Spectrum Brands, Inc. Announces Second Quarter Financial Results
Spectrum Brands, Inc. Press Release (excerpted)FlashlightNews.org - 05/02/2006
ATLANTA, Ga., - Spectrum Brands, Inc. (NYSE: SPC), a global consumer products company with a diverse portfolio of world-class brands, announced diluted earnings per share of one cent and pro forma diluted earnings per share of three cents for its fiscal second quarter ended April 2, 2006, in line with analysts' mean estimates as reported by First Call.
For comparison purposes, the company estimates that the prior year's pro forma diluted earnings per share would have been 42 cents when adjusted to include the impact of all 2005 and 2006 acquisitions and divestitures for the full fiscal year. See Table 4, "Reconciliation of GAAP to As Adjusted Financial Data," for further detail.
"We are disappointed by the results from our North American and European battery businesses this quarter, where a decrease in sales volume and high raw material costs, particularly zinc, resulted in significant underperformance to our expectations," said Spectrum Brands Chairman and CEO Dave Jones. "However, we are encouraged by this quarter's good performance from our specialty pet and Remington product portfolios. Our lawn and garden business is poised for a solid performance in the upcoming selling season with consumer purchases at retail up ten percent, although inventory management initiatives by some of our largest retail customers had a negative impact on Q2 lawn and garden sales."
"With a challenging second quarter behind us, we are now moving forward with a renewed focus on organic sales growth, aggressive cost management and debt reduction. Through the various restructuring activities we have previously announced, we are committed to aggressively pursuing cost management initiatives throughout our organization designed to achieve $150 million in annual cost savings by the end of fiscal 2007. At the same time, we are increasing our focus on sales growth and investing in our brands through new product development and increased advertising."
Financial results for the quarter ended April 2, 2006 include results from United Industries, acquired on February 7, 2005, Tetra Holding GmbH, acquired on April 29, 2005, and Jungle Labs, acquired on September 1, 2005. Financial results for periods prior to the acquisition dates exclude United, Tetra and Jungle. On January 25, 2006 Spectrum Brands divested its Canadian fertilizer technology and professional products businesses. As a result of this sale the company has reported the second quarter results of these businesses as discontinued operations in the condensed consolidated statements of operations for both 2006 and 2005.
Second Quarter ResultsSpectrum Brands' second quarter net sales were $625.1 million, as compared to $521.0 million for the same period last year. Revenue contribution from acquisitions was $118.6 million. Unfavorable currency translation impacted sales by a net $6.9 million. When compared to management's estimates of fiscal year 2005 revenue adjusted to include all acquisitions and dispositions for the full period, net sales declined by four percentage points.
Gross profit for the quarter was $233.7 million versus $185.6 million for the same period last year. Cost of goods sold during the quarter included $0.4 million in restructuring and related charges, and 2005 second quarter results included a $27.7 million inventory valuation charge associated with the United acquisition. Excluding these charges, gross profit margin for the second quarter was 37.5 percent versus 40.9 percent for the same period last year. The decline in gross margin percentage resulted primarily from lower sales in the global battery business and increased raw material costs. Management's estimate of gross profit in fiscal year 2005's second quarter, when adjusted to include all acquisitions and dispositions, is $269.9, or 41.4 percent of net sales.
North American net sales were $315.8 million compared with $280.6 million reported last year. When 2005 results are adjusted to include all acquisitions and divestitures for the full year, net sales show a year over year decline of three percent. Battery and lighting sales declined 20 percent as recovery of alkaline battery sales under the company's new "Performance Guaranteed" marketing program was slower than anticipated and retail inventory reductions on the part of several large customers negatively impacted sales. Remington branded product sales improved by 23%, as the company grew market share in all categories, including men's and women's shaving and grooming and personal care. Although consumer purchases of Spectrum Brands lawn and garden products at retail showed positive growth of ten percent during the second quarter, reported lawn and garden sales declined one percent versus year ago standalone results for United Industries as a result of retail customers' inventory reduction programs. North American segment profits were $39.4 million versus $33.7 million reported last year.
Editor's note: For the complete text of this release, please visit Spectrum Brands Press Release