Energizer Holdings, Inc. (ENR)

[Enterprising Investor]

Energizer Holdings, Inc. Announces Fiscal 2019 First Quarter Results (2/05/18)

- Positive organic net sales growth of 1.7% was fully offset by unfavorable currency headwinds which resulted in a decrease to reported net sales of 0.2% in the first fiscal quarter

- Diluted EPS was $1.16 in the first fiscal quarter compared to $0.98 in the prior year first quarter, and Adjusted Diluted EPS was $1.64 compared to $1.55 in the prior year first quarter

- Increasing full year Adjusted Diluted EPS outlook to $3.45 to $3.55

- Completed the Spectrum Brands' Battery and Portable Lighting and Global Auto Care Acquisitions

ST. LOUIS, Feb. 5, 2019 /PRNewswire/ -- Energizer Holdings, Inc. (NYSE: ENR) today announced results for the first fiscal quarter, which ended December 31, 2018. For the first fiscal quarter, net earnings were $70.8 million, or $1.16 per diluted share, compared to $60.4 million, or $0.98 per diluted share, in the prior year first quarter. Adjusted net earnings in the first quarter were $100.2 million, or $1.64 per diluted share, compared to adjusted net earnings of $95.5 million, or $1.55 per diluted share, in the prior year first quarter.

"As we continued to focus on our strategic initiatives, we delivered strong operating results driven by organic top line growth and cost savings from our continuous improvement efforts," said Alan Hoskins, Chief Executive Officer. "These strong results will allow us to continue to invest in our business for long term growth while delivering $3.45 to $3.55 per adjusted diluted share on our base business, an increase over our previous outlook."

"During January, we closed on both of our acquisitions: Spectrum's battery and portable lighting business and the auto care business. We are very excited about the strategic, operational and financial opportunities of both of these businesses. This is truly a transformative time in Energizer's history as we become the global leader in the portable power and automotive care categories."

First Quarter 2019 Financial Highlights (Unaudited)

The following is a summary of key first fiscal quarter results. All comparisons are with the first quarter of fiscal 2018 unless otherwise stated.

•Net sales were $571.9 million, a decrease of 0.2%: (a)

- Organic net sales increased $9.9 million, or 1.7%, due to category growth and distribution gains across both segments and the impact of the reclassification of licensing revenues, slightly offset by increased retailer promotion and unfavorable mix.

- The impact of the Nu Finish acquisition increased net sales by $1.0 million, or 0.2%;

- Our Argentina operations, deemed to be highly inflationary, had an unfavorable impact on net sales of $3.3 million, or 0.6%.

- Unfavorable movement in foreign currencies, excluding Argentina, resulted in decreased sales of $9.0 million, or 1.5%.

•Gross margin percentage was 48.2%, down 30 basis points from prior year driven by unfavorable movement in foreign currencies partially offset by lower production costs and the lapping of the investments made in continuous improvement initiatives in the prior year.

•A&P spending was 7.2% of net sales, an increase of 70 basis points, or $3.6 million, versus the prior year driven by the timing of media spending.

•SG&A spending, excluding acquisition and integration costs, as a percent of net sales was 15.0%, or $85.7 million, a decrease of $7.8 million versus the prior year driven by the benefit of our continuous improvement initiatives as well as lapping prior year investments in those initiatives. These benefits were partially offset by the licensing revenue reclassification to net sales. (a)

•Interest expense was $48.2 compared to $13.4 for the prior year comparative period. The current quarter expense included $32.4 of interest and ticking fees related to the Spectrum battery and portable lighting acquisition. Excluding the acquisition costs, the current year interest expense increased $2.4 driven by increased borrowings and increased rates on our variable debt outstanding. (a)

•Earnings before income tax was negatively impacted by the movement in foreign currencies by approximately $10 million, net of hedge impact. This includes $4 million from our Argentina operations.

•Income tax rate on a year to date basis was 21.3% as compared to 49.2% in the prior year. The current and prior year rate includes $1.5 million and $31.0 million respectively, for the one-time impact of the new U.S. tax legislation passed in December 2017. Excluding the impact of our Non-GAAP adjustments, the year to date tax rate was 20.8% as compared to 23.4% in the prior year. The decrease in the rate is driven by the new 21% statutory U.S. rate effective for all of fiscal year 2019 compared to the statutory rate of 24.5% in fiscal year 2018. (a)

•Diluted earnings per share for the quarter was $1.16 and Adjusted diluted earnings per share for the quarter was $1.64. (a)

•Net cash from operating activities on a year to date basis was $118.9 million and Adjusted free cash flow on a year to date basis was $150.9 million, or 26.4% of net sales. (a)

•Dividend payments in the quarter were approximately $19.8 million, or $0.30 per share.

(a) See Press Release attachments for additional information as well as the GAAP to Non-GAAP reconciliations.

[Tables deleted]

Total Net sales decreased 0.2%, or $1.4 million:

•Organic net sales were up 1.7%, or $9.9 million, in the first fiscal quarter due to the following items:

- Category growth and distribution gains across both segments contributed 2.1% to the organic increase;

- The impact of the reclassification of licensing revenues contributed 0.3%;
- Partially offsetting the above was increased retailer promotion and unfavorable mix of 0.7%.

•The Nu Finish acquisition positively impacted net sales by 0.2%, or $1.0 million.

•Our Argentina operations had an unfavorable impact on net sales of $3.3 million or 0.6%. Our pricing actions in the market could not fully overcome the negative inflationary impacts.

•Unfavorable currency impacts were $9.0 million, or 1.5%.



Total Segment profit in the first fiscal quarter decreased $1.6 million, or 0.9%. Excluding the unfavorable movement in foreign currencies of $7.1 million, impact of the Nu Finish acquisition of $0.5 million, and decline due to Argentina operations of $1.9 million, organic segment profit increased $6.9 million, or 4.0%, in the current fiscal quarter. The increase was driven by organic top-line growth in the quarter and the benefit of our continuous improvement initiatives as well as lapping prior year investments in those initiatives. These increases were partially offset by higher A&P spending in the current fiscal quarter due to timing of spending.

Refer to the Reconciliation of GAAP and Non-GAAP Financial Measures attached for further information on our above breakouts.

Financial Outlook for Fiscal Year 2019

The company is increasing its adjusted EPS outlook for the full fiscal year to $3.45 to $3.55 and has updated the assumptions below related to its financial outlook for fiscal year 2019. Our outlook includes the impact of our acquisition of Nu Finish, but does not contemplate the impact of the Spectrum Brands' battery and portable lighting and global auto care acquisitions, or the equity and debt issuances, completed in January 2019.

Our outlook for fiscal year 2019 will be updated after the second fiscal quarter to include these transactions.

Note that all comparisons are with the fiscal year ended September 30, 2018 unless otherwise stated.

Net Sales on a reported basis are expected to be up low single digits:

•Organic net sales are expected to be up low single digits;

•Nu Finish acquisition is expected to contribute 30 to 40 basis points of net sales growth;

•Argentina is now expected to be a headwind of 60 basis points due to the high inflation;

•Unfavorable movements in foreign currency, excluding Argentina, are now expected to negatively impact net sales by 1.5% to 2.0% based on current rates.

Gross margin rates, excluding acquisition and integration costs, are now expected to be down approximately 10 to 50 basis points to the prior year; a slight improvement to our prior outlook.

A&P spending is now expected to be at the midpoint of our long term outlook range of 6% to 7% of net sales.

SG&A, as a percent of net sales, excluding acquisition and integration costs, is expected to further decline on a year over year basis as we continue to recognize the benefits from our continuous improvement initiatives. It is now expected to be down 40 to 70 basis points.

Earnings before income taxes is now expected to be unfavorably impacted by foreign currency headwinds of roughly $30 to $35 million, net of hedge impacts, based on current rates, including $13 million associated with Argentina, which was deemed highly inflationary as of July 1, 2018.

Ex-unusual income tax rate is now expected to be in the range of 21% to 23% based on the current expected country mix of earnings and the additional guidance issued on the new tax law changes during the first fiscal quarter of 2019.

Adjusted Diluted earnings per share for the full fiscal year is now expected to be in the range of $3.45 to $3.55.

Capital spending is expected to be in the range of $30 to $35 million.

Adjusted Free cash flow is expected to be roughly flat reflecting the expected foreign currency headwinds and lapping the benefits of hurricanes and asset sales in fiscal year 2018 that are not expected to repeat.

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 the updated financial outlook for fiscal 2019. 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/1192/28997

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.

https://www.prnewswire.com/news-releases/energizer-holdings-inc-announces-fiscal-2019-first-quarter-results-300789530.html