| Acquisition | Acquisitions Battery Acquisition - On January 2, 2019, the Company completed the Battery Acquisition with a contractual purchase price of $2,000.0 , subject to certain purchase price adjustments. The acquisition expanded our battery portfolio globally with the addition of a strong value brand. The initial cash paid after contractual and estimated working capital adjustments was $1,956.2 . Included in the above amount is $450.0 of cash consideration that has initially been allocated to the Divestment business discussed below. Energizer funded the Battery Acquisition through net proceeds from the issuance of senior notes, term loans and cash on hand. See Note 10, Debt, for additional discussion on the senior notes and term loans issued. Success fees of $13.0 were earned by financial advisers in January 2019 after closing the acquisition. This was in addition to the $2.0 paid in January 2018 for services rendered on the transaction. On December 11, 2018, the European Commission approved the acquisition of the Acquired Battery Business conditioned on the divestiture of the Varta consumer battery, chargers, portable power and portable lighting business in the Europe, Middle East and Africa region (EMEA), including manufacturing and distribution facilities in Germany. Energizer will retain the rights to the Varta brand in Latin America and Asia Pacific, as well as Spectrum’s global Rayovac branded consumer and hearing aid batteries business. Energizer began the formal divestiture process immediately after close and expects to complete the divestiture in the beginning of the fourth quarter of fiscal 2019. The assets and liabilities associated with this business have been reported as held or sale both on the preliminary purchase price allocation and the Consolidated (Condensed) Balance Sheets as of March 31, 2019. The Battery Acquisition was accounted for as a business combination using the acquisition method of accounting which requires assets acquired and liabilities assumed to be recognized at fair value as of the acquisition date. We have calculated fair values of assets and liabilities acquired for the Battery Acquisition based on our preliminary valuation analysis. Certain preliminary values, including Inventory, Property, plant and equipment, Intangible assets, Deferred taxes and the resultant Goodwill, are not yet finalized pending the final purchase price allocation and are subject to change as additional information is obtained and the final valuation is completed. Preliminary estimates will be finalized within one year of the date of acquisition. For purposes of the allocation, the Company determined a preliminary fair value adjustment for inventory based on the estimated selling price of finished goods on hand at the closing date less the sum of (a) costs of disposal and (b) a reasonable profit allowance for the selling effort of the acquiring entity. The preliminary fair value adjustment for the inventory of $14.2 was recorded as expense to Cost of products sold in the second quarter 2019 as that inventory was sold. The fair values of the Battery Acquisition's Property, plant and equipment were estimated using the market approach for land and variations of the cost approach for the buildings and equipment. The fair values of the Battery Acquisition's identifiable intangible assets were estimated using variations of the income approach such as the relief from royalty method and the multi-period excess earnings method. The Company is still evaluating the current and deferred tax implications and the accounting implications of the asset versus stock deal by legal jurisdiction, as well as the varying statutory tax rates across the global business. The Company maintained the deferred balances from the carrying amount of the Acquired Battery Business as of January 2, 2019 until that evaluation is completed. Preliminary step ups on the deferred tax liabilities have been recorded based on the valuation of the Property, plant and equipment and Intangible assets. Assets held for sale include the valuation of Inventory, Property, plant and equipment and Intangible assets consistent with the valuation methods discussed above. The preliminary fair value adjustment for the inventory of $11.2 was recorded as expense in the results from discontinued operations in the second quarter 2019 as that inventory was sold. A preliminary estimate of goodwill has also been allocated to the Assets held for sale. The following table outlines the preliminary purchase price allocation as of the date of acquisition: Cash and cash equivalents $ 37.8 Trade receivables 60.6 Inventories 81.0 Other current assets 21.0 Assets held for sale 855.0 Property, plant and equipment, net 138.5 Goodwill 498.6 Other intangible assets, net 747.5 Other assets 14.1 Current portion of capital leases (1.2 ) Accounts payable (40.8 ) Other current liabilities (22.8 ) Long-term debt (14.7 ) Liabilities held for sale (405.0 ) Other liabilities (13.4 ) Net assets acquired $ 1,956.2 The table below outlines the purchased identifiable intangible assets of $747.5 : Total Weighted Average Useful Lives Trade names $ 513.0 Indefinite Proprietary technology 61.0 5.9 Customer relationships 173.5 15.0 Total Other intangible assets, net $ 747.5 Estimated asset valuations and assumed liabilities, including deferred income taxes, may be adjusted in subsequent filings as final purchase price allocations are completed. Any changes to the initial estimates of the fair value of assets and liabilities acquired will be allocated to residual goodwill. The goodwill acquired in this acquisition is attributable to the workforce of the acquired business and the synergies expected to arise with this transaction through network optimization, selling, general and administrative reductions and procurement efficiencies. The assignment of goodwill to our reportable segments, as well as the allocation to Assets held for sale, is not currently complete. The goodwill associated with this acquisition is deductible for tax purposes. Auto Care Acquisition - On November 15, 2018, Energizer entered into a definitive acquisition agreement to acquire Spectrum’s global auto care business, including the Armor All, STP, and A/C PRO brands for a contractual purchase price of $1,250.0 , subject to certain purchase price adjustments. The contractual purchase price was comprised of $937.5 in cash and $312.5 of newly-issued Energizer common stock to Spectrum. The acquisition allowed for the Company to become a global leader in the auto care market and added automotive performance and air conditioning recharge products to its auto care portfolio. On January 28, 2019, the Company completed the Auto Care Acquisition. The initial cash paid after contractual and estimated working capital adjustments was $938.7 . Per the acquisition agreement, the equity consideration to Spectrum was determined by dividing the contractually committed common stock amount of $312.5 by the volume weighted average sales price (VWAP) per share of the Company's common stock for the 10 consecutive trading days immediately preceding November 15, 2018, subject to certain potential adjustments under such agreement. As a result, 5.3 million shares were issued to Spectrum on January 28, 2019. The equity consideration paid to Spectrum was fair valued at $240.5 based on the 5.3 million shares at the Energizer closing stock price of $45.55 on January 28, 2019. In addition, per the terms of the agreement, additional consideration of $36.8 was included in the above cash consideration paid to Spectrum based on the difference between the 10 day VWAP and the 20 day VWAP beginning with the 10th trading day immediately preceding November 15, 2018. The Company funded a portion of the cash consideration of the Auto Care Acquisition with the issuance of new senior notes and the issuance of common stock and Series A mandatory convertible preferred stock in January 2019. Refer to Note 10, Debt, and Note 12, Shareholders' Equity, for further information on the debt and equity issuances, respectively. Success fees of $6.0 were earned by a financial adviser in January 2019 after closing the acquisition. This was in addition to the $2.0 earned in November 2018 for services rendered on the transaction. The Auto Care Acquisition was accounted for as a business combination using the acquisition method of accounting which requires assets acquired and liabilities assumed to be recognized at fair value as of the acquisition date. We have calculated fair values of assets and liabilities acquired for the Auto Care Acquisition based on our preliminary valuation analysis. Certain preliminary values, including Inventory, Property, plant and equipment, Intangible assets, Deferred taxes and the resultant Goodwill, are not yet finalized pending the final purchase price allocation and are subject to change as additional information is obtained and the final valuation is completed. Preliminary estimates will be finalized within one year of the date of acquisition. For purposes of the allocation, the Company determined a preliminary fair value adjustment for inventory based on the estimated selling price of finished goods on hand at the closing date less the sum of (a) costs of disposal and (b) a reasonable profit allowance for the selling effort of the acquiring entity. The preliminary fair value adjustment for the inventory was $19.5 , of which $13.0 was recorded as expense to Cost of products sold in the second quarter 2019 as that inventory was sold and the remaining $6.5 will be recorded in the third quarter when the remaining inventory is sold. The fair values of the Auto Care Acquisition's Property, plant and equipment were estimated using variations of the cost approach for the building and equipment. The fair values of the Auto Care Acquisition's identifiable intangible assets were estimated using variations of the income approach such as the relief from royalty method and the multi-period excess earnings method. The Company is still evaluating the current and deferred tax implications and the accounting implications of the asset versus stock deal by legal jurisdiction, as well as the varying statutory tax rates across the global business. The Company maintained the deferred balances from the carrying amount of the Acquired Auto Care Business as of January 28, 2019 until that evaluation is completed. Preliminary step ups on the deferred tax liabilities have been recorded based on the valuation of the Property, plant and equipment and Intangible assets. The following table outlines the preliminary purchase price allocation as of the date of acquisition: Cash and cash equivalents $ 3.3 Trade receivables 49.7 Inventories 97.8 Other current assets 1.3 Property, plant and equipment, net 66.5 Goodwill 268.4 Other intangible assets, net 972.5 Deferred tax assets 12.1 Other assets 3.2 Current portion of capital leases (0.4 ) Accounts payable (27.5 ) Other current liabilities (14.7 ) Long-term debt (31.9 ) Other liabilities (deferred tax liabilities) (221.1 ) Net assets acquired $ 1,179.2 The table below outlines the purchased identifiable intangible assets of $972.5 : Total Weighted Average Useful Lives Trade names $ 702.9 Indefinite Trade names 16.7 15.0 Proprietary technology 113.5 9.8 Customer relationships 139.4 15.0 Total Other intangible assets, net $ 972.5 Estimated asset valuations and assumed liabilities, including deferred income taxes, will be adjusted in subsequent filings as final purchase price allocations are completed. Any changes to the initial estimates of the fair value of assets and liabilities acquired will be allocated to residual goodwill. The goodwill acquired in this acquisition is attributable to the workforce of the acquired business and the synergies expected to arise with this transaction through network optimization, selling, general and administrative reductions and procurement efficiencies. The assignment of goodwill to our reportable segments is not currently complete. The goodwill is not deductible for tax purposes. Nu Finish Acquisition - On July 2, 2018, the Company acquired all of the assets of Reed-Union Corporation's automotive appearance business, including Nu Finish Car Polish and Scratch Doctor brands (Nu Finish Acquisition). The acquisition purchase price of $38.1 was funded through a combination of cash on hand and committed debt facilities. The revenue in the quarter and six months ended March 31, 2019 associated with the Nu Finish Acquisition was $1.9 and $2.9 , respectively, and earnings before income taxes was $0.8 for both periods. We have calculated fair values of assets and liabilities acquired for the Nu Finish Acquisition and completed our valuation analysis. For purposes of the allocation, the Company determined a fair value adjustment for inventory based on the estimated selling price of finished goods on hand at the closing date less the sum of (a) costs of disposal and (b) a reasonable profit allowance for the selling effort of the acquiring entity. The fair value adjustment for the inventory of $0.2 was recorded as expense to Cost of products sold in the fourth quarter 2018 as that inventory was sold. The fair values of the Nu Finish Acquisition's identifiable intangible assets were estimated using variations of the income approach such as the relief from royalty method and the multi-period excess earnings method. The purchase price allocation is as follows: Trade receivables $ 2.4 Inventories 0.9 Goodwill 14.7 Other intangible assets, net 21.8 Accounts payable (1.7 ) Net assets acquired $ 38.1 The table below outlines the purchased identifiable intangible assets of $21.8 : Total Weighted Average Useful Lives Customer relationships $ 15.2 15.0 Trade names 4.2 14.0 Proprietary formula 2.4 11.0 Total Other intangible assets, net $ 21.8 14.4 The goodwill acquired in this acquisition is attributable to the workforce of the acquired business and the synergies expected to arise with this transaction. The acquired goodwill has been allocated to the Americas' reportable segment. The goodwill is deductible for tax purposes. Pro Forma Financial Information- Pro forma net sales, Pro forma net earnings/(loss) from continuing operations, Pro from net earnings/(loss) from continuing operations attributable to common shareholders and Pro forma diluted net earnings/(loss) per common share - continuing operations for the quarter and six months ended March 31, 2019 and 2018 are shown in the table below. The pro forma results are presented as if the Battery and Auto Care Acquisitions had occurred on October 1, 2017. The pro forma results are not indicative of the results the Company would have achieved if the acquisitions had occurred that date or indicative of the results of the future operation of the combined company. The Nu Finish Acquisition was immaterial for this disclosure and is only included for the periods owned by the Company. The pro forma adjustments are based upon preliminary purchase price allocations and include purchase accounting adjustments for the impact of the inventory step up charge, depreciation and amortization expense from the fair value of the intangible assets and property, plant and equipment, interest and financing costs and the impact of the equity consideration completed to fund the acquisitions. Cost synergies that may result from combining Energizer and the Battery and Auto Care Acquisitions are not included in the pro forma table below. For the Quarter Ended March 31, For the Six Months Ended March 31, 2019 2018 2019 2018 Pro forma net sales $ 578.5 $ 607.5 $ 1,353.2 $ 1,393.2 Pro forma net earnings/(loss) from continuing operations 16.1 15.2 103.2 (25.1 ) Pro forma mandatory preferred stock dividends 4.1 4.1 8.1 8.1 Pro forma net earnings/(loss) from continuing operations attributable to common shareholders $ 12.0 $ 11.1 $ 95.1 $ (33.2 ) Pro forma diluted net earnings/(loss) per common share - continuing operations $ 0.17 $ 0.16 $ 1.34 $ (0.47 ) Pro forma weighted average shares of common stock - Diluted 71.0 71.1 71.0 71.3 The shares included in the above are adjusted to assume that the common stock and MCPS shares issued for the Auto Care Acquisition occurred as of October 1, 2017. For all periods presented, the MCPS conversion was anti-dilutive and not assumed in the calculation. The unaudited pro forma data above includes the following significant adjustments made to account for certain costs to adjust for as if the acquisitions had occurred as of October 1, 2017. The following expenses, which are net of the applicable tax rates, were added to or removed from the net earnings amounts for each respective period: For the Quarter Ended March 31, For the Six Months Ended March 31, (Additional expense)/Expense removed 2019 2018 2019 2018 Inventory step up (1) $ 22.5 $ — $ 22.0 $ (26.5 ) Acquisition and integration costs (2) 30.1 16.7 50.3 (48.9 ) Interest and ticking fees on escrowed debt (3) 27.5 2.8 53.0 2.2 Gains on escrowed funds (4) — — (12.0 ) — (1) The inventory step up was removed from fiscal 2019 and recorded in the first quarter of fiscal 2018 as the inventory turn would have occurred in that quarter. The remaining inventory step up of $5.1 related to the Auto Care Acquisition expected to be incurred in the third quarter 2019 was also included in the first six months ended March 31, 2018 as the inventory turn would have occurred in that period if the acquisition had occurred as of October 1, 2017. (2) Acquisition and integration costs incurred to obtain legal approval, pay investment banking fees and other transaction related expenses were removed from the various periods and recorded in the first quarter of fiscal 2018 when the transaction is assumed to have occurred. (3) Interest and ticking fees from the acquisition related debt were accrued over the periods prior to the acquisition occurring. These fees were removed as they would not have been incurred if the acquisition occurred October 1, 2017. The interest from the new capital structure was included in the results and the pre-tax amount of $47.6 and $95.2 for the three and six month periods, respectively, were included in the results above. (4) The escrowed debt funds earned interest income and had gains on the non functional currency balances. These gains would not have been realized if the transaction had occurred as of October 1, 2017. The pro-forma results above include restructuring charges recorded by the Auto Care Business of $ 3.1 and $ 7.1 during the three and six months ended March 31, 2018, respectively. Excluded from the above is the Write-down of assets of business held for sale to fair value less cost to sell of $107.2 recorded by the Auto Care Business during the six months ended March 31, 2019. This loss was recorded as a direct result of the transaction and would not have impacted the combined company results. Net sales and Loss before income taxes for the Battery and Auto Care Acquisitions included in the Company's Consolidated (Condensed) Statement of Earnings and Comprehensive Income are shown in the following table. The Loss before income taxes includes the inventory fair value adjustment recorded for the acquisitions, but excludes all acquisition and integration costs as well as any additional interest incurred by the Company for the debt issuances to complete the acquisitions: For the Quarter and Six Months Ended March 31, 2019 Battery Acquisition Auto Care Acquisition Net sales $ 99.9 $ 84.5 Inventory fair value adjustment 14.2 13.0 Loss before income taxes (1.1 ) (0.8 ) Acquisition and Integration Costs- The Company incurred pre-tax acquisition and integration costs related to the Battery Acquisition, the Auto Care Acquisition, and the Nu Finish Acquisition of $95.4 and $131.9 in the quarter and six months ended March 31, 2019, respectively, and $19.4 and $25.1 for the quarter and six months ended March 31, 2018, respectively. Pre-tax costs recorded in Costs of products sold were $31.7 for both the quarter and the six months ended March 31, 2019 and primarily related to the inventory fair value adjustment of $27.2 . Pre-tax acquisition and integration costs recorded in SG&A were $29.1 and $48.0 for the quarter and six months ended March 31, 2019, respectively, and $16.5 and $22.2 for the quarter and six months ended March 31, 2018, respectively, and primarily related to acquisition success fees and legal, consulting and advisory fees to assist with obtaining regulatory approval around the globe and to plan for the closing and integration of the Battery Acquisition and Auto Care Acquisition. Also included in the pre-tax acquisition costs for the quarter and six months ended March 31, 2019 was $33.2 and $65.6 , respectively, of interest expense, including ticking fees, related to the escrowed debt for the Battery Acquisition and the financing fees incurred related to amending and issuing the debt for the Battery and Auto Care Acquisitions. The quarter and six months ended March 31, 2018 each included $2.9 related to debt for the Battery Acquisition. In the quarter ended March 31, 2019, the Company incurred $1.5 of expense to settle hedge contracts of the acquired business and earned income of $0.1 related to transition services agreements. During the first quarter 2019, prior to closing on the Battery Acquisition, the Company held the funds from the escrowed debt offerings in a restricted cash account. The Company recorded a pre-tax gain in Other items, net of $9.0 related to the favorable movement in the escrowed USD restricted cash held in our European Euro functional entity during the six months ended March 31, 2019. The Company also recorded interest income in Other items, net of $5.8 |
