Energizer Holdings, Inc. (ENR) Q1 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the First Quarter 2013 Energizer Inc. Earnings Conference Call. My name is Lisa, and I'll be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Ms. Jackie Burwitz, Vice President, Investor Relations. Please proceed.

Thank you, Lisa, and good morning, everyone, and thanks for joining us on Energizer's first fiscal quarter 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 expressing the expectations of management regarding our future plans and performance, including: future sales, earnings, earnings per share, capital expenditures, advertising and promotional spending, product launches, the amount and timing of savings and costs related to restructurings and other initiatives, the amount and timing of changes to our working capital metrics, the impact of price increases, currency fluctuations, raw material and commodity costs, category value, future plans for return of capital to shareholders, and future growth in our businesses. Any such statements are forward-looking statements, which reflect our current views with respect to future events. These statements are based on assumptions and are subject to risk and uncertainties, including those described under the caption Risk Factors in our annual report on Form 10-K filed November 20, 2012. These risks and uncertainties 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 growth trends of the business. With that, I would like to turn the call over to Dan for a review of the quarter.

Thanks, Jackie. For the first quarter of fiscal 2013, adjusted net earnings per diluted share increased $0.15 or 7% to $2.20. Organic sales, gross margin and adjusted net earnings, excluding unusuals, were essentially flat, while shares outstanding were lower in the quarter. Turning to divisional results. In Personal Care, organic sales declined 1.4% due to a number of offsetting factors. On the positive side, the Hydro franchise, which includes the Hydro men's and Hydro Silk women's system products, continued to show top line momentum, growing 26% versus prior year, reflecting the strength of these global new product launches. The rapid sales growth in Hydro reflects strong repeat purchases of cartridges as we are reducing promotional spending and advertising to more of a run-rate level as full distribution is realized. Overall, men's and women's systems sales were flat, as the growth in the Hydro franchise was offset by legacy declines, primarily in the Quattro franchise. These legacy declines reflect the negative impact of heightened promotional activity across the systems category, as well as trade up to the Hydro franchise. With sales in men's and women's razor blade systems essentially flat, the modest organic sales decline within the total Personal Care division was a result of 3 general factors: Disposable razors declined 5% versus prior year as heightened promotional activity continued in this segment. Shave prep sales were down 7% due to increased promotional activity by competitors. And sales in Infant Care declined 9% as the impact of declining birth rates and significant competitive product launches continue. We saw positive sales in 2 other product segments. Within Sun Care, sales increased 8% due to continued growth in international markets in the southern hemisphere, both in Asia and Latin America. The December quarter is a low sales quarter for Sun Care in North America, as the March quarter is when the summer sell-in will ramp up. And within Fem Care, sales increased 3%, reflecting a change from prior sales trends driven by continued growth in sport and the positive impact of the sell-in of Gentle Glide 360 innovation, our newest product launch in this category. For the Household Products division, organic sales increased almost 1% driven by $18 million of incremental sales volume from Hurricane Sandy. Excluding incremental sales from the hurricane, organic sales declined 2% compared to the prior year quarter. The decline x hurricane was driven in large part by the loss of shelf space at a major retail customer which occurred mid-way through the prior fiscal year, as well as the increased cost of contract renewals with certain retail customers in North America and Asia. On the positive side, we continue to see top line benefits from the 2012 price increase as we will not anniversary the price increase until the second fiscal quarter. Now I would like to provide a little more insight on a couple of key line items on the consolidated P&L. Advertising and promotion spending was essentially flat versus last year on a dollar and percent-of-sales basis. The 7.9% spending rate is relatively low compared to annual spending levels reflecting a quiet quarter in terms of product launches. Total selling, general and administrative expenses were lower by $13.6 million, equating to a 110-basis-point reduction as a percent of net sales. This reduction reflects lower expenses at both the corporate and divisional levels. For the first quarter, our overall effective income tax rate was 31.2%. Excluding unusual items, our effective tax rate in the first quarter was 31.6%. This rate is higher than our previous estimate for fiscal 2013, reflecting the impact of country mix, including higher U.S. sales and profits due in part to Hurricane Sandy. As you may know, the tax legislation enacted in early January reinstated the R&D tax credit for U.S. firms on a retroactive basis to the beginning of 2012. Based on our fiscal year, we will benefit from this reinstated credit in 2 ways. First, we'll receive a tax credit for the 75% of fiscal 2012, or about $1.5 million, and we'll receive a full credit of $2 million for fiscal 2013. However, we did not included this in our first quarter provision estimate since the law was passed in January of 2013. Excluding unusual items in fiscal 2013, we expect our total year effective tax rate to be around 31%. Keep in mind this can change as our earnings mix changes during the year. From an all-in standpoint, including the tax benefit of restructuring cost, we are currently estimating an effective income tax rate in the rate of -- range of 30% to 30.5%. During the first fiscal quarter, we continue to make progress on our working capital initiative, achieving a 50-basis-point reduction on a trailing fourth quarter's basis versus last quarter. Networking capital as a percent of sales is 20.9%, a 200-basis-point reduction from the baseline working capital level of 22.9% at the end of fiscal 2011. We are 5 quarters into this initiative, and on track to achieve the targeted reduction of 400 basis points by the end of fiscal 2014. To date, our progress has been largely related to an improvement in base payables resulting from targeted negotiations with vendors. As we move through fiscal 2013, we expect to see additional progress in reducing days sales outstanding and days in inventory. During the remainder of 2013, we anticipate temporary increases in inventory levels related to the manufacturing footprint changes in the 2013 restructuring project. We will provide insight into these temporary increases in our future quarterly updates. During the quarter, we had 2 significant unusual items. First, we recorded $49 million in charges related to the 2013 restructuring plan which was announced in November 8, 2012. There are 3 primary components of this charge: a $23 million noncash write-off of assets in the form of asset impairment and accelerated depreciation primarily related to anticipated changes to our manufacturing footprint. This includes the closing of 3 facilities and the streamlining of 3 more facilities within our Household Products division. Additionally, we incurred $14 million in severance-related expenses, and $12 million in consulting and other charges. Second, in the first quarter, we recorded a curtailment gain of $37 million related to the decision to freeze our U.S. defined benefit plan effective January 1, 2014. This gain was originally recorded as a deferred asset in 2009 when we switched our defined benefit plan from a final average pay formula to a cash balance formula, and the balance was being amortized into income over the average future service life of the participants. With the freeze of the defined benefit plan, accounting rules require that we accelerate the recognition of the entire deferred gain in the current period. As an unusual item, this gain is excluded from our financial outlook range for adjusted earnings per share. With that overview of the quarter, I will now turn the call over to Ward.

Thank you, Dan. I will walk you through each of our businesses and key factors that are impacting them. In Personal Care, our key priority for 2013 is to roll out innovation across all of our categories. As you will recall from our Investor Day in December, we have a robust innovation pipeline. New product launch activity is ramping up this quarter and will extend through the balance of the fiscal year. Let me begin with Wet Shave. Our top line growth in the overall Wet Shave segment was depressed this past quarter by significantly heightened levels of promotional spending across all wet shave segments in the United States. Specifically, our major competitor in Wet Shave executed 19 free-standing insert coupons, including 2 buy-1-get-1-free coupon events this past quarter versus 11 FSI coupons with no BOGOs the previous year quarter. The unprecedented level of promotional spending in the U.S. impacted our disposable razor’s and legacy system's U.S. market share. Despite this onslaught, our U.S. Hydro franchise continues to deliver very solid results. Furthermore, we continue to see strong mid- to high-single-digit growth in disposable razors in our markets in Asia and Latin America due to trade up in distributor gains. Though one can wrench share through ramping up promotional spending and discounting, we have always preferred to grow our business through introducing innovative new products. This remains our long-term strategy in Wet Shave and is evident by the following: We are expanding the Schick Hydro franchise beginning this quarter by launching Schick Hydro 5 disposable razors and Schick Hydro Silk disposable razors in North America. With this launch, we continue to innovate in the category by providing the same great technology and skin care benefits unique to Hydro to the 37% of the market that prefers disposable razors. After successful launches in North America and Asia in 2012, we are also expanding our launch of Schick Hydro Silk systems and Hydro Power in the markets in Europe. We will support the launch of Hydro and Hydro Silk disposables and the rollout of Hydro Silk and Power Select with strong media campaigns, as well as promotional activity, and so you can expect higher A&P spending as a percent of sales versus the first quarter level as we move through the rest of fiscal 2013. In addition to these new product launches within the Schick Hydro franchise, we continue to grow our Schick Hydro sales across the market where we've launched. As Dan noted, our global net sales grew 26% in the quarter due to double-digit sales in refills across all of our areas. We will continue our core focus on driving Hydro trial as we continue to be pleased with the effectiveness of promotional programs on both trial and repeat. Furthermore, consumer offtake of Hydro Silk continues to be incremental to our women's systems franchise in all markets where we've launched. Specifically, our U.S. 52-week market share for women's systems grew 2.6 points to 39.7%. In addition to the Schick Hydro disposable launch starting in North America and our continued rollout of Hydro Silk and Hydro Power globally, we introduced a new 4-bladed Edge men's system at a key U.S. retailer this quarter. Finally, we have 2 additional new razor-and-blade product launches which we will discuss in further detail at the upcoming CAGNY conference next month. Our Personal Care top line results were more robust outside of the Wet Shave category this quarter driven by innovation in Fem Care line of business, the launch of media support behind Litter Genie, and a robust international growth in Sun Care. The recent launch of Gentle Glide 360 is on track with share gains in the latest 2 4-week periods. In addition, Sport continues to grow share in this quarter. We will continue to support the Gentle Glide 360 launch with strong media and promotional campaigns. In Sun Care, while our first quarter is not a heavy Sun Care quarter in the U.S., sales grew approximately 17% versus prior year in key international markets. This continues the long-term trend of double-digit growth of our international Sun Care business, much of which is a result of both distribution gains and the launch of innovation -- innovative new products. Specifically, we have introduced and are currently shipping 3 new product innovations: new Banana Boat coolzone lotions, Banana Boat Protect and Hydrate lotions, Hawaiian Tropic Silk Hydration Sprays, which have all received broad distribution in our top accounts. We've also executed a price increase of 3% on certain Banana Boat SKUs. Finally, our Litter Genie media campaign kicked off in October. Retail sales have ramped up significantly as a result of the increased awareness, and we feel sales are stronger than anticipated. Again our plans are to continue to support this exciting new innovation with ongoing media and promotional campaigns. In Household Products, our key priority for 2013 is to rationalize and streamline our cost structure to improve our competitiveness. And we focused on our core Battery and Portable Lighting product lines, markets and customers. I will cover the progress of the restructuring project in a few minutes, but I did want to cover a few recent category and market share trends, provide more context to the quarterly results Dan discussed earlier. In the current quarter, global Battery category volume was relatively flat in the latest 12-week data driven by Hurricane Sandy. x hurricane, however, we estimated the global category volume was down nearly 2%. Battery category value was up 2.7%, but relatively flat again, excluding the impact of Hurricane Sandy. We will anniversary our 2012 battery price increase in the second fiscal quarter, thus, we believe that the trend in category value will more closely align with the negative trend in category volume as we move through the remainder of fiscal 2013. Despite these category challenges, the Household Products division delivered profit growth, incremental to the impact of the hurricane. In North America, low single-digit net sales growth was due to the favorable impact of hurricane volumes and the price increase, partially offset by lower volume and market share losses resulting from decreased shelf space and display activities in key retailer early last year. In Asia Pacific, we experienced top line softness in some of our key markets due to category declines. However, market shares were relatively stable. In Europe, Middle East and Africa, organic sales were up 1% and higher sales in developing markets in Central Europe, Middle East and Africa, partially offset by softness in some of our Western and Southern European markets. Category remains very challenging, especially in Southern Europe. Market shares were relatively stable. Finally, in Latin America, our sales are stable as lower volumes due primarily to timing and shipment, and the continuation of negative category volume trends were offset by stable pricing. We continue increase our market share leadership position in this part of the world. We are very pleased with the profit improvement in Household Products versus a year ago. This is without any restructuring savings flowing through. Now turning to the update of our 2013 restructuring program. As previously communicated, we expect to realize gross, annualized pretax savings of $200 million through the combination of reduction in force, manufacturing footprint changes, procurement savings, benefit plan changes and other reductions. Significant progress has been made over the past 2 months, with teams across the organization have begun implementing these changes. Thus far, 354 positions have been eliminated. We initially focused on organizational realignment and not plant locations across North America. Nearly 3/4 of our total nonplant, North American headcount reduction target has been achieved. We remain on track to reach our overall reduction adjustment of 1,500 positions. The timing and manufacturing footprint changes remains on track with facility closures expected to the balance of this calendar year. In addition, procurement initiatives are progressing well. We continue to work with our suppliers to identify and eliminate non-value-added waste and cost in targeted areas. All other initiatives are also on schedule. Given the timing of the approval of the plan in November, savings were not material in the first quarter, but will begin accruing in the second quarter. Total savings in fiscal 2013 are estimated to be in the range of $25 million to $35 million, which is consistent with our initial financial outlook. We remain confident in delivering our overall gross annualized pretax savings target of $200 million by 2015, and expect restructuring cost to remain under $250 million. As previously noted, $50 million of the targeted savings will be used to provide the operating flexibility needed to invest in our businesses, grow our brands, and continue to accelerate our innovation efforts which we believe are critical to ensuring long-term sustainable growth. We will continue to provide updates on the progress of this critical program during future earnings calls and releases. Before we move to Q&A, I would like to reaffirm our fiscal 2013 adjusted earnings per share outlook of $6.75 to $7. Within this outlook, we are expecting to achieve mid-single-digit sales growth in Personal Care for the fiscal year driven by our new product launches. Within our Household Products, we are expecting a low single-digit sales decline for the fiscal year. This decline is driven by continued category softness, and year-over-year impact of shelf space and display losses in fiscal 2012. The sales projection for each of our businesses is consistent with the financial outlook given last quarter. In addition, this outlook includes estimated, net pretax restructuring savings of $25 million to $35 million for fiscal 2013, which does not include the impact to restructuring cost or any share repurchases during this fiscal year. Now Dan and I will be happy to take your questions. Operator?

[Operator Instructions] Your first question comes from the line of Wendy Nicholson with Citi Research.

My first question has to do with the profitability in the Personal Care segment. And I would have expected that with the lesser level of advertising and the shift towards more blades and the particular strength of Hydro, that margins would have been maybe a little bit more insulated, even if sales came in a little bit light of your forecast. So I guess, can you explain that a little bit. Am I not thinking about potential contribution to EBIT from the Hydro Blade, but more importantly, if we look out over the next few quarters, to the extent Personal Care continues to be a little bit challenged and if you fall short of that mid-single-digit, top line growth target, is there a risk that the negative operating leverage clips your earnings outlook for the year would you say? Or do you feel like you've got enough offsets for that?

On the profit question part of your question, I'll have Danny answer that. I think really from the sales top line perspective, we really are feeling pretty confident still about achieving that mid-single-digit sales growth for the Personal Care division. And again, a lot of that is attributed to all the innovation that we went through and that we're launching, as well as some additional innovation that we'll be talking about. So we still are feeling pretty good on the top line projections we've been providing for Personal Care. As for the margins, Personal Care for the quarter, I'll let Dan answer that.

Yes, Wendy, if you recall, a year ago this quarter is when we really pulled back on spending within Personal Care as the Hydro launch has essentially matured. So in reality, spending within Personal Care, we actually had slightly more A&P spending in this quarter versus year ago. So it really wasn't a favorable comparison. And that's why if you look on a consolidated basis, the A&P spend is pretty much the same as it was year ago. And just to kind of echo what Ward was saying, when we look at our organic sales forecast within Personal Care, and a lot of it is related to the products that Ward talked about -- we talked about in Investor Day, it's really across the portfolio. There's not -- there aren't 1 or 2 big areas. It's across all of Wet Shave, clearly within Sun Care and even within -- inside Fem Care. So we feel pretty good about the plans we have in place and that's going to generate incremental organic growth.

And can you give us any sense for -- I think at Analyst Day, you talked about planograms kind of being changed at the beginning of the year. Just how much of that is a sure thing? How much of it is orders in hand, the stuff's on the truck and it's going out the door this month or next versus, oh, we're hoping to get distribution over the next 6 months and that sort of mid-single-digit is going to come at the very end of the year? Because I think that's obviously where most investors are sort of most skeptical, if I could say.

Yes, in terms the distribution listings for most all the new products that we've outlined at this point, those are pretty much locked in. As we worked carefully with our customers and especially this is the time of year a lot of these planograms get reset. The sell in of these promotions really took place -- products to place last fall. The distribution, we know what distribution we've had. We know in most cases what planograms are going to be set. These products are shipping, and so a lot of those decisions are already behind us. So our projections again are based on what we know we've already achieved, both in terms of listings and planogram sets for 2013.

Your next question comes from the line of Christopher Ferrara with Bank of America Merrill Lynch.

Guys, I guess on Edge, can you talk on the razor -- I mean, can you talk about I guess the early on takeaways out of Costco? And can you talk a little bit about the retailer's incentive to stock it. Or I guess what I want to understand is, how is it doing, kind of expand, right, because I mean where I saw it's $25 basically for a handle and $17, blades. How do I think about the margin for a retailer versus the ring for a retailer, and what their incentive would be for it to go somewhere else besides Costco?

I don't want to go into customers specific opportunities, per se. Let me just say that with Edge, it's early in the game. It is a joint opportunity with this customer that the customer is as eager about as we are, and so proceeding accordingly. Whether and when it's an opportunity that could roll out elsewhere is really kind of premature to talk about. We do know that the Edge brand has quite a bit of staying power in this particular space. And it's kind of an innovative way to crossover from simply shave press into the razor and blade business with a brand name that does have that saliency . So we're early in the game. We're optimistic in working with the customer to see how well we can grow it and see where it goes.

And I guess, as a follow-up. I mean, it's more philosophically. I mean, would it be fair to say, would you have a view that there's lots of profit to be made in the blades and razor category, perhaps below the $3-per-blade price point in that category?

I think there is. I think there is -- the overall category remains one of the higher-margin, most profitable categories in the entire Personal Care space. And the tradition of growing profitability through offering better innovation that people are willing to pay for at all price points, I think remains intact. I think maybe where it started to get a bit frayed is when you get to the very, very high end of that price-value relationship. I think we've seen a little bit of balking by consumers the last couple of years at the top end. So we don't really play at the top, top end, even with our Hydro 5 and Hydro 3 which offer best shaves out there. From a pricing value proposition, I think we're more in line to what consumers are willing to pay.

Your next question comes from the line of Bill Chappell with SunTrust.

Just a little bit more on the Battery business. I'm actually surprised that your volumes were kind of in line with worldwide volume trends despite losing some share in the U.S. And just wanted to dig into that in terms of going forward. I know you don't lap that shelf space loss until after this current quarter, but are you expecting share to stabilize after that? Are you seeing with the planogram resets, you might lose some more or gain some of that back?

I think we'll see at a minimum, our share stabilize as we annualize through that one particular distribution loss that we took early last year. And I think our Household -- Battery division management's intent on growing some share back. But I don't see further declines like we've seen over this past year. We continue to, I think, offer some of the best brands and best category solutions for our customers in the category. I think we have more focus on the category than anybody else out there. And those are the reasons, as I'm looking forward anyway in terms of our share performance in Household, that would be my view.

Okay. And just a follow-up, maybe Dan, on the FX side, as you look now with regards to your guidance, I would assume there's a little more of a cushion, I don't know how kind of your hedges work and how much cushion? Or if there's any versus what you're original guidance was 3 months ago.

Yes, Bill, we're not seeing a whole lot of change. But the liens negatively impacted us and so that's -- in a big way with our razors and blade business. Later in the year, we would see some positives with the year also. We don't see FX year remaining or year total being a big driver of ups or down.

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

Hey, when you look at the Personal Care growth target of the sort of the mid-single-digits for this year, have you ever said how much of that do you think is going in new product versus the base business? And then there's some scuttle in the industry that you're co-branding an AXE razor with Unilever and I'm just wondering how big of an impact that'll be on the top line?

Yes, the -- intended for the first part of your question, I'd say you could -- about 2/3 of that organic growth for the Personal Care division this fiscal year is going to be attributable to the innovation pipeline. The other 1/3 coming from just some of the normal growth we're experiencing on Sun Care and the continued expansion of Hydro, the original Hydro products. In terms of this -- the AXE product, this is something really that we're going to, I think, spend more time talking about at CAGNY. So I really don't want to get into details right now. Although obviously, there's some information out there and so just to be clear, this is a product that we're offering. It's owned by us, so it would be managed by us. It is a co-branded opportunity, so we, in effect, are licensing the AXE brand for this particular product. And obviously, we're coordinating the use of that brand with Unilever's use of that brand globally. We think it's a wonderful opportunity for us. We think it's a wonderful opportunity for Unilever. I think for our retail customers, we're trying this out and I think consumers will respond well to it. But we're really not ready to get into the details of it. I hate to kind of balk at that point, but further details certainly will be forthcoming over the next 30 to 60 days on that.

Okay, I mean it won't be this year, just for modeling purposes, if we want to sort of like build the growth in the Personal Care business. And I have one more follow-up, if I can.

Well I think I would lump it in to the overall comment about innovation contributing about 2/3 of that organic growth on Personal Care. But we're not going to dissect it out any further than that.

Okay, that's -- and then there was some commentary in the press release about cost for contract renewals, or higher costs for contract renewals. Does that mean it's costing you more to stay in existing accounts or is there incremental distribution in batteries that you kind of had to pay up for?

I think it's really just a combination of all that. And it's a matter of negotiations with customers in various parts of various classes of trades, frankly in various parts of the world. And the cost of business is not going down. I will put it that way. And yet, it's always a negotiation with the retailer in terms of how do we kind of grow both our businesses and grow profitability of both our businesses, which I think we have a pretty good track record of doing.

Got you. Will the ACV be higher or lower in batteries this year, do you think?

All commodity volume?

Yes.

In distribution?

Yes.

I think in our distribution, it's pretty broadly distributed now. I mean, it may go up or down a couple of basis points, but that's not a material change for us one way or the other.

Your next question comes from the line of Dara Mohsenian with Morgan Stanley.

So I wanted to touch on your long-term top line growth expectations. And if you look out over the next few years, do you think it's realistic you can grow corporate organic sales growth beyond 2013? If you look at the last few years, you've been relatively flat even with the Hydro benefit and it looks like the competition's increasing. So I'm just curious for your expectations for corporate top line growth beyond this innovation-driven year in fiscal 2013?

Sure. Well obviously, we'll see some very healthy growth in Personal Care this year behind the innovation we talked about. We certainly are not going stop innovation after this fiscal year, so innovation remains in our long-term plans, 2, 3, 4 years out. And we're in some categories that has some nice category growth rate especially in the developing parts of the world. And we're in a good position in many of those places to take advantage of that. So we have a number of nodes of growth especially in the Personal Care side that we continue to pursue. I don't think we give actual guidance for long-term organic sales growth at this point in time. But based on what we're doing this year, and again, just the Personal Care division becomes a larger and larger portion of the overall company as we go forward through that growth, and it has had more of an influence to the overall growth number for the total company as we go forward. And I would expect that to continue.

Okay. And then has there been some type of change in terms of the way you approach your innovation process or the R&D process that you think drives a greater innovation pipeline as you look out over the next few years?

I don't know if I would say a change other than maybe an expansion of. I would say we've always had one of the strongest innovation pipeline and disciplines coming out of the razor and blade group and razor and blade business, where we really are working on 7-to-10-year innovation pipelines growth that roll forward. And that discipline and that expertise we have applied over time to various businesses we've acquired. And again, when you acquire a business, and I reflect back on the acquisition of the Playtex businesses we acquired '07, '08 and more recently, the ASR business we acquired, getting that innovation pipeline full, developed and then executed is probably always the longest lag of those. And what you're seeing now is the R&D razor and blade discipline being applied to category after category after category. And so you're seeing Sun Care, we really I think stepped up the innovation a couple of years ago and you continue to see that. In Fem Care, you're seeing that with the Gentle Glide 360. Infant Care, we have some stuff on horizon we're not ready to talk about quite yet, although the Litter Genie is a nice example of that. So I think you're seeing just some kind of inherent strengths we have as it relates to innovation that stemmed out of razor and blades, of being rolled out and with time, executed across all our personal care categories. And this is a great year where we're really just in almost category, we have something going on.

[Operator Instructions] Your next question comes from the line of Nik Modi with UBS.

So just wanted to quickly ask on cost cutting. So you've outlined obviously a lot of initiatives. Just curious kind of where trade spending falls into the whole mix of -- as you look out over the next couple of years. And if you could just comment on, if you think there's any opportunity there?

Well I think there's always opportunities to get more for the trade spending dollars we spend. And we've actually put some resources, it's really outside the restructuring program per se that we've been talking about. But we have redirected some resources, went out towards customer analytics, customer P&L management, helping our customers improve their efficiencies, improve their return on inventory investment, that sort of thing. I think we've always been pretty good at that, especially actually on the household battery side, although our Personal Care people, I think, are also pretty good at that. And it's an area of strength, but I think we're strengthening even more. But I wouldn't necessarily cite that as part of this $200 million in savings that we're citing as part of the restructuring program per se.

So it would be additive if you did find some efficiency there.

Absolutely. And sometimes that's offsetting other cost in other parts of the business, whether it's raw materials or labor or health care cost or whatever. I mean, it's not all additive. We always have cost pressures in some parts of the business, and always looking for efficiencies and other stuff [ph] setback.

Your next question comes from the line of Ali Dibadj with Bernstein. Ali Dibadj - Sanford C. Bernstein & Co., LLC., Research Division: Want to zoom in on batteries for a second. Just with a quick follow-up and a broader question. From a follow-up perspective, you do now have a sense of planograms, as you mentioned. Can you talk about any shifts there or any price changes or increases you'd expect going forward? Because the way you're describing it, it sounds like this is negative 2, x Sandy number in Household probably gets worse from here. But the broader question is, and I apologize for this, I guess I'm kind of confused about your positioning in batteries at this point. Because -- so Duracell very clearly spending more money to stay at the high end of prices and the high end of kind of brand. And Spectrum is doing the opposite, which is coming in at the low end to gain share. But your priced aligned with Duracell, but it feels like you're kind of abandoning in some sense the investment in the Batteries category and it doesn't sound like you're going to change that. So won't you have to invest more in the Battery category. You might not want to. But won't you have to invest more in the Battery category to maintain your price premium in line with Duracell or risk it kind of tipping point in some sense from a share perspective -- a price perspective, maybe margin perspective. So I guess I'd love some more clarity there and in the follow up upfront.

There was a lot of questions there and let me see if I can get some of them for you. In terms of -- you asked about planograms setting. The previous comments were really kind of more in the context of all the new products that we've sold in and in those planograms and most of it -- most of that obviously being on the Personal Care side. Those listing decisions kind of already being made and locked in, that's the case. I would say in the Battery side, we're in the midst, really, of planogram discussion, customer opportunities that with batteries, you tend to have more of a seasonality, OND: October, November, December, kind of focus. And those I think, are more in process, whereas in products, we're pretty much locked in. So just to be clear on that. In terms of the brands, we're not abandoning the premium by any means. The Energizer imagery and Energizer quality, Energizer pricing, there are no changes in that strategy as we've talked many times in the past, as we view the battery business. There's 2 premium brands, there's Energizer and Duracell. And there's a number of value brands, including Rayovac, private label and others. We have, actually, a unique competitive strength in that we also have a value brand that we can use from time to time in the Eveready brand. And we do have an Eveready Alkaline offering that we use in certain customers, certain countries, and certain classes of trade. What that does is it gives us the benefit of protecting the premium image and pricing of Energizer as we continue that heated competition between Energizer and Duracell, while also fighting on the second front with a very effective brand. In this case, we have Eveready. In terms of funding and sustaining the Energizer brand, obviously, as we do our project and part of that $200 million in savings, we're dropping $50 million of that back into the businesses. It's fair to guess that, that not all of that is actually going into Personal Care, that some of that can be funneled back into the brand building and equity sustaining activities with Energizer. So hopefully, that answers all your questions.

It does. It helps. Shifting gears to Personal Care, it sounds like you're pretty confident actually in the kind of 6% to 7% organic growth you need in that business to get to your mid-single target for the next 3 quarters. And are you anticipating that the level of investment your competitors have put in the marketplace this past quarter, which sounds like a little bit of a surprising level, a high level, dissipates over time or you assuming that's sustainable? And then, are you in that category also looking forward broadly, looking for anything to boost that growth. So for example, we hear the media press out of J&J looking to sell fem care, is that something that'll be of interest to you. So 2 questions there, again. I apologize.

Yes, we can't really -- we don't really care to speculate on what our major competitors are going to do promotion-wise going forward. You look at the impact of the some of the categories from their promotional effort, and you see razor and blade value, growth rates in the U.S. where a lot of these promotions taking place, is down significantly on a 12-week basis, the first-52-week basis. Value growth, the data I'm looking at for razor and blade is like only under 1.5% for the category for the quarter during all this promotional activity. That's versus a 52-week run rate of over 3%. And that's versus a really kind of an ongoing global growth rates in the same category of 3%. So you have to wonder how sustainable that model is, if you're really trying to grow your value and the profitability of that category. But you'll have to talk others about their strategy there. Our strategy, very clearly, is based on innovation. And as we laid out in San Bernes [ph], we laid again in this call, and as we lay out further in CAGNY, we have a lot of innovation to bring. And so that is the source of the guidance we're giving on this mid-single-digit organic growth of Personal Care for this year and I think sets us up well for continued growth. And I forget what was the second part of your question. Oh, are we're looking at the J&J opportunity. I think, obviously, we've always focused on just plastic tampons. It it's not in a strategic business for us, but it's been a nice business for us, not without its challenges. It's kind of nice to see both the Sport and Gentle Glide brands of plastic tampons growing right now. We're excited about Gentle Glide 360. It is real innovation again that we're bringing to the category that's right on in terms of the product proposition. And we're going to let that run until and so we're pretty much focused on that. And whether there are opportunities outside that from an M&A point of view, we really just don't comment on that at all. So I can't help you on that.

There are no additional questions at this time. I would now like to turn the presentation over to Mr. Ward Klein for closing remarks.

Well, we really don't have anything else to cover today in the call. So thank you, everybody, for joining us. And, operator, I'll turn it back over to you.

Thank you. Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.