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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(in millions, except per share data)

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

While we report financial results in accordance with generally accepted accounting principles (“GAAP”), this discussion also includes non-GAAP measures. These non-GAAP measures are referred to as “adjusted” or “organic” and exclude items such as impairment charges, restructuring charges, acquisition and integration costs, and the divestiture of the Infant and Pet Care business. Reconciliations of non-GAAP measures are included within this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This non-GAAP information is provided as a supplement to, not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. We use this non-GAAP information internally to make operating decisions and believe it is helpful to investors because it allows more meaningful period-to-period comparisons of ongoing operating results. Given the various significant events which occurred during fiscal 2020, including Project Fuel restructuring, acquisition related expenses and the early retirement of the $600 Senior Notes due 2021, we view the use of non-GAAP measures that take into account the impact of these unique events as particularly valuable in understanding our underlying operational results and providing insights into future performance.

The information can also be used to perform trend analysis and to better identify operating trends that may otherwise be masked or distorted by the types of items that are excluded. This non-GAAP information is also a component in determining management’s incentive compensation. Finally, we believe this information provides more transparency. The following provides additional detail on our non-GAAP measures:

•We analyze our net sales and segment profit on an organic basis to better measure the comparability of results between periods. Organic net sales exclude the impact of changes in foreign currency, acquisitions, and dispositions. This information is provided because these fluctuations can distort the underlying change in net sales either positively or negatively. For the year ended September 30, 2020, the impact of divestitures includes the Infant and Pet Care business, which was sold in December 2019, and the impact of acquisitions includes the acquisition of Cremo in September 2020. For the year ended September 30, 2019, the impact of acquisitions includes net sales and segment profit activity for Jack Black through February 2019. For the year ended September 30, 2019, the impact of dispositions includes October 2017 net sales and segment profit for the Playtex gloves assets. For the year ended September 30, 2018, the impact of acquisitions includes net sales and segment profit activity for Jack Black from March through September 2018 and Bulldog net sales and segment profit for October 2017. For the year ended September 30, 2018, the impact of dispositions includes November 2016 through September 2017 net sales and segment profit for the Playtex gloves assets.

•Adjusted net earnings and adjusted earnings per share are defined as net earnings and diluted earnings per share excluding items such as impairment charges, restructuring charges, acquisition and integration costs, cost of early debt retirement, COVID-19 pandemic expenses, advisory expenses in connection with the evaluation of the Feminine and Infant Care businesses, Sun Care reformulation costs, pension settlement expense, investor settlement expenses, the disposition of the Infant and Pet Care business and the Playtex gloves assets, the related tax effects of these items and the impact of the Tax Act.

•Adjusted effective tax rate is defined as the effective tax rate excluding items such as impairment charges, restructuring charges, acquisition and integration costs, cost of early debt retirement, COVID-19 pandemic expenses, advisory expenses in connection with the evaluation of the Feminine and Infant Care businesses, Sun Care reformulation costs, pension settlement expense, investor settlement expenses, the disposition of the Infant and Pet Care business and the Playtex gloves assets, the related tax effects of these items and the impact of the Tax Act.

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

Impact of COVID-19

On March 11, 2020, the World Health Organization declared COVID-19 a worldwide pandemic, which has impacted individuals, families, companies and economies around the world. Due to the uncertainty surrounding COVID-19 and its fast spreading nature, global leaders have taken significant measures to keep their people safe, including asking people to stay home unless they are considered essential employees, closing offices and retail locations and cancelling all non-essential travel. Governmental policies have continued to evolve, which have included phased policies with the intention to slowly reopen the local and global economies. We continue to take significant measures to protect our employees and business during the reopening process. As a result of these COVID-19 related measures, we have incurred increased costs including increased employee costs, such as emergency pay and expanded benefits, and other operating costs, such as cleaning costs, personal protective equipment purchases and increased airfreight expenses, which have negatively impacted our profitability, partially offset by government credits provided to the Company through the CARES Act. These incremental net charges totaled $4.3 in fiscal 2020.

The Company’s top priority during this time continues to be ensuring the health and welfare of our employees. Additional measures have been put in place at all of our manufacturing locations to ensure the safety of our employees, including thermal scanning, requiring the use of proper protective gear, making hand sanitizer widely available throughout our facilities and following social distancing guidelines. Additionally, we have implemented work-from-home policies for our employees that can work from home and have cancelled all non-essential company travel. We have not had any material operational disruption across our manufacturing and distribution facilities. There has been a slight increase in the level of absenteeism as our employees are taking intermittent leave; however, this has not caused a significant disruption in our operations.

As noted within the discussion of our consolidated results below, our earnings were negatively impacted by the COVID-19 pandemic for the year ended September 30, 2020, which was largely driven by a decrease in demand for our Sun Care products, as the impact of the stay-at-home orders and phased approach to re-opening local economies has reduced vacation travel and certain outdoor activities. This decline was partially offset by an increase in demand for Wet Ones, due largely to consumers’ increased focus on personal hygiene. We expect to see continued strong demand for Wet Ones going forward. The impact that COVID-19 continues to have on our customers and their cash flows and ability to operate remains uncertain at this time. However, in some cases we have seen changes in payment patterns, requests for extended payment terms or impact to customer operations, resulting in an increase in our bad debt expense. As the duration and severity of the COVID-19 pandemic continues to affect economic conditions and therefore consumer spending and demand, we will continue to closely monitor the impact it has on our business and customers.

We continue to closely monitor our supply chain and, to date, have not experienced any significant issues securing key ingredients for our products. The continued duration and severity of COVID-19 may result in disruptions related to our key suppliers going forward; however, the impact, timing and severity of potential disruptions cannot be reasonably estimated at this time.

We experienced increased volatility in foreign currency exchange rates and commodity prices in fiscal 2020, which we believe is largely due to the economic uncertainty from COVID-19 and the depreciation of certain foreign currencies against the U.S. dollar. We expect to see continued volatility in the foreign currency exchange rates; however, we cannot estimate the impact at this time.

We expect to maintain adequate liquidity during these uncertain times. As noted within “Liquidity and Capital Resources” below, COVID-19 has not had a significant impact on our liquidity, cash flows or capital resources, including our ability to enter into the unsecured indenture agreement for 5.50% Senior Notes in the amount of $750 due June 1, 2028 (“2028 Notes”), or to replace our former unsecured revolving credit facility in the U.S. with a new secured revolving credit facility in an aggregate principal amount of $425 (the “Revolving Credit Facility”). We will continue to assess the impact that COVID-19 has on our liquidity needs and the current economic market conditions.

Significant Events

Acquisitions

On September 2, 2020, the Company completed the acquisition of Cremo, a premier men's grooming company in the U.S, in an all-cash transaction at a purchase price of $233.6. As a result of the acquisition, Cremo became a wholly owned subsidiary of the Company. Refer to Note 3 of Notes to Consolidated Financial Statements for further discussion on the Cremo acquisition.

Divestiture

On December 17, 2019, we completed the sale of our Infant and Pet Care business included in the All Other segment for $122.5, which included consideration for providing services for up to one year under a transition services agreement. For further information on the divestiture of the Infant and Pet Care business, refer to Note 3 of Notes to Consolidated Financial Statements.

Goodwill and Intangible Asset Impairment

The Company performs an annual test for impairment of goodwill and indefinite-lived intangible assets. The annual test performed in the fourth quarter of fiscal 2020 did not indicate that the Company’s goodwill and intangible assets had a fair value below the carrying value.

During the third quarter of fiscal 2019, we determined a triggering event had occurred as a result of a decline in our market capitalization after a decline in the Company’s share price. We performed an interim impairment analysis using financial information through June 30, 2019 and forecasts for cash flows developed using our three-year strategic plan. The interim impairment review was performed on all long-lived assets, including definite-lived intangibles, goodwill, and indefinite-lived intangible assets. The results of the impairment review indicated the carrying value of the goodwill of the Wet Shave, Infant Care, and Skin Care reporting units were greater than their respective fair values, resulting in a non-cash goodwill impairment of $369.0, $37.0, and $2.0, respectively. Additionally, the carrying value of the Wet Ones and Diaper Genie trade names were greater than the fair values and resulted in non-cash impairments of the indefinite-lived intangible assets of $87.0 and $75.0, respectively. We performed an assessment in the fourth quarter of fiscal 2019 to determine if any significant events or changes in circumstances had occurred that would be considered a potential triggering event. We did not identify any indication of a triggering event that would indicate the existence of additional impairment of the reporting units, indefinite-lived intangible assets, and definite-lived intangible assets.

During the third quarter of fiscal 2018, we determined a triggering event had occurred as a result of a sustained decline in our market capitalization. We performed an interim impairment analysis using financial information through June 30, 2018 and forecasts for cash flows developed using our strategic plan. The interim impairment review was performed across all reporting units and indefinite-lived intangible assets and we found the carrying value of the goodwill of our Infant Care reporting unit to be above its fair value, resulting in a non-cash goodwill impairment charge of $24.4. The impairment of the Infant Care reporting unit was caused by declining revenue and earnings forecasts and higher discount rates. Higher discount rates were the result of certain market-based assumptions and company specific risks.

Refer to Notes 2 and 7 of Notes to Consolidated Financial Statements for further discussion on the annual impairment test.

Project Fuel

Project Fuel is an enterprise-wide transformational initiative that was launched in the second quarter of fiscal 2018 to address all aspects of our business and cost structure, simplifying and transforming our organization, structure and key processes. Project Fuel is facilitating further re-investment in our growth strategy while enabling us to achieve our desired future state operations.

In addition to the expected cost savings, Project Fuel is designed to strengthen our challenger culture and reinforce our consumer-centric organizational focus. It is also designed to simplify the organization and streamline ways of working in order to increase competitiveness, speed and agility, and ensure we have the skills, capabilities and investments needed to compete in a rapidly changing world.

We expect that Project Fuel will generate $265 to $275 in total annual gross savings by the end of the 2021 fiscal year. The savings generated will be used to fuel investments and brand building in strategic growth initiatives, offset anticipated operational cost headwinds from inflation and other rising input costs and improve our overall profitability and cash flows. Project Fuel related gross savings were approximately $74 in fiscal 2020, bringing cumulative gross savings to approximately $212.

To implement the restructuring element of Project Fuel, we estimated one-time pre-tax charges to be approximately $160 to $165, with an additional capital investment of $70 to $80 through the end of fiscal year 2021. Project Fuel restructuring charges were $38.1 for fiscal 2020, bringing cumulative Project Fuel restructuring charges to $133.6. Additionally, capital expenditures for Project Fuel were $24.4 in fiscal 2020, bringing cumulative capital expenditures for Project Fuel to $58.1.

For further information on our restructuring projects, refer to Note 4 of Notes to Consolidated Financial Statements.

Sun Care Reformulation Costs

As a result of discussions with one of our suppliers during the fourth quarter of fiscal 2018, we made certain supply chain and procurement decisions, including implementing a raw material substitution due to anticipated regulatory changes related to European Union Regulation (EC) No. 1907/2006 concerning the Registration, Evaluation, Authorization, and Restriction of Chemicals, establishing a European Chemical Agency (“REACH”), that affected the supply chain of select Sun Care products. To align with our raw material selection process, we chose to make those changes in advance of the fiscal 2019 Sun Care season to minimize potential impact to our distribution channels during the peak sales period.

We incurred charges totaling $2.8 in Cost of products sold in fiscal 2019 as a result of the changes to our supply chain. Fiscal 2018 had charges totaling $25.3 to Cost of products sold, primarily due to costs associated with the write-off of select sun care product inventories.

Executive Summary

Following is a summary of key results for fiscal 2020, 2019 and 2018. Net earnings and diluted earnings per share (“EPS”) for the time periods presented were impacted by impairment charges, restructuring charges, acquisition and integration costs, cost of early debt retirement, COVID-19 pandemic expenses, advisory expenses in connection with the evaluation of the Feminine and Infant Care businesses, Sun Care reformulation costs, pension settlement expense, investor settlement expenses, the disposition of the Infant and Pet Care business and the Playtex gloves assets, the related tax effects of these items and the impact of the Tax Act. The impact of these items on reported net earnings and EPS are provided below as a reconciliation of net earnings and EPS to adjusted net earnings and adjusted diluted EPS, which are non-GAAP measures.

Fiscal 2020

•Net sales of $1,949.7 decreased 8.9% from fiscal 2019, inclusive of a 0.2% increase due to the acquisition of Cremo, a 4.4% decrease due to the sale of the Infant and Pet Care business and a 0.3% decrease due to currency movements. Excluding the impact of the Cremo acquisition, the sale of the Infant and Pet Care business and currency movements, organic net sales decreased 4.4% for fiscal 2020 as compared to the prior year period, as declines primarily in Wet Shave and Sun Care products were partially offset by growth in Skin Care driven by Wet Ones and grooming products.

•Net earnings for fiscal 2020 was $67.6, as compared to a net loss of $372.2 in the prior fiscal year. On an adjusted basis, as illustrated in the table below, net earnings for fiscal 2020 decreased 21.2% to $148.8. The decline was primarily driven by lower net sales and increased Selling, general and administrative expenses (“SG&A”), partially offset by improved gross margin percentage and lower Advertising and sales promotion expense (“A&P”) compared to the prior year.

•Net earnings per diluted share during fiscal 2020 was $1.24 compared to a loss of $6.88 in the prior fiscal year. On an adjusted basis, as illustrated in the table below, net earnings per diluted share during fiscal 2020 were $2.73 compared to $3.48 in the prior year.

Fiscal Year

Net Earnings Diluted EPS

Cost of early retirement of long-term debt 26.2 — — 0.48 — —

Gain on sale of Infant and Pet Care business (4.1) — — (0.08) — —

Feminine and Infant Care evaluation costs (6) 0.3 2.1 — 0.01 0.04 —

Investor settlement expense (7) — 0.9 — — 0.02 —

Gain on sale of Playtex gloves assets — — (15.3) — — (0.28)

Pension settlement expense (8) — — 5.4 — — 0.10

Impact of dilutive shares (9) — — — — (0.01) —

Weighted-average shares outstanding - Diluted 54.6 54.1 54.5

(1)Impairment charges reflect the impact of the goodwill and intangible asset impairments recorded in fiscal 2019 and 2018. Refer to Note 7 of Notes to Consolidated Financial Statements for further discussion on impairment charges.

(2)Restructuring costs associated with Project Fuel includes SG&A of $13.3, $8.6, and $1.4 for fiscal 2020, 2019, and 2018, respectively, associated with certain information technology enablement expenses and incentive and retention compensation expenses for Project Fuel. Additionally, it includes Cost of products sold of $0.2 and $0.6 for fiscal 2020 and 2019, respectively, related to inventory obsolescence write-offs.

(3)Includes SG&A of $39.2, $6.7, and $3.4 for fiscal 2020, 2019 and 2018, respectively, related to integration expenses associated with acquisitions and Cost of products sold of $0.6 and $1.8 related to the valuation of acquired inventory for fiscal 2020 and 2018, respectively.

(4)Includes pre-tax Cost of products sold of $4.3 for fiscal 2020 which included incremental costs incurred by the Company related to higher benefit and emergency payments, supplies and freight.

(5)Includes Cost of products sold of $2.8 and $25.3 for fiscal 2019 and 2018, respectively, associated with supply chain changes and inventory write-offs on select Sun Care products.

(6)Includes pre-tax SG&A of $0.3 and $2.1 for fiscal 2020 and 2019, respectively, associated with consulting costs incurred in connection with the evaluation of our Feminine Care and Infant Care segments.

(7)Includes pre-tax SG&A of $0.9 for fiscal 2019 associated with a settlement with an investor.

(8)Pension settlement expense was the result of increased lump sum benefit payments in fiscal 2018 from higher employee turnover associated with Project Fuel. The lump sum benefit payments are not expected to be recurring in nature.

(9)GAAP EPS was calculated using basic weighted average shares outstanding due to a net loss. Adjusted diluted EPS was calculated using diluted weighted average shares outstanding.

(10)Includes the impact of the Tax Act totaling $3.6 and $21.3 in Income tax expense for fiscal 2019 and 2018, respectively, in addition to the tax impact of the other adjustments to Net Earnings (Loss) and Diluted EPS - GAAP.

Operating Results

The following table presents changes in net sales for fiscal 2020 and 2019, as compared to the corresponding prior year period, and provides a reconciliation of organic net sales to reported amounts.

Net Sales

Net Sales - Total Company

For the Years Ended September 30,

Impact of Infant and Pet Care sale (93.4) (4.4) % — — %

Impact of Cremo acquisition 4.5 0.2 % — — %

Impact of Playtex gloves asset sale — — % (1.0) — %

Impact of Jack Black acquisition — — % 17.1 0.8 %

Impact of currency (7.5) (0.3) % (32.6) (1.6) %

For fiscal 2020, net sales decreased 8.9% on a reported basis. Excluding the impact of the Cremo acquisition, the divestiture of the Infant and Pet Care business and currency movements, organic net sales decreased 4.4% versus the prior year. The decline in organic net sales in fiscal 2020 was largely due to the ongoing COVID-19 pandemic and the related stay-at-home orders and travel restrictions which resulted in lower consumer demand and decreases in net sales for our Wet Shave and Sun Care products. Organic net sales declined in North America by 2.4% while International organic net sales fell 7.6%. Globally, declines related to COVID-19 were primarily in Wet Shave and Sun Care while Skin Care grew, driven by Wet Ones. Feminine Care had decreased volumes during fiscal 2020, driven by distribution declines and increased competitive pressures.

Management estimates that the negative impact to net sales due to COVID-19 was approximately $102, and when excluding this impact, organic net sales increased 0.5% compared to the prior year. Management estimated the impact of the COVID-19 pandemic on net sales at the product and category level, through a detailed analysis of many factors, including rolling weekly and monthly net sales trends prior to COVID-19, historical and current order patterns by customer compared to the prior year period and segment performance in the context of overall category trends. This is the Company’s best estimate and there can be no assurance that our estimate reflects the actual COVID-19 impact to net sales.

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

Gross Profit

Gross profit was $880.9 in fiscal 2020, as compared to $966.6 in fiscal 2019. Gross margin as a percent of net sales for fiscal 2020 was 45.2%, up 10 basis points as compared to fiscal 2019. Excluding the impact of acquisitions, divestitures, and non-recurring charges such as COVID-19 pandemic expenses and Project Fuel obsolescence, gross margin as a percent of sales increased by 10 basis points compared to fiscal 2019, as Project Fuel related savings and lower input costs helped to offset the impact of lower volumes, and higher pricing in Sun Care offset unfavorable mix in Wet Shave.

Selling, General and Administrative Expense

SG&A was $408.8 in fiscal 2020, or 21.0% of net sales, as compared to $372.0 in fiscal 2019, or 17.4% of net sales. Excluding the impact of non-recurring expenses, consisting of Cremo acquisition and integration costs, the divestiture of Infant and Pet Care, Project Fuel and Feminine and Infant Care evaluation costs in both periods, SG&A as a percent of net sales increased 150 basis points compared to fiscal 2019. The increase in SG&A spend was driven by higher bad debt expense driven by the COVID-19 pandemic and increased salary and benefits expense compared to the prior fiscal year.

Advertising and Sales Promotion Expense

For fiscal 2020, A&P was $216.2, down $34.7 as compared to fiscal 2019. A&P as a percent of net sales was 11.1% for fiscal 2020, compared with 11.7% in fiscal 2019. The decrease was driven by lower spend across all segments. Wet Shave spend in fiscal 2020 was down across all product groups and geographies. Additionally, Feminine Care A&P in North America declined in fiscal 2020. The decline in A&P was primarily caused by the COVID-19 pandemic, as the Company lowered A&P in fiscal 2020 due to the reduction in demand across multiple product lines. Additionally, A&P declined by $7.5 due to the sale of the Infant and Pet Care business.

Research and Development Expense

Research and development expense (“R&D”) increased to $55.3 in fiscal 2020, compared to $53.5 in fiscal 2019. As a percent of net sales, R&D was approximately 2.8% in fiscal 2020 compared to 2.5% in fiscal 2019.

Interest Expense Associated with Debt

Interest expense associated with debt for fiscal 2020 was $61.2, a decrease of $1.4 as compared to fiscal 2019. The decline in interest expense was the result of lower average outstanding debt, primarily as a result of the repayment of the $185 term loan due April 2019 in the second quarter of fiscal 2019. Additionally, there were no borrowings under the Revolving Credit Facility as of September 30, 2020.

In addition to the interest expense associated with debt, we incurred $26.2 of costs for the early retirement of the $600 2021 Notes in fiscal 2020.

Other Expense (Income), Net

Other expense (income), net was expense of $5.4 in fiscal 2020 compared to expense of $1.5 in fiscal 2019. The increase in expense in fiscal 2020 was largely related to the significant devaluation of local currencies in several key countries in Latin America, Asia and Central Europe against the U.S. dollar in the second quarter and the resulting revaluation of balance sheet exposures, partially offset by foreign currency exchange contract gains.

Income Tax Provision (Benefit)

Income taxes, which include federal, state and foreign taxes, were 22.6%, 4.6% and 36.9% of Earnings (loss) before income taxes in fiscal 2020, 2019 and 2018, respectively.

The effective income tax rate for fiscal 2020 for operations was 22.6% as compared to 4.6% in the prior year. The fiscal 2019 effective tax rate reflects a small benefit on a net loss, due to the impairment of goodwill and intangible assets, a portion of which are non-deductible. Excluding impairment charges, restructuring charges, acquisition and integration costs, cost of early debt retirement, COVID-19 pandemic expenses, advisory expenses in connection with the evaluation of the Feminine and Infant Care businesses, Sun Care reformulation costs, pension settlement expense, investor settlement expenses, the disposition of the Infant and Pet Care business and the Playtex gloves assets and the impact of the Tax Act, the adjusted effective tax rate for fiscal 2020 was 22.5% compared to 23.8% in the prior year.

Reported Adjustments Adjusted(Non-GAAP)

Effective tax rate 22.6 % 22.5 %

Reported Adjustments Adjusted(Non-GAAP)

(Loss) earnings before income taxes $ (390.3) $ 638.1 $ 247.8

Income tax (benefit) provision (18.1) 77.1 59.0

Effective tax rate 4.6 % 23.8 %

Reported Adjustments Adjusted(Non-GAAP)

Effective tax rate 36.9 % 23.0 %

Our effective tax rate is highly sensitive to the mix of countries from which earnings or losses are derived. Declines in earnings in lower tax rate jurisdictions, earnings increases in higher tax rate jurisdictions, repatriation of foreign earnings or operating losses in the future could increase future tax rates. Additionally, adjustments to prior year tax provision estimates could increase or decrease future tax provisions.

Segment Results

Segment performance is evaluated based on segment profit, exclusive of general corporate expenses, share-based compensation costs, costs associated with impairment charges, restructuring charges, acquisition and integration costs, cost of early debt retirement, COVID-19 pandemic expenses, advisory expenses in connection with the evaluation of the Feminine and Infant Care businesses, Sun Care reformulation costs, investor settlement expenses, the disposition of the Infant and Pet Care business and the Playtex gloves assets and the amortization and impairment of intangible assets. Financial items, such as interest income and expense, are managed on a global basis at the corporate level. The exclusion of such charges from segment results reflects management’s view on how it evaluates segment performance.

Our operating model includes some shared business functions across the segments, including product warehousing and distribution, transaction processing functions and, in most cases, a combined sales force and management teams. We apply a fully allocated cost basis, in which shared business functions are allocated between the segments on a percentage of net sales basis. Such allocations are estimates and do not represent the costs of such services if performed on a stand-alone basis.

The following tables present changes in segment net sales and segment profit for fiscal 2020 and 2019, as compared to the corresponding prior year periods, and also provide a reconciliation of organic segment net sales and organic segment profit to reported amounts. For a reconciliation of Segment profit to Earnings (loss) before income taxes, see Note 18 of Notes to Consolidated Financial Statements.

Wet Shave

Net Sales - Wet Shave

For the Years Ended September 30,

Impact of currency (4.6) (0.3) % (25.3) (1.9) %

Wet Shave net sales for fiscal 2020 decreased 7.0%, inclusive of a 0.3% decline due to currency movements. Excluding the impact of currency movements, organic net sales decreased $83.2, or 6.7%, primarily driven by significantly lower volumes and unfavorable price mix. The decline in organic net sales was driven by a reduction in category sales and demand from the COVID-19 pandemic, impacting all regions. Volumes declined in Men’s Systems and Disposables, partially offset by slight growth in volumes in Women’s systems. Geographically, the decline in organic sales was driven by North America, which fell 6.1% due to lower volumes in Men’s Systems and Disposables and an unfavorable price mix across all product categories. International Wet Shave declined organically by 7.1%, primarily in Asia Pacific and Europe which was driven by volume declines in Men’s Systems and Disposables.

Segment Profit - Wet Shave

For the Years Ended September 30,

Segment profit - prior year $ 246.5 $ 265.2

Impact of currency (2.4) (0.9) % (5.3) (2.0) %

Wet Shave segment profit for fiscal 2020 was $206.2, down $40.3 or 16.3%, inclusive of the impact of currency movements. Excluding the impact of currency movements, organic segment profit decreased $37.9, or 15.4%. The decline in segment profit was the result of lower gross margins that were impacted by decreased volumes across all regions in Men’s Systems and Disposables, unfavorable price mix in Men’s and Women’s Systems and increased SG&A spend, offset by favorable cost mix and A&P. Segment profit was significantly impacted by the COVID-19 pandemic, which reduced demand and volumes of Wet Shave products, and was partially offset by the reduction in A&P.

Sun and Skin Care

Net Sales - Sun and Skin Care

For the Years Ended September 30,

Impact of Cremo acquisition 4.5 1.0 % — — %

Impact of Playtex gloves asset sale — — % (1.0) (0.2) %

Impact of Jack Black acquisition — — % 17.1 3.8 %

Impact of currency (2.5) (0.5) % (5.9) (1.4) %

Sun and Skin Care net sales for fiscal 2020 decreased 0.2%, inclusive of a 1.0% increase from the Cremo acquisition and a 0.5% decline due to currency movements. Excluding the impact of acquisitions and currency movements, organic net sales decreased $3.1, primarily due to declines in Banana Boat and Hawaiian Tropic, as the COVID-19 pandemic resulted in travel disruption during the summer vacation season, significantly reducing demand during the peak Sun Care season. This decline was partially offset by growth in Wet One’s hand wipes and Men’s grooming, with volume growth for both Bulldog and Jack Black. Geographically, North America grew organic net sales 3.2%, driven by Wet Ones, which saw more than 60% growth due to demand increases largely attributable to the COVID-19 pandemic. Internationally, organic net sales fell almost 11%, driven by declines in Sun Care volumes in Asia Pacific and Latin America.

Segment Profit - Sun and Skin Care

For the Years Ended September 30,

Segment profit - prior year $ 80.4 $ 80.9

Impact of Cremo acquisition 1.1 1.4 % — — %

Impact of Playtex gloves asset sale — — % (0.3) (0.4) %

Impact of Jack Black acquisition — — % 5.3 6.6 %

Impact of currency (0.7) (0.8) % (0.7) (0.8) %

Segment profit - current year $ 69.1 (14.0) % $ 80.4 (0.5) %

Sun and Skin Care segment profit for fiscal 2020 was $69.1, a decrease of 14.0% compared to the prior year, inclusive of a 1.4% increase from the Cremo acquisition and a 0.8% decline from currency movements. Excluding the impact of the acquisition and currency movements, organic segment profit decreased $11.7, or 14.6%. The decrease in segment profit was driven by product mix as lower net sales and gross margin in Sun Care from reduced volumes was partially offset by increased volumes in Wet Ones and Men’s Grooming products. Declines in A&P in Sun Care were offset by higher overall segment SG&A.

Feminine Care

Net Sales - Feminine Care

For the Years Ended September 30,

Impact of currency (0.4) (0.1) % (0.7) (0.2) %

Feminine Care net sales for fiscal 2020 decreased $9.5, or 3.1%, inclusive of a 0.1% decline due to currency movements. Excluding the impact of currency movements, organic segment net sales decreased $9.1, or 3.0%, driven by volume declines across branded tampons and Carefree liners. Pads had volume growth during fiscal 2020 with the introduction of Carefree pads more than offsetting volume declines in Stayfree. The COVID-19 pandemic was a net positive as pantry loading in the second quarter of fiscal 2020 caused increased volumes, partially offset by lower net sales during the remainder of fiscal 2020.

Segment Profit - Feminine Care

For the Years Ended September 30,

Segment profit - prior year $ 48.3 $ 37.2

Impact of currency (0.1) (0.2) % (0.4) (1.1) %

Segment profit - current year $ 52.3 8.3 % $ 48.3 29.8 %

Feminine Care segment profit for fiscal 2020 was $52.3, an increase of $4.0, or 8.3%, inclusive of currency impacts. The increase in segment profit is primarily the result of lower A&P and favorable cost mix from manufacturing efficiencies, partially offset by lower volumes and higher SG&A.

All Other

Net Sales - All Other

For the Years Ended September 30,

Impact of Infant and Pet Care business sale (93.4) (78.0) % — — %

Impact of currency — — % (0.7) (0.6) %

All Other net sales for fiscal 2020 decreased 77.6%. Excluding the impact of the divestiture of the Infant and Pet Care business, organic net sales increased $0.5 or 0.4%.

Segment Profit - All Other

For the Years Ended September 30,

Segment profit - prior year $ 11.7 $ 18.5

Impact of Infant and Pet Care business sale (9.1) (77.8) % — — %

Impact of currency — — % (0.4) (2.2) %

Segment profit - current year $ 3.1 (73.5) % $ 11.7 (36.8) %

All Other segment profit for fiscal 2020 decreased 73.5% compared to the prior year period. Excluding the impact of the divestiture of the Infant and Pet Care business, organic segment profit increased 4.3%.

General Corporate and Other Expenses

Fiscal Year

General corporate and other expenses $ 54.9 $ 57.3 $ 68.8

Restructuring and related costs 38.1 55.6 39.9

Acquisition and integration planning costs 39.8 6.7 5.2

Cost of early retirement of long-term debt 26.2 — —

Gain on sale of Infant and Pet Care business (4.1) — —

COVID-19 expenses 4.3 — —

Sun Care reformulation costs — 2.8 25.3

Feminine and Infant Care evaluation costs 0.3 2.1 —

Investor settlement expense — 0.9 —

Gain on sale of Playtex gloves assets — — (15.3)

Pension settlement expense — — 5.4

For fiscal 2020, general corporate expenses were $54.9, a decrease of $2.4 as compared to fiscal 2019. Fiscal 2019 general corporate expenses decreased $11.5 when compared to fiscal 2018. The decline in general corporate expenses in fiscal 2020 relates to savings from Project Fuel and reduced consulting and legal fees, offset by a slight increase in salary and benefit costs and incentive compensation expense.

The Company incurred expenses associated with the early retirement of the $600 Senior Notes due 2021, including the recognition of remaining debt issuance costs and interest expense in the third quarter of fiscal 2020. Additionally, the Company incurred expenses, primarily legal, consulting and financing costs, associated with the termination of the Harry’s acquisition in the first half of fiscal 2020. Acquisition and integration costs incurred in the fourth quarter of fiscal 2020 were related to the acquisition of Cremo, which was completed in September 2020.

Liquidity and Capital Resources

To date, COVID-19 has not had a significant impact on our liquidity or capital resources. However, the continued spread of COVID-19 has led to disruption and volatility in the global capital markets, which, depending on future developments, could impact our capital resources and liquidity in the future.

At September 30, 2020, a portion of our cash balances were located outside the U.S. Given our extensive international operations, a significant portion of our cash is denominated in foreign currencies. We manage our worldwide cash requirements by reviewing available funds among the many subsidiaries through which we conduct business and the cost effectiveness with which those funds can be accessed. We generally repatriate a portion of current year earnings from select non-U.S. subsidiaries only if the economic cost of the repatriation is not considered material.

The counterparties to deposits consist of a number of major financial institutions. We consistently monitor positions with, and credit ratings of, counterparties both internally and by using outside ratings agencies.

Our total borrowings were $1,271.1 at September 30, 2020, including $21.1 tied to variable interest rates. Our total borrowings at September 30, 2019 were $1,231.4.

On May 22, 2020, the Company entered into a new unsecured indenture agreement for 5.5% Senior Notes in the amount of $750 due June 1, 2028 (“2028 Notes”). The Company used a portion of the net proceeds of the 2028 Notes to satisfy and discharge the obligations outstanding for the $600 Senior Notes due 2021 (“2021 Notes”). The remainder of the net proceeds will be used to pay our fees and expenses and for general corporate purposes, which may include, but are not limited to, the repayment of outstanding indebtedness, working capital, capital expenditures and acquisitions. The Company’s $500 Senior Notes are due May 24, 2022. We expect to refinance these notes prior to their maturity.

On April 3, 2020, we replaced our former unsecured revolving credit facility in the U.S. with a new secured revolving credit facility in an aggregate principal amount of $425 (the “Revolving Credit Facility”). Taking into account outstanding letters of credit of $8.7, as of September 30, 2020, $416.3 was available under the Revolving Credit Facility. At September 30, 2019, we had outstanding borrowings of $117.0 under our prior senior unsecured revolving credit agreement dated as of June 1, 2015, as amended, supplemented or modified from time to time among the Company, as borrower, JPMorgan Chase Bank, N.A., as administrative agent, and the other parties thereto, and the related Subsidiary Guaranty Agreement dated as of June 30, 2015 (the “Prior Revolving Facility” and, collectively with the Revolving Credit Facility, the “Revolving Credit Facilities”).

We had outstanding international borrowings, recorded within Notes payable, of $21.1 and $14.4 as of September 30, 2020 and September 30, 2019, respectively.

Historically, we have generated and expect to continue to generate positive cash flows from operations. Our cash flows are affected by the seasonality of our Sun Care products, typically resulting in higher net sales and increased cash generated in the second and third quarter of each fiscal year. While we cannot reasonably estimate the full impact COVID-19 will have on our cash flows, we believe our cash on hand, cash flows from operations, additional proceeds from the 2028 Notes and available borrowing under the Revolving Credit Facility will be sufficient to satisfy our future working capital requirements, interest payments, research and development activities, capital expenditures, and other financing requirements for at least the next 12 months. We will continue to monitor our cash flows, spending and liquidity needs.

Short-term financing needs primarily consist of working capital requirements, and principal and interest payments on our long-term debt. Long-term financing needs will depend largely on potential growth opportunities, including acquisition activity and repayment or refinancing of our long-term debt obligations. We may, from time-to-time, seek to repurchase shares of our common stock. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. Our long-term liquidity may be influenced by our ability to borrow additional funds, renegotiate existing debt, and raise equity under terms that are favorable to us.

In fiscal 2021, we expect our total capital expenditures to be in the range of $60 to $70 primarily related to maintenance of manufacturing facilities, new products and information technology system enhancements. While we intend to fund these capital expenditures with cash generated from operations, we may also utilize our borrowing facilities.

During fiscal 2020, we contributed $6.6 to our pension and postretirement plans. The expected minimum required contribution to our pension and postretirement plans in fiscal 2021 is $6.3; however, discretionary contributions may be made.

Debt Covenants

The Revolving Credit Facility governing our outstanding debt at September 30, 2020 contains certain customary representations and warranties, financial covenants, covenants restricting our ability to take certain actions, affirmative covenants and provisions relating to events of default. Under the terms of the Revolving Credit Facility, the ratio of our indebtedness to our earnings before interest, taxes, depreciation and amortization (“EBITDA”), as defined in the agreement and detailed below, cannot be greater than 4.0 to 1. In addition, under the Revolving Credit Facility, the ratio of our EBITDA, as defined in the Revolving Credit Facility, to total interest expense must exceed 3.0 to 1. Under the Revolving Credit Facility, EBITDA is defined as net earnings, as adjusted to add-back interest expense, income taxes, depreciation and amortization, all of which are determined in accordance with GAAP. In addition, the Revolving Credit Facility allows certain non-cash charges such as stock award amortization and asset write-offs including, but not limited to, impairment and accelerated depreciation, and operating expense reductions or synergies to be “added-back” in determining EBITDA for purposes of the indebtedness ratio. Total debt and interest expense are calculated in accordance with GAAP. If we fail to comply with these covenants or with other requirements of the Revolving Credit Facility, the lenders may have the right to accelerate the maturity of the debt. Acceleration under one of our facilities would trigger cross-defaults on our other borrowings.

As of September 30, 2020, we were in compliance with the provisions and covenants associated with the Revolving Credit Facility.

Cash Flows

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

Fiscal Year

Net cash from (used by):

Effect of exchange rate changes on cash 5.6 (6.1) 2.5

Net increase (decrease) in cash and cash equivalents $ 23.1 $ 75.2 $ (236.5)

Operating Activities

Cash flow from operating activities was $232.6 in fiscal 2020, as compared to $190.6 in fiscal 2019. The increase in operating cash flow in fiscal 2020 was driven by working capital improvements, including lower accounts receivables due to improved days in sales outstanding and lower net sales, reduced inventory balances, offset by a decrease in accounts payable days outstanding.

Investing Activities

Cash flow used by investing activities was $196.4 in fiscal 2020 as compared to $45.5 in the prior fiscal year. The change was primarily due to the $233.6 acquisition of Cremo in the fourth quarter of fiscal 2020, a $13.8 outflow related to a minority investment of a direct-to-consumer company, offset by a $95.8 inflow related to the sale of the Infant and Pet Care business in the first quarter of fiscal 2020. Capital expenditures were $47.7 during fiscal 2020 and $58.0 during the prior year.

Financing Activities

Net cash used by financing activities was $18.7 in fiscal 2020 as compared to $63.8 in fiscal 2019. During fiscal 2020, we made repayments of $117.0 on the Prior Revolving Facility. The Company also replaced its 2021 Senior Notes with the issuance 2028 Senior Notes. Additional financing cash outflows incurred during fiscal 2020 included the payment of costs incurred in connection with the early retirement of the 2021 Notes totaling $26.2 and debt issuance costs totaling $11.7 related to the issuance of the 2028 Notes. Financing outflows associated with the Company’s $150 uncommitted accounts receivable facility (“Accounts Receivable Facility”) were $11.2 during fiscal 2020 compared to financing inflows of $8.4 in the prior year period. Refer to Note 10 in the Notes to Consolidated Financial Statements for further discussion on the Accounts Receivable Facility.

Share Repurchases

In January 2018, our Board approved an authorization to repurchase up to 10.0 shares of our common stock. This authorization replaced a prior share repurchase authorization from May 2015. We have 10.0 shares remaining available for purchase under the January 2018 Board authorization. Any future share repurchases may be made in the open market, privately negotiated transactions or otherwise, in such amounts and at such times as we deem appropriate based upon prevailing market conditions, business needs and other factors.

During fiscal 2020, 0.1 shares were purchased related to the surrender of shares of common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock equivalent awards.

Dividends

On November 20, 2020, our Board declared a cash dividend of $0.15 per share of common stock, payable on January 6, 2021, to all shareholders of record as of the close of business on December 10, 2020.

Inflation

Management recognizes that inflationary pressures may have an adverse effect on our company through higher material, labor and transportation costs, asset replacement costs and related depreciation, healthcare and other costs. In general, we have been able to offset or minimize inflation effects through a variety of methods including pricing actions, cost reductions and productivity improvements. We can provide no assurance that such mitigation will be available in the future.

Seasonality

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

Foreign Currency

Certain net sales and costs of our international operations are denominated in the local currency of the respective countries. As such, sales and profits from these subsidiaries may be impacted by fluctuations in the value of these local currencies relative to the U.S. dollar. We also have significant intercompany financing arrangements that may result in gains and losses in our results of operations. In an effort to mitigate the impact of currency exchange rate effects, we may hedge certain operational and intercompany transactions; however, our hedging strategies may not fully offset gains and losses recognized in our results of operations.

On June 23, 2016, the U.K. held a referendum in which voters approved an exit from the E.U., commonly referred to as “Brexit,” and on March 29, 2017, the U.K. began the process to withdraw from the E.U. Volatility in exchange rates is expected to continue as the U.K. negotiates its exit from the E.U. Historically, our hedging strategy has included hedging a portion of our exposure to the British pound, thereby reducing our currency risk. We routinely monitor and evaluate this strategy based on risk and will adjust as necessary to minimize exposure to fluctuations in exchange rates related to our U.K. operations. A weaker British pound as compared to the U.S. dollar during a reporting period causes the local currency results of our U.K. operations to be translated into fewer U.S. dollars. For fiscal 2020, net sales of our U.K. operations were 4% of our consolidated net sales. Future impacts on our U.K. operations and financial results will depend, in part, on the outcome of tariff, trade, regulatory and other negotiations.

Commitments and Contingencies

Contractual Obligations

A summary of our significant contractual obligations at September 30, 2020 is shown below:

Total Less than 1year 1-3 years 3-5 years More than 5years

Long-term debt, including current maturities $ 1,250.0 — 500.0 — 750.0

(1)Globally, our total pension and post retirement contributions in the next 12 months are estimated to be approximately $6.3. U.S. pension plans constitute approximately 70% of the plan assets for our pension plans. The estimates beyond fiscal 2020 represent future pension payments to comply with local funding requirements in the U.S. only. The projected payments beyond fiscal 2023 are not currently determinable.

(2)Included in the table above are approximately $32.6 of fixed costs related to third-party logistics contracts.

(3)Included in the table above are approximately $5.9 of deferred compensation payments to retirees.

Purchase obligations set forth in the table above represent contractual obligations that generally have longer terms and are non-routine in nature. We are also party to various service and supply contracts that generally extend one to three months. These arrangements are primarily individual, short-term purchase orders for routine goods and services at market prices, which are part of our normal operations and are reflected in historical operating cash flow trends. These contracts can generally be canceled at our option at any time. We do not believe such arrangements will adversely affect our liquidity position. In addition, we have various commitments related to service and supply contracts that contain penalty provisions for early termination. Because of the short period between order and shipment date (generally less than one month) for most of our orders, the dollar amount of current backlog is not material and is not considered to be a reliable indicator of future sales volume. Generally, sales to our top customers are made pursuant to purchase orders and we do not have supply agreements or guarantees of minimum purchases from them. As a result, these customers may cancel their purchase orders or reschedule or decrease their level of purchases from us at any time. As of September 30, 2020, we do not believe such purchase arrangements or termination penalties will have a significant effect on our results of operations, financial position or liquidity position in the future. As such, these arrangements have been excluded from the table above.

Environmental Matters

Our operations, like those of other companies, are subject to various federal, state, foreign and local laws and regulations intended to protect public health and the environment. These regulations relate primarily to worker safety, air and water quality, underground fuel storage tanks and waste handling and disposal. Accrued environmental costs at September 30, 2020 were $11.6. It is difficult to quantify with reasonable certainty the cost of environmental matters, particularly remediation and future capital expenditures for environmental control equipment. Total environmental capital expenditures and operating expenses are not expected to have a material effect on our total capital and operating expenditures, consolidated earnings or competitive position. However, current environmental spending estimates could be modified as a result of changes in our plans or our understanding of underlying facts, changes in legal requirements, including any requirements related to global climate change, or other factors.

Supplemental Guarantor Financial Information

The Company issued Senior Notes in May 2012, which are fully and unconditionally guaranteed on a joint and several basis by the Company’s existing and future material direct and indirect domestic subsidiaries that are guarantors of any the Company’s credit agreements or other indebtedness for borrowed money (the “Guarantors”). The Guarantors are 100% owned either directly or indirectly by the Company and jointly and severally guarantee the Company’s obligations under the Notes. The Company’s subsidiaries organized outside of the U.S. and certain domestic subsidiaries which are not guarantors of any of the Company’s other indebtedness (collectively, the “Non-Guarantors”), do not guarantee the Notes. The subsidiary guarantee with respect to the Notes is subject to release upon sale of all of the capital stock of the subsidiary guarantor; if the guarantee under the Company’s credit agreements and other indebtedness for borrowed money is released or discharged (other than due to payment under such guarantee); or when the requirements for legal defeasance are satisfied or the obligations are discharged in accordance with the indenture.

The following tables present summarized financial information for Edgewell Personal Care Company (the “Parent”) and the Guarantors on a combined basis after elimination of (i) intercompany transactions and balances among the Parent and the Guarantors and (ii) equity in earnings from and investments in any subsidiary that is a non-Guarantor.

Summarized Statement of Operations Twelve Months Ended September 30, 2020

Summarized Balance Sheet September 30, 2020 September 30, 2019

Assets

Liabilities and Shareholder’s Equity

Critical Accounting Policies

The methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our consolidated financial statements. Specific areas, among others, requiring the application of management’s estimates and judgment include assumptions pertaining to accruals for consumer and trade promotion programs, pension and postretirement benefit costs, share-based compensation, future cash flows associated with impairment testing of goodwill and other long-lived assets, uncertain tax positions, the reinvestment of undistributed foreign earnings and tax valuation allowances. On an ongoing basis, we evaluate our estimates, but actual results could differ materially from those estimates.

Our most critical accounting policies are revenue recognition, pension and other postretirement benefits, the valuation of long-lived assets (including property, plant and equipment), income taxes (including uncertain tax positions) and the carrying value of intangible assets (and the related impairment testing of goodwill and other indefinite-lived intangible assets). A summary of our significant accounting policies is contained in Note 2 of Notes to Consolidated Financial Statements. This listing is not intended to be a comprehensive list of all of our accounting policies.

Revenue Recognition

We derive revenue from the sale of our products. Revenue is recognized when the customer obtains control of the goods, which occurs when the ability to use and obtain benefits from the goods are passed to the customer, most commonly upon the delivery of goods to the customer. Discounts are offered to customers for early payment, and an estimate of the discounts is recorded as a reduction of Net sales in the same period as the sale. Our standard sales terms are final and returns or exchanges are not permitted with the exception of end of season returns for Sun Care products. Reserves are established and recorded in cases where the right of return does exist for a particular sale.

We assess the contractual obligations in customers’ purchase orders and identify performance obligations related to the transferred goods (or a bundle of goods) that are distinct. To identify the performance obligations, we consider all the goods promised, whether explicitly stated or implied based on customary business practices. Our purchase orders are short term in nature, lasting less than one year, and contain a single delivery element. For a purchase order that has more than one performance obligation, we allocate the total consideration to each distinct performance obligation on a relative stand-alone selling price basis. We do not exclude variable consideration in determining the remaining value of performance obligations.

We record sales at the time that control of goods passes to the customer. The terms of these sales vary, but, in all instances, the following conditions are met: (1) the sales arrangement is evidenced by purchase orders submitted by customers; (2) the selling price is fixed or determinable; (3) title to the product has transferred; (4) there is an obligation to pay at a specified date without

any additional conditions or actions required by us; and (5) collectability is reasonably assured. Simultaneously with the sale, we reduce Net sales and Cost of products sold and reserve amounts on the Consolidated Balance Sheet for anticipated returns based upon an estimated return level in accordance with GAAP. Customers are required to pay for the Sun Care product purchased during the season under the required terms. Under certain circumstances, we allow customers to return Sun Care products that have not been sold by the end of the Sun Care season, which is normal practice in the Sun Care industry. The timing of returns of Sun Care products can vary in different regions, based on climate and other factors. However, the majority of returns occur in the U.S. from September through January, following the summer Sun Care season. We estimate the level of Sun Care returns as the Sun Care season progresses, using a variety of inputs including historical experience, consumption trends during the Sun Care season, obsolescence factors including expiration dates and inventory positions at key retailers. We monitor shipment activity and inventory levels at key retailers during the season in an effort to more accurately estimate potential returns.

This allows us to manage shipment activity to our customers, especially in the latter stages of the Sun Care season, to reduce the potential for returned product. The level of returns may fluctuate from our estimates due to several factors, including weather conditions, customer inventory levels and competitive activity. Based on our fiscal 2020 Sun Care shipments, each percentage point change in our returns rate would have impacted our reported net sales by $2.7 and our reported operating income by $2.6. At September 30, 2020 and 2019, our reserve on the Consolidated Balance Sheet for returns was $44.8 and $60.4, respectively.

We offer a variety of programs, primarily to our retail customers, designed to promote sales of our products. Such programs require periodic payments and allowances based on estimated results of specific programs and are recorded as a reduction to net sales. We accrue, at the time of sale, the estimated total payments and allowances associated with each transaction. Additionally, we offer programs directly to consumers to promote the sale of our products. Promotions which reduce the ultimate consumer sale prices are recorded as a reduction of net sales at the time the promotional offer is made, generally using estimated redemption and participation levels. Taxes we collect on behalf of governmental authorities, which are generally included in the price to the customer, are also recorded as a reduction of net sales.

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

Pension Plans and Other Postretirement Benefits

The determination of our obligation and expense for pension and other postretirement benefits is dependent on certain assumptions developed by us and used by actuaries in calculating such amounts. Assumptions include, among others, the discount rate, the expected long-term rate of return on plan assets, and future salary increases, where applicable. Actual results that differ from assumptions made are recognized on the balance sheet and subsequently amortized to earnings over future periods. Significant differences in actual experience or significant changes in macroeconomic conditions resulting in changes to assumptions may materially affect pension and other postretirement obligations. In determining the discount rate, we use the yield on high-quality bonds that coincide with the cash flows of our plans’ estimated payouts. For the U.S. plans, which represent our most significant obligations, we consider the Mercer yield curve in determining the discount rates.

We utilize a spot discount rate approach to estimate service and interest components of net periodic benefit cost for our pension benefits. The spot discount rate approach applies the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows and is a more precise application of the yield curve spot rates used in the traditional single discount rate approach.

Of the assumptions listed above, changes in the expected long-term rate of return on plan assets and changes in the discount rate used in developing plan obligations will likely have the most significant impact on our annual earnings, prospectively. Based on plan assets at September 30, 2020, a one percentage point decrease or increase in expected asset returns would increase or decrease our pension expense by approximately $4.9. In addition, it may increase and accelerate the rate of required pension contributions in the future. Uncertainty related to economic markets and the availability of credit may produce changes in the yields on corporate bonds rated as high-quality. As a result, discount rates based on high-quality corporate bonds may increase or decrease, leading to lower or higher, respectively, pension obligations. A one percentage point decrease in the discount rate would increase pension obligations by approximately $93.9 at September 30, 2020.

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

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

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

Share-Based Compensation

We award restricted stock equivalents (“RSE”), which generally vest over two to four years. A portion of the RSE awards may provide for the issuance of common stock to certain managerial staff and executive management if specified performance targets are achieved. The fair value of each grant is estimated on the date of grant based on the current market price of the shares. The total amount of compensation expense recognized reflects the initial assumption that target performance goals will be achieved. Compensation expense may be adjusted during the life of the performance grant based on management’s assessment of the probability that performance goals will be achieved. If such goals are not met or it is determined that achievement of performance goals is not probable, compensation expense is adjusted to reflect the reduced expected payout level. If it is determined that the performance goals will be exceeded, additional compensation expense is recognized.

Non-qualified stock options (“share options”) are granted at the market price on the grant date and generally vest ratably over three years. We calculate the fair value of total share-based compensation for share options using the Black-Scholes option pricing model, which utilizes certain assumptions and estimates that have a material impact on the amount of total compensation cost recognized in our consolidated financial statements, including the expected term, expected stock price volatility, risk-free interest rate and expected dividends. The original estimate of the grant date fair value is not subsequently revised unless the awards are modified or there is a change in the number of awards expected to forfeit prior to vesting.

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

Valuation of Long-Lived Assets

We periodically evaluate our long-lived assets, including property, plant and equipment, goodwill and intangible assets, for potential impairment indicators. Judgments regarding the existence of impairment indicators, including lower than expected cash flows from acquired businesses, are based on legal factors, market conditions and operational performance. Future events could cause us to conclude that impairment indicators exist. We estimate fair value using valuation techniques such as discounted cash flows. This requires management to make assumptions regarding future income, working capital and discount rates, which would affect the impairment calculation. See the discussion on “Acquisitions, Goodwill and Intangible Assets” included later in this section for further information, including information on the non-cash impairment charges taken during fiscal 2019 and 2018.

Income Taxes

Our annual effective income tax rate is determined based on our income, statutory tax rates and the tax impacts of items treated differently for tax purposes than for financial reporting purposes. Tax law requires certain items to be included in the tax return at different times than the items reflected in the financial statements. Some of these differences are permanent, such as expenses that are not deductible in our tax return, and some differences are temporary, reversing over time, such as depreciation expense. These temporary differences create deferred tax assets and liabilities.

Deferred tax assets generally represent the tax effect of items that can be used as a tax deduction or credit in future years for which we have already recorded the tax benefit in our income statement. Deferred tax liabilities generally represent tax expense recognized in our financial statements for which payment has been deferred, the tax effect of expenditures for which a deduction has already been taken in our tax return but has not yet been recognized in our financial statements or assets recorded at estimated fair value in business combinations for which there was no corresponding tax basis adjustment.

We estimate income taxes and the effective income tax rate in each jurisdiction that we operate. This involves estimating taxable earnings, specific taxable and deductible items, the likelihood of generating sufficient future taxable income to utilize deferred tax assets, the portion of the income of foreign subsidiaries that is expected to be remitted to the U.S. and be taxable and possible exposures related to future tax audits. Deferred tax assets are evaluated on a subsidiary by subsidiary basis to ensure that the asset will be realized. Valuation allowances are established when the realization is not deemed to be more likely than not. Future performance is monitored, and when objectively measurable operating trends change, adjustments are made to the valuation allowances accordingly. To the extent the estimates described above change, adjustments to income taxes are made in the period in which the estimate is changed.

We operate in multiple jurisdictions with complex tax and regulatory environments, which are subject to differing interpretations by the taxpayer and the taxing authorities. At times, we may take positions that management believes are supportable, but are potentially subject to successful challenges by the appropriate taxing authority. We evaluate our tax positions and establish liabilities in accordance with guidance governing accounting for uncertainty in income taxes. We review these tax uncertainties in light of the changing facts and circumstances, such as the progress of tax audits, and adjust them accordingly.

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

Acquisitions, Goodwill and Intangible Assets

We allocate the cost of an acquired business to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The excess value of the cost of an acquired business over the estimated fair value of the assets acquired and liabilities assumed is recognized as goodwill. The valuation of the acquired assets and liabilities will impact the determination of future operating results. We use a variety of information sources to determine the value of acquired assets and liabilities, including: third-party appraisers for the values and lives of property, identifiable intangibles and inventories; actuaries for defined benefit retirement plans; and legal counsel or other experts to assess the obligations associated with legal, environmental or other claims.

During fiscal 2020, the Company used variations of the income approach in determining the fair value of intangible assets acquired in the acquisition of Cremo Holding Company, LLC. Specifically, we utilized the multi-period excess earnings method to determine the fair value of the definite lived customer relationships acquired and the relief from royalty method to determine the fair value of the definite lived trade name and proprietary technology that we acquired.

Our determination of the fair value of customer relationships acquired involved significant estimates and assumptions related to revenue growth rates, discount rates, and customer attrition rates. The determination of the fair value of trade names and proprietary technology acquired involved the use of significant estimates and assumptions related to revenue growth rates, royalty rates and discount rates. We believe that the fair value assigned to the assets acquired and liabilities assumed are based on reasonable assumptions and estimates that marketplace participants would use.

The recorded value of goodwill and intangible assets from recently acquired businesses are derived from more recent business operating plans and macroeconomic environmental conditions and, therefore, are likely more susceptible to an adverse change that could require an impairment charge. As such, significant judgment is required in estimating the fair value of goodwill and intangible assets. Additionally, significant judgment is needed when assigning a useful life to intangible assets. Certain intangible assets are expected to have determinable useful lives. Our assessment of intangible assets that have a determinable life is based on a number of factors including the competitive environment, market share, brand history, underlying product life cycles, operating plans and the macroeconomic environment. The costs of determinable-lived intangible assets are amortized to expense over the estimated useful life. The value of residual goodwill is not amortized, but is tested at least annually for impairment. See Note 7 of Notes to Consolidated Financial Statements.

However, future changes in the judgments, assumptions and estimates that are used in our acquisition valuations and intangible asset and goodwill impairment testing, including discount rates or future operating results and related cash flow projections, could result in significantly different estimates of the fair values in the future. An increase in discount rates, a reduction in projected cash flows or a combination of the two could lead to a reduction in the estimated fair values, which may result in impairment charges that could materially affect our financial statements in any given year.

During the fourth quarter of fiscal 2020, we performed an annual test for impairment of goodwill on each of our reporting units: Wet Shave, Sun Care, Skin Care, and Feminine Care. As part of the annual goodwill impairment test, we estimated the fair value of each reporting unit using both market and income approaches of valuation. The income approach utilizes the discounted cash flow method and incorporates significant estimates and assumptions, including long-term projections of future cash flows, market conditions, and discount rates reflecting the risk inherent in future cash flows. The projections for future cash flows are generated using our company’s strategic plan to determine a five-year period of forecasted cash flows and operating data. The market approach uses the guideline public company method to calculate the value of each reporting unit based on the operating data of similar assets from competing publicly traded companies. Multiples derived from guideline companies provide an indication of how much a knowledgeable investor in the marketplace would be willing to pay for a company. The multiples are adjusted given the specific characteristics of the reporting unit including its position in the market relative to the guideline companies and applied to the reporting unit’s operating data to arrive at an indication of value. The income and market approaches are weighted based on circumstances specific to each reporting unit and combined are used to calculate fair value.

Determining the fair value of a reporting unit requires the use of significant judgment, estimates and assumptions. While we believe that the estimates and assumptions underlying the valuation methodology are reasonable, these estimates and assumptions could have a significant impact on whether an impairment charge is recognized, and also on the magnitude of any such charge. The results of an impairment analysis are as of a point in time. There is no assurance that actual future earnings or cash flows of the reporting units will not decline significantly from these projections. We will monitor any changes to these assumptions and will evaluate goodwill as deemed warranted during future periods.

The key assumptions for the market and income approaches used to determine fair value of the reporting units are updated at least annually. Those assumptions and estimates include market data and market multiples, discount rates and terminal growth rates, as well as future levels of revenue growth and operating margins, which are based upon our strategic plan. The assumptions used for the annual goodwill impairment test for fiscal year 2020 include terminal growth rates ranging from 0.25% to 2.50% and a weighted average cost of capital of 9.5%.

Our annual impairment testing date is July 1, 2020, and the valuation indicated there was no impairment of the goodwill of the reporting units. The impairment analysis performed in fiscal 2020 indicated that the Wet Shave and Skin Care reporting units had fair values that were less than 110% of the carrying amounts. Refer below for a sensitivity analysis for reporting units with less than 10% headroom between fair value and carrying value.

We evaluate the fair value of indefinite-lived intangible assets annually in conjunction with the goodwill impairment test. Our assessment of intangible assets that have an indefinite life is based on a number of factors including the competitive environment, market share, brand history, underlying product life cycles, operating plans and the macroeconomic environment.

During the fourth quarter of fiscal 2020, we completed our annual impairment test of indefinite-lived intangible assets, which consist of trademarks and brand names used across our segments. The estimated fair value was determined using two income approaches: the multi-period excess earnings method and the relief-from-royalty method, both of which require significant assumptions, including estimates regarding future revenue and operating margin growth, discount rates, and appropriate royalty rates. Revenue and operating margin growth assumptions are based on historical trends and management’s expectations for future growth by brand. The discount rates were based on a weighted-average cost of capital utilizing industry market data of similar companies, in addition to estimated returns on the assets utilized in the operations of the applicable reporting unit, including net working capital, fixed assets and intangible assets. We estimated royalty rates based on operating profits of the brand.

The valuations of the indefinite-lived intangible assets had no indication of impairment as of the annual testing date on July 1, 2020. The impairment analysis performed in fiscal 2020 indicated that the Banana Boat trade name had a fair value that was less than 110% of the carrying amount. Refer below for a sensitivity analysis for the Banana Boat trade name had the key assumptions been adjusted.

Future changes in the judgment, assumptions and estimates that are used in our impairment testing could result in significantly different estimates of the fair values in the future. An increase in discount rates, a reduction in projected cash flows or a combination of the two could lead to a reduction in the estimated fair values, which may result in impairment charges that could materially affect our financial statements in any given year. The assumptions used for the annual valuation for indefinite-lived intangible assets for fiscal year 2020 include terminal growth rates ranging from 0.25% to 2.50% and a weighted average cost of capital ranging from 9.75% to 11.5%.

The annual impairment analysis performed in fiscal 2020 did not indicate that impairment existed in the reporting units or indefinite lived trade names. However, the annual impairment analysis indicated that the Wet Shave and Skin Care reporting units had fair values that were less than 110% of the carrying values. Additionally, the Banana Boat trade name had a fair value that was less than 110% of the carrying amount. The carrying amount of the goodwill of the Wet Shave and Skin Care reporting units as of September 30, 2020 was $598.2 and $103.6, respectively, excluding the estimated goodwill associated with the Cremo acquisition as of September 30, 2020. The carrying amount of the Banana Boat trade name was $277.2 as of September 30, 2020. The table below presents, based on the annual impairment test performed in fiscal 2020, the change in value of the Wet Shave and Skin Care reporting units and the Banana Boat trade name, given adjustments to the key assumptions. For the analysis, we estimated the fair value of the reporting units if we increased the discount rate by 25 basis points or reduced the long-term revenue growth rate by 25 basis points and then recalculated the percentage the fair value would have exceeded the carrying amount.

Discount rate increased by 25 bps Long-term growth rate decreased by 25 bps

Wet Shave reporting unit

Change in fair value $ (24) $ (19)

Percentage by which fair value exceeds carrying amount 1.4 % 1.7 %

Skin Care reporting unit

Change in fair value $ (8) $ (6)

Percentage by which fair value exceeds carrying amount 1.8 % 2.6 %

Banana Boat trade name

Change in fair value $ (9) $ (7)

Percentage by which fair value exceeds carrying amount 2.2 % 3.0 %

Recently Issued Accounting Standards

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

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

($ in millions)

The market risk inherent in our financial instruments and positions represents the potential loss arising from adverse changes in currency rates, commodity prices, interest rates and our stock price. The following risk management discussion and the estimated amounts generated from the sensitivity analysis are forward-looking statements of market risk, assuming certain adverse market conditions occur. Company policy allows derivatives to be used only for identifiable exposures and, therefore, we do not enter into hedges for trading purposes where the sole objective is to generate profits.

Currency Rate Exposure

A significant share of our sales is tied to currencies other than the U.S. dollar, our reporting currency. As such, a weakening of currencies relative to the U.S. dollar can have a negative impact to reported earnings. Conversely, strengthening of currencies relative to the U.S. dollar can improve reported results. The primary currencies to which we are exposed include the euro, the Japanese yen, the British pound, the Canadian dollar and the Australian dollar.

We do business in certain developing markets, which may be susceptible to greater volatility of inflation and currency exchange rates, as well as government pricing and import controls. While the activity is not considered material in relation to the consolidated company as a whole, there could be negative impacts to operating results in certain markets if inflationary pressures, exchange volatility and government controls negatively impact our ability to operate effectively and profitably.

Derivatives Designated as Cash Flow Hedging Relationships

At September 30, 2020, we maintained a cash flow hedging program related to foreign currency risk. These derivative instruments have a high correlation to the underlying exposure being hedged and have been deemed highly effective for accounting purposes in offsetting the associated risk.

We enter into forward currency contracts to hedge the cash flow uncertainty associated with currency fluctuations. These transactions are accounted for as cash flow hedges. We had an unrealized pre-tax loss of $3.0 and an unrealized pre-tax gain of $1.7 at September 30, 2020 and 2019, respectively, on these forward currency contracts accounted for as cash flow hedges included in Accumulated other comprehensive loss (“AOCI”). Assuming foreign exchange rates versus the U.S. dollar remain at September 30, 2020 levels over the next 12 months, the majority of the pre-tax gain included in AOCI at September 30, 2020 is expected to be included in Other expense (income), net. Contract maturities for these hedges extend into fiscal year 2022. There were 64 open foreign currency contracts at September 30, 2020 with a notional value of approximately $130.2.

For further information on our derivatives designated as cash flow hedging relationships, see Note 16 of Notes to Consolidated Financial Statements.

Derivatives Not Designated as Cash Flow Hedging Relationships

Our foreign subsidiaries enter into internal and external transactions that create non-functional currency balance sheet positions at the foreign subsidiary level. These exposures are generally the result of intercompany purchases, intercompany loans and, to a lesser extent, external purchases, and are revalued in the foreign subsidiary’s local currency at the end of each period. Changes in the value of the non-functional currency balance sheet positions in relation to the foreign subsidiary’s local currency result in an exchange gain or loss recorded in Other expense (income), net. The primary currency to which our foreign subsidiaries are exposed is the U.S. dollar.

We enter into foreign currency derivative contracts, which are not designated as cash flow hedges for accounting purposes, to mitigate these balance sheet exposures. Any gains or losses on these contracts are expected to be offset by exchange gains or losses on the underlying exposure; thus, they are not subject to significant market risk. The change in the estimated fair value of the foreign currency contracts resulted in losses of $0.5 and $1.2 for fiscal 2020 and 2019, respectively, which were recorded in Other expense (income), net. There were five open foreign currency derivative contracts which were not designated as cash flow hedges at September 30, 2020, with a notional amount of approximately $39.0.

For further information on our derivatives not designated as cash flow hedging relationships, see Note 16 of Notes to Consolidated Financial Statements.

Commodity Price Exposure

We use raw materials that are subject to price volatility. At times, we have used, and may in the future use, hedging instruments to reduce exposure to variability in cash flows associated with future purchases of certain materials and commodities. At September 30, 2020, there were no open derivative or hedging instruments for future purchases of raw materials or commodities.

Interest Rate Exposure

Our exposure to interest rate risk relates primarily to our variable-rate debt instruments, which currently bear interest based on LIBOR plus margin. As of September 30, 2020, our outstanding debt included $21.1 related to our international, variable-rate note payable. Assuming a one percent increase in the applicable interest rates, annual interest expense would increase by approximately $0.2.

The remaining outstanding debt as of September 30, 2020 is fixed-rate debt. Changes in market interest rates generally affect the fair value of fixed-rate debt, but do not impact earnings or cash flows.

Item 8. Financial Statements and Supplementary Data.

INDEX TO FINANCIAL STATEMENTS

Consolidated Financial Statements

Responsibility for Financial Statements 46

Management’s Report on Internal Control over Financial Reporting 46

Report of Independent Registered Public Accounting Firm 47

Consolidated Balance Sheets as of September 30, 2020 and 2019. 52

Notes to Consolidated Financial Statements. 55

Responsibility for Financial Statements

The preparation and integrity of the financial statements of Edgewell Personal Care Company (the “Company”) are the responsibility of its management. These statements have been prepared in conformance with generally accepted accounting principles in the United States of America, and in the opinion of management, fairly present the Company’s financial position, results of operations and cash flows.

The Company maintains accounting and internal control systems, which it believes are adequate to provide reasonable assurance that assets are safeguarded against loss from unauthorized use or disposition and that the financial records are reliable for preparing financial statements. The selection and training of qualified personnel, the establishment and communication of accounting and administrative policies and procedures, and a program of internal audits are important elements of these control systems.

The Board of Directors, through its Audit Committee consisting solely of non-management directors, meets periodically with management, internal audit and the independent auditors to discuss audit and financial reporting matters. To assure independence, PricewaterhouseCoopers LLP has direct access to the Audit Committee.

Management’s Report on Internal Control over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as defined under Exchange Act Rules 13a-15(f) and 15d-15(f). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles for external purposes. The Company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. Internal control over financial reporting, because of its inherent limitations, may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the framework set forth in Internal Control - Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the Company’s assessment, management has concluded that internal control over financial reporting as of September 30, 2020 was effective.

The Company's management has excluded the acquisition of Cremo Holding Company, LLC (“Cremo”) from its assessment of internal control over financial reporting as of September 30, 2020, because Cremo was acquired by the Company on September 2, 2020. The assets excluded from our assessment for the Cremo acquisition represent 0.6% of consolidated assets as of September 30, 2020 and 0.2% of consolidated net sales for the fiscal year ended September 30, 2020.

The Company’s internal control over financial reporting as of September 30, 2020 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report that appears herein.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Edgewell Personal Care Company

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Edgewell Personal Care Company and its subsidiaries (the “Company”) as of September 30, 2020 and 2019, and the related consolidated statements of earnings and comprehensive income (loss), of changes in shareholders' equity and of cash flows for each of the three years in the period ended September 30, 2020, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended September 30, 2020 appearing under Item 15(2) (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of September 30, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 30, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2020 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded Cremo Holding Company, LLC (“Cremo”) from its assessment of internal control over financial reporting as of September 30, 2020, because it was acquired by the Company in a purchase business combination during 2020. We have also excluded Cremo from our audit of internal control over financial reporting. Cremo is a wholly-owned subsidiary whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent less 0.6% and 0.2%, respectively, of the related consolidated financial statement amounts as of and for the year ended September 30, 2020.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Indefinite-Lived Intangible Asset Impairment Assessment – Banana Boat Trade Name

As described in Notes 2 and 7 to the consolidated financial statements, the Company’s consolidated indefinite-lived trade names and brands balance as of September 30, 2020 was $601.4 million, which includes $277.2 million related to the Banana Boat trade name. Management evaluates indefinite-lived intangible assets annually for impairment in the fourth fiscal quarter, or when indicators of a potential impairment are present. The impairment assessment compares the carrying values of the indefinite-lived intangible assets to the estimated fair values. The estimated fair value of the indefinite-lived intangible assets was determined using one of two income approaches: (i) the multi-period excess earnings method and (ii) the relief-from-royalty method, both of which require significant assumptions, including estimates regarding future revenue and operating margin growth, discount rates, and appropriate royalty rates.

The principal considerations for our determination that performing procedures relating to the indefinite-lived intangible asset impairment assessment for the Banana Boat trade name is a critical audit matter are the significant judgment by management when developing the fair value of the trade name; this in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management’s significant assumptions related to future revenue growth, operating margin, and the discount rate, used in the multi-period excess earnings method. In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s indefinite-lived intangible asset impairment assessment, including controls over the determination of the fair value of indefinite-lived intangible assets. These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the Banana Boat trade name, (ii) evaluating the appropriateness of the multi-period excess earnings method, (iii) testing the completeness and accuracy of underlying data used in the method, and (iv) evaluating the reasonableness of significant assumptions used by management related to future revenue growth, operating margin, and the discount rate. Evaluating management’s assumptions related to future revenue growth, operating margin and the discount rate involved evaluating whether the assumptions used by management were reasonable considering (i) current performance of the products supported by the trade name, (ii) relevant industry forecasts and macroeconomic conditions, (iii) management’s historical forecasting accuracy, (iv) consistency with evidence obtained in other areas of the audit, and (v) management’s objectives and strategies. Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of management’s application of the multi-period excess earnings method and the discount rate assumption.

Goodwill Impairment Assessments – Wet Shave and Skin Care Reporting Units

As described in Notes 2 and 7 to the consolidated financial statements, the Company’s consolidated goodwill, net balance as of September 30, 2020 was $1,159.7 million, which includes $598.2 million related to the Wet Shave reporting unit and $103.6 million related to the Skin Care reporting unit, excluding the estimated goodwill associated with the Cremo acquisition as of September 30, 2020. Management evaluates goodwill annually for impairment in the fourth fiscal quarter, or when indicators of a potential impairment are present. The impairment assessment compares the carrying values of the reporting units to the estimated fair values. In determining the estimated fair value of the reporting units when performing a quantitative analysis, both the market approach and the income approach are considered in the valuation, and where appropriate, both methods will be used and weighted, unless appropriate market comparables are not available for a reporting unit. The key assumptions and estimates for the market and income approaches used to determine fair value of the reporting units included market data and market multiples, discount rates and terminal growth rates, as well as future levels of revenue growth, and operating margins, which are based upon the Company’s strategic plan.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessments for the Wet Shave and Skin Care reporting units is a critical audit matter are the significant judgment by management when developing the fair value measurement of the reporting units; this in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence relating to management’s significant assumptions related to revenue growth, operating margins, and discount rates. In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessments, including controls over the determination of the fair value of the Company’s reporting units. These procedures also included, among others (i) testing management’s process for developing the fair value estimates of the Wet Shave and Skin Care reporting units, (ii) evaluating the appropriateness of the income approach, (iii) testing the completeness and accuracy of underlying data used in the income approach, and (iv) evaluating the reasonableness of significant assumptions used by management related to revenue growth, operating margins, and discount rates. Evaluating management’s assumptions related to revenue growth, operating margins, and discount rates involved evaluating whether the assumptions used by management were reasonable considering (i) current and past performance of the reporting units, (ii) relevant industry forecasts and macroeconomic conditions, (iii) management’s historical forecasting accuracy, (iv) consistency with evidence obtained in other areas of the audit, and (v) management’s objectives and strategies. Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of management’s income approach and the discount rates assumptions.

Valuation of Definite Lived Trade Name and Customer Relationships Acquired Intangible Assets – Cremo Acquisition

As described in Note 3 to the consolidated financial statements, the Company completed the acquisition of Cremo Holding Company, LLC (Cremo) in fiscal year 2020. The Company’s purchase price allocation included other intangible assets of $95.1 million, which includes definite lived trade name and customer relationships. The Company used variations of the income approach in determining the fair value of intangible assets acquired in the acquisition of Cremo. Specifically, the Company utilized the multi-period excess earnings method to determine the fair value of the definite lived customer relationships acquired and the relief from royalty method to determine the fair value of the definite lived trade name acquired and proprietary technology acquired. The Company’s determination of the fair value of the intangible assets acquired involved the use of significant estimates and assumptions related to revenue growth rates, discount rates, customer attrition rates, and royalty rates.

The principal considerations for our determination that performing procedures relating to the valuation of the definite lived trade name and customer relationships intangible assets acquired in the Cremo acquisition is a critical audit matter are the significant judgment by management when developing the fair value estimates; this in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s significant assumptions relating to (i) the discount rate for both the definite lived trade name and customer relationships and (ii) the royalty rate for the definite lived trade name. In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

the definite lived trade name and customer relationships, (iii) evaluating the appropriateness of the valuation methods, (iv) testing the completeness and accuracy of underlying data used in the methods, and (v) evaluating the reasonableness of significant assumptions related to the discount rate for both the definite lived trade name and the customer relationships and the royalty rate for the definite lived trade name. The royalty rate was evaluated by considering comparable businesses and other industry factors. Professionals with specialized skill and knowledge were used to assist in the evaluation of (i) the Company’s multi-period excess earnings and relief from royalty methods and (ii) the discount rate for both the definite lived trade name and the customer relationships, and the royalty rate for the definite lived trade name.

/s/ PricewaterhouseCoopers LLP

St. Louis, Missouri

November 20, 2020

We have served as the Company’s auditor since 1999.

EDGEWELL PERSONAL CARE COMPANY

CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME (LOSS)

(in millions, except per share data)

Fiscal Year

Selling, general and administrative expense 408.8 372.0 395.1

Research and development expense 55.3 53.5 61.1

Gain on sale of Infant and Pet Care business (4.1) — —

Gain on sale of Playtex gloves assets — — (15.3)

Pension settlement expense — — 5.4

Interest expense associated with debt 61.2 62.6 68.0

Cost of early retirement of long-term debt 26.2 — —

Other expense (income), net 5.4 1.5 (1.4)

Income tax provision (benefit) 19.7 (18.1) 60.5

Basic earnings (loss) per share (Note 6):

Diluted earnings (loss) per share (Note 6):

Statements of Comprehensive Income (Loss):

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments 29.9 (36.7) (11.6)

Total other comprehensive income (loss), net of tax 44.3 (87.6) (16.9)

Total comprehensive income (loss) $ 111.9 $ (459.8) $ 86.4

See accompanying Notes to Consolidated Financial Statements.

EDGEWELL PERSONAL CARE COMPANY

CONSOLIDATED BALANCE SHEETS

(in millions, except share data)

Assets

Current assets

Cash and cash equivalents $ 364.7 $ 341.6

Property, plant and equipment, net 370.9 396.0

Liabilities and Shareholders’ Equity

Current liabilities

Current maturities of long-term debt $ — $ 117.0

Deferred income tax liabilities 102.5 101.1

Commitments and contingencies (Note 17)

Shareholders’ equity

Accumulated other comprehensive loss (191.6) (235.9)

Total liabilities and shareholders’ equity $ 3,540.9 $ 3,420.9

See accompanying Notes to Consolidated Financial Statements.

EDGEWELL PERSONAL CARE COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

Fiscal Year

Cash Flow from Operating Activities

Adjustments to reconcile net earnings (loss) to net cash flow from operations:

Share-based compensation expense 19.2 17.8 17.0

Deferred income taxes (2.9) (59.6) 2.3

Deferred compensation payments (8.7) (7.5) (16.7)

Loss (gain) on sale of assets 2.3 1.5 (10.9)

Gain on sale of Infant and Pet Care business (4.1) — —

Cost of early retirement of long-term debt 26.2 — —

Non-cash Sun Care reformulation costs — — 25.3

Non-cash restructuring costs — — 1.8

Accounts receivable, net 66.3 (1.9) (10.7)

Other current assets 3.0 (14.7) (2.0)

Other current liabilities (20.3) 19.2 9.3

Cash Flow from Investing Activities

Acquisitions, net of cash acquired (233.6) — (90.2)

Proceeds from sale of Infant Care business 95.8 — —

Proceeds from sale of Playtex gloves assets — — 19.0

Investment in equity securities (13.8) — —

Proceeds from sale of other assets — 4.1 4.7

Collection of deferred purchase price from accounts receivable sold 4.3 9.7 9.7

Other, net (1.4) (1.3) —

Net cash used by investing activities (196.4) (45.5) (118.8)

Cash Flow from Financing Activities

Cash proceeds from the issuance of Senior Notes due 2028 750.0 — —

Cash payments on Senior Notes due 2021 (600.0) — —

Term Loan repayment — (185.0) —

Debt issuance costs for the Revolving Credit Facility (3.6) — —

Debt issuance costs for Senior Notes due 2028 (11.7) — —

Cost of early retirement of long-term debt (26.2) — —

Employee shares withheld for taxes (2.0) (3.0) (3.1)

Common shares purchased — — (124.4)

Net cash used by financing activities (18.7) (63.8) (379.6)

Effect of exchange rate changes on cash 5.6 (6.1) 2.5

Net increase (decrease) in cash and cash equivalents 23.1 75.2 (236.5)

Cash and cash equivalents, beginning of period 341.6 266.4 502.9

Cash and cash equivalents, end of period $ 364.7 $ 341.6 $ 266.4

Supplemental Disclosures of Cash Flow Information:

Cash paid for interest, net $ 56.1 $ 60.6 $ 66.6

Cash paid for income taxes, net 24.6 58.0 22.0

See accompanying Notes to Consolidated Financial Statements.

EDGEWELL PERSONAL CARE COMPANY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(in millions)

Common Shares Treasury Shares

Foreign currency translation adjustments — — — — — — (11.6) (11.6)

Pension and postretirement activity — — — — — — (9.0) (9.0)

Deferred gain on hedging activity — — — — — — 3.7 3.7

Repurchase of shares — — (2.1) (124.4) — — — (124.4)

Foreign currency translation adjustments — — — — — — (36.7) (36.7)

Pension and postretirement activity — — — — — — (49.5) (49.5)

Deferred loss on hedging activity — — — — — — (1.4) (1.4)

Activity under share plans — — 0.2 15.4 (0.6) — — 14.8

Net earnings — — — — — 67.6 — 67.6

Foreign currency translation adjustments — — — — — — 29.9 29.9

Pension and postretirement activity — — — — — — 17.7 17.7

Deferred loss on hedging activity — — — — — — (3.3) (3.3)

Activity under share plans — — 0.1 13.4 4.1 — — 17.5

See accompanying Notes to Consolidated Financial Statements.

EDGEWELL PERSONAL CARE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions, except per share data)

Note 1 - Background and Basis of Presentation

Background

Edgewell Personal Care Company and its subsidiaries (collectively, “Edgewell” or the “Company”), is one of the world’s largest manufacturers and marketers of personal care products in the wet shave, sun and skin care and feminine care categories. Edgewell operates in more than 20 countries and has a global footprint in more than 50 countries.

The Company conducts its business in the following three segments:

•Wet Shave consists of products sold under the Schick®, Wilkinson Sword®, Edge, Skintimate®, Shave Guard® and Personna® brands, as well as non-branded products. The Company’s wet shave products include razor handles and refillable blades, disposable shave products and shaving gels and creams.

•Sun and Skin Care consists of Banana Boat® and Hawaiian Tropic® sun care products and Cremo®, Jack Black® and Bulldog® men’s skin care products, as well as Wet Ones® wipes and Playtex® household gloves until the sale of the gloves assets in October 2017.

•Feminine Care includes tampons, pads and liners sold under the Playtex Gentle Glide® and Sport®, Stayfree®, Carefree® and o.b.® brands.

Through December 2019, the Company also conducted business in its All Other segment which included infant and pet care products, such as bottles, cups and pacifiers, sold under the Playtex®, OrthoPro® and Binky® brand names, as well as the Diaper Genie® and Litter Genie® disposal systems. The Company completed the sale of the Infant and Pet Care business in December 2019.

Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company and its controlled subsidiaries and have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”), under the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”).The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Actual results may differ materially from those estimates.All intercompany balances and transactions have been eliminated in consolidation and, in the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included.

Acquisition of Cremo. On September 2, 2020, the Company completed the acquisition of Cremo Holding Company, LLC (“Cremo”), a men’s skincare products company based in the United States. The results of Cremo for the post-acquisition period are included within the Company’s results since the acquisition date for the fiscal year ended September 30, 2020. For more information on the acquisition, see Note 3 of Notes to Consolidated Financial Statements.

Sale of Infant and Pet Care assets. On December 17, 2019, the Company completed the sale of its Infant and Pet Care business which was included in the All Other segment through the date of the sale. The All Other segment will have no further operating results after the first quarter of fiscal 2020. Operations for the Company’s manicure kits were reclassified to the Sun and Skin Care segment for both the current and prior year periods as these products were not part of the divestiture. The impact of recasting the prior period segment information was not material. For more information on the sale of Infant and Pet Care assets, see Note 3 of Notes to Consolidated Financial Statements.

Acquisition of Jack Black. On March 1, 2018, the Company completed the acquisition of Jack Black, L.L.C. (“Jack Black”), a luxury men’s skincare products company based in the United States. The results of Jack Black for the post-acquisition period are included within the Company’s results since the acquisition date for the fiscal years ended September 30, 2020, 2019 and 2018. For more information on the acquisition, see Note 3 of Notes to Consolidated Financial Statements.

Note 2 - Summary of Significant Accounting Policies

Foreign Currency Translation

Financial statements of foreign operations where the local currency is the functional currency are translated using end-of-period exchange rates for assets and liabilities, and average exchange rates during the period for results of operations. Related translation adjustments are reported as a component within accumulated other comprehensive income in the shareholders’ equity section of the Consolidated Balance Sheets, except as noted below.

Gains and losses resulting from foreign currency transactions are included in Net earnings (loss). Foreign currency losses of $10.5, $3.9 and $3.7 during fiscal 2020, 2019 and 2018, respectively, were included within Other expense (income), net. The Company uses foreign exchange (“FX”) instruments to reduce the risk of FX transactions as described below and in Note 16 of Notes to Consolidated Financial Statements.

Financial Instruments and Derivative Securities

The Company uses financial instruments, from time to time, in the management of foreign currency, interest rate and other risks that are inherent to its business operations. Such instruments are not held or issued for trading purposes.

FX instruments, including forward currency contracts, are used primarily to reduce cash transaction exposures and, to a lesser extent, to manage other translation exposures. FX instruments used are selected based on their risk reduction attributes, costs and the related market conditions. The Company has designated certain foreign currency contracts as cash flow hedges for accounting purposes as of September 30, 2020.

At September 30, 2020, the Company had $21.1 of variable rate debt outstanding. The Company has, in the past, used interest rate swaps to hedge the risk of variable rate debt. As of September 30, 2020, the Company did not have any outstanding interest rate swap agreements.

For further discussion, see Note 11 and Note 16 of Notes to Consolidated Financial Statements.

Cash Equivalents

Cash equivalents are considered to be highly liquid investments with a maturity of three months or less when purchased. At September 30, 2020, the Company had $364.7 in available cash and cash equivalents, a portion of which was outside of the U.S. The Company has extensive operations outside of the U.S., including a significant manufacturing footprint. The Company manages its worldwide cash requirements by reviewing available funds among the many subsidiaries through which it conducts its business and the cost effectiveness with which those funds can be accessed. The repatriation of cash balances from certain of the Company’s subsidiaries could have adverse tax consequences or be subject to regulatory capital requirements; however, those balances are generally available without legal restrictions to fund ordinary business operations.

Cash Flow Presentation

The Consolidated Statements of Cash Flows are prepared using the indirect method, which reconciles Net earnings (loss) to Net cash from operating activities. The reconciliation adjustments include the removal of timing differences between the occurrence of operating receipts and payments and their recognition in Net earnings (loss). The adjustments also remove cash flows arising from investing and financing activities, which are presented separately from operating activities. Cash flows from foreign currency transactions and operations are translated at an average exchange rate for the period. Cash flows from hedging activities are included in the same category as the items being hedged, which is primarily operating activities. Cash payments related to income taxes are classified as operating activities.

Trade Receivables

Trade receivables are stated at their net realizable value. The allowance for doubtful accounts reflects the Company’s best estimate of probable losses inherent in the trade receivables portfolio determined on the basis of historical experience, specific allowances for known troubled accounts and other currently available information. Bad debt expense is included in Selling, general and administrative expense (“SG&A”). The Company began an accounts receivable factoring program in September 2017. For further discussion, see Note 10 of Notes to Consolidated Financial Statements.

Inventories

Inventories are valued at the lower of cost or net realizable value, with cost generally being determined using average cost or the first-in, first-out (“FIFO”) method.

Capitalized Software Costs

Capitalized software costs are included in Property, plant and equipment, net. These costs are amortized using the straight-line method over periods of related benefit ranging from three to seven years. Expenditures related to capitalized software are included within Capital expenditures in the Consolidated Statements of Cash Flows. Amortization expense associated with capitalized software was $5.2, $4.3, and $5.3 in fiscal 2020, 2019 and 2018, respectively.

Property, Plant and Equipment, net

Property, plant and equipment, net (“PP&E”) is stated at historical cost. PP&E acquired as part of a business combination is recorded at estimated fair value. Expenditures for new facilities and expenditures that substantially increase the useful life of property, including interest during construction, are capitalized and reported as Capital expenditures in the accompanying Consolidated Statements of Cash Flows. Maintenance, repairs and minor renewals are expensed as incurred. When property is retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts, and gains or losses on the disposition are reflected in Net earnings (loss). Depreciation is generally provided on the straight-line basis by charges to earnings at rates based on estimated useful lives. Estimated useful lives range from two to 10 years for machinery and equipment and three to 30 years for buildings and building improvements. Depreciation expense was $66.3, $69.9 and $74.3 in fiscal 2020, 2019 and 2018, respectively. Fiscal 2019 depreciation expense includes accelerated depreciation charges of $1.9 related to restructuring activities. See Note 4 of Notes to Consolidated Financial Statements for further information on restructuring charges.

Estimated useful lives are periodically reviewed and, when appropriate, changes are made and accounted for prospectively. When certain events or changes in operating conditions occur, asset lives may be adjusted and an impairment assessment may be performed on the recoverability of the carrying amounts.

Goodwill and Other Intangible Assets

Goodwill and indefinite-lived intangibles are not amortized but are instead evaluated annually for impairment as part of the Company’s annual business planning cycle in the fourth fiscal quarter, or when indicators of a potential impairment are present. The estimated fair value of each reporting unit (Wet Shave, Sun Care, Skin Care and Feminine Care) is estimated using valuation models that incorporate assumptions and projections of expected future cash flows and operating plans. In determining the estimated fair value of the reporting units when performing a quantitative analysis, both the market approach and the income approach are considered in the valuation, and where appropriate, both methods will be used and weighted, unless appropriate market comparables are not available for a reporting unit.

Determining the fair value of a reporting unit requires the use of significant judgment, estimates and assumptions. While the Company believes that the estimates and assumptions underlying the valuation methodology are reasonable, these estimates and assumptions could have a significant impact on whether an impairment charge is recognized, and also on the magnitude of any such charge. The results of an impairment analysis are as of a point in time. There is no assurance that actual future earnings or cash flows of the reporting units will not vary significantly from these projections. The Company will monitor any changes to these assumptions and will evaluate the carrying value of goodwill as deemed warranted during future periods. The continued duration and severity of the COVID-19 pandemic may result in future impairment charges as a prolonged pandemic could have an additional impact on the results of the Company’s operations due to changes in consumer habits.

The key assumptions and estimates for the market and income approaches used to determine fair value of the reporting units included market data and market multiples, discount rates and terminal growth rates, as well as future levels of revenue growth, and operating margins, which are based upon the Company’s strategic plan.

The Company evaluates indefinite-lived intangible assets, which consist of trademarks and brand names used across the Company’s segments for impairment on an annual basis. The estimated fair value was determined using one of two income approaches: (i) the multi-period excess earnings method and (ii) the relief-from-royalty method, both of which require significant assumptions, including estimates regarding future revenue and operating margin growth, discount rates, and appropriate royalty rates. Revenue and operating margin growth assumptions are based on historical trends and management’s expectations for future growth by brand. The discount rates were based on a weighted-average cost of capital utilizing industry market data of similar companies, and estimated returns on the assets utilized in the operations of the applicable reporting unit, including net working capital, fixed assets and intangible assets. The Company estimated royalty rates based on operating profits of the brand.

Intangible assets with finite lives, and a remaining weighted-average life of approximately eight years, are amortized on a straight-line basis over expected lives of five to 20 years. Such intangibles are also evaluated for impairment including ongoing monitoring of potential impairment indicators.

Refer to Note 7 of Notes to Consolidated Financial Statements for further discussion on goodwill and other intangible assets.

Impairment of Long-Lived Assets

The Company reviews long-lived assets, other than goodwill and other intangible assets, for impairment when events or changes in business circumstances indicate that the remaining useful life may warrant revision or that the carrying amount of the long-lived asset may not be fully recoverable. The Company performs an undiscounted cash flow analysis to determine if impairment exists for an asset or asset group. If impairment is determined to exist, any related impairment loss is calculated based on estimated fair value. Impairment losses on assets to be disposed of, if any, are based on the estimated proceeds to be received, less cost of disposal.

Revenue Recognition

Principal Revenue Streams and Significant Judgments

Our principal revenue streams can be divided into: (i) sale of personal care products primarily through retailers in North America; (ii) sale of personal care products through a combination of retailers and distributors internationally; and iii) production and sale of private brands products in North America and internationally that are made to customer specifications.

Performance Obligations

The Company’s revenue is generated from the sale of its products. Revenue is recognized when the customer obtains control of the goods, which occurs when the ability to use and obtain benefits from the goods are passed to the customer, most commonly upon the delivery of goods to the customer. Discounts are offered to customers for early payment and an estimate of the discounts is recorded as a reduction of Net sales in the same period as the sale. The Company’s standard sales terms are final and returns or exchanges are not permitted with the exception of end of season returns for Sun Care products. Reserves are established and recorded in cases where the right of return exists for a particular sale.

The Company assesses the goods promised in its customers’ purchase orders and identifies a performance obligation to transfer goods (or a bundle of goods) that is distinct. To identify the performance obligations, the Company considers all the goods promised, whether explicitly stated or implied based on customary business practices. The Company’s purchase orders are short term in nature, lasting less than one year and contain a single delivery element. For a purchase order that has more than one performance obligation, the Company allocates the total consideration to each distinct performance obligation on a relative stand-alone selling price basis. The Company does not exclude variable consideration in determining the remaining value of performance obligations.

Significant Judgments

The Company records sales at the time that control of goods pass to the customer. The terms of these sales vary but, in all instances, the following conditions are met: (i) the sales arrangement is evidenced by purchase orders submitted by customers; (ii) the selling price is fixed or determinable; (iii) title to the product has transferred; (iv) there is an obligation to pay at a specified date without any additional conditions or actions required by the Company; and (v) collectability is reasonably assured. Simultaneously with the sale, the Company reduces Net sales and Cost of products sold and reserves amounts on its Consolidated Balance Sheet for anticipated returns based upon an estimated return level in accordance with GAAP. Customers are required to pay for the Sun Care product purchased during the season under the required terms. Under certain circumstances, the Company allows customers to return Sun Care products that have not been sold by the end of the Sun Care season, which is normal practice in the Sun Care industry. The timing of returns of Sun Care products can vary in different

regions based on climate and other factors. However, the majority of returns occur in the U.S. from September through January following the summer Sun Care season. The Company estimates the level of Sun Care returns as the Sun Care season progresses using a variety of inputs including historical experience, consumption trends during the Sun Care season, obsolescence factors including expiration dates and inventory positions at key retailers. The Company monitors shipment activity and inventory levels at key retailers during the season in an effort to more accurately estimate potential returns. This allows the Company to manage shipment activity to its customers, especially in the latter stages of the Sun Care season, to reduce the potential for returned product. The Company also allows for returns of other products under limited circumstances. Non-Sun Care returns are evaluated each period based on communications with customers and other issues known as of period end. The Company had a reserve for returns of $44.8 and $60.4 at September 30, 2020 and September 30, 2019, respectively. The adoption of ASU 2014-09 required changes in the presentation of returns on the Consolidated Balance Sheet, namely that a return asset should be recognized for returns expected to be resold, measured at the carrying amount of goods at the time of sale, less the expected costs to recover the goods and any expected reduction in value.

In addition, the Company offers a variety of programs, such as consumer coupons and rebate programs, primarily to its retail customers, designed to promote sales of its products. Such programs require periodic payments and allowances based on estimated results of specific programs and are recorded as a reduction to Net sales. The Company accrues, at the time of sale, the estimated total payments and allowances associated with each transaction. Additionally, the Company offers programs directly to consumers to promote the sale of its products. Promotions which reduce the ultimate consumer sale price are recorded as a reduction of Net sales at the time the promotional offer is made using estimated redemption and participation levels. Taxes the Company collects on behalf of governmental authorities, which are generally included in the price to the customer, are also recorded as a reduction of Net sales. The Company continually assesses the adequacy of accruals for customer and consumer promotional program costs not yet paid. To the extent total program payments differ from estimates, adjustments may be necessary. Historically, these adjustments have not been material.

Contract Balances

The timing of revenue recognition is based on completion of performance obligations through the transfer of goods. Standard payment terms with customers require payment after goods have been delivered and risk of ownership has transferred to the customer. The Company has contract liabilities as a result of advanced payments received from certain customers before goods have been delivered and all performance obligations have been completed. Contract liabilities were $1.4 and $1.7 at September 30, 2020 and September 30, 2019, respectively, and were classified within Other current liabilities on our Consolidated Balance Sheets. Substantially all of the amount deferred will be recognized within a year, with the significant majority to be captured within a quarter following deferral.

Trade receivables are stated at their net realizable value. The allowance for doubtful accounts reflects the Company’s best estimate of probable losses inherent in the receivables portfolio determined on the basis of historical experience, specific allowances for known troubled accounts, and other currently available information.

Advertising and Sales Promotion Costs

The Company advertises and promotes its products through national and regional media and expenses such activities as incurred. Advertising and sales promotion expense reported on the Consolidated Statements of Earnings and Comprehensive Income (Loss) includes advertising costs of $121.2, $137.9 and $171.3 for fiscal 2020, 2019 and 2018, respectively.

Share-Based Payments

The Company grants restricted share equivalents (“RSE”), which generally vest over two to four years. The estimated fair value of each grant is estimated on the date of grant based on the current market price of the Company’s common shares. The original estimate of the grant date fair value is not subsequently revised unless the awards are modified. The Company has elected to recognize forfeiture of awards as they occur. A portion of the RSE awards provide for the issuance of common stock to certain managerial staff and executive management if the Company achieves specified performance targets. The total amount of compensation expense recognized reflects the initial assumption that target performance goals will be achieved. Compensation expense may be adjusted during the life of the performance grant based on management’s assessment of the probability that performance targets will be achieved. If such targets are not met or it is determined that achievement of performance goals is not probable, compensation expense is adjusted to reflect the reduced expected payout level in the period the determination is made. If it is determined that the performance targets will be exceeded, additional compensation expense is recognized.

Non-qualified stock options (“Share Options”) are granted at the market price on the grant date and generally vest ratably over three years. The Company calculates the fair value of total share-based compensation for Share Options using the Black-Scholes option pricing model, which utilizes certain assumptions and estimates that have a material impact on the amount of total compensation cost recognized in the Consolidated Financial Statements, including the expected term, expected share price volatility, risk-free interest rate and expected dividends. The original estimate of the grant date fair value is not subsequently revised unless the awards are modified. The Company has elected to recognize forfeiture of awards as they occur.

Income Taxes

The Company’s annual effective income tax rate is determined based on its pre-tax income (loss), statutory tax rates and the tax impacts of items treated differently for tax purposes than for financial reporting purposes. Tax law requires certain items be included in the tax return at different times than the items are reflected in the financial statements. Some of these differences are permanent, such as expenses that are not deductible in the Company’s tax return, and some differences are temporary, reversing over time, such as depreciation expense. These temporary differences create deferred tax assets and liabilities.

Deferred tax assets generally represent the tax effect of items that can be used as a tax deduction or credit in future years for which the Company has already recorded the tax benefit in the Consolidated Statement of Earnings. Deferred tax liabilities generally represent tax expense recognized in the Company’s financial statements for which payment has been deferred, the tax effect of expenditures for which a deduction has already been taken in its tax return but has not yet been recognized in its financial statements or assets recorded at estimated fair value in business combinations for which there was no corresponding tax basis adjustment.

The Company estimates income taxes and the effective income tax rate in each jurisdiction that it operates. This involves estimating taxable earnings, specific taxable and deductible items, the likelihood of generating sufficient future taxable income to utilize deferred tax assets, the portion of the income of foreign subsidiaries that is expected to be remitted to the U.S. and be taxable and possible exposures related to future tax audits. Deferred tax assets are evaluated on a subsidiary by subsidiary basis to ensure that the asset will be realized. Valuation allowances are established when the realization is not deemed to be more likely than not. Future performance is monitored, and when objectively measurable operating trends change, adjustments are made to the valuation allowances accordingly. To the extent the estimates described above change, adjustments to income taxes are made in the period in which the estimate is changed.

The Company operates in multiple jurisdictions with complex tax and regulatory environments, which are subject to differing interpretations by the taxpayer and the taxing authorities. At times, the Company may take positions that management believes are supportable but are potentially subject to successful challenges by the appropriate taxing authority. The Company evaluates its tax positions and establishes liabilities in accordance with guidance governing accounting for uncertainty in income taxes. The Company reviews these tax uncertainties in light of the changing facts and circumstances, such as the progress of tax audits, and adjusts them accordingly.

Estimated Fair Values of Financial Instruments

Certain financial instruments are required to be recorded at estimated fair value. Changes in assumptions or estimation methods could affect the fair value estimates; however, the Company does not believe any such changes would have a material impact on its financial condition, results of operations or cash flows. Other financial instruments including cash and cash equivalents and short-term borrowings, including notes payable, are recorded at cost, which approximates estimated fair value. The estimated fair values of long-term debt and financial instruments are disclosed in Note 16 of Notes to Consolidated Financial Statements.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02 which amends existing lease accounting guidance to require recognition of lease assets and lease liabilities on the balance sheet for leases previously classified as operating leases. Additionally, this update requires qualitative disclosure along with specific quantitative disclosures. The Company adopted the standard effective October 1, 2019, using the modified retrospective approach with no restatement of prior period amounts. As a result of adoption, the Company recognized leased right of use assets and liabilities of $57.4 and $57.5, respectively. The impact to the Consolidated Statements of Earnings and Comprehensive Income (Loss) and Consolidated Statement of Cash Flows was not material for fiscal 2020. Refer to Note 9 in Notes to Consolidated Financial Statements for further discussion on recently adopted accounting pronouncements.

In August 2017, the FASB issued ASU 2017-12, which eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires, for qualifying hedges, the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. The guidance also modifies the accounting for components excluded from the assessment of hedge effectiveness, eases documentation and assessment requirements and modifies certain disclosure requirements. The Company adopted the standard effective October 1, 2019. The impact from adoption of this new accounting pronouncement was not material to the Company's financial statements for fiscal 2020.

In June 2018, the FASB issued ASU 2018-07, which simplifies the treatment of share-based payment transactions used in acquiring goods and services from non-employees. The amendments note that measurement of share-based payments used to acquire goods or services should be valued at the grant-date fair value. The grant date is defined as the date at which the grantor and grantee reach a mutual understanding of the terms and conditions of the award. Finally, any awards containing a performance condition should be valued considering the probability of satisfying the necessary performance conditions consistent with employee share-based awards. The Company adopted the standard effective October 1, 2019. The impact from adopting this guidance was not material to the Company's financial statements for fiscal 2020.

In March 2020, the SEC issued Final Rule No. 33-10762 and Final Rule No. 34-88307, Financial Disclosures about Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant's Securities. The final rule amends the disclosure requirements in SEC Regulation S-X, Rule 3-10, which currently requires entities to separately present financial statements for subsidiary issuers and guarantors of registered debt securities unless certain exceptions are met. The rule permits entities to provide summarized financial information of the parent company and each issuer and guarantor in either a note to the financial statements or in management's discussion and analysis. The final rule is effective for filings beginning October 1, 2021, with early adoption permitted. The Company adopted the final rule in the second quarter of fiscal 2020.

In March 2020, the FASB issued ASU 2020-04, which provides optional guidance to ease the potential burden in accounting for and recognizing the effects of reference rate reform on financial reporting. The amendments provide expedients and exceptions to GAAP for contracts, hedging relationships, and other transactions affected by reference rate reform including contracts within the scope of Topic 310 Receivables and Topic 470 Debt, which should be accounted for prospectively adjusting the effective interest rate. Modifications within the scope of Topic 842 should be accounted for as a continuation with no reassessment of lease classification and discount rate. Additionally, modifications of contracts do not require an entity to reassess its original conclusion about whether that contract contains an embedded derivative. These amendments are effective immediately and may be applied prospectively to new contracts and modifications entered into on or before December 31, 2022. The impact on the adoption of the guidance was not material to the financial statements.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13 intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The new guidance applies to all financial instruments, including trade receivables, and requires the measurement of all expected credit losses for financial assets held at a reporting date to be based on historical experience, current conditions and reasonable and supportable forecasts. Previous guidance did not include forward-looking information. The update will be effective for the Company beginning October 1, 2020 and early adoption is permitted for fiscal years beginning after December 15, 2018. The Company is in the process of evaluating the impact the guidance will have on its financial statements. The impact of the new guidance is not expected to be material and will be dependent on the credit quality of the trade receivables outstanding at the date of adoption. The Company evaluates the credit-worthiness of customers when negotiating contracts and, as trade receivables are short term in nature, the timing between recognition of a credit loss under existing guidance and the new guidance is not expected to differ materially.

In August 2018, the FASB issued ASU 2018-13 adjusting the disclosure requirements for fair value measurements. The guidance updates the disclosure requirements regarding leveling of fair value assets and the valuation of Level 3 fair value measurements. The update will be effective for the Company beginning October 1, 2020 and early adoption is permitted. The standard will not result in material changes to the required disclosures.

In August 2018, the FASB issued ASU 2018-14 which modifies the disclosure requirements for defined benefit pension plans and other post retirement plans. The guidance removes disclosures that are no longer considered cost beneficial, clarifies the specific requirements of disclosures and adds disclosure requirements identified as relevant. The new standard will be effective for the Company beginning October 1, 2020 and early adoption is permitted. The standard will not result in material changes to the required disclosures.

In August 2018, the FASB issued ASU 2018-15 which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The amendments in this ASU require an entity that is the customer in a hosting arrangement to follow the guidance on internal-use software to determine which implementation costs to capitalize and which costs to expense. The standard also requires a customer to expense the capitalized implementation costs of a hosting arrangement over the term of the hosting arrangement. The new guidance requires an entity to present the expense related to the capitalized implementation costs in the same line item in the statement of income as the fees associated with the hosting element of the arrangement and classify payments for capitalized implementation costs in the statement of cash flows in the same manner as payments made for fees associated with the hosting element. The entity is also required to present the capitalized implementation costs in the statement of financial position in the same line item that a prepayment for the fees of the associated hosting arrangement would be presented. The guidance is effective for the Company beginning October 1, 2020 and early adoption is permitted. The adoption of this guidance could impact the timing of expenses associated with implementation costs for internal-use software but does not expect it to have a material impact to the financial statements or required disclosures.

EPC US Equity

EPC · 10-K · period ended 2020-09-30

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

EPC US Equity☆

EPC · 10-K · period ended 2020-09-30

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

EPC US Equity