Energizer (US:ENR)2025-05-06 17:48PART I — FINANCIAL INFORMATION Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, detailing financial performance and position for the periods ended March 31, 2025 Consolidated Financial Statements The consolidated financial statements show increased net sales and earnings for the six months ended March 31, 2025, despite a significant decrease in operating cash flow Consolidated Statement of Earnings Highlights (Six Months Ended March 31) | Metric | 2025 (in millions) | 2024 (in millions) | Change | | :--- | :--- | :--- | :--- | | Net Sales | $1,394.6 | $1,379.9 | +1.1% | | Gross Profit | $528.6 | $520.3 | +1.6% | | Earnings Before Income Taxes | $66.5 | $51.8 | +28.4% | | Net Earnings | $50.6 | $34.3 | +47.5% | | Diluted EPS | $0.69 | $0.47 | +46.8% | Consolidated Balance Sheet Highlights | Metric | March 31, 2025 (in millions) | September 30, 2024 (in millions) | | :--- | :--- | :--- | | Total Current Assets | $1,394.8 | $1,478.9 | | Total Assets | $4,211.9 | $4,342.4 | | Total Current Liabilities | $749.5 | $819.8 | | Total Liabilities | $4,078.0 | $4,206.6 | | Total Shareholders' Equity | $133.9 | $135.8 | Consolidated Statement of Cash Flows Highlights (Six Months Ended March 31) | Metric | 2025 (in millions) | 2024 (in millions) | | :--- | :--- | :--- | | Net Cash from Operating Activities | $64.2 | $214.9 | | Net Cash used by Investing Activities | $(55.7) | $(64.6) | | Net Cash used by Financing Activities | $(81.7) | $(193.9) | | Net Decrease in Cash | $(77.6) | $(65.2) | Notes to Financial Statements These notes detail business segments, revenue recognition, strategic acquisitions, ongoing restructuring efforts, debt refinancing, and significant legal proceedings - The company operates in two main product categories: Batteries & Lights (Energizer, Rayovac brands) and Auto Care (Armor All, Nu Finish brands)1718 Net Sales by Product (Six Months Ended March 31) | Product | 2025 (in millions) | 2024 (in millions) | | :--- | :--- | :--- | | Batteries | $1,077.0 | $1,051.5 | | Auto Care | $274.2 | $281.1 | | Lights | $43.4 | $47.3 | | Total | $1,394.6 | $1,379.9 | - Acquired Centralsul in Brazil to expand Auto Care presence and battery manufacturing assets in Belgium to establish a European production location; a subsequent acquisition of Advanced Power Solutions NV was completed on May 2, 2025313435 - The 'Project Momentum' restructuring program is expected to incur total pre-tax cash costs of $180 million to $185 million and capital expenditures of $80 million to $90 million by the end of fiscal 20253839 - In March 2025, the company refinanced its debt, extending the maturity of its $760 million Term Loan to 2032 and its $500 million Revolving Credit Facility to 2030, resulting in a $5.2 million loss on extinguishment of debt71 - The company is defending against three consolidated class-action lawsuits alleging it conspired with Wal-Mart to inflate battery and lighting product prices, with no accrual recorded as a loss is not considered probable or estimable126 Management's Discussion and Analysis (MD&A) Management discusses financial performance, highlighting sales growth, progress on the 'Project Momentum' program, and strategic management of liquidity and capital resources Results of Operations Results of operations show modest net sales growth driven by organic expansion, improved gross margins from restructuring savings, and varied performance across product segments Reconciliation of Net Earnings to Adjusted Net Earnings (Non-GAAP) | Metric (in millions, except EPS) | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Earnings (GAAP) | $28.3 | $32.4 | $50.6 | $34.3 | | Adjustments, after tax | $21.1 | $19.7 | $48.2 | $60.3 | | Adjusted Net Earnings | $49.4 | $52.1 | $98.8 | $94.6 | | Diluted EPS (GAAP) | $0.39 | $0.45 | $0.69 | $0.47 | | Adjusted Diluted EPS | $0.67 | $0.72 | $1.35 | $1.30 | Net Sales Change Analysis (YTD 2025 vs YTD 2024) | Component | % Change | | :--- | :--- | | Organic | +2.6% | | Change in hyperinflationary markets | -0.3% | | Impact of currency | -1.2% | | Total Net Sales Change | +1.1% | - Adjusted Gross Margin for Q2 2025 increased by 30 basis points to 40.8%, primarily driven by Project Momentum savings of approximately $16 million, offsetting increased freight costs and strategic pricing investments167169 - Batteries & Lights Q2 organic sales grew 3.0% due to new and expanded distribution, while Auto Care Q2 organic sales fell 2.6% due to planned promotional investments and a shift in refrigerant sales timing to Q3184185 Liquidity and Capital Resources The company's liquidity and capital resources are managed through operating cash flow, debt refinancing, dividend payments, and share repurchase authorizations, with a focus on strategic investments and debt reduction - Operating cash flow decreased by $150.7 million year-over-year for the six months ended March 31, 2025, primarily due to a working capital change of approximately $134 million, driven by an $85 million increase in inventory201 - In March 2025, the company extended the maturity of its $760 million Term Loan to 2032 and its $500 million Revolving Facility to 2030, with $492.4 million remaining available under the Revolving Facility as of March 31, 2025198200 - The Board of Directors declared a quarterly cash dividend of $0.30 per share, and a share repurchase authorization for 7.5 million shares is active, with no shares repurchased in Q2 2025206207240 - Anticipated capital expenditures for fiscal 2025 are $80 million to $90 million, including $25 million to $35 million for Project Momentum initiatives202 Quantitative and Qualitative Disclosures About Market Risk The company manages market risks from currency fluctuations, commodity prices, and interest rates through hedging strategies, with operations in hyperinflationary economies noted - The company hedges cash flow uncertainty for inventory purchases in foreign currencies, with 64 open contracts at March 31, 2025, having a notional value of approximately $187 million97219 - To manage commodity risk, the company hedges future zinc purchases, with 16 open contracts as of March 31, 2025, having a notional value of approximately $29 million98223 - An interest rate swap is used to fix the benchmark rate (SOFR) at 1.042% on $600 million of variable-rate debt, mitigating interest rate exposure96225 - The economies of Egypt (effective Oct 1, 2024) and Argentina (effective July 1, 2018) are treated as highly inflationary, reflecting remeasurement gains and losses in current earnings227228229 Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2025231 - No changes in internal control over financial reporting occurred during the quarter ended March 31, 2025, that materially affected or are likely to materially affect these controls233 PART II — OTHER INFORMATION Legal Proceedings The company is defending against consolidated class action lawsuits alleging price-fixing, believing it has substantial defenses and has not accrued for a probable loss - The company is defending against class action lawsuits alleging it conspired with Wal-Mart to inflate prices in violation of antitrust and consumer protection laws126234 - Management believes that its liability from pending legal proceedings is not reasonably likely to be material to its financial position, results, or cash flows234 Risk Factors This section emphasizes international operational risks, including tariffs, currency fluctuations, and geopolitical instability, given that approximately 40% of fiscal 2024 sales originated from foreign countries - Approximately 40% of the company's sales in fiscal year 2024 originated from foreign countries, exposing it to significant international risks236 - Key international risks include unfavorable macroeconomic conditions, political instability, tariffs, trade restrictions, and currency fluctuations236243 - Significant uncertainty exists regarding future trade policies and tariffs between the U.S. and other countries, which could materially impact the business237 Share Repurchases The company did not repurchase any equity securities during Q2 fiscal 2025, with an authorization for 7.5 million shares remaining active Issuer Purchases of Equity Securities (Q2 FY2025) | Period | Total Number of Shares Purchased | | :--- | :--- | | January 2025 | 0 | | February 2025 | 0 | | March 2025 | 0 | | Total | 0 | - As of March 31, 2025, the maximum number of shares that may yet be purchased under the current plan is 7,500,000240