Energizer To Split Into Two Companies; Q2 Profit Up 16%, Beats View

(RTTNews) - Consumer goods company Energizer Holdings Inc. (ENR) said Wednesday that it plans to split its household products and personal-care divisions into two independent, publicly traded companies. Shares of Energizer are currently gaining 16 percent in the regular trading session.

Separately, Energizer reported a 16 percent increase in profit for the second quarter from last year, as lower expenses more than offset a decline in sales. Adjusted earnings per share for the quarter beat analysts' estimates, while revenues missed their estimates. Looking ahead, the company reaffirmed its financial outlook for fiscal 2014.

St. Louis, Missouri-based Energizer said its board of directors has authorized its management to pursue a plan to separate the company's household products and personal care divisions into two companies. The company plans the separation as a tax-free spin-off to its shareholders, to be completed in the second half of the 2015 fiscal year.

Energizer expects the Household Products division, with batteries and portable lighting products, to generate strong margins and significant cash flows, and be anchored by the Energizer and Eveready brands. The division reported annual revenue of about $1.9 billion in the trailing twelve month period ended March 31, 2014.

The company expects the Personal Care division to be a pure-play consumer products company with an attractive stable of well-established brand names. The division had annual revenue of about $2.6 billion in the trailing twelve month period ended March 31, 2014, adjusted on a pro-forma basis for the feminine care acquisition.

Upon completion of the separation, Ward Klein, currently chief executive officer of Energizer, is expected to serve as executive chairman of the board of standalone Personal Care. David Hatfield, currently President and CEO of Energizer Personal Care, is expected to serve as CEO of standalone Personal Care.

Patrick Mulcahy, currently Chairman of the Board, is expected to be executive chairman of the board of standalone Household Products. Alan Hoskins, currently President and CEO of Energizer Household Products, is expected to serve as CEO of standalone Household Products.

Energizer plans to provide further details about the board and management teams of the separate companies at a later date. The company has retained Goldman, Sachs & Co. as financial adviser and Wachtell, Lipton, Rosen & Katz and Bryan Cave LLP as legal counsel to advise on the separation process.

In a separate statement, Energizer said its net earnings for the second quarter increased to $98.5 million or $1.57 per share from $84.9 million or $1.35 per share in the prior-year period.

Adjusted net earnings per share for the quarter were $1.88, compared to $1.80 in the same period last year. On average, 15 analysts polled by Thomson Reuters expected the company to report earnings of $1.71 per share. Analysts estimates typically exclude special items.

CEO Ward Klein said, "Second quarter adjusted net earnings per diluted share were in-line with our expectations as we continue to make excellent progress with our cost savings initiatives."

Net sales for the quarter declined 3 percent to $1.06 billion from $1.10 billion in the year-ago quarter. Analysts had a consensus revenue estimate of $1.08 billion.

Personal Care net sales for the quarter rose 6 percent to $652.6 million. Household products net sales declined 16 percent to $373.4 million, primarily due to the loss of distribution within two U.S. retail customers in the segment.

Looking ahead to fiscal 2014, Energizer reaffirmed its outlook for adjusted net earnings per share of $7.00 to $7.25, and reported net earnings of $5.70 to $6.10 per share.

The outlook assumes, among others, total company low-single digit net sales growth, including the impacts of the feminine care acquisition and currencies. Street expects the company to report earnings of $7.06 per share for the year on revenues of $4.48 billion.

ENR is currently trading at $113.68, up $15.97 or 16.34 percent on a volume of 2.94 million shares.