EDGEWELL PERSONAL CARE CO Management’s Discussion and Analysis of Financial Condition and Results of Operations. (form 10-K) – Marketscreener.com

(in millions, except per share data)

 The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our Consolidated Financial
Statements and the accompanying notes included in this Annual Report on Form
10-K. The following discussion may contain forward-looking statements that
reflect our plans, estimates and beliefs and involve risks, uncertainties and
assumptions. Our actual results could differ materially from those discussed in
these forward-looking statements. Factors that could cause or contribute to
these differences include those discussed in Item 1A. Risk Factors and "Forward-Looking Statements" included within this Annual Report on Form 10-K. 22
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Non-GAAP Financial Measures

 While we report financial results in accordance with GAAP, this discussion also
includes non-GAAP measures. These non-GAAP measures are referred to as "adjusted" or "organic" and exclude items such as restructuring charges,
acquisition and integration costs, SKU rationalization charges, Sun Care
reformulation costs, legal, pension, and value-added tax settlements, cost of
early debt retirement, UK tax rate increase, COVID-19 pandemic expenses,
advisory expenses in connection with the evaluation of the Feminine and Infant
Care businesses, the disposition of the Infant and Pet Care business, and the
related tax effects of these items. Reconciliations of non-GAAP measures are
included within this Management's Discussion and Analysis of Financial Condition
and Results of Operations. This non-GAAP information is provided as a supplement to, not as a substitute
for, or as superior to, measures of financial performance prepared in accordance
with GAAP. We use this non-GAAP information internally to make operating
decisions and believe it is helpful to investors because it allows more
meaningful period-to-period comparisons of ongoing operating results. Given the
various significant events, including restructuring projects and recent
acquisitions, we view the use of non-GAAP measures that take into account the
impact of these unique events as particularly valuable in understanding our
underlying operational results and providing insights into future performance.
The information can also be used to perform trend analysis and to better
identify operating trends that may otherwise be masked or distorted by the types
of items that are excluded. This non-GAAP information is also a component in
determining management's incentive compensation. Finally, we believe this
information provides more transparency. The following provides additional detail
on our non-GAAP measures: •We analyze net sales and segment profit on an organic basis to better measure
the comparability of results between periods. Organic net sales and organic
segment profit exclude the impact of changes in foreign currency and the impact
of acquisitions and divestitures:
•Organic net sales was unfavorably impacted in fiscal 2022 by the Billie
acquisition as sales that were previously reported as third party sales to
Billie were included as inter-company sales. Organic net sales for fiscal 2021
was impacted by the Cremo acquisition and the divestiture of the Infant and Pet
Care products.
•Segment profit was unfavorably impacted in fiscal 2022 as a result of a change
in the timing of profit recognition due to the Billie acquisition. Subsequent to
the acquisition of Billie, profit previously earned on sales to Billie was
deferred until Billie sells to a third party. •We utilize "adjusted" non-GAAP measures including gross profit, SG&A, operating
income, income taxes, net earnings, and diluted earnings per share internally to
make operating decisions. The following items are excluded when analyzing
non-GAAP measures: restructuring and related costs, acquisition and integration
costs, stock keeping unit ("SKU") rationalization charges, legal settlements and
other non-standard items. 

All comparisons are with the same period in the prior year, unless otherwise
noted.

Impact of the COVID-19 Pandemic

 Throughout the COVID-19 pandemic, we have taken and continue to take significant
measures to protect our employees and business, while remaining in compliance
with local guidelines and requirements. The Company's top priority during this time continues to be ensuring the health
and wellbeing of our employees and additional health and safety measures have
been put in place at all of our manufacturing and office locations. To date, we
have not experienced any material operational disruptions across our
manufacturing or distribution facilities. The prolonged COVID-19 pandemic environment has resulted in increased supply
chain challenges across labor management, raw material procurement and product
distribution. The continued duration and severity of COVID-19 pandemic may cause
further disruptions related to our key suppliers, increase procurement and
distribution costs and impact our ability to hire and retain employees, which
may result in higher labor costs going forward. However, the impact, timing and
severity of potential disruptions cannot be reasonably estimated at this time. Significant Events Acquisitions On November 29, 2021, the Company completed the acquisition of Billie, a leading
U.S. based consumer brand company that offers a broad portfolio of personal care
products for women, for a purchase price of $309.4, net of cash acquired. We
purchased Billie utilizing a combination of cash on hand and drawing on our U.S.
revolving credit facility maturing in 2025 ("Revolving Credit Facility"). As a
result, Billie became a wholly owned subsidiary of the Company. Refer to Note 3
of Notes to Condensed Consolidated Financial Statements for further discussion. 23
-------------------------------------------------------------------------------- On September 2, 2020, we completed the acquisition of Cremo, a premier men's
grooming company in the U.S., in an all-cash transaction at a purchase price of
$233.9, net of cash acquired. As a result of the acquisition, Cremo became a
wholly owned subsidiary of the Company. Refer to Note 3 of Notes to Condensed
Consolidated Financial Statements for further discussion on the Cremo
acquisition. Divestiture On December 17, 2019, we completed the sale of our Infant and Pet Care business
included in the All Other segment for $122.5 which included consideration for
providing services for up to one year under a transition services agreement. For
further information on the divestiture of the Infant and Pet Care business,
refer to Note 3 of Notes to Condensed Consolidated Financial Statements. 

Executive Summary

 The following is a summary of key results for fiscal 2022, 2021 and 2020. Net
earnings and diluted earnings per share ("EPS") for the time periods presented
were impacted by restructuring and related costs, acquisition and integration
costs, and other non-standard items, as described in the table below. The impact
of these items on reported net earnings and EPS are provided below as a
reconciliation of net earnings and EPS to adjusted net earnings and adjusted
diluted EPS, which are non-GAAP measures. 

Fiscal 2022

 •Net sales were $2,171.7, an increase of 4.0% from fiscal 2021, inclusive of a
3.6% increase due to the acquisition of Billie and a 3.5% decrease due to
negative currency movements. Organic net sales increased 3.9% for fiscal 2022 as
compared to the prior year period, driven by growth across all segments and in
both North America and International markets. •Net earnings for fiscal 2022 was $98.6, as compared to net earnings of $117.0
in the prior fiscal year. On an adjusted basis, as illustrated in the table
below, net earnings for fiscal 2022 decreased 17.5% to $137.6. The decline was
primarily driven by higher cost of goods sold from inflationary pressures and
increased amortization expense associated with the Billie acquisition. •Net earnings per diluted share during fiscal 2022 was $1.84 compared to
earnings of $2.12 in the prior fiscal year. On an adjusted basis, as illustrated
in the table below, net earnings per diluted share during fiscal 2022 were $2.57
compared to $3.02 in the prior year. 

Year Ended September 30, 2022

 Operating Gross Profit SG&A Income EBIT Income taxes Net Earnings Diluted EPS
GAAP - Reported $ 879.4 $ 389.1 $ 181.2 $ 123.0 $ 24.4 $ 98.6 $ 1.84
Restructuring and related
costs 0.1 0.8 16.2 16.2 4.2 12.0 0.23
Acquisition and integration
costs 0.8 9.1 9.9 9.9 1.3 8.6 0.16
SKU rationalization charges 22.5 - 22.5 22.5 5.5 17.0 0.32
Sun Care reformulation costs 3.5 - 4.6 4.6 1.2 3.4 0.06
Legal settlement - (7.5) (7.5) (7.5) (1.8) (5.7) (0.11)
Value-added tax settlement
costs - 3.4 3.4 3.4 1.1 2.3 0.04
Pension settlement expense - - - 1.8 0.4 1.4 0.03

Total Adjusted Non-GAAP $ 906.3 $ 383.3 $ 230.3

 $ 173.9 $ 36.3 $ 137.6 $ 2.57 GAAP as a percent of net
sales 40.5 % 17.9 % 8.3 % GAAP effective tax rate 19.9 %
Adjusted as a percent of net
sales 41.7 % 17.6 % 10.6 % Adjusted effective tax rate 20.9 % 24

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Year Ended September 30, 2021

Operating

 Gross Profit SG&A Income EBIT Income Taxes Net Earnings Diluted EPS
GAAP - Reported $ 950.1 $ 391.2 $ 238.8 $ 146.0 $ 29.0 $ 117.0 $ 2.12
Restructuring and related
charges 0.6 8.7 30.1 30.1 7.5 22.6 

0.41

Acquisition and integration
costs 1.3 7.1 8.4 8.4 2.1 6.3 

0.12

Sun Care reformulation costs 1.1 - 1.1 1.1 0.3 0.8 

0.01

Cost of early retirement of
long-term debt - - - 26.1 6.4 19.7 0.36
UK tax rate increase - - - - (0.3) 0.3 -
Total Adjusted Non-GAAP $ 953.1 $ 375.4 $ 278.4 $ 211.7 $ 45.0 $ 166.7 $ 3.02 GAAP as a percent of net
sales 45.5 % 18.7 % 11.4 % GAAP effective tax rate 19.8 %
Adjusted as a percent of net
sales 45.7 % 18.0 % 13.3 % Adjusted effective tax rate 21.2 % Year Ended September 30, 2020 

Operating

 Gross Profit SG&A Income EBIT Income Taxes Net Earnings Diluted EPS
GAAP - Reported $ 880.9 $ 408.8 $ 176.0 $ 87.3 $ 19.7 $ 67.6 $ 1.24
Restructuring and related
charges 0.2 13.3 38.1 38.1 8.7 29.4 

0.54

Acquisition and integration
costs 0.6 39.2 39.8 39.8 9.7 30.1 0.56
COVID-19 expenses 4.3 - 4.3 4.3 1.1 3.2 0.06
Feminine and Infant Care
evaluation costs - 0.3 0.3 0.3 0.1 0.2 -
Cost of early retirement of
long-term debt - - - 26.2 6.4 19.8 

0.36

Gain on sale of Infant and
Pet Care business - - - (4.1) (2.6) (1.5) 

(0.03)

Total Adjusted Non-GAAP $ 886.0 $ 356.0 $ 258.5

 $ 191.9 $ 43.1 $ 148.8 

$ 2.73

 GAAP as a percent of net
sales 45.2 % 21.0 % 9.0 % GAAP effective tax rate 22.6 %
Adjusted as a percent of net
sales 45.4 % 18.3 % 13.3 % Adjusted effective tax rate 22.5 % Operating Results The following table presents changes in net sales for fiscal 2022 and 2021, as
compared to the corresponding prior year period, and provides a reconciliation
of organic net sales to reported amounts. 25
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Net Sales

 Net Sales - Total Company For the Years Ended September 30, 2022 %Chg 2021 %Chg Net sales - prior year $ 2,087.3 $

1,949.7

 Organic 80.4 3.9 % 

72.1 3.7 %

Impact of Billie acquisition, net 74.9 3.6 %

– – %

 Impact of Cremo acquisition - - % 

56.0 2.9 %

 Impact of Infant and Pet Care sale - - % 

(26.8) (1.4) %

 Impact of currency (70.9) (3.5) % 36.3 1.9 % Net sales - current year $ 2,171.7 4.0 % $ 2,087.3 7.1 % For fiscal 2022, net sales increased 4.0% on a reported basis. Organic net sales
increased 3.9% versus the prior year, driven in equal part by higher volumes and
pricing. By segment, growth was led by strong performance in Sun Care and
Grooming and more modest growth in both Wet Shave and Feminine Care. Organic net
sales grew across geographies, as North America increased 2.6% and international
markets increased 5.9%. 

For further discussion regarding net sales, including a summary of reported
versus organic changes, see “Segment Results.”

Gross Profit

 Gross profit was $879.4 in fiscal 2022, as compared to $950.1 in fiscal 2021.
Gross margin as a percent of net sales for fiscal 2022 was 40.5%, down 500 basis
points as compared to fiscal 2021. Adjusted gross margin as a percent of net
sales decreased by 400 basis points compared to fiscal 2021, reflective of
higher commodity and transportation related costs net of productivity savings.
The positive impact from pricing was largely offset by negative product mix and
unfavorable currency. 

Selling, General and Administrative Expense

 SG&A was $389.1 in fiscal 2022, or 17.9% of net sales, as compared to $391.2 in
fiscal 2021, or 18.7% of net sales. Adjusted SG&A as a percent of net sales
decreased 40 basis points compared to fiscal 2021, as the benefit of sales
leverage, operational efficiency programs, lower incentive compensation were
partially offset by the increased operating costs associated with the Billie
acquisition, including amortization, and increased wages and other operating
expenses. 

Advertising and Sales Promotion Expense

 For fiscal 2022, A&P was $238.3, down $3.2 as compared to $241.5 fiscal 2021.
A&P as a percent of net sales was 11.0% for fiscal 2022, compared with 11.6% in
fiscal 2021. The decline in A&P was due to lower expense for Wet Shave and
Feminine Care, partially offset by increases in support for the Sun and Skin
Care segment. 

Research and Development Expense

Research and development expense (“R&D”) decreased to $55.5 in fiscal 2022,
compared to $57.8 in fiscal 2021. As a percent of net sales, R&D was
approximately 2.6% for the fiscal 2022 compared with 2.8% for fiscal 2021.

Interest Expense Associated with Debt

 Interest expense associated with debt for fiscal 2022 was $71.4, an increase of
$3.5 as compared to $67.9 in fiscal 2021. The increase in interest expense was
the result of a higher overall debt balance from Revolving Credit Facility
borrowings in fiscal 2022 primarily to finance the acquisition of Billie. 26
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Other (Income) Expense, Net

Other (income) expense, net was income of $13.2 in fiscal 2022 compared to
income of $1.2 in fiscal 2021. The increase in income was driven by favorable
foreign currency hedge settlements, which helped to offset other negative
operational impacts from currency.

Income Tax Provision

Income taxes, which include federal, state and foreign taxes, were 19.9% and
19.8% of Earnings before income taxes in fiscal 2022 and 2021, respectively.

 The effective income tax rate for fiscal 2022 for operations was 19.9% as
compared to 19.8% in the prior year. On an adjusted basis, the effective tax
rate for fiscal 2022 was 20.9% compared to 21.2% in the prior year. The fiscal
2022 effective tax rate reflects a favorable mix of earnings in low tax
jurisdictions and net favorable discrete items including the impact of a change
in our prior estimates. Our effective tax rate is highly sensitive to the mix of countries from which
earnings or losses are derived. Declines in earnings in lower tax rate
jurisdictions, earnings increases in higher tax rate jurisdictions, or
repatriation of foreign earnings or operating losses in the future could
increase future tax rates. Additionally, adjustments to prior year tax provision
estimates could increase or decrease future tax provisions. 

Segment Results

 Segment performance is evaluated based on segment profit, exclusive of general
corporate expenses, share-based compensation costs, amortization of intangible
assets, and costs associated with restructuring charges, acquisition and
integration costs, SKU rationalization charges, and other non-standard expenses.
The exclusion of such changes from segment results reflects management's view on
how it evaluates segment performance. Financial items, such as interest income
and expense, are managed on a global basis at the corporate level. Our operating model includes some shared business functions across the segments,
including product warehousing and distribution, transaction processing functions
and, in most cases, a combined sales force and management teams. We apply a
fully allocated cost basis, in which shared business functions are allocated
between the segments on a percentage of net sales basis. Such allocations are
estimates and do not represent the costs of such services if performed on a
stand-alone basis. The following tables present changes in segment net sales and segment profit for
fiscal 2022 and 2021, as compared to the corresponding prior year periods, and
also provide a reconciliation of organic segment net sales and organic segment
profit to reported amounts. For a reconciliation of Segment profit to Earnings
before income taxes, see Note 18 of Notes to Consolidated Financial Statements.
Net sales and segment profit activity related to Billie products were included
in the Wet Shave segment for the post-acquisition period. 

Wet Shave

 Net Sales - Wet Shave For the Years Ended September 30, 2022 %Chg 2021 %Chg Net sales - prior year $ 1,215.9 $ 1,162.3 Organic 14.3 1.2 % 26.6 2.3 % Impact of Billie acquisition, net 74.9 6.2 % - - % Impact of currency (62.6) (5.2) % 27.0 2.3 % Net sales - current year $ 1,242.5 2.2 % $ 1,215.9 4.6 % 

Wet Shave net sales for fiscal 2022 increased 2.2%, inclusive of a 6.2% increase
from the Billie acquisition and a 5.2% decline due to negative currency
movements. Organic net sales increased $14.3, or 1.2%, primarily driven by
increases in Disposables, and Shave Preps, offset by declines in Men’s and
Women’s Systems. Organic net sales in International markets increased 3.9%
compared to declines in North America of 2.3%.

 27
-------------------------------------------------------------------------------- Segment Profit - Wet Shave
For the Years Ended September 30, 2022 %Chg 2021 %Chg
Segment profit - prior year $ 221.0 $ 206.2
Organic (21.2) (9.6) % 8.9 4.3 %
Impact of Billie acquisition, net (6.8) (3.1) % - - %
Impact of currency (19.0) (8.6) % 5.9 

2.9 %

Segment profit – current year $ 174.0 (21.3) % $ 221.0 7.2 %

 Wet Shave segment profit for fiscal 2022 was $174.0, down $47.0 or 21.3%.
Organic segment profit decreased $21.2, or 9.6%. The decline in segment profit
was primarily due to inflationary pressures resulting in higher commodity costs
and warehousing and distribution costs, partially offset by favorable pricing
and lower A&P expense. Sun and Skin Care Net Sales - Sun and Skin Care
For the Years Ended September 30, 2022 %Chg 2021 %Chg
Net sales - prior year $ 585.3 $ 462.0
Organic 61.4 10.5 % 59.0 12.8 %
Impact of Cremo acquisition - - % 56.0 12.1 %
Impact of currency (8.2) (1.4) % 8.3 

1.8 %

Net sales – current year $ 638.5 9.1 % $ 585.3 26.7 %

 Sun and Skin Care net sales for fiscal 2022 increased 9.1%. Organic net sales
increased $61.4, or 10.5%, primarily due to Sun Care, resulting in growth of
22%. Grooming organic net sales increased 8%, driven by Cremo and Jack Black.
Wet Ones organic net sales declined 24%, driven by lower volumes as consumer
demand fell and overall demand continued to return to pre-pandemic levels. Segment Profit - Sun and Skin Care
For the Years Ended September 30, 2022 %Chg 2021 

%Chg

Segment profit - prior year $ 98.7 $ 69.1
Organic 11.4 11.6 % 19.2 27.8 %
Impact of Cremo acquisition - - % 8.9 12.9 %
Impact of currency (1.6) (1.7) % 1.5 

2.1 %

Segment profit – current year $ 108.5 9.9 % $ 98.7

42.8 %

 Sun and Skin Care segment profit for fiscal 2022 was $108.5, an increase of
9.9%. Organic segment profit increased $11.4, or 11.6% driven by increased net
sales and gross margin from favorable volumes of Sun Care products and pricing
for Wet Ones, partially offset by higher freight and materials costs. 28
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Feminine Care

 Net Sales - Feminine Care
For the Years Ended September 30, 2022 %Chg 2021 %Chg
Net sales - prior year $ 286.1 $ 298.6
Organic 4.7 1.6 % (13.5) (4.5) %
Impact of currency (0.1) - % 1.0 0.3 %

Net sales – current year $ 290.7 1.6 % $ 286.1 (4.2) %

 Feminine Care net sales for fiscal 2022 increased $4.6, or 1.6%. Organic segment
net sales increased $4.7, or 1.6%, driven largely by higher category consumption
compared to the prior year. Segment Profit - Feminine Care
For the Years Ended September 30, 2022 %Chg 2021 %Chg
Segment profit - prior year $ 37.2 $ 52.3
Organic (5.9) (15.9) % (15.7) (30.0) %
Impact of currency (0.1) (0.2) % 0.6 1.1 %

Segment profit – current year $ 31.2 (16.1) % $ 37.2 (28.9) %

Feminine Care segment profit for fiscal 2022 was $31.2, a decrease of $6.0, or
16.1%. The decrease is primarily due to inflationary pressures on labor,
materials and distribution, partially offset by favorable pricing.

All Other

The Infant and Pet Care business divestiture, completed in December 2019,
disposed of the entirety of the operations of the All Other segment. The results
below represent the impact of the divestiture to segment performance:

Net Sales – All Other

For the Years Ended September 30,

 2021 

%Chg

 Net sales - prior year $ 26.8 Impact of Infant and Pet Care business sale (26.8) (100.0) % Net sales - current year $ - (100.0) % Segment Profit - All Other
For the Years Ended September 30, 2021 %Chg
Segment profit - prior year $ 3.1 

Impact of Infant and Pet Care business sale (3.1) (100.0) %

 Segment profit - current year $ - (100.0) % 29

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General Corporate and Other Expenses

 Fiscal Year 2022 2021 

2020

General corporate and other expenses $ 54.0 $ 56.5 $ 54.9
Restructuring and related costs 16.2 30.1 

38.1

Acquisition and integration costs 9.9 8.4 39.8
SKU rationalization 22.5 - -
Legal settlement (7.5) - -
Pension settlement 1.8 - -
Value-added tax settlement costs 3.4 - 

–

Sun Care reformulation costs 4.6 1.1 

–

Cost of early retirement of long-term debt - 26.1 

26.2

COVID-19 expenses - - 

4.3

Gain on sale of Infant and Pet Care business - - 

(4.1)

Feminine and Infant Care evaluation costs - - 

0.3

General corporate and other expenses $ 104.9 $ 122.2 $ 159.5
% of net sales

 4.8 % 5.9 % 8.2 % For fiscal 2022, general corporate expenses were $54.0, a decrease of $2.5 as
compared to fiscal 2021. Fiscal 2021 general corporate expenses increased $1.6
when compared to fiscal 2020. During the year ended September 30, 2022, the Company recorded a charge of $22.5
relating to the write-off of inventory for certain Wet Ones SKUs and related
contract termination charges associated with a third-party co-manufacturer. This
charge was included in Cost of products sold in the Consolidated Financial
Statements. In fiscal 2022, the Company took specific actions to strengthen our operating
model, simplify our organization and improve manufacturing and supply chain
efficiency and productivity. As a result of these actions, we incurred
restructuring charges of $16.2 during fiscal 2022, primarily related to employee
severance and benefit costs. In previous years, we incurred restructuring
charges related to Project Fuel, our previous enterprise wide initiative,
including $30.1 in fiscal 2021. 

Liquidity and Capital Resources

 At September 30, 2022, a portion of our cash balances were located outside the
U.S. Given our extensive international operations, a significant portion of our
cash is denominated in foreign currencies. Refer to Note 16 of Notes to
Condensed Consolidated Financial Statements for a discussion of the primary
currencies to which the Company is exposed. We manage our worldwide cash
requirements by reviewing available funds among the many subsidiaries through
which we conduct business and the cost effectiveness with which those funds can
be accessed. We generally repatriate a portion of current year earnings from
select non-U.S. subsidiaries only if the economic cost of the repatriation is
not considered material. 

Our cash is deposited with multiple counterparties which consist of major
financial institutions. We consistently monitor positions with, and credit
ratings of, counterparties both internally and by using outside ratings
agencies.

 Our total borrowings were $1,424.0 at September 30, 2022, including $174.0 tied
to variable interest rates. Our total borrowings at September 30, 2021 were
$1,276.5. We had outstanding international borrowings, recorded within Notes
payable, of $19.0 and $26.5 as of September 30, 2022 and September 30, 2021,
respectively. Effective February 7, 2022, we increased the maximum receivables sold facility
amount under the Sixth Amendment to Master Accounts Receivable Purchase
Agreement to $180.0 from $150.0. Refer to Note 10 of Notes to Condensed
Consolidated Financial Statements for further discussion on our $180 uncommitted
master accounts receivable purchase agreement with The Bank of Tokyo-Mitsubishi
UFJ, Ltd., New York Branch, as the purchaser (the "Accounts Receivable
Facility"). On August 5, 2022, we entered into the Master Receivable Assignment Agreement
(the "Japan Agreement"). The Japan Agreement was between Schick Japan K.K. and
Concerto Receivables Corporation (the "Purchaser"), Tokyo Branch, a subsidiary
of MUFG Bank, LTD., which allows us to assign third party accounts receivable to
the Purchaser. The Japan Agreement allows for the sale of up to ¥3,000 with
limits set between individual customers. The terms of the agreement expire one
year after the date of execution and will be renewed annually unless either
party notifies of its intent not to renew. The assigned receivables will be
discounted using the funding rate from the Tokyo Interbank Market plus 1.1%. 30
-------------------------------------------------------------------------------- Historically, we have generated and expect to continue to generate positive cash
flows from operations. Our cash flows are affected by the seasonality of our Sun
Care business, typically resulting in higher net sales and increased cash
generated in the second and third quarters of each fiscal year. We believe our
cash on hand, cash flows from operations and borrowing capacity under our U.S.
Revolving Credit Facility will be sufficient to satisfy our future working
capital requirements, interest payments, R&D activities, capital expenditures,
and other financing requirements for at least the next 12 months. We will
continue to monitor our cash flows, spending, and liquidity needs. To date, the COVID-19 pandemic has not had a significant impact on our liquidity
or capital resources. However, the COVID-19 pandemic has led to disruption and
volatility in the global capital markets which could impact our capital
resources and liquidity in the future. Short-term financing needs primarily consist of working capital requirements and
principal and interest payments on our long-term debt. Long-term financing needs
will depend largely on potential growth opportunities, including acquisition
activity and repayment or refinancing of our long-term debt obligations. Our
long-term liquidity may be influenced by our ability to borrow additional funds,
renegotiate existing debt, and raise equity under terms that are favorable to
us. We may, from time-to-time, seek to repurchase shares of our common stock.
Such repurchases, if any, will depend on prevailing market conditions, our
liquidity requirements, contractual restrictions and other factors. In fiscal 2023, we expect our total capital expenditures to be in the range of
$55 to $65 primarily related to both maintenance of and productivity efforts
across manufacturing facilities, new product development and information
technology system enhancements. While we intend to fund these capital
expenditures with cash generated from operations, we may also utilize our
borrowing facilities. 

During fiscal 2022, we did not make any contributions to our pension and
postretirement plans. Due to the election of certain terms of the American
Rescue Plan Act, we are not required to make any cash contributions to our
pension and postretirement plans in fiscal 2023.

Debt Covenants

 The Revolving Credit Facility governing our outstanding debt at September 30,
2022 contains certain customary representations and warranties, financial
covenants, covenants restricting our ability to take certain actions,
affirmative covenants, and provisions relating to events of default. Under the
terms of the Revolving Credit Facility, the ratio of our indebtedness to our
earnings before interest, taxes, depreciation and amortization ("EBITDA"), as
defined in the agreement and detailed below, cannot be greater than 4.0 to 1.0.
In addition, under the Revolving Credit Facility, the ratio of our EBITDA to
total interest expense must exceed 3.0 to 1.0. If we fail to comply with these
covenants or with other requirements of the Revolving Credit Facility, the
lenders may have the right to accelerate the maturity of the debt. Acceleration
under one of our facilities would trigger cross-defaults on our other
borrowings. Under the Revolving Credit Facility, EBITDA is defined as net
earnings, as adjusted to add-back interest expense, income taxes, depreciation
and amortization, all of which are determined in accordance with GAAP. In
addition, the Revolving Credit Facility allows certain non-cash charges such as
stock award amortization and asset write-offs including, but not limited to,
impairment and accelerated depreciation, and operating expense reductions or
synergies to be "added-back" in determining EBITDA for purposes of the
indebtedness ratio. Total debt and interest expense are calculated in accordance
with GAAP. 

As of September 30, 2022, we were in compliance with the provisions and
covenants associated with the Revolving Credit Facility.

Cash Flows

A summary of our cash flow from operating, investing and financing activities is
provided in the following table:

 Fiscal Year 2022 2021 2020
Net cash from (used by):
Operating activities $ 102.0 $ 229.0 $ 232.6
Investing activities (355.4) (48.7) (196.4)
Financing activities (17.6) (65.4) (18.7)
Effect of exchange rate changes on cash (19.5) 

(0.4) 5.6
Net (decrease) increase in cash and cash equivalents $ (290.5) $ 114.5 $ 23.1

 31
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Operating Activities

 Cash flow from operating activities was $102.0 in fiscal 2022, as compared to
$229.0 in fiscal 2021. The decrease in fiscal 2022 was a result of lower net
earnings and a net cash outflow due to temporarily increased inventory levels in
an effort to ensure raw material and product availability in a continued
difficult operating environment. 

Investing Activities

 Cash flow used by investing activities was $355.4 in fiscal 2022 as compared to
$48.7 in fiscal 2021. We completed the acquisition of Billie for $309.4, net of
cash acquired, in fiscal 2022. Additionally, we collected $5.0 of proceeds from
the sale of the Infant and Pet Care business during the first nine months of
fiscal 2022, compared to $7.5 in the prior year period. Capital expenditures
were $56.4 and $56.8 during fiscal 2022 and 2021, respectively. Additionally,
other investing cash inflows related to the collection of receivables from our
Accounts Receivable Facility totaled $6.9 and $2.6 during fiscal 2022 and 2021,
respectively, as a result of collections on the deferred purchase price of
accounts receivables sold. Financing Activities Net cash used by financing activities was $17.6 in fiscal 2022 as compared to
$65.4 in fiscal 2021. During the fiscal 2022, we had net borrowings of $155.0
under our Revolving Credit Facility, primarily to fund the acquisition of
Billie. We repurchased $125.3 of our common stock under our 2018 Board
authorization to repurchase our common stock in fiscal 2022 compared to $9.2 in
the prior year period. Dividend payments totaled $32.6 and $25.6 in fiscal 2022
and 2021, respectively. Additionally, cash flows associated with the Accounts
Receivable Facility were outflows of $0.8 during fiscal 2022 compared to
financing outflows of $2.4 in the prior year period. In fiscal 2021, the Company
repaid its 2022 Senior Notes with the proceeds received from the issuance of the
2029 Senior Notes, together with cash on hand. Additional financing cash
outflows incurred in fiscal 2021 were related to costs of early debt retirement
of the 2022 Senior Notes totaling $26.1 and debt issuance costs of $6.5. 

Share Repurchases

 In January 2018, our Board approved an authorization to repurchase up to 10.0
shares of our common stock. This authorization replaced a prior share repurchase
authorization from May 2015. During fiscal 2022, we repurchased 3.3 shares of
our common stock for $125.3. We have 6.5 shares remaining available for purchase
under the January 2018 Board authorization. During fiscal 2022, 0.3 shares were purchased related to the surrender of shares
of common stock to satisfy tax withholding obligations in connection with the
vesting of restricted stock equivalent awards. 

Since September 30, 2022, we repurchased 0.2 shares of common stock for $6.9.
There are 6.3 common shares remaining available to be purchased.

Dividends

 On November 4, 2021, the Board declared a quarterly cash dividend of $0.15 per
share of common stock outstanding. The dividend was paid on January 6, 2022 to
holders of record as of the close of business on December 3, 2021. On February 4, 2022, the Board declared a quarterly cash dividend of $0.15 per
common share for the first fiscal quarter. The dividend was paid April 5, 2022,
to stockholders of record as of the close of business on March 8, 2022. 

On May 6, 2022, the Board declared a quarterly cash dividend of $0.15 per common
share for the second fiscal quarter. The dividend was paid July 7, 2022, to
stockholders of record as of the close of business on June 2, 2022.

On July 29, 2022, the Board declared a quarterly cash dividend of $0.15 per
common share for the third fiscal quarter. The dividend will be payable on
October 5, 2022 to shareholders of record as of the close of business on
September 2, 2022.

On November 3, 2022, the Board declared a quarterly cash dividend of $0.15 per
common share for the fourth fiscal quarter. The dividend will be payable on
January 4, 2023 to shareholders of record as of the close of business on
November 29, 2022.

Dividends declared during fiscal 2022 totaled $32.6. Payments made for dividends
during fiscal 2022 totaled $32.6.

 32
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Inflation

 Management recognizes that inflationary pressures may have an adverse effect on
our company through higher material, labor and transportation costs, asset
replacement costs and related depreciation, healthcare and other costs. We
continued to navigate the challenging and uncertain inflationary environment and
resultant cost pressure with a combination of productivity efforts to achieve
efficiencies and lower costs to our Cost of products sold and SG&A expenses and
increase focus on revenue management. We can provide no assurance that such
mitigation will be available in the future. 

Seasonality

 Customer orders for sun care products within our Sun and Skin Care segment are
highly seasonal. This has historically resulted in higher sun care sales to
retailers during the late winter through mid-summer months. Within our Wet Shave
segment, sales of women's products are moderately seasonal, with increased
consumer demand in the spring and summer months. See "Our business is subject to
seasonal volatility" in Item 1A. Risk Factors. 

Foreign Currency

 Certain net sales and costs of our international operations are denominated in
the local currency of the respective countries. As such, sales and profits from
these subsidiaries may be impacted by fluctuations in the value of these local
currencies relative to the U.S. dollar. We also have significant intercompany
financing arrangements that may result in gains and losses in our results of
operations. In an effort to mitigate the impact of currency exchange rate
effects, we may hedge certain operational and intercompany transactions;
however, our hedging strategies may not fully offset gains and losses recognized
in our results of operations. Commitments and Contingencies Legal Proceedings During the year ended September 30, 2022, we settled certain legal matters
primarily related to intellectual property claims against a third party. The
settlement resulted in a gain of $7.5 which was included in SG&A in the
Condensed Consolidated Financial Statements. The Company received payment for
the settlement in the fourth quarter of fiscal 2022. We are subject to a number of legal proceedings in various jurisdictions arising
out of our operations during the ordinary course of business. Many of these
legal matters are in preliminary stages and involve complex issues of law and
fact and may proceed for protracted periods of time. The amount of liability, if
any, from these proceedings cannot be determined with certainty. We review legal
proceedings and claims, regulatory reviews and inspections and other legal
proceedings on an ongoing basis and follows appropriate accounting guidance when
making accrual and disclosure decisions. We establish accruals for those
contingencies when the incurrence of a loss is probable and can be reasonably
estimated and discloses the amount accrued and the amount of a reasonably
possible loss in excess of the amount accrued if such disclosure is necessary
for its financial statements to not be misleading. We do not record liabilities
when the likelihood that the liability has been incurred is probable, but the
amount cannot be reasonably estimated. Based upon present information, we
believe that its liability, if any, arising from such pending legal proceedings,
asserted legal claims, and known potential legal claims which are likely to be
asserted, is not reasonably likely to be material to its financial position,
results of operations or cash flows, when taking into account established
accruals for estimated liabilities. 33
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Contractual Obligations

 We have significant contractual obligations to fulfill our business operations
including the repayment of short and long term debt, periodic interest payments,
minimum levels of pension funding, and other obligations including payments for
various leases of real estate, vehicles, and equipment, and minimum fixed costs
to be paid to third party logistics vendors. We are also party to various
service and supply contracts that generally extend one to three months. These
arrangements are primarily individual, short-term purchase orders for routine
goods and services at market prices, which are part of our normal operations and
are reflected in historical operating cash flow trends. These contracts can
generally be canceled at our option at any time. We do not believe such
arrangements will adversely affect our liquidity position. In addition, we have
various commitments related to service and supply contracts that contain penalty
provisions for early termination. Because of the short period between order and
shipment date (generally less than one month) for most of our orders, the dollar
amount of current backlog is not material and is not considered to be a reliable
indicator of future sales volume. Generally, sales to our top customers are made
pursuant to purchase orders and we do not have supply agreements or guarantees
of minimum purchases from them. As a result, these customers may cancel their
purchase orders or reschedule or decrease their level of purchases from us at
any time. As of September 30, 2022, we do not believe such purchase arrangements
or termination penalties will have a significant effect on our results of
operations, financial position or liquidity position in the future. 

Environmental Matters

 Our operations, like those of other companies, are subject to various federal,
state, local and foreign laws and regulations intended to protect public health
and the environment. These regulations relate primarily to worker safety, air
and water quality, underground fuel storage tanks, and waste handling and
disposal. Accrued environmental costs at September 30, 2022 were $9.6. It is
difficult to quantify with reasonable certainty the cost of environmental
matters, particularly remediation and future capital expenditures for
environmental control equipment. Total environmental capital expenditures and
operating expenses are not expected to have a material effect on our total
capital and operating expenditures, consolidated earnings or competitive
position. However, current environmental spending estimates could be modified as
a result of changes in our plans or our understanding of underlying facts,
changes in legal requirements, including any requirements related to global
climate change, or other factors. 

Critical Accounting Policies

 The methods, estimates and judgments we use in applying our most critical
accounting policies have a significant impact on the results we report in our
consolidated financial statements. Specific areas, among others, requiring the
application of management's estimates and judgment include assumptions
pertaining to accruals for consumer and trade promotion programs, pension and
postretirement benefit costs, share-based compensation, future cash flows
associated with impairment testing of goodwill and other long-lived assets,
uncertain tax positions, the reinvestment of undistributed foreign earnings and
tax valuation allowances. On an ongoing basis, we evaluate our estimates, but
actual results could differ materially from those estimates. Our most critical accounting policies are revenue recognition, pension and other
postretirement benefits, the valuation of long-lived assets (including property,
plant and equipment), income taxes (including uncertain tax positions) and
valuation related to acquisitions, goodwill and intangible assets. A summary of
our significant accounting policies is contained in Note 2 of Notes to
Consolidated Financial Statements. This listing is not intended to be a
comprehensive list of all of our accounting policies. 

Revenue Recognition

 We derive revenue from the sale of our products. Revenue is recognized when the
customer obtains control of the goods, which occurs when the ability to use and
obtain benefits from the goods are passed to the customer, most commonly upon
the delivery of the goods. Discounts are offered to customers for early payment,
and an estimate of the discounts is recorded as a reduction of Net sales in the
same period as the sale. Our standard sales terms are final and returns or
exchanges are not permitted with the exception of end of season returns for Sun
Care products, as detailed below. Reserves are established and recorded in cases
where the right of return does exist for a particular sale. We assess the contractual obligations in customers' purchase orders and identify
performance obligations related to the transferred goods (or a bundle of goods)
that are distinct. To identify the performance obligations, we consider all the
goods promised, whether explicitly stated or implied based on customary business
practices. Our purchase orders are short term in nature, lasting less than one
year, and contain a single delivery element. For a purchase order that has more
than one performance obligation, we allocate the total consideration to each
distinct performance obligation on a relative stand-alone selling price basis.
We do not exclude variable consideration in determining the remaining value of
performance obligations. 34
-------------------------------------------------------------------------------- We record sales at the time that control of goods passes to the customer. The
terms of these sales vary, but, in all instances, the following conditions are
met: (1) the sales arrangement is evidenced by purchase orders submitted by
customers; (2) the selling price is fixed or determinable; (3) title to the
product has transferred; (4) there is an obligation to pay at a specified date
without any additional conditions or actions required by us; and (5)
collectability is reasonably assured. Simultaneously with the sale, we reduce
Net sales and Cost of products sold and reserve amounts on the Consolidated
Balance Sheet for anticipated returns based upon an estimated return level in
accordance with GAAP. Customers are required to pay for the Sun Care product
purchased during the season under the required terms. Under certain
circumstances, we allow customers to return Sun Care products that have not been
sold by the end of the Sun Care season, which is normal practice in the Sun Care
industry. The timing of returns of Sun Care products can vary in different
regions, based on climate and other factors. However, the majority of returns
occur in the U.S. from September through January, following the summer Sun Care
season. We estimate the level of Sun Care returns as the Sun Care season
progresses, using a variety of inputs including historical experience,
consumption trends during the Sun Care season, obsolescence factors including
expiration dates and inventory positions at key retailers. We monitor shipment
activity and inventory levels at key retailers during the season in an effort to
more accurately estimate potential returns. This allows us to manage shipment
activity to our customers, especially in the latter stages of the Sun Care
season, to reduce the potential for returned product. The level of returns may
fluctuate from our estimates due to several factors, including, but not limited
to, weather conditions, customer inventory levels and competitive activity.
Based on our fiscal 2022 Sun Care shipments, each percentage point change in our
returns rate would have impacted our reported net sales by $4.1 and our reported
operating income by $2.7. At September 30, 2022 and 2021, our reserve on the
Consolidated Balance Sheet for returns was $47.5 and $52.7, respectively. We offer a variety of programs, primarily to our retail customers, designed to
promote sales of our products. Such programs require periodic payments and
allowances based on estimated results of specific programs and are recorded as a
reduction to net sales. We accrue, at the time of sale, the estimated total
payments and allowances associated with each transaction. Additionally, we offer
programs directly to consumers to promote the sale of our products. Promotions
which reduce the ultimate consumer sale prices are recorded as a reduction of
net sales at the time the promotional offer is made, generally using estimated
redemption and participation levels. Taxes we collect on behalf of governmental
authorities, which are generally included in the price to the customer, are also
recorded as a reduction of net sales. 

We continually assess the adequacy of accruals for customer and consumer
promotional program costs not yet paid. To the extent total program payments
differ from estimates, adjustments may be necessary. Historically, these
adjustments have not been material to annual results.

Pension Plans and Other Postretirement Benefits

 The determination of our obligation and expense for pension and other
postretirement benefits is dependent on certain assumptions developed by us and
used by actuaries in calculating such amounts. Assumptions include, among
others, the discount rate, the expected long-term rate of return on plan assets,
and future salary increases, where applicable. Actual results that differ from
assumptions made are recognized on the balance sheet and subsequently amortized
to earnings over future periods. Significant differences in actual experience or
significant changes in macroeconomic conditions resulting in changes to
assumptions may materially affect pension and other postretirement obligations.
In determining the discount rate, we use the yield on high-quality bonds that
coincide with the cash flows of our plans' estimated payouts. For our U.S.
plans, which represent our most significant obligations, we use the Mercer yield
curve in determining the discount rates. We utilize a spot discount rate approach to estimate service and interest
components of net periodic benefit cost for our pension benefits. The spot
discount rate approach applies the specific spot rates along the yield curve
used in the determination of the benefit obligation to the relevant projected
cash flows and is a more precise application of the yield curve spot rates used
in the traditional single discount rate approach. Of the assumptions listed above, changes in the expected long-term rate of
return on plan assets and changes in the discount rate used in developing plan
obligations will likely have the most significant impact on our annual earnings,
prospectively. Based on plan assets at September 30, 2022, a one percentage
point decrease or increase in expected asset returns would increase or decrease
our pension expense by approximately $4.4. In addition, it may increase and
accelerate the rate of required pension contributions in the future. Uncertainty
related to economic markets and the availability of credit may produce changes
in the yields on corporate bonds rated as high-quality. As a result, discount
rates based on high-quality corporate bonds may increase or decrease, leading to
lower or higher pension obligations, respectively. A one percentage point
decrease in the discount rate would increase pension obligations by
approximately $46.9 at September 30, 2022. 

As allowed under GAAP, our U.S. qualified pension plan uses market related
value, which recognizes market appreciation or depreciation in the portfolio
over five years, thereby reducing the short-term impact of market fluctuations.

 35
--------------------------------------------------------------------------------

We have historically provided defined benefit pension plans to our eligible
employees, former employees and retirees. We fund our pension plans in
compliance with the Employee Retirement Income Security Act of 1974 or local
funding requirements.

Further detail on our pension and other postretirement benefit plans is included
in Note 12 of Notes to Consolidated Financial Statements.

Share-Based Compensation

 We award restricted stock equivalents ("RSE"), which generally vest over a range
of two to four years. The fair value of each grant is estimated on the date of
grant based on the current market price of our shares of common stock. We also award performance restricted stock equivalents ("PRSE") which may
provide for the issuance of common stock to certain managerial staff and
executive management if specified performance or market targets are achieved.
The recipient of the PRSE award may earn a total award ranging from 0% to 200%
of the target award. For PRSE awards with performance conditions, the fair value of each grant is
estimated on the date of grant based on the current market price of our shares
of common stock. The total amount of compensation expense recognized reflects
the initial assumption that target performance goals will be achieved.
Compensation expense may be adjusted during the life of the performance grant
based on management's assessment of the probability that performance goals will
be achieved. If such goals are not met or it is determined that achievement of
performance goals is not probable, compensation expense is adjusted to reflect
the reduced expected payout level. If it is determined that the performance
goals will be exceeded, additional compensation expense is recognized. For PRSE awards based on market conditions, the fair value is estimated on the
grant date using a Monte Carlo simulation. The payout for PRSE awards with
market conditions are assessed by comparing our total shareholder return ("TSR")
during a certain three year period to the respective TSRs of companies in a
selected performance peer group. Non-qualified stock options ("share options") are granted at the market price of
our common stock on the grant date and generally vest ratably over three years.
We calculate the fair value of total share-based compensation for share options
using the Black-Scholes option pricing model, which utilizes certain assumptions
and estimates that have a material impact on the amount of total compensation
cost recognized in our consolidated financial statements, including the expected
term, expected stock price volatility, risk-free interest rate and expected
dividends. The original estimate of the grant date fair value is not
subsequently revised unless the awards are modified or there is a change in the
number of awards expected to forfeit prior to vesting. 

Further detail on Share-Based Payments is included in Note 13 of Notes to
Consolidated Financial Statements.

Valuation of Long-Lived Assets

 We periodically evaluate our long-lived assets, including property, plant and
equipment, goodwill, and intangible assets, for potential impairment indicators.
Judgments regarding the existence of impairment indicators, including lower than
expected cash flows from acquired businesses, are based on legal factors, market
conditions and operational performance. Future events could cause us to conclude
that impairment indicators exist. We estimate fair value using valuation
techniques such as discounted cash flows. This requires management to make
assumptions regarding future income, working capital, and discount rates, which
would affect the impairment calculation. 

Income Taxes

 Our annual effective income tax rate is determined based on our income,
statutory tax rates and the tax impacts of items treated differently for tax
purposes than for financial reporting purposes. Tax law requires certain items
to be included in the tax return at different times than the items reflected in
the financial statements. Some of these differences are permanent, such as
expenses that are not deductible in our tax return, and some differences are
temporary, reversing over time, such as depreciation expense. These temporary
differences create deferred tax assets and liabilities. Deferred tax assets generally represent the tax effect of items that can be used
as a tax deduction or credit in future years for which we have already recorded
the tax benefit in our income statement. Deferred tax liabilities generally
represent tax expense recognized in our financial statements for which payment
has been deferred, the tax effect of expenditures for which a deduction has
already been taken in our tax return but has not yet been recognized in our
financial statements, or assets recorded at estimated fair value in business
combinations for which there was no corresponding tax basis adjustment. 36
-------------------------------------------------------------------------------- We estimate income taxes and the effective income tax rate in each jurisdiction
that we operate. This involves estimating taxable earnings, specific taxable and
deductible items, the likelihood of generating sufficient future taxable income
to utilize deferred tax assets, the portion of the income of foreign
subsidiaries that is expected to be remitted to the U.S. and be taxable and
possible exposures related to future tax audits. Deferred tax assets are
evaluated on a subsidiary by subsidiary basis to ensure that the asset will be
realized. Valuation allowances are established when the realization is not
deemed to be more likely than not. Future performance is monitored, and when
objectively measurable operating trends change, adjustments are made to the
valuation allowances accordingly. To the extent the estimates described above
change, adjustments to income taxes are made in the period in which the estimate
is changed. We operate in multiple jurisdictions with complex tax and regulatory
environments, which are subject to differing interpretations by the taxpayer and
the taxing authorities. At times, we may take positions that management believes
are supportable, but are potentially subject to successful challenges by the
appropriate taxing authority. We evaluate our tax positions and establish
liabilities in accordance with guidance governing accounting for uncertainty in
income taxes. We review these tax uncertainties in light of the changing facts
and circumstances, such as the progress of tax audits, and adjust them
accordingly. 

Further detail on Income Taxes is included in Note 5 of Notes to Consolidated
Financial Statements.

Acquisitions, Goodwill and Intangible Assets

 We allocate the cost of an acquired business to the assets acquired and
liabilities assumed based on their estimated fair values at the date of
acquisition. The excess value of the cost of an acquired business over the
estimated fair value of the assets acquired and liabilities assumed is
recognized as goodwill. The valuation of the acquired assets and liabilities
will impact the determination of future operating results. We use a variety of
information sources to determine the value of acquired assets and liabilities,
including: third-party appraisers for the values and lives of property,
identifiable intangibles and inventories; actuaries for defined benefit
retirement plans; and legal counsel or other experts to assess the obligations
associated with legal, environmental or other claims. During fiscal 2022, the Company used variations of the income approach in
determining the fair value of intangible assets acquired in the acquisition of
Billie, Inc. Specifically, we utilized the multi-period excess earnings method
to determine the fair value of the definite lived customer relationships
acquired and the relief from royalty method to determine the fair value of the
definite lived trade name and proprietary technology that we acquired. Our determination of the fair value of customer relationships acquired involved
significant estimates and assumptions related to revenue growth rates, discount
rates, and customer attrition rates. The determination of the fair value of
trade names and proprietary technology acquired involved the use of significant
estimates and assumptions related to revenue growth rates, royalty rates and
discount rates. We believe that the fair value assigned to the assets acquired
and liabilities assumed are based on reasonable assumptions and estimates that
marketplace participants would use. The recorded value of goodwill and intangible assets from recently acquired
businesses are derived from more recent business operating plans and
macroeconomic environmental conditions and, therefore, are likely more
susceptible to an adverse change that could require an impairment charge. As
such, significant judgment is required in estimating the fair value of goodwill
and intangible assets. Additionally, significant judgment is needed when
assigning a useful life to intangible assets. Certain intangible assets are
expected to have determinable useful lives. Our assessment of intangible assets
that have a determinable life is based on a number of factors including the
competitive environment, market share, brand history, underlying product life
cycles, operating plans and the macroeconomic environment. The costs of
determinable-lived intangible assets are amortized to expense over the estimated
useful life. The value of residual goodwill is not amortized, but is tested at
least annually for impairment. See Note 7 of Notes to Consolidated Financial
Statements. However, future changes in the judgments, assumptions and estimates that are
used in our acquisition valuations and intangible asset and goodwill impairment
testing, including discount rates or future operating results and related cash
flow projections, could result in significantly different estimates of the fair
values in the future. An increase in discount rates, a reduction in projected
cash flows or a combination of the two could lead to a reduction in the
estimated fair values, which may result in impairment charges that could
materially affect our financial statements in any given year. During the fourth quarter of fiscal 2022, we performed an annual test for
impairment of goodwill on each of our reporting units. We elected to perform a
qualitative test of goodwill impairment for the Sun Care reporting unit. Taking
into account the excess fair value over carrying value in the prior valuation,
as well as macroeconomic factors, industry conditions and actual results
relative to the amounts projected in the prior quantitative test, we determined
it was not more likely than not that the fair value of the reporting unit is
less than the carrying amount. For the Wet Shave, Feminine Care, and Skin Care
reporting units, we elected to perform a quantitative impairment test in fiscal
2022. As part of the quantitative goodwill impairment test, we estimated the
fair value of each reporting unit using both market and income approaches of
valuation. The income approach 37
-------------------------------------------------------------------------------- utilizes the discounted cash flow method and incorporates significant estimates
and assumptions, including long-term projections of future cash flows, market
conditions, and discount rates reflecting the risk inherent in future cash
flows. The projections for future cash flows are generated using our company's
strategic plan to determine a five-year period of forecasted cash flows and
operating data. The market approach uses the guideline public company method to
calculate the value of each reporting unit based on the operating data of
similar assets from competing publicly traded companies. Multiples derived from
guideline companies provide an indication of how much a knowledgeable investor
in the marketplace would be willing to pay for a company. The multiples are
adjusted given the specific characteristics of the reporting unit including its
position in the market relative to the guideline companies and applied to the
reporting unit's operating data to arrive at an indication of value. The income
and market approaches are weighted based on circumstances specific to each
reporting unit and combined are used to calculate fair value. Determining the fair value of a reporting unit requires the use of significant
judgment, estimates and assumptions. While we believe that the estimates and
assumptions underlying the valuation methodology are reasonable, these estimates
and assumptions could have a significant impact on whether an impairment charge
is recognized, and also on the magnitude of any such charge. The results of an
impairment analysis are as of a point in time. There is no assurance that actual
future earnings or cash flows of the reporting units will not decline
significantly from these projections. We will monitor any changes to these
assumptions and will evaluate goodwill as deemed warranted during future
periods.
The key assumptions for the market and income approaches used to determine fair
value of the reporting units are updated at least annually. Those assumptions
and estimates include market data and market multiples, discount rates and
terminal growth rates, as well as future levels of revenue growth and operating
margins based upon our strategic plan. The assumptions used for the annual
goodwill impairment test for fiscal year 2022 include terminal growth rates of
2.50% and a weighted-average cost of capital ranging from 11.0% to 12.0%. Our annual impairment testing date was July 1, 2022, and the valuation indicated
there was no impairment of the goodwill of the tested reporting units. The
results of the valuation indicated that all reporting units had a fair value
that exceeded its carrying value by more than 18%. We evaluate the fair value of indefinite-lived intangible assets annually in
conjunction with the goodwill impairment test. Our assessment of intangible
assets that have an indefinite life is based on a number of factors including
the competitive environment, market share, brand history, underlying product
life cycles, operating plans and the macroeconomic environment. During the fourth quarter of fiscal 2022, we elected to complete a qualitative
assessment for impairment of indefinite lived trade names, except for the Wet
Ones trade name, for which we completed a quantitative assessment. There were no
significant events nor adverse trends that indicated any of the indefinite lived
intangible assets were impaired during the fourth quarter of fiscal 2022. We tested the Wet Ones trade name for impairment by performing a quantitative
assessment to estimate the fair value. The estimated fair value was determined
using the multi-period excess earnings method, which requires significant
assumptions, including estimates regarding future revenue and operating margin
growth, and discount rates. Revenue and operating margin growth assumptions are
based on historical trends and management's expectations for future growth by
brand. The discount rates were based on a weighted-average cost of capital
utilizing industry market data of similar companies, in addition to estimated
returns on the assets utilized in the operations of the applicable reporting
unit, including net working capital, fixed assets and intangible assets. The valuation of the Wet Ones trade name had no indication of impairment as of
the annual testing date on July 1, 2022. The impairment analysis performed in
fiscal 2022 indicated that the Wet Ones trade name had a fair value that
exceeded its carrying value by greater than 100%. Future changes in the judgment, assumptions and estimates that are used in our
impairment testing could result in significantly different estimates of the fair
values in the future. An increase in discount rates, a reduction in projected
cash flows or a combination of the two could lead to a reduction in the
estimated fair values, which may result in impairment charges that could
materially affect our financial statements in any given year. The assumptions
used for the annual valuation for indefinite-lived intangible assets for fiscal
year 2022 include a terminal growth rate of 2.50% and a weighted-average cost of
capital of 12.0%. 

The annual impairment analysis performed in fiscal 2022 did not indicate that
impairment existed in the reporting units or indefinite lived trade names.

Recently Issued Accounting Standards

 Refer to Note 2 of Notes to Consolidated Financial Statements for a discussion
regarding recently issued accounting standards and their estimated impact on our
financial statements. 38

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