UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report:
August 3, 2006
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(Date of earliest event reported)
SPECTRUM BRANDS, INC.
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(Exact Name of Registrant as Specified in Charter)
Wisconsin 001-13615 22-2423556
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(State or other Jurisdiction of (Commission File No.) (IRS Employer
Incorporation) Identification No.)
Six Concourse Parkway, Suite 3300, Atlanta, Georgia 30328
(Address of principal executive offices, including zip code)
(770) 829-6200
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(Registrant's telephone number, including area code)
N/A
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(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))
EXPLANATORY NOTE
The Registrant's Current Report on Form 8-K is being amended by this Amendment
No. 1 solely to delete all non-GAAP measures except "Diluted Earnings Per
Share, as Adjusted" appearing in the Registrant's earnings release included in
Exhibit 99.1 to the Registrant's Current Report on Form 8-K furnished on August
3, 2006. No other information or amounts are amended hereby.
A revised version of the Registrant's earnings release, as so changed, is
included as an exhibit hereto.
Item 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
(a) The following information, including Exhibit 99.1 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 August 3, 2006, Spectrum Brands, Inc. issued a press release discussing,
among other things, its estimated financial results for its third fiscal quarter
of 2006 ended July 2, 2006. A copy of the press release is furnished as Exhibit
99.1 to this report.
Item 8.01. OTHER EVENTS.
The press release dated August 3, 2006, attached hereto as Exhibit
99.1 also reports that Spectrum Brands was informed by the U.S. Attorney's
Office for the Northern District of Georgia on July 27, 2006 that the U.S.
Attorney's Office has terminated its investigation initiated November 9, 2005
related to the company's financial results for the third and fourth quarters of
fiscal year 2005 and the impact of these results on anticipated fiscal year 2006
earnings, as well as to the sale of company shares by senior management in
advance of negative financial disclosures in 2005. Spectrum Brands continues to
cooperate with the Atlanta District Office of the Securities and Exchange
Commission's investigation into such matters.
Item 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(d) 99.1 Press Release dated August 3, 2006 issued by Spectrum Brands, Inc.,
as amended.
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: August [ ], 2006 SPECTRUM BRANDS, INC.
By:
-------------------------------------
Name: Randall J. Steward
Title: Executive Vice President and
Chief Financial Officer
EXHIBIT INDEX
Exhibit Description
- ------- -----------
99.1 Press Release dated August 3, 2006 issued
by Spectrum Brands, Inc., as amended.
Exhibit 99.1
EXPLANATORY NOTE
Set forth below is an amendment to the Spectrum Brands, Inc. press release
dated August 3, 2006. The sole purpose of the amendment is to delete all
non-GAAP measures except "Diluted Earnings Per Share, as Adjusted." No other
information or amounts are amended.
Spectrum Brands, Inc. Announces Third Quarter Financial Results
ATLANTA--(BUSINESS WIRE)--Aug. 3, 2006--Spectrum Brands, Inc. (NYSE:SPC), a
global consumer products company with a diverse portfolio of world-class brands,
announced financial results of diluted earnings per share of five cents for its
fiscal third quarter ended July 2, 2006. Excluding certain adjustments which
management believes are not indicative of the company's on-going normalized
operations, diluted earnings per share for its fiscal third quarter would have
been $0.22. See Table 3, "Reconciliation of GAAP to As Adjusted Diluted
Earnings Per Share," for further detail).
Last year, the company reported diluted earnings per share of $0.46 for the
quarter ended July 3, 2005. The company estimates that the prior year's third
quarter diluted earnings per share, excluding certain adjustments which
management believes are not indicative of the company's ongoing normalized
operations, were $0.70.
"Spectrum Brands continues to face challenges in our European battery
business, which was the leading contributor to our disappointing third quarter
results," said David A. Jones, chairman and chief executive officer. "We also
generated lower-than-expected sales this quarter from Remington men's shaving in
North America at Father's Day. However, there were a number of bright spots in
our third quarter results, including a strong performance from Remington branded
products in Europe and a modest but encouraging sequential improvement in our
North American battery business.
"The Spectrum Brands management team is fully focused on improving our
financial performance. We are moving quickly to stabilize our European battery
business and to execute on our growth strategy throughout the rest of our
product portfolio. We continue to make good progress on our cost reduction
initiatives. In addition, we are examining ways to reduce debt and leverage
levels and strengthen our balance sheet through potential divestiture of
selected assets with the goal of becoming a leaner, more flexible organization
well-positioned to create long-term shareholder value."
Financial results for the quarter ended July 2, 2006 include results from
Tetra Holding GmbH, acquired on April 29, 2005, and Jungle Labs, acquired on
September 1, 2005. Financial results for periods prior to the acquisition dates
exclude Tetra and Jungle. On January 25, 2006 Spectrum Brands divested its
Canadian fertilizer technology and professional products businesses. As a result
of this sale, the company has reported the third quarter and year-to-date
results of these businesses as discontinued operations in the condensed
consolidated statements of operations for both 2006 and 2005.
Third Quarter Results
Spectrum Brands' third quarter net sales were $698.3 million, as compared to
$707.8 million for the same period last year. The revenue contribution from
acquisitions was $22.8 million. Foreign exchange translation contributed a net
positive $5.0 million.
Gross profit and gross margin for the quarter was $265.5 million and 38.0
percent, respectively, versus $270.2 million and 38.2 percent for the same
period last year. Cost of goods sold during the quarter included $2.7 million in
restructuring and related charges. Prior year results included a $7.3 million
inventory valuation charge related to the United and Tetra acquisitions and $7.8
million in restructuring and related charges associated with the closure of a
French manufacturing facility. The decline in gross margin percentage resulted
primarily from lower sales in the global battery business and increased raw
material costs.
Operating income was $49.0 million, or 7.0 percent of sales, versus fiscal
2005's third quarter operating income of $69.0 million, or 9.7 percent of sales.
Operating expenses in 2006 included net restructuring and related charges and
other costs of $9.8 million primarily attributable to the United integration and
rationalization of the company's European sales and marketing organization. In
2005 operating expenses included $7.3 million in net restructuring and related
charges and other costs primarily related to the United acquisition. Distribu-
tion costs were $9.7 million higher than compared with a year ago, in large
part due to significant increases in fuel costs. Increased investment in
advertising spending added another $2.2 million to operating expenses.
Third quarter interest expense was $45.7 million versus $38.6 million last
year due to increased debt levels from the Tetra acquisition and higher interest
rates. Total debt at July 2, 2006 was $2.283 billion.
Third Quarter Segment Results
North American net sales were $394.2 million compared with $412.8 million
reported last year. Battery and lighting sales declined 11 percent versus last
year, as the company has not yet fully recovered from market share and
distribution losses that occurred in 2005 and earlier in fiscal 2006. Remington
branded product sales declined by 27 percent, largely the result of a weak
category performance in Father's Day men's shaver sales. In the company's lawn
and garden business, consumer purchases of Spectrum Brands products at retail
grew five percent during the third quarter; however, reported lawn and garden
sales grew at a three percent rate primarily as a result of retail customers'
inventory reduction programs. North American segment profits were $61.7 million
versus $72.3 million reported last year, as a result of the year over year sales
decline.
European/ROW net sales were $117.1 million versus $137.3 million in the
prior year. Sales of Remington branded products grew by 19 percent as a result
of strong penetration gains in continental Europe. However, this improvement was
more than offset by an unfavorable product mix shift from branded to private
label battery sales and from higher margin specialty retail distribution
channels to lower margin food and mass channels, which contributed to a 23
percent sales decline from batteries. Segment profitability for the quarter was
$4.3 million compared with $18.0 million last year, primarily a function of
lower battery sales volume and higher raw material costs.
In Latin America, net sales increased to $54.6 million as compared to $49.6
million in the third quarter last year. Sales growth was driven by strong
performance from Remington branded products in the region combined with modest
growth in battery and lighting product sales. Favorable foreign exchange
translation contributed $1.5 million to net sales. Latin American segment
profitability of $4.2 million was flat versus last year as rising commodity
prices and higher selling and marketing expenses offset higher revenues.
In 2006, Spectrum Brands created the Global Pet segment, a new business
segment for reporting purposes, comprising United Pet Group, Tetra and Jungle
Labs, all of which were acquired during 2005. The Global Pet segment contributed
net sales of $132.4 million and segment profits of $20.6 million during the
third quarter. This compares to segment revenues of $108.1 million and segment
profits of $11.6 million in the third fiscal quarter of last year. The third
quarter revenue contribution from acquisitions was $22.8 million.
Corporate expenses were $27.6 million, or 4.0 percent of net sales, as
compared to $22.1 million, or 3.1 percent of net sales, in the prior year
period. Expansion of the global operations support infrastructure and increased
professional fees accounted for the majority of the increase.
Termination of U.S. Attorney's Office Investigation
In unrelated news, Spectrum Brands was informed by the U.S. Attorney's
Office for the Northern District of Georgia on July 27, 2006 that the U.S.
Attorney's Office has terminated its investigation initiated November 9, 2005
related to the company's financial results for the third and fourth quarters of
fiscal year 2005 and the impact of these results on anticipated fiscal year 2006
earnings, as well as to the sale of company shares by senior management in
advance of negative financial disclosures in 2005. Spectrum Brands continues to
cooperate with the Atlanta District Office of the Securities and Exchange
Commission's investigation into such matters.
Webcast Information
Spectrum Brands management will discuss third quarter financial results in a
live webcast on Thursday, August 3, at 8:30 a.m. EDT. Interested investors and
others can access this webcast through the company's website,
www.spectrumbrands.com.
Non-GAAP Measurements
Within this release, reference is made to adjusted diluted earnings per
share. See attached Table 3, "Reconciliation of GAAP to As Adjusted Diluted
Earnings Per Share," for a complete reconciliation of diluted earnings per share
on a GAAP basis to adjusted net income and adjusted diluted EPS.
Spectrum Brands management and some investors use adjusted diluted earnings
per share 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 adjusted diluted earnings per share 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 adjusted diluted earnings per share
provide 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.
About Spectrum Brands, Inc.
Spectrum Brands 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 more than 120 countries around
the world. Headquartered in Atlanta, Georgia, Spectrum Brands 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,
and various other factors, including those discussed herein and those set forth
in Spectrum Brands' securities filings, including the most recently filed Annual
Report on Form 10-K and Form 10-Q.
Attached
Table 1 - Condensed Consolidated Statements of Operations
Table 2 - Supplemental Financial Data
Table 3 - Reconciliation of GAAP to As Adjusted Diluted Earnings Per Share
Table 1
SPECTRUM BRANDS, INC.
Condensed Consolidated Statements of Operations
For the three and nine months ended July 2, 2006 and July 3, 2005
(Unaudited)
(In millions, except per share amounts)
THREE MONTHS NINE MONTHS
------------------------ -----------------------------
F2006 F2005(a) INC(DEC) F2006 F2005(a) INC(DEC)
------ -------- % ------ -------- %
Net sales $698.3 $707.8 -1.3% $1,943.3 $1,719.5 13.0%
Cost of goods sold 430.1 429.8 1,196.5 1,057.7
Restructuring and
related charges 2.7 7.8 4.4 7.8
------ ------ -------- --------
Gross profit 265.5 270.2 -1.7% 742.4 654.0 13.5%
Selling 154.3 142.8 419.7 349.4
General and
administrative 43.2 43.0 137.4 112.7
Research and
development 7.5 8.0 22.5 21.2
Restructuring and
related charges 11.5 7.4 22.8 7.5
------ ------ -------- --------
Total operating
expenses 216.5 201.2 602.4 490.8
Operating
income 49.0 69.0 -29.0% 140.0 163.2 -14.2%
Interest expense 45.7 38.6 130.0 94.5
Other income, net (0.1) (1.1) (6.0) (1.3)
------ ------ -------- --------
Income from
continuing
operations
before income
taxes 3.4 31.5 16.0 70.0
Income tax expense 0.9 10.7 5.3 24.9
------ ------ -------- --------
Income from
continuing
operations 2.5 20.8 10.7 45.1
Income (loss) from
discontinued
operations, net
of tax - 2.9 (5.3)(a) 4.6
------ ------ --------- --------
Net income $ 2.5 $ 23.7 $ 5.4 $ 49.7
====== ====== ========= ========
Average shares
outstanding (b) 49.5 48.9 49.5 42.0
Income from
continuing
operations $ 0.05 $ 0.42 $ 0.22 $ 1.07
Discontinued
operations - 0.06 (0.11) 0.11
------ ------ -------- --------
Basic earnings per
share $ 0.05 $ 0.48 $ 0.11 $ 1.18
====== ====== ======== ========
Average shares and
common stock
equivalents
outstanding (b) 51.6 51.1 51.0 43.9
Income from
continuing
operations $ 0.05 $ 0.41 $ 0.21 $ 1.03
Discontinued
operations - 0.05 (0.10) 0.10
------ ------ -------- --------
Diluted earnings
per share $ 0.05 $ 0.46 $ 0.11 $ 1.13
====== ====== ======== ========
(a) The fertilizer technology and Canadian professional fertilizer businesses of
Nu-Gro, disposed of in January 2006, are excluded from continuing operations
for all periods presented. Certain amounts have been reclassified in the
three and nine months ended July 3, 2005 to conform to the current year
classification and present these businesses as discontinued operations.
(b) Per share figures calculated prior to rounding in millions.
Table 2
SPECTRUM BRANDS, INC.
Supplemental Financial Data
For the three and nine months ended July 2, 2006 and July 3, 2005
(Unaudited)
($ In millions)
Supplemental Financial Data F2006 F2005
- --------------------------- --------- ---------
Cash $ 13.1 $ 27.0
Trade receivables, net $ 374.3 $ 449.5
Days Sales Outstanding (a) 50 54
Inventory, net $ 461.0 $ 470.3
Inventory Turnover (b) 3.6 3.7
Total Debt $2,282.9 $2,336.7
THREE MONTHS NINE MONTHS
------------------ -----------------
Supplemental Cash Flow Data F2006 F2005 F2006 F2005
- --------------------------- -------- --------- ------- ---------
Depreciation and amortization,
excluding amortization of debt
issuance costs $ 22.5 $ 21.0 $ 66.4 $ 48.8
Capital expenditures $ 20.9 $ 20.6 $ 51.2 $ 40.8
THREE MONTHS NINE MONTHS
------------------ -----------------
Supplemental Segment Sales &
Profitability F2006 F2005 F2006 F2005
- ---------------------------- --------- -------- -------- --------
Net Sales
- ---------
North America $ 394.2 $ 412.8 $ 954.6 $ 909.2
Europe/ROW 117.1 137.3 416.9 503.8
Latin America 54.6 49.6 168.9 151.9
Global Pet 132.4 108.1 402.9 154.6
-------- -------- -------- ---------
Total net sales $ 698.3 $ 707.8 $1,943.3 $1,719.5
======== ======== ======== =========
Segment Profit
- --------------
North America $ 61.7 $ 72.3 $ 125.9 $ 147.2
Europe/ROW 4.3 18.0 41.5 73.3
Latin America 4.2 4.3 14.2 13.6
Global Pet 20.6 11.7 62.4 11.6
-------- -------- -------- --------
Total segment profit 90.8 106.3 244.0 245.7
Corporate 27.6 22.1 76.8 67.2
Restructuring and related
charges 14.2 15.2 27.2 15.3
Interest expense 45.7 38.6 130.0 94.5
Other income, net (0.1) (1.1) (6.0) (1.3)
-------- -------- -------- --------
Income from continuing
operations before income
taxes $ 3.4 $ 31.5 $ 16.0 $ 70.0
======== ======== ======== ========
(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 As Adjusted Diluted Earnings Per Share
For the three and nine months ended July 2, 2006 and July 3, 2005
(Unaudited)
(In millions, except per share amounts)
THREE MONTHS NINE MONTHS
------------------------ ------------------------
F2006 F2005 F2006 F2005
---------- ---------- ---------- ---------
Diluted Earnings Per Share, as Reported $ 0.05 $ 0.46 $ 0.11 $ 1.13
Adjustments:
Restructuring and related charges,
net of tax 0.20 (a) 0.20 (c) 0.36 (f) 0.23 (j)
Inventory valuation charges, net of tax - 0.10 (d) 0.00 (g) 0.51 (k)
Discontinued operations, net of tax - (0.06)(e) 0.10 (h) (0.10) (l)
Other adjustments, net of tax (0.03) (b) - (0.11)(i) 0.17 (m)
---------- ---------- ---------- ---------
Diluted Earnings Per Share, as Adjusted $ 0.22 $ 0.70 $ 0.46 $ 1.94
========== ========== ========== =========
Diluted shares outstanding (n) 51.6 51.1 51.0 43.9
Note: Unless otherwise noted, amounts presented below (other than per share amounts) are pre-tax.
(a) For the three months ended July 2, 2006, includes $2.7 million ($0.04 per diluted share) of
restructuring and related charges included in cost of goods sold, incurred during the period.
Also includes $9.9 million ( $0.14 per diluted share) and $1.6 million ($0.02 per diluted
share) of restructuring and related charges included in operating expenses, incurred during
the period, in connection with (i) the United integration and (ii) a series of actions in
Europe to reduce operating costs and rationalize operating structure, respectively.
(b) For the three months ended July 2, 2006, general and administrative expenses include a $1.7
million ($0.02 per diluted share) benefit related to expiring penalties, associated with the
Company's provision for presumed credits applied to the Brazilian excise tax on manufactured
products, which expired in the current period. In addition, interest expense includes
approximately $0.4 million ($0.01 per diluted share) net benefit related to interest charges
associated with the Company's provision for presumed credits applied to the Brazilian excise
tax on manufactured products.
(c) For the three months ended July 3, 2005, includes $7.8 million ($0.10 per diluted share) of
restructuring and related charges included in cost of goods sold, incurred during the period,
associated with the closure of our manufacturing facility in Breitenbach, France. Also
includes $7.3 million ($0.10 per diluted share) of restructuring and related charges included
in operating expenses, incurred during the period, in connection with the United integration.
(d) For the three months ended July 3, 2005, includes inventory valuation adjustments of $5.7
million ($0.08 per diluted share) related to the fair value write-up of Tetra inventory and
$1.6 million ($0.02 per diluted share) related to the fair value write-up of United inventory
in accordance with the requirements of SFAS 141, "Business Combinations."
(e) For the three months ended July 3, 2005, reflects a net of tax $2.9 million ($0.06 per diluted
share) adjustment to exclude the discontinued operations of the fertilizer technology and
Canadian professional fertilizer businesses of Nu-Gro, disposed of in January 2006.
(f) For the nine months ended July 2, 2006, includes $4.4 million ($0.06 per diluted share) of
restructuring and related charges included in cost of goods sold, incurred during the period.
Also includes $17.6 million ($0.23 per diluted share) and $5.2 million ($0.07 per diluted
share) of restructuring and related charges included in operating expenses, incurred during
the period, in connection with (i) the United integration and (ii) a series of actions in
Europe to reduce operating costs and rationalize operating structure, respectively.
(g) For the nine months ended July 2, 2006, includes an inventory valuation adjustment of $0.2
million ($0.00 per diluted share) related to the fair value write-up of Jungle Labs inventory
in accordance with the requirements of SFAS 141, "Business Combinations."
(h) For the nine months ended July 2, 2006, reflects a net of tax $5.3 million ($0.10 per diluted
share) adjustment to exclude the discontinued operations of the fertilizer technology and
Canadian professional fertilizer businesses of Nu-Gro, disposed of in January 2006.
(i) For the nine months ended July 2, 2006, general and administrative expenses include a $2.0
million ($0.03 per diluted share) benefit related to expiring penalties, associated with the
Company's provision for presumed credits applied to the Brazilian excise tax on manufactured
products, which expired in the current period. In addition, other income, net includes a $7.9
million ($0.10 per diluted share) gain on sale of the Company's Bridgeport, CT and Madison, WI
manufacturing facilities. Lastly, interest expense includes $1.3 million ($0.02 per diluted
share) related to interest charges associated with the Company's provision for presumed
credits applied to the Brazilian excise tax on manufactured products.
(j) For the nine months ended July 3, 2005, includes $7.8 million ($0.12 per diluted share) of
restructuring and related charges included in cost of goods sold, incurred during the period,
associated with the closure of our manufacturing facility in Breitenbach, France. Also
includes $7.5 million ($0.11 per diluted share) of restructuring and related charges included
in operating expenses, incurred during the period, in connection with the United integration.
(k) For the nine months ended July 3, 2005, includes inventory valuation adjustments of $5.7
million ($0.08 per diluted share) related to the fair value write-up of Tetra inventory and
$29.3 million ($0.43 per diluted share) related to the fair value write-up of United inventory
in accordance with the requirements of SFAS 141.
(l) For the nine months ended July 3, 2005, reflects a net of tax $4.6 million ($0.10 per diluted
share) adjustment to exclude the discontinued operations of the fertilizer technology and
Canadian professional fertilizer businesses of Nu-Gro, disposed of in January 2006.
(m) For the nine months ended July 3, 2005, operating expenses include a $1.6 million ($0.02 per
diluted share) gain on sale of land and building, offset by a $1.1 million ($0.01 per diluted
share) charge related to the disposal of our Madison, WI manufacturing facility, closed in
fiscal 2003. In addition, interest expense includes $12.0 million ($0.18 per diluted share)
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.
(n) Per share figures calculated prior to rounding in millions.