SPB - Earnings call transcript Q1 2018 | Spectrum Brands Holdings, Inc.

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Operator

Good morning ladies and gentlemen. At this time, I would like to welcome everyone to the Spectrum Brands Fiscal 2018 First Quarter Earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer period.

If you would like to ask a question during that time, simply press star the number one on your telephone keypad. at zero during assist and assistance press conference, you. need then star an anyone any this time please Should operator will

recorded for to conference. introduce As conference David begin Prichard, Thank and your ladies of Mr. Mr. I today, Investor Prichard, President being may Relations you. like a X. Brands. Thursday, now gentlemen, would Vice February Spectrum reminder, is this you

David Prichard

call are of by for Welcome and Officer, of Slide have help to quarter This you’ll include see document you start Thank that remarks comments Financial I’m placed we X and will our our Due with risk, website our will Chief uncertain. opening moderator Spectrum the Brands review dated results statements, Holdings statements statements event outlined will most you morning press follow Spectrum you, we remain assumptions current recent If X, recent We available presentation Jamie, we President first call included and call and and fiscal beyond. and slide projections measures deliver there are any in nature this SEC comments, Chief These Executive the presentation, call. call. cautionary will including XXXX for and Rouvé, based note the Actual update XXXX and release to a management’s Q&A these our then measures you’ll press statement. outlook Executive discuss Holdings and risk materially. we Vice our at earnings the certain factors to again With Prichard, most and on conduct everybody. both expectations, conference today’s spectrumbrands.com. Also, our be Relations Chief our Spectrum your X Spectrum webcast. good release today. XX-K. a to on calendar our the assume and Dave section and encourages along Relations Doug XXXX a following differ To pleased forward-looking that filings Investor financial out February X, Brands to in are upon and note Doug I’ll may that over Brands Andreas fiscal page for Andreas with Investor our Officer. our that session. are now do Slides Andreas today in that, If Martin, forward-looking X-K this and in turn call please Rouvé. to filing of non-GAAP our Brands be led for Reconciliations our Relations which Officer, Investor obligation turn no website to basis GAAP I section. on am in by

Andreas Rouvé

Thanks Dave, and you for joining thank us. all

the tolling $XX growth look total classify quarter Turning $X.X first approximately and first operations. grew sale of dog for X% of as with reduced led a or home We planned net reported growth sales impact continuing driven improvement the therefore Organic announcement operations. expected solid to and U.S. was following January from global our currency to favorable the continuing an different QX delivered have X, segment quarter. year. double-digit a about record business. sales European early impact quarter and discontinued and X%. million Slide In customer and of expected our had batteries Regionally, from exit and cat our pet, were sales a by million which our is food full agreement, acquisitions our way core Hardware of results growth the in X.X% to held and for and appliance financial first our as

facilities after challenges pet in soft the and supply specialty product Latin pet rawhide demand out some from the U.S. our channel American recall. business also was Our of impacted in our

home strong of and some rawhide-free our our their the Sales we rawhide retailers products delayed and the However, in slightly Global and saw with Auto replace in alternatives. intake acquired business to successful garden in quarter as and reduced order in were low down inventories were the season. growth Care

business ecommerce in from in more and home operations of Our driven core than with QX was growth bright continuing hardware XX% and a improvement. again market, pet our U.S. spot by

consumer into media to social resources digital add we want growing continue We ensure they shift increase online our capturing and to decisions that wherever influence channels to more their and of and marketing spending the through are purchase investment buy.

year-over-year. Our X.X% adjusted QX by EBITDA reported improved

by our acquisitions continued from and offset and costs input our contributions costs. our and currency impact were cost commodity on improvement Solid rising PetMatrix GloFish negative a

improvement by seasonal Please also quarter delayed the far intake our impact of first contract of home gained in mix label while we some a AC smallest our Auto strong XXXX Care business in the as season products price me that QX and year of annual that fiscal the and only products. We XX% faced for let major with quarter. holiday the retailers private some our Global continuing promotions and generated in is appearance remind hardware had unfavorable the EBITDA you

spring in Kansas Auto early Turning our November Slide X, center distribution consolidation in Ohio in is distribution moving to Coevorden and of toward be April. exited peak our head we as distribution Also, which U.S. facility coast Care Also, complete, distribution west and is division February. east completed is center hardware our our project consolidation we The improvement home in pet to in coast our centers as footprint forward our the will summer have exit European will consolidate completion strategic of we key progress now in major made period. the our initiatives. into important our Dayton, and

where growth. benefits have these caused called later the working the organic is digital on our organic phase, capital, year remain the and into cost announced transition this focused products support freshener improved on We new and Project Alpha, the projects savings, higher air efficiencies and this during expansion adjacent To categories. with investment An service make we development into more While product and to of objective, All launch delays adjacent and shipments category. Armor we the into start-up lower expand will our see also accelerating example last beyond. and early innovative call marketing lower automotive we initiative levels

Our responded gained customers have channels. way in and many all in we favorable already key a new our portfolio very listings to

categories is into is Another stages the first well opportunities. Nature’s and complementary redirect major pet project channels, is The as more we a In Ignite, but and about with our growth a the initiative re-launch Eukanuba IAMS step, of opportunities. aims to resources Project to which initiatives in division our are implementation additional expansion best expenses Europe. these excited require of Miracle spending as our start-up the in early growth and

XXXX. Project the the performance [indiscernible] made of partly quarters. second expect half Alpha in benefits Ignite will in we continuing We through out expect in to Project see as stronger in to our fiscal fund XXXX start Accordingly, we the operations

GBA reaffirmed fiscal a $XXX flow discontinued fiscal free versus We guidance our million in which cash also have to adjusted record of XXXX XXXX, includes our today million segment. $XXX $XXX million

business Energizer faster calendar XX This X, We focused to announced to of January strategy Turning a brands. in higher a step lighting to cash for transformational definitive XXXX. January was for Holdings our billion reshape batteries spectrum and a in to announced on Brands $X a sell agreement month was our in significant expected margin brands global company. transaction developments end a the into and to Spectrum consumer of growing, close before Slide more

our shares, small to in care drive stages in hardware as as increase of are organic and marketing business the early but Care, our net and with believe value. from batteries personal strengthen investment repurchase home and growth debt, global in we divestitures and By Auto segment We way, Global growth long-term of of we appliance in pet, refocusing plan and to our appliance our home reduce discussions improvement, proceeds other the divest in our garden. these acquisitions component in remaining key we will intention active use also We bolt-on and and well parties. are as this the to business shareholder interested XXXX, initiatives business our

to category. me product the it performance our turn and on now details Doug over by for review Let financial

Doug Martin

Thanks Andreas, everyone. morning and good

in some meaningful in are our quarter noted, therefore sell to statements. resulted held quarter. half and in lower by along with the second This year and half. differences As sales large relatively sale in moved driven discontinued U.S. EBITDA changes and for information the higher during of with we decided have them operations the the the Also, financial benefit nature continuing first our financial GBA this businesses and one-time into the Andreas sales across in our seasonal law EBITDA more of tax and the businesses classifications presentation

QX XX, Slide from sales. with net to turning Now operations, let’s review continuing results beginning

X.X% sales First of last versus year. increased quarter reported net million $XXX.X

the margin new of in the XX.X% increased by million, tax and tolling of tax $X.XX XX.X% QX backlog law, and and top year. to rate HHI we effective reported a Reported with center. quarter from and or $X.XX decreased again annual line investments lower from consolidation year, U.S. sales SG&A to of rawhide reducing grew performance points the Excluding last impact the expense million distribution negative input a from by to product fiscal to primarily driven first favorable U.S. of reform. of basis, compared $XX.X expense food charges. a corporate and and primarily prior the Reported XX.X% enacted of $X.X basis last of in European increase the last the to to of in QX due gross or efficiencies associated launches. primarily operations of partially EPS impact use marketing increased cost included to agreement exit $XXX.X organic due primarily mix, to distribution restructuring due impact project will of operations ramp-up XX.X% basis million recall, in continuing balance year planned versus $X.XX marketing benefit year, change acquisitions pressure, from the $X.X XX.X% compared due unfavorable year Kansas of or increased support in net the for XXX sales U.S. the sales recently of decreased margin largely income interest of the of $X.XX start-up and of the tax $XXX.X sales the million investments, normalized record points rate continued HHHI’s distribution million of approximately versus operating costs, year X%. attributable Adjusted changes increases primarily blended pet X.X% of delivered XXX negative XX.X% to due in FX last This year pet operating X.X%. to On last acquisition tax the driven continuing this the the diluted net EPS new XX% X.X% Reported a

of of of XX, charge last year. $X.X result Turning increases to Cash recall and interest $X XXXX payments the respectively fiscal U.S. we and XXXX, by benefit consolidation million, to comparable HHI law $XX for operating were million of notes. timing U.S. euro-denominated million quarter $XX.X million and $X changes. million during year. were driven project than and QX $XX of of $XXX.X were from net operations June. million inefficiencies the recorded the the year primarily flat expense payments year. the in report Cash amortization continuing million higher interest from restructuring integration Cash and recently Restructuring payments Slide $XX tax charges and $XX.X operations acquisition first versus continuing from of a initiated share-based to and the for last million in tax and million, $X decreased continuing the rawhide were were pet center on compensation million Depreciation, million last enacted related the last essentially last we of distribution related our to taxes $XX.X respectively quarter

business to net beginning with QX unit from Care, X.X%. Turning Global operations, XX sales decreased results continuing reported and of Auto Slide million $XX.X

the by shipments. especially million million, volumes, offset product sales growth, in by basis a U.S. XX.X% was of X.X%. driven Reported lower margin points organic net decreased Excluding lower favorable $XX.X more operating International XXX to of FX mix, than and unfavorable timing revenues Europe, decreased by inefficiencies. adjusted decline to XX.X%, EBITDA of with [indiscernible] primarily $X.XX driven

the reminder, not for the year or a XX% meaningful GAC’s of is a typically full performance of year. As about less indicator of and balance QX

introduction its year GAC growth, with Wax larger new gains, As its the in and focus investments of Global Wash fabric full rate benefits launched automotive we improved full cans, and air The line and were Wipes, of in the share line market. moves vent summer of U.S. on the adjacency XXXX, sticks, in gel QX. fresheners second clips organic odor All successfully which growth and in and is spring saw Armor Auto from periods, the re-freshener, launches overall a programs paper U.S., accelerating prospects. in includes our faster larger expansions This excited the its of Armor into and we are much eliminator Care behind and XXXX an and expects by Alpha Ultrashine its one its product cards, acceptance trade aerosols. and international further Project is vitality as All by

we savings Dayton Turning both large through XXXX as has of improved than spring summer a comfortably Care Dayton for and distribution capital fiscal a it demand little multiple and cost is to year U.S. completed operations, deliver in The more manufacturing, time after move working seasons. Auto and facility XXXX. began to expected and R&D GAC’s facility Global its new officially consolidation locations

to Slide reported XX, sales year. outperformance plumbing versus of and last security home in and residential driven the in strong Canada. million, improvement hardware was This again of and net by growth QX U.S. increase an record Turning XX.X% $XXX.X once

smart single XXX with organic quarter, $XX product in million cost inflation. Once ago in and beginning of larger and XXXX is DC center FX will steady delivering which shut down beyond. the to X.X% profitability HHI growth line a a consolidation be than more few road fell sales is help was result innovation, and start-up in its a this multi-year higher inventory the ease. due map Also to experienced were Amazon a facility higher Boaters Impacting part for in-home Reported of east Electronics completed, facility basis XX.X%. HHI International impacting coast in $X.X is This million, into later Excluding growing that while closed adjusted HHI’s west consolidation Shows, profitability are the unveiled normal of has rapidly its XX.X%. at two EBITDA favorable work lock which smart leadership Consumer confirming mix, has operating costs smart system in to initial volumes, this new April and lower to including were quarter recently to the coast to costs the month. in points months and commodity locks XXXX, pricing members. U.S. for market. HHI to also FX. distribution in expected again innovation new levels residential QX deliver and is U.S. HHI’s Starting sales our footprint project, Kansas. customer encouraging secure offset quickset streamlined locks increased and Prime continuing seen product of associated was began backlog, complete a higher margins the Key HHI’s inefficiencies

as to GloFish $XX.X margin million and last increased of Slide X.X% the acquisitions Now transition is higher revenue Pet million net result a Global its sale global which of from and completed pet, branded continues PetMatrix a business spring. XX. XXXX. QX reported stronger in $XXX.X to of

declined aides, margin favorable $XX of dog Negatively and was decline X.X% impacting a the agreement. point FX net sales acquisitions customer $XX.X million, as $X.X adjusted of in and and the by one U.S. expectations, have sales was Pet FX cat our of customer are impacts increased that Nature’s food initiatives recall is American is sluggish with Organic expansion a as exit revenues growth effective believe innovation XX%. of across will bottom acquisitions, chews, acquisitions and food traffic this innovation impacted performing ahead revenues the of well store basis Reported adjusted XXX as channels. the Miracle million $X.X three Alpha been from XX.X% the the of and enhancing the the year. XX% brands planned organic sales the a million and or Eukanuba lessen inventory launching certain excluding which South full-year sales the acquisition integrated, tolling million line the organic is exit both Excluding European be in net for of will EBITDA be approximately European the we and million while ecommerce of boosted plants production pet to QX In by non-pet agreement fully of $X.X to further to continuing due improvement, We EBITDA tolling $X.X also to health million. as recall Europe, business. impact under and in the pet in brand XX.X% very and million pet U.S., GloFish grooming, of now channels, expect and impact well dog impact of return animal rawhide margin continue declined introducing and to favorable while adjustments the are legacy of our Europe, full $XX in continued levels. IAMS pet rawhide adversely the Pet Project and as Tetra. chew strong were PetMatrix top full-year the of both to in results companion decreased of which

of high continues timing spring pacing to were driven and DEET Shot phasing and by and growth a spring, products, Hot about aerosol Slide to division’s new home and reduced due EBITDA home sales in for normal volumes home basis and expectations in innovation Backwoods garden more upon million plan to Adjusted XX% to several quarterly XX% weather quarter, results. garden, based $XX.X Moving fiscal primarily margin of in million XX, seasonally of fell traditional is with related, X.X%, new reverting historic the reported pattern points and smallest reported garden X%. summer fell The decreased above-category repellant. full-year which $X.X sales XX lower of Cutter XXXX comprising slightly typically net and and

the balance million XX, $XXX $X ended discontinued flow in than were of available of in sheet on million quarter cash cash first $XX the of operations, billion. on and year. a compared we position Slide balance to with million more million, the $XX $XXX strong revolver, a liquidity our outstanding fiscal million including XXXX debt Capital to expenditures, $XXX prior Moving

guidance, Slide impact rates based above the from modest to sales rates. FX continuing for grow Turning current categories, XXXX most operations XX category reported expect positive on anticipated we from including and our to net

items; estimated adjusted between $XXX to expect the following between non-cash are including is deliver between $XXX include approximately expected be $XXX million, ranges amortization approximately expected and is full be of and $XXX expense $XX be operations: payments million, compensation. to $XX of cash expected to depreciation to record We including $XXX cash $XXX $XXX for million million and interest million; discontinued million million and year free between amortization flow interest $XXX million million for and XXXX, stock-based and million

Thank to and million turn and it be and now to for expenditures we tax blended and and million, Cash versus a back charges being to are is $XXX of million. million between impact Our rate to XXXX expected and XXXX that of GBA anticipate be between sales we’ll between changes do taxpayer you, effective restructuring for adjusted to during Q&A. using use U.S. earnings, in any and $XX of between tax any U.S. XX% to expected Dave be related are impact and expected the loss law operating acquisition expected segment. $XXX and integration Note taxes the XX% now carry-forwards. as We $XX to XX.X% $XX are be prior $XX million cash dispositions. we a federal payments years. the capital continue without net are significant million XX% rate and for Cash not of fiscal prior

David Prichard

now much, With and please. may session, the very Thank that, Operator, you Q&A begin Doug. Andreas you

Operator

Lynch. comes from Tong Olivia instructions] Merrill BoA question first [Operator with Your

Your line is open.

Olivia Tong

to Wanted morning. good on concentrate Thanks, sales. first

do great, issue, growth pretty business, impacted any GBA the think to there or have obviously particularly what could were the of you those but existing to your category relative looked so obviously some results? compare expectations, how is to recent now? timing Thanks. divisions bit new rate margins innovative, else first, launched line-up, that in because smartlock Excluding sounds HHI, margins Then the light aggregate of what was our but HHI a the wondering that base. you’ve products on the margins, do the how new the compare

Andreas Rouvé

for category is would strong to X% benefit market Yes, good to continue this which think Olivia, the your range HHI. in say of the growth growth, I on question will first from back sales, the I continue drive, about housing Andreas. of morning U.S. in we growth a Coming a to kind category

Of course, will differences. be there

We fast. believe door the very to that are electronic in continue can we than segment is grow faster that growing we which that, so strong

course number, the negative growth above have in we was quarter our but HHI, the which private impact gained strong us that mix had pull additional XX%, is the up Our driven customer of . impact label by which total in partly help price on an it fact sales did some

Now pet business, business, here moving the sub-categories. see is onto next is different which that not which the seasonal, as are we there should again

for entrants making are get consumers flattish, also promote Some equipment, to faster category new launching categories, are ownership category. are because more fish so we the than increasing, very probably are instance into aquatics, markets, we active getting slightly we the in growing try hobby, to new slightly in progress into like here down and good the but some

see, we took really this onto still coupled capacity, capacity, quarter the continue retailers up our recall. is recapture we or now second them impact will up garden, our in their not we the then is to early that category this and and some Doug which again and our and is the from a, is solid should move low factories continue pet so solid category, We up really the season, garden, small it but and space. earlier, this time in category all Wal-Marts would are world to so holiday running. here any in products the we face second until companion, during headwinds, giving February space It our while have slight especially to impact again, takes rawhide the our are where major supply focusing and us some at we indication still decline more chain full be all holiday to the of but is home retailers all the recall XXX% - the single-digit the we XXX% to back Then single-digit growth. if only we are on to fact frame, back are there therefore therefore next don’t fill But about season now of mentioned I for now this The is part see say, factories as expect seasonal meaningful home time inventory low that had with now growth of the - strong and reduction, as they those this the year. all which of

also so grow and that expect actually XXXX, Auto categories believe see had we becoming also category infrastructure in single look this growth impact the the first air first of awareness the grow in in We believe inventory Auto low the single-digit we We insect and and to quarter, negative Care see they already we continue. portfolios, from repellants to is Care, normalization international believe market products again some in because low garden. there retailers appearance driven the again in their space. digit we growth those the than to from XXXX, create have that quarter expand trade category consumers, this home last where expect small In to is wars we grow. range. We really conditioning can are heavily again the to continue more product year the basically the rollout believe our and so different so take we in consumers the increased should in single nice - we again that’s in Also seasonal going slight again, products reducing will self-service continuing a AC, at solution, Zika categories aware our the stock into wanted the performance. We this more need continue. slight a with digits a scare in grow we of the season, that low in above Europe with to countries and of seen as international we pushback success leveraging more faster the The on was

that different but for categories. I to all sorry reply, tried lengthy So cover the

you precise need Now your just question your at on me question the again, Can colleagues second what moving help again? was to look my again. to margins, I

Olivia Tong

understanding across particularly It the that the HHI, was given but new board the came just that given how basically pretty new some products? base compare but products, those the to margins in got the down, of innovative margins do you’ve margins

Andreas Rouvé

as flag this one part the hardware home although this know, in is was this win, our to be You in private of did our which HHI, and in impact, really of second also related so is, distribution improvement forward. anniversary I to going label the mentioned, is I mix pretty to impact soon consolidation Kansas. we going which base major numbers this approaching We had the have that

the to on bit the quarter. is in price market and we this which not improvement, As therefore quarter, us we that’s higher our level and will passed onto through moving which margins be price back able costs therefore price first could home our now first we are we which part increases with did not did and increase service forward our implementing also inefficiencies only to level going but in hardware are now of compress service in step. our project, increases But that towards we a up, had our implement dropped and customers, had the pass be the commodity hurt as

Olivia Tong

finish battery you’re and what Energizer pending for the what in behind guys guys scenes Rayovac, thanks. what in deal U.S., terms the deal I’m with in play significant of getting in concentration do there. Perfect, role obviously the saying particularly There’s just the line? curious share, Then so lastly, towards are you you the doing

Andreas Rouvé

we of first probability cooperate obligations Overall, high that going a all, Well the to that approval. to have receive in contract believe is regulatory we approval. are certain there the very we how we get

and again as go back - look look sold at a I German, batteries. to think and there I tendency of basis, the private battery a across you XX% XX a take is private the if increased volume globe of from labels label, a market, step German market me the if you the global at approach

I brands, category. together misleading a will good gain But of a that’s only believe Energizer in the and regulatory we the So to very the with think looking law probability approvals, it’s work bit success. the therefore, little again, we firms at

Doug Martin

operate in have. that course, the to battery as historically we’ll continue meantime Olivia, And of business we

Olivia Tong

Thanks very much.

Operator

with Bob Securities. from comes Labick CJS question next Your

is open. Your line

Bob Labick

morning. Good

Andreas Rouvé

Hi Bob.

Bob Labick

Hi.

could entities? us but if more to missed an we and update tell stuff, some latest Sorry situation when you it’s us X-Ks you give know I opportunity I with the the had been December and you stand? where can in the obviously HRG and this, the collapse public each on but

Andreas Rouvé

Andreas Bob, Yes again here.

have they and you we formed special intense discussions of a are As directors, may know, independent with in HRG. committee the

I now which think share you. they making no are we there right are but with progress, good more details can

as can share. there new keep We we immediately you events will soon as posted are

Bob Labick

this mean the out you year, just M&A? market mentioned talk know still about other or of Does regarding--I in how great. thinking but use the terms ruling platform Okay, acquisitions, end the divestitures, the you’re you of the by about is the timing you’re Then of bolt-on out proceeds there acquisitions. from could

Doug Martin

this Bob, is Doug.

and of the want to last out also the do we best do I about we’ll acquisition. and allocation with you to pet GloFish our capital if saw we as animal as within continued added sheet companion and remaining year think have. means on the possible, our historically that, put we’ve to that use think our businesses, to that part to business, that will on and as We balance we focusing the continue building

to were another for there us So a lot would there’s that. the we expectations that to If and interesting us right consideration continue to flow for of nicely do well. opportunity us, certainly cash fit vertical as us, and that give was with growth had

we’d as to we opportunities. know, very We’re capital open have very, find allocation you for so but business, remain, right the disciplined,

Bob Labick

could Currently, the you you Okay, while stock? opportunity are discuss is precluded part on, from are once things I buying all Then great. concluded. that? that’s going this know of back

Doug Martin

have to discussions, doesn’t on extent about, in stock, market. precluded do work from active world in that we there know We to and plan that obviously being the be about Yes. active that not a know we’d are going buy the the place

Bob Labick

much. Okay, very great. Thanks

Doug Martin

Thank you.

Operator

Faiza Deutsche comes Bank. from Alwy Your with next question

Your line open. is

Faiza Alwy

My morning. flow. cash is first free on Good thanks. Great, question

in First your would could outlook you that the businesses it what talk operations, and looks this overall of and about cash the didn’t outlook cash raised flow what’s if but is outlook what change, an increase? flow all, of that taxes increase EBITDA, your so imply payments sort be that you are for does in on Then secondly, excluding year? like driving discontinued organic so, cash restructuring, for the

Doug Martin

separately isn’t expectations of of on and detail On for probably our to divested the the into the continuing the our fairly across is I’m because going cash divestitures, or and expectations break versus as kind operations flow business not seasonal, the effort. don’t timing business legacy businesses, flow to the that predicted only out the cash first to entire you know so question, the try worth business get know, we

of businesses that other year. they’re gave commit but are unusual rules how for some operations, the just and we going XX-Q earlier we’re discontinued to that to there filed, expense guidance, what Now, that the in to is you’ll interest that allocation in performing things, when also so re-commit are get indication the guidance

a right them million machine other for context and working here. initiatives, little have within in--or manage are You’re generation hit we in of also restructuring, a we’ll modest tax both maybe capital $XX expecting our the cash other flow flow to of year, from - that have spent of little parts from and amounts, more the more cash

indication is EBITDA changes expectations from internal performance specific our a of what are. So it not

Faiza Alwy

that? the Okay, a just you February. are have I to on an annual HRG are following regulations and company believe that question, then because being up there part meeting Could Delaware you in required to in the as of you confirm February, month need meeting have annual of an

Doug Martin

February. in Not

scheduled. as let indicated in know We will delayed and when our that, we the release, world we meeting the will be have

Faiza Alwy

your Then term is, seems the years. just several you talk like longer How for business and maybe the basis? one what business it - Andreas, business about sorry, because on last bit if has the thing Okay. the pretty for it more a a you pet are about long-term last pet outlook been could weak little thinking

Andreas Rouvé

invest the of we again that from call without program. that did those staff, level where the believe we we all of the instance, we we we--but to P&G, our to had Spectrum I therefore business negative resources join this actually first. going Eukanuba impact am at one When just factory, the so re-launch exit, mass going pet staffing, acquired with strongest Holland went over mentioned not we took point. MPD opportunities. had and product now are from to Actually, business so Coevorden, basically for roles the we the turning through so I and divisions the is Brands, into the the growth those and earlier, entire IAMS business our We at the were this joining are brands corporate all new development be summer,

going here gained strategy our and factory this we we per cost in term cat a load in factories competitive, are very which really dog private have to two which having fiscal longer the going food lower year. where are again the makes us first us batteries, we where the materialize of strategy contracts now unit, with element high business label were is and because and to to Another follow in gives private load labels as successful, our same

it the three ago extremely starts we cat and So business. which dog was come positive and therefore are year-over-year that we believe years point we where food business, which business, to grow, and about our that really has to it acquired declining

still and is prepare over but utilize brands, specialty upgrade There did strong the we in element resources we products awareness, that very portfolio Nature’s we not we the our certain were the extent last second the which years were to - have invested to those are actually full were channel where The two in to offer channels for in expand, the again the expand serve and Miracle can wider different mentioned car. a and also, earlier, going into portfolio taking instance better mess Doug up we Nature’s brand into strong adjacencies, to the automotive are pet pet with that so strong to strong the we very we Miracle channel. also strong, brand strong like but going clean brand this program, as this to also to are

in believe also have we very momentum therefore, that So those nice categories. we

market getting to flattish, in have and first in and The gaining customers, new into new since years new consumers trend. here children, also slight two new is in positive a there a decline the third nice really here success I we create also category, started hobby, element and mentioned the listings, to here on invest the seeing or we we are where earlier, aquatics is are Europe demand, that

firmly we our one strongest to therefore growing going categories pet be So going of believe forward. that is

Faiza Alwy

you. thank Great,

Operator

from Your next with question Jefferies. comes Kevin Grundy

Your line is open.

Kevin Grundy

specific of great that can how savings, bit Thanks, in to commodities, to is much it’s contend again wanted - topic It a a how you like good on of categories become obviously major and piece, pricing, much the continue to elsewhere. quarter less interest difficult be Doug, the this quarter. mix I understand of the seem margin guys. maybe a Maybe some about of is to a certain of have very would we about and pick you pricing, will morning headwind, pricing pressure think productivity Then now to take so can be headwind. help that. areas segments space your with? continues how perhaps up within the in lot across us you’ll in and to should versus Andreas, mix, the talk commodities, the that,

would an on this be to some Thank to take that and going are then with for a point, your conversations retailers You your pricing, confidence guidance there much get the in in sounded pretty of update how and I in pricing those ability follow-up. your is have great how in optimistic at ability year, your on your you. of categories. It included

Doug Martin

follow-up all a have after that, Kevin? You Good.

take haven’t it’s in on. everywhere. have Let do years, and commodity number that a couple those of this seen - broad-based aware pressure We we me year you’re that a of of

Auto our little little bit couple a costs little specifically, of the bit. their year garden. of part of opportunity business. bit explained in of mix portfolio and across because and of XX% the and Auto it’s in a into that our I XX% in Care little happening to a zinc in case incremental perspective, Care HHI that is anything home and portfolio Andreas in leverage and garden We From pressure had a this other Distribution small thing the Global us For it’s in think year. in some business our input quarter. a there There’s first Global home - case such a

and From pet course then DC also recall in Then So having of in I’m a not impact. drag in the also as pretty the that the reported. concerned our we cost. in and a quarter, in of now, mix is to win rolling the first bit a and HHI, about leveraging recalls a private of of that’s basis, - Auto are a base bit Andreas HHI label a year significant reported the Care a Global process pet lesser in of--in are mentioned, degree out

the and that, which be With the we you core across balance us overall, there continuing a margin of your questions It’s pricing, in pass our to and productivity. pressures expect of offset using for with improved businesses, the on are business, focused So to cost in across the the it quarter, know, at we’re very a mix it’s productivity going I’ll back DNA day-out, some Andreas is businesses business driving on forward. company. that to expect as these and so are have able impacting element input would do [indiscernible]. day-in we other be our to to core least Productivity, some attribute, as we

Andreas Rouvé

simplified not if the goes Again, a becomes I therefore to bit decisive. I If so take a is the you be - margin know, successful really where it discussion, price we it’s retailer little you win-lose want think a with that. down, fully agree with no-go, topic we pricing will

combine packagers, where win-win, of day increase it and that a typically with our price again pass trying the consumer, better we getting What is launches, can a and commodities it make the where product even are upgrades, the product we us, our we it combined the where modifications in he’s so a the we deal. end in for So so the their is becoming the intelligent product be day way second to that the up, retailer at we a the to key increases to for a coming trying have inflation we to prices very consumer also that kind and approach retailer are do are from pass therefore, the of try for on packaging at win-win new of onto also retail take partners price also end what therefore consumer.

Kevin Grundy

How modest, is that? across miss I the year? take are much you pricing included the for able to pricing it your much--did Is in How much outlook portfolio? of

Andreas Rouvé

is about consumer the kind on half depends full unrealistic four-quarter, the labels we the of XXX% see of of as how of say the I a price absolutely impact before, sometimes should which we have would is portfolio, set, because, so is it year will I mentioned may a private say prices. I limit half-year how increase on competitive a impact. But would presence in

Kevin Grundy

is it business. goes case which to a that it’s also kind get business, doesn’t, event Okay, but you it’s Andreas, is the in that customer-facing the multiple those that’s business. in of that on the in that risk bit helpful. it and that and you key execution not obviously are regulatory The question risk pay, - but it asking follow-up, with the the and to and and the possible guys that context particularly of are you’re keep managing around is ask confident-slash-hopeful so willing that a that that personnel through, Energizer is business plausible the going that the morale deal differently, I Energizer, battery doesn’t, in

little that you. can you’re a with how business? the So talk of sort around construct, you Thank execution risk hypothetical bit that managing

Andreas Rouvé

aid of we and a as to market. aid we battery the in which middle hearing best we if example of The new great hearing on run business therefore the innovation. performing batteries launching the is continue own are the launching it, is We are just best generation

European new We our means packaging the facilities, mentioned batteries. review here now right yesterday Europe, business. are into to for earlier I’m that business I invest continue had we in we investing in

continue win new We to customers.

in so have We would momentum. we therefore to exist stronger very merged longer together XXXX bigger, so not again would The player, to we in XXXX Spectrum Varta with the Rayovac Rayovac. become question business openly it’s also growing Europe as and that employees come by believe also year-over-year battery if are Brands I strengthen we the in that is it our very term, acquisition, any your morale, not point one where again--you where the nice on of a the business, battery to to Varta global the term and that joined back therefore believe in portfolio, long joined probably our Rayovac-slash-Varta’s combining and going with know, team of we for the is Spectrum beneficial back part Brands and battery strengths, battery an Energizer long business. explained to

Kevin Grundy

Okay, luck, your time. guys. for thank Good you

Andreas Rouvé

Thanks Kevin.

Operator

Capital Markets. with Gere Keybanc next Jason Your comes from question

line Your open. is

Jason Gere

can there’s that got, a flesh that, out to as that you about go, if you if think to and underpenetrated, world changes? terms busy destocking, continuing any of in discussions I resets In kind space impact - was call, from about a on seems ops little apologize everybody business, room thank quarter. do you. are a late just talk growth Did day. quarter what the of the you great the plan-o-gram you of you the getting, the conversely I still in well, little then guys talk earnings to bit it the shelf more businesses and think you ecommerce just can a maybe you’re wondering I’m

Andreas Rouvé

This is Andreas again.

Let me the plan-o-gram. first on cover question your

in retailers of percent it’s simplicity, end space some a we it win, of cleaner getting that pet, we coming fewer to other auto kind this with You’re we continue offerings, firmly a categories shelf percent the or much day, the in so therefore correct we decisive where losing strong. how in be have, at care is it one have the in shelf but are of of we a shelf seeing the quite tendency lot tendency there where believe are facing, a for the but really we do SKU in be of up

therefore we of major so for a So as headwind clean seeing but tendency there us. is a a are yes, kind shelf initiative, for not far that

where look pet course other question than in is improvement there the categories, you if the the second and categories hardware sold online as Auto different on the Now, of home Care. like share are of higher at business categories, in ecommerce,

information into more the all drive and but into in they We that also buy see staff, wherever it are we then for consumer often it, search trend because buy they investing want online. they as more very business that in digital to to it, behaving, a our marketing

acquired couple focusing we we business ecommerce. So added, in they the have dedicated for instance of on Care, Auto a zero when years people ago, had

We have of dedicated continue team all grow meantime it, in to focusing so that we a in now the can our on expect we businesses.

Jason Gere

how just could for to the if we us going because the to sure range range? percent we’re accounted is right of GBA going that first continuing that’s little a ops last modeling Okay, great. you of help forward, cash I what be know make perspective, quarter I was getting I’m color give flow, test the Doug, luck free a on any just wondering, but from if bit to didn’t about think numbers, restated, Thanks. ballpark business think--and our modeling to the we give year, going I here you within the just can my EPS appreciate - a but

Doug Martin

you it give Jason. I’ll helpful, be hopefully will this much and

in slightly tell and the business you can business our being target, with the ’XX, and battery X% being above that other is maybe heavier was little will EBITDA little I the business helpful appliance probably You lower. capex that’s add is that a business for thing GBA from what the our a

Jason Gere

I’ll it? that’s more, Thanks take Okay, No it. guys.

Doug Martin

that’s XXX to our number. XXX,

David Prichard

please. Operator, question, next

Operator

next Your question Sam with from Wells comes Reid Fargo.

open. Your line is

Sam Reid

question on question. guys my for taking I specifically. had quick Project Alpha Thanks a

and and to given guys last for some quarter plans spending the how was talked directed in the to still global quarter curious batteries modified just are of of investment business? your make level as initiative, Some much to that you you appliances, or looking investment investment to changes guys earmarked you last that have same of of your that the you

Andreas Rouvé

first new we the - a expectations, launched we in quarter, to project, successful appliance refer, in was projects. product if we will Hobbs beneficial Actually line-up be business. XXXX, developing is did just owner batteries initiatives Russell investment so even appliances. will may instance, market for may significant to to very which execute the for future of continue completely therefore and such for It the hit is one into the our home continue those drive launch so exceeded business. U.S. in in the actually, The I instance, going it forward If a we we sales the

Project that, our will continue Alphas. we and business remaining those We will execute continue in to also all

Sam Reid

core term reframe your expectations? EBITDA longer help you no Could know part question. margin global batteries EBITDA expansion follow-up you that your expect across longer one indicated is mix. changes historically of curious but that the business I appliances have your margin then and that you, Got and a business, Thanks. how guys you now

Doug Martin

range, said likely to over-delivery that to because into or Sure, in that XX than as expanding reinvest expectation that, over-deliver in really Sam, basis this every the we margins and XX is Doug. the It XX are to not to extent further also the able are recall, point we’ve doesn’t EBITDA we’ve business. to we change more growth XX an of that then you’ll year given

for be So governor that range going a forward, to continue will long-term actually that us is going kind expectation. our of so

Sam Reid

much. so thanks Awesome,

Operator

question James. next Joe Your Raymond with from comes Altobello

Your is open. line

Joe Altobello

guys. Thanks, morning. Good hey

from a I the your for target cash flow want go to on for to year? second. back in First, flow expected impact What’s this cash changes quickly working capital

Doug Martin

don’t into Joe, of detail, you’ve been either. this I don’t talking on that I go and We call to expect will Jason. level

Joe Altobello

Okay, fair enough.

Doug Martin

the progress we’ve not little kicked the Obviously as made in will a of and a lot some working lot in of initiatives lagging in year, end now little in down HHI improve some inventory inventory you’ve rest through bleed capital inventory in we’re with benefits right today businesses have see early at but Global and couple very into we performance, inventory. year it’s progress of a Where realize DC us seen then Auto that but off isn’t associated those we consolidations, the or capital transitions number working parts bit the high our bit the expect payable we’re the accounts in because initiatives of and a and investing a of Care either XXXX. of to years, you’ll last so really businesses from our that additional

Joe Altobello

because with have trying go lot. there where that, the It a I to sounds is how tank, improvements. capital Okay, regard in you that’s guess, like was much to with I left is working

Doug Martin

We’re for we’re It’s lot satisfied. us productivity never - satisfied. a like never

Joe Altobello

great. Okay,

have got ton portfolio? expand went sale batteries, with as that new make Does to of business sale to of is I markets. your it’s it is existing the guys battery you the bit of attractive you that of the infrastructure a really job markets new good a guess that I the about think distribution, battery to of a little piggybacking with business Secondly, things one done and harder

Andreas Rouvé

This is Andreas.

that The concepts the teams be XX% we and been cover is Latin have correct. see all we will ABC appliance reduced partners for retailers what key will XX% look together all markets, regional deliver also than where we and somehow business, we with to still analysis now for this of of office, international distribution XXX% significantly of markets serve will has the markets, where the a key to however, you this you and footprint, can do them. developing right an are our developing continue work footprint international battery more European able those to with to on the might of smaller then of base in in exactly direct, to American the those kind of continents, if platform; business You’re close you

will an to impact, there major believe - yes, in is impact moderate, going we right you present we relatively So countries. are but to continue is because all be be that the again

Joe Altobello

great. Okay,

lighter one, Just - if margin a quarter. little I on one we could, thought bit last than obviously EBITDA this

target you’ve headwinds year commodities evergreen expect of close Given with do things, XX how of ’XX regard to expansion? to that? finish least the got XX with the about for GBA, think at Obviously exclusion your and to basis some we other margin to but fiscal would points you

Doug Martin

that are expectation year-out. our we Joe, and long year-in know, margin, but to--our you is EBITDA as guide, term is on ambition don’t we we’ll going that Yes, do and

Joe Altobello

Okay, you, great. guys. Thank

David Prichard

Okay Operator, I think queue. we question have time in the one more for

Operator

question comes Your from Zaffino next with Oppenheimer. Ian

open. is line Your

Ian Zaffino

great. couple A Hi, questions.

what’s get On you in your proceeds, the battery anticipated expect what the or bank? to do sale,

Doug Martin

We you of rate, three tax haven’t the law, old we’re because of year. disclosed know, We so actually new year-end that, a of because XX.X%, at September, number close we’re of impact There one will the the whether our at net the rate a allocated know a the Ian, that, new prepared fiscal proceeds which timing. don’t transaction world, as exactly close, an we be. what next indication factors in moment around of makes not part in when at is expect and to or price have in give blended we quarters to the fiscal actually so it it quarter a this so are year that and we difference rate, other including really

Ian Zaffino

of a to or Is way could some those offset use that NOLs tax implications? anything you there

Doug Martin

Sure.

at NOLs have remaining. we know, you As Brands Spectrum

certainly other, to to or way There’s that. present those a benefit cash huge there’s one We though, not so benefit. expect use a value the

Ian Zaffino

$X operating framework tax should under be the on so guess billion? I rate XX% that Okay, of a we

Doug Martin

you your assumptions. say leave didn’t I’ll to I No, that.

Ian Zaffino

you and case, issued that there lot restructuring. that you maintained, since just free flow there some Okay. Is would is Then charges of that guidance the increase. to think way and nuanced EBITDA a in guidance, question, of a time couple about unchanged? EBITDA the or guidance is guidance implied or is an a you’ve more last there imply actually EBITDA changed in the guidance cash the then guidance, noise There changes just of is were

Doug Martin

items other guide EBITDA, I and for we a would and little are couple a in say expectations we that system, little lean on adjustments what are bit of you for those a to harder. capital the know, those little year, of As line tweaking don’t noise the working our into initiatives bit will probably

Ian Zaffino

the than as expected lean that meaning you’ll some offset so Okay, into or flow, capital, you see EBITDA working [indiscernible]? cash better free that to would--maybe

Doug Martin

that sheet that a to it further. initiatives up taken I look of around drive deliver flow, we’ve would--not taken No, up free other given tax cash to to balance would but say change and bit guidance cash that range some. within parts would restructuring the I little cash to our we’ve

Ian Zaffino

All perfect. Got Thank it, right, okay. much. very you

Doug Martin

you. All right, thank

David Prichard

Thank want have we’ll the you. all from both proceed our of the thank and Have certainly to you hour, we fiscal thank day. you. quarter participating I conclude call. a first that, Thank top Andreas good conference earnings so Brands, we XXXX here our and of Doug, at us to call. With for Spectrum reached in

Operator

today’s concludes call. conference This

disconnect. now may You

Spectrum Brands (SPB) 8 Feb 182018 Q1 Earnings call transcript