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, 2019 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 ______________________________________________________ ...

+ Fiscal Q1 2020 Earnings February 5, 2020 Forward-Looking Statements Energizer Holdings, Inc. (the "Company") and its management may make certain statements that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as "anticipates," "targets," "expects," "hopes," "estimates," "intends," ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________________________ FORM 10-K _______________________________ (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 10 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________ Commission File No. 001-36837 ENERGIZER HOLDINGS, INC. (Exact n ...

PART I — FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, including statements of earnings, balance sheets, cash flows, and shareholders' equity, along with detailed notes explaining the company's business, accounting policies, recent acquisitions, divestitures, and other financial details [Consolidated Statements of Earnings and Comprehensive Income (Condensed)](index=4&type=section&id=Consolidated%20Statements%20of%20Earnings%20and%20Comprehensive%20Income%20(Condensed)) The condensed consolidated statements of earnings show a significant increase in net sales for both the quarter and nine months ended June 30, 2019, primarily due to recent acquisitions. However, net earnings from continuing operations and diluted EPS decreased substantially compared to the prior year, impacted by higher costs and interest expenses Consolidated Statements of Earnings and Comprehensive Income (Condensed) | Metric | Q3 2019 ($M) | Q3 2018 ($M) | 9M 2019 ($M) | 9M 2018 ($M) | |:------------------------------------------------|:-------------|:-------------|:-------------|:-------------| | Net sales | 647.2 | 392.8 | 1,775.5 | 1,340.5 | | Gross profit | 246.3 | 176.1 | 716.0 | 622.9 | | Earnings from continuing operations | 9.2 | 23.8 | 17.7 | 92.0 | | Net earnings/(loss) attributable to common shareholders | 3.0 | 23.8 | (2.8) | 92.0 | | Basic net earnings per common share - continuing operations | 0.07 | 0.40 | 0.15 | 1.54 | | Diluted net earnings per common share - continuing operations | 0.07 | 0.39 | 0.15 | 1.50 | - Net sales increased **significantly** for both the quarter (**64.8%**) and nine months (**32.5%**) ended June 30, 2019, primarily driven by recent acquisitions[11](index=11&type=chunk) - Net earnings from continuing operations decreased by **61.3%** for the quarter and **80.7%** for the nine months ended June 30, 2019, compared to the prior year[11](index=11&type=chunk) [Consolidated Balance Sheets (Condensed)](index=6&type=section&id=Consolidated%20Balance%20Sheets%20(Condensed)) The consolidated balance sheet as of June 30, 2019, reflects substantial growth in total assets, liabilities, and shareholders' equity compared to September 30, 2018, largely due to the Battery and Auto Care Acquisitions, which significantly increased goodwill, other intangible assets, and long-term debt Consolidated Balance Sheets (Condensed) | Metric | June 30, 2019 ($M) | September 30, 2018 ($M) | |:-------------------------------------|:-------------------|:------------------------| | Total assets | 5,577.7 | 3,178.8 | | Total liabilities | 5,007.0 | 3,154.3 | | Total shareholders' equity | 570.7 | 24.5 | | Cash and cash equivalents | 206.4 | 522.1 | | Goodwill | 1,062.4 | 244.2 | | Other intangible assets, net | 1,922.2 | 232.7 | | Long-term debt | 3,493.2 | 976.1 | - Total assets increased by **$2,398.9 million** (**75.5%**) from September 30, 2018, to June 30, 2019, primarily driven by goodwill and other intangible assets from acquisitions[14](index=14&type=chunk) - Total liabilities increased by **$1,852.7 million** (**58.7%**), mainly due to a significant rise in long-term debt to fund acquisitions[14](index=14&type=chunk) - Total shareholders' equity saw a **substantial increase** from **$24.5 million** to **$570.7 million**, reflecting new equity issuances[14](index=14&type=chunk) [Consolidated Statements of Cash Flows (Condensed)](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20(Condensed)) The consolidated statements of cash flows for the nine months ended June 30, 2019, show a significant decrease in cash from operating activities and a large increase in cash used by investing activities due to major acquisitions. This was largely offset by substantial cash proceeds from financing activities, primarily debt and equity issuances Consolidated Statements of Cash Flows (Condensed) | Metric | 9M 2019 ($M) | 9M 2018 ($M) | |:------------------------------------------------|:-------------|:-------------| | Net cash from operating activities | 7.0 | 188.0 | | Net cash used by investing activities | (2,893.2) | (11.1) | | Net cash from/(used by) financing activities | 1,325.6 | (37.9) | | Net (decrease)/increase in cash, cash equivalents, and restricted cash | (1,561.9) | 132.9 | - Net cash from operating activities decreased **significantly** from **$188.0 million** in 2018 to **$7.0 million** in 2019, primarily due to working capital changes and acquisition-related cash expenditures[17](index=17&type=chunk) - Net cash used by investing activities surged to **$2,893.2 million** in 2019, mainly driven by the Battery and Auto Care Acquisitions totaling **$2,453.8 million**[17](index=17&type=chunk) - Net cash from financing activities was **$1,325.6 million** in 2019, a **substantial increase** from a net use of **$37.9 million** in 2018, reflecting significant debt and equity issuances to fund acquisitions[17](index=17&type=chunk) [Consolidated Statements of Shareholders' Equity/(Deficit) (Condensed)](index=9&type=section&id=Consolidated%20Statements%20of%20Shareholders'%20Equity%2F(Deficit)%20(Condensed)) The consolidated statements of shareholders' equity show a significant increase in total equity from $24.5 million at September 30, 2018, to $570.7 million at June 30, 2019, primarily driven by the issuance of common stock and mandatory convertible preferred stock to fund acquisitions, partially offset by net losses and share repurchases Changes in Shareholders' Equity (9 Months Ended June 30, 2019) | Metric | September 30, 2018 ($M) | June 30, 2019 ($M) | |:-------------------------------------|:------------------------|:-------------------| | Total Shareholders' Equity/(Deficit) | 24.5 | 570.7 | | Additional Paid-in Capital | 217.8 | 867.2 | | Retained Earnings | 177.3 | 109.5 | | Treasury Stock | (129.4) | (161.4) | | Accumulated Other Comprehensive Loss | (241.8) | (245.3) | - Additional paid-in capital increased **significantly** from **$217.8 million** to **$867.2 million**, reflecting proceeds from common stock and preferred stock issuances[19](index=19&type=chunk) - Retained earnings decreased from **$177.3 million** to **$109.5 million**, impacted by net losses and dividend payments[19](index=19&type=chunk) - Treasury stock increased due to common stock repurchases totaling **$45.0 million** during the nine months ended June 30, 2019[19](index=19&type=chunk) [Notes to Consolidated (Condensed) Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20(Condensed)%20Financial%20Statements) This section provides detailed disclosures on the company's business operations, significant accounting policies, recent acquisitions and divestitures, financial instruments, and other material financial information, offering context to the condensed financial statements [(1) Description of Business and Basis of Presentation](index=11&type=section&id=(1)%20Description%20of%20Business%20and%20Basis%20of%20Presentation) Energizer Holdings, Inc. is a global manufacturer and marketer of household batteries, specialty batteries, portable lights, and automotive fragrance and appearance products. The company recently expanded its portfolio through the Battery Acquisition (Rayovac®, Varta®) and Auto Care Acquisition (Armor All®, STP®, A/C PRO®) in early 2019, and is in the process of divesting the Varta® consumer battery business in EMEA - Energizer acquired Spectrum's global battery, lighting, and portable power business (Battery Acquisition) on January 2, 2019, including Rayovac® and Varta® brands[27](index=27&type=chunk) - Energizer acquired Spectrum's global auto care business (Auto Care Acquisition) on January 28, 2019, including Armor All®, STP®, and A/C PRO® brands[28](index=28&type=chunk) - The company entered into an agreement on May 29, 2019, to divest the Varta® consumer battery business in Europe, Middle East, and Africa (Divestment Business) to VARTA Aktiengesellschaft for **€180.0 million**, with Spectrum contributing an additional **$200.0 million**[29](index=29&type=chunk)[32](index=32&type=chunk) - The Divestment Business's assets and liabilities are classified as held for sale, and its operations as discontinued operations[32](index=32&type=chunk) [(2) Revenue Recognition](index=12&type=section&id=(2)%20Revenue%20Recognition) The company adopted ASU 2014-09, Revenue from Contracts with Customers, effective October 1, 2018, with no material impact on financial statements. Revenue is primarily recognized at a single point in time upon transfer of title and risk of loss, with net sales reflecting transaction prices reduced by variable consideration such as discounts and promotional programs - Adoption of ASU 2014-09, Revenue from Contracts with Customers, had **no material impact** on the company's financial statements[36](index=36&type=chunk)[40](index=40&type=chunk) - Revenue is recognized when title, ownership, and risk of loss pass to the customer, typically upon delivery or pickup of finished goods[46](index=46&type=chunk) Net Sales by Product Category and Geography | Category/Segment | Q3 2019 ($M) | Q3 2018 ($M) | 9M 2019 ($M) | 9M 2018 ($M) | |:-------------------|:-------------|:-------------|:-------------|:-------------| | **Product** | | | | | | Batteries | 457.2 | 350.1 | 1,398.5 | 1,204.9 | | Auto Care | 160.8 | 24.1 | 289.9 | 68.9 | | Lights and Licensing | 29.2 | 18.6 | 87.1 | 66.7 | | **Total Net Sales**| **647.2** | **392.8** | **1,775.5** | **1,340.5** | | **Geography** | | | | | | Americas | 465.1 | 241.3 | 1,220.2 | 838.5 | | International | 182.1 | 151.5 | 555.3 | 502.0 | | **Total Net Sales**| **647.2** | **392.8** | **1,775.5** | **1,340.5** | [(3) Acquisitions](index=15&type=section&id=(3)%20Acquisitions) Energizer completed the Battery Acquisition for $2,000.0 million and the Auto Care Acquisition for $1,250.0 million in early 2019, significantly expanding its product portfolios. These acquisitions involved substantial cash and equity considerations, leading to preliminary allocations of purchase price to assets, liabilities, goodwill, and intangible assets, which are subject to finalization - Battery Acquisition completed on January 2, 2019, for a contractual purchase price of **$2,000.0 million**, funded by senior notes, term loans, and cash on hand[54](index=54&type=chunk) - Auto Care Acquisition completed on January 28, 2019, for a contractual purchase price of **$1,250.0 million**, comprising **$937.5 million** in cash and **$312.5 million** in newly-issued common stock[66](index=66&type=chunk)[68](index=68&type=chunk) Preliminary Purchase Price Allocation for Battery Acquisition (as of acquisition date) | Asset/Liability | Amount ($M) | |:--------------------------------|:------------| | Cash and cash equivalents | 37.8 | | Trade receivables | 59.4 | | Inventories | 82.4 | | Assets held for sale | 805.0 | | Property, plant and equipment, net | 138.5 | | Goodwill | 547.2 | | Other intangible assets, net | 747.5 | | Liabilities held for sale | (405.0) | | Net assets acquired | 1,956.2 | Preliminary Purchase Price Allocation for Auto Care Acquisition (as of acquisition date) | Asset/Liability | Amount ($M) | |:--------------------------------|:------------| | Cash and cash equivalents | 3.3 | | Trade receivables | 42.1 | | Inventories | 96.1 | | Property, plant and equipment, net | 66.5 | | Goodwill | 270.1 | | Other intangible assets, net | 972.5 | | Deferred tax assets | 12.1 | | Other liabilities (deferred tax liabilities) | (221.1) | | Net assets acquired | 1,179.2 | Acquisition and Integration Costs (Pre-tax) | Period | Q3 2019 ($M) | 9M 2019 ($M) | Q3 2018 ($M) | 9M 2018 ($M) | |:-------------------|:-------------|:-------------|:-------------|:-------------| | Total Costs | 28.0 | 159.9 | 15.9 | 41.0 | | Cost of products sold | 12.4 | 44.1 | — | — | | SG&A | 15.1 | 63.1 | 22.4 | 44.6 | | Interest expense | — | 65.6 | 3.4 | 6.3 | [(4) Divestment](index=22&type=section&id=(4)%20Divestment) The company is divesting the Varta® consumer battery business in EMEA for €180.0 million, with an additional $200.0 million contribution from Spectrum. This business is classified as held for sale and its operations as discontinued, resulting in a net loss from discontinued operations for the quarter and nine months ended June 30, 2019 - The Divestment Business is expected to be sold by the end of calendar year 2019 for **€180.0 million**, plus a **$200.0 million** contribution from Spectrum[104](index=104&type=chunk) Assets and Liabilities of Divestment Business Classified as Held for Sale (June 30, 2019) | Category | Amount ($M) | |:------------------|:------------| | Assets held for sale | 807.6 | | Liabilities held for sale | 384.9 | Loss from Discontinued Operations (Divestment Business) | Metric | Q3 2019 ($M) | 9M 2019 ($M) | |:------------------------------------------------|:-------------|:-------------| | Net sales | 69.9 | 150.1 | | Loss before income taxes from discontinued operations | (1.4) | (15.3) | | Net loss from discontinued operations | (1.8) | (12.8) | - The loss from discontinued operations for the nine months ended June 30, 2019, included an inventory fair value adjustment of **$11.2 million** and divestment-related pre-tax costs of **$9.9 million**[110](index=110&type=chunk) [(5) Income Taxes](index=24&type=section&id=(5)%20Income%20Taxes) The nine-month effective tax rate decreased to 30.3% from 45.3% in the prior year, influenced by disallowed transaction costs from acquisitions and the impact of the U.S. Tax Cuts and Jobs Act (TCJA), which reduced the corporate tax rate to 21% for fiscal year 2019 - The nine-month effective tax rate was **30.3%** for 2019, down from **45.3%** in 2018[111](index=111&type=chunk) - The current year's tax provision included the estimated impact of disallowed transaction costs related to the Battery and Auto Care Acquisitions[111](index=111&type=chunk) - The U.S. corporate income tax rate was reduced from **35%** to **21%** by the Tax Act, effective for Energizer as of January 1, 2018, with the full **21%** rate impacting fiscal year 2019[112](index=112&type=chunk) - The company completed accounting for the mandatory transition tax, recording an additional **$0.7 million** in 2019 for state tax impact, bringing the total to **$36.7 million**[114](index=114&type=chunk) [(6) Share-Based Payments](index=24&type=section&id=(6)%20Share-Based%20Payments) Total share-based compensation expense for the quarter and nine months ended June 30, 2019, was $6.7 million and $20.8 million, respectively. The company granted Restricted Stock Equivalent (RSE) awards and performance shares to key employees and executives, with vesting contingent on time and performance targets Share-Based Compensation Expense | Period | Q3 2019 ($M) | 9M 2019 ($M) | Q3 2018 ($M) | 9M 2018 ($M) | |:-------------|:-------------|:-------------|:-------------|:-------------| | Total Cost | 6.7 | 20.8 | 7.0 | 21.0 | - In November 2018, the company granted approximately **73,000 RSE shares** vesting ratably over four years, **55,000 RSE shares** vesting on the third anniversary, and **190,000 performance shares** (max **380,000**) based on EPS and free cash flow targets[117](index=117&type=chunk) [(7) Earnings per share](index=26&type=section&id=(7)%20Earnings%20per%20share) Basic and diluted earnings per share calculations reflect the impact of net earnings from continuing and discontinued operations, mandatory preferred stock dividends, and dilutive effects of restricted stock equivalents and performance shares. Mandatory Convertible Preferred Stock (MCPS) was anti-dilutive for all periods and excluded from diluted EPS Basic and Diluted Earnings Per Share | Metric | Q3 2019 | Q3 2018 | 9M 2019 | 9M 2018 | |:------------------------------------------------|:-------------|:-------------|:-------------|:-------------| | Basic net earnings per common share - continuing operations | $0.07 | $0.40 | $0.15 | $1.54 | | Basic net earnings/(loss) per common share | $0.04 | $0.40 | $(0.04) | $1.54 | | Diluted net earnings per common share - continuing operations | $0.07 | $0.39 | $0.15 | $1.50 | | Diluted net earnings/(loss) per common share | $0.04 | $0.39 | $(0.04) | $1.50 | | Weighted average common shares outstanding - Diluted | 70.6 | 61.4 | 66.5 | 61.4 | - Mandatory Convertible Preferred Stock (MCPS) was considered **anti-dilutive** and excluded from diluted EPS calculations for all periods presented[127](index=127&type=chunk) - Performance-based restricted stock equivalents (**0.8 million** for Q3/9M 2019, **0.5 million** for Q3/9M 2018) were excluded from diluted EPS as performance targets were not achieved[127](index=127&type=chunk) [(8) Segments](index=28&type=section&id=(8)%20Segments) Energizer manages operations through two geographic segments: Americas and International. Segment performance is evaluated based on segment operating profit, excluding corporate expenses, share-based compensation, acquisition/integration costs, amortization, and R&D. Both segments showed significant net sales and profit growth, largely driven by recent acquisitions Segment Net Sales and Profit | Metric/Segment | Q3 2019 ($M) | Q3 2018 ($M) | 9M 2019 ($M) | 9M 2018 ($M) | |:-----------------|:-------------|:-------------|:-------------|:-------------| | **Net Sales** | | | | | | Americas | 465.1 | 241.3 | 1,220.2 | 838.5 | | International | 182.1 | 151.5 | 555.3 | 502.0 | | **Total Net Sales**| **647.2** | **392.8** | **1,775.5** | **1,340.5** | | **Segment Profit** | | | | | | Americas | 103.8 | 60.4 | 308.6 | 239.2 | | International | 41.0 | 32.6 | 132.0 | 115.9 | | **Total Segment Profit**| **144.8** | **93.0** | **440.6** | **355.1** | - Americas net sales increased **92.7%** for the quarter and **45.5%** for the nine months, with acquisitions contributing significantly[132](index=132&type=chunk) - International net sales increased **20.2%** for the quarter and **10.6%** for the nine months, also boosted by acquisitions[132](index=132&type=chunk) - Total segment profit increased **55.7%** for the quarter and **24.1%** for the nine months, driven by acquisitions and organic growth[132](index=132&type=chunk) [(9) Goodwill and intangible assets](index=29&type=section&id=(9)%20Goodwill%20and%20intangible%20assets) Goodwill and indefinite-lived intangible assets are not amortized but are evaluated annually for impairment. The Battery and Auto Care Acquisitions significantly increased goodwill and indefinite-lived intangible assets, with total intangible assets reaching $1,922.2 million at June 30, 2019 Goodwill by Segment | Segment | October 1, 2018 ($M) | June 30, 2019 ($M) | |:--------------|:---------------------|:-------------------| | Americas | 228.4 | 228.4 | | International | 15.8 | 15.6 | | Unallocated | — | 818.4 | | **Total** | **244.2** | **1,062.4** | - Goodwill increased by **$818.2 million** from October 1, 2018, to June 30, 2019, primarily due to the Battery Acquisition (**$547.2 million**) and Auto Care Acquisition (**$270.1 million**)[138](index=138&type=chunk) Total Intangible Assets, Net (June 30, 2019) | Category | Gross Carrying Amount ($M) | Accumulated Amortization ($M) | Net Carrying Amount ($M) | |:----------------------------------------|:---------------------------|:------------------------------|:-------------------------| | Trademarks and trade names (amortizable) | 61.0 | 8.8 | 52.2 | | Customer relationships | 412.5 | 28.2 | 384.3 | | Proprietary technology | 174.5 | 10.5 | 164.0 | | Trademarks and trade names - indefinite lived | 1,292.4 | — | 1,292.4 | | **Total Other intangible assets, net** | **1,977.8** | **55.6** | **1,922.2** | - Indefinite-lived intangible assets increased from **$76.9 million** at September 30, 2018, to **$1,292.4 million** at June 30, 2019, mainly from the Battery (**$513.0 million**) and Auto Care (**$702.9 million**) Acquisitions[141](index=141&type=chunk) [(10) Debt](index=31&type=section&id=(10)%20Debt) The company's long-term debt significantly increased to $3,493.2 million at June 30, 2019, from $976.1 million at September 30, 2018, primarily due to new senior secured term loans and senior notes issued to fund the Battery and Auto Care Acquisitions. The company also utilizes interest rate swaps to manage variable rate debt exposure and was in compliance with all debt covenants Long-Term Debt Breakdown | Debt Type | June 30, 2019 ($M) | September 30, 2018 ($M) | |:------------------------------------------------|:-------------------|:------------------------| | Senior Secured Term Loan A Facility due 2021 | 77.5 | — | | Senior Secured Term Loan B Facility due 2025 | 997.5 | — | | 5.50% Senior Notes due 2025 | 600.0 | 600.0 | | 6.375% Senior Notes due 2026 | 500.0 | — | | 4.625% Senior Notes due 2026 (Euro Notes of €650.0) | 739.2 | — | | 7.750% Senior Notes due 2027 | 600.0 | — | | Capital lease obligations | 47.4 | — | | **Total long-term debt** | **3,493.2** | **976.1** | - New debt issuances in 2019 included a **$400.0 million** revolving credit facility, **$200.0 million** Term Loan A, **$1,000.0 million** Term Loan B, **$500.0 million** USD Senior Notes, **€650.0 million** Euro Senior Notes, and **$600.0 million** Senior Notes due 2027[146](index=146&type=chunk)[149](index=149&type=chunk)[153](index=153&type=chunk) - The company had **$1,075.0 million** in variable rate debt outstanding at June 30, 2019, with interest rate swaps fixing LIBOR on **$200.0 million** at **2.03%** and on **$400.0 million** (decreasing quarterly) at **2.47%**[196](index=196&type=chunk) - As of June 30, 2019, the company was in compliance with all provisions and covenants associated with its debt agreements[158](index=158&type=chunk) [(11) Pension Plans](index=33&type=section&id=(11)%20Pension%20Plans) The company maintains several defined benefit pension plans, with the U.S. plan frozen in fiscal year 2015. For the nine months ended June 30, 2019, the U.S. plan reported a net periodic benefit of $(1.2) million, and International plans reported a net periodic benefit of $(0.4) million Net Periodic Pension (Benefit)/Cost (Nine Months Ended June 30) | Metric | 2019 U.S. ($M) | 2018 U.S. ($M) | 2019 International ($M) | 2018 International ($M) | |:--------------------------------------|:---------------|:---------------|:------------------------|:------------------------| | Service cost | — | — | 0.4 | 0.4 | | Interest cost | 15.3 | 14.1 | 2.3 | 3.2 | | Expected return on plan assets | (19.6) | (22.6) | (3.8) | (4.8) | | Amortization of unrecognized net losses | 3.1 | 3.3 | 0.7 | 1.6 | | Net periodic (benefit)/cost | (1.2) | (5.1) | (0.4) | 0.4 | - The U.S. pension plan was frozen in fiscal year 2015[163](index=163&type=chunk) - A pension plan was acquired as part of the Divestment Business with the Battery Acquisition and is included in Liabilities held for sale[168](index=168&type=chunk) [(12) Shareholders' Equity](index=34&type=section&id=(12)%20Shareholders'%20Equity) The company repurchased 1.0 million common shares for $45.0 million during the nine months ended June 30, 2019. Common stock dividends of $0.30 per share were declared quarterly, totaling $61.4 million. Additionally, the company issued 4.7 million common shares for $205.3 million and 2.2 million shares of Series A Mandatory Convertible Preferred Stock (MCPS) for $199.5 million to fund the Auto Care Acquisition - The company repurchased **1,036,000 common shares** for **$45.0 million** during the nine months ended June 30, 2019, at an average price of **$43.46 per share**[169](index=169&type=chunk) - Total common stock dividends declared for the nine months ended June 30, 2019, were **$61.4 million**, with quarterly dividends of **$0.30 per share**[172](index=172&type=chunk) - In January 2019, the company issued **4,687,498 shares** of common stock, generating net proceeds of **$205.3 million**, and **5,278,921 shares** to Spectrum as partial consideration for the Auto Care Acquisition, valued at **$240.5 million**[174](index=174&type=chunk)[175](index=175&type=chunk) - In January 2019, the company issued **2,156,250 shares** of Series A Mandatory Convertible Preferred Stock (MCPS), with net proceeds of **$199.5 million**, to fund the Auto Care Acquisition[180](index=180&type=chunk) - Dividends on MCPS are payable quarterly at an annual rate of **7.50%**, with total declared dividends of **$7.7 million** and paid dividends of **$4.0 million** for the nine months ended June 30, 2019[182](index=182&type=chunk)[184](index=184&type=chunk) [(13) Financial Instruments and Risk Management](index=36&type=section&id=(13)%20Financial%20Instruments%20and%20Risk%20Management) Energizer uses derivatives solely for hedging identifiable exposures to currency, commodity, and interest rate risks, not for speculative purposes. The company employs cash flow hedges for foreign currency and zinc purchases, and interest rate swaps for variable rate debt. Derivatives not designated as hedges are used for balance sheet exposures - The company uses hedging instruments to reduce exposure to variability in cash flows associated with future purchases of certain materials and commodities, such as zinc[192](index=192&type=chunk)[193](index=193&type=chunk) - Foreign currency risk is managed through forward currency contracts to hedge cash flow uncertainty of inventory purchases, with primary exposures in Euro, British pound, Canadian dollar, and Australian dollar[194](index=194&type=chunk)[200](index=200&type=chunk) - Interest rate risk on variable rate debt is managed through interest rate swap agreements, fixing LIBOR on **$200.0 million** at **2.03%** and on **$400.0 million** (decreasing quarterly) at **2.47%**[196](index=196&type=chunk) Estimated Fair Values of Derivatives (June 30, 2019) | Derivative Type | Estimated Fair Value Asset/(Liability) ($M) | |:--------------------------------|:--------------------------------------------| | Foreign currency contracts | 1.3 | | Interest rate swaps | (3.9) | | Zinc contracts | (0.7) | | Foreign currency contracts (non-hedge) | (1.0) | [(14) Accumulated Other Comprehensive (Loss)/Income](index=41&type=section&id=(14)%20Accumulated%20Other%20Comprehensive%20(Loss)%2FIncome) Accumulated Other Comprehensive Loss (AOCI) increased slightly from $(241.8) million at September 30, 2018, to $(245.3) million at June 30, 2019. This change reflects foreign currency translation adjustments, pension activity, and gains/losses from zinc, foreign currency, and interest rate hedging contracts, with some reclassifications to earnings Changes in Accumulated Other Comprehensive (Loss)/Income (9 Months Ended June 30, 2019) | Component | Balance at Sep 30, 2018 ($M) | OCI before Reclassifications ($M) | Reclassifications to Earnings ($M) | Activity related to Discontinued Operations ($M) | Balance at Jun 30, 2019 ($M) | |:----------------------------------------|:-----------------------------|:----------------------------------|:-----------------------------------|:-------------------------------------------------|:-----------------------------| | Foreign Currency Translation Adjustments | (113.6) | 3.3 | — | 1.0 | (109.3) | | Pension Activity | (136.4) | (0.2) | 3.2 | — | (133.4) | | Zinc Contracts | — | (0.5) | — | 0.6 | 0.1 | | Foreign Currency Contracts | 3.3 | 2.9 | (5.2) | — | 1.0 | | Interest Rate Contracts | 4.9 | (8.3) | (0.3) | — | (3.7) | | **Total** | **(241.8)** | **(2.8)** | **(2.3)** | **1.6** | **(245.3)** | - Reclassifications to earnings for the nine months ended June 30, 2019, included **$7.1 million** from cash flow hedges (foreign currency and interest rate contracts) and **$(3.8) million** from pension items[222](index=222&type=chunk) [(15) Supplemental Financial Statement Information](index=42&type=section&id=(15)%20Supplemental%20Financial%20Statement%20Information) This section provides detailed breakdowns of 'Other items, net', inventories, other current assets, property, plant and equipment, and other current and non-current liabilities, offering granular insights into specific balance sheet and income statement accounts Other Items, Net (Nine Months Ended June 30) | Item | 2019 ($M) | 2018 ($M) | |:----------------------------------------|:----------|:----------| | Interest income | (1.3) | (1.2) | | Interest income on restricted cash | (5.8) | — | | Foreign currency exchange (gain)/loss | 2.4 | 7.7 | | Pension benefit other than service costs | (2.1) | (5.1) | | Acquisition foreign currency loss/(gain) | (8.1) | (9.9) | | Settlement of acquired business hedging contracts | 1.5 | — | | Transition services agreement income | (0.8) | — | | Other | 0.3 | (0.6) | | **Total Other items, net** | **(13.9)**| **(9.1)** | Inventories (June 30, 2019 vs. September 30, 2018) | Category | June 30, 2019 ($M) | September 30, 2018 ($M) | |:-------------------------|:-------------------|:------------------------| | Raw materials and supplies | 85.6 | 40.0 | | Work in process | 143.2 | 86.5 | | Finished products | 295.5 | 196.6 | | **Total inventories** | **524.3** | **323.1** | Property, Plant and Equipment, Net (June 30, 2019 vs. September 30, 2018) | Category | June 30, 2019 ($M) | September 30, 2018 ($M) | |:-----------------------------|:-------------------|:------------------------| | Total gross property | 1,025.4 | 823.6 | | Accumulated depreciation | (664.4) | (656.9) | | **Total property, plant and equipment, net** | **361.0** | **166.7** | [(16) Related Party Transactions](index=43&type=section&id=(16)%20Related%20Party%20Transactions) Following the Battery and Auto Care Acquisitions, Energizer entered into transition service agreements (TSA) and a supply agreement with Spectrum. Spectrum owns 7.7% of Energizer's common shares as of June 30, 2019. These agreements involve mutual provision of back-office support services and supply of goods, resulting in associated expenses, income, and intercompany balances - Spectrum owns **7.7%** of Energizer's outstanding common shares as of June 30, 2019, following the Auto Care Acquisition[227](index=227&type=chunk) - Energizer and Spectrum entered into transition service agreements (TSA) for back-office support, with Energizer incurring **$10.7 million** in SG&A expense and **$0.7 million** in COGS, and recording **$0.8 million** in income from reverse TSAs for the nine months ended June 30, 2019[230](index=230&type=chunk)[232](index=232&type=chunk) - A supply agreement with Spectrum resulted in **$9.2 million** in expense for the nine months ended June 30, 2019[233](index=233&type=chunk) [(17) Legal proceedings/contingencies and other obligations](index=45&type=section&id=(17)%20Legal%20proceedings%2Fcontingencies%20and%20other%20obligations) The company is involved in various legal proceedings in the ordinary course of business but believes that any resulting liability is not reasonably likely to be material to its financial position, results of operations, or cash flows. Additionally, Energizer had approximately $22.7 million in purchase obligations at June 30, 2019 - The company believes that its liability from pending legal proceedings is **not reasonably likely to be material** to its financial position, results of operations, or cash flows[236](index=236&type=chunk) - As of June 30, 2019, the company had approximately **$22.7 million** in purchase obligations for goods and services[237](index=237&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=46&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Energizer's financial condition and results of operations, including a discussion of non-GAAP measures, forward-looking statements, recent acquisitions and divestitures, operating highlights, segment performance, and liquidity and capital resources [Non-GAAP Financial Measures](index=46&type=section&id=Non-GAAP%20Financial%20Measures) Management uses several non-GAAP financial measures, such as Segment Profit, Adjusted Net Earnings From Continuing Operations, Adjusted Diluted Net Earnings From Continuing Operations Per Common Share (EPS), Organic growth, and Adjusted Selling, General & Administrative (SG&A) as a percent of sales, to provide additional meaningful comparisons and insights into ongoing operating performance, excluding non-recurring items and currency fluctuations - Non-GAAP measures exclude items not reflective of ongoing operating performance, such as acquisition and integration costs and the one-time impact of U.S. tax legislation[241](index=241&type=chunk) - Segment Profit excludes general corporate expenses, share-based compensation, acquisition and integration activities, amortization, R&D, gain on sale of real estate, interest expense, and other corporate items[242](index=242&type=chunk) - Organic measures adjust for the impact of acquisitions, changes in Argentina Operations (due to hyperinflation), and currency fluctuations[244](index=244&type=chunk)[245](index=245&type=chunk)[247](index=247&type=chunk) [Forward-Looking Statements](index=47&type=section&id=Forward-Looking%20Statements) This section contains forward-looking statements that reflect expectations, estimates, or projections about future results, which are subject to known and unknown risks, uncertainties, and assumptions. Key factors that could cause actual results to differ materially include market conditions, integration challenges, divestiture risks, new product success, customer relationships, strategic initiatives, foreign currency impacts, commodity costs, regulatory changes, and debt compliance - Forward-looking statements are not guarantees of performance and are subject to known and unknown risks, uncertainties, and assumptions[249](index=249&type=chunk) - Key risk factors include the ability to integrate acquired businesses, realize projected results and synergies, and successfully close the Varta divestiture[249](index=249&type=chunk) - Other significant risks include market trends, ability to attract/retain customers, impact of foreign currency exchange rates, raw material costs, legislative changes, cyber-attacks, and compliance with debt covenants[249](index=249&type=chunk) [Recent Acquisitions and Divestitures](index=48&type=section&id=Recent%20Acquisitions%20and%20Divestitures) Energizer completed the Battery Acquisition ($2,000.0M) and Auto Care Acquisition ($1,250.0M) in early 2019, significantly boosting revenue but also incurring substantial acquisition and integration costs. The Varta consumer battery business is being divested, with its operations reported as discontinued. The Nu Finish Acquisition ($38.1M) also contributed to revenue - Battery Acquisition (Jan 2, 2019) for **$2,000.0 million**, contributed **$109.1 million** in revenue and **$6.1 million** in income before taxes for Q3 2019[252](index=252&type=chunk)[254](index=254&type=chunk) - Auto Care Acquisition (Jan 28, 2019) for **$1,250.0 million**, contributed **$135.6 million** in revenue and **$13.6 million** in income before taxes for Q3 2019[255](index=255&type=chunk)[256](index=256&type=chunk) - Nu Finish Acquisition (Jul 2, 2018) for **$38.1 million**, contributed **$3.0 million** in revenue for Q3 2019[257](index=257&type=chunk) Pre-tax Acquisition and Integration Costs | Period | Q3 2019 ($M) | 9M 2019 ($M) | Q3 2018 ($M) | 9M 2018 ($M) | |:-------------------|:-------------|:-------------|:-------------|:-------------| | Total Costs | 28.0 | 159.9 | 15.9 | 41.0 | | Cost of products sold | 12.4 | 44.1 | — | — | | SG&A | 15.1 | 63.1 | 22.4 | 44.6 | | Interest expense | — | 65.6 | 3.4 | 6.3 | [Highlights / Operating Results](index=49&type=section&id=Highlights%20%2F%20Operating%20Results) Energizer reported a decrease in Net earnings from continuing operations and Adjusted diluted EPS for both the quarter and nine months ended June 30, 2019, despite significant net sales growth driven by acquisitions. Gross margin percentage declined due to the lower margin profile of acquired businesses and unfavorable currency. SG&A and interest expenses increased, largely due to acquisition-related costs and higher debt Net Earnings and Adjusted Diluted EPS from Continuing Operations | Metric | Q3 2019 | Q3 2018 | 9M 2019 | 9M 2018 | |:------------------------------------------------|:-------------|:-------------|:-------------|:-------------| | Net earnings from continuing operations | $9.2 | $23.8 | $17.7 | $92.0 | | Adjusted diluted net earnings per diluted share - continuing operations | $0.37 | $0.54 | $2.07 | $2.55 | Total Net Sales Growth Drivers | Driver | Q3 % Chg | 9M % Chg | |:---------------------------|:---------|:---------| | Organic | 3.6% | 2.3% | | Impact of Battery Acquisition | 27.8% | 15.6% | | Impact of Auto Care Acquisition | 34.5% | 16.4% | | Impact of Nu Finish Acquisition | 0.8% | 0.4% | | Change in Argentina operations | —% | (0.3)% | | Impact of currency | (1.9)% | (1.9)% | | **Total Net Sales % Chg** | **64.8%**| **32.5%**| - Gross margin percentage for Q3 2019 was **38.1%** (**40.0%** excluding inventory step-up and integration costs), down from **44.8%** in prior year, primarily due to the lower margin profile of acquired businesses and unfavorable foreign currencies[280](index=280&type=chunk) - Interest expense increased **significantly** to **$51.9 million** for Q3 2019 (from **$17.7 million**) and **$177.3 million** for 9M 2019 (from **$47.6 million**), driven by higher debt associated with acquisitions and related financing fees[287](index=287&type=chunk)[288](index=288&type=chunk) [Segment Results](index=53&type=section&id=Segment%20Results) Both Americas and International segments experienced substantial net sales and segment profit growth for the quarter and nine months ended June 30, 2019, predominantly driven by the positive impact of recent acquisitions. Organic growth also contributed, while unfavorable foreign currency movements partially offset these gains Americas Segment Net Sales and Profit Growth Drivers (Q3 2019) | Driver | Net Sales % Chg | Segment Profit % Chg | |:---------------------------|:----------------|:---------------------| | Organic | 3.0% | 4.6% | | Impact of Battery Acquisition | 37.3% | 21.5% | | Impact of Auto Care Acquisition | 51.7% | 47.7% | | Impact of Nu Finish Acquisition | 1.2% | (0.2)% | | Change in Argentina | —% | (1.0)% | | Impact of currency | (0.5)% | (0.7)% | | **Total % Chg** | **92.7%** | **71.9%** | International Segment Net Sales and Profit Growth Drivers (Q3 2019) | Driver | Net Sales % Chg | Segment Profit % Chg | |:---------------------------|:----------------|:---------------------| | Organic | 4.6% | 16.0% | | Impact of Battery Acquisition | 12.7% | 19.3% | | Impact of Auto Care Acquisition | 7.2% | 4.3% | | Impact of Nu Finish Acquisition | 0.1% | 0.3% | | Impact of currency | (4.4)% | (14.1)% | | **Total % Chg** | **20.2%** | **25.8%** | - Global segment profit improved by **55.7%** for the quarter and **24.1%** for the nine months, with acquisitions contributing **$49.5 million** (Q3) and **$89.3 million** (9M)[306](index=306&type=chunk)[309](index=309&type=chunk) [General Corporate and Global Marketing Expenses](index=56&type=section&id=General%20Corporate%20and%20Global%20Marketing%20Expenses) General corporate and other expenses increased for both the quarter and nine months ended June 30, 2019, primarily due to costs related to acquisitions. However, legacy business expenses decreased due to lower deferred compensation expense and continuous improvement initiatives. Global marketing expenses remained relatively stable General Corporate and Global Marketing Expenses | Expense Category | Q3 2019 ($M) | Q3 2018 ($M) | 9M 2019 ($M) | 9M 2018 ($M) | |:-----------------------------------|:-------------|:-------------|:-------------|:-------------| | General corporate and other expenses | 29.9 | 24.7 | 78.3 | 71.0 | | Global marketing expense | 3.0 | 4.6 | 12.5 | 13.0 | | **Total** | **32.9** | **29.3** | **90.8** | **84.0** | | **% of Net Sales** | **5.1%** | **7.5%** | **5.1%** | **6.3%** | - General corporate and other expenses for the legacy business decreased by **$3.2 million** in Q3 and **$7.1 million** in 9M, driven by lower mark-to-market expense on deferred compensation and benefits from continuous improvement initiatives[314](index=314&type=chunk)[316](index=316&type=chunk) [Liquidity and Capital Resources](index=57&type=section&id=Liquidity%20and%20Capital%20Resources) Energizer's liquidity is focused on operating activities, working capital, strategic investments, and debt reduction. The company's cash position decreased significantly due to substantial cash used for acquisitions, which was largely funded by new debt and equity issuances. Operating cash flow declined due to working capital changes, while financing activities provided significant cash. The company also continued its common stock dividend and share repurchase programs - Cash and cash equivalents were **$206.4 million** at June 30, 2019, with approximately **96%** held outside the U.S[319](index=319&type=chunk) - Cash flow from operating activities from continuing operations decreased by **$157.6 million** to **$30.4 million** for the nine months ended June 30, 2019, primarily due to working capital changes (increased receivables and inventory) and acquisition-related cash expenditures[325](index=325&type=chunk)[326](index=326&type=chunk)[328](index=328&type=chunk)[329](index=329&type=chunk) - Net cash used by investing activities from continuing operations was **$2,490.1 million** for the nine months ended June 30, 2019, mainly for the Battery (**$1,518.4 million**) and Auto Care (**$935.4 million**) Acquisitions[330](index=330&type=chunk)[331](index=331&type=chunk) - Net cash from financing activities from continuing operations was **$1,328.5 million** for the nine months ended June 30, 2019, driven by **$1,800.0 million** from debt issuance and **$404.8 million** from common and preferred stock issuances, partially offset by debt payments and dividends[333](index=333&type=chunk)[334](index=334&type=chunk)[335](index=335&type=chunk) Contractual Obligations (June 30, 2019) | Obligation Category | Total ($M) | < 1 year ($M) | 1-3 years ($M) | 3-5 years ($M) | > 5 years ($M) | |:-----------------------------------|:-----------|:--------------|:---------------|:---------------|:---------------| | Long-term debt, including current maturities | 3,514.2 | 10.0 | 97.5 | 20.0 | 3,386.7 | | Interest on long-term debt | 1,388.5 | 194.5 | 386.3 | 380.8 | 426.9 | | Operating leases | 164.7 | 22.3 | 29.9 | 87.8 | 24.7 | | Capital leases | 95.1 | 4.7 | 9.4 | 10.1 | 70.9 | | Purchase obligations and other | 22.7 | 22.1 | 0.6 | — | — | | **Total** | **5,246.2**| **297.9** | **523.7** | **502.6** | **3,922.0** | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=60&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Energizer is exposed to market risks from changes in currency rates, commodity prices, and interest rates, which are managed through hedging instruments. The company uses cash flow hedges for foreign currency and zinc purchases, and interest rate swaps for variable rate debt. Additionally, Argentina's economy has been designated as highly inflationary, impacting financial statement translation [Market Risk Sensitive Instruments and Positions](index=61&type=section&id=Market%20Risk%20Sensitive%20Instruments%20and%20Positions) The company uses derivatives to hedge identifiable exposures to foreign currency, commodity (zinc), and interest rate risks. Cash flow hedges are in place for forecasted inventory purchases and variable rate debt, while non-designated derivatives hedge balance sheet exposures. The designation of Argentina as a highly inflationary economy impacts the recognition of exchange gains and losses in current earnings - The company uses forward currency contracts as cash flow hedges to mitigate foreign currency risk on forecasted inventory purchases, with primary exposures to Euro, British pound, Canadian dollar, and Australian dollar[349](index=349&type=chunk)[350](index=350&type=chunk) - Zinc purchases are hedged with cash flow contracts extending into 2020, with a pre-tax loss of **$0.7 million** recognized at June 30, 2019[354](index=354&type=chunk) - Interest rate risk on **$1,075.0 million** of variable rate debt is managed with interest rate swaps, fixing LIBOR on **$200.0 million** at **2.03%** and on **$400.0 million** (decreasing quarterly) at **2.47%**[356](index=356&type=chunk) - Effective July 1, 2018, Argentina's economy was designated as highly inflationary, requiring remeasurement of financial statements into USD and reflecting future exchange gains/losses from monetary assets/liabilities in current earnings[358](index=358&type=chunk) [Item 4. Controls and Procedures](index=62&type=section&id=Item%204.%20Controls%20and%20Procedures) The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2019, providing reasonable assurance of accurate and timely reporting. No material changes to internal control over financial reporting occurred during the quarter - Disclosure controls and procedures were **effective** as of June 30, 2019, providing reasonable assurance of achieving reporting objectives[359](index=359&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2019[360](index=360&type=chunk) PART II — OTHER INFORMATION [Item 1. Legal Proceedings](index=63&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to various legal proceedings in the ordinary course of business. While these matters are often complex and protracted, management believes that any potential liability arising from them is not reasonably likely to be material to the company's financial position, results of operations, or cash flows, considering established accruals - The company is a party to legal proceedings and claims arising in the ordinary course of business[362](index=362&type=chunk) - Management believes that any liability from these proceedings is **not reasonably likely to be material** to the company's financial position, results of operations, or cash flows[362](index=362&type=chunk) [Item 1A. Risk Factors](index=63&type=section&id=Item%201A.%20Risk%20Factors) This section updates the risk factors, highlighting new risks related to the acquired Battery and Auto Care Businesses, including operational dependencies (Dayton, Ohio facility), seasonal volatility, and regulatory changes concerning refrigerant gas R-134a. Significant risks also pertain to the successful closing of the Varta divestiture and the company's substantial debt levels, which could limit operational flexibility and financial capacity - The Acquired Auto Care Business's operations and profitability are highly dependent on the efficient operation of its Dayton, Ohio facility, which has experienced deficiencies and requires additional investment[364](index=364&type=chunk) - Sales of certain Acquired Businesses' products are subject to seasonal volatility, making forecasting difficult and exposing the company to risks from unfavorable weather conditions[365](index=365&type=chunk) - Changes in governmental regulations regarding the use of refrigerant gas R-134a could materially adversely affect the Acquired Auto Care Business's ability to sell aftermarket A/C products[368](index=368&type=chunk)[369](index=369&type=chunk)[370](index=370&type=chunk) - The company faces **significant risks** in successfully closing the divestiture of the Divestment Business, including failure to transfer liabilities, potential third-party claims, and disruption to ongoing business[372](index=372&type=chunk)[373](index=373&type=chunk) - The company's **substantial debt** of approximately **$3.5 billion** at June 30, 2019, could adversely affect its business by limiting cash flow, imposing restrictive covenants, and increasing vulnerability to adverse economic conditions[378](index=378&type=chunk)[379](index=379&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=67&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the quarter ended June 30, 2019, Energizer repurchased 1,036,000 shares of its common stock for $45.0 million at an average price of $43.46 per share under its existing authorization. As of August 6, 2019, 2.8 million shares remain available for repurchase Common Stock Repurchases (Q3 2019) | Period | Total Number of Shares Purchased | Average Price Per Share ($) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | |:-----------------|:---------------------------------|:----------------------------|:---------------------------------------------------------------------------------| | June 1 - June 30 | 1,036,356 | 43.46 | 1,036,000 | - As of August 6, 2019, **2.8 million shares** remain available for repurchase under the **7.5 million share** authorization approved in July 2015[344](index=344&type=chunk) [Item 6. Exhibits](index=67&type=section&id=Item%206.%20Exhibits) This section provides a comprehensive index of exhibits filed with the Form 10-Q, including various agreements (e.g., Separation and Distribution, Tax Matters, Employee Matters, Transition Services, Acquisition Agreements) and corporate governance documents (e.g., Articles of Incorporation, Bylaws, Certificate of Designations) [SIGNATURES](index=71&type=section&id=SIGNATURES) This section contains the official signatures, certifying the due authorization and filing of the report on behalf of Energizer Holdings, Inc. by its Executive Vice President and Chief Financial Officer

PART I — FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents Energizer's unaudited consolidated financial statements, including earnings, balance sheets, cash flows, and shareholders' equity, reflecting recent acquisitions [Consolidated Statements of Earnings and Comprehensive Income (Condensed)](index=4&type=section&id=Consolidated%20Statements%20of%20Earnings%20and%20Comprehensive%20Income%20(Condensed)) Energizer reported a net loss of **$62.3 million** for the quarter and a decrease in net earnings for the six months, primarily due to increased interest and acquisition costs Net Sales and Gross Profit (in millions) | Metric | Qtr Ended Mar 31, 2019 | Qtr Ended Mar 31, 2018 | 6M Ended Mar 31, 2019 | 6M Ended Mar 31, 2018 | | :------------- | :--------------------- | :--------------------- | :-------------------- | :-------------------- | | Net Sales | $556.4 | $374.4 | $1,128.3 | $947.7 | | Gross Profit | $194.2 | $168.5 | $469.7 | $446.8 | Net (Loss)/Earnings from Continuing Operations (in millions) | Metric | Qtr Ended Mar 31, 2019 | Qtr Ended Mar 31, 2018 | 6M Ended Mar 31, 2019 | 6M Ended Mar 31, 2018 | | :------------------------------------- | :--------------------- | :--------------------- | :-------------------- | :-------------------- | | Net (loss)/earnings from continuing operations | $(62.3) | $7.8 | $8.5 | $68.2 | Basic and Diluted EPS from Continuing Operations | Metric | Qtr Ended Mar 31, 2019 | Qtr Ended Mar 31, 2018 | 6M Ended Mar 31, 2019 | 6M Ended Mar 31, 2018 | | :------------------------------------- | :--------------------- | :--------------------- | :-------------------- | :-------------------- | | Basic EPS - continuing operations | $(0.97) | $0.13 | $0.08 | $1.14 | | Diluted EPS - continuing operations | $(0.97) | $0.13 | $0.08 | $1.11 | [Consolidated Balance Sheets (Condensed)](index=6&type=section&id=Consolidated%20Balance%20Sheets%20(Condensed)) Total assets and liabilities significantly increased to **$5,642.3 million** and **$4,997.0 million** respectively, driven by recent acquisitions and increased debt Key Balance Sheet Figures (in millions) | Metric | March 31, 2019 | September 30, 2018 | | :------------------------- | :------------- | :----------------- | | Total Assets | $5,642.3 | $3,178.8 | | Total Liabilities | $4,997.0 | $3,154.3 | | Total Shareholders' Equity | $645.3 | $24.5 | | Goodwill | $1,012.4 | $244.2 | | Other Intangible Assets, net | $1,936.8 | $232.7 | [Consolidated Statements of Cash Flows (Condensed)](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20(Condensed)) Operating cash flow decreased to **$1.8 million**, while investing activities used **$2,875.0 million** and financing provided **$1,438.3 million**, primarily due to acquisitions Cash Flow Summary (Six Months Ended March 31, in millions) | Metric | 2019 | 2018 | | :---------------------------------------- | :--------- | :------- | | Net cash from operating activities | $1.8 | $160.6 | | Net cash used by investing activities | $(2,875.0) | $(11.3) | | Net cash from financing activities | $1,438.3 | $(45.4) | | Acquisitions, net of cash acquired | $(2,403.8) | — | | Cash, cash equivalents, and restricted cash, end of period | $332.9 | $490.3 | [Consolidated Statements of Shareholders' Equity/(Deficit) (Condensed)](index=9&type=section&id=Consolidated%20Statements%20of%20Shareholders'%20Equity%2F(Deficit)%20(Condensed)) Shareholders' equity increased to **$645.3 million**, primarily driven by common and preferred stock issuances for acquisitions, offset by net loss and dividends Shareholders' Equity Changes (in millions, except shares in thousands) | Metric | March 31, 2019 | September 30, 2018 | | :----------------------------------- | :------------- | :----------------- | | Total Shareholders' Equity/(Deficit) | $645.3 | $24.5 | | Additional Paid-in Capital | $860.5 | $217.8 | | Retained Earnings | $127.9 | $177.3 | | Common Stock (Shares in thousands) | 69,875 | 59,608 | - Issuance of common stock contributed **$445.8 million** to additional paid-in capital for the six months ended March 31, 2019[18](index=18&type=chunk) - Issuance of preferred stock contributed **$199.5 million** to additional paid-in capital for the six months ended March 31, 2019[18](index=18&type=chunk) [Notes to Consolidated (Condensed) Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20(Condensed)%20Financial%20Statements) This section provides detailed notes explaining the company's accounting policies, significant transactions, and financial statement components [1.5.1 Description of Business and Basis of Presentation (Note 1)](index=11&type=section&id=(1)%20Description%20of%20Business%20and%20Basis%20of%20Presentation) Energizer, a global battery and auto care product manufacturer, expanded its portfolio through recent acquisitions, with a portion of the Varta business classified as held for sale - Energizer is a global manufacturer, marketer, and distributor of household batteries, specialty batteries, portable lights, and automotive fragrance and appearance products[22](index=22&type=chunk)[23](index=23&type=chunk) - On January 2, 2019, Energizer completed the Battery Acquisition, expanding its battery portfolio with Rayovac® and Varta® brands[24](index=24&type=chunk)[28](index=28&type=chunk) - On January 28, 2019, Energizer completed the Auto Care Acquisition, adding Armor All®, STP®, and A/C PRO® brands to its auto care portfolio[25](index=25&type=chunk) - The Varta consumer battery, chargers, portable power, and portable lighting business in the Europe, Middle East and Africa region (EMEA) has been classified as held for sale and discontinued operations, with divestiture expected in early Q4 fiscal 2019[28](index=28&type=chunk) [1.5.2 Revenue Recognition (Note 2)](index=12&type=section&id=(2)%20Revenue%20Recognition) The company adopted ASU 2014-09 with no material impact, recognizing revenue from product sales at the point of transfer, with net sales of **$556.4 million** for the quarter - The Company adopted ASU 2014-09, Revenue from Contracts with Customers, effective October 1, 2018, with no material impact to financial statements[32](index=32&type=chunk)[36](index=36&type=chunk) - Revenue is recognized at a single point in time when title, ownership, and risk of loss pass to the customer, typically upon delivery or pickup of finished goods[43](index=43&type=chunk) - Net sales reflect transaction prices reduced by variable consideration, including discounts and promotional programs, which are accrued at the time of sale[44](index=44&type=chunk)[45](index=45&type=chunk) Net Sales by Product (in millions) | Product | Qtr Ended Mar 31, 2019 | 6M Ended Mar 31, 2019 | | :----------------- | :--------------------- | :-------------------- | | Batteries | $419.4 | $941.3 | | Auto Care | $108.6 | $129.1 | | Lights and Licensing | $28.4 | $57.9 | | **Total Net Sales** | **$556.4** | **$1,128.3** | Net Sales by Geography (in millions) | Region | Qtr Ended Mar 31, 2019 | 6M Ended Mar 31, 2019 | | :----------------- | :--------------------- | :-------------------- | | North America | $323.9 | $664.9 | | Latin America | $57.7 | $90.2 | | **Americas** | **$381.6** | **$755.1** | | Modern Markets | $102.5 | $229.9 | | Developing Markets | $44.9 | $94.6 | | Distributors Markets | $27.4 | $48.7 | | **International** | **$174.8** | **$373.2** | | **Total Net Sales** | **$556.4** | **$1,128.3** | [1.5.3 Acquisitions (Note 3)](index=14&type=section&id=(3)%20Acquisitions) Energizer completed three acquisitions totaling over **$3.2 billion**, significantly increasing goodwill and intangible assets, and incurring **$131.9 million** in integration costs for the six months - Battery Acquisition completed on January 2, 2019, for a contractual purchase price of **$2,000.0 million**, adding Rayovac® and Varta® brands[50](index=50&type=chunk) - Auto Care Acquisition completed on January 28, 2019, for a contractual purchase price of **$1,250.0 million** (comprised of cash and newly-issued common stock), adding Armor All®, STP®, and A/C PRO® brands[60](index=60&type=chunk)[61](index=61&type=chunk) - Nu Finish Acquisition completed on July 2, 2018, for **$38.1 million**[74](index=74&type=chunk) Preliminary Purchase Price Allocation for Battery Acquisition (as of acquisition date, in millions) | Asset/Liability | Amount | | :------------------------- | :------- | | Cash and cash equivalents | $37.8 | | Inventories | $81.0 | | Assets held for sale | $855.0 | | Goodwill | $498.6 | | Other intangible assets, net | $747.5 | | Liabilities held for sale | $(405.0) | Preliminary Purchase Price Allocation for Auto Care Acquisition (as of acquisition date, in millions) | Asset/Liability | Amount | | :------------------------- | :--------- | | Cash and cash equivalents | $3.3 | | Inventories | $97.8 | | Goodwill | $268.4 | | Other intangible assets, net | $972.5 | | Other liabilities | $(221.1) | Acquisition and Integration Costs (Pre-tax, in millions) | Period | Qtr Ended Mar 31, 2019 | 6M Ended Mar 31, 2019 | | :------------------------- | :--------------------- | :-------------------- | | Total Costs | $95.4 | $131.9 | | Costs of products sold | $31.7 | $31.7 | | SG&A | $29.1 | $48.0 | | Interest expense | $33.2 | $65.6 | Pro Forma Financial Information (in millions, except per share data) | Metric | 6M Ended Mar 31, 2019 | | :------------------------------------------------------------------ | :-------------------- | | Pro forma net sales | $1,353.2 | | Pro forma net earnings/(loss) from continuing operations | $103.2 | | Pro forma diluted net earnings/(loss) per common share - continuing operations | $1.34 | [1.5.4 Divestment (Note 4)](index=21&type=section&id=(4)%20Divestment) The Varta EMEA business was classified as held for sale, with **$848.2 million** in assets and a net loss of **$11.0 million** from discontinued operations for the quarter - The Divestment Business (Varta EMEA) was classified as held for sale and discontinued operations, with the sale expected in early Q4 fiscal 2019[95](index=95&type=chunk) Divestment Business Assets and Liabilities Held for Sale (March 31, 2019, in millions) | Category | Amount | | :--------- | :------- | | Assets | $848.2 | | Liabilities | $389.6 | Net Loss from Discontinued Operations (in millions) | Metric | Qtr/6M Ended Mar 31, 2019 | | :-------------------------------------- | :------------------------ | | Net sales | $80.2 | | Loss before income taxes | $(13.9) | | Net loss from discontinued operations | $(11.0) | [1.5.5 Income Taxes (Note 5)](index=22&type=section&id=(5)%20Income%20Taxes) The six-month effective tax rate was **46.9%**, influenced by disallowed acquisition costs and a finalized mandatory transition tax totaling **$37.5 million** - The six-month effective tax rate was **46.9%** for March 31, 2019, compared to **50.1%** for the prior year comparative period[100](index=100&type=chunk) - The current year provision included the estimated impact of disallowed transaction costs related to the Battery and Auto Care Acquisitions[100](index=100&type=chunk) - The Company finalized accounting for the mandatory transition tax, recording an additional **$1.5 million**, for a total tax of **$37.5 million**[103](index=103&type=chunk) - The Company elected to treat Global Intangible Low Taxed Income (GILTI) as a current period expense[104](index=104&type=chunk) [1.5.6 Share-Based Payments (Note 6)](index=23&type=section&id=(6)%20Share-Based%20Payments) Share-based compensation costs totaled **$14.1 million** for the six months, reflecting RSE awards and performance shares granted in November 2018 Total Share-Based Compensation Cost (in millions) | Period | Qtr Ended Mar 31, 2019 | 6M Ended Mar 31, 2019 | | :------------------------- | :--------------------- | :-------------------- | | Total Compensation Cost | $7.6 | $14.1 | - In November 2018, the Company granted RSE awards of approximately **73,000 shares** (vesting ratably over four years) and **55,000 shares** (vesting on the third anniversary)[108](index=108&type=chunk) - Approximately **190,000 performance shares** were granted in November 2018, vesting subject to meeting target amounts for cumulative adjusted EPS and cumulative free cash flow over a three-year period[108](index=108&type=chunk) [1.5.7 Earnings per Share (Note 7)](index=23&type=section&id=(7)%20Earnings%20per%20share) Basic and diluted net loss per share from continuing operations was **$(0.97)** for the quarter, with Mandatory Convertible Preferred Stock excluded as anti-dilutive Basic and Diluted EPS from Continuing Operations | Metric | Qtr Ended Mar 31, 2019 | 6M Ended Mar 31, 2019 | | :------------------------------------- | :--------------------- | :-------------------- | | Basic EPS - continuing operations | $(0.97) | $0.08 | | Diluted EPS - continuing operations | $(0.97) | $0.08 | Weighted Average Common Shares Outstanding (in millions) | Metric | Qtr Ended Mar 31, 2019 | 6M Ended Mar 31, 2019 | | :------------------------------------- | :--------------------- | :-------------------- | | Weighted average common shares - Basic | 67.3 | 63.5 | | Weighted average common shares - Diluted | 67.3 | 64.6 | - The Company's Mandatory Convertible Preferred Stock (MCPS) was considered anti-dilutive for all periods and excluded from diluted earnings per share calculations[115](index=115&type=chunk) [1.5.8 Segments (Note 8)](index=24&type=section&id=(8)%20Segments) Energizer operates in Americas and International segments, with both showing increased net sales and segment profit for the quarter, driven by acquisitions - Operations are managed via two major geographic reportable segments: Americas and International[117](index=117&type=chunk) - Segment performance is evaluated based on segment operating profit, exclusive of general corporate expenses, share-based compensation, acquisition and integration activities, amortization, and R&D costs[117](index=117&type=chunk) Segment Net Sales (Qtr Ended March 31, in millions) | Segment | 2019 | 2018 | | :------------ | :----- | :----- | | Americas | $381.6 | $224.1 | | International | $174.8 | $150.3 | | **Total** | **$556.4** | **$374.4** | Segment Profit (Qtr Ended March 31, in millions) | Segment | 2019 | 2018 | | :------------ | :---- | :--- | | Americas | $88.7 | $55.7 | | International | $36.4 | $34.1 | | **Total** | **$125.1** | **$89.8** | Total Segment Assets (in millions) | Segment | March 31, 2019 | September 30, 2018 | | :------------ | :------------- | :----------------- | | Americas | $1,047.1 | $504.2 | | International | $652.3 | $851.5 | | **Total** | **$1,699.4** | **$1,355.7** | [1.5.9 Goodwill and Intangible Assets (Note 9)](index=27&type=section&id=(9)%20Goodwill%20and%20intangible%20assets) Goodwill and indefinite-lived intangible assets significantly increased to **$1,012.4 million** and **$1,292.6 million**, respectively, primarily due to recent acquisitions - Goodwill and indefinite-lived intangible assets are not amortized but are evaluated annually for impairment[125](index=125&type=chunk) Goodwill by Segment (in millions) | Segment | Balance at Oct 1, 2018 | Battery Acquisition | Auto Care Acquisition | Balance at Mar 31, 2019 | | :------------ | :--------------------- | :------------------ | :-------------------- | :---------------------- | | Americas | $228.4 | — | — | $228.4 | | International | $15.8 | — | — | $16.0 | | Unallocated | — | $498.6 | $268.4 | $768.0 | | **Total** | **$244.2** | **$498.6** | **$268.4** | **$1,012.4** | - Indefinite-lived intangible assets increased to **$1,292.6 million** at March 31, 2019, from **$76.9 million** at September 30, 2018, primarily due to the Battery Acquisition (**$513.0 million**) and Auto Care Acquisition (**$702.9 million**)[127](index=127&type=chunk) Total Intangible Assets (March 31, 2019, in millions) | Category | Gross Amount | Accumulated Amortization | Net Carrying Amount | | :---------------------------------------- | :----------- | :----------------------- | :------------------ | | Total Amortizable intangible assets | $685.4 | $41.2 | $644.2 | | Trademarks and trade names - indefinite lived | $1,292.6 | — | $1,292.6 | | **Total Other intangible assets, net** | **$1,978.0** | **$41.2** | **$1,936.8** | [1.5.10 Debt (Note 10)](index=28&type=section&id=(10)%20Debt) Total long-term debt surged to **$3,627.1 million** due to new credit agreements and senior note issuances to finance recent acquisitions Long-Term Debt Breakdown (in millions) | Debt Type | March 31, 2019 | September 30, 2018 | | :-------------------------------------- | :------------- | :----------------- | | Senior Secured Term Loan A Facility due 2021 | $150.0 | — | | Senior Secured Term Loan B Facility due 2025 | $1,000.0 | — | | 5.50% Senior Notes due 2025 | $600.0 | $600.0 | | 6.375% Senior Notes due 2026 | $500.0 | — | | 4.625% Senior Notes due 2026 (Euro Notes) | $729.2 | — | | 7.750% Senior Notes due 2027 | $600.0 | — | | Capital lease obligations | $47.9 | — | | **Total long-term debt, including current maturities** | **$3,627.1** | **$988.0** | - Entered into a new credit agreement on December 17, 2018, providing a **$400.0 million** revolving credit facility and **$1,200.0 million** in term loans (Term Loan A and B)[131](index=131&type=chunk) - Finalized pricing of **$600.0 million** in 7.750% Senior Notes due 2027 on January 17, 2019, to fund the Auto Care Acquisition[136](index=136&type=chunk) - Finalized pricing of **$500.0 million** in 6.375% Senior Notes and **€650.0 million** in 4.625% Senior Notes due 2026 in June 2018, with proceeds used for the Battery Acquisition[138](index=138&type=chunk)[139](index=139&type=chunk) - Entered into interest rate swap agreements to fix the variable benchmark component (LIBOR) on **$200.0 million** of debt at **2.03%** (through June 2022) and on **$400.0 million** of debt at **2.47%** (effective Oct 1, 2018, decreasing quarterly until Dec 31, 2020)[140](index=140&type=chunk)[141](index=141&type=chunk) Aggregate Maturities of Long-Term Debt (as of March 31, 2019, in millions) | Year | Long-term debt | Capital leases | | :-------- | :------------- | :------------- | | 2020 | $10.0 | $4.8 | | 2021 | $60.0 | $4.8 | | 2022 | $110.0 | $4.7 | | 2023 | $10.0 | $4.6 | | 2024 | $10.0 | $5.3 | | Thereafter | $3,379.2 | $72.6 | [1.5.11 Pension Plans (Note 11)](index=30&type=section&id=(11)%20Pension%20Plans) The company sponsors defined benefit pension plans, with a net periodic pension benefit of **$(0.4) million** for the U.S. plan and **$(0.1) million** for International for the quarter - The Company has several defined benefit pension plans, with the U.S. plan frozen in fiscal year 2015[147](index=147&type=chunk) Net Periodic Pension (Benefit)/Cost (Qtr Ended March 31, in millions) | Component | U.S. | International | | :-------------- | :----- | :------------ | | Service cost | — | $0.2 | | Interest cost | $5.1 | $0.8 | | Expected return | $(6.5) | $(1.3) | | Amortization | $1.0 | $0.2 | | **Net periodic (benefit)/cost** | **$(0.4)** | **$(0.1)** | - A pension plan was acquired as part of the Divestment Business and is included in Liabilities held for sale[153](index=153&type=chunk) [1.5.12 Shareholders' Equity (Note 12)](index=31&type=section&id=(12)%20Shareholders'%20Equity) The company paid **$40.8 million** in common stock dividends and issued common and preferred stock totaling **$404.8 million** to fund the Auto Care Acquisition - The Board of Directors declared a cash dividend of **$0.30** per share of common stock for the first and second quarters of fiscal 2019[155](index=155&type=chunk) - Total dividends paid on common stock were **$40.8 million** for the six months ended March 31, 2019[156](index=156&type=chunk) - In January 2019, the Company issued **4,687,498 shares** of common stock, generating net proceeds of **$205.3 million**, used to fund a portion of the Auto Care Acquisition[158](index=158&type=chunk) - On January 28, 2019, **5,278,921 shares** of common stock were issued to Spectrum as partial consideration for the Auto Care Acquisition, valued at **$240.5 million**[159](index=159&type=chunk) - In January 2019, the Company issued **2,156,250 shares** of Series A Mandatory Convertible Preferred Stock (MCPS), generating net proceeds of **$199.5 million**, used to fund the Auto Care Acquisition[164](index=164&type=chunk) - Dividends on MCPS are payable quarterly at an annual rate of **7.50%** of the liquidation preference (**$100.00** per share)[166](index=166&type=chunk) [1.5.13 Financial Instruments and Risk Management (Note 13)](index=33&type=section&id=(13)%20Financial%20Instruments%20and%20Risk%20Management) Energizer manages market risks from currency, commodity, and interest rates using derivatives, with Argentina's highly inflationary economy impacting financial statement translation - The Company uses derivatives only for identifiable exposures to manage market risk from currency rates, interest rates, and commodity prices, not for speculative purposes[172](index=172&type=chunk)[175](index=175&type=chunk) - In February 2019, the Company entered into a hedging contract on zinc purchases, recognized a pre-tax gain of **$0.2 million** at March 31, 2019, and classified it as a cash flow hedge[177](index=177&type=chunk) - Energizer uses forward currency contracts to hedge cash flow uncertainty of forecasted inventory purchases, with an unrealized pre-tax gain of **$3.6 million** at March 31, 2019[184](index=184&type=chunk) - The Company uses interest rate swap agreements to fix the variable benchmark component (LIBOR) on **$200.0 million** and **$400.0 million** of its variable rate debt[180](index=180&type=chunk) - At March 31, 2019, the estimated fair value of the Company's financial assets and liabilities carried at fair value are primarily classified as Level 2 inputs[198](index=198&type=chunk)[201](index=201&type=chunk) [1.5.14 Accumulated Other Comprehensive (Loss)/Income (Note 14)](index=37&type=section&id=(14)%20Accumulated%20Other%20Comprehensive%20(Loss)%2FIncome) Accumulated other comprehensive loss improved to **$(227.5) million**, influenced by foreign currency translation, pension activity, and cash flow hedges Accumulated Other Comprehensive (Loss)/Income (in millions) | Metric | March 31, 2019 | September 30, 2018 | | :---------------------------------------- | :------------- | :----------------- | | Balance at period end | $(227.5) | $(241.8) | | Foreign Currency Translation Adjustments | $(97.0) | $(113.6) | | Pension Activity | $(134.3) | $(136.4) | | Zinc Contracts | $1.5 | — | | Foreign Currency Contracts | $2.8 | $3.3 | | Interest Rate Contracts | $(0.5) | $4.9 | - OCI before reclassifications for the six months ended March 31, 2019, was **$14.7 million**[202](index=202&type=chunk) - Total reclassifications to earnings for the six months ended March 31, 2019, amounted to **$1.7 million**[206](index=206&type=chunk) [1.5.15 Supplemental Financial Statement Information (Note 15)](index=38&type=section&id=(15)%20Supplemental%20Financial%20Statement%20Information) "Other items, net" showed **$(13.1) million** income for six months, while inventories and property, plant, and equipment significantly increased due to acquisitions Other Items, Net (in millions) | Item | Qtr Ended Mar 31, 2019 | 6M Ended Mar 31, 2019 | | :---------------------------------------- | :--------------------- | :-------------------- | | Interest income | $(0.7) | $(1.0) | | Interest income on restricted cash | — | $(5.8) | | Foreign currency exchange loss | $3.8 | $2.7 | | Pension benefit other than service costs | $(0.7) | $(1.4) | | Acquisition foreign currency gains | — | $(9.0) | | Settlement of acquired business hedging contracts | $1.5 | $1.5 | | Transition services agreement income | $(0.1) | $(0.1) | | **Total Other items, net** | **$3.8** | **$(13.1)** | Inventories (in millions) | Category | March 31, 2019 | September 30, 2018 | | :--------------------- | :------------- | :----------------- | | Raw materials and supplies | $89.3 | $40.0 | | Work in process | $130.2 | $86.5 | | Finished products | $271.6 | $196.6 | | **Total inventories** | **$491.1** | **$323.1** | Property, Plant and Equipment, Net (in millions) | Category | March 31, 2019 | September 30, 2018 | | :------------------------------------- | :------------- | :----------------- | | Total gross property | $1,016.8 | $823.6 | | Accumulated depreciation | $(653.1) | $(656.9) | | **Total property, plant and equipment, net** | **$363.7** | **$166.7** | [1.5.16 Related Party Transactions (Note 16)](index=39&type=section&id=(16)%20Related%20Party%20Transactions) Energizer incurred **$5.4 million** in TSA expenses and **$4.4 million** from a supply agreement with Spectrum, a related party, following recent acquisitions - Spectrum owns **7.6%** of Energizer's outstanding common shares as of March 31, 2019, following the Auto Care Acquisition[211](index=211&type=chunk) - Energizer and Spectrum entered into transition service agreements (TSA) and reverse TSAs for back office support services[214](index=214&type=chunk) - For the quarter and six months ended March 31, 2019, the Company incurred **$5.0 million** in SG&A and **$0.4 million** in COGS for TSA expenses[216](index=216&type=chunk) - The Company recorded **$0.1 million** in income in Other items, net, related to reverse transition services agreements provided[216](index=216&type=chunk) - A supply agreement with Spectrum resulted in an expense of **$4.4 million** for the quarter and six months ended March 31, 2019[217](index=217&type=chunk) [1.5.17 Legal Proceedings/Contingencies and Other Obligations (Note 17)](index=41&type=section&id=(17)%20Legal%20proceedings%2Fcontingencies%20and%20other%20obligations) The company faces various legal proceedings, with liabilities not expected to be material, and has **$41.1 million** in purchase obligations - The Company is subject to a number of legal proceedings in various jurisdictions arising out of its operations[219](index=219&type=chunk) - The Company believes that its liability, if any, arising from pending legal proceedings is not reasonably likely to be material to its financial position, results of operations, or cash flows[219](index=219&type=chunk) - At March 31, 2019, the Company had approximately **$41.1 million** of purchase obligations[221](index=221&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=42&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section discusses Energizer's financial condition, operating results, and liquidity, including the impact of recent acquisitions and non-GAAP measures [2.1 Non-GAAP Financial Measures](index=42&type=section&id=Non-GAAP%20Financial%20Measures) Management utilizes non-GAAP measures like Segment Profit and Adjusted EPS to assess ongoing performance, excluding acquisition costs, currency impacts, and one-time tax effects - Non-GAAP financial measures are used to provide meaningful comparisons to historical or future periods by excluding items not reflective of ongoing operating performance, such as acquisition and integration costs and one-time tax impacts[225](index=225&type=chunk) - Segment Profit excludes general corporate and other expenses, global marketing expenses, R&D expenses, amortization expense, interest expense, other items, net, and charges related to acquisition and integration[226](index=226&type=chunk) - Adjusted Net Earnings From Continuing Operations and Adjusted Diluted Net Earnings From Continuing Operations Per Common Share (EPS) exclude the impact of acquisition and integration costs and the one-time impact of new U.S. tax legislation[227](index=227&type=chunk) - Organic growth is a non-GAAP measure that excludes or adjusts for the impact of acquisitions, changes in Argentina Operations, and the impact of currency from foreign exchange rate changes[228](index=228&type=chunk) [2.2 Forward-Looking Statements](index=43&type=section&id=Forward-Looking%20Statements) Forward-looking statements are subject to risks including market conditions, acquisition integration, divestiture challenges, competitive pressures, and debt covenants - Forward-looking statements are not guarantees of performance and are inherently subject to known and unknown risks, uncertainties, and assumptions that could cause actual results to differ materially[233](index=233&type=chunk) - Key factors that could cause actual results to differ include market and economic conditions, ability to integrate businesses and realize synergies, ability to divest the Varta® consumer battery business, success of new products, customer distribution, strategic initiatives, competitive pressure, cost savings, foreign currency exchange rates, raw material costs, legislative/regulatory changes, cyber-attacks, litigation, and compliance with debt covenants[233](index=233&type=chunk) [2.3 Recent Acquisitions Overview](index=44&type=section&id=Recent%20Acquisitions%20Overview) Energizer completed Battery (**$2,000.0 million**), Auto Care (**$1,250.0 million**), and Nu Finish (**$38.1 million**) acquisitions, incurring **$131.9 million** in pre-tax integration costs for six months - The Battery Acquisition was completed on January 2, 2019, for **$2,000.0 million**, including Rayovac® and Varta® brands[236](index=236&type=chunk) - The Auto Care Acquisition was completed on January 28, 2019, for **$1,250.0 million**, including Armor All®, STP®, and A/C PRO® brands[239](index=239&type=chunk) - The Nu Finish Acquisition was completed on July 2, 2018, for **$38.1 million**[241](index=241&type=chunk) Pre-tax Acquisition and Integration Costs (in millions) | Period | Qtr Ended Mar 31, 2019 | 6M Ended Mar 31, 2019 | | :------------------------- | :--------------------- | :-------------------- | | Total Costs | $95.4 | $131.9 | | Costs of products sold | $31.7 | $31.7 | | SG&A | $29.1 | $48.0 | | Interest expense | $33.2 | $65.6 | [2.4 Highlights / Operating Results](index=45&type=section&id=Highlights%20%2F%20Operating%20Results) The company reported a **$62.3 million** net loss for Q2 2019, despite **48.6%** net sales growth to **$556.4 million** driven by acquisitions, with gross margin declining to **34.9%** Net (Loss)/Earnings from Continuing Operations (in millions) | Metric | Qtr Ended Mar 31, 2019 | Qtr Ended Mar 31, 2018 | | :------------------------------------- | :--------------------- | :--------------------- | | Net (loss)/earnings from continuing operations | $(62.3) | $7.8 | Adjusted Diluted EPS from Continuing Operations | Metric | Qtr Ended Mar 31, 2019 | Qtr Ended Mar 31, 2018 | Change (%) | | :------------------------------------- | :--------------------- | :--------------------- | :--------- | | Adjusted diluted EPS - continuing operations | $0.20 | $0.45 | -55.6% | Total Net Sales Drivers (Qtr Ended Mar 31, 2019, in millions) | Driver | Amount | % Chg | | :------------------------- | :----- | :---- | | Net sales - FY '18 | $374.4 | | | Organic | $7.1 | 1.9% | | Impact of Battery Acquisition | $99.9 | 26.7% | | Impact of Auto Care Acquisition | $84.5 | 22.6% | | Impact of Nu Finish Acquisition | $1.9 | 0.5% | | Change in Argentina operations | $(0.9) | (0.2)%| | Impact of currency | $(10.5)| (2.9)%| | Net sales - FY '19 | $556.4 | 48.6% | - Gross margin percentage for Q2 2019 was **34.9%**, down from **45.0%** in the prior year, primarily due to the lower margin rate profile of acquired businesses and unfavorable foreign currency movement, and a **$31.7 million** inventory step-up[263](index=263&type=chunk) - Interest expense for Q2 2019 was **$77.2 million**, significantly higher than **$16.5 million** in Q2 2018, primarily due to higher debt associated with acquisitions, including **$33.2 million** in issuance fees and ticking fees[270](index=270&type=chunk) - The effective tax rate for Q2 2019 was **46.9%**, compared to **50.1%** in the prior year, influenced by disallowed transaction costs from acquisitions and the one-time impact of U.S. tax legislation[276](index=276&type=chunk) [2.5 Segment Results](index=49&type=section&id=Segment%20Results) Americas net sales grew **70.3%** to **$381.6 million** and International net sales grew **16.3%** to **$174.8 million**, both driven by acquisitions and organic growth Americas Net Sales Drivers (Qtr Ended Mar 31, 2019, in millions) | Driver | Amount | % Chg | | :------------------------- | :----- | :---- | | Net sales - FY '18 | $224.1 | | | Organic | $2.0 | 0.9% | | Impact of Battery Acquisition | $78.1 | 34.9% | | Impact of Auto Care Acquisition | $77.9 | 34.8% | | Impact of Nu Finish Acquisition | $1.8 | 0.8% | | Change in Argentina | $(0.9) | (0.4)%| | Impact of currency | $(1.4) | (0.7)%| | Net Sales - FY '19 | $381.6 | 70.3% | International Net Sales Drivers (Qtr Ended Mar 31, 2019, in millions) | Driver | Amount | % Chg | | :------------------------- | :----- | :---- | | Net sales - FY '18 | $150.3 | | | Organic | $5.1 | 3.4% | | Impact of Battery Acquisition | $21.8 | 14.5% | | Impact of Auto Care Acquisition | $6.6 | 4.4% | | Impact of Nu Finish Acquisition | $0.1 | 0.1% | | Impact of currency | $(9.1) | (6.1)%| | Net Sales - FY '19 | $174.8 | 16.3% | Americas Segment Profit Drivers (Qtr Ended Mar 31, 2019, in millions) | Driver | Amount | % Chg | | :------------------------- | :----- | :---- | | Segment Profit - FY '18 | $55.7 | | | Organic | $1.7 | 3.1% | | Impact of Battery Acquisition | $7.1 | 12.7% | | Impact of Auto Care Acquisition | $24.0 | 43.1% | | Impact of Nu Finish Acquisition | $1.5 | 2.7% | | Change in Argentina | $(0.4) | (0.7)%| | Impact of currency | $(0.9) | (1.7)%| | Segment Profit - FY '19 | $88.7 | 59.2% | International Segment Profit Drivers (Qtr Ended Mar 31, 2019, in millions) | Driver | Amount | % Chg | | :------------------------- | :----- | :---- | | Segment Profit - FY '18 | $34.1 | | | Organic | $1.9 | 5.6% | | Impact of Battery Acquisition | $6.0 | 17.6% | | Impact of Auto Care Acquisition | $0.7 | 2.1% | | Impact of Nu Finish Acquisition | — | —% | | Impact of currency | $(6.3) | (18.6)%| | Segment Profit - FY '19 | $36.4 | 6.7% | [2.6 General Corporate and Global Marketing Expenses](index=52&type=section&id=General%20Corporate%20and%20Global%20Marketing%20Expenses) General corporate and global marketing expenses increased to **$36.1 million** for the quarter, but decreased to **6.5%** of net sales due to acquisition-driven sales growth General Corporate and Global Marketing Expenses (in millions) | Expense Category | Qtr Ended Mar 31, 2019 | Qtr Ended Mar 31, 2018 | 6M Ended Mar 31, 2019 | 6M Ended Mar 31, 2018 | | :--------------------------------- | :--------------------- | :--------------------- | :-------------------- | :-------------------- | | General corporate and other expenses | $29.7 | $24.7 | $48.4 | $46.3 | | Global marketing expense | $6.4 | $5.2 | $9.5 | $8.4 | | **Total** | **$36.1** | **$29.9** | **$57.9** | **$54.7** | | **% of Net Sales** | **6.5%** | **8.0%** | **5.1%** | **5.8%** | - The increase in general corporate and other expenses for the quarter was primarily due to the lapping of a reduction in legal reserves in the prior year fiscal quarter, partially offset by lower compensation costs and mark-to-market expense[299](index=299&type=chunk) [2.7 Liquidity and Capital Resources](index=53&type=section&id=Liquidity%20and%20Capital%20Resources) Cash and cash equivalents were **$332.9 million**, with operating cash flow decreasing to **$13.0 million**, while investing used **$2,424.4 million** and financing provided **$1,439.3 million** for acquisitions - Energizer's primary future cash needs are centered on operating activities, working capital, strategic investments, and debt reductions[303](index=303&type=chunk) - Cash and cash equivalents were **$332.9 million** at March 31, 2019, with approximately **70%** held outside of the U.S[304](index=304&type=chunk) - Cash flow from operating activities from continuing operations was **$13.0 million** for the six months ended March 31, 2019, a decrease of **$147.6 million** from the prior year, primarily due to acquisition-related cash expenditures and working capital changes[310](index=310&type=chunk) - Net cash used by investing activities from continuing operations was **$2,424.4 million** for the six months ended March 31, 2019, primarily for the Battery Acquisition (**$1,468.4 million**) and the cash portion of the Auto Care Acquisition (**$935.4 million**)[312](index=312&type=chunk)[313](index=313&type=chunk) - Net cash from financing activities from continuing operations was **$1,439.3 million** for the six months ended March 31, 2019, driven by **$1,800.0 million** from debt issuance, **$205.3 million** from common stock issuance, and **$199.5 million** from Mandatory Preferred Convertible Stock issuance[315](index=315&type=chunk) - Dividends paid on common stock totaled **$40.8 million** for the six months ended March 31, 2019[315](index=315&type=chunk) - No shares were repurchased on the open market during the first six months of fiscal 2019 under the **7.5 million** share repurchase authorization[322](index=322&type=chunk) [2.8 Other Matters](index=55&type=section&id=Other%20Matters) Accrued environmental costs were **$7.1 million** and are not material, while purchase obligations totaled **$41.1 million** - Accrued environmental costs were **$7.1 million** at March 31, 2019[324](index=324&type=chunk) - Environmental costs are not expected to have a material effect on total capital and operating expenditures, earnings, or competitive position[324](index=324&type=chunk) - At March 31, 2019, the Company had approximately **$41.1 million** of purchase obligations[326](index=326&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=56&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Energizer manages market risks from currency, commodity, and interest rates using derivatives, with Argentina's highly inflationary economy impacting financial statement translation - The Company is exposed to market risk from adverse changes in currency rates, commodity prices, and interest rates, and uses derivatives for identifiable exposures[327](index=327&type=chunk) - Forward currency contracts are used to hedge cash flow uncertainty of forecasted inventory purchases, with an unrealized pre-tax gain of **$3.6 million** at March 31, 2019[329](index=329&type=chunk) - A hedging contract on zinc purchases was entered into in February 2019, resulting in a pre-tax gain of **$0.2 million** at March 31, 2019[335](index=335&type=chunk) - Interest rate swaps are used to fix the variable benchmark component (LIBOR) on **$600.0 million** of variable rate debt[336](index=336&type=chunk) - Effective July 1, 2018, Argentina's economy was designated as highly inflationary, requiring remeasurement of financial statements into USD and reflecting exchange gains and losses from monetary assets and liabilities in current earnings[338](index=338&type=chunk) [Item 4. Controls and Procedures](index=58&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of March 31, 2019, with 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, 2019, providing reasonable assurance of accurate and timely reporting[341](index=341&type=chunk) - There was no change in the Company's internal control over financial reporting during the quarter ended March 31, 2019, that materially affected or is reasonably likely to materially affect it[342](index=342&type=chunk) PART II — OTHER INFORMATION [Item 1. Legal Proceedings](index=59&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings, with any resulting liabilities not expected to be material to its financial position or operations - The Company and its affiliates are subject to a number of legal proceedings in various jurisdictions arising out of its operations[344](index=344&type=chunk) - Accruals are established for contingencies where the incurrence of a loss is probable and can be reasonably estimated[344](index=344&type=chunk) - Based on present information, the Company believes its liability from pending legal proceedings is not reasonably likely to be material to its financial position, results of operations, or cash flows[344](index=344&type=chunk) [Item 1A. Risk Factors](index=59&type=section&id=Item%201A.%20Risk%20Factors) New risk factors include operational dependence on the Dayton facility, seasonal volatility, R-134a regulations, divestiture risks for Varta EMEA, and substantial acquisition-related debt - The operations and profitability of the Acquired Auto Care Business are highly dependent on the efficient operation of its Dayton, Ohio facility, which has experienced business disruptions and requires additional investment[346](index=346&type=chunk) - The Acquired Businesses are subject to seasonal volatility, particularly the Auto Care Business, which can be significantly impacted by unfavorable weather conditions and makes forecasting difficult[347](index=347&type=chunk) - Changes in governmental regulations regarding the use of refrigerant gas R-134a could have a material adverse effect on the ability of the Acquired Auto Care Business to sell its aftermarket A/C products[350](index=350&type=chunk)[351](index=351&type=chunk) - The divestiture of the Varta® consumer battery, chargers, portable power, and portable lighting business in EMEA involves significant risks and uncertainties, including the inability to find potential buyers on favorable terms or within the required timeline, and potential asset impairment charges[354](index=354&type=chunk)[355](index=355&type=chunk)[358](index=358&type=chunk) - The Company's significant debt level of approximately **$3.6 billion** at March 31, 2019, incurred to finance acquisitions, could adversely affect cash flow, limit future growth opportunities, and impose restrictive covenants[362](index=362&type=chunk)[363](index=363&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=63&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company purchased **262** equity shares for tax withholding, with no open market repurchases under the 7.5 million share authorization during the quarter Purchases of Equity Securities (Q2 Fiscal 2019) | Period | Total Number of Shares Purchased | Average Price Per Share | | :------------------------- | :------------------------------- | :---------------------- | | January 1 - January 31 | — | — | | February 1 - February 28 | 152 | $47.66 | | March 1 - March 31 | 110 | $45.09 | | **Total** | **262** | **$46.58** | - The **262 shares** purchased during the quarter relate to the surrender of common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock or execution of net exercises[372](index=372&type=chunk) - No shares were repurchased on the open market during the quarter under the **7.5 million** share repurchase authorization approved on July 1, 2015[373](index=373&type=chunk) - As of May 7, 2019, **3.8 million shares** remain available for repurchase under the authorization[323](index=323&type=chunk) [Item 6. Exhibits](index=63&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including various agreements, corporate governance documents, debt instruments, and certifications - The Exhibit Index lists various agreements, including Separation and Distribution, Tax Matters, Employee Matters, Transition Services, and multiple Acquisition Agreements[376](index=376&type=chunk) - Corporate governance documents such as the Third Amended and Restated Articles of Incorporation, Bylaws, and Certificate of Designations for Preferred Stock are included[376](index=376&type=chunk)[378](index=378&type=chunk) - Debt-related documents, including Supplemental Indentures for various Senior Notes, are part of the exhibits[379](index=379&type=chunk)[380](index=380&type=chunk) - Certifications of periodic financial reports by the Chief Executive Officer and Chief Financial Officer are filed herewith[379](index=379&type=chunk)[380](index=380&type=chunk)[381](index=381&type=chunk)

[PART I — FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) Energizer Holdings, Inc.'s unaudited condensed consolidated financial statements and notes for Q4 2018 [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Energizer Holdings, Inc. presents its unaudited condensed consolidated financial statements and notes for Q4 2018 [Consolidated Statements of Earnings and Comprehensive Income (Condensed)](index=4&type=section&id=Consolidated%20Statements%20of%20Earnings%20and%20Comprehensive%20Income%20(Condensed)) Net earnings for Q4 2018 increased to **$70.8 million**, with diluted EPS rising to **$1.16** Financial Metrics Summary (Millions) | Metric | Q4 2018 (Millions) | Q4 2017 (Millions) | | :---------------------------------------- | :----------------- | :----------------- | | Net sales | $571.9 | $573.3 | | Gross profit | $275.5 | $278.3 | | Earnings before income taxes | $90.0 | $119.0 | | Income tax provision | $19.2 | $58.6 | | Net earnings | $70.8 | $60.4 | | Basic net earnings per share | $1.19 | $1.00 | | Diluted net earnings per share | $1.16 | $0.98 | | Total comprehensive income | $64.9 | $71.5 | [Consolidated Balance Sheets (Condensed)](index=5&type=section&id=Consolidated%20Balance%20Sheets%20(Condensed)) Total assets significantly increased to **$4,416.1 million** at December 31, 2018, primarily due to a rise in restricted cash Balance Sheet Overview (Millions) | Metric | Dec 31, 2018 (Millions) | Sep 30, 2018 (Millions) | | :----------------------------------- | :---------------------- | :---------------------- | | Cash and cash equivalents | $607.3 | $522.1 | | Total current assets | $1,208.8 | $1,171.1 | | Restricted cash | $2,456.5 | $1,246.2 | | Total assets | $4,416.1 | $3,178.8 | | Total current liabilities | $832.0 | $751.2 | | Long-term debt held in escrow | $2,346.2 | $1,230.7 | | Total liabilities | $4,345.7 | $3,154.3 | | Total shareholders' equity | $70.4 | $24.5 | [Consolidated Statements of Cash Flows (Condensed)](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20(Condensed)) Net cash from operating activities decreased to **$118.9 million** for Q4 2018, while financing activities generated a **$1,183.6 million** inflow Cash Flow Summary (Millions) | Metric | Q4 2018 (Millions) | Q4 2017 (Millions) | | :------------------------------------------------------------------ | :----------------- | :----------------- |\ | Net cash from operating activities | $118.9 | $141.0 | | Net cash used by investing activities | ($4.7) | ($5.5) | | Net cash from/(used by) financing activities | $1,183.6 | ($63.9) | | Net increase in cash, cash equivalents, and restricted cash | $1,295.5 | $76.3 | | Cash, cash equivalents, and restricted cash, end of period | $3,063.8 | $454.3 | [Consolidated Statements of Shareholders' Equity/(Deficit) (Condensed)](index=7&type=section&id=Consolidated%20Statements%20of%20Shareholders'%20Equity%2F(Deficit)%20(Condensed)) Shareholders' equity increased to **$70.4 million** at December 31, 2018, driven by net earnings, partially offset by dividends Shareholders' Equity Components (Millions) | Metric | Dec 31, 2018 (Millions) | Sep 30, 2018 (Millions) | | :----------------------------------- | :---------------------- | :---------------------- | | Common Stock | $0.6 | $0.6 | | Additional Paid-in Capital | $208.2 | $217.8 | | Retained Earnings | $226.1 | $177.3 | | Treasury Stock | ($116.8) | ($129.4) | | Accumulated Other Comprehensive Loss | ($247.7) | ($241.8) | | Total Shareholders' Equity/(Deficit) | $70.4 | $24.5 | - **Net earnings** contributed **$70.8 million** to retained earnings during Q4 2018[16](index=16&type=chunk) - Dividends to shareholders for Q4 2018 totaled **$18.4 million** (**$0.30 per share**)[16](index=16&type=chunk) [Notes to Consolidated (Condensed) Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20(Condensed)%20Financial%20Statements) These notes detail Energizer's business, accounting policies, acquisitions, tax impacts, share-based compensation, segment reporting, debt, and financial instruments [ (1) Description of Business and Basis of Presentation](index=8&type=section&id=(1)%20Description%20of%20Business%20and%20Basis%20of%20Presentation) Energizer is a global manufacturer of batteries and automotive products, with unaudited financials prepared under Regulation S-X - Energizer is a global manufacturer and marketer of household batteries, specialty batteries, portable lights, and automotive fragrance and appearance products[20](index=20&type=chunk) - The company adopted ASU 2014-09 and ASU 2018-15 effective October 1, 2018, with no material impact on retained earnings or capitalized implementation costs[23](index=23&type=chunk)[24](index=24&type=chunk) - ASU 2016-02 (Leases) and ASU 2017-12 (Hedging Activities) are effective for Energizer beginning October 1, 2019, with impact under evaluation[26](index=26&type=chunk)[27](index=27&type=chunk)[29](index=29&type=chunk) [ (2) Revenue Recognition](index=9&type=section&id=(2)%20Revenue%20Recognition) The company adopted the new five-step revenue recognition model effective October 1, 2018, with no material impact - Revenue is recognized when title, ownership, and risk of loss pass to the customer, typically upon delivery or pickup of finished goods[40](index=40&type=chunk) - **Net sales** are reduced by variable consideration, including discounts and estimated payments/allowances for promotional programs[41](index=41&type=chunk)[42](index=42&type=chunk) Net Sales by Category (Millions) | Net Sales Category | Q4 2018 (Millions) | Q4 2017 (Millions) | | :----------------- | :----------------- | :----------------- | | Batteries | $524.3 | $524.5 | | Other | $47.6 | $48.8 | | Total Net Sales | $571.9 | $573.3 | Net Sales by Region (Millions) | Net Sales by Region | Q4 2018 (Millions) | Q4 2017 (Millions) | | :------------------ | :----------------- | :----------------- | | North America | $341.0 | $335.0 | | Latin America | $32.5 | $38.1 | | Americas Total | $373.5 | $373.1 | | Modern Markets | $127.4 | $130.0 | | Developing Markets | $49.7 | $46.6 | | Distributors Markets| $21.3 | $23.6 | | International Total | $198.4 | $200.2 | | Total Net Sales | $571.9 | $573.3 | [ (3) Acquisitions](index=11&type=section&id=(3)%20Acquisitions) Energizer completed two major acquisitions post-quarter: Spectrum's global battery business for **$2,000.0 million** and its global auto care business for **$1,250.0 million** - On January 2, 2019, Energizer completed the acquisition of Spectrum Brands' global battery, lighting, and portable power business for **$2,000.0 million**, funded by senior notes, term loans, and cash[47](index=47&type=chunk) - The Battery Acquisition was conditioned on the divestiture of the Varta® consumer battery business in EMEA, expected in the first half of calendar year 2019[49](index=49&type=chunk) - On January 28, 2019, Energizer completed the acquisition of Spectrum's global auto care business for **$1,250.0 million**, comprising **$937.5 million** in cash and **$312.5 million** in newly-issued common stock[50](index=50&type=chunk)[51](index=51&type=chunk) - The Nu Finish® and Scratch Doctor® brands were acquired on July 2, 2018, for **$38.1 million**, contributing **$1.0 million** in revenue for Q4 2018[59](index=59&type=chunk) Nu Finish Acquisition - Preliminary Purchase Price Allocation (Millions) | Nu Finish Acquisition - Preliminary Purchase Price Allocation (Millions) | | :--------------------------------------------------------------------- | | Accounts receivable: $2.4 | | Inventory: $0.9 | | Goodwill: $14.7 | | Other identifiable intangible assets: $21.8 | | Accounts payable: ($1.7) | | Net assets acquired: $38.1 | [ (4) Income Taxes](index=12&type=section&id=(4)%20Income%20Taxes) The effective tax rate for Q4 2018 was **21.3%**, significantly lower than **49.2%** in the prior year, due to the U.S. Tax Cuts and Jobs Act - The three-month effective tax rate was **21.3%** for Q4 2018, down from **49.2%** in Q4 2017[62](index=62&type=chunk) - The Tax Act reduced the corporate income tax rate from **35% to 21%**, with a full **21%** impact starting fiscal year 2019[63](index=63&type=chunk)[65](index=65&type=chunk) - An additional **$1.5 million** was recorded for the mandatory transition tax in Q4 2018, bringing the total to **$37.5 million**[68](index=68&type=chunk) [ (5) Share-Based Payments](index=13&type=section&id=(5)%20Share-Based%20Payments) Total share-based compensation expense was **$6.5 million** for Q4 2018, slightly down from **$6.7 million** in the prior year Total Share-Based Compensation Cost (Millions) | Metric | Q4 2018 (Millions) | Q4 2017 (Millions) | | :----------------------------------- | :----------------- | :----------------- | | Total share-based compensation cost | $6.5 | $6.7 | - In November 2018, RSE awards of approximately **73,000 shares** (ratable vesting over four years) and **55,000 shares** (vesting on third anniversary) were granted[71](index=71&type=chunk) - Additionally, **190,000 performance shares** were granted, vesting based on cumulative adjusted EPS and free cash flow targets over three years[71](index=71&type=chunk) [ (6) Earnings per share](index=14&type=section&id=(6)%20Earnings%20per%20share) Basic EPS for Q4 2018 was **$1.19**, and diluted EPS was **$1.16**, reflecting an increase from the prior year Earnings Per Share Summary | Metric | Q4 2018 | Q4 2017 | | :------------------------------------------- | :------ | :------ | | Net earnings (Millions) | $70.8 | $60.4 | | Basic average shares outstanding (Millions) | 59.7 | 60.2 | | Diluted average shares outstanding (Millions)| 61.0 | 61.5 | | Basic earnings per common share | $1.19 | $1.00 | | Diluted earnings per common share | $1.16 | $0.98 | - For Q4 2018, **0.1 million** restricted stock equivalents were anti-dilutive and excluded from diluted EPS calculations[79](index=79&type=chunk) [ (7) Segments](index=15&type=section&id=(7)%20Segments) Energizer manages operations through Americas and International segments, with performance evaluated based on segment operating profit - The company's reportable segments are Americas and International, a change from prior reporting[82](index=82&type=chunk) - Segment performance is assessed using segment operating profit, which excludes general corporate expenses, share-based compensation, acquisition and integration activities, amortization, R&D, and other corporate items[83](index=83&type=chunk) Segment Sales and Profit (Millions) | Segment Sales and Profit (Millions) | Q4 2018 | Q4 2017 | | :---------------------------------- | :------ | :------ | | Net Sales - Americas | $373.5 | $373.1 | | Net Sales - International | $198.4 | $200.2 | | Total Net Sales | $571.9 | $573.3 | | Segment Profit - Americas | $116.1 | $123.1 | | Segment Profit - International | $54.6 | $49.2 | | Total Segment Profit | $170.7 | $172.3 | Total Assets by Segment (Millions) | Total Assets by Segment (Millions) | Dec 31, 2018 | Sep 30, 2018 | | :--------------------------------- | :----------- | :----------- | | Americas | $507.7 | $504.2 | | International | $891.2 | $851.5 | | Total segment assets | $1,398.9 | $1,355.7 | | Corporate | $2,544.0 | $1,346.3 | | Goodwill and other intangible assets | $473.2 | $476.8 | | Total assets | $4,416.1 | $3,178.8 | [ (8) Goodwill and intangible assets](index=17&type=section&id=(8)%20Goodwill%20and%20intangible%20assets) Goodwill remained stable at **$244.0 million** at December 31, 2018, with amortizable intangible assets decreasing to **$152.6 million** Goodwill by Segment (Millions) | Goodwill by Segment (Millions) | Oct 1, 2018 | Dec 31, 2018 | | :----------------------------- | :---------- | :----------- | | Americas | $228.4 | $228.3 | | International | $15.8 | $15.7 | | Total | $244.2 | $244.0 | Amortizable Intangible Assets (Millions) | Amortizable Intangible Assets (Millions) | Gross Carrying Amount (Dec 31, 2018) | Accumulated Amortization (Dec 31, 2018) | Net Carrying Amount (Dec 31, 2018) | | :--------------------------------------- | :----------------------------------- | :-------------------------------------- | :--------------------------------- | | Trademarks | $44.3 | $6.8 | $37.5 | | Customer relationships | $99.6 | $15.1 | $84.5 | | Patents | $34.5 | $6.4 | $28.1 | | Proprietary formulas | $2.4 | $0.1 | $2.3 | | Non-compete | $0.5 | $0.3 | $0.2 | | Total intangible assets | $181.3 | $28.7 | $152.6 | [ (9) Debt](index=18&type=section&id=(9)%20Debt) Energizer's total long-term debt was **$987.0 million** at December 31, 2018, with an additional **$2,346.2 million** held in escrow for the Battery Acquisition Debt Overview (Millions) | Debt Type (Millions) | Dec 31, 2018 | Sep 30, 2018 | | :-------------------------------------------------- | :----------- | :----------- | | Senior Secured Term Loan B Facility due 2022 | $387.0 | $388.0 | | 5.50% Senior Notes due 2025 | $600.0 | $600.0 | | Total long-term debt, including current maturities | $987.0 | $988.0 | | Total long-term debt held in escrow | $2,346.2 | $1,230.7 | | Notes payable | $275.1 | $247.3 | - The company had a **$350.0 million** senior secured revolving credit facility, with **$260.0 million** outstanding and **$6.7 million** in letters of credit as of December 31, 2018, which were repaid on January 2, 2019[95](index=95&type=chunk)[98](index=98&type=chunk)[110](index=110&type=chunk) - New 2018 Term Loans (**$200.0 million** 3-year Term Loan A and **$1,000.0 million** 7-year Term Loan B) and 2026 Notes (**$500.0 million** USD and **€650.0 million** Euro) were funded into escrow and released on January 2, 2019, to finance the Battery Acquisition[100](index=100&type=chunk)[102](index=102&type=chunk)[105](index=105&type=chunk)[107](index=107&type=chunk) - Energizer uses interest rate swaps to fix variable rate debt components (LIBOR) on **$200.0 million** at **2.03%** through June 2022 and on **$400.0 million** at **2.47%** through December 2020[108](index=108&type=chunk)[109](index=109&type=chunk) [ (10) Pension Plans](index=20&type=section&id=(10)%20Pension%20Plans) Net periodic pension benefit for U.S. and International plans was (**$0.4 million**) and (**$0.1 million**), respectively, for Q4 2018 Net Periodic Pension (Benefit)/Cost (Millions) | Net Periodic Pension (Benefit)/Cost (Millions) | Q4 2018 (U.S.) | Q4 2017 (U.S.) | Q4 2018 (International) | Q4 2017 (International) | | :--------------------------------------------- | :------------- | :------------- | :---------------------- | :---------------------- | | Service Cost | — | — | $0.1 | $0.2 | | Interest Cost | $5.1 | $4.7 | $0.7 | $1.1 | | Expected return on plan assets | ($6.5) | ($7.5) | ($1.2) | ($1.6) | | Amortization of unrecognized net losses | $1.0 | $1.0 | $0.3 | $0.5 | | Settlement charge | — | $0.1 | — | — | | Net periodic (benefit)/cost | ($0.4) | ($1.7) | ($0.1) | $0.2 | - The U.S. pension plan was frozen in fiscal year 2015[116](index=116&type=chunk) [ (11) Shareholders' Equity](index=20&type=section&id=(11)%20Shareholders'%20Equity) No shares were repurchased in Q1 fiscal 2019, but a **$0.30 per share** cash dividend was declared, and significant stock was issued post-quarter - No shares were repurchased in Q1 fiscal 2019, but **1,126,379 shares** were repurchased for **$50.0 million** in Q1 fiscal 2018[120](index=120&type=chunk) - A cash dividend of **$0.30 per common share** was declared for Q1 fiscal 2019, totaling **$18.4 million**[121](index=121&type=chunk) - In January 2019, **4,687,498 common shares** were issued, generating **$205.9 million** net proceeds, and **2,156,250 shares** of Series A Mandatory Convertible Preferred Stock (MCPS) were issued, generating **$209.1 million** net proceeds, both to fund the Auto Care Acquisition[122](index=122&type=chunk)[128](index=128&type=chunk) - The MCPS will convert automatically on January 15, 2022, into **1.7892 to 2.1739 common shares**, paying cumulative quarterly dividends at an annual rate of **7.50%** of its **$100.00** liquidation preference[129](index=129&type=chunk)[130](index=130&type=chunk) [ (12) Financial Instruments and Risk Management](index=22&type=section&id=(12)%20Financial%20Instruments%20and%20Risk%20Management) Energizer manages market risks using derivatives solely for hedging, reporting unrealized pre-tax gains on interest rate swaps and forward currency contracts - The company uses derivatives to hedge against commodity price, foreign currency, and interest rate risks, not for speculative purposes[136](index=136&type=chunk)[139](index=139&type=chunk) - As of December 31, 2018, Energizer had an unrecognized pre-tax gain of **$2.9 million** on interest rate swap contracts and **$4.7 million** on forward currency contracts, both included in Accumulated other comprehensive loss[144](index=144&type=chunk)[148](index=148&type=chunk) - The primary currencies of exposure for foreign currency risk include the Euro, British pound, Canadian dollar, and Australian dollar[141](index=141&type=chunk) Derivatives Designated as Cash Flow Hedging Relationships (Millions) | Derivatives Designated as Cash Flow Hedging Relationships (Millions) | Estimated Fair Value (Dec 31, 2018) | Gain/(Loss) Recognized in OCI (Q4 2018) | Gain/(Loss) Reclassified OCI into Income (Q4 2018) | | :----------------------------------------------------------------- | :---------------------------------- | :-------------------------------------- | :------------------------------------------------- | | Foreign currency contracts | $4.7 | $3.2 | $2.8 | | Interest rate contracts | $2.9 | ($4.8) | ($0.1) | | Total | $7.6 | ($1.6) | $2.7 | - The fair value of fixed rate long-term debt was **$588.4 million** (carrying value **$600.0 million**) and escrowed fixed rate long-term debt was **$1,210.2 million** (carrying value **$1,245.2 million**) at December 31, 2018, determined using Level 2 inputs[163](index=163&type=chunk) [ (13) Accumulated Other Comprehensive (Loss)/Income](index=26&type=section&id=(13)%20Accumulated%20Other%20Comprehensive%20(Loss)%2FIncome) Accumulated Other Comprehensive Loss increased to (**$247.7 million**) at December 31, 2018, primarily due to foreign currency translation adjustments AOCI Components (Millions) | AOCI Component (Millions) | Sep 30, 2018 | OCI before Reclassifications (Q4 2018) | Reclassifications to Earnings (Q4 2018) | Dec 31, 2018 | | :---------------------------------------- | :----------- | :------------------------------------- | :-------------------------------------- | :----------- | | Foreign Currency Translation Adjustments | ($113.6) | ($3.7) | — | ($117.3) | | Pension Activity | ($136.4) | — | $1.1 | ($135.3) | | Hedging Activity (Interest Rate Contracts)| $3.3 | $2.5 | ($2.2) | $3.6 | | Hedging Activity (Interest) | $4.9 | ($3.7) | $0.1 | $1.3 | | Total | ($241.8) | ($4.9) | ($1.0) | ($247.7) | Reclassifications out of AOCI to Earnings (Millions) | Reclassifications out of AOCI to Earnings (Millions) | Q4 2018 | Q4 2017 | | :--------------------------------------------------- | :------ | :------ | | Gains and losses on cash flow hedges (Net) | $2.1 | ($2.3) | | Amortization of defined benefit pension items (Net) | ($1.1) | ($1.2) | | Total reclassifications to earnings | $1.0 | ($3.5) | [ (14) Supplemental Financial Statement Information](index=27&type=section&id=(14)%20Supplemental%20Financial%20Statement%20Information) This section details various income statement and balance sheet accounts, with "Other items, net" showing **$16.9 million** income in Q4 2018 Other Items, Net (Millions) | Other Items, Net (Millions) | Q4 2018 | Q4 2017 | | :----------------------------------------- | :------ | :------ | | Interest income | ($0.2) | ($0.5) | | Interest income on restricted cash | ($5.8) | — | | Foreign currency exchange (gain)/loss | ($1.1) | $4.1 | | Pension benefit other than service costs | ($0.7) | ($1.6) | | Acquisition foreign currency gains | ($9.0) | — | | Other | ($0.1) | ($0.7) | | Total Other items, net | ($16.9) | $1.3 | Inventories Breakdown (Millions) | Inventories (Millions) | Dec 31, 2018 | Sep 30, 2018 | | :--------------------- | :----------- | :----------- | | Raw materials and supplies | $47.7 | $40.0 | | Work in process | $80.6 | $86.5 | | Finished products | $161.9 | $196.6 | | Total inventories | $290.2 | $323.1 | Property, Plant and Equipment, Net (Millions) | Property, Plant and Equipment, Net (Millions) | Dec 31, 2018 | Sep 30, 2018 | | :-------------------------------------------- | :----------- | :----------- | | Total gross property | $814.2 | $823.6 | | Accumulated depreciation | ($651.6) | ($656.9) | | Total property, plant and equipment, net | $162.6 | $166.7 | [ (15) Legal proceedings/contingencies and other obligations](index=29&type=section&id=(15)%20Legal%20proceedings%2Fcontingencies%20and%20other%20obligations) Energizer accrues for probable and estimable legal losses and had **$49.7 million** in purchase obligations at December 31, 2018 - The company establishes accruals for legal contingencies where a loss is probable and reasonably estimable, believing current liabilities are not reasonably likely to be material[173](index=173&type=chunk) - As of December 31, 2018, Energizer had approximately **$49.7 million** in purchase obligations for goods and services[174](index=174&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Energizer's financial condition, operating results, and liquidity, including acquisitions, segment performance, and cash flow [Non-GAAP Financial Measures](index=30&type=section&id=Non-GAAP%20Financial%20Measures) Energizer uses non-GAAP measures like Segment Profit and Adjusted EPS to provide insights into ongoing operating performance, excluding specific non-recurring items - Non-GAAP measures exclude items not reflective of ongoing operating performance, such as acquisition and integration costs and the one-time impact of new U.S. tax legislation[178](index=178&type=chunk) - Segment Profit excludes general corporate expenses, share-based compensation, acquisition and integration activities, amortization, R&D, interest expense, and other corporate items[179](index=179&type=chunk) - Organic measures adjust for the impact of acquisitions, changes in Argentina Operations (due to hyperinflation), and currency fluctuations[181](index=181&type=chunk)[182](index=182&type=chunk)[184](index=184&type=chunk) [Forward-Looking Statements](index=31&type=section&id=Forward-Looking%20Statements) This section contains forward-looking statements subject to known and unknown risks, including market conditions, new product success, acquisition integration, and regulatory changes - Forward-looking statements are subject to known and unknown risks, uncertainties, and assumptions that could cause actual results to differ materially[186](index=186&type=chunk) - Key risk factors include market and economic conditions, new product success, customer retention, strategic initiative execution, foreign currency rates, raw material costs, legislative changes, cyber-attacks, litigation, and debt covenant compliance[186](index=186&type=chunk) [Battery Acquisition](index=32&type=section&id=Battery%20Acquisition) Energizer completed the acquisition of Spectrum Brands' global battery business for **$2,000.0 million** on January 2, 2019, conditioned on the Varta® divestiture - The Battery Acquisition was completed on January 2, 2019, for **$2,000.0 million**, with an initial cash payment of **$1,956.2 million**[189](index=189&type=chunk) - The European Commission approved the acquisition conditioned on Energizer divesting the Varta® consumer battery, chargers, portable power, and portable lighting business in EMEA[191](index=191&type=chunk) - Energizer retains rights to the Varta brand in Latin America and Asia Pacific, and Spectrum's global Rayovac®-branded consumer and hearing aid batteries business[191](index=191&type=chunk) [Auto Care Acquisition](index=32&type=section&id=Auto%20Care%20Acquisition) Energizer acquired Spectrum's global auto care business on January 28, 2019, for **$1,250.0 million**, funded by new senior notes and equity issuances - The Auto Care Acquisition was completed on January 28, 2019, for a contractual purchase price of **$1,250.0 million**[192](index=192&type=chunk)[193](index=193&type=chunk) - Consideration included **$938.7 million** in cash and **5.3 million** newly-issued common shares to Spectrum, valued at **$240.5 million**[193](index=193&type=chunk) - Funding for the cash portion came from new senior notes (**$600.0 million** at **7.750%** due 2027) and the issuance of common stock and Series A mandatory convertible preferred stock[194](index=194&type=chunk) - Pre-tax acquisition and integration costs for Q4 2018 totaled **$51.3 million**, including **$32.4 million** in interest expense related to escrowed debt for the Battery Acquisition[196](index=196&type=chunk)[197](index=197&type=chunk) [Nu Finish Acquisition](index=33&type=section&id=Nu%20Finish%20Acquisition) The Nu Finish® and Scratch Doctor® brands were acquired on July 2, 2018, for **$38.1 million**, contributing **$1.0 million** in Q4 2018 revenue - The Nu Finish acquisition was completed on July 2, 2018, for **$38.1 million**[199](index=199&type=chunk) - It generated **$1.0 million** in revenue for Q4 2018, with an immaterial impact on earnings before income taxes[199](index=199&type=chunk) [Highlights / Operating Results](index=34&type=section&id=Highlights%20%2F%20Operating%20Results) Energizer reported net earnings of **$70.8 million** (**$1.16** diluted EPS) for Q1 fiscal 2019, up from **$60.4 million**, with adjusted diluted EPS increasing by **5.8%** Financial Highlights (Millions) | Metric | Q1 FY19 (Millions) | Q1 FY18 (Millions) | YoY Change (%) | | :---------------------------------------- | :----------------- | :----------------- | :------------- | | Reported Net Earnings | $70.8 | $60.4 | 17.2% | | Reported Diluted EPS | $1.16 | $0.98 | 18.4% | | Adjusted Net Earnings (Non-GAAP) | $100.2 | $95.5 | 4.9% | | Adjusted Diluted EPS (Non-GAAP) | $1.64 | $1.55 | 5.8% | Net Sales Drivers (Millions) | Net Sales Drivers (Millions) | Q1 FY18 Net Sales | Change | % Chg | | :--------------------------- | :---------------- | :----- | :---- | | Organic | | $9.9 | 1.7% | | Impact of acquisition | | $1.0 | 0.2% | | Change in Argentina operations | | ($3.3) | (0.6)%| | Impact of currency | | ($9.0) | (1.5)%| | Q1 FY19 Net Sales | $571.9 | ($1.4) | (0.2)%| - Gross margin percentage decreased by **30 basis points** to **48.2%** in Q1 FY19, primarily due to unfavorable foreign currency movements, partially offset by lower production costs[210](index=210&type=chunk) - Interest expense increased significantly to **$48.2 million** in Q1 FY19 from **$13.4 million** in Q1 FY18, largely due to **$32.4 million** in interest and ticking fees related to the Battery Acquisition's escrowed debt[214](index=214&type=chunk) - Other items, net, was an income of **$16.9 million** in Q1 FY19, compared to an expense of **$1.3 million** in Q1 FY18, driven by interest income on restricted cash (**$5.8 million**) and acquisition foreign currency gains (**$9.0 million**)[216](index=216&type=chunk)[217](index=217&type=chunk) [Segment Results](index=36&type=section&id=Segment%20Results) Global segment profit declined by **0.9%** to **$170.7 million**, while organic segment profit increased by **4.0%**, with International segment profit improving by **11.0%** Net Sales by Segment (Millions) | Net Sales by Segment (Millions) | Q1 FY18 | Organic Change | Argentina Change | Acquisition Impact | Currency Impact | Q1 FY19 | % Chg | | :------------------------------ | :------ | :------------- | :--------------- | :----------------- | :-------------- | :------ | :---- | | Americas | $373.1 | $4.7 (1.3%) | ($3.3) (0.9%) | $1.0 (0.3%) | ($2.0) (0.6%) | $373.5 | 0.1% | | International | $200.2 | $5.2 (2.6%) | — | — | ($7.0) (3.5%) | $198.4 | (0.9)%| | Total Net Sales | $573.3 | $9.9 (1.7%) | ($3.3) (0.6%) | $1.0 (0.2%) | ($9.0) (1.5%) | $571.9 | (0.2)%| Segment Profit by Segment (Millions) | Segment Profit by Segment (Millions) | Q1 FY18 | Organic Change | Argentina Change | Acquisition Impact | Currency Impact | Q1 FY19 | % Chg | | :----------------------------------- | :------ | :------------- | :--------------- | :----------------- | :-------------- | :------ | :---- | | Americas | $123.1 | ($4.2) (3.4%) | ($1.9) (1.5%) | $0.5 (0.4%) | ($1.4) (1.2%) | $116.1 | (5.7)%| | International | $49.2 | $11.1 (22.6%) | — | — | ($5.7) (11.6%) | $54.6 | 11.0% |\ | Total Segment Profit | $172.3 | $6.9 (4.0%) | ($1.9) (1.1%) | $0.5 (0.3%) | ($7.1) (4.1%) | $170.7 | (0.9)%| [General Corporate and Global Marketing Expenses](index=39&type=section&id=General%20Corporate%20and%20Global%20Marketing%20Expenses) General corporate and other expenses decreased by **$2.9 million** to **$18.7 million** in Q1 fiscal 2019, mainly due to lower compensation costs General Corporate and Global Marketing Expense (Millions) | Expense Category (Millions) | Q1 FY19 | Q1 FY18 | | :----------------------------------------- | :------ | :------ | | General corporate and other expenses | $18.7 | $21.6 | | Global marketing expense | $3.1 | $3.2 | | General corporate and global marketing expense | $21.8 | $24.8 | - The decrease in general corporate expenses was primarily due to higher compensation costs and mark-to-market expense on unfunded deferred compensation liability in the prior year[231](index=231&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) Energizer expects to fund operations and investments through cash from operations and capital markets, holding **$607.3 million** in cash at December 31, 2018 - Energizer's primary future cash needs are for operating activities, working capital, and strategic investments, expected to be funded by cash from operations and capital markets[233](index=233&type=chunk) - At December 31, 2018, the company had **$607.3 million** in cash and cash equivalents, with a significant portion held outside the U.S[234](index=234&type=chunk) - Post-quarter, the Battery Acquisition (**$1,956.2 million** cash) was funded by senior notes and term loans, and the Auto Care Acquisition (**$938.7 million** cash, **$240.5 million** equity) was funded by new senior notes and equity issuances[236](index=236&type=chunk)[237](index=237&type=chunk) [Operating Activities](index=40&type=section&id=Operating%20Activities) Cash flow from operating activities decreased by **$22.1 million** to **$118.9 million** for Q4 2018, due to lower net earnings from acquisition-related cash expenditures Cash Flow from Operating Activities (Millions) | Metric | Q4 2018 (Millions) | Q4 2017 (Millions) | | :--------------------------------------- | :----------------- | :----------------- | | Cash flow from operating activities | $118.9 | $141.0 | - The decrease in operating cash flow was mainly driven by lower net earnings due to cash expenditures for the Spectrum acquisition, including interest and ticking fees on escrowed debt[240](index=240&type=chunk) [Investing Activities](index=40&type=section&id=Investing%20Activities) Net cash used by investing activities was **$4.7 million** for Q4 2018, primarily consisting of capital expenditures Investing Activities Summary (Millions) | Metric | Q4 2018 (Millions) | Q4 2017 (Millions) | | :----------------------------------- | :----------------- | :----------------- | | Capital expenditures | ($4.8) | ($5.5) | | Proceeds from sale of assets | $0.1 | — | | Net cash used by investing activities| ($4.7) | ($5.5) | - Excluding the acquired businesses, anticipated capital expenditures for fiscal year 2019 are **$30 million to $35 million** for maintenance, product development, and cost reduction[242](index=242&type=chunk) [Financing Activities](index=40&type=section&id=Financing%20Activities) Net cash from financing activities was **$1,183.6 million** for Q4 2018, driven by **$1,200.0 million** in debt issuance proceeds Financing Activities Summary (Millions) | Metric | Q4 2018 (Millions) | Q4 2017 (Millions) | | :------------------------------------------------------------------ | :----------------- | :----------------- | | Cash proceeds from issuance of debt (>90 days) | $1,200.0 | — | | Net increase in debt (<=90 days) | $28.0 | $6.5 | | Dividends paid | ($19.8) | ($17.6) | | Debt issuance costs | ($16.5) | — | | Common stock purchased | — | ($50.0) | | Net cash from/(used by) financing activities | $1,183.6 | ($63.9) | [Dividends](index=41&type=section&id=Dividends) A cash dividend of **$0.30 per common share** was declared for Q1 fiscal 2019, totaling **$18.0 million** - A cash dividend of **$0.30 per common share** was declared for Q1 fiscal 2019, paid on December 13, 2018, totaling **$18.0 million**[245](index=245&type=chunk) - Post-quarter, a **$0.30 per common share** dividend and a **$1.8333 per MCPS share** dividend were declared for Q2 fiscal 2019[246](index=246&type=chunk)[247](index=247&type=chunk) [Share Repurchases](index=41&type=section&id=Share%20Repurchases) No shares were repurchased on the open market during Q1 fiscal 2019, with **3.8 million** shares remaining available for repurchase - No shares were repurchased on the open market during Q1 fiscal 2019 under the **7.5 million** share repurchase authorization approved in July 2015[248](index=248&type=chunk)[298](index=298&type=chunk) - As of February 5, 2019, **3.8 million shares** remain available for repurchase under the current authorization[249](index=249&type=chunk) [Other Matters](index=41&type=section&id=Other%20Matters) Accrued environmental costs were **$6.4 million** at December 31, 2018, with no material impact expected, and total contractual obligations were **$5,004.0 million** - Accrued environmental costs were **$6.4 million** at December 31, 2018, with no material effect expected on total capital and operating expenditures, earnings, or competitive position[250](index=250&type=chunk) Contractual Obligations (Millions) | Contractual Obligations (Millions) | Total | Less than 1 year | 1 - 3 years | 3 - 5 years | More than 5 years | | :--------------------------------- | :-------- | :--------------- | :---------- | :---------- | :---------------- | | Long-term debt, including current maturities | $987.0 | $4.0 | $8.0 | $375.0 | $600.0 | | Long-term debt held in escrow, including current maturities | $2,445.2 | $60.0 | $170.0 | $20.0 | $2,195.2 | | Interest on long-term debt | $1,147.0 | $173.0 | $335.7 | $299.2 | $339.1 | | Notes payable | $275.1 | $275.1 | — | — | — | | Operating leases | $61.9 | $13.9 | $17.3 | $4.5 | $26.2 | | Pension plans | $3.5 | $3.5 | — | — | — | | Purchase obligations and other | $49.7 | $41.5 | $8.2 | — | — | | Mandatory transition tax | $34.6 | $1.5 | $5.8 | $5.7 | $21.6 | | Total | $5,004.0 | $572.5 | $545.0 | $704.4 | $3,182.1 | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Energizer is exposed to market risks from currency, commodity, and interest rates, using derivatives for hedging, and has designated Argentina's economy as highly inflationary [Market Risk Sensitive Instruments and Positions](index=42&type=section&id=Market%20Risk%20Sensitive%20Instruments%20and%20Positions) Market risk arises from adverse changes in currency rates, commodity prices, and interest rates, with derivatives used exclusively for hedging, not speculation - Market risk arises from potential losses due to adverse changes in currency rates, commodity prices, and interest rates[254](index=254&type=chunk) - Derivatives are used only for identifiable exposures and not for trading or speculative purposes[254](index=254&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 forecasted inventory purchases, with an unrealized pre-tax gain of **$4.7 million** at December 31, 2018 - Forward currency contracts are used to hedge cash flow uncertainty of forecasted inventory purchases due to short-term currency fluctuations[256](index=256&type=chunk) - Primary currency exposures include the Euro, British pound, Canadian dollar, and Australian dollar[255](index=255&type=chunk) - At December 31, 2018, there was an unrealized pre-tax gain of **$4.7 million** on these cash flow hedges, expected to be recognized in earnings over the next 12 months[256](index=256&type=chunk) [Derivatives Not Designated as Cash Flow Hedging Relationships](index=43&type=section&id=Derivatives%20Not%20Designated%20as%20Cash%20Flow%20Hedging%20Relationships) Foreign currency derivative contracts hedge existing balance sheet exposures, with gains or losses expected to offset corresponding exchange gains or losses - Foreign currency derivative contracts are used to hedge existing balance sheet exposures and are not designated as cash flow hedges[259](index=259&type=chunk) - Gains or losses on these contracts are expected to be offset by corresponding exchange gains or losses on the underlying exposures, limiting market risk[259](index=259&type=chunk) [Commodity Price Exposure](index=43&type=section&id=Commodity%20Price%20Exposure) The company's raw materials are subject to price volatility, and while hedging instruments may be used in the future, none were open at December 31, 2018 - Energizer uses raw materials subject to price volatility and may use hedging instruments in the future[260](index=260&type=chunk) - As of December 31, 2018, there were no open derivative or hedging instruments for future purchases of raw materials or commodities[260](index=260&type=chunk) [Interest Rate Exposure](index=43&type=section&id=Interest%20Rate%20Exposure) Energizer faces interest rate risk on its **$1,600.0 million** variable rate debt, using interest rate swaps to fix LIBOR on **$200.0 million** at **2.03%** and on **$400.0 million** at **2.47%** - Energizer had **$1,600.0 million** in variable rate debt outstanding at December 31, 2018[261](index=261&type=chunk) - Interest rate swaps fix LIBOR on **$200.0 million** of debt at **2.03%** through June 2022 and on **$400.0 million** of debt at **2.47%** through December 2020[261](index=261&type=chunk) - The weighted average interest rate on variable rate debt, including swaps, was **4.74%** for Q4 2018[262](index=262&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 its subsidiary's financial statements to be remeasured into U.S. dollars - Effective July 1, 2018, Argentina's economy was designated as highly inflationary, requiring its subsidiary's financial statements to be remeasured into U.S. dollars[263](index=263&type=chunk) - Under highly inflationary accounting, future exchange gains and losses from monetary assets and liabilities are reflected in current earnings[263](index=263&type=chunk) [Item 4. Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures) Energizer's CEO and CFO concluded that disclosure controls and procedures were effective as of December 31, 2018, with no material changes to internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of December 31, 2018, ensuring accurate and timely reporting of information[265](index=265&type=chunk) - No material changes to the company's internal control over financial reporting occurred during Q4 2018[266](index=266&type=chunk) [PART II — OTHER INFORMATION](index=45&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) This section covers Energizer's legal proceedings, updated risk factors related to recent acquisitions, equity sales, and a comprehensive exhibit index [Item 1. Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings) Energizer is involved in various legal proceedings, with accruals made for probable and estimable losses, and management believes liabilities are not material - The company is subject to legal proceedings in various jurisdictions arising from its operations[268](index=268&type=chunk) - Accruals are established for contingencies where a loss is probable and can be reasonably estimated[268](index=268&type=chunk) - Management believes that any liability from pending legal proceedings is not reasonably likely to be material to the company's financial position, results of operations, or cash flows[268](index=268&type=chunk) [Item 1A. Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) This section updates risk factors, adding new risks related to the acquired Battery and Auto Care Businesses, including operational dependencies, seasonal volatility, and significant acquisition debt [Risks Related to the Acquired Battery Business and the Acquired Auto Care Business](index=45&type=section&id=Risks%20Related%20to%20the%20Acquired%20Battery%20Business%20and%20the%20Acquired%20Auto%20Care%20Business) The acquired businesses introduce new risks, including operational dependencies on specific facilities, seasonal sales volatility, and potential impacts from governmental regulations - The Acquired Auto Care Business's operations and profitability are highly dependent on the efficient operation of its Dayton, Ohio facility, which has experienced disruptions and requires additional investment[270](index=270&type=chunk) - Sales of certain Acquired Businesses' products are seasonal, with peaks in the first six months of the calendar year for auto care, making forecasting difficult and exposing the business to adverse weather conditions[271](index=271&type=chunk) - Changes in governmental regulations regarding refrigerant gas R-134a or its substitutes could materially adversely affect the Acquired Auto Care Business's ability to sell aftermarket A/C products[274](index=274&type=chunk)[275](index=275&type=chunk)[276](index=276&type=chunk) [We may not be able to successfully complete the divestiture of the Varta® consumer battery, chargers, portable power and portable lighting business in the Europe, the Middle East and Africa region, including manufacturing and distribution facilities in Germany (the "Varta Divestment Business").](index=46&type=section&id=We%20may%20not%20be%20able%20to%20successfully%20complete%20the%20divestiture%20of%20the%20Varta%C2%AE%20consumer%20battery%2C%20chargers%2C%20portable%20power%20and%20portable%20lighting%20business%20in%20the%20Europe%2C%20the%20Middle%20East%20and%20Africa%20region%2C%20including%20manufacturing%20and%20distribution%20facilities%20in%20Germany%20(the%20%22Varta%20Divestment%20Business%22).) Energizer faces significant risks in divesting the Varta Divestment Business as required by the European Commission, including finding a suitable buyer and potential third-party claims - The European Commission conditioned the Battery Acquisition approval on the divestiture of the Varta Divestment Business within six months[278](index=278&type=chunk) - Divestiture risks include inability to find buyers, failure to transfer liabilities/operations, retention of indemnification obligations, third-party claims, challenges in separating intellectual property, and disruption to ongoing business[279](index=279&type=chunk) - Failure to complete the divestiture within the allotted timeframe could lead to the European Commission assuming responsibility, potentially resulting in significantly lower proceeds[282](index=282&type=chunk) - The divestiture will result in transition services between parties, increasing the risk of business disruption[285](index=285&type=chunk) [Our debt to finance the acquisitions of the Acquired Businesses is significant and could adversely affect our business and our ability to meet our obligations.](index=47&type=section&id=Our%20debt%20to%20finance%20the%20acquisitions%20of%20the%20Acquired%20Businesses%20is%20significant%20and%20could%20adversely%20affect%20our%20business%20and%20our%20ability%20to%20meet%20our%20obligations.) Energizer's total outstanding indebtedness was approximately **$3.7 billion** at December 31, 2018, which could limit cash flow for growth and increase vulnerability to economic downturns - Total outstanding indebtedness was approximately **$3.7 billion** at December 31, 2018, with an additional **$600.0 million** incurred in January 2019 for the Auto Care Acquisition[286](index=286&type=chunk) - Significant debt could require a substantial portion of cash flow for payments, limit funds for future growth, impose restrictive covenants, increase vulnerability to adverse economic conditions, and create a competitive disadvantage[287](index=287&type=chunk) - The company may not generate sufficient cash flow to service all debt, potentially forcing asset disposals, equity capital raises, or debt restructuring, which may not be successful[291](index=291&type=chunk)[292](index=292&type=chunk) [Despite our high debt level, we may still be able to incur significant additional amounts of debt, which could further exacerbate the risks associated with our substantial debt.](index=48&type=section&id=Despite%20our%20high%20debt%20level%2C%20we%20may%20still%20be%20able%20to%20incur%20significant%20additional%20amounts%20of%20debt%2C%20which%20could%20further%20exacerbate%20the%20risks%20associated%20with%20our%20substantial%20debt.) Despite high debt levels, Energizer and its subsidiaries may incur substantial additional debt due to qualifications and exceptions in existing debt restrictions, exacerbating risks - The company and its subsidiaries may incur substantial additional debt in the future, despite existing high debt levels[290](index=290&type=chunk) - Restrictions on additional debt in indentures and credit agreements are subject to significant qualifications and exceptions, allowing for further debt incurrence[290](index=290&type=chunk) [We may not be able to generate sufficient cash to service all of our debt, including the notes, and fund our working capital and capital expenditures, and we may be forced to take other actions to satisfy our obligations under our debt, which may not be successful.](index=48&type=section&id=We%20may%20not%20be%20able%20to%20generate%20sufficient%20cash%20to%20service%20all%20of%20our%20debt%2C%20including%20the%20notes%2C%20and%20fund%20our%20working%20capital%20and%20capital%20expenditures%2C%20and%20we%20may%20be%20forced%20to%20take%20other%20actions%20to%20satisfy%20our%20obligations%20under%20our%20debt%2C%20which%20may%20not%20be%20successful.) Energizer's ability to meet debt obligations depends on future operating performance, and insufficient cash flow could lead to liquidity problems or default - The ability to make scheduled debt payments depends on future operating performance and cash flow, which are subject to uncontrollable economic, financial, and regulatory factors[291](index=291&type=chunk) - Insufficient cash flows could lead to liquidity problems, forcing the company to reduce investments, dispose of assets, seek additional equity, or restructure/refinance debt[292](index=292&type=chunk) - Failure to make scheduled debt payments could result in default, acceleration of debt, foreclosure on assets, and potential bankruptcy or liquidation[293](index=293&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) During Q1 fiscal 2019, Energizer purchased **136,802 shares** for **$52.14 per share** to satisfy tax withholding obligations, with no open market repurchases Share Repurchase Activity | Period | Total Number of Shares Purchased (1) | Average Price Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) | Maximum Number That May Yet Be Purchased Under the Plans or Programs (2) | | :------------------------- | :----------------------------------- | :---------------------- | :----------------------------------------------------------------------------------- | :------------------------------------------------------------------------- | | October 1 - October 31 | 554 | $57.40 | — | 3,838,791 | | November 1 - November 30 | 136,248 | $52.12 | — | 3,838,791 | | December 1 - December 31 | — | — | — | 3,838,791 | | Total | 136,802 | $52.14 | — | | - **136,802 shares** were purchased during the quarter to satisfy tax withholding obligations for restricted stock vesting and net exercises[297](index=297&type=chunk) - No shares were repurchased on the open market under the July 1, 2015, share repurchase authorization during the quarter[298](index=298&type=chunk) [Item 6. Exhibits](index=49&type=section&id=Item%206.%20Exhibits) This section refers to the Exhibit Index, which lists all exhibits filed with the Form 10-Q, including various agreements and certifications - This item directs to the Exhibit Index for a list of all exhibits filed with the report[299](index=299&type=chunk) [EXHIBIT INDEX](index=50&type=section&id=EXHIBIT%20INDEX) The Exhibit Index provides a comprehensive list of documents filed as exhibits to the Form 10-Q, including agreements, corporate governance, and certifications - The Exhibit Index lists various agreements, corporate documents, debt instruments, and certifications filed as exhibits[301](index=301&type=chunk)[302](index=302&type=chunk)[303](index=303&type=chunk)[304](index=304&type=chunk)[305](index=305&type=chunk)[307](index=307&type=chunk) [SIGNATURES](index=53&type=section&id=SIGNATURES) This section contains the required signatures, certifying the report was signed by Timothy W. Gorman, EVP and CFO of Energizer Holdings, Inc., on February 5, 2019 - The report is signed by Timothy W. Gorman, Executive Vice President and Chief Financial Officer of Energizer Holdings, Inc., on February 5, 2019[310](index=310&type=chunk)[312](index=312&type=chunk)