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ST. LOUIS, Jan. 23 /PRNewswire-FirstCall/ -- Energizer Holdings, Inc.,
(NYSE: ENR), today announced results of its first quarter ended December 31,
2005. Net earnings for the quarter were $120.5 million, or $1.77 per diluted
share, versus net earnings of $120.4 million, or $1.60 per diluted share in
the first fiscal quarter of 2005. Included in the current year quarter is a
charge of $3.1 million, after-tax, or $0.05 per share, for the restructuring
of the companys European supply chain.
Sales for the quarter were $882.4 million, an increase of $6.5 million in
absolute dollars and $17.4 million in constant currency basis. Higher sales
in both battery segments were partially offset by lower sales in the Razors
and Blades segment. Segment profit increased 3% to $220.2 million as
improvements in the Razors and Blades segment were partially offset by a
decrease in the North America Battery segment. General corporate and other
expenses decreased $2.0 million, and interest and other financing items
increased $10.1 million.
Results for the prior year quarter were adjusted for the adoption of
Statement of Financial Accounting Standards No. 123, "Share-Based Payment",
which resulted in an additional compensation expense of $1.3 million, after-
tax, or $0.02 per diluted share. In addition, the prior year segment results
for the quarter were adjusted to fully allocate overhead costs between the
business segments. This reallocation of costs impacted segment results only,
with no impact on total income. The detail for both prior year adjustments is
detailed in footnote 4.
North America Battery
Net sales to customers for the first quarter of $395.8 million increased
$9.4 million, or 2%, as higher sales volumes were partially offset by
unfavorable pricing and product mix. Lithium and rechargeable batteries
continued volume growth in excess of 20%, while Energizer Max unit sales
increased 3%. Overall pricing and product mix was unfavorable due to the
continuing shift to larger pack sizes, which sell at lower per unit prices.
Gross profit decreased $6.8 million for the quarter, as contribution of
incremental sales volume was more than offset by unfavorable pricing and
higher product cost. Product cost in the current quarter was $5.7 million
unfavorable to the prior year quarter due to higher year-over-year material
cost. Segment profit decreased $2.9 million, as the lower gross margin was
partially offset by lower advertising and promotion and selling expenses.
The United States (U.S.) retail battery category is defined as household
batteries (alkaline, carbon zinc, lithium and rechargeable) and specialty
batteries. The U.S. retail battery category increased by 4.4% in dollars for
the 12 weeks ending December 3, 2005, versus the same period last year.
Retail consumption of Energizers products increased 9.5% in dollars for the
same period. Our focus on the performance segment, specifically rechargeables
and lithium batteries, resulted in an increase of approximately 1.8 share
points compared to the same period in the prior year, bringing Energizers
share of the total retail category to approximately 37.7% for the quarter.
Energizer estimates that retail inventory levels at December 31, 2005, were at
seasonally normal levels.
With holiday promotional commitments behind us and higher post-holiday
retail pricing taking effect, Energizer expects to see benefits from its
battery price increase in the future. However, higher material costs and the
continuing shift to larger package sizes are likely to offset at least a
portion of any favorable pricing attained in the near term.
International Battery
Net sales for the quarter were $270.5 million, an increase of
$9.2 million, or 4%, as higher volumes were partially offset by $4.9 million
of unfavorable currency impacts and unfavorable pricing and product mix.
Volume increases were primarily in the performance and premium product lines.
Segment profit increased $0.7 million, or 1%, as the benefit of higher volumes
was nearly offset by unfavorable pricing, higher product costs and unfavorable
currency impacts.
Razors & Blades
Razor and blade sales for the quarter were $216.1 million, a decrease of
$12.1 million, or 5%, compared to the same quarter last year, with currencies
accounting for $7.3 million of the decline. On a constant currency basis,
sales declined 2%. Excluding currency impacts, sales for the Quattro
franchise this quarter increased 30% over the same quarter last year on
incremental sales from Quattro for Women and Quattro Power. However, declines
in older technology products more than offset Quattro increases.
Additionally, sales were dampened in the current quarter by retail inventory
reductions in several key markets, as well as U.S. retailers holding down
category inventory levels in anticipation of a major competitor product launch
in January 2006.
Overall share of the wet shave category in primary markets was 20.7% for
the year ending November 2005, down slightly from 21.5% for the twelve months
ended November 2004. The prior year period benefited from new product
launches in Europe.
Segment profit for the quarter increased $7.6 million due to lower
advertising and promotional spending compared to last years higher spending
related to the launch of Quattro in several European markets, as well as lower
selling and administrative expenses.
Other Items
Corporate and other expenses decreased $2.0 million for the quarter
primarily on lower incentive and stock-based compensation expense, partially
offset by the aforementioned restructuring charges more fully described below.
The first quarter includes a charge of $4.7 million, pre-tax, or $0.05 per
share for severance benefits related to European supply chain restructuring.
The full project is expected to cost $24 to $28 million, largely in fiscal
2006, with annual cost savings of approximately $6 million beginning in fiscal
2007.
Interest expense increased $5.5 million on higher average borrowings
resulting from share repurchases and higher interest rates. Other net
financing items were unfavorable $4.6 million for the quarter due to exchange
losses in the current period compared to exchange gains included in last
years first quarter.
Income taxes were 31.0% for the quarter, compared to 32.0% for the same
quarter last year. The improved tax rate is due to a variety of small
favorable tax attributes.
Energizer repurchased 4.1 million shares of its common stock during the
quarter and made additional purchases in January 2006 bringing the total
shares purchased thus far in fiscal 2006 to 5.3 million. Capital
expenditures and depreciation expense for the quarter were $14.3 million and
$27.2 million, respectively. Total outstanding debt at December 31, 2005 was
$1.56 billion.
Statements in this press release that are not historical, particularly
statements regarding estimates of battery category growth, retail consumption
of Energizer products, total retail category shares of Energizer Battery and
SWS, retailer inventory levels, the realization of benefits from the announced
battery price increase, and expected charges to earnings and annual cost
savings associated with the European restructuring project, may be considered
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Energizer cautions readers not to place undue
reliance on any forward-looking statements, which speak only as of the date
made.
Energizer advises readers that various risks and uncertainties could
affect its financial performance and could cause Energizers actual results
for future periods to differ materially from those anticipated or projected.
Energizers estimates of battery category value growth, retail consumption of
its battery products, Energizer and SWS market share, and retailer inventory
levels, are based solely on limited data available to Energizer and
managements reasonable assumptions about market conditions, and consequently
may be inaccurate, or may not reflect significant segments of the retail
market. Moreover, Energizer sales volumes in future quarters may lag unit
consumption if retailers are currently carrying inventories in excess of the
Companys estimates, or if those retailers elect to further contract their
inventory levels. The anticipated benefits of Energizers price increase may
not be realized if competitive activity mandates additional promotional
spending, or if material costs increase at a higher than expected rate With
respect to the European restructuring project, Energizer is currently engaged
in negotiations related to the proposed closing of its Caudebec facility, and
the results of those negotiations, as well as unexpected additional
restructuring expenses, may lead to higher than anticipated charges to
earnings. Similarly, Energizers estimate of annual cost savings from the
reorganization project may be impacted by a number of factors, including
unrealizable efficiencies of scale and unforeseen integration difficulties.
Additional risks and uncertainties include those detailed from time to time in
Energizers publicly filed documents, including Energizers Registration
Statement on Form 10, its annual report on Form 10-K for the Year ended
September 30, 2005, and its Current Report on Form 8-K dated April 25, 2000.
ENERGIZER HOLDINGS, INC.
STATEMENT OF EARNINGS
(Condensed)
(Dollars in millions, except per share data - Unaudited)
Quarter Ended December 31,
2005 2004
Net sales $882.4 $875.9
Cost of products sold 451.0 430.5
Selling, general and administrative expense 141.6 147.6
Advertising and promotion expense 81.6 96.3
Research and development expense 15.5 16.5
Interest expense 16.5 11.0
Other financing items, net 1.5 (3.1)
Earnings before income taxes 174.7 177.1
Income tax provision (54.2) (56.7)
Net earnings $120.5 $120.4
Earnings per share
Basic $1.83 $1.67
Diluted $1.77 $1.60
Weighted average shares of common
stock - Basic 65.7 72.3
Weighted average shares of common
stock - Diluted 68.1 75.2
See Accompanying Notes to Condensed Financial Statements
Energizer Holdings, Inc.
Notes to Condensed Financial Statements
Quarter ending December 31, 2005
(Dollars in millions, except per share data)
1. Operating results for any quarter are not necessarily indicative of
the results for any other quarter or the full year.
2. Operations for Energizer Holdings, Inc. (the Company) are managed via
three major segments -- North America Battery (United States and
Canada battery and lighting products), International Battery (rest of
world battery and lighting products) and Razors and Blades (global
razors, blades, and related products). The Company reports segment
results reflecting all profit derived from each outside customer sale
in the region in which the customer is located. Research and
development costs for the battery segments are combined and included
in the Total Battery results. Research and development costs for
Razors and Blades are included in that segments results. Segment
performance is evaluated based on segment operating profit exclusive
of general corporate expenses, share-based compensation, costs
associated with most restructuring, integration or business
realignment and amortization of intangible assets. Financial items,
such as interest income and expense, are managed on a global basis at
the corporate level.
Following the acquisition of Schick-Wilkinson Sword (SWS) in 2003, the
Company has adopted an operating model that includes a combination of
stand-alone and combined business functions between the battery and
razor and blades businesses, varying by country and region of the
world. Shared functions include product warehousing and distribution,
various transaction processing functions, legal and environmental
activities, and in some countries, combined sales forces and
management. Beginning in fiscal 2006, the Company applied a fully
allocated cost basis, in which shared business functions are allocated
between the businesses. Fiscal 2005 was adjusted to this same basis
and a reconciliation for this fiscal year is presented in Note 4.
On October 1, 2005, the Company adopted SFAS No. 123 (revised 2004),
"Share-Based Payment" (SFAS 123R) using the "modified
retrospective" method. Accordingly, prior year results have been
adjusted to incorporate the effects of SFAS 123R. The impact to the
Companys net earnings is consistent with the pro forma disclosures
provided in previous financial statements as found in Note 4.
Segment sales and profitability for the quarters ended December 31,
2005 and 2004, respectively, are presented below.
Quarter Ended December,
Net Sales 2005 2004
North America Battery $395.8 $386.4
International Battery 270.5 261.3
Total Battery 666.3 647.7
Razors and Blades 216.1 228.2
Total net sales $882.4 $875.9
Profitability
North America Battery $114.9 $117.8
International Battery 66.7 66.0
R&D Battery (8.0) (8.2)
Total Battery 173.6 175.6
Razors and Blades 46.6 39.0
Total segment profitability $220.2 $214.6
General corporate and other expenses (26.2) (28.2)
Amortization (1.3) (1.4)
Interest and other financial items (18.0) (7.9)
Earnings before income taxes $174.7 $177.1
Supplemental product information is presented below for revenues from
external customers:
Quarter Ended December,
Net Sales 2005 2004
Alkaline batteries $442.3 $447.7
Carbon zinc batteries 72.1 72.3
Other batteries and lighting products 151.9 127.7
Razors and blades 216.1 228.2
Total net sales $882.4 $875.9
3. Basic earnings per share is based on the average number of common
shares during the period. Diluted earnings per share is based on the
average number of shares used for the basic earnings per share
calculation, adjusted for the dilutive effect of stock options and
restricted stock equivalents.
4. The tables below reflect the impact on 2005 results of the change the
Company made to the fully allocated method and the adoption of SFAS
123R as described in Note 2.
Quarter ended December 31, 2004 Quarter ended March 31, 2005
Fully Fully
Allocated Allocated
As Adjust- FAS Adjus- As Adjust- FAS Adjus-
Reported ment 123R ted Reported ment 123R ted
Profitability
North
America
Battery $117.2 0.6 - $117.8 $48.5 0.5 - $49.0
International
Battery 64.7 1.3 - 66.0 40.4 1.4 - 41.8
R&D Battery (8.2) - - (8.2) (8.6) - - (8.6)
Total
Battery 173.7 1.9 - 175.6 80.3 1.9 - 82.2
Razors and
Blades 41.4 (2.4) - 39.0 28.3 (2.3) - 26.0
Total segment
profitability $215.1 (0.5) - $214.6 $108.6 (0.4) - $108.2
Corporate
expense (26.7) 0.5 (2.0) (28.2) (21.0) 0.4 (2.3) (22.9)
Amortization
expense (1.4) - - (1.4) (1.4) - - (1.4)
Interest and
other
financial
items (7.9) - - (7.9) (12.8) - - (12.8)
Earnings before
income taxes $179.1 - (2.0) $177.1 $73.4 0.0 (2.3) $71.1
Income tax
provision (57.4) - 0.7 (56.7) (15.8) - 0.9 (14.9)
Net earnings $121.7 - (1.3) $120.4 $57.6 0.0 (1.4) $56.2
EPS - Basic $1.68 - (0.01) $1.67 $0.81 - (0.02) $0.79
EPS - Diluted $1.62 - (0.02) $1.60 $0.78 - (0.02) $0.76
Quarter ended June 30, 2005 Quarter ended September 30, 2005
Fully Fully
Allocated Allocated
As Adjust- FAS Adjus- As Adjust- FAS Adjus-
Reported ment 123R ted Reported ment 123R ted
Profitability
North
America
Battery $57.3 (0.3) - $57.0 $72.7 (0.7) - $72.0
International
Battery 37.1 1.3 - 38.4 31.5 0.8 - 32.3
R&D Battery (8.4) - - (8.4) (10.8) - - (10.8)
Total
Battery 86.0 1.0 - 87.0 93.4 0.1 - 93.5
Razors and
Blades 20.4 (2.5) - 17.9 27.2 (2.6) - 24.6
Total segment
profitability $106.4 (1.5) - $104.9 $120.6 (2.5) - $118.1
Corporate
expense (22.7) 1.5 (2.4) (23.6) (27.2) 2.5 (2.3) (27.0)
Amortization
expense (1.2) - - (1.2) (1.3) - - (1.3)
Interest and
other
financial
items (10.9) - - (10.9) (18.5) - - (18.5)
Earnings before
income taxes $71.6 - (2.4) $69.2 $73.6 - (2.3) $71.3
Income tax
provision (17.8) - 0.9 (16.9) (20.3) - 0.8 (19.5)
Net earnings $53.8 - (1.5) $52.3 $53.3 - (1.5) $51.8
EPS - Basic $0.76 - (0.02) $0.74 $0.77 - (0.02) $0.75
EPS - Diluted $0.73 - (0.02) $0.71 $0.74 - (0.02) $0.72
Year ended September 30, 2005
Fully
As Allocated FAS
Profitability Reported Adjustment 123R Adjusted
North America Battery $295.7 0.1 - $295.8
International Battery 173.7 4.8 - 178.5
R&D Battery (36.0) - - (36.0)
Total Battery 433.4 4.9 - 438.3
Razors and Blades 117.3 (9.8) - 107.5
Total segment profitability $550.7 (4.9) - $545.8
Corporate expense (97.6) 4.9 (9.0) (101.7)
Amortization expense (5.3) - - (5.3)
Interest and other
financial items (50.1) - - (50.1)
Earnings before income taxes $397.7 0.0 (9.0) $388.7
Income tax provision (111.3) - 3.3 (108.0)
Net earnings $286.4 0.0 (5.7) $280.7
EPS - Basic $4.03 - (0.08) $3.95
EPS - Diluted $3.90 - (0.08) $3.82
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