Spectrum Brands Reports Fourth Quarter and Fiscal Year 2006 Financial Results
Spectrum Brands Press Release (excerpted)FlashlightNews.org - 11/20/2006
Company reports annual sales increase, and imporovement in Rayovac battery sales
Rayovac 3-in-1 LED™ Flashlight
ATLANTA, Ga. - Spectrum Brands, Inc. (NYSE: SPC), a global consumer products company with a diverse portfolio of world-class brands, announced fourth quarter net sales of $608.4 million and a diluted net loss of $8.88 per share for the quarter ended September 30, 2006. Excluding certain adjustments which management believes are not indicative of the company's on-going normalized operations, the diluted loss per share for the fourth quarter was $0.07. Included in the quarterly results are:
- a non-cash pretax impairment charge of $433.0 million, or $8.05 per share, related to the value of certain trade names and goodwill carried on the company's books. This charge resulted from an annual evaluation of goodwill and indefinite-lived intangibles as required by SFAS 142, "Goodwill and Other Intangible Assets."
- a non-cash charge in the amount of $18.9 million, or $0.38 per share, increasing the valuation allowance against certain net deferred tax assets, and
- pretax restructuring and related charges of $28.8 million, or $0.38 per share, related to the rationalization of the company's European business and ongoing integration activities resulting primarily from the 2005 acquisitions of United Industries and Tetra Holding GmbH.
During the fourth quarter of fiscal 2005, the company reported a diluted loss per share of $0.06, including restructuring and related charges of $0.15 per share, $0.03 per share in inventory valuation charges associated with acquisitions, and $0.02 income from discontinued operations.
Spectrum Brands' 2006 fourth quarter net sales were $608.4 million, a four percent increase over the comparable period last year. Organic growth in the quarter was three percent and foreign exchange rates added one percent. Global battery sales increased two percent year over year, as strong results from North America and Latin America more than offset a decline in Europe/ROW sales. Global Pet reported good growth of seven percent. Home and Garden sales increased by eight percent. Sales of Remington branded products declined by two percent on a worldwide basis.
Chairman and Chief Executive Officer Dave Jones stated, "Our fourth quarter results were encouraging and show marked improvement in revenue trends in a number of key areas, including North American battery sales, Global Pet and Home & Garden. While hard work remains ahead of us, we are pleased with the progress we are seeing throughout the company despite a challenging environment. We remain committed to further reducing costs while making the necessary investments to transform our business for long-term success."
Gross profit and gross margin for the quarter were $210.8 million and 34.6 percent, respectively, versus $215.4 million and 36.7 percent for the same period last year. Current year cost of goods sold included $18.0 million in restructuring and related costs; fiscal 2005 cost of goods sold included $2.7 million in restructuring and related costs and a $2.6 million inventory valuation allowance. Increased raw material costs in the quarter were offset by improved margins in the Remington branded products and the benefit of integration cost savings.
The Company's operating loss for the quarter was $423.2 million versus fiscal 2005's fourth quarter operating income of $32.8 million. The primary reasons for the decline are the $433.0 million impairment charge (see further detail below) and $28.8 million in restructuring and related charges taken in fiscal 2006 versus $13.6 million of restructuring and related charges and inventory valuation charges in fiscal 2005. Significantly higher distribution costs also contributed to the increase in operating expenses.
Fourth Quarter Segment Results
North American net sales were $257.8 million, a five percent improvement compared with $246.5 million reported last year. The increase was driven by strong growth in batteries and in home and garden sales, somewhat offset by a decline in Remington branded products. Battery sales were up significantly, largely due to the successful launch of Rayovac's new Power Challenge marketing campaign. In the company's home and garden business, consumer purchases of Spectrum Brands products at retail grew eight percent during the fourth quarter, in line with reported results. North American segment profits were $20.5 million versus $17.5 million reported last year.
European/ROW net sales were $143.0 million versus $153.8 million in the prior year. Foreign exchange translation contributed $5.2 million. Remington branded product sales showed strong growth, but this growth was more than offset by continuing weakness in the battery category, particularly in Western Europe. Segment profitability for the quarter was $13.7 million compared with $21.2 million last year, primarily a function of lower battery sales volume and higher raw material costs.
About Spectrum Brands, Inc.
Spectrum Brands is a global consumer products company and a leading supplier of batteries, lawn and garden care products, specialty pet supplies, shaving and grooming products, household insecticides, personal care products and portable lighting. Spectrum Brands' products are sold by the world's top 25 retailers and are available in more than one million stores in more than 120 countries around the world. Headquartered in Atlanta, Georgia, Spectrum Brands generates annual revenue of approximately $2.5 billion and has approximately 9,800 employees worldwide. The company's stock trades on the New York Stock Exchange under the symbol SPC.