Edgewell Personal Care(EPC) - 2024 Q2 - Quarterly Report

Part I. Financial Information This section provides the company's financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures Financial Statements This section presents Edgewell Personal Care Company's unaudited condensed consolidated financial statements and detailed explanatory notes Condensed Consolidated Statements of Earnings and Comprehensive Income Net sales for the three months ended March 31, 2024, were $599.4 million, with net earnings increasing to $36.0 million Consolidated Earnings Highlights (in millions, except per share data) | Metric | Three Months Ended Mar 31, 2024 | Three Months Ended Mar 31, 2023 | Six Months Ended Mar 31, 2024 | Six Months Ended Mar 31, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $599.4 | $598.4 | $1,088.3 | $1,067.5 | | Gross profit | $258.1 | $242.3 | $455.8 | $431.9 | | Operating income | $70.1 | $56.8 | $96.2 | $88.7 | | Net earnings | $36.0 | $19.4 | $40.8 | $31.8 | | Diluted net earnings per share | $0.72 | $0.37 | $0.81 | $0.61 | Condensed Consolidated Balance Sheets As of March 31, 2024, total assets were $3,756.3 million, with total shareholders' equity increasing to $1,551.3 million Balance Sheet Summary (in millions) | Metric | March 31, 2024 | September 30, 2023 | | :--- | :--- | :--- | | Total current assets | $994.8 | $962.4 | | Total assets | $3,756.3 | $3,740.7 | | Total current liabilities | $541.9 | $523.4 | | Long-term debt | $1,350.8 | $1,360.7 | | Total liabilities | $2,205.0 | $2,200.2 | | Total shareholders' equity | $1,551.3 | $1,540.5 | Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities for the six months ended March 31, 2024, significantly improved to $56.1 million Cash Flow Summary for Six Months Ended March 31 (in millions) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $56.1 | $1.9 | | Net cash used by investing activities | $(19.7) | $(20.0) | | Net cash used by financing activities | $(59.4) | $(29.0) | | Net decrease in cash and cash equivalents | $(20.2) | $(33.5) | Notes to Condensed Consolidated Financial Statements Notes provide detailed information on business segments, restructuring charges, debt, and segment performance data - The company operates in three segments: Wet Shave, Sun and Skin Care, and Feminine Care[26] - For the six months ended March 31, 2024, the company incurred $10.0 million in restructuring charges for its operating model redesign[33][34] - As of March 31, 2024, total long-term debt was $1,350.8 million, primarily from senior notes due in 2028 and 2029[46] - During the six months ended March 31, 2024, the company repurchased 0.8 million shares for $30.3 million, with 3.8 million shares remaining for repurchase[54] Segment Net Sales for Six Months Ended March 31 (in millions) | Segment | 2024 | 2023 | | :--- | :--- | :--- | | Wet Shave | $594.8 | $583.9 | | Sun and Skin Care | $351.2 | $322.6 | | Feminine Care | $142.3 | $161.0 | | Total net sales | $1,088.3 | $1,067.5 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 and first six months fiscal 2024 results, including organic sales, gross margin, segment performance, and liquidity Executive Summary Q2 fiscal 2024 net sales increased to $599.4 million with organic sales up 0.1%, and adjusted diluted EPS rose to $0.88 Q2 Fiscal 2024 Performance vs. Q2 Fiscal 2023 | Metric | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | Net Sales | $599.4M | $598.4M | | Organic Net Sales Growth | +0.1% | N/A | | GAAP Diluted EPS | $0.72 | $0.37 | | Adjusted Diluted EPS | $0.88 | $0.56 | Six Months Fiscal 2024 Performance vs. Six Months Fiscal 2023 | Metric | Six Months 2024 | Six Months 2023 | | :--- | :--- | :--- | | Net Sales | $1,088.3M | $1,067.5M | | Organic Net Sales Growth | +1.4% | N/A | | GAAP Diluted EPS | $0.81 | $0.61 | | Adjusted Diluted EPS | $1.11 | $0.88 | Operating and Segment Results Q2 2024 gross margin improved to 43.1%, with varied organic sales performance across Wet Shave, Sun and Skin Care, and Feminine Care segments - Q2 adjusted gross margin increased 320 basis points to 43.7%, driven by productivity savings and pricing[109] - Wet Shave organic net sales decreased 4.5% in Q2, primarily due to a 14.0% decline in North America[123] - Sun and Skin Care organic net sales grew 11.5% in Q2, driven by strong growth in global Sun Care and North America Grooming[128] - Feminine Care organic net sales decreased 12.0% in Q2, mainly due to declines in Tampons and Pads[132] - A fire at the Wet Ones manufacturing plant resulted in $3.8 million of incremental costs in Q2 2024[83][138] Liquidity and Capital Resources As of March 31, 2024, total borrowings were $1,384.6 million, with $308.7 million available under the revolving credit facility Total Borrowings (in millions) | Category | March 31, 2024 | September 30, 2023 | | :--- | :--- | :--- | | Long-term notes (fixed) | $1,250.0 | $1,250.0 | | Revolver loans (variable) | $111.0 | $122.0 | | Short-term notes payable (variable) | $23.6 | $19.5 | | Total borrowings | $1,384.6 | $1,391.5 | - As of March 31, 2024, the company had $308.7 million available under its $425.0 million revolving credit facility[142] - During the first six months of fiscal 2024, the company repurchased 0.8 million shares for $30.3 million[151] - On May 8, 2024, the Board declared a quarterly cash dividend of $0.15 per common share[152] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are currency rates, commodity prices, and interest rates, with a 1% rate increase impacting annual expense by $1.4 million - The company's main market risks are from adverse changes in currency rates, commodity prices, and interest rates[158] - As of March 31, 2024, a hypothetical 1% increase in interest rates would increase annual interest expense on variable-rate debt by approximately $1.4 million[158] Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2024[162] - No material changes were made to the internal control over financial reporting during the quarter ended March 31, 2024[163] Part II. Other Information This section provides details on unregistered equity sales, other information, and a list of exhibits filed with the report Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's repurchase of 403,118 equity shares in Q2 fiscal 2024, with 3.8 million shares remaining Issuer Purchases of Equity Securities (Q2 2024) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 2024 | 93,248 | $37.00 | | February 2024 | 167,070 | $38.44 | | March 2024 | 142,800 | $37.86 | - During the second quarter of fiscal 2024, the company repurchased a total of 403,118 shares, with 3,783,617 shares remaining available for purchase[166] Other Information No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter[168] Exhibits This section lists exhibits filed with the Form 10-Q, including governance documents, material contracts, and CEO/CFO certifications - Exhibits filed include CEO and CFO certifications (31.1, 31.2, 32.1, 32.2) and various credit and indenture agreements[171]