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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 December 31, 2020
Or
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
____________________________________________________________________________________________________________
enr-20201231_g1.jpg
ENERGIZER HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Missouri36-4802442
(State or other jurisdiction of(I. R. S. Employer
incorporation or organization)Identification No.)
 
533 Maryville University Drive 
St. Louis,Missouri63141
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $.01 per shareENRNew York Stock Exchange
7.50% Series A Mandatory Convertible Preferred Stock, par value $.01 per shareENR PRANew 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

1



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 filerAccelerated filer
    
Non-accelerated filerSmaller 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 February 4, 2021: 68,366,976.
2


INDEX
 Page
PART I — FINANCIAL INFORMATION 
  
Item 1. Financial Statements (Unaudited) 
  
Consolidated Statements of Earnings and Comprehensive Income (Condensed) for the Quarters Ended December 31, 2020 and 2019
Consolidated Balance Sheets (Condensed) as of December 31, 2020 and September 30, 2020
Consolidated Statements of Cash Flows (Condensed) for the Three Months Ended December 31, 2020 and 2019
Consolidated Statements of Shareholders' Equity (Condensed) for the Three Months Ended December 31, 2020 and 2019

              
Notes to Consolidated (Condensed) Financial Statements
  
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
  
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
  
PART II — OTHER INFORMATION 
  
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
  
EXHIBIT INDEX
SIGNATURES




3

ENERGIZER HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
(Condensed)
(In millions, except per share data - Unaudited)  

 For the Quarter Ended December 31,
 20202019
Net sales$848.6 $736.8 
Cost of products sold510.7 435.5 
Gross profit337.9 301.3 
Selling, general and administrative expense124.1 122.1 
Advertising and sales promotion expense49.6 46.8 
Research and development expense7.6 8.9 
Amortization of intangible assets15.5 13.8 
Interest expense47.3 46.8 
Loss on extinguishment of debt5.7 4.2 
Other items, net0.8  
Earnings before income taxes87.3 58.7 
Income tax provision20.2 12.9 
Net earnings from continuing operations67.1 45.8 
Net earnings from discontinued operations, net of income tax expense of $7.5 for the quarter ended December 31, 2019 0.3 
Net earnings67.1 46.1 
Mandatory preferred stock dividends(4.0)(4.0)
Net earnings attributable to common shareholders$63.1 $42.1 
Basic net earnings per common share - continuing operations$0.92 $0.60 
Basic net earnings per common share - discontinued operations 0.01 
Basic net earnings per common share$0.92 $0.61 
Diluted net earnings per common share - continuing operations$0.91 $0.60 
Diluted net earnings per common share - discontinued operations  
Diluted net earnings per common share$0.91 $0.60 
Weighted average shares of common stock - Basic68.5 69.1 
Weighted average shares of common stock - Diluted73.5 70.2 
Statements of Comprehensive Income:
Net earnings$67.1 $46.1 
Other comprehensive income/(loss), net of tax expense/(benefit)
Foreign currency translation adjustments5.5 30.0 
Pension activity, net of tax of $0.5 and $0.5, respectively.(0.5)(0.2)
Deferred loss on hedging activity, net of tax of ($0.9) and ($1.0), respectively.(2.6)(4.6)
Total comprehensive income$69.5 $71.3 
The above financial statements should be read in conjunction with the Notes To Consolidated (Condensed) Financial Statements (Unaudited).
4


ENERGIZER HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Condensed)
(In millions - Unaudited)
 
AssetsDecember 31,
2020
September 30,
2020
Current assets 
Cash and cash equivalents$305.6 $459.8 
Restricted cash 790.0 
Trade receivables, less allowance for doubtful accounts of $4.3 and $2.8, respectively335.8 292.0 
Inventories522.5 511.3 
Other current assets176.1 157.8 
Total current assets1,340.0 2,210.9 
Property, plant and equipment, net367.2 352.1 
Operating lease assets120.7 121.9 
Goodwill1,056.2 1,016.0 
Other intangible assets, net1,918.2 1,909.0 
Deferred tax asset26.2 24.3 
Other assets100.6 94.1 
Total assets$4,929.1 $5,728.3 
Liabilities and Shareholders' Equity
Current liabilities
Current maturities of long-term debt$4.1 $841.3 
Current portion of capital leases2.3 1.7 
Notes payable5.5 3.8 
Accounts payable390.2 378.1 
Current operating lease liabilities14.7 14.8 
Other current liabilities361.0 408.7 
Total current liabilities777.8 1,648.4 
Long-term debt3,345.0 3,306.9 
Operating lease liabilities110.5 111.9 
Deferred tax liability151.1 140.4 
Other liabilities215.1 211.6 
Total liabilities4,599.5 5,419.2 
Shareholders' equity
Common stock0.7 0.7 
Mandatory convertible preferred stock  
Additional paid-in capital841.6 859.2 
Retained earnings(25.0)(66.2)
Treasury stock(182.4)(176.9)
Accumulated other comprehensive loss(305.3)(307.7)
Total shareholders' equity329.6 309.1 
Total liabilities and shareholders' equity$4,929.1 $5,728.3 

The above financial statements should be read in conjunction with the Notes To Consolidated (Condensed) Financial Statements (Unaudited).
5

ENERGIZER HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Condensed)
(In millions - Unaudited)
 For the Three Months Ended December 31,
 20202019
Cash Flow from Operating Activities  
Net earnings$67.1 $46.1 
Net earnings from discontinued operations 0.3 
Net earnings from continuing operations67.1 45.8 
Non-cash integration and restructuring charges1.9 4.4 
Depreciation and amortization29.8 27.6 
Deferred income taxes7.7 2.8 
Share-based compensation expense4.0 7.2 
Loss on extinguishment of debt5.7 4.2 
Non-cash items included in income, net5.6 3.1 
Other, net(0.7)2.6 
Changes in current assets and liabilities used in operations(44.8)35.8 
Net cash from operating activities from continuing operations76.3 133.5 
Net cash used by operating activities from discontinued operations (10.0)
Net cash from operating activities76.3 123.5 
Cash Flow from Investing Activities
Capital expenditures(8.4)(11.7)
Proceeds from sale of assets 1.5 
Acquisitions, net of cash acquired(66.4)(3.6)
Net cash used by investing activities from continuing operations(74.8)(13.8)
Net cash used by investing activities from discontinued operations (2.4)
Net cash used by investing activities(74.8)(16.2)
  
Cash Flow from Financing Activities  
Cash proceeds from issuance of debt with original maturities greater than 90 days550.0 365.0 
Payments on debt with maturities greater than 90 days(1,383.3)(400.3)
Net increase/(decrease) in debt with original maturities of 90 days or less1.2 (4.0)
Premiums paid on extinguishment of debt(55.9)— 
Debt issuance costs(12.5)(0.9)
Dividends paid on mandatory convertible preferred stock(4.0)(4.0)
Dividends paid on common stock(22.7)(22.7)
Common stock purchased(21.3) 
Taxes paid for withheld share-based payments(6.7)(9.4)
Net cash used by financing activities from continuing operations(955.2)(76.3)
Net cash used by financing activities from discontinued operations (1.1)
Net cash used by financing activities(955.2)(77.4)
Effect of exchange rate changes on cash9.5 5.1 
Net (decrease)/increase in cash, cash equivalents, and restricted cash from continuing operations(944.2)48.5 
Net decrease in cash, cash equivalents, and restricted cash from discontinued operations (13.5)
Net (decrease)/increase in cash, cash equivalents, and restricted cash(944.2)35.0 
Cash, cash equivalents, and restricted cash, beginning of period1,249.8 258.5 
Cash, cash equivalents, and restricted cash, end of period$305.6 $293.5 

The above financial statements should be read in conjunction with the Notes To Consolidated (Condensed) Financial Statements (Unaudited).
6

ENERGIZER HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Condensed)
(Amounts in millions, Shares in thousands - Unaudited)

Number of SharesAmount
Preferred StockCommon StockPreferred StockCommon StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive (Loss)/IncomeTreasury StockTotal Shareholders' Equity
September 30, 20202,156 68,518 $ $0.7 $859.2 $(66.2)$(307.7)$(176.9)$309.1 
Net earnings from continuing operations— — — — — 67.1 — — 67.1 
Share based payments— — — — 4.0 — — — 4.0 
Common stock purchased— (500)— — — — — (21.3)(21.3)
Activity under stock plans— 314 — — (20.6)(0.9)— 14.8 (6.7)
Deferred compensation plan— 22 — — (1.0)— — 1.0  
Dividends to common shareholders ($0.30 per share)— — — — — (21.0)— — (21.0)
Dividends to preferred shareholders ($1.875 per share)— — — — — (4.0)— — (4.0)
Other comprehensive income— — — — — — 2.4 — 2.4 
December 31, 20202,156 68,354 $ $0.7 $841.6 $(25.0)$(305.3)$(182.4)$329.6 

Number of SharesAmount
Preferred StockCommon StockPreferred StockCommon StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive (Loss)/IncomeTreasury StockTotal Shareholders' Equity
September 30, 20192,156 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, 20192,156 69,276 $ $0.7 $852.6 $149.1 $(273.1)$(141.8)$587.5 

The above financial statements should be read in conjunction with the Notes To Consolidated (Condensed) Financial Statement (Unaudited).
7

ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED (CONDENSED) FINANCIAL STATEMENTS
(In millions - Unaudited)



(1) Description of Business and Basis of Presentation
Description of Business - Energizer Holdings, Inc. and its subsidiaries (Energizer or the Company) is a global manufacturer, marketer and distributor of household batteries, specialty batteries, portable lights, and automotive appearance, performance, refrigerants and freshener products.

Batteries and lights are sold under the Energizer®, Eveready®, Rayovac® and Varta® brand names following the 2019 acquisition of Spectrum Holdings, Inc.'s (Spectrum) global battery, lighting, and portable power business (Battery Acquisition). Energizer offers batteries using lithium, alkaline, carbon zinc, nickel metal hydride, zinc air and silver oxide constructions.

Automotive appearance, performance, refrigerants and freshener products are sold under the Refresh Your Car!®, California Scents®, Driven®, Bahama & Co.®, LEXOL®, Eagle One®, Armor All®, STP®, and A/C PRO® brands following the fiscal 2019 acquisition of Spectrum's global auto care business (Auto Care Acquisition).

On January 2, 2020, the Company sold the Varta® consumer battery business in the Europe, Middle East and Africa regions, including manufacturing and distribution facilities in Germany (Divestment Business) to VARTA Aktiengesellschaft (VARTA AG) for a contractual purchase price of €180.0, subject to purchase price adjustments (Varta Divestiture). This business was acquired as part of the Battery Acquisition. Pursuant to the terms of the Battery Acquisition agreement, Spectrum also contributed cash proceeds toward this sale. Refer to Note 4, Divestment, for further discussion.

Basis of Presentation - The accompanying Consolidated (Condensed) Financial Statements include the accounts of Energizer and its subsidiaries. All significant intercompany transactions are eliminated. Energizer has no material equity method investments, variable interests or non-controlling interests.

The accompanying Consolidated (Condensed) Financial Statements have been prepared in accordance with Article 10 of Regulation S-X and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The year-end Consolidated (Condensed) Balance Sheet was derived from the audited financial statements included in Energizer's Report on Form 10-K, but does not include all disclosures required by U.S. GAAP. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair statement of our operations, financial position and cash flows
have been included. Certain reclassifications have been made to the prior year financial statements to conform to the current presentation. Operating results for any quarter are not necessarily indicative of the results for any other quarter or for the full year. These statements should be read in conjunction with the financial statements and notes thereto for Energizer for the year ended September 30, 2020 included in the Annual Report on Form 10-K dated November 17, 2020.

The operations of the Divestment Business for the three months ended December 31, 2019 have been classified as discontinued operations in the accompanying Consolidated (Condensed) Statements of Earnings and Comprehensive Income and Consolidated (Condensed) Statements of Cash Flows. Refer to Note 4, Divestment, for more information on the discontinued operations.

Recently Issued Accounting Pronouncements In March 2020, the FASB issued ASU 2020-04 Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendment provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on contracts, hedging relationships and other transactions that reference LIBOR. These updates are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company is currently evaluating our contracts and the optional expedients provided by this update.

In August 2020, the FASB issued ASU 2020-06 Changes to Accounting for Convertible Debt. This amendment simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. The FASB has reduced the number of accounting models for convertible debt and convertible preferred stock instruments and made certain disclosure amendments to improve the information provided to financial statement users. The new guidance also modifies how particular convertible instruments and certain contracts that may be settled in cash or
8

ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED (CONDENSED) FINANCIAL STATEMENTS
(In millions - Unaudited)


shares impact the diluted EPS computation. The amendment goes into effect for fiscal years starting after December 15, 2021, which for Energizer would be the beginning of fiscal year 2023. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact that this updated may have on our financial statements, however it is not expected to be material.

(2) Revenue Recognition

The Company, through its operating subsidiaries, is one of the world’s largest manufacturers, marketers and distributors of household batteries, specialty batteries and lighting products, and a leading designer and marketer of automotive fragrance, appearance, performance and air conditioning recharge products. We distribute our products to consumers through numerous retail locations worldwide, including mass merchandisers and warehouse clubs, food, drug and convenience stores, electronics specialty stores and department stores, hardware and automotive centers, e-commerce and military stores. We sell to our customers through a combination of a direct sales force and exclusive and non-exclusive third-party distributors and wholesalers.

The Company’s revenue is primarily generated from the sale of finished product to customers. Sales predominantly contain a single delivery element, or performance obligation, and revenue is recognized at a single point in time when title, ownership and risk of loss pass to the customer. This typically occurs when finished goods are delivered to the customer or when finished goods are picked up by a customer or customer’s carrier, depending on contract terms.

Supplemental product and market information is presented below for revenues from external customers for the quarters ended December 31, 2020 and 2019:
 For the Quarter Ended December 31,
Net Sales20202019
Batteries$706.1 $621.9 
Auto Care101.8 78.7 
Lights, Licensing and Other40.7 36.2 
Total Net Sales$848.6 $736.8 

 For the Quarter Ended December 31,
 20202019
Net Sales
North America$516.9 $453.7 
Latin America69.7 60.8 
     Americas586.6 514.5 
Modern Markets174.6 142.8 
Developing Markets56.9 51.2 
Distributors Markets30.5 28.3 
     International262.0 222.3 
 Total Net Sales$848.6 $736.8 

(3) Acquisitions

Formulations Acquisition - During the first quarter of fiscal 2021, the Company entered into an agreement with Green Global Holdings, LLC to acquire a North Carolina-based company that specializes in developing formulations for cleaning tasks (Formulations Acquisition). On December 1, 2020 the acquisition was completed for a cash purchase price of $51.2, subject to post-closing working capital adjustments. The product formulations are both sold to customers directly and licensed to manufacturers. This acquisition will bring significant innovation capabilities in formulations to our organization.
9

ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED (CONDENSED) FINANCIAL STATEMENTS
(In millions - Unaudited)



The acquisition is being accounted for as a business combination using the acquisition method of accounting which requires assets acquired and liabilities assumed to be recognized at fair value as of the acquisition date. The preliminary fair value of proprietary technology acquired and customer relationships were determined by applying the multi-period excess earnings method under the income approach.

The following table outlines the preliminary purchase price allocation as of the date of acquisition:
Trade receivables$1.8 
Inventories0.1 
Goodwill29.2 
Other intangible assets, net20.5 
Operating lease assets0.5 
Accounts payable(0.2)
Current operating lease liabilities(0.2)
Other current liabilities(0.2)
Operating lease liabilities(0.3)
Net assets acquired$51.2 

The table below identifies the initial estimate for purchased intangible assets of $20.5:
TotalWeighted Average Useful Lives
Proprietary technology$19.5 7
Customer relationships1.0 15
Total Other intangible assets, net$20.5 

The Company will continue to review its allocation of fair value to assets acquired and liabilities assumed for this acquisition, including income tax considerations. The goodwill acquired in this acquisition is attributable to the value the Company expects to achieve from the significant innovation capabilities in formulations that the acquired company will bring to our organization, as well as the workforce acquired. The goodwill has been allocated to the Americas segment. The goodwill is deductible for tax purposes.

In conjunction with the acquisition, the Company entered into incentive compensation agreements with certain key personnel. These agreements allow for potential earn out payments of up to $35.0 based on the achievement of a combination of financial and product development and commercialization performance targets and continued employment with the Company. These agreements are not considered a component of the acquisition purchase price but rather as employee compensation arrangements. There have been no amounts recognized under the agreements at December 31, 2020.

FDK Indonesia Acquisition - During fourth quarter of fiscal 2020, the Company entered into an agreement with FDK Corporation to acquire its subsidiary PT FDK Indonesia, a battery manufacturing facility (FDK Indonesia Acquisition). On October 1, 2020, the Company completed the acquisition for a contractual purchase price of $18.2. After contractual and working capital adjustments, the Company initially paid cash of $16.9 and paid $0.7 for a working capital adjustment subsequent to December 31, 2020. The acquisition of the FDK Indonesia facility increases the Company's alkaline battery production capacity and allows us to avoid future planned capital expenditures.

The FDK Indonesia Acquisition is being accounted for as a business combination using the acquisition method of accounting which requires assets acquired and liabilities assumed to be recognized at fair value as of the acquisition date. The fair value of the Property, plant and equipment were estimated using the cost approach. After determining the fair value of the real property acquired, allocation of purchase price for the acquisition resulted in no intangible assets or goodwill.

10

ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED (CONDENSED) FINANCIAL STATEMENTS
(In millions - Unaudited)


The following table outlines the purchase price allocation as of the date of acquisition:
Cash and cash equivalents$1.7 
Trade receivables4.3 
Inventories8.3 
Other current assets0.6 
Property, plant and equipment, net19.6 
Other assets0.7 
Accounts payable(10.0)
Other current liabilities(1.2)
Other liabilities(6.4)
Net assets acquired$17.6 

The Company will continue to review its allocation of fair value to assets acquired and liabilities assumed for this acquisition, including income tax considerations.

Custom Accessories Europe Acquisition - On January 31, 2020, the Company entered into a share purchase agreement to acquire Custom Accessories Europe Group International Limited (“CAE”) for $1.9 in cash. CAE is a well-established marketer of branded automotive accessories throughout the United Kingdom and Europe. CAE partners with major automotive accessory brand owners to identify and develop complimentary brand extensions supported by sourcing and distribution activities. The purchase agreement has potential earnout payments that could increase the purchase price up to $9.9 if certain financial metrics are achieved over the next three years. During the first quarter of fiscal 2021, the Company determined that it is likely the full earnout payment will be met over the next three years and increased the purchase price to $9.9. The Company has allocated the purchase price to the assets acquired and liabilities assumed, resulting in identified intangible assets for vendor relationships of approximately $8.0, which will be amortized over the three-year lives of the vendor agreements.

Pro Forma Financial Information- Pro forma results for the Formulations Acquisition, FDK Indonesia Acquisition and CAE acquisition were not considered material and, as such, are not included.

Acquisition and Integration Costs- Acquisition and integration costs incurred during fiscal year 2021 and 2020 relate to the FDK Indonesia Acquisition, Formulations Acquisition, and Spectrum Battery and Auto Care Acquisitions which occurred in fiscal year 2019.

The Company incurred pre-tax acquisition and integration costs of $18.3 for the quarter ended December 31, 2020, and $19.3 for the quarter ended December 31, 2019.

Pre-tax costs recorded in Costs of products sold were $7.7 for the quarter ended December 31, 2020 and $6.9 for the quarter ended December 31, 2019, primarily related to the facility exit and restructuring related costs, discussed in Note 5, Restructuring.

Pre-tax acquisition and integration costs recorded in SG&A were $10.4 for the quarter ended December 31, 2020 and primarily related to the integration of the Battery and Auto Care acquisitions, including costs of integrating the auto care information technology systems of the businesses, and legal fees incurred for the fiscal year 2021 acquisitions. Pre-tax acquisition and integration costs recorded in SG&A were $11.1 for the quarter ended December 31, 2019 and primarily related to the integration of the Battery and Auto Care Acquisitions, including consulting fees and costs of integrating both the battery and auto care information technology systems of the business.

For the quarters ended December 31, 2020 and 2019, the Company recorded $0.1 and $0.4, respectively, of acquisition and integration related costs in research and development.

Included in Other items, net were pre-tax expenses of $0.1 and $0.9 for the quarters ended December 31, 2020 and December 31, 2019, respectively. Other items, net for the quarter ended December 31, 2019 included a $2.2 loss
11

ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED (CONDENSED) FINANCIAL STATEMENTS
(In millions - Unaudited)


related to the hedge contract on the proceeds from the Varta Divestiture, offset by a $1.0 gain on sale of assets and $0.3 of transition services income.

(4) Divestment

As discussed in Note 1, Description of Business and Basis of Presentation, the Divestment Business was classified as discontinued operations in the accompanying Consolidated (Condensed) Statements of Earnings and Comprehensive Income.

On May 29, 2019, the Company entered into a definitive purchase agreement with VARTA AG to sell the Divestment Business for €180.0, subject to approval by the European Commission and certain purchase price adjustments. On January 2, 2020, the Company sold the business to VARTA AG. Total cash proceeds, including related hedging arrangements, net of the final working capital settlement, were $323.1 from Varta AG and Spectrum. Spectrum contributed proceeds pursuant to the terms of the Battery Acquisition agreement.

Under the definitive purchase agreement, the Company indemnified VARTA AG for certain tax liabilities that existed as of the divestment date. As previously disclosed, Spectrum has further indemnified the Company for those liabilities that arose from the tax years prior to the Company's acquisition of the Divestment Business. An indemnification asset and liability, where necessary, has been recorded to reflect these arrangements.

The following table summarizes the components of Net loss from discontinued operations in the accompanying Consolidated (Condensed) Statement of Earnings and Comprehensive Income for the quarter ended December 31, 2019.
For the Quarter Ended
December 31, 2019
Net sales$115.8 
Cost of products sold88.2 
Gross profit27.6 
Selling, general and administrative expense17.4 
Advertising and sales promotion expense0.3 
Research and development expense0.8 
Interest expense5.2 
Other items, net(3.9)
Earnings before income taxes7.8 
Income tax expense7.5 
Net earnings from discontinued operations$0.3 

Included in the Net loss from discontinued operations for the quarter ended December 31, 2019 are divestment related pre-tax costs of $1.1 and allocated pre-tax interest expense of $5.0.

12

ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED (CONDENSED) FINANCIAL STATEMENTS
(In millions - Unaudited)


(5) Restructuring

In the fourth fiscal quarter of 2019, the Company began implementing restructuring related integration plans for our manufacturing and distribution networks. These plans include the closure and combination of distribution and manufacturing facilities in order to reduce complexity and realize greater efficiencies in our manufacturing, packaging and distribution processes. All activities within this plan are expected to be completed by December 31, 2021. For this program we expect to incur additional severance and related benefit costs and other exit-related costs associated with these plans of up to approximately $27 through the end of calendar 2021.    

In the fourth fiscal quarter of 2020, the Company initiated a new restructuring program with a primary focus on reorganizing our global end-to-end supply chain network and ensuring accountability by category. This program includes streamlining the Company’s end-to-end supply chain model to enable rapid response to category specific demands and enhancing our ability to better serve our customers. Planning and execution of this program began in fiscal year 2021, with completion expected by the beginning of fiscal year 2022. The expected remaining costs associated with this project are approximately $4 to $7.

The pre-tax expense for charges related to the restructuring plans for the quarters ended December 31, 2020 and 2019 are noted in the table below and were reflected in the Consolidated (Condensed) Statement of Earnings and Comprehensive Income:
For the Quarter Ended December 31, 2020For the Quarter Ended December 31, 2019
2019 Restructuring Program
Costs of products sold
Severance and related benefit costs$0.1 $0.9 
Accelerated depreciation & asset write-offs1.4 3.4 
Other exit costs(1)
5.1 2.0 
2019 Restructuring Total$6.6 $6.3 
2020 Restructuring Program
Costs of products sold
Other restructuring related costs(2)
$0.8 $ 
Selling, general and administrate expense
Severance and related benefit costs0.3  
Other restructuring related costs(2)
2.9  
2020 Restructuring Total$4.0 $ 
Total restructuring related expense$10.6 $6.3 
(1) Includes charges primarily related to consulting, relocation, environmental investigatory and mitigation costs, and other facility exit costs.
(2) Primarily includes consulting fees for the restructuring program.

The restructuring costs noted above for the quarter ended December 31, 2020, were incurred within the Americas and International segments in the amount of $9.2 and $1.4, respectively. The restructuring costs for the quarter ended December 31, 2019 were incurred within the Americas and International segments in the amount of $5.9 and $0.4, respectively.

13

ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED (CONDENSED) FINANCIAL STATEMENTS
(In millions - Unaudited)


The following table summarizes the activity related to the 2019 restructuring program for the quarter ended December 31, 2020:
Utilized
September 30, 2020Charge to IncomeCashNon-Cash
December 31, 2020 (1)
Severance & termination related costs$5.3 $0.1 $3.4 $ $2.0 
Accelerated depreciation & asset write-offs 1.4  1.4  
Other exit costs2.9 5.1 5.3  2.7 
   Total$8.2 $6.6 $8.7 $1.4 $4.7 
(1) At December 31, 2020, the restructuring reserve is recorded on the Consolidated (Condensed) Balance Sheet in Other current liabilities of $4.7.

The following table summarizes the activity related to the 2020 restructuring program for the quarter ended December 31, 2020:
Utilized
September 30, 2020Charge to IncomeCashNon-Cash
December 31, 2020 (1)
Severance & termination related costs$0.4 $0.3 $ $ $0.7 
Other restructuring related costs0.8 3.7 3.3  $1.2 
   Total$1.2 $4.0 $3.3 $ $1.9 
(1) At December 31, 2020, the restructuring reserve is recorded on the Consolidated (Condensed) Balance Sheet in Other current liabilities of $1.9.

The following table summarizes the activity related to the 2019 restructuring program for the quarter ended December 31, 2019:
Utilized
September 30, 2019Charge to IncomeCashNon-CashDecember 31, 2019
Severance & termination related costs$9.8 $0.9 $ $ $10.7 
Accelerated depreciation & asset write-offs 3.4  3.4  
Other exit costs 2.0 1.3  0.7 
   Total$9.8 $6.3 $1.3 $3.4 $11.4 
14

ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED (CONDENSED) FINANCIAL STATEMENTS
(In millions - Unaudited)


(6) Share-Based Payments

Total compensation cost for Energizer’s share-based compensation arrangements was $4.0 and $7.2 for the quarters ended December 31, 2020 and 2019, respectively, and was recorded in SG&A expense.

Restricted Stock Equivalents (RSE)—(in whole dollars and total shares)

In November 2020, the Company granted RSE awards to a group of key employees of approximately 120,000 shares that vest ratably over four years and granted RSE awards to a group of key executives of approximately 71,000 shares that vest on the third anniversary of the date of grant. In addition, the Company granted approximately 272,000 performance shares to a group of key employees and key executives that will vest subject to meeting target amounts for both cumulative adjusted earnings per share and cumulative free cash flow as a percentage of sales over the three year performance period. These performance measures are equally weighted in determining the final share award with the maximum award payout of approximately 544,000 shares. The closing stock price on the date of the grant used to determine the award fair value was $42.98.

In November 2019, the Company granted RSE awards to a group of key employees of approximately 134,000 shares that vest ratably over four years and granted RSE awards to a group of key executives of approximately 81,000 shares that vest on the third anniversary of the date of grant. In addition, the Company granted approximately 306,000 performance shares to a group of key employees and key executives that will vest subject to meeting target amounts for both cumulative adjusted earnings per share and cumulative free cash flow as a percentage of sales over the three year performance period. These performance measures are equally weighted in determining the final share award with the maximum award payout of approximately 612,000 shares. The closing stock price on the date of the grant used to determine the award fair value was $43.10.

In November 2018, the Company granted RSE awards to a group of key employees of approximately 73,000 shares that vest ratably over four years and granted RSE awards to a group of key executives of approximately 55,000 shares that vest on the third anniversary of the date of grant. In addition, the Company granted approximately 190,000 performance shares to a group of key employees and key executives that will vest subject to meeting target amounts for both cumulative adjusted earnings per share and cumulative free cash flow as a percentage of sales over the three year performance period. These performance measures are equally weighted in determining the final share award with the maximum award payout of approximately 380,000 shares. The closing stock price on the date of the grant used to determine the award fair value was $60.25.

In November 2017, the Company granted RSE awards to a group of key employees of approximately 100,000 shares that vest ratably over four years. The closing stock price on the date of the grant used to determine the award fair value was $44.20.

(7) Earnings per share

Basic earnings per share is based on the average number of common shares outstanding during the period. Diluted earnings per share is based on the average number of shares used for the basic earnings per share calculation, adjusted for the dilutive effect of restricted stock equivalents, performance share awards and deferred compensation equity plans. Common shares issuable upon conversion of the MCPS are included in the calculation of diluted earnings per share using the if-converted method and are only included if the conversion would be further dilutive to the calculation.

The following table sets forth the computation of basic and diluted earnings per share for the quarters ended December 31, 2020 and 2019:
15

ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED (CONDENSED) FINANCIAL STATEMENTS
(In millions - Unaudited)


(in millions, except per share data)For the Three Months Ended December 31,
Basic earnings per share20202019
Net earnings from continuing operations$67.1 $45.8 
Mandatory preferred stock dividends(4.0)(4.0)
Net earnings from continuing operations attributable to common shareholders63.1 41.8 
Net earnings from discontinued operations, net of tax 0.3 
Net earnings attributable to common shareholders$63.1 $42.1 
Weighted average common shares outstanding - Basic68.5 69.1 
Basic net earnings per common share from continuing operations$0.92 $0.60 
Basic net earnings per common share from discontinued operations 0.01 
Basic net earnings per common share$0.92 $0.61 
Diluted earnings per share
Weighted average common shares outstanding - Basic68.5 69.1 
Dilutive effect of restricted stock equivalents0.1 0.2 
Dilutive effect of performance shares0.1 0.7 
Dilutive effect of stock based deferred compensation plan0.1 0.2 
Dilutive effect of MCPS4.7  
Weighted average common shares outstanding - Diluted73.5 70.2 
Diluted net earnings per common share from continuing operations$0.91 $0.60 
Diluted net earnings per common share from discontinued operations  
Diluted net earnings per common share$0.91 $0.60 

For the quarters ended December 31, 2020 and 2019, 0.5 million and 0.1 million restricted stock equivalents, respectively, were anti-dilutive and not included in the diluted net earnings per share calculation.

Performance based restricted stock equivalents of 1.5 million and 0.9 million were excluded for the quarters ended December 31, 2020 and 2019, respectively, as they were anti-dilutive or the performance targets for those shares have not been achieved as of the end of the applicable period.

For the quarter ended December 31, 2020, the diluted net earnings per common share is assuming the conversion of the mandatory convertible preferred stock to 4.7 million of common stock, and excluding the mandatory preferred stock dividends from net earnings. For the quarter ended December 31, 2019, the conversion is considered not dilutive and the mandatory preferred stock dividends are included in the dilution calculation.

(8) Segments

Operations for Energizer are managed via two major geographic reportable segments: Americas and International. Segment performance is evaluated based on segment operating profit, exclusive of general corporate expenses, share-based compensation costs, acquisition and integration activities, amortization costs, research & development costs and other items determined to be corporate in nature. Financial items, such as interest income and expense and loss on extinguishment of debt are managed on a global basis at the corporate level. The exclusion of substantially all acquisition and integration costs from segment results reflects management’s view on how it evaluates segment performance.

Energizer’s operating model includes a combination of standalone and shared business functions between the geographic segments, varying by country and region of the world. Shared functions include, but are not limited to,
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ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED (CONDENSED) FINANCIAL STATEMENTS
(In millions - Unaudited)


IT, procurement and finance. Energizer applies a fully allocated cost basis, in which shared business functions are allocated between segments. Such allocations are estimates, and do not represent the costs of such services if performed on a standalone basis.

Segment sales and profitability for the quarters ended December 31, 2020 and 2019, respectively, are presented below:
 For the Quarter Ended December 31,
 20202019
Net Sales 
Americas$586.6 $514.5 
International262.0 222.3 
Total net sales$848.6 $736.8 
Segment Profit 
Americas$155.9 $129.2 
International59.8 52.2 
Total segment profit$215.7 $181.4 
    General corporate and other expenses (1) (24.0)(24.9)
    Global marketing expense (2)(9.4)(6.1)
    Research and development expense - Adjusted (3)(7.5)(8.5)
    Amortization of intangible assets(15.5)(13.8)
    Acquisition and integration costs (4)(18.3)(19.3)
Interest expense(47.3)(46.8)
Loss on extinguishment of debt(5.7)(4.2)
Other items, net - Adjusted (5)(0.7)0.9 
Total earnings before income taxes$87.3 $58.7 
(1) Included in SG&A in the Consolidated (Condensed) Statement of Earnings and Comprehensive Income.
(2) Global marketing expense for the quarters ended December 31, 2020 and 2019 includes $4.9 and $2.9 recorded in SG&A, respectively, and $4.5 and $3.2 recorded in Advertising and sales promotion expense, respectively, in the Consolidated (Condensed) Statement of Earnings and Comprehensive Income.
(3) Research and development expense for the quarters ended December 31, 2020 and 2019 includes $0.1 and $0.4, respectively, of acquisition and integration costs which have been reclassified for purposes of the reconciliation above.
(4) Acquisition and integration costs were included in the following lines in the Consolidated (Condensed) Statement of Earnings and Comprehensive Income:
For the Quarter Ended December 31,
20202019
Cost of products sold$7.7 $6.9 
Selling, general and administrative expense10.4 11.1 
Research and development expense0.1 0.4 
Other items, net0.1 0.9 
Total acquisition and integration costs$18.3 $19.3 
(5)    Other items, net for the quarters ended December 31, 2020 and 2019 on the Consolidated (Condensed) Statement of Earnings and Comprehensive Income included acquisition related costs of $