Spectrum Brands Holdings Reports Fiscal 2024 First Quarter Results
- Net income from continuing operations improved to $17.5 million
- Adjusted EBITDA increased to $84.3 million
- The company repurchased 3.3 million shares for $243 million
- Maintaining Fiscal 2024 Earnings Framework, expecting net sales to decline low single-digits and adjusted EBITDA to grow high single-digits
- Net sales decreased by 3.0%
- Organic net sales decreased by 4.6%
- Net sales decline due to lower sales of small kitchen appliances in North America and volume declines in certain Pet channels
- Operating loss margin for Home & Garden segment increased to 7.6%
Insights
The reported net sales decline of 3.0% for Spectrum Brands could be indicative of broader market trends, particularly in the consumer goods sector. The decrease in sales of small kitchen appliances in North America suggests a potential shift in consumer spending habits or increased competition. The company's strategy to offset these declines with favorable foreign currency and positive pricing adjustments is a common approach to mitigate revenue shortfalls. However, investors will likely scrutinize the long-term viability of this strategy, as currency fluctuations are unpredictable and price increases could affect demand elasticity.
The substantial share repurchase program, amounting to $826 million, reflects a strong cash position and a management strategy focused on shareholder returns. This could be seen as a positive signal to investors regarding the company's financial health and the perceived undervaluation of shares. However, it's crucial to assess whether this capital allocation is the most efficient use of resources, especially when organic growth is challenging.
Despite the sales decline, the improvement in Adjusted EBITDA by $44.5 million is a significant metric for operational efficiency and profitability. An increase in Adjusted EBITDA margin by 660 basis points is particularly noteworthy, as it suggests that the company has effectively controlled costs and improved its operational execution. This could positively impact the stock as it may lead to improved earnings forecasts.
The consumer goods industry, particularly the small kitchen appliances segment, is undergoing changes that affect companies like Spectrum Brands. The reported decline in consumer demand within this segment could be reflective of market saturation, technological disruption, or changes in consumer priorities. The company's mention of SKU rationalizations indicates a strategic move to streamline offerings, which could lead to improved inventory management and reduced operational complexity. However, it may also result in a temporary dip in sales as the product mix is optimized.
The Global Pet Care and Home & Garden segments show contrasting trends, with the former experiencing a slight decline in sales and the latter a marginal increase. This suggests that the company's portfolio diversity may help buffer against downturns in specific categories. The emphasis on 'fewer, bigger, better innovations' aligns with a trend towards quality over quantity in product development, which could enhance brand strength and customer loyalty in the long run.
From an economic perspective, the performance of Spectrum Brands provides insights into consumer confidence and discretionary spending. The decline in sales of non-essential consumer goods, such as small kitchen appliances, could be symptomatic of a broader economic downturn or a shift towards saving rather than spending. The company's ability to maintain profitability through cost improvements and pricing adjustments, however, indicates a resilience that is critical during economic contractions.
The positive impact of foreign currency on net sales also raises the subject of exchange rate risks and their management. While favorable in this instance, reliance on such factors for profitability can be precarious. Investors and analysts should consider the potential volatility in currency markets and its impact on future earnings.
The liquidity position, with a cash balance of $445 million and significant short-term investments, suggests a solid financial foundation that could support future growth initiatives or help weather economic headwinds. However, the net debt figure, albeit low, warrants monitoring to ensure it remains within a manageable range, especially in an environment of potential interest rate changes.
-
Net Sales Decreased
3.0% Driven by Lower Consumer Demand in North American Small Kitchen Appliances and the Impact of SKU Rationalizations, Offset by Favorable Foreign Currency and Positive Pricing Adjustments -
Net Income from Continuing Operations of
$17.5 Million $84.3 Million $57.5 million $44.5 million -
Excluding Investment Income of
$23.0 million $61.3 million -
Repurchased 3.3 million shares in Q1 for
$243 million -
Repurchased 11.0 million shares since the close of HHI through today for
$826 million - Maintaining Fiscal 2024 Earnings Framework and Continue to Expect Net Sales to Decline Low Single-Digits compared to Prior Year and, Excluding Investment Income, Adjusted EBITDA to Grow High Single-Digits
“The first quarter of fiscal 24 is an indication that the investments we are making in our people are paying off. Our operations have a very effective sales and operations planning process behind them now, with rigorous rhythm, cadence, and accountability. This is driving much better factory production performance, better operations in our distribution centers leading to higher fill rates and higher customer service levels to our retail partners. We are continuing to focus on fewer, bigger, better innovations and on our commercial operations through added investments in sales and marketing as we seek to restore revenue growth,“ said David Maura, Chairman and Chief Executive Officer of Spectrum Brands.
Mr. Maura continued, "We have delevered our company. We are operating much more efficiently. We are returning large amounts of capital to our shareholders through dividends and share buy-backs. We are also accelerating our efforts to separate our Home & Personal Care business as we restore the profitability of that unit. Our margins and EBITDA are growing again in both our Global Pet Care and Home & Garden businesses. With our operational house now in order, our primary focus is to return to revenue growth. Our aim is consistent operating performance and a material uplift in the valuation of our shares."
Fiscal 2024 First Quarter Highlights
|
Three Month Periods Ended |
|
|
|
|||||||||
(in millions, except per share and %) |
|
December 31, 2023 |
|
January 1, 2023 |
|
Variance |
|||||||
Net sales |
|
$ |
692.2 |
|
$ |
713.3 |
|
|
$ |
(21.1 |
) |
(3.0 |
)% |
Gross profit |
|
|
244.9 |
|
|
201.9 |
|
|
|
43.0 |
|
21.3 |
% |
Operating income (loss) |
|
|
25.0 |
|
|
(20.2 |
) |
|
|
45.2 |
|
n/m |
|
Net income (loss) from continuing operations |
|
|
17.5 |
|
|
(40.0 |
) |
|
|
57.5 |
|
n/m |
|
Diluted earnings per share from continuing operations |
|
$ |
0.51 |
|
$ |
(0.99 |
) |
|
$ |
1.50 |
|
n/m |
|
Non-GAAP Operating Metrics |
|
|
|
|
|
|
|
||||||
Adjusted EBITDA from continuing operations |
|
$ |
84.3 |
|
$ |
39.8 |
|
|
$ |
44.5 |
|
111.8 |
% |
Adjusted EPS from continuing operations |
|
$ |
0.78 |
|
$ |
(0.32 |
) |
|
$ |
1.10 |
|
n/m |
|
n/m = not meaningful |
|
|
|
|
|
|
|
||||||
-
Net sales decreased
3.0% with a decrease in organic net sales of4.6% , excluding the impact of$11.7 million North America , volume declines in certain Pet channels, and the impact of SKU rationalizations. - Gross profit and gross profit margin increased from the sale of lower cost inventory, lower inventory-related expenses and cost improvements, offset by unfavorable transaction FX and lower volumes.
- Operating income increased due to reduced spend on restructuring, optimization and strategic transaction activities, fixed-cost reduction efforts and lower factoring charges, offset by increased investments in advertising and marketing.
- Net income from continuing operations and diluted earnings per share increased from the increase in operating income, higher investment income, lower interest costs, and lower share count.
-
Adjusted EBITDA increased
111.8% and adjusted EBITDA margin increased 660 basis points attributable to higher gross margins, lower operating expenses, higher investment income and lower interest expense, partially offset by the reduction in sales volume and higher investments. -
Adjusted diluted EPS increased to
$0.78
Fiscal 2024 First Quarter Segment Level Data
Global Pet Care (GPC)
|
Three Month Periods Ended |
|
|
|
|
||||||||||
(in millions, except %) |
|
December 31, 2023 |
|
January 1, 2023 |
|
Variance |
|||||||||
Net sales |
|
$ |
276.9 |
|
|
$ |
277.5 |
|
|
$ |
(0.6 |
) |
|
(0.2 |
)% |
Operating income |
|
|
43.9 |
|
|
|
22.7 |
|
|
|
21.2 |
|
|
93.4 |
% |
Operating income margin |
|
|
15.9 |
% |
|
|
8.2 |
% |
|
|
770 |
|
bps |
|
|
Adjusted EBITDA |
|
$ |
52.7 |
|
|
$ |
37.2 |
|
|
$ |
15.5 |
|
|
41.7 |
% |
Adjusted EBITDA margin |
|
|
19.0 |
% |
|
|
13.4 |
% |
|
|
560 |
|
bps |
|
|
The decrease in net sales was mainly driven by continued softness in the global aquatics category and the impact of the decision to exit several non-strategic categories and SKUs, offset by growth in the companion animals category. North American sales declined due to soft demand in aquatics and the SKU exits. Sales in EMEA increased due to growth in the Companion Animal category driven by strong dog and cat food sales. Organic net sales decreased
Operating income, Adjusted EBITDA and margins increased due to lower cost inventory compared to prior year, favorable product and channel mix, and savings from prior year cost reduction initiatives. This was partially offset by lower volumes and increased advertising investments.
Home & Garden (H&G)
|
Three Month Periods Ended |
|
|
|
|
||||||||||
(in millions, except %) |
|
December 31, 2023 |
|
January 1, 2023 |
|
Variance |
|||||||||
Net sales |
|
$ |
72.0 |
|
|
$ |
71.4 |
|
|
$ |
0.6 |
|
0.8 |
% |
|
Operating loss |
|
|
(5.5 |
) |
|
|
(7.2 |
) |
|
|
1.7 |
|
(23.6 |
)% |
|
Operating loss margin |
|
|
(7.6 |
)% |
|
|
(10.1 |
% |
|
|
250 |
bps |
|
||
Adjusted EBITDA |
|
$ |
(0.7 |
) |
|
$ |
(2.4 |
) |
|
$ |
1.7 |
|
(70.8 |
)% |
|
Adjusted EBITDA margin |
|
|
(1.0 |
)% |
|
|
(3.4 |
)% |
|
|
240 |
bps |
|
||
The net sales increase was primarily driven by higher sales in the Controls business, where late warmer fall weather extended the selling season and retailer reorder patterns improved to be more in line with historical trends than in fiscal 2023. Sales in the Cleaning category declined, as consumer demand for some product lines within this category remain soft compared to COVID demand levels.
The improved operating income, Adjusted EBITDA and margins were driven by higher sales, manufacturing efficiencies carrying into the fiscal year and operational cost reductions from cost improvement initiatives, offset by increased investments in innovation and advertising.
Home & Personal Care (HPC)
|
Three Month Periods Ended |
|
|
|
|
||||||||||
(in millions, except %) |
|
December 31, 2023 |
|
January 1, 2023 |
|
Variance |
|||||||||
Net sales |
|
$ |
343.3 |
|
|
$ |
364.4 |
|
|
$ |
(21.1 |
) |
|
(5.8 |
)% |
Operating income (loss) |
|
|
16.5 |
|
|
|
(4.3 |
) |
|
|
20.8 |
|
|
n/m |
|
Operating income (loss) margin |
|
|
4.8 |
% |
|
|
(1.2 |
)% |
|
|
600 |
|
bps |
|
|
Adjusted EBITDA |
|
$ |
26.7 |
|
|
$ |
13.2 |
|
|
$ |
13.5 |
|
|
102.3 |
% |
Adjusted EBITDA margin |
|
|
7.8 |
% |
|
|
3.6 |
% |
|
|
420 |
|
bps |
|
|
n/m = not meaningful |
|
|
|
|
|
|
|
|
|||||||
The decrease in net sales is primarily due to continued category decline from lower consumer demand in small kitchen appliances. Sales in International markets grew across Personal Care and small Kitchen Appliances categories. However, sales in
The increase in operating income was driven by lower cost inventory compared to the prior year, offset by lower volume and negative mix. The increase in Adjusted EBITDA and margins is driven by lower cost inventory and inventory related expenses and cost improvement initiatives, including reduction of operating expenses initiated in the prior year, offset by lower volumes and negative mix.
Liquidity and Debt
As of the end of the quarter, the Company had a cash balance of
Fiscal 2024 Earnings Framework
Spectrum Brands continues to expect reported net sales to decline by low single-digits in Fiscal 2024. Fiscal 2024 Adjusted EBITDA, excluding investment income, is expected to increase by high single-digits.
The Company continues to target 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 8, 2024. 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
Forward-Looking Statements
We have made or implied certain forward-looking statements in this document and may make additional oral forward-looking statements from time to time. 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, inventory management, 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 economic, social and political conditions or civil unrest, terrorist attacks, acts of war, natural disasters, other public health concerns or unrest in
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
SPECTRUM BRANDS HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) |
||||||||
|
Three Month Periods Ended |
|||||||
(in millions, except per share amounts) |
|
December 31, 2023 |
|
January 1, 2023 |
||||
Net sales |
|
$ |
692.2 |
|
|
$ |
713.3 |
|
Cost of goods sold |
|
|
447.3 |
|
|
|
511.4 |
|
Gross profit |
|
|
244.9 |
|
|
|
201.9 |
|
Selling, general & administrative |
|
|
219.9 |
|
|
|
222.1 |
|
Operating income (loss) |
|
|
25.0 |
|
|
|
(20.2 |
) |
Interest expense |
|
|
19.2 |
|
|
|
33.4 |
|
Interest income |
|
|
(23.4 |
) |
|
|
(0.1 |
) |
Gain from debt repurchase |
|
|
(4.7 |
) |
|
|
— |
|
Other non-operating expense (income), net |
|
|
4.0 |
|
|
|
(1.4 |
) |
Income (loss) from continuing operations before income taxes |
|
|
29.9 |
|
|
|
(52.1 |
) |
Income tax expense (benefit) |
|
|
12.4 |
|
|
|
(12.1 |
) |
Net income (loss) from continuing operations |
|
|
17.5 |
|
|
|
(40.0 |
) |
Income from discontinued operations, net of tax |
|
|
11.7 |
|
|
|
19.5 |
|
Net income (loss) |
|
|
29.2 |
|
|
|
(20.5 |
) |
Net income from continuing operations attributable to non-controlling interest |
|
|
0.1 |
|
|
|
0.3 |
|
Income from discontinued operations attributable to non-controlling interest, net of tax |
|
|
— |
|
|
|
0.1 |
|
Net income (loss) attributable to controlling interest |
|
$ |
29.1 |
|
|
$ |
(20.9 |
) |
Amounts attributable to controlling interest |
|
|
|
|
||||
Net income (loss) from continuing operations attributable to controlling interest |
|
$ |
17.4 |
|
|
$ |
(40.3 |
) |
Income from discontinued operations attributable to controlling interest, net of tax |
|
|
11.7 |
|
|
|
19.4 |
|
Net income (loss) attributable to controlling interest |
|
$ |
29.1 |
|
|
$ |
(20.9 |
) |
Earnings Per Share |
|
|
|
|
||||
Basic earnings per share from continuing operations |
|
$ |
0.51 |
|
|
$ |
(0.99 |
) |
Basic earnings per share from discontinued operations |
|
|
0.34 |
|
|
|
0.48 |
|
Basic earnings per share |
|
$ |
0.85 |
|
|
$ |
(0.51 |
) |
Diluted earnings per share from continuing operations |
|
$ |
0.51 |
|
|
$ |
(0.99 |
) |
Diluted earnings per share from discontinued operations |
|
|
0.34 |
|
|
|
0.48 |
|
Diluted earnings per share |
|
$ |
0.85 |
|
|
$ |
(0.51 |
) |
Weighted Average Shares Outstanding |
|
|
|
|
||||
Basic |
|
|
34.0 |
|
|
|
40.9 |
|
Diluted |
|
|
34.1 |
|
|
|
40.9 |
|
SPECTRUM BRANDS HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited) |
||||||||
|
Three Month Periods Ended |
|||||||
(in millions) |
|
December 31, 2023 |
|
January 1, 2023 |
||||
Cash flows from operating activities |
|
|
|
|
||||
Net cash provided (used) by operating activities from continuing operations |
|
$ |
18.1 |
|
|
$ |
(57.0 |
) |
Net cash used by operating activities from discontinued operations |
|
|
(22.4 |
) |
|
|
(7.2 |
) |
Net cash used by operating activities |
|
|
(4.3 |
) |
|
|
(64.2 |
) |
Cash flows from investing activities |
|
|
|
|
||||
Purchases of property, plant and equipment |
|
|
(8.4 |
) |
|
|
(10.0 |
) |
Purchases of short term investments |
|
|
(700.0 |
) |
|
|
— |
|
Proceeds from sale of short term investments |
|
|
842.0 |
|
|
|
— |
|
Net cash provided (used) by investing activities from continuing operations |
|
|
133.6 |
|
|
|
(10.0 |
) |
Net cash used by investing activities from discontinued operations |
|
|
— |
|
|
|
(3.6 |
) |
Net cash provided (used) by investing activities |
|
|
133.6 |
|
|
|
(13.6 |
) |
Cash flows from financing activities |
|
|
|
|
||||
Payment of debt |
|
|
(174.1 |
) |
|
|
(3.3 |
) |
Proceeds from issuance of debt |
|
|
— |
|
|
|
90.0 |
|
Payment of debt issuance costs |
|
|
(3.2 |
) |
|
|
(2.3 |
) |
Treasury stock purchases |
|
|
(243.0 |
) |
|
|
— |
|
Dividends paid to shareholders |
|
|
(14.1 |
) |
|
|
(17.1 |
) |
Share based award tax withholding payments, net of proceeds upon vesting |
|
|
(5.4 |
) |
|
|
(10.5 |
) |
Net cash (used) provided by financing activities from continuing operations |
|
|
(439.8 |
) |
|
|
56.8 |
|
Net cash used by financing activities from discontinued operations |
|
|
— |
|
|
|
(0.4 |
) |
Net cash (used) provided by financing activities |
|
|
(439.8 |
) |
|
|
56.4 |
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
2.0 |
|
|
|
5.7 |
|
Net change in cash, cash equivalents and restricted cash in continuing operations |
|
|
(308.5 |
) |
|
|
(15.7 |
) |
Cash, cash equivalents, and restricted cash, beginning of period |
|
|
753.9 |
|
|
|
243.9 |
|
Cash, cash equivalents, and restricted cash, end of period |
|
$ |
445.4 |
|
|
$ |
228.2 |
|
SPECTRUM BRANDS HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited) |
||||||||
(in millions) |
|
December 31, 2023 |
|
September 30, 2023 |
||||
Assets |
|
|
|
|
||||
Cash and cash equivalents |
|
$ |
445.4 |
|
$ |
753.9 |
||
Short term investments |
|
|
950.0 |
|
|
1,103.3 |
||
Trade receivables, net |
|
|
535.1 |
|
|
477.1 |
||
Other receivables |
|
|
75.6 |
|
|
84.5 |
||
Inventories |
|
|
457.0 |
|
|
462.8 |
||
Prepaid expenses and other current assets |
|
|
52.6 |
|
|
44.3 |
||
Total current assets |
|
|
2,515.7 |
|
|
2,925.9 |
||
Property, plant and equipment, net |
|
|
271.2 |
|
|
275.1 |
||
Operating lease assets |
|
|
104.9 |
|
|
110.8 |
||
Deferred charges and other |
|
|
38.1 |
|
|
31.8 |
||
Goodwill |
|
|
860.1 |
|
|
854.7 |
||
Intangible assets, net |
|
|
1,056.3 |
|
|
1,060.1 |
||
Total assets |
|
$ |
4,846.3 |
|
$ |
5,258.4 |
||
Liabilities and Shareholders' Equity |
|
|
|
|
||||
Current portion of long-term debt |
|
$ |
8.8 |
|
$ |
8.6 |
||
Accounts payable |
|
|
382.7 |
|
|
396.6 |
||
Accrued wages and salaries |
|
|
33.4 |
|
|
46.1 |
||
Accrued interest |
|
|
17.0 |
|
|
20.6 |
||
Income tax payable |
|
|
125.1 |
|
|
114.5 |
||
Other current liabilities |
|
|
182.3 |
|
|
178.4 |
||
Total current liabilities |
|
|
749.3 |
|
|
764.8 |
||
Long-term debt, net of current portion |
|
|
1,387.8 |
|
|
1,546.9 |
||
Long-term operating lease liabilities |
|
|
90.9 |
|
|
95.6 |
||
Deferred income taxes |
|
|
173.7 |
|
|
174.8 |
||
Other long-term liabilities |
|
|
142.9 |
|
|
158.0 |
||
Total liabilities |
|
|
2,544.6 |
|
|
2,740.1 |
||
Shareholders' equity |
|
|
2,300.8 |
|
|
2,517.6 |
||
Non-controlling interest |
|
|
0.9 |
|
|
0.7 |
||
Total equity |
|
|
2,301.7 |
|
|
2,518.3 |
||
Total liabilities and equity |
|
$ |
4,846.3 |
|
$ |
5,258.4 |
||
SPECTRUM BRANDS HOLDINGS, INC.
OTHER SUPPLEMENTAL INFORMATION (Unaudited)
NET SALES AND ORGANIC NET SALES
The following is a summary of net sales by segment for the three month periods ended December 31, 2023 and January 1, 2023:
(in millions, except %) |
|
Three Month Periods Ended |
|
|
|
|
|||||||
|
December 31, 2023 |
|
January 1, 2023 |
|
Variance |
||||||||
GPC |
|
$ |
276.9 |
|
$ |
277.5 |
|
$ |
(0.6 |
) |
|
(0.2 |
)% |
H&G |
|
|
72.0 |
|
|
71.4 |
|
|
0.6 |
|
|
0.8 |
% |
HPC |
|
|
343.3 |
|
|
364.4 |
|
|
(21.1 |
) |
|
(5.8 |
)% |
Net Sales |
|
$ |
692.2 |
|
$ |
713.3 |
|
|
(21.1 |
) |
|
(3.0 |
)% |
We define organic net sales as reported net sales excluding the effect of changes in foreign currency exchange rates and acquisitions. We believe this non-GAAP measure provides useful information to investors because it reflects regional and operating segment performance from our activities without the effect of changes in currency exchange rate and 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 current period net sales using the currency exchange rates that were in effect during the prior period. Net sales are attributed to the geographic regions based on the country of destination. We exclude net sales from acquired businesses in the current year for which there are no comparable sales in the prior period. The following is a reconciliation of reported sales to organic sales for the three month period ended December 31, 2023 compared to reported net sales for the three month periods ended January 1, 2023:
|
December 31, 2023 |
|
|
|
|
|
|||||||||||||
Three Month Periods Ended (in millions, except %) |
|
Net Sales |
|
Effect of Changes in Currency |
|
Organic Net Sales |
|
Net Sales January 1, 2023 |
|
Variance |
|||||||||
GPC |
|
$ |
276.9 |
|
$ |
(5.0 |
) |
|
$ |
271.9 |
|
$ |
277.5 |
|
$ |
(5.6 |
) |
(2.0 |
)% |
H&G |
|
|
72.0 |
|
|
— |
|
|
|
72.0 |
|
|
71.4 |
|
|
0.6 |
|
0.8 |
% |
HPC |
|
|
343.3 |
|
|
(6.7 |
) |
|
|
336.6 |
|
|
364.4 |
|
|
(27.8 |
) |
(7.6 |
)% |
Total |
|
$ |
692.2 |
|
$ |
(11.7 |
) |
|
$ |
680.5 |
|
$ |
713.3 |
|
|
(32.8 |
) |
(4.6 |
)% |
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 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:
- Share 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, restructuring and optimization 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, development and implementation of strategies to optimize operations, reduce costs, increase revenues, improve profit margins, including recognition of one-time exit or disposal costs. These amounts are excluded from our performance metrics as they are reflective of incremental investment by the Company towards strategic initiatives and business development activities, incremental costs directly attributable to such initiatives and are not considered recurring or reflective of the continuing ongoing operations of the consolidated group or segments;
- 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 associated with the Tristar Business acquisition;
- Non-cash asset impairments or write-offs realized and recognized in earnings from continuing operations, including impairments from property, plant and equipment, operating and finance lease assets, and goodwill and other intangible assets, when applicable;
- Incremental costs recognized by the HPC segment attributable to the realization of product recalls initiated in the prior year;
- Incremental reserves for non-recurring litigation or environmental remediation activity attributable to significant and unusual nonrecurring claims with no previous history or precedent;
- Unallocated shared costs associated with discontinued operations from certain shared and center-led administrative functions, through the close of the HHI divestiture on June 20, 2023; 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. Subsequent to the close of the HHI divestiture, amounts attributable to unallocated shared costs would be mitigated through income from TSAs, subsequent strategic or restructuring initiatives, elimination of extraneous costs, or re-allocations or absorption of existing continuing operations;
- Impact from the early settlement of foreign currency cash flow hedges, resulting in assumed losses at the original stated maturities of foreign currency cash flow hedges in our EMEA region that were settled early 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 excluded gains intended to mitigate cost through the year ending September 30, 2023; and
- Other adjustments primarily attributable to: (1) key executive severance and other one-time compensatory costs; and (2) non-recurring unusual insurable losses.
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 December 31, 2023.
(in millions, except %) |
|
GPC |
|
H&G |
|
HPC |
|
Corporate |
|
Consolidated |
||||||||||
Net income (loss) from continuing operations |
|
$ |
43.5 |
|
|
$ |
(5.5 |
) |
|
$ |
15.9 |
|
|
$ |
(36.4 |
) |
|
$ |
17.5 |
|
Income tax expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
12.4 |
|
|
|
12.4 |
|
Interest expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
19.2 |
|
|
|
19.2 |
|
Depreciation |
|
|
3.6 |
|
|
|
1.9 |
|
|
|
2.7 |
|
|
|
6.2 |
|
|
|
14.4 |
|
Amortization |
|
|
5.6 |
|
|
|
2.9 |
|
|
|
2.6 |
|
|
|
— |
|
|
|
11.1 |
|
EBITDA |
|
|
52.7 |
|
|
|
(0.7 |
) |
|
|
21.2 |
|
|
|
1.4 |
|
|
|
74.6 |
|
Share based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3.9 |
|
|
|
3.9 |
|
HHI separation costs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1.3 |
|
|
|
1.3 |
|
HPC separation initiatives |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.3 |
|
|
|
0.3 |
|
Fiscal 2023 restructuring |
|
|
0.1 |
|
|
|
— |
|
|
|
0.4 |
|
|
|
— |
|
|
|
0.5 |
|
Global ERP transformation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3.0 |
|
|
|
3.0 |
|
Other project costs |
|
|
(0.1 |
) |
|
|
— |
|
|
|
0.1 |
|
|
|
— |
|
|
|
— |
|
Non-cash purchase accounting adjustments |
|
|
— |
|
|
|
— |
|
|
|
0.5 |
|
|
|
— |
|
|
|
0.5 |
|
Impairment of intangible assets |
|
|
— |
|
|
|
— |
|
|
|
4.0 |
|
|
|
— |
|
|
|
4.0 |
|
Legal and environmental |
|
|
— |
|
|
|
— |
|
|
|
1.2 |
|
|
|
— |
|
|
|
1.2 |
|
HPC product recall |
|
|
— |
|
|
|
— |
|
|
|
(0.7 |
) |
|
|
— |
|
|
|
(0.7 |
) |
Gain from debt repurchase |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4.7 |
) |
|
|
(4.7 |
) |
Other |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.4 |
|
|
|
0.4 |
|
Adjusted EBITDA |
|
$ |
52.7 |
|
|
$ |
(0.7 |
) |
|
$ |
26.7 |
|
|
$ |
5.6 |
|
|
$ |
84.3 |
|
Net sales |
|
$ |
276.9 |
|
|
$ |
72.0 |
|
|
$ |
343.3 |
|
|
$ |
— |
|
|
$ |
692.2 |
|
Adjusted EBITDA margin |
|
|
19.0 |
% |
|
|
(1.0 |
)% |
|
|
7.8 |
% |
|
|
— |
|
|
|
12.2 |
% |
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 %) |
|
GPC |
|
H&G |
|
HPC |
|
Corporate |
|
Consolidated |
||||||||||
Net income (loss) from continuing operations |
|
$ |
23.0 |
|
|
$ |
(7.2 |
) |
|
$ |
(4.2 |
) |
|
$ |
(51.6 |
) |
|
$ |
(40.0 |
) |
Income tax benefit |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(12.1 |
) |
|
|
(12.1 |
) |
Interest expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
33.4 |
|
|
|
33.4 |
|
Depreciation |
|
|
3.7 |
|
|
|
1.8 |
|
|
|
3.2 |
|
|
|
3.5 |
|
|
|
12.2 |
|
Amortization |
|
|
5.5 |
|
|
|
2.8 |
|
|
|
2.1 |
|
|
|
— |
|
|
|
10.4 |
|
EBITDA |
|
|
32.2 |
|
|
|
(2.6 |
) |
|
|
1.1 |
|
|
|
(26.8 |
) |
|
|
3.9 |
|
Share based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3.3 |
|
|
|
3.3 |
|
Tristar integration |
|
|
— |
|
|
|
— |
|
|
|
5.7 |
|
|
|
— |
|
|
|
5.7 |
|
HHI divestiture and separation costs |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1.5 |
|
|
|
1.5 |
|
HPC separation initiatives |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2.4 |
|
|
|
2.4 |
|
Fiscal 2022 restructuring |
|
|
— |
|
|
|
0.2 |
|
|
|
— |
|
|
|
0.4 |
|
|
|
0.6 |
|
|
|
|
— |
|
|
|
— |
|
|
|
2.9 |
|
|
|
— |
|
|
|
2.9 |
|
Global ERP transformation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1.6 |
|
|
|
1.6 |
|
Other project costs |
|
|
2.1 |
|
|
|
— |
|
|
|
1.0 |
|
|
|
2.3 |
|
|
|
5.4 |
|
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 |
|
Other |
|
|
2.9 |
|
|
|
— |
|
|
|
0.6 |
|
|
|
0.8 |
|
|
|
4.3 |
|
Adjusted EBITDA |
|
$ |
37.2 |
|
|
$ |
(2.4 |
) |
|
$ |
13.2 |
|
|
$ |
(8.2 |
) |
|
$ |
39.8 |
|
Net Sales |
|
$ |
277.5 |
|
|
$ |
71.4 |
|
|
$ |
364.4 |
|
|
$ |
— |
|
|
$ |
713.3 |
|
Adjusted EBITDA margin |
|
|
13.4 |
% |
|
|
(3.4 |
)% |
|
|
3.6 |
% |
|
|
— |
|
|
|
5.6 |
% |
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, restructuring and optimization 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, development and implementation of strategies to optimize operations, reduce costs, increase revenues, improve profit margins, including recognition of one-time exit or disposal costs. These amounts are excluded from our performance metrics as they are reflective of incremental investment by the Company towards strategic initiatives and business development activities, incremental costs directly attributable to such initiatives and are not considered recurring or reflective of the continuing ongoing operations of the consolidated group or segments;
- 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 associated with the Tristar Business acquisition;
- Non-cash asset impairments or write-offs realized and recognized in earnings from continuing operations, including impairments from property, plant and equipment, operating and finance lease assets, and goodwill and other intangible assets, when applicable;
- Incremental costs recognized by the HPC segment attributable to the realization of product recalls initiated in the prior year;
- Incremental reserves for non-recurring litigation or environmental remediation activity attributable to significant and unusual nonrecurring claims with no previous history or precedent;
- Unallocated shared costs associated with discontinued operations from certain shared and center-led administrative functions, through the close of the HHI divestiture on June 20, 2023; 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. Subsequent to the close of the HHI divestiture, amounts attributable to unallocated shared costs would be mitigated through income from TSAs, subsequent strategic or restructuring initiatives, elimination of extraneous costs, or re-allocations or absorption of existing continuing operations;
- Impact from the early settlement of foreign currency cash flow hedges, resulting in assumed losses at the original stated maturities of foreign currency cash flow hedges in our EMEA region that were settled early 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 excluded gains intended to mitigate cost through the year ending September 30, 2023; and
- Other adjustments primarily attributable to: (1) key executive severance and other one-time compensatory costs; and (2) non-recurring unusual insurable losses; 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 December 31, 2023 and January 1, 2023 based upon enacted corporate tax rate inthe United States .
SPECTRUM BRANDS HOLDINGS, INC.
OTHER SUPPLEMENTAL INFORMATION (Unaudited)
ADJUSTED DILUTED EPS (continued)
The following is a reconciliation of reported diluted EPS from continuing operations to adjusted diluted EPS from continuing operations for the three month periods ended December 31, 2023 and January 1, 2023.
|
Three Month Periods Ended |
|||||||
|
|
December 31, 2023 |
|
January 1, 2023 |
||||
Diluted EPS from continuing operations, as reported |
|
$ |
0.51 |
|
|
$ |
(0.99 |
) |
Adjustments: |
|
|
|
|
||||
HHI divestiture and separation costs |
|
|
0.04 |
|
|
|
0.04 |
|
HPC separation initiatives |
|
|
0.01 |
|
|
|
0.06 |
|
Tristar integration |
|
|
— |
|
|
|
0.14 |
|
Fiscal 2023 restructuring |
|
|
0.01 |
|
|
|
— |
|
Fiscal 2022 restructuring |
|
|
— |
|
|
|
0.01 |
|
|
|
|
— |
|
|
|
0.07 |
|
Global ERP transformation |
|
|
0.09 |
|
|
|
0.04 |
|
Other project costs |
|
|
— |
|
|
|
0.13 |
|
Unallocated shared costs |
|
|
— |
|
|
|
0.15 |
|
Non-cash purchase accounting adjustments |
|
|
0.01 |
|
|
|
0.01 |
|
Gain from remeasurement contingent consideration liability |
|
|
— |
|
|
|
(0.04 |
) |
Impairment on intangible assets |
|
|
0.12 |
|
|
|
— |
|
Early settlement of foreign currency cash flow hedges |
|
|
— |
|
|
|
0.06 |
|
Legal and environmental |
|
|
0.03 |
|
|
|
— |
|
HPC product recalls |
|
|
(0.02 |
) |
|
|
0.01 |
|
Gain on debt repurchase |
|
|
(0.14 |
) |
|
|
— |
|
Debt amendment costs |
|
|
— |
|
|
|
0.06 |
|
Other |
|
|
0.02 |
|
|
|
0.12 |
|
Pre-tax adjustments |
|
$ |
0.17 |
|
|
$ |
0.86 |
|
Income tax adjustment |
|
|
0.10 |
|
|
|
(0.19 |
) |
Total adjustments |
|
$ |
0.27 |
|
|
$ |
0.67 |
|
Diluted EPS from continuing operations, as adjusted |
|
$ |
0.78 |
|
|
$ |
(0.32 |
) |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240207898763/en/
Investor/Media Contact:
Joanne Chomiak 608-275-4458
Source: Spectrum Brands Holdings, Inc.
FAQ
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