U.S. Markets closed

Spectrum Brands Lowers Term Debt

Zacks Equity Research

In an effort to further strengthen its balance sheet, Spectrum Brands Holdings, Inc. (SPB) yesterday announced that it has lowered its term debt by $100 million. With this, the global branded consumer products company has achieved its pre-announced target of reducing term loan by $200 million in fiscal 2013.

Spectrum Brands remains focused on using its free cash flow to lower its debt burden. In the third quarter of fiscal 2013, the company made voluntary prepayments worth $100 million, in order to achieve its long-term targeted leverage (total debt to adjusted EBITDA) ratio of about 2.5x–3.5x.

At the end of third-quarter fiscal 2013, Spectrum Brand had an outstanding term loan of $757 million. The company, during the last reported quarter, revealed that it is expecting a leverage ratio of approximately 4.4 times or less at the end of fiscal 2013.

Moreover, Spectrum Brands is focused on strengthening its balance sheet through simplification of its capital structure. The company also continues to enhance its financial flexibility in order to boost shareholder value.

Earlier, on Aug 6, Spectrum Brands’ board of directors approved a new share repurchase program worth $200 million, which will expectedly be complete within 2 years from the day of announcement.

Spectrum Brands’ decision to buy back shares not only reflects the company’s strong and consistent cash generation but depicts its commitment to enhance shareholder value as well. Moreover, the company paid its first ever quarterly dividend of 25 cents per share on Mar 12 this year and announced that it will regularize it thereafter. Looking beyond fiscal 2013, the company will consider increasing its dividend rate depending on the amount of growth in its free cash flow.

Some of the consumer goods companies that have been rewarding their shareholders through payment of regular dividend over the years include Colgate-Palmolive Co. (CL), Procter & Gamble Co. (PG) and The Clorox Co. (CLX).

Further, Spectrum Brands is undertaking aggressive cost cuts and seeking opportunities to expand its brand portfolio. It is also utilizing its game-changing Spectrum Value Model well to deliver value to customers at a lower price than that of its peers. Currently, Spectrum Brands holds a Zacks Rank #3 (Hold).

Read the Full Research Report on PGRead the Full Research Report on CLRead the Full Research Report on CLXRead the Full Research Report on SPBZacks Investment Research