ST. LOUIS, Feb. 3, 2016 /PRNewswire/ -- Edgewell
Personal Care Company (NYSE: EPC) today announced results for its
first fiscal quarter, which ended December
31, 2015.
Executive Summary
- 1Q organic net sales grew 0.5%, including a 240 basis point
impact from international go-to-market changes.
- 1Q Adjusted EBITDA was $94.4
million.
- 1Q GAAP Diluted Earnings Per Share ("EPS") was $0.39, Adjusted EPS was $0.68.
- The Company's outlook for fiscal 2016 remains unchanged, with
relatively flat organic net sales, Adjusted EPS of $3.20-$3.40 and $440-$460
million in Adjusted EBITDA.
The Company reports results on a GAAP and "Non-GAAP" basis,
and has reconciled them to the most directly comparable GAAP
measures later in this release. See "Non-GAAP Financial
Measures" below, for a more detailed explanation, including
definitions of various terms used in this release such as "Adjusted
EBITDA", "Normalized EBITDA", "Organic net sales", "Organic segment
profit" and "go-to-market impacts."
All comparisons used in this release are with the same period
in the prior fiscal year unless otherwise stated.
"We made progress on our top-line performance in the first
quarter of fiscal 2016. Organic net sales grew 50 basis
points, driven by a return to growth in North America," said David Hatfield, Edgewell's President and Chief
Executive Officer. "Solid underlying growth enabled us to
overcome the impact of ongoing international go-to-market changes,
and we continued to make progress on our key initiatives for
2016. This positive start to the year reinforces our view
that we are taking the right steps to position Edgewell for future
growth and value creation."
Fiscal 1Q 2016 Operating Results (Unaudited)
Net sales were $495 million
in the quarter, a decrease of 7.9%. Organic net sales grew
0.5%, driven by growth in Wet Shave and Sun and Skin Care.
Wet Shave sales were primarily driven by growth in North America, and Sun and Skin Care increases
were led by strong performance in Asia Pacific. Organic
net sales in North America were up
2.7%, while organic net sales outside North America were down 2.1%, primarily due to
go-to-market impacts. Excluding estimated international
go-to-market impacts of $13 million,
underlying sales were up 2.9%.
Gross margin decreased 180 basis points to 46.0%.
Gross margin declined 90 basis points excluding the negative impact
of currency. Although higher volumes and productivity savings
contributed to margin expansion, they were more than offset by
higher product costs, which included higher input costs, driven by
significant foreign exchange transaction costs.
Advertising and sales promotion expense ("A&P") was
$46.6 million, representing 9.4% of
net sales, consistent on a percent of net sales basis with the
prior year. Lower A&P spending in the quarter versus the
prior year was primarily due to go-to-market changes and the timing
of spend related to new product innovation.
Selling, general and administrative expense ("SG&A")
was $100.4 million, or 20.3% of net
sales, compared to $133.5 million, or
24.9% of net sales. Included within the current quarter
results were pre-tax costs of $7.3
million related to the spin-off of the Company's Household
Products business in July 2015. Excluding these spin-off
costs, SG&A as a percent of net sales was 18.8%, including
amortization of intangible assets not allocated to the
segments. Historical SG&A results on a continuing
operations basis include certain costs associated with supporting
the Household Products business that were not eligible to be
reported in discontinued operations. When adjusting SG&A
in the prior year quarter for those ineligible expenses, SG&A
this quarter would have increased an estimated 70 basis points as a
percent of net sales, due in part to expected dis-synergies as the
Company transitions to operating a standalone company.
First quarter Adjusted EBITDA was $94.4 million versus a first quarter 2015
Normalized EBITDA of $117.4
million, down $23 million,
which included a decline of $10
million due to negative currency, a decline of $4 million due to Venezuela/Industrial in the prior year
results, and a remaining $9 million
primarily due to lower gross margin and higher SG&A.
The year-to-date effective tax rate was 22.8% as compared
to a 4.2% benefit in the prior year. The tax rate from the
prior year reflects a tax benefit on higher spin-off charges and
restructuring costs which occurred in higher tax-rate
jurisdictions. Excluding the impact of the separation and
restructuring, the adjusted effective tax rate this quarter was
27.7%, consistent with the prior year quarter.
First quarter Adjusted EPS was $0.68, compared to $0.62 in the prior year quarter. GAAP
EPS was $0.39 as compared to
$0.32 in the prior year quarter.
Other Items
The first quarter included $7.5
million of pre-tax spin charges compared to
$23.8 million in the same period of
the prior year. Additionally, the Company recorded
pre-tax expense of $18.5 million
related to its 2013 restructuring, as compared to
$9.2 million in the prior year.
Average (trailing 4 quarter) working capital as a percent of
sales was 17.0% at December 31,
2015, versus 17.5% as of September
30, 2015, with the 50 basis point improvement driven by Days
Payable Outstanding. Working Capital continues to reflect a
temporary higher level of inventory primarily in Feminine Care due
to the upcoming closure of the Montreal plant.
Net Cash used by operating activities was $58.7 million during the first quarter of fiscal
2016. The quarter was negatively impacted by the seasonality
of the Company's business, primarily related to Sun Care, as well as the payment timing of
year-end accrued expenses and interest payments. The Company
expects to have positive cash flow for the full year. In the
quarter, the Company completed share repurchases of nearly 1
million shares for $79 million.
1Q 2016 Operating Segment Results (Unaudited)
Wet Shave (Men's Systems, Women's Systems, Disposables,
Shave Preps)
Wet Shave organic net sales increased $3.7 million, or 1.1%, including an estimated
$11.5 million negative impact from
go-to-market changes. Underlying growth was driven by women's
systems, disposables and shave preps in North America and men's and women's systems in
Asia. Organic segment profit declined $12.7 million, or 14.0%, due to lower gross
margin resulting from higher product costs, go-to-market changes,
and higher SG&A. Higher product costs reflected the
impact of U.S. dollar-based input costs into the Company's
international manufacturing plants as well as higher cost for shave
preps.
Sun and Skin Care (Sun
Care, Wipes, Gloves)
Sun and Skin Care organic net sales increased $2.4 million, or 4.4%, driven by strong
Sun Care sales in international
markets, particularly Oceania and emerging markets in Asia.
Globally, Sun Care growth was strong
across both the Banana Boat® and Hawaiian Tropic® brands. Skin Care
sales declined in North America,
due primarily to increased competition. Organic segment
profit declined $1.1 million or
29.7%, as higher sales volumes and lower SG&A were more than
offset by lower gross margin, reflecting the impact of lower
production volumes versus a year ago, due to temporary changes in
operating levels.
Feminine Care (Tampons, Pads, Liners)
Feminine Care organic net sales decreased $2.2 million, or 2.3%. Sales in
North America decreased 0.4% as
volume gains in the Sport® Pads and Liner business were offset by
declines in legacy products and by go-to-market impacts in
Asia and Latin America. Organic segment profit was up
$3.1 million, or 20.4%, driven by
lower A&P spend and improved gross margin, reflecting
restructuring savings.
All Other (Infant Care,
all other brands)
Organic All Other net sales decreased $1.1 million, or 2.4%, as growth in Diaper Genie®
was more than offset by lower volumes in infant cups and bottles
related to the ongoing impact of competitive pressure.
Organic segment profit grew $1.9
million on higher gross margin due to favorable product
costs and lower SG&A.
Full Fiscal Year 2016 Financial Outlook remains
unchanged
Organic net sales are expected to be flat, including the
negative impact of go-to-market changes through the end of the
third quarter of fiscal 2016. For the full year, the
go-to-market changes are estimated to impact top line growth by
approximately 1.5%. Therefore, underlying sales growth,
excluding these go-to-market changes, is expected to increase by
low single digits. Organic net sales excludes unfavorable
currency impact on net sales, which is now expected to be in the
range of $50-$60 million for the full
fiscal year, versus the prior outlook of $40-$50 million. Reported net sales are
expected to decrease by mid-single digits.
Adjusted EBITDA is projected to be in the range of
$440-$460 million for fiscal 2016,
including $20-$25 million of negative
currency impact for the full fiscal year versus the prior outlook
of $15-$20 million.
Adjusted EPS is projected to be in the range of
$3.20-$3.40 for fiscal 2016 including
$20-$25 million of negative currency
impact for the full fiscal year versus the prior outlook of
$15-$20 million.
Adjusted Tax rate is now expected to be in the range of
30%-32% for fiscal 2016.
Other Items: The full-year estimate for spin costs
is unchanged at $10-$12 million, with
the majority of the costs expected to be incurred in the first half
of the year. The full-year estimate for restructuring related
costs is unchanged at $40-$45
million. Incremental restructuring savings are expected to
be approximately $15 million in
fiscal 2016 and an additional $40-$50
million in fiscal 2017 and 2018 combined.
Webcast Information
In conjunction with this announcement, the Company will hold an
investor conference call beginning at 9:00
a.m. eastern time today. The call will focus on fiscal
2016 first quarter earnings and the outlook for fiscal 2016.
All interested parties may access a live webcast of this conference
call at www.edgewell.com, under "Investors," and "News and Events"
tabs or by using the following link:
http://ir.edgewell.com/news-and-events/events
For those unable to participate during the live webcast, a
replay will be available on www.edgewell.com, under "Investors,"
"Financial Reports," and "Quarterly Earnings" tabs.
About Edgewell
Edgewell is a leading pure-play consumer products company with
an attractive, diversified portfolio of established brand names
such as Schick® and Wilkinson Sword® men's and women's shaving
systems and disposable razors; Edge® and Skintimate® shave
preparations; Playtex®, Stayfree®, Carefree® and o.b.® feminine
care products; Banana Boat® and Hawaiian Tropic® sun care products;
Playtex® infant feeding, Diaper Genie® and gloves; and Wet Ones®
moist wipes. The Company has a broad global footprint and
operates in more than 50 markets, including the U.S., Canada, Mexico, Germany, Japan and Australia, with approximately 6,000 employees
worldwide.
Non-GAAP Financial Measures. While the Company
reports financial results in accordance with accounting principles
generally accepted in the U.S. ("GAAP"), this discussion also
includes Non-GAAP measures. These Non-GAAP measures are
referred to as "adjusted" and exclude expenses associated
with spin costs, restructuring charges (including 2013
restructuring and spin restructuring) and adjustments to prior year
tax accruals.
This Non-GAAP information is provided as a supplement to, not as
a substitute for, or as superior to, measures of financial
performance prepared in accordance with GAAP. The Company
uses this Non-GAAP information internally to make operating
decisions and believes it is helpful to investors because it allows
more meaningful period-to-period comparisons of ongoing operating
results. The information can also be used to perform analysis
and to better identify operating trends that may otherwise be
masked or distorted by the types of items that are excluded.
This Non-GAAP information is a component in determining
management's incentive compensation. Finally, the Company
believes this information provides a higher degree of
transparency.
Adjusted EBITDA is defined as earnings before income
taxes, interest expense, depreciation and amortization and excludes
items such as spin costs and restructuring charges.
Historical results on a continuing operations basis include
certain costs associated with supporting the Company's former
Household Products business that are not eligible to be reported in
discontinued operations. These costs affect SG&A,
interest expense, spin costs, restructuring and tax. As a
result, EPS and EBITDA on both a GAAP and Non-GAAP basis for this
quarter and fiscal year are not comparable to the prior year, and
will not be comparable as we move through each of the first three
quarters of fiscal 2016. To address this, the Company has
provided Normalized EBITDA, which adjusts corporate SG&A
expenses to reflect the Company's estimated full-year run
rate. Normalized EBITDA is presented to provide a
basis for comparing to future performance. A reconciliation
of Fiscal 2015 Consolidated Statement of Earnings and Normalized
EBITDA by quarter was provided in an 8-K filed on December 1, 2015, and can be found on the
Company's website www.edgewell.com, under "Investors," and
"Financial Reports," "Key Statistics" tabs or by using the
following link:
http://ir.edgewell.com/financial-reports/key-statistics
The Company analyzes its net revenue and segment profit on an
organic basis to better measure the comparability of results
between periods. Organic net sales and segment profit
exclude the impact of changes in foreign currency, the impact of
acquisitions and dispositions (including the results of the former
industrial blade business) and the period-over-period change
resulting from the deconsolidation of our Venezuela operations. This information
is provided because these fluctuations can distort the underlying
change in net sales and segment profit either positively or
negatively. See Non-GAAP reconciliations later in this
release.
To compete more effectively as an independent company, the
Company has increased its use of third-party distributors and
wholesalers, and has decreased or eliminated its business
operations in certain countries, consistent with its international
go-to-market strategy. Within this press release the Company
discusses go-to-market impacts, which reflect its best
estimate on the impact of these international go-to-market changes
and exits, and represent the year-over-year change in those
markets. The Company expects to realize the majority of the
remaining impact from these changes in the first three quarters of
fiscal year 2016.
Forward-Looking Statements. This document contains
both historical and forward-looking statements.
Forward-looking statements are not based on historical facts, but
instead reflect the Company's expectations, estimates or
projections concerning future results or events, including, without
limitation, the future earnings and performance of Edgewell
Personal Care Company or any of its businesses. These
statements generally can be identified by the use of
forward-looking words or phrases such as "believe," "expect,"
"expectation," "anticipate," "may," "could," "intend," "belief,"
"estimate," "plan," "target," "predict," "likely," "will,"
"should," "forecast," "outlook," or other similar words or
phrases. These statements are not guarantees of performance
and are inherently subject to known and unknown risks,
uncertainties and assumptions that are difficult to predict and
could cause the Company's actual results to differ materially from
those indicated by those statements. The Company cannot
assure you that any of its expectations, estimates or projections
will be achieved. The forward-looking statements included in
this document are only made as of the date of this document and the
Company disclaims any obligation to publicly update any
forward-looking statement to reflect subsequent events or
circumstances. Numerous factors could cause the Company's
actual results and events to differ materially from those expressed
or implied by forward-looking statements, including, without
limitation:
- The Company is subject to risks related to its international
operations, such as global economic conditions, currency
fluctuations and its changing international go-to-market strategy,
that could adversely affect its results of operations;
- The Company may not achieve some or all of the expected
benefits of the spin-off of its Household Products business, and
this may materially adversely affect its business;
- The Company's manufacturing facilities, supply channels or
other business operations may be subject to disruption from events
beyond its control;
- The Company's access to capital markets and borrowing capacity
could be limited;
- If the Company cannot continue to develop new products in a
timely manner, and at favorable margins, it may not be able to
compete effectively;
- The Company has a substantial level of indebtedness and is
subject to various covenants relating to such indebtedness, which
could limit its discretion to operate and grow its business;
- The Company faces risks arising from the restructuring of its
operations and uncertainty with respect to its ability to achieve
its estimated cost savings;
- Loss of any of the Company's principal customers and emergence
of new sales channels could significantly decrease its sales and
profitability;
- The Company may not be able to attract, retain and develop key
personnel;
- The Company may experience losses or be subject to increased
funding and expenses related to its pension plans;
- The Company may not be able to continue to identify and
complete strategic acquisitions and effectively integrate acquired
companies to achieve desired financial benefits;
- The Company's Wet Shave segment's men's shaving systems
category has faced relatively flat to declining sales;
- The Company's business involves the potential for product
liability and other claims against it, which could affect its
results of operations and financial condition and result in product
recalls or withdrawals;
- A failure of a key information technology system or a breach of
the Company's information security could adversely impact its
ability to conduct business;
- The resolution of the Company's tax contingencies may result in
additional tax liabilities, which could adversely impact its cash
flows and results of operations;
- If the Company fails to adequately protect its intellectual
property rights, competitors may manufacture and market similar
products, which could adversely affect its market share and results
of operations;
- Potential liabilities in connection with the Separation may
arise under fraudulent conveyance and transfer laws and legal
capital requirements.
In addition, other risks and uncertainties not presently known
to the Company or that it considers immaterial could affect the
accuracy of any such forward-looking statements. The list of
factors above is illustrative, but not exhaustive. All
forward-looking statements should be evaluated with the
understanding of their inherent uncertainty. Additional risks
and uncertainties include those detailed from time to time in the
Company's publicly filed documents, including in Item 1A. Risk
Factors of Part I of the Company's Annual Report on Form 10-K for
the year ended September 30,
2015.
EDGEWELL PERSONAL
CARE COMPANY
CONDENSED
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited, in
millions, except per share data)
|
|
|
|
Quarter Ended
December 31,
|
|
2015
|
|
2014
|
|
|
|
|
Net sales
|
$
|
495.1
|
|
|
$
|
537.1
|
|
Cost of products
sold
|
267.6
|
|
|
280.3
|
|
Gross
profit
|
227.5
|
|
|
256.8
|
|
|
|
|
|
Selling, general and
administrative expense
|
100.4
|
|
|
133.5
|
|
Advertising and sales
promotion expense
|
46.6
|
|
|
50.7
|
|
Research and
development expense
|
16.0
|
|
|
15.7
|
|
Spin restructuring
charges
|
—
|
|
|
1.2
|
|
2013 restructuring
charges
|
18.5
|
|
|
9.2
|
|
Interest
expense
|
17.7
|
|
|
27.8
|
|
Other income,
net
|
(2.4)
|
|
|
(0.4)
|
|
Earnings from
continuing operations before income taxes
|
30.7
|
|
|
19.1
|
|
Income tax provision
(benefit)
|
7.0
|
|
|
(0.8)
|
|
Earnings from
continuing operations
|
23.7
|
|
|
19.9
|
|
Earnings from
discontinued operations, net of tax
|
—
|
|
|
85.2
|
|
Net
earnings
|
$
|
23.7
|
|
|
$
|
105.1
|
|
|
|
|
|
Basic earnings per
share:
|
|
|
|
Continuing operations
|
$
|
0.40
|
|
|
0.32
|
|
Discontinued operations
|
—
|
|
|
1.38
|
|
Net earnings
|
0.40
|
|
|
1.70
|
|
|
|
|
|
Diluted earnings
per share:
|
|
|
|
Continuing operations
|
$
|
0.39
|
|
|
$
|
0.32
|
|
Discontinued operations
|
—
|
|
|
1.37
|
|
Net earnings
|
0.39
|
|
|
1.69
|
|
|
|
|
|
Weighted-average
shares outstanding:
|
|
|
|
Basic
|
59.7
|
|
|
62.0
|
|
Diluted
|
59.9
|
|
|
62.4
|
|
See Accompanying Notes.
EDGEWELL PERSONAL
CARE COMPANY
CONDENSED
CONSOLIDATED BALANCE SHEETS
(unaudited, in
millions)
|
|
|
|
|
Assets
|
December
31,
2015
|
|
September
30,
2015
|
Current
assets
|
|
|
|
Cash and cash
equivalents
|
$
|
694.2
|
|
|
$
|
712.1
|
|
Trade receivables,
net
|
240.0
|
|
|
279.8
|
|
Inventories
|
355.8
|
|
|
332.8
|
|
Other current assets
(1)
|
174.0
|
|
|
311.9
|
|
Total current
assets
|
1,464.0
|
|
|
1,636.6
|
|
Property, plant and
equipment, net
|
483.1
|
|
|
476.1
|
|
Goodwill
|
1,416.6
|
|
|
1,421.8
|
|
Other intangible
assets, net
|
1,402.3
|
|
|
1,408.5
|
|
Other assets
(1)
|
120.5
|
|
|
48.7
|
|
Total
assets
|
$
|
4,886.5
|
|
|
$
|
4,991.7
|
|
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
Current
liabilities
|
|
|
|
Notes
payable
|
$
|
17.3
|
|
|
$
|
17.5
|
|
Accounts
payable
|
210.9
|
|
|
236.9
|
|
Other current
liabilities (1)
|
283.0
|
|
|
412.4
|
|
Total current
liabilities
|
511.2
|
|
|
666.8
|
|
Long-term
debt
|
1,841.3
|
|
|
1,704.0
|
|
Deferred income tax
liabilities (1)
|
346.2
|
|
|
335.8
|
|
Other
liabilities
|
391.3
|
|
|
421.0
|
|
Total
liabilities
|
3,090.0
|
|
|
3,127.6
|
|
Shareholders'
equity
|
|
|
|
Common
shares
|
0.7
|
|
|
0.7
|
|
Additional paid-in
capital
|
1,634.5
|
|
|
1,644.2
|
|
Retained
earnings
|
796.6
|
|
|
772.9
|
|
Treasury
shares
|
(451.9)
|
|
|
(382.2)
|
|
Accumulated other
comprehensive loss
|
(183.4)
|
|
|
(171.5)
|
|
Total shareholders'
equity
|
1,796.5
|
|
|
1,864.1
|
|
Total liabilities and
shareholders' equity
|
$
|
4,886.5
|
|
|
$
|
4,991.7
|
|
|
|
(1)
|
The Company early
adopted new accounting guidance during the first quarter of fiscal
2016 which required all deferred income tax assets and liabilities
to be classified as non-current, resulting in a reclassification of
$85.1 deferred income tax assets and $2.7 deferred income tax
liabilities from current to non-current as of December 31,
2015. The adoption of the new guidance had no impact on the
balance sheet as of September 30, 2015.
|
See Accompanying Notes.
EDGEWELL PERSONAL
CARE COMPANY
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in
millions)
|
|
|
|
Quarter Ended
December 31,
|
|
2015
|
|
2014
|
Cash Flow from
Operating Activities
|
|
|
|
Net
earnings
|
$
|
23.7
|
|
|
$
|
105.1
|
|
Non-cash
restructuring costs
|
0.7
|
|
|
1.4
|
|
Depreciation and
amortization
|
20.2
|
|
|
33.2
|
|
Non-cash items
included in income, net
|
13.6
|
|
|
8.9
|
|
Other, net
|
(11.5)
|
|
|
3.7
|
|
Changes in current
assets and liabilities used in operations
|
(105.4)
|
|
|
(184.3)
|
|
Net cash used by
operating activities
|
(58.7)
|
|
|
(32.0)
|
|
|
|
|
|
Cash Flow from
Investing Activities
|
|
|
|
Capital
expenditures
|
(14.5)
|
|
|
(15.3)
|
|
Acquisitions, net of
cash acquired
|
—
|
|
|
(11.1)
|
|
Proceeds from sale of
assets
|
—
|
|
|
1.8
|
|
Net cash used by
investing activities
|
(14.5)
|
|
|
(24.6)
|
|
|
|
|
|
Cash Flow from
Financing Activities
|
|
|
|
Cash proceeds from
debt with original maturities greater than 90 days
|
144.8
|
|
|
—
|
|
Cash payments on debt
with original maturities greater than 90 days
|
—
|
|
|
(80.0)
|
|
Net (decrease)
increase in debt with original maturities of 90 days or
less
|
(2.2)
|
|
|
188.2
|
|
Common shares
purchased
|
(78.9)
|
|
|
—
|
|
Cash dividends
paid
|
—
|
|
|
(31.1)
|
|
Proceeds from
issuance of common shares, net
|
—
|
|
|
1.4
|
|
Excess tax benefits
from share-based payments
|
—
|
|
|
8.4
|
|
Net cash from
financing activities
|
63.7
|
|
|
86.9
|
|
|
|
|
|
Effect of exchange
rate changes on cash
|
(8.4)
|
|
|
(27.7)
|
|
|
|
|
|
Net (decrease)
increase in cash and cash equivalents
|
(17.9)
|
|
|
2.6
|
|
Cash and cash
equivalents, beginning of period
|
712.1
|
|
|
1,129.0
|
|
Cash and cash
equivalents, end of period
|
$
|
694.2
|
|
|
$
|
1,131.6
|
|
See Accompanying Notes.
EDGEWELL PERSONAL CARE COMPANY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited,
in millions, except per share data)
1.
|
The Company conducts
its business in the following four segments: Wet Shave, Sun and
Skin Care, Feminine Care and All Other. Segment performance
is evaluated based on segment profit, exclusive of general
corporate expenses, share-based compensation costs, costs
associated with most restructuring initiatives (including the Spin
restructuring and the 2013 Restructuring), and amortization of
intangible assets. Financial items, such as interest income
and expense, are managed on a global basis at the corporate
level. The exclusion of charges such as other acquisition
transaction and integration costs, and substantially all
restructuring, from segment results reflects management's view on
how it evaluates segment performance.
|
|
|
|
On July 1, 2015, the
Company completed the separation of its Household Products business
into a separate publicly-traded company (the "Spin" or the
"Separation"). The historical financial results of the
Company's Household Products business are presented as discontinued
operations on the Condensed Consolidated Statements of Earnings
and, as such, have been excluded from both continuing operations
and segment results for all periods presented. The prior year
Condensed Consolidated Statements of Cash Flows has not been
adjusted to reflect the effect of the Separation, as the Company
had not adopted the Financial Accounting Standards Board's updated
guidance on the presentation of discontinued operations at the time
of Separation. Historical results on a continuing operations
basis include certain costs associated with supporting the
Household Products business that were not eligible to be reported
in discontinued operations.
|
|
|
|
The Company incurred
incremental costs to evaluate, plan and execute the
Separation. For the first quarter of fiscal 2016, $7.3
of pre-tax charges were recorded in Selling, general and
administrative expense ("SG&A") and $0.2 of pre-tax charges for
the first quarter of fiscal 2016 were recorded in Cost of products
sold. For the first quarter of fiscal 2015, $23.8 of pre-tax
charges were recorded in SG&A and $1.2 were recorded in Spin
restructuring costs.
|
|
|
|
For the first quarter
of fiscal 2016, the Company recorded pre-tax expense of $18.5
related to its 2013 restructuring, as compared to pre-tax expense
of $9.2 for the first quarter of fiscal 2015. The 2013
restructuring charges were reported as a separate line item on the
income statement.
|
|
Segment net sales and
profitability are presented below:
|
|
|
Quarter Ended
December 31,
|
|
2015
|
|
2014
|
Net
Sales
|
|
|
|
Wet Shave
|
$
|
316.3
|
|
|
$
|
341.4
|
|
Sun and Skin
Care
|
53.5
|
|
|
54.3
|
|
Feminine
Care
|
92.5
|
|
|
95.8
|
|
All Other
|
32.8
|
|
|
45.6
|
|
Total net
sales
|
$
|
495.1
|
|
|
$
|
537.1
|
|
|
|
|
|
Segment
Profit
|
|
|
|
Wet Shave
|
$
|
66.8
|
|
|
$
|
90.5
|
|
Sun and Skin
Care
|
1.7
|
|
|
3.7
|
|
Feminine
Care
|
17.6
|
|
|
15.2
|
|
All Other
|
7.2
|
|
|
6.8
|
|
Total segment
profit
|
93.3
|
|
|
116.2
|
|
General corporate and
other expenses
|
(17.7)
|
|
|
(31.4)
|
|
Spin costs
(1)
|
(7.5)
|
|
|
(23.8)
|
|
Spin restructuring
charges
|
—
|
|
|
(1.2)
|
|
2013 restructuring
and related costs
|
(18.5)
|
|
|
(9.2)
|
|
Amortization of
intangibles
|
(3.6)
|
|
|
(4.1)
|
|
Interest and other
expense, net
|
(15.3)
|
|
|
(27.4)
|
|
Total earnings from
continuing operations before income taxes
|
$
|
30.7
|
|
|
$
|
19.1
|
|
|
|
|
|
(1)
|
Includes pre-tax
costs of $7.3 for the first quarter of fiscal 2016 and $23.8 for
the first quarter of fiscal 2015, which were included in SG&A,
and pre-tax costs of $0.2 for the first quarter of fiscal 2016
included in Cost of products sold.
|
|
|
2.
|
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
weighted average number of shares used for the basic earnings per
share calculation, adjusted for the dilutive effect of share
options and restricted stock equivalent awards.
|
|
|
|
The following table
provides a reconciliation of net earnings and net earnings per
diluted share ("EPS") to Adjusted net earnings and Adjusted EPS,
which are Non-GAAP measures.
|
|
Net
Earnings
|
|
Diluted
EPS
|
|
Q1
2016
|
|
Q1
2015
|
|
Q1
2016
|
|
Q1
2015
|
Net Earnings from
Continuing Operations and Diluted EPS - GAAP
(Unaudited)
|
$
|
23.7
|
|
|
$
|
19.9
|
|
|
$
|
0.39
|
|
|
$
|
0.32
|
|
Impacts, net of
tax: Expense (Income)
|
|
|
|
|
|
|
|
Spin costs
(1)
|
4.8
|
|
|
15.5
|
|
|
0.08
|
|
|
0.25
|
|
Spin restructuring
charges
|
—
|
|
|
0.9
|
|
|
—
|
|
|
0.01
|
|
2013 restructuring and
related charges, net
|
12.5
|
|
|
4.9
|
|
|
0.21
|
|
|
0.08
|
|
Adjustment to prior years'
tax accruals
|
—
|
|
|
(2.5)
|
|
|
—
|
|
|
(0.04)
|
|
Adjusted Net Earnings and Adjusted Diluted EPS -
Non-GAAP
|
$
|
41.0
|
|
|
$
|
38.7
|
|
|
$
|
0.68
|
|
|
$
|
0.62
|
|
|
|
|
|
|
|
|
|
Weighted average
shares - Diluted
|
|
|
|
|
59.9
|
|
|
62.4
|
|
|
|
|
|
(1)
|
Includes costs of
$4.7 and $15.5 (net of tax) for the first quarters of fiscal 2016
and 2015, respectively, which are included in SG&A.
Additionally, costs of $0.1 (net of tax) for the first quarter of
fiscal 2016 were included in Cost of products sold.
|
|
The following tables
provide a GAAP to Non-GAAP reconciliation of certain line items
from the Condensed Consolidated Statement of Earnings:
|
|
Q1
2016
|
GAAP -
Reported
|
|
Spin
Costs
|
|
2013 Restructuring
Charges
|
|
Total Adjusted
Non-GAAP
|
Net sales
|
$
|
495.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
495.1
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
227.5
|
|
|
0.2
|
|
|
—
|
|
|
227.7
|
|
% of net
sales
|
46.0
|
%
|
|
|
|
|
|
46.0
|
%
|
|
|
|
|
|
|
|
|
SG&A
|
100.4
|
|
|
7.3
|
|
|
—
|
|
|
93.1
|
|
% of net
sales
|
20.3
|
%
|
|
|
|
|
|
18.8
|
%
|
|
|
|
|
|
|
|
|
Advertising and sales
promotion expense ("A&P")
|
46.6
|
|
|
—
|
|
|
—
|
|
|
46.6
|
|
% of net
sales
|
9.4
|
%
|
|
|
|
|
|
9.4
|
%
|
|
|
|
|
|
|
|
|
Research and
development expense ("R&D")
|
16.0
|
|
|
—
|
|
|
—
|
|
|
16.0
|
|
% of net
sales
|
3.2
|
%
|
|
|
|
|
|
3.2
|
%
|
|
|
|
|
|
|
|
|
Operating
income
|
30.7
|
|
|
7.5
|
|
|
18.5
|
|
|
56.7
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
23.7
|
|
|
4.8
|
|
|
12.5
|
|
|
41.0
|
|
|
|
|
|
|
|
|
|
Diluted
EPS
|
$
|
0.39
|
|
|
$
|
0.08
|
|
|
$
|
0.21
|
|
|
$
|
0.68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1
2015
|
GAAP -
Reported
|
|
Spin
Costs
|
|
Spin Restructuring
Charges
|
|
2013 Restructuring
Charges
|
|
Adjustments to
Prior Year Tax Accruals
|
|
Total Adjusted
Non-GAAP
|
Net sales
|
$
|
537.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
537.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
256.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
256.8
|
|
% of net
sales
|
47.8
|
%
|
|
|
|
|
|
|
|
|
|
47.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
SG&A
|
133.5
|
|
|
23.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
109.7
|
|
% of net
sales
|
24.9
|
%
|
|
|
|
|
|
|
|
|
|
20.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
A&P
|
50.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
50.7
|
|
% of net
sales
|
9.4
|
%
|
|
|
|
|
|
|
|
|
|
9.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
R&D
|
15.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15.7
|
|
% of net
sales
|
2.9
|
%
|
|
|
|
|
|
|
|
|
|
2.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income from
continuing operations
|
19.1
|
|
|
23.8
|
|
|
1.2
|
|
|
9.2
|
|
|
—
|
|
|
53.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from
continuing operations
|
19.9
|
|
|
15.5
|
|
|
0.9
|
|
|
4.9
|
|
|
(2.5)
|
|
|
38.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS from
continuing operations
|
$
|
0.32
|
|
|
$
|
0.25
|
|
|
$
|
0.01
|
|
|
$
|
0.08
|
|
|
$
|
(0.04)
|
|
|
$
|
0.62
|
|
|
|
|
|
3.
|
Starting July 1,
2015, as a result of the Separation, operations for the Company are
reported via four segments - Wet Shave, Sun and Skin Care, Feminine
Care and All Other. The following tables present changes in
net sales and segment profit for the first quarter of fiscal
2016.
|
Net Sales (In
millions - Unaudited)
|
Quarter Ended
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wet
Shave
|
|
Sun and Skin
Care
|
|
Feminine
Care
|
|
All
Other
|
|
Total
|
|
Q1
|
|
%Chg
|
|
Q1
|
|
%Chg
|
|
Q1
|
|
%Chg
|
|
Q1
|
|
%Chg
|
|
Q1
|
|
%Chg
|
Net Sales - Q1
'15
|
$
|
341.4
|
|
|
|
|
$
|
54.3
|
|
|
|
|
$
|
95.8
|
|
|
|
|
$
|
45.6
|
|
|
|
|
$
|
537.1
|
|
|
|
Organic
|
3.7
|
|
|
1.1%
|
|
|
2.4
|
|
|
4.4%
|
|
|
(2.2)
|
|
|
(2.3)%
|
|
|
(1.1)
|
|
|
(2.4)%
|
|
|
2.8
|
|
|
0.5%
|
|
Impact of
Venezuela
|
(9.6)
|
|
|
(2.8)%
|
|
|
—
|
|
|
—%
|
|
|
—
|
|
|
—%
|
|
|
—
|
|
|
—%
|
|
|
(9.6)
|
|
|
(1.8)%
|
|
Impact of
currency
|
(19.2)
|
|
|
(5.6)%
|
|
|
(3.2)
|
|
|
(5.9)%
|
|
|
(1.1)
|
|
|
(1.1)%
|
|
|
(1.0)
|
|
|
(2.2)%
|
|
|
(24.5)
|
|
|
(4.6)%
|
|
Impact of industrial
blade sale
|
—
|
|
|
—%
|
|
|
—
|
|
|
—%
|
|
|
—
|
|
|
—%
|
|
|
(10.7)
|
|
|
(23.5)%
|
|
|
(10.7)
|
|
|
(2.0)%
|
|
Net Sales - Q1
'16
|
$
|
316.3
|
|
|
(7.3)%
|
|
|
$
|
53.5
|
|
|
(1.5)%
|
|
|
$
|
92.5
|
|
|
(3.4)%
|
|
|
$
|
32.8
|
|
|
(28.1)%
|
|
|
$
|
495.1
|
|
|
(7.9)%
|
|
Segment Profit (In
millions - Unaudited)
|
Quarter Ended
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wet
Shave
|
|
Sun and Skin
Care
|
|
Feminine
Care
|
|
All
Other
|
|
Total
|
|
Q1
|
|
%Chg
|
|
Q1
|
|
%Chg
|
|
Q1
|
|
%Chg
|
|
Q1
|
|
%Chg
|
|
Q1
|
|
%Chg
|
Segment Profit - Q1
'15
|
$
|
90.5
|
|
|
|
|
$
|
3.7
|
|
|
|
|
$
|
15.2
|
|
|
|
|
$
|
6.8
|
|
|
|
|
$
|
116.2
|
|
|
|
Organic
|
(12.7)
|
|
|
(14.0)%
|
|
|
(1.1)
|
|
|
(29.7)%
|
|
|
3.1
|
|
|
20.4
|
%
|
|
1.9
|
|
|
27.9
|
%
|
|
(8.8)
|
|
|
(7.6)%
|
|
Impact of
Venezuela
|
(3.3)
|
|
|
(3.6)%
|
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|
(3.3)
|
|
|
(2.8)%
|
|
Impact of
currency
|
(7.7)
|
|
|
(8.5)%
|
|
|
(0.9)
|
|
|
(24.3)%
|
|
|
(0.7)
|
|
|
(4.6)%
|
|
|
(0.7)
|
|
|
(10.3)%
|
|
|
(10.0)
|
|
|
(8.6)%
|
|
Impact of industrial
blade sale
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|
(0.8)
|
|
|
(11.8)%
|
|
|
(0.8)
|
|
|
(0.7)%
|
|
Segment Profit - Q1
'16
|
$
|
66.8
|
|
|
(26.1)%
|
|
|
$
|
1.7
|
|
|
(54.0)%
|
|
|
$
|
17.6
|
|
|
15.8
|
%
|
|
$
|
7.2
|
|
|
5.8
|
%
|
|
$
|
93.3
|
|
|
(19.7)%
|
|
|
|
|
|
4.
|
The Company reports
financial results on a GAAP and adjusted basis. The table
below is used to reconcile earnings from continuing operations
before income taxes to EBITDA, Adjusted EBITDA and Normalized
EBITDA which are Non-GAAP measures to improve comparability of
results between periods.
|
|
Q1
2016
|
|
Q1
2015
|
Earnings from
continuing operations before income taxes - GAAP
|
$
|
30.7
|
|
|
$
|
19.1
|
|
Interest
expense
|
17.7
|
|
|
27.8
|
|
Depreciation and
amortization
|
20.7
|
|
|
25.2
|
|
EBITDA
(1)
|
$
|
69.1
|
|
|
$
|
72.1
|
|
|
|
|
|
Spin restructuring
charges
|
—
|
|
|
1.2
|
|
Spin costs
|
7.5
|
|
|
23.8
|
|
2013 restructuring
and related costs (2)
|
17.8
|
|
|
7.8
|
|
Adjusted EBITDA
(1)
|
$
|
94.4
|
|
|
$
|
104.9
|
|
|
|
|
|
SG&A
(3)
|
—
|
|
|
12.5
|
|
|
|
|
|
Normalized
EBITDA
|
$
|
94.4
|
|
|
$
|
117.4
|
|
|
|
|
|
(1)
|
Historical adjusted
EBITDA results on a continuing operations basis include costs
associated with supporting the Household Product business that are
not eligible to be reported in discontinued operations which affect
corporate SG&A. As such, both EBITDA and adjusted EBITDA
this quarter and this fiscal year are not comparable to the prior
year, and will not be comparable year-over-year as we move through
each of the first three quarters of fiscal 2016.
|
|
|
|
|
(2)
|
Excludes $0.7 and
$1.4 of accelerated depreciation for the first fiscal quarters of
2016 and 2015, respectively, which was included within Depreciation
and Amortization.
|
|
|
|
|
(3)
|
Corporate SG&A
has been adjusted to reflect an estimated full year run-rate of $74
in fiscal 2015.
|
|
|
|
|
5.
|
Segment Working
Capital metrics for Q1 2016 compared to Q4 2015 are presented
below.
|
|
|
|
Q1
2016
|
|
Days
|
|
Q4
2015
|
|
Days
|
Average receivables,
adjusted (1) (2)
|
$
|
245.2
|
|
|
37.6
|
|
|
$
|
246.7
|
|
|
37.2
|
|
Average inventories
(1)
|
356.2
|
|
|
106.5
|
|
|
362.0
|
|
|
107.1
|
|
Average accounts
payable (1)
|
197.1
|
|
|
58.9
|
|
|
185.4
|
|
|
54.8
|
|
|
|
|
|
|
|
|
|
Average working
capital (3)
|
$
|
404.3
|
|
|
|
|
$
|
423.4
|
|
|
|
% of net sales
(4)
|
17.0
|
%
|
|
|
|
17.5
|
%
|
|
|
|
|
|
|
(1)
|
Excludes amounts
identified as corporate.
|
|
|
|
|
(2)
|
Adjusted for trade
allowances recorded as a reduction of net sales per GAAP and
reported in accrued expenses on the Condensed Consolidated Balance
Sheets.
|
|
|
|
|
(3)
|
Working capital is
defined as receivables (less trade allowance in accrued
liabilities), plus inventories, less accounts payable. Average
working capital is calculated using an average of the four-quarter
end balances for each working capital component as of December 31,
2015 and September 30, 2015, respectively.
|
|
|
|
|
(4)
|
Average working
capital ÷ trailing four quarter net sales.
|
|
|
|
Statements included
in this working capital comparative are not guarantees of
performance and are inherently subject to known risks and
uncertainties, which could cause actual performance or achievement
to differ materially from those expressed in or indicated by those
statements. Numerous factors could cause the Company's actual
results and events to differ materially from those expressed or
implied by forward-looking statements. Refer to
"Forward-Looking Statements" included within this release, as well
as the Company's publicly-filed documents for the risks that may
cause actual results to differ from statements herein, including
its Annual Report on Form 10-K filed with the SEC on November 30,
2015.
|
|
6.
|
Segment net sales and
profitability for each quarter of fiscal 2015, respectively, are
presented below.
|
|
|
|
Q1
2015
|
|
Q2
2015
|
|
Q3
2015
|
|
Q4
2015
|
|
Fiscal
Year
2015
|
Net
Sales
|
|
|
|
|
|
|
|
|
|
Wet Shave
|
$
|
341.4
|
|
|
$
|
372.2
|
|
|
$
|
369.3
|
|
|
$
|
358.4
|
|
|
$
|
1,441.3
|
|
Sun and Skin
Care
|
54.3
|
|
|
130.2
|
|
|
153.3
|
|
|
65.8
|
|
|
403.6
|
|
Feminine
Care
|
95.8
|
|
|
101.6
|
|
|
104.1
|
|
|
96.7
|
|
|
398.2
|
|
All Other
|
45.6
|
|
|
47.1
|
|
|
46.2
|
|
|
39.2
|
|
|
178.1
|
|
Total net
sales
|
$
|
537.1
|
|
|
$
|
651.1
|
|
|
$
|
672.9
|
|
|
$
|
560.1
|
|
|
$
|
2,421.2
|
|
|
|
|
|
|
|
|
|
|
|
Segment
Profit
|
|
|
|
|
|
|
|
|
|
Wet Shave
|
$
|
90.5
|
|
|
$
|
99.8
|
|
|
$
|
56.4
|
|
|
$
|
62.0
|
|
|
$
|
308.7
|
|
Sun and Skin
Care
|
3.7
|
|
|
37.3
|
|
|
25.8
|
|
|
4.7
|
|
|
71.5
|
|
Feminine
Care
|
15.2
|
|
|
20.9
|
|
|
7.9
|
|
|
4.7
|
|
|
48.7
|
|
All Other
|
6.8
|
|
|
7.1
|
|
|
5.2
|
|
|
5.5
|
|
|
24.6
|
|
Total segment
profit
|
116.2
|
|
|
165.1
|
|
|
95.3
|
|
|
76.9
|
|
|
453.5
|
|
General corporate and
other expenses
|
(31.4)
|
|
|
(38.6)
|
|
|
(36.6)
|
|
|
(15.4)
|
|
|
(122.0)
|
|
Impairment
charge
|
—
|
|
|
—
|
|
|
—
|
|
|
(318.2)
|
|
|
(318.2)
|
|
Venezuela
deconsolidation charge
|
—
|
|
|
(79.3)
|
|
|
—
|
|
|
—
|
|
|
(79.3)
|
|
Spin costs
(1)
|
(23.8)
|
|
|
(32.2)
|
|
|
(55.7)
|
|
|
(30.3)
|
|
|
(142.0)
|
|
Spin restructuring
charges
|
(1.2)
|
|
|
(22.8)
|
|
|
(4.3)
|
|
|
—
|
|
|
(28.3)
|
|
2013 restructuring
and related costs (2)
|
(9.2)
|
|
|
(6.6)
|
|
|
(4.9)
|
|
|
(6.3)
|
|
|
(27.0)
|
|
Industrial sale
charges
|
—
|
|
|
—
|
|
|
(21.9)
|
|
|
(10.8)
|
|
|
(32.7)
|
|
Amortization of
intangibles
|
(4.1)
|
|
|
(3.6)
|
|
|
(3.8)
|
|
|
(3.6)
|
|
|
(15.1)
|
|
Cost of early debt
retirements
|
—
|
|
|
—
|
|
|
(59.6)
|
|
|
—
|
|
|
(59.6)
|
|
Interest and other
expense, net
|
(27.4)
|
|
|
(26.8)
|
|
|
(20.9)
|
|
|
(12.9)
|
|
|
(88.0)
|
|
Total earnings
from continuing operations before income taxes
|
$
|
19.1
|
|
|
$
|
(44.8)
|
|
|
$
|
(112.4)
|
|
|
$
|
(320.6)
|
|
|
$
|
(458.7)
|
|
|
|
|
|
(1)
|
Includes pre-tax
costs of $23.8, $31.5, $52.4, $30.1 and $137.8, respectively, for
the first, second, third and fourth quarter of fiscal 2015 and
fiscal year 2015, which were included in SG&A, and pre-tax
costs of $0.7, $3.3, $0.2 and $4.2, respectively, for the second,
third and fourth quarters of fiscal 2015 and fiscal year 2015,
included in Cost of products sold.
|
|
|
|
|
(2)
|
Includes pre-tax
costs of $0.3 for the third quarter of fiscal 2015 and fiscal year
2015 associated with certain information technology and related
activities, which were included in SG&A.
|
|
|
|
|
7.
|
On March 31,
2015, the Company deconsolidated its Venezuelan subsidiaries.
Included in consolidated results of operations, and reflected
below, are the historical results of the Company's Venezuela
operations through the second quarter of fiscal 2015 (reflected at
the official exchange rate of 6.30 bolivars per U.S.
dollar).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1
|
Q2
|
Q3
|
Q4
|
FY
|
Wet Shave - Net
Sales
|
Fiscal
2015
|
$9.6
|
$14.4
|
—
|
—
|
$24.0
|
|
|
|
|
|
|
|
|
|
Q1
|
Q2
|
Q3
|
Q4
|
FY
|
Wet Shave - Segment
Profit
|
Fiscal
2015
|
$3.3
|
$6.0
|
—
|
—
|
$9.3
|
|
|
|
|
8.
|
The sale of the
industrial blade business was completed in September 2015.
The historical results of the industrial blade business are
included in consolidated results of operations through September
30, 2015. Reflected below are the net sales for the
industrial blade business. The impact on All Other segment
profit is not material.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1
|
Q2
|
Q3
|
Q4
|
FY
|
Industrial - Net
Sales
|
Fiscal
2015
|
$10.7
|
$11.2
|
$12.4
|
$7.6
|
$41.9
|
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SOURCE Edgewell Personal Care Company