Highlights From ENR's Q4 Conference Call: Strong Global Presence, But Uncertain Outlook


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November 3, 2009 2:58 PM EST

Energizer Holdings Inc. (NYSE: ENR) reports Q4 EPS of $0.98, versus the analyst estimate of $1.16. Revenue for the quarter was $1.08 billion, which compares to the estimate of $1.06 billion. Shares are down 9% today.

Highlights From ENR's Q4 Conference Call:


  • Sees FY10 low double digit growth in net ex-items.
  • (CEO) We're quite global in our footprint with operations in 50 countries that is our own operations on the ground in 50 countries and basically selling to the rest of the world from that footprint.
  • We're number one in batteries both in the United States and globally. We are number two in razors and blades both in the United States and globally.
  • We are number one in the US shave prep market now through the acquisition of Edge.
  • We are number two in the tampon market, plastic tampons is really where we focus and where we stay, very good business. Number one in infant care in the United States and with Banana Boat and Hawaiian Tropic we are the number one Sun care business in the United States.
  • There's an opportunity for trade up in performance from carbon, zinc chemistry to alkaline chemistry and now from alkaline chemistry to the lithium chemistry it is a category, that is global in nature and where innovation though infrequent when it happens such as our lithium batteries is important.
  • Competition, basically there's two competitors globally in the battery business ourselves and Proctor and Gamble (NYSE: PG) with the Duracell brand. A fairly rational competitive set on a global stage. In the US these brands account for over 70% of the market price.
  • The category trends historically have been growth rates of three, four, 5% that has gotten more difficult in the past 18 months we were seeing negative trends in global battery of about two, three, 4%.
  • We are seeing the negativity of that trend moderate a little bit, and are currently tracking on a global basis in the markets we compete and this would be a 31 market sample, 31 country sample of around 1 point -- -1.4%.
  • Right here you see market shares of what we call premium brands in United States and all other again the premium brands basically being Energizer and Duracell when you add them up are a little over 70% of the US battery market. All other would be Rayovac, Panasonic, Sony our own Eveready, carbon, zinc, private label and all other.
  • There's a new trade up opportunity that we've been exploiting the past 10 years and that is going from alkaline to lithium. And you see in the upper right hand corner here AA, AAA lithium products.
  • We are building our second lithium battery production facility, actually we will be opening that up here in the next two to three months. Even in these tough times, our lithium business has been growing 17 or 18%. Batteries is a nice category.
  • In Argentina where we're 61% of the battery market. In Greece 44, Singapore 72, Australia, 62, we virtually are everywhere.
  • Inventing lithium batteries, we're the ones who have done that, and this year, kind of a small item, but I have in the lower right hand corner is a zinc air prismatic battery that we're currently producing and working with original equipment manufacturers.
  • This is a battery solution that basically has three times the energy density of lithium ion and provides a primary battery solution for devices that don't want to invest in and have to charge for a rechargeable system within the device. So we're working with OEMs right now and some retailers to see if we can get this puppy off the road. But again, just an example of the kind of innovation that we're working on, on the household side.
  • In the first five weeks of our fiscal year as currencies moved as the U.S. dollar strengthened in that flight to quality, if you recall back in September, October, we basically had a $140 million hole open-up on our budget in the first five weeks of our year.
  • We have had the price, we took three rounds of price increases really over the past 2, 2.5 years; those have held. I'm not sure we can expect to get some additional future price increases in the near term given how stressed consumers are.
  • The household battery and flashlight business was growing top line at around 6% and from a bottom line point of view, some pretty good growth and fairly stable margins in that 18 to 20% range.
  • Again these are categories where in the razor and blade business we're as I've said earlier number two. These have shown some pretty good dynamic dollar growth trends over time of 3% on systems and even more so on disposables in women's. It is a global business, this gives you again a view of where we are globally with razors and blades and a few of our market share positions.
  • The recent acquisition of Edge is a natural fit with our razor and blade business, a compelling acquisition both strategically and economically and Dan will take you through the economics in a moment.
  • Moving on to skin care, the sun care category has been growing nearly 7% over the last three years. The long-term growth trend of five to 7% is real.
  • We have international expansion opportunities with sun care. Again our international sales of our sun care business has grown 17% since we've acquired Playtex.
  • The June quarter sales for sun care actually were up 6% despite the category. Year-to-date sales up three and then as part of our skin care line we have a small product called Wet Ones. Wet Ones is a nice little niche, we own 67% of that particular sub-category. And it is growing in excess of 20% right now with the fear of the flu season upon us.
  • Moving to Infant Care finally, this is probably the business I know least about when we acquired Playtex, weren't quite sure how it fit in our portfolio. The longer we've held Playtex, and the longer we've been in Infant Care the more I like it. It's been showing 3% category growth rate.
  • Our personal care business in 2004 has gone from $868 million to over $1.9 billion last fiscal year. Our top line CAGR for our personal care of business over that timeframe is 21% per year.
  • (CFO) A&P year-over-year, as you can see through both businesses is $55 million favorable which obviously means lower spending which is not necessarily a good thing long-term with the innovation plans in the brands that we have. Our R&D and overheads are also lower by about 11 million.
  • We initially went out with 9.5 million shares offered the green shoe was executed so our final share issuance was about 10.9 million shares at $49 a share. We had 32 million of offers, so it was three times oversubscribed and I think our feeling is that that this share issuance itself was successfully executed.
  • 443 million is the cash on the balance sheet at the end of June it's our highest level ever. We had a $180 million increase in U.S. cash during the quarter.
  • Capital structure wise, our debt-to-EBITDA, our hard and fast covenant limit is four times but above 3.5 we have to pay an interest penalty. We also are not allowed to be above 3.5 for five consecutive quarters.
  • We have 2.9 billion of debt, 2.4 billion of that is fixed rate debt and overall the blend of our fixed and floating rate is under 5%, which we feel is very advantageous. Our compliance reported debt does not include the $200 million in June that we have in our asset securitization.
  • The net acquisition price was around 217 million. The basis for the valuation, $150 million of net sales and 25 to 30 million of EBITDA.