Spectrum Brands Holdings (SPB) Misses Q2 EPS by 3c

Spectrum Brands Holdings (NYSE: SPB) reported Q2 EPS of $0.72, $0.03 worse than the analyst estimate of $0.75. Revenue for the quarter came in at $1.02 billion versus the consensus estimate of $1.02 billion.

“We are pleased with our record results in the second quarter, which seasonally is our smallest quarter of the year,” said Dave Lumley, Chief Executive Officer of Spectrum Brands Holdings. “Combined with our record first quarter, we have solid first half momentum toward delivering a fifth consecutive year of record financial performance in fiscal 2014.

“Our second quarter had many notable highlights with broad-based contributions from our divisions globally,” Mr. Lumley said. “Virtually all of our divisions achieved higher net sales and adjusted EBITDA, enabling us to significantly grow our adjusted EPS and expand our adjusted EBITDA margin. In Europe we again delivered record results. In a region with negative foreign currency headwinds, our Latin American battery, personal care, small appliance and HHI sales all increased on a constant currency basis.

“We also overcame unusually harsh winter weather in January and part of February in the U.S. and Canada that hurt retailer store traffic and POS, particularly in our HHI and Pet businesses,” he said.

“Similar to the first quarter, we achieved a record level of continuous improvement savings for a fiscal second quarter,” Mr. Lumley said. “This reinforces our ongoing focus to reduce our cost structure, more than offset higher product costs and continue to invest in new products, many of which are launching in the second half of fiscal 2014 and into fiscal 2015.

“We are optimistic about the second half of the year, which should be much larger than our record first half and stronger than the second half of fiscal 2013,” Mr. Lumley said. “We have new products launching in all divisions, retail distribution gains secured, new retailer customers in place, continued geographic expansion, and select pricing actions. We will maintain strict spending controls and are on track to achieve a record level of cost reductions in fiscal 2014.

“Our Spectrum Value Model continues to work effectively around the world and is resonating with retailers and consumers in a global economy that remains challenging,” he said. “’Same or better performance/less price’, value-branded Spectrum Brands products are winning in today’s marketplace with today’s smart shoppers.

“We are executing well on our growth plans and are focused on delivering another year of steady, measured financial improvement, including a strong increase in free cash flow, in fiscal 2014,” Mr. Lumley said. “Our commitment remains to create greater shareholder value, with a focus on growing our adjusted EBITDA, reducing debt and deleveraging, and maximizing sustainable free cash flow.”

Fiscal 2014 Outlook

Spectrum Brands expects fiscal 2014 net sales, as reported, to increase approximately at the rate of U.S. GDP growth compared to fiscal 2013 net sales, including HHI in the prior year on a pro forma basis. Fiscal 2014 free cash flow is expected to be at least $350 million and capital expenditures are projected to be approximately $70 million to $75 million. In the second half of fiscal 2014, the Company expects to use its strong free cash flow to make significant payments on its term debt, totaling approximately $250 million for the fiscal year, and delever its balance sheet, resulting in leverage (total debt to adjusted EBITDA) of approximately 4.2 times or less at the end of the fiscal year.

For earnings history and earnings-related data on Spectrum Brands Holdings (SPB) click here.

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