Energizer (ENR) - 2021 Q3 - Quarterly Report

Report Overview This section provides an overview of the filing information and the report's table of contents Filing Information This section details the filing specifics for Energizer Holdings, Inc.'s Form 10-Q for the quarter ended June 30, 2021, identifying the company as a large accelerated filer listed on the New York Stock Exchange - Filing Type: Form 10-Q for the quarterly period ended June 30, 2021[1] - Registrant: Energizer Holdings, Inc. (ENR on NYSE)[2] - Filer Status: Large accelerated filer[3] - Common Stock Outstanding (as of August 5, 2021): 68,371,727 shares[3] Table of Contents The table of contents outlines the report's structure, including financial statements, detailed notes, management's discussion and analysis, market risk disclosures, controls and procedures, and other required information PART I — FINANCIAL INFORMATION This part presents the unaudited condensed consolidated financial statements and management's discussion and analysis for Energizer Holdings, Inc Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for Energizer Holdings, Inc., including statements of earnings and comprehensive income, balance sheets, cash flows, and shareholders' equity, along with detailed explanatory notes Consolidated Statements of Earnings and Comprehensive Income (Condensed) This section presents the condensed consolidated statements of earnings and comprehensive income for the quarter and nine months ended June 30 Consolidated Statements of Earnings and Comprehensive Income (Condensed) - Quarter Ended June 30 | Metric | Q3 2021 (Millions) | Q3 2020 (Millions) | | :----- | :----------------- | :----------------- | | Net sales | $721.8 | $658.0 | | Cost of products sold | $448.5 | $394.8 | | Gross profit | $273.3 | $263.2 | | Earnings before income taxes | $23.6 | $38.9 | | Net earnings from continuing operations | $20.8 | $29.0 | | Net earnings/(loss) | $20.8 | $29.8 | | Net earnings/(loss) attributable to common shareholders | $16.8 | $25.8 | | Basic net earnings per common share | $0.25 | $0.38 | | Diluted net earnings per common share | $0.24 | $0.38 | | Total comprehensive income/(loss) | $17.2 | $31.6 | Consolidated Statements of Earnings and Comprehensive Income (Condensed) - Nine Months Ended June 30 | Metric | YTD 2021 (Millions) | YTD 2020 (Millions) | | :----- | :------------------ | :------------------ | | Net sales | $2,255.5 | $1,981.8 | | Cost of products sold | $1,373.8 | $1,181.7 | | Gross profit | $881.7 | $800.1 | | Earnings before income taxes | $97.2 | $119.5 | | Net earnings from continuing operations | $77.7 | $88.5 | | Net earnings/(loss) | $77.7 | $(41.8) | | Net earnings/(loss) attributable to common shareholders | $65.6 | $(53.9) | | Basic net earnings per common share | $0.96 | $(0.78) | | Diluted net earnings per common share | $0.95 | $(0.78) | | Total comprehensive income/(loss) | $121.1 | $(48.8) | Consolidated Balance Sheets (Condensed) This section presents the condensed consolidated balance sheets as of June 30, 2021, and September 30, 2020 Consolidated Balance Sheets (Condensed) | Metric | June 30, 2021 (Millions) | September 30, 2020 (Millions) | | :----- | :----------------------- | :---------------------------- | | Cash and cash equivalents | $207.7 | $459.8 | | Restricted cash | $0.0 | $790.0 | | Total current assets | $1,414.2 | $2,210.9 | | Total assets | $4,977.4 | $5,728.3 | | Total current liabilities | $831.7 | $1,648.4 | | Long-term debt | $3,355.6 | $3,306.9 | | Total liabilities | $4,636.8 | $5,419.2 | | Total shareholders' equity | $340.6 | $309.1 | Consolidated Statements of Cash Flows (Condensed) This section presents the condensed consolidated statements of cash flows for the nine months ended June 30 Consolidated Statements of Cash Flows (Condensed) - Nine Months Ended June 30 | Metric | YTD 2021 (Millions) | YTD 2020 (Millions) | | :----- | :------------------ | :------------------ | | Net earnings/(loss) | $77.7 | $(41.8) | | Net cash from operating activities | $17.5 | $219.0 | | Net cash (used by)/from investing activities | $(109.9) | $233.5 | | Net cash used by financing activities | $(957.5) | $(116.5) | | Net (decrease)/increase in cash, cash equivalents, and restricted cash | $(1,042.1) | $337.1 | | Cash, cash equivalents, and restricted cash, end of period | $207.7 | $595.6 | Consolidated Statements of Shareholders' Equity (Condensed) This section presents the condensed consolidated statements of shareholders' equity for the periods presented Consolidated Statements of Shareholders' Equity (Condensed) | Metric | September 30, 2020 (Millions) | June 30, 2021 (Millions) | | :----- | :---------------------------- | :----------------------- | | Common Stock | $0.7 | $0.7 | | Additional Paid-in Capital | $859.2 | $850.3 | | Retained Earnings | $(66.2) | $(64.3) | | Treasury Stock | $(176.9) | $(181.8) | | Accumulated Other Comprehensive (Loss)/Income | $(307.7) | $(264.3) | | Total Shareholders' Equity | $309.1 | $340.6 | Notes to Consolidated (Condensed) Financial Statements This section provides detailed explanations and disclosures for the condensed consolidated financial statements, covering business operations, accounting policies, acquisitions, divestitures, restructuring, share-based payments, earnings per share, segment reporting, goodwill, debt, pension plans, shareholders' equity, financial instruments, comprehensive income, supplemental information, and legal contingencies (1) Description of Business and Basis of Presentation This section describes Energizer Holdings, Inc.'s global operations, key brands, and the accounting treatment of discontinued operations and new accounting pronouncements - Energizer Holdings, Inc. is a global manufacturer, marketer, and distributor of primary batteries, portable lights, and auto care products[23] - Key brands include Energizer®, Eveready®, Rayovac®, Varta® (batteries/lights) and Refresh Your Car!®, Armor All®, STP® (auto care)[24][25] - The Varta® consumer battery business in Europe, Middle East and Africa regions was sold on January 2, 2020, and is classified as discontinued operations[26][29] - The company is evaluating new accounting pronouncements related to Reference Rate Reform (ASU 2020-04) and Convertible Debt (ASU 2020-06), with the latter not expected to have a material impact[30][34] (2) Revenue Recognition This section outlines the company's revenue recognition policies and provides a breakdown of net sales by product category and geographic region - Revenue is primarily generated from finished product sales, recognized at a single point in time when title, ownership, and risk of loss pass to the customer, typically upon delivery or customer pickup[36] Net Sales by Product Category (Millions) | Product Category | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | | :--------------- | :------ | :------ | :------- | :------- | | Batteries | $482.9 | $470.7 | $1,701.8 | $1,520.3 | | Auto Care | $206.4 | $161.4 | $447.1 | $370.3 | | Lights, Licensing and Other | $32.5 | $25.9 | $106.6 | $91.2 | | Total Net Sales | $721.8 | $658.0 | $2,255.5 | $1,981.8 | Net Sales by Geographic Region (Millions) | Geographic Region | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | | :---------------- | :------ | :------ | :------- | :------- | | North America | $465.5 | $443.4 | $1,401.7 | $1,257.4 | | Latin America | $59.7 | $48.5 | $192.1 | $158.9 | | Americas | $525.2 | $491.9 | $1,593.8 | $1,416.3 | | Modern Markets | $112.1 | $96.0 | $407.0 | $339.9 | | Developing Markets | $51.0 | $42.5 | $157.7 | $139.9 | | Distributors Markets | $33.5 | $27.6 | $97.0 | $85.7 | | International | $196.6 | $166.1 | $661.7 | $565.5 | | Total Net Sales | $721.8 | $658.0 | $2,255.5 | $1,981.8 | (3) Acquisitions This section details the company's acquisitions in fiscal year 2021, including the Formulations Acquisition, FDK Indonesia Acquisition, and Custom Accessories Europe Acquisition, along with associated costs - Formulations Acquisition (Dec 1, 2020): Acquired a North Carolina-based company specializing in cleaning task formulations for $51.2 million, expected to bring significant innovation capabilities. Goodwill of $29.2 million allocated to the Americas segment[38][41][43] - FDK Indonesia Acquisition (Oct 1, 2020): Acquired a battery manufacturing facility for $18.2 million, increasing alkaline battery production capacity and allowing for the avoidance of future planned capital expenditures. No intangible assets or goodwill were recognized[45][46][48] - Custom Accessories Europe (CAE) Acquisition (Jan 31, 2020): Acquired for $1.9 million in cash, with potential earn-out payments up to $9.9 million. Identified intangible assets for vendor relationships of approximately $8.0 million[50] Pre-tax Acquisition and Integration Costs (Millions) | Expense Category | Q3 2021 | YTD 2021 | Q3 2020 | YTD 2020 | | :----------------- | :------ | :------- | :------ | :------- | | Cost of products sold | $9.6 | $24.6 | $5.5 | $20.7 | | SG&A | $9.7 | $28.7 | $6.1 | $25.3 | | Research and development | $0.1 | $1.1 | $0.2 | $1.2 | | Other items, net | $0.1 | $0.2 | $(0.4) | $0.4 | | Total Pre-tax Acquisition and Integration Costs | $19.5 | $54.6 | $11.4 | $47.6 | (4) Divestment This section details the divestment of the Varta® consumer battery business in Europe, Middle East, and Africa regions, including the sale price and financial impact - On January 2, 2020, the Varta® consumer battery business in the Europe, Middle East and Africa regions was sold to VARTA Aktiengesellschaft for €180.0 million, classified as discontinued operations[26][61] - Total cash proceeds from the Varta Divestiture, including related hedging arrangements, net of final working capital settlement, were $323.1 million[61] Net Earnings/(Loss) from Discontinued Operations (Millions) - Nine Months Ended June 30, 2020 | Metric | YTD 2020 | | :----- | :------- | | Net sales | $115.8 | | Cost of products sold | $88.2 | | Gross profit | $27.6 | | Selling, general and administrative expense | $18.0 | | Advertising and sales promotion expense | $0.3 | | Research and development expense | $0.8 | | Interest expense | $12.1 | | Loss on sale of disposition | $137.2 | | Other items, net | $(3.9) | | Earnings/(loss) before income taxes | $(136.9) | | Income tax (benefit)/expense | $(6.6) | | Net earnings/(loss) from discontinued operations | $(130.3) | (5) Restructuring This section outlines the company's 2019 and 2020 restructuring programs, their expected completion dates, anticipated costs, and projected annual cost savings - The 2019 restructuring program, focused on manufacturing and distribution network integration, is expected to be substantially complete by December 31, 2021, with approximately $12 million in additional exit-related costs anticipated[67][212][215] - A new 2020 restructuring program, initiated in Q4 FY2020, aims to reorganize the global end-to-end supply chain, with completion expected by the beginning of fiscal year 2022 and approximately $3 million in additional costs[68][213][215] Total Restructuring Related Expense (Millions) | Expense Category | Q3 2021 | YTD 2021 | Q3 2020 | YTD 2020 | | :----------------- | :------ | :------- | :------ | :------- | | 2019 Restructuring Program | $5.6 | $18.0 | $7.3 | $21.0 | | 2020 Restructuring Program | $4.4 | $13.8 | $0.0 | $0.0 | | Total Restructuring Related Expense | $10.0 | $31.8 | $7.3 | $21.0 | - These programs are expected to generate approximately $67 to $75 million of total annual cost savings by the end of fiscal 2022, primarily within Costs of products sold[216] (6) Share-Based Payments This section details the company's share-based compensation plans, including restricted stock equivalent awards and performance shares granted to employees and executives Total Share-Based Compensation Cost (Millions) | Period | Q3 2021 | YTD 2021 | Q3 2020 | YTD 2020 | | :----- | :------ | :------- | :------ | :------- | | Compensation Cost | $3.9 | $13.3 | $5.3 | $21.2 | - Restricted Stock Equivalent (RSE) awards and performance shares are granted to key employees and executives, vesting over three to four years, with performance shares tied to cumulative adjusted earnings per share and cumulative free cash flow targets[77][78][79] (7) Earnings per share This section explains the calculation of basic and diluted earnings per share, including the treatment of dilutive securities - Basic earnings per share is based on the average number of common shares outstanding, while diluted earnings per share adjusts for the dilutive effect of RSE awards, performance share awards, and deferred compensation equity plans[81] Basic and Diluted EPS from Continuing Operations (Per Share) | Metric | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | | :----- | :------ | :------ | :------- | :------- | | Basic net earnings per common share - continuing operations | $0.25 | $0.37 | $0.96 | $1.11 | | Diluted net earnings per common share - continuing operations | $0.24 | $0.37 | $0.95 | $1.10 | - The Company's Mandatory Convertible Preferred Stock (MCPS) was considered anti-dilutive for all periods and excluded from the calculations of diluted earnings/(loss) per share[85] (8) Segments This section describes the company's two reportable segments, Americas and International, and how their performance is evaluated based on segment operating profit - Operations for Energizer are currently managed via two major geographic reportable segments: Americas and International[86] - Segment performance is evaluated based on segment operating profit, exclusive of general corporate expenses, share-based compensation costs, acquisition and integration activities, acquisition earn out, amortization costs, research & development costs and other items determined to be corporate in nature[86] Net Sales by Segment (Millions) | Segment | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | | :-------- | :------ | :------ | :------- | :------- | | Americas | $525.2 | $491.9 | $1,593.8 | $1,416.3 | | International | $196.6 | $166.1 | $661.7 | $565.5 | | Total Net Sales | $721.8 | $658.0 | $2,255.5 | $1,981.8 | Segment Profit (Millions) | Segment | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | | :-------- | :------ | :------ | :------- | :------- | | Americas | $127.7 | $122.9 | $415.9 | $353.9 | | International | $35.8 | $34.8 | $135.2 | $127.4 | | Total Segment Profit | $163.5 | $157.7 | $551.1 | $481.3 | (9) Goodwill and intangible assets This section discusses the company's accounting policies for goodwill and intangible assets, including annual impairment evaluations and their carrying values by segment - Goodwill and intangible assets deemed to have an indefinite life are not amortized but are evaluated annually for impairment[97] Goodwill by Segment (Millions) | Segment | October 1, 2020 | June 30, 2021 | | :-------- | :-------------- | :------------ | | Americas | $865.8 | $895.4 | | International | $150.2 | $162.8 | | Total Goodwill | $1,016.0 | $1,058.2 | Total Other Intangible Assets, Net (Millions) | Asset Type | June 30, 2021 | September 30, 2020 | | :-------------------------------- | :------------ | :----------------- | | Total Amortizable intangible assets | $521.1 | $543.6 | | Trademarks and trade names - indefinite lived | $1,366.2 | $1,365.4 | | Total Other intangible assets, net | $1,887.3 | $1,909.0 | (10) Debt This section details the company's debt refinancing activities in fiscal year 2021, including new offerings, credit facilities, and the resulting losses on extinguishment of debt - The Company completed several debt refinancing activities in fiscal 2021, including a $800 million Senior Notes offering, a new $400 million revolving credit facility and $550 million Term Loan, an incremental $650 million Term Loan, and a €650 million Senior Notes offering[104][105][106][107] - These refinancing activities resulted in significant losses on extinguishment of debt, including redemption premiums of $55.9 million, $66.6 million, and $18.6 million[104][106][107] - As of June 30, 2021, the Company had $103.0 million outstanding under the 2020 Revolving Facility and $289.3 million remained available[112] - The Company entered into a new interest rate swap in December 2020, fixing LIBOR at 0.95% on variable rate debt, with a notional value of $700.0 million at June 30, 2021[115] Aggregate Maturities of Long-Term Debt (Millions) as of June 30, 2021 | Period | Long-term debt | | :------- | :------------- | | One year | $12.0 | | Two year | $12.0 | | Three year | $12.0 | | Four year | $12.0 | | Five year | $12.0 | | Thereafter | $3,307.8 | | Total long-term debt payments due | $3,367.8 | (11) Pension Plans This section provides information on the company's defined benefit pension plans, including net periodic pension benefit/cost for U.S. and International plans - The Company sponsors several defined benefit pension plans covering employees in the U.S. (frozen in fiscal year 2014) and certain employees in other countries[123] Net Periodic Pension (Benefit)/Cost (Millions) - Quarter Ended June 30 | Metric | U.S. 2021 | U.S. 2020 | International 2021 | International 2020 | | :----- | :-------- | :-------- | :----------------- | :----------------- | | Service cost | $0.0 | $0.0 | $0.2 | $0.2 | | Interest cost | $3.1 | $4.0 | $0.4 | $0.3 | | Expected return on plan assets | $(5.5) | $(6.1) | $(0.8) | $(0.6) | | Amortization of unrecognized net losses | $1.8 | $1.6 | $0.4 | $0.3 | | Net periodic (benefit)/cost | $(0.6) | $(0.5) | $0.2 | $0.2 | Net Periodic Pension (Benefit)/Cost (Millions) - Nine Months Ended June 30 | Metric | U.S. 2021 | U.S. 2020 | International 2021 | International 2020 | | :----- | :-------- | :-------- | :----------------- | :----------------- | | Service cost | $0.0 | $0.0 | $0.6 | $0.6 | | Interest cost | $9.5 | $12.0 | $1.2 | $0.9 | | Expected return on plan assets | $(16.5) | $(18.3) | $(2.4) | $(1.8) | | Amortization of unrecognized net losses | $5.4 | $4.8 | $1.2 | $0.9 | | Net periodic (benefit)/cost | $(1.6) | $(1.5) | $0.6 | $0.6 | (12) Shareholders' Equity This section details the company's share repurchase program, common stock dividends, and mandatory convertible preferred stock dividends - A new share repurchase program for up to 7.5 million shares of common stock was approved in November 2020. During the nine months ended June 30, 2021, the Company repurchased 500,000 shares for $21.3 million[126] - Cash dividends of $0.30 per share of common stock were declared for the first, second, and third quarters of fiscal 2021. Total common stock dividends declared were $62.8 million (YTD 2021) and $63.6 million (YTD 2020)[127][128] - Cash dividends of $1.875 per share of Mandatory Convertible Preferred Stock (MCPS) were declared and paid quarterly[129] (13) Financial Instruments and Risk Management This section describes the company's use of derivative instruments to manage exposure to currency rates, interest rates, and commodity prices, and outlines foreign currency and interest rate risks - The Company uses derivatives (interest rate swaps, forward currency contracts, zinc contracts) to manage exposure to currency rates, interest rates, and commodity prices, not for speculative purposes[132][137][140] - Foreign currency risk arises from product costs tied to the U.S. dollar and nonfunctional currency balance sheet positions of foreign subsidiaries[138][139] - Interest rate risk relates to variable rate debt, with $1,300.0 million outstanding at June 30, 2021. A new interest rate swap fixed LIBOR at 0.95% on $700.0 million of variable rate debt[140][142] Estimated Fair Values and Gains/Losses on Derivatives Designated as Cash Flow Hedges (Millions) | Derivative Type | Estimated Fair Value (June 30, 2021) | Q3 2021 Gain/(Loss) Reclassified from OCI into Income | YTD 2021 Gain/(Loss) Reclassified from OCI into Income | | :---------------- | :----------------------------------- | :---------------------------------------------------- | :--------------------------------------------------- | | Foreign currency contracts | $(1.6) | $(0.4) | $(3.0) | | Interest rate swaps contracts | $9.8 | $(7.9) | $(1.8) | | Zinc contracts | $7.3 | $0.8 | $2.0 | | Total | $15.5 | $(7.5) | $(2.8) | Estimated Fair Values and Gains/Losses on Derivatives Not Designated as Cash Flow Hedges (Millions) | Derivative Type | Estimated Fair Value (June 30, 2021) | Q3 2021 Loss Recognized in Income | YTD 2021 Loss Recognized in Income | | :---------------- | :----------------------------------- | :-------------------------------- | :--------------------------------- | | Foreign currency contracts | $0.2 | $(0.3) | $(0.9) | (14) Accumulated Other Comprehensive (Loss)/Income This section presents the changes in accumulated other comprehensive (loss)/income, detailing components such as foreign currency translation adjustments, pension activity, and derivative gains/losses Accumulated Other Comprehensive (Loss)/Income (AOCI) (Millions) | Component | Balance at Sep 30, 2020 | OCI before Reclassifications (YTD 2021) | Reclassifications to Earnings (YTD 2021) | Balance at June 30, 2021 | | :-------------------------------- | :---------------------- | :-------------------------------------- | :--------------------------------------- | :----------------------- | | Foreign Currency Translation Adjustments | $(137.4) | $24.8 | $0.0 | $(112.6) | | Pension Activity | $(163.5) | $(1.7) | $5.1 | $(160.1) | | Zinc Contracts | $3.4 | $3.5 | $(1.3) | $5.6 | | Foreign Currency Contracts | $(4.1) | $(4.2) | $6.8 | $(1.5) | | Interest Rate Contracts | $(6.1) | $6.7 | $3.7 | $4.3 | | Total | $(307.7) | $29.1 | $14.3 | $(264.3) | Reclassifications out of AOCI to Earnings (Millions) - Nine Months Ended June 30, 2021 | AOCI Component | Amount Reclassified from AOCI | | :-------------------------------- | :---------------------------- | | Foreign currency contracts | $9.0 | | Interest rate contracts | $4.9 | | Zinc contracts | $(1.7) | | Actuarial loss (pension) | $6.6 | | Total reclassifications to earnings | $14.3 | (15) Supplemental Financial Statement Information This section provides additional details on various financial statement components, including other items, net, inventories, property, plant and equipment, and other current and non-current liabilities Other Items, Net (Millions) | Component | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | | :-------------------------------- | :------ | :------ | :------- | :------- | | Interest income | $(0.2) | $(0.2) | $(0.5) | $(0.4) | | Foreign currency exchange (gain)/loss | $(0.9) | $2.9 | $0.9 | $8.0 | | Pension benefit other than service costs | $(0.6) | $(0.5) | $(1.6) | $(1.5) | | Acquisition foreign currency loss | $0.0 | $0.0 | $0.0 | $2.2 | | Transition services agreement income | $0.0 | $(0.4) | $0.0 | $(0.8) | | Other | $0.2 | $(1.1) | $0.4 | $(1.7) | | Total Other items, net | $(1.5) | $0.7 | $(0.8) | $5.8 | Inventories (Millions) | Component | June 30, 2021 | September 30, 2020 | | :---------------------- | :------------ | :----------------- | | Raw materials and supplies | $145.6 | $85.2 | | Work in process | $200.9 | $148.7 | | Finished products | $344.6 | $277.4 | | Total inventories | $691.1 | $511.3 | Property, Plant and Equipment, Net (Millions) | Component | June 30, 2021 | September 30, 2020 | | :---------------------- | :------------ | :----------------- | | Land | $15.8 | $8.9 | | Buildings | $125.0 | $121.9 | | Machinery and equipment | $855.8 | $821.4 | | Capital leases | $52.8 | $51.4 | | Construction in progress | $49.7 | $39.3 | | Total gross property | $1,099.1 | $1,042.9 | | Accumulated depreciation | $(726.5) | $(690.8) | | Total property, plant and equipment, net | $372.6 | $352.1 | Other Current Liabilities (Millions) | Component | June 30, 2021 | September 30, 2020 | | :----------------------------------------- | :------------ | :----------------- | | Accrued advertising, sales promotion and allowances | $18.3 | $12.1 | | Accrued trade allowances | $48.1 | $45.4 | | Accrued salaries, vacations and incentive compensation | $52.7 | $68.1 | | Accrued interest expense | $11.8 | $36.9 | | Accrued redemption premium | $0.0 | $55.9 | | Restructuring reserve | $6.6 | $9.4 | | Income taxes payable | $16.2 | $30.2 | | Other | $136.7 | $150.7 | | Total other current liabilities | $290.4 | $408.7 | Other Liabilities (Millions) | Component | June 30, 2021 | September 30, 2020 | | :-------------------------------- | :------------ | :----------------- | | Pensions and other retirement benefits | $84.1 | $89.9 | | Deferred compensation | $22.8 | $26.8 | | Mandatory transition tax | $16.7 | $16.7 | | Other non-current liabilities | $70.9 | $78.2 | | Total other liabilities | $194.5 | $211.6 | (16) Legal proceedings/contingencies and other obligations This section addresses the company's involvement in various legal proceedings and its assessment of potential liabilities and purchase obligations - The Company is subject to various legal proceedings, but believes that any resulting liability is not reasonably likely to be material to its financial position, results of operations, or cash flows, considering established accruals[180] - As of June 30, 2021, the Company had approximately $34.0 million of purchase obligations under supply and service contracts[181] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Energizer's financial condition, results of operations, and liquidity, including discussions of forward-looking statements, non-GAAP measures, COVID-19 impacts, acquisitions, restructuring, operating results, segment performance, and capital resources Forward-Looking Statements This section highlights that the document contains forward-looking statements subject to various risks and uncertainties that could cause actual results to differ materially - The document contains forward-looking statements reflecting expectations, estimates, or projections concerning future results or events, which are inherently subject to known and unknown risks, uncertainties, and assumptions[185] - Numerous factors could cause actual results to differ materially, including global economic conditions, COVID-19 impacts, competition, changes in the retail environment, supply chain disruptions, and significant debt obligations[185][189] Non-GAAP Financial Measures This section explains management's use of non-GAAP financial measures to provide additional insights into ongoing operating performance, excluding specific non-recurring items - Management uses non-GAAP financial measures (e.g., Segment Profit, Adjusted Net Earnings, Organic Sales) to provide additional meaningful comparisons and exclude items not reflective of ongoing operating performance, such as acquisition and integration costs, acquisition earn-out, and loss on extinguishment of debt[188][191][192] - Non-GAAP measures are intended to assist investors in understanding the business and should be considered in addition to, not as a substitute for, GAAP measures[188] COVID-19 Impact This section discusses the impact of COVID-19 on the company's business, including strong performance in core segments, incremental costs, and the net effect on earnings per share - Core batteries and auto care businesses performed strongly in the nine months ended June 30, 2021, partially due to increased replenishment volumes and elevated demand driven by COVID-19[199] - Incremental COVID-19 costs in Q1 FY2021 were $11.7 million (air freight, fines, PPE), partially offset by a $2.2 million reduction in SG&A travel expenses, resulting in a net impact of $9.5 million[199] - The net reduction to reported and adjusted earnings per share due to COVID-19 was $0.10 for the nine months ended June 30, 2021, and $0.12 for the nine months ended June 30, 2020[199][201] - The full impact of COVID-19 remains uncertain, but the Company believes it has multiple options to mitigate, including deferring capital expenditures and reducing overhead expenses[202] Fiscal Year 2021 Acquisitions This section summarizes the FDK Indonesia and Formulations acquisitions in fiscal year 2021, including their strategic benefits and incremental financial contributions - FDK Indonesia Acquisition (Oct 1, 2020): Acquired a battery manufacturing facility for $18.2 million, increasing alkaline battery production capacity and avoiding future planned capital expenditures[203] - Formulations Acquisition (Dec 1, 2020): Acquired a North Carolina-based company specializing in cleaning task formulations for $51.2 million, expected to bring significant innovation capabilities[204] Incremental Revenue and Segment Profit from FY2021 Acquisitions (Millions) | Period | Incremental Revenue | Incremental Segment Profit | | :----- | :------------------ | :------------------------- | | Q3 2021 | $4.9 | $0.3 | | YTD 2021 | $25.2 | $3.4 | Acquisition and Integration Costs This section provides a breakdown of pre-tax acquisition and integration costs incurred across various expense categories for the reported periods Pre-tax Acquisition and Integration Costs (Millions) | Expense Category | Q3 2021 | YTD 2021 | Q3 2020 | YTD 2020 | | :----------------- | :------ | :------- | :------ | :------- | | Cost of products sold | $9.6 | $24.6 | $5.5 | $20.7 | | SG&A | $9.7 | $28.7 | $6.1 | $25.3 | | Research and development | $0.1 | $1.1 | $0.2 | $1.2 | | Other items, net | $0.1 | $0.2 | $(0.4) | $0.4 | | Total Pre-tax Acquisition and Integration Costs | $19.5 | $54.6 | $11.4 | $47.6 | Restructuring Costs This section details the company's 2019 and 2020 restructuring programs, including their objectives, expected completion, and anticipated cost savings - The 2019 restructuring program, focused on manufacturing and distribution network integration, is expected to be substantially complete by December 31, 2021, with approximately $12 million in additional exit-related costs anticipated[212][215] - A new 2020 restructuring program, initiated in Q4 FY2020, aims to reorganize the global end-to-end supply chain, with completion expected by the beginning of fiscal year 2022 and approximately $3 million in additional costs[213][215] Total Pre-tax Restructuring Expense (Millions) | Period | Q3 2021 | YTD 2021 | Q3 2020 | YTD 2020 | | :----- | :------ | :------- | :------ | :------- | | Total Pre-tax Expense | $10.0 | $31.8 | $7.3 | $21.0 | - These programs are expected to generate approximately $67 to $75 million of total annual cost savings by the end of fiscal 2022, primarily within Costs of products sold[216] Highlights / Operating Results This section summarizes the Company's financial performance, including net earnings, sales growth drivers, gross margin, operating expenses, interest expense, and tax rates for the quarter and nine months ended June 30, 2021 Financial Results Summary This section provides a summary of reported and adjusted net earnings from continuing operations and diluted earnings per share for the current and prior periods Net Earnings from Continuing Operations (Millions) | Metric | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | | :----- | :------ | :------ | :------- | :------- | | Net earnings from continuing operations | $20.8 | $29.0 | $77.7 | $88.5 | | Diluted net earnings per common share - continuing operations | $0.24 | $0.37 | $0.95 | $1.10 | Adjusted Net Earnings from Continuing Operations (Millions) | Metric | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | | :----- | :------ | :------ | :------- | :------- | | Adjusted net earnings from continuing operations | $54.6 | $38.5 | $197.6 | $132.1 | | Adjusted diluted net earnings per diluted common share - continuing operations | $0.74 | $0.50 | $2.69 | $1.73 | - Adjusted diluted net earnings from continuing operations per common share increased 48% for the third fiscal quarter of 2021 and 55% for the nine months ended June 30, 2021, compared to the prior year comparable periods[218][221] Net Sales Analysis This section analyzes the drivers of total net sales growth, including organic growth, acquisition impacts, and currency effects for the reported periods Total Net Sales Growth Drivers (Millions) | Driver | Q3 2021 Change | Q3 2021 % Chg | YTD 2021 Change | YTD 2021 % Chg | | :----------------------- | :------------- | :------------ | :-------------- | :------------- | | Net sales - prior year | $658.0 | | $1,981.8 | | | Organic | $38.3 | 5.8% | $206.3 | 10.4% | | Impact of FY 2021 Acquisitions | $4.9 | 0.7% | $25.2 | 1.3% | | Change in Argentina | $1.9 | 0.3% | $5.5 | 0.3% | | Impact of currency | $18.7 | 2.9% | $36.7 | 1.8% | | Net Sales - current year | $721.8 | 9.7% | $2,255.5 | 13.8% | - Organic Net sales increased 5.8% in the third fiscal quarter of 2021, driven by increased global volumes (3.0%), new distribution (1.8%), and favorable pricing (1%)[228] - Organic Net sales increased 10.4% for the nine months ended June 30, 2021, driven by increased global volumes (5.0%), new distribution (4.5%), and favorable pricing (1%)[230][231] Gross Margin Analysis This section analyzes the reported and adjusted gross margin percentages, identifying key factors contributing to changes, such as operating costs, product mix, and synergies Gross Margin Percentage | Period | Reported Gross Margin % | Adjusted Gross Margin % | | :----- | :---------------------- | :---------------------- | | Q3 2021 | 37.9% | 39.2% | | Q3 2020 | 40.0% | 40.8% | | YTD 2021 | 39.1% | 40.2% | | YTD 2020 | 40.4% | 41.4% | - Gross margin percentage decreased by 160 basis points (adjusted) in Q3 2021 and 120 basis points (adjusted) for YTD 2021, primarily due to higher operating costs (labor, tariffs, transportation) and a higher mix of lower-margin auto care business[233][234] - Partially offsetting these margin impacts were synergies of approximately $14 million (Q3 2021) and $41 million (YTD 2021) and favorable currency exchange rates[236] Selling, General, and Administrative Expense (SG&A) Analysis This section analyzes reported and adjusted SG&A expenses, both in absolute terms and as a percentage of net sales, highlighting factors influencing changes SG&A Expense (Millions) and % of Net Sales | Period | Reported SG&A (Millions) | Reported SG&A % of Net Sales | Adjusted SG&A (Millions) | Adjusted SG&A % of Net Sales | | :----- | :----------------------- | :--------------------------- | :----------------------- | :--------------------------- | | Q3 2021 | $117.5 | 16.3% | $106.6 | 14.8% | | Q3 2020 | $112.8 | 17.1% | $106.7 | 16.2% | | YTD 2021 | $365.4 | 16.2% | $334.4 | 14.8% | | YTD 2020 | $351.0 | 17.7% | $325.7 | 16.4% | - Adjusted SG&A as a percentage of Net sales decreased due to benefits from higher sales, synergy realization as a result of transition service agreement exits, and reduced spending, due in part to travel restrictions imposed as a result of COVID-19[237][240] - On an absolute dollar basis, adjusted SG&A increased $8.7 million for the nine months ended June 30, 2021, primarily driven by higher overhead associated with top-line sales growth and unfavorable currency headwinds, partially offset by synergies of approximately $16 million[241] Advertising and Sales Promotion Expense (A&P) Analysis This section analyzes advertising and sales promotion expenses, both in absolute terms and as a percentage of net sales, explaining the drivers of changes A&P Expense (Millions) and % of Net Sales | Period | A&P (Millions) | A&P % of Net Sales | | :----- | :------------- | :----------------- | | Q3 2021 | $44.1 | 6.1% | | Q3 2020 | $37.3 | 5.7% | | YTD 2021 | $120.8 | 5.4% | | YTD 2020 | $106.9 | 5.4% | - The increase in A&P expense for current year periods was due to planned incremental investment in the product portfolio to support brands and innovation[242] Research and Development (R&D) Analysis This section presents research and development expenses, both in absolute terms and as a percentage of net sales R&D Expense (Millions) and % of Net Sales | Period | R&D (Millions) | R&D % of Net Sales | | :----- | :------------- | :----------------- | | Q3 2021 | $8.2 | 1.1% | | Q3 2020 | $8.4 | 1.3% | | YTD 2021 | $24.8 | 1.1% | | YTD 2020 | $25.6 | 1.3% | Interest Expense Analysis This section analyzes interest expense, highlighting the primary reasons for changes in the reported periods Interest Expense (Millions) | Period | Interest Expense | | :----- | :--------------- | | Q3 2021 | $38.6 | | Q3 2020 | $50.8 | | YTD 2021 | $125.0 | | YTD 2020 | $144.8 | - Interest expense decreased primarily due to debt refinancing activities completed over the past 15 months[244] Loss on Extinguishment of Debt Analysis This section details the losses incurred from the extinguishment of debt, primarily due to various debt refinancing activities Loss on Extinguishment of Debt (Millions) | Period | Loss on Extinguishment of Debt | | :----- | :----------------------------- | | Q3 2021 | $27.6 | | YTD 2021 | $103.3 | - Losses resulted from refinancing the €650 million 2026 Senior Notes in June 2021, and earlier refinancing of the Revolver, Term Loans, and 2027 Senior Notes[245] Other Items, Net Analysis This section provides an analysis of other items, net, detailing the components contributing to the reported benefit or expense Other Items, Net (Millions) | Period | Other Items, Net | | :----- | :--------------- | | Q3 2021 | $(1.5) (benefit) | | Q3 2020 | $0.7 (expense) | | YTD 2021 | $(0.8) (benefit) | | YTD 2020 | $5.8 (expense) | Effective Tax Rate Analysis This section analyzes the reported and adjusted effective tax rates for the current and prior year-to-date periods - The effective tax rate on a year-to-date basis was 20.1% for YTD 2021, compared to 25.9% for YTD 2020[247] - Excluding non-GAAP adjustments, the year-to-date adjusted effective tax rate was 23.2% for YTD 2021, compared to 22.9% for YTD 2020[247] Segment Results This section analyzes the financial performance of the Americas and International segments, detailing net sales and segment profit growth drivers, including organic growth, acquisition impacts, and currency effects Americas Segment Performance This section analyzes the Americas segment's net sales and segment profit, detailing the drivers of growth, including organic sales, acquisitions, and currency impacts Americas Net Sales Growth Drivers (Millions) | Driver | Q3 2021 Change | Q3 2021 % Chg | YTD 2021 Change | YTD 2021 % Chg | | :----------------------- | :------------- | :------------ | :-------------- | :------------- | | Net sales - FY '20 | $491.9 | | $1,416.3 | | | Organic | $23.2 | 4.7% | $153.1 | 10.8% | | Impact of FY 2021 Acquisitions | $3.6 | 0.7% | $18.5 | 1.3% | | Change in Argentina | $1.9 | 0.4% | $5.5 | 0.4% | | Impact of currency | $4.6 | 1.0% | $0.4 | 0.0% | | Net sales - FY '21 | $525.2 | 6.8% | $1,593.8 | 12.5% | - Americas organic net sales increased 4.7% in Q3 2021, driven by distribution gains in both auto care and battery categories in North America and Latin America, as well as strong auto replenishment, partially offset by a decline in North America battery sales[253] - Americas organic net sales increased 10.8% for YTD 2021, driven by distribution gains across both product groups, strong replenishment (partially due to the net impacts of COVID-19 demand), and price increases[256] Americas Segment Profit Growth Drivers (Millions) | Driver | Q3 2021 Change | Q3 2021 % Chg | YTD 2021 Change | YTD 2021 % Chg | | :----------------------- | :------------- | :------------ | :-------------- | :------------- | | Segment profit - FY '20 | $122.9 | | $353.9 | | | Organic | $3.2 | 2.6% | $58.8 | 16.6% | | Impact of FY 2021 Acquisitions | $0.4 | 0.3% | $3.0 | 0.8% | | Change in Argentina | $1.2 | 1.0% | $4.3 | 1.2% | | Impact of currency | $0.0 | 0.0% | $(4.1) | (1.1)% | | Segment profit - FY '21 | $127.7 | 3.9% | $415.9 | 17.5% | - Americas organic segment profit increased 2.6% in Q3 2021, driven by top-line growth and realized synergies resulting in decreased SG&A, partially offset by higher operating costs and planned higher A&P spending[261] - Americas organic segment profit increased 16.6% for YTD 2021, driven by strong top-line growth and synergy realization, partially offset by operational costs related to COVID-19 and planned higher A&P spending[264] International Segment Performance This section analyzes the International segment's net sales and segment profit, detailing the drivers of growth, including organic sales, acquisitions, and currency impacts International Net Sales Growth Drivers (Millions) | Driver | Q3 2021 Change | Q3 2021 % Chg | YTD 2021 Change | YTD 2021 % Chg | | :----------------------- | :------------- | :------------ | :-------------- | :------------- | | Net sales - FY '20 | $166.1 | | $565.5 | | | Organic | $15.1 | 9.1% | $53.2 | 9.4% | | Impact of FY 2021 Acquisitions | $1.3 | 0.8% | $6.7 | 1.2% | | Impact of currency | $14.1 | 8.5% | $36.3 | 6.4% | | Net sales - FY '21 | $196.6 | 18.4% | $661.7 | 17.0% | - International organic net sales increased 9.1% in Q3 2021, driven by auto care distribution gains and elevated demand in both battery and auto care categories[255] - International organic net sales increased 9.4% for YTD 2021, driven by increased distribution and strong replenishment due to elevated COVID-19 demand levels and timing of activity between quarters[257] International Segment Profit Growth Drivers (Millions) | Driver | Q3 2021 Change | Q3 2021 % Chg | YTD 2021 Change | YTD 2021 % Chg | | :----------------------- | :------------- | :------------ | :-------------- | :------------- | | Segment profit - FY '20 | $34.8 | | $127.4 | | | Organic | $(5.2) | (14.9)% | $(10.5) | (8.2)% | | Impact of FY 2021 Acquisitions | $(0.1) | (0.3)% | $0.4 | 0.3% | | Impact of currency | $6.3 | 18.1% | $17.9 | 14.0% | | Segment profit - FY '21 | $35.8 | 2.9% | $135.2 | 6.1% | - International organic segment profit declined 14.9% in Q3 2021, due to increased labor, tariffs, and transportation costs, and an unfavorable mix shift to auto care products, which negatively impacted gross margin and mostly offset organic revenue growth[262] - International organic segment profit declined 8.2% for YTD 2021, due to operational costs related to COVID-19, unfavorable mix, and increased operating costs (labor, tariffs, transportation), which negatively impacted gross margin[265] General Corporate and Global Marketing Expenses This section analyzes general corporate and global marketing expenses, detailing the factors influencing changes in these costs General Corporate and Global Marketing Expenses (Millions) | Expense Type | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | | :-------------------------------- | :------ | :------ | :------- | :------- | | General corporate and other expenses | $21.5 | $25.6 | $71.3 | $74.0 | | Global marketing expense | $9.8 | $7.4 | $28.7 | $19.1 | | Total | $31.3 | $33.0 | $100.0 | $93.1 | | % of Net Sales | 4.3% | 5.0% | 4.4% | 4.7% | - General corporate and other expenses decreased in Q3 and YTD 2021 primarily due to lower mark-to-market expenses on deferred compensation plans and reduced stock compensation expense, partially offset by higher legal and corporate development costs[266] - Global marketing expenses increased due to planned incremental investment in the branded product portfolio[268] Liquidity and Capital Resources This section discusses Energizer's cash needs, sources of liquidity, and capital allocation strategies, including details on operating, investing, and financing activities, as well as dividend payments and share repurchases Operating Activities This section analyzes cash flow from operating activities, detailing the primary drivers of changes, including working capital and cash earnings Cash Flow from Operating Activities from Continuing Operations (Millions) | Period | Cash Flow from Operating Activities | | :----- | :---------------------------------- | | YTD 2021 | $17.5 | | YTD 2020 | $231.9 | - The $214.4 million decrease in operating cash flow for YTD 2021 was primarily driven by working capital changes of approximately $282 million, partially offset by a $72 million increase in cash earnings[274] - Working capital changes included approximately $115 million in increased inventory investment, $71 million due to changes in accounts payable and accrued interest, and $39 million in accounts receivable[274][275][276] Investing Activities This section analyzes net cash used by investing activities, detailing capital expenditures, acquisitions, and anticipated future investing cash outflows Net Cash Used by Investing Activities from Continuing Operations (Millions) | Period | Net Cash Used by Investing Activities | | :----- | :------------------------------------ | | YTD 2021 | $109.9 | | YTD 2020 | $47.4 | - Investing activities for YTD 2021 included capital expenditures of $42.7 million and acquisitions (net of cash acquired) of $67.2 million[277][278] - Anticipated investing cash outflows for full fiscal year 2021 include $30-$37 million for capital expenditures related to maintenance, product development, and cost reduction, and $40-$48 million for integration-related capital expenditures[279] Financing Activities This section analyzes net cash used by financing activities, detailing debt proceeds and payments, premiums on debt extinguishment, debt issuance costs, and dividend payments Net Cash Used by Financing Activities from Continuing Operations (Millions) | Period | Net Cash Used by Financing Activities | | :----- | :------------------------------------ | | YTD 2021 | $957.5 | | YTD 2020 | $115.4 | - YTD 2021 financing activities included $1,982.6 million in debt proceeds, $2,770.2 million in debt payments, $141.1 million in premiums paid on debt extinguishment, and $27.6 million in debt issuance costs[280][281] - Dividends paid on common stock were $63.8 million and on mandatory convertible preferred stock were $12.1 million for YTD 2021[281] - Common stock repurchases were $21.3 million for YTD 2021[284] Dividends This section details the cash dividends declared and paid on both common stock and mandatory convertible preferred stock for fiscal year 2021 - Cash dividends of $0.30 per share of common stock were declared for the first, second, and third quarters of fiscal 2021[285] - Cash dividends of $1.875 per share of Mandatory Convertible Preferred Stock (MCPS) were declared and paid quarterly[286] - Subsequent to quarter-end, a $0.30 common stock dividend for Q4 FY2021 and a $1.875 MCPS dividend were declared[287][288] Share Repurchases This section outlines the company's share repurchase program, including the authorization, shares repurchased, and planned accelerated share repurchase program - A new share repurchase authorization for up to 7.5 million shares of common stock was approved in November 2020[289] - During the nine months ended June 30, 2021, 500,000 shares were repurchased for $21.3 million at an average price of $42.61 per share[289] - The Company intends to enter into a $75.0 million accelerated share repurchase (ASR) program in Q4 FY2021, expected to be completed before the end of calendar year 2021[291] Other Matters This section covers environmental matters and a summary of the Company's significant contractual obligations Environmental Matters This section discusses the company's accrued environmental costs and the expected impact of environmental expenditures on its financial position - Accrued environmental costs at June 30, 2021, were $9.2 million[294] - Environmental capital expenditures and operating expenses are not expected to have a material effect on total capital, operating expenditures, earnings, or competitive position[294] Contractual Obligations This section provides a summary of the company's significant contractual obligations, categorized by type and maturity period Summary of Significant Contractual Obligations (Millions) as of June 30, 2021 | Obligation Type | Total | Less than 1 year | 1 - 3 years | 3 - 5 years | More than 5 years | | :-------------------------------- | :---- | :--------------- | :---------- | :---------- | :---------------- | | Long-term debt, including current maturities | $3,367.8 | $12.0 | $24.0 | $24.0 | $3,307.8 | | Interest on long-term debt | $919.8 | $126.3 | $251.7 | $249.5 | $292.3 | | Notes payable | $103.4 | $103.4 | $0.0 | $0.0 | $0.0 | | Operating leases | $174.5 | $19.6 | $34.5 | $31.5 | $88.9 | | Capital leases | $85.4 | $5.0 | $9.9 | $10.0 | $60.5 | | Pension plans | $1.1 | $1.1 | $0.0 | $0.0 | $0.0 | | Purchase obligations and other | $34.0 | $12.8 | $14.2 | $6.2 | $0.8 | | Mandatory transition tax | $16.7 | $0.0 | $0.0 | $9.4 | $7.3 | | Total | $4,702.7 | $280.2 | $334.3 | $330.6 | $3,757.6 | Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the Company's exposure to market risks, including currency rates, commodity prices, and interest rates, and outlines its strategies for managing these risks through derivative instruments Market Risk Sensitive Instruments and Positions This subsection details the Company's use of derivative instruments to manage its exposure to foreign currency, commodity price, and interest rate risks, including specific hedging relationships and their financial impact Derivatives Designated as Cash Flow Hedging Relationships This section describes the company's use of forward currency contracts to hedge forecasted inventory purchases and the associated unrealized gains or losses - The Company uses forward currency contracts to hedge the cash flow uncertainty of forecasted inventory purchases, primarily for Euro, British pound, Canadian dollar, and Australian dollar exposures[301] - At June 30, 2021, an unrealized pre-tax loss of $1.6 million was recorded on these contracts, with $1.8 million expected to be recognized in earnings over the next 12 months[301] Derivatives Not Designated as Cash Flow Hedging Relationships This section explains the use of foreign currency derivative contracts not designated as cash flow hedges to manage balance sheet exposures and their impact on income - Foreign currency derivative contracts not designated as cash flow hedges are used to hedge existing balance sheet exposures, with any gains or losses expected to be offset by corresponding exchange gains or losses on the underlying exposures[302][303] - Losses recognized in income from these contracts were $0.3 million for the quarter ended June 30, 2021, and $0.9 million for the nine months ended June 30, 2021[303] Commodity Price Exposure This section discusses the company's use of hedging instruments to mitigate exposure to price volatility in raw materials, specifically zinc purchases - The Company uses hedging instruments to reduce exposure to price volatility in raw materials, specifically future zinc purchases[305][306] - At June 30, 2021, a pre-tax gain of $7.3 million was recognized on zinc contracts, included in Accumulated other comprehensive loss[306] Interest Rate Exposure This section details the company's interest rate risk related to variable rate debt and its use of interest rate swaps to fix LIBOR - The Company has interest rate risk with $1,300.0 million of variable rate debt outstanding at June 30, 2021, under the 2020 Term Loan and 2020 Revolving Facility[307] - A new interest rate swap (2020 Interest rate swap) fixed LIBOR at 0.95% on $700.0 million of variable rate debt, resulting in an unrealized pre-tax gain of $9.8 million at June 30, 2021[308][309] - The weighted average interest rate on variable rate debt, inclusive of the interest rate swap, was 2.96% for the quarter ended June 30, 2021[309] Argentina Currency Exposure and Hyperinflation This section explains the accounting treatment for Argentina's highly inflationary economy, requiring remeasurement of financial statements into USD - Effective July 1, 2018, Argentina's economy was designated as highly inflationary, requiring remeasurement of financial statements into USD and reflecting future exchange gains and losses from monetary assets and liabilities in current earnings[310] Item 4. Controls and Procedures This section details the evaluation of the Company's disclosure controls and procedures and internal control over financial reporting, confirming their effectiveness as of June 30, 2021 Evaluation of Disclosure Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures and the absence of material changes to internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of June 30, 2021, providing reasonable assurance of accurate and timely reporting[311] - There was no change in the Company's internal control over financial reporting during the quarter ended June 30, 2021, that has materially affected or is reasonably likely to materially affect it[313] PART II -- OTHER INFORMATION This part includes information on legal proceedings, risk factors, equity security sales, and exhibits Item 1. Legal Proceedings This section addresses the Company's involvement in various legal proceedings and its assessment of potential liabilities - The Company is involved in various legal proceedings but believes that any resulting liability is not reasonably likely to be material to its financial position, results of operations, or cash flows, considering established accruals[315] Item 1A. Risk Factors This section refers to the detailed discussion of risk factors in the Company's most recent Annual Report on Form 10-K - There have been no material changes to the risk factors previously discussed in the Annual Report on Form 10-K filed on November 17, 2020[316] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports on the Company's purchases of equity securities during the third quarter of fiscal 2021, including shares withheld for tax obligations Issuer Purchases of Equity Securities - Q3 Fiscal 2021 | Period | Total Number of Shares Purchased | Average Price 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 | | :----------------- | :----------------------------- | :---------------------- | :----------------------------------------------------------------------------- | :----------------------------------------------------------------- | | April 1 - April 30 | — | — | — | 7,000,000 | | May 1 - May 31 | — | — | — | 7,000,000 | | June 1 - June 30 | 150 | $42.20 | — | 7,000,000 | | Total | 150 | $42.20 | — | 7,000,000 | - The 150 shares purchased during the quarter ended June 30, 2021, 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[320] Item 6. Exhibits This section directs readers to the Exhibit Index for a comprehensive list of all documents filed as exhibits to the Form 10-Q - Refers to the Exhibit Index for a list of all exhibits filed with the report[318] EXHIBIT INDEX This section provides a comprehensive list of exhibits filed with the Form 10-Q, including various agreements, corporat