Edgewell Personal Care Co (EPC) 2014 Q3 法說會逐字稿

Good morning. My name is Denise, and I'll be your conference operator today. At this time, I would now like to welcome everyone to Energizer Holdings' third-quarter FY14 results conference call.

(Operator Instructions)

I would now like to turn the conference over to Jackie Burwitz, Vice President Investor Relations. You may begin your conference.

Thank you, Denise. Good morning everyone, and thank you for joining us on Energizer's third-quarter FY14 earnings conference call. With me this morning are Ward Klein, Chief Executive Officer, and Dan Sescleifer, Chief Financial Officer. This call is being recorded and will be available for replay via our website EnergizerHoldings.com.

During our prepared comments and the question-and-answer session that follows, we may make statements about our expectations for future plans and performance including future sales, earnings, capital expenditures, advertising and promotional spending, product launches, the amount and timing of savings, and costs related to restructuring, the amount and timing of changes to our working capital metrics, currency fluctuations, tax rates, raw materials, and commodity costs, category value acquisition or integration plans. Future plans for return of capital to shareholders, whether as a separation of the Household Products and Personal Care businesses is completed or expected -- as expected or at all, the timing and terms of any such separation, whether the conditions to the separation can be satisfied, whether the expected operational, marketing, and strategic benefits of the separation can be achieved, and whether the costs and expenses of the separation can be controlled within expectations. Any such statements are forward-looking statements which reflect our current views with respect to future events. These statements are based on assumptions and are subject to risks, including those described under the caption Risk Factors in our annual report on Form 10K filed November 21, 2013 and our quarterly report on Form 10-Q filed May 1, 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, even though our situation may change. And these forward-looking statements represent our views as of today only.

During this call we will refer to non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with Generally Accepted Accounting Principles. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is shown in the press release issued earlier today, which is available in the Investor Relations section of our website, EnergizerHoldings.com. Management believes these non-GAAP measures provide investors valuable information on the underlying trends of the business. With that, I'd like to turn the call over to Ward.

Thanks Jackie, and good morning everyone. On today's call I will review the quarter and provide an update on the status of our proposed separation of the Personal Care and Household Products businesses that we announced earlier this year. We are moving forward on a number of strategic fronts related to the separation, and we continue to believe this will position both businesses for growth and enhance the opportunity for increased shareholder value.

For the quarter, when considering the headwinds faced by the businesses, earnings came in as we expected. We still anticipate full year adjusted earnings per share to be within our $7 to $7.25 outlook range. The highlights from the quarter are achieving top-line growth in the Personal Care business due to increased Sun Care sales, higher sales of women's razors and blade systems, and continued growth of the Hydro line of razors and blades. Improving margins in both businesses. Due to the restructuring savings and select price increases, significantly increasing A&P investment in our brands that is expected to fuel future growth, and generating greater earnings accretion than expected on the feminine care acquisition, we have now increased our outlook for FY14 accretion to a range of $0.35 to $0.40.

Also, while our global share of batteries declined due to customer losses in the fourth quarter of FY13, our share outside of these accounts increased. In addition, I would also like to point out this was the last full quarter that our Household Products division comparisons will be negatively impacted by the distribution losses that occurred early in last year's fourth quarter.

Now looking at the businesses in more depth. Within Personal Care the combined US categories in which we compete were down over 1%, as all categories except shave prep showed declines. While still down, some of the categories showed improving trends sequentially over the prior quarter. Our share within these categories was also slightly down around 1 point. Within wet shave, our share declined 1 point as continued gains in Hydro were partially offset by declines in legacy brands. Hydro's share of men's systems achieved its highest quarterly share ever of 9.8%, up 1 point versus the same quarter in the previous year. Hydro also grew market share in June, despite a major competitive launch, with Hydro value up 4% in the month. Hydro brand metrics continue to strengthen with awareness, consideration, trial, and usage all growing. And in particular, our newly launched Hydro Sensitive and Hydro Groomer drove incremental sales and consumption.

Our women's systems share was down 1.5 points due to increased competitive activity. In disposables, the category declined slightly and our share was down as we anniversaried promotional activity in the prior year, and experienced increased competitive activity in the current quarter. In shave preps, the category was up nearly 2%, primarily due to pricing, showing the first category growth since September of 2013. While our share was down 2 points, we have had recent distribution gains that will improve our market share going forward.

Now turning to Sun Care. The June quarter represents 50% of annual category sales. For the quarter, the category was basically flat, driven by a cooler May and June. Our share was stable across Banana Boat and Hawaiian Tropic, as both brands kept pace with category. I would like to point out that we had two products that were within the top five new products in the category, our Banana Boat Kids Free Spray and Hawaiian Tropic Self Hydration.

The fem care category was also flat for the quarter, with our share down. Our share of tampons is showing signs of stabilizing behind our recent launch of Sport Fresh Balance. However, our pads and liners business continue to show share declines versus prior year before Energizer acquired the business. These brands were under-invested prior to our acquisition eight months ago. To restore growth, we recently increased our spending behind these brands in the third quarter. This higher level of support will continue into the fourth quarter as we are focused on driving long-term equity and trial.

Within Household Products, organic sales were down 10% due to distribution losses that occurred during the fourth quarter of FY13. As I mentioned, the current quarter is the last full quarter where our for Household Products division comparisons will be negatively impacted by the distribution losses that occurred last year. Energizer's global share was down 2 points. That said, our share increased outside the lost accounts. During the third quarter, the battery category continued to decline mid single digits in both volume and value, and we expect top-line challenges to remain due to expected low single digit declines in the household battery segment.

In batteries we are committed to leading through innovation and to supporting our brand equities. In that vein, we increased our investment spending in this division behind our new Power Seal technology. We also continued to make progress on our initiatives to optimize our global cost structure. Now I would like to turn it over to Dan for the financial highlights.

Thanks, Ward. Adjusted earnings per share was $1.46, a decline of 7% over the prior year. As Ward said, despite significant headwinds, earnings were in line with our expectations. The most notable change for our P&L versus the prior year quarter was a $40 million increase in A& P spending behind our brands. A& P as a percent of sales was 14.3%, a 340 basis point increase versus the prior year quarter. As we stated last quarter, we remain committed to investing behind our brands. Spending was increased across both businesses in support of advertising and promotional programs, and product launch activity.

Within Personal Care, we launched several new products: Hydro Groomer, Hydro Sensitive formulations, and Playtex Sport Fresh Balance. In Sun Care, we continued to invest behind the Banana Boat Protect and Hydrate platform and Hawaiian Tropic Self Hydration. In Household Products, we are investing in our Energizer Max with Power Seal technology, which is currently being rolled out in the US. We also continue to make excellent progress with our restructuring initiatives, as we recognized nearly $32 million of year-over-year savings. This brings the project-to-date savings total to over $220 million.

As a result of these savings and improved pricing in Personal Care, margins were strong. Gross margin, excluding the impact of currencies and acquisitions, increased 230 basis points versus the prior year. SG&A, excluding restructuring and acquisition-related costs, continued to improve versus prior year levels due to restructuring savings and tightened spending controls. And rounding out the P&L, our effective tax rate, excluding the unusual items outlined in our press release, was 29.2%, in line with our full-year estimate of 29% to 30%.

Moving to our balance sheet. We continue to make excellent progress on our Working Capital Initiatives. In the quarter, working capital as a percent of sales was 15.4%, an improvement of 270 basis points versus our FY13 year-end results and a 750 basis point reduction from the 2011 baseline period established at the beginning of the initiative. In terms of the cash conversion cycle, this equates to a 35-day reduction. Total cash flow generated by our Working Capital Initiative now exceeds $300 million. Finally, in terms of capital allocation, dividend payments in the quarter were $31 million as compared to $25 million last year as a result of our dividend increase to $0.40 per share (sic - see Press Release "$0.50 per share") in September of 2013. No shares were repurchased during the quarter.

Now turning to our outlook for FY14. Our assumptions for the full year have changed slightly since our second quarter update. We are now projecting organic net sales to be down low to single mid digits with a low single digit decline in Personal Care and a mid to high single digit decline in Household Products. Incremental restructuring savings are now estimated to be in the range of $135 million to $150 million, an increase over the estimate provided at the end of the second quarter as we continue to make excellent progress with our initiatives. A&P as a percent of sales is expected to be in the range of 10.5% to 11% for the full year. We are increasing our EPS accretion estimate from the feminine care acquisition to $0.35 to $0.40. This excludes the impacts of the acquisition and integration costs and the inventory step-up. We are assuming an unfavorable foreign currency impact of $45 million to $50 million pretax, based upon recent rates, in line with our outlook last quarter. Our outlook for the ex unusual tax rate remains in the 29% to 30% range. As Ward mentioned earlier, we still anticipate full-year adjusted earnings per share to be within our $7 to $7.25 outlook range. Now I'd like to turn the call back over to Ward.

Thanks, Dan. Now as promised I'll provide an update on the separation of our Personal Care and Household Products businesses. The separation is the most complex and work-intensive transaction we have undertaken as a public Company, but we believe the effort required is more than justified by the value creation opportunity. There are a number of work streams under way. We are currently focused on the early stages of the separation, which include the following: determining the commercial go-to-market strategy for each business in the countries we compete in throughout the world; concurrently, defining how to separate the businesses in each of these markets so that each business can successfully operate as a stand-alone company; finalizing the executive leadership for both companies; determining transactional service arrangements between the businesses that will exist post-spin; developing required regulatory filings; and evaluating capital structures and related debt issuance for each business.

Currently we are in the planning stages of the separation process. Once detailed plans are finalized, we will begin the implementation and take the necessary steps to successfully separate the businesses. As I noted previously, we will continue to provide updates on significant decisions, at a minimum once per quarter. Here are some updates and decisions made since the announcement in April.

The Household Products division will be the entity that is spun off. The leadership team below the CEO level will be announced in the coming eight weeks. The targeted date for the spinoff transaction is no later than July 1, 2015. This timeframe reflects the event complexity of separating two comparably sized and significant integrated businesses that are combined around the globe. We anticipate filing the Form 10 in early calendar 2015. Following the filing of the Form 10, we will begin the investor outreach process where we will communicate the unique go-forward plans for each company.

We've made a lot of progress in the past 90 days. We are already developing stand-alone plans and organizational structures suited to each business to ensure that each will hit the ground running with positive momentum at the effective date of the business separation. To ensure the businesses have positive momentum at the time of separation, we will continue to focus on our key objectives: restoring growth in Personal Care by focusing on innovation; expanding distribution in household products by leveraging our strong brand equity and full portfolio; integrating the feminine care acquisition; and finishing strong on our restructuring and Working Capital Initiatives. This completes our prepared remarks for the third-quarter earnings call. And Dan and I will be happy to take your questions. I'll turn it over to the Operator.

(Operator Instructions)

Our first question comes from Dara Mohsenian with Morgan Stanley.

Hi, good morning.

Good morning, Dara.

You increased your cost savings guidance for this year this quarter but didn't raise the longer term forecast. So I'm just wondering, is that purely timing related or could the higher forecast for this year portend an increase in the long-term savings number eventually and give you more confidence there? And then out of the savings you have left on the program, how much should we expect in FY15 versus FY16 in terms of what's incremental?

Dara, this is Dan. I think at this point, I would assume it's timing. We're making very good progress on our procurement initiatives, and as you know from the project as we outlined it, we've gone to a center-lead procurement model. We have a team in place and they are making great strides. We are not prepared at this point in time to increase the estimate, but there's a lot of opportunities we think to explore different areas for cost savings. So we're just not ready to commit to anything in additional.

In terms of 2015 to 2016, I don't have the split on that but I think you can expect there's probably about $50 million of that that's going to really wait until 2016. The first $225 million to $250 million we would expect to have by the end of next fiscal year.

Okay. And then the A&P line has clearly been pretty volatile here over the last few years. Obviously it was way up year over year in Q3. I'm wondering if the 10.5% to 11% guidance for the full year as a percent of sales, is that the right run rate in your minds longer term? Or given the competitive environment's so heated, might that need to move up as a percent of sales in FY15 or beyond?

I would like to keep it in that range going forward. We haven't obviously talked about fiscal 2015 yet, and with the separation a lot of things will change as we move forward. But the 10.5% to 11%, the level A&P investment we did this past quarter and plans for the current quarter, where we end up for the year to me is a good run rate if we can achieve that going forward. Obviously our A&P is volatile. A lot of it is tied to either seasonality of our businesses, a number of which are seasonal, as you know. And part of it is also tied to innovation, the launch (technical difficulties). So I think as you go forward, it would be nice to have that run rate as we go forward. I unfortunately think we'll probably still have some volatility quarter to quarter based on those reasons.

Okay, thanks.

Thank you.

Our next question comes from Bill Schmitz with Deutsche Bank.

Hey, guys. Good morning.

Good morning, Bill.

A couple of questions. The first is, can you just remind me exactly when the Sam's distribution loss happened? So like how much of that is a headwind in the quarter? Because it sounds like you're guiding to flat battery sales in the quarter. So I guess, when that stuff stopped being shipped, and then maybe if there's any incremental distribution in the quarter you want to talk about?

Bill this is Dan. It really occurred almost exactly a year ago, and we believe that in Q4 we've got about $5 million of overlap. That's about it.

Okay. And is there any incremental distribution on top of the stuff you lost? Obviously you haven't gotten it back yet, but is there anything else that maybe you want to talk about on the distribution side?

Really not on a customer-specific basis. The two big losses of last year are well-known now by everybody, and they are what they are. We've had some positive steps in a number of key customers as we lead into the upcoming holiday season, but I really would hesitate to give any granularity on that right now.

Okay, great. And then on the separation, have you guys thought about governance at all yet? So are you going to have a staggered board, is there going to be a poison pill? Is there anything you can sort of just update us on that front for the two businesses?

Well, we really haven't gotten into that in any great detail, frankly, at this point, so it would be premature to say. It would be premature, as you know, as we've announced I'll be going with the Personal Care company and Pat Mulcahy with the Household company. I think those are the kind of questions that the two respective independent boards will deal with once the entities are formed. So to be determined, I think is the answer.

The one last one is, your Personal Care flat organic growth for the quarter, what are you assuming for the category growth in that period?

I think what we're looking at, again as I cited, the categories remain, especially in the US, many of them remain down, but the degree to which they decline is abating. Sequentially the negative category trends we've seen in general are less this quarter than last quarter or last year. And we sense a degree of normalcy returning to some of these categories after what's been a hyper-competitive environment the last couple of years.

Our next question comes from Bill Chappell with SunTrust.

If you could talk a little bit on the battery side in terms of the competitive launches, or I mean competitive wins or lower losses, have you seen a more -- you talked about a highly competitive environment. Has it been more pricing, more discounting than you've seen in the past? Or what you expected, and have you seen more aggressive stance from competitors trying to win business like we did last year, or has that abated as well?

I would say the degree of competition which has been heightened in batteries the past year, 1.5 years remains heightened. I don't think it's any worse. Maybe some of the discounting has abated a little bit. What I like about the battery category is it seems to be a return to focus on innovation, both on our case and our competitors' case. This Power Seal technology that we're putting out in the United States right now and the leak-proof nature of the claims that are somewhat unique to batteries, and we think are a competitive advantage for us, we see taking hold and resonating with consumers, resonating with our customers. And we'll continue to push our innovation. I know some of our competitors have some innovation out there as well. As in all categories which we compete, we prefer to compete through innovation rather than just strict trade promotion, which is kind of where we've been the last couple years.

And on Sun Care, it's so hard to gauge with weather comps and what-have-you, what the category looks like. Is this still a mid single digit growing category, and are you comfortable that -- you're gaining share, or are there other new products we're hearing about that might come on that could take share over the coming months?

As for the category dynamics, I do still think in my heart it's the long term, a mid single digit category growth story. The fundamental's there, of aging population, awareness of skin cancer, awareness of protection from skin cancer, those haven't changed. And I think those fundamentals remain in place. Obviously we're at the whims of the weather. And so the flatness this year, really we do attribute it to a cool May/June, a cool start to the season. So from a category perspective that's kind of how I still see it.

From a competitive launch of innovation, I'm not aware of anything that is fundamentally changing innovation brought into sun protection, outside of what really we've been focusing on the 1.5 seasons. And this introduction of hydration along with protection, we have found again to be really resonating with our consumers. Products are very efficacious. And when people try that and feel that moisturization along with getting long-lasting broadband protection, it really is working. So we'll continue to push, I think, on that as it seems to be working for us.

Our next question comes from Chris Ferrara with Wells Fargo.

Hey. Thanks, guys. I guess following up on A&P. I guess can you give a little bit more detail on that big bump, and I guess what you spent behind? I mean is it spending -- is it supporting launches more, or were there more launches? And I guess in that context, can you tie that in with, you have this ramp up in spending but you're calling for Personal Care flat next quarter, which is a deceleration from the nice bump you got this quarter. So any color there would be great.

Sure. A lot of spend will tend to get focused on around innovation. So when you look at Hydro Sensitive, Hydro Groomer. On the Sun Care, the moisturization. On batteries, Power Seal technology. These are all examples of us bringing innovation to our consumers, relevant innovation. And we're more than happy to have the up media spend and sampling and other trial-generating activities when we are doing that. And I think that captures a lot of what we've been doing this year and what you're seeing the back half of this year. And again, we don't really launch these consumers in some of these categories during the dead winter months. And so, as we've talked about as we've gone through this fiscal year, we gave the heads up on yes, A&P as a percent of sales may be down now but it's going to be up quite a bit the back half, and that's what you're seeing.

I would add to that, too, that what I'm pleased to see is a lot of this incremental investment that we're putting against the consumer is going into media and what I would call brand equity building activities. And in fact have ramped down what BOGOs or what sort of heavy discounting we were doing in a number of these categories last year. Last year being more in defending our franchise, and so I think it's a healthier investment of A&P as well as more investment of A&P.

And Chris, one other comment is that over a third of the increase was against the changing fem care brands that we just acquired.

Okay. And then again in the context of why you expect Personal Care to decelerate next quarter?

I think the sort of the investments we're doing are more long-term investments. If I was doing a bunch of BOGOs right now you'd be seeing probably more aggressive short-term numbers, but I think that's renting share versus owning share. And we're really going at more raising brand awareness and health dynamics of our brand equity. That doesn't, as you know, show up four or eight weeks after you've spent the money.

Our next question comes from Wendy Nicholson with Citi Research.

Hi. A couple things. First question. The other batteries/lighting segment, was that business also affected by the distribution loss, or is there something else that's leading that business to be down kind of mid-teens as much as it has been? And then my second question is, you've only got one quarter left, and I know that it's seasonally an important quarter, but still you've got a really big range now of potential outcomes for the fourth quarter. So can you talk at all about kind of your confidence level? Higher end of the range, lower end of the range, what might lead you to come out at one end versus the other at this point? Thanks.

Sure, Wendy. On the other products, which is kind of specialty batteries and flashlights, those were affected by some of the distribution losses that we incurred last year. So you are seeing that in those numbers. Overall those businesses are fairly stable. Certainly continue to be profitable. And we continue to focus on innovation in those areas. And there is some, I think, growth opportunities in those areas. As for the range, sticking to the range of $7 to $7.25, obviously we do feel quite confident that we'll hit within that range. And I don't know if it's appropriate really to speak really beyond that, other than our A&P spend as a percent of sales we think will be healthy this quarter. And we will achieve that range, to give you a sense of how we're feeling about the business.

Our next question comes from Nik Modi with RBC Capital Markets.

Yes, thanks. Two quick ones for me. If you could just give us an update on -- I know you guys have had some trade spending efficiency projects under way as part of the restructuring. So if you've got any updates there, that would be appreciated. And then the second question is just on zinc costs. We've seen a pretty dramatic rise recently here, and just wanted to get your sense on how you're thinking about that in terms of the impact on the cost structure. Thanks.

Nik, on trade spending we've had some savings as a result of the restructuring initiative, but as we mentioned, I think it was on the last call, we have a much more robust project underway across those businesses that continues. There's no update on that. Any savings that would be derived from that are not included in our current estimate, but that project is live and going forward.

As far as zinc costs, zinc, as you know, has spiked up quite a bit in the last few weeks. We don't know if that's a short-term phenomenon or if it's going to be long term. It won't really materially impact our financials this quarter because by the time that would roll through inventory would be FY15. And we're just kind of on a wait-and-see mode. But even at the current levels, it's not going to have a real material impact on our numbers.

Our next question comes from John Faucher with JPMorgan.

Yes, thank you. Two questions. One, just want to see if there was any color in terms of what's driving the improved accretion from the fem care transaction. If there's anything about the businesses generally coming in a little bit better than you anticipated? And then the second piece was, as you look at spins, a lot of times you get the sense that companies get distracted. But if I look at the gross margin performance and if you look at the strong productivity in the quarter, it doesn't seem like you guys are losing focus on the key running the business day-to-day. So can you just talk about what you're putting in place to sort of keep everybody focused despite some of the distractions relative to the upcoming spin? Thanks.

Sure. On your first question regarding the acquisition. Again, I think as we've taken over the business and kind of applied our discipline to it, and frankly applied our cost structure to that business, a lot of the shared service agreements have ended over the course of these eight, nine months. And as you fold it on to our backbone, I think we found our backbone to be more efficient maybe than the way the previous company was either allocating their costs or incurring their cost. And so that's been a pleasant surprise. You don't really know that until you really get your hands on the business and start managing the business and start getting off the TSAs. But I think almost every time we transition something over to our platform, we've been able to operate it a little bit more efficiently.

I think that that comment about our platform actually goes to answer part of your second question too, in terms of the organization does have a lot on its plate. I'm very proud of this organization's ability to effectively compete in the marketplace, effectively reduce working capital, large amounts that Dan described, effectively carve costs out of the organization worldwide, as our restructuring project has proven, effectively integrate an acquisition, as we're proving to do with the J&J deal. Why is this organization able to do that? Because it's a damn good organization. And that may sound a little cavalier, but I think you can see the result, whether it's in gross margins, whether it's overhead cost control, whether it's reinvesting in the brands. And this organization's hitting on all cylinders under tremendous amount of workload.

Our next question comes from Ali Dibadj with Bernstein.

One is on the A&P spend specifically. Just to get a better sense of how you think about it, because you increased it a lot obviously this quarter, and that's good. But I'm asking about the returns on it. Arguably they haven't been great,. You used to spend kind of this 10%, 11% type A&P as a percentage of sales, and would actually grow the top line. So I wonder whether you actually have to up the ante again on A&P even further than you have historically, even further than what you're thinking about for this year's 10.5%, 11.5% to actually grow. So is the return on this advertising spend, and it might not just be an Energizer phenomenon. It might be an industry-wide phenomenon, but is the return on this advertising spend actually getting worse so you actually have to up the investment more?

It's a great question. I would characterize it this way. Again, the 10.5% to 11% that we're putting in is in brand-building activities more than maybe in the past, and I'm very happy about that. Those don't show an immediate return, but we see immediate results as we track brand metrics whether it's unaided awareness, whether it's purchase interest, whether it's uniqueness, depends on the brand, the category, and what's most relevant. And so we do see a return in those, and I would call that just general brand health. I would say it's tougher to immediately translate that into results when you have categories that are in the decline rates that we've been seeing. Again, the battery decline rates we've called out for years, and have proven correct in that call-out. I think on the Personal Care category weakness is in the United States, those are somewhat unexpected, but we see abating. And so it's a mix of short-term factors and long term factors. But we do see some pretty good results from the A&P spending that were put in place when we are looking at our brand metrics in particular. And in the end, the strength of the brands is the of the Company. So full speed ahead. If it's going to take more than 11% of sales going forward, we will deal with that as we go into 2015.

Our next question comes from Olivia Tong with Banc of America Merrill Lynch.

Great, thank you. Can you talk about the split in A&P spend between batteries versus Personal Care this quarter? And then next quarter when you report, are you planning to provide a full year outlook for 2015 for total Energizer?

In terms of the split between A&P, we generally don't get too specific between the businesses, but I think if you look at -- we perform from a profitability standpoint, there's definitely a lot of investment on the Personal Care side. Both businesses were up for the quarter, but a lot of it on Personal Care. In terms of what we're going to disclose regarding 2015 in November, we're still debating that because it's not a full fiscal year, at least according to our targeted date of July 1 or before. So we're still deciding what makes the most sense to give investors transparency as to what we expect prior to spin. And we just don't have an answer at this point.

Our next question comes from Jason English with Goldman Sachs.

Hey. Good morning, folks. Thanks for the question. I wanted to circle back on a couple of the other questions that have already been asked. So first to Nik's question on zinc costs. Can you remind us how much zinc you use? And then on a related topic, given the competitive intensity in the category these days, is it reasonable to think that you will be able to get some pricing, or the category overall will be able to get pricing into FY15 as it starts to roll through the P&L?

On the zinc question we never disclosed how much we use, but what I'll tell you is that based on the recent delta and the price increase, it's less than $5 million of full year impact to us.

That's helpful, thank you. And then circling back on Faucher's question on the J&J fem care business, I think early on you had a much lower accretion number because of your plans to try to reinvigorate these brands on meaningful investment. Can you talk about the investment you're making there, the reinvigoration efforts, and whether or not this higher accretion is just more reflection of a deferral of some of that spend, or are you comfortable with the spend as it exists today?

Well I think the, as we've tried to communicate as we done through the fiscal year, we weren't spending much on these businesses as we were taking them over. Again, we took them over in November, so in the middle of the first quarter. And we are spending now. So the accretion that you've seen up to now isn't necessarily something you just straight line ongoing because as mentioned earlier, the spending that's being put in these businesses is now starting to ramp up. Obviously they'll up accretive, and we gave you the ranges where we'll end up for the year. But a lot of that was front loaded because the spin is back load.

The spin itself is, again, similar to the comments on some of the other businesses. Increase in doing media spend, kind of the fundamentals of brand equity in terms of improving those brand health measures. And we're just starting on that journey. And we are very happy with the technology we have in fem care, both on the tampon side and the technologies we've picked up from J&J. Very efficacious products, and we just need to do a better job of getting those brand metrics strengthened. So I think that's really where the focus is starting on fem care, and I would think continue as we go over into 2015.

Our next question comes from Kevin Grundy with Jefferies.

Good morning, guys.

Good morning.

So Ward, I wanted to come back to Personal Care and just broadly now, and there have been some discussion earlier in the call on skin care. But the much bigger portion of the business is wet shave. And as we look back at the historical performance of the business broadly for the segment, it was a business that used to grow 3%. If we look now back to 2012 and probably where you'll land in 2014, it's something closer to flattish, maybe even modestly down. So given that wet shave remains competitive, you have the dynamic where there's not a lot of volume growth and hasn't been for some time in razors and blades. How should we think about that now longer term? Is this still a business where you think it can legitimately do 3% to 4% growth, or are we in a range now where it's maybe flattish to up modestly?

And then unrelated to that, are you guys -- can you share anything with respect to dissynergies? And there's market discussion about 1% of sales and whether that's reasonable. So any commentary there on both those topics would be helpful. Thank you.

Yes, sure. On the category, the wet shave category, can you get back the 3% to 5% value growth? I would hope so. Right now it's not there. You look at our most recent US numbers. On a 52-week basis, value's down 3.3%, the category's down 2.9% on a 12-week basis. So we're seeing the -- the declines were much steeper earlier this year and last. So we're seeing an abatement of the declines of the category. And that I think is a very good sign. Can the category from a value point of view get back to 3% to 5%? I would hope so. I think the focus on innovation, I think the focus on delivering a great shave, and I think especially as you look outside the developed markets to the developing world where we have some presence, that it's reasonable to expect that category to show those dynamics. Again it�s been an extraordinary period the past couple years, these negative trends, but we think a lot of them have been self-afflicted by, shall we say, the category players. And we don't lead this category. And I think that's starting to abate.

So in terms of breakage cost as it relates to the separation, we've identified certain ones that are easier to identify than others, but we really haven't given a range of dissynergies yet. I'm not sure we're really prepared to do that, as Dan alluded to earlier in the comments. We're in the midst of really, the studying part, or the analysis part of exactly the best way to do this, again so both companies get a very strong footing and a very strong start as separate companies the middle of next year.

Our next question comes from Jason Gere with KeyBanc.

Okay, thanks. Good morning. Two questions. One, talking about this tough consumer environment that we've been mired in. Can you talk a little bit about Hydro? And then in terms of the growth that you're seeing in Hydro versus your other businesses, how much of the growth this quarter really came from the new products, the innovation, versus the core Hydro business, which is a price discount to the leading player out there? And are consumers really starting to emphasis more on the value there? So just wondering, I guess, this first question is really more about consumer behavior within wet shaving, and if you could talk a little bit about that.

Sure. On Hydro itself, as I talked about, it's hitting all-time record share. Again the metrics we track, whether it's awareness and health of the brand are at all-time highs, and continue to roll forward. It's a very efficacious product, as you all know, but it has always been priced at somewhat of a lower price point than its competitive items on our competitors' side. That's true from day one, that's true today. That just reflects reality of the strength of brand equities, despite the efficacious of the product. So as we grow Hydro, I think that the team's just done a very good job of growing it across the whole franchise, Sensitive and Groomer are just the most recent examples of innovation that we keep rolling out with the Hydro technology. And that momentum builds on itself. So you come out with Hydro, you come out with Hydro disposables, you come out for Hydro with Women, you come out with Hydro Groomer, come out with Hydro Sensitive. They all build on each other, and are the reasons why we've achieved the record share on that brands that we have.

I think there's still upside on Hydro, both within the US and in other markets. In some of the other markets we haven't introduced the full range yet that I just went through. And as well as just traction on Hydro itself. So whether consumers are becoming more price sensitive, I think it's certainly a topic all consumer package goods CEOs worry about these days. The consumers, especially US, as we know, are hard-pressed. So when you come out with a product like a Hydro that's not only very efficacious but a great value, I think it is in the sweet spot for where a lot of consumers are right now.

Our next question comes from Connie Maneaty with BMO Capital Market.

Good morning. We've heard from some other companies that retailers are being kind of tight on reordering, and I'm just wondering if your sell-in across all your customer base matches your sell-through?

I'm not aware of any extraordinary cutbacks in ordering by our retailers at this point in time. So I guess the short answer to that is, we aren't necessarily seeing that.

Okay.

At this time, we have no further questions. Well, time for questions, excuse me. I will now turn the call back over to management for closing remarks. Please proceed.

Well, that really does conclude, then, our presentation and our Q&A session. Again, thank you to everyone on the call for your interest in Energizer Holdings. Have a good day.

This concludes today's conference. You may now disconnect. Have a great day.