EDGEWELL PERSONAL CARE COMPANY 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, September 30,
2015 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 Total Adjusted
Restructuring Non-GAAP
Charges
--------------- ---------- -------------- ---------------
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 2013 Adjustments to Total Adjusted
Restructuring Restructuring Prior Year Tax Non-GAAP
Charges Charges Accruals
--------------- ---------- -------------- -------------- --------------- ---------------
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
