Jacqueline E. Burwitz - Vice President of Investor Relations Daniel J. Sescleifer - Chief Financial Officer and Executive Vice President Ward M. Klein - Chief Executive Officer, Director, Member of Executive Committee and Member of Finance & Oversight Committee.

William B. Chappell - SunTrust Robinson Humphrey, Inc., Research Division Nik Modi - RBC Capital Markets, LLC, Research Division William Schmitz - Deutsche Bank AG, Research Division Ali Dibadj - Sanford C.

Bernstein & Co., LLC., Research Division Wendy Nicholson - Citigroup Inc, Research Division Christopher Ferrara - Wells Fargo Securities, LLC, Research Division Kevin M. Grundy - Jefferies LLC, Research Division Olivia Tong - BofA Merrill Lynch, Research Division Constance Marie Maneaty - BMO Capital Markets U.S.

Jason English - Goldman Sachs Group Inc., Research Division Jason M. Gere - KeyBanc Capital Markets Inc., Research Division.

Good morning. My name is Celia, and I will be your conference operator today. At this time, I would like to welcome everyone to Energizer Holdings' First Quarter Fiscal 2014 Results Conference Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the conference call over to Ms.

Jackie Burwitz, Vice President, Investor Relations. You may begin your conference..

Thank you, Celia, and good morning, everyone. Thanks for joining us on Energizer's First Quarter Fiscal 2014 Earnings Conference Call. With me this morning are Ward Klein, Chief Executive Officer; and Dan Sescleifer, Chief Financial Officer. This call is being recorded and will be available for replay via our website, energizerholdings.com.

During our prepared comments and the question-and-answer session that follows, we may make statements about our expectations for future plans and performance, including future sales, earnings, capital expenditures, advertising and promotional spending, product launches, the amount and timing of savings and costs related to restructurings, the amount and timing of changes to our working capital metrics, currency fluctuations, tax rates, raw materials and commodity costs, category value, acquisition or integration plans and future plans for return of capital to shareholders.

Any such statements are forward-looking statements, which reflect our current views with respect to future events. These statements are based on assumptions and are subject to risks, including those described under the caption Risk Factors in our annual report on Form 10-K filed November 21, 2013.

These risks may cause our actual results to be materially different from those expressed or implied by our forward-looking statements. We do not undertake to update these forward-looking statements even though our situation may change, and these forward-looking statements represent our views as of today only.

During this call, we will refer to non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with Generally Accepted Accounting Principles.

A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is shown in the press release issued earlier today, which is available in the Investor Relations section of our website, energizerholdings.com.

Management believes these non-GAAP measures provide investors valuable information on the underlying trends of the business. With that, I would like to turn the call over to Dan for a review of the first quarter results..

Thanks, Jackie, and good morning, everyone. I'll start with the headlines for the quarter. First, adjusted earnings per share was near our expectations as lower spending and upside from the Feminine Care acquisition helped to offset organic top line softness and unfavorable currencies.

Second, net sales were soft in the quarter due to expected shortfalls within Household Products and weaker-than-expected revenue in Personal Care. Third, acquisition integration efforts are underway, and the financial performance of our newly acquired Feminine Care business is exceeding our expectations.

And finally, we continue to make excellent progress on our cost reduction efforts, and our board has authorized us to expand the scope of the program to include the balance of the organization. Now some details for the quarter. Earnings per share x unusuals was $2.10 per share or 4.5% below prior year.

Sales shortfalls across both divisions contributed to the decline. Within Household Products, top line results were in line with expectations.

Organic net sales were 10% below a year ago, with about 6 points of the decline due to the previously mentioned loss of distribution in 2 key retail accounts in the U.S., 3 points due to lapping prior year Hurricane Sandy volumes and 1 point due to import restrictions in Venezuela and Argentina.

However, Personal Care sales were much softer than expected. Organic sales declined 6% below a year ago, with about 3 points of the decline due primarily to weak category volumes and some share declines, 1 point due to timing of prior innovation launch volumes and 1 point due to pricing controls and import restrictions in Venezuela and Argentina.

Ward will provide more details behind the categories and our share performance later in the call. As for Venezuela and Argentina, we continue to monitor the developing situations in these countries.

Price controls and currency restrictions are continuing challenges in Venezuela, as are import restrictions, price controls and the recent devaluation in Argentina. In addition, there is heightened risk of a devaluation in Venezuela based on recent government statements.

The accretion from the recent Feminine Care acquisition exceeded our expectations during the quarter, providing $14 million of segment profit and $0.14 of earnings per share accretion.

Our original estimate for the full fiscal year of approximately $0.10 of accretion was conservative as there has been upside due to better-than-anticipated product costs. In addition, we do not have any A&P spending behind these brands in the quarter.

Overall, this business generates gross margin percent significantly below our average Personal Care margins. Nevertheless, projected margins are above what was factored into our original financial outlook. We continue to make excellent progress in integrating this business and feel more bullish than before with the projected fiscal 2014 benefit.

However, we will ramp up brand building support as we progress throughout the year, resulting in a majority of accretion occurring in the first half of the year. As we complete integration of this new business, we estimate full year adjusted earnings per share accretion will be approximately $0.25.

This projection excludes any acquisition-related costs that have been spiked out as unusual items in the tables provided within the release. Now breaking down the P&L. Gross margin, excluding acquisition costs and currencies, increased 50 basis points versus the prior year.

This favorability is a continued trend and a result of our restructuring efforts. Commodity costs were also favorable versus prior year.

SG&A spending, excluding restructuring and acquisition-related costs, was below prior year as restructuring savings and tight spending controls helped to offset inflationary costs and increased expenses related to mark-to-market changes incurred as part of our unfunded deferred compensation liability.

Due to its unfunded status, we adjust the liability balance to account for market price volatility. We have recently taken actions to reduce the volatility by freezing the program and modifying the investment options. This is yet another example of the depth of our restructuring program and efforts we are taking to limit the volatility within our P&L.

A&P as a percent of sales was 7.3% or 60 basis points below a year ago. The decreased spending was a result of the timing of promotion and innovation launch activity as compared to the prior year. We remain committed to investing at our full year planned levels.

Interest expense was about $2 million below a year ago due to lower average debt outstanding. Other financing costs were favorable in the quarter due to a small gain on foreign currency hedging contracts, net of revaluation losses by nonfunctional currency balance sheet exposures. This compares to a nearly $8 million expense last year.

Last year's number was impacted by foreign exchange losses related primarily to the yen and the loss from mark-to-market adjustments on certain commodity contracts. Finally, the effective tax rate in this quarter was 28.9% and 29.5% on an x unusuals basis. This is in line with our full year x unusuals estimates. Moving to the balance sheet.

We continue to make significant progress with our working capital initiatives. As mentioned during our fourth quarter call, we surpassed our original project goals and believe there's more opportunity ahead. In the quarter, working capital as a percent of sales was 17%.

This represents an improvement of 110 basis points versus our year-end results and a 590-basis-point reduction from the 2011 baseline period established at the beginning of the improvement initiative. In terms of capital allocation, dividend payments in the quarter were $31 million as compared to $25 million last year.

And during the quarter, we did not repurchase any shares. Before turning the call over to Ward, I wanted to briefly comment on the status of the opening balance sheet and valuation efforts associated with our acquisition. We have recorded preliminary estimates including the inventory valuation adjustment.

We expect to finalize our valuation and report any final adjustments during the second quarter. With that as the overview of the quarter, I will turn the call over to Ward..

Thank you, Dan, and good morning, everyone. Before we discuss the quarter results, let me first cover what we are as a company.

At the onset of the restructuring last fiscal year, we focused on 2/3 of our overall global corporate footprint, including almost all of the Household business, with the goal of reducing our costs and increasing our competitiveness in a declining category.

We have been pleased with the level of engagement from our organization and the results of those efforts. We feel that the renewed focus on the core business and reinvestment in our brands will yield tangible results for the business in the future.

We are now in the process of expanding this restructuring program across the remainder of the Personal Care division, particularly in line with the recent weak category trends we have been seeing.

The goal of the program is to simplify our processes and organization, to improve our marketplace agility and to enable reinvestment back into the business.

We believe the increased investment in innovation, brand equity and critical capability development will benefit our consumers and customers and provide the opportunity to resume the growth of our portfolio. Now turning to the quarter. As Dan stated, first quarter adjusted earnings per share results were in line with our expectations.

However, there were certain trends that we believe will persist in the first half of our fiscal year, which led to our decision to adjust our full year earnings outlook. I will get into the details of our updated estimates a little bit later. First, I'd like to discuss segment performance.

As Dan already alluded to, Personal Care organic sales were down 6% versus a year ago. This is below our expectations as we originally assumed that the North American Personal Care categories in which we compete would stabilize after a turbulent year of heavy promotions. However, this is not the case. This is evident in the latest 12-week U.S.

category results. Men's razors and blades system category volumes were down nearly 16%, and category value was down almost 11%. Women's system category was down nearly 3% in volume and 2% in value. The disposable category was down nearly 3% in volume and 1% in value, and Shave Preps category was down 3% in volume and 3.5% in value.

The Fem Care category was down nearly 3% in volume and 1% in value. Infant Care category down 6% in volume, 3% in value. And Sun Care category volumes were up 3% in volume and 8% in value, but as you know, this is a relatively light quarter for Sun Care sales.

On an aggregate basis, the categories in which Energizer Personal Care competes were down almost 4% in value in the latest 12 weeks. We believe many of these category trends will continue through at least the first half of our fiscal year.

As a result, we modified our top line outlook from low single-digit organic growth in Personal Care to flat versus a year ago. It is important to note that we believe this is a short-term setback for these categories.

Longer-term growth projections remain positive due to innovation, trade-up opportunities and, most importantly, the strong brands and products we have to offer our customers and consumers. In the context of the very weak category trends, our U.S. share results were positive to mixed over the 12 weeks ending December 14.

In our largest Personal Care segment, Shaving, our total U.S. razor and blades share grew 90 basis points, led by continued double-digit volume growth behind our Hydro franchise. Sun Care share grew 170 basis points due in part to the carryover benefit of our new products introduced last year.

However, Shave Preps, Infant Care and Fem Care shares declined due primarily to aggressive competitor promotional activity. On a global basis, our razor and blades share grew 30 basis points. Before leaving Personal Care, I did want to comment on our acquisition of the Stayfree, Carefree and o.b. brands that closed in the quarter.

Integration efforts are progressing well. As Dan mentioned, we are more bullish on our financial outlook than our original estimates, primarily due to a more improved cost and margin structure.

We are confident that these brands will round out our Feminine Care portfolio, and we'll make this category segment an important component of our overall Personal Care business. It is also important to note that we remain committed to increasing [indiscernible] support levels behind these brands.

Increased investments will be concentrated in the back half of the year as we fully integrate these brands into our overall Feminine Care marketing plan. Now turning to Household Products. As Dan mentioned, sales declined 10%, but this was in line with our expectations.

Previously disclosed loss of distribution contributed about 6 points to the decline, and lapping Hurricane Sandy response volumes contributed another 3 points. Global category value was down nearly 7% in our latest 12-week data. However, nearly 1/2 of the decline was due to lapping prior year hurricane response volumes in the U.S.

Excluding this impact, category results remained in line with our expectations, being down 2% to 4%. In terms of market share, we experienced a 1.9-point decline due solely to the previously disclosed loss of distribution at 2 U.S. retail customers. However, outside of these accounts, our global share actually grew 60 basis points, and our U.S.

share grew 140 basis points as we have been able to leverage our marketing innovation and expand our merchandising presence and distribution across many key markets. This is a clear sign that our battery business remains strong and healthy and continues to represent an important part of our overall portfolio.

Looking ahead, we continue to expect the global category to be down 2% to 4% for the remainder of fiscal 2014, with our market shares beginning to stabilize in July as we anniversary customer losses. Before moving to our revised full year outlook, I wanted to provide an update on our restructuring project.

We continue to make excellent progress with over $140 million of savings realized thus far. We have met our headcount reduction goal, and initiatives are tracking as planned. As a result of the increased scope and success of the original project initiatives, we have increased our total project gross savings estimate from $225 million to $300 million.

We expect the actions necessary to complete the program will be completed by the end of fiscal 2015, and the full run rate of savings are expected to be realized in fiscal 2016. This represents an additional year to the program and an additional $75 million of expected savings.

Due to the planning and implementation timing needed to execute this program, we believe the incremental savings will begin in fiscal '15.

In this volatile and competitive environment, we believe it's critical to optimize our cost structure to provide for increased financial flexibility to offset future volatility and to allow for incremental investments in our business.

As a result of the negative category and currency trends we saw in quarter 1, and our expectations that many of these headwinds will continue through at least first half of our fiscal year, we have decided to adjust our full year earnings outlook by lowering our adjusted EPS outlook from the $7.25 to $7.50 range down to the $7 to $7.25 range.

Most importantly, this 3% reduction reflects our commitment to hold to our original brand investment plans. We believe that we cannot and should not adjust our spending plans down, due to the temporary category declines we experienced. Included within the adjusted outlook are the following assumptions.

Total organic net sales, excluding the impact of the acquisition and currencies, are expected to decline in the low single digits. Personal Care organic sales are projected to be flat as compared to the prior year.

The revised outlook reflects the shortfall realized in the first quarter, anticipated category headwinds through the first half of fiscal year and impacts from import restrictions and price controls in Venezuela and Argentina.

For Household Products, organic net sales are expected to decline mid-single-digits, consistent with our previous outlook; restructuring savings of $100 million versus the prior year, which is at the high end of our original estimated range.

It's important to note that the impact of the scope expansion just announced is not expected to have a material impact to fiscal '14 results. A&P as a percent of net sales will be in the range of 10.5% to 11%, consistent with our original plans, as we remain committed to investing in the long-term health of the brands.

And EPS accretion of approximately $0.25 from the acquisition of the Feminine Care brands, excluding the impact of deal and integration costs and the inventory step-up adjustment. This is higher than our expectations in November for the reasons Dan stated previously.

Unfavorable foreign currency is affecting operating profit of approximately $45 million to $50 million. This is higher than our original range of $20 million to $25 million. And an effective tax rate, excluding unusual items, in the range of 29% to 30%, again consistent with our original outlook.

As we look at the quarterly cadence of earnings, we continue to expect earnings per share growth to be in the back half of the year as the sales comps in the first half will be negatively impacted by many of the trends we saw in quarter 1. In addition, we have several new products that will be launched this year.

Within Personal Care, we will be launching Hydro Silk Sensitive and Hydro Groomer, a 4-in-1 shaving tool for grooming in all areas of the body. In addition, we will be adding the Ribbons [ph] moisturizing technology used in our Sun Care products into our new Intuition Ribbons women's [ph] system product.

We will also be introducing the first of Tampon's odor shield technology to defend our position as the #1 sport tampon brand. In Sun Care, we have several new products, including a line of Banana Boat for men and Banana Boat Sport Power Stick [ph] technology to further enhance our position as the #1 brand in the sport category.

We are also extending the Hydro Silk and Hydro Disposables to additional international markets.

In closing, the primary objectives for 2014 remain unchanged, restoring longer-term growth in Personal Care by continuing to focus on and fund innovation, expand distribution within Household Products and leverage our strong brand equity, integrating the acquisition with our existing Playtex Feminine Care business and executing against our restructuring and working capital initiatives.

We are confident that the plans we have are in the best interest of our shareholders and will position us for long-term success. Operator, you can now open up the line for questions..

[Operator Instructions] The first question comes from the line of Bill Chappell, SunTrust..

Ward, just maybe trying to understand the Personal Care issues and the competitive landscape.

Do you think it's just one player being irrational or are you seeing kind of overall deflation as some of the players -- maybe all of you are starting to see it, more favorable commodity costs? And is this deflation that we would expect through the year? I mean, give us some more color on why you think this is happening..

Great question, Bill. I think it varies by category, at least in the categories in which we compete. The big news for us was the razor and blade deflation, and declines that we saw for the quarter are much more than we expected.

But as we dig into the numbers, a lot of it seems to be related to substantially reduced promotional activity out of our major competitor in that category. So even though -- and we're up against extremely high levels of promotion in that category a year ago, as you know.

So frankly, our assessment on razors and blades right now is there's loaded pantries. The discounting to get to those loaded pantries is abating. I think it's going to take this quarter and maybe the Jan, Feb, March quarter to work through that.

But in a way, it's somewhat healthy for the category I think, long term, as we see, at least in the razor and blade portion, discount levels and promotional spend get back to more normal levels. We haven't quite seen that in Shave Preps.

And in fact, at our main competitor in Shave Preps, the hyper levels of promotional activity we've been dealing with over the past calendar year, we continue to see in the quarter. And its impact on both our share but actually on the overall categories is pretty evident. So not quite sure what to make of that.

And I think the big news really for us is razors and blades..

Okay, great. And then just a follow-up.

Have you seen any competitive change on Fem Care post-acquisition? I mean, have they become more aggressive to kind of -- now there's more ownership of those brands?.

I've not -- I'm not aware of anything in particular. Of course, we just acquired those brands, as you know, in the past quarter. And so how that plays out remains to be seen. I think that category typically has been viewed as a battle of 2 titans kind of taking on each other, and that's kind of been the nature.

But we obviously have a much larger position, but I think a stronger position, more easily defendable position as a result of these acquisitions. But again, our approach in that category, as in all categories, is really to compete through innovation and strengthen the brand equities. And I don't see us really changing that strategy for that category..

The next question comes from the line of Nik Modi, RBC Capital..

Quick question on cost savings. Ward, if you can just address how you're thinking about it in terms of the trade spending, the international affiliate structure. If you could just talk about how much of that is included in the expansion of the program, if those are things that you still need to look into..

I'll turn it over to Dan for the numbers on that. But really, as we've approached this massive cost program, we've looked at everything. And so all the items you listed have been on the table and remain on the table as we find just better ways to compete. So as you know, we've looked very heavily at corporate overhead.

We made a lot of changes to corporate programs that Dan's alluded to in the past. A lot of work has been done on the Household Products division, and it's been the bulk of the work, not all of the work but the bulk of the work this past year, 1.5 years.

And really, what we're signaling is expansion of the scope to the Personal Care division, but we're really looking at a lot of the same things. We're looking at procurement. We're having a great deal of success in terms of centralizing our procurement operations and the savings we've seen out of that. Supply chain, we're looking at great success there.

Affiliate structure, we see opportunities to consolidate these functions of not actual affiliates but back office functions, for example, support functions at international affiliates. So they're all on the table. There are a number of different work streams that have been involved in this project.

Again, it's gone faster and deeper and better than we originally anticipated, and see this rollout to the other third of the company to be kind of a natural extension of the success so far. I don't know, Dan, if you want to add anything to that..

Yes, just a couple of things. The increase to $300 million that we announced today really involves the continued success on the original scope and then broadening the scope to the rest of the organization, and you can really read into that the Personal Care division and that announcement went out internally this morning.

We do believe there are opportunities in trade promotion spending. There's a separate initiative that is underway at this point in time. Those dollars are not included in this amount, and we really have not quantified what that opportunity is.

As far as the affiliate structure goes, as Ward has said, we see opportunities in some of those savings from affiliate changes are already incorporated into the savings estimate that we have. And in addition, we have another initiative really targeted at inventory days within the supply chain organization that we have not quantified.

But we know there are opportunities to reduce working capital even more through lower inventory levels..

The next question comes from the line of Bill Schmitz, Deutsche Bank..

Just a J&J assumption. So tell me if my math is wrong, I think it was $225 million of sales. You paid $170 million for it. It was financed mostly with overseas cash. So probably interest rate 2%-ish.

Are those reliable assumptions?.

Yes, Bill. We financed -- I think, it was $135 million of the $185 million purchase price was overseas. The sales are roughly maybe a little bit lower than what you have just stated. But yes, those are correct assumptions..

Okay.

So this sort of gap in between the 31% operating margin this quarter and kind of what you guys think it does for the rest of the year, does that mean like the delta is just going to be a massive uptick in A&P spending?.

There's a lot of support behind the brands going forward, so the answer to that is yes..

Just keep in mind, there really wasn't any A&P support behind the brands during these first 10 weeks that we've owned it..

Okay, I got you. And then just on the blades and razors piece, like what's the good environment for you? I know last year was a problem because promotional spending was super intense. And then this year, the category is declining because the promotional spending came back down.

So what kind of environment would you guys want to be able to sort of optimize growth of the business?.

I think I get an environment where it's driven by innovation, which is kind of the classic trade-up opportunity, which we still have, we think, a lot of leg room and ceiling, for us anyway in our franchise.

And to be able to focus on introducing innovation, supporting innovation, supporting the brand equities, those sorts of activities, I think, are healthier for the overall category.

The amount of hyper promotion and now the yanking of that is -- and the mortgaging that follows that, is, I think, just highly disruptive for our customers and is not necessarily the way we prefer to compete. And now we've been very successful over the years with innovations like Hydro and Intuition and even earlier than that, Quattro.

And the Hydro franchise continues to grow double digits well into its fourth year as we expand that platform, as well as -- geographically, as well as new products. That is a healthy category in my mind..

Got you. I mean, I know you shaved your mustache, but it seems like people are shaving less now.

I mean, what's like the long term -- do you feel like it's an indication for maybe just like a change in consumer usage behavior?.

We're seeing a lot of the press take-up on that, but we're not really seeing that in the numbers. There's much more macro impacts on these category numbers right now than what that may be. And from a fashion trend point of view, as you know, I'm a fashion trend leader, I'm sure the world will come around to shaving its mustache..

The next question comes from the line of Ali Dibadj, Bernstein..

So the return on that incremental $75 million that you announced this time, of savings, are much lower than the original cost cutting given how high the charges are versus the savings. And they're further in the future.

So can you use that to talk a little bit about -- to give us a sense, I guess, of what that may mean in terms of future cost savings above and beyond the $300 million? And in that context, can you talk a little bit about where we are on the original idea that 80% of the cost savings dropped to the bottom line?.

Yes. Ali, this is Dan. I think the factor between the cost saves and the costs incurred, or the cost reductions versus the cost incurred, is pretty much in line with what we did originally. I mean, we originally were at $200 million of savings, and the factor is about 1 -- 1.25 of that would be the cost.

And we're fairly close to that with this announcement as well. So I think it's pretty much still in line with what we had announced before..

And on the 80% of savings going to the bottom line?.

Well, what we announced before when we upped our target to $225 million was that the additional savings all would go to investment, okay? So that means $150 million dropped to the bottom line and $75 million invested. With respect to the additional amount that we just announced this morning, those savings won't be realized probably until fiscal 2015.

We really haven't decided what the use of those funds is going to be..

Okay. And then just a broader question in terms of how you're thinking about the business, guys.

Years ago, many of us had a long list of things that we were hoping the company could do, whether it be a dividend, whether it be restructuring cost savings, whether it be changing the compensation incentives, working capital improvements, et cetera, et cetera. And to your credit, you've done many of those things, which is great.

The big one that's left on the list, I want to hear your perspective on that in particular, is portfolio change. So buying bigger things. Maybe this J&J trend is one thing you're going to continue, or on the flip side, splitting up or selling the company outright.

How are you thinking about those options in that bucket that hasn't been fully tackled, at least publicly?.

I think we certainly look at our options on a regular basis, including many of the ones you described. On the acquisition front, we have been prudent in all the acquisitions we've done. We're happy with all the acquisitions we've done.

The J&J one, we just closed on, is I think a fine example of that, which are bolt-on close-in acquisitions of leading brands. Those are the ones we like the most. The fact is there's just not that many that come along. And so we can be patient, and we don't acquire just for acquisition's sake.

But we have -- we will acquire when we find the right product to be at the right price. And I would say that on the acquisition side, we are seeing a few -- a step-up in properties coming on the market right now.

So in '14, I think, at least the way we view it, I'd characterize '14 as a little bit more active in the M&A area than the past couple of years have been. And we're actively engaged in potential opportunities there. So I think you're right in terms of a lot of the things we've focused on.

Innovation, working capital reductions, cost reductions have all been part of our efforts to enhance value for our shareholders. Acquisitions have been part of that as well. And again, we just closed on one this past quarter.

So I don't see a material change in that, but as you know, it does get a bit opportunistic when you look at acquisitions and as we look at share repurchase. And we've kind of always been opportunistic. I don't think that will change as we go forward..

And what about the other idea of divestitures or splitting or sale?.

We haven't done much in the way of divestitures. Frankly, we don't have a lot of practice with that. But we're not opposed to that. And when we look at our portfolio, if we see some business units that maybe don't fit and if there's a way to reconfigure that in a way that's accretive for shareholders, we'll be -- we're always open to that.

I think when you get things out of the portfolio, to do so in a way that's accretive to shareholders is maybe the main challenge. And I get more reluctant in pruning a portfolio if it's highly dilutive, unless we really have [indiscernible] business. And I don't think any of our businesses qualify as that..

The next question comes from the line of Wendy Nicholson, Citi..

I just want to clarify just a couple of things. First of all, just on the concept of the share buyback.

Is any share buyback reflected in your EPS forecast for this year? And then on your outlook for the Personal Care business, just to be clear, are you forecasting that the sort of the backdrop, the competitive landscape changes or that we just see more of the same and the recovery just comes from easier comps and you gaining more share?.

On the first one, our estimate does include a little bit of share repurchase to offset the dilutive effects of compensation programs of the past. That's fairly modest, I think it's maybe 0.5 million shares. So that is in the forecast, to answer your first question.

And on the second question, Wendy, from the competitive environment point of view, it's always dangerous to speculate what it will be like. We do know what we're up against historically. We know we're up against extraordinary amount of competitive discount spending, especially razors and blades this past quarter.

And there's still some extraordinary levels of discounting from last year before changing management of our major competitor that we'll be up against. But as you anniversary through that, we certainly saw in the O&D quarter a substantial reduction in the hyper promotion activity.

Again, I wouldn't want to speculate whether that's going to be the case going forward. This is -- we do have our current quarter, I think, that's still going to be a challenge for these categories, and I'm talking for the [ph] categories.

They're up against hyper levels of promotional activity that took place, and it's just going to take a while from the pantry load that took place from the hyper level of promotion to also work its way off. But I do see those 2 characters getting more normalized..

Okay.

And then could you update us on, and I'm sorry if you commented on it, but just the Axe razor business at Walmart, kind of how that's doing, is it meeting expectations, and any plans to expand that or kind of where we stand on that?.

Yes. Unfortunately, I'm real reluctant to talk about specific customers or market tests, and the one you're talking about qualifies as both. But I think we have indicated that, that market test maybe has run its course. So it's probably best maybe just to kind of leave it at that..

Okay. I'm sorry, run its course, does that mean it's over and it's going to be leaving or that you're finished with the test and -- I'm not sure how to interpret that..

Well, we're finished with the test, and again, given the nature of doing market tests in particular customers, I think it's best to leave it at that, sorry to be a little vague..

The next question comes from the line of Chris Ferrara, Wells Fargo..

I just had a question on the '14 EPS guidance. And look, I'm not looking to get down to the total nitty-gritty, but I guess big picture, the guidance was cut by like $0.125 at the midpoint but the incremental FX drag is $0.28.

All right, so I know you're getting some back from savings and from boosting the J&J accretion, but you also took a couple of points out of organic sales. So I'm just wondering how the math works.

Like is there another source of EPS that's allowing you to be at $7 to $7.25 given that incremental FX and the sales cut?.

Yes. Chris, this is Dan. You're right. You cited the 2 negatives. We do have some upside with respect to higher restructure savings. And so we blend all of those together, and it really kind of came down to lowering it by $0.25 on each end..

But you really did a good job of hitting the pushes -- the puts and the takes. Those are kind of the major positives and negatives that have gone into the number and the small revision in the number..

And I think the other element, which Ward talked about, is we're committed to spending against our planned A&P. And so despite the fact that we were relatively low in Q1, which is not a high product launch quarter for us, we will spend against plan, and irrespective of the level of sales..

I think maybe one thing I'd add to that would be, there is a more normalized assumption regarding the Sun Care market for the U.S. in our plans. We'll wait and see if that pans out. But as you recall, last year's Sun Care market got off to a very slow start in the U.S. and was unusually light for the year.

We think this year will be a little more normalized..

And actually, there's one more piece I need to add. The accretion from the Fem Care acquisition is higher than we originally forecasted as well..

Right, okay. And I guess bigger picture on the Personal Care stuff and again more specifically on blades and razors. Is there anything you can do? I mean, obviously, you guys want an innovation-led category, and this stuff's been going on for a little while now.

I mean, is it just a sort of a statement that innovation in the category, whether it's from you or Procter, just isn't enough to sort of push normalized unit and value growth in the category? Look, I appreciate near term, there may have been pantry loading, but this has been going on for, I guess, longer than that.

So just curious, your take on that..

Our long-term view of razors and blades, actually, if you look at the overall category, units have been in perpetual decline for years at a small rate, 1%, 2% or 3%. And unlike the unit declines we saw for this quarter, which I don't think is normal, we view the category as continuing in that trend long-term.

And that's a result of people trading up more expensive systems, blades that last longer, results in those unit trends. The important one is, of course, value trends. And we just -- the industry just passed another round of price increases in razors and blades.

I believe our competitors was in the 3% to 4% range, I believe we were in the 6% to 7% range. And those price increases oftentimes being justified based on the quality of product innovation we bring into the category. I don't think those fundamentals have changed or need to change. It's really just level of hyper promotional activity that we have to.

[Audio Gap] get in the way. And so we still think there's opportunities in the category to pull through innovation..

Next question comes from the line of Kevin Grundy, Jefferies..

So most of my questions have been answered, but I just wanted to follow on kind of in line with Ali's question earlier about the portfolio. So Ward, you've been pretty consistent now about talking about the rate of decline from a top line and from an industry perspective with respect to the battery business.

Can you provide a little bit of context for your near-term and long-term expectations as far as profit and cash flow growth go for that business? It would be helpful as we kind of thinking about ascribing values to different parts of the portfolio..

Sure. We really view household as a long-term continued profit and cash generator. And those segment profits out of that business are north of $400 million. I think it's a challenge for that organization to keep it there.

The amount of investment required to go into that organization has been not all that great, and frankly, with the restructuring efforts, even diminished. So cash flows have been very strong out of that business. And we do have a fairly good international footprint on that side of the house, where there are some markets that are growing.

So the challenge really for the Household division is to take those 2%, 3%, 4% unit declines and offset them either through mixed pricing or geographic portfolio management to keep it stable.

And one doesn't normally brag about keeping something stable, but when you have a very healthy, big, global multibillion-dollar brand of cash flows and profit like that in the category that nevertheless is in a systemic decline, that's really kind of the challenge and the job [ph]..

Next question comes from the line of Olivia Tong, Bank of America..

On Personal Care, given the number of moving parts in the margin this quarter, can you give a little bit more granularity on how much of the margin improvement is ongoing versus a function of timing? Because I don't think there was a lot of savings in the Personal Care side of the business this quarter.

So I'm just trying to understand what your thoughts are on Personal Care margins going forward?.

The one negative on margin, just from a percent standpoint, is by factoring in the acquisitions it has a substantially lower gross margin, Olivia. So gross margin will be reduced from historical levels. But aside from that, you're right.

I mean, going forward, as we expand the scope into that division, we would expect to see some gross margin improvement and probably some SG&A improvement. But that's yet to be quantified in terms of the geography with P&L..

Got it.

And then on A&P, I understand there might be some timing issues, but why would A&P be down given a pretty difficult competitive environment right now? And I'm just trying to understand, is it all timing? is there some -- what drives like Q2 to Q4 improvement in A&P as well?.

On the A&P, first of all, it varies by division. Our actual investment, A&P investment in our Household division was up for the quarter. That was offset by some A&P held back in the Personal Care division for the quarter. But a lot of that being really tied to timing of innovation.

A lot of the new products I mentioned in the formal call -- part of the call, are new products that are going to be launched or are being launched really this quarter or next, and some of that launch activity taking place this quarter but a big chunk of it taking place in what's our third quarter. And then our A&P is tied to that.

So you can kind of guess it by the amount of A&P we spent the first quarter, and yet by this number we're holding to for the year, I think it gives you a sense of the support behind those innovations in the back half of the year..

The next question comes from the line of Connie Maneaty, BMO Capital..

I guess I'm kind of stunned by the price increases that you and Procter took in Shaving. So I guess my question is this.

Other than the category that's essentially controlled by a duopoly, what justifies price increases of this magnitude given that inflation is so minimal? And don't you think the 2 of you run the risk of pushing consumers into the online subscription services or alternative ways of buying products that seem to be getting more and more expensive?.

I'll answer maybe the last part of your question first. We're watchful of those alternative mechanisms of buying product, but the point is in the end, what product are you buying? And the quality and the patent and IP protection behind the quality of our portfolio, and I would venture to say our competitor's portfolio, is quite strong.

And so what's more important to how you buy a product is what product are you buying. And I think the quality of our products justify the ability to raise the pricing.

I will say this, that as you look at pricing in the razor and blade market, because of the strength of our competitors bringing [ph] equity versus ours, we tend to be and have always been priced at somewhat of a discount.

And in that sense, getting absent [ph] price points that consumers push back on, I think, is less of an issue for us than maybe our competitor. But the quality is there.

People are, with these 3 blades, 4 blades, 5 blades products, getting a better shaving experience, in some cases, using those shaves longer, those razors longer, and our price elasticity work supports the sort of pricing actions we've taken..

The next question comes from the line of Jason English, Goldman Sachs..

I just have a couple of quick follow-ons, a lot of questions have already been asked. The spend behind the back half innovation.

Can you give us some more color on the types of initiatives that you're bringing to market in the back half?.

Really kind of what we mentioned earlier, I would say some of the bigger initiatives for us is certainly again in razor and blades side, Hydro Sensitive, going after a subsegment of Hydro users with sensitive skin. We have a great product coming out there. The Groomer, which is kind of the battery-powered groomer all in one.

You do hear more about men, in particular, shaving parts of the body, and this Groomer is an ideal product for that. And I think they're a carryover to Sun Care. In the Sun Care line, we've had a great deal of success with the moisturization, introducing moisturization in the sun production.

And we're just extending that into additional SKUs and forms and even some sprays [ph] for the coming year. So I would say some -- those are some of the big ones. But we also have internationally opportunities to continue to roll out parts of our Hydro franchise.

So even Hydro Disposable, Hydro Silk for women, these are successful -- very successful launches we have over the past year or 18 months, have still yet to hit a number of our international markets. And so those activities will also be taking place. So it's really pretty much across the board.

Even in Infant Care, there's been some innovation that we'll be bringing, whether it's improved diaper pails [ph], whether Genie continues to be an opportunity, the unification on our bottles and cost [ph] lines is an opportunity. So frankly, just a lot.

Again, I would characterize this as mostly singles and doubles, not huge home runs like the Hydro launch platform, but a fair amount of innovation activity that will be hitting really the summer -- late spring through summer, fall and kind of what the A&P increase is tied to..

Okay, that's helpful. And then one other follow-on to Bill Schmitz question on the J&J math. The math that he was going down does lead you to EBIT margins for that business in the low single-digit range for the rest of the year. It would suggest that you were going to spend high 20s as a percentage of sales in A&P.

Why does it make sense to spend that much? Are there specific initiatives you're excited about that warrant that level of investment? Could you just give a little more color on why such a heavy, heavy spend for that business?.

Yes. I'm not sure I agree with exactly how you characterized the heavy, heavy spend. We are calling out we are going to spend behind that -- business. And when you -- that's versus no spend, that's a pretty big increase in and of itself.

But I think the real opportunities we see on Fem Care is really leveraging across the line of tampons and the brands we've picked up. And so we've always done some promotional activities between general volume in Sport with Carefree and Stayfree. I don't know if we've done much with o.b. But there's just a wealth of opportunities in that regard.

And obviously, it takes us a few quarters to get those programs nailed down and aligned with customer play-ins. But that gives you a sense of -- it's a huge step-up in A&P but albeit it's from 0 for the past quarter. And a lot of that investment is behind the brand, stabilizing the brand.

Keep in mind, we pick these brands up at, I think, a pretty good price. But there was a reason for that, and that was really the long-term systemic decline. And so the focus is to stabilize that business as we go into the back half of the year..

The next question comes from the line of Jason Gere, KeyBanc..

I guess a question I have is about -- it's on Personal Care but not on the, I guess, the developed markets as I think it's been a little bit exhausted. But maybe more of the emerging markets or the international rollout opportunities that still seem underpenetrated by you guys.

So as you think about the cost savings, you're at almost the halfway mark of this $300 million program that's out there.

I'm just wondering, as you think about the next half that comes through, what's kind of limiting you from seeking some of those opportunities in the emerging markets to kind of expand Personal Care where I think growth would be a little bit better? And is that precluded by just what's going on, obviously, the promotional environment and the changes going on in the developed markets? I was wondering if you can provide a little bit of color about that and maybe as you see the next couple of years if there is more of an opportunity to expand beyond just the developed markets..

That's a great question. For us, as you know, since we acquired Schick in 2003, we've done a fairly good job of growing the Personal Care space over our international battery footprint. And we continue to do that in both developed international markets and some developing international markets.

I would say maybe at a pace that's been a measured pace, but we frankly have some pretty big gaps despite our international footprint. So if you look at a market like India, we're not in India. You look at a market like Brazil, we have a pretty small presence, frankly, in Brazil.

If you look at a market like China, we've been in China for a number of years. But in the case of the Personal Care side, I would say modest development.

So as much as we've had success in many international markets, whether it's Europe, Central Europe, parts of the Middle East, certain parts of Southeast Asia where we have very strong operations, we do have a couple of huge gaps there.

And it's very, as you can imagine, tough to greenfield something into a market the size of India, Brazil for a company of our size. It really is more a matter of buying the wagon from which we can grow our brands versus trying to grow your brands greenfield.

And I think trying to grow your brands greenfield in markets of that size is -- will be endless years of losses. So it kind of is an interesting question about buying the wagon in some of these big markets that we're not in.

And as we talk about acquisitions in the past and as we still look at opportunities, there are a few of these markets where we're as interested in wagons as we are in the product categories that might be available. So I hope that kind of characterizes for you.

That's really the kind of the strengths and weaknesses, puts and takes as it relates to our Personal Care expansion internationally, which has been going on [indiscernible]..

That was our final question. I will now turn the call back over to Mr. Ward Klein for closing remarks..

Well, operator, thank you for handling the conference call today. And for everyone listening, thank you for your interest in Energizer Holdings. Have a good day..

Thank you for participating in today's conference. This call will be available for replay beginning 1 hour after the meeting ends. You may now disconnect. Have a great day..