SPECTRUM BRANDS INC. Reports Operating Results (10-Q)

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May 18, 2010
SPECTRUM BRANDS INC. (SPB, Financial) filed Quarterly Report for the period ended 2010-04-04.

Spectrum Brands Inc. has a market cap of $811.7 million; its shares were traded at around $26.5 .

Highlight of Business Operations:

Fiscal 2009 Quarter is a result of certain customers that delayed orders historically made in the first quarter of our fiscal year to the second quarter of our fiscal year in connection with their continuing effort to reduce inventory levels. Shaving and grooming product sales increased $10 million in the Fiscal 2010 Quarter compared to the Fiscal 2009 Quarter driven by increases within Europe and North America of $4 million and $3 million, respectively, coupled with favorable foreign exchange translation of $2 million. Personal care product sales during the Fiscal 2010 Quarter increased $2 million, or 2%, compared to the Fiscal 2009 Quarter, as a result of favorable foreign exchange impacts. Lighting product sales increased $4 million, or 21%, during the Fiscal 2010 Quarter compared to the Fiscal 2009 Quarter.

Global consumer battery sales increased $29 million, or 7%, in the Fiscal 2010 Six Months compared to the Fiscal 2009 Six Months. The increase was driven by favorable foreign exchange translation of $23 million coupled with increased sales to a major customer in North America as well as increases in Central America and Columbia. These increases were tempered by decreased consumer battery sales of $11 million in Europe, primarily due to our continued exit of unprofitable or low margin private label battery sales. The $11 million, or 4%, increase in pet supplies sales in the Fiscal 2010 Six Months compared to the Fiscal 2009 Six Months is primarily attributable to favorable foreign exchange translation of $6 million coupled with increased sales in our companion animal products of $3 million, which were driven by the continued growth of our Dingo and Natures Miracle branded products, coupled with the annualized impact of price increases implemented in the Fiscal 2009 Quarter. Home and garden control product sales increased $2 million, or 2%, in the Fiscal 2010 Six Months compared to the Fiscal 2009 Six Months. The slight increase is due to increased sales with a major customer. Electric shaving and grooming products increased $19 million, or 16%, in the Fiscal 2010 Six Months compared to the Fiscal 2009 Six Months. This increase is primarily due to favorable foreign exchange translation of $7 million and increased sales in Europe of $13 million. During the Fiscal 2010 Six Months electric personal care sales increased $10 million, or 9%, compared to the Fiscal 2009 Six Months primarily due to favorable foreign exchange translation of $6 million and increases within North America and Latin America of $3 million and $2 million, respectively. These increases within electric personal care sales were slightly offset by declines in Europe of $1 million. The $2 million, or 5%, increase in portable lighting sales in the Fiscal 2010 Six Months compared to the Fiscal 2009 Six Months was primarily a result of favorable foreign exchange translation of $2 million.

Gross Profit. Gross profit for the Fiscal 2010 Quarter was $210 million versus $185 million for the Fiscal 2009 Quarter. Our gross profit margin for the Fiscal 2010 Quarter increased to 39.4% from 36.7% in the Fiscal 2009 Quarter. This increase in gross profit margin is primarily due to favorable foreign exchange translation and Restructuring and related charges of $2 million in the Fiscal 2010 Quarter compared to $3 million in the Fiscal 2009 Quarter. Restructuring and related charges in the Fiscal 2010 Quarter were primarily related to cost reduction initiatives announced in 2009 while the Fiscal 2009 Quarter primarily related to the shutdown of our Ningbo, China battery manufacturing facility. Gross profit for the Fiscal 2010 Six Months was $394 million versus $375 million for the Fiscal 2009 Six Months. Our gross profit margin for the Fiscal 2010 Six Months decreased slightly to 35.0% from 35.6% in the Fiscal 2009 Six Months. As a result of our adoption of fresh-start reporting upon emergence from Chapter 11 of the Bankruptcy Code, in accordance with SFAS No. 141, Business Combinations, (SFAS 141), inventory balances were revalued at August 30, 2009 resulting in an increase in such inventory balances of $49 million. As a result of the inventory revaluation, New Spectrum recognized $34 million in additional cost of goods sold in the Fiscal 2010 Six Months. The impact of the inventory revaluation was offset by lower Restructuring and related charges as Cost of goods sold during the Fiscal 2010 Six Months included $4 million of Restructuring and related charges whereas the Fiscal 2009 Six Months included $13 million of Restructuring and related charges. The Restructuring and related charges incurred in the Fiscal 2010 Six Months were primarily associated with cost reduction initiatives announced in 2009. The $13 million of Restructuring and related charges incurred in the Fiscal 2009 Six Months primarily related to the shutdown of our Ningbo, China battery manufacturing facility. See Restructuring and Related Charges below, as well as Note 12, Restructuring and Related Charges, to our Condensed Consolidated Financial Statements (Unaudited) included in this Quarterly Report on Form 10-Q for additional information regarding our restructuring and related charges.

Operating Expense. Operating expenses for the Fiscal 2010 Quarter totaled $164 million versus $152 million for the Fiscal 2009 Quarter representing an increase of $12 million. During the Fiscal 2010 Quarter we incurred additional depreciation and amortization in connection with the revaluation of our long lived assets as a result of our adoption of fresh-start reporting upon emergence from Chapter 11 of the Bankruptcy Code, in accordance with SFAS 141. This increase was partially offset by lower restructuring and related charges in the Fiscal 2010 Quarter versus the Fiscal 2009 Quarter. In the Fiscal 2010 Quarter we recorded approximately $3 million of restructuring and related charges which included cost reduction initiatives announced in 2009 and our global realignment announced in January 2007. We recorded $13 million of restructuring and related charges in the Fiscal 2009 Quarter which included consulting, legal and accounting fees related to the evaluation of our capital structure coupled with various cost reduction initiatives announced in 2009. Operating expenses for the Fiscal 2010 Six Months totaled $330 million versus $316 million for the Fiscal 2009 Six Months representing an increase of $14 million. The increase in the Fiscal 2010 Six Months was due to the same factors affecting the Fiscal 2010 Quarter increase which was also partially offset by lower restructuring and related charges. In the Fiscal 2010 Six Months we recorded approximately $8 million of restructuring and related charges which were primarily related to cost reduction initiatives announced in 2009. We recorded $24 million of restructuring and related charges in the Fiscal 2009 Six Months which related to consulting, legal and accounting fees related to the evaluation of our capital structure coupled with various cost reduction initiatives announced in 2009 and our global realignment announced in January 2007. See Restructuring and Related Charges below, as well as Note 12, Restructuring and Related Charges, to our Condensed Consolidated Financial Statements (Unaudited) included in this Quarterly Report on Form 10-Q for additional information regarding our restructuring and related charges.

Segment net sales to external customers in the Fiscal 2010 Quarter increased $21 million to $308 million from $287 million during the Fiscal 2009 Quarter, a 7% increase. Favorable foreign currency exchange translation impacted net sales in the Fiscal 2010 Quarter by approximately $14 million. Battery sales for the Fiscal 2010 Quarter increased to $190 million when compared to sales of $184 million in the Fiscal 2009 Quarter. The increased sales are attributable to favorable foreign currency exchange translation of $9 million coupled with increased specialty battery sales of $6 million which was partially tempered by a decline in alkaline sales of $8 million. These specialty battery sales were driven by increased volume in Central America and Columbia while the decreases in alkaline batteries was primarily attributable to declines in Europe, primarily due to our continued exit of unprofitable or low margin private label battery sales. Net sales of electric shaving and grooming products in the Fiscal 2010 Quarter increased by $10 million from their levels in the Fiscal 2009 Quarter due to favorable foreign exchange translation of $2 million coupled with increased sales in Europe and North America of $4 million and $3 million, respectively. Net sales of electric personal care products in the Fiscal 2010 Quarter increased by $2 million compared to the Fiscal 2009 Quarter due to favorable foreign exchange translation. Net sales of portable lighting products for the Fiscal 2010 Quarter increased to $22 million as compared to sales of $18 million for the Fiscal 2009 Quarter. Segment net sales to external customers in the Fiscal 2010 Six Months increased $61 million to $737 million from $676 million during the Fiscal 2009 Six Months, a 9% increase. Favorable foreign currency exchange translation impacted net sales in the Fiscal 2010 Six Months by approximately $39 million. Battery sales for the Fiscal 2010 Six Months increased to $434 million when compared to sales of $405 million in the Fiscal 2009 Six Months. The increased sales are attributable to favorable foreign currency exchange translation of $23 million coupled with increased specialty battery sales of $13 million which was partially tempered by a decline in alkaline sales of $7 million. The increases in specialty battery sales and declines in alkaline battery sales are due to the same factors mentioned above. Net sales of electric shaving and grooming products in the Fiscal 2010 Six MoRead the The complete Report