Energizer Holdings, Inc. has announced results of its first quarter ended Dec. 31, 2003. Net earnings for the quarter were U.S. $115.0 million, or $1.32 per diluted share, versus net earnings of $86.4 million, or $0.95 per share in the first fiscal quarter of 2003. The current quarter for the St. Louis, MO, U.S.-based company includes previously unrecognizable tax benefits of $6.7 million, or $0.08 per share. Last year's first quarter included intellectual property rights income of $3.7 million, net of taxes, or $0.04 per share.
In total, the inclusion of Schick-Wilkinson Sword's (SWS) results, net of incremental interest expense increased first-quarter diluted earnings per share by $0.16. Additionally, current year earnings included a benefit of $0.16 per diluted share due to the impact of foreign currency exchange.
For the quarter, sales increased 42 percent to $811.7 million and profit from operating segments increased 35 percent to $189.8 million. The company credits this increase to the acquisition of SWS on March 28, 2003 and also to higher battery sales. General corporate and other expenses increased $9.6 million, and interest and other financing items increased $1.2 million.
"Our results were positively impacted by the inclusion of SWS and strengthening foreign currencies," Energizer CEO Pat Mulcahy said in a written statement. "In addition, the North American battery category has stabilized relative to the same period last year. We are pleased with the acquisition of SWS and consumer acceptance of its innovative new products, QUATTRO, and Intuition. While the competitive environment remains intense, we are committed to supporting both of our businesses for long-term growth."
In the company's North America Battery segment, net sales to customers for the first quarter of $369.9 million increased $22.4 million, or 6 percent during the same period last year due to higher volume, favorable pricing, product mix, and favorable currency translation of $4.4 million related to Energizer's Canadian operations. Volumes increased in non-alkaline product lines, while alkaline volume was essentially flat despite fewer bonus packs. Overall pricing was favorable in the quarter, as lower list prices for key alkaline products were more than offset by reductions in promotional spending and list price increases on other products.
The company said that its gross profit increased $8.0 million, due to higher sales, partially offset by higher product costs. Segment profit increased $4.8 million for the current quarter, as improved gross margin was partially offset by higher management costs.
In the U.S., retail alkaline category units declined an estimated 5 percent compared to the same quarter last year, while category value fell approximately 7 percent. Retail consumption of Energizer's alkaline products decreased an estimated 8 percent in units and 7 percent in value. Energizer estimates its share of the alkaline battery market at approximately 31 percent for the quarter, essentially flat with the same quarter last year. Energizer believes that retail inventory levels at Dec. 31, 2003, were slightly higher than seasonal average levels and are expected to normalize in the coming quarter.
In the International Battery segment, net sales for the quarter were $238.8 million, an increase of $13.9 million, or 6 percent, on favorable currency impacts of $19.7 million, partially offset by lower volumes and unfavorable local currency pricing in Europe. Segment profit increased $9.4 million, including a $12.7 benefit from currency valuations. Absent the impact of currencies, segment profit declined $3.3 million, or 8, percent, on European sales declines and higher product costs, partially offset by improved results in the Asia Pacific and Latin American regions.
Razor and Blade sales for the quarter were $203.0 million, an increase of $19.0 million, or 10 percent, compared to the same quarter last year. The sales growth was primarily attributable to the new men's and women's shaving systems, QUATTRO and Intuition, and favorable currency of $15.2 million, partially offset by anticipated sales declines in other SWS product lines, which were negatively impacted by new product sales.
Segment profit for the quarter was $34.4 million, an increase of $5.3 million, or 18 percent, compared to pro forma profit for the same quarter last year. Higher gross margin from new product sales and favorable currency impact of $4.5 million were partially offset by significantly higher advertising and promotion expense in support of the QUATTRO launch, and to a lesser extent, Intuition.
Looking forward, Intuition and QUATTRO sales are expected to fuel year-over-year sales growth for the remainder of the fiscal year, including continuing new product rollout to additional international markets. Legacy product sales will likely continue to be negatively impacted by new product sales; however the amount of such decline cannot be accurately predicted. For the second fiscal quarter of 2004, the company anticipates that Razor and Blade segment results will be substantially improved from unusually low results in the same quarter last year.
Corporate and other expenses increased $9.6 million for the quarter due to costs of integrating the SWS business and higher compensation, legal and administrative costs. Interest and other financing items increased $1.2 million for the quarter, reflecting incremental debt due to the acquisition of SWS, partially offset by favorable foreign exchange in the current quarter.
Income taxes were 30.6 percent for the quarter, including $6.7 million of previously unrecognizable tax benefits relating to improved earnings in countries with tax losses in prior years. Absent these benefits, the tax rate for the first quarter was 34.6 percent compared to 36.0 percent for the same period last year, mainly driven by improved earnings in lower tax rate jurisdictions.
During the quarter, Energizer repurchased 3.4 million shares of its common stock. The company made additional purchases in January 2004 bringing the total shares purchased thus far in fiscal 2004 to 3.9 million. Capital expenditures and depreciation expense for the quarter were $19.1 million and $27.7 million, respectively.
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