News Releases

ST. LOUIS, Feb. 8, 2021 /PRNewswire/ -- Energizer Holdings, Inc. (NYSE: ENR) today announced results for the first fiscal quarter, which ended December 31, 2020.  

"Energizer had a strong start to the year with solid first quarter results.  We met elevated demand, while also reducing the incremental costs we incurred in the second half of fiscal 2020," said Mark LaVigne, Chief Executive Officer. "As a result of the strong organic growth, improved operational execution, and the significant reduction in interest expense in the remainder of the year from our refinancing, we are raising our Adjusted earnings per share outlook for fiscal 2021.  As we look ahead, we are squarely focused on driving the top-line momentum, executing with excellence and improving our margins."

Top-Line Performance
For the quarter, demand across batteries, auto and lights in both segments was elevated, resulting in strong sales growth.  Net sales were $848.6 million compared to $736.8 million in the prior year period. 

• Organic Net sales increased 12.7%, or $93.3 million, in the first fiscal quarter due to the following items:
• New distribution, primarily in North America, contributed 5.5%;
• Increased year-over-year replenishment volumes, primarily in North America, contributed 4%, driven by elevated demand in both battery and auto;
• Timing of activity between quarters contributed to the increase as we lapped the prior year shifting of holiday orders from the first quarter of fiscal 2020 into the fourth quarter of fiscal 2019. In addition, we experienced an acceleration of orders at the end of the current quarter driven by the timing of Brexit shipments and increased country lockdowns. These activities contributed 2.2%; and
• Favorable pricing added 1%.

Gross Margin
Gross margin percentage on a reported basis was 39.8%, versus 40.9% in the prior year.  Excluding the current and prior year costs related to acquisition and integration, adjusted gross margin was 40.7%, down 110 basis points from the prior year.

Gross margin was impacted primarily by incremental COVID-19 costs, mix attributable to channel, customer and product as well as increased operating costs and to a lesser extent the lower margin rate profile of our acquisitions.

Direct incremental COVID-19 costs were largely related to air freight, fines and penalties and personal protection equipment necessary to meet the sustained, elevated demand over the last year.  The additional product costs resulted from increased tariffs associated with higher volumes, commodity costs and transportation costs, consistent with global market inflationary trends. 

Synergies of $13 million and favorable currency recognized more than offset the mix and product cost impacts.

Our previous outlook provided in November 2020 included an estimate for COVID-19 costs of approximately $15 million to be incurred in the first quarter.  Our actual costs incurred and impacting gross margin were $11.7 million, about $3 million below our initial outlook.  As we exit the first quarter, we believe the direct incremental costs we have been experiencing will significantly diminish over the remainder of the year.

Selling, General and Administrative expense (SG&A)
SG&A, excluding acquisition and integration costs, was 13.4% of net sales, or $113.7 million, compared to prior year of 15.1% of net sales, or $111.0 million. The decrease, as a percent of sales, was driven by synergy realization and reduced spending, due in part to travel restrictions imposed as a result of COVID-19. On an absolute dollar basis, adjusted SG&A increased $2.7 million driven in part by higher overheads associated with the top-line sales growth partially offset by synergies of $7 million and lower travel expense.⁽¹⁾

Advertising and promotion expense (A&P)
A&P was 5.8% of net sales for the first fiscal quarter, a decrease of 60 basis points over the prior year.  The absolute dollar increase was $2.8 million.

The changes in Adjusted EBITDA and Adjusted diluted net earnings per common share - continuing operations for the quarter were driven by the organic revenue growth and synergy realization slightly offset by net COVID-19 costs of approximately $10 million and higher SG&A, on an absolute dollar basis. 

The Company took advantage of favorable debt markets and refinanced its existing Revolver, Term Loans and Senior Notes with  $1.2 billion in Term Loans, issued in two tranches of $550 million in December 2020 and $650 million in January 2021. We anticipate annual interest savings of approximately $25 million with approximately $19 million of savings to be realized over the remainder of fiscal 2021.  The Company also amended certain covenants in its credit agreement, which will create additional capacity and flexibility.

Strong Free Cash Flow and Continued Return of Capital

• Generated strong cash flows from continuing operations of $76.3 million for the quarter and Adjusted Free Cash Flow from continuing operations of $90.2 million. The decrease from the prior year was primarily due to the expected impacts of working capital changes in quarter over quarter comparisons. In particular, the prior year first quarter benefited from a $30 million receipt of a valued added tax refund settlement. ⁽¹⁾
• Dividend payments in the quarter of approximately $22.7 million, or $0.30 per common share and $4.0 million, or $1.875 per share of mandatory preferred convertible stock.
• Repurchased approximately 500,000 shares of common stock for $21.3 million in the first fiscal quarter.
• Paid down over $80 million of long-term debt during the quarter, excluding refinancing activity.
• Net debt to credit defined EBITDA was 4.6 times at the end of calendar year 2020.

Financial Outlook and Assumptions for Fiscal Year 2021⁽¹⁾
As a result of our first quarter results and the expected interest expense savings from the refinancing, we are updating our full year fiscal 2021 outlook for revenue growth and Adjusted EBITDA to the high end of our previously disclosed range and our Adjusted earnings per share range to $3.10 to $3.40.  We expect no change to the previously disclosed adjusted free cash flow range based on working capital investments planned in the back half of fiscal 2021.

There continues to be significant uncertainty from the pandemic and the related impacts on consumer demand and costs to operate.  We will continue to monitor these impacts closely and provide any updates to our outlook in future filings. 

Webcast Information
In conjunction with this announcement, the Company will hold an investor conference call beginning at 10:00 a.m. eastern time today. The call will focus on first fiscal quarter earnings and recent trends in the business. All interested parties may access a live webcast of this conference call at www.energizerholdings.com, under "Investors" and "Events and Presentations" tabs or by using the following link:

https://www.webcaster4.com/Webcast/Page/1192/39124

For those unable to participate during the live webcast, a replay will be available on www.energizerholdings.com, under "Investors," "Events and Presentations," and "Past Events" tabs.

Forward-Looking Statements
This document contains both historical and forward-looking statements. Forward-looking statements are not based on historical facts but instead reflect our expectations, estimates or projections concerning future results or events, including, without limitation, the future sales, gross margins, costs, earnings, cash flows, tax rates and performance of the Company. These statements generally can be identified by the use of forward-looking words or phrases such as "believe," "expect," "expectation," "anticipate," "may," "could," "intend," "belief," "estimate," "plan," "target," "predict," "likely," "should," "forecast," "outlook," or other similar words or phrases. These statements are not guarantees of performance and are inherently subject to known and unknown risks, uncertainties and assumptions that are difficult to predict and could cause our actual results to differ materially from those indicated by those statements. We cannot assure you that any of our expectations, estimates or projections will be achieved. The forward-looking statements included in this document are only made as of the date of this document and we disclaim any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances. Numerous factors could cause our actual results and events to differ materially from those expressed or implied by forward-looking statements, including, without limitation:

• global economic and financial market conditions, including those resulting from the COVID-19 pandemic, and actions taken by our customers, suppliers, other business partners and governments in markets where we compete;
• competition in our product categories;
• changes in the retail environment and consumer preferences;
• demand, supply and operational challenges resulting from the COVID-19 pandemic;
• loss or impairment of our reputation or failure of our marketing plans;
• loss of any of our principal customers;
• our ability to meet our growth targets based on our product, marketing and operations innovation and our responses to competitive innovation and changing consumer habits;
• risks related to our international operations, including currency fluctuations and the impact of the United Kingdom's exit from the European Union;
• our ability to protect our intellectual property rights;
• risks resulting from our reliance on certain significant suppliers, including interruptions in supply;
• the availability of raw materials and our ability to forecast customer demand and to manage production capacity;
• changes in production costs, including raw materials prices;
• disruption of our manufacturing facilities, supply channels or other business operations or those of our suppliers from events beyond our control;
• our ability to generate anticipated cost savings, successfully implement our strategies and efficiently manage our supply chain and manufacturing processes;
• the seasonality of sales and the impact of adverse weather during peak selling seasons for certain of our products;
• risks related to the performance of our key information technology systems;
• our operations' dependence on information technology systems that are subject to data privacy regulations and are potential targets of cyberattack;
• the impact of significant debt obligations on our business and our ability to meet those obligations;
• potential losses or increased funding and expenses related to our pension plans;
• the accuracy of our estimates and assumptions on which our financial projections are based;
• our ability to successfully complete strategic acquisitions, divestitures or joint ventures and integrate acquired businesses;
• our ability to realize the anticipated benefits of the 2019 acquisitions of the global auto care and battery, lighting and power businesses from Spectrum Brands and the availability of sufficient indemnification for liabilities with respect to the acquisitions;
• our exposure to claims of product liability, labeling claims, commercial claims and other legal claims, and their impact on our results of operations and financial condition and any resulting product recalls or withdrawals;
• the impact on our business of increasing and changing regulation in the U.S. and abroad, including environmental laws, customs and tariff determinations, and tax laws, policies and regulations, and the uncertainty and cost of future compliance and consequences of noncompliance with applicable laws; and
• increased focus by governmental and non-governmental organizations, customers, consumers and shareholders on sustainability issues, including those related to climate change.

In addition, other risks and uncertainties not presently known to us or that we consider immaterial could affect the accuracy of any such forward-looking statements. The list of factors above is illustrative, but by no means exhaustive. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. Additional risks and uncertainties include those detailed from time to time in our publicly filed documents, including those described under the heading "Risk Factors" in our Form 10-K filed with the Securities and Exchange Commission on November 17, 2020.

ENERGIZER HOLDINGS, INC.
Reconciliation of GAAP and Non-GAAP Measures
For the Quarter Ended December 31, 2020

The Company reports its financial results in accordance with accounting principles generally accepted in the U.S. ("GAAP").  However, management believes that certain non-GAAP financial measures provide users with additional meaningful comparisons to the corresponding historical or future period. These non-GAAP financial measures exclude items that are not reflective of the Company's on-going operating performance, such as acquisition and integration costs and the loss on extinguishment of debt.  In addition, these measures help investors to analyze year over year comparability when excluding currency fluctuations, acquisition activity as well as other company initiatives that are not on-going.  We believe these non-GAAP financial measures are an enhancement to assist investors in understanding our business and in performing analysis consistent with financial models developed by research analysts. Investors should consider non-GAAP measures in addition to, not as a substitute for, or superior to, the comparable GAAP measures.  In addition, these non-GAAP measures may not be the same as similar measures used by other companies due to possible differences in method and in the items being adjusted.

We provide the following non-GAAP measures and calculations, as well as the corresponding reconciliation to the closest GAAP measure in the following supplemental schedules:

Segment Profit.  This amount represents the operations of our two reportable segments including allocations for shared support functions.  General corporate and other expenses, global marketing expenses, R&D expenses, amortization expense, interest expense, other items, net, and the charges related to acquisition and integration costs have all been excluded from segment profit.

Adjusted Net Earnings From Continuing Operations and Adjusted Diluted Net Earnings Per Common Share - Continuing Operations (EPS).  These measures exclude the impact of the costs related to acquisition and integration and the loss on extinguishment of debt.

Non-GAAP Tax Rate. This is the tax rate when excluding the pre-tax impact of acquisition and integration costs and the loss on extinguishment of debt, as well as the related tax impact for these items, calculated utilizing the statutory rate for where the impact was incurred.

Organic.  This is the non-GAAP financial measurement of the change in revenue or segment profit that excludes or otherwise adjusts for the impact of acquisitions, change in Argentina operations and impact of currency from the changes in foreign currency exchange rates as defined below:

Impact of acquisitions. Energizer completed two acquisitions in the first fiscal quarter of 2021, a battery plant in Indonesia on October 1, 2020 and a formulation company in the United States on December 1, 2020.  These adjustments include the impact of the acquisitions' ongoing operations contributed to each respective income statement caption for the first year's operations directly after the acquisition date. This does not include the impact of acquisition and integration costs associated with any acquisition.

Change in Argentina Operations. The Company is presenting separately all changes in sales and segment profit from our Argentina affiliate due to the designation of the economy as highly inflationary as of July 1, 2018.

Impact of currency. The Company evaluates the operating performance of our Company on a currency neutral basis.  The impact of currency is the difference between the value of current year foreign operations at the current period ending USD exchange rate, compared to the value of the current year foreign operations at the prior period ending USD exchange rate.

Adjusted Comparisons.  Detail for adjusted gross profit, adjusted gross margin, adjusted SG&A, adjusted SG&A as percent of sales, adjusted R&D and adjusted Other items, net are also supplemental non-GAAP measure disclosures. These measures exclude the impact of costs related to acquisition and integration and the loss on extinguishment of debt.

Free Cash Flow and Adjusted Free Cash Flow. Free Cash Flow is defined as net cash provided by operating activities from continuing operations reduced by capital expenditures, net of the proceeds from asset sales. Adjusted Free Cash Flow is defined as Free Cash Flow excluding the cash payments for acquisition and integration expenses and integration capital expenditures. The expense cash payments are net of the statutory tax benefit associated with the payment.

EBITDA and Adjusted EBITDA. EBITDA is defined as net earnings before income tax provision, interest, loss on extinguishment of debt and depreciation and amortization.  Adjusted EBITDA further excludes the impact of the costs related to acquisition and integration and share based payments.

Supplemental product information is presented below for revenues from external customers:

SOURCE Energizer Holdings, Inc.