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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report:
November 10, 2005
---------------------------------
(Date of earliest event reported)
SPECTRUM BRANDS, INC.
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Wisconsin 001-13615 22-2423556
- ---------------------------- ----------- -------------------
(State or other Jurisdiction (Commission (IRS Employer
of Incorporation) File No.) Identification No.)
Six Concourse Parkway, Suite 3300, Atlanta, Georgia 30328
------------------------------------------------------------
(Address of principal executive offices, including zip code)
(770) 829-6200
----------------------------------------------------
(Registrant's telephone number, including area code)
N/A
-------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the Registrant under any of the
following provisions:
[_] Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
[_] Soliciting material pursuant to Rule 14a-12 under the Exchange
Act (17 CFR 240.14a-12)
[_] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[_] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
(a) The following information, including the Exhibit attached hereto, is being
furnished pursuant to this Item 2.02 and shall not be deemed "filed" for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor
shall it be deemed incorporated by reference in any filing under the Securities
Act of 1933, as amended, except as shall be expressly set forth by specific
reference in such filing.
On November 10, 2005, Spectrum Brands, Inc. issued a press release discussing
its estimated financial results for its fourth fiscal quarter ending September
30, 2005. A copy of the press release is furnished as Exhibit 99.1 to this
report.
Item 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(d) 99.1 Press Release dated November 10, 2005 issued by Spectrum Brands, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: November 10, 2005 SPECTRUM BRANDS, INC.
By: /s/ Randall J. Steward
----------------------------------
Name: Randall J. Steward
Title: Executive Vice President
and Chief Financial Officer
EXHIBIT INDEX
Exhibit Description
- ------- -----------
99.1 Press Release dated November 10, 2005
issued by Spectrum Brands, Inc.
Exhibit 99.1
Spectrum Brands, Inc. Announces Fourth
Quarter and Fiscal Year 2005 Financial Results
ATLANTA--(BUSINESS WIRE)--Nov. 10, 2005--Spectrum Brands, Inc.
(NYSE:SPC) announced a fiscal 2005 fourth quarter diluted net loss per
share of six cents and pro forma diluted earnings per share of
thirteen cents, in line with analyst expectations as reported by First
Call. These results compare to diluted earnings per share of 52 cents
and pro forma diluted earnings per share of 60 cents for the
comparable prior year period.
"We delivered results in line with revised expectations despite
facing a number of challenges during the fourth quarter," said
Spectrum Brands Chairman and CEO Dave Jones. "We were pleased to see
strong sales growth in certain parts of our business - namely, 31
percent growth in Latin America and seven percent growth in our North
American lawn and garden business. However, these positive results
were more than offset by declines in battery sales in North America
and Europe." The company cited weakness in consumer spending in
Europe, the impact of its battery marketing strategy transition and
high battery inventory levels at retail in North America as the
primary reasons for the decline.
"Our fourth quarter results were also negatively impacted by
increased raw materials and fuel and transportation costs," Jones
continued. "We expect to relieve a portion of these cost pressures in
fiscal 2006 through the implementation of pricing increases across a
number of product categories. Furthermore, we are taking actions to
accelerate the timing and amount of cost savings resulting from the
integration of the United Industries and Tetra acquisitions, and we
are instituting incremental cost cutting measures company-wide to
further strengthen our competitive position and to protect margins and
cash flow. However, given the recent challenges in our battery
business, concerns about consumer spending trends and our expectations
for continuing cost pressures we believe it prudent to revise our
guidance for fiscal 2006 pro forma earnings to a range of $2.10 to
$2.20."
Fourth Quarter Results
(Financial results for the quarter ended September 30, 2005
include results from United Industries, acquired on February 7, 2005,
and Tetra Holding GmbH, acquired on April 29, 2005. Financial results
for periods prior to the acquisition dates exclude United and Tetra.
Pro forma diluted EPS and other pro forma numbers referenced in this
release exclude the impact of certain items detailed in the attached
Table 3, "Reconciliation of GAAP to Pro Forma Financial Data" and
Table 6, "Reconciliation of GAAP to Pro Forma EPS Guidance.")
Spectrum Brands' fourth quarter net sales were $603.7 million, as
compared to $377.0 million for the same period last year. United's
fourth quarter sales were $204.5 million and Tetra contributed sales
of $55.8 million. Favorable currency translation contributed $7.6
million.
Gross profit for the quarter was $219.3 million versus $155.5
million for the same period last year. Cost of goods sold during the
quarter included $2.7 million in restructuring and related costs
incurred in connection with the closing of a zinc carbon manufacturing
facility in Breitenbach, France and $2.6 million in inventory
valuation charges associated with acquisitions. (In accordance with
U.S. generally accepted accounting principles, inventory acquired in
an acquisition is revalued as part of the purchase price allocation.
During the current quarter $2.6 million was recognized in cost of
goods sold. The inventory valuation has no cash impact.) In fiscal
2004, cost of goods sold included $0.4 million in restructuring and
related costs associated with the integration of the Remington
acquisition. Excluding these charges, gross profit for the fourth
quarter was $224.6 million, representing a gross margin of 37.2
percent versus 41.4 percent for the same period last year. The decline
in gross margin percentage resulted from costs associated with the
transition of the company's battery marketing strategy in North
America, the inclusion of the lower margin United business and
increased raw material, fuel and transportation costs.
Operating income was $34.1 million versus fiscal 2004's fourth
quarter operating income of $46.5 million. Operating expenses in 2005
included restructuring and related charges of $8.3 million primarily
related to the integration of United. In 2004 operating expenses
included $4.5 million in restructuring and related charges associated
with the Remington acquisition. Pro forma operating income for the
fourth quarter was $47.7 million, or 7.9 percent of sales, compared to
$51.4 million, or 13.6 percent of sales last year.
During the fourth quarter the company reduced its full-year
effective tax rate to approximately 34.5 percent based on
implementation of tax reduction strategies afforded the company as a
result of recent acquisitions.
Fourth Quarter Segment Results
North American net sales were $133.4 million as compared with
$169.4 million reported last year, as strong growth in sales of
Remington branded products was more than offset by a decline in
battery sales and a six percent reduction in selling days during the
quarter. North American segment profits were $18.4 million versus
$45.1 million reported last year. As previously announced by the
company, fiscal 2005 battery sales and gross margins were negatively
impacted by the transition from Rayovac's "50% More" battery marketing
campaign to a new performance-based marketing strategy and by high
retail inventory levels during the quarter. At the retail level,
Rayovac branded alkaline batteries market share was unchanged while
the category declined by approximately six percent.
European/ROW net sales were $153.8 million versus the $164.6
million reported last year, with no significant impact from foreign
exchange translation. Segment profitability for the quarter was $21.2
million compared with $22.0 million last year. The overall stagnant
economic and consumer spending environment in Europe and a resulting
product mix shift to private label from branded batteries were the
primary drivers of quarterly sales results.
In Latin America, net sales increased to $56.2 million as compared
to $43.0 million in the fourth quarter last year. Favorable currency
translation accounted for $6.4 million of the increase. Strong growth
in battery sales largely driven by improved economic conditions and
the impact of the Remington branded products introduction in this
region were the principal drivers of sales growth in the quarter.
Latin American segment profitability of $5.4 million compares to last
year's $2.8 million.
United contributed net sales of $204.5 million and segment profits
of $10.6 million during the fourth quarter. United generated revenues
of $199.3 million in the fourth quarter of 2004 prior to its
acquisition by Spectrum Brands. The North American lawn and garden
business reported a seven percent increase in sales, largely driven by
strong growth in fertilizer and growing media. Consumer purchases of
Spectrum Brands products at retail showed even stronger growth during
the quarter, with double-digit increases in every major category
resulting in an overall growth of approximately 14 percent in consumer
takeaway over the same period last year.
Tetra net sales in the fourth quarter were $55.8 million and
segment profitability was $7.0 million. Excluding the Tetra inventory
valuation charge of $2.3 million, pro forma segment profitability was
$9.3 million. Tetra generated revenues of $58.2 million in the fourth
quarter of 2004 prior to its acquisition by Spectrum Brands. Sales of
aquatic equipment and supplies declined as a result of weak consumer
spending in this product category during the fourth quarter.
Corporate expenses were $17.5 million, or 2.9 percent of net
sales, as compared to $18.5 million, or 4.9 percent of net sales, in
the prior year period. Increases in research and development spending
and increased professional fees in support of Sarbanes-Oxley
compliance and ongoing legal activity were more than offset by
adjustments to incentive compensation accruals.
Interest expense increased to $39.5 million in the quarter as
compared to $16.7 million last year. The increase is the result of
higher debt levels associated with the United and Tetra acquisitions.
Fiscal 2005 Results
Net sales for the 2005 fiscal year were $2.359 billion, compared
with $1.417 billion for the prior year. The increase was primarily
attributable to the inclusion of results from the United, Tetra,
Microlite and Ningbo acquisitions, which contributed, respectively,
net sales of $787.0 million, $95.9 million, $39.4 million (for the
eight months not included in the comparable period last year), and
$10.6 million (for the six months not included in the comparable
period last year). Favorable foreign exchange rates contributed $45.9
million.
Gross profit in 2005 was $883.9 million compared with $606.1
million last year. The 2005 results included $37.5 million in
inventory valuation charges related to acquisitions and $10.5 million
in restructuring and related charges associated with the closure of a
manufacturing facility in France. Fiscal 2004 gross profit included a
net $0.8 million benefit from an adjustment to restructuring and
related charges associated with the Remington acquisition. Excluding
these charges, year to date pro forma gross margin was 39.5 percent in
2005 and 42.7 percent in 2004. The decline in gross margin percentage
was primarily due to the impact of our marketing transition in the
North American battery business, the inclusion of United's lower
margin business, higher raw materials and transportation costs and
unfavorable product mix changes.
Operating expenses were $679.4 million, compared with $449.9
million reported last year. In 2005 and 2004, operating expenses
included a net $15.4 million and $12.2 million, respectively, in
restructuring and related and other charges. Excluding restructuring
and related costs in both years, operating expense as a percentage of
sales improved to 28 percent in 2005 compared with 31 percent of sales
in 2004. Pro forma operating income in 2005 was $267.9 million, or
11.4 percent of sales, versus $167.6 million, or 11.8 percent of sales
last year.
During the fourth quarter the company reduced its full year
effective tax rate from an estimated 36 percent to approximately 34.5
percent. The full year effective tax rate for fiscal 2004 was 38
percent.
Net income for fiscal 2005 was $46.8 million compared with $55.8
million in the prior year. Pro forma net income was $96.3 million
versus $63.3 million reported last year. Pro forma diluted earnings
per share were $2.11 compared to pro forma diluted earnings per share
of $1.83 in fiscal 2004.
Fiscal 2005 Segment Results
North American net sales were $610.8 million, compared with $654.0
million reported last year, primarily due to a decline in battery
sales during the fourth quarter. North American segment profitability
was $113.2 million versus $130.7 million reported last year, primarily
as a result of the impact of the marketing transition in the battery
business and increased raw materials and fuel and transportation
costs.
European/ROW net sales were $657.7 million, an increase of 6.4
percent versus $618.0 million last year. Favorable foreign exchange
rates accounted for $30.2 million of the increase. Strong sales growth
from Remington branded products contributed as well. The acquisition
of Ningbo Baowang contributed $10.6 million in incremental net sales
for the six months of the current year for which results were not
included in the prior year. European segment profits were $94.6
million versus $96.2 million in the prior year. The battery business
in Europe has been negatively impacted by a stagnant economy and a
continuing shift from branded product sales to private label, which
has pressured net sales and gross margins.
In Latin America, net sales increased to $208.1 million from
$145.2 million in the prior year as a result of strong sales growth
across the region and a $39.4 million contribution from the Microlite
acquisition during the eight months not included in prior year
results. Favorable foreign exchange rates contributed $12.6 million.
Latin American segment profitability was $19.0 million compared to
$11.7 million last year.
United generated net sales of $787.0 million and segment profits
of $79.0 million during the eight-month period it was included in
fiscal 2005 results. Excluding inventory valuation charges totaling
$29.3 million, United's pro forma segment profits were $108.3 million.
For the five month period subsequent to its acquisition, Tetra
contributed net sales of $95.9 million and segment profits of $9.7
million. Excluding the inventory valuation charge of $7.9 million,
Tetra pro forma segment profits were $17.6 million.
Corporate expenses were $84.7 million, or 3.6 percent of sales, as
compared to $71.0 million, or 5.0 percent of sales for the same period
last year. The increase was due primarily to higher levels of research
and development spending, increased costs of Sarbanes-Oxley compliance
and higher legal costs.
Interest expense for the year increased to $134.1 million
reflecting increased debt levels incurred to fund the current year
acquisitions.
Financial Outlook
The company currently expects fiscal year 2006 net sales of
approximately $2.8 billion and pro forma fully diluted earnings per
share of between $2.10 and $2.20. In the first quarter of 2006, pro
forma earnings per share of between 20 and 25 cents are projected. The
company believes its new earnings guidance more appropriately reflects
its outlook for (1) modest net sales growth as a result of a stagnant
West European economy and moderate consumer spending growth and (2)
continuing margin pressure from increased raw materials and energy and
transportation costs.
Webcast Information
Spectrum Brands management will discuss fourth quarter financial
results in a live webcast on Thursday, November 10, at 8:30 a.m. EST.
Interested investors and others can access this webcast through the
company's website, www.spectrumbrands.com.
Non-GAAP Measurements
Throughout this release, references are made to pro forma gross
profit, pro forma operating income, pro forma net income and pro forma
diluted EPS. See attached Table 3, "Reconciliation of GAAP to Pro
Forma Financial Data," for a complete reconciliation of gross profit,
operating income, net income and diluted EPS on a GAAP basis to pro
forma gross profit, pro forma operating income, pro forma net income
and pro forma diluted EPS. The company also maintains a reconciliation
of GAAP financial reporting to pro forma results in the Investor
Relations section of its website, which may be found at
www.spectrumbrands.com.
Spectrum Brands management and certain investors use pro forma
results of operations as one means of analyzing the company's current
and future financial performance and identifying trends in its
financial condition and results of operations. Spectrum Brands
provides pro forma information to investors to assist in meaningful
comparisons of past, present and future operating results and to
assist in highlighting the results of on-going core operations. While
management believes these pro forma results provide useful
supplemental information, pro forma results are not intended to
replace the company's GAAP financial results and should be read in
conjunction with those GAAP results.
About Spectrum Brands, Inc.
Spectrum Brands (formerly Rayovac Corporation) is a global
consumer products company and a leading supplier of batteries, lawn
and garden care products, specialty pet supplies, shaving and grooming
products, household insecticides, personal care products and portable
lighting. 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 generates approximately $2.8 billion in annualized
revenues and has approximately 10,000 employees worldwide. The
company's stock trades on the New York Stock Exchange under the symbol
SPC.
Certain matters discussed in this news release, with the exception
of historical matters, may be forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. 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 from
these statements as a result of (1) changes in external competitive
market factors, such as introduction of new product features or
technological developments, development of new competitors or
competitive brands or competitive promotional activity or spending,
(2) changes in consumer demand for the various types of products
Spectrum Brands offers, (3) changes in the general economic conditions
where Spectrum Brands does business, such as stock market prices,
interest rates, currency exchange rates, inflation, consumer spending
and raw material costs, (4) the company's ability to successfully
implement manufacturing, distribution and other cost efficiencies, (5)
the successful implementation of the company's recently announced
price increases and (6) various other factors, including those
discussed herein and those set forth in Spectrum Brands' securities
filings, including the most recently filed form S-4, Annual Report on
Form 10-K and quarterly reports on Form 10-Q, respectively.
Attached
Table 1 - Condensed Consolidated Statements of Operations
Table 2 - Supplemental Financial Data
Table 3 - Reconciliation of GAAP to Pro Forma Financial Data
Table 4 - Net Sales Adjusted for Acquisitions
Table 5 - Condensed Consolidated Statement of Operations Adjusted
to Include Results of Acquisitions for Full Fiscal Year 2005
Table 6 -- Reconciliation of GAAP to Pro Forma EPS Guidance
Table 1
SPECTRUM BRANDS, INC.
Condensed Consolidated Statements of Operations
For the three month periods and fiscal years ended September 30, 2005
and 2004
(Unaudited)
(In millions, except per share amounts)
THREE MONTHS FISCAL YEAR
-------------------------- --------------------------
F2005 F2004 INC(DEC) F2005 F2004 INC(DEC)
-------- --------- --------- ---------
% %
Net sales $ 603.7 $ 377.0 60.1% $2,359.5 $1,417.2 66.5%
Cost of goods
sold 381.7 221.1 1,465.1 811.9
Restructuring
and related
charges 2.7 0.4 10.5 (0.8)
------- -------- -------- --------
Gross profit 219.3 155.5 41.0% 883.9 606.1 45.8%
Selling 124.2 73.3 473.8 293.1
General and
administrative 44.6 23.4 160.4 121.3
Research and
development 8.1 7.8 29.4 23.3
Restructuring
and related
charges 8.3 4.5 15.8 12.2
------- -------- -------- --------
Total operating
expenses 185.2 109.0 679.4 449.9
Operating
income 34.1 46.5 -26.7% 204.5 156.2 30.9%
Interest expense 39.5 16.7 134.1 65.7
Other expense
(income), net 0.4 0.4 (0.9) (0.1)
------- -------- -------- --------
(Loss) income
from
continuing
operations
before
income taxes (5.8) 29.4 71.3 90.6
Income tax
(benefit)
expense (2.9) 11.1 24.5 34.4
------- -------- -------- --------
(Loss) income
from
continuing
operations (2.9) 18.3 46.8 56.2
Loss from
discontinued
operations, net
of tax - (0.1)(a) - (0.4)(a)
------- -------- -------- --------
Net (loss)
income $ (2.9) $ 18.2 $ 46.8 $ 55.8
======= ======== ======== ========
Average shares
outstanding (b) 49.0 34.1 43.7 33.4
(Loss) income
from continuing
operations $ (0.06) $ 0.53 $ 1.07 $ 1.68
Discontinued
operations - - - (0.01)
------- -------- -------- --------
Basic earnings
per share $ (0.06) $ 0.53 $ 1.07 $ 1.67
======= ======== ======== ========
Average shares
and common
stock
equivalents
outstanding (b) 49.0(c) 35.2 45.6 34.6
(Loss) income
from continuing
operations $ (0.06) $ 0.52 $ 1.03 $ 1.62
Discontinued
operations - - - (0.01)
------- -------- -------- --------
Diluted earnings
per share $ (0.06) $ 0.52 $ 1.03 $ 1.61
======= ======== ======== ========
(a) For the three months and fiscal year ended September 30, 2004,
reflects the after-tax net income of the Remington retail store
business for which the Company discontinued operations in fiscal
2004.
(b) Per share figures calculated prior to rounding in millions.
(c) For the three months ended September 30, 2005, the Company has
not assumed the exercise of common stock equivalents as the impact
would be antidilutive.
Table 2
SPECTRUM BRANDS, INC.
Supplemental Financial Data
For the three month periods and fiscal years ended September 30, 2005
and 2004
(Unaudited)
($ In millions)
Supplemental Financial Data F2005 F2004
- -------------------------------- --------- -------
Cash $ 30.2 $ 15.8
Trade receivables, net $ 362.1 $270.0
Days Sales Outstanding (a) 47 51
Inventory, net $ 451.6 $264.7
Inventory Turnover (b) 3.6 3.3
Total Debt $2,307.3 $829.9
THREE MONTHS FISCAL YEAR
----------------- -------------------
Supplemental Cash Flow Data F2005 F2004 F2005 F2004
- -------------------------------- --------- ------- --------- ---------
Depreciation and amortization,
excluding amortization of
debt issuance costs $ 18.5 $ 10.3 $ 60.9 $ 35.3
Capital expenditures $ 22.7 $ 10.4 $ 63.8 $ 26.9
THREE MONTHS FISCAL YEAR
----------------- -------------------
Supplemental Segment Sales & F2005 F2004 F2005 F2004
Profitability
- -------------------------------- --------- ------- --------- ---------
Net Sales
- --------------------------------
North America $ 133.4 $169.4 $ 610.8 $ 654.0
Europe/ROW 153.8 164.6 657.7 618.0
Latin America 56.2 43.0 208.1 145.2
United 204.5 - 787.0 -
Tetra 55.8 - 95.9 -
-------- ------ -------- --------
Total net sales $ 603.7 $377.0 $2,359.5 $1,417.2
======== ====== ======== ========
Segment Profit
- --------------------------------
North America $ 18.4 $ 45.1 $ 113.2 $ 130.7
Europe/ROW 21.2 22.0 94.6 96.2
Latin America 5.4 2.8 19.0 11.7
United 10.6 - 79.0 -
Tetra 7.0 - 9.7 -
-------- ------ -------- --------
Total segment profit 62.6 69.9 315.5 238.6
Corporate 17.5 18.5 84.7 71.0
Restructuring and related
charges 11.0 4.9 26.3 11.4
Interest expense 39.5 16.7 134.1 65.7
Other expense (income), net 0.4 0.4 (0.9) (0.1)
-------- ------ -------- --------
(Loss) income from
continuing operations
before income taxes $ (5.8) $ 29.4 $ 71.3 $ 90.6
======== ====== ======== ========
(a) Reflects actual days sales outstanding at end of period.
(b) Reflects cost of sales (excluding restructuring and related
charges) during the quarter divided by average inventory for the
quarter, multiplied by four.
Table 3
SPECTRUM BRANDS, INC.
Reconciliation of GAAP to Pro Forma Financial Data
For the three month periods and fiscal years ended September 30, 2005
and 2004
(Unaudited)
(In millions, except per share amounts)
THREE MONTHS
--------------------------------
F2005
--------------------------------
As Reported Pro Forma Pro Forma
Adjustments
Net sales $ 603.7 $ - $ 603.7
Gross profit 219.3 5.3(a) 224.6
Gross profit % of sales 36.3% 37.2%
Operating expenses 185.2 8.3(b) 176.9
Operating income 34.1 13.6 47.7
Operating income % of sales 5.6% 7.9%
(Loss) income from continuing
operations before income taxes (5.8) 13.6 7.8
(Loss) income from continuing
operations (d) (2.9) 9.5 6.6
Loss from discontinued operations, net
of tax - - -
Net (loss) income (2.9) 9.5 6.6
Basic earnings per share (f) $ (0.06) $ 0.19 $ 0.13
======= ======= =======
Diluted earnings per share (f)(g) $ (0.06) $ 0.19 $ 0.13
======= ======= =======
THREE MONTHS
--------------------------------
F2004
--------------------------------
As Reported Pro Forma Pro Forma
Adjustments
Net sales $ 377.0 $ - $ 377.0
Gross profit 155.5 0.4 155.9
Gross profit % of sales 41.2% 41.4%
Operating expenses 109.0 4.5 104.5
Operating income 46.5 4.9 51.4
Operating income % of sales 12.3% 13.6%
(Loss) income from continuing
operations before income taxes 29.4 4.9(c) 34.3
(Loss) income from continuing
operations (d) 18.3 3.0 21.3
Loss from discontinued operations, net
of tax (0.1) 0.1(e) -
Net (loss) income 18.2 3.0 21.2
Basic earnings per share (f) $ 0.53 $ 0.09 $ 0.62
======= ======= =======
Diluted earnings per share (f)(g) $ 0.52 $ 0.08 $ 0.60
======= ======= =======
(a) For the three months ended September 30, 2005, reflects inventory
valuation adjustments of $2.3 million and $0.3 million related to the
fair value write-up of Tetra and Jungle inventory, respectively, in
accordance with the requirements of SFAS 141, "Business
Combinations." Also includes $2.7 million of restructuring and
related charges incurred during the period primarily associated with
the closure of our manufacturing facility in Breitenbach, France.
(b) For the three months ended September 30, 2005, reflects
restructuring and related charges incurred during the period
primarily in connection with the United integration.
(c) For the three months ended September 30, 2004, reflects the
completion of global restructuring initiatives and the impact of
initiatives related to the integration of the Remington business.
(d) During the three months ended September 30, 2005, the Company,
based on its current estimate of profits for fiscal 2005, finalized
its full year effective tax rate from 36 percent to approximately
34.5 percent.
(e) For the three months ended September 30, 2004, reflects the
after-tax net income of the Remington retail store business for which
the Company discontinued operations in fiscal 2004.
(f) Per share figures calculated prior to rounding in millions.
(g) For the three months ended September 30, 2005, the Company has not
assumed the exercise of common stock equivalents as the impact would
be antidilutive, thus, the reported earnings per share calculation
for the three months ended September 30, 2005 assumes diluted shares
outstanding of 49.0 million. Pro forma earnings per share
calculation for the three months ended September 30, 2005 assumes
diluted shares outstanding of 51.2 million.
Table 3 (continued)
SPECTRUM BRANDS, INC.
Reconciliation of GAAP to Pro Forma Financial Data
For the three month periods and fiscal years ended September 30, 2005
and 2004
(Unaudited)
(In millions, except per share amounts)
FISCAL YEAR
--------------------------------
F2005
--------------------------------
As Pro Forma Pro Forma
Reported Adjustments
Net sales $2,359.5 $ - $2,359.5
Gross profit 883.9 48.0(a) 931.9
Gross profit % of sales 37.5% 39.5%
Operating expenses 679.4 15.4(b) 664.0
Operating income 204.5 63.4 267.9
Operating income % of sales 8.7% 11.4%
Income from continuing operations
before income taxes 71.3 75.4(c) 146.7
Income from continuing operations (e) 46.8 49.5 96.3
Loss from discontinued operations, net
of tax - - -
Net income 46.8 49.5 96.3
Basic earnings per share (g) $ 1.07 $1.13 $ 2.20
======== ===== ========
Diluted earnings per share (g) $ 1.03 $1.08 $ 2.11
======== ===== ========
FISCAL YEAR
--------------------------------
F2004
--------------------------------
As Pro Forma Pro Forma
Reported Adjustments
Net sales $1,417.2 $ - $1,417.2
Gross profit 606.1 (0.8) 605.3
Gross profit % of sales 42.8% 42.7%
Operating expenses 449.9 12.2 437.7
Operating income 156.2 11.4 167.6
Operating income % of sales 11.0% 11.8%
Income from continuing operations
before income taxes 90.6 11.4(d) 102.0
Income from continuing operations (e) 56.2 7.1 63.3
Loss from discontinued operations, net
of tax (0.4) 0.4(f) -
Net income 55.8 7.5 63.3
Basic earnings per share (g) $ 1.67 $0.22 $ 1.89
======== ========= ========
Diluted earnings per share (g) $ 1.61 $0.22 $ 1.83
======== ========= ========
(a) For the fiscal year ended September 30, 2005, reflects inventory
valuation adjustments of $7.9 million, $0.3 million and $29.3 million
related to the fair value write-up of Tetra, Jungle and United
inventory, respectively, in accordance with the requirements of SFAS
141, "Business Combinations." Also includes $10.5 million of
restructuring and related charges incurred during the period
primarily associated with the closure of our manufacturing facility
in Breitenbach, France.
(b) For the fiscal year ended September 30, 2005, operating expenses
include approximately a $1.6 million gain on sale of land and
building, offset by a $1.1 million charge related to the disposal of
our Madison, WI manufacturing facility, closed in fiscal 2003. Also
includes $15.8 million of restructuring and related charges incurred
during the period primarily in connection with the United
integration, partially offset by the reduction of certain
environmental reserves in North America.
(c) For the fiscal year ended September 30, 2005, interest expense
includes $12.0 million related to the write-off of debt issuance
costs in the second quarter of 2005 associated with debt refinanced
in connection with the United acquisition.
(d) For the fiscal year ended September 30, 2004, reflects the
completion of global restructuring initiatives and the impact of
initiatives related to the integration of the Remington business.
(e) During the three months ended September 30, 2005, the Company,
based on its current estimate of profits for fiscal 2005, reduced its
full year effective tax rate from 36 percent to approximately 34.5
percent. The full year effective tax rate for 2004 was 38 percent.
(f) For the fiscal year ended September 30, 2004, reflects the after-
tax net income of the Remington retail service center business for
the fiscal year ended September 30, 2004.
(g) Per share figures calculated prior to
rounding in millions.
Table 4
SPECTRUM BRANDS, INC.
Net Sales Adjusted for Acquisitions
For the three month periods and fiscal years ended September 30, 2005
and 2004
(Unaudited)
(In millions)
THREE MONTHS
-------------------------------------------------
North Europe/ROW Latin United Tetra Total
America America
-------- ---------- -------- ------- ------ -------
Net sales for the
three months ended
September 30, 2005 $133.4 $153.8 $ 56.2 $204.5 $55.8 $603.7
====== ====== ====== ====== ===== ======
Net sales for the
three months ended
September 30, 2004 169.4 164.6 43.0 - - 377.0
Add contributions
from acquired
businesses: (a)
Tetra 58.2 58.2
United 199.3 199.3
-------- ---------- -------- ------- ------ -------
Net sales for the
three months ended
September 30,
2004, as adjusted $169.4 $164.6 $ 43.0 $199.3 $58.2 $634.5
====== ====== ====== ====== ===== ======
Percentage change
in net sales, as
adjusted -21.3% -6.6% 30.7% 2.6% -4.1% -4.9%
(a)Represents fiscal 2004 net sales during the comparable period of
fiscal 2005 ownership. Tetra (April 29, 2005 acquisition date);
United (February 7, 2005 acquisition date). Tetra and United
owned for the entire three months ended September 30, 2005, thus
contributions are from the three months ended September 30, 2004.
Amounts obtained from unaudited internal data compiled by the
management of the acquired companies.
Table 4 (continued)
SPECTRUM BRANDS, INC.
Net Sales Adjusted for Acquisitions
For the three month periods and fiscal years ended September 30, 2005
and 2004
(Unaudited)
(In millions)
FISCAL YEAR
-----------------------------------------------------
North Europe/ROW Latin United Tetra Total
America America
-------- ---------- -------- ------- ------ ---------
Net sales for the
fiscal year
ended September
30, 2005 $610.8 $657.7 $208.1 $787.0 $95.9 $2,359.5
====== ====== ====== ====== ===== ========
Net sales for the
fiscal year
ended September
30, 2004 654.0 618.0 145.2 - - 1,417.2
Add contributions
from acquired
businesses: (a)
Tetra 95.6 95.6
United 739.8 739.8
Microlite 36.2 36.2
Ningbo 10.6 10.6
-------- ------ -------- ------- ------ --------
Net sales for the
fiscal year
ended September
30, 2004, as
adjusted $654.0 $628.6 $181.4 $739.8 $95.6 $2,299.4
====== ====== ====== ====== ===== ========
Percentage change
in net sales, as
adjusted -6.6% 4.6% 14.7% 6.4% 0.3% 2.6%
(a)Represents fiscal 2004 net sales during the comparable period of
fiscal 2005 ownership. Tetra contribution is from May - September
2004 (April 29, 2005 acquisition date); United contribution is
from February 7 - September 2004 (February 7, 2005 acquisition
date); Microlite contribution is from October 2003 - May 2004 (May
28, 2004 acquisition date); and Ningbo contribution is from
October 2003 - March 2004 (March 31, 2004 acquisition date)
Amounts obtained from unaudited internal data compiled by the
management of the acquired companies. For Ningbo, prior year
results were assumed to be consistent with current year results.
Table 5
SPECTRUM BRANDS, INC.
Condensed Combined Statement of Operations Adjusted to Include Results
of Acquisitions for Full Fiscal Year
For the fiscal year ended September 30, 2005
(Unaudited)
(In millions, except per share amounts)
Fiscal Impact of Non- Other Fiscal
2005 As Acquisitions Recurring Adjustments 2005 As
Reported (a) Charges Adjusted
------------------------------------------------------
Net sales $2,359.5 $ 371.3 $ - $ - $2,730.8
Cost of goods
sold 1,465.1 224.7 (42.3)(b) - 1,647.5
Restructuring
and related
charges 10.5 - (10.5)(c) - -
-------- ------------ --------- ------ --------
Gross profit 883.9 146.6 52.8 - 1,083.3
Operating
expenses:
Selling,
general and
administrative
expenses 663.6 144.9 (9.9)(d) (2.1)(g) 796.5
Restructuring
and related
charges 15.8 - (15.8)(e) - -
-------- ------------ --------- ------ --------
679.4 144.9 (25.7) (2.1) 796.5
Operating
income (loss) 204.5 1.7 78.5 2.1 286.8
Interest expense 134.1 - (12.0)(f) 36.3(h) 158.4
Other (income)
expense, net (0.9) (0.9) - - (1.8)
-------- ------------ ----- ------ --------
Income (loss)
from
continuing
operations
before
income taxes 71.3 2.6 90.5 (34.2) 130.2
Income tax
expense
(benefit) 24.5 - - 21.1(i) 45.6
-------- ------------ ----- ----------- --------
Net (loss)
income $ 46.8 $ 2.6 $ 90.5 $(55.3) $ 84.6
======== ============ ===== ====== ========
Diluted shares
outstanding 45.6
Adjusted diluted
shares
outstanding 50.5(j)
Diluted earnings
per share (k) $ 1.03 $ 1.67
======== ========
Note: This comparable information is provided solely for the purpose
of additional analysis of the results of the Company excluding items
management believes to be nonrecurring and assuming all acquisitions
completed during the year ended September 30, 2005 were completed on
October 1, 2004. These acquisitions are detailed in Note (a) below.
The data is presented for informational purposes only. The
presentation is not intended to be in conformity with the rules
governing the preparation of pro forma financial information, nor is
it intended to be a forecast of future operating results.
(a) Includes the results of operations for the following:
- -- United, from its Unaudited Consolidated Statement of Operations for
the period from October 1, 2004 through February 7, 2005.
- -- Tetra, from its Unaudited Consolidated Statement of Operations for
the period from October 1, 2004 through April 30, 2005.
- -- Firstrax, from its Unaudited Consolidated Statement of Operations
for the period from October 1, 2004 through January 31, 2005.
- -- Jungle, from its Unaudited Consolidated Statement of Operations for
the period from October 1, 2004 through August 31, 2005.
(b) Comprises a $29.3 million charge for the fair value adjustment
applied to United's acquired inventory, a $7.9 million charge for the
fair value adjustment applied to Tetra's acquired inventory, a $1.9
million charge for the fair value adjustment applied to UPG inventory,
acquired in United's acquisition of the United Pet Group on July 30,
2004, a $0.3 million charge for the fair value adjustment applied to
Jungle's acquired inventory, and $2.9 million of transaction related
costs incurred by United in January 2005.
(c) Comprises Spectrum Brands restructuring and related charges
incurred during the year primarily in connection with the closure of
a manufacturing facility in France.
(d) Comprises transaction related costs incurred by United in January
2005 of $9.4 million, a $1.1 million charge related to the disposal
of Spectrum Brands property in Wisconsin, $0.4 million in transaction
costs incurred by United in connection with its acquisition of UPG,
and $0.5 million of executive recruiter fees incurred by United.
These amounts are offset by a $1.6 million gain on the sale of
Spectrum Brands property in Mexico.
(e) Restructuring and related charges incurred during the year
primarily in connection with Spectrum Brands' integration of United's
operations.
(f) Debt issuance costs related to the debt refinancing that occurred
in connection with Spectrum Brands' United acquisition.
(g) Impact on amortization of Spectrum Brands' acquisitions of
United, Tetra, Firstrax and Jungle Labs.
(h) Interest expense associated with the debt issued and refinanced in
connection with the acquired companies.
(i) Adjustment to income tax expense to arrive at an adjusted 2005
effective tax rate of 35 percent (expected rate for fiscal 2006).
(j) Increase to weighted shares outstanding due to the assumed
issuance of 13.75 million shares of Spectrum Brands common stock on
October 1, 2004.
(k) Per share figures calculated prior to rounding in millions.
Table 6
SPECTRUM BRANDS, INC.
Reconciliation of GAAP to Pro Forma EPS Guidance
Estimates for the Three Month Period Ended January 1, 2006 and Fiscal
Year Ended September 30, 2006
(Unaudited)
(In millions)
Q1 F2006 F2006
-------------- --------------
EPS Range EPS Range
-------------- --------------
Diluted earnings per share $0.13 - $0.16 $1.87 - $1.92
Pro forma adjustments:
Restructuring and related charges,
net of tax $0.07 - $0.09 $0.23 - $0.28
Pro forma diluted earnings per share $0.20 - $0.25 $2.10 - $2.20
CONTACT: Spectrum Brands, Atlanta
Investor Contact:
Nancy O'Donnell, 770-829-6208
or
Ketchum for Spectrum Brands
Media Contact:
David Doolittle, 404-879-9266