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Energizer Holdings, Inc. Announces Fiscal 2021 Fourth Quarter and Full Year Results and Financial Outlook for Fiscal 2022

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  • ENR

- The Company delivered Diluted net earnings per share of $1.14 and Adjusted earnings per share of $0.79 in the fourth quarter, up 34% from the prior year, despite increasing inflationary cost pressures.¹

- Net Sales exceeded $3.0 billion, up 10.1% from the prior year, driven by our sixth consecutive year of organic growth.

- Full year Diluted net earnings per share of $2.11, inclusive of a $1.11 loss on debt extinguishment from debt refinancing. Adjusted earnings per share of $3.48 in fiscal 2021, up 51% from the prior year.¹

ST. LOUIS, Nov. 10, 2021 /PRNewswire/ -- Energizer Holdings, Inc. (NYSE: ENR) today announced results for the fourth fiscal quarter and full fiscal year, which ended September 30, 2021.

Energizer Holdings, Inc. (PRNewsfoto/Energizer Holdings, Inc.)
Energizer Holdings, Inc. (PRNewsfoto/Energizer Holdings, Inc.)

"Elevated demand and distribution gains resulted in our sixth consecutive year of organic growth," said Mark LaVigne, President and Chief Executive Officer. "This growth, combined with synergy realizations that partially offset rising input costs, delivered Adjusted earnings per share of $3.48 in fiscal 2021. I am incredibly proud of the work that our team around the world has done to succeed in delivering these results despite the difficult operating environment we continue to face."

"Looking forward, we expect demand for our products to normalize and inflationary pressures to persist throughout fiscal 2022. We have executed or have planned pricing across 85% of our business and will continue to evaluate additional pricing and cost reduction efforts. As we navigate through this volatile macro environment, we are focused on maintaining top-line momentum and optimizing our cost structure enabling us to invest in our brands, return cash to shareholders and pay down debt."

Top-Line Performance

For the fourth fiscal quarter, strong auto care performance drove net sales growth. This was offset by battery declines as a result of the COVID-19 elevated demand experienced in the prior year fourth quarter. Net sales were $766.0 million for the fourth fiscal quarter compared to $763.0 million in the prior year period and $3,021.5 million for the fiscal year compared to $2,744.8 million for the prior fiscal year.



Fourth Quarter


% Chg


Full Fiscal
Year


% Chg

Net Sales - FY'20


$

763.0





$

2,744.8




Organic


(5.8)



(0.8)

%


200.5



7.3

%

Impact of FY 2021 Acquisitions


1.8



0.2

%


27.0



1.0

%

Change in Argentina operations


1.3



0.2

%


6.8



0.2

%

Impact of currency


5.7



0.8

%


42.4



1.6

%

Net Sales - FY'21


$

766.0



0.4

%


$

3,021.5



10.1

%

____________________

(1)

See Press Release attachments and supplemental schedules for additional information, including the GAAP to Non-GAAP reconciliations.

For the fiscal quarter, organic net sales decreased 0.8% due to the following items: (1)

  • Replenishment was down approximately 2.3% as the prior year period was elevated due to increased battery demand and the timing of orders;

  • Distribution gains in both battery and auto contributed an increase of approximately 0.9%; and

  • Favorable pricing contributed approximately 0.6%.

For the fiscal year, organic net sales increased 7.3% due to the following items: (1)

  • New distribution in both segments and across all categories, contributed approximately 3.9% of the increase;

  • Increased year over year global demand contributed approximately 2.6%, driven by higher battery sales earlier in the fiscal year and increased auto care sales throughout the fiscal year; and

  • Favorable pricing contributed approximately 0.8% to the organic increase.

Gross Margin

Gross margin percentage on a reported basis for the fourth fiscal quarter was 36.5%, versus 36.9% in the prior year quarter, and was 38.4% for fiscal 2021, versus 39.4% in the prior year. Excluding the acquisition and integration costs in both years, gross margin was 37.7% for the fourth fiscal quarter, down 70 basis points from the prior year quarter, and was 39.6% for the fiscal year, down 100 basis points from prior year.(1)



Fourth Quarter


Full Fiscal Year

Adjusted Gross Margin - FY'20 (1)


38.4

%


40.6

%

Product input cost


(4.2)

%


(2.8)

%

Mix impact


(0.2)

%


(0.6)

%

Lower margin rate profile of the FY 21 acquired businesses


(0.1)

%


(0.2)

%

Synergy realization


1.3

%


1.8

%

Net reduction of FY20 COVID-19 cost impact


2.5

%


0.6

%

Currency


%


0.2

%

Adjusted Gross Margin - FY'21 (1)


37.7

%


39.6

%

The Gross margin decrease for the quarter and fiscal year was driven by higher input costs, including labor costs, commodities, tariffs and transportation, consistent with ongoing inflationary trends. Additionally, gross margin was negatively impacted by mix as our auto care business, which has a lower gross margin percentage, experienced strong organic growth in the quarter and full fiscal year.

Partially offsetting these margin impacts were synergies of approximately $9 million and $50 million for the quarter and fiscal year, respectively, and the net favorable impact of eliminating incremental COVID-19 costs which impacted the prior year.

Selling, General and Administrative expense (SG&A)

SG&A, excluding acquisition and integration costs, for the fourth fiscal quarter was 14.3% of net sales, or $109.4 million, as compared to 15.6% of net sales, or $118.8 million, in the prior year. The absolute dollar decrease of $9.4 million was primarily driven by a reduction in compensation costs year over year.(1)

SG&A, excluding acquisition and integration costs, for fiscal 2021 was $443.8 million, or 14.7% of net sales, as compared to $444.5 million, or 16.2% of net sales, in the prior year. The decrease, as a percent of Net sales, was primarily driven by synergy realization and higher net sales while SG&A expense remained consistent with prior year.(1)

Advertising and promotion expense (A&P)

A&P was 5.4% of net sales for both the fourth fiscal quarter and fiscal 2021. For the quarter, this was an increase of 10 basis points, or $1.1 million. For fiscal 2021, spending was flat as a percentage of net sales while absolute spending increased $15.0 million. The increase was due to planned incremental investment in our product portfolio as we continue to invest in support of our brands and innovation.

Earnings Per Share and Adjusted EBITDA


Fourth Quarter


Full Fiscal Year

(In millions, except per share data)


2021


2020


2021


2020

Net earnings/(loss) from continuing operations


$

83.2



$

(41.7)



$

160.9



$

46.8


Diluted net earnings/(loss) per common share - continuing operations


$

1.14



$

(0.67)



$

2.11



$

0.44











Adjusted net earnings from continuing operations(1)


$

57.8



$

44.7



$

255.4



$

176.8


Adjusted diluted net earnings per common share - continuing operations (1)


$

0.79



$

0.59



$

3.48



$

2.31


Adjusted EBITDA(1)


$

135.9



$

140.4



$

620.3



$

562.0


The Company took advantage of favorable debt markets and refinanced its debt capital structure over the past 18 months. Interest expense decreased by $13.4 million and $33.2 million, respectively, for the quarter and full fiscal year compared to the prior year, primarily as a result of the refinancing activity.

For the quarter, Adjusted net earnings per share increased 34% over the prior year due to a reduction in SG&A expense and interest savings, driven by our debt refinancing. For the full year, Adjusted net earnings per share increased 51% over the prior year reflecting organic revenue growth, synergy realization, reduction in incremental COVID-19 costs and interest savings, partially offset by higher A&P in the current period.

Free Cash Flow and Continued Return of Capital

  • Generated year-to-date cash flows from continuing operations of $179.7 million, as compared to $389.3 million in the prior year, and Adjusted free cash flow from continuing operations of $203.5 million in the current year. Contributing to the decrease was the expected impact of quarter-over-quarter working capital changes, largely driven by an increase in inventory levels. During the year, we took a proactive approach to invest in incremental safety stock given the continued volatility of the global supply network– including uncertainty around product sourcing, transportation challenges and labor availability. In addition to the working capital changes, the prior year's first quarter benefited from a one-time $30 million receipt of a valued added tax refund settlement.(1)

  • Paid dividends in the quarter of approximately $20 million, or $0.30 per common share and $4.1 million, or $1.875 per share of mandatory preferred convertible stock. Dividend payments for the year were $83.9 million, or $1.20 per common share and $16.2 million, or $7.50 per share of mandatory preferred convertible shares.

  • Repurchased approximately 2 million shares of common stock in the fiscal year. This included 1.5 million shares repurchased in the fourth fiscal quarter under the $75 million Accelerated Share Repurchase (ASR) program the Company entered into in August 2021. The program will be completed in the first fiscal quarter of 2022 and approximately 1.9 million total shares are expected to be repurchased.

Financial Outlook and Assumptions for Fiscal Year 2022 (1)

Our categories remain very healthy and have experienced solid growth when compared to pre-pandemic levels. As we enter into fiscal 2022, we are benefiting from significant pricing actions we have executed, however input costs have continued to rise dramatically. Looking specifically at our key metrics for fiscal 2022:

  • We expect organic revenue to be roughly flat, with auto care growth and pricing actions across all businesses offset by expected declines in battery as we comp prior year elevated COVID-19 demand in the first two fiscal quarters. We also expect reported revenue will be negatively impacted by foreign currency headwinds of $20 million to $25 million at current rates.

  • Product input costs, including raw materials, labor and transportation costs have risen rapidly over the past quarter. While we expect the absolute dollar impact of these rising costs to be offset by pricing actions and cost reduction efforts, we anticipate gross margin headwinds of approximately 150 basis points based on current rates and assumptions. These inflationary cost pressures, combined with the anticipated volume declines in battery in the first half of the year are expected to result in Adjusted earnings per share in the range of $3.00 to $3.30 and Adjusted EBITDA in the range of $560 million to $590 million. The current operating environment remains very volatile and we will remain focused on offsetting headwinds through additional pricing and cost reduction opportunities in fiscal 2022.

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 fourth quarter and fiscal 2021 financial results and the financial outlook for fiscal 2022. 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/1192/42503

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 the conditions resulting from the ongoing COVID-19 pandemic, and actions taken by our customers, suppliers, other business partners and governments in markets in which we compete might materially and negatively impact us.

  • Competition in our product categories might hinder our ability to execute our business strategy, achieve profitability, or maintain relationships with existing customers.

  • Changes in the retail environment and consumer preferences could adversely affect our business, financial condition and results of operations.

  • We must successfully manage the demand, supply, and operational challenges brought about by the COVID-19 pandemic and any other disease outbreak, including epidemics, pandemics, or similar widespread public health concerns.

  • Loss or impairment of the reputation of our Company or our leading brands or failure of our marketing plans could have an adverse effect on our business.

  • Loss of any of our principal customers could significantly decrease our sales and profitability.

  • Our ability to meet our growth targets depends on successful product, marketing and operations innovation and successful responses to competitive innovation and changing consumer habits.

  • We are subject to risks related to our international operations, including currency fluctuations, which could adversely affect our results of operations.

  • If we fail to protect our intellectual property rights, competitors may manufacture and market similar products, which could adversely affect our market share and results of operations.

  • Our reliance on certain significant suppliers subjects us to numerous risks, including possible interruptions in supply, which could adversely affect our business.

  • Our business is vulnerable to the availability of raw materials, our ability to forecast customer demand and our ability to manage production capacity.

  • Changes in production costs, including raw material prices, freight and labor, could erode our profit margins and negatively impact operating results, and reactions to our pricing actions.

  • The manufacturing facilities, supply channels or other business operations of the Company and our suppliers may be subject to disruption from events beyond our control.

  • We may be unable to generate anticipated cost savings (including from our restructuring programs), successfully implement our strategies, or efficiently manage our supply chain and manufacturing processes, and our profitability and cash flow could suffer as a result.

  • Sales of certain of our products are seasonal and adverse weather conditions during our peak selling seasons for certain auto care products could have a material adverse effect.

  • A failure of a key information technology system could adversely impact our ability to conduct business.

  • Our operations depend on the use of information technology systems that are subject to data privacy regulations, including recently effective European Union requirements, and could be the target of cyberattack.

  • We have significant debt obligations that could adversely affect our business and our ability to meet our obligations.

  • We may experience losses or be subject to increased funding and expenses related to our pension plans.

  • The estimates and assumptions on which our financial projections are based may prove to be inaccurate, which may cause our actual results to materially differ from our projections, which may adversely affect our future profitability, cash flows and stock price.

  • If we pursue strategic acquisitions, divestitures or joint ventures, we might experience operating difficulties, dilution, and other consequences that may harm our business, financial condition, and operating results, and we may not be able to successfully consummate favorable transactions or successfully integrate acquired businesses.

  • We may be unable to realize the anticipated benefits of the 2019 acquisitions of the global auto care and battery, lighting and power businesses from Spectrum Brands.

  • The 2019 auto care and battery acquisitions may have liabilities that are not known to us and the acquisition agreements may not provide us with sufficient indemnification with respect to such liabilities.

  • Our business involves the potential for claims of product liability, labeling claims, commercial claims and other legal claims against us, which could affect our results of operations and financial condition and result in product recalls or withdrawals.

  • Our business is subject to increasing regulation in the U.S. and abroad, the uncertainty and cost of future compliance and consequence of non-compliance with which may have a material adverse effect on our business.

  • Increased focus by governmental and non-governmental organizations, customers, consumers and shareholders on sustainability issues, including those related to climate change, may have an adverse effect on our business, financial condition and results of operations and damage our reputation.

  • We are subject to environmental laws and regulations that may expose us to significant liabilities and have a material adverse effect on our results of operations and financial condition.

  • We cannot guarantee that any share repurchase program will be fully consummated or that any share repurchase program will enhance long-term stockholder value, and share repurchases could increase the volatility of the price of our stock and diminish our cash reserves.

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.

CONSOLIDATED STATEMENT OF EARNINGS

(Condensed)

(In millions, except per share data - Unaudited)



Quarter Ended
September 30,


Twelve Months Ended
September 30,




2021


2020


2021


2020













Net sales

$

766.0



$

763.0



$

3,021.5



$

2,744.8




Cost of products sold (1)

486.3



481.2



1,860.1



1,662.9




Gross profit

279.7



281.8



1,161.4



1,081.9




Selling, general and administrative expense (1)

121.8



132.3



487.2



483.3




Advertising and promotion expense

41.3



40.2



162.1



147.1




Research and development expense (1)

9.7



9.8



34.5



35.4




Amortization of intangible assets

15.2



14.2



61.2



56.5




Interest expense

36.8



50.2



161.8



195.0




Loss on extinguishment of debt (2)



90.7



103.3



94.9




Other items, net (1)

(2.1)



(3.8)



(2.9)



2.0




Earnings/(loss) before income taxes

57.0



(51.8)



154.2



67.7




Income tax (benefit)/provision

(26.2)



(10.1)



(6.7)



20.9




Net earnings/(loss) from continuing operations

$

83.2



$

(41.7)



$

160.9



$

46.8




Net loss from discontinued operations (3)



(9.8)





(140.1)




Net earnings/(loss)

83.2



(51.5)



160.9



(93.3)




Mandatory preferred stock dividends

(4.1)



(4.1)



(16.2)



(16.2)




Net earnings/(loss) attributable to common shareholders

$

79.1



$

(55.6)



$

144.7



$

(109.5)














Basic net earnings/(loss) per common share - continuing operations

$

1.17



$

(0.67)



$

2.12



$

0.44




Basic net loss per common share - discontinued operations



(0.14)





(2.03)




Basic net earnings/(loss) per common share

$

1.17



$

(0.81)



$

2.12



$

(1.59)














Diluted net earnings/(loss) per common share - continuing operations

$

1.14



$

(0.67)



$

2.11



$

0.44




Diluted net loss per common share - discontinued operations



(0.14)





(2.02)




Diluted net earnings/(loss) per common share

$

1.14



$

(0.81)



$

2.11



$

(1.58)














Weighted average shares of common stock - Basic

67.6



68.5



68.2



68.8




Weighted average shares of common stock - Diluted

72.8



68.5



68.7



69.5






(1)

See the Supplemental Schedules - Non-GAAP Reconciliation attached which breaks out the Acquisition and integration related items included within these lines.

(2)

The Loss on the extinguishment of debt for the twelve months ended September 30, 2021 relates the Company's redemption of the €650 million Senior Notes due in 2026 in June 2021, the redemption of the $600.0 million Senior Notes due in 2027 in January 2021 and the term loan refinancing in December 2020. The quarter ended September 30, 2020 relates to the Company's redemption of the $750.0 million Senior Notes due in 2026 in September 2020 and the redemption of the $600.0 million Senior Notes due in 2025 in July 2020. The twelve months ended September 30, 2020 also includes the write off of deferred financing fees related to the term loan refinancing in December 2019.

(3)

Included in these results is the pre-tax loss on the disposition of the Varta consumer battery business of $141.6 million in the twelve months ended September 30, 2020. The Net loss on discontinued operations is net of income tax expense of $5.4 million and a benefit of $1.2 million for the quarter and twelve months ended September 30, 2020, respectively.

ENERGIZER HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(Condensed)

(In millions - Unaudited)




SEPTEMBER 30,



2021


2020

Assets





Current assets





Cash and cash equivalents


$

238.9



$

459.8


Restricted cash




790.0


Trade receivables


292.9



292.0


Inventories


728.3



511.3


Other current assets


179.4



157.8


Total current assets


$

1,439.5



$

2,210.9


Property, plant and equipment, net


382.9



352.1


Operating lease asset


112.3



121.9


Goodwill


1,053.8



1,016.0


Other intangible assets, net


1,871.3



1,909.0


Deferred tax asset


21.7



24.3


Other assets


126.0



94.1


Total assets


$

5,007.5



$

5,728.3


Liabilities and Shareholders' Equity





Current liabilities





Current maturities of long-term debt


$

12.0



$

841.3


Current portion of capital leases


2.3



1.7


Notes payable


105.0



3.8


Accounts payable


454.8



378.1


Current operating lease liabilities


15.5



14.8


Other current liabilities


356.8



408.7


Total current liabilities


$

946.4



$

1,648.4


Long-term debt


3,333.4



3,306.9


Operating lease liabilities


102.3



111.9


Deferred tax liability


91.3



140.4


Other liabilities


178.4



211.6


Total liabilities


$

4,651.8



$

5,419.2


Shareholders' equity





Common stock


0.7



0.7


Mandatory convertible preferred stock





Additional paid-in capital


832.0



859.2


Retained earnings


(5.0)



(66.2)


Treasury stock


(241.6)



(176.9)


Accumulated other comprehensive loss


(230.4)



(307.7)


Total shareholders' equity


$

355.7



$

309.1


Total liabilities and shareholders' equity


$

5,007.5



$

5,728.3


ENERGIZER HOLDINGS, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(Condensed)

(In millions - Unaudited)



FOR THE YEARS ENDED
SEPTEMBER 30,


2021


2020

Cash Flow from Operating Activities




Net earnings/(loss)

$

160.9



$

(93.3)


Loss from discontinued operations



(140.1)


Net earnings from continuing operations

$

160.9



$

46.8


Adjustments to reconcile net earnings to net cash flow from operations:




Non-cash integration and restructuring charges

8.9



17.8


Depreciation and amortization

118.5



111.9


Deferred income taxes

(62.9)



(34.8)


Share-based compensation expense

10.2



24.5


Gain on sale of real estate

(3.3)




Loss on extinguishment on debt

103.3



94.9


Non-cash items included in income, net

17.3



23.1


Other, net

(3.9)



(7.1)


Changes in assets and liabilities used in operations, net of acquisitions




Decrease in accounts receivable, net

9.5



47.8


Increase in inventories

(211.8)



(39.8)


(Increase)/decrease in other current assets

(7.4)



53.4


Increase in accounts payable

51.4



76.2


Decrease in other current liabilities

(11.0)



(25.4)


Net cash from operating activities from continuing operations

179.7



389.3


Net cash used by operating activities from discontinued operations



(12.9)


Net cash from operating activities

179.7



376.4


Cash Flow from Investing Activities




Capital expenditures

(64.9)



(65.3)


Proceeds from sale of assets

5.7



6.4


Acquisitions, net of cash acquired

(67.2)



(5.1)


Net cash used by investing activities from continuing operations

(126.4)



(64.0)


Net cash from investing activities from discontinued operations



280.9


Net cash (used by)/from investing activities

(126.4)



216.9


Cash Flow from Financing Activities




Cash proceeds from issuance of debt with original maturities greater than 90 days

1,982.6



2,020.6


Payments on debt with maturities greater than 90 days

(2,773.8)

...