto Care organic segment profit increased by **23.0%** in Q2 FY2023 and **$17.9 million** for the six months, driven by gross margin improvement from Project Momentum and pricing, partially offset by higher SG&A/A&P[209](index=209&type=chunk)[212](index=212&type=chunk) [ General Corporate](index=42&type=section&id=General%20Corporate) General Corporate and Other Expenses (Millions, % of Net Sales) | Metric | Q2 2023 | Q2 2022 | 6M 2023 | 6M 2022 | | :-------------------------------- | :------: | :------: | :------: | :------: | | General corporate and other expenses | $27.8 | $25.6 | $53.2 | $47.3 | | % of Net Sales | 4.1% | 3.7% | 3.7% | 3.1% | - General corporate and other expenses increased by **$2.2 million** in Q2 FY2023 and **$5.9 million** for the six months, primarily due to higher mark-to-market expenses on deferred compensation plans and increased stock compensation[213](index=213&type=chunk) [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) - Energizer's primary future cash needs are for operating activities, working capital, strategic investments, and debt reductions, which are expected to be funded by cash from operations and access to capital markets[214](index=214&type=chunk) - As of March 31, 2023, the company had **$193.7 million** in cash and cash equivalents, with approximately **94%** held outside the U.S[215](index=215&type=chunk) - The company prepaid **$131.0 million** of the Term Loan and repurchased **$25.0 million** of Senior Notes in the first half of fiscal 2023. Subsequent to the quarter, an additional **$30.0 million** of the Term Loan was prepaid[219](index=219&type=chunk) [ Operating Activities](index=43&type=section&id=Operating%20Activities) - Cash flow from operating activities was **$210.2 million** for the six months ended March 31, 2023, a significant improvement from a cash use of **$108.7 million** in the prior year[221](index=221&type=chunk) - This **$318.9 million** change was primarily driven by working capital improvements, including **$107 million** from accounts receivable collections, **$174 million** less inventory investment, and **$30 million** from changes in accounts payable and accrued liabilities[221](index=221&type=chunk)[222](index=222&type=chunk) [ Investing Activities](index=43&type=section&id=Investing%20Activities) Net Cash Used by Investing Activities (Millions) | Metric | 6M 2023 | 6M 2022 | | :-------------------- | :------: | :------: | | Capital expenditures | $(18.7) | $(45.9) | | Proceeds from sale of assets | $0.7 | $0.1 | | Acquisitions, net | $— | $0.4 | | **Net cash used by investing activities** | **$(18.0)** | **$(45.4)** | - Net cash used by investing activities decreased to **$18.0 million** for the six months ended March 31, 2023, from **$45.4 million** in the prior year, mainly due to lower capital expenditures[221](index=221&type=chunk)[222](index=222&type=chunk) - Anticipated investing cash outflows for fiscal 2023 are **$55-65 million** for capital expenditures, including Project Momentum initiatives[222](index=222&type=chunk) [ Financing Activities](index=44&type=section&id=Financing%20Activities) Net Cash (Used by)/From Financing Activities (Millions) | Metric | 6M 2023 | 6M 2022 | | :-------------------------------- | :------: | :------: | | Payments on debt (>90 days) | $(152.9) | $(7.2) | | Net decrease in debt (<=90 days) | $(5.3) | $(102.2) | | Dividends paid on common stock | $(43.3) | $(42.8) | | Dividends paid on mandatory convertible preferred stock | $— | $(8.0) | | **Net cash (used by)/from financing activities** | **$(203.4)** | **$130.2** | - Net cash used by financing activities was **$203.4 million** for the six months ended March 31, 2023, a shift from **$130.2 million** generated in the prior year, primarily due to significant debt payments[223](index=223&type=chunk)[226](index=226&type=chunk) [ Dividends](index=44&type=section&id=Dividends) - The Board of Directors declared a cash dividend of **$0.30** per share of common stock for Q1, Q2, and Q3 of fiscal 2023[223](index=223&type=chunk) [ Share Repurchases](index=44&type=section&id=Share%20Repurchases) - The company has an authorization to acquire up to **7.5 million** shares of its common stock, with **5.0 million** shares remaining under this authorization[224](index=224&type=chunk) - Future share repurchases will be determined by the Board based on market conditions, capital allocation objectives, and other factors[225](index=225&type=chunk) [Other Matters](index=46&type=section&id=Other%20Matters) [ Environmental Matters](index=46&type=section&id=Environmental%20Matters) - Accrued environmental costs were **$14.1 million** at March 31, 2023. Total environmental capital expenditures and operating expenses are not expected to materially affect the company's financial position[229](index=229&type=chunk) [ Contractual Obligations](index=46&type=section&id=Contractual%20Obligations) - The company has long-term debt obligations of **$3,430.5 million**, with **$12.0 million** due within the next twelve months, and interest commitments of **$861.0 million**, with **$154.4 million** expected within the next twelve months[231](index=231&type=chunk) - Other material future obligations include a mandatory transition tax of **$16.7 million** (first payment of **$3.6 million** due Q2 FY2024) and purchase commitments of **$14.2 million** (**$8.4 million** due within twelve months)[232](index=232&type=chunk)[233](index=233&type=chunk) - Total future operating and finance lease payments are **$147.8 million** and **$67.4 million**, respectively, with **$19.4 million** and **$2.5 million** due within the next twelve months[235](index=235&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=44&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the company's exposure to market risks, including currency rates, commodity prices, and interest rates, and outlines its strategies for managing these risks through derivative instruments [ Derivatives Designated as Cash Flow Hedging Relationships](index=47&type=section&id=Derivatives%20Designated%20as%20Cash%20Flow%20Hedging%20Relationships) - The company uses forward currency contracts to hedge cash flow uncertainty from forecasted inventory purchases due to short-term currency fluctuations, primarily for Euro, British pound, Canadian dollar, and Australian dollar exposures[237](index=237&type=chunk)[238](index=238&type=chunk) - At March 31, 2023, Energizer had an unrealized pre-tax loss of **$0.7 million** on these forward currency contracts, expected to be recognized in earnings over the next 12 months[238](index=238&type=chunk) [ Derivatives Not Designated as Cash Flow Hedging Relationships](index=47&type=section&id=Derivatives%20Not%20Designated%20as%20Cash%20Flow%20Hedging%20Relationships) - Energizer enters into foreign currency derivative contracts not designated as cash flow hedges to hedge existing balance sheet exposures, with gains or losses expected to offset underlying exposures[239](index=239&type=chunk)[240](index=240&type=chunk) - These contracts resulted in a gain of **$0.1 million** for Q2 FY2023 and **$0.6 million** for the six months ended March 31, 2023, recorded in Other items, net[240](index=240&type=chunk) [ Commodity Price Exposure](index=47&type=section&id=Commodity%20Price%20Exposure) - The company uses hedging contracts on future zinc purchases to reduce exposure to price volatility, with contracts extending into fiscal 2024[241](index=241&type=chunk)[242](index=242&type=chunk) - At March 31, 2023, the pre-tax unrealized loss on zinc contracts was **$3.5 million**, included in Accumulated other comprehensive loss[242](index=242&type=chunk) [ Interest Rate Exposure](index=47&type=section&id=Interest%20Rate%20Exposure) - At March 31, 2023, Energizer had **$1,051.0 million** in variable rate debt under the 2020 Term Loan and Revolving Facility[243](index=243&type=chunk) - The 2020 Interest rate swap, with a notional value of **$700.0 million**, was amended in February 2023 to transition the fixed variable benchmark component from LIBOR to SOFR at **1.042%**[244](index=244&type=chunk)[245](index=245&type=chunk) - At March 31, 2023, an unrealized pre-tax gain of **$68.5 million** was recorded on the interest rate swap, and the weighted average interest rate on variable rate debt (inclusive of the swap) was **4.58%**[246](index=246&type=chunk) [ Argentina Currency Exposure and Hyperinflation](index=48&type=section&id=Argentina%20Currency%20Exposure%20and%20Hyperinflation) - Effective July 1, 2018, the financial statements of the Argentina subsidiary are consolidated under highly inflationary economy rules, requiring remeasurement into USD and reflecting exchange gains/losses from monetary assets/liabilities in current earnings[247](index=247&type=chunk) [Item 4. Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures as of March 31, 2023, and states that there have been no material changes to internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective as of March 31, 2023, providing reasonable assurance of accurate and timely reporting[248](index=248&type=chunk) - No material changes to the company's internal control over financial reporting occurred during the quarter ended March 31, 2023[249](index=249&type=chunk) PART II — OTHER INFORMATION [Item 1. Legal Proceedings](index=49&type=section&id=Item%201.%20Legal%20Proceedings) This section addresses the company's involvement in various legal proceedings, stating that while such matters arise in the ordinary course of business, the company does not anticipate any material adverse effects on its financial position, results of operations, or cash flows - The company is subject to various legal proceedings but believes that any resulting liability is not reasonably likely to be material to its financial position, results of operations, or cash flows, considering established accruals[250](index=250&type=chunk) [Item 1A. Risk Factors](index=49&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the detailed discussion of risk factors in the company's Annual Report on Form 10-K and confirms that no material changes have occurred since its filing - There have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended September 30, 2022[251](index=251&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=49&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports on the company's equity security purchases during the second quarter of fiscal 2023, indicating no purchases were made under publicly announced plans or programs during this period Issuer Purchases of Equity Securities (Q2 FY2023) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number That May Yet Be Purchased Under the Plans or Programs | | :-------------------- | :------------------------------: | :--------------------------: | :--------------------------------------------------------------------------: | :--------------------------------------------------------------------: | | January 1 - January 31 | — | — | — | 5,041,940 | | February 1 - February 28 | — | — | — | 5,041,940 | | March 1 - March 31 | — | — | — | 5,041,940 | | **Total** | **—** | **—** | **—** | **5,041,940** | - No equity securities were purchased by Energizer or its affiliates during the second quarter of fiscal 2023[253](index=253&type=chunk) [Item 6. Exhibits](index=49&type=section&id=Item%206.%20Exhibits) This section refers to the Exhibit Index for a comprehensive list of documents filed as exhibits to the Form 10-Q - A detailed list of exhibits is provided in the Exhibit Index[254](index=254&type=chunk) [EXHIBIT INDEX](index=50&type=section&id=EXHIBIT%20INDEX) This section provides a comprehensive list of all exhibits filed with the Form 10-Q, including articles of incorporation, bylaws, incentive plans, credit agreement amendments, and certifications - The Exhibit Index lists various documents, including the Third Amended and Restated Articles of Incorporation, Fourth Amended and Restated Bylaws, Energizer Holdings, Inc. 2023 Omnibus Incentive Plan, and Amendment No. 3 to the Amended and Restated Credit Agreement[257](index=257&type=chunk) [SIGNATURES](index=51&type=section&id=SIGNATURES) This section contains the official signature of the registrant, Energizer Holdings, Inc., by its Executive Vice President and Chief Financial Officer, affirming the submission of the report - The report is duly signed on behalf of Energizer Holdings, Inc. by John J. Drabik, Executive Vice President and Chief Financial Officer, on May 8, 2023[261](index=261&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________________________ FORM 10-Q _______________________________ (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2022 Or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-36837 ______________________________________________________ ...

Energizer Holdings, Inc. (NYSE:ENR) Q3 2022 Earnings Conference Call August 8, 2022 10:00 AM ET Company Participants Jackie Burwitz - Vice President, Investor Relations Mark LaVigne - President and CEO John Drabik - Chief Financial Officer Conference Call Participants Bill Chappell - Truist Securities Lauren Lieberman - Barclays Andrea Teixeira - JPMorgan Jason English - Goldman Sachs Robert Ottenstein - Evercore William Reuter - Bank of America Carla Casella - JPMorgan Operator Good morning. My name is Joe ...

Energizer Holdings, Inc. (NYSE:ENR) Q2 2022 Earnings Conference Call May 9, 2022 10:00 AM ET Company Participants Jackie Burwitz - Vice President, Investor Relations Mark LaVigne - President and CEO John Drabik - Chief Financial Officer Conference Call Participants Wendy Nicholson - Citi Bill Chappell - Truist Securities Andrea Teixeira - JPMorgan Lauren Lieberman - Barclays Javier Escalante - Evercore ISI William Reuter - Bank of America Carla Casella - JPMorgan Operator Good morning. My name is Gary, and ...

PART I — FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the company's unaudited condensed consolidated financial statements for the quarter ended December 31, 2021 [Consolidated Statements of Earnings and Comprehensive Income (Condensed)](index=4&type=section&id=Consolidated%20Statements%20of%20Earnings%20and%20Comprehensive%20Income%20(Condensed)) Consolidated Statements of Earnings and Comprehensive Income (Condensed) (In millions, except per share data) | Metric | Q4 2021 | Q4 2020 | | :--- | :--- | :--- | | Net sales | $846.3 | $848.6 | | Gross profit | $311.6 | $337.9 | | Earnings before income taxes | $76.5 | $87.3 | | Net earnings | $60.0 | $67.1 | | Net earnings attributable to common shareholders | $56.0 | $63.1 | | Basic net earnings per common share | $0.84 | $0.92 | | Diluted net earnings per common share | $0.83 | $0.91 | | Total comprehensive income | $78.7 | $69.5 | [Consolidated Balance Sheets (Condensed)](index=5&type=section&id=Consolidated%20Balance%20Sheets%20(Condensed)) Consolidated Balance Sheets (Condensed) (In millions) | Metric | Dec 31, 2021 | Sep 30, 2021 | | :--- | :--- | :--- | | Total current assets | $1,550.3 | $1,439.5 | | Total assets | $5,109.9 | $5,007.5 | | Total current liabilities | $1,015.5 | $946.4 | | Total liabilities | $4,700.5 | $4,651.8 | | Total shareholders' equity | $409.4 | $355.7 | | Total liabilities and shareholders' equity | $5,109.9 | $5,007.5 | [Consolidated Statements of Cash Flows (Condensed)](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20(Condensed)) Consolidated Statements of Cash Flows (Condensed) (In millions) | Metric | Q4 2021 | Q4 2020 | | :--- | :--- | :--- | | Net cash (used by)/from operating activities | $(54.6) | $76.3 | | Net cash used by investing activities | $(24.0) | $(74.8) | | Net cash from/(used by) financing activities | $61.4 | $(955.2) | | Net decrease in cash, cash equivalents, and restricted cash | $(17.7) | $(944.2) | | Cash, cash equivalents, and restricted cash, end of period | $221.2 | $305.6 | [Consolidated Statements of Shareholders' Equity (Condensed)](index=7&type=section&id=Consolidated%20Statements%20of%20Shareholders'%20Equity%20(Condensed)) Consolidated Statements of Shareholders' Equity (Condensed) (Amounts in millions) | Metric | Sep 30, 2021 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Shareholders' Equity | $355.7 | $409.4 | | Net earnings | — | $60.0 | | Dividends to common shareholders | — | $(20.1) | | Dividends to preferred shareholders | — | $(4.0) | | Other comprehensive income | — | $18.7 | [Notes to Consolidated (Condensed) Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20(Condensed)%20Financial%20Statements) [Description of Business and Basis of Presentation](index=8&type=section&id=(1)%20Description%20of%20Business%20and%20Basis%20of%20Presentation) - Energizer Holdings, Inc is a global manufacturer, marketer, and distributor of primary batteries, portable lights, and auto care products[20](index=20&type=chunk)[21](index=21&type=chunk)[22](index=22&type=chunk) - The financial statements are condensed and prepared in accordance with Article 10 of Regulation S-X, with segment disclosures recast as of October 1, 2021[24](index=24&type=chunk) - The Company adopted ASU 2019-12 Income Taxes (Topic 740) as of October 1, 2021, which did not materially impact the financial statements[25](index=25&type=chunk) [Revenue Recognition](index=8&type=section&id=(2)%20Revenue%20Recognition) - Revenue is primarily generated from finished product sales, recognized when control transfers to the customer, typically upon delivery or pickup[27](index=27&type=chunk) - Sales are distributed globally through various retail channels, including mass merchandisers, food, drug, convenience stores, and e-commerce[26](index=26&type=chunk) Net Sales by Products and Markets (In millions) | Category | Q4 2021 | Q4 2020 | | :--- | :--- | :--- | | **By Products:** | | | | Batteries | $701.7 | $708.7 | | Auto Care | $106.1 | $104.7 | | Lights | $38.5 | $35.2 | | **By Markets:** | | | | North America | $508.9 | $516.9 | | Modern Markets | $165.3 | $174.5 | | Developing Markets | $115.4 | $108.3 | | Distributors Markets | $56.7 | $48.9 | | **Total Net Sales** | **$846.3** | **$848.6** | [Acquisitions](index=9&type=section&id=(3)%20Acquisitions) - The Formulations Acquisition was completed on December 1, 2020, for a cash purchase price of **$51.2 million** to enhance innovation capabilities[34](index=34&type=chunk) - Acquisition and integration costs totaled **$16.5 million** in Q1 fiscal 2022, down from $18.3 million in Q1 fiscal 2021[42](index=42&type=chunk)[46](index=46&type=chunk) Formulations Acquisition Purchase Price Allocation (In millions) | Asset/Liability | Amount | | :--- | :--- | | Goodwill | $28.7 | | Other intangible assets, net | $20.5 | | Net assets acquired | $50.2 | [Restructuring](index=11&type=section&id=(4)%20Restructuring) - The 2019 restructuring program, focused on manufacturing and distribution network integration, was substantially completed by December 31, 2021[48](index=48&type=chunk) - A new 2020 restructuring program, aimed at reorganizing the global supply chain, was also substantially completed by December 31, 2021[49](index=49&type=chunk) Total Restructuring Related Expense (In millions) | Program | Q4 2021 | Q4 2020 | | :--- | :--- | :--- | | 2019 Restructuring Program | $3.9 | $6.6 | | 2020 Restructuring Program | $1.4 | $4.0 | | **Total** | **$5.3** | **$10.6** | [Earnings per share](index=14&type=section&id=(5)%20Earnings%20per%20share) - For Q4 2021, the conversion of Mandatory Convertible Preferred Stock (MCPS) was not dilutive, and mandatory preferred stock dividends were included in the dilution calculation[63](index=63&type=chunk) Basic and Diluted Earnings Per Share (In millions, except per share data) | Metric | Q4 2021 | Q4 2020 | | :--- | :--- | :--- | | Net earnings attributable to common shareholders | $56.0 | $63.1 | | Weighted average common shares outstanding - Basic | 66.8 | 68.5 | | Basic net earnings per common share | $0.84 | $0.92 | | Weighted average common shares outstanding - Diluted | 67.1 | 73.5 | | Diluted net earnings per common share | $0.83 | $0.91 | [Segments](index=15&type=section&id=(6)%20Segments) - As of October 1, 2021, Energizer changed its reportable operating segments from geographical to product groupings (Battery & Lights and Auto Care)[66](index=66&type=chunk) - Segment performance is evaluated based on segment operating profit, excluding general corporate expenses and other specified items[66](index=66&type=chunk) Net Sales and Segment Profit by Product Grouping (In millions) | Metric | Q4 2021 | Q4 2020 | | :--- | :--- | :--- | | **Net Sales:** | | | | Batteries & Lights | $740.2 | $743.9 | | Auto Care | $106.1 | $104.7 | | **Total Net Sales** | **$846.3** | **$848.6** | | **Segment Profit:** | | | | Batteries & Lights | $168.4 | $180.5 | | Auto Care | $(0.2) | $18.3 | | **Total Segment Profit** | **$168.2** | **$198.8** | [Goodwill and intangible assets](index=16&type=section&id=(7)%20Goodwill%20and%20intangible%20assets) - Goodwill and indefinite-lived intangible assets are not amortized but are evaluated annually for impairment, with balances recast for new segments[74](index=74&type=chunk) Goodwill by Segment (In millions) | Segment | Oct 1, 2021 | Dec 31, 2021 | | :--- | :--- | :--- | | Batteries & Lights | $900.3 | $900.7 | | Auto Care | $153.5 | $152.6 | | **Total** | **$1,053.8** | **$1,053.3** | Total Other Intangible Assets, Net (In millions) | Category | Dec 31, 2021 | Sep 30, 2021 | | :--- | :--- | :--- | | Total Amortizable intangible assets | $490.6 | $505.6 | | Trademarks and trade names - indefinite lived | $1,365.6 | $1,365.7 | | **Total Other intangible assets, net** | **$1,856.2** | **$1,871.3** | [Debt](index=17&type=section&id=(8)%20Debt) - The Company amended its Credit Agreement on December 31, 2021, increasing the 2020 Revolving Facility to **$500.0 million**[82](index=82&type=chunk) - As of December 31, 2021, the Company had **$182.5 million** outstanding under the 2020 Revolving Facility, with **$309.5 million** remaining available[84](index=84&type=chunk)[88](index=88&type=chunk) Long-Term Debt Details (In millions) | Debt Type | Dec 31, 2021 | Sep 30, 2021 | | :--- | :--- | :--- | | Senior Secured Term Loan Facility due 2027 | $1,191.0 | $1,194.0 | | 4.750% Senior Notes due 2028 | $600.0 | $600.0 | | 4.375% Senior Notes due 2029 | $800.0 | $800.0 | | 3.50% Senior Notes due 2029 (Euro Notes of €650.0) | $739.1 | $752.7 | | Capital lease obligations | $43.6 | $44.3 | | **Total long-term debt, including current maturities** | **$3,373.7** | **$3,391.0** | | Less current portion | $(14.2) | $(14.3) | | Less unamortized debt premium and debt issuance fees | $(41.2) | $(43.3) | | **Total long-term debt** | **$3,318.3** | **$3,333.4** | [Pension Plans](index=19&type=section&id=(9)%20Pension%20Plans) - The Company operates several defined benefit pension plans for U.S. and international employees, with the U.S. plan frozen in fiscal year 2014[94](index=94&type=chunk) Net Periodic Pension (Benefit)/Cost (In millions) | Component | Q4 2021 (U.S.) | Q4 2020 (U.S.) | Q4 2021 (International) | Q4 2020 (International) | | :--- | :--- | :--- | :--- | :--- | | Service cost | $— | $— | $0.2 | $0.2 | | Interest cost | $3.2 | $3.2 | $0.5 | $0.4 | | Expected return on plan assets | $(5.7) | $(5.5) | $(0.8) | $(0.8) | | Amortization of unrecognized net losses | $1.6 | $1.8 | $0.1 | $0.4 | | **Net periodic (benefit)/cost** | **$(0.9)** | **$(0.5)** | **$—** | **$0.2** | [Shareholders' Equity](index=19&type=section&id=(10)%20Shareholders'%20Equity) - An Accelerated Share Repurchase (ASR) program in Q4 fiscal 2021 resulted in the delivery of approximately **2.0 million shares** at an average price of **$38.30**[96](index=96&type=chunk)[97](index=97&type=chunk) - Common stock dividends declared were **$0.30 per share** for Q1 and Q2 fiscal 2022[101](index=101&type=chunk)[103](index=103&type=chunk) - Subsequent to the quarter, all outstanding MCPS automatically converted into approximately **4.7 million shares** of common stock[104](index=104&type=chunk) [Financial Instruments and Risk Management](index=20&type=section&id=(11)%20Financial%20Instruments%20and%20Risk%20Management) - The Company uses derivatives to manage market risks from currency rates, interest rates, and commodity prices, not for speculative purposes[106](index=106&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk)[111](index=111&type=chunk)[115](index=115&type=chunk) - As of December 31, 2021, the Company had variable rate debt of **$1,373.5 million**, with an interest rate swap fixing LIBOR at **0.95%** on a notional value of **$700.0 million**[115](index=115&type=chunk)[116](index=116&type=chunk) Estimated Fair Values of Derivatives Designated as Cash Flow Hedges (In millions) | Derivative Type | Dec 31, 2021 (Asset) | Sep 30, 2021 (Asset) | | :--- | :--- | :--- | | Foreign currency contracts | $3.7 | $5.0 | | Interest rate swap | $17.0 | $11.7 | | Zinc contracts | $5.1 | $4.7 | | **Total** | **$25.8** | **$21.4** | [Accumulated Other Comprehensive (Loss)/Income](index=24&type=section&id=(12)%20Accumulated%20Other%20Comprehensive%20(Loss)%2FIncome) Changes in Accumulated Other Comprehensive (Loss)/Income (AOCI) (In millions) | Component | Sep 30, 2021 Balance | OCI before Reclassifications | Reclassifications to Earnings | Dec 31, 2021 Balance | | :--- | :--- | :--- | :--- | :--- | | Foreign Currency Translation Adjustments | $(109.8) | $12.3 | $— | $(97.5) | | Pension Activity | $(134.4) | $(0.1) | $— | $(133.2) | | Zinc Contracts | $3.6 | $2.3 | $(2.0) | $3.9 | | Foreign Currency Contracts | $3.6 | $0.9 | $(0.8) | $3.7 | | Interest Rate Contracts | $6.6 | $3.4 | $1.4 | $11.4 | | **Total** | **$(230.4)** | **$18.8** | **$(0.1)** | **$(211.7)** | Reclassifications out of AOCI to Earnings (In millions) | AOCI Component | Q4 2021 Amount | Q4 2020 Amount | Affected Line Item | | :--- | :--- | :--- | :--- | | Foreign currency contracts | $(1.0) | $2.6 | Cost of products sold | | Interest rate contracts | $1.8 | $1.3 | Interest expense | | Zinc contracts | $(2.6) | $0.8 | Cost of products sold | | Amortization of defined benefit pension actuarial loss | $1.7 | $2.2 | Other items, net (not shown in table) | [Supplemental Financial Statement Information](index=25&type=section&id=(13)%20Supplemental%20Financial%20Statement%20Information) Other Items, Net (In millions) | Component | Q4 2021 | Q4 2020 | | :--- | :--- | :--- | | Interest income | $(0.2) | $(0.1) | | Foreign currency exchange loss | $1.3 | $1.3 | | Pension benefit other than service costs | $(1.1) | $(0.5) | | Other | $0.2 | $0.1 | | **Total Other items, net** | **$0.2** | **$0.8** | Inventories (In millions) | Component | Dec 31, 2021 | Sep 30, 2021 | | :--- | :--- | :--- | | Raw materials and supplies | $138.8 | $118.8 | | Work in process | $208.3 | $206.3 | | Finished products | $408.8 | $403.2 | | **Total inventories** | **$755.9** | **$728.3** | Other Current Liabilities (In millions) | Component | Dec 31, 2021 | Sep 30, 2021 | | :--- | :--- | :--- | | Accrued advertising, sales promotion and allowances | $31.5 | $19.5 | | Accrued trade allowances | $75.7 | $57.3 | | Accrued salaries, vacations and incentive compensation | $31.3 | $65.4 | | Accrued interest expense | $11.4 | $16.5 | | Restructuring reserve | $2.2 | $5.7 | | Income taxes payable | $48.3 | $30.3 | | Other | $182.2 | $162.1 | | **Total other current liabilities** | **$382.6** | **$356.8** | [Legal proceedings/contingencies and other obligations](index=26&type=section&id=(14)%20Legal%20proceedings%2Fcontingencies%20and%20other%20obligations) - The Company is subject to various legal proceedings, with current liabilities not deemed material to its financial position or results[146](index=146&type=chunk)[149](index=149&type=chunk) - As of December 31, 2021, the Company had approximately **$33.2 million** in purchase obligations under supply and service contracts[150](index=150&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition, operating results, and liquidity, covering performance, risks, and non-GAAP measures [Forward-Looking Statements](index=28&type=section&id=Forward-Looking%20Statements) - The document contains forward-looking statements reflecting expectations about future results, sales, margins, costs, and earnings[154](index=154&type=chunk) - These statements are subject to risks including economic conditions, competition, COVID-19 impacts, and supply chain disruptions[154](index=154&type=chunk) [Non-GAAP Financial Measures](index=29&type=section&id=Non-GAAP%20Financial%20Measures) - Management uses non-GAAP financial measures to provide meaningful comparisons by excluding items not reflective of ongoing operations[158](index=158&type=chunk) - Key non-GAAP measures include Segment Profit, Adjusted Net Earnings, Adjusted Diluted EPS, and Organic sales[160](index=160&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk) [COVID-19](index=30&type=section&id=COVID-19) - The COVID-19 pandemic continued to pose significant risks in Q1 fiscal 2022, impacting demand and disrupting the global supply chain[166](index=166&type=chunk)[167](index=167&type=chunk) - The Company faced higher operating costs due to elevated commodity prices and unprecedented transportation cost pressures[168](index=168&type=chunk) - Labor availability remains a major challenge across most U.S. sites, leading to increased investment in incremental safety stock[169](index=169&type=chunk) [Acquisition and Integration Costs](index=31&type=section&id=Acquisition%20and%20Integration%20Costs) - SG&A expenses for Q4 2021 were primarily driven by integration of acquired IT systems, consulting costs, and retention-related compensation[175](index=175&type=chunk) Pre-tax Acquisition and Integration Costs (In millions) | Expense Category | Q4 2021 | Q4 2020 | | :--- | :--- | :--- | | Costs of products sold | $6.0 | $7.7 | | Selling, general and administrative expense | $9.4 | $10.4 | | Research and development expense | $1.1 | $0.1 | | Other items, net | $— | $0.1 | | **Total** | **$16.5** | **$18.3** | [Restructuring Costs](index=31&type=section&id=Restructuring%20Costs) - Both the 2019 and 2020 restructuring programs were substantially completed by December 31, 2021[177](index=177&type=chunk)[178](index=178&type=chunk) - The Company expects to achieve estimated total cost savings of **$55 million to $60 million** by the end of the current fiscal year[182](index=182&type=chunk) Total Pre-tax Restructuring Expense (In millions) | Period | Q4 2021 | Q4 2020 | | :--- | :--- | :--- | | Total | $5.3 | $10.6 | [Highlights / Operating Results](index=32&type=section&id=Highlights%20%2F%20Operating%20Results) - Net sales decreased by **$2.3 million (0.3%)** YoY, as pricing actions were offset by unfavorable currency impacts and lapping prior-year demand[188](index=188&type=chunk)[189](index=189&type=chunk)[190](index=190&type=chunk) - Adjusted gross margin percentage decreased by **320 basis points** YoY, driven by higher operating and transportation costs[191](index=191&type=chunk)[193](index=193&type=chunk) Key Financial Results (In millions, except per share data) | Metric | Q4 2021 | Q4 2020 | | :--- | :--- | :--- | | Net earnings | $60.0 | $67.1 | | Diluted net earnings per common share | $0.83 | $0.91 | | Adjusted diluted net earnings per common share | $1.03 | $1.17 | | Total Net sales | $846.3 | $848.6 | | Reported Gross margin percentage | 36.8% | 39.8% | | Adjusted Gross margin percentage | 37.5% | 40.7% | | Selling, general, and administrative expense (SG&A) | $122.1 | $124.1 | | Adjusted SG&A | $111.6 | $113.7 | | Advertising and sales promotion expense (A&P) | $51.7 | $49.6 | | Research and Development (R&D) | $8.9 | $7.6 | | Interest expense | $37.0 | $47.3 | | Loss on extinguishment of debt | $— | $5.7 | | Effective tax rate | 21.6% | 23.1% | | Adjusted effective tax rate | 21.6% | 22.6% | [Segment Results](index=35&type=section&id=Segment%20Results) - Battery & Lights organic net sales declined by **0.2%** due to an expected decrease in battery demand compared to strong prior-year sales[202](index=202&type=chunk)[203](index=203&type=chunk) - Auto Care net sales increased by **1.3%** YoY, driven by new distribution and price increases[202](index=202&type=chunk)[205](index=205&type=chunk) - Global reported segment profit decreased by **15.4%** YoY, with organic operating profit declining by **17.3%** due to lower sales and higher costs[207](index=207&type=chunk) - Auto Care segment profit decreased significantly due to increased product input costs negatively impacting gross margin[208](index=208&type=chunk) Segment Profit Change (In millions) | Segment | Q4 2021 Change | Q4 2021 % Change | | :--- | :--- | :--- | | Batteries & Lights | $(12.1) | (6.7)% | | Auto Care | $(18.5) | (101.1)% | | **Total Segment Profit** | **$(30.6)** | **(15.4)%** | [General Corporate](index=37&type=section&id=General%20Corporate) - The decrease in general corporate expenses was primarily driven by reduced stock compensation expense, partially offset by higher IT spending[210](index=210&type=chunk) General Corporate and Other Expenses (In millions) | Metric | Q4 2021 | Q4 2020 | | :--- | :--- | :--- | | General corporate and other expenses | $21.7 | $24.0 | | % of Net Sales | 2.6% | 2.8% | [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) - Future cash needs will focus on operating activities, strategic investments, and debt reductions, funded by operations and capital markets[211](index=211&type=chunk) - As of December 31, 2021, the Company had **$221.2 million** in cash and cash equivalents, with approximately **98%** held outside the U.S[212](index=212&type=chunk)[213](index=213&type=chunk) - The Company was in compliance with all debt covenants as of December 31, 2021, and expects to remain so for the next twelve months[215](index=215&type=chunk) [Operating Activities](index=37&type=section&id=Operating%20Activities) - The **$130.9 million** decrease in cash flow from operating activities was primarily driven by a **$109 million** change in working capital[216](index=216&type=chunk) - Despite negative cash flow from operations in the quarter, the Company anticipates positive cash flow for the full fiscal year 2022[218](index=218&type=chunk) Cash Flow from Operating Activities (In millions) | Metric | Q4 2021 | Q4 2020 | | :--- | :--- | :--- | | Net cash (used by)/from operating activities | $(54.6) | $76.3 | [Investing Activities](index=38&type=section&id=Investing%20Activities) - Total investing cash outflows of **$55 million to $65 million** are anticipated for capital expenditures in fiscal 2022[220](index=220&type=chunk) Net Cash Used by Investing Activities (In millions) | Metric | Q4 2021 | Q4 2020 | | :--- | :--- | :--- | | Net cash used by investing activities | $(24.0) | $(74.8) | | Capital expenditures | $(24.4) | $(8.4) | | Acquisitions, net of cash acquired and working capital settlements | $0.4 | $(66.4) | [Financing Activities](index=38&type=section&id=Financing%20Activities) - Q4 2021 financing activities included a **$94.2 million** net increase in short-term debt and **$2.5 million** in debt issuance costs[221](index=221&type=chunk) - Q4 2020 financing activities were significantly impacted by debt refinancing, including **$550.0 million** in debt issuance and **$1,383.3 million** in payments[222](index=222&type=chunk)[224](index=224&type=chunk) Net Cash from/(used by) Financing Activities (In millions) | Metric | Q4 2021 | Q4 2020 | | :--- | :--- | :--- | | Net cash from/(used by) financing activities | $61.4 | $(955.2) | | Net increase in debt with original maturities of 90 days or less | $94.2 | $1.2 | | Dividends paid on common stock | $(20.5) | $(22.7) | | Dividends paid on mandatory convertible preferred stock | $(4.0) | $(4.0) | | Common stock purchased | $— | $(21.3) | [Dividends](index=40&type=section&id=Dividends) - The Board declared a cash dividend of **$0.30 per common share** for Q1 and Q2 fiscal 2022, with all MCPS subsequently converting to common stock[225](index=225&type=chunk)[226](index=226&type=chunk) [Share Repurchases](index=40&type=section&id=Share%20Repurchases) - An Accelerated Share Repurchase (ASR) program in Q4 fiscal 2021 resulted in the acquisition of approximately **2.0 million shares** at an average price of **$38.30**[227](index=227&type=chunk) - Future share repurchases will be determined by the Board based on market conditions and capital allocation objectives[228](index=228&type=chunk)[229](index=229&type=chunk) [Other Matters](index=41&type=section&id=Other%20Matters) [Environmental Matters](index=41&type=section&id=Environmental%20Matters) - Accrued environmental costs were **$9.5 million** at December 31, 2021, and are not expected to materially affect the Company's financial position[231](index=231&type=chunk) [Contractual Obligations](index=41&type=section&id=Contractual%20Obligations) - The Company has long-term debt obligations of **$3,330.1 million**, with **$12.0 million** due within the next twelve months[233](index=233&type=chunk) - Material future purchase commitments for goods and services total **$33.2 million**[235](index=235&type=chunk) - Total future operating and finance lease payments are **$165.0 million** and **$84.0 million**, respectively[237](index=237&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the company's exposure to currency, commodity, and interest rate risks and its strategies for managing them [Market Risk Sensitive Instruments and Positions](index=41&type=section&id=Market%20Risk%20Sensitive%20Instruments%20and%20Positions) - The Company's market risk arises from potential losses due to adverse changes in currency rates, commodity prices, and interest rates[238](index=238&type=chunk) [Derivatives Designated as Cash Flow Hedging Relationships](index=42&type=section&id=Derivatives%20Designated%20as%20Cash%20Flow%20Hedging%20Relationships) - Energizer uses forward currency contracts to hedge cash flow uncertainty from forecasted inventory purchases[241](index=241&type=chunk) - Unrealized pre-tax gains on these forward currency contracts were **$3.7 million** at December 31, 2021[241](index=241&type=chunk) [Derivatives Not Designated as Cash Flow Hedging Relationships](index=42&type=section&id=Derivatives%20Not%20Designated%20as%20Cash%20Flow%20Hedging%20Relationships) - Foreign currency derivative contracts not designated as cash flow hedges are used to hedge existing balance sheet exposures[243](index=243&type=chunk) - The change in fair value of these contracts resulted in a **$1.9 million gain** in Q4 2021, compared to a **$0.9 million loss** in Q4 2020[243](index=243&type=chunk) [Commodity Price Exposure](index=42&type=section&id=Commodity%20Price%20Exposure) - The Company uses zinc contracts to reduce exposure to cash flow variability from future zinc purchases[244](index=244&type=chunk)[245](index=245&type=chunk) - The pre-tax unrealized gain on zinc contracts was **$5.1 million** at December 31, 2021[245](index=245&type=chunk) [Interest Rate Exposure](index=42&type=section&id=Interest%20Rate%20Exposure) - Energizer has interest rate risk on its variable rate debt, which totaled **$1,373.5 million** at December 31, 2021[246](index=246&type=chunk) - An interest rate swap fixed the variable benchmark component (LIBOR) at **0.95%** on **$700.0 million** of variable rate debt[248](index=248&type=chunk)[249](index=249&type=chunk) - For Q4 2021, the weighted average interest rate on variable rate debt, inclusive of the interest rate swap, was **2.94%**[249](index=249&type=chunk) [Argentina Currency Exposure and Hyperinflation](index=43&type=section&id=Argentina%20Currency%20Exposure%20and%20Hyperinflation) - Effective July 1, 2018, Argentina's economy was designated as highly inflationary, requiring financial statements to be remeasured into U.S. dollars[250](index=250&type=chunk) - The ongoing impact of highly inflationary accounting is difficult to determine as it depends on exchange rate movements[250](index=250&type=chunk) [Item 4. Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of December 31, 2021[251](index=251&type=chunk) - No material changes to the Company's internal control over financial reporting occurred during the quarter ended December 31, 2021[252](index=252&type=chunk) PART II — OTHER INFORMATION [Item 1. Legal Proceedings](index=44&type=section&id=Item%201.%20Legal%20Proceedings) The company addresses its involvement in legal proceedings, concluding that potential liabilities are not expected to be material - The Company is party to legal proceedings and claims in various jurisdictions, with accruals established for probable and estimable losses[254](index=254&type=chunk) - Based on current information, any liability from pending legal claims is not reasonably likely to be material to the Company's financial position[254](index=254&type=chunk) [Item 1A. Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) This section notes no material changes to the risk factors disclosed in the company's most recent Annual Report on Form 10-K - There have been no material changes to the risk factors previously discussed in the Company's Annual Report on Form 10-K filed on November 16, 2021[255](index=255&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports on the company's equity security purchases during the first quarter of fiscal 2022 - The Company acquired **450,522 shares** in Q1 fiscal 2022 as part of the **$75.0 million** Accelerated Share Repurchase (ASR) program[258](index=258&type=chunk) - **58,059 shares** were purchased during the quarter to satisfy tax withholding obligations related to restricted stock vesting[258](index=258&type=chunk) Purchases of Equity Securities (Q1 Fiscal 2022) | Period | Total Number of Shares Purchased | Average Price Per Share | | :--- | :--- | :--- | | October 1 - October 31 | 140 | $39.64 | | November 1 - November 30 | 508,441 | $33.93 | | December 1 - December 31 | — | — | | **Total** | **508,581** | **$33.93** | [Item 6. Exhibits](index=44&type=section&id=Item%206.%20Exhibits) This section provides an index of exhibits filed with the Form 10-Q, including corporate governance and credit agreement documents - The exhibit index lists various documents, including corporate governance documents, credit agreements, and amendments[261](index=261&type=chunk) - It also includes certifications of periodic financial reports by the CEO and CFO pursuant to the Sarbanes-Oxley Act of 2002[261](index=261&type=chunk)

Financial Data and Key Metrics Changes - The company reported revenue of $846 million for Q1 2022, which was roughly flat compared to the prior year on an organic basis [9][22] - Adjusted gross margin decreased by 320 basis points to 37.5% compared to Q1 2021, primarily due to inflationary cost pressures [10][24] - Adjusted earnings per share for the quarter were $1.03, partially offsetting the gross margin decline [10] Business Line Data and Key Metrics Changes - The Battery category experienced a modest decline in organic sales, while Auto Care showed organic growth of 1.3% [22] - The Battery category grew by 9.7% in value and 7.8% in volume on a two-year stack basis, but saw a decline of 3.5% in value and 8.4% in volume in the three months ending November 2021 [12] - The Auto Care category value increased by 9% year-over-year and 20.6% on a two-year stack basis, driven by changing consumer behavior [14][15] Market Data and Key Metrics Changes - The company noted that the macro environment remains challenging, with rising costs in commodities, transportation, and labor impacting operations [16][30] - The company anticipates flat to low-single-digit growth in category value for the Battery segment moving forward [13] Company Strategy and Development Direction - The company is taking aggressive actions to offset rising costs, including additional pricing actions and cost containment measures [8][34] - The focus remains on gross margin recovery and continuous improvement initiatives to offset inflationary pressures [60][70] Management's Comments on Operating Environment and Future Outlook - Management reaffirmed the outlook for net sales, adjusted earnings per share, and adjusted EBITDA for the full year, despite the challenging operating environment [8][35] - The company expects to operate with elevated safety stock for the foreseeable future due to ongoing supply chain disruptions [19] Other Important Information - The segment reporting has changed from geographical segments to product line segments, now categorized as Battery and Lighting Products and Auto Care [21] - The company completed an accelerated share repurchase program, purchasing nearly 2 million shares [29] Q&A Session Summary Question: Can you provide more detail on gross margin progression through the year? - Management indicated that pricing actions will be effective in the second quarter, with expectations for gross margin recovery in the back half of the year [36][41] Question: What are the competitive dynamics regarding pricing? - The company noted that competitive products, including private labels, are experiencing price increases in line with branded products due to inflation [46] Question: How is the company positioned for future acquisitions? - Management stated that M&A is of reduced interest at the moment due to leverage levels, with a focus on gross margin recovery first [60] Question: What is the outlook for the Auto Care segment? - Management expressed confidence in the Auto Care segment, citing healthy demand driven by an increasing number of vehicles and miles driven [63] Question: What percentage of the U.S. business is e-commerce? - The company indicated that approximately 17% of the Battery category goes through online sales, although specific breakdowns were not provided [77]

Part I [Business](index=4&type=section&id=Item%201.%20Business) Energizer is a global manufacturer of household products, including batteries and auto care, serving diverse retail channels and subject to regulations - Energizer is a global diversified household products company specializing in **batteries, auto care, and portable lights**, with well-known brands[14](index=14&type=chunk)[18](index=18&type=chunk)[19](index=19&type=chunk) - Wal-Mart Stores, Inc. accounted for **13.7% of annual sales** in fiscal year 2021, making it the largest customer[26](index=26&type=chunk) - As of September 30, 2021, the company employed approximately **6,000 people** across 38 countries[35](index=35&type=chunk) - Operations are subject to significant governmental regulations, including environmental rules and scrutiny over components like **refrigerant R-134a**[55](index=55&type=chunk)[56](index=56&type=chunk) [Risk Factors](index=9&type=section&id=Item%201A.%20Risk%20Factors) The company faces material risks from intense competition, retail changes, supply chain disruptions, international operations, substantial debt, and increasing regulatory scrutiny - Intense competition from consumer product companies could hinder profitability and customer relationships[74](index=74&type=chunk)[76](index=76&type=chunk) - Changes in the retail landscape and consumer preferences could negatively impact sales and margins[79](index=79&type=chunk) - The COVID-19 pandemic presents ongoing operational challenges, including supply chain disruptions and **$6 million in incremental costs** in fiscal 2021[81](index=81&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk) - Over **40% of fiscal 2021 sales** from foreign countries expose the company to international risks like currency fluctuations and trade policy changes[97](index=97&type=chunk) - Significant debt obligations, totaling approximately **$3.5 billion** as of September 30, 2021, could adversely affect the business[137](index=137&type=chunk) [Unresolved Staff Comments](index=27&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the Securities and Exchange Commission - None[189](index=189&type=chunk) [Properties](index=27&type=section&id=Item%202.%20Properties) The company's principal executive office is in St. Louis, Missouri, with numerous manufacturing and distribution facilities globally - The company's principal executive office is located in **St. Louis, Missouri**[190](index=190&type=chunk) - Energizer operates principal manufacturing, packaging, and distribution facilities across the Americas and internationally[191](index=191&type=chunk) [Legal Proceedings](index=27&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various legal proceedings, but management does not expect a material adverse effect on its financial position - The company is party to various legal proceedings arising in the normal course of business but does not expect them to have a material adverse effect on its financial condition or results of operations[193](index=193&type=chunk) [Mine Safety Disclosure](index=27&type=section&id=Item%204.%20Mine%20Safety%20Disclosure) This section is not applicable to the company's operations - None[196](index=196&type=chunk) [Information About Our Executive Officers](index=28&type=section&id=Item%204A.%20Information%20About%20Our%20Executive%20Officers) This section provides biographical information for Energizer's key executive officers as of November 16, 2021 - **Mark S. LaVigne** serves as President and Chief Executive Officer[196](index=196&type=chunk) - **John J. Drabik** was appointed Executive Vice President, Chief Financial Officer effective October 1, 2021[198](index=198&type=chunk) Part II [Market for Registrant's Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities](index=29&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%20and%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Energizer's common stock trades on the NYSE, with the company repurchasing shares and paying dividends, as detailed in its performance graph - The company's common stock is listed on the New York Stock Exchange under the symbol **"ENR"**[202](index=202&type=chunk) Issuer Purchases of Equity Securities (Shares, USD) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number That May Yet Be Purchased Under the Plans or Programs | | :--- | :--- | :--- | :--- | :--- | | July 1, 2021 - July 31, 2021 | 116 | $43.21 | — | 7,000,000 | | August 1, 2021 - August 31, 2021 | — | — | 1,507,538 | 5,492,462 | | September 1, 2021 - September 30, 2021 | 49 | $38.18 | — | 5,492,462 | | Total | 165 | $41.72 | — | 5,492,462 | - In Q4 2021, the company initiated a **$75.0 million accelerated share repurchase (ASR) program**, delivering approximately **1.5 million shares** in August 2021[204](index=204&type=chunk) Cumulative Total Shareholder Return (Index) | | 9/30/16 | 9/30/17 | 9/30/18 | 9/30/19 | 9/30/20 | 9/30/21 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Energizer Holdings, Inc. | 100.0 | 94.4 | 122.8 | 93.8 | 86.4 | 88.6 | | Midcap 400 | 100.0 | 117.5 | 134.2 | 130.9 | 128.0 | 184.0 | | Household Products | 100.0 | 102.9 | 100.0 | 140.1 | 160.2 | 160.0 | [Reserved](index=31&type=section&id=Item%206.%20Reserved) This item is reserved and contains no information - None [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition and results for fiscal 2021, covering sales growth, margin decline, liquidity, and debt management [Overview](index=36&type=section&id=Overview) Energizer is a global leader in household batteries, lighting, and automotive care, operating through Americas and International segments - Energizer is a leading global manufacturer and distributor of **household batteries, lighting, and automotive care products**[251](index=251&type=chunk) - Operations are managed through two major geographic segments: **Americas and International**[260](index=260&type=chunk) [Financial Results](index=37&type=section&id=Financial%20Results) Net earnings from continuing operations significantly increased in fiscal 2021 to $160.9 million, or $2.11 per diluted share Summary of Financial Results (Millions USD, except per share data) | (in millions, except per share data) | FY 2021 | FY 2020 | FY 2019 | | :--- | :--- | :--- | :--- | | **Net earnings from continuing operations** | **$160.9** | **$46.8** | **$64.7** | | Diluted net earnings per common share - continuing operations | $2.11 | $0.44 | $0.78 | | **Adjusted net earnings from continuing operations** | **$255.4** | **$176.8** | **$216.1** | | Adjusted diluted net earnings per diluted share - continuing operations | $3.48 | $2.31 | $3.00 | [Operating Results](index=39&type=section&id=Operating%20Results) Fiscal 2021 saw net sales increase by 10.1% to $3,021.5 million, driven by organic growth, despite a decline in gross margin due to higher input costs Net Sales and Organic Growth (Millions USD) | (in millions) | FY 2021 | % Change | FY 2020 | | :--- | :--- | :--- | :--- | | Net sales | $3,021.5 | 10.1% | $2,744.8 | | Organic Growth | $200.5 | 7.3% | $61.4 | - Gross margin for fiscal 2021 was **38.4%**, a **100 basis point decrease** from the prior year, primarily due to higher input costs[278](index=278&type=chunk) - Adjusted SG&A as a percent of sales improved to **14.7%** in fiscal 2021 from **16.2%** in fiscal 2020, driven by synergy realization[281](index=281&type=chunk)[283](index=283&type=chunk) - Interest expense decreased to **$161.8 million** in fiscal 2021 from **$195.0 million** in fiscal 2020 due to debt refinancing[289](index=289&type=chunk) - The company recorded a **$103.3 million loss** on extinguishment of debt in fiscal 2021 due to refinancing transactions[291](index=291&type=chunk) [Segment Results](index=43&type=section&id=Segment%20Results) In fiscal 2021, Americas segment net sales grew 9.3% and profit increased 13.1%, while International net sales grew 12.0% but profit decreased organically Segment Net Sales (Millions USD) | (in millions) | FY 2021 | % Change | FY 2020 | | :--- | :--- | :--- | :--- | | **Americas Net Sales** | **$2,155.3** | **9.3%** | **$1,971.2** | | Organic Growth | $155.5 | 7.9% | $69.8 | | **International Net Sales** | **$866.2** | **12.0%** | **$773.6** | | Organic Growth | $45.0 | 5.8% | ($8.4) | Segment Profit (Millions USD) | (in millions) | FY 2021 | % Change | FY 2020 | | :--- | :--- | :--- | :--- | | **Americas Segment Profit** | **$563.8** | **13.1%** | **$498.5** | | Organic Growth | $61.3 | 12.3% | $14.8 | | **International Segment Profit** | **$163.3** | **4.8%** | **$155.8** | | Organic Growth | ($10.9) | (7.0)% | ($22.4) | [Liquidity and Capital Resources](index=47&type=section&id=Liquidity%20and%20Capital%20Resources) Cash flow from operations decreased to $179.7 million in fiscal 2021, while financing activities used $1,069.1 million for debt and share repurchases - Cash flow from operating activities was **$179.7 million** in fiscal 2021, a **$209.6 million decrease** from the prior year, primarily due to increased inventory investment[327](index=327&type=chunk)[328](index=328&type=chunk)[329](index=329&type=chunk) - Net cash used by investing activities was **$126.4 million**, including **$64.9 million in capital expenditures** and **$67.2 million for acquisitions**[331](index=331&type=chunk) - Net cash used by financing activities was **$1,069.1 million**, reflecting debt refinancing, **$96.3 million in treasury stock purchases**, and dividend payments[335](index=335&type=chunk)[338](index=338&type=chunk) - As of September 30, 2021, the company had **$238.9 million in cash** and **$287.3 million available** under its revolving credit facility[322](index=322&type=chunk)[325](index=325&type=chunk) [Critical Accounting Policies](index=51&type=section&id=Critical%20Accounting%20Policies) Critical accounting policies involve significant management judgment and estimates in areas such as revenue recognition, pension plans, goodwill, and income taxes - Critical accounting policies involve significant management judgment and estimates in areas such as **revenue recognition, pension benefits, goodwill, and income taxes**[357](index=357&type=chunk) - Revenue recognition involves estimating variable consideration for trade promotions based on historical patterns and future expectations[360](index=360&type=chunk) - Valuation of goodwill and intangible assets requires significant estimates for growth and discount rates, with annual impairment testing[366](index=366&type=chunk)[368](index=368&type=chunk)[370](index=370&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=54&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks from currency rates, commodity prices, and interest rates, using derivatives to hedge these exposures - The company is exposed to market risks from **currency rates, commodity prices, and interest rates**, utilizing derivatives for hedging purposes[379](index=379&type=chunk)[381](index=381&type=chunk) - Approximately **40% of fiscal 2021 sales** from foreign countries create significant currency exposure, particularly to major currencies[382](index=382&type=chunk)[383](index=383&type=chunk) - As of September 30, 2021, the company had **$1,299.0 million in variable rate debt** and used an interest rate swap to fix the LIBOR component on **$700.0 million** notional amount[390](index=390&type=chunk)[391](index=391&type=chunk) [Financial Statements and Supplementary Data](index=57&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements and the independent auditor's unqualified opinion, highlighting revenue recognition as a critical audit matter - PricewaterhouseCoopers LLP issued an **unqualified opinion** on the consolidated financial statements and internal control over financial reporting as of September 30, 2021[401](index=401&type=chunk) - The critical audit matter identified was **Revenue Recognition** related to trade promotion programs, due to significant management judgment[409](index=409&type=chunk)[410](index=410&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=109&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) This section is not applicable - Not applicable[731](index=731&type=chunk) [Controls and Procedures](index=109&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of September 30, 2021 - Management concluded that the company's **disclosure controls and procedures were effective** as of September 30, 2021[732](index=732&type=chunk) - Management determined that the company's **internal control over financial reporting was effective** as of September 30, 2021[734](index=734&type=chunk) [Other Information](index=109&type=section&id=Item%209B.%20Other%20Information) This section is not applicable - Not applicable[737](index=737&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=109&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This section is not applicable - Not applicable[738](index=738&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=110&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2022 Proxy Statement - Information regarding **directors, executive officers, and corporate governance** is incorporated by reference from the company's Proxy Statement[741](index=741&type=chunk) [Executive Compensation](index=110&type=section&id=Item%2011.%20Executive%20Compensation) Information concerning director and executive compensation is incorporated by reference from the 2022 Proxy Statement - Information regarding **executive compensation** is incorporated by reference from the company's Proxy Statement[742](index=742&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=110&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership and equity compensation plans is incorporated by reference from the 2022 Proxy Statement - Information regarding **security ownership** is incorporated by reference from the company's Proxy Statement[743](index=743&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=110&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related party transactions and director independence is incorporated by reference from the 2022 Proxy Statement - Information regarding **certain relationships, related transactions, and director independence** is incorporated by reference from the company's Proxy Statement[744](index=744&type=chunk) [Principal Accountant Fees and Services](index=110&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the 2022 Proxy Statement - Information regarding **principal accountant fees and services** is incorporated by reference from the company's Proxy Statement[745](index=745&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=112&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits filed with the Form 10-K, including certifications by the CEO and CFO - This item lists all **financial statements, schedules, and exhibits** filed with the Form 10-K[748](index=748&type=chunk) [Form 10-K Summary](index=117&type=section&id=Item%2016.%20Form%2010-K%20Summary) No Form 10-K summary is provided - None[761](index=761&type=chunk)

Financial Data and Key Metrics Changes - The company achieved over $3 billion in net sales for the first time, with a 10.1% increase in net sales for fiscal 2021, and organic sales growth of 7.3% [8][26] - Adjusted earnings per share increased by 51% to $3.48, while adjusted EBITDA rose by 10% [27] - Adjusted gross margin decreased by 100 basis points to 37.7% due to inflationary cost pressures [23][26] Business Line Data and Key Metrics Changes - The Auto Care business experienced nearly 17% growth, benefiting from elevated demand and distribution gains [8][9] - The Battery business faced a decline in organic revenue, down less than 1% in the fourth quarter compared to 6% growth in the prior year [22] - The Auto Care category showed consistent growth, with a 3.5% increase in value compared to the previous year [14] Market Data and Key Metrics Changes - The global Battery category grew by 2.9% in value and 3.7% in volume on a two-year stack basis, despite a decline in the category in the near term [11][12] - The Auto Care category's household penetration reached nearly 75%, with a 20% increase in buy rate [14] Company Strategy and Development Direction - The company plans to mitigate rising costs through pricing actions against approximately 85% of its business, with a focus on maintaining brand preference and market share [17][19] - The company is exploring additional pricing opportunities and cost reduction initiatives to offset inflationary pressures [19][32] - The strategic focus includes investing in brands and expanding Auto Care internationally [15][60] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the volatile macro environment, with rising costs related to commodities, transportation, and labor expected to continue throughout 2022 [16][31] - The outlook for fiscal 2022 anticipates organic sales to be roughly flat, with expected declines in Battery volume due to prior year elevated demand [19][30] - Management remains optimistic about the long-term growth potential of the Auto Care category and the resilience of its brands [15][66] Other Important Information - The company proactively built inventory to ensure product availability during peak selling seasons, resulting in a 42% increase in inventory compared to the prior year [18] - The company entered into a $75 million accelerated share repurchase program, with approximately 1.9 million shares repurchased under this program [25] Q&A Session Summary Question: Comments on gross margin and pricing opportunities - Management indicated that pricing actions have been taken on 85% of the business, with ongoing evaluations for additional pricing opportunities [36] - Commodity costs are expected to worsen, leading to an anticipated gross margin erosion of approximately 150 basis points [39][40] Question: Long-term view on gross margin rebuilding - Management emphasized a focus on recouping dollars related to inflation and identified opportunities for efficiency improvements in the long term [45][46] Question: Inventory management for fiscal 2022 - Management plans to cautiously reduce elevated inventory levels while considering the current operating environment [47] Question: Impact of cost pressures on pricing - Management acknowledged that costs have increased beyond initial expectations, affecting pricing strategies during the peak season [49] Question: Supply chain issues and their impact - Supply chain congestion affects both Battery and Auto Care businesses, with management taking proactive steps to manage inventory and logistics [51][52] Question: Online business performance - The company reported robust growth in e-commerce, with consumers showing a strong preference for branded products in both Battery and Auto Care categories [60] Question: Auto Care growth sustainability - Management plans to sustain Auto Care growth through innovation and international expansion, with positive consumer engagement trends [64][66]

Financial Data and Key Metrics Changes - The company reported a topline growth of nearly 10% driven by strong growth in the auto care business and international battery sales, partially offset by declines in the North America battery business [9][10] - Organic sales growth was 5.8%, with adjusted EPS increasing to $0.74, a nearly 50% increase year-over-year [10][25] - Adjusted EBITDA for the quarter was $144 million, up 7% compared to the prior year [25][30] Business Line Data and Key Metrics Changes - The auto care business experienced over 25% growth, while the international battery business also showed strong growth [10][26] - The Americas segment grew 4.7%, with auto care showing strong double-digit growth, while the international segment grew 9.1% [26] - The gross margin decreased by 160 basis points to 39.2% due to rising input costs and the lower margin profile of the auto care business [10][27] Market Data and Key Metrics Changes - Battery consumption was down 11.6% year-over-year but up 9.5% compared to 2019, indicating a recovery trend [16] - The auto care category grew 19% year-over-year and 21% compared to two years ago, driven by increased consumer engagement in DIY activities [17][19] - The company gained a 2.8 share point in the battery category due to increased distribution and visibility [16] Company Strategy and Development Direction - The company is focused on offsetting rising operating costs through cost reduction initiatives and pricing strategies [8][12] - Plans to repurchase $75 million of stock through an accelerated share repurchase program, indicating confidence in future growth [11] - The company is investing in inventory to mitigate supply chain disruptions and ensure high service levels during peak seasons [13][50] Management's Comments on Operating Environment and Future Outlook - Management noted that operating costs have risen rapidly and are expected to continue, with a focus on managing these pressures [13][30] - The company increased its full fiscal year outlook for net sales growth to 8% to 9% [10][32] - Management expressed confidence in the long-term growth prospects of their categories, driven by sustained changes in consumer behavior [15][36] Other Important Information - The CFO announced his retirement, with John Drabik set to take over the role effective October 1 [20][21] - The company has recognized approximately $124 million in synergies since its acquisitions, exceeding initial targets [28] Q&A Session Summary Question: Discussion on pricing cost offsets and gross margins - Management indicated that pricing actions are expected to provide minimal benefit in Q1, with more significant impacts anticipated in the second half of fiscal 2022 [39][40] Question: Insights on auto care season and consumer behavior - Management noted that consumer behaviors around cleaning and car care have persisted, contributing to elevated demand [45][46] Question: Reinvestment in SG&A and supply chain visibility - Management confirmed that current reinvestment plans are included in the outlook, with improved visibility into the supply chain leading to proactive inventory management [49][50] Question: CapEx expectations and inventory accumulation - Management indicated that CapEx is expected to return to historical levels of 1.5% to 2% of net sales, with inventory accumulation primarily in raw materials [59][60] Question: Share buyback program and competitive environment - Management explained that the share buyback program is part of a broader capital allocation strategy, with recent distribution gains coming primarily at the expense of Duracell [62][64]