Energizer (ENR) - 2023 Q4 - Annual Report

PART I Item 1. Business Energizer is a global leader in household batteries, auto care, and portable lights, leveraging strong brands and extensive distribution in competitive, seasonal markets - Energizer is a global diversified household products leader in batteries, auto care, and portable lights, with over 100 years of expertise[14][15] - Product Categories: - Household batteries (primary, rechargeable, specialty, hearing aid) under Energizer®, Eveready®, Rayovac®, and Varta® (Latin America, Asia Pacific) brands - Auto care products (appearance, fragrance, performance, A/C recharge) under Armor All®, Nu Finish®, Refresh Your Car!®, LEXOL®, Eagle One®, California Scents®, Driven®, Bahama & Co®, Carnu®, Grand Prix®, Kit®, Tempo®, STP®, and A/C PRO® brands - Portable lights (handheld, headlights, lanterns, area lights) under Energizer®, Eveready®, Rayovac®, Hard Case®, Dolphin®, and WeatherReady® sub-brands[18][19][20][21][22] - The company distributes products globally through mass merchandisers, warehouse clubs, food, drug, convenience stores, electronics specialty stores, department stores, hardware and automotive centers, e-commerce, and military stores[25] - Walmart Stores, Inc. accounted for 14.2% of the Company's annual sales in fiscal year 2023[25] - Seasonality: - Increased purchases for batteries during fiscal first quarter - Increased purchases for automotive fragrance, appearance, performance, and air conditioning recharge products during fiscal second and third quarters - Natural disasters can drive short-term increases in portable power and lighting product sales[33] - As of September 30, 2023, Energizer had approximately 5,080 employees across 30 countries, with about 300 unionized employees primarily in Wisconsin and Ohio[35] - The company's operations are subject to various federal, state, local, and foreign laws and regulations, including those related to public health, environment, consumer product safety, advertising, competition, data privacy, and anti-corruption (e.g., FCPA, UK Bribery Act)[51][53][54][55][56][57] Item 1A. Risk Factors Energizer faces material risks from global economic volatility, intense competition, operational disruptions, significant debt, and increasing regulatory and ESG compliance demands - Economic, Competitive and Industry Risks: - Global economic and financial market conditions (supply chain, labor shortages, inflation, recession risk, currency fluctuations) can negatively impact the business[63][64][65][66][67] - Intense competition from consumer product companies, including private label brands, can lead to pricing concessions and margin reduction[68][69] - Changes in retail environment (e.g., e-commerce growth, hard discounters) and consumer preferences can adversely affect sales and financial condition[70][71] - Disease outbreaks or public health concerns can disrupt operations, supply chains, and consumer demand[72] - Loss or impairment of brand reputation due to negative publicity, product safety issues, or ineffective marketing can harm the business[73] - Dependence on a small number of principal customers (e.g., Walmart) means loss of any could significantly decrease sales and profitability[74] - Failure in product, marketing, and operations innovation, or inability to respond to competitive innovation and changing consumer habits, can hinder growth[75][76] - Risks related to international operations, including currency fluctuations, political instability, and regulatory changes, can adversely affect results[77][78][79][80](index=80&type=chunk][81][82][83][84] - Operational and Technology Risks: - Changes in production costs (raw materials, transportation, inflation) can erode profit margins[85] - Reliance on significant suppliers creates risks of supply interruptions and increased costs[86] - Vulnerability to raw material availability, forecasting customer demand, and managing production capacity[87] - Manufacturing facilities and supply channels are subject to disruption from events beyond control (e.g., natural disasters, cyber-attacks, work stoppages)[88][89] - Operational execution, including achieving cost savings from restructuring efforts (e.g., Project Momentum), is critical[90] - Potential for significant impairment charges if goodwill and indefinite-lived intangible assets become impaired[91] - Seasonality of sales (e.g., auto care products) and adverse weather conditions can materially affect results[92] - Failure of key information technology systems or cyberattacks could disrupt business operations and damage reputation[93][94] - Inability to attract, retain, and develop key employees, or manage human capital resources effectively, poses risks[95][96][97][98][99][100][101][102][103] - Financial and Strategic Risks: - Significant debt obligations (approx. $3.4 billion as of Sep 30, 2023) could limit cash flow, impose restrictive covenants, and increase vulnerability to adverse economic conditions[104][105][106] - Credit ratings are important to the cost of capital and access to financing[107] - Potential losses or increased funding/expenses related to pension plans[108] - Inaccurate financial projections can cause actual results to differ materially[109] - Risks associated with strategic acquisitions, divestitures, or joint ventures, including integration difficulties and failure to achieve anticipated benefits[110][111][112][113][114][115] - Legal, Compliance and Sustainability Risks: - Potential for product liability, labeling, commercial, and other legal claims, leading to recalls or withdrawals[116] - Increasing government regulations (e.g., R-134a refrigerants, data privacy laws like GDPR, CCPA) could impose material costs and liabilities[117][118][119] - Increased focus on ESG issues (sustainability, climate change, plastic waste) by stakeholders may require operational changes and incur additional costs[120][121][122] - Environmental laws and regulations may expose the company to significant liabilities for contamination and remediation[123][124] - Resolution of tax contingencies may result in additional tax liabilities[125][126][127][128] - Risks Specific to Common Stock: - No guarantee on the timing, amount, or payment of future dividends[129] - Certain anti-takeover provisions in corporate documents and Missouri law may deter or delay an acquisition[130][131][132] Item 1B. Unresolved Staff Comments No unresolved staff comments from the SEC - No unresolved staff comments[134] Item 2. Properties Energizer's principal office is in St. Louis, Missouri, with global manufacturing, packaging, and R&D facilities deemed adequate and well-maintained - Principal Executive Office: St. Louis, Missouri - North America Facilities: Asheboro, NC (Battery & Lights manufacturing/packaging), Garrettsville, OH (Battery & Lights manufacturing), Marietta, OH (Battery & Lights manufacturing), Westlake, OH (R&D for Battery & Lights and Auto Care), Dayton, OH (Auto Care manufacturing/distribution), Fennimore, WI (Battery & Lights manufacturing), Portage, WI (Battery & Lights manufacturing), Franklin, IN (Battery & Lights distribution/packaging) - International Facilities: Bekasi, Indonesia (Battery & Lights manufacturing), Cimanggis, Indonesia (Battery & Lights manufacturing), Jurong, Singapore (Battery & Lights manufacturing), Alexandria, Egypt (Battery & Lights manufacturing), Washington, UK (Battery & Lights manufacturing), Rassau, UK (Auto Care manufacturing), Jaboatao, Brazil (Battery & Lights manufacturing)[135][136][137] - Management believes production facilities are adequate and well-maintained[135] Item 3. Legal Proceedings Energizer is involved in various global legal proceedings, but believes total liability is not material to its financial position or results - Energizer is party to various legal proceedings in multiple jurisdictions[139] - The company believes its liability from these proceedings is not reasonably likely to be material to its financial position, results of operations, or cash flows, after accounting for established accruals[139] Item 4. Mine Safety Disclosure No mine safety disclosures to report - No mine safety disclosures[141] Item 4A. Information About Our Executive Officers This section lists Energizer's executive officers as of November 14, 2023, including key leadership roles and their appointments by the Board - Mark S. LaVigne: President and Chief Executive Officer (since Jan 1, 2021) - Sue K. Drath: Chief Human Capital Officer (since 2015), transitioning to Special Advisor by March 31, 2024 - John J. Drabik: Executive Vice President, Chief Financial Officer (effective Oct 1, 2021) - Michael A. Lampman: Executive Vice President, North America and Global Business Units (since Sep 27, 2021) - Robin W. Vauth: Executive Vice President, International (since Sep 27, 2021)[143][144][145][146][147][148] PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities Energizer's common stock (ENR) is listed on NYSE, with 4,780 shareholders, regular dividends expected, and no Q4 FY2023 share repurchases - Common Stock is listed on the New York Stock Exchange (NYSE) under the symbol 'ENR'[151] - As of September 30, 2023, there were approximately 4,780 shareholders of record[151] - The Company expects to continue to pay regular quarterly dividends, but future dividends are dependent on future earnings, capital requirements, and the Company's financial condition[152] Issuer Purchases of Equity Securities (Q4 Fiscal 2023) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number That May Yet Be Purchased Under the Plans or Programs | |:---|:---|:---|:---|:---| | July 1, 2023 - July 31, 2023 | — | — | — | 5,041,940 | | August 1, 2023 - August 31, 2023 | — | — | — | 5,041,940 | | September 1, 2023 - September 30, 2023 | — | — | — | 5,041,940 | | Total | — | — | — | 5,041,940 | Cumulative 5-Year Total Shareholder Return (9/30/2018 - 9/30/2023) | | 9/30/18 | 9/30/19 | 9/30/20 | 9/30/21 | 9/30/22 | 9/30/23 | |:---|:---|:---|:---|:---|:---|:---| | Energizer Holdings, Inc. | 100.00 | 76.39 | 70.35 | 72.17 | 48.17 | 63.55 | | S&P Midcap 400 | 100.00 | 97.51 | 95.40 | 137.07 | 116.17 | 134.20 | | S&P SmallCap 600 | 100.00 | 90.66 | 83.14 | 131.07 | 106.39 | 117.11 | | S&P 500 Household Products | 100.00 | 140.05 | 160.23 | 160.01 | 146.73 | 170.06 | Item 6. Reserved This item is reserved and contains no information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Energizer's FY2023 financial performance, condition, and operations, including key metrics, non-GAAP adjustments, significant events, restructuring, segment results, liquidity, and critical accounting policies Forward-Looking Statements Forward-looking statements are projections subject to known and unknown risks, uncertainties, and assumptions - Forward-looking statements reflect expectations, estimates, or projections concerning future results or events and are subject to known and unknown risks, uncertainties, and assumptions[162] Non-GAAP Financial Measures This section defines non-GAAP financial measures used by Energizer to provide additional insights into performance - Non-GAAP Measures Provided: - Segment Profit: Excludes general corporate expenses, amortization, impairment, acquisition/integration costs, restructuring costs, debt extinguishment, pension settlement, Russian market exit costs, Brazil flood costs, and finance lease termination gain - Adjusted Net Earnings and Adjusted Diluted EPS: Excludes specific non-recurring items and their tax impacts - Non-GAAP Tax Rate: Calculated excluding pre-tax impact of non-recurring items and related tax impacts - Organic: Change in revenue or segment profit excluding Russia/Argentina operations and currency fluctuations - Adjusted Gross Profit, Adjusted Gross Margin, Adjusted SG&A as a percent of sales, and Adjusted Other items, net: Excludes specific non-recurring items[162][163][164][165][166][167][168][169][170] Macroeconomic Environment and Significant Events Energizer faces an inflationary macroeconomic environment and geopolitical instability, impacting operations, including the Russian market exit and Brazil flood - The company continues to operate in an inflationary environment with macroeconomic pressures and geopolitical instability expected to persist into fiscal year 2024[172] - Energizer exited the Russian market in Q2 fiscal 2022 due to global economic and political uncertainty, resulting in $1.3M in COGS (inventory impairment, shipping) and $5.8M in SG&A (asset impairment, severance) in fiscal 2022[173][174][175] - The Jaboatao, Brazil battery manufacturing facility experienced severe flooding in May 2022, incurring $9.7M in costs (primarily damaged inventory) in COGS for fiscal 2022, with the insurance claim settled in fiscal 2023[176] Recent Acquisitions Energizer completed strategic acquisitions, including FDK Indonesia and Spectrum Brands' businesses, to expand its product portfolio - FDK Indonesia Acquisition (Oct 1, 2020): Acquired a battery manufacturing facility for $18.2M (contractual purchase price), increasing alkaline battery production capacity - North Carolina-based Formulations Company (Dec 1, 2020): Acquired for $51.2M (purchase price), bringing innovation capabilities in cleaning formulations - Spectrum Brands Holdings, Inc. Global Battery, Lighting and Portable Power Business (Jan 2, 2019): Acquired Rayovac® and Varta® brands, expanding battery portfolio; Varta® consumer battery business in EMEA was sold on Jan 2, 2020 - Spectrum's Global Auto Care Business (Jan 28, 2019): Acquired Armor All®, STP®, and A/C PRO® brands[177][178][179][180] Acquisition and Integration Costs (Pre-tax) | Fiscal Year | Total Costs ($M) | COGS ($M) | SG&A ($M) | R&D ($M) | Other items, net ($M) | |:---|:---|:---|:---|:---|:---| | 2023 | — | — | — | — | — | | 2022 | 16.5 | 6.0 | 9.4 | 1.1 | — | | 2021 | 68.9 | 33.7 | 40.0 | 1.1 | (5.9) | Restructuring Costs Energizer's restructuring programs, including 'Project Momentum,' aim to optimize margins and efficiency for significant annual savings - Project Momentum (Approved Nov 2022, Expanded July 2023): - Enterprise-wide profit recovery program focused on operating margins, supply chain optimization, and organizational efficiency - Expected annual pre-tax savings: $115M to $130M from restructuring, plus $15M to $20M from continuous improvement/working capital (total $130M-$150M by end of FY2025) - Estimated one-time costs: $95M to $110M cash operating, $12M non-cash, $70M to $80M capital expenditures - $54M of savings recognized in fiscal 2023 - Fiscal 2023 pre-tax expense: $59.7M (COGS: $29.9M, SG&A: $30.0M, Other items, net: -$0.2M)[186][187][191] - 2019 Restructuring Program (Substantially complete by Dec 31, 2021): - Focused on manufacturing and distribution network integration, facility closures, and efficiencies - Fiscal 2022 pre-tax expense: $1.7M (net of $4.5M gain on finance lease termination) - Fiscal 2021 pre-tax expense: $36.8M (net of $3.3M gain on sale of fixed assets)[188][189][191] - 2020 Restructuring Program (Substantially complete by Dec 31, 2021): - Focused on reorganizing global end-to-end supply chain network and category accountability - Fiscal 2022 pre-tax expense: $1.7M - Fiscal 2021 pre-tax expense: $36.8M[190][191] - Total project savings from 2019 and 2020 Restructuring programs were approximately $55M to $60M, fully realized as of September 30, 2022[194] Overview Energizer is a global manufacturer of batteries, lighting, and auto care products, managed through two reportable segments - Energizer is a global manufacturer, marketer, and distributor of household batteries, specialty batteries, lighting products, and auto care products[197] - Historical Innovations: - First dry-cell battery (1893) - First flashlight (1899) - First mercury-free alkaline battery - Energizer Ultimate Lithium® (longest-lasting AA/AAA for high-tech devices)[198] - Operations are managed via two reportable product groupings: Battery & Lights and Auto Care[205] Financial Results This section presents Energizer's GAAP and non-GAAP net earnings, diluted EPS, and currency impacts for recent fiscal years Net Earnings and Diluted EPS (GAAP) | Fiscal Year Ended Sep 30 | Net earnings/(loss) attributable to common shareholders ($M) | Diluted net earnings/(loss) per common share ($) | |:---|:---|:---| | 2023 | 140.5 | 1.94 | | 2022 | (235.5) | (3.37) | | 2021 | 144.7 | 2.11 | Adjusted Net Earnings and Diluted EPS (Non-GAAP) | Fiscal Year Ended Sep 30 | Adjusted net earnings ($M) | Adjusted diluted net earnings per diluted share ($) | |:---|:---|:---| | 2023 | 224.0 | 3.09 | | 2022 | 221.1 | 3.08 | | 2021 | 255.4 | 3.48 | - Currency Impact (excluding hyperinflationary markets): - Fiscal 2023: Negative impact of $21.3M on earnings before income tax, or $0.23 per share - Fiscal 2022: Negative impact of $25.9M on earnings before income tax, or $0.29 per share[209][210] Operating Results This section details Energizer's operating performance, including net sales, gross profit, SG&A, and other expenses, highlighting key drivers and changes Net Sales Performance | Metric | FY2023 ($M) | % Chg YoY | FY2022 ($M) | % Chg YoY | |:---|:---|:---|:---|:---|\ | Net sales - prior year | 3,050.1 | - | 3,021.5 | - | | Organic | (31.6) | (1.0)% | 94.4 | 3.1 % | | Change in Russia Operations | (12.6) | (0.4)% | (19.3) | (0.6)% | | Change in Argentina Operations | (5.3) | (0.2)% | 11.9 | 0.4 % | | Impact of currency | (40.9) | (1.4)% | (58.4) | (2.0)% | | Net sales - current year | 2,959.7 | (3.0)% | 3,050.1 | 0.9 % | - FY2023 Organic Net Sales Decrease (1.0%): - Volume declines of ~7.5% due to higher retail pricing, general economic conditions, and weaker battery performance in non-tracked channels - Volume declines of ~1.0% from planned exit of low-margin business, delayed new product launches by device manufacturers, and lost battery distribution internationally - Partially offset by global pricing actions, increasing organic sales by ~7.5%[218] - FY2022 Organic Net Sales Increase (3.1%): - Pricing actions in battery and auto care drove ~7.6% increase - New global distribution contributed ~0.8% to organic growth - Offset by net volume decrease of ~5.3% due to lapping elevated prior-year battery demand and declines related to pricing actions[219] Gross Profit and Margin | Metric | FY2023 (Reported) | FY2023 (Adjusted) | FY2022 (Reported) | FY2022 (Adjusted) | FY2021 (Reported) | FY2021 (Adjusted) | |:---|:---|:---|:---|:---|:---|:---|\ | Gross profit ($M) | 1,124.0 | 1,153.9 | 1,119.5 | 1,136.5 | 1,161.4 | 1,195.1 | | Gross margin (%) | 38.0% | 39.0% | 36.7% | 37.3% | 38.4% | 39.6% | - FY2023 Gross Profit Drivers: - Increase driven by positive impact of executed price increases in battery and auto care and Project Momentum savings (~$47M) - Partially offset by higher operating costs (raw materials) and adverse currency impacts[220] - FY2022 Gross Profit Drivers: - Decrease driven by higher operating costs (transportation, material, labor) and operating inefficiencies from reduced production volumes - Partially offset by price increases, elimination of FY2021 COVID-19 costs, and synergies (~$6M)[221] Selling, General and Administrative (SG&A) Expenses | Fiscal Year Ended Sep 30 | SG&A Expenses ($M) | SG&A as % of Net Sales | Adjusted SG&A Expenses ($M) | Adjusted SG&A as % of Net Sales | |:---|:---|:---|:---|:---|\ | 2023 | 489.4 | 16.5% | 459.4 | 15.5% | | 2022 | 484.5 | 15.9% | 467.3 | 15.3% | | 2021 | 487.2 | 16.1% | 443.8 | 14.7% | - FY2023 Adjusted SG&A Decrease: Driven by Project Momentum savings, favorable currency impacts, and lower environmental costs, partially offset by higher compensation and factoring fees[226] - FY2022 Adjusted SG&A Increase: Driven by increased environmental costs, recycling fees, travel, and higher IT spending related to digital transformation[227] Advertising and Sales Promotion (A&P) and Research and Development (R&D) Expenses | Fiscal Year Ended Sep 30 | A&P ($M) | A&P as % of Net Sales | R&D ($M) | R&D as % of Net Sales | |:---|:---|:---|:---|:---|\ | 2023 | 142.3 | 4.8% | 32.9 | 1.1% | | 2022 | 137.1 | 4.5% | 34.7 | 1.1% | | 2021 | 162.1 | 5.4% | 34.5 | 1.1% | Amortization Expense | Fiscal Year Ended Sep 30 | Amortization Expense ($M) | |:---|:---|\ | 2023 | 59.4 | | 2022 | 61.1 | | 2021 | 61.2 | Note: FY2023 reduction due to fully amortized intangibles from Battery acquisition, partially offset by increased amortization from STP trade name Impairment of Goodwill and Intangible Assets | Fiscal Year Ended Sep 30 | Impairment Charges ($M) | |:---|:---|\ | 2023 | — | | 2022 | 541.9 | | 2021 | — | Note: FY2022 impairment included Armor All ($370.4M), STP ($26.3M), Rayovac ($127.8M) trade names, and Auto Care International goodwill ($17.4M) due to category declines, increased input costs, and higher discount rates Interest Expense | Fiscal Year Ended Sep 30 | Interest Expense ($M) | |:---|:---|\ | 2023 | 168.7 | | 2022 | 158.4 | | 2021 | 161.8 | Note: FY2023 increase due to higher interest rates, partially offset by lower average outstanding debt; FY2022 decrease due to debt refinancing in FY2021 (Gain)/Loss on Extinguishment of Debt | Fiscal Year Ended Sep 30 | (Gain)/Loss on Extinguishment of Debt ($M) | |:---|:---|\ | 2023 | 1.5 (Gain) | | 2022 | — | | 2021 | 103.3 (Loss) | Note: FY2023 gain from retirement of $25.0M Senior Notes at a discount and early repayment of $188.0M term loan, resulting in a $1.5M gain on extinguishment of debt; FY2021 loss from refinancing €650.0M Senior Notes and redemption of $600.0M Senior Notes Other Items, Net | Component | FY2023 ($M) | FY2022 ($M) | FY2021 ($M) | |:---|:---|:---|:---|\ | Interest income | (8.9) | (1.0) | (0.7) | | Foreign currency exchange loss | 17.3 | 7.8 | 5.5 | | Pension cost/(benefit) other than service costs | 2.7 | (4.1) | (1.9) | | Settlement loss on U.S. pension annuity buy out | 50.2 | — | — | | Exit of Russian market | — | 7.5 | — | | Gain on finance lease termination | — | (4.5) | — | | Gain on sale of assets | — | — | (3.3) | | Other | (4.2) | 1.6 | (2.5) | | Total Other items, net | 57.1 | 7.3 | (2.9) | Income Taxes and Effective Tax Rate | Fiscal Year Ended Sep 30 | Effective Tax Rate (Reported) | Adjusted Effective Tax Rate (Non-GAAP) | |:---|:---|:---|\ | 2023 | 20.0% | 21.2% | | 2022 | (24.2)% (Benefit) | 19.5% | | 2021 | 4.3% | 22.6% | Note: FY2023 adjusted rate increase due to release of reserves from statute limitations and settlements; FY2022 reported rate unfavorably impacted by goodwill impairment; FY2021 reported rate favorably impacted by tax structuring and debt refinancing - Argentina's economy remains highly inflationary as of September 30, 2023, requiring remeasurement of financial statements into USD, with exchange gains/losses reflected in current earnings[242] Segment Results This section analyzes Energizer's financial performance by Battery & Lights and Auto Care segments, detailing sales and profit drivers - In fiscal year 2022, the Company changed its reportable segments from geographical (Americas and International) to two product groupings: Battery & Lights and Auto Care, to better reflect management's decision-making[243] Segment Net Sales | Segment | FY2023 Net Sales ($M) | FY2023 % Chg YoY | FY2022 Net Sales ($M) | FY2022 % Chg YoY | |:---|:---|:---|:---|:---|\ | Batteries & Lights | 2,344.9 | (3.4)% | 2,427.3 | 1.0 % | | Auto Care | 614.8 | (1.3)% | 622.8 | 0.7 % | | Total Net Sales | 2,959.7 | (3.0)% | 3,050.0 | 0.9 % | - FY2023 Batteries & Lights Net Sales Decline (3.4%): Organic decline of 1.0% due to category declines from higher retail pricing, economic conditions, weaker non-tracked customer performance (~7.5%), planned exit of low-margin business, and lost international distribution (~1.5%), partially offset by global pricing actions (~8.0%)[247] - FY2023 Auto Care Net Sales Decline (1.3%): Organic decline of 1.1% due to lower volumes from category declines, higher retail pricing, economic conditions, cooler spring weather impacting refrigerant sales, and retailer inventory management (~8.0%), partially offset by global pricing actions (~7.0%)[247] - FY2022 Batteries & Lights Net Sales Increase (1.0%): Organic growth of 3.5% driven by pricing increases (~7.5%) and new distribution (~0.5%), partially offset by expected decline in battery demand compared to elevated COVID-19 related sales (~4.5%)[248] - FY2022 Auto Care Net Sales Increase (0.7%): Organic growth of 1.6% driven by global price increases (~8.0%) and new distribution (~1.5%), offset by volume decrease (~8.0%) due to pricing actions, lapping elevated demand, and negative impact of higher gas prices[249] Segment Profit | Segment | FY2023 Segment Profit ($M) | FY2023 % Chg YoY | FY2022 Segment Profit ($M) | FY2022 % Chg YoY | |:---|:---|:---|:---|:---|\ | Batteries & Lights | 551.5 | (0.4)% | 553.6 | — % | | Auto Care | 75.0 | 61.3 % | 46.5 | (52.6)% | | Total Segment Profit | 626.5 | 4.4 % | 600.1 | (7.9)% | - FY2023 Total Segment Profit Increase (4.4%): Driven by organic segment profit increase of 8.5%, partially offset by unfavorable foreign currency movements ($22.0M), Russian market exit ($1.2M), and Argentina operations decline ($1.4M)[251] - FY2023 Batteries & Lights Segment Profit Decline (0.4%): Primarily due to unfavorable currency movements, offset by organic profit increase of 3.9% from improved operating margins (Project Momentum), decreased overhead, and lower R&D spending[252] - FY2023 Auto Care Segment Profit Increase (61.3%): Organic segment profit increased 63.4% due to improved operating margins (Project Momentum) and decreased overhead spending, partially offset by lower organic sales and higher A&P/R&D spending[252] - FY2022 Total Segment Profit Decrease (7.9%): Driven by organic segment profit decrease of 5.2%, unfavorable foreign currency movements ($23.8M), and Russian market exit ($4.0M), partially offset by favorable changes in Argentina operations ($9.7M)[252] - FY2022 Batteries & Lights Segment Profit (Flat): Organic profit increase of 2.6% from top-line growth and lower A&P, offset by increased operating costs (labor, tariffs, transportation) and higher overhead spending[253] - FY2022 Auto Care Segment Profit Decline (52.6%): Organic segment profit decreased 49.1% as organic revenue growth was insufficient to offset increased product input costs, partially offset by lower A&P[253] General Corporate and Other Expenses | Fiscal Year Ended Sep 30 | General Corporate and Other Expenses ($M) | % of Net Sales | |:---|:---|:---|\ | 2023 | 107.2 | 3.6% | | 2022 | 101.6 | 3.3% | | 2021 | 96.0 | 3.2% | Note: FY2023 increase driven by increased factoring fees, higher mark-to-market expenses on deferred compensation plans, and increased stock compensation; FY2022 increase driven by increased travel, bonus, and stock compensation, partially offset by lower mark-to-market expense Liquidity and Capital Resources This section outlines Energizer's liquidity and capital resources, including cash needs, debt structure, covenant compliance, and cash flow - Energizer's primary future cash needs are for operating activities, working capital, and strategic investments, expected to be funded by cash from operations and access to capital markets[255] Cash and Cash Equivalents | As of Sep 30 | Cash and Cash Equivalents ($M) | % Outside U.S. | |:---|:---|:---|\ | 2023 | 223.3 | 84% | | 2022 | 205.3 | 73.5% | - Debt Structure: - $500.0M revolving credit facility (2020 Revolving Facility) and $1,200.0M Term Loan due Dec 2027[257] - In Feb 2023, Credit Agreement amended to transition interest reference rate from LIBOR to SOFR[258] - As of Sep 30, 2023: No outstanding borrowings on Revolving Facility, $7.1M outstanding letters of credit, $492.9M available capacity[259] - Total aggregate outstanding indebtedness was approximately $3.4 billion as of Sep 30, 2023[104][261] - During fiscal 2023, the Company repurchased $16.3M of 4.750% Senior Notes due 2028 and $8.7M of 4.375% Senior Notes due 2029 at a total discount of $3.4M, and made early payments of $188.0M on the Term Loan, resulting in a $1.5M gain on extinguishment of debt[234][260] - The Company was in compliance with all debt covenants as of September 30, 2023, and expects to remain so for at least the next 12 months[262] Cash Flow from Operating Activities | Fiscal Year Ended Sep 30 | Net Cash from Operating Activities ($M) | |:---|:---|\ | 2023 | 395.2 | | 2022 | 1.0 | | 2021 | 179.7 | Note: FY2023 increase of $394.2M primarily due to working capital changes (~$397.3M), including $105M from accounts receivable collections, $227M less inventory investment, and $131M from changes in accounts payable/accrued liabilities Net Cash Used by Investing Activities | Fiscal Year Ended Sep 30 | Net Cash Used by Investing Activities ($M) | |:---|:---|\ | 2023 | 56.1 | | 2022 | 90.9 | | 2021 | 126.4 | Key Components: Capital expenditures ($56.8M in FY2023, $77.8M in FY2022, $64.9M in FY2021), proceeds from asset sales, acquisition of intangible assets, and acquisitions net of cash - Anticipated capital expenditures for fiscal 2024 are $95M to $105M, including $35M to $45M for Project Momentum initiatives[266] Net Cash (Used by)/From Financing Activities | Fiscal Year Ended Sep 30 | Net Cash (Used by)/From Financing Activities ($M) | |:---|:---|:---|\ | 2023 | (309.4) | | 2022 | 79.1 | | 2021 | (1,069.1) | Key Components (FY2023): Payments on debt ($222.1M), dividends paid on common stock ($86.3M), taxes paid for withheld share-based payments ($2.2M) Dividends Declared to Common Shareholders | Fiscal Year Ended Sep 30 | Total Dividends Declared ($M) | |:---|:---|\ | 2023 | 88.0 | | 2022 | 85.5 | | 2021 | 82.6 | Note: A dividend of $0.30 per share for Q1 FY2024 was declared on Nov 6, 2023, payable Dec 14, 2023 - No additional shares were repurchased in fiscal 2022 or 2023 under the 7.5 million share repurchase program approved in November 2020; Approximately 5.0 million shares remain authorized[271][571] Contractual Obligations and Commitments (as of Sep 30, 2023) | Obligation Type | Total ($M) | Due within 12 months ($M) | |:---|:---|:---|\ | Long-term debt | 3,344.2 | 12.0 | | Interest commitments | 769.6 | 150.3 | | Mandatory transition tax | 16.7 | 3.9 | | Purchase commitments | 8.3 | 4.3 | | Operating lease payments | 145.2 | 20.4 | | Finance lease payments | 66.2 | 2.5 | Other Matters This section addresses accrued environmental costs and the company's assessment of legal proceedings' materiality - Accrued environmental costs were $14.0M at September 30, 2023, with $3.9M expected to be spent in fiscal 2024[281] - The Company believes its liability from legal proceedings is not reasonably likely to be material to its financial position, results of operations, or cash flows[282] Critical Accounting Policies and Estimates This section outlines Energizer's critical accounting policies and estimates, requiring significant management judgment for financial reporting - Key Policies/Estimates: - Revenue Recognition: Estimates for consumer/trade-promotion programs, discounts, and returns - Pension Plans: Assumptions for discount rate, salary increases, and expected long-term return on assets significantly impact obligations and expense - Business Combinations: Allocation of acquisition cost to assets/liabilities based on fair values, with goodwill recognized for excess value - Intangible Assets: Significant judgment in assigning useful lives (indefinite vs. determinable) and annual impairment testing - Goodwill: Annual impairment analysis using discounted cash flow models with significant estimates for future cash flows and discount rates - Income Taxes: Estimates for taxable earnings, deferred tax assets/liabilities, valuation allowances, and uncertain tax positions[283][284][286][287][288][289][290][291][292][293][294][295][296][297][298][299][300][301][302][303][304] - In fiscal 2023, no impairment of goodwill and indefinite-lived intangible assets was identified; For Rayovac, fair value exceeded carrying value by approximately 5%[289][290] - In fiscal 2022, non-cash impairments of $541.9M were recorded for Armor All, STP, and Rayovac trade names, and Auto Care International goodwill[291][297] - The STP trade name was converted to a definite-life intangible asset with a 25-year useful life in fiscal 2023, resulting in approximately $3.0M additional annual pre-tax amortization expense[292] - The Company adopted ASU 2020-04 (Reference Rate Reform) on October 1, 2022, with no material impact on financial statements[305] Item 7A. Quantitative and Qualitative Disclosures About Market Risk Energizer faces market risks from currency, commodity prices, and interest rates, mitigated by derivatives, with Argentina's hyperinflation impacting financials - Market risk arises from adverse changes in currency rates, commodity prices, and interest rates[306] - Approximately 40% of fiscal 2023 sales were from foreign countries, exposing the company to currency risks, especially with a significant portion of product costs tied to the U.S. dollar[308] - Currency Hedging: - Uses forward currency contracts as cash flow hedges for forecasted inventory purchases (primary currencies: Euro, British pound, Canadian dollar, Australian dollar) - Unrealized pre-tax gain on cash flow hedges: $3.3M (Sep 30, 2023) vs. $16.3M (Sep 30, 2022) - Uses non-designated foreign currency derivative contracts to hedge balance sheet exposures, with gains/losses offsetting underlying exposures[309][310][311][312] - Commodity Price Hedging: - Uses hedging instruments for raw materials like zinc - Unrealized pre-tax loss on zinc contracts: $0.7M (Sep 30, 2023) vs. $6.1M (Sep 30, 2022)[313][314] - Interest Rate Risk: - Variable rate debt outstanding: $990.2M (Sep 30, 2023) under 2020 Term Loans and international borrowings - Interest rate swap (effective Dec 2020, amended Feb 2023) fixes the SOFR component at 1.042% on $700.0M notional value through Dec 2024 - Unrealized pre-tax gain on interest rate swap: $79.8M (Sep 30, 2023) vs. $86.4M (Sep 30, 2022) - Weighted average interest rate on variable rate debt: 4.59% (FY2023)[315][316][317][318][319] - Argentina's economy remains highly inflationary, requiring remeasurement of financial statements into USD, with future exchange gains and losses reflected in current earnings[320] Item 8. Financial Statements and Supplementary Data This section presents Energizer's audited consolidated financial statements for fiscal years 2021-2023, including statements and comprehensive notes - The consolidated financial statements for Energizer Holdings, Inc. and its subsidiaries are presented, including the Report of Independent Registered Public Accounting Firm, Consolidated Statements of Earnings and Comprehensive Income, Consolidated Balance Sheets, Consolidated Statements of Cash Flows, Consolidated Statements of Shareholders' Equity, and Notes to Consolidated Financial Statements[323][327] Consolidated Statements of Earnings and Comprehensive Income (Selected Data) | Metric ($M) | FY2023 | FY2022 | FY2021 | |:---|:---|:---|:---|\ | Net sales | 2,959.7 | 3,050.1 | 3,021.5 | | Gross profit | 1,124.0 | 1,119.5 | 1,161.4 | | Selling, general and administrative expense | 489.4 | 484.5 | 487.2 | | Advertising and sales promotion expense | 142.3 | 137.1 | 162.1 | | Research and development expense | 32.9 | 34.7 | 34.5 | | Amortization of intangible assets | 59.4 | 61.1 | 61.2 | | Impairment of goodwill and intangible assets | — | 541.9 | — | | Interest expense | 168.7 | 158.4 | 161.8 | | (Gain)/loss on extinguishment of debt | (1.5) | — | 103.3 | | Other items, net | 57.1 | 7.3 | (2.9) | | Earnings/(loss) before income taxes | 175.7 | (305.5) | 154.2 | | Income tax provision/(benefit) | 35.2 | (74.0) | (6.7) | | Net earnings/(loss) | 140.5 | (231.5) | 160.9 | | Net earnings/(loss) attributable to common shareholders | 140.5 | (235.5) | 144.7 | | Diluted net earnings/(loss) per common share | 1.94 | (3.37) | 2.11 | | Dividend Per Common Share | 1.20 | 1.20 | 1.20 | | Total comprehensive income/(loss) | 148.1 | (146.4) | 238.2 | Consolidated Balance Sheets (Selected Data) | Metric ($M) | Sep 30, 2023 | Sep 30, 2022 | |:---|:---|:---|\ | Cash and cash equivalents | 223.3 | 205.3 | | Trade receivables, net | 511.6 | 421.7 | | Inventories | 649.7 | 771.6 | | Total current assets | 1,556.6 | 1,590.0 | | Property, plant and equipment, net | 363.7 | 362.1 | | Goodwill | 1,016.2 | 1,003.1 | | Other intangible assets, net | 1,237.7 | 1,295.8 | | Total assets | 4,509.6 | 4,572.1 | | Total current liabilities | 734.2 | 697.9 | | Long-term debt | 3,332.1 | 3,499.4 | | Total liabilities | 4,298.9 | 4,441.5 | | Total shareholders' equity | 210.7 | 130.6 | Consolidated Statements of Cash Flows (Selected Data) | Metric ($M) | FY2023 | FY2022 | FY2021 | |:---|:---|:---|:---|\ | Net cash from operating activities | 395.2 | 1.0 | 179.7 | | Net cash used by investing activities | (56.1) | (90.9) | (126.4) | | Net cash (used by)/from financing activities | (309.4) | 79.1 | (1,069.1) | | Net increase/(decrease) in cash, cash equivalents, and restricted cash | 18.0 | (33.6) | (1,010.9) | | Cash, cash equivalents, and restricted cash, end of period | 223.3 | 205.3 | 238.9 | Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure No changes in or disagreements with accountants on accounting and financial disclosure - Not applicable[631] Item 9A. Controls and Procedures Energizer's management concluded disclosure controls and internal control over financial reporting were effective as of September 30, 2023 - Disclosure controls and procedures were effective as of September 30, 2023[632] - Internal control over financial reporting was effective as of September 30, 2023, as audited by PricewaterhouseCoopers LLP[634][635] - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2023[636] Item 9B. Other Information No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during Q4 FY2023 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the three months ended September 30, 2023[637] Item 9C. Disclosures Regarding Foreign Jurisdiction that Prevent Inspections No disclosures regarding foreign jurisdictions that prevent inspections - Not applicable[638] PART III Item 10. Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from Item 4A and the Proxy Statement - Information on directors, executive officers, and corporate governance is incorporated by reference from Item 4A and the Proxy Statement[641] - The Company has adopted business practices and standards of conduct for all employees, including executive officers, and a code of conduct for the Board of Directors, available on its website[643] - A Securities Trading Policy is in place to promote compliance with insider trading laws[644] Item 11. Executive Compensation Executive compensation information, including director compensation, is incorporated by reference from the Proxy Statement - Executive compensation information is incorporated by reference from the Proxy Statement[645] - The Human Capital Committee Report is not deemed 'filed' with the SEC unless specifically incorporated[645] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership and equity compensation plan information is incorporated by reference from the Proxy Statement - Security ownership information for beneficial owners and management, and equity compensation plan details, are incorporated by reference from the Proxy Statement[646] Item 13. Certain Relationships and Related Transactions, and Director Independence Information on related transactions and director independence is incorporated by reference from the Proxy Statement - Information on related transactions and director independence is incorporated by reference from the Proxy Statement[647] Item 14. Principal Accountant Fees and Services Information on principal accountant fees and services is incorporated by reference from the Proxy Statement - Information on principal accountant fees and services, including ratification and pre-approval policy, is incorporated by reference from the Proxy Statement[648] PART IV Item 15. Exhibits and Financial Statement Schedules This section lists financial statements, schedules, and exhibits filed as part of the Form 10-K, including various agreements and plans - Financial Statements: Included as part of Item 8 - Financial Statement Schedules: Omitted if not applicable or information is in financial statements/notes - Exhibits: Includes various agreements (separation, tax, acquisition), indentures for senior notes, credit agreements, and equity incentive plans - Omitted Debt Instruments: Certain long-term debt instruments are not filed if the total authorized amount does not exceed 10% of consolidated assets[650][651][652][653][654][655] Item 16. Form 10-K Summary No Form 10-K Summary is provided - No Form 10-K Summary is provided[660]