Filing summary
Registrant and period: The supplied filing is Energizer Holdings, Inc.’s unaudited Form 10-Q for the quarter and six months ended March 31, 2011. This does not match the request metadata identifying Edgewell Personal Care Co.; investors should verify the issuer before relying on this summary.
Financial performance
| Metric | Quarter ended March 31, 2011 | Prior-year quarter | Six months ended March 31, 2011 | Prior-year six months |
|---|---|---|---|---|
| Net sales | $1,035.3 million | $935.1 million | $2,212.4 million | $2,111.8 million |
| Gross profit | $471.1 million | $447.2 million | $1,026.7 million | $1,007.4 million |
| Gross margin | 45.5% | 47.8% | 46.4% | 47.7% |
| Net earnings | $39.1 million | $88.5 million | $149.5 million | $214.2 million |
| Diluted EPS | $0.55 | $1.25 | $2.11 | $3.04 |
- Second-quarter sales rose 11%, led by Wet Shave, including approximately $72 million of ASR sales. Six-month sales rose 5%, including approximately $99 million from ASR.
- Quarterly net earnings declined 56%; six-month earnings declined 30%. Second-quarter operating profit by segment was $52.2 million for Household Products and $123.3 million for Personal Care.
- Gross margin fell year over year. Management cited Schick Hydro launch promotions and the inclusion of lower-priced ASR products; favorable product mix and a sun-care returns adjustment partly offset these pressures.
- Operating cash flow was $105.9 million for the six months, versus $274.2 million a year earlier. Investing cash outflow was $306.5 million, including $267.1 million for acquisitions. Financing cash flow was $41.7 million; cash declined $151.7 million to $478.0 million.
- At March 31, total borrowings were $2,416.4 million, including $225.9 million of notes payable; long-term debt was $1,969.5 million. Committed debt facilities totaled $2,626.4 million, with $194.7 million available. The current ratio was approximately 1.72, based on reported current assets and current liabilities.
Material changes and unusual items
- ASR acquisition, completed November 23, 2010, added value-priced wet-shave products to Personal Care. The $301 million cash purchase price was funded with cash and borrowings; acquisition-related inventory valuation reduced gross profit by $4.3 million in the quarter and $7.0 million in the six months.
- Household Products restructuring charges were $36.7 million for the quarter and $38.6 million for the six months. The company plans to close battery facilities in Cebu, Philippines, and La Chaux-de-Fonds, Switzerland. Estimated total pre-tax charges are $75–$85 million, with annual pre-tax savings of $25–$35 million expected by the end of fiscal 2012.
- Household Products quarterly sales fell 4% and segment operating profit fell 27%. Management cited battery-category weakness, U.S. inventory de-stocking and promotional activity. Personal Care quarterly sales rose 24%, while segment operating profit rose 7%; excluding ASR and currency effects, management reported lower segment profit, reflecting launch-related spending.
- Other notable expenses included ASR transaction and integration costs and Venezuela currency-related impacts. The prior-year six-month comparison included a $24.2 million Venezuela-related charge in other financing items.
- Debt covenant ratios at March 31 were 2.88x debt to pro forma EBITDA and 5.17x pro forma EBIT to interest, versus stated thresholds of no more than 4.00x debt/EBITDA and more than 3.00x EBIT/interest. The $275 million U.S. revolving credit facility, with $65 million outstanding, was due to mature May 15, 2011; renewal was expected but not assured. The receivables securitization facility also renewed annually in May, and renewal was not assured.
Outlook, risks and contingencies
- Fiscal 2011 diluted EPS guidance was $4.00–$4.20 including unusual items, and $5.10–$5.30 excluding primarily restructuring and ASR-related unusual items. Management expected EPS excluding unusual items below prior year in the third quarter and improved year-over-year in the fourth quarter.
- Management expected Household Products segment profit below prior year for the rest of fiscal 2011, citing category weakness and unfavorable raw-material costs. Expected U.S. pricing and pack-size changes were projected to contribute $4–$6 and $6–$8, respectively, in the second half.
- Personal Care, excluding ASR, was expected to achieve mid- to high-single-digit sales growth in the remaining six months, with Schick Hydro advertising and promotion spending as a share of sales expected to moderate. Japan-related impacts remained uncertain.
- Raw-material and commodity costs were expected to be $18–$20 million unfavorable for the remainder of fiscal 2011 versus the comparable prior-year period. A one-percentage-point rise in variable interest rates was estimated to increase annual pre-tax expense and cash outflow by about $4 million after hedging.
- The Japan earthquake and tsunami disrupted the market; management reported no major supply disruption or asset impairment at filing date, but future consumer demand and operating effects were uncertain. Lower future inventory purchases could also cause some Japan-related foreign-exchange hedge losses to be recognized sooner.
- Venezuela’s currency conversion restrictions and economic conditions created uncertainty around approximately $28 million of net monetary assets. The company said pending legal proceedings were not reasonably likely to be material, based on current information. Management considered operating cash flows and periodic borrowings adequate for liquidity needs, but gave no assurance.
Important facts for investors to verify
- Confirm the filing issuer: this document names Energizer Holdings, Inc., not Edgewell Personal Care Co.
- Assess whether the stated EPS outlook excludes all relevant unusual costs and how actual restructuring and ASR costs compare with estimates.
- Track renewal terms and availability for the revolving credit and receivables securitization facilities, alongside covenant headroom and debt maturities.
- Monitor cash conversion, working-capital needs, restructuring execution and the expected savings timetable.
- Evaluate battery-category trends, raw-material costs, Schick Hydro returns and spending, and the evolving effects of events in Japan and Venezuela.