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Reports 1st Qtr. Results

Spectrum Brands, Inc. Press Release (excerpted) - 2/11/2008

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Spectrum Brands reports first quarter 2008 financial results, reports $0.85 per share loss

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ATLANTA, Ga. - Spectrum Brands, Inc. (NYSE: SPC) announced today first quarter net sales from continuing operations of $560.5 million and a net loss of $0.85 per share for the quarter ended December 30, 2007. Excluding certain items which management believes are not indicative of the company's on-going normalized operations, the company generated adjusted diluted earnings per share of $0.06. These items include:

  • a loss from discontinued operations, net of tax, of $33.3 million, or $0.65 per share, related to the company's Home & Garden business, which is being held for sale; the loss from discontinued operations includes a loss, net of tax, of $1.2 million on the sale of the company's Canadian Home & Garden business;
  • net tax adjustments of $14.2 million, or $0.28 per share, to reflect a normalized ongoing effective tax rate;
  • restructuring and related charges, net of tax, of $2.5 million, or $0.05 per share, associated with company-wide cost reduction initiatives; and
  • other items netting to a benefit of $3.6 million, net of tax, or $.07 per share.

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During the first quarter of fiscal 2007, the company reported a net loss per share of $0.38. Excluding a loss from discontinued operations of $0.43 per share, restructuring and related charges of $0.10 per share and other non-cash benefits totaling $0.03 per share, first quarter 2007 adjusted diluted earnings per share were $0.12.

Spectrum Brands' net sales of $560.5 million represented a slight decline of one percent from the prior year. Sales in the quarter were negatively impacted by customer requests for earlier than normal shipments of holiday related merchandise, resulting in a timing shift of approximately $15 million in battery and personal care sales from the fiscal first quarter of 2008 to the fiscal fourth quarter of 2007. In addition, our continued deliberate exiting of unprofitable or marginally profitable private label battery sales in Europe was a contributor to the year over year decline. Foreign currency exchange had a favorable impact of $31 million.

Adjusted EBITDA from continuing operations was $68.3 million as compared with $59.3 million in the prior year, a 15 percent improvement. Including adjusted EBITDA results from Home & Garden, which is accounted for as discontinued operations, the company generated adjusted EBITDA of $49.1 million, a 19 percent improvement over 2007's $41.4 million.

"Spectrum Brands delivered a third consecutive quarter of strong year over year EBITDA growth, demonstrating good progress on our 2008 goal of operating profitability improvement," said Kent Hussey, Chief Executive Officer. "Our first quarter top line results were negatively impacted by timing issues related to customer-requested early shipments of holiday related merchandise, which shifted sales between the fiscal first quarter of 2008 and the fiscal fourth quarter of 2007. As a result, we believe the sales trends for the six months ended December 30, 2007 taken as a whole are more representative of business trends. Measured over that six month period, our global battery sales increased four percent and Remington sales increased ten percent. As we look to the balance of 2008 and beyond, we believe that the actions taken in 2007 to put the right culture and infrastructure in place will provide opportunities for us to deliver sustainable operating profitability improvement and create long-term shareholder value."

Gross profit and gross margin for the quarter were $208.2 million and 37.2 percent, respectively, versus $208.9 million and 37.0 percent for the same period last year. Restructuring and related charges of $0.1 million were included in the current quarter's cost of goods sold; cost of goods sold in the comparable period last year included $6.0 million in similar charges. Excluding these restructuring and related charges, gross margin declined 90 basis points primarily due to negative product mix.

The current quarter's operating expenses were $156.5 million, or 27.9 percent of sales, as compared with last year's $171.4 million in operating expenses, or 30.4 percent of sales. Excluding $3.7 million in restructuring and related charges in the fiscal first quarter of 2008 and $1.4 million in the fiscal first quarter of 2007, operating expenses represented 27.3 percent of sales and 30.1 percent of sales, respectively. The improvement was largely due to lower selling, marketing and general and administrative expense, driven by the restructuring initiatives previously implemented across the organization, as well as a reduction in advertising expense.

Spectrum generated first quarter operating income and operating margin of $51.7 million and 9.2 percent versus $37.5 million and 6.6 percent last year, a 38 percent improvement. After excluding restructuring and related charges from both years' results, as itemized above, operating margin increased 190 basis points versus the prior year.

The Global Batteries and Personal Care segment reported net sales of $418.0 million compared with $426.9 million reported last year. Favorable foreign exchange translation contributed $27.7 million. Global battery sales were flat compared with the prior year. North American battery sales volumes declined two percent, largely as a result of a move on the part of some customers to bring in holiday-related merchandise earlier than was the case in the prior year. European battery sales declined two percent from the prior year. The positive impact of the strong Euro was offset by a sales volume decline, the majority of which represents the company's planned exit from unprofitable or marginally profitable private label business. Latin American battery sales generated year over year growth of seven percent. Sales of Remington branded products declined six percent worldwide during the quarter. However, sales over the six month period ended December 30, 2007 increased ten percent, a figure which eliminates the impact of timing differences between quarters. Increased distribution and market share gains in Europe generated double digit sales growth in that region during the quarter compared to the prior year, but the improvement was more than offset by a decline in the North American market attributable to retailer initiatives for earlier shipments of holiday related merchandise and a decline in the men's shaving category. Segment profitability for Global Batteries and Personal Care was $47.1 million versus last year's $39.8 million, an 18 percent improvement. The profit improvement was driven by lower operating expenses resulting from a reduction in selling and marketing expense and the impact of cost cutting initiatives throughout the business.

About Spectrum Brands, Inc.

Spectrum Brands is a global consumer products company and a leading supplier of batteries, portable lighting, lawn and garden products, household insect control, shaving and grooming products, personal care products and specialty pet supplies. Spectrum Brands' products are sold by the world's top 25 retailers and are available in more than one million stores in 120 countries around the world. Headquartered in Atlanta, Georgia, Spectrum Brands generated fiscal year 2007 net sales of $2.0 billion and has approximately 7,100 employees worldwide. The company's stock trades on the New York Stock Exchange under the symbol SPC.