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Energizer Holdings, Inc. Announces Third Quarter Results

Energizer Holdings, Inc. Press Release (excerpted) FlashlightNews.org - 7/24/2007

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Improvements in the North America Battery and the Razors and Blades segments are partially offset by lower International Battery results.


Energizer Battery Charger

Energizer Battery Charger

ST LOUIS, Mo. - Energizer Holdings, Inc., , today announced results of its third quarter ended June 30, 2007. Net earnings for the quarter were $62.5 million, or $1.06 per diluted share, versus net earnings of $51.3 million, or $0.83 per diluted share in the third fiscal quarter of 2006. Included in the current quarter is a favorable adjustment of $7.8 million, or $0.13 per diluted share, related to previously unrecognized tax benefits associated with prior years' foreign losses and a reduction of prior year tax accruals, partially offset by a charge of $2.3 million, after-tax, or $0.04 per share, for restructuring projects in Europe. Last year's third quarter included an $8.6 million, or $0.14 per diluted share, favorable adjustment related to prior years' tax accruals, which was nearly offset by charges of $7.9 million, after-tax, or $0.13 per diluted share, related to the European restructuring projects.

"We are once again pleased with our quarterly results," said Ward M. Klein, Chief Executive Officer. "The battery business posted solid volume growth around the world and pricing has largely offset significant material cost increases. We continue to invest in people and advertising to enhance our brand position around the world. In our razors and blades business, men's shaving systems sales have slowed compared to recent periods where we had more new product activity, and in the face of significant competition. However, the introduction of Quattro Disposable and a strong push on other disposable products has contributed to top line growth. Our seasonal and launch related A&P has now peaked and we look for the shaving business to have a strong fiscal year finish."

Sales for the quarter were $800.0 million, an increase of $65.1 million, as all three segments improved. Segment profit increased 4% to $123.0 million for the quarter due to improvements in both battery segments, partially offset by an expected decline in the Razors and Blades segment. On a constant currency basis, sales increased 6% while segment profit decreased 2%. General corporate and other expenses decreased $6.2 million, and interest and other financing items decreased $3.4 million.

For the nine months ended June 30, 2007, net earnings were $251.4 million, or $4.30 per diluted share, compared to net earnings of $221.8 million, or $3.44 per diluted share, in the same period last year. Included in the current and prior year nine month results are charges of $7.6 million, after- tax, or $0.13 per diluted share, and $11.0 million, after-tax, or $0.17 per diluted share, respectively, for restructuring projects in Europe. In addition, the current and prior year nine month results included the aforementioned benefit from tax accrual adjustments.

Sales for the nine months were $2,490.1 million, an increase of $243.3 million in absolute dollars and $190.3 million on a constant currency basis, as all three segments improved. Including $22.6 million of favorable currency, segment profit increased $38.4 million to $491.5 million. Excluding the impact of currency, segment profit increased $15.8 million on improvements in the North America Battery and the Razors and Blades segments, partially offset by lower International Battery results. For the nine months, general corporate and other expenses decreased $5.6 million, and interest and other financing items increased $2.6 million.

North America Battery

Net sales for the third quarter of $303.8 million increased $28.1 million, or 10%, due to higher volume contributing $13.5 million and favorable pricing and product mix adding $13.9 million. Energizer Max units increased 1% while lithium and rechargeable batteries and chargers grew approximately 30%. Overall pricing and product mix was favorable reflecting general price increases implemented in January 2007.

Gross profit for the quarter increased $11.1 million as higher sales were partially offset by higher product costs. Overall product cost rate for the quarter was unfavorable $13.3 million due to higher material costs. Segment profit increased $8.4 million as higher gross profit was partially offset by higher advertising, promotion and selling expenses.

The United States (U.S.) retail battery category is defined as household batteries (alkaline, carbon zinc, lithium and rechargeable) and specialty batteries. The U.S. retail battery category increased by 3% in dollars for the 12 weeks ending June 16, 2007, versus the same period last year, as price increases and consumers trading up to premium and performance brands were partially offset by declines in hurricane preparedness sales in the southeastern U.S. Retail consumption of Energizer's products increased 7% in dollars for the same period. Energizer's growth is a result of a continued focus on brand and category building activities including more effective merchandising and product mix management, and shifting price-oriented promotions to more profitable events in line with our published minimum advertised price program. Non-promoted Energizer Max sales were up 14% in the quarter while promoted sales were down 8%, as reported by A.C.Nielsen (A.C.N.). As a result, non-promoted volume across Energizer's total battery portfolio reached nearly 70% of total battery sales within the A.C.N. measured universe in the current quarter, our highest level in the last two years and the highest among major battery brands.

For the nine months, sales increased $96.4 million, or 11%, primarily due to higher sales volumes and favorable pricing and product mix. For the current nine months, Energizer Max unit sales increased 1%. Lithium batteries, rechargeable batteries and chargers grew in excess of 30%. Higher pricing reflects the impact of prior year price increases in the first fiscal quarter as well as the aforementioned 2007 increase and lower levels of promotional spending on Energizer Max.

Gross profit increased $33.8 million for the nine months as higher sales were partially offset by higher product costs, primarily due to the increased cost of zinc. Product cost in the current period was unfavorable $32.9 million compared to the same period last year as material cost increases of $37.3 million were partially offset by other cost reductions earlier in the year. Segment profit increased $20.6 million, or 9%, as higher gross profit was partially offset by higher advertising, selling, general and administrative expenses.

International Battery

Net sales for the quarter were $244.0 million, an increase of $29.8 million, or 14%. Absent $11.3 million of favorable currency impacts, sales increased 9% due to higher volumes of $13.7 million and favorable pricing and product mix of $4.8 million.

Gross profit increased $10.8 million, including $9.9 million of favorable currency impacts. Absent currencies, the contribution of higher volume and pricing was nearly offset by a higher product cost rate of $9.1 million of which $6.4 million related to higher zinc and other material costs. Segment profit for the quarter increased $3.5 million in absolute dollars but declined $3.4 million excluding currency impacts due to higher general, administrative and selling expenses.

For the nine months, net sales increased $99.6 million, or 15%, with favorable currency accounting for $32.4 million of the increase. On a constant currency basis, sales increased 10%, primarily on higher volumes in all areas and favorable pricing and product mix in Asia and Latin America, partially offset by unfavorable product mix in Europe for the first half of the year.

Gross profit increased $22.3 million in absolute dollars, but declined $4.4 million on a constant currency basis, as the impact from higher volume and pricing was more than offset by $38.1 million of unfavorable product cost, which included $32.7 million of raw material costs. Segment profit increased $2.2 million in absolute dollars but declined $16.7 million excluding currency impacts due to higher selling, general and administrative expenses in addition to the gross profit impact.

Outlook

Looking forward, battery material costs continue above historical levels. Based on current sales and cost forecasts, product costs are expected to be unfavorable $20 to $22 million for the last quarter of fiscal 2007, compared to the same period last year. Implemented price increases in most markets are expected to offset the majority of the higher cost.


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