EDGEWELL PERSONAL CARE Co 10-Q for FY2024 Q1
EDGEWELL PERSONAL CARE Co (EPC)
10-Q
2024-02-07
For: 2023-12-31
View Original
Added on
April 08, 2026
About this 10-Q
EDGEWELL PERSONAL CARE Co filed this 10-Q on February 7, 2024, covering the quarter ended December 31, 2023 (FY2024 Q1).
Headline figures
Quarter ended December 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $488.9M
- up 4.2% from $469.1M a year earlier
- Net income
- $4.8M
- down 61.3% from net income of $12.4M a year earlier
- Diluted EPS
- $0.09
- down 62.5% from $0.24 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________
FORM 10-Q
_______________________________
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended December 31, 2023
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from _______________ to _______________
Commission File Number: 001-15401
____________________________________________________________________________________________________________
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I. R. S. Employer Identification No.) | |||||||||||||
| (Registrant’s telephone number, including area code) | ||||||||||||||
| (Address of principal executive offices and zip code) | ||||||||||||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☒ | Accelerated filer | ☐ | ||||||||||||
| Non-accelerated filer | ☐ | (Do not check if a smaller reporting company) | Smaller reporting company | |||||||||||
| Emerging growth company | ||||||||||||||
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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
Common shares, $0.01 par value - 49,933,117 shares as of January 31, 2024.
EDGEWELL PERSONAL CARE COMPANY
INDEX TO FORM 10-Q
| PART I. | FINANCIAL INFORMATION | |||||||
| Item 1. | Financial Statements | |||||||
Condensed Consolidated Statements of Earnings and Comprehensive Income for the three months ended | ||||||||
Condensed Consolidated Balance Sheets as of | ||||||||
Condensed Consolidated Statements of Cash Flows for the three months ended | ||||||||
Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three months ended | ||||||||
| Notes to Condensed Consolidated Financial Statements | ||||||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |||||||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | |||||||
| Item 4. | Controls and Procedures | |||||||
| PART II. | OTHER INFORMATION | |||||||
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |||||||
| Item 5. | Other Information | |||||||
| Item 6. | Exhibits | |||||||
| SIGNATURE | ||||||||
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
EDGEWELL PERSONAL CARE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
(unaudited, in millions, except per share data)
| Three Months Ended December 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Net sales | $ | $ | |||||||||||||||||||||
| Cost of products sold | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Selling, general and administrative expense | |||||||||||||||||||||||
| Advertising and sales promotion expense | |||||||||||||||||||||||
| Research and development expense | |||||||||||||||||||||||
| Restructuring charges | |||||||||||||||||||||||
| Operating income | |||||||||||||||||||||||
| Interest expense associated with debt | |||||||||||||||||||||||
| Other expense (income), net | ( | ||||||||||||||||||||||
| Earnings before income taxes | |||||||||||||||||||||||
| Income tax provision | |||||||||||||||||||||||
| Net earnings | $ | $ | |||||||||||||||||||||
| Earnings per share: | |||||||||||||||||||||||
| Basic net earnings per share | $ | $ | |||||||||||||||||||||
| Diluted net earnings per share | $ | $ | |||||||||||||||||||||
| Statements of Comprehensive Income: | |||||||||||||||||||||||
| Net earnings | $ | $ | |||||||||||||||||||||
| Other comprehensive income (loss), net of tax | |||||||||||||||||||||||
| Foreign currency translation adjustments | |||||||||||||||||||||||
Pension and postretirement activity, net of tax (benefit) of $( | ( | ( | |||||||||||||||||||||
Deferred loss on hedging activity, net of tax (benefit) of $( | ( | ( | |||||||||||||||||||||
| Total other comprehensive income, net of tax | |||||||||||||||||||||||
| Total comprehensive income | $ | $ | |||||||||||||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
3
EDGEWELL PERSONAL CARE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in millions, except share data)
| December 31, 2023 | September 30, 2023 | ||||||||||
| Assets | |||||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
Trade receivables, less allowance for doubtful accounts of $ | |||||||||||
| Inventories | |||||||||||
| Other current assets | |||||||||||
| Total current assets | |||||||||||
| Property, plant and equipment, net | |||||||||||
| Goodwill | |||||||||||
| Other intangible assets, net | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and Shareholders’ Equity | |||||||||||
| Current liabilities | |||||||||||
| Notes payable | $ | $ | |||||||||
| Accounts payable | |||||||||||
| Other current liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt | |||||||||||
| Deferred income tax liabilities | |||||||||||
| Other liabilities | |||||||||||
| Total liabilities | |||||||||||
| Shareholders’ equity | |||||||||||
Preferred shares, $ | |||||||||||
Common shares, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Retained earnings | |||||||||||
Common shares in treasury at cost, | ( | ( | |||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total shareholders’ equity | |||||||||||
| Total liabilities and shareholders’ equity | $ | $ | |||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
4
EDGEWELL PERSONAL CARE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in millions)
| Three Months Ended December 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Cash Flow from Operating Activities | |||||||||||
| Net earnings | $ | $ | |||||||||
| Depreciation and amortization | |||||||||||
| Share-based compensation expense | |||||||||||
| Loss on sale of assets | |||||||||||
| Deferred compensation payments | ( | ||||||||||
| Deferred income taxes | ( | ( | |||||||||
| Other, net | ( | ( | |||||||||
| Changes in operating assets and liabilities | ( | ( | |||||||||
| Net cash used by operating activities | $ | ( | $ | ( | |||||||
| Cash Flow from Investing Activities | |||||||||||
| Capital expenditures | ( | ( | |||||||||
| Collection of deferred purchase price on accounts receivable sold | |||||||||||
| Other, net | ( | ||||||||||
| Net cash used by investing activities | $ | ( | $ | ( | |||||||
| Cash Flow from Financing Activities | |||||||||||
| Cash proceeds from debt with original maturities greater than 90 days | |||||||||||
| Cash payments on debt with original maturities greater than 90 days | ( | ( | |||||||||
| Proceeds from debt with original maturities of 90 days or less | |||||||||||
| Repurchase of shares | ( | ( | |||||||||
| Dividends to common shareholders | ( | ( | |||||||||
| Net financing inflow from the Accounts Receivable Facility | |||||||||||
| Employee shares withheld for taxes | ( | ( | |||||||||
| Other, net | ( | ||||||||||
| Net cash from financing activities | $ | $ | |||||||||
| Effect of exchange rate changes on cash | |||||||||||
| Net decrease in cash and cash equivalents | ( | ( | |||||||||
| Cash and cash equivalents, beginning of period | |||||||||||
| Cash and cash equivalents, end of period | $ | $ | |||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
5
EDGEWELL PERSONAL CARE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(unaudited, in millions)
| Common Shares | Treasury Shares | ||||||||||||||||||||||||||||||||||||||||||||||
| Number | Par Value | Number | Amount | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Shareholders’ Equity | ||||||||||||||||||||||||||||||||||||||||
| Balance as of September 30, 2023 | $ | ( | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
| Net earnings | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Pension and postretirement activity | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Deferred loss on hedging activity | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Dividends declared to common shareholders | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Repurchase of shares including excise tax | — | — | ( | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||
| Activity under share plans | — | — | ( | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2023 | $ | ( | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
| Common Shares | Treasury Shares | ||||||||||||||||||||||||||||||||||||||||||||||
| Number | Par Value | Number | Amount | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Shareholders’ Equity | ||||||||||||||||||||||||||||||||||||||||
| Balance as of September 30, 2022 | $ | ( | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
| Net earnings | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Pension and postretirement activity | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Deferred gain on hedging activity | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Dividends declared to common shareholders | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Repurchase of shares including excise tax | — | — | ( | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||
| Activity under share plans | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2022 | $ | ( | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
6
EDGEWELL PERSONAL CARE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, in millions, except per share data)
Note 1 - Background and Basis of Presentation
Background
Edgewell Personal Care Company and its subsidiaries (collectively, “Edgewell” or the “Company”) is one of the world’s largest manufacturers and marketers of personal care products in the wet shave, sun and skin care, and feminine care categories. With operations in over 20 countries, the Company’s products are widely available in more than 50 countries.
The Company conducts its business in the following three segments:
•Wet Shave consists of products sold under the Schick®, Wilkinson Sword®, Edge, Skintimate®, Billie®, Shave Guard and our custom brands group (formerly sold under our Shave Guard and Personna® brands), as well as non-branded products. The Company’s wet shave products include razor handles and refillable blades, disposable shave products, and shaving gels and creams.
•Sun and Skin Care consists of Banana Boat® and Hawaiian Tropic® sun care products, Jack Black®, Bulldog® and Cremo® men’s grooming products, Billie women’s grooming products and Wet Ones® products.
•Feminine Care includes tampons, pads and liners sold under the Playtex Gentle Glide® and Sport®, Stayfree®, Carefree®, and o.b.® brands.
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of the Company and its controlled subsidiaries and have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) under the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). The preparation of the unaudited Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Actual results may differ materially from those estimates. All intercompany balances and transactions have been eliminated in consolidation and, in the opinion of management, all normal recurring adjustments considered necessary for a fair statement have been included in the interim results reported. The fiscal year-end balance sheet data was derived from audited consolidated financial statements, but do not include all of the annual disclosures required by GAAP; accordingly, these unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Company’s audited annual consolidated financial statements included in its Annual Report on Form 10-K filed with the SEC on November 28, 2023.
Recently Issued Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures to update income tax disclosure requirements primarily by requiring specific categories and greater disaggregation within the rate reconciliation and disaggregation of income taxes paid by jurisdiction. The amendments in the ASU also remove disclosures related to certain unrecognized tax benefits and deferred taxes. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. The amendments may be applied prospectively or retrospectively with early adoption is permitted. We are currently assessing the impact of the requirements on our consolidated financial statements and disclosures.
In November 2023, the FASB issued ASU No. 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures to expand reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in the ASU require that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to an entity's chief operating decision maker (“CODM”), a description of other segment items by reportable segment, and any additional measures of a segment's profit or loss used by the CODM when deciding how to allocate resources. Annual disclosures are required for fiscal years beginning after December 15, 2023. Interim disclosures are required for periods within fiscal years beginning after December 15, 2024. Retrospective application is required for all prior periods presented with early adoption is permitted. We are currently assessing the impact of the requirements on our consolidated financial statements and disclosures.
7
Recently Adopted Accounting Pronouncements
In September 2022, the Financial Accounting Standards Board issued Accounting Standards Update 2022-04, "Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations" which requires that a buyer in a supplier finance program disclose additional information about the program for financial statement users including a rollforward of those obligations. The Company adopted the standard as of October 1, 2023, except for amendments relating to the rollforward requirement, which is effective for fiscal years beginning after December 15, 2023.
Revision of Previously Issued Consolidated Financial Statements
As previously disclosed in the Company’s 2023 Annual Report on Form 10-K filed with the SEC on November 28, 2023, the Company evaluated aged accrued expenditures related to goods received but not yet invoiced by certain of its vendors (“GRNI”). Based upon an assessment, including evaluating the expiry of the applicable statute of limitations of the accrued expenditures, the Company concluded that $8.5 of aged accrued GRNI originating in years 2014 through 2018 were no longer required to be reflected as accounts payable on the Consolidated Balance Sheet as of September 30, 2023 and should have been reversed in prior fiscal years. The Company concluded that the misstatements were not material, either individually or in the aggregate, to its previously issued consolidated financial statements.
To correct the immaterial misstatements, the Company has revised the Consolidated Statements of Earnings and Comprehensive Income, Consolidated Statements of Cash Flows, and Consolidated Statements of Changes in Shareholders' Equity for the three months ended December 31, 2022 as well as the associated Notes to the Condensed Consolidated Financial Statements to reflect the corrections of these immaterial misstatements as of and for the three months ended December 31, 2022. There were no changes to previously issued total cash flows generated from (used by) operating, investing, or financing activities for three months ended December 31, 2022.
The following table reflects the revisions to the previously issued Consolidated Statements of Earnings and Comprehensive Income for the three months ended December 31, 2022:
| As Previously Reported | Adjustment | As Revised | ||||||||||||||||||
| Net sales | $ | $ | $ | |||||||||||||||||
| Cost of products sold | ( | |||||||||||||||||||
| Gross profit | ||||||||||||||||||||
| Operating income | ||||||||||||||||||||
| Earnings before income taxes | ||||||||||||||||||||
| Income tax provision | ||||||||||||||||||||
| Net earnings | ||||||||||||||||||||
| Earnings per share: | ||||||||||||||||||||
| Basic net earnings per share | $ | $ | $ | |||||||||||||||||
| Dilutive net earnings per share | ||||||||||||||||||||
| Total comprehensive income | ||||||||||||||||||||
The following table reflects the revisions to the previously issued Consolidated Statements of Cash Flows for the period ended December 31, 2022.
| As Previously Reported | Adjustment | As Revised | |||||||||||||||
| Net earnings | $ | $ | $ | ||||||||||||||
| Changes in operating assets and liabilities | ( | ( | ( | ||||||||||||||
8
Note 2 - Restructuring Charges
Operating Model Redesign
In fiscal 2024, the Company continues to take actions to strengthen its operating model, simplify the organization and improve manufacturing and supply chain efficiency and productivity. As a result of these actions, the Company expects to incur restructuring and repositioning related charges of approximately $19 in fiscal 2024. The Company has incurred restructuring and related charges as follows:
| Three Months Ended December 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Severance and related costs | $ | $ | |||||||||||||||||||||
| Asset write-off and accelerated depreciation | |||||||||||||||||||||||
| Consulting, project implementation and management, and other exit costs | |||||||||||||||||||||||
Total restructuring and related costs (1) | $ | $ | |||||||||||||||||||||
The following table summarizes the restructuring activities and related accrual for the three months ended December 31, 2023:
| Utilized | |||||||||||||||||||||||||||||||||||
| October 1, 2023 | Charge to Income | Cash | December 31, 2023 | ||||||||||||||||||||||||||||||||
| Severance and related costs | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||
| Consulting, project implementation and management, and other exit costs | ( | ||||||||||||||||||||||||||||||||||
| Total restructuring activities and related accrual | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||
Note 3 - Income Taxes
For the three months ended December 31, 2023, the Company had income tax expense of $1.2 , on Earnings before income taxes of $6.0 . The effective tax rate for the three months ended December 31, 2023 was 20.1 %. The difference between the federal statutory rate and the effective rate is primarily due to a favorable mix of earnings in lower tax rate jurisdictions.
For the three months ended December 31, 2022, the Company had income tax expense of $4.6 on Earnings before income taxes of $17.0 . The effective tax rate for the three months ended December 31, 2022 was 27.0 %. The difference between the federal statutory rate and the effective rate was primarily due to an unfavorable mix of earnings in higher tax rate jurisdictions.
9
Note 4 - Earnings per Share
Basic earnings per share is based on the weighted-average number of common shares outstanding during the period. Diluted earnings per share is based on the number of shares used for the basic earnings per share calculation, adjusted for the dilutive effect of share options, restricted share equivalent (“RSE”) and performance restricted share equivalent (“PRSE”) awards.
The following is the reconciliation between the number of weighted-average shares used in the basic and diluted earnings per share calculation:
| Three Months Ended December 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Basic weighted-average shares outstanding | |||||||||||||||||||||||
| Effect of dilutive securities: | |||||||||||||||||||||||
| Options, RSE and PRSE awards | |||||||||||||||||||||||
| Total dilutive securities | |||||||||||||||||||||||
| Diluted weighted-average shares outstanding | |||||||||||||||||||||||
The following weighted-average common shares were excluded from the calculation of diluted earnings per share because the effect of including these awards was antidilutive.
| Three Months Ended December 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Option awards | |||||||||||||||||||||||
| RSE and PRSE awards | |||||||||||||||||||||||
10
Note 5 - Goodwill and Intangible Assets
The following table sets forth goodwill by segment:
| Wet Shave | Sun and Skin Care | Feminine Care | Total | ||||||||||||||||||||
| Gross balance as of September 30, 2023 | $ | $ | $ | $ | |||||||||||||||||||
| Accumulated goodwill impairment | ( | ( | ( | ||||||||||||||||||||
| Net balance as of September 30, 2023 | $ | $ | $ | $ | |||||||||||||||||||
Changes in the three months ended December 31, 2023 | |||||||||||||||||||||||
| Cumulative translation adjustment | |||||||||||||||||||||||
Gross balance as of | $ | $ | $ | $ | |||||||||||||||||||
| Accumulated goodwill impairment | ( | ( | ( | ||||||||||||||||||||
Net balance as of | $ | $ | $ | $ | |||||||||||||||||||
The following table sets forth intangible assets by class:
| December 31, 2023 | September 30, 2023 | ||||||||||||||||||||||||||||||||||
| Carrying Amount | Accumulated Amortization | Net | Carrying Amount | Accumulated Amortization | Net | ||||||||||||||||||||||||||||||
| Indefinite lived | |||||||||||||||||||||||||||||||||||
| Trade names and brands | $ | $ | — | $ | $ | $ | — | $ | |||||||||||||||||||||||||||
| Amortizable | |||||||||||||||||||||||||||||||||||
| Trade names and brands | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Technology and patents | |||||||||||||||||||||||||||||||||||
| Customer related and other | |||||||||||||||||||||||||||||||||||
| Amortizable intangible assets | |||||||||||||||||||||||||||||||||||
| Total intangible assets | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Amortization expense was $7.8 and $7.7 for the three months ended December 31, 2023 and 2022, respectively. Estimated amortization expense for amortizable intangible assets is as follows:
| Estimated amortization expense | |||||
| Remainder of fiscal year 2024 | |||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| Thereafter | |||||
Goodwill and intangible assets deemed to have an indefinite life are not amortized but are instead reviewed annually for impairment or when indicators of a potential impairment are present. The Company’s annual impairment testing date is July 1. An interim impairment analysis may indicate that carrying amounts of goodwill and other intangible assets require adjustment or that remaining useful lives should be revised. The Company determined there was no triggering event requiring an interim impairment analysis during the three months ended December 31, 2023.
11
Note 6 - Supplemental Balance Sheet Information
| December 31, 2023 | September 30, 2023 | ||||||||||
| Inventories | |||||||||||
| Raw materials and supplies | $ | $ | |||||||||
| Work in process | |||||||||||
| Finished products | |||||||||||
| Total inventories | $ | $ | |||||||||
| Other Current Assets | |||||||||||
| Prepaid expenses | $ | $ | |||||||||
| Value added tax receivables | |||||||||||
| Income taxes receivable | |||||||||||
| Other | |||||||||||
| Total other current assets | $ | $ | |||||||||
| Property, Plant and Equipment | |||||||||||
| Land | $ | $ | |||||||||
| Buildings | |||||||||||
| Machinery and equipment | |||||||||||
| Capitalized software costs | |||||||||||
| Construction in progress | |||||||||||
| Total gross property, plant and equipment | |||||||||||
| Accumulated depreciation and amortization | ( | ( | |||||||||
| Total property, plant and equipment, net | $ | $ | |||||||||
| Other Current Liabilities | |||||||||||
| Accrued advertising and sales promotion | $ | $ | |||||||||
| Accrued trade allowances | |||||||||||
| Accrued salaries, vacations and incentive compensation | |||||||||||
| Income taxes payable | |||||||||||
| Returns reserve | |||||||||||
| Accrued interest | |||||||||||
| Other | |||||||||||
| Total other current liabilities | $ | $ | |||||||||
| Other Liabilities | |||||||||||
| Pensions and other retirement benefits | $ | $ | |||||||||
| Other | |||||||||||
| Total other liabilities | $ | $ | |||||||||
Note 7 - Accounts Receivable Facilities
The Company participates in accounts receivable facility programs both in the United States and Japan. These receivable agreements are between the Company and MUFG Bank, LTD, and the subsidiaries of both parties. Transfers under the accounts receivable repurchase agreements are accounted for as sales of accounts receivables, resulting in the receivables being derecognized from the Condensed Consolidated Balance Sheet. The purchaser assumes the credit risk at the time of sale and has the right at any time to assign, transfer, or participate any of its rights under the purchased receivables to another bank or financial institution. The purchase and sale of receivables under accounts receivable repurchase agreements is intended to be an absolute and irrevocable transfer without recourse by the purchaser to the Company for the creditworthiness of any obligor. The Company has considered its performance obligation to collect and service the receivables sold in the United States and Japan and has determined that such services are not material. The compensation received is considered acceptable servicing compensation and as such, the Company does not recognize a servicing asset or liability.
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Accounts receivables sold were $216.1 and $212.1 for the three months ended December 31, 2023 and 2022, respectively. The trade receivables sold that remained outstanding as of December 31, 2023 and September 30, 2023 were $82.4 and $82.1 , respectively. The net proceeds received were included in both Cash from operating activities and Cash used by investing activities on the Condensed Consolidated Statements of Cash Flows. The difference between the carrying amount of the trade receivables sold and the sum of the cash received is recorded as a loss on sale of receivables in Other expense (income), net in the Condensed Consolidated Statements of Earnings and Comprehensive Income. The loss on sale of trade receivables was $1.2 and $0.9 for the three months ended December 31, 2023 and 2022, respectively.
Note 8 - Debt
The detail of long-term debt was as follows:
| December 31, 2023 | September 30, 2023 | ||||||||||
| Senior notes, fixed interest rate of 5.5%, due 2028 | $ | $ | |||||||||
| Senior notes, fixed interest rate of 4.1%, due 2029 | |||||||||||
U.S. revolving credit facility (1) | |||||||||||
| Total | |||||||||||
Less unamortized debt issuance costs and discount (2) | |||||||||||
| Total long-term debt | $ | $ | |||||||||
(1)The U.S. revolving credit facility matures in April 2025.
(2)As of December 31, 2023, the balance for the Senior Notes due 2028 and the Senior Notes due 2029 are reflected net of debt issuance costs of $6.5 and $4.2 , respectively. As of September 30, 2023, the balance for the Senior Notes due 2028 and the Senior Notes due 2029 are reflected net of debt issuance costs of $6.9 and $4.4 , respectively.
Note 9 - Retirement Plans
The Company has several defined benefit pension plans covering employees in the U.S. and certain employees in other countries. The plans provide retirement benefits based on years of service and compensation. The Company also sponsors or participates in several other non-U.S. pension and postretirement arrangements, including various retirement and termination benefit plans, some of which are required by local law or coordinated with government-sponsored plans, which are not significant in the aggregate and, therefore, are not included in the information presented below.
The Company’s net periodic pension and postretirement costs for its material plans were as follows:
| Three Months Ended December 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Service cost | $ | $ | |||||||||||||||||||||
| Interest cost | |||||||||||||||||||||||
| Expected return on plan assets | ( | ( | |||||||||||||||||||||
| Recognized net actuarial loss | |||||||||||||||||||||||
| Net periodic cost | $ | $ | |||||||||||||||||||||
The service cost component of the net periodic cost associated with the Company’s retirement plans is recorded to Cost of products sold and SG&A on the Condensed Consolidated Statement of Earnings and Comprehensive Income. The remaining net periodic cost is recorded to Other expense (income), net on the Condensed Consolidated Statement of Earnings and Comprehensive Income.
13
Note 10 - Shareholders’ Equity
Share Repurchases
In January 2018, the Company’s Board of Directors (the “Board”) authorized the repurchase of up to 10.0 shares of the Company’s common stock, replacing the previous share repurchase authorization from May 2015. The Company repurchased 0.4 shares of its common stock for $15.0 during the three months ended December 31, 2023. There are 4.2 shares of common stock available for repurchase in the future under the Board’s authorization as of December 31, 2023 . Any future share repurchases may be made in the open market, privately negotiated transactions, or otherwise permitted, and in such amounts and at such times as the Company deems appropriate based upon prevailing market conditions, business needs, and other factors.
Dividends
Dividend activity in the three months ended December 31, 2023 are as follows:
| Date Declared | Record Date | Payable Date | Amount Per Share | |||||||||||||||||
| August 1, 2023 | September 7, 2023 | October 4, 2023 | $ | 0.15 | ||||||||||||||||
| November 2, 2023 | December 6, 2023 | January 4, 2024 | $ | 0.15 | ||||||||||||||||
On February 1, 2024, the Board declared a quarterly cash dividend of $0.15 per common share for the second fiscal quarter of 2024. The dividend will be payable on April 4, 2024 to shareholders of record as the close of business on March 7, 2024.
Dividends declared during the three months ended December 31, 2023 totaled $7.6 . Payments made for dividends during the three months ended December 31, 2023 totaled $7.6 .
Note 11 - Accumulated Other Comprehensive Loss
The following table presents the changes in AOCI, net of tax, by component:
| Foreign Currency Translation Adjustments | Pension and Post-retirement Activity | Hedging Activity | Total | ||||||||||||||||||||
| Balance as of October 1, 2023 | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||
| Other comprehensive income (loss), net of tax | ( | ( | |||||||||||||||||||||
| Reclassifications to earnings | ( | ( | |||||||||||||||||||||
Balance as of December 31, 2023 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Foreign Currency Translation Adjustments | Pension and Post-retirement Activity | Hedging Activity | Total | ||||||||||||||||||||
| Balance as of October 1, 2022 | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||
| Other comprehensive (loss) income, net of tax | ( | ( | |||||||||||||||||||||
| Reclassifications to earnings | ( | ( | |||||||||||||||||||||
| Balance as of December 31, 2022 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
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The following table presents the reclassifications out of AOCI:
| Three Months Ended December 31, | Affected Line Item in the Condensed Consolidated Statements of Earnings | |||||||||||||||||||||||||||||||
| Details of AOCI Components | 2023 | 2022 | ||||||||||||||||||||||||||||||
| Gain on cash flow hedges | ||||||||||||||||||||||||||||||||
| Foreign exchange contracts | $ | $ | Other expense (income), net | |||||||||||||||||||||||||||||
| Income tax expense | Income tax provision | |||||||||||||||||||||||||||||||
| Amortization of defined benefit pension and postretirement items | ||||||||||||||||||||||||||||||||
Actuarial losses (1) | $ | ( | $ | ( | ||||||||||||||||||||||||||||
| Income tax (benefit) | ( | ( | Income tax provision | |||||||||||||||||||||||||||||
| ( | ( | |||||||||||||||||||||||||||||||
| Total reclassifications for the period | $ | $ | ||||||||||||||||||||||||||||||
(1)These AOCI components are included in the computation of net periodic cost. See Note 9 of Notes to Condensed Consolidated Financial Statements.
Note 12 - Financial Instruments and Risk Management
In the ordinary course of business, the Company may enter into contractual arrangements (also referred to as derivatives) to reduce its exposure to foreign currency. The Company has master netting agreements with all of its counterparties that allow for the settlement of contracts in an asset position with contracts in a liability position in the event of default. The Company manages counterparty risk through the utilization of investment grade commercial banks, diversification of counterparties, and its counterparty netting arrangements. The section below outlines the types of derivatives in place as of December 31, 2023 and September 30, 2023, as well as the Company’s objectives and strategies for holding derivative instruments.
Foreign Currency Risk
A significant share of the Company’s sales is tied to currencies other than the U.S. dollar, the Company’s reporting currency. As such, a weakening of currencies relative to the U.S. dollar can have an unfavorable impact on reported earnings. Conversely, strengthening of currencies relative to the U.S. dollar can improve reported results. The primary currencies to which the Company is exposed include the euro, the Japanese yen, the British pound, the Canadian dollar, and the Australian dollar.
Additionally, the Company’s foreign subsidiaries enter into internal and external transactions that create non-functional currency balance sheet positions at the foreign subsidiary level. These exposures are generally the result of intercompany purchases, intercompany loans and, to a lesser extent, external purchases, and are revalued in the foreign subsidiary’s local currency at the end of each month. Changes in the value of the non-functional currency balance sheet positions in relation to the foreign subsidiary’s local currency results in an exchange gain or loss recorded in Other expense (income), net. The primary currency to which the Company’s foreign subsidiaries are exposed is the U.S. dollar.
Cash Flow Hedges
As of December 31, 2023, the Company maintains a cash flow hedging program related to foreign currency risk. These derivative instruments have a high correlation to the underlying exposure being hedged and have been deemed highly effective by the Company for accounting purposes in offsetting the associated risk.
The Company has forward currency contracts to hedge cash flow uncertainty associated with currency fluctuations. These transactions are accounted for as cash flow hedges. The Company had an unrealized pre-tax loss of $0.6 and an unrealized pre-tax gain of $4.4 as of December 31, 2023 and September 30, 2023, respectively, on these forward currency contracts, which are accounted for as cash flow hedges and included in AOCI. Assuming foreign exchange rates versus the U.S. dollar remain at December 31, 2023 levels over the next 12 months, the majority of the pre-tax loss included in AOCI as of December 31, 2023 is expected to be included in Other expense (income), net. Contract maturities for these hedges extend into fiscal 2025. As of December 31, 2023, there were 64 open foreign currency contracts with a total notional value of $99.9 .
Derivatives not Designated as Hedges
The Company has foreign currency derivative contracts, which are not designated as cash flow hedges for accounting purposes, to hedge balance sheet exposures. Any gains or losses on these contracts are expected to be offset by exchange gains or losses on the underlying exposures and, thus, are not expected to be subject to significant market risk. The change in the estimated fair
15
value of the foreign currency contracts for the three months ended December 31, 2023 and 2022, resulted in a loss of $ and $, respectively, and was recorded in Other expense (income), net in the Condensed Consolidated Statements of Earnings and Comprehensive Income. As of December 31, 2023, there were three open foreign currency derivative contracts not designated as cash flow hedges with a total notional value of $27.0 .
The following table provides estimated fair values of derivative instruments:
Fair Value of Assets (Liabilities) as of (1) | |||||||||||
| December 31, 2023 | September 30, 2023 | ||||||||||
| Derivatives designated as cash flow hedging relationships: | |||||||||||
| Foreign currency contracts | $ | ( | $ | ||||||||
| Derivatives not designated as cash flow hedging relationships: | |||||||||||
| Foreign currency contracts | $ | ( | $ | ||||||||
(1)Derivative assets are presented in Other current assets or Other assets. Derivative liabilities are presented in Other current liabilities or Other liabilities.
The following table provides the pre-tax amounts of gains and losses on derivative instruments:
| Three Months Ended December 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Derivatives designated as cash flow hedging relationships: | |||||||||||||||||||||||
| Foreign currency contracts | |||||||||||||||||||||||
Gain (loss) recognized in OCI (1) | $ | $ | ( | ||||||||||||||||||||
Gain reclassified from AOCI into income (1) (2) | |||||||||||||||||||||||
| Derivatives not designated as cash flow hedging relationships: | |||||||||||||||||||||||
| Foreign currency contracts | |||||||||||||||||||||||
Loss recognized in income (2) | $ | $ | |||||||||||||||||||||
(1)Each of these derivative instruments had a high correlation to the underlying exposure being hedged for the periods indicated and have been deemed highly effective by the Company in offsetting associated risk.
The following table provides financial assets and liabilities for balance sheet offsetting:
| As of December 31, 2023 | As of September 30, 2023 | ||||||||||||||||||||||
Assets (1) | Liabilities (2) | Assets (1) | Liabilities (2) | ||||||||||||||||||||
| Foreign currency contracts | |||||||||||||||||||||||
| Gross amounts of recognized assets (liabilities) | $ | $ | ( | $ | $ | ( | |||||||||||||||||
| Gross amounts offset in the balance sheet | ( | ( | |||||||||||||||||||||
| Net amounts of assets (liabilities) presented in the balance sheet | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||
(1)All derivative assets are presented in Other current assets or Other assets.
(2)All derivative liabilities are presented in Other current liabilities or Other liabilities.
Fair Value Hierarchy
Accounting guidance on fair value measurements for certain financial assets and liabilities requires that assets and liabilities carried at fair value be classified in one of the following three categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs reflecting the reporting entity’s own assumptions or external inputs from inactive markets.
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The following table sets forth the Company’s financial assets and liabilities, which are carried at fair value and measured on a recurring basis during the period, all of which are classified as Level 2 within the fair value hierarchy:
| December 31, 2023 | September 30, 2023 | ||||||||||
| Assets (Liabilities) at estimated fair value: | |||||||||||
| Deferred compensation liability | $ | ( | $ | ( | |||||||
| Derivatives - foreign currency contracts (liability) asset | ( | ||||||||||
| Net assets (liabilities) at estimated fair value | $ | ( | $ | ( | |||||||
The estimated fair value of the deferred compensation liability is determined based upon the quoted market prices of the investment options that are offered under the plan. As of December 31, 2023 and September 30, 2023, the estimated fair value of foreign currency contracts is the amount that the Company would receive or pay to terminate the contracts, considering first the quoted market prices of comparable agreements or, in the absence of quoted market prices, factors such as interest rates, currency exchange rates, and remaining maturities.
As of December 31, 2023 and September 30, 2023, the Company had no Level 1 financial assets or liabilities, other than pension plan assets, and no Level 3 financial assets or liabilities as of December 31, 2023 and September 30, 2023, respectively.
As of December 31, 2023 and September 30, 2023, the fair market value of fixed rate long-term debt was $1,139.8 and $1,028.6 , respectively, compared to its carrying value of $1,250.0
Note 13 - Segment Data
For an overview of the Company’s segments, refer to Note 1 of the Notes to Condensed Consolidated Financial Statements. Segment performance is evaluated based on segment profit, excluding certain U.S. GAAP items that management does not believe are indicative of ongoing operating performance due to their unusual or non-recurring nature and which may have a disproportionate positive or negative impact on the Company’s financial results in any particular period. Financial items, such as interest income and expense, are managed on a global basis at the corporate level and therefore are excluded from segment profit. The exclusion of such charges from segment results reflects management’s view on how management monitors and evaluates segment operating performance, generates future operating plans and makes strategic decisions regarding the allocation of capital.
The Company’s operating model includes some shared business functions across the segments, including product warehousing and distribution, transaction processing functions and, in most cases, combined sales force and management teams. The Company applies a fully allocated cost basis in which shared business functions are allocated between the segments.
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Segment net sales and profitability are presented below:
| Three Months Ended December 31, | |||||||||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||||||||
| Net Sales | |||||||||||||||||||||||||||||
| Wet Shave | $ | $ | |||||||||||||||||||||||||||
| Sun and Skin Care | |||||||||||||||||||||||||||||
| Feminine Care | |||||||||||||||||||||||||||||
| Total net sales | $ | $ | |||||||||||||||||||||||||||
| Segment Profit | |||||||||||||||||||||||||||||
| Wet Shave | $ | $ | |||||||||||||||||||||||||||
| Sun and Skin Care | ( | ||||||||||||||||||||||||||||
| Feminine Care | |||||||||||||||||||||||||||||
| Total segment profit | |||||||||||||||||||||||||||||
| General corporate and other expenses | ( | ( | |||||||||||||||||||||||||||
| Amortization of intangibles | ( | ( | |||||||||||||||||||||||||||
| Interest and other expense, net | ( | ( | |||||||||||||||||||||||||||
Restructuring and related costs (1) | ( | ( | |||||||||||||||||||||||||||
Acquisition and integration costs (2) | ( | ( | |||||||||||||||||||||||||||
Sun Care reformulation costs (3) | ( | ( | |||||||||||||||||||||||||||
Wet Ones manufacturing plant fire (4) | ( | ||||||||||||||||||||||||||||
| Other project costs | ( | ||||||||||||||||||||||||||||
| Total earnings before income taxes | $ | $ | |||||||||||||||||||||||||||
(1)Includes pre-tax SG&A of nil and $0.1 for the three months ended December 31, 2023 and 2022, respectively.
(2)Includes pre-tax SG&A of $0.7 and $2.1 for the three months ended December 31, 2023 and 2022, respectively, for the acquisition of Billie, Inc. on November 29, 2021.
(3)Includes pre-tax R&D of $0.5 and $0.5 for the three months ended December 31, 2023 and 2022, respectively, related to the reformulation, recall and destruction of certain Sun Care products.
(4)On December 1, 2023, a fire occurred at our Wet Ones manufacturing plant in Sidney, Ohio. There were no injuries reported and damage was limited to a single manufacturing process. As a consequence of the fire damage, there was a partial shutdown of the operations that manufacture Wet Ones raw materials. Through the three months ended December 31, 2023, the Company has incurred $1.5 in costs related to incremental material charges, labor and absorption as a result of the fire.
The following table presents the Company’s net sales by geographic area:
| Three Months Ended December 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Net Sales to Customers | |||||||||||||||||||||||
| United States | $ | $ | |||||||||||||||||||||
| International | |||||||||||||||||||||||
| Total net sales | $ | $ | |||||||||||||||||||||
18
Supplemental product information is presented below for net sales:
| Three Months Ended December 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Razors and blades | $ | $ | |||||||||||||||||||||
| Tampons, pads, and liners | |||||||||||||||||||||||
| Sun care products | |||||||||||||||||||||||
| Grooming products | |||||||||||||||||||||||
| Wipes and other skin care | |||||||||||||||||||||||
| Shaving gels and creams | |||||||||||||||||||||||
| Total net sales | $ | $ | |||||||||||||||||||||
Note 14 - Commitments and Contingencies
Legal Proceedings
The Company and its subsidiaries are subject to a number of legal proceedings in various jurisdictions arising out of its operations during the ordinary course of business. Many of these legal matters are in preliminary stages and involve complex issues of law and fact and may proceed for protracted periods of time. The amount of liability, if any, from these proceedings cannot be determined with certainty. The Company reviews its legal proceedings and claims, regulatory reviews and inspections and other legal proceedings on an ongoing basis and follows appropriate accounting guidance when making accrual and disclosure decisions. The Company establishes accruals for those contingencies when the incurrence of a loss is probable and can be reasonably estimated and discloses the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued if such disclosure is necessary for its financial statements to not be misleading. The Company does not record liabilities when the likelihood that the liability has been incurred is probable, but the amount cannot be reasonably estimated. Based upon present information, the Company believes that its liability, if any, arising from such pending legal proceedings, asserted legal claims, and known potential legal claims which are likely to be asserted, is not reasonably likely to be material to its financial position, results of operations or cash flows, when taking into account established accruals for estimated liabilities.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(Amounts in millions, except per share data, unaudited)
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited Condensed Consolidated Financial Statements and the accompanying notes included in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K filed with the SEC on November 28, 2023 (the “2023 Annual Report”). The following discussion may contain forward-looking statements that reflect our plans, estimates, and beliefs and involve risks, uncertainties, and assumptions. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those discussed within “Forward-Looking Statements” below and in Item 1A. Risk Factors and “Forward-Looking Statements” included within our 2023 Annual Report.
Forward-Looking Statements
This document contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of Edgewell Personal Care Company or any of our businesses (the “Company”). Forward-looking statements generally can be identified by the use of words or phrases such as “believe,” “expect,” “expectation,” “anticipate,” “may,” “could,” “intend,” “estimate,” “plan,” “target,” “predict,” “likely,” “will,” “should,” “forecast,” “outlook,” “strategy,” or other similar words or phrases. These statements are not based on historical facts, but instead reflect our expectations, estimates or projections concerning future results or events, including, without limitation, the future earnings and performance of the Company or any of our businesses. Many factors outside our control could affect the realization of these estimates. 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 our actual results to differ materially from those indicated by those statements. We cannot assure you that any of our expectations, estimates or projections will be achieved. The forward-looking statements included in this report are only made as of the date of this report, and we disclaim any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances, except as required by law. You should not place undue reliance on these statements.
In addition, other risks and uncertainties not presently known to us or that we presently consider immaterial could significantly affect the forward-looking statements. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. Risks and uncertainties include those detailed from time to time in our publicly filed documents, including in Item 1A. Risk Factors of Part I of our 2023 Annual Report.
Non-GAAP Financial Measures
While we report financial results in accordance with GAAP, this discussion also includes non-GAAP measures. These non-GAAP measures are referred to as “adjusted” or “organic” and exclude items which are considered by the Company as unusual or non-recurring, and which may have a disproportionate positive or negative impact on the Company’s financial results in any particular period. Reconciliations of non-GAAP measures are included within this Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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. We use this non-GAAP information internally to make operating decisions and believe it is helpful to investors because it allows more meaningful period-to-period comparisons of ongoing operating results. Given certain significant events, we view the use of non-GAAP measures that take into account the impact of these unique events as particularly valuable in understanding our underlying operational results and providing insights into future performance. The information can also be used to perform trend 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 also a component in determining management’s incentive compensation. Finally, we believe this information provides more transparency.
The following provides additional detail on our non-GAAP measures for the periods presented:
•We analyze net sales and segment profit on an organic basis to better measure the comparability of results between periods. Organic net sales and organic segment profit exclude the impact of changes in foreign currency translation.
◦Segment profit will be impacted by fluctuations in translation and transactional foreign currency. The impact of currency was applied to segments using management’s best estimate.
•Additionally, we utilize “adjusted” non-GAAP measures including adjusted gross profit, adjusted selling general and administrative (“SG&A”), adjusted operating income, adjusted income taxes, adjusted net earnings, and adjusted diluted earnings per share internally to make operating decisions.
All comparisons are with the same period in the prior year, unless otherwise noted.
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Industry and Market Data
Unless we indicate otherwise, we base the information contained or incorporated by reference herein, concerning our industry on our general knowledge and expectations. Our market position, market share, and industry market size are estimates based on internal and external data from various industry analyses, our internal research and adjustments, and assumptions that we believe to be reasonable. We have not independently verified data from industry analyses and cannot guarantee its accuracy or completeness. In addition, we believe that industry, market size, market position and market share data within our industry provides general guidance but is inherently imprecise and has not been verified by any independent source. Further, our estimates and assumptions involve risks and uncertainties and are subject to change based on various factors, including those discussed in Item 1A. Risk Factors in Part I of our 2023 Annual Report. These and other factors could cause results to differ materially from those expressed in the estimates and assumptions. You are cautioned not to place undue reliance on this data.
Retail sales for purposes of market size, market position and market share information are based on retail sales in U.S. dollars.
Trademarks and Trade Names
We own or have rights to use trademarks and trade names that we use in conjunction with the operation of our business, which appear throughout this Quarterly Report on Form 10-Q. We may also refer to brand names, trademarks, service marks and trade names of other companies and organizations, which are the property of their respective owners.
21
Executive Summary
The following is a summary of key results for the first quarter of fiscal 2024, as compared to the corresponding periods in fiscal 2023. In addition to net sales, net earnings and earnings per share (“EPS”) for the periods presented were also impacted by certain costs or income, as described in the table below. The impact of these items on reported net earnings and EPS are provided as a reconciliation of net earnings and EPS to adjusted net earnings and adjusted diluted EPS, both of which are non-GAAP measures.
First Quarter of Fiscal 2024
•Net sales in the first quarter of fiscal 2024 increased $19.8, or 4.2%, to $488.9, as compared to the prior year quarter. Organic net sales increased $14.3, or 3.1%, compared to the prior year quarter, as international markets increased $28.7 or 16.2%, primarily driven by strong performance across all segments, and reflecting growth from higher volumes and pricing across wet shave and grooming, partially offset by lower net sales in North America of $14.4 or 4.9%. In aggregate, organic net sales growth was driven by increased pricing, with volumes essentially flat.
•Net earnings in the first quarter of fiscal 2024 were $4.8 compared to $12.4 in the prior year quarter. On an adjusted basis, net earnings for the first quarter of fiscal 2024 were $12.0 compared to $16.5 in the prior year quarter. Adjusted net earnings decreased primarily due to increased SG&A and advertising and promotion expense (“A&P”) in the current quarter.
•Net earnings per diluted share during the first quarter of fiscal 2024 were $0.09 compared to $0.24 in the prior year quarter. On an adjusted basis, net earnings per diluted share during the first quarter of fiscal 2024 were $0.24 compared to $0.32 in the prior year quarter.
| Three Months Ended December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||
| Gross Profit | SG&A | Operating Income | EBIT(1) | Income taxes | Net Earnings | Diluted EPS | |||||||||||||||||||||||||||||||||||
| GAAP — Reported | $ | 197.7 | $ | 103.3 | $ | 26.1 | $ | 6.0 | $ | 1.2 | $ | 4.8 | $ | 0.09 | |||||||||||||||||||||||||||
| Restructuring and related costs | — | — | 6.8 | 6.8 | 1.7 | 5.1 | 0.11 | ||||||||||||||||||||||||||||||||||
| Acquisition and integration costs | — | 0.7 | 0.7 | 0.7 | 0.2 | 0.5 | 0.01 | ||||||||||||||||||||||||||||||||||
| Sun Care reformulation costs | — | — | 0.5 | 0.5 | 0.1 | 0.4 | 0.01 | ||||||||||||||||||||||||||||||||||
| Wet Ones manufacturing plant fire | 1.5 | — | 1.5 | 1.5 | 0.4 | 1.1 | 0.02 | ||||||||||||||||||||||||||||||||||
| Other project costs | — | 0.1 | 0.1 | 0.1 | — | 0.1 | — | ||||||||||||||||||||||||||||||||||
| Total Adjusted Non-GAAP | $ | 199.2 | $ | 102.5 | $ | 35.7 | $ | 15.6 | $ | 3.6 | $ | 12.0 | $ | 0.24 | |||||||||||||||||||||||||||
| GAAP as a percent of net sales | 40.4 | % | 21.1 | % | 5.3 | % | GAAP effective tax rate | 20.1 | % | ||||||||||||||||||||||||||||||||
| Adjusted as a percent of net sales | 40.7 | % | 21.0 | % | 7.3 | % | Adjusted effective tax rate | 22.8 | % | ||||||||||||||||||||||||||||||||
| Three Months Ended December 31, 2022 | |||||||||||||||||||||||||||||||||||||||||
| Gross Profit | SG&A | Operating Income | EBIT(1) | Income taxes | Net Earnings | Diluted EPS | |||||||||||||||||||||||||||||||||||
| GAAP — Reported | $ | 189.6 | $ | 95.7 | $ | 31.9 | $ | 17.0 | $ | 4.6 | $ | 12.4 | $ | 0.24 | |||||||||||||||||||||||||||
| Restructuring and related costs | — | 0.1 | 2.8 | 2.8 | 0.7 | 2.1 | 0.04 | ||||||||||||||||||||||||||||||||||
| Acquisition and integration costs | — | 2.1 | 2.1 | 2.1 | 0.5 | 1.6 | 0.03 | ||||||||||||||||||||||||||||||||||
| Sun Care reformulation costs | — | — | 0.5 | 0.5 | 0.1 | 0.4 | 0.01 | ||||||||||||||||||||||||||||||||||
| Total Adjusted Non-GAAP | $ | 189.6 | $ | 93.5 | $ | 37.3 | $ | 22.4 | $ | 5.9 | $ | 16.5 | $ | 0.32 | |||||||||||||||||||||||||||
| GAAP as a percent of net sales | 40.4 | % | 20.4 | % | 6.8 | % | GAAP effective tax rate | 27.0 | % | ||||||||||||||||||||||||||||||||
| Adjusted as a percent of net sales | 40.4 | % | 19.9 | % | 8.0 | % | Adjusted effective tax rate | 26.4 | % | ||||||||||||||||||||||||||||||||
(1)EBIT is defined as Earnings before Income taxes.
22
Operating Results
The following table presents changes in net sales for the first quarter of fiscal 2024, as compared to the corresponding periods in fiscal 2023, and provides a reconciliation of organic net sales to reported amounts.
Net Sales
| Net Sales - Total Company | |||||||||||||||||||||||
| Period Ended December 31, 2023 | |||||||||||||||||||||||
| Q1 | % Chg | ||||||||||||||||||||||
| Net sales - fiscal 2023 | $ | 469.1 | |||||||||||||||||||||
| Organic | 14.3 | 3.1 | % | ||||||||||||||||||||
| Impact of currency | 5.5 | 1.1 | % | ||||||||||||||||||||
| Net sales - fiscal 2024 | $ | 488.9 | 4.2 | % | |||||||||||||||||||
For the first quarter of fiscal 2024, net sales were $488.9, an increase of $19.8, or 4.2%, including a $5.5, or 1.1%, favorable impact from currency movements. Organic net sales increased $14.3, or 3.1%, as international markets across all segments increased 16.2%, reflecting growth from higher volumes and pricing across Wet Shave and Grooming, partially offset by lower net sales in North America which decreased by 4.9%. In aggregate, organic net sales growth was driven by increased pricing, with volumes essentially flat.
For further discussion regarding net sales, including a summary of reported versus organic changes, see “Segment Results.”
Gross Profit
Gross profit was $197.7 during the first quarter of fiscal 2024, compared to $189.6 in the prior year quarter, an increase of $8.1 or 4.3%. Gross margin as a percent of net sales for the first quarter of fiscal 2023 was 40.4%, or flat compared to the prior year quarter. Adjusted gross margin as a percent of net sales was 40.7% compared to 40.4% in the prior year quarter. The increase of 30-basis points was due to productivity savings of approximately 380-basis points, the benefit of higher pricing of approximately 210-basis points, and approximately 70-basis points of favorable currency, more than offset core gross inflationary pressures of approximately 70-basis points, transitory cost headwinds related to unfavorable absorption and heightened unit cost inflation trapped in inventory of 520-basis points and 40-basis points of negative mix and other.
Selling, General and Administrative Expense
SG&A was $103.3, or 21.1%, of net sales in the first quarter of fiscal 2024 compared to $95.7, or 20.4%, of net sales in the prior year quarter. Adjusted SG&A as a percent of net sales was 21.0%, an increase of 110-basis points, primarily driven by higher people and incentive compensation expenses, and the impact of unfavorable currency movements.
Advertising and Sales Promotion Expense
For the first quarter of fiscal 2024, A&P was $48.2, an increase of $2.3, or 5.0%, compared to $45.9 in the prior year quarter. A&P as a percent of net sales was 9.9%, compared to 9.8% in the prior year quarter, primarily due to timing of brand investments and marketing campaigns.
Research and Development Expense
Research and development expense (“R&D”) for the first quarter of fiscal 2024 was $13.3, a decrease of $0.1, or 0.7%, compared to $13.4 in the prior year quarter. As a percent of net sales, R&D was 2.7% in the first quarter of fiscal 2024 compared to 2.9% in the prior year quarter.
Interest Expense Associated with Debt
Interest expense associated with debt for the first quarter of fiscal 2024 was $19.8, a decrease of $0.1, or 0.5%, compared to $19.9 in the prior year quarter. The decrease in interest expense was the result of a lower overall debt balance on the Revolving Credit Facility, partially offset by higher interest rates.
23
Other expense (income), net
Other expense (income), net was $0.3 of expense in the first quarter of fiscal 2024, a decrease in income of $5.3, or 106.0%, compared to $5.0 of income in the prior year quarter. The change compared to the prior year quarter was primarily driven by lower foreign currency hedge gains.
Income Tax Provision
The effective tax rate for the first quarter of 2024 was 20.1% compared to 27.0% in the prior year period. The fiscal 2024 effective tax rate reflects a more favorable mix of earnings in lower tax rate jurisdictions and the impact of a change in our prior estimates. On an adjusted basis, the effective tax rate was 22.8% and 26.4% for the first quarter of 2024 and 2023, respectively.
Operating Model Redesign
In fiscal 2024, the Company is continuing to strengthen its operating model, simplify the organization and improve manufacturing and supply chain efficiency. As a result of these actions, we expect to incur charges of approximately $19 in fiscal 2024. We incurred $6.8 during the first quarter of fiscal 2024, primarily related to employee severance and related costs.
Segment Results
The following tables present changes in segment net sales and segment profit for the first quarter of fiscal 2024, compared to the corresponding periods in fiscal 2023, and provide a reconciliation of organic segment net sales and organic segment profit to reported amounts. For a reconciliation of segment profit to Earnings before income taxes, refer to Note 13 of Notes to Condensed Consolidated Financial Statements.
Our operating model includes some shared business functions across segments, including product warehousing and distribution, transaction processing functions and, in most cases, a combined sales force and management teams. We apply a fully allocated cost basis in which shared business functions are allocated between segments.
Wet Shave
| Net Sales - Wet Shave | |||||||||||||||||||||||
Period Ended December 31, 2023 | |||||||||||||||||||||||
| Q1 | % Chg | ||||||||||||||||||||||
Net sales - fiscal 2023 | $ | 275.3 | |||||||||||||||||||||
| Organic | 22.4 | 8.1 | % | ||||||||||||||||||||
| Impact of currency | 4.0 | 1.5 | % | ||||||||||||||||||||
Net sales - fiscal 2024 | $ | 301.7 | 9.6 | % | |||||||||||||||||||
Wet Shave net sales for the first quarter of fiscal 2024 increased $26.4, or 9.6%, including a $4.0 or 1.5% favorable impact from currency. Organic net sales increased $22.4, or 8.1%, reflecting an increase in Men’s and Women’s Systems, Disposables and Shave Preps. International organic sales increased 18.3%, driven by strong volume and price growth in most international markets, with notable growth in key Asian markets, partially offset by a 2.0% decrease in North American sales.
| Segment Profit -Wet Shave | |||||||||||||||||||||||
Period Ended December 31, 2023 | |||||||||||||||||||||||
| Q1 | % Chg | ||||||||||||||||||||||
Segment profit - fiscal 2023 | $ | 35.7 | |||||||||||||||||||||
| Organic | 14.4 | 40.3 | % | ||||||||||||||||||||
| Impact of currency | 3.6 | 10.1 | % | ||||||||||||||||||||
Segment profit - fiscal 2024 | $ | 53.7 | 50.4 | % | |||||||||||||||||||
Wet Shave segment profit for the first quarter of fiscal 2024 was $53.7, an increase of $18.0, or 50.4%. Organic segment profit increased $14.4, or 40.3%, reflecting higher net sales and higher gross margins.
24
Sun and Skin Care
| Net Sales - Sun and Skin Care | |||||||||||||||||||||||
Period Ended December 31, 2023 | |||||||||||||||||||||||
| Q1 | % Chg | ||||||||||||||||||||||
Net sales - fiscal 2023 | $ | 112.9 | |||||||||||||||||||||
| Organic | 1.0 | 0.9 | % | ||||||||||||||||||||
| Impact of currency | 1.5 | 1.3 | % | ||||||||||||||||||||
Net sales - fiscal 2024 | $ | 115.4 | 2.2 | % | |||||||||||||||||||
Sun and Skin Care net sales for the first quarter of fiscal 2024 increased $2.5, or 2.2%. Organic net sales increased $1.0, or 0.9%, driven by mid-single-digit Sun Care growth across both North America and International markets, partially offset by lower sales in Men’s grooming and Wet One’s. Organic net sales in International markets increased 8.0%, led by strong Sun Care demand in Latin America and Europe, while North America organic net sales decreased 2.3%, primarily driven by lower volumes.
| Segment Profit - Sun and Skin Care | |||||||||||||||||||||||
Period Ended December 31, 2023 | |||||||||||||||||||||||
| Q1 | % Chg | ||||||||||||||||||||||
Segment profit - fiscal 2023 | $ | 13.3 | |||||||||||||||||||||
| Organic | (15.1) | (113.6) | % | ||||||||||||||||||||
| Impact of currency | 0.5 | 3.8 | % | ||||||||||||||||||||
Segment (loss) - fiscal 2024 | $ | (1.3) | (109.8) | % | |||||||||||||||||||
Segment loss for the first quarter of fiscal 2024 was $1.3, a decrease of $14.6, or 109.8%. Organic segment profit decreased $15.1, or 113.6%, primarily driven by lower gross profit resulting from significantly higher inflation related costs.
Feminine Care
| Net Sales - Feminine Care | |||||||||||||||||||||||
Period Ended December 31, 2023 | |||||||||||||||||||||||
| Q1 | % Chg | ||||||||||||||||||||||
Net sales - fiscal 2023 | $ | 80.9 | |||||||||||||||||||||
| Organic | (9.1) | (11.2) | % | ||||||||||||||||||||
| Impact of currency | — | — | % | ||||||||||||||||||||
Net sales - fiscal 2024 | $ | 71.8 | (11.2) | % | |||||||||||||||||||
Feminine Care net sales for the first quarter of fiscal 2024 was $71.8, a decrease of $9.1, or 11.2%, primarily due to a decline in Tampons, reflective of the comparison to last years competitive product out-of-stocks and further retailer inventory reductions this fiscal quarter.
| Segment Profit - Feminine Care | |||||||||||||||||||||||
Period Ended December 31, 2023 | |||||||||||||||||||||||
| Q1 | % Chg | ||||||||||||||||||||||
Segment profit - fiscal 2023 | $ | 11.9 | |||||||||||||||||||||
| Organic | (4.5) | (37.9) | % | ||||||||||||||||||||
| Impact of currency | (0.1) | (0.8) | % | ||||||||||||||||||||
Segment profit - fiscal 2024 | $ | 7.3 | (38.7) | % | |||||||||||||||||||
Feminine Care segment profit for the first quarter of fiscal 2024 was $7.3, a decrease of $4.6, or 38.7%. Organic segment profit decreased $4.5, or 37.9%, primarily driven by lower sales and the resulting impact on gross profit.
25
General Corporate and Other Expenses
| Three Months Ended December 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Corporate expenses | $ | 16.2 | $ | 15.9 | |||||||||||||||||||
| Amortization of intangibles | 7.8 | 7.7 | |||||||||||||||||||||
| Interest and other expense, net | 20.1 | 14.9 | |||||||||||||||||||||
| Restructuring and related costs | 6.8 | 2.8 | |||||||||||||||||||||
| Acquisition and integration costs | 0.7 | 2.1 | |||||||||||||||||||||
| Sun Care reformulation costs | 0.5 | 0.5 | |||||||||||||||||||||
| Wet Ones manufacturing plant fire | 1.5 | — | |||||||||||||||||||||
| Other project costs | 0.1 | — | |||||||||||||||||||||
| General corporate and other expenses | $ | 53.7 | $ | 43.9 | |||||||||||||||||||
| % of net sales | 11.0 | % | 9.4 | % | |||||||||||||||||||
For the first quarter of fiscal 2024, corporate expenses were $16.2, or 3.3%, of net sales, compared to $15.9, or 3.4%, of net sales in the prior year quarter. For the first quarter of fiscal 2024, the increase in corporate expenses was primarily due to higher people and incentive compensation costs.
Wet Ones manufacturing plant fire
On December 1, 2023, a fire occurred at our Wet Ones manufacturing plant in Sidney, Ohio. There were no injuries reported and damage was limited to a single manufacturing process. As a consequence of the fire damage, there was a partial shutdown of the operations that manufacture Wet Ones raw materials. Through the three months ended December 31, 2023, the Company has incurred $1.5 in costs related to incremental material charges, labor and absorption as a result of the fire.
26
Liquidity and Capital Resources
As of December 31, 2023, a significant portion of our cash balances was located outside the U.S. Given our extensive international operations, a significant portion of our cash is denominated in foreign currencies. Refer to Note 12 of Notes to Condensed Consolidated Financial Statements for a discussion of the primary currencies to which the Company is exposed. We manage our worldwide cash requirements by reviewing available funds among the many subsidiaries through which we conduct business and the cost effectiveness with which those funds can be accessed. We generally repatriate a portion of current year earnings from select non-U.S. subsidiaries only if the economic cost of the repatriation is not considered material.
Our cash is deposited with multiple counterparties which consist of major financial institutions. We consistently monitor positions with, and credit ratings of, counterparties both internally and by using outside ratings agencies.
Our total borrowings as of December 31, 2023 and September 30, 2023 were as follows:
| Interest Type | Currency | December 31, 2023 | September 30, 2023 | |||||||||||||||||
| Long-term notes | fixed | USD | $ | 1,250.0 | $ | 1,250.0 | ||||||||||||||
| Revolver loans borrowed under credit facility | variable | USD | 213.0 | 122.0 | ||||||||||||||||
| Short-term notes payable | variable | various | 24.2 | 19.5 | ||||||||||||||||
| Total borrowings | $ | 1,487.2 | $ | 1,391.5 | ||||||||||||||||
Our Revolver utilization is summarized below.
| December 31, 2023 | September 30, 2023 | ||||||||||
| Total revolver capacity | $ | 425.0 | $ | 425.0 | |||||||
| Less: Revolver borrowings | 213.0 | 122.0 | |||||||||
| Less: Outstanding letters of credit | 5.4 | 5.9 | |||||||||
| Revolver balance available | $ | 206.6 | $ | 297.1 | |||||||
Historically, we have generated, and expect to continue to generate, favorable cash flows from operations. Our cash flows are affected by the seasonality of our Sun Care businesses, typically resulting in higher net sales and increased cash generated in the second and third quarters of each fiscal year. We believe our cash on hand, cash flows from operations and borrowing capacity under the Revolving Credit Facility will be sufficient to satisfy our future working capital requirements, interest payments, R&D activities, capital expenditures, and other financing requirements for at least the next 12 months. We will continue to monitor our cash flows, spending and liquidity needs.
Short-term financing needs primarily consist of working capital requirements and interest payments on our long-term debt. Long-term financing needs will depend largely on potential growth opportunities, including acquisition activity and repayment or refinancing of our long-term debt obligations. Our long-term liquidity may be influenced by our ability to borrow additional funds, renegotiate existing debt, and raise equity under terms that are favorable to us. We may, from time-to-time, seek to repurchase shares of our common stock. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.
As of December 31, 2023, we were in compliance with the provisions and covenants associated with our debt agreements.
27
Cash Flows
A summary of our cash flow activities is provided in the following table:
| Three Months Ended December 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Net cash (used by) from: | |||||||||||
| Operating activities | $ | (72.9) | $ | (86.3) | |||||||
| Investing activities | (6.0) | (11.2) | |||||||||
| Financing activities | 69.8 | 82.9 | |||||||||
| Effect of exchange rate changes on cash | 6.9 | 10.0 | |||||||||
| Net decrease in cash and cash equivalents | $ | (2.2) | $ | (4.6) | |||||||
Operating Activities
Cash flow used by operating activities was $72.9 during the first quarter of fiscal 2024, compared to a use of $86.3 during the prior year period. The decrease in cash used versus the same period in the prior year was driven by a lower net working capital build.
Investing Activities
Net cash used by investing activities was $6.0 during the first quarter of fiscal 2024, compared to $11.2 during the prior year period. Capital expenditures were $6.5 during the first quarter of fiscal 2024, compared to $11.3 in the prior year period.
Financing Activities
Net cash from financing activities was $69.8 during the first quarter of fiscal 2024, compared to $82.9 in the prior year period. During the first quarter of fiscal 2024, we had net borrowings of $91.0 under the Revolving Credit Facility, compared to $100.0 in the prior year period. Dividend payments totaled $7.6 in the first quarter of fiscal 2024, compared to $8.3 in the prior year period. We had financing outflows for employee equity awards held for taxes totaling $7.0 in the first quarter of fiscal 2024, compared to $8.1 in the prior year period.
Share Repurchases
During the first three months of fiscal 2024, we repurchased 0.4 shares of our common stock for $15.0. We have 4.2 shares remaining under the Repurchase Plan as of December 31, 2023. Future share repurchases, if any, would be made in the open market, privately negotiated transactions or otherwise, in such amounts and at such times as we deem appropriate based upon prevailing market conditions, business needs and other factors.
Dividends
Dividend activity for the three months ended December 31, 2023 are as follows:
| Date Declared | Record Date | Payable Date | Amount Per Share | |||||||||||||||||
| August 1, 2023 | September 7, 2023 | October 4, 2023 | $ | 0.15 | ||||||||||||||||
| November 2, 2023 | December 6, 2023 | January 4, 2024 | $ | 0.15 | ||||||||||||||||
On February 1, 2024, the Board declared a quarterly cash dividend of $0.15 per common share for the second fiscal quarter of 2024. The dividend will be payable on April 4, 2024 to shareholders of record as the close of business on March 7, 2024.
Dividends declared during the three months ended December 31, 2023 totaled $7.6. Payments made for dividends during the three months ended December 31, 2023 totaled $7.6.
Commitments and Contingencies
Contractual Obligations
As of December 31, 2023, we had outstanding borrowings of $213.0 under the Revolving Credit Facility. As of December 31, 2023, future minimum repayments of debt were: $213.0 in fiscal 2025, $750.0 in fiscal 2028 and $500.0 in fiscal 2029.
There have been no other material changes in our contractual obligations since the presentation in our 2023 Annual Report.
28
Recent Accounting Pronouncements
Information regarding new accounting pronouncements is included in Note 1 of the Notes to Condensed Consolidated Financial Statements
Critical Accounting Policies
Our critical accounting policies and estimates are fully described in our 2023 Annual Report. The preparation of these financial statements requires us to make estimates and assumptions. These estimates and assumptions can be subjective and complex, and consequently, actual results could differ from those estimates. There have been no significant changes to our critical accounting policies and estimates since September 30, 2023.
29
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
(Amounts in millions)
The market risk inherent in our financial instruments and positions represents the potential loss arising from adverse changes in currency rates, commodity prices, and interest rates. At times, we enter into contractual arrangements (derivatives) to reduce these exposures. For further information on our foreign currency derivative instruments, refer to Note 12 of Notes to our Condensed Consolidated Financial Statements. As of December 31, 2023, there were no open derivative or hedging instruments for future purchases of raw materials or commodities. Our exposure to interest rate risk relates primarily to our variable-rate debt instruments, which currently bear interest based on Secured Overnight Financing Rate (SOFR) plus margin. As of December 31, 2023, our outstanding variable-rate debt included $237.2 related to the Revolving Credit Facility and international, variable-rate notes payable. Assuming a one-percent increase in the applicable interest rates, annual interest expense on these variable-rate debt instruments would increase approximately $2.4.
There have been no material changes in our assessment of market risk sensitivity since our presentation of Quantitative and Qualitative Disclosures About Market Risk in our 2023 Annual Report.
30
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Exchange Act, is recorded, processed, summarized and reported within the specified time periods, and that such information is accumulated and communicated to management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure.
Our management, with the participation of our CEO and CFO, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2023. Based on that evaluation, our CEO and CFO concluded that, as of that date, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended December 31, 2023 that have materially affected, or are likely to materially affect, our internal control over financial reporting.
31
PART II - OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.
The following table sets forth the purchases of our Company’s securities by the Company and any affiliated purchasers within the meaning of Rule 10b-18(a)(3) (17 CFR 240.10b-18(a)(3)) during the first quarter of fiscal 2024:
| Period | Total Number of Shares Purchased (1) (2) | Average Price Paid per share (3) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) | Maximum Number that May Yet Be Purchased Under the Plans or Programs | ||||||||||||||||||||||
| October 1 to 31, 2023 | 99,039 | $ | 35.49 | 99,039 | 4,511,638 | |||||||||||||||||||||
| November 1 to 30, 2023 | 298,526 | $ | 34.57 | 111,208 | 4,400,430 | |||||||||||||||||||||
| December 1 to 31, 2023 | 230,524 | $ | 35.46 | 213,695 | 4,186,735 | |||||||||||||||||||||
(1)Includes 204,147 shares purchased during the quarter related to the surrender to the Company of shares of common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock equivalent awards.
(2)In January 2018, our Board authorized a repurchase of up to 10 million shares of our Company’s common stock. This authorization replaced the prior share repurchase authorization of May 2015. During the first quarter of fiscal 2024, we repurchased 423,942 shares under this authorization.
(3)Includes $0.02 per share of brokerage fee commissions and excludes excise tax.
Item 5. Other Information.
During the three months ended December 31, 2023 , no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” as each term is defined in Item 408(a) of Regulation S-K.
32
Item 6. Exhibits.
| Exhibit Number | Exhibit | ||||
| 3.1 | |||||
| 3.2 | |||||
| 3.3 | |||||
| 10.1 | |||||
| 10.2 | |||||
| 10.3 | |||||
| 10.4 | |||||
| 10.5 | |||||
| 10.6 | |||||
| 31.1* | |||||
| 31.2* | |||||
| 32.1** | |||||
| 32.2** | |||||
| 101 | The following materials from the Edgewell Personal Care Company Quarterly Report on Form 10-Q formatted in inline eXtensible Business Reporting Language (“iXBRL”): (i) the Condensed Consolidated Statements of Earnings and Comprehensive Income for the three months ended December 31, 2023 and 2022, (ii) the Condensed Consolidated Balance Sheets at | ||||
*Filed herewith.
** Furnished herewith
33
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| EDGEWELL PERSONAL CARE COMPANY | |||||||||||
| Registrant | |||||||||||
| By: | /s/ Daniel J. Sullivan | ||||||||||
| Daniel J. Sullivan | |||||||||||
| Chief Financial Officer | |||||||||||
| (principal financial and principal accounting officer) | |||||||||||
| Date: | February 7, 2024 | ||||||||||
34
Exhibit 31.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Rod R. Little, certify that:
1.I have reviewed this quarterly report on Form 10-Q of Edgewell Personal Care Company;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: February 7, 2024
| /s/ Rod R. Little | ||
| Rod R. Little | ||
| Chief Executive Officer | ||
| (principal executive officer) | ||
Exhibit 31.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Daniel J. Sullivan, certify that:
1.I have reviewed this quarterly report on Form 10-Q of Edgewell Personal Care Company;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: February 7, 2024
| /s/ Daniel J. Sullivan | ||
| Daniel J. Sullivan | ||
| Chief Financial Officer | ||
| (principal financial officer) | ||
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned officer of Edgewell Personal Care Company (the "Company") hereby certifies to his knowledge that the Company's quarterly report on Form 10-Q for the period ended December 31, 2023 (the "Report"), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) of 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: February 7, 2024
| /s/ Rod R. Little | ||
| Rod R. Little | ||
| Chief Executive Officer | ||
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned officer of Edgewell Personal Care Company (the "Company") hereby certifies to his knowledge that the Company's quarterly report on Form 10-Q for the period ended December 31, 2023 (the "Report"), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: February 7, 2024
| /s/ Daniel J. Sullivan | ||
| Daniel J. Sullivan | ||
| Chief Financial Officer | ||