- Net Sales Increased 3.4% and Organic Sales Increased
4.1%
- GAAP Operating Income Increased 62.7%, Driven by Improved
Gross Profit
- Adjusted EBITDA Increased 21.5%
- Proactive Steps to Improve Liquidity and Financial
Flexibility
- Total Current Liquidity of Over $600 Million as of Today,
which Includes Over $500 Million of Cash and an Incremental $90
Million Available Under the Company’s Revolver
- In Light of Uncertainty Surrounding COVID-19 Impacts, the
Company is Withdrawing Fiscal 2020 Guidance
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
second quarter of fiscal 2020 ended March 29, 2020.
“First and foremost, I want to say thank you to our Spectrum
Brands family. With over 11,000 employees worldwide, I am proud of
the amazing way in which we responded, collaborated and took
proactive steps to protect our people and our Company and to serve
our retail customers and consumers all around the world. What we
have learned during these unprecedented times, is that Spectrum
Brands is a company whose products are essential and whose retail
customers are essential and have so far predominantly remained open
around the world. I have never seen our people come together the
way they have over the last six weeks and demonstrate so clearly
our vision of having a team that is empowered and inspired. I
believe that what has motivated our people during these challenging
times is the realization that we are not just making goods and
providing services, we are coming alongside our fellow citizens
through this crisis by helping them cook meals in their kitchen,
take care of and enjoy their pets, secure their homes and
businesses, rid their yards of weeds and protect their families and
homes from insects. This is no more evident than our team in
Blacksburg, VA pivoting to produce Cutter-branded hand sanitizer in
a few short weeks. This accomplishment affirms that our people are
our greatest asset. Again, a big thank you from the bottom of my
heart,” said David Maura, Chairman and Chief Executive Officer of
Spectrum Brands Holdings.
“Our second quarter results reflected strong top and bottom-line
results, with net sales growth of 3%, organic growth of 4%,
operating income growth of 62.7% and adjusted EBITDA growth of
21.5%. It is important to recognize that this growth was driven by
strong results throughout the quarter. From a balance sheet
perspective, we moved quickly to increase the amount of cash on
hand to strengthen liquidity by drawing down on our $800 million
revolver and ended the quarter with $458 million of cash on hand.
Since the end of the quarter, we added a new $90 million tranche to
our revolving credit facility. During the quarter, we also
finalized the sale of the European dog and cat food manufacturing
operations for cash proceeds of over $30 million, closed our
Cambodia rawhide manufacturing facility and acquired Omega Sea to
add to the Global Pet Care portfolio of aquatics brands. All of
these accomplishments further demonstrate the importance of strong,
consistent execution,” said Mr. Maura.
Fiscal 2020 Second Quarter
Highlights
Three Month Periods
Ended
(in millions, except per share and
%)
March 29, 2020
March 31, 2019
Variance
Net sales
$
937.8
$
906.7
$
31.1
3.4%
Gross profit
328.9
305.5
23.4
7.7%
Operating income
67.7
41.6
26.1
62.7%
Net loss from continuing operations
(59.2)
(54.0)
(5.2)
(9.6%)
Diluted loss per share from continuing
operations
$
(1.29)
$
(1.06)
$
(0.23)
(22.2%)
Non-GAAP Operating Metrics
Adjusted EBITDA from continuing
operations
$
140.4
$
115.6
$
24.8
21.5%
Adjusted EPS from continuing
operations
$
0.91
$
0.26
$
0.65
248.1%
n/m = not meaningful
- Net sales increased 3.4%. Excluding the impact of $7.3 million
of unfavorable foreign exchange and acquisition sales of $0.8
million, organic net sales increased 4.1%, with growth in Global
Pet Care, Home & Personal Care and Home & Garden, offset by
a slight decline in Hardware & Home Improvement. In total, the
Company estimates that the net COVID 19 impact to revenue in the
quarter was a negative ($7.5) million.
- Gross profit margin increased 140 basis points as a cash
benefit of $8.4 million from retrospective tariff exclusions,
improved productivity and volume growth were partially offset by
higher tariffs and unfavorable foreign exchange rates.
- Operating income was driven by the increase in sales and gross
profit. In addition, there was recognition of a $7 million gain on
the final disposition of the European dog and cat food
manufacturing operations offsetting higher Global Productivity
Improvement Plan (“GPIP”) restructuring costs.
- Net loss and diluted loss per share were driven by a loss on
the Company’s Energizer common stock holding despite an increase in
operating income, lower interest expense and lower shares
outstanding.
- Adjusted EBITDA increased 21.5%. Growth in Hardware & Home
Improvement, Global Pet Care and Home & Personal Care was
offset by a slight decline in Home & Garden. In total, the
Company estimates that the net COVID-19 impact to operating income
and adjusted EBITDA in the quarter was a negative ($3.6)
million.
- Adjusted EBITDA margin improved 230 basis points driven
primarily by improved gross profit and lower operating
expenses.
- Adjusted diluted EPS increased 248.1% and was attributable to
improved operating income, lower interest expense and lower shares
outstanding.
- During the quarter, the Company repurchased 2.7 million shares
of common stock for $149.2 million through open market repurchases
and settled its Accelerated Share Repurchase Program (ASR) for an
additional 0.3 million shares. In connection with the other steps
we took to bolster our liquidity, we also temporary suspended our
stock repurchase program.
- The Company currently does not expect to change its dividend
policy, which issues a quarterly payout of 42 cents per share to
shareholders.
Fiscal 2020 Second Quarter Segment
Level Data
Hardware & Home Improvement
(HHI)
Three Month Periods
Ended
(in millions, except %)
March 29, 2020
March 31, 2019
Variance
Net Sales
$
329.1
$
331.1
$
(2.0)
(0.6%)
Operating Income
61.0
44.4
16.6
37.4%
Operating Income Margin
18.5%
13.4%
510
bps
Adjusted EBITDA
$
69.5
$
52.7
$
16.8
31.9%
Adjusted EBITDA Margin
21.1%
15.9%
520
bps
n/m = not meaningful
Net sales were down slightly, with a slight decline in
residential security, partially offset by growth from builders’
hardware. The sales growth in builder’s hardware was driven by new
product introductions in the home center channel. Organic net sales
decreased 0.6%. The net impact of COVID-19 in the quarter was
nearly $3 million in revenue loss due to supply challenges, which
more than offset orders customers pulled forward in to the second
quarter.
Significantly higher operating income, adjusted EBITDA and
margins were driven by a cash benefit of $8.4 million from
retrospective tariff exclusions and productivity improvements,
partially offset by tariff costs.
Home & Personal Care (HPC)
Three Month Periods
Ended
(in millions, except %)
March 29, 2020
March 31, 2019
Variance
Net Sales
$
232.7
$
221.7
$
11.0
5.0%
Operating Loss
(3.5)
(6.8)
3.3
(48.5%)
Operating Loss Margin
(1.5%)
(3.1%)
160
bps
Adjusted EBITDA
$
8.0
$
4.5
$
3.5
77.8%
Adjusted EBITDA Margin
3.4%
2.0%
140
bps
n/m = not meaningful
Net sales were driven by growth throughout the quarter, across
all regions and by increases in both personal care and small
appliances. Strong net sales growth in the U.S. was driven by mass
and online channels despite declines from the impact of temporary
store closures of many department store and specialty channels
during the last few days of the quarter. Excluding unfavorable
foreign exchange impacts of $5.6 million, organic net sales grew
7.5%.
Reduced operating loss, and higher adjusted EBITDA and EBITDA
margins were driven by higher volumes, lower operating expenses and
productivity improvements, partially offset by foreign exchange
headwinds and tariff costs.
Global Pet Care (GPC)
Three Month Periods
Ended
(in millions, except %)
March 29, 2020
March 31, 2019
Variance
Net Sales
$
236.9
$
214.9
$
22.0
10.2%
Operating Income
28.2
19.7
8.5
43.1%
Operating Income Margin
11.9%
9.2%
270
bps
Adjusted EBITDA
$
40.0
$
32.8
$
7.2
22.0%
Adjusted EBITDA Margin
16.9%
15.3%
160
bps
n/m = not meaningful
Higher net sales were attributable to strong growth in both the
companion animal and aquatics categories. Growth occurred
throughout the quarter and accelerated at the end of the quarter.
Excluding unfavorable foreign exchange impacts of $1.6 million and
acquisition sales of $0.8 million, organic net sales grew
10.6%.
Higher operating income, adjusted EBITDA and EBITDA margin
growth were driven by volume growth, productivity improvements and
positive pricing, partially offset by higher tariff costs.
Operating income growth was also driven by a $7 million gain from
disposition of the European dog and cat food manufacturing
operations.
Home & Garden (H&G)
Three Month Periods
Ended
(in millions, except %)
March 29, 2020
March 31, 2019
Variance
Net Sales
$
139.1
$
139.0
$
0.1
0.1%
Operating Income
23.0
24.6
(1.6)
(6.5%)
Operating Income Margin
16.5%
17.7%
(120)
bps
Adjusted EBITDA
$
28.4
$
29.6
$
(1.2)
(4.1%)
Adjusted EBITDA Margin
20.4%
21.3%
(90)
bps
n/m = not meaningful
Net sales were essentially flat with the prior year despite
difficult year ago comparisons and COVID-19 related transportation
shortages, as strong POS in the quarter generated early season
orders. Net sales growth of our brands was offset by a decline in
private label and captive brands sales.
Lower operating income, adjusted EBITDA and margins were driven
by the COVID-19 related revenue impact, timing of supplier rebates
and tariff costs, which were partially offset by productivity
improvements and mix favorability.
Liquidity and Debt
Spectrum Brands completed the quarter with a strong liquidity
position, including a cash balance of $458 million.
As of the end of the second quarter of fiscal 2020, the Company
had approximately $3,042 million of debt outstanding, consisting of
approximately $2,019 million of senior unsecured notes, $780
million of Revolver borrowings and approximately $243 million of
capital leases and other obligations.
On April 3, 2020, as part of a series of precautionary measures
in response to the COVID-19 outbreak, the Company strengthened its
liquidity by adding a $90 million dollar denominated tranche to its
existing $800 million multi-currency Cash Flow Revolver. The
Company believes that its strong balance sheet and ample
flexibility on debt covenants provide it with meaningful financial
flexibility.
Fiscal 2020 Outlook for Continuing Operations
Given the rapidly changing social and economic conditions around
the globe as a result of the COVID-19 pandemic, the Company has
withdrawn its fiscal 2020 guidance.
While withdrawing our guidance, the Company believes that is
well positioned to weather the COVID-19 pandemic because of the
appeal that of brands and products in a stay at home environment
and the positive results of its efforts in pursuing and executing
its productivity improvement programs and the investments it has
made in its products and brands. Equally, the Company believes that
it is assisted by its strong liquidity position and its expected
ability to access the debt and capital markets should the needs
arise in the future.
Nonetheless, there can be no assurance regarding the future
performance of the Company and there are a number of factors
related to the COVID-19 pandemic that are negatively and materially
impacting the Company’s results of operations and financial
condition. Such factors include, continued or future disruptions at
its manufacturing facilities around the world, including further or
continued disruptions in the places it is currently experiencing
disruptions such as the Philippines, Mexico, the United States and
China; the pandemic’s impact on the global economy and consumer
behavior; and the future impact of the pandemic on the economy and
financial markets generally. The full impact of these factors and
other factor cannot be fully assessed at this time.
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, April 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 6314509. 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 14. 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 the COVID-19 pandemic on our customers, employees,
manufacturing facilities and suppliers and our overall business and
results of operations, all of which tend to aggravate the other
risks and uncertainties we face (2) the impact of our indebtedness
on our business, financial condition and results of operations; (3)
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; (4) any failure to comply with
financial covenants and other provisions and restrictions of our
debt instruments; (5) 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; (6) 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;
(7) interest rate and exchange rate fluctuations; (8) the loss of
significant reduction in, or dependence upon, sales to any
significant retail customer(s); (9) competitive promotional
activity or spending by competitors, or price reductions by
competitors; (10) the introduction of new product features or
technological developments by competitors and/or the development of
new competitors or competitive brands; (11) the impact of actions
taken by significant stockholders; (12) changes in consumer
spending preferences and demand for our products, particularly in
light of the current pandemic and economic stress; (13) our ability
to develop and successfully introduce new products, protect our
intellectual property and avoid infringing the intellectual
property of third parties; (14) 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; (15) the seasonal nature of sales of
certain of our products; (16) the effects of climate change and
unusual weather activity as well as further natural disasters and
pandemics; (17) the cost and effect of unanticipated legal, tax or
regulatory proceedings or new laws or regulations (including
environmental, public health and consumer protection regulations);
(18) our discretion to conduct, suspend or discontinue our share
repurchase program (including our discretion to conduct purchases,
if any, in a variety of manners such as open-market purchases or
privately negotiated transactions) (19) 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; (20) the impact of existing, pending or
threatened litigation, government regulations or other requirements
or operating standards applicable to our business; (21) the impact
of cybersecurity breaches or our actual or perceived failure to
protect company and personal data; (22) changes in accounting
policies applicable to our business; (23) our ability to utilize
net operating loss carry-forwards to offset tax liabilities from
future taxable income; (24) the impact of expenses resulting from
the implementation of new business strategies, divestitures or
current and proposed restructuring activities; (25) our ability to
successfully implement further acquisitions or dispositions and the
impact of any such transactions on our financial performance; (26)
the unanticipated loss of key members of senior management and the
transition of new members of our management teams to their new
roles; (27) the effects of political or economic conditions,
terrorist attacks, acts of war, natural disasters, public health
concerns or other unrest in international markets; and (28) the
other risk factors set forth in the securities filings of Spectrum
Brands Holdings, Inc. and SB/RH Holdings, LLC, including their most
recently filed Annual Report on Form 10-K and subsequent Quarterly
Report(s) on Form 10-Q.
We caution the reader that our estimates of trends, market
share, retail consumption of our products and reasons for changes
in such consumption are based solely on limited data available us
and our management’s reasonable assumptions about market
conditions, and consequently may be inaccurate or may not reflect
significant segments of the retail market. We also caution the
reader that undue reliance should not be placed on any
forward-looking statements, which speak only as of the date of this
release. We undertake no duty or responsibility to update any of
these forward-looking statements to reflect events or circumstances
after the date of this document or to reflect actual outcomes.
SPECTRUM BRANDS HOLDINGS,
INC.
CONSOLIDATED STATEMENTS OF
INCOME (Unaudited)
Three Month Periods
Ended
Six Month Periods
Ended
(in millions, except per share
amounts)
March 29, 2020
March 31, 2019
March 29, 2020
March 31, 2019
Net sales
$
937.8
$
906.7
$
1,809.3
$
1,787.0
Cost of goods sold
606.0
601.0
1,198.5
1,174.7
Restructuring and related charges
2.9
0.2
12.8
1.0
Gross profit
328.9
305.5
598.0
611.3
Selling
150.0
151.4
296.1
306.9
General and administrative
81.9
83.6
162.2
183.0
Research and development
10.1
11.2
19.9
22.3
Restructuring and related charges
19.0
12.4
36.6
20.5
Transaction related charges
7.2
5.3
11.3
11.6
(Gain) loss on assets held for sale
(7.0)
—
25.7
—
Write-off from impairment of intangible
assets
—
—
24.2
—
Total operating expenses
261.2
263.9
576.0
544.3
Operating income
67.7
41.6
22.0
67.0
Interest expense
35.5
94.2
70.4
151.2
Other non-operating expense, net
110.4
24.1
66.8
24.8
Loss from continuing operations before
income taxes
(78.2)
(76.7)
(115.2)
(109.0)
Income tax benefit
(19.0)
(22.7)
(18.3)
(26.0)
Net loss from continuing operations
(59.2)
(54.0)
(96.9)
(83.0)
Income from discontinued operations, net
of tax
1.4
783.6
4.3
700.4
Net (loss) income
(57.8)
729.6
(92.6)
617.4
(Loss) income attributable to
non-controlling interest
(0.8)
1.0
0.1
1.2
Net (loss) income attributable to
controlling interest
$
(57.0)
$
728.6
$
(92.7)
$
616.2
Amounts attributable to controlling
interest
Net loss from continuing operations
attributable to controlling interest
$
(58.4)
$
(55.0)
$
(97.0)
$
(84.2)
Net income from discontinued operations
attributable to controlling interest
1.4
783.6
4.3
700.4
Net (loss) income attributable to
controlling interest
$
(57.0)
$
728.6
$
(92.7)
$
616.2
Earnings Per Share
Basic earnings per share from continuing
operations
$
(1.29)
$
(1.06)
$
(2.09)
$
(1.60)
Basic earnings per share from discontinued
operations
0.03
15.13
0.09
13.32
Basic earnings per share
$
(1.26)
$
14.07
$
(2.00)
$
11.72
Diluted earnings per share from continuing
operations
$
(1.29)
$
(1.06)
$
(2.09)
$
(1.60)
Diluted earnings per share from
discontinued operations
0.03
15.13
0.09
13.32
Diluted earnings per share
$
(1.26)
$
14.07
$
(2.00)
$
11.72
Weighted Average Shares
Outstanding
Basic
45.1
51.8
46.4
52.6
Diluted
45.1
51.8
46.4
52.6
SPECTRUM BRANDS HOLDINGS,
INC.
CONSOLIDATED STATEMENTS OF
CASH FLOW (Unaudited)
Six Month Periods
Ended
(in millions)
March 29, 2020
March 31, 2019
Cash flows from operating
activities
Net cash used by operating activities from
continuing operations
$
(184.6)
$
(279.7)
Net cash used by operating activities from
discontinued operations
—
(254.0)
Net cash used by operating activities
(184.6)
(533.7)
Cash flows from investing
activities
Purchases of property, plant and
equipment
(31.7)
(27.1)
Proceeds from disposal of property, plant
and equipment
0.6
0.1
Proceeds from sale of discontinued
operations, net of cash
—
2,854.4
Business acquisitions, net of cash
acquired
(17.0)
—
Proceeds from sale of equity
investment
28.6
—
Other investing activity
2.5
—
Net cash (used) provided by investing
activities from continuing operations
(17.0)
2,827.4
Net cash used by investing activities from
discontinued operations
—
(5.3)
Net cash (used) provided by investing
activities
(17.0)
2,822.1
Cash flows from financing
activities
Payment of debt, including premium on
extinguishment
(130.0)
(2,479.9)
Proceeds from issuance of debt
780.0
136.3
Payment of debt issuance costs
(0.8)
(0.1)
Payment of contingent consideration
(197.0)
—
Treasury stock purchases
(239.8)
(268.5)
Accelerated share repurchase
(125.0)
—
Dividends paid to shareholders
(39.1)
(44.6)
Share based award tax withholding
payments, net of proceeds upon vesting
(12.6)
(2.5)
Net cash provided (used) by financing
activities from continuing operations
35.7
(2,659.3)
Net cash used by financing activities from
discontinued operations
—
(2.3)
Net cash provided (used) provided by
financing activities
35.7
(2,661.6)
Effect of exchange rate changes on cash
and cash equivalents
(0.5)
(3.1)
Net change in cash, cash equivalents and
restricted cash
(166.4)
(376.3)
Net change in cash, cash equivalents and
restricted cash in discontinued operations
—
—
Net change in cash, cash equivalents and
restricted cash in continuing operations
(166.4)
(376.3)
Cash, cash equivalents, and restricted
cash, beginning of period
627.1
561.4
Cash, cash equivalents, and restricted
cash, end of period
$
460.7
$
185.1
SPECTRUM BRANDS HOLDINGS,
INC.
CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION (Unaudited)
(in millions)
March 29, 2020
September 30, 2019
Assets
Cash and cash equivalents
$
457.8
$
627.1
Trade receivables, net
465.9
356.7
Other receivables
99.5
74.2
Inventories
607.9
548.4
Prepaid expenses and other current
assets
60.1
53.5
Total current assets
1,691.2
1,659.9
Property, plant and equipment, net
396.2
452.9
Operating lease assets
93.6
—
Investments
134.0
230.8
Deferred charges and other
102.8
51.7
Goodwill
1,324.1
1,328.1
Intangible assets, net
1,453.3
1,507.1
Total assets
$
5,195.2
$
5,230.5
Liabilities and Shareholders'
Equity
Current portion of long-term debt
$
13.3
$
136.9
Accounts payable
387.4
456.8
Accrued wages and salaries
47.7
72.1
Accrued interest
36.7
29.3
Indemnification payable to Energizer
31.7
230.8
Other current liabilities
190.1
216.0
Total current liabilities
706.9
1,141.9
Long-term debt, net of current portion
2,999.1
2,214.4
Long term operating lease liability
79.7
—
Deferred income taxes
77.2
55.9
Other long-term liabilities
110.1
112.0
Total liabilities
3,973.0
3,524.2
Shareholders' equity
1,214.1
1,698.3
Noncontrolling interest
8.1
8.0
Total equity
1,222.2
1,706.3
Total liabilities and equity
$
5,195.2
$
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;
- 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;
- 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 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 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 six month period ended March 29, 2020;
- 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 and six month
periods ended March 31, 2019; (2) incremental costs for separation
of a key executive during the six month periods ended March 29,
2020 and March 31, 2019; (3) incremental costs associated with a
safety recall in GPC during the three and six month periods ended
March 31, 2019; (4) operating margin on H&G sales to GAC
discontinued operations during the three and six month period ended
March 29, 2019; and (5) certain fines and penalties for delayed
shipments following the completion of a GPC 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% for the three and six month periods
ended March 29, 2020 and March 29, 2019 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 and six month periods ended March 29, 2020
and March 31, 2019.
Three Month Periods
Ended
Six Month Periods
Ended
March 29, 2020
March 31, 2019
March 29, 2020
March 31, 2019
Diluted EPS from continuing operations, as
reported
$
(1.29)
$
(1.06)
$
(2.09)
$
(1.60)
Adjustments:
Restructuring and related charges
0.48
0.24
1.06
0.41
Transaction related charges
0.16
0.10
0.24
0.22
Debt refinancing costs
—
0.98
0.06
0.96
Loss on Energizer investment
2.37
0.10
1.47
0.09
Write-off from impairment of intangible
assets
—
—
0.52
0.41
(Gain) Loss on assets held for sale
(0.16)
—
0.56
—
Foreign currency change on multicurrency
divestiture loans
0.07
0.42
0.01
—
Salus
—
—
0.01
—
GPC safety recall
—
—
—
0.01
Depreciation & amortization on HPC
long-lived assets
—
—
—
0.55
Other
—
0.02
—
0.08
Income tax adjustment
(0.72)
(0.54)
(0.75)
(0.65)
Total adjustments
2.20
1.32
3.18
2.08
Diluted EPS from continuing operations, as
adjusted
$
0.91
$
0.26
$
1.09
$
0.48
The following summarizes transaction related charges for the
three and six month periods ended March 29, 2020 and March 31,
2019:
Three Month Periods
Ended
Six Month Periods
Ended
(in millions)
March 29, 2020
March 31, 2019
March 29, 2020
March 31, 2019
Coevorden operations divestiture
$
1.5
$
—
$
1.7
$
—
GBL divestiture
2.7
2.5
5.1
2.5
Omega Sea acquisition
1.3
—
1.3
—
Other
1.7
2.8
3.2
9.1
Total transaction-related charges
$
7.2
$
5.3
$
11.3
$
11.6
The following summarizes restructuring and related charges for
the three and six month periods ended March 29, 2020 and March 31,
2019:
Three Month Periods
Ended
Six Month Periods
Ended
(in millions)
March 29, 2020
March 31, 2019
March 29, 2020
March 31, 2019
Global productivity improvement plan
$
21.2
$
12.7
$
47.9
$
18.5
Other
0.7
(0.1)
1.5
3.0
Total restructuring and related
charges
$
21.9
$
12.6
$
49.4
$
21.5
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 29, 2020 and March 31, 2019:
Three Month Periods
Ended
Six Month Periods
Ended
(in millions, except %)
March 29, 2020
March 31, 2019
Variance
March 29, 2020
March 31, 2019
Variance
HHI
$
329.1
$
331.1
(2.0)
(0.6%)
$
626.8
$
636.2
(9.4)
(1.5%)
HPC
232.7
221.7
11.0
5.0%
554.8
538.9
15.9
3.0%
GPC
236.9
214.9
22.0
10.2%
442.7
419.6
23.1
5.5%
H&G
139.1
139.0
0.1
0.1%
185.0
192.3
(7.3)
(3.8%)
Net Sales
$
937.8
$
906.7
31.1
3.4%
$
1,809.3
$
1,787.0
22.3
1.2%
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
29, 2020 compared to reported net sales for the three and six month
periods ended March 31, 2019:
March 29, 2020
Three Month Periods Ended (in millions,
except %)
Net Sales
Effect of Changes in
Currency
Net Sales Excluding Effect of
Changes in Currency
Effect of Acquisitions
Organic Net Sales
Net Sales March 31,
2019
Variance
HHI
$
329.1
$
0.1
$
329.2
$
—
$
329.2
$
331.1
$
(1.9)
(0.6%)
HPC
232.7
5.6
238.3
—
238.3
221.7
16.6
7.5%
GPC
236.9
1.6
238.5
(0.8)
237.7
214.9
22.8
10.6%
H&G
139.1
—
139.1
—
139.1
139.0
0.1
0.1%
Total
$
937.8
$
7.3
$
945.1
$
(0.8)
$
944.3
$
906.7
37.6
4.1%
March 29, 2020
Six Month Period Ended (in millions,
except %)
Net Sales
Effect of Changes in
Currency
Net Sales Excluding Effect of
Changes in Currency
Effect of Acquisitions
Organic Net Sales
Net Sales March 31,
2019
Variance
HHI
$
626.8
$
—
$
626.8
$
—
$
626.8
$
636.2
$
(9.4)
(1.5%)
HPC
554.8
10.8
565.6
—
565.6
538.9
26.7
5.0%
GPC
442.7
2.8
445.5
(0.8)
444.7
419.6
25.1
6.0%
H&G
185.0
—
185.0
—
185.0
192.3
(7.3)
(3.8%)
Total
$
1,809.3
$
13.6
$
1,822.9
$
(0.8)
$
1,822.1
$
1,787.0
35.1
2.0%
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; including 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;
- 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;
- 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 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 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 and six month
periods ended March 29, 2020 and March 31, 2019; (2) incremental
costs for separation of a key executive during the six month
periods ended March 29, 2020 and March 31, 2019; (3) incremental
costs associated with a safety recall in GPC during the three and
six month periods ended March 31, 2019; (4) operating margin on
H&G sales to GAC discontinued operations during the three and
six month period ended March 29, 2019; and (5) certain fines and
penalties for delayed shipments following the completion of a GPC
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 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 March 29, 2020
and March 31, 2019, including the calculation of adjusted EBITDA
margin for each of the respective periods.
Three Month Period Ended March 29, 2020
(in millions, except %)
HHI
HPC
GPC
H&G
Corporate
Consolidated
Net income (loss) from continuing
operations
$
60.8
$
(6.2)
$
27.2
$
23.0
$
(164.0)
$
(59.2)
Income tax benefit
—
—
—
—
(19.0)
(19.0)
Interest expense
—
—
—
—
35.5
35.5
Depreciation and amortization
8.5
9.0
9.8
5.2
3.9
36.4
EBITDA
69.3
2.8
37.0
28.2
(143.6)
(6.3)
Share and incentive based compensation
—
—
—
—
14.6
14.6
Restructuring and related charges
0.2
1.7
6.4
0.2
13.4
21.9
Transaction related charges
—
2.7
3.6
—
0.9
7.2
Loss on Energizer investment
—
—
—
—
106.8
106.8
Gain on assets held for sale
—
—
(7.0)
—
—
(7.0)
Foreign currency translation on
multicurrency divestiture loans
—
0.8
—
—
2.3
3.1
Salus
—
—
—
—
0.1
0.1
Adjusted EBITDA
$
69.5
$
8.0
$
40.0
$
28.4
$
(5.5)
$
140.4
Net Sales
$
329.1
$
232.7
$
236.9
$
139.1
$
—
$
937.8
Adjusted EBITDA Margin
21.1%
3.4%
16.9%
20.4%
—
15.0%
Three Month Period Ended March 31, 2019
(in millions, except %)
HHI
HPC
GPC
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
Restructuring and related charges
0.4
1.3
2.3
0.3
8.3
12.6
Transaction related charges
0.4
0.9
0.3
—
3.7
5.3
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%
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 29, 2020
and March 31, 2019, including the calculation of adjusted EBITDA
margin for each of the respective periods.
Six Month Period Ended March 29, 2020
(in millions, except %)
HHI
HPC
GPC
H&G
Corporate
Consolidated
Net income (loss) from continuing
operations
$
95.0
$
18.8
$
(26.0)
$
14.4
$
(199.1)
$
(96.9)
Income tax benefit
—
—
—
—
(18.3)
(18.3)
Interest expense
—
—
—
—
70.4
70.4
Depreciation and amortization
16.6
17.8
25.9
10.3
7.4
78.0
EBITDA
111.6
36.6
(0.1)
24.7
(139.6)
33.2
Share and incentive based compensation
—
—
—
—
29.1
29.1
Restructuring and related charges
0.7
2.8
16.7
0.4
28.8
49.4
Transaction related charges
—
4.3
5.0
—
2.0
11.3
Loss on Energizer investment
—
—
—
—
68.3
68.3
Loss on assets held for sale
—
—
25.7
—
—
25.7
Write-off from impairment of intangible
assets
—
—
24.2
—
—
24.2
Foreign currency loss on multicurrency
divestiture loans
—
0.7
—
—
(0.3)
0.4
Salus
—
—
—
—
0.4
0.4
Other
—
—
—
—
0.5
0.5
Adjusted EBITDA
$
112.3
$
44.4
$
71.5
$
25.1
$
(10.8)
$
242.5
Net Sales
$
626.8
$
554.8
$
442.7
$
185.0
$
—
$
1,809.3
Adjusted EBITDA Margin
17.9%
8.0%
16.2%
13.6%
—
13.4%
Six Month Period Ended March 31, 2019
(in millions, except %)
HHI
HPC
GPC
H&G
Corporate
Consolidated
Net income 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 based compensation
—
—
—
—
23.2
23.2
Restructuring and related charges
3.2
1.5
4.9
1.0
10.9
21.5
Transaction related charges
0.9
5.5
0.9
—
4.3
11.6
GPC safety recall
—
—
0.6
—
—
0.6
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%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200430005278/en/
Investor/Media Contacts: Kevin Kim 608-278-614
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