Energizer Holdings, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended September 30, 2022. Amounts are in U.S. dollars; financial figures are in millions unless noted. Energizer sells batteries and portable lights, and automotive appearance, performance, fragrance and A/C recharge products. Its reportable segments are Batteries & Lights and Auto Care.
Key financial results
| Metric | FY2022 | FY2021 |
|---|---|---|
| Net sales | $3,050.1 | $3,021.5 |
| Gross profit / gross margin | $1,119.5 / 36.7% | $1,161.4 / 38.4% |
| Operating cash flow, continuing operations | $1.0 | $179.7 |
| Capital expenditures | $77.8 | $64.9 |
| Cash and cash equivalents at year-end | $205.3 | $238.9 |
| Total assets | $4,572.1 | $5,007.5 |
- Profit: GAAP continuing-operations net loss was $231.5, or $3.37 per diluted share, versus net income of $160.9, or $2.11 per diluted share, in FY2021. The FY2022 result included $541.9 of non-cash goodwill and intangible-asset impairment charges. Adjusted continuing-operations net earnings, a non-GAAP measure, were $221.1, or $3.08 per diluted share, compared with $255.4, or $3.48, in FY2021.
- Segment performance: Batteries & Lights sales rose 1.0% to $2,427.3 and segment profit was flat at $553.6. Auto Care sales rose 0.7% to $622.8, while segment profit fell 52.6% to $46.5.
- Debt and liquidity: Aggregate outstanding indebtedness was approximately $3.6 billion; balance-sheet long-term debt was $3,499.4, with $12.0 of current maturities. The company had $492.0 available on its $500.0 revolving facility after letters of credit, no revolver borrowings at year-end, and reported compliance with debt covenants.
Changes versus FY2021
- Sales increased 0.9%; organic sales increased 3.1%, primarily from pricing, while volume declined approximately 5.3%. Currency reduced sales by $58.4, and exiting Russia reduced them by $19.3.
- Gross margin declined 170 basis points to 36.7%. Management cited inflation in materials, transport and labor, lower production volumes and operating inefficiencies; pricing and lower prior-year COVID-related costs partly offset the pressure.
- Segment profit decreased 7.9% to $600.1. Batteries & Lights held steady, but Auto Care profit more than halved as input-cost inflation outweighed pricing and sales growth.
- Operating cash flow fell to $1.0 from $179.7, primarily due to working-capital movements, including receivables and payment timing. Cash flow less capital expenditures was approximately negative $76.8.
- Reported results shifted from profit to loss largely because of the impairment charge; the company also incurred lower acquisition and integration costs than in FY2021.
Outlook, commentary and notable items
- Management expected inflationary pressures to continue into FY2023. It forecast FY2023 capital expenditures of approximately $55–$65.
- After year-end, the board approved Project Momentum, an enterprise-wide profit-recovery program. The company expects $80–$100 of annual pre-tax savings, including $65–$80 from restructuring, with approximately $30–$40 expected in FY2023; estimated one-time restructuring costs are $40–$50 over two years.
- In May 2022, flooding temporarily halted production at the Brazilian battery plant. The company recorded $9.7 of costs net of insurance proceeds; most production had resumed by the filing date.
- The company exited Russia in March 2022. Related FY2022 charges totaled $14.6; Russia represented approximately 1% of the business.
- Annual impairment testing resulted in charges for the Armor All, STP and Rayovac trade names and Auto Care International goodwill. Management identified forecast performance, costs and discount rates as factors that could lead to further impairments. STP was converted to a finite-lived asset, adding approximately $3.0 of expected FY2023 amortization.
- Other key risks include high debt and interest-rate exposure, inflation and supply constraints, currency movements, retailer and customer concentration, competition and private-label pressure, regulation of R-134a refrigerants, environmental remediation, cybersecurity, and litigation. Wal-Mart represented 12.9% of FY2022 sales. Accrued environmental costs were $15.4, including $5.3 expected to be spent in FY2023.
- The independent auditor issued an unqualified opinion on the financial statements and internal control over financial reporting; management also concluded controls were effective.
Important facts for investors to verify
- How much of adjusted earnings and segment profit is repeatable after excluding impairments, restructuring, acquisition-related and other special items.
- Whether Project Momentum achieves its stated savings and timing, and what restructuring costs and operational effects result.
- Whether pricing can offset ongoing input-cost inflation without further material volume losses, particularly in Auto Care.
- Whether working capital normalizes and operating cash flow recovers from FY2022’s near-zero level.
- Debt repayment, borrowing costs and covenant headroom, including exposure to variable rates and benchmark-rate transition.
- The assumptions underpinning brand and goodwill valuations, and the risk of further impairment charges.
- Estimates for trade promotions, environmental remediation and other contingencies, along with the impact of foreign exchange and the Russia exit.