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Energizer Announces
First Quarter Results

For the current quarter, total net sales decreased $147.4 million, or 12%

Energizer Holdings, Inc. Press Release (excerpted)

FlashlightNews.org - 1/28/2009
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Energizer Advanced Lithium Batteries

Energizer Advanced Lithium Batteries

ST. LOUIS, Mo. - Energizer Holdings, Inc., (NYSE: ENR), today announced results of its first quarter ended December 31, 2008. Net earnings for the quarter were $111.0 million, or $1.88 per diluted share, versus net earnings of $102.6 million, or $1.74 per diluted share in the first fiscal quarter of 2008.

Integration and business realignment costs of $3.0 million, after-tax, or $0.05 per diluted share, are included in the current quarter. Last year's first quarter included 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.

"The first quarter results were as expected given severe macro-economic challenges," said Ward Klein, Chief Executive Officer. "Our Personal Care division delivered solid performance despite sluggish consumer spending. In Household Products, we faced difficult battery category dynamics, as well as volume reductions due to September quarter sell-in, and December quarter retailer destocking. We feel good about our competitive position in both businesses, but future performance is greatly dependent on the overall economic environment."

For the current quarter, total net sales decreased $147.4 million, or 12%, to $1,042.5 million. On a constant currency basis, sales decreased $89.1 million, or 7%. Net sales in the Household Products division decreased $141.8 million, down 18%, or $98.7 million, down 12% on a constant currency basis. Net sales in the Personal Care business decreased $5.6 million, down 1%, but increased $9.7 million, or 2%, on a constant currency basis. Gross margin, excluding the impact of the inventory write-up last year, was up 200 basis points due primarily to a change in mix towards more profitable premium and lithium batteries and shaving systems, Segment profit decreased $9.0 million, or 4%, to $246.6 million; whereas on a constant currency basis total segment profit increased $3.8 million, or 1%. General corporate and other expenses declined $10.1 million. Interest expense declined $7.7 million; while other net financing costs increased $20.5 million.

Household Products

For the quarter net sales were $648.0 million, down $141.8 million. On a constant currency basis, net sales declined $98.7 million, or 12%, due primarily to volume declines in North America. Approximately $55 million of the decline in sales is a result of higher than normal shipments as compared to consumption in last year's first quarter, hurricane-related and early holiday shipments in the September quarter, and retailer destocking. The remaining volume decrease reflects a decline in consumption of batteries in most developed markets. Overall pricing and product mix was flat as compared to the prior year quarter as higher pricing in the U.S. was nearly offset by unfavorable price mix, including an increase in large pack sizes, which sell at lower per unit prices, and higher promotional allowances in response to competitive activity in a number of markets.

Gross profit for the first quarter decreased $48.2 million compared to the same quarter in the prior year. Excluding currencies, gross profit declined $26.7 million as lower sales were partially offset by lower freight costs and favorable product costs, which are expected to be unfavorable for the remainder of fiscal 2009 due primarily to higher cost for manganese ore as it begins to move through our inventory and the fixed cost impact of lower unit production. Segment profit declined $27.7 million, including $11.9 million of unfavorable currency impacts. Excluding currency impacts, segment profit fell $15.8 million as lower gross profit was partially offset by an $11.2 million reduction in advertising and promotion expense versus the same quarter a year ago.

Looking ahead, we expect the weak battery consumption trend to continue in 2009. During the December quarter, many U.S. retailers sharply reduced battery inventory levels, which now appear to be below seasonally normal levels. This should somewhat improve the sales volume comparison for our second fiscal quarter. For the remainder of the year, we estimate that product costs will be unfavorable approximately $20 million, which should be offset by pricing already initiated and manufacturing cost reduction efforts.

Other Items

Corporate and other expenses decreased $10.1 million for the quarter due primarily to lower compensation related expenses and lower integration and realignment costs. The current quarter included charges of $4.6 million, pre- tax, related to the integration of Playtex and other realignment activities versus charges of $7.9 million in the prior year quarter.

Interest expense decreased $7.7 on lower average interest cost on variable debt and lower average borrowings. Other net financing items were unfavorable $20.5 million for the quarter due to exchange losses incurred as U.S. dollar based payables for the Company's foreign affiliates were unfavorably impacted by the significant strengthening of the U.S. dollar versus most local currencies.

For the quarter, the effective tax rate was 31.7%. Capital expenditures were $31.5 million and depreciation expense was $28.4 million.

Energizer's Debt to Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) Ratio for the last four quarters, as defined by the company's credit agreements, was 3.30 to 1.00. At the end of the current quarter ending December 31, 2008, the company's debt level was $2.9 billion, with $2.2 billion, or 76%, at fixed rates averaging 5.54%.

Currency Outlook

The U.S. dollar remains significantly stronger versus most foreign currencies as compared to a year ago. At prevailing currency rates as of January 20, 2009, we expect the overall operating profit impact of currency translation to be unfavorable $105 to $115 million for the remainder of fiscal 2009 as compared to the same period in fiscal 2008.

"In response to the current negative macro-economic environment, we maintain a sharp focus on prudent cost containment programs and margin maintenance and enhancement efforts," said Mr. Klein. "Importantly, we continue to fund innovation investments that strengthen our long-term growth platform and set us up for continued long-term growth."

The entire earnigns release, including Statement of Earnings, can be found at: phx.corporate-ir.net/phoenix.

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