enr-20200630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________

FORM 10-Q

_______________________________


(Mark One)
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-36837

____________________________________________________________________________________________________________

ENERGIZER HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Missouri

36-4802442

(State or other jurisdiction of

(I. R. S. Employer

incorporation or organization)

Identification No.)

533 Maryville University Drive

St. Louis,

Missouri

63141

(Address of principal executive offices)

(Zip Code)

(314)

985-2000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $.01 per share	ENR	New York Stock Exchange
7.50% Series A Mandatory Convertible Preferred Stock, par value $.01 per share	ENR PRA	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares of Energizer Holdings, Inc. common stock, $.01 par value, outstanding as of the close of business on August 3, 2020: 68,517,466.


INDEX
			Page
PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Consolidated Statements of Earnings and Comprehensive Income (Condensed) for the Quarters and Nine Months Ended June 30, 2020 and 2019			4

Consolidated Balance Sheets (Condensed) as of June 30, 2020 and September 30, 2019			5

Consolidated Statements of Cash Flows (Condensed) for the Nine Months Ended June 30, 2020 and 2019			6

Consolidated Statements of Shareholders' Equity/(Deficit) (Condensed) for the Nine Months Ended June 30, 2020 and 2019			7

Notes to Consolidated (Condensed) Financial Statements			9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			38

Item 3. Quantitative and Qualitative Disclosures About Market Risk			55

Item 4. Controls and Procedures			57

PART II — OTHER INFORMATION

Item 1. Legal Proceedings			58

Item 1A. Risk Factors			58

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			60

Item 6. Exhibits			60

EXHIBIT INDEX			61

SIGNATURES			64

ENERGIZER HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME

(Condensed)

(In millions, except per share data - Unaudited)


	For the Quarter Ended June 30,						For the Nine Months Ended June 30,
	2020		2019		2020		2019
Net sales	$	658.0	$	647.2	$	1,981.8	$	1,775.5
Cost of products sold	394.8		400.9		1,181.7		1,059.5
Gross profit	263.2		246.3		800.1		716.0
Selling, general and administrative expense	112.8		127.6		351.0		373.5
Advertising and sales promotion expense	37.3		34.3		106.9		99.9
Research and development expense	8.4		9.5		25.6		23.7
Amortization of intangible assets	14.3		14.4		42.3		30.1
Interest expense	50.8		51.9		149.0		177.3
Other items, net	0.7		(0.8)		5.8		(13.9)
Earnings before income taxes	38.9		9.4		119.5		25.4
Income tax provision	9.9		0.2		31.0		7.7
Net earnings from continuing operations	29.0		9.2		88.5		17.7
Net earnings/(loss) from discontinued operations, net of income tax benefit of $0.4 and $6.6 for the quarter and nine months ended June 30, 2020, respectively, and an expense of $0.4 and a benefit of $2.5 for the quarter and nine months ended June 30, 2019, respectively	0.8		(1.8)		(130.3)		(12.8)
Net earnings/(loss)	29.8		7.4		(41.8)		4.9
Mandatory preferred stock dividends	(4.0)		(4.4)		(12.1)		(7.7)
Net earnings/(loss) attributable to common shareholders	$	25.8	$	3.0	$	(53.9)	$	(2.8)

Basic net earnings per common share - continuing operations	$	0.37	$	0.07	$	1.11	$	0.15
Basic net earnings/(loss) per common share - discontinued operations	0.01		(0.03)		(1.89)		(0.19)
Basic net earnings/(loss) per common share	$	0.38	$	0.04	$	(0.78)	$	(0.04)

Diluted net earnings per common share - continuing operations	$	0.37	$	0.07	$	1.10	$	0.15
Diluted net earnings/(loss) per common share - discontinued operations	0.01		(0.03)		(1.88)		(0.19)
Diluted net earnings/(loss) per common share	$	0.38	$	0.04	$	(0.78)	$	(0.04)

Weighted average shares of common stock - Basic	68.5		69.6		68.9		65.5
Weighted average shares of common stock - Diluted	68.7		70.6		69.4		66.5

Statements of Comprehensive Income:
Net earnings/(loss)	$	29.8	$	7.4	$	(41.8)	$	4.9
Other comprehensive income/(loss), net of tax expense/(benefit)
Foreign currency translation adjustments	2.0		(12.3)		(3.2)		4.3
Pension activity, net of tax of $0.5 and $2.2 for the quarter and nine months ended June 30, 2020, and $0.2 and $0.8, for the quarter and nine months ended June 30, 2019 respectively.	1.1		0.9		6.3		3.0
Deferred loss on hedging activity, net of tax of ($0.6) and ($2.8) for the quarter and nine months ended June 30, 2020, respectively, and ($1.9) and ($3.7) for the quarter and nine months ended June 30, 2019, respectively.	(1.3)		(6.4)		(10.1)		(10.8)
Total comprehensive gain/(loss)	$	31.6	$	(10.4)	$	(48.8)	$	1.4

The above financial statements should be read in conjunction with the Notes To Consolidated (Condensed) Financial Statements (Unaudited).

ENERGIZER HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(Condensed)

(In millions - Unaudited)


Assets	June 30, 2020		September 30, 2019
Current assets
Cash and cash equivalents	$	595.6	$	258.5
Trade receivables, less allowance for doubtful accounts of $4.7 and $3.8, respectively	317.9		340.2
Inventories	518.6		469.3
Other current assets	186.0		177.1
Assets held for sale	—		791.7
Total current assets	1,618.1		2,036.8

Property, plant and equipment, net	344.9		362.0
Operating lease assets	123.0		—
Goodwill	1,008.7		1,004.8
Other intangible assets, net	1,923.4		1,958.9
Deferred tax asset	22.8		22.8
Other assets	85.6		64.3
Total assets	$	5,126.5	$	5,449.6

Liabilities and Shareholders' Equity
Current liabilities
Current maturities of long-term debt	$	91.3	$	—
Current portion of capital leases	1.7		1.6
Notes payable	205.4		31.9
Accounts payable	321.7		299.0
Current operating lease liabilities	14.3		—
Other current liabilities	350.0		333.6
Liabilities held for sale	—		402.9
Total current liabilities	984.4		1,069.0
Long-term debt	3,252.5		3,461.6
Operating lease liabilities	112.6		—
Deferred tax liability	172.5		170.6
Other liabilities	218.7		204.6
Total liabilities	4,740.7		4,905.8
Shareholders' equity
Common stock	0.7		0.7
Mandatory convertible preferred stock	—		—
Additional paid-in capital	859.1		870.3
Retained earnings	10.8		129.5
Treasury stock	(179.5)		(158.4)
Accumulated other comprehensive loss	(305.3)		(298.3)
Total shareholders' equity	385.8		543.8
Total liabilities and shareholders' equity	$	5,126.5	$	5,449.6

The above financial statements should be read in conjunction with the Notes To Consolidated (Condensed) Financial Statements (Unaudited).

ENERGIZER HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Condensed)

(In millions - Unaudited)


	For the Nine Months Ended June 30,
	2020		2019
Cash Flow from Operating Activities
Net (loss)/earnings	$	(41.8)	$	4.9
Net loss from discontinued operations	(130.3)		(12.8)
Net earnings from continuing operations	88.5		17.7
Non-cash integration and restructuring charges	12.1		—
Depreciation and amortization	84.3		70.8

Deferred income taxes	2.1		(1.2)
Share-based compensation expense	21.2		20.8

Mandatory transition tax	—		0.7
Inventory step up	—		33.7
Non-cash items included in income, net	22.6		(3.0)
Other, net	0.2		(16.7)
Changes in current assets and liabilities used in operations	0.9		(92.4)
Net cash from operating activities from continuing operations	231.9		30.4
Net cash used by operating activities from discontinued operations	(12.9)		(23.4)
Net cash from operating activities	219.0		7.0

Cash Flow from Investing Activities
Capital expenditures	(44.4)		(36.4)
Proceeds from sale of assets	1.5		0.1
Acquisitions, net of cash acquired	(4.5)		(2,453.8)
Net cash used by investing activities from continuing operations	(47.4)		(2,490.1)
Net cash from/(used by) investing activities from discontinued operations	280.9		(403.1)
Net cash from/(used by) investing activities	233.5		(2,893.2)

Cash Flow from Financing Activities
Cash proceeds from issuance of debt with original maturities greater than 90 days	620.6		1,800.0
Payments on debt with maturities greater than 90 days	(770.3)		(513.8)
Net increase/(decrease) in debt with original maturities of 90 days or less	171.5		(204.5)
Debt issuance costs	(6.1)		(40.1)
Net proceeds from issuance of mandatory convertible preferred stock	—		199.5
Net proceeds from issuance of common stock	—		205.3
Dividends paid on mandatory convertible preferred stock	(12.1)		(4.0)
Dividends paid on common stock	(64.3)		(61.7)
Common stock purchased	(45.0)		(45.0)
Taxes paid for withheld share-based payments	(9.7)		(7.2)


Net cash (used by)/from financing activities from continuing operations	(115.4)		1,328.5
Net cash used by financing activities from discontinued operations	(1.1)		(2.9)
Net cash (used by)/from financing activities	(116.5)		1,325.6

Effect of exchange rate changes on cash	1.1		(1.3)

Net increase/(decrease) in cash, cash equivalents, and restricted cash from continuing operations	70.2		(1,132.5)
Net increase/(decrease) in cash, cash equivalents, and restricted cash from discontinued operations	266.9		(429.4)
Net increase/(decrease) in cash, cash equivalents, and restricted cash	337.1		(1,561.9)
Cash, cash equivalents, and restricted cash, beginning of period	258.5		1,768.3
Cash, cash equivalents, and restricted cash, end of period	$	595.6	$	206.4

The above financial statements should be read in conjunction with the Notes To Consolidated (Condensed) Financial Statements (Unaudited).

ENERGIZER HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY/(DEFICIT)

(Condensed)

(Amounts in millions, Shares in thousands - Unaudited)


	Number of Shares				Amount
	Preferred Stock	Common Stock	Preferred Stock		Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss)/Income		Treasury Stock		Total Shareholders' Equity
September 30, 2019	2,156	68,902	$	—	$	0.7	$	870.3	$	129.5	$	(298.3)	$	(158.4)	$	543.8
Net earnings from continuing operations	—	—	—		—		—		45.8		—		—		45.8
Net earnings from discontinued operations	—	—	—		—		—		0.3		—		—		0.3
Share based payments	—	—	—		—		7.2		—		—		—		7.2



Activity under stock plans	—	374	—		—		(24.9)		(1.1)		—		16.6		(9.4)
Dividends to common shareholders ($0.30 per share)	—	—	—		—		—		(21.4)		—		—		(21.4)
Dividends to preferred shareholders ($1.875 per share)	—	—	—		—		—		(4.0)		—		—		(4.0)
Other comprehensive income	—	—	—		—		—		—		25.2		—		25.2
December 31, 2019	2,156	69,276	$	—	$	0.7	$	852.6	$	149.1	$	(273.1)	$	(141.8)	$	587.5
Net earnings from continuing operations	—	—	—		—		—		13.7		—		—		13.7
Net loss from discontinued operations	—	—	—		—		—		(131.4)		—		—		(131.4)
Share based payments	—	—	—		—		8.7		—		—		—		8.7
Common stock purchased	—	(980)	—		—		—		—		—		(45.0)		(45.0)


Activity under stock plans	—	36	—		—		(1.7)		(0.1)		—		1.5		(0.3)
Deferred compensation plan	—	125	—		—		(5.7)		—		—		5.7		—
Dividends to common shareholders ($0.30 per share)	—	—	—		—		—		(21.4)		—		—		(21.4)
Dividends to preferred shareholders ($1.875 per share)	—	—	—		—		—		(4.1)		—		—		(4.1)
Other comprehensive loss	—	—	—		—		—		—		(34.0)		—		(34.0)
March 31, 2020	2,156	68,457	$	—	$	0.7	$	853.9	$	5.8	$	(307.1)	$	(179.6)	$	373.7
Net earnings from continuing operations	—	—	—		—		—		29.0		—		—		29.0
Net earnings from discontinued operations	—	—	—		—		—		0.8		—		—		0.8
Share based payments	—	—	—		—		5.3		—		—		—		5.3



Activity under stock plans	—	2	—		—		(0.1)		—		—		0.1		—

Dividends to common shareholders ($0.30 per share)	—	—	—		—		—		(20.8)		—		—		(20.8)
Dividends to preferred shareholders ($1.875 per share)	—	—	—		—		—		(4.0)		—		—		(4.0)
Other comprehensive income	—	—	—		—		—		—		1.8		—		1.8
June 30, 2020	2,156	68,459	$	—	$	0.7	$	859.1	$	10.8	$	(305.3)	$	(179.5)	$	385.8

ENERGIZER HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY/(DEFICIT)

(Condensed)

(Amounts in millions, Shares in thousands - Unaudited)


	Number of Shares				Amount
	Preferred Stock	Common Stock	Preferred Stock		Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss)/Income		Treasury Stock		Total Shareholders' Equity
September 30, 2018	—	59,608	$	—	$	0.6	$	217.8	$	177.3	$	(241.8)	$	(129.4)	$	24.5
Net earnings from continuing operations	—	—	—		—		—		70.8		—		—		70.8
Share based payments	—	—	—		—		6.5		—		—		—		6.5

Activity under stock plans	—	290	—		—		(16.1)		(3.6)		—		12.6		(7.1)
Dividends to common shareholders ($0.30 per share)	—	—	—		—		—		(18.4)		—		—		(18.4)
Other comprehensive loss	—	—	—		—		—		—		(5.9)		—		(5.9)
December 31, 2018	—	59,898	$	—	$	0.6	$	208.2	$	226.1	$	(247.7)	$	(116.8)	$	70.4
Net loss from continuing operations	—	—	—		—		—		(62.3)		—		—		(62.3)
Net loss from discontinued operations	—	—	—		—		—		(11.0)		—		—		(11.0)
Share based payments	—	—	—		—		7.6		—		—		—		7.6

Issuance of common stock	—	9,966	—		0.1		445.7		—