Actionable news
0
All posts from Actionable news
Actionable news in EPC: EDGEWELL PERSONAL CARE COMPANY,

Edgewell Personal Care Announces Third Quarter Fiscal 2017 Results and Updates Fiscal Year 2017 Financial Outlook

Executive Summary

  • Net sales were $637.5 million in the third quarter of fiscal 2017, a decrease of 1.2% when compared to the prior year period on a reported basis, and down 0.6% on an organic basis. (Organic basis excludes sales growth from the Bulldog acquisition and the negative impact from currency.)
  • GAAP Diluted Earnings Per Share ("EPS") and Adjusted EPS grew to $0.95 and $1.11, respectively, for the third quarter, compared to $0.61 and $0.66, respectively, a year ago.
  • The Company is increasing its fiscal 2017 financial outlook for Adjusted EPS and lowering its outlook for organic net sales.

The Company reports and forecasts results on a GAAP and "Non-GAAP" basis, and has reconciled Non-GAAP results and outlook to the most directly comparable GAAP measures later in this release. See "Non-GAAP Financial Measures" for a more detailed explanation, including definitions of various Non-GAAP terms used in this release. All comparisons used in this release are with the same period in the prior fiscal year unless otherwise stated.

"We delivered strong profit performance in the third quarter, in what continues to be a very difficult market environment," said David Hatfield, Edgewell's Chief Executive Officer, President and Chairman of the Board. "Although category weakness in the U.S. persists, and competitive intensity remains high, we delivered solid results in the quarter, driven by sales growth in International, market share gains in Wet Shave and Sun and Skin Care, both globally and in the U.S., and by good financial discipline." Mr. Hatfield continued, "Based on our performance in the quarter, we are increasing our full year outlook for Adjusted EPS, and we remain confident in our ability to deliver strong free cash flow while continuing to invest in future growth opportunities."

Fiscal 3Q 2017 Operating Results (Unaudited)

Net sales were $637.5 million in the quarter, a decrease of 1.2% when compared to the prior year quarter. Excluding a $4.0 million benefit from the Bulldog acquisition and a $7.9 million negative impact from currency, organic net sales decreased 0.6%, as growth in Sun and Skin Care was more than offset by declines in Feminine Care. Wet Shave was essentially flat versus the prior year on an organic basis.

Gross margin increased 230 basis points to 50.5%, driven by lower product costs due to operational efficiencies and lower commodity costs and favorable product mix, slightly offset by the impact of currency movements.

Advertising and sales promotion expense ("A&P") was $114.2 million, or 17.9% of net sales, a decrease from prior year A&P of $122.5 million, or 19.0% of net sales. The prior year included higher spending in support of new product innovation in Feminine Care and higher media and promotional campaigns for Wet Shave.

Selling, general and administrative expense ("SG&A") was $97.5 million, or 15.3% of net sales, as compared to $104.8 million, or 16.2% of net sales, in the prior year. Excluding prior year spin costs, SG&A as a percent of net sales decreased 50 basis points over the prior year, primarily related to lower share-based and other compensation expense, the timing of investments and project spending, as well as savings related to the Company's Zero Based Spending program.

The Company recorded pre-tax restructuring expense of $12.8 million compared to $5.8 million in the prior year quarter. The increase is primarily related to a non-cash charge for the disposition of real estate.

Other income, net was $1.6 million during the quarter as compared to an $8.2 million expense in the prior year, primarily reflecting a net benefit from foreign currency exchange contract gains and losses in the quarter, partially offset by revaluation of nonfunctional currency balance sheet exposures, as well as $3.2 million of interest expense related to settlements with tax authorities recorded in the prior year quarter.

Earnings before income taxes were $65.5 million during the quarter compared to $34.1 million in the third quarter of fiscal 2016. Adjusted operating income increased to $94.3 million in the quarter from $69.2 million in the prior year period and was primarily driven by higher gross margin and lower spending.

The effective tax rate for the first nine months of fiscal 2017 was 22.9% as compared to 19.0% in the prior year period. The adjusted effective tax rate for the first nine months of fiscal 2017, excluding the tax associated with restructuring, was 23.9%, in line with the prior year adjusted rate of 23.8%.

Net earnings in the quarter were $54.9 million, as compared to $36.7 million in the third quarter of fiscal 2016. Adjusted net earnings in the quarter were $63.7 million, as compared to $39.2 million in the third quarter of fiscal 2016.

GAAP Diluted EPS was $0.95 in the quarter, as compared to $0.61 in the prior year quarter. Adjusted EPS for the quarter was $1.11, compared to $0.66 in the prior year quarter.

Net cash from operating activities was $119.4 million for the first nine months of fiscal 2017, as compared to $4.1 million during the same period during the prior year. The improvement reflects the $100.5 million of discretionary funding of certain international pension plans during the second quarter of fiscal 2016 and higher current period net earnings, partially offset by higher current year deferred compensation payments. In the first nine months of fiscal 2017, the Company completed share repurchases of approximately 1.3 million shares for $94.6 million.

Fiscal 3Q 2017 Operating Segment Results (Unaudited)

Following is a summary of third quarter results by segment. All comparisons are with the third quarter of fiscal year 2016.

Wet Shave (Men's Systems, Women's Systems, Disposables, Shave Preps)

Wet Shave net sales decreased $6.1 million, or 1.7%. Excluding the impact of currency movements, organic net sales were essentially flat versus the prior year, as higher volumes were offset by unfavorable price mix. Men's Systems volumes increased in both International and North America in the quarter due to the timing of promotional activities and new private label distribution in Europe. Disposables volumes improved primarily in North America behind innovation and distribution gains. Women's Systems volumes declined, reflecting weak category trends in the U.S. Wet Shave segment profit increased $14.3 million, or 31.4%, primarily due to improved gross margins driven by lower product and commodity costs, as well as improved product and cost mix. In addition, A&P spending was lower in the quarter on decreased media spend for Women's Systems and Disposables, partially offset by higher spend in Men's Systems.

Sun and Skin Care net sales increased $9.8 million, or 6.5%. Excluding the Bulldog acquisition and the impact of currency movements, organic net sales increased $7.4 million, or 4.9%, driven by growth in both International and North America and in both the Banana Boat® and Hawaiian Tropic® brands. This was partially offset by a $2.6 million decline related to the Company's exiting of the private label Sun Care business. Growth in North America was primarily driven by lower returns and lower promotional spend compared to the prior year quarter. Growth in International was largely driven by category growth and new distribution. Sun and Skin Care segment profit increased $8.1 million, or 23.6%, driven primarily by lower returns, lower promotional spend and cost savings generated through restructuring programs.

Feminine Care (Tampons, Pads, Liners)

Feminine Care net sales decreased $10.7 million, or 11.0%, driven by volume declines related to Sport® branded pad distribution losses, increased competitive pressure, and category softness. Price mix was also unfavorable in the quarter in support of promotional programs behind innovation. This resulted in declines across Tampons, Pads and Liners. Feminine Care segment profit increased $0.2 million, or 2.7%, due to lower A&P and overhead spending, offset in part by lower volumes and unfavorable price mix. Product cost mix was essentially flat, as lower commodity costs and savings generated through restructuring programs helped to offset final transition costs related to the shift of manufacturing from Montreal to Dover, Delaware.

All Other (Infant Care, all other brands)

All Other net sales decreased $0.6 million, or 1.9%. Excluding the impact of currency movements, organic net sales decreased $0.4 million, or 1.3%. Growth in Diaper Genie® and Pet Care products was more than offset by declines in infant cups and bottles. All Other segment profit increased $0.6 million, or 9.8%.

Full Fiscal Year 2017 Financial Outlook

For fiscal 2017, reported net sales are now expected to be down approximately 1% to 2%, including an approximate 60 basis point increase from the acquisition of Bulldog, and negative foreign currency translation effects of approximately 60 basis points (based on spot exchange rates as of August 1, 2017). The Company is also revising its organic net sales outlook to be down 1% to 2% (previously flat) compared to the prior year, reflecting a lower sales outlook in Wet Shave and Feminine Care.

The Company's outlook for GAAP EPS for fiscal 2017 is in the range of $3.55 - $3.70, and the Company has increased its outlook for Adjusted EPS to $3.90 to $4.05 (previously $3.80 - $4.00). Adjusted operating income margin is now anticipated to expand by 50 to 70 basis points (previously 50 basis points). The effective tax rate for the fiscal year is now estimated to be in the range of 24% to 25% (previously 26% to 27%).

The Company anticipates that fiscal 2017 free cash flow will be approximately 100% of GAAP net earnings.

The full-year estimate for restructuring related costs is now $28 to $30 million (previously $25 to $28 million). Full year incremental restructuring savings are expected to be approximately $20 to $25 million in fiscal 2017, with an additional $20 to $25 million in fiscal 2018 and 2019 combined. The Company does not expect to incur material restructuring charges related to this project in fiscal 2018.

The Company's Zero Based Spending initiative is anticipated to drive $10 to $15 million in savings (net of implementation expense) in fiscal 2017, with an additional $25 to $30 million of savings expected in fiscal 2018.

Webcast Information

In conjunction with this announcement, the Company will hold an investor conference call beginning at 10:00 a.m. Eastern Time today. The call will focus on fiscal 2017 third quarter earnings and the outlook for fiscal 2017. All interested parties may access a live webcast of this conference call at www.edgewell.com, under "Investors," and "News and Events" tabs or by using the following link:

For those unable to participate during the live webcast, a replay will be available on www.edgewell.com, under "Investors," "Financial Reports," and "Quarterly Earnings" tabs.

About Edgewell

Edgewell is a leading pure-play consumer products company with an attractive, diversified portfolio of established brand names such as Schick® and Wilkinson Sword® men's and women's shaving systems and disposable razors; Edge® and Skintimate® shave preparations; Playtex®, Stayfree®, Carefree® and o.b.® feminine care products; Banana Boat®, Hawaiian Tropic® and Bulldog® sun and skin care products; Playtex® infant feeding, Diaper Genie® and gloves; and Wet Ones® moist wipes. The Company has a broad global footprint and operates in more than 50 markets, including the U.S., Canada, Mexico, Germany, Japan, the U.K. and Australia, with approximately 6,000 employees worldwide.

Non-GAAP Financial Measures. While the Company reports financial results in accordance with accounting principles generally accepted in the U.S. ("GAAP"), this discussion also includes Non-GAAP measures. These Non-GAAP measures are referred to as "adjusted" or "organic" and exclude items such as spin costs, restructuring charges, the sale of the industrial business and amortization of intangibles. Reconciliations of Non-GAAP measures, including reconciliations of measures related to the Company's fiscal 2017 financial outlook, are included within the Notes to Condensed Consolidated Financial Statements included with this release.

This Non-GAAP information is provided as a supplement to, not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. The Company uses this Non-GAAP information internally to make operating decisions and believes it is helpful to investors because it allows more meaningful period-to-period comparisons of ongoing operating results. The information can also be used to perform analysis and to better identify operating trends that may otherwise be masked or distorted by the types of items that are excluded. This Non-GAAP information is a component in determining management's incentive compensation. Finally, the Company believes this information provides a higher degree of transparency. The following provides additional detail on the Company's Non-GAAP measures.

  • The Company analyzes its net revenue on an...

More