UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
_______________________________ | | | | | |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 20212022
or
| | | | | |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______________ to _______________
Commission File Number: 001-15401
EDGEWELL PERSONAL CARE COMPANY
(Exact name of registrant as specified in its charter) | | | | | | | | | | | | | | |
Missouri | 43-1863181 |
(State or other jurisdiction of incorporation or organization) | (I. R. S. Employer Identification No.) |
| |
6 Research Drive | (203) | 944-5500 |
Shelton, | CT | 06484 | (Registrant’s telephone number, including area code) |
(Address of principal executive offices and zip code) | | |
Securities registered pursuant to Section 12(b) of the Act: | | | | | | | | |
Title of each class | Trading symbol(s) | Name of each exchange on which registered |
Common Stock, par value $0.01 per share | EPC | New 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 ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. | | | | | | | | | | | | | | |
Large accelerated filer | ☒ | | Accelerated filer | ☐ |
| | | | |
Non-accelerated filer | ☐ | (Do not check if a smaller reporting company) | Smaller reporting company | ☐ |
| | | | |
| | | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
Common shares, $0.01 par value - 54,363,27351,826,214 shares as of July 31, 2021.2022.
EDGEWELL PERSONAL CARE COMPANY
INDEX TO FORM 10-Q
| | | | | | | | |
PART I. | FINANCIAL INFORMATION | |
Item 1. | Financial Statements (Unaudited).Statements. | |
| Condensed Consolidated Statements of Earnings and Comprehensive Income for the three and nine months ended June 30, 20212022 and 2020.2021. | |
| Condensed Consolidated Balance Sheets as of June 30, 20212022 and September 30, 2020.2021. | |
| Condensed Consolidated Statements of Cash Flows for the nine months ended June 30, 20212022 and 2020.2021. | |
| Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and nine months ended June 30, 20212022 and 2020.2021. | |
| Notes to Condensed Consolidated Financial Statements. | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. | |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk. | |
Item 4. | Controls and Procedures. | |
| | |
PART II. | OTHER INFORMATION | |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. | |
Item 6. | Exhibits. | |
| | |
SIGNATURE | | |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).Statements.
EDGEWELL PERSONAL CARE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
(unaudited, in millions, except per share data)
| | | Three Months Ended June 30, | | Nine Months Ended June 30, | | Three Months Ended June 30, | | Nine Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
Net sales | Net sales | $ | 573.7 | | | $ | 483.9 | | | $ | 1,544.1 | | | $ | 1,460.9 | | Net sales | $ | 623.8 | | | $ | 573.7 | | | $ | 1,634.8 | | | $ | 1,544.1 | |
Cost of products sold | Cost of products sold | 303.4 | | | 261.2 | | | 838.8 | | | 802.1 | | Cost of products sold | 383.2 | | | 303.4 | | | 974.2 | | | 838.8 | |
Gross profit | Gross profit | 270.3 | | | 222.7 | | | 705.3 | | | 658.8 | | Gross profit | 240.6 | | | 270.3 | | | 660.6 | | | 705.3 | |
| Selling, general and administrative expense | Selling, general and administrative expense | 97.5 | | | 91.3 | | | 284.0 | | | 307.8 | | Selling, general and administrative expense | 92.7 | | | 97.5 | | | 290.9 | | | 284.0 | |
Advertising and sales promotion expense | Advertising and sales promotion expense | 81.9 | | | 67.5 | | | 191.5 | | | 155.6 | | Advertising and sales promotion expense | 80.9 | | | 81.9 | | | 197.0 | | | 191.5 | |
Research and development expense | Research and development expense | 14.6 | | | 12.4 | | | 42.6 | | | 40.1 | | Research and development expense | 13.6 | | | 14.6 | | | 40.1 | | | 42.6 | |
Restructuring charges | Restructuring charges | 5.2 | | | 8.0 | | | 11.6 | | | 20.6 | | Restructuring charges | 3.5 | | | 5.2 | | | 9.2 | | | 11.6 | |
Operating income | Operating income | 71.1 | | | 43.5 | | | 175.6 | | | 134.7 | | Operating income | 49.9 | | | 71.1 | | | 123.4 | | | 175.6 | |
Gain on sale of Infant and Pet Care business | 0 | | | 0 | | | 0 | | | (4.1) | | |
Interest expense associated with debt | Interest expense associated with debt | 16.4 | | | 15.5 | | | 51.1 | | | 43.7 | | Interest expense associated with debt | 18.0 | | | 16.4 | | | 53.3 | | | 51.1 | |
Cost of early retirement of long-term debt | Cost of early retirement of long-term debt | 0 | | | 26.2 | | | 26.1 | | | 26.2 | | Cost of early retirement of long-term debt | — | | | — | | | — | | | 26.1 | |
Other expense (income), net | 0.8 | | | (3.5) | | | (0.2) | | | 5.8 | | |
Other (income) expense, net | | Other (income) expense, net | (4.4) | | | 0.8 | | | (9.5) | | | (0.2) | |
Earnings before income taxes | Earnings before income taxes | 53.9 | | | 5.3 | | | 98.6 | | | 63.1 | | Earnings before income taxes | 36.3 | | | 53.9 | | | 79.6 | | | 98.6 | |
Income tax provision | Income tax provision | 13.1 | | | 0.6 | | | 25.7 | | | 16.5 | | Income tax provision | 5.8 | | | 13.1 | | | 14.7 | | | 25.7 | |
Net earnings | Net earnings | $ | 40.8 | | | $ | 4.7 | | | $ | 72.9 | | | $ | 46.6 | | Net earnings | $ | 30.5 | | | $ | 40.8 | | | $ | 64.9 | | | $ | 72.9 | |
| Earnings per share: | Earnings per share: | | Earnings per share: | |
Basic net earnings per share | Basic net earnings per share | $ | 0.75 | | | $ | 0.09 | | | $ | 1.34 | | | $ | 0.86 | | Basic net earnings per share | $ | 0.58 | | | $ | 0.75 | | | $ | 1.21 | | | $ | 1.34 | |
Diluted net earnings per share | Diluted net earnings per share | $ | 0.74 | | | $ | 0.09 | | | $ | 1.32 | | | $ | 0.86 | | Diluted net earnings per share | $ | 0.57 | | | $ | 0.74 | | | $ | 1.20 | | | $ | 1.32 | |
| Statements of Comprehensive Income: | Statements of Comprehensive Income: | | Statements of Comprehensive Income: | |
Net earnings | Net earnings | $ | 40.8 | | | $ | 4.7 | | | $ | 72.9 | | | $ | 46.6 | | Net earnings | $ | 30.5 | | | $ | 40.8 | | | $ | 64.9 | | | $ | 72.9 | |
Other comprehensive income (loss), net of tax | | |
Other comprehensive (loss) income, net of tax | | Other comprehensive (loss) income, net of tax | |
Foreign currency translation adjustments | Foreign currency translation adjustments | 9.1 | | | 14.5 | | | 23.0 | | | 8.1 | | Foreign currency translation adjustments | (34.4) | | | 9.1 | | | (50.3) | | | 23.0 | |
Pension and postretirement activity, net of tax of $(0.2), $(0.3), $(0.2) and $(0.4) | (0.7) | | | (1.1) | | | (1.3) | | | (1.8) | | |
Deferred gain (loss) on hedging activity, net of tax of $0.1, $(0.8), $1.7 and $(0.7) | 0.2 | | | (1.8) | | | 3.5 | | | (1.5) | | |
Total other comprehensive income, net of tax | 8.6 | | | 11.6 | | | 25.2 | | | 4.8 | | |
Total comprehensive income | $ | 49.4 | | | $ | 16.3 | | | $ | 98.1 | | | $ | 51.4 | | |
Pension and postretirement activity, net of tax of $0.4, $(0.2), $0.7, and $(0.2) | | Pension and postretirement activity, net of tax of $0.4, $(0.2), $0.7, and $(0.2) | 0.7 | | | (0.7) | | | 0.8 | | | (1.3) | |
Deferred gain on hedging activity, net of tax of $1.4, $0.1, $2.0, and $1.7 | | Deferred gain on hedging activity, net of tax of $1.4, $0.1, $2.0, and $1.7 | 3.1 | | | 0.2 | | | 4.5 | | | 3.5 | |
Total other comprehensive (loss) income, net of tax | | Total other comprehensive (loss) income, net of tax | (30.6) | | | 8.6 | | | (45.0) | | | 25.2 | |
Total comprehensive (loss) income | | Total comprehensive (loss) income | $ | (0.1) | | | $ | 49.4 | | | $ | 19.9 | | | $ | 98.1 | |
See accompanying Notes to Condensed Consolidated Financial Statements.
EDGEWELL PERSONAL CARE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in millions, except share data)
| | | June 30, 2021 | | September 30, 2020 | | June 30, 2022 | | September 30, 2021 |
Assets | Assets | | | | Assets | | | |
Current assets | Current assets | | | | Current assets | | | |
Cash and cash equivalents | Cash and cash equivalents | $ | 437.5 | | | $ | 364.7 | | Cash and cash equivalents | $ | 181.6 | | | $ | 479.2 | |
Trade receivables, less allowance for doubtful accounts of $7.4 and $8.2 | 149.6 | | | 158.8 | | |
Trade receivables, less allowance for doubtful accounts of $4.6 and $6.9 | | Trade receivables, less allowance for doubtful accounts of $4.6 and $6.9 | 155.2 | | | 150.7 | |
Inventories | Inventories | 359.2 | | | 314.1 | | Inventories | 414.1 | | | 345.7 | |
Other current assets | Other current assets | 155.7 | | | 146.0 | | Other current assets | 182.8 | | | 160.1 | |
Total current assets | Total current assets | 1,102.0 | | | 983.6 | | Total current assets | 933.7 | | | 1,135.7 | |
Property, plant and equipment, net | Property, plant and equipment, net | 358.1 | | | 370.9 | | Property, plant and equipment, net | 347.8 | | | 362.6 | |
Goodwill | Goodwill | 1,166.9 | | | 1,159.7 | | Goodwill | 1,332.3 | | | 1,162.8 | |
Other intangible assets, net | Other intangible assets, net | 914.4 | | | 928.1 | | Other intangible assets, net | 1,010.7 | | | 906.4 | |
Other assets | Other assets | 105.8 | | | 98.6 | | Other assets | 96.8 | | | 107.1 | |
Total assets | Total assets | $ | 3,647.2 | | | $ | 3,540.9 | | Total assets | $ | 3,721.3 | | | $ | 3,674.6 | |
| Liabilities and Shareholders’ Equity | Liabilities and Shareholders’ Equity | | Liabilities and Shareholders’ Equity | |
Current liabilities | Current liabilities | | Current liabilities | |
| Notes payable | Notes payable | $ | 24.8 | | | $ | 21.1 | | Notes payable | $ | 18.9 | | | $ | 26.5 | |
Accounts payable | Accounts payable | 215.9 | | | 181.9 | | Accounts payable | 239.2 | | | 209.5 | |
Other current liabilities | Other current liabilities | 306.4 | | | 307.5 | | Other current liabilities | 317.0 | | | 300.8 | |
Total current liabilities | Total current liabilities | 547.1 | | | 510.5 | | Total current liabilities | 575.1 | | | 536.8 | |
Long-term debt | Long-term debt | 1,233.6 | | | 1,237.9 | | Long-term debt | 1,356.9 | | | 1,234.2 | |
Deferred income tax liabilities | Deferred income tax liabilities | 103.4 | | | 102.5 | | Deferred income tax liabilities | 137.8 | | | 129.0 | |
Other liabilities | Other liabilities | 251.5 | | | 257.1 | | Other liabilities | 173.4 | | | 190.3 | |
Total liabilities | Total liabilities | 2,135.6 | | | 2,108.0 | | Total liabilities | 2,243.2 | | | 2,090.3 | |
Shareholders’ equity | Shareholders’ equity | | | | Shareholders’ equity | | | |
Preferred shares, $0.01 par value, 10,000,000 authorized; none issued or outstanding | Preferred shares, $0.01 par value, 10,000,000 authorized; none issued or outstanding | 0 | | | 0 | | Preferred shares, $0.01 par value, 10,000,000 authorized; none issued or outstanding | — | | | — | |
Common shares, $0.01 par value, 300,000,000 authorized; 65,251,989 issued; 54,358,629 and 54,355,183 outstanding | 0.7 | | | 0.7 | | |
Common shares, $0.01 par value, 300,000,000 authorized; 65,251,989 issued; 51,955,666 and 54,369,714 outstanding | | Common shares, $0.01 par value, 300,000,000 authorized; 65,251,989 issued; 51,955,666 and 54,369,714 outstanding | 0.7 | | | 0.7 | |
Additional paid-in capital | Additional paid-in capital | 1,624.7 | | | 1,631.8 | | Additional paid-in capital | 1,599.9 | | | 1,631.1 | |
Retained earnings | Retained earnings | 829.9 | | | 782.4 | | Retained earnings | 905.9 | | | 865.7 | |
Common shares in treasury at cost, 10,893,360 and 10,896,806 | (777.3) | | | (790.4) | | |
Common shares in treasury at cost, 13,296,323 and 10,882,275 | | Common shares in treasury at cost, 13,296,323 and 10,882,275 | (846.5) | | | (776.3) | |
Accumulated other comprehensive loss | Accumulated other comprehensive loss | (166.4) | | | (191.6) | | Accumulated other comprehensive loss | (181.9) | | | (136.9) | |
Total shareholders’ equity | Total shareholders’ equity | 1,511.6 | | | 1,432.9 | | Total shareholders’ equity | 1,478.1 | | | 1,584.3 | |
Total liabilities and shareholders’ equity | Total liabilities and shareholders’ equity | $ | 3,647.2 | | | $ | 3,540.9 | | Total liabilities and shareholders’ equity | $ | 3,721.3 | | | $ | 3,674.6 | |
See accompanying Notes to Condensed Consolidated Financial Statements.
EDGEWELL PERSONAL CARE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in millions) | | | | | | | | | | | |
| Nine Months Ended June 30, |
| 2021 | | 2020 |
Cash Flow from Operating Activities | | | |
Net earnings | $ | 72.9 | | | $ | 46.6 | |
Depreciation and amortization | 65.9 | | | 65.5 | |
Share-based compensation expense | 19.6 | | | 15.1 | |
Loss on sale of assets | 0.6 | | | 1.2 | |
Gain on sale of Infant and Pet Care business | 0 | | | (4.1) | |
Deferred compensation payments | (9.2) | | | (8.7) | |
Deferred income taxes | (1.3) | | | (16.1) | |
Cost of early retirement of long-term debt | 26.1 | | | 26.2 | |
Other, net | (0.8) | | | 7.3 | |
Changes in operating assets and liabilities | (17.9) | | | (14.4) | |
Net cash from operating activities | $ | 155.9 | | | $ | 118.6 | |
| | | |
Cash Flow from Investing Activities | | | |
Capital expenditures | (34.1) | | | (26.9) | |
Proceeds from sale of Infant and Pet Care business | 7.5 | | | 95.8 | |
Acquisition of Cremo | (0.3) | | | 0 | |
Collection of deferred purchase price on accounts receivable sold | 2.6 | | | 3.9 | |
Other, net | (1.8) | | | (1.5) | |
Net cash (used by) from investing activities | $ | (26.1) | | | $ | 71.3 | |
| | | |
Cash Flow from Financing Activities | | | |
Cash proceeds from the issuance of Senior Notes due 2029 | 500.0 | | | 0 | |
Cash payments on Senior Notes due 2022 | (500.0) | | | 0 | |
Cash proceeds from the issuance of Senior Notes due 2028 | 0 | | | 750.0 | |
Cash payments on Senior Notes due 2021 | 0 | | | (600.0) | |
Cash proceeds from debt with original maturities greater than 90 days | 0 | | | 50.0 | |
Cash payments on debt with original maturities greater than 90 days | 0 | | | (167.0) | |
Net increase in debt with original maturities of 90 days or less | 2.4 | | | 1.7 | |
Debt issuance costs for Senior Notes due 2029 | (6.5) | | | 0 | |
Debt issuance costs for Senior Notes due 2028 | 0 | | | (10.4) | |
Debt issuance costs for the Revolving Credit Facility | 0 | | | (3.6) | |
Cost of early retirement of long-term debt | (26.1) | | | (26.2) | |
Dividends to common shareholders | (16.7) | | | 0 | |
Repurchase of shares | (9.2) | | | 0 | |
Net financing inflow (outflow) from the Accounts Receivable Facility | 0.8 | | | (14.4) | |
Employee shares withheld for taxes | (4.0) | | | (1.7) | |
Other, net | (0.6) | | | 0 | |
Net cash used by financing activities | $ | (59.9) | | | $ | (21.6) | |
| | | |
Effect of exchange rate changes on cash | 2.9 | | | 2.0 | |
| | | |
Net increase in cash and cash equivalents | 72.8 | | | 170.3 | |
Cash and cash equivalents, beginning of period | 364.7 | | | 341.6 | |
Cash and cash equivalents, end of period | $ | 437.5 | | | $ | 511.9 | |
| | | | | | | | | | | |
| Nine Months Ended June 30, |
| 2022 | | 2021 |
Cash Flow from Operating Activities | | | |
Net earnings | $ | 64.9 | | | $ | 72.9 | |
Depreciation and amortization | 67.1 | | | 65.9 | |
Share-based compensation expense | 18.4 | | | 19.6 | |
Loss on sale of assets | 0.6 | | | 0.6 | |
Deferred compensation payments | (7.1) | | | (9.2) | |
Deferred income taxes | (10.6) | | | (1.3) | |
Cost of early retirement of long-term debt | — | | | 26.1 | |
Other, net | (4.8) | | | (0.8) | |
Changes in operating assets and liabilities | (56.1) | | | (17.9) | |
Net cash from operating activities | $ | 72.4 | | | $ | 155.9 | |
| | | |
Cash Flow from Investing Activities | | | |
Capital expenditures | (37.4) | | | (34.1) | |
Acquisition of Billie, net of cash acquired | (309.4) | | | — | |
Proceeds from sale of Infant and Pet Care business | 5.0 | | | 7.5 | |
Acquisition of Cremo | — | | | (0.3) | |
Collection of deferred purchase price on accounts receivable sold | 5.6 | | | 2.6 | |
Other, net | (1.4) | | | (1.8) | |
Net cash used by investing activities | $ | (337.6) | | | $ | (26.1) | |
| | | |
Cash Flow from Financing Activities | | | |
Cash proceeds from the issuance of Senior Notes due 2029 | — | | | 500.0 | |
Cash payments on Senior Notes due 2022 | — | | | (500.0) | |
Cash proceeds from debt with original maturities greater than 90 days | 534.0 | | | — | |
Cash payments on debt with original maturities greater than 90 days | (413.0) | | | — | |
Net (decrease) increase in debt with original maturities of 90 days or less | (4.3) | | | 2.4 | |
Debt issuance costs for Senior Notes due 2029 | — | | | (6.5) | |
Cost of early retirement of long-term debt | — | | | (26.1) | |
Dividends to common shareholders | (24.7) | | | (16.7) | |
Repurchase of shares | (110.1) | | | (9.2) | |
Net financing inflow from the Accounts Receivable Facility | 6.5 | | | 0.8 | |
Employee shares withheld for taxes | (10.4) | | | (4.0) | |
Other, net | 0.6 | | | (0.6) | |
Net cash used by financing activities | $ | (21.4) | | | $ | (59.9) | |
| | | |
Effect of exchange rate changes on cash | (11.0) | | | 2.9 | |
| | | |
Net (decrease) increase in cash and cash equivalents | (297.6) | | | 72.8 | |
Cash and cash equivalents, beginning of period | 479.2 | | | 364.7 | |
Cash and cash equivalents, end of period | $ | 181.6 | | | $ | 437.5 | |
See accompanying Notes to Condensed Consolidated Financial Statements.
EDGEWELL PERSONAL CARE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(unaudited, in millions)
| | | Common Shares | | Treasury Shares | | | Common Shares | | Treasury Shares | |
| | Number | | Par Value | | Number | | Amount | | Additional Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Shareholders’ Equity | | Number | | Par Value | | Number | | Amount | | Additional Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Shareholders’ Equity |
Balance at March 31, 2021 | 65.2 | | | $ | 0.7 | | | (10.9) | | | $ | (781.3) | | | $ | 1,622.0 | | | $ | 797.7 | | | $ | (175.0) | | | $ | 1,464.1 | | |
Balance at September 30, 2021 | | Balance at September 30, 2021 | 65.2 | | | $ | 0.7 | | | (10.9) | | | $ | (776.3) | | | $ | 1,631.1 | | | $ | 865.7 | | | $ | (136.9) | | | $ | 1,584.3 | |
Net earnings | | Net earnings | — | | | — | | | — | | | — | | | — | | | 11.2 | | | — | | | 11.2 | |
Foreign currency translation adjustments | | Foreign currency translation adjustments | — | | | — | | | — | | | — | | | — | | | — | | | (6.9) | | | (6.9) | |
| Deferred gain on hedging activity | | Deferred gain on hedging activity | — | | | — | | | — | | | — | | | — | | | — | | | 0.4 | | | 0.4 | |
Dividends declared to common shareholders | | Dividends declared to common shareholders | — | | | — | | | — | | | — | | | — | | | (8.4) | | | — | | | (8.4) | |
Repurchase of shares | | Repurchase of shares | — | | | — | | | (0.5) | | | (24.5) | | | — | | | — | | | — | | | (24.5) | |
Activity under share plans | | Activity under share plans | — | | | — | | | 0.3 | | | 33.6 | | | (37.4) | | | — | | | — | | | (3.8) | |
Balance at December 31, 2021 | | Balance at December 31, 2021 | 65.2 | | | $ | 0.7 | | | (11.1) | | | $ | (767.2) | | | $ | 1,593.7 | | | $ | 868.5 | | | $ | (143.4) | | | $ | 1,552.3 | |
Net earnings | Net earnings | — | | | — | | | — | | | — | | | — | | | 40.8 | | | — | | | 40.8 | | Net earnings | — | | | — | | | — | | | — | | | — | | | 23.2 | | | — | | | 23.2 | |
Foreign currency translation adjustments | Foreign currency translation adjustments | — | | | — | | | — | | | — | | | — | | | — | | | 9.1 | | | 9.1 | | Foreign currency translation adjustments | — | | | — | | | — | | | — | | | — | | | — | | | (9.0) | | | (9.0) | |
Pension and postretirement activity | Pension and postretirement activity | — | | | — | | | — | | | — | | | — | | | — | | | (0.7) | | | (0.7) | | Pension and postretirement activity | — | | | — | | | — | | | — | | | — | | | — | | | 0.1 | | | 0.1 | |
Deferred gain on hedging activity | Deferred gain on hedging activity | — | | | — | | | — | | | — | | | — | | | — | | | 0.2 | | | 0.2 | | Deferred gain on hedging activity | — | | | — | | | — | | | — | | | — | | | — | | | 1.0 | | | 1.0 | |
Dividends declared to common shareholders | Dividends declared to common shareholders | — | | | — | | | — | | | — | | | — | | | (8.6) | | | — | | | (8.6) | | Dividends declared to common shareholders | — | | | — | | | — | | | — | | | — | | | (8.2) | | | — | | | (8.2) | |
| Repurchase of shares | | Repurchase of shares | — | | | — | | | (1.4) | | | (50.9) | | | — | | | — | | | — | | | (50.9) | |
Activity under share plans | Activity under share plans | — | | | — | | | 0 | | | 4.0 | | | 2.7 | | | 0 | | | — | | | 6.7 | | Activity under share plans | — | | | — | | | 0.1 | | | 3.5 | | | 3.5 | | | — | | | — | | | 7.0 | |
Balance at June 30, 2021 | 65.2 | | | $ | 0.7 | | | $ | (10.9) | | | $ | (777.3) | | | $ | 1,624.7 | | | $ | 829.9 | | | $ | (166.4) | | | $ | 1,511.6 | | |
Balance at March 31, 2022 | | Balance at March 31, 2022 | 65.2 | | | $ | 0.7 | | | (12.4) | | | $ | (814.6) | | | $ | 1,597.2 | | | $ | 883.5 | | | $ | (151.3) | | | $ | 1,515.5 | |
Net earnings | | Net earnings | — | | | — | | | — | | | — | | | — | | | 30.5 | | | — | | | 30.5 | |
Foreign currency translation adjustments | | Foreign currency translation adjustments | — | | | — | | | — | | | — | | | — | | | — | | | (34.4) | | | (34.4) | |
Pension and postretirement activity | | Pension and postretirement activity | — | | | — | | | — | | | — | | | — | | | — | | | 0.7 | | | 0.7 | |
Deferred gain on hedging activity | | Deferred gain on hedging activity | — | | | — | | | — | | | — | | | — | | | — | | | 3.1 | | | 3.1 | |
Dividends declared to common shareholders | | Dividends declared to common shareholders | — | | | — | | | — | | | — | | | — | | | (8.1) | | | — | | | (8.1) | |
Repurchase of shares | | Repurchase of shares | — | | | — | | | (1.0) | | | (34.7) | | | — | | | — | | | — | | | (34.7) | |
Activity under share plans | | Activity under share plans | — | | | — | | | 0.1 | | | 2.8 | | | 2.7 | | | — | | | — | | | 5.5 | |
Balance at June 30, 2022 | | Balance at June 30, 2022 | 65.2 | | | $ | 0.7 | | | (13.3) | | | $ | (846.5) | | | $ | 1,599.9 | | | $ | 905.9 | | | $ | (181.9) | | | $ | 1,478.1 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Shares | | Treasury Shares | | | | | | | | |
| Number | | Par Value | | Number | | Amount | | Additional Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Shareholders’ Equity |
Balance at September 30, 2020 | 65.2 | | | $ | 0.7 | | | (10.9) | | | $ | (790.4) | | | $ | 1,631.8 | | | $ | 782.4 | | | $ | (191.6) | | | $ | 1,432.9 | |
Net earnings | — | | | — | | | — | | | — | | | — | | | 72.9 | | | — | | | 72.9 | |
Foreign currency translation adjustments | — | | | — | | | — | | | — | | | — | | | — | | | 23.0 | | | 23.0 | |
Pension and postretirement activity | — | | | — | | | — | | | — | | | — | | | — | | | (1.3) | | | (1.3) | |
Deferred gain on hedging activity | — | | | — | | | — | | | — | | | — | | | — | | | 3.5 | | | 3.5 | |
Dividends declared to common shareholders | — | | | — | | | — | | | — | | | — | | | (25.4) | | | — | | | (25.4) | |
Repurchase of shares | — | | | — | | | (0.3) | | | (9.2) | | | — | | | — | | | — | | | (9.2) | |
Activity under share plans | — | | | — | | | 0.3 | | | 22.3 | | | (7.1) | | | 0 | | | — | | | 15.2 | |
Balance at June 30, 2021 | 65.2 | | | $ | 0.7 | | | (10.9) | | | $ | (777.3) | | | $ | 1,624.7 | | | $ | 829.9 | | | $ | (166.4) | | | $ | 1,511.6 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Shares | | Treasury Shares | | | | | | | | |
| Number | | Par Value | | Number | | Amount | | Additional Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Shareholders’ Equity |
Balance at March 31, 2020 | 65.2 | | | $ | 0.7 | | | (10.9) | | | $ | (793.5) | | | $ | 1,626.1 | | | $ | 756.7 | | | $ | (242.7) | | | $ | 1,347.3 | |
Net earnings | — | | | — | | | — | | | — | | | — | | | 4.7 | | | — | | | 4.7 | |
Foreign currency translation adjustments | — | | | — | | | — | | | — | | | — | | | — | | | 14.5 | | | 14.5 | |
Pension and postretirement activity | — | | | — | | | — | | | — | | | — | | | — | | | (1.1) | | | (1.1) | |
Deferred loss on hedging activity | — | | | — | | | — | | | — | | | — | | | — | | | (1.8) | | | (1.8) | |
Activity under share plans | — | | | — | | | 0 | | | 1.4 | | | 3.2 | | | 0 | | | — | | | 4.6 | |
Balance at June 30, 2020 | 65.2 | | | $ | 0.7 | | | (10.9) | | | $ | (792.1) | | | $ | 1,629.3 | | | $ | 761.4 | | | $ | (231.1) | | | $ | 1,368.2 | |
| | | Common Shares | | Treasury Shares | | | Common Shares | | Treasury Shares | |
| | Number | | Par Value | | Number | | Amount | | Additional Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Shareholders’ Equity | | Number | | Par Value | | Number | | Amount | | Additional Paid-In Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Shareholders’ Equity |
Balance at September 30, 2019 | 65.2 | | | $ | 0.7 | | | (11.0) | | | $ | (803.8) | | | $ | 1,627.7 | | | $ | 714.8 | | | $ | (235.9) | | | $ | 1,303.5 | | |
Balance at September 30, 2020 | | Balance at September 30, 2020 | 65.2 | | | $ | 0.7 | | | (10.9) | | | $ | (790.4) | | | $ | 1,631.8 | | | $ | 782.4 | | | $ | (191.6) | | | $ | 1,432.9 | |
Net earnings | Net earnings | — | | | — | | | — | | | — | | | — | | | 46.6 | | | — | | | 46.6 | | Net earnings | — | | | — | | | — | | | — | | | — | | | 17.7 | | | — | | | 17.7 | |
Foreign currency translation adjustments | Foreign currency translation adjustments | — | | | — | | | — | | | — | | | — | | | — | | | 8.1 | | | 8.1 | | Foreign currency translation adjustments | — | | | — | | | — | | | — | | | — | | | — | | | 33.7 | | | 33.7 | |
Pension and postretirement activity | Pension and postretirement activity | — | | | — | | | — | | | — | | | — | | | — | | | (1.8) | | | (1.8) | | Pension and postretirement activity | — | | | — | | | — | | | — | | | — | | | — | | | (2.0) | | | (2.0) | |
Deferred loss on hedging activity | Deferred loss on hedging activity | — | | | — | | | — | | | — | | | — | | | — | | | (1.5) | | | (1.5) | | Deferred loss on hedging activity | — | | | — | | | — | | | — | | | — | | | — | | | (1.8) | | | (1.8) | |
Dividends declared to common shareholders | | Dividends declared to common shareholders | — | | | — | | | — | | | — | | | — | | | (8.5) | | | — | | | (8.5) | |
Repurchase of shares | | Repurchase of shares | — | | | — | | | (0.3) | | | (9.2) | | | — | | | — | | | — | | | (9.2) | |
Activity under share plans | Activity under share plans | — | | | — | | | 0.1 | | | 11.7 | | | 1.6 | | | 0 | | | — | | | 13.3 | | Activity under share plans | — | | | — | | | 0.2 | | | 15.4 | | | (13.0) | | | — | | | — | | | 2.4 | |
Balance at June 30, 2020 | 65.2 | | | $ | 0.7 | | | (10.9) | | | $ | (792.1) | | | $ | 1,629.3 | | | $ | 761.4 | | | $ | (231.1) | | | $ | 1,368.2 | | |
Balance at December 31, 2020 | | Balance at December 31, 2020 | 65.2 | | | $ | 0.7 | | | (11.0) | | | $ | (784.2) | | | $ | 1,618.8 | | | $ | 791.6 | | | $ | (161.7) | | | $ | 1,465.2 | |
Net earnings | | Net earnings | — | | | — | | | — | | | — | | | — | | | 14.4 | | | — | | | 14.4 | |
Foreign currency translation adjustments | | Foreign currency translation adjustments | — | | | — | | | — | | | — | | | — | | | — | | | (19.8) | | | (19.8) | |
Pension and postretirement activity | | Pension and postretirement activity | — | | | — | | | — | | | — | | | — | | | — | | | 1.4 | | | 1.4 | |
Deferred gain on hedging activity | | Deferred gain on hedging activity | — | | | — | | | — | | | — | | | — | | | — | | | 5.1 | | | 5.1 | |
Dividends declared to common shareholders | | Dividends declared to common shareholders | — | | | — | | | — | | | — | | | — | | | (8.3) | | | — | | | (8.3) | |
Activity under share plans | | Activity under share plans | — | | | — | | | 0.1 | | | 2.9 | | | 3.2 | | | — | | | — | | | 6.1 | |
Balance at March 31, 2021 | | Balance at March 31, 2021 | 65.2 | | | $ | 0.7 | | | (10.9) | | | $ | (781.3) | | | $ | 1,622.0 | | | $ | 797.7 | | | $ | (175.0) | | | $ | 1,464.1 | |
Net earnings | | Net earnings | — | | | — | | | — | | | — | | | — | | | 40.8 | | | — | | | 40.8 | |
Foreign currency translation adjustments | | Foreign currency translation adjustments | — | | | — | | | — | | | — | | | — | | | — | | | 9.1 | | | 9.1 | |
Pension and postretirement activity | | Pension and postretirement activity | — | | | — | | | — | | | — | | | — | | | — | | | (0.7) | | | (0.7) | |
Deferred gain on hedging activity | | Deferred gain on hedging activity | — | | | — | | | — | | | — | | | — | | | — | | | 0.2 | | | 0.2 | |
Dividends declared | | Dividends declared | — | | | — | | | — | | | — | | | — | | | (8.6) | | | — | | | (8.6) | |
| Activity under share plans | | Activity under share plans | — | | | — | | | — | | | 4.0 | | | 2.7 | | | — | | | — | | | 6.7 | |
Balance at June 30, 2021 | | Balance at June 30, 2021 | 65.2 | | | $ | 0.7 | | | (10.9) | | | $ | (777.3) | | | $ | 1,624.7 | | | $ | 829.9 | | | $ | (166.4) | | | $ | 1,511.6 | |
See accompanying Notes to Condensed Consolidated Financial Statements.
EDGEWELL PERSONAL CARE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, in millions, except per share data)
Note 1 - Background and Basis of Presentation
Background
Edgewell Personal Care Company and its subsidiaries (collectively, “Edgewell” or the “Company”) is one of the world’s largest manufacturers and marketers of personal care products in the wet shave, sun and skin care, and feminine care categories. Edgewell operates in more than 20 countries with extensive retail reach acrossand has a global footprint in more than 50 markets.countries.
The Company conducts its business in the following three segments:
•Wet Shave consists of products sold under the Schick®, Wilkinson Sword®, Edge®Edge, Skintimate®, Skintimate®Billie®, Shave Guard and Personna® brands, as well as non-branded products. The Company’s wet shave products include razor handles and refillable blades, disposable shave products, and shaving gels and creams.
•Sun and Skin Care consists of Banana Boat® and Hawaiian Tropic® sun care products, Jack Black®, Bulldog® and Cremo® men’s grooming products, and Wet Ones® products.
•Feminine Care includes tampons, pads, and liners sold under the Playtex Gentle Glide® and Sport®, Stayfree®, Carefree®, and o.b.® brands.
Through December 2019, the Company also conducted business in its All Other segment which included infant care products, such as bottles, cups, and pacifiers, sold under the Playtex®, OrthoPro® and Binky® brand names, as well as the Diaper Genie® and Litter Genie® disposal systems. The Company completed the sale of the Infant and Pet Care business in December 2019.
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of the Company and its controlled subsidiaries and have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”), under the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). The preparation of the unaudited Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Actual results may differ materially from those estimates. All intercompany balances and transactions have been eliminated in consolidation and, in the opinion of management, all normal recurring adjustments considered necessary for a fair presentationstatement have been included in the interim results reported. The fiscal year-end balance sheet data was derived from audited consolidated financial statements, but do not include all of the annual disclosures required by GAAP; accordingly, these unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Company’s audited annual consolidated financial statements included in its Annual Report on Form 10-K filed with the SEC on November 20, 2020.19, 2021.
Acquisition of Billie, Inc. On November 29, 2021, the Company completed the acquisition of Billie, Inc. (“Billie”) (the “Acquisition”), a leading U.S. based consumer brand company that offers a broad portfolio of personal care products for women. The results of Billie for the post-acquisition period are included within the Company’s results since the acquisition date. For more information on the Acquisition, see Note 2 of Notes to Condensed Consolidated Financial Statements.
Recently Adopted Accounting Pronouncements.
In June 2016,December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13 intended2019-12, which eliminates certain exceptions related to improve financial reporting by requiring timelier recordingthe approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period when interim loss exceeds anticipated loss for the year, and the recognition of credit losses on loansdeferred tax liabilities for outside basis differences related to changes in ownership of equity method investments and other financial instruments held by financial institutionsforeign subsidiaries. The guidance also simplifies aspects of accounting for franchise taxes and other organizations. The new guidance applies to all financial instruments, including trade receivables,enacted changes in tax laws or rates and requiresclarifies the measurementaccounting for transactions that result in a step-up in the tax basis of all expected credit losses for financial assets held at a reporting date to be based on historical experience, current conditions and reasonable and supportable forecasts. Previous guidance did not include forward-looking information.goodwill. The Company adopted thethis standard effective as of October 1, 2020. 2021. There was no cumulative effect adjustment recorded to retained earnings as the amount was not material, and the effects of this standard on our financial position, results of operations and cash flows were not material.
Statement of Cash Flows Presentation
The adoptionnet presentation of borrowings and repayments under the guidance didCompany's U.S revolving credit facility in the Condensed Consolidated Statement of Cash Flows for the three months ended December 31, 2021 has been corrected in order to reflect borrowings and repayments on a gross basis, resulting in $93.0 of repayments presented gross that were previously netted against borrowings. Net cash from financing activities reported in the Condensed Consolidated Statement of Cash Flows for the three months ended December 31, 2021 was not have aimpacted and the Company has concluded that this correction is not material impact on the Company’sto its financial statements. The Company evaluates the creditworthiness of customers when negotiating contracts and, as trade receivables are short term in nature, the timing between recognition of a credit loss under existing guidance and the new guidance was not materially different for the Company.
In August 2018, the FASB issued ASU 2018-15, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The amendments in this standard require an entity that is the customer in a hosting arrangement to follow the guidance on internal-use software to determine which implementation costs to capitalize and which costs to expense. The standard also requires a customer to expense the capitalized implementation costs of a hosting arrangement over the term of the hosting arrangement. The new guidance requires an entity to present the expense related to the capitalized implementation costs in the same line item in the statement of income as the fees associated with the hosting element of the arrangement and classify payments for capitalized implementation costs in the statement of cash flows in the same manner as payments made for fees associated with the hosting element. The entity is also required to present the capitalized implementation costs in the statement of financial position in the same line item that a prepayment for the fees of the associated hosting arrangement would be presented. The Company adopted the standard effective as of October 1, 2020 on a prospective basis. The Company notes the guidance has not had a material impact on its financial statements through the third quarter of fiscal 2021.
Note 2 - Business Combinations and Divestitures
Cremo Holding Company, LLCBillie Inc.
On September 2, 2020,November 29, 2021 (the “Acquisition Date”), the Company completed the acquisition (“Acquisition”)Acquisition for cash consideration of Cremo Holding Company, LLC (“Cremo”).$309.4, net of cash acquired. As a result of the Acquisition, Billie became a wholly owned subsidiary of the Company. The Company accounted for the Acquisition utilizing the acquisition method of accounting, which requires assets and liabilities to be recognized based on estimates of their acquisition date fair values. The determination of the values of the acquired assets and assumed liabilities, including goodwill, and other intangible assets and deferred taxes, requires significant judgement. The purchase price allocation remains preliminary, as certain information is not yet available. This includes, but is not limited to, the finalization of the fair value of certain assets and liabilities, including the completion of intangible asset valuations. Additionally, tax returns and analyses required to calculate the underlying tax basis of Billie’s assets, liabilities and net operating losses have not been finalized. We have calculated fair valuesexpect to complete the purchase price allocation during the 12-month period following the Acquisition Date, during which time the value of the assets and liabilities acquired from Cremo including goodwill and intangible assets and working capital. The Company completed the final fair value determination of the Acquisition in the first quarter of fiscal year 2021.may be revised as appropriate.
The Company used variations of the income approach in determining the fair value of intangible assets acquired in the Acquisition. Specifically, we utilized the multi-period excess earnings method to determine the fair value of the definite lived customer relationships acquired and the relief from royalty method to determine the fair value of the definite lived trade name and proprietary technology acquired. Our determination of the fair value of the intangible assets acquired involved the use of significant estimates and assumptions related to revenue growth rates, discount rates, customer attrition rates, and royalty rates. Edgewell believes that the fair value assigned to the assets acquired and liabilities assumed are based on reasonable assumptions and estimates that marketplace participants would use.
The Company’sfollowing table provides the preliminary allocation of the purchase price allocation included netrelated to the Acquisition based upon the fair value of assets of $234.6 and consisted of working capital and other net assets of $11.5 (including cash of $0.7), other intangible assets of $95.1liabilities assumed:
| | | | | |
Current assets | $ | 17.0 | |
Goodwill | 181.2 |
Intangible assets | 136.0 |
Other assets, including property, plant and equipment, net | 3.2 |
Current liabilities | (6.9) | |
Deferred tax liabilities | (21.1) | |
| $ | 309.4 | |
The acquired goodwill of $128.0, representingrepresented the value of expansion into new markets and channels of trade. The acquired goodwilltrade and is not deductible for tax purposes. The intangible assets acquired consisted primarily of the CremoBillie trade name and customer relationships and product formulations with a weighted average useful life of 1719 years. All assets are included in the Company’s Sun and Skin CareWet Shave segment.
The Company noted that the netBillie contributed Net sales and net earningsa Loss before income taxes totaling $67.6 and $4.8, respectively, for the post-acquisition period ending June 30, 2022 in the Condensed Consolidated Statements of Cremo from the beginningEarnings and Comprehensive Income. The Loss before income taxes was driven primarily by amortization expense of fiscal 2020 through the date of the closing of the Acquisition were not material relative to the total net sales and net earnings of the Company during fiscal 2020, and thus pro-forma results for Cremo were not disclosed in accordance with Accounting Standards Codification 805.acquired intangible assets. Acquisition and integration costs related to CremoBillie totaling $1.3$0.9 and $3.3 for the three and nine months ended June 30, 2021, respectively,$7.2 were included in Selling, general and administrative expense (“SG&A”) infor the Condensed Consolidated Statements of Earningsthree and Comprehensive Income. Additionally,nine months ended June 30, 2022, respectively, and acquisition costs of $1.3$0.8 were included in Cost of products sold for the nine months ended June 30, 2021.
Sale of Infant and Pet Care Business
On December 17, 2019, the Company completed the sale of its Infant and Pet Care business included2022 in the All Other segmentCondensed Consolidated Statements of Earnings and Comprehensive Income.
The following summarizes the Company's unaudited pro forma consolidated results of operations for $122.5, which included consideration for providing services to the purchaser for up to one year under a transition services agreement. The Company received proceeds of $115.0, which included the consideration for providing support under the transition services agreement,three and the remaining sales price receivable includes $5.0 reported in current assets as ofnine months ended June 30, 2021. Total assets included in2022 and June 30, 2021, as though the sale were comprised of $18.8 of inventory, $3.6 of property, plant and equipment, and $77.8 of goodwill and intangible assets. The sale of the Infant and Pet Care business resulted in a gain of $4.1 in the Company’s fiscal 2020 Consolidated Statement of Earnings. The gainAcquisition occurred on the sale was net of expenses incurred to facilitate the closing of the transaction and in support of the transition services agreementOctober 1, 2020:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Nine Months Ended June 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Pro forma net sales | $ | 623.8 | | | $ | 591.4 | | | $ | 1,644.8 | | | $ | 1,594.9 | |
Pro forma net earnings | 31.6 | | 34.9 | | 70.3 | | 53.3 |
The unaudited pro forma consolidated results of operations were adjusted by pre-tax amortization expense of $1.3 for the nine months ended June 30, 2022, compared to $2.2 and $6.5 for the three and nine months ended June 30, 2021, respectively. Additionally, pro forma earnings for the three and nine months ended June 30, 2022 exclude $0.9 and $8.0 of pre-tax acquisition costs, respectively, which were included in the pro forma earnings for the three and nine months ended June 30, 2021, respectively. The pro forma earnings were also adjusted to reflect the capital structure as of the Acquisition Date, and all pro forma adjustments have been included with related tax effects. The unaudited pro forma consolidated results of operations are not necessarily indicative of the results obtained had the Acquisition occurred on October 1, 2020, or of those results that may be obtained in the future. Amounts do not reflect any anticipated cost savings or cross-selling opportunities expected to result from the Acquisition.
Note 3 - Restructuring Charges
Project FuelOperating Model Redesign
Project FuelIn fiscal 2022, the Company is an enterprise-wide transformational initiative launchedtaking specific actions to strengthen its operating model, simplify the organization and improve manufacturing and supply chain efficiency and productivity. As a result of these actions, we expect to incur one-time restructuring charges of approximately $15 in the second quarter of fiscal 2018 to address all aspects of our business and cost structure, simplifying and transforming our organization, structure and key processes. Project Fuel is facilitating further re-investment in our growth strategy while enabling us to achieve our desired future state operations.
2022. The Company does not include Project Fuelincurred the following restructuring costs in the results of its reportable segments. However, the estimated impact of allocating such charges to segment results for the three and nine months ended June 30, 20212022:
| | | | | | | | | | | |
| Three Months Ended June 30, 2022 | | Nine Months Ended June 30, 2022 |
Severance and related benefit costs | $ | 1.0 | | | $ | 4.0 | |
Asset write-off and accelerated depreciation | 0.3 | | | 0.4 | |
Consulting, project implementation and management, and other exit costs | 2.6 | | | 5.4 | |
Total restructuring | $ | 3.9 | | | $ | 9.8 | |
Pre-tax SG&A of $0.4 and
2020,$0.6 for the three and nine months ended June 30, 2022, respectively,
would have been as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2021 |
| Wet Shave | | Sun and Skin Care | | Feminine Care | | Corporate | | Total |
Project Fuel | | | | | | | | | |
Severance and related benefit costs | $ | 0.7 | | | $ | 0 | | | $ | 0 | | | $ | 0.6 | | | 1.3 | |
Asset impairment and accelerated depreciation | 0.2 | | | 0 | | | 0 | | | 0 | | | 0.2 | |
Consulting, project implementation and management, and other exit costs | 0.3 | | | 0 | | | 0.3 | | | 6.1 | | | 6.7 | |
Total restructuring | $ | 1.2 | | | $ | 0 | | | $ | 0.3 | | | $ | 6.7 | | | $ | 8.2 | |
associated with certain information technology enablement expenses and compensation expenses for restructuring programs were included in Consulting, project implementation and management, and other exit costs. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended June 30, 2021 |
| Wet Shave | | Sun and Skin Care | | Feminine Care | | Corporate | | Total |
Project Fuel | | | | | | | | | |
Severance and related benefit costs | $ | 1.6 | | | $ | 0.1 | | | $ | 0 | | | $ | 3.9 | | | $ | 5.6 | |
Asset impairment and accelerated depreciation | 0.4 | | | 0 | | | 0 | | | 0 | | | 0.4 | |
Consulting, project implementation and management, and other exit costs | 1.1 | | | 0.1 | | | 0.3 | | | 10.6 | | | 12.1 | |
Total restructuring | $ | 3.1 | | | $ | 0.2 | | | $ | 0.3 | | | $ | 14.5 | | | $ | 18.1 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2020 |
| Wet Shave | | Sun and Skin Care | | Feminine Care | | | | Corporate | | Total |
Project Fuel | | | | | | | | | | | |
Severance and related benefit costs | $ | 0 | | | $ | 0.2 | | | $ | 0 | | | | | $ | 5.0 | | | 5.2 | |
Asset impairment and accelerated depreciation | 0.6 | | | 0 | | | 0 | | | | | 0 | | | 0.6 | |
Consulting, project implementation and management, and other exit costs | 1.9 | | | 0.2 | | | 0.1 | | | | | 2.4 | | | 4.6 | |
Total restructuring | $ | 2.5 | | | $ | 0.4 | | | $ | 0.1 | | | | | $ | 7.4 | | | $ | 10.4 | |
Project Fuel | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended June 30, 2020 |
| Wet Shave | | Sun and Skin Care | | Feminine Care | | | | Corporate | | Total |
Project Fuel | | | | | | | | | | | |
Severance and related benefit costs | $ | 0.2 | | | $ | 0.2 | | | $ | 0 | | | | | $ | 6.8 | | | $ | 7.2 | |
Asset impairment and accelerated depreciation | 1.6 | | | 0 | | | 0 | | | | | 0 | | | 1.6 | |
Consulting, project implementation and management, and other exit costs | 7.7 | | | 0.4 | | | 0.3 | | | | | 13.6 | | | 22.0 | |
Total restructuring | $ | 9.5 | | | $ | 0.6 | | | $ | 0.3 | | | | | $ | 20.4 | | | $ | 30.8 | |
Project Fuel was an enterprise-wide transformational initiative launched in fiscal 2018 to improve operational performance and reshape the business’ cost structure. Project Fuel was completed on September 30, 2021.The Company incurred the following restructuring charges for the three and nine months ended June 30, 2021:
| | | | | | | | | | | |
| Three Months Ended June 30, 2021 | | Nine Months Ended June 30, 2021 |
Severance and related benefit costs | $ | 1.3 | | | 5.6 | |
Asset write-off and accelerated depreciation | 0.2 | | | 0.4 | |
Consulting, project implementation and management, and other exit costs | 6.7 | | | 12.1 | |
Total restructuring | $ | 8.2 | | | $ | 18.1 | |
Pre-tax SG&A of $2.8 and $6.2 for the three and nine months ended June 30, 2021, respectively, and $2.3 and $10.0 for the three and nine months ended June 30, 2020, respectively, associated with certain information technology enablement expenses and compensation expenses related to Project Fuel were included in Consulting, project implementation and management, and other exit costs. Pre-tax Cost of products sold of $0.2 and $0.3 for the three and nine months ended June 30, 2021, respectively,
and $0.1 and $0.2 for the three and nine months ended June 30, 2020, respectively, related to inventory write-offs associated with Project Fuel, were included in Asset impairment and accelerated depreciation.
The following table summarizes the restructuring activities and related accrual (excluding certain obsolescence charges related tofor the restructuring) for fiscal 2021:nine months ended June 30, 2022: | | | Utilized | | | | Utilized | |
| | October 1, 2020 | | Charge to Income | | Other (1) | | Cash | | Non-Cash | | June 30, 2021 | | October 1, 2021 | | Charge to Income | | | Cash | | Non-Cash | | June 30, 2022 |
Restructuring | | | | | | | | | | | | |
Severance and related benefit costs | Severance and related benefit costs | $ | 4.3 | | | $ | 5.6 | | | $ | 0.1 | | | $ | (9.6) | | | $ | 0 | | | $ | 0.4 | | Severance and related benefit costs | $ | 1.9 | | | $ | 4.0 | | | | $ | (4.9) | | | $ | — | | | $ | 1.0 | |
Asset impairment and accelerated depreciation | 0 | | | 0.4 | | | 0 | | | 0 | | | (0.4) | | | 0 | | |
Asset write-off and accelerated depreciation | | Asset write-off and accelerated depreciation | — | | | 0.4 | | | | — | | | (0.4) | | | — | |
Consulting, project implementation and management, and other exit costs | Consulting, project implementation and management, and other exit costs | 1.1 | | | 12.1 | | | 0 | | | (9.4) | | | 0 | | | 3.8 | | Consulting, project implementation and management, and other exit costs | 3.6 | | | 5.4 | | | | (8.4) | | | — | | | 0.6 | |
Total restructuring | Total restructuring | $ | 5.4 | | | $ | 18.1 | | | $ | 0.1 | | | $ | (19.0) | | | $ | (0.4) | | | $ | 4.2 | | Total restructuring | $ | 5.5 | | | $ | 9.8 | | | | $ | (13.3) | | | $ | (0.4) | | | $ | 1.6 | |
(1)Includes the impact of currency translation.
Note 4 - Income Taxes
For the three and nine months ended June 30, 2022, the Company had income tax expense of $5.8 and $14.7, respectively, on Earnings before income taxes of $36.3 and $79.6, respectively. The effective tax rate for the three and nine months ended June 30, 2022 was 16.1% and 18.5%, respectively. The difference between the federal statutory rate and the effective rate is primarily due to a favorable mix of earnings in low tax jurisdictions and the favorable impact of a change in the Company’s prior estimates.
For the three and nine months ended June 30, 2021, the Company had income tax expense of $13.1 and $25.7, respectively, on Earnings before income taxes of $53.9 and $98.6, respectively. The effective tax rate for the three and nine months ended June 30, 2021 was 24.2% and 26.1%, respectively. The difference between the federal statutory rate and the effective rate for the three and nine months ended June 30, 2021 is primarily due to the unfavorable mix of earnings in higher tax rate jurisdictions as well as unfavorable global intangible low-tax income and Internal Revenue Service Code Section 162(m) permanent adjustments.
For the three and nine months ended June 30, 2020, the Company had income tax expense of $0.6 and $16.5, respectively, on Earnings before income taxes of $5.3 and $63.1, respectively. The effective tax rate for the three and nine months ended June 30, 2020 was 11.9% and 26.1%, respectively. The difference between the federal statutory rate and the effective rate for the three months ended June 30, 2020 was primarily due to the favorable mix of earnings in lower tax rate jurisdictions. The difference between the federal statutory rate and the effective rate for the nine months ended June 30, 2020 was primarily due to the unfavorable impact of the sale of the Infant and Pet Care business.
Note 5 - Earnings per Share
Basic earnings per share is based on the weighted-average number of common shares outstanding during the period. Diluted earnings per share is based on the number of shares used for the basic earnings per share calculation, adjusted for the dilutive effect of share options and restricted share equivalent (“RSE”) and performance restricted share equivalent (“PRSE”) awards.
The following is the reconciliation between the number of weighted-average shares used in the basic and diluted earnings per share calculation: | | | Three Months Ended June 30, | | Nine Months Ended June 30, | | Three Months Ended June 30, | | Nine Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
Basic weighted-average shares outstanding | Basic weighted-average shares outstanding | 54.4 | | | 54.3 | | | 54.4 | | | 54.3 | | Basic weighted-average shares outstanding | 52.5 | | | 54.4 | | | 53.5 | | | 54.4 | |
Effect of dilutive securities: | Effect of dilutive securities: | | | Effect of dilutive securities: | | |
RSE awards | 1.0 | | | 0.3 | | | 0.7 | | | 0.2 | | |
RSE and PRSE awards | | RSE and PRSE awards | 0.6 | | | 1.0 | | | 0.6 | | | 0.7 | |
Total dilutive securities | Total dilutive securities | 1.0 | | | 0.3 | | | 0.7 | | | 0.2 | | Total dilutive securities | 0.6 | | | 1.0 | | | 0.6 | | | 0.7 | |
Diluted weighted-average shares outstanding | Diluted weighted-average shares outstanding | 55.4 | | | 54.6 | | | 55.1 | | | 54.5 | | Diluted weighted-average shares outstanding | 53.1 | | | 55.4 | | | 54.1 | | | 55.1 | |
For the three and nine months ended June 30, 2022, the calculation of diluted weighted-average shares outstanding excludes 1.0 of share options. For the three and nine months ended June 30, 2022 the calculation excludes 0.5 and 0.3, respectively, of RSE and PRSE awards because the effect of including these awards was anti-dilutive. For the three and nine months ended June 30, 2021, the calculation of diluted weighted-average shares outstanding excludes 0.9 of share options because the effect of including these awards was anti-dilutive. For the three and nine months ended June 30, 2020, the calculation of diluted weighted-average shares outstanding excludes 0.7 of share options and 0.1 of RSE awards because the effect of including these awards was anti-dilutive.options.
Note 6 - Goodwill and Intangible Assets
The following table sets forth goodwill by segment: | | | | | | | | | | | | | | | | | | | | | | | |
| Wet Shave | | Sun and Skin Care | | Feminine Care | | Total |
Gross balance at October 1, 2020 | $ | 967.2 | | | $ | 356.8 | | | $ | 206.7 | | | $ | 1,530.7 | |
Accumulated goodwill impairment | (369.0) | | | (2.0) | | | 0 | | | (371.0) | |
Net balance at October 1, 2020 | $ | 598.2 | | | $ | 354.8 | | | $ | 206.7 | | | $ | 1,159.7 | |
| | | | | | | |
Changes in the nine-month period ended June 30, 2021 | | | | | | | |
Cremo acquisition measurement period adjustment | 0 | | | 0.3 | | | 0 | | | 0.3 | |
Cumulative translation adjustment | 2.9 | | | 1.0 | | | 3.0 | | | 6.9 | |
| | | | | | | |
Gross balance at June 30, 2021 | $ | 970.1 | | | $ | 358.1 | | | $ | 209.7 | | | $ | 1,537.9 | |
Accumulated goodwill impairment | (369.0) | | | (2.0) | | | 0 | | | (371.0) | |
Net balance at June 30, 2021 | $ | 601.1 | | | $ | 356.1 | | | $ | 209.7 | | | $ | 1,166.9 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Wet Shave | | Sun and Skin Care | | Feminine Care | | Total |
Gross balance at October 1, 2021 | $ | 967.5 | | | $ | 357.6 | | | $ | 208.7 | | | $ | 1,533.8 | |
Accumulated goodwill impairment | (369.0) | | | (2.0) | | | — | | | (371.0) | |
Net balance at October 1, 2021 | $ | 598.5 | | | $ | 355.6 | | | $ | 208.7 | | | $ | 1,162.8 | |
| | | | | | | |
Changes in the nine-month period ended June 30, 2022 | | | | | | | |
Billie acquisition | 181.2 | | | — | | | — | | | 181.2 | |
Cumulative translation adjustment | (9.3) | | | (1.8) | | | (0.6) | | | (11.7) | |
| | | | | | | |
Gross balance at June 30, 2022 | $ | 1,139.4 | | | $ | 355.8 | | | $ | 208.1 | | | $ | 1,703.3 | |
Accumulated goodwill impairment | (369.0) | | | (2.0) | | | — | | | (371.0) | |
Net balance at June 30, 2022 | $ | 770.4 | | | $ | 353.8 | | | $ | 208.1 | | | $ | 1,332.3 | |
The following table sets forth definite-lived intangible assets by class: | | | June 30, 2021 | | September 30, 2020 | | June 30, 2022 | | September 30, 2021 |
| | Gross Carrying Amount | | Accumulated Amortization | | Net | | Gross Carrying Amount | | Accumulated Amortization | | Net | | Carrying Amount | | Accumulated Amortization | | Net | | Carrying Amount | | Accumulated Amortization | | Net |
Indefinite lived | | Indefinite lived | | | | | | | | | | | |
Trade names and brands | | Trade names and brands | $ | 592.3 | | | $ | — | | | $ | 592.3 | | | $ | 600.8 | | | $ | — | | | $ | 600.8 | |
| Amortizable | | Amortizable | |
Trade names and brands | Trade names and brands | $ | 256.3 | | | $ | 54.7 | | | $ | 201.6 | | | $ | 256.2 | | | $ | 45.4 | | | $ | 210.8 | | Trade names and brands | $ | 339.6 | | | $ | 68.5 | | | $ | 271.1 | | | $ | 256.2 | | | $ | 57.7 | | | $ | 198.5 | |
Technology and patents | Technology and patents | 79.3 | | | 75.9 | | | 3.4 | | | 79.1 | | | 75.3 | | | 3.8 | | Technology and patents | 78.3 | | | 75.4 | | | 2.9 | | | 79.1 | | | 75.8 | | | 3.3 | |
Customer related and other | Customer related and other | 222.3 | | | 115.8 | | | 106.5 | | | 219.9 | | | 107.8 | | | 112.1 | | Customer related and other | 269.8 | | | 125.4 | | | 144.4 | | | 221.2 | | | 117.4 | | | 103.8 | |
Total amortizable intangible assets | Total amortizable intangible assets | $ | 557.9 | | | $ | 246.4 | | | $ | 311.5 | | | $ | 555.2 | | | $ | 228.5 | | | $ | 326.7 | | Total amortizable intangible assets | $ | 687.7 | | | $ | 269.3 | | | $ | 418.4 | | | $ | 556.5 | | | $ | 250.9 | | | $ | 305.6 | |
Amortization expense was $7.8 and $21.8 for the three and nine months ended June 30, 2022, respectively, and $5.5 and $16.6 for the three and nine months ended June 30, 2021, respectively, and $4.2 and $12.7 for the three and nine months ended June 30, 2020, respectively. Estimated amortization expense for amortizable intangible assets for the remainder of fiscal 20212022 and for fiscal 2022, 2023, 2024, 2025, 2026 and 20262027 is $5.5, $22.1, $22.0, $21.9, $21.9$7.7, $30.8, $30.7, $30.7, $30.4 and $21.7,$30.4, respectively, and $196.4$257.7 thereafter.
The Company had indefinite-lived intangible assets of $602.9 ($183.9 in Wet Shave, $389.1 in Sun and Skin Care, and $29.9 in Feminine Care) at June 30, 2021, an increase of $1.5 from September 30, 2020, which was the result of foreign currency fluctuations. The Company had indefinite-lived trade names and brands of $601.4 ($183.1 in Wet Shave, $388.4 in Sun and Skin Care, and $29.9 in Feminine Care) at September 30, 2020.
Goodwill and intangible assets deemed to have an indefinite life are not amortized but are instead reviewed annually for impairment of value or when indicators of a potential impairment are present. The Company’s annual impairment testing date is July 1. The Company continuously monitors events which could trigger anAn interim impairment analysis such as changing business conditionsmay indicate that carrying amounts of goodwill and environmental factors, including the impact of the ongoing novel coronavirus 2019 (“COVID-19”) pandemic.other intangible assets require adjustment or that remaining useful lives should be revised. The Company determined there was no triggering event requiring an interim impairment analysis during the nine months ended June 30, 2021. The qualitative analysis performed by the Company concluded that it was more likely than not that the goodwill and intangible assets had fair values greater than the carrying values. However, the unknown duration and continuing severity of COVID-19 may result in future impairment charges as changes in consumer habits could have an additional impact on the results of the Company’s operations. This could result in changes to the assumptions utilized in the annual impairment analysis to determine the estimated fair value of the Company’s goodwill and indefinite-lived intangible assets, including long-term growth rates and discount rates.2022.
Note 7 - Supplemental Balance Sheet Information | | | June 30, 2021 | | September 30, 2020 | | June 30, 2022 | | September 30, 2021 |
Inventories | Inventories | | | | Inventories | | | |
Raw materials and supplies | Raw materials and supplies | $ | 56.6 | | | $ | 58.5 | | Raw materials and supplies | $ | 68.3 | | | $ | 61.3 | |
Work in process | Work in process | 79.5 | | | 71.5 | | Work in process | 93.9 | | | 83.4 | |
Finished products | Finished products | 223.1 | | | 184.1 | | Finished products | 251.9 | | | 201.0 | |
Total inventories | Total inventories | $ | 359.2 | | | $ | 314.1 | | Total inventories | $ | 414.1 | | | $ | 345.7 | |
Other Current Assets | Other Current Assets | | | | Other Current Assets | | | |
Miscellaneous receivables | Miscellaneous receivables | $ | 28.9 | | | $ | 23.3 | | Miscellaneous receivables | $ | 45.4 | | | $ | 30.3 | |
Inventory returns receivable | Inventory returns receivable | 1.0 | | | 1.0 | | Inventory returns receivable | 1.4 | | | 0.9 | |
Prepaid expenses | Prepaid expenses | 72.3 | | | 64.8 | | Prepaid expenses | 73.8 | | | 67.3 | |
Value added tax collectible from customers | Value added tax collectible from customers | 20.1 | | | 20.4 | | Value added tax collectible from customers | 23.5 | | | 19.6 | |
Income taxes receivable | Income taxes receivable | 22.0 | | | 26.3 | | Income taxes receivable | 22.4 | | | 29.1 | |
Other | Other | 11.4 | | | 10.2 | | Other | 16.3 | | | 12.9 | |
Total other current assets | Total other current assets | $ | 155.7 | | | $ | 146.0 | | Total other current assets | $ | 182.8 | | | $ | 160.1 | |
Property, Plant and Equipment | Property, Plant and Equipment | | | | Property, Plant and Equipment | | | |
Land | Land | $ | 19.3 | | | $ | 19.3 | | Land | $ | 18.4 | | | $ | 19.2 | |
Buildings | Buildings | 144.0 | | | 142.2 | | Buildings | 141.5 | | | 144.5 | |
Machinery and equipment | Machinery and equipment | 1,042.4 | | | 1,014.2 | | Machinery and equipment | 1,043.0 | | | 1,049.0 | |
Capitalized software costs | Capitalized software costs | 55.4 | | | 53.6 | | Capitalized software costs | 56.4 | | | 57.0 | |
Construction in progress | Construction in progress | 38.4 | | | 32.7 | | Construction in progress | 55.8 | | | 44.0 | |
Total gross property, plant and equipment | Total gross property, plant and equipment | 1,299.5 | | | 1,262.0 | | Total gross property, plant and equipment | 1,315.1 | | | 1,313.7 | |
Accumulated depreciation and amortization | Accumulated depreciation and amortization | (941.4) | | | (891.1) | | Accumulated depreciation and amortization | (967.3) | | | (951.1) | |
Total property, plant and equipment, net | Total property, plant and equipment, net | $ | 358.1 | | | $ | 370.9 | | Total property, plant and equipment, net | $ | 347.8 | | | $ | 362.6 | |
Other Current Liabilities | Other Current Liabilities | | | | Other Current Liabilities | | | |
Accrued advertising, sales promotion and allowances | Accrued advertising, sales promotion and allowances | $ | 63.0 | | | $ | 49.4 | | Accrued advertising, sales promotion and allowances | $ | 47.9 | | | $ | 33.8 | |
Accrued trade allowances | Accrued trade allowances | 29.5 | | | 30.8 | | Accrued trade allowances | 32.4 | | | 34.0 | |
Accrued salaries, vacations and incentive compensation | Accrued salaries, vacations and incentive compensation | 50.7 | | | 62.6 | | Accrued salaries, vacations and incentive compensation | 46.7 | | | 66.4 | |
Income taxes payable | Income taxes payable | 12.5 | | | 13.4 | | Income taxes payable | 11.9 | | | 9.8 | |
Returns reserve | Returns reserve | 45.9 | | | 44.8 | | Returns reserve | 54.8 | | | 52.7 | |
Restructuring reserve | Restructuring reserve | 4.2 | | | 5.4 | | Restructuring reserve | 1.6 | | | 5.5 | |
Value added tax payable | Value added tax payable | 9.3 | | | 6.8 | | Value added tax payable | 8.8 | | | 4.6 | |
Deferred compensation | Deferred compensation | 5.9 | | | 5.9 | | Deferred compensation | 4.6 | | | 5.9 | |
Short term lease obligation | Short term lease obligation | 10.7 | | | 9.1 | | Short term lease obligation | 10.4 | | | 11.0 | |
Customer advance payments | Customer advance payments | 3.4 | | | 1.4 | | Customer advance payments | 1.1 | | | 0.6 | |
Dividends payable | Dividends payable | 8.2 | | | 0 | | Dividends payable | 7.8 | | | 8.2 | |
Other | Other | 63.1 | | | 77.9 | | Other | 89.0 | | | 68.3 | |
Total other current liabilities | Total other current liabilities | $ | 306.4 | | | $ | 307.5 | | Total other current liabilities | $ | 317.0 | | | $ | 300.8 | |
Other Liabilities | Other Liabilities | | | | Other Liabilities | | | |
Pensions and other retirement benefits | Pensions and other retirement benefits | $ | 119.0 | | | $ | 121.0 | | Pensions and other retirement benefits | $ | 53.7 | | | $ | 55.4 | |
Deferred compensation | Deferred compensation | 22.6 | | | 28.2 | | Deferred compensation | 17.3 | | | 22.7 | |
Long term lease obligation | Long term lease obligation | 42.4 | | | 34.6 | | Long term lease obligation | 40.9 | | | 46.9 | |
Other non-current liabilities | Other non-current liabilities | 67.5 | | | 73.3 | | Other non-current liabilities | 61.5 | | | 65.3 | |
Total other liabilities | Total other liabilities | $ | 251.5 | | | $ | 257.1 | | Total other liabilities | $ | 173.4 | | | $ | 190.3 | |
Note 8 - Leases
A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment over a contracted period in exchange for payment. The Company evaluates if an arrangement is a lease at the effective date of the agreement. For operating leases entered into prior to October 1, 2019, the right of use (“ROU”) assets and operating lease liabilities are recognized on the balance sheet based on the present value of the remaining future minimum payments over the lease term from the implementation date. Certain leases include an option to either renew or terminate the lease. For purposes of calculating lease liabilities, these options are included within the lease term when it has become reasonably certain that the Company will exercise such options. Leases entered into subsequent to October 1, 2019 calculate the operating lease ROU asset and operating lease liabilities based on the present value of minimum payments over the lease term at the effective date of the lease.
The Company leases certain offices and manufacturing facilities, warehouses, employee vehicles and certain manufacturing related equipment.equipment and determines if an arrangement is or contains a lease at inception. Leases with an initial term of 12 monthsmay include options to extend or lessterminate the lease, and those options are not recorded on the Condensed Consolidated Balance Sheet.Sheet when it is reasonably certain that the Company will exercise one of those options. All recorded leases are classified as operating leases, and lease expense is recognized on a straight-line basis over the lease term.
The Company has elected to utilize the package Leases with an initial term of practical expedients which allows it to carryforward its historical lease classification, its assessment on whether a contract was or contains a lease, and its assessment of initial direct costs for any leases that existed prior to October 1, 2019. Additionally, the Company has elected as an accounting policy not to separate non-lease components from lease components and, instead, account for these components as a single lease component. The Company has made an accounting policy election not to recognize ROU assets and lease liabilities for leases that, as of October 1, 2019, are for 12 months or less. For leases that doless are not provide an implicit rate, the Company uses its secured incremental borrowing rate, basedrecorded on the information available for leases, including the lease term and interest rate environment in the country in which the lease exists, to calculate the present value of the future lease payments.Consolidated Balance Sheet.
A summary of the Company's lease information is as follows: | | | June 30, 2021 | | September 30, 2020 | | June 30, 2022 | | September 30, 2021 |
Assets | Assets | Classification | | | | Assets | Classification | | | |
Right of use assets | Right of use assets | Other assets | $ | 52.9 | | | $ | 43.5 | | Right of use assets | Other assets | $ | 51.0 | | | $ | 57.7 | |
| Liabilities | Liabilities | | Liabilities | |
Current lease liabilities | Current lease liabilities | Other current liabilities | $ | 10.7 | | | $ | 9.1 | | Current lease liabilities | Other current liabilities | $ | 10.4 | | | $ | 11.0 | |
Long-term lease liabilities | Long-term lease liabilities | Other liabilities | 42.4 | | | 34.6 | | Long-term lease liabilities | Other liabilities | 40.9 | | | 46.9 | |
Total lease liabilities | Total lease liabilities | | $ | 53.1 | | | $ | 43.7 | | Total lease liabilities | | $ | 51.3 | | | $ | 57.9 | |
| Other information | Other information | | Other information | |
Weighted-average remaining lease term (years) | Weighted-average remaining lease term (years) | | 10 | | 12 | Weighted-average remaining lease term (years) | | 10 | | 10 |
Weighted-average incremental borrowing rate | Weighted-average incremental borrowing rate | | 6.6 | % | | 7.2 | % | Weighted-average incremental borrowing rate | | 6.5 | % | | 6.3 | % |
| | | | | | | | | | | | | | | | | | | | | | | Three Months Ended June 30, | | Nine Months Ended June 30, |
| | Three Months Ended June 30, 2021 | | Three Months Ended June 30, 2020 | | Nine Months Ended June 30, 2021 | | Nine Months Ended June 30, 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
Statement of Earnings | Statement of Earnings | | | | | | | | Statement of Earnings | | | | | | | |
Lease cost (1) | Lease cost (1) | $ | 3.6 | | | $ | 3.3 | | | $ | 11.0 | | | $ | 10.4 | | Lease cost (1) | $ | 3.7 | | | $ | 3.6 | | | $ | 10.5 | | | $ | 11.0 | |
| Other information | Other information | | Other information | |
Leased assets obtained in exchange for new lease liabilities | Leased assets obtained in exchange for new lease liabilities | $ | 1.1 | | | $ | 0.5 | | | $ | 18.8 | | | $ | 1.1 | | Leased assets obtained in exchange for new lease liabilities | 1.0 | | | 1.1 | | | 3.9 | | | 18.8 | |
Cash paid for amounts included in the measurement of lease liabilities | Cash paid for amounts included in the measurement of lease liabilities | $ | 3.6 | | | $ | 3.4 | | | $ | 11.0 | | | $ | 10.4 | | Cash paid for amounts included in the measurement of lease liabilities | $ | 3.7 | | | $ | 3.6 | | | $ | 10.7 | | | $ | 11.0 | |
(1)Lease expense is included in Cost of products sold or SG&A expense based on the nature of the lease. Short-term lease expense is excluded from this amount and is not material.
The Company's future lease payments, including reasonably assured renewal options under lease agreements, are as follows: | Lease liability repayments | Lease liability repayments | June 30, 2021 | Lease liability repayments | June 30, 2022 |
Remainder of fiscal 2021 | $ | 3.3 | | |
2022 | 12.0 | | |
Remainder of fiscal 2022 | | Remainder of fiscal 2022 | $ | 4.4 | |
2023 | 2023 | 10.1 | | 2023 | 11.4 | |
2024 | 2024 | 8.0 | | 2024 | 9.2 | |
2025 | 2025 | 7.1 | | 2025 | 8.3 | |
2026 and thereafter | 39.2 | | |
2026 | | 2026 | 6.9 | |
2027 and thereafter | | 2027 and thereafter | 37.6 | |
Total future minimum lease commitments | Total future minimum lease commitments | 79.7 | | Total future minimum lease commitments | 77.8 | |
Less: Imputed interest | Less: Imputed interest | (26.6) | | Less: Imputed interest | (26.5) | |
Present value of lease liabilities | Present value of lease liabilities | $ | 53.1 | | Present value of lease liabilities | $ | 51.3 | |
Note 9 - Accounts Receivable Facility
The Company participates in a $150an uncommitted master accounts receivable purchase agreement withdated September 15, 2017 by and between the Company and MUFG Bank, Ltd, formerly known as The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch, as the purchaser (the “Accounts Receivable Facility”). Transfers under the Accounts Receivable Facility are accounted for as sales of receivables, resulting in the receivables being de-recognized from the Consolidated Balance Sheet. The purchaser assumes the credit risk at the time of sale and has the right at any time to assign, transfer, or participate any of its rights under the purchased receivables to another bank or financial institution. The purchase and sale of receivables under the Accounts Receivable Facility is intended to be an absolute and irrevocable transfer without recourse by the purchaser to the Company for the creditworthiness of any obligor. The Company continues to have collection and servicing responsibilities for the receivables sold and receives separate compensation for their servicing. The compensation received is considered acceptable servicing compensation and, as such, the Company does not recognize a servicing asset or liability.
On February 7, 2022, the Company entered into the Sixth Amendment to Master Accounts Receivable Purchase Agreement between Edgewell Personal Care, LLC and MUFG Bank, LTD., formerly known as The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch, which increased the maximum receivables sold amount under the Accounts Receivable Facility to $180.0 from $150.0 and amended the pricing index used to determine the purchase price for subject receivables from LIBOR to the Bloomberg Short Term Bank Yield Index (“BSBY”). The applicable margin that is added to the BSBY pricing index specific for each obligor was unchanged. Except as noted above, all other terms, conditions, obligations, covenants or agreements contained in the Accounts Receivable Facility are unmodified in all respects and continue in full force and effect.
As of June 30, 2021,2022, the discount rate used to determine the purchase price for the subject receivables isshall be based upon LIBORBSBY plus a margin applicable to the specified obligor.
Accounts receivables sold were $354.0 and $791.2 for the three and nine months ended June 30, 2022, respectively, and $293.9 and $634.2 for the three and nine months ended June 30, 2021, respectively, and $245.3 and $646.5 for the three and nine months ended June 30, 2020, respectively. The trade receivables sold that remained outstanding as of June 30, 20212022 and September 30, 20202021 were $136.1$156.0 and $77.0,$91.1, respectively. The net proceeds received were included in both Cash provided by operating activities and Cash provided by investing activities on the Condensed Consolidated Statements of Cash Flows. The difference between the carrying amount of the trade receivables sold and the sum of the cash received is recorded as a loss on sale of receivables in Other (income) expense, (income), net in the Condensed Consolidated Statements of Earnings and Comprehensive Income. The loss on sale of trade receivables was $0.6 and $1.1 for the three and nine months ended June 30, 2022, respectively, and the loss on sale of trade receivables was $0.2 and $0.6 for the three and nine months ended June 30, 2021, respectively, and the loss on sale of trade receivables was $0.2 and $1.1 for the three and nine months ended June 30, 2020, respectively.
Note 10 - Debt
The detail of long-term debt was as follows: | | | | | | | | | | | |
| June 30, 2021 | | September 30, 2020 |
Senior notes, fixed interest rate of 4.7%, due 2022 | $ | 0 | | | $ | 500.0 | |
Senior notes, fixed interest rate of 5.5%, due 2028 | 750.0 | | | 750.0 | |
Senior notes, fixed interest rate of 4.1%, due 2029 | 500.0 | | | 0 | |
U.S. revolving credit facility due 2025 | — | | | — | |
Total long-term debt, including current maturities | 1,250.0 | | | 1,250.0 | |
| | | |
Less unamortized debt issuance costs and discount (1) (2) | 16.4 | | | 12.1 | |
Total long-term debt | $ | 1,233.6 | | | $ | 1,237.9 | |
| | | | | | | | | | | |
| June 30, 2022 | | September 30, 2021 |
Senior notes, fixed interest rate of 5.500%, due 2028 | $ | 750.0 | | | $ | 750.0 | |
Senior notes, fixed interest rate of 4.125%, due 2029 | 500.0 | | | 500.0 | |
U.S. revolving credit facility (1) | 121.0 | | | — | |
Total long-term debt, including current maturities | 1,371.0 | | | 1,250.0 | |
| | | |
Less unamortized debt issuance costs and discount (2) | 14.1 | | | 15.8 | |
Total long-term debt | $ | 1,356.9 | | | $ | 1,234.2 | |
(1)The U.S. revolving credit facility matures in 2025.
(2)At June 30, 2022, the balance for the Senior Notes due 2028 and the Senior Notes due 2029 are reflected net of debt issuance costs of $8.7 and $5.4, respectively. At September 30, 2021, the balance for the Senior Notes due 2028 and the Senior Notes due 2029 are reflected net of debt issuance costs of $10.2$9.8 and $6.2,$6.0, respectively. At September 30, 2020, the balance for the Senior Notes due 2022 and the Senior Notes due 2028 are reflected net of debt issuance costs of $0.6 and $11.3, respectively.
(2)At September 30, 2020, the balance for the Senior Notes due 2022 was reflected net of discount of $0.2.
The Company had outstanding variable-rate international borrowings, recorded in Notes payable, of $24.8$18.9 and $21.1$26.5 as of June 30, 20212022 and September 30, 2020,2021, respectively.
Issuance of Senior Notes due 2029 and Redemption of Senior Notes due 2022
On March 8, 2021, the Company entered into a new unsecured indenture agreement for 4.125% Senior Notes in the amount of $500 due April 1, 2029 (“2029 Notes”). The Company used the net proceeds from the issuance of the 2029 Notes, together with cash on hand, to satisfy and discharge the obligations outstanding for its 4.70% Senior Notes in the amount of $500 due 2022 (“2022 Notes”) and to pay fees associated therewith. The Company incurred $6.5 in bank, legal and other fees in connection with the issuance of the 2029 Notes, which will be deferred and amortized to interest expense over the term of these notes. Interest expense on the 2029 Notes is due semiannually on April 1 and October 1 with the first interest payment scheduled for October 1, 2021.
In connection with the early repayment of the 2022 Notes, the Company recorded expense of $26.1 for the nine months ended June 30, 2021, which is included in “Cost of early debt retirements” in the Condensed Consolidated Statements of Earnings and Comprehensive Income. This expense included a premium of $25.5 and debt issuance cost write-offs of $0.6.
The 2029 Notes are guaranteed, jointly and severally, by each of the Company’s direct and indirect wholly-owned domestic subsidiaries that guarantee the Company’s existing secured revolving credit facility (or certain replacements thereof) or that guarantee certain capital markets indebtedness of the Company, in each case provided that the amount of such credit facility or indebtedness exceeds a specified amount, for so long as they remain guarantors under such indebtedness and subject to release in certain other circumstances. The 2029 Notes and guarantees thereof are unsecured, unsubordinated indebtedness of the Company and the guarantors.
Note 11 - Retirement Plans
The Company has several defined benefit pension plans covering employees in the U.S. and certain employees in other countries, which are included in the information presented below. The plans provide retirement benefits based on years of service and compensation. The Company also sponsors or participates in several other non-U.S. pension and postretirement 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 below.
The Company’s net periodic pension and postretirement (income) costs for these plans for the third quarter and nine months ended June 30 were as follows: | | | Three Months Ended June 30, | | Nine Months Ended June 30, | | Three Months Ended June 30, | | Nine Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
Service cost | Service cost | $ | 1.1 | | | $ | 1.1 | | | $ | 3.3 | | | $ | 3.2 | | Service cost | $ | 0.9 | | | $ | 1.1 | | | $ | 2.9 | | | $ | 3.3 | |
Interest cost | Interest cost | 2.5 | | | 3.4 | | | 7.4 | | | 10.3 | | Interest cost | 2.6 | | | 2.5 | | | 7.8 | | | 7.4 | |
Expected return on plan assets | Expected return on plan assets | (5.6) | | | (5.8) | | | (16.8) | | | (17.3) | | Expected return on plan assets | (5.3) | | | (5.6) | | | (15.9) | | | (16.8) | |
Recognized net actuarial loss | Recognized net actuarial loss | 2.3 | | | 2.2 | | | 6.9 | | | 6.8 | | Recognized net actuarial loss | 1.5 | | | 2.3 | | | 4.6 | | | 6.9 | |
Settlement loss recognized | 0 | | | 0.3 | | | 0 | | | 0.7 | | |
Net periodic cost | $ | 0.3 | | | $ | 1.2 | | | $ | 0.8 | | | $ | 3.7 | | |
| Net periodic (income) cost | | Net periodic (income) cost | $ | (0.3) | | | $ | 0.3 | | | $ | (0.6) | | | $ | 0.8 | |
|
The service cost component of the net periodic (income) cost associated with the Company’s retirement plans is recorded to Cost of products sold and SG&A on the Condensed Consolidated Statement of Earnings and Comprehensive Income. The remaining net periodic (income) cost is recorded to Other (income) expense, (income), net on the Condensed Consolidated Statement of Earnings and Comprehensive Income.
Note 12 - Shareholders’ Equity
Share Repurchases
In January 2018, the Company’s Board of Directors (the “Board”) approved an authorization toauthorized the repurchase of up to 10.0 shares of the Company’s common stock, replacing the previous share repurchase authorization from May 2015. The Company repurchased 0.32.9 shares of its common stock for $9.2$110.1 during the nine months ended June 30, 2021. The Company2022 and has 9.76.9 shares of its common stock available for repurchase in the future under the Board’s authorization. Any future share repurchases may be made in the open market, privately negotiated transactions, or otherwise, and in such amounts and at such times as the Company deems appropriate based upon prevailing market conditions, business needs, and other factors.
Dividends
On May 6, 2021,February 4, 2022, the Board declared a quarterly cash dividend of $0.15 per common share for the first fiscal quarter. The dividend was paid on April 5, 2022 to stockholders of record as of the close of business on March 8, 2022.
On May 6, 2022, the Board declared a quarterly cash dividend of $0.15 per common stock outstanding.share for the second fiscal quarter. The dividend was paid on July 7, 20212022 to holdersstockholders of record as of the close of business on June 4, 2021.2, 2022.
Dividends declared during the nine months ended June 30, 20212022 totaled $25.4.$24.7. Payments made for dividends during the nine months ended June 30, 20212022 totaled $16.7.$24.7.
On August 5, 2021,July 29, 2022, the Board of Directors declared a quarterly cash dividend of $0.15 per common share for the third fiscal quarter. The dividend iswill be payable on October 5, 20212022 to stockholdersshareholders of record as of the close of business on September 9, 2021.2, 2022.
Note 13 - Accumulated Other Comprehensive Loss
The following table presents the changes in accumulated other comprehensive loss (“AOCI”), net of tax, by component: | | | Foreign Currency Translation Adjustments | | Pension and Post-retirement Activity | | Hedging Activity | | Total | | Foreign Currency Translation Adjustments | | Pension and Post-retirement Activity | | Hedging Activity | | Total |
Balance at October 1, 2020 | $ | (47.4) | | | $ | (142.1) | | | $ | (2.1) | | | $ | (191.6) | | |
Balance at October 1, 2021 | | Balance at October 1, 2021 | $ | (41.8) | | | $ | (97.3) | | | $ | 2.2 | | | $ | (136.9) | |
OCI before reclassifications (1) | OCI before reclassifications (1) | 23.0 | | | (6.3) | | | 0.9 | | | 17.6 | | OCI before reclassifications (1) | (50.3) | | | (2.6) | | | 8.7 | | | (44.2) | |
Reclassifications to earnings | Reclassifications to earnings | 0 | | | 5.0 | | | 2.6 | | | 7.6 | | Reclassifications to earnings | — | | | 3.4 | | | (4.2) | | | (0.8) | |
Balance at June 30, 2021 | $ | (24.4) | | | $ | (143.4) | | | $ | 1.4 | | | $ | (166.4) | | |
Balance at June 30, 2022 | | Balance at June 30, 2022 | $ | (92.1) | | | $ | (96.5) | | | $ | 6.7 | | | $ | (181.9) | |
| | | Foreign Currency Translation Adjustments | | Pension and Post-retirement Activity | | Hedging Activity | | Total | | Foreign Currency Translation Adjustments | | Pension and Post-retirement Activity | | Hedging Activity | | Total |
Balance at October 1, 2019 | $ | (77.3) | | | $ | (159.8) | | | $ | 1.2 | | | $ | (235.9) | | |
Balance at October 1, 2020 | | Balance at October 1, 2020 | $ | (47.4) | | | $ | (142.1) | | | $ | (2.1) | | | $ | (191.6) | |
OCI before reclassifications (1) | OCI before reclassifications (1) | 8.1 | | | (7.2) | | | 0.3 | | | 1.2 | | OCI before reclassifications (1) | 23.0 | | | (6.3) | | | 0.9 | | | 17.6 | |
Reclassifications to earnings | Reclassifications to earnings | 0 | | | 5.4 | | | (1.8) | | | 3.6 | | Reclassifications to earnings | — | | | 5.0 | | | 2.6 | | | 7.6 | |
Balance at June 30, 2020 | $ | (69.2) | | | $ | (161.6) | | | $ | (0.3) | | | $ | (231.1) | | |
Balance at June 30, 2021 | | Balance at June 30, 2021 | $ | (24.4) | | | $ | (143.4) | | | $ | 1.4 | | | $ | (166.4) | |
(1)OCI is defined as other comprehensive income (loss).
The following table presents the reclassifications out of AOCI: | | | Three Months Ended June 30, | | Nine Months Ended June 30, | | Affected Line Item in the Condensed Consolidated Statements of Earnings | | Three Months Ended June 30, | | Nine Months Ended June 30, | | Affected Line Item in the Condensed Consolidated Statements of Earnings |
Details of AOCI Components | Details of AOCI Components | | 2021 | | 2020 | | 2021 | | 2020 | | Details of AOCI Components | | 2022 | | 2021 | | 2022 | | 2021 | |
Gain / (Loss) on cash flow hedges | Gain / (Loss) on cash flow hedges | | | | | | | | | | Gain / (Loss) on cash flow hedges | | | | | | | | | |
Foreign exchange contracts | Foreign exchange contracts | | $ | (0.5) | | | $ | 1.0 | | | $ | (3.7) | | | $ | 2.6 | | | Other income, net | Foreign exchange contracts | | $ | 3.4 | | | $ | (0.5) | | | $ | 6.3 | | | $ | (3.7) | | | Other (income) expense, net |
| | (0.5) | | | 1.0 | | | (3.7) | | | 2.6 | | | | 1.1 | | | (0.1) | | | 2.1 | | | (1.1) | | | Income tax provision |
| | (0.1) | | | 0.3 | | | (1.1) | | | 0.8 | | | Income tax provision | | 2.3 | | | (0.4) | | | $ | 4.2 | | | $ | (2.6) | | |
| (0.4) | | | 0.7 | | | (2.6) | | | 1.8 | | | |
Amortization of defined benefit pension and postretirement items | Amortization of defined benefit pension and postretirement items | | | | | | | | | | Amortization of defined benefit pension and postretirement items | | | | | | | | | |
Actuarial losses | Actuarial losses | | $ | (2.4) | | | $ | (2.2) | | | $ | (7.0) | | | $ | (6.8) | | | (1) | Actuarial losses | | $ | (1.5) | | | $ | (2.4) | | | $ | (4.6) | | | $ | (7.0) | | | (1) |
Settlements | | 0 | | | (0.3) | | | 0 | | | (0.7) | | | (1) | |
| (2.4) | | | (2.5) | | | (7.0) | | | (7.5) | | | |
| | (0.7) | | | (0.7) | | | (2.0) | | | (2.1) | | | Income tax provision | | (0.4) | | | (0.7) | | | (1.2) | | | (2.0) | | | Income tax provision |
| | (1.7) | | | (1.8) | | | (5.0) | | | (5.4) | | | | (1.1) | | | (1.7) | | | (3.4) | | | $ | (5.0) | | |
| Total reclassifications for the period | Total reclassifications for the period | | $ | (2.1) | | | $ | (1.1) | | | $ | (7.6) | | | $ | (3.6) | | | Total reclassifications for the period | | $ | 1.2 | | | $ | (2.1) | | | $ | 0.8 | | | $ | (7.6) | | |
(1)These AOCI components are included in the computation of net periodic cost. See Note 11 of Notes to Condensed Consolidated Financial Statements.
Note 14 - Financial Instruments and Risk Management
In the course of ordinary business, the Company entersmay enter into contractual arrangements (also referred to as derivatives) to reduce its exposure to foreign currency. The Company has master netting agreements with all of its counterparties that allow for the settlement of contracts in an asset position with contracts in a liability position in the event of default. The Company manages counterparty risk through the utilization of investment grade commercial banks, diversification of counterparties, and its counterparty netting arrangements. The section below outlines the types of derivatives that existedin place at June 30, 20212022 and September 30, 2020,2021, as well as the Company’s objectives and strategies for holding derivative instruments.
Foreign Currency Risk
A significant share of the Company’s sales is tied to currencies other than the U.S. dollar, the Company’s reporting currency. As such, a weakening of currencies relative to the U.S. dollar can have a negative impact on reported earnings. Conversely, strengthening of currencies relative to the U.S. dollar can improve reported results. The primary currencies to which the Company is exposed include the euro, the Japanese yen, the British pound, the Canadian dollar, and the Australian dollar.
Additionally, the Company’s foreign subsidiaries enter into internal and external transactions that create non-functional currency balance sheet positions at the foreign subsidiary level. These exposures are generally the result of intercompany purchases, intercompany loans and, to a lesser extent, external purchases, and are revalued in the foreign subsidiary’s local currency at the end of each month. Changes in the value of the non-functional currency balance sheet positions in relation to the foreign subsidiary’s local currency results in an exchange gain or loss recorded in Other income,(income) expense, net. The primary currency to which the Company’s foreign subsidiaries are exposed is the U.S. dollar.
Cash Flow Hedges
At June 30, 2021,2022, the Company maintained a cash flow hedging program related to foreign currency risk. These derivative instruments have a high correlation to the underlying exposure being hedged and have been deemed highly effective by the Company for accounting purposes in offsetting the associated risk.
The Company entered into a series ofhas forward currency contracts to hedge cash flow uncertainty associated with currency fluctuations. These transactions are accounted for as cash flow hedges. The Company had an unrealized pre-tax gaingains of $2.2$9.8 and an unrealized pre-tax loss of $3.0$3.3 at June 30, 20212022 and September 30, 2020,2021, respectively, on these forward currency contracts, which are accounted for as cash flow hedges and included in AOCI. Assuming foreign exchange rates versus the U.S. dollar remain at June 30, 20212022 levels over the next 12 months, the majority of the pre-tax gain included in AOCI at June 30, 20212022 is expected to be included in Other income,(income) expense, net. Contract maturities for these hedges extend into fiscal 2022.2023. At June 30, 2021,2022, there were 64 open foreign currency contracts with a total notional value of $133.1.
Derivatives not Designated as Hedges
The Company has entered into foreign currency derivative contracts, which are not designated as cash flow hedges for accounting purposes, to hedge balance sheet exposures. Any gains or losses on these contracts are expected to be offset by exchange gains or losses on the underlying exposures and, thus, are not subject to significant market risk. The change in the estimated fair value of the foreign currency contracts for the three and nine months ended June 30, 20212022 resulted in gains of $0.3 and $2.0, respectively, compared to a loss of $1.2 and gain of $0.7, respectively, compared to a gain of $0.3 and a loss of $0.2, respectively,$0.7 for the three and nine months ended June 30, 2020,2021, respectively, and was recorded in Other income,(income) expense, net in the Condensed Consolidated Statements of Earnings and Comprehensive Income. At June 30, 2021,2022, there were 57 open foreign currency derivative contracts not designated as cash flow hedges with a total notional value of $42.0.$67.6.
The following table provides estimated fair values of derivative instruments: | | | Fair Value of Asset (Liability) (1) | | Fair Value of Assets (1) |
| | June 30, 2021 | | September 30, 2020 | | June 30, 2022 | | September 30, 2021 |
Derivatives designated as cash flow hedging relationships: | Derivatives designated as cash flow hedging relationships: | | | | Derivatives designated as cash flow hedging relationships: | | | |
Foreign currency contracts | Foreign currency contracts | $ | 2.2 | | | $ | (3.0) | | Foreign currency contracts | $ | 9.8 | | | $ | 3.3 | |
Derivatives not designated as cash flow hedging relationships: | Derivatives not designated as cash flow hedging relationships: | | Derivatives not designated as cash flow hedging relationships: | |
Foreign currency contracts | Foreign currency contracts | $ | 0.7 | | | $ | (0.6) | | Foreign currency contracts | $ | 2.0 | | | $ | 0.5 | |
(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.
The following table provides the amounts of gains and losses on derivative instruments: | | | Three Months Ended June 30, | | Nine Months Ended June 30, | | Three Months Ended June 30, | | Nine Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
Derivatives designated as cash flow hedging relationships: | Derivatives designated as cash flow hedging relationships: | | | | | | | | Derivatives designated as cash flow hedging relationships: | | | | | | | |
Foreign currency contracts | Foreign currency contracts | | | Foreign currency contracts | | |
Gain (loss) recognized in OCI (1) | $ | (0.2) | | | $ | (1.6) | | | $ | 1.5 | | | $ | 0.4 | | |
Gain recognized in OCI (1) | | Gain recognized in OCI (1) | $ | 7.8 | | | $ | (0.2) | | | $ | 12.7 | | | $ | 1.5 | |
Gain (loss) reclassified from AOCI into income (1) (2) | Gain (loss) reclassified from AOCI into income (1) (2) | (0.5) | | | 1.0 | | | (3.7) | | | 2.6 | | Gain (loss) reclassified from AOCI into income (1) (2) | 3.4 | | | (0.5) | | | 6.3 | | | (3.7) | |
Derivatives not designated as cash flow hedging relationships: | Derivatives not designated as cash flow hedging relationships: | | Derivatives not designated as cash flow hedging relationships: | |
Foreign currency contracts | Foreign currency contracts | | Foreign currency contracts | |
Gain (loss) recognized in income (2) | $ | (1.2) | | | $ | 0.3 | | | $ | 0.7 | | | $ | (0.2) | | |
Gain recognized in income (2) | | Gain recognized in income (2) | $ | 0.3 | | | $ | (1.2) | | | $ | 2.0 | | | $ | 0.7 | |
(1)Each of these derivative instruments had a high correlation to the underlying exposure being hedged for the periods indicated and have been deemed highly effective by the Company in offsetting associated risk.
(2)Gain (loss) was recorded in Other income,(income) expense, net.
The following table provides financial assets and liabilities for balance sheet offsetting: | | | At June 30, 2021 | | At September 30, 2020 | | At June 30, 2022 | | At September 30, 2021 |
| | Assets (1) | | Liabilities (2) | | Assets (1) | | Liabilities (2) | | Assets (1) | | Liabilities (2) | | Assets (1) | | Liabilities (2) |
Foreign currency contracts | Foreign currency contracts | | | | | | | | Foreign currency contracts | | | | | | | |
Gross amounts of recognized assets (liabilities) | Gross amounts of recognized assets (liabilities) | $ | 3.6 | | | $ | (0.9) | | | $ | 0 | | | $ | (3.7) | | Gross amounts of recognized assets (liabilities) | $ | 12.1 | | | $ | (0.2) | | | $ | 3.9 | | | $ | (0.2) | |
Gross amounts offset in the balance sheet | Gross amounts offset in the balance sheet | (0.1) | | | 0.3 | | | 0 | | | 0.1 | | Gross amounts offset in the balance sheet | (0.1) | | | — | | | (0.1) | | | 0.1 | |
Net amounts of assets (liabilities) presented in the balance sheet | Net amounts of assets (liabilities) presented in the balance sheet | $ | 3.5 | | | $ | (0.6) | | | $ | 0 | | | $ | (3.6) | | Net amounts of assets (liabilities) presented in the balance sheet | $ | 12.0 | | | $ | (0.2) | | | $ | 3.8 | | | $ | (0.1) | |
(1)All derivative assets are presented in Other current assets or Other assets.
(2)All derivative liabilities are presented in Other current liabilities or Other liabilities.
Fair Value Hierarchy
Accounting guidance on fair value measurements for certain financial assets and liabilities requires that assets and liabilities carried at fair value be classified in one of the following three categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs reflecting the reporting entity’s own assumptions or external inputs from inactive markets.
The following table sets forth the Company’s financial assets and liabilities, which are carried at fair value and measured on a recurring basis during the period, all of which are classified as Level 2 within the fair value hierarchy: | | | June 30, 2021 | | September 30, 2020 | | June 30, 2022 | | September 30, 2021 |
Liabilities at estimated fair value: | Liabilities at estimated fair value: | | | | Liabilities at estimated fair value: | | | |
Deferred compensation | Deferred compensation | $ | (28.4) | | | $ | (33.9) | | Deferred compensation | $ | (21.6) | | | $ | (28.4) | |
Derivatives - foreign currency contracts | Derivatives - foreign currency contracts | 2.9 | | | (3.6) | | Derivatives - foreign currency contracts | 11.8 | | | 3.7 | |
Net liabilities at estimated fair value | Net liabilities at estimated fair value | $ | (25.5) | | | $ | (37.5) | | Net liabilities at estimated fair value | $ | (9.8) | | | $ | (24.7) | |
The estimated fair value of the deferred compensation liability is determined based upon the quoted market prices of the investment options that are offered under the plan. At June 30, 2022 and September 30, 2021, the estimated fair value of foreign currency contracts is the amount that the Company would receive or pay to terminate the contracts, considering first the quoted market prices of comparable agreements or, in the absence of quoted market prices, factors such as interest rates, currency exchange rates, and remaining maturities.
At June 30, 20212022 and September 30, 20202021, the Company had no Level 1 financial assets or liabilities, other than pension plan assets, and no Level 3 financial assets or liabilities at June 30, 20212022 and at September 30, 2020.2021, respectively.
At June 30, 20212022 and September 30, 20202021, the fair market value of fixed rate long-term debt was $1,314.6$1,024.1 and $1,323.1,$1,300.1, respectively, compared to its carrying value of $1,250.0.$1,250.0 in each period. The estimated fair value of the long-term debt was estimated using yields obtained from independent pricing sources for similar types of borrowing arrangements. The estimated fair value of long-term debt, excluding the U.S. revolving credit facility havedue 2025 (“Revolving Credit Facility”), has been determined based on Level 2 inputs.
Due to the nature of cash and cash equivalents and short-term borrowings, including notes payable, carrying amounts on the balance sheets approximate fair value. Additionally, the carrying amounts of the Company’s revolving credit facility,Revolving Credit Facility, which are classified as long-term debt on the balance sheet, approximate fair value due to the revolving nature of the balances. The estimated fair value of cash and cash equivalents, short-term borrowings, and the revolving credit agreementRevolving Credit Facility have been determined based on Level 2 inputs.
Note 15 - Segment Data
For an overview of the Company’s segments, refer to Note 1 to Notes to Condensed Consolidated Financial Statements.
Segment performance is evaluated based on segment profit, exclusive of general corporate expenses, share-based compensation costs, restructuring charges and certain costs deemed non-recurring in nature, including evaluation, acquisition and integration costs, cost of early retirement of long-term debt, incremental pandemic expenses, gains or losses on the sale of businesses,stock keeping unit (“SKU”) rationalization charges, legal settlements, value-added tax (“VAT”) settlement costs, Sun Care reformulation costs, and the amortization of intangible assets. Financial items, such as interest income and expense, are managed on a global basis at the corporate level. The exclusion of such charges from segment results reflects management’s view on how it evaluates segment performance.
The Company completed the sale of its Infant and Pet Care business in December 2019. As a result, no additional Net Sales or Segment Profit will be reported for the All Other segment in subsequent periods.
The Company’s operating model includes some shared business functions across the segments, including product warehousing and distribution, transaction processing functions and, in most cases, combined sales force and management teams. The Company applies a fully allocated cost basis in which shared business functions are allocated between the segments.
The Company completed the acquisition of Billie on November 29, 2021. Net Sales and Segment Profit associated with Billie products have been reported in the Wet Shave segment since the Acquisition Date. Fiscal 2022 acquisition and integration costs related to the Billie acquisition, while Fiscal 2021 costs related primarily to the Cremo acquisition, which was acquired on September 2, 2020.Segment net sales and profitability are presented below: | | | Three Months Ended June 30, | | Nine Months Ended June 30, | | Three Months Ended June 30, | | Nine Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
Net Sales | Net Sales | | | | | | | | Net Sales | | | | | | | |
Wet Shave | Wet Shave | $ | 304.9 | | | $ | 278.0 | | | $ | 876.7 | | | $ | 835.5 | | Wet Shave | $ | 326.3 | | | $ | 304.9 | | | $ | 917.4 | | | $ | 876.7 | |
Sun and Skin Care | Sun and Skin Care | 195.2 | | | 136.9 | | | 457.7 | | | 369.5 | | Sun and Skin Care | 216.2 | | | 195.2 | | | 504.3 | | | 457.7 | |
Feminine Care | Feminine Care | 73.6 | | | 69.0 | | | 209.7 | | | 229.1 | | Feminine Care | 81.3 | | | 73.6 | | | 213.1 | | | 209.7 | |
All Other | 0 | | | 0 | | | 0 | | | 26.8 | | |
Total net sales | Total net sales | $ | 573.7 | | | $ | 483.9 | | | $ | 1,544.1 | | | $ | 1,460.9 | | Total net sales | $ | 623.8 | | | $ | 573.7 | | | $ | 1,634.8 | | | $ | 1,544.1 | |
| Segment Profit | Segment Profit | | | Segment Profit | | |
Wet Shave | Wet Shave | $ | 43.1 | | | $ | 44.6 | | | $ | 141.6 | | | $ | 142.0 | | Wet Shave | $ | 37.5 | | | $ | 43.1 | | | $ | 116.6 | | | $ | 141.6 | |
Sun and Skin Care | Sun and Skin Care | 45.0 | | | 23.5 | | | 86.4 | | | 67.9 | | Sun and Skin Care | 46.6 | | | 45.0 | | | 92.6 | | | 86.4 | |
Feminine Care | Feminine Care | 13.7 | | | 12.0 | | | 28.1 | | | 43.4 | | Feminine Care | 8.8 | | | 13.7 | | | 19.1 | | | 28.1 | |
All Other | 0 | | | 0 | | | 0 | | | 3.1 | | |
Total segment profit | Total segment profit | 101.8 | | | 80.1 | | | 256.1 | | | 256.4 | | Total segment profit | 92.9 | | | 101.8 | | | 228.3 | | | 256.1 | |
General corporate and other expenses | General corporate and other expenses | (15.7) | | | (17.7) | | | (41.2) | | | (41.9) | | General corporate and other expenses | (14.8) | | | (15.7) | | | (42.8) | | | (41.2) | |
Restructuring and related costs (1) | (8.2) | | | (10.4) | | | (18.1) | | | (30.8) | | |
Restructuring and related costs | | Restructuring and related costs | (3.9) | | | (8.2) | | | (9.8) | | | (18.1) | |
Acquisition and integration costs (1) | | Acquisition and integration costs (1) | (0.9) | | | (1.3) | | | (8.0) | | | (4.6) | |
SKU rationalization charges (2) | | SKU rationalization charges (2) | (22.5) | | | — | | | (22.5) | | | — | |
Legal settlement (3) | | Legal settlement (3) | 7.5 | | | — | | | 7.5 | | | — | |
VAT settlement costs (4) | | VAT settlement costs (4) | — | | | — | | | (3.4) | | | — | |
Sun Care reformulation costs (5) | | Sun Care reformulation costs (5) | (0.6) | | | — | | | (4.1) | | | — | |
Amortization of intangibles | | Amortization of intangibles | (7.8) | | | (5.5) | | | (21.8) | | | (16.6) | |
Cost of early retirement of long-term debt | Cost of early retirement of long-term debt | 0 | | | (26.2) | | | (26.1) | | | (26.2) | | Cost of early retirement of long-term debt | — | | | — | | | — | | | (26.1) | |
Acquisition and integration costs (2) | (1.3) | | | (0.3) | | | (4.6) | | | (32.0) | | |
Gain on sale of Infant and Pet Care business | 0 | | | 0 | | | 0 | | | 4.1 | | |
COVID-19 expense (3) | 0 | | | (3.9) | | | 0 | | | (3.9) | | |
Feminine and Infant Care evaluation costs (4) | 0 | | | 0 | | | 0 | | | (0.3) | | |
Amortization of intangibles | (5.5) | | | (4.2) | | | (16.6) | | | (12.7) | | |
Interest and other expense, net | Interest and other expense, net | (17.2) | | | (12.1) | | | (50.9) | | | (49.6) | | Interest and other expense, net | (13.6) | | | (17.2) | | | (43.8) | | | (50.9) | |
Total earnings before income taxes | Total earnings before income taxes | $ | 53.9 | | | $ | 5.3 | | | $ | 98.6 | | | $ | 63.1 | | Total earnings before income taxes | $ | 36.3 | | | $ | 53.9 | | | $ | 79.6 | | | $ | 98.6 | |
(1)Includes pre-tax SG&A of $2.8$0.9 and $6.2$7.2 for the three and nine months ended June 30, 2021,2022, respectively, and $2.3 and $10.0 for the three and nine months ended June 30, 2020, respectively, associated with certain information technology enablement expenses and incentive and retention compensation expenses for Project Fuel. Additionally, pre-tax Cost of products sold of $0.2 and $0.3 for the three and nine months ended June 30, 2021, respectively, and $0.1 and $0.2 for the three and nine months ended June 30, 2020, respectively, related to inventory write-offs associated with Project Fuel is included.
(2)Includes pre-tax SG&A of $1.3 and $3.3 for the three and nine months ended June 30, 2021, respectively, and $0.3 and $32.0respectively. Additionally, includes Cost of products sold of $0.8 related to the valuation of acquired inventory for the three andBillie acquisition for the nine months ended June 30, 2020, respectively, related to acquisition and integration costs. Additionally,2022. Cost of products sold ofincludes $1.3 related to the valuation of acquired inventory for the Cremo acquisition for the nine months ended June 30, 2021 is included.2021.
(3)(2)Includes pre-tax CostCOGS of products sold of $3.9$22.5 for the three and nine months ended June 30, 2020 which2022 for the write-off of certain Wet Ones SKUs and related contract termination charges. Wet Ones products are included incremental costs aswithin the Sun and Skin Care segment.
(3)Includes pre-tax SG&A of $7.5 for the three and nine months ended June 30, 2022 for a result of the COVID-19 pandemic incurred by the Company related to higher benefit and emergency payments, supplies and freight.favorable legal settlement.
(4)Includes pre-tax SG&A of $0.3$3.4 for the nine months ended June 30, 2020.2022 related to the estimated settlement of prior years’ value-added tax audits in Germany.
(5)Includes pre-tax R&D of $0.6 for the three and nine months ended June 30, 2022 and pre-tax COGS of $3.5 for the nine months ended June 30, 2022 related to the reformulation, recall and destruction of certain Sun Care products.
The following table presents the Company’s net sales by geographic area: | | | Three Months Ended June 30, | | Nine Months Ended June 30, | | Three Months Ended June 30, | | Nine Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
Net Sales to Customers | Net Sales to Customers | | | | | | | | Net Sales to Customers | | | | | | | |
United States | United States | $ | 336.4 | | | $ | 277.4 | | | $ | 889.0 | | | $ | 830.8 | | United States | $ | 392.8 | | | $ | 336.4 | | | $ | 997.2 | | | $ | 889.0 | |
International | International | 237.3 | | | 206.5 | | | 655.1 | | | 630.1 | | International | 231.0 | | | 237.3 | | | 637.6 | | | 655.1 | |
Total net sales | Total net sales | $ | 573.7 | | | $ | 483.9 | | | $ | 1,544.1 | | | $ | 1,460.9 | | Total net sales | $ | 623.8 | | | $ | 573.7 | | | $ | 1,634.8 | | | $ | 1,544.1 | |
Supplemental product information is presented below for net sales: | | | Three Months Ended June 30, | | Nine Months Ended June 30, | | Three Months Ended June 30, | | Nine Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
Razors and blades | Razors and blades | $ | 271.9 | | | $ | 244.9 | | | $ | 780.6 | | | $ | 735.3 | | Razors and blades | $ | 290.1 | | | $ | 271.9 | | | $ | 821.1 | | | $ | 780.6 | |
Tampons, pads, and liners | Tampons, pads, and liners | 73.6 | | | 69.0 | | | 209.7 | | | 229.1 | | Tampons, pads, and liners | 81.3 | | | 73.6 | | | 213.1 | | | 209.7 | |
Sun care products | Sun care products | 143.9 | | | 94.0 | | | 275.7 | | | 246.3 | | Sun care products | 162.4 | | | 143.9 | | | 334.0 | | | 275.7 | |
Grooming products | Grooming products | 32.4 | | | 15.6 | | | 108.6 | | | 55.3 | | Grooming products | 33.9 | | | 32.4 | | | 114.6 | | | 108.6 | |
Wipes and other skin care | Wipes and other skin care | 18.9 | | | 27.3 | | | 73.4 | | | 67.9 | | Wipes and other skin care | 19.9 | | | 18.9 | | | 55.7 | | | 73.4 | |
Shaving gels and creams | Shaving gels and creams | 33.0 | | | 33.1 | | | 96.1 | | | 100.2 | | Shaving gels and creams | 36.2 | | | 33.0 | | | 96.3 | | | 96.1 | |
Infant care and other | 0 | | | 0 | | | 0 | | | 26.8 | | |
Total net sales | Total net sales | $ | 573.7 | | | $ | 483.9 | | | $ | 1,544.1 | | | $ | 1,460.9 | | Total net sales | $ | 623.8 | | | $ | 573.7 | | | $ | 1,634.8 | | | $ | 1,544.1 | |
Note 16 - Commitments and Contingencies
Legal Proceedings
During the quarter ending June 30, 2022, the Company settled certain legal matters primarily related to intellectual property claims against a third party. The settlement resulted in a gain of $7.5 which was included in SG&A in the Condensed Consolidated Financial Statements. The Company received payment for the settlement subsequent to June 30, 2022.
SKU rationalization
During the quarter ended June 30, 2022, the Company recorded a charge of $22.5 relating to the write-off of inventory for certain Wet Ones SKUs and related contract termination charges associated with a third-party co-manufacturer. This charge was included in Cost of products sold in the Condensed Consolidated Financial Statements.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(Amounts in millions, except per share data, unaudited)
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited Condensed Consolidated Financial Statements and the accompanying notes included in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K filed with the SEC on November 20, 202019, 2021 (the “2020“2021 Annual Report”). The following discussion may contain forward-looking statements that reflect our plans, estimates, and beliefs and involve risks, uncertainties, and assumptions. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those discussed within “Forward-Looking Statements” below and in Item 1A. Risk Factors and “Forward-Looking Statements” included within our 20202021 Annual Report.
Forward-Looking Statements
This document contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of Edgewell Personal Care Company (“Edgewell”,Edgewell,” “we” or “our Company”) or any of our businesses. Forward-looking statements generally can be identified by the use of words or phrases such as “believe,” “expect,” “expectation,” “anticipate,” “may,” “could,” “intend,” “belief,” “estimate,” “plan,” “target,” “predict,” “likely,” “will,” “should,” “forecast,” “outlook,” or other similar words or phrases. These statements are not based on historical facts, but instead reflect our expectations, estimates, or projections concerning future results or events, including, without limitation, the future earnings and performance of our Company or any of our businesses.businesses, and the integration of the Billie, Inc. (“Billie”) acquisition and expected benefits from this transaction, including growth opportunities and cost savings. Many factors outside our control (including the ongoing COVID-19 pandemic) could affect the realization of these estimates. These statements are not guarantees of performance and are inherently subject to known and unknown risks, uncertainties and assumptions that are difficult to predict and could cause our actual results to differ materially from those indicated by those statements. We cannot assure you that any of our expectations, estimates or projections will be achieved. The forward-looking statements included in this report are only made as of the date of this report and we disclaim any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances, except as required by law. You should not place undue reliance on these statements.
In addition, other risks and uncertainties not presently known to us or that we presently consider immaterial could significantly affect the forward-looking statements. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. Risks and uncertainties include those detailed from time to time in our publicly filed documents, including in Item 1A. Risk Factors of Part I of our 20202021 Annual Report.
Non-GAAP Financial Measures
While we report financial results in accordance with GAAP, this discussion also includes non-GAAP measures. These non-GAAP measures are referred to as “adjusted” or “organic” and exclude items such as restructuring costs, acquisition and integration costs, cost of early retirement of long-term debt, the UK tax rate increase, incremental pandemic charges, business evaluation costs, and the gain on the sale of the Infant and Pet Care business.other non-standard items. Reconciliations of non-GAAP measures are included within this Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This non-GAAP information is provided as a supplement to, not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. We use this non-GAAP information internally to make operating decisions and believe it is helpful to investors because it allows more meaningful period-to-period comparisons of ongoing operating results. Given certain significant events, including the Project Fuel restructuring and recent acquisitions and divestitures,acquisition of Billie, we view the use of non-GAAP measures that take into account the impact of these unique events as particularly valuable in understanding our underlying operational results and providing insights into future performance. The information can also be used to perform trend analysis and to better identify operating trends that may otherwise be masked or distorted by the types of items that are excluded. This non-GAAP information is also a component in determining management’s incentive compensation. Finally, we believe this information provides more transparency.
The following provides additional detail on our non-GAAP measures:
•We analyze our net sales and segment profit on an organic basis to better measure the comparability of results between periods. Organic net sales and organic segment profit exclude the impact of changes in foreign currency acquisitions, and divestitures. This information is provided because these typesthe impact of fluctuations can distort the underlyingBillie acquisition.
◦Organic net sales will be unfavorably impacted in fiscal 2022 by the Billie acquisition as sales that were previously reported as third party sales to Billie are now included as inter-company sales.
◦Segment profit will be unfavorably impacted in fiscal 2022 as a result of a change in netthe timing of profit recognition due to the Billie acquisition. Subsequent to the acquisition of Billie, profit previously earned on sales and segment profit either positively or negatively.to Billie will be deferred until Billie sells to a third party.
•WeAdditionally, we utilize “adjusted”“adjusted��� non-GAAP measures including gross profit, SG&A, operating income, income taxes, net earnings, and diluted earnings per share internally to make operating decisions. The following items are excluded when analyzing non-GAAP measures: restructuring and related costs, acquisition and integration costs, cost of early retirement of long-term debt, the UK tax rate increase, incremental pandemicstock keeping unit (“SKU”) rationalization charges, the gain on sale of the Infantlegal settlements and Pet Care business, and advisory expenses in connection with the evaluation of the Feminine and Infant Care businesses.other non-standard items.
All comparisons are with the same period in the prior year, unless otherwise noted.
Industry and Market Data
Unless we indicate otherwise, we base the information concerning our industry contained or incorporated by reference herein, concerning our industry on our general knowledge of and expectations concerning the industry.expectations. Our market position, market share, and industry market size are estimates based on our estimates using internal data and external data from various industry analyses, our internal research and adjustments, and assumptions that we believe to be reasonable. We have not independently verified data from industry analyses and cannot guarantee its accuracy or completeness. In addition, we believe that data regarding the industry, market size, and our market position and market share data within suchour industry provideprovides general guidance but areis inherently imprecise and havehas not been verified by any independent source. Further, our estimates and assumptions involve risks and uncertainties and are subject to change based on various factors, including those discussed in Item 1A. Risk Factors in Part I of our 20202021 Annual Report. These and other factors could cause results to differ materially from those expressed in the estimates and assumptions. You are cautioned not to place undue reliance on this data.
Retail sales for purposes of market size, market position and market share information are based on retail sales in U.S. dollars.
Trademarks and Trade Names
We own or have rights to use trademarks and trade names that we use in conjunction with the operation of our business, which appear throughout this Quarterly Report on Form 10-Q. We may also refer to brand names, trademarks, service marks and trade names of other companies and organizations, and these brand names, trademarks, service marks and trade nameswhich are the property of their respective owners.
Impact of the COVID-19 Pandemic
On March 11, 2020, the World Health Organization declaredThroughout the novel coronavirus 2019 (“COVID-19”) a worldwide pandemic, which has impacted individuals, families, companies and economies around the world. Throughout the pandemic, we have taken and continue to take significant measures to protect our employees and business,businesses, while remaining in compliance with local guidelines and requirements.national guidelines.
The Company’s top priority during this time continues to be ensuring the health and welfare of our employees and additional health and safety measures have been put in place at all of our manufacturing locations. To date, we have not experienced anya material operational disruptionsdisruption across our manufacturing or distribution facilities.
The prolonged COVID-19 pandemic environment has resulted in increased supply chain challenges across labor management, product procurement and distribution. The continued duration and severity of the COVID-19 pandemic may cause further disruptions related to our key suppliers, increase procurement and distribution costs and impact our ability to hire and retain employees, which may result in higher labor costs going forward. However, the impact, timing and severity of potential disruptions cannot be reasonably estimated at this time.
We expect to maintain adequate liquidity, during these uncertain times and we will continue to assess the impact that the COVID-19 pandemic has on our liquidity needs and current economic market conditions. As noted within “Liquidity and Capital Resources” below, the COVID-19 pandemic has not had a significant impact on our liquidity, cash flows or capital resources, including our ability to enter into the unsecured indenture agreement for 4.125% Senior Notes in the amount of $500 due April 1, 2029 (the “2029 Notes”).resources.
Significant Events
Acquisitions
On September 2, 2020,November 29, 2021, the Company completed the acquisition of Cremo,Billie, a premier men's groomingleading U.S. based consumer brand company in the U.S, in an all-cash transaction atthat offers a broad portfolio of personal care products for women, for a purchase price of $233.9.$309.4, net of cash acquired. We purchased Billie utilizing a combination of cash on hand and drawing on our U.S. revolving credit facility due 2025 (“Revolving Credit Facility”). As a result, of the acquisition, CremoBillie became a wholly owned subsidiary of the Company. Refer to Note 2 of Notes to Condensed Consolidated Financial Statements for further discussion on the Cremo acquisition.
Divestiture
On December 17, 2019, we completed the sale of our Infant and Pet Care business included in the All Other segment for $122.5 which included consideration for providing services for up to one year under a transition services agreement. For further information on the divestiture of the Infant and Pet Care business, refer to Note 2 of Notes to Condensed Consolidated Financial Statements.discussion.
Executive Summary
The following is a summary of key results for the third quarter and first nine months of fiscal 20212022 compared to the third quarter and first nine months of fiscal 2020.prior year period. Net earnings and earnings per share (“EPS”) for the periods presented were impacted by restructuring charges,and related costs, acquisition and integration costs, cost of early retirement of long-term debt, the UK tax rate increase, incremental pandemic charges, the gain on sale of the Infant and Pet Care business, and Feminine and Infant Care evaluation costs,other non-standard items, as described in the table below. The impact of these items on reported net earnings and EPS are provided as a reconciliation of net earnings and EPS to adjusted net earnings and adjusted diluted EPS, both of which are non-GAAP measures.
Third Quarter of Fiscal 20212022
•Net sales in the third quarter of fiscal 2021 were $573.7, up 18.6% compared2022 increased 8.7% to the prior year quarter.$623.8. Organic net sales increased 12.5%9.0% compared to the prior year quarter, due to increased demandwith growth across all segments after reduced demandincluding strong growth in the prior year quarter as a result of the COVID-19 pandemic. Net sales increased inSun Care, Feminine Care and Women’s shave across both North AmericaAmerican and International markets.
•Net earnings in the third quarter of fiscal 20212022 were $40.8$30.5 compared to $4.7$40.8 in the prior year quarter. On an adjusted basis, net earnings for the third quarter of fiscal 2021 increased 37.0%2022 were $45.8 compared to $49.2.$49.2 in the prior year quarter. Adjusted earnings increased duedeclined compared to the prior year quarter despite higher net sales, due to lower gross margins from inflationary pressures including higher materials, labor, and improved margins partially offset by higher advertisingwarehousing and promotional expense (“A&P”) in support of executing our category and brand strategies and new product launches across core geographies and markets.distribution costs.
•Net earnings per diluted share during the third quarter of fiscal 20212022 were $0.74$0.57 compared to $0.09$0.74 in the prior year quarter. On an adjusted basis, net earnings per diluted share during the third quarter of fiscal 2021 was $0.892022 were $0.86 compared to $0.66$0.89 in the prior year quarter.
| | | Three Months Ended June 30, 2021 | | Three Months Ended June 30, 2022 |
| | Gross Profit | | SG&A | | Operating Income | | EBIT | | Income taxes | | Net Earnings | | Diluted EPS | | Gross Profit | | SG&A | | Operating Income | | EBIT(1) | | Income taxes | | Net Earnings | | Diluted EPS |
GAAP — Reported | GAAP — Reported | $ | 270.3 | | $ | 97.5 | | $ | 71.1 | | | $ | 53.9 | | | $ | 13.1 | | | $ | 40.8 | | $ | 0.74 | | GAAP — Reported | $ | 240.6 | | $ | 92.7 | | $ | 49.9 | | $ | 36.3 | | | $ | 5.8 | | | $ | 30.5 | | $ | 0.57 | |
Restructuring and related costs | Restructuring and related costs | 0.2 | | 2.8 | | 8.2 | | | 8.2 | | | 2.0 | | | 6.2 | | 0.11 | | Restructuring and related costs | — | | 0.4 | | 3.9 | | 3.9 | | | 0.9 | | | 3.0 | | 0.06 | |
Acquisition and integration costs | Acquisition and integration costs | — | | 1.3 | | 1.3 | | | 1.3 | | | 0.3 | | | 1.0 | | 0.02 | | Acquisition and integration costs | — | | 0.9 | | 0.9 | | 0.9 | | | 0.3 | | | 0.6 | | 0.01 | |
UK tax rate increase | — | | — | | — | | | — | | | (1.2) | | | 1.2 | | 0.02 | | |
SKU rationalization charges | | SKU rationalization charges | 22.5 | | — | | 22.5 | | 22.5 | | | 5.5 | | | 17.0 | | 0.32 | |
Legal settlement | | Legal settlement | — | | (7.5) | | (7.5) | | (7.5) | | | (1.8) | | | (5.7) | | (0.11) | |
Sun Care reformulation costs | | Sun Care reformulation costs | — | | — | | 0.6 | | 0.6 | | | 0.2 | | | 0.4 | | 0.01 | |
Total Adjusted Non-GAAP | Total Adjusted Non-GAAP | $ | 270.5 | | $ | 93.4 | | $ | 80.6 | | | $ | 63.4 | | | $ | 14.2 | | | $ | 49.2 | | $ | 0.89 | | Total Adjusted Non-GAAP | $ | 263.1 | | $ | 98.9 | | $ | 70.3 | | $ | 56.7 | | | $ | 10.9 | | | $ | 45.8 | | $ | 0.86 | |
| GAAP as a percent of net sales | GAAP as a percent of net sales | 47.1 | % | | 17.0 | % | | 12.4 | % | | GAAP effective tax rate | 24.2 | % | | GAAP as a percent of net sales | 38.6 | % | | 14.9 | % | | 8.0 | % | | GAAP effective tax rate | 16.1 | % | |
Adjusted as a percent of net sales | Adjusted as a percent of net sales | 47.2 | % | | 16.3 | % | | 14.0 | % | | Adjusted effective tax rate | 22.4 | % | | Adjusted as a percent of net sales | 42.2 | % | | 15.9 | % | | 11.3 | % | | Adjusted effective tax rate | 19.3 | % | |
| | | Three Months Ended June 30, 2020 | | Three Months Ended June 30, 2021 |
| | Gross Profit | | SG&A | | Operating Income | | EBIT | | Income taxes | | Net Earnings | | Diluted EPS | | Gross Profit | | SG&A | | Operating Income | | EBIT(1) | | Income taxes | | Net Earnings | | Diluted EPS |
GAAP — Reported | GAAP — Reported | $ | 222.7 | | | $ | 91.3 | | | $ | 43.5 | | | $ | 5.3 | | | $ | 0.6 | | | $ | 4.7 | | | $ | 0.09 | | GAAP — Reported | $ | 270.3 | | $ | 97.5 | | $ | 71.1 | | $ | 53.9 | | | $ | 13.1 | | | $ | 40.8 | | $ | 0.74 | |
Restructuring and related costs | Restructuring and related costs | 0.1 | | | 2.3 | | | 10.4 | | | 10.4 | | | 2.3 | | | 8.1 | | | 0.15 | | Restructuring and related costs | 0.2 | | 2.8 | | 8.2 | | 8.2 | | | 2.0 | | | 6.2 | | 0.11 | |
Acquisition and integration costs | Acquisition and integration costs | — | | | 0.3 | | | 0.3 | | | 0.3 | | | — | | | 0.3 | | | 0.01 | | Acquisition and integration costs | — | | 1.3 | | 1.3 | | 1.3 | | | 0.3 | | | 1.0 | | 0.02 | |
Cost of early retirement of long-term debt | — | | | — | | | — | | | 26.2 | | | 6.4 | | | 19.8 | | | 0.36 | | |
COVID-19 expenses | 3.9 | | | — | | | 3.9 | | | 3.9 | | | 0.9 | | | 3.0 | | | 0.05 | | |
UK tax rate increase | | UK tax rate increase | — | | — | | — | | — | | | (1.2) | | | 1.2 | | 0.02 | |
| Total Adjusted Non-GAAP | Total Adjusted Non-GAAP | $ | 226.7 | | | $ | 88.7 | | | $ | 58.1 | | | $ | 46.1 | | | $ | 10.2 | | | $ | 35.9 | | | $ | 0.66 | | Total Adjusted Non-GAAP | $ | 270.5 | | $ | 93.4 | | $ | 80.6 | | $ | 63.4 | | | $ | 14.2 | | | $ | 49.2 | | $ | 0.89 | |
| GAAP as a percent of net sales | GAAP as a percent of net sales | 46.0 | % | | 18.9 | % | | 9.0 | % | | GAAP effective tax rate | 11.3 | % | | GAAP as a percent of net sales | 47.1 | % | | 17.0 | % | | 12.4 | % | | GAAP effective tax rate | 24.2 | % | |
Adjusted as a percent of net sales | Adjusted as a percent of net sales | 46.8 | % | | 18.3 | % | | 12.0 | % | | Adjusted effective tax rate | 22.1 | % | | Adjusted as a percent of net sales | 47.2 | % | | 16.3 | % | | 14.0 | % | | Adjusted effective tax rate | 22.4 | % | |
(1)EBIT is defined as Earnings before Income taxes.
First Nine Months of Fiscal 20212022
•Net sales for the first nine months of fiscal 20212022 increased 5.7%5.9% to $1,544.1.$1,634.8. Organic net sales increased 2.1%4.8% compared to the prior year period, due to increasesgrowth in Sun Care globally, growth in Wet Shave globallyin International markets and Sungrowth in Women’s shave, Feminine Care and Skin CareGrooming in North AmericaAmerica.
offset by declines in Feminine Care in North America. The growth in net sales for Wet Shave and Sun and Skin Care reflects improved underlying category performance, particularly in the United States, as well as increased brand and promotional investments. The decline in Feminine Care was primarily related to lower category demand related to the prior year’s pantry loading due to COVID-19.
•Net earnings for the first nine months of fiscal 20212022 were $72.9$64.9 compared to $46.6$72.9 in the prior year. On an adjusted basis, net earnings for the first nine months of fiscal 2021 decreased 4.5%2022 were $96.0 compared to $111.0.$111.0 in the prior year period. Adjusted earnings decreasedwere down due to higher cost of goods sold from inflationary pressures, higher A&P across Wet Shave products, including Men’s and Women’s systems,increased Selling, General and Feminine Care products. The increase in A&P was partially offset by higher net sales and improved gross margins.Administrative (“SG&A”) expense, largely related to amortization costs associated with the Billie acquisition.
•Net earnings per diluted share during the first nine months of fiscal 20212022 were $1.32$1.20 compared to $0.86$1.32 in the prior year period. On an adjusted basis, as illustrated in the following table, net earnings per diluted share during the first nine months of fiscal 20212022 were $2.01$1.77 compared to $2.13$2.01 in the prior year quarter.
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| Nine Months Ended June 30, 2021 |
| Gross Profit | | SG&A | | Operating Income | | EBIT | | Income taxes | | Net Earnings | | Diluted EPS |
GAAP — Reported | $ | 705.3 | | | $ | 284.0 | | | $ | 175.6 | | | $ | 98.6 | | | $ | 25.7 | | | $ | 72.9 | | | $ | 1.32 | |
Restructuring and related costs | 0.3 | | | 6.2 | | | 18.1 | | | 18.1 | | | 4.4 | | | 13.7 | | | 0.25 | |
Acquisition and integration costs | 1.3 | | | 3.3 | | | 4.6 | | | 4.6 | | | 1.1 | | | 3.5 | | | 0.06 | |
Cost of early retirement of long-term debt | — | | | — | | | — | | | 26.1 | | | 6.4 | | | 19.7 | | | 0.36 | |
UK tax rate increase | — | | | — | | | — | | | — | | | (1.2) | | | 1.2 | | | 0.02 | |
Total Adjusted Non-GAAP | $ | 706.9 | | | $ | 274.5 | | | $ | 198.3 | | | $ | 147.4 | | | $ | 36.4 | | | $ | 111.0 | | | $ | 2.01 | |
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GAAP as a percent of net sales | 45.7 | % | | 18.4 | % | | 11.4 | % | | GAAP effective tax rate | 26.1 | % | | |
Adjusted as a percent of net sales | 45.8 | % | | 17.8 | % | | 12.8 | % | | Adjusted effective tax rate | 24.8 | % | | |
| | | Nine Months Ended June 30, 2020 | | Nine Months Ended June 30, 2022 |
| | Gross Profit | | SG&A | | Operating Income | | EBIT | | Income taxes | | Net Earnings | | Diluted EPS | | Gross Profit | | SG&A | | Operating Income | | EBIT(1) | | Income taxes | | Net Earnings | | Diluted EPS |
GAAP — Reported | GAAP — Reported | $ | 658.8 | | | $ | 307.8 | | | $ | 134.7 | | | $ | 63.1 | | | $ | 16.5 | | | $ | 46.6 | | | $ | 0.86 | | GAAP — Reported | $ | 660.6 | | | $ | 290.9 | | | $ | 123.4 | | | $ | 79.6 | | | $ | 14.7 | | | $ | 64.9 | | | $ | 1.20 | |
Restructuring and related costs | Restructuring and related costs | 0.2 | | | 10.0 | | | 30.8 | | | 30.8 | | | 6.9 | | | 23.9 | | | 0.44 | | Restructuring and related costs | — | | | 0.6 | | | 9.8 | | | 9.8 | | | 2.5 | | | 7.3 | | | 0.14 | |
Acquisition and integration costs | Acquisition and integration costs | — | | | 32.0 | | | 32.0 | | | 32.0 | | | 7.8 | | | 24.2 | | | 0.45 | | Acquisition and integration costs | 0.8 | | | 7.2 | | | 8.0 | | | 8.0 | | | 0.8 | | | 7.2 | | | 0.13 | |
Cost of early retirement of long-term debt | — | | | — | | | — | | | 26.2 | | | 6.4 | | | 19.8 | | | 0.36 | | |
Gain on sale of Infant and Pet Care business | — | | | — | | | — | | | (4.1) | | | (2.6) | | | (1.5) | | | (0.03) | | |
COVID-19 expenses | 3.9 | | | — | | | 3.9 | | | 3.9 | | | 0.9 | | | 3.0 | | | 0.05 | | |
Feminine and Infant Care evaluation costs | — | | | 0.3 | | | 0.3 | | | 0.3 | | | 0.1 | | | 0.2 | | | — | | |
SKU rationalization charges | | SKU rationalization charges | 22.5 | | | — | | | 22.5 | | | 22.5 | | | 5.5 | | | 17.0 | | | 0.31 | |
Legal settlement | | Legal settlement | — | | | (7.5) | | | (7.5) | | | (7.5) | | | (1.8) | | | (5.7) | | | (0.11) | |
Value-added tax settlement costs | | Value-added tax settlement costs | — | | | 3.4 | | | 3.4 | | | 3.4 | | | 1.1 | | | 2.3 | | | 0.04 | |
Sun Care reformulation costs | | Sun Care reformulation costs | 3.5 | | | — | | | 4.1 | | | 4.1 | | | 1.1 | | | 3.0 | | | 0.06 | |
Total Adjusted Non-GAAP | Total Adjusted Non-GAAP | $ | 662.9 | | | $ | 265.5 | | | $ | 201.7 | | | $ | 152.2 | | | $ | 36.0 | | | $ | 116.2 | | | $ | 2.13 | | Total Adjusted Non-GAAP | $ | 687.4 | | | $ | 287.2 | | | $ | 163.7 | | | $ | 119.9 | | | $ | 23.9 | | | $ | 96.0 | | | $ | 1.77 | |
| GAAP as a percent of net sales | GAAP as a percent of net sales | 45.1 | % | | 21.1 | % | | 9.2 | % | | GAAP effective tax rate | 26.1 | % | | GAAP as a percent of net sales | 40.4 | % | | 17.8 | % | | 7.5 | % | | GAAP effective tax rate | | 18.5 | % | |
Adjusted as a percent of net sales | Adjusted as a percent of net sales | 45.4 | % | | 18.2 | % | | 13.8 | % | | Adjusted effective tax rate | 23.7 | % | | Adjusted as a percent of net sales | 42.0 | % | | 17.6 | % | | 10.0 | % | | Adjusted effective tax rate | | 20.0 | % | |
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| Nine Months Ended June 30, 2021 |
| Gross Profit | | SG&A | | Operating Income | | EBIT(1) | | Income taxes | | Net Earnings | | Diluted EPS |
GAAP — Reported | $ | 705.3 | | | $ | 284.0 | | | $ | 175.6 | | | $ | 98.6 | | | $ | 25.7 | | | $ | 72.9 | | | $ | 1.32 | |
Restructuring and related costs | 0.3 | | | 6.2 | | | 18.1 | | | 18.1 | | | 4.4 | | | 13.7 | | | 0.25 | |
Acquisition and integration costs | 1.3 | | | 3.3 | | | 4.6 | | | 4.6 | | | 1.1 | | | 3.5 | | | 0.06 | |
Cost of early retirement of long-term debt | — | | | — | | | — | | | 26.1 | | | 6.4 | | | 19.7 | | | 0.36 | |
UK tax rate increase | — | | | — | | | — | | | — | | | (1.2) | | | 1.2 | | | 0.02 | |
Total Adjusted Non-GAAP | $ | 706.9 | | | $ | 274.5 | | | $ | 198.3 | | | $ | 147.4 | | | $ | 36.4 | | | $ | 111.0 | | | $ | 2.01 | |
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GAAP as a percent of net sales | 45.7 | % | | 18.4 | % | | 11.4 | % | | GAAP effective tax rate | | 26.1 | % | | |
Adjusted as a percent of net sales | 45.8 | % | | 17.8 | % | | 12.8 | % | | Adjusted effective tax rate | | 24.8 | % | | |
(1) EBIT is defined as Earnings before Income taxes.
Operating Results
The following table presents changes in net sales for the third quarter and first nine months of fiscal 2021,2022, as compared to the corresponding period in fiscal 2020,2021, and provides a reconciliation of organic net sales to reported amounts.
Net Sales | | | | | | | | | | | | | | | | | | | | | | | |
Net Sales - Total Company | | | | | | | |
Period Ended June 30, 2021 | | | | | | | |
| Q3 | | % Chg | | Nine Months | | % Chg |
Net sales - prior year | $ | 483.9 | | | | | $ | 1,460.9 | | | |
Organic | 60.5 | | | 12.5 | % | | 31.0 | | | 2.1 | % |
Impact of Cremo acquisition | 13.7 | | | 2.8 | % | | 44.9 | | | 3.1 | % |
Impact of the sale of the Infant and Pet Care business | — | | | — | % | | (26.8) | | | (1.8) | % |
Impact of currency | 15.6 | | | 3.3 | % | | 34.1 | | | 2.3 | % |
Net sales - current year | $ | 573.7 | | | 18.6 | % | | $ | 1,544.1 | | | 5.7 | % |
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Net Sales - Total Company | | | | | | | |
Period Ended June 30, 2022 | | | | | | | |
| Q3 | | % Chg | | Nine Months | | % Chg |
Net sales - fiscal 2021 | $ | 573.7 | | | | | $ | 1,544.1 | | | |
Organic | 51.4 | | | 9.0 | % | | 73.8 | | | 4.8 | % |
Impact of Billie acquisition, net | 21.1 | | | 3.7 | % | | 55.3 | | | 3.6 | % |
Impact of currency | (22.4) | | | (4.0) | % | | (38.4) | | | (2.5) | % |
Net sales - fiscal 2022 | $ | 623.8 | | | 8.7 | % | | $ | 1,634.8 | | | 5.9 | % |
For the third quarter of fiscal 2021,2022, net sales were $573.7,$623.8, an 18.6% increase compared toof 8.7%, including a $21.1 or 3.7% impact from the prior year quarter.acquisition of Billie and a $22.4 or 4.0% unfavorable impact from currency movements. Organic net sales increased 12.5% driven by strong Sun Care9.0%, reflecting increased volumes and Wet Shave performance across bothhigher pricing in the quarter. North America organic net sales increased 9.3% and International markets, and in part reflecting the impact of cycling prior year COVID-19 related headwinds.organic net sales increased 8.4%.
For the first nine months of fiscal 2021,2022, net sales were $1,544.1,$1,634.8, an increase of 5.9%, including a 5.7% increase compared to$55.3 or 3.6% impact from the prior year period.acquisition of Billie and a $38.4 or 2.5% unfavorable impact from currency movements. Organic net sales increased 2.1% compared to the prior year period. Organic net sales4.8% driven by increases across multiple product lines including Wet Shave, Sun Care, Grooming and Feminine Care. The increases were drivenoffset by higherdeclines in volumes of Wet Shave and Sun Care, particularly in North America, reflective of higher demand due to cycling COVID-19 headwinds in the prior year period and favorable pricing impacting Sun and Skin Care. Lower volumes for Feminine Care were driven by COVID-19 demand declines and pantry loading during the prior year period.
For further discussion regarding net sales, including a summary of reported versus organic changes, see “Segment Results.”
Gross Profit
Gross profit was $270.3$240.6 during the third quarter of fiscal 2021,2022, compared to $222.7$270.3 in the prior year quarter. Gross margin as a percent of net sales for the third quarter of fiscal 20212022 was 47.1%38.6%. Included in Cost of products sold was a $22.5 charge for the write-off of inventory for certain Wet Ones SKUs and a related contract termination charge. Adjusted gross margin percentage was 42.2% compared to 47.2%, an increase in the prior year quarter, a decline of 40-basis500-basis points compared to the prior year quarter, as favorable pricing, product mix and trade promotional spending, and gross savingsa 440-basis point net impact from Project Fuel more than offset higher commodity labor and distribution costs.transportation related costs net of productivity savings, and a 190-basis point combined impact from negative mix, higher trade spend and unfavorable currency, were only partly offset by the benefit from pricing.
Gross profit was $705.3$660.6 during the first nine months of fiscal 2021,2022, compared to $658.8$705.3 in the prior year period. Gross margin as a percent of net sales for the first nine months of fiscal 20212022 was 45.7%, up 60-basis points40.4% compared to 45.7% in the prior year period. Included in Cost of products sold was a $22.5 charge for the write-off of inventory for certain Wet Ones SKUs and a related contract termination charge. Adjusted gross margin percentage was 45.8%42.0%, up 40-basisdown 380-basis points from 45.8% in the prior year period, driven by favorable pricecommodity inflation, higher warehousing and categorydistribution expenses, and unfavorable product mix, gross savings from Project Fuel and favorable foreign currency fluctuationswhich were partially offset by rising commodity and supply chain costs and higher obsolescence charges.
favorable pricing.
Selling, General and Administrative Expense
Selling, general and administrative expense (“SG&A”)&A was $97.5$92.7 in the third quarter of fiscal 2021,2022, or 17.0%14.9% of net sales, compared to $91.3$97.5 in the prior year quarter, or 18.9%17.0% of net sales. Included in SG&A was a $7.5 gain related to a favorable legal settlement. Adjusted SG&A as a percent of net sales was 16.3%15.9%, a decline of 200-basis40-basis points, as the benefit ofleverage from increased net sales, leverage in the current quarterbenefits from operational efficiency programs, and favorable currency translation more than offset increased operating costs associated with the Cremo businessimpact of the Billie acquisition, including amortization, and negative foreign currency exchange.higher overall compensation expense.
SG&A was $284.0$290.9 in the first nine months of fiscal 2021,2022, or 18.4%17.8% of net sales, as compared to $307.8$284.0 in the prior year period, or 21.1%18.4% of net sales. Included in SG&A was a $7.5 gain related to a favorable legal settlement. Adjusted SG&A as a percent of net sales was 17.8%17.6%, a decreasedecline of 40-basis20-basis points, as stronger cost controldriven largely by leverage related to higher total net sales and the benefit of sales leverage more thanfrom operational efficiency programs. The decline was partially offset investments made in increased talent and capabilities and unfavorable foreign currency fluctuations.
by additional costs incurred associated with the Billie acquisition, including amortization expense as well as overall inflation.
Advertising and Sales Promotion Expense
For the third quarter of fiscal 2021,2022, A&P was $81.9, up $14.4$80.9, down $1.0 compared to the prior year quarter of $67.5.$81.9. A&P as a percent of net sales was 14.3%13.0%, up from 13.9%as compared to 14.3% in the prior year period. quarter as increased spending in support of Billie, Feminine Care and sun season execution were more than offset by lower spend in International markets, and the impact of currency translation.
For the first nine months of fiscal 2021,2022, A&P was $191.5,$197.0, up $35.9$5.5 compared to the prior year period. A&P as a percent of net sales was 12.4%12.1%, as compared to 10.7%down from 12.4% in the prior year period. The increase in A&P expense was the resultprimarily driven by increases in support of investments in and focus on critical commercial efforts supporting the Schick Hydro relaunch, Schick Stubble Eraser® product launch, Skintimate campaign, and Men’s systems development in Japan, increased support for the Sun Care businessafter the COVID-19 pandemic-related declines in the prior year and the inclusion of Cremo brand investments.
additional A&P expense for Grooming products.
Research and Development Expense
Research and development expense (“R&D”) for the third quarter of fiscal 20212022 was $14.6,$13.6, compared to $12.4$14.6 in the prior year quarter. As a percent of net sales, R&D was 2.5%2.2% in the third quarter of fiscal 20212022 compared to 2.6%2.5% in the prior year quarter.
R&D for the first nine months of fiscal 20212022 was $42.6,$40.1, compared to $40.1$42.6 in the prior year period. As a percent of net sales, R&D was 2.8%2.5% in the first nine months of fiscal 2021,2022, compared to 2.7%2.8% in the prior year period. R&D expense was slightly updown compared to the prior year driven primarily by incremental investments in resources and capabilities in support of the Company’s focus on innovation and development primarily in the Sun and Skin Care segment.
lower program spend.
Interest Expense Associated with Debt
Interest expense associated with debt for the third quarter of fiscal 20212022 was $16.4,$18.0, compared to $15.5$16.4 in the prior year quarter. For the first nine months of fiscal 2021,2022, interest expense was $51.1,$53.3 compared to $43.7$51.1 in the prior year period. The increase in interest expense was the result of higher average outstandingoverall debt and higher interest ratebalance from draws on the Revolving Credit Facility in fiscal 2022 primarily as a resultto finance the acquisition of the issuance of the 5.5% $750 Senior Notes due 2028 issued in May 2020 (the “2028 Notes”).
Billie.
Other (Income) Expense, (Income), Netnet
Other (income) expense, net was $0.8income of $4.4 in the third quarter of fiscal 2021,2022, compared to incomeexpense of $3.5$0.8 in the prior year quarter. The unfavorable movement in other expensesOther (income) expense, net was income of $9.5 during the first nine months of fiscal 2022, compared to the prior year quarter was driven by prior year income from hedge settlements. Other income, net wasof $0.2 during the first nine months of fiscal 2021,2021. The increase in income was driven by favorable foreign currency hedge settlements compared to expense of $5.8 during the first nine months of fiscal 2020. The favorable movement was largely related to unfavorable foreign currency movements in the prior period.
year, which helped to offset other negative operational impacts from currency.
Income Tax Provision
The effective tax rate for the firstthree and nine months of fiscal 2021ended June 30, 2022 was 26.1%16.1% and 18.5%, respectively, compared to 24.2% and 26.1% in the prior year period.period, respectively. On an adjusted basis, the effective tax rate was 24.8%19.3% and 23.7%20.0% for the firstthree and nine months of fiscalended June 30, 2022, respectively, and 22.4% and 24.8% for the three and nine months ended June 30, 2021, and fiscal 2020, respectively. The fiscal 20212022 effective tax rate and adjusted effective tax rate reflects higher unfavorable global intangible low-tax incomereflect a favorable mix of earnings in low tax jurisdictions and Internal Revenue Service Code Section 162(m) permanent adjustments compared to fiscal 2020.
The following table presents a reconciliationfavorable impact of the adjusted effective tax rate, which is a non-GAAP measure: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended June 30, 2021 | | Nine Months Ended June 30, 2020 |
| Reported | | Adjustments (1) | | Adjusted (Non-GAAP) | | Reported | | Adjustments (1) | | Adjusted (Non-GAAP) |
Earnings before income taxes | $ | 98.6 | | | $ | 48.8 | | | $ | 147.4 | | | $ | 63.1 | | | $ | 89.1 | | | $ | 152.2 | |
Income tax provision | 25.7 | | | 10.7 | | | 36.4 | | | 16.5 | | | 19.5 | | | 36.0 | |
Net earnings | $ | 72.9 | | | $ | 38.1 | | | $ | 111.0 | | | $ | 46.6 | | | $ | 69.6 | | | $ | 116.2 | |
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Effective tax rate | 26.1 | % | | | | | | 26.1 | % | | | | |
Adjusted effective tax rate | | | | | 24.8 | % | | | | | | 23.7 | % |
(1)Includes adjustments for expenses management excludes when analyzing the operating performance of the Company. Refer to the GAAP to Non-GAAP reconciliation above for a detailed listing of adjustments.
Project Fuel
Project Fuel is an enterprise-wide transformational initiative that was launched in the second fiscal quarter of 2018, to address all aspects of our business and cost structure, simplifying and transforming the organization, structure and key processes. Project Fuel is facilitating further re-investmentchange in our growth strategy while enabling usprior estimates.
Operating Model Redesign
In fiscal 2022, we are taking specific actions to achieve its desired future state operations.
Fiscal third quarter 2021 Project Fuel related gross savings were approximately $19, bringing cumulative gross savings to approximately $264. We now expect Project Fuel to generate approximately $280 in total project gross savings by the end of the 2021 fiscal year. The savings generated will be used to fuel investments and brand building in strategic growth initiatives,
mitigate anticipated operational cost headwinds from inflation and other rising input costsstrengthen our operating model, simplify our organization and improve our overall profitabilitymanufacturing and cash flows.
To implement the restructuring elementsupply chain efficiency and productivity. As a result of Project Fuel,these actions, we now expect to incur one-time pre-tax charges of approximately $160 through the end of the 2021$15 in fiscal year.
Restructuring2022. We incurred $3.9 and related charges were $8.2 and $18.1 for$9.8 during the third quarter and first nine months ended June 30, 2021,of fiscal 2022, respectively, bringing cumulative chargesprimarily related to $151.7 for the project.
Capital expenditures for Project Fuel were $8.4 for the nine months ended June 30, 2021 bringing cumulative capital expenditures to $66.5 for the project.
For further information on our restructuring projects, refer to Note 3 of Notes to Condensed Consolidated Financial Statements.employee severance and benefit costs.
Segment Results
The following tables present changes in segment net sales and segment profit for the third quarter and first nine months of fiscal 2021,2022, compared to the corresponding periodperiods in fiscal 2020,2021, and provide a reconciliation of organic segment net sales and organic segment profit to reported amounts. For a reconciliation of segment profit to Earnings before income taxes, refer to Note 15 of Notes to Condensed Consolidated Financial Statements.
Our operating model includes some shared business functions across the segments, including product warehousing and distribution, transaction processing functions and, in most cases, a combined sales force and management teams. We apply a fully allocated cost basis in which shared business functions are allocated between segments.
Net sales and segment profit activity related to Billie products were included in the segments.Wet Shave segment for the post-acquisition period.
Wet Shave | Net Sales - Wet Shave | Net Sales - Wet Shave | | Net Sales - Wet Shave | |
Period Ended June 30, 2021 | | |
Period Ended June 30, 2022 | | Period Ended June 30, 2022 | |
| | Q3 | | % Chg | | Nine Months | | % Chg | | Q3 | | % Chg | | Nine Months | | % Chg |
Net sales - prior year | $ | 278.0 | | | | | $ | 835.5 | | | | |
Net sales - fiscal 2021 | | Net sales - fiscal 2021 | $ | 304.9 | | | | | $ | 876.7 | | | |
Organic | Organic | 15.9 | | | 5.7 | % | | 14.8 | | | 1.8 | % | Organic | 19.1 | | | 6.3 | % | | 19.0 | | | 2.2 | % |
Impact of Billie acquisition, net | | Impact of Billie acquisition, net | 21.1 | | | 6.9 | % | | 55.3 | | | 6.3 | % |
Impact of currency | Impact of currency | 11.0 | | | 4.0 | % | | 26.4 | | | 3.1 | % | Impact of currency | (18.8) | | | (6.2) | % | | (33.6) | | | (3.9) | % |
Net sales - current year | $ | 304.9 | | | 9.7 | % | | $ | 876.7 | | | 4.9 | % | |
Net sales - fiscal 2022 | | Net sales - fiscal 2022 | $ | 326.3 | | | 7.0 | % | | $ | 917.4 | | | 4.6 | % |
Wet Shave net sales for the third quarter of fiscal 20212022 increased 9.7%7.0% compared to the prior year quarter, inclusive of a 4.0%6.9% increase from the acquisition of Billie and a 6.2% decline due to currency movements. Organic net sales increased $15.9,$19.1, or 5.7%6.3%, driven by on-going growthincreases in Men’s and Women’s shave, both brandedSystems, Disposables, and private label, and higher consumption across the full category. By region,Shave Preps. Organic net sales in North America
increased 5.2%, reflecting higher volumes and price, while International organic net sales increased 4.6%7.1%, while International markets increased 6.6%.primarily driven by higher volumes.
Wet Shave net sales for the first nine months of fiscal 20212022 increased 4.9%4.6%, inclusive of a 3.1%6.3% increase from the acquisition of Billie and a 3.9% decline due to currency movements. Organic net sales increased $14.8, or 1.8%. The increase in organic net sales was2.2% compared to the prior year driven by growthincreases in Women’s systems, partiallySystems, Disposables, and Shave Preps, offset by declines in Men’s systems and Shave Preps. Women’s systems growth included increases in Intuition, Skintimate and Hydro Silk, while Men’s systems saw growth in Hydro and Bulldog, offsetting declines in other brands. By region, North America organicSystems. Organic net sales increased 2.0% whilein International markets increased 1.6%4.2% compared to declines in North America of 0.4%.
| Segment Profit - Wet Shave | Segment Profit - Wet Shave | | Segment Profit - Wet Shave | |
Period Ended June 30, 2021 | | |
Period Ended June 30, 2022 | | Period Ended June 30, 2022 | |
| | Q3 | | % Chg | | Nine Months | | % Chg | | Q3 | | % Chg | | Nine Months | | % Chg |
Segment profit - prior year | $ | 44.6 | | | | | $ | 142.0 | | | | |
Segment profit - fiscal 2021 | | Segment profit - fiscal 2021 | $ | 43.1 | | | | | $ | 141.6 | | | |
Organic | Organic | (4.1) | | | (9.2) | % | | (6.4) | | | (4.5) | % | Organic | 0.2 | | | 0.5 | % | | (7.5) | | | (5.3) | % |
Impact of Billie acquisition, net | | Impact of Billie acquisition, net | (1.0) | | | (2.3) | % | | (8.6) | | | (6.1) | % |
Impact of currency | Impact of currency | 2.6 | | | 5.8 | % | | 6.0 | | | 4.2 | % | Impact of currency | (4.8) | | | (11.2) | % | | (8.9) | | | (6.3) | % |
Segment profit - current year | $ | 43.1 | | | (3.4) | % | | $ | 141.6 | | | (0.3) | % | |
Segment profit - fiscal 2022 | | Segment profit - fiscal 2022 | $ | 37.5 | | | (13.0) | % | | $ | 116.6 | | | (17.7) | % |
Wet Shave segment profit for the third quarter of fiscal 20212022 was $43.1,$37.5, down $1.5,$5.6, or 3.4%, compared to the prior year quarter, inclusive of the impact of currency movements.13.0%. Organic segment profit decreased $4.1,increased $0.2, or 9.2%0.5%, as increased net sales and favorable gross margins were more than reflecting lower A&P expense, partially offset by higher A&P for Men’s systems during the quarter.lower gross profit.
Wet Shave segment profit for the first nine months of fiscal 20212022 was $141.6,$116.6, down $0.4,$25.0, or 0.3%, from the prior year period, inclusive of the impact of currency movements.17.7%. Organic segment profit decreased $6.4,$7.5, or 4.5%5.3%, primarily due to significantlyinflationary pressures resulting in higher A&P in support of Men’scommodity costs and Women’s systems,warehousing and distribution costs, partially offset partially by higher gross marginsfavorable pricing and lower overheads.
A&P expense.
Sun and Skin Care
Sun and Skin Care segment net sales and profit are affected by the seasonality of sun care products. As a result, segment net sales and profit have historically been higher in the second and third quarters of the fiscal year. | | | | | | | | | | | | | | | | | | | | | | | |
Net Sales - Sun and Skin Care | | | | | | | |
Period Ended June 30, 2021 | | | | | | | |
| Q3 | | % Chg | | Nine Months | | % Chg |
Net sales - prior year | $ | 136.9 | | | | | $ | 369.5 | | | |
Organic | 40.4 | | | 29.5 | % | | 36.2 | | | 9.8 | % |
Impact of Cremo acquisition | 13.7 | | | 10.0 | % | | 44.9 | | | 12.2 | % |
Impact of currency | 4.2 | | | 3.1 | % | | 7.1 | | | 1.9 | % |
Net sales - current year | $ | 195.2 | | | 42.6 | % | | $ | 457.7 | | | 23.9 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
Net Sales - Sun and Skin Care | | | | | | | |
Period Ended June 30, 2022 | | | | | | | |
| Q3 | | % Chg | | Nine Months | | % Chg |
Net sales - fiscal 2021 | $ | 195.2 | | | | | $ | 457.7 | | | |
Organic | 24.6 | | | 12.6 | % | | 51.4 | | | 11.2 | % |
Impact of currency | (3.6) | | | (1.8) | % | | (4.8) | | | (1.0) | % |
Net sales - fiscal 2022 | $ | 216.2 | | | 10.8 | % | | $ | 504.3 | | | 10.2 | % |
Sun and Skin Care net sales for the third quarter of fiscal 20212022 increased 42.6% compared to the prior year quarter, inclusive of a 10.0% increase due to the Cremo acquisition and a 3.1% increase due to currency movements.10.8%. Organic net sales increased $40.4,$24.6, or 29.5%12.6%. The increase in organic net sales was primarilylargely driven by Sun Care organic growth of nearly 50%approximately 15%, reflecting a sharpdistribution gains in North America and continued category recovery in consumption after COVID-19 impacted declines in the prior year period, as well as 17%International markets. Additionally, Grooming organic net sales increased 7.5%, driven by 14% growth in Men’s grooming.International, while Wet Ones organic net sales contracted $8.5, or 32% in the quarter, reflecting ongoing high retailer inventory and lower consumption as we cycled prior year COVID-19 driven performance.returned to growth, increasing 7.4%.
Sun and Skin Care net sales for the first nine months of fiscal 20212022 increased 23.9% compared to the prior year period, inclusive of a 12.2% increase due to the Cremo acquisition and a 1.9% increase due to currency movements.10.2%. Organic net sales increased $36.2,$51.4, or 9.8%11.2%. TheOrganic net sales increases were driven by higher Sun Care volumes, resulting in growth of 23% globally, partially offset by unfavorable trade and coupons. Men’s Grooming increased 7%, driven by Cremo and Jack Black. Wet Ones organic net sales increase wasdeclined 23%, driven by Sun Care growth which totaled 10% globally reflecting a sharp recovery in consumption after COVID-19, and favorable pricing in International markets. Wet Ones grew 9% driven by higherlower volumes inas demand fell during the first halfsix months of fiscal 2021. Men’s Grooming increased over 12% driven by Jack Black and Bulldog. | | | | | | | | | | | | | | | | | | | | | | | |
Segment Profit - Sun and Skin Care | | | | | | | |
Period Ended June 30, 2021 | | | | | | | |
| Q3 | | % Chg | | Nine Months | | % Chg |
Segment profit - prior year | $ | 23.5 | | | | | $ | 67.9 | | | |
Organic | 18.4 | | | 78.3 | % | | 11.5 | | | 16.9 | % |
Impact of Cremo acquisition | 1.9 | | | 8.1 | % | | 5.7 | | | 8.4 | % |
Impact of currency | 1.2 | | | 5.1 | % | | 1.3 | | | 1.9 | % |
Segment profit - current year | $ | 45.0 | | | 91.5 | % | | $ | 86.4 | | | 27.2 | % |
2022 to pre-COVID-19 pandemic levels. | | | | | | | | | | | | | | | | | | | | | | | |
Segment Profit - Sun and Skin Care | | | | | | | |
Period Ended June 30, 2022 | | | | | | | |
| Q3 | | % Chg | | Nine Months | | % Chg |
Segment profit - fiscal 2021 | $ | 45.0 | | | | | $ | 86.4 | | | |
Organic | 2.2 | | | 4.9 | % | | 6.9 | | | 8.0 | % |
Impact of currency | (0.6) | | | (1.3) | % | | (0.7) | | | (0.8) | % |
Segment profit -fiscal 2022 | $ | 46.6 | | | 3.6 | % | | $ | 92.6 | | | 7.2 | % |
Segment profit for the third quarter of fiscal 20212022 was $45.0,$46.6, an increase of $21.5, compared to the prior year quarter.$1.6. Organic segment profit excluding the Cremo acquisition and currency movements, increased $18.4, driven by increased net$2.2, as higher sales and gross margin from favorable volumes and pricing,in Sun Care were partially offset by unfavorable materials costs.inflationary cost pressures and higher A&P spend.
Segment profit for the first nine months of fiscal 20212022 was $86.4,$92.6, an increase of $18.5,$6.2, or 27.2%, compared to the prior year period.7.2%. Organic segment profit excluding the Cremo acquisition and currency movements, increased $11.5,$6.9, or 16.9%8.0%, driven primarily by increased nethigher sales and gross margin from favorable volumes, and pricing,partially offset by unfavorable materials costs.inflationary cost pressures and higher A&P expense.
Feminine Care | Net Sales - Feminine Care | Net Sales - Feminine Care | | Net Sales - Feminine Care | |
Period Ended June 30, 2021 | | |
Period Ended June 30, 2022 | | Period Ended June 30, 2022 | |
| | Q3 | | % Chg | | Nine Months | | % Chg | | Q3 | | % Chg | | Nine Months | | % Chg |
Net sales - prior year | $ | 69.0 | | | | | $ | 229.1 | | | | |
Net sales - fiscal 2021 | | Net sales - fiscal 2021 | $ | 73.6 | | | | | $ | 209.7 | | | |
Organic | Organic | 4.2 | | | 6.1 | % | | (20.0) | | | (8.7) | % | Organic | 7.7 | | | 10.5 | % | | 3.4 | | | 1.6 | % |
Impact of currency | Impact of currency | 0.4 | | | 0.6 | % | | 0.6 | | | 0.2 | % | Impact of currency | — | | | — | % | | — | | | — | % |
Net sales - current year | $ | 73.6 | | | 6.7 | % | | $ | 209.7 | | | (8.5) | % | |
Net sales - fiscal 2022 | | Net sales - fiscal 2022 | $ | 81.3 | | | 10.5 | % | | $ | 213.1 | | | 1.6 | % |
Feminine Care net sales for the third quarter of fiscal 20212022 increased $4.6,$7.7, or 6.7%10.5%. The increase in net sales was largely driven by increasedreflected higher category consumption as the category recovered from the prior year’s steep declines due to COVID-19.and improved product availability and shelf replenishment.
Feminine Care net sales for the first nine months of fiscal 2021 decreased $19.4,2022 increased $3.4, or 8.5%1.6%. NetThe increase in net sales declines were driven by overallreflected higher category declines, the effect ofconsumption compared to the prior year pantry loading and the negative effect of distribution losses. | | | | | | | | | | | | | | | | | | | | | | | |
Segment Profit - Feminine Care | | | | | | | |
Period Ended June 30, 2021 | | | | | | | |
| Q3 | | %Chg | | Nine Months | | %Chg |
Segment profit - prior year | $ | 12.0 | | | | | $ | 43.4 | | | |
Organic | 1.4 | | | 11.7 | % | | (15.8) | | | (36.4) | % |
Impact of currency | 0.3 | | | 2.5 | % | | 0.5 | | | 1.1 | % |
Segment profit - current year | $ | 13.7 | | | 14.2 | % | | $ | 28.1 | | | (35.3) | % |
year. | | | | | | | | | | | | | | | | | | | | | | | |
Segment Profit - Feminine Care | | | | | | | |
Period Ended June 30, 2022 | | | | | | | |
| Q3 | | %Chg | | Nine Months | | %Chg |
Segment profit -fiscal 2021 | $ | 13.7 | | | | | $ | 28.1 | | | |
Organic | (4.8) | | | (35.1) | % | | (9.0) | | | (32.0) | % |
Impact of currency | (0.1) | | | (0.7) | % | | — | | | — | % |
Segment profit - fiscal 2022 | $ | 8.8 | | | (35.8) | % | | $ | 19.1 | | | (32.0) | % |
Feminine Care segment profit for the third quarter of fiscal 20212022 was $13.7, an increase$8.8, a decrease of $1.7,$4.9, or 14.2%35.8%, compared to the prior year quarter. The decline waslargely driven by lower gross profit, reflecting higher gross margin, reflectingcommodity and transportation related costs, as well as increased volumes, favorable trade offset by higher costs, including materials cost and warehousing and distribution charges, and higher A&P.&P support.
Feminine Care segment profit for the first nine months of fiscal 20212022 was $28.1,$19.1 a decrease of $15.3,$9.0, or 35.3%32.0%, from the prior year period, primarily due to unfavorable gross margin from lower sales volumes across all products, unfavorable cost mix due to higherinflationary pressures on materials and warehouse and distribution, costs, and higher A&P.
All Other
The Infant and Pet Care business divestiture, completed in December 2019, disposed of the entirety of the operations of the All Other segment. The results below represent the impact of the divestiture to segment performance: | | | | | | | | | | | |
Net Sales - All Other | | | |
Period Ended June 30, 2021 | | | |
| Nine Months | | %Chg |
Net sales - prior year | $ | 26.8 | | | |
Organic | — | | | — | % |
Impact of the sale of the Infant and Pet Care business | (26.8) | | | (100.0) | % |
Impact of currency | — | | | — | % |
Net sales - current year | $ | — | | | (100.0) | % |
| | | | | | | | | | | |
Segment Profit - All Other | | | |
Period Ended June 30, 2021 | | | |
| Nine Months | | %Chg |
Segment profit - prior year | $ | 3.1 | | | |
Organic | — | | | — | % |
Impact of the sale of the Infant and Pet Care business | (3.1) | | | (100.0) | % |
Impact of currency | — | | | — | % |
Segment profit - current year | $ | — | | | (100.0) | % |
partially offset by favorable pricing.
General Corporate and Other Expenses | | | Quarter Ended June 30, | | Nine Months Ended June 30, | | Quarter Ended June 30, | | Nine Months Ended June 30, |
| | 2021 | | 2020 | | 2021 | | 2020 | | 2022 | | 2021 | | 2022 | | 2021 |
Corporate expenses | Corporate expenses | $ | 15.7 | | | $ | 17.7 | | | $ | 41.2 | | | $ | 41.9 | | Corporate expenses | $ | 14.8 | | | $ | 15.7 | | | $ | 42.8 | | | $ | 41.2 | |
Restructuring and related costs | Restructuring and related costs | 8.2 | | | 10.4 | | | 18.1 | | | 30.8 | | Restructuring and related costs | 3.9 | | | 8.2 | | | 9.8 | | | 18.1 | |
Acquisition and integration costs | Acquisition and integration costs | 1.3 | | | 0.3 | | | 4.6 | | | 32.0 | | Acquisition and integration costs | 0.9 | | | 1.3 | | | 8.0 | | | 4.6 | |
SKU rationalization charges | | SKU rationalization charges | 22.5 | | | — | | | 22.5 | | | — | |
Legal settlement | | Legal settlement | (7.5) | | | — | | | (7.5) | | | — | |
Value-added tax settlement costs | | Value-added tax settlement costs | — | | | — | | | 3.4 | | | — | |
Sun Care reformulation costs | | Sun Care reformulation costs | 0.6 | | | — | | | 4.1 | | | — | |
Cost of early retirement of long-term debt | Cost of early retirement of long-term debt | — | | | 26.2 | | | 26.1 | | | 26.2 | | Cost of early retirement of long-term debt | — | | | — | | | — | | | 26.1 | |
Gain on sale of Infant and Pet Care business | — | | | — | | | — | | | (4.1) | | |
| COVID-19 expenses | — | | | 3.9 | | | — | | | 3.9 | | |
Feminine and Infant Care evaluation costs | — | | | — | | | — | | | 0.3 | | |
General corporate and other expenses | General corporate and other expenses | $ | 25.2 | | | $ | 58.5 | | | $ | 90.0 | | | $ | 131.0 | | General corporate and other expenses | $ | 35.2 | | | $ | 25.2 | | | $ | 83.1 | | | $ | 90.0 | |
% of net sales | % of net sales | 4.4 | % | | 12.1 | % | | 5.8 | % | | 9.0 | % | % of net sales | 5.6 | % | | 4.4 | % | | 5.1 | % | | 5.8 | % |
For the third quarter of fiscal 2021, general2022, corporate expenses were $14.8, or 2.4% of net sales, compared to $15.7, or 2.7% of net sales. For the first nine months of fiscal 2022, corporate expenses were $42.8, or 2.6% of net sales, compared to $17.7,$41.2, or 3.7%2.7% of net sales, in the prior year quarter.sales. For the third quarter of fiscal 2021,2022, the decline in corporate expense was primarily due to lower compensation expenses, Project Fuel savings and lower discretionary spending.
For the first nine months of fiscal 2021, general corporate expenses were $41.2, or 2.7% of net sales, compared to $41.9, or 2.9% of net sales, in the prior year period. For the nine months ended June 30, 2021,2022, the slight declineincrease in corporate expense was primarily due to Project Fuel savingshigher salary and lower discretionary spending.benefit costs.
Liquidity and Capital Resources
To date, COVID-19 has not had a significant impact on our liquidity or capital resources. However, the ongoing COVID-19 pandemic has led to disruption and volatility in the global capital markets, which, depending on future developments, could impact our capital resources and liquidity in the future.
At June 30, 2021,2022, a portion of our cash balances were located outside the U.S. Given our extensive international operations, a significant portion of our cash is denominated in foreign currencies. Refer to Note 14 of Notes to Condensed Consolidated Financial Statements for a discussion of the primary currencies to which the Company is exposed. We manage our worldwide cash requirements by reviewing available funds among the many subsidiaries through which we conduct business and the cost effectiveness with which those funds can be accessed. We generally repatriate a portion of current year earnings from select non-U.S. subsidiaries only if the economic cost of the repatriation is not considered material.
The counterparties that hold our deposits consist of major financial institutions. We consistently monitor positions with, and the credit ratings of, counterparties both internally and by using outside ratings agencies.
Our total borrowings were $1,274.8$1,389.9 at June 30, 2021,2022, including $24.8$139.9 tied to variable interest rates. Our total borrowings at September 30, 20202021 were $1,271.1.$1,276.5. We had outstanding borrowings of $121.0 under the Revolving Credit Facility at June 30, 2022, primarily to fund the acquisition of Billie. Taking into account outstanding letters of credit of $6.5, as of June 30, 2022, $297.5 was available under the Revolving Credit Facility. We had outstanding international borrowings, recorded in Notes payable, of $24.8$18.9 and $21.1$26.5 as of June 30, 20212022 and September 30, 2020,2021, respectively.
As previously discussed,Effective February 7, 2022, we increased the maximum receivables sold facility amount under the Sixth Amendment to Master Accounts Receivable Purchase Agreement to $180.0 from $150.0. Refer to Note 9 of Notes to Condensed Consolidated Financial Statements for further discussion on March 8, 2021, the Company entered into the 2029 Notes. The Company used the net proceeds of the 2029 Notes, together with cash on hand, to satisfy and discharge the obligations outstanding under its 4.70% Senior Notes in the amount of $500 due 2022 (the “2022 Notes”).our Accounts Receivable Facility.
Historically, we have generated, and expect to continue to generate, positive cash flows from operations. Our cash flows are affected by the seasonality of our Sun Care products, typically resulting in higher net sales and increased cash generated in the second and third quarter of each fiscal year. While we cannot reasonably estimate the full impact of the COVID-19 pandemic will have on our cash flows, we believe our cash on hand, cash flows from operations and borrowing capacity under our U.S Revolving Credit Facility due 2025 (the “Revolving Credit Facility”) will be sufficient to satisfy our future working capital requirements, interest payments, R&D activities, capital expenditures, and other financing requirements for at least the next 12 months. We will continue to monitor our cash flows, spending and liquidity needs.
To date, the COVID-19 pandemic has not had a significant impact on our liquidity or capital resources. However, the COVID-19 pandemic has led to disruption and volatility in the global capital markets, which, depending on future developments, could impact our capital resources and liquidity in the future.
Short-term financing needs consist primarily of working capital requirements and principal and interest payments on our long-term debt. Long-term financing needs will depend largely on potential growth opportunities, including acquisition activity and repayment or refinancing of our long-term debt obligations. Our long-term liquidity may be influenced by our ability to borrow additional funds, renegotiate existing debt, and raise equity on terms that are favorable to us. We may, from time-to-time, seek to repurchase shares of our common stock. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. Our long-term liquidity may be influenced by our ability to borrow additional funds, renegotiate existing debt, and raise equity on terms that are favorable to us.
The expected minimum required contribution to our pension plans in fiscal 2021 is $6.3; however, discretionary contributions may also be made. During the first nine months of fiscal 2021 we contributed $4.3 to our pension plans.
As of June 30, 2021,2022, we were in compliance with the provisions and covenants associated with our debt agreements.
Cash Flows
A summary of our cash flow activities is provided in the following table: | | | Nine Months Ended June 30, | | Nine Months Ended June 30, |
| | 2021 | | 2020 | | 2022 | | 2021 |
Net cash from (used by): | Net cash from (used by): | | | | Net cash from (used by): | | | |
Operating activities | Operating activities | $ | 155.9 | | | $ | 118.6 | | Operating activities | $ | 72.4 | | | $ | 155.9 | |
Investing activities | Investing activities | (26.1) | | | 71.3 | | Investing activities | (337.6) | | | (26.1) | |
Financing activities | Financing activities | (59.9) | | | (21.6) | | Financing activities | (21.4) | | | (59.9) | |
Effect of exchange rate changes on cash | Effect of exchange rate changes on cash | 2.9 | | | 2.0 | | Effect of exchange rate changes on cash | (11.0) | | | 2.9 | |
Net increase in cash and cash equivalents | $ | 72.8 | | | $ | 170.3 | | |
Net (decrease) increase in cash and cash equivalents | | Net (decrease) increase in cash and cash equivalents | $ | (297.6) | | | $ | 72.8 | |
Operating Activities
Cash flow from operating activities was $155.9$72.4 during the first nine months of fiscal 2021,2022, compared to $155.9 during the prior year period. The decrease in cash flows from operating activities of $118.6 duringversus the same period in the prior year. The increase in cash from operationsyear was primarily related to increaseddriven by a larger net earnings.working capital build.
Investing Activities
Cash flow used by investing activities was $26.1$337.6 during the first nine months of fiscal 2021,2022, compared to cash inflows of $71.3$26.1 used during the same periodprior year period. We completed the acquisition of Billie for $309.4, net of cash acquired, in the prior year. During the nine months ended June 30, 2021,fiscal 2022. Additionally, we collected $7.5$5.0 of proceeds from the sale of the Infant and Pet Care business compared to $95.8 in the prior year quarter. Capital expenditures were $34.1 during the first nine months of fiscal 20212022, compared to $26.9 during the same period$7.5 in the prior year. Additionally, other investing cash inflows related to the collection of receivables from our $150 uncommitted master accounts receivable purchase agreement with The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch, as the purchaser (the “Accounts Receivable Facility”) totaled $2.6 and $3.9year period. Capital expenditures were $37.4 during the first nine months of fiscal 2021 and 2020, respectively, as a result of collections on2022, compared to $34.1 in the deferred purchase price of accounts receivables sold.prior year period.
Financing Activities
Net cash used by financing activities was $59.9$21.4 during the first nine months of fiscal 2021,2022, compared to $21.6 during the same period$59.9 in the prior year.year period. During the first nine months of fiscal 2021,2022, we had net borrowings of $121.0 under our Revolving Credit Facility, primarily to fund the acquisition of Billie. We repurchased $9.2$110.1 of our common stock under our 2018 Board authorization to repurchase our common stock (the “Repurchase Plan”). The Company compared to $9.2 in the prior year period. Dividend payments totaled $24.7 in the first nine months of fiscal 2022, compared to $16.7 in the prior year period. We had financing outflows for employee equity awards held for taxes totaling $10.4 in the first nine months of fiscal 2022, compared to $4.0 in the prior year period. In fiscal 2021, we replaced itsour $500 2022 Senior Notes with the issuance of $500 2029 Notes, together with cash on hand.Senior Notes. Additional financing cash outflows incurred in fiscal 2021 were related to costs of early debt retirement of the 2022 Senior Notes totaling $26.1 and debt issuance costs of $6.5. Dividend payments totaled $16.7 in the first nine months of fiscal 2021. Additionally, cash flows associated with the Accounts Receivable Facility were inflows of $0.8 during the first nine months of fiscal 2021 compared to financing outflows of $14.4 in the prior year period. In the prior year period, the Company replaced its 4.7% Senior Notes in the amount of $600 Senior Notes due 2021 with the $750 2028 Senior Notes. Early debt retirement of the 2021 Senior Notes totaling $26.2 and debt issuance costs totaling $10.4. The Company had net repayments of its Revolving Credit Facility during the nine months ended June 30, 2020 totaling $117.0.
Share Repurchases
During the first nine months of fiscal 2021,2022, we repurchased 0.32.9 shares of our common stock for $9.2.$110.1. We have 9.76.9 shares remaining under the Repurchase Plan. Future share repurchases, if any, would be made in the open market, privately negotiated transactions or otherwise, in such amounts and at such times as we deem appropriate based upon prevailing market conditions, business needs and other factors.
Dividends
On May 6, 2021,February 4, 2022, the Company’s Board of Directors (the “Board”) declared a quarterly cash dividend of $0.15 per common share of common stock outstanding.for the first fiscal quarter. The dividend was paid April 5, 2022, to stockholders of record as of the close of business on March 8, 2022.
On May 6, 2022, the Board declared a quarterly cash dividend of $0.15 per common share for the second fiscal quarter. The dividend was paid July 7, 20212022, to holdersstockholders of record as of the close of business on June 4, 2021. 2, 2022.
Dividends declared during the nine months ended June 30, 20212022 totaled $25.4.$24.7. Payments made for dividends during the nine months ended June 30, 20212022 totaled $16.7.$24.7.
On August 5, 2021,July 29, 2022, the Board of Directors declared a quarterly cash dividend of $0.15 per common stock outstandingshare for the third fiscal quarter. The dividend iswill be payable on October 5, 20212022 to stockholdersshareholders of record as of the close of business on September 9, 2021.
2, 2022.
Commitments and Contingencies
Contractual Obligations
During the first nine monthsAt June 30, 2022, we had outstanding borrowings of fiscal 2021, there were no net repayments on$121.0 under the Revolving Credit Facility. As of June 30, 2021,2022, future minimum repayments of debt were: $121.0 in fiscal 2025, $750.0 in fiscal 2028 and $500.0 in fiscal 2029.
There have been no other material changes in our contractual obligations since the presentation in our 20202021 Annual Report.
Critical Accounting Policies
Our critical accounting policies and estimates are fully described in our Annual Report on Form 10-K for the year ended September 30, 2021, as filed with the Securities and Exchange Commission ( the “SEC”) on November 19, 2021. The preparation of these financial statements requires us to make estimates and assumptions. These estimates and assumptions can be subjective and complex, and consequently, actual results could differ from those estimates. There have been no significant changes to our critical accounting policies and estimates since September 30, 2021.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
(Amounts in millions)
The market risk inherent in our financial instruments and positions represents the potential loss arising from adverse changes in currency rates, commodity prices, and interest rates. At times, we enter into contractual arrangements (derivatives) to reduce these exposures. For further information on our foreign currency derivative instruments, refer to Note 14 of Notes to Condensed Consolidated Financial Statements. As of June 30, 2021,2022, there were no open derivative or hedging instruments for future purchases of raw materials or commodities. Our exposure to interest rate risk relates primarily to our variable-rate debt instruments, which currently bear interest based on LIBOR plus margin. As of June 30, 2021,2022, our outstanding variable-rate debt included $24.8$139.9 related to our Revolving Credit Facility and international, variable-rate notenotes payable. Assuming a one-percent increase in the applicable interest rates, annual interest expense on these variable-rate debt instruments would not increase materially.approximately $1.4.
There have been no material changes in our assessment of market risk sensitivity since our presentation of Quantitative and Qualitative Disclosures About Market Risk in our 20202021 Annual Report on Form 10-K.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Exchange Act, is recorded, processed, summarized and reported within the specified time periods, and that such information is accumulated and communicated to management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure.
Our management, with the participation of our CEO and CFO, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2021.2022. Based on that evaluation, our CEO and CFO concluded that, as of that date, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended June 30, 20212022 that have materially affected, or are likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
The following table sets forth the purchases of our Company’s securities by the Company and any affiliated purchasers within the meaning of Rule 10b-18(a)(3) (17 CFR 240.10b-18(a)(3)) during the third quarter of fiscal 2021:2022: | | | | | | | | | | | | | | | | | | | | | | | | | | |
Period | | Total Number of Shares Purchased (1) (2) | |
Average Price Paid per share (3) | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) | | Maximum Number that May Yet Be Purchased Under the Plans or Programs |
April 1 to 30, 2021 | | 24,676 | | | $ | 38.75 | | | — | | | 9,750,000 | |
May 1 to 31, 2021 | | — | | | — | | | — | | | 9,750,000 | |
June 1 to 30, 2021 | | — | | | — | | | — | | | 9,750,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Period | | Total Number of Shares Purchased (1) (2) | |
Average Price Paid per share (3) | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) | | Maximum Number that May Yet Be Purchased Under the Plans or Programs |
April 1 to 30, 2022 | | 145,706 | | | $ | 36.99 | | | 127,297 | | | 7,714,359 | |
May 1 to 31, 2022 | | 487,405 | | | 35.69 | | | 487,405 | | | 7,226,954 | |
June 1 to 30, 2022 | | 359,341 | | | 35.07 | | | 359,341 | | | 6,867,613 | |
(1)24,67618,409 shares purchased during the third quarter relate to the surrender to the Company of shares of common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock equivalent awards.
(2)In January 2018, our Board authorized a repurchase of up to 10 million shares of our Company’s common stock. This authorization replaced the prior share repurchase authorization of May 2015. During the third quarter of fiscal 2021,2022, we did not repurchaserepurchased 974,043 shares under this authorization.
(3)Includes $0.02 per share of brokerage fee commissions.
Item 6. Exhibits. | | | | | |
Exhibit Number | Exhibit |
3.1 | |
| |
3.2 | |
| |
3.3 | |
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10.1 | Credit Agreement, dated as of March 28, 2020, by and among, inter alia, the Company, the subsidiaries of the Company from time to time parties thereto, the lenders from time to time parties thereto, MUFG, as syndication agent, TD as joint lead arranger and BofA, as administrative agent and collateral agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed April 2, 2020). |
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10.2 | |
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10.3 | |
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31.110.4 | |
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31.1* | |
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31.231.2* | |
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32.132.1* | |
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32.232.2* | |
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101 | The following materials from the Edgewell Personal Care Company Quarterly Report on Form 10-Q formatted in inline eXtensible Business Reporting Language (“iXBRL”): (i) the Condensed Consolidated Statements of Earnings and Comprehensive Income for the three and nine months ended June 30,30,2022 and 2021, and 2020, (ii) the Condensed Consolidated Balance Sheets at June 30, 20212022 and September 30, 2020,2021, (iii) the Condensed Consolidated Statements of Cash Flows for the nine months ended June 30, 20212022 and 2020,2021, (iv) the Condensed Consolidated Statements of Shareholder’s Equity for the three and nine months ended June 30, 20212022 and 20202021 and (v) Notes to Condensed Consolidated Financial Statements. The financial information contained in the XBRL-related documents is “unaudited” and “unreviewed.” |
*Filed herewith.
SIGNATURESSIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | | | | | | | | | |
| | EDGEWELL PERSONAL CARE COMPANY |
| | | |
| | Registrant |
| | | |
| | By: | /s/ Daniel J. Sullivan |
| | | Daniel J. Sullivan |
| | | Chief Financial Officer |
| | | (principal financial officer) |
| | | |
Date: | August 5, 20214, 2022 | | |