Energizer (ENR) - 2021 Q4 - Annual Report

Part I Business Energizer is a global manufacturer of household products, including batteries and auto care, serving diverse retail channels and subject to regulations - Energizer is a global diversified household products company specializing in batteries, auto care, and portable lights, with well-known brands[14][18][19] - Wal-Mart Stores, Inc. accounted for 13.7% of annual sales in fiscal year 2021, making it the largest customer[26] - As of September 30, 2021, the company employed approximately 6,000 people across 38 countries[35] - Operations are subject to significant governmental regulations, including environmental rules and scrutiny over components like refrigerant R-134a[55][56] Risk Factors The company faces material risks from intense competition, retail changes, supply chain disruptions, international operations, substantial debt, and increasing regulatory scrutiny - Intense competition from consumer product companies could hinder profitability and customer relationships[74][76] - Changes in the retail landscape and consumer preferences could negatively impact sales and margins[79] - The COVID-19 pandemic presents ongoing operational challenges, including supply chain disruptions and $6 million in incremental costs in fiscal 2021[81][84][85] - Over 40% of fiscal 2021 sales from foreign countries expose the company to international risks like currency fluctuations and trade policy changes[97] - Significant debt obligations, totaling approximately $3.5 billion as of September 30, 2021, could adversely affect the business[137] Unresolved Staff Comments The company reports no unresolved staff comments from the Securities and Exchange Commission - None[189] Properties The company's principal executive office is in St. Louis, Missouri, with numerous manufacturing and distribution facilities globally - The company's principal executive office is located in St. Louis, Missouri[190] - Energizer operates principal manufacturing, packaging, and distribution facilities across the Americas and internationally[191] Legal Proceedings The company is involved in various legal proceedings, but management does not expect a material adverse effect on its financial position - The company is party to various legal proceedings arising in the normal course of business but does not expect them to have a material adverse effect on its financial condition or results of operations[193] Mine Safety Disclosure This section is not applicable to the company's operations - None[196] Information About Our Executive Officers This section provides biographical information for Energizer's key executive officers as of November 16, 2021 - Mark S. LaVigne serves as President and Chief Executive Officer[196] - John J. Drabik was appointed Executive Vice President, Chief Financial Officer effective October 1, 2021[198] Part II Market for Registrant's Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities Energizer's common stock trades on the NYSE, with the company repurchasing shares and paying dividends, as detailed in its performance graph - The company's common stock is listed on the New York Stock Exchange under the symbol "ENR"[202] Issuer Purchases of Equity Securities (Shares, USD) | 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, 2021 - July 31, 2021 | 116 | $43.21 | — | 7,000,000 | | August 1, 2021 - August 31, 2021 | — | — | 1,507,538 | 5,492,462 | | September 1, 2021 - September 30, 2021 | 49 | $38.18 | — | 5,492,462 | | Total | 165 | $41.72 | — | 5,492,462 | - In Q4 2021, the company initiated a $75.0 million accelerated share repurchase (ASR) program, delivering approximately 1.5 million shares in August 2021[204] Cumulative Total Shareholder Return (Index) | | 9/30/16 | 9/30/17 | 9/30/18 | 9/30/19 | 9/30/20 | 9/30/21 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Energizer Holdings, Inc. | 100.0 | 94.4 | 122.8 | 93.8 | 86.4 | 88.6 | | Midcap 400 | 100.0 | 117.5 | 134.2 | 130.9 | 128.0 | 184.0 | | Household Products | 100.0 | 102.9 | 100.0 | 140.1 | 160.2 | 160.0 | Reserved This item is reserved and contains no information - None Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and results for fiscal 2021, covering sales growth, margin decline, liquidity, and debt management Overview Energizer is a global leader in household batteries, lighting, and automotive care, operating through Americas and International segments - Energizer is a leading global manufacturer and distributor of household batteries, lighting, and automotive care products[251] - Operations are managed through two major geographic segments: Americas and International[260] Financial Results Net earnings from continuing operations significantly increased in fiscal 2021 to $160.9 million, or $2.11 per diluted share Summary of Financial Results (Millions USD, except per share data) | (in millions, except per share data) | FY 2021 | FY 2020 | FY 2019 | | :--- | :--- | :--- | :--- | | Net earnings from continuing operations | $160.9 | $46.8 | $64.7 | | Diluted net earnings per common share - continuing operations | $2.11 | $0.44 | $0.78 | | Adjusted net earnings from continuing operations | $255.4 | $176.8 | $216.1 | | Adjusted diluted net earnings per diluted share - continuing operations | $3.48 | $2.31 | $3.00 | Operating Results Fiscal 2021 saw net sales increase by 10.1% to $3,021.5 million, driven by organic growth, despite a decline in gross margin due to higher input costs Net Sales and Organic Growth (Millions USD) | (in millions) | FY 2021 | % Change | FY 2020 | | :--- | :--- | :--- | :--- | | Net sales | $3,021.5 | 10.1% | $2,744.8 | | Organic Growth | $200.5 | 7.3% | $61.4 | - Gross margin for fiscal 2021 was 38.4%, a 100 basis point decrease from the prior year, primarily due to higher input costs[278] - Adjusted SG&A as a percent of sales improved to 14.7% in fiscal 2021 from 16.2% in fiscal 2020, driven by synergy realization[281][283] - Interest expense decreased to $161.8 million in fiscal 2021 from $195.0 million in fiscal 2020 due to debt refinancing[289] - The company recorded a $103.3 million loss on extinguishment of debt in fiscal 2021 due to refinancing transactions[291] Segment Results In fiscal 2021, Americas segment net sales grew 9.3% and profit increased 13.1%, while International net sales grew 12.0% but profit decreased organically Segment Net Sales (Millions USD) | (in millions) | FY 2021 | % Change | FY 2020 | | :--- | :--- | :--- | :--- | | Americas Net Sales | $2,155.3 | 9.3% | $1,971.2 | | Organic Growth | $155.5 | 7.9% | $69.8 | | International Net Sales | $866.2 | 12.0% | $773.6 | | Organic Growth | $45.0 | 5.8% | ($8.4) | Segment Profit (Millions USD) | (in millions) | FY 2021 | % Change | FY 2020 | | :--- | :--- | :--- | :--- | | Americas Segment Profit | $563.8 | 13.1% | $498.5 | | Organic Growth | $61.3 | 12.3% | $14.8 | | International Segment Profit | $163.3 | 4.8% | $155.8 | | Organic Growth | ($10.9) | (7.0)% | ($22.4) | Liquidity and Capital Resources Cash flow from operations decreased to $179.7 million in fiscal 2021, while financing activities used $1,069.1 million for debt and share repurchases - Cash flow from operating activities was $179.7 million in fiscal 2021, a $209.6 million decrease from the prior year, primarily due to increased inventory investment[327][328][329] - Net cash used by investing activities was $126.4 million, including $64.9 million in capital expenditures and $67.2 million for acquisitions[331] - Net cash used by financing activities was $1,069.1 million, reflecting debt refinancing, $96.3 million in treasury stock purchases, and dividend payments[335][338] - As of September 30, 2021, the company had $238.9 million in cash and $287.3 million available under its revolving credit facility[322][325] Critical Accounting Policies Critical accounting policies involve significant management judgment and estimates in areas such as revenue recognition, pension plans, goodwill, and income taxes - Critical accounting policies involve significant management judgment and estimates in areas such as revenue recognition, pension benefits, goodwill, and income taxes[357] - Revenue recognition involves estimating variable consideration for trade promotions based on historical patterns and future expectations[360] - Valuation of goodwill and intangible assets requires significant estimates for growth and discount rates, with annual impairment testing[366][368][370] Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks from currency rates, commodity prices, and interest rates, using derivatives to hedge these exposures - The company is exposed to market risks from currency rates, commodity prices, and interest rates, utilizing derivatives for hedging purposes[379][381] - Approximately 40% of fiscal 2021 sales from foreign countries create significant currency exposure, particularly to major currencies[382][383] - As of September 30, 2021, the company had $1,299.0 million in variable rate debt and used an interest rate swap to fix the LIBOR component on $700.0 million notional amount[390][391] Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements and the independent auditor's unqualified opinion, highlighting revenue recognition as a critical audit matter - PricewaterhouseCoopers LLP issued an unqualified opinion on the consolidated financial statements and internal control over financial reporting as of September 30, 2021[401] - The critical audit matter identified was Revenue Recognition related to trade promotion programs, due to significant management judgment[409][410] Changes in and Disagreements With Accountants on Accounting and Financial Disclosure This section is not applicable - Not applicable[731] Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of September 30, 2021 - Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2021[732] - Management determined that the company's internal control over financial reporting was effective as of September 30, 2021[734] Other Information This section is not applicable - Not applicable[737] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This section is not applicable - Not applicable[738] Part III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2022 Proxy Statement - Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's Proxy Statement[741] Executive Compensation Information concerning director and executive compensation is incorporated by reference from the 2022 Proxy Statement - Information regarding executive compensation is incorporated by reference from the company's Proxy Statement[742] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership and equity compensation plans is incorporated by reference from the 2022 Proxy Statement - Information regarding security ownership is incorporated by reference from the company's Proxy Statement[743] Certain Relationships and Related Transactions, and Director Independence Information on related party transactions and director independence is incorporated by reference from the 2022 Proxy Statement - Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the company's Proxy Statement[744] Principal Accountant Fees and Services Information regarding principal accountant fees and services is incorporated by reference from the 2022 Proxy Statement - Information regarding principal accountant fees and services is incorporated by reference from the company's Proxy Statement[745] Part IV Exhibits and Financial Statement Schedules This section lists all financial statements, schedules, and exhibits filed with the Form 10-K, including certifications by the CEO and CFO - This item lists all financial statements, schedules, and exhibits filed with the Form 10-K[748] Form 10-K Summary No Form 10-K summary is provided - None[761]