Accelerating the Pace of
Change
EDGEWELL PER SONAL CARE 2018 ANNUAL R EPO RT
E DGE WELL AT A G L ANCE
WET SHAVE
SUN AND SKIN CARE
KEY BRAND S:
KEY GEO GRA PHI ES:
KEY BRANDS:
KEY GEOGRAPHIES:
Schick, Edge, Wilkinson Sword,
Skintimate
U.S., Japan, Germany,
U.K., Canada
Banana Boat, Hawaiian Tropic,
Wet Ones, Bulldog, Jack Black
U.S., Canada, Mexico,
Australia, U.K.
KEY GEO GRA PHI ES:
U.S., Canada
INFANT/ OTHER
KEY BRANDS:
Playtex, Diaper Genie,
Litter Genie
KEY GEOGRAPHIES:
U.S., Canada
FE MI NINE CA RE
KEY BRAND S:
Playtex, Carefree,
Stayfree, o.b.
SEGME NT SALES
60%
Wet Shave
56%
U.S.
GEOGRA PHIC SALES
FI N ANCI AL HIGHLIGHTS ($ in millions)
Net Sales
Organic Net Sales versus prior year(1)
Gross Profit Margin
Net Earnings from continuing operations
Adjusted Net Earnings(2)
Diluted EPS from continuing operations (GAAP)
Adjusted EPS - (Non GAAP)(2)
20%
Sun and Skin Care
15%
Feminine Care
5%
Other
44%
International
2018
2,234
(4.5%)
46.4%
103.3
192
$ 1.90
$ 3.52
2017
2,298
(2.8%)
49.2%
5.7
228
$ 0.10
$ 3.97
In addition to Net Sales and Earnings presented in accordance with generally accepted accounting principles (GAAP), Edgewell has presented certain non-GAAP measures in the table above.
These measures should be considered an alternative to, but not superior to or as substitute for, the comparable GAAP measures.
(1) Reconciliation of reported Net Sales to Organic Net Sales is included on page 31 of the Company's 10-K for the 2018 fiscal year.
(2) Reconciliation of Net Earnings to Adjusted Net Earnings and GAAP EPS to Non-GAAP EPS is included on page 30 of the Company's 10-K for the 2018 fiscal year.
TO OUR SHAR EHOLDER S, INVESTOR S, CUSTOMER S AND COLLEAGUES:
For Edgewell Personal Care, fiscal 2018 was a year of
significant progress despite a challenging market and
competitive conditions. We advanced all three prongs
of our strategy: providing fuel for growth, focusing
on the fundamentals and investing to capture growth
opportunities. In fiscal 2019, we are continuing to take
action to make Edgewell a stronger competitor.
Edgewell’s fiscal 2018 results
reflect the reality of an evolving
and challenging marketplace. We
delivered $2.2 billion in net sales
and $3.52 in adjusted earnings
per share, a decrease of 2.8% and
11% year-over-year, respectively.
We generated strong cash from
operations of $265 million, which
we used to invest in innovation,
acquire Jack Black, reduce our
debt and repurchase more than
2 million shares during the year.
Importantly, the entire Company
is working with a sense of urgency
to implement the changes needed
to win. We have revitalized and
strengthened our senior leadership
team to help us address the rapidly
changing consumer and competitive
environment. We have bolstered our
Board of Directors with additional
expertise and experience in the
areas most critical to our business,
with four new directors appointed
in the past few months. We are also
aggressively improving our cost
structure through Project Fuel,
which will enable us to reinvest in
our most profitable brands and
fuel our strategic growth initiatives.
Edgewell’s Board and leadership
team are confident in our strategy
and believe we are taking the right
steps to enhance shareholder value.
Fuel for the Future:
ACC EL ER AT I N G P R OJ EC T F U EL TO
C A P T U R E CO S T S AV I N G S
In fiscal 2018, we accelerated the
pace of the changes we are making
under Project Fuel, our enterprise-
wide initiative to transform the
Company's business and cost
Edgewell Personal Care 2018 Annual Report
3
E STI MATED A NNUALIZED GROS S SAVINGS
2018 SALES MIX
FRO M PROJECT FUEL
A&P
SG&A/R&D
Ops & Supply Chain
$130M
$225-240M
Growth Initiatives
(Invest for Growth)
International Expansion
International Sun Care
eCommerce
Bulldog/Jack Black
Challenged Businesses
(Optimize ROI)
North America (N.A.) Branded Men’s Shave
N.A. Shave Preps
Feminine Care
Stable Businesses
(Maintain/Grow)
N.A. Sun Care
Private Label Shave
N.A. Women’s and Disposables
International Shave (Developed Markets)
Infant/Other
FY 2019
FY 2020
FY 2021
ST RATEGIC PILL A R S
Faster
Better
Deeper
Fuel Growth
$225-240M in Annual
Gross Savings
Focus on the
Fundamentals
Re-configure into
Growth Opportunities
19%
22%
59%
structure. This initiative is designed
to streamline the organization,
simplify ways of working and clarify
and sharpen accountability. Through
this initiative, we are reducing
our cost base, transforming our
ways of working to create a more
agile and modern consumer
products company, and investing
in innovation, digital capabilities
and growth areas.
We made significant progress on
these goals in fiscal 2018, achieving
savings ahead of schedule and
increasing our outlook for gross
savings in fiscal 2019 and beyond.
Through Project Fuel, we expect to
achieve between $225 million and
$240 million in annual gross savings
by the end of fiscal 2021—providing
the financial flexibility we need to
compete and win.
Focusing on Fundamentals:
I N N OVAT I N G TO S T R EN G T H EN O U R
CO R E B R A N D P O R T FO L I O
While Edgewell continues to
experience strong headwinds
because of unprecedented
competitive pressure in the razors
and blades category, we took a
number of steps this year to address
these and other challenges. We are
leveraging our strengths to capture
market opportunities.
One of Edgewell’s strongest
competitive advantages is our
portfolio of well-recognized and
profitable brands. We are making
those brands even stronger by
reinvesting cost savings generated
by Project Fuel in brand equity
and innovation. In fiscal 2018, we
introduced key innovation across
our core brands, such as Intuition,
Schick Hydro, Schick Xtreme and
Carefree. We also brought our
shaving expertise to one of our newer
brands, Bulldog, with the launch of
the first Bulldog bamboo razor.
4
Edgewell Personal Care 2018 Annual Report
RECO NFIGURE INTO GROW TH
OP PORTUNIT IES
FULL PORT FOLIO OF INNOVATION
Shave Innovation
eCommerce
International Expansion
International Sun Care
Bulldog/Jack Black
Driving Growth:
I N V E S T I N G I N T H E M O S T P R O M I S I N G
O P P O R T U N I T I E S
Edgewell is also investing in key
initiatives that will drive our next
phase of growth. These initiatives
accounted for approximately 20%
of total company sales in fiscal 2018,
driven by double-digit organic sales
gains in the fiscal year.
First, we are pursuing oppor-
tunities and innovation in men's
and women's grooming and hair
maintenance. With our excellent
market coverage throughout a
variety of tiers—from high-end
branded products to value-driven
private-label customers—Edgewell
is uniquely positioned to capture
new opportunities in this evolving
category. For example, our Women’s
Systems business returned to growth
this year with the launch of the
Intuition f.a.b. line, a revolutionary
new razor that streamlines hair
maintenance for on-the-go women,
who use the forward or backward
razor design to shave without lifting
the blade from their skin.
At the same time, we are seeing
opportunities for our brands to
cross between Wet Shave and Sun
and Skin Care—a strong bright spot
in the Edgewell portfolio—with the
launch of the Bulldog Razor and
Blades, exclusively in Walgreens
stores in the U.S. and Boot’s stores
in the U.K. This launch shows
our agility in capitalizing on hair
maintenance, while leveraging
Edgewell’s assets in Sun and
Skin Care.
In Sun and Skin Care, we launched
the Banana Boat Simply Protect line
of sun care products that leverages
the better-for-you consumer trend.
We are also supplementing our
organic growth with key bolt-on
acquisitions. We have expanded
our footprint in men’s skin care
Edgewell Personal Care 2018 Annual Report
5
Edgewell is acting with a sense of
urgency. We are executing a clearly
defined three-pronged strategy to
achieve cost savings, capitalize on
our strong portfolio, and invest in
compelling growth opportunities.
with the acquisition of Jack Black
premium skin care products in
March. At the same time, we
have fully integrated Bulldog into
the Edgewell portfolio, more
than doubling net sales since the
acquisition and increasing the
brand’s coverage to 25 countries.
E-commerce is also a key area
in which we are continuing to
invest and grow. In particular, we
are achieving growth through our
flagship store in China’s Tmall.com
retail site, our state-of-the-art
Schick.com site, our Amazon
expansion and the launch of other
branded direct-to-consumer sites
such as Bulldog, which recently
expanded to the U.K. and U.S.
In fact, our marketing efforts for
Schick Hydro in the U.S. and China
are now 100% digital.
Proactively Building on
Our Foundation
If you are an investor, a customer, a
consumer, or a supplier, I hope you
take one key message away from
this letter: Edgewell is acting with a
sense of urgency. We are executing
a clearly defined three-pronged
strategy to achieve cost savings,
capitalize on our strong portfolio,
and invest in compelling growth
opportunities. Across our company,
we are committed to returning to
growth and increasing shareholder
value through hard work, innovative
thinking and financial discipline.
6
Edgewell Personal Care 2018 Annual Report
Our team of dedicated employees
is what enables us to innovate and
compete. It is their creativity and
significant effort that allows us to
deliver the brands that consumers
love. We are deeply grateful for their
dedication and contributions.
I look forward to updating you
on our progress throughout 2019.
Thank you for your investment in
Edgewell.
David P. Hatfield
Chief Executive Officer,
President and Chairman of the Board
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended September 30, 2018
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from _______________ to _______________
Commission File Number 001-15401
EDGEWELL PERSONAL CARE COMPANY
(Exact name of registrant as specified in its charter)
Missouri
(State or other jurisdiction of incorporation or organization)
43-1863181
(I. R. S. Employer Identification No.)
1350 Timberlake Manor Parkway
Chesterfield, Missouri 63017
(Address of principal executive offices) (Zip Code)
(314) 594-1900
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $0.01 per share
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller
reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
1
Large accelerated filer
Accelerated filer
Non-accelerated filer
(Do not check if a smaller reporting company)
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
No
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of March 31, 2018,
the last day of the registrant's most recently completed second fiscal quarter, was $2,224,930,833.
The number of shares of the registrant's common stock outstanding as of October 31, 2018 was 54,040,609.
Certain portions of the registrant's definitive proxy statement for its 2019 annual meeting of shareholders, to be filed with the
Securities and Exchange Commission within 120 days after September 30, 2018, are incorporated by reference into Part III of this
report.
DOCUMENTS INCORPORATED BY REFERENCE
2
EDGEWELL PERSONAL CARE COMPANY
INDEX TO FORM 10-K
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Business.
Risk Factors.
Unresolved Staff Comments.
Properties.
Legal Proceedings.
Mine Safety Disclosures.
PART I
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
Selected Financial Data.
Management's Discussion and Analysis of Financial Condition and Results of Operations.
Quantitative and Qualitative Disclosures About Market Risk.
Financial Statements and Supplementary Data.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
Controls and Procedures.
Other Information.
PART III
Directors, Executive Officers and Corporate Governance.
Executive Compensation.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Certain Relationships and Related Transactions, and Director Independence.
Principal Accounting Fees and Services.
Item 15.
Exhibits, Financial Statement Schedules.
Part IV
Signatures
Exhibit Index
6
12
21
22
22
22
23
25
26
47
49
99
100
100
100
100
101
101
101
102
103
104
3
Presentation of Information
Unless the context requires otherwise, references to "Edgewell Personal Care Company," "Edgewell," "we," "us," "our" and
"the Company" refer to Edgewell Personal Care Company, and its consolidated subsidiaries.
Trademarks and Trade Names
We own or have rights to use trademarks and trade names that we use in conjunction with the operation of our business, which
appear throughout this Annual Report on Form 10-K. Solely for convenience, we only use the ™ or ® symbols the first time
any trademark or trade name is mentioned. We may also refer to brand names, trademarks, service marks and trade names of
other companies and organizations, and these brand names, trademarks, service marks and trade names are the property of their
respective owners.
Industry and Market Data
Unless we indicate otherwise, we base the information concerning our industry contained or incorporated by reference herein
on our general knowledge of and expectations concerning the industry. Our market position, market share and industry market
size is based on our estimates using internal data and data from various industry analyses, our internal research and adjustments
and assumptions that we believe to be reasonable. We have not independently verified data from industry analyses and cannot
guarantee accuracy or completeness. In addition, we believe that data regarding the industry, market size and our market
position and market share within such industry provide general guidance but are inherently imprecise. Further, our estimates
and assumptions involve risks and uncertainties and are subject to change based on various factors, including those discussed in
the "Risk Factors" section of this document. These and other factors could cause results to differ materially from those
expressed in the estimates and assumptions.
Retail sales for purposes of market size, market position and market share information are based on retail sales in United States
dollars.
Forward-Looking Statements
This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You should not place undue reliance on these statements.
Forward-looking statements generally can be identified by the use of words or phrases such as "believe," "expect,"
"expectation," "anticipate," "may," "could," "intend," "belief," "estimate," "plan," "target," "predict," "likely," "will," "should,"
"forecast," "outlook," or other similar words or phrases. These statements are not based on historical facts, but instead reflect
our expectations, estimates or projections concerning future results or events, including, without limitation, the future earnings
and performance of Edgewell Personal Care Company or any of our businesses. These statements are not guarantees of
performance and are inherently subject to known and unknown risks, uncertainties and assumptions that are difficult to predict
and could cause our actual results to differ materially from those indicated by those statements. We cannot assure you that any
of our expectations, estimates or projections will be achieved. The forward-looking statements included in this report are only
made as of the date of this report, and we disclaim any obligation to publicly update any forward-looking statement to reflect
subsequent events or circumstances, except as required by law. Factors that could cause fluctuations in our actual results
include, but are not limited to, the following:
•
•
•
•
•
•
•
•
our ability to compete in products and prices in an intensely competitive industry;
the loss of any of our principal customers;
our inability to execute a successful e-commerce strategy;
fluctuations in the price and supply of raw materials;
our failure to maintain our brands’ reputation;
our failure to achieve projected cost savings under our various initiatives, including Project Fuel;
legislative or regulatory changes impacting or limiting our business;
product quality and safety issues, including recalls and product liability; and
4
•
the costs, disruption and diversion of management’s attention associated with campaigns commenced by activist
investors.
In addition, other risks and uncertainties not presently known to us or that we presently consider immaterial could significantly
affect the forward-looking statements. The list of factors above is illustrative, but not exhaustive. All forward-looking
statements should be evaluated with the understanding of their inherent uncertainty. Additional risks and uncertainties include
those detailed from time to time in our publicly filed documents, including in Item 1A. Risk Factors of Part I of this Annual
Report on Form 10-K.
5
PART I
Item 1. Business.
Overview
Edgewell Personal Care Company, and its subsidiaries, 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. We have a portfolio of over 25
brands and a broad global footprint in more than 50 countries.
History and Development
We were incorporated in the state of Missouri on September 23, 1999 and, prior to April 2000, were a wholly-owned subsidiary
of Ralston Purina Company. On April 1, 2000, all of the outstanding shares of our common stock were distributed to
shareholders of Ralston Purina Company and we became an independent publicly-owned company. During the years that
followed, we implemented a strategy of acquiring several personal care brands, which created the foundation for the company
we are today.
In 2003, we completed the acquisition of the Schick-Wilkinson Sword business ("SWS") from Pfizer, Inc., which was the
second largest manufacturer and marketer of men's and women's wet shave products in the world. Our portfolio of wet shave
products includes: Hydro® and Quattro® men's shaving systems; Hydro Silk®, Quattro for Women®, Intuition® and Silk
Effects® Plus women's shaving systems; and the Hydro, Quattro, Xtreme 3®, Slim Twin®, Slim Triple® and Extra3®
disposables. SWS has over 75 years of history in the shaving products industry with a reputation for high quality and
innovation in shaving technology. SWS products are sold throughout the world.
In 2007, we acquired Playtex Products, Inc. ("Playtex"), expanding our branded consumer products portfolio. Playtex was a
leading manufacturer and marketer of well-recognized brands such as Playtex® feminine care products, Playtex infant care
products, Diaper Genie® diaper disposal systems, Wet Ones® pre-moistened wipes, and Banana Boat® and Hawaiian Tropic®
sun care products.
In 2009, we completed the acquisition of the Edge® and Skintimate® shave preparation brands from S.C. Johnson & Son, Inc.,
adding United States ("U.S.") market leading shave preparation brands to our existing wet shave product portfolio. In 2010, we
completed the acquisition of American Safety Razor, LLC ("ASR"), a leading global manufacturer of private label and value
wet shaving razors and blades and specialty blades. ASR was founded in 1875.
Strengthening our company's feminine care product portfolio, in 2013 we acquired the Stayfree® pad, Carefree® liner and
o.b.® tampon feminine hygiene brands in the U.S., Canada and the Caribbean from Johnson & Johnson.
In 2015, we completed the separation of our Household Products business, which manufactures and markets batteries and
portable lighting, into a separate publicly-traded company (the "Spin" or the "Separation"). We completed the tax-free
Separation by distributing 100% of the outstanding shares of common stock of Energizer SpinCo, Inc. to our shareholders. The
newly formed company assumed the name Energizer Holdings, Inc. ("New Energizer") and began trading under the symbol
"ENR" on the New York Stock Exchange ("NYSE"). Edgewell retained the Personal Care business and trades on the NYSE
under the symbol "EPC." Following the Separation, we do not beneficially own any shares of New Energizer. In connection
with the Separation, we changed our name to Edgewell Personal Care Company on June 30, 2015.
On October 31, 2016, we completed the acquisition of Bulldog Skincare Holdings Limited, a men's grooming and skincare
products company based in the United Kingdom (the "U.K."). On March 1, 2018, we completed the acquisition of Jack Black,
L.L.C., a men's luxury skincare products company based in the U.S. These acquisitions created opportunities to expand our
personal care portfolio into a growing global category and have allowed us to leverage our international geographic footprint.
6
Our Business Segments and Product Strategies
We manage our business in four reportable segments: Wet Shave, Sun and Skin Care, Feminine Care and All Other. Segment
performance is evaluated based on segment profit, exclusive of general corporate expenses, share-based compensation costs,
costs associated with restructuring initiatives and other items that are not representative of management's view on how segment
performance is evaluated. Information regarding the product portfolios of these segments is included within the following
discussion. Financial information regarding each of our reportable segments, as well as other geographical information, is
included in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations and in Note 18 of
Notes to Consolidated Financial Statements included within Item 8. Financial Statements and Supplementary Data of this
Annual Report on Form 10-K.
Wet Shave
Wet shave products are sold under the Schick®, Wilkinson Sword®, Edge, Skintimate, Shave Guard® and Personna® brand
names. We manufacture and distribute Schick and Wilkinson Sword razor systems, composed of razor handles and refillable
blades, and disposable shave products for men and women. While we market our wet shave products throughout the world, our
primary markets are the U.S., Canada, Japan, Germany, France and the U.K. We believe we hold the number two global market
share position in wet shaving. The category is competitive with manufacturers vying for consumer loyalty and retail shelf
space.
We have gained recognition for our innovation designed to improve the shaving experience, including the introduction of our
Schick Hydro men's shaving system in 2010.
During 2017, we launched our first direct-to-consumer site in the U.S., featuring our new Hydro Connect™ innovation. Hydro
Connect, which is also available in certain markets internationally, features cartridges with three- and five-blade Hydro
technology that fit on Gillette® handles. Additionally, during 2017, we launched our Schick Quattro YOU™ disposables for
women in North America, which have a unique SmoothProtect™ four-blade design to protect skin and a slimmer handle for
greater control.
In 2018, we introduced Intuition f.a.b.™ for women which has five bi-directional blades that shave up and down. We intend to
continue to develop and expand across our Wet Shave brands, including Hydro, Quattro, Intuition and Xtreme 3.
In the U.S., Canada and Japan, we also sell market-leading shave preparation products, including shaving gels and creams
under the Edge, Skintimate and Shave Guard brands.
We also manufacture, distribute and sell a complete line of private label and value-priced wet shaving disposable razors,
shaving systems and replacement blades. These wet shave products are sold primarily under a retailer's store name or under
value brand names such as Personna.
Our Wet Shave segment represented 60% of our net sales in each of fiscal 2018, 2017 and 2016. Our razors and blades
represented 53% of our net sales in each of fiscal 2018, 2017 and 2016.
Sun and Skin Care
Sun and Skin Care products are sold under the Banana Boat, Hawaiian Tropic, Bulldog®, Jack Black® and Wet Ones brand
names. We market sun care products under the Banana Boat and Hawaiian Tropic brands and believe these brands, on a
combined basis, hold a leading market share position in the U.S. sun care category. We compete across the full spectrum of sun
care categories: general protection, sport, kids, baby, tanning and after sun. Outside the U.S., we believe we are also the leading
sun care manufacturer in Australia and Mexico. We expect to continue to drive our worldwide business through innovation,
increased distribution and geographic expansion.
Our Bulldog skincare products are purpose built for men and were created to work simply and efficiently while dealing with
issues specific to men's skin. Since acquiring the brand in October 2016, we have expanded sales geographically and are
committed to further growth and distribution for the brand. We acquired the Jack Black brand in March 2018 to obtain a
footprint in the luxury men's skincare market. We will use resources at our disposal to grow the Jack Black brand globally. We
also offer Wet Ones, the leader in the U.S. portable hand wipes category, and offered Playtex household gloves until the sale of
this business in October 2017.
Our Sun and Skin Care segment represented 20%, 19% and 18% of our net sales during fiscal 2018, 2017 and 2016,
respectively. Our sun care products represented 15% of our net sales during fiscal 2018 and 2017 and 14% of our net sales
during fiscal 2016.
7
Feminine Care
In Feminine Care, we market products under the Playtex, Stayfree, Carefree and o.b. brands. We offer tampons under the
Playtex Gentle Glide® 360°™, Playtex Sport®, Playtex and o.b. brands, including the Playtex Sport compact tampon launched
in 2017. We also market pads and liners under the Stayfree and Carefree brands. We believe we are one of the top three
manufacturers of feminine care products in North America, with unique, competitive product technologies and well-known
brands that address complementary consumer needs. We intend to continue to invest in innovation in our feminine care brands.
Our Feminine Care segment represented 15% of our net sales during fiscal 2018 and 2017 and 16% of our net sales during
fiscal 2016.
All Other
Our All Other segment includes infant care, pet care and miscellaneous other products. In the infant care category, we believe
our Playtex Diaper Genie brand of diaper disposal systems leads the U.S. diaper pail category. The Diaper Genie brand consists
of the diaper pail unit and refill liners. We market Litter Genie®, a waste disposal solution for cat owners originating from our
Diaper Genie technology. We also market a broad range of products including bottles, cups and mealtime products under the
Playtex brand name. We offer a line of pacifiers, including the OrthoPro® and Binky® pacifiers.
Our All Other segment represented 6% of our net sales during fiscal 2018, 2017 and 2016.
Competition
The personal care product categories are highly competitive, both in the U.S. and on a global basis, as large manufacturers with
global operations and new entrants attempting to disrupt the market compete for consumer acceptance and, increasingly, limited
retail shelf space. Competition is based upon brand perception, product performance, customer service and price.
The global shaving products category is comprised of wet shave blades and razors, electric shavers and shaving gels and
creams. The wet shave segment of that business is further segmented between razor systems and disposable products. This
category is characterized by high margins and international growth opportunities. Geographically, North America, Western
Europe, Australia and Japan represent relatively developed and stable markets. With our established product lines and global
presence, we believe we compete effectively in this market. Our principal competitors in the global wet shave business are The
Procter & Gamble Company, which owns the Gillette brand and is the leading company in the global wet shave segment, and
Bic Group, which competes primarily in the disposable segment. We also compete with newer entrants to the Wet Shave market
for both direct-to-consumer online and traditional retail shelf space including Dollar Shave Club, owned by Unilever, and
Harry's.
The markets for sun and skin care, feminine care and other personal care products are also highly competitive, characterized by
frequent introduction of new products, accompanied by major advertising and promotional programs. Our competitors in these
markets consist of a large number of domestic and foreign companies, including The Procter & Gamble Company and
Kimberly-Clark Corp. in feminine care; Bayer AG and Johnson & Johnson in sun and skin care; and a variety of competitors in
the fragmented infant care market.
The market for sun care products is also characterized by global growth, and is impacted by trends in skin care. With our
balanced sun care portfolio, depth of sun care expertise and global presence, we believe we compete effectively and have more
than doubled our international sun care business since acquiring the Banana Boat and Hawaiian Tropic brands in 2008. We
intend to continue to compete by driving innovation, building differentiated equity and focusing on in-store visibility.
The global men's skincare market is expected to continue to grow, with increased demand for men's personal care products. Our
competitors in this market include large companies such as Johnson & Johnson, L'Oréal S.A., The Estee Lauder Companies,
Inc. and Unilever, as well as smaller companies. We compete in the market in multiple price points by creating simple and
effective skincare products with natural ingredients at an affordable price through our Bulldog products and the luxury men's
skincare market with Jack Black.
With our fiscal 2014 acquisition of the Stayfree, Carefree and o.b. brands, we have expanded our presence within the feminine
care product category and have become one of the top three manufacturers in North America. We compete by having a portfolio
of well-known brands that address complementary consumer needs.
8
Sales and Distribution
Our products are marketed primarily through a direct sales force, but also through exclusive and non-exclusive distributors and
wholesalers. In the U.S., Japan and the larger countries of Western Europe and Latin America, we have dedicated commercial
organizations, reflecting the scale and importance of these businesses. During fiscal 2015, in order to compete more effectively
in smaller markets after the Separation, we increased our use of third-party distributors and wholesalers and either decreased or
eliminated our business operations in certain countries. As a result of increased competition through the expansion of online
markets, we have established e-commerce operations across several lines of business including the Schick.com website in the
U.S. providing men’s and women’s shaving products, a Bulldog direct to consumer site in the U.K. and plans to expand to the
U.S., and acceleration of e-commerce sales in China through our partnership with T-Mall. We distribute our products to
consumers through numerous retail locations worldwide, including mass merchandisers and warehouse clubs, food, drug and
convenience stores, and military stores.
Although a large percentage of our sales are attributable to a relatively small number of retail customers, only Wal-Mart Stores,
Inc. and its subsidiaries ("Wal-Mart"), as a group, account for more than 10% of our consolidated annual net sales. Wal-Mart
accounted for approximately 23% of our net sales from continuing operations in fiscal 2018. Purchases by Wal-Mart included
products from all of our segments. Target Corporation represented approximately 11%, 10% and 15% of net sales for our Sun
and Skin Care, Feminine Care and All Other segments, respectively. Sales to Amazon in fiscal 2018 represented approximately
15% of net sales for our All Other segments.
Generally, orders are shipped within a month of their order date. Because of the short period of time between order and
shipment dates, the dollar amount of current backlog is not material and is not considered to be a reliable indicator of future
sales volume.
Government contracts do not represent a material portion of our net sales.
Seasonality
Customer orders for sun care products within our Sun and Skin Care segment are highly seasonal, which has historically
resulted in higher sun care sales to retailers during the late winter through mid-summer months. Within our Wet Shave segment,
sales of women's products are moderately seasonal, with increased consumer demand in the spring and summer months. See
"Our business is subject to seasonal volatility" in Item 1A. Risk Factors.
Sources and Availability of Raw Materials
The principal raw materials used in our products include steel, various plastic resins, plastic based components, textile fibers
and non-woven fabrics, organic and inorganic chemicals, soap based lubricants and plastic-pulp based packaging. These
materials are sourced on a regional or global basis, as applicable, and are generally available from multiple sources. Price and
availability of our raw materials fluctuate over time. While we have confidence our supply assurance plans adequately support
our current operational needs, we cannot predict the future with certainty. Both price and supply are subject to risk from global
socio- and macroeconomic influences such as, but not exclusive to, force majeure, loss or impairment to key manufacturing
sites, transportation, government regulation, currency or other unforeseen circumstances. In the past, we have avoided
significant interruption in the availability of our input materials and believe our extensive experience in procurement allows us
to manage these risks effectively.
Patents, Technology and Trademarks
We own a number of U.S., Canadian and foreign trademarks, which we consider of substantial importance and which are used
individually or in conjunction with our other trademarks. These include, but are not limited to: Edgewell, Schick, Schick
Hydro, Schick Hydro Silk, Hydro Connect, Wilkinson Sword, Intuition, Quattro, Xtreme 3, Protector, Silk Effects, Slim Twin,
Edge, Skintimate, Personna, Banana Boat, Hawaiian Tropic, Bulldog, Jack Black, Binky, Diaper Genie, Litter Genie, Drop-
Ins®, Gentle Glide, 360°, Play On®, Twist 'N Click®, Sport, Sport Level Protection®, VentAire®, Wet Ones, Stayfree,
Carefree and o.b. As a result of the Playtex acquisition, we also own royalty-free licenses in perpetuity to the Playtex trademark
in the U.S., Canada and many foreign jurisdictions related to certain feminine hygiene, baby care and other products, but
excluding certain apparel-related products.
9
Our ability to compete effectively in the wet shave, sun and skin care, feminine care and other personal care categories
depends, in part, on our ability to maintain the proprietary nature of technology and manufacturing processes through a
combination of patent and trade secret protection, non-disclosure agreements and licensing agreements. We own or license
from third parties a considerable number of patents, patent applications and other technology, which we believe are significant
to our business. These relate primarily to shaving product improvements and additional features, feminine care hygiene
products including digital and applicator tampons, pads and liners, baby bottles and nipples, disposable liners and plastic
holders for nurser systems, children's drinking cups, pacifiers, sunscreen formulations, diaper disposal systems, pet care and pet
waste disposal products, and manufacturing processes.
As of September 30, 2018, we owned, either directly or beneficially, approximately 832 unexpired U.S. patents, which have a
range of expiration dates from October 2018 to June 2036, and we had approximately 134 U.S. patent applications pending. We
routinely prepare additional patent applications for filing in the U.S., and actively pursue foreign patent protection in various
foreign countries. As of September 30, 2018, we owned, either directly or beneficially, approximately 2,075 foreign patents
having a range of expiration dates from October 2018 to December 2042, and we had approximately 320 patent applications
pending in foreign countries.
We rely on trademark, trade secret, patent and copyright laws to protect our intellectual property rights. We cannot be sure that
these intellectual property rights will be effectively utilized or, if necessary, successfully asserted. There is a risk that we will
not be able to obtain and perfect our own intellectual property rights, or, where appropriate, license intellectual property rights
from others.
Governmental Regulation and Environmental Matters
We are subject to various federal, state, foreign and local laws and regulations by governmental agencies intended to protect the
public health and environment, including those governing the manufacture, use, discharge and disposal of hazardous materials,
labeling and notice requirements related to consumer exposure to certain chemicals, and requirements for the recycling of our
products and their packaging. These agencies include, but are not limited to (i) the U.S. Food and Drug Administration and
equivalent international agencies that regulate ingredients in consumer products, (ii) the U.S. Environmental Protection Agency
(“EPA”) and equivalent international agencies that regulate our manufacturing facilities, and (iii) the Chemical Registration/
Notification authorities that regulate chemicals that we use in, or transport to, the various countries in which we manufacture
and/or market our products. We have seen an increase in registration and reporting requirements concerning the use of certain
chemicals in a number of countries, such as Registration, Evaluation, Authorization and Restriction of Chemicals (“REACH”)
regulations in the European Union (the “E.U.”).
Contamination has been identified at certain of our current and former facilities, as well as third-party waste disposal sites, and
we are conducting investigation and remediation activities in relation to such properties. In connection with certain sites, we
have received notices from the EPA, state agencies and private parties seeking contribution, that we have been identified as a
potentially responsible party ("PRP") under the Comprehensive Environmental Response, Compensation and Liability Act and,
as a result, we may be required to share in the cost of cleanup with respect to a number of federal "Superfund" sites. We 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 our own properties.
The amount of our 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
adverse effect on our total capital and operating expenditures, cash flows, earnings or competitive position. Current
environmental spending estimates could be modified as a result of changes in our plans or our 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 E.U, 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.
10
The US Toxic Substances Control Act (“TSCA”) and similar laws in other jurisdictions, are intended to ensure that chemicals
do not pose unreasonable risks to human health or the environment. TSCA requires the EPA to maintain the TSCA registry
listing chemicals manufactured or processed in the United States. Chemicals not listed on the TSCA registry cannot be
imported into or sold in the U.S. until registered with the EPA. TSCA also sets forth specific reporting, recordkeeping and
testing rules for chemicals, including requirements for the import and export of certain chemicals, as well as other restrictions
relevant to our business. Pursuant to these laws, the EPA from time to time issues Significant New Use Rules, or SNURs, when
it identifies new uses of chemicals that could pose risks to human health or the environment and also requires pre-manufacture
notification of new chemical substances that do not appear on the TSCA registry. When we import chemicals into the U.S., we
must ensure that chemicals appear on the TSCA registry prior to import, participate in the SNUR process when a chemical we
import requires testing data and report to the EPA information relating to quantities, identities and uses of imported chemicals.
In the E.U., our business is affected by legislation dealing with REACH which requires manufacturers and importers of
chemical substances to register such substances with the European Chemicals Agency, or the ECHA, and enables European and
national authorities to track such substances. Depending on the amount of chemical substances to be manufactured or imported,
and the specific risks of each substance, REACH requires different sets of data to be included in the registration submitted to
the ECHA. Registration of substances with the ECHA imposes significant recordkeeping requirements that can result in
significant financial obligations for companies such as us to import products into Europe. REACH is accompanied by
legislation regulating the classification, labeling and packaging of chemical substances and mixtures.
We believe that our facilities and products are in substantial compliance with current laws and regulations.
Employees
As of September 30, 2018, we employed approximately 5,900 employees, with approximately 2,200 based in the U.S. Certain
of these employees are represented by unions or work councils. We believe that we generally have a good relationship with our
employees, and with the unions and work councils that represent certain employees.
Executive Officers
Set forth below are the names, ages as of September 30, 2018, and current positions of our executive officers.
Name
David P. Hatfield
Rod R. Little
Colin A. Hutchison
John N. Hill
Marisa Iasenza
Age Title
58 Chief Executive Officer, President and Chairman of the Board
49 Chief Financial Officer
60 Chief Operating Officer
55 Chief Human Resources Officer
49 Chief Legal Officer
Set forth below is a brief description of the position and business experience of each of our executive officers.
David P. Hatfield has served as the Chairman of our Board since July 6, 2016. Mr. Hatfield has been our Chief Executive
Officer and President since July 1, 2015. From October 2007 to July 1, 2015, he served as President and Chief Executive
Officer of the Energizer Personal Care division commencing upon the acquisition of Playtex in October 2007. In 2007, Mr.
Hatfield was named President and Chief Executive Officer of Schick-Wilkinson Sword. From 2004 to 2007, he served as the
Executive Vice President and Chief Marketing Officer of Schick-Wilkinson Sword. Prior to 2004, he held various other
positions within our Company since joining Ralston Purina Company in 1986.
Rod R. Little has served as Chief Financial Officer since March 5, 2018. Mr. Little previously served as Chief Financial Officer
of HSNi from January 2017 to December 2017 and Executive Vice President and Chief Financial Officer of Elizabeth Arden,
Inc. from April 2014 to November 2016. Prior to joining Elizabeth Arden, Mr. Little spent 17 years with Procter & Gamble
where he held numerous positions of increasing responsibility in Procter & Gamble’s divisional and corporate finance
organization, ultimately serving as the chief finance officer of their global salon professional division from 2009 until 2014.
Mr. Little also served for five years in the United States Air Force prior to joining Procter & Gamble in 1997.
11
Colin A. Hutchison has served as Chief Operating Officer since April 4, 2017. Mr. Hutchison had previously served as Vice
President Commercial, International since July 1, 2015. From January 2011 to July 1, 2015, Mr. Hutchison served as Vice
President and General Manager of our Private Brands Group, and prior to that as Vice President for Schick-Wilkinson Sword
and Personal Care in Europe since joining our company in 2004. Prior to joining our company, Mr. Hutchison held various
positions at consumer goods businesses based in Europe including United Biscuits and the Campbell's Soup Company.
John N. Hill has served as Chief Human Resources Officer since April 4, 2017. Mr. Hill had previously led the North America
commercial organization as our company's Vice President, North America since July 1, 2015, and as the VP, North America
Commercial of Energizer's Personal Care division from 2007 to 2015. Mr. Hill joined our company in 2003 as General
Manager Schick Canada following the acquisition of Schick-Wilkinson Sword from Pfizer, Inc. Prior to joining Edgewell, Mr.
Hill held various positions at other international consumer product companies, including Warner-Lambert Company, Kraft and
General Foods.
Marisa Iasenza has served as Chief Legal Officer since June 4, 2018. From 2008 to 2018, Ms. Iasenza served in roles of
increasing responsibility at Harman International Industries, Incorporated, most recently as Senior Vice President, General
Counsel & Secretary. From 2007 to 2008, she served as Assistant General Counsel at United Agri Products.
Available Information
Our website address is www.edgewell.com. We are not including the information contained on our website as part of, or
incorporating it by reference into, this filing. We make available to the public on our website, free of charge, our Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed
or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after
such material is electronically filed with, or furnished to, the U.S. Securities and Exchange Commission ("SEC"). Our reports
filed with, or furnished to, the SEC may be read and copied at the SEC's Public Reference Room at 100 F Street, N.E.
Washington, DC 20549. Investors may obtain information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. These filings are also available on the SEC's website at www.sec.gov.
Item 1A. Risk Factors.
The following risks and uncertainties could materially adversely affect our business, results of operations, financial condition
and cash flows. We may amend or supplement the risk factors described below from time to time in other reports we file with
the SEC.
Risks Related to Our Business
Competition in our industries may hinder our ability to execute our business strategy, achieve profitability, or maintain
relationships with existing customers.
The categories in which we operate are mature and highly competitive, both in the U.S. and globally, as a limited number of
large manufacturers compete for consumer acceptance, limited retail shelf space and e-commerce opportunities. Because of the
highly competitive environment in which we operate as well as increasing retailer concentration, our retailer customers,
including online retailers, frequently seek to obtain pricing concessions or better trade terms, resulting in either reduction of our
margins or losses of distribution to lower cost competitors. Competition is based upon brand perceptions, product performance
and innovation, customer service and price. Our ability to compete effectively may be affected by a number of factors,
including:
•
•
•
several of our competitors, including The Procter & Gamble Company, Unilever, Johnson & Johnson and others, may
have substantially greater financial, marketing, research and development and other resources and greater market share
in certain segments than we do, which could provide them with greater scale and negotiating leverage with retailers
and suppliers;
our competitors may have lower production, sales and distribution costs, and higher profit margins, which may enable
them to offer aggressive retail discounts and other promotional incentives;
our competitors may be able to obtain exclusive distribution rights at particular retailers or favorable in-store
placement; and
• we may lose market share to private label brands sold by retail chains, or to price brands sold by local and regional
competitors, which, in each case, are typically sold at lower prices than our products.
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Loss of any of our principal customers could significantly decrease our sales and profitability.
Wal-Mart, together with its subsidiaries, is our largest customer, accounting for approximately 23% of our net sales in fiscal
2018. Generally, sales to our top customers are made pursuant to purchase orders and we do not have supply agreements or
guarantees of minimum purchases from them. As a result, these customers may cancel their purchase orders or reschedule or
decrease their level of purchases from us at any time. The loss or a substantial decrease in the volume of purchases by any of
our top customers would harm our sales and profitability. Increasing retailer customer concentration could result in reduced
sales outlets for our products, as well as greater negotiating pressures and pricing requirements.
Our inability to execute a successful e-commerce strategy could have a significant negative impact on our business.
Sales of consumer products via e-commerce has gained increasing importance among market participants as more end user
customers purchase consumer goods through e-commerce. We are engaged in e-commerce sales channels with respect to many
of our products; however, if e-commerce and other sales channels were to take significant market share away from traditional
retailers, and if we are not successful in achieving sales growth in these sales channels, our business, financial condition and
results of operations may be negatively impacted. While we are establishing an e-commerce footprint, there can be no
assurances that these initiatives will be successful.
We face risks arising from our ongoing efforts to achieve cost savings.
In the normal course of business, we may initiate projects which change our footprint or our operations in order to gain
efficiencies and reduce costs. The execution of cost savings initiatives may present a number of significant risks, including:
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•
•
actual or perceived disruption of service or reduction in service standards to customers;
the failure to preserve adequate internal controls as we restructure our general and administrative functions, including
our information technology and financial reporting infrastructure;
the failure to preserve supplier relationships and distribution, sales and other important relationships and to resolve
conflicts that may arise;
loss of sales as we reduce or eliminate staffing on non-core product lines;
diversion of management attention from ongoing business activities; and
the failure to maintain employee morale and retain key employees while implementing benefit changes and reductions
in the workforce.
Because of these and other factors, we cannot predict whether we will realize the purpose and anticipated benefits of these
initiatives and, if we do not, our business and results of operations may be adversely affected.
In fiscal 2018, we launched Project Fuel, an enterprise-wide transformational initiative that is designed to address all aspects of
our business and cost structure. The project will incorporate our Zero Based Spending and global productivity initiatives, and
will include a new global restructuring initiative. The achievement of our savings targets depends on our ability to successfully
identify and realize savings opportunities. Events and circumstances, such as financial or strategic difficulties, delays and
unexpected costs may occur that could result in our company not realizing the anticipated benefits, or not realizing such
anticipated benefits on our expected timetable. If we are unable to realize the anticipated savings our results of operations, cash
flows and financial condition may be adversely affected.
Changes in production costs, including raw material prices and tariffs, could erode our profit margins and negatively
impact operating results.
Pricing and availability of raw materials, energy, shipping and other services needed for our business can be volatile due to
general economic conditions, labor costs, production levels, import duties and tariffs and other factors beyond our control.
There is no certainty that we will be able to offset future cost increases. This volatility can significantly affect our production
cost, and may, therefore, have a material adverse effect on our business, results of operations and financial condition.
13
Loss of reputation of our leading brands or failure of our marketing plans could have an adverse effect on our business.
We depend on the continuing reputation and success of our brands, particularly the Schick, Wilkinson Sword, Edge, Skintimate,
Playtex, Diaper Genie, Wet Ones, Banana Boat, Hawaiian Tropic, Bulldog, Jack Black, Stayfree, Carefree and o.b. brands. Our
operating results could be adversely affected if one of our leading brands suffers damage to its reputation due to real or
perceived quality issues. Further, the success of our brands can suffer if our marketing plans or new product offerings do not
improve, or have a negative impact on our brands' image or ability to attract and retain consumers. Additionally, if claims made
in our marketing campaigns become subject to litigation alleging false advertising, it could damage our brand, cause us to alter
our marketing plans in ways that may materially and adversely affect sales, or result in the imposition of significant damages
against us. Further, a boycott or other campaign critical of us, through social media or otherwise, could negatively impact our
brands' reputation and, consequently, our products' sales.
Our business is subject to increasing global regulation, including product related regulations and environmental
regulations, that may expose us to significant liabilities.
The manufacture, packaging, labeling, storage, distribution, advertising and sale of our products are subject to extensive
regulation. For example, our products are regulated by health authorities both in the U.S. and in the E.U. (such as the U.S. Food
and Drug Administration) and consumer protection organizations (such as the U.S. Consumer Product Safety Commission).
These regulatory frameworks focus on our ingredients as well as the safety and efficacy of our products. Similarly, the
advertising and marketing of our products is regulated by agencies such as the U.S. Federal Trade Commission. All of these
regulatory frameworks exist at the federal, state and local level in the U.S. as well as in foreign countries where we sell our
products. New or more restrictive regulations or more restrictive interpretations of existing regulations are likely and could lead
to additional compliance cost and have an adverse impact on our business. Additionally, a finding that we are in violation of, or
not in compliance with, applicable laws or regulations could subject us to material civil remedies, including fines, damages,
injunctions or product recalls, or criminal sanctions. Even if a claim is unsuccessful, is not merited or is not fully pursued, the
negative publicity surrounding such assertions could jeopardize our reputation and brand image and have a material adverse
effect on our businesses, as well as require resources to rebuild our reputation.
We must comply with various environmental laws and regulations in the jurisdictions in which we operate, including those
relating to the handling and disposal of solid and hazardous wastes and the remediation of contamination associated with the
use and disposal of hazardous substances. A release of such substances due to accident or an intentional act could result in
substantial liability to governmental authorities or to third parties. Pursuant to certain environmental laws, we could be subject
to joint and several strict liability for contamination relating to our or our predecessors' current or former properties or any of
their respective third-party waste disposal sites. In addition to potentially significant investigation and remediation costs, any
such contamination can give rise to claims from governmental authorities or other third-parties for natural resource damage,
personal injury, property damage or other liabilities. We have incurred, and will continue to incur, capital and operating
expenses and other costs in complying with environmental laws and regulations, including remediation costs relating to our
current and former properties and third-party waste disposal sites. As new laws and regulations are introduced, we could
become subject to additional environmental liabilities in the future that could cause a material adverse effect on our results of
operations or financial condition.
We face risks associated with global economic conditions.
Unfavorable global economic conditions, unemployment levels and uncertainty about future economic prospects could reduce
consumer demand for our products as a result of a reduction in discretionary spending. A shift of purchasing patterns to lower-
cost options such as private label brands sold by retail chains, could drive the market towards lower margin products and force
us to reduce prices in order to compete. Similarly, our retailer customers could reduce their inventories, shift to different
products or require us to lower our prices to retain the shelf placement of our products. Declining financial performance by
certain of our retailer customers could impact their ability to pay us on a timely basis, or at all. Worsening economic conditions
could harm our sales and profitability.
14
Our business involves the potential for product liability and other claims against us, which could affect our results of
operations and financial condition and result in product recalls or withdrawals.
We face exposure to claims arising out of alleged defects in our products, including for property damage, bodily injury or other
adverse effects. We maintain product liability insurance, but this insurance does not cover all types of claims, particularly
claims other than those involving personal injury or property damage or claims that exceed the amount of insurance coverage.
Further, we may not be able to maintain such insurance in sufficient amounts, on desirable terms, or at all, in the future. In
addition to the risk of monetary judgments not covered by insurance, product liability claims could result in negative publicity
that could harm our products' reputation and in certain cases require a product recall. Product recalls or product liability claims,
and any subsequent remedial actions, could have a material adverse effect on our business, reputation, brand value, results of
operations and financial condition.
Our business could be negatively impacted as a result of stockholder activism or an unsolicited takeover proposal or a proxy
contest.
In recent years, proxy contests and other forms of shareholder activism have been directed against numerous public companies.
If a proxy contest or an unsolicited takeover proposal was made with respect to us, we could incur significant costs in
defending our Company, which would have an adverse effect on our financial results. Shareholder activists may also seek to
involve themselves in the governance, strategic direction and operations of our Company. Such proposals may disrupt our
business and divert the attention of our management and employees, and any perceived uncertainties as to our future direction
resulting from such a situation could result in the loss of potential business opportunities, be exploited by our competitors,
cause concern to our current or potential customers, and make it more difficult to attract and retain qualified personnel and
business partners, all of which could adversely affect our business. In addition, actions of activist shareholders may cause
significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not
necessarily reflect the underlying fundamentals and prospects of our business.
If we fail to adequately protect our intellectual property rights, competitors may manufacture and market similar products,
which could adversely affect our market share and results of operations.
The vast majority of our total net sales are from products bearing proprietary trademarks and brand names. In addition, we own
or license from third parties a considerable number of patents, patent applications and other technology. We rely on trademark,
trade secret, patent and copyright laws to protect our intellectual property rights. There is a risk that we will not be able to
obtain and perfect or maintain our own intellectual property rights or, where appropriate, license intellectual property rights
necessary to support new product introductions. In addition, even if such rights are protected in the U.S., the laws of some other
countries in which our products are or may be sold do not protect intellectual property rights to the same extent as the laws of
the U.S. Our intellectual property rights could be invalidated, circumvented or challenged in the future, and we could incur
significant costs in connection with legal actions relating to such rights. As patents expire, we could face increased competition
or decreased royalties, either of which could negatively impact our operating results. If other parties infringe our intellectual
property rights, they may dilute the value of our brands in the marketplace, which could diminish the value that consumers
associate with our brands and harm our sales.
We may not be able to attract, retain and develop key personnel.
Our future performance depends in significant part upon the continued service of our executive officers and other key
personnel. The loss of the services of one or more of our executive officers or other key employees could have a material
adverse effect on our business, prospects, financial condition and results of operations. Our success also depends on our
continuing ability to attract, retain and develop highly qualified personnel. Competition for such personnel is intense, and there
can be no assurance that we can retain and motivate our key employees or attract and retain other highly qualified personnel in
the future.
15
We are subject to risks related to our international operations, including currency fluctuations, which could adversely affect
our results of operations.
Our businesses are conducted on a worldwide basis, with nearly 44% of our sales in fiscal 2018 arising outside the U.S., and a
significant portion of our production capacity and cash are located overseas. Consequently, we are subject to a number of risks
associated with doing business in foreign countries, including:
•
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•
•
•
•
•
•
•
the possibility of expropriation, confiscatory taxation or price controls;
the ability to repatriate foreign-based cash effectively, which constitutes substantially all of our overall cash, for
strategic needs in the U.S., as well as the heightened counterparty, internal control and country-specific risks
associated with holding cash overseas;
the effect of foreign income taxes, value-added taxes and withholding taxes, including the inability to recover amounts
owed to us by a government authority without extended proceedings or at all;
the effect of the U.S. tax treatment of foreign source income and losses, and other restrictions on the flow of capital
between countries;
adverse changes in local investment or exchange control regulations;
restrictions on and taxation of international imports and exports;
legal and regulatory constraints, including tariffs and other trade barriers;
currency fluctuations, including the impact of hyper-inflationary conditions, particularly where exchange controls
limit or eliminate our ability to convert from local currency;
political or economic instability, government nationalization of business or industries, government corruption, and
civil unrest, including political or economic instability; and
difficulty in enforcing contractual and intellectual property rights;
One or more of these factors could harm our international operations or investments and our operating results.
If we cannot continue to develop new products in a timely manner, and at favorable margins, we may not be able to compete
effectively.
The industries in which we compete have been known for the pace of innovations in product life, product design and applied
technology, and our success depends on our future innovations. The successful development and introduction of new products
requires retail and consumer acceptance and overcoming the reaction from competitors. New product introductions in
categories where we have existing products will likely also reduce sales of our existing products. Our investments in research
and development may not result in successful products or innovation that will recover the costs of such investments. Our
customers or end consumers may not purchase our new products once introduced. Additionally, new products could require
regulatory approval which may not be available or may require modification to the product which could impact product
success. Our competitors may introduce new or enhanced products that significantly outperform ours, or develop
manufacturing technology that permits them to manufacture at a lower cost relative to ours and sell at a lower price. If we fail
to develop and launch successful new products, or fail to reduce our cost structure to a competitive level, we may be unable to
grow our business and compete successfully.
16
Legislative changes in applicable tax laws, policies and regulations or unfavorable resolution of tax matters may result in
additional tax liabilities, which could adversely impact our cash flows and results of operations.
Our businesses are subject to taxation in the U.S. and multiple foreign jurisdictions. On December 22, 2017, the U.S.
government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The
changes included in the Tax Act are broad and complex and the impact of the Tax Act is subject to change as a result of changes
in interpretations of the Tax Act, legislative action to address questions that arise from the Tax Act, changes in accounting
standards for income taxes or related interpretations, updates or changes to estimates of current year earnings, exchange rates
and other factors. In addition, international tax reform remains a priority with the Organization for Economic Cooperation and
Development’s Action Plan on Base Erosion & Profit Shifting and other proposed foreign jurisdictional tax law changes. Given
the uncertainty of the possible changes and their potential interdependency, we are unable to determine whether the net
consolidated impact of changes in global tax legislation would be positive or negative. However, the impact of any legislative
tax law, policy or regulation changes by federal, state and local and foreign authorities may result in additional tax liabilities
which could adversely impact our cash flows and results of operations. Significant estimation and judgment is required in
determining our provisions for taxes in the U.S. and jurisdictions outside the U.S. In the ordinary course of our business, there
are transactions and calculations in which the ultimate tax determination is uncertain. We are regularly under audit by tax
authorities, and although we believe our tax positions are defensible and our tax provision estimates are reasonable, the final
outcome of tax audits and related litigation could be materially different than that reflected in our income tax provisions and
accruals. The unfavorable resolution of any audits or litigation could have an adverse impact on future operating results and our
financial condition. More aggressive and assertive tax collection policies, particularly in jurisdictions outside the U.S., may
increase the costs of resolving tax issues and enhance the likelihood that we will have increased tax liabilities going forward.
We may not be able to continue to identify and complete strategic acquisitions and effectively integrate acquired companies
to achieve desired financial benefits.
We have completed a number of acquisitions and we expect to continue making acquisitions if appropriate opportunities arise.
Acquisitions could be a key use of our cash and a potential driver of future growth. However, we may not be able to identify
and successfully negotiate suitable strategic acquisitions at attractive valuations, obtain financing for future acquisitions on
satisfactory terms or otherwise complete future acquisitions. Our reduced size relative to other companies in our industry may
make completing desirable acquisitions more challenging.
If we can complete future acquisitions, we may face significant challenges in consolidating functions and effectively
integrating procedures, personnel, product lines, and operations in a timely and efficient manner. The integration process can be
complex and time consuming, may be disruptive to our existing and acquired business and may cause an interruption of, or a
loss of momentum in, the business. Even if we can successfully complete the integration of acquired businesses into our
operations, there is no assurance that anticipated cost savings, synergies, or revenue enhancements will be realized within the
expected time frame, or at all.
A failure of a key information technology system or a breach of our information security could adversely impact our ability
to conduct business.
We rely extensively on information technology systems in order to conduct business, including some that are managed by third-
party service providers. These systems include, but are not limited to, programs and processes relating to internal and external
communications, ordering and managing materials from suppliers, converting materials to finished products, shipping products
to customers, processing transactions, summarizing and reporting results of operations, and complying with regulatory, legal or
tax requirements. These information technology systems could be damaged or cease to function properly due to the poor
performance or failure of third-party service providers, catastrophic events, power outages, network outages, failed upgrades or
other similar events. If our business continuity plans do not effectively resolve such issues on a timely basis, we may suffer
interruptions in conducting our business which may adversely impact our operating results.
17
Further, our systems and networks, as well as those of our retailer customers, suppliers, service providers, and banks, may
become the target of advanced cyber-attacks or information security breaches which will pose a risk to the security of our
services, systems, networks and supply chain, as well as to the confidentiality, availability and integrity of data of our
Company, employees, customers or consumers, as well as disrupt our operations or damage our facilities or those of third
parties. As cybersecurity threats rapidly evolve in sophistication and become more prevalent across the industry globally, our
Company is continually increasing our attention to these threats. We assess potential threats and vulnerabilities and make
investments seeking to address them, including ongoing monitoring and updating of networks and systems, increasing
specialized information security skills, deploying employee security training, and updating security policies for our company
and our third-party providers. However, because the techniques, tools and tactics used in cyber-attacks frequently change and
may be difficult to detect for periods of time, we may face difficulties in anticipating and implementing adequate preventative
measures or fully mitigating harms after such an attack. As a result, a cyber-attack could negatively impact our net sales and
increase our operating and capital costs. In addition, our employees frequently access our suppliers' and customers' systems and
we may be liable if our employees are the source of any breaches in these third-party systems. It could also damage our
reputation with retailer customers and consumers and diminish the strength and reputation of our brands, or require us to pay
monetary penalties.
Periodically, we also need to upgrade our information technology systems or adopt new technologies. If such a new system or
technology does not function properly or otherwise exposes us to increased cybersecurity breaches and failures, it could affect
our ability to order materials, make and ship orders, and process payments in addition to other operational and information
integrity and loss issues. Further, if the information technology systems, networks or service providers we rely upon fail to
function properly or cause operational outages or aberrations, or if we or one of our third-party providers suffer significant
unavailability of key operations, or inadvertent disclosure of, lack of integrity of, or loss of our sensitive business or
stakeholder information, due to any number of causes, ranging from catastrophic events or power outages to improper data
handling, security incidents or employee error or malfeasance, and our business continuity plans do not effectively address
these failures on a timely basis, we may be exposed to reputational, competitive, operational, financial and business harm as
well as litigation and regulatory action. The costs and operational consequences of responding to the above items and
implementing remediation measures could be significant and could adversely impact our results.
Impairment of our goodwill and other intangible assets would result in a reduction in net income.
We have a material amount of goodwill, trademarks and other intangible assets, as well as other long-lived assets, which are
periodically evaluated for impairment in accordance with current accounting standards. Declines in our profitability and
estimated cash flows related to specific intangible assets, as well as potential changes in market valuations for similar assets
and market discount rates, may result in an impairment charge, which could have an adverse impact on our operating results.
During the third quarter of fiscal 2018, we completed an interim impairment assessment on indefinite-lived intangible assets
and goodwill. We determined that the carrying values of the Infant Care reporting unit was greater than the fair value and
recorded a goodwill impairment charge of $24.4 million. The fair values of our intangible assets and goodwill are sensitive to
changes in forecasted cash flows, as well as other assumptions used in an impairment analysis, including discount rates.
Our manufacturing facilities, supply channels or other business operations may be subject to disruption from events beyond
our control.
Operations of our manufacturing and packaging facilities worldwide, and of our corporate offices, and the methods we use to
obtain supplies and to distribute our products, may be subject to disruption for a variety of reasons, including availability of
raw materials, work stoppages, industrial accidents, disruptions in logistics, loss or impairment of key manufacturing sites,
product quality or safety issues, licensing requirements and other regulatory issues, trade disputes between countries in which
we have operations, and acts of war, terrorism, pandemics, fire, earthquake, hurricanes, flooding or other natural disasters. The
supply of our raw materials may be similarly disrupted. There is also a possibility that third-party manufacturers, which
produce a significant portion of certain of our products, could discontinue production with little or no advance notice, or
experience financial problems or problems with product quality or timeliness of product delivery, resulting in manufacturing
delays or disruptions, regulatory sanctions, product liability claims or consumer complaints. If a major disruption were to occur,
it could result in delays in shipments of products to customers or suspension of operations. We maintain business interruption
insurance to potentially mitigate the impact of business interruption, but such coverage may not be sufficient to offset the
financial or reputational impact of an interruption.
18
Our access to capital markets and borrowing capacity could be limited.
Our access to capital markets to raise funds through the sale of debt or equity securities is subject to various factors, including
general economic and financial market conditions. Significant reduction in market liquidity conditions could impact access to
funding and increase associated funding costs, which could reduce our earnings and cash flows. Additionally, disruptions in
financial markets could reduce our access to debt and equity capital markets, negatively affecting our ability to implement our
business plan and strategy.
Our access to debt financing at competitive risk-based interest rates is partly a function of our credit ratings. The major credit
rating agencies periodically evaluate our creditworthiness and have assigned us credit ratings. These ratings are based on a
number of factors, which include our financial strength and financial policies as well as our strategies, operations and
execution. A downgrade to our credit ratings could increase our interest rates, limit our access to public debt markets, limit the
institutions willing to provide us credit facilities, result in more restrictive credit arrangements and make any future credit
facilities or credit facility amendments more costly and difficult to obtain.
Our business is subject to seasonal volatility.
Customer orders for sun care products within our Sun and Skin Care segment are highly seasonal, which has historically
resulted in higher sun care sales to retailers during the late winter through mid-summer months. Accordingly, our sales,
financial performance, working capital requirements and cash flow may experience volatility during these periods. Further,
purchases of our sun care products can be significantly impacted by unfavorable weather conditions during the summer period,
and as a result we may suffer decreases in net sales if conditions are not favorable for use of our products, which could in turn
have a material adverse effect on our financial condition, results of operation and cash flows. Within our Wet Shave segment,
sales of women's products are moderately seasonal, with increased consumer demand in the spring and summer months.
We have a substantial level of indebtedness and are subject to various covenants relating to such indebtedness, which could
limit our discretion to operate and grow our business.
As of September 30, 2018, our debt level was approximately $1.3 billion. We may be required to dedicate a substantial portion
of our cash to debt service, thereby reducing funds available to fund working capital, capital expenditures, acquisitions and
investments and other general corporate purposes. Our failure to make scheduled interest payments or to repay or refinance the
indebtedness at maturity or obtain additional financing as needed could have a material adverse effect on our business.
Additionally, certain of our debt instruments are subject to certain financial and other covenants, including debt ratio tests. We
may be in breach of such covenants in the event of future declines in our operating cash flows or earnings performance, foreign
currency movements or other events. In the event of such breach, our lenders may be entitled to accelerate the related debt as
well as any other debt to which a cross-default provision applies, and we could be required to seek amendments or waivers
under the debt instruments or to refinance the debt. There is no assurance that we would obtain such amendments or waivers or
effect such refinancing, or that we would be able to do so on terms similar to our current debt instruments. The covenants and
financial ratio requirements contained in our debt instruments could also increase our vulnerability to general adverse economic
and industry conditions, limit our flexibility in planning for, or reacting to, changes in our business and the markets in which
we operate, place us at a competitive disadvantage relative to our competitors that have greater financial flexibility or limit,
among other things, our ability to borrow additional funds as needed or take advantage of business opportunities as they arise.
There can be no guarantee that we will repurchase stock.
Although our Board has authorized a share repurchase program, and we repurchased approximately 2.1 million of our shares in
fiscal 2018 for $124.4 million, any determination to repurchase or to continue to repurchase our common shares will be based
primarily upon our financial condition, results of operations, available U.S. cash, business requirements and our Board's
continuing determination that the repurchase program is in the best interests of our shareholders and is in compliance with all
laws and agreements applicable to the repurchase program.
19
We do not expect to pay dividends for the foreseeable future.
Following the completion of the Separation, our Board eliminated the quarterly cash dividend payable on our common shares,
which had been in effect prior to that time, and we do not currently expect to declare or pay dividends on our common shares
for the foreseeable future. Instead, we intend to retain earnings to finance the growth and development of our business, for our
share repurchase program and for working capital and general corporate purposes. Any payment of dividends will be at the
discretion of our Board and will depend upon various factors then existing, including earnings, financial condition, results of
operations, capital requirements, level of indebtedness, contractual restrictions with respect to payment of dividends,
restrictions imposed by applicable law, general business conditions and other factors that our Board may deem relevant. As a
result, our shareholders may not receive any return on an investment in our capital stock in the form of dividends.
Our financial results could be adversely impacted by the U.K.'s departure from the E.U.
On June 23, 2016, the U.K. held a referendum in which voters approved an exit from the E.U., commonly referred to as
"Brexit," and on March 29, 2017, the U.K. began the process to withdraw from the E.U. Volatility in exchange rates is expected
to continue as the U.K. negotiates its exit from the E.U. Given the lack of comparable precedent, the implications of Brexit or
how such implications might affect us and our operations are unclear. Brexit could, among other things, disrupt trade and the
free movement of goods, services and people between the U.K. and the E.U. or other countries, as well as create legal and
global economic uncertainty. For fiscal 2018, net sales of our U.K. operations were 4% of our consolidated net sales. In
addition, we completed the acquisition of Bulldog Skincare Holdings Limited on October 31, 2016, which is based in the U.K.
These and other potential implications of Brexit could adversely affect our business and financial results.
We may experience losses or be subject to increased funding and expenses related to our pension plans.
The funding obligations for our pension plans are impacted by the performance of the financial markets, interest rates and
governmental regulations. While the pension benefit earned to date by active participants under our legacy U.S. pension plan
was frozen effective January 1, 2014, and retirement service benefits no longer accrue under this retirement program, our
pension obligations are expected to remain significant. If the investment of plan assets does not provide the expected long-term
returns, if interest rates or other assumptions change, or if governmental regulations change the timing or amounts of required
contributions to the plans, we could be required to make significant additional pension contributions which may have an
adverse impact on our liquidity, our ability to comply with debt covenants and may require recognition of increased expense
within our financial statements.
Certain provisions in our articles of incorporation and bylaws, and of Missouri law, could deter or delay a third-party's
efforts to acquire us, especially if our Board determines it is not in the best interest of our shareholders.
Our articles of incorporation and bylaws contain, and the General and Business Corporation Law of Missouri contains,
provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids
unacceptably expensive to the bidder and to encourage prospective acquirers to negotiate with our Board rather than to attempt
a hostile takeover by making the replacement of incumbent directors more time-consuming and difficult. These provisions
include, among others:
•
•
•
•
•
•
•
•
restrictions on various types of business combinations with, or the voting of certain holders of shares of our voting
stock by, significant shareholders;
the inability of our shareholders to call a special meeting or, unless unanimous, to act by written consent;
rules regarding how shareholders may present proposals or nominate directors for election at shareholder meetings;
the right of our Board to issue preferred stock without shareholder approval;
a provision that our shareholders may only remove directors "for cause" and with the approval of the holders of two-
thirds of our outstanding voting stock at a special meeting of shareholders called expressly for that purpose;
the ability of our directors, and not shareholders, to fix the size of our Board or to fill vacancies on our Board;
a prohibition of amendment of our bylaws by shareholders without first amending the articles of incorporation; and
the requirement that any amendment or repeal of specified provisions of our articles of incorporation (including
provisions relating to certain business combinations, directors, and amendment of our bylaws) must be approved by
the holders of at least two-thirds of the outstanding shares of our common stock and any other voting shares that may
be outstanding, voting together as a single class.
20
We believe that these provisions will help to protect our shareholders from coercive or otherwise unfair takeover tactics by
requiring potential acquirers to negotiate with our Board and by providing our Board with more time to assess any acquisition
proposal. These provisions are not intended to make us immune from takeovers. However, these provisions will apply even if
the offer may be considered beneficial by some shareholders and could deter or delay an acquisition that our Board determines
is not in our best interests or the best interests of our shareholders. These provisions may also prevent or discourage attempts to
remove and replace incumbent directors.
The trading price of our common shares may be volatile.
The trading price of our common shares could be subject to significant fluctuations in response to several factors, some of
which are beyond our control. These include general stock market volatility, variations in our quarterly operating results,
general trends in the consumer products industry, changes by securities analysts in their estimates or investment ratings and
general marketplace conditions.
Risks Related to the Separation of the Household Products Business
If the Separation, together with certain related transactions, does not qualify as a transaction that is generally tax free for
U.S. federal income tax purposes, our shareholders could be subject to significant tax liabilities.
In connection with the Separation we received an opinion of counsel regarding the qualification of the Separation, together with
certain related transactions, as a transaction that is generally tax free for U.S. federal income tax purposes under Sections 355
and 368(a)(1)(D) of the Internal Revenue Code (the "Code"). The opinion of counsel was based upon and relied on, among
other things, certain facts and assumptions, as well as certain representations, statements and undertakings made by us and New
Energizer, including those relating to our and New Energizer's past and future conduct. If any of these representations,
statements or undertakings are, or become, inaccurate or incomplete, or if either we or New Energizer breaches any of the
covenants in the Separation documents, the opinion of counsel may be invalid and the conclusions reached therein could be
jeopardized.
Notwithstanding the opinion of counsel, the Internal Revenue Service ("IRS") could determine that the distribution, together
with certain related transactions, should be treated as a taxable transaction if it determines that any of the representations,
assumptions or undertakings upon which the opinion of counsel was based are false or have been violated, or if it disagrees
with the conclusions in the opinion of counsel. The opinion of counsel is not binding on the IRS and there can be no assurance
that the IRS will not assert a contrary position.
If the Separation, together with certain related transactions, fails to qualify as a transaction that is generally tax-free, for U.S.
federal income tax purposes, we would recognize taxable gain as if we had sold the New Energizer common shares in a taxable
sale for its fair market value and our shareholders who received New Energizer shares in the distribution would be subject to
tax as if they had received a taxable distribution equal to the fair market value of such shares. Failure of the Separation to
qualify as a transaction that is generally tax-free could have a substantial impact on our tax obligations, consolidated financial
condition and cash flows.
Indemnifications under the Separation agreement with New Energizer or New Energizer’s inability to satisfy
indemnification obligations in the future could negatively impact our financial results.
Pursuant to the separation agreement and certain other agreements with New Energizer, New Energizer agreed to indemnify us
for certain liabilities, and we agreed to indemnify New Energizer for certain liabilities, in each case for uncapped amounts.
Indemnities that we may be required to provide New Energizer may be significant and could negatively impact our business.
Further, the indemnity from New Energizer may not be sufficient to protect us against the full amount of such liabilities, and
New Energizer may not be able to fully satisfy its indemnification obligations. Moreover, even if we ultimately succeed in
recovering from New Energizer any amounts for which we are held liable, we may be temporarily required to bear these losses
ourselves. Each of these risks could negatively affect our business, results of operations and financial condition.
Item 1B. Unresolved Staff Comments.
None.
21
Item 2. Properties.
As of September 30, 2018, we owned or leased 59 properties, 26 in the U.S. and 33 in other countries. Eleven of these
properties are used as production plants consisting of 1.8 million square feet that is owned and 0.9 million square feet that is
leased. Five of these plants are located in the U.S. and six are in other countries. Six of these plants are used exclusively by our
Wet Shave segment, one by our Feminine Care segment, two are shared by our Sun and Skin Care and All Other segments, one
is shared by our Wet Shave and All Other segments and one is shared by our Wet Shave and Sun and Skin Care segments. We
also have 12 warehouses totaling 0.6 million square feet, of which 0.6 million is leased. We operate from 36 different offices
throughout the world totaling 0.4 million square feet, all of which is leased, and includes our corporate headquarters in Shelton,
Connecticut. We believe all of our facilities are well-maintained and suitable for the operations conducted in them.
Item 3. Legal Proceedings.
We, and our affiliates, are subject to a number of legal proceedings in various jurisdictions arising out of our 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. We review our legal proceedings and claims, regulatory reviews and inspections and other legal
proceedings on an ongoing basis and follow appropriate accounting guidance when making accrual and disclosure decisions.
We establish accruals for those contingencies when the incurrence of a loss is probable and can be reasonably estimated, and
disclose the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued, if such disclosure is
necessary for our financial statements to not be misleading. We do 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, we believe that our
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 our financial position, results of operations or cash flows, taking
into account established accruals for estimated liabilities.
See also the discussion captioned "Governmental Regulation and Environmental Matters" included within Item 1. Business of
this Annual Report on Form 10-K.
Item 4. Mine Safety Disclosures.
Not applicable.
22
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
Market Information
Edgewell common shares are listed and traded on the New York Stock Exchange ("NYSE") under the symbol "EPC." The
following table presents the high and low sales prices of our common shares for the periods indicated, as reported by the
NYSE.
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Market Price Per Share
FY2018
FY2017
High
Low
High
Low
$
$
$
$
73.00 $
62.67 $
50.99 $
59.16 $
55.94
46.04
39.50
46.05
$
$
$
$
84.45 $
82.06 $
78.04 $
76.76 $
72.79
72.75
69.63
69.72
There were approximately 7,753 shareholders of record of our common shares as of October 31, 2018.
Dividends
We have not declared nor paid any dividends since the third quarter of fiscal 2015, and we do not currently intend to pay
dividends in the foreseeable future. Any future dividends are dependent on future earnings, capital requirements and our
financial condition and will be declared at the sole discretion of our Board of Directors. See "We do not expect to pay dividends
for the foreseeable future" in Item 1A. Risk Factors.
Issuer Purchases of Equity Securities
In January 2018, our Board of Directors approved an authorization to repurchase up to ten million shares of our common stock.
This authorization replaced a prior share repurchase authorization from May 2015. We did not repurchase any shares of our
common stock under this resolution in the fourth quarter of fiscal 2018.
Period
July 1, 2018 to July 31, 2018
August 1, 2018 to August 31, 2018
September 1, 2018 to September 30, 2018
Total Number of
Shares
Purchased (1)
16,812
Average Price
Paid per Share (2)
51.19
$
—
— $
—
— $
Total Number of
Shares Purchased
as Part of
Publicly
Announced Plans
or Programs
Maximum
Number that
May Yet Be
Purchased Under
the Plans or
Programs
—
—
—
10,000,000
10,000,000
10,000,000
(1) 16,812 shares purchased during the quarter relate to the surrender of shares of common stock to our company to satisfy tax withholding obligations
in connection with the vesting of restricted stock equivalents.
(2)
Includes $0.02 per share of brokerage fee commissions.
During fiscal 2018, we repurchased 2,086,401 shares under the share repurchase authorization from May 2015. Future share
repurchases, if any, would be made in the open market, privately negotiated transactions or otherwise, in such amounts and at
such times as we deem appropriate based upon prevailing market conditions, business needs and other factors. See "There can
be no guarantee that we will repurchase stock" under Item 1A. Risk Factors.
During fiscal 2018, we repurchased 53,423 shares related to the surrender of shares of common stock to satisfy tax withholding
obligations in connection with the vesting of restricted stock equivalent awards.
23
Performance Graph
The following graph compares the cumulative 5-year total return provided to shareholders of Edgewell Personal Care
Company's common shares relative to the cumulative total returns of the S&P Midcap 400 index and the S&P Household
Products index. An investment of $100 (with reinvestment of all dividends and other distributions, including the New Energizer
shares distributed on July 1, 2015) is assumed to have been made in our common shares and in each of the indexes on
September 30, 2013 and its relative performance is tracked through September 30, 2018. These indices are included only for
comparative purposes as required by Securities and Exchange Commission rules and do not necessarily reflect management's
opinion that such indices are an appropriate measure of the relative performance of our common shares. They are not intended
to forecast possible future performance of our common shares, nor is our historical common share price performance
necessarily indicative of our future common share price performance.
* $100 invested on 9/30/13 in stock or index, with reinvestment of all dividends. Fiscal year ending September 30.
Copyright© 2018 Standard & Poor's, a division of S&P Global. All rights reserved.
Edgewell Personal Care Company
S&P Midcap 400
S&P Household Products
9/13
$ 100.00
$ 100.00
$ 100.00
9/14
$ 137.69
$ 111.82
$ 114.61
9/15
$ 183.36
$ 113.38
$ 107.84
9/16
$ 178.69
$ 130.76
$ 134.89
9/17
$ 163.52
$ 153.66
$ 138.79
9/18
$ 103.88
$ 175.49
$ 134.89
24
Item 6. Selected Financial Data.
The selected historical financial data presented below should be read in conjunction with Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations and our consolidated financial statements and accompanying notes
included in Item 8. Financial Statements and Supplementary Data.
(in millions, except per share data)
Statements of Earnings Data
Net sales
Depreciation and amortization
Earnings (loss) from continuing operations before income
taxes (4)
Earnings (loss) from continuing operations
Earnings from discontinued operations, net of tax
Net earnings (loss)
Basic earnings (loss) per share:
Continuing operations
Discontinued operations
Net earnings (loss)
Diluted earnings (loss) per share:
Continuing operations
Discontinued operations
Net earnings (loss)
Cash dividends per common share (1)
Balance Sheet Data (2)
Working capital (3)
Property, plant and equipment, net
Total assets
Long-term debt
$
$
$
$
$
$
2018
2,234.4
97.6
163.8
103.3
—
103.3
1.90
—
1.90
1.90
—
1.90
$
$
$
$
2017
2,298.4
96.2
Fiscal Year
2016
2,362.0
96.5
$
(52.9)
5.7
—
5.7
0.10
—
0.10
0.10
—
0.10
$
$
$
219.9
178.7
—
178.7
3.02
—
3.02
2.99
—
2.99
$
$
$
$
— $
— $
— $
2015
2,421.2
91.3
$
2014
2,612.2
101.7
(458.7)
(296.1)
20.8
(275.3) $
(4.78) $
0.34
(4.44)
(4.78) $
0.34
(4.44)
1.50
$
145.8
117.7
238.4
356.1
1.90
3.85
5.74
1.88
3.81
5.69
2.00
2018
2017
As of September 30,
2016
2015
$
$
234.2
424.1
3,953.3
1,103.8
661.8
453.4
4,188.8
1,525.4
$
583.8
486.1
4,771.5
1,544.2
$
969.8
498.9
4,986.3
1,698.6
2014
1,155.9
751.7
6,928.7
1,768.9
(1) We paid dividends through the third quarter of fiscal 2015. We did not declare or pay any dividends thereafter.
(2) Balance sheet data as of September 30, 2014 has not been adjusted to reflect the Separation.
(3) Working capital represents current assets less current liabilities.
(4) (Loss) earnings from continuing operations before income taxes were (reduced) increased by the following items:
25
Restructuring and related costs (5)
Impairment charges
Sun Care reformulation costs
Gain on sale of Playtex gloves
Pension settlement expense
Jack Black acquisition and integration costs
Spin costs (6)
Industrial sale charges
Venezuela deconsolidation charge
Cost of early debt retirements
Spin restructuring charges
Acquisition, integration and other realignment costs
Net pension and postretirement gains
Total
2018
2017
Fiscal Year
2016
2015
2014
$
$
(39.9) $
(24.4)
(25.3)
15.3
(5.4)
(5.2)
—
—
—
—
—
—
—
(84.9) $
(30.3) $
(319.0)
—
—
—
—
—
—
—
—
—
—
—
(349.3) $
(38.8) $
(6.5)
—
—
—
—
(12.0)
(0.2)
—
—
—
—
—
(57.5) $
(27.0) $
(318.2)
—
—
—
—
(142.0)
(32.7)
(79.3)
(59.6)
(28.3)
—
—
(687.1) $
(53.5)
—
—
—
—
—
(24.4)
—
—
—
—
(18.5)
1.1
(95.3)
(5) Includes Selling, general and administrative expense ("SG&A") of $1.4, $0.3 and $4.3 for fiscal 2018, 2015 and 2014, respectively,
and Cost of products sold of $0.7 and $1.8 for fiscal 2017 and 2016, respectively, and positive adjustments of $0.7 for fiscal 2014.
(6) Includes SG&A of $11.8, $137.8 and $24.4 for fiscal 2016, 2015 and 2014, respectively, and Cost of products sold of $0.2 and $4.2
for fiscal 2016 and 2015, respectively.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
(in millions, except per share data, unaudited)
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with
our consolidated financial statements and the accompanying notes included in this Annual Report on Form 10-K. The following
discussion may contain forward-looking statements that reflect our plans, estimates and beliefs and involve risks, uncertainties
and assumptions. Our actual results could differ materially from those discussed in these forward-looking statements. Factors
that could cause or contribute to these differences include those discussed in Item 1A. Risk Factors and "Forward-Looking
Statements" included within this Annual Report on Form 10-K.
Non-GAAP Financial Measures. While we report financial results in accordance with accounting principles generally accepted
in the United States ("reported" or "GAAP"), this discussion also includes Non-GAAP measures. These Non-GAAP measures
are referred to as "adjusted" or "organic" and exclude items such as restructuring charges, impairment charges, Sun Care
reformulation costs, pension settlement expense, the disposition of the Playtex gloves business and the industrial business, costs
associated with the acquisition and integration of Jack Black, L.L.C. ("Jack Black"), the impact of the Tax Cuts and Jobs Act
(the "Tax Act"), spin costs and amortization of intangibles. Reconciliations of Non-GAAP measures are included within this
Management's Discussion and Analysis of Financial Condition and Results of Operations.
This Non-GAAP information is provided as a supplement to, not as a substitute for, or as superior to, measures of financial
performance prepared in accordance with GAAP. We use this Non-GAAP information internally to make operating decisions
and believe it is helpful to investors because it allows more meaningful period-to-period comparisons of ongoing operating
results. Given the various significant events including the Project Fuel restructuring and acquisitions of Jack Black and Bulldog
Skincare Holdings Limited ("Bulldog"), we view the use of Non-GAAP measures that take into account the impact of these
unique events as particularly valuable in understanding our underlying operational results and providing insights into future
performance.
The information can also be used to perform trend analysis and to better identify operating trends that may otherwise be
masked or distorted by the types of items that are excluded. This Non-GAAP information is a component in determining
management's incentive compensation. Finally, we believe this information provides a higher degree of transparency. The
following provides additional detail on our Non-GAAP measures:
26
• We analyze our net sales and segment profit on an organic basis to better measure the comparability of results between
periods. Organic net sales and organic segment profit exclude the impact of changes in foreign currency, acquisitions
including Bulldog and Jack Black and dispositions including the sale of the Playtex gloves and the industrial business.
Underlying net sales represents organic net sales adjusted for the fiscal 2016 international go-to-market impacts, as
defined below. This information is provided because these types of fluctuations can distort the underlying change in
net sales and segment profit either positively or negatively.
• To compete more effectively as an independent company, we increased our use of third-party distributors and
wholesalers, and decreased or eliminated our business operations in certain countries, consistent with our international
go-to-market strategy. Within this Management's Discussion and Analysis of Financial Condition and Results of
Operations, we discuss go-to-market impacts, which reflect our best estimate on the impact of these international go-
to-market changes and exits, and represent the year-over-year change in those markets. We believe we realized the
majority of the impact from these changes in the fourth quarter of fiscal 2015 and first three quarters of fiscal 2016.
• Adjusted net earnings and adjusted earnings per share are defined as net earnings and diluted earnings per share
excluding items such as restructuring charges, impairment charges, Sun Care reformulation costs, pension settlement
expense, Jack Black integration costs, spin costs, the disposition of the Playtex gloves business and the industrial
business, the related tax effects of these items and the impact of the Tax Act.
• Adjusted effective tax rate is defined as the effective tax rate excluding items such as restructuring charges,
impairment charges, Sun Care reformulation costs, pension settlement expense, Jack Black integration costs, spin
costs, the dispositions of the Playtex gloves business and the industrial business, the related tax effects of these items
and the impact of the Tax Act from the income tax provision and earnings before income taxes.
All comparisons are with the same period in the prior year, unless otherwise noted.
Overview
Edgewell Personal Care Company, and its subsidiaries (collectively, "Edgewell"), 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. We have a
portfolio of over 25 brands and a broad global footprint that operates in more than 50 countries.
We conduct our 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. Our 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 and Jack Black and Bulldog men's
skin care products, as well as Wet Ones wipes and Playtex household gloves until the sale of the gloves business in
October 2017.
• Feminine Care includes tampons, pads and liners sold under the Playtex Gentle Glide and Sport, Stayfree, Carefree
and o.b. brands.
• All Other includes infant care products, such as bottles, cups and pacifiers, sold under the Playtex, OrthoPro and
Binky brand names, as well as the Diaper Genie and Litter Genie disposal systems.
The personal care product categories are highly competitive, both in the United States ("U.S.") and on a global basis, as large
manufacturers with global operations compete for consumer acceptance and, increasingly, limited retail shelf space.
Competition is based upon brand perception, product performance, customer service and price. The markets are generally
characterized by the frequent introduction of new products, accompanied by major advertising and promotional programs. Our
priority is to deliver our strategic objectives, focusing on maximizing sales and profit growth through innovation, product line
extensions and share gains, and we continue to target improved working capital management as a key business objective.
27
Significant Events
Project Fuel
In February 2018, we launched Project Fuel, an enterprise-wide transformational initiative designed to address all aspects of
our business and cost structure. The project will incorporate our existing Zero Based Spending ("ZBS") and global productivity
initiatives and will include a new global restructuring initiative. While we incurred costs for Project Fuel in fiscal 2018, the
majority of costs and savings under Project Fuel are expected to take place during fiscal 2019 through fiscal 2021.
In addition to the expected cost savings and improved profitability, Project Fuel is designed to strengthen our challenger culture
and reinforce our consumer-centric organizational focus. It is also designed to simplify the organization and streamline ways of
working in order to increase competitiveness, speed and agility, and ensure we have the skills, capabilities and investments
needed to compete in a rapidly changing world.
For further information on our restructuring projects, see Note 5 of Notes to Condensed Consolidated Financial Statements.
Goodwill and Intangible Asset Impairment
During the third quarter of fiscal 2018, we determined a triggering event had occurred as a result of a sustained decline in our
market capitalization. We performed an interim impairment analysis using financial information through June 30, 2018 and
forecasts for cash flows developed using our strategic plan. The interim impairment review was performed across all reporting
units and indefinite lived intangible assets and we found the carrying value of the goodwill of our Infant Care reporting unit to
be above its fair value, resulting in a non-cash goodwill impairment charge of $24.4. The impairment of the Infant Care
reporting unit was caused by declining revenue and earnings forecasts and higher discount rates. Higher discount rates were the
result of certain market-based assumptions and company specific risks. Refer to Note 8 of our Notes to Condensed
Consolidated Financial Statements for further discussion on the interim impairment test. We performed an assessment in the
fourth quarter to determine if any significant events or changes in circumstances had occurred that would be considered a
potential triggering event. We did not identify any indication of a triggering event that would indicate the existence of
impairment of the reporting units.
During the fourth quarter of fiscal 2017, we completed our annual impairment testing and found the carrying values of our
Playtex and Edge brand names to be above the fair value, resulting in a non-cash asset impairment charge of $312.0 and $7.0,
respectively. The impairment of the Playtex brand was caused by market share declines due to increased competition affecting
feminine care, skin care and infant care products. The Edge impairment was related to erosion of market share to competing
products. Based on the impairment taken on the Playtex brand in fiscal 2015 and continued competitive pressure on both
brands, these intangible assets were converted to definite-lived assets with a useful life of 20 years. We recorded amortization
expense of $7.2 and $1.8 during fiscal 2018 and 2017, respectively, related to the amortization of the Playtex and Edge brand
names.
During the fourth quarter of fiscal 2016, we completed our annual impairment testing and found the carrying value of our
Skintimate brand name to be above the fair value, resulting in an additional non-cash asset impairment charge of $6.5. The
fiscal 2016 impairment charge was caused by further market share erosion above previous estimates. Based on the impairments
taken in fiscal 2015 and 2016 and continued competitive pressure on this brand, the Skintimate brand name was converted to a
definite-lived asset and assigned a useful life of 20 years. As a result of the conversion, we recorded amortization expense of
$1.5 in fiscal 2018 and 2017 related to the Skintimate brand name.
Sun Care Reformulation Costs
The fourth quarter results of fiscal 2018 include a $25.3 one-time charge to cost of products sold primarily due to costs
associated with the write-off of select sun care product inventories.
As a result of discussions with one of our suppliers during the quarter, we made certain supply chain and procurement
decisions, including implementing a raw material substitution due to anticipated regulatory changes related to Registration,
Evaluation, Authorization, and Restriction of Chemicals ("REACH"), the European chemical control law, that affect the supply
chain of select Sun Care products. To align with our raw material selection process, we chose to make these changes now, well
in advance of next year’s Sun Care season to minimize potential impact to our distribution channels during the peak sales
period. As a result, we recorded charges primarily for the write-off of finished goods inventory for those select products.
28
Acquisitions
On March 1, 2018, we completed the acquisition of Jack Black, a leading U.S. based luxury men's skincare products company
based in the United States, for approximately $90.2, net of cash acquired. The acquisition will create opportunities to expand
our personal care portfolio in growing categories in the U.S. and globally, while nurturing the brand equity of Jack Black. The
results of Jack Black for the post-acquisition period are included within our results since the acquisition date. Refer to Note 4 of
our Notes to Condensed Consolidated Financial Statements for further discussion related to the acquisition of Jack Black.
On October 31, 2016, we completed the acquisition of Bulldog, a men's grooming and skincare products company based in the
U.K. for $34.0, net of cash acquired. The acquisition created opportunities to expand our personal care portfolio into a growing
global category where we can leverage our international geographic footprint. The acquisition was financed through available
foreign cash. The results of Bulldog for the post-acquisition period are included within our results for fiscal 2018 and 2017.
Dispositions
We completed the sale of the Playtex gloves business to a household products company for $19.0 on October 26, 2017. The
sale allows us to better focus and utilize resources on other product lines. Total assets sold were approximately $3.7 resulting in
a pre-tax gain on sale of $15.3.
Discontinued Operations
On July 1, 2015, we completed the separation of our Household Products business into a separate publicly-traded company (the
"Spin" or the "Separation"). The historical results of the Households Products business ("New Energizer") are presented as
discontinued operations. We have focused our discussion in this Management's Discussion and Analysis of Financial Condition
and Results of Operations on our continuing operation, Edgewell. Historical results on a continuing operations basis include
certain costs associated with supporting the Household Products business that were not reported in discontinued operations in
fiscal 2015. These costs affected Selling, general and administrative expense ("SG&A"), interest expense, spin costs,
restructuring charges and income taxes.
Prior to the Separation, we managed our business in two reportable segments: Personal Care and Household Products.
Beginning July 1, 2015, we manage our business in four reportable segments: Wet Shave, Sun and Skin Care, Feminine Care
and All Other. Prior periods have been recast to reflect our current segment reporting.
Our financial statements include incremental costs incurred to evaluate, plan and execute the Separation. Fiscal 2016 included
costs related to the Separation of $11.8 recorded in SG&A and $0.2 recorded in Cost of products sold, respectively.
Executive Summary
Following is a summary of key results for fiscal 2018, 2017 and 2016. Net earnings and diluted earnings per share ("EPS") for
the time periods presented were impacted by restructuring charges, Sun Care reformulation costs, pension settlement expense,
impairment charges, Jack Black integration costs, spin costs, the disposition of the Playtex gloves business and the industrial
business, the related tax effects of these items and the impact of the Tax Act. The impact of these items on reported net earnings
and EPS are provided below as a reconciliation of net earnings and EPS to adjusted net earnings and adjusted diluted EPS,
which are Non-GAAP measures.
29
Fiscal 2018
• Net sales of $2,234.4 decreased 2.8% from fiscal 2018, inclusive of a 0.6% decrease due to the sale of the Playtex
gloves business, a 0.9% increase due to the acquisition of Jack Black and Bulldog and a 1.4% increase due to currency
movements. Excluding the impact of the acquisitions, the sale of the Playtex gloves business and currency
movements, organic net sales decreased 4.5% for fiscal 2018 as compared to the prior year period, as declines in Wet
Shave and Feminine Care were partially offset by growth in Sun and Skin Care.
• Net earnings for fiscal 2018 were $103.3, as compared to $5.7 in the prior year. On an adjusted basis, as illustrated in
the table below, net earnings for fiscal 2018 decreased 16.1% to $191.6. The decline was primarily driven by a lower
Gross margin percentage, partially offset by lower advertising and sales promotion expense ("A&P") compared to the
prior year.
• Net earnings per diluted share during fiscal 2018 were $1.90 compared to $0.10 in the prior year. On an adjusted basis,
as illustrated in the table below, net earnings per diluted share from continuing operations during fiscal 2018 were
$3.52 compared to $3.97 in the prior year.
Fiscal Year
Net Earnings
2017
2018
2016
2018
Diluted EPS
2017
2016
Net Earnings and Diluted EPS - GAAP
$
103.3
$
5.7
$
178.7
$
1.90
$
0.10
$
2.99
Restructuring and related costs (1)
Impairment charges
Sun Care reformulation costs (2)
Gain on sale of Playtex gloves
Pension settlement expense (3)
Jack Black acquisition and integration costs
Spin costs (4)
Industrial sale charges
Income taxes (5)
39.9
24.4
25.3
(15.3)
5.4
5.2
—
—
3.4
30.3
319.0
—
—
—
—
—
—
(126.6)
38.8
6.5
—
—
—
—
12.0
0.2
(22.9)
0.73
0.45
0.46
(0.28)
0.10
0.10
—
—
0.06
0.53
5.55
—
—
—
—
—
—
(2.21)
0.65
0.11
—
—
—
—
0.20
—
(0.38)
Adjusted Net Earnings and Adjusted Diluted EPS -
Non-GAAP
$
191.6
$
228.4
$
213.3
$
3.52
$
3.97
$
3.57
Weighted-average shares outstanding - Diluted
54.5
57.5
59.7
(1)
(2)
Includes pre-tax Selling, general and administrative expense ("SG&A") of $1.4 for fiscal 2018 with certain information technology enablement
expenses for Project Fuel. Includes Cost of products sold of $0.7 and $1.8 for fiscal 2017 and 2016, respectively.
Includes Cost of products sold of $25.3 for fiscal 2018 due to costs associated with the write-off of select sun care product inventories due to a
change of formulas in advance of next year's Sun Care season.
(3) Pension settlement expense was the result of increased lump sum benefit payments in fiscal 2018 from higher employee turnover associated with
(4)
(5)
Project Fuel. The lump sum benefit payments are not expected to be recurring in nature.
Includes SG&A and Cost of products sold of $11.8 and $0.2 for fiscal 2016, respectively.
Includes the impact of the Tax Act totaling $21.3 in Income tax expense for fiscal 2018 in addition to the tax impact of the other adjustments to Net
Earnings and Diluted EPS - GAAP
30
Operating Results
The following table presents changes in net sales for fiscal 2018 and 2017, as compared to the corresponding prior year period,
and provides a reconciliation of organic net sales to reported amounts.
Net Sales
Net Sales - Total Company
For the Years Ended September 30,
Net sales - prior year
Organic
Impact of Playtex gloves sale
Impact of acquisitions
Impact of currency
Net sales - current year
2018
%Chg
2017
%Chg
$
$
2,298.4
(103.7)
(13.8)
20.0
33.5
2,234.4
$
(4.5)%
(0.6)%
0.9 %
1.4 %
(2.8)% $
2,362.0
(65.0)
—
14.6
(13.2)
2,298.4
(2.8)%
— %
0.6 %
(0.5)%
(2.7)%
For fiscal 2018, net sales decreased 2.8% on a reported basis. Excluding the impact of the Jack Black and Bulldog acquisitions,
the Playtex gloves sale and currency movements, organic net sales decreased 4.5% versus the prior year period. North America
organic net sales decreased $91.6 or 6.3%, and International organic net sales declined $12.1, or 1.3%. The decline in organic
net sales was primarily due to declines in Wet Shave, primarily in North America and Asia, and Feminine Care, which more
than offset growth in International Sun and Skin Care.
For fiscal 2017, net sales decreased 2.7% on a reported basis. Excluding the impact of the Bulldog acquisition and currency
movements, organic net sales decreased 2.8% versus the prior year period. North America organic net sales decreased $67.2, or
4.4%, and International organic net sales increased $2.2, or 0.3%. The decline in organic net sales was primarily due to declines
in Wet Shave, primarily in North America and Europe, and Feminine Care, which more than offset growth in global Sun and
Skin Care.
For further discussion regarding net sales, including a summary of reported versus organic changes, see "Segment Results."
Gross Profit
Gross profit was $1,036.8 in fiscal 2018, as compared to $1,130.6 in fiscal 2017. The decrease in gross profit was due to lower
sales volumes in Wet Shave and Feminine Care compared to the prior year, and unfavorable price mix in North American Wet
Shave and Sun Care. Gross margin as a percent of net sales for fiscal 2018 was 46.4%, down 280 basis points as compared to
fiscal 2017. Excluding one time charges related to Sun Care reformulation and the Jack Black acquisition and integration costs,
gross margin as a percent of sales was down 160 basis points compared to fiscal 2017. The decrease in gross margin percentage
was primarily driven by unfavorable price mix in Wet Shave which was impacted by increased coupon and trade promotion
spend, and Sun and Skin Care which was negatively impacted by higher levels of returns and remnant product sales. Lower
sales volumes in Wet Shave and Feminine Care also negatively impacted gross margin percentage.
Gross profit was $1,130.6 in fiscal 2017, as compared to $1,159.9 in fiscal 2016. The decrease in gross profit was due primarily
to lower sales volumes compared to the prior year, partially offset by the positive impact of the Bulldog acquisition. Gross
margin as a percent of net sales for fiscal 2017 was 49.2%, up 10 basis points as compared to fiscal 2016. The increase in gross
margin was primarily driven by favorable price mix and lower promotions and returns in Sun and Skin Care, lower promotions
in Feminine Care and lower commodity costs across all segments, partially offset by higher product costs related to the
consolidation of Feminine Care manufacturing.
31
Selling, General and Administrative Expense
SG&A was $392.2 in fiscal 2018, or 17.6% of net sales, as compared to $390.0 in the prior year period, or 17.0% of net sales.
Excluding $8.8 of SG&A costs associated with the acquisition of Jack Black, $1.4 of information technology enablement
charges for Project Fuel and $4.9 in unfavorable currency translation, SG&A was $377.1, or 16.9% in fiscal 2018. The decrease
in SG&A was primarily driven by lower incentive compensation as well as savings realized from our Zero Based Spending
program.
SG&A was $390.0 in fiscal 2017, or 17.0% of net sales, as compared to $412.7 in the prior year period, or 17.5% of net sales.
Included in SG&A in fiscal 2016 were approximately $11.8 of Spin costs. Excluding these costs, SG&A was $400.9,
or 17.0% of net sales for the prior year period. The decrease in SG&A was primarily driven by lower incentive compensation as
well as savings realized from our Zero Based Spending program, which more than offset increased amortization expense.
Advertising and Sales Promotion Expense
For fiscal 2018, A&P was $293.3, down $25.0 as compared to fiscal 2017. A&P spending as a percent of net sales was 13.1%
for fiscal 2018, compared with 13.8% in fiscal 2017. The decrease was driven by lower Wet Shave spend in the current year in
Men's systems and disposables support in North America. Additionally, Feminine Care A&P spend in North America declined
in fiscal 2018.
For fiscal 2017, A&P was $318.3, or 13.8% of net sales, a decrease from $336.7, or 14.3% of net sales, in fiscal 2016. The
decrease was driven by higher Wet Shave spend in the prior year in support of new product innovation in disposables for
Xtreme 3 as well as lower spending in Feminine Care in fiscal 2017.
Research and Development Expense
Research and development expense ("R&D") was down over the three-year period with spending at $61.1 in fiscal 2018,
compared to $67.6 in fiscal 2017 and $71.9 in fiscal 2016. As a percent of sales, R&D was approximately 2.7% in fiscal 2018,
2.9% in fiscal 2017 and 3.0% in fiscal 2016.
Interest Expense Associated with Debt
Interest expense associated with debt for fiscal 2018 was $68.0, a decrease of $1.2 as compared to fiscal 2017. Interest expense
associated with debt for fiscal 2017 decreased $2.6 as compared to fiscal 2016. The decreases were due to lower average debt
outstanding.
Other Expense (Income), Net
Other expense (income), net was expense of $5.4 in fiscal 2018, income of $10.2 in fiscal 2017 and expense of $3.2 in fiscal
2016. All periods primarily reflect the net impact of foreign currency exchange contract gains and losses and revaluation of
nonfunctional currency balance sheet exposures. Additionally, Other expense (income), net was impacted by an additional $2.5
net loss on sale of trade accounts receivable associated with the uncommitted master accounts receivable purchase agreement
entered into with The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch, as the purchaser on September 15, 2017.
Income Tax Provision (Benefit)
Income taxes, which include federal, state and foreign taxes, were 36.9%, 110.8% and 18.7% of Earnings (loss) from
continuing operations before income taxes in fiscal 2018, 2017 and 2016, respectively.
The effective income tax rate for fiscal 2018 for continuing operations was 36.9% as compared to 110.8% in the prior year. The
fiscal 2018 effective tax rate includes a net charge of $21.3 related to the Tax Act comprised of a $98.9 million one-time
transition tax on foreign earnings, offset by a $77.6 benefit from the re-measurement of U.S. deferred tax assets and liabilities.
Excluding the restructuring charges, impairment charges, Sun Care reformulation costs, pension settlement expense, Jack Black
integration costs, the disposition of the Playtex gloves business and the impact of the Tax Act, the adjusted effective tax rate for
fiscal 2018 was 23.0% compared to 22.9% in the prior year.
32
The effective income tax rate for fiscal 2017 for continuing operations was 110.8% as compared to 18.7% in fiscal 2016. The
effective tax rate for fiscal 2017 was significantly impacted by the pre-tax impairment of intangible assets. The adjusted
effective tax rate for fiscal 2017 was 22.9% compared to 23.1% in the prior year, which excludes the impact of restructuring
charges and asset impairment charges. The following table presents a reconciliation of the adjusted effective tax rate, which is a
Non-GAAP measure:
Earnings (loss) before income taxes
Income tax (benefit) provision
Net earnings
Effective tax rate
Earnings (loss) before income taxes
Income tax (benefit) provision
Net earnings
Effective tax rate
Earnings (loss) before income taxes
Income tax (benefit) provision
Net earnings
Effective tax rate
$
$
$
$
$
$
Reported
163.8
60.5
103.3
36.9%
Reported
(52.9)
(58.6)
5.7
110.8%
Reported
219.9
41.2
178.7
18.7%
2018
Adjustments (1)
84.9
$
(3.4)
88.3
$
Adjusted
(Non-GAAP)
248.7
$
57.1
191.6
$
23.0%
2017
Adjustments (1)
349.3
$
126.6
222.7
$
Adjusted
(Non-GAAP)
296.4
$
68.0
228.4
$
22.9%
2016
Adjustments (1)
57.5
$
22.9
34.6
$
Adjusted
(Non-GAAP)
277.4
$
64.1
213.3
$
23.1%
(1)
Includes adjustments for restructuring charges, impairment charges, Sun Care reformulation costs, pension settlement expense, Jack Black
integration costs, spin costs, the dispositions of the Playtex gloves business and the industrial business, the related tax effects of these items and the
impact of the Tax Act from the income tax provision and earnings before income taxes.
Our effective tax rate is highly sensitive to the mix of countries from which earnings or losses are derived. Declines in earnings
in lower tax rate jurisdictions, earnings increases in higher tax rate jurisdictions, repatriation of foreign earnings or operating
losses in the future could increase future tax rates. Additionally, adjustments to prior year tax provision estimates could increase
or decrease future tax provisions.
Savings Initiatives
The ZBS initiative was established to capture savings and cost-conscious spending policies consistent with our strategic needs.
Net cost savings from our ZBS initiative were approximately $33 million in fiscal 2018. Fiscal 2018 ZBS savings are not
included in total Project Fuel estimated savings, however going forward, the savings associated with the ZBS initiative will be
included in Project Fuel.
Project Fuel is an enterprise-wide transformational initiative, launched in the second fiscal quarter of 2018, designed to address
all aspects of our business and cost structure. The project will incorporate our existing ZBS and global productivity initiatives
and includes a global restructuring initiative.
We now expect Project Fuel will generate $225 to $240 (previously $225) in total annual gross savings by the end of the 2021
fiscal year. It is expected that the savings generated will be used to fuel investments in brand building and strategic growth
initiatives, offset anticipated operational headwinds from inflation and other rising input costs, and improve the overall
profitability and cash flow of our Company.
33
To implement the restructuring element of Project Fuel, our Company now estimates one-time pre-tax charges to be
approximately $130 to $140 (previously $120 to $130), with an additional capital investment of $60 to $70 through the end of
the 2021 fiscal year.
Fiscal fourth quarter 2018 Project Fuel related restructuring charges and capital expenditures were $20.3 and $2.3 respectively,
bringing cumulative charges and capital expenditures to $39.9 and $2.3 respectively for the fiscal year. Fourth quarter Project
Fuel related savings were $8.9, bringing cumulative savings to $15.4 for the fiscal year.
Segment Results
Segment performance is evaluated based on segment profit, exclusive of general corporate expenses, share-based compensation
costs, costs associated with restructuring initiatives, Sun care reformulation costs, Jack Black acquisition and integration costs,
the sale of the Playtex glove business, 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.
Our operating model includes some shared business functions across the segments, including product warehousing and
distribution, transaction processing functions, and in most cases a combined sales force and management teams. We apply a
fully allocated cost basis, in which shared business functions are allocated between the segments on a percentage of net sales
basis. Such allocations are estimates, and do not represent the costs of such services if performed on a stand-alone basis.
The following tables present changes in segment net sales and segment profit for fiscal 2018 and 2017, as compared to the
corresponding prior year periods, and also provide a reconciliation of organic segment net sales and organic segment profit to
reported amounts. For a reconciliation of segment profit to Earnings before income taxes, see Note 18 of Notes to Consolidated
Financial Statements.
Wet Shave
Net Sales - Wet Shave
For the Years Ended September 30,
Net sales - prior year
Organic
Impact of currency
Net sales - current year
2018
%Chg
2017
%Chg
$
$
1,375.3
(73.5)
28.3
1,330.1
$
(5.3)%
2.0 %
(3.3)% $
1,425.8
(39.2)
(11.3)
1,375.3
(2.7)%
(0.8)%
(3.5)%
Wet Shave net sales for fiscal 2018 decreased 3.3%, inclusive of a 2.0% increase due to currency movements. Excluding the
impact of currency movements, organic net sales decreased $73.5, or 5.3%, primarily driven by volume declines in all markets
and unfavorable price mix in North America. Volume declines in Men's Systems primarily occurred in North America and Asia
Pacific. North America declines were the result of lost distribution while Asia Pacific declines were mainly from wholesaler
inventory level adjustments. Women's Systems had volume growth associated with the current year launch of Intuition f.a.b.
Disposables were down primarily in North America across all brands as a result of the anniversary of the Quattro You launch in
the prior year. The North America Wet Shave category continued to be disrupted with increased competitive activity and
unprecedented levels of pricing and promotional pressure since the second quarter of fiscal 2017. Shaving gels and creams
experienced competitive pressure and consumption declines.
Wet Shave net sales for fiscal 2017 decreased 3.5%, inclusive of a 0.8% decline due to currency movements. Excluding the
impact of currency movements, organic net sales decreased $39.2, or 2.7%, primarily driven by volume declines. Volume
declines in North America were driven by all categories of Wet Shave. International Wet Shave experienced declines primarily
related to higher prior year promotional activity and competitive pressure and category softness primarily in Europe. Shaving
gels and creams experienced competitive pressure, distribution losses and discontinuations globally.
34
Segment Profit - Wet Shave
For the Years Ended September 30,
Segment profit - prior year
Organic
Impact of currency
Segment profit - current year
2018
%Chg
2017
%Chg
$
$
294.9
(32.4)
6.6
269.1
$
(11.0)%
2.3 %
(8.7)% $
290.2
8.3
(3.6)
294.9
2.9 %
(1.3)%
1.6 %
Wet Shave segment profit for fiscal 2018 was $269.1, down $25.8 or 8.7%, inclusive of the impact of currency movements.
Excluding the impact of currency movements, organic segment profit decreased $32.4, or 11.0%. The decline in segment profit
is the result of lower gross margins that were affected by declining sales volumes and unfavorable price mix primarily from
higher trade spend and coupons. The decline in gross margin was offset by overall reduction in spend primarily in A&P and
other overhead costs.
Wet Shave segment profit for fiscal 2017 was $294.9, up $4.7 or 1.6%, inclusive of the impact of currency movements.
Excluding the impact of currency movements, organic segment profit increased $8.3, or 2.9%, primarily due to improved
operational efficiencies, lower commodity costs and decreased A&P spend, partially offset by lower organic net sales.
Sun and Skin Care
Net Sales - Sun and Skin Care
For the Years Ended September 30,
Net sales - prior year
Organic
Impact of Playtex gloves sale
Impact of acquisitions
Impact of currency
Net sales - current year
2018
%Chg
2017
%Chg
$
$
440.4
(0.9)
(13.8)
20.0
4.0
449.7
$
(0.2)%
(3.1)%
4.5 %
0.9 %
2.1 % $
414.9
13.2
—
14.6
(2.3)
440.4
3.2 %
— %
3.5 %
(0.6)%
6.1 %
Sun and Skin Care net sales for fiscal 2018 increased 2.1%, inclusive of a 4.5% increase from acquisitions, a 3.1% decline from
the sale of the Playtex gloves business and a 0.9% increase due to currency movements. Excluding the impact of acquisitions,
dispositions and currency movements, organic net sales decreased $0.9, or 0.2%, with strong performance by Bulldog, Wet
Ones and Banana Boat offset by declines in Hawaiian Tropic and the exit of the private label business. Volumes increased in
North America, Asia Pacific and Europe. Unfavorable price mix more than offset the increased volumes primarily in North
America as a result of remnant sales from the prior season, higher trade spend and unfavorable returns compared to the prior
year.
Sun and Skin Care net sales for fiscal 2017 increased 6.1%, inclusive of a 3.5% increase related to the acquisition of Bulldog
and a 3.5% decline due to currency movements. Excluding the impact of the Bulldog acquisition and currency movements,
organic segment net sales increased $13.2, or 3.2%, with strong performance by Banana Boat and Hawaiian Tropic products
globally, driven by higher volumes, lower returns and favorable price mix, partially offset by a $8.2 decline related to exiting
the private label sun care business.
35
Segment Profit - Sun and Skin Care
For the Years Ended September 30,
Segment profit - prior year
Organic
Impact of Playtex gloves sale
Impact of acquisitions
Impact of currency
Segment profit - current year
2018
%Chg
2017
%Chg
$
$
98.8
(16.7)
(1.3)
(0.6)
0.5
80.7
$
(16.9)%
(1.3)%
(0.6)%
0.5 %
(18.3)% $
89.5
10.2
—
0.3
(1.2)
98.8
11.4 %
— %
0.3 %
(1.3)%
10.4 %
Sun and Skin Care segment profit for fiscal 2018 was $80.7, a decrease of $18.1 or 18.3%, inclusive of the impact of the
acquisitions of Jack Black and Bulldog, the sale of the Playtex gloves business and unfavorable currency movements.
Excluding the impact of the acquisitions, the sale of the Playtex gloves business and currency movements, organic segment
profit decreased $16.7, or 16.9%. The decrease in segment profit was driven by unfavorable price mix from higher returns and
sell-off of remnant inventory from the prior season. Sun and Skin Care also had unfavorable cost mix from unfavorable
materials pricing and higher warehouse and distribution expense. A&P spend was higher in the current year to support Bulldog
expansion and overheads increased from the acquisition of Jack Black.
Sun and Skin Care segment profit for fiscal 2017 was $98.8, an increase of $9.3 or 10.4%, inclusive of the impact of the
acquisition of Bulldog and unfavorable currency movements. Excluding the impact of the Bulldog acquisition and currency
movements, organic segment profit increased $10.2, or 11.4%, driven primarily by higher volumes, lower returns and favorable
price mix, as well as favorable material costs and increased operational efficiencies, which were partially offset by increased
A&P spend.
Feminine Care
Net Sales - Feminine Care
For the Years Ended September 30,
Net sales - prior year
Organic
Impact of currency
Net sales - current year
2018
%Chg
2017
%Chg
$
$
351.6
(22.7)
0.6
329.5
$
(6.5)%
0.2 %
(6.3)% $
388.9
(37.6)
0.3
351.6
(9.7)%
0.1 %
(9.6)%
Feminine Care net sales for fiscal 2018 decreased $22.1, or 6.3%, inclusive of a 0.2% increase due to currency movements.
Excluding the impact of currency movements, organic segment net sales decreased $22.7, or 6.5%, driven by volume declines
across Gentle Glide and Sport branded tampons and Stayfree pads partially offset by growth in Carefree liners. The volume
declines were primarily related to heightened competitive pressure in the category.
Feminine Care net sales for fiscal 2017 decreased $37.3, or 9.6%, inclusive of a 0.1% increase due to currency movements.
Excluding the impact of currency movements, organic segment net sales decreased $37.6, or 9.7%, driven by volume declines
across Gentle Glide, Stayfree, Carefree and Sport branded tampons, pads and liners related to distribution losses and
heightened competitive pressure, partially offset by lower promotional spend in the current year period.
Segment Profit - Feminine Care
For the Years Ended September 30,
Segment profit - prior year
Organic
Impact of currency
Segment profit - current year
2018
%Chg
2017
%Chg
$
$
28.9
8.7
0.4
38.0
$
30.1%
1.4%
31.5% $
39.1
(10.2)
—
28.9
(26.1)%
— %
(26.1)%
Feminine Care segment profit for fiscal 2018 was $38.0, an increase of $9.1, or 31.5%, inclusive of currency impacts. The
increase in segment profit is primarily the result of lower A&P spend and decreased overheads in the segment related to the
shift of manufacturing operations from Montreal, Canada to Dover, Delaware.
36
Feminine Care segment profit for fiscal 2017 was $28.9, a decrease of $10.2, or 26.1%, primarily due to volume declines and
transition costs related to the shift of manufacturing from Montreal, Canada to Dover, Delaware, partially offset by favorable
material costs.
All Other
Net Sales - All Other
For the Years Ended September 30,
Net sales - prior year
Organic
Impact of currency
Net sales - current year
2018
%Chg
2017
%Chg
$
$
131.1
(6.6)
0.6
125.1
$
(5.0)%
0.4 %
(4.6)% $
132.4
(1.4)
0.1
131.1
(1.1)%
0.1 %
(1.0)%
All Other net sales for fiscal 2018 decreased 4.6%, inclusive of a 0.4% increase due to the impact of currency movements.
Excluding the impact of currency movements, organic net sales decreased $6.6, or 5.0%, as a result of volume declines in
Diaper Genie and infant cups and bottles from lost distribution, partially offset by growth in pet care products.
All Other net sales for fiscal 2017 decreased 1.0%, inclusive of a 0.1% increase due to the impact of currency
movements. Excluding the impact of currency movements, organic net sales decreased $1.4, or 1.1%, as a result of volume
declines in infant cups and bottles, partially offset by growth in Diaper Genie and pet care products.
Segment Profit - All Other
For the Years Ended September 30,
Segment profit - prior year
Organic
Impact of currency
Segment profit - current year
2018
%Chg
2017
%Chg
$
$
26.6
(7.2)
0.4
19.8
$
(27.1)%
1.5 %
(25.6)% $
28.4
(1.9)
0.1
26.6
(6.7)%
0.4 %
(6.3)%
All Other segment profit for fiscal 2018 was $19.8, a decrease of $6.8 or 25.6%, inclusive of the impact of currency
movements. Excluding the impact of currency movements, segment profit decreased $7.2, or 27.1%, primarily due to
unfavorable cost mix driven by higher materials and warehouse and distribution costs.
All Other segment profit for fiscal 2017 was $26.6, a decrease of $1.8 or 6.3%, inclusive of the impact of currency movements.
Excluding the impact of currency movements, segment profit decreased $1.9, or 6.7%, as lower spending and favorable price
mix were more than offset by unfavorable product costs.
37
General Corporate and Other Expenses
Corporate expenses
Restructuring and related costs (1)
Impairment charges
Sun Care reformulation costs (2)
Gain on sale of Playtex gloves business
Pension settlement expense (3)
Jack Black integration costs
Spin costs (4)
Industrial business sale charges
General corporate and other expenses
% of net sales
2018
Fiscal Year
2017
2016
$
$
$
$
67.8
39.9
24.4
25.3
(15.3)
5.4
5.2
—
—
152.7
6.8%
$
$
76.0
30.3
319.0
—
—
—
—
—
—
425.3
18.5%
80.4
38.8
6.5
—
—
—
—
12.0
0.2
137.9
5.8%
(1)
(2)
Includes SG&A of $1.4 for fiscal 2018 and Cost of products sold of $0.7 and $1.8 for fiscal 2017 and 2016, respectively.
Includes Cost of products sold of $25.3 for fiscal 2018 due to costs associated with the write-off of select sun care product inventories due to a
change of formulas in advance of next year's Sun Care season.
(3) Pension settlement expense was the result of increased lump sum benefit payments in fiscal 2018 from higher employee turnover associated with
Project Fuel. The lump sum benefit payments are not expected to be recurring in nature.
(4)
Includes SG&A and Cost of products sold of $11.8 and $0.2 for fiscal 2016, respectively.
General Corporate and Other Expenses
For fiscal 2018, general corporate expenses were $67.8, a decrease of $8.2 as compared to fiscal 2017. Fiscal 2017 general
corporate expenses decreased $4.4 when compared to fiscal 2016. The decline in general corporate expenses relates to lower
share-based and incentive compensation expense and savings realized from our ZBS program.
Liquidity and Capital Resources
At September 30, 2018, substantially all of our cash balances were located outside the U.S. Given our extensive international
operations, a significant portion of our cash is denominated in foreign currencies. We manage our worldwide cash requirements
by reviewing available funds among the many subsidiaries through which we conduct business and the cost effectiveness with
which those funds can be accessed. We generally repatriate a portion of current year earnings from select non-U.S. subsidiaries
only if the economic cost of the repatriation is not considered material.
The counterparties to deposits consist of a number of major financial institutions. We consistently monitor positions with, and
credit ratings of, counterparties both internally and by using outside ratings agencies.
Our total borrowings were $1,296.9 at September 30, 2018, including $192.0 tied to variable interest rates. Our total
borrowings at September 30, 2017 were $1,544.8.
As of September 30, 2018, we had outstanding borrowings of $7.0 under our unsecured revolving credit facility in the U.S. (the
"Revolving Facility") and $8.0 of outstanding letters of credit. Taking into account outstanding borrowings and outstanding
letters of credit at September 30, 2018, $710.0 remains available under the Revolving Facility. As of September 30, 2018 and
2017, we had $185.0 outstanding under a term loan classified as a current liability. We have the ability and intent to refinance
the term loan prior to its maturity date.
We had outstanding international borrowings, recorded within Notes payable, of $8.2 and $19.4 as of September 30, 2018 and
September 30, 2017, respectively.
In fiscal 2019, we expect our total capital expenditures to be in the range of $85 to $95 primarily related to maintenance of
manufacturing facilities, new products and information technology system enhancements. While we intend to fund these capital
expenditures with cash generated from operations, we may also utilize our borrowing facilities.
During fiscal 2018, we contributed $7.8 to our pension plans. The expected minimum required contribution to our pension
plans in fiscal 2019 is $7.3; however, discretionary contributions may be made.
38
Debt Covenants
The credit agreements governing our outstanding debt at September 30, 2018 contain certain customary representations and
warranties, financial covenants, covenants restricting our ability to take certain actions, affirmative covenants and provisions
relating to events of default. Under the terms of our credit agreements, the ratio of our indebtedness to our earnings before
interest, taxes, depreciation and amortization ("EBITDA"), as defined in the agreement and detailed below, cannot be greater
than 4.0 to 1, and may not remain above 3.5 to 1 for more than four consecutive quarters. In addition, under the credit
agreements, the ratio of our current year earnings before interest and taxes ("EBIT"), as defined in the agreements, to total
interest expense must exceed 3.0 to 1. 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. EBIT is calculated similarly to EBITDA except that
depreciation and amortization are not "added-back." Total interest expense is calculated in accordance with GAAP. If we fail 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 our facilities would trigger cross defaults on our other borrowings.
As of September 30, 2018, we were in compliance with the provisions and covenants associated with these debt agreements.
Cash Flows
A summary of our cash flow from operating, investing and financing activities is provided in the following table:
Net cash from (used by):
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes on cash
Net (decrease) increase in cash and cash equivalents
Operating Activities
2018
Fiscal Year
2017
2016
$
$
$
264.7
(128.5)
(375.2)
2.5
(236.5) $
$
313.6
(84.6)
(478.0)
13.0
(236.0) $
186.8
(69.5)
(93.4)
2.9
26.8
Cash flow from operating activities was $264.7 in fiscal 2018, as compared to $313.6 in fiscal 2017. The decline in operating
cash flows of $48.9 was primarily driven by the benefit received in fiscal 2017 for entering into the Accounts Receivable
Facility, resulting in an acceleration of cash collections from accounts receivable in the prior year. The change in accounts
receivable in the current year was flat as we continued to operate the Accounts Receivable Facility. This impact was partially
offset by other changes in working capital.
Cash flow from operating activities was $313.6 in fiscal 2017, as compared to $186.8 in fiscal 2016. The improvement is
primarily reflective of the discretionary funding of certain international defined benefit plans of $100.5 during fiscal 2016 and
higher fiscal 2017 adjusted net earnings, partially offset by a $17.7 increase in deferred compensation payments.
Investing Activities
Cash flow used by investing activities was $128.5 in fiscal 2018 as compared to $84.6 in the prior fiscal year. The change was
primarily due to the $90.2 acquisition of Jack Black in the second quarter of fiscal 2018, slightly offset by the $19.0 sale of the
Playtex gloves business in the first quarter of fiscal 2018. In the prior year we purchased Bulldog for $34.0. Capital
expenditures were $62.0 during fiscal 2018 and $69.0 during the prior year.
Cash flow used by investing activities was $84.6 in fiscal 2017 as compared to $69.5 in fiscal 2016. The increase was primarily
due to the $34.0 acquisition of Bulldog in fiscal 2017, partially offset by proceeds from the sale of assets. Capital expenditures
were $69.0 during fiscal 2017 and $69.5 during the prior fiscal year.
39
Financing Activities
Net cash used by financing activities was $375.2 in fiscal 2018 as compared to $478.0 in fiscal 2017. The $102.8 decrease in
net cash used by financing activities was driven by greater repayments on the Revolving Facility in fiscal 2017. We had $7.0
drawn on the Revolving Facility as of September 30, 2018. Additionally, we repurchased $124.4 in common shares in fiscal
2018 compared to $165.4 in fiscal 2017.
Net cash used by financing activities was $478.0 in fiscal 2017 as compared to $93.4 in fiscal 2016. The $377.6 increase in net
cash used by financing activities was driven by the repayment of the Credit Agreement by and among Edgewell Personal Care
Netherlands B.V., as borrower, our Company, and The Bank of Tokyo-Mitsubishi UFJ, Ltd., as Administrative Agent
for $277.0 in fiscal 2017 and a $132.2 reduction in net borrowings on other debt instruments, partially offset by a decrease in
the repurchase of common shares of $31.2.
Dividends
We did not declare or pay any cash dividends during fiscal 2018, and we do not currently intend to pay dividends in the
foreseeable future. Any future dividends are dependent on future earnings, capital requirements and our financial condition, and
will be declared at the sole discretion of our Board. See "We do not expect to pay dividends for the foreseeable future" in Item
1A. Risk Factors.
Share Repurchases
In January 2018, our Board approved an authorization to repurchase up to 10.0 shares of our common stock. This authorization
replaced a prior share repurchase authorization from May 2015. During fiscal 2018, we repurchased 2.1 shares of our common
stock for $124.4, all of which were purchased under the May 2015 authorization. We have 10.0 shares remaining under the
January 2018 Board authorization to repurchase our 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 we deem
appropriate based upon prevailing market conditions, business needs and other factors. See "There can be no guarantee that we
will repurchase stock" in Item 1A. Risk Factors.
During fiscal 2018, 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 restricted stock equivalent awards.
Inflation
Management recognizes that inflationary pressures may have an adverse effect on our company through higher material, labor
and transportation costs, asset replacement costs and related depreciation, and healthcare and other costs. In general, we have
been able to offset or minimize inflation effects through a variety of methods including pricing actions, cost reductions and
productivity improvements. We can provide no assurance that such mitigation will be available in the future.
Seasonality
Customer orders for sun care products within our Sun and Skin Care segment are highly seasonal. This has historically resulted
in higher sun care sales to retailers during the late winter through mid-summer months. Within our Wet Shave segment, sales of
women's products are moderately seasonal, with increased consumer demand in the spring and summer months. See "Our
business is subject to seasonal volatility" in Item 1A. Risk Factors.
Foreign Currency
Certain net sales and costs of our international operations are denominated in the local currency of the respective countries. As
such, sales and profits from these subsidiaries may be impacted by fluctuations in the value of these local currencies relative to
the U.S. dollar. We also have significant intercompany financing arrangements that may result in gains and losses in our results
of operations. In an effort to mitigate the impact of currency exchange rate effects, we may hedge certain operational and
intercompany transactions; however, our hedging strategies may not fully offset gains and losses recognized in our results of
operations.
40
On June 23, 2016, the U.K. held a referendum in which voters approved an exit from the European Union (the "E.U."),
commonly referred to as "Brexit," and on March 29, 2017, the U.K. began the process to withdraw from the E.U. Volatility in
exchange rates is expected to continue as the U.K. negotiates its exit from the E.U. Historically, our hedging strategy has
included hedging a portion of our exposure to the British Pound, thereby reducing our currency risk. We routinely monitor and
evaluate this strategy based on risk, and will adjust as necessary to minimize exposure to fluctuations in exchange rates related
to our U.K. operations. A weaker British Pound as compared to the U.S. dollar during a reporting period causes the local
currency results of our U.K. operations to be translated into fewer U.S. dollars. For fiscal 2017, net sales of our U.K. operations
were 4% of our consolidated net sales. Future impacts on our U.K. operations and financial results will depend, in part, on the
outcome of tariff, trade, regulatory and other negotiations. See "Our financial results could be adversely impacted by the U.K.'s
departure from the E.U." in Item 1A. Risk Factors.
Commitments and Contingencies
Contractual Obligations
A summary of our significant contractual obligations at September 30, 2018 is shown below:
Total
Less than 1
year
1-3 years
3-5 years
More than 5
years
Long-term debt, including current maturities
Interest on long-term debt
Notes payable
Minimum pension funding (1)
Operating leases
Purchase obligations and other (2) (3)
Total
$
$
1,292.0
185.5
8.2
41.6
56.2
75.6
1,659.1
$
$
185.0
57.3
8.2
7.3
15.0
31.7
304.5
$
$
7.0
104.7
—
14.2
20.6
21.2
167.7
$
$
1,100.0
23.5
—
20.1
12.8
13.2
1,169.6
$
$
—
—
—
—
7.8
9.5
17.3
(1) Globally, our total pension contributions in the next 12 months are estimated to be approximately $7.3. U.S. pension plans constitute 69% of the
plan assets for our pension plans. The estimates beyond fiscal 2019 represent future pension payments to comply with local funding requirements in
the U.S. only. The projected payments beyond fiscal 2023 are not currently determinable.
(2)
(3)
Included in the table above are approximately $50.8 of fixed costs related to third-party logistics contracts.
Included in the table above are approximately $6.3 of deferred compensation payments to retirees.
Purchase obligations set forth in the table above represent contractual obligations that generally have longer terms and are non-
routine in nature. We are also party to various service and supply contracts that generally extend one to three months. These
arrangements are primarily individual, short-term purchase orders for routine goods and services at market prices, which are
part of our normal operations and are reflected in historical operating cash flow trends. These contracts can generally be
canceled at our option at any time. We do not believe such arrangements will adversely affect our liquidity position. In addition,
we have various commitments related to service and supply contracts that contain penalty provisions for early termination.
Because of the short period between order and shipment date (generally less than one month) for most of our orders, the dollar
amount of current backlog is not material and is not considered to be a reliable indicator of future sales volume. Generally,
sales to our top customers are made pursuant to purchase orders and we do not have supply agreements or guarantees of
minimum purchases from them. As a result, these customers may cancel their purchase orders or reschedule or decrease their
level of purchases from us at any time. As of September 30, 2018, we do not believe such purchase arrangements or
termination penalties will have a significant effect on our results of operations, financial position or liquidity position in the
future. As such, these arrangements have been excluded from the table above.
41
Environmental Matters
Our operations, like those of other companies, are subject to various federal, state, foreign and local laws and regulations
intended to protect public health and the environment. These regulations relate primarily to worker safety, air and water quality,
underground fuel storage tanks and waste handling and disposal. Accrued environmental costs at September 30, 2018 were
$10.3. It is difficult to quantify with certainty the cost of environmental matters, particularly remediation and future capital
expenditures for environmental control equipment. Total environmental capital expenditures and operating expenses are not
expected to have a material effect on our total capital and operating expenditures, consolidated earnings or competitive
position. However, current environmental spending estimates could be modified as a result of changes in our plans or our
understanding of underlying facts, changes in legal requirements, including any requirements related to global climate change,
or other factors.
Legal and Other Contingencies
We, and our affiliates, are subject to a number of legal proceedings in various jurisdictions arising out of our 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. We review our legal proceedings and claims, regulatory reviews and inspections and other legal
proceedings on an ongoing basis and follow appropriate accounting guidance when making accrual and disclosure decisions.
We establish accruals for those contingencies when the incurrence of a loss is probable and can be reasonably estimated, and
disclose the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued, if such disclosure is
necessary for our financial statements to not be misleading. We do 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, we believe that our
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 our financial position, results of operations or cash flows, taking
into account established accruals for estimated liabilities.
Critical Accounting Policies
The methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the
results we report in our consolidated financial statements. Specific areas, among others, requiring the application of
management's estimates and judgment include assumptions pertaining to accruals for consumer and trade-promotion programs,
pension and postretirement benefit costs, share-based compensation, future cash flows associated with impairment testing of
goodwill and other long-lived assets, uncertain tax positions, the reinvestment of undistributed foreign earnings and tax
valuation allowances. On an ongoing basis, we evaluate our estimates, but actual results could differ materially from those
estimates.
Our most critical accounting policies are revenue recognition, pension and other postretirement benefits, the valuation of long-
lived assets (including property, plant and equipment), income taxes (including uncertain tax positions) and the carrying value
of intangible assets (and the related impairment testing of goodwill and other indefinite-lived intangible assets). A summary of
our significant accounting policies is contained in Note 2 of Notes to Consolidated Financial Statements. This listing is not
intended to be a comprehensive list of all of our accounting policies.
Revenue Recognition
We derive revenues from the sale of our products. Revenue is recognized when title, ownership and risk of loss pass to the
customer. When discounts are offered to customers for early payment, an estimate of the discounts is recorded as a reduction of
net sales in the same period as the sale. Standard sales terms are final and, except for seasonal sun care returns which are
discussed in detail in the next paragraph, returns or exchanges are not permitted unless a special exception is made. Reserves
are established and recorded in cases where the right of return exists for a particular sale.
42
Under certain circumstances, we allow 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. We record 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 us; and
collection is reasonably assured. Simultaneous with the sale, we reduce sales and cost of sales, and reserve amounts on the
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. We generally receive returns
of U.S. sun care products from September through January following the summer sun care season. We estimate 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. We
monitor shipment activity and inventory levels at key retailers during the season to more accurately estimate potential returns.
This allows us to manage shipment activity to our customers, especially in the latter stages of the sun care season, to reduce the
potential for returned product. The level of returns may fluctuate from our estimates due to several factors including weather
conditions, customer inventory levels and competitive activity. Based on our fiscal 2018 sun care shipments, each percentage
point change in our returns rate would have impacted our reported net sales by $3.0 and our reported operating income by $2.8.
At September 30, 2018 and 2017, our reserve on the Consolidated Balance Sheet for returns was $58.6 and $53.3, respectively.
We offer a variety of programs, primarily to our retail customers, designed to promote sales of our products. Such programs
require periodic payments and allowances based on estimated results of specific programs and are recorded as a reduction to
net sales. We accrue, at the time of sale, the estimated total payments and allowances associated with each transaction.
Additionally, we offer programs directly to consumers to promote the sale of our 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, generally using
estimated redemption and participation levels. Taxes we collect on behalf of governmental authorities, which are generally
included in the price to the customer, are also recorded as a reduction of net sales.
We continually assess 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 to annual results.
Pension Plans and Other Postretirement Benefits
The determination of our obligation and expense for pension and other postretirement benefits is dependent on certain
assumptions developed by us and used by actuaries in calculating such amounts. Assumptions include, among others, the
discount rate, the expected long-term rate of return on plan assets, and future salary increases, where applicable. Actual results
that differ from assumptions made are recognized on the balance sheet and subsequently amortized to earnings over future
periods. Significant differences in actual experience or significant changes in macroeconomic conditions resulting in changes to
assumptions may materially affect pension and other postretirement obligations. In determining the discount rate, we use the
yield on high-quality bonds that coincide with the cash flows of our plans' estimated payouts. For the U.S. plans, which
represent our most significant obligations, we consider the Mercer yield curve in determining the discount rates.
In fiscal 2017, we changed the methodology used to estimate the service and interest components of net periodic benefit cost
for our pension benefits, which resulted in a decrease in the service and interest components in fiscal 2017. We believe that the
spot discount rate approach, which applies the specific spot rates along the yield curve used in the determination of the benefit
obligation to the relevant projected cash flows, is a more precise application of the yield curve spot rates used in the traditional
single discount rate approach. This change in methodology does not affect the measurement of our total benefit obligations but
did cause an approximate $4.0 decline in our annual net periodic benefit cost in fiscal 2017. This change was accounted for
prospectively as a change in accounting estimate.
Of the assumptions listed above, changes in the expected long-term rate of return on plan assets and changes in the discount
rate used in developing plan obligations will likely have the most significant impact on our annual earnings, prospectively.
Based on plan assets at September 30, 2018, a one percentage point decrease or increase in expected asset returns would
increase or decrease our pension expense by approximately $4.9. In addition, it may increase and accelerate the rate of required
pension contributions in the future. Uncertainty related to economic markets and the availability of credit may produce changes
in the yields on corporate bonds rated as high-quality. As a result, discount rates based on high-quality corporate bonds may
increase or decrease, leading to lower or higher, respectively, pension obligations. A one percentage point decrease in the
discount rate would increase pension obligations by approximately $71.6 at September 30, 2018.
As allowed under GAAP, our U.S. qualified pension plan uses Market Related Value, which recognizes market appreciation or
depreciation in the portfolio over five years, thereby reducing the short-term impact of market fluctuations.
43
We have historically provided defined benefit pension plans to our eligible employees, former employees and retirees. We fund
our pension plans in compliance with the Employee Retirement Income Security Act of 1974 or local funding requirements.
Further detail on our pension and other postretirement benefit plans is included in Note 12 of Notes to Consolidated Financial
Statements.
Share-Based Compensation
We grant restricted stock equivalents ("RSE") awards, which generally vest over two to four years. A portion of the RSE
awards granted may provide for the issuance of common stock to certain managerial staff and executive management if
specified performance targets are achieved. The fair value of each grant issued is estimated on the date of grant based on the
current market price of the shares. 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 goals will be achieved. If such goals 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. If it is determined that the performance goals 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. We calculate 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 our consolidated financial statements, including the expected term, expected stock price
volatility, risk-free interest rate and expected dividends. 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.
Valuation of Long-Lived Assets
We periodically evaluate our long-lived assets, including property, plant and equipment, goodwill and intangible assets, for
potential impairment indicators. Judgments regarding the existence of impairment indicators, including lower than expected
cash flows from acquired businesses, are based on legal factors, market conditions and operational performance. Future events
could cause us to conclude that impairment indicators exist. We estimate fair value using valuation techniques such as
discounted cash flows. This requires management to make assumptions regarding future income, working capital and discount
rates, which would affect the impairment calculation. See the discussion on "Acquisitions, Goodwill and Intangible Assets"
included later in this section for further information, including information on the non-cash impairment charges taken during
fiscal 2018, 2017 and 2016.
In November 2012, our Board authorized an enterprise-wide restructuring plan. In January 2014, our Board authorized an
expansion of the scope of the previously announced restructuring project. We recorded accelerated depreciation of $1.8 and
$3.9 for fiscal 2017 and 2016, respectively, related primarily to certain manufacturing assets including property, plant and
equipment located at facilities to be closed or streamlined as part of our restructuring initiatives. See Note 5 of Notes to
Consolidated Financial Statements for further details.
Income Taxes
Our annual effective income tax rate is determined based on our 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 to be included in the tax return
at different times than the items reflected in the financial statements. Some of these differences are permanent, such as expenses
that are not deductible in our 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 we have already recorded the tax benefit in our income statement. Deferred tax liabilities generally represent tax expense
recognized in our financial statements for which payment has been deferred, the tax effect of expenditures for which a
deduction has already been taken in our tax return but has not yet been recognized in our financial statements or assets recorded
at estimated fair value in business combinations for which there was no corresponding tax basis adjustment.
44
We generally repatriate a portion of current year earnings from select non-US subsidiaries only if the economic cost of the
repatriation is not considered material. The Securities and Exchange Commission has issued rules under Staff Accounting
Bulletin 118 that would allow for a measurement period of up to one year after the enactment date of the Tax Act to finalize the
recording of the related tax impacts. As such, our reassessment of permanently reinvested foreign earnings remains provisional
as of September 30, 2018. See Note 6 of Notes to Consolidated Financial Statements for further discussion.
We estimate income taxes and the effective income tax rate in each jurisdiction that we operate. 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.
We operate in multiple jurisdictions with complex tax and regulatory environments, which are subject to differing
interpretations by the taxpayer and the taxing authorities. At times, we may take positions that management believes are
supportable, but are potentially subject to successful challenges by the appropriate taxing authority. We evaluate our tax
positions and establish liabilities in accordance with guidance governing accounting for uncertainty in income taxes. We review
these tax uncertainties in light of the changing facts and circumstances, such as the progress of tax audits, and adjust them
accordingly.
Acquisitions, Goodwill and Intangible Assets
We allocate the cost of an acquired business to the assets acquired and liabilities assumed based on their estimated fair values at
the date of acquisition. The excess value of the cost of an acquired business over the estimated fair value of the assets acquired
and liabilities assumed is recognized as goodwill. The valuation of the acquired assets and liabilities will impact the
determination of future operating results, as we recognize amortization expense on definite-lived intangible assets. We use a
variety of information sources to determine the value of acquired assets and liabilities including: third-party appraisers for the
values and lives of property, identifiable intangibles and inventories; actuaries for defined benefit retirement plans; and legal
counsel or other experts to assess the obligations associated with legal, environmental or other claims. The recorded value of
goodwill and intangible assets from recently acquired businesses are derived from more recent business operating plans and
macroeconomic environmental conditions and, therefore, are likely more susceptible to an adverse change that could require an
impairment charge. As such, significant judgment is required in estimating the fair value of goodwill and intangible assets.
Additionally, judgment is needed when assigning a useful life to intangible assets.
During the third quarter of fiscal 2018, we determined a triggering event had occurred as a result of a sustained decline in our
market capitalization. We performed an interim test of impairment of the goodwill on each of our reporting units - Wet Shave,
Sun Care, Skin Care, Feminine Care, Infant Care and All Other. As part of the interim goodwill impairment test we estimated
the fair value of each reporting unit using both market and income approaches of valuation. The income approach utilizes the
discounted cash flow method and incorporates significant estimates and assumptions, including long-term projections of future
cash flows, market conditions, and discount rates reflecting the risk inherent in future cash flows. The projections for future
cash flows are generated using our company’s strategic plan to determine a five-year period of forecasted cash flows and
operating data. The market approach uses the guideline public company method to calculate the value of each reporting unit
based on the operating data of similar assets from competing publicly traded companies. Multiples derived from guideline
companies provide an indication of how much a knowledgeable investor in the marketplace would be willing to pay for a
company. The multiples are adjusted given the specific characteristics of the reporting unit including its position in the market
relative to the guideline companies and applied to the reporting unit’s operating data to arrive at an indication of value. The
income and market approaches are weighted based on circumstances specific to each reporting unit and combined are used to
calculate fair value. We performed an assessment in the fourth quarter to determine if any significant events or changes in
circumstances had occurred that would be considered a potential triggering event. We did not identify any indication of a
triggering event that would indicate the existence of impairment of the reporting units.
Determining the fair value of a reporting unit requires the use of significant judgments, estimates and assumptions. While we
believe 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. We will monitor any changes to these
assumptions and will evaluate goodwill as deemed warranted during future periods.
45
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 our strategic plan. The assumptions used for the interim and annual goodwill impairment
test for fiscal year 2018 include terminal growth rates ranging from 0.5% to 2.00% and a weighted average cost of capital
ranging from 9.3% to 11.5%. The fair values of our Skin Care and Feminine Care reporting units are less than 110% of the
respective carrying amounts. The carrying value as of the testing date of the goodwill associated with our Skin Care and
Feminine Care reporting units is $105.7 and $207.3, respectively.
During the third quarter of fiscal 2018, the carrying value of the goodwill of our Infant Care reporting unit to be above its fair
value, resulting in a non-cash goodwill impairment charge of $24.4. The impairment of the Infant Care reporting unit was
caused by declining revenue and earnings forecasts and higher discount rates. Higher discount rates were the result of certain
market-based assumptions and company specific risks. The goodwill associated with the Infant Care reporting unit is $39.4
after the impairment charge. Our annual impairment testing date is July 1, 2018, and as the valuation of the goodwill of the
reporting units was determined at the interim test date of June 30, 2018, there was no indication of impairment of the goodwill
of the reporting units for the Company's annual test. We performed an assessment in the fourth quarter to determine if any
significant events or changes in circumstances had occurred that would be considered a potential triggering event. We did not
identify any indication of a triggering event that would indicate the existence of impairment of the indefinite-lived intangible
assets.
We evaluate the fair value of indefinite-lived intangible assets annually in conjunction with the goodwill impairment test. Our
assessment of intangible assets that have an indefinite life is based on a number of factors including the competitive
environment, market share, brand history, underlying product life cycles, operating plans and the macroeconomic environment.
During the third quarter, we completed an interim impairment testing on indefinite-lived intangible assets, which consist of
trademarks and brand names used across our 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. We estimated royalty rates based on operating
profits of the brand. Our annual impairment testing date is July 1, 2018, and as the valuations of the indefinite lived intangible
assets were determined at the interim test date of June 30, 2018, there was no indication of impairment of indefinite lived
intangible assets for the Company's annual test. We performed an assessment in the fourth quarter to determine if any
significant events or changes in circumstances had occurred that would be considered a potential triggering event. We did not
identify any indication of a triggering event that would indicate the existence of impairment of the indefinite-lived intangible
assets.
Future changes in the judgments, assumptions and estimates that are used in our impairment testing, could result in
significantly different estimates of the fair values in the future. An increase in discount rates, a reduction in projected cash
flows or a combination of the two could lead to a reduction in the estimated fair values, which may result in impairment
charges that could materially affect our financial statements in any given year. The assumptions used for the interim and annual
valuation for indefinite lived intangible assets for fiscal year 2018 include terminal growth rates ranging from 0.5% to 2.00%
and a weighted average cost of capital ranging from 9.75% to 11.8%.
During the fourth quarter of fiscal 2017, we completed our annual impairment testing and found the carrying values of our
Playtex and Edge brand names to be above fair value, resulting in a non-cash asset impairment charge of $312.0 and $7.0,
respectively. The impairment was the result of competitive pressure within the industry including the discontinuation of
products.
Based on the impairments taken on the Playtex and Edge brand names and based on continued competitive pressure on these
brands, these intangible assets were converted from indefinite-lived assets to definite lived assets with a useful life of 20 years.
We recorded amortization expense of $7.2 during fiscal 2018 related to the amortization of the Playtex and Edge brand names.
During the fourth quarter of fiscal 2016, we completed our annual impairment testing and found the carrying value of our
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. Based on impairments taken and
continued competitive pressure on this brand, as of October 1, 2016, the Skintimate brand name was converted to a definite-
lived asset and assigned a useful life of 20 years. This conversion increased annual amortization expense by $1.5.
46
The interim impairment analysis performed in the third quarter of fiscal 2018 indicated that the Wet Ones trade name and the
Skin Care, Feminine Care and Infant Care reporting units had fair values that were less than 110% of the carrying amount. The
carrying amount of the Wet Ones trade name as of the impairment testing date was $173.6 and the carrying value of goodwill in
the Skin Care, Feminine Care and Infant Care reporting units as of the impairment testing date were $105.7, $207.3 and $39.4,
respectively. Our impairment analysis indicated that the fair value of the Infant Care reporting unit was below the carrying
amount and an impairment was recorded to reduce the goodwill to fair value. The table below presents, based on the
impairment test performed in the third quarter, the change in the fair value of the Wet Ones trade name and Skin Care,
Feminine Care and Infant Care reporting units given adjustments to the key assumptions. For the analysis, we increased the
discount rate by 25 basis points and reduced the long-term revenue growth rate by 25 basis points and then recalculated the fair
value in comparison to the carry amount.
Wet Ones brand name
Change in fair value
Percentage by which fair value falls short of the carry amount
Skin Care reporting unit
Change in fair value
Percentage by which fair value exceeds carry amount
Feminine Care reporting unit
Change in fair value
Percentage by which fair value exceeds carry amount
Infant Care reporting unit
Change in fair value
Percentage by which fair value falls short of the carry amount
Discount rate
increased by
25 bps
Long-term
growth rate
decreased by
25 bps
$
$
$
$
(5)
$
(0.4)%
(5)
$
5.2 %
(4)
$
3.0 %
(4)
0.4 %
(3)
5.7 %
(3)
3.3 %
(2)
$
(1.3)%
(2)
(0.8)%
Recently Issued Accounting Standards
Refer to Note 2 of Notes to Consolidated Financial Statements for a discussion regarding recently issued accounting standards
and their estimated impact on our financial statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
($ in millions)
The market risk inherent in our financial instruments and positions represents the potential loss arising from adverse changes in
currency rates, commodity prices, interest rates and our stock price. The following risk management discussion and the
estimated amounts generated from the sensitivity-analysis are forward-looking statements of market risk, assuming certain
adverse market conditions occur. Company policy allows derivatives to be used only for identifiable exposures and, therefore,
we do not enter into hedges for trading purposes where the sole objective is to generate profits.
Currency Rate Exposure
A significant share of our sales are tied to currencies other than the U.S. dollar, our 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 we are exposed include the Euro, the
Japanese Yen, the British Pound, the Canadian Dollar and the Australian Dollar.
We do business in certain developing markets, which may be susceptible to greater volatility of inflation and currency
exchange rates, as well as government pricing and import controls. While the activity is not considered material in relation to
the consolidated company as a whole, there could be negative impacts to operating results in certain markets if inflationary
pressures, exchange volatility and government controls negatively impact our ability to operate effectively and profitably.
47
Derivatives Designated as Cash Flow Hedging Relationships
At September 30, 2018, we 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.
We enter into forward currency contracts to hedge the cash flow uncertainty associated with currency fluctuations. These
transactions are accounted for as cash flow hedges. We had an unrealized pre-tax gain of $3.9 and an unrealized pre-tax loss of
$1.6 at September 30, 2018 and 2017, respectively, on these forward currency contracts accounted for as cash flow hedges
included in Accumulated other comprehensive loss ("AOCI"). Assuming foreign exchange rates versus the U.S. dollar remain
at September 30, 2018 levels over the next 12 months, the majority of the pre-tax gain included in AOCI at September 30, 2018
is expected to be included in Other expense (income), net. Contract maturities for these hedges extend into fiscal year 2020.
There were 63 open foreign currency contracts at September 30, 2018 with a notional value of approximately $134.2.
For further information on our derivatives designated as cash flow hedging relationships, see Note 16 of Notes to Consolidated
Financial Statements.
Derivatives Not Designated as Cash Flow Hedging Relationships
Our 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
result in an exchange gain or loss recorded in Other expense (income), net. The primary currency to which our foreign
subsidiaries are exposed is the U.S. dollar.
We enter into foreign currency derivative contracts which are not designated as cash flow hedges for accounting purposes to
mitigate these balance sheet exposures. Any gains or losses on these contracts are expected to be offset by exchange gains or
losses on the underlying exposure, thus they are not subject to significant market risk. The change in the estimated fair value of
the foreign currency contracts resulted in gains of $1.7 and $2.4 for fiscal 2018 and 2017, respectively, which were 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, 2018, with a notional amount of approximately $65.4.
For further information on our derivatives not designated as cash flow hedging relationships, see Note 16 of Notes to
Consolidated Financial Statements.
Commodity Price Exposure
We use raw materials that are subject to price volatility. At times, we have used, and may in the future use, hedging instruments
to reduce exposure to variability in cash flows associated with future purchases of certain materials and commodities. At
September 30, 2018, there were no open derivative or hedging instruments for future purchases of raw materials or
commodities.
Interest Rate Exposure
Our exposure to interest rate risk relates primarily to our variable-rate debt instruments, which currently bear interest based on
LIBOR plus margin. As of September 30, 2018, our outstanding debt included $7.0 variable-rate debt on our revolving credit
facility in the U.S. and $185.0 variable-rate debt on our term loan. Assuming a one percent increase in the applicable interest
rates, annual interest expense would increase by approximately $1.9.
The remaining outstanding debt as of September 30, 2018 is fixed-rate debt. Changes in market interest rates generally affect
the fair value of fixed-rate debt, but do not impact earnings or cash flows.
48
Item 8. Financial Statements and Supplementary Data.
INDEX TO FINANCIAL STATEMENTS
Consolidated Financial Statements
Responsibility for Financial Statements
Management's Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Earnings and Comprehensive Income for the fiscal years ended
September 30, 2018, 2017 and 2016.
Consolidated Balance Sheets as of September 30, 2018 and 2017.
Consolidated Statements of Cash Flows for the fiscal years ended September 30, 2018, 2017 and 2016.
Consolidated Statement of Changes in Shareholders' Equity for the period from October 1, 2015 to
September 30, 2018.
Notes to Consolidated Financial Statements.
50
50
51
53
54
55
56
57
49
Responsibility for Financial Statements
The preparation and integrity of the financial statements of Edgewell Personal Care Company (the "Company") are the
responsibility of its management. These statements have been prepared in conformance with generally accepted accounting
principles in the United States of America, and in the opinion of management, fairly present the Company's financial position,
results of operations and cash flows.
The Company maintains accounting and internal control systems, which it believes are adequate to provide reasonable
assurance that assets are safeguarded against loss from unauthorized use or disposition and that the financial records are
reliable for preparing financial statements. The selection and training of qualified personnel, the establishment and
communication of accounting and administrative policies and procedures, and a program of internal audits are important
elements of these control systems.
The Board of Directors, through its Audit Committee consisting solely of non-management directors, meets periodically with
management, internal audit and the independent auditors to discuss audit and financial reporting matters. To assure
independence, PricewaterhouseCoopers LLP has direct access to the Audit Committee.
Management's Report on Internal Control over Financial Reporting
The management of the Company is responsible for establishing and maintaining internal control over financial reporting. The
Company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting
principles for external purposes. The Company's internal control over financial reporting includes those policies and procedures
that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the Company are being made only in accordance with authorizations of management and directors of the
Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the Company's assets that could have a material effect on the financial statements. Internal control over financial
reporting, because of its inherent limitations, may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate. Management conducted an assessment of the
effectiveness of the Company's internal control over financial reporting based on the framework set forth in Internal Control -
Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on
the Company's assessment, management has concluded that internal control over financial reporting as of September 30, 2018
was effective. The Company's internal control over financial reporting as of September 30, 2018 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report that appears herein.
50
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Edgewell Personal Care Company:
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Edgewell Personal Care Company and its subsidiaries (the
“Company”) as of September 30, 2018 and 2017, and the related consolidated statements of earnings and comprehensive
income, of changes in shareholders’ equity and of cash flows for each of the three years in the period ended September 30,
2018, including the related notes, and schedule of valuation and qualifying accounts for each of the three years in the period
ended September 30, 2018 appearing under Item 15(2) (collectively referred to as the “consolidated financial statements”). We
also have audited the Company's internal control over financial reporting as of September 30, 2018, based on criteria
established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of September 30, 2018 and 2017, and the results of its operations and its cash flows for each of the
three years in the period ended September 30, 2018 in conformity with accounting principles generally accepted in the United
States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of September 30, 2018, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included
in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express
opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting
based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material
respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
51
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
St. Louis, Missouri
November 16, 2018
We have served as the Company’s auditor since 1999.
52
CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
EDGEWELL PERSONAL CARE COMPANY
(in millions, except per share data)
Net sales
Cost of products sold
Gross profit
Selling, general and administrative expense
Advertising and sales promotion expense
Research and development expense
Restructuring charges
Impairment charges
Gain on sale of Playtex gloves
Pension settlement expense
Industrial sale charges
Interest expense associated with debt
Other expense (income), net
Earnings (loss) before income taxes
Income tax provision (benefit)
Net earnings
Basic earnings per share (Note 7):
Net earnings
Diluted earnings per share (Note 7):
Net earnings
Statements of Comprehensive Income (Loss):
Net earnings
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments
Pension and postretirement activity, net of tax of ($3.0) in 2018, $12.7 in 2017 and
$11.6 in 2016
Deferred gain (loss) on hedging activity, net of tax of ($1.7) in 2018, $1.0 in 2017 and
$2.8 in 2016
Total other comprehensive income (loss), net of tax
Total comprehensive income
$
$
2018
Fiscal Year
2017
$
2,234.4
1,197.6
1,036.8
$
2,298.4
1,167.8
1,130.6
2016
2,362.0
1,202.1
1,159.9
392.2
293.3
61.1
38.5
24.4
(15.3)
5.4
—
68.0
5.4
163.8
60.5
103.3
$
390.0
318.3
67.6
29.6
319.0
—
—
—
69.2
(10.2)
(52.9)
(58.6)
5.7
$
412.7
336.7
71.9
37.0
6.5
—
—
0.2
71.8
3.2
219.9
41.2
178.7
1.90
0.10
3.02
1.90
0.10
2.99
$
103.3
$
5.7
$
178.7
(11.6)
(9.0)
3.7
(16.9)
86.4
$
39.1
25.0
1.7
65.8
71.5
$
1.0
(22.9)
(6.1)
(28.0)
150.7
$
See accompanying Notes to Consolidated Financial Statements.
53
EDGEWELL PERSONAL CARE COMPANY
CONSOLIDATED BALANCE SHEETS
(in millions, except share data)
Assets
Current assets
Cash and cash equivalents
Trade receivables, less allowance for doubtful accounts of $6.0 and $4.3
Inventories
Other current assets
Total current assets
Property, plant and equipment, net
Goodwill
Other intangible assets, net
Other assets
Total assets
Liabilities and Shareholders' Equity
Current liabilities
Current maturities of long-term debt
Notes payable
Accounts payable
Other current liabilities
Total current liabilities
Long-term debt
Deferred income tax liabilities
Other liabilities
Total liabilities
Commitments and contingencies (Note 17)
Shareholders' equity
September 30,
2018
September 30,
2017
$
$
$
$
$
$
266.4
226.5
329.5
128.8
951.2
424.1
1,450.8
1,099.0
28.2
3,953.3
184.9
8.2
238.4
285.5
717.0
1,103.8
176.1
211.8
2,208.7
502.9
224.1
333.5
125.7
1,186.2
453.4
1,445.9
1,071.7
31.6
4,188.8
—
19.4
223.6
281.4
524.4
1,525.4
181.8
215.5
2,447.1
Preferred shares, $0.01 par value, 10,000,000 authorized; none issued or outstanding
—
—
Common shares, $0.01 par value, 300,000,000 authorized; 65,251,989 and 65,251,989 issued;
54,040,386 and 56,017,537 outstanding
Additional paid-in capital
Retained earnings
Common shares in treasury at cost, 11,211,603 and 9,234,452
Accumulated other comprehensive loss
Total shareholders' equity
Total liabilities and shareholders' equity
0.7
1,628.3
1,083.1
(819.2)
(148.3)
1,744.6
3,953.3
$
0.7
1,623.4
952.9
(703.9)
(131.4)
1,741.7
4,188.8
$
See accompanying Notes to Consolidated Financial Statements.
54
EDGEWELL PERSONAL CARE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Cash Flow from Operating Activities
Net earnings
Adjustments to reconcile net earnings to net cash flow from operations:
2018
Fiscal Year
2017
2016
$
103.3
$
5.7
$
178.7
Non-cash restructuring costs
Non-cash sun care reformulation costs
Depreciation and amortization
Impairment charge
(Gain) loss on sale of assets
Deferred income taxes
Share-based compensation expense
International pension funding
Other, net
Deferred compensation payments
Changes in current assets and liabilities used in operations, net of effects of business
acquisitions:
Accounts receivable, net
Inventories
Other current assets
Accounts payable
Other current liabilities
Net cash from operating activities
Cash Flow from Investing Activities
Capital expenditures
Acquisitions, net of cash acquired
Proceeds from sale of assets
Playtex glove sale
Net cash used by investing activities
Cash Flow from Financing Activities
Cash proceeds from debt with original maturities greater than 90 days
Cash payments on debt with original maturities greater than 90 days
Net (decrease) increase in debt with original maturities of 90 days or less
Employee shares withheld for taxes
Common shares purchased
Other, net
Net cash used by financing activities
Effect of exchange rate changes on cash
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest, net
Cash paid for income taxes, net
$
$
1.8
25.3
97.6
24.4
(10.9)
2.3
17.0
—
19.5
(16.7)
(5.4)
(12.3)
(2.0)
11.5
9.3
264.7
(62.0)
(90.2)
4.7
19.0
(128.5)
550.0
(788.0)
(9.7)
(3.1)
(124.4)
—
(375.2)
2.5
(236.5)
502.9
266.4
66.6
22.0
$
$
6.8
—
94.4
319.0
3.8
(87.4)
22.2
—
(19.7)
(27.9)
41.4
(15.5)
22.6
23.7
(75.5)
313.6
(69.0)
(34.0)
18.4
—
(84.6)
271.0
(568.0)
2.0
(17.4)
(165.4)
(0.2)
(478.0)
13.0
(236.0)
738.9
502.9
66.4
14.4
$
$
3.9
—
92.6
6.5
1.1
7.8
25.6
(100.5)
(10.6)
(10.2)
23.3
28.2
75.8
(29.3)
(106.1)
186.8
(69.5)
—
—
—
(69.5)
756.3
(631.0)
(11.1)
(10.4)
(196.6)
(0.6)
(93.4)
2.9
26.8
712.1
738.9
71.3
28.3
See accompanying Notes to Consolidated Financial Statements.
55
EDGEWELL PERSONAL CARE COMPANY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(in millions)
Common Shares
Treasury Shares
Par
Value
Number Amount
Additional
Paid-In
Capital
Balance at October 1, 2015
Net loss
Foreign currency translation
adjustments
Pension and postretirement activity
Deferred loss on hedging activity
Distribution to New Energizer
Repurchase of shares
Activity under share plans
Balance at September 30, 2016
Net earnings
Foreign currency translation
adjustments
Pension and postretirement activity
Deferred gain on hedging activity
Repurchase of shares
Activity under share plans
Balance at September 30, 2017
Net earnings
Foreign currency translation
adjustments
Pension and postretirement activity
Impact of ASU 2018-02
Deferred gain on hedging activity
Repurchase of shares
Activity under share plans
Balance at September 30, 2018
Number
65.2
—
$
—
—
—
—
—
—
65.2
—
—
—
—
—
—
65.2
—
—
—
—
—
—
—
65.2
$
$
$
0.7
—
—
—
—
—
—
—
0.7
—
—
—
—
—
—
0.7
—
—
—
—
—
—
—
0.7
(5.1) $ (382.2) $ 1,644.2
—
—
—
—
—
—
—
(196.6)
15.8
—
—
—
—
—
—
—
—
—
(2.5)
0.3
(1.7)
(7.3) $ (563.0) $ 1,642.5
—
—
—
—
—
—
(165.4)
24.5
—
—
—
—
—
—
—
(2.2)
0.3
(19.1)
(9.2) $ (703.9) $ 1,623.4
—
—
—
Retained
Earnings
772.9
$
178.7
—
—
—
(5.6)
—
—
946.0
5.7
—
—
—
—
1.2
952.9
103.3
$
$
—
—
—
—
(2.1)
0.1
—
—
—
—
—
—
—
—
—
(124.4)
4.9
9.1
(11.2) $ (819.2) $ 1,628.3
—
—
17.2
—
—
9.7
$ 1,083.1
Accumulated
Other
Comprehensive
Loss
Total
Shareholders'
Equity
$
$
$
$
(171.5) $
—
1,864.1
178.7
1.0
(22.9)
(6.1)
2.3
—
—
(197.2) $
—
39.1
25.0
1.7
—
—
(131.4) $
—
(11.6)
(9.0)
—
3.7
—
—
(148.3) $
1.0
(22.9)
(6.1)
(3.3)
(196.6)
14.1
1,829.0
5.7
39.1
25.0
1.7
(165.4)
6.6
1,741.7
103.3
(11.6)
(9.0)
17.2
3.7
(124.4)
23.7
1,744.6
See accompanying Notes to Consolidated Financial Statements.
56
EDGEWELL PERSONAL CARE COMPANY
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:
• 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 and Jack Black® and
Bulldog® men's skin care products, as well as Wet Ones® wipes and Playtex® household gloves until the sale of the
gloves business in October 2017.
• Feminine Care includes tampons, pads and liners sold under the Playtex Gentle Glide® and Sport®, Stayfree®,
Carefree ®and o.b.® brands.
• 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.
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.
Acquisition of Jack Black. On March 1, 2018, the Company completed the acquisition of Jack Black, L.L.C. ("Jack Black"), a
luxury men's skincare products company based in the United States. The results of Jack Black for the post-acquisition period
are included within the Company's results since the acquisition date for the fiscal year ended September 30. 2018. For more
information on the acquisition, see Note 4 of Notes to Condensed Consolidated Financial Statements.
Acquisition of Bulldog Skincare. On October 31, 2016, the Company completed the acquisition of Bulldog Skincare Holdings
Limited ("Bulldog"), a men's grooming and skincare products company based in the United Kingdom ("U.K."). The results of
Bulldog for the post-acquisition period are included within the Company's results for the fiscal year ended September 30, 2018
and 2017. For more information on the acquisition, see Note 4 of Notes to Consolidated Financial Statements.
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.
57
Gains and losses resulting from foreign currency transactions are included in Net earnings. Foreign currency losses of $3.7
during fiscal 2018 and foreign currency gains of $5.4 and $4.3 during fiscal 2017 and 2016, respectively, were included within
Other expense (income), net. The Company uses foreign exchange ("FX") instruments to reduce risk of FX transactions as
described below and in Note 16 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, 2018.
At September 30, 2018, the Company had $192.0 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, 2018, the Company did not have any interest rate swap
agreements outstanding.
For further discussion, see Note 11 and Note 16 of Notes to Consolidated Financial Statements.
Cash Equivalents
Cash equivalents are considered to be highly liquid investments with a maturity of three months or less when purchased. At
September 30, 2018, the Company had $266.4 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.
Cash Flow Presentation
The Consolidated Statements of Cash Flows are prepared using the indirect method, which reconciles Net earnings 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. 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.
Accounts Receivable
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"). The Company began an accounts receivable factoring program in September
2017. For further discussion, see Note 10 of Notes to Consolidated Financial Statements.
Inventories
Inventories are valued at the lower of cost or net realizable value, with cost generally being determined using average cost or
the first-in, first-out ("FIFO") method.
The fourth quarter results of fiscal 2018 include a $25.3 one-time charge to cost of products sold primarily due to costs
associated with the write-off of select sun care product inventories.
58
As a result of discussions with one of its suppliers during the quarter, the Company made certain supply chain and procurement
decisions, including implementing a raw material substitution due to anticipated regulatory changes related to REACH, the
European chemical control law, that affect the supply chain of select Sun Care products. To align with the Company's raw
material selection process, the Company chose to make these changes now, well in advance of next year’s Sun Care season to
minimize potential impact to distribution channels during the peak sales period. As a result, the Company recorded charges
primarily for the write-off of finished goods inventory for those select products.
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 $5.3, $6.0, and
$5.8 in fiscal 2018, 2017 and 2016, 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 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
$74.3 in fiscal 2018. Depreciation expense was $74.1 in fiscal 2017, including accelerated depreciation charges of $1.8 related
to restructuring. Depreciation expense in fiscal 2016 was $76.3, including accelerated depreciation charges of $3.9 related to
restructuring. See Note 5 of Notes to Consolidated Financial Statements for further information on restructuring.
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 vary significantly from these projections. The Company will monitor any
changes to these assumptions and will evaluate the carrying value of goodwill as deemed warranted during future periods.
The key assumptions and estimates for the market and income approaches used to determine fair value of the reporting units
included 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.
59
The Company completed impairment testing on indefinite-lived intangible assets, 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.
During the third quarter of fiscal 2018, the Company performed an interim impairment analysis and found the carrying amount
of the goodwill for its Infant Care reporting unit to be above its fair value, resulting in a non-cash goodwill impairment charge
of $24.4. The impairment of the Infant Care reporting unit was caused by declining revenue and earnings forecasts and higher
discount rates. Higher discount rates were the result of certain market-based assumptions and company specific risks. During
the fourth quarter of fiscal 2017, the Company completed its annual impairment testing and found the carrying amounts of the
Playtex and Edge brand names to be above the fair value, resulting in a non-cash asset impairment charge of $312.0 and $7.0,
respectively. See Note 8 of Notes to Consolidated Financial Statements for further information on these impairments. During
the fourth quarter of fiscal 2016, the Company completed its annual impairment testing and found the carrying amount of its
Skintimate brand name to be above the fair value, resulting in a non-cash asset impairment charge of $6.5.
Intangible assets with finite lives, and a remaining weighted-average life of approximately nine 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.
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.
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. 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. 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. 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 $58.6 and $53.3 at September 30, 2018 and September 30, 2017,
respectively.
60
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 $171.3, $197.4 and $201.6, for fiscal 2018, 2017 and 2016, respectively.
Share-Based Payments
The Company grants restricted share equivalent ("RSE") awards, which generally vest over two to four years. The estimated
fair value of each grant issued is estimated on the date of grant based on the current market price of the shares. The original
estimate of the grant date fair value is not subsequently revised unless the awards are modified. The Company has elected to
recognize forfeiture of awards as they occur. 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 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. The original estimate of the grant date fair value is not subsequently
revised unless the awards are modified. The Company has elected to recognize forfeiture of awards as they occur.
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 Consolidated 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 generally repatriates a portion of current year earnings from select non-US subsidiaries only if the economic cost
of the repatriation is not considered material. The SEC has issued rules under Staff Accounting Bulletin 118 that would allow
for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax
impacts. As such, the Company's reassessment of permanently reinvested foreign earnings remains provisional as of September
30, 2018. See Note 6 of Notes to Consolidated Financial Statements for further discussion.
61
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 16 of Notes to Consolidated Financial
Statements.
Recently Adopted Accounting Pronouncements
In July 2015, the FASB issued an 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 or 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 adoption of
this guidance on a prospective basis as of October 1, 2017 did not have a material impact on the Company's financial
statements or the related disclosures.
In March 2016, the FASB issued an ASU which simplifies several aspects of the accounting for share-based payment
transactions, including requiring excess tax benefits and tax deficiencies to be recognized as income tax benefits or expenses in
the consolidated statement of earnings. The standard requires cash flows from excess tax benefits and deficiencies, previously
classified as a financing activity, to be classified as an operating activity in the consolidated statement of cash flows. The
Company adopted these provisions of the guidance prospectively in fiscal 2018. As a result, the Company recognized tax
deficiencies of $0.9 through income taxes during fiscal 2018 rather than additional paid-in capital. The tax deficiencies were
recorded as an operating activity in the Condensed Consolidated Statement of Cash Flows during fiscal 2018. Also, as part of
the adoption, a $9.7 adjustment was recorded to increase retained earnings and deferred tax assets to recognize the cumulative
amount of previously unrecognized excess tax benefits as of October 1, 2017. Additionally, the ASU requires the presentation
of employee taxes paid when an employer withholds shares for tax withholding purposes to be presented as a financing activity
in the statement of cash flows as opposed to as an operating activity. This aspect of the new guidance was required to be
adopted retrospectively. As such, $17.4 of cash outflows for tax withholding payments were reclassified from an operating
activity to a financing activity in the Condensed Consolidated Statement of Cash Flows for fiscal 2017. Finally, under the ASU,
the Company elected to record forfeitures as they occur. This election did not have a material impact on the Company's
financial statements.
In January 2017, the FASB issued an ASU which simplifies the subsequent measurement of goodwill by eliminating step 2
from the goodwill impairment test. Under existing guidance, an entity performs procedures to determine the fair value at the
impairment testing date of its assets and liabilities following the same procedures required when determining the fair value of
assets acquired and liabilities assumed in a business combination. The amended guidance requires an entity to perform its
annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, and
recognize an impairment charge to the extent the carrying amount exceeds the fair value and does not exceed the total amount
of goodwill allocated to the reporting unit. The Company elected to adopt this standard in the third quarter of fiscal 2018 in
conjunction with the Company's interim test for goodwill impairment. Refer to Note 8 for discussion on the interim impairment
test for goodwill and intangible assets.
62
In March 2018, the FASB issued an ASU which amends the accounting standards codification to reflect the guidance related to
the enactment of the Tax Cuts and Jobs Act (the "Tax Act") issued in the SEC Staff Accounting Bulletin No. 118. The Company
adopted this standard in the second quarter of fiscal 2018. Refer to Note 6 for disclosures related to the Tax Act.
In February 2018, the FASB issued an ASU which addresses the recently enacted Tax Act. Specifically, the guidance allows the
Company to elect to reclassify any "stranded tax" created as a result of the Tax Act from Accumulated Other Comprehensive
Loss to Retained Earnings. The new guidance will be effective for the Company beginning October 1, 2018, with early
adoption permitted. The Company adopted this standard in the fourth quarter of fiscal 2018. The Company recorded a $17.2
adjustment to increase accumulated other comprehensive loss and retained earnings related to the Company's U.S. Pension
plan.
Recently Issued Accounting Pronouncements
In May 2014, the FASB issued an ASU which provides a single comprehensive revenue recognition model for all contracts
with customers to improve comparability within industries, across industries and across capital markets. During 2016, the
FASB issued three ASUs clarifying the revenue recognition implementation guidance on various topics included within the
original ASU. The new guidance will be effective for the Company beginning October 1, 2018.
During fiscal 2017, the Company obtained assistance from a third party and established a cross-functional implementation
team, including representatives from all of its businesses globally, to analyze the current processes in place for the recognition
of revenue and identify potential differences that would result from application of the new guidance. The initial assessment
included analysis of significant types of arrangements, processes and systems, and reviews of representative contracts.
Revenues are primarily generated from the sale of finished products to customers. Those sales predominantly contain a single
delivery element and revenue is recognized at a single point in time when ownership, risks and rewards transfer. The initial
assessment has been completed and the Company is continuing to validate the conclusions reached during the assessment.
While the Company is still finalizing its conclusions, the timing of revenue recognition is not expected to be materially
impacted by the new standard. Adoption will impact the manner in which returns are presented on the Consolidated Balance
Sheet to reflect a return asset and refund liability. The Company has begun reviewing the enhanced disclosure requirements
under the new standard. The Company will adopt the revenue standard using the modified retrospective method in the first
quarter of fiscal 2019.
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 a material increase in both assets and liabilities to include operating leases on the Consolidated
Balance Sheets.
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, the sale of accounts receivable, contingent consideration payments on
business combinations, proceeds from the settlement of insurance claims and distributions received from equity method
investees, among others. The update will be effective for the Company beginning October 1, 2018, with early adoption
permitted. The Company noted that the adoption of the standard will reclassify approximately $9.5 operating cash inflows
associated with the $150 uncommitted master accounts receivable purchase agreement entered into with The Bank of Tokyo-
Mitsubishi UFJ, Ltd., New York Branch, as the purchaser on September 15, 2017 (the “Accounts Receivable Facility”) to
investing cash inflows in the Consolidated Statement of Cash Flows.
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 will adopt the guidance October 1, 2018, but does not expect that the impact on its financial statements will be
material.
63
In January 2017, the FASB issued an ASU clarifying the definition of a business, reducing the number of transactions that need
to be further evaluated and providing a framework to assist entities in evaluating whether both an input and a substantive
process are present. The amendments in the ASU specify that when the fair value of the gross assets acquired or disposed of is
concentrated in a single identifiable asset or a group of similar identifiable assets, the integrated set of assets and activities is
not a business. The guidance also requires that an integrated set of assets and activities must include, at a minimum, an input
and a substantive process that together significantly contribute to the ability to create output to be considered a business, and
removes the evaluation of whether a market participant could replace the missing elements. The ASU will be effective for
transactions occurring after October 1, 2018, with early adoption permitted. The impact of the ASU will be dependent upon the
nature of any future acquisitions or dispositions made by the Company.
In March 2017, the FASB issued an ASU intended to improve the presentation of net periodic pension and postretirement
benefit cost. Under existing guidance, the components of net periodic pension and postretirement benefit cost are aggregated
and reported in the same line item as other compensation costs arising from services rendered by the applicable employees
during the period. The amendments change these requirements so that only the service cost component is recorded in the same
line item as other compensation costs for the applicable employees, and all other components of net periodic pension and
postretirement benefit cost are recorded on a separate line item outside of income from operations. The amendments also
specify that only the service cost component is eligible for capitalization. The ASU will be effective for the Company
beginning October 1, 2018, with early adoption permitted October 1, 2017, and will be applied retrospectively for the
presentation of the cost components and prospectively for the capitalization of the service cost component. The Company
expects that the retrospective impact of adoption on its Consolidated Statement of Operations for the year ended September 30,
2018 will result in a reclassification that will increase Cost of products sold, Selling, general and administrative expense and
Other income, net of $3.9, $2.9 and $6.8, respectively. The Company expects that the retrospective impact of adoption on its
Consolidated Statement of Operations for the year ended September 30, 2017 will result in a reclassification that will increase
Cost of products sold, Selling, general and administrative expense and Other income, net of $4.7, $2.5 and $7.2, respectively.
In May 2017, the FASB issued an ASU that clarifies the scope of accounting for modifications of share-based payment awards.
The amendments provide guidance about which changes to the terms or conditions of a share-based payment award require an
entity to apply modification accounting. The ASU will be effective for the Company beginning October 1, 2018, with early
adoption permitted. The Company will adopt the guidance October 1, 2018, but does not expect that the impact on its financial
statements will be material.
In August 2017, the FASB issued an ASU that eliminates the requirement to separately measure and report hedge
ineffectiveness and generally requires, for qualifying hedges, the entire change in the fair value of a hedging instrument to be
presented in the same income statement line as the hedged item. The guidance also modifies the accounting for components
excluded from the assessment of hedge effectiveness, eases documentation and assessment requirements and modifies certain
disclosure requirements. The new standard will be effective beginning October 1, 2019, with early adoption permitted. The
Company has not yet determined the impact from adoption of this new accounting pronouncement on its financial statements.
In June 2018, the FASB issued an ASU which simplifies the treatment of share-based payment transactions used in acquiring
goods and services from non-employees. The amendments note that measurement of share-based payments used to acquire
goods or services should be valued at the grant-date fair value. The grant date is defined as the date at which the grantor and
grantee reach a mutual understanding of the terms and conditions of the award. Finally, any awards containing a performance
condition should be valued considering the probability of satisfying the necessary performance conditions consistent with
employee share-based awards. The update will be effective for the Company beginning October 1, 2019, with early adoption
permitted. The Company is in the process of evaluating the impact the guidance will have on its financial statements but does
not expect the impact to be material.
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. The impact of the new guidance is not
expected to be material, and will be dependent on the credit quality of the trade receivables outstanding at the date of adoption.
The Company evaluates the credit-worthiness of customers when negotiating contracts and, as trade receivables are short term
in nature, the timing between recognition of a credit loss under existing guidance and the new guidance is not expected to differ
materially.
64
In August 2018, the FASB issued an ASU adjusting the disclosure requirements for fair value measurements. The guidance
updates the disclosure requirements regarding leveling of fair value assets and the valuation of Level 3 fair value
measurements. The update will be effective for the Company beginning October 1, 2020 and early adoption is permitted. The
Company is in the process of evaluating the impact the guidance will have on its financial statements.
In August 2018, the FASB issued an ASU which modifies the disclosure requirements for defined benefit pension plans and
other post retirement plans. The guidance removes disclosures that are no longer considered cost beneficial, clarifies the
specific requirements of disclosures and adds disclosure requirements identified as relevant. The new standard will be effective
for the Company beginning October 1, 2020 and early adoption is permitted. The Company is in the process of evaluating the
impact of this guidance but does not expect it to result in a material change to the financial statements.
In August 2018, the FASB issued an ASU which aligns the requirements for capitalizing implementation costs incurred in a
hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop
or obtain internal-use software. The amendments in this ASU require an entity that is the customer in a hosting arrangement to
follow the guidance on internal-use software to determine which implementation costs to capitalize and which costs to expense.
The standard also requires a customer to expense the capitalized implementation costs of a hosting arrangement over the term
of the hosting arrangement. The new guidance requires an entity to present the expense related to the capitalized
implementation costs in the same line item in the statement of income as the fees associated with the hosting element of the
arrangement and classify payments for capitalized implementation costs in the statement of cash flows in the same manner as
payments made for fees associated with the hosting element. The entity is also required to present the capitalized
implementation costs in the statement of financial position in the same line item that a prepayment for the fees of the associated
hosting arrangement would be presented. The guidance is effective for the Company beginning October 1, 2020 and early
adoption is permitted. The Company is in process of evaluating the impact this guidance.
Note 3 - Divestiture
The Company completed the sale of its Playtex gloves business to a household products company for $19.0 on October 26,
2017. The sale allows the Company to better focus and utilize its resources on its other product lines. Total assets sold were
approximately $3.7, resulting in a pre-tax gain on sale of $15.3.
Note 4 - Acquisitions
Jack Black, L.L.C.
On March 1, 2018, the Company completed the acquisition of Jack Black, a men's luxury skincare products company based in
the U.S., for $90.2, 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 operating cash.
The Company has recognized the assets and liabilities of Jack Black based on estimates of their acquisition date fair values.
The determination of the fair values of the acquired assets and assumed liabilities, including goodwill and other intangible
assets, requires significant judgment. The Company completed the final fair value determination during the fourth quarter of
fiscal 2018.
As of March 1, 2018, the opening balance sheet for Jack Black included net assets acquired of $93.9 and consisted of working
capital and other net assets of $11.9 (including cash of $3.7), other intangible assets of $47.7 and goodwill of $34.3,
representing the value of expansion into new markets. Goodwill is expected to be deductible for tax purposes. The intangible
assets acquired consisted primarily of the Jack Black trade name, customer relationships and product formulations with a
weighted average useful life of 17 years. All assets are included in the Company's Sun and Skin Care segment.
The Company noted the revenues and net earnings of Jack Black from the beginning of the period through the acquisition date
were not material relative to the total revenues and net earnings of the Company during fiscal 2018. Acquisition and integration
costs related to Jack Black totaling $0.3 and $3.4 in the fourth quarter and 12 months ended September 30, 2018, respectively,
were included in Selling, general and administrative expense ("SG&A"). Additionally, acquisition and integration costs of $1.8
were included in Cost of products sold in the 12 months ended September 30, 2018.
65
Bulldog Skincare Holdings Limited
On October 31, 2016, the Company completed the acquisition of Bulldog, a men's grooming and skincare products company
based in the U.K., for $34.0, net of cash acquired. The acquisition created 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.
The Company has recognized the assets and liabilities of Bulldog based on estimates of their acquisition date fair values. The
Company completed the fair value determinations during the third quarter of fiscal 2017, resulting in immaterial changes.
As of October 31, 2016, the opening balance sheet for Bulldog included net assets acquired of $35.2 consisting of working
capital and other net assets of $0.8 (including cash of $1.2), other intangible assets of $18.0 and goodwill of $16.4.
The intangible assets acquired consisted of customer relationships and product formulations, with a weighted-average useful
life of 14 years, and the Bulldog trade name, which has been classified as an indefinite-lived intangible asset. The excess of the
purchase price over net tangible and intangible assets acquired resulted in goodwill of $16.4, which represents the value of the
expansion into new markets and the acquired workforce of Bulldog, and is not expected to be deductible for tax purposes. All
assets are included in the Company's Sun and Skin Care segment.
The revenues and net earnings of Bulldog from the beginning of fiscal 2017 through the acquisition date were not material
relative to the total revenues and net earnings of the Company during fiscal 2017.
Note 5 - Restructuring Charges
Project Fuel
In February 2018, the Company announced Project Fuel, an enterprise-wide transformational initiative that is designed to
address all aspects of the Company's business and cost structure. The project will incorporate the Company's Zero Based
Spending and global productivity initiatives, and will include a new global restructuring initiative. Initial costs for Project Fuel
relate to efforts to fully define the scope and reach of the project. In addition, the Company has incurred severance costs related
to the reduction of overhead at some of the Company’s manufacturing facilities. While the Company is incurring costs for
Project Fuel in fiscal 2018, the majority of costs and savings under Project Fuel are expected to take place during fiscal 2019
through fiscal 2021.
In addition to the expected cost savings and improved profitability, Project Fuel is designed to strengthen the Company's
challenger culture and reinforce its consumer-centric organizational focus. It is also designed to simplify the organization and
streamline ways of working in order to increase competitiveness, speed and agility, and ensure the Company has the skills,
capabilities and investments needed to compete in a rapidly changing world.
The Company does not include Project Fuel restructuring costs in the results of its reportable segments. The estimated impact
of allocating such charges to segment results for fiscal 2018 would have been as follows:
Wet
Shave
Sun and
Skin Care
Feminine
Care
All Other
Corporate
Total
Fiscal 2018
Project Fuel
Severance and related benefit costs
Accelerated depreciation
Consulting, project implementation and management
and other exit costs
Total Restructuring
$
3.1
1.8
2.3
7.2
$
0.9
—
0.2
1.1
$
1.1
—
—
1.1
$
0.1
—
—
0.1
6.9
—
23.5
30.4
$
$
12.1
1.8
26.0
39.9
In addition, pre-tax selling, general and administrative expenses of $1.4 associated with certain information technology
enablement expenses related to Project Fuel were included in Consulting, project implementation and management and other
exit costs.
2013 Restructuring
In November 2012, the Board authorized an enterprise-wide restructuring plan (the "2013 Restructuring"). The 2013
Restructuring originally included several initiatives focused on reducing costs in general and administrative functions, as well
as reducing manufacturing and operating costs associated with the Company's discontinued operations. In January 2014, the
66
Board authorized an expansion of scope of the previously announced 2013 Restructuring, which included rationalization and
streamlining 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. Due to an
increase in the Wet Shave footprint costs and a delay in the transition of manufacturing in our Feminine Care segment from
Montreal, Canada to Dover, Delaware, project costs were higher than expected during fiscal 2017, and include a non-cash
charge related to the disposition of real estate.
Expenses incurred under the 2013 Restructuring plan are reflected below, including the estimated impact of allocating such
charges to segment results. No 2013 Restructuring charges have been allocated to the Company's All Other segment. The
Company does not include 2013 Restructuring costs in the results of its reportable segments.
2013 Restructuring
Severance and related benefit costs
Accelerated depreciation
Consulting, program management and other exit
costs
Total Restructuring
2013 Restructuring
Severance and related benefit costs
Accelerated depreciation
Consulting, program management and other exit
costs
Total Restructuring
Wet
Shave
Sun and Skin
Care
Fiscal 2017
Feminine
Care
Corporate
Total
$
$
$
$
1.2
0.1
9.0
10.3
$
$
— $
—
0.2
0.2
$
5.3
6.8
7.0
19.1
Wet
Shave
Sun and Skin
Care
Fiscal 2016
Feminine
Care
10.6
—
4.8
15.4
$
$
0.2
—
0.2
0.4
$
$
6.2
3.9
11.1
21.2
$
$
$
$
— $
—
—
— $
Corporate
Total
— $
—
—
— $
6.5
6.9
16.2
29.6
17.0
3.9
16.1
37.0
In addition, $0.7 and $1.8 for fiscal 2017 and 2016, respectively, associated with obsolescence charges related to the exit of
certain non-core product lines as part of the 2013 Restructuring were included in Cost of products sold. Project-to-date
restructuring costs inclusive of non-core inventory obsolescence and information technology charges total $170.1.
67
Restructuring Reserves
The following table summarizes Project Fuel and 2013 Restructuring activities and related accruals (excluding certain
obsolescence charges related to the 2013 Restructuring):
October 1,
2017
Charge to
Income
Other (1)
Cash
Non-Cash
September 30,
2018
Utilized
Restructuring
Severance and termination related costs
$
2.4
$
12.1
$
(0.1) $
(9.3) $
— $
Asset impairment and accelerated
depreciation
Other related costs
Total Restructuring
—
—
2.4
$
1.8
26.0
39.9
$
—
—
$
(0.1) $
—
(23.4)
(32.7) $
(1.8)
—
(1.8) $
5.1
—
2.6
7.7
October 1,
2016
Charge to
Income
Other (1)
Cash
Non-Cash
September 30,
2017
Utilized
Restructuring
Severance and termination related costs
$
16.7
$
6.5
$
(0.3) $
(20.5) $
— $
Asset impairment and accelerated
depreciation
Other related costs
Total Restructuring
—
—
16.7
$
6.9
16.2
29.6
$
—
—
$
(0.3) $
—
(16.2)
(36.7) $
(6.9)
—
(6.9) $
(1)
Includes the impact of currency translation.
Note 6 - Income Taxes
The provisions for income taxes from continuing operations consisted of the following:
2018
Fiscal Year
2017
2016
$
0.5
0.2
27.0
27.7
(79.3)
(3.8)
(3.2)
(86.3)
(58.6) $
Currently payable:
United States - Federal
State
Foreign
Total current
Deferred:
United States - Federal
State
Foreign
Total deferred
Provision for income taxes
The source of pre-tax earnings (loss) was:
United States
Foreign
Pre-tax earnings (loss)
$
$
$
$
26.4
1.7
29.2
57.3
(4.1)
6.5
0.8
3.2
60.5
2018
5.3
158.5
163.8
$
$
$
$
68
Fiscal Year
2017
(230.5) $
177.6
(52.9) $
2016
53.3
166.6
219.9
2.4
—
—
2.4
2.6
3.0
24.4
30.0
4.6
2.5
4.1
11.2
41.2
A reconciliation of income taxes with the amounts computed at the statutory federal income tax rate follows:
Computed tax at federal statutory rate
State income taxes, net of federal tax benefit
Foreign tax less than the federal rate
Adjustments to prior years' tax accruals
Other taxes including repatriation of foreign
earnings
Other, net
Impairment
Tax reform
Total
2018
40.2
0.4
(10.1)
1.2
3.7
(1.9)
5.7
21.3
60.5
$
$
Fiscal Year
2017
24.5% $
0.2
(6.1)
0.7
2.3
(1.2)
3.5
13.0
36.9% $
(18.5)
(2.0)
(38.0)
(6.2)
5.0
1.1
—
—
(58.6)
35.0% $
3.9
71.8
11.8
(9.5)
(2.2)
—
—
110.8% $
2016
77.0
1.3
(32.5)
(4.8)
4.4
(4.2)
—
—
41.2
35.0%
0.6
(14.8)
(2.2)
2.0
(1.9)
—
—
18.7%
The deferred tax assets and deferred tax liabilities recorded on the balance sheet were as follows, and include current and
noncurrent amounts:
Deferred tax liabilities:
Depreciation and property differences
Intangible assets
Other tax liabilities
Gross deferred tax liabilities
Deferred tax assets:
Accrued liabilities
Deferred and share-based compensation
Tax loss carryforwards and tax credits
Postretirement benefits other than pensions
Pension plans
Inventory differences
Other tax assets
Gross deferred tax assets
Valuation allowance
Net deferred tax liabilities
September 30,
2018
2017
$
$
(33.5) $
(244.6)
(8.1)
(286.2)
43.3
17.6
6.8
4.5
42.2
5.6
12.4
132.4
(7.0)
(160.8) $
(57.0)
(355.0)
(5.8)
(417.8)
57.3
31.5
84.7
4.4
59.5
4.5
20.4
262.3
(8.4)
(163.9)
There were no material tax loss carryforwards that expired in fiscal 2018. Future expirations of tax loss carryforwards and tax
credits, if not utilized, are not material from 2019 through 2022. 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.
69
The Company generally repatriates a portion of current year earnings from select non-US subsidiaries only if the economic cost
of the repatriation is not considered material. The SEC has issued rules under Staff Accounting Bulletin 118 that would allow
for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax
impacts. As such, the Company's reassessment of permanently reinvested foreign earnings remains provisional as of September
30, 2018. While provisional, the Company’s intention is to reinvest earnings of other foreign subsidiaries indefinitely as the
repatriation of cash balances 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. 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 retirements obligations, fund capital projects and to support
foreign growth initiatives including potential acquisitions. As of September 30, 2018, approximately $996.6 of foreign
subsidiary earnings were considered indefinitely invested in those businesses. If the Company repatriated any of the earnings it
could be subject to withholding tax and the impact of foreign currency movements. Accordingly, it is not practical to calculate
a specific potential tax exposure. Applicable income and withholding taxes will be provided on these earnings in the periods in
which they are no longer considered reinvested.
Unrecognized tax benefits activity is summarized below:
Unrecognized tax benefits, beginning of year
Additions based on current year tax positions and acquisitions
Reductions for prior year tax positions and dispositions
Settlements with taxing authorities and statute expirations
Unrecognized tax benefits, end of year
2018
2017
2016
$
$
22.7
1.8
(2.0)
(1.8)
20.7
$
$
27.9
1.8
(0.6)
(6.4)
22.7
$
$
47.1
6.0
(8.5)
(16.7)
27.9
Included in the unrecognized tax benefits noted above was $19.3 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 12 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 $4.4 of interest, (net of
the deferred tax asset of $0.9) at September 30, 2018, and $3.8 of interest, (net of the deferred tax asset of $1.8) at September
30, 2017. 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, 2014 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, 2008. 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.
U.S. Tax Reform
On December 22, 2017, the U.S. government enacted the Tax Act. This new comprehensive tax legislation reduces the U.S.
federal corporate tax rate from 35% to 21% but also limits and/or eliminates certain deductions while creating new taxes on
certain foreign sourced earnings. Since the Company has a September 30 fiscal year end, the lower U.S. corporate income tax
rate will be phased in, resulting in a blended U.S. statutory federal rate of approximately 24.5% for the fiscal year ending
September 30, 2018 and 21% for subsequent fiscal years. The reduction in the U.S. corporate tax rate requires the Company to
remeasure its U.S. deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which
can be 24.5% or 21%. The Tax Act also imposed a one-time transition tax on historical earnings of certain foreign subsidiaries
that were not previously taxed by the U.S.
70
Due to the Company’s fiscal year end, certain tax provisions of the new Tax Act will impact the Company in fiscal 2018 while
others will be effective in subsequent years. For the year ended September 30, 2018, the estimated impact of the one-time
transition tax on foreign earnings was $98.9, offset by the estimated benefit of remeasurement of U.S. deferred tax assets and
liabilities of $77.6. The net impact of these transitional provisions resulted in a net charge of $21.3 for the year, which was
included as a component of income tax expense. The Company has tax loss carryforwards and tax credits, a portion of which
are expected be used to partially offset amounts payable over eight years related to the one-time transition tax on foreign
earnings.
The tax law changes included in the Tax Act are broad and complex. The final impact may differ from the Company's
estimates, possibly materially, due to, among other things, changes in interpretation of the Tax Act, legislative action to address
questions that arise because of the Tax Act, changes in accounting standards for income taxes or related interpretations in
response to the Tax Act, or updates or changes to estimates the Company used to calculate the transition impacts, including
impacts from changes to earnings estimates, foreign income tax estimates and foreign exchange rates. The SEC has issued rules
under Staff Accounting Bulletin 118 that would allow for a measurement period of up to one year after the enactment date of
the Tax Act to finalize the recording of the related tax impacts. As of September 30, 2018, amounts recorded for the Tax Act
remain provisional for the transition tax, remeasurement of deferred taxes and reassessment of permanently reinvested
earnings.
On August 1, 2018, proposed Treasury Regulations were issued under Section 965 providing additional guidance and
clarification on many of the provisions associated with the one-time transition tax, enacted in connection with the Tax Act. The
Company is in the process of evaluating the proposed regulations and the impact they may have on the provisional amounts
recorded for the transition tax as of September 30, 2018.
Note 7 - Earnings per Share
Basic earnings per share is based on the average number of common shares outstanding during the period. Diluted earnings per
share is based on the average number of shares used for the basic earnings 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 per share
calculation:
Basic weighted-average shares outstanding
Effect of dilutive securities:
RSE awards
Total dilutive securities
Diluted weighted-average shares outstanding
2018
Fiscal Year
2017
2016
54.4
0.1
0.1
54.5
57.3
0.2
0.2
57.5
59.2
0.5
0.5
59.7
For fiscal 2018, 2017 and 2016, the calculation of diluted weighted-average shares outstanding excludes 0.5, 0.5 and 0.4 of
share options because the effect of including these awards was anti-dilutive. For fiscal 2018 and 2017, the calculation of diluted
weighted-average shares outstanding excludes 0.1 of RSE awards 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.
71
Note 8 - Goodwill and Intangible Assets
The following table sets forth goodwill by segment:
Balance at October 1, 2017
Acquisition of Jack Black
Impairment charge
Cumulative translation adjustment
Balance at September 30, 2018
Wet
Shave
Sun and
Skin Care
Feminine
Care
All
Other
$
$
971.2
—
—
(3.0)
968.2
$
$
195.6
34.3
—
(0.5)
229.4
$
$
209.5
—
—
(1.5)
208.0
$
$
69.6
—
(24.4)
—
45.2
$
$
Total
1,445.9
34.3
(24.4)
(5.0)
1,450.8
Accumulated goodwill impairment losses totaled $24.4 at September 30, 2018 in the All Other segment.
Total amortizable intangible assets were as follows:
Trade names and brands
Technology and patents
Customer related and other
Total amortizable intangible
assets
$
$
September 30, 2018
September 30, 2017
Gross
Carrying
Amount
206.7
79.0
179.3
Accumulated
Amortization
25.4
$
75.9
96.2
Net
$
Gross
Carrying
Amount
$
181.3
3.1
83.1
188.6
77.9
151.5
Accumulated
Amortization
16.0
$
74.4
89.8
Net
$
172.6
3.5
61.7
465.0
$
197.5
$
267.5
$
418.0
$
180.2
$
237.8
Total amortizable intangible assets increased $47.0 primarily as a result of the acquisition of Jack Black. See Note 4 of Notes to
Consolidated Financial Statements for more information. Amortization expense for intangible assets was $17.7, $17.8 and
$14.4 for fiscal 2018, 2017 and 2016, respectively. Estimated amortization expense for amortizable intangible assets for fiscal
2019, 2020, 2021, 2022 and 2023 is approximately $17.8, $17.1, $16.5, $16.4, and $16.3, respectively, and $183.4 thereafter.
The Company had indefinite-lived trade names and brands of $831.5 ($182.2 in Wet Shave, $475.6 in Sun and Skin Care, $29.9
in Feminine Care and $143.8 in All Other) at September 30, 2018, a decrease of $2.4 from September 30, 2017. The Company
had indefinite-lived trade names and brands of $833.9 ($184.0 in Wet Shave, $475.6 in Sun and Skin Care, $30.3 in Feminine
Care and $144.0 in All Other) at September 30, 2017.
The change in indefinite-lived intangible assets primarily resulted from changes in foreign currency translation rates.
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.
Indefinite-lived intangible assets
The Company performed an interim impairment analysis as of the end of the third quarter of fiscal 2018 as a result of a
sustained decline in the Company's market capitalization in the third quarter which was considered a triggering event. The
interim impairment analysis was performed as of June 30, 2018, using the strategic plan to calculate a five year cash flow for
all trademarks. The interim impairment analysis indicated that the Company's indefinite trade names were not impaired.
The impairment analysis indicated that the Wet Ones trade name was not impaired during the fiscal 2018 impairment testing,
however the fair value of the brand name was determined to be $178 or approximately 103% of the carrying value. The fair
value of the trade name will be sensitive to changes in discount rates and forecasts that could lead to future impairment as the
fair value of the intangible asset continues to be relatively close to the carrying value due to the assets being written down to
their fair value in fiscal 2015.
72
The Company's annual impairment testing date is July 1, 2018, and as the valuations of the indefinite lived intangible assets
were determined at the interim test date of June 30, 2018, there was no indication of impairment of indefinite lived intangible
assets for the Company's annual test. The Company performed an assessment in the fourth quarter to determine if any
significant events or changes in circumstances had occurred that would be considered a potential triggering event. The
Company did not identify any indication of a triggering event that would indicate the existence of impairment of the indefinite-
lived intangible assets.
During the fourth quarter of fiscal 2017, the Company completed its annual impairment testing and found the carrying values
of the Playtex and Edge brand names to be above the fair value, resulting in a non-cash asset impairment charge of $312.0 and
$7.0, respectively. The fiscal 2017 impairment charges were caused by the increased level of competition especially in the
Feminine Care segment and discontinuation of certain products.
Based upon the impairments in fiscal 2017 and 2015 for Playtex and the outlook for Edge, both intangible assets are being
converted to definite lived intangible assets during the fourth quarter of fiscal 2017 with useful lives of 20 years. As a result of
the conversion, we recorded intangible asset amortization by $7.2 and $1.8 for fiscal 2018 and 2017, respectively.
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. Based on the impairments taken in
fiscal 2016 and 2015 and continued competitive pressure on this brand, as of October 1, 2016, the Skintimate brand name was
converted to a definite-lived asset and assigned a useful life of 20 years. As a result of the conversion, we recorded amortization
expense of $1.5 during fiscal 2018 and 2017.
Goodwill
The Company performed an interim impairment analysis in the third quarter of fiscal 2018 as a result of a sustained decline in
the Company's market capitalization in the third quarter which was considered a triggering event. The interim impairment
analysis was performed as of June 30, 2018, using the strategic plan to calculate a five year cash flow for all reporting units.
The analysis indicated that the carrying amount of the goodwill for the Infant Care reporting unit was greater than its fair value.
The impairment of the Infant Care reporting unit was calculated as the difference between its fair value, determined in the
interim impairment review, and the carrying value. As a result, the Company recorded an impairment charge on the goodwill of
the Infant Care reporting unit totaling $24.4 as of June 30, 2018. The valuation of the Infant Care reporting unit decreased
compared to the prior year because of the higher discount rates in conjunction with lower forecasted revenue growth rates and
earnings margins, resulting in lower projected long-term future cash flows.
The impairment analysis indicated that the Skin Care and Feminine Care reporting units were not impaired during the fiscal
2018 impairment testing, however the fair value of the reporting units were 107% and 104%, of the carry value, respectively.
The carrying value of the goodwill associated with the Skin Care and Feminine Care reporting units at the date of the interim
impairment analysis was $105.7 and $207.3, respectively. The fair value of the Skin Care, Feminine Care and Infant Care
reporting units will continue to be sensitive to changes in discount rates and long-term revenue growth rates which could cause
an impairment.
The Company's annual impairment testing date is July 1, 2018, and as the valuation of the goodwill of the reporting units was
determined at the interim test date of June 30, 2018, there was no indication of additional impairment for the Company's annual
test. Additionally, the Company performed an assessment in the fourth quarter to determine if any significant events or changes
in circumstances had occurred that would be considered a potential triggering event. The assessment did not identify any
indication of a triggering event that would indicate the existence of impairment of the reporting units.
73
Note 9 - Supplemental Balance Sheet Information
Inventories
Raw materials and supplies
Work in process
Finished products
Total inventories
Other Current Assets
Miscellaneous receivables
Prepaid expenses
Value added tax collectible from customers
Income taxes receivable
Other
Total other current assets
Property, Plant and Equipment
Land
Buildings
Machinery and equipment
Capitalized software costs
Construction in progress
Total gross property, plant and equipment
Accumulated depreciation
Total property, plant and equipment, net
Other Current Liabilities
Accrued advertising, sales promotion and allowances
Accrued trade allowances
Accrued salaries, vacations and incentive compensation
Income taxes payable
Returns reserve
Restructuring reserve
Value added tax payable
Deferred compensation
Other
Total other current liabilities
Other Liabilities
Pensions and other retirement benefits
Deferred compensation
Other non-current liabilities
Total other liabilities
September 30,
2018
September 30,
2017
$
$
$
$
$
$
$
$
$
$
52.0
67.5
210.0
329.5
12.6
68.4
25.2
17.3
5.3
128.8
19.2
141.9
964.8
48.4
59.9
1,234.2
(810.1)
424.1
28.2
29.9
44.2
20.3
58.6
7.7
4.0
6.3
86.3
285.5
91.5
40.7
79.6
211.8
$
$
$
$
$
$
$
$
$
$
50.6
60.9
222.0
333.5
16.9
55.6
25.2
24.7
3.3
125.7
19.3
139.1
947.4
42.3
49.7
1,197.8
(744.4)
453.4
32.2
24.6
40.6
18.3
53.3
3.0
5.8
13.8
89.8
281.4
109.4
47.3
58.8
215.5
Note 10 - Accounts Receivable Facility
On September 15, 2017, the Company entered into the $150 uncommitted Accounts Receivable Facility. Transfers under this
agreement are accounted for as sales of receivables, resulting in the receivables being de-recognized from the consolidated
balance sheet. The purchaser assumes the credit risk at the time of sale and has the right at any time to assign, transfer or
participate any of its rights under the purchased receivables to another bank or financial institution. The purchase and sale of
receivables under the agreement is intended to be an absolute and irrevocable transfer without recourse by the purchaser to the
Company for the creditworthiness of any obligor. The Company continues to have collection and servicing responsibilities for
the receivables sold and receives separate compensation for their servicing. The compensation received is considered
acceptable servicing compensation and, as such, the Company does not recognize a servicing asset or liability under the facility.
74
As of September 30, 2018, the discount rate used to determine the purchase price for the subject receivables is based upon
LIBOR plus a margin applicable to the specified obligor.
Account receivables sold under this agreement for the year ended September 30, 2018 and 2017 were $1,051.8 and $98.1,
respectively. The trade receivables sold that remained outstanding under this agreement as of September 30, 2018 and 2017
were $77.9 and $81.7, respectively. The net proceeds received were included in cash provided by operating activities in the
Consolidated Statement of Cash Flows. The difference between the carrying amount of the trade receivables sold and the sum
of the cash received is recorded as a loss on sale of receivables in Other expense (income), net in the Consolidated Statement of
Earnings. For the year ended September 30, 2018, the loss on sale of trade receivables was $2.5. For the year ended September
30, 2017, the loss on sale of trade receivables was immaterial.
Note 11 - Debt
The detail of long-term debt was as follows:
Senior notes, fixed interest rate of 4.7%, due 2021, net (1)
Senior notes, fixed interest rate of 4.7%, due 2022, net (1) (2)
U.S. revolving credit facility due 2020 (3)
Term loan due 2019, net (1) (3)
Total long-term debt, including current maturities
Less current portion
Total long-term debt
September 30,
2018
September 30,
2017
$
$
598.8
498.0
7.0
184.9
1,288.7
184.9
1,103.8
$
$
598.3
497.4
245.0
184.7
1,525.4
—
1,525.4
(1) At September 30, 2018, 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 $1.2, $1.5 and $0.1, respectively. At September 30, 2017, 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 $1.7, $1.9 and $0.3, respectively.
(2) At September 30, 2018 and September 30, 2017, the balance for the senior notes due 2022 is reflected net of discount of $0.5 and
$0.7, respectively.
(3) Variable-rate debt, based on LIBOR plus applicable margin.
At September 30, 2018 and 2017, the Company also had outstanding short-term notes payable with financial institutions with
original maturities of less than 90 days of $8.2 and $19.4, respectively, and which had weighted-average interest rates of 5.5%
and 5.5%, respectively. These notes were primarily outstanding international borrowings.
U.S. Revolving Credit Facility
On March 13, 2017, the Company entered into Amendment No. 3 to the Credit Agreement (the "Amendment"), amending the
Credit Agreement dated June 1, 2015 (as amended, the "Credit Agreement"), and an Increasing Lender Support Supplement to
the Credit Agreement (the "Supplement"). The Amendment and the Supplement provided for an increase
of $75.0 (from $650.0 to $725.0) in the revolving loans available to the Company. Additionally, certain other changes were
made to the Credit Agreement, including allowing the Company to enter into receivables sales facilities for up to $150. As of
September 30, 2018, the Company had outstanding borrowings of $7.0 under its unsecured revolving credit facility in the U.S.,
recorded in Long-term debt, and $8.0 of outstanding letters of credit. Taking into account outstanding borrowings and
outstanding letters of credit, $710.0 remains available as of September 30, 2018.
For further information on the receivables sales facility, see Note 10 of Notes to Consolidated Financial Statements.
75
Debt Covenants
The credit agreements governing the Company's outstanding debt at September 30, 2018 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. EBIT is calculated similarly 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, 2018, the Company was in compliance with the provisions and covenants associated with its debt
agreements.
Debt Maturities
Aggregate maturities of long-term debt, including current maturities, at September 30, 2018 were as follows: $185.0 in one
year, $7.0 in two years, $600.0 in three years and $500.0 in four years.
Note 12 - 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.
The Company funds its pension plans in compliance with ERISA or local funding requirements. The Company evaluated the
discretionary funding of certain international defined benefit plans and contributed approximately $100.5 to one of its plans
during fiscal 2016.
76
The following tables present the benefit obligation, plan assets and funded status of the plans:
Change in projected benefit obligation
Benefit obligation at beginning of year
Service cost
Interest cost
Actuarial (gain) loss
Benefits paid, net
Plan curtailments
Plan settlements
Expenses paid
Foreign currency exchange rate changes
Projected benefit obligation at end of year
Change in plan assets
Estimated fair value of plan assets at beginning of year
Actual return on plan assets
Company contributions
Plan settlements
Benefits paid
Expenses paid
Foreign currency exchange rate changes
Estimated fair value of plan assets at end of year
Funded status at end of year
As of September 30,
Pension
Postretirement
2018
2017
2018
2017
$
$
$
619.0
6.1
16.7
(17.1)
(26.5)
—
(20.5)
(3.1)
(3.3)
571.3
523.1
14.2
9.4
(20.5)
(26.5)
(3.1)
(3.3)
493.3
(78.0) $
$
650.2
7.3
14.7
(22.6)
(33.5)
(1.5)
—
(3.2)
7.6
619.0
508.0
37.9
5.8
—
(33.4)
(3.2)
8.0
523.1
(95.9) $
$
10.6
—
0.4
(2.1)
(0.3)
—
—
—
(0.3)
8.3
—
—
0.3
—
(0.3)
—
—
—
(8.3) $
12.4
0.2
0.3
(2.6)
(0.2)
—
—
—
0.5
10.6
—
—
0.2
—
(0.2)
—
—
—
(10.6)
The following table presents the amounts recognized in the Consolidated Balance Sheets and Consolidated Statement of
Changes in Shareholders' Equity:
Amounts recognized in the Consolidated Balance Sheets
Noncurrent assets
Current liabilities
Noncurrent liabilities
Net amount recognized
Amounts recognized in Accumulated other comprehensive loss
Net loss (gain)
Prior service credit
Net amount recognized, pre-tax
As of September 30,
Pension
Postretirement
2018
2017
2018
2017
$
$
$
$
$
4.5
(1.1)
(81.4)
(78.0) $
153.4
—
153.4
$
$
$
5.1
(3.3)
(97.7)
(95.9) $
162.3
—
162.3
$
$
— $
(0.3)
(8.0)
(8.3) $
(4.9) $
—
(4.9) $
—
(0.3)
(10.3)
(10.6)
(3.1)
—
(3.1)
77
Pre-tax changes recognized in other comprehensive income for fiscal 2018 were as follows:
Changes in plan assets and benefit obligations recognized in other comprehensive income
Net loss arising during the year
Effect of exchange rates
Amounts recognized as a component of net periodic benefit cost
Amortization or curtailment recognition of prior service cost
Amortization or settlement recognition of net (loss) gain
Total recognized in other comprehensive income
Pension
Post-
retirement
$
$
$
1.8
(0.7)
—
(10.0)
(8.9) $
(2.1)
0.1
—
0.1
(1.9)
The minimum required contribution to our pension and post retirement plans in fiscal 2019 is $7.0 and $0.3, respectively;
however, discretionary contributions may also be made.
The Company's expected future benefit payments are as follows:
Fiscal 2019
Fiscal 2020
Fiscal 2021
Fiscal 2022
Fiscal 2023
Fiscal 2024 to 2028
Pension
Post-
retirement
$
$
36.0
35.7
35.4
35.5
36.0
167.7
0.3
0.3
0.3
0.4
0.4
1.8
The accumulated benefit obligation for defined benefit pension plans was $558.8 and $606.3 at September 30, 2018 and 2017,
respectively. The following table shows pension plans with an accumulated benefit obligation in excess of plan assets:
Projected benefit obligation
Accumulated benefit obligation
Estimated fair value of plan assets
As of September 30,
2017
2018
$
$
418.4
418.4
340.4
468.6
468.5
367.6
Pension plan assets in the U.S. plan represent approximately 69% 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 48% and (b) debt
securities, including U.S. bonds: approximately 52%. Actual allocations at September 30, 2018 approximated these targets. The
U.S. plan held no shares of Company common stock at September 30, 2018. Investment objectives are similar for non-U.S.
pension arrangements, subject to local regulations.
78
The following table presents pension and postretirement expense:
2018
Pension
2017
2016
2018
Postretirement
2017
2016
Fiscal Year
$
Service cost
Interest cost
Expected return on plan assets
Amortization of unrecognized prior service cost
Recognized net actuarial loss (gain)
Settlement loss recognized
Net periodic benefit cost (credit)
$
6.1
16.7
(31.7)
—
4.7
5.4
1.2
$
7.3
14.7
(31.9)
—
6.6
0.3
(3.0)
$
5.1
21.9
(31.0)
—
5.3
—
1.3
— $
0.4
—
—
(0.1)
—
0.3
$
0.2
0.3
—
—
(0.4)
—
0.1
0.2
0.4
—
(0.1)
(1.0)
—
(0.5)
In fiscal 2017, the Company changed the methodology used to estimate the service and interest components of net periodic
benefit (credit) cost for its pension and postretirement benefits, which resulted in a decrease in expense of approximately $4
during fiscal 2017. The Company believes the spot discount rate approach, which applies the specific spot rates along the yield
curve used in the determination of the benefit obligations to the relevant cash flows, is a more precise application of the yield
curve spot rates used in the traditional single discount rate approach. The change was accounted for prospectively as a change
in accounting estimate.
Amounts expected to be amortized from accumulated other comprehensive loss into net periodic benefit cost (credit) during
fiscal 2019, are as follows:
Net actuarial (loss) gain
Prior service (cost) credit
Pension
$
$
(4.3)
$
— $
Post-
retirement
0.2
—
The following table presents assumptions, which reflect weighted-averages for the component plans, used in determining the
above information:
Plan obligations:
Discount rate
Compensation increase rate
Net periodic benefit cost:
Discount rate
Expected long-term rate of
return on plan assets
Compensation increase rate
2018
Pension
2017
2016
2018
Postretirement
2017
2016
Fiscal Year
3.7%
2.5%
3.3%
6.1%
2.5%
3.3%
2.5%
3.0%
6.5%
2.5%
3.0%
2.5%
3.8%
7.4%
2.5%
4.0%
N/A
3.7%
N/A
N/A
3.7%
N/A
2.8%
N/A
N/A
2.8%
N/A
3.5%
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.
79
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 16 of Notes to Consolidated Financial Statements for further discussion on the estimated fair
value hierarchy and estimated fair value principles.
Pension assets at estimated fair value
Equity
U.S. equity
International equity
Debt
U.S. government
Other government
Corporate
Cash and cash equivalents
Other
Total, excluding investments valued at net asset value ("NAV")
Investments valued at NAV
Total
Pension assets at estimated fair value
Equity
U.S. equity
International equity
Debt
U.S. government
Other government
Corporate
Cash and cash equivalents
Other
Total, excluding investments valued at NAV
Investments valued at NAV
Total
As of September 30, 2018
Level 2
Total
Level 1
$
82.5
68.1
— $
—
—
—
61.5
3.5
—
215.6
215.6
$
$
172.1
2.0
1.3
1.3
15.6
192.3
192.3
$
$
82.5
68.1
172.1
2.0
62.8
4.8
15.6
407.9
85.4
493.3
As of September 30, 2017
Level 2
Total
Level 1
$
91.0
63.6
— $
—
—
—
—
1.8
—
156.4
156.4
$
$
172.8
6.0
67.3
1.3
21.1
268.5
268.5
$
$
91.0
63.6
172.8
6.0
67.3
3.1
21.1
424.9
98.2
523.1
$
$
$
$
$
$
The following table sets forth the estimated fair value of the Company's pension assets valued at NAV:
Pension assets valued at NAV estimated at fair value
Equity
U.S. equity
International equity
Total investments valued at NAV
There were no Level 3 pension assets as of September 30, 2018 and 2017.
The Company had no postretirement plan assets as of September 30, 2018 and 2017.
As of September 30,
2017
2018
$
$
11.0
74.4
85.4
$
$
11.8
86.4
98.2
80
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 2018, 2017, and 2016 were $10.2, $11.2, and $10.1,
respectively, and are reflected in SG&A and Cost of products sold.
Note 13 - Share-Based Payments
As of September 30, 2018, the Company had three share-based compensation plans - the 2018 Stock Incentive Plan (the "2018
Plan"), 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, which was then superseded by the 2018 Stock Incentive Plan. New
awards granted after January 2018 are issued under the 2018 Plan. The 2018 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 2018 Plan is 12.0, of which 5.2 were available for future
awards as of September 30, 2018.
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
earnings before income taxes for the Company's share-based compensation arrangements were $17.0, $22.2 and $25.6 for fiscal
2018, 2017 and 2016, respectively, and were recorded in SG&A. The total income tax benefit recognized for share-based
compensation arrangements was $4.6, $8.3 and $9.6, for fiscal 2018, 2017 and 2016, respectively. 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
The following table summarizes share option activity during fiscal 2018:
Weighted-
Average
Exercise
Price
Shares
Weighted-
Average
Remaining
Contractual
Term
(in years)
Aggregate
Intrinsic
Value
$
$
$
0.5
0.1
(0.1)
—
0.5
0.5
0.3
94.12
58.90
88.00
—
88.77
88.77
97.98
7.4
7.4
$
$
—
—
Outstanding on October 1, 2017
Granted
Canceled
Exercised
Outstanding on September 30, 2018
Vested and unvested expected to vest as of September 30, 2018
Exercisable on September 30, 2018
No share options were exercised in fiscal 2018, 2017 or 2016.
81
The Company estimates the grant-date fair value of share option awards using the Black-Scholes option pricing model. During
fiscal 2018 and 2017, the Company granted 0.1 and 0.2 non-qualified share option awards to certain executives and employees
with a grant-date fair value of $1.6 and $3.2, respectively. No share option awards were granted during fiscal 2016. The
following table presents the Company's weighted average fair value per option and the assumptions utilized in the Black-
Scholes option pricing model.
Weighted-average fair value per share option
Expected volatility
Risk-free interest rate
Expected share option life (in years)
Dividend yield
$
2018
2017
$
16.29
23.00%
2.27%
6.0
—%
19.96
24.00%
1.53%
6.0
—%
As of September 30, 2018, there was an estimated $1.4 of total unrecognized compensation costs related to share option
awards, which will be recognized over a weighted-average period of approximately 1.6 years.
Restricted Share Equivalents
The following table summarizes RSE award activity during fiscal 2018:
Non-vested at October 1, 2017
Granted
Vested
Canceled
Non-vested at September 30, 2018
Weighted-
Average
Grant Date
Estimated
Fair
Value
Shares
$
0.5
0.4
(0.2)
(0.1)
0.6
83.19
57.23
86.90
70.79
64.56
The Company records estimated expense for performance-based grants based on target achievement of performance metrics for
the three-year period for each respective program, unless evidence exists that achievement above or below target for the
applicable performance metric is more likely to occur. The estimated fair value of the award is determined using the closing
share price of the Company's common stock on the date of grant. As of September 30, 2018, there were 0.1 performance-based
RSE awards outstanding, which are included in the table above.
As of September 30, 2018, there was an estimated $21.5 of total unrecognized compensation costs related to RSE awards,
which will be recognized over a weighted-average period of approximately 2.2 years. The weighted-average estimated fair
value per RSE award granted in fiscal 2018, 2017 and 2016 was $57.23, $74.71, and $84.92, respectively. The estimated fair
value of RSE awards vested in fiscal 2018, 2017 and 2016 was $15.7, $24.9, and $44.1, respectively.
Note 14 - Shareholders' Equity
At September 30, 2018, there were 300.0 shares of the Company's common stock authorized, of which 1.2 shares were reserved
for outstanding awards under the 2018, 2009 and Incentive Stock Plans. The Company's Amended and Restated Articles of
Incorporation authorize it to issue up to 10.0 shares of $0.01 par value of preferred stock. As of September 30, 2018, there were
no shares of preferred stock issued or outstanding.
In January 2018, the Board approved an authorization to repurchase up to 10.0 shares of the Company's common stock. This
authorization replaced a prior share repurchase authorization from May 2015. During fiscal 2018, the Company repurchased
2.1 shares of its common stock for $124.4, all of which were purchased under the previous authorization from May 2015. The
Company has 10.0 shares remaining under the January 2018 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.
82
During fiscal 2018, 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 2018, 2017 and 2016, the Company paid $0.1, $1.6 and $0.6, respectively, of 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.
Note 15 - Accumulated Other Comprehensive Income (Loss)
The following table presents the changes in accumulated other comprehensive income (loss) ("AOCI"), net of tax, by
component:
Balance at October 1, 2016
OCI before reclassifications (1)
Reclassifications to earnings
Balance at September 30, 2017
OCI before reclassifications (1)
Reclassifications to earnings
Adoption of ASU 2018-02
Balance at September 30, 2018
Foreign
Currency
Translation
Adjustments
$
Pension and
Post-
retirement
Activity
Hedging
Activity
Total
(68.1) $
39.1
—
(29.0)
(11.6)
—
—
(40.6) $
(126.3) $
20.8
4.2
(101.3)
0.9
7.3
(17.2)
(110.3) $
(2.8) $
3.5
(1.8)
(1.1)
2.6
1.1
—
2.6
$
(197.2)
63.4
2.4
(131.4)
(8.1)
8.4
(17.2)
(148.3)
$
(1) OCI is defined as other comprehensive income (loss).
The following table presents the reclassifications out of AOCI:
Details of AOCI Components
2018
2017
Fiscal Year
Gains and losses on cash flow hedges
Foreign exchange contracts
Amortization of defined benefit pension and postretirement items
Prior service costs
Actuarial losses
Settlements
Total reclassifications for the period
$
$
$
$
$
(1.5) $
(1.5)
0.4
(1.1) $
— $
4.5
5.4
9.9
(2.6)
7.3
$
Affected Line Item in the
Consolidated Statements
of Earnings
2.6 Other expense (income), net
2.6
Total before tax
(0.8) Tax expense (benefit)
1.8 Net of tax
— (1)
(1)
6.2
(1)
0.3
6.5
Total before tax
(2.3) Tax expense (benefit)
4.2 Net of tax
6.2
$
6.0 Net of tax
(1) These AOCI components are included in the computation of net periodic benefit cost. See Note 12 of Notes to Consolidated Financial Statements.
83
Note 16 - 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, 2018 and 2017, 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, 2018, the Company
had $192.0 of variable rate debt outstanding, which consisted primarily of outstanding borrowings under the Company's
revolving credit facilities in the U.S. and a 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 23% of net sales in
fiscal 2018. 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 2018, Target Corporation represented
approximately 11%, 10% and 15% of net sales for the Company's Sun and Skin Care, Feminine Care and All Other segments,
respectively. Finally, sales to Amazon in fiscal 2018 represented approximately 15% of net sales for the Company's All Other
segments.
Product Concentration. Within the Wet Shave segment, the Company's razor and blades represented 53%, 53% and 53% of net
sales and within the Sun and Skin Care segment, sun care products represented 15%, 15% and 14% of net sales during fiscal
2018, 2017 and 2016, respectively.
Cash Flow Hedges
At September 30, 2018, 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 gain of $3.9
and an unrealized pre-tax loss of $1.6 at September 30, 2018 and 2017, respectively, on these forward currency contracts
accounted for as cash flow hedges included in AOCI. Assuming foreign exchange rates versus the U.S. dollar remain at
September 30, 2018 levels over the next 12 months, the majority of the pre-tax gain included in AOCI at September 30, 2018 is
expected to be included in Other expense (income), net. Contract maturities for these hedges extend into fiscal year 2020. There
were 63 open foreign currency contracts at September 30, 2018 with a total notional value of $134.2.
84
Derivatives not Designated as Hedges
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 resulted in gains of $1.7 and $2.4 for fiscal 2018 and 2017, respectively, which were 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, 2018, with a total notional value of $65.4.
The following table provides estimated fair values of derivative instruments:
Derivatives designated as cash flow hedging relationships:
Foreign currency contracts
Derivatives not designated as cash flow hedging relationships:
Foreign currency contracts
Fair Value of Asset (Liability) (1)
September 30,
September 30,
2017
2018
$
$
3.9
1.3
$
$
(1.6)
0.4
(1) All derivative assets are presented in Other current assets or Other assets. All derivative liabilities are presented in Other current liabilities or Other
liabilities.
The following table provides the amounts of gains and losses on derivative instruments:
Derivatives designated as cash flow hedging relationships:
Foreign currency contracts
Gain (loss) recognized in OCI (1)
Gain reclassified from AOCI into income (effective portion) (1) (2)
Derivatives not designated as cash flow hedging relationships:
Foreign currency contracts
Gain (loss) recognized in income (2)
2018
Fiscal Year
2017
2016
$
$
$
3.9
(1.5)
$
5.4
2.7
(7.7)
1.2
1.7
$
2.4
$
(10.1)
(1) 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.
(2) Gain (loss) was recorded in Other expense (income), net.
The following table provides financial assets and liabilities for balance sheet offsetting:
Foreign currency contracts
Gross amounts of recognized assets (liabilities)
Gross amounts offset in the balance sheet
Net amounts of assets (liabilities) presented in the balance sheet
$
$
5.3
(0.1)
5.2
$
$
— $
—
— $
2.5
(0.1)
2.4
$
$
(3.7)
0.1
(3.6)
As of September 30, 2018
Assets (1)
Liabilities (2)
As of September 30, 2017
Assets (1)
Liabilities (2)
(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.
85
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:
Assets (Liabilities) at estimated fair value:
Deferred compensation
Derivatives - foreign currency contracts
Net liabilities at estimated fair value
As of September 30,
2017
2018
$
$
(46.9) $
5.2
(41.7) $
(60.9)
(1.2)
(62.1)
At September 30, 2018 and 2017, the Company had no Level 1 or Level 3 financial assets or liabilities, other than pension plan
assets.
At September 30, 2018 and 2017, the fair market value of fixed rate long-term debt was $1,061.2 and $1,143.8, respectively,
compared to its carrying value of $1,096.8 and $1,095.7, 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 $184.9 and $184.7 at September 30, 2018 and 2017, respectively. 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, 2018, 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 17 - Commitments and Contingencies
Operating Leases
Total rental expense less sublease rental income for all operating leases was $17.5, $15.9 and $13.1 in fiscal 2018, 2017 and
2016, respectively. Future minimum rental commitments under non-cancellable operating leases in effect as of September 30,
2018, are $15.0 in fiscal 2019, $12.6 in fiscal 2020, $8.0 in fiscal 2021, $6.7 in fiscal 2022, $6.1 in fiscal 2023 and $7.8
thereafter. These leases are primarily for office facilities.
86
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 18 - 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 and Jack Black and Bulldog men's
skin care products, as well as Wet Ones wipes and Playtex household gloves until the sale of the gloves business in
October 2017.
•
• Feminine Care includes tampons, pads and liners sold under the Playtex Gentle Glide and Sport, Stayfree, Carefree
and o.b. brands.
• 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.
87
Segment performance is evaluated based on segment profit, exclusive of general corporate expenses, share-based compensation
costs, costs associated with restructuring initiatives, Sun Care reformulation costs, the sale of the Playtex gloves and industrial
blade businesses, pension settlement expense, Jack Black integration costs, spin costs 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.
Segment net sales and profitability are presented below:
Net Sales
Wet Shave
Sun and Skin Care
Feminine Care
All Other
Total net sales
Segment Profit
Wet Shave
Sun and Skin Care
Feminine Care
All Other
Total segment profit
General corporate and other expenses
Restructuring and related costs (1)
Impairment charges
Sun Care reformulation costs (2)
Gain on sale of Playtex gloves
Pension settlement expense (3)
Jack Black acquisition and integration costs
Spin costs (4)
Industrial sale charges
Amortization of intangibles
Interest and other expense, net
Total earnings (loss) before income taxes
Depreciation and amortization
Wet Shave
Sun and Skin Care
Feminine Care
All Other
Total segment depreciation and amortization
Corporate
Total depreciation and amortization
2018
Fiscal Year
2017
2016
$
$
$
$
$
$
1,330.1
449.7
329.5
125.1
2,234.4
269.1
80.7
38.0
19.8
407.6
(67.8)
(39.9)
(24.4)
(25.3)
15.3
(5.4)
(5.2)
—
—
(17.7)
(73.4)
163.8
49.0
13.6
12.0
5.3
79.9
17.7
97.6
$
$
$
$
$
$
$
$
$
1,375.3
440.4
351.6
131.1
2,298.4
294.9
98.8
28.9
26.6
449.2
(76.0)
(30.3)
(319.0)
—
—
—
—
—
—
(17.8)
(59.0)
(52.9) $
46.6
12.9
14.0
5.0
78.5
17.7
96.2
$
$
1,425.8
414.9
388.9
132.4
2,362.0
290.2
89.5
39.1
28.4
447.2
(80.4)
(38.8)
(6.5)
—
—
—
—
(12.0)
(0.2)
(14.4)
(75.0)
219.9
45.8
11.3
19.3
5.1
81.5
15.0
96.5
88
Total Assets
Wet Shave
Sun and Skin Care
Feminine Care
All Other
Total segment assets
Corporate (5)
Goodwill and other intangible assets, net
Total assets
Capital Expenditures
Wet Shave
Sun and Skin Care
Feminine Care
All Other
Total segment capital expenditures
Corporate
Total capital expenditures
2018
Fiscal Year
2017
2016
$
$
$
$
732.9
174.3
184.0
38.3
1,129.5
274.0
2,549.8
3,953.3
36.3
11.7
10.1
3.9
62.0
—
62.0
$
$
$
$
755.5
159.1
206.9
36.0
1,157.5
513.7
2,517.6
4,188.8
40.7
12.8
11.2
4.3
69.0
—
69.0
$
$
39.9
12.4
12.6
4.2
69.1
0.4
69.5
(1)
(2)
Includes pre-tax SG&A of $1.4 for fiscal 2018, associated with certain information technology enablement expenses related to Project Fuel.
Includes Cost of products sold of $0.7 and $1.8 for fiscal 2017 and 2016, respectively.
Includes Cost of products sold of $25.3 for fiscal 2018 due to costs associated with the write-off of select sun care product inventories due to a
change of formulas in advance of next year's Sun Care season.
(3) Pension settlement expense was the result of increased lump sum benefit payments in fiscal 2018 from higher employee turnover associated with
Project Fuel. The lump sum benefit payments are not expected to be recurring in nature.
(4)
Includes SG&A and Cost of products sold of $11.8 and $0.2 for fiscal 2016, respectively.
(5) Corporate assets include all cash and cash equivalents, financial instruments and deferred tax assets that are managed outside of operating segments.
The following table presents the Company's net sales and long-lived assets by geographic area:
Net Sales to Customers
United States
International
Total net sales
Long-lived Assets
United States
Germany
Other International
Total long-lived assets excluding goodwill and other intangibles, net
2018
Fiscal Year
2017
2016
$
$
$
$
1,245.8
988.6
2,234.4
316.9
39.0
68.2
424.1
$
$
$
$
1,330.5
967.9
2,298.4
$
$
1,392.0
970.0
2,362.0
335.7
38.7
79.0
453.4
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 16 of Notes to Consolidated Financial Statements.
89
Supplemental product information is presented below for net sales:
Razors and blades
Sun care products
Tampons, pads and liners
Shaving gels and creams
Infant care and other
Skin care products
Total net sales
2018
Fiscal Year
2017
2016
1,185.4
342.0
329.4
144.7
125.2
107.7
2,234.4
$
$
1,222.0
353.1
351.6
153.3
131.1
87.3
2,298.4
$
$
1,259.5
337.7
388.9
166.3
132.4
77.2
2,362.0
$
$
Note 19 - 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 Edgewell Personal Care Company (the "Parent 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.
90
EDGEWELL PERSONAL CARE COMPANY
CONDENSED CONSOLIDATING STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
Fiscal Year Ended September 30, 2018
Net sales
Cost of products sold
Gross profit
Selling, general and administrative expense
Advertising and sales promotion expense
Research and development expense
Gain on sale of Playtex gloves
Impairment charge
Restructuring charges
Pension settlement loss
Interest expense associated with debt
Other expense, net
Intercompany service fees
Equity in earnings of subsidiaries
Earnings before income taxes
Income tax (benefit) provision
Net earnings
Statement of Comprehensive Income:
Net earnings
Other comprehensive loss, net of tax
Total comprehensive income
$
$
$
$
Parent
Company
Guarantors
1,477.5
894.4
583.1
— $
—
—
$
Non-
Guarantors
1,073.1
619.4
453.7
Eliminations
$
(316.2) $
(316.2)
—
Total
2,234.4
1,197.6
1,036.8
—
—
—
—
—
—
—
53.5
—
—
(142.3)
88.8
(14.5)
103.3
103.3
(16.9)
86.4
$
$
$
238.6
177.9
61.1
(15.3)
24.4
31.9
4.6
13.6
2.3
(14.5)
(128.8)
187.3
45.0
142.3
142.3
(16.9)
125.4
$
$
$
153.6
115.4
—
—
—
6.6
0.8
0.9
3.1
14.5
—
158.8
30.0
128.8
128.8
(8.3)
120.5
$
$
$
—
—
—
—
—
—
—
—
—
—
271.1
(271.1)
—
(271.1) $
(271.1) $
25.2
(245.9) $
392.2
293.3
61.1
(15.3)
24.4
38.5
5.4
68.0
5.4
—
—
163.8
60.5
103.3
103.3
(16.9)
86.4
91
EDGEWELL PERSONAL CARE COMPANY
CONDENSED CONSOLIDATING STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
Fiscal Year Ended September 30, 2017
Net sales
Cost of products sold
Gross profit
Selling, general and administrative expense
Advertising and sales promotion expense
Research and development expense
Impairment charge
Restructuring charges
Interest expense associated with debt
Other income, net
Intercompany service fees
Equity in earnings of subsidiaries
(Loss) earnings before income taxes
Income tax (benefit) provision
Net earnings
Statement of Comprehensive Income:
Net earnings
Other comprehensive income, net of tax
Total comprehensive income
$
$
$
$
Parent
Company
Guarantors
1,578.2
908.4
669.8
— $
—
—
$
Non-
Guarantors
1,080.4
619.6
460.8
Eliminations
$
(360.2) $
(360.2)
—
Total
2,298.4
1,167.8
1,130.6
—
—
—
—
—
53.5
—
—
(39.2)
(14.3)
(20.0)
5.7
5.7
65.8
71.5
$
$
$
248.1
207.4
67.0
319.0
9.7
14.4
—
(20.0)
(153.0)
(22.8)
(62.0)
39.2
39.2
65.8
105.0
$
$
$
141.9
110.9
0.6
—
19.9
1.3
(10.2)
20.0
—
176.4
23.4
153.0
153.0
57.2
210.2
$
$
$
—
—
—
—
—
—
—
—
192.2
(192.2)
—
(192.2) $
(192.2) $
(123.0)
(315.2) $
390.0
318.3
67.6
319.0
29.6
69.2
(10.2)
—
—
(52.9)
(58.6)
5.7
5.7
65.8
71.5
92
EDGEWELL PERSONAL CARE COMPANY
CONDENSED CONSOLIDATING STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
Fiscal Year Ended September 30, 2016
Net sales
Cost of products sold
Gross profit
$
Selling, general and administrative expense
Advertising and sales promotion expense
Research and development expense
Impairment charge
Restructuring charges
Industrial sale charges
Interest expense associated with debt
Other (income) expense, net
Intercompany service fees
Equity in earnings of subs
Earnings before income taxes
Income tax (benefit) provision
Net earnings
Parent
Company
Guarantors
1,627.9
942.6
685.3
— $
—
—
$
Non-
Guarantors
1,141.6
667.0
474.6
Eliminations
$
(407.5) $
(407.5)
—
Total
2,362.0
1,202.1
1,159.9
5.3
—
—
—
—
—
54.5
—
—
(216.2)
156.4
(22.3)
178.7
264.3
224.4
70.4
6.5
15.0
0.2
10.2
(1.3)
(17.5)
(112.6)
225.7
22.7
203.0
143.1
112.3
1.5
—
22.0
—
7.1
4.5
17.5
—
166.6
40.8
125.8
—
—
—
—
—
—
—
—
—
328.8
(328.8)
—
(328.8)
412.7
336.7
71.9
6.5
37.0
0.2
71.8
3.2
—
—
219.9
41.2
178.7
Statement of Comprehensive (Loss) Income:
Net earnings
Other comprehensive loss, net of tax
Total comprehensive income
$
$
178.7
(28.0)
150.7
$
$
203.0
(29.4)
173.6
$
$
125.8
(18.4)
107.4
$
$
(328.8) $
47.8
(281.0) $
178.7
(28.0)
150.7
93
EDGEWELL PERSONAL CARE COMPANY
CONDENSED CONSOLIDATING BALANCE SHEETS
September 30, 2018
Assets
Current assets
Cash and cash equivalents
Trade receivables, net
Inventories
Other current assets
Total current assets
Investment in subsidiaries
Intercompany receivables, net (1)
Property, plant and equipment, net
Goodwill
Other intangible assets, net
Other assets
Total assets
Liabilities and Shareholders' Equity
Current liabilities
Intercompany payables, net (1)
Long-term debt
Deferred income tax liabilities
Other liabilities
Total liabilities
Total shareholders' equity
Total liabilities and shareholders' equity
Parent
Company
Guarantors
Non-
Guarantors
Eliminations
Total
$
$
$
$
— $
—
—
—
—
3,760.0
—
—
—
—
1.0
3,761.0
$
19.7
900.0
1,096.7
—
—
2,016.4
1,744.6
3,761.0
$
$
2.5
46.1
175.4
48.8
272.8
1,227.4
836.1
316.7
1,037.5
886.5
0.1
4,577.1
471.8
—
7.1
142.6
195.6
817.1
3,760.0
4,577.1
$
$
$
$
263.9
180.4
154.1
80.0
678.4
—
63.9
107.4
413.3
212.5
27.1
1,502.6
225.5
—
—
33.5
16.2
275.2
1,227.4
1,502.6
$
$
$
$
— $
—
—
—
—
(4,987.4)
(900.0)
—
—
—
—
(5,887.4) $
— $
(900.0)
—
—
—
(900.0)
(4,987.4)
(5,887.4) $
266.4
226.5
329.5
128.8
951.2
—
—
424.1
1,450.8
1,099.0
28.2
3,953.3
717.0
—
1,103.8
176.1
211.8
2,208.7
1,744.6
3,953.3
(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.
94
EDGEWELL PERSONAL CARE COMPANY
CONDENSED CONSOLIDATING BALANCE SHEETS
September 30, 2017
Assets
Current assets
Cash and cash equivalents
Trade receivables, net
Inventories
Other current assets
Total current assets
Investment in subsidiaries
Intercompany receivables, net (1)
Property, plant and equipment, net
Goodwill
Other intangible assets, net
Other assets
Total assets
Liabilities and Shareholders' Equity
Current liabilities
Intercompany payables, net (1)
Long-term debt
Deferred income tax liabilities
Other liabilities
Total liabilities
Total shareholders' equity
Total liabilities and shareholders' equity
Parent
Company
Guarantors
Non-
Guarantors
Eliminations
Total
$
$
$
$
— $
—
—
—
—
3,554.1
—
—
—
—
1.6
3,555.7
$
19.3
698.9
1,095.4
—
0.4
1,814.0
1,741.7
3,555.7
$
$
6.4
34.4
198.7
46.3
285.8
1,363.2
644.2
335.7
1,061.9
900.3
0.1
4,591.2
259.8
—
430.0
147.6
199.7
1,037.1
3,554.1
4,591.2
$
$
$
$
496.5
189.7
134.8
79.4
900.4
—
54.7
117.7
384.0
171.4
29.9
1,658.1
245.3
—
—
34.2
15.4
294.9
1,363.2
1,658.1
$
$
$
$
— $
—
—
—
—
(4,917.3)
(698.9)
—
—
—
—
(5,616.2) $
— $
(698.9)
—
—
—
(698.9)
(4,917.3)
(5,616.2) $
502.9
224.1
333.5
125.7
1,186.2
—
—
453.4
1,445.9
1,071.7
31.6
4,188.8
524.4
—
1,525.4
181.8
215.5
2,447.1
1,741.7
4,188.8
(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.
95
EDGEWELL PERSONAL CARE COMPANY
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Fiscal Year Ended September 30, 2018
Net cash from operating activities
$
127.5
$
346.2
$
141.2
$
(350.2) $
264.7
Parent
Company
Guarantors
Non-
Guarantors
Eliminations
Total
(46.6)
4.7
(90.2)
19.0
(113.1)
550.0
(788.0)
1.0
—
—
—
(15.4)
—
—
—
(15.4)
—
—
(10.7)
(350.2)
—
—
(237.0)
(360.9)
—
(3.9)
6.4
2.5
2.5
(232.6)
496.5
—
—
—
—
—
—
—
—
350.2
—
—
350.2
—
—
—
(62.0)
4.7
(90.2)
19.0
(128.5)
550.0
(788.0)
(9.7)
—
(124.4)
(3.1)
(375.2)
2.5
(236.5)
502.9
266.4
$
263.9
$
— $
Cash Flow from Investing Activities
Capital expenditures
Proceeds on sale of fixed assets
Acquisition, net of cash acquired
Playtex glove sale
Net cash used by investing activities
Cash Flow from Financing Activities
Cash proceeds from issuance of debt with
original maturities greater than 90 days
Cash payments on debt with original maturities
greater than 90 days
Net increase (decrease) in debt with original
maturity days of 90 or less
Payments for intercompany notes
Common shares purchased
Employee share withheld for taxes
Net cash used by financing activities
Effect of exchange rate changes on cash
Net decrease in cash and cash equivalents
Cash and cash equivalents, beginning of period
—
—
—
—
—
—
—
—
—
(124.4)
(3.1)
(127.5)
—
—
—
Cash and cash equivalents, end of period
$
— $
96
EDGEWELL PERSONAL CARE COMPANY
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Fiscal Year Ended September 30, 2017
Parent
Company
$
182.9
Guarantors
63.1
$
Non-
Guarantors
142.6
$
Eliminations
$
(75.0) $
Total
313.6
1.9
(51.7)
—
5.9
(43.9)
271.0
(291.0)
—
1.4
—
—
—
—
(18.6)
—
0.6
5.8
6.4
—
(17.3)
(34.0)
12.5
(38.8)
—
(277.0)
(1.9)
0.6
—
(75.0)
(0.1)
—
(353.4)
13.0
(1.9)
—
—
—
(1.9)
—
—
1.9
—
—
75.0
—
—
76.9
—
(236.6)
733.1
496.5
$
$
$
$
—
— $
— $
—
(69.0)
(34.0)
18.4
(84.6)
271.0
(568.0)
—
2.0
(165.4)
—
(0.2)
(17.4)
(478.0)
13.0
(236.0)
738.9
502.9
Net cash from operating activities
Cash Flow from Investing Activities
Proceeds from intercompany notes
Capital expenditures
Acquisitions, net of cash acquired
Proceeds on sale of fixed assets
Net cash used by investing activities
Cash Flow from Financing Activities
Cash proceeds from debt with original maturities
greater than 90 days
Cash payments on debt with original maturities
greater than 90 days
Payment for intercompany notes
Net increase in debt with original maturity days
of 90 or less
Common shares purchased
Intercompany dividend
Other, net
Employee share withheld for taxes
Net cash used by financing activities
Effect of exchange rate changes on cash
—
—
—
—
—
—
—
—
—
(165.4)
—
(0.1)
(17.4)
(182.9)
—
Net increase (decrease) in cash and cash
equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
$
$
—
— $
— $
97
EDGEWELL PERSONAL CARE COMPANY
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Fiscal Year Ended September 30, 2016
Net cash from (used by) operating activities
$
218.2
Parent
Company
Guarantors
$
(47.0) $
Non-
Guarantors
47.4
Eliminations
$
(31.8) $
Total
186.8
Cash Flow from Investing Activities
Capital Expenditures
Payment for equity contributions
Net cash (used by) from investing activities
Cash Flow from Financing Activities
Cash proceeds from issuance of debt with
original maturities greater than 90 days
Cash payments on debt with original maturities
greater than 90 days
Net (decrease) increase in debt with original
maturity days of 90 or less
Other, net
Common shares purchased
Proceeds from equity contribution
Employee share withheld for taxes
Intercompany dividend
Net cash (used by) from financing activities
Effect of exchange rate changes on cash
—
(10.6)
(10.6)
—
—
—
(0.6)
(196.6)
—
(10.4)
—
(207.6)
—
Net increase in cash and cash
equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
$
—
—
— $
(51.8)
(11.1)
(62.9)
746.0
(631.0)
(12.8)
—
—
10.6
—
—
112.8
—
2.9
2.9
5.8
$
(17.7)
—
(17.7)
10.3
—
1.7
—
—
11.1
—
(31.8)
(8.7)
2.9
—
21.7
21.7
—
—
—
—
—
(21.7)
—
31.8
10.1
(69.5)
—
(69.5)
756.3
(631.0)
(11.1)
(0.6)
(196.6)
—
(10.4)
—
(93.4)
—
2.9
23.9
709.2
733.1
$
—
—
— $
26.8
712.1
738.9
98
Note 20 - Quarterly Financial Information (Unaudited)
Net sales
Gross profit (3)(6)
Net earnings (loss) (1)(2)(3)(4)(5)(6)
Basic earnings per share (7)
Diluted earnings per share (7)
Net sales
Gross profit
Net earnings (1) (2)
Basic earnings per share (7)
Diluted earnings per share (7)
$
$
Fiscal 2018 (by quarter)
Q1
Q2
Q3
Q4
$
468.3
200.3
6.7
0.12
0.12
$
608.1
302.1
65.1
1.21
1.20
$
620.6
302.7
12.1
0.23
0.22
537.4
231.7
19.4
0.36
0.36
Fiscal 2017 (by quarter)
Q1
Q2
Q3
Q4
$
485.0
228.0
33.5
0.58
0.58
$
611.0
309.6
65.7
1.14
1.14
$
637.5
322.1
54.9
0.96
0.95
564.9
270.9
(148.4)
(2.61)
(2.61)
(1) Restructuring and related costs were $3.7, $15.9 and $20.3 for the second, third and fourth quarters of fiscal 2018, respectively, and
$7.2, $5.6, $12.8 and $4.7 for the first, second, third and fourth quarters of fiscal 2017, respectively. See Note 5 of Notes to
Consolidated Financial Statements.
(2) The third quarter of fiscal 2018 and the fourth quarter of fiscal 2017 includes a non-cash impairment charge of $24.4 and $319.0
related to intangible assets, respectively. See Note 8 of Notes to Consolidated Financial Statements.
(3) The fourth quarter of fiscal 2018 includes charges to Cost of products sold of $25.3 related to Sun Care reformulation costs.
(4) The sale of the Playtex gloves business resulted in a gain of $15.9 in the first quarter of fiscal 2018 and additional costs of $0.6 in
the third quarter of fiscal 2018.
(5) Includes pension settlement costs totaling $5.4 in the fourth quarter of fiscal 2018.
(6) Includes Jack Black acquisition and integration costs impacting SG&A of $2.6, $0.5 and $0.3 in the second, third and fourth
quarters of fiscal 2018, respectively. Additionally, the impact of Jack Black acquisition and integration costs to Cost of products
sold totaled $1.8 in the third quarter of fiscal 2018.
(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.
Note 21 - Subsequent Event
Nazareth Production Facility
In October 2018, the Company announced its intention to close its production facility in Nazareth, Israel as part of Project Fuel.
The production from this site will be redistributed across multiple locations best positioned to serve regional needs. The
transfer of production will take approximately 12 to 18 months to complete during which the facility will continue to operate.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
99
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized and reported
within the specified time periods, and that such information is accumulated and communicated to management, including our
Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), as appropriate, to allow timely decisions regarding
required disclosure.
Our management, with the participation of our CEO and CFO, evaluated the effectiveness of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2018. Based on that
evaluation, our CEO and CFO concluded that, as of that date, our disclosure controls and procedures were effective.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate control over financial reporting, as defined under
Exchange Act rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including
our CEO and CFO, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the
framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Management's assessment included an evaluation of the design of our internal control over financial
reporting and testing of the operational effectiveness of our internal control over financial reporting. Based on this assessment,
management determined that our internal control over financial reporting was effective as of September 30, 2018.
The effectiveness of our internal control over financial reporting as of September 30, 2018 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included
herein.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended September 30, 2018 that have
materially affected, or are likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Information regarding our directors will be included in our definitive proxy statement for our annual meeting of shareholders,
which will be filed with the United States Securities and Exchange Commission ("SEC") within 120 days after September 30,
2018.
Information regarding our executive officers is included in Item 1. Business of this Annual Report on Form 10-K.
We have adopted business practices and standards of conduct that are applicable to all employees, including our Chief
Executive Officer, Chief Financial Officer and Chief Accounting Officer. We have also adopted a code of business conduct
applicable to our Board of Directors. The codes have been posted on the Investor section of our website at www.edgewell.com.
In the event that an amendment to, or a waiver from, a provision of one of the codes of ethics occurs and it is determined that
such amendment or waiver is subject to the disclosure provisions of Item 5.05 of Current Report on Form 8-K, we intend to
satisfy such disclosure by posting such information on our website for at least a 12-month period.
Item 11. Executive Compensation.
Information regarding the compensation of our named executive officers and directors will be included in our definitive proxy
statement for our annual meeting of shareholders, which will be filed with the SEC within 120 days after September 30, 2018.
100
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Information regarding individuals or groups that own more than 5% of our common shares, as well as information regarding
the security ownership of our executive officers and directors, information relating to securities authorized for issuance under
equity compensation plans and other shareholder matters will be included in our definitive proxy statement for our annual
meeting of shareholders, which will be filed with the SEC within 120 days after September 30, 2018.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Information regarding transactions with related parties and director independence will be included in our definitive proxy
statement for our annual meeting of shareholders, which will be filed with the SEC within 120 days after September 30, 2018.
Item 14. Principal Accounting Fees and Services.
Information regarding the services provided by and fees paid to PricewaterhouseCoopers LLP, our independent auditors, will
be included in our definitive proxy statement for our annual meeting of shareholders, which will be filed with the SEC within
120 days after September 30, 2018.
101
PART IV
Item 15. Exhibits, Financial Statement Schedules.
Documents filed as part of this report:
1) Financial Statements. The following are included within Item 8. Financial Statements and Supplementary Data of this
Annual Report on Form 10-K.
• Report of Independent Registered Public Accounting Firm.
• Consolidated Statements of Earnings and Comprehensive Income for the fiscal years ended September 30, 2018,
2017 and 2016.
• Consolidated Balance Sheets as of September 30, 2018 and 2017.
• Consolidated Statements of Cash Flows for the fiscal years ended September 30, 2018, 2017 and 2016.
• Consolidated Statement of Changes in Shareholders' Equity for the period from October 1, 2015 to September 30,
2018.
• Notes to Consolidated Financial Statements.
2) Financial Statement Schedules.
Schedule II - Valuation and Qualifying Accounts
Allowance for Doubtful Accounts
Balance at beginning of year
Provision charged to expense, net of reversals
Write-offs, less recoveries, translation, other
Balance at end of year
Income Tax Valuation Allowance
Balance at beginning of year
Provision charged to expense
Write-offs, less recoveries, translation, other
Balance at end of year
2018
Fiscal Year
2017
2016
$
$
$
$
4.3
2.3
(0.6)
6.0
8.4
0.7
(2.1)
7.0
$
$
$
$
4.9
(0.4)
(0.2)
4.3
8.5
0.1
(0.2)
8.4
$
$
$
$
5.4
(0.3)
(0.2)
4.9
8.4
—
0.1
8.5
3) Exhibits. The exhibits are included in the Exhibit Index that appears at the end of this Annual Report on Form 10-K.
102
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
EDGEWELL PERSONAL CARE COMPANY
By /s/ David P. Hatfield
David P. Hatfield
Chief Executive Officer
Date: November 16, 2018
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and as of the date indicated.
Signature
/s/ David P. Hatfield
David P. Hatfield (principal executive officer)
/s/ Rod R. Little
Rod R. Little (principal financial officer)
Title
Chief Executive Officer and Chairman of the Board
Chief Financial Officer
/s/ Robert Black
Robert Black
/s/ George Corbin
George Corbin
/s/ Daniel J. Heinrich
Daniel J. Heinrich
/s/ Carla C. Hendra
Carla C. Hendra
/s/ R. David Hoover
R. David Hoover
/s/ James C. Hunter
James C. Hunter
/s/ James C. Johnson
James C. Johnson
/s/ Elizabeth Valk Long
Elizabeth Valk Long
/s/ Joseph D. O'Leary
Joseph D. O'Leary
/s/ Rakesh Sachdev
Rakesh Sachdev
/s/ Gary Waring
Gary Waring
Date: November 16, 2018
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
103
EXHIBIT INDEX
Exhibit
Number
2.1***
Exhibit
Separation and Distribution Agreement by and between the Company and Energizer Holdings, Inc. dated as of June 25, 2015
(incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed June 29, 2015).
2.2***
Tax Matters Agreement by and between the Company and Energizer Holdings, Inc. dated as of June 26, 2015 (incorporated by
reference to Exhibit 2.2 to the Company's Current Report on Form 8-K filed June 29, 2015).
2.3***
Employee Matters Agreement by and between the Company and Energizer Holdings, Inc. dated as of June 25, 2015
(incorporated by reference to Exhibit 2.3 to the Company's Current Report on Form 8-K filed June 29, 2015).
2.4***
Transition Services Agreement by and between the Company and Energizer Holdings, Inc. dated as of June 25, 2015
(incorporated by reference to Exhibit 2.4 to the Company's Current Report on Form 8-K filed June 29, 2015).
2.5***
Contribution Agreement by and between the Company and Energizer Holdings, Inc. dated June 30, 2015 (incorporated by
reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed July 1, 2015).
3.1
3.2
3.3
4.1
4.2
4.3
10.1
10.2
10.3
10.4
10.5
Amended and Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended December 31, 2013).
Articles of Merger effective June 30, 2015 (incorporated by reference to Exhibit 3.1 to the Company's Current Report on
Form 8-K filed July 1, 2015).
Amended and Restated Bylaws of the Company effective June 30, 2015 (incorporated by reference to Exhibit 3.2 to the
Company's Current Report on Form 8-K filed July 1, 2015).
Indenture, dated as of May 19, 2011, by and among the Company, the guarantors named therein, and The Bank of New York
Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form
8-K, filed May 19, 2011).
First Supplemental Indenture, dated as of May 19, 2011, by and among the Company, the guarantors named therein, and The
Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.2 of the Company's
Current Report on Form 8-K, filed May 19, 2011).
Second Supplemental Indenture (including the Form of Note), dated as of May 24, 2012, by and among the Company, the
guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated by reference to
Exhibit 4.2 to the Company's Current Report on Form 8-K filed May 24, 2012).
Credit Agreement, dated June 1, 2015, by and among the Company, as borrower, JPMorgan Chase Bank, N.A., as
administrative agent, and Bank of America, N.A., The Bank of Tokyo-Mitsubishi UFJ, Ltd., and Citibank, N.A., as co-
syndication agents (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed June 1,
2015).
Omnibus Amendment No. 1 dated as of September 25, 2015 to Credit Agreement and Subsidiary Guaranty by and among
Edgewell Personal Care Company, as borrower, Edgewell Personal Care Brands, LLC, as new subsidiary borrower, certain
other subsidiaries of Edgewell, as subsidiary guarantors, JPMorgan Chase Bank, N.A., as administrative agent, Bank of
America, N.A., The Bank of Tokyo-Mitsubishi UFJ, Ltd., and Citibank, N.A., as co-syndication agents, and the various
lenders who are a party thereto (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed
September 29, 2015).
Amendment No. 2 to Credit Agreement by and among Edgewell Personal Care Company, as borrower, Edgewell Personal
Care Brands, LLC, as subsidiary borrower, certain other subsidiaries of Edgewell Personal Care Company, as subsidiary
guarantors, JPMorgan Chase Bank, N.A., as administrative agent, and the various lenders who are a party thereto
(incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed April 29, 2016).
Amendment No. 3 to Credit Agreement dated as of March 13, 2017, by and among Edgewell Personal Care Company, as
borrower, Edgewell Personal Care Brands, LLC, as subsidiary borrower, certain other subsidiaries of Edgewell Personal Care
Company, as subsidiary guarantors, JPMorgan Chase Bank, N.A., as administrative agent, Bank of America, N.A., as
syndication agent, and the various lenders who are a party thereto (incorporated by reference to Exhibit 10.1 to the Company's
Current Report on Form 8-K filed March 14, 2017).
Increasing Lender Supplement dated as of March 13, 2017, by and among The Bank of Tokyo-Mitsubishi UFJ, Ltd., as
increasing lender, Edgewell Personal Care Company, as borrower, and JPMorgan Chase Bank, N.A., as administrative agent
(incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed March 14, 2017).
104
10.6
10.7
10.8
10.9
10.10
Credit Agreement by and among Edgewell Personal Care Netherlands B.V., as borrower, the Company, and The Bank of
Tokyo-Mitsubishi UFJ, Ltd., as Administrative Agent (incorporated by reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K filed June 15, 2015).
Amendment No. 1 dated as of September 25, 2015 to Credit Agreement by and among Edgewell Personal Care Netherlands
B.V., Edgewell Personal Care Company, the institutions listed on the signature pages thereto and the Bank of Tokyo-
Mitsubishi UFJ, Ltd., as the administrative agent for the lenders referred to therein (incorporated by reference to Exhibit 10.2
to the Company's Current Report on Form 8-K filed September 29, 2015).
Master Accounts Receivable Purchase Agreement dated as of September 15, 2017 among Edgewell Personal Care, LLC, as
the Seller, Edgewell Personal Care Company, as Guarantor, and The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch,
as the Purchaser (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed September 19,
2017).
Trademark License Agreement by and between the Company and Energizer Brands, LLC dated June 25, 2015 (incorporated
by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed June 29, 2015).
Trademark License Agreement by and between the Company and Wilkinson Sword GmbH, as licensors, and Energizer
Holdings, Inc. dated June 25, 2015 (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K
filed June 29, 2015).
10.11
Tax Sharing Agreement (incorporated by reference to Exhibit 2.2 of the Company’s Post-Effective Amendment No. 1 to Form
10, filed April 19, 2000).
10.12**
A Summary of the Company's director compensation program (incorporated by reference to the Company's Definitive Proxy
Statement for the fiscal year ended September 30, 2016).
10.13**
Form of Indemnification Agreement (for directors with existing agreements) (incorporated by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K filed May 28, 2015).
10.14**
Form of Indemnification Agreement (for new directors) (incorporated by reference to Exhibit 10.2 to the Company's Current
Report on Form 8-K filed May 28, 2015).
10.15**
Second Amended and Restated 2009 Incentive Stock Plan (incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended December 31, 2013).
10.16**
Form of Restricted Stock Equivalent Award Agreement (incorporated by reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K filed November 14, 2014).
10.17**
Form of Restricted Stock Equivalent Award Agreement (incorporated by reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K filed July 10, 2015).
10.18**
Form of Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.2 to the Company's Current Report
on Form 8-K filed July 10, 2015).
10.19**
Form of Performance Restricted Stock Equivalent Award Agreement (incorporated by reference to Exhibit 10.16 to the
Company's Annual Report on Form 10-K for the year ended September 30, 2016).
10.20**
Form of annual Restricted Stock Equivalent Award Agreement for Directors (incorporated by reference to Exhibit 10.15 to the
Company's Annual Report on Form 10-K for the year ended September 30, 2015).
10.21*,** Form of annual Restricted Stock Equivalent Award Agreement for Directors.
10.22**
Form of appointment Restricted Stock Equivalent Award Agreement for Directors (incorporated by reference to Exhibit 10.16
to the Company's Annual Report on Form 10-K for the year ended September 30, 2015).
10.23**
Form of Change of Control Employment Agreement, as amended December 31, 2008 (incorporated by reference to Exhibit
10.1 of the Company's Current Report on Form 8-K filed January 6, 2009).
10.24**
Form of Change of Control Employment Agreement for use with designated individuals subsequent to January 1, 2012
(incorporated by reference to Exhibit 10.64 to the Company's Annual Report on Form 10-K for the year ended September 30,
2012).
10.25**
Form of Change of Control Agreement with certain Executive Officers (incorporated by reference to Exhibit 10.3 to the
Company's Current Report on Form 8-K filed July 10, 2015).
10.26**
Form of Change of Control Agreement with certain Executive Officers (incorporated by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K filed May 2, 2017).
10.27**
January 1, 2015 Restatement of the Company's Executive Savings Investment Plan (incorporated by reference to Exhibit
10.21 to the Company's Annual Report on Form 10-K for the year ended September 30, 2015).
105
10.28**
Amendment to the Company's Executive Savings Investment Plan, effective July 1, 2015 (incorporated by reference to
Exhibit 10.12 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2015).
10.29**
2010 Restatement of the Company's Supplemental Executive Retirement Plan dated October 15, 2010 (incorporated by
reference to Exhibit 10.54 of Amendment No. 1 to the Company's Annual Report on Form 10-K/A, filed May 16, 2011).
10.30**
10.31**
10.32**
First Amendment to the 2010 Restatement of the Company's Supplemental Executive Retirement Plan, effective July 1, 2015
(incorporated by reference to Exhibit 10.24 to the Company's Annual Report on Form10-K for the year ended September 30,
2015).
Second Amendment to the 2010 Restatement of the Company's Supplemental Executive Retirement Plan, effective July 1,
2015 (incorporated by reference to Exhibit 10.13 to the Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 2015).
2009 Restatement of the Company's Deferred Compensation Plan, as amended and restated effective as of January 1, 2009
(incorporated by reference to Exhibit 10 of the Company's Annual Report on Form 10-K for the year ended September 30,
2008).
10.33**
First Amendment to the 2009 Restatement of the Company's Deferred Compensation Plan (incorporated by reference to
Exhibit 4.3 to the Company's Registration Statement on Form S-8 filed November 21, 2012).
10.34**
Amendment No. 2 to the 2009 Restatement of the Company's Deferred Compensation Plan (incorporated by reference to
Exhibit 4.4 to the Company's Registration Statement on Form S-8 filed November 21, 2012).
10.35**
Amendment No. 3 to 2009 Restatement of the Company's Deferred Compensation Plan, dated November 7, 2011
(incorporated by reference to Exhibit 10.59 to the Company's Annual Report on Form 10-K for the year ended September 30,
2012).
10.36**
Amendment No. 4 to the 2009 Restatement of the Company's Deferred Compensation Plan (incorporated by reference to
Exhibit 10.60 to the Company's Annual Report on Form 10-K for the year ended September 30, 2012).
10.37**
Amendment to the 2009 Restatement of the Company's Deferred Compensation Plan, effective July 1, 2015 (incorporated by
reference to Exhibit 10.14 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2015).
10.38**
Executive Group Personal Excess Liability Insurance Plan (incorporated by reference to Exhibit 10.9 of the Company's Post-
Effective Amendment No. 1 to Form 10, filed April 19, 2000).
10.39**
Amended and Restated Executive Officer Bonus Plan (incorporated by reference to Exhibit 10.36 to the Company's Annual
Report on Form 10-K for the year ended September 30, 2016).
10.40**
2017 Edgewell Personal Care Company Financial Planning Plan (incorporated by reference to Exhibit 10.39 to the Company's
Annual Report on Form 10-K for the year ended September 30, 2017.
10.41**
Edgewell Personal Care Company Executive Severance Plan (incorporated by reference to Exhibit 10.4 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2017).
21.1*
Subsidiaries of Registrant.
23.1*
Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm.
31.1*
31.2*
32.1*
32.2*
101*
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as
amended, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as
amended, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
The following materials from the Edgewell Personal Care Company Annual Report on Form 10-K formatted in eXtensible
Business Reporting Language (XBRL): (i) the Consolidated Statements of Earnings and Comprehensive Income for the years
ended September 30, 2016, 2017 and 2018, (ii) the Consolidated Balance Sheets at September 30, 2017 and 2018, (iii) the
Consolidated Statements of Cash Flows for the years ended September 30, 2016, 2017 and 2018, (iv) Consolidated Statement
of Changes in Shareholders' Equity for the period from October 1, 2015 to September 30, 2018, and (v) Notes to Consolidated
Financial Statements for the year ended September 30, 2018.
*Filed herewith.
**Denotes a management contract or compensatory plan or arrangement.
***The Company hereby undertakes to furnish supplementally a copy of any omitted schedule or exhibit to such agreement to the Securities
and Exchange Commission upon request.
106
EDGEWELL PERSONAL CARE COMPANY
List of Subsidiaries
Subsidiary Name
American Safety Razor Australia Pty. Limited
Edgewell Personal Care Australia Pty. Ltd.
Edgewell Personal Care Austria GmbH
Smile-Tote, Inc.
Edgewell Personal Care Canada ULC
Edgewell Personal Care Group, Inc. Cayman Islands
Schick Cayman Islands Ltd.
Edgewell Cayman Islands Ltd.
Edgewell Personal Care Chile SpA
Edgewell Personal Care Netherlands B.V., Agencia en Chile
Schick (Guangzhou) Company Limited
Edgewell Personal Care Colombia S.A.S.
Personna International CZ s.r.o.
Bulldog Skincare, Inc.
Edgewell Personal Care Brands, LLC
Edgewell Personal Care Group, Inc.
Edgewell Personal Care, LLC
Edgewell Personal Care Middle East, Inc.
Edgewell Personal Care Taiwan Ltd.
Jack Black, L.L.C.
Playtex Investment Corporation
Playtex Manufacturing, Inc.
Playtex Marketing Corporation
Playtex Products, LLC
Schick Manufacturing, Inc.
Sun Pharmaceuticals, LLC
Tanning Research Laboratories, LLC
Edgewell Personal Care Middle East, Inc. DMCC Branch
Hawaiian Tropic Europe, Inc.
Edgewell Personal Care France SAS
Edgewel Personal Care Holding GmbH
Wilkinson Sword GmbH
Edgewell Personal Care Hong Kong Limited
Schick Asia Limited
Hawaiian Tropic Europe, LLC., Ireland Branch
Personna International Israel Ltd.
Edgewell Personal Care Italy S.r.L.
Exhibit 21.1
Jurisdiction of
Incorporation
Australia
Percentage
of Control
100%
Australia
Austria
California
British
Columbia
(Canada)
Cayman Islands
Cayman Islands
Cayman Islands
Chile
Chile
China
Colombia
Czech Republic
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Dubai
Florida
France
Germany
Germany
Hong Kong
Hong Kong
Ireland
Israel
Italy
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Schick Japan Kabushiki Kaisha
Centro de Manufactura Edgewell Obregon, S. de R.L. de C.V.
Edgewell Personal Care Mexico S.A. de C.V.
Personna International de Mexico, S.A. de C.V.
Edgewell Personal Care Netherlands B.V.
Tropria Holding, B.V.
Edgewell Personal Care New Zealand ULC
Carewell Industries, Inc.
Edgewell Personal Care Peru S.A.
Edgewell Personal Care Poland sp.zo.o.
Edgewell Personal Care Puerto Rico, Inc.
Schick (Guangzhou) Company Limited, Shanghai Branch
Edgewell Personal Care Spain, S.L.
Edgewell Personal Care Taiwan Ltd., Taiwan Branch
Bulldog Skincare Holdings Limited
Bulldog Skincare Limited
Edgewell PBG GP
Edgewell Personal Care UK Limited
Edgewell Personal Care Holdings UK Ltd.
Edgewell Personal Care Investments UK Ltd.
Personna International UK Limited
Shavekit Limited
Wilkinson Sword Limited
Edgewell Personal Care VZ, C.A.
Importadora Schick, C.A.
Schick de Venezuela, C.A.
Schick Materia Prima, C.A.
Japan
Mexico
Mexico
Mexico
Netherlands
Netherlands
New Zealand
New York
Peru
Poland
Puerto Rico
Shanghai
Spain
Taiwan
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Venezuela
Venezuela
Venezuela
Venezuela
100%
100%
(Partnership)
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
(Partnership)
100%
100%
100%
100%
~12%
100%
100%
100%
100%
100%
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Forms S 8 (Nos. 333-33690, 333-33676,
333-35116, 333-157070, 333-171921 and 333-194033) of Edgewell Personal Care Company of our report dated November 16,
2018 relating to the financial statements, financial statement schedule, and the effectiveness of internal control over financial
reporting, which appears in this Form 10 K.
/s/ PricewaterhouseCoopers LLP
St. Louis, Missouri
November 16, 2018
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.1
I, David P. Hatfield, certify that:
1.
I have reviewed this annual report on Form 10-K of Edgewell Personal Care Company;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which
this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and
report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: November 16, 2018
/s/ David P. Hatfield
David P. Hatfield
Chief Executive Officer
(principal executive officer)
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.2
I, Rod R. Little, certify that:
1.
I have reviewed this annual report on Form 10-K of Edgewell Personal Care Company;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and
report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant's internal control over financial reporting.
Date: November 16, 2018
/s/ Rod R. Little
Rod R. Little
Chief Financial Officer
(principal financial officer)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
The undersigned officer of Edgewell Personal Care Company (the "Company") hereby certifies to his knowledge that the
Company's annual report on Form 10-K for the period ended September 30, 2018 (the "Report"), as filed with the Securities and
Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) of 15(d), as applicable, of the
Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Dated: November 16, 2018
/s/ David P. Hatfield
David P. Hatfield
Chief Executive Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
The undersigned officer of Edgewell Personal Care Company (the "Company") hereby certifies to her knowledge that the
Company's annual report on Form 10-K for the period ended September 30, 2018 (the "Report"), as filed with the Securities and
Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) of 15(d), as applicable, of the
Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Dated: November 16, 2018
/s/ Rod R. Little
Rod R. Little
Chief Financial Officer
Executive Officers and Senior Leadership
David P. Hatfield
Chief Executive Officer, President
and Chairman of the Board
Colin Hutchison
Chief Operating Officer
Rod R. Little
Chief Financial Officer
John Hill
Chief Human Resources Officer
Board of Directors
David P. Hatfield
Chief Executive Officer, President
and Chairman of the Board
Robert W. Black
Executive Advisor Partner,
Wind Point Partners
Senior Advisor,
The Boston Consulting Group, Inc.
George Corbin
Chief Digital Officer,
Mars Incorporated
Daniel J. Heinrich
Executive Vice President and
Chief Financial Officer (Retired),
The Clorox Company
Marisa Iasenza
Chief Legal Officer and Secretary
Stephanie Lynn
Vice President, eCommerce
Anne-Sophie Gaget
Vice President, Global Strategy
and Innovation
Jennifer Seeser
Vice President, Controllership
and External Reporting
Paul Hibbert
Vice President, Global Supply Chain
and Operations
Chris Gough
Vice President, Investor Relations,
Corporate Development and Treasury
Carla C. Hendra
Global Chief Executive,
Ogilvy Consulting Worldwide
R. David Hoover
Chairman and Chief Executive
Officer (Retired),
Ball Corporation
John C. Hunter, III
Chairman, President and
Chief Executive Officer (Retired),
Solutia, Inc.
James C. Johnson
General Counsel (Retired),
Loop Capital Markets LLC
Elizabeth Valk Long
Executive Vice President (Retired),
Time Inc.
Joseph D. O'Leary
President and Chief Operating
Officer (Retired),
PetSmart, Inc.
Rakesh Sachdev
Chief Executive Officer,
Platform Specialty Products Corporation
Gary K. Waring
Assurance Partner (Retired),
Ernst & Young LLP
Corporate Information
Corporate Headquarters
Edgewell Personal Care Company
6 Research Drive
Shelton, CT 06484
www.edgewell.com
Fiscal Year End
September 30
Shareholders
On September 30, 2018, there were approximately
7,838 shareholders of record.
Independent Accountants
PricewaterhouseCoopers LLP
St. Louis, MO
Stock Symbol
EPC (NYSE)
Financial Community Information
Inquiries from institutional investors, financial analysts,
registered representatives, portfolio managers and
individual shareholders should be directed to Investor
Relations at Edgewell’s corporate headquarters.
Transfer Agent
Continental Stock Transfer & Trust Company is
Edgewell’s stock transfer agent, registrar and dividend
paying agent, and maintains the Company’s shareholder
records. Shareholders seeking information about
account records, stock certificates and change of
address should contact:
Continental Stock Transfer
& Trust Company
One State Street, 30th Floor
New York, NY 10004
800-509-5586
Cautionary Statements Regarding
Forward-Looking Statements
We discuss expectations regarding future performance,
events and outcomes, such as our business outlook
and objectives, in this annual report. All such
statements are “forward-looking statements,” and
are based on financial data and our business plans
available as of the date of this annual report, which may
become out-of-date or incomplete. We assume no
obligation to update any forward-looking statements as
a result of new information, future events or other
factors. Forward-looking statements are inherently
uncertain and investors must recognize that actual
results could be significantly different from our
expectations. Risks and uncertainties that could cause
results to differ from expectations are detailed in
Edgewell’s Annual Report on Form 10-K for the year
ended September 30, 2018, and in our other filings
with the Securities and Exchange Commission.
Edgewell Personal Care Company | 6 Research Drive, Shelton, CT 06484
www.edgewell.com | ©2018 Edgewell