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Spectrum Brands Announces Its Plans for Senior Notes

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Price movement

Spectrum Brands Holdings (SPB) has a market cap of $7.8 billion. It rose 0.79% to close at $127.17 per share on September 12, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -4.7%, -3.8%, and 25.8%, respectively, on the same day.

SPB is trading 3.4% below its 20-day moving average, 1.1% above its 50-day moving average, and 15.5% above its 200-day moving average.

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Related ETF and peers

The iShares Morningstar Mid-Cap Growth Index ETF (JKH) invests 0.22% of its holdings in Spectrum Brands. The ETF tracks a market-cap-weighted index of midcap companies selected by Morningstar based on their growth characteristics. The YTD price movement of JKH was 4.2% on September 12.

The market cap of Spectrum Brands’s competitors are as follows:

  • Procter & Gamble (PG) — $239.8 billion
  • Edgewell Personal Care (EPC) — $4.6 billion
  • Masco Corporation (MAS) — $11.8 billion

Latest news on SPB

In a press release on September 12, 2016, Spectrum Brands (SPB) reported, “Spectrum Brands Holdings, Inc. (SPB), a global consumer products company with market-leading brands, announced today that its wholly owned subsidiary Spectrum Brands, Inc. (“Spectrum Brands”) commenced a cash tender offer (the “Tender Offer”) with respect to any and all of the $520 million aggregate outstanding principal amount of Spectrum Brands 6.375% Senior Notes due 2020 (the “Notes”).”

The company added, “Spectrum Brands will pay the purchase price for Notes validly tendered and accepted for purchase, as well as accrued and unpaid interest up to, but not including, the payment date.”

In another release, Spectrum Brands announced that its “wholly owned subsidiary Spectrum Brands, Inc. (“Spectrum Brands”) intends to offer 375 million euros aggregate principal amount of Senior Notes (the “Notes”). The terms of the proposed offerings are subject to market conditions.”

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SPB added that the company “intends to use the net proceeds from the sale of the Notes, together with amounts available under our revolving credit facility, to fund the repurchase of any and all of the $520.0 million aggregate outstanding principal amount of its 6.375% Senior Notes due 2020 (the “2020 Senior Notes”) in a cash tender offer (the “Tender Offer”) and to call for redemption any 2020 Senior Notes that remain outstanding after the Tender Offer.”

Performance of Spectrum Brands in fiscal 3Q16

Spectrum Brands (SPB) reported fiscal 3Q16 net sales of $1.4 million, a rise of 9.1% from the net sales of $1.3 million in fiscal 3Q15. Sales from the Global Batteries & Appliances and Global Pet Supplies segments fell 1.1% and 0.6%, respectively.

Sales from the Hardware & Home Improvement, Home & Garden, and Global Auto Care segments rose 4.8%, 4.8%, and 148.1%, respectively, between fiscal 3Q15 and fiscal 3Q16. The company’s gross profit margin and operating income rose 6.2% and 52.3%, respectively.

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EPS and cash

Spectrum Brands’s net income and EPS (earnings per share) rose to $101.9 million and $1.71, respectively, in fiscal 3Q16, compared with $44.9 million and $0.79, respectively, in fiscal 3Q15.

The company reported adjusted EBITDA[1. earnings before interest, tax, depreciation, and amortization] of $279.2 million in fiscal 3Q16, a rise of 18.2% over fiscal 3Q15. SPB’s cash and cash equivalents fell 52.8% and its inventory rose 7.9% between fiscal 4Q15 and fiscal 3Q16.

Projections

Spectrum Brands (SPB) made the following projections for fiscal 2016:

  • net sales increase in the high single-digit range, including the positive impacts of the acquisitions of the European pet food business on December 31, 2014, Salix Animal Health on January 16, 2015, and Armored Auto Group on May 21, 2015, and the negative impact of foreign exchange of ~2.8%–3.0% based on current spot rates
  • free cash flows in the range of $505 million–$515 million
  • capital expenditures in the range of $100 million–$110 million

In the next part, we’ll take a look at Polaris Industries (PII).

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