Backed by solid performances in most of the segments,
Spectrum Brands Holdings Inc.
) reported stellar fiscal 2014 second-quarter results, recording a
63.6% surge in its adjusted earnings of 72 cents per share.
However, quarterly earnings missed the Zacks Consensus Estimate by
On a GAAP basis, the company reported earnings of 64 cents per
share compared with a loss of 79 cents per share in the year-ago
Consolidated net sales for the quarter climbed 3.4% to $1,021.7
million and beat the Zacks Consensus estimate of $1,015 million.
The healthy top-line growth was driven by a rise in personal care,
home and garden, battery and Hardware & Home Improvement (HHI)
sales. Excluding the unfavorable impact of currency translation,
net sales jumped 4% year over year.
Aided by improved sales and better cost management, the company's
adjusted earnings before interests, taxes, depreciation and
amortization (EBITDA) escalated 9.2% year over year to $156.5
million, with the adjusted EBITDA margin improving 80 basis points
(bps) to 15.3%.
Sales at Spectrum Brands'
Global Batteries & Appliances
segment came in at $480.9 million, up 2.6% from the year-ago
quarter, as marginally lower small appliance sales were compensated
well by strong personal care and battery sales. The segment's
adjusted EBITDA came in at $61.2 million versus $56.9 million in
the year-ago quarter.
Global Pet Supplies
segment sales totaled $159.4 million, compared with $160.5 million
recorded last year. Weakness in sales was attributable to harsh
winter conditions that weighed on consumer traffic and led to
softness in the aquatics category. Consequently, lower revenues in
the North American categories overpowered the marginal rise in
European aquatics and companion animal revenues.
Adjusted EBITDA at the segment advanced 3.6% to $28.5 million, on
the back of aggressive cost curtailment, which overshadowed the
negative impact of poor geographic mix and soft volumes.
Sales at the
Home & Garden
segment augmented 12.3% year over year to $114.5 million primarily
due to increased demand for the lawn and garden controls product
category, coupled with the initial benefits derived from the
acquisition of Liquid Fence animal repellents. The segment's
adjusted EBITDA improved 11.4% to $26.4 million.
segment sales picked up 4% to $266.9 million, aided by enhancements
in the residential security category along with sustained global
expansion, partly offset by the extreme weather in Canada and the
U.S. The segment's adjusted EBITDA of $45.3 million was up 11.3%
year over year.
A Quick Look at the First Half of Fiscal 2014
During the first half of fiscal 2014, the company's adjusted
earnings soared 48.4% to $1.81 per share. Further, net sales rose
14.2% to $2.12 billion whereas adjusted EBITDA grew 10.3% to $335.2
million. The first-half results were mainly boosted by the
acquisition of the HHI segment in Dec 2013 and robust sales at the
Home and Garden segment.
Other Financial Details
Spectrum Brands ended the quarter with a cash and cash equivalents
of $93.4 million and a total debt of $3,429.5 million. Also, under
its ABL (?) facility, the company had nearly $124 million
Fiscal 2014 Outlook
Following an impressive second quarter, Spectrum Brands reaffirmed
its guidance for fiscal 2014. Including the HHI acquisition in the
prior-year period on a pro-forma basis, the company expects net
sales for fiscal 2014 to grow at the rate of the Gross Domestic
Product (GDP) compared with fiscal 2013 net sales.
During fiscal 2014, the company continues to anticipate generating
a free cash flow of at least $350 million and intends to make
capital expenditure in the range of $70-$75 million. Furthermore,
in the second half of fiscal 2014, Spectrum Brands projects a
reduction of its debt by approximately $250 million, as predicted
After delivering a strong quarter despite battling weather-related
headwinds, the company remains positive about the second half of
the year. It looks forward to launching additional products in all
its segments and continues to strengthen its global footprint.
Alongside, it plans to undertake efficient cost-cutting measures
and implement a better pricing strategy. With these continuous
efforts, the company is likely to achieve its growth objectives and
deliver another strong year.
Other Stocks to Consider
This global consumer discretionary products company carries a Zacks
Rank #3 (Hold). However, other better-ranked stocks in the same
Prestige Brands Holdings, Inc.
), with a Zacks Rank #1 (Strong Buy) and
Summer Infant, Inc.
), each holding a Zacks Rank #2 (Buy).
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