Spectrum Brands Holdings Reports Fiscal 2023 Fourth Quarter

• Net Sales Decreased 1.2% Driven by Slower Category POS and Planned Exit of Non-Strategic Categories
• Fourth Quarter Net Income from Continuing Operations was $53.5 Million with Adjusted EBITDA of $113.7 Million
• Excluding Investment Income of $32.5 Million, Adjusted EBITDA was $81.2 Million
• The Company Expects to Deliver Low Single-Digit Net Sales Decline and High Single-Digits Adjusted EBITDA Growth for Fiscal 2024, Excluding the Impact of Investment Income, with Adjusted EBITDA Growth in All Business Units

MIDDLETON, Wis.–(BUSINESS WIRE)–Spectrum Brands Holdings, Inc. (NYSE: SPB; “Spectrum Brands” or the “Company”), a leading global branded consumer products and home essentials company focused on driving innovation and providing exceptional customer service, today reported results from continuing operations for the fourth quarter ended September 30, 2023.

“We have concluded a pivotal year for the business as we close out our fourth quarter. We have already paid down $1.6 billion of our outstanding debt with the proceeds from the sale of our HHI business and have ended the year in a net cash position. We have reduced our inventory by over $300 million since the beginning of the year while improving fill rates across all businesses. We have also improved our margin structure by driving cost improvements and exiting non-core unproductive categories. With the latest financial results for the quarter, we have started to transition our business from defending against the various headwinds and preserving cash to leaning into the opportunities that a strong balance sheet and improved margins present to us,” said David Maura, Chairman and Chief Executive Officer of Spectrum Brands.

Continuing, Mr. Maura commented, “I am excited about fiscal 2024 as we enter the new fiscal year with a strong balance sheet, healthier margins and better inventory profile. Our focus during fiscal 2024 will be investing in our people, our brands and supporting new products initiatives to drive long-term growth in our businesses. We started increasing our investments in marketing and advertising during the fourth quarter and will continue that trend going forward. We believe the overall macro-economic environment will continue to deteriorate and will result in top-line pressure, particularly in our Home and Personal Care business. However, we have taken the right steps to position each of our businesses to grow EBITDA with an overall EBITDA expectation of high single-digit growth.”

Fiscal 2023 Fourth Quarter Highlights

• Net sales decreased 1.2%. Excluding the impact of $11.3 million of favorable foreign exchange rates, organic net sales decreased 2.7%. Net sales were lower primarily due to continued lower consumer demand for kitchen appliances products and the negative impact of exiting several non-strategic categories in the GPC business.
• Gross profit and margin increased due to improved pricing and cost improvements, partially offset by unfavorable transaction fx.
• Operating income was relatively flat despite lower volumes due to gross profit improvements, operating spend reduction initiatives, and lower project spend on restructuring and integration.
• Net income and diluted earnings per share increased due to lower interest expense, interest income, gains from debt repurchases and income tax benefit. Lower share count also contributed to higher diluted earnings per share.
• Adjusted EBITDA increased $39.0 million, driven by gross profit improvements and interest income.
• Adjusted diluted EPS increased 183.3% due to increased Adjusted EBITDA, lower interest expense and lower share count.

Fiscal 2023 Fourth Quarter Segment Level Data

Global Pet Care (GPC)

Higher net sales were attributable to positive price and foreign currency impact offset by volume decline particularly from slower aquatic environment sales. The companion animals category grew despite the negative impact of the decision to exit several non-strategic categories. The EMEA region posted strong sales growth in companion animal driven by dog and cat food sales. Excluding favorable foreign exchange impacts of $6.5 million, organic net sales decreased 0.7%.

Operating income, Adjusted EBITDA and margins increased due to positive pricing adjustments, favorable mix from the decision to exit non-strategic SKUs, lower distribution costs compared to prior year disruptions, lower freight costs and savings from cost reduction actions taken earlier in the year. This was partially offset by lower volumes in aquatics.

Home & Garden (H&G)

The net sales increase was primarily driven by commercial investments and favorable weather conditions leading to POS growth in both controls and household repellent categories. Spectracide and Hot Shot brands experienced double digit POS growth aided by increased advertising spend, leading to higher replenishment orders.

Higher operating income, adjusted EBITDA and margins were driven by higher volumes and related fixed cost absorption and the impact of cost-saving actions initiated earlier in the year. The business experienced higher product costs from raw material and labor, in line with expectations.

Home & Personal Care (HPC)

The decrease in net sales was driven by lower consumer demand, particularly in the kitchen appliances category. Sales were also impacted by continued higher retailer inventory for air fryers in the US market. Sales increased in personal care and garment care categories. Net of favorable foreign exchange impacts of $4.8 million, organic net sales declined by $26.6 million, or 7.7%.

Operating income, adjusted EBITDA and margins decreased from lower volume and unfavorable transactional foreign exchange impacts. This was partially offset by savings from various cost savings initiatives and lower ocean freight rates. Operating income was also impacted by some product disposals.

Liquidity and Debt

As of the end of the fiscal year, the Company had a cash balance of $754 million plus $1,103 million of short-term investments consisting of term deposits with a maturity greater than 3 months but less than 12 months, and approximately $1,574 million of debt outstanding, consisting of approximately $1,488 million of senior unsecured notes and approximately $86 million of finance lease obligations.

The Company ended the quarter in a net positive cash position, taking into consideration short-term investments.

Fiscal 2023 Earnings Framework

Spectrum Brands expects low single-digit reported net sales decline in Fiscal 2024, with foreign exchange expected to have a slightly negative impact based upon current rates. Fiscal 2024 adjusted EBITDA is expected to increase by high single-digits.

From a capital structure perspective, the Company is targeting a long-term net leverage ratio of 2.0 – 2.5 times after full deployment of HHI sale proceeds.

Conference Call/Webcast Scheduled for 9:00 A.M. Eastern Time Today

Spectrum Brands will host an earnings conference call and webcast at 9:00 a.m. Eastern Time today, November 17, 2023. The live webcast and related presentation slides will be available by visiting the Event Calendar page in the Investor Relations section of Spectrum Brands’ website at www.spectrumbrands.com. Participants may register for the call here. Instructions will be provided to ensure the necessary audio applications are downloaded and installed. Users can obtain these at no charge.

Following the call, a replay of the live broadcast also will be accessible through the Event Calendar page in the Investor Relations section of the Company’s website.

About Spectrum Brands Holdings, Inc.

Spectrum Brands Holdings is a home-essentials company with a mission to make living better at home. We focus on delivering innovative products and solutions to consumers for use in and around the home through our trusted brands. We are a leading supplier of specialty pet supplies, lawn and garden and home pest control products, personal insect repellents, shaving and grooming products, personal care products, and small household appliances. Helping to meet the needs of consumers worldwide, Spectrum Brands offers a broad portfolio of market-leading, well-known and widely trusted brands including Tetra®, DreamBone®, SmartBones®, Nature’s Miracle®, 8-in-1®, FURminator®, Healthy-Hide®, Good Boy®, Meowee!®, OmegaOne®, Spectracide®, Cutter®, Repel®, Hot Shot®, Rejuvenate®, Black Flag®, Liquid Fence®, Remington®, George Foreman®, Russell Hobbs®, Black+Decker®, PowerXL®, Emeril Lagasse®, and Copper Chef®. For more information, please visit www.spectrumbrands.com. Spectrum Brands – A Home Essentials Company™

Non-GAAP Measurements

Management believes that certain non-GAAP financial measures may be useful in providing additional meaningful comparisons between current results and results in prior periods. Management believes that organic net sales provide for a more complete understanding of underlying business trends of regional and segment performance by excluding the impact of currency exchange rate fluctuations and the impact of acquisitions. In addition, within this release, including the supplemental information attached hereto, reference is made to adjusted diluted EPS, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), and adjusted EBITDA margin. Adjusted EBITDA is a metric used by management to evaluate segment performance and frequently used by the financial community which provides insight into an organization’s operating trends and facilitates comparisons between peer companies, since interest, taxes, depreciation and amortization can differ greatly between organizations as a result of differing capital structures and tax strategies. Adjusted EBITDA also is one of the measures used for determining compliance with the Company’s debt covenants. Adjusted EBITDA excludes certain items that are unusual in nature or not comparable from period to period. Adjusted EBITDA margin reflects adjusted EBITDA as a percentage of net sales of the Company. The Company’s management uses adjusted diluted EPS as one means of analyzing the Company’s current and future financial performance and identifying trends in its financial condition and results of operations. Management believes that adjusted diluted EPS is a useful measure for providing further insight into our operating performance because it eliminates the effects of certain items that are not comparable from one period to the next. An income tax adjustment is included in adjusted diluted EPS to exclude the impact of the valuation allowance against deferred taxes and other tax-related items in order to reflect a normalized ongoing effective tax rate. The Company provides this information to investors to assist in comparisons of past, present and future operating results and to assist in highlighting the results of on-going operations. While the Company’s management believes that non-GAAP measurements are useful supplemental information, such adjusted results are not intended to replace the Company’s GAAP financial results and should be read in conjunction with those GAAP results. Other Supplemental Information has been provided to demonstrate reconciliation of non-GAAP measurements discussed above to most relevant GAAP financial measurements.

Forward-Looking Statements

We have made, implied or incorporated by reference certain forward-looking statements in this document. All statements, other than statements of historical facts included or incorporated by reference in this document, without limitation, statements or expectations regarding our business strategy, future operations, financial condition, estimated revenues, projected costs, inventory management, earnings power, projected synergies, prospects, plans and objectives of management, outcome of any litigation and information concerning expected actions of third parties are forward-looking statements. When used in this document, the words future, anticipate, pro forma, seeks, intend, plan, envision, estimate, believe, belief, expect, project, forecast, outlook, earnings framework, goal, target, could, would, will, can, should, may and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. Since these forward-looking statements are based upon our current expectations of future events and projections and are subject to a number of risks and uncertainties, many of which are beyond our control and some of which may change rapidly, actual results or outcomes may differ materially from those expressed or implied herein, and you should not place undue reliance on these statements. Important factors that could cause our actual results to differ materially from those expressed or implied herein include, without limitation: (1) the economic, social and political conditions or civil unrest, terrorist attacks, acts of war, natural disasters, other public health concerns or unrest in international markets impacting our business, customers, employees (including our ability to retain and attract key personnel), manufacturing facilities, suppliers, capital markets, financial condition, and results of operations, all of which tend to aggravate the other risks and uncertainties we face; (2) the impact of a number of local, regional and global uncertainties could negatively impact our business; (3) the negative effect of the armed conflict between Russia and Ukraine and the Israel-Hamas war and their impact on those regions and surrounding regions, including on our operations and on those of our customers, suppliers, and other stakeholders; (4) our increased reliance on third-party partners, suppliers, and distributors to achieve our business objectives; (5) the impact of expenses resulting from the implementation of new business strategies, divestitures or current and proposed restructuring and optimization activities, including changes in inventory and distribution center changes which are complicated and involve coordination among a number of stakeholders, including our suppliers and transportation and logistics handlers; (6) the impact of our indebtedness and financial leverage position on our business, financial condition, and results of operations; (7) the impact of restrictions in our debt instruments on our ability to operate our business, finance our capital needs or pursue or expand business strategies; (8) any failure to comply with financial covenants and other provisions and restrictions of our debt instruments; (9) the effects of general economic conditions, including the impact of, and changes to tariffs and trade policies, inflation, recession or fears of a recession, depression or fears of a depression, labor costs, and stock market volatility or monetary or fiscal policies in the countries where we do business; (10) the impact of fluctuations in transportation and shipment costs, fuel costs, commodity prices, costs or availability of raw materials or terms and conditions available from suppliers, including suppliers’ willingness to advance credit; (11) interest rate fluctuations; (12) changes in foreign currency exchange rates that may impact our purchasing power, pricing, and margin realization within international jurisdictions; (13) the loss of, significant reduction in, or dependence upon, sales to any significant retail customer(s), including their changes in retail inventory levels and management thereof; (14) competitive promotional activity or spending by competitors, or price reductions by competitors; (15) the introduction of new product features or technological developments by competitors and/or the development of new competitors or competitive brands; (16) changes in consumer spending preferences and demand for our products, particularly in light of economic stress and the COVID-19 pandemic; (17) our ability to develop and successfully introduce new products, protect our intellectual property and avoid infringing the intellectual property of third parties; (18) our ability to successfully identify, implement, achieve and sustain productivity improvements, cost efficiencies (including at our manufacturing and distribution operations), and cost savings; (19) the seasonal nature of sales of certain of our products; (20) the impact weather conditions may have on the sales of certain of our products; (21) the effects of climate change and unusual weather activity as well as our ability to respond to future natural disasters and pandemics and to meet our environmental, social and governance goals; (22) the cost and effect of unanticipated legal, tax or regulatory proceedings or new laws or regulations (including environmental, public health, and consumer protection regulations); (23) public perception regarding the safety of products that we manufacture and sell, including the potential for environmental liabilities, product liability claims, litigation and other claims related to products manufactured by us and third parties; (24) the impact of existing, pending or threatened litigation, government regulation or other requirements or operating standards applicable to our business; (25) the impact of cybersecurity breaches or our actual or perceived failure to protect company and personal data, including our failure to comply with new and increasingly complex global data privacy regulations; (26) changes in accounting policies applicable to our business; (27) our discretion to adopt, conduct, suspend or discontinue any share repurchase program or conduct any debt repayments, redemptions, repurchases or refinancing transactions (including our discretion to conduct purchases or repurchases, if any, in a variety of manners including open-market purchases, privately negotiated transactions, tender offers, redemptions, or otherwise); (28) our ability to utilize net operating loss carry-forwards to offset tax liabilities from future taxable income; (29) our ability to successfully integrate the February 18, 2022, acquisition of the home appliances and cookware products business acquired from Tristar Products, Inc. (the “Tristar Business”) into the Company’s Home and Personal Care (“HPC”) business and realize the benefits of this acquisition; (30) our ability to successfully integrate the May 28, 2021 acquisition of the Rejuvenate business and tradename from For Life Products, LLC into the Company’s Home & Garden (“H&G”) business and realize the benefits of this acquisition; (31) our ability to separate the Company’s HPC business and create an independent Global Appliances business on expected terms, and within the anticipated time period, or at all, and to realize the potential benefits of such business; (32) our ability to create a pure play consumer products company composed of our Global Pet Care (“GPC”) and H&G business and to realize the expected benefits of such creation, and within the anticipated time period, or at all; (33) our ability to successfully implement further acquisitions or dispositions and the impact of any such transactions on our financial performance; (34) the impact of actions taken by significant stockholders; (35) the unanticipated loss of key members of senior management and the transition of new members of our management teams to their new roles; and (36) the other risk factors set forth in the securities filings of Spectrum Brands Holdings, Inc. and SB/RH Holdings, LLC, including the 2022 Annual Report and subsequent Quarterly Reports on Form 10-Q.

Some of the above-mentioned factors are described in further detail in the sections entitled “Risk Factors” in our annual and quarterly reports, as applicable. You should assume the information appearing in this document is accurate only as of the date hereof. Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the United States Securities and Exchange Commission, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, to reflect actual results or changes in factors or assumptions affecting such forward-looking statements.

Contacts

Investor/Media Contact:
Faisal Qadir 608-278-6207

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