- Net Sales Increased 22.6% and Organic Net Sales Increased
17.8%, with Double-Digit Growth Across All Business Units
- Net Income From Continuing Operations Increased $96.0
Million to $36.8 Million
- Adjusted EBITDA Increased 28.8% to $180.9 Million
- Maintained Strong Financial Flexibility with Over $860
million of Total Liquidity
- Raising 2021 Earnings Framework to Reflect Expected Net
Sales and Adjusted EBITDA Growth in the Mid Teens
- Raising Total Savings Gross Target from Global Productivity
Improvement Program from $150 Million to $200 Million
- Board of Directors Authorized a New 3-Year, $1 Billion Stock
Repurchase Program
Spectrum Brands Holdings, Inc. (NYSE: SPB; “Spectrum Brands” or
the “Company”), a leading global branded consumer products and home
essentials company focused on driving innovation and providing
exceptional customer service, today reported results from
continuing operations for the second quarter of fiscal 2021 ended
April 4, 2021.
“Our latest financial results for second quarter reflect another
quarter of exceptional top line growth and operating leverage, with
net sales growth of 23%, net income from continuing operations
increased $96 million with adjusted EBITDA up 29% to $181 million.
Our operating leverage also improved despite higher inflation and
incremental investments in marketing and advertising. Higher
re-investments continue to reignite the fly wheel of new product
launches, improving our top line growth, expanding our margins and
driving greater profitability and cash flow generation,” said David
Maura, Chairman and Chief Executive Officer of Spectrum Brands.
“Our balance sheet this quarter also improved sequentially,
ending the quarter with net leverage of 3.2 times and over $860
million in total liquidity. Going forward, we will continue to
focus on disciplined execution of our winning playbook. Our stellar
first half financial performance and continued organic growth give
us confidence in again raising our earnings framework to reflect
mid-teens net sales and adjusted EBITDA growth, as well as adjusted
free cash flow of $260 million to $280 million. We are also raising
our total gross savings target from our Global Productivity
Improvement Program to $200 million by the end of fiscal 2022" said
Mr. Maura.
Fiscal 2021 Second Quarter
Highlights
Three Month Periods
Ended
(in millions, except per share and
%)
April 4, 2021
March 29, 2020
Variance
Net sales
$
1,149.8
$
937.8
$
212.0
22.6
%
Gross profit
404.0
328.9
75.1
22.8
%
Operating income
116.8
67.7
49.1
72.5
%
Net income (loss) from continuing
operations
36.8
(59.2)
96.0
n/m
Diluted earnings (loss) per share from
continuing operations
$
0.88
$
(1.29)
$
2.17
n/m
Non-GAAP Operating Metrics
Adjusted EBITDA from continuing
operations
$
180.9
$
140.4
$
40.5
28.8
%
Adjusted EPS from continuing
operations
$
1.76
$
0.91
$
0.85
93.4
%
n/m = not meaningful
- Net sales increased 22.6%. Excluding the impact of $18.0
million of favorable foreign exchange rates and acquisition sales
of $26.8 million, organic net sales increased 17.8%, with growth
across all four business units.
- Gross profit margin was in-line with a year ago with higher
volumes in all business units, improved efficiencies from our
Global Productivity Improvement Program (GPIP) and favorable mix,
offset by higher freight and input cost inflation and last year's
retrospective tariff exclusion benefits.
- Operating income growth was driven by higher volumes, improved
productivity and lower restructuring costs, partially offset by
higher freight and input cost inflation and marketing and
advertising investments.
- Net income and diluted earnings per share increases were
primarily driven by operating income growth and favorability from
Energizer investments, offset by higher debt refinance costs.
- Adjusted EBITDA increased 28.8% and adjusted EBITDA margins
increased 70 basis points.
- Adjusted diluted EPS improved to $1.76 due to favorable volumes
and improved productivity.
- The Company sold its remaining Energizer common stock shares
during the quarter, for proceeds of $12.6 million.
Fiscal 2021 Second Quarter Segment Level Data
Hardware & Home Improvement
(HHI)
Three Month Periods
Ended
(in millions, except %)
April 4, 2021
March 29, 2020
Variance
Net Sales
$
389.5
$
329.1
$
60.4
18.4
%
Operating Income
66.0
61.0
5.0
8.2
%
Operating Income Margin
16.9
%
18.5
%
(160)
bps
Adjusted EBITDA
$
73.4
$
69.5
$
3.9
5.6
%
Adjusted EBITDA Margin
18.8
%
21.1
%
(230)
bps
n/m = not meaningful
Net sales were driven by growth across all categories during the
quarter, with strong consumer demand and successful new product
introductions. Security sales reflected growth across retail,
e-commerce and new build channels. Organic net sales increased
17.4% excluding slightly favorable foreign exchange impacts.
Higher operating income and adjusted EBITDA were driven by
positive volumes and productivity improvements, partially offset by
last year's benefit from retrospective tariff exclusions, higher
freight and input cost inflation, distribution costs, COVID-19
related costs and higher marketing investments.
Home & Personal Care (HPC)
Three Month Periods
Ended
(in millions, except %)
April 4, 2021
March 29, 2020
Variance
Net Sales
$
297.9
$
232.7
$
65.2
28.0
%
Operating Income (Loss)
11.5
(3.5)
15.0
n/m
Operating Income (Loss) Margin
3.9
%
(1.5)
%
540
bps
Adjusted EBITDA
$
25.4
$
8.0
$
17.4
217.5
%
Adjusted EBITDA Margin
8.5
%
3.4
%
510
bps
n/m = not meaningful
Net sales were driven by continued strength in the small kitchen
appliances and the personal care categories, as well as growth
across all regions. E-commerce sales, both in pure play and
retailer.com channels continued to grow at a high rate. Excluding
favorable foreign exchange impacts of $8.7 million, organic net
sales grew 24.3%.
Improved operating income, adjusted EBITDA, and margins were
driven by higher volumes and productivity improvements, partially
offset by freight and input cost inflation and continued marketing
investments.
Global Pet Care (GPC)
Three Month Periods
Ended
(in millions, except %)
April 4, 2021
March 29, 2020
Variance
Net Sales
$
293.6
$
236.9
$
56.7
23.9
%
Operating Income
39.8
28.2
11.6
41.1
%
Operating Income Margin
13.6
%
11.9
%
170
bps
Adjusted EBITDA
$
55.6
$
40.0
$
15.6
39.0
%
Adjusted EBITDA Margin
18.9
%
16.9
%
200
bps
n/m = not meaningful
Higher net sales were attributable to continued growth in the
aquatics and companion animal categories, with broad-based demand
across sub-categories and channel partners. Excluding favorable
foreign exchange impacts of $6.1 million and acquisition sales of
$26.8 million, organic net sales grew 10.0%.
Higher operating income, adjusted EBITDA, and improved margins
were driven by existing and acquired volume growth and productivity
improvements, partially offset by higher freight and input cost
inflation and distribution costs, as well as advertisement and
marketing investments. Operating income growth was also impacted by
lower restructuring costs.
Home & Garden (H&G)
Three Month Periods
Ended
(in millions, except %)
April 4, 2021
March 29, 2020
Variance
Net Sales
$
168.8
$
139.1
$
29.7
21.4
%
Operating Income
29.9
23.0
6.9
30.0
%
Operating Income Margin
17.7
%
16.5
%
120
bps
Adjusted EBITDA
$
34.8
$
28.4
$
6.4
22.5
%
Adjusted EBITDA Margin
20.6
%
20.4
%
20
bps
n/m = not meaningful
Net sales grew across all three categories - controls, household
insecticides, and repellents. Performance was driven by strong
early season orders across channels.
Improved operating income, adjusted EBITDA, and margins were
driven by volume growth, favorable mix and productivity
improvements, partially offset by advertisement and marketing
investments and higher distribution expenses.
Liquidity and Debt
As of the end of the quarter, the Company had a cash balance of
$290 million and approximately $2,610 million of debt outstanding,
consisting of approximately $2,051 million of senior unsecured
notes, $400 million of term loans and approximately $159 million of
capital leases and other obligations.
Net leverage at the end of the second quarter was 3.2 times,
compared to 3.4 times at the end of the previous quarter.
Fiscal 2021 Earnings Framework
Spectrum Brands now expects mid-teens reported net sales growth
(previously high single-digit growth), with foreign exchange
expected to have a positive impact based upon current rates.
Adjusted EBITDA is also expected to increase mid-teens
(previously high single-digit growth) with the backdrop of
continued transportation and commodity related inflation. Adjusted
free cash flow is now expected to be between $260 million and $280
million (previously $250 million-$270 million), with plans for
incremental investments in inventory levels.
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 7, 2021. 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 5384608. 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 21. 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 is a home-essentials company with a
mission to make living better at home. We focus on delivering
innovative products and solutions to consumers for use in and
around the home through our trusted brands. We are 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®, Good Boy®, Meowee!® ,
Wildbird®, Wafcol®, OmegaOne®, OmegaSea®, Spectracide®, Cutter®,
Repel®, Hot Shot®, Black Flag®, and Liquid Fence®. Spectrum Brands,
a member of the Russell 1000 index, generated fiscal 2020 net sales
of approximately $4.0 billion.
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), adjusted EBITDA margin and
adjusted free cash flow. 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 flow from business operations that is
available for acquisitions and other investments, service of debt
principal, dividends and share repurchases and meet its 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
We have made, implied or incorporated by reference certain
forward-looking statements in this document including, without
limitation, statements regarding the Company’s recently adopted
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 factors 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 commenced, suspended or
discontinued at any time. All statements, other than statements of
historical facts included or incorporated by reference in this
document, without limitation, statements or expectations regarding
our Global Productivity Improvement Program, our business strategy,
future operations, financial condition, estimated revenues,
projected costs, projected synergies, prospects, plans and
objectives of management, information concerning expected actions
of third parties, retention and future compensation of key
personnel, our ability to meet environmental, social, and
governance goals, the expected impact of the COVID-19 pandemic,
economic, social, and political conditions or civil unrest in the
U.S. and other countries, and other statements regarding the
Company's ability to meet its expectations for its fiscal 2021 are
forward-looking statements. When used in this document, the words
future, anticipate, pro forma, seeks, intend, plan, envision,
estimate, believe, belief, expect, project, forecast, outlook,
goal, target, could, would, will, can, should, may and similar
expressions are also intended to identify forward-looking
statements, although not all forward-looking statements contain
such identifying words.
Since these forward-looking statements are based upon our
current expectations of future events and projections and are
subject to a number of risks and uncertainties, many of which are
beyond our control and some of which may change rapidly, actual
results or outcomes may differ materially from those expressed or
implied herein, and you should not place undue reliance on these
statements. Important factors that could cause our actual results
to differ materially from those expressed or implied herein
include, without limitation: (1) the impact of the COVID-19
pandemic on our customers, employees, manufacturing facilities,
suppliers, the capital markets and our financial condition, 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 transportation and shipment
costs, 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 COVID-19 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 Program), 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 including
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,
including our failure to comply with new and increasingly complex
global data privacy regulations; (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 impact of economic, social and political conditions
or civil unrest in the U.S. and other countries; (28) the effects
of political or economic conditions, terrorist attacks, acts of
war, natural disasters, public health concerns or other unrest in
international markets; (29) our ability to achieve our goals
regarding environmental, social and governance practices; (30) our
increased reliance on third party partners, suppliers, and
distributors to achieve our business objectives; and (31) the other
risk factors set forth in the securities filings of Spectrum Brands
Holdings, Inc. and SB/RH Holdings, LLC, including the 2020 Annual
Report and subsequent Quarterly Reports on Form 10-Q.
Some of the above-mentioned factors are described in further
detail in the sections entitled “Risk Factors” in our annual and
quarterly reports, as applicable. You should assume the information
appearing in this document is accurate only as of the date hereof,
or as otherwise specified, as our business, financial condition,
results of operations and prospects may have changed since such
date. Except as required by applicable law, including the
securities laws of the United States and the rules and regulations
of the United States Securities and Exchange Commission, we
undertake no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information,
future events or otherwise, to reflect actual results or changes in
factors or assumptions affecting such forward-looking
statements.
SPECTRUM BRANDS HOLDINGS,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME (Unaudited)
Three Month Periods
Ended
Six Month Periods
Ended
(in millions, except per share
amounts)
April 4, 2021
March 29, 2020
April 4, 2021
March 29, 2020
Net Sales
$
1,149.8
$
937.8
$
2,294.7
$
1,809.3
Cost of goods sold
744.5
606.0
1,467.0
1,198.5
Restructuring and related charges
1.3
2.9
1.4
12.8
Gross profit
404.0
328.9
826.3
598.0
Selling
173.2
150.0
340.0
296.1
General and administrative
89.0
81.9
180.9
162.2
Research and development
12.5
10.1
22.9
19.9
Restructuring and related charges
2.8
19.0
11.9
36.6
Transaction related charges
9.7
7.2
30.3
11.3
(Gain) loss on assets held for sale
—
(7.0)
—
25.7
Write-off from impairment of intangible
assets
—
—
—
24.2
Total operating expenses
287.2
261.2
586.0
576.0
Operating income
116.8
67.7
240.3
22.0
Interest expense
65.5
35.5
102.2
70.4
Other non-operating (income) expense,
net
(1.2)
110.4
(7.4)
66.8
Income (loss) from continuing operations
before income taxes
52.5
(78.2)
145.5
(115.2)
Income tax expense (benefit)
15.7
(19.0)
35.5
(18.3)
Net income (loss) from continuing
operations
36.8
(59.2)
110.0
(96.9)
(Loss) income from discontinued
operations, net of tax
(1.1)
1.4
(1.4)
4.3
Net income (loss)
35.7
(57.8)
108.6
(92.6)
Net (loss) income attributable to
non-controlling interest
(0.9)
(0.8)
(0.1)
0.1
Net income (loss) attributable to
controlling interest
$
36.6
$
(57.0)
$
108.7
$
(92.7)
Amounts attributable to controlling
interest
Net income (loss) from continuing
operations attributable to controlling interest
$
37.7
$
(58.4)
$
110.1
$
(97.0)
Net (loss) income from discontinued
operations attributable to controlling interest
(1.1)
1.4
(1.4)
4.3
Net income (loss) attributable to
controlling interest
$
36.6
$
(57.0)
$
108.7
$
(92.7)
Earnings Per Share
Basic earnings per share from continuing
operations
$
0.88
$
(1.29)
$
2.57
$
(2.09)
Basic earnings per share from discontinued
operations
(0.02)
0.03
(0.03)
0.09
Basic earnings per share
$
0.86
$
(1.26)
$
2.54
$
(2.00)
Diluted earnings per share from continuing
operations
$
0.88
$
(1.29)
$
2.56
$
(2.09)
Diluted earnings per share from
discontinued operations
(0.03)
0.03
(0.03)
0.09
Diluted earnings per share
$
0.85
$
(1.26)
$
2.53
$
(2.00)
Weighted Average Shares
Outstanding
Basic
42.6
45.1
42.8
46.4
Diluted
42.9
45.1
43.0
46.4
SPECTRUM BRANDS HOLDINGS,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOW (Unaudited)
Six Month Periods
Ended
(in millions)
April 4, 2021
March 29, 2020
Cash flows from operating
activities
Net cash used by operating activities from
continuing operations
$
(63.9)
$
(184.6)
Net cash used by operating activities from
discontinued operations
(15.9)
—
Net cash used by operating activities
(79.8)
(184.6)
Cash flows from investing
activities
Purchases of property, plant and
equipment
(28.1)
(31.7)
Proceeds from disposal of property, plant
and equipment
—
0.6
Business acquisitions, net of cash
acquired
(129.8)
(17.0)
Proceeds from sale of equity
investment
73.1
28.6
Other investing activity
(0.3)
2.5
Net cash used by investing activities from
continuing operations
(85.1)
(17.0)
Cash flows from financing
activities
Payment of debt, including premium on
extinguishment
(880.3)
(130.0)
Proceeds from issuance of debt
899.0
780.0
Payment of debt issuance costs
(12.6)
(0.8)
Payment of contingent consideration
—
(197.0)
Treasury stock purchases
(42.3)
(239.8)
Accelerated share repurchase
—
(125.0)
Dividends paid to shareholders
(35.7)
(39.1)
Dividends paid by subsidiary to
non-controlling interest
(1.3)
—
Share based award tax withholding
payments, net of proceeds upon vesting
(7.2)
(12.6)
Other financing activities, net
0.3
—
Net cash (used) provided by financing
activities
(80.1)
35.7
Effect of exchange rate changes on cash
and cash equivalents
3.4
(0.5)
Net change in cash, cash equivalents and
restricted cash in continuing operations
(241.6)
(166.4)
Cash, cash equivalents, and restricted
cash, beginning of period
533.8
627.1
Cash, cash equivalents, and restricted
cash, end of period
$
292.2
$
460.7
SPECTRUM BRANDS HOLDINGS,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF FINANCIAL POSITION (Unaudited)
(in millions)
April 4, 2021
September 30, 2020
Assets
Cash and cash equivalents
$
290.0
$
531.6
Trade receivables, net
524.9
501.1
Other receivables
88.5
74.2
Inventories
812.1
557.7
Prepaid expenses and other current
assets
83.2
63.5
Total current assets
1,798.7
1,728.1
Property, plant and equipment, net
392.6
396.5
Operating lease assets
103.0
103.8
Deferred charges and other
49.2
115.2
Goodwill
1,434.6
1,332.0
Intangible assets, net
1,496.4
1,431.7
Total assets
$
5,274.5
$
5,107.3
Liabilities and Shareholders'
Equity
Current portion of long-term debt
$
18.6
$
15.3
Accounts payable
548.6
557.5
Accrued wages and salaries
76.6
95.0
Accrued interest
11.7
38.5
Other current liabilities
270.9
238.6
Total current liabilities
926.4
944.9
Long-term debt, net of current portion
2,551.6
2,461.0
Long-term operating lease liabilities
86.2
88.8
Deferred income taxes
86.8
65.4
Other long-term liabilities
128.7
131.4
Total liabilities
3,779.7
3,691.5
Shareholders' equity
1,487.6
1,407.5
Non-controlling interest
7.2
8.3
Total equity
1,494.8
1,415.8
Total liabilities and equity
$
5,274.5
$
5,107.3
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 the restructuring initiatives across the
Company's segments;
- Transaction related charges that 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, including
development of transferred shared service operations, platforms and
personnel transferred as part of the divestitures and exiting of
transition service arrangements (TSAs) and reverse TSAs;
- Gains and losses attributable to the Company’s investment in
Energizer common stock;
- 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);
- Incremental interest costs recognized for the early
extinguishment debt, including the cash payment of premium from
early extinguishment and non-cash write-off of debt issuance costs
during the three and six month periods ended April 4, 2021 and six
month period ended March 29, 2020;
- Other adjustments primarily consisting of costs attributable to
(1) proposed settlement on outstanding litigation matters at our
H&G division attributable to significant and unusual
non-recurring claims with no previous history or precedent realized
during the six month period ended April 4, 2021, (2) legal and
litigation costs associated with Salus during the three and six
month period ended March 29, 2020 as they are not considered a
component of the continuing commercial products company, (3)
foreign currency attributable to multicurrency loans for the three
and six month period ended March 29, 2020, 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 divestitures, (4) expenses and cost recovery for flood damage
at Company facilities in Middleton, Wisconsin during the three and
six month period ended March 29, 2020 and (5) incremental costs for
separation of a key executive during the three and six month
periods ended March 29, 2020.
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 April 4, 2021 and March 29, 2020 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 April 4, 2021
and March 29, 2020.
Three Month Periods
Ended
Six Month Periods
Ended
April 4, 2021
March 29, 2020
April 4, 2021
March 29, 2020
Diluted EPS from continuing operations, as
reported
$
0.88
$
(1.29)
$
2.56
$
(2.09)
Adjustments:
Restructuring and related charges
0.10
0.48
0.31
1.06
Transaction related charges
0.23
0.16
0.71
0.24
Debt refinancing costs
0.73
—
0.73
0.06
(Gain) loss on Energizer investment
(0.02)
2.37
(0.16)
1.47
(Gain) loss on assets held for sale
—
(0.16)
—
0.56
Write-off from impairment of intangible
assets
—
—
—
0.52
Inventory acquisition step-up
0.06
—
0.08
—
Other
(0.01)
0.07
0.13
0.02
Income tax adjustment
(0.21)
(0.72)
(0.47)
(0.75)
Total adjustments
0.88
2.20
1.33
3.18
Diluted EPS from continuing operations, as
adjusted
$
1.76
$
0.91
$
3.89
$
1.09
SPECTRUM BRANDS HOLDINGS, INC. OTHER
SUPPLEMENTAL INFORMATION (Unaudited)
ADJUSTED DILUTED EPS (continued)
The following summarizes restructuring and related charges for
the three and six month periods ended April 4, 2021 and March 29,
2020:
Three Month Periods
Ended
Six Month Periods
Ended
(in millions)
April 4, 2021
March 29, 2020
April 4, 2021
March 29, 2020
Global productivity improvement
program
$
1.7
$
21.2
10.9
47.9
Other restructuring activities
2.4
0.7
2.4
1.5
Total restructuring and related
charges
$
4.1
$
21.9
$
13.3
$
49.4
The following summarizes transaction related charges for the
three and six month periods ended April 4, 2021 and March 29,
2020:
Three Month Periods
Ended
Six Month Periods
Ended
(in millions)
April 4, 2021
March 29, 2020
April 4, 2021
March 29, 2020
Armitage acquisition and integration
$
2.0
$
—
$
6.8
$
—
Coevorden operations divestiture and
separation
2.0
1.5
4.8
1.7
GBL divestiture and separation
0.9
2.7
2.7
5.1
Omega Sea acquisition and integration
0.1
1.3
0.2
1.3
Other
4.7
1.7
15.8
3.2
Total transaction-related charges
$
9.7
$
7.2
$
30.3
$
11.3
NET SALES AND ORGANIC NET SALES
The following is a summary of net sales by segment for the three
and six month periods ended April 4, 2021 and March 29, 2020:
Three Month Periods
Ended
Six Month Periods
Ended
(in millions, except %)
April 4, 2021
March 29, 2020
Variance
April 4, 2021
March 29, 2020
Variance
HHI
$
389.5
$
329.1
60.4
18.4
%
$
798.2
$
626.8
171.4
27.3
%
HPC
297.9
232.7
65.2
28.0
%
676.4
554.8
121.6
21.9
%
GPC
293.6
236.9
56.7
23.9
%
569.1
442.7
126.4
28.6
%
H&G
168.8
139.1
29.7
21.4
%
251.0
185.0
66.0
35.7
%
Net Sales
$
1,149.8
$
937.8
212.0
22.6
%
$
2,294.7
$
1,809.3
485.4
26.8
%
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 period ended April 4,
2021 compared to reported net sales for the three and six month
period ended March 29, 2020:
April 4, 2021
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 29,
2020
Variance
HHI
$
389.5
$
(3.2)
$
386.3
$
—
$
386.3
$
329.1
$
57.2
17.4
%
HPC
297.9
(8.7)
289.2
—
289.2
232.7
56.5
24.3
%
GPC
293.6
(6.1)
287.5
(26.8)
260.7
236.9
23.8
10.0
%
H&G
168.8
—
168.8
—
168.8
139.1
29.7
21.4
%
Total
$
1,149.8
$
(18.0)
$
1,131.8
$
(26.8)
$
1,105.0
$
937.8
$
167.2
17.8
%
April 4, 2021
Six 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 29,
2020
Variance
HHI
$
798.2
$
(4.7)
$
793.5
$
—
$
793.5
$
626.8
$
166.7
26.6
%
HPC
676.4
(14.2)
662.2
—
662.2
554.8
107.4
19.4
%
GPC
569.1
(10.3)
558.8
(47.1)
511.7
442.7
69.0
15.6
%
H&G
251.0
—
251.0
—
251.0
185.0
66.0
35.7
%
Total
$
2,294.7
$
(29.2)
$
2,265.5
$
(47.1)
$
2,218.4
$
1,809.3
$
409.1
22.6
%
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 six month periods ended April 4, 2021 and
three and six month periods ended March 29, 2020, other incentive
compensation includes certain incentive bridge awards issued due to
changes in the Company’s LTIP that allow for cash based payment
upon employee election but do not qualify for shared-based
compensation. All bridge awards fully vested in November 2020;
- Restructuring and related charges, which consist of project
costs associated with the restructuring initiatives across the
Company's segments;
- Transaction related charges that 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, including
development of transferred shared service operations, platforms and
personnel transferred as part of the divestitures and exiting of
transition service arrangements (TSAs) and reverse TSAs;
- Gains and losses attributable to the Company’s investment in
Energizer common stock;
- 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);
- Other adjustments primarily consisting of costs attributable to
(1) proposed settlement on outstanding litigation matters at our
H&G division attributable to significant and unusual
non-recurring claims with no previous history or precedent realized
during the six month period ended April 4, 2021, (2) legal costs
associated with Salus during the three and six month periods ended
April 4, 2021 and March 29, 2020 as they are not considered a
component of the continuing commercial products company, (3)
foreign currency attributable to multicurrency loans for the three
and six month period ended March 29, 2020, 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 divestitures, (4) expenses and cost recovery for flood damage
at Company facilities in Middleton, Wisconsin during the three and
six month period ended March 29, 2020 and (5) incremental costs for
separation of a key executive during the three and six month period
ended March 29, 2020.
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)
from continuing operations to adjusted EBITDA for the three month
periods ended April 4, 2021 and March 29, 2020, including the
calculation of adjusted EBITDA margin for each of the respective
periods.
Three Month Period Ended April 4,
2021
(in millions, except %)
HHI
HPC
GPC
H&G
Corporate
Consolidated
Net income from continuing operations
$
65.0
$
11.0
$
38.7
$
29.9
$
(107.8)
$
36.8
Income tax expense
—
—
—
—
15.7
15.7
Interest expense
—
—
—
—
65.5
65.5
Depreciation and amortization
8.6
11.8
9.6
4.9
3.8
38.7
EBITDA
73.6
22.8
48.3
34.8
(22.8)
156.7
Share and incentive based compensation
—
—
—
—
8.5
8.5
Restructuring and related charges
(0.2)
1.5
0.6
—
2.2
4.1
Transaction related charges
—
1.1
4.1
—
4.5
9.7
Gain on Energizer investment
—
—
—
—
(0.9)
(0.9)
Inventory acquisition step-up
—
—
2.6
—
—
2.6
Other
—
—
—
—
0.2
0.2
Adjusted EBITDA
$
73.4
$
25.4
$
55.6
$
34.8
$
(8.3)
$
180.9
Net Sales
$
389.5
$
297.9
$
293.6
$
168.8
$
—
$
1,149.8
Adjusted EBITDA Margin
18.8
%
8.5
%
18.9
%
20.6
%
—
15.7
%
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)
Other
—
0.8
—
—
2.4
3.2
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
%
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 April 4, 2021
and March 29, 2020, including the calculation of adjusted EBITDA
margin for each of the respective periods.
Six Month Period Ended April 4,
2021
(in millions, except %)
HHI
HPC
GPC
H&G
Corporate
Consolidated
Net income from continuing operations
$
154.5
$
49.2
$
72.7
$
29.4
$
(195.8)
$
110.0
Income tax expense
—
—
—
—
35.5
35.5
Interest expense
—
—
—
—
102.2
102.2
Depreciation and amortization
17.1
20.6
19.3
9.9
7.5
74.4
EBITDA
171.6
69.8
92.0
39.3
(50.6)
322.1
Share and incentive based compensation
—
—
—
—
16.7
16.7
Restructuring and related charges
—
4.1
2.1
—
7.1
13.3
Transaction related charges
—
2.4
11.7
—
16.2
30.3
Gain on Energizer investment
—
—
—
—
(6.9)
(6.9)
Inventory acquisition step-up
—
—
3.4
—
—
3.4
Other
—
—
—
6.0
—
6.0
Adjusted EBITDA
$
171.6
$
76.3
$
109.2
$
45.3
$
(17.5)
$
384.9
Net Sales
$
798.2
$
676.4
$
569.1
$
251.0
$
—
$
2,294.7
Adjusted EBITDA Margin
21.5
%
11.3
%
19.2
%
18.0
%
—
16.8
%
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
Other
—
0.7
—
—
0.6
1.3
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
%
SPECTRUM BRANDS HOLDINGS, INC. OTHER
SUPPLEMENTAL INFORMATION (Unaudited)
ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN
(continued)
Compensation Program Change
During the fourth quarter ended September 30, 2020, the Company
made a change to its annual management incentive plans ("MIP")
payout that previously provided for the issuance of stock for a
designated pool of recipients in lieu of cash. The annual MIP
payout was fully funded through cash distributions with no stock
issuance. Our operating performance metric of Adjusted EBITDA
excludes any consideration for stock-based compensation expense.
Additionally, the Company had historically recognized all stock
based compensation costs in the prior periods.
The program change continued into fiscal 2021 and beyond. Any
MIP payouts will be paid in cash and reflected as a reduction to
EBITDA and Adjusted EBITDA. Beginning in fiscal 2021, the Company
has recognized a portion of the MIP compensation as a component of
the segment EBITDA which may impact comparability of segment
results with the three and six month period ended March 29, 2020.
Although not expected to be material to operating results, we have
included proforma financial information below to reflect the
compensation charge related to the compensation program change as
if it were not considered stock compensation at the beginning of
2020 fiscal year and have allocated it to the segment EBITDA for
the three and six month periods ended March 29, 2020 for
comparability.
Three month period ended March 29,
2020
(in millions)
HHI
HPC
GPC
H&G
Corporate
Consolidated
Adjusted EBITDA
$
69.5
$
8.0
$
40.0
$
28.4
$
(5.5)
$
140.4
Proforma compensation program change
(0.6)
(0.4)
(0.4)
(0.3)
(2.6)
(4.3)
Proforma Adjusted EBITDA
$
68.9
$
7.6
$
39.6
$
28.1
$
(8.1)
136.1
Six month period ended March 29,
2020
(in millions)
HHI
HPC
GPC
H&G
Corporate
Consolidated
Adjusted EBITDA
$
112.3
$
44.4
$
71.5
$
25.1
$
(10.8)
242.5
Proforma compensation program change
(1.3)
(0.8)
(0.7)
(0.5)
(5.2)
(8.5)
Proforma Adjusted EBITDA
$
111.0
$
43.6
$
70.8
$
24.6
$
(16.0)
$
234.0
SPECTRUM BRANDS HOLDINGS, INC. OTHER
SUPPLEMENTAL INFORMATION (Unaudited)
FORECASTED ADJUSTED FREE CASH FLOW
The following is a reconciliation of the forecasted net cash
flow from operating activities to adjusted free cash flow for the
year ending September 30, 2021.
(in millions)
September 30, 2021
Net cash flow from operating
activities
295 - 315
Purchases of property, plant and
equipment
(85) - (95)
Transaction related costs and taxes
50 - 60
Adjusted free cash flow
260 - 280
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210507005049/en/
Investor/Media Contact: Kevin Kim 608-278-6148
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