Jacqueline E. Burwitz - Vice President of Investor Relations Daniel J.

Sescleifer - Chief Financial Officer and Executive Vice President Ward M. Klein - Chief Executive Officer, Director, Member of Executive Committee and Member of Finance & Oversight Committee

William B. Chappell - SunTrust Robinson Humphrey, Inc., Research Division Dara W.

Mohsenian - Morgan Stanley, Research Division Ali Dibadj - Sanford C. Bernstein & Co., LLC., Research Division Wendy Nicholson - Citigroup Inc, Research Division William Schmitz - Deutsche Bank AG, Research Division Olivia Tong - BofA Merrill Lynch, Research Division Constance Marie Maneaty - BMO Capital Markets U.S.

Good morning, and thank you for joining us on Energizer's third 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 about our expectations for 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, tax rates, raw materials 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 risks 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 our 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 will turn the call over to Dan for a review of the quarter.

Thanks, Jackie. I'll start with the headlines.

First, EPS growth in the quarter and year-to-date has been solid, up 33% for the quarter and 25% year-to-date on an x unusuals basis. Second, our restructuring program is tracking well ahead of expectations with savings being realized much sooner than originally expected.

And third, we're on track with our overall capital plan, including working capital reductions and returning cash flow to shareholders. Now some details for the quarter.

EPS x unusuals was $1.57 a share, up $0.39 or 33% ahead of prior year. The upside was driven primarily by $30 million of restructuring savings and continued spending discipline.

Sales for the quarter were $1.1 billion, down 1% on a reported basis and nearly flat organically. Household Products division sales were up 3.7%, excluding currencies, due to the timing of promotional activity that pulled some fourth quarter sales into the third quarter, a soft prior year quarter comparative and continued organic growth in the international markets.

However, Personal Care division sales were below expectations with an organic sales decline of 1.8% versus prior year. The overall U.S.

Personal Care categories, in which we compete, remains sluggish. In particular, an unusually wet spring and summer season negatively impacted our Sun Care business.

Nevertheless, we are pleased with the results and continued progress on our restructuring project. We delivered $30 million of savings in the quarter and $55 million through the first 9 months of the year.

We are now targeting over $80 million in gross savings to be realized within fiscal year 2013. The overall savings target remains at $225 million.

But as mentioned earlier, savings are being realized at a quicker pace than originally anticipated as the organization has aggressively embraced the program and we have had early successes behind several of our procurement initiatives. Moving to the P&L.

Segment profit rose 18%, with the segment operating margin of 19%. That's up 310 basis points compared to last year.

Total advertising and promotion spending, as a percent of sales, was 10.9% versus 12.6% in the prior year quarter. The current quarter spending level was in line with our back half of the year estimate of roughly 11%.

Total selling, general and administrative expenses were lower by $32 million, equating to a 260 basis point reduction as a percent of net sales. This reduction reflects the impact of our restructuring initiatives and effective spending controls.

These reductions were partially offset by $11 million of unfavorable currency impacts. The third quarter effective tax rate, excluding unusual items, was 26%.

On a year-to-date basis, our effective tax rate excluding unusual items is 29.2%. Now turning to cash flow, which will be detailed in our 10-Q filing later today.

Year-to-date free cash flow, defined as cash flow from operations less capital spending, exceeded $400 million compared to $270 million last year. The increase is driven by improvements in working capital management and operating earnings and lower capital spending.

Keep in mind that fiscal 2013 results also included more than $50 million of cash restructuring costs. During the third fiscal quarter, we continue to make progress on our working capital initiative, achieving a 370 basis point reduction in average working capital as a percent of net sales from the baseline working capital level of 22.9% at the end of fiscal 2011.

We are well on track to complete all planned initiatives this year and expect to achieve the targeted reduction of 400 basis points earlier than the end of fiscal 2014, the original targeted date. To date, we have realized progress in all 3 areas, days payable outstanding, days sales outstanding and days in inventory.

In terms of capital allocation, the fiscal 2013 dividend payments totaled more than $74 million. We did not repurchase any shares this fiscal year as compared to $211 million repurchased through the first 9 months of fiscal 2012.

Now I'll highlight just a few areas of our segment results for the quarter. In Personal Care, organic sales decreased 1.8% versus the prior year quarter.

This result was below expectations due in part to category value declines in our U.S. measured categories, down 1.8% in the latest 12-week period, partially offset by growth in the international markets.

Additionally, competitive pressures continue to be at elevated levels, which have contributed to overall category deflation and have unfavorably impacted our market share in the U.S. across some categories.

In spite of this negative environment, global Wet Shave organic sales increased 1.5%, due primarily to higher sales of disposables, including the launch of hydro disposable, as well as organic sales outside the U.S. Ward will provide more details behind our Hydro growth in a bit.

In our other Personal Care categories, organic sales decreased 7% due primarily to lower sales of Sun Care in the U.S. due to wet weather.

We also continued to see category declines in Feminine and Infant Care. Nevertheless, Personal Care segment profit increased 8% in the quarter, driven primarily by lower spending, which more than offset the margin declines due to lower sales.

For Household Products, organic sales increased 4%, driven by strong volumes due to a soft prior year comparison in the U.S. across most channels, timing of promotional activities that pulled some fourth quarter sales into the third quarter and continued organic growth in certain international markets.

Household Products segment profit increased $34 million or 50%, driven by higher sales, favorable product costs and lower spending. These results include benefits realized from our restructuring efforts, which have most impacted the Household Products business.

Finally, as you've probably seen in the press release, we are expecting to record a significant curtailment gain in the fourth quarter related to discontinuing certain postretirement benefits. This gain is driven by actuarial accounting rules, so I'll summarize by simply saying that it is another indication of the depth of our cost-reduction efforts.

With that overview of the quarter, I will now turn the call over to Ward.

Thank you, Dan. I would like to provide more insight into our divisional results.

In the Personal Care categories in which we compete, U.S. category dollars declined by around 2% in the latest 12 weeks versus category growth of almost 2% in the prior year.

Fiscal year-to-date, these categories are down approximately 1% versus an increase of nearly 4% last year. In our second quarter conference call, we discussed the category deflationary trends.

And while we lowered the forward sales organic growth rate in our outlook at that time, we still anticipated back half growth of 3% to 5%. In essence, our previous outlook was based on assumptions about modest improvements in category health, including modest razor and blade category growth as we anniversary the heightened levels of promotional spending begun 1 year ago.

Sun Care category growth, based on more normalized weather patterns and some recovery in category consumption across the balance of our portfolio, especially Fem care and Infant Care. However, in the last 12-week data, these categories all remained in decline due to continued elevated levels of promotional spending, notably in razors and blades, shave preps and feminine care, as well as continued poor weather conditions, which impacts primarily the Sun Care category.

As a result, our top line, particularly in the United States, has been softer than expected. Let me review key areas important to understand in U.S.

category in share trends we've noted. First, within the total U.S.

razor and blade category, despite the heightened levels of competitive promotional activity, we have maintained our overall Wet Shave share position in the latest 12 weeks due to the successful launch of Hydro disposables. This new product helped drive growth in the overall disposable category, which was up 4% in value, the only segment of razors and blades in the U.S.

showing growth, and another example of how innovation can grow both the category and our share. However, the largest segment on the razors and blade category, men's systems, declined 6% in value and 10% in units during the quarter.

You saw the largest rates of decline in the U.S. razors and blade category we have ever seen and reflect in part the previously discussed heightened levels of promotional spending that have taken place in the category, along with our competitor's focus on pack downsizing.

The negative effects of this promotional environment also spilled into the shave prep category, which is down 3% in value this past quarter. Outside of Wet Shave, the U.S.

Sun Care category, driven by poor weather, has remained negative in both units and value, down 4% and 3%, respectively, as the key early summer season periods were weak. Running out weak U.S.

retail environment, both Fem Care and Infant Care categories have declined 4% and 5% in units and 2% in value this past quarter. In contrast to the U.S.

experience, the razors and blade category is growing at nearly 2% internationally. Within our results, international razors and blades and shave preps grew 6% this past quarter, which has helped offset weakened U.S.

results. Globally, our Hydro men's system sales increased 9% this past quarter as this innovative product platform continues to expand around the world.

Most importantly, global Hydro retail blade sales grew 12% for the quarter; and women's Hydro Silk system sales are also growing year-over-year, up 52% in the quarter, which includes the success of our launch in Europe this year, following on our very successful launch in the U.S. and key Asian markets last year.

Total Hydro platform sales, which includes Hydro men's systems, Hydro Power, Hydro Silk women systems and now Hydro disposables, achieved sales of over $200 million in the past 12 months, up 27% versus the prior 12 months. Looking forward into our fourth fiscal quarter, we anticipate continued weak U.S.

category dynamics, and therefore, have lowered our U.S. sales outlook for the fourth quarter.

Nevertheless, we remain confident that we will benefit from our ongoing focus on the Hydro franchise, our large and profitable women's systems franchises and our broad portfolio of disposable products, which continues to grow quarter after quarter, as well as continued international growth of our razor and blade and Sun Care businesses, which have grown 4% and 13%, respectively, fiscal year-to-date. Turning to Household Products.

Global consumption trends remained consistent with our long-term expectations, with global category volume and value down in the 1% to 2% range for the quarter. In this environment, our global market share was up to 35.7% due to the regained shelf space that we discussed on our second quarter call.

However, we recently experienced distribution losses in 2 U.S. retailers, which we project will negatively impact our global market share by 2 to 3 points and net sales by approximately 6%, starting in our fourth quarter with an ongoing impact at a similar 6% level during the first 3 quarters of 2014.

In addition to these customer losses, we expect our fourth quarter sales to be negatively impacted by several other issues, continuation of the decline in category trend of approximately 2%; the reduction in 2% of sales resulting from our exit of certain lower-margin noncore product lines in Household Products in fiscal 2013 as part of our restructuring program; and 2% to 4% decline due to the timing of promotional activity in fiscal 2013, coupled with the incremental Hurricane Isaac volume in the prior year fourth quarter. The total impact from these factors, including the distribution losses, is projected to result in net sales declines in our fourth quarter of more than 10%.

In anticipation of a difficult environment, we entered fiscal 2013 with a focus on the rationalization and streamlining of our cost structure. I will cover the progress of the restructuring project in a few minutes, but I did want to cover a few recent battery category and market share trends to provide more context to the quarterly results and the outlook.

In North America, our organic sales improved in the low to mid-single digits in the quarter as we retained and grew our shelf presence at a number of important accounts. In Asia-Pacific, organic net sales were essentially flat as our 4 to 5 point improvement in market share was offset by category weakness in some key markets.

In Europe, Middle East, Africa, organic sales increased in the low-single digits due to higher volumes and higher pricing in several emerging markets combined with market share growth in Europe. And finally in Latin America, organic sales increased in the low teens, driven by growing market share in the category that grew 8% in value this quarter.

As evident by our strong and growing market share positions in Europe, Asia and Latin America, our battery business is a vibrant global business and remains so, notwithstanding the recent loss of distribution of 2 customers in the U.S. Now turning to the update of our 2013 restructuring program.

We have made significant progress, and implementation of these plans remains ahead of our original assumptions. As a result, we've revised our fiscal year 2013 gross savings estimates from the previous $50 million to $60 million to more than $80 million.

Our total project savings estimate of $225 million discussed last quarter has not changed. We are essentially realizing the savings against the original initiative sooner.

Thus far, we have achieved nearly 80% of our headcount reduction goal, and the timing of manufacturing footprint changes remains on schedule. In addition, organizational structure changes within our international markets are scheduled to be implemented throughout the balance of fiscal '13 and into fiscal '14.

In addition, procurement initiatives are progressing well. We have made significant progress with establishing a center-led procurement team, and results there are exceeding our expectations.

We are pleased with the progress of the savings initiatives. We are obviously disappointed with the recent overall top line trends.

Given the significance of the sales slowdown in Personal Care, secular category declines in Household Products, the accelerated savings have more than offset the impact of lower-than-expected sales. Furthermore, we remain committed to the goal of reinvesting a significant portion of the restructuring savings in our businesses to grow our brands and help accelerate innovation efforts that we believe are critical to ensuring long-term sustainable growth.

Final plans and timing for reinvestment will be established during our upcoming 2014 budget cycle. In addition, we continue to challenge our organization to search for additional savings opportunities.

As Dan mentioned, we also continue to make substantial progress in our working capital initiative, with working capital as a percent of sales down 370 basis points versus the 2011 base level. Given our original goal was for a 400 basis point reduction in working capital by the end of 2014, we remain confident we will hit or exceed this target and continue to challenge the organization to search for additional working capital reduction opportunities.

As noted in the release, we are reaffirming our financial outlook for -- of $6.75 to $7 for fiscal 2013. Before making my concluding comments and opening the call up to questions, we believe it is appropriate to provide further insight into our outlook for the remainder of fiscal 2013 and a preliminary view of 2014.

As Ward noted, we are reaffirming our outlook for fiscal 2013 of $6.75 to $7 adjusted earnings per share, which translates into 9% to 13% growth in adjusted earnings per share this year, following a 19% growth in fiscal 2012. We have provided insight into several areas in our previous comments.

But to summarize, included in our outlook for the last quarter of the current fiscal year are the following: Personal Care organic sales growth of low-single digits, Household Products organic sales declines of more than 10%, continued realization of restructuring savings, increased spending to support our brands versus the fourth quarter of 2012 and unfavorable foreign exchange rates. While we are still in the process of budgeting for 2014 on a preliminary basis, we are anticipating growth in EPS x unusuals of mid-single digits.

As Ward indicated, we will also be challenging the organization to identify new cost savings opportunities, as well as to increase our working capital improvement goals, both of which will be discussed in our November release.

This fiscal year is shaping up to be a tale of 2 cities. The key negative factors this year include heightened levels of competitive activity, notably in the U.S.

that has driven category value trends negative in the razor and blade, shave preps and tampon categories put pressure on market share, additional category declines in intimate care and Sun Care categories, the loss of 2 U.S. retail customers in Household Products and approximately $30 million year-to-date currency headwinds.

The key positive factors this year include the successful implementation of our restructuring program initiatives that has resulted in a faster-than-expected realization of significant savings; quicker realization of the benefits of our working capital initiatives; the 220 basis point reduction in working capital so far this year versus last year; continued success from some of the key innovative launches -- innovation launches, including 14% growth of our Hydro franchise; and strong international growth across both divisions. It is because of the continued hard work of our colleagues that we are able to maintain substantial earnings growth guidance for this fiscal year of between 9% and 13% despite this negative environment.

I'd like to conclude my prepared comments with 2 positive points: First, the Board of Directors approved an increase in the Energizer quarterly dividend to $0.50 per share, which represents a 25% increase effective with the September dividend. This increase is due in part to the favorable impact of the progress made on both our restructuring initiatives and our working capital objectives.

We felt this increase in the dividend was appropriate given our cash flow generating capabilities. And second, we just announced today that we have signed an agreement to acquire Johnson & Johnson's feminine hygiene brands in the United States, Canada and Caribbean, including the STAYFREE and CAREFREE pads and liner business, as well as the o.b.

tampon business. These brands have annual sales of approximately $250 million.

Purchase price is $185 million subject to customary inventory adjustment. This acquisition is expected to be modestly accretive in fiscal 2014.

We look forward to combining these businesses with our Playtex Feminine Care business, strengthening both in the process. These highly complementary businesses will provide us with a full product line, with greater scale to more effectively compete in the Feminine Care space.

We expect this deal to close in late 2013 subject to obtaining regulatory approvals and other customary closing conditions. Now, we will open up the lines for questions.

Operator?

Can you talk a little bit more about the customer losses in Household and kind of on a go forward basis? And I say that just, is this you're losing some shelf space, or are we seeing a trend where retailers just want to go with a single brand or a 2-brand strategy and they could continue throughout?

We won't talk about specific customers since we never do. But to a more general answer, these were situations really where customers were already exclusive with 1 brand or the other, so it's really just a brand switch, it's not necessarily an increase in exclusivity trend per se.

So just this is -- they're pretty sizable drops in terms of your total revenue. Would you expect a similar kind of revenue hit in the first 3 quarters of 2014?

Yes. As we tried to outline, I think in our comments, we see about, I think it was around a 6% drop ongoing for the first 3 quarters attributable to these 2 customer switches.

So first, I just want to get some detail behind the 2014 earnings guidance. Can you give us some kind of sense on what you think A&P spending levels will be for next year and top line growth?

And also is the J&J Fem Care acquisition accretion in the guidance for 2014 or not? And last, can you give us a sense of cost savings you're expecting in 2014?

Yes, let me try to answer maybe the first part of that, and I'll defer to Dan on the last part of your question. We're giving the guidance kind of a quarter early, and so it's a little bit more general than specific guidance that I expect we'll provide in November.

And part of the reason for that is we really are in the middle of putting together our plans for '14, so we're fairly confident in the mid-single digit earnings per share guidance that we have provided today. But in terms of further details behind that, as to top line, A&P and so forth, we're not really in a position, I think, to share that.

But I think maybe we'll speak a little bit more to that next quarter.

Okay. And on the...

Just to answer the rest of your question. So the -- any accretion from the J&J acquisition is not included because that's really just hot off the press, so that's outside of our guidance.

And in terms of cost, the cost savings that we've realized to date are permanent. They will continue into next year.

And so next year, we will have year-over-year cost savings versus 2013. But we're really about 2/3 of the way through our planning process.

So as Ward said, we really want to wait until we get it all buttoned up and then November we will give you a much clearer picture.

Okay. Can you talk about where A&P is coming in this year relative to your expectations when we spoke last quarter?

I'm assuming it's lower. Why would that be the case, given a more difficult competitive environment?

And then just more broadly, as you look at the business here, we're not seeing much organic sales growth year-to-date despite the very strong innovation pipeline in Personal Care. So as you look going forward, how do you expect to reaccelerate organic sales growth, particularly with the competitive environment and the battery shelf space losses?

And maybe at least conceptually, you can talk about A&P spending going forward, and if that's a big piece of trying to drive a top line reacceleration?

Right. So in terms of A&P for this year, the plan all along was really to gradually increase throughout the year as we launched innovations.

On the first quarter, we were like 7.9%. We were at 9.4% in Q2, and we're at 10.9% in Q3.

I think on the last call, we mentioned that our plan in the back half of the year was to be at about 11% of net sales, and we're really on that target. When you look compared to last year, last year Q3, we had a lot of launches related to Hydro Silk and Power, so it was by far the highest A&P spend as a percent of sales for fiscal '12, so it's really not a fair comparison over a year.

We're really on track with exactly what we plan to do is basically increase in spending throughout this fiscal year. And we would expect, as a percent of sales, to be fairly close to where we were a year ago.

And I think longer term, in terms of reinvestment, what we've mentioned is that with the reinvestment of the restructuring savings, we probably would add 100 basis points or so to that level going forward once the restructuring program is fully completed.

Want to delve a little bit more in the distribution losses because when you first had a Walmart, I guess a year ago, you had 2 major accounts now. And some investors are worried that this is more than just kind of the ebb and flow that you see.

And the view that's out there for some people is that look, at the low end of the competitor that is increasing capacity and being relatively aggressive, obviously in Rayovac. And at the higher end, you have a competitor that's also being aggressive, particularly on advertising spend.

While you guys in some sense caught in the middle, attempting to command a little bit of a higher price, but not spending as much on advertising. So the worry that this trend continues.

I wanted to get your response to that. Is that your view?

Are you spending enough on your higher price product with the advertising that you're spending right now?

Yes, Ali, let me try to answer a couple of questions, I think, embedded in your question. As for the customer gains and losses, there are certain classes of trade, always have been, that tend to go exclusive of battery supplier.

They tend to have limited assortment strategies and/or limited space in their stores. So a drug, convenience will be an example of latter; clubs would be an example of the former.

And so here it's really just a matter of listing that customer one or the other. That's different from the Walmart experience -- I'm sorry, that was discussed last year, which is really just more merchandising pegs and store kind of thing.

And so the use of exclusivity by some classes of trade really is not a new phenomena. And as I alluded to in my earlier answer, I don't see it as an increasing phenomena at this point.

It's really embedded within certain classes of trade. And then as to the spending question -- I'm not sure I agree with -- my view on the battery category remains.

There's really 2 premium brands, and then there's a bunch of value brands. And we've talked about that many times in terms of how the 2 premium brands account for 70%, 75% of the market; the value brands, 25% to 30% of the market.

And so that dynamic hasn't changed at all. And so for us, the competition is in the premium end.

We got a great brand. You saw market share growth outside the U.S.

referenced already in this call. It's a global brand and remains quite vibrant.

And we'll invest -- continue to invest in that brand, both in terms of product and branding.

Okay. And then in terms of Personal Care, in particular, totally understand kind of weather impact and some of the competition that you're mentioning.

Can you give us a little bit more about how the Axe Razor is doing, how Diaper Genie is doing? And then just a couple of follow-ons, one hot off the press, one not so much.

In the past years from Sun Care, you've had to buy back some inventory when it hasn't been selling. Do you expect that to happen at the end of the season?

And then hot off the press one is more around the J&J Fem Care acquisition. I just wanted to understand the strategy behind that, because that's been a business, the Fem Care business that we and some others have said, well maybe Energizer should get out of it because share loss has been quite dramatic for a very, very long time.

But instead, you decided to kind of double down with a business that isn't doing great either I'd argue. So trying to understand a little bit of strategy in the Personal Care business on that piece as well.

And obviously, some of the other Axe and Diaper Genie questions as well.

Yes, I'll try to answer all 3 questions that you just asked in the one. In terms of the innovation pipeline that we've been talking about, one of the key ones has been the continued global rollout, for example, of Hydro Silk.

Of course, we introduced that in the U.S. last year, but we've really been rolling that out internationally this year and is a large part why international shaving is up 6% right now.

In terms of the U.S., the main innovation rollout for us currently has been the rollout of the Hydro disposables. And as cited earlier, the Hydro disposables have been going quite well and is really, I think, the main reason why the whole U.S.

disposable category's up 4%. And again, the only part of razors and blades categories showing growth is behind disposables and behind the Hydro disposable.

Litter Genie is another innovation that we've talked about. The distribution bill's a little bit slower than planned, although we just got a major listing taken care of this past quarter.

It will start showing up next quarter. And consumer acceptance on that product solution continues to remain excellent, so we're still bullish on Litter Genie.

And on the Sun Care area, we did come out with a couple of innovations this year in the U.S. The Ribbons technology, which focuses on moisturization as well as protection and the CoolZone technology.

And I would say probably in those 2 cases of innovation, the trial's a little bit slower than we would have hoped, but it's primarily related to just overall category trial and is slower due to the weather. The important point, I think, on both those innovations is again the consumer acceptance on the Silk technology, moisturization and the CoolZone has been excellent.

And then in terms of Axe, Axe is really just a test in a particular customer, and that test is underway and so remains to be determined. The test is fairly early along.

Your second question regarding Sun Care returns is a common practice in Sun Care category and has been for many years and is a procedure, policy that we've actually, since acquiring or getting into the Sun Care business, done a really bang-up job in lowering Sun Care returns as a percent of sales. So systems improvements, sales forecasting, market intelligence improvements and so forth.

And so you obviously have Sun Care product taken back this year, there is every year. But we've demonstrated in the last 3 or 4 years, our ability to significantly lower the amount of product that's returned.

And a lot of that really has to do with just not forcing sales when you're tracking inventories at retail and being responsible about that. So right now, I'm not aware of despite the slow season, I think our teams are managing the pipeline quite well.

And then what was your third question?

J&J.

Oh J&J, I'm sorry. J&J is kind of a doubling down on that category.

But what it really brings for us is full-line presence. And that's, I think been one of the strategic challenges.

I've referenced strategic challenges in the Fem Care in the past, that we were just in plastic tampons. Again, that's not a bad place to be, that tends to be the subcategory where the growth is.

And we have a great success with Sport growing. We've brought some new technology recently to the legacy business, Gentle Glide.

But we've always just had to compete with the other competitors who have the broad line. And frankly in the past, kind of helped do that.

We've done joint promotions with J&J to that very effect. It's hard to get an end cap just on plastic tampons, for example.

It's much easier to get an end cap for Fem Care when you have a full line. So we've done some of those joint promotions in the past with J&J.

We're quite familiar with their product line as a result of that. And so when the opportunity came to acquire it and combine it with ours, it really is a natural, and we're excited.

This is something that literally was done today. It's been negotiated over a number of months, and we look forward to getting it closed.

I'd like to, by the end of the fiscal year, we'll see how the regulatory authorities allow that. And again, just puts -- our business and I'd venture to say, J&J's Personal Care businesses with being together in much stronger positions to compete going forward.

Sorry if I missed it but just a couple of quick questions. Margins on the J&J business, are they higher or lower than your current Personal Care margins?

And then did you comment about the probability of a buy back in 2014? It looks like you can pay for the J&J deal straight out of cash, but any thoughts for the buyback next year?

I don't really -- on margins for a J&J business and so forth, I'd rather not get into those kind of grainy details, sorry. And again, this is something that just consummated today.

So we'll get more I think flavor of and description of the overall strategy once it's closed, probably at our next earnings release, we'll be able to talk about it a little bit more than I am today. But again, we're quite excited about it.

Sorry, I'm blanking on the second part of your question.

Share repurchase.

Oh, share repurchase. We've announced today the increase in the dividend.

With the J&J deal, we're able to use actually some overseas cash to consummate part of that deal. We are a strong cash flow as we talked about in the release, large part due to the big success we're having on the working capital initiative plus just the nature of our businesses tend to be cash flow generators, especially on the battery side as you know with cash -- depreciation always outpacing CapEx on that side of the house.

So we're in a great, I think, cash position, a balance sheet position as we go into '14. What we do with that as it relates to acquisitions versus share repurchase is as we kind of always say, opportunistic.

And we traditionally have favored share repurchase, but just a lot of factors that go into that.

Okay. And then again, sorry, if I missed it, but did you update or have you changed your target for 25% of the cost savings from the restructuring program being used to reinvest in the business and 75% to drop to the bottom line?

Or does that guidance still hold?

I would say, in general, that guidance pretty much still holds. We did increase the size of savings identified last quarter, as you know, from the $200 million to $225 million.

And the intent at that time was always $150 million of that to go to the bottom line and we kept it at $150 million. So we see really the kind of [indiscernible] in these days is cost opportunities, any additional cost opportunities we can find, we'll take, but plow back into supporting our brands and supporting the innovation, continuing and rolling out of innovation like we were this year.

Can you guys take a stab at what you think free cash flow is going to be relative to sort of EPS growth next year? Because I know you had like $50 million of restructuring cash cost.

I don't know what those could mean next year. Also, it seems like D&A is running a lot higher than CapEx, that probably continues for a while.

So is that a number that you can try to provide us?

I'm looking to Dan.

At this point, no. Again, we're so ahead of schedule on the working capital initiative.

We're going to see a lot of that this year. There may be some incremental benefit next year from that.

And like you said, depreciation and CapEx, there is a positive mismatch there from a cash flow perspective. We'll try to give you a better insight in November.

And how do you get a finance? I mean I probably missed this, but how is the J&J deal -- I know it's not huge, but how are you going to finance it?

We have available credit in the U.S., and we also will be able to utilize some international cash as well.

Okay. Do you need to repatriate, or you can actually sweep the cash...

We can actually just utilize it without repatriating.

Okay, great. And then sort of like, along the lines of some of the other questions on the distribution losses.

The customer you referred to that rhymes with jams, I think you've been in there for like 15 years. So what has changed?

Like these things don't usually shift like that, and I'm wondering maybe if it's more of a conscious decision by you guys a little bit and kind of how you look at customers and how you look at profitability? Or am I being too optimistic on that front?

Yes, I really don't want to go there. It's a customer.

We, I think, do an excellent job with customers that rhyme with jam. Actually, I think we're vendor of the year last year.

So it's -- that's -- sometimes you lose these for reasons outside of your control, and we nevertheless have great capability of growing our customers' battery business. We pretty much have a history of growing our customers' battery business faster than our competitors are able to do so.

That's kind of our focus. We had a specially focused commercial organization in the U.S.

on the battery business. And no one knows the category better than them.

But sometimes, you take a hit like this, and you move on.

I was just following-up a little bit more on battery, and I'm trying to understand the share losses. What's the chance or opportunity to get that share back?

Is this a 12-month contract, or is there an opportunity earlier than that? And following on that, given the continued decline in batteries and share losses on top of that, is there a need for additional restructuring on top of what you're currently already going through?

Let me characterize again the share losses. This is a fairly isolated event in one market.

As you noted in my prepared comments, we actually have a growing share in many of our international markets. And we have a big international footprint on batteries.

And so in terms of what effect this may or may not have in our restructuring efforts, frankly, I think our restructuring efforts are very well thought-out and comprehensive already. And if we can find additional opportunities, we will regardless of any one customer or customer situation.

And as for how long a term this may be, in these certain classes of trade with these certain customers, these contracts can range anywhere from 1 to 4 years in duration, depends on the customer and so forth. They're constantly up for renewal and so opportunities always exist where you're not to get back in.

And I can promise you that, that remains a keen focus for our battery folks.

Got it. And then on the Feminine Care.

Maybe I misunderstood you, but why does the addition of a fuller Feminine Care line help sales for your existing portfolio? And then also on J&J, do you think there's going to be a need to invest meaningfully behind the J&J businesses?

Again, maybe some examples. The end cap example I try to give is one example of where when you bring multiple fem care lines together, you can get greater synergies at retail.

You can get greater, should we say, attention from buyers, you get greater influence on planograms. When you're talking the whole planogram, not just one small portion of the planogram.

This is a category where women do use across the different segments, and so the opportunities for cross promotion, cross sampling, cross sales all open up. And so it really is kind of real straightforward in terms of the commercial opportunities, particularly that exist in bringing these businesses together.

In terms of investing, I think we'll be taking a long and hard look at opportunities to grow this business once we bring them all together. And I think the opportunities to do so are much greater being together than has been the case for these businesses being separate.

Could you let us know which product lines you're exiting in Household Products in the fourth quarter? I think you said they were noncore.

And also on the acquisition, what are the margins like? Are they accretive above or below your corporate average?

And does Johnson & Johnson do private label as well as branded?

In terms of the products lines, the noncore product lines that we've exited, they're in the process of exiting, but I think we basically have exited. It would be things like flameless candles.

These are the kind of candle kind of products that are battery powered, things such as cords and connections, connective devices, some of the household lighting. This is more kind of plug-in lighting sort of areas, areas where we saw some opportunities with our agent sourcing in LED expertise coming out of our flashlight business.

But as we explore these categories, I think we saw they're probably not as big an opportunity as we would have hoped. And as part of our restructuring effort where you kind of eliminate the red, did a thoughtful analysis on these kinds of product categories and really concluded it might be better to license our branding versus being in those categories ourselves.

So those are the kind of, the categories we got out of, Connie. And as far again, the acquisition in terms of margins and the other questions we've gotten on this call, again, our apologies, but we literally just closed on this thing this morning.

And we haven't actually bought the thing until we get through regulatory approvals for another 90 days. So I just don't feel comfortable really talking much detail at all other than announcing that a purchase agreement has been signed.

Well, that really concludes our comments here from Energizer. Again, thank you, all, for your interest in the company and for your questions, and I look forward to talking to you in the next turn of the wheel.