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Spectrum Brands Posts Strong Q4 Earnings

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Spectrum Brands Holdings, Inc. (SPB) posted strong fourth-quarter fiscal 2013 results with adjusted earnings rising 6.0% year over year to 88 cents per share and surpassing the Zacks Consensus Estimate of 85 cents. The global branded consumer discretionary products company’s bottom-line results mainly benefited from top-line growth.

Including certain one-time items for both the periods, the company reported a loss of 70 cents per share for the fourth quarter as compared with earnings of 10 cents in the year-ago comparable quarter.

Consolidated net sales for the quarter came in at $1,137.7 million, up 36.6% from the year-ago comparable period of $832.6 million. The sales growth was primarily driven by the Hardware & Home Improvement (:HHI) acquisition in Dec 2012. Moreover, Spectrum Brands’ net sales beat the Zacks Consensus Estimate of $1,131.0 million. Further, including HHI results for the prior-year’s fourth quarter on a pro-forma basis, net sales increased 4.4%.

The company’s adjusted earnings before interests, taxes, depreciation and amortizations (:EBITDA) increased 3.3% year over year to $184.7 million. Excluding the impact of HHI acquisition, Spectrum Brands adjusted EBITDA increased approximately 3.6% year over year to $130.3 million, while as a percentage of sales it improved 30 basis points to 15.4%.

Segment Detail

Sales at Spectrum Brands’ Global Batteries & Appliances segment came in at $577.3 million compared with the year-ago quarter figure of $580.0 million primarily due to the company’s planned elimination of low-margin promotions in North American small electrical appliances. However, excluding the negative impact from currency exchange rates, the segment’s revenues rose marginally from the previous year. The segment’s adjusted EBITDA came in at $77.3 million versus $77.1 million in the year-ago quarter. However, excluding the currency translation effect, adjusted EBITDA increased 9.1% in the quarter.

The company’s Global Pet Supplies segment sales came in at $165.2 million, down from the year-ago comparable quarter sales of $166.5 million. The fall occurred as the sales growth of North American and European companion animals were more than offset by weak sales of North American aquatics. Adjusted EBITDA of the segment came at $35.8 million compared with $35.7 million in the year-ago period.

Sales at the Home & Garden segment increased 17.8% year over year to $101.4 million primarily due to favorable weather conditions as well as extended selling season. The segment’s adjusted EBITDA grew 26.0% to $21.8 million primarily driven by higher sales and effective cost management.

On a pro-forma basis, Spectrum Brands’ HHI segment sales increased 14.4% to $293.8 million primarily driven by robust performance at its U.S. residential security and plumbing businesses. However, the segment’s adjusted EBITDA of $54.4 million was slightly higher than the year-ago figure due to increased spending on new product development and marketing.

Other Financial Details

Spectrum Brands ended the fiscal 2013 with a cash and cash equivalents of $207.3 million and a total debt of $3,218.9 million. During the fiscal the company generated a free cash flow of $254.0 million in excess of its targeted goal of $240.0 million.

During fiscal 2013, Spectrum Brands repaid over $200 million of its long-term debt. It intends to reduce its debt further in fiscal 2014 by $250 million or above.

Fiscal 2014 Outlook

Including HHI in the prior year period on a pro-forma basis, Spectrum Brands expects net sales for fiscal 2014 to grow at or above the rate of GDP compared with fiscal 2013 net sales. Moreover, the company hopes to generate free cash flow of $350 million and projects capital expenditure in the range of $70.0–$75.0 million.

Other Stocks to Consider

Currently, Spectrum Brands carries a Zacks Rank #4 (Sell). However, some better-ranked consumer discretionary products stocks include Jarden Corporation (JAH), Nutrisystem, Inc. (NTRI) and Prestige Brands Holdings, Inc. (PBH). All these carry a Zacks Rank #2 (Buy).

Read the Full Research Report on JAH
Read the Full Research Report on PBH
Read the Full Research Report on SPB
Read the Full Research Report on NTRI

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