Close

Form 8-K ENERGIZER HOLDINGS, INC. For: May 18

May 18, 2018 6:37 AM EDT



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K


CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 18, 2018

enrlogoa07.jpg

Energizer Holdings, Inc.
(Exact name of registrant as specified in its charter)
Missouri
(State or other jurisdiction of incorporation)
1-36837
(Commission File Number)
36-4802442
(IRS Employer
Identification Number)
533 Maryville University Drive
St. Louis, Missouri 63141
(Address of principal executive offices)
Registrant’s telephone number, including area code: (314) 985-2000

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))



Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company o

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.







Item 7.01    Regulation FD Disclosure.
Attached hereto as Exhibit 99.1, which is incorporated herein by reference, is a copy of certain slides that are expected to be used by Energizer Holdings, Inc. (the “Company”) in discussions with certain investors.
The information is being furnished pursuant to Item 7.01 of this report and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, or otherwise subject to liabilities of that section and will not be incorporated by reference into any registration statement filed by the Company, under the Securities Act of 1933, as amended unless specifically identifies as being incorporated therein by reference. This Report will not be deemed an admission as to the materiality of any information in this Report that is being disclosed pursuant to Regulation FD.
Please refer to page 2 of Exhibit 99.1 for a discussion of certain forward-looking statements included therein and the risks and uncertainties related hereto.
Item 9.01    Financial Statements and Exhibits.
(d) Exhibits
Exhibit
Number
Description of Exhibit
Presentation Slides, dated May 18, 2018.




















SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
ENERGIZER HOLDINGS, INC.
By:  /s/ Timothy W. Gorman    
Timothy W. Gorman
Executive Vice President and Chief Financial Officer
Dated: May 18, 2018



Exhibit 99.1 Investor Presentation May 18th, 2018


 
Safe Harbor Statements Forward-Looking Statements Unless the context otherwise requires, references in this presentation to “Energizer,” “we,” “our,” and the “Company” refer to Energizer Holdings, Inc., and its subsidiaries. This presentation contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements about the expected benefits of the proposed acquisition of the battery and portable lighting business of Spectrum Brands Holdings, Inc. (the “transaction”), including, without limitation, future business, financial and operating results, the manner in which the proposed transaction is expected to be financed, and the anticipated timing of the completion of the proposed transaction. These forward-looking statements generally are identified by the words “will,” “opportunity,” “offers,” “expected,” “intends,” “anticipated” and similar words and expressions. Any statements that are not statements of historical fact should be considered to be forward-looking statements. Any such forward-looking statements are made based on information currently known and are subject to various risks and uncertainties. Risks and uncertainties to which these forward-looking statements are subject include, without limitation: (1) the proposed transaction may not be completed on the anticipated terms and timing or at all, (2) required regulatory approvals, including antitrust approvals, are not obtained, or that in order to obtain such regulatory approvals, conditions are imposed that adversely affect the anticipated benefits from the proposed transaction or cause the parties to abandon the proposed transaction, (3) a condition to closing of the proposed transaction may not be satisfied, (4) potential adverse reactions or changes to business relationships resulting from the announcement or completion of the transactions, (5) the ability to obtain or consummate financing or refinancing related to the transaction upon acceptable terms or at all, (6) risks associated with third party contracts containing consent and/or other provisions that may be triggered by the proposed transaction, (7) negative effects of the announcement or the consummation of the transaction on the market price of Energizer’s common stock, (8) the potential impact of unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, synergies, economic performance, indebtedness, financial condition and losses on the future prospects, business and management strategies for the management, expansion and growth of Energizer’s operations after the consummation of the transaction and on the other conditions to the completion of the proposed transaction, (9) the risks and costs associated with, and the ability of Energizer to, integrate the businesses successfully and to achieve anticipated synergies, (10) the risk that disruptions from the proposed transaction will harm Energizer’s business, including current plans and operations, (11) risks related to changes and developments in external competitive market factors, such as introduction of new product features or technological developments, development of new competitors or competitive brands or competitive promotional activity or spending, (12) the ability of Energizer to retain and hire key personnel, (13) adverse legal and regulatory developments or determinations or adverse changes in, or interpretations of, U.S. or other foreign laws, rules or regulations, including tax laws, rules and regulations, that could delay or prevent completion of the proposed transactions or cause the terms of the proposed transactions to be modified, and (14) management’s response to any of the aforementioned factors. For additional information concerning factors that could cause actual results and events to differ materially from those projected herein, please refer to Energizer’s most recent 10-K, 10-Q and 8-K reports. Readers should not to rely on any forward-looking statements. Energizer does not assume any obligation to publicly provide revisions or updates to any forward-looking statements, whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws. This presentation does not constitute an offer to sell or the solicitation of an offer to buy any security and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offering, solicitation or sale would be unlawful. 2


 
Safe Harbor Statements (cont’d) Non-GAAP Financial Measures While the Company reports financial results in accordance with accounting principles generally accepted in the U.S. (“GAAP”), this presentation includes non- GAAP measures, including, without limitation, Adjusted Gross Margin, Free Cash Flow, Adjusted Free Cash Flow, EBITDA, Adjusted EBITDA, and Pro Forma Adjusted EBITDA and ratios derived therefrom. We believe these non-GAAP measures provide a meaningful comparison to the corresponding historical or future period, assist investors in performing their analysis, and provide investors with visibility into the underlying financial performance of the Company’s business. The Company believes that these non-GAAP measures are presented in such a way as to allow investors to more clearly understand the nature and amount of the adjustments to arrive at the non-GAAP measure. Investors should consider non-GAAP measures in addition to, not as a substitute for, or superior to, the comparable GAAP measures. Additionally, these non-GAAP measures may differ from similarly titled measures presented by other companies. A reconciliation of these non-GAAP measures to the nearest comparable GAAP measure is available at the end of this presentation. We are unable to provide a reconciliation to FY18E adjusted gross margin or adjusted free cash flow as we are uncertain as to the timing of when acquisition and integration costs will be incurred. We are unable to provide a reconciliation of free cash flow, a non-GAAP measure, of the acquired business due to the carve-out nature of the proposed transaction. Market and Industry Data This presentation includes industry and trade association data, forecasts and information that were prepared based, in part, upon data, forecasts and information obtained from independent trade associations, industry publications and surveys and other independent sources available to the Company. These third-party publications and surveys generally state that the information included therein has been obtained from sources believed to be reliable, but that the publications and surveys can give no assurance as to the accuracy or completeness of such information. Energizer has not independently verified any of the data from third-party sources nor has it ascertained the underlying economic assumptions on which such data are based. Presentation of Financial Information The pro forma financial information set forth herein has not been prepared in accordance with Article 11 of Regulation S-X, but rather represents a simple combination of Energizer’s and Spectrum Brands’ Battery and Portable Lighting Business (“Spectrum Batteries”) results. Pro forma financial information pursuant to Article 11 could differ materially from the combined information set forth herein. The pro forma financial information also gives effect to estimated synergies from the acquisition. Such adjustment is presented because the bridge credit agreement and the indenture governing the notes are expected to permit such an adjustment, and to permit investors to understand the calculation of EBITDA under the covenants in such agreements. It should not be viewed as a projection of actual results in any period. In particular, investors should understand that the Company expects to incur substantial cash expenditures (in excess of the anticipated annual synergies) to realize such synergies, and such expenditures are not taken into account in presenting EBITDA. In addition, the Company does not expect to fully realize the synergies for several years. The actual amount of synergies that the Company ultimately realizes, and the costs of implementation, could differ materially from the estimates set forth herein. 3


 
Agenda I. Transaction Overview II. Energizer Holdings Update III. Acquisition Rationale IV. Key Credit Highlights V. Financial Overview VI. Appendix 4


 
Executive Summary  On January 16, 2018, Energizer Holdings, Inc. (“Energizer” or the “Company”) announced it had entered into a definitive agreement to acquire the Global Battery and Portable Lighting Business (“Spectrum Batteries”) of Spectrum Brands Holdings, Inc. for a purchase price of $2.0bn in cash (the “Transaction”)  Situation Transaction is subject to customary closing conditions, including regulatory approvals Backdrop  Energizer has received US HSR approval but is still pending antitrust approval in several international jurisdictions  Expected to close prior to the end of CY18  Energizer obtained $2,760mm in committed financing to support the Transaction  Permanent financing for the acquisition is expected to be comprised of approximately:  $400mm Revolving Credit Facility  $200mm Term Loan A  $1,150mm Term Loan B  $350mm USD-denominated Senior Notes Financing Overview  $750mm equivalent EUR-denominated Senior Notes issued by a European subsidiary  Existing Energizer Credit Facilities will be refinanced, while the existing 5.50% Senior Notes due 2025 will remain outstanding  Pro forma for the transaction, First Lien Leverage and Total Leverage are expected to be 2.2x and 4.9x, respectively, based on LTM Q2 FY18 Pro Forma Adj. EBITDA of $622mm (1) 1. Pro Forma Adjusted EBITDA includes $90mm of run-rate synergies, the mid-point of our $80 to $100mm of expected run rate synergies. Refer to Appendix for reconciliation of Pro Forma LTM Adjusted EBITDA. 5


 
Acquisition Overview  Spectrum Batteries produces and markets globally a diversified range of products including alkaline, carbon zinc, hearing aid, watch & electronic, photo and nickel metal hydride rechargeable batteries as well as battery chargers and portable lighting products  Spectrum Portfolio is anchored by the Varta and Rayovac brands, which add strong positions in complementary Batteries at a geographies in Europe and Latin America  Glance Portfolio also includes various household and specialty batteries, including hearing aid batteries, as well as handheld flashlights and external power sources for electronic devices  Spectrum Batteries generated Net Sales and Adjusted EBITDA of $878mm and $159mm, respectively, in LTM Q2 2018 (1)  We believe the combination unites product portfolios that are highly complementary in nature and creates a broader portfolio of well-known global battery brands that will enhance Energizer’s presence in current markets and expand its reach into both new international markets and attractive channels  Furthermore, we believe the combination provides a compelling set of strategic opportunities that will benefit consumers, including: Strategic  Expanding international presence Rationale  Broadening brand portfolio and manufacturing capabilities  Accelerating product innovation capabilities  Strengthening position in growing hearing aid channels such as audiologists  Driving cost efficiencies, with $80mm - $100mm in run-rate synergies expected by the third year, excluding one- time costs to achieve  Generating significant incremental cash flow that will position Energizer for future growth  LTM Q2 2018 Proforma Net Sales: ~$2.7bn  (2) Financial LTM Q2 2018 Proforma Adjusted EBITDA: $622mm Information  Standalone Energizer LTM Q2 2018 Free Cash Flow: $213mm (3)  Spectrum Batteries expected to generate additional Free Cash Flow in excess of $100mm per year (4) 1. Please see Appendix for a reconciliation to GAAP figures. 2. Pro Forma Adjusted EBITDA includes $90mm of run-rate synergies, the mid-point of our $80 to $100mm of expected run rate synergies. Refer to Appendix for reconciliation of Pro Forma LTM Adjusted EBITDA. 3. Free cash flow defined as cash flow from operating activities, less capital expenditures, net of proceeds from asset sales. Please see Appendix for a reconciliation to GAAP figures. 4. Includes $80-100mm run-rate synergies. 6


 
Pro Forma Structure Borrower / USD Notes Issuer Public EUR Notes Issuer Shareholders Guarantor (1) Non-Guarantor  $400mm New Revolving Credit Facility  $200mm New Term Loan A Energizer  $1,150mm New Term Loan B Holdings, Inc.  $350mm New USD-denominated Senior Notes  $600mm Existing 5.50% Senior Notes due 2025 Foreign Dutch Entity U.S. Subsidiaries  $750mm equivalent New EUR- Subsidiaries (Non-Guarantor) denominated Senior Notes 1. Guarantors of Euro notes to be determined. 7


 
Agenda I. Transaction Overview II. Energizer Holdings Update III. Acquisition Rationale IV. Key Credit Highlights V. Financial Overview VI. Appendix 8


 
Energizer At a Glance Key Financials Brand & Product Overview Key Brands Product Breakdown 100% $1,756mm $389mm Batteries & Auto 12% Lights 11% 75% FY17 Revenue FY17 Adj. EBITDA (1) Premium 50% 77% 25% 3.7% 21.4% 0% Value FY15-17 Average Adj. FY17A % of Net Sales FY15-17 Sales CAGR (1) Household EBITDA Margin Specialty Lights, Auto & Other Free Cash Flow Dynamics (2) Business Highlights ($ in millions) 29 years of Presence in $199 Success with 140 Markets $167 Energizer Bunny Globally (3) $135 Campaign 7.2% Organic ~22% Online Revenue Growth Share with 57% During FY17 Growth (4) Holiday Season FY15 FY16 FY17 1. Please see Appendix for a reconciliation to GAAP figures. 2. Free cash flow defined as cash flow from operating activities, less capital expenditures, net of proceeds from asset sales. Please see Appendix for a reconciliation to GAAP figures. 3. In the U.S. and other markets. 4. 1010data –3 months ending February 2018. 9


 
Since Separation, We Have Created Value by Effectively Executing Our Strategies A foundation for delivering long-term value to our shareholders, customers and consumers Leading with Innovation Is Key to Our Success  Energizer Bunny is now Bigger, Better & Bunnier with innovation across all battery segments, including the recently launched longest-lasting Energizer Max battery  New products and upgrades across all lighting segments  Continued commitment to advance product performance and consumer experiences Continuous Improvements Drive Productivity Gains  Successful implementation of portfolio optimization, making Ultimate Lithium battery, the world’s longest-lasting AA battery, Focus on more available and accessible Maximizing  Accelerating eCommerce sales Cash Flows  Enhancement of supply chain operation, including optimizing manufacturing footprint, streamlining business processes  Working capital improvement by reduction of inventory levels Effectively Executing Financial Fundamentals  Net sales up +7.4% in FY17, with organic growth of +3.7%  Free Cash Flow growth of +19.5% in FY17 (1)  Value share up 0.2 points and volume sales up 2.7% for latest 52 weeks (2)  Online branded leader with 22% share and growth of 57% in the latest quarter(3) 1. Free cash flow defined as cash flow from operating activities, less capital expenditures, net of proceeds from asset sales. Please see Appendix for a reconciliation to GAAP figures. 2. Nielsen Global Track - 52 weeks ending February 2018 (Global Monthly Markets). 3. 1010data – 3 months ending February 2018. 10


 
Energizer Drives Productivity by Focusing on a Balanced Approach to Capital Allocation Relentless focus on delivering value to Deliver Value shareholders, customers and consumers Selective, Reinvest in Return of Disciplined Pillars to our success Our Business Capital M&A Maximize Free Cash Flow Our foundation 11


 
Performance Demonstrates Successful Strategic Execution Gross Margin Initiatives Initiatives to Maximize Free Cash Flow FY17 Saw Consistent Record of Adjusted Gross Margin  Increased focus on SKUs that drive the most volume and Expansion (1) profitability both domestically and internationally Q1 FY17 +290 bps  Portfolio optimization facilitates forecast accuracy, increases supply chain efficiencies and improves working capital Q2 FY17 +390 bps  Revenue management refinement through pricing Q3 FY17 +10 bps architecture, trade spending ROI, and mix optimization Q4 FY17 +80 bps Over +200 bps of Adjusted Gross Margin Achieved Free Cash Flow of $199mm in FY17 (2) Improvement in FY17  Energizer’s FY18E adjusted gross margin is expected to  Continuous improvement expected to drive Energizer’s improve up to 25 bps as a result of continued productivity FY18E Adjusted Free Cash Flow to approximately $240mm initiatives to $250mm (3) FY18 Year to Date (through Q2) Performance Update  YTD organic sales growth of 1.4%  Favorable pricing across several markets increased net sales by 1.8%  Investments made in our portfolio in the back half of fiscal 2017 benefited organic sales by 0.8%  Partially offsetting the above increases in organic sales were merchandising changes at a US retailer 0.1%, lapping storm volume from the prior fiscal year of 0.6%, and the divesture of the non-core promotional business negatively impacted sale by 0.7%  YTD Lithium sales growth of 44% and unit growth of 68% for Total Segments – YTD Lithium sales growth of 60% for Total Americas (4)  $153M of Adjusted FCF in first 6 months or +11% versus prior year driven by improvements in working capital (5) 1. Adjusted gross margin excludes Impact of restructuring, spin and acquisition integration costs. Please see Appendix for a reconciliation to GAAP figures. 2. Free cash flow defined as cash flow from operating activities, less capital expenditures, net of proceeds from asset sales. Please see Appendix for a reconciliation to GAAP figures. 3. Adjusted free cash flow defined as free cash flow excluding costs for Spectrum acquisition. 4. Energizer internal financials. 12 5. Please see Appendix for reconciliation to GAAP figures.


 
Successful Track Record of Driving Cost Reductions and Efficiency 2013 Restructuring Project Manufacturing Highlights  Other Energizer has focused on cutting costs and maximizing 16% utilization FY09 FY17 % Δ SG&A 18% Manufacturing Plants 16 9 (44%) COGS 66% Packaging Facilities 4 1 (75%) $218mm+ Run-Rate Savings Achieved Distribution Centers 41 25 (39%) Pro Forma Battery Manufacturing Footprint (1) 1. After transaction close. 13


 
Energizer Growing in eCommerce Online Penetration (1) E-Commerce Strategy Going Forward  Energizer is the leading U.S. Online Battery  Accelerate E-Commerce sales globally via branded manufacturer in the Sales marketplace platforms and with brick and mortar U.S. online battery market omni-channel partners ENR  Energizer captured ~22% of 22%  Build, Buy and Borrow talent and partnerships to eCommerce sales in the Other expand dynamic capabilities 78% U.S., with 57% growth in the  Redefine the organization to win in the digital latest 3 month period economy eCommerce Value Performance (2) Energizer Value Sales ($MM) Energizer Value Share +117% vs 2YA 19.3 $47.5 $31.1 17.0 $21.9 16.0 2015 2016 2017 2015 2016 2017 1. 1010data - 3 months ending February 2018. 2. 1010data – Values Sales and Value Share, All Merchants; yearly sales through December 2017. 14


 
Agenda I. Transaction Overview II. Energizer Holdings Update III. Acquisition Rationale IV. Key Credit Highlights V. Financial Overview VI. Appendix 15


 
Strategic Merits of the Transaction Meets Energizer’s Disciplined Overlapping business model allows Energizer to Acquisition Criteria leverage its core competencies Benefits from Complementary Expanded brands and product portfolio to meet more Businesses customer and consumer needs Increases Presence Energizer will benefit from presence in higher growth in International Markets Latin America and enhanced scale in Europe Enhances R&D Capabilities Accelerates innovation and enables the introduction of and Resources more World’s First products Leverage existing asset base and eliminate Creates Operational Benefits redundancies to address rising costs to compete in category Enhances Ability To Compete in Brands and products to compete in growing channels Growing Channels like eCommerce 16


 
Spectrum Batteries Meets Energizer’s Disciplined Acquisition Criteria  Branded household products  Defensible business models due to brand, technology and distribution  Leverage Energizer’s core competencies  Similar financial profile  Complementary customer, channel and geographic overlap  Leverage existing global battery platform and integrated supply chain  Ability to derive synergies through scale, operations or enhanced distribution 17


 
Spectrum Batteries At a Glance Key Financials (1) Brand & Product Overview (1) Key Brands Product Breakdown $866mm $168mm 100% 8% Domestic 23% 75% FY2017 Revenue FY17 Adj. EBITDA (2) 50% 69% 25% 2.2% 19.3% International FY15-17 Average Adj. 0% FY15-17 Sales CAGR FY17A % of Net Sales EBITDA Margin (2) Household Specialty Lights, Auto & Other Adjusted EBITDA Less Capex (1,2) Business Highlights ($ in millions) $148 Strong Position in Longest Lasting in $146 Alkaline Run-Time Hearing Aid $135 eCommerce growth Leading Value +49%, outpacing Brand in the US the category (3) and Growing (4) FY15 FY16 FY17 1. Source: Spectrum Brands Management. 2. Please see Appendix for a reconciliation to GAAP figures. 3. 1010data – Total U.S. eCommerce – Calendar Year 2017 vs Calendar Year 2016. 4. Nielsen Global Track – U.S.– Latest 12 Months Ending February 2018. 18


 
Acquisition Enhances Our Multi-Brand Strategy to Appeal to More Consumers Globally The Energizer brand The smart, trusted choice challenges and redefines Deliver the best for families everywhere, Deliver the best where energy, technology and inspiring peace of mind as freedom meet to provide batteries at the best it lights, protects, batteries at the best powerful, innovative solutions value entertains and cares for value for consumers to do, enjoy and their everyday moments accomplish more than they ever expected 19


 
Spectrum Batteries Brings Strength in Energizer’s Strategic Focus Areas 1 Leading Hearing Aid Battery Platform in an Attractive Growing Industry Sector  Rayovac currently offers the longest lasting hearing aid battery in the market (1)  Represents second-largest product category for Spectrum Batteries, with stable mid-single digit top line growth and ~60% gross margins since 2015 (2)  Category is experiencing favorable tailwinds (2): The global Hearing Aid batteries Hearing Aid devices are expected to grow over Growth will be driven by aging population market is expected to grow ~39% 25% by 2023, due to increases in impairment as well as increases in Hearing Aid device during the period 2016-2023 & adoption rates and binaural usage Ownership and usage 2 Strong Presence in International Markets (3) Double digit revenue growth from FY15 to FY17, driven by alkaline and customer wins within the EMEA distribution channel ~5% gross margin expansion in the last two years, benefiting from product mix shift from zinc carbon LATAM to alkaline products APAC Strong margins driven by attractive, hearing aid heavy product mix Future Opportunity for Pro Forma Energizer   Benefits from increased presence in a high growth and Strong foothold and increased scale and efficiency in high margin category that is anticipated to experience high growth LATAM and EMEA markets continued momentum given global device and Energizerdemographic h trends 1. Based on ANSI/IEC Performance Tests for size 10, 13, 312, excluding size 675 (per Energizer’s website). 2. 4i Battery forecast 2017. 3. Source: Spectrum Brands Management. 20


 
Estimated Synergies 1 Energizer projects $80 – $100 million in annual synergies to be realized in full over a 3 year period 2 Synergies are expected to be derived from the following key areas:  Network optimization  SG&A reductions  Procurement efficiencies 3 Total one-time costs to achieve are estimated at 1.0-1.25x annual run-rate synergies 21


 
Agenda I. Transaction Overview II. Energizer Holdings Update III. Acquisition Rationale IV. Key Credit Highlights V. Financial Overview VI. Appendix 22


 
Key Credit Highlights 1  Broad product portfolio across the U.S., Europe, and Latin America Broadest Product Portfolio with Global  Combination enables broader and better solutions for consumers Scale  Attractive growth potential in the Hearing Aid business 2  Relentless product innovation, producing some of the highest-performing power and Market Leader in lighting advancements ever created for the consumer market Innovation, Maximizing Customer Value  Passion to improve consumers’ lives by creating reliable, long-lasting, responsible products 3  Strong financial performance in recessionary and growth markets Attractive Category  Dynamics Benefits from device and demographic trends  ~$5.7bn category globally (1) with high household penetration 4  Significant experience in consumer product marketing, sales and product development Highly Experienced Management Team  Proven ability to innovate and manage existing brands 1. Nielsen Global Track through December 2017; World Markets. 23


 
1 Improved Product and Geographic Diversification Status Quo FY17 Pro Forma FY17 Product Categories Product Categories Lights, Auto & Lights, Auto & Other Other 12% 11% Other Specialty Other Specialty 10% Premium 9% 33% Hearing Aid 1% Hearing Aid Premium 6% Carbon Zinc 49% 6% Carbon Zinc 6% Value 9% Performance Value 10% Performance 25% 13% FY17 Net Sales: $1,756mm Pro Forma FY17 Net Sales: $2,621mm Geographic Distribution Geographic Distribution Asia Pacific Asia Pacific 16% 12% North EMEA EMEA America North 20% 29% 50% America 57% Latin America 7% Latin America 9% Source: Energizer internal financials and Spectrum Brands Management. 24


 
1 Global Brand Presence with Operational Scale Global Reach Manufacturing and Distribution Energizer Spectrum Brands 25


 
2 Leading with Innovation Is Key to Our Success Our Longest Lasting Patented World’s Longest Lasting Improved cell design and Energizer MAX Ever The World’s #1 Rechargeable Digital Focus Technology and Highest Energy AA formation delivers more power Lasting up to 30% Longer Battery Brand Battery Battery and Lights Battery 1896 2014 2016 1972 2004 Energizer invents the Energizer develops a Introduced longest Rayovac launches the Energizer first dry cell battery standard-setting No- lasting Energizer Max, first heavy duty all introduces the first for commercial use Leak Guarantee Ultimate Lithium, and Zinc battery AAA lithium battery Hearing Aid Batteries 1904 1993 2011 2015 Varta is established and Rayovac introduces a Rayovac and Varta Rayovac launches manufactures small, portable reusable, long-life creates an Fusion Advanced lead accumulators for alkaline battery indestructible flashlight Alkaline Batteries flashlights and engine ignitions Refresh Your Car® Refresh Your Car® Refresh Your Car® Refillable Fragrance System Antibacterial Active Odor Elimination Building on the electric fragrance segment HandStands brings to market the The first line of automotive air HandStands pioneered, the new Refillable world’s first anti-bacterial cleaner fresheners to both attack odor System features a refill capsule that can be specially formulated to condition molecules and remove odors at their used alone, or on a 12-V and Visor mounted and protect a car’s interior source. Available in four Auto FragranceAuto device surfaces platforms 26


 
3 Battery Market Exhibits Favorable Dynamics Historically stable, resilient category, with favorable trends for Energizer’s business model and strategy $5.7bn $2.8bn High Household Growth in Specialty (2) Category Category Penetration Category Globally (1) in the U.S. (1) +6.9%+ 79% .vs Year +3.3% Ago +3.3% Y-o-Y global growth in CY17 (1) Demand Driven by Growth Driven Devices Devices, Disasters and Requiring Small Batteries, Demographics including Connected (IoT) Devices 1. Nielsen GlobalTrack data ending December 2017, World Total and U.S. for Global Market Size. 2. Nielsen Consumer panel 52 weeks ending 12/23/2017. 27


 
3 Industry Track-record of Consistency with Sustained Strength in Branded Batteries Historical Trends and Future Outlook  The battery industry has been stable with improving trends for an extended period of time  While other non-edible goods have decelerating value sales growth trends, batteries trends have improved driven by disasters, device growth, demographics, and mix shift into specialty  Brands continue to matter, as branded volume trends consistently out-perform private label  Overall volumes are expected to be stable for the industry going forward  Volume is expected to shift into specialty and high-power batteries due to evolving device power demands  eCommerce is also expected to grow, but currently makes up a relatively small portion of the overall market (~5%) (1) U.S. Battery Branded Value Trends (Total U.S. xAOC + U.S. Value Sales Trends(2) eCommerce)(3) Total Non-Edible Batteries Total Branded 4.0% 3.6% 6.0% 3.4% 5.0% 5.0% 3.0% 2.3% 4.0% 2.0% 3.0% 2.3% 2.5% 1.3% 2.0% 0.9% 1.0% 0.3% 1.0% 0.0% 0.0% 2015 2016 2017 2015 2016 2017 Recent category and branded sales growth label demonstrates sustained strength in branded segment 1. Energizer custom analytics estimate for U.S. 2. IRI Total US – MULC – Total Non-Edible; Nielsen Total U.S. xAOC Total Batteries, 3. Nielsen Total U.S. xAOC Calendar Year data through 2014, 2015, 2016, and 2017 - Total Branded are defined as brands outside of Private Label; 1010data All Merchants Calendar Year data through 2014, 2015, 2016 and 2017 – Total Branded are defined as brands outside of AmazonBasics. 28


 
3 Optimistic About Growth Potential in Industry Energizer has product offerings in multiple growth segments to capitalize on battery industry trends Devices (1) Volume Sales Mix (2)  Number of Devices per HH expected to stabilize for  Miniaturization is 8.1% 13.8% Household Devices and increase for Specialty Devices 2.9%2.2% expected to drive 3.0% 2.3% 2.9% 2.7% Mix shift into CAGR ‘18-’23F – Developed Markets OTHER 30.6% smaller cells 9V 28.8% Household Devices Specialty Devices D  EHI portfolio is C well positioned for AAA this evolution, AA 53.2% +0.5% +5.8%+ 49.6% over indexing in specialty cells vs the category Category Volume Mix EHI Volume Mix Hearing Aid (3) Global Billion Dollar Disasters (4)   Hearing Aids per Global disasters 41 41 Capita is are on the rise 35 Average: 24 expected to grow and drive 29 30 27 25 due to increased increases in 24 23 21 21 21 impairment demand 19 19 17 rates, increased 13  8 adoption rates, Disasters are and increased diverse in type binaural usage and dispersed Developed – 3% CAGR 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 globally 2000 Developing – 5% CAGR 1. TNS Global Device Inventory ; 4i Analysis and Projections 2018 – Developed Markets. 2. Nielsen Global track World Monthly; 52 Weeks ending February 2018. 3. EHIMA: MarkeTrak Reports, EuroTrak Reports, Basgaard; JHIMA: JapanTrak; Better Hearing Institute, 4i estimates. 4. 2016 Annual Global Climate and Catastrophe Report – Aon Benfield. 29


 
4 Highly Experienced Management Team Sue Drath Chief Human Resource Alan Hoskins Tim GormanOfficer Mark LaVigne Chief Executive Officer Chief Financial Officer Chief Operating Officer Sue Drath Sue Drath Chief Human Resource Chief Human Resource Officer Officer • 33 years at Energizer; previously CEO of • 4 years at Energizer; previously VP & • 8 years at Energizer; previously VP Household Products division Chief Accounting Officer General Counsel & Corp Secretary • Global sales, marketing and operations • 25 years at PepsiAmericas in a variety of • 15 years as legal advisor specializing in experience finance and accounting leadership roles M&A transactions • Leads SPB battery acquisition Greg Kinder Kelly Boss Sue Drath Chief Supply Chain Officer General Counsel Chief Human Capital Officer Sue Drath Sue Drath Sue Drath Chief Human Resource Chief Human Resource Chief Human Resource Officer Officer Officer • 5 years at Energizer; previously VP & Associate General Counsel • 5 years at Energizer; previously VP & • 25 years at Energizer; previously VP of • 24 years of legal experience in consumer Chief Procurement Officer Global Rewards goods industry • 30 years of experience at leading • Multiple roles in manufacturing and • Oversees legal, government affairs and manufacturing companies corporate human resources corporate compliance and ethics 30


 
Agenda I. Transaction Overview II. Energizer Holdings Update III. Acquisition Rationale IV. Key Credit Highlights V. Financial Overview VI. Appendix 31


 
Energizer Historical Financials Historical Net Sales Performance Historical Gross Profit Performance ($ in millions) ($ in millions) $1,756 $1,785 $811 $819 $1,632 $1,634 $756 $712 FY15 FY16 FY17 LTM 2Q18 FY15 FY16 FY17 LTM 2Q18 Historical Adjusted EBITDA Performance (1) Historical Capex Spend ($ in millions) ($ in millions) $389 $373 $346 $341 $40 22.1% $29 20.9% 20.9% 21.2% $25 $24 FY15 FY16 FY17 LTM 2Q18 FY15 FY16 FY17 LTM 2Q18 Adjusted EBITDA Margin 1. Please see Appendix for historical Adjusted EBITDA reconciliation. 32


 
Spectrum Batteries Historical Financials Historical Net Sales Performance Historical Gross Profit Performance (2) ($ in millions) ($ in millions) ’15-’17 CAGR: 4.3% $841 $866 $878 $830 $277 $285 $262 $277 FY15 FY16 FY17 LTM 2Q18 FY15 FY16 FY17 LTM 2Q18 Historical Adjusted EBITDA (1) Historical Capex Spend ($ in millions) ($ in millions) $169 $168 $22 $22 $159 $21 $153 $19 20.1% 19.4% 18.5% 18.1% FY15 FY16 FY17 LTM 2Q18 FY15 FY16 FY17 LTM 2Q18 Adjusted EBITDA Margin Source: Spectrum Brands Management. 1. Please see Appendix for historical Adjusted EBITDA reconciliation. 2. Includes shipping and handling costs reclassified to cost of goods sold consistent with Energizer’s accounting policies. 33


 
Financial Policy Overview  Management will continue to employ a disciplined approach to capital allocation, prioritizing Focus on deleveraging over the next 3 fiscal years from closing Deleveraging  Deleveraging primarily driven by Free Cash Flow generation, including benefits of productivity initiatives and synergy realization from the Spectrum Batteries acquisition  Company expects to continue to pay a regular public-company cash dividend  In July 2015, Energizer’s Board of Directors approved an authorization for the Company to acquire up Return to to 7.5 million shares of its common stock Shareholders  From inception to Q2 FY18, a total of 3.3 million shares were repurchased on the open market at an average price of $42.17 per share  As of May 2, 2018, 4.2 million shares remain available for repurchase  Modest intra-period utilization of the upsized $400mm Revolving Credit Facility Maintain Ample  Maintenance of ample cash balance to preserve strong liquidity position Liquidity  Limited capital expenditure needs and expected continued benefit from working capital improvements  Continued organic growth from geographic expansion and product innovation Disciplined  Growth Strategy Strategic approach to M&A, with strict criteria for high quality assets in complementary household product businesses 34


 
Agenda I. Transaction Overview II. Energizer Holdings Update III. Acquisition Rationale IV. Key Credit Highlights V. Financial Overview VI. Appendix 35


 
Historical Adjusted EBITDA and Free Cash Flow Reconciliation Energizer Adjusted EBITDA Reconciliation Spectrum Batteries Adjusted EBITDA Reconciliation ($ in millions) Fiscal Year Ended September 30, ($ in millions) Fiscal Year Ended September 30, 2015 2016 2017 LTM 2Q18 2015 2016 2017 LTM 2Q18 Net Earnings ($4.0) $127.7 $201.5 $127.2 Net Earnings $82.2 $59.3 $84.5 $97.8 Income tax expense / (benefit) 3.3 38.0 71.8 89.5 Income tax expense / (benefit) 28.8 67.5 36.4 16.2 Earnings (loss) before taxes ($0.7) $165.7 $273.3 $216.7 Earnings (loss) before taxes 111.0 126.8 120.9 114.0 Interest 77.9 54.3 53.1 56.6 Interest 0.7 1.5 1.6 2.0 D&A 41.8 34.3 50.2 46.8 D&A 28.3 28.0 29.8 31.6 EBITDA $119.0 $254.3 $376.6 $320.1 EBITDA $140.0 $156.3 $152.3 $147.6 Handstands EBITDA 0.0 27.5 0.0 0.0 Restructuring 1.8 0.0 1.7 1.3 Restructuring 13.0 4.9 0.0 0.0 Acquisition and integration costs 0.0 0.2 0.4 0.5 Spin Costs 98.1 10.4 0.0 0.0 Share-Based Payments 7.4 8.3 8.3 4.2 Spin Restructuring 39.1 5.8 (3.8) 0.0 Carve Out Allocations 4.1 4.3 5.3 5.6 Inventory Step-Up 0.0 8.1 0.0 0.0 Adj. EBITDA $153.3 $169.1 $168.0 $159.2 Gain on Sale of Real Estate 0.0 0.0 (16.9) (1.7) % of Net Sales 18.5% 20.1% 19.4% 18.1% Acquisition and Integration Costs 0.0 10.0 8.4 28.1 FY15- FY17 Average Adj. EBITDA Margin 19.3% Venezuela Deconsolidation 65.2 0.0 0.0 0.0 Capital Expenditures 18.5 21.2 22.3 21.8 Share-Based Payments 11.1 20.4 24.3 26.4 Adjusted EBITDA Less Capex $134.8 $147.9 $145.7 $137.4 Adj. EBITDA $345.5 $341.5 $388.6 $372.9 % of Net Sales 21.2% 20.9% 22.1% 20.9% FY15- FY17 Average Adj. EBITDA Margin 21.4% Pro Forma LTM 2Q18 Adjusted EBITDA Reconciliation Energizer Free Cash Flow Reconciliation ($ in millions) ($ in millions) Fiscal Year Ended September 30, LTM Q218 2015 2016 2017 LTM 2Q18 Energizer Adj. EBITDA $373 Net cash from operating activities $161.8 $193.9 $197.2 $233.5 SPB Batteries Adj. EBITDA 159 Capital Expenditures (40.4) (28.7) (25.2) (24.2) Adjusted EBITDA $532 Proceeds from Sale of Assets 13.7 1.5 27.2 4.1 Plus: Estimated mid-point of run-rate synergies 90 Free Cash Flow $135.1 $166.7 $199.2 $213.4 Synergized Adjusted EBITDA $622 % of Net Sales 8.3% 10.2% 11.3% 12.0% % Growth 23.4% 19.5% Note: Please refer to “Presentation of Financial Information” on page 3 as it relates to pro forma financial data. 36


 
Historical Gross Margin and Adjusted Free Cash Flow Reconciliation Energizer Adusted Gross Margin Reconciliation ($ in millions) Fiscal Year Ended September 30, 2017 Fiscal Year Ended September 30, 2016 Q1 17 Q2 17 Q3 17 Q4 17 2017 Q1 16 Q2 16 Q3 16 Q4 16 2016 Sales $559.6 $359.0 $372.0 $465.1 $1,755.7 $506.8 $334.0 $361.0 $432.4 $1,634.2 Reported Cost of Products Sold 288.0 191.1 214.0 251.3 944.4 277.0 192.4 207.3 245.1 921.8 Reported Gross Profit $271.6 $167.9 $158.0 $213.8 $811.3 $229.8 $141.6 $153.7 $187.3 $712.4 Reported Gross Margin 48.5% 46.8% 42.5% 46.0% 46.2% 45.3% 42.4% 42.6% 43.3% 43.6% Restructuring 0.0 0.0 0.0 0.0 0.0 1.1 1.2 0.1 0.0 2.4 Spin 0.0 0.0 0.0 0.0 0.0 0.0 0.5 (0.1) 0.0 0.4 Acquisition and Integration Costs 0.0 0.2 0.9 0.0 1.1 0.0 0.0 0.0 0.0 0.0 Inventory Step Up 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 8.1 8.1 Adjusted Cost of Products Sold 288.0 190.9 213.1 251.3 943.3 275.9 190.7 207.3 237.0 910.9 Adjusted Gross Profit $271.6 $168.1 $158.9 $213.8 $812.4 $230.9 $143.3 $153.7 $195.4 $723.3 Adjusted Gross Margin 48.5% 46.8% 42.7% 46.0% 46.3% 45.6% 42.9% 42.6% 45.2% 44.3% Energizer Adjusted Free Cash Flow Reconciliation ($ in millions) Six Months Ended March 31 YTD 2Q17 YTD 2Q18 Net cash from operating activities $ 124.3 $160.6 Capital Expenditures (12.3) (11.3) Proceeds from Sale of Assets 23.1 - Free Cash Flow $135.1 $149.3 Spectrum Acquisition Related Payments 2.7 3.5 Adjusted Free Cash Flow $137.8 $152.8 % Growth 10.9% 37


 


 


Serious News for Serious Traders! Try StreetInsider.com Premium Free!

You May Also Be Interested In





Related Categories

SEC Filings