Spectrum Brands Holdings, Inc. (SPB)

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Spectrum Brands Holdings (SPB)

Q2 2013 Earnings Call

April 30, 2013 4:30 pm ET

Executives

David A. Prichard - Vice President of Investor Relations and Corporate Communications

David R. Lumley - Chief Executive Officer, Director, President of Global Batteries and President of Home & Garden

Anthony L. Genito - Chief Financial Officer, Chief Accounting Officer, Executive Vice President and Member of Risk Management Steering Committee

Analysts

William Schmitz - Deutsche Bank AG, Research Division

Daniel Oppenheim - Crédit Suisse AG, Research Division

Lee J. Giordano - Imperial Capital, LLC, Research Division

Hamed Khorsand - BWS Financial Inc.

Karru Martinson - Deutsche Bank AG, Research Division

Presentation

Operator

Good afternoon. My name is Laura, and I will be your conference operator today. At this time, I would like to welcome everyone to the Spectrum Brands Fiscal 2013 Second Quarter Earnings Call. [Operator Instructions] As a reminder, ladies and gentlemen, this conference is being recorded today, Tuesday, April 30, 2013. Thank you.

I would now like to introduce Mr. David Prichard, Vice President of Investor Relations. Mr. Prichard, you may begin your conference.

David A. Prichard

Good afternoon, and welcome to Spectrum Brands Holdings Fiscal 2013 Second Quarter and First Half Earnings Conference Call and Webcast. I'm Dave Prichard, Vice President of Investor Relations for Spectrum Brands and moderator for today's call.

Now to help you follow along with our comments this afternoon, as some of you may have seen already, we have placed a slide presentation -- and it's on the Event Calendar page in the Investor Relations section of our website, which is www.spectrumbrands.com. This document will remain there following our call, so you can access it in the days to come as well.

So if we start with Slide 2 of this presentation I just referenced, our call today will be led, again, by Dave Lumley, our Chief Executive Officer; and Tony Genito, our Chief Financial Officer, who will both provide opening comments and then conduct the Q&A session.

If we now turn to Slides 3 and 4, our comments today include forward-looking statements. They include our outlook for fiscal 2013 and beyond. These statements are based upon management's current expectations, projections and assumptions and are, by nature, uncertain. Now actual results may differ materially, so due to that risk, Spectrum Brands encourages you to review the risk factors and cautionary statements outlined in our press release dated April 30, 2013 and our most recent SEC filings and Spectrum Brands' most recent 10-K. We assume no obligation to update any forward-looking statement.

Also, please note that we're going to discuss certain non-GAAP financial measures in this call. Now reconciliations of these on a GAAP basis for these measures, they're included in this afternoon's press release and 8-K filing, which are also both available on our website in the Investor Relations section.

For the second quarter of fiscal 2013, the company reported a net loss of $41.2 million or $0.79 diluted loss per share on average shares and common stock equivalents outstanding of 52.1 million. This compared to a net loss of $28.7 million or $0.56 diluted loss per share in the year-ago quarter based upon average shares and common stock equivalents outstanding of 51.5 million.

By segment for the second quarter of fiscal 2013, the Global Batteries & Appliances segment reported net income as adjusted of $34.6 million versus $35.6 million a year ago. The Global Pet Supplies segment reported net income as adjusted of $16.4 million versus net income as adjusted of $14.8 million in fiscal 2012. The Home and Garden business segment reported net income as adjusted of $20.6 million versus net income of $21.2 million as adjusted last year. And finally, the Hardware & Home Improvement segment reported net income as adjusted of $600,000 in the second quarter of fiscal 2013.

With that as background, I am now very pleased to turn the call over to our Chief Executive Officer, Dave Lumley.

David R. Lumley

Thanks, Dave, and thank you, all, for joining us this afternoon.

Turning to Slide 6. We reported good results for Spectrum Brands, including the legacy business, in the second quarter, which seasonally is our smallest quarter of the year, and HHI, our new hardware group, added an improved performance in its first full quarter as part of our company.

Our markets remain challenged by a difficult macroeconomic environment, highlighted by sluggish retail activity, tightening retail inventory management and frankly, a stunned consumer. These consumers are juggling higher taxes, generally stagnant wages and higher everyday expenses.

Still, we believe our Spectrum Value Model and our largely nondiscretionary, non-premium price replacement products serves us well, providing consistent value to our retail partners and consumers worldwide.

With a solid first half behind us, we remain on track to deliver another year of record growth and improved results from our legacy business, along with the added growth from HHI.

On Slide 7. Our second quarter net sales showed an increase of 1%, including HHI at both quarterly periods. HHI and Global Pet reported revenue growth. Our legacy business sales were solid, impacted by the planned $10 million continuing exit of low-margin promotional business in North American Small Appliances; this is similar to past quarters. We also had an expected shortfall in Home and Garden revenues given the difficult comparison with last year due to the very early and warm 2012 spring.

Our net loss in the second quarter was driven by an inventory revaluation related to HHI and one-time acquisition and integration and restructuring costs.

Read the rest of this transcript for free on seekingalpha.com