EDGEWELL PERSONAL CARE Co 10-Q for FY2021 Q3
EDGEWELL PERSONAL CARE Co (EPC)
10-Q
2021-08-05
For: 2021-06-30
View Original
Added on
April 08, 2026
About this 10-Q
EDGEWELL PERSONAL CARE Co filed this 10-Q on August 5, 2021, covering the quarter ended June 30, 2021 (FY2021 Q3).
Headline figures
Quarter ended June 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $573.7M
- up 18.6% from $483.9M a year earlier
- Net income
- $40.8M
- up 768.1% from net income of $4.7M a year earlier
- Diluted EPS
- $0.74
- up 722.2% from $0.09 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 June 30, 2021
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 - 54,363,273 shares as of July 31, 2021.
EDGEWELL PERSONAL CARE COMPANY
INDEX TO FORM 10-Q
| PART I. | FINANCIAL INFORMATION | |||||||
| Item 1. | Financial Statements (Unaudited). | |||||||
| Condensed Consolidated Statements of Earnings and Comprehensive Income for the three and nine months ended June 30, 2021 and 2020. | ||||||||
| Condensed Consolidated Balance Sheets as of June 30, 2021 and September 30, 2020. | ||||||||
| Condensed Consolidated Statements of Cash Flows for the nine months ended June 30, 2021 and 2020. | ||||||||
| Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and nine months ended June 30, 2021 and 2020. | ||||||||
| 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 6. | Exhibits. | |||||||
| SIGNATURE | ||||||||
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
EDGEWELL PERSONAL CARE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
(unaudited, in millions, except per share data)
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| 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 | |||||||||||||||||||||||
| Gain on sale of Infant and Pet Care business | ( | ||||||||||||||||||||||
| Interest expense associated with debt | |||||||||||||||||||||||
| Cost of early retirement of long-term 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 of $(0.2), $(0.3), $(0.2) and $(0.4) | ( | ( | ( | ( | |||||||||||||||||||
Deferred gain (loss) on hedging activity, net of tax of $0.1, $(0.8), $1.7 and $(0.7) | ( | ( | |||||||||||||||||||||
| 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)
| June 30, 2021 | September 30, 2020 | ||||||||||
| Assets | |||||||||||
| Current assets | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Trade receivables, less allowance for doubtful accounts of $7.4 and $8.2 | |||||||||||
| 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, $0.01 par value, 10,000,000 authorized; none issued or outstanding | |||||||||||
| Common shares, $0.01 par value, 300,000,000 authorized; 65,251,989 issued; 54,358,629 and 54,355,183 outstanding | |||||||||||
| Additional paid-in capital | |||||||||||
| Retained earnings | |||||||||||
| Common shares in treasury at cost, 10,893,360 and 10,896,806 | ( | ( | |||||||||
| 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)
| Nine Months Ended June 30, | |||||||||||
| 2021 | 2020 | ||||||||||
| Cash Flow from Operating Activities | |||||||||||
| Net earnings | $ | $ | |||||||||
| Depreciation and amortization | |||||||||||
| Share-based compensation expense | |||||||||||
| Loss on sale of assets | |||||||||||
| Gain on sale of Infant and Pet Care business | ( | ||||||||||
| Deferred compensation payments | ( | ( | |||||||||
| Deferred income taxes | ( | ( | |||||||||
| Cost of early retirement of long-term debt | |||||||||||
| Other, net | ( | ||||||||||
| Changes in operating assets and liabilities | ( | ( | |||||||||
| Net cash from operating activities | $ | $ | |||||||||
| Cash Flow from Investing Activities | |||||||||||
| Capital expenditures | ( | ( | |||||||||
| Proceeds from sale of Infant and Pet Care business | |||||||||||
| Acquisition of Cremo | ( | ||||||||||
| Collection of deferred purchase price on accounts receivable sold | |||||||||||
| Other, net | ( | ( | |||||||||
| Net cash (used by) from investing activities | $ | ( | $ | ||||||||
| Cash Flow from Financing Activities | |||||||||||
| Cash proceeds from the issuance of Senior Notes due 2029 | |||||||||||
| Cash payments on Senior Notes due 2022 | ( | ||||||||||
| Cash proceeds from the issuance of Senior Notes due 2028 | |||||||||||
| Cash payments on Senior Notes due 2021 | ( | ||||||||||
| Cash proceeds from debt with original maturities greater than 90 days | |||||||||||
| Cash payments on debt with original maturities greater than 90 days | ( | ||||||||||
| Net increase in debt with original maturities of 90 days or less | |||||||||||
| Debt issuance costs for Senior Notes due 2029 | ( | ||||||||||
| Debt issuance costs for Senior Notes due 2028 | ( | ||||||||||
| Debt issuance costs for the Revolving Credit Facility | ( | ||||||||||
| Cost of early retirement of long-term debt | ( | ( | |||||||||
| Dividends to common shareholders | ( | ||||||||||
| Repurchase of shares | ( | ||||||||||
| Net financing inflow (outflow) from the Accounts Receivable Facility | ( | ||||||||||
| Employee shares withheld for taxes | ( | ( | |||||||||
| Other, net | ( | ||||||||||
| Net cash used by financing activities | $ | ( | $ | ( | |||||||
| Effect of exchange rate changes on cash | |||||||||||
| Net increase 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 at March 31, 2021 | $ | ( | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
| Net earnings | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Pension and postretirement activity | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Deferred gain on hedging activity | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Dividends declared to common shareholders | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Activity under share plans | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2021 | $ | $ | ( | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||
| Common Shares | Treasury Shares | ||||||||||||||||||||||||||||||||||||||||||||||
| Number | Par Value | Number | Amount | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Shareholders’ Equity | ||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2020 | $ | ( | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
| Net earnings | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Pension and postretirement activity | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Deferred gain on hedging activity | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Dividends declared to common shareholders | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Repurchase of shares | — | — | ( | ( | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||
| Activity under share plans | — | — | ( | — | |||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2021 | $ | ( | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
| Common Shares | Treasury Shares | ||||||||||||||||||||||||||||||||||||||||||||||
| Number | Par Value | Number | Amount | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Shareholders’ Equity | ||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2020 | $ | ( | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
| Net earnings | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Pension and postretirement activity | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Deferred loss on hedging activity | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Activity under share plans | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2020 | $ | ( | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
6
| Common Shares | Treasury Shares | ||||||||||||||||||||||||||||||||||||||||||||||
| Number | Par Value | Number | Amount | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Shareholders’ Equity | ||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2019 | $ | ( | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
| Net earnings | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Pension and postretirement activity | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Deferred loss on hedging activity | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Activity under share plans | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2020 | $ | ( | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
7
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. Edgewell operates in more than 20 countries with extensive retail reach across 50 markets.
The Company conducts its business in the following three segments:
•Wet Shave consists of products sold under the Schick®, Wilkinson Sword®, Edge®, Skintimate®, 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, 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.
Through December 2019, the Company also conducted business in its All Other segment which included infant care products, such as bottles, cups, and pacifiers, sold under the Playtex®, OrthoPro® and Binky® brand names, as well as the Diaper Genie® and Litter Genie® disposal systems. The Company completed the sale of the Infant and Pet Care business in December 2019.
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 presentation 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 20, 2020.
Recently Adopted Accounting Pronouncements.
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13 intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The new guidance applies to all financial instruments, including trade receivables, and requires the measurement of all expected credit losses for financial assets held at a reporting date to be based on historical experience, current conditions and reasonable and supportable forecasts. Previous guidance did not include forward-looking information. The Company adopted the standard effective as of October 1, 2020. The adoption of the guidance did not have a material impact on the Company’s financial statements. The Company evaluates the creditworthiness of customers when negotiating contracts and, as trade receivables are short term in nature, the timing between recognition of a credit loss under existing guidance and the new guidance was not materially different for the Company.
8
Note 2 - Business Combinations and Divestitures
Cremo Holding Company, LLC
On September 2, 2020 , the Company completed the acquisition (“Acquisition”) of Cremo Holding Company, LLC (“Cremo”). The Company accounted for the Acquisition utilizing the acquisition method of accounting, which requires assets and liabilities to be recognized based on estimates of their acquisition date fair values. The determination of the values of the acquired assets and assumed liabilities, including goodwill and other intangible assets, requires significant judgement. We have calculated fair values of the assets and liabilities acquired from Cremo including goodwill and intangible assets and working capital. The Company completed the final fair value determination of the Acquisition in the first quarter of fiscal year 2021.
The Company used variations of the income approach in determining the fair value of intangible assets acquired in the Acquisition. Specifically, we utilized the multi-period excess earnings method to determine the fair value of the definite lived customer relationships acquired and the relief from royalty method to determine the fair value of the definite lived trade name and proprietary technology acquired. Our determination of the fair value of the intangible assets acquired involved the use of significant estimates and assumptions related to revenue growth rates, discount rates, customer attrition rates, and royalty rates. Edgewell believes that the fair value assigned to the assets acquired and liabilities assumed are based on reasonable assumptions and estimates that marketplace participants would use.
The Company’s purchase price allocation included net assets of $234.6 and consisted of working capital and other net assets of $11.5 (including cash of $0.7 ), other intangible assets of $95.1 and goodwill of $128.0 , representing the value of expansion into new markets and channels of trade. The acquired goodwill is deductible for tax purposes. The intangible assets acquired consisted primarily of the Cremo trade name, customer relationships and product formulations with a weighted average useful life of 17 years. All assets are included in the Company’s Sun and Skin Care segment.
The Company noted that the net sales and net earnings of Cremo from the beginning of fiscal 2020 through the date of the closing of the Acquisition were not material relative to the total net sales and net earnings of the Company during fiscal 2020, and thus pro-forma results for Cremo were not disclosed in accordance with Accounting Standards Codification 805. Acquisition and integration costs related to Cremo totaling $1.3 and $3.3 for the three and nine months ended June 30, 2021, respectively, were included in Selling, general and administrative expense (“SG&A”) in the Condensed Consolidated Statements of Earnings and Comprehensive Income. Additionally, acquisition costs of $1.3 were included in Cost of products sold for the nine months ended June 30, 2021.
Sale of Infant and Pet Care Business
9
Note 3 - Restructuring Charges
Project Fuel
Project Fuel is an enterprise-wide transformational initiative launched in the second quarter of fiscal 2018 to address all aspects of our business and cost structure, simplifying and transforming our organization, structure and key processes. Project Fuel is facilitating further re-investment in our growth strategy while enabling us to achieve our desired future state operations.
The Company does not include Project Fuel restructuring costs in the results of its reportable segments. However, the estimated impact of allocating such charges to segment results for the three and nine months ended June 30, 2021 and 2020, respectively, would have been as follows:
| Three Months Ended June 30, 2021 | |||||||||||||||||||||||||||||
| Wet Shave | Sun and Skin Care | Feminine Care | Corporate | Total | |||||||||||||||||||||||||
| Project Fuel | |||||||||||||||||||||||||||||
| Severance and related benefit costs | $ | $ | $ | $ | |||||||||||||||||||||||||
| Asset impairment and accelerated depreciation | |||||||||||||||||||||||||||||
| Consulting, project implementation and management, and other exit costs | |||||||||||||||||||||||||||||
| Total restructuring | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Nine Months Ended June 30, 2021 | |||||||||||||||||||||||||||||
| Wet Shave | Sun and Skin Care | Feminine Care | Corporate | Total | |||||||||||||||||||||||||
| Project Fuel | |||||||||||||||||||||||||||||
| Severance and related benefit costs | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Asset impairment and accelerated depreciation | |||||||||||||||||||||||||||||
| Consulting, project implementation and management, and other exit costs | |||||||||||||||||||||||||||||
| Total restructuring | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Three Months Ended June 30, 2020 | |||||||||||||||||||||||||||||||||||
| Wet Shave | Sun and Skin Care | Feminine Care | Corporate | Total | |||||||||||||||||||||||||||||||
| Project Fuel | |||||||||||||||||||||||||||||||||||
| Severance and related benefit costs | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
| Asset impairment and accelerated depreciation | |||||||||||||||||||||||||||||||||||
| Consulting, project implementation and management, and other exit costs | |||||||||||||||||||||||||||||||||||
| Total restructuring | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
| Nine Months Ended June 30, 2020 | |||||||||||||||||||||||||||||||||||
| Wet Shave | Sun and Skin Care | Feminine Care | Corporate | Total | |||||||||||||||||||||||||||||||
| Project Fuel | |||||||||||||||||||||||||||||||||||
| Severance and related benefit costs | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
| Asset impairment and accelerated depreciation | |||||||||||||||||||||||||||||||||||
| Consulting, project implementation and management, and other exit costs | |||||||||||||||||||||||||||||||||||
| Total restructuring | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
Pre-tax SG&A of $2.8 and $6.2 for the three and nine months ended June 30, 2021, respectively, and $2.3 and $10.0 for the three and nine months ended June 30, 2020, respectively, associated with certain information technology enablement expenses and compensation expenses related to Project Fuel were included in Consulting, project implementation and management, and other exit costs. Pre-tax Cost of products sold of $0.2 and $0.3 for the three and nine months ended June 30, 2021, respectively,
10
| Utilized | |||||||||||||||||||||||||||||||||||
| October 1, 2020 | Charge to Income | Other (1) | Cash | Non-Cash | June 30, 2021 | ||||||||||||||||||||||||||||||
| Restructuring | |||||||||||||||||||||||||||||||||||
| Severance and related benefit costs | $ | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||||
| Asset impairment and accelerated depreciation | ( | ||||||||||||||||||||||||||||||||||
| Consulting, project implementation and management, and other exit costs | ( | ||||||||||||||||||||||||||||||||||
| Total restructuring | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||
Note 4 - Income Taxes
For the three and nine months ended June 30, 2021, the Company had income tax expense of $13.1 and $25.7 , respectively, on Earnings before income taxes of $53.9 and $98.6 , respectively. The effective tax rate for the three and nine months ended June 30, 2021 was 24.2 % and 26.1 %, respectively. The difference between the federal statutory rate and the effective rate for the three and nine months ended June 30, 2021 is primarily due to the unfavorable mix of earnings in higher tax rate jurisdictions as well as unfavorable global intangible low-tax income and Internal Revenue Service Code Section 162(m) permanent adjustments.
For the three and nine months ended June 30, 2020, the Company had income tax expense of $0.6 and $16.5 , respectively, on Earnings before income taxes of $5.3 and $63.1 , respectively. The effective tax rate for the three and nine months ended June 30, 2020 was 11.9 % and 26.1 %, respectively. The difference between the federal statutory rate and the effective rate for the three months ended June 30, 2020 was primarily due to the favorable mix of earnings in lower tax rate jurisdictions. The difference between the federal statutory rate and the effective rate for the nine months ended June 30, 2020 was primarily due to the unfavorable impact of the sale of the Infant and Pet Care business.
Note 5 - 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 and restricted share equivalent (“RSE”) awards.
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Basic weighted-average shares outstanding | |||||||||||||||||||||||
| Effect of dilutive securities: | |||||||||||||||||||||||
| RSE awards | |||||||||||||||||||||||
| Total dilutive securities | |||||||||||||||||||||||
| Diluted weighted-average shares outstanding | |||||||||||||||||||||||
For the three and nine months ended June 30, 2021, the calculation of diluted weighted-average shares outstanding excludes 0.9 of share options because the effect of including these awards was anti-dilutive. For the three and nine months ended June 30, 2020, the calculation of diluted weighted-average shares outstanding excludes 0.7 of share options and 0.1 of RSE awards because the effect of including these awards was anti-dilutive.
11
Note 6 - Goodwill and Intangible Assets
| Wet Shave | Sun and Skin Care | Feminine Care | Total | ||||||||||||||||||||
| Gross balance at October 1, 2020 | $ | $ | $ | $ | |||||||||||||||||||
| Accumulated goodwill impairment | ( | ( | ( | ||||||||||||||||||||
| Net balance at October 1, 2020 | $ | $ | $ | $ | |||||||||||||||||||
| Changes in the nine-month period ended June 30, 2021 | |||||||||||||||||||||||
| Cremo acquisition measurement period adjustment | |||||||||||||||||||||||
| Cumulative translation adjustment | |||||||||||||||||||||||
| Gross balance at June 30, 2021 | $ | $ | $ | $ | |||||||||||||||||||
| Accumulated goodwill impairment | ( | ( | ( | ||||||||||||||||||||
| Net balance at June 30, 2021 | $ | $ | $ | $ | |||||||||||||||||||
| June 30, 2021 | September 30, 2020 | ||||||||||||||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net | Gross Carrying Amount | Accumulated Amortization | Net | ||||||||||||||||||||||||||||||
| Trade names and brands | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Technology and patents | |||||||||||||||||||||||||||||||||||
| Customer related and other | |||||||||||||||||||||||||||||||||||
| Total amortizable intangible assets | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Amortization expense was $5.5 and $16.6 for the three and nine months ended June 30, 2021, respectively, and $4.2 and $12.7 for the three and nine months ended June 30, 2020, respectively. Estimated amortization expense for amortizable intangible assets for the remainder of fiscal 2021 and for fiscal 2022, 2023, 2024, 2025 and 2026 is $5.5 , $22.1 , $22.0 , $21.9 , $21.9 and $21.7 , respectively, and $196.4 thereafter.
The Company had indefinite-lived intangible assets of $602.9 ($183.9 in Wet Shave, $389.1 in Sun and Skin Care, and $29.9 in Feminine Care) at June 30, 2021, an increase of $1.5 from September 30, 2020, which was the result of foreign currency fluctuations. The Company had indefinite-lived trade names and brands of $601.4 ($183.1 in Wet Shave, $388.4 in Sun and Skin Care, and $29.9 in Feminine Care) at September 30, 2020.
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Note 7 - Supplemental Balance Sheet Information
| June 30, 2021 | September 30, 2020 | ||||||||||
| Inventories | |||||||||||
| Raw materials and supplies | $ | $ | |||||||||
| Work in process | |||||||||||
| Finished products | |||||||||||
| Total inventories | $ | $ | |||||||||
| Other Current Assets | |||||||||||
| Miscellaneous receivables | $ | $ | |||||||||
| Inventory returns receivable | |||||||||||
| Prepaid expenses | |||||||||||
| Value added tax collectible from customers | |||||||||||
| 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, sales promotion and allowances | $ | $ | |||||||||
| Accrued trade allowances | |||||||||||
| Accrued salaries, vacations and incentive compensation | |||||||||||
| Income taxes payable | |||||||||||
| Returns reserve | |||||||||||
| Restructuring reserve | |||||||||||
| Value added tax payable | |||||||||||
| Deferred compensation | |||||||||||
| Short term lease obligation | |||||||||||
| Customer advance payments | |||||||||||
| Dividends payable | |||||||||||
| Other | |||||||||||
| Total other current liabilities | $ | $ | |||||||||
| Other Liabilities | |||||||||||
| Pensions and other retirement benefits | $ | $ | |||||||||
| Deferred compensation | |||||||||||
| Long term lease obligation | |||||||||||
| Other non-current liabilities | |||||||||||
| Total other liabilities | $ | $ | |||||||||
13
Note 8 - Leases
A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment over a contracted period in exchange for payment. The Company evaluates if an arrangement is a lease at the effective date of the agreement. For operating leases entered into prior to October 1, 2019, the right of use (“ROU”) assets and operating lease liabilities are recognized on the balance sheet based on the present value of the remaining future minimum payments over the lease term from the implementation date. Certain leases include an option to either renew or terminate the lease. For purposes of calculating lease liabilities, these options are included within the lease term when it has become reasonably certain that the Company will exercise such options. Leases entered into subsequent to October 1, 2019 calculate the operating lease ROU asset and operating lease liabilities based on the present value of minimum payments over the lease term at the effective date of the lease.
The Company leases certain offices and manufacturing facilities, warehouses, employee vehicles and certain manufacturing related equipment. Leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheet. All recorded leases are classified as operating leases, and lease expense is recognized on a straight-line basis over the lease term.
The Company has elected to utilize the package of practical expedients which allows it to carryforward its historical lease classification, its assessment on whether a contract was or contains a lease, and its assessment of initial direct costs for any leases that existed prior to October 1, 2019. Additionally, the Company has elected as an accounting policy not to separate non-lease components from lease components and, instead, account for these components as a single lease component. The Company has made an accounting policy election not to recognize ROU assets and lease liabilities for leases that, as of October 1, 2019, are for 12 months or less. For leases that do not provide an implicit rate, the Company uses its secured incremental borrowing rate, based on the information available for leases, including the lease term and interest rate environment in the country in which the lease exists, to calculate the present value of the future lease payments.
A summary of the Company's lease information is as follows:
| June 30, 2021 | September 30, 2020 | |||||||||||||
| Assets | Classification | |||||||||||||
| Right of use assets | Other assets | $ | $ | |||||||||||
| Liabilities | ||||||||||||||
| Current lease liabilities | Other current liabilities | $ | $ | |||||||||||
| Long-term lease liabilities | Other liabilities | |||||||||||||
| Total lease liabilities | $ | $ | ||||||||||||
| Other information | ||||||||||||||
| Weighted-average remaining lease term (years) | ||||||||||||||
| Weighted-average incremental borrowing rate | % | % | ||||||||||||
| Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Nine Months Ended June 30, 2021 | Nine Months Ended June 30, 2020 | ||||||||||||||||||||
| Statement of Earnings | |||||||||||||||||||||||
Lease cost (1) | $ | $ | $ | $ | |||||||||||||||||||
| Other information | |||||||||||||||||||||||
| Leased assets obtained in exchange for new lease liabilities | $ | $ | $ | $ | |||||||||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities | $ | $ | $ | $ | |||||||||||||||||||
14
| Lease liability repayments | June 30, 2021 | ||||
| Remainder of fiscal 2021 | $ | ||||
| 2022 | |||||
| 2023 | |||||
| 2024 | |||||
| 2025 | |||||
| 2026 and thereafter | |||||
| Total future minimum lease commitments | |||||
| Less: Imputed interest | ( | ||||
| Present value of lease liabilities | $ | ||||
Note 9 - Accounts Receivable Facility
The Company participates in a $150 uncommitted master accounts receivable purchase agreement with The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch, as the purchaser (the “Accounts Receivable Facility”). Transfers under the Accounts Receivable Facility are accounted for as sales of receivables, resulting in the receivables being de-recognized from the 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 the Accounts Receivable Facility 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 continues to have collection and servicing responsibilities for the receivables sold and receives separate compensation for their servicing. The compensation received is considered acceptable servicing compensation and, as such, the Company does not recognize a servicing asset or liability.
As of June 30, 2021, the discount rate used to determine the purchase price for the subject receivables is based upon LIBOR plus a margin applicable to the specified obligor.
15
Note 10 - Debt
The detail of long-term debt was as follows:
| June 30, 2021 | September 30, 2020 | ||||||||||
| Senior notes, fixed interest rate of 4.7%, due 2022 | $ | $ | |||||||||
| 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 due 2025 | — | — | |||||||||
| Total long-term debt, including current maturities | |||||||||||
Less unamortized debt issuance costs and discount (1) (2) | |||||||||||
| Total long-term debt | $ | $ | |||||||||
(1)At June 30, 2021, the balance for the Senior Notes due 2028 and the Senior Notes due 2029 are reflected net of debt issuance costs of $10.2 and $6.2 , respectively. At September 30, 2020, the balance for the Senior Notes due 2022 and the Senior Notes due 2028 are reflected net of debt issuance costs of $0.6 and $11.3 , respectively.
(2)At September 30, 2020, the balance for the Senior Notes due 2022 was reflected net of discount of $0.2 .
The Company had outstanding variable-rate international borrowings, recorded in Notes payable, of $24.8 and $21.1 as of June 30, 2021 and September 30, 2020, respectively.
Issuance of Senior Notes due 2029 and Redemption of Senior Notes due 2022
On March 8, 2021, the Company entered into a new unsecured indenture agreement for 4.125 % Senior Notes in the amount of $500 due April 1, 2029 (“2029 Notes”). The Company used the net proceeds from the issuance of the 2029 Notes, together with cash on hand, to satisfy and discharge the obligations outstanding for its 4.70 % Senior Notes in the amount of $500 due 2022 (“2022 Notes”) and to pay fees associated therewith. The Company incurred $6.5 in bank, legal and other fees in connection with the issuance of the 2029 Notes, which will be deferred and amortized to interest expense over the term of these notes. Interest expense on the 2029 Notes is due semiannually on April 1 and October 1 with the first interest payment scheduled for October 1, 2021.
In connection with the early repayment of the 2022 Notes, the Company recorded expense of $26.1 for the nine months ended June 30, 2021, which is included in “Cost of early debt retirements” in the Condensed Consolidated Statements of Earnings and Comprehensive Income. This expense included a premium of $25.5 and debt issuance cost write-offs of $0.6 .
The 2029 Notes are guaranteed, jointly and severally, by each of the Company’s direct and indirect wholly-owned domestic subsidiaries that guarantee the Company’s existing secured revolving credit facility (or certain replacements thereof) or that guarantee certain capital markets indebtedness of the Company, in each case provided that the amount of such credit facility or indebtedness exceeds a specified amount, for so long as they remain guarantors under such indebtedness and subject to release in certain other circumstances. The 2029 Notes and guarantees thereof are unsecured, unsubordinated indebtedness of the Company and the guarantors.
Note 11 - Retirement Plans
16
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Service cost | $ | $ | $ | $ | |||||||||||||||||||
| Interest cost | |||||||||||||||||||||||
| Expected return on plan assets | ( | ( | ( | ( | |||||||||||||||||||
| Recognized net actuarial loss | |||||||||||||||||||||||
| Settlement loss recognized | |||||||||||||||||||||||
| 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.
Note 12 - Shareholders’ Equity
In January 2018, the Company’s Board of Directors (the “Board”) approved an authorization to repurchase up to 10.0 shares of the Company’s common stock, replacing the previous share repurchase authorization from May 2015. The Company repurchased 0.3 shares of its common stock for $9.2 during the nine months ended June 30, 2021. The Company has 9.7 shares of its common stock available for repurchase in the future under the Board’s authorization. Any future share repurchases may be made in the open market, privately negotiated transactions, or otherwise, and in such amounts and at such times as the Company deems appropriate based upon prevailing market conditions, business needs, and other factors.
On May 6, 2021, the Board declared a cash dividend of $0.15 per share of common stock outstanding. The dividend was paid on July 7, 2021 to holders of record as of the close of business on June 4, 2021.
Dividends declared during the nine months ended June 30, 2021 totaled $25.4 . Payments made for dividends during the nine months ended June 30, 2021 totaled $16.7 .
Note 13 - Accumulated Other Comprehensive Loss
The following table presents the changes in accumulated other comprehensive loss (“AOCI”), net of tax, by component:
| Foreign Currency Translation Adjustments | Pension and Post-retirement Activity | Hedging Activity | Total | ||||||||||||||||||||
| Balance at October 1, 2020 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
OCI before reclassifications (1) | ( | ||||||||||||||||||||||
| Reclassifications to earnings | |||||||||||||||||||||||
| Balance at June 30, 2021 | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||
| Foreign Currency Translation Adjustments | Pension and Post-retirement Activity | Hedging Activity | Total | ||||||||||||||||||||
| Balance at October 1, 2019 | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||
OCI before reclassifications (1) | ( | ||||||||||||||||||||||
| Reclassifications to earnings | ( | ||||||||||||||||||||||
| Balance at June 30, 2020 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
(1)OCI is defined as other comprehensive income (loss).
17
The following table presents the reclassifications out of AOCI:
| Three Months Ended June 30, | Nine Months Ended June 30, | Affected Line Item in the Condensed Consolidated Statements of Earnings | ||||||||||||||||||||||||||||||
| Details of AOCI Components | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||
| Gain / (Loss) on cash flow hedges | ||||||||||||||||||||||||||||||||
| Foreign exchange contracts | $ | ( | $ | $ | ( | $ | Other income, net | |||||||||||||||||||||||||
| ( | ( | |||||||||||||||||||||||||||||||
| ( | ( | Income tax provision | ||||||||||||||||||||||||||||||
| ( | ( | |||||||||||||||||||||||||||||||
| Amortization of defined benefit pension and postretirement items | ||||||||||||||||||||||||||||||||
| Actuarial losses | $ | ( | $ | ( | $ | ( | $ | ( | (1) | |||||||||||||||||||||||
| Settlements | ( | ( | (1) | |||||||||||||||||||||||||||||
| ( | ( | ( | ( | |||||||||||||||||||||||||||||
| ( | ( | ( | ( | Income tax provision | ||||||||||||||||||||||||||||
| ( | ( | ( | ( | |||||||||||||||||||||||||||||
| Total reclassifications for the period | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||
(1)These AOCI components are included in the computation of net periodic cost. See Note 11 of Notes to Condensed Consolidated Financial Statements.
Note 14 - Financial Instruments and Risk Management
In the course of ordinary business, the Company enters 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 that existed at June 30, 2021 and September 30, 2020, 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 a negative 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 income, net. The primary currency to which the Company’s foreign subsidiaries are exposed is the U.S. dollar.
Cash Flow Hedges
At June 30, 2021, the Company maintained 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 entered into a series of 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 gain of $2.2 and an unrealized pre-tax loss of $3.0 at June 30, 2021 and September 30, 2020, 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 June 30, 2021 levels over the next 12 months, the majority of the pre-tax gain included in AOCI at June 30, 2021 is expected to be included in Other income, net. Contract maturities for these hedges extend into fiscal 2022. At June 30, 2021, there were 64 open foreign currency contracts with a total notional value of $133.1 .
18
Derivatives not Designated as Hedges
The Company has entered into 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 subject to significant market risk. The change in the estimated fair value of the foreign currency contracts for the three and nine months ended June 30, 2021 resulted in a loss of $1.2 and gain of $0.7 , respectively, compared to a gain of $0.3 and a loss of $0.2 , respectively, for the three and nine months ended June 30, 2020, and was recorded in Other income, net in the Condensed Consolidated Statements of Earnings and Comprehensive Income. At June 30, 2021, there were five open foreign currency derivative contracts not designated as cash flow hedges with a total notional value of $42.0 .
The following table provides estimated fair values of derivative instruments:
Fair Value of Asset (Liability) (1) | |||||||||||
| June 30, 2021 | September 30, 2020 | ||||||||||
| Derivatives designated as cash flow hedging relationships: | |||||||||||
| Foreign currency contracts | $ | $ | ( | ||||||||
| Derivatives not designated as cash flow hedging relationships: | |||||||||||
| Foreign currency contracts | $ | $ | ( | ||||||||
(1)All derivative assets are presented in Other current assets or Other assets. All derivative liabilities are presented in Other current liabilities or Other liabilities.
The following table provides the amounts of gains and losses on derivative instruments:
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Derivatives designated as cash flow hedging relationships: | |||||||||||||||||||||||
| Foreign currency contracts | |||||||||||||||||||||||
Gain (loss) recognized in OCI (1) | $ | ( | $ | ( | $ | $ | |||||||||||||||||
Gain (loss) reclassified from AOCI into income (1) (2) | ( | ( | |||||||||||||||||||||
| Derivatives not designated as cash flow hedging relationships: | |||||||||||||||||||||||
| Foreign currency contracts | |||||||||||||||||||||||
Gain (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:
| At June 30, 2021 | At September 30, 2020 | ||||||||||||||||||||||
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.
19
| June 30, 2021 | September 30, 2020 | ||||||||||
| Liabilities at estimated fair value: | |||||||||||
| Deferred compensation | $ | ( | $ | ( | |||||||
| Derivatives - foreign currency contracts | ( | ||||||||||
| Net 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. At June 30, 2021, 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.
At June 30, 2021 and September 30, 2020 the Company had no Level 1 financial assets or liabilities, other than pension plan assets, and no Level 3 financial assets or liabilities at June 30, 2021 and at September 30, 2020.
At June 30, 2021 and September 30, 2020 the fair market value of fixed rate long-term debt was $1,314.6 and $1,323.1 , respectively, compared to its carrying value of $1,250.0 . The estimated fair value of the long-term debt was estimated using yields obtained from independent pricing sources for similar types of borrowing arrangements. The estimated fair value of long-term debt, excluding the revolving credit facility, have been determined based on Level 2 inputs.
Due to the nature of cash and cash equivalents and short-term borrowings, including notes payable, carrying amounts on the balance sheets approximate fair value. Additionally, the carrying amounts of the Company’s revolving credit facility, which are classified as long-term debt on the balance sheet, approximate fair value due to the revolving nature of the balances. The estimated fair value of cash and cash equivalents, short-term borrowings, and the revolving credit agreement have been determined based on Level 2 inputs.
Note 15 - Segment Data
For an overview of the Company’s segments, refer to Note 1 to Notes to Condensed Consolidated Financial Statements.
Segment performance is evaluated based on segment profit, exclusive of general corporate expenses, share-based compensation costs, restructuring charges, and certain costs deemed non-recurring in nature, including evaluation, acquisition and integration costs, cost of early retirement of long-term debt, incremental pandemic expenses, gains or losses on the sale of businesses, and the amortization of intangible assets. Financial items, such as interest income and expense, are managed on a global basis at the corporate level. The exclusion of such charges from segment results reflects management’s view on how it evaluates segment performance.
The Company completed the sale of its Infant and Pet Care business in December 2019. As a result, no additional Net Sales or Segment Profit will be reported for the All Other segment in subsequent periods.
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.
20
Segment net sales and profitability are presented below:
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Net Sales | |||||||||||||||||||||||
| Wet Shave | $ | $ | $ | $ | |||||||||||||||||||
| Sun and Skin Care | |||||||||||||||||||||||
| Feminine Care | |||||||||||||||||||||||
| All Other | |||||||||||||||||||||||
| Total net sales | $ | $ | $ | $ | |||||||||||||||||||
| Segment Profit | |||||||||||||||||||||||
| Wet Shave | $ | $ | $ | $ | |||||||||||||||||||
| Sun and Skin Care | |||||||||||||||||||||||
| Feminine Care | |||||||||||||||||||||||
| All Other | |||||||||||||||||||||||
| Total segment profit | |||||||||||||||||||||||
| General corporate and other expenses | ( | ( | ( | ( | |||||||||||||||||||
Restructuring and related costs (1) | ( | ( | ( | ( | |||||||||||||||||||
| Cost of early retirement of long-term debt | ( | ( | ( | ||||||||||||||||||||
Acquisition and integration costs (2) | ( | ( | ( | ( | |||||||||||||||||||
| Gain on sale of Infant and Pet Care business | |||||||||||||||||||||||
COVID-19 expense (3) | ( | ( | |||||||||||||||||||||
Feminine and Infant Care evaluation costs (4) | ( | ||||||||||||||||||||||
| Amortization of intangibles | ( | ( | ( | ( | |||||||||||||||||||
| Interest and other expense, net | ( | ( | ( | ( | |||||||||||||||||||
| Total earnings before income taxes | $ | $ | $ | $ | |||||||||||||||||||
(1)Includes pre-tax SG&A of $2.8 and $6.2 for the three and nine months ended June 30, 2021, respectively, and $2.3 and $10.0 for the three and nine months ended June 30, 2020, respectively, associated with certain information technology enablement expenses and incentive and retention compensation expenses for Project Fuel. Additionally, pre-tax Cost of products sold of $0.2 and $0.3 for the three and nine months ended June 30, 2021, respectively, and $0.1 and $0.2 for the three and nine months ended June 30, 2020, respectively, related to inventory write-offs associated with Project Fuel is included.
(2)Includes pre-tax SG&A of $1.3 and $3.3 for the three and nine months ended June 30, 2021, respectively, and $0.3 and $32.0 for the three and nine months ended June 30, 2020, respectively, related to acquisition and integration costs. Additionally, Cost of products sold of $1.3 related to the valuation of acquired inventory for the nine months ended June 30, 2021 is included.
(4)Includes pre-tax SG&A of $0.3 for the nine months ended June 30, 2020.
| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Net Sales to Customers | |||||||||||||||||||||||
| United States | $ | $ | $ | $ | |||||||||||||||||||
| International | |||||||||||||||||||||||
| Total net sales | $ | $ | $ | $ | |||||||||||||||||||
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| Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Razors and blades | $ | $ | $ | $ | |||||||||||||||||||
| Tampons, pads, and liners | |||||||||||||||||||||||
| Sun care products | |||||||||||||||||||||||
| Grooming products | |||||||||||||||||||||||
| Wipes and other skin care | |||||||||||||||||||||||
| Shaving gels and creams | |||||||||||||||||||||||
| Infant care and other | |||||||||||||||||||||||
| Total net sales | $ | $ | $ | $ | |||||||||||||||||||
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(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 20, 2020 (the “2020 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 2020 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 (the “Exchange Act”), as amended. 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 (“Edgewell”, “we” or “our Company”) or any of our businesses. Forward-looking statements generally can be identified by the use of words or phrases such as “believe,” “expect,” “expectation,” “anticipate,” “may,” “could,” “intend,” “belief,” “estimate,” “plan,” “target,” “predict,” “likely,” “will,” “should,” “forecast,” “outlook,” or other similar words or phrases. These statements are not 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 our Company or any of our businesses. Many factors outside our control (including the ongoing COVID-19 pandemic) 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 2020 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 such as restructuring costs, acquisition and integration costs, cost of early retirement of long-term debt, the UK tax rate increase, incremental pandemic charges, business evaluation costs, and the gain on the sale of the Infant and Pet Care business. 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, including the Project Fuel restructuring and recent acquisitions and divestitures, 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:
•We analyze our 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, acquisitions, and divestitures. This information is provided because these types of fluctuations can distort the underlying change in net sales and segment profit either positively or negatively.
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•We utilize “adjusted” non-GAAP measures including gross profit, SG&A, operating income, income taxes, net earnings, and diluted earnings per share internally to make operating decisions. The following items are excluded when analyzing non-GAAP measures: restructuring and related costs, acquisition and integration costs, cost of early retirement of long-term debt, the UK tax rate increase, incremental pandemic charges, the gain on sale of the Infant and Pet Care business, and advisory expenses in connection with the evaluation of the Feminine and Infant Care businesses.
All comparisons are with the same period in the prior year, unless otherwise noted.
Industry and Market Data
Unless we indicate otherwise, we base the information concerning our industry contained or incorporated by reference herein on our general knowledge of and expectations concerning the industry. Our market position, market share, and industry market size are based on our estimates using internal data 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 data regarding the industry, market size and our market position and market share within such industry provide general guidance but are inherently imprecise and have 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 2020 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, and these brand names, trademarks, service marks and trade names are the property of their respective owners.
Impact of COVID-19
On March 11, 2020, the World Health Organization declared the novel coronavirus 2019 (“COVID-19”) a worldwide pandemic, which has impacted individuals, families, companies and economies around the world. Throughout the pandemic, we have taken and continue to take significant measures to protect our employees and business, while remaining in compliance with local guidelines and requirements.
The Company’s top priority during this time continues to be ensuring the health and welfare of our employees and additional measures have been put in place at all of our manufacturing locations. To date, we have not experienced any material operational disruptions across our manufacturing or distribution facilities.
The prolonged COVID-19 environment has resulted in increased supply chain challenges across product procurement and distribution. The continued duration and severity of COVID-19 may cause further disruptions related to our key suppliers, increase procurement costs and impact our ability to hire and retain employees, which may result in higher labor costs going forward. However, the impact, timing and severity of potential disruptions cannot be reasonably estimated at this time.
We expect to maintain adequate liquidity during these uncertain times and we will continue to assess the impact that COVID-19 has on our liquidity needs and current economic market conditions. As noted within “Liquidity and Capital Resources” below, COVID-19 has not had a significant impact on our liquidity, cash flows or capital resources, including our ability to enter into the unsecured indenture agreement for 4.125% Senior Notes in the amount of $500 due April 1, 2029 (the “2029 Notes”).
Significant Events
Acquisitions
On September 2, 2020, the Company completed the acquisition of Cremo, a premier men's grooming company in the U.S, in an all-cash transaction at a purchase price of $233.9. As a result of the acquisition, Cremo became a wholly owned subsidiary of the Company. Refer to Note 2 of Notes to Condensed Consolidated Financial Statements for further discussion on the Cremo acquisition.
Divestiture
On December 17, 2019, we completed the sale of our Infant and Pet Care business included in the All Other segment for $122.5 which included consideration for providing services for up to one year under a transition services agreement. For further information on the divestiture of the Infant and Pet Care business, refer to Note 2 of Notes to Condensed Consolidated Financial Statements.
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Executive Summary
The following is a summary of key results for the third quarter and first nine months of fiscal 2021 compared to the third quarter and first nine months of fiscal 2020. Net earnings and earnings per share (“EPS”) for the periods presented were impacted by restructuring charges, acquisition and integration costs, cost of early retirement of long-term debt, the UK tax rate increase, incremental pandemic charges, the gain on sale of the Infant and Pet Care business, and Feminine and Infant Care evaluation costs, 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.
Third Quarter of Fiscal 2021
•Net sales in the third quarter of fiscal 2021 were $573.7, up 18.6% compared to the prior year quarter. Organic net sales increased 12.5% compared to the prior year quarter, due to increased demand across all segments after reduced demand in the prior year quarter as a result of the COVID-19 pandemic. Net sales increased in both North America and International markets.
•Net earnings in the third quarter of fiscal 2021 were $40.8 compared to $4.7 in the prior year quarter. On an adjusted basis, net earnings for the third quarter of fiscal 2021 increased 37.0% to $49.2. Adjusted earnings increased due to higher net sales and improved margins partially offset by higher advertising and promotional expense (“A&P”) in support of executing our category and brand strategies and new product launches across core geographies and markets.
•Net earnings per diluted share during the third quarter of fiscal 2021 were $0.74 compared to $0.09 in the prior year quarter. On an adjusted basis, net earnings per diluted share during the third quarter of fiscal 2021 was $0.89 compared to $0.66 in the prior year quarter.
| Three Months Ended June 30, 2021 | |||||||||||||||||||||||||||||||||||||||||
| Gross Profit | SG&A | Operating Income | EBIT | Income taxes | Net Earnings | Diluted EPS | |||||||||||||||||||||||||||||||||||
| GAAP — Reported | $ | 270.3 | $ | 97.5 | $ | 71.1 | $ | 53.9 | $ | 13.1 | $ | 40.8 | $ | 0.74 | |||||||||||||||||||||||||||
| Restructuring and related costs | 0.2 | 2.8 | 8.2 | 8.2 | 2.0 | 6.2 | 0.11 | ||||||||||||||||||||||||||||||||||
| Acquisition and integration costs | — | 1.3 | 1.3 | 1.3 | 0.3 | 1.0 | 0.02 | ||||||||||||||||||||||||||||||||||
| UK tax rate increase | — | — | — | — | (1.2) | 1.2 | 0.02 | ||||||||||||||||||||||||||||||||||
| Total Adjusted Non-GAAP | $ | 270.5 | $ | 93.4 | $ | 80.6 | $ | 63.4 | $ | 14.2 | $ | 49.2 | $ | 0.89 | |||||||||||||||||||||||||||
| GAAP as a percent of net sales | 47.1 | % | 17.0 | % | 12.4 | % | GAAP effective tax rate | 24.2 | % | ||||||||||||||||||||||||||||||||
| Adjusted as a percent of net sales | 47.2 | % | 16.3 | % | 14.0 | % | Adjusted effective tax rate | 22.4 | % | ||||||||||||||||||||||||||||||||
| Three Months Ended June 30, 2020 | |||||||||||||||||||||||||||||||||||||||||
| Gross Profit | SG&A | Operating Income | EBIT | Income taxes | Net Earnings | Diluted EPS | |||||||||||||||||||||||||||||||||||
| GAAP — Reported | $ | 222.7 | $ | 91.3 | $ | 43.5 | $ | 5.3 | $ | 0.6 | $ | 4.7 | $ | 0.09 | |||||||||||||||||||||||||||
| Restructuring and related costs | 0.1 | 2.3 | 10.4 | 10.4 | 2.3 | 8.1 | 0.15 | ||||||||||||||||||||||||||||||||||
| Acquisition and integration costs | — | 0.3 | 0.3 | 0.3 | — | 0.3 | 0.01 | ||||||||||||||||||||||||||||||||||
| Cost of early retirement of long-term debt | — | — | — | 26.2 | 6.4 | 19.8 | 0.36 | ||||||||||||||||||||||||||||||||||
| COVID-19 expenses | 3.9 | — | 3.9 | 3.9 | 0.9 | 3.0 | 0.05 | ||||||||||||||||||||||||||||||||||
| Total Adjusted Non-GAAP | $ | 226.7 | $ | 88.7 | $ | 58.1 | $ | 46.1 | $ | 10.2 | $ | 35.9 | $ | 0.66 | |||||||||||||||||||||||||||
| GAAP as a percent of net sales | 46.0 | % | 18.9 | % | 9.0 | % | GAAP effective tax rate | 11.3 | % | ||||||||||||||||||||||||||||||||
| Adjusted as a percent of net sales | 46.8 | % | 18.3 | % | 12.0 | % | Adjusted effective tax rate | 22.1 | % | ||||||||||||||||||||||||||||||||
First Nine Months of Fiscal 2021
•Net sales for the first nine months of fiscal 2021 increased 5.7% to $1,544.1. Organic net sales increased 2.1% compared to the prior year period, due to increases in Wet Shave globally and Sun and Skin Care in North America
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offset by declines in Feminine Care in North America. The growth in net sales for Wet Shave and Sun and Skin Care reflects improved underlying category performance, particularly in the United States, as well as increased brand and promotional investments. The decline in Feminine Care was primarily related to lower category demand related to the prior year’s pantry loading due to COVID-19.
•Net earnings for the first nine months of fiscal 2021 were $72.9 compared to $46.6 in the prior year. On an adjusted basis, net earnings for the first nine months of fiscal 2021 decreased 4.5% to $111.0. Adjusted earnings decreased due to higher A&P across Wet Shave products, including Men’s and Women’s systems, and Feminine Care products. The increase in A&P was partially offset by higher net sales and improved gross margins.
•Net earnings per diluted share during the first nine months of fiscal 2021 were $1.32 compared to $0.86 in the prior year period. On an adjusted basis, as illustrated in the following table, net earnings per diluted share during the first nine months of fiscal 2021 were $2.01 compared to $2.13 in the prior year quarter.
| Nine Months Ended June 30, 2021 | |||||||||||||||||||||||||||||||||||||||||
| Gross Profit | SG&A | Operating Income | EBIT | Income taxes | Net Earnings | Diluted EPS | |||||||||||||||||||||||||||||||||||
| GAAP — Reported | $ | 705.3 | $ | 284.0 | $ | 175.6 | $ | 98.6 | $ | 25.7 | $ | 72.9 | $ | 1.32 | |||||||||||||||||||||||||||
| Restructuring and related costs | 0.3 | 6.2 | 18.1 | 18.1 | 4.4 | 13.7 | 0.25 | ||||||||||||||||||||||||||||||||||
| Acquisition and integration costs | 1.3 | 3.3 | 4.6 | 4.6 | 1.1 | 3.5 | 0.06 | ||||||||||||||||||||||||||||||||||
| Cost of early retirement of long-term debt | — | — | — | 26.1 | 6.4 | 19.7 | 0.36 | ||||||||||||||||||||||||||||||||||
| UK tax rate increase | — | — | — | — | (1.2) | 1.2 | 0.02 | ||||||||||||||||||||||||||||||||||
| Total Adjusted Non-GAAP | $ | 706.9 | $ | 274.5 | $ | 198.3 | $ | 147.4 | $ | 36.4 | $ | 111.0 | $ | 2.01 | |||||||||||||||||||||||||||
| GAAP as a percent of net sales | 45.7 | % | 18.4 | % | 11.4 | % | GAAP effective tax rate | 26.1 | % | ||||||||||||||||||||||||||||||||
| Adjusted as a percent of net sales | 45.8 | % | 17.8 | % | 12.8 | % | Adjusted effective tax rate | 24.8 | % | ||||||||||||||||||||||||||||||||
| Nine Months Ended June 30, 2020 | |||||||||||||||||||||||||||||||||||||||||
| Gross Profit | SG&A | Operating Income | EBIT | Income taxes | Net Earnings | Diluted EPS | |||||||||||||||||||||||||||||||||||
| GAAP — Reported | $ | 658.8 | $ | 307.8 | $ | 134.7 | $ | 63.1 | $ | 16.5 | $ | 46.6 | $ | 0.86 | |||||||||||||||||||||||||||
| Restructuring and related costs | 0.2 | 10.0 | 30.8 | 30.8 | 6.9 | 23.9 | 0.44 | ||||||||||||||||||||||||||||||||||
| Acquisition and integration costs | — | 32.0 | 32.0 | 32.0 | 7.8 | 24.2 | 0.45 | ||||||||||||||||||||||||||||||||||
| Cost of early retirement of long-term debt | — | — | — | 26.2 | 6.4 | 19.8 | 0.36 | ||||||||||||||||||||||||||||||||||
| Gain on sale of Infant and Pet Care business | — | — | — | (4.1) | (2.6) | (1.5) | (0.03) | ||||||||||||||||||||||||||||||||||
| COVID-19 expenses | 3.9 | — | 3.9 | 3.9 | 0.9 | 3.0 | 0.05 | ||||||||||||||||||||||||||||||||||
| Feminine and Infant Care evaluation costs | — | 0.3 | 0.3 | 0.3 | 0.1 | 0.2 | — | ||||||||||||||||||||||||||||||||||
| Total Adjusted Non-GAAP | $ | 662.9 | $ | 265.5 | $ | 201.7 | $ | 152.2 | $ | 36.0 | $ | 116.2 | $ | 2.13 | |||||||||||||||||||||||||||
| GAAP as a percent of net sales | 45.1 | % | 21.1 | % | 9.2 | % | GAAP effective tax rate | 26.1 | % | ||||||||||||||||||||||||||||||||
| Adjusted as a percent of net sales | 45.4 | % | 18.2 | % | 13.8 | % | Adjusted effective tax rate | 23.7 | % | ||||||||||||||||||||||||||||||||
Operating Results
The following table presents changes in net sales for the third quarter and first nine months of fiscal 2021, as compared to the corresponding period in fiscal 2020, and provides a reconciliation of organic net sales to reported amounts.
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Net Sales
| Net Sales - Total Company | |||||||||||||||||||||||
| Period Ended June 30, 2021 | |||||||||||||||||||||||
| Q3 | % Chg | Nine Months | % Chg | ||||||||||||||||||||
| Net sales - prior year | $ | 483.9 | $ | 1,460.9 | |||||||||||||||||||
| Organic | 60.5 | 12.5 | % | 31.0 | 2.1 | % | |||||||||||||||||
| Impact of Cremo acquisition | 13.7 | 2.8 | % | 44.9 | 3.1 | % | |||||||||||||||||
| Impact of the sale of the Infant and Pet Care business | — | — | % | (26.8) | (1.8) | % | |||||||||||||||||
| Impact of currency | 15.6 | 3.3 | % | 34.1 | 2.3 | % | |||||||||||||||||
| Net sales - current year | $ | 573.7 | 18.6 | % | $ | 1,544.1 | 5.7 | % | |||||||||||||||
For the third quarter of fiscal 2021, net sales were $573.7, an 18.6% increase compared to the prior year quarter. Organic net sales increased 12.5% driven by strong Sun Care and Wet Shave performance across both North America and International markets, and in part reflecting the impact of cycling prior year COVID-19 related headwinds.
For the first nine months of fiscal 2021, net sales were $1,544.1, a 5.7% increase compared to the prior year period. Organic net sales increased 2.1% compared to the prior year period. Organic net sales increases were driven by higher volumes of Wet Shave and Sun Care, particularly in North America, reflective of higher demand due to cycling COVID-19 headwinds in the prior year period and favorable pricing impacting Sun and Skin Care. Lower volumes for Feminine Care were driven by COVID-19 demand declines and pantry loading during the prior year period.
For further discussion regarding net sales, including a summary of reported versus organic changes, see “Segment Results.”
Gross Profit
Gross profit was $270.3 during the third quarter of fiscal 2021, compared to $222.7 in the prior year quarter. Gross margin as a percent of net sales for the third quarter of fiscal 2021 was 47.1%. Adjusted gross margin percentage was 47.2%, an increase of 40-basis points compared to the prior year quarter, as favorable pricing, product mix and trade promotional spending, and gross savings from Project Fuel more than offset higher commodity, labor and distribution costs.
Gross profit was $705.3 during the first nine months of fiscal 2021, compared to $658.8 in the prior year period. Gross margin as a percent of net sales for the first nine months of fiscal 2021 was 45.7%, up 60-basis points compared to the prior year period. Adjusted gross margin percentage was 45.8%, up 40-basis points from the prior year period, driven by favorable price and category mix, gross savings from Project Fuel and favorable foreign currency fluctuations offset by rising commodity and supply chain costs and higher obsolescence charges.
Selling, General and Administrative Expense
Selling, general and administrative expense (“SG&A”) was $97.5 in the third quarter of fiscal 2021, or 17.0% of net sales, compared to $91.3 in the prior year quarter, or 18.9% of net sales. Adjusted SG&A as a percent of net sales was 16.3%, a decline of 200-basis points as the benefit of sales leverage in the current quarter more than offset increased operating costs associated with the Cremo business and negative foreign currency exchange.
SG&A was $284.0 in the first nine months of fiscal 2021, or 18.4% of net sales, as compared to $307.8 in the prior year period, or 21.1% of net sales. Adjusted SG&A as a percent of net sales was 17.8%, a decrease of 40-basis points, as stronger cost control and the benefit of sales leverage more than offset investments made in increased talent and capabilities and unfavorable foreign currency fluctuations.
Advertising and Sales Promotion Expense
For the third quarter of fiscal 2021, A&P was $81.9, up $14.4 compared to the prior year quarter of $67.5. A&P as a percent of net sales was 14.3%, up from 13.9% in the prior year period. For the first nine months of fiscal 2021, A&P was $191.5, up $35.9 compared to the prior year period. A&P as a percent of net sales was 12.4%, as compared to 10.7% in the prior year period. The increase in A&P was the result of investments in and focus on critical commercial efforts supporting the Schick Hydro relaunch, Schick Stubble Eraser® product launch, Skintimate campaign, and Men’s systems development in Japan, increased support for the Sun Care business and the inclusion of Cremo brand investments.
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Research and Development Expense
Research and development expense (“R&D”) for the third quarter of fiscal 2021 was $14.6, compared to $12.4 in the prior year quarter. As a percent of net sales, R&D was 2.5% in the third quarter of fiscal 2021 compared to 2.6% in the prior year quarter.
R&D for the first nine months of fiscal 2021 was $42.6, compared to $40.1 in the prior year period. As a percent of net sales, R&D was 2.8% in the first nine months of fiscal 2021, compared to 2.7% in the prior year period. R&D expense was slightly up compared to the prior year driven by incremental investments in resources and capabilities in support of the Company’s focus on innovation and development primarily in the Sun and Skin Care segment.
Interest Expense Associated with Debt
Interest expense associated with debt for the third quarter of fiscal 2021 was $16.4, compared to $15.5 in the prior year quarter. For the first nine months of fiscal 2021, interest expense was $51.1, compared to $43.7 in the prior year period. The increase in interest expense was the result of higher average outstanding debt and higher interest rate primarily as a result of the issuance of the 5.5% $750 Senior Notes due 2028 issued in May 2020 (the “2028 Notes”).
Other Expense (Income), Net
Other expense, net was $0.8 in the third quarter of fiscal 2021, compared to income of $3.5 in the prior year quarter. The unfavorable movement in other expenses compared to the prior year quarter was driven by prior year income from hedge settlements. Other income, net was $0.2 during the first nine months of fiscal 2021, compared to expense of $5.8 during the first nine months of fiscal 2020. The favorable movement was largely related to unfavorable foreign currency movements in the prior period.
Income Tax Provision
The effective tax rate for the first nine months of fiscal 2021 was 26.1%, compared to 26.1% in the prior year period. On an adjusted basis, the effective tax rate was 24.8% and 23.7% for the first nine months of fiscal 2021 and fiscal 2020, respectively. The fiscal 2021 effective tax rate and adjusted effective tax rate reflects higher unfavorable global intangible low-tax income and Internal Revenue Service Code Section 162(m) permanent adjustments compared to fiscal 2020.
The following table presents a reconciliation of the adjusted effective tax rate, which is a non-GAAP measure:
| Nine Months Ended June 30, 2021 | Nine Months Ended June 30, 2020 | ||||||||||||||||||||||||||||||||||
| Reported | Adjustments (1) | Adjusted (Non-GAAP) | Reported | Adjustments (1) | Adjusted (Non-GAAP) | ||||||||||||||||||||||||||||||
Earnings before income taxes | $ | 98.6 | $ | 48.8 | $ | 147.4 | $ | 63.1 | $ | 89.1 | $ | 152.2 | |||||||||||||||||||||||
| Income tax provision | 25.7 | 10.7 | 36.4 | 16.5 | 19.5 | 36.0 | |||||||||||||||||||||||||||||
Net earnings | $ | 72.9 | $ | 38.1 | $ | 111.0 | $ | 46.6 | $ | 69.6 | $ | 116.2 | |||||||||||||||||||||||
| Effective tax rate | 26.1 | % | 26.1 | % | |||||||||||||||||||||||||||||||
| Adjusted effective tax rate | 24.8 | % | 23.7 | % | |||||||||||||||||||||||||||||||
(1)Includes adjustments for expenses management excludes when analyzing the operating performance of the Company. Refer to the GAAP to Non-GAAP reconciliation above for a detailed listing of adjustments.
Project Fuel
Project Fuel is an enterprise-wide transformational initiative that was launched in the second fiscal quarter of 2018, to address all aspects of our business and cost structure, simplifying and transforming the organization, structure and key processes. Project Fuel is facilitating further re-investment in our growth strategy while enabling us to achieve its desired future state operations.
Fiscal third quarter 2021 Project Fuel related gross savings were approximately $19, bringing cumulative gross savings to approximately $264. We now expect Project Fuel to generate approximately $280 in total project gross savings by the end of the 2021 fiscal year. The savings generated will be used to fuel investments and brand building in strategic growth initiatives,
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mitigate anticipated operational cost headwinds from inflation and other rising input costs and improve our overall profitability and cash flows.
To implement the restructuring element of Project Fuel, we now expect to incur one-time pre-tax charges of approximately $160 through the end of the 2021 fiscal year.
Restructuring and related charges were $8.2 and $18.1 for the third quarter and nine months ended June 30, 2021, respectively, bringing cumulative charges to $151.7 for the project.
Capital expenditures for Project Fuel were $8.4 for the nine months ended June 30, 2021 bringing cumulative capital expenditures to $66.5 for the project.
For further information on our restructuring projects, refer to Note 3 of Notes to Condensed Consolidated Financial Statements.
Segment Results
The following tables present changes in segment net sales and segment profit for the third quarter and first nine months of fiscal 2021, compared to the corresponding period in fiscal 2020, 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 15 of Notes to Condensed Consolidated Financial Statements.
Our operating model includes some shared business functions across the 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 the segments.
Wet Shave
| Net Sales - Wet Shave | |||||||||||||||||||||||
| Period Ended June 30, 2021 | |||||||||||||||||||||||
| Q3 | % Chg | Nine Months | % Chg | ||||||||||||||||||||
| Net sales - prior year | $ | 278.0 | $ | 835.5 | |||||||||||||||||||
| Organic | 15.9 | 5.7 | % | 14.8 | 1.8 | % | |||||||||||||||||
| Impact of currency | 11.0 | 4.0 | % | 26.4 | 3.1 | % | |||||||||||||||||
| Net sales - current year | $ | 304.9 | 9.7 | % | $ | 876.7 | 4.9 | % | |||||||||||||||
Wet Shave net sales for the third quarter of fiscal 2021 increased 9.7% compared to the prior year quarter, inclusive of a 4.0% increase due to currency movements. Organic net sales increased $15.9, or 5.7%, driven by on-going growth in Women’s shave, both branded and private label, and higher consumption across the full category. By region, North America organic net sales increased 4.6%, while International markets increased 6.6%.
Wet Shave net sales for the first nine months of fiscal 2021 increased 4.9%, inclusive of a 3.1% increase due to currency movements. Organic net sales increased $14.8, or 1.8%. The increase in organic net sales was driven by growth in Women’s systems, partially offset by declines in Men’s systems and Shave Preps. Women’s systems growth included increases in Intuition, Skintimate and Hydro Silk, while Men’s systems saw growth in Hydro and Bulldog, offsetting declines in other brands. By region, North America organic net sales increased 2.0% while International markets increased 1.6%.
| Segment Profit - Wet Shave | |||||||||||||||||||||||
| Period Ended June 30, 2021 | |||||||||||||||||||||||
| Q3 | % Chg | Nine Months | % Chg | ||||||||||||||||||||
| Segment profit - prior year | $ | 44.6 | $ | 142.0 | |||||||||||||||||||
| Organic | (4.1) | (9.2) | % | (6.4) | (4.5) | % | |||||||||||||||||
| Impact of currency | 2.6 | 5.8 | % | 6.0 | 4.2 | % | |||||||||||||||||
| Segment profit - current year | $ | 43.1 | (3.4) | % | $ | 141.6 | (0.3) | % | |||||||||||||||
Wet Shave segment profit for the third quarter of fiscal 2021 was $43.1, down $1.5, or 3.4%, compared to the prior year quarter, inclusive of the impact of currency movements. Organic segment profit decreased $4.1, or 9.2%, as increased net sales and favorable gross margins were more than offset by higher A&P for Men’s systems during the quarter.
Wet Shave segment profit for the first nine months of fiscal 2021 was $141.6, down $0.4, or 0.3%, from the prior year period, inclusive of the impact of currency movements. Organic segment profit decreased $6.4, or 4.5%, primarily due to significantly higher A&P in support of Men’s and Women’s systems, offset partially by higher gross margins and lower overheads.
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Sun and Skin Care
Sun and Skin Care segment net sales and profit are affected by the seasonality of sun care products. As a result, segment net sales and profit have historically been higher in the second and third quarters of the fiscal year.
| Net Sales - Sun and Skin Care | |||||||||||||||||||||||
| Period Ended June 30, 2021 | |||||||||||||||||||||||
| Q3 | % Chg | Nine Months | % Chg | ||||||||||||||||||||
| Net sales - prior year | $ | 136.9 | $ | 369.5 | |||||||||||||||||||
| Organic | 40.4 | 29.5 | % | 36.2 | 9.8 | % | |||||||||||||||||
| Impact of Cremo acquisition | 13.7 | 10.0 | % | 44.9 | 12.2 | % | |||||||||||||||||
| Impact of currency | 4.2 | 3.1 | % | 7.1 | 1.9 | % | |||||||||||||||||
| Net sales - current year | $ | 195.2 | 42.6 | % | $ | 457.7 | 23.9 | % | |||||||||||||||
Sun and Skin Care net sales for the third quarter of fiscal 2021 increased 42.6% compared to the prior year quarter, inclusive of a 10.0% increase due to the Cremo acquisition and a 3.1% increase due to currency movements. Organic net sales increased $40.4, or 29.5%. The increase in organic net sales was primarily driven by Sun Care growth of nearly 50%, reflecting a sharp recovery in consumption after COVID-19 impacted declines in the prior year period, as well as 17% organic net sales growth in Men’s grooming. Wet Ones organic net sales contracted $8.5, or 32% in the quarter, reflecting ongoing high retailer inventory and lower consumption as we cycled prior year COVID-19 driven performance.
Sun and Skin Care net sales for the first nine months of fiscal 2021 increased 23.9% compared to the prior year period, inclusive of a 12.2% increase due to the Cremo acquisition and a 1.9% increase due to currency movements. Organic net sales increased $36.2, or 9.8%. The organic net sales increase was driven by Sun Care growth which totaled 10% globally reflecting a sharp recovery in consumption after COVID-19, and favorable pricing in International markets. Wet Ones grew 9% driven by higher volumes in the first half of fiscal 2021. Men’s Grooming increased over 12% driven by Jack Black and Bulldog.
| Segment Profit - Sun and Skin Care | |||||||||||||||||||||||
| Period Ended June 30, 2021 | |||||||||||||||||||||||
| Q3 | % Chg | Nine Months | % Chg | ||||||||||||||||||||
| Segment profit - prior year | $ | 23.5 | $ | 67.9 | |||||||||||||||||||
| Organic | 18.4 | 78.3 | % | 11.5 | 16.9 | % | |||||||||||||||||
| Impact of Cremo acquisition | 1.9 | 8.1 | % | 5.7 | 8.4 | % | |||||||||||||||||
| Impact of currency | 1.2 | 5.1 | % | 1.3 | 1.9 | % | |||||||||||||||||
| Segment profit - current year | $ | 45.0 | 91.5 | % | $ | 86.4 | 27.2 | % | |||||||||||||||
Segment profit for the third quarter of fiscal 2021 was $45.0, an increase of $21.5, compared to the prior year quarter. Organic segment profit, excluding the Cremo acquisition and currency movements, increased $18.4, driven by increased net sales and gross margin from favorable volumes and pricing, offset by unfavorable materials costs.
Segment profit for the first nine months of fiscal 2021 was $86.4, an increase of $18.5, or 27.2%, compared to the prior year period. Organic segment profit, excluding the Cremo acquisition and currency movements, increased $11.5, or 16.9%, driven by increased net sales and gross margin from favorable volumes and pricing, offset by unfavorable materials costs.
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Feminine Care
| Net Sales - Feminine Care | |||||||||||||||||||||||
| Period Ended June 30, 2021 | |||||||||||||||||||||||
| Q3 | % Chg | Nine Months | % Chg | ||||||||||||||||||||
| Net sales - prior year | $ | 69.0 | $ | 229.1 | |||||||||||||||||||
| Organic | 4.2 | 6.1 | % | (20.0) | (8.7) | % | |||||||||||||||||
| Impact of currency | 0.4 | 0.6 | % | 0.6 | 0.2 | % | |||||||||||||||||
| Net sales - current year | $ | 73.6 | 6.7 | % | $ | 209.7 | (8.5) | % | |||||||||||||||
Feminine Care net sales for the third quarter of fiscal 2021 increased $4.6, or 6.7%. The increase in net sales was largely driven by increased consumption as the category recovered from the prior year’s steep declines due to COVID-19.
Feminine Care net sales for the first nine months of fiscal 2021 decreased $19.4, or 8.5%. Net sales declines were driven by overall category declines, the effect of the prior year pantry loading and the negative effect of distribution losses.
| Segment Profit - Feminine Care | |||||||||||||||||||||||
| Period Ended June 30, 2021 | |||||||||||||||||||||||
| Q3 | %Chg | Nine Months | %Chg | ||||||||||||||||||||
| Segment profit - prior year | $ | 12.0 | $ | 43.4 | |||||||||||||||||||
| Organic | 1.4 | 11.7 | % | (15.8) | (36.4) | % | |||||||||||||||||
| Impact of currency | 0.3 | 2.5 | % | 0.5 | 1.1 | % | |||||||||||||||||
| Segment profit - current year | $ | 13.7 | 14.2 | % | $ | 28.1 | (35.3) | % | |||||||||||||||
Feminine Care segment profit for the third quarter of fiscal 2021 was $13.7, an increase of $1.7, or 14.2%, compared to the prior year quarter. The decline was driven by higher gross margin, reflecting increased volumes, favorable trade offset by higher costs, including materials cost and warehousing and distribution charges, and higher A&P.
Feminine Care segment profit for the first nine months of fiscal 2021 was $28.1, a decrease of $15.3, or 35.3%, from the prior year period, primarily due to unfavorable gross margin from lower sales volumes across all products, unfavorable cost mix due to higher materials and warehouse and distribution costs, and higher A&P.
All Other
The Infant and Pet Care business divestiture, completed in December 2019, disposed of the entirety of the operations of the All Other segment. The results below represent the impact of the divestiture to segment performance:
| Net Sales - All Other | |||||||||||
| Period Ended June 30, 2021 | |||||||||||
| Nine Months | %Chg | ||||||||||
| Net sales - prior year | $ | 26.8 | |||||||||
| Organic | — | — | % | ||||||||
| Impact of the sale of the Infant and Pet Care business | (26.8) | (100.0) | % | ||||||||
| Impact of currency | — | — | % | ||||||||
| Net sales - current year | $ | — | (100.0) | % | |||||||
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| Segment Profit - All Other | |||||||||||
| Period Ended June 30, 2021 | |||||||||||
| Nine Months | %Chg | ||||||||||
| Segment profit - prior year | $ | 3.1 | |||||||||
| Organic | — | — | % | ||||||||
| Impact of the sale of the Infant and Pet Care business | (3.1) | (100.0) | % | ||||||||
| Impact of currency | — | — | % | ||||||||
| Segment profit - current year | $ | — | (100.0) | % | |||||||
General Corporate and Other Expenses
| Quarter Ended June 30, | Nine Months Ended June 30, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Corporate expenses | $ | 15.7 | $ | 17.7 | $ | 41.2 | $ | 41.9 | |||||||||||||||
| Restructuring and related costs | 8.2 | 10.4 | 18.1 | 30.8 | |||||||||||||||||||
| Acquisition and integration costs | 1.3 | 0.3 | 4.6 | 32.0 | |||||||||||||||||||
| Cost of early retirement of long-term debt | — | 26.2 | 26.1 | 26.2 | |||||||||||||||||||
| Gain on sale of Infant and Pet Care business | — | — | — | (4.1) | |||||||||||||||||||
| COVID-19 expenses | — | 3.9 | — | 3.9 | |||||||||||||||||||
| Feminine and Infant Care evaluation costs | — | — | — | 0.3 | |||||||||||||||||||
| General corporate and other expenses | $ | 25.2 | $ | 58.5 | $ | 90.0 | $ | 131.0 | |||||||||||||||
| % of net sales | 4.4 | % | 12.1 | % | 5.8 | % | 9.0 | % | |||||||||||||||
For the third quarter of fiscal 2021, general corporate expenses were $15.7, or 2.7% of net sales, compared to $17.7, or 3.7% of net sales, in the prior year quarter. For the third quarter of fiscal 2021, the decline in corporate expense was primarily due to lower compensation expenses, Project Fuel savings and lower discretionary spending.
For the first nine months of fiscal 2021, general corporate expenses were $41.2, or 2.7% of net sales, compared to $41.9, or 2.9% of net sales, in the prior year period. For the nine months ended June 30, 2021, the slight decline in corporate expense was primarily due to Project Fuel savings and lower discretionary spending.
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Liquidity and Capital Resources
To date, COVID-19 has not had a significant impact on our liquidity or capital resources. However, the ongoing COVID-19 pandemic has led to disruption and volatility in the global capital markets, which, depending on future developments, could impact our capital resources and liquidity in the future.
At June 30, 2021, a portion of our cash balances were located outside the U.S. Given our extensive international operations, a significant portion of our cash is denominated in foreign currencies. 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.
The counterparties that hold our deposits consist of major financial institutions. We consistently monitor positions with, and the credit ratings of, counterparties both internally and by using outside ratings agencies.
Our total borrowings were $1,274.8 at June 30, 2021, including $24.8 tied to variable interest rates. Our total borrowings at September 30, 2020 were $1,271.1. We had outstanding international borrowings, recorded in Notes payable, of $24.8 and $21.1 as of June 30, 2021 and September 30, 2020, respectively.
As previously discussed, on March 8, 2021, the Company entered into the 2029 Notes. The Company used the net proceeds of the 2029 Notes, together with cash on hand, to satisfy and discharge the obligations outstanding under its 4.70% Senior Notes in the amount of $500 due 2022 (the “2022 Notes”).
Historically, we have generated, and expect to continue to generate, positive cash flows from operations. Our cash flows are affected by the seasonality of our Sun Care products, typically resulting in higher net sales and increased cash generated in the second and third quarter of each fiscal year. While we cannot reasonably estimate the full impact COVID-19 will have on our cash flows, we believe our cash on hand, cash flows from operations and borrowing capacity under our U.S Revolving Credit Facility due 2025 (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 consist primarily of working capital requirements and principal 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. 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. Our long-term liquidity may be influenced by our ability to borrow additional funds, renegotiate existing debt, and raise equity on terms that are favorable to us.
The expected minimum required contribution to our pension plans in fiscal 2021 is $6.3; however, discretionary contributions may also be made. During the first nine months of fiscal 2021 we contributed $4.3 to our pension plans.
As of June 30, 2021, we were in compliance with the provisions and covenants associated with our debt agreements.
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Cash Flows
A summary of our cash flow activities is provided in the following table:
| Nine Months Ended June 30, | |||||||||||
| 2021 | 2020 | ||||||||||
| Net cash from (used by): | |||||||||||
| Operating activities | $ | 155.9 | $ | 118.6 | |||||||
| Investing activities | (26.1) | 71.3 | |||||||||
| Financing activities | (59.9) | (21.6) | |||||||||
| Effect of exchange rate changes on cash | 2.9 | 2.0 | |||||||||
| Net increase in cash and cash equivalents | $ | 72.8 | $ | 170.3 | |||||||
Operating Activities
Cash flow from operating activities was $155.9 during the first nine months of fiscal 2021, compared to cash flows from operating activities of $118.6 during the same period in the prior year. The increase in cash from operations was primarily related to increased net earnings.
Investing Activities
Cash flow used by investing activities was $26.1 during the first nine months of fiscal 2021, compared to cash inflows of $71.3 during the same period in the prior year. During the nine months ended June 30, 2021, we collected $7.5 of proceeds from the sale of the Infant and Pet Care business, compared to $95.8 in the prior year quarter. Capital expenditures were $34.1 during the first nine months of fiscal 2021 compared to $26.9 during the same period in the prior year. Additionally, other investing cash inflows related to the collection of receivables from our $150 uncommitted master accounts receivable purchase agreement with The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch, as the purchaser (the “Accounts Receivable Facility”) totaled $2.6 and $3.9 during the first nine months of fiscal 2021 and 2020, respectively, as a result of collections on the deferred purchase price of accounts receivables sold.
Financing Activities
Net cash used by financing activities was $59.9 during the first nine months of fiscal 2021, compared to $21.6 during the same period in the prior year. During the first nine months of fiscal 2021, we repurchased $9.2 of our common stock under our 2018 Board authorization to repurchase our common stock (the “Repurchase Plan”). The Company replaced its 2022 Notes with the issuance of 2029 Notes, together with cash on hand. Additional financing cash outflows incurred were related to costs of early debt retirement of the 2022 Notes totaling $26.1 and debt issuance costs of $6.5. Dividend payments totaled $16.7 in the first nine months of fiscal 2021. Additionally, cash flows associated with the Accounts Receivable Facility were inflows of $0.8 during the first nine months of fiscal 2021 compared to financing outflows of $14.4 in the prior year period. In the prior year period, the Company replaced its 4.7% Senior Notes in the amount of $600 Senior Notes due 2021 with the $750 2028 Senior Notes. Early debt retirement of the 2021 Senior Notes totaling $26.2 and debt issuance costs totaling $10.4. The Company had net repayments of its Revolving Credit Facility during the nine months ended June 30, 2020 totaling $117.0.
Share Repurchases
During the first nine months of fiscal 2021, we repurchased 0.3 shares of our common stock for $9.2. We have 9.7 shares remaining under the Repurchase Plan. 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
On May 6, 2021, the Company’s Board of Directors (the “Board”) declared a cash dividend of $0.15 per share of common stock outstanding. The dividend was paid on July 7, 2021 to holders of record as of the close of business on June 4, 2021. Dividends declared during the nine months ended June 30, 2021 totaled $25.4. Payments made for dividends during the nine months ended June 30, 2021 totaled $16.7.
On August 5, 2021, the Board declared a quarterly cash dividend of $0.15 per common stock outstanding for the third fiscal quarter. The dividend is payable October 5, 2021 to stockholders of record as of the close of business on September 9, 2021.
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Commitments and Contingencies
Contractual Obligations
During the first nine months of fiscal 2021, there were no net repayments on the Revolving Credit Facility. As of June 30, 2021, future minimum repayments of debt were: $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 2020 Annual Report.
35
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
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 14 of Notes to Condensed Consolidated Financial Statements. As of June 30, 2021, 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 LIBOR plus margin. As of June 30, 2021, our outstanding variable-rate debt included $24.8 related to our international, variable-rate note payable. Assuming a one-percent increase in the applicable interest rates, annual interest expense on these variable-rate debt instruments would not increase materially.
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 2020 Annual Report on Form 10-K.
36
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 June 30, 2021. 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 June 30, 2021 that have materially affected, or are likely to materially affect, our internal control over financial reporting.
37
PART II - OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
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 third quarter of fiscal 2021:
| 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 | ||||||||||||||||||||||
| April 1 to 30, 2021 | 24,676 | $ | 38.75 | — | 9,750,000 | |||||||||||||||||||||
| May 1 to 31, 2021 | — | — | — | 9,750,000 | ||||||||||||||||||||||
| June 1 to 30, 2021 | — | — | — | 9,750,000 | ||||||||||||||||||||||
(1)24,676 shares purchased during the quarter relate 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 third quarter of fiscal 2021, we did not repurchase shares under this authorization.
(3)Includes $0.02 per share of brokerage fee commissions.
Item 6. Exhibits.
| Exhibit Number | Exhibit | ||||
| 3.1 | |||||
| 3.2 | |||||
| 3.3 | |||||
| 10.1 | |||||
| 10.2 | |||||
| 10.3 | |||||
| 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 and nine months ended June 30, 2021 and 2020, (ii) the Condensed Consolidated Balance Sheets at June 30, 2021 and September 30, 2020, (iii) the Condensed Consolidated Statements of Cash Flows for the nine months ended June 30, 2021 and 2020, (iv) the Condensed Consolidated Statements of Shareholder’s Equity for the three and nine months ended June 30, 2021 and 2020 and (v) Notes to Condensed Consolidated Financial Statements. The financial information contained in the XBRL-related documents is “unaudited” and “unreviewed.” | ||||
38
SIGNATURES
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 | |||||||||||
| Date: | August 5, 2021 | ||||||||||
39
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: August 5, 2021
| /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: August 5, 2021
| /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 June 30, 2021 (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: August 5, 2021
| /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 her knowledge that the Company's quarterly report on Form 10-Q for the period ended June 30, 2021 (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: August 5, 2021
| /s/ Daniel J. Sullivan | ||
| Daniel J. Sullivan | ||
| Chief Financial Officer | ||