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Spectrum Brands Holdings Reports Record Fiscal 2015 Results

The following excerpt is from the company's SEC filing.

5.9% reported sales growth and reported EPS of $2.66,

including acquisition and refinancing costs of $82.7 million

2.1% organic sales growth, 6.2% adjusted EPS increase,

10.3% organic adjusted EBITDA growth and solid margin expansion

Adjusted net cash provided from operating activities after purchases of property, plant and equipment (adjusted free cash flow) reaches record $454 million in

fiscal 2015 versus $359 million in fiscal 2014

Planning 7

consecutive year of record performance in fiscal 2016,

including free cash flow of approximately $505-$515 mi llion

Spectrum Brands Holdings, Inc. (NYSE: SPB), a global consumer products company offering an expanding portfolio of leading brands providing superior value to consumers and customers every day, today reported record performance for fiscal 2015 ended September 30, 2015.

During fiscal 2015, Spectrum Brands completed the acquisitions of Armored AutoGroup Parent Inc. (Armored AutoGroup), the European IAMS and Eukanuba pet food business, Salix Animal Health and Tell Manufacturing. The Company also strengthened its balance sheet and improved liquidity through significant capital structure activity.

Fiscal 2015 Highlights:

Net sales of $4.69 billion in fiscal 2015 increased 5.9 percent compared to $4.43 billion last year. Excluding the negative impact of $229.8 million of foreign exchange and acquisition sales of $400.0 million, organic sales increased 2.1 percent from the prior year.

Net income of $148.9 million and diluted earnings per share of $2.66 in fiscal 2015 compared to net income of $214.1 million and diluted earnings per share of $4.02 in fiscal 2014.

Adjusted diluted earnings per share, a non-GAAP measure, of $4.31 in fiscal 2015 increased 6.2 percent from $4.06 last year predominantly due to the impact of improved mix and acquisitions. See Table 4 for a reconciliation to GAAP earnings per share.

Adjusted diluted earnings per share in the fourth quarter of fiscal 2015 increased 15.3 percent to $1.13 compared to $0.98 a year earlier. See Table 4 for a reconciliation to GAAP earnings per share.

Adjusted EBITDA, a non-GAAP measure, of $800.6 million in fiscal 2015 increased 10.5 percent compared to $724.3 million in fiscal 2014.

See Table 5 for a reconciliation to GAAP net income.

Adjusted EBITDA of $229.3 million in the fourth quarter of fiscal 2015 grew 22.8 percent from $186.8 million last year. See Table 5 for a reconciliation to GAAP net income.

Adjusted EBITDA margin, a non-GAAP measure, of 17.1 percent in fiscal 2015 increased from 16.4 percent in fiscal 2014, which represented the eighth consecutive year of adjusted EBITDA margin improvement. The increase was primarily due to improved mix, operating expense leverage and acquisitions. See Table 5 for a reconciliation to GAAP net income.

Leverage (total debt to adjusted EBITDA, pro forma for acquisitions in fiscal 2015) was approximately 4.4 times at the end of fiscal 2015.

Fiscal 2015 adjusted net cash provided from operating activities after purchases of property, plant and equipment (adjusted free cash flow, a non-GAAP measure) was a record $454 million compared to $359 million in fiscal 2014 and $254 million in fiscal 2013. See Table 6 for a reconciliation to GAAP Cash Flow from Operating Activities.

“Fiscal 2015 was our 6

consecutive year of record financial performance, including a solid fourth quarter,” said Andreas Rouvé, Chief Executive Officer of Spectrum Brands Holdings. “Highlights included record Home and Garden and HHI results, strong performances from our personal care and small appliances businesses, and, regionally, another excellent year in Europe. Even excluding acquisitions, we were able to grow adjusted EBITDA in the fourth quarter, overcoming $22 million of negative foreign exchange.

“Fiscal 2015 was a year of important strategic and accretive acquisitions that will accelerate our growth, enhance our margin and brand profile, and extend our product and category breadth,” he said. “We quickly completed the integrations of Tell Manufacturing, Salix Animal Health and the European IAMS and Eukanuba pet food business and are moving to do the same with our new Global Auto Care division. Our focus now is on sales growth and margin expansion initiatives for each acquisition.

“We exited several unprofitable geographic product categories in the HHI business, significantly reduced ineffective promotional programs in the Battery and Pet businesses, stepped up the pace of new product introductions, delivered strong cost improvement savings, and leveraged expenses across the business,” Mr. Rouvé said.

“Looking to fiscal 2016, we expect healthy top and bottom-line growth again from a mix of new products, new customers, distribution and market share gains, increased cross-selling, geographic expansion and continuous improvement savings along with strong expense controls,” he said. “At current spot rates, we face continuing negative foreign currency headwinds, primarily in the first half of the year. We have plans in place to offset these headwinds as in fiscal 2015.

“Our focus is to fully leverage the capabilities of each of our global divisions by taking advantage of our strong regional sales presence to ensure Spectrum Brands is the preferred partner of our retail customers

,” Mr. Rouvé said. “We are sharpening the pursuit of our

‘more, more, more’ organic growth strategy to enter more countries, serve more channels, and launch more categories by leveraging our strong retailer relationships.”

Fiscal 2015 Consolidated Financial Results

Consolidated net sales of $4.69 billion in fiscal 2015 increased 5.9 percent compared to $4.43 billion in fiscal 2014. Excluding the negative impact of $229.8 million of foreign exchange, as well as acquisition sales of $400.0 million, organic sales increased 2.1 percent.

Gross profit and gross profit margin for fiscal 2015 were $1.67 billion and 35.6 percent compared to $1.57 billion and 35.4 percent, respectively, in fiscal 2014. The gross profit margin percentage increase was primarily due to improved mix and acquisitions, partially offset by the negative impact of foreign exchange.

Operating expenses of $1.20 billion in fiscal 2015 compared to $1.09 billion in the prior year. The increase was predominantly due to higher acquisition, integration and restructuring charges primarily related to acquisitions.

The Company reported GAAP net income of $148.9 million, or $2.66 diluted income per share, in fiscal 2015 on average diluted shares and common stock equivalents outstanding of 55.9 million. In fiscal 2014, the Company reported GAAP net income of $214.1 million, or $4.02 diluted income per share, on average diluted shares and common stock equivalents outstanding of 53.3 million. Adjusted for certain items in both fiscal years, which are presented in Table 4 of this press release and which management believes are not indicative of the Company’s ongoing normalized operations, the Company generated adjusted diluted earnings per share, a non-GAAP measure, of $4.31 in fiscal 2015, a 6.2 percent increase compared to $4.06 in fiscal 2014. The improvement was predominantly due to the impact of acquisitions and improved mix, partially offset by the negative impact of foreign exchange.

Adjusted EBITDA, a non-GAAP measure, of $800.6 in fiscal 2015 increased 10.5 percent compared to $724.3 million in fiscal 2014. HHI and Home and Garden delivered record adjusted EBITDA year-over-year while personal care and small appliances increased on a constant currency basis. Excluding the negative impact of $74.1 million of foreign exchange, as well as acquisition-related EBITDA of $75.5 million, organic adjusted EBITDA of $799.2 increased 10.3 percent versus fiscal 2014. Reported adjusted EBITDA margin expanded to 17.1 percent compared to 16.4 percent last year, which represented the eighth consecutive year of adjusted EBITDA margin growth. The improvement was primarily due to improved mix, operating expense leverage and acquisitions. Adjusted EBITDA is a

non-GAAP measurement of profitability which the Company believes is a useful indicator of the operating health of the business and its trends. See Table 5 for a reconciliation to GAAP net income.

Fiscal 2015 Fourth Quarter Consolidated Financial Results

Net sales of $1.31 billion in the fourth quarter of fiscal 2015 increased 11.0 percent compared to $1.18 billion in fiscal 2014. Excluding the negative impact of $73.6 million of foreign exchange, as well as acquisition sales of $178.0 million, organic sales increased 2.2 percent.

Gross profit and gross profit margin in the fourth quarter of fiscal 2015 were $467.4 million and 35.7 percent, respectively, compared to $411.0 million and 34.9 percent, respectively, last year. The gross profit margin percentage increase was primarily due to acquisitions and improved mix, partially offset by the negative impact of foreign exchange.

Operating expenses of $333.0 million in the fourth quarter of fiscal 2015 compared to $295.4 million in the prior year. The increase was predominantly due to higher acquisition, integration and restructuring charges primarily related to acquisitions.

The Company reported GAAP net income of $26.5 million, or $0.44 diluted income per share, in the fourth quarter of fiscal 2015 on average diluted shares and common stock equivalents outstanding of 59.8 million. In fiscal 2014, GAAP net income was $47.9 million, or $0.90 diluted income per share, on average diluted shares and common stock equivalents outstanding of 53.4 million. Adjusted for certain items in both fiscal years, which are presented in Table 4 of this press release and which management believes are not indicative of the Company’s ongoing normalized operations, the Company generated adjusted diluted earnings per share, a non-GAAP measure, of $1.13 in fiscal 2015, an increase of 15.3 percent compared to $0.98 in fiscal 2014.

Adjusted EBITDA, a non-GAAP measure, of $229.3 million in the fourth quarter of fiscal 2015 increased 22.8 percent compared to $186.8 million in fiscal 2014. The Home and Garden, HHI and personal care businesses delivered higher reported adjusted EBITDA quarter-over-quarter. Excluding the negative impact of $22.1 million of foreign exchange, as well as acquisition-related EBITDA of $38.3 million, organic adjusted EBITDA of $213.1 increased 14.1 percent versus the fourth quarter of 2014. Reported adjusted EBITDA margin of 17.5 percent increased from 15.9 percent last year. See Table 5 for a reconciliation to GAAP net income.

Fiscal 2015 Fourth Quarter Segment Level Data

Global Batteries & Appliances

The Global Batteries & Appliances segment reported fiscal 2015 fourth quarter net sales of $553.0 million versus $595.7 million in the year-ago quarter. Excluding the negative impact of $57.9 million

of foreign exchange, fiscal 2015 fourth quarter net sales increased 2.5 percent. On a constant currency basis, higher net sales for the personal care and small appliances product categories more than offset lower battery revenues.

Global battery net sales of $229.2 million in the fourth quarter of fiscal 2015 compared to $268.7 million in the fourth quarter of fiscal 2014. Excluding negative foreign exchange impacts of $28.1 million, fiscal 2015 fourth quarter net sales decreased 4.2 percent. North American battery net sales decreased primarily due to lower distribution space at a key retail customer, holiday shipment timing and reduction of promotional activity. In Europe, VARTA® battery net sales

growth on a constant currency basis

was attributable to new retail customers and the launch of innovative promotional products. Latin American battery revenues declined on a constant currency basis due to a reduction of trade inventory and the implemented price increases.

Net sales for the global personal care product category of $125.8 million...


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