Energizer Announces First Quarter Results
|Energizer Holdings, Inc. Press Release (excerpted)||FlashlightNews.org - 1/30/2008|
Company's first-quarter earnings hurt by Playtex acquisition costs
Energizer's Duo Charger
ST. LOUIS, Mo. - Energizer Holdings, Inc., (NYSE: ENR), today announced results of its first quarter ended December 31, 2007. Net earnings for the quarter were $102.6 million, or $1.74 per diluted share, versus net earnings of $122.3 million, or $2.08 per diluted share in the first fiscal quarter of 2007. The current quarter includes an after-tax expense of $15.5 million, or $0.26 per diluted share, related to the write-up and subsequent sale of inventory purchased in the Playtex Products, Inc. acquisition as well as integration and other realignment costs of $5.2 million, after-tax, or $0.09 per diluted share. Included in the prior year quarter were charges of $2.3 million, after tax, or $0.04 per diluted share for restructuring projects in Europe.
As previously noted, Energizer's business and financial results are now reported in two segments: Household Products and Personal Care. For the current quarter, net sales increased $230.7 million, or 24%, to $1,189.9 million, due primarily to the acquisition of Playtex Products, Inc. on October 1, 2007, which added $148.5 million to net sales for the quarter, and increased sales in Household Products and the legacy Personal Care businesses. Segment profit increased $29.5 million, or 13%, to $255.6 million. On a constant currency basis, sales increased $183.2 million and operating profit increased $3.5 million. General corporate and other expenses increased $4.7 million and interest and other financing costs increased $25.6 million.
The inclusion of Playtex's results and the incremental interest expense associated with the financing of the acquisition reduced diluted earnings per share by $0.39 in the quarter, including $0.26 related to the inventory write-up charge and $0.06 related to integration costs. Absent the inventory write-up and the integration costs, Playtex was $0.07 dilutive for the quarter as incremental financing costs exceeded Playtex operating income for the quarter due in part to the fact that the first quarter is an "off-season" quarter for Sun Care, and Energizer is in the early stages of the Playtex integration.
"I am pleased with our performance during the quarter, as momentum continued in our Household Products segment and we focused our efforts on building a new Personal Care division, consisting of the Schick Wilkinson-Sword and Playtex Products businesses," said Ward Klein, Chief Executive Officer. "Within Personal Care, we were able to maintain sales growth while focusing on substantial integration efforts. The Playtex acquisition was dilutive for the quarter, partially due to acquisition related charges and partially because the December quarter is the slow season for Playtex sun care. In addition, material costs in Household Products were a significant headwind but have now peaked and will moderate going forward. Finally, we increased our advertising in both of our legacy businesses, accelerating our long-term brand building activities."
Mr. Klein continued, "I am optimistic about the outlook for all of our businesses, but fiscal 2008 will be a transition year as we integrate Playtex into Energizer Personal Care while we strive to minimize disruption and continue to support brand building initiatives across all categories."
The Household Products segment, which consists of our global battery and lighting products businesses, had net sales for the first quarter of $789.8 million, an increase of $66.1 million, or 9%. On a constant currency basis, sales increased $33.1 million, or 4.6%, due to improved pricing and product mix and higher volumes. Overall pricing and product mix were favorable as price increases in the United States (U.S.) and other markets as well as favorable product mix in lighting products were partially offset by unfavorable package size mix, as growth in larger packs, which sell at lower per unit prices, exceeded smaller pack growth.
Gross profit increased $29.2 million for the quarter due primarily to favorable currency. On a constant currency basis, gross profit was virtually flat as the contribution of higher sales was offset by higher product costs. Overall, product cost was unfavorable $38.0 million, primarily on higher material costs. Segment profit increased $12.4 million, reflecting a $21.7 million currency benefit. Absent currency, segment profit declined $9.3 million, primarily on higher advertising and promotion.
The United States (U.S.) retail battery category is defined as household batteries (alkaline, carbon zinc, lithium and rechargeable) and specialty batteries. Consumption in the U.S. retail battery category increased by 5% in dollars for the 12 weeks ending December 29, 2007, versus the same period last year, primarily due to price increases and consumers trading up to performance brands. Retail consumption of Energizer's products increased 5% in dollars for the same period. Retail sales of Energizer MAX grew 4% in the quarter, slightly lower than the overall category, in the face of a sharp increase in competitive activity. Retail sales of Energizer's lithium and rechargeable products increased 22% in the quarter while our price-oriented product sales declined 12%. We experienced similar product mix shift in international markets, reflecting a global movement of consumers trading up to higher performing battery products.
Looking forward, U.S. retail inventories at December 31, 2007, were modestly higher than normal seasonal levels, which we expect to correct in the coming months. In addition, sales in the March 2007 quarter benefitted from unusually low U.S. retail inventory levels at December 31, 2006, setting up a difficult sales comparison in the March 2008 quarter. With respect to material costs, zinc costs have peaked and should decline throughout the remainder of the year, however, nickel and certain other commodity costs will remain unfavorable for the next two quarters. At current forecast levels, we expect total material costs to be unfavorable $10 to $15 million for the remainder of the fiscal year, with comparisons improving as the year progresses. In addition, we recently announced a 8.5% price increase on our rechargeable products in the U.S. to help offset some higher costs associated with these product lines.
Gross profit on a constant currency basis was down slightly, despite higher sales volume, due primarily to the impact of higher promotional spending on men's systems and, to a lesser extent, unfavorable product mix. The increase in gross profit resulting from the addition of Hawaiian Tropic in the quarter was offset by a prior year favorable returns provision adjustment in Banana Boat. The first quarter is a historically low volume quarter for Sun Care. As a result, adjustments of this nature have a greater impact on the comparative. Segment profit decreased $10.3 million to $72.7 million for the quarter. On a constant currency basis, segment profit decreased $14.6 million due primarily to higher advertising and promotional spending primarily behind the Quattro Disposables. In addition, overheads were up for the quarter due largely to increased costs due to the inclusion of the Hawaiian Tropic business and prior year non-recurring gains of more than $3.0 million, including certain property sales, which impacted the comparative.
Statements in this press release that are not historical, particularly statements regarding anticipated moderation of material costs in Energizer Household Products, the outlook for Energizer's businesses, estimates of battery category growth, retail consumption and sales of Energizer products and retailer inventory levels, anticipated commodity and material costs for the remainder of the year, the impact of price increases on rechargeable products as an offset to higher costs associated with those products, increases in advertising and promotion expenses for Energizer Personal Care products, timing and extent of synergies and earnings accretion related to the Playtex acquisition, and Energizer's anticipated weighted average interest rate, 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.
The entire press release can be seen at: Energizer Holdings, Inc. Announces First Quarter Results.