Good morning. My name is Allison, and I will be your conference operator today. At this time, I would like to welcome everyone to Energizer's Fourth Quarter and Fiscal Year 2017 Conference Call. After the speakers' remarks, there will be a question-and-answer session. As a reminder, this call is being recorded. I would now like to turn the conference over to Jackie Burwitz, Vice President, Investor Relations. You may begin your conference.

Good morning and thank you for joining us. During the call, we will discuss our fourth quarter and fiscal year 2017 results and provide an outlook to fiscal 2018. With me this morning are Alan Hoskins, Chief Executive Officer; Tim Gorman, Chief Financial Officer; and Mark LaVigne, Chief Operating Officer. This call is being recorded and will be available for replay via our website, EnergizerHoldings.com. During the call, we may make statements about our expectations for future plans and financial and operating performance. Any such statements are forward-looking statements, which reflect our current views with respect to future events. We also refer to non-GAAP financial measures. A reconciliation of non-GAAP financial measures to 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. Information concerning our category and market share discussed on this call relates to markets where we compete and are based on estimates using Energizer's internal data, data from industry analysis, and adjustments that we believe to be reasonable. Investors should review the risk factors in our Form 10-K and our other SEC filings for a description of the key factors affecting our business. These risks may cause actual results to differ materially from our forward-looking statements. We do not undertake to update these forward-looking statements. With that, I'd like to turn call over to Alan.

Thanks, Jackie, and good morning, everyone. Our performance in fiscal year 2017 was outstanding across a number of metrics. First, we are growing our business behind the investments that we made not only through our fiscal year 2017, but since our spin. Organic net sales were up 7.5% for the quarter and 3.7% for the fiscal year. Excluding the impact of storms, the organic sales growth was 3% and 2.4% for the quarter and fiscal year, respectively. This healthy organic sales performance was in line with our outlook, and is a direct result of executing against our strategic priorities. Next, we are delivering continued earnings growth. Adjusted diluted earnings per share for the fourth quarter was $0.54 and $2.98 for fiscal year 2017, up 29% versus fiscal 2016. In the quarter, hurricane volumes contributed approximately $0.08 to earnings per share as our integrated supply chain effectively delivered critical product to our customers during unprecedented storm activity. Excluding the impact from hurricane volumes, adjusted diluted earnings per share was $0.46 for the quarter and $2.90 for the fiscal year, in line with our previously-communicated outlook. Finally, in line with our primary objective to maximize our free cash flow, we continued to generate strong cash flow during the fiscal year, allowing us to continue rewarding shareholders and reinvesting in our business. For the fiscal year, free cash flow was $199 million, up 19% from the prior year. Nearly two-thirds of our free cash flow was returned to shareholders through a combination of both dividends of $69 million and opportunistic share repurchase at 1.4 million shares for $59 million, of which 1.2 million shares or $50 million occurred in the fourth quarter. The performance of fiscal 2017 was strong as we continued to focus on our three strategic priorities of lead with innovation,…

Thanks, Alan, and good morning everyone. I'll discuss the financial results for the fourth quarter, including providing detail on net sales and gross margins in the quarter. I will also walk through the details of our income statement and other metrics as we ended the current fiscal year. Finally, I'll provide our outlook for the upcoming fiscal year 2018. For the quarter, adjusted earnings per share was $0.54, equal to the prior year fourth quarter and is inclusive of an $0.08 benefit from the hurricane activity in the current year fourth quarter. Excluding the hurricane activity, the decrease in adjusted earnings per share was primarily due to higher advertising and promotion spend in support of the portfolio changes as we enter the holiday selling season, and a higher tax rate in the quarter. Both of these impacts were expected and were included in our previous outlook. Total net sales for the quarter increased $33 million or 7.6% to $465 million, with the growth comprised of the volume components. Hurricane related sales contributed $21.4 million in the quarter and were $20.5 million higher than hurricane activity in the prior year fourth quarter. This contributed 4.5% of organic net sales growth in the current quarter. Distribution gains in certain international markets, and the timing of holiday activity with certain U.S. retail customers, increased net sales by 3.5%. Improved pricing and mix increased net sales by 2.5%, as price increases were executed across several markets globally, including the U.S. The effect of our portfolio changes associated with repositioning Ultimate Lithium and exiting EcoAdvanced decreased net sales by 2%. We expect the impact of this portfolio change has been fully realized at the end of the fourth quarter and we do not expect any further impacts as we move into fiscal year 2018. The…

Thanks, Tim. Fiscal 2017 was another strong year for Energizer. As I stated earlier, this performance is a result of our colleagues' continued focus on our strategic priorities of leading with innovation, operating with excellence and driving productivity. We are building on this momentum with an outlook for top and bottom-line growth in fiscal 2018. We believe that we've created a foundation for continued success. We are excited about the opportunities ahead of us. And we remain focused on delivering value for our shareholders. Operator, we can now open it up for Q&A.

Thank you. We will now begin the question-and-answer session. Our first question will come from Nik Modi of RBC Capital Markets. Please go ahead.

Thanks. Good morning, everyone.

Morning.

If I could just squeeze in both of my questions here, just the first one, Alan, maybe you can talk about the trade spending this year that you guys have been putting into place and how that tied up with the net price realization in the quarter? Are you starting to see any benefits from that? And then, the second question is just on M&A and maybe you can just give us kind of an overview of kind of what you're seeing in the market and if there is anything out there that looks interesting to you guys. Thanks.

Thanks, you bet. So, just first, why don't we go into trade investment? If you'll recall, when we spun off, we put dedicated resources in place behind trade investment, particularly focused of North America. They had primary responsibility, at that time, making sure we provided clear visibility in analytics to our trade investments. They were responsible for really making sure they governed all the spending behaviors that we were seeing around the globe, as well as optimizing our spending. Since then, we've invested in both tools and technologies to support those resources. And, as a result, we've been able to work directly with our retail partners, collaborating with them to identify what are ineffective activities and then replacing those with more highly effective ones to drive a higher ROI. As you've seen in our results, the depth and frequency of our promotions have been reduced. And our average unit prices have increased. And I think it's important to point out, while we've not set a target, this has really been about looking for inefficiencies and then redressing those back into sustainable growth opportunities focused on category fundamentals. Think about availability and visibility. And this is helping drive our overall organic growth. It's improving profitability. And it's growing our base (32:28) share. So that's regarding trade investment. In terms of M&A, just a couple of comments on that, since the last earnings call, we've participated in a number of reviews on assets. Some, we liked. Some, we didn't. We've seen valuations, in some cases, that are too high. Others where, operationally, we were concerned about their fit with the business. But we continue to look at opportunities. We cast, somewhat close to what I've shared in the past, (32:55) a pretty wide net in the consumer goods space. We feel this really gives us a good opportunity to look at a number of assets without limiting ourselves to things that are just near adjacent. We like the targets that we're looking at to have strong franchises and solid financial results. So think about that as really good free cash flow generation. We're also looking at targeting businesses that have similar operational profiles as existing business. That gives us a chance to both create synergy and leverage our broad geographic platform and strong distribution footprint to make sure that we can grow the acquired businesses. So we continue to be in the hunt; again, but based on some valuations and fits, we've chosen to pass on some of those opportunities. But it is a core part of what we're looking at in terms of taking a balanced approach with capital allocation.

And our next question will come from Jason Gere with KeyBanc Capital. Please go ahead.

Okay. Thanks and then I'll do the same. I guess I'll just ask the two questions and I'll let you guys answer. I guess the first one, Alan, if you could talk about the holiday activity coming in a little bit earlier. As we think about the comparisons for organic sales, and I appreciate the color on low single digit for the year, the first quarter, obviously, is a tough comparison. As you look right now and your, I guess, expectations of where retail inventory is, do you anticipate that organic sales for the first quarter could be flat to positive or do you think that because since it's lapping the distribution gains, it might be slightly down? I know that kind of dovetails into your guidance on the EBIT being down in the first quarter. The second question, I guess more broadly speaking, if you could talk about online. What was the category growth of online in the quarter? I know you said you guys gained 2 points of share. Could you talk about what your growth was versus maybe some of the branded players or even some of the private label players out there? Thank you.

Yeah. Sure. Thank you. And good morning. So, just real quick, when we look at overall holiday, we're very confident going into the holiday. We've seen, and as we walk stores now, really solid merchandising visibility. And as you know, in international, we've improved our availability through expanded distribution. We like where we sit now. We believe that inventories are in a really good position, having exited fiscal year 2017. So we don't have a concern there. We like the programs that we've put in place. I'll give you a couple of examples. Not only strong category fundamentals being executed, we've really beefed up our presence at retail to execute against that, and we've launched a lot of new innovation in the categories. When you think about automotive, we've already presented our fiscal year 2018 auto fragrance innovation, and we've gotten really good reaction so far from the trade to that and that's being set at shelves now. We're excited about the battery innovation that we've brought to the category, both in Energizer MAX as well the repositioning as part of our overall portfolio changes. So, going into holiday, we like what we've set in play. We like the way it's being executed. And then, I'll ask Tim to comment a little bit on some of the backdrop.

Yes. So, Jason, that's why I kind of laid out in terms of how the year unfolded. So, as you recall, we had a very strong Q1 in 2017 with the early replenishment that contributed about 300 basis points. So you think about that in terms of timing. So, we'll have difficult comps in both the first quarter and the fourth quarter as we'll lap hurricane activity. Relative to what we see in the first quarter, with that difficult comp, we would expect to be essentially flat to slightly positive in the first quarter, and then the rest of the year will play out.

And then Jason, this is Mark. I'll cover the e-commerce question. This is obviously a rapidly growing and important channel for us. And it's one where we're investing heavily in resources and expertise to make sure we drive results for the business. From an overall category growth rate within batteries, over the last 52 weeks, online in batteries has grown 32%. From an AmazonBasics perspective, over the last 52 weeks, they've grown 59%. And Energizer has grown, over the last 52 weeks, 44%. In the latest 13 weeks, Energizer has grown 52%. And we continue to be the branded share leader in e-commerce for batteries. So, our investments are paying off. And we're growing ahead of the category trends that we're seeing online.

Our next question will come from Bill Chappell with SunTrust. Please go ahead.

Thanks. Good morning.

Morning, Bill.

Morning, Bill.

I don't know if I'm supposed to sneak both questions in at the same time. So I'll try one at a time and we'll see if that works. You know, Alan, just looking into the risk – I'm just trying to understand. With the upcoming holiday season, let's say that we do see a continued massive shift online versus in-store. How does that play out in terms of inventory you're shipping into the bricks-and-mortar stores and does it lead to a massive de-load in the second quarter or how do you account for that or how do you forecast for that over the next two, three months?

Yeah, I mean, we take into consideration trends in the business, both online and brick-and-mortar as well as the trends we're seeing in e-commerce with our brick-and-mortar partners that are moving to omni-channel; all that gets balanced into our forecast for the full year. We make sure that we align our shipments with the plans that we know we're capable of executing, meaning there's not an overload of the trade of inventory. We feel we can balance that and manage that properly through the year. So, we don't personally see a risk there. We do anticipate growth online. And we feel that, again, given the investments that we've made, and our continued focus on making sure that availability, content, research and marketing are there to be able to reach that online consumer that we're well-positioned to compete and grow there too. I think what we've demonstrated over the last several quarters is our ability to do both. And that's an important call-out; growing both online and in brick-and-mortar at the same time. A lot of this really stems back to good joint business planning with our retailers and our online partners to make sure that we stay out (39:39) of that position.

Okay. And then, Tim, just to switch back to the fourth quarter, on the higher tax rate, I just want to make sure I understand. Did the share repurchase, you had to repatriate cash and that boosted the tax rate in the quarter? And then are you assuming for 2018 there is no incremental share repurchase that would affect the tax rate?

Yeah. In terms of the fourth quarter, Bill, part of what was driving the tax rate was the higher mix of earnings in the U.S. associated with hurricane activity. So, that was part of the driver of the higher tax rate is income in the U.S. being taxed at the higher U.S. rate.

So, you didn't have to pay a repatriation tax to repurchase the shares?

No. As I mentioned in the prepared remarks, on a year-over-year basis, the impact of taxes associated with repatriated earnings was actually lower in the current year versus a year ago.

Got it.

We normally look at repatriating earnings on a tax-efficient basis. And there are times when we do incur minimal taxes as we bring that back.

Okay. Thanks so much.

Yeah. Thanks, Bill.

Our next question will come from William Reuter of Bank of America Merrill Lynch. Please go ahead.

Morning, guys. Just one question on working capital, you talked a little bit about how you expect it to be a benefit next year. Can you talk about what type of a benefit it will be? And then, I guess, one more while I'm it, how are you guys thinking about share repurchases this year, in light of what you guys completed in the fourth quarter? And then, I'll pass it on. Thank you.

Yeah. I'll take the last one, first. As we talked about, in terms of capital allocation, we remain committed to a balanced approach. So, first is investing in the business. Second is a meaningful dividend. And then we do look at opportunistic share repurchases and then finally M&A. With regard to working capital, so the free cash flow outlook that we've given, $210 million to $220 million, that's lapping $27 million benefit of asset sales in fiscal year 2017. So, you can kind of guess in terms of the magnitude, the improvement is really being driven by both the underlying business performance, but also working capital improvements both in accounts receivable. Again, we had the benefit of hurricane-related sales. Those have been repaid in fiscal year 2018. So we've already seen that benefit and then, likewise, we expect the inventory will begin to normalize as we execute the portfolio change, the full introduction of the new improved MAX offering and then lastly, execute the manufacturing footprint change. So, combination of both accounts receivable and inventory improvement is driving the improved free cash flow on this coming year.

And, Bill, with respect to share buyback and M&A, we believe we've got capacity to do both and we're going to continue to seek opportunities to optimize returns using both overall.

Thank you.

Our next question will come from Faiza Alwy of Deutsche Bank. Please go ahead.

Yes, hi. Good morning. Thanks. So, I guess my first question is could you disaggregate the 350 basis points of benefit that you got on new international distribution and the timing of shipments, sort of how much of that is distribution that's expected to continue through the rest of the year?

Yeah. If you look at the 3.5%, approximately 1.2% of that was associated with distribution gains and the balances is the phasing.

Okay, okay. Great. And then just on pricing, is this another incremental pricing that's supposed to come in in 2018? Can you share sort of any feedback you're getting on that from retailers? Is that pricing expected to stick and how should we think about – is it going to build through the course of the year?

Yeah. This is Alan, so over the past 12 months, we've taken pricing in 26 markets. We expect the full annualized benefit of the pricing impact to our current fiscal year 2018. We have seen the price points increase on shelf in many of the markets, so you're aware of that. And I think what you're seeing play out in category value globally, and particularly the U.S., is value has improved as a result of the pricing action, along with the mix shift to specialty and to premium. We believe that the pricing actions we've taken are also going to help us offset higher commodity costs in 2018. And it further gives us the opportunity to reinvest back into innovation in our brand. So, overall, we're pleased with the outcome and the organization's ability to execute against the pricing and, again, more importantly, we are seeing that appear on-shelf in many markets.

Yeah. And I think, if you look back across fiscal year 2017, you see improved pricing and mix in each of the four quarters that we had in fiscal year 2017.

Our next question will come from Kevin Grundy of Jefferies. Please go ahead.

Thanks. Good morning, guys.

Morning, Kevin.

Morning.

Couple questions, I just wanted to come back to online first, you hinted last call at some potential broader strategy adjustments in that channel, utilizing either the Energizer or EVEREADY brand potentially, but it didn't sound like there was any sort of big unveiling today on this call, so to confirm that's the case would be sort of number one, that there are no sort of big strategy adjustments, either with respect to product and/or pricing? And then, my second question relates to margins. So first on gross margins, you're expecting relatively flat year-over-year performance in 2018. What's the ambition there longer term? What do you think the opportunity is to drive that higher and, if so, how? And then, just one last one on the productivity piece, because it seems like that would become increasingly important in terms of driving earnings and free cash flow growth. Can you potentially frame that for us? You talked about some of the spending there to realize those savings. Maybe if you could put a number on that for us longer term, that would also be helpful? Thank you for all those.

Yeah. This is Mark. I'll cover the e-comm online question first and then turn it over Tim for the balance of the questions. As I mentioned earlier, I would say there's no big unveiling today in terms of a new strategy in terms of online. But rest assured, we're laser-focused on this area. We recognize that it is a big opportunity for us. And when it comes down to strategy, it's not that different than what you'd see us execute in-store. It's all about visibility and availability. So when consumers are shopping online, we want to make sure they interact with our product in the same way that they do in the store. And so it really gets down to the fundamentals of executing content and search, data and analytics to make sure that we're intersecting with the consumers at the right point in time. In terms of the two brands, that is something that we have in our arsenal at all times, with Energizer and EVEREADY. And it is certainly something that we would look to leverage online, to the extent that it would resonate with our consumers in doing so. So that's something that we always have available. We always look for it. And thus far, our investments are really paying off. Like I mentioned, in the latest 13 week, our online sales rate is growing at 52%, which is well ahead of the category.

Yeah. Kevin, with respect to gross margin, obviously, we've had significant improvements over the last several years in our gross margin rate. As we move forward and what we called out in our kind of long-term financial algorithm is for gross margin to be flat to improving slightly. And that's kind of the long-term outlook that we have. The opportunities that we'll continue to look at is you know how do we continue to streamline our integrated supply chain. And those actions are being undertaken with the footprint change that we discussed in the prepared remarks. With respect to the benefit, the savings associated with the costs that we're incurring, as I mentioned in my prepared remarks, and I kind of laid out what the costs were going to be in each of the quarters and indicated that the savings would exceed that investment that we're making, and that is the expectation for the current year. And then, as we move forward, we've identified additional opportunities that we'll continue to look to improve our overall streamlining our processes and reducing the complexity in the business. So that is part of our continuous improvement mindset that we have and will continue to execute against.

Tim, is there anything you can put a number one for us with respect to the return on that spend?

Yeah. As I mentioned, the return is in excess of the investments we're making and that's a run rate that we would expect to have exiting that. Run rate will be in the range of $15 million to $20 million.

Okay. All right. Thank you, guys. Good luck.

Thank you.

And, ladies and gentlemen, this will conclude our question-and-answer session. I would like to turn the conference back over to Mr. Alan Hoskins, for any closing remarks.

Thank you, Operator. And thank you for joining us on the call today and your interest in Energizer.