10-Q 1 enr-20231231.htm 10-Q enr-20231231
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________
FORM 10-Q
_______________________________

(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2023
Or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                         to
Commission File Number: 001-36837
____________________________________________________________________________________________________________
enrlogoa47.jpg
ENERGIZER HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Missouri36-4802442
(State or other jurisdiction of(I. R. S. Employer
incorporation or organization)Identification No.)
 
533 Maryville University Drive 
St. Louis,Missouri63141
(Address of principal executive offices)(Zip Code)
(314)985-2000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $.01 per shareENRNew York Stock Exchange

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

1



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.
Large accelerated filerAccelerated filer
    
Non-accelerated filerSmaller 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 of Energizer Holdings, Inc. common stock, $.01 par value, outstanding as of the close of business on February 2, 2024: 71,782,335.
2


INDEX
 Page
PART I — FINANCIAL INFORMATION 
  
Item 1. Financial Statements (Unaudited) 
  
Consolidated Statements of Earnings and Comprehensive Income (Condensed) for the Quarters Ended December 31, 2023 and 2022
Consolidated Balance Sheets (Condensed) as of December 31, 2023 and September 30, 2023
Consolidated Statements of Cash Flows (Condensed) for the Three Months Ended December 31, 2023 and 2022
Consolidated Statements of Shareholders' Equity (Condensed) for the Three Months Ended December 31, 2023 and 2022

              
Notes to Consolidated (Condensed) 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 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
  
EXHIBIT INDEX
SIGNATURES




3



ENERGIZER HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
(Condensed)
(In millions, except per share data - Unaudited)  

 For the Quarters Ended December 31,
 20232022
Net sales$716.6 $765.1 
Cost of products sold449.6 466.8 
Gross profit267.0 298.3 
Selling, general and administrative expense128.1 120.4 
Advertising and sales promotion expense47.0 53.4 
Research and development expense7.8 7.6 
Amortization of intangible assets14.5 16.0 
Interest expense40.7 42.9 
Loss/(gain) on extinguishment of debt0.5 (2.9)
Other items, net19.0 (1.4)
Earnings before income taxes9.4 62.3 
Income tax provision7.5 13.3 
Net earnings$1.9 $49.0 
Basic net earnings per common share$0.03 $0.69 
Diluted net earnings per common share$0.03 $0.68 
Weighted average shares of common stock - Basic71.7 71.4 
Weighted average shares of common stock - Diluted72.6 72.2 
Statements of Comprehensive Income: 
Net earnings$1.9 $49.0 
Other comprehensive (loss)/income, net of tax (benefit)/expense
Foreign currency translation adjustments(1.1)(18.6)
Pension activity, net of tax of $0.2 and $1.2, respectively.
(0.9)2.4 
Deferred loss on hedging activity, net of tax of $(6.5) and $(4.7), respectively.
(19.6)(13.4)
Total comprehensive (loss)/income$(19.7)$19.4 

The above financial statements should be read in conjunction with the Notes to Consolidated (Condensed) Financial Statements (Unaudited).
4


ENERGIZER HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Condensed)
(In millions - Unaudited)
 
AssetsDecember 31,
2023
September 30,
2023
Current assets 
Cash and cash equivalents$241.7 $223.3 
Trade receivables, less allowance for doubtful accounts of $4.7 and $4.6, respectively
376.4 511.6 
Inventories640.6 649.7 
Other current assets212.3 172.0 
Total current assets1,471.0 1,556.6 
Property, plant and equipment, net384.3 363.7 
Operating lease assets96.5 98.4 
Goodwill1,023.7 1,016.2 
Other intangible assets, net1,224.4 1,237.7 
Deferred tax assets92.2 88.4 
Other assets131.8 148.6 
Total assets$4,423.9 $4,509.6 
Liabilities and Shareholders' Equity
Current liabilities
Current maturities of long-term debt$12.0 $12.0 
Current portion of finance leases0.9 0.3 
Notes payable2.2 8.2 
Accounts payable374.6 370.8 
Current operating lease liabilities17.3 17.3 
Other current liabilities317.4 325.6 
Total current liabilities724.4 734.2 
Long-term debt3,303.3 3,332.1 
Operating lease liabilities81.9 84.7 
Deferred tax liabilities10.5 12.4 
Other liabilities133.2 135.5 
Total liabilities4,253.3 4,298.9 
Shareholders' equity
Common stock0.8 0.8 
Additional paid-in capital718.5 750.5 
Retained losses(164.3)(164.8)
Treasury stock(225.1)(238.1)
Accumulated other comprehensive loss(159.3)(137.7)
Total shareholders' equity170.6 210.7 
Total liabilities and shareholders' equity$4,423.9 $4,509.6 

The above financial statements should be read in conjunction with the Notes to Consolidated (Condensed) Financial Statements (Unaudited).
5


ENERGIZER HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Condensed)
(In millions - Unaudited)

 For the Three Months Ended December 31,
 20232022
Cash Flow from Operating Activities  
Net earnings$1.9 $49.0 
Adjustments to reconcile net earnings to net cash flow from operations:
Non-cash integration and restructuring charges2.4  
Depreciation and amortization30.0 32.1 
Deferred income taxes1.1 0.9 
Share-based compensation expense6.3 4.6 
Loss/(gain) on extinguishment of debt0.5 (2.9)
Non-cash items included in income, net6.3 4.4 
Exchange loss/(gain) included in income23.7 (1.0)
Other, net2.3 0.8 
Changes in current assets and liabilities used in operations103.6 73.1 
Net cash from operating activities178.1 161.0 
Cash Flow from Investing Activities
Capital expenditures(25.5)(9.5)
Proceeds from sale of assets 0.7 
Acquisitions, net of cash acquired(11.6) 
Net cash used by investing activities(37.1)(8.8)
  
Cash Flow from Financing Activities  
Payments on debt with maturities greater than 90 days(78.2)(49.8)
Net decrease in debt with original maturities of 90 days or less(5.2)(5.9)
Dividends paid on common stock(22.7)(21.8)
Taxes paid for withheld share-based payments(4.7)(1.9)
Net cash used by financing activities(110.8)(79.4)
Effect of exchange rate changes on cash(11.8)2.2 
Net increase in cash, cash equivalents, and restricted cash18.4 75.0 
Cash, cash equivalents, and restricted cash, beginning of period223.3 205.3 
Cash, cash equivalents, and restricted cash, end of period$241.7 $280.3 

The above financial statements should be read in conjunction with the Notes to Consolidated (Condensed) Financial Statements (Unaudited).
6



ENERGIZER HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Condensed)
(Amounts in millions, Shares in thousands - Unaudited)

Number of SharesAmount
Common StockCommon StockAdditional Paid-in CapitalRetained (Losses)/EarningsAccumulated Other Comprehensive (Loss)/IncomeTreasury StockTotal Shareholders' Equity
September 30, 202371,500 $0.8 $750.5 $(164.8)$(137.7)$(238.1)$210.7 
Net earnings— — — 1.9 — — 1.9 
Share-based payments— — 6.4 — — — 6.4 
Activity under stock plans277 — (16.3)(1.4)— 13.0 (4.7)
Dividends to common shareholders ($0.30 per share)
— — (22.1)— — — (22.1)
Other comprehensive loss— — — — (21.6)— (21.6)
December 31, 202371,777 $0.8 $718.5 $(164.3)$(159.3)$(225.1)$170.6 

Number of SharesAmount
Common StockCommon StockAdditional Paid-in CapitalRetained (Losses)/EarningsAccumulated Other Comprehensive (Loss)/IncomeTreasury StockTotal Shareholders' Equity
September 30, 202271,270 $0.8 $828.7 $(304.7)$(145.3)$(248.9)$130.6 
Net earnings— — — 49.0 — — 49.0 
Share-based payments— — 4.6 — — — 4.6 
Activity under stock plans142 — (8.5)(0.3)— 6.9 (1.9)
Dividends to common shareholders ($0.30 per share)
— — (21.9)— — — (21.9)
Other comprehensive loss— — — — (29.6)— (29.6)
December 31, 202271,412 $0.8 $802.9 $(256.0)$(174.9)$(242.0)$130.8 

The above financial statements should be read in conjunction with the Notes to Consolidated (Condensed) Financial Statement (Unaudited).
7

ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED (CONDENSED) FINANCIAL STATEMENTS
(In millions - Unaudited)



(1) Description of Business and Basis of Presentation
Description of Business - Energizer Holdings, Inc. and its subsidiaries (Energizer or the Company) is a global manufacturer, marketer and distributor of primary batteries, portable lights, and auto care appearance, performance, refrigerants and fragrance products.

Batteries and lights are sold under the Energizer®, Eveready®, Rayovac® and Varta® brand names. Energizer offers batteries using lithium, alkaline, carbon zinc, nickel metal hydride, zinc air and silver oxide constructions.

Automotive appearance, performance, refrigerants and fragrance products are sold under the Armor All®, STP®, A/C PRO® Refresh Your Car!®, California Scents®, Driven®, Bahama & Co.®, LEXOL® and Eagle One® brands.

Basis of Presentation - The accompanying Consolidated (Condensed) Financial Statements include the accounts of Energizer and its subsidiaries. All significant intercompany transactions are eliminated. Energizer has no material equity method investments, variable interests or non-controlling interests.

The accompanying Consolidated (Condensed) Financial Statements have been prepared in accordance with Article 10 of Regulation S-X and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The year-ended September 30, 2023 Consolidated (Condensed) Balance Sheet was derived from the audited financial statements included in Energizer's Report on Form 10-K, but does not include all disclosures required by U.S. GAAP. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair statement of our operations, financial position and cash flows have been included. Certain reclassifications have been made to the prior year financial statements to conform to the current presentation. Operating results for any quarter are not necessarily indicative of the results for any other quarter or for the full year. These statements should be read in conjunction with the financial statements and notes thereto for Energizer for the year ended September 30, 2023 included in the Annual Report on Form 10-K dated November 14, 2023.

Recently Adopted Accounting Pronouncements In September 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2022-04, Liabilities — Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations. The new guidance requires qualitative and quantitative disclosure sufficient to enable users of the financial statements to understand the nature, activity during the period, changes from period to period and potential magnitude of such programs. The amendments are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal periods, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023. The Company adopted the required guidance in the first quarter of fiscal 2024.

The Company has a voluntary Supplier Financing Program (the program) in collaboration with certain financial institutions that offers participating suppliers access to a third-party service which allows them to view scheduled payments online and enables them the ability to request payment of their invoices from the financial institutions earlier than the negotiated terms with the Company. The Company is not a party to the negotiations or agreements reached between participating suppliers and third-party financial institutions. The Company's obligations, including the amounts due and payment terms, remain unaffected by our suppliers’ decision to participate in the program. The Company does not provide any form of guarantee or assume any liability in connection with the agreements between our suppliers and the third-party financial institutions involved in the program. As of December 31, 2023 and September 30, 2023, the Company had $55.4 and $60.9, respectively, of outstanding supplier obligations confirmed as valid under the program which are included within Accounts payable on the Consolidated (Condensed) Balance Sheets.

Recently Issued Accounting Pronouncements - In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting: Improvements to Reportable Segment Disclosures. This guidance requires disclosure of incremental segment information on an annual and interim basis. This amendment is effective for our fiscal year ending September 30, 2025 and our interim periods within the fiscal year ending September 30, 2026. We are currently assessing the impact of this guidance on our disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes: Improvements to Income Tax Disclosures. This guidance requires consistent categories and greater disaggregation of information in the rate reconciliation and disclosures of income taxes paid by jurisdiction. This amendment is effective for our fiscal year ending September 30, 2026. We are currently assessing the impact of this guidance on our disclosures.


8

ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED (CONDENSED) FINANCIAL STATEMENTS
(In millions - Unaudited)


(2) Revenue Recognition

The Company, through its operating subsidiaries, is one of the world’s largest manufacturers, marketers and distributors of household batteries, specialty batteries and lighting products, and is a leading designer and marketer of automotive fragrance, appearance, performance and air conditioning recharge products. The Company distributes its products to consumers through numerous retail locations worldwide, including mass merchandisers and warehouse clubs, food, drug and convenience stores, electronics specialty stores and department stores, hardware and automotive centers, e-commerce and military stores. The Company sells to its customers through a combination of a direct sales force and exclusive and non-exclusive third-party distributors and wholesalers.

The Company’s revenue is primarily generated from the sale of finished product to customers. Sales predominantly contain a single delivery element, or performance obligation, and revenue is recognized at a single point in time when title, ownership and risk of loss pass to the customer. This typically occurs when finished goods are delivered to the customer or when finished goods are picked up by the carrier at origin or the customer, depending on contract terms.

North America sales are generally through large retailers with nationally or regionally recognized brands.

Our International sales, which includes Latin America, are comprised of modern trade, developing and distributor market groups. Modern trade, which is most prevalent in Western Europe and more developed economies throughout the world, generally refers to sales through large retailers with nationally or regionally recognized brands. Developing markets generally include sales by wholesalers or small retailers who may not have a national or regional presence. Distributors are utilized in other markets where the Company does not have a direct sales force. Each market's determination is based on the predominant customer type or sales strategy utilized in the market.

Supplemental product and market information is presented below for revenues from external customers for the quarters ended December 31, 2023 and 2022:
 For the Quarters Ended December 31,
Net Sales by products20232022
Batteries$591.4 $639.5 
Auto Care98.8 93.5 
Lights26.4 32.1 
Total Net Sales$716.6 $765.1 

 For the Quarters Ended December 31,
 20232022
Net Sales by markets 
North America$416.3 $456.3 
Modern Markets155.0 153.6 
Developing Markets106.0 108.5 
Distributors Markets39.3 46.7 
 Total Net Sales$716.6 $765.1 

(3) Acquisitions

Belgium Acquisition - On October 27, 2023, the Company acquired certain battery manufacturing assets in Belgium from Advanced Power Solutions Belgium NV (APS) for a contractual purchase price of EUR3.5 (Belgium Acquisition). The Company also acquired certain raw materials from APS, procured by APS on the Company's behalf to facilitate the transition, for a total acquisition purchase price of $11.6 (including value added taxes). The Company assumed a building lease as part of the acquisition and acquired these assets to provide a battery manufacturing location in Europe. The Company is still finalizing the valuation of these assets and related income tax considerations, but initially no goodwill has been recognized with this acquisition.

9

ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED (CONDENSED) FINANCIAL STATEMENTS
(In millions - Unaudited)


The Company recorded $2.6 of acquisition and integration costs associated with the Belgium Acquisition during the three months ended December 31, 2023. The costs included $2.9 of operating costs recorded in Costs of good sold as the Company was awaiting the receipt of the raw materials procured on the Company's behalf by APS. These costs were offset by $1.0 of income recorded in Other items, net from producing inventory for APS under a transaction services agreement (TSA) entered into at the closing of the transaction. No further income is expected from this TSA. The Company also recorded $0.7 of legal and diligence fees associated with the closing of this acquisition recorded in Selling, general and administrative expenses.

There were no acquisition and integration costs during the three months ended December 31, 2022.

(4) Restructuring

Project Momentum Restructuring - In November 2022, the Board of Directors approved a profit recovery program, Project Momentum, which includes an enterprise-wide restructuring focused on recovering operating margins, optimizing our manufacturing, distribution and global supply chain networks, and enhancing our organizational efficiency throughout the Company. In July 2023, the Company's Board of Directors approved an expansion to the Project Momentum profit recovery program and delegated authority to the Company's management to determine the final actions with respect to the plan. The expansion of this program included an additional year, which will allow for additional optimization of our battery manufacturing, distribution and global supply chain networks, further review of our global real estate footprint and the implementation of IT systems that will allow us to streamline our organization and fully execute the program.

Following the Belgium Acquisition in the first quarter of fiscal 2024, the Company is expanding the Project Momentum program and increasing the savings and cost expectations, partially due to the impact the expanded manufacturing capacity will have on the Company's battery network. It is estimated that the Company will incur total pre-tax exit-related cash operating costs associated with the program of approximately $140 to $150, non-cash costs of approximately $20, and capital expenditures of $75 to $85 through the end of fiscal 2025.

The pre-tax expense for charges related to the restructuring for the quarters ended December 31, 2023 and 2022 are noted in the table below, and were reflected in the Consolidated (Condensed) Statement of Earnings and Comprehensive Income:

For the Quarters Ended December 31,
20232022
Project Momentum Restructuring Program
Costs of products sold
Severance and related benefit costs$0.5 $ 
Accelerated depreciation & asset write-offs1.3  
Other restructuring related costs(1)
11.0 0.3 
Selling, general and administrate expense
Severance and related benefit costs1.8 0.5 
Accelerated depreciation & asset write-offs0.5  
Other restructuring related costs(2)
3.4 5.8 
Momentum Restructuring Cost Total$18.5 $6.6 
     IT enablement(3)
3.9  
Total restructuring and related costs$22.4 $6.6 
(1) Includes charges primarily related to consulting, relocation, decommissioning, and other facility exit costs.
(2) Primarily includes consulting, real estate rationalization costs, and legal fees for the restructuring program.
(3) Relates to operating expenses for new IT systems, primarily the organizational design and change management costs, which are enabling the Company to complete restructuring initiatives. Costs are included in SG&A in the Consolidated (Condensed) Statement of Earnings and Comprehensive Income.

10

ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED (CONDENSED) FINANCIAL STATEMENTS
(In millions - Unaudited)


Although the Company's restructuring costs are recorded outside of segment profit, if allocated to our reportable segments, the pre-tax restructuring and related costs for the quarter ended December 31, 2023 would be incurred within the Battery & Lights segment in the amounts of $20.8 and the Auto Care segment in the amount of $1.6. For the quarter ended December 31, 2022, the pre-tax restructuring and related costs would have been incurred within the Battery & Lights segment in the amount of $5.8 and the Auto Care segment in the amount of $0.8.

The following table summarizes the restructuring and related costs reserve activity related to the Project Momentum restructuring program for the quarters ended December 31, 2022 and 2023:
Utilized
September 30, 2022 (1)
Charge to IncomeCashNon-Cash
December 31, 2022 (1)
Severance & termination related costs$ $0.5 $0.2 $ $0.3 
Other restructuring related costs0.9 6.1 3.8  3.2 
    Total restructuring and related costs$0.9 $6.6 $4.0 $ $3.5 
Utilized
September 30, 2023 (1)
Charge to IncomeCashNon-Cash
December 31, 2023 (1)
Severance & termination related costs$15.4 $2.3 $3.9 $ $13.8 
Accelerated depreciation & asset write-offs 1.8  1.8  
Other restructuring related costs3.3 14.4 15.4 0.1 2.2 
IT enablement0.9 3.93.8 0.1 0.9 
    Total restructuring and related costs$19.6 $22.4 $23.1 $2.0 $16.9 
(1) The restructuring and related costs reserve is recorded on the Consolidated (Condensed) Balance Sheet in Other current liabilities and Other long term liabilities. Refer to Note 13, Supplemental Financial Statement Information for additional details.


11

ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED (CONDENSED) FINANCIAL STATEMENTS
(In millions - Unaudited)


(5) Segments

Operations for Energizer are managed via two product segments: Batteries & Lights and Auto Care. Segment performance is evaluated based on segment operating profit, exclusive of general corporate expenses (including share-based compensation costs), amortization of intangibles, acquisition and integration activities, restructuring and related costs, and other items determined to be corporate in nature. Financial items, such as interest income and expense and the (loss)/gain on extinguishment of debt are managed on a global basis at the corporate level. The exclusion of restructuring costs and acquisition and integration costs from segment results reflects management’s view on how it evaluates segment performance.

Energizer’s operating model includes a combination of standalone and shared business functions between the product segments, varying by country and region of the world. Shared functions include the sales and marketing functions, as well as human resources, IT and finance shared service costs. Energizer applies a fully allocated cost basis, in which shared business functions are allocated between segments. Such allocations are estimates, and may not represent the costs of such services if performed on a standalone basis.

Segment sales and profitability for the quarters ended December 31, 2023 and 2022 are presented below:
 For the Quarters Ended December 31,
20232022
Net Sales 
Batteries & Lights$617.8 $671.6 
Auto Care98.8 93.5 
Total Net Sales$716.6 $765.1 
Segment Profit 
Batteries & Lights$132.4 $138.3 
Auto Care6.9 10.6 
Total segment profit$139.3 $148.9 
    General corporate and other expenses (1) (29.2)(25.4)
    Amortization of intangible assets(14.5)(16.0)
Project Momentum restructuring and related costs (2)(22.4)(6.6)
    Acquisition and integration costs (3)(2.6) 
Interest expense(40.7)(42.9)
(Loss)/gain on extinguishment of debt (0.5)2.9 
December 2023 Argentina Economic Reform (4)(21.0) 
Other items - Adjusted1.0 1.4 
Total earnings before income taxes$9.4 $62.3 
Depreciation and amortization
Batteries & Lights$13.0 $13.4 
Auto Care2.5 2.7 
Total segment depreciation and amortization$15.5 $16.1 
Amortization of intangible assets14.5 16.0 
         Total depreciation and amortization$30.0 $32.1 

(1) Included in SG&A in the Consolidated (Condensed) Statement of Earnings and Comprehensive Income.

(2) Restructuring and related costs were included in the following lines in the Consolidated (Condensed) Statement of Earnings and Comprehensive Income:
12

ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED (CONDENSED) FINANCIAL STATEMENTS
(In millions - Unaudited)


For the Quarters Ended December 31,
Restructuring and related costs20232022
Cost of products sold$12.8 $0.3 
SG&A - Restructuring costs5.7 6.3 
SG&A - IT Enablement3.9  
Total Restructuring and related costs$22.4 $6.6 

(3) Acquisition and integration costs included $2.9 recorded in Cost of products sold, $0.7 recorded in SG&A and income of $1.0 recorded in Other items, net. Refer to Note 3, Acquisitions, for further information.

(4) During December 2023, a new president was inaugurated in Argentina bringing significant economic reform to the country including devaluing the Argentine Peso by 50% in the month of December (December 2023 Argentina Reform). In addition, new regulations were implemented reducing restrictions around foreign currency purchases. As a result of this reform and devaluation, the Company recorded $21.0 of exchange losses in Other items, net on the Consolidated (Condensed) Statement of Earnings.

Corporate assets shown in the following table include cash, all financial instruments, pension assets, amounts indemnified by others per the purchase agreements and tax asset balances that are managed outside of operating segments.

Total AssetsDecember 31, 2023September 30, 2023
Batteries & Lights$1,300.2 $1,362.0 
Auto Care380.2 423.5 
Total segment assets$1,680.4 $1,785.5 
Corporate495.4 470.2 
Goodwill and other intangible assets2,248.1 2,253.9 
Total assets$4,423.9 $4,509.6 

(6) Earnings per share

Basic earnings per share is based on the average number of common shares outstanding during the period. Diluted earnings per share is based on the average number of shares used for the basic earnings per share calculation, adjusted for the dilutive effect of restricted stock unit (RSU) awards, performance share awards and deferred compensation equity plans.

The following table sets forth the computation of basic and diluted earnings per share for the quarters ended December 31, 2023 and 2022:
(in millions, except per share data)For the Quarters Ended December 31,
Basic net earnings per share20232022
Net earnings$1.9 $49.0 
Weighted average common shares outstanding - Basic71.7 71.4 
Basic net earnings per common share$0.03 $0.69 
Diluted net earnings per share
Weighted average common shares outstanding - Basic71.7 71.4 
Dilutive effect of RSU0.4 0.2 
Dilutive effect of performance shares0.5 0.5 
Dilutive effect of stock based deferred compensation plan 0.1 
Weighted average common shares outstanding - Diluted72.6 72.2 
Diluted net earnings per common share$0.03 $0.68 

13

ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED (CONDENSED) FINANCIAL STATEMENTS
(In millions - Unaudited)


For the quarters ended December 31, 2023 and 2022, there were 0.5 million and 0.2 million antidilutive RSU shares, respectively, not included in the diluted net earnings per share calculation.

Performance based RSU shares of 1.3 million were excluded for both quarters ended December 31, 2023 and 2022 as the performance targets for those awards have not been achieved as of the end of the applicable periods.

(7) Income Taxes    

The effective tax rate for the three months ended December 31, 2023 was 79.8% as compared to 21.3% for the prior year comparative period. The current year rate is higher than prior year as the exchange rate loss of $21.0 from the December 2023 Argentina Reform was not deductible for tax purposes and did not result in a statutory tax benefit.

(8) Goodwill and intangible assets

Goodwill and intangible assets deemed to have an indefinite life are not amortized, but are evaluated annually for impairment as part of our annual business planning cycle in the fourth fiscal quarter, or when indicators of a potential impairment are present.

The following table sets forth goodwill by segment as of October 1, 2023 and December 31, 2023:

Batteries & LightsAuto CareTotal
Balance at October 1, 2023$882.0 $134.2 $1,016.2 
Cumulative translation adjustment7.5  7.5 
Balance at December 31, 2023$889.5 $134.2 $1,023.7 

Energizer had indefinite-lived intangible assets of $763.7 at December 31, 2023 and $762.8 at September 30, 2023. The difference between the periods is driven by currency adjustments.
14

ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED (CONDENSED) FINANCIAL STATEMENTS
(In millions - Unaudited)



Total intangible assets at December 31, 2023 are as follows:
Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
Trademarks and trade names$142.7 $(31.5)$111.2 
Customer relationships394.5 (146.6)247.9 
Patents34.2 (19.5)14.7 
Proprietary technology172.5 (104.5)68.0 
Proprietary formulas29.2 (10.3)18.9 
    Total Amortizable intangible assets773.1 (312.4)460.7 
Trademarks and trade names - indefinite lived763.7 — 763.7 
     Total Other intangible assets, net$1,536.8 $(312.4)$1,224.4 

Total intangible assets at September 30, 2023 were as follows:
Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
Trademarks and trade names$142.4 $(29.4)$113.0 
Customer relationships394.2 (139.7)254.5 
Patents33.9 (18.2)15.7 
Proprietary technology172.5 (100.0)72.5 
Proprietary formulas29.2 (10.0)19.2 
    Total Amortizable intangible assets772.2 (297.3)474.9 
Trademarks and trade names - indefinite lived762.8 — 762.8 
    Total Other intangible assets, net$1,535.0 $(297.3)$1,237.7 


(9) Debt

The detail of long-term debt was as follows:
December 31, 2023September 30, 2023
Senior Secured Term Loan Facility due 2027$904.0 $982.0 
6.500% Senior Notes due 2027300.0 300.0 
4.750% Senior Notes due 2028583.7 583.7 
4.375% Senior Notes due 2029791.3 791.3 
3.50% Senior Notes due 2029 (Euro Notes of €650.0)(1)
717.4 687.2 
Finance lease obligations(2)
49.7 32.0 
Total long-term debt, including current maturities$3,346.1 $3,376.2 
Less current portion(12.9)(12.3)
Less unamortized debt premium and debt issuance fees(29.9)(31.8)
Total long-term debt$3,303.3 $3,332.1 
(1) Changes in the USD balance of the Euro denominated 3.50% Senior Notes due in 2029 is due to movements in the currency rate year-over-year.
(2) The increase in finance lease obligations is due to the acquisition of a finance lease associated with the Belgium Acquisition.

Credit Agreement - During the first quarter of fiscal 2024, the Company pre-paid $75.0 of the Senior Secured Term Loan due in 2027. During the first quarter of fiscal 2023, the Company pre-paid $25.0 of the Senior Term Loan. The Company wrote off $0.5 and $0.2 of deferred financing fees as a result of these early payments in fiscal 2024 and fiscal 2023, respectively. Subsequent to December 31, 2023, the Company pre-paid an additional $55.0 of the Term Loan.

15

ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED (CONDENSED) FINANCIAL STATEMENTS
(In millions - Unaudited)


Borrowings under the Term Loan require quarterly principal payments at a rate of 0.25% of the original principal balance, or $3.0. Borrowings under the Revolving Facility bear interest at a rate per annum equal to, at the option of the Company, Secured Overnight Finance Rate (SOFR) or the Base Rate (as defined) plus the applicable margin. The Term Loan bears interest at a rate per annum equal to SOFR plus the applicable margin. The Credit Agreement also contains customary affirmative and restrictive covenants.

The Company has an interest rate swap that fixes the variable benchmark component (SOFR) at an interest rate of 1.042% on variable rate debt of $700.0. The notional value of the swap will stay at this value through December 22, 2024 and then will decrease by $100.0 on December 22, 2024 and by $100.0 each year thereafter until its termination date on December 22, 2027. Refer to Note 11, Financial Instruments and Risk Management, for additional information on the Company's interest rate swap transactions.

As of December 31, 2023 and 2022, the Company had no outstanding borrowings under the Revolving Facility and $7.6 of outstanding letters of credit. Taking into account outstanding letters of credit, $492.4 remained available under the Revolving Facility as of December 31, 2023. At both December 31, 2023 and September 30, 2023, the Company's weighted average interest rate on short-term borrowings was 7.7%.

Senior Notes - During the first quarter of fiscal 2023, the Company retired $16.3 of the 4.750% Senior Notes due in 2028 and $8.7 of the 4.375% Senior Notes due in 2029 for a cash cost of $21.6. The Company wrote off $0.3 of deferred financing fees as a result of these transactions.

The prepayment of the Term Loan during the first quarter of fiscal 2024 resulted in a net Loss on extinguishment of debt for the quarter ended December 31, 2023 of $0.5 recorded on the Consolidated (Condensed) Statement of Earnings and Comprehensive Income. The transactions associated with both the retirement of Senior Notes and prepayment of the Term Loan during the first quarter of fiscal 2023 resulted in a net Gain on extinguishment of debt of $2.9 for the quarter ended December 31, 2022.

Notes payable - The Company had $2.2 in Notes payable at December 31, 2023 and $8.2 at September 30, 2023. The balances are comprised of other borrowings, including those from foreign affiliates. At December 31, 2023 and September 30, 2023, the Company had no outstanding borrowings on the Revolving Facility.

Debt Covenants - The agreements governing the Company's debt contain certain customary representations and warranties, affirmative, negative and financial covenants and provisions relating to events of default. If the Company fails to comply with these covenants or with other requirements of these debt agreements, the lenders may have the right to accelerate the maturity of the debt. Acceleration under one of these debt agreements would trigger cross defaults to other borrowings. As of December 31, 2023, the Company was in compliance with the provisions and covenants associated with its debt agreements.

The counterparties to long-term committed borrowings consist of a number of major financial institutions. The Company consistently monitors positions with, and credit ratings of, counterparties both internally and by using outside ratings agencies.

Debt Maturities - Aggregate maturities of long-term debt as of December 31, 2023 are as follows:
Long-term debt
One year$12.0 
Two year12.0 
Three year12.0 
Four year1,168.0 
Five year583.7 
Thereafter1,508.7 
Total long-term debt payments due$3,296.4 

16

ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED (CONDENSED) FINANCIAL STATEMENTS
(In millions - Unaudited)


(10) Pension Plans

The Company has several defined benefit pension plans covering many of its employees in the U.S. and certain employees in other countries. The plans provide retirement benefits based on various factors including years of service and in certain circumstances, earnings. Most plans are now frozen to new entrants and for additional service.
The Company’s net periodic pension cost for these plans are as follows:
For the Quarters Ended December 31,
U.S.International
2023202220232022
Service cost$ $ $0.1 $0.1 
Interest cost3.6 5.1 0.8 0.8 
Expected return on plan assets(3.3)(5.2)(0.8)(0.7)
Amortization of unrecognized net losses0.5 0.6 0.2 0.1 
Net periodic cost$0.8 $0.5 $0.3 $0.3 

The service cost component of the net periodic cost above is recorded in Selling, general and administrative expense on the Consolidated (Condensed) Statement of Earnings and Comprehensive Income, while the remaining components are recorded to Other items, net.

The Company also sponsors or participates in a number of other non-U.S. pension arrangements, including various retirement and termination benefit plans, some of which are required by local law or coordinated with government-sponsored plans, which are not significant in the aggregate and, therefore, are not included in the information presented above.

(11) Financial Instruments and Risk Management

The market risk inherent in the Company's operations creates potential earnings volatility arising from changes in currency rates, interest rates and commodity prices. The Company's policy allows derivatives to be used only for identifiable exposures and, therefore, the Company does not enter into hedges for trading or speculative purposes where the sole objective is to generate profits.

Concentration of Credit Risk—The counterparties to derivative contracts consist of a number of major financial institutions and are generally institutions with which the Company maintains lines of credit. The Company does not enter into derivative contracts through brokers nor does it trade derivative contracts on any other exchange or over-the-counter markets. Risk of currency positions and mark-to-market valuation of positions are strictly monitored at all times.

The Company continually monitors positions with, and credit ratings of, counterparties both internally and by using outside rating agencies. While nonperformance by these counterparties exposes Energizer to potential credit losses, such losses are not anticipated.

In the ordinary course of business, the Company may enter into contractual arrangements (derivatives) to reduce its exposure to commodity price and foreign currency risks. The section below outlines the types of derivatives that existed at December 31, 2023 and September 30, 2023, as well as the Company's objectives and strategies for holding these derivative instruments.

Commodity Price Risk—The Company uses raw materials that are subject to price volatility. At times, the Company uses hedging instruments to reduce exposure to variability in cash flows associated with future purchases of certain materials and commodities.

Foreign Currency Risk—A significant portion of Energizer’s product cost is more closely tied to the U.S. dollar than to the local currencies in which the product is sold. As such, a weakening of currencies relative to the U.S. dollar results in margin declines unless mitigated through pricing actions, which are not always available due to the economic or competitive environment. Conversely, a strengthening of currencies relative to the U.S. dollar can improve margins. The primary currencies to which Energizer is exposed include the Euro, the British pound, the Canadian dollar and the Australian dollar. However, the
17

ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED (CONDENSED) FINANCIAL STATEMENTS
(In millions - Unaudited)


Company also has significant exposures in many other currencies which, in the aggregate, may have a material impact on the Company's operations.

Additionally, Energizer’s foreign subsidiaries enter into internal and external transactions that create nonfunctional 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 period. Changes in the value of the non-functional currency balance sheet positions in relation to the foreign subsidiary’s local currency results in a transaction gain or loss recorded in Other items, net on the Consolidated (Condensed) Statement of Earnings and Comprehensive Income. The primary currency to which Energizer’s foreign subsidiaries are exposed is the U.S. dollar.

Interest Rate Risk—The Company has interest rate risk with respect to interest expense on variable rate debt. At December 31, 2023, the Company had variable rate debt outstanding of $904.0 under the Term Loan.

The Company has an interest rate swap that fixes the variable benchmark component (SOFR) at an interest rate of 1.042% on variable rate debt of $700.0. The notional value of the swap will stay at this value through December 22, 2024 and then will decrease by $100.0 on December 22, 2024 and by $100.0 each year thereafter until its termination date on December 22, 2027. The notional value of the swap was $700.0 at December 31, 2023.

Derivatives Designated as Cash Flow Hedging Relationships—The Company has entered into a series of forward currency contracts to hedge the cash flow uncertainty of the forecasted payment of inventory purchases due to short term currency fluctuations. Energizer’s foreign affiliates, which have the largest exposure to U.S. dollar purchases, have the Euro, the British pound, the Canadian dollar and the Australian dollar as their local currencies. These foreign currencies represent a significant portion of Energizer's foreign currency exposure. At December 31, 2023 and September 30, 2023, Energizer had an unrealized pre-tax loss of $3.7 and an unrealized pre-tax gain of $3.3, respectively, on these forward currency contracts accounted for as cash flow hedges included in Accumulated other comprehensive loss on the Consolidated (Condensed) Balance Sheets. Assuming foreign exchange rates versus the U.S. dollar remain at December 31, 2023 levels, over the next 12 months $3.3 of the pre-tax loss included in Accumulated other comprehensive loss is expected to be recognized in earnings. Contract maturities for these hedges extend into fiscal year 2025. There were 68 open foreign currency contracts at December 31, 2023, with a total notional value of approximately $160.

The Company has entered into hedging contracts on future zinc purchases to reduce exposure to variability in cash flows associated with price volatility. The contracts are determined to be cash flow hedges and qualify for hedge accounting. The contract maturities for these hedges extend into fiscal 2025. There were 18 open contracts at December 31, 2023, with a total notional value of approximately $34. The Company had an unrealized pre-tax gain of $0.7 and an unrealized pre-tax loss of $0.7 on these hedges at December 31, 2023 and September 30, 2023, respectively, and was included in Accumulated other comprehensive loss on the Consolidated (Condensed) Balance Sheet.

At December 31, 2023 and September 30, 2023, Energizer recorded an unrealized pre-tax gain of $59.2 and $79.8, respectively, on the Interest rate swap agreement, both of which were included in Accumulated other comprehensive loss on the Consolidated (Condensed) Balance Sheet.

Derivatives not Designated in Hedging Relationships—Energizer enters into foreign currency derivative contracts, which are not designated as cash flow hedges for accounting purposes, to hedge existing balance sheet exposures. Any gains or losses on these contracts are expected to be offset by corresponding exchange losses or gains on the underlying exposures, and as such are not subject to significant market risk. There were eight open foreign currency derivative contracts which are not designated as cash flow hedges at December 31, 2023, with a total notional value of approximately $151.

18

ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED (CONDENSED) FINANCIAL STATEMENTS
(In millions - Unaudited)


The following table provides the Company's estimated fair values as of December 31, 2023 and September 30, 2023, and the amounts of gains and losses on derivative instruments classified as cash flow hedges for the three months ended December 31, 2023 and 2022, respectively:

At December 31, 2023
For the Quarter Ended December 31, 2023
Derivatives designated as Cash Flow Hedging RelationshipsEstimated Fair Value (Liability) / Asset (1)Loss Recognized in OCI (2)Gain/(Loss) Reclassified From OCI into Income (3) (4)
Foreign currency contracts$(3.7)$(6.1)$0.9 
Interest rate swap59.2 (12.6)8.0 
Zinc contracts0.7 (1.8)(3.2)
Total$56.2 $(20.5)$5.7 
At September 30, 2023
For the Quarter Ended December 31, 2022
Derivatives designated as Cash Flow Hedging RelationshipsEstimated Fair Value Asset / (Liability) (1)(Loss)/Gain Recognized in OCI (2)Gain Reclassified From OCI into Income (3) (4)
Foreign currency contracts$3.3 $(9.2)$6.5 
Interest rate swap79.8  4.9 
Zinc contracts(0.7)3.5 1.1 
Total$82.4 $(5.7)$12.5 
(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.
(2) OCI is defined as other comprehensive income.
(3) Gain/(Loss) reclassified to Income was recorded as follows: Foreign currency contracts in Cost of products sold, interest rate contracts in Interest expense, and commodity contracts in Cost of products sold.
(4) Each of these hedging relationships has derivative instruments with a high correlation to the underlying exposure being hedged and has been deemed highly effective in offsetting the underlying risk.

The following table provides estimated fair values as of December 31, 2023 and September 30, 2023 and the gains and losses on derivative instruments not classified as cash flow hedges for the three months ended December 31, 2023 and 2022, respectively:
At December 31, 2023
For the Quarter Ended December 31, 2023
Estimated Fair Value Asset (1)Gain Recognized in Income (2)
Foreign currency contracts$2.1 $3.2 
 At September 30, 2023
For the Quarter Ended December 31, 2022
Estimated Fair Value Liability (1)Gain Recognized in Income (2)
Foreign currency contracts$(1.3)$0.5 
(1) All derivative assets and liabilities are presented in Other current assets or Other assets and Other current liabilities or Other liabilities, respectively.
(2) Gain / (Loss) recognized in Income was recorded as foreign currency in Other items, net.


19

ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED (CONDENSED) FINANCIAL STATEMENTS
(In millions - Unaudited)


Energizer has the following recognized financial assets resulting from those transactions that meet the scope of the disclosure requirements as necessitated by applicable accounting guidance for balance sheet offsetting.
Offsetting of derivative assets
At December 31, 2023At September 30, 2023
DescriptionBalance Sheet locationGross amounts of recognized assetsGross amounts offset in the Balance SheetNet amounts of assets presented in the Balance SheetGross amounts of recognized assetsGross amounts offset in the Balance SheetNet amounts of assets presented in the Balance Sheet
Foreign Currency ContractsOther Current Assets, Other Assets$2.4 $(0.3)$2.1 $4.4 $(1.0)$3.4 
Offsetting of derivative liabilities
At December 31, 2023At September 30, 2023
DescriptionBalance Sheet locationGross amounts of recognized liabilitiesGross amounts offset in the Balance SheetNet amounts of liabilities presented in the Balance SheetGross amounts of recognized liabilitiesGross amounts offset in the Balance SheetNet amounts of liabilities presented in the Balance Sheet
Foreign Currency ContractsOther Current Liabilities, Other Liabilities$(4.0)$0.3 $(3.7)$(2.4)$1.0 $(1.4)

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.

Under the fair value accounting guidance hierarchy, an entity is required to maximize the use of quoted market prices and minimize the use of unobservable inputs. The following table sets forth the Company's financial assets and liabilities, which are carried at fair value, as of December 31, 2023 and September 30, 2023 that are measured on a recurring basis during the period, segregated by level within the fair value hierarchy:
 Level 2
(Liabilities)/Assets at estimated fair value:December 31,
2023
September 30,
2023
Deferred compensation$(22.7)$(21.0)
Derivatives - Foreign Currency contracts(3.7)3.3 
Derivatives - Foreign Currency contracts (non-hedge)2.1 (1.3)
Derivatives - Interest Rate Swap59.2 79.8 
Derivatives - Zinc contracts0.7 (0.7)
Net Assets at estimated fair value$35.6 $60.1 

Energizer had no Level 1 financial assets or liabilities, other than pension plan assets, and no Level 3 financial assets or liabilities at December 31, 2023 and September 30, 2023. The Company does measure certain assets and liabilities, such as Goodwill and Other intangibles, at fair value on a non-recurring basis using Level 3 inputs. There were no Level 3 fair value measurement gains or losses recognized during the quarters ended December 31, 2023 or 2022.

20

ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED (CONDENSED) FINANCIAL STATEMENTS
(In millions - Unaudited)


Due to the nature of cash and cash equivalents, carrying amounts on the balance sheets approximate estimated fair value. The estimated fair value of cash was determined based on Level 1 inputs and cash equivalents and restricted cash are determined based on Level 2 inputs.

At December 31, 2023, the estimated fair value of the Company's unfunded deferred compensation liability is determined based upon the quoted market prices of investment options that are offered under the plan. The estimated fair value of foreign currency contracts, interest rate swap and zinc contracts, as described above, is the amount that the Company would receive or pay to terminate the contracts, considering first, quoted market prices of comparable agreements, or in the absence of quoted market prices, such factors as interest rates, currency exchange rates and remaining maturities.

At December 31, 2023, the fair market value of fixed rate long-term debt was $2,172.2 compared to its carrying value of $2,392.4, and at September 30, 2023, the fair market value of fixed rate long-term debt was $2,000.9 compared to its carrying value of $2,362.2. The estimated fair value of the long-term debt is estimated using yields obtained from independent pricing sources for similar types of borrowing arrangements. The estimated fair value of fixed rate long-term debt has been determined based on Level 2 inputs.

(12) Accumulated Other Comprehensive (Loss)/Income

The following table presents the changes in accumulated other comprehensive (loss)/income (AOCI), net of tax by component:
Foreign Currency Translation AdjustmentsPension ActivityZinc ContractsForeign Currency ContractsInterest Rate ContractsTotal
Balance at September 30, 2023
$(89.7)$(110.3)$(0.5)$2.1 $60.7 $(137.7)
OCI before reclassifications(1.1)(1.5)(1.3)(4.6)(9.4)(17.9)
Reclassifications to earnings 0.6 2.4 (0.6)(6.1)(3.7)
Balance at December 31, 2023$(90.8)$(111.2)$0.6 $(3.1)$45.2 $(159.3)

The following table presents the reclassifications out of AOCI to earnings:
For the Quarters Ended December 31,
20232022
Details of AOCI ComponentsAmount Reclassified
from AOCI (1)
Affected Line Item in the Combined Statements of Earnings
Gains and losses on cash flow hedges
Foreign currency contracts$(0.9)$(6.5)Cost of products sold
Interest rate contracts(8.0)(4.9)Interest expense
Zinc contracts3.2 (1.1)Cost of products sold
(5.7)(12.5)Earnings before income taxes
1.4 3.2 Income tax expense
$(4.3)$(9.3)Net earnings
Amortization of defined benefit pension items
Actuarial loss0.7 0.7 (2)
(0.1)(0.1)Income tax benefit
$0.6 $0.6 Net loss
Total reclassifications to earnings$(3.7)$(8.7)Net earnings
(1) Amounts in parentheses indicate credits to Consolidated (Condensed) Statement of Earnings and Comprehensive Income.
(2) This AOCI component is included in the computation of net periodic pension benefit/(cost) (see Note 10, Pension Plans, for further details).

21

ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED (CONDENSED) FINANCIAL STATEMENTS
(In millions - Unaudited)



(13) Supplemental Financial Statement Information

The components of certain income statement accounts are as follows:
For the Quarters Ended December 31,
20232022
Other items, net
       Interest income$(5.6)$(0.2)
Foreign currency exchange loss/(gain) (1)23.7 (1.0)
Pension cost other than service costs1.0 0.7 
Transition services agreement income(1.0) 
       Other0.9 (0.9)
Total Other items, net$19.0 $(1.4)

(1) Foreign currency exchange loss includes the currency impact from the December 2023 Argentina economic reform. During December 2023, a new president was inaugurated in Argentina bringing significant economic reform to the country including devaluing the Argentine Peso by 50% in the month of December. As a result of this reform and devaluation, the Company recorded $21.0 of exchange losses in Other items, net on the Consolidated (Condensed) Statement of Earnings.
22

ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED (CONDENSED) FINANCIAL STATEMENTS
(In millions - Unaudited)



The components of certain balance sheet accounts are as follows:
December 31, 2023September 30, 2023
Inventories  
Raw materials and supplies$140.6 $113.5 
Work in process201.1 258.5 
Finished products298.9 277.7 
Total inventories$640.6 $649.7 
Other Current Assets  
Miscellaneous receivables$23.6 $20.8 
Prepaid expenses117.0 83.6 
Value added tax collectible from customers38.1 30.6 
Other33.6 37.0 
Total other current assets$212.3 $172.0 
Property, Plant and Equipment  
Land$13.0 $12.9 
Buildings137.9 135.2 
Machinery and equipment832.8 832.9 
Construction in progress80.3 69.7 
Finance Leases55.8 39.2 
Total gross property1,119.8 1,089.9 
Accumulated depreciation(735.5)(726.2)
Total property, plant and equipment, net$384.3 $363.7 
Other Current Liabilities  
Accrued advertising, sales promotion and allowances$19.1 $12.9 
Accrued trade allowances42.3 52.7 
Accrued freight and warehousing32.0 35.1 
Accrued salaries, vacations and incentive compensation33.7 57.9 
Accrued interest expense11.4 20.5 
Restructuring and related cost reserve15.3 17.1 
Income taxes payable52.9 36.9 
Other110.7 92.5 
Total other current liabilities$317.4 $325.6 
Other Liabilities  
Pensions and other retirement benefits$55.8 $55.0 
Deferred compensation17.6 17.4 
Mandatory transition tax12.8 12.8 
Restructuring and related cost reserve1.6 2.5 
Other non-current liabilities45.4 47.8 
Total other liabilities$133.2 $135.5 


(14) Legal proceedings/contingencies and other obligations

Legal proceedings/contingencies - The Company and its affiliates are subject to a number of legal proceedings in various jurisdictions arising out of its operations. Many of these legal matters are in preliminary stages and involve complex issues of law and fact, and may proceed for protracted periods of time. The amount of liability, if any, from these proceedings cannot be
23

ENERGIZER HOLDINGS, INC.
NOTES TO CONSOLIDATED (CONDENSED) FINANCIAL STATEMENTS
(In millions - Unaudited)


determined with certainty. The Company and its affiliates are a party to legal proceedings and claims that arise during the ordinary course of business. The Company reviews our legal proceedings and claims, regulatory reviews and inspections and other legal proceedings on an ongoing basis and follows appropriate accounting guidance when making accrual and disclosure decisions. The Company establishes accruals for those contingencies where the incurrence of a loss is probable and can be reasonably estimated, and discloses the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued, if such disclosure is necessary for our financial statements to not be misleading. The Company does not record liabilities when the likelihood that the liability has been incurred is probable, but the amount cannot be reasonably estimated. Based upon present information, the Company believes that its liability, if any, arising from such pending legal proceedings, asserted legal claims and known potential legal claims which are likely to be asserted, is not reasonably likely to be material to the Company's financial position, results of operations, or cash flows, when taking into account established accruals for estimated liabilities.

Other obligations - In the ordinary course of business, the Company also enters into supply and service contracts. These contracts can include either volume commitments or fixed expiration dates, termination provisions and other standard contractual considerations. At December 31, 2023, the Company had approximately $7.4 of purchase obligations under these contracts.

24

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion is meant to provide investors with information management believes is helpful in reviewing Energizer’s historical-basis results of operations, operating segment results, and liquidity and capital resources. Statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) that are not historical may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You should read the following MD&A in conjunction with the Consolidated (Condensed) Financial Statements (unaudited) and corresponding notes included herein.

All amounts discussed are in millions of U.S. dollars, unless otherwise indicated.

Forward-Looking Statements

This document contains both historical and forward-looking statements. Forward-looking 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 sales, gross margins, costs, earnings, cash flows, tax rates and performance of the Company. These statements generally can be identified by the use of forward-looking words or phrases such as "believe," "expect," "expectation," "anticipate," "may," "could," "will," "intend," "belief," "estimate," "plan," "target," "predict," "likely," "should," "forecast," "outlook," or other similar words or phrases. These statements are not guarantees of performance and are inherently subject to known and unknown risks, uncertainties and assumptions that are difficult to predict and could cause 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 document are only made as of the date of this document and we disclaim any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. Numerous factors could cause our actual results and events to differ materially from those expressed or implied by forward-looking statements, including, without limitation:
Global economic and financial market conditions beyond our control might materially and negatively impact us.
Competition in our product categories might hinder our ability to execute our business strategy, achieve profitability, or maintain relationships with existing customers.
Changes in the retail environment and consumer preferences could adversely affect our business, financial condition and results of operations.
We must successfully manage the demand, supply, and operational challenges brought on by any disease outbreak, including epidemics, pandemics, or similar widespread public health concerns.
Loss or impairment of the reputation of our Company or our leading brands or failure of our marketing plans could have an adverse effect on our business.
Loss of any of our principal customers could significantly decrease our sales and profitability.
Our ability to meet our growth targets depends on successful product, marketing and operations innovation and successful responses to competitive innovation and changing consumer habits.
We are subject to risks related to our international operations, including currency fluctuations, which could adversely affect our results of operations.
If we fail to protect our intellectual property rights, competitors may manufacture and market similar products, which could adversely affect our market share and results of operations.
Changes in production costs, including raw material prices and transportation costs, from inflation or otherwise, have adversely affected, and in the future could erode, our profit margins and negatively impact operating results.
Our reliance on certain significant suppliers subjects us to numerous risks, including possible interruptions in supply, which could adversely affect our business.
Our business is vulnerable to the availability of raw materials, our ability to forecast customer demand and our ability to manage production capacity.
The manufacturing facilities, supply channels or other business operations of the Company and our suppliers may be subject to disruption from events beyond our control.
The Company's future results may be affected by its operational execution, including its ability to achieve cost savings as a result of any current or future restructuring events.
If our goodwill and indefinite-lived intangible assets become impaired, we will be required to record impairment charges, which may be significant.
A failure of a key information technology system could adversely impact our ability to conduct business.
We rely significantly on information technology and any inadequacy, interruption, theft or loss of data, malicious attack, integration failure, failure to maintain the security, confidentiality or privacy of sensitive data residing on our systems or
25

other security failure of that technology could harm our ability to effectively operate our business and damage the reputation of our brands.
We have significant debt obligations that could adversely affect our business and our ability to meet our obligations.
If we pursue strategic acquisitions, divestitures or joint ventures, we might experience operating difficulties, dilution, and other consequences that may harm our business, financial condition, and operating results, and we may not be able to successfully consummate favorable transactions or successfully integrate acquired businesses.
Our business involves the potential for product liability claims, labeling claims, commercial claims and other legal claims against us, which could affect our results of operations and financial condition and result in product recalls or withdrawals.
Our business is subject to increasing government regulations in both the U.S. and abroad that could impose material costs.
Increased focus by governmental and non-governmental organizations, customers, consumers and shareholders on environmental, social and governance (ESG) issues, including those related to sustainability and climate change, may have an adverse effect on our business, financial condition and results of operations and damage our reputation.
We are subject to environmental laws and regulations that may expose us to significant liabilities and have a material adverse effect on our results of operations and financial condition.

In addition, other risks and uncertainties not presently known to us or that we consider immaterial could affect the accuracy of any such forward-looking statements. The list of factors above is illustrative, but by no means exhaustive. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. Additional risks and uncertainties include those discussed herein and detailed from time to time in our other publicly filed documents, including those described under the heading “Risk Factors” in our Form 10-K filed with the Securities and Exchange Commission on November 14, 2023.

Non-GAAP Financial Measures

The Company reports its financial results in accordance with accounting principles generally accepted in the U.S. ("GAAP"). However, management believes that certain non-GAAP financial measures provide users with additional meaningful comparisons to the corresponding historical or future period, and are used for management incentive compensation. These non-GAAP financial measures exclude items that are not reflective of the Company's on-going operating performance, such as restructuring and related costs, acquisition and integration costs, the loss/(gain) on extinguishment of debt and the December 2023 Argentina Economic Reform. In addition, these measures help investors to analyze year over year comparability when excluding currency fluctuations as well as other Company initiatives that are not on-going. We believe these non-GAAP financial measures are an enhancement to assist investors in understanding our business and in performing analysis consistent with financial models developed by research analysts. Investors should consider non-GAAP measures in addition to, not as a substitute for, or superior to, the comparable GAAP measures. In addition, these non-GAAP measures may not be the same as similar measures used by other companies due to possible differences in methods and in the items being adjusted.

We provide the following non-GAAP measures and calculations, as well as the corresponding reconciliation to the closest GAAP measure:

Segment Profit. This amount represents the operations of our two reportable segments including allocations for shared support functions. General corporate and other expenses, Intangible amortization expense, Interest expense, Loss/(gain) on extinguishment of debt, Other items, net, restructuring and related costs, and the charges related to acquisition and integration costs have all been excluded from segment profit.

Adjusted Net Earnings and Adjusted Diluted Net Earnings Per Common Share (EPS). These measures exclude the impact of the costs related to restructuring activities, acquisition and integration, and the Loss/(gain) on extinguishment of debt and the December 2023 Argentina Economic Reform.

Non-GAAP Tax Rate. This is the tax rate when excluding the pre-tax impact of restructuring activities, acquisition and integration, and the loss/(gain) on extinguishment of debt and the December 2023 Argentina Economic Reform, as well as the related tax impact for these items, calculated utilizing the statutory rate for where the impact was incurred.

Organic. This is the non-GAAP financial measurement of the change in revenue, segment profit or other margins that excludes or otherwise adjusts for the change in Argentina Operations and impact of currency from the changes in foreign currency exchange rates as defined below:

Change in Argentina Operations. The Company is presenting separately all changes in sales and segment profit from our Argentina affiliate due to the designation of the economy as highly inflationary as of July 1, 2018.
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Impact of currency. The Company evaluates the operating performance of our Company on a currency neutral basis. The Impact of Currency is the change in foreign currency exchange rates year-over-year on reported results, which is calculated by comparing the value of current year foreign operations at the current period USD exchange rate versus the value of current year foreign operations at the prior period USD exchange rate. The impact of currency also includes gains/(losses) of currency hedging programs, and it excludes hyper-inflationary markets.
Adjusted Selling, General & Administrative Expense (SG&A) and Gross Margin as a percent of sales. Detail for Adjusted Gross margin and Adjusted SG&A as a percent of sales are also supplemental non-GAAP measures. These measures exclude the impact of costs related to restructuring activities, and acquisition and integration.

Macroeconomic Environment

We continue to operate in an inflationary environment where macro-economic pressures and geopolitical instability are expected to continue in fiscal year 2024. While we did not experience significant disruptions in our operations in the first quarter of fiscal year 2024, the risks of future negative impacts due to transportation, including recent transportation issues in the Red Sea, logistical or supply constraints and higher commodity costs for certain raw materials remain present, and the Company could continue to experience corresponding incremental costs and gross margin pressures.

Argentina Economic Reform

In November 2023, a new president was elected in Argentina who is implementing significant economic reform. Upon his inauguration in December 2023, the government devalued the Argentine Peso (ARS) approximately 50% over night. The Company's net sales and operating profit in Argentina were not significantly impacted based on the timing of the devaluation within the quarter. The Company had net sales of $12.3 and $13.2 and operating profit of $5.1 and $4.1 in the three months ended December 31, 2023 and December 31, 2022, respectively. The Company anticipates that Argentina's operating costs may rise quicker than the Company is able to implement future price increases to offset rising costs, which may result in a near term decline to operating profit during fiscal 2024.

This devaluation and economic reform resulted in $21.0 of currency losses recognized in Other items, net in the three months ended December 31, 2023. This included exchange losses of $14.7 from the remeasurement of the Company's Argentina monetary assets and liabilities and $6.3 of transactional currency exchange losses on the ARS which are discussed further in Item 3. Quantitative and Qualitative Disclosures About Market Risk.

It is difficult to determine what continuing impact the new president and his economic reform or the use of highly inflationary accounting for Argentina may have on our consolidated financial statements as such impact is dependent upon movements in the applicable exchange rates between the local currency and the U.S. dollar and the amount of monetary assets and liabilities included in our affiliates' balance sheet, as well as any additional reforms that may be issued by the new Argentine Administration.

Belgium Acquisition

On October 27, 2023, the Company acquired certain battery manufacturing assets in Belgium from Advanced Power Solutions Belgium NV (APS) for a contractual purchase price of EUR3.5 (Belgium Acquisition). The Company also acquired certain raw materials from APS, procured by APS on the Company's behalf to facilitate the transition, for a total acquisition purchase price of $11.6 (including value added taxes). The Company assumed a building lease as part of the acquisition and acquired these assets to provide a battery manufacturing location in Europe. The Company is still finalizing the valuation of these assets and related income tax considerations, but initially no goodwill has been recognized with this acquisition.

The Company recorded $2.6 of acquisition and integration costs associated with the Belgium Acquisition during the three months ended December 31, 2023. The costs included $2.9 of operating costs recorded in Costs of good sold as the Company was awaiting the receipt of the raw materials procured on the Company's behalf by APS. These costs were offset by $1.0 of income recorded in Other items, net from producing inventory for APS under a transaction services agreement (TSA) entered into at the closing of the transaction. No further income is expected from this TSA. The Company also recorded $0.7 of legal and diligence fees associated with the closing of this acquisition recorded in Selling, general and administrative expenses.

Project Momentum Restructuring Program

In November 2022, the Board of Directors approved a profit recovery program, Project Momentum, which includes an enterprise-wide restructuring focused on recovering operating margins, optimizing our manufacturing, distribution and global supply chain networks, and enhancing our organizational efficiency across the Company. In July 2023, the Company's Board of
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Directors approved an expansion of this program to include an additional year, which will allow for additional optimization of our battery manufacturing, distribution and global supply chain networks, further review of our global real estate footprint and the implementation of IT systems that will allow us to streamline our organization and fully execute the program.

Following the Belgium Acquisition in the first quarter of fiscal 2024, the Company is expanding the Project Momentum program and increasing the savings and cost expectations, partially due to the impact the expanded manufacturing capacity will have on the Company's battery network. The restructuring component of the program is now expected to generate $145 to $160 of annual pre-tax savings, and the Company estimates that it will incur one-time cash operating costs of $140 to $150, non-cash costs of approximately $20, and capital expenditures of $75 to $85 over the three year program. Additionally, along side the restructuring component of the program, Project Momentum includes continuous improvement and working capital initiatives that are designed to strengthen our balance sheet, focus on cash flow, and generate P&L savings of approximately $15 to $20 annually. Total expected pre-tax savings of Project Momentum are between $160 and $180 by the end of fiscal year 2025, with approximately $55 to $65 of those savings to be recognized in fiscal year 2024.

As of December 31, 2023, the Company has realized approximately $76 of these savings from Project Momentum, with approximately $22 in fiscal year 2024. The savings were primarily within Cost of products sold and SG&A on the Consolidated (Condensed) Statements of Earnings and Comprehensive Income.

In the quarters ended December 31, 2023 and 2022, the total Project Momentum restructuring and related pre-tax costs were $22.4 and $6.6, respectively. The expenses primarily consisted of severance and other benefit related costs, accelerated depreciation, asset write-offs, consulting costs, IT enablement, decommissioning, relocation, and other exit related costs. These costs were reflected within Cost of products sold, SG&A and Other items, net on the Consolidated (Condensed) Statements of Earnings and Comprehensive Income.

Although the Company's Project Momentum restructuring costs are recorded outside of segment profit, if allocated to our reportable segments, the restructuring and related costs for the quarter ended December 31, 2023 would be incurred within the Battery & Lights segment in the amount of $20.8 and the Auto Care segment in the amount of $1.6. The Company's Project Momentum restructuring costs for the quarter ended December 31, 2022 would be incurred within the Battery & Lights segment in the amount of $5.8 and the Auto Care segment in the amount of $0.8.

Project Momentum restructuring and related costs since inception are $83.0. Refer to Note 4, Restructuring, to the Consolidated (Condensed) Financial Statements for additional discussion on the Company's restructuring costs.

Highlights / Operating Results

Financial Results (in millions, except per share data)

Energizer reported first fiscal quarter Net earnings of $1.9, or $0.03 per diluted common share, compared to Net earnings of $49.0, or $0.68 per diluted common share, in the prior year first fiscal quarter. Adjusted Diluted net earnings per common share was $0.59 for the first fiscal quarter as compared to $0.72 in the prior year quarter.
Net earnings and Diluted net earnings per common share for the time periods presented were impacted by certain items related to restructuring and related costs, acquisition and integration costs, the Loss/(gain) on extinguishment of debt and the December 2023 Argentina Economic Reform as described in the tables below. The impact of these items is provided below as a reconciliation of Net earnings and Diluted net earnings per common share to Adjusted Net earnings and Adjusted Diluted net earnings per common share, which are non-GAAP measures. See disclosure on Non-GAAP Financial Measures above.
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For the Quarters Ended December 31,
20232022
Net earnings$1.9$49.0 
Pre-tax adjustments
Restructuring and related costs (1)22.46.6 
Acquisition and integration (2)2.6— 
Loss/(gain) on extinguishment of debt0.5(2.9)
December 2023 Argentina Economic Reform (3)21.0— 
Total adjustments, pre-tax$46.5$3.7 
Total adjustments, after tax$40.6$2.8 
Adjusted Net earnings (4)$42.5$51.8 
Diluted net earnings per common share $0.03$0.68 
Adjustments (per common share)
Restructuring and related costs (1)0.230.07 
Acquisition and integration (2)0.03— 
Loss/(gain) on extinguishment of debt0.01(0.03)
December 2023 Argentina Economic Reform (3)0.29— 
Adjusted Diluted net earnings per diluted common share$0.59$0.72 
Weighted average shares of common stock - Diluted72.672.2 
Currency, excluding hyperinflationary markets, benefited the quarter ended December 31, 2023 by $5.6 in Earnings before income taxes, or $0.06 per share, compared to the prior year quarter.

(1) Restructuring and related costs were incurred as follows:
For the Quarters Ended December 31,
20232022
Cost of products sold$12.8 $0.3 
SG&A - Restructuring costs5.7 6.3 
SG&A - IT Enablement3.9 — 
Total Restructuring and related costs$22.4 $6.6 
(2) Acquisition and integration costs of $2.6 included costs of $2.9 recorded in Costs of goods sold and $0.7 recorded in SG&A, partially offset by TSA income of $1.0 recorded in Other items, net on the Consolidated (Condensed) Statement of Earnings.
(3) During December 2023, a new president was inaugurated in Argentina bringing significant economic reform to the country including devaluing the Argentine Peso by 50% in the month of December. As a result of this reform and devaluation, the Company recorded $21.0 of exchange losses in Other items, net on the Consolidated (Condensed) Statement of Earnings.
(4) The effective tax rate for the Adjusted Net earnings and Adjusted Diluted EPS for the quarters ended December 31, 2023 and 2022 was 24.0% and 21.5%, respectively, as calculated utilizing the statutory rate for where the costs were incurred.

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Highlights
Total Net sales For the Quarter Ended December 31, 2023
$ Change% Chg
Net sales - prior year$765.1 
Organic(56.3)(7.4)%
Change in Argentina Operations(0.9)(0.1)%
Impact of currency8.7 1.2 %
Net Sales - current year$716.6 (6.3)%
See non-GAAP measure disclosures above.

Net sales were $716.6 for the first fiscal quarter of 2024, a decrease of $48.5 as compared to the prior year quarter. Organic Net sales decreased 7.4%, primarily driven by the following items:

The battery business experienced volume declines of approximately 7% primarily due to earlier holiday orders compared to the prior year, which benefited the fourth quarter of 2023, and weaker performance at non-tracked channels; and

Pricing was relatively flat in the period resulting in a net decrease to organic sales of 0.4%.

Gross margin percentage on a reported basis for the first fiscal quarter of 2024 was 37.3%, compared to 39.0% in the prior year. Excluding restructuring costs in the current and prior year of $12.8 and $0.3, respectively, and integration costs of $2.9 in the current year, Adjusted Gross margin was 39.5% compared to 39.0% in the prior year, an increase of 50 basis points.
For the Quarter Ended December 31, 2023
Gross margin - FY'23 Reported and Adjusted39.0 %