Energizer Holdings, Inc. · NYSE:ENR
Energizer — Investor Day (May 2015)
51 slides from Energizer's investor day presentation, May 2015
Slide 1: The New Energizer
The New Energizer PAT MULCAHY Chairman of the Board Presentation of Information; Forward-Looking Statements Unless the context otherwise requires, references in this presentation to “Energizer,” “New Energizer,” “we,” “our,” and “the Company” refer to Energizer SpinCo, Inc., a Missouri corporation,
Slide 2: Strong legacy of shareholder value creation
Energizer Holdings, Inc. has a strong legacy of shareholder value creation Since spin off from ENR STOCK PRICE (per share) $141.58 Ralston Purina in March 2000, Energizer Holdings, Inc. has: • Distributed $317 million to shareholders via quarterly dividends • Repurchased $2.8 billion in stock opport
Slide 3: Board of Directors and executive team
We have a strong Board of Directors with the right blend of continuity, fresh perspective and independence Six current Three new Management Energizer Holdings, Inc. independent representative members members that bring Alan Hoskins, Pat Mulcahy fresh perspectives CEO Chairman of the Board on global
Slide 4: Our agenda for today
Our agenda for today • New Energizer’s Value Proposition Alan Hoskins • Energizer’s Brands and Global Leadership Position • Enhancing Value Across Our Chosen Categories and Channels Mark LaVigne • Driving Momentum Across Our Operations and Organization Brian Hamm • Delivering Total Shareholder Retur
Slide 5: Innovative, brand-driven Household Products company
Our agenda for today • New Energizer’s Value Proposition Who We Are • Our Brands and Global Leadership Position • Lead with Innovation Why We’ll Win • Operate with Excellence • Drive Productivity Gains • Focused on Free Cash Flow How We’ll Deliver Long-Term Value • Committed to Returning Cash to Sha
Slide 6: Talented and deep management team ready to execute
Talented and deep management team ready to execute Alan Hoskins CEO Sue Drath Brian Hamm Mark LaVigne Greg Kinder Chief Human Resource Chief Financial Officer Chief Operating Officer Chief Supply Chain Officer Officer 17 years in consumer 15 years as a strategic 30 years in global 23 years in human
Slide 7: Two iconic brands
Our business is built on two iconic brands • Billions of consumers around the world prefer the Energizer and Eveready brands and purchase them to meet their power and lighting needs • After 26 years, the Energizer Bunny keeps going and going, generating millions of impressions each year Source: Niel
Slide 8: Broad portfolio of products uniquely positioned
Our broad portfolio of products is uniquely positioned Premium ESTABLISHED BROAD PRODUCT PORTFOLIO ENR SALES BY PRODUCT SEGMENT • Premium Alkaline (percent of net sales in 2014) Brand & • Lithium Performance product • Performance Alkaline 16% portfolio • Rechargeable competes 17% across all • Value
Slide 9: Eveready provides quality products at an affordable price
Eveready provides a portfolio of quality products families can trust at an affordable price Powerful second brand in portfolio that appeals to consumers across many segments # 2 in Value Alkaline # 1 in Carbon Zinc Source: Nielsen Global Track, 52-weeks ending March 2015. 17 Energizer and Eveready b
Slide 10: Revenues balanced across markets
Our revenues are balanced across markets NORTH AMERICA vs. DEVELOPED vs. TOP 10 vs. INTERNATIONAL DEVELOPING ALL MARKETS (percent of net sales in 2014) (percent of net sales in 2014) (percent of net sales in 2014) 75% 51% 28% 49% 72% 25% North America International Developed Developing Top 10 All Ot
Slide 11: Category volumes and value trends improving
Category volumes and value trends are improving in latest 12 week data GLOBAL HOUSEHOLD BATTERY GLOBAL HOUSEHOLD BATTERY CATEGORY VOLUME CATEGORY VALUE (percent change) (percent change) 1.7% 1.5% -1.4% -1.8% Latest 52 weeks Latest 12 weeks Latest 52 weeks Latest 12 weeks Source: Nielsen Global Track
Slide 12: New devices that use primary batteries are emerging
New devices that use primary batteries are emerging Further opportunities for our categories EMERGING DEVICE CATEGORIES Home Automation Medical Fitness 23 Our agenda for today • New Energizer’s Value Proposition Who We Are • Our Brands and Global Leadership Position • Lead with Innovation Why We’ll
Slide 13: Global household products company with unified direction
We’re a global household products company with a unified direction … Mission Strategic Priorities Connect our brands, our Lead Operate Drive people and the products we with with Productivity offer to the world Innovation Excellence Gains better than anyone else Focus on maximizing cash flows, and Ob
Slide 14: Clear strategy to drive value creation
Energizer has a clear strategy to drive value creation WHERE WE’LL PLAY HOW WE’LL WIN 1• Achieve leading distribution 2• Drive top-tier consumer preference and conversion Customers Markets 3• Relentlessly focus on cost savings and productivity gains 4• Operate with excellence Categories 5• Build a t
Slide 15: Our mandate for winning in power and light
Our mandate for winning in power and light Giving consumers a better overall performance BATTERIES LIGHTS Long RESPONSIBILITY LONG LASTING AND Bright AND Lasting RELIABILITY QUALITY QUALITY DURABLE USER FRIENDLY 29 Through consumer insights, we identify needs and bring innovative solutions to our ca
Slide 16: Brands extended through licensing partnerships
We’ve extended our powerful brands through strategic licensing partnerships to broader categories Lighting Batteries Connecting Charging Solar Bulbs Automotive Automotive Cables Household Batteries Chargers/Inverters Photo Accessories & Batteries Gaming Chargers USB Chargers Gas-Powered Generators P
Slide 17: We create value for our channel partners
We’re a global household products company with a unified direction Mission Strategic Priorities Connect our brands, our Lead Operate Drive people and the products we with with Productivity offer to the world Innovation Excellence Gains better than anyone else Focus on maximizing cash flows, and Obje
Slide 18: Large and diversified channel/customer base
We have a large and diversified channel/customer base Our products are delivered across retail trade channels BROAD, DIVERSE DISTRIBUTION ENR GLOBAL SALES BY CUSTOMER (percent of net sales in 2014) DIY Sporting Goods Military • No single customer Online Traditional Trade 76% accounts for >10% of sal
Slide 19: Reduced working capital needs, improving cash flow
We’re a global household products company with a unified direction Mission Strategic Priorities Connect our brands, our Lead Operate Drive people and the products we with with Productivity offer to the world Innovation Excellence Gains better than anyone else Focus on maximizing cash flows, and Obje
Slide 20: Significant cost savings and healthy margins
Our efforts to date have led to significant cost savings Household Products’ cumulative restructuring savings ~$ 185 million >$210 million through FY2014 through 3/31/15 Source: internal data. 39 These restructuring efforts have helped enhance our healthy margins HOUSEHOLD PRODUCTS GROSS MARGIN • Ad
Slide 21: Global areas of focus to drive productivity gains
Global areas of focus to drive productivity gains 1 Trade investment 2 Working capital management Global Areas of Focus 3 SG&A optimization 4 Procurement 5 Integrated supply chain 41 Our agenda for today • New Energizer’s Value Proposition Who We Are • Our Brands and Global Leadership Position • Lea
Slide 22: Leading cash flow generator
Our efforts to date have made us a leading cash flow generator HOUSEHOLD PRODUCTS FREE CASH FLOW • Healthy gross margins (as percent of sales, prior fiscal three-year average) 14.0 • Successful reductions in working Peer 1 capital EHP* 12.6 • Low capital expenditure Peer 2 10.4 requirements Peer 3 9
Slide 23: Our key takeaways
Our key takeaways • Lead with innovation Execute our game plan • Operate with excellence • Drive productivity gains • First fiscal year is a year of transition Build for long-term success • Remain focused on maximizing cash flow Deliver long-term value to • Reinvest in the business shareholders, cus
Slide 24: Building on our legacy as a standalone company
The New Energizer MARK LAVIGNE Chief Operating Officer 47 We’re building upon our rich legacy to craft the next chapter as a standalone company Proactive in improving the way we operate and how we perform Leverage the separation as a catalyst to better prepare our business to win Provide clear focus
Slide 25: Profitable share growth in key markets and customers
We’re focused on profitable share growth by winning in key markets and with key customers SEGMENT NET SALES • Half of our sales are generated (% of FY14 net sales) $ 1.8 Billion outside North America • Focused on our core global 19% markets, customers and 49% categories to drive profitable share gro
Slide 26: Operations to enable long-term shareholder value
Our operations will enable and reinforce long-term, sustainable shareholder value creation FROM TO Where • Optimize battery performance • Concentrate on the core We • Diversify into faster-growing • Focus on priority categories, markets Focus personal care categories and customers • De-centralized b
Slide 27: Three-step process; streamline commercial footprint
Three-step process to deliver results STRUCTURAL RESET • Commercial model transformation • Efficient service delivery model 1 Establishing the right operating platform • Integrated supply chain model for the New Energizer • Balancing internal / external manufacturing SUPERIOR PERFORMANCE 2 High-impa
Slide 28: Differentiated commercial approach
We’re adopting a differentiated commercial approach 1 COMMERCIAL MARKET CONDITIONS & APPROACH COMPETITIVE POSITION • Improved focus • Largest markets on major SCALE MARKETS Lead • Leading share position, high brand relevance Invest and grow • Concentrated retail landscape markets and >90% • Mid-size
Slide 29: Shared services and centralization drive productivity
We’re using shared services and centralization 1 to drive productivity across all enabling functions IMPROVEMENT CHANGES Key Takeaways • Globally integrated marketing • More efficient use of Adopted center-led resources organization model to drive • More effective efficiencies and • Centers of excel
Slide 30: Best product availability at lowest possible cost
We’re striving to provide the best product availability 1 at the lowest possible cost COST OF GOODS SOLD SUPPLY CHAIN IMPERATIVES (% of FY14 net sales) Drive productivity with continued cost focus $ 990 Million 1• Continue to drive cost leadership 62% 2• Move to a more variable cost structure 38% 3•
Slide 31: Center-led integrated supply chain model
Post separation, we’ll operate under a center-led 1 integrated supply chain model CHIEF SUPPLY CHAIN OFFICER Global Sales & Procurement Manufacturing Supply Chain Operations Planning Centers of Excellence / Business Services Empowered & Disciplined Flexible & Operating with Standardized Systems / Ac
Slide 32: Three-step process: continuing journey
Three-step process to deliver results STRUCTURAL RESET 1 Establishing the right operating platform for the New Energizer • Trade investment SUPERIOR PERFORMANCE • Working capital management 2 High-impact initiatives to enable efficient • SG&A optimization operations and continuous productivity gains
Slide 33: Cost reduction and margin improvement
We’ll continue to focus on 2 cost reduction and margin improvement Relentless pursuit of lower COGS enabled by: RESTRUCTURING (through 3/31/15, by category) • Adopting lean manufacturing practices globally • Eliminating non-value added activities COGS • Streamlining manufacturing overheads 34% Other
Slide 34: Progress in improving working capital
Significant progress in improving working capital 2 to date … further upside available in DII DSO DAYS DPO DAYS DII DAYS • Standardized credit terms • Standardized payment terms • Higher due to manufacturing for all suppliers footprint changes/time on water • Applied supply chain • Battery aging pro
Slide 35: Ready to operate independently
We are ready to operate independently 3 • Focused goal of maximizing free cash flow Clarity of purpose and objectives • Management committed to driving value • Enhanced operating model Business realigned for success given • Lower complexity and efficiency gains reduced scale resulting from spin • Ri
Slide 36: Key takeaways
Key takeaways Many accomplishments Leveraged the separation as a catalyst to in the past year better prepare our business to win Have been and Constantly improving the way we operate will continue to be proactive and our business performance Our focus is clear and the We will attain our goals founda
Slide 37: The creation of a new Energizer
The creation of a new Energizer Tax-free spin to shareholders; begin trading independently on July 1 1-for-1 ratio: receive 1 new ENR share for every 1 parent co share held Retain Energizer Holdings, Inc. name and ENR ticker symbol “When-issued” trading expected to begin in mid-June New Energizer to
Slide 38: Track record of delivering cost savings
Our agenda for today Track record of delivering cost savings Transition period as we separate Driving value as a standalone company Our capital structure and allocation strategies 75 Our track record of delivering cost savings provides a strong foundation RESTRUCTURING WORKING CAPITAL FREE CASH FLOW
Slide 39: Offsetting spin-related dis-synergies
We’re aiming to offset our share of spin-related dis-synergies Parent Co. dis-synergies of $65 - $85 million. New Energizer expected to incur roughly one half of total. Aiming to offset dis-synergies in 3-to-4 quarters post spin via these focus areas: COMMERCIAL SHARED SERVICE CENTERS OUTSOURCING NO
Slide 40: Interim reporting and normalized reporting from Q4/FY15
Our agenda for today Track record of delivering cost savings Transition period as we separate Driving value as a standalone company Our capital structure and allocation strategies 79 We’re committed to providing relevant data in the interim, and expect normalized reporting starting with Q4/FY15 Augu
Slide 41: Topline and EBITDA base adjustments
Topline adjustments anticipated ADJUSTED ANNUALIZED NET SALES BASE NORMAL VARIABILITY DUE TO $1.8B • Storms • Timing of holiday shipments • Distribution gains and losses ($95-$100M) ~$1.6B ($21M) • New product launches ($45-50M) INCREMENTAL ADJUSTMENTS FOR • Currency • Venezuela deconsolidation • Go
Slide 42: Capital expenditures to remain modest
Capital expenditures for standalone household products to remain relatively modest DIVISIONAL CAPITAL SPENDING CAPITAL SPENDING OUTLOOK ($ in millions, excludes corporate and IT) (percent of total, includes corporate and IT) $38 20% $ 35- $45 Million $32 $28 65% 15% $18 Maintenance Efficiency Produc
Slide 43: Executing on our financial goals
We’re executing on our financial goals EBITDA / Free Cash Flow • Expand gross margins • Proactively reduce SG&A costs • Improve cash conversion cycle Margin Expansion / reduce working capital • Grow share profitably • Efficiently spend capital Revenue • Leverage center-led • Bring innovation procure
Slide 44: Long-term financial targets
Our agenda for today Track record of delivering cost savings Transition period as we separate Driving value as a standalone company Our capital structure and allocation strategies 87 Our strong balance sheet supports growth and return of capital • $300 million (minimum) in Summary Capitalization off
Slide 45: Strong balance sheet supports growth and capital return
Flexible capital structure ensures low borrowing costs with no near-term maturities DEBT MATURITY LADDER (notional amounts) • Availability under revolver $600M Unsecured Notes to provide liquidity • Covenant-lite Term Loan B $400M Term Loan B • Unsecured notes provide attractive fixed rate $250M fin
Slide 46: Flexible capital structure with no near-term maturities
We’re taking the right steps to reinvest in the business to drive long-term shareholder value Support Drive Further Invest in Systems/ Revenue Cost Savings Processes/People R&D and A&P spend to Reduce manufacturing Trade promotion support innovation costs management tool Maintain and grow
Slide 47: Prudent capital allocation policy
When evaluating M&A, we’ll be selective and disciplined in our approach Prior Parent Criteria New ENR Criteria • Fast moving consumable goods • Household products or adjacent categories where we can compete and • Household/personal care preferred generate superior returns • Strong brands • Different
Slide 48: Reinvesting in the business for long-term value
Q&A ALAN HOSKINS MARK LAVIGNE BRIAN HAMM 95 Appendix 96
Slide 49: Return of capital to shareholders; M&A criteria
Company Contacts BRIAN HAMM Energizer’s Chief Financial Officer Briank.Hamm@energizer.com JENNIFER BEATTY, CFA Energizer’s Vice President – Investor Relations Jennifer.Beatty@energizer.com (314) 985-1849 97 LTM 3/31/15 % Chg 2014 % Chg 2013 % Chg 2012 Net Sales North America Net sales ‐ prior year $
Slide 50: Q&A
2014 % Chg 2013 % Chg 2012 North America Segment Profit Segment Profit ‐ prior year Operations $307.1 ($39.2) ‐12.8% $302.9 $4.5 1.5% $288.2 $16.1 Impact of currency ($4.0) ‐1.3% ($0.3) ‐0.1% ($1.4) Segment Profit ‐ current year $263.9 ‐14.1% $307.1 1.4% $302.9 % of Sales 29.0% 29.5% 27.5% Latin Ame
Slide 51: Company Contacts and Net Sales Reconciliation
Free Cash Flow Reconciliation 3 Year 3 Year 2014 2013 2012 Total Average Revenue $1,840.4 $2,012.2 $2,087.7 $1,980.1 Operating Cash Flow $219.9 $329.5 $285.3 $278.2 Capital Expenditures ($28.4) ($17.8) ($38.1) ($28.1) Free Cash Flow (a) $191.5 $311.7 $247.2 $750.4 $250.1 % of Sales 10.4% 15.5% 11.8%