Spectrum Brands Holdings Reports Record Fiscal 2016 Results

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  • 7.4% reported net sales growth, 139.8% net income increase and
    reported diluted earnings per share (EPS) of $5.99
  • 2.6% organic net sales growth, 19.0% adjusted EBITDA increase and
    strong margin expansion
  • Net cash provided from operating activities of $615.0 million,
    excluding a tender premium of $15.6 million and after purchases of
    property, plant and equipment of $95.2 million, resulted in record
    $535 million of adjusted free cash flow in fiscal 2016 compared to
    $454 million in fiscal 2015 and $359 million in fiscal 2014
  • Planning 8th consecutive year of record
    performance in fiscal 2017, including adjusted free cash flow of
    approximately $575-$590 million

MIDDLETON, Wis.–(BUSINESS WIRE)–Spectrum Brands Holdings, Inc. (NYSE: SPB), a global consumer products
company offering an expanding portfolio of leading brands providing
superior value to consumers and customers every day, today reported
record performance for fiscal 2016 ended September 30, 2016.

The Company also said it plans to deliver an eighth consecutive year of
record performance in fiscal 2017, including expected growth in reported
net sales above category rates and adjusted free cash flow of up to 10
percent.

Fiscal 2016 Highlights:

  • Net sales of $5.04 billion in fiscal 2016 increased 7.4 percent
    compared to $4.69 billion last year. Excluding the negative impact of
    $126.2 million of foreign exchange and acquisition sales of $351.8
    million, organic net sales, a non-GAAP measure, increased 2.6 percent
    from the prior year. See Other Supplemental Information for
    reconciliation to GAAP net sales.
  • Net income of $357.1 million and diluted EPS of $5.99 in fiscal
    2016 increased compared to net income of $148.9 million and diluted
    EPS of $2.66 in fiscal 2015 primarily due to the impact of the GAC
    acquisition, volume, improved mix, reduced acquisition and
    restructuring activity, a lower effective tax rate, and one-time debt
    financing and refinancing costs from the prior period.
  • Adjusted diluted EPS, a non-GAAP measure, of $5.20 in fiscal 2016
    increased 20.6 percent compared to $4.31 last year predominantly due
    to the impact of the GAC acquisition, volume, improved mix and lower
    interest expense, partially offset by higher weighted average common
    shares outstanding. See Other Supplemental Information for
    reconciliation to GAAP EPS.
  • Adjusted EBITDA, a non-GAAP measure, of $952.8 million in fiscal
    2016 increased 19.0 percent compared to $800.6 million in fiscal 2015.
    Excluding the negative impact of foreign exchange of $79.8 million, as
    well as the effect on EBITDA from acquisitions of $106.4 million,
    organic adjusted EBITDA of $926.2 million increased 15.7 percent
    versus the prior year. See Other Supplemental Information for
    reconciliation to GAAP net income.
  • Adjusted EBITDA margin, a non-GAAP measure, of 18.9 percent in
    fiscal 2016 increased from 17.1 percent in fiscal 2015, which
    represented the sixth consecutive year of adjusted EBITDA margin
    improvement. The increase was primarily due to the GAC acquisition,
    improved mix and operating expense leverage on the base business. See
    Other Supplemental Information for reconciliation to GAAP net income.
  • Leverage (total debt at par of $3,682 million to adjusted EBITDA of
    $952.8 million) decreased to approximately 3.9 times at the end of
    fiscal 2016 compared to approximately 4.4 times at the end of fiscal
    2015. Including the subsequent redemption in October 2016 of the
    remaining $130 million of 6.375% senior unsecured notes tendered for
    in September, total leverage was approximately 3.7 times.
  • Adjusted free cash flow, a non-GAAP measure, was a record $535
    million compared to $454 million in fiscal 2015 and $359 million in
    fiscal 2014. See Other Supplemental Information for reconciliation to
    GAAP Cash Flow Provided From Operating Activities.

“Fiscal 2016 was our 7th consecutive year of record financial
performance,” said Andreas Rouvé, Chief Executive Officer of Spectrum
Brands Holdings. “Our improvement was broad-based across most businesses
and geographies. Home and Garden, Hardware and Home Improvement and
Global Auto Care achieved record results. Batteries, Personal Care and
Global Pet delivered strong performances. All of our core regions
reported organic net sales and adjusted EBITDA growth on a currency
neutral basis.

“Fiscal 2016 was a year of good progress with our Spectrum First
initiative,” Mr. Rouvé said. “Spectrum First is the pathway to move our
Company to the next level of performance as a large cap stock with
growth accelerators built around customers, process and people.

“The launch of innovative products accelerated in all categories, and we
continued to leverage our global infrastructure and shared services as
well as improve our processes,” he said. “To support our organic growth,
we began to step up R&D and marketing investments while adding sales
specialists to pursue white space opportunities worldwide. At the same
time, unprofitable businesses were exited to help improve profitability,
margins and free cash flow.

“Adjusted free cash flow grew a strong 18 percent,” said Mr. Rouvé.
“Term debt reduction of more than $410 million enabled us to reduce
total leverage by one-half turn and end the fiscal year at approximately
3.9 times, consistent with our guidance.

“We delivered good profit growth and solid margin expansion in the
fourth quarter, despite lower net sales due mostly to four fewer
shipping days that impacted revenues by approximately 5 to 6 percent as
well as the exit of unprofitable business of approximately $12 million,”
he said. “The related favorable mix effect coupled with strong cost
savings helped deliver significant gross margin and adjusted EBITDA
margin expansion despite the negative foreign exchange headwinds.

“As we look to fiscal 2017, we plan for above category top-line and
bottom-line growth and a free cash flow increase of up to 10 percent
driven by the continuous launch of innovation and further leveraging of
our global platform to expand distribution of our products,” Mr. Rouvé
said. “We remain focused on our ‘more, more, more’ organic growth
strategy to push more cross-listings, serve more sales channels and
enter into more countries through leveraging our strong retailer
relationships.”

Fiscal 2016 Consolidated Financial Results

Consolidated net sales of $5.04 billion in fiscal 2016 increased 7.4
percent compared to $4.69 billion in fiscal 2015. Excluding the negative
impact of $126.2 million of foreign exchange, as well as acquisition
sales of $351.8 million, organic net sales increased 2.6 percent.

Gross profit and gross profit margin for fiscal 2016 were $1.92 billion
and 38.1 percent compared to $1.67 billion and 35.6 percent,
respectively, in fiscal 2015. The gross profit margin percentage
increase was primarily due to improved mix and the GAC acquisition,
partially offset by the negative impact of foreign exchange.

Operating expenses of $1.26 billion in fiscal 2016 compared to $1.20
billion in the prior year. Higher SG&A expense, driven primarily by the
full-year effect of the GAC acquisition, was partially offset by lower
acquisition, integration and restructuring costs.

The Company reported GAAP net income of $357.1 million, or $5.99 diluted
income per share, in fiscal 2016 on average diluted shares and common
stock equivalents outstanding of 59.6 million. In fiscal 2015, the
Company reported GAAP net income of $148.9 million, or $2.66 diluted
income per share, on average diluted shares and common stock equivalents
outstanding of 55.9 million. The Company generated adjusted diluted
earnings per share, a non-GAAP measure, of $5.20 in fiscal 2016, a 20.6
percent increase compared to $4.31 in fiscal 2015. The improvement was
predominantly due to the impact of the GAC acquisition, volume and
favorable mix, partially offset by the negative impact of foreign
exchange.

Adjusted EBITDA, a non-GAAP measure, of $952.8 in fiscal 2016 increased
19.0 percent compared to $800.6 million in fiscal 2015. HHI and Home and
Garden delivered record adjusted EBITDA while all businesses grew
year-over-year. Excluding the negative impact of $79.8 million of
foreign exchange, as well as acquisition-related EBITDA of $106.4
million, organic adjusted EBITDA of $926.2 increased 15.7 percent versus
fiscal 2015. See Other Supplemental Information for reconciliation to
GAAP net income. Reported adjusted EBITDA margin expanded to 18.9
percent compared to 17.1 percent last year, which represented the sixth
consecutive year of adjusted EBITDA margin growth. The improvement was
primarily due to improved mix, the impact of the GAC acquisition and
operating expense leverage.

Fiscal 2016 Fourth Quarter Consolidated Financial Results

Net sales of $1.25 billion in the fourth quarter of fiscal 2016
decreased 4.5 percent compared to $1.31 billion in fiscal 2015.
Excluding the negative impact of $16.9 million of foreign exchange,
organic net sales declined 3.2 percent. Four fewer shipping days
negatively affected revenues by approximately $70 to $80 million.

Gross profit and gross profit margin in the fourth quarter of fiscal
2016 were $485.8 million and 38.9 percent, respectively, compared to
$467.4 million and 35.7 percent, respectively, last year. The gross
profit margin percentage increase was primarily due to favorable mix and
strong productivity, partially offset by the negative impact of foreign
exchange.

Operating expenses of $327.3 million in the fourth quarter of fiscal
2016 decreased 1.7 percent compared to $333.0 million in the prior year
primarily due to lower acquisition, integration and restructuring
charges.

The Company reported net income of $89.0 million, or $1.49 diluted EPS,
in the fourth quarter of fiscal 2016 on average diluted shares and
common stock equivalents outstanding of 59.8 million. In the fourth
quarter of fiscal 2015, net income was $26.5 million, or $0.44 diluted
EPS, on average diluted shares and common stock equivalents outstanding
of 59.8 million. The Company generated adjusted diluted EPS of $1.31 in
the fourth quarter of fiscal 2016, an increase of 15.9 percent compared
to $1.13 in fiscal 2015 primarily due to strong productivity and
favorable mix.

Adjusted EBITDA of $236.9 million in the fourth quarter of fiscal 2016
increased 3.3 percent compared to $229.3 million in fiscal 2015.
Excluding the negative impact of $14.4 million of foreign exchange,
organic adjusted EBITDA of $251.3 increased 9.6 percent versus the
fourth quarter of 2015. Reported adjusted EBITDA margin of 19.0 percent
increased from 17.5 percent last year. See Other Supplemental
Information for reconciliation to GAAP net income.

Fiscal 2016 Fourth Quarter Segment Level Data

Global Batteries & Appliances (GBA)

             
Three Month Period Ended Twelve Months Ended
(in millions, except %) September 30, 2016 September 30, 2015 Variance September 30, 2016 September 30, 2015 Variance
Net Sales $ 520.0 $ 553.0 $ (33.0 ) (6.0 %) 2,010.3 $ 2,092.2 $ (81.9 ) (3.9 %)
Adjusted EBITDA 83.4 77.6 5.8 7.5 % 311.4 306.9 4.5 1.5 %
Adjusted EBITDA Margin 16.0 % 14.0 % 200 bps 15.5 % 14.7 % 80 bps

The GBA segment reported fiscal 2016 fourth quarter net sales of $520.0
million versus $553.0 million in the year-ago quarter. Organic net sales
decreased 3.7 percent as consumer batteries, personal care and small
appliances reported lower revenues which were, in large part, negatively
impacted by four fewer shipping days totaling approximately $27 to $31
million of sales for the GBA segment.

Global battery net sales of $222.7 million in the fourth quarter of
fiscal 2016 decreased 2.9 percent compared to $229.3 million in the
fourth quarter of fiscal 2015. Excluding negative foreign exchange
impacts of $1.8 million, fiscal 2016 fourth quarter organic net sales
fell 2.1 percent, including the unfavorable impact of four fewer
shipping days of approximately $12 to $13 million of sales. Solid growth
on a currency neutral basis in Europe, driven by increased specialty
battery revenues, and in Latin America primarily from gains in specialty
batteries and lights was more than offset predominantly by lower results
in North America and fewer shipping days. Lower North American sales
were due to holiday shipment timing and strong new customer orders for
hearing aid batteries in the prior year.

Net sales for the global personal care product category of $120.6
million in the fourth quarter of fiscal 2016 compared to $125.8 million
last year. Excluding negative foreign exchange impacts of $3.0 million,
organic net sales declined 1.7 percent, including the unfavorable impact
of four fewer shipping days of approximately $6 to $8 million. Growth in
constant currency in Europe, primarily in hair care appliances, and a
double-digit increase in constant currency in Latin America from hair
care and men’s shaving and grooming were more than offset by lower North
American revenues and fewer shipping days. The North American decline
was primarily due to competitor discounting, category softness in
certain hair care appliance channels, and the timing of customer
shipments against strong growth last year.

Net sales of $176.7 million in the global small appliances product
category in the fourth quarter of fiscal 2016 compared to $197.9 million
in the year-ago quarter. Excluding negative foreign exchange impacts of
$7.9 million, fiscal 2016 fourth quarter organic net sales decreased 6.7
percent, including the unfavorable impact of four fewer shipping days of
approximately $9 to $10 million of sales. Compared to strong growth of
8.2 percent in the prior year, lower fiscal 2016 fourth quarter revenues
in North America, Europe and Latin America were attributable to
competitor discounting, retailer shipment timing, fewer shipping days
and soft POS largely in food preparation, beverage and cooking
categories at several key U.S. retail customers.

GBA adjusted EBITDA of $83.4 million in the fourth quarter of fiscal
2016 increased 7.5 percent compared to $77.6 million in the year-ago
quarter. Excluding negative foreign exchange impacts of $13.3 million,
organic adjusted EBITDA of $96.7 million in the fourth quarter of fiscal
2016 grew 24.6 percent versus the prior year. Adjusted EBITDA margin of
16.0 percent expanded 200 basis points compared to 14.0 percent last
year.

Hardware & Home Improvement (HHI)

             
Three Month Period Ended Twelve Months Ended
(in millions, except %) September 30, 2016 September 30, 2015 Variance September 30, 2016 September 30, 2015 Variance
Net Sales $ 328.1 $ 331.4 $ (3.3 ) (1.0 %) $ 1,241.0 $ 1,205.5 $ 35.5 2.9 %
Adjusted EBITDA 69.1 65.2 3.9 6.0 % 241.6 225.5 16.1 7.1 %
Adjusted EBITDA Margin 21.1 % 19.7 % 140 bps 19.5 % 18.7 % 80 bps

The HHI segment reported net sales of $328.1 million in the fourth
quarter of fiscal 2016, a 1.0% decline compared to $331.4 million in the
prior year. Excluding the negative impact of foreign exchange of $1.4
million, organic net sales decreased 0.6 percent. Strong growth in the
core North American residential security category was negatively
impacted by fewer shipping days totaling approximately $18 to $20
million of sales. The planned exit of unprofitable businesses and the
expiration of a customer tolling agreement adversely impacted sales
growth by 0.9 percent.

Adjusted EBITDA of $69.1 million increased 6.0 percent versus $65.2
million last year. Adjusted EBITDA margin of 21.1 percent improved 140
basis points compared to 19.7 percent last year.

Global Pet Supplies

             
Three Month Period Ended Twelve Months Ended
(in millions, except %) September 30, 2016 September 30, 2015 Variance September 30, 2016 September 30, 2015 Variance
Net Sales $ 206.7 $ 219.3 $ (12.6 ) (5.7 %) $ 825.7 $ 758.2 $ 67.5 8.9 %
Adjusted EBITDA 41.7 42.2 (0.5 ) (1.2 %) 140.1 124.5 15.6 12.5 %
Adjusted EBITDA Margin 20.2 % 19.2 % 100 bps 17.0 % 16.4 % 60 bps

The Global Pet Supplies segment reported net sales of $206.7 million in
the fourth quarter of fiscal 2016 compared to $219.3 million last year.
Excluding the unfavorable impact of foreign exchange of $2.5 million,
organic net sales declined 4.6 percent. Lower aquatics and companion
animal revenues were predominantly due to four fewer shipping days which
negatively impacted sales by approximately $11 to $12 million. Aquatics
revenues also were negatively affected by reduced U.S. commercial sales
due to fewer remodels at a major retailer compared to the prior year and
in Europe as a result of U.K. economic conditions. North American
companion animal sales were negatively affected largely by the timing of
promotions and the exit of low-margin private label rawhide business at
a major retailer. In Europe, revenues were also lower from the planned
exit of a pet food customer tolling agreement.

Fourth quarter adjusted EBITDA of $41.7 million compared to $42.2
million in fiscal 2015. Adjusted EBITDA margin grew 100 basis points to
20.2 percent compared to 19.2 percent in the prior year.

Home and Garden

             
Three Month Period Ended Twelve Months Ended
(in millions, except %) September 30, 2016 September 30, 2015 Variance September 30, 2016 September 30, 2015 Variance
Net Sales $ 94.3 $ 108.3 $ (14.0 ) (12.9 %) $ 509.0 $ 474.0 $ 35.0 7.4 %
Adjusted EBITDA 19.9 24.4 (4.5 ) (18.4 %) 138.3 124.5 13.8 11.1 %
Adjusted EBITDA Margin 21.1 % 22.5 % (140 ) bps 27.2 % 26.3 % 90 bps

The Home and Garden segment reported fourth quarter net sales of $94.3
million, a 12.9 percent decrease compared to $108.3 million last year.
Lower revenues, primarily in the repellents and lawn and garden controls
categories, were attributable to four fewer shipping days which impacted
sales by approximately $6 to $8 million and lower year-over-year
replenishment orders due to earlier seasonal load-ins across retailers
in the first half of fiscal 2016.

Fourth quarter adjusted EBITDA of $19.9 million fell 18.4 percent versus
$24.4 million a year ago. Adjusted EBITDA margin of 21.1 percent
decreased 140 basis points from 22.5 percent last year.

Global Auto Care (GAC)

               
Three Month Period Ended Twelve Months Ended
(in millions, except %) September 30, 2016 September 30, 2015 Variance September 30, 2016 September 30, 2015 Variance
Net Sales $ 100.7 $ 96.1 $ 4.6 4.8 % $ 453.7 $ 160.5 $ 293.2 182.7 %
Adjusted EBITDA 31.4 28.0 3.4 12.1 % 153.4 47.3 106.1 224.3 %
Adjusted EBITDA Margin 31.2 % 29.1 % 210 bps 33.8 % 29.5 % 430 bps

The GAC segment reported net sales of $100.7 million in the fourth
quarter of fiscal 2016, an increase of 4.8 percent compared to $96.1
million in the prior year. Excluding the negative impact of foreign
exchange of $0.3 million, fourth quarter organic net sales of $101.0
million increased 5.1 percent, despite four fewer shipping days that
unfavorably impacted sales by approximately $8 to $9 million. Favorable
summer weather drove solid U.S. growth in refrigerants, especially A/C
PRO®.

Fourth quarter adjusted EBITDA of $31.4 million grew 12.1 percent
compared to $28.0 million in fiscal 2015. Adjusted EBITDA margin of 31.2
percent expanded 210 basis points from 29.1 percent last year.

Liquidity and Debt

Spectrum Brands completed fiscal 2016 on September 30, 2016 with a solid
liquidity position, including a cash balance of approximately $275
million and more than $466 million available on its $500 million Cash
Flow Revolver.

As of the end of fiscal 2016, the Company had approximately $3,682
million of debt outstanding, consisting of a series of secured Term
Loans in the aggregate amount of $1,123 million, $2,427 million of
senior unsecured notes, and approximately $132 million of capital leases
and other obligations.

As a result of solid earnings and strong working capital management, the
Company generated record adjusted free cash flow in fiscal 2016 of $535
million, surpassing its goal of $505-$515 million, fiscal 2015 adjusted
free cash flow of $454 million and fiscal 2014 free cash flow of $359
million.

Leverage (total debt to adjusted EBITDA) was approximately 3.9 times at
the end of fiscal 2016, consistent with previous guidance, and compared
to 4.4 times at the end of fiscal 2015. Including the subsequent
redemption in October 2016 of the remaining $130 million of 6.375%
senior unsecured notes tendered for in September, total leverage was
approximately 3.7 times.

Fiscal 2017 Outlook

Spectrum Brands expects fiscal 2017 reported net sales to grow above
category rates, along with an anticipated negative impact from foreign
exchange of approximately 100 to 150 basis points.

Fiscal 2017 adjusted free cash flow is projected to be approximately
$575-$590 million compared to $535 million in fiscal 2016. See Other
Supplemental Information for a reconciliation to Forecasted GAAP Cash
Flow from Operating Activities. Capital expenditures, which were $95.2
million in fiscal 2016, are expected to be in the range of $110 million
to $120 million, including rollover spending from fiscal 2016. These
incremental investments will support footprint optimization, vertical
integration improvements, technology and innovation and are expected to
enhance the Company’s margin structure and organic net sales growth rate.

Conference Call/Webcast Scheduled for 9:00 A.M. Eastern Time Today

Spectrum Brands will host an earnings conference call and webcast at
9:00 a.m. Eastern Time today, November 17. To access the live conference
call, U.S. participants may call 877-556-5260 and international
participants may call 973-532-4903. The conference ID number is
95725899. A live webcast and related presentation slides will be
available by visiting the Event Calendar page in the Investor Relations
section of Spectrum Brands’ website at www.spectrumbrands.com.

A replay of the live webcast also will be accessible through the Event
Calendar page in the Investor Relations section of the Company’s
website. A telephone replay of the conference call will be available
through Thursday, December 1. To access this replay, participants may
call 855-859-2056 and use the same conference ID number.

About Spectrum Brands Holdings, Inc.

Spectrum Brands Holdings, a member of the Russell 1000 Index, is a
global and diversified consumer products company and a leading supplier
of consumer batteries, residential locksets, residential builders’
hardware, plumbing, shaving and grooming products, personal care
products, small household appliances, specialty pet supplies, lawn and
garden and home pest control products, personal insect repellents, and
auto care products. Helping to meet the needs of consumers worldwide,
our Company offers a broad portfolio of market-leading, well-known and
widely trusted brands including Rayovac®, VARTA®, Kwikset®, Weiser®,
Baldwin®, National Hardware®, Pfister®, Remington®, George Foreman®,
Black + Decker®, Tetra®, Marineland®, Nature’s Miracle®, Dingo®,
8-in-1®, FURminator®, IAMS®, Eukanuba®, Healthy-Hide®, Digest-eeze™,
Littermaid®, Spectracide®, Cutter®, Repel®, Hot Shot®, Black Flag®,
Liquid Fence®, Armor All®, STP® and A/C PRO®. Spectrum Brands’ products
are sold in approximately 160 countries. Spectrum Brands Holdings
generated net sales of approximately $5.04 billion in fiscal 2016. For
more information, visit
www.spectrumbrands.com.

Non-GAAP Measurements

Management believes that certain non-GAAP financial measures may be
useful in certain instances to provide additional meaningful comparisons
between current results and results in prior operating periods.
Management believes that organic net sales provide for a more complete
understanding of underlying business trends of regional and segment
performance by excluding the impact of currency exchange rate
fluctuations and the impact of acquisitions.
In addition, within
this release, including the supplemental information attached hereto,
reference is made to adjusted diluted EPS, adjusted earnings before
interest, taxes, depreciation and amortization (EBITDA), and adjusted
EBITDA margin.

Contacts

Spectrum Brands Holdings, Inc.
Investor/Media Contact:
Dave
Prichard

608-278-6141

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