SPB - Earnings call transcript Q3 2018 | Spectrum Brands Holdings, Inc.

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Operator

Good morning. My name is Marianna, and I will be your conference operator today. At this time, I would like to welcome everyone to the Spectrum Brands Fiscal 2018 Third Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' prepared remarks, there will be a question-and-answer period.

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

David A. Prichard

XXXX welcome I'm Webcast. Prichard, morning's and Vice Relations Brands operator, I'll Call Investor Dave to of Spectrum you, Earnings Conference and Holdings' Thank call. Fiscal for Third President be Quarter and this Spectrum Brands, moderating

section follow slide page call. you help there our our IR presentation in the to have remain a comments, www.spectrumbrands.com. Now placed at Calendar on Event the will This of website we document our following

So will management's slide our turn today be are for XXXX now you'll led we differ opening they'll and then deliver CFO. CEO, comments beyond. Q&A our of Actual will see Maura, materially. assumptions David the results Martin, nature Chairman and do remarks If and if may presentation, uncertain. include upon start expectations, the we and slides statements with outlook X by and conduct statements, including call and are Doug that fiscal current session. to These and our by projections, and X, forward-looking Doug X David based

X-K obligation now review available Now release With Brands Investor website outlined Holdings' in today's Spectrum encourages call due section. SEC basis David the update Spectrum Chairman that, the and that in XXXX, filing, will and to and recent forward-looking our discuss included the these recent Reconciliations cautionary to filings CEO, we for Relations July Maura. Brands any please to note and I non-GAAP measures the this on call. most release risk both in We are XX, will in over you on are which GAAP that and turn measures financial our certain press dated a to factors statement. press no assume risk, statements our Also, our XX-K. most

David M. Maura

I Brands. us joining complete start them thanks, the is everybody, from by new took has. Hey and welcoming you quarter believe shareholders here David, today. three last I I transaction significant I a that no for on new to months and actually company. Spectrum everyone our to now results that opportunities ago, I'd thanks, role the and That to the which like way upside directly told Group When in spoke participate would enables define our company second HRG to

us a However, refine We're and being I of that starting process did mention it refined. refinery. would are we

are While and you pleased results of have changes, also we report have restoring a of more leadership half streamlined this a beginning completely much result less and the you on the focused they're our margin potential year would remised units, ultimately growth much through on leveraged, already through the fiscal months into growth with will determination this gratitude our more every that operating significantly to responded extreme to company that greater worldwide much thank positive to and demonstrate quarter with a my believe to back the progress much to we read team on my that and positive delivering that not to move and to who back in momentum third trajectory we focus members the ownership company I'm make, to our accountability culture promised I the in one year. results. as transformational more we be with would a four extend higher resiliency I structure. put of core employees positive sincerest we have all company,

greenfield Edgerton, we've adjusted deliver significant EBITDA sales we prior facilities encouraging & against that Home operating strongly our QX. and from for HHI results reported increased many, assets and Garden, experiencing Auto by rate did our of third both double-digit Kansas in many X.X% achieved the from progress growth, quarterly organic our assets the years Ohio. in Improvement Care year in efficiencies quarter. quarter rebounded Home our Highlighted Our businesses highest the growth continuing Hardware Global & our strong versus operations Care We we Auto top sales and Dayton, and been and in line in this

This products quarter is for The is our market brands also our demand largest quarter. and solid.

the most introductions portfolio Ohio which and Dayton, were our and exceedingly efficiency hold customer measures Perhaps markedly our launched was are reduced our across culture strong. backlogs approach new importantly, New that facilities, working. are and new confirms taking in growth e-commerce Edgerton, were order to and product Kansas

continue $XXX product X% and unfavorable mix, few grow of EBITDA by higher a impacted significantly adjusted name million to about the increased facilities. did efficiency to as costs freight we operating Kansas in the costs, we Our be input even and improve as even Ohio commodity

forward. strategic that I of long-term these lower result However, and efficiencies operating the confident going merits remain in will inventories improved consolidations

And essentially I'm customer way. largely start-up to now the from today from food in adjusted business. were and looking order backlog improved business recall can cash quarter ago, rawhide to Pet us, turn to the some the to $XXX to delivered in some U.S., as our continuing as last segments unit small year. encouraging European return the ops aquatics that Netherlands the the $XXX But pet ability us guidance May distribution of we a would temporary To reset. in is these and we in year operation million issues. some we to expect ramp anniversarying reporting third to that had issues million. free behind now to – the I about the In results are ship of did such, of built we $XXX late by quarter. in it this and here. adjusted fourth behind turn impacted up the and $XXX thought our in now was And as Kansas our have our We're April and negatively these a bullish acquisitions correct rawhide in to Pet the in rawhide this the slide forward efficiencies we've issues had on for year be short-term a efficient I centers operating strong Pet X, and to Pet are GloFish last quarter's consolidation our leading If highlight but you the we turn over fiscal experienced move Dayton. I XXXX QX get of we and of reiterate results honest, if want some outlook EBITDA I As million this aspects million our to slide continue X be flow PetMatrix forward progress of I recall and

which First the order created – and this is essentially about rid in backlog reduced that million was this got $XX by our the Kansas, quarter, of facility in remarkable, month of the backlog March. achieved was The three-DC the shipments we in moved of and did achieved before model network to its company highest the facility we actual two. a had model with – history it our and a DC versus single

proves and actually process cycle at underwritten our is down this properly it wasn't improvement team The to they been It management outset. times. work. in teams just strengthened, going So facility place the are DC to has DC continue that drive one

forward, picking improvements to improve to was we're leadership along more by going team, order with service summary, our product shipping to this. of automating this continue experienced quarter calendar accuracy is to forward, to work which remarkable. year to better expand important level backlog In and to we strengthened selection and the the most growth broad end of We in workforce, have in move part a our customer down Kansas looking HHI trained installed our as sales the the newly an equipment XX.X% I'm speed drive will improvement optimal capacity. that third DC and And of enable our levels helped confident continue

today here pleased numbers be found reporting these bottlenecks in of the As month couldn't given I March. more to we I you, that logistic the sit

So clear you. fixes servicing and Thank backlog improvement, been we ending short-term facility. In on serving customer. with and on the entire much, customer. exceedingly the and all hard did enough third team there. new the in HHI is tactical you normal which results cultural leadership of emphasize the million make improved modest Dayton, and of can't focus meaningful under work employees is a backlog maniacal shift its I That focus shipped lot the in March for team saw important and third the in our team a me. of quarter an absolute the quarter and round the quarter thank I the very That number real a and to There's there. third $X it's a impressive applause that

seasonal to the we for to their per guys start year's demand products rose unit culture spring this demand as And and all and we on-time a more be rates very And the Auto what the to to here facility team, acceptable now team the much season this care Our I to Care's Dayton leadership improvements of lower significant stops of out solid and the winds of it operating them did Rob really fall, possible, at gratitude that. three as have accountability, into call All demand employees bringing the grateful we Lewis, ownership, next season. during and and for I'm takes new challenge. calendar. together do down market already the especially Dayton my job Brands an extend Keller in and Deridder. they given believe Steve actually Spectrum I'm we've to with exemplifiy our the make make sincerest get seasonal period in Global to forever manufacturing for shipment the pleased cost turnaround new really to shipping thanks will more there, naturally GAC And the and we're Randy Dayton Under entire teams pulled going efficient our They are the take the whatever basis of in peak production scheduled by excellent areas. the that. customers. these

completed a more for of meaningfully Group The approved provided on to in attributes. future X, Care turn however, the shareholders you at could Board structure much a We tax was additionally If liquidity significant And off a stock. increases truly to result of July distributed work more it by turning and shareholder time, with base. business HRG to in the us was here we're to merger extremely this XX. slide about governance widely I transaction have in bringing the ask and this the tax-free both company's please, much prospects I'm while the has unit. start companies around the do does Directors Auto great with excited but independent now overwhelmingly trading It us our

be shares, in our acquisitions investment initiatives. this we and year. from during are on Energizer a will sale of remain with continuing the its a much to we sales, organic Lighting for for divestitures and use mainly units, ahead billion. and move that have calendar year bolt-on looking at asset we the $X in repurchase we're Battery track we closing, this look to to and business as pending market to to divest and Appliance to close I XX be it from at increase debt, significant net although as transaction remaining close we the businesses. ever expect I've also the excited be the fall believe Regarding the in the four our That's company. and end continue In to years active growth position discussions And into proceeds Small Spectrum of Personal these been that best We now, intend to about reduce Care we'll we to cash

can And will free second our sheet the this our We proceeds resolution Group significantly of strengthen but Doug. give come much over fiscal to more Thanks, now our turn a now structure, to details let ownership Doug the future. Brands the sales you it from we're during the asset half Spectrum building you focused Q&A, in the quarter. and HRG much I'm of smarter, on back well on more year. and to to me stronger, for with XXXX way he flow from balance happy from cash the the

Douglas L. Martin

the operations, being of our impact I entity by to I the team legal plan in the the historic HRG on this with of on management company, a continue presentation financials. everyone. form business. The merger merger Thanks, board our Group through and start and the of but Brands morning, good Spectrum to while HRG operating the results normal, the and you surviving on morning Spectrum Brands legal run take commenting resulted name, the want as to form David,

period HRG result a however, include QX rather Brands. As our Spectrum solely comparable both Spectrum of than activity and results year-to-date this

to little filed, and unfamiliar Q's are look the they're difference. when the that's going to So a you really

I Reported numbers Spectrum for the and primarily from Brands-only least the speaking remainder an of free adjusted So performance and Spectrum flow to perspective. EBITDA will adjusted at will fiscal year, HRG. include both cash be

Additional be filings our separate to XX-Q, the from listing HRG complete Spectrum historical details apart financial both for and a Spectrum information can in found relating Group HRG and of activities our found website. be and in Brands Brands on can Investor Relations addition

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

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

market the basis SG&A sales, and XX.X% gross compared solid or favorable sales, GAC last and to demand primarily $X.X impact from tailwinds acquisition part of reported double-digit the XX.X% favorable finally sales & organic XX% $XXX.X of Garden $XXX.X later lower expense or restructuring from sales driven HHI backlogs. margin grew reduced net and XX in growth due growth $X.X the million, to also of chain year, increased weather currency by solid broke Reported as of X.X%. XX.X% from On QX operations quarter. the and last of U.S. gross delivered due rate. costs. diluted million, year-over-year to Home Reported compared to due versus sales from million, Excluding of of million points supply $X.XX basis, foreign Spectrum prior and leverage spending the to $X.XX was largely of adjusted last tax year sales EPS HRG continuing discipline in diluted which reported operations release of changes valuation year, corporate loss continuing operating XXX higher of primarily due higher of $XX.XX $X.XX last year, from XX.X% basis growth. increased allowances. in XX.X% a by to the increased volumes Reported EPS primarily year, primarily margin XX.X% versus points profit. driven a strong increased of

the using a due XXXX for are year rate last XX.X% tax fiscal laws. U.S. blended in XX% changes annual We for versus to

to battery continuing and and And compensation payments acquisition from operations of $XX.X $XX.X million million costs of and decreased respectively, $XX.X higher year. cash equivalent to driven to timing Kansas Turning our Spectrum last year payments GAC $XX.X expense in quarter of last and reported restructuring continuing $X respectively, depreciation, $X.X versus charge by as $XX.X debt were $X.X related on were Spectrum taxes and as last divestiture was higher million slide inefficiencies million interest share-based of Spectrum consolidation and year. million, Ohio million, from integration of and XX. related to million the our cash year. rates. million the $X.X in operations Euro-denominated $XX.X operating were increased million Spectrum than interest Higher well primarily payments Restructuring for charges notes from third XXXX. cash of LIBOR million the million result Spectrum and the compared HHI in acquisition cash last amortization and projects. processes. $XX.X appliances increases

EBITDA from acceptance our continuing were of of Care. order declined year Armor pressures, onto year XX performance from along a GAC reducing growth Reported record a in customer $XX.X costs GAC refrigerants last benefiting launched million, higher was increase XXX Auto Alpha refrigerants, slide year beginning All tailwind driven marketing points, an and in solid chemicals in results strong backlog. new Now which Project last market basis automotive from unit with net air the is its by XX.X% Wash million operating fresheners. adjusted of distribution operations quarterly and $XXX.X of business slightly of QX line reported prior inefficiencies, with Ultra Armor sales Global margins successfully Wax by Wipes, year from All below in increased especially its while and inflationary this Shine and $XX.X driven investments.

of customer increase last strong $XXX.X slide QX plumbing tailwind Home the from security record significant and shipments now of XX. in in a year quarterly in XX.X% due through order continued to million, demand Turning Kansas reported reduction & an sales our residential to Hardware DC. and backlog a net Improvement in of

XX.X%. favorable of EBITDA XX sales million, XX.X% of grew with of Excluding strong reported increased basis points. quarterly a $X.X Record FX organic million a margin adjusted $XX.X increase

FX million, be EBITDA quarter, to for favorable costs. continued however, as of XX.X%. grew pressured Profitability well $X.X Excluding steel higher adjusted the organic costs commodity and copper freight in by zinc, as increased

with hardware New pace security, QX. scheduled lines steady a product continued for in across plumbing innovations introductions and QX builders' the more at

this orders Now of to is million GloFish, performing of U.S. driven Also to pet exit QX impacted the to unable from now really from X.X% which million and sales business from was Approximately acquisition now which be recall the XXXX, European tolling of fully normal April as $XXX.X increase consolidation grew reported and of $XX.X Global net largely a the $X of customer slide which sales, companion dog back annualized. million largely in well. the in of operating food a and PetMatrix adversely animal rawhide distribution been quarter $X.X European sales centers were end by million in result rhythm. initiated cat Pet, while by were estimated food million has June of an is are the a sales of lost began in-house agreement of shipped $X to at partially that planned due decline offsetting XX. safety

product X.X% $XX.X Reported million, of fell XXX and mix acquisition a organic $X.X $XX.X basis reported million volumes. to impact sales EBITDA the sales net unfavorable and driven point X.X% Excluding margin decreased with quarter. in primarily foreign million adjusted of unfavorable of exchange by lower decline the

EBITDA and is across health $X.X food, this to Pet $X.X of acquisition which grooming, aids and exchange with Nature's introduce Alpha of initiatives in expansion one chews our categories, rawhide continues Miracle EBITDA its year. foreign declined another channels, of million, XX.X%. unfavorable adjusted the along of million further organic Excluding Project non-pet innovation

We the expect full to tolling continue European the be agreement to of million. $XX approximately exit of year the food pet impact customer

cost oil, margin Garden, Home and EBITDA basis Adjusted declines decreased which by The the and Garden result in product $XX primarily X.X% which XX.X% to net inflation Moving sales driven million household in both a slide categories. points. reported from sales XXX unfavorable & and growth input reported strong fell year improvement & $XXX.X steel. X.X% were Home the of XX. last of million, outdoor of corrugate of and is were mix

the services gains retail in an expects Given distribution in quarter solid market July in share outstanding of Garden deliver and to date Trends XXXX. Home team, & it QX as are encouraging. another to did

Now producing Care provided All certain Garden by Auto lines QX also to during Home facility. St. in & business Global support Louis our important the Armor

Now of slide sheet liquidity, balance billion. moving with with the on in $XXX outstanding XX. $X debt We million liquidity to our $XXX million and over billion, very fact third the a of $XXX on of ample balance strong flow cash cash million available $X.X including ended quarter revolver

working we and were million behind to similar the expect the revolver and $XX.X $XX.X prior us through in to QX pay million down including Our capital capital expenditures peak operations season is borrowing year-end. year. discontinued fiscal essentially

guidance. XX slide and to Turning our XXXX

above sales from We including for operations expect to rates net the anticipated modest category FX. positive categories, reported from impacts continuing most grow

$XXX expense year cash Spectrum interest amortization $XXX following and to $XXX XXXX, $XXX the million, discontinued million ranges million between amortization to depreciation cash expected $XX be of $XX for expected for and are We items. interest between million operations. Spectrum to be and million million now Full noncash $XXX Spectrum is million million million. Spectrum approximately $XXX and expected compensation. between flow continue and estimated $XXX is adjusted free including stock-based of approximately expect million between $XXX be to including be payments to and include

between for $XX for are $XXX For cash and expected We between taxes we $XXX Spectrum Dave million, significant taxes cash dispositions. use million CapEx Spectrum now back and being $XX during expected approximately of cash you payments XX% do now rate integration without and be adjusted blended now and should a and related and a XX.X% million charges fiscal anticipate are not earnings, U.S. Thank XXXX. to federal any of the impact million. to restructuring for and acquisition versus between Q&A. now be $XXX million to $XXX taxpayer be and and million

David A. Prichard

the Doug. begin that, and Operator now session David please. with may you Thanks Q&A

Operator

Thank you.

comes Alwy Deutsche question first Faiza with from the of Your Bank. line

Your line is open.

Faiza Alwy

Great. Good morning. Thank you.

David M. Maura

Morning.

Faiza Alwy

One David, I two to wanted is ask HHI. questions. just around

like cleared. a has lot excess sounds So backlog the it of been

given are the seeing? in concern – know perhaps So thoughts sense housing your in the hear of trends what just There's what And some demand a other that just are you I retailers you like, you on at give Lowes gained sort of some segment. generally, underlying just could sales us HHI volatility a so to been end-market bit and for label. private could if love distribution I'd for you've talk maybe little of around

more around come question, that So And some get you. this. I'll then a just I Thank we but second color back once have through that. to

David M. Maura

least at was I get But if backlog or underlying can $XX four, growth only me pleased like sounded the correct the would say, we and Doug three. double-digit. got we organic million, by I'm wrong. down – No, but I there That anything listen,

strong. are markets Our end exceedingly

that's tremendous we is of And in it basically good. this decisions outbound, think I it. month a from technology, XXX any went and technology other not amount And global just trailers some to a a a I proper and of where trailers with in, but from say the don't inbound don't blocking And only And yeoman's I SmartKey we was standstill used would listen, POS made done. think uses think toolbox a today. went in aged Our SmartKey March the we we enough of biggest got stuff orders parking that I we're underwriting lines don't partnering logistics And position timeline effort. have but team's but satisfactory. of a level. bring previous Pfister, There's next look, prudent job, my did Full think with I and a network I'm with In The great were Time our not, want On applications are the again, business just for people from our I there. Kwikset other We've go listening you to innovation me we strong. and if love to toolbox, launched. SmartKey incoming that are lot and our

have think issues still real I we issues, hardware. builders' with

We automation, just have and I'll be where some pieces, new from very back that down some there be elongated need metal, Doug's the put unique stuff we in on Carolina our in that and working. brought not was in me facility there. look, that's SKU can DC in that we're But we trip. a couple math. intensive going But, weeks to you make sure with come do to to

backlog, you back of the organic. was a And the of million double-digit If number. out that rest that's just $XX

So you listen, I this quarter remain of I the HHI. tell level result see can double-digit at it's organic for a fantastic numbers that in growth.

Now, think of company? growth No. look, do that's the I rate the long-term

eighth of where we're XXXX. honest, – be in probably the digit peak still housing kind was meltdown financial mid-single it's let's inning housing in probably a anywhere near still and grower, seventh think see starts prior recovery to the don't we we're the or we see or the I don't the of in But recovery.

short that's tight. concluding And and still had there's minutes of that's supply the a the number week, that's buying watching trend. so of home a sales really time, five millennials first go, and very period movie because really, of their homes still And for like existing It's not. you is homes to just room new are and this

to continue You've got watch to it.

for our inflation, it's don't making talk see and On now for the we that of because them. What's business. because and are to sales in I'll we do margin business major this I'm it's fantastic my at the demand. restore time price of price. So it We're we we need customers, gross Full next money, to to Time now tremendous go that, do it, see In the thrilled go question? go if And guys time

Faiza Alwy

Great.

Appliances Care business. the was and Personal of the next my So Small question sale around

that discontinued lowered is noticed assuming EBITDA from So most I I'm business. you of the essentially operations. this that

David M. Maura

No.

Faiza Alwy

No.

Okay.

David M. Maura

assumption. But No, that's a wrong ahead. go

Faiza Alwy

Okay.

particular what to EBITDA making love more are progress of is? the this Maybe hold-up out carve-out on previously believe about you that for questions if sort could the what around there I you you're So tariffs, talked break financials. know hear that. I'd is, about business sort I of front.

a sell color scenario around decide not how where this to you So about the there business? more thinking might you're is just sale,

David M. Maura

something's not give business you Yeah. sold price, we'll it. done audited And And the what and an that's it listen if we right on until the is. I on buyer find M&A what I so the financials is at balance week. sold, mean it's If got own don't That's back happens. right sheet. the last we put the you update, update

thought. from business quarter deterioration little have underlying margin stabilization, and might recent the delayed Battery some which But of out when a put interested round. business been to have of not cash carved we we in basically tremendous Whirlpool. in And, first held costs are free deal audited, and difficulty you right. Appliance inflation still structure only being the around good there's pretty impact getting but see in to the get I we're than And, frankly, we It because didn't Appliance all actually needed And tariffs, yes, generates We buyers point faster a to frankly, It's the DC. bantered assets sale have in very, Honestly, for our quite flow. our very to numerous the tariffs moved it. And, we in unit. the that then financials it. It want not pursue results it. a amount business. good fourth

So, the bullish look, I'm still on asset. selling

away guy. M&A history. an basically from Spectrum. my exceedingly I'm know guys You Multiples are stretched

I think our multiple's reasonable.

exceedingly And of of amount equity is find stapled capital we critical Strategics out supply position. excessive. ways more that to like to have records Private world to dominant low. a think they ops don't go to grow. market brands get phenomenal firm need there. rates the rest There to are U.S. and Interest got are seven have really work. levered their share I chain, strategy. still PE mass, can financing put worldwide Any and players times bigger, the in go-to-market has efficient need appliances

have. don't So, just than look, we this to more I on comment want any

Let's deal definitive and you it. get to a we'll about tell

Faiza Alwy

Great. Thank you much. so

David A. Prichard

question. Okay. Operator, next

Operator

Your Raymond Altobello James. Joe from next question comes with

is line Your open.

Joseph Nicholas Altobello

morning. Good guys. Hey,

So throughout to much higher year costs potential headwind much pretty what's I'm quantify costs this going commodity how all that logistic you're David, higher you a businesses. mentioned presentation, could next the year? in of number do And if to year? and price times you your of of see curious next your a think and against you maybe

David M. Maura

Yeah. away pressure, you been game. it's been obviously, where have brand than I'm significantly retail have prices sticking, much multi-nationals, more others, where some our position, have larger results increases. but getting take guidance easily clearly, equity and to number kind Look, divisions. likely it. the one see the powerful, When in the the buyers retailer they're of I is from is those taking They having the go price to we coming some of of more into your out a demand

to we're go then on we're and having we're the supply We've go needed where our to and healthy we're them. to And one situation us full service to get up has got so chain look, customer to in for conversations be time, those service ask been price. standpoint. levels to And going get able now I just going – where from we're a get

business and retail can shy. in we are The We're development, restore R&D, do us innovation, to in our the business better more to means helps invest profitable are make that company, a We're with. which a as So margins. we partners counterparty makes money the money. new quite we grow, more product going frankly, our not to

So price increases. coming are to pretty if for we're and listening, a stance we're to going aggressive my take ask customers

Joseph Nicholas Altobello

guess Okay. business, That's up very the Pet helpful. exit were back backlog, And you I the and looks this on like secondly, if the the quarter. recall, tolling sales it and Pet actually out

expected it you last that earlier that to mentioned year, business You hasn't. and turn

the Would seems in that problem and of terms it forward, looking here. of that's sales like So to child been up next EBITDA business expect you be year? sort

David M. Maura

It other did really call recall and to ago, you, turn you know that owners it been – would you're personally me calling have I'd a think tell wildly would I it really right It have we customers. with You with with specialty recently. we retailers was of hurt year of on It out, our voluntary. FDA. these some what, had was and visited than our deserve Pet did the It pet expensive. the was I I out. me ourselves. us

we've Digest-eeze. I'm with right but – it's not, quality, are that's them relaunched are We got it programs in cleaning where between best We're was chemicals and Ambato We're got Ecuador product market we've living with we it the looking, to plant and treating in you the Dingo. label we of the our your producing amazing and new enzymes highest a human relaunching putting to great. in new we on Believe the Salix or there. lost. just it I've and We're Dayton product. made private fantastic make comes back all it them. acquisition not making radiation Edgerton, front telling down there going a I there we've the we're only the facility. I old after are healthiest I been dog, for from mean,

way to a it's yes. bullish. longwinded look, I remain say So

next that I'm let's right. think experience going we growth going see to are and I forward absolutely and quarter if talk

Joseph Nicholas Altobello

lot. a Thanks do. Will Okay.

David A. Prichard

Thanks, Joe.

Operator

next from Securities. Labick CJS question with Bob comes Your

open. is line Your

Bob J. Labick

and I'm talk a little bit going to & about the take Home step Garden. a

margins did & the those on mix, You said was the a you in margins that obviously that. and color little or more and Home Can that there. that around Garden, like recovery out Global Just facility materials? things potential about Auto talk helped raw impacted

David M. Maura

and and Yeah, it the the really too and the more question, ahead with I is ends way believe siloed myself reason here I Chief in surprise Chief truth. way Officer. be one And preaching yet, new of structures, all many And I'm company and the saw not way, which regional, bureaucratic. to those brutally down. is the this new since is tell and the going call biggest me everything begins you, I'm you. culture. culture almost and but appreciate listen, let expanded by I'm of fact, My go got role, reporting because asked appreciate matrix-like Executive transparent, But unvarnished tell things really no, blunt to tearing Bob, nobody's Officer, too I I taking And me Encouragement I

the people reporting been. important Dayton, raised AM faster the know speak are it's the a solution challenge, people clear X in had you accountability, has to In we kind want have And asked. are, of it's how question one, is, wouldn't I because solutions-oriented know problem. of to and they can the the a our I a most mentality given problem called those a where ownership, to lines their back it, get company I encouraging And stress are to we hand restraints peel really say bring I at change can't a As – structures, and And we capacity simplifying old we you just have up. the faster now. that problems evident back the if new world, onion to really where

just sure and would stock. That's with mentality. happened a Chapin Care's it this Pet this not and difference. All here what only all sitting contributing we keep I in what to and quarter, to one team, launched everybody Randy it's And And actually plant Global only XX% I'm customers, international why Home this not for this, Garden the Auto now, to have that I in it and and look, line complainers. going that's entire quarter. we silos, results margins side, team a thanks overall Miracle. Randy, St. in made in one we do win. that specific would ran our to my line, make had little have Listen, why Virginia. the we're and Louis – to able – the listen, produce able mean, sprays wrong. Nature's if to in we're that's just team new customers last hey, did That's trigger gave produce amazing. get to And, And a the me contribute in delivered the we're not Armor today a we fantastically. & we and not quarter, and didn't guys to only are it's – said, look down listen, making Rob where opened another And margin been me excited service U.S. drug XX% It's margin of those down we think line bunch I able XX% is so the We here bit. of our division. we division We don't we that's I'm and and whiners had Blacksburg, a reason Deridder. been But Steve, breaking this EBITDA on But

to oversell We time. we more do do. I'm long to exceedingly lot at have of I'm has mean, Garden doing this we been Home and to I I really stronger, lot But to best we did, the a company. practices work want more this. a a quarter that have smarter, become focused & has but glad pleased don't globally a basically really,

take the get the going into Home equally leadership excited best the team stewardship, of them practices Care from fall It's apply & new and Auto to some new with new to I'm be so culture. to and the And under then exciting. Garden those

And Dayton get XX until to assets I team I we his overcommit. take say want industrial Garden, got bullish they're we I'm want in want excited. can don't have and won't thing to and Care, to Auto going So it. same. do. logic people The what quit all between get it's very are about But that's we just to overly really that they get beautiful. just the to I & one We Randy me months. for what but Home the don't there, – on in

Douglas L. Martin

follow-up. specifically mix to a just talked Garden Bob, & is bit Home little about. difference The in that heavier is year-over-year private we've related margin Doug. of This label quick

also of of over drag. late, a that concentrate and to from the We also much entire going a a But perspective talked our sell network. across little didn't about efficiency items the a are the because of help season as and aerosol us productivity liquids started business, bit margin is in just David which time,

Bob J. Labick

similar ability to of color. particularly the That's going great great a And among your facilities forward. shift take is advantage to Okay. Great. asset

trying believe So strong out specific without from pinning number, down segments? do peg or and transportation quarter. to it that your higher last problems a like you with margins or quarter, so, you quarter how it levels Or to recovery you to raw thinking materials the to or a you are can a historic about on be year not very looking across And medium long-term? sounds this back

David M. Maura

Spectrum trying business like of and you going question. I'm I get to want let's you are know over-delivering. the it two you answer Spectrum about to going Look I'm it. your down. not Well me but I I But to give things. the you, of to peg back business under-promising, talk want get then in back to in do

X at to go make we'll And specifics. much how we incredible the a on vein, now curve get. additional you go just operating to it give more it. those depends not And lot so that us changes exciting – and Look, Dayton the given there's in their legacy Look, efficiencies intelligence & to of get right. need give learning in going industrial And can Garden, the I'm XX to up months And me. fall. Home take, the can is we also knowledge price native to

And going all let me about future. go that's it talk let's so do in the and that, And say. to I'm

Bob J. Labick

Thanks so Sounds much. good.

Operator

Your next Zaffino Ian with question comes from Oppenheimer.

line open. is Your

Ian Zaffino

So question down plants, you would as GAC guidance does look be, the shut to fill assume...

David M. Maura

we're better. down plants, them we're Whoa, making whoa, any not shutting whoa, whoa,

Ian Zaffino

Okay.

address looking Is talk has I it give it what very some there about far, might you think as far issues. a how some color better, but arise, like had should you good company be about any so the efficiency be should everything ramps done because just might that past build the at be builds? inventory or in on would you've something potential and where job might us make as Maybe thinking could this the how So that you be issues helpful? inventory an that on we we fix as or

David M. Maura

I What real facilities. history one want I I morning a future quick. there it's put happened were through don't go Auto I care unit I about the our don't No, care quarterback, mean, and create let's the the Care. into in a Dayton, were for want be and listen, future, about five to and Auto There They Care just revisionist, past, one, Monday no, was different Ohio. to great in

you So do packaging you retail-ready look, distribution and could there, what's to plus there, with production do was and take to the more your you those your change-outs. more plus SKUs you called Dayton tried volumes, assumed tried there, to tried do problem you volumes, do old

another to bottles from an Texas running brought or it's you a in bunch I you're but Garland, you're believe – that be not I okay. running of a XX-ounce customer it, the going inspiring, if then so, through line in on empowering, personally wants lines, and XX-ounce bottle, old And XX-ounce there's me. encouraging. and downtimes an

plants and and of to to that. go on have team the increase GAC of I'll Now, going to there's are that. the facility a and decisions re-underwriting I never the poor I those I the there, they're Home I the we good. brought Garden be a be to, his we we really a And with a packaging, optimized, won't at is believe there around in in recently. of prove these did added just Pet going through that. have But long-term, Would them. will was, that that did these of it. framework actually, XPL? Randy to will optimization what view party, because re-underwriting be cost world-class. going to approve Retail-ready standard assets better and you & And I these whole the time, accountability to out third probably facilities, We're is re-baseline other additional knows need efficiency that of want so me think to But are we Maybe too, and end it, supplement. to we wanted ripping to use there? new to way a of personally. about lot job and we to team I've to part thought a question, But lines just there, of do needed big just I'm Ian, your it use be rethink, of that learned of too distribution and much that's going way I make all look But it. put Lewis some accounting kind the been Dayton of may and consultants and team just day, do at be co-packer. to a asked

Douglas L. Martin

we Ian, specifically this QX seasonal from our in an inventory be is bit year a the reorient basis. a know, we'll think again probably in you perspective, as this will I pretty so great inventory facility. build we next But little year, business, that on shape as an

Ian Zaffino

currently? give update so share while can you NOL an on count forma have and you, balance pro HRG, great. the And, Doug, for just Okay, the I us

Douglas L. Martin

Sure. Yeah.

losses So expected got. from the got. that we we we we NOLs to to And get, that capital expected the get HRG,

are So about million. $XXX $X.X those and billion

level As well. the with couple worth Brands Spectrum NOLs we of of the you a to years' know, at entered use as year

So no is before. about count. share in said outstanding we real XX million change And what the

the what funny XX-Q move outstanding, will really again number shares to for going occurred, XX-Q. something and still normal the fourth see of to the transaction in quarter run form that legal is XX to us. the million going in again then show you're the see Now because way the rate up you'll be

Ian Zaffino

Thank Great. very you All right. much.

David A. Prichard

you. Thank

Operator

Hardt. Chartier question Your Crespi, Jim from Monness, with next comes

open. Your line is

Jim A. Chartier

questions you. I got two for

you X% on inventory out that retailers levels recently & pressure the to and reducing Garden from expected in said Scott's there? they the business. Are that First, X% same headwind Home seeing business, came

David M. Maura

grow We're our Home business. to going & Garden

Jim A. Chartier

Okay.

David M. Maura

Going year. forward next and

Jim A. Chartier

would on Okay. into that some thoughts initiative. opportunity forward? curious an just Alpha, Or there on returns you from then that expand that Project going could early if what be are get your is the to And maybe And detail great.

David M. Maura

to to way going It Alpha but I'll years little project. suggestion is the Doug hit It's longer ago. a Project Yeah. three me life. I'll you of tiny no side going be or originated a with tell specifics, let become the

of product absolute is to development be there and So investing excitement new across portfolio our and innovation, resourcing, driving news businesses. and going

faster, we going to forward. to going lot to are smarter, a move stronger, more We our we're be be consumers as relevant and

We are content providers.

We it and great great are at not part Project going to this business. culture fiscal be of XXXX, will part provide of make drive the Alpha be value it will of content, a XXXX. And

Douglas L. Martin

year spend of in businesses. on opportunity Just all – this future. took specifically, to with invest almost the We – of the the Jim, continuing most ops the the the Alpha

that in Instead about we this which we're advertising and out example So broader near really of into line invested in and of distribution we've that's the Pet, year. That in but packaging, true kind investing generation cleaning, Home little new of We're beginnings well. formulations, we've us locks for thing. in as getting there, opportunities, launch all underway. next home. pure And business the did of sizes, Nature's our the electronics and takes Miracle in We're invested very applications that. work's smart very excited

So those Alpha the of we're two where those funds. really good examples investing with are in future

Jim A. Chartier

Great. of best and luck. Thanks

Douglas L. Martin

you. Thank

Operator

Your from question America. Tong comes next Olivia Bank with of

Your line is open.

David M. Maura

year Olivia. morning, Good

Olivia Tong

you hear Can morning. Good Hey. me?

David M. Maura

Yes.

Douglas L. Martin

Yes.

Olivia Tong

Perfect.

the what of priority I you to interest then HRG So of where just for cash closed new debt your is in? the go-forward in does expense. net that now you terms expectation And your deal fall use, ask wanted

David M. Maura

that. Yeah, let hit me

level. our level, down so call early were have Holdco a away, are Spectrum they high right of to call They bond they that lot a bonds not however, up sit steps Brands they're and a and think Super cost us at the our agreements year. feature at part of I interest, people do operating bank expecting and next

guys an couple want the at to the I all put capital becoming like to cadence me, quarters. first. I'm and of I a some end a allocator of see to solid day, more business real operator. But know I'm You and now the really of rhythm up

start And so and at quarters make my get some back of a earn the where we deposits do trust macro believe view and do under honest, our that guy, and what is have world that a as and the back us say. we just are of I few trust overstretched. to a us, I a besides we I belt your where, want there to bank in think confidence lot not then I'm But but people being I'm also, valuations view out I

high, doesn't want price And sure view the when to world make of liquidity so, appropriately. I world my it the do I price is

next And that so to think I and liquidity. billion world's build crystal about pretty $X it times shares. blunt I we I buy call not of X there want we to high because today back materially I'm a been that of keep sheet this you the the have some might But and see have and this balance the months, over extremely want XXXX. a going I company, that, and position a am run in company for and I six We fortress-like ball might delever levered want fall to go to saying I saying while. we liquidity apart sub But may I've it.

HRG it. those isn't. we'll And where first. and earn liquidity make on to premium putting frankly. cap And decent a track we'll But the get I quite our operating the I'm then want optimize market a sure to bonds. go So, I record. look there And way its have at look, entirety, we'll to look in want I to into want structure we

Olivia Tong

guess follow up. Got it. just to I

it in about outlook But cash how flow by Looking year. offset course, curious that your how you the plan at flow proceeds. the But, contribution of the of million this $XXX next terms year, next cash call for – of to eventually the obviously, year. lose ops, discontinued kind for you're let's free looks view looking from the free

David M. Maura

a get a free to XX-day to guys for love short-termism Look, company. but a than tremendous strong our to irritate that to guide, five don't a a guidance. of in I you amount you think this going everybody again, today quarterly longer love quite sustainable now. probably believe maximizing I'm I know I three But be bit. to view from takes years have with I it. all shareholders I cash. going of going that's to that you little make And from frankly, believe investments away it, notice create years It's I

be going excitement so grow customers. increased cash and I out where efficiencies, innovation need vitality businesses, flow can to And from so velocity capital on look, grow But a free times new and where our the news the our the And in we're going. build it to product line. to development the get creates to we straight some may that certain materially of the And shelves invest is side, want there here. that think of create more doesn't get I in SKUs to I of that amount that's more

So but attract. to you I know the want, want that's not of base the answer that's shareholder I kind

Olivia Tong

it. Got Thanks.

Operator

Your next comes question with from Wells Reid Sam Fargo.

open. Your line is

Sam Reid

Thanks, that from that to guys, of just you some way well guess impacting I'm terms the the you're my response getting shelf taking on here channels. guys curious is are question those the space could way into for on in at retailers? if non-Pet allocated your your though Quick like in say being And It sounds you're Pet of question. comment themselves. expanding I segment. volumes the your specialty you that retailers pet any on

David M. Maura

some wildfire. wildly got mass negative know you we to to gone we've and the three handed I was absolutely taken And question. great that our ago. mean what, it's we've Nature's of and Miracle And us. years like like channels, growing brands a That's heads our

just shelves. in can't hit St. it line and I here I'm we're a to Miracle Louis. in for the new I In wait to fact, Nature's about reviewed launch,

And personally lot and a ownership. stuff their also this; recently of meeting be retailers I'll coming. to have but we have tell So you the the we with, with specialty. specialty been going It's grow specialty broadly I to I new and distributed, I for think have in their again back we're into back to are phenomenal think pet programs go them because to put them customers pet desperate going

you their three they not the source mean, from can't pets their I as have product. and real. over think dropped store of humanization simply everything a traffic last I offering, is the differentiated commoditized result, years Asia

can content, of dogs, back bring their product. shelf, we and cetera excitement a was we it three today. we're the again, and to best we to do on between future the specialty channel. cats, happened want years ago going best yes, the and best about displays, GloFish, lot you're with we pet They're I'm with and consumers talking et can with But the back Our And management, and pet years had premium exclusive struggles that retailers. for and in-store that part with about, build us talking over and we the we're some what a think the brands, mass news going not of some last now. some why think big stuff the they pain have want category two the But there we've

coming We to win-win solutions I growth channel. I can about quarters that's talk And hope in that are that bringing relationships to we're how trajectory. channel we're back not rebuilding on with the and a But you there yet.

Sam Reid

Care Global helpful. pivoting super maybe then Got That's to over here. you. No, quickly thanks much. And really so Auto just

supply also just you've bit some other made, of left. some know in the to chain, here that you Thanks. beyond talked that efficiency margins the year back get we've but levers I levels know of to work and on we I there's the still of a progress little might've So say, example? really are up the pull kind can what seen, I'm for kind curious, obviously last

David M. Maura

Look, the expand All can garage. think I outside Look. Armor

Okay.

STP. STP categories. with might All change engines, Richard a to mindset it get general Bubba need deck could Yes, am STP Wallace. great need purpose guy. cleaners. could into be two-cycle He's we to Petty. Armor to think go of a personally into I I lubricant, We we the expand like friends more

of previous. mold been owned and a to it break since that's have the We got Clorox mindset around

halls, call for them sitting our I stands look, Nobody our real I anymore. design they our to town down with talks, what knows STP so I rethink. teams, them marketing, And innovation, call said, completely want

You meet Petroleum. a Stone kid don't They today, Treated Pilots. they Temple think know it's Scientifically it's

slogan, again, these and that's of new the what's So going maybe drive life, expanding new drive that have sales a new need old Maybe to we breaking categories, we into mindsets, future new margins. it. old need product, making rebrand business. out to bringing of That's new to and

Sam Reid

thanks so No, Awesome. luck. much. Best of

Douglas L. Martin

Thank you.

David M. Maura

you. Thank

David A. Prichard

call we before I one have for Operator, close we Okay. down question more please. think the time

Operator

Your last question of comes Reuter William Bank from the line America. with of

is line Your open.

William Michael Reuter

(XX:XX)...the desire for liquidity.

$X of and commentary then in still the $X wasn't have you're reduction. billion cash to for proceeds this going imply were You debt a you high coming of sale extremely meant on of of billion expected to almost was that majority I sure planning cash, or have that's use the gross keeping balance you whether to from whether business. the that Battery

David M. Maura

next on margin, March to again, is this highest just come Auto and going Yeah, GAC think moving We're make but we're Doug's want is we're the and to comment, I on look, that's to operation – forward. not planet, exaggeration, I the Care just of the performing – year. not sure

I hear to want that to means inventory, single right. service So some customer want about want I build it, a don't issue. because don't I

to in be, to supply mean, a XX% where level. I on-time, everybody we full going going at to going be. just make we're confidence that's it's sure it's So

benchmark tolerance Okay, raised, have less. anything the is and so for I zero

million, $XX So that's That's $XX that'll small. require million. some but maybe capital,

to trust re-earn and of that, going of see want bigger our I'm the out want these some going I on with got cash I've Clearly, sheet think refinance no de-lever. liquid, sit to it's and I when base. debtholders much want to me very very I my get to debt allow to I billion to put there. quarters of investor Your $X attractive We're behind rate. get to question. question us. want But is at yield going I not – the into balance a structure scale very, a my to

prudent of but some a think going bonds it's lot can it'll think I than XXXX, today, let calendar into me as to will cheaper be I get for call down I them we and very debt. we our company get pay

liquidity. will of billion not $X sit on We

William Michael Reuter

near be think me. it term, sidelines. then market, least seems follow-up in going you're the just that and to the And at are high the like too seems on you Okay. one valuation essentially for like multiples It in M&A

today, of a As would the list well multiples the think out at you see were businesses guess wish in have with if you mix that do businesses fit there of I they the about other right portfolio? you that

David M. Maura

own person, agree I a I'm and or your is focuses That better think else's throughout agree wrong. I of anything I my lot drive cash one and sale view see And now simple operational look, two statement say proceeds effort's somebody place that with Two, my to goal So part your of business going. my question. at real data quick, times sheet massively look I don't me Bloomberg have balance right where Reuters EBITDA. – is XX first our my but all number going is flow. businesses. put I'd then capital we'll I main that's tuck-ins, the at with to you're free stock a do our than a price data, improvement de-lever aggressive. also and asset look,

HRG the screening got EBITDA, when merger like Some us they've X reality people the wrong numbers – and times XX times. times in and and value of because in we're there trading X at at we're

stock old market you're do you company's need out fashioned out the what to homework And your worth. if and is and so, figure there a this picker's

William Michael Reuter

very for helpful. Thanks commentary. That's the

David A. Prichard

and exceeded of the with top have Thank we Okay. the you that hour.

now. will us all on Doug call Have Quarter good to at conference in a David Third want day. Spectrum thank thank you again. of Brands, and I for both we we fiscal of our Thanks So conclude behalf want and here participating Call. XXXX Earnings our to

Operator

today's concludes This call. conference

You may now disconnect.

Spectrum Brands (SPB) 26 Jul 182018 Q3 Earnings call transcript