Energizer Holdings, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended September 30, 2023. The filing provides annual results, not standalone fourth-quarter financials. Amounts are in U.S. dollars; financial figures are in millions except per-share data.
Business context
Energizer manufactures and sells household and specialty batteries, portable lights, and automotive care products, including Energizer, Eveready, Rayovac, Armor All and STP brands. It reports two segments: Batteries & Lights and Auto Care. Walmart accounted for 14.2% of FY2023 sales; more than 40% of sales came from outside the U.S.
Financial performance and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Net sales | $2,959.7 | $3,050.1 |
| Gross profit / reported gross margin | $1,124.0 / 38.0% | $1,119.5 / 36.7% |
| Operating earnings | $344.4 | Loss of $247.4 |
| Net earnings (loss) | $140.5 | Loss of $231.5 |
| Diluted earnings (loss) per share | $1.94 | Loss of $3.37 |
| Adjusted net earnings | $224.0 | $221.1 |
| Adjusted diluted EPS | $3.09 | $3.08 |
| Operating cash flow | $395.2 | $1.0 |
| Capital expenditures | $56.8 | $77.8 |
Adjusted gross margin, excluding specified items, was 39.0%, up 170 basis points. Segment profit was $626.5, up 4.4%; Batteries & Lights profit was $551.5, down 0.4%, and Auto Care profit was $75.0, up 61.3%.
Cash and cash equivalents were $223.3, including approximately 84% held outside the U.S. Total debt, including finance leases, was approximately $3.4 billion; contractual long-term debt payments were $3,344.2, with $12.0 due within 12 months. No revolving-credit borrowings were outstanding, and $492.9 of capacity remained available after letters of credit. The company reported compliance with debt covenants. Common dividends declared were $1.20 per share.
Material changes versus FY2022
- Sales declined 3.0%; organic sales decreased 1.0%. Pricing added approximately 7.5% to organic sales but was offset by volume declines of approximately 7.5%, lower-margin business exits, delayed device-maker launches, distribution losses and currency headwinds.
- Reported net earnings recovered from the prior-year loss, which included $541.9 of goodwill and intangible-asset impairment charges. FY2023 also included a $50.2 pension-settlement loss and $59.7 of Project Momentum restructuring and related costs.
- Operating cash flow rose by $394.2, principally reflecting approximately $397.3 of year-over-year working-capital improvement, including lower inventory investment and receivables collections. The cash-flow increase was therefore substantially working-capital driven.
- Debt was reduced through $200.0 of term-loan payments, including $188.0 in early repayments, and retirement of senior notes. Interest expense rose to $168.7 from $158.4, mainly due to higher rates.
Outlook, commentary and risks
- Project Momentum: The expanded program targets $130–$150 of annual pretax savings by FY2025, including approximately $54 recognized in FY2023. The restructuring component is expected to deliver $115–$130 of annual pretax savings, with $95–$110 of cash operating costs, $12 of non-cash costs and $70–$80 of capital expenditures through FY2025. Separate continuous-improvement and working-capital initiatives target $15–$20 of annual P&L savings.
- Management expects FY2024 capital expenditures of approximately $95–$105, including $35–$45 for Project Momentum initiatives. The filing does not provide a clear numerical FY2024 revenue or EPS forecast.
- Management cited continuing inflationary and geopolitical pressures, with potential transportation, logistics, supply and commodity-cost impacts. Pricing has supported sales and margins, but contributed to weaker volumes and category performance.
- Key risks include competitive and private-label pricing, concentrated retail customers, foreign-exchange exposure, variable-rate debt and refinancing needs, supply interruptions, and regulation of R-134a refrigerant. Environmental remediation costs were accrued at $14.0, of which $3.9 was expected to be spent in FY2024. The company said pending legal matters were not reasonably likely to be material based on current information.
- Rayovac’s trade-name fair value exceeded its $422.2 carrying value by only about 5%; a 50-basis-point increase in the discount rate would have put carrying value approximately 0.6% above fair value. No FY2023 impairment was recorded. The independent auditor reported effective internal control over financial reporting and issued an unqualified opinion.
Important facts for investors to verify
- Whether FY2024 sales volumes stabilize as pricing benefits persist, and how Batteries & Lights and Auto Care perform by volume and channel.
- Whether Project Momentum achieves its savings targets on schedule and within expected cash costs and capital spending.
- How much of the FY2023 operating-cash-flow improvement is repeatable after the working-capital normalization.
- Debt repayment capacity, interest costs, refinancing exposure and continued compliance with debt covenants.
- Whether Rayovac’s narrow impairment headroom and other brand valuations withstand changes in forecasts, margins and discount rates.
- Potential impacts from R-134a restrictions, environmental remediation, foreign-exchange movements and other legal or tax contingencies.