Spectrum Brands CEO Discusses Q3 2010 Results - Earnings Call Transcript

Spectrum Brands CEO Discusses Q3 2010 Results - Earnings Call Transcript
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Spectrum Brands Holdings, Inc. (SPB)

Q3 2010 Earnings Call

August 17, 2010 9:00 AM ET

Executives

John Wilson – Senior Vice President and General Counsel

Dave Lumley – Chief Executive Officer

Tony Genito – Chief Financial Officer

John Heil – President, Global Pet Supplies

Terry Polistina – President, Small Appliances

Analysts

Reza Vahabzadeh – Barclays Capital

Bill Chappell – SunTrust

Hamed Khorsand – BWS Financial

Mary Gilbert – Imperial Capital

Presentation

Operator

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Good morning. My name is Andrea, and I will be your conference operator today. At this time, I would like to welcome everyone to the Spectrum Brands Third Quarter Fiscal 2010 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers prepared remarks there will be a question-and-answer period. (Operator Instructions)

As a reminder ladies and gentlemen, this conference is being recorded today August 17, 2010. Thank you. I would now like to introduce Mr. John Wilson, General Counsel. Mr. Wilson, you may begin your conference.

John Wilson

Good morning. And welcome to the Spectrum Brands third quarter fiscal 2010 earnings call. My name is John Wilson, and I'm the General Counsel for Spectrum Brands, filling in for Carey Phelps, our Head of Investor Relations, who is unable to join us today.

With me this morning are Dave Lumley, our Chief Executive Officer; Tony Genito, our Chief Financial Officer. Also available on the phone to answer questions are John Heil, President of our Global Pet Supplies segment; and Terry Polistina, President of our Small Appliances segment.

Before we begin, let me remind you that our comments this morning include forward looking statements including our outlook for the full year of fiscal 2010 and beyond. These statements are based on 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 August 17, 2010, and our most recent SEC filings and Spectrum Brands Inc. 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 translations.

Spectrum Brands management uses these metrics because it believes that they one, provide a means of analyzing the company's current and future performance in identifying trends and two, provides 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, I should point out that adjusted EBITDA can also be a useful measure of the company's ability to service debt and is one of the measures used for determining the company's debt covenant compliance.

Also, management believes that free cash flow is useful to both managements and investors in their analysis of the company’s ability to service and repay its debt and use 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 statements 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 as service debt and therefore does not reflect funds available for investment or discretionary use.

While Spectrum Brands management believes that these non-GAAP financial measures I just mentioned 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 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.

For completed quarter we provided reconciliations of adjusted EBITDA to the comparable GAAP metrics in table four of our press release dated August 17, 2010, which has been furnished on a Form 8-K filed with the SEC. A copy of the 8-K is available on our website, www.spectrumbrands.com, under the Investor Relations section. And we'll 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 amount of the company's assets and liabilities were adjusted to reflect their fair value. As a result reported historical financial statements for 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.

During the course of our comments today, unless we say otherwise, current year results relate to the fiscal third quarter of 2010 while any references to prior year results for the fiscal third of 2009. Also, unless we state otherwise, all results provided today for the quarter and for other periods are provided on a pro forma basis assuming that Russell Hobbs’ results of operation had been included in Spectrum's portfolio since the beginning of the prospective period discussed.

With that, I'll turn the call over to Dave.

Dave Lumley

Thanks, John, and thank you for joining us today. Very exciting time at Spectrum Brands, on June 16th we added the Russell Hobbs' family of small appliance brands to our portfolio, including well-known names such as George Foreman, Black & Decker, Toastmaster, Farberware and LitterMaid. Together we are a $3 billion global consumer products company with compelling opportunities for growth and expansion, as well as the potential for strong free cash flow generation.

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