Energizer Announces Fourth Quarter and Fiscal 2006 Results
Energizer Holdings, Inc. Press Release (excerpted)FlashlightNews.org - 11/02/2006
Company reports lower earnings and increased revenue compared to previous fiscal year
Energizer e2 Batteries
ST. LOUIS, Mo. - Energizer Holdings, Inc. (NYSE: ENR) today announced results of its fourth quarter and fiscal year ended September 30, 2006. Net earnings for the quarter were $39.1 million, or $0.66 per diluted share, versus net earnings of $51.8 million, or $0.72 per diluted share in the fourth fiscal quarter of 2005.
Last year's fourth quarter included charges of $3.7 million, after-tax, or $0.05 per share, related to several minor restructuring projects, offset by $4.3 million, or $0.06 per diluted share, of previously unrecognized tax benefits related to prior years' foreign losses and a reduction to prior year tax accruals.
For the quarter, sales of $830.1 million increased 5%, primarily due to the battery segments. Segment profit of $116.9 million decreased 1% as increases in both battery segments were offset by a decline in the razors and blades segment, driven by increased advertising. Favorable currency impacted sales by $9.7 million and segment profit by $2.9 million. General corporate and other expenses increased $18.0 million, primarily on the aforementioned restructuring and foreign pension charges, and interest and other financing items increased $4.5 million.
For the year ended September 30, 2006, net earnings were $260.9 million, or $4.14 per diluted share, compared to net earnings of $280.7 million, or $3.82 per diluted share, in the same period last year.
Sales for fiscal 2006 increased $87.1 million in spite of $23.3 million of unfavorable currency translation. On a constant currency basis sales were up 4%, as all three segments experienced increases. Segment profit increased $24.2 million, including $7.7 million of unfavorable currency. On a constant currency basis, segment profit improved $31.9 million, or 6%, primarily on increases in the razors and blades segment. For the year, general corporate and other expenses increased $27.2 million, including the aforementioned restructuring charges, while interest and other financing items increased $29.1 million.
"Fiscal 2006 was another successful year for Energizer with solid performance by our two major businesses despite significant challenges in the form of commodities, currencies and competition," said Ward Klein, Chief Executive Officer. "Looking into 2007, zinc prices have continued to rise off of the already historic highs experienced in 2006. We have been able to raise prices in a number of markets around the globe and have additional increases pending, including our recently announced January 2007 price increase in the United States. To the extent these are successful we may be able to recover the cost increase in absolute dollars but gross margin percentage will suffer. In the shaving business, we have been able to withstand a major new product launch by a competitor while successfully launching new products of our own, including Quattro Titanium."
North America Battery
Net sales for the fourth quarter of $343.4 million increased $22.9 million, or 7%, on higher volume and pricing. Volume increases contributed $13.3 million despite only $2 million in hurricane-related sales in the current quarter compared to $16 million in the fourth quarter of last year. Energizer MAX volume increased 4% in the quarter on strong demand for smaller cell sizes, partially offset by declines in larger cell-sized batteries, which are most impacted by hurricane demand. High performance lithium, rechargeable batteries and battery chargers grew in excess of 30% in the quarter while price segment batteries declined. Overall pricing and product mix was favorable in the quarter as the contribution from price increases was partially offset by the continuing shift of sales to larger package sizes, which sell at lower per unit prices.
Gross profit increased $10.5 million for the quarter, on higher sales, partially offset by $6.7 million of unfavorable product costs. Material and distribution costs were $8.3 million higher in the quarter, with higher zinc cost accounting for the bulk of the increase. For the quarter, segment profit increased $1.0 million as the higher gross profit was partially offset by higher advertising, promotion, general and administrative expenses.
Outlook
Looking ahead, commodity costs for key metals used in battery manufacturing, primarily zinc, have increased significantly. At current prices, zinc costs for 2007 will be more than double the 2006 rates. If product sold during 2006 had been produced at anticipated 2007 production costs, product costs would have been $60 to $65 million higher. Previously implemented price increases in the United States and other international markets will improve the pricing early in fiscal 2007 but will be insufficient to cover the entire cost increase in the first fiscal quarter. As a result, the company has initiated a number of additional price increases, including the January 2007 price increase in the United States. Pricing, when combined with expected production efficiencies, is intended to recover materials cost increase. However, per unit gross margin will continue to be unfavorable until the January 2007 price increase takes effect.