Energizer Holdings Inc (NYSE:ENR) announced results for the second fiscal quarter, which ended March 31, 2016.  For the second fiscal quarter, net earnings were $16.4 million, or $0.26 per diluted share, compared to a net loss of $69.2 million, or a loss of $1.11 per diluted share, in the prior year second quarter. Adjusted net earnings in the second quarter were $18.5 million, or $0.30 per diluted share, compared to adjusted net earnings of $27.5 million, or $0.44 per diluted share, in the prior year second quarter.

“We achieved solid results in the second quarter adding to our momentum from the start of the year,” said Alan Hoskins, Chief Executive Officer.  “We continued to increase distribution in the U.S. and pricing in certain international markets.  In addition, global category trends were stable.   As a result of this strong performance in the first half of the year, improving foreign currency trends and a more favorable outlook on our effective tax rate, we are increasing our full year outlook for adjusted earnings per share in the range of $2.15 to $2.25.  We remain focused on delivering results for the balance of the year and a top-tier cash flow performance, as well as investing in the long-term health of our business.”

Second Quarter Financial Highlights (Unaudited)
The following is a summary of key second fiscal quarter results.  All comparisons are with the second quarter of fiscal 2015 unless otherwise stated.

Net sales were $334.0 million, a decrease of 6.4%: (a)

  • Organic net sales increased 0.5% due primarily to distribution and space gains and storm related volumes. These gains were partially offset by the lapping of the EcoAdvanced product launch in the prior year.
  • The following items were offsetting amounts to the organic net sales increase:
    • Unfavorable currency impacts were $15.5 million, or 4.3%;
    • International go-to-market changes, including the exit from certain markets and shift to distributors, resulted in a decline of$3.9 million, or 1.1%; and
    • Change in Venezuela results, due to the deconsolidation, resulted in a decline of $5.4 million, or 1.5%. This will be the last quarter of impact from the deconsolidation which occurred at the end of the prior year second quarter.
  • Gross Margin percentage was 42.4%, down 480 basis points driven in part by unfavorable currencies, change inVenezuela results and international go-to-market changes. Excluding the impact from these items, gross margin percentage declined 220 basis points driven by higher costs in the quarter due to investments in product improvements and productivity initiatives partially offset by favorable commodity and other product costs. (a)
  • A&P spending was 5.4% of net sales, a decrease of 290 basis points, or $11.4 million, due to higher prior year spending related to the EcoAdvanced launch and the timing of current year advertising and promotional activities.
  • SG&A, excluding spin and restructuring costs, was 24.3% of net sales compared to 22.5% in the prior year. The higher percentage comparison versus the prior year quarter reflects the impact of lower reported net sales, incremental investment spending and the timing of overhead spend. (a)
  • Restructuring related charges were $1.5 million in the second fiscal quarter. (a)
  • Spin-off and spin restructuring related charges were $1.9 million in the second fiscal quarter. (a)
  • Pretax income of $21.0 million compared to pre-tax loss of $71.7 million in the prior year quarter.
  • Income tax rate on a year to date basis was 29.1% due to the favorable impacts from the country mix of earnings. This favorable change in tax rate is included in the current quarter’s results, which is reflected in the disproportionately lower rate of 21.9% in the quarter.
  • Net earnings per diluted share were $0.26.
  • Adjusted net earnings per diluted share were $0.30 compared to $0.44 prior year second quarter. (a)
  • Adjusted EBITDA was $51.4 million. (a)
  • Net cash from operating activities on a year to date basis was $128.3 million and Free Cash Flow on a year to date basis was $114.8, or 13.7% of net sales. (a)
  • Dividend payments in the quarter were approximately $15.5 million, or $0.25 per share, and $30.9 million on a year to date basis, or $0.50 per share.
  • Repurchased 600,000 shares of common stock on a year to date basis for $21.8 million.

(a) See Press Release attachments for additional information as well as the GAAP to Non-GAAP reconciliations.

Results for the second quarter and six months ended March 31, 2015 are based on carve out financial data.  Net sales, Gross profit, Advertising & promotion (A&P) and Research & development (R&D) spending are directly attributable to our business.  However, certain Selling, general, and administrative expense (SG&A), Interest expense, Other financing items and Spin-off and Restructuring related charges were allocated from our former parent company, Edgewell, and not necessarily representative of Energizer’s stand-alone results or expected future results as an independent company.

Total Net Sales (In millions – Unaudited)

For the Quarter and Six Months Ended March 31, 2016

Q2

% Chg

Six Months

% Chg

Net Sales – FY’15

$

356.9

$

858.2

Organic

1.9

0.5%

49.3

5.7%

International Go-to-Market

(3.9)

(1.1)%

(9.5)

(1.1)%

Change in Venezuela results

(5.4)

(1.5)%

(8.5)

(1.0)%

Impact of currency

(15.5)

(4.3)%

(48.7)

(5.6)%

Net sales – FY’16

$

334.0

(6.4)%

$

840.8

(2.0)%

**Refer to the Reconciliation of GAAP and Non-GAAP Financial Measures attached.

Total net sales decreased 6.4% or $22.9 million driven by the unfavorable impact in foreign currency of 4.3%, the change in Venezuela  results of 1.5% (due to the Company’s previously announced deconsolidation) and the impact of international go-to-market changes of 1.1%, including the exit and shift to distributors in certain markets.

Organic net sales increased 0.5% in the quarter as a result of the following items:

  • Increase of approximately 3% related to distribution and space gains;
  • Decrease of approximately 3% related to the lapping of the EcoAdvanced product launch in the prior year;
  • Increase of approximately 0.5% primarily related to incremental storm volumes; and
  • Flat price/mix impact as pricing declines due to heightened competitive activity in our Asia developed markets were offset by net pricing and mix gains in the rest of world.

Total Segment Profit (In millions – Unaudited)

For the Quarter and Six Months Ended March 31, 2016

Q2

% Chg

Six Months

% Chg

Segment Profit – FY’15

$

80.8

$

213.8

Organic

(1.0)

(1.2)%

30.1

14.1%

International Go-to-market

1.0

1.2%

2.6

1.2%

Change in Venezuela results

(2.0)

(2.5)%

(2.5)

(1.2)%

Impact of currency

(10.4)

(12.8)%

(34.4)

(16.1)%

Segment Profit – FY’16

$

68.4

(15.3)%

$

209.6

(2.0)%

**Refer to the Reconciliation of GAAP and Non-GAAP Financial Measures attached.

Total Segment Profit in the second fiscal quarter declined 15.3%, or $12.4 million.  Excluding the unfavorable movement in foreign currency of $10.4 million, the $2.0 million change in Venezuela results (due to the Company’s previously announced deconsolidation) and the favorable $1.0 million net impact of go-to-market changes resulting from overhead reductions, organic segment profit declined 1.2% or $1.0 million in the current fiscal quarter.  The 1.2% decline was driven primarily by lower gross margin as a result of higher costs in the quarter due to investments in product improvements and productivity initiatives partially offset by favorable commodity and other products costs.

Financial Outlook Projection for Fiscal Year 2016
As a result of the strong performance in the first half of the year, improved current foreign currency rates and a more favorable effective tax rate estimate, the company has increased its financial outlook for Adjusted EPS in the range of $2.15 to $2.25.  The Company is also providing the following assumptions related to the full year financial outlook for fiscal year 2016:

  • Net Sales are expected to be down low single digits:
    • Organic net sales are expected to be up low-single digits;
    • The negative impact of foreign currency movement is now expected to reduce net sales by $60 to $70 million, a slight improvement from our prior outlook;
    • International go-to-market changes are expected to reduce net sales in the low single digits, consistent with the prior outlook; and
    • Change in Venezuela results, due to the previously announced deconsolidation, will reduce net sales by $8.5 million, or 0.5%, consistent with the prior outlook.
  • Gross Margin rates are expected to decline up to 250 basis points, consistent with the prior outlook, driven in part by unfavorable currency impacts, international go-to-market changes, the impact from the Venezuela deconsolidation and investments in product improvements and productivity initiatives.
  • SG&A as a percent of net sales, excluding spin related and restructuring costs, is expected to be in the low 20’s, consistent with the prior outlook.
  • Pre-tax income is expected to be negatively impacted due to the movement in foreign currencies by $50 to $60 million, a slight improvement from our prior outlook.
  • Income Tax Rate is now expected to be in the range of 29 to 30 percent, a slight improvement from our prior outlook.
  • Adjusted EBITDA is now expected to be in the range of $280 to $300 million, a slight improvement from our prior outlook, reflecting the impact of improved current currency rates.
  • Free Cash Flow is expected to exceed $150 million, consistent with the prior outlook.
  • Spin and restructuring costs are now expected to be in the range of $15 to $20 million in fiscal year 2016.

All comparisons above are with the fiscal year ended September 30, 2015 (which was on a carve out basis through the first three quarters), unless otherwise stated. (Original Source)

Shares of Energizer Holdings closed yesterday at $43.72, down $-0.72 or -1.62%. ENR has a 1-year high of $144.95 and a 1-year low of $28.86. The stock’s 50-day moving average is $42.39 and its 200-day moving average is $37.86.

On the ratings front, ENR has been the subject of a number of recent research reports. In a report issued on April 7, Citigroup analyst Wendy Nicholson maintained a Buy rating on ENR, with a price target of $49, which implies an upside of 12.1% from current levels. Separately, on April 4, Goldman Sachs’ Jason English upgraded the stock to Buy and has a price target of $49.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Wendy Nicholson and Jason English have a total average return of 6.6% and 3.0% respectively. Nicholson has a success rate of 72.5% and is ranked #596 out of 3838 analysts, while English has a success rate of 52.6% and is ranked #1351.

Energizer Holdings, Inc. manufacturers and markets batteries and lighting products. The company’s products include household batteries, specialty batteries and portable lighting. The company is headquartered in St. Louis, MO.