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Energizer Announces
4th Quarter and Fiscal 2009 Results

Battery maker reports sales down 4%; profit down 66% on year over year basis

Energizer Holdings, Inc. Press Release (excerpted)

FlashlightNews.org - 11/03/2009


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Energizer Hard Case Tactical Flashlight

Energizer Hard Case Tactical Flashlight

ST. LOUIS, Mo. - Energizer Holdings, Inc., (NYSE: ENR), today announced results of its fourth quarter and fiscal year ended September 30, 2009. Net earnings for the quarter were $37.1 million, or $0.53 per diluted share, versus net earnings of $99.1 million, or $1.67 per diluted share in the fourth fiscal quarter of 2008. Fourth quarter diluted earnings per share was negatively impacted by $0.10 per share as compared to the prior year quarter due to higher average shares outstanding. In addition, the current quarter includes the following:

• charges related to the previously announced voluntary enhanced retirement option (VERO) and reduction in force (RIF), and other business realignment and integration charges of $25.8 million after-tax, or $0.38 per diluted share;

• an additional tax provision of $2.9 million, or $0.04 per diluted share, and

• an after-tax expense of $2.3 million, or $0.03 per diluted share, related to the write-up and subsequent sale of inventory purchased in the Edge and Skintimate shave preparation acquisition.

Last year's fourth quarter included an after-tax expense of $3.4 million, or $0.06 per diluted share, related to Playtex integration and other realignment costs and $2.9 million, or $0.05 per diluted share, of favorable foreign tax adjustments.

"Fiscal 2009 was a challenging year in which we took significant actions to fortify our businesses," said Ward Klein, Chief Executive Officer. "In the fourth quarter, we implemented restructuring efforts and focused on reducing debt so that we enter fiscal 2010 with sufficient momentum to properly support our brands and innovation pipeline. We will continue to invest in both advertising and promotion and innovation so that we can meet our mid to long-term growth objectives. This combined with an anticipated improvement in consumption as the economy slowly recovers, should allow us to return to double digit growth in net earnings and single digit growth in earnings per share in 2010."

For the current quarter, total net sales decreased $44.0 million, or 4%, to $1,079.4 million. On a constant currency basis, sales decreased $7 million, or less than 1%. Net sales in the Household Products division decreased $96.8 million, down 14%, or $72 million, down 11%, on a constant currency basis. Net sales in the Personal Care business, including $57 million from the shave preparation acquisition, increased $52.8 million, up 12%, or $64 million, up 14%, on a constant currency basis. Gross margin decreased 370 basis points due, in part, to the unfavorable impact of currency and certain inventory valuation charges related to obsolescence and the step up of inventory acquired in the shave preparation acquisition. Excluding currency and the inventory valuation charges, gross margin was 46.3%, down 160 basis points due primarily to product mix including higher margin hurricane volume in the prior year (C&D batteries), higher sales of lower margin Quattro for Women Trimmer razors in fiscal 2009 and higher product costs primarily in Personal Care. Segment profit decreased $44.9 million, or 20%, to $174.7 million. Excluding the unfavorable impact of currency of approximately $20 million, segment profit decreased approximately $25 million. General corporate and other expenses increased $41.6 million due primarily to the $38.6 million pre-tax charge related to the previously announced VERO and RIF. Interest expense and other net financing costs declined $8.3 million and $1.1 million, respectively.

On May 15, 2009, Energizer completed an equity offering of 10,925,000 shares at $49.00 per share, resulting in net proceeds of $510.2 million. In addition, on June 5, 2009, the company completed the acquisition of the shave preparation business for an aggregate purchase price of $275 million.

For the year ended September 30, 2009, net earnings were $297.8 million, or $4.72 per diluted share, compared to net earnings of $329.3 million, or $5.59 per diluted share, in the same period last year. The higher average shares outstanding as a result of the share issuance reduced diluted earnings per share by $0.34 for the year ended September 30, 2009 as compared to fiscal 2008. Included in the current year results are:

Outlook

Looking ahead, we expect to significantly increase investment levels in both A & P and other targeted growth initiatives after a year of aggressive cost containment. In 2009, we reduced spending by more than $140 million relative to our plan in light of significant currency unfavorability and the global recession. However, we believe the long term health of the business requires a return to higher investment levels. We expect A & P as a percent of sales will be around 12.0%, based on our current projections. This level of A & P should allow us to maintain our brand equity and incrementally support innovation as we continue new product efforts across our portfolio.

At current pricing and exchange rates, we expect that favorable material costs versus Fiscal 2009 in the range of $15 million to $20 million, and favorable currency, in the range of $55 to $60 million will fund a portion of the higher investment in A & P and targeted growth initiatives. In addition, the recent VERO should reduce overhead costs by approximately $20 million annually, with approximately $14 million of savings realized in fiscal 2010, allowing for a re-direction of spending dollars. We expect interest expense to be in the range of $130 million, as we repay scheduled maturities. The company estimates that the tax rate for fiscal 2010 will be comparable to fiscal 2009 excluding unusual items.

Overall, we remain cautious regarding consumption trends in most of our categories in the near term as retailer inventory investment remains uncertain, the speed of the economic recovery, especially as it relates to consumer spending, is slow, and device trends in the battery category remain difficult to assess given the recent economic downturn. In the beginning of fiscal 2009, we indicated that achievement of our annual earnings per share growth target, which remains our key focus, was highly unlikely given the currency headwinds and the economic downturn. Directionally, fiscal 2009 turned out about as expected. We expect a more stable global economy and somewhat stronger brand categories in 2010 as consumer confidence and spending are expected to recover over time.

Inclusive of our investment plans and our assumptions regarding improving economic conditions and category performance leads us to believe that low double digit growth in net earnings excluding unusual items is possible in fiscal 2010. Such a result would deliver low single digit earnings per share growth as higher average shares outstanding of approximately 70.8 million are expected to reduce earnings per share by $0.30 to $0.40, net of benefits from the shave preparation acquisition and lower interest expense. Nevertheless, economic uncertainty remains at the forefront and, as noted above, investing in our brands for the long-term will be a priority in the coming year.

For the entire release, including Statement of Earnings, go to phx.corporate-ir.net

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