Energizer Holdings Inc  (NYSE:ENR)

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Q1 2019 Earnings Conference Call
Feb. 05, 2019, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning. My name is Debby, and I will be your conference operator today. At this time, I would like to welcome everyone to Energizer's First Quarter Fiscal Year 2019 Conference Call. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions) As a reminder, this call is being recorded.

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

Jacqueline Burwitz -- Vice President of Investor Relations

Good morning, and thank you for joining us. During the call, we will discuss our results for the first quarter of fiscal year 2019, our outlook for fiscal 2019 and update you on the integration and financing of our -- our recent acquisitions of Spectrum Brands' battery and portable lighting business and the auto care business.

With me this morning are Alan Hoskins, Chief Executive Officer; Mark LaVigne, Chief Operating Officer; and Tim Gorman, Chief Financial Officer. This call is being recorded and will be available for replay via our website, energizerholdings.com.

During the call, we may make statements about our expectations for future plans and financial and operating performance. Any such statements are forward-looking statements, which reflect our current views with respect to future events. We also refer to non-GAAP financial measures. A reconciliation of non-GAAP financial measures to comparable GAAP measures is shown in the press release issued earlier today, which is available in the Investor Relations section of our website, energizerholdings.com.

During our prepared remarks, we will refer to the acquisition of Spectrum's global battery and portable lighting products business as the Spectrum battery acquisition and the acquisition of Spectrum's auto care business as Spectrum auto care.

Information concerning our category and market share discussed on this call relates to markets where we compete and are based on estimates using Energizer's internal data, data from industry analysis and adjustments that we believe to be reasonable.

Investors should review the risk factors in our Form 10-K, 10-Q and our other SEC filings for a description of the key factors affecting our business. These risks may cause actual results to differ materially from our forward-looking statements. We do not undertake to update these forward-looking statements.

During today's call, Alan will briefly cover financial highlights for the quarter and our outlook for fiscal 2019. He will also provide details on the closing of both the Spectrum battery business and Spectrum auto care business, as well as discuss our capital allocation plan. Mark will then provide insight into category trends, our sales drivers and integration activities. Tim will provide details regarding financing of the auto care acquisition as well as a more in-depth review of the results of the quarter and our updated outlook for fiscal 2019.

With that, I would like to turn the call over to Alan.

Alan R. Hoskins -- Chief Executive Officer

Thanks, Jackie, and good morning, everyone. During the first quarter, the Energizer team was able to deliver continued strong results in the base business while preparing for and ultimately closing of the battery and auto care acquisitions. This is a testament to the incredible work by our teams to preserve the momentum in our base business, while successfully starting the journey to transform our Company. First quarter adjusted earnings per share were up 5.8% and were better than expected due to the organic revenue growth of 1.7%, cost savings from our continuous improvement projects and a lower tax rate. We continue to execute on our strategic priorities of leading with innovation, operating with excellence and driving productivity. We are also seeing the benefits of our investment in brand building and our continuous improvement initiatives.

As a result, our core business is strong and our team is executing well. This is reflected in our financial results with solid organic revenue growth over 1 point share gain in our global value share and strong gross margin performance despite currency and raw material headwinds.

Looking at the balance of the year and bolstered by the first quarter strong performance, we will reinvest back into the business to continue strengthening our brands for long-term growth. A portion will also flow through, to our full year outlook. As a result, we are increasing our adjusted earnings per share range by $0.05 to $3.45 to $3.55. In addition to strong execution with our existing business, the team also worked diligently to obtain the necessary approval for both acquisitions.

In January, we secured the financing for the auto care acquisition with the issuance of $215.6 million of both common and preferred stock in addition to the 5.3 million shares of common stock issued to Spectrum and $600 million in debt. The necessary regulatory approvals and financing behind us, we're able to close both transactions in January. We believe both transactions are compelling strategic, operational and financial opportunities for Energizer, drive long-term value for all of our stakeholders.

The battery acquisition has strong strategic merit. Combining the two consumer battery companies will allow us to drive efficiencies, cost savings and even better partnerships with our retail customers, through an expanded brand portfolio platform. The synergy opportunities are significant with the range of $55 million to $65 million. We will also be able to leverage our expanded brand portfolio, which enables us to compete more effectively across many markets and channels.

In addition, the combination had significant scale, most notably in Latin America. And as Mark will discuss in a moment, the integration is well under way. We've also commenced the process for the required divestiture of the Varta business in the EMEA market and we expect to complete that divestiture by the end of June.

Turning to the auto care acquisition. This transaction closed on January 28th, adding the iconic Armor All, STP and A/C PRO brands. We are tremendously excited to add these to our broad portfolio. Operationally, there is a high degree of customer and channel overlap. In addition, this acquisition brings very talented commercial and marketing teams to our organization that know the auto category exceptionally well and as strong customer relationship.

We are excited to leverage that expertise and scaled, partnered with our retailers to drive growth in the category. We have modeled $15 million of cost savings in our plan. It is important to note that this is also a transformational platform for our auto care business, from which Energizer can drive growth. It provides meaningful scale as this more than triples our auto care net sales, adds iconic brands to our portfolio and makes us the immediate market share leader in the category.

In addition, we will benefit from the operational enhancements as a result of Spectrum, consolidating manufacturing into the Dayton facility. While there had been issues, a comprehensive plan to drive further operational and cost efficiencies has been developed and will be executed over the next several years.

To reiterate, our primary objective is to drive revenue synergies with our current auto care business, including an expansion of the business in North America and driving new growth in our international markets.

Finally, this business has a solid financial profile with good margins. We expect to continue to enhance those going forward through continued productivity improvements. With this transaction having just closed, we are in the initial phase of integration and operational planning. But we're making quick progress as we've been able to leverage the efficiencies from the work performed on the battery acquisition.

I'd like to briefly touch on our capital allocation strategy going forward. We do not expect significant changes to our financial policies. However, due to the increased leverage related to both acquisitions, we expect that paying down debt will be our priority over the next three years. We look to return to leverage levels in line with our historical levels of approximately three times debt to adjusted EBITDA. We will also continue to pay our quarterly cash dividend consistent with current levels.

We believe a strong balance sheet provides us the appropriate base from which we can prudently manage our business. In the near-term, we will continue to consider bolt-on acquisitions. However, the integration of these businesses and paying down debt will be the priorities for this management team.

Now, I'd like to turn the call over to Mark. Mark?

Mark S. LaVigne -- Executive Vice President and Chief Operating Officer

Thank you, Alan and good morning, everyone.

First, we will start with the review of the overall performance of the battery category, and then we will turn to our organic revenue growth, which includes continued success online. And then finally, we will touch on our plans for the seamless integrations of both of our acquisition.

Last quarter, we updated our outlook for the global battery category from flat to down low-single digits to flat to slightly positive. For the 13 weeks ending November 2018, the global category trends were consistent with this outlook with positive global volume. We also saw growth in global value, which increased 1.1%. Excluding hurricanes, value was up 2.9% due to continued trade up in the category to the premium segment and pricing in Latin America.

Energizer's global market share, including 1010 (ph) e-commerce data was 36% for the latest 13 weeks, up more than one value share point. In the US, including e-commerce, Energizer's value share was 36.6%, up 210 basis points.

Now, turning to our top line performance in the quarter. Our organic revenue grew 1.7%, driven by category growth, distribution gains and the reclassification of licensing revenue. While we implemented pricing actions in 11 markets, these increases were offset by increased retailer promotions and unfavorable mix.

Looking at the revenues by segment. In the Americas, reported net sales increased slightly. The reported number reflects organic revenue growth of 1.3%, driven by category growth and distribution gains as well as the incremental benefit of the Nu Finish acquisition. This was almost entirely offset by the negative impact from the devaluation of the Argentine currency, other foreign currency headwinds and the impact of promotional phasing.

In international, reported net sales decreased by 0.9%. This slight decline is driven by the unfavorable impact of foreign currencies of $7 million or 3.5%, partially offset by organic revenue growth of 2.6% or $5.2 million. The organic growth was driven by distribution gain in our developed and developing markets.

As you may recall, in fiscal 2017, our international business executed a continuous improvement project, which resulted in a more efficient and effective organization and which manage to lower overheads by 300 basis points as a percent of sales. This team continues to demonstrate a relentless focus on execution.

Within our developing and developed international markets, we saw very strong organic revenue growth of nearly 11% and just over 1% respectively. Focusing more specifically on the US online sales channel, e-commerce battery category grew 14% and now represents 10% of US tracked channel value. Energizer's e-commerce growth continued to accelerate as we grew to a 27% value share, up 6.5 point.

While our initial focus was the US battery opportunity, we are now leveraging net expertise to drive e-commerce growth in our other categories in international market. Regardless of the category on market, we will focus on core category fundamentals and operating with excellence to drive our business.

Now, turning to our integration work on our newly acquired battery and auto care businesses. We did acquire two businesses, but since both were acquired from Spectrum, we have been able to reduce the complexity of the integrations, because of the similarities in synergies and areas such as the IT integration and other back office support functions.

Our integration is focused on a simple three-stage process. First, we will minimize the disruption in the period immediately following closing. Thanks to the hard work of the Energizer and Spectrum team, we have been successful with minimal business disruption. Second, we will create and validate detailed integration plans, which will be designed to ensure a smooth transition onto our platform and capture both cost and revenue synergies. This process is well under way. And then finally, we will leverage the strength of each of these new businesses to grow net sales and cash flow in the coming years. You will hear much more about this in the coming quarters.

With that, I'll turn it over to Tim.

Timothy Gorman -- Executive Vice President and Chief Financial Officer

Thanks, Mark. I will provide the financial results for the first quarter and our revised outlook for fiscal year 2019.

For the quarter, adjusted earnings per share was $1.64, up 5.8% compared to $1.55 in the prior year first quarter. The current quarter benefited from lower SG&A, excluding the acquisition and integration costs and a lower tax rate. Total net sales for the quarter decreased $1.4 million or 0.2% to $572 million, impacted by $9 million from unfavorable foreign currency and $3.3 million due to Argentina's highly inflationary operation, offset by $1 million from the newly acquired Nu Finish business. As Mark noted, organic net sales increased by 1.7% or $10 million.

I would like to point out that beginning last year, on July 1st, we began separately reporting Argentina as highly inflationary. Price increases that were previously included in organic net sales are now reflected in a single line item for Argentina inclusive of currency impact. The impact on organic net sales was approximately 50 basis points. Gross margin was 48.2% in the first quarter, down 30 basis points from the prior year, primarily driven by the unfavorable movement in foreign currencies, which created an 80 basis point headwind in the quarter. This foreign currency headwind was partially offset by improved plant productivity and lapping continuous improvement investments in the prior year first quarter.

Increased commodities were a 40 basis point headwind in the first quarter. A&P as a percent of net sales was 7.2%, up 70 basis points from the prior year first quarter. The increase was in line with our expectations and reflected the phasing of A&P spend in fiscal 2019. SG&A, excluding the acquisition and integration costs was $85.7 million or 15% of net sales in the current quarter, down 130 basis points compared to the prior year first quarter.

On an absolute dollar basis, SG&A decreased $7.8 million, due primarily to lower compensation costs, which benefited from our continuous improvement initiatives, strong cost management and favorable currency impact. We incurred acquisition and integration costs of $36.5 million in the current quarter. This included $32.4 million of interest expense and $18.9 million of legal, consulting and advisory fees incurred in conjunction with the transactions, including integration activities.

The amount incurred in the quarter is offset by the benefit from a foreign currency hedge of $9 million and $5.8 million of interest income associated with the escrowed fund. Since announcing the battery acquisition in January 2018, we have incurred $121 million of acquisition and integration costs. This includes $82 million of SG&A and $74 million of interest expense, offset by foreign currency benefits of $24 million and interest income on our escrowed funds of $11 million.

Interest expense in the current quarter, excluding acquisition related debt and associated interest was $15.8 million, up $2.4 million compared to the prior year first quarter. The increased expense was attributable to increased borrowings on our revolver and increased rates. The increase in the revolver borrowings was due to cash being held in our Netherlands entity to fund the battery acquisition.

Exiting the quarter and prior to the Spectrum acquisitions, our overall weighted average interest rate was approximately 5.2%. Excluding borrowings associated with the Spectrum acquisition, we ended the quarter with $1.3 billion of debt and our debt-to-EBITDA multiple stood at roughly 3.1 time. We also had $607 million of cash on hand at the end of the quarter with a significant portion held outside the US.

The balance sheet also included $2.5 billion of restricted cash, which represents the bond proceeds from our debt offering closed in July and term loans associated with our new credit facility. These escrowed funds were held until the closing of the Spectrum battery acquisition on January 2nd.

Debt associated with the escrowed proceeds are separately reflected on our balance sheet. Our ex unusual effective tax rate for the third quarter was 20.8% compared to 23.4% in the prior year first quarter. The decreased rate for the quarter reflects the continued benefit of lower US tax rate and country mix of earnings. In the quarter, we paid a dividend of $19.8 million and there were no share repurchase during the quarter. As Alan mentioned, we will continue to take a balanced approach to capital allocation with a focus on paying down debt.

Now I would like to turn to our revised outlook for fiscal year 2019. As Alan mentioned, our adjusted earnings per share outlook is now $3.45 to $3.55, up $0.05 from our previous range. We expect to invest a portion of the favorable results from the first quarter back into the business over the balance of the year to drive long-term growth in particular for brand building activity. This outlook is related to our existing core business and does not include any impact related to the Spectrum acquisitions we discussed earlier.

Given the Spectrum acquisitions just closed in January, we plan to provide an updated outlook inclusive of acquisitions, anticipated first year synergy benefits and deal and integration-related cost during the next quarter's earnings call. In addition, this outlook does not -- doesn't include any storm activity in fiscal year 2019. Any storm activity would be incremental to this outlook. As a reminder, we are lapping the storm activity in fiscal year 2018 of $8 million in net sales and $0.04 of EPS, while not material beginning in fiscal year 2019, we began reporting royalty revenue as part of net sales on a prospective basis. In fiscal 2018, royalty revenue was reported in SG&A and was $1.9 million and $9 million for the first quarter and full year respectively.

Now looking at the outlook for fiscal 2019 in more detail. Net sales on a reported basis are expected to be up low-single digits. Organic net sales are expected to be up low-single digits including lapping the impact of hurricane activity of approximately $9 million in fiscal 2018 offset by the $9 million benefit of the royalty revenue mentioned earlier.

Argentina which is designated as highly inflationary is expected to be about a 60 basis point net sales headwind and unfavorable movements in foreign currency excluding Argentina are expected to negatively impact net sales 550 basis point to 200 basis point based on current rates including Argentina. The range would increase by 100 basis point. Gross margin rates are expected to be down 10 basis points to 50 basis points from the prior year, primarily the result of currency headwinds.

This is an improvement from our prior outlook, increases in commodity costs and tariffs are being offset by modest price increases in certain markets and productivity improvements. We expect commodities to be a 30 basis point to 50 basis point headwind and we are currently about 90% locked on our primary input requirements for fiscal 2019. In regards to tariffs, the overall impact, the Energizer is not material with the full year impact in the range of $4 million to $6 million.

A&P spending is now expected to be at the mid point of our long-term outlook of 6% to 7% of net sales. The increase reflects the previously mentioned investments in brand building. SG&A, excluding the acquisition and integration cost as a percent of net sales is expected to decline on a year-over-year basis in the range of 40 basis points to 70 basis points, also an improvement from our prior outlook.

Pretax income is expected to be unfavorably impacted by the movement of foreign currencies by roughly $30 million to $35 million, net of hedges based on current rates. This includes approximately $13 million associated with the hyper-inflation in Argentina. The majority of the unfavorable currency impact is expected to occur in the first half of fiscal 2019. Our ex-unusual income tax rate is expected to be in the range of 21% to 23% reflecting the continued favorable impact of US tax law changes in country mix of earnings.

Our expectation for capital spending for the full year is expected to be in the range of $30 million to $35 million and we continue to expect depreciation and amortization to be in the range of $40 million to $50 million. Adjusted free cash flow is expected to be roughly flat to the $238 million in fiscal 2018. Our outlook reflects the expected unfavorable currency impact lapping storm activity in 2018, and $6 million of asset sales in fiscal 2018, not expected to repeat, dividends increased 3.5%, beginning in the first quarter of fiscal 2019, reflecting an annual dividend rate of $1.20.

Before turning the call back over to Alan, I wanted to cover off on the Spectrum acquisition. As previously noted, we closed the battery acquisition on January 2nd, and recently closed the auto care acquisition on January 28th. In 2018, we put in place the financing for the battery acquisition which included $1.2 billion in term loans, $500 million in US funds, and the equivalent of $754 million of euro-denominated bonds.

During January, we issued equity and debt to finance the auto care acquisition. This included $215 million -- $215.6 million of common stock or 4.7 million shares, $215.6 million of mandatory convertible preferred shares or 2.2 million preferred shares and $600 million of US bonds. Preferred shares have a coupon rate of 7.5% and a conversion premium of 21.5% reflecting the conversion share price of $55.89. In addition, we put in place a cap call option adding an additional 18.5% to the conversion premium or conversion share price of $64.40. Any benefit associated with the cap call option would be settled in cash. The newly issued US bonds carry an interest rate of 7.75% with a no-call provision for three years, our overall interest rate is expected to be about 6%.

We had previously indicated, our intention issue up to $5 million of equity -- for equity linked securities. Due to our ability to use approximately $350 million of international cash to finance the acquisition, in excess of our original estimate we were able to lower the amount of equity necessary to finance the auto care acquisition without impacting leverage. We expect our pro forma, net debt to EBITDA multiple to be roughly 4.4 times inclusive of synergies and the Varta divestiture.

On January 14, we filed audited financial statements for the acquired battery and auto care businesses as well as for pro forma financial statements for the fiscal year ended September 30th, 2018 for the combined businesses. These statements also reflect the divestment of the Varta consumer business in EMEA. For the Varta divestment, we are assuming roughly $550 million in proceeds. Using those pro forma financial statements as the basis and adjusting for unusual items in the acquired businesses including $92.5 million in impairment of goodwill, $18.5 million of restructuring costs and $6.5 million of the carve-out allocations would provide the following metrics.

Excluding the benefit of synergies the dilution created by the acquisitions is approximately 20%. This dilution is driven by the following factors. 10 million of newly issued common shares, dividends totaling $16 million on the newly issued preferred common share, preferred shares. And increased amortization of $32 million pre-tax related to purchase price accounting.

Including the anticipated growth in our core business, benefit of synergies and lower interest expense due to our planned deleveraging over the next three years, we expect these combinations to be accretive by approximately 20% compared to fiscal year 2018 adjusted earnings per share. Additionally, any incremental improvements to the acquired businesses beyond the model transaction synergies will further benefit accretion.

Now, I would like to turn the call back over to Alan for closing remarks.

Alan R. Hoskins -- Chief Executive Officer

Thanks, Tim. Before we open it up for questions, I wanted to thank our colleagues around the globe for delivering another strong quarter. We are able to drive great results in our existing business while managing the two acquisitions to a successful close in January. We are also excited to bring the new battery, portable lighting and auto care colleagues from Spectrum into the Energizer organization. We look forward to partnering with them to restore growth in the acquired businesses and using the strength of our combined portfolios to expand our business.

Operator, we're now ready to open the line for questions.

Questions and Answers:

Operator

We will now begin the question-and-answer session. (Operator Instructions) The first question comes from Bill Chappell with SunTrust. Please go ahead.

Bill Chappell -- SunTrust -- Analyst

Good morning.

Alan R. Hoskins -- Chief Executive Officer

Good morning, Bill.

Bill Chappell -- SunTrust -- Analyst

The first question just on US battery. I understand, it doesn't appear or I guess your comments that you took include pricing in this cycle for the US. And so just trying to understand why that wouldn't be the case with commodities and with a fairly rational, pricing environment over the past few years. And also you, Mark, I think you alluded to revenue synergies,out of the Spectrum deal. Could you maybe highlight where you see the revenue synergies by combining the two businesses?

Alan R. Hoskins -- Chief Executive Officer

Yeah. Hi, Bill, it's Alan. I'll kick off on the pricing question, turn it over to Mark, on the synergy question. So, yeah, as you know, we have taken pricing in the 11 markets around the world. We do, and we'll continue to look at a number of variables that impact the decision to take pricing, whether that be market dynamics, competitive situations. We'll certainly look at any new product innovation we have and then we are taking pricing to help offset commodity inflation, as well as of fluctuations in currencies that will continue.

Looking ahead, we will continue to take any pricing action independently and where we feel it's warranted based on those variables across the 140 markets that we sell and distribute to. We'll use that information to take decisions that are in the best interest of Energizer on pricing going forward. The one thing I did want to add and this is something that we've actually been talking about since 2015 at separation. There is a significant amount of work that Energizer does do around continuous improvement to drive productivity gains in our business.

We're able to use that to help offset some of those variables that challenge the businesses' headwinds, we will continue to do that as well as one of our core strategies that will not change. And keep in mind, before we were to present pricing opportunities to the trade, it is important that we have our own house in order first, and that's the whole intent of those types of productivity initiatives that makes those types of conversations easier going forward. And then Mark?

Mark S. LaVigne -- Executive Vice President and Chief Operating Officer

Yeah. On the revenue synergies, Bill, I think let's start on the battery side of the acquisition, when you look at the brands that we're acquiring with Rayovac and Varta outside of EMEA, it really provides the optionality to continue to invest in those brands and use those brands with customers and different channels to help provide maybe a differentiated offering. It allows us to, go to the retailers with a full complement all the way from an opening price point, all the way up to the performance segment.

In Latin America, specifically, it's going to provide a scale in addition to the brands, it's also going to provide us access to new distribution opportunities with their distributors and our distributors. For now, those distributors, once we go through, the integration process will be able to carry both brands. So the revenue synergy is there, on the auto side, it's a little bit different, you're going to be able to take our auto care business and really plug it into their platform, which is going to provide extra muscle to the commercial organization to sell in.

And then on the other side of things, on the international platform that we have -- where we have feet on the ground in different international markets or relationships with distributors, it's going to allow us to leverage the strength of our auto care brand and grow the international business in an even more meaningful way.

Alan R. Hoskins -- Chief Executive Officer

And I think one more, Bill, for your benefit is, as you know in the battery side of the business and portable lighting, we have very strong category captaincy relationships with trade. Those same relationships exist on the auto care business and for acquiring and having that strength and scale to be able to go to the trade with, to talk as the category experts going to be really important going forward. To help shape the narrative, around driving growth and creating value in our categories.

Bill Chappell -- SunTrust -- Analyst

Got it. And just a follow-up. Alan, you commented that, emphasize that the priority for auto care is reap the synergies, but I just want to make sure, you still very comfortable or the Company is still very comfortable that you can get back to kind of the profitability that business wanted a couple of years ago. Is that still fair?

Alan R. Hoskins -- Chief Executive Officer

Yeah. Mark, do you want to...

Mark S. LaVigne -- Executive Vice President and Chief Operating Officer

Bill, it's Mark. I think on that piece, it's going to be a journey to get back to the profitability levels that it achieved 18 months ago. We're still confident that the business has stabilized from where it was I think in spring of last year. But there is some work to do. We have a good handle on the work that needs to be done, particularly around Dayton.

We have to make sure that we continue to instil the confidence in retailers that things are stabilizing that we are going to perform at high level. That's priority number one is to get through this next peak season and really make sure that we're executing on all cylinders and that the retailers have confidence in us. At that point, we can get in and start understanding some of the changes we need to make in Dayton or elsewhere, to be able to drive the profitability better, but we are still confident in the trajectory of that business.

I wouldn't want to predict in terms of when are we going to be able to achieve the profitability that was there 18 months ago, but we understand it's a target that's out there. But we're going to make sure we get there over a period of time in a way that sets the business up, the long-term success.

Alan R. Hoskins -- Chief Executive Officer

And let me -- just to help understand why our confidence is were -- is one, despite the disruption at the Dayton facility, that commercial organization marketing or position, we're able to generate top line sales during that period and hold the space in distribution that they had. Second, we are seeing higher fill rates in the business around 99%. Our intention is to work with the team to ensure that that is sustained as we go into and through peak next season.

You've got the potential for the combined innovation from our two R&D groups in the auto care in general. We're excited about what that's going to allow us to present in '20 for '21 resets as we build into that, that will complement the work that's occurring and date. And then just a data point on Dayton, we've had three perspectives on both the issues and opportunities that Mark alluded to, that we're going to be addressing.

First, you've got the view that Spectrum had, and it was certainly an open book when we acquired the business given this, if this wasn't an auction, we were able to see a lot more. Our teams that were responsible for a lot of the work we did in both the transformers and separation. We're able to take an independent look at that facility and come to very similar conclusions.

We also had a third data point. There was an external consultant that reviewed that business, revealing again very similar both issues and opportunities. There were commonalities around that allowed us to put together our go-forward plan in terms of what needs to be done to make sure we both address and take advantage of that state of the art facility.

Bill Chappell -- SunTrust -- Analyst

Got it. Thanks so much.

Alan R. Hoskins -- Chief Executive Officer

Thanks, Bill.

Mark S. LaVigne -- Executive Vice President and Chief Operating Officer

Thanks, Bill.

Operator

The next question comes from Olivia Tong with Bank of America. Please go ahead.

Olivia Tong -- Bank of America -- Analyst

Thanks. Good morning.

Alan R. Hoskins -- Chief Executive Officer

Good morning, Olivia.

Mark S. LaVigne -- Executive Vice President and Chief Operating Officer

Olivia, if we could, your volume is a little bit low. Sorry.

Olivia Tong -- Bank of America -- Analyst

Sorry about that, is it better.

Mark S. LaVigne -- Executive Vice President and Chief Operating Officer

Yeah.

Alan R. Hoskins -- Chief Executive Officer

Thank you so much. Yeah. Thank you. Good morning.

Olivia Tong -- Bank of America -- Analyst

Okay. Perfect. Sorry. Thank you. Thanks, guys. So I, first on the accretion, appreciate the color on accretion, but hoping you guys can give us your view on how on the top line improvement for the acquired businesses. I know the acquisition just closed, but looking at the scanner data more recently, including this morning, it looks like the Spectrum businesses, both in battery and auto have been pretty soft.

I know -- we all know the operational issues and auto. And you know you mentioned a couple of times, it's more of a journey, it's not going to get back to the way it used to be right away, but can you just give us, help us with a few pointers to understand your view on what your expectations would look like on the top line.

Alan R. Hoskins -- Chief Executive Officer

I'll start and then Tim can fill out the rest. I think the way to think about the battery business, it's been held out for sale for nearly a year. We finally able to close. I can tell you, there was a huge sigh of relief with the organization, when we are able to close and start engaging as a collective group. It will take some time to sort of stabilize the top line and make sure that we get it back to where it needs to be about.

We're confident that we're going to be able to do that. On the auto side, the Q1 is the smallest quarter for that business. And so it's very weather-dependent as well. And so with the weather we had in the fall, it didn't have the sales trends that you would like to see. But that being this the smallest quarter for the business, we're not as concerned about that. Really, it's about what's going to happen over the next six months. It's the peak season for the new steps. And auto, we need to make sure, we execute. And so I would say, auto we need to execute over the next six months and batteries. We understand, we just need to get and understand and make sure we stabilize that business that has really been held up for sale for a long time. And develop a collective portfolio story through our retail partners of how we're going to leverage to Varta and Rayovac brands going forward.

Mark S. LaVigne -- Executive Vice President and Chief Operating Officer

We like -- before Tim addresses the accretion, we really do like the portfolio and platform through these acquisitions. And I think you'll recall, we have revised our outlook for the battery category overall volume globally to up flat to slightly positive. And in the auto category, you're looking at low-single digit growth through 2023. So, very appealing for the segments, we're going to be heating in. We'll be sharing more around our strategies for both of those businesses in the upcoming quarters, as we understand and solidify what's occurring in those businesses, but we are still very excited about the growth opportunity of both.

Timothy Gorman -- Executive Vice President and Chief Financial Officer

Yeah, Olivia. We'll provide more detail on next quarter's call for '19. What I was giving was really based upon just what exists from those pro forma financial statements reflecting the expectation of pay down interest and inclusive of the synergy benefits, we'd be at roughly 20% accretion. Any improvement in those underlying businesses from the trends that they've had historically would be incremental for that 20% accretion.

Olivia Tong -- Bank of America -- Analyst

Okay. Actually I just a follow up there in terms of the 20% dilution that's just assuming. That's obviously the new shares that the dividend...

Timothy Gorman -- Executive Vice President and Chief Financial Officer

Correct.

Olivia Tong -- Bank of America -- Analyst

And the incremental amortization. It doesn't include synergies that you were expecting year one or it does?

Timothy Gorman -- Executive Vice President and Chief Financial Officer

It does not, it does not. So that's pure, just -- there's no synergies, no interest reduction or, reduced debt. So those would all be incremental to that.

Olivia Tong -- Bank of America -- Analyst

Got it. Okay. And have you guys, as you -- again, I know it's really early, but as you sort of work through the numbers, when do you think you'll be in a position to give us a better sense of what the synergies could be in year one to since there are so many moving parts right now?

Timothy Gorman -- Executive Vice President and Chief Financial Officer

Yeah. So we're like a week from closing auto. So that's why our -- we will provide all that information on next quarter's call. And be in a position to give you both what our expectations for both businesses are for '19 again for the portion of the year that we owned it. And then what our expectation for synergies are in year one. And then the cost that will -- for deal-related and act and integration-related costs.

So we'll provide all those on the next earnings call. Our long-term expectation for synergies have not changed from what we previously shared. So over the next three years for the combined businesses if you're at the midpoint of the range to be roughly $75 million in synergies. As we proceed, we'll update those synergies as we know more.

Olivia Tong -- Bank of America -- Analyst

Got it. Just last question. Is it fair to assume that, since it did take a little bit longer to get this deal done. And obviously as time passes that it's sort of, and asset held, it is an asset held for sale for longer than you had anticipated. In terms of the realization of the synergies, is it fair to assume that there is some sort of more second half way than you had originally anticipated as we think about modeling our fiscal '19 all in?

Alan R. Hoskins -- Chief Executive Officer

I think on the synergy I would model, it's the same. I think we've said 10% year one, and then the balance equally split between two and three. We were able to do more work on the integration, because of the longer period of time between signing and closing. We're going to look for opportunities to see if we can maybe capture some of those synergies earlier. We'll be very reluctant to capture synergies earlier on the auto business for the reasons we've talked about previously.

But I think that, we can update those -- on the April call, but we'll make sure we get the synergies as soon as we can as long as it doesn't disrupt the business and really sets the business up for long-term success.

Olivia Tong -- Bank of America -- Analyst

Great, thank you so much. Appreciate it.

Alan R. Hoskins -- Chief Executive Officer

Thanks, Olivia.

Mark S. LaVigne -- Executive Vice President and Chief Operating Officer

Thank you.

Operator

The next question is from Cody Ross with Goldman Sachs. Please go ahead.

Cody Ross -- Goldman Sachs -- Analyst

Hi, there. Thank you for taking my question. I appreciate it. So just wanted to start with your core business. You guys gained share in measured channels, it's been quite impressive. However, Rayovac seems to be a share donator. Can you discuss the drivers of your strong performance and also juxtapose them next to Rayovac's witness? Thank you.

Alan R. Hoskins -- Chief Executive Officer

Yeah. So overall I think as Mark alluded to, when you look at the measured markets, plus the e-commerce, Energizer's value share is at $36 (ph). It's up roughly 1.3 points on a value basis. Spectrum sits roughly at a $9 value share during the same three month window. They're essentially flat. They are just down slightly. So, what we have seen and where Energizer is really focused, and this has not changed since '15. It really has been on availability and visibility.

So think about distribution and expanded space in stores across the channels and across markets. And we're leveraging innovation to be able to capture that by again driving the narrative with the trade of how we can create value in the category, and that has been consistent since '15. I think first the Spectrum business, I think in the call with them, they probably allude a little bit more, what's happened in the past, what I can tell you going forward. As we intend to leverage a dual brand strategy given that there's really -- expands our portfolio in the value segment. And similar to what we've done in Asia to really build out and grow our position in the market and grow the category for our retailers.

Spectrum brands has a really solid innovation and product base for us to be able to work with and we are excited to bring that into our brand and product portfolio to expand our platform going forward. So very exciting for us going forward, especially in markets, like LatAm where we can leverage the dual brand strategy. But overall, our core tenants for driving growth will be consistent with what we've done in the past.

Cody Ross -- Goldman Sachs -- Analyst

Great. Thank you. If I can sneak one more in there. On the auto care segment, isolating the STP and Armor All brands, if we go back when Clorox owned these brands, they generated about $300 million in sales and 30% EBIT margins. And today, correct me if I'm wrong sales for those two brands remain around the $300 million level and EBIT margins have slightly declined. What do you believe the growth opportunities are for these two brands? And do you think these brands can grow on line with the global category at around 2%? Thank you.

Alan R. Hoskins -- Chief Executive Officer

Its a great questions. I think numbers are roughly accurate. I think in terms of drivers of top line growth one of the things that we're going to look to is expanding on, with our international platform. We do know that other owners of this business have tried to do that in the past, but we feel with the way our teams engage with the retailers, we have individuals in markets like Australia and the UK, who can help drive the business much like we've been able to do with the HandStands business going forward. I think in the US, its largely a mature business, but we think there's some opportunities, either for new distribution or expanded distribution as you continue to get in and drive the category with given retailer.

Mark S. LaVigne -- Executive Vice President and Chief Operating Officer

But I think -- your question, we would expect the brands to grow in line with the overall category expectations, which we then it you've indicated 2%, that's probably in line with our expectation.

Alan R. Hoskins -- Chief Executive Officer

And then on the online question that you asked, its relatively under penetrated online. And so it's early days with the auto channel in e-commerce. So we're going to make sure we get in and leverage and can lead from the beginning of that growth.

Cody Ross -- Goldman Sachs -- Analyst

Thank you very much.

Alan R. Hoskins -- Chief Executive Officer

Thank you.

Mark S. LaVigne -- Executive Vice President and Chief Operating Officer

Thank you.

Operator

(Operator Instructions) Our next question comes from Karru Martinson with Jefferies. Please go ahead.

Karru Martinson -- Jefferies -- Analyst

Good morning. Just given the closing...

Alan R. Hoskins -- Chief Executive Officer

Good morning.

Mark S. LaVigne -- Executive Vice President and Chief Operating Officer

Good morning.

Karru Martinson -- Jefferies -- Analyst

Given the closing of the auto care business just a week ago, how we are looking for summer season since the -- you guys not really have your hands on that.

Alan R. Hoskins -- Chief Executive Officer

I mean the key is -- I mean, the decisions have been made and but we closed a week ago. We have teams that have been deployed to the various locations to make sure we sit with our new colleagues and understand what the plan is. This is a very critical time between now and the beginning of the summer with the auto care business. So the approach is going to be, to make sure we get in, where they need our assistance, to lend that assistance and just make sure that it comes off from an execution standpoint without ahead. We want to make sure that fill rates and the customer service levels are what they need to be. So while our hands weren't on the business, when the decisions were made for these line review, we obviously own the business during a time in those business decisions will be executed, and we need to make sure we execute at a high level and reinstil the confidence with the retailers.

Mark S. LaVigne -- Executive Vice President and Chief Operating Officer

And keep in mind, it's a longer selling season in automotive and it is in batteries and we are now in the process joining the two R&D teams to talk about what the innovation cycle plan looks like across the four segments will be competing in to best meet those auto task needs of the consumer, that should likely be presented in '20 for the '21 reset. So we're working through that now as we look ahead.

Karru Martinson -- Jefferies -- Analyst

Okay. And then as you guys talked about, still remaining open to bolt-on acquisitions. How do you look at the portfolio today and perhaps some smaller brand divestitures, where do you see that going?

Alan R. Hoskins -- Chief Executive Officer

Yeah. It's Alan. So, we've shared this in our recent roadshow, the way we're thinking about M&A, obviously was strategic. We did want to look at a second platform that allowed us drive future growth. Automotive was a key target for us from the beginning, the fact that the Armor, global auto care business from Spectrum became available without going to auc (ph) was a key opportunity for us, given the fact that it was at the top of our priority list.

So we see going forward, given that our priority really has pay down debt and make sure that we continue to solidify our base business. We will look at small tuck-ins, like clean automotive. Strategically, if you think about M&A going forward, I would prefer the organization really focus on going really deep in being exceptional at what we do as opposed to going out and buying bunch of -- bunches of different categories that may or may not have operational and strategic fit.

We just think that bringing that discipline and focus to our M&A approach has proved to work well for us in battery and we'll continue to do that same thing in automotive. In terms of divestitures at this point, we're very pleased with the portfolio that we have. I think the priorities for us going forward are going to be prioritisation of innovation within the new platforms that we have and making sure that we continue to drive that growth narrative with the retail trade.

Karru Martinson -- Jefferies -- Analyst

Thank you very much. Appreciate it.

Alan R. Hoskins -- Chief Executive Officer

Thank you.

Mark S. LaVigne -- Executive Vice President and Chief Operating Officer

Thank you.

Operator

The next question comes from Faiza Alwy with Deutsche Bank. Please go ahead.

Faiza Alwy -- Deutsche Bank -- Analyst

Yeah, thanks, good morning.

Alan R. Hoskins -- Chief Executive Officer

Good morning.

Mark S. LaVigne -- Executive Vice President and Chief Operating Officer

Good morning.

Faiza Alwy -- Deutsche Bank -- Analyst

So, I appreciate that you're not in a position to give guidance including the acquisitions at this point. And I appreciate some of the color that you gave around stabilizing the top line for the acquired businesses. But I was hoping that you could frame sort of some of the uncertainties around these businesses. So, how should we think about like gross margins for these businesses, like I don't -- the Spectrum sort of hedge for commodities, what's the commodity outlook maybe, perhaps if you could give us some color around reinvestments. I will stop there and see, if we can get any more color around any of that?

Alan R. Hoskins -- Chief Executive Officer

Yeah. So, with respect to the two acquired businesses and again, I'd point you to the pro forma financial statements, because I think, it gives you good view of the businesses being acquired. So from a gross margin standpoint, obviously on the Spectrum battery as well as on the Spectrum auto, their margins profiles are while strong are lower than ours.

They do traditional hedging programs on the battery side, with the acquisition those hedges actually rolled off at the time of acquisition. Which is not entirely a bad thing given some of the recent commodity trends that we've seen. On the auto care side they have experienced headwinds relative to on the refrigerant the R-134a due to the anti-dumping tariffs have seen price increases on that. That is reflected in the outlook that we'll provide next quarter that continues to be a headwind.

The rest of the commodities, many of them are not really tangible. So, they manage those with their suppliers, similar to what we do. And as we've closed on both transaction, our procurement team is working with their procurement team to kind of taking a unified approach across both the businesses. With both, it's really about what we're going to be doing for rather than what's been done historically.

Mark S. LaVigne -- Executive Vice President and Chief Operating Officer

Yeah. And along those lines, the way to think about it is, reinvestment back into the business will beyond those systems. So think about investments in brands and innovation for the two acquired businesses that will mirror lot of what we've done on our base existing business. We will certainly look at pricing opportunities, where they make sense for the business as we look at commodity inflation and at certainly improvement in currencies. I think the other thing too. We have talked about network optimization and centralized procurement there.

Tim, just spoke to, both of those will be key drivers across the businesses we've got significant experience between the transformers work in '20, '21 and then the work we did at separation to understand how to drive those efficiencies, what we want to do is to be able to step back and understand both from a market and the brand opportunity. What we want to pursue in priority order and that, that will align behind that. But we're very excited about taking some of the things that we've done exceptionally well and adjusting for what we see in both the categories will be getting in the future and then pushing those forward into both the integration and execution principle wealth.

Faiza Alwy -- Deutsche Bank -- Analyst

Okay, great. That's helpful. And then just a quick follow-up on the battery business, where you called out increased retailer promotion an unfavorable mix in the quarter. So, I just wanted to get more color on, I don't think we've seen the increased retailer promotion and sometime in batteries. So I was just wondering if we could get some more color around that and if you think the competitive environment in batteries is changing?

Alan R. Hoskins -- Chief Executive Officer

Yeah. So, it's Alan, let me, the headline I would give you is that we are seeing continued improvement in both pricing and mix and that promotion continues to remain stable, those would be the big takeaways. Underlying both of those comments within the pricing mix piece of that, globally, we did see average unit prices increased around 1.3% in the three-month window. I mean that is driven by growth in the premium segment consistent with what we've seen in the past as well as pricing activity that occurred both in LatAm and in the UK.

In the US average unit prices were also up 1.1%, and that was driven by pricing actions, both in the price brand segment and in private label, and that narrowed the gap and pricing to the premium segment. So overall, that continues to show improvement. In terms of the promotional call out that you're referring to. Just to give you an example, we did see a slight increase in our promotional levels. There is no change to our promotional strategy or tactics. Again, our focus is on availability and visibility.

We did have a large retailer that extended a program that is in place earlier. It just so happened to coincide with hurricane activity and the traffic in the store actually generated more volume sold on promotion than we expected, but there is no change in the strategy and those levels continued to remain stable.

Faiza Alwy -- Deutsche Bank -- Analyst

Great. Thank you so much.

Mark S. LaVigne -- Executive Vice President and Chief Operating Officer

You're welcome.

Alan R. Hoskins -- Chief Executive Officer

Thank you.

Operator

The next question comes from Steve Strycula with UBS. Please go ahead.

Steven Strycula -- UBS -- Analyst

Hi, good morning. So, a question for on specific to Spectrum batteries. Now hearing a lot from the channel, the US retailers are increasingly focused on prioritizing number one and number two brands from an assortment standpoint which serves the Energizer brand quite well. Well, what they are not mentioning is the appetite for increased allocation for number three position brands such as potentially the Spectrum assets. So how, when you think about the deal, the synergies are self-evident, but how do you think about broader category assortment and ultimately what is the revenue function within the portfolio for Spectrum batteries, does it defend our private label. Thank you.

Alan R. Hoskins -- Chief Executive Officer

Yes, the great questions. So again, I'll come back to the overarching strategy as to really be able to leverage a dual brand premium price brand strategy. If you're familiar with some of the success we've had in Asia Pacific, we do that across many markets where we're able to, the dominated market position, because we're able to offer both price point and performance similar to meet their deeds better than anyone else. We plan to replicate that strategy in markets where it takes sense. The rollout of the Rayovac brands will be to help meet that opening price point and that value segments consumers' need. And it fits very well into the portfolio and certainly something that we have long desired to be able to expand both our breadth and depth of distribution in key areas such as Latin America that will continue, and then Mark anything you'd like to add.

Mark S. LaVigne -- Executive Vice President and Chief Operating Officer

I think that the rollout of Rayovac will depend on the retailer and their strategy as it relates to their consumer. What this does is, it gives us a portfolio of value brands on the premium, and the category that Energizer, it allows you to really be -- to provide a full complement all the way from, whether it be a private label offering, a value offering all the way up to premium and performance.

Alan R. Hoskins -- Chief Executive Officer

And it will be different retailer to retailers, their assortment and image strategies do vary channel to channel, and market to market.

Steven Strycula -- UBS -- Analyst

Thank you.

Alan R. Hoskins -- Chief Executive Officer

Thank you.

Operator

The next question comes from Kevin Grundy with Jefferies. Please go ahead.

Kevin Grundy -- Jefferies -- Analyst

Hey, good morning, everyone.

Alan R. Hoskins -- Chief Executive Officer

Good morning, Kevin.

Kevin Grundy -- Jefferies -- Analyst

Hey Alan, I apologize if I missed this, did we get an update, I mean trends at this morning. Did we get an update on the potential proceeds of $550 million to $600 million from the European Varta retail business.

Alan R. Hoskins -- Chief Executive Officer

Yeah. Let me have -- I'll have Mark, we talked to it briefly in the prepared remarks. I'll have Mark provide us a little bit more of an update.

Mark S. LaVigne -- Executive Vice President and Chief Operating Officer

Kevin, I'll update them what you've previously heard, the divestiture process is ongoing. We're still modeling proceeds in the by $550 million range, consistent with what we announced in connection with debt and equity offering. So, no meaningful change. We expect by the end of June, but we've got to get in a number of the potential buyers further along in the process and see if we can advance that with the European commission.

Kevin Grundy -- Jefferies -- Analyst

Okay, that's helpful. And then my one follow up would be, Mark, the growth or lack thereof, I guess in the auto care business that we're seeing in the Nielsen data, how representative is that of what you're seeing across the business from across channels. And I ask that in a sense, I'm just trying to gauge how much of a potential sort of step back, we have from the initial EBITDA numbers that were out there for that business. I know you mentioned before, this is going to be a journey and so forth, but it seems like there's probably a step or two back before we move forward. And I'm just trying to gauge how representative that Nielsen data is. Thank you for that.

Mark S. LaVigne -- Executive Vice President and Chief Operating Officer

Yeah. I think, the Nielsen data, you saw a soft trend in our first quarter in, October, November, December. I think you're going to -- that business is so weather-dependent. And I think that was, again it's the smallest quarter for the business, it also had some unfavorable weather trends that occurred. So, I think, what we are focused on is, really the first 12 months in ownership. And I think, and as Tim alluded to in his previous question, we're going to provide an update of what we expect that business to do in '19, in -- at the next earnings call. I would say -- we have not, from a top line standpoint really changed, that we expect the top line to hold in there. It's going to obviously all about execution and make sure that we're able to capture some opportunities in this selling that maybe they weren't able to, last year when they had some of the business disruption.

Profitability upside that we have talked about in the past, that will take some time. I don't think, we're changing in terms of what we're expecting EBITDA to be, I think the last time we had talked, it was around, we had modeled $99 million that's what with respect to we just announced. We expect it to grow from there. So, I think that's going to be a longer ramp up. So, first priority is, make sure the top line is stable and then make sure we execute with excellence and then start to work some of the cost out to make sure we improve profitability.

Kevin Grundy -- Jefferies -- Analyst

Thanks, Mark. Just to clarify, you are comfortable with the EBITDA base that Tim provided on both the businesses, both Spectrum Batteries as well as auto care? Is that correct?

Mark S. LaVigne -- Executive Vice President and Chief Operating Officer

The EBITDA numbers that we provided previously we are comfortable with those going forward.

Timothy Gorman -- Executive Vice President and Chief Financial Officer

On a go-forward basis.

Kevin Grundy -- Jefferies -- Analyst

Okay. Thank you. Good luck.

Mark S. LaVigne -- Executive Vice President and Chief Operating Officer

Thanks, Kevin.

The next question comes from William Reuter with Bank of America. Please go ahead.

William Reuter -- Bank of America Merrill Lynch -- Analyst

Good morning.

Mark S. LaVigne -- Executive Vice President and Chief Operating Officer

Good morning, Bill.

William Reuter -- Bank of America Merrill Lynch -- Analyst

My first question is, you laid out the leverage target of three times, I think three years from now. Based upon the guidance that you've provided, can you let us know where you expect that you'll end fiscal year '19 in terms of leverage either on a gross or a net basis?

Timothy Gorman -- Executive Vice President and Chief Financial Officer

So we'll provide that as part of the update on next quarter's earnings call.

William Reuter -- Bank of America Merrill Lynch -- Analyst

Okay. And then in terms of one-time integration costs, I know the big-picture expectation over a period of years. But I'm not sure if I know what you're expecting to incur in fiscal year '19. Do you have that number?

Timothy Gorman -- Executive Vice President and Chief Financial Officer

That again would be on next quarter's update. What we've indicated is over -- in terms of integration cost ratio to achieve synergies is roughly 1.25 to 1.5 times and 10% synergies in the first year. I mentioned on the prepared remarks, we have incurred quite a bit of integration cost thus far. And so we'll provide an update of what we expect for fiscal year 2019 on next quarter's call.

William Reuter -- Bank of America Merrill Lynch -- Analyst

Okay. I am just so excited I can't wait. Okay. All right. I'll wait.

Timothy Gorman -- Executive Vice President and Chief Financial Officer

It's too early. Thank you.

William Reuter -- Bank of America Merrill Lynch -- Analyst

Thanks a lot.

Mark S. LaVigne -- Executive Vice President and Chief Operating Officer

Okay. Thanks, Bill.

Operator

That concludes the question-and-answer portion of the call. Now I would like to turn the call over to Alan Hoskins for closing remarks.

Alan R. Hoskins -- Chief Executive Officer

Yes, operator, thank you. And thank you for all that called in for joining us on the call today for your support and for your continued interest in Energizer.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Duration: 64 minutes

Call participants:

Jacqueline Burwitz -- Vice President of Investor Relations

Alan R. Hoskins -- Chief Executive Officer

Mark S. LaVigne -- Executive Vice President and Chief Operating Officer

Timothy Gorman -- Executive Vice President and Chief Financial Officer

Bill Chappell -- SunTrust -- Analyst

Olivia Tong -- Bank of America -- Analyst

Cody Ross -- Goldman Sachs -- Analyst

Karru Martinson -- Jefferies -- Analyst

Faiza Alwy -- Deutsche Bank -- Analyst

Steven Strycula -- UBS -- Analyst

Kevin Grundy -- Jefferies -- Analyst

William Reuter -- Bank of America Merrill Lynch -- Analyst

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