Spectrum Brands Holdings Reports Record Fiscal 2016 First Quarter Results

  • 14.1% reported sales growth and reported EPS of $1.24
  • 6.3% organic sales growth, 17.8% adjusted EBITDA growth and solid
    margin expansion
  • Net cash provided from operating activities after purchases of
    property, plant and equipment (free cash flow) expected to grow to
    approximately $505-$515 million versus $454 million in fiscal 2015 and
    $359 million in fiscal 2014
  • Reaffirms outlook for 7th consecutive year
    of record performance in fiscal 2016

MIDDLETON, Wis.–(BUSINESS WIRE)–Spectrum Brands Holdings, Inc. (NYSE: SPB), a global consumer products
company offering an expanding portfolio of leading brands providing
superior value to consumers and customers every day, today reported
record performance for the first quarter of fiscal 2016 ended January 3,
2016 and reiterated expectations for a seventh consecutive year of
record results for fiscal 2016.

During January of 2016, Spectrum Brands’ iconic Rayovac® brand began a
year-long celebration of its 110th anniversary as a worldwide
leader in battery power and innovation with a rich heritage of
state-of-the-art products offering consumers more power for the money.
Also in January, the Company’s Baldwin Hardware brand turned “70 Years
Bold,” launching a celebration of the brand’s rich history and milestone
70th anniversary throughout 2016.

Fiscal 2016 First Quarter Highlights:

  • Net sales of $1.22 billion in the first quarter of fiscal 2016
    increased 14.1 percent compared to $1.07 billion last year. Excluding
    the negative impact of $61.4 million of foreign exchange and sales
    from recent acquisitions of $144.9 million, organic sales increased
    6.3 percent from the prior year.
  • Net income of $73.6 million and diluted earnings per share of $1.24
    in the first quarter of fiscal 2016 compared to net income of $49.8
    million and diluted earnings per share of $0.94 in fiscal 2015.
  • Adjusted diluted earnings per share, a non-GAAP measure, of $1.01
    in the first quarter of fiscal 2016 decreased compared to $1.07 last
    year predominantly due to the impact of higher interest expense and
    common shares outstanding and the seasonality of the Global Auto Care
    business acquired in May 2015. See Table 4 for a reconciliation to
    GAAP earnings per share.
  • Adjusted EBITDA, a non-GAAP measure, of $207.1 million in the first
    quarter of fiscal 2016 increased 17.8 percent compared to $175.8
    million in fiscal 2015. Excluding the negative impact of foreign
    exchange of $33.3 million, as well as acquisition EBITDA of $29.5
    million, organic adjusted EBITDA of $210.9 million increased 20.0
    percent versus the prior year’s quarter. See Table 5 for a
    reconciliation to GAAP net income.
  • Adjusted EBITDA margin, a non-GAAP measure, in the first quarter of
    fiscal 2016 improved to 17.0 percent compared to 16.5 percent in the
    year-ago quarter primarily due to improved mix, operating expense
    leverage and acquisitions. See Table 5 for a reconciliation to GAAP
    net income.
  • In January 2016 the Board of Directors of Spectrum Brands approved
    a 15.2 percent increase in the quarterly common stock dividend rate to
    $0.38, effective with the March 2016 payment.
  • Fiscal 2016 net cash provided from operating activities after
    purchases of property, plant and equipment (free cash flow, a non-GAAP
    measure) is expected to grow to approximately $505-$515 million versus
    $454 million in fiscal 2015 and $359 million in fiscal 2014. See Table
    6 for a reconciliation to Forecasted GAAP Cash Flow from Operating
    Activities.

“Our solid first quarter performance is an excellent start to achieving
a 7th consecutive year of record performance in fiscal 2016,”
said Andreas Rouvé, Chief Executive Officer of Spectrum Brands Holdings.

“Highlights included record Home and Garden and HHI results, and strong
performances from our global battery and legacy Pet businesses, and,
regionally, in the U.S. as well as in Europe and Latin America on a
currency neutral basis in the face of expected and significant foreign
currency headwinds,” Mr. Rouvé said. “We are especially pleased with the
improved performances of our North American battery and legacy Pet
businesses which were challenged in fiscal 2015.

“Our organic net sales growth of 6.3% was broad-based, reflecting
contributions from virtually all businesses globally,” Mr. Rouvé said.
“Organic adjusted EBITDA grew at a faster rate as every business
improved. Higher margins benefited from the leverage of our fixed global
infrastructure and shared services platform, and from another quarter of
solid cost improvement savings.

“New product introductions also contributed as we work to step up our
vitality rate in fiscal 2016 and beyond and selectively invest more
behind some of our key brands,” Mr. Rouvé said. “The integration of
Global Auto Care continues on a fast and smooth timetable with expected
synergies being realized.

“Looking to the rest of the year, we continue to expect healthy top and
bottom-line growth from a mix of new products, new customers,
distribution and market share gains, increased cross-selling, geographic
expansion and continuous improvement savings along with expense
controls,” he said. “As in recent years, the second half of our fiscal
year should again be larger than the first half, given the seasonal
nature of some of our businesses.

“We are managing the business for long-term, sustainable organic growth
and therefore are selectively increasing our spending on growth
initiatives,” Mr. Rouvé said. “We are making good progress in
implementing our Spectrum First organic growth accelerators.”

Fiscal 2016 First Quarter Consolidated Financial Results

Net sales of $1.22 billion in the first quarter of fiscal 2016 increased
14.1 percent compared to $1.07 billion in fiscal 2015. Excluding the
negative impact of $61.4 million of foreign exchange, as well as
acquisition sales of $144.9 million, organic sales increased 6.3 percent.

Gross profit and gross profit margin in the first quarter of fiscal 2016
were $440.7 million and 36.2 percent, respectively, compared to $370.2
million and 34.7 percent, respectively, last year. The gross profit
margin percentage increase was primarily due to the impact of
acquisitions and improved mix, partially offset by the negative impact
of foreign exchange.

Operating expenses of $298.2 million in the first quarter of fiscal 2016
compared to $254.6 million in the prior year. The increase was
predominantly due to acquisitions and higher stock-based compensation
expense.

The Company reported GAAP net income of $73.6 million, or $1.24 diluted
income per share, in the first quarter of fiscal 2016 on average diluted
shares and common stock equivalents outstanding of 59.2 million. In the
first quarter of fiscal 2015, GAAP net income was $49.8 million, or
$0.94 diluted income per share, on average diluted shares and common
stock equivalents outstanding of 53.1 million. Adjusted for certain
items in both fiscal years, which are presented in Table 4 of this press
release and which management believes are not indicative of the
Company’s ongoing normalized operations, the Company generated adjusted
diluted earnings per share, a non-GAAP measure, of $1.01 in the first
quarter of fiscal 2016, a decrease of 5.6 percent compared to $1.07 in
fiscal 2015 primarily due to higher interest expense and common shares
outstanding.

Adjusted EBITDA, a non-GAAP measure, of $207.1 million in the first
quarter of fiscal 2016 increased 17.8 percent compared to $175.8 million
in fiscal 2015. Excluding the negative impact of $33.3 million of
foreign exchange, as well as acquisition-related EBITDA of $29.5
million, organic adjusted EBITDA of $210.9 increased 20.0 percent versus
the first quarter of 2016. All of the Company’s businesses delivered
improved adjusted EBITDA on a constant currency basis. Adjusted EBITDA
margin of 17.0 percent increased from 16.5 percent last year. See Table
5 for a reconciliation to GAAP net income.

Fiscal 2016 First Quarter Segment Level Data

Global Batteries & Appliances

The Global Batteries & Appliances segment reported fiscal 2016 first
quarter net sales of $611.3 million versus $636.5 million in the
year-ago quarter. Excluding the negative impact of $52.8 million of
foreign exchange, fiscal 2016 first quarter net sales increased 4.3
percent. On a constant currency basis, higher net sales for the battery
and personal care categories more than offset lower small appliance
category revenues.

Global battery net sales of $252.6 million in the first quarter of
fiscal 2016 increased 5.2 percent compared to $240.2 million in the
first quarter of fiscal 2015. Excluding negative foreign exchange
impacts of $23.5 million, fiscal 2016 first quarter net sales improved
14.9 percent. Double-digit growth in North American battery net sales
was driven by new alkaline business at certain retailers and the timing
of holiday shipments. In Europe, VARTA® battery net sales growth was
primarily attributable to alkaline holiday promotions. Latin American
battery revenues increased on a constant currency basis as a result of
solid growth across the region.

Net sales for the global personal care product category of $168.8
million in the first quarter of fiscal 2016 compared to $172.5 million
last year. Excluding negative foreign exchange impacts of $16.0 million,
fiscal 2016 first quarter net sales increased 7.1 percent. The
improvement was attributable to new retail customers and the timing of
holiday shipments in North America and growth on a currency neutral
basis in Europe and Latin America from a combination of promotions and
new customers in hair care, hair removal and grooming.

Net sales of $189.9 million in the global small appliances product
category in the first quarter of fiscal 2016 compared to $223.8 million
in the year-ago quarter. Excluding negative foreign exchange impacts of
$13.3 million, fiscal 2016 first quarter net sales decreased 9.2
percent. The decline was primarily attributable to competitor
discounting and softer category performance in North America, partially
offset by increases on a constant currency basis in Europe and Latin
America from innovation and new listings.

Global Batteries & Appliances reported segment net income was $87.7
million versus $88.2 million in the prior year. Adjusted EBITDA of
$105.5 million in the first quarter of fiscal 2016 compared to $112.1
million in the year-ago quarter. Excluding negative foreign exchange
impacts of $31.4 million, organic adjusted EBITDA in the first quarter
of fiscal 2016 grew 22.1 percent versus the prior year. Adjusted EBITDA
margin of 17.3 percent compared to 17.6 percent last year. See Table 5
for a reconciliation to GAAP net income.

Hardware & Home Improvement

The Hardware & Home Improvement (HHI) segment delivered record first
quarter results. Net sales of $282.7 million in the first quarter of
fiscal 2016 increased 4.2 percent compared to $271.2 million in the
prior year’s quarter. The improvement was driven by growth in U.S.
residential security and plumbing categories. The planned exit of
unprofitable businesses and expiration of a customer tolling agreement
adversely impacted sales growth by 3.3 percent. Excluding the negative
impact of foreign exchange of $4.7 million, net sales increased 6.0
percent in the first quarter of fiscal 2016.

Segment reported net income of $41.4 million in the first quarter of
fiscal 2016 compared to $38.5 million in the prior year’s first quarter.
Adjusted EBITDA of $53.7 million, a record first quarter level,
increased 3.5 percent versus $51.9 million last year. Adjusted EBITDA
margin of 19.0 percent compared to 19.1 percent in the prior year. See
Table 5 for a reconciliation to GAAP net income.

Global Pet Supplies

The Global Pet Supplies segment reported net sales of $203.4 million in
the first quarter of fiscal 2016 compared to $120.6 million last year.
The increase was driven primarily by acquisition-related revenues of
$71.2 million. Excluding the negative impact of foreign exchange of $3.9
million, as well as acquisition revenues, fiscal 2016 first quarter net
sales of $136.1 million improved 12.9 percent compared to the prior
year. The increase was predominantly attributable to North American
aquatics category growth, stronger rawhide and stain and odor product
category results, and the timing of holiday shipments.

Segment reported net income was $16.0 million in the first quarter of
fiscal 2016 versus $2.7 million in the first quarter of fiscal 2015.
First quarter adjusted EBITDA of $29.2 million compared to $13.0 million
in fiscal 2015 due to acquisitions and improved North American legacy
business results. Adjusted EBITDA margin increased 360 basis points to
14.4% compared to 10.8% in the prior year. See Table 5 for a
reconciliation to GAAP net income.

Home and Garden

The Home and Garden segment reported record first quarter results.
Fiscal 2016 first quarter net sales of $47.7 million increased 20.8
percent compared to $39.5 million in last year’s first quarter. Strong
growth in the lawn and garden controls category was driven by warm
weather which extended the outdoor season. Household controls and
repellent category revenues also increased.

Segment first quarter reported net income was $3.3 million versus $0.9
million a year ago. Record first quarter adjusted EBITDA of $7.1 million
increased 18.3 percent versus $6.0 million a year ago. The adjusted
EBITDA margin of 14.9 percent fell 30 basis points from 15.2 percent
last year due to revenue driving investments in the quarter. See Table 5
for a reconciliation to GAAP net income.

Global Auto Care

The Global Auto Care (GAC) segment reported net sales of $73.7 million,
adjusted net income of $8.8 million and adjusted EBITDA of $19.2 million
in the first quarter of fiscal 2016. U.S. appearance, performance and
refrigerant category consumption was strong, helped by unseasonably warm
weather. Armor All® experienced especially solid point-of-sale at key
U.S. customers. Adjusted EBITDA margin was 26.1 percent. See Table 5 for
a reconciliation to GAAP net income.

Liquidity and Debt

Spectrum Brands completed its fiscal 2016 first quarter with a solid
liquidity position, including a cash balance of approximately $162
million and approximately $245 million available, net of letters of
credit, on its $500 million Cash Flow Revolver.

As of the end of the quarter, the Company had approximately $4,198
million of debt outstanding, excluding discounts and deferred financing
fees, consisting of $230 million outstanding on its Cash Flow Revolver,
a series of secured Term Loans in the aggregate amount of $1,524
million, $520 million of 6.375% senior unsecured notes, $570 million of
6.625% senior unsecured notes, $250 million of 6.125% senior unsecured
notes, $1 billion of 5.75% senior unsecured notes, and approximately
$104 million of capital leases and other obligations.

Fiscal 2016 Outlook

Spectrum Brands expects fiscal 2016 net sales, as reported, to increase
in the high-single digit range compared to fiscal 2015 reported net
sales of $4.69 billion, including the positive impacts of the
acquisitions of the European pet food business on December 31, 2014,
Salix Animal Health on January 16, 2015 and Armored Auto Group on May
21, 2015, along with an anticipated negative impact from foreign
exchange of approximately 200 to 220 basis points based on current spot
rates.

Fiscal 2016 free cash flow is projected to be approximately $505-$515
million compared to $454 million in fiscal 2015. See Table 6 for a
reconciliation to Forecasted GAAP Cash Flow from Operating Activities.
Capital expenditures, which were $89.1 million in fiscal 2015, are
expected to be in the range of $110 million to $120 million. These
incremental investments include the impact of full-year expenditures
supporting recent acquisitions, a major aerosol capacity expansion, and
support of technology and innovation.

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 2. To access the live conference
call, U.S. participants may call 877-556-5260 and international
participants may call 973-532-4903. The conference ID number is
18638399. 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 Tuesday, February 16. To access this replay, participants may
call 855-859-2056 and use the same conference ID number.

About Spectrum Brands Holdings, Inc.

Spectrum Brands Holdings, a member of the Russell 2000 Index, is a
global and diversified consumer products company and a leading supplier
of consumer batteries, 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, personal insect repellents, and
auto care products. Helping to meet the needs of consumers worldwide,
our Company offers a broad portfolio of market-leading, well-known and
widely trusted brands including Rayovac®, VARTA®, Kwikset®, Weiser®,
Baldwin®, National Hardware®, Pfister®, Remington®, George Foreman®,
Black + Decker®, Tetra®, Marineland®, Nature’s Miracle®, Dingo®,
8-in-1®, FURminator®, IAMS®, Eukanuba®, Healthy-Hide®, Digest-eeze™,
Littermaid®, Spectracide®, Cutter®, Repel®, Hot Shot®, Black Flag®,
Liquid Fence®, Armor All®, STP® and A/C PRO®. Spectrum Brands’ products
are sold by the world’s top 25 retailers and are available in more than
one million stores in approximately 160 countries. Spectrum Brands
Holdings generated net sales of approximately $4.69 billion in fiscal
2015. For more information, visit
www.spectrumbrands.com.

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.
Excluding the impact of currency exchange rate fluctuations may provide
additional meaningful information about underlying business trends.
In
addition, within this release, including the tables attached hereto,
reference is made to adjusted diluted earnings per share and adjusted
earnings before interest, taxes, depreciation and amortization (EBITDA).

See attached Table 4, “Reconciliation of GAAP Diluted Income Per
Share to Adjusted Diluted Earnings Per Share,” for a complete
reconciliation of diluted earnings per share on a GAAP basis to adjusted
diluted earnings per share, and see attached Table 5, “Reconciliation of
GAAP Net Income (Loss) to Adjusted EBITDA,” for a reconciliation of GAAP
Net Income (Loss) to adjusted EBITDA for the three months ended January
3, 2016 versus the three months ended December 28, 2014. See attached
Table 6, “Reconciliation of Forecasted Cash Flow from Operating
Activities to Forecasted Free Cash Flow,” for a reconciliation of Net
Cash provided from Operating Activities to Free Cash Flow for the twelve
months ending September 30, 2016.
Adjusted EBITDA is a metric
used by management 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
can be a useful measure of a company’s ability to service debt and is
one of the measures used 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.
In
addition, the Company’s management uses adjusted diluted earnings per
share 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 earnings per share 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.

The Company’s management believes that free cash flow is useful to
both management and investors in their analysis of the Company’s ability
to service and repay its debt and meet its working capital requirements.

Free cash flow should not be considered in isolation or as a
substitute for pretax income (loss), net income (loss), cash provided by
(used in) operating activities or other statement of operations or cash
flow statement data prepared in accordance with GAAP or as a measure of
profitability or liquidity.
In addition, the calculation of free
cash flow does not reflect cash used to service debt and therefore, does
not reflect funds available for investment or discretionary uses.
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.

Forward-Looking Statements

Certain matters discussed in this news release and other oral and
written statements by representatives of the Company regarding matters
such as the Company’s ability to meet its expectations for its fiscal
2016 (including its ability to increase its net sales and adjusted
EBITDA) may be forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. We have tried,
whenever possible, to identify these statements by using words like
“future,” “anticipate”, “intend,” “plan,” “estimate,” “believe,”
“expect,” “project,” “forecast,” “could,” “would,” “should,” “will,”
“may,” and similar expressions of future intent or the negative of such
terms. These statements are subject to a number of risks and
uncertainties that could cause results to differ materially from those
anticipated as of the date of this release.
Actual results may
differ materially as a result of (1) Spectrum Brands Holdings’ ability
to manage and otherwise comply with its covenants with respect to its
significant outstanding indebtedness, (2) our ability to integrate and
realize synergies from our recent acquisitions and any possible future
acquisitions, (3) risks related to changes and developments in external
competitive market factors, such as introduction of new product features
or technological developments, development of new competitors or
competitive brands or competitive promotional activity or spending, (4)
changes in consumer demand for the various types of products Spectrum
Brands Holdings offers, (5) unfavorable developments in the global
credit markets, (6) the impact of overall economic conditions on
consumer spending, (7) fluctuations in commodities prices, the costs or
availability of raw materials or terms and conditions available from
suppliers, (8) changes in the general economic conditions in countries
and regions where Spectrum Brands Holdings does business, such as stock
market prices, interest rates, currency exchange rates, inflation and
consumer spending, (9) Spectrum Brands Holdings’ ability to successfully
implement manufacturing, distribution and other cost efficiencies and to
continue to benefit from its cost-cutting initiatives, (10) Spectrum
Brands Holdings’ ability to identify, develop and retain key employees,
(11) unfavorable weather conditions and various other risks and
uncertainties, including those discussed herein and those set forth in
the securities filings of each of Spectrum Brands Holdings, Inc.

Contacts

Spectrum Brands Holdings, Inc.
Investor/Media Contact:
Dave
Prichard, 608-278-6141

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