Spectrum Brands Holdings Reports Solid Fiscal 2017 Fourth Quarter Results, Announces Projects Alpha and Ignite to Further Support Long-Term Growth Ambitions

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
solid results for the fourth quarter of fiscal 2017 ended September 30,
2017. Spectrum Brands also announced the launch of two complementary
multi-year projects, Alpha and Ignite, designed to further support the
Company’s long-term growth ambitions.

This press release includes non-GAAP metrics such as organic net sales,
adjusted diluted earnings per share (EPS), adjusted EBITDA, adjusted
EBITDA margin, organic adjusted EBITDA and adjusted free cash flow. See
Other Supplemental Information for reconciliation to comparable GAAP
metrics.

Fiscal 2017 Fourth Quarter Highlights:

• Net sales of $1.32 billion in the fourth quarter of fiscal 2017
  increased 5.8 percent compared to $1.25 billion last year. Excluding
  the positive impact of $12.4 million of foreign exchange and
  acquisition sales of $20.8 million, organic net sales grew 3.1 percent
  from the prior year.
• Net income of $94.9 million and diluted EPS of $1.63 in the fourth
  quarter of fiscal 2017 increased compared to net income of $89.0
  million and diluted EPS of $1.49 in fiscal 2016 primarily due to
  reduced interest expense, a larger income tax benefit and lower
  average shares outstanding.
• Adjusted diluted EPS of $1.35 in the fourth quarter of fiscal 2017
  improved 3.1 percent compared to $1.31 last year.
• Operating income of $108.4 million in the fourth quarter of fiscal
  2017 decreased 31.6 percent compared to $158.5 million in fiscal 2016
  primarily as a result of higher general and administrative costs from
  stock-based compensation programs, increased restructuring and related
  charges, and a write-off from the impairment of intangible assets.
• Operating income margin of 8.2 percent in the fourth quarter of
  fiscal 2017 fell 450 basis points compared to 12.7 percent in the
  prior year.
• Adjusted EBITDA of $257.5 million in the fourth quarter of fiscal
  2017 increased 8.7 percent compared to $236.9 million in fiscal 2016.
  Excluding the positive impact of foreign exchange of $1.8 million and
  acquisition EBITDA of $6.9 million, organic adjusted EBITDA of $248.8
  million improved 5.0 percent versus the prior year.
• Adjusted EBITDA margin of 19.5 percent in the fourth quarter of
  fiscal 2017 increased 50 basis points compared to 19.0 percent in
  fiscal 2016 primarily due to higher volumes and the impact of
  acquisitions.
• Fiscal 2017 adjusted free cash flow was a record $587 million based
  on net cash provided from operating activities of $665 million after
  purchases of property, plant and equipment of $115 million and other
  adjustments of $37 million. This compared to adjusted free cash flow
  of $535 million in fiscal 2016 and $454 million in fiscal 2015.

“We finished a challenging fiscal 2017 with a strong fourth quarter
performance,” said Andreas Rouvé, Chief Executive Officer of Spectrum
Brands Holdings. “Our Home & Garden and Hardware & Home Improvement
businesses led the way with record quarterly results, and Global Auto
Care and Personal Care delivered solid performances as well. Regionally,
growth was driven by our core U.S. business along with strong expansion
in our European and Asia-Pacific regions.

“Our organic sales growth was reduced by the exit of low-margin,
non-strategic business. Accordingly, we grew our organic adjusted EBITDA
faster than net sales,” Mr. Rouvé said. “I’m pleased to report that our
e-commerce business remained a bright spot in the fourth quarter, with
growth of more than 50% in our core U.S. market.

“Fiscal 2017 was our 8th consecutive year of record adjusted
EBITDA, adjusted EBITDA margin and free cash flow, which grew 10 percent
in large part from continued working capital improvements,” he said. “We
achieved white space and cross-selling wins, expanded our e-commerce
business with targeted digital investments, improved our overall product
vitality rate and pace of innovation, and delivered strong continuous
improvement savings along with major efficiency enhancement programs in
GAC and HHI that will bring important future benefits.

“To help sustain this momentum in fiscal 2018, we are launching two
exciting and complementary initiatives, Projects Alpha and Ignite, to
further enhance our multi-year growth ambitions,” he said. “For Project
Alpha, we will spend as much as an additional $20 million this year to
accelerate our organic sales growth by expanding into adjacent product
segments through selective investment in new product development and
strong market launches using new digital and social media marketing
campaigns.

“Project Ignite is a Company-wide initiative to ensure that our
organizations continue to adapt to rapidly changing consumer preferences
and retail channels and that resources are prioritized and allocated to
our best growth opportunities,” Mr. Rouvé said. “We expect both projects
to be multi-year in scope with Ignite partially funding increased
investments behind Alpha in 2018.

“Finally, we anticipate measured top- and bottom-line growth in fiscal
2018, with record adjusted free cash flow,” Mr. Rouvé said. “We plan to
further improve the efficiency of our processes and continue to leverage
our global infrastructure and shared services to expand into more
categories, channels and countries.”

Fiscal 2017 Fourth Quarter Consolidated Financial Results

Net sales of $1.32 billion in the fourth quarter of fiscal 2017
increased 5.8 percent compared to $1.25 billion in fiscal 2016.
Excluding the positive impact of $12.4 million of foreign exchange and
acquisition sales of $20.8 million, organic net sales grew 3.1 percent.

Gross profit and gross profit margin in the fourth quarter of fiscal
2017 were $496.2 million and 37.5 percent, respectively, compared to
$485.8 million and 38.9 percent, respectively, last year. The gross
profit margin percentage decrease was primarily due to unfavorable mix,
the negative impact of the Pet U.S. rawhide safety recall and operating
start-up inefficiencies.

Operating expenses of $387.8 million in the fourth quarter of fiscal
2017 increased 18.5 percent compared to $327.3 million in the prior year
primarily due to acquisitions, higher stock-based compensation costs,
increased restructuring and related charges, and an impairment of
intangible assets.

Operating income of $108.4 million in the fourth quarter of fiscal 2017
fell 31.6 percent versus $158.5 million last year as a result of higher
operating expenses and lower gross profit. Operating income margin of
8.2 percent in the fourth quarter of fiscal 2017 decreased 450 basis
points versus 12.7 percent last year.

Net income was $94.9 million, or $1.63 diluted EPS, in the fourth
quarter of fiscal 2017 on average diluted shares and common stock
equivalents outstanding of 58.1 million. In the fourth quarter of fiscal
2016, net income was $89.0 million, or $1.49 diluted EPS, on average
diluted shares and common stock equivalents outstanding of 59.8 million.
The increase in net income and diluted EPS was primarily due to reduced
interest expense, a larger income tax benefit and lower average shares
outstanding. The Company generated adjusted diluted EPS of $1.35 in the
fourth quarter of fiscal 2017, an improvement of 3.1 percent compared to
$1.31 in the prior year.

Adjusted EBITDA of $257.5 million in the fourth quarter of fiscal 2017
increased 8.7 percent compared to $236.9 million in fiscal 2016.
Hardware & Home Improvement, Home and Garden, Global Pet Supplies and
Global Auto Care delivered increased adjusted EBITDA. Excluding the
positive impact of $1.8 million of foreign exchange and acquisition
EBITDA of $6.9 million, organic adjusted EBITDA of $248.8 improved 5.0
percent versus the fourth quarter of fiscal 2016. Reported adjusted
EBITDA margin increased 50 basis points to 19.5 percent compared to 19.0
percent last year.

Fiscal 2017 Consolidated Financial Results

Net sales of $5.01 billion in fiscal 2017 decreased slightly compared to
$5.04 billion in fiscal 2016. Excluding the negative impact of $28.3
million of foreign exchange and acquisition sales of $28.1 million,
organic net sales in fiscal 2017 declined by 0.6 percent from the prior
year.

Operating income of $561.4 million in fiscal 2017 decreased from $656.2
million last year, while operating income margin fell 180 basis points
to 11.2 percent versus 13.0 percent in 2016.

Net income was $295.8 million, or $5.02 diluted EPS, in fiscal 2017 on
average diluted shares and common stock equivalents outstanding of 59.0
million. In fiscal 2016, net income was $357.1 million, or $5.99 diluted
EPS, on average diluted shares and common stock equivalents outstanding
of 59.6 million. The decrease in net income and EPS was primarily due to
increased S,G&A expenses, higher restructuring and related charges, and
a write-off from the impairment of intangible assets. The Company
generated adjusted EPS of $5.46 in fiscal 2017, an increase of 5.0
percent compared to $5.20 last year primarily as a result of lower
interest costs and lower average share count.

Fiscal 2017 adjusted EBITDA of $955.7 million increased slightly
compared to adjusted EBITDA in fiscal 2016 of $952.8 million. Excluding
the negative impact of $15.2 million of foreign exchange and acquisition
EBITDA of $9.5 million, organic adjusted EBITDA of $961.4 million
improved 0.9 percent in fiscal 2017 versus the prior year. Reported
adjusted EBITDA margin of 19.1 percent in fiscal 2017 grew 20 basis
points compared to 18.9 percent in fiscal 2016.

Fiscal 2017 Fourth Quarter Segment Level Data

Fourth quarter net sales increased primarily due to higher battery and
personal care revenues. Excluding positive foreign exchange impacts of
$7.6 million, organic net sales grew 1.2 percent.

Global battery net sales increased $12.4 million or 5.6 percent, driven
by solid growth in Europe, Latin America and Asia-Pacific. U.S. revenues
were essentially unchanged. Excluding positive foreign exchange impacts
of $4.5 million, organic net sales improved 3.5 percent.

Net sales for the global personal care product category increased $6.7
million or 5.6 percent led by strong growth in the U.S. and Asia-Pacific
and moderate growth in Europe and Latin America. Excluding positive
foreign exchange impacts of $2.0 million, organic net sales improved 3.9
percent.

Net sales in the global small appliances product category fell $5.2
million or 2.9 percent. Higher sales in Europe and Latin America,
primarily from new product launches and new listings, was more than
offset by lower U.S. and Canadian revenues as a result of sluggish POS,
increased competitor promotions and retailer adjustments. Excluding
positive foreign exchange impacts of $1.1 million, organic net sales
decreased 3.6 percent.

Fourth quarter decreases in operating income, adjusted EBITDA and
margins were due to unfavorable mix despite sales volume growth and
higher investments to support new product launches, partially offset by
the positive impact of foreign exchange and cost improvements. Excluding
positive foreign exchange impacts of $1.1 million, organic adjusted
EBITDA of $81.8 million decreased 1.9 percent.

Higher fourth quarter net sales were driven by strong growth in
residential security and plumbing in the U.S. and, to a lesser degree,
in Canada. The planned exit of unprofitable businesses in Mexico
adversely impacted growth by approximately 1.6 percent. Excluding
positive foreign exchange impacts of $1.9 million, organic net sales
increased 5.8 percent.

Decreases in fourth quarter operating income and margin were primarily
due to unfavorable product mix and continuing operating start-up issues
and restructuring costs connected with the U.S. distribution center
consolidation project. Improved adjusted EBITDA and margin were
principally the result of the higher volumes.

Fourth quarter net sales increased as a result of $20.8 million of
revenues from the PetMatrix and GloFish acquisitions completed in June
and May 2017, respectively. European dog and cat food sales declined
largely from the acceleration of the planned exit of a pet food customer
tolling agreement of $6.4 million, which negatively impacted sales by
approximately 3.1 percent. U.S. companion animal sales were adversely
impacted by the rawhide dog chew product safety recall initiated in June
2017, as well as sluggish store traffic in certain channels. Excluding
the positive impact of foreign exchange of $2.3 million and acquisition
sales of $20.8 million, organic net sales decreased 6.1 percent in the
fourth quarter.

Decreased operating income and margin were primarily driven by the
impact of the recall and unfavorable mix. Adjusted EBITDA increased as a
result of the PetMatrix and GloFish acquisitions. Excluding positive
foreign exchange impacts of $0.9 million and acquisition EBITDA of $6.9
million, organic adjusted EBITDA of $36.2 million fell 13.2 percent.

Higher fourth quarter net sales were driven by growth in the segment’s
three categories of outdoor controls, repellents and household controls
as a result of favorable POS, along with increased replenishment orders
due to lower retailer inventory levels.

Operating income, adjusted EBITDA and margins increased in the fourth
quarter predominantly due to the higher volumes as well as favorable
product mix and operating efficiencies.

Increased fourth quarter net sales were driven by growth in Europe and
Asia-Pacific. U.S. revenues were essentially unchanged as higher
appearance product sales were offset by lower refrigerant revenues
principally as a result of cooler weather conditions and tighter auto
retailer inventory controls.

Lower operating income in the fourth quarter was primarily the result of
operating inefficiencies. The increase in adjusted EBITDA and margin was
driven by lower expenses.

Liquidity and Debt

Spectrum Brands completed fiscal 2017 on September 30, 2017 with a solid
liquidity position, including a cash balance of approximately $168
million and more than $680 million available on its $700 million Cash
Flow Revolver.

As of the end of fiscal 2017, the Company had approximately $3,897
million of debt outstanding, consisting of a series of secured Term
Loans in the aggregate amount of $1,303 million, $2,321 million of
senior unsecured notes, and approximately $273 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 2017 of $587
million, within its guidance range of $575-$590 million, and surpassing
fiscal 2016 adjusted free cash flow of $535 million.

Leverage (total debt to adjusted EBITDA) was approximately 4.1 times at
the end of fiscal 2017, slightly higher than 3.9 times at the end of
fiscal 2016, primarily as a result of acquisitions and share repurchases.

In fiscal 2017, the Company repurchased 2,068,653 shares of common stock
for $252.5 million or $122.08 per share on average. During the fourth
quarter, the Company repurchased 729,145 shares of common stock for
$86.6 million or $118.74 per share on average.

Fiscal 2018 Outlook

Spectrum Brands expects fiscal 2018 reported net sales to grow above
category rates for most categories, along with an anticipated positive
impact from foreign exchange of approximately 160 to 180 basis points
based upon current rates.

Fiscal 2018 adjusted free cash flow is projected to be approximately
$620-$640 million compared to $587 million in fiscal 2017. Capital
expenditures are expected to be between $110 million to $120 million.

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 16. 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
94360383. 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, November 30. 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®, GloFish®, Nature’s Miracle®,
Dingo®, 8-in-1®, FURminator®, IAMS® and Eukanuba® (Europe only),
Healthy-Hide®, Digest-eeze™, DreamBone®, SmartBones®, Littermaid®,
Spectracide®, Cutter®, Repel®, Hot Shot®, Black Flag®, Liquid Fence®,
Armor All®, STP® and A/C PRO®. Spectrum Brands Holdings' products are
sold in approximately 160 countries. Spectrum Brands Holdings generated
net sales of approximately $5.01 billion in fiscal 2017. 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. Adjusted EBITDA is a metric used by management to
evaluate segment performance and frequently used by the financial
community which provides insight into an organization’s operating trends
and facilitates comparisons between peer companies, since interest,
taxes, depreciation and amortization can differ greatly between
organizations as a result of differing capital structures and tax
strategies. Adjusted EBITDA also is one of the measures used for
determining the Company’s debt covenant. Adjusted EBITDA excludes
certain items that are unusual in nature or not comparable from period
to period. Adjusted EBITDA margin reflects adjusted EBITDA as a
percentage of net sales of the Company. Organic adjusted EBITDA
excludes the impact of currency exchange rate fluctuations and
acquisitions. The Company’s management uses adjusted diluted EPS as one
means of analyzing the Company’s current and future financial
performance and identifying trends in its financial condition and
results of operations. Management believes that adjusted diluted
EPS is a useful measure for providing further insight into our operating
performance because it eliminates the effects of certain items that are
not comparable from one period to the next. An income tax
adjustment is included in adjusted diluted EPS to exclude the impact of
the valuation allowance against deferred taxes and other tax-related
items in order to reflect a normalized ongoing effective tax rate of 35%.
The Company’s management believes that adjusted 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. Adjusted free cash flow should not be
considered in isolation or as a substitute for pretax income, net
income, net cash from operating activities or other statement of income
or cash flow statement data prepared in accordance with GAAP or as a
measure of profitability or liquidity. In addition, the
calculation of adjusted free cash flow does not reflect cash used to
service debt and therefore, does not reflect funds available for
investment or discretionary uses. The Company provides this
information to investors to assist in comparisons of past, present and
future operating results and to assist in highlighting the results of
on-going operations. While the Company’s management believes that
non-GAAP measurements 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.

Contacts

Spectrum Brands Holdings, Inc.
Investor/Media Contact:
Dave
Prichard
608-278-6141

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