Spectrum Brands Holdings Reports Fiscal 2018 Fourth Quarter Results from Continuing Operations
Completing a Significant Transformation to Create a Meaningfully Less Leveraged, More Focused Business with Improved Financial Strength to Drive Long-term Growth
As previously announced, effective
“Fiscal 2018 was a year of significant transformation at
With these transformative actions in fiscal 2018 and following the divestiture of the Company’s Global Batteries and Lighting business and the Global Auto Care business, in fiscal 2019 the Company expects to:
- Have meaningfully less leverage, with total debt to adjusted EBITDA expected to decline from 5.8x to approximately 3.5x EBITDA;
- Consist of a narrower portfolio of four business units (Hardware and Home Improvement, Home & Garden, Pet and Appliances), providing a greater focus and clarity of purpose to produce innovative and exciting new products with excellent customer service;
- Increase investment in its core businesses units, including in the areas of research and development, innovation, new product development, digital marketing and brand support to drive sustainable and profitable growth;
- Achieve meaningful organic revenue growth from continuing operations in fiscal 2019 driven by innovation, increased marketing investments, pricing actions, including tariff-related increases, and market share gains;
- Deliver fiscal 2019 adjusted EBITDA from continuing operations in the
$560 to $580 million range after rebasing the Company; and - Maintain a strong liquidity position, which at the end of fiscal 2018 was
$1.3 billion , including$552 million of cash and$777 million available under the Company’s cash flow revolver.
Fiscal 2018 Fourth Quarter Highlights from Continuing Operations:
- Net sales of
$787.8 million in the fourth quarter of fiscal 2018 were unchanged compared to$787.8 million last year. Excluding the impact of$3.1 million of unfavorable foreign exchange, organic net sales of$790.9 million increased 0.4 percent versus the prior year. - Net loss from continuing operations of
$(150.3) million and diluted loss per share from continuing operations of$(3.00) in the fourth quarter of fiscal 2018 compared to a net loss from continuing operations of$(32.5) million and diluted loss per share from continuing operations of($1.01) in fiscal 2017 primarily due to the write-off from impairment of goodwill, HRG merger costs, lower gross profit and higher distribution costs. - Adjusted diluted EPS from continuing operations of
$0.79 in the fourth quarter of fiscal 2018 decreased 7.1 percent versus$0.85 last year predominantly due to lower gross profit and higher distribution costs. - Operating loss of
$(78.8) million in the fourth quarter of fiscal 2018 compared to operating income of$45.8 million last year primarily as a result of the write-off from impairment of goodwill in Global Auto Care, HRG merger costs, operating inefficiencies, input cost inflation and higher distribution costs. - Adjusted EBITDA of
$134.1 million in the fourth quarter of fiscal 2018 decreased 23.1 percent compared to$174.5 million in fiscal 2017. Excluding the impact of$2.0 million of favorable foreign exchange, organic adjusted EBITDA of$132.1 million fell 24.3 percent versus the prior year. - Adjusted EBITDA margin of 17.0 percent in the fourth quarter of fiscal 2018 decreased 520 basis points compared to 22.2 percent in fiscal 2017 primarily due to operating inefficiencies, input cost inflation and higher distribution costs.
While the transformational actions taken are expected to position
- Home & Garden –
$12 million driven by lower-than-expected volume, related unfavorable manufacturing variances as production volumes were reduced, an early retailer shutdown of the season, the absence of hurricane-driven demand for insecticides and repellents, lower vendor rebates, and a legal reserve for an emerging claims issue. Global Pet Supplies –$7 million due to lower-than-expected revenue and related unfavorable manufacturing variances as production volumes were reduced.- Global Auto Care –
$18 million related to low-margin excess and obsolete inventory liquidation, lower volume related to greater-than-expected retailer inventory reductions, Dayton plant inefficiencies, physical inventory adjustments and scrap relating to the facility consolidation projects, and a cumulative correction of duty rates on a significant sourced component. - Hardware & Home Improvement –
$6 million related to lower growth than forecast.
Adjusted free cash flow of
Fiscal 2018 organic sales growth was encouraging at nearly 2%, driven by HHI and GAC, the Company’s two Pet acquisitions performed very well, and the U.S. Pet business stabilized and has returned to growth.
“With a clear focus and approach to careful capital allocation,” Mr. Maura said, “we expect meaningful reported net sales growth from continuing operations in fiscal 2019 due to new product introductions, increased marketing investments, pricing actions, including tariff-related increases, and market share gains. We also anticipate modest gross margin rate contraction with input cost inflation and tariffs being partly offset by pricing and productivity.”
Mr. Maura also said, “As announced last Thursday, subject to the European Commission’s regulatory review process, we believe that our Company is on track to close in early
Fiscal 2018 Fourth Quarter Consolidated Financial Results from Continuing Operations
Net sales of
Gross profit and gross profit margin in the fourth quarter of fiscal 2018 were
Operating expenses of
Net loss from continuing operations was
As a result of the lower U.S. corporate tax rate due to recently enacted tax reform, fiscal 2018 adjusted EPS reflects a 24.5 percent blended tax rate versus 35.0 percent used in previous years.
Adjusted EBITDA of
Fiscal 2018 Consolidated Financial Results from Continuing Operations
Net sales of
Operating income of
Net income from continuing operations was
Fiscal 2018 adjusted EBITDA from continuing operations of
Fiscal 2018 Fourth Quarter Segment Level Data Compared to Prior Year
Hardware & Home Improvement (HHI)
Three Months Ended Sept. 30, | Year Ended Sept. 30, | |||||||||||||||||||||||||||||||
(in millions, except %) | 2018 | 2017 | Variance | 2018 | 2017 | Variance | ||||||||||||||||||||||||||
Net Sales | $ | 360.9 | $ | 348.9 | $ | 12.0 | 3.4 | % | $ | 1,377.7 | $ | 1,276.1 | $ | 101.6 | 8.0 | % | ||||||||||||||||
Operating Income | 53.3 | 48.3 | 5.0 | 10.4 | % | 155.6 | 185.7 | (30.1 | ) | (16.2 | %) | |||||||||||||||||||||
Operating Income Margin | 14.8 | % | 13.8 | % | 100 | bps | 11.3 | % | 14.6 | % | (330 | ) | bps | |||||||||||||||||||
Adjusted EBITDA | 75.2 | 76.4 | (1.2 | ) | (1.6 | %) | 254.7 | 254.4 | 0.3 | 0.1 | % | |||||||||||||||||||||
Adjusted EBITDA Margin | 20.8 | % | 21.9 | % | (110 | ) | bps | 18.5 | % | 19.9 | % | (140 | ) | bps | ||||||||||||||||||
Higher fourth quarter net sales were driven by a continuation of solid demand in residential security, plumbing and builders’ hardware in the U.S., along with a reduction in the customer order backlog at the
Improvements in fourth quarter operating income and margin were primarily a result of higher volumes and lower restructuring costs, while decreases in adjusted EBITDA and margin were largely due to higher input costs.
Three Months Ended Sept. 30, | Year Ended Sept. 30, | |||||||||||||||||||||||||||||||
(in millions, except %) | 2018 | 2017 | Variance | 2018 | 2017 | Variance | ||||||||||||||||||||||||||
Net Sales | $ | 212.1 | $ | 217.2 | $ | (5.1 | ) | (2.3 | %) | $ | 820.5 | $ | 793.2 | $ | 27.3 | 3.4 | % | |||||||||||||||
Operating Income | (7.9 | ) | (5.3 | ) | (2.6 | ) | 49.1 | % | 34.9 | 29.1 | 5.8 | 19.9 | % | |||||||||||||||||||
Operating Income Margin | (3.7 | %) | (2.4 | %) | (130 | ) | bps | 4.3 | % | 3.7 | % | 60 | bps | |||||||||||||||||||
Adjusted EBITDA | 32.0 | 44.0 | (12.0 | ) | (27.3 | %) | 136.7 | 142.7 | (6.0 | ) | (4.2 | %) | ||||||||||||||||||||
Adjusted EBITDA Margin | 15.1 | % | 20.3 | % | (520 | ) | bps | 16.7 | % | 18.0 | % | (130 | ) | bps | ||||||||||||||||||
Fourth quarter net sales decreased primarily as a result of lower aquatics revenues in the U.S. largely driven from prior-year business exits at a major retailer and in
The operating loss and negative margin were primarily driven by the write-off from impairment of intangible assets. Adjusted EBITDA and margin decreased as a result of lower volumes, volume-related unfavorable manufacturing variances, operating inefficiencies and unfavorable product mix. Excluding unfavorable foreign exchange impacts of
Home and Garden (H&G)
Three Months Ended Sept. 30, | Year Ended Sept. 30, | |||||||||||||||||||||||||||||||
(in millions, except %) | 2018 | 2017 | Variance | 2018 | 2017 | Variance | ||||||||||||||||||||||||||
Net Sales | $ | 111.7 | $ | 119.1 | $ | (7.4 | ) | (6.2 | %) | $ | 482.2 | $ | 493.3 | $ | (11.1 | ) | (2.3 | %) | ||||||||||||||
Operating Income | 14.6 | 26.0 | (11.4 | ) | (43.8 | %) | 88.0 | 114.4 | (26.4 | ) | (23.1 | %) | ||||||||||||||||||||
Operating Income Margin | 13.1 | % | 21.8 | % | (870 | ) | bps | 18.2 | % | 23.2 | % | (500 | ) | bps | ||||||||||||||||||
Adjusted EBITDA | 19.8 | 32.2 | (12.4 | ) | (38.5 | %) | 107.5 | 133.0 | (25.5 | ) | (19.2 | %) | ||||||||||||||||||||
Adjusted EBITDA Margin | 17.7 | % | 27.0 | % | (930 | ) | bps | 22.3 | % | 27.0 | % | (470 | ) | bps | ||||||||||||||||||
Reduced fourth quarter net sales were driven by lower-than-expected volume due to retailer’s early exiting of the category and the lack of repellent and insecticide demand relating to the timing of hurricanes in the prior year, unfavorable promotional timing against a strong 2017, related unfavorable manufacturing variances as production volumes were reduced, lower vendor rebates, and a reserve for a legal claim, partially offset by solid growth in household control category sales.
Lower operating income, adjusted EBITDA and margins decreased predominantly due to lower volumes, unfavorable product mix and higher input costs.
Global Auto Care (GAC)
Three Months Ended Sept. 30, | Year Ended Sept. 30, | |||||||||||||||||||||||||||||||
(in millions, except %) | 2018 | 2017 | Variance | 2018 | 2017 | Variance | ||||||||||||||||||||||||||
Net Sales | $ | 103.1 | $ | 102.6 | $ | 0.5 | 0.5 | % | $ | 465.5 | $ | 446.9 | $ | 18.6 | 4.2 | % | ||||||||||||||||
Operating Income | (86.1 | ) | 20.7 | (106.8 | ) | (515.9 | %) | (28.8 | ) | 100.8 | (129.6 | ) | (128.6 | %) | ||||||||||||||||||
Operating Income Margin | (83.5 | %) | 20.2 | % | (10,370 | ) | bps | (6.2 | %) | 22.6 | % | (2,880 | ) | bps | ||||||||||||||||||
Adjusted EBITDA | 14.6 | 32.5 | (17.9 | ) | (55.1 | %) | 99.3 | 148.4 | (49.1 | ) | (33.1 | %) | ||||||||||||||||||||
Adjusted EBITDA Margin | 14.2 | % | 31.7 | % | (1,750 | ) | bps | 21.3 | % | 33.2 | % | (1,190 | ) | bps | ||||||||||||||||||
Higher fourth quarter sales were driven by increased performance chemical and refrigerant revenues, partially offset by lower appearance product sales. Excluding unfavorable foreign exchange impacts of
The operating loss and negative margin were largely driven by the write-off from impairment of GAC goodwill as well as operating inefficiencies at the Dayton facility. Lower adjusted EBITDA and margin were the result of Dayton operating inefficiencies, higher input costs, increased distribution costs, excess and obsolete inventory liquidation mix, a multi-year duty catch-up accrual, and higher marketing investments.
Classification of the Company’s Reporting Segments
Effective with the first quarter of fiscal 2019 ending
Fiscal 2018 Fourth Quarter and Full Year Consolidated Financial Results from GBA Discontinued Operations
Income from GBA discontinued operations, net of tax, of
Income from GBA discontinued operations, net of tax, of
Liquidity and Debt
As of the end of fiscal 2018, the Company had approximately
Total leverage was approximately 5.8 times at the end of fiscal 2018, slightly lower than 6.1 times at the end of fiscal 2017, primarily as a result of the redemption of
Fiscal 2019 Outlook
Fiscal 2019 adjusted EBITDA from continuing operations is expected to be between
Auto Business Sale Go-Shop Provision
Auto Business Sale agreement (the “GAC Transaction Agreement”) contains a “go-shop” provision that allows
There can be no assurance that this “go-shop” provision will result in a superior proposal, and the Company does not intend to disclose developments with respect to the solicitation process unless and until the Company makes a determination requiring further disclosure.
Conference Call/Webcast Scheduled for
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
About
Non-GAAP Measurements
Management believes that certain non-GAAP financial measures may be useful in certain instances to provide additional meaningful comparisons between current results and results in prior operating periods.Management believes that organic net sales provide for a more complete understanding of underlying business trends of regional and segment performance by excluding the impact of currency exchange rate fluctuations and the impact of acquisitions.In addition, within this release, including the supplemental information attached hereto, reference is made to adjusted diluted EPS, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), and adjusted EBITDA margin.Adjusted EBITDA is a metric used by management to evaluate segment performance and frequently used by the financial community which provides insight into an organization’s operating trends and facilitates comparisons between peer companies, since interest, taxes, depreciation and amortization can differ greatly between organizations as a result of differing capital structures and tax strategies. Adjusted EBITDA also is one of the measures used for determining the Company’s debt covenant.Adjusted EBITDA excludes certain items that are unusual in nature or not comparable from period to period.Adjusted EBITDA margin reflects adjusted EBITDA as a percentage of net sales of the Company.Organic adjusted EBITDA excludes the impact of currency exchange rate fluctuations and acquisitions. The Company’s management uses adjusted diluted EPS as one means of analyzing the Company’s current and future financial performance and identifying trends in its financial condition and results of operations.Management believes that adjusted diluted EPS is a useful measure for providing further insight into our operating performance because it eliminates the effects of certain items that are not comparable from one period to the next.An income tax adjustment is included in adjusted diluted EPS to exclude the impact of the valuation allowance against deferred taxes and other tax-related items in order to reflect a normalized ongoing effective tax rate.The Company’s management believes that adjusted free cash flow is useful to both management and investors in their analysis of the Company’s ability to service and repay its debt and meet its working capital requirements.Adjusted free cash flow should not be considered in isolation or as a substitute for pretax income, net income, net cash from operating activities or other statement of income or cash flow statement data prepared in accordance with GAAP or as a measure of profitability or liquidity.In addition, the calculation of adjusted free cash flow does not reflect cash used to service debt and therefore, does not reflect funds available for investment or discretionary uses.The Company provides this information to investors to assist in comparisons of past, present and future operating results and to assist in highlighting the results of on-going operations.While the Company’s management believes that non-GAAP measurements are useful supplemental information, such adjusted results are not intended to replace the Company’s GAAP financial results and should be read in conjunction with those GAAP results.Other Supplemental Information has been provided to demonstrate reconciliation of non-GAAP measurements discussed above to most relevant GAAP financial measurements.
Forward-Looking Statements
Certain matters discussed in this news release and other oral and written statements by representatives of the Company regarding matters such as statements under “Fiscal 2019 Outlook” and other statements regarding the Company’s ability to meet its expectations for its fiscal 2019 (including expectations regarding capital expenditures and its ability to increase its net sales, free cash flow and adjusted EBITDA) may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We have tried, whenever possible, to identify these statements by using words like “future,” “anticipate”, “intend,” “plan,” “estimate,” “believe,” “belief,” “expect,” “project,” “forecast,” “could,” “would,” “should,” “will,” “may,” and similar expressions of future intent or the negative of such terms. These statements are subject to a number of risks and uncertainties that could cause results to differ materially from those anticipated as of the date of this release.Actual results may differ materially as a result of(1) the impact of our indebtedness on our business, financial condition and results of operations; (2) the impact of restrictions in our debt instruments on our ability to operate our business, finance our capital needs or pursue or expand business strategies; (3) any failure to comply with financial covenants and other provisions and restrictions of our debt instruments; (4) the extent of success of the Company’s revised business strategy and the Company’s ability to execute and realize on the expected benefits of such strategy; (5) the impact of actions taken by significant stockholders; (6) the impact of fluctuations in commodity prices, costs or availability of raw materials or terms and conditions available from suppliers, including suppliers’ willingness to advance credit; (7) interest rate and exchange rate fluctuations; (8) the loss of significant reduction in, or dependence upon, sales to any significant retail customer(s); (9) competitive promotional activity or spending by competitors, or price reductions by competitors; (10) the introduction of new product features or technological developments by competitors and/or the development of new competitors or competitive brands; (11) the effects of general economic conditions, including inflation, recession or fears of a recession, depression or fears of a depression, labor costs and stock market volatility or changes in trade, tariff, monetary or fiscal policies in the countries where we do business; (12) changes in consumer spending preferences and demand for our products; (13) our ability to develop and successfully introduce new products, protect our intellectual property and avoid infringing the intellectual property of third parties; (14) our ability to successfully implement, achieve and sustain manufacturing and distribution cost efficiencies and improvements, and fully realize anticipated cost savings; (15) the seasonal nature of sales of certain of our products; (16) the effects of climate change and unusual weather activity; (17) the cost and effect of unanticipated legal, tax or regulatory proceedings or new laws or regulations (including environmental, public health and consumer protection regulations); (18) public perception regarding the safety of products that we manufacture and sell, including the potential for environmental liabilities, product liability claims, litigation and other claims related to products manufactured by us and third parties; (19) the impact of pending or threatened litigation; (20) the impact of cybersecurity breaches or our actual or perceived failure to protect company and personal data; (21) changes in accounting policies applicable to our business; (22) our ability to utilize net operating loss carry-forwards to offset tax liabilities from future taxable income; (23) government regulations; (24) the impact of expenses resulting from the implementation of new business strategies, divestitures or current and proposed restructuring activities; (25) our inability to successfully integrate and operate new acquisitions at the level of financial performance anticipate; (26) the unanticipated loss of key members of senior management; (27) the effects of political or economic conditions, terrorist attacks, acts of war or other unrest in international markets; (28) the Company’s ability to consummate its pending divestitures on the expected terms and within the anticipated time period, or at all, which is dependent on the parties’ ability to satisfy certain closing conditions, including receipt of regulatory approvals, and our ability to realize the expected benefits of such transactions and to successfully separate such businesses; (29) the Company’s ability to realize the expected benefits from the merger with HRG; and (30) the other risk factors set forth in the securities filings of
SPECTRUM BRANDS HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) |
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Three Month Periods Ended | Year Ended | |||||||||||||||
(in millions, except per share amounts) | Sept. 30, 2018 | Sept. 30, 2017 | Sept. 30, 2018 | Sept. 30, 2017 | ||||||||||||
Net sales | $ | 787.8 | $ | 787.8 | $ | 3,145.9 | $ | 3,009.5 | ||||||||
Investment income | — | — | — | 1.1 | ||||||||||||
Revenue | 787.8 | 787.8 | 3,145.9 | 3,010.6 | ||||||||||||
Cost of goods sold | 495.0 | 476.2 | 1,979.5 | 1,815.4 | ||||||||||||
Restructuring and related charges | 2.9 | 1.7 | 12.8 | 18.1 | ||||||||||||
Gross profit | 289.9 | 309.9 | 1,153.6 | 1,177.1 | ||||||||||||
Selling | 128.5 | 119.9 | 492.3 | 473.8 | ||||||||||||
General and administrative | 97.0 | 90.2 | 323.9 | 318.9 | ||||||||||||
Research and development | 7.2 | 6.3 | 28.3 | 27.2 | ||||||||||||
Acquisition and integration related charges | 2.3 | 4.0 | 14.3 | 15.6 | ||||||||||||
Restructuring and related charges | 20.9 | 27.4 | 80.0 | 42.3 | ||||||||||||
Write-off from impairment of goodwill | 92.5 | — | 92.5 | — | ||||||||||||
Write-off from impairment of intangible assets | 20.3 | 16.3 | 20.3 | 16.3 | ||||||||||||
Total operating expenses | 368.7 | 264.1 | 1,051.6 | 894.1 | ||||||||||||
Operating (loss) income | (78.8) | 45.8 | 102.0 | 283.0 | ||||||||||||
Interest expense | 58.0 | 77.5 | 264.6 | 309.9 | ||||||||||||
Other non-operating (income) expense, net | (1.7) | 2.5 | (6.3) | 4.2 | ||||||||||||
Loss from continuing operations before income taxes | (135.1) | (34.2) | (156.3) | (31.1) | ||||||||||||
Income tax expense (benefit) | 16.6 | (11.0) | (460.7) | 38.1 | ||||||||||||
Net income (loss) from continuing operations | (151.7) | (23.2) | 304.4 | (69.2) | ||||||||||||
Income from discontinued operations, net of tax | 35.5 | 47.2 | 567.6 | 342.4 | ||||||||||||
Net (loss) income | (116.2) | 24.0 | 872.0 | 273.2 | ||||||||||||
Net (loss) income attributable to non-controlling interest | (0.4) | 50.2 | 103.7 | 167.2 | ||||||||||||
Net (loss) income attributable to controlling interest | $ | (115.8) | $ | (26.2) | $ | 768.3 | $ | 106.0 | ||||||||
Amounts attributable to controlling interest | ||||||||||||||||
Net (loss) income from continuing operations attributable to controlling interest | $ | (150.3) | $ | (32.5) | $ | 230.1 | $ | (121.1) | ||||||||
Net income from discontinued operations attributable to controlling interest | 34.5 | 6.3 | 538.2 | 227.1 | ||||||||||||
Net income attributable to controlling interest | $ | (115.8) | $ | (26.2) | $ | 768.3 | $ | 106.0 | ||||||||
Earnings Per Share | ||||||||||||||||
Basic earnings per share from continuing operations | $ | (3.00) | $ | (1.01) | $ | 6.23 | $ | (3.75) | ||||||||
Basic earnings per share from discontinued operations | 0.69 | 0.20 | 14.56 | 7.04 | ||||||||||||
Basic earnings per share | $ | (2.31) | $ | (0.81) | $ | 20.79 | $ | 3.29 | ||||||||
Diluted earnings per share from continuing operations | $ | (3.00) | $ | (1.01) | $ | 6.21 | $ | (3.75) | ||||||||
Diluted earnings per share from discontinued operations | 0.69 | 0.20 | 14.53 | 7.04 | ||||||||||||
Diluted earnings per share | $ | (2.31) | $ | (0.81) | $ | 20.74 | $ | 3.29 | ||||||||
Weighted Average Shares Outstanding | ||||||||||||||||
Basic | 50.0 | 32.3 | 36.9 | 32.2 | ||||||||||||
Diluted | 50.0 | 32.3 | 37.0 | 32.2 | ||||||||||||
SPECTRUM BRANDS HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited) |
||||||||
(in millions) | Sept. 30, 2018 | Sept. 30, 2017 | ||||||
Cash flows from operating activities | ||||||||
Net income | $ | 872.0 | $ | 273.2 | ||||
Income from discontinued operations, net of tax | 567.6 | 342.4 | ||||||
Net income (loss) from continuing operations | 304.4 | (69.2) | ||||||
Adjustments to reconcile net income to net cash from operating activities: | ||||||||
Depreciation and amortization | 131.7 | 132.2 | ||||||
Share based compensation | 11.8 | 52.9 | ||||||
Write-off from impairment of goodwill | 92.5 | — | ||||||
Write-off from impairment of intangible assets | 20.3 | 16.3 | ||||||
Purchase accounting inventory adjustment | 0.8 | 3.3 | ||||||
Pet safety recall inventory write-off | 4.1 | 15.0 | ||||||
Amortization of debt issuance costs and debt discount | 19.6 | 17.3 | ||||||
Write-off of unamortized discount and debt issuance costs | — | 2.5 | ||||||
Dividends from subsidiaries classified as discontinued operations | 3.1 | 12.2 | ||||||
Deferred tax (benefit) expense | (539.0) | 21.9 | ||||||
Net changes in operating assets and liabilities | 24.6 | (49.3) | ||||||
Net cash provided by operating activities from continuing operations | 73.9 | 155.1 | ||||||
Net cash provided by operating activities from discontinued operations | 269.2 | 685.0 | ||||||
Net cash provided by operating activities | 343.1 | 840.1 | ||||||
Cash flows from investing activities | ||||||||
Purchases of property, plant and equipment | (64.7) | (77.8) | ||||||
Proceeds from sales of property, plant and equipment | 2.8 | 3.9 | ||||||
Business acquisitions, net of cash acquired | — | (304.7) | ||||||
Proceeds from sale of HRG Insurance Operations | 1,546.8 | — | ||||||
Net asset-based loan repayments | — | 30.9 | ||||||
Other investing activities, net | (0.5) | (1.5) | ||||||
Net cash provided (used) by investing activities from continuing operations | 1,484.4 | (349.2) | ||||||
Net cash used by investing activities from discontinued operations | (211.6) | (1,253.2) | ||||||
Net cash provided (used) by investing activities | 1,272.8 | (1,602.4) | ||||||
Cash flows from financing activities | ||||||||
Proceeds from issuance of debt | 19.6 | 315.6 | ||||||
Payment of debt | (1,066.0) | (251.9) | ||||||
Payment of debt issuance costs | (0.4) | (7.0) | ||||||
Purchase of subsidiary stock, net | (288.0) | (265.0) | ||||||
Dividends paid to shareholders | (22.4) | — | ||||||
Dividends paid by subsidiary to non-controlling interest | (28.6) | (39.9) | ||||||
Share based award tax withholding payments, net of proceeds upon vesting | (24.3) | (40.8) | ||||||
Other financing activities, net | 20.7 | 6.5 | ||||||
Net cash used by financing activities from continuing operations | (1,389.4) | (282.5) | ||||||
Net cash provided by financing activities from discontinued operations | 100.6 | 865.5 | ||||||
Net cash (used) provided by financing activities | (1,288.8) | 583.0 | ||||||
Effect of exchange rate changes on cash and cash equivalents on Venezuela devaluation | — | (0.4) | ||||||
Effect of exchange rate changes on cash and cash equivalents | (7.0) | 3.1 | ||||||
Net change in cash and cash equivalents | 320.1 | (176.6) | ||||||
Net change in cash and cash equivalents in discontinued operations | 37.7 | 18.5 | ||||||
Net change in cash and cash equivalents in continuing operations | 282.4 | (195.1) | ||||||
Cash and cash equivalents, beginning of period | 270.1 | 465.2 | ||||||
Cash and cash equivalents, end of period | $ | 552.5 | $ | 270.1 | ||||
SPECTRUM BRANDS HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited) |
||||||||
(in millions) | 2018 | 2017 | ||||||
Assets | ||||||||
Cash and cash equivalents | $ | 552.5 | $ | 270.1 | ||||
Trade receivables, net | 254.2 | 266.0 | ||||||
Other receivables | 35.7 | 19.7 | ||||||
Inventories | 503.4 | 496.3 | ||||||
Prepaid expenses and other current assets | 54.7 | 54.8 | ||||||
Current assets of business held for sale | 1,958.2 | 28,929.2 | ||||||
Total current assets | 3,358.7 | 30,036.1 | ||||||
Property, plant and equipment, net | 494.9 | 503.9 | ||||||
Deferred charges and other | 184.0 | 43.7 | ||||||
Goodwill | 2,178.5 | 2,277.1 | ||||||
Intangible assets, net | 1,531.6 | 1,612.0 | ||||||
Noncurrent assets of business held for sale | — | 1,376.9 | ||||||
Total assets | $ | 7,747.7 | $ | 35,849.7 | ||||
Liabilities and Shareholders' Equity | ||||||||
Current portion of long-term debt | $ | 21.2 | $ | 161.4 | ||||
Accounts payable | 436.1 | 373.1 | ||||||
Accrued wages and salaries | 45.7 | 55.4 | ||||||
Accrued interest | 65.0 | 78.0 | ||||||
Other current liabilities | 125.3 | 125.8 | ||||||
Current liabilities of business held for sale | 656.9 | 26,851.3 | ||||||
Total current liabilities | 1,350.2 | 27,645.0 | ||||||
Long-term debt, net of current portion | 4,651.3 | 5,543.7 | ||||||
Deferred income taxes | 35.0 | 493.2 | ||||||
Other long-term liabilities | 121.6 | 64.8 | ||||||
Noncurrent liabilities of business held for sale | — | 156.1 | ||||||
Total liabilities | 6,158.1 | 33,902.8 | ||||||
Shareholders' equity | 1,581.3 | 758.0 | ||||||
Noncontrolling interest | 8.3 | 1,188.9 | ||||||
Total equity | 1,589.6 | 1,946.9 | ||||||
Total liabilities and equity | $ | 7,747.7 | $ | 35,849.7 | ||||
SPECTRUM BRANDS HOLDINGS, INC. |
OTHER SUPPLEMENTAL INFORMATION (Unaudited) |
ADJUSTED DILUTED EPS
We define adjusted diluted EPS as reported diluted EPS excluding the effect of one-time, non-recurring activity and volatility associated with our income tax expense. The Company believes that adjusted diluted EPS provides further insight and comparability in operating performance as it eliminates the effects of certain items that are not comparable from one period to the next. Adjustments to diluted EPS include the following:
- proforma adjustment associated with the per share impact from the HRG Merger, including the change in weighted average shares from the incremental shares issued to execute the HRG Merger share exchange with Spectrum’s non-controlling interest, plus the inclusion of income attributable to non-controlling interest in Spectrum recognized by
HRG Group, Inc. (“HRG”) prior to the consolidation of the shareholder groups and recognition of Spectrum as a wholly-owned business after completion of the HRG Merger; - acquisition and integration costs that consist of transaction costs from nonrecurring acquisition transactions during the period and/or subsequent integration related project costs directly associated with the acquired business;
- restructuring and related costs, which consist of project costs associated with restructuring initiatives across segments;
- purchase accounting inventory adjustments recognized in earnings subsequent to an acquisition;
- non-cash asset impairments or write-offs of intangible assets, goodwill, or property plant and equipment realized;
- estimated costs from a non-recurring voluntary recall of rawhide product by the PET segment;
- transaction costs associated with the HRG Merger;
- non-recurring HRG net operating costs that consist of redundant and duplicative costs from the legacy HRG corporate operations that are eliminated post HRG Merger transaction date of
July 13, 2018 , including compensation and benefits, directors fees, professional fees, insurance, public company costs, among others; also including other non-recurring interest income, a one-time fee for the termination of the HRG New York corporate home office lease and the one-time termination fee of HRG legacy pension plan. - net operating costs associated with Salus, as it is not reflective of the continuing operations of the Spectrum commercial product business and its reporting segments;
- interest costs associated with HRG-originated debt; and
- other.
During the three month period and year ended
Income tax adjustment to diluted EPS is to exclude the impact of adjusting the valuation allowance against deferred taxes and other tax related items in order to reflect a normalized ongoing effective tax rate, net of adjustments made to diluted EPS. For the three month and fiscal year ended
SPECTRUM BRANDS HOLDINGS, INC. |
OTHER SUPPLEMENTAL INFORMATION (Unaudited) |
ADJUSTED DILUTED EPS (continued)
The following is a reconciliation of reported diluted EPS to adjusted diluted EPS for the three month period and year ended
Three Month Period Ended Sept. 30, 2018 | Three Month Period Ended Sept. 30, 2017 | |||||||||||||||||||||||
Cont. Ops | Disc. Ops | Total | Cont. Ops | Disc. Ops | Total | |||||||||||||||||||
Diluted earnings per share, as reported | $ | (3.00) | $ | 0.69 | $ | (2.31) | $ | (1.01) | $ | 0.20 | $ | (0.81) | ||||||||||||
Adjustments: | ||||||||||||||||||||||||
HRG Merger share exchange proforma adjustment | 0.17 | (0.03) | 0.14 | 0.58 | 0.45 | 1.03 | ||||||||||||||||||
Acquisition and integration related charges | 0.04 | 0.53 | 0.57 | 0.07 | 0.03 | 0.10 | ||||||||||||||||||
Restructuring and related charges | 0.44 | — | 0.44 | 0.52 | 0.01 | 0.53 | ||||||||||||||||||
Purchase accounting inventory adjustment | — | — | — | 0.04 | — | 0.04 | ||||||||||||||||||
Pet safety recall | 0.05 | — | 0.05 | 0.19 | — | 0.19 | ||||||||||||||||||
Write off from impairment of goodwill | 1.73 | — | 1.73 | — | — | — | ||||||||||||||||||
Write off from impairment of intangible assets | 0.38 | — | 0.38 | 0.29 | — | 0.29 | ||||||||||||||||||
HRG merger related transaction costs | 0.44 | — | 0.44 | 0.06 | — | 0.06 | ||||||||||||||||||
Non-recurring HRG net operating costs | 0.11 | — | 0.11 | 0.08 | — | 0.08 | ||||||||||||||||||
Salus | — | — | — | (0.02) | — | (0.02) | ||||||||||||||||||
Interest cost on HRG debt | 0.36 | — | 0.36 | 0.68 | — | 0.68 | ||||||||||||||||||
Other | 0.02 | — | 0.02 | 0.01 | — | 0.01 | ||||||||||||||||||
Income tax adjustment | 0.05 | (0.08) | (0.42) | (0.64) | (0.44) | (1.08) | ||||||||||||||||||
Total Adjustments | 3.79 | 0.42 | 3.82 | 1.86 | 0.05 | 1.91 | ||||||||||||||||||
Diluted earnings per share, as adjusted | $ | 0.79 | $ | 1.11 | $ | 1.51 | $ | 0.85 | $ | 0.25 | $ | 1.10 | ||||||||||||
Year Ended Sept. 30, 2018 | Year Ended Sept. 30, 2017 | |||||||||||||||||||||||
Cont. Ops | Disc. Ops | Total | Cont. Ops | Disc. Ops | Total | |||||||||||||||||||
Diluted earnings per share, as reported | $ | 6.21 | $ | 14.53 | $ | 20.74 | $ | (3.75) | $ | 7.04 | $ | 3.29 | ||||||||||||
Adjustments: | ||||||||||||||||||||||||
HRG Merger share exchange proforma adjustment | (0.61) | (4.15) | (4.76) | 2.52 | (1.77) | 0.75 | ||||||||||||||||||
Acquisition and integration related charges | 0.26 | 1.43 | 1.69 | 0.28 | 0.09 | 0.37 | ||||||||||||||||||
Restructuring and related charges | 1.71 | 0.03 | 1.74 | 1.07 | 0.04 | 1.11 | ||||||||||||||||||
Debt refinancing costs | — | — | — | 0.15 | — | 0.15 | ||||||||||||||||||
Purchase accounting inventory adjustment | 0.02 | — | 0.02 | 0.06 | — | 0.06 | ||||||||||||||||||
Pet safety recall | 0.35 | — | 0.35 | 0.63 | — | 0.63 | ||||||||||||||||||
Write off from impairment of goodwill | 1.71 | — | 1.71 | — | — | — | ||||||||||||||||||
Write off from impairment of intangible assets | 0.37 | — | 0.37 | 0.29 | — | 0.29 | ||||||||||||||||||
HRG merger related transaction costs | 0.85 | — | 0.85 | 0.14 | — | 0.14 | ||||||||||||||||||
Non-recurring HRG net operating costs | 0.35 | — | 0.35 | 0.67 | — | 0.67 | ||||||||||||||||||
Salus | 0.02 | — | 0.02 | 0.07 | — | 0.07 | ||||||||||||||||||
Interest cost on HRG debt | 1.88 | — | 1.88 | 2.63 | — | 2.63 | ||||||||||||||||||
Other | 0.08 | — | 0.08 | 0.01 | — | 0.01 | ||||||||||||||||||
Income tax adjustment | (9.66) | (2.65) | (12.31) | (1.23) | (0.72) | (1.95) | ||||||||||||||||||
Total Adjustments | (2.67) | (5.34) | (8.01) | 7.29 | (2.36) | 4.93 | ||||||||||||||||||
Diluted earnings per share, as adjusted | $ | 3.54 | $ | 9.19 | $ | 12.73 | $ | 3.54 | $ | 4.68 | $ | 8.22 | ||||||||||||
The weighted average shares and adjusted earnings per share data are adjusted for all periods to reflect the reverse stock split and share exchange because of the HRG Merger, which closed on
(in millions, except per share amounts) |
Three Month Period |
Year Ended Sept. 30, 2017 |
||||||
Spectrum weighted average shares | 57.8 | 58.6 | ||||||
Spectrum weighted average shares owned by HRG | 34.3 | 34.3 | ||||||
Spectrum weighted average shares owned by third parties (A) | 23.4 | 24.3 | ||||||
HRG weighted average shares | 200.4 | 200.0 | ||||||
HRG share conversion at 1 to 0.1613 (B) | 32.3 | 32.2 | ||||||
Total weighted average shares (A + B) | 55.8 | 56.6 | ||||||
SPECTRUM BRANDS HOLDINGS, INC. |
OTHER SUPPLEMENTAL INFORMATION (Unaudited) |
ADJUSTED DILUTED EPS (continued)
For the three month period and year ended
(in millions, except per share amounts) |
Three Month Period |
Year Ended Sept. 30, 2017 |
||||||
Spectrum weighted average shares | 50.2 | 37.0 | ||||||
Dilutive impact from HRG Merger share exchange | 3.4 | 17.1 | ||||||
Spectrum weighted average shares owned by third parties (A) | 53.5 | 53.5 | ||||||
The following summarizes acquisition and integration related charges for the three month period and year ended
Three Month Period Ended Sept. 30, 2018 | Three Month Period Ended Sept. 30, 2017 | |||||||||||||||||||||||
(in millions) | Cont. Ops | Disc. Ops | Total | Cont. Ops | Disc. Ops | Total | ||||||||||||||||||
HHI Business | $ | 0.4 | $ | — | $ | 0.4 | $ | (0.1) | $ | 0.3 | $ | 0.2 | ||||||||||||
PetMatrix | 0.4 | — | 0.4 | 2.5 | — | 2.5 | ||||||||||||||||||
Armored AutoGroup | 0.3 | — | 0.3 | 0.2 | — | 0.2 | ||||||||||||||||||
Glofish | 0.1 | — | 0.1 | 0.9 | — | 0.9 | ||||||||||||||||||
Other | 1.1 | 28.1 | 29.2 | 0.5 | 1.6 | 2.1 | ||||||||||||||||||
Total acquisition and integration related charges | $ | 2.3 | $ | 28.1 | $ | 30.4 | $ | 4.0 | $ | 1.9 | $ | 5.9 | ||||||||||||
Year Ended Sept. 30, 2018 | Year Ended Sept. 30, 2017 | |||||||||||||||||||||||
(in millions) | Cont. Ops | Disc. Ops | Total | Cont. Ops | Disc. Ops | Total | ||||||||||||||||||
HHI Business | $ | 6.0 | $ | — | $ | 6.0 | $ | 5.6 | $ | 0.3 | $ | 5.9 | ||||||||||||
PetMatrix | 4.9 | — | 4.9 | 4.5 | — | 4.5 | ||||||||||||||||||
Armored AutoGroup | 0.9 | — | 0.9 | 2.3 | 0.9 | 3.2 | ||||||||||||||||||
Glofish | 0.2 | — | 0.2 | 1.0 | — | 1.0 | ||||||||||||||||||
Other | 2.3 | 77.5 | 79.8 | 2.2 | 4.1 | 6.3 | ||||||||||||||||||
Total acquisition and integration related charges | $ | 14.3 | $ | 77.5 | $ | 91.8 | $ | 15.6 | $ | 5.3 | $ | 20.9 | ||||||||||||
The following summarizes restructuring and related charges for the three month period and year ended
Three Month Period Ended Sept. 30, 2018 | Three Month Period Ended Sept. 30, 2017 | |||||||||||||||||||||||
(in millions) | Cont. Ops | Disc. Ops | Total | Cont. Ops | Disc. Ops | Total | ||||||||||||||||||
HHI distribution center consolidation | $ | 11.6 | $ | — | $ | 11.6 | $ | 18.4 | $ | — | $ | 18.4 | ||||||||||||
GAC business rationalization initiative | 3.6 | — | 3.6 | 4.4 | — | 4.4 | ||||||||||||||||||
PET rightsizing initiative | 5.1 | — | 5.1 | 5.4 | — | 5.4 | ||||||||||||||||||
Other restructuring activities | 3.5 | 0.2 | 3.7 | 0.9 | 0.7 | 1.6 | ||||||||||||||||||
Total restructuring and related charges | $ | 23.8 | $ | 0.2 | $ | 24.0 | $ | 29.1 | $ | 0.7 | $ | 29.8 | ||||||||||||
Year Ended Sept. 30, 2018 | Year Ended Sept. 30, 2017 | |||||||||||||||||||||||
(in millions) | Cont. Ops | Disc. Ops | Total | Cont. Ops | Disc. Ops | Total | ||||||||||||||||||
HHI distribution center consolidation | $ | 52.0 | $ | — | $ | 52.0 | $ | 27.4 | $ | — | $ | 27.4 | ||||||||||||
GAC business rationalization initiative | 17.1 | — | 17.1 | 24.2 | — | 24.2 | ||||||||||||||||||
PET rightsizing initiative | 12.1 | — | 12.1 | 8.2 | — | 8.2 | ||||||||||||||||||
Other restructuring activities | 11.6 | 1.6 | 13.2 | 0.6 | 2.1 | 2.7 | ||||||||||||||||||
Total restructuring and related charges | $ | 92.8 | $ | 1.6 | $ | 94.4 | $ | 60.4 | $ | 2.1 | $ | 62.5 | ||||||||||||
SPECTRUM BRANDS HOLDINGS, INC. |
OTHER SUPPLEMENTAL INFORMATION (Unaudited) |
NET SALES AND ORGANIC NET SALES
The following is a summary of net sales by segment for the three month and fiscal year ended
Three Month Periods Ended Sept. 30, | Year Ended Sept. 30, | |||||||||||||||||||||||||||||
(in millions, except %) | 2018 | 2017 | Variance | 2018 | 2017 | Variance | ||||||||||||||||||||||||
HHI | $ | 360.9 | $ | 348.9 | 12.0 | 3.4% | $ | 1,377.7 | $ | 1,276.1 | 101.6 | 8.0% | ||||||||||||||||||
PET | 212.1 | 217.2 | (5.1) | (2.3%) | 820.5 | 793.2 | 27.3 | 3.4% | ||||||||||||||||||||||
H&G | 111.7 | 119.1 | (7.4) | (6.2%) | 482.2 | 493.3 | (11.1) | (2.3%) | ||||||||||||||||||||||
GAC | 103.1 | 102.6 | 0.5 | 0.5% | 465.5 | 446.9 | 18.6 | 4.2% | ||||||||||||||||||||||
Total | $ | 787.8 | $ | 787.8 | 0.0 | 0.0% | $ | 3,145.9 | $ | 3,009.5 | 136.4 | 4.5% | ||||||||||||||||||
We define organic net sales as reported net sales excluding the effect of changes in foreign currency exchange rates and acquisitions. We believe this non-GAAP measure provides useful information to investors because it reflects regional and operating segment performance from our activities without the effect of changes in currency exchange rate and/or acquisitions. We use organic net sales as one measure to monitor and evaluate our regional and segment performance. Organic growth is calculated by comparing organic net sales to reported net sales in the prior year. The effect of changes in currency exchange rates is determined by translating the period’s net sales using the currency exchange rates that were in effect during the prior period. Net sales are attributed to the geographic regions based on the country of destination. We exclude net sales from acquired businesses in the current year for which there are no comparable sales in the prior period. The following is a reconciliation of reported sales to organic sales for the three month and fiscal year ended
Sept. 30, 2018 | ||||||||||||||||||||||||
Three month periods ended (in millions, except %) |
Net Sales |
Effect of |
Net Sales |
Effect of |
Organic |
Net Sales |
Variance | |||||||||||||||||
HHI | $ | 360.9 | $ | 1.6 | $ | 362.5 | $ | — | $ | 362.5 | $ | 348.9 | $ | 13.6 | 3.9% | |||||||||
PET | 212.1 | 0.9 | 213.0 | — | 213.0 | 217.2 | (4.2) | (1.9%) | ||||||||||||||||
H&G | 111.7 | — | 111.7 | — | 111.7 | 119.1 | (7.4) | (6.2%) | ||||||||||||||||
GAC | 103.1 | 0.6 | 103.7 | — | 103.7 | 102.6 | 1.1 | 1.1% | ||||||||||||||||
Total | $ | 787.8 | $ | 3.1 | $ | 790.9 | $ | — | $ | 790.9 | $ | 787.8 | 3.1 | 0.4% | ||||||||||
Sept. 30, 2018 | ||||||||||||||||||||||||
Year ended (in millions, except %) |
Net Sales |
Effect of |
Net Sales |
Effect of |
Organic |
Net Sales Sept. 30, 2017 |
Variance | |||||||||||||||||
HHI | $ | 1,377.7 | $ | (4.3) | $ | 1,373.4 | $ | — | $ | 1,373.4 | $ | 1,276.1 | $ | 97.3 | 7.6% | |||||||||
PET | 820.5 | (15.4) | 805.1 | (64.5) | 740.6 | 793.2 | (52.6) | (6.6%) | ||||||||||||||||
H&G | 482.2 | — | 482.2 | — | 482.2 | 493.3 | (11.1) | (2.3%) | ||||||||||||||||
GAC | 465.5 | (2.0) | 463.5 | — | 463.5 | 446.9 | 16.6 | 3.7% | ||||||||||||||||
Total | $ | 3,145.9 | $ | (21.7) | $ | 3,124.2 | $ | (64.5) | $ | 3,059.7 | $ | 3,009.5 | 50.2 | 1.7% | ||||||||||
SPECTRUM BRANDS HOLDINGS, INC. |
OTHER SUPPLEMENTAL INFORMATION (Unaudited) |
ADJUSTED EBITDA, ADJUSTED EBITDA MARGIN, AND ORGANIC ADJUSTED EBITDA
Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, Amortization) is a non-GAAP metric used by management that we believe provides useful information to investors because it reflects ongoing operating performance and trends of our segments excluding certain non-cash based expenses and/or non-recurring items during each of the comparable periods and facilitates comparisons between peer companies since interest, taxes, depreciation and amortization can differ greatly between organizations as a result of differing capital structures and tax strategies. Further, adjusted EBITDA is a measure used for determining the Company’s debt covenant. EBITDA is calculated by excluding the Company’s income tax expense, interest expense, depreciation expense and amortization expense (from intangible assets) from net income. Adjusted EBITDA further excludes the following:
- share based compensation expense as it is a non-cash based compensation cost, including HRG share based compensation expense from stock based awards that became fully vested as of the HRG Merger transaction date of
July 13, 2018 ; - acquisition and integration costs that consist of transaction costs from acquisition transactions during the period, or subsequent integration related project costs directly associated with the acquired business as previously summarized;
- restructuring and related costs, which consist of project costs associated with restructuring initiatives as previously summarized;
- non-cash purchase accounting inventory adjustments recognized in earnings subsequent to an acquisition;
- non-cash asset impairments or write-offs of intangible assets, goodwill, or property plant and equipment realized;
- estimated costs for a non-recurring voluntary recall of rawhide product by the PET segment;
- transaction costs associated with the HRG Merger;
- non-recurring HRG net operating costs that consist of redundant and duplicative costs from the legacy HRG corporate operations that are eliminated post HRG Merger transaction date of
July 13, 2018 , including compensation and benefits, directors fees, professional fees, insurance, public company costs, among others; also including other non-recurring interest income, a one-time fee for the termination of the HRG New York corporate home office lease and the one-time termination fee of HRG legacy pension plan; - net operating costs associated with Salus, as it is not reflective of the continuing operations of the Spectrum commercial products business and its reporting segments;
- other.
During the fiscal year ended
Adjusted EBITDA margin is calculated as adjusted EBITDA as a percentage of reported net sales for the respective period. Organic adjusted EBITDA is calculated by excluding the effect of changes in currency exchange rates and adjusted EBITDA contributed from acquired businesses in the current year.
SPECTRUM BRANDS HOLDINGS, INC. |
OTHER SUPPLEMENTAL INFORMATION (Unaudited) |
ADJUSTED EBITDA, ADJUSTED EBITDA MARGIN, AND ORGANIC ADJUSTED EBITDA (continued)
The following is a reconciliation of reported net income to adjusted EBITDA for the three month periods ended
Three month period ended Sept. 30, 2018 (in millions, except %) | HHI | PET | H&G | GAC | Corporate | Consolidated | ||||||||||||||||||
Net income (loss) from continuing operations | $ | 54.1 | $ | (7.6) | $ | 14.5 | $ | (86.3) | $ | (126.4) | $ | (151.7) | ||||||||||||
Income tax benefit | — | — | — | — | 16.6 | 16.6 | ||||||||||||||||||
Interest expense | — | — | — | — | 58.0 | 58.0 | ||||||||||||||||||
Depreciation and amortization | 8.6 | 10.6 | 4.8 | 4.2 | 4.1 | 32.3 | ||||||||||||||||||
EBITDA | 62.7 | 3.0 | 19.3 | (82.1) | (47.7) | (44.8) | ||||||||||||||||||
Share based compensation | — | — | — | — | 5.4 | 5.4 | ||||||||||||||||||
Acquisition and integration related charges | 0.5 | 1.0 | — | 0.4 | 0.4 | 2.3 | ||||||||||||||||||
Restructuring and related charges | 12.0 | 5.1 | 0.5 | 3.8 | 2.5 | 23.9 | ||||||||||||||||||
Write-off from impairment of intangible assets | — | 20.3 | — | — | — | 20.3 | ||||||||||||||||||
Write-off from impairment of goodwill | — | — | — | 92.5 | — | 92.5 | ||||||||||||||||||
Pet safety recall | — | 2.6 | — | — | — | 2.6 | ||||||||||||||||||
Spectrum merger related transaction charges | — | — | — | — | 23.8 | 23.8 | ||||||||||||||||||
Non-recurring HRG operating costs and interest income | — | — | — | — | 7.0 | 7.0 | ||||||||||||||||||
Salus | — | — | — | — | (0.1) | (0.1) | ||||||||||||||||||
Other | — | — | — | — | 1.2 | 1.2 | ||||||||||||||||||
Adjusted EBITDA | $ | 75.2 | $ | 32.0 | $ | 19.8 | $ | 14.6 | $ | (7.5) | $ | 134.1 | ||||||||||||
Net Sales | $ | 360.9 | $ | 212.1 | $ | 111.7 | $ | 103.1 | $ | — | $ | 787.8 | ||||||||||||
Adjusted EBITDA Margin | 20.8% | 15.1% | 17.7% | 14.2% | — | 17.0% | ||||||||||||||||||
Three month period ended Sept. 30, 2017 (in millions, except %) | HHI | PET | H&G | GAC | Corporate | Consolidated | ||||||||||||||||||
Net income (loss) from continuing operations | $ | 47.3 | $ | (5.3) | $ | 26.0 | $ | 20.7 | $ | (111.9) | $ | (23.2) | ||||||||||||
Income tax expense | — | — | — | — | (11.0) | (11.0) | ||||||||||||||||||
Interest expense | — | — | — | — | 77.5 | 77.5 | ||||||||||||||||||
Depreciation and amortization | 10.3 | 11.5 | 5.2 | 7.2 | 3.7 | 37.9 | ||||||||||||||||||
EBITDA | 57.6 | 6.2 | 31.2 | 27.9 | (41.7) | 81.2 | ||||||||||||||||||
Share based compensation | — | — | — | — | 24.4 | 24.4 | ||||||||||||||||||
Acquisition and integration related charges | (0.1) | 3.7 | — | 0.2 | 0.2 | 4.0 | ||||||||||||||||||
Restructuring and related charges | 18.9 | 5.4 | — | 4.4 | 0.4 | 29.1 | ||||||||||||||||||
Write-off from impairment of intangible assets | — | 15.3 | 1.0 | — | — | 16.3 | ||||||||||||||||||
Inventory acquisition step-up | — | 2.5 | — | — | — | 2.5 | ||||||||||||||||||
Pet safety recall | — | 10.9 | — | — | — | 10.9 | ||||||||||||||||||
Venezuela devaluation | — | — | — | — | 0.4 | 0.4 | ||||||||||||||||||
Spectrum merger related transaction charges | — | — | — | — | 3.4 | 3.4 | ||||||||||||||||||
Non-recurring HRG operating costs and interest income | — | — | — | — | 3.3 | 3.3 | ||||||||||||||||||
Salus | — | — | — | — | (1.0) | (1.0) | ||||||||||||||||||
Adjusted EBITDA | $ | 76.4 | $ | 44.0 | $ | 32.2 | $ | 32.5 | $ | (10.6) | $ | 174.5 | ||||||||||||
Net Sales | $ | 348.9 | $ | 217.2 | $ | 119.1 | $ | 102.6 | $ | — | $ | 787.8 | ||||||||||||
Adjusted EBITDA Margin | 21.9% | 20.3% | 27.0% | 31.7% | — | 22.2% | ||||||||||||||||||
Organic Adjusted EBITDA (in millions, except %) | HHI | PET | H&G | GAC | Corporate | Consolidated | ||||||||||||||||||
Adjusted EBITDA - three month period ended Sept. 30, 2018 | $ | 75.2 | $ | 32.0 | $ | 19.8 | $ | 14.6 | $ | (7.5) | $ | 134.1 | ||||||||||||
Effect of change in foreign currency | (2.2) | 0.5 | (0.1) | 0.4 | (0.6) | (2.0) | ||||||||||||||||||
Net EBITDA excluding effect of changes in currency | 73.0 | 32.5 | 19.7 | 15.0 | (8.1) | 132.1 | ||||||||||||||||||
Effect of acquisitions | — | — | — | — | — | — | ||||||||||||||||||
Organic Adjusted EBITDA | 73.0 | 32.5 | 19.7 | 15.0 | (8.1) | 132.1 | ||||||||||||||||||
Adjusted EBITDA - three month period ended Sept. 30, 2017 | 76.4 | 44.0 | 32.2 | 32.5 | (10.6) | 174.5 | ||||||||||||||||||
Increase (Decrease) in Organic Adjusted EBITDA | $ | (3.4) | $ | (11.5) | $ | (12.5) | $ | (17.5) | $ | 2.5 | $ | (42.4) | ||||||||||||
Increase (Decrease) in Organic Adjusted EBITDA (%) | (4.5%) | (26.1%) | (38.8%) | (53.8%) | 23.6% | (24.3%) | ||||||||||||||||||
SPECTRUM BRANDS HOLDINGS, INC. |
OTHER SUPPLEMENTAL INFORMATION (Unaudited) |
ADJUSTED EBITDA, ADJUSTED EBITDA MARGIN, AND ORGANIC ADJUSTED EBITDA (continued)
The following is a reconciliation of reported net income to adjusted EBITDA for the years ended
Year Ended Sept. 30, 2018 (in millions, except %) | HHI | PET | H&G | GAC | Corporate | Consolidated | ||||||||||||||||||
Net income (loss) from continuing operations | $ | 155.9 | $ | 35.0 | $ | 87.9 | $ | (29.0) | $ | 54.6 | $ | 304.4 | ||||||||||||
Income tax benefit | — | — | — | — | (460.7) | (460.7) | ||||||||||||||||||
Interest expense | — | — | — | — | 264.6 | 264.6 | ||||||||||||||||||
Depreciation and amortization | 40.0 | 42.3 | 18.8 | 16.3 | 14.3 | 131.7 | ||||||||||||||||||
EBITDA | 195.9 | 77.3 | 106.7 | (12.7) | (127.2) | 240.0 | ||||||||||||||||||
Share based compensation | — | — | — | — | 11.8 | 11.8 | ||||||||||||||||||
Acquisition and integration related charges | 6.0 | 6.2 | — | 1.0 | 1.1 | 14.3 | ||||||||||||||||||
Restructuring and related charges | 52.8 | 13.2 | 0.8 | 18.5 | 7.5 | 92.8 | ||||||||||||||||||
Write-off from impairment of intangible assets | — | 20.3 | — | — | — | 20.3 | ||||||||||||||||||
Write-off from impairment of goodwill | — | — | — | 92.5 | — | 92.5 | ||||||||||||||||||
Inventory acquisition step-up | — | 0.8 | — | — | — | 0.8 | ||||||||||||||||||
Pet safety recall | — | 18.9 | — | — | — | 18.9 | ||||||||||||||||||
Spectrum merger related transaction charges | — | — | — | — | 45.9 | 45.9 | ||||||||||||||||||
Non-recurring HRG operating costs and interest income | — | — | — | — | 18.9 | 18.9 | ||||||||||||||||||
Salus | — | — | — | — | 1.1 | 1.1 | ||||||||||||||||||
Other | — | — | — | — | 4.6 | 4.6 | ||||||||||||||||||
Adjusted EBITDA | $ | 254.7 | $ | 136.7 | $ | 107.5 | $ | 99.3 | $ | (36.3) | $ | 561.9 | ||||||||||||
Net Sales | $ | 1,377.7 | $ | 820.5 | $ | 482.2 | $ | 465.5 | $ | — | $ | 3,145.9 | ||||||||||||
Adjusted EBITDA Margin | 18.5% | 16.7% | 22.3% | 21.3% | — | 17.9% | ||||||||||||||||||
Year Ended Sept. 30, 2017 (in millions, except %) | HHI | PET | H&G | GAC | Corporate | Consolidated | ||||||||||||||||||
Net income (loss) from continuing operations | $ | 184.0 | $ | 28.8 | $ | 114.4 | $ | 100.8 | $ | (497.2) | $ | (69.2) | ||||||||||||
Income tax expense | — | — | — | — | 38.1 | 38.1 | ||||||||||||||||||
Interest expense | — | — | — | — | 309.9 | 309.9 | ||||||||||||||||||
Depreciation and amortization | 38.3 | 43.1 | 17.6 | 21.1 | 12.1 | 132.2 | ||||||||||||||||||
EBITDA | 222.3 | 71.9 | 132.0 | 121.9 | (137.1) | 411.0 | ||||||||||||||||||
Share based compensation | — | — | — | — | 52.9 | 52.9 | ||||||||||||||||||
Acquisition and integration related charges | 5.5 | 7.3 | — | 2.3 | 0.5 | 15.6 | ||||||||||||||||||
Restructuring and related charges | 26.6 | 9.1 | — | 24.2 | 0.5 | 60.4 | ||||||||||||||||||
Write-off from impairment of intangible assets | — | 15.3 | 1.0 | — | — | 16.3 | ||||||||||||||||||
Inventory acquisition step-up | — | 3.3 | — | — | — | 3.3 | ||||||||||||||||||
Pet safety recall | — | 35.8 | — | — | — | 35.8 | ||||||||||||||||||
Venezuela devaluation | — | — | — | — | 0.4 | 0.4 | ||||||||||||||||||
Spectrum merger related transaction charges | — | — | — | — | 7.6 | 7.6 | ||||||||||||||||||
Non-recurring HRG operating costs and interest income | — | — | — | — | 31.9 | 31.9 | ||||||||||||||||||
Salus | — | — | — | — | 4.0 | 4.0 | ||||||||||||||||||
Adjusted EBITDA | $ | 254.4 | $ | 142.7 | $ | 133.0 | $ | 148.4 | $ | (39.3) | $ | 639.2 | ||||||||||||
Net Sales | $ | 1,276.1 | $ | 793.2 | $ | 493.3 | $ | 446.9 | $ | — | $ | 3,009.5 | ||||||||||||
Adjusted EBITDA Margin | 19.9% | 18.0% | 27.0% | 33.2% | — | 21.2% | ||||||||||||||||||
Organic Adjusted EBITDA (in millions, except %) | HHI | PET | H&G | GAC | Corporate | Consolidated | ||||||||||||||||||
Adjusted EBITDA - year ended Sept. 30, 2018 | $ | 254.7 | $ | 136.7 | $ | 107.5 | $ | 99.3 | $ | (36.3) | $ | 561.9 | ||||||||||||
Effect of change in foreign currency | (2.0) | — | (0.1) | 0.5 | 0.5 | (1.1) | ||||||||||||||||||
Net EBITDA excluding effect of changes in currency | 252.7 | 136.7 | 107.4 | 99.8 | (35.8) | 560.8 | ||||||||||||||||||
Effect of acquisitions | — | (22.8) | — | — | — | (22.8) | ||||||||||||||||||
Organic Adjusted EBITDA | 252.7 | 113.9 | 107.4 | 99.8 | (35.8) | 538.0 | ||||||||||||||||||
Adjusted EBITDA - year ended Sept. 30, 2017 | 254.4 | 142.7 | 133.0 | 148.4 | (39.3) | 639.2 | ||||||||||||||||||
Increase (Decrease) in Organic Adjusted EBITDA | $ | (1.7) | $ | (28.8) | $ | (25.6) | $ | (48.6) | $ | 3.5 | $ | (101.2) | ||||||||||||
Increase (Decrease) in Organic Adjusted EBITDA (%) | (0.7%) | (20.2%) | (19.2%) | (32.7%) | (8.9%) | (15.8%) | ||||||||||||||||||
SPECTRUM BRANDS HOLDINGS, INC. |
OTHER SUPPLEMENTAL INFORMATION (Unaudited) |
ADJUSTED FREE CASH FLOW
Our definition of adjusted free cash flow, which is a non-GAAP financial measure, takes into consideration capital investments required to maintain the operations of our businesses and execute our strategy. We believe adjusted free cash flow provides useful information to investors regarding our ability to generate cash from business operations that is available for acquisitions and other investments, service of debt principal, dividends and share repurchases and meet its working capital requirements. Our definition of adjusted free cash flow may be different from definitions used by other companies. We also use adjusted free cash flow, as defined, as one measure to monitor and evaluate performance. The following is a reconciliation of the Company’s adjusted free cash flow for the fiscal years ending
Sept. 30, 2018 | Sept. 30, 2017 | |||||||||||||||||||||||
(in millions) | Cont. Ops | Disc. Ops | Total | Cont. Ops | Disc. Ops | Total | ||||||||||||||||||
Net cash flow from operating activities | $ | 74 | $ | 269 | $ | 343 | $ | 155 | $ | 685 | $ | 840 | ||||||||||||
Operating cash flow provided by HRG discontinued operations | — | (97) | (97) | — | (361) | (361) | ||||||||||||||||||
Operating cash flow used by HRG corp & other operations | 138 | — | 138 | 186 | — | 186 | ||||||||||||||||||
GBA divestiture transaction costs | — | 49 | 49 | — | — | — | ||||||||||||||||||
HRG merger transaction costs | 39 | — | 39 | — | — | — | ||||||||||||||||||
Cash interest charges related to refinancing | — | — | — | 5 | — | 5 | ||||||||||||||||||
Stanley settlement payment | — | — | — | 23 | — | 23 | ||||||||||||||||||
Rawhide recall | 17 | — | 17 | 9 | — | 9 | ||||||||||||||||||
Purchases of property, plant and equipment | (65) | (38) | (103) | (78) | (37) | (115) | ||||||||||||||||||
Adjusted free cash flow | $ | 203 | $ | 183 | $ | 386 | $ | 300 | $ | 287 | $ | 587 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20181119005232/en/
Source:
Investor/Media Contact:
Dave Prichard, 608-278-6141