Jacqueline E. Burwitz - Vice President-Investor Relations Daniel J. Sescleifer - Chief Financial Officer & Executive Vice President Ward M. Klein - Chief Executive Officer & Director Alan R. Hoskins - President & CEO-Energizer Household Products David P. Hatfield - President & CEO-Energizer Personal Care.

Olivia Tong - Bank of America Merrill Lynch Kevin Michael Grundy - Jefferies LLC William Chappell - SunTrust Robinson Humphrey Megan V. Cody - UBS Securities LLC Ali Dibadj - Sanford C. Bernstein & Co. LLC Bill Schmitz - Deutsche Bank Securities, Inc. John A. Faucher - JPMorgan Securities LLC.

Good morning. My name is Tia, and I'll be your conference operator for today. At this time, I would like to welcome everyone to Energizer Holdings second quarter fiscal 2015 results conference call. I would now like to turn the conference over to Jackie Burwitz, Vice President, Investor Relations. You may begin your conference..

Thank you, Tia, and good morning, everyone, and thanks for joining us on Energizer's conference call to discuss our second quarter fiscal 2015 results. With me this morning are Ward Klein, Chief Executive Officer; and Dan Sescleifer, Chief Financial Officer.

Joining us for the Q&A portion of the call are David Hatfield, CEO of Personal Care; and Alan Hoskins, CEO of Household Products. This call is being recorded and will be available for replay via our website, energizerholdings.com.

During the call, we may make statements about our expectation for future plans and performance, including future sales, earnings, advertising and promotional spending, product launches, savings and costs related to restructuring, changes to our working capital metrics, currency fluctuations, commodity costs, category value, future plans for return of capital to shareholders, whether the spinoff of the Household Products business is completed as expected or at all, the timing, costs and terms of a spinoff, and whether the expected benefits of the spinoff can be achieved.

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 risk, including those described under the caption Risk Factors in our Annual Report on Form 10-K, filed November 18, 2014.

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. 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 those 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 in the business. With that, I would like to turn the call over to Dan..

Thanks, Jackie, and good morning, everyone. I would like to start with financial overview of the quarter and then turn the call over to Ward to comment on the businesses and progress on the planned separation of the Personal Care and Household Products divisions.

We delivered solid second quarter adjusted earnings per share of $1.97, an increase of 4.8% versus the prior year, despite significant currency headwinds. Net sales declined to 5.1% including approximately $60 million of unfavorable currency impacts. Organic top line was up 0.3%, excluding the impact of increased sales in Venezuela.

Gross margins improved 200 basis points. A&P spending increased $10.8 million or 160 basis points on a percent of sales basis. SG&A as a percent of sales, excluding unusual items, improved 90 basis points. I'll provide a deeper dive into each of these items.

Organic sales, excluding the year-over-year change in Venezuela, increased 0.3% as gains in the Household Products segment were offset by declines in the Personal Care segment. In Household Products, organic sales increased 3%, due primarily to the second quarter launch of EcoAdvanced, the first battery made with recycled batteries.

Personal Care organic sales declined 1.3% due to lower volumes in Wet Shave, Infant Care and Feminine Care as we continued to see elevated levels of competitive promotional spending. These lower volumes were partially offset by improved price mix in Wet Shave.

We continued to see strong gross margin expansion of 200 basis points, up to 49.8%, as we continued to make excellent progress with our restructuring initiatives. During the quarter, we realized $27 million in incremental savings, bringing the project to-date savings to $310 million.

During the quarter, A&P spending increased $10.8 million to 10.7% of net sales, a 160 basis point increase versus prior year, as spending increased in both segments in support of launch activity and brand-building programs.

SG&A excluding restructuring and acquisition-related costs and costs related to the spinoff decreased 90 basis points versus prior-year levels due to restructuring savings and continued tight spending controls.

In rounding out the P&L, our year-to-date effective tax rate, excluding unusual items, was 28.3% versus 29.3% in the prior year, reflecting a favorable mix of foreign earnings.

Looking at operating profit, Household Products increased 9.3% as volume gains from the EcoAdvanced launch and restructuring savings more than offset currency headwinds and higher A&P spending. Excluding the impact of unfavorable currencies and year-over-year Venezuelan results, Household Products operating profit was up 36%.

Personal Care segment profit was down 3.3% due to unfavorable currencies. Excluding currency impacts and year-over-year Venezuela results, Personal Care segment profit increased 3.1%, driven by restructuring savings and improved price mix, partially offset by increased A&P investments.

Moving to our balance sheet, working capital as a percent of sales was 15.3%, up slightly from the first quarter. We continued to realize improvements within days payable outstanding across both operating segments.

However, days in inventory have increased versus recent trends due to the post-restructuring changes and the Household Products manufacturing footprint; temporary inventory builds as a result of ongoing Personal Care footprint changes; and increased inventory levels in support of new product launch activity; and lingering effects of West Coast port labor disruption.

Finally, in terms of capital allocation, dividend payments in the quarter were $31 million, equal to the prior-year quarter. No shares were repurchased during the quarter. Before moving to the financial outlook, I would like to discuss our decision to deconsolidate our Venezuelan operations from our results.

The economic and political situation in Venezuela remains very volatile, and Venezuelan exchange control regulations have restricted our ability to obtain U.S. dollars. Unfortunately, we expect this condition to continue for the foreseeable future.

As a result of our decision to deconsolidate, we recorded a second quarter one-time charge of $145 million. Our future consolidated results will not include the operating results of our Venezuelan business.

We have provided a supplemental schedule in our press release to recap our trailing six quarters of net sales and segment profit for each business. Now moving to our financial outlook, as indicated last quarter, due to the July 1 expected separation date, a full-year earnings per share estimate is not applicable.

Our nine-month financial forecast has adjusted earnings per share below the prior-year nine-month period in the mid-single digits due to lower earnings per share in the third quarter versus prior year, driven by higher A&P spending and the impact of unfavorable currencies.

Excluding the negative impact of currencies, forecasted adjusted earnings per share is expected to be above prior year for the nine-month period. Our focus for the third quarter remains on executing our new product launches, delivering top line results, enhancing margins, and investing behind our brands.

For the nine months, we are now anticipating total company organic net sales to be slightly down. Personal Care organic sales are expected to be flat and Household Products organic sales are projected to be down in the low single digits versus the prior year.

We expect the total company gross margin rate to increase versus prior-year levels for the nine months by approximately 50 basis points.

A&P investment as a percent of sales is expected to increase over 150 basis points for the nine, months, with a significant increase in the third quarter, as we continue to invest behind innovation across both businesses.

We are now estimating that the nine-month organic free cash profit growth will be negatively impacted $65 million to $70 million due to unfavorable foreign currency movement. And as previously discussed, Venezuela will be removed from our consolidated results beginning in the third quarter.

The prior-year third quarter included net sales of $14.4 million and operating profit of $5.6 million from Venezuela. Now I'd like to turn the call over to Ward for a review of the businesses and an update on the progress of our proposed separation of our businesses..

Thanks, Dan. As Dan stated, we delivered solid second quarter results despite significant currency headwinds. Within the U.S.

Personal Care business, all categories exhibited growth in the March quarter for the second consecutive quarter, with Feminine Care, Skin Care, Shave Crafts, and Infant Care categories strengthened sequentially year over year, while the Razors and Blades category softened. Overall, our U.S.

Personal Care business experienced a one point aggregate share decline, due primarily to high competitive promotional activities. In Wet Shave, the U.S. Razors and Blades category was up slightly by 0.3%, as growth in women's systems and disposables was offset by a decline in men's systems. Our share was down one point across the declining categories.

Our Hydro franchise share was essentially flat as we anniversaried our Hydro Sensitive launch in the prior year, while our legacy brands experienced declines due primarily to continued elevated competitive promotional activity and a decrease in some of our promotional activity this year versus the prior year.

The Feminine Care category grew approximately 1.8%, with our share being relatively stable. Looking forward, we expect to see market share improvement in this category behind the recent launch of our sports pads and liners as well as gains in our Carefree and Stayfree brands, as these brands have now lapped prior-year distribution losses.

Importantly, for the third quarter we are planning to increase A&P support across our portfolio, including our new products, Hydro Silk TrimStyle and our sports pads and liners, both of which began shipping in March. We also plan to increase equity investments across our key growth brands.

Turning to Household Products, the battery category showed improvement this quarter, with volume up 1% and value flat. Net sales in the quarter improved 3% versus prior year, excluding currencies in Venezuela. This quarter's improvement was driven by Europe and the U.S., where winter storms helped drive demand in January.

Going forward, we continue to expect the category to decline in the low-single digits. Energizer grew value share of 1.1 points in the most recent 12 weeks due to increases in Europe and North America.

We gained new distribution in France and Germany and, in the U.S., our growth was attributable to the strong focus on category fundamentals and the launch of EcoAdvanced late in the quarter.

We believe we still have room to grow our share and profits to invest in our brands and introduce innovation like our EcoAdvanced battery, the first battery made with recycled batteries, bringing to market a product that satisfies unmet customer need, while delivering our longest lasting alkaline battery ever.

Now turning to the separation, we are quickly approaching the targeted July 1 spinoff date and are in process of finalizing several key decisions related to the transaction. In addition to delivering our fiscal 2015 financial plan, our colleagues are working hard to execute the remaining milestones in the separation plans.

We remain focused on the operational transition and business preparation to successfully operate as two separate companies. I've been truly impressed by the entire organization's focus, determination and perseverance throughout this entire process. Organization design is nearly completed.

At the regional level, our market execution plans remain on track. We have also completed distributor selection in applicable markets and cross-functional teams have been created in each region to be accountable for the distributor transition. We continue to engage with our key customers in order to ensure a smooth transition.

We are now estimating gross dyssynergy before cost offsets of $65 million to $85 million relating primarily to corporate and regional head count, real estate, IT systems and professional services.

As we discussed last quarter, we are also executing a restructuring initiative in order to position both businesses for success as standalone entities and to offset these dyssynergies.

These restructured initiatives include adapting the global go-to-market footprints to reflect the future strategies and scale of each business; centralizing certain back-office functions and outsourcing certain non-core transactional activities, both in an effort to increase efficiencies; and reducing head counts to optimize the cost structures of each business.

Both businesses are expected to reach a normalized run rate SG&A within three to four quarters post-spin as several duplicate costs will be maintained for a period of time post-spin as we stabilize and complete restructuring initiatives.

Based on the decision made to-date, we are estimating the total spinoff in restructuring and related costs through the close of spinoff will be approximately $350 million to $425 million including debt breakage costs of approximately $60 million.

These estimates do not include costs related to any tax-related charges or potential capital expenditures which may be incurred in the transaction and may be significant. The initial Form 10 was filed in February. We have subsequently filed an amendment responding to SEC clarifying comments and questions.

We plan to file another amendment on May 11 to include second quarter financial results and pro forma information about the Household Products capital structure. Prior to spin, we intend to put in place the necessary debt capital to complete our separation and set up both businesses for long-term success.

We expect total debt, excluding cash at separation, to be roughly 3 times EBITDA for each business. Based on that metric, total debt levels will approximate $1.5 billion for Personal Care and $1 billion for household, leaving both companies with strong and stable opening balance sheets.

As you have seen from our filings last week, we have announced our intention to secure interim bridge loan facility and prepay our private placement notes. Edgewell, as the remaining company, will continue to hold the $600 million public notes due in 2021, the $500 million public notes due in 2022.

Our intent is to enter into or make permanent financing for both companies prior to the completion of this bill. In terms of the capital allocation strategies for the two businesses, final decisions will be made by the two independent Boards of Directors post-spin.

It is likely that Household Products will pay a meaningful dividend, given its ability to generate substantial and consistent cash flow. Share repurchases may also be part of the mix and could be opportunistic in nature.

For Personal Care, a balanced approach to capital allocation is likely, focused on identifying the best opportunities to maximize shareholder returns, including internal investment, M&A and share buybacks. But again, final decisions on capital allocation will be made by the respective boards post-July 1.

On June 2, both management teams will host separate Investor Day presentations in New York City. This will provide investors and analysts the opportunity to meet and hear from senior leadership of the two businesses.

In early-to-mid June, following the Investor Day presentations, each business will conduct road shows in order to meet with investors in face-to-face discussions. Both businesses are committed to transparency with investors and plan to establish a close interaction with investors and analysts moving forward.

In conclusion, our businesses are performing well despite significant currency headwinds and the enormous amount of work being conducted by the organization in preparation for the split. The split remains on schedule and on budget, with a focus being to set up both companies in a strong manner and positioned for accelerated success.

Our continued launch of new, truly innovative products into stores, increased investment in innovation spending, and our increased investment in internal capital projects, combined with significant restructuring efforts underway, all demonstrate our commitment to the long-term success of both businesses.

Finally in closing, I'd be remiss if I didn't call out the immeasurable contributions of Dan Sescleifer to our organization. As many of you know and after 15-plus years as our Chief Financial Officer, Dan will be retiring from the company at the time of the split.

Dan's legacy at Energizer includes being the financial leader of a company that's outperformed three-quarters of our packaged good peers during his tenure, as well as leading a finance team that is second to none.

This is Dan's last earnings call with Energizer, and I know many of the analysts, investors and colleagues listening in today join me in thanking Dan for his loyal and effective service. We wish him well. In the same day, this is also Jackie's last call with Energizer, and our many thanks to her.

This completes our prepared remarks for this fourth quarter earnings call. And Dan, David, Alan and I will be happy to take your questions.

Operator?.

The first question comes from the line of Olivia Tong with Bank of America. Please proceed..

Good morning.

Can you hear me?.

Yes, we can..

Oh, perfect. Thanks for the question. Appreciate it. Why don't we get a little bit more detail on the overhead? You had mentioned in the press release that it would take about three to four quarters to work off. Apologies if I missed some of your opening remarks. But just want to see if you could give a little bit more color behind that.

What are some of the things that – talk about some of the things that you're working on? And what's going to drive that getting you back to that normalized run rate? Thank you..

Sure. Maybe I'll give that over to Dan..

Olivia, if you think about what we're doing, we're separating entities in 50 markets around the world. We're creating two new corporate entities. And unfortunately, both businesses are going to have some interactions going forward. So there'll be some transition services agreement that'll be in place.

We certainly have some redundant costs as we work to implement our new go-to-market strategies and organizations internationally.

And so with all of that, there's going to be duplicate costs and higher costs with the TSAs that we have in place, and our anticipation is that after a year both companies will be free-standing into the targeted cost structures that have already been determined..

Got it.

And then did you also give the impact of the sell-in for EcoAdvanced?.

Do you want me to take that?.

Give that to Alan..

Hi, Olivia. It's Alan..

Hi, Alan..

So on EcoAdvanced – hi. We're actually very pleased with the results so far. They're tracking to our launch plan. Our customers and our consumers are also elated with the launch thus far. We've got over 1 billion impressions in the market already on the launch of the brand in just two months, so we're very excited about that as well.

We've shipped roughly $17 million in EcoAdvanced product into the stores to fill the pegs in the planograms as well as the promotional displays. And we expect over the next two quarters for the turn to occur on that fill-in, and then we'll see retail inventory levels return to normalized levels..

Got it.

So should we expect that batteries dips down before it comes back to a normalized run rate again going forward?.

I think the best way to explain that, and it may be a recurring question today, during the latest 12 weeks we did see some stabilization in the category, with volume up 1.1%, value essentially flat. As Ward alluded to, that was driven by both North America and Europe.

To the latest 52 weeks, it is in the normal run rate we've been projecting, which is in that minus 2.2% range and up to 4% as we've seen in previous years. Going forward, near term, we expect the category to be in low single-digit decline..

Got it, thank you so much..

Your next question comes from the line of Bill Schmitz with Deutsche Bank. Please proceed..

Bill, can you – are you on? Tia?.

The next question comes from the line of Kevin Grundy with Jefferies. Please proceed..

Hey. Good morning, guys..

Good morning, Kevin..

Dan and Jackie, congratulations and best of luck to both of you..

Thank you..

So my question, I actually have a couple here. Dan, is there anything else you'd point out? You talked about the dyssynergies and your ability to offset those over the next three to four quarters.

Anything else that investors should be aware of where the EBITDA for both businesses should look any different than currently what's in the marketplace I guess and based on your existing disclosures?.

So the two biggest items, and we've talked about this in our outlook, is we're facing some pretty significant currency headwinds, so that's going to be a negative. And then we're taking Venezuela out of the results going forward. So those would probably be the two biggest parts..

But there should be no other drag, Dan, route-to-market changes, shift in the distributor model, anything like that that would change the EBITDA base.

Is that fair?.

The go-to market changes are just now being executed and put in place. So really I'd almost want to defer until June when we know more and when the two businesses are on the road shows because there clearly is risk. We think we can manage that risk, but I really don't know enough at this point in time to give you an answer on that..

Okay, and then two quick ones unrelated. Fair to say Venezuela has been about 0.5 point contributor to the top line for you guys going forward, so we can be cognizant of that modeling going forward? And then thanks for the capital structure commentary. That's helpful.

Should we take that as certainly a view of what the more permanent capital structure – optimal capital structure will be for both businesses? That's it for me. Thank you..

On your second part, I'd say it's our best guess right now. But as I alluded to in my comments, it's really going to be up to the two boards. But we've announced who is on the two boards. Both board members are aware of this thinking at this point in time, but really in the end it's going to be their decision after July 1.

That's our best estimate right now on capital structure,.

And the only other comment is on Venezuela it's been about 1.5 points, I believe, on the top line..

Okay. Oh, Dan, just to growth, not in terms of what it comprises of revenue..

Oh, I'm sorry. Yeah. Yeah. I'm sorry. Yes, you do know that. Yes..

So 0.5 point is fair?.

I haven't done the math on that number. We've disclosed it in the back. You can take a look in the back of the earnings release, the back two pages. I just haven't done the math on that, but you can see how much it contributes to – let's go back to....

$54 million..

So $54 million of sales in fiscal 2014, so roughly a little over a point then. Yeah..

Okay, thank you..

Thank you..

The next question comes from the line of Bill Chappell with SunTrust Bank. Please proceed..

Thanks, good morning..

Good morning..

Just looking at the competitive landscape and what you're seeing both Battery and Wet Shave, are you seeing any positive signs, as Duracell looks like it's going to go into a new home? I know it's still early and still hasn't happened.

And then conversely, on the Wet Shave, do you think some of the competitive pressures are – I think at one point you thought that Wet Shave would be picking up by now and the overall category trends would be improving as we moved into the spring/summer? Do you think that a competitor is kind of taking advantage of the split to try to put excess pressure?.

I tell you what, Bill, let me turn the Battery side over to Alan to answer and then to David on the Wet Shave..

Hey, Bill. Good morning..

Good morning..

So in terms of – as you know, we won't comment specifically on a competitor. Duracell has and always will be a strong competitor, regardless of who runs that business.

We will continue to monitor the competitive environment, but firmly believe that, as we announced at CAGNY, we've got three core strategies that are going to allow us to really control our own destiny. We're very focused on leading with innovation, continuing to operate with excellence from the point of manufacturer all the way to the shelf.

And then finally, continuing to drive productivity in our business. I think as you see the new Energizer going forward, those three strategies will continue to be in play for us and driving productivity will continue to be on the forefront as we look at ways to optimize our costs. So we're going to continue to monitor the environment.

We're going to play our game plan out because we're very satisfied with the results thus far. We have a lot of momentum behind the activities we have in the market and we expect that to continue..

And then on the shaving side, if you remember last quarter, we actually characterized the promotional pressure as the highest we've ever seen in the shaving business, higher even than what was implemented two years ago under the 40-country category combination directive of a prior regime.

This quarter, it was equally high and, in fact, it increased or held on the women's system side on the disposable side. So this was very high levels. I wouldn't really comment about why it's that high and I really can't comment about where it'll go from here. What we're really focused on is driving innovation in the marketplace.

We're actually feeling good about our share of shelf and our baseline shares have been strengthening. So we're feeling good coming out of the second quarter. So that's kind of how we see it there..

I appreciate it.

I guess, just a follow-up to that, on the battery so is it as sign that there's really no change right now on the competitive landscape? And then, on Wet Shave, I mean, do you think we can get back to a mid-single digit category growth in the U.S.? Or are we kind of past those days while the competitive environment is like that?.

So on the battery side, I think, the simplest way to think about it is, we plan on continuing to bring innovation to market both in the forms of new product launch and marketing news, both of which our customers and consumers are certainly appreciating. We're seeing that translate into a number of different positives for our business.

So as an example, our brand health measures are improving as we've increased our level of A&P. We're also seeing strengthening of our brands. And as you've seen in the latest results, we've been able to build our market share globally up 1.1 point. So we're going to continue down that path because of the momentum we have behind it.

Again, as I alluded to earlier, we're really seeing the category in a low-single-digit decline, following the stabilization we've seen in the latest 12 weeks..

And then on the shaving side for the U.S. category, I think we see it in the low 1% to 2% for the near future. Now recognize that that's just U.S. From a global point of view, we're actually seeing higher growth rates internationally. I'll also say that with the changes in the category, we actually feel like we're positioned well to compete.

We have Hydro on the premium side, but we have brands to meet the needs of consumers in the middle, and then we have private label to meet the value needs and the opening price point niches..

Great, thanks for the color. And, Dan and Jackie, thanks, you'll be missed..

The next question comes from the line of Megan Cody with UBS. Please proceed..

Hi, thanks. So I know you guys had indicated that A&P spend will be up meaningfully in the June quarter. And it seems like perhaps some new innovations are in the pipeline.

But I was wondering if you could go through some more specific puts and takes for what you think will drive an improvement in your Personal Care business, maybe some more specifics on those innovations? Or if you think competitive pressures will abate? Have you seen any of that happen one month into the June quarter?.

We really feel like we've increased A&P as a percent of sales in the fiscal year 2014. We've increased it as a percent of sales in the first half of fiscal year 2015. And we're actually seeing the results of that in our baseline shares of the Shave and Fem Care. So those baseline shares have been stabilizing and are actually strengthening.

We actually think that that leads in well to quarter three where we'll also see the benefit of innovation. And we've seen category growth accelerating for the second straight quarter. So we're feeling pretty good about quarter three.

We also see international growth, which we had in quarter two, where we saw in all areas both volume growth and also price mix growth. We see that continuing into quarter three..

This is Ward. If I could add just from a corporate point of view, the innovation that we're launching right now is why the A&P spend is up and will be up again in the current quarter. You look at the EcoAdvanced launch on the battery side, a true innovation in the category. We're just getting started on that in the U.S. and that's just the U.S.

and opportunities elsewhere affect that. And you look on the personal care side, with Fem Care, with bringing sport into pads and liners. The pads and liners are innovative in and of themselves and the sports theme resonates with consumers. Again, we're just getting started on that.

Razors, the TrimStyle that we've introduced is, I think, the best trimmer that's out there right now and, again, we're just getting started on that. And then you look back on Hydro Sensitive, which was our big launch last year, especially in the developed markets like the U.S.

We're going against high comparables on that right now with Hydro, but Hydro is still stable but growing. And we have opportunities with Hydro Sensitive in international markets. We're just getting going on that. So I hope that gives you kind of a sense of the innovation that our teams are pursuing even in the midst of the split.

We haven't dropped that ball at all. In fact, there's quite a bit of activity right now..

Okay, great. Thank you so much..

You're welcome..

The next question comes from the line of Ali Dibadj with Bernstein. Please proceed..

Hey, guys. I just have really one question.

And it's if you can tell us a little bit more about what your advisors or legal counsel has said about either of the future two businesses being potentially sold within the two years, given the fact pattern of your split and any tax risk with the IRS? Could you give us some detail and some thought process around that?.

Really, Ali, as we've said in prior quarters, we're really just focusing on getting the two companies launched to be long-term successful companies in their own right.

So everything that we've been sharing with you today and in past quarters, whether it relates to investments in the brand equities as indicated by A&Ps or percent of sales, whether it's indicated by the innovation that we've already talked about, whether it's indicated by some of the investments we're making in capital and people as we do the split, all these are to set both companies up for long-term success.

And so that really remains our focus, and that's what we're going to execute..

And so you've never had any thoughts about any of these businesses being sold as a lot us clearly have?.

You know, that's not really our focus right now..

Okay, thanks..

You're welcome..

The next question comes from the line of Bill Schmitz with Deutsche Bank. Please proceed..

Hey, guys. Good morning..

Good morning, Bill..

You might have already been asked this, but why are the spin costs so high? What goes into those numbers? And I guess a related follow-up to that, are you largely done with the changeover in distributors in some of the international markets, or is that still an ongoing process?.

Let me give you some top line comments and maybe turn over it to Dan if there's more granularity. But when you think about what we're doing here in taking a $4.5 billion company and splitting it across 50 countries, it's not your typical spin. And so you have to go and really rethink your entire global footprint.

That's by country, that's by region, and that obviously is globally. So you clone two IT systems, for example. You clone two supply chain systems, for example, HR systems, finance, the whole nine yards. It's really not just spinning off 50% of your business exercise.

And so the reason why we've been very deliberate on this is the reason why it's taken 15 months and we called that out early on. It has been difficult. I've really been impressed with how this organization has stepped up and done this project while keeping the wheels on the bus, keeping the momentum on the businesses.

And so I think that gives you at least a 50,000-foot flavor of what we're doing is extraordinary. I'm not aware of any other consumer packaged goods company frankly going through the sort of split that we are in fact are doing and doing successfully. And then I'll turn it over to Dan to add any other color to that..

I think Ward covered most of the items. If you think, it's a global organization and when we split this apart, there is significant IT expenses because we're on common IT platforms. Certainly, there are two different real estate strategies going forward as we separate affiliates.

With respect to separating affiliates and new go-to-market strategies, there's severance involved. In terms of the transaction itself, tax, legal, banking; there's a number of consulting fees related. So it adds up. We've got reams of detail on this. We track it very closely.

I would add that the one thing that we have thrown in to the number this time is the cost on refunding the private placement notes, which is $50 million, which we did not talk about before. So it's more of a complete number that we've showed.

But all of these things add up, and it's really a function of the scale of this business and the complexity of the transaction..

If I can even just further comment, again, what's a little bit unusual too here is as we sit there and create dyssynergies by duplicating a lot of the resources that are required when you do something like this is the implementation of further restructuring to offset those dyssynergies.

And honestly, the teams, both the Household team, Personal Care team, corporate have gone after those restructuring opportunities as part of the split aggressively and I think wisely, again, along the lines of setting up both these companies to be in the strongest position possible as we go forward..

Great, that's really helpful. And I'm sure you guys already addressed this and I apologize because I got on so late.

But on the Battery side, how much of the growth this quarter was the pipeline fill from the launch? And then how much is it just like share gains in the ongoing health in the category? Because the holiday period obviously was super aggressive by you guys.

I don't know if there were price rollbacks, like list price rollbacks or they were just promotional activity, but I'm just curious if the holiday pricing is being carried forward, or if that was an anomaly in a sort of high-volume, high-demand season and kind of back to normal now?.

Hey, Bill. It's Alan. So a couple of things. First, the EcoAdvanced was roughly $17 million that we shipped in of our total to fill pegs and to fill displays. As you look at the category, we did see improvement in the category during the latest 12 weeks.

As I mentioned earlier up 1.1 point in volume and basically flat in value, attributed to performance improvement in the category in both North America and in Europe. Now, the North America piece, a part of that, don't forget, was driven by winter storms which impacted that number.

So as we go forward again we're anticipating sort of low-single-digit decline in the category. As we look forward, for Energizer, we believe that the opportunity for us really lies in a few things. So first and foremost, we're going to continue to drive the EcoAdvanced that the launch right now was just in North America.

Our plans obviously going forward entail the globe, but we'll get into that later at a different point in time. We've also got a cycle plan of marketing news that we're bringing to customers. These are consumer solutions that come out of our global brand group, which also help us fill momentum behind our products in our portfolio in the stores.

So we're very excited about what we've got into play. There's a lot more detail that we'll be sharing in June at Investor Day. But right now, we're going to stay in the course because we're pleased with the momentum we're getting both in terms of our rebound in share and what we're seeing in the category.

As you look at pricing and promotion in general, if you go back to June of 2014, we've actually seen a continued decline both in the level of promotions that we have in the market and the depth of those promotions. And that comes pulsing certainly out of holiday.

You're going to see a normal spike-up in promotional activity during that O&D period, but it subsides after that and gets back to more normalized levels. And that's what we're seeing..

Okay, great. That's very helpful. Thank you, guys. Sorry if I repeated other questions..

No worries..

The next question comes from the line of John Faucher with JPMorgan. Please proceed..

Thank you and I'm going to repeat Bill's comment. I apologize if this has been covered already. Can you talk a little bit about sort of the raw material trends? And sort of two questions on this.

How we should think about this over the next couple of quarters? And then maybe longer-term as we look at some of the potential for dyssynergies on the raw material side? As you fully separate the two companies, is purchasing going to be a negative leverage point? Thanks..

Dan, do you want to get that?.

Yeah. So on raw materials, John, we've been primarily focused on Q3. I think we're going to have some spike out of this. Obviously, petroleum costs are down and so that's a benefit to both businesses, so I would expect slightly positive raw material impacts in Q3.

Longer-term, in terms of dyssynergies, yes, procurement dyssynergies are part of that calculation. And – but we do believe that overall and as we've said in the release and in the script – I know you didn't listen to the prepared comments, but basically, we think we can offset all dyssynergies going forward with other cost reductions.

So yes, there will be some adverse impacts from separating the two procurement organizations. I'd like to defer specifics to the road shows in June because Brian [Hamm] and Sandy [Sheldon] will have more details at that point in time..

Any particular commodities that we would look at that would be an issue there? Or....

I think it's anything that's jointly purchased, right, so packaging, I think, might be an example. Certainly, there's some benefits to having combined warehousing and distribution that we will lose going forward. So those are two examples..

Okay. Thank you..

At this time, there are no further questions in queue. I would now like to turn the call back to Mr. Ward for any closing remarks..

Thank you, operator. And again, thank you, everyone, for listening in and for your questions and for your interest in this company as it embarks on its upcoming split. We'll, I'm sure, be seeing a lot of you here in June in New York. Have a good day..

Ladies and gentlemen, thank you for your participation in today's conference. That concludes the presentation. You may now disconnect. Have a great day..