Energizer (US:ENR)2021-02-08 17:32PART I — FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Presents unaudited condensed consolidated financial statements for Energizer Holdings, Inc., including earnings, balance sheets, cash flows, and detailed notes Consolidated Statements of Earnings and Comprehensive Income | Financial Metric | Q1 2021 (ended Dec 31, 2020) | Q1 2020 (ended Dec 31, 2019) | | :--- | :--- | :--- | | Net sales | $848.6M | $736.8M | | Gross profit | $337.9M | $301.3M | | Earnings before income taxes | $87.3M | $58.7M | | Net earnings from continuing operations | $67.1M | $45.8M | | Net earnings attributable to common shareholders | $63.1M | $42.1M | | Diluted EPS - continuing operations | $0.91 | $0.60 | Consolidated Balance Sheets | Balance Sheet Item | Dec 31, 2020 | Sep 30, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $305.6M | $459.8M | | Total current assets | $1,340.0M | $2,210.9M | | Goodwill | $1,056.2M | $1,016.0M | | Total assets | $4,929.1M | $5,728.3M | | Total current liabilities | $777.8M | $1,648.4M | | Long-term debt | $3,345.0M | $3,306.9M | | Total liabilities | $4,599.5M | $5,419.2M | | Total shareholders' equity | $329.6M | $309.1M | Consolidated Statements of Cash Flows | Cash Flow Activity | Three Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | | :--- | :--- | :--- | | Net cash from operating activities | $76.3M | $123.5M | | Net cash used by investing activities | ($74.8M) | ($16.2M) | | Net cash used by financing activities | ($955.2M) | ($77.4M) | | Effect of exchange rate changes on cash | $9.5M | $5.1M | | Net (decrease)/increase in cash | ($944.2M) | $35.0M | Notes to Consolidated (Condensed) Financial Statements Provides detailed information on accounting policies, financial activities, including revenue, acquisitions, restructuring, debt, and segment performance Net Sales by Product Category (Q1) | Category | 2020 | 2019 | | :--- | :--- | :--- | | Batteries | $706.1M | $621.9M | | Auto Care | $101.8M | $78.7M | | Lights, Licensing and Other | $40.7M | $36.2M | | Total Net Sales | $848.6M | $736.8M | - In Q1 FY2021, the company completed two acquisitions: the Formulations Acquisition for a cash purchase price of $51.2 million and the FDK Indonesia Acquisition for a contractual price of $18.2 million to increase alkaline battery production capacity3440 - The company initiated a new restructuring program in Q4 FY2020 focused on its global supply chain, with expected costs of $4 to $7 million; total restructuring expenses for the quarter were $10.6 million, up from $6.3 million in the prior year5960 - In December 2020, the company refinanced its debt by entering into a new Credit Agreement for a $400 million revolving facility and a $550 million Term Loan due 2027, using the proceeds to pay down existing term loans and its revolver97 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 FY2021 financial results, highlighting strong sales growth, acquisitions, restructuring, debt refinancing, and changes in liquidity and segment performance Highlights / Operating Results Net sales increased 15.2% to $848.6 million driven by organic growth and acquisitions, with adjusted diluted EPS up 37.6% despite gross margin decline Q1 Net Sales Growth Breakdown | Component | Contribution ($M) | % Change | | :--- | :--- | :--- | | Prior Year Net Sales | $736.8 | - | | Organic Growth | $93.3 | 12.7% | | Impact of FY 2021 Acquisitions | $9.6 | 1.3% | | Change in Argentina | $2.8 | 0.4% | | Impact of Currency | $6.1 | 0.8% | | Current Year Net Sales | $848.6 | 15.2% | - Organic net sales growth of 12.7% was driven by new distribution (5.5%), increased replenishment volumes due to elevated demand (4.0%), timing of holiday/Brexit shipments (2.2%), and favorable pricing (1.0%)218 Adjusted Gross Margin Reconciliation | Component | Basis Point Impact | | :--- | :--- | | Gross Margin - FY'20 Adjusted | 41.8% | | Incremental COVID-19 costs | (130) bps | | Mix and product cost impacts | (150) bps | | Lower margin of acquired businesses | (40) bps | | Synergy realization | 180 bps | | Currency impact | 30 bps | | Gross Margin - FY'21 Adjusted | 40.7% | Segment Results Americas and International segments showed strong net sales growth, with total segment profit increasing 18.9% to $215.7 million driven by top-line growth and synergies Q1 Segment Performance vs. Prior Year | Segment | Net Sales | % Change | Organic % Change | Segment Profit | % Change | Organic % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Americas | $586.6M | 14.0% | 12.8% | $155.9M | 20.7% | 20.0% | | International | $262.0M | 17.9% | 12.3% | $59.8M | 14.6% | 1.3% | | Total | $848.6M | 15.2% | 12.7% | $215.7M | 18.9% | 14.6% | Liquidity and Capital Resources Operating cash flow decreased due to working capital changes, while significant debt refinancing and share repurchases impacted financing activities, with $392.3 million available under the revolving credit facility - Operating cash flow decreased by $57.2 million year-over-year, primarily due to working capital changes, including a prior year VAT refund and current year inventory investment250 - The company executed significant debt refinancing, including issuing a new $550 million Term Loan and repaying $1,383.3 million of existing debt, resulting in a $5.7 million loss on extinguishment of debt for the quarter254226 - A new share repurchase program for up to 7.5 million shares was approved in November 2020, with 500,000 shares repurchased for $21.3 million during the quarter261114 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks from currency, commodity, and interest rate changes, which are hedged using derivative instruments, and addresses the impact of Argentina's inflationary economy - The company hedges foreign currency risk, primarily for the Euro, British pound, Canadian dollar, and Australian dollar, using forward contracts, resulting in an unrealized pre-tax loss of $10.2 million as of December 31, 2020269270 - To manage interest rate risk on its variable rate debt, the company entered into a new interest rate swap in December 2020, fixing the LIBOR component on $550.0 million of debt at 0.95%276 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of December 31, 2020, 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 December 31, 2020279 PART II — OTHER INFORMATION Item 1. Legal Proceedings The company is subject to various legal proceedings, but management believes any resulting liability will not be material to its financial position or results - The company states that its liability from pending legal proceedings is not reasonably likely to be material to its financial position or results282 Item 1A. Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 500,000 shares for $21.3 million under a new authorization and acquired additional shares for tax withholding obligations during Q1 FY2021 Issuer Purchases of Equity Securities (Q1 FY2021) | Period | Total Shares Purchased | Average Price Paid | Shares Purchased Under Plan | Max Shares Remaining Under Plan | | :--- | :--- | :--- | :--- | :--- | | Oct 2020 | 135 | $40.24 | — | 1,822,655 | | Nov 2020 | 305,719 | $42.47 | 150,698 | 7,349,302 | | Dec 2020 | 349,302 | $42.91 | 349,302 | 7,000,000 | | Total | 655,156 | $42.70 | 500,000 | 7,000,000 | Item 6. Exhibits References the Exhibit Index, listing all agreements and documents filed as part of the Form 10-Q