Spectrum Brands Holdings CEO Discusses F4Q2010 Results – Earnings Call Transcript

Spectrum Brands Holdings CEO Discusses F4Q2010 Results â¿¿ Earnings Call Transcript
By Seeking Alpha ,

Spectrum Brands Holdings Inc. (SPB)

F4Q2010 Earnings Call Transcript

December 6, 2010 4:30 pm ET

Executives

David Prichard – VP, IR & Corporate Communications

Dave Lumley – CEO

Tony Genito – EVP and CFO

Terry Polistina – President, Small Appliances Division

John Heil – President, Global Pet Supplies

Analysts

William Chappell – SunTrust

Karru Martinson – Deutsche Bank

Torin Eastburn – CJS Securities

Mary Gilbert – Imperial Capital

Arun Seshadri – Credit Suisse

Presentation

Operator

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Good afternoon. My name is Steve and I will be your conference operator today. At this time, I would like to welcome everyone to the Spectrum Brands' fiscal 2010 full year and fourth quarter conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you.

I'll turn the call over to Mr. David Prichard, Vice President of Investor Relations.

David Prichard

Thank you and good afternoon, and welcome to Spectrum Brands' fiscal 2010 full year and fourth quarter earnings conference call and audio webcast. I am Dave Prichard, Vice President of Investor Relations for Spectrum Brands and your moderator for today's call.

With me this afternoon to lead the call are Dave Lumley, our Chief Executive Officer and Tony Genito, our Chief Financial Officer. Also with us today for the Q&A session are Terry Polistina, President, Global Small Appliances and John Heil, President of our Global Pet Supplies segment.

Our comments today include forward-looking statements including our outlook for fiscal 2011 and beyond. These statements are based upon management's current expectations, projections and assumptions, and are by nature uncertain. Actual results may differ materially. Due to that risk, Spectrum Brands encourages you to review the risk factors and cautionary statements outlined in our press release dated December 06, 2010 and our most recent SEC filings and Spectrum Brands, Inc.'s most recent 10-K. We assume no obligation to update any forward-looking statements.

Additionally, please note that we will discuss certain non-GAAP financial measures during our remarks, including adjusted diluted earnings per share, adjusted EBITDA, free cash flow and net sales excluding foreign exchange translation. Spectrum Brands' management uses these metrics because it believes they provide a means of analyzing the Company's current and future performance and identifying trends; and two, provide further insight into our operating performance, because they eliminate certain items that are not comparable either from one period to the next or from one company to another.

Additionally, adjusted EBITDA can also be a useful measure of a Company's ability to service debt, and is one of the measures used for determining the Company's debt covenants compliance.

Also, management believes that free cash flow is useful to both management and investors in their analysis of the Company's ability to service and repay its debt and meet its working capital requirements. Free cash flow should not be considered in isolation or as a substitute for pre-tax income or loss, net income or loss cash provided by or used in operating activities or other statement of operations or cash flow statement data prepared in accordance with GAAP or as a measure of profitability or liquidity.

In addition, the calculation of free cash flow does not reflect cash used to service debt and therefore does not reflect funds available for investment or discretionary uses. While Spectrum Brands management believes that these non-GAAP financial measures 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.

I want to caution the audience that although our net income is the GAAP measure from which adjusted EBITDA is derived, projected adjusted EBITDA results discussed during this call may differ significantly from net income results, due to factors not included in the calculation of adjusted EBITDA.

In our press release, dated December 6, 2010, which has been furnished on the Form 8-K filed with the SEC we have provided the reconciliations for the following non-GAAP information in the tables indicated. First, in table three, a complete reconciliation of diluted loss per share on a GAAP basis to adjusted earnings per share. Second, in table four, a reconciliation of GAAP net income or loss to adjusted EBITDA on a consolidated prospective basis for the twelve months ending September 30, 2011.

Fourth in table seven, a reconciliation of cash provided from operating activities to free cash flow for the twelve months ending September 30, 2011. A copy of the 8-K is available on our website www.spectrumbrands.com under the Investor Relation section. We will provide reconciliations of net sales excluding foreign exchange during this call.

As a reminder, in connection with the Company's emergence from Chapter 11 on August 28, 2009, we adopted fresh start reporting on August 30, 2009. At that time, the recorded amounts of the company's assets and liabilities were adjusted to reflect their fair value. As a result, the reported historical financial statements of the predecessor Company are not comparable to those of the successor Company, whose results encompass the results of operations on and after August 30, 2009.

Now, let me take a moment to quickly review our GAAP results. The Company reported a net loss of $190 million for fiscal 2010 or $5.28 per diluted loss per share, which included significant costs incurred as a result of the Russell Hobbs transaction, and related financing. For fiscal 2009, the Company reported net income of $943 million.

By segment, for fiscal 2010, Global Batteries & Personal Care reported net income of $137 million in fiscal 2010 versus $126 million in the year earlier. Global Pet Supplies reported net income of $50 million in 2010 versus net income of $41 million into fiscal 2009. Home & Garden reported net income of $40 million in fiscal 2010 versus a net loss of $51 million in fiscal 2009. Finally, Small Appliances recorded net income of $400,000 in fiscal 2010 and in fiscal 2009, Russell Hobbs, reported a net loss of $47 million.

For the fourth quarter of fiscal 2010, the Company reported a net loss of $24 million or $0.48 per diluted loss per share versus net income of $1.153 billion in fiscal 2009, which included a gain of $1.223 billion from various reorganization items, which represents expenses, income, gains and losses that the Company has identified as directly relating to our Chapter 11 filing.

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