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Energizer Announces Second Quarter Results

Energizer Holdings, Inc. Press Release (excerpted) - 4/29/2008

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Company reports increase in net sales, decline in net profit

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ST. LOUIS, Mo. - Energizer Holdings, Inc., (NYSE: ENR), today announced results of its second quarter ended March 31, 2008. Net earnings for the quarter were $60.9 million, or $1.03 per diluted share, versus net earnings of $66.6 million, or $1.14 per diluted share in the second fiscal quarter of 2007. The current quarter includes an after-tax expense of $1.0 million, or $0.02 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 $2.9 million, after-tax, or $0.05 per diluted share. Included in the prior year quarter were charges of $3.0 million, after tax, or $0.05 per diluted share for restructuring projects in Europe.

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"While we knew that the second quarter would be challenging, the modest decline in the U.S. battery category combined with the magnitude of the trade inventory de-stocking by retailers was unanticipated," said Ward Klein, Chief Executive Officer. "We believe that the category decline was related to sluggishness in the U.S. economy and that our battery business and battery category fundamentals remain strong and well-positioned for long-term growth. In Personal Care, our businesses are holding their own as we continue to launch new products while integrating the Schick and Playtex businesses. The remainder of fiscal 2008 will be challenging, but we will continue to invest in all of our businesses as our outlook for 2009 and beyond remains positive."

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 $220.1 million, or 30%, to $951.0 million, due primarily to the acquisition of Playtex on October 1, 2007, which added $223.8 million to net sales for the quarter. Net sales in the legacy Household Products and Personal Care businesses were essentially flat for the quarter. Segment profit increased $21.3 million, or 15%, to $163.7 million. On a constant currency basis, sales increased $183.3 million and segment profit increased $5.3 million. General corporate and other expenses decreased $9.0 million and interest and other financing costs increased $34.9 million.

Household Products

Sales for the quarter declined $22.3 million overall, and $43.0 million, or 9%, excluding $20.7 million of favorable currencies. The sales decline was due primarily to lower sales volumes in North America, as sales of batteries sold outside of North America were essentially flat. In North America, lower year over year sales volumes were driven by three factors. First, post-holiday, March-quarter retail inventory reductions were unusually low in 2007 and unusually high this year creating an unfavorable comparison of approximately $25 million. Second, we continue to de-emphasize lower margin business in the price oriented segment, leading to lower sales volumes of $10.7 million with minimal impact to operating profit. Third, retail consumption of Energizer products declined 2% in the quarter, slightly better than the estimated 3% overall battery category decline likely due to general economic sluggishness.

Looking ahead, retail inventory levels are in line with seasonally normal levels, and our performance in the last half of the year will be determined by consumer take away. We are also expecting continued trade up by consumers to higher performing batteries where Energizer's share position is strongest, although the rate of trade up may continue to be slowed by overall economic sluggishness. Product costs are expected to continue to be unfavorable in the next two quarters at a rate of $8 to $10 million per quarter due to rechargeable battery cost increases and inefficient plant utilization rates caused by production volume declines. Price increases on rechargeable batteries have been initiated in the U.S. and certain other markets to begin to recover a portion of rising costs.

To read the entire release, including the condensed Statement of Earnings, go to Energizer Holdings, Inc. Announces Second Quarter Results.