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Wednesday, 08/03/2016 8:42:19 AM

Wednesday, August 03, 2016 8:42:19 AM

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Spectrum Brands Holdings Reports Record Fiscal 2016 Third Quarter Results (7/28/16)

• 9.1% reported sales growth, 126.9% net income increase and reported diluted earnings per share (EPS) of $1.71

• 3.7% organic net sales growth, 18.2% adjusted EBITDA increase and strong margin expansion

• Term debt reduced by $250 million in June as part of the Company’s intention to significantly delever and end fiscal 2016 on September 30 below 4 times total leverage

• Fiscal 2016 net cash provided from operating activities expected to be $605-$625 million after expected purchases of property, plant and equipment of $100-$110 million, resulting in approximately $505-$515 million of free cash flow versus $454 million in fiscal 2015 and $359 million in fiscal 2014

• Reaffirms outlook for 7th consecutive year of record performance in fiscal 2016

MIDDLETON, Wis.--(BUSINESS WIRE)--Spectrum Brands Holdings, Inc. (NYSE: SPB), a global consumer products company offering an expanding portfolio of leading brands providing superior value to consumers and customers every day, today reported record performance for the third quarter of fiscal 2016 ended July 3, 2016 and reiterated expectations for a seventh consecutive year of record results for fiscal 2016.

Fiscal 2016 Third Quarter Highlights:

• Net sales of $1.36 billion in the third quarter of fiscal 2016 increased 9.1 percent compared to $1.25 billion last year. Excluding the negative impact of $15.8 million of foreign exchange and acquisition sales of $84.1 million, organic net sales, a non-GAAP measure, increased 3.7 percent from the prior year. See Other Supplemental Information for reconciliation to GAAP net sales.

• Net income of $101.9 million and diluted EPS of $1.71 in the third quarter of fiscal 2016 increased compared to net income of $44.9 million and diluted EPS of $0.79 in fiscal 2015 primarily due to the impact of the GAC acquisition, volume, improved mix, reduced acquisition and restructuring activity, one-time debt refinancing costs, and a change in income tax provision from the prior period.

• Adjusted diluted EPS, a non-GAAP measure, of $1.73 in the third quarter of fiscal 2016 increased 21.8 percent compared to $1.42 last year predominantly due to the impact of the GAC acquisition, volume and improved mix, partially offset by higher common shares outstanding. See Other Supplemental Information for reconciliation to GAAP EPS.

• Adjusted EBITDA, a non-GAAP measure, of $279.2 million in the third quarter of fiscal 2016 increased 18.2 percent compared to $236.2 million in fiscal 2015. Excluding the negative impact of foreign exchange of $14.8 million, as well as the effect on EBITDA from acquisitions of $27.8 million, organic adjusted EBITDA of $266.2 million increased 12.7 percent versus the prior year’s quarter. See Other Supplemental Information for reconciliation to GAAP net income.

• Adjusted EBITDA margin, a non-GAAP measure, in the third quarter of fiscal 2016 improved to 20.5 percent compared to 18.9 percent in the year-ago quarter primarily due to the GAC acquisition, improved mix and operating expense leverage on the base business. See Other Supplemental Information for reconciliation to GAAP net income.

• Free cash flow, a non-GAAP measure, is expected to grow to approximately $505-$515 million versus $454 million in fiscal 2015 and $359 million in fiscal 2014. See Other Supplemental Information for reconciliation to Forecasted GAAP Cash Flow from Operating Activities.

“We reported solid growth in the third quarter that, together with a strong first half, maintains our momentum to deliver a 7th consecutive year of record performance in fiscal 2016,” said Andreas Rouvé, Chief Executive Officer of Spectrum Brands Holdings.

“Home and Garden and HHI achieved record results, global batteries delivered excellent growth and, regionally, there were solid performances in the U.S. as well as in Europe, Latin America and Canada on a currency neutral basis,” Mr. Rouvé said. “However, sales in our Global Pet and personal care and small appliances businesses were below our expectations in the third quarter, and we are working to improve their top-line results as we look to fiscal 2017.

“We are pleased with our organic sales growth of 3.7% in the third quarter, which reinforces the benefits of a diversified and global portfolio of largely non-discretionary and well-known consumer brands for everyday living,” he said. “We overcame weather challenges during part of the quarter in North America and Europe, which slowed POS, as well as tighter inventory control programs at certain key retailers.

“Organic adjusted EBITDA increased more than three times the rate of organic sales as virtually every business improved. Our margin expansion was due to favorable mix, operating leverage from our global infrastructure and share services platform, a strong level of continuous improvement savings, and the impact of Global Auto Care which reported excellent organic growth.

“As a key part of our Spectrum First initiative, our ‘more, more, more’ organic growth strategy centers on entering more countries, serving more channels, and launching more categories through leveraging our strong retailer relationships and selectively investing in R&D, sales and marketing,” Mr. Rouvé said.

“Major term debt reduction was made in the third quarter, consistent with our plan to significantly delever this year, and we remain on target to grow our free cash flow by more than 10 percent,” Mr. Rouvé said. “Our focus is to manage the business for long-term, sustainable organic growth, increase our adjusted EBITDA and maximize free cash flow.”

Fiscal 2016 Third Quarter Consolidated Financial Results

Net sales of $1.36 billion in the third quarter of fiscal 2016 increased 9.1 percent compared to $1.25 billion in fiscal 2015. Excluding the negative impact of $15.8 million of foreign exchange, as well as acquisition sales of $84.1 million, organic net sales increased 3.7 percent.

Gross profit and gross profit margin in the third quarter of fiscal 2016 were $530.6 million and 39.0 percent, respectively, compared to $458.0 million and 36.7 percent, respectively, last year. The gross profit margin percentage increase was primarily due to the impact of the GAC acquisition and favorable mix, partially offset by the negative impact of foreign exchange.

Operating expenses of $323.9 million in the third quarter of fiscal 2016 were essentially unchanged compared to $322.3 million in the prior year.

The Company reported net income of $101.9 million, or $1.71 diluted EPS, in the third quarter of fiscal 2016 on average diluted shares and common stock equivalents outstanding of 59.6 million. In the third quarter of fiscal 2015, net income was $44.9 million, or $0.79 diluted EPS, on average diluted shares and common stock equivalents outstanding of 56.5 million. The Company generated adjusted diluted EPS of $1.73 in the third quarter of fiscal 2016, an increase of 21.8 percent compared to $1.42 in fiscal 2015 primarily due to the GAC acquisition, volume and favorable mix, partially offset by higher common shares outstanding.

Adjusted EBITDA of $279.2 million in the third quarter of fiscal 2016 increased 18.2 percent compared to $236.2 million in fiscal 2015. Excluding the negative impact of $14.8 million of foreign exchange, as well as acquisition-related EBITDA of $27.8 million, organic adjusted EBITDA of $266.2 increased 12.7 percent versus the third quarter of 2015. See Other Supplemental Information for reconciliation to GAAP net income. Adjusted EBITDA margin of 20.5 percent increased from 18.9 percent last year.

Fiscal 2016 Nine Months Consolidated Financial Results

Net sales of $3.79 billion in the nine months of fiscal 2016 increased 12.1 percent compared to $3.38 billion for the same period in fiscal 2015. Excluding the negative impact of $109.2 million of foreign exchange, as well as acquisition sales of $351.8 million, organic net sales of $3.55 billion in the nine months of fiscal 2016 increased 4.9 percent from the prior year.

The Company reported net income of $268.2 million, or $4.51 diluted EPS, in the nine months of fiscal 2016 on average diluted shares and common stock equivalents outstanding of 59.5 million. In the nine months of fiscal 2015, Spectrum Brands reported net income of $122.5 million, or $2.26 diluted EPS, on average diluted shares and common stock equivalents outstanding of 54.3 million. The Company generated adjusted diluted EPS of $3.89 in the nine months of fiscal 2016 compared to $3.20 last year.

Fiscal 2016 nine months adjusted EBITDA of $715.9 million compared to adjusted EBITDA in the nine months of fiscal 2015 of $571.2 million. Excluding the negative impact of $65.8 million of foreign exchange, as well as acquisition EBITDA of $106.4 million, organic adjusted EBITDA of $675.3 million increased 18.2 percent versus last year. The reported adjusted EBITDA margin of 18.9 percent in the nine months of fiscal 2016 compared to 16.9 percent in fiscal 2015.

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Fiscal 2016 Third Quarter Segment Level Data

The GBA segment reported fiscal 2016 third quarter net sales of $454.1 million versus $459.0 million in the year-ago quarter. Organic net sales increased 1.7 percent as the increase in consumer batteries more than offset the decline in small appliances.

Global battery net sales of $187.2 million in the third quarter of fiscal 2016 increased 5.0 percent compared to $178.3 million in the third quarter of fiscal 2015. Excluding negative foreign exchange impacts of $3.9 million, fiscal 2016 third quarter organic net sales improved 7.2 percent. Higher North American results were primarily attributable to alkaline distribution gains largely in non-scanned channels. Strong European growth was driven by alkaline and hearing aid battery gains, while higher Latin American results on a currency neutral basis were primarily due to growth in alkaline and specialty batteries.

Net sales for the global personal care product category of $115.8 million in the third quarter of fiscal 2016 compared to $119.4 million last year. Excluding negative foreign exchange impacts of $3.1 million, organic net sales were essentially unchanged. Growth in Europe, primarily in hair care appliances and hair removal, and a double-digit increase in constant currency in Latin America from men’s shaving and grooming growth were offset by lower North American revenues. The North American decline was predominantly due to tighter retailer inventory levels and category softness in hair care appliances against strong growth last year.

Net sales of $151.1 million in the global small appliances product category in the third quarter of fiscal 2016 compared to $161.3 million in the year-ago quarter. Excluding negative foreign exchange impacts of $5.8 million, fiscal 2016 third quarter organic net sales decreased 2.7 percent. Growth in Europe on a currency neutral basis was more than offset by lower North American sales driven by retailer inventory reductions and soft POS largely in food preparation and beverage categories at several key retail customers. Latin American organic net sales were unchanged on a currency neutral basis.

GBA adjusted EBITDA of $64.3 million in the third quarter of fiscal 2016 increased 7.0 percent compared to $60.1 million in the year-ago quarter. Excluding negative foreign exchange impacts of $16.2 million, organic adjusted EBITDA of $80.5 million in the third quarter of fiscal 2016 grew 33.9 percent versus the prior year. Adjusted EBITDA margin of 14.2 percent compared to 13.1 percent last year.

Hardware & Home Improvement (HHI)

The HHI segment delivered record third quarter results. Net sales of $328.5 million in the third quarter of fiscal 2016 increased 4.8 percent compared to $313.5 million in the prior year. The improvement was driven by growth in the core U.S. residential security, builders’ hardware and plumbing categories. The planned exit of unprofitable businesses and expiration of a customer tolling agreement adversely impacted sales growth by 0.9 percent. Excluding the negative impact of foreign exchange of $3.3 million, organic net sales increased 5.8 percent in the third quarter of fiscal 2016.

Adjusted EBITDA of $65.2 million, a record third quarter level, increased 4.2 percent versus $62.6 million last year. Adjusted EBITDA margin of 19.8 percent compared to 20.0 percent last year.

Global Pet Supplies

The Global Pet Supplies segment reported net sales of $207.1 million in the third quarter of fiscal 2016 compared to $208.3 million last year. Excluding the favorable impact of foreign exchange of $0.7 million, organic net sales declined 0.9 percent. Lower aquatics revenues in Europe were due mainly to a wet and cool outdoor pond season and in North America from the planned exit of certain low-margin glass and kit systems business. Solid North American companion animal growth from rawhide revenue increases and distribution gains was offset by lower European results due to a distributor change and reduced private label business.

Third quarter adjusted EBITDA of $37.7 million compared to $38.4 million in fiscal 2015. Adjusted EBITDA margin fell 20 basis points to 18.2 percent compared to 18.4 percent in the prior year.

Home and Garden

The Home and Garden segment reported record third quarter results. Fiscal 2016 third quarter net sales of $212.0 million increased 4.8 percent compared to $202.3 million last year. Strong growth in the repellent category, as well as increased sales in the lawn and garden and the household insect controls categories, resulted from market share gains and the impact of the Zika virus.

Record third quarter adjusted EBITDA of $67.0 million increased 7.4 percent versus $62.4 million a year ago. Adjusted EBITDA margin of 31.6 percent increased 80 basis points from 30.8 percent last year.

Global Auto Care (GAC)

The GAC segment, acquired on May 21, 2015, reported net sales of $159.8 million and adjusted EBITDA of $54.2 million in the third quarter of fiscal 2016. Excluding the negative impact of foreign exchange and acquisition-related impacts, organic net sales of $76.1 million and organic adjusted EBITDA of $26.5 million from May 21, 2016 through July 3, 2016 increased compared to the period of May 21, 2015 through June 28, 2015, respectively, driven by favorable weather in late June and strong U.S. growth in refrigerants, primarily A/C PRO®. Reported adjusted EBITDA margin was 33.9 percent.

Liquidity and Debt

Spectrum Brands completed its fiscal 2016 third quarter in a solid liquidity position, including a cash balance of approximately $117 million and approximately $277 million available, net of letters of credit, on its $500 million Cash Flow Revolver. Consistent with its strong seasonal cash flow for the third quarter, Spectrum Brands made approximately $250 million of discretionary payments on its term loans.

As of the end of the quarter, the Company had approximately $3,939 million of debt outstanding, excluding discounts and deferred financing fees, consisting of approximately $200 million outstanding on its Cash Flow Revolver, a series of secured Term Loans in the aggregate amount of $1,277 million, $520 million of 6.375% senior unsecured notes, $570 million of 6.625% senior unsecured notes, $250 million of 6.125% senior unsecured notes, $1 billion of 5.75% senior unsecured notes, and approximately $123 million of capital leases and other obligations.

Fiscal 2016 Outlook

Spectrum Brands expects fiscal 2016 net sales, as reported, to increase in the high-single digit range compared to fiscal 2015 reported net sales of $4.69 billion, including the positive impacts of the acquisitions of the European pet food business on December 31, 2014, Salix Animal Health on January 16, 2015 and Armored Auto Group on May 21, 2015, along with an anticipated negative impact from foreign exchange of approximately 280 to 300 basis points based on current spot rates.

Fiscal 2016 free cash flow is projected to be approximately $505-$515 million compared to $454 million in fiscal 2015. See Other Supplemental Information for a reconciliation to Forecasted GAAP Cash Flow from Operating Activities. Capital expenditures, which were $89.1 million in fiscal 2015, are expected to be in the range of $100 million to $110 million. These incremental investments include the impact of full-year expenditures supporting recent acquisitions, a major aerosol capacity expansion, and support of technology and innovation.

Conference Call/Webcast Scheduled for 9:00 A.M. Eastern Time Today

Spectrum Brands will host an earnings conference call and webcast at 9:00 a.m. Eastern Time today, July 28. To access the live conference call, U.S. participants may call 877-556-5260 and international participants may call 973-532-4903. The conference ID number is 41164873. A live webcast and related presentation slides will be available by visiting the Event Calendar page in the Investor Relations section of Spectrum Brands’ website at www.spectrumbrands.com.

A replay of the live webcast also will be accessible through the Event Calendar page in the Investor Relations section of the Company’s website. A telephone replay of the conference call will be available through Wednesday, August 11. To access this replay, participants may call 855-859-2056 and use the same conference ID number.

About Spectrum Brands Holdings, Inc.

Spectrum Brands Holdings, a member of the Russell 2000 Index, is a global and diversified consumer products company and a leading supplier of consumer batteries, residential locksets, residential builders’ hardware, plumbing, shaving and grooming products, personal care products, small household appliances, specialty pet supplies, lawn and garden and home pest control products, personal insect repellents, and auto care products. Helping to meet the needs of consumers worldwide, our Company offers a broad portfolio of market-leading, well-known and widely trusted brands including Rayovac®, VARTA®, Kwikset®, Weiser®, Baldwin®, National Hardware®, Pfister®, Remington®, George Foreman®, Black + Decker®, Tetra®, Marineland®, Nature’s Miracle®, Dingo®, 8-in-1®, FURminator®, IAMS®, Eukanuba®, Healthy-Hide®, Digest-eeze™, Littermaid®, Spectracide®, Cutter®, Repel®, Hot Shot®, Black Flag®, Liquid Fence®, Armor All®, STP® and A/C PRO®. Spectrum Brands' products are sold by the world's top 25 retailers and are available in more than one million stores in approximately 160 countries. Spectrum Brands Holdings generated net sales of approximately $4.69 billion in fiscal 2015. For more information, visit www.spectrumbrands.com.

http://www.businesswire.com/news/home/20160728005174/en/Spectrum-Brands-Holdings-Reports-Record-Fiscal-2016http://www.businesswire.com/news/home/20160728005174/en/Spectrum-Brands-Holdings-Reports-Record-Fiscal-2016

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