Logo of jester cap with thought bubble.

Image source: The Motley Fool.

Energizer Holdings (NYSE:ENR)
Q4 2019 Earnings Call
Nov 13, 2019, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good morning. My name is Gary, and I will be your conference operator today. At this time, I would like to welcome everyone to Energizer's fourth-quarter fiscal 2019 conference call. [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.

Jackie Burwitz -- Vice President of Investor Relations

Good morning, and thank you for joining us. During the call, we will discuss our results for the fourth-quarter and fiscal year 2019, as well as, our outlook for 2020. This call is being recorded and will be available for replay via the investor relations section of our website, energizerholdings.com. Also available on our website is a slide presentation providing additional details around our risks and outlook for the coming year.

With me this morning are Alan Hoskins, chief executive officer; Mark LaVigne, president and chief operating officer; and Tim Gorman, chief financial officer. During the call, we may make statements about our expectations for future plans, including 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 on our website. Information concerning our category and market share discussed on this call relates to markets where we compete and is based on estimates using Energizer's internal data, data from industry analysis, and adjustments that we believe to be reasonable. Unless otherwise stated, the information provided pertains to the 13-week period ending in August. References to specific quarters and years pertain to our fiscal years and references to the legacy and/or base business relate to the Energizer business prior to the completion of the battery and auto care acquisition.

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

Alan Hoskins -- Chief Executive Officer

Thanks, Jackie, and good morning, everyone. 2019 was an important year in Energizer's transformation to become a global, diversified household product leader in batteries, lights, and auto care, which will create significant value for our shareholders and will enhance our colleagues' ability to connect with consumers and partner with our customers. As we indicated in our earnings release, the organization did a terrific job of achieving full-year financial outlook and delivering strong organic net sales growth of 4.1%. We managed to accomplish this while also executing on our integration plans, which delivered cost synergies of $18 million ahead of expectations.

From source to consumer use, we have proven capabilities in innovating, marketing and manufacturing high-quality products, which our experienced commercial teams used to successfully partner with our customers around the globe to meet the needs of the consumer. That has been and will continue to be the formula for us to deliver significant EBITDA and free cash flow growth. Now turning to our operations. Our combined battery and lights business, which now represents approximately 80% of our top line is strong and operating well.

Just as important, the overall battery category remains healthy, with a stable pricing and promotional environment. Our 9% organic growth in the quarter had several components, including a strong top-line gain from distribution and a number of one-time items, including the timing of certain customer orders for the holiday season shift, but shifted forward into the fourth quarter, the impact from Hurricane Dorian, the impact of anticipated U.S. competitive product launch, and the temporary volume shifts in order patterns, and customer decisions, which can occur between battery segments in the category following a price increase. Despite these moving pieces, our organization is well-positioned as we head into 2020, where we expect to achieve our fifth consecutive year of organic growth.

Turning to auto care. We were attracted to this business because we saw the growth potential in these assets and the ability to leverage our operating, innovation and marketing expertise. As I look back on 2019, we have accomplished a great deal to set this business up for future success. We certainly faced challenges but we immediately began addressing the issues under our control, including fixing the manufacturing issues at Dayton and increasing investments in innovation.

As we look forward to 2020, trends in the auto care category remain favorable as markets such as the U.S. expect to increase in the size of the car park and consumers will increase their usage and length of ownership, all of which are a good fit for our leading do-it-yourself brands. During 2020, and we will increase investment in our auto care brands and deliver new innovation to meet the needs of customers, and consumers better than anyone else. In addition, our teams are maintaining their focus on improved operational efficiencies for the peak selling season in 2020.

As a result of the tremendous work from the organization, we expect our first full year of ownership for the combined auto care portfolio to deliver organic net sales growth of approximately 3.5%. With a total combined business, top-line growth increased synergy realization and the full-year impact of the acquisitions should result in growth of adjusted EBITDA for 2020 to be in the range of $610 million to $640 million. We plan to deliver strong free cash flow and earnings-per-share growth, reflecting the strength of and momentum in our combined businesses, which takes into account the impact related to trade tariffs, currency, and Brexit. Looking ahead, this management team is confident in our ability to become the global leader in battery, lights, and auto care categories through our proven game plan of driving both growth and efficiencies across our business.

First, we will lead the innovation with smart brand-building investments to drive long-term growth by converting consumers to our products and brands. Second, we will continue to operate with excellence by focusing on and investing in our commercial capabilities, including visibility in-store and online, efficient and effective distribution, and insight-driven revenue management to drive growth in our brands, and create value for our customers. We will also build upon Energizer's strong customer relationships and leverage our large global distribution footprint to drive incremental growth globally in both the battery and auto care businesses. And finally, we will continue to drive productivity to reduce costs and maximize efficiencies through continuous improvement initiatives, and by simplifying and standardizing our business.

Our existing capabilities and proven operating expertise leveraged across the acquired businesses will allow us to generate consistent organic revenue growth, realize significant synergy savings, and deliver top-tier free cash flow among our peer group to support continued investment in our business, the steady reduction of debt, and also provide a return of capital to shareholders. We believe this formula supports a solid foundation for delivering shareholder value in years to come. On November 21st, we will be hosting an Investor Day, where you will learn more from our leadership team about our strategies, outlook and plans to deliver long-term value to our shareholders, customers, and consumers. With that, I'd like to turn the call over to Mark.

Mark LaVigne -- President and Chief Operating Officer

Thank you, Alan, and good morning, everyone. Following on the strength of what our teams delivered in 2019, our plan for 2020 is a year of execution to take advantage of the opportunities we have created across our business. To that end, let me first update you on the progress of the integration efforts to date, and then, share some insights on our categories and business performance. We have made significant progress in our integration efforts since closing both acquisitions in January.

The successful stabilization of the Dayton auto care manufacturing facility is just one example. We used our operating expertise to quickly increase and consistently maintain fill rates at high levels to meet the needs of our customers. Under our ownership, the facility average fill rates of 99% during peak season. We are now in the middle of a multiyear plan to optimize and streamline facilities in the U.S., which will reduce complexity and realize greater efficiencies in manufacturing, packaging, and distribution.

In battery, we will consolidate our distribution facilities, as well as, centralized specialty battery manufacturing. In auto, we will consolidate North American auto care manufacturing into the Dayton facility, which is one of the first major steps in a series of continuous improvement exercises aimed at further enhancing the efficiency of our auto care operations. We will also outsource all auto care distribution consistent with our model in battery, driving both cost efficiencies, and operational effectiveness. We are using a phased approach across these changes to ensure business continuity and to provide adequate transition time for our colleagues, customers, and suppliers.

We have achieved many milestones over the past six months related to the migration of IT systems, and the lack of any disruption to the business is a credit to our IT, commercial, and supply chain teams. By the end of calendar 2020, we expect to have the majority of our markets integrated onto combined ERP systems, which will enable consolidation and streamlining of our operations and support functions. And by early January, we expect to exit most of the transition service agreements with Spectrum, with the remaining to be exited throughout 2020. On previous calls, we have stressed that stabilizing the acquired businesses and minimizing any customer disruption has been and will continue to be our first priority.

I want to acknowledge the great work our colleagues around the globe are doing successfully to complete the integration while managing to minimize any disruption. As we progress through 2020, we will accelerate our integration efforts to drive improved performance across our businesses. We are on track to deliver run-rate synergies of $100 million, which we expect to be fully realized in operating profit by the end of the third year of ownership. We expect to also achieve incremental synergies beyond the $100 million, which will be reinvested to drive top-line growth through innovation and brand building activities, particularly for our auto care brands.

We are extremely confident in our ability to achieve these synergies, which will enable us to drive growth and profitability for the long term. And finally, I wanted to provide a quick update on the VARTA divestiture. The buyer, VARTA AG filed a Form CO with the European Commission on October 14th, and the completion of the divestiture remains on track. Before we cover our business performance, let's cover some relevant category trends.

Global battery value was up 2.6%, which was driven by pricing in the premium segment in both the U.S. and Latin America, growth in the price segment and an expansion of higher-priced private label at a U.S. retailer. The trends are reasonably consistent with what we have seen in the past, as we have historically seen short-term growth in the price segment following pricing actions in the premium segment.

This typically reverses over the course of several quarters as pricing settles into the marketplace. During this period, Energizer experienced a loss of one value share point globally in measured channels. This loss was driven by several anticipated impacts, a decline in POS trends in the U.S. because of the price increases just referenced, a competitor's new product launch, and an increase in private label activities in certain retailers.

In fact, we have seen expanded distribution in unmeasured channels, which partially offset the decline in measured channels. The teams are also taking a deliberate and disciplined approach, as we head into 2020, and are confident that we have the plans in place to compete effectively going forward. In the U.S., e-commerce battery category growth was up 15%, with Energizer growing 28% and Rayovac, 79%. With our dedicated e-commerce team now running the brand, Rayovac was the fastest-growing branded offering online and contributed to our leadership position.

Overall, the commercial environment in the U.S. remains favorable, with a reduction in total promotional activity and increases in average unit price. Our long-term outlook for global battery category volume remains unchanged, with volumes flat to slightly up and value growing ahead of volume trends. Turning to auto category.

The overall category continues to grow with value up 2.7%. We saw growth in all four subcategories in which we compete, appearance chemicals, up 6.1%; performance chemicals growing 1%; air fresheners, up 3.3%, and refrigerants, up 0.5%. Energizer's value sales declined one share point overall in these subcategories. This, however, is sequential improvement from the third quarter due to increased retail space and improved service levels.

We remain confident in our innovation pipeline for 2020 and beyond, which will help us maintain our leadership position. As I mentioned earlier, the incremental synergies will be used to increase investment behind our iconic brands to drive future growth. In addition to our marketing and innovation expertise. Our existing relationships with key retailers is another reason we believe we can grow the auto care business.

Our retail partners understand that we know how to innovate and market our brands to grow the overall category. Moving on to business performance, starting with batteries. During the quarter, we continued the global rollout of the new Energizer visual identity and packaging refresh that prominently displays our iconic brand characters, the Energizer Bunny, and Mr. Energizer.

The packaging refresh strengthens brand appeal and connects with consumers in a clear and impactful way. While the rollout has just started hitting shelves, there has been an enthusiastic early response from both customers and consumers. On the strength of our exceptional execution and brand investments, we achieved our fourth consecutive year of organic growth. Our colleagues did an outstanding job delivering on increased distribution and responding to the earlier phasing of promotional holiday displays, which drove significant organic growth.

I also want to recognize the superior execution by our colleagues to help serve our customers during the recent natural disasters affecting the U.S. As we look ahead to 2020, we expect another year of organic growth for our combined battery business in the range of 1% to 2%. The growth will be driven by pricing, as well as, distribution gains as we continue to leverage our relationships with our retail partners to grow the battery category. This will be partially offset by lapping our hurricane sales in 2019, as we do not include natural disasters in our outlook.

Moving on to auto care. As I mentioned on the third-quarter call, efforts are under way to infuse significant incremental innovation to the pipeline, which we can then pair with our leading brands. Our investment has been focused on building the capabilities and adding resources to create a multi-year innovation portfolio. Our focus on growing the innovation pipeline and leveraging the relationships with retail partners will set us up for long-term success in this growing category.

Looking specifically at 2020, we expect our auto care business to achieve top-line organic growth of 3.5%, which includes expectations for a reversal of a portion of the negative weather impacts in 2019, normalization of international distributor order patterns, and growth in line with category trends. As you can see from what we accomplished in 2019, we have the right team in place to move these businesses forward by focus on growing the top-line and optimizing productivity while executing the plan for integration flawlessly. With that, I will turn it over to Tim.

Tim Gorman -- Chief Financial Officer

Thanks, Mark, and good morning, everyone. You saw the fourth-quarter and full-year results in our earnings release this morning. In addition, a slide deck is available on our website highlighting the key financial metrics. We ended 2019, delivering our outlook for net sales of $2.5 billion, adjusted EBITDA of $545 million, adjusted free cash flow of $256 million, and adjusted earnings per share of $3.

As Alan and Mark commented, we had a strong year as our organization remains focused on the legacy Energizer business, while closing two significant transactions. We are excited about the opportunities ahead in 2020 to accelerate the integration efforts while also generating strong EBITDA, and free cash flow growth that will enable us to steadily reduce our debt and leverage ratio, and most importantly, reinvest in the business to drive growth in each of our categories. Starting with fourth-quarter results. Total net sales were $719 million, which included $226 million from the acquired businesses and strong global organic revenue growth of 9.2%.

This exceeded our 6% growth expectation and benefited from approximately $9 million of unplanned hurricane activity. On a global basis, over 90% of the increase in organic sales came from distribution gains for both existing and new space that added 410 basis points of growth, phasing of U.S. holiday promotional activity in measured, and non-measured channels, which contributed 310 basis points, price increases enacted earlier this year across several markets, added 120 basis points and a favorable 30 basis point year over year impact of hurricane activity in the fourth quarter. Organic growth was 7.5% in the Americas and 12.5% internationally, driven by distribution and pricing in both segments.

The strength of the U.S. dollar has been a headwind throughout 2019 and in the fourth quarter. The impact to net sales was 120 basis points during the quarter, and we anticipate continued impact to our 2020 results. Our adjusted gross margin rate was 42.1% for the fourth quarter, down 340 basis points.

As we've discussed previously, the lower margin profile of the acquired businesses decreased the consolidated gross margin by 390 basis points in the fourth quarter. The remaining results were largely driven by the benefits of pricing and synergies, offset by the negative impacts of currency headwinds and additional costs related to trade tariffs. A&P investment was higher during the first nine months of the year and was in line with our prior outlook. As we move into 2020, we expect A&P dollars to increase by 12% to 15% versus the prior year.

We remain focused on effectively managing SG&A to successfully achieve our operating priorities. Excluding acquisition and integration costs, we reduced SG&A as a percent of net sales in the fourth quarter as a result of the benefits of synergy savings, and continuous improvement initiatives across our combined businesses. Moving forward, we expect additional SG&A improvements from our disciplined approach to managing costs and the contributions from our integration efforts over the next two years. Our FX tax rate for the quarter and the year were lower, reflecting the lower U.S.

tax rate, and favorable adjustments related to prior-year returns. We continued to take a balanced approach to capital allocation, fueled by strong free cash flow generation from our combined businesses. This enabled us to pay down $115 million of debt in 2019, resulting in a net leverage ratio of 4.7 times as of September 30th. Capital expenditures were $55 million, including $10 million related to integration activities as we invest for future growth.

Finally, we paid a quarterly common dividend of $21 million and a preferred dividend of $4 million. Turning to our outlook for 2020. Adjusted EBITDA is expected to be $610 million to $640 million. Adjusted free cash flow is expected to be $310 million to $340 million and adjusted earnings per share from continuing operations is expected to be in the range of $3 to $3.20.

This includes lapping the $0.03 of hurricane benefit in the current year and over $0.25 of headwind related to currencies, tariffs, and Brexit. Despite these headwinds, the outlook for 2020 remains strong. We expect net sales to grow approximately 9% to 10% in the range of $2.72 billion to $2.74 billion, this includes low single-digit organic revenue growth, with combined battery expected to grow 1% to 2%, lapping the benefits of hurricane in 2019, and combined auto care expected to grow 3.5%. Despite the mid-single-digit decline expected in the first quarter, driven by the anticipated phasing of holiday activity from the first quarter to the fourth quarter and the benign replenishment in the aftermath of Dorian, we remain confident in delivering our full-year outlook of low single-digit organic growth.

In combined battery, we expect to achieve distribution gains in new doors and to expand our shelf space and secondary displays in existing accounts. In addition, we will continue to see the benefits of improved pricing and mix, particularly in North America. In combined auto care, we continue to expect improved performance in the auto care business, in line with the commentary we shared last quarter, driven by three factors. First, a recovery in the refrigerant subcategory, assuming a normalized weather year.

Second, a resumption of distributor order activity as we lapped fill volumes in certain international markets. And finally, organic growth in line with category trends, driven by increased innovation and investment in support of our combined auto care business. We expect our gross margin rate, excluding acquisition and integration costs, to improve by 10 to 40 basis points as the benefit of synergies and improved operating efficiencies are partially offset by an estimated $15 million to $20 million from foreign currency headwinds, and $10 million to $15 million in incremental tariffs, and Brexit costs. And finally, we expect to realize incremental synergies in 2020 in the range of $45 million to $50 million with approximately 65% benefit in COGS and 35% benefit in overheads.

The savings are related to the facility consolidation and the exit of most of the TSA agreements with Spectrum in the coming months. And there are additional integration activities planned, and under way to deliver our target of over $100 million in savings by the end of 2021. By the end of 2020, we will be two-thirds of the way to completing our goal. We expect integration cash costs of $65 million to $75 million and integration-related capital expenditures of $50 million to $60 million.

Integration-related to capital expenditures should diminish future capital needs of the combined businesses and drive future continuous improvement beyond 2020. Our priorities for excess cash are to pay down debt and to end 2020 with a net debt-to-adjusted EBITDA multiple in the range of 4.2 times to 4.4 times, which includes the proceeds from the VARTA divestiture. Now I would like to turn the call back over to Alan for closing remarks.

Alan Hoskins -- Chief Executive Officer

Thanks, Tim. Before we open it up for questions, I want to thank our colleagues around the globe for their continued focus and hard work. 2019 was an important year as we positioned Energizer to generate significant shareholder value in the years to come. I also want to take a moment to reference the recent leadership announcements that we made on Monday.

At Energizer, we believe the development of talent across our organization is critical to our success. Mark LaVigne is taking on the role of president in addition to chief operating officer. As I'm sure you are all aware, Mark has been instrumental in defining and executing our strategic initiatives. This included overseeing our separation from Edgewell Personal Care in 2015, since successfully implementing our integrated operating model to enable the successful integration of the acquired businesses.

Hannah Kim, assistant general counsel, and corporate secretary, will serve as the company's chief legal officer and corporate secretary. Hannah is a strong leader within our organization and bring significant external strategic governance and legal experience, and the organization looks forward to continuing to benefit from her experience, knowledge, and insights. Hannah's appointment follows Kelly Boss's decision to retire next summer. Kelly's strategic counsel has served us well, and on behalf of the entire leadership team, I would like to thank her for her many contributions over the past six years.

Finally, we announced that John Drabik, vice president, corporate controller, and treasurer, has been appointed to the role of senior vice president, corporate controller, and has been designated our chief accounting officer. I look forward to working with Mark and his expanded role, as well as, with Hannah, John and other members of our leadership team as we continue to execute on our strategy and deliver long-term value for our shareholders. With that, I would now like to turn it over to the operator, who will open up the line for questions.

Questions & Answers:


Operator

[Operator instructions]Our first question comes from Bill Chappell with SunTrust. Please go ahead.

Bill Chappell -- SunTrust Robinson Humphrey -- Analyst

Thanks. Good morning.

Alan Hoskins -- Chief Executive Officer

Good morning.

Mark LaVigne -- President and Chief Operating Officer

Good morning, Bill.

Bill Chappell -- SunTrust Robinson Humphrey -- Analyst

I guess, first of all, the battery side. Just help us understand the bridge, just we've been seeing in scanner data in terms of 200, 300 basis points of lost share and a real pickup at private label at Target? Just trying to understand how that translates into organic growth going into fiscal 2020? And how this doesn't just continue to repeat itself over the next three, four months?

Mark LaVigne -- President and Chief Operating Officer

Bill, it's Mark. I'll start with that. I mean first, I think the first part of the question is, how do you reconcile maybe the disconnect between organic growth and what you're seeing in scanner data, and a lot of that is built on a couple of things. One is you're only covering about 60% of the market in scanner data.

And so you've got another 40%, and in those areas, we've had some healthy growth. I think when you look at the trends, in our prepared remarks, we referenced the trends over the latest three months ending August, so you have value up to six, any of the volume that was roughly flat. In the latest four-week data, depending upon which period you look at, you have seen some negative trends with volume being down roughly 4.2 in the latest scanner data. And I think in the short-term period, you've got to look at what's happening during that period, and there could be a number of things that have never occurred year over year, and some of that is hurricane-related volume.

So you're seeing some year-over-year comp related to that. The other thing you're seeing is you saw an uptick during Hurricane Dorian, but you didn't see the power outage. And with the track of that storm, it impacted roughly 18% of the U.S. population.

And so, you saw some pantry loading occurred and then you didn't have the follow-on usage. And so that's impacting some of it as well. The trends that hit Energizer a little bit harder than they do the category because we tend to benefit from the hurricane activity. And then as a result, when you see the pantry loading, it will impact us because we are a known hurricane partner with our retailers.

I think also what you're seeing in the scanner data is the impact of a competitive launch. And I think what you're going to see out of Energizer is we know how to combat these launches. We're not going to overreact in the short term. Based on short-term trends.

We feel very confident in the plans we have in place, particularly once you get past this holiday season, which is why we're calling for organic growth going forward. I think the worst thing we could do both for Energizer business, as well as, the overall category is to overreact to short-term trends. The competitive launch hit around the July time period. We've weathered that storm, and we expect to have a really strong 2020.

Bill Chappell -- SunTrust Robinson Humphrey -- Analyst

Got it. And then just a follow-up. On the journey back to $150 million, $160 million of EBITDA for the auto care business, trying to understand where we are. And in particular, I think in the past, you said that half of the way back would be -- with getting the ability to pass off pricing.

And so I didn't know if you're now in the position going into next year if you're 3.5% growth assumes some pricing or if that's still to come?

Mark LaVigne -- President and Chief Operating Officer

The way we've decomposed the 3.5% pricing is really around three elements, which is category growth, some normalization of weather patterns, and then, the international distributor resuming more normalized order patterns going forward. That 3.5% contemplates that. Just as we do in the battery category, we'll look at the ability to take pricing. It's not anything that we talk about, of our plans going forward.

But if there's an opportunity, we'll certainly do it much like we do in the battery category. We feel good about the plans. We've gotten through the line review season. We feel like we have adequate space to be able to drive the organic growth we're calling for.

It's really now down to execution and getting through the resets, which were going to occur in the March, April timeframe.

Bill Chappell -- SunTrust Robinson Humphrey -- Analyst

Got it. Thanks so much.

Mark LaVigne -- President and Chief Operating Officer

Thanks, Bill.

Operator

The next question is from Jason English with Goldman Sachs. Please go ahead.

Jason English -- Goldman Sachs -- Analyst

Hey, good morning, folks. Thanks for slotting me in. Congratulations on the promotion, Mark.

Mark LaVigne -- President and Chief Operating Officer

Thanks, Jason.

Jason English -- Goldman Sachs -- Analyst

I wanted to, I guess, I have two questions. First, drilling down into your GAAP free cash flow. It's going to be burning next year by more integration-related capex than we were expecting, certainly more than you had foreshadowed with the details you gave on the second-quarter call. Can you help us understand what's causing the stepped up integration-related capex? And also, give us some color or context of how we should think about these integration buckets, the magnitude of free cash flow drag over the next couple of years? How do they -- do they gradually slow down? Do they meaningfully step down in any order of magnitude would be really appreciated.

Alan Hoskins -- Chief Executive Officer

Yeah, Jason. The amount of capital being expended in '20 is really going to be the bulk of the capital that we expend. You'll see a significant drop off as we move forward beyond 2020. And as I said in the comments, you should expect some of that integration capital will reduce future capital needs of the combined businesses.

Likewise, in terms of cash that will be expended beyond the capital relative to integration activities. The big year is '20 in terms of activities that will take place that Mark commented during his comments on activities that are taking place in 2020. So you see a significant ramp-up in the synergies being realized, and that will continue into 2021. Beyond 2021, we're calling out those -- those integration benefits will kind of fall into that continuous improvement category.

So the return on the capital and cash investments that we're making to realize the synergies have a very healthy return.

Jason English -- Goldman Sachs -- Analyst

OK. So I think we're looking at like $100 million to $120 million of cash outlay this year? Are we talking about a drop to something in the range of 50 or 20 or anything -- any more specificity you could provide would be helpful.

Alan Hoskins -- Chief Executive Officer

Yeah, it'll -- so the capital required in 2021 will be roughly $5 million to $10 million. So a significant decrease from what you see. And in the cash side for cash costs, so I think, severance and other related matters will drop off from the amounts that we've called out. I'd say, cutting it roughly in half as we move forward into 2021.

Jason English -- Goldman Sachs -- Analyst

That's really helpful. And last question for me, I'll pass it on. As we look at many of your core input costs, most of them are sort of metal complex related. There's been a fair amount of deflation in the spot markets.

You're talking about positive price, and mix in North America next year, should we expect that to be accompanied with in cost benefits at the same time?

Alan Hoskins -- Chief Executive Officer

Yeah, we are seeing a benefit in input costs. As you know, zinc is a large contributor to our input costs, that is favorable as we move forward into 2020. Right now, we're roughly two-thirds of the way locked on our commodity needs for 2020. And so, we are seeing approximately a 10 to 20 basis point benefit on commodities as we move forward into 2020.

Jason English -- Goldman Sachs -- Analyst

OK. That's really helpful. Thank you, guys. See you in a couple of weeks.

Alan Hoskins -- Chief Executive Officer

Thank you.

Operator

Next question is from Kevin Grundy with Jefferies. Please go ahead.

Kevin Grundy -- Jefferies -- Analyst

Hey, good morning, everyone. And Mark, I want to extend my congratulations as well.

Mark LaVigne -- President and Chief Operating Officer

Thanks, Kevin.

Kevin Grundy -- Jefferies -- Analyst

I wanted to come back to the U.S. market in batteries and the market share dynamic and you guys acknowledged some of the factors. So my question is really specifically on private label. And it's just noteworthy, as you guys are well aware, Target has long been a stronghold for you guys.

But it seems interesting, they're pushing private label and hardly unique for the battery category. But talk a little bit about -- are we sort of at the early stages of a bigger push in private label because the context is, of course, like private label has been relatively flattish for a long period of time, particularly in brick-and-mortar. What's the level of concern here that we see other retailers increasingly pushing in this category in a way that they have not before? What's the risk at a Walmart, where Rayovac has historically been the house brand? Maybe you can talk a little bit about that? And then sort of what it's going to take you over the next 12 months to restore some of that lost market share? And then I have a follow-up.

Mark LaVigne -- President and Chief Operating Officer

Yeah. Kevin, I think what I would say is, and you've heard us. We'll take it up a couple of levels because we don't want to talk about specific customers for their individual strategies. As you know, private label has been a part of this category, for a long time, will continue to be.

It is up one share point over the latest reporting period. For us, again, we're not going to overreact to that, if what we know -- and what's been proven out over time. We continue to invest in the brands. We continue to invest in product innovation and connecting with consumers.

Brands are going to continue to resonate and matter to individual consumers. In terms of being up one share point, not overly concerned about that. Creating a trend because we have all of the investments in place, we need to -- in order to compete effectively. I would say, overall, in the category, it's one that -- in terms of overall concern, it's not something I can say, it's something that we don't worry about.

We don't worry about it in terms of private label, but what we worry about is where we can invest, and how we can continue to advantage our brands, and we know that works. And if we do that, and I don't expect it to become an emerging trend in the category, and we continue to defer it to be relatively benign going forward.

Alan Hoskins -- Chief Executive Officer

Yeah, and Kevin it's Alan. And keep in mind that in the battery category, our brands still matter. You've got roughly 85% of the total category sales in the U.S. coming from the branded part of the category.

We expect that to continue. This is, as we look across the globe, even across other markets. You're not seeing a trend to us that would be alarming or concerning. However, keep in mind that we do believe there's opportunity to leverage the Rayovac brand as that opening price point proposition for a lot of our retailers around the globe.

Kevin Grundy -- Jefferies -- Analyst

OK. Great. One quick follow-up. Just on the guidance, and maybe this is for Tim.

Just the bridge from the six -- this is the adjusted EBITDA guidance that you had provided for fiscal '20 back in May, which was $650 million to $675 million at the time, and now, $610 million to $640 million. It seems like it's largely explained by incremental FX headwinds in tariffs and Brexit. But maybe if you could just sort of fill in any other changes, maybe it's greater investment now behind batteries that you did not foresee earlier. There's a little bit greater support behind auto care to ensure that this can get back to category levels.

Just sort of bridge the way you guys have kind of seen fiscal '20 now relative to what you did back in May, and I'll pass it on. Thank you.

Tim Gorman -- Chief Financial Officer

Yeah, Kevin. So you're right. In May, we called out $650 million to $675 million. In Q3, with the impacts on the auto care business.

We had called out $10 million to $15 million call down on that original guide in May. And then, we do see the impacts of currency, tariffs -- trade tariffs and Brexit impacting to drag us down further from where we were at in Q3. We are making -- and reflected in the guide that we provided was increased investment in A&P that's called out to drive growth for the long-term. So it really is the items that are out of our control in terms of currency, tariffs, and Brexit.

With the tariffs, we have had offsets to some of the impacts that we're seeing from tariffs, but making short-term supply chain changes for what may be a temporary impact, those are the decisions that we weigh, as we -- alternatives. And you're seeing outside of China, difficulty in changing some of that sourcing, so we're moving forward. And if you take those items into account, it's still a very strong outlook for 2020, as we're driving activity within both -- within all of our categories. And also, realizing a significant increase in synergy benefits.

Kevin Grundy -- Jefferies -- Analyst

OK. Thank you very much. Good luck, guys.

Tim Gorman -- Chief Financial Officer

Thanks, Kevin.

Operator

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

Faiza Alwy -- Deutsche Bank -- Analyst

Yes. Hi, good morning. So a couple of questions for me. One, just on auto care, I know previously, you talked about 2% sales growth, and it's now 3.5%.

So I'm wondering if anything has changed relative to what we had talked about a couple of months ago? Are you -- I know you were talking about sort of line resets within auto care. So I'm just wondering if there's increased optimism around that category.

Alan Hoskins -- Chief Executive Officer

Our call that we just made in the prepared remarks is consistent with what we've said before. It was 3.5% at the midpoint, and that's consistent with what we've said today. I think the 2% you're referencing was what we ascribe to the category growth. And so the 2% category growth, we expect to grow in line with the category.

And then the reason it's above that is related to the resumption of normal weather patterns in the refrigerant side, and then, the international distributor piece.

Faiza Alwy -- Deutsche Bank -- Analyst

OK, got it. OK. And then my second question is just sort of a slightly bigger picture question, which is if we look at your historical growth, it's been relatively strong at around 3% if you look at it over a longer period of time. But there is a lot of volatility on a quarter-to-quarter basis.

So it seems like you don't get full credit for your sort of overall stable, consistent growth that, Alan, you referenced in your remarks. So I'm wondering, is there anything you can do to institute more sort of stability or consistency on a quarter-to-quarter basis? Or is this just how the category is, and we just have to sort of deal with it, and all you can do is be transparent? So I'm just curious on your thoughts around this.

Alan Hoskins -- Chief Executive Officer

Yeah, thanks, Faiza. It's Alan. So again, we're -- as we look at this, it's not our quarter to quarter. We're looking at the full year knowing that both our strategic plans, how we launch innovation, and the way our customers manage sets and execution of plans in store.

It ebbs and flows quarter to quarter. We -- that's why we look at the full year. We account for that vulnerability in each of those quarters. We're very confident in our ability to deliver the year the way we've laid out, knowing that we've called out some of the things in the first quarter, we're going to have to account for.

If you look at what we've done the last couple of years, and then a similar pattern, where Q1 a little bit softer, and then Q2, three, four, we picked that back up in line with what we expected. Our outlook for '20 would be no different than that. And again, we've taken into account what would be considered any vulnerabilities that needs to be factored into that outlook. Mark?

Mark LaVigne -- President and Chief Operating Officer

And Faiza, I think the best thing we can do is run it with a longer-term horizon than quarter to quarter in place. And I understand the frustration that that may result in because of some of the volatility. But when we're planning, we really plan for the year. And when customers want to move orders or when customers want to shift things ahead of time.

And in this case, it was Q4 versus Q1, we're going to be responsive to the customer needs, and I think that, is what ultimately our shareholders would want us to do. I understand that that results in some shifting of timing, and some unevenness in some of the results. And frankly, I think you'll see a little bit of that in auto care as well between Q2 and Q3 because of weather patterns there as well. So you could see some significant shifting between Q2 and Q3, much like you do between Q4 and Q1 on the battery side.

We'll do our best to communicate what we think the trends are going to be quarter-to-quarter. Overall, we're always going to default to the year. In this case, we're confident that in the overall call that we've made for the year, it's just sometimes hard to predict quarter to quarter because we want to respond to what the needs of the customers are.

Alan Hoskins -- Chief Executive Officer

And rest assured, we will keep the pedal to the metal here. We are not pulling back.

Tim Gorman -- Chief Financial Officer

But I think your comments on -- if you look over the last four years, it has been a very consistent organic growth pattern, and with the outlook that we provided for '20, you're going to have your fifth year of organic growth in the low-single-digits.

Faiza Alwy -- Deutsche Bank -- Analyst

Thank you.

Operator

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

Steve Strycula -- UBS -- Analyst

Hi, good morning.

Mark LaVigne -- President and Chief Operating Officer

Good morning.

Alan Hoskins -- Chief Executive Officer

Good morning.

Steve Strycula -- UBS -- Analyst

So my first question, I want to kind of zoom in on the battery business on a few of the talking points you've already walked us through, and we appreciate the color. The first piece would be, how do we think through your ability to navigate or be patient through the holiday season when a key competitor launches a big product? It seems like you've seen this movie several times before. And how do you think about managing it through and being confident revenue grows on the other side? And similarly, how do you think about managing the private label competition that's been mounted previously? Again, you said that over time, these things tend to settle themselves out. But from an investor/shareholder standpoint, how should they think about -- how should they be confident that you've got this, what are the tactics you typically do? And then how does Rayovac really fit into that as you think about managing battery category assortment, which seems like it's becoming increasingly complex with Duracell coming out with Optimum, which is above copper top, Rayovac being modernized; private label coming in more premium.

Just trying to see like how these moving pieces fit together in your conversations with the retailer? Thank you.

Alan Hoskins -- Chief Executive Officer

Yeah. Yeah. Steve, it's Alan. A real quick headline for me, and then I'll hand it over to Mark for a more in-depth answer.

As we look at competitive launches, and you actually captured it correctly, we have seen the movie multiple times. We account for competitive launches in our outlook, which we have done. We track and monitor that regularly. And as you would imagine, we have our own, both either pre-emptive or strategic plans that allow us to counter those competitive activities.

You would anticipate that is going to continue through the quarter and post quarter in terms of Energizer engaging with and executing with our customers, the plans that we have in place. As we look at what we see out in the stores at retail, we are very confident in the merchandising and execution that our teams have deployed, and the results that we believe we'll get from that. So again, we are -- if there's not a lack of over concern on our part, it's just we've done a lot of really good sound planning, and set strategies in place that we believe will allow us to remain competitive despite a competitive launch. Mark?

Mark LaVigne -- President and Chief Operating Officer

Yeah, I would say we're not patient at all. I mean, so when a competitor launches a product, we make sure we're in there and we're competing from the start. What we're not going to do, though, are value-disruptive activities, and that's where we will have restraint and discipline. But we are challenging our teams to get in with retailers and they truly either get the space back, gain more space, get some off-shelf displays in order to counteract the competitive activity.

We're confident with what we've done. We're confident in the portfolio we have. We're confident in the plans we have going into holiday. And then I think the meaningful opportunity will be the next time retailers would open up their shelf sets to be reset.

Obviously, we'll go in and aggressively try to regain any space that was lost as a result of that competitive activity. The end of your question really also provided the answer, which is how do you get comfort around private label? We're better positioned today than we ever have been in terms of how to counteract that pressure that you may see in the category because we have Eveready, but we also have Rayovac now, which is particularly helpful in the U.S. Retailers need and want an opening price point product. They can serve that with private label and a store brand or they can serve it with our value-branded products, and we think we have a really compelling story to tell.

So, we helped solidify their needs from top to bottom in the category, and we're better positioned today than we ever have been in order to have those conversations.

Steve Strycula -- UBS -- Analyst

Gotcha. And then my quick follow-up to that would be, as your sales team goes into the channel, it's a key talking point that battery life for Rayovac relative to private label offerings is compelling in magnitude in terms faster from an inventory velocity perspective? Like are there's -- like hard facts that you would underwrite? And then, how did the lithium test go at club this quarter? I knew that was a newer piece of your business, and then, I'll pass along.

Mark LaVigne -- President and Chief Operating Officer

Yeah, I mean, you touched on a lot of the talking points. It's really going to depend what the given retailer is looking for in that opening price point and what their strategy is around it. But rest assured, between Eveready and Rayovac we have the assets at our disposal to meet just about any need they have. While we don't talk about specific customers, obviously, we've gotten some distribution in club with some of our products.

And whenever a product like lithium gets visibility in the store, it does very well.

Alan Hoskins -- Chief Executive Officer

And that same thing in club is working across our categories.

Steve Strycula -- UBS -- Analyst

OK. Thank you.

Operator

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

Olivia Tong -- Bank of America Merrill Lynch -- Analyst

Great. Thank you. First, I wanted to start on auto and your expectations for 3.5% growth there. It sounds like you got from shelf space.

Is that primarily promotional? Or is that more permanent in your mind? And have you had conversations that lead you to believe that you're on the path toward more space? Can you also talk a little bit about innovation and how inventory is in the channel right now? Thanks.

Mark LaVigne -- President and Chief Operating Officer

On the innovation front, that's the question that's always hard to answer because we're working on innovation. We're working on reinvesting in our brands, but those are plans we like to share with our retailers and ultimately show up on shelf before we discuss them publicly, we have done a lot of work since acquiring that asset to really reinfuse some more innovation into that pipeline and feel really good about the path we're on. We're not all the way there yet, but we would expect over the course of 2020 to really have a healthy innovation pipeline, much like we do in battery. In terms of the shelf resets that you're going to see in the spring, I would -- there were puts and takes, and there are pluses and minuses.

I think ultimately, the space will end up being a net positive. The task now is to make sure that that space is productive and that we connect with consumers, and those plans are under way as well. I would -- this is a transition year with the auto care business in terms of making sure that we reinvest in it. We reignite those brands and that the space and the velocity trends turn around, which ultimately is going to turn into the ability to have those discussions during the next line review season, which will be late spring and summer of next year, which we think the following year, which should provide a nice uplift to that business.

Factor in also the international plans, which in 2020 are fairly benign. So that work is under way to grow that business internationally. And then in 2021 is when we would start to see some benefit from that work as well.

Alan Hoskins -- Chief Executive Officer

And in support of that innovation, keep in mind that we are going to be investing behind the automotive brands. And that is something that will be quite different than prior ownership. Our expectation is that A&P for '20 will be in that 5% to 5.5% of sales range, including the acquisitions, and we believe that that investment behind A&P is really going to help prop up that innovation that we'll be introducing to market.

Tim Gorman -- Chief Financial Officer

Olivia, I think the other thing that we've talked about is getting Dayton stabilized was really key in 2019, and you saw that the service levels remained at that average 99% service levels. So, that takes that out of the conversation, as we move forward in terms of our ability to deliver on customer needs and wants.

Olivia Tong -- Bank of America Merrill Lynch -- Analyst

Understood. On battery, I just wanted to dig a little deeper into pricing going forward because despite clearly better than anticipated sales and price being positive this quarter, it was a little bit less of a benefit than you had implied last quarter. So just trying to understand either what could end up happening, what you pulled, what maybe is coming, but it was introduced later in the quarter, just a little bit more detail, that would be great.

Alan Hoskins -- Chief Executive Officer

Yeah. As we move forward, obviously, we were taking pricing in several markets throughout the year. So, as you -- with the U.S. being in -- really at the beginning of the third quarter, you've got the carryover benefit of that, which will carry over into next year with some of the other markets, you have markets that are cycling off as we move forward.

So it was in line with our expectations and as we move forward, you're seeing some of the impacts of the POS trends, as we move forward into '20 and particularly Q1, where the benefits of the pricing are being offset by some of the POS trends we're seeing.

Mark LaVigne -- President and Chief Operating Officer

And we do expect that the gap and then that shift should normalize over time as we've seen in the past.

Olivia Tong -- Bank of America Merrill Lynch -- Analyst

Got it. Thank you.

Operator

Our next question is from Andrea Teixeira with J.P. Morgan. Please go ahead.

Andrea Teixeira -- J.P. Morgan -- Analyst

Hi, thank you. Good morning. So my question is on the bridge [Inaudible]

Alan Hoskins -- Chief Executive Officer

Andrea, you cut out.

Andrea Teixeira -- J.P. Morgan -- Analyst

I'm sorry. So, I'm sorry for the technical difficulties. So, on the -- my question is on the bridge to the top-line outlook on the first quarter, specifically in the holiday sell-in and promotions. So you're about 2.4% headwind on the guide, but you're saying mid-single-digit decline in the first quarter.

So, I'm trying to if you're embedding about a 1% additional customer and pantry destocking on the holiday season? And in terms of the cadence of the remainder of the fiscal year, it puts some pressure for the second and the third, when you're probably expecting a mid-single-digit organic growth. So if you can help us, like, bridge that? And if you can give us like a breakdown, distribution and pricing? And on the A&P spend, I was hoping -- I mean, you could just discuss now that you're hoping to increase the auto spend. But if you can also talk about the investment in the Rayovac and Eveready positioning, that would be helpful. Thank you.

Alan Hoskins -- Chief Executive Officer

I'll start. I think there's a lot of questions in there that I think we'll try and cover and where we may be missed one, you can follow-up with us on that. But again, quarter to quarter, we really want to get away from trying to provide details quarter to quarter, we plan for the year. And overall, for the year, we expect the organic growth of 1% to 2%.

What you saw in the Q1, Q4, you saw some promotional shifting, which was, I think, Tim called out in his prepared remarks, of roughly 310 basis points, shifted from Q1 into Q4. We still would have had the organic growth of 6% even without that. But I think that was the reason behind wanting to make sure that the mid-single-digit in Q1. We made sure we called that out just to prepare you all so that there wasn't the volatility that came up in a previous question.

So I think from that standpoint, we feel really good. I mean, there is still a competitive launch that we're fighting against. Again, as I said, we're not going to overreact. We know the plans we have in place, we're confident in the full year, but we have to let that play out over Q1.

And I think, again, the worst thing we could do is overreact in Q1 because that could be detrimental long-term, and we don't want to engage in that type of activity.

Mark LaVigne -- President and Chief Operating Officer

And then for A&P, to answer the question briefly. Think about it as we treat each of the businesses a little bit differently depending on how and the need to reach consumers. And for the legacy battery business, digital and TV are important. We have shift a lot of our media weight there to be able to support the brands.

When you look at automotive, it will be a combination of what we do digitally and then what we do in store. When you get into some of the other brands that we have, such as Rayovac and Eveready. We do support those with A&P, but understand, their predominant share outside of home center and mass in the U.S. is through traditional channels.

So, the way you advertise and support it with A&P is going to be different. Most of that is going to be visual merchandising in the store and a lot less of what you traditionally would see in the U.S. with TV and digital.

Andrea Teixeira -- J.P. Morgan -- Analyst

OK. Thank you.

Operator

The next question is from Javier Escalante with Evercore ISI. Please go ahead.

Javier Escalante -- Evercore ISI -- Analyst

Hi, good morning, everyone. I would like to have probably kind of like a simplistic take on batteries. If you can help us understand, in the case of the U.S., what would be your best guess of retail takeaway for the Energizer business, which is what is included in organic sales? How much was the contribution of the pullback or the pull forward from the holiday shipping? And what is the impact of these distribution gains? And I do have a follow-up when it comes to the distribution gains. Thank you.

Mark LaVigne -- President and Chief Operating Officer

I think in terms of decomposing, I think some of the simplistic request you have is if you look at the holiday, it was 310 basis points from Q1 to Q4. In the latest category data that you've seen, you've seen value in the category go up 1.5, and this is in the four-week data, depending upon which data set you look at and volumes down four. As we mentioned, I think it was Bill's question, where we had -- our value was down roughly 4.5 and that time period with our volume down 12. In those numbers are a lot of hurricane comps.

You also had hurricane comp against Florence and Michael from last year, depending upon the time period. You also have some destocking that's going on in terms of pantries because of Dorian, where power didn't go out. But in -- what I would say to focus on, again, is as you get through holiday, and the competitive launch, and we have our plans in place to do so, what we focus, on less about share and more about organic growth in dollars. And what we've said is 1% to 2%.

That's going to come from distribution gains, that's going to come from pricing, and that's going to come from better execution as we get into 2020. How that plays out in the measured universe is difficult for us to decompose for you because that's only about 60% of the category for us. We're still executing with excellence in e-commerce and home center and club, which ultimately, don't get picked up in that scanner universe. And then, there's a large portion in the international business, which is going to drive some of that growth as well.

So, if I -- for us to take it from a subset because I think if you're talking globally, the measured universe is going to cover less than 50% of the universe for us. And it's tough to extrapolate from there to our results. What we're focused on is the organic growth of 1% to 2%. I'm not sure I answered your question, Javier, but I just wanted to at least explain how we're thinking about it.

Alan Hoskins -- Chief Executive Officer

And then Javier, the other part of your question was around the distribution piece. And if you look at the quarter, you had a good part of the organic revenue driven by the distribution gains that we have that we're both permanent and some were incremental supplemental displays that we saw, we would expect that to continue into the balance of '20 as well. As you know, our core fundamentals are really focused on gaining that distribution and visibility in stores, our primary fundamentals that we invest behind, you'll expect that to continue in '20 and beyond.

Javier Escalante -- Evercore ISI -- Analyst

Thank you, and the follow-up precisely on the distribution side, right, because how much this distribution gains can you attribute it to the fact, particularly, the international ones, to the fact that you now have Rayovac wholesalers? And to what extent is this a revenue synergy, essentially from the deal that you never did mention? Thank you.

Mark LaVigne -- President and Chief Operating Officer

That's an asset that we intend to leverage. Obviously, having the value branded Rayovac in Florida and certain markets around the world is an asset that we intend to leverage and to help drive growth and distribution. And so, we're going to continue to drive that, and we're going to be able to do it across our portfolio. This just adds a different dimension to it.

Tim Gorman -- Chief Financial Officer

I think the additional benefit that you have is now you have one combined commercial team driving the entire portfolio. And obviously, the acquired battery business was impacted by the length of the transaction taking to close. And so now, our commercial teams are fully integrated, and you have them driving both Energizer and Rayovac activity.

Alan Hoskins -- Chief Executive Officer

And keep in mind, if you look at the -- if you just come back to the organic growth for the quarter and the year, the majority of that was driven by distribution. 4.2% in Q4, and then, it was the majority of that -- the gain that we had for the full fiscal year, we expect that to continue.

Javier Escalante -- Evercore ISI -- Analyst

And this distribution, if you can clarify, is how -- because international growth was so strong, is mostly outside the U.S. or it's also within the U.S.?

Mark LaVigne -- President and Chief Operating Officer

Well, the 12.5% is going to be -- there's Americas and international, that's going to be the pure international play. And again that was through a combination of leveraging the portfolio where you're seeing a mix shift more toward premium and specialty in Europe, and then, you're seeing broad distribution across the portfolio in all of the non-America markets.

Alan Hoskins -- Chief Executive Officer

Yeah, Javier, it was balanced across both the Americas and International. You saw Americas up 7.5%, obviously, aided by hurricane activity, but still a very strong growth in the quarter, coupled with the 12.5% in international.

Operator

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

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

Hi. Almost all might have been answered at this point. I only had one. I guess, at this point, given that you're still kind of pretty deep into the integration and the turnaround of auto care, would you consider looking at M&A at this point? Or do you need to be solely focused on those two objectives? Thanks.

Alan Hoskins -- Chief Executive Officer

So our -- to be really clear, Bill, our objective for '20 and '21 is to do a few things. One, pay down debt, that is our top priority. We will continue to reinvest in our brands and our business for long-term growth. Those are the two top priorities that we have as a company.

Certainly, we'll be providing a return of capital through a dividend payment, and we will look at opportunistic share repurchase, both to offset dilution, and we will look at it opportunistically if it creates a return for the shareholder. M&A falls further down that ladder, to be very clear. We'll look at small tuck-ins potentially. But I have to dial you back up to that top priority, it's to pay down debt and maintain a healthy balance sheet.

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

Makes sense. All right. That's all for me. Thank you.

Operator

The next question is from Carla Casella with J.P. Morgan. Please go ahead.

Carla Casella -- J.P. Morgan -- Analyst

Hi, you mentioned that the VARTA is proceeding -- the VARTA sale is proceeding as planned. But can you remind us, are you still looking for $300 million to $320 million of net proceeds, cash proceeds?

Alan Hoskins -- Chief Executive Officer

That's correct. Yeah. That's correct.

Carla Casella -- J.P. Morgan -- Analyst

And then this quarter, you mentioned you paid down some debt. I'm just curious what you paid down? And then also what -- which debt will be paid down with VARTA proceeds?

Tim Gorman -- Chief Financial Officer

Yeah. So, we've paid roughly $30 million in the quarter against term loan and the $300 million will be -- will be paying down term loan. We have roughly $1 billion in term loans. So after the pay down, we'll be at roughly $700 million remaining.

Carla Casella -- J.P. Morgan -- Analyst

OK. And then, just from all of the discussion today, I'm trying to get a sense for whether you expect working capital to be a source or use of the cash for 2020, is there some money that you'll be taking out of working capital? Or will that be something that may build behind some of your initiatives?

Alan Hoskins -- Chief Executive Officer

Yeah, you'll see some a little bit of bumpiness into working capital as we migrate through the integration activities because typically, you will build inventory in advance. And then longer-term, we will see a working capital benefit from the integration activities that we're doing.

Carla Casella -- J.P. Morgan -- Analyst

OK. And one clarification, you mentioned the gross profit, you're looking -- gross margin, you're expecting to increase 10 to 40 basis points. I just want to make sure what base that is off of? Is that off the pro forma 42.6% from this year?

Tim Gorman -- Chief Financial Officer

It is. It is. So if you go back, pro forma, it would have been 41.6% pro forma in fiscal year '18. For fiscal year '19, pro forma with fully integrated acquisitions, it'd be at 41.9% and growing in fiscal year '20 to the outlook that we provided.

Carla Casella -- J.P. Morgan -- Analyst

OK. Great. Thank you.

Operator

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

Alan Hoskins -- Chief Executive Officer

Thank you for joining us on our call today and your interest in Energizer. We do look forward to seeing many of you next week in New York City on November 21st. We'll be hosting an Investor Day, where you'll learn more from our entire leadership team about our strategies, outlook, and plans to deliver long-term value to our shareholders, customers, and our consumers. Our Investor Day presentation will also be webcast for all interested parties to listen.

So, thank you again for joining us today.

Operator

[Operator sign-off]

Duration: 70 minutes

Call participants:

Jackie Burwitz -- Vice President of Investor Relations

Alan Hoskins -- Chief Executive Officer

Mark LaVigne -- President and Chief Operating Officer

Tim Gorman -- Chief Financial Officer

Bill Chappell -- SunTrust Robinson Humphrey -- Analyst

Jason English -- Goldman Sachs -- Analyst

Kevin Grundy -- Jefferies -- Analyst

Faiza Alwy -- Deutsche Bank -- Analyst

Steve Strycula -- UBS -- Analyst

Olivia Tong -- Bank of America Merrill Lynch -- Analyst

Andrea Teixeira -- J.P. Morgan -- Analyst

Javier Escalante -- Evercore ISI -- Analyst

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

Carla Casella -- J.P. Morgan -- Analyst

More ENR analysis

All earnings call transcripts