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Spectrum Brands Reports First Quarter 2007 Financial Results

Spectrum Brands, Inc. Press Release (excerpted) - 2/8/2007

Company announces it is pursuing sale of Home & Garden business

Rayovac Hybrid Rechargeable Batteries

Rayovac Hybrid Rechargeable Batteries

ATLANTA, Ga. - Spectrum Brands, Inc. (NYSE:SPC), a global consumer products company with a diverse portfolio of world-class brands, announced first quarter net sales of $564.6 million and a net loss of $0.38 per share for the quarter ended December 31, 2006. Reported net sales exclude sales from the company's Home & Garden division, which is being accounted for as discontinued operations pending completion of an ongoing sale process. Excluding certain adjustments which management believes are not indicative of the company's on-going normalized operations, the company generated diluted earnings per share for the first quarter of $0.12.

Included in the quarterly results are:

  • a loss from discontinued operations, net of tax, of $22.2 million, or $0.43 per share, related to the company's Home & Garden division, which is being held for sale; and
  • pretax restructuring and related charges of $7.4 million, or $0.10 per share, related to ongoing integration activities within the Global Pet business and the rationalization of the company's Latin American and European businesses.

During the first quarter of fiscal 2006, the company reported diluted earnings per share of $0.05, which included a loss from discontinued operations, net of tax, of $0.40 per share and restructuring and related charges and other charges of $0.05 per share.

Spectrum Brands' first quarter net sales were $564.6 million, as compared with net sales of $566.3 million in the comparable period last year. Global battery sales declined six percent year over year, as strong results from Latin America were offset by sales declines in North America and Europe/ROW. Sales of Remington branded products increased by seven percent on a worldwide basis. Global Pet reported growth of four percent. Favorable foreign exchange rates had a $16.2 million positive impact on net sales during the quarter, mostly driven by the strong Euro.

Gross profit and gross margin for the quarter were $208.9 million and 37.0 percent, respectively, versus $224.0 million and 39.6 percent for the same period last year. Restructuring and related charges of $6.0 million were included in the current quarter's cost of goods sold; cost of goods sold in the comparable period last year included $1.3 million in similar charges. Increased raw material costs, primarily zinc, were the most significant driver of the decline in gross margin.

The company generated operating income of $37.5 million versus $67.6 million in fiscal 2006's first quarter. The primary reasons for the decline were increased advertising and marketing expense of approximately $14 million and higher commodity costs, including an increase of $7 million in zinc costs.

Commenting on the results of the quarter, Spectrum Brands President and Chief Executive Officer David Jones stated, "Our first quarter results reflect progress in a number of areas, despite a challenging environment, and we are confident that we are taking the right actions for the long-term to build our brands, reduce costs and create sustainable value. We are focused on the successful completion of the divestiture of our Home & Garden business, a key milestone in the strategic review we began last July. We anticipate that the proceeds from this transaction will enable us to reduce outstanding debt and leverage and will allow us more flexibility to focus on strengthening our remaining businesses. With the assistance of Goldman Sachs, we are continuing to consider further strategic options to improve our capital structure, including potential additional asset sales."

First Quarter Segment Results

North America net sales were $172.2 million, compared with $190.9 million reported last year, as a result of a decline in battery sales, largely driven by the timing of holiday shipments and lower sales of Remington branded products. Rayovac alkaline battery sales at retail were up six percent, versus industry-wide sales growth of three percent, largely due to the successful launch of Rayovac's new marketing campaign. Remington men's shaving products underperformed in an overall weak category during the holiday season, partially offset by growth from grooming and personal care products. North American segment profits were $18.9 million versus $35.5 million reported last year, as an improvement in operating expenses resulting from integration savings was more than offset by higher commodity costs and $7 million in increased advertising expense.

Europe/ROW net sales were $186.9 million versus $182.7 million in the prior year. Foreign exchange translation contributed $13.1 million. Remington branded product sales showed significant growth, partially offset by continuing weakness in the battery category, particularly in Central Europe. Segment profitability for the quarter was $21.4 million compared with $30.5 million last year, primarily a function of lower battery sales volume and higher raw material costs.

Latin America continued its positive growth trend with a quarterly net sales increase of 13 percent versus the prior year, benefiting from strong growth in both Remington branded products and Rayovac batteries. Latin America segment profitability of $10.2 million increased from $6.7 million last year, attributable to the implementation of battery pricing increases across the region, the growing profit contribution from Remington and the reversal of certain excise tax-related accruals.

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 net sales of $2.5 billion in fiscal 2006 and has approximately 8,400 employees worldwide. The company's stock trades on the New York Stock Exchange under the symbol SPC.

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