- Net Sales Declined 1.0% and Organic Sales Declined
0.3%
- GAAP Operating Loss Driven by the Divestiture of European
Dog and Cat Food Manufacturing Operations and Related
Impairments
- Adjusted EBITDA Declined, In-Line with Our
Expectations
- Reaffirms Fiscal 2020 Net Sales, Adjusted EBITDA and
Adjusted Free Cash Flow Targets
- Executed a $125 Million Accelerated Share Repurchase Program
(ASR) and Repurchased $81 Million of Common Stock Through Open
Market Repurchases
Spectrum Brands Holdings, Inc. (NYSE: SPB; “Spectrum Brands” or
the “Company”), a leading global branded consumer products company
focused on driving innovation and providing exceptional customer
service, today reported results from continuing operations for the
first quarter of fiscal 2020 ended December 29, 2019.
“We experienced organic growth in Home & Personal Care and
Global Pet Care, while timing issues in Home & Garden and
Hardware & Home Improvement drove us flat overall during the
quarter. The decline in adjusted EBITDA was in line with our
expectations as tariffs exceeded the ramp-up of our productivity
improvements. We expect to resume sales growth this quarter and,
additionally, savings from our Global Productivity Improvement Plan
are expected to offset our tariff headwinds. We continue to expect
net sales, adjusted EBITDA and free cash flow growth in 2020,” said
David Maura, Chairman and Chief Executive Officer of Spectrum
Brands Holdings.
“We continued to make progress on a number of fronts in the
first quarter. First, we entered into an agreement for the sale of
our dog and cat food manufacturing operations in Coevorden, The
Netherlands. This action represents progress against our plan in
Global Pet Care to exit non-core assets and focus our efforts on
our core growth brands. Second, we rewarded shareholders by
executing a $125 million ASR and repurchasing 1.3 million shares of
common stock for $81.4 million through open market repurchases
during the quarter. And third, we made significant progress on our
plans to generate over $100 million of run-rate savings from Global
Productivity Improvement Plan over the next 15 to 18 months,” said
Mr. Maura.
Fiscal 2020 First Quarter
Highlights
Three Month Periods
Ended
(in millions, except per share and
%)
December 29, 2019
December 30, 2018
Variance
Net sales
$
871.5
$
880.3
$
(8.8)
(1.0%)
Gross profit
269.1
305.7
(36.6)
(12.0%)
Operating (loss) income
(45.9)
25.2
(71.1)
n/m
Net loss from continuing operations
(37.7)
(29.1)
(8.6)
(29.6%)
Diluted loss per share from continuing
operations
$
(0.81)
$
(0.56)
$
(0.25)
(44.5%)
Non-GAAP Operating Metrics
Adjusted EBITDA from continuing
operations
$
102.2
$
115.3
$
(13.1)
(11.4%)
Adjusted EPS from continuing
operations
$
0.20
$
0.21
$
(0.01)
(4.4%)
n/m = not meaningful
- Net sales decreased 1.0%. Excluding the impact of $6.3 million
of unfavorable foreign exchange, organic net sales decreased 0.3%,
with growth in Home & Personal Care and Global Pet Care, offset
by declines in Home & Garden and Hardware & Home
Improvement.
- Gross profit margin decreased 380 basis points as higher
tariffs, timing of capitalized manufacturing variances, GPIP
restructuring costs, and accelerated depreciation were partially
offset by productivity and positive pricing.
- Operating loss was driven by the recognition of a loss on the
asset sale and impairment charges in Global Pet Care associated
with the Coevorden dog and cat food manufacturing operations
divestiture and higher GPIP restructuring costs, partially offset
by lower depreciation and amortization. Operating income was also
negatively impacted this quarter by $8.5 million of higher stock
compensation from more normalized long-term incentive compensation
compared to a timing delay last year. This is expected to normalize
during the course of the fiscal year.
- Net loss and diluted loss per share were driven by the
operating loss, partially offset by the unrealized gain on
Energizer common stock, lower interest expense and shares
outstanding.
- Adjusted EBITDA decreased 11.4%. Growth in Global Pet Care and
Home & Personal Care was offset by declines in Hardware &
Home Improvement and Home & Garden.
- Adjusted EBITDA margin declined 140 basis points driven
primarily by higher tariff, manufacturing and stranded costs
related to the divestitures to Energizer, partially offset by
productivity and positive pricing.
- Adjusted diluted EPS decrease of 4.4% was attributable to
higher tariff, manufacturing and stranded costs offset by lower
interest expense and shares outstanding.
- During the quarter, the Company repurchased 1.3 million shares
of common stock for $81.4 million through open market repurchases
and executed a $125 million ASR. We received 1.7 million shares
upon execution of the agreement. The exact number of shares we will
repurchase under the plan will not be known until the plan is fully
executed, which will be either in Q2 2020 or Q3 2020.
Fiscal 2020 First Quarter Segment Level
Data
Hardware & Home Improvement
(HHI)
Three Month Periods
Ended
(in millions, except %)
December 29, 2019
December 30, 2018
Variance
Net Sales
$
297.7
$
305.1
$
(7.4)
(2.4%)
Operating Income
34.5
43.3
(8.8)
(20.3%)
Operating Income Margin
11.6%
14.2%
(260)
bps
Adjusted EBITDA
$
42.8
$
55.6
$
(12.8)
(23.0%)
Adjusted EBITDA Margin
14.4%
18.2%
(380)
bps
n/m = not meaningful
Lower net sales were driven by residential security and
builders’ hardware, partially offset by growth in plumbing. The
decline in residential security was driven lower builder volume and
builder’s hardware was driven by timing of orders from a large
customer. Organic net sales decreased 2.5%.
Lower operating income, adjusted EBITDA and margins were driven
by tariff costs and lower volumes, partially offset by higher
pricing and lower distribution costs.
Home & Personal Care (HPC)
Three Month Periods
Ended
(in millions, except %)
December 29, 2019
December 30, 2018
Variance
Net Sales
$
322.1
$
317.2
$
4.9
1.5%
Operating Income (Loss)
23.7
(7.9)
31.6
n/m
Operating Income (Loss) Margin
7.4%
(2.5%)
990
bps
Adjusted EBITDA
$
36.4
$
35.0
$
1.4
4.0%
Adjusted EBITDA Margin
11.3%
11.0%
30
bps
n/m = not meaningful
Net sales were driven by growth in Europe in both personal care
and small appliances. Net sales in the U.S. declined at a more
moderate rate compared to fiscal 2019, with declines in personal
care and small appliances pressured by department store and
specialty channels. Excluding unfavorable foreign exchange impacts
of $5.2 million, organic net sales grew 3.2%.
Higher operating income, adjusted EBITDA and EBITDA margins were
driven by productivity and higher volumes. Higher operating income
this quarter was impacted by $29.3 million in higher non-cash
depreciation and amortization charges recorded in the year ago
quarter due primarily to the segment being removed as held for
sale.
Global Pet Care (GPC)
Three Month Periods
Ended
(in millions, except %)
December 29, 2019
December 30, 2018
Variance
Net Sales
$
205.8
$
204.7
$
1.1
0.5%
Operating (Loss) Income
(52.9)
12.5
(65.4)
n/m
Operating (Loss) Income Margin
(25.7%)
6.1%
(3,180)
bps
Adjusted EBITDA
$
31.5
$
29.1
$
2.4
8.2%
Adjusted EBITDA Margin
15.3%
14.2%
110
bps
n/m = not meaningful
Higher net sales were attributable to continued growth in U.S.
companion animal, predominantly dog chews and treats in mass and
online channels, despite difficult comparisons in the prior year.
Net sales were also impacted by a decline in U.S. aquatics.
European sales grew in both aquatic and companion animal. Excluding
unfavorable foreign exchange impacts of $1.2 million, organic net
sales grew 1.1%.
The operating loss was driven by charges related to the European
dog and cat food manufacturing operations being recognized as held
for sale and the related impairment of intangible assets, as well
as higher restructuring charges from the previously disclosed exit
of our Latin America rawhide facilities. Adjusted EBITDA and EBITDA
margin growth was driven by productivity, positive pricing and
volume growth, partially offset by higher tariff costs.
Home & Garden (H&G)
Three Month Periods
Ended
(in millions, except %)
December 29, 2019
December 30, 2018
Variance
Net Sales
$
45.9
$
53.3
$
(7.4)
(13.9%)
Operating Loss
(8.6)
(2.4)
(6.2)
(258.3%)
Operating Loss Margin
(18.7%)
(4.5%)
(1,420)
bps
Adjusted EBITDA
$
(3.3)
$
3.1
$
(6.4)
n/m
Adjusted EBITDA Margin
(7.2%)
5.8%
(1,300)
bps
n/m = not meaningful
Lower net sales in repellents and household insect controls were
impacted by higher than normal inventory levels at retail, softness
in the overall category POS and timing of shipments, partially
offset by growth in outdoor controls with stronger early season
orders.
Decreases in operating income, adjusted EBITDA and margins were
driven by increases in manufacturing costs due to a later seasonal
inventory build this year, lower volumes, and advertising spending,
which were partially offset by productivity.
Liquidity and Debt
Spectrum Brands completed the quarter with a strong liquidity
position, including a cash balance of approximately $142 million
and approximately $678 million available on its $800 million Cash
Flow Revolver.
As of the end of the first quarter of fiscal 2020, the Company
had approximately $2,369 million of debt outstanding, consisting of
approximately $2,021 million of senior unsecured notes, $103
million of Revolver borrowings and approximately $245 million of
capital leases and other obligations.
In January 2020, the Company paid the previously disclosed
payment to Energizer in connection with the divestiture of the
VARTA business.
Fiscal 2020 Outlook for Continuing Operations
Spectrum Brands continues to expect low single-digit reported
net sales growth, with foreign exchange expected to have a slightly
negative impact based upon current rates.
We continue to expect fiscal 2020 adjusted EBITDA to be between
$570 and $590 million, and adjusted free cash flow to be between
$240 million and $260 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, January 30, 2020. To
access the live conference call, U.S. participants may call
877-604-7329 and international participants may call 602-563-8688.
The conference ID number is 4238158. 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 February 13. 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 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,
Spectrum Brands offers a broad portfolio of market-leading,
well-known and widely trusted brands including Kwikset®, Weiser®,
Baldwin®, National Hardware®, Pfister®, Remington®, George
Foreman®, Russell Hobbs®, Black+Decker®, Tetra®, Marineland®,
Nature’s Miracle®, Dingo®, 8-in-1®, FURminator®, IAMS® and
Eukanuba® (Europe only), Digest-eeze™, Healthy-Hide®, Littermaid®,
Spectracide®, Cutter®, Repel®, Hot Shot®, Black Flag® and Liquid
Fence®. For more information, please visit
www.spectrumbrands.com.
Non-GAAP Measurements
Management believes that certain non-GAAP financial measures may
be useful in providing additional meaningful comparisons between
current results and results in prior 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. Adjusted free cash flow provides useful
information to investors regarding our ability to generate cash
from business operations that is available for acquisitions and
other investments, service of debt principal, dividends and share
repurchases and to meet working capital requirements. Our
definition of adjusted free cash flow takes into consideration
capital investments required to maintain operations of our
businesses and execute our strategy. 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 2020 Outlook for Continuing
Operations”, statements regarding our Global Productivity
Improvement Plan and other statements regarding the Company’s
ability to meet its expectations for its fiscal 2020. 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 effects of general
economic conditions, including the impact of, and changes, to
tariffs and trade policies, inflation, recession or fears of a
recession, depression or fears of a depression, labor costs and
stock market volatility or monetary or fiscal policies in the
countries where we do business; (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 impact of actions taken by significant stockholders; (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 identify, implement, achieve and sustain
productivity improvements (including our Global Productivity
Improvement Plan), cost efficiencies (including at our
manufacturing and distribution operations), and 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
existing, pending or threatened litigation, regulation or other
requirements or operating standards applicable to our business;
(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) the impact of expenses
resulting from the implementation of new business strategies,
divestitures or current and proposed restructuring activities; (23)
our ability to successfully implement further acquisitions or
dispositions and the impact of any such transactions on our
financial performance; (24) the unanticipated loss of key members
of senior management and the transition of new members of our
management teams to their new roles; (25) the effects of political
or economic conditions, terrorist attacks, acts of war or other
unrest in international markets; and (26) 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
and subsequent Quarterly Report(s) 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.
CONSOLIDATED STATEMENTS OF
INCOME (Unaudited)
Three Month Periods
Ended
(in millions, except per share
amounts)
December 29, 2019
December 30, 2018
Net sales
$
871.5
$
880.3
Cost of goods sold
592.5
573.7
Restructuring and related charges
9.9
0.9
Gross profit
269.1
305.7
Selling
146.1
155.6
General and administrative
80.4
99.3
Research and development
9.9
11.1
Restructuring and related charges
17.5
8.2
Transaction related charges
4.1
6.3
Write-off from impairment of intangible
assets
24.2
—
Loss on assets held for sale
32.8
—
Total operating expenses
315.0
280.5
Operating (loss) income
(45.9)
25.2
Interest expense
34.8
57.0
Other non-operating (income) expense,
net
(43.7)
0.7
Loss from continuing operations before
income taxes
(37.0)
(32.5)
Income tax expense (benefit)
0.7
(3.4)
Net loss from continuing operations
(37.7)
(29.1)
Income (Loss) from discontinued
operations, net of tax
2.8
(83.2)
Net loss
(34.9)
(112.3)
Income attributable to non-controlling
interest
0.9
0.2
Net loss attributable to controlling
interest
$
(35.8)
$
(112.5)
Amounts attributable to controlling
interest
Net loss from continuing operations
attributable to controlling interest
$
(38.6)
$
(29.3)
Net income (loss) from discontinued
operations attributable to controlling interest
2.8
(83.2)
Net loss attributable to controlling
interest
$
(35.8)
$
(112.5)
Earnings Per Share
Basic earnings per share from continuing
operations
$
(0.81)
$
(0.56)
Basic earnings per share from discontinued
operations
0.06
(1.55)
Basic earnings per share
$
(0.75)
$
(2.11)
Diluted earnings per share from continuing
operations
$
(0.81)
$
(0.56)
Diluted earnings per share from
discontinued operations
0.06
(1.55)
Diluted earnings per share
$
(0.75)
$
(2.11)
Weighted Average Shares
Outstanding
Basic
47.7
53.4
Diluted
47.7
53.4
SPECTRUM BRANDS HOLDINGS,
INC.
CONSOLIDATED STATEMENTS OF
CASH FLOW (Unaudited)
Three Month Periods
Ended
(in millions)
December 29, 2019
December 30, 2018
Cash flows from operating
activities
Net cash used by operating activities from
continuing operations
$
(196.7)
$
(283.6)
Net cash used by operating activities from
discontinued operations
—
(28.3)
Net cash used by operating activities
(196.7)
(311.9)
Cash flows from investing
activities
Purchases of property, plant and
equipment
(18.7)
(13.5)
Proceeds from sales of property, plant and
equipment
—
0.1
Net cash used by investing activities from
continuing operations
(18.7)
(13.4)
Net cash used by investing activities from
discontinued operations
—
(5.1)
Net cash used by investing activities
(18.7)
(18.5)
Cash flows from financing
activities
Payment of debt, including premium on
extinguishment
(127.5)
(45.6)
Proceeds from issuance of debt
103.0
124.3
Payment of debt issuance costs
(0.8)
—
Treasury stock purchases
(90.6)
(18.5)
Accelerated share repurchase pending final
settlement
(125.0)
—
Dividends paid to shareholders
(19.9)
(22.4)
Share based award tax withholding
payments, net of proceeds upon vesting
(12.2)
(2.2)
Net cash (used) provided by financing
activities from continuing operations
(273.0)
35.6
Net cash used by financing activities from
discontinued operations
—
(2.3)
Net cash (used) provided by financing
activities
(273.0)
33.3
Effect of exchange rate changes on cash
and cash equivalents
3.5
(2.9)
Net change in cash, cash equivalents and
restricted cash in continuing operations
(484.9)
(300.0)
Cash, cash equivalents and restricted
cash, beginning of period
627.1
561.3
Cash, cash equivalents and restricted
cash, end of period
$
142.2
$
261.3
SPECTRUM BRANDS HOLDINGS,
INC.
CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION (Unaudited)
(in millions)
December 29, 2019
September 30, 2019
Assets
Cash and cash equivalents
$
142.2
$
627.1
Trade receivables, net
510.0
356.7
Other receivables
54.7
74.2
Inventories
627.8
548.4
Prepaid expenses and other current
assets
62.0
53.5
Current assets of business held for
sale
29.0
—
Total current assets
1,425.7
1,659.9
Property, plant and equipment, net
403.4
452.9
Operating lease assets
98.5
—
Investments
269.3
230.8
Deferred charges and other
52.1
51.7
Goodwill
1,321.5
1,328.1
Intangible assets, net
1,472.6
1,507.1
Total assets
$
5,043.1
$
5,230.5
Liabilities and Shareholders'
Equity
Current portion of long-term debt
$
13.9
$
136.9
Accounts payable
471.0
456.8
Accrued wages and salaries
48.0
72.1
Accrued interest
36.7
29.3
Indemnification payable to Energizer
231.1
230.8
Other current liabilities
191.0
216.0
Current liabilities of business held for
sale
9.3
—
Total current liabilities
1,001.0
1,141.9
Long-term debt, net of current portion
2,324.3
2,214.4
Long term operating lease liability
85.6
—
Deferred income taxes
50.8
55.9
Other long-term liabilities
108.1
112.0
Total liabilities
3,569.8
3,524.2
Shareholders' equity
1,464.3
1,698.3
Noncontrolling interest
9.0
8.0
Total equity
1,473.3
1,706.3
Total liabilities and equity
$
5,043.1
$
5,230.5
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:
- Restructuring and related charges, which consist of project
costs associated with restructuring initiatives across the
segments;
- 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; and (2) divestiture related transaction
costs that are recognized in continuing operations and
post-divestiture separation costs consisting of incremental costs
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;
- 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 during the three month period ended December 29,
2019;
- Non-cash asset impairments or write-offs realized and
recognized in earnings from continuing operations (when
applicable);
- Non-cash purchase accounting inventory adjustments recognized
in earnings from continuing operations subsequent to an acquisition
(when applicable);
- Foreign currency gains and losses attributable to multicurrency
loans for the three month period ended December 29, 2019 that were
entered into with foreign subsidiaries in exchange for receipt of
divestiture proceeds by the parent company and the distribution of
the respective foreign subsidiaries’ net assets as part of the GBL
and GAC divestures during the year ended September 30, 2019. The
Company has entered into various hedging arrangements to mitigate
the volatility of foreign exchange risk associated with such
loans;
- Legal and litigation costs associated with Salus during the
three month periods ended December 29, 2019 and December 30, 2018
as they are not considered a component of the continuing commercial
products company, but continue to be consolidated until the Salus
operations can be wholly dissolved and/or deconsolidated; and
- Incremental interest costs recognized for the extinguishment of
the 6.625% Notes, including the cash payment of premium from early
extinguishment and non-cash write-off of debt issuance costs during
the three month period ended December 29. 2019;
- Other adjustments primarily consisting of costs attributable to
(1) expenses and cost recovery for flood damage at Company
facilities in Middleton, Wisconsin during the three month periods
ended December 29, 2019 and December 30, 2018 respectively; (2)
incremental costs for separation of a key executive during the
three month periods ended December 29, 2019 and December 30, 2018;
(3) incremental costs associated with a safety recall in GPC during
the three month period ended December 30, 2018; (4) operating
margin on H&G sales to GAC discontinued operations during the
three-month period ended December 30, 2018, which continued to
operate under a supply agreement following the GAC divestiture
during the year ended September 30, 2019; and (5) certain fines and
penalties for delayed shipments following the completion of a GPC
distribution center consolidation in EMEA during the three month
period ended December 30, 2018.
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% for the three month periods ended
December 29, 2019 and December 30, 2018 based upon enacted
corporate tax rate in the United States.
SPECTRUM BRANDS HOLDINGS, INC. OTHER
SUPPLEMENTAL INFORMATION (Unaudited)
ADJUSTED DILUTED EPS (continued)
The following is a reconciliation of reported diluted EPS from
continuing operations to adjusted diluted EPS from continuing
operations for the three month periods ended December 29, 2019 and
December 30, 2018.
Three Month Periods
Ended
December 29, 2019
December 30, 2018
Diluted EPS from continuing operations, as
reported
$
(0.81)
$
(0.56)
Adjustments:
Transaction related charges
0.09
0.12
Restructuring and related charges
0.57
0.17
Debt refinancing costs
0.05
—
Unrealized gain on Energizer
investment
(0.81)
—
Write-off from impairment of intangible
assets
0.69
—
Loss on assets held for sale
0.51
—
Foreign currency change on multicurrency
divestiture loans
(0.05)
—
Salus
0.01
—
GPC safety recall
—
0.01
Depreciation & amortization on HPC
long-lived assets
—
0.54
Other
—
0.06
Income tax adjustment
(0.05)
(0.13)
Total adjustments
1.01
0.77
Diluted EPS from continuing operations, as
adjusted
$
0.20
$
0.21
The following summarizes transaction related charges for the
three month periods ended December 29, 2019 and December 30,
2018:
Three Month Periods
Ended
(in millions)
December 29, 2019
December 30, 2018
Coevorden operations divestiture
$
0.2
$
—
GBL divestiture
2.3
—
Other
1.6
6.3
Total transaction-related charges
$
4.1
$
6.3
The following summarizes restructuring and related charges for
the three month periods ended December 29, 2019 and December 30,
2018:
Three Month Periods
Ended
(in millions)
December 29, 2019
December 30, 2018
Global productivity improvement plan
$
26.6
$
5.9
Other
0.8
3.2
Total restructuring and related
charges
$
27.4
$
9.1
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
month periods ended December 29, 2019 and December 30, 2018:
Three Month Periods
Ended
(in millions, except %)
December 29, 2019
December 30, 2018
Variance
HHI
$
297.7
$
305.1
(7.4)
(2.4%)
HPC
322.1
317.2
4.9
1.5%
GPC
205.8
204.7
1.1
0.5%
H&G
45.9
53.3
(7.4)
(13.9%)
Net Sales
$
871.5
$
880.3
(8.8)
(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 month period ended December 29, 2019
compared to reported net sales for the three month period ended
December 30, 2018:
December 29, 2019
Three Month Periods Ended (in millions,
except %)
Net Sales
Effect of Changes in
Currency
Organic Net Sales
Net Sales December 30,
2018
Variance
HHI
$
297.7
$
(0.1)
$
297.6
$
305.1
$
(7.5)
(2.5%)
HPC
322.1
5.2
327.3
317.2
10.1
3.2%
GPC
205.8
1.2
207.0
204.7
2.3
1.1%
H&G
45.9
—
45.9
53.3
(7.4)
(13.9%)
Net Sales
$
871.5
$
6.3
$
877.8
$
880.3
(2.5)
(0.3%)
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 year ending September 30, 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;
- Restructuring and related charges, which consist of project
costs associated with restructuring initiatives across the
segments;
- 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; and (2) divestiture related transaction
costs that are recognized in continuing operations and
post-divestiture separation costs consisting of incremental costs
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;
- 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 during the three month period ended December 29,
2019;
- Non-cash asset impairments or write-offs realized and
recognized in earnings from continuing operations (when
applicable);
- Non-cash purchase accounting inventory adjustments recognized
in earnings from continuing operations subsequent to an acquisition
(when applicable);
- Foreign currency gains and losses attributable to multicurrency
loans for the three month period ended December 29, 2019 that were
entered into with foreign subsidiaries in exchange for receipt of
divestiture proceeds by the parent company and the distribution of
the respective foreign subsidiaries’ net assets as part of the GBL
and GAC divestures during the year ended September 30, 2019. The
Company has entered into various hedging arrangements to mitigate
the volatility of foreign exchange risk associated with such
loans;
- Legal and litigation costs associated with Salus during the
three month periods ended December 29, 2019 and December 30, 2018
as they are not considered a component of the continuing commercial
products company, but continue to be consolidated until the Salus
operations can be wholly dissolved and/or deconsolidated; and
- Other adjustments primarily consisting of costs attributable to
(1) expenses and cost recovery for flood damage at Company
facilities in Middleton, Wisconsin during the three month periods
ended December 29, 2019 and December 30, 2018 respectively; (2)
incremental costs for separation of a key executive during the
three month periods ended December 29, 2019 and December 30, 2018;
(3) incremental costs associated with a safety recall in GPC during
the three month period ended December 30, 2018; (4) operating
margin on H&G sales to GAC discontinued operations during the
three-month period ended December 30, 2018, which continued to
operate under a supply agreement following the GAC divestiture
during the year ended September 30, 2019; and (5) certain fines and
penalties for delayed shipments following the completion of a GPC
distribution center consolidation in EMEA during the three month
period ended December 30, 2018.
Adjusted EBITDA margin is calculated as adjusted EBITDA as a
percentage of reported net sales for the respective periods.
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 December 29,
2019 and December 30, 2018, including the calculation of adjusted
EBITDA margin for each of the respective periods.
Three Month Period Ended December 29,
2019 (in millions, except %)
HHI
HPC
GPC
H&G
Corporate
Consolidated
Net income (loss) from continuing
operations
$
34.2
$
24.9
$
(53.3)
$
(8.6)
$
(34.9)
$
(37.7)
Income tax expense
—
—
—
—
0.7
0.7
Interest expense
—
—
—
—
34.8
34.8
Depreciation and amortization
8.1
8.8
16.1
5.2
3.5
41.7
EBITDA
42.3
33.7
(37.2)
(3.4)
4.1
39.5
Share and incentive based compensation
—
—
—
—
14.5
14.5
Restructuring and related charges
0.5
1.1
10.3
0.1
15.4
27.4
Transaction related charges
—
1.6
1.4
—
1.1
4.1
Unrealized gain on Energizer
investment
—
—
—
—
(38.5)
(38.5)
Loss on assets held for sale
—
—
32.8
—
—
32.8
Write-off from impairment of intangible
assets
—
—
24.2
—
—
24.2
Foreign currency change on multicurrency
divestiture loans
—
—
—
—
(2.5)
(2.5)
Salus
—
—
—
—
0.3
0.3
Other
—
—
—
—
0.4
0.4
Adjusted EBITDA
$
42.8
$
36.4
$
31.5
$
(3.3)
$
(5.2)
$
102.2
Net Sales
$
297.7
$
322.1
$
205.8
$
45.9
$
—
$
871.5
Adjusted EBITDA Margin
14.4%
11.3%
15.3%
-7.2%
—
11.7%
Three Month Period Ended December 30,
2018 (in millions, except %)
HHI
HPC
GPC
H&G
Corporate
Consolidated
Net income (loss) from continuing
operations
$
43.7
$
(8.1)
$
11.8
$
(2.0)
$
(74.5)
$
(29.1)
Income tax benefit
—
—
—
—
(3.4)
(3.4)
Interest expense
—
—
—
—
57.0
57.0
Depreciation and amortization
8.6
38.1
10.6
4.8
3.9
66.0
EBITDA
52.3
30.0
22.4
2.8
(17.0)
90.5
Share based compensation
—
—
—
—
6.0
6.0
Transaction related charges
0.5
4.7
0.7
—
0.4
6.3
Restructuring and related charges
2.8
0.2
2.6
0.7
2.8
9.1
Other
—
0.1
3.4
(0.4)
0.3
3.4
Adjusted EBITDA
$
55.6
$
35.0
$
29.1
$
3.1
$
(7.5)
$
115.3
Net Sales
$
305.1
$
317.2
$
204.7
$
53.3
$
—
$
880.3
Adjusted EBITDA Margin
18.2%
11.0%
14.2%
5.8%
—
13.1%
SPECTRUM BRANDS HOLDINGS, INC. OTHER
SUPPLEMENTAL INFORMATION (Unaudited)
FORECASTED ADJUSTED EBITDA
The following is a reconciliation of forecasted net income to
adjusted EBITDA for the year ending September 30, 2020
(in millions)
F2020
Net income
$
53 - 93
Income tax expense
13 - 23
Interest expense
140 - 150
Depreciation and amortization
145 - 150
EBITDA
366 - 401
Share and incentive based compensation
55 - 60
Transaction related charges
12
Restructuring and related charges
65 - 75
Loss on assets held for sale
33
Write-off from impairment of intangible
assets
24
Adjusted EBITDA
$
570 - 590
FORECASTED ADJUSTED FREE CASH FLOW
The following is a reconciliation of forecasted net cash flow
from operating activities to adjusted free cash flow for the year
ending September 30, 2020
(in millions)
F2020
Net cash flow from operating
activities
$
290 - 310
Purchases of property, plant and
equipment
(90) - (100)
Divestiture related separation costs and
taxes
40 - 50
Adjusted free cash flow
$
240 - 260
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200130005294/en/
Investor/Media Contacts: Kevin Kim
608-278-6148
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