NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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, feminine care and infant care categories. Edgewell has a portfolio of over
25
brands and a global footprint in more than
50
countries.
The Company conducts its business in the following four segments:
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Wet Shave
consists of products sold under the Schick, Wilkinson Sword, Edge, Skintimate, 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.
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•
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Sun and Skin Care
consists of Banana Boat and Hawaiian Tropic sun care products, as well as Wet Ones wipes and Playtex household gloves.
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Feminine Care
includes tampons, pads and liners sold under the Playtex Sport, Stayfree, Carefree and o.b. brands, as well as personal cleansing wipes under the Playtex brand.
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All Other
includes infant care products, such as bottles, cups and pacifiers, under the Playtex, OrthoPro and Binky brand names, as well as the Diaper Genie and Litter Genie disposal systems.
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Basis of Presentation
The accompanying 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 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 presentation have been included.
Separation.
On July 1, 2015, the Company completed the separation of its Household Products business into a separate publicly-traded company (the "Spin" or the "Separation"). The historical financial results of the Company's Household Products business, which assumed the name Energizer Holdings, Inc. ("New Energizer"), are presented as discontinued operations on the Consolidated Statements of Earnings and, as such, have been excluded from both continuing operations and segment results for all periods presented. The Company has reflected the Separation as a distribution on the Consolidated Statement of Changes in Shareholders' Equity and as cash transferred on the Consolidated Statement of Cash Flows in fiscal 2015. The Consolidated Statements of Comprehensive Income (Loss) and Cash Flows for all prior periods presented have not been adjusted to reflect the effect of the Separation, as the Company had not adopted the Financial Accounting Standards Board's ("FASB") updated guidance on the presentation of discontinued operations at the time of Separation. Unless indicated otherwise, the information in Notes to Consolidated Financial Statements relates to the Company's continuing operations. Prior periods have been recast to reflect the Company's current segment reporting. See Note 3 of Notes to Consolidated Financial Statements for more information on the Separation.
Reclassifications.
Certain amounts in the prior periods presented have been reclassified to conform to the current period financial statement presentation. The Company began reporting capitalized software costs within Property, plant and equipment, net as of September 30, 2016. Previously, the Company had included capitalized software costs within Other assets. The Consolidated Balance Sheet as of September 30, 2015 has been adjusted to reclassify
$22.8
of net software costs from Other assets to Property, plant and equipment, net. The supplemental detail for Property, plant and equipment, net and long-lived assets included within Note 9 and Note 17 of Notes to Consolidated Financial Statements has been updated to reflect the inclusion of capitalized software costs.
Venezuela Deconsolidation.
Venezuelan exchange control regulations have resulted in an other-than-temporary lack of exchangeability between the Venezuelan bolivar and U.S. dollar, resulting in a lack of control over the Company's Venezuelan subsidiaries for accounting purposes. As the Company expects this condition will continue for the foreseeable future, it deconsolidated its Venezuelan subsidiaries on March 31, 2015, and began accounting for the investment in its Venezuelan operations using the cost method of accounting. As a result of deconsolidating its Venezuelan subsidiaries, the Company recorded a charge of
$144.5
during the three months ended March 31, 2015, of which
$79.3
was included within continuing operations and had no accompanying tax benefit. This charge included the write-off of the investment in the Company's Venezuelan subsidiaries, foreign currency translation losses of
$18.5
previously recorded in Accumulated other comprehensive loss and the write-off of
$18.5
of intercompany receivables. Since March 31, 2015, the Company's financial results have not included the operating results of its Venezuelan operations.
Note 2 - Summary of Significant Accounting Policies
Foreign Currency Translation
Financial statements of foreign operations where the local currency is the functional currency are translated using end-of-period exchange rates for assets and liabilities, and average exchange rates during the period for results of operations. Related translation adjustments are reported as a component within accumulated other comprehensive income in the shareholders' equity section of the Consolidated Balance Sheets, except as noted below.
Gains and losses resulting from foreign currency transactions are included in Net earnings (loss). During fiscal 2016, a foreign currency gain of
$4.3
and during fiscal 2015 and 2014, foreign currency losses of
$33.1
and
$10.8
, respectively, were included within Other expense (income), net. These gains and losses were partially offset by gains and losses from foreign exchange ("FX") instruments as described below and in Note 15 of Notes to Consolidated Financial Statements.
Financial Instruments and Derivative Securities
The Company uses financial instruments, from time to time, in the management of foreign currency, interest rate and other risks that are inherent to its business operations. Such instruments are not held or issued for trading purposes.
FX instruments, including forward currency contracts, are used primarily to reduce cash transaction exposures and, to a lesser extent, to manage other translation exposures. FX instruments used are selected based on their risk reduction attributes, costs and the related market conditions. The Company has designated certain foreign currency contracts as cash flow hedges for accounting purposes as of
September 30, 2016
.
At
September 30, 2016
, the Company had
$731.3
of variable rate debt outstanding. The Company has, in the past, used interest rate swaps to hedge the risk of variable rate debt. As of September 30, 2016, the Company did not have any interest rate swap agreements outstanding.
For further discussion, see Note 10 and Note 15 of Notes to Consolidated Financial Statements.
Cash Equivalents
Cash equivalents are all considered to be highly liquid investments with a maturity of three months or less when purchased. At
September 30, 2016
, the Company had
$738.9
in available cash and cash equivalents, substantially all of which was outside of the U.S. The Company has extensive operations outside of the U.S., including a significant manufacturing footprint. The Company manages its worldwide cash requirements by reviewing available funds among the many subsidiaries through which it conducts its business and the cost effectiveness with which those funds can be accessed. The repatriation of cash balances from certain of the Company's subsidiaries could have adverse tax consequences or be subject to regulatory capital requirements; however, those balances are generally available without legal restrictions to fund ordinary business operations. U.S. income taxes have not been provided on a significant portion of undistributed earnings of international subsidiaries. The Company's intention is to reinvest these earnings indefinitely.
Cash Flow Presentation
The Consolidated Statements of Cash Flows are prepared using the indirect method, which reconciles Net earnings (loss) to Net cash from operating activities. The reconciliation adjustments include the removal of timing differences between the occurrence of operating receipts and payments and their recognition in Net earnings (loss). The adjustments also remove cash flows arising from investing and financing activities, which are presented separately from operating activities. Cash flows from foreign currency transactions and operations are translated at an average exchange rate for the period. Cash flows from hedging activities are included in the same category as the items being hedged, which is primarily operating activities. Cash payments related to income taxes are classified as operating activities.
Prior year cash flow information has not been adjusted for discontinued operations.
Accounts Receivable Valuation
Accounts receivable are stated at their net realizable value. The allowance for doubtful accounts reflects the Company's best estimate of probable losses inherent in the receivables portfolio determined on the basis of historical experience, specific allowances for known troubled accounts and other currently available information. Bad debt expense is included in Selling, general and administrative expense ("SG&A").
Inventories
Inventories are valued at the lower of cost or market, with cost generally being determined using average cost or the first-in, first-out ("FIFO") method.
In connection with the feminine care brands acquisition in fiscal 2014, the Company recorded an increase in the estimated fair value of inventory acquired of
$8.0
, to bring the carrying value of the inventory purchased to an amount which approximated the estimated selling price of the finished goods on hand at the acquisition closing date less the sum of (a) costs to sell and distribute and (b) a reasonable profit allowance for these efforts by the acquiring entity. As the inventory was sold during the first and second quarters of fiscal 2014, the adjustments were charged to Cost of products sold in those respective periods.
Capitalized Software Costs
Capitalized software costs are included in Property, plant and equipment, net. These costs are amortized using the straight-line method over periods of related benefit ranging from
three
to
seven
years. Expenditures related to capitalized software are included within Capital expenditures in the Consolidated Statements of Cash Flows. Amortization expense was
$5.8
,
$6.1
, and
$2.5
in fiscal
2016
,
2015
and
2014
, respectively.
Property, Plant and Equipment, net
Property, plant and equipment, net is stated at historical cost. Property, plant and equipment acquired as part of a business combination is recorded at estimated fair value. Expenditures for new facilities and expenditures that substantially increase the useful life of property, including interest during construction, are capitalized and reported as Capital expenditures in the accompanying Consolidated Statements of Cash Flows. Maintenance, repairs and minor renewals are expensed as incurred. When property is retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts, and gains or losses on the disposition are reflected in Net earnings (loss). Depreciation is generally provided on the straight-line basis by charges to pre-tax earnings at rates based on estimated useful lives. Estimated useful lives range from
two
to
25
years for machinery and equipment and
three
to
30
years for buildings and building improvements. Depreciation expense was
$76.3
in fiscal
2016
, including accelerated depreciation charges of
$3.9
related to the Company's Restructuring project. Depreciation expense was
$73.7
in fiscal
2015
, including accelerated depreciation charges of
$4.6
related to the Company's Restructuring project. Depreciation expense in fiscal
2014
was
$82.9
, including accelerated depreciation charges of
$0.6
related to the Company's Restructuring project. See Note 5 of Notes to Consolidated Financial Statements for further information on the Restructuring project.
Estimated useful lives are periodically reviewed and, when appropriate, changes are made prospectively. When certain events or changes in operating conditions occur, asset lives may be adjusted and an impairment assessment may be performed on the recoverability of the carrying amounts.
Goodwill and Other Intangible Assets
Goodwill and indefinite-lived intangibles are not amortized, but are evaluated annually for impairment as part of the Company's annual business planning cycle in the fourth fiscal quarter, or when indicators of a potential impairment are present. The estimated fair value of each reporting unit (Wet Shave, Sun Care, Skin Care, Feminine Care, Infant Care and All Other) is estimated using valuation models that incorporate assumptions and projections of expected future cash flows and operating plans. In determining the estimated fair value of the reporting units when performing a quantitative analysis, both the market approach and the income approach are considered, and the weighting of each approach is based on circumstances specific to each reporting unit.
Determining the fair value of a reporting unit requires the use of significant judgments, estimates and assumptions. While the Company believes that the estimates and assumptions underlying the valuation methodology are reasonable, these estimates and assumptions could have a significant impact on whether an impairment charge is recognized, and also on the magnitude of any such charge. The results of an impairment analysis are as of a point in time. There is no assurance that actual future earnings or cash flows of the reporting units will not decline significantly from these projections. The Company will monitor any changes to these assumptions and will evaluate goodwill as deemed warranted during future periods.
The key assumptions for the market and income approaches used to determine fair value of the reporting units are updated at least annually. Those assumptions and estimates include market data and market multiples, discount rates and terminal growth rates, as well as future levels of revenue growth, operating margins, depreciation, amortization and working capital requirements, which are based upon the Company's strategic plan. The results of current year testing do not indicate that impairment exists, as of the testing date. The fair values of the Company's Skin Care, Feminine Care and Infant Care reporting units are between
110%
and
120%
of the respective carrying values. The carrying value of goodwill associated with the Company's Skin Care, Feminine Care and Infant Care reporting units is
$54.6
,
$207.4
and
$63.8
, respectively.
Intangible assets with finite lives, and a remaining weighted-average life of approximately
13
years, are amortized on a straight-line basis over expected lives of
five
to
20
years. Such intangibles are also evaluated for impairment including ongoing monitoring of potential impairment indicators.
During the fourth quarter of fiscal 2015, the Company completed impairment testing on indefinite-lived intangible assets other than goodwill, which consist of trademarks and brand names used across the Company's segments and determined that the carrying values of its Playtex, Wet Ones and Skintimate brand names were above the fair values, resulting in a non-cash asset impairment charge of
$318.2
. During the fourth quarter of fiscal 2016, the Company completed its annual impairment testing and found the carrying value of its Skintimate brand name to be above the fair value, resulting in an additional non-cash asset impairment charge of
$6.5
. See Note 8 of Notes to Consolidated Financial Statements for further information on these impairments.
Impairment of Long-Lived Assets
The Company reviews long-lived assets, other than goodwill and other intangible assets for impairment, when events or changes in business circumstances indicate that the remaining useful life may warrant revision or that the carrying amount of the long-lived asset may not be fully recoverable. The Company performs undiscounted cash flow analysis to determine if impairment exists. If impairment is determined to exist, any related impairment loss is calculated based on estimated fair value. Impairment losses on assets to be disposed of, if any, are based on the estimated proceeds to be received, less cost of disposal.
In May 2015, the Company's Board of Directors (the "Board") authorized the strategic decision to exit the Company's industrial business due to a shift of management focus to other products. The Company sold the business to a third-party in September 2015. Impacted by this decision were operations in Verona, Virginia; Obregon, Mexico; and the United Kingdom (the "U.K."). During fiscal 2015, the Company incurred
$21.9
of non-cash asset impairment charges, in addition to a
$10.8
loss on the sale of the business, which was recorded as a separate line item. For further information on the sale, refer to Note 3 of Notes to the Consolidated Financial Statements.
Revenue Recognition
The Company's revenue is from the sale of its products. Revenue is recognized when title, ownership and risk of loss pass to the customer. Discounts are offered to customers for early payment and an estimate of the discounts is recorded as a reduction of Net sales in the same period as the sale. The Company's standard sales terms are final and returns or exchanges are not permitted unless a special exception is made. Reserves are established and recorded in cases where the right of return does exist for a particular sale.
Under certain circumstances, the Company allows customers to return sun care products that have not been sold by the end of the sun care season, which is normal practice in the sun care industry. The Company records sales at the time the title, ownership and risk of loss pass to the customer. The terms of these sales vary but, in all instances, the following conditions are met: the sales arrangement is evidenced by purchase orders submitted by customers; the selling price is fixed or determinable; title to the product has transferred; there is an obligation to pay at a specified date without any additional conditions or actions required by the Company; and collectability is reasonably assured. Simultaneous with the sale, the Company reduces sales and cost of sales, and reserves amounts on its Consolidated Balance Sheet for anticipated returns based upon an estimated return level, in accordance with GAAP. Customers are required to pay for the sun care product purchased during the season under the required terms. The Company generally receives returns of U.S. sun care products from September through January following the summer sun care season. It estimates the level of sun care returns using a variety of inputs including historical experience, consumption trends during the sun care season, obsolescence factors, including expiration dates, and inventory positions at key retailers as the sun care season progresses. The Company monitors shipment activity and inventory levels at key retailers during the season in an effort to more accurately estimate potential returns. This allows the Company to manage shipment activity to its customers, especially in the latter stages of the sun care season, to reduce the potential for returned product. The Company had a reserve for returns of
$49.9
and
$50.3
at
September 30, 2016
and
September 30, 2015
, respectively.
The Company offers a variety of programs, such as consumer coupons and rebate programs, primarily to its retail customers, designed to promote sales of its products. Such programs require periodic payments and allowances based on estimated results of specific programs and are recorded as a reduction to Net sales. The Company accrues, at the time of sale, the estimated total payments and allowances associated with each transaction. Additionally, the Company offers programs directly to consumers to promote the sale of its products. Promotions which reduce the ultimate consumer sale prices are recorded as a reduction of Net sales at the time the promotional offer is made using estimated redemption and participation levels. Taxes the Company collects on behalf of governmental authorities, which are generally included in the price to the customer, are also recorded as a reduction of Net sales. The Company continually assesses the adequacy of accruals for customer and consumer promotional program costs not yet paid. To the extent total program payments differ from estimates, adjustments may be necessary. Historically, these adjustments have not been material.
Advertising and Sales Promotion Costs
The Company advertises and promotes its products through national and regional media and expenses such activities as incurred. Advertising and sales promotion expense reported on the Consolidated Statement of Earnings includes advertising costs of
$178.2
,
$198.8
and
$194.6
, for fiscal 2016, 2015 and 2014, respectively.
Share-Based Payments
The Company grants restricted share equivalent ("RSE") awards, which generally vest over
two
to
four
years. Historically, a portion of the RSE awards granted provide for the issuance of common stock to certain managerial staff and executive management if the Company achieves specified performance targets. The estimated fair value of each grant issued is estimated on the date of grant based on the current market price of the shares, as adjusted for the impact to the grant date fair value of the inclusion of a total shareholder return modifier for those performance awards containing such a provision. The total amount of compensation expense recognized reflects the initial assumption that target performance goals will be achieved. Compensation expense may be adjusted during the life of the performance grant based on management's assessment of the probability that performance targets will be achieved. If such targets are not met or it is determined that achievement of performance goals is not probable, compensation expense is adjusted to reflect the reduced expected payout level in the period the determination is made. If it is determined that the performance targets will be exceeded, additional compensation expense is recognized.
Non-qualified stock option awards ("share options") are granted at the market price on the grant date and generally vest ratably over
three
years. The Company calculates the fair value of total share-based compensation for share options using the Black-Scholes option pricing model, which utilizes certain assumptions and estimates that have a material impact on the amount of total compensation cost recognized in the Consolidated Financial Statements, including the expected term, expected share price volatility, risk-free interest rate and expected dividends. An additional assumption is made on the number of awards expected to forfeit prior to vesting. The original estimate of the grant date fair value is not subsequently revised unless the awards are modified, or there is a change in the number of awards expected to forfeit prior to vesting.
Income Taxes
The Company's annual effective income tax rate is determined based on its income, statutory tax rates and the tax impacts of items treated differently for tax purposes than for financial reporting purposes. Tax law requires certain items be included in the tax return at different times than the items are reflected in the financial statements. Some of these differences are permanent, such as expenses that are not deductible in the Company's tax return, and some differences are temporary, reversing over time, such as depreciation expense. These temporary differences create deferred tax assets and liabilities.
Deferred tax assets generally represent the tax effect of items that can be used as a tax deduction or credit in future years for which the Company has already recorded the tax benefit in the Statement of Earnings. Deferred tax liabilities generally represent tax expense recognized in the Company's financial statements for which payment has been deferred, the tax effect of expenditures for which a deduction has already been taken in its tax return but has not yet been recognized in its financial statements or assets recorded at estimated fair value in business combinations for which there was no corresponding tax basis adjustment.
The Company regularly repatriates a portion of current year earnings from select non-U.S. subsidiaries. Generally, these non-U.S. subsidiaries are in tax jurisdictions with effective tax rates that do not result in materially higher U.S. tax provisions related to the repatriated earnings. No provision is made for additional taxes on undistributed earnings of foreign affiliates that are intended and planned to be indefinitely invested in foreign affiliates. The Company intends to reinvest these earnings indefinitely in its foreign subsidiaries to fund local operations, fund strategic growth objectives, fund pension and other postretirement obligations and fund capital projects. See Note 6 of Notes to Consolidated Financial Statements for further discussion.
The Company estimates income taxes and the effective income tax rate in each jurisdiction that it operates. This involves estimating taxable earnings, specific taxable and deductible items, the likelihood of generating sufficient future taxable income to utilize deferred tax assets, the portion of the income of foreign subsidiaries that is expected to be remitted to the U.S. and be taxable and possible exposures related to future tax audits. Deferred tax assets are evaluated on a subsidiary by subsidiary basis to ensure that the asset will be realized. Valuation allowances are established when the realization is not deemed to be more likely than not. Future performance is monitored, and when objectively measurable operating trends change, adjustments are made to the valuation allowances accordingly. To the extent the estimates described above change, adjustments to income taxes are made in the period in which the estimate is changed.
The Company operates in multiple jurisdictions with complex tax and regulatory environments, which are subject to differing interpretations by the taxpayer and the taxing authorities. At times, the Company may take positions that management believes are supportable, but are potentially subject to successful challenges by the appropriate taxing authority. The Company evaluates its tax positions and establishes liabilities in accordance with guidance governing accounting for uncertainty in income taxes. The Company reviews these tax uncertainties in light of the changing facts and circumstances, such as the progress of tax audits, and adjusts them accordingly.
Estimated Fair Values of Financial Instruments
Certain financial instruments are required to be recorded at estimated fair value. Changes in assumptions or estimation methods could affect the fair value estimates; however, the Company does not believe any such changes would have a material impact on its financial condition, results of operations or cash flows. Other financial instruments including cash and cash equivalents and short-term borrowings, including notes payable, are recorded at cost, which approximates estimated fair value. The estimated fair values of long-term debt and financial instruments are disclosed in Note 15 of Notes to Consolidated Financial Statements.
Recently Adopted Accounting Pronouncements
In May 2015, the FASB issued a new Accounting Standards Update ("ASU"), which removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value ("NAV") per share practical expedient. Under the new guidance, investments valued using NAV as a practical expedient are no longer assigned to a level in the fair value hierarchy, rather the value associated with the investments is disclosed in a reconciliation of the total investments measured at fair value. The Company has chosen to early adopt this guidance in fiscal 2016. The change in disclosure requirements impacted the Company's disclosure of the estimated fair value of its pension assets in Note 11 of Notes to Consolidated Financial Statements, and was applied retrospectively. There was no change in total pension or post-retirement plan assets as of September 30, 2016 or 2015 due to the adoption of this guidance.
In April 2015, the FASB issued a new ASU, which requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts and premiums. The Company has chosen to early adopt this guidance for the fiscal year ended September 30, 2016. The Company adopted this guidance retrospectively, resulting in reductions to Other assets and Long-term debt of
$5.0
and
$5.4
as of September 30, 2016 and 2015, respectively, on the Company's Consolidated Balance Sheet. These changes are reflected within Note 10 and Note 18 of Notes to Consolidated Financial Statements. The adoption of this guidance had no impact on the Company's Statements of Earnings or Cash Flows for the fiscal years ended September 30, 2016, 2015 and 2014.
In November 2015, the FASB issued a new ASU, which simplifies the presentation of deferred income taxes. Under the new guidance, an entity is required to classify deferred tax assets and liabilities as noncurrent in a classified statement of financial position. The current requirement that deferred tax assets and liabilities of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments in this ASU. The Company chose to early adopt this guidance during the first quarter of fiscal 2016. The Company adopted this guidance prospectively, resulting in reductions to Other current assets, Other current liabilities and Deferred income tax liabilities of
$86.3
,
$0.7
and
$76.2
, respectively, and an increase in Other assets of
$9.4
as of September 30, 2016.
Recently Issued Accounting Pronouncements
In October 2016, the FASB issued an ASU intended to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Under the new guidance, an entity should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory, such as intellectual property and property, plant and equipment, when the transfer occurs. The update will be effective for the Company beginning October 1, 2018 with early adoption permitted. The Company is in the process of evaluating the impact the guidance will have on its financial statements.
In August 2016, the FASB issued an ASU intended to address diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments provide guidance on specific cash flow issues, including debt prepayment or debt extinguishment costs, contingent consideration payments on business combinations, proceeds from the settlement of insurance claims and distributions received from equity method investees, amongst others. The update will be effective for the Company beginning October 1, 2018 with early adoption permitted. The Company is in the process of evaluating the impact the guidance will have on its financial statements.
In June 2016, the FASB issued an ASU intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The new guidance applies to all financial instruments, including trade receivables, and requires the measurement 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. The update will be effective for the Company beginning October 1, 2020 and early adoption is permitted for fiscal years beginning after December 15, 2018. The Company is in the process of evaluating the impact the guidance will have on its financial statements.
In March, April and May 2016, the FASB issued three ASUs which clarify the revenue recognition implementation guidance on principal versus agent considerations, identifying performance obligations, determining whether an entity's promise to grant a license provides a customer with either a right to use or a right to access the entity's intellectual property, assessing the collectability criteria, presentation of sales and similar taxes, noncash consideration and various other items. The amendments in these ASUs affect the guidance in ASU 2014-09,
Revenue from Contracts with Customers
, and the effective date and transition requirements are the same as those for ASU 2014-09 which, for the Company, will be October 1, 2018. The Company has not yet determined the method of adoption for the new revenue guidance and is in the process of evaluating existing revenue recognition policies and contracts to determine its impact on the financial statements.
In March 2016, the FASB issued an ASU designed to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The amendments in this update will be effective for the Company beginning October 1, 2017, with early adoption permitted. The Company does not expect to early adopt the guidance, and while it is still in the process of evaluating the impact to the financial statements, it believes the most notable impacts will be to Income tax provision (benefit) and Diluted earnings (loss) per share.
In February 2016, the FASB issued an ASU which amends existing lease accounting guidance to require recognition of lease assets and lease liabilities on the balance sheet for leases previously classified as operating leases. Additionally, this update requires qualitative disclosure along with specific quantitative disclosures. Lessees and lessors will be required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The update will be effective for the Company beginning October 1, 2019, with early adoption permitted. The Company does not expect to early adopt this guidance and is in the process of evaluating its impact on the financial statements; however, the Company believes the primary impacts will be an increase in both assets and liabilities on the Consolidated Balance Sheets.
In September 2015, the FASB issued a new ASU, which requires an acquirer in a business combination to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The acquirer is required to record, in the same period's financial statements, the effect on earnings of changes in depreciation, amortization or other income effect, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The amount recorded in current-period earnings that would have been recorded in previous reporting periods if the adjustments had been made at the acquisition date should be presented separately on the face of the income statement or disclosed in the notes. This guidance will be effective for the Company beginning October 1, 2016. The Company does not believe its adoption will have a material impact on the financial statements.
In July 2015, the FASB issued a new ASU, which aligns the measurement of inventory under GAAP more closely with International Financial Reporting Standards. Under the new guidance, an entity that measures inventory using FIFO or average cost should measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The update will be effective for the Company beginning October 1, 2017, with early adoption permitted. The Company does not expect to early adopt this revised guidance and is in the process of evaluating its impact on the financial statements.
In August 2014, the FASB issued a new ASU, which requires management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued. This evaluation should be based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued. This guidance will be effective for the Company beginning on October 1, 2017, with early adoption permitted. The Company does not intend to early adopt this guidance, and believes its adoption will not have an impact on the financial statements.
Note 3 - Discontinued Operations and Divestiture
Discontinued Operations
On July 1, 2015, the Company completed the Separation; therefore, the Household Products business has been reclassified to discontinued operations on the Consolidated Statement of Earnings for fiscal 2015 and 2014. Discontinued operations includes the results of the Household Products business, except for certain corporate overhead and other allocations, which remain in continuing operations. The costs to separate New Energizer are primarily reflected in continuing operations; however, certain costs specifically related to New Energizer are included in discontinued operations. The prior year Consolidated Statements of Comprehensive Loss and Cash Flows have not been adjusted to reflect the impact of the Separation for all periods presented. Net sales and earnings from New Energizer's operations were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
2015
|
|
2014
|
|
Net sales
|
$
|
1,232.5
|
|
|
$
|
1,835.5
|
|
|
|
|
|
|
|
Earnings before income taxes from discontinued operations
|
$
|
91.1
|
|
|
$
|
327.7
|
|
|
Income tax provision for discontinued operations
|
70.3
|
|
|
89.3
|
|
|
Net earnings from discontinued operations, net of tax
|
$
|
20.8
|
|
|
$
|
238.4
|
|
As a result of the Separation, during fiscal 2015, the Company recorded a
$230.6
reduction in retained earnings which included net assets of
$8.8
. The Separation also resulted in a reduction of Accumulated other comprehensive loss associated with foreign currency translation adjustments and with pension and postretirement benefit plans. The total adjustment to accumulated other comprehensive loss was
$221.8
for fiscal 2015. In June 2016, the Company transferred the remaining international pension obligation to New Energizer, which had been pending jurisdictional approval. In connection with the transfer, Accumulated other comprehensive loss was reduced an additional
$2.3
.
The Company incurred incremental costs to evaluate, plan and execute the Separation. The Company also initiated certain restructuring activities in order to prepare both businesses to operate as stand-alone entities. These pre-tax charges related to Spin and Spin restructuring initiatives were included in continuing operations as follows:
|
|
|
|
•
|
$12.0
for fiscal 2016 (
$11.8
included in SG&A and
$0.2
included in Cost of products sold);
|
|
|
|
|
•
|
$170.3
for fiscal 2015 (
$137.8
included in SG&A,
$4.2
included in Cost of products sold and
$28.3
included in Spin restructuring charges);
|
|
|
|
|
•
|
$24.4
for fiscal 2014 (included in SG&A); and
|
|
|
|
|
•
|
$206.7
for the project-to-date (
$174.0
included in SG&A,
$4.4
included in Cost of products sold and
$28.3
included in Spin restructuring charges).
|
Of the total Spin and Spin restructuring costs included within continuing operations,
$9.7
were non-cash, primarily related to asset impairments and incremental costs associated with the modification of equity awards. The Company does not expect to incur additional Spin or Spin restructuring costs.
In addition to the above costs included in continuing operations,
$73.5
and
$38.6
of pre-tax Spin and Spin restructuring costs in fiscal 2015, and an additional
$20.3
of pre-tax Spin costs in fiscal 2014, were included in discontinued operations.
Divestiture
In May 2015, the Board authorized the strategic decision to exit the Company's industrial business, which was part of its All Other segment, due to a shift of management focus to other segment products. The Company finalized the sale of the business in September 2015. The sale impacted operations in Verona, Virginia; Obregon, Mexico; and the U.K. During fiscal 2015, the Company incurred
$21.9
of non-cash asset impairment charges and recorded a
$10.8
loss on the sale. The operating results of the industrial business were not material to the Company's financial statements during the periods presented.
Note 4 - Acquisitions
Feminine Care Brands Acquisition
In October 2013, the Company completed the acquisition of the Stayfree pad, Carefree liner and o.b. tampon feminine care brands in the U.S., Canada and the Caribbean from Johnson & Johnson for an aggregate cash purchase price of
$187.1
. The Company combined these acquired brands within its existing feminine care business in the Feminine Care segment, providing the Company with brands in each of the key feminine hygiene categories.
Household Products Acquisition (Discontinued Operations)
In December 2014, the Company completed an acquisition related to the Household Products business for
$12.1
. The Company developed an estimate of the fair values of assets acquired, which resulted in
$2.3
of goodwill, which was fully allocated to the former Household Products segment and distributed with the assets and liabilities of New Energizer.
Subsequent Event
On October 31, 2016, the Company completed the acquisition of Bulldog Skincare Holdings Limited, a men's grooming and skincare products company based in the U.K. for
£28.1
, or approximately
$34
, net of cash acquired. The acquisition creates opportunities to expand Edgewell's personal care portfolio into a growing global category where it can leverage its international geographic footprint. The acquisition was financed through available foreign cash.
Note 5 - Restructuring Charges
Spin Restructuring
As mentioned in Note 3 of Notes to Consolidated Financial Statements, the Company initiated certain restructuring activities related to the Separation in order to prepare both businesses to operate as stand-alone entities. The restructuring activities included efforts to adapt the global go-to-market footprint to adjust to the future strategies and scale of each stand-alone business; centralize certain back-office functions to increase efficiencies; outsource certain non-core transactional activities; and reduce headcount to optimize the cost structures of each stand-alone business.
The Company incurred
$28.3
of pre-tax Spin restructuring costs in fiscal 2015. These charges consisted of severance and related benefit costs, non-cash asset write-downs, as well as other exit-related costs. As of September 30, 2016,
$5.2
of accrued Spin restructuring charges were included within Other current liabilities. The Company does not expect to incur additional Spin restructuring charges.
The Company does not include Spin restructuring costs in the results of its reportable segments. The estimated impact of allocating such charges to segment results for fiscal 2015 would have been as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2015
|
|
|
Wet Shave
|
|
Sun and Skin Care
|
|
Feminine Care
|
|
All Other
|
|
Corporate
|
|
Total
|
|
Spin Restructuring
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance and related benefit costs
|
$
|
17.3
|
|
|
$
|
3.9
|
|
|
$
|
2.1
|
|
|
$
|
0.4
|
|
|
$
|
1.3
|
|
|
$
|
25.0
|
|
|
Other exit costs
|
(1.6
|
)
|
|
0.6
|
|
|
2.6
|
|
|
1.7
|
|
|
—
|
|
|
3.3
|
|
|
Total Spin restructuring
|
$
|
15.7
|
|
|
$
|
4.5
|
|
|
$
|
4.7
|
|
|
$
|
2.1
|
|
|
$
|
1.3
|
|
|
$
|
28.3
|
|
The following table summarizes the Spin restructuring activities and the related accrual which is included in Other current liabilities as of the dates below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Utilized
|
|
|
|
|
October 1, 2015
|
|
Charge to Income
|
|
Other
(1)
|
|
Cash
|
|
Non-Cash
|
|
September 30, 2016
|
|
Spin Restructuring
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance and related benefit costs
|
$
|
10.8
|
|
|
$
|
—
|
|
|
$
|
0.8
|
|
|
$
|
(6.4
|
)
|
|
$
|
—
|
|
|
$
|
5.2
|
|
|
Other exit costs
|
0.3
|
|
|
—
|
|
|
—
|
|
|
(0.3
|
)
|
|
—
|
|
|
—
|
|
|
Total Spin restructuring
|
$
|
11.1
|
|
|
$
|
—
|
|
|
$
|
0.8
|
|
|
$
|
(6.7
|
)
|
|
$
|
—
|
|
|
$
|
5.2
|
|
|
|
|
|
(1)
|
Includes the impact of currency translation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Utilized
|
|
|
|
|
October 1, 2014
|
|
Charge to Income
(1)
|
|
Other
(2)
|
|
Cash
|
|
Non-Cash
|
|
September 30, 2015
|
|
Spin Restructuring
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance and related benefit costs
|
$
|
—
|
|
|
$
|
54.9
|
|
|
$
|
(15.6
|
)
|
|
$
|
(28.5
|
)
|
|
$
|
—
|
|
|
$
|
10.8
|
|
|
Non-cash asset write-down
|
—
|
|
|
7.4
|
|
|
(0.1
|
)
|
|
—
|
|
|
(7.3
|
)
|
|
—
|
|
|
Other exit costs
|
—
|
|
|
4.6
|
|
|
1.8
|
|
|
(6.1
|
)
|
|
—
|
|
|
0.3
|
|
|
Total Spin restructuring
|
$
|
—
|
|
|
$
|
66.9
|
|
|
$
|
(13.9
|
)
|
|
$
|
(34.6
|
)
|
|
$
|
(7.3
|
)
|
|
$
|
11.1
|
|
|
|
|
|
(1)
|
Includes
$38.6
of pre-tax costs that are now reflected in discontinued operations.
|
|
|
|
|
(2)
|
Includes the impact of currency translation and the transfer of liabilities to New Energizer.
|
Restructuring
In November 2012, the Company's Board of Directors (the "Board") authorized an enterprise-wide restructuring plan (the "Restructuring"). The Restructuring originally included several initiatives focused on reducing costs in general and administrative functions, as well as reducing manufacturing and operating costs associated with discontinued operations. In January 2014, the Board authorized an expansion of scope of the previously announced Restructuring, which included rationalization and streamlining of the Edgewell operating facilities and other cost saving initiatives. Restructuring charges specific to Edgewell have primarily related to plant closure and accelerated depreciation charges and severance and related benefit costs. The Company expects full year restructuring costs to total
$15.0
to
$20.0
for 2017.
Expenses incurred under the Restructuring plan are reflected below, including the estimated impact of allocating such charges to segment results. No Restructuring charges have been allocated to the Company's All Other segment. The Company does not include restructuring costs in the results of its reportable segments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2016
|
|
|
Wet Shave
|
|
Sun and Skin Care
|
|
Feminine Care
|
|
Corporate
|
|
Total
|
|
Restructuring
|
|
|
|
|
|
|
|
|
|
|
Severance and related benefit costs
|
$
|
10.6
|
|
|
$
|
0.2
|
|
|
$
|
6.2
|
|
|
$
|
—
|
|
|
$
|
17.0
|
|
|
Accelerated depreciation
|
—
|
|
|
—
|
|
|
3.9
|
|
|
—
|
|
|
3.9
|
|
|
Consulting, program management and other exit costs
|
4.8
|
|
|
0.2
|
|
|
11.1
|
|
|
—
|
|
|
16.1
|
|
|
Total Restructuring
|
$
|
15.4
|
|
|
$
|
0.4
|
|
|
$
|
21.2
|
|
|
$
|
—
|
|
|
$
|
37.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2015
|
|
|
Wet Shave
|
|
Sun and Skin Care
|
|
Feminine Care
|
|
Corporate
|
|
Total
|
|
Restructuring
|
|
|
|
|
|
|
|
|
|
|
Severance and related benefit costs
|
$
|
1.9
|
|
|
$
|
1.2
|
|
|
$
|
6.1
|
|
|
$
|
0.1
|
|
|
$
|
9.3
|
|
|
Accelerated depreciation
|
—
|
|
|
—
|
|
|
4.6
|
|
|
—
|
|
|
4.6
|
|
|
Consulting, program management and other exit costs
|
2.1
|
|
|
2.1
|
|
|
7.6
|
|
|
1.0
|
|
|
12.8
|
|
|
Total Restructuring
|
$
|
4.0
|
|
|
$
|
3.3
|
|
|
$
|
18.3
|
|
|
$
|
1.1
|
|
|
$
|
26.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2014
|
|
|
Wet Shave
|
|
Sun and Skin Care
|
|
Feminine Care
|
|
Corporate
|
|
Total
|
|
Restructuring
|
|
|
|
|
|
|
|
|
|
|
Severance and related benefit costs
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
20.7
|
|
|
$
|
0.8
|
|
|
$
|
21.5
|
|
|
Accelerated depreciation
|
—
|
|
|
—
|
|
|
0.6
|
|
|
—
|
|
|
0.6
|
|
|
Consulting, program management and other exit costs
|
8.5
|
|
|
9.2
|
|
|
9.2
|
|
|
0.9
|
|
|
27.8
|
|
|
Total Restructuring
|
$
|
8.5
|
|
|
$
|
9.2
|
|
|
$
|
30.5
|
|
|
$
|
1.7
|
|
|
$
|
49.9
|
|
In addition, pre-tax costs of
$0.3
and
$4.3
for fiscal 2015 and 2014, respectively, associated with certain information technology enablement activities related to the Company's Restructuring initiatives were included in SG&A. Pre-tax Cost of products sold of
$1.8
for fiscal 2016 associated with obsolescence charges related to the exit of certain non-core product lines as part of the restructuring and positive pre-tax adjustments of
$0.7
for fiscal 2014 associated with the Company's Restructuring, were included in Cost of products sold. These information technology costs and non-core inventory obsolescence charges are considered part of the total project costs incurred for the Restructuring initiative.
The following table summarizes the Restructuring activities and related accrual (excluding certain information technology enablement and obsolescence charges related to the Restructuring) for fiscal 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Utilized
|
|
|
|
|
October 1, 2015
|
|
Charge to Income
|
|
Other
(1)
|
|
Cash
|
|
Non-Cash
|
|
September 30, 2016
|
|
Restructuring
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance and termination related costs
|
$
|
13.7
|
|
|
$
|
17.0
|
|
|
$
|
0.6
|
|
|
$
|
(14.6
|
)
|
|
$
|
—
|
|
|
$
|
16.7
|
|
|
Asset impairment and accelerated depreciation
|
—
|
|
|
3.9
|
|
|
—
|
|
|
—
|
|
|
(3.9
|
)
|
|
—
|
|
|
Other related costs
|
—
|
|
|
16.1
|
|
|
—
|
|
|
(16.1
|
)
|
|
—
|
|
|
—
|
|
|
Total Restructuring
|
$
|
13.7
|
|
|
$
|
37.0
|
|
|
$
|
0.6
|
|
|
$
|
(30.7
|
)
|
|
$
|
(3.9
|
)
|
|
$
|
16.7
|
|
|
|
|
|
(1)
|
Includes the impact of currency translation.
|
The following table summarizes the Restructuring activities and related accrual (excluding certain information technology enablement and obsolescence charges related to the restructuring) for fiscal
2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Utilized
|
|
|
|
|
October 1, 2014
|
|
Charge to Income
(1)
|
|
Other
(2)
|
|
Cash
|
|
Non-Cash
|
|
September 30, 2015
|
|
Restructuring
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance and termination related costs
|
$
|
22.1
|
|
|
$
|
13.0
|
|
|
$
|
(8.3
|
)
|
|
$
|
(13.1
|
)
|
|
$
|
—
|
|
|
$
|
13.7
|
|
|
Asset impairment and accelerated depreciation
|
—
|
|
|
14.2
|
|
|
(0.5
|
)
|
|
—
|
|
|
(13.7
|
)
|
|
—
|
|
|
Other related costs
|
4.3
|
|
|
18.8
|
|
|
(1.2
|
)
|
|
(21.9
|
)
|
|
—
|
|
|
—
|
|
|
Net (gain) loss on asset sales
|
—
|
|
|
(11.0
|
)
|
|
0.5
|
|
|
13.9
|
|
|
(3.4
|
)
|
|
—
|
|
|
Total Restructuring
|
$
|
26.4
|
|
|
$
|
35.0
|
|
|
$
|
(9.5
|
)
|
|
$
|
(21.1
|
)
|
|
$
|
(17.1
|
)
|
|
$
|
13.7
|
|
|
|
|
|
(1)
|
Includes
$8.3
of pre-tax costs that are now reflected in discontinued operations.
|
|
|
|
|
(2)
|
Includes the impact of currency translation and the transfer of liabilities to New Energizer.
|
Note 6 - Income Taxes
The provisions for income taxes from continuing operations consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
2016
|
|
2015
|
|
2014
|
|
Currently payable:
|
|
|
|
|
|
|
United States - Federal
|
$
|
2.6
|
|
|
$
|
12.0
|
|
|
$
|
4.2
|
|
|
State
|
3.0
|
|
|
(1.0
|
)
|
|
(0.5
|
)
|
|
Foreign
|
24.4
|
|
|
45.3
|
|
|
26.6
|
|
|
Total current
|
30.0
|
|
|
56.3
|
|
|
30.3
|
|
|
Deferred:
|
|
|
|
|
|
|
United States - Federal
|
4.6
|
|
|
(194.8
|
)
|
|
(1.6
|
)
|
|
State
|
2.5
|
|
|
0.5
|
|
|
—
|
|
|
Foreign
|
4.1
|
|
|
(24.6
|
)
|
|
(0.6
|
)
|
|
Total deferred
|
11.2
|
|
|
(218.9
|
)
|
|
(2.2
|
)
|
|
Provision for income taxes
|
$
|
41.2
|
|
|
$
|
(162.6
|
)
|
|
$
|
28.1
|
|
The source of pre-tax earnings (loss) was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
2016
|
|
2015
|
|
2014
|
|
United States
|
$
|
53.3
|
|
|
$
|
(589.3
|
)
|
|
$
|
(36.0
|
)
|
|
Foreign
|
166.6
|
|
|
130.6
|
|
|
181.8
|
|
|
Pre-tax earnings
|
$
|
219.9
|
|
|
$
|
(458.7
|
)
|
|
$
|
145.8
|
|
A reconciliation of income taxes with the amounts computed at the statutory federal income tax rate follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
2016
|
|
2015
|
|
2014
|
|
Computed tax at federal statutory rate
|
$
|
77.0
|
|
|
35.0
|
%
|
|
$
|
(160.5
|
)
|
|
35.0
|
%
|
|
$
|
51.1
|
|
|
35.0
|
%
|
|
State income taxes, net of federal tax benefit
|
1.3
|
|
|
0.6
|
|
|
(9.9
|
)
|
|
2.2
|
|
|
(0.6
|
)
|
|
(0.4
|
)
|
|
Foreign tax less than the federal rate
|
(32.5
|
)
|
|
(14.8
|
)
|
|
(32.2
|
)
|
|
7.0
|
|
|
(19.5
|
)
|
|
(13.4
|
)
|
|
Adjustments to prior years' tax accruals
|
(13.1
|
)
|
|
(6.0
|
)
|
|
1.8
|
|
|
(0.4
|
)
|
|
(8.7
|
)
|
|
(5.9
|
)
|
|
Other taxes including repatriation of foreign earnings
|
4.4
|
|
|
2.0
|
|
|
5.4
|
|
|
(1.2
|
)
|
|
5.9
|
|
|
4.1
|
|
|
Nontaxable share option
|
—
|
|
|
—
|
|
|
(0.2
|
)
|
|
—
|
|
|
(4.3
|
)
|
|
(2.9
|
)
|
|
Venezuela deconsolidation
|
—
|
|
|
—
|
|
|
27.7
|
|
|
(6.0
|
)
|
|
—
|
|
|
—
|
|
|
Other, net
|
4.1
|
|
|
1.9
|
|
|
5.3
|
|
|
(1.2
|
)
|
|
4.2
|
|
|
2.8
|
|
|
Total
|
$
|
41.2
|
|
|
18.7
|
%
|
|
$
|
(162.6
|
)
|
|
35.4
|
%
|
|
$
|
28.1
|
|
|
19.3
|
%
|
The deferred tax assets and deferred tax liabilities recorded on the balance sheet were as follows, and include current and noncurrent amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
2016
|
|
2015
|
|
Deferred tax liabilities:
|
|
|
|
|
Depreciation and property differences
|
$
|
(65.2
|
)
|
|
$
|
(58.0
|
)
|
|
Intangible assets
|
(457.3
|
)
|
|
(472.7
|
)
|
|
Other tax liabilities
|
(4.0
|
)
|
|
(1.4
|
)
|
|
Gross deferred tax liabilities
|
(526.5
|
)
|
|
(532.1
|
)
|
|
Deferred tax assets:
|
|
|
|
|
Accrued liabilities
|
66.2
|
|
|
78.8
|
|
|
Deferred and share-based compensation
|
47.6
|
|
|
46.3
|
|
|
Tax loss carryforwards and tax credits
|
72.6
|
|
|
74.9
|
|
|
Postretirement benefits other than pensions
|
4.6
|
|
|
3.0
|
|
|
Pension plans
|
73.7
|
|
|
52.1
|
|
|
Inventory differences
|
6.8
|
|
|
2.1
|
|
|
Other tax assets
|
26.9
|
|
|
38.5
|
|
|
Gross deferred tax assets
|
298.4
|
|
|
295.7
|
|
|
Valuation allowance
|
(8.5
|
)
|
|
(8.4
|
)
|
|
Net deferred tax liabilities
|
$
|
(236.6
|
)
|
|
$
|
(244.8
|
)
|
There were no material tax loss carryforwards that expired in fiscal
2016
. Future expirations of tax loss carryforwards and tax credits, if not utilized, are not material from 2017 through 2020. For years subsequent to 2020 or for tax loss carryforwards and tax credits that have no expiration,
$62.5
of the value at
September 30, 2016
is primarily due to the fiscal 2015 domestic loss which has a 20 year carryforward period and is expected to be fully utilized. The valuation allowance is primarily attributable to tax loss carryforwards and certain deferred tax assets impacted by the deconsolidation of the Company's Venezuelan subsidiaries.
The Company regularly repatriates a portion of current year earnings from select non-U.S. subsidiaries. Generally, these non-U.S. subsidiaries are in tax jurisdictions with effective tax rates that do not result in materially higher U.S. tax provisions related to the repatriated earnings. No provision is made for additional taxes on undistributed earnings of foreign affiliates that are intended and planned to be indefinitely invested in the affiliate. The Company intends to, and has plans to, reinvest these earnings indefinitely in its foreign subsidiaries to, amongst other things, fund local operations, fund pension and other post retirement obligations, fund capital projects and to support foreign growth initiatives including potential acquisitions. At
September 30, 2016
, approximately
$1,083.8
of foreign subsidiary earnings were considered indefinitely invested in those businesses. The Company estimates that the U.S. federal income tax liability that could potentially arise if indefinitely invested earnings of foreign subsidiaries were repatriated in full to the U.S. would be significant. While it is not practical to calculate a specific potential U.S. tax exposure due to changing statutory rates in foreign jurisdictions over time, as well as other factors, the Company estimates the range of potential U.S. tax may be in excess of
$288.1
, if all undistributed earnings were repatriated assuming foreign cash was available to do so. Applicable U.S. income and foreign withholding taxes would be provided on these earnings in the periods in which they are no longer considered indefinitely reinvested.
Unrecognized tax benefits activity are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
Unrecognized tax benefits, beginning of year
|
$
|
47.1
|
|
|
$
|
37.8
|
|
|
Additions based on current year tax positions and acquisitions
|
6.0
|
|
|
17.6
|
|
|
Reductions for prior year tax positions and dispositions
|
(8.5
|
)
|
|
(8.0
|
)
|
|
Settlements with taxing authorities and statute expirations
|
(16.7
|
)
|
|
(0.3
|
)
|
|
Unrecognized tax benefits, end of year
|
$
|
27.9
|
|
|
$
|
47.1
|
|
Included in the unrecognized tax benefits noted above was
$24.1
of uncertain tax positions that would affect the Company's effective tax rate, if recognized. The Company does not expect any significant increases or decreases to its unrecognized tax benefits within twelve months of this reporting date. In the Consolidated Balance Sheets, unrecognized tax benefits are classified as Other liabilities (non-current) to the extent that payments are not anticipated within one year.
The Company classifies accrued interest and penalties related to unrecognized tax benefits in the income tax provision. The accrued interest and penalties are not included in the table above. The Company accrued approximately
$6.0
of interest, (net of the deferred tax asset of
$1.7
) at
September 30, 2016
, and
$10.8
of interest, (net of the deferred tax asset of
$3.8
) and
$2.8
of penalties at September 30, 2015. Interest was computed on the difference between the tax position recognized in accordance with GAAP and the amount previously taken or expected to be taken in the Company's tax returns.
The Company files income tax returns in the U.S. federal jurisdiction, various cities and states, and more than
50
foreign jurisdictions where the Company has operations. U.S. federal income tax returns for tax years ended September 30, 2013 and after remain subject to examination by the Internal Revenue Service (the "IRS"). With few exceptions, the Company is no longer subject to state and local income tax examinations for years before September 30, 2006. The status of international income tax examinations varies by jurisdiction. At this time, the Company does not anticipate any material adjustments to its financial statements resulting from tax examinations currently in progress.
Note 7 - Earnings (Loss) per Share
Basic earnings (loss) per share is based on the average number of common shares outstanding during the period. Diluted earnings (loss) per share is based on the average number of shares used for the basic earnings (loss) per share calculation, adjusted for the dilutive effect of share options and RSE awards.
Following is the reconciliation between the number of weighted-average shares used in the basic and diluted earnings (loss) per share calculation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
Basic weighted-average shares outstanding
|
59.2
|
|
|
62.0
|
|
|
62.0
|
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
Share options
|
—
|
|
|
—
|
|
|
—
|
|
|
RSE awards
|
0.5
|
|
|
—
|
|
|
0.6
|
|
|
Total dilutive securities
|
0.5
|
|
|
—
|
|
|
0.6
|
|
|
Diluted weighted-average shares outstanding
|
59.7
|
|
|
62.0
|
|
|
62.6
|
|
For fiscal 2016 and 2015, the calculation of diluted weighted-average shares outstanding excludes
0.4
of share options because the effect of including these awards was anti-dilutive. For fiscal 2016, the calculation of diluted weighted-average shares outstanding excludes
0.2
of RSE awards because the effect of including these awards was anti-dilutive. For fiscal 2015, the calculation of diluted weighted-average shares outstanding excludes
0.5
of RSE awards that would have otherwise been dilutive, because the Company reported a net loss. For fiscal
2014
, the number of RSE awards considered anti-dilutive was immaterial.
Note 8 - Goodwill and Intangible Assets
The following table sets forth goodwill by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wet
Shave
|
|
Sun and
Skin Care
|
|
Feminine
Care
|
|
All
Other
|
|
Total
|
|
Balance at October 1, 2015
|
$
|
967.4
|
|
|
$
|
178.0
|
|
|
$
|
206.8
|
|
|
$
|
69.6
|
|
|
$
|
1,421.8
|
|
|
Cumulative translation adjustment
|
(2.1
|
)
|
|
—
|
|
|
0.6
|
|
|
—
|
|
|
(1.5
|
)
|
|
Balance at September 30, 2016
|
$
|
965.3
|
|
|
$
|
178.0
|
|
|
$
|
207.4
|
|
|
$
|
69.6
|
|
|
$
|
1,420.3
|
|
Total amortizable intangible assets were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2016
|
|
September 30, 2015
|
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
|
|
Trade names and brands
|
$
|
14.6
|
|
|
$
|
12.2
|
|
|
$
|
2.4
|
|
|
$
|
14.6
|
|
|
$
|
11.9
|
|
|
$
|
2.7
|
|
|
Technology and patents
|
76.9
|
|
|
69.8
|
|
|
7.1
|
|
|
76.8
|
|
|
65.5
|
|
|
11.3
|
|
|
Customer-related and other
|
141.8
|
|
|
79.6
|
|
|
62.2
|
|
|
147.8
|
|
|
72.8
|
|
|
75.0
|
|
|
Total amortizable intangible assets
|
$
|
233.3
|
|
|
$
|
161.6
|
|
|
$
|
71.7
|
|
|
$
|
239.2
|
|
|
$
|
150.2
|
|
|
$
|
89.0
|
|
Amortization expense for intangible assets was
$14.4
,
$15.1
and
$17.9
for fiscal 2016, 2015 and 2014, respectively. Estimated amortization expense for amortizable intangible assets for fiscal 2017, 2018, 2019, 2020 and 2021 is approximately
$14.1
,
$6.6
,
$5.4
,
$4.7
and
$4.1
, respectively, and
$36.8
thereafter.
The Company had indefinite-lived intangible assets of
$1,313.4
(
$258.6
in Wet Shave,
$491.4
in Sun and Skin Care,
$299.9
in Feminine Care and
$263.5
in All Other) at
September 30, 2016
, a decrease of
$6.1
from
September 30, 2015
, due to impairment recorded during fiscal 2016, as discussed below, and changes in foreign currency translation rates.
Impairment
Goodwill and intangible assets deemed to have an indefinite life are not amortized, but reviewed annually in the fourth fiscal quarter for impairment of value or when indicators of a potential impairment are present. The Company continuously monitors changing business conditions, which may indicate that the remaining useful life of goodwill and other intangible assets may warrant revision or carrying amounts may require adjustment.
The Company completed impairment testing on indefinite-lived intangible assets other than goodwill during the fourth quarter of fiscal 2015, which consist of trademarks and brand names used across the Company's segments. The estimated fair value was determined using two income approaches: the multi-period excess earnings method and the relief-from-royalty method, both of which require significant assumptions, including estimates regarding future revenue and operating margin growth, discount rates, contributory asset charges and appropriate royalty rates. Revenue and operating margin growth assumptions are based on historical trends and management's expectations for future growth by brand. The discount rates were based on a weighted-average cost of capital utilizing industry market data of similar companies, in addition to estimated returns on the assets utilized in the operations of the applicable reporting unit, including net working capital, fixed assets and intangible assets. The Company estimated royalty rates based on operating profits of the brand.
In fiscal 2015, the Company determined that the carrying values of its Playtex, Wet Ones and Skintimate brand names were above the fair values, resulting in a non-cash asset impairment charge of
$318.2
. This non-cash asset impairment charge, which was shown as a separate line item, is attributable to the Company's segments as follows:
$29.6
Wet Shave;
$55.8
Sun and Skin Care;
$161.3
Feminine Care and
$71.5
All Other. The impairment of the Playtex brand was primarily the result of slower adoption of new products and lower legacy product sales for certain feminine care products, as well as declines in certain international markets related to the Separation. In addition, the impairment of the Playtex brand was driven by the Company's infant care products, where competitive pressures, delays in product launches and loss of licensing drove the sales decline. Both the Wet Ones and Skintimate impairments were primarily related to the introduction of competing products in the market, which resulted in share and margin declines.
During the fourth quarter of fiscal 2016, the Company completed its annual impairment testing and found the carrying value of its Skintimate brand name to be above the fair value, resulting in a non-cash asset impairment charge of
$6.5
. The fiscal 2016 impairment charge was caused by further market share erosion above previous estimates. Despite impairment charges over the past two fiscal years, the Company believes there is substantial value in the brand based upon the latest financial estimates. The Company determined that the Playtex and Wet Ones brands names were not further impaired during the fiscal 2016 testing; however, the fair value of both brand names continues to be relatively close to the carrying value due to the assets being written own to their fair value in fiscal 2015. These intangible assets, as well as the Skintimate brand name, will be sensitive in the future to changes in forecasted cash flows, as well as other assumptions used in an impairment analysis, including discount rates.
During fiscal 2015, the Company recorded a
$2.5
impairment of brand names and a
$5.6
impairment of customer-related intangibles associated with the sale of its industrial business. For further information on the sale of the industrial business, see Note 3 of Notes to Consolidated Financial Statements.
Note 9 - Supplemental Balance Sheet Information
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2016
|
|
September 30,
2015
|
|
Inventories
|
|
|
|
|
Raw materials and supplies
|
$
|
50.8
|
|
|
$
|
57.8
|
|
|
Work in process
|
43.9
|
|
|
50.1
|
|
|
Finished products
|
214.5
|
|
|
224.9
|
|
|
Total inventories
|
$
|
309.2
|
|
|
$
|
332.8
|
|
|
Other Current Assets
|
|
|
|
|
Miscellaneous receivables
|
$
|
29.1
|
|
|
$
|
53.8
|
|
|
Deferred income tax benefits
|
—
|
|
|
85.1
|
|
|
Prepaid expenses
|
49.0
|
|
|
56.9
|
|
|
Value added tax collectible from customers
|
22.4
|
|
|
19.9
|
|
|
Income taxes receivable
|
39.3
|
|
|
80.8
|
|
|
Other
|
3.4
|
|
|
15.4
|
|
|
Total other current assets
|
$
|
143.2
|
|
|
$
|
311.9
|
|
|
Property, Plant and Equipment
|
|
|
|
|
Land
|
$
|
27.8
|
|
|
$
|
27.7
|
|
|
Buildings
|
146.0
|
|
|
131.1
|
|
|
Machinery and equipment
|
913.7
|
|
|
848.4
|
|
|
Capitalized software costs
|
38.4
|
|
|
42.6
|
|
|
Construction in progress
|
36.2
|
|
|
54.3
|
|
|
Total gross property
|
1,162.1
|
|
|
1,104.1
|
|
|
Accumulated depreciation
|
(676.0
|
)
|
|
(605.2
|
)
|
|
Total property, plant and equipment, net
|
$
|
486.1
|
|
|
$
|
498.9
|
|
|
Other Current Liabilities
|
|
|
|
|
Accrued advertising, sales promotion and allowances
|
$
|
46.8
|
|
|
$
|
74.5
|
|
|
Accrued trade allowances
|
30.1
|
|
|
45.3
|
|
|
Accrued salaries, vacations and incentive compensation
|
56.0
|
|
|
46.8
|
|
|
Income taxes payable
|
19.7
|
|
|
25.3
|
|
|
Returns reserve
|
49.9
|
|
|
50.3
|
|
|
Restructuring reserve
|
21.9
|
|
|
24.8
|
|
|
Value added tax payable
|
25.0
|
|
|
21.9
|
|
|
Deferred compensation
|
26.1
|
|
|
—
|
|
|
Other
|
95.9
|
|
|
123.5
|
|
|
Total other current liabilities
|
$
|
371.4
|
|
|
$
|
412.4
|
|
|
Other Liabilities
|
|
|
|
|
Pensions and other retirement benefits
|
$
|
154.9
|
|
|
$
|
242.7
|
|
|
Deferred compensation
|
58.6
|
|
|
90.6
|
|
|
Other non-current liabilities
|
61.3
|
|
|
87.7
|
|
|
Total other liabilities
|
$
|
274.8
|
|
|
$
|
421.0
|
|
Note 10 - Debt
The detail of long-term debt was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2016
|
|
September 30,
2015
|
|
Senior notes, fixed interest rate of 4.7%, due 2021, net
(1)
|
$
|
597.8
|
|
|
$
|
597.3
|
|
|
Senior notes, fixed interest rate of 4.7%, due 2022, net
(1) (2)
|
496.9
|
|
|
496.4
|
|
|
Netherlands revolving credit facility due 2017
(3)
|
281.8
|
|
|
269.9
|
|
|
U.S. revolving credit facility due 2020
(3)
|
265.0
|
|
|
335.0
|
|
|
Term loan due 2019, net
(1) (3)
|
184.5
|
|
|
—
|
|
|
Total long-term debt, including current maturities
|
1,826.0
|
|
|
1,698.6
|
|
|
Less current portion
|
281.8
|
|
|
—
|
|
|
Total long-term debt
|
$
|
1,544.2
|
|
|
$
|
1,698.6
|
|
|
|
|
|
(1)
|
At September 30, 2016, the balance for the senior notes due 2021, the senior notes due 2022 and the term loan are reflected net of debt issuance costs of
$2.2
,
$2.3
and
$0.5
, respectively. At September 30, 2015, the senior notes due 2021 and the senior notes due 2022 are each reflected net of debt issuance costs of
$2.7
.
|
|
|
|
|
(2)
|
At
September 30, 2016
and September 30, 2015, balances for the senior notes due 2022 are reflected net of discount of
$0.8
and
$0.9
, respectively.
|
|
|
|
|
(3)
|
Variable-rate debt, based on LIBOR plus applicable margin.
|
Notes payable at
September 30, 2016
and
2015
consisted of notes payable to financial institutions with original maturities of less than ninety days of
$18.5
and
$17.5
, respectively, and had a weighted-average interest rate of
5.5%
and
5.5%
, respectively. This primarily consisted of outstanding international borrowings at each reporting date.
As of September 30, 2016, the Company had outstanding borrowings of
$265.0
under its unsecured revolving credit facility in the U.S., recorded in Long-term debt, and
$8.2
of outstanding letters of credit. Taking into account outstanding borrowings and outstanding letters of credit,
$376.8
remains available as of
September 30, 2016
. On April 26, 2016, the Company, along with its wholly-owned subsidiary, Edgewell Personal Care Brands, LLC, ("Brands"), and certain other of its subsidiaries entered into Amendment No. 2 to the Credit Agreement (the "Amendment"), amending the Credit Agreement dated June 1, 2015. The Amendment provides for an increase of
$50.0
(from
$600.0
to
$650.0
) in the revolving loans available to the Company and Brands and the availability of a
$185.0
term loan to Brands. On April 26, 2016, Brands borrowed
$185.0
in a term loan under the Credit Agreement. The term loan matures on the third anniversary of the date of the Amendment, and bears interest at an annual rate equal to LIBOR plus the applicable margin of
1.075%
-
1.575%
based on total leverage, or the Alternate Base Rate plus the applicable margin, which will be
1.0%
lower than for LIBOR loans (as such terms are defined in the Credit Agreement). The proceeds of the term loan borrowing were used to pay down existing indebtedness.
As of
September 30, 2016
, the Company had outstanding borrowings of
€250.8
(approximately
$281.8
) under its revolving credit facility in the Netherlands, recorded in Current maturities of long-term debt. No additional borrowing is available under this facility, which matures in June 2017.
Subsequent Event
On October 20, 2016, the Company terminated its commitments under the Netherlands revolving credit facility and repaid all outstanding loans and other obligations in full, in the amount of
€251.3
, or approximately
$277
.
Debt Covenants
The credit agreements governing the Company's outstanding debt at September 30, 2016 contain certain customary representations and warranties, financial covenants, covenants restricting its ability to take certain actions, affirmative covenants and provisions relating to events of default. Under the terms of the Company's credit agreements, the ratio of its indebtedness to its earnings before interest, taxes, depreciation and amortization ("EBITDA"), as defined in the agreement and detailed below, and the ratio of the Company's current year earnings before interest and taxes ("EBIT"), as defined in the agreements, to total interest expense must remain below certain thresholds. Under the credit agreements, EBITDA is defined as net earnings, as adjusted to add-back interest expense, income taxes, depreciation and amortization, all of which are determined in accordance with GAAP. In addition, the credit agreement allows certain non-cash charges such as stock award amortization and asset write-offs including, but not limited to, impairment and accelerated depreciation, to be "added-back" in determining EBITDA for purposes of the indebtedness ratio. Total debt is calculated in accordance with GAAP, but excludes outstanding borrowings under the Netherlands Credit Facility (which was repaid in October 2016). EBIT is calculated in a fashion identical to EBITDA except that depreciation and amortization are not "added-back." Total interest expense is calculated in accordance with GAAP. If the Company fails to comply with these covenants or with other requirements of these credit agreements, the lenders may have the right to accelerate the maturity of the debt. Acceleration under one of the Company's facilities would trigger cross defaults on its other borrowings.
As of
September 30, 2016
, the Company was in compliance, in all material respects, with the provisions and covenants associated with its debt agreements.
Debt Maturities
Aggregate maturities of long-term debt, including current maturities, at
September 30, 2016
were as follows:
$281.8
in one year,
$185.0
in three years,
$265.0
in four years,
$600.0
in five years and
$500.0
thereafter.
Note 11 - Retirement Plans
Pensions and Postretirement Plans
The Company has several defined benefit pension plans covering employees in the U.S. and certain employees in other countries. The plans provide retirement benefits based on years of service and earnings.
The Company also sponsors or participates in a number of 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.
As part of the Separation, and in accordance with an employee matters agreement entered into with New Energizer, certain combined plans were split between Edgewell and New Energizer. Accordingly, the Company transferred to New Energizer pension obligations associated with their active, retired and other former employees for those impacted defined benefit pension plans. The allocation of plan assets was determined in accordance with applicable ERISA (The Employee Retirement Income Security Act of 1974), IRS and other jurisdictional requirements. In June 2016, the Company transferred the remaining international pension obligation to New Energizer, which had been pending jurisdictional approval. In connection with this transfer, the Company's pension liability decreased by approximately
$11.6
.
The Company funds its pension plans in compliance with ERISA or local funding requirements. The Company has evaluated the discretionary funding of certain international defined benefit plans and contributed approximately
$100.5
to one of its plans during fiscal 2016. Additionally, the Company remeasured the pension benefit obligation and unrecognized loss in Accumulated other comprehensive loss for the funded plan, using an updated discount rate of
2.40%
as of January 31, 2016, increasing the liability and decreasing Accumulated other comprehensive loss by approximately
$7.7
.
The following tables present the benefit obligation, plan assets and funded status of the plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
Pension
|
|
Postretirement
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Change in projected benefit obligation
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of year
|
$
|
607.6
|
|
|
$
|
1,356.7
|
|
|
$
|
10.8
|
|
|
$
|
16.2
|
|
|
Service cost
(1)
|
5.1
|
|
|
8.1
|
|
|
0.2
|
|
|
0.5
|
|
|
Interest cost
(1)
|
21.9
|
|
|
41.5
|
|
|
0.4
|
|
|
0.5
|
|
|
Plan participants' contributions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Actuarial loss (gain)
|
59.6
|
|
|
8.4
|
|
|
1.0
|
|
|
(0.1
|
)
|
|
Benefits paid, net
|
(32.8
|
)
|
|
(65.9
|
)
|
|
(0.1
|
)
|
|
(0.1
|
)
|
|
Plan settlements
|
(0.9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Foreign currency exchange rate changes
|
1.3
|
|
|
(27.8
|
)
|
|
0.1
|
|
|
(2.4
|
)
|
|
Amounts distributed to New Energizer
|
(11.6
|
)
|
|
(713.4
|
)
|
|
—
|
|
|
(3.8
|
)
|
|
Projected benefit obligation at end of year
|
$
|
650.2
|
|
|
$
|
607.6
|
|
|
$
|
12.4
|
|
|
$
|
10.8
|
|
|
Change in plan assets
|
|
|
|
|
|
|
|
|
Estimated fair value of plan assets at beginning of year
|
$
|
373.6
|
|
|
$
|
1,037.3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Actual return on plan assets
|
51.3
|
|
|
36.0
|
|
|
—
|
|
|
—
|
|
|
Company contributions
|
115.1
|
|
|
32.2
|
|
|
0.1
|
|
|
0.1
|
|
|
Plan participants' contributions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Plan settlements
|
(0.9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Benefits paid
|
(32.8
|
)
|
|
(65.9
|
)
|
|
(0.1
|
)
|
|
(0.1
|
)
|
|
Foreign currency exchange rate changes
|
1.7
|
|
|
(12.9
|
)
|
|
—
|
|
|
—
|
|
|
Amounts distributed to New Energizer
|
—
|
|
|
(653.1
|
)
|
|
—
|
|
|
—
|
|
|
Estimated fair value of plan assets at end of year
|
$
|
508.0
|
|
|
$
|
373.6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Funded status at end of year
|
$
|
(142.2
|
)
|
|
$
|
(234.0
|
)
|
|
$
|
(12.4
|
)
|
|
$
|
(10.8
|
)
|
|
|
|
|
(1)
|
Service cost and interest cost included within this table for the first nine months of fiscal 2015 include those costs associated with pension plans transferred to New Energizer at the Separation. Those costs are included within discontinued operations and are not reflected in operating income from continuing operations within the Consolidated Statement of Earnings.
|
The following table presents the amounts recognized in the Consolidated Balance Sheets and Consolidated Statement of Changes in Shareholders' Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
Pension
|
|
Postretirement
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Amounts recognized in the Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
Noncurrent assets
|
$
|
1.0
|
|
|
$
|
3.2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Current liabilities
|
(1.7
|
)
|
|
(4.5
|
)
|
|
(0.3
|
)
|
|
(0.1
|
)
|
|
Noncurrent liabilities
|
(141.5
|
)
|
|
(232.7
|
)
|
|
(12.1
|
)
|
|
(10.7
|
)
|
|
Net amount recognized
|
$
|
(142.2
|
)
|
|
$
|
(234.0
|
)
|
|
$
|
(12.4
|
)
|
|
$
|
(10.8
|
)
|
|
Amounts recognized in Accumulated other comprehensive loss
|
|
|
|
|
|
|
|
|
Net loss (gain)
|
$
|
198.0
|
|
|
$
|
167.0
|
|
|
$
|
(0.7
|
)
|
|
$
|
(2.7
|
)
|
|
Prior service credit
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|
Net amount recognized, pre-tax
|
$
|
198.0
|
|
|
$
|
167.0
|
|
|
$
|
(0.7
|
)
|
|
$
|
(2.8
|
)
|
The changes in other comprehensive loss associated with pension benefits included divestiture of net actuarial losses as a result of the Separation.
Pre-tax changes recognized in other comprehensive income for fiscal 2016 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
Post-
retirement
|
|
Changes in plan assets and benefit obligations recognized in other comprehensive income
|
|
|
|
|
Net loss arising during the year
|
$
|
39.3
|
|
|
$
|
1.0
|
|
|
Effect of exchange rates
|
0.4
|
|
|
—
|
|
|
Amounts recognized as a component of net periodic benefit cost
|
|
|
|
|
Amortization or curtailment recognition of prior service cost
|
—
|
|
|
0.1
|
|
|
Amortization or settlement recognition of net (loss) gain
|
(5.3
|
)
|
|
1.0
|
|
|
Total recognized in other comprehensive income
|
$
|
34.4
|
|
|
$
|
2.1
|
|
The Company expects to contribute
$9.0
to its pension plans and
$0.3
to its postretirement plans in fiscal
2017
.
The Company's expected future benefit payments are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
Post-
retirement
|
|
Fiscal 2017
|
$
|
40.2
|
|
|
$
|
0.3
|
|
|
Fiscal 2018
|
40.9
|
|
|
0.3
|
|
|
Fiscal 2019
|
35.1
|
|
|
0.3
|
|
|
Fiscal 2020
|
35.1
|
|
|
0.3
|
|
|
Fiscal 2021
|
34.8
|
|
|
0.4
|
|
|
Fiscal 2022 to 2026
|
171.5
|
|
|
2.1
|
|
The accumulated benefit obligation for defined benefit pension plans was
$633.1
and
$593.7
at
September 30, 2016
and
2015
, respectively. The following table shows pension plans with an accumulated benefit obligation in excess of plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
2016
|
|
2015
|
|
Projected benefit obligation
|
$
|
628.1
|
|
|
$
|
583.6
|
|
|
Accumulated benefit obligation
|
612.5
|
|
|
570.8
|
|
|
Estimated fair value of plan assets
|
485.0
|
|
|
346.3
|
|
Pension plan assets in the U.S. plan represent approximately
71%
of assets in all of the Company's defined benefit pension plans. Investment policy for the U.S. plan includes a mandate to diversify assets and invest in a variety of asset classes to achieve that goal. The U.S. plan's assets are currently invested in several funds representing most standard equity and debt security classes. The broad target allocations are: (a) equities, including U.S. and foreign: approximately
60%
and (b) debt securities, including U.S. bonds: approximately
40%
. Actual allocations at
September 30, 2016
approximated these targets. The U.S. plan held no shares of Company common stock at
September 30, 2016
. Investment objectives are similar for non-U.S. pension arrangements, subject to local regulations.
The following table presents pension and postretirement expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
Pension
|
|
Postretirement
|
|
|
2016
|
|
2015
|
|
2014
|
|
2016
|
|
2015
|
|
2014
|
|
Service cost
|
$
|
5.1
|
|
|
$
|
8.1
|
|
|
$
|
14.4
|
|
|
$
|
0.2
|
|
|
$
|
0.5
|
|
|
$
|
2.0
|
|
|
Interest cost
|
21.9
|
|
|
41.5
|
|
|
54.6
|
|
|
0.4
|
|
|
0.5
|
|
|
0.8
|
|
|
Expected return on plan assets
|
(31.0
|
)
|
|
(59.9
|
)
|
|
(69.3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Amortization of unrecognized prior service cost
|
—
|
|
|
0.2
|
|
|
0.3
|
|
|
(0.1
|
)
|
|
(0.1
|
)
|
|
—
|
|
|
Recognized net actuarial loss (gain)
|
5.3
|
|
|
8.1
|
|
|
18.5
|
|
|
(1.0
|
)
|
|
(0.8
|
)
|
|
(0.1
|
)
|
|
Curtailment and other gain recognized
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.1
|
)
|
|
Settlement loss recognized
|
—
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Net periodic benefit cost (credit)
|
1.3
|
|
|
(2.0
|
)
|
|
18.7
|
|
|
(0.5
|
)
|
|
0.1
|
|
|
1.6
|
|
|
Net periodic benefit (credit) cost associated with New Energizer
|
—
|
|
|
(5.9
|
)
|
|
7.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Net periodic benefit cost (credit) included in continuing operations
|
$
|
1.3
|
|
|
$
|
3.9
|
|
|
$
|
11.6
|
|
|
$
|
(0.5
|
)
|
|
$
|
0.1
|
|
|
$
|
1.6
|
|
Amounts expected to be amortized from accumulated other comprehensive loss into net periodic benefit cost (credit) during fiscal 2017, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
Postretirement
|
|
Net actuarial (loss) gain
|
$
|
(7.0
|
)
|
|
$
|
0.5
|
|
|
Prior service (cost) credit
|
$
|
—
|
|
|
$
|
—
|
|
Effective January 1, 2014, benefits under the U.S. pension plan were frozen and future service benefits are no longer being accrued. As a result, the amortization period for unrecognized gains and losses was changed for fiscal 2015 and beyond from the average remaining service period of active employees to the average remaining life expectancy of all plan participants. Because unrecognized losses currently exist, this change will result in a decrease in future pension expense due to the longer amortization period being applied.
The following table presents assumptions, which reflect weighted-averages for the component plans, used in determining the above information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
Pension
|
|
Postretirement
|
|
|
2016
|
|
2015
|
|
2014
|
|
2016
|
|
2015
|
|
2014
|
|
Plan obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
3.0
|
%
|
|
3.8
|
%
|
|
|
|
2.8
|
%
|
|
3.5
|
%
|
|
|
|
Compensation increase rate
|
2.5
|
%
|
|
2.5
|
%
|
|
|
|
N/A
|
|
|
N/A
|
|
|
|
|
Net periodic benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
3.8
|
%
|
|
3.8
|
%
|
|
4.3
|
%
|
|
3.5
|
%
|
|
3.7
|
%
|
|
4.9
|
%
|
|
Expected long-term rate of return on plan assets
|
7.4
|
%
|
|
7.6
|
%
|
|
7.3
|
%
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
Compensation increase rate
|
2.5
|
%
|
|
2.6
|
%
|
|
3.1
|
%
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
The expected return on plan assets was determined based on historical and expected future returns of the various asset classes, using the target allocations described above.
The following table sets forth the estimated fair value of the Company's pension assets segregated by level within the estimated fair value hierarchy. Refer to Note 15 of Notes to Consolidated Financial Statements for further discussion on the estimated fair value hierarchy and estimated fair value principles.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2016
|
|
Pension assets at estimated fair value
|
Level 1
|
|
Level 2
|
|
Total
|
|
Equity
|
|
|
|
|
|
|
U.S. equity
|
$
|
111.5
|
|
|
$
|
—
|
|
|
$
|
111.5
|
|
|
International equity
|
54.0
|
|
|
—
|
|
|
54.0
|
|
|
Debt
|
|
|
|
|
|
|
U.S. government
|
—
|
|
|
201.6
|
|
|
201.6
|
|
|
Other government
|
—
|
|
|
7.0
|
|
|
7.0
|
|
|
Corporate
|
—
|
|
|
1.3
|
|
|
1.3
|
|
|
Cash and cash equivalents
|
5.1
|
|
|
1.7
|
|
|
6.8
|
|
|
Other
|
—
|
|
|
18.5
|
|
|
18.5
|
|
|
Total, excluding investments valued at net asset value ("NAV")
|
170.6
|
|
|
230.1
|
|
|
400.7
|
|
|
Investments valued at NAV
|
|
|
|
|
107.3
|
|
|
Total
|
$
|
170.6
|
|
|
$
|
230.1
|
|
|
$
|
508.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2015
|
|
Pension assets at estimated fair value
|
Level 1
|
|
Level 2
|
|
Total
|
|
Equity
|
|
|
|
|
|
|
U.S. equity
|
$
|
105.0
|
|
|
$
|
—
|
|
|
$
|
105.0
|
|
|
International equity
|
4.5
|
|
|
—
|
|
|
4.5
|
|
|
Debt
|
|
|
|
|
|
|
U.S. government
|
—
|
|
|
146.3
|
|
|
146.3
|
|
|
Other government
|
—
|
|
|
2.3
|
|
|
2.3
|
|
|
Corporate
|
—
|
|
|
1.6
|
|
|
1.6
|
|
|
Cash and cash equivalents
|
—
|
|
|
0.5
|
|
|
0.5
|
|
|
Other
|
—
|
|
|
16.4
|
|
|
16.4
|
|
|
Total, excluding investments valued at NAV
|
$
|
109.5
|
|
|
$
|
167.1
|
|
|
$
|
276.6
|
|
|
Investments valued at NAV
|
|
|
|
|
97.0
|
|
|
Total
|
$
|
109.5
|
|
|
$
|
167.1
|
|
|
$
|
373.6
|
|
The following table sets forth the estimated fair value of the Company's pension assets valued at NAV:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30,
|
|
|
2016
|
|
2015
|
|
Pension assets valued at NAV estimated at fair value
|
|
|
|
|
Equity
|
|
|
|
|
U.S. equity
|
$
|
16.8
|
|
|
$
|
16.5
|
|
|
International equity
|
90.5
|
|
|
80.5
|
|
|
Total investments valued at NAV
|
$
|
107.3
|
|
|
$
|
97.0
|
|
There were no Level 3 pension assets as of
September 30, 2016
and
2015
.
The Company had no postretirement plan assets as of
September 30, 2016
and
2015
.
The Company's investment objective for defined benefit retirement plan assets is to satisfy the current and future pension benefit obligations. The investment philosophy is to achieve this objective through diversification of the retirement plan assets. The goal is to earn a suitable return with an appropriate level of risk while maintaining adequate liquidity to distribute benefit payments. The diversified asset allocation includes equity positions as well as fixed income investments. The increased volatility associated with equities is offset with higher expected returns, while the long duration fixed income investments help dampen the volatility of the overall portfolio. Risk exposure is controlled by re-balancing the retirement plan assets back to target allocations, as needed. Investment firms managing retirement plan assets carry out investment policy within their stated guidelines. Investment performance is monitored against benchmark indices, which reflect the policy and target allocation of the retirement plan assets.
Defined Contribution Plan
The Company sponsors a defined contribution plan, which extends participation eligibility to the vast majority of U.S. employees. Effective January 1, 2014, the Company matches
100%
of participant's before-tax or Roth contributions up to
6%
of eligible compensation. Amounts charged to expense during fiscal
2016
,
2015
, and
2014
were
$10.1
,
$14.5
, and
$13.7
, respectively, and are reflected in SG&A and Cost of products sold.
Note 12 - Share-Based Payments
As of
September 30, 2016
, the Company had two share-based compensation plans - the Second Amended and Restated 2009 Incentive Stock Plan (the "2009 Plan") and the Incentive Stock Plan. The Incentive Stock Plan was superseded by the 2009 Plan, and new awards granted after January 2009 are issued under the 2009 Plan. The 2009 Plan provides for the award of restricted stock, RSE awards or share options to purchase the Company's common stock to directors, officers and employees of the Company. The maximum number of shares authorized for issuance under the 2009 Plan is
12.0
, of which
6.4
were available for future awards as of September 30, 2016.
Share options are granted at the market price on the grant date and generally vest ratably over
three
years. These awards typically have a maximum term of
ten
years. Restricted stock and RSE awards may also be granted. Option shares and prices, and restricted stock and RSE awards, are adjusted in conjunction with stock splits and other recapitalizations, including the Separation, so that the holder is in the same economic position before and after these equity transactions.
The Company uses the straight-line method of recognizing compensation cost. Total compensation costs charged against income from continuing operations for the Company's share-based compensation arrangements were
$25.6
,
$33.1
and
$30.5
, respectively, for fiscal 2016,
2015
and
2014
, and were recorded in SG&A. The total income tax benefit recognized for share-based compensation arrangements was
$9.6
,
$12.3
and
$11.4
, respectively, for fiscal 2016,
2015
and
2014
. Restricted stock issuance and shares issued for share option exercises under the Company's share-based compensation program are generally issued from treasury shares.
Share Options
In July 2015, the Company granted non-qualified share option awards to certain executives and employees remaining with the Company after the Separation. The grant included
0.4
share option awards, which will vest ratably over
three
years. The grant-date fair value of awards, which was estimated using the Black-Scholes option pricing model, was
$12.2
, and is being recognized over the applicable vesting period. The share options remain exercisable for
ten
years from the date of grant. However, this term may be reduced under certain circumstances including the recipient's termination of employment.
The following table summarizes share option activity during fiscal
2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted-Average Exercise Price
|
|
Weighted-Average Remaining Contractual Term
(in years)
|
|
Aggregate Intrinsic Value
|
|
Outstanding on October 1, 2015
|
0.4
|
|
|
$
|
100.68
|
|
|
|
|
|
|
Granted
|
—
|
|
|
—
|
|
|
|
|
|
|
Canceled
|
—
|
|
|
—
|
|
|
|
|
|
|
Exercised
|
—
|
|
|
—
|
|
|
|
|
|
|
Outstanding on September 30, 2016
|
0.4
|
|
|
$
|
100.68
|
|
|
8.8
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Vested and unvested expected to vest as of September 30, 2016
|
0.4
|
|
|
$
|
100.68
|
|
|
8.8
|
|
$
|
—
|
|
|
Exercisable on September 30, 2016
|
0.1
|
|
|
100.68
|
|
|
|
|
|
No share options were exercised in fiscal 2016. The total intrinsic value of share option awards at the time of exercise for 2015 and 2014 were
$4.5
and
$9.6
, respectively.
The following table presents the Company's assumptions utilized in the Black-Scholes option pricing model in the determination of the grant date fair value of share option awards granted in fiscal 2015. There were no share option awards granted in fiscal 2016 or 2014.
|
|
|
|
|
|
|
|
|
2015
|
|
Weighted-average fair value per share option
|
$
|
28.77
|
|
|
Expected volatility
|
25.00
|
%
|
|
Risk-free interest rate
|
1.94
|
%
|
|
Expected share option life (in years)
|
6.0
|
|
|
Dividend yield
|
—
|
%
|
As of
September 30, 2016
, there was an estimated
$7.1
of total unrecognized compensation costs related to share option awards, which will be recognized over a weighted-average period of approximately
1.8 years
.
Restricted Share Equivalents
The following table summarizes RSE award activity during fiscal 2016:
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted-Average
Grant Date Estimated Fair
Value
|
|
Non-vested at October 1, 2015
|
1.1
|
|
|
$
|
100.04
|
|
|
Granted
|
—
|
|
|
84.92
|
|
|
Vested
|
(0.4
|
)
|
|
100.41
|
|
|
Canceled
|
(0.2
|
)
|
|
100.85
|
|
|
Non-vested at September 30, 2016
|
0.5
|
|
|
99.14
|
|
As of
September 30, 2016
, there was an estimated
$25.6
of total unrecognized compensation costs related to RSE awards, which will be recognized over a weighted-average period of approximately
2.1 years
. The weighted-average estimated fair value for RSE awards granted in fiscal
2016
,
2015
and
2014
was
$84.92
,
$112.58
, and
$104.22
, respectively. The estimated fair value of RSE awards vested in fiscal
2016
,
2015
and
2014
was
$44.1
,
$57.1
, and
$47.2
, respectively.
Note 13 - Shareholders' Equity
At September 30, 2016, there were
300.0
shares of the Company's common stock authorized, of which
1.3
shares were reserved under the 2009 and Incentive Stock Plans. The Company's Articles of Incorporation authorize it to issue up to
10.0
shares of
$0.01
par value of preferred stock. As of September 30, 2016, there were no shares of preferred stock issued or outstanding.
In May 2015, the Board approved an authorization to repurchase up to
10.0
shares of the Company's common stock. This authorization replaced the prior share repurchase authorization. During fiscal 2016, the Company repurchased
2.5
shares of its common stock for
$196.6
, all of which were purchased under this authorization. The Company has
5.5
shares remaining under the Board authorization to repurchase its common shares in the future. 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 the Company deems appropriate based upon prevailing market conditions, business needs and other factors.
During fiscal 2016,
0.1
shares were purchased related to the surrender of shares of common stock to satisfy tax withholding obligations in connection with the vesting of RSE awards.
During fiscal 2016, the Company paid $
0.6
cash dividends related to the vesting of RSE awards, which had been declared and accrued during prior fiscal years. The Company has not declared any dividends since the third quarter of fiscal 2015, and does not currently intend to declare dividends in the foreseeable future. Any future dividends are dependent on future earnings, capital requirements and the Company's financial condition and will be declared at the sole discretion of the Board. In fiscal 2015, the Company declared cash dividends of
$94.2
, or
$1.50
per share.
Note 14 - 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
|
|
Balance at September 30, 2014
|
$
|
(78.2
|
)
|
|
$
|
(202.8
|
)
|
|
$
|
9.9
|
|
|
$
|
(271.1
|
)
|
|
OCI before reclassifications
|
(145.1
|
)
|
|
(12.3
|
)
|
|
(24.3
|
)
|
|
(181.7
|
)
|
|
Venezuela deconsolidation charge
|
33.7
|
|
|
—
|
|
|
—
|
|
|
33.7
|
|
|
Amounts distributed to New Energizer
|
120.5
|
|
|
104.5
|
|
|
(3.2
|
)
|
|
221.8
|
|
|
Reclassifications to earnings
|
—
|
|
|
4.9
|
|
|
20.9
|
|
|
25.8
|
|
|
Balance at September 30, 2015
|
(69.1
|
)
|
|
(105.7
|
)
|
|
3.3
|
|
|
(171.5
|
)
|
|
OCI before reclassifications
|
1.0
|
|
|
(25.6
|
)
|
|
(7.2
|
)
|
|
(31.8
|
)
|
|
Amounts distributed to New Energizer
|
—
|
|
|
2.3
|
|
|
—
|
|
|
2.3
|
|
|
Reclassifications to earnings
|
—
|
|
|
2.7
|
|
|
1.1
|
|
|
3.8
|
|
|
Balance at September 30, 2016
|
$
|
(68.1
|
)
|
|
$
|
(126.3
|
)
|
|
$
|
(2.8
|
)
|
|
$
|
(197.2
|
)
|
The following table presents the reclassifications out of AOCI:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
|
Details of AOCI Components
|
|
2016
|
|
2015
|
|
Affected Line Item in the Consolidated Statements of Earnings
|
|
Gains and losses on cash flow hedges
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
$
|
1.2
|
|
|
$
|
29.9
|
|
|
Other expense (income), net
|
|
|
|
1.2
|
|
|
29.9
|
|
|
Total before tax
|
|
|
|
(0.1
|
)
|
|
(9.0
|
)
|
|
Tax expense
|
|
|
|
$
|
1.1
|
|
|
$
|
20.9
|
|
|
Net of tax
|
|
Amortization of defined benefit pension and postretirement items
|
|
|
|
|
|
|
|
Prior service costs
|
|
$
|
(0.1
|
)
|
|
$
|
0.1
|
|
|
(1)
|
|
Actuarial losses
|
|
4.3
|
|
|
7.3
|
|
|
(1)
|
|
|
|
4.2
|
|
|
7.4
|
|
|
Total before tax
|
|
|
|
(1.5
|
)
|
|
(2.5
|
)
|
|
Tax expense
|
|
|
|
$
|
2.7
|
|
|
$
|
4.9
|
|
|
Net of tax
|
|
Foreign currency translation adjustments
|
|
|
|
|
|
|
|
Venezuela deconsolidation charge
|
|
$
|
—
|
|
|
$
|
33.7
|
|
|
Venezuela deconsolidation charge
|
|
|
|
$
|
—
|
|
|
$
|
33.7
|
|
|
|
|
|
|
|
|
|
|
|
|
Total reclassifications for the period
|
|
$
|
3.8
|
|
|
$
|
59.5
|
|
|
Net of tax
|
|
|
|
|
(1)
|
These AOCI components are included in the computation of net periodic benefit cost. See Note 11 of Notes to Consolidated Financial Statements.
|
Note 15 - Financial Instruments and Risk Management
At times, the Company enters into contractual arrangements (derivatives) to reduce its exposure to foreign currency and interest rate risks. The section below outlines the types of derivatives that existed at September 30, 2016 and September 30, 2015, as well as the Company's objectives and strategies for holding derivative instruments.
Foreign Currency Risk
A significant share of the Company's sales are 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 to 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 period. 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 expense (income), net. The primary currency to which the Company's foreign subsidiaries are exposed is the U.S. dollar.
Interest Rate Risk
The Company has interest rate risk with respect to interest expense on variable rate debt. At
September 30, 2016
, the Company had
$731.3
of variable rate debt outstanding, which consisted primarily of outstanding borrowings under the Company's revolving credit facilities in the U.S. and the Netherlands and the Company's term loan.
Other Risks
Customer Concentration.
Financial instruments that potentially subject the Company to concentrations of credit risk primarily consist of accounts receivable. The Company generally does not require collateral from customers. The Company's largest customer, Wal-Mart Stores, Inc. and its affiliates (collectively, "Wal-Mart"), accounted for approximately
25%
of net sales in fiscal 2016. No other customer accounted for more than 10.0% of the Company's consolidated net sales. Purchases by Wal-Mart included products from all of the Company's segments. Additionally, in fiscal 2016, Target Corporation represented approximately
11%
,
11%
and
16%
of net sales for the Company's Sun and Skin Care, Feminine Care and All Other segments, respectively, and Toys "R" Us, Inc. represents
11%
of net sales for the Company's All Other segment.
Product Concentration.
Within the Wet Shave segment, the Company's razor and blades represented
53.3%
,
52.8%
and
54.0%
of net sales and within the Sun and Skin Care segment, sun care products represented
14.3%
,
13.2%
and
12.9%
of net sales during fiscal 2016, 2015 and 2014, respectively.
Cash Flow Hedges
At
September 30, 2016
, 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 for accounting purposes in offsetting the associated risk.
The Company entered into a series of 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 loss of
$4.3
at
September 30, 2016
and a pre-tax gain of
$4.6
at September 30, 2015 on these forward currency contracts accounted for as cash flow hedges included in Accumulated other comprehensive loss. Assuming foreign exchange rates versus the U.S. dollar remain at
September 30, 2016
levels over the next twelve months, approximately
$4.2
of the pre-tax loss included in Accumulated other comprehensive loss at
September 30, 2016
, is expected to be included in Other expense (income), net. Contract maturities for these hedges extend into fiscal year 2018. There were
70
open foreign currency contracts at
September 30, 2016
with a total notional value of
$140.3
.
Derivatives not Designated as Hedges
The Company held a share option with a major financial institution to mitigate the impact of changes in certain of the Company's deferred compensation liabilities, which were tied to the Company's common share price. The contract matured in November 2014. Period activity related to the share option is classified in the same category in the cash flow statement as the period activity associated with the Company's deferred compensation liability, which is cash flow from operations.
The Company 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, thus they are not subject to significant market risk. The change in estimated fair value of the foreign currency contracts for fiscal 2016 resulted in a loss of
$10.1
and for fiscal 2015 resulted in a gain of
$13.1
and was recorded in Other expense (income), net. There were
five
open foreign currency derivative contracts which were not designated as cash flow hedges at
September 30, 2016
, with a total notional value of
$115.4
.
The following table provides estimated fair values and the amounts of gains and losses on derivative instruments classified as cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
September 30, 2016
|
|
Fiscal 2016
|
|
Derivatives designated as Cash Flow Hedging Relationships
|
|
Estimated Fair Value, Liability
(1) (2)
|
|
Loss
Recognized
in OCI
(3)
|
|
Gain Reclassified From OCI into Income (Effective
Portion)
(4) (5)
|
|
Foreign currency contracts
|
|
$
|
(4.3
|
)
|
|
$
|
(7.7
|
)
|
|
$
|
1.2
|
|
|
|
|
|
|
|
|
|
|
|
|
At
September 30, 2015
|
|
Fiscal 2015
|
|
Derivatives designated as Cash Flow Hedging Relationships
|
|
Estimated Fair Value, Asset
(1) (2)
|
|
Gain
Recognized
in OCI
(3)
|
|
Gain Reclassified From OCI into Income (Effective
Portion)
(4) (5)
|
|
Foreign currency contracts
|
|
$
|
4.6
|
|
|
$
|
20.0
|
|
|
$
|
29.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2014
|
|
Derivatives designated as Cash Flow Hedging Relationships
|
|
|
|
Gain
Recognized
in OCI
(3)
|
|
Gain Reclassified From OCI into Income (Effective
Portion)
(4) (5)
|
|
Foreign currency contracts
|
|
|
|
$
|
17.7
|
|
|
$
|
4.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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.
|
|
|
|
|
(3)
|
OCI is defined as Other comprehensive loss.
|
|
|
|
|
(4)
|
Gain reclassified to income was recorded as follows: foreign currency contracts in Other expense (income), net.
|
|
|
|
|
(5)
|
Each of these derivative instruments had a high correlation to the underlying exposure being hedged for the periods indicated and had been deemed highly effective in offsetting associated risk.
|
The following table provides estimated fair values and the amounts of gains and losses on derivative instruments not classified as cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
September 30, 2016
|
|
Fiscal 2016
|
|
Derivatives not designated as Cash Flow Hedging Relationships
|
|
Estimated Fair Value (Liability)
|
|
Loss Recognized in Income
(1)
|
|
Foreign currency contracts
|
|
$
|
(1.3
|
)
|
|
$
|
(10.1
|
)
|
|
Total
|
|
$
|
(1.3
|
)
|
|
$
|
(10.1
|
)
|
|
|
|
|
|
|
|
|
|
At
September 30, 2015
|
|
Fiscal 2015
|
|
Derivatives not designated as Cash Flow Hedging Relationships
|
|
Estimated Fair Value Asset
|
|
Gain Recognized in Income
(1)
|
|
Share option
(2)
|
|
$
|
—
|
|
|
$
|
0.5
|
|
|
Foreign currency contracts
|
|
1.3
|
|
|
13.1
|
|
|
Total
|
|
$
|
1.3
|
|
|
$
|
13.6
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2014
|
|
Derivatives not designated as Cash Flow Hedging Relationships
|
|
|
|
Gain Recognized in Income
(1)
|
|
Share option
(2)
|
|
|
|
$
|
12.3
|
|
|
Foreign currency contracts
|
|
|
|
4.2
|
|
|
Total
|
|
|
|
|
$
|
16.5
|
|
|
|
|
|
(1)
|
(Loss) gain recognized in income was recorded as follows: share option in SG&A and foreign currency contracts in Other expense (income), net.
|
|
|
|
|
(2)
|
The Company held a share option with a major financial institution, which matured in November 2014 and was subsequently not renewed.
|
The following table provides financial assets and liabilities as required by applicable accounting guidance for balance sheet offsetting:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offsetting of derivative assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2016
|
|
At September 30, 2015
|
|
Description
|
|
Balance Sheet location
|
|
Gross amounts of recognized assets
|
|
Gross amounts offset in the Balance Sheet
|
|
Net amounts of assets presented in the Balance Sheet
|
|
Gross amounts of recognized assets
|
|
Gross amounts offset in the Balance Sheet
|
|
Net amounts of assets presented in the Balance Sheet
|
|
Foreign Currency Contracts
|
|
Other Current Assets, Other Assets
|
|
$
|
1.7
|
|
|
$
|
—
|
|
|
$
|
1.7
|
|
|
$
|
6.6
|
|
|
$
|
(0.5
|
)
|
|
$
|
6.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offsetting of derivative liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At September 30, 2016
|
|
At September 30, 2015
|
|
Description
|
|
Balance Sheet location
|
|
Gross amounts of recognized liabilities
|
|
Gross amounts offset in the Balance Sheet
|
|
Net amounts of liabilities presented in the Balance Sheet
|
|
Gross amounts of recognized liabilities
|
|
Gross amounts offset in the Balance Sheet
|
|
Net amounts of liabilities presented in the Balance Sheet
|
|
Foreign Currency Contracts
|
|
Other Current Liabilities, Other Liabilities
|
|
$
|
(6.2
|
)
|
|
$
|
0.2
|
|
|
$
|
(6.0
|
)
|
|
$
|
(0.2
|
)
|
|
$
|
—
|
|
|
$
|
(0.2
|
)
|
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.
Under the fair value accounting guidance hierarchy, an entity is required to maximize the use of quoted market prices and minimize the use of unobservable inputs. The following table sets forth the Company's financial assets and liabilities, which are carried at fair value, that are measured on a recurring basis during the period, all of which are classified as Level 2 within the fair value hierarchy:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
2016
|
|
2015
|
|
Assets (Liabilities) at estimated fair value:
|
|
|
|
|
Deferred compensation
|
$
|
(84.5
|
)
|
|
$
|
(90.0
|
)
|
|
Derivatives - foreign currency contracts
|
(5.6
|
)
|
|
5.9
|
|
|
Net liabilities at estimated fair value
|
$
|
(90.1
|
)
|
|
$
|
(84.1
|
)
|
At
September 30, 2016
and September 30, 2015, the Company had no Level 1 or Level 3 financial assets or liabilities, other than pension plan assets.
At
September 30, 2016
and September 30, 2015, the fair market value of fixed rate long-term debt was
$1,106.2
and
$1,059.8
, respectively, compared to its carrying value of
$1,094.7
and
$1,093.7
, respectively. The estimated fair value of the fixed-rate long-term debt is estimated using yields obtained from independent pricing sources for similar types of borrowing arrangements. The estimated fair value of variable-rate debt, excluding revolving credit facilities, which consists of bank debt, was
$185.0
compared to its carrying value of
$184.5
. The estimated fair value is equal to the face value of the debt. The estimated fair values of long-term debt, excluding revolving credit facilities, have 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 facilities, 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 agreements have been determined based on level 2 inputs.
At
September 30, 2016
, 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. 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.
Note 16 - Commitments and Contingencies
Operating Leases
Total rental expense less sublease rental income for all operating leases was
$13.1
,
$12.9
and
$15.4
in fiscal
2016
,
2015
and
2014
, respectively. Future minimum rental commitments under non-cancellable operating leases in effect as of
September 30, 2016
, were
$11.6
in fiscal
2017
,
$8.2
in fiscal
2018
,
$6.2
in fiscal
2019
,
$5.4
in fiscal
2020
,
$2.1
in fiscal
2021
and
$2.4
thereafter. These leases are primarily for office facilities.
Government Regulation and Environmental Matters
The operations of the Company are subject to various federal, state, foreign and local laws and regulations intended to protect the public health and environment.
Contamination has been identified at certain of the Company's current and former facilities, as well as third-party waste disposal sites, and the Company is conducting investigation and remediation activities in relation to such properties. In connection with certain sites, the Company has received notices from the U.S. Environmental Protection Agency, state agencies and private parties seeking contribution, that it has been identified as a potentially responsible party ("PRP") under the Comprehensive Environmental Response, Compensation and Liability Act, and may be required to share in the cost of cleanup with respect to a number of federal "Superfund" sites. The Company may also be required to share in the cost of cleanup with respect to state-designated sites, and certain international locations, as well as any of its own properties.
The amount of the Company's ultimate liability in connection with those sites may depend on many factors, including the volume and toxicity of material contributed to the site, the number of other PRPs and their financial viability, and the remediation methods and technology to be used. Total environmental capital expenditures and operating expenses are not expected to have a material effect on the Company's total capital and operating expenditures, cash flows, earnings or competitive position. Current environmental spending estimates could be modified as a result of changes in the Company's plans or its understanding of the underlying facts, changes in legal requirements, including any requirements related to global climate change, or other factors.
Many European countries, as well as the European Union, have been very active in adopting and enforcing environmental regulations. As such, it is possible that new regulations may increase the risk and expense of doing business in such countries.
Certain of the Company's products are subject to regulation under the U.S. Federal Food, Drug and Cosmetic Act and are regulated by the U.S. Food and Drug Administration.
Legal Proceedings
The Company and its affiliates are subject to a number of legal proceedings in various jurisdictions arising out of its operations during the ordinary course of business. Many of these legal matters are in preliminary stages and involve complex issues of law and fact, and may proceed for protracted periods of time. The amount of liability, if any, from these proceedings cannot be determined with certainty. The Company reviews its legal proceedings and claims, regulatory reviews and inspections and other legal proceedings on an ongoing basis and follows appropriate accounting guidance when making accrual and disclosure decisions. The Company establishes accruals for those contingencies when the incurrence of a loss is probable and can be reasonably estimated, and discloses the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued, if such disclosure is necessary for its financial statements to not be misleading. The Company does not record liabilities when the likelihood that the liability has been incurred is probable, but the amount cannot be reasonably estimated. Based upon present information, the Company believes that its liability, if any, arising from such pending legal proceedings, asserted legal claims and known potential legal claims, which are likely to be asserted, is not reasonably likely to be material to its financial position, results of operations or cash flows, taking into account established accruals for estimated liabilities.
Note 17 - Segment and Geographical Data
The Company conducts its business in the following four segments:
|
|
|
|
•
|
Wet Shave
consists of products sold under the Schick, Wilkinson Sword, Edge, Skintimate, 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, as well as Wet Ones wipes and Playtex household gloves.
|
|
|
|
|
•
|
Feminine Care
includes tampons, pads and liners sold under the Playtex Sport, Stayfree, Carefree and o.b. brands, as well as personal cleansing wipes under the Playtex brand.
|
|
|
|
|
•
|
All Other
includes infant care products, such as bottles, cups and pacifiers, under the Playtex, OrthoPro and Binky brand names, as well as the Diaper Genie and Litter Genie disposal systems.
|
Segment performance is evaluated based on segment profit, exclusive of general corporate expenses, share-based compensation costs, costs associated with restructuring initiatives, the Venezuela deconsolidation charge, Industrial sale charges, Cost of early debt retirements, acquisition or integration, and the amortization and impairment 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's 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. The Company applies a fully allocated cost basis, in which shared business functions are allocated among the segments. Such allocations are estimates, and do not represent the costs of such services if performed on a stand-alone basis.
Prior periods have been recast to reflect the Company's current segment reporting.
Segment net sales and profitability are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
2016
|
|
2015
|
|
2014
|
|
Net Sales
|
|
|
|
|
|
|
Wet Shave
|
$
|
1,425.8
|
|
|
$
|
1,441.3
|
|
|
$
|
1,585.8
|
|
|
Sun and Skin Care
|
414.9
|
|
|
403.6
|
|
|
424.5
|
|
|
Feminine Care
|
388.9
|
|
|
398.2
|
|
|
404.5
|
|
|
All Other
|
132.4
|
|
|
178.1
|
|
|
197.4
|
|
|
Total net sales
|
$
|
2,362.0
|
|
|
$
|
2,421.2
|
|
|
$
|
2,612.2
|
|
|
|
|
|
|
|
|
|
Segment Profit
|
|
|
|
|
|
|
Wet Shave
|
$
|
290.2
|
|
|
$
|
308.7
|
|
|
$
|
388.2
|
|
|
Sun and Skin Care
|
89.5
|
|
|
71.5
|
|
|
73.9
|
|
|
Feminine Care
|
39.1
|
|
|
48.7
|
|
|
51.1
|
|
|
All Other
|
28.4
|
|
|
24.6
|
|
|
17.4
|
|
|
Total segment profit
|
447.2
|
|
|
453.5
|
|
|
530.6
|
|
|
|
|
|
|
|
|
|
General corporate and other expenses
|
(80.4
|
)
|
|
(122.0
|
)
|
|
(151.8
|
)
|
|
Impairment charge
|
(6.5
|
)
|
|
(318.2
|
)
|
|
—
|
|
|
Venezuela deconsolidation charge
|
—
|
|
|
(79.3
|
)
|
|
—
|
|
|
Spin costs
(1)
|
(12.0
|
)
|
|
(142.0
|
)
|
|
(24.4
|
)
|
|
Spin restructuring charges
|
—
|
|
|
(28.3
|
)
|
|
—
|
|
|
Restructuring and related costs
(2)
|
(38.8
|
)
|
|
(27.0
|
)
|
|
(53.5
|
)
|
|
Industrial sale charges
|
(0.2
|
)
|
|
(32.7
|
)
|
|
—
|
|
|
Feminine care brands acquisition and integration costs
(3)
|
—
|
|
|
—
|
|
|
(9.5
|
)
|
|
Acquisition inventory valuation
(3)
|
—
|
|
|
—
|
|
|
(8.0
|
)
|
|
Net pension and postretirement benefit gains
|
—
|
|
|
—
|
|
|
1.1
|
|
|
Other realignment and integration
|
—
|
|
|
—
|
|
|
(1.0
|
)
|
|
Amortization of intangibles
|
(14.4
|
)
|
|
(15.1
|
)
|
|
(17.9
|
)
|
|
Cost of early debt retirements
|
—
|
|
|
(59.6
|
)
|
|
—
|
|
|
Interest and other expense, net
|
(75.0
|
)
|
|
(88.0
|
)
|
|
(119.8
|
)
|
|
Total earnings (loss) from continuing operations before income taxes
|
$
|
219.9
|
|
|
$
|
(458.7
|
)
|
|
$
|
145.8
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
Wet Shave
|
$
|
45.8
|
|
|
$
|
44.0
|
|
|
$
|
51.9
|
|
|
Sun and Skin Care
|
11.3
|
|
|
10.5
|
|
|
10.0
|
|
|
Feminine Care
|
19.3
|
|
|
15.0
|
|
|
14.0
|
|
|
All Other
|
5.1
|
|
|
4.9
|
|
|
5.2
|
|
|
Total segment depreciation and amortization
|
81.5
|
|
|
74.4
|
|
|
81.1
|
|
|
Corporate
|
15.0
|
|
|
16.9
|
|
|
20.6
|
|
|
Total depreciation and amortization
|
$
|
96.5
|
|
|
$
|
91.3
|
|
|
$
|
101.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
2016
|
|
2015
|
|
2014
|
|
Total Assets
|
|
|
|
|
|
|
Wet Shave
|
$
|
757.4
|
|
|
$
|
878.5
|
|
|
|
|
Sun and Skin Care
|
164.9
|
|
|
202.3
|
|
|
|
|
Feminine Care
|
253.3
|
|
|
258.7
|
|
|
|
|
All Other
|
34.5
|
|
|
43.5
|
|
|
|
|
Total segment assets
|
1,210.1
|
|
|
1,383.0
|
|
|
|
|
Corporate
(4)
|
756.0
|
|
|
773.0
|
|
|
|
|
Goodwill and other intangible assets, net
|
2,805.4
|
|
|
2,830.3
|
|
|
|
|
Total assets
|
$
|
4,771.5
|
|
|
$
|
4,986.3
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures
|
|
|
|
|
|
|
Wet Shave
|
$
|
39.9
|
|
|
$
|
43.0
|
|
|
$
|
24.5
|
|
|
Sun and Skin Care
|
12.4
|
|
|
13.2
|
|
|
7.3
|
|
|
Feminine Care
|
12.6
|
|
|
14.0
|
|
|
7.1
|
|
|
All Other
|
4.2
|
|
|
6.9
|
|
|
3.7
|
|
|
Total segment capital expenditures
|
69.1
|
|
|
77.1
|
|
|
42.6
|
|
|
Corporate
|
0.4
|
|
|
—
|
|
|
7.5
|
|
|
Total capital expenditures
|
$
|
69.5
|
|
|
$
|
77.1
|
|
|
$
|
50.1
|
|
|
|
|
|
(1)
|
Includes pre-tax SG&A of
$11.8
,
$137.8
and
$24.4
for fiscal 2016, 2015 and 2014, respectively, and pre-tax Cost of products sold of
$0.2
and
$4.2
for fiscal 2016 and 2015, respectively.
|
|
|
|
|
(2)
|
Includes pre-tax SG&A of
$0.3
and
$4.3
for fiscal 2015 and 2014, respectively, associated with certain information technology and related activities. Also includes pre-tax Cost of products sold of
$1.8
for fiscal 2016 associated with obsolescence charges related to the exit of certain non-core product lines as part of the restructuring and positive pre-tax Cost of products sold of
$0.7
for fiscal 2014, associated with the Company's restructuring.
|
|
|
|
|
(3)
|
Fiscal 2014 includes pre-tax acquisition and integration costs of
$9.5
related to the fiscal 2014 feminine care brands acquisition, as well as a
$8.0
pre-tax inventory valuation adjustment recorded within Cost of products sold.
|
|
|
|
|
(4)
|
Corporate assets include all cash and cash equivalents, financial instruments and deferred tax assets that are managed outside of operating segments. In addition, corporate assets for fiscal 2014 includes assets attributable to the Household Products business.
|
The following table presents geographic segment information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
2016
|
|
2015
|
|
2014
|
|
Net Sales to Customers
|
|
|
|
|
|
|
United States
|
$
|
1,392.0
|
|
|
$
|
1,403.6
|
|
|
$
|
1,444.7
|
|
|
International
|
970.0
|
|
|
1,017.6
|
|
|
1,167.5
|
|
|
Total net sales
|
$
|
2,362.0
|
|
|
$
|
2,421.2
|
|
|
$
|
2,612.2
|
|
|
|
|
|
|
|
|
|
Long-lived Assets
|
|
|
|
|
|
|
United States
|
$
|
343.7
|
|
|
$
|
325.4
|
|
|
|
|
Canada
|
34.3
|
|
|
60.1
|
|
|
|
|
Germany
|
39.1
|
|
|
45.4
|
|
|
|
|
Other International
|
69.0
|
|
|
68.0
|
|
|
|
|
Total long-lived assets excluding goodwill and intangibles
|
$
|
486.1
|
|
|
$
|
498.9
|
|
|
|
The Company's international net sales are derived from customers in numerous countries, with no sales to any individual foreign country exceeding 10% of the Company's total net sales. For information on customer concentration and product concentration risk, see Note 15 of Notes to Consolidated Financial Statements.
Supplemental product information is presented below for net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
2016
|
|
2015
|
|
2014
|
|
Razors and blades
|
$
|
1,259.5
|
|
|
$
|
1,278.2
|
|
|
$
|
1,411.6
|
|
|
Tampons, pads and liners
|
388.9
|
|
|
398.2
|
|
|
404.5
|
|
|
Sun care products
|
337.7
|
|
|
320.1
|
|
|
337.3
|
|
|
Infant care and other
|
132.4
|
|
|
178.1
|
|
|
197.4
|
|
|
Shaving gels and creams
|
166.3
|
|
|
163.1
|
|
|
174.2
|
|
|
Skin care products
|
77.2
|
|
|
83.5
|
|
|
87.2
|
|
|
Total net sales
|
$
|
2,362.0
|
|
|
$
|
2,421.2
|
|
|
$
|
2,612.2
|
|
Note 18 - Guarantor and Non-Guarantor Financial Information
The Company's senior notes issued in May 2011 and May 2012 (collectively, the "Notes") are fully and unconditionally guaranteed on a joint and several basis by the Company's existing and future direct and indirect domestic subsidiaries that are guarantors of any of the Company's credit agreements or other indebtedness for borrowed money (the "Guarantors"). The Guarantors are 100% owned either directly or indirectly by the Company and jointly and severally guarantee the Company's obligations under the Notes and substantially all of the Company's other outstanding indebtedness. The Company's subsidiaries organized outside of the U.S. and certain domestic subsidiaries which are not guarantors of any of the Company's other indebtedness (collectively, the "Non-Guarantors"), do not guarantee the Notes. The subsidiary guarantee with respect to the Notes is subject to release upon sale of all of the capital stock of the subsidiary guarantor; if the guarantee under the Company's credit agreements and other indebtedness for borrowed money is released or discharged (other than due to payment under such guarantee); or when the requirements for legal defeasance are satisfied or the obligations are discharged in accordance with the indenture.
Set forth below are the condensed consolidating financial statements presenting the results of operations, financial position and cash flows of the Parent Company, Edgewell Personal Care Company, the Guarantors on a combined basis, the Non-Guarantors on a combined basis and eliminations necessary to arrive at the information for the Company as reported, on a consolidated basis. Eliminations represent adjustments to eliminate investments in subsidiaries and intercompany balances and transactions between or among the Parent Company, the Guarantors and the Non-Guarantors.
As described in Note 1, the Company completed the Separation of its Household Products business into a separate publicly-traded company on July 1, 2015. Certain legal entities that are now part of New Energizer were subsidiary guarantors under the terms of the Company's credit agreements. As a result of the Separation, those entities have been released as Guarantors. The financial statements below reflect those entities as Guarantors through the date of the Separation. On the Consolidating Statements of Earnings, results related to the entities that are now a part of New Energizer are reflected in Earnings from discontinued operations, net of tax.
EDGEWELL PERSONAL CARE COMPANY
CONDENSED CONSOLIDATING STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
Fiscal
Year Ended September 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent Company
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
|
Net sales
|
$
|
—
|
|
|
$
|
1,627.9
|
|
|
$
|
1,141.6
|
|
|
$
|
(407.5
|
)
|
|
$
|
2,362.0
|
|
|
Cost of products sold
|
—
|
|
|
942.6
|
|
|
667.0
|
|
|
(407.5
|
)
|
|
1,202.1
|
|
|
Gross profit
|
—
|
|
|
685.3
|
|
|
474.6
|
|
|
—
|
|
|
1,159.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expense
|
5.3
|
|
|
264.3
|
|
|
143.1
|
|
|
—
|
|
|
412.7
|
|
|
Advertising and sales promotion expense
|
—
|
|
|
224.4
|
|
|
112.3
|
|
|
—
|
|
|
336.7
|
|
|
Research and development expense
|
—
|
|
|
70.4
|
|
|
1.5
|
|
|
—
|
|
|
71.9
|
|
|
Impairment charge
|
—
|
|
|
6.5
|
|
|
—
|
|
|
—
|
|
|
6.5
|
|
|
Restructuring charges
|
—
|
|
|
15.0
|
|
|
22.0
|
|
|
—
|
|
|
37.0
|
|
|
Industrial sale charges
|
—
|
|
|
0.2
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
|
Interest expense associated with debt
|
54.5
|
|
|
10.2
|
|
|
7.1
|
|
|
—
|
|
|
71.8
|
|
|
Other (income) expense, net
|
—
|
|
|
(1.3
|
)
|
|
4.5
|
|
|
—
|
|
|
3.2
|
|
|
Intercompany service fees
|
—
|
|
|
(17.5
|
)
|
|
17.5
|
|
|
—
|
|
|
—
|
|
|
Equity in earnings of subsidiaries
|
(216.2
|
)
|
|
(112.6
|
)
|
|
—
|
|
|
328.8
|
|
|
—
|
|
|
Earnings before income taxes
|
156.4
|
|
|
225.7
|
|
|
166.6
|
|
|
(328.8
|
)
|
|
219.9
|
|
|
Income tax provision (benefit)
|
(22.3
|
)
|
|
22.7
|
|
|
40.8
|
|
|
—
|
|
|
41.2
|
|
|
Net earnings
|
$
|
178.7
|
|
|
$
|
203.0
|
|
|
$
|
125.8
|
|
|
$
|
(328.8
|
)
|
|
$
|
178.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
$
|
178.7
|
|
|
$
|
203.0
|
|
|
$
|
125.8
|
|
|
$
|
(328.8
|
)
|
|
$
|
178.7
|
|
|
Other comprehensive loss, net of tax
|
(28.0
|
)
|
|
(29.4
|
)
|
|
(18.4
|
)
|
|
47.8
|
|
|
(28.0
|
)
|
|
Total comprehensive income
|
$
|
150.7
|
|
|
$
|
173.6
|
|
|
$
|
107.4
|
|
|
$
|
(281.0
|
)
|
|
$
|
150.7
|
|
EDGEWELL PERSONAL CARE COMPANY
CONDENSED CONSOLIDATING STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
Fiscal
Year Ended September 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent Company
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
|
Net sales
|
$
|
—
|
|
|
$
|
1,674.0
|
|
|
$
|
977.2
|
|
|
$
|
(230.0
|
)
|
|
$
|
2,421.2
|
|
|
Cost of products sold
|
—
|
|
|
1,025.3
|
|
|
445.8
|
|
|
(233.7
|
)
|
|
1,237.4
|
|
|
Gross profit
|
—
|
|
|
648.7
|
|
|
531.4
|
|
|
3.7
|
|
|
1,183.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expense
|
95.5
|
|
|
276.1
|
|
|
200.0
|
|
|
—
|
|
|
571.6
|
|
|
Advertising and sales promotion expense
|
—
|
|
|
243.8
|
|
|
124.1
|
|
|
(0.8
|
)
|
|
367.1
|
|
|
Research and development expense
|
—
|
|
|
68.9
|
|
|
2.1
|
|
|
—
|
|
|
71.0
|
|
|
Impairment charge
|
—
|
|
|
318.2
|
|
|
—
|
|
|
—
|
|
|
318.2
|
|
|
Venezuela deconsolidation charge
|
—
|
|
|
66.7
|
|
|
12.6
|
|
|
—
|
|
|
79.3
|
|
|
Spin restructuring charges
|
—
|
|
|
3.8
|
|
|
24.5
|
|
|
—
|
|
|
28.3
|
|
|
Restructuring charges
|
—
|
|
|
11.2
|
|
|
15.5
|
|
|
—
|
|
|
26.7
|
|
|
Industrial sale charges
|
—
|
|
|
33.0
|
|
|
(0.3
|
)
|
|
—
|
|
|
32.7
|
|
|
Cost of early debt retirements
|
59.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
59.6
|
|
|
Interest expense associated with debt
|
95.0
|
|
|
(0.3
|
)
|
|
5.1
|
|
|
—
|
|
|
99.8
|
|
|
Intercompany interest (income) expense
|
(73.5
|
)
|
|
73.8
|
|
|
(0.3
|
)
|
|
—
|
|
|
—
|
|
|
Other expense (income), net
|
—
|
|
|
0.1
|
|
|
(11.9
|
)
|
|
—
|
|
|
(11.8
|
)
|
|
Intercompany service fees
|
—
|
|
|
7.9
|
|
|
(7.9
|
)
|
|
—
|
|
|
—
|
|
|
Equity in loss (earnings) of subsidiaries
|
142.7
|
|
|
(135.4
|
)
|
|
—
|
|
|
(7.3
|
)
|
|
—
|
|
|
(Loss) earnings from continuing operations before income taxes
|
(319.3
|
)
|
|
(319.1
|
)
|
|
167.9
|
|
|
11.8
|
|
|
(458.7
|
)
|
|
Income tax (benefit) provision
|
(43.7
|
)
|
|
(155.4
|
)
|
|
32.0
|
|
|
4.5
|
|
|
(162.6
|
)
|
|
(Loss) earnings from continuing operations
|
(275.6
|
)
|
|
(163.7
|
)
|
|
135.9
|
|
|
7.3
|
|
|
(296.1
|
)
|
|
Earnings from discontinued operations, net of tax
|
0.3
|
|
|
9.6
|
|
|
10.9
|
|
|
—
|
|
|
20.8
|
|
|
Net (loss) earnings
|
$
|
(275.3
|
)
|
|
$
|
(154.1
|
)
|
|
$
|
146.8
|
|
|
$
|
7.3
|
|
|
$
|
(275.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Comprehensive (Loss) Income:
|
|
|
|
|
|
|
|
|
|
|
Net (loss) earnings
|
$
|
(275.3
|
)
|
|
$
|
(154.1
|
)
|
|
$
|
146.8
|
|
|
$
|
7.3
|
|
|
$
|
(275.3
|
)
|
|
Other comprehensive loss, net of tax
|
(122.2
|
)
|
|
(77.6
|
)
|
|
(117.5
|
)
|
|
195.1
|
|
|
(122.2
|
)
|
|
Total comprehensive (loss) income
|
$
|
(397.5
|
)
|
|
$
|
(231.7
|
)
|
|
$
|
29.3
|
|
|
$
|
202.4
|
|
|
$
|
(397.5
|
)
|
EDGEWELL PERSONAL CARE COMPANY
CONDENSED CONSOLIDATING STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
Fiscal
Year Ended September 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent Company
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
|
Net sales
|
$
|
—
|
|
|
$
|
1,715.3
|
|
|
$
|
1,378.9
|
|
|
$
|
(482.0
|
)
|
|
$
|
2,612.2
|
|
|
Cost of products sold
|
—
|
|
|
988.5
|
|
|
812.1
|
|
|
(478.3
|
)
|
|
1,322.3
|
|
|
Gross profit
|
—
|
|
|
726.8
|
|
|
566.8
|
|
|
(3.7
|
)
|
|
1,289.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expense
|
30.5
|
|
|
299.0
|
|
|
205.2
|
|
|
—
|
|
|
534.7
|
|
|
Advertising and sales promotion expense
|
—
|
|
|
227.1
|
|
|
145.1
|
|
|
(0.9
|
)
|
|
371.3
|
|
|
Research and development expense
|
—
|
|
|
67.6
|
|
|
1.9
|
|
|
—
|
|
|
69.5
|
|
|
Restructuring charges
|
—
|
|
|
14.6
|
|
|
35.3
|
|
|
—
|
|
|
49.9
|
|
|
Net pension and post-retirement gains
|
—
|
|
|
—
|
|
|
(1.1
|
)
|
|
—
|
|
|
(1.1
|
)
|
|
Interest expense associated with debt
|
115.4
|
|
|
0.1
|
|
|
3.5
|
|
|
—
|
|
|
119.0
|
|
|
Intercompany interest (income) expense
|
(113.2
|
)
|
|
113.3
|
|
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
|
Other expense, net
|
—
|
|
|
0.7
|
|
|
0.1
|
|
|
—
|
|
|
0.8
|
|
|
Intercompany service fees
|
—
|
|
|
27.6
|
|
|
(27.2
|
)
|
|
(0.4
|
)
|
|
—
|
|
|
Equity in earnings of subsidiaries
|
(383.8
|
)
|
|
(339.5
|
)
|
|
—
|
|
|
723.3
|
|
|
—
|
|
|
Earnings from continuing operations before income taxes
|
351.1
|
|
|
316.3
|
|
|
204.0
|
|
|
(725.6
|
)
|
|
145.8
|
|
|
Income tax (benefit) provision
|
(5.0
|
)
|
|
(2.1
|
)
|
|
37.5
|
|
|
(2.3
|
)
|
|
28.1
|
|
|
Earnings from continuing operations
|
356.1
|
|
|
318.4
|
|
|
166.5
|
|
|
(723.3
|
)
|
|
117.7
|
|
|
Earnings from discontinued operations
|
—
|
|
|
51.1
|
|
|
187.3
|
|
|
—
|
|
|
238.4
|
|
|
Net earnings
|
$
|
356.1
|
|
|
$
|
369.5
|
|
|
$
|
353.8
|
|
|
$
|
(723.3
|
)
|
|
$
|
356.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
$
|
356.1
|
|
|
$
|
369.5
|
|
|
$
|
353.8
|
|
|
$
|
(723.3
|
)
|
|
$
|
356.1
|
|
|
Other comprehensive loss, net of tax
|
(98.2
|
)
|
|
(69.5
|
)
|
|
(89.0
|
)
|
|
158.5
|
|
|
(98.2
|
)
|
|
Total comprehensive income
|
$
|
257.9
|
|
|
$
|
300.0
|
|
|
$
|
264.8
|
|
|
$
|
(564.8
|
)
|
|
$
|
257.9
|
|
EDGEWELL PERSONAL CARE COMPANY
CONDENSED CONSOLIDATING BALANCE SHEETS
September 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent Company
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
5.8
|
|
|
$
|
733.1
|
|
|
$
|
—
|
|
|
$
|
738.9
|
|
|
Trade receivables, net
|
—
|
|
|
108.9
|
|
|
151.8
|
|
|
—
|
|
|
260.7
|
|
|
Inventories
|
—
|
|
|
187.7
|
|
|
121.5
|
|
|
—
|
|
|
309.2
|
|
|
Other current assets
|
—
|
|
|
43.7
|
|
|
99.5
|
|
|
—
|
|
|
143.2
|
|
|
Total current assets
|
—
|
|
|
346.1
|
|
|
1,105.9
|
|
|
—
|
|
|
1,452.0
|
|
|
Investment in subsidiaries
|
3,483.7
|
|
|
825.0
|
|
|
—
|
|
|
(4,308.7
|
)
|
|
—
|
|
|
Intercompany receivables, net
(1)
|
—
|
|
|
487.6
|
|
|
53.5
|
|
|
(541.1
|
)
|
|
—
|
|
|
Intercompany notes receivable
(1)
|
—
|
|
|
1.9
|
|
|
—
|
|
|
(1.9
|
)
|
|
—
|
|
|
Property, plant and equipment, net
|
—
|
|
|
343.8
|
|
|
142.3
|
|
|
—
|
|
|
486.1
|
|
|
Goodwill
|
—
|
|
|
1,061.9
|
|
|
358.4
|
|
|
—
|
|
|
1,420.3
|
|
|
Other intangible assets, net
|
—
|
|
|
1,235.1
|
|
|
150.0
|
|
|
—
|
|
|
1,385.1
|
|
|
Other assets
|
2.0
|
|
|
0.1
|
|
|
25.9
|
|
|
—
|
|
|
28.0
|
|
|
Total assets
|
$
|
3,485.7
|
|
|
$
|
4,301.5
|
|
|
$
|
1,836.0
|
|
|
$
|
(4,851.7
|
)
|
|
$
|
4,771.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders' Equity
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
$
|
21.4
|
|
|
$
|
288.4
|
|
|
$
|
558.4
|
|
|
$
|
—
|
|
|
$
|
868.2
|
|
|
Intercompany payables, net
(1)
|
541.1
|
|
|
—
|
|
|
—
|
|
|
(541.1
|
)
|
|
—
|
|
|
Intercompany notes payable
(1)
|
—
|
|
|
—
|
|
|
1.9
|
|
|
(1.9
|
)
|
|
—
|
|
|
Long-term debt
|
1,094.2
|
|
|
450.0
|
|
|
—
|
|
|
—
|
|
|
1,544.2
|
|
|
Deferred income tax liabilities
|
—
|
|
|
232.4
|
|
|
22.9
|
|
|
—
|
|
|
255.3
|
|
|
Other liabilities
|
—
|
|
|
236.3
|
|
|
38.5
|
|
|
—
|
|
|
274.8
|
|
|
Total liabilities
|
1,656.7
|
|
|
1,207.1
|
|
|
621.7
|
|
|
(543.0
|
)
|
|
2,942.5
|
|
|
Total shareholders' equity
|
1,829.0
|
|
|
3,094.4
|
|
|
1,214.3
|
|
|
(4,308.7
|
)
|
|
1,829.0
|
|
|
Total liabilities and shareholders' equity
|
$
|
3,485.7
|
|
|
$
|
4,301.5
|
|
|
$
|
1,836.0
|
|
|
$
|
(4,851.7
|
)
|
|
$
|
4,771.5
|
|
|
|
|
|
(1)
|
Intercompany activities include product purchases between Guarantors and Non-Guarantors, charges for services provided by the Parent Company and various subsidiaries to other affiliates within the consolidated entity and other intercompany activities in the normal course of business.
|
EDGEWELL PERSONAL CARE COMPANY
CONDNESED CONSOLIDATING BALANCE SHEETS
September 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent Company
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
2.9
|
|
|
$
|
709.2
|
|
|
$
|
—
|
|
|
$
|
712.1
|
|
|
Trade receivables, net
|
—
|
|
|
113.7
|
|
|
166.1
|
|
|
—
|
|
|
279.8
|
|
|
Inventories
|
—
|
|
|
200.3
|
|
|
174.0
|
|
|
(41.5
|
)
|
|
332.8
|
|
|
Other current assets
|
—
|
|
|
171.9
|
|
|
132.9
|
|
|
7.1
|
|
|
311.9
|
|
|
Total current assets
|
—
|
|
|
488.8
|
|
|
1,182.2
|
|
|
(34.4
|
)
|
|
1,636.6
|
|
|
Investment in subsidiaries
|
3,409.8
|
|
|
793.6
|
|
|
—
|
|
|
(4,203.4
|
)
|
|
—
|
|
|
Intercompany receivables, net
(1)
|
—
|
|
|
230.9
|
|
|
53.4
|
|
|
(284.3
|
)
|
|
—
|
|
|
Intercompany notes receivable
(1)
|
189.1
|
|
|
1.9
|
|
|
—
|
|
|
(191.0
|
)
|
|
—
|
|
|
Property, plant and equipment, net
|
—
|
|
|
325.4
|
|
|
173.5
|
|
|
—
|
|
|
498.9
|
|
|
Goodwill
|
—
|
|
|
1,061.9
|
|
|
359.9
|
|
|
—
|
|
|
1,421.8
|
|
|
Other intangible assets, net
|
—
|
|
|
1,254.4
|
|
|
154.1
|
|
|
—
|
|
|
1,408.5
|
|
|
Other assets
|
2.8
|
|
|
0.1
|
|
|
17.6
|
|
|
—
|
|
|
20.5
|
|
|
Total assets
|
$
|
3,601.7
|
|
|
$
|
4,157.0
|
|
|
$
|
1,940.7
|
|
|
$
|
(4,713.1
|
)
|
|
$
|
4,986.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders' Equity
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
$
|
22.0
|
|
|
$
|
313.0
|
|
|
$
|
331.8
|
|
|
$
|
—
|
|
|
$
|
666.8
|
|
|
Intercompany payables, net
(1)
|
284.3
|
|
|
—
|
|
|
—
|
|
|
(284.3
|
)
|
|
—
|
|
|
Intercompany notes payable
(1)
|
—
|
|
|
189.1
|
|
|
1.9
|
|
|
(191.0
|
)
|
|
—
|
|
|
Long-term debt
|
1,428.7
|
|
|
—
|
|
|
269.9
|
|
|
—
|
|
|
1,698.6
|
|
|
Deferred income tax liabilities
|
—
|
|
|
304.4
|
|
|
31.4
|
|
|
—
|
|
|
335.8
|
|
|
Other liabilities
|
2.6
|
|
|
315.5
|
|
|
137.3
|
|
|
(34.4
|
)
|
|
421.0
|
|
|
Total liabilities
|
1,737.6
|
|
|
1,122.0
|
|
|
772.3
|
|
|
(509.7
|
)
|
|
3,122.2
|
|
|
Total shareholders' equity
|
1,864.1
|
|
|
3,035.0
|
|
|
1,168.4
|
|
|
(4,203.4
|
)
|
|
1,864.1
|
|
|
Total liabilities and shareholders' equity
|
$
|
3,601.7
|
|
|
$
|
4,157.0
|
|
|
$
|
1,940.7
|
|
|
$
|
(4,713.1
|
)
|
|
$
|
4,986.3
|
|
|
|
|
|
(1)
|
Intercompany activities include product purchases between Guarantors and Non-Guarantors, charges for services provided by the Parent Company and various subsidiaries to other affiliates within the consolidated entity and other intercompany activities in the normal course of business.
|
EDGEWELL PERSONAL CARE COMPANY
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Fiscal
Year Ended September 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent Company
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
|
Net cash from (used by) operating activities
|
$
|
207.8
|
|
|
$
|
(47.0
|
)
|
|
$
|
47.4
|
|
|
$
|
(31.8
|
)
|
|
$
|
176.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow from Investing Activities
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
—
|
|
|
(51.8
|
)
|
|
(17.7
|
)
|
|
—
|
|
|
(69.5
|
)
|
|
Payment for equity contributions
|
(10.6
|
)
|
|
(11.1
|
)
|
|
—
|
|
|
21.7
|
|
|
—
|
|
|
Net cash (used by) from investing activities
|
(10.6
|
)
|
|
(62.9
|
)
|
|
(17.7
|
)
|
|
21.7
|
|
|
(69.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow from Financing Activities
|
|
|
|
|
|
|
|
|
|
|
Cash proceeds from issuance of debt with original maturities greater than 90 days
|
—
|
|
|
746.0
|
|
|
10.3
|
|
|
—
|
|
|
756.3
|
|
|
Cash payments on debt with original maturities greater than 90 days
|
—
|
|
|
(631.0
|
)
|
|
—
|
|
|
—
|
|
|
(631.0
|
)
|
|
Net (decrease) increase in debt with original maturity days of 90 or less
|
—
|
|
|
(12.8
|
)
|
|
1.7
|
|
|
—
|
|
|
(11.1
|
)
|
|
Deferred finance expense
|
(0.6
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.6
|
)
|
|
Common shares purchased
|
(196.6
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(196.6
|
)
|
|
Proceeds for equity contributions
|
—
|
|
|
10.6
|
|
|
11.1
|
|
|
(21.7
|
)
|
|
—
|
|
|
Intercompany dividend
|
—
|
|
|
—
|
|
|
(31.8
|
)
|
|
31.8
|
|
|
—
|
|
|
Net cash (used by) from financing activities
|
(197.2
|
)
|
|
112.8
|
|
|
(8.7
|
)
|
|
10.1
|
|
|
(83.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
—
|
|
|
—
|
|
|
2.9
|
|
|
—
|
|
|
2.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
—
|
|
|
2.9
|
|
|
23.9
|
|
|
—
|
|
|
26.8
|
|
|
Cash and cash equivalents, beginning of period
|
—
|
|
|
2.9
|
|
|
709.2
|
|
|
—
|
|
|
712.1
|
|
|
Cash and cash equivalents, end of period
|
$
|
—
|
|
|
$
|
5.8
|
|
|
$
|
733.1
|
|
|
$
|
—
|
|
|
$
|
738.9
|
|
EDGEWELL PERSONAL CARE COMPANY
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Fiscal
Year Ended September 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent Company
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
|
Net cash (used by) from operating activities
|
$
|
(178.9
|
)
|
|
$
|
(24.2
|
)
|
|
$
|
351.9
|
|
|
$
|
—
|
|
|
$
|
148.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow from Investing Activities
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
—
|
|
|
(75.2
|
)
|
|
(24.2
|
)
|
|
—
|
|
|
(99.4
|
)
|
|
Change related to Venezuela operations
|
—
|
|
|
—
|
|
|
(93.8
|
)
|
|
—
|
|
|
(93.8
|
)
|
|
Acquisitions, net of cash acquired
|
—
|
|
|
(12.1
|
)
|
|
—
|
|
|
—
|
|
|
(12.1
|
)
|
|
Proceeds from sale of assets
|
—
|
|
|
2.5
|
|
|
14.1
|
|
|
—
|
|
|
16.6
|
|
|
Proceeds from intercompany notes
|
1,350.0
|
|
|
—
|
|
|
100.0
|
|
|
(1,450.0
|
)
|
|
—
|
|
|
Payments for intercompany notes
|
(499.1
|
)
|
|
—
|
|
|
(100.0
|
)
|
|
599.1
|
|
|
—
|
|
|
Intercompany receivables and payables, net
|
—
|
|
|
(294.6
|
)
|
|
—
|
|
|
294.6
|
|
|
—
|
|
|
Investments in subsidiaries
|
—
|
|
|
270.0
|
|
|
(270.0
|
)
|
|
—
|
|
|
—
|
|
|
Payment for equity contributions
|
—
|
|
|
(16.1
|
)
|
|
—
|
|
|
16.1
|
|
|
—
|
|
|
Change in restricted cash
|
—
|
|
|
—
|
|
|
13.9
|
|
|
—
|
|
|
13.9
|
|
|
Net cash from (used by) investing activities
|
850.9
|
|
|
(125.5
|
)
|
|
(360.0
|
)
|
|
(540.2
|
)
|
|
(174.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow from Financing Activities
|
|
|
|
|
|
|
|
|
|
|
Cash proceeds from debt with original maturities greater than 90 days
|
1,335.0
|
|
|
999.0
|
|
|
270.2
|
|
|
—
|
|
|
2,604.2
|
|
|
Cash payments on debt with original maturities greater than 90 days
|
(1,900.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,900.0
|
)
|
|
Net (decrease) increase in debt with original maturity days of 90 or less
|
(135.0
|
)
|
|
11.6
|
|
|
(129.2
|
)
|
|
—
|
|
|
(252.6
|
)
|
|
Deferred finance expense
|
(2.6
|
)
|
|
(12.3
|
)
|
|
(0.2
|
)
|
|
—
|
|
|
(15.1
|
)
|
|
Proceeds from intercompany notes
|
—
|
|
|
599.1
|
|
|
—
|
|
|
(599.1
|
)
|
|
—
|
|
|
Payments for intercompany notes
|
—
|
|
|
(1,450.0
|
)
|
|
—
|
|
|
1,450.0
|
|
|
—
|
|
|
Common shares purchased
|
(175.2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(175.2
|
)
|
|
Cash dividends paid
|
(93.2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(93.2
|
)
|
|
Transfer of cash and cash equivalents to New Energizer
|
—
|
|
|
(12.4
|
)
|
|
(487.3
|
)
|
|
—
|
|
|
(499.7
|
)
|
|
Proceeds from issuance of common shares, net
|
4.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4.4
|
|
|
Intercompany receivables and payables, net
|
294.6
|
|
|
—
|
|
|
—
|
|
|
(294.6
|
)
|
|
—
|
|
|
Proceeds for equity contributions
|
—
|
|
|
—
|
|
|
16.1
|
|
|
(16.1
|
)
|
|
—
|
|
|
Intercompany dividend
|
—
|
|
|
14.3
|
|
|
(14.3
|
)
|
|
—
|
|
|
—
|
|
|
Net cash (used by) from financing activities
|
(672.0
|
)
|
|
149.3
|
|
|
(344.7
|
)
|
|
540.2
|
|
|
(327.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
—
|
|
|
—
|
|
|
(63.7
|
)
|
|
—
|
|
|
(63.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
—
|
|
|
(0.4
|
)
|
|
(416.5
|
)
|
|
—
|
|
|
(416.9
|
)
|
|
Cash and cash equivalents, beginning of period
|
$
|
—
|
|
|
3.3
|
|
|
1,125.7
|
|
|
—
|
|
|
1,129.0
|
|
|
Cash and cash equivalents, end of period
|
$
|
—
|
|
|
$
|
2.9
|
|
|
$
|
709.2
|
|
|
$
|
—
|
|
|
$
|
712.1
|
|
EDGEWELL PERSONAL CARE COMPANY
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Fiscal
Year Ended September 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent Company
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Total
|
|
Net cash (used by) from operating activities
|
$
|
(108.2
|
)
|
|
$
|
370.1
|
|
|
$
|
365.5
|
|
|
$
|
(55.4
|
)
|
|
$
|
572.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow from Investing Activities
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
—
|
|
|
(53.8
|
)
|
|
(31.5
|
)
|
|
—
|
|
|
(85.3
|
)
|
|
Acquisitions, net of cash acquired
|
—
|
|
|
(52.0
|
)
|
|
(135.1
|
)
|
|
—
|
|
|
(187.1
|
)
|
|
Proceeds from sale of assets
|
—
|
|
|
8.1
|
|
|
1.0
|
|
|
—
|
|
|
9.1
|
|
|
Proceeds from intercompany notes
|
140.1
|
|
|
2.5
|
|
|
—
|
|
|
(142.6
|
)
|
|
—
|
|
|
Payments from intercompany notes
|
—
|
|
|
—
|
|
|
(12.9
|
)
|
|
12.9
|
|
|
—
|
|
|
Intercompany receivables and payables, net
|
(135.0
|
)
|
|
(302.0
|
)
|
|
(55.5
|
)
|
|
492.5
|
|
|
—
|
|
|
Payment for equity contributions
|
—
|
|
|
(44.2
|
)
|
|
—
|
|
|
44.2
|
|
|
—
|
|
|
Change in restricted cash
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
|
(0.1
|
)
|
|
Net cash from (used by) investing activities
|
5.1
|
|
|
(441.4
|
)
|
|
(234.1
|
)
|
|
407.0
|
|
|
(263.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow from Financing Activities
|
|
|
|
|
|
|
|
|
|
|
Cash payments on debt with original maturities greater than 90 days
|
(140.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(140.1
|
)
|
|
Net increase in debt with original maturity days of 90 or less
|
135.0
|
|
|
2.9
|
|
|
56.3
|
|
|
—
|
|
|
194.2
|
|
|
Proceeds for intercompany notes
|
—
|
|
|
12.9
|
|
|
—
|
|
|
(12.9
|
)
|
|
—
|
|
|
Payments for intercompany notes
|
—
|
|
|
(140.1
|
)
|
|
(2.5
|
)
|
|
142.6
|
|
|
—
|
|
|
Common shares purchased
|
(94.4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(94.4
|
)
|
|
Cash dividends paid
|
(123.9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(123.9
|
)
|
|
Proceeds from issuance of common shares, net
|
9.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9.9
|
|
|
Excess tax benefits from share-based payments
|
6.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6.6
|
|
|
Intercompany receivables and payables, net
|
302.0
|
|
|
190.5
|
|
|
—
|
|
|
(492.5
|
)
|
|
—
|
|
|
Proceeds from equity contributions
|
—
|
|
|
—
|
|
|
44.2
|
|
|
(44.2
|
)
|
|
—
|
|
|
Capital contribution
|
—
|
|
|
—
|
|
|
(55.4
|
)
|
|
55.4
|
|
|
—
|
|
|
Net cash from financing activities
|
95.1
|
|
|
66.2
|
|
|
42.6
|
|
|
(351.6
|
)
|
|
(147.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
—
|
|
|
—
|
|
|
(30.2
|
)
|
|
—
|
|
|
(30.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash
equivalents
|
(8.0
|
)
|
|
(5.1
|
)
|
|
143.8
|
|
|
—
|
|
|
130.7
|
|
|
Cash and cash equivalents, beginning of period
|
8.0
|
|
|
8.4
|
|
|
981.9
|
|
|
—
|
|
|
998.3
|
|
|
Cash and cash equivalents, end of period
|
$
|
—
|
|
|
$
|
3.3
|
|
|
$
|
1,125.7
|
|
|
$
|
—
|
|
|
$
|
1,129.0
|
|
Note 19 - Quarterly Financial Information (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2016 (by quarter)
|
|
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
Net sales
|
$
|
495.1
|
|
|
$
|
611.2
|
|
|
$
|
645.1
|
|
|
$
|
610.6
|
|
|
Gross profit
|
227.5
|
|
|
311.1
|
|
|
311.2
|
|
|
310.1
|
|
|
Net earnings
(1) (2) (6)
|
23.7
|
|
|
66.1
|
|
|
36.7
|
|
|
52.2
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
(7)
|
0.40
|
|
|
1.11
|
|
|
0.62
|
|
|
0.89
|
|
|
Diluted earnings per share
(7)
|
0.39
|
|
|
1.10
|
|
|
0.61
|
|
|
0.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2015 (by quarter)
|
|
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
Net sales
|
$
|
537.1
|
|
|
$
|
651.1
|
|
|
$
|
672.9
|
|
|
$
|
560.1
|
|
|
Gross profit
|
256.8
|
|
|
334.3
|
|
|
323.4
|
|
|
269.3
|
|
|
Earnings (loss) from continuing operations
(1) (2) (3) (4) (5) (6)
|
19.9
|
|
|
(54.6
|
)
|
|
(67.7
|
)
|
|
(193.7
|
)
|
|
Earnings (loss) from discontinued operations, net of tax
|
85.2
|
|
|
(33.8
|
)
|
|
(4.8
|
)
|
|
(25.8
|
)
|
|
Net earnings (loss)
|
105.1
|
|
|
(88.4
|
)
|
|
(72.5
|
)
|
|
(219.5
|
)
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
(7)
|
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
0.32
|
|
|
$
|
(0.88
|
)
|
|
$
|
(1.09
|
)
|
|
$
|
(3.15
|
)
|
|
Discontinued operations
|
1.37
|
|
|
(0.54
|
)
|
|
(0.08
|
)
|
|
(0.42
|
)
|
|
Net earnings (loss)
|
1.70
|
|
|
(1.42
|
)
|
|
(1.17
|
)
|
|
(3.57
|
)
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share
(7)
|
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
0.32
|
|
|
$
|
(0.88
|
)
|
|
$
|
(1.09
|
)
|
|
$
|
(3.15
|
)
|
|
Discontinued operations
|
1.37
|
|
|
(0.54
|
)
|
|
(0.08
|
)
|
|
(0.42
|
)
|
|
Net earnings (loss)
|
1.69
|
|
|
(1.42
|
)
|
|
(1.17
|
)
|
|
(3.57
|
)
|
|
|
|
|
(1)
|
Restructuring and related costs were
$18.5
,
$5.1
,
$5.8
and
$9.4
for the first, second, third and fourth quarters of fiscal 2016, respectively, and
$9.1
,
$6.6
,
$5.0
and
$6.3
for the first, second, third and fourth quarters of fiscal 2015, respectively. See Note 5 of Notes to Consolidated Financial Statements.
|
|
|
|
|
(2)
|
Separation related costs were
$7.5
,
$1.7
and
$2.8
for the first, second and third quarters of fiscal 2016, respectively, and
$23.8
,
$32.2
,
$55.7
and
$30.3
the first, second, third and fourth quarters of fiscal 2015, respectively. See Note 3 of Notes to Consolidated Financial Statements.
|
|
|
|
|
(3)
|
The second quarter of fiscal 2015 includes a charge of
$79.3
as a result of deconsolidating the Company's Venezuelan subsidiaries. See Note 1 of Notes to Consolidated Financial Statements.
|
|
|
|
|
(4)
|
The third quarter of fiscal 2015 includes early debt retirement costs of
$59.6
associated with the prepayment of the Company's private placement notes.
|
|
|
|
|
(5)
|
The third and fourth quarters of fiscal 2015 were impacted by Industrial sale charges. The Company recorded charges of
$21.9
in the third quarter, primarily consisting of fixed asset and intangible impairments. A loss on the sale of
$10.8
was recorded during the fourth quarter. See Note 3 of Notes to Consolidated Financial Statements.
|
|
|
|
|
(6)
|
The fourth quarters of fiscal 2016 and 2015 include non-cash impairment charges of
$6.5
and
$318.2
related to intangible assets, respectively. See Note 8 of Notes to Consolidated Financial Statements.
|
|
|
|
|
(7)
|
Quarterly and annual computations are prepared independently. Therefore, the sum of each quarter may not necessarily total the fiscal period amounts noted elsewhere within this Annual Report on Form 10-K.
|