Spectrum Brands Reports
Third Quarter 2007 Financial Results
|Spectrum Brands, Inc. Press Release (excerpted)||FlashlightNews.org - 8/07/2007|
Rayovac parent says it plans to improve capital stucture by selling an un-named strategic asset
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 third quarter net sales of $442.0 million and a net loss of $0.15 per share for the quarter ended July 1, 2007. Excluding certain items which management believes are not indicative of the company's on-going normalized operations, the company generated a diluted loss per share of $0.16. These items include:
- pretax restructuring and related charges of $30.6 million, or $0.43 per share, associated with company-wide cost reduction initiatives;
- income from discontinued operations, net of tax, of $22.8 million, or $0.45 per share, related to the company's Home & Garden business, which is being held for sale, and
- other charges of $0.5 million net of tax, or $0.01 per share.
The company's third quarter 2006 earnings per share of $0.05 included earnings from discontinued operations, net of tax, of $0.35 per share, restructuring and related charges of $0.10 per share and other adjustments of $0.03 per share.
Spectrum Brands' third quarter net sales were $442.0 million, an increase of 3.4 percent compared with net sales of $427.5 million in the comparable period last year. The Global Batteries and Personal Care business segment generated year over year sales growth of four percent, as the positive impact of foreign currency translation and sales growth in Latin America partially offset weaker sales in North America. Global battery sales increased two percent and Remington branded product sales increased eight percent. The Global Pet Supplies business segment reported sales growth of two percent. Favorable foreign exchange rates had a $15.9 million positive impact on companywide net sales during the quarter. Reported net sales exclude the impact of the company's Home & Garden division, which is accounted for as a discontinued operation. Home & Garden generated $258.4 million in net sales during the quarter, a year over year decline of 4.6 percent attributable to unfavorable weather conditions during the quarter.
Gross profit and gross margin for the quarter were $164.2 million and 37.1 percent, respectively, versus $156.4 million and 36.6 percent for the same period last year. Restructuring and related charges of $4.1 million were included in the current quarter's cost of goods sold; cost of goods sold in the comparable period last year included $2.7 million in similar charges. Excluding these restructuring and related charges, gross margin improved as the positive impact of price increases and manufacturing cost efficiencies offset increased raw material costs.
Spectrum generated third quarter operating income of $3.7 million versus $10.5 million in the same quarter of fiscal 2006. The primary reason for the decline was a significant increase in restructuring and related charges of $30.6 million in fiscal 2007 compared with $6.8 million in the prior year, which more than offset a $7.8 million reduction in operating expenses in the current quarter.
Commenting on third quarter results, Spectrum Brands Chief Executive Officer Kent Hussey stated, "Our overall portfolio continues to make progress and we are confident that we are taking the right actions for the long-term to drive revenue growth, reduce costs and create sustainable value. As we previously disclosed, our third quarter financial results were lower than we had anticipated; however, we did see year over year improvement in sales, operating expenses and EBITDA. Looking forward, we expect further year over year improvement in EBITDA in the fourth quarter of 2007 and beyond, largely driven by cost reduction actions already completed or underway. In order to restore a more normal capital structure to the business as quickly as possible, we have decided to sell an attractive strategic asset. Details of the sale will be announced when the sale process is formally initiated within the next several weeks. Our Home & Garden business will continue to be treated as a business held for sale, although the timing of the sale process for that asset is yet to be determined."
The Global Batteries and Personal Care segment reported net sales of $307.0 million, compared with $295.2 million reported last year. Foreign exchange translation contributed $14.3 million. Global battery sales showed year over year growth of two percent. North American battery sales were negatively impacted by the timing of shipments and caution on the part of retailers regarding retail inventory levels. Rayovac alkaline battery sales to consumers at retail increased nine percent, in line with category results, primarily driven by the successful implementation of price increases in January 2007. In Europe, the positive impact of the strong Euro was more than enough to offset the impact of negative product mix shifts, resulting in sales growth of four percent. Latin American battery sales showed year over year growth of twenty percent, benefiting from pricing and product mix. Remington branded products grew eight percent during the quarter, driven by distribution and market share gains in both Latin America and Europe. Segment profitability for Global Batteries and Personal Care was $27.4 million versus last year's $10.0 million. In addition to increased sales, the improvement was driven by lower operating expenses resulting from cost cutting initiatives throughout the business.
Spectrum Brands will hold a conference call at 8:30 a.m. (ET) on August 7 to further discuss its third quarter results. The call will be accessible via webcast through the company's website, www.spectrumbrands.com, and will be archived online until August 21.
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.