SPB - Earnings call transcript Q3 2019 | Spectrum Brands Holdings, Inc.

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Operator

Good morning. My name is Michelle and I will be your conference operator today. At this time, I would like to welcome everyone to the Spectrum Brands’ Fiscal 2019 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. reminder, Wednesday, gentlemen, August a being conference As today, recorded X. Instructions] ladies this and is [Operator Thank you.

I would your Brands. Mr. now with Prichard, Prichard like you to introduce may begin conference. Mr. David Spectrum

David Prichard

to your Thank you, quarter conference call moderator Relations Vice for and call for Brands Prichard, fiscal I Dave of XXXX our earnings am Spectrum webcast. President operator third Holdings Spectrum welcome and Investor Brands today. and

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

and So you Executive Martin, Doug presentation Chief will conduct if and and Officer again will Financial the the our session. X will Officer. we that remarks Chairman the Slide will call opening with David Q&A Chief we see by at then be deliver and we and look Doug David led start our Maura,

note X XXXX If comments and we fiscal Slides forward-looking to beyond. for today turn you and that including outlook include our statements our will X,

on risk in encourages statements assumptions in forward-looking release statement. a X, to are financial Spectrum Relations release measures XXXX to note website X-K most recent Now, today’s and recent included expectations, filings that please Holdings’ measures projections any most on materially. call. uncertain. SEC XX-Qs and are Spectrum both August no may which by Also, this management’s are and for GAAP Investor Reconciliations update and outlined XX-K. Brands We we press nature risk, these available in filing, Brands to current our certain statements in our based Actual will assume the Due are cautionary section. upon the that review results these basis discuss non-GAAP factors dated obligation and and differ you press and our

now turn over I the David Maura. to that, and Chairman So CEO, call with will our

David Maura

this us for want morning. I to And joining Dave. thank just you, Thank everyone

increases we pace As our about our I from this weather deliver on are risen our financial here am in the line. fiscal to Home and business growth year a Brands commitments challenge company of a cost set at all proud resume and a close, very input to unfavorable Garden, to employees on our of have tariffs, our XXXX draws headwind despite of are as ago Spectrum to across platform year associates our businesses, our Spectrum distribution positioning and delivering we & in XXXX. goal solidifying stabilizing

a leverage in year. We fiscal have X.Xx net also from peak this exit to structure X.Xx December ratio of as of an materially estimated or – ‘XX improved year capital our of better we leverage

very of revolver. expect million We cash position in $XXX financial to strong be and with our under million $XXX availability full a over

have our far, buyback authorization fiscal year Additionally, $XXX leaving remaining with $XXX million million shares we plan. so of during the us over repurchased under our

believe to a continue our the on opportunistic shares We acquisition capital. high represents our return of

dividends. to million fiscal ‘XX, over to our and through share of recently including dividend, shareholders cash So return committed far have we during $XXX buybacks declared our

our quarter indicated and undertaken was have potential second of we call, identify model global our improvements. analysis On to we performance objective operating a the

execution Plan. detailed have third Improvement we Productivity I into actually we During Global from of our planning the started analysis calling and quarter, have the am initial moved what

growth investments that and permanently and low the insights, innovator, provider flow shareholders. brand to steward is cost our and the is of long-term plan, to teams expected enabling Spectrum our and much consumer growth a company, free delivering marketing. earnings in our development over and strategy This research in line prepare materially Brands increase are as with reinvigorate and very I our which to to embracing am and enter effectiveness leading cash the while efficiency operating we As XXXX, thrilled actually

If you to could move X. Slide please

we As everyday, housing associated news we we inflation sluggishness in input a face market. the have quarter, costs logistic have of costs U.S. headwinds, do distribution fourth and some while got the businesses are with almost in number and the got entered the tariffs that

EBITDA year are from We our of debt million further guidance last to we X.Xx X.Xx of million affirming or to and $XXX $XXX improve full better year adjusted expect leverage to net year this end.

and my will Doug for clarity are driving hear from will on focus across more I geographies, details simply our comments As focus. vision, about and functions results, our business teams how you units

in to competitive strongest with continues marketplace brands. weighted year Our our the positioning this toward improve incremental investments

customer enhance innovate and Our continue teams relationships. to

control brand leveraging time and year-to-date May-June our period. experienced For Garden basis, class St. in and share, multi-year outdoor grew example, expect Home a world the Spectracide Louis. to operations XX% grow unfavorable despite investments we reach the weather the On in that’s we while volumes under brand to these customers continue incremental & by over manufacturing that

one innovation security number pushing the position by smart are leadership residential the brand our In and in we electronics into HHI, connected position in markets on market. our category the building home

under quarter growth. for Home from and new lines planting & entirely growth reflected in our focused brand Europe Kwikset a have mechanical we coded new With our incorporates entry simple system lock the core business ways: starting here U.S. in a Bluetooth-enabled on care Aura, you from Personal was fourth and lock smart upgrade a Care feature in app, and number platforms of innovation quarter. In one, of this product use for team the leadership through to access future addition can results, the and Kwikset an industry-leading convenient this secure that programming a lock we seeds the allow driving our This and personal stabilizing key. derived core traditional

business was SmartBone highlight. Clearly, from combination category our market the DreamBone a significant our share animal companion premium Pet lines. with and Care quarter, reflected coupled Global growth this results Strong product product of gains

category and extensions the we come. continue news double-digit with flavors as in in growth to fact, channels, will as overall In and track twice to is line innovate brands strong and our these new

have go-to-market chain future. a launching turn supply our commercial as unlock attention could performance work continue leverage identified your of focus and detailed procurement, to consumer Brands primary study, which to smarter, operations global continue X, with These customer while models, brands, expect improvements productivity building Slide G&A have our after and we include I faster, strengthening on a And marketing. to streams, four you we If strong our areas improvement. consumer-facing and advantages in teams further stronger relationships innovation Spectrum we areas and scale the

sourcing of productivity realized these the executed for have XXXX. in and initiatives will The invested During approximately million improvement company already quarter, savings. fiscal into majority plan be new $XX we million global the these the $XX on

the our marketing expect will be substantial position. drive reinvested capabilities, and We improve into portion R&D, technology-enabling growth cost of savings these and

operational Our vision, we our consumer-driven growth. company earnings driving greater energized pathway experienced and talent going; but on to position nothing, accountability, been Spectrum cash sustainable are These outstanding accepting our culture flow is focused innovation leadership where a new for we are principles XXXX what that an and prioritize; and are with chain This quicker behind increasing execute. brands. service, investments of clarity, mindset and focus, decision-making marketing while quality and improved actions we we are guiding a has sales, how our refreshed excellence and free that with

turn introduction, Doug over to to quarter. it over With the that now go will I

Doug Martin

everyone. morning, good and David Thanks,

profit partially from operations declined global by Slide with exchange net sales, revenues inflation a lower QX offset from Hardware XX Home X.X% tariffs and and unfavorable of to & margin basis and cost a product down were points foreign of Reported driven XX productivity Gross Turning continuing beginning as offset by & increased partially unfavorable care net gross sales positive were mix. XXX Improvement, Personal results Care, organic pet Home increased was Strong while Garden. review sales by & sales points, pricing basis input and X.X%. X.X%. Home

Jobs loss this absence $XXX of due of depreciation year by a partially X.X% benefit lower interest of to year. sales net points Reported reported million per diluted the and Care stock, lower prior Adjusted amortization restructuring of basis a driven higher increased a $X.XX absence outstanding XXXX offset and and unrealized related and expense Cut the to Act distribution regulations operating X.X% the to Reported the basis, Personal the of EPS large diluted higher net compared due from income loss X.X% year year year share tax expense. SG&A higher declined charges common tax charges. by prior this our Energizer the in and under shares compared the On or XXX on ago. Home of to XX.X% costs, & year interest recently Tax XX.X% issued expense margin expense to increased were prior and loss

$X.X moving Cash DC in and discontinued as compensation million of into and primarily operations continuing depreciation and and back versus last for lower Turning cash XX, $XX.X million HPC divestiture Cash compensation $XX.X to unit prior of to last expense $XX.X driven million levels. year. decreased HHI QX, million this to million and the operations for related from $XX.X the $XX.X year share-based the primarily last million The continuing respectively was year. amortization of QX and activity of spend were impact due million a $XX.X year. were debt the lower amortization payments Depreciation, operations. by transaction including driven higher result by $XX.X year restructuring interest reported continuing increased changes of comparable and from million operations million Slide share-based $XX.X from taxes and respectively consolidation

unit would in excluding sales & X.X% lower year, by EBITDA impacted with security math reflected Organic $XX for and XX X.X% net partially sales contraction million the that XX.X% of on FX sales, shipments net declined net impact business results of you impact X.X% U.S. of have the Kansas and strip to higher million to decline the positive million $X.X margin offset Improvement, also backlog $XX maybe beginning out the input $XX.X Kansas negatively would Hardware higher were in Adjusted which basis XX it prior Slide pricing. do about plumbing in I’ll hardware costs from on HHI’s organic that, have modestly. while builders’ declined by points X.X% to year-over-year Now reported unfavorable grew growth. resulted million with of Home residential

given cloud residential from electronic relatively product growing increases apps introduce and invest especially Looking behind price lock ahead, new continued rates. low to fast benefit HHI and deadbolt also we control. to U.S. planned smart its adoption mobile In products continued and lines, technology, QX, sees and in growth access

a in Slide to negatively distribution appliances coffeemakers small U.S. and for in & sales decreased impacted losses Home were channel as The and reported These sales care by care growth predominantly result XX, mass which from foreign growth were sales Europe, UK adjusted loss in year of organic in offset partially and is while Latin as FX to transaction, decrease Net margin across from in million, net ovens, hair primarily and the the drug input of unfavorable year as primarily Personal sales the fell food or toaster personal exchange Now net $XX.X HPC, productivity. by fell channels and e-commerce offset higher costs distribution well flat. EBITDA Care, attributable prior by X.X% U.S. America. were essentially in mass channel. prior partially

across to organizational XXXX, As investing with installed we The focus for leadership prepare behind streamlining, continue have product more in rebalancing rationalization initiatives and innovation we fiscal team will to in are HPC XXXX. simplification recovery and brands structure financial on newly its before, categories in coupled costs business growth its core said resetting

Pet Global to sales which reported net performance, XX.X%. Moving on XX, half first building solid increased is Slide sales

by investments higher in as comparisons sales supply partially in another driven performance expect we decline costs. animal center volumes year sales Significantly Excluding a EBITDA were ago Net with in region distribution million modest offset aquatics. grew very new XX data-driven primarily net of QX, positive higher to basis manufacturing its continue strong unfavorable growth with from predominantly a unproductive million, distribution and in Adjusted grew fulfillment rapidly to launches XX.X%. supported the SKUs dog favorable and result by e-commerce In and FX higher animal lower XX.X% attributable treats, and long-term and drive U.S. net channel. selective base a Europe marketing U.S. to structure. continues cost to margin constraints. product with $XX increased XX.X% also companion our large manufacturing margin point increased higher pricing to growth of growing and digital companion by at global strong chews trim work to chain U.S. $X.X in solid in Pet organic along sales

insect of repellants $XX.X EBITDA weather Turning grow input season outdoor X.X% weather and Adjusted conditions a decreased partially most to marketing to Home by & unfavorable actions. wins. offset declined driven center is productivity in to to household continue XX.X% controls XXXX and the the in by EBITDA which Despite Home strong produced decrease challenges & and and Slide expect points to sales Garden quarter, partially due during with driven in offset sales distribution million higher Garden by and margin EBITDA XXX cost basis pricing in we to XX, orders. by net advertising QX, increases adjusted behind being was growth home X.X% both sales investments early and

balance $XXX cash the million QX of liquidity Moving $XX.X fiscal million. in XXXX. from flow to of expenditures a billion, were Capital including solid quarter down last Debt million and our was available outstanding $XXX $XXX revolver billion versus we the XX% XX, end balance a $X.X million million at on cash $X.X in $XX.X position, sheet on the year. completed Slide

Turning of year foreign with our to Slide spot impact points basis exchange on negative XXX XX having to rates. approximately guidance, expects XXXX reported sales net based Brand the be now with comparable current Spectrum prior a and

between of full year year, that million, We affirming depreciation approximately million and QX. to amortization our $XX million versus in expected roughly $XXX are to $XXX $XX million million, including of of last be with EBITDA adjusted compensation is expected stock-based $XXX and $XX million million guidance $XXX

depreciation catch-up adjusted EPS, excluded. of HPC million in amortization from QX $XX been and has the For

be million increasing $XX million $XX now are million. relating are cash between now $XX capital million and to between to restructuring We to and and pending restructuring-related $XX and be Galileo Project expenditures expected

impact $X approximately Act mentioned. updated asset regulations Tax has NOLs have the federal recently issued number under of XXXX to sales. billion as reflect This the We of been remaining usable the post previously the

Finally, state taxes. for including use EPS, of adjusted XX% a we tax rate

Dave to you. And now Thank back for Q&A.

David Prichard

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

Operator

comes with Tong [Operator first America. Olivia Bank of question Instructions] Your line of from the

Olivia Tong

talk and you. moving know Great, thanks. flow; lot I about the that but start? of are the first a used, is there basis, quarter, I different through to we’ve lower to year-over-year just a a which want of off to pieces you got base usually half is puts obviously on you similarly starting that last can actually takes here free I just way start Thank so cash started and

David Maura

I will that take let Doug first one.

Doug Martin

would are of the have on businesses January early morning, but clarity working Hi, because guiding not year gain loss of sale in good want Olivia. the late transparency, don’t two Yes, at free time through cash capital or in one will flow on and we we the not January. January; - principally this the run sales. now the what traditionally One in through run because

tell the at story I our we’ll pieces can track internal all it’s that at have already expectations the the you of end obviously year of confusing you. debt of cash balance all reflected for numbers a on out net free captured against this on those lay and So, the they’re have in little of we proceeds flow and bit a on point. our cash and and sheet we’re

it, next I gave think – and model then like I this year outside - think that look of year. were for information as have the you I what So out about like coming can based you use modeling I if that your I elements to to we on the of might

basis between forward. and a pay on adjusted that’s for So that’s $XX that – we $XX debt taxes, to is million going restructuring million still an cash as be depreciation cash CapEx, annual down expect the

So, reach help. and if hopefully not, that’s Kevin out or if – to please they can Dave continue helpful, to that’s

David Maura

collect now, the The pay will starting some generally only just thing free in to the do over we may we’ve look debt cash add, this we’re so cash And off of year. I think we did year, and in of also out the XX% if I half would the we build of more of we so, liquidity and is debt a far position do thus as our future. the retired lot you at the company; back finish our instruments

can to quickly reduced bucks interest we’ll the expense of $XXX benefit when I going which $XXX come with you million third time see forward of think to up this the report next million, start results, we we talk quarter you.

Olivia Tong

in at broad What terms better talk how the can And than we to this aware based, clearly pretty of? Got then And inventory sustainable Thank shifts specific it. it? Thanks. bit the you. across was any far appliances point? – we a you you so clearly about can levels so of changes be better, go division sales, timing that on view over is? then How made you quite your this business should reinvigorate in-store divisions, expected to you’ve just

David Maura

are Yes, an to levels innovation you spending, and we year hopefully and view we’ve look clarity and a the for to company growth planting line, company the to reporting want as bottom don’t and know, and build stability get push to – line. do is consistent so A&P this the eliminate of the really a look, anything XXXX, back drive but would to I marketing. and ago a – means, seeds, quarter invest over I is put XXXX, tell I could focus I we dilutive run then. year of the to am seeds are I which we I top story. investment as what is earnings XXXX. on in for just strategic had you think we we unfortunate and ship you Since new that to position tried promise clearly trying non-strategic increase we and marketing in toward to you more to spending, took we numbers, higher to product want and report steer on money I the Again, over higher what obviously development to into what across spend are and start then vision call remember, in getting but in much better it look you planting those the short activity be returning continuing and R&D want really

Doug Martin

saw the Appliance you management team in and place business in focused say some timing a a update the the year next to the but from last negatives some perspective, of have we’ve better we’ll that from profitable call and got Olivia, and lap - they’re making, beginning are on they’re a revenue, I not on improvement, is we would probably - they are progress the revenue. but just new highly

is So, expect the then. of pretty weather’s of would XX% the big has box front still in then this that strong season We forward channels surprises out from now far. particularly generally and the POS Garden so of And coming have better any I and perspective, in been there year us. between & I going wouldn’t Home been say

and but year little seasonality. to yet, & your better to timing would Home So lot relative to say go a a last for Garden I question,

Operator

CJS of question next Labick Your the comes Bob Securities. from line with

Bob Labick

let’s on nice keep Good morning. growth. Congratulations some up. Yes, it

or a of growth in talk view segments in strategy longer-term then, shift key maybe e-commerce prepared kind and about I in can particularly you to for online of well? then and drivers you talk a that on organic terms of bit the one So you pushing about a the and as about focus online are strategy each as little potential, how well, as a you the growth so bit two, maybe of there remarks PET, you medium to mentioned but over wanted the – the merge little shift talk

David Maura

good XX we’ve marketing, the last how very we midst doing made think early do in in search, other on done kind so, how a in focused getting done now understands Yes, good and how key of and got the don’t people the world in we’ve that but some of the we’re are think returns spend, right really I the frankly, we’re right of job digital pretty we on good understands have a with allocate it the the capital with we’ve of I of I but really days, language space, think do not partners we’re to a some on now digital we them, e-com algorithms, key actually board we months spend, there. digital fix content on Amazons much and hires job optimizing there. again we get that return getting were that that and speak our partnering just quite the talent we – better digital our and

a of we I that to kind – So, a migrate a new the part of on to lot doing mean capital on want to higher of are I rate to is role internal now allocation. we capital your much – of my Appliances get was and continues think, years online - we Right much allocation pretty external return spent question, first ten rapidly. side. Clearly I doing digital

We are time as and component. like strong; HHI in products Garden e-com like locks. definitely Home meaningful heavy Garden business a and Home - in PET our well. side, get hardware bottle small, rates & but a & you growth smaller is are that’s our liquid Any got a on the you’ve increase is on seeing

with doing rate the and on a Kevo massive space online, market rate less market adoption continue there, to investment white at And very growth see moment, end exponential. the but strong the first rate growth. there, very up see but products, digital low is just of low You penetration our I with step we and were I side. lock to typically see the we particularly one We

out, our But at and a I’ve think, about to job, customer. Lake talk in put technology smart team are point-of-sale of also we HHI they’ve bring revamping – better our was we’ve to Doug great the and so key Forest to market it. in merchandise, not heard, adoption And digital them Because, the only clarity the just recently do our to really I increase our times you’ve purchase. some explaining we I and at customers and want trying rate. grow We we with want we whether the maintain a point confidence tailwind we’re of in be expansionary times, behind here locks the quite leadership recessionary they’re frankly, think to given to there got tailwind continue think the leader stay, position. here we that’ll want to

So you’ll were that with of probably and a lot activity. see that summer see in out a this more release lot news you’ll further of that and new coming products to

Bob Labick

you Could great. given priorities Okay, the you’ve for to that mostly were obviously, And quick Executive you whole you other at in and level. then to mentioned talk one HPC team about them the team Thank it a want your one, color. don’t what new priorities Is just new the given – going put to words forward? I the mouth, charge them? you’ve or

David Maura

people too in track I got do division. We off very, SKUs. many we things, with at too tried to many to just too are good procuring very blunt many be think product. to that Listen we Look,

provider. We back brands. some our we just with to got we’ve and low innovation We that marry are to get cost have And really core. great a

And for get have at - to that’s the right got think we done we of the of I just have the kind focus. lost kind we right right prices to a decade. product We and customers what

question levers in of on purposes, listen, the the to we’re would flow ways seeds. profitability we on there a it and but more complexity doubled My new could so, no innovation. in expensive are this do just ago for better just theme; out, some been probably going short-term to So this the to future on are marketing, And is line free cash from quarter, those sometimes current that business and have things - have we mission years kind that. moment, time reporting I’m it’s we to you for numbers pulling enterprise, the growth sustainable no it’s that efficient would back have Listen, plant doing plant create willing sacrifice XX that But there’s that drive to just focus. us seeds was there’s restoring that’s of not rob growth. to

have help bring to answer they convenience. invest to you’ve so to know that consumers’ you’ve products needs to let And about you’ve and through new or people a personal behind a why got side, them those – And also got things continue innovation, the mandate on help them have a smart got – to that beauty let experiences in advertising. better on know their kitchen

a mandate, so, that different mandates they those is DNA is team, the also team, the this of And are of but really DNA in prior not in it the were have dual clarity which streamlined supply of are chain, vision, focus main can activity. being we the operating to and expenses, that business tell reinvest would in strategic new more I so that brought you kind that unit. to

Operator

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

Faiza Alwy

Yes, morning. hi, good

about and has I when now? question outlook talk HHI. remodeling last February; talked we Can you housing do in that to first about your concern for So slowing. some there with know it was business my about

improved. I think since then things have

your you’re wanted thinking updated just I on, So about the market? take how

David Maura

pre-rapid it And noticed deceleration you, me and and I think first partially just in market from tell concerned think Clearly, November we - was very a quite sluggish that the housing saw was is X.X% I through it had right. would I macro real market XXXX a events so demand, Look, definitely the has I the the December lowering mortgage think given the trading rates very accustomed given to rates. the rates. pushing lower tenure Fed, I become and Yes, now pivot it you’re and is when low lower and by it headwind.

which be there pent-up It’s supply it you wanting is XX% we actually line is, to a the affordability it’s the great, new a so still the And dominant sales, in a in remain And we we player space. right, division. home of But you’re in and issue. affects demand. top HHI millennials now right into with lot again, builders of our remodel do pickup think housing. see I will the total about think see get we And see the

And for partners product be we see of quite locks. – they to so, create our our would to lot in adopters could to how code home a $XXX,XXX also digital looking because of frankly kind early quite be new us, tend frankly extremely more be now do the that the we and that $XXX,XXX in builder are be if good that builds of zip range,

look So our comp want HHI QX a have the get over to skis, again, don’t for in we we unit. tough

getting want our we units, I’m billing the XXXX. growth we today HHI are in now as I – to right lot for a feeling to than are We I investing we’re business to billing back stabilizing about XXXX, did better you months talk our for approach But ago. take X all outlook long-term we’re better as just the on feet,

Faiza Alwy

then if Okay, last very decelerated. a year HHI a on great. easy I look so from EBITDA, perspective. to still X-year but know was I relative follow-up on comp it accelerated like And just it it’s basis, And year, a margin last a at

I a talk bit X puts Is more more just years ago? it is mix around investments, so that cost takes? to color about and the could EBITDA, So inflation, issue, of it if that compare you the is little some a

David Maura

that’s to going okay. if am Doug, pass to I this one

Doug Martin

short we’ve Primarily cost on cost - a inflation, of little categories run. – a bit it’s in tariffs, related on our but little across some there, pricing board, the across the bit of side driven of to input generally the gotten some

some the we in that include and about see of talked and some opportunities HHI. remarks improvement manufacturing chain supply in initiatives And prepared his earlier David

Operator

comes question Chartier next the Hardt. of Crespi, & from Your Monness, with line Jim

Jim Chartier

guys. Good Thanks my for morning. Hi taking question.

much you weighted investment to half weighted how spend less more – was the color half can it versus year? On we margins little impact see was bit this a first of There some half a should the to in of your on half? second �� give back on and EBITDA more first first

David Maura

varies division. by It

lawn spending. garden can and we’re going off actually I XX% a up with of you, start, left, to So tell season look we’re the to reasonable and ramp

half more we our was want know appliance situation to retailers, we would color? I be you sales supporting increase, So wins side increasing, I add those endeavors. distribution customers. appropriate it’s that Manchester but not are some profitability growth. of Plus, that it’s would marketing a support United Doug, in and see we want for inexpensive have weighted the first to actually and like again probably don’t on say things amount where more the the

Doug Martin

think think I the And up that I year, of ramp quarter, year right. into the first quarter but Now our which the in later holiday next some little a bit little is and heavier we - happen spend that’s will business headed as stable in and appliances the half, they of their committed pet given the then be HHI on steady And is the are again bit year, will ahead seasonality state. perhaps, back relatively through time. pretty a

Jim Chartier

opportunities. for of most detailed the bottom the Great. then reinvest about you through continue efficiency plan to talked that in you improvement line growth or initiatives? flow study And to to to you Do into plan your

David Maura

of kind our am I hands, before Look, this. about and very wait we that do want tangible next you to Yes. broadly we I quarter. more more about get evidence it some excited intend actually talk to to in and

We can pretty to I much more new growth balance it bottom But reinvest development. But steering marketing and us terms on get study; product of become lot a and bent deliver going vitality, or XXXX decent go much side. companies should CPG make is come and I want no added think we about again, will line. I - I’m to too to spend in business. there take a if of a if is want much manual redundancies We four XXXX it, - think line sure there’s performing stone to more in think think is all in in to it shareholders the lot We I with the comprehensive efficient. non-strategic towards top ship unturned. healthier the or we deserve must innovation procurement or I proportion it the that make that it value will investments in spend, to underlying businesses. procedures and I a beyond. want a draw you of spend not of we It’s as, on

Operator

Your line Fargo. next Reid of with Sam question Wells comes from the

Sam Reid

those existing products coming coming the question. what and versus platform to new proportion prior sense Hey, to to segments. across all your Thanks year from see are sales how and your a give across innovation for the products it’s online us my you that taking of Look, exciting all compares maybe Could this guys. years?

David Maura

to It’s never it? hit want you Doug enough.

Doug Martin

been in to increase don’t will general have high rate last increasing provide bit continue is specifics X-year across vary little the has the they I a Yes. over this a couple and in period to Sam, you, the because teens in year. area years and of But in vitality businesses. is generally to our

Sam Reid

it. Got

And Now, on then sneak one HHI I helpful. could here. that’s super if

relatively us today the X across mentioned in around electric what deadbolts smart Could prepared penetration X be guys some smart you remarks, they the next or over there give could rates penetration and versus that lock lock numbers be and You though household low bolts to and products. years? might where rates

Doug Martin

U.S. the on the smart is in sub XX%ish lock Penetration category.

Our overall…

David Maura

as XX%, go. and narrow Use between that’s we X% as

Doug Martin

And non-connected, both it’s then it non-connected, of other of connected business. total XX% XX% TouchPad our has around under our overall also electronics business which and non-smart, and around, include a would so little

David Maura

to house, on or listen or to of their let phone, access something, somebody and And to buying in to to house lock run to whole that the home, phones. relative we be be on Just front. want just able the to just a a on future the you let their their generation to deliver living first that they’re have is customers house now used it’s

Operator

Raymond comes James. with question of from Your the line next Altobello Joe

Joe Altobello

morning. Thanks. good Hi guys,

year. So I few making did investments are guys a questions this the have you around

going if I step-up year-to-date, last seems is for R&D marketing so, in Is at couple expecting this that for much flat are investment and this of the about And EBITDA guide areas marketing. for a case it other of quarters, both your year? all that how on help in you’re to morning. of like quantify us you so of if can You example selling the look talked expense, including that expense

Doug Martin

those that which is spend. of actually and couple of see, reprioritization areas are to gross there Joe, the piece that net you don’t

we And did Home we the & of Personal as We spend on or focused we’re and in just driving, the we - came planned, are as the first of all will those Home those Care that to off. & tell in investment increase quarter and planning So in did activities. both are Garden I second in business you revenue planned.

The what as year. vary business line other two it way to businesses think investment depending by relates step-up were items, as throughout we’ll see to flat we they the best individual and will, go is But as our planned we year-over-year upon about to those consumer. reach in the

David Maura

And of and our dollars could particularly innovation to recycled units. of probably some lot you with that enhancement a these more I you could spend have unit to of I marketing, at some the we mean twice the But talk a that about initiatives profitability additional at invest of being hear if we will think discipline in Doug’s this of we QX into challenge of shareholder appliance our about in wise inside phase dashboard this Again, point, get you the getting quarter, we’re are stock of unit. reported non-productive quarter in hadn’t profitability earlier comments undertaking. that a we parallel as to kind theme, so and of and there’s very vitality detailed

So a sticking we with are discipline.

Joe Altobello

Okay.

So $XX up call to $XX this step for year, the would million the you full year? it million, is

Doug Martin

not of That’s that, an not unreasonable. an unreasonable The area. is it high end

Joe Altobello

That doesn’t right? recurring that’s And come…

Doug Martin

investment on and through savings forever, some David go to in in these go – go we’d as And get like initiatives, that these future forever Yes. productivity growth. those areas. only mentioned, some That of reinvest that efficiency as obviously but of on would will will not we

Joe Altobello

quarter. about squeeze a uses David, already, some you paid year. given you cash second that how as more just are bought in And guess want and this down you ton I about this well? re-purchases back if of It done one, more for debt down the to one debt you for Okay. of pay last stock of in see I in back or stock could it like Thanks. you we thinking think half how year the sounds M&A Could you

David Maura

appreciate Listen, No. that. I

share. I back is buying cash our the that greatest think return the greatest it of single on use has single

wanting to over think look have in wood you three and don’t from of you, tuck-ins in vision, XX-month metric more making skis, still as progress. two the just and we - XXXX, stronger focus if However, to smarter, the Brands it just period to tell starting rhythm I – operations I through are where, again. we committed believe have transformed get to just chop, stable and just has about kind delivering ago a stronger I a we right Spectrum and mean this direction. cadence went the we’re divestitures is to I and time out am quarters at future. We Brands I Spectrum - but and lived of I real ends clarity, We faster, the plenty consistency, ago, year tremendous the of this underlying we want get de-leveraging. I my we kind every absolutely I’ll moving at are disruption quarter look, look in of through quarters to operationally that smarter, talked company through

tuck-in very, that that. horizon, can I is compelling, the if see it’s our own very I don’t So are accretive at existing buying at very, with these fit look we that anything synergistic, said, But shares can big very units, but use capital because and are highly to single acquisitions we’ll and prices, going our business the be make. on accretive best have probably we to like allocation of do

Operator

Your Karru with Jefferies. next of Martinson line question the comes from

Karru Martinson

that, VARTA the they proceeds liability make being you about Energizer On as morning, part slightly the of Is expected. they’re lower any that to coming all dispositions and Good from talked of for guys. there yesterday’s forced call, that?

David Maura

we sold for billion. So entire division $X the battery

they And capped we million. million, that needed. But $XXX possible million cap the $XXX we of We disclosed complete have reserves sale. we’ve see that booked – we’ve no, it to when $XXX that’s And does should true-up. wait a will and

and that at and And so, – better, buyer what they to to to do is how we’ll hopefully, will see discussion, we work M&A but wait price. they have who the have progress

Karru Martinson

here. down pay go forma about How we on in annualized material think interest a the debt basis? with And pro should Okay. forward

Doug Martin

of day If the we end Q today. the at be will you – filing the

an You’ll now the very be annualized able basis. it’s straightforward to so it debt in - there, calculate table you’ll see on it’s

Karru Martinson

some roundup I just space a Garden for for the lastly, equivalents. Home garden wondering was there and there in Okay. has if any of talk space? And been you guys was gains some sort lawn seeing for & other in lift

David Maura

enough against our me, even I Look, have the lot I we I can have products I are about I make been better for distribution products think have Monsanto never there. great think glyph and offering the Spectracide better people But litigation product, point. about it a things. want tell want It’s efficacy, warned expanded to a that our more, value comments for We that get it’s We message amazing is it’s to to fact out a want at more superior sate. a continue product great think its product. we an benefits there. price and of that

stepping our marketing. investment up are So that’s we why

David Prichard

questioner, take more and think operator. Okay, we we will I It then that one like down looks have let’s call. the close so

Operator

comes JPMorgan. question from Carla of with final Casella the Your line

Carla Casella

of us – wondered an tariffs, are on give if you if if impact changes update are they any could I Hi, made? expected

David Maura

Yes. would be best sides reach They interest the prefer ourselves. that consensus. both a think and of We globe the would

volatility; on, any I a from yes, to we this standpoint have us and think increase receive on through for think elasticity, we extended consumer through March of pay got went to Obviously, going vertically if is we to don’t with are. would a we on the demand ultimately the the are have than I don’t enjoy a we But be, side has so if know, it mean, on but going I but, write we businesses this in demand check and it we to and Treasury, to pass weekend, mechanical the I we’ll and, pass last that you look, that it situation integrated end think are of to this, fire the final fund I retailers. the it, would our have tariff fall; United where on Chinese product see depending know lot go you States the more alone don’t prepared January we for biggest we were god, up were thank majority we where have X, doing in how is. this week progress to of pass then things we’ll know globe. our if drill here you we a the But this problem that to know, injected are know, and

Carla Casella

little you Okay, this lost just bit started Was that? appliance, something quarter? then personal when mentioned a the of that’s care And great. appliance do cycle share, that we

Doug Martin

last getting it better year so began comps – in first the lap to it in as thinks No, will of the half unfolds, last continue year year, but the should begin and U.S.

Carla Casella

and Okay. were leverage And forward and long with initiatives? to And of divestitures is think that look maybe to good then brought starting all the of that just expect a another at on the term are go to you get level? kind the and that X.Xx, leg investment completed you portfolio now adding to – cost you savings Do have business your down you and of stool? your the

David Maura

look I I cadence remarks of said really underlying rhythm I to want company. consistency in and the earlier Yes, in see my the the think of earnings

tuck-ins the anything are We that needle. not at move would looking these small but are

private for price value assets. I the think want our what stock of is relative very to attractive people

that a you we more program, into drive obviously to and start about cash we EBITDA it going get – deliver we then we get detail, to talk cetera really to it’s to to and the balance and So advantage life it’s next excited flow take talk – as but, can We of line, are to would I to this into over cash free quarter. deliver I like got promised lot of a the keep generate et some in want think greater to can the free we want we improves remaining we XXXX we the it. buyback If what sheet you high down, year. think of here, would hurdle

and best I it’s will of things So a opportunistic just be continue the – is at we lot are to looking we can.

Carla Casella

forward does to willing think that to leverage X.Xx up is or need the you would on go more? come that down And the or you be take

David Maura

X.Xx happened long-term a given last run like on where We what and see us that’s to would I basis. year

David Prichard

and Okay, Well, thank Doug. David operator. you

questions of nearly have reached exhausted We the our hour. top the and

So, fiscal quarter Brands, call. conclude participating conference ahead XXXX earnings for our Have day. On our to we in this a morning Spectrum of want we all go call. good second thank will and you behalf of

Operator

you call. Thank in today’s for participating

now disconnect. may You

Spectrum Brands (SPB) 7 Aug 192019 Q3 Earnings call transcript