- Reported and Organic Sales Growth of
3% and 5%
- Repurchased 8.6% of Common Shares
Outstanding
- Significant Deleveraging from Debt
Reduction Totaling $2.4 Billion
Spectrum Brands Holdings, Inc. (NYSE: SPB), a leading global
branded consumer products company focused on driving innovation and
providing exceptional customer service, today reported results from
continuing operations for the second quarter of fiscal 2019 ended
March 31, 2019.
“Our Q2 results, highlighted by strong and broad-based top-line
growth, met our expectations, and we remain on track to deliver
full-year adjusted EBITDA within our guidance range of $560-$580
million,” said David Maura, Chairman and Chief Executive Officer of
Spectrum Brands Holdings.
Fiscal 2019 Second Quarter Highlights
from Continuing Operations
Three Month Periods Ended (in
millions, except per share and %) March 31, 2019
March 31, 2018 Variance Net Sales $ 906.7 $ 882.6 $
24.1 2.7% Gross Profit 305.5 306.0 (0.5) (0.2%) Operating Income
41.6 31.3 10.3 32.9% Net Loss from continuing operations (54.0)
(34.7) (19.3) 55.6% Diluted EPS from continuing operations $ (1.06)
$ (1.00) $ (0.06) 6.0%
Non-GAAP Operating Metrics Adjusted
EBITDA from continuing operations $ 115.6 $ 115.9 $ (0.3) (0.3%)
Adjusted EPS from continuing operations $ 0.26 $ 0.49 $ (0.23)
(46.9%)
- Net sales growth was led by a 14%
increase in Home & Garden and strong growth in Hardware &
Home Improvement. Organic net sales increased 4.9%, excluding $19.3
million of unfavorable foreign exchange, with all four divisions
delivering organic sales growth.
- Gross profit margin decreased 100 basis
points primarily due to input cost inflation and unfavorable
product mix, partially offset by pricing.
- Operating income increased as a result
of lower acquisition, integration and restructuring charges.
Operating margin expanded 100 basis points.
- Increased net loss and diluted loss per
share were driven by one-time interest charges related to early
debt extinguishment and foreign exchange losses associated with
multi-currency divestiture loans, partially offset by lower
restructuring and acquisition and integration expense and a larger
income tax benefit.
- Lower adjusted diluted EPS was
attributable to higher operating expenses driven by a
year-over-year change in stock-based compensation and higher
interest costs from assumed HRG debt.
- Adjusted EBITDA of $115.6 million was
essentially unchanged. Growth in Home & Garden and Hardware
& Home Improvement, as well as lower corporate expenses and
investment income, was offset by decreases in Home & Personal
Care and Global Pet Supplies.
- Adjusted EBITDA margin fell 40 basis
points driven primarily by increased distribution costs and
unfavorable mix.
- Income from discontinued operations,
net of tax, was $783.6 million as a result of the completion of the
Global Battery & Lighting and Global Auto Care divestitures in
January of 2019.
“Significant, value-creating actions were completed in the
second quarter,” Mr. Maura said, “that accelerate Spectrum Brands’
transformation in 2019 into a meaningfully stronger and more
focused consumer products company poised to resume profitable
growth in 2020 and drive long-term value creation.
“We quickly used $2.9 billion in asset sale proceeds to reduce
debt by $2.4 billion and materially delever our balance sheet,
while ending the quarter with strong liquidity of more than $800
million,” he said. “We also returned $250 million to shareholders
through an aggressive repurchase of nearly 9 percent of our shares,
leaving up to $750 million available on our existing 3-year buyback
authorization.
“We are currently conducting a detailed analysis of our global
operating model to identify opportunities for significant
performance improvement and operating efficiencies across our
businesses as we seek to position the new Spectrum Brands as a more
focused and streamlined company,” Mr. Maura said. “At the same
time, we continue to refine our organizational structure with new
leadership in key roles, expand our innovation pipeline across all
four businesses, and meaningfully step up investment spending
behind our strongest brands.”
Fiscal 2019 Second Quarter Segment Level Data
Hardware & Home Improvement (HHI) Three
Month Periods Ended (in millions, except
%) March 31, 2019 March 31, 2018
Variance Net Sales $ 331.1 $ 318.5 $ 12.6 4.0% Operating
Income 44.4 19.6 24.8 126.5% Operating Income Margin 13.4% 6.2% 720
bps Adjusted EBITDA $ 52.7 $ 45.5 $ 7.2 15.8% Adjusted EBITDA
Margin 15.9% 14.3% 160 bps
Increased net sales were driven by growth in U.S. residential
security, plumbing and builders’ hardware along with significant
improvements in shipping performance at the Kansas distribution
center. Excluding unfavorable foreign exchange impacts of $2.3
million, organic net sales grew 4.7%.
Improved operating income and margin were driven largely by
reduced restructuring costs. Higher adjusted EBITDA and margin were
primarily a result of increased volumes, productivity improvements
and strong expense controls.
Home & Personal Care (HPC)
Three Month Periods Ended (in
millions, except %) March 31, 2019 March 31,
2018 Variance Net Sales $ 221.7 $ 231.1 $ (9.4) (4.1%)
Operating Income (6.8) 14.2 (21.0) (147.9%) Operating Income Margin
(3.1%) 6.1% (920) bps Adjusted EBITDA $ 4.5 $ 20.1 $ (15.6) (77.6%)
Adjusted EBITDA Margin 2.0% 8.7% (670) bps
Reduced net sales were driven primarily by lower personal care
revenues, partly offset by improved small appliances revenues.
Personal care sales fell in the U.S. predominantly as a result of
prior-year hair care distribution losses in mass and food/drug
channels and in Europe primarily from e-commerce and U.K. food/drug
channel softness. Net sales for small appliances increased
primarily from growth in the U.S. mass channel in coffeemakers and
garment care, partially offset in Europe by foreign exchange and
Brexit-related consumer softness in the U.K. Excluding unfavorable
foreign exchange impacts of $11.8 million, organic net sales
increased 1.0%.
The operating loss compared to last year was partly attributable
to the absence of depreciation and amortization charges in the
prior year due to the segment being classified as held for sale. In
addition, the decline in operating income and operating income
margin, as well as adjusted EBITDA and adjusted EBITDA margin, was
impacted by increased marketing investments, reduced personal care
volumes, unfavorable product mix, transaction foreign exchange, and
higher input costs.
Global Pet Supplies (PET)
Three Month Periods Ended (in
millions, except %) March 31, 2019 March 31,
2018 Variance Net Sales $ 214.9 $ 211.2 $ 3.7 1.8%
Operating Income 19.7 14.9 4.8 32.2% Operating Income Margin 9.2%
7.1% 210 bps Adjusted EBITDA $ 32.8 $ 35.7 $ (2.9) (8.1%) Adjusted
EBITDA Margin 15.3% 16.9% (160) bps
Increased net sales were attributable to strong growth in U.S.
companion animal revenues, predominantly dog chews and treats,
partly offset by lower U.S. aquatics sales and European pet food
revenues. Excluding unfavorable foreign exchange impacts of $5.2
million, organic net sales grew 4.2%.
Improved operating income and margin were largely driven by the
absence of rawhide recall-related costs compared to last year and
lower restructuring expense this year, partially offset by
increased manufacturing and distribution costs. Reduced adjusted
EBITDA and margin were primarily a result of increased
manufacturing and distribution costs.
Home & Garden (H&G)
Three Month Periods Ended (in
millions, except %) March 31, 2019 March 31,
2018 Variance Net Sales $ 139.0 $ 121.8 $ 17.2 14.1%
Operating Income 24.6 20.4 4.2 20.6% Operating Income Margin 17.7%
16.7% 100 bps Adjusted EBITDA $ 29.6 $ 25.3 $ 4.3 17.0% Adjusted
EBITDA Margin 21.3% 20.8% 50 bps
Significantly higher net sales, primarily from a double-digit
increase in outdoor control category revenues, were driven by
generally improved weather, distribution wins and strong early
season home center orders.
Increased operating income, adjusted EBITDA and margins were
predominantly a result of improved manufacturing efficiencies from
higher volumes and pricing actions.
Liquidity and Debt
Spectrum Brands completed the second quarter of fiscal 2019 with
a strong liquidity position, including a cash balance of
approximately $176 million and more than $652 million available on
its $800 million Cash Flow Revolver.
As of the end of the second quarter of fiscal 2019, the Company
had approximately $2,392 million of debt outstanding, consisting of
$126 million drawn on its Cash Flow Revolver, $2,012 million of
senior unsecured notes, and approximately $254 million of capital
leases and other obligations.
During the second quarter, the Company repurchased 4.6 million
shares of its common stock for $250.0 million, or $54.22 per
share.
Fiscal 2019 Outlook for Continuing Operations
Spectrum Brands expects reported net sales growth driven by
innovation, increased marketing investments, pricing actions and
market share gains. The impact from foreign exchange on net sales
is now expected to have a negative impact of approximately 130
basis points based upon current rates.
Adjusted EBITDA is expected to be between $560-$580 million, and
capital expenditures are expected to be between $70-$75
million.
Conference Call/Webcast Scheduled for 9:00 A.M. Eastern Time
Today
Spectrum Brands will host an earnings conference call and
webcast at 9:00 a.m. Eastern Time today, May 8. To access the live
conference call, U.S. participants may call 877-556-5260 and
international participants may call 973-532-4903. The conference ID
number is 9293064. A live webcast and related presentation slides
will be available by visiting the Event Calendar page in the
Investor Relations section of Spectrum Brands’ website at
www.spectrumbrands.com.
A replay of the live webcast also will be accessible through the
Event Calendar page in the Investor Relations section of the
Company’s website. A telephone replay of the conference call will
be available through May 22. To access this replay, participants
may call 855-859-2056 and use the same conference ID number.
About Spectrum Brands Holdings, Inc.
Spectrum Brands Holdings, a member of the Russell 1000 Index, is
a global and diversified consumer products company and a leading
supplier of residential locksets, residential builders’ hardware,
plumbing, shaving and grooming products, personal care products,
small household appliances, specialty pet supplies, lawn and garden
and home pest control products, and personal insect repellents.
Helping to meet the needs of consumers worldwide, our Company
offers a broad portfolio of market-leading, well-known and widely
trusted brands including Kwikset®, Weiser®, Baldwin®, National
Hardware®, Pfister®, Remington®, Black + Decker®, George Foreman®,
Russell Hobbs®, Tetra®, Marineland®, GloFish®, Nature’s Miracle®,
Dingo®, 8-in-1®, FURminator®, IAMS® and Eukanuba® (Europe only),
Healthy-Hide®, Digest-eeze™, DreamBone®, SmartBones®, Littermaid®,
Spectracide®, Cutter®, Repel®, Hot Shot®, Black Flag® and Liquid
Fence®. For more information, visit www.spectrumbrands.com.
Non-GAAP Measurements
Management believes that certain non-GAAP financial measures may
be useful in certain instances to provide additional meaningful
comparisons between current results and results in prior operating
periods. Management believes that organic net sales provide for a
more complete understanding of underlying business trends of
regional and segment performance by excluding the impact of
currency exchange rate fluctuations and the impact of acquisitions.
In addition, within this release, including the supplemental
information attached hereto, reference is made to adjusted diluted
EPS, adjusted earnings before interest, taxes, depreciation and
amortization (EBITDA), and adjusted EBITDA margin. Adjusted EBITDA
is a metric used by management to evaluate segment performance and
frequently used by the financial community which provides insight
into an organization’s operating trends and facilitates comparisons
between peer companies, since interest, taxes, depreciation and
amortization can differ greatly between organizations as a result
of differing capital structures and tax strategies. Adjusted EBITDA
also is one of the measures used for determining compliance with
the Company’s debt covenants. Adjusted EBITDA excludes certain
items that are unusual in nature or not comparable from period to
period. Adjusted EBITDA margin reflects adjusted EBITDA as a
percentage of net sales of the Company. The Company’s management
uses adjusted diluted EPS as one means of analyzing the Company’s
current and future financial performance and identifying trends in
its financial condition and results of operations. Management
believes that adjusted diluted EPS is a useful measure for
providing further insight into our operating performance because it
eliminates the effects of certain items that are not comparable
from one period to the next. An income tax adjustment is included
in adjusted diluted EPS to exclude the impact of the valuation
allowance against deferred taxes and other tax-related items in
order to reflect a normalized ongoing effective tax rate. The
Company provides this information to investors to assist in
comparisons of past, present and future operating results and to
assist in highlighting the results of on-going operations. While
the Company’s management believes that non-GAAP measurements are
useful supplemental information, such adjusted results are not
intended to replace the Company’s GAAP financial results and should
be read in conjunction with those GAAP results. Other Supplemental
Information has been provided to demonstrate reconciliation of
non-GAAP measurements discussed above to most relevant GAAP
financial measurements.
Forward-Looking Statements
This document contains, and certain oral and written statements
made by our representatives from time to time may contain,
forward-looking statements, including, without limitation,
statements made under “Fiscal 2019 Outlook for Continuing
Operations”, other statements regarding the Company’s ability to
meet its expectations for its fiscal 2019 and 2020 and the
Company’s share repurchase program, for which the manner of
purchase, the number of shares to be purchased and the timing of
purchases will be based on a number of factor including the price
of the Company’s common stock, general business and market
conditions and applicable legal requirements, and is subject to the
discretion of the Company's management and may be discontinued at
any time. We have tried, whenever possible, to identify these
statements by using words like “future,” “anticipate”, “intend,”
“plan,” “estimate,” “believe,” “belief,” “expect,” “project,”
“forecast,” “could,” “would,” “should,” “will,” “may,” and similar
expressions of future intent or the negative of such terms. These
statements are subject to a number of risks and uncertainties that
could cause results to differ materially from those anticipated as
of the date of this release. Actual results may differ materially
as a result of (1) the impact of our indebtedness on our business,
financial condition and results of operations; (2) the impact of
restrictions in our debt instruments on our ability to operate our
business, finance our capital needs or pursue or expand business
strategies; (3) any failure to comply with financial covenants and
other provisions and restrictions of our debt instruments; (4) the
impact of actions taken by significant stockholders; (5) the impact
of fluctuations in commodity prices, costs or availability of raw
materials or terms and conditions available from suppliers,
including suppliers’ willingness to advance credit; (6) interest
rate and exchange rate fluctuations; (7) the loss of significant
reduction in, or dependence upon, sales to any significant retail
customer(s); (8) competitive promotional activity or spending by
competitors, or price reductions by competitors; (9) the
introduction of new product features or technological developments
by competitors and/or the development of new competitors or
competitive brands; (10) the effects of general economic
conditions, including inflation, recession or fears of a recession,
depression or fears of a depression, labor costs and stock market
volatility or changes in trade, tariff, monetary or fiscal policies
in the countries where we do business; (11) changes in consumer
spending preferences and demand for our products; (12) our ability
to develop and successfully introduce new products, protect our
intellectual property and avoid infringing the intellectual
property of third parties; (13) our ability to successfully
implement, achieve and sustain manufacturing and distribution cost
efficiencies and improvements, and fully realize anticipated cost
savings; (14) the seasonal nature of sales of certain of our
products; (15) the effects of climate change and unusual weather
activity; (16) the cost and effect of unanticipated legal, tax or
regulatory proceedings or new laws or regulations (including
environmental, public health and consumer protection regulations);
(17) public perception regarding the safety of products that we
manufacture and sell, including the potential for environmental
liabilities, product liability claims, litigation and other claims
related to products manufactured by us and third parties; (18) the
impact of pending or threatened litigation; (19) the impact of
cybersecurity breaches or our actual or perceived failure to
protect company and personal data; (20) changes in accounting
policies applicable to our business; (21) our ability to utilize
net operating loss carry-forwards to offset tax liabilities from
future taxable income; (22) government regulations; (23) the impact
of expenses resulting from the implementation of new business
strategies, divestitures or current and proposed restructuring
activities; (24) our inability to successfully integrate and
operate new acquisitions at the level of financial performance
anticipated; (25) the unanticipated loss of key members of senior
management; (26) the effects of political or economic conditions,
terrorist attacks, acts of war or other unrest in international
markets; and (27) the other risk factors set forth in the
securities filings of Spectrum Brands Holdings, Inc., including the
most recently filed Annual Report on Form 10-K or Quarterly Report
on Form 10-Q.
Spectrum Brands also cautions the reader that its estimates of
trends, market share, retail consumption of its products and
reasons for changes in such consumption are based solely on limited
data available to Spectrum Brands and management’s reasonable
assumptions about market conditions, and consequently may be
inaccurate, or may not reflect significant segments of the retail
market. Spectrum Brands also cautions the reader that undue
reliance should not be placed on any forward-looking statements,
which speak only as of the date of this release. Spectrum Brands
undertakes no duty or responsibility to update any of these
forward-looking statements to reflect events or circumstances after
the date of this report or to reflect actual outcomes.
SPECTRUM BRANDS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME (Unaudited)
Three Month Periods Ended Six Month Periods
Ended (in millions, except per share amounts) March
31, 2019 March 31, 2018 March 31, 2019 March
31, 2018 Net sales $ 906.7 $ 882.6 $ 1,787.0 $ 1,804.9 Cost of
goods sold 601.0 574.9 1,174.7 1,178.3 Restructuring and related
charges 0.2 1.7 1.0 2.0 Gross profit 305.5
306.0 611.3 624.6 Selling 151.4 152.4 306.9 306.1 General and
administrative 83.6 82.6 183.0 162.2 Research and development 11.2
11.5 22.3 23.0 Acquisition and integration related charges 5.3 9.6
11.6 14.9 Restructuring and related charges 12.4 18.6
20.5 35.5 Total operating expenses 263.9
274.7 544.3 541.7 Operating income 41.6 31.3
67.0 82.9 Interest expense 94.2 67.7 151.2 143.0 Other
non-operating expense (income), net 24.1 —
24.8 (0.7) Loss from continuing operations before income
taxes (76.7) (36.4) (109.0) (59.4) Income tax benefit (22.7)
(1.7) (26.0) (122.2) Net (loss) income from
continuing operations (54.0) (34.7) (83.0) 62.8 Income from
discontinued operations, net of tax 783.6 11.3
700.4 492.7 Net income (loss) 729.6 (23.4) 617.4 555.5 Net
income attributable to non-controlling interest 1.0
5.5 1.2 77.0 Net income (loss) attributable to
controlling interest $ 728.6 $ (28.9) $ 616.2 $ 478.5
Amounts
attributable to controlling interest Net (loss) income from
continuing operations attributable to controlling interest $ (55.0)
$ (32.6) $ (84.2) $ 7.5 Net income from discontinued operations
attributable to controlling interest 783.6 3.7
700.4 471.0 Net income (loss) attributable to controlling
interest $ 728.6 $ (28.9) $ 616.2 $ 478.5
Earnings Per Share
Basic earnings per share from continuing operations $ (1.06) $
(1.00) $ (1.60) $ 0.23 Basic earnings per share from discontinued
operations 15.13 0.11 13.32 14.52 Basic
earnings per share $ 14.07 $ (0.89) $ 11.72 $ 14.75 Diluted
earnings per share from continuing operations $ (1.06) $ (1.00) $
(1.60) $ 0.23 Diluted earnings per share from discontinued
operations 15.13 0.11 13.32 14.42
Diluted earnings per share $ 14.07 $ (0.89) $ 11.72 $ 14.65
Weighted Average Shares Outstanding Basic 51.8 32.5 52.6
32.4 Diluted 51.8 32.5 52.6 32.7
SPECTRUM BRANDS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOW (Unaudited)
Six Month Periods Ended (in millions)
March 31, 2019 March 31, 2018 Cash flows from
operating activities Net cash used by operating activities from
continuing operations
$
(279.7)
$
(257.3) Net cash (used) provided by operating activities from
discontinued operations (254.0) 71.5 Net cash used by
operating activities (533.7) (185.8)
Cash flows from investing
activities Purchases of property, plant and equipment (27.1)
(38.1) Proceeds from sales of property, plant and equipment 0.1 0.9
Proceeds from sale of discontinued operations, net of cash
2,854.4 1,520.2 Net cash provided by investing activities
from continuing operations 2,827.4 1,483.0 Net cash used by
investing activities from discontinued operations (5.3)
(185.1) Net cash provided by investing activities 2,822.1
1,297.9
Cash flows from financing activities Proceeds from
issuance of debt 136.3 581.3 Payment of debt, including premium on
extinguishment (2,479.9) (998.0) Payment of debt issuance costs
(0.1) (0.3) Treasury stock purchases (268.5) — Purchases of
subsidiary stock, net — (258.0) Dividends paid to shareholders
(44.6) — Dividends paid by subsidiary to non-controlling interest —
(19.7) Share based award tax withholding payments, net of proceeds
upon vesting (2.5) (22.7) Other financing activities, net —
10.0 Net cash used by financing activities from continuing
operations (2,659.3) (707.4) Net cash (used) provided by financing
activities from discontinued operations (2.3) 118.5
Net cash used by financing activities (2,661.6) (588.9) Effect of
exchange rate changes on cash and cash equivalents (3.1)
3.2 Net change in cash, cash equivalents and restricted cash
(376.3) 526.4 Net change in cash, cash equivalents and restricted
cash in discontinued operations — 37.7 Net change in
cash, cash equivalents and restricted cash in continuing operations
(376.3) 488.7 Cash, cash equivalents and restricted cash, beginning
of period 561.4 254.8 Cash, cash equivalents and
restricted cash, end of period $ 185.1 $ 743.5
SPECTRUM BRANDS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION (Unaudited)
(in millions) March 31, 2019 Sept.
30, 2018 Assets Cash and cash equivalents $ 176.2 $
552.5 Trade receivables, net 470.5 317.1 Other receivables 95.5
51.7 Inventories 776.2 583.6 Prepaid expenses and other current
assets 66.3 63.2 Current assets of business held for sale —
2,402.6 Total current assets 1,584.7 3,970.7 Property, plant
and equipment, net 469.8 500.0 Deferred charges and other 161.0
231.8 Investments 237.9 — Goodwill 1,449.3 1,454.7 Intangible
assets, net 1,583.8 1,641.8 Total assets $ 5,486.5 $
7,799.0
Liabilities and Shareholders' Equity Current portion
of long-term debt $ 16.1 $ 26.9 Accounts payable 450.4 584.7
Accrued wages and salaries 50.3 55.1 Accrued interest 33.6 65.0
Other current liabilities 441.4 159.4 Current liabilities of
business held for sale — 537.6 Total current
liabilities 991.8 1,428.7 Long-term debt, net of current portion
2,342.0 4,624.3 Deferred income taxes 88.5 35.0 Other long-term
liabilities 135.6 121.4 Total liabilities 3,557.9
6,209.4 Shareholders' equity 1,919.1 1,581.3 Noncontrolling
interest 9.5 8.3 Total equity 1,928.6
1,589.6 Total liabilities and equity $ 5,486.5 $ 7,799.0
SPECTRUM BRANDS HOLDINGS, INC. OTHER
SUPPLEMENTAL INFORMATION (Unaudited)
ADJUSTED DILUTED EPS
We define adjusted diluted EPS as reported diluted EPS excluding
the effect of one-time, non-recurring activity and volatility
associated with our income tax expense. The Company believes that
adjusted diluted EPS provides further insight and comparability in
operating performance as it eliminates the effects of certain items
that are not comparable from one period to the next. Adjustments to
diluted EPS include the following:
- proforma adjustment associated with the
per share impact from the Spectrum Merger, including the change in
weighted average shares from the incremental shares issued to
execute the HRG Merger share exchange with Spectrum’s
non-controlling interest, plus the inclusion of income attributable
to non-controlling interest in Spectrum recognized by HRG Group,
Inc. (“HRG”) prior to the consolidation of the shareholder groups
and recognition of Spectrum as a wholly-owned business after
completion of the Spectrum Merger for the three and six month
periods ended March 31, 2018.
- Transaction related charges consist of
(1) transaction costs from qualifying acquisition transactions
during the period, or subsequent integration related project costs
directly associated with an acquired business; (2) post-divestiture
separation costs consisting of incremental costs incurred by the
continuing operations of the Company after completion of the GBL
and GAC divestitures to facilitate separation of shared operations,
development of transferred shared service operations, platforms and
personnel transferred as part of the divestitures and exiting of
TSAs and reverse TSAs with Energizer; (3) divestiture related
transaction costs that are recognized in continuing operations due
to the change in plan to cease marketing and selling of the HPC
business.
- restructuring and related costs, which
consist of project costs associated with restructuring initiatives
across segments;
- unrealized gains and losses
attributable to the Company’s investment in Energizer common stock,
acquired as part of consideration received from the Company’s sale
and divestiture of GAC to Energizer;
- foreign currency gains and losses
attributable to multicurrency loans that were entered with foreign
subsidiaries in exchange for the receipt of divestiture proceeds by
the parent company through the distribution of the respective
foreign subsidiaries’ net assets as part of the GBL and GAC
divestitures. The Company has also entered into various hedging
arrangements to mitigate the volatility of foreign exchange risk
associated with such loans.
- purchase accounting inventory
adjustments recognized in earnings subsequent to an
acquisition;
- non-cash asset impairments or
write-offs of intangible assets, goodwill, or property plant and
equipment realized;
- estimated costs from a non-recurring
voluntary recall of rawhide product by the PET segment;
- transaction costs associated with the
Spectrum Merger;
- non-recurring HRG net operating costs
that consist of redundant and duplicative costs from the legacy HRG
corporate operations that are eliminated post Spectrum Merger
transaction date of July 13, 2018, including compensation and
benefits, directors fees, professional fees, insurance, public
company costs, among others; also including other non-recurring
interest income, a one-time fee for the termination of the HRG New
York corporate home office lease and the one-time termination fee
of HRG legacy pension plan;
- interest costs associated with
HRG-originated debt during the three and six month periods ended
March 31, 2018;
- depreciation and amortization on
long-lived assets from HPC that was deferred during the three and
six month periods ended March 31, 2018 while considered held for
sale (effective December 27, 2017) and subsequently reclassified as
held for use during the three month period ended December 30, 2018,
resulting in the recognition of a cumulative true-up of amounts
previously deferred; and
- other adjustments primarily consisting
of costs attributable to operating margin on H&G sales to GAC
discontinued operations for the three and six month periods ended
March 31, 2019 and 2018; expenses and cost recovery for flood
damage at Company facilities in Middleton, Wisconsin during the
three and six month periods ended March 31, 2019; and certain fines
and penalties for delayed shipments following the completion of a
PET distribution center consolidation in EMEA during the six month
period ended March 31, 2019.
Income tax adjustment to diluted EPS is to exclude the impact of
adjusting the valuation allowance against deferred taxes and other
tax related items in order to reflect a normalized ongoing
effective tax rate of 25.0% and 24.5% for the three and six month
periods ended March 31, 2019 and March 31, 2018, respectively, net
of adjustments made to diluted EPS, based upon enacted corporate
tax rate in the United States. The following is a reconciliation of
reported diluted EPS from continuing operations to adjusted diluted
EPS from continuing operations for the three and six month periods
ended March 31, 2019 and 2018.
Three Month Periods Ended Six
Month Periods Ended March 31, 2019 March 31, 2018
March 31, 2019 March 31, 2018 Diluted EPS from
continuing operations, as reported $ (1.06) $ (1.00) $ (1.60) $
0.23 Adjustments: Spectrum Merger share exchange proforma
adjustment — 0.38 — 0.88 Transaction related charges 0.10 0.17 0.22
0.27 Restructuring and related charges 0.24 0.37 0.41 0.67 Debt
refinancing costs 0.98 — 0.96 — Unrealized loss on Energizer
investment 0.10 — 0.09 — Foreign currency loss on multicurrency
divestiture loans 0.42 — 0.41 — Purchase accounting inventory
adjustment — — — 0.01 Pet safety recall — 0.07 0.01 0.20 Spectrum
Merger related transaction costs — 0.29 — 0.34 Non-recurring HRG
net operating costs — 0.15 — 0.24 Interest cost on HRG debt — 0.46
— 1.13 Depreciation & amortization on HPC long-lived assets —
(0.21) 0.55 (0.21) Other 0.02 — 0.08 — Income tax adjustment
(0.54) (0.19) (0.65) (2.58) Total adjustments
1.32 1.49 2.08 0.95 Diluted EPS from
continuing operations, as adjusted $ 0.26 $ 0.49 $ 0.48 $ 1.18
SPECTRUM BRANDS HOLDINGS, INC. OTHER
SUPPLEMENTAL INFORMATION (Unaudited)
ADJUSTED DILUTED EPS (continued)
The weighted average shares and adjusted earnings per share data
are adjusted for the three and six month periods ended March 31,
2018, to reflect the reverse stock split and share exchange because
of the HRG Merger, which closed on July 13, 2018. For the three
month period ended December 31, 2017, the weighted average shares
was adjusted using (i) the 20-trading-day volume-weighted average
price per share of Spectrum common stock ending on July 12, 2018,
(ii) the number of shares of Spectrum common stock outstanding, the
number of shares of Spectrum common stock held by HRG and its
subsidiaries and the number of shares of Spectrum common stock
outstanding as of July 12, 2018, (iii) $328.2 million of HRG net
indebtedness and transaction expense at closing, and (iv) a $200.0
million upward adjustment contemplated by the Merger Agreement,
each HRG stockholder received approximately 0.1613 of a share of
the post-Merger combined company stock for each share of pre-Merger
common stock. The following is a recalculation of the weighted
average shares adjusted for the impact of the reverse stock split
and share exchange for the three and six month periods ended March
31, 2018.
Three Month Period Six Month
Period (in millions, except per share amounts) Ended
March 31, 2018 Ended March 31, 2018 Spectrum weighted
average shares 57.1 57.4 Spectrum weighted average shares owned by
HRG 34.3 34.3 Spectrum weighted average shares owned
by third parties (A) 22.8 23.1 HRG weighted average shares 201.6
201.1 HRG share conversion at 1 to 0.1613 (B) 32.5
32.4 Total weighted average shares (A + B) 55.3 55.5
The following summarizes transaction related charges for the
three and six month periods ended March 31, 2019 and 2018:
Three Month Periods Ended Six
Month Periods Ended (in millions) March 31, 2019
March 31, 2018 March 31, 2019 March 31, 2018
HHI Integration $ 0.4 $ 1.9 $ 0.9 $ 4.6 PetMatrix Integration — 2.1
— 3.7 HPC divestiture related charges 0.9 5.4 5.5 5.4 GBL post
divestiture separation costs 2.5 — 2.5 — GAC post divestiture
separation costs 0.4 — 0.4 — Other integration related charges
1.1 0.2 2.3 1.2 Total $ 5.3 $ 9.6 $
11.6 $ 14.9
The following summarizes restructuring and related charges for
the three and six month periods ended March 31, 2019 and 2018:
Three Month Periods Ended Six
Month Periods Ended (in millions) March 31, 2019
March 31, 2018 March 31, 2019 March 31, 2018
Global productivity improvement plan $ 12.7 $ — $ 18.5 $ — HHI
distribution center consolidation — 13.6 2.3 28.8 PET rightsizing
initiative — 3.4 — 4.0 Other restructuring activities (0.1)
3.3 0.7 4.7 Total restructuring and related
charges $ 12.6 $ 20.3 $ 21.5 $ 37.5
SPECTRUM BRANDS HOLDINGS, INC. OTHER
SUPPLEMENTAL INFORMATION (Unaudited)
NET SALES AND ORGANIC NET SALES
The following is a summary of net sales by segment for the three
and six month periods ended March 31, 2019 and 2018,
respectively:
Three Month Periods Ended Six Month Periods
Ended (in millions, except %) March 31, 2019
March 31, 2018 Variance March 31, 2019
March 31, 2018 Variance HHI $ 331.1 $ 318.5 12.6 4.0%
$ 636.2 $ 644.4 (8.2) (1.3%) HPC 221.7 231.1 (9.4) (4.1%) 538.9
573.1 (34.2) (6.0%) PET 214.9 211.2 3.7 1.8% 419.6 413.6 6.0 1.5%
H&G 139.0 121.8 17.2 14.1% 192.3
173.8 18.5 10.6% Net Sales $ 906.7 $ 882.6 24.1 2.7% $ 1,787.0 $
1,804.9 (17.9) (1.0%)
We define organic net sales as reported net sales excluding the
effect of changes in foreign currency exchange rates and
acquisitions. We believe this non-GAAP measure provides useful
information to investors because it reflects regional and operating
segment performance from our activities without the effect of
changes in currency exchange rate and/or acquisitions. We use
organic net sales as one measure to monitor and evaluate our
regional and segment performance. Organic growth is calculated by
comparing organic net sales to reported net sales in the prior
year. The effect of changes in currency exchange rates is
determined by translating the period’s net sales using the currency
exchange rates that were in effect during the prior period. Net
sales are attributed to the geographic regions based on the country
of destination. We exclude net sales from acquired businesses in
the current year for which there are no comparable sales in the
prior period. The following is a reconciliation of reported sales
to organic sales for the three and six month periods ended March
31, 2019 compared to reported net sales for the three and six month
periods ended March 31, 2018, respectively:
March 31, 2019
Three Month Periods Ended Effect of Changes in
Organic Net Sales (in millions, except %)
Net Sales Currency Net Sales March 31,
2018 Variance HHI $ 331.1 $ 2.3 $ 333.4 $ 318.5 $ 14.9
4.7% HPC 221.7 11.8 233.5 231.1 2.4 1.0% PET 214.9 5.2 220.1 211.2
8.9 4.2% H&G 139.0 — 139.0 121.8
17.2 14.1% Net Sales $ 906.7 $ 19.3 $ 926.0 $ 882.6 43.4 4.9%
March 31, 2019 Six Month Periods Ended
Effect of Changes in Organic Net Sales (in
millions, except %) Net Sales Currency Net
Sales March 31, 2018 Variance HHI $ 636.2 $ 3.9 $
640.1 $ 644.4 $ (4.3) (0.7%) HPC 538.9 22.0 560.9 573.1 (12.2)
(2.1%) PET 419.6 7.0 426.6 413.6 13.0 3.1% H&G 192.3
— 192.3 173.8 18.5 10.6% Total $ 1,787.0 $
32.9 $ 1,819.9 $ 1,804.9 15.0 0.8%
SPECTRUM BRANDS HOLDINGS, INC. OTHER
SUPPLEMENTAL INFORMATION (Unaudited)
ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN
Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation,
Amortization) is a non-GAAP metric used by management that we
believe provides useful information to investors because it
reflects ongoing operating performance and trends of our segments
excluding certain non-cash based expenses and/or non-recurring
items during each of the comparable periods and facilitates
comparisons between peer companies since interest, taxes,
depreciation and amortization can differ greatly between
organizations as a result of differing capital structures and tax
strategies. Further, adjusted EBITDA is a measure used for
determining the Company’s debt covenant. EBITDA is calculated by
excluding the Company’s income tax expense, interest expense,
depreciation expense and amortization expense (from intangible
assets) from net income. Adjusted EBITDA further excludes the
following:
- Stock based and other incentive
compensation costs that consist of costs associated with long-term
compensation arrangements and other equity based compensation based
upon achievement of long-term performance metrics; and generally
consist of non-cash, stock-based compensation. During the three
month period ended March 31, 2019, the Company issued certain
incentive bridge awards due to changes in the Company’s long-term
compensation plans that allow for cash based payment upon employee
election which have been included in the adjustment but would not
qualify for shared-based compensation expense;
- Transaction related charges consist of
(1) transaction costs from qualifying acquisition transactions
during the period, or subsequent integration related project costs
directly associated with an acquired business; (2) post-divestiture
separation costs consisting of incremental costs incurred by the
continuing operations of the Company after completion of the GBL
and GAC divestitures to facilitate separation of shared operations,
development of transferred shared service operations, platforms and
personnel transferred as part of the divestitures and exiting of
TSAs and reverse TSAs with Energizer; (3) divestiture related
transaction costs that are recognized in continuing operations due
to the change in plan to cease marketing and selling of the HPC
business.
- Restructuring and related charges,
which consist of project costs associated with restructuring
initiatives across the segments;
- Unrealized gains and losses
attributable to the Company’s investment in Energizer common stock,
acquired as part of consideration received from the Company’s sale
and divestiture of GAC to Energizer;
- Foreign currency gains and losses
attributable to multicurrency loans that were entered with foreign
subsidiaries in exchange for the receipt of divestiture proceeds by
the parent company through the distribution of the respective
foreign subsidiaries’ net assets as part of the GBL and GAC
divestitures. The Company has also entered into various hedging
arrangements to mitigate the volatility of foreign exchange risk
associated with such loans.
- Incremental costs associated with a
safety recall in PET.
- Non-cash purchase accounting inventory
adjustments recognized in earnings from continuing operations
subsequent to an acquisition (when applicable);
- Non-cash asset impairments or
write-offs realized and recognized in earnings from continuing
operations (when applicable);
- Transactions costs directly associated
with the Spectrum Merger during the three and six month periods
ended March 31, 2018;
- Non-recurring HRG net operating costs
during the three and six month periods ended March 31, 2018,
considered to be redundant or duplicative as a result of the
Spectrum Merger and not considered a component of the continuing
commercial products company post-merger, including compensation and
benefits, directors fees, professional fees, insurance, public
company costs, amongst others, and including interest and other
non-recurring income that will ultimately be eliminated following
the transaction; and
- Other adjustments primarily consisting
of costs attributable to operating margin on H&G sales to GAC
discontinued operations for the three and six month periods ended
March 31, 2019 and 2018; expenses and cost recovery for flood
damage at Company facilities in Middleton, Wisconsin during the
three and six month periods ended March 31, 2019; and certain fines
and penalties for delayed shipments following the completion of a
PET distribution center consolidation in EMEA during the six month
period ended March 31, 2019.
Adjusted EBITDA margin is calculated as adjusted EBITDA as a
percentage of reported net sales for the respective period.
SPECTRUM BRANDS HOLDINGS, INC. OTHER
SUPPLEMENTAL INFORMATION (Unaudited)
ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN
(continued)
The following is a reconciliation of reported net income (loss)
to adjusted EBITDA for the three month periods ended March 31, 2019
and 2018, including the calculation of adjusted EBITDA margin for
each of the respective periods.
Three Month Period
Ended March 31, 2019 (in millions, except %) HHI
HPC PET H&G Corporate
Consolidated Net income (loss) from continuing operations $
43.6 $ (6.6) $ 19.6 $ 24.7 $ (135.3) $ (54.0) Income tax benefit —
— — — (22.7) (22.7) Interest expense — — — — 94.2 94.2 Depreciation
and amortization 8.3 9.2 10.6 4.8
3.7 36.6 EBITDA 51.9 2.6 30.2 29.5 (60.1) 54.1 Share
and incentive based compensation — — — — 17.3 17.3 Transaction
related charges 0.4 0.9 0.3 — 3.7 5.3 Restructuring and related
charges 0.4 1.3 2.3 0.3 8.3 12.6 Unrealized loss on Energizer
investment — — — — 5.0 5.0 Foreign currency loss on multicurrency
divestiture loans — — — — 21.8 21.8 Other — (0.3)
— (0.2) — (0.5) Adjusted EBITDA $ 52.7
$ 4.5 $ 32.8 $ 29.6 $ (4.0) $ 115.6 Net Sales $ 331.1 $ 221.7 $
214.9 $ 139.0 $ — $ 906.7 Adjusted EBITDA Margin 15.9%
2.0% 15.3% 21.3% — 12.7%
Three Month Period Ended March 31, 2018 (in millions, except
%) HHI HPC PET H&G
Corporate Consolidated Net income (loss) from
continuing operations $ 18.5 $ 14.6 $ 15.2 $ 20.5 $ (103.5) $
(34.7) Income tax benefit — — — — (1.7) (1.7) Interest expense — —
— — 67.7 67.7 Depreciation and amortization 11.5 —
10.7 4.7 3.2 30.1 EBITDA 30.0 14.6 25.9
25.2 (34.3) 61.4 Share based compensation — — — — (3.1) (3.1)
Transaction related charges 1.9 5.3 2.1 — 0.3 9.6 Restructuring and
related charges 13.6 0.2 3.8 0.2 2.5 20.3 Pet safety recall — — 3.9
— — 3.9 Spectrum merger related transaction charges — — — — 16.1
16.1 Non-recurring HRG operating costs and interest income — — — —
7.8 7.8 Other — — — (0.1) —
(0.1) Adjusted EBITDA $ 45.5 $ 20.1 $ 35.7 $ 25.3 $ (10.7) $
115.9 Net Sales $ 318.5 $ 231.1 $ 211.2 $ 121.8 $ — $ 882.6
Adjusted EBITDA Margin 14.3% 8.7% 16.9%
20.8% — 13.1%
SPECTRUM BRANDS HOLDINGS, INC. OTHER
SUPPLEMENTAL INFORMATION (Unaudited)
ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN
(continued)
The following is a reconciliation of reported net income (loss)
to adjusted EBITDA for the six month periods ended March 31, 2019
and 2018, including the calculation of adjusted EBITDA margin for
each of the respective periods.
Six Month Period Ended
March 31, 2019 (in millions, except %) HHI HPC
PET H&G Corporate Consolidated Net
income (loss) from continuing operations $ 87.3 $ (14.7) $ 31.4 $
22.8 $ (209.8) $ (83.0) Income tax benefit — — — — (26.0) (26.0)
Interest expense — — — — 151.2 151.2 Depreciation and amortization
16.8 47.3 21.3 9.6 7.6
102.6 EBITDA 104.1 32.6 52.7 32.4 (77.0) 144.8 Share and incentive
based compensation — — — — 23.2 23.2 Transaction related charges
0.9 5.5 0.9 — 4.3 11.6 Restructuring and related charges 3.2 1.5
4.9 1.0 10.9 21.5 Pet safety recall — — 0.6 — — 0.6 Unrealized loss
on Energizer investment — — — — 5.0 5.0 Foreign currency loss on
multicurrency divestiture loans — — — — 21.8 21.8 Other —
(0.1) 2.8 (0.7) 0.3 2.3 Adjusted
EBITDA $ 108.2 $ 39.5 $ 61.9 $ 32.7 $ (11.5) $ 230.8 Net Sales $
636.2 $ 538.9 $ 419.6 $ 192.3 $ — $ 1,787.0 Adjusted EBITDA Margin
17.0% 7.3% 14.8% 17.0% —
12.9%
Six Month Period Ended March 31, 2018 (in millions,
except %) HHI HPC PET H&G
Corporate Consolidated Net income from continuing
operations $ 49.7 $ 47.2 $ 28.1 $ 21.4 $ (83.6) $ 62.8 Income tax
benefit — — — — (122.2) (122.2) Interest expense — — — — 143.0
143.0 Depreciation and amortization 22.4 8.8
21.1 9.4 6.9 68.6 EBITDA 72.1 56.0 49.2 30.8
(55.9) 152.2 Share based compensation — — — — 1.4 1.4 Transaction
related charges 4.6 5.6 4.2 — 0.5 14.9 Restructuring and related
charges 28.8 0.2 4.4 0.2 3.9 37.5 Inventory acquisition step-up — —
0.8 — — 0.8 Pet safety recall — — 11.1 — — 11.1 Spectrum merger
related transaction charges — — — — 18.9 18.9 Non-recurring HRG
operating costs and interest income — — — — 12.2 12.2 Other
— — — (0.3) (0.1) (0.4) Adjusted
EBITDA $ 105.5 $ 61.8 $ 69.7 $ 30.7 $ (19.1) $ 248.6 Net Sales $
644.4 $ 573.1 $ 413.6 $ 173.8 $ — $ 1,804.9 Adjusted EBITDA Margin
16.4% 10.8% 16.9% 17.7% —
13.8%
SPECTRUM BRANDS HOLDINGS, INC. OTHER
SUPPLEMENTAL INFORMATION (Unaudited)
ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN
(continued)
The following is a reconciliation of forecasted net income to
adjusted EBITDA for the fiscal year ending September 30, 2019.
(in millions) F2019 Net income $
0 - 36
Income tax expense
0 - 15
Interest expense
215 - 225
Depreciation and amortization 175 - 185 EBITDA 409 - 441
Share and incentive based compensation 57 Transaction related
charges 13 - 14 Restructuring and related charges 40 - 50 Pet
safety recall 1 Unrealized loss on Energizer investment 5 Foreign
currency loss on multicurrency divestiture loans 22 Other 2
- 3 Adjusted EBITDA $ 560 - 580
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190508005220/en/
Investor/Media Contact:Dave
Prichard608-278-6141
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