- Net Sales Decreased 5.8% driven by Lower Replenishment
Orders, Slower Holiday Retail Sales, Unfavorable Foreign Currency,
Offset by Positive Pricing Adjustments
- Net Loss from Continuing Operations of $40.0 Million and
Adjusted EBITDA of $39.8 Million
- Focused Operating Strategy Towards Free Cash Flow Generation
with $65 million in Inventory Reduction in the First Quarter
including HHI Business
- The Company Expects to Collect $4.3 Billion Upon Completion
of the Sale of HHI, Anticipated to Close no Later Than the End of
June 2023
- Updating Fiscal 2023 Earnings Framework and Now Expect Net
Sales to be Flat to Prior Year While Maintaining Low Double-Digits
Adjusted EBITDA Growth Expectation
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 first quarter of fiscal 2023 ended
January 1, 2023.
"Our financial results for the quarter demonstrate our renewed
focus on profitability, financial discipline and cost management.
We are pleased that our first quarter EBITDA exceeded expectations,
despite continued heavy inventory levels at retail weighing on the
volume of products sold during the quarter. As we anticipated, we
continue to be challenged by a difficult economic environment and
face lower consumer demand compared to strong COVID related demand
growth a year ago. While the volume decline and unfavorable foreign
exchange were the main contributors of our EBITDA decline in the
quarter, EBITDA was also negatively impacted by approximately $25
million from the sales of higher cost inventory accumulated during
last year. We expect the vast majority of this higher cost
inventory to be shipped in the first half of the year, leading to
much better profitability in the second half of our fiscal year.
Our continued focus on increasing prices, simplifying our business
model and reducing costs is paying off as we operate as a leaner
organization with a renewed financial discipline,” said David
Maura, Chairman and Chief Executive Officer of Spectrum Brands.
Continuing, Mr. Maura commented, “Our focus on cash generation
yielded positive results as we reduced our inventory by another $65
million during our first quarter, including HHI. We will maintain
this focus on reducing working capital and strengthening our
balance sheet throughout fiscal 23 as we navigate these uncertain
economic conditions. With respect to our strategic transformation,
we expect to win the DOJ lawsuit, close the HHI transaction and
collect $4.3 billion of cash by no later than June 2023."
Fiscal 2023 First Quarter Highlights
Three Month Periods
Ended
(in millions, except per share and
%)
January 1, 2023
January 2, 2022
Variance
Net sales
$
713.3
$
757.2
$
(43.9
)
(5.8
)%
Gross profit
201.9
219.3
(17.4
)
(7.9
)%
Operating loss
(20.2
)
(23.8
)
3.6
(15.1
)%
Net loss from continuing operations
(40.0
)
(30.2
)
(9.8
)
32.5
%
Diluted earnings per share from continuing
operations
$
(0.99
)
$
(0.73
)
$
(0.26
)
35.6
%
Non-GAAP Operating Metrics
Adjusted EBITDA from continuing
operations
$
39.8
$
49.3
$
(9.5
)
(19.3
)%
Adjusted EPS from continuing
operations
$
(0.32
)
$
(0.06
)
$
(0.26
)
433.3
%
- Net sales decreased 5.8% with a decrease in organic net sales
of 9.5%, excluding the impact of $39.6 million of unfavorable
foreign exchange rates and acquisition sales of $67.8 million. Net
sales declined due to lower replenishment orders from retailers'
focus on inventory reduction and slower holiday POS offset by
annualization of pricing actions taken during the prior year and
new price increases in the EMEA region during the first
quarter.
- Gross profit and gross profit margin declined from the
reduction in sales, unfavorable mix and sales of higher cost
inventory accumulated in the prior year.
- Operating loss decreased from lower distribution costs, fixed
cost reduction efforts initiated in the prior year, plus reduced
spend on restructuring, optimization and strategic transaction
initiatives offsetting the decline in gross profit.
- Net loss increase and diluted earnings per share decrease were
primarily driven by the increase in interest costs offsetting the
decrease in operating loss.
- Adjusted EBITDA decreased 19.3% and adjusted EBITDA margin
decreased 90 basis points attributable to the decrease in volume
and unfavorable impact of foreign exchange.
- Adjusted diluted EPS decreased to a loss of $0.32 per share due
to lower Adjusted EBITDA.
Fiscal 2023 First Quarter Segment Level Data
Home & Personal Care (HPC)
Three Month Periods
Ended
(in millions, except %)
January 1, 2023
January 2, 2022
Variance
Net sales
$
364.4
$
379.7
$
(15.3
)
(4.0
)%
Operating (loss) income
(4.3
)
20.4
(24.7
)
n/m
Operating (loss) income margin
(1.2
%)
5.4
%
(660
)
bps
Adjusted EBITDA
$
13.2
$
27.4
$
(14.2
)
(51.8
)%
Adjusted EBITDA margin
3.6
%
7.2
%
(360
)
bps
n/m = not meaningful
The decrease in net sales is primarily due to slower product
category retail sales with an increasingly competitive landscape
and high retail inventory levels limiting replenishment orders
during the holiday season. Prior year pricing adjustments
positively impacted net sales. Sales in EMEA were further impacted
by the Russia-Ukraine war. Organic net sales decreased 15.1%,
excluding acquisition sales of $67.8 million and unfavorable
foreign currency impact of $25.7 million.
The decrease in operating income, adjusted EBITDA and margins is
driven by lower volume, the sales of higher cost inventory
accumulated in the prior year, and unfavorable foreign currency in
EMEA, which were partially mitigated by cost savings from the
reduction of operating expenses initiated in the prior year.
Operating income was further impacted by incremental costs from the
integration of the Tristar Business, and dissolution of Russia
commercial operations.
Global Pet Care (GPC)
Three Month Periods
Ended
(in millions, except %)
January 1, 2023
January 2, 2022
Variance
Net sales
$
277.5
$
302.2
$
(24.7
)
(8.2
)%
Operating income
22.7
12.3
10.4
84.6
%
Operating income margin
8.2
%
4.1
%
410
bps
Adjusted EBITDA
$
37.2
$
38.7
$
(1.5
)
(3.9
)%
Adjusted EBITDA margin
13.4
%
12.8
%
60
bps
The decrease in net sales was driven by higher retail inventory
levels limiting replenishment orders and lower retail sales in hard
good categories, primarily with pet specialty retailers, offset by
new positive pricing adjustments in EMEA and the impact of prior
year price increases. Sales and distribution for the chews &
treats category continue to grow from prior year with declines in
other hard goods and aquatic environments as compared to prior year
elevated levels. EMEA sales were negatively impacted by unfavorable
foreign exchange rates and lower aquatic sales offset by growth in
companion animal sales including dog & cat food. Organic net
sales decreased 3.6%, excluding unfavorable foreign currency
impacts of $13.9 million.
Operating income and margin increased due to lower distribution
costs compared to prior year disruptions, positive pricing
adjustments and savings from prior year cost reduction initiatives,
offset by lower volumes and unfavorable foreign currency impact.
Adjusted EBITDA decreased due to lower volumes with margin increase
due to pricing adjustments and operating expense savings.
Home & Garden (H&G)
Three Month Periods
Ended
(in millions, except %)
January 1, 2023
January 2, 2022
Variance
Net sales
$
71.4
$
75.3
$
(3.9
)
(5.2
)%
Operating loss
(7.2
)
(15.7
)
8.5
(54.1
)%
Operating loss margin
(10.1
)%
(20.8
)%
1,070
bps
Adjusted EBITDA
$
(2.4
)
$
(7.3
)
$
4.9
(67.1
)%
Adjusted EBITDA margin
(3.4
)%
(9.7
)%
630
bps
The net sales decrease was primarily driven by higher retail
inventory reducing replenishment needs and lower early seasonal
inventory investment across pest control product categories, offset
by pricing adjustments initiated in the prior year. Cleaning
products realized year-over-year growth with increased distribution
and price increases following integration-related disruptions in
the prior year.
Operating loss improvement with increases in adjusted EBITDA and
margins were driven by pricing, operational performance and
annualization of operating cost savings initiatives from the prior
year, plus higher integration-related costs in the prior year
following the Rejuvenate acquisition further benefiting operating
income.
Liquidity and Debt
As of the end of the quarter, the Company had a cash balance of
$228 million and $3,315 million of debt outstanding, consisting of
$2,001 million of senior unsecured notes, $1,223 million of term
loans and revolver draws and $91 million of finance leases.
Proforma net leverage at the end of the first quarter was 6.2
times, compared to 5.4 times at the end of the previous quarter.
The Company entered into an amendment to the credit agreement to
temporarily increase the maximum consolidated leverage ratio
permitted from 6.0 to 1.0 to be no greater than 7.0 to 1.0 until
the earliest of (i) September 29, 2023, or (ii) 10 business days
after the closing of the HHI divestiture or the receipt of the
related termination fee.
Fiscal 2023 Earnings Framework
Spectrum Brands now expects flat reported net sales in Fiscal
2023, with foreign exchange expected to have a negative impact
based upon current rates. Fiscal 2023 adjusted EBITDA is still
expected to increase by low double-digits.
From a capital structure perspective, the Company is targeting a
long-term net leverage ratio of 2.0 - 2.5 times after full
deployment of HHI sale proceeds.
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, February 10, 2023. The
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. Participants
may register here. Instructions will be provided to ensure
the necessary audio applications are downloaded and installed.
Users can obtain these at no charge.
A replay of the live broadcast will be accessible through the
Event Calendar page in the Investor Relations section of the
Company’s website.
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 specialty pet supplies, lawn and garden and home pest
control products, personal insect repellents, shaving and grooming
products, personal care products, and small household appliances.
Helping to meet the needs of consumers worldwide, Spectrum Brands
offers a broad portfolio of market-leading, well-known and widely
trusted brands including Tetra®, DreamBone®, SmartBones®, Nature’s
Miracle®, 8-in-1®, FURminator®, Healthy-Hide®, Good Boy®, Meowee!®,
OmegaOne®, Spectracide®, Cutter®, Repel®, Hot Shot®, Rejuvenate®,
Black Flag®, Liquid Fence®, Remington®, George Foreman®, Russell
Hobbs®, Black+Decker®, PowerXL®, Emeril Lagasse®, and Copper Chef®.
For more information, please visit www.spectrumbrands.com. Spectrum
Brands – A Home Essentials Company™
Non-GAAP Measurements
Management believes that certain non-GAAP financial measures may
be useful in certain instances to provide additional meaningful
comparisons between current results and results in prior operating
periods. Within this document, including the tables that follow,
reference is made to organic net sales, adjusted earnings before
interest, taxes, depreciation and amortization (EBITDA), adjusted
EBITDA margin, and adjusted earnings per share (EPS). 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 foreign currency exchange
fluctuations and the impact of acquisitions (when applicable) when
there is no comparable sales in the prior period. Organic sales
growth is calculated by comparing organic net sales to net sales in
the prior comparative period. The effect of changes in foreign
currency exchange rates is determined by translating the period’s
net sales using the foreign currency exchange rates that were in
effect during the prior comparative period. 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, because interest, taxes, depreciation and
amortization can differ greatly between organizations as a result
of differing capital structures and tax strategies. Adjusted EBITDA
can also be a useful measure for determining the Company's debt
covenant compliance. 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. Management uses adjusted diluted EPS as 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
of 25.0%. 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. Supplemental tables
have been provided within the Appendix to this document to
demonstrate reconciliation of non-GAAP measurements to the most
comparable GAAP measure.
Forward-Looking Statements
We have made or implied certain forward-looking statements in
this document. All statements, other than statements of historical
facts included or incorporated by reference in this document,
including, without limitation, statements or expectations regarding
our business strategy, future operations, financial condition,
estimated revenues, projected costs, earnings power, projected
synergies, prospects, plans and objectives of management, outcome
of any litigation and information concerning expected actions of
third parties are forward-looking statements. When used in this
document, the words future, anticipate, pro forma, seek, intend,
plan, envision, estimate, believe, belief, expect, project,
forecast, outlook, earnings framework, goal, target, could, would,
will, can, should, may and similar expressions are 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 COVID-19 pandemic, economic,
social and political conditions or civil unrest, terrorist attacks,
acts of war, natural disasters, other public health concerns or
unrest in the United States or the international markets impacting
our business, customers, employees (including our ability to retain
and attract key personnel), manufacturing facilities, suppliers,
capital markets, financial condition and results of operations, all
of which tend to aggravate the other risks and uncertainties we
face; (2) the impact of a number of local, regional and global
uncertainties could negatively impact our business; (3) the
negative effect of the armed conflict between Russia and Ukraine
and its impact on those regions and surrounding regions, including
on our operations and on those of our customers, suppliers and
other stakeholders; (4) our increased reliance on third-party
partners, suppliers and distributors to achieve our business
objectives; (5) the impact of expenses resulting from the
implementation of new business strategies, divestitures or current
and proposed restructuring and optimization activities, including
distribution center changes which are complicated and involve
coordination among a number of stakeholders, including our
suppliers and transportation and logistics handlers; (6) the impact
of our indebtedness and financial leverage position on our
business, financial condition and results of operations; (7) 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; (8) any failure to comply with financial
covenants and other provisions and restrictions of our debt
instruments; (9) 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;
(10) the impact of fluctuations in transportation and shipment
costs, fuel costs, commodity prices, costs or availability of raw
materials or terms and conditions available from suppliers,
including suppliers’ willingness to advance credit; (11) interest
rate fluctuations; (12) changes in foreign currency exchange rates
that may impact our purchasing power, pricing and margin
realization within international jurisdictions; (13) the loss of,
significant reduction in or dependence upon, sales to any
significant retail customer(s), including their changes in retail
inventory levels and management thereof; (14) competitive
promotional activity or spending by competitors, or price
reductions by competitors; (15) the introduction of new product
features or technological developments by competitors and/or the
development of new competitors or competitive brands; (16) changes
in consumer spending preferences and demand for our products,
particularly in light of economic stress and the COVID-19 pandemic;
(17) our ability to develop and successfully introduce new
products, protect our intellectual property and avoid infringing
the intellectual property of third parties; (18) our ability to
successfully identify, implement, achieve and sustain productivity
improvements, cost efficiencies (including at our manufacturing and
distribution operations) and cost savings; (19) the seasonal nature
of sales of certain of our products; (20) the impact weather
conditions may have on the sales of certain of our products; (21)
the effects of climate change and unusual weather activity as well
as our ability to respond to future natural disasters and pandemics
and to meet our environmental, social and governance goals; (22)
the cost and effect of unanticipated legal, tax or regulatory
proceedings or new laws or regulations (including environmental,
public health and consumer protection regulations); (23) 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; (24) the impact of
existing, pending or threatened litigation, government regulation
or other requirements or operating standards applicable to our
business; (25) 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; (26) changes in accounting
policies applicable to our business; (27) our discretion to adopt,
conduct, suspend or discontinue any share repurchase program
(including our discretion to conduct purchases, if any, in a
variety of manners including open-market purchases or privately
negotiated transactions); (28) our ability to utilize net operating
loss carry-forwards to offset tax liabilities from future taxable
income; (29) our ability to consummate the announced Hardware and
Home Improvement ("HHI") divestiture on the expected terms and
within the anticipated time period, or at all, which is dependent
on the parties' ability to satisfy certain closing conditions and
our ability to realize the benefits of the transaction, including
reducing the financial leverage of the Company, investing in the
organic growth of the Company, funding any future acquisitions,
returning capital to shareholders and/or maintaining our quarterly
dividends; (30) our ability to overcome, or timely overcome, the
U.S. Department of Justice's complaint to enjoin the proposed
acquisition of the Company's HHI business by ASSA ABLOY ("ASSA"),
including ASSA's ability to complete the dispositions that it has
proposed to resolve all the alleged competitive concerns (i.e., the
disposition of its Emtek business and its smart residential
business in the U.S. and Canada); (31) the risk that regulatory
approvals that are required to complete the proposed HHI
divestiture may not be realized, may take longer than expected or
may impose adverse conditions; (32) our ability to successfully
integrate the February 18, 2022, acquisition of the home appliances
and cookware products business from Tristar Products, Inc. into the
Company's Home and Personal Care ("HPC") business and realize the
benefits of this acquisition; (33) our ability to separate the
Company's HPC business and create an independent Global Appliances
business on expected terms, and within the anticipated time period,
or at all, and to realize the potential benefits of such business;
(34) our ability to create a pure play consumer products company
composed of our Global Pet Care and Home & Garden business and
to realize the expected benefits of such creation, and within the
anticipated time period, or at all; (35) our ability to
successfully implement further acquisitions or dispositions and the
impact of any such transactions on our financial performance; (36)
the impact of actions taken by significant stockholders; and (37)
the unanticipated loss of key members of senior management and the
transition of new members of our management teams to their new
roles.
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 end of the
period covered by this document, or as otherwise specified, as our
business, financial condition, results of operations and prospects
may have changed since that 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
(in millions, except per share
amounts)
January 1, 2023
January 2, 2022
Net sales
$
713.3
$
757.2
Cost of goods sold
511.4
537.9
Gross profit
201.9
219.3
Selling
131.3
146.3
General and administrative
84.6
89.2
Research and development
6.2
7.6
Total operating expenses
222.1
243.1
Operating loss
(20.2
)
(23.8
)
Interest expense
33.4
21.8
Other non-operating (income) expense,
net
(1.5
)
0.6
Loss from continuing operations before
income taxes
(52.1
)
(46.2
)
Income tax benefit
(12.1
)
(16.0
)
Net loss from continuing operations
(40.0
)
(30.2
)
Income from discontinued operations, net
of tax
19.5
38.8
Net (loss) income
(20.5
)
8.6
Net income from continuing operations
attributable to non-controlling interest
0.3
—
Net income from discontinued operations
attributable to non-controlling interest
0.1
0.4
Net (loss) income attributable to
controlling interest
$
(20.9
)
$
8.2
Amounts attributable to controlling
interest
Net loss from continuing operations
attributable to controlling interest
$
(40.3
)
$
(30.2
)
Net income from discontinued operations
attributable to controlling interest
19.4
38.4
Net (loss) income attributable to
controlling interest
$
(20.9
)
$
8.2
Earnings Per Share
Basic earnings per share from continuing
operations
$
(0.99
)
$
(0.73
)
Basic earnings per share from discontinued
operations
0.48
0.93
Basic earnings per share
$
(0.51
)
$
0.20
Diluted earnings per share from continuing
operations
$
(0.99
)
$
(0.73
)
Diluted earnings per share from
discontinued operations
0.48
0.93
Diluted earnings per share
$
(0.51
)
$
0.20
Weighted Average Shares
Outstanding
Basic
40.9
41.3
Diluted
40.9
41.3
SPECTRUM BRANDS HOLDINGS,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOW (Unaudited)
Three Month Periods
Ended
(in millions)
January 1, 2023
January 2, 2022
Cash flows from operating
activities
Net cash used by operating activities from
continuing operations
$
(57.0
)
$
(255.8
)
Net cash used by operating activities from
discontinued operations
(7.2
)
(15.3
)
Net cash used by operating activities
(64.2
)
(271.1
)
Cash flows from investing
activities
Purchases of property, plant and
equipment
(10.0
)
(14.1
)
Proceeds from disposal of property, plant
and equipment
—
0.1
Net cash used by investing activities from
continuing operations
(10.0
)
(14.0
)
Net cash used by investing activities from
discontinued operations
(3.6
)
(5.0
)
Net cash used by investing activities
(13.6
)
(19.0
)
Cash flows from financing
activities
Payment of debt
(3.3
)
(3.2
)
Proceeds from issuance of debt
90.0
465.0
Payment of debt issuance costs
(2.3
)
—
Treasury stock purchases
—
(110.0
)
Dividends paid to shareholders
(17.1
)
(17.3
)
Share based award tax withholding
payments, net of proceeds upon vesting
(10.5
)
(24.5
)
Net cash provided by financing activities
from continuing operations
56.8
310.0
Net cash used by financing activities from
discontinued operations
(0.4
)
(0.4
)
Net cash provided by financing
activities
56.4
309.6
Effect of exchange rate changes on cash
and cash equivalents
5.7
(2.5
)
Net change in cash, cash equivalents and
restricted cash in continuing operations
(15.7
)
17.0
Cash, cash equivalents, and restricted
cash, beginning of period
243.9
190.0
Cash, cash equivalents, and restricted
cash, end of period
$
228.2
$
207.0
SPECTRUM BRANDS HOLDINGS,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF FINANCIAL POSITION (Unaudited)
(in millions)
January 1, 2023
September 30, 2022
Assets
Cash and cash equivalents
$
228.0
$
243.7
Trade receivables, net
269.8
247.4
Other receivables
121.1
95.7
Inventories
702.3
780.6
Prepaid expenses and other current
assets
48.3
51.2
Current assets of business held for
sale
1,811.1
1,816.7
Total current assets
3,180.6
3,235.3
Property, plant and equipment, net
264.2
263.8
Operating lease assets
78.6
82.5
Deferred charges and other
66.6
38.7
Goodwill
965.0
953.1
Intangible assets, net
1,210.8
1,202.2
Total assets
$
5,765.8
$
5,775.6
Liabilities and Shareholders'
Equity
Current portion of long-term debt
$
12.5
$
12.3
Accounts payable
365.2
453.1
Accrued wages and salaries
26.4
28.4
Accrued interest
49.1
27.6
Other current liabilities
201.1
203.0
Current liabilities of business held for
sale
427.0
463.7
Total current liabilities
1,081.3
1,188.1
Long-term debt, net of current portion
3,267.7
3,144.5
Long-term operating lease liabilities
52.5
56.0
Deferred income taxes
62.7
60.1
Other long-term liabilities
62.2
57.8
Total liabilities
4,526.4
4,506.5
Shareholders' equity
1,232.8
1,263.2
Non-controlling interest
6.6
5.9
Total equity
1,239.4
1,269.1
Total liabilities and equity
$
5,765.8
$
5,775.6
SPECTRUM BRANDS HOLDINGS,
INC.
OTHER SUPPLEMENTAL INFORMATION
(Unaudited)
NET SALES AND ORGANIC NET SALES
The following is a summary of net sales by segment for the three
month periods ended January 1, 2023 and January 2, 2022:
Three Month Periods
Ended
(in millions, except %)
January 1, 2023
January 2, 2022
Variance
HPC
$
364.4
$
379.7
$
(15.3
)
(4.0
)%
GPC
277.5
302.2
(24.7
)
(8.2
)%
H&G
71.4
75.3
(3.9
)
(5.2
)%
Net Sales
$
713.3
$
757.2
(43.9
)
(5.8
)%
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 acquisitions. We use organic
net sales as one measure to monitor and evaluate our regional and
segment performance. Organic growth is calculated by comparing
organic net sales to reported net sales in the prior year. The
effect of changes in currency exchange rates is determined by
translating the period’s net sales using the currency exchange
rates that were in effect during the prior period. Net sales are
attributed to the geographic regions based on the country of
destination. We exclude net sales from acquired businesses in the
current year for which there are no comparable sales in the prior
period. The following is a reconciliation of reported sales to
organic sales for the three month period ended January 1, 2023
compared to reported net sales for the three month periods ended
January 2, 2022:
January 1, 2023
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 January 2,
2022
Variance
HPC
$
364.4
$
25.7
$
390.1
$
(67.8
)
$
322.3
$
379.7
$
(57.4
)
(15.1
)%
GPC
277.5
13.9
291.4
—
291.4
302.2
(10.8
)
(3.6
)%
H&G
71.4
—
71.4
—
71.4
75.3
(3.9
)
(5.2
)%
Total
$
713.3
$
39.6
$
752.9
$
(67.8
)
$
685.1
$
757.2
(72.1
)
(9.5
)%
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 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 compensation costs consist of costs associated with
long-term incentive compensation arrangements that generally
consist of non-cash, stock-based compensation;
- Incremental amounts attributable to strategic transactions and
business development initiatives including, but not limited to, the
acquisition or divestitures of a business, costs to effect and
facilitate a transaction, including such cost to integrate or
separate the respective business. These amounts are excluded from
our performance metrics as they are reflective of incremental
investment by the Company towards business development activities,
incremental costs attributable to such transactions and are not
considered recurring or reflective of the continuing ongoing
operations of the consolidated group or segments;
- Incremental amounts realized towards restructuring and
optimization projects including, but not limited to, costs towards
the development and implementation of strategies to optimize
operations and improve efficiency, reduce costs, increase revenues,
increase or maintain our current profit margins, including
recognition of one-time exit or disposal costs. These amounts are
excluded from our ongoing performance metrics as they are
reflective of incremental investment by the Company towards
significant initiatives controlled by management, incremental costs
directly attributable to such initiatives, indirect impact or
disruption to operating performance during implementation, and are
not considered recurring or reflective of the continuing ongoing
operations of the consolidated group or segments;
- Unallocated shared costs associated with discontinued
operations from certain shared and center-led administrative
functions the Company's business units excluded from income from
discontinued operations as they are not a direct cost of the
discontinued business but a result of indirect allocations,
including but not limited to, information technology, human
resources, finance and accounting, supply chain, and commercial
operations. Amounts attributable to unallocated shared costs would
be mitigated through subsequent strategic or restructuring
initiatives, transition services agreements, elimination of
extraneous costs, or re-allocations or absorption of existing
continuing operations following the completed sale of the
discontinued operations;
- Non-cash purchase accounting adjustments recognized in earnings
from continuing operations subsequent to an acquisition, including,
but not limited to, the costs attributable to the step-up in
inventory value and the incremental value in operating lease assets
with below market rent, among others;
- Non-cash gain from the reduction in the contingent
consideration liability recognized during the three month period
ended January 1, 2023 associated with the Tristar Business
acquisition in the prior year on February 18, 2022;
- Non-cash asset impairments or write-offs realized and
recognized in earnings from continuing operations;
- Impact from the early settlement of foreign currency cash flow
hedges in the prior year, resulting in subsequent assumed losses at
the original stated maturities of foreign currency cash flow hedges
in our EMEA region that were settled early in the prior year due to
changes in the Company's legal entity organization structure and
forecasted purchasing strategy of HPC finished goods inventory
within the region, resulting in the recognition of excluded gains
in the prior year intended to mitigate cost through the year ending
September 30, 2023.
- Incremental costs recognized by the HPC segment attributable to
the realization of product recalls initiated by the Company in the
prior year.
- Incremental reserves for non-recurring litigation or
environmental remediation activity including the proposed
settlement on outstanding litigation matters at our H&G
division attributable to significant and unusual nonrecurring
claims with no previous history or precedent with remeasurements
during the three month period ended January 2, 2022; and
- Other adjustments are primarily attributable to (1) costs
associated with Salus as they are not considered a component of the
continuing commercial products company; (2) key executive severance
related costs; (3) insurable losses and cost recovery associated
with hurricane damages at a key supplier of our Glofish business
and loss realized from misapplied funds during the three month
period ended January 1, 2023.
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 and adjusted EBITDA
margin for the three month period ended January 1, 2023.
(in millions, except %)
HPC
GPC
H&G
Corporate
Consolidated
Net (loss) income from continuing
operations
$
(4.2
)
$
23.0
$
(7.2
)
$
(51.6
)
$
(40.0
)
Income tax benefit
—
—
—
(12.1
)
(12.1
)
Interest expense
—
—
—
33.4
33.4
Depreciation
3.2
3.7
1.8
3.5
12.2
Amortization
2.1
5.5
2.8
—
10.4
EBITDA
1.1
32.2
(2.6
)
(26.8
)
3.9
Share based compensation
—
—
—
3.3
3.3
Tristar integration
5.7
—
—
—
5.7
HHI divestiture
—
—
—
1.5
1.5
HPC separation initiatives
—
—
—
2.4
2.4
Coevorden operations separation
—
1.3
—
—
1.3
Fiscal 2022 restructuring
—
—
0.2
0.4
0.6
Global ERP transformation
—
—
—
1.6
1.6
HPC brand portfolio transitions
1.0
—
—
—
1.0
Russia closing initiatives
2.9
—
—
—
2.9
Other project costs
—
0.8
—
2.3
3.1
Unallocated shared costs
—
—
—
6.3
6.3
Non-cash purchase accounting
adjustments
0.5
—
—
—
0.5
Gain from remeasurement of contingent
consideration liability
(1.5
)
—
—
—
(1.5
)
Early settlement of foreign currency cash
flow hedges
2.6
—
—
—
2.6
HPC product recall
0.3
—
—
—
0.3
Salus and other
0.6
2.9
—
0.8
4.3
Adjusted EBITDA
$
13.2
$
37.2
$
(2.4
)
$
(8.2
)
$
39.8
Net sales
$
364.4
$
277.5
$
71.4
$
—
$
713.3
Adjusted EBITDA margin
3.6
%
13.4
%
(3.4
)%
—
5.6
%
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 and adjusted EBITDA
margin for the three month period ended January 2, 2022.
(in millions, except %)
HPC
GPC
H&G
Corporate
Consolidated
Net income (loss) from continuing
operations
$
19.0
$
11.7
$
(15.8
)
$
(45.1
)
$
(30.2
)
Income tax benefit
—
—
—
(16.0
)
(16.0
)
Interest expense
—
—
—
21.8
21.8
Depreciation
3.1
3.5
1.8
3.8
12.2
Amortization
4.7
5.7
2.9
—
13.3
EBITDA
26.8
20.9
(11.1
)
(35.5
)
1.1
Share based compensation
—
—
—
5.6
5.6
Tristar acquisition
—
—
—
1.7
1.7
Rejuvenate integration
—
—
4.3
—
4.3
Armitage integration
—
0.7
—
—
0.7
Omega integration
—
0.9
—
—
0.9
HPC separation initiatives
—
—
—
1.7
1.7
HHI divestiture
—
—
—
4.3
4.3
Coevorden operations separation
—
3.2
—
—
3.2
Global ERP transformation
—
—
—
2.9
2.9
GPC distribution center transition
—
12.8
—
—
12.8
Global productivity improvement
program
0.5
0.2
—
1.1
1.8
Other project costs
0.1
—
—
2.0
2.1
Unallocated shared costs
—
—
—
6.8
6.8
Legal and environmental remediation
reserves
—
—
(0.5
)
—
(0.5
)
Salus and other
—
—
—
(0.1
)
(0.1
)
Adjusted EBITDA
$
27.4
$
38.7
$
(7.3
)
$
(9.5
)
$
49.3
Net Sales
$
379.7
$
302.2
$
75.3
$
—
$
757.2
Adjusted EBITDA margin
7.2
%
12.8
%
(9.7
)%
—
6.5
%
SPECTRUM BRANDS HOLDINGS,
INC.
OTHER SUPPLEMENTAL INFORMATION
(Unaudited)
ADJUSTED DILUTED EPS
We define adjusted diluted earnings per share (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:
- Incremental amounts attributable to strategic transactions and
business development initiatives including, but not limited to, the
acquisition or divestitures of a business, costs to effect and
facilitate a transaction, including such cost to integrate or
separate the respective business. These amounts are excluded from
our performance metrics as they are reflective of incremental
investment by the Company towards business development activities,
incremental costs attributable to such transactions and are not
considered recurring or reflective of the continuing ongoing
operations of the consolidated group or segments;
- Incremental amounts realized towards restructuring and
optimization projects including, but not limited to, costs towards
the development and implementation of strategies to optimize
operations and improve efficiency, reduce costs, increase revenues,
increase or maintain our current profit margins, including
recognition of one-time exit or disposal costs. These amounts are
excluded from our ongoing performance metrics as they are
reflective of incremental investment by the Company towards
significant initiatives controlled by management, incremental costs
directly attributable to such initiatives, indirect impact or
disruption to operating performance during implementation, and are
not considered recurring or reflective of the continuing ongoing
operations of the consolidated group or segments;
- Unallocated shared costs associated with discontinued
operations from certain shared and center-led administrative
functions the Company's business units excluded from income from
discontinued operations as they are not a direct cost of the
discontinued business but a result of indirect allocations,
including but not limited to, information technology, human
resources, finance and accounting, supply chain, and commercial
operations. Amounts attributable to unallocated shared costs would
be mitigated through subsequent strategic or restructuring
initiatives, transition services agreements, elimination of
extraneous costs, or re-allocations or absorption of existing
continuing operations following the completed sale of the
discontinued operations;
- Non-cash purchase accounting adjustments recognized in earnings
from continuing operations subsequent to an acquisition, including,
but not limited to, the costs attributable to the step-up in
inventory value and the incremental value in operating lease assets
with below market rent, among others;
- Non-cash gain from the reduction in the contingent
consideration liability recognized during the three month period
ended January 1, 2023 associated with the Tristar Business
acquisition in the prior year on February 18, 2022;
- Non-cash asset impairments or write-offs realized and
recognized in earnings from continuing operations;
- Impact from the early settlement of foreign currency cash flow
hedges in the prior year, resulting in subsequent assumed losses at
the original stated maturities of foreign currency cash flow hedges
in our EMEA region that were settled early in the prior year due to
changes in the Company's legal entity organization structure and
forecasted purchasing strategy of HPC finished goods inventory
within the region, resulting in the recognition of excluded gains
in the prior year intended to mitigate costs through the year
ending September 30, 2023.
- Incremental costs recognized by the HPC segment attributable to
the realization of product recalls initiated by the Company in the
prior year.
- Incremental interest costs realized during the three month
period ended January 1, 2023 for fees paid towards the amendment to
the credit agreement to temporarily increase the maximum
consolidated leverage ratio permitted from 6.0 to 1.0 to be no
greater than 7.0 to 1.0 until the earliest of (i) September 29,
2023, or (ii) 10 business days after the closing of the HHI
divestiture or the receipt of the related termination fee.
- Incremental reserves for non-recurring litigation or
environmental remediation activity including the proposed
settlement on outstanding litigation matters at our H&G
division attributable to significant and unusual nonrecurring
claims with no previous history or precedent with remeasurements
during the three month period ended January 2, 2022;
- Other adjustments are primarily attributable to (1) costs
associated with Salus as they are not considered a component of the
continuing commercial products company; (2) key executive severance
related costs; (3) insurable losses and cost recovery associated
with hurricane damages at a key supplier of our Glofish business
and loss realized from misapplied funds during the three month
period ended January 1, 2023; and
- Income tax adjustment to diluted EPS is to exclude the impact
of adjusting the valuation allowance against deferred taxes and
other tax related items in order to reflect a normalized ongoing
effective tax rate of 25.0% for the three month periods ended
January 1, 2023 and January 2, 2022 based upon enacted corporate
tax rate in the United States.
SPECTRUM BRANDS HOLDINGS,
INC.
OTHER SUPPLEMENTAL INFORMATION
(Unaudited)
ADJUSTED DILUTED EPS (continued)
The following is a reconciliation of reported diluted EPS from
continuing operations to adjusted diluted EPS from continuing
operations for the three month periods ended January 1, 2023 and
January 2, 2022.
Three Month Periods
Ended
January 1, 2023
January 2, 2022
Diluted EPS from continuing operations, as
reported
$
(0.99
)
$
(0.73
)
Adjustments:
Tristar acquisition and integration
0.14
0.04
HHI divestiture
0.04
0.10
HPC separation initiatives
0.06
0.04
Coevorden operations separation
0.03
0.08
Rejuvenate integration
—
0.10
Armitage integration
—
0.02
Omega integration
—
0.02
Fiscal 2022 restructuring
0.01
—
Global ERP transformation
0.04
0.07
HPC brand portfolio transitions
0.02
—
Russia closing initiatives
0.07
—
GPC distribution center transition
—
0.31
Global productivity improvement
program
—
0.04
Other project costs
0.08
0.06
Unallocated shared costs
0.15
0.17
Non-cash purchase accounting
adjustments
0.01
—
Gain from remeasurement contingent
consideration liability
(0.04
)
—
Early settlement of foreign currency cash
flow hedges
0.06
—
HPC product recalls
0.01
—
Debt amendment costs
0.06
—
Legal and environmental
—
(0.01
)
Salus and other
0.12
—
Pre-tax adjustments
$
0.86
$
1.04
Income tax adjustment
(0.19
)
(0.37
)
Total adjustments
$
0.67
$
0.67
Diluted EPS from continuing operations, as
adjusted
$
(0.32
)
$
(0.06
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230209005792/en/
Investor/Media Contact: Faisal Qadir 608-278-6207
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