Energizer Holdings, Inc. — Q3 FY2022 Form 10-Q
Reporting period: Quarter and nine months ended June 30, 2022. Energizer manufactures and sells batteries, lights, and auto care products. Financial figures are in U.S. dollars; amounts are in millions except per-share data.
Financial performance
| Metric | Q3 FY2022 | Q3 FY2021 | Nine months FY2022 | Nine months FY2021 |
|---|---|---|---|---|
| Net sales | $728.0 | $721.8 | $2,259.7 | $2,255.5 |
| Gross profit | $284.0 | $273.3 | $834.0 | $881.7 |
| Gross margin | 39.0% | 37.9% | 36.9% | 39.1% |
| Net earnings | $52.4 | $20.8 | $131.4 | $77.7 |
| Diluted EPS | $0.73 | $0.24 | $1.82 | $0.95 |
| Adjusted diluted EPS (non-GAAP) | $0.77 | $0.74 | $2.26 | $2.69 |
Quarterly sales rose 0.9%; organic sales increased 3.8%, offset partly by unfavorable currency and the Russia exit. Quarterly adjusted gross margin improved 120 basis points to 40.4%, while the nine-month adjusted margin fell 260 basis points to 37.6%, reflecting higher input, labor, and transportation costs. Nine-month adjusted EPS declined despite higher GAAP EPS, which benefited from the prior-year debt-extinguishment loss not recurring.
- Segments: Q3 Battery & Lights sales were $531.6, up 3.7%, and segment profit was $142.7, up 25.3%. Auto Care sales were $196.4, down 6.1%, and segment profit was $12.9, down 59.3%. For nine months, segment profit was $406.4 for Battery & Lights (down 3.2%) and $37.0 for Auto Care (down 53.1%).
- Cash flow: Operating cash flow used $106.2 in the first nine months, versus $17.5 generated in the prior-year period. The company attributed the change chiefly to working-capital movements, including higher inventory and payment timing. Investing cash outflow was $78.9; financing cash inflow was $158.4. Cash declined to $199.5 from $238.9 at September 30, 2021.
- Liquidity and debt: Current assets were $1,641.0 and current liabilities $773.4. Debt-related balance-sheet amounts included $3,544.6 of long-term debt, $12.0 of current maturities, and $61.4 of notes payable. The $500 revolving facility had $60.0 drawn, $8.0 in letters of credit, and $432.0 available. The company reported covenant compliance.
Material developments, outlook, and risks
- The company issued $300.0 of 6.500% senior notes due 2027 in March 2022, using proceeds partly to repay revolver borrowings. Quarterly interest expense increased year over year, while nine-month interest expense decreased from the prior year.
- A May 2022 flood halted production at the Brazil battery plant during June; some production resumed in July. The company recorded $9.9 of costs, primarily damaged inventory, and said the insurance deductible was approximately $10 and expected further losses to be minimal.
- Energizer exited Russia in the second quarter, recording $14.0 of costs over the nine-month period. Russia represented approximately 1% of its business. The company cited potential wider disruption from the Russia-Ukraine conflict.
- Management expected elevated input-cost inflation to persist through the remainder of FY2022, but anticipated inventory reduction, more normalized working capital, and positive operating cash flow for the full fiscal year. It also said annual restructuring savings of $55–$60 remained on track. No full-year sales or EPS guidance is stated in the provided filing text.
- Other key exposures include foreign exchange, commodity and variable-rate interest risk; supply-chain, raw-material, freight and labor pressures; high debt; and international, regulatory, environmental, customer and competitive risks. The company reported $15.9 of accrued environmental costs. Pending legal matters were not considered reasonably likely to be material based on information available, and purchase obligations totaled $25.2.
Key investor facts to verify
- Whether inventory and other working-capital balances normalize as management expects, supporting its full-year positive operating-cash-flow outlook.
- Whether pricing continues to offset inflation, and whether gross margins recover—particularly in Auto Care, where segment profit fell sharply.
- Brazil plant recovery, insurance coverage and any additional flood-related costs.
- Debt-service and interest-rate exposure, including the effect of variable-rate borrowings and available revolver capacity.
- Execution and realization of the stated restructuring savings, while monitoring currency, supply-chain and geopolitical risks.