Jacqueline E. Burwitz - Vice President-Investor Relations, Energizer Holdings, Inc. Alan R. Hoskins - President, Chief Executive Officer & Director Brian K. Hamm - Chief Financial Officer & Executive Vice President.

William B. Chappell - SunTrust Robinson Humphrey, Inc. Stephen R. Powers - UBS Securities LLC Chris Ferrara - Wells Fargo Securities Bill Schmitz - Deutsche Bank Securities, Inc. Olivia Tong - Bank of America Merrill Lynch Kevin Grundy - Jefferies LLC Nik H. Modi - RBC Capital Markets LLC.

Good Morning. My name is Frank, and I will be the conference operator for today. At this time, I would like to welcome everybody to the Energizer Holdings Third Quarter Fiscal 2015 Conference Call. After the speakers' remarks there will be a question-and-answer session. As a reminder, this call will be recorded.

I would now like to turn the conference over to Jackie Burwitz. Please go ahead, ma'am..

energizerholdings.com. With that I'd like to turn the call over to Alan..

leading with innovation, operating with excellence and driving productivity gains. Now, I'd like to touch base on each of these this morning. First, leading with innovation, in the quarter, the third quarter specifically we continued to rollout our innovative EcoAdvanced product, the world's first AA battery made from 4% recycled batteries.

EcoAdvanced is performing well and we now have launched in the U.S. and select European and Asian markets. Year-to-date sales have totaled nearly $30 million and we have plans to continue our launch activity in key markets across the globe over the next several quarters.

Our total value share grew behind this latest innovation, up 1.1% on a global basis driven by gains in the U.S. and key markets across Europe and Asia. We also continued to invest behind our leading brands and in support of our EcoAdvanced product launch, A&P as a percent of sales increased 270 basis points versus the prior year quarter.

Another strategic priority is to operate with excellence. The organization did this extremely well as we've successfully completed the spin-off while maintaining focus on the business. In regards to the spin, customer service and supply chain continued to operate efficiently without disruption to our customers.

Strategic market exits and shifts to distributors continue as planned, shared service centers are up and running and outsourcing plans are on schedule. Additionally, in the quarter when we dedicated tremendous resources to effectively execute our spin-off, our organic sales were up one-tenth of a percent versus a year ago.

During the quarter, our global value market share also continued to increase up 1.1% while the category continued to show signs of stabilization as value is down half-a-percent and volume was up one-tenth of a percent in the latest 12-week data both of which are improvements versus the 52-week trends.

Looking at our organic sales performance across the four segments; North America organic sales were down 2.8% as incremental sales from EcoAdvanced product launch were offset by prior year fill volume activity and a temporary promotional shelf gain that resulted in inflated prior year comps.

Organic sales in Asia were up 5.3% due to expanded distribution. These gains were achieved despite heightened competitive activity in certain markets. Our Europe, Middle Eastern and Africa organic sales increased 1.7% due to space, distribution and share gains in Germany, France and the UK.

And in Latin America organic sales decreased 1.1% as pricing gains were offset by modest volume softness. Our final strategic priority is to drive productivity gains across the business. We continue to execute well against our cost savings initiative as gross margin increased 200 basis points and SG&A as a percent of sales improved 280 basis points.

We have now realized the full run rate savings impact from the 2013 restructuring project and total project savings exceeded $218 million. This is a tremendous accomplishment for our organization, one that I'm very proud of but we're not done.

We will continue to challenge costs and identify additional savings opportunities and as we discussed during our Investor Day presentation, we've launched five new productivity initiatives including trade investment optimization, SG&A improvement, working capital improvement, procurement savings and integrated supply chain optimization.

Now, again, as I referenced, there is still more work to be done regarding these initiatives, and Brian will now update you on his prepared remarks on those initiatives along with our third quarter financial results and our outlook for the fourth quarter.

Brian?.

A&P spending as a percent of sales increased 270 basis points in support of our brands and the EcoAdvanced launch. SG&A as a percent of sales on an ex-unusual basis improved 280 basis points as we executed on several initiatives and in effort to right-size our cost structure and offset dis-synergies resulting from the separation.

EBITDA on an ex-unusual basis was approximately $79 million and EPS on an ex-unusual basis was $0.64. There were also several one-time or unusual costs which impacted the quarter including cost associated with the spin and the 2013 restructuring initiative. Spin related charges in the third quarter were $76 million.

This represents an allocation for carve out purposes from the parent company. Costs from the 2013 restructuring project in the quarter were $19 million. These charges were primarily related to the closure of our Tianjin manufacturing facility which we announced during the third quarter.

Cost related to the 2013 restructuring are nearly complete with less than $5 million of additional cost estimated for the remainder of the program. In total, restructuring costs for the entire project related to our business are estimated to be approximately $205 million while savings have totaled more than $218 million.

That wraps up our commentary on the quarter results. I'd now like to turn our attention to the future outlook. As we discussed during our Investor Day presentation, expanding margins and continuing to take out cost are critical to our future success.

In support of these goals, we are making excellent progress against the five productivity improvement initiatives we previously shared with you. First, trade investment; this is a multiyear process and we are at the beginning of that journey. We've installed a dedicated revenue management team with accountability for pricing and pricing architecture.

We believe this will help drive profitable share growth by helping us analyze and more effectively invest our trade investment dollars. Second, SG&A; shared service centers are up and running, go-to-market changes are nearly complete and we're finalizing our zero-based budgeting efforts for the upcoming fiscal year.

Third, working capital; we're continuing to review areas to improve overall working capital and are beginning to execute against our skew management project in an effort to improve days in inventory. Fourth, procurement; our team is in place and we're continuing to execute against the targets and initiatives for the upcoming year.

And finally, we continue to optimize our integrated supply chain structure. As I mentioned earlier, we recently announced the closure of our Tianjin manufacturing facility as we continue to move production into our most high-tech in cost efficient facilities, simplify our supply chain and balance internal manufacturing with third-party sourcing.

As we discussed on Investor Day, it is important that we successfully execute against these initiatives as we expect there will be a period of transition over the upcoming few quarters.

As we execute our go-to-market changes including market access and shift of distributors in certain subscale markets, lap the impacts of the Venezuela deconsolidation through the second quarter of fiscal 2016 and finalize task related to the separation from Edgewell.

We've began to realize the impacts from these items in the third quarter and our results will continue to be impacted over the next three quarters to four quarters. In addition, we've been experienced significant currency headwinds which we anticipate continuing over the same time period.

As it specifically relates to the upcoming fourth quarter, as you can imagine, there are several moving parts within our cost structure and overall P&L as we recently completed the spin. Historical cost information is based upon carve out data and we are finalizing our zero-based budgeting efforts for the upcoming fiscal year.

As a result, we will not be providing fourth quarter EBITDA and EPS guidance. However, we did want to provide visibility into some of the key drivers for the upcoming quarter.

First, international go-to-market changes are estimated to have an unfavorable impact on net sales in the mid-single digits due to the exit from China, Sri Lanka and Ukraine and shift of distributors in certain subscale markets.

However, the bottom line impact from these changes is expected to be minimal as overhead reductions are expected to offset a significant portion of the gross profit decline. Next, the deconsolidation of Venezuela will reduce net sales by $5.6 million and segment profit by $2.7 million.

And based upon recent exchange rate versus the prior year, we expect net sales to be unfavorably impacted by $25 million to $30 million and pre-tax earnings net of the hedge impact are estimated to be reduced by $12 million to $15 million.

In addition, organic revenue is expected to decline in the mid-single digits to high-single digits due to a difficult prior year comparison.

As you may recall, last year's fourth quarter organic net sales were up 4% despite a 3% decline in the category, driven by the timing of early holiday deliveries and a temporary prior year promotional shelf space gain that will not be repeated this year.

Gross margin rate is expected to decline by up to 300 basis points driven primarily by currency Venezuela deconsolidation and the go-to-market changes. As previously discussed most of our finished goods are denominated in US dollars which unfavorably impacts the gross margin rate as foreign currencies weaken.

In addition, we're moving high margin Venezuela results due to the deconsolidation negatively impacts our overall gross margin rate. Finally we expect to incur approximately $25 to $35 million of one-time spin cost including international tax charges through the end of fiscal 2016 as we finalized separation activities.

The majority of these charges are expected to be incurred in the fourth quarter. It's important to highlight that the outlook related to these items is consistent with what we shared during Investor Day. Our future adjusted base EBITDA outlook for fiscal 2016 of $310 million to $325 million remains unchanged.

We recognize it will be challenging to understand our results as we go through this period of transition. We are committed to providing the visibility, clarity and understanding on the underlying heath of the business and its key business drivers.

In order to help with comparability of our financial results and to assist in the communication of the expected impact from some of these items, we have provided supplemental schedules within our press release which sets forth our historical quarterly financial information based upon the Form 10 filings and the impact for the next three quarters as it relates to the Venezuela deconsolidation.

We are finalizing our plans for fiscal 2016 and we'll share our financial outlook for the upcoming fiscal year during the November earnings call. Now, I'd like to turn the call back over to Alan for closing remarks..

Thanks Brian. As we have stated, the fourth quarter will be transitional as the New Energizer begins to execute our plans as a standalone company. We will continue tight cost controls and optimized trade spending while identifying new profitable distribution opportunities to strengthen our business.

Now, despite the top-line challenges, we remain confident in our strategies and believe that we're well poised for a successful fiscal 2016 and beyond. So, for our audience today, this completes our prepared remarks and we'll be happy to take your questions. I'll take turn it back to the operator..

Thank you, sir. First question comes from Bill Chappell from SunTrust. Please go ahead, sir..

Thanks. Good morning..

Good morning, Bill..

Just wanted – I guess, starting off, as we look into the upcoming holiday season, maybe you can give us an idea of market share gains, losses, whether EcoAdvanced is having a meaningful impact in helping get back some of the – or get some incremental shelf space as we go into the holidays and just, kind of, your initial take.

I know we're still four months away, but probably two months away from shipments..

Yeah. So we're going to be lapping share gains from the prior year. I think that would be your starting advantage. You think about heading into the first quarter, fourth quarter, first quarter. We, as you know, we lay our plans out with our retailers roughly 52 weeks in advance of execution.

So a lot of what has been committed is now being planned for execution in the stores. We feel good about the plans that we have with our retail partners, particularly in developed markets where that has the most impact.

And right now, Bill, heading into that period, we do have good share momentum again but we've got pretty big things that we're going to be lapping coming up that will impact share as we head into that fourth quarter..

Yeah. Bill, it's Brian. Just to build on that a little bit, as we stated on our prepared remarks, we were expecting a mid-single digit to high-single digit organic decline, it's really based upon what we're lapping from the prior year.

There was a temporary shelf space gain, the promotional shelf space gain that we had last year that drove a plus 4% organic growth and a down 3% category in the fourth quarter of last year. We chose not to repeat that until we do expect some share decline in the fourth quarter, but share is going to ebb and flow.

What we're focused on is continuing to run the business the right way and invest wisely, and share will take care of itself..

Okay.

And then, just on uses of cash, I mean, I think you've laid it out at the Analyst Day, but any update – I don't even know if you've been allowed to do share repurchase since the split, but kind of your thought process going forward and would you maybe more aggressively bring cash over from international to do that in the near-term?.

Yeah. The uses of cash or the priorities of uses of cash remain consistent with what we shared on Investor Day; it's reinvest in the business, it's return capital via a meaningful competitive dividend, opportunistic share repurchase and then selective disciplined M&A.

Specifically, as it relates to your question, the company formed on July 1, we're definitely in a blackout period until we release the results. And so we have been out of the market, but our thought on share repurchase is consistent with what we shared on Investor Day.

We'll look opportunistically weighing short-term, mid-term and long-term cash needs to determine how best to drive long-term value to shareholders. As far as bringing international cash back it's something that we continue to look at all the time as to what's the best use of that cash.

Obviously, if were to bring it back, you would pay a tax on it but, it's something that we continuing to look at, and discuss very frequently with our board as to how best to put that cash to use..

I'll turn it over. Thanks so much..

Next question comes from Steve Powers from UBS. Please go ahead, sir..

Hey, thanks, good morning. I guess I want to make sure I understand the revenue guidance for the fourth quarter correctly. I think those items that you walked through are, if I am not mistaken, effectively additive. So it appears you're may be guiding revenue down as much as like 20%.

Is that the correct read?.

Yeah. There is – those four moving parts are additive. We said currencies will continue to be headwind of about 5.5%, the go-to-market changes will be down about 5%, Venezuela will be down 1%, the organic will be mid-single digits to high-single digits. And so, if all these play out, you're looking at a range of total revenue down 17% to 20%.

But, all of these are consistent with what we shared during Investor Day. There will be a period of transition as we finalize the separation and adjust to our new scale and focus on the key markets and the customers..

Okay.

As you look forward to 2016 especially on the go-to-market and the organic, any early indicators or sort of the cadence of growth as you look across 2016?.

Steve, it's Alan. Just to chime in on that, we had on Investor Day provided our outlook that we anticipate the category would continue to decline both single-digit. We have seen some stabilization in the category starting in January of 2015 that has helped pretty stead from that point quarter-to-quarter all the way through the May reporting period.

We do anticipate though as we think about our long range planning, we are anticipating to build into our model that low single-digit decline even though we're seeing some stabilization in the category right now..

Okay. Fair. I know there are lots of moving parts, but is there any help you can provide us in terms of what the go-forward SG&A run rate is likely to be either as it relates to Q4 or next year as you finalize the P&L? I think that would be helpful if you just validate our estimates.

And then going back to the top-line, any color you might be able to provide in terms of the regional details, pockets of strength, pockets of relative weakness versus your base case? Thanks..

Yeah, Steve, I'll go ahead – let me answer the latter question and then I'll turn it over to Brian on SG&A. So as we look at the markets, right now as I indicated we are seeing some stabilization in both category volume and value since the January period and that has been pretty consistent up through the May reporting period.

We do anticipate that will continue in some markets, but not all. At this point, we are seeing some shifts in category performance. So as an example, global volume right now is up tenth of a percent and that's the latest 12-week total household battery, value is down 0.5%. When you look at the U.S.

just to pick the largest battery market in the world, U.S. volume is down 1.6%, value down 1.3%. We don't anticipate that trend to shift too much and given the scale of that market you would anticipate the current trends we're seeing to hold or move more toward that low-single digit that we're projecting.

Now as you look at the breakout of markets, developed markets are actually down 1.4% in value in the latest 12 weeks and that's a pretty similar trend to what we have seen in previous reporting periods. However, in developing markets in the latest 12 weeks, they're up 4.7%.

So we anticipate going forward as the New Energizer, we put a lot of emphasis in our go-to-market model in defining where we want to play to win and that really – that meant leveraging our global footprint and where we knew we could build our two brands and do it in a very effective way.

This will entail continuing to really drive profit out of our developed markets and where we have opportunities to expand in certain developing markets, we will pursue those opportunities. We still believe there is growth opportunities to offset some of the decline we're seeing in developed and developing will do that.

It just takes a while though those are typically slow builds when you invest in those types of markets.

And on the SG&A I'll turn it over to Brian, but I can tell you, as we said in Investor Day, when you think about the shape of the P&L going forward our objective is to maintain or improve SG&A as a percent of sales, but I'll let Brian provide a little bit more color on that..

Yeah. As you can imagine, there are several moving parts as we separate a global organization from Edgewell. At this time, we're not able to provide more detail on SG&A than what we provided during Investor Day. However, during the November call we will provide that detail.

Just a couple of other comments on sales by area to build on some of Alan's comments, in North America in quarter three organic sales were down 2.8%. We had the benefit of EcoAdvanced, but also lapping some prior year fill activity and also that promotional shelf space gain that we talked about earlier. In Latin America, sales were down about 1%.

We've seen pricing but also some modest volume declines within EMEA, some really nice distribution in shelf space gains in key markets across EMEA for us and then Asia, despite heightened competitive activity that we see in some of those markets specifically Australia, we have nice revenue growth within the quarter..

Next question comes from Chris Ferrara from Wells Fargo. Please go ahead, sir..

Hey. Thanks, guys. I just wanted to go to A&P for a little bit, so $35 million spent in A&P. Obviously, that's a really big number 9.4% of sales, bigger than Q1 even.

I guess, EcoAdvanced needed support, but is this indicative of what the run-rate would be when you adjust it seasonally or do you think this is a particularly large spend number for the quarter?.

Yeah. Hey, Chris, it's Alan. Great question. It's actually large for the quarter because of our expansion of EcoAdvanced into new markets. That is going to require A&P support to drive both awareness and build trial with consumers.

You would expect as we announced on Investor Day, I am planning on A&P as a percent of sales to be in a run-rate around 6% to 7%. Now, keep in mind that will ebb and flow and it ebbs and flows with competitive activity and its contention on any new innovative launches that we have in our cycle plan that will be forthcoming.

So you can see that A&P move out of the range higher before launching new products and it could potentially move lower if we chose to reinvest that money into something different, perhaps, driving awareness in-store on past purchases opposed to above the line with TVC.

But, if you think about the EcoAdvanced launch and really back to Steve's question as well, we're actually really pleased with the launch to-date. We've got roughly $30 million in shipments year-to-date through June, then we've got over a billion impressions in the market.

At this point what we are very pleased with is the A&P investments that we made have given us strong consumer repeat purchase rates and well above new product launch norms which we're pleased with, the same with brand awareness tracking, it's ahead of new product norms.

We are seeing a key boost and key brand metrics such as long-lasting and innovative and at this point, we're really pleased with the launch. We are sitting right around 1% value share in both the U.S. and Canada. It's actually higher in other markets where we launched such as Australia and the Nordics.

And really going forward, we plan now to move more towards tactical elements of the plan with our trade partners, as we increase both the level of visibility and merchandizing in-store. But as you go forward, the way to think about A&P is this.

In our category, brands really do matter and it's important that you support them with A&P investment for a couple of reasons, first, you want to be able to maintain the healthy margins that we realize in the category; and second, you got to be able to bring at least from my experience both brand-news and the innovation to both trade and to consumers, so that you can avoid just the discussion around price and product only, and we think that's important.

So, going forward we will continue to invest heavily in our new innovation and we believe it's the right thing to do, and candidly, we are pleased with the results that we are seeing both in improvements in our brand equity measures and our measured market share at this point..

Okay. That's really helpful.

And I guess as a quick follow-up, I mean, first on back to the A&P, does 2016 because you will still be supporting EcoAdvanced, does that look to be an above trend year or high enough trend year? I guess, and then, more specifically, on EcoAdvanced, can you just talk a little bit about maybe the performance profile, the margin of that brand, once you get past initial heavy spending, what it looks like, is it – obviously it's a focus for an eco-focused customer, right? How mainstream can it be? How big can it get? That would be great.

Thank you..

Yeah. So let me start with the latter part. I may even ask Brain to chime in on a couple of the questions you had there.

So with EcoAdvanced the way to think about it is when we approach the category we use consumer insights and I won't belabor it too much, but what those insights led us do is really leverage and capitalize on the consumers' expanded definition of performance which includes long-lasting performance plus quality, reliability and responsibility and that's what the EcoAdvanced brings is really all four of those consumer needs.

We plan on continuing to launch EcoAdvanced in select markets around the world. I wouldn't anticipate you would see this everywhere as you would imagine, there are some developing markets where that particular price point just doesn't make sense.

One of the things that we like about EcoAdvanced is, it's actually contributed to accretive value growth in the category as a launch. And it's allowed us to really expand our brand in-store both in distribution and in visibility to both consumers with our customers. So we're really pleased with what we've done with it to that point.

Going forward, we will continue to develop that product and there is a number of things that we're working both in our procurement and marketing teams to continue to drive down the cost of that product from the initial launch. That's in our current plan, and those plans will be executed over the course of the next 12 months to 24 months.

I don't want to get too much into the margin as you would imagine from a competitive standpoint, but what I can tell you is we are pleased with the margins that we're generating from this particular launch and as we continue to drive down our product cost, we anticipate that that margin will be able to hold or improve over time.

And I'll turn it back over to Brian for little bit more color on the other questions..

Yeah. And just to build on Alan's comment really quick, EcoAdvanced is our entry into the performance alkaline segment of the category. That performance alkaline segment of the category is up 20%, north of 20% over the latest 12 weeks, and it's helping the overall category because it's providing solutions to consumers and news to the category.

That's good for us and also good for the retailers as well. As far as the level of A&P support you expect for 2016, I'm going to defer that until the November call when we provide our financial outlook and some of the key P&L drivers in elements of the 2016 outlook at that time..

And Chris, the reason for that delay in part is we have other things in our cycle plan of innovation that will require A&P investments. So, there are some moving parts to that we're going to have to spread differently..

Thanks a lot. I appreciate it, guys..

Next question comes from Bill Schmitz from Deutsche Bank. Please go ahead, sir..

Hi, guys. Good morning..

Hi, good morning..

Hey, can you just talk about what your views on channel inventory right now? And then, one of your competitors had some pretty promising comments in that category saying that aggressive (36:40) spending doesn't really drive consumption.

And so, it sounds like at least one competitor think it rational and I know it's probably too early and you're probably sick of the question, but any sort of read on how the new Duracell is going to behave? And then I have a follow-up if I can..

Okay. I'm going to take a pass and ask Brian to chime in, Bill. So, first, the views on the channel inventory, inventories right now depending on the channel, some channel is going to be a little high, other channels are actually appropriately inventoried.

A lot of that believe it or not has to do with storm builds and how storms come into play as well as the timing in which shipments went in for holiday and how that inventory flowed through in it. Again, it's different channel to channel. Overall, we feel that inventories with the retail trade will continue to normalize over the next few quarters.

I think that's the best way to summarize it for you. On promotional spending, let me just, let me kind of address it for you this way, as we think about promotional spending at Energizer, we partner with our retailers, as I said for larger retailers at least a year in advance and setting both their promotional and merchandizing plans.

We typically in our joint business planning sessions with them try to align to their strategies, but as a part of that strategy, our revenue management team that Brian alluded to earlier really evaluate, assess our choice to participate in some of those promotional activities contingent on the ROI that they generate.

Promotion has been and will be a part of this category going forward. It's part of the mix that all high, low and hybrid retailers use as you know across consumer package goods.

We don't anticipate the competitive activity changing, but I will tell you this, Energizer from a category view will really continue to focus back on those three strategic priorities.

And the simplest way I can say that is leading with innovation will be that top priority, and we believe that's important because – and again, as I mentioned earlier, it allows us talk about more than just product and price, it brings very well needed and appreciated news both marketing and innovation to the category for both our customers and consumers.

So you'll see us continue to focus our efforts as an organization on that particular tenant within our strategic plan, certainly driving productivity and operating with excellence will be critical to the success in launching all that new innovation.

But, again, our focus is going to be primarily on building what we call quality share, base building share, and we do that along the path to purchase. So think about that as high return TVC we generate our best returns in TVC we'll continue to focus on that.

Half the purchases really increasing both the visibility and availability of our products in store to consumers and shoppers which are quite different.

And then finally, we'll recap that with very strong execution programs with feet on the floor in stores around the globe depending on the customer and the channel, but that will be a key focus for us going forward.

And then, finally, in terms of the new Duracell, Duracell has been and will continue to be an aggressive competitor regardless of the ownership.

But again, I think as you see the New Energizer going forward, we remain focused and dedicated to the three strategies that we put in play, we plan to play those by our rules, our way and believe – and are confident that in doing so we will be able to continue to build share and do it in a very profitable way in our business by expanding distribution and increasing the visibility and availability of our products..

Okay. Great. Thanks so much for that. And then, I think Chappell sort of asked the question, but I just wanted to chime in also.

So when do you guys think you're going to start using the balance sheet more aggressively? I mean, how long is the transition period going to take? And then, I know M&A was one of the uses of cash in the Investor Day presentation.

And I'm curious if you guys are actively looking at acquisitions now or do you think you're going to sort of take a breather for a while as you get the spin completed?.

Yeah, Bill, it's Brian. Just as we stated in Investor Day, it's a balance between all three; it's investing in the business, returning capital with dividends and share repo and then, if the right M&A opportunity comes about, then we'll definitely take a look at it. We're 36 days post-spin.

We've hit the ground running and it's some – how best to utilize cash is something that we talk about every single day and also talk about very closely with our board. And so, it's definitely top of mind, we recognize that returning capital to shareholders via a dividend and share repo is critical ways that we deliver value.

But, it's going to be a balanced approach..

And then, if you don't mind, just to chime in on M&A real quick as you asked the question about potential prospects. Let me just talk briefly about the way we're thinking about M&A. It's really about the right business at the right time, the right price and the right place. And let me just clarify what we mean by that.

So, the right business is again within the household space looking for strong brands in household categories that have really good track record of innovation and good channel overlap with our core business which is batteries and portable lights.

The right time is really about making sure that we balance M&A with the other priorities we have in our business and target businesses with the profile, some of the cash profile as – CapEx profile as an example that allow us to quickly capitalize on the cost and revenue opportunities.

Third, around right price, we certainly have a disciplined M&A team in place that has done this before. And they are going to be very focused in acquiring good businesses at fair prices, but also consider our desire to make sure we maintain a healthy balance sheet.

And then finally, from a placing standpoint, think about this from the context of the fact our organization just did a significant amount of work around go-to-market changes. And that was included the decision to exit certain markets and move to distributors and others.

We believe this will allow us to better focus on our top markets and key customers, but as a result of that, we see an opportunity where we can leverage new businesses with geographic overlap to potentially expand into new opportunities that we believe will be important going forward to the expansion of our brands around the world..

And the next question comes from Olivia Tong from Bank of America Merrill Lynch. Please go ahead..

Good morning. Thanks. Appreciate the detail on the international markets and just noticed that the organic sales they are really lumpy by quarter.

Has that always been the case or is there something specific going on this year? And then how do you think about the category growth rates by region going forward?.

Yeah. I'll take the first and then pass it over to Alan for outlook going forward. A couple of things to play is that in Latin America obviously there is a lot of volatility within many of the markets in which we operate.

And then also just the overall small scale within Latin America is that small numbers can drive a big percent change on a year-over-year basis, but what we've consistently seen within Latin America is the ability to continue to take price, but volume has declined because of some of the economic challenges within many of those markets.

Within EMEA, we've made good inroads in gaining profitable share and in good distribution in shelf space gains within the key markets that we're focusing in on. So for the last three quarters we're very happy with our performance within EMEA. Within Asia, it's a very competitive environment especially within Australia.

We've seen competition really heat things up and that's really the reason for some of that quarter-in, quarter-out volatility..

And then Olivia, just to expand on the second part of your question in terms of, sort of, anticipated, it's really hard to project what the trends will be going forward in each of the key regions, but here is the way you may want to think about it. If you look at the trends in North America both volume and value have been down low single-digit.

I would anticipate that likely would continue. Europe, we've seen, if you look at the latest 52-week, you've seen both volume and value relatively steady, units up higher than value, driven predominantly by certainly private label in certain markets, but also because of some of the promotional activity that had occurred there.

Latin America, you're certainly seeing value up. A lot of that is attributed to hyper-inflationary and pricing actions that are taken in those markets by different brands with volumes down.

And I think as Brian alluded to, the big surprise in having run this region, I think it's finally catching up to Asia, some of what's happened to the category around the world. We're seeing both volume and value down. I would anticipate that low-single digit decline to continue as well.

And I think a lot of that on the value front is really driven by the competitive activity. We're seeing among new trade entrants into that market, that is a new challenge for the existing type retailers like the Woolworths or Coles..

And really quickly, Olivia, on North America I forgot to mention is that we have seen year-over-year results bounce around quite a bit. In quarter one organic sales were down about 14%, quarter two up 2% and then quarter three down 2.8%. There is a story behind each quarter.

In quarter one we were down as holiday deliveries shifted to quarter four of 2014. So those holiday deliveries in prior years were in quarter one; and quarter four of 2014, shifted. And then also we had some retail inventory reductions.

In quarter two in North America we're helped with the launch of EcoAdvanced and then we talked about quarter three and then our outlook for quarter four is that we're lapping some aggressive prior year comps and plus 4% when the category at that time was down 3%..

Got it. That's very helpful. And then, the incremental or the gains that you've gotten from EcoAdvanced, have they come from your existing products or do you think that you got some more shelf space with that. And then earlier you had mentioned that you think that there is probably a bit more inventory in the retail channel.

So going forward at least for the next few quarters, would you expect at least for next year to ship below consumption?.

Yes. It's a great question. So first on the EcoAdvanced, anytime you launch a new product you're going to see some sourcing of volume from your own existing brands and competitive brands that has happened as you would imagine. But what we're pleased with is we're actually seeing some incremental from that launch of EcoAdvanced which was important.

When we did a lot of our bases work we actually found that this would be incremental to the category and a lot of the markets that franchise effect is playing out the way we had hoped.

A little less so in the North America because we're introducing a new segment, if you will, in performance alkaline and there has been some catch up in terms of the space that should be allocated to that brand which we expect to see occur over the next several quarters.

So EcoAdvanced will certainly hold its own, but we're pleased with this when we look at the launch of that product versus new product industry norms or competitive launches that would have been similar, not only is it holding its own, it's actually exceeding in some of the key measures, so we are pleased with that.

In terms of the inventory, you can expect that to ebb and flow over the next couple of quarters. Certainly as we head into holiday there is a usually a build that will occurs as retailers get ready to execute against that. In terms of EcoAdvanced itself we do have some inventory we'll be flushing through over the next several quarters.

But, we expect that to normalize. Personally I don't have a concern about the inventory levels on the EcoAdvanced and the impact it may have on future sales..

Got it. Thanks.

And just lastly just for modeling purposes, the corporate expenses that come from legacy ENR to you guys, is that about $15 million a quarter?.

What we said in Investor Day is that the parent company had corporate expenses of around $135 million to $140 million; a reasonable estimate is about half of that. But, again we're still finalizing our budgeting efforts for 2016. I'll be able to give you a lot better number during the November earnings call..

And the next question comes from Kevin Grundy from Jefferies. Please go ahead..

Hey. Good morning, guys..

Good morning..

So, my first question is on margins by segment.

Can you – so the margin gap in LATAM and EMEA versus some of your developed market segments, how much of that gap can you close and over what period of time?.

Yeah, it's definitely a focus for us. When you look at LATAM, decent gross margins, however, the high inflationary environment within several of those markets, so our SG&A spend is pretty high within Latin America.

What we're doing as far as some of the go-to-market changes and also as part of the moving to shared services and then also moving to outsourcing in certain transactional functions hopefully should help that, right, and because it allows us to deliver those services to that market from other markets hopefully at a more favorable cost; it's plans that we have in place now and it's going to continue to be an area of focus for us going forward.

Same with EMEA, EMEA, it's complex to do business, multiple currencies and just a complex overall business market within some of those geographies across EMEA. It is a focus for us. Again, the go-to-market changes and also moving to shared services and also outsourcing should help that.

But, it's something that is a priority of ours now and we'll continue to attack into the future. As far as specific timeframe and a specific amount is to how much of that gap we'll be able to close, again, we're still going through our ABP (51:08) process and then we'll be going through our long-term strat planning process in the coming months.

So, I'm going to hold off on getting some specifics until we complete both of those exercises..

Okay. Fair enough. And then, Alan, thanks for the M&A commentary earlier. That was helpful.

Are there any categories I guess within household and most notably in batteries as an example, are you philosophically opposed to increasing your battery exposure through M&A or should we think about this you're going to be looking for higher growth, higher margin sort of accretive category, if you were to pursue M&A?.

Yeah. So, M&A, it's going to be whatever we do it needs to be margin accretive and think about the profile as being similar cash profiles. You want that stable cash flow coming in.

We do want businesses that had similar CapEx profiles, the ability to leverage our global footprint, the ability to be able to build brands in the markets that we enter that are either new markets or existing markets, and one of things I talked about during the roadshow that I think is important to call out in M&A, we really want to look at M&A across the value stream to make sure that we can truly benefit from both the synergy, the cost and revenue opportunities that might exist in whatever company we choose to pursue.

It's really hard to comment on sort of hypothetical acquisition in terms of what that would look like, so I'd have to default now until we took a decision to do that, but I will tell you we work very closely with our board of directors in terms of assessing opportunities as they come up and we'll continue to do that as well into the future.

In terms of giving you specific categories, I hate to throw a wide net to you the way I have, but just think household space. We believe that that's where the potential opportunities are for us to capture true synergy as well as to maximize again our global footprint in the way we go to market..

And our next question comes from Nik Modi from RBC Capital Markets. Please go ahead..

Yeah. Good morning, everyone..

Good morning, Nik..

Good morning. Just wanted to touch on the trade spend. So, you talked about promotional efficiency as part of this potential savings opportunity, can you just help us quantify just the overall buckets in that spend pool? And then the other question I had just quickly on the licensing business. I mean, the brand obviously has been invested in a lot.

I am sure there would be other companies that would love the Energizer brand name on their products just to show the credibility.

Can you just give us some thoughts on that part of the business?.

Yeah. So, Brian and I will tag team for you on this one, Nik, if you don't mind. And let me kind of provide some color and then Brian may have a little more detail for you. So, as you think about trade investment, it's certainly a big investment bucket for New Energizer.

One of the things and having spent a lot of time in this area myself over the years that we're really going to look at is a combination of both the pricing, architecture as well as trade promotion efficiency.

And really, what we've done with the revenue management team is we put a group in place and they are charged globally to look not just system and process, but overall strategy and approach to how we think about trade investment going forward.

We did do some initial work during our previous restructuring that was able to drive out some inefficiencies in the way we spend money and this last go-round, we took it a step further and identified just trade promotion and think about this as non-invoice spending and really understanding where we are getting the best lifts and the best returns on those investments, we have been able to really quantify that and qualify and then take those best practices out to other markets around the world.

That's the point we are at right now. Think about this on trade investment, because we are considering both architecture and post-promotional analysis.

This is more than a one year journey and as a courtesy to Brian and the team, I'm really giving them a little bit of wiggle room to step back and define what we think the quantification would be of that initiative. It's a little hard to put your arms around right now. We brought a partner in to work with our revenue management team.

They are sitting down now and going through both strategy and clarity of scope of work to define exactly not just the scope of work by putting numbers against that in terms of targets we believe we can aspire to over time, but again this will be a multi-year journey in terms of trade investment.

Brian, I don't know if you have anything you'd like to add on that..

Yeah, just a couple of things, Nik, is that I am going to stay very close to this one. In my previous company it's an area relooked in a revamp that I led in my previous company this is a big opportunity for us, but the team has just been put in place and it is definitely a multi-year journey.

we're going to do this the right way, and for the benefit over the long-term. It's going to be very difficult to quantify exactly that size of the opportunity, because a lot of it depends. And I know you know this, it's how company set their list pricing and then that's going to determine how much is your on-invoice and post-invoice spend.

So we're looking at this thing, we're starting with list price strategy and architecture building pricing – going to pricing architecture, pricing tiers, folding into how we're going to invest with our key customers.

We were taking a comprehensive look at this and we'll continue to provide more insight and details as to how we're progressing with this journey, but it's definitely a top priority for the organization..

We understand that there's a desire to understand that and we empathize with our audience on that. Keep in mind, though, that we are truly global selling into 140 markets around the world, it's not as simple as a one U.S. base list price structure that we can go in and modify.

We actually have to literally go in market to market and assess and understand how that pricing is set up not only to direct retail, but through our distributor network as well. So it's take a little bit of time to Brian's point, we want to do this one and do it right, I mean that's why we're not able to quantify today.

We really want to give the team the proper time to put the scope of our work documents together. Nik, to your second question just real quick on the licensing business, so today, it's roughly $10 million in revenue for us, but as I had mentioned both Investor Day and during the road show, we actually this as an opportunity.

I think you're spot on; you'd be amazed at how many requests we get each week on can we use the Energizer or Eveready name on our products. But, we do want to make sure that we are selective there's a pretty rigorous qualification process we go through internally.

We've actually been able to set up a best practice that the industry is using now in assessing partners and licensing. But, think about it primarily in the space of power and light, we may expand that depending on what our future portfolio looks like, but today we're really going to try and stay in that space of power and light.

We believe that the Energizer and Eveready names lend themselves well to that particular segment of categories..

Great. Thanks, guys..

This concludes our question-and-answer session. I now like to turn the conference back over to Alan Hoskins for any closing remarks..

Great. Thank you, operator. So, on behalf of the New Energizer, we'd like to thank you for joining us on our first earnings call.

As Brian has alluded to in a number of occasions, you can anticipate this to be the norm where we're providing as much transparency as we can to you on the business with some foresight in terms of where we'll be taking the business.

But all-in we do appreciate your time this morning and calling in to listen and thank you for your questions and your interest. We look forward to communicating with you in the future as well. Thanks..

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..