Q4 2022 Spectrum Brands Holdings Inc Earnings Call

November 18, 2022

The conference will begin shortly to raise your hand during Q&A you can dial star one one.

[music].

Good day and welcome to the Q4 and full year 2020 to spectrum brands Holdings earnings Conference call I would now like to turn the call over to faithful Cotter you may begin.

Thank you.

Good morning, and welcome to spectrum brands Holdings, Q4, and full year 2022 earnings conference call and webcast I'm fast O'connor, Vice President of strategic finance and enterprise reporting and either moderate today's call.

If you follow our comments, we have placed a slide presentation on the event calendar page in the Investor Relations sections of our website at Www Dot spectrum brands Dot com.

Document will remain there following our call.

Starting with slide two of the presentation.

Call will be led by David Maura, our chairman and Chief Executive Officer, and Jeremy Smeltzer, Chief Financial Officer.

After closing remarks, we will conduct the Q&A.

Turning to slides three and four our comments today include forward looking statements, which are based upon management's current expectations projections and assumptions.

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 November 18, 2022, and our most recent SEC filings and spectrum brands Holdings'. Most recent annual report on Form 10-K.

And quarterly report on Form 10-Q.

We assume no obligation to update any forward looking statement.

Also please note we will discuss certain non-GAAP financial measures in this call reconciliations on a GAAP basis for these measures are included in today's press release, and 8-K filing which are both available on our website in the Investor Relations section.

Finally, we encourage you to listen to our remarks today alongside with reading spectrum brands press release, and 8-K issued today and our annual reports on Form 10-K. Once it is filed with the SEC.

Now I'll turn the call over to David.

Thanks, Russell and good morning, everybody. Thank you for joining us today for our fourth quarter fiscal 'twenty two conference call I'm going to kick the call off today with a discussion on the dynamic environment. We are operating in and I'm going to talk about our company is operating and strategic direction.

Jeremy is then going to provide a more detailed financial and operational update with discussion of our specific business unit results. If I could turn your attention to slide six.

We entered fiscal 'twenty, two with very favorable economic conditions, driven by factors such as high COVID-19 demand in and around the whole low interest rates and abundant capital low unemployment and high consumer confidence spurred demand for our products. We plan for a growth year based on strong consumer demand.

And retailers ordering high amounts of inventory as they anticipated high sell through rates.

We anticipated headwinds from input cost inflation, including historically high ocean freight costs, but had planned for price increases to offset these margin pressures.

Unfortunately, we faced additional headwinds as the year went on with supply chains around the globe, becoming more inefficient and supply chain costs also increasing during this time with port slowdowns and high inventory throughput the system, causing demerged detention and distribution costs. Despite.

<expletive>.

And then the macro economic environment started to change during late in the second quarter.

In Europe , as the Russia, Ukraine was negatively impacted consumer confidence.

Subsequently the U S retail outlook changed during our third quarter as consumer demand softened and retailers focused on reducing high inventory levels.

Finally, the U S dollar started to strengthen in the fourth quarter, leading to unfavorable translation impact on our fourth quarter results. In addition, a significant transaction headwind develop for our EMEA based businesses, who source the majority of their goods from Asia in U S dollars all in all the macroeconomic environment.

Has it become more challenging as the year progressed.

In response, we implemented multiple rounds of pricing to offset some of these cost pressures.

We also reacted quickly and decisively to the declining unit volume late in the year, and we initiated cost out actions, including reductions in head count.

More fundamentally we pivoted the operating strategy of the company from expansion and increased investments for running a leaner company that is focused on fundamentals free cash flow generation and debt reduction. We immediately began a cost reduction initiative during the previous quarter.

To prepare the company for a more difficult economic outlook in the short term.

If I could now have you turn to slide seven.

Here, we have an overview of our fourth quarter results the challenging economic environment. I. Just mentioned is clearly impacting our performance and results as both our net sales and EBITDA modestly declined in the quarter compared to the prior year period consumer.

Demand is continuing to normalize to pre pandemic levels for our hard good categories. Our retail partners are maintaining their focus on taking out inventory, which is translating into lower replenishment orders. The strong U S. Dollar has further causing our reported sales to be lower.

Due to the impact of translational FX.

The volume decrease is contributing to the EBIT decline, which has also pressured by high demurrage and detention cost and distribution cost related to supply chain inefficiencies.

Some of these pressures were offset by the benefits of cost reduction actions, including headcount elimination that we in.

Initiated during the previous quarter, although pricing now largely offsets inflation, we experienced in the quarter, we face new headwinds from a stronger U S dollar, which directly increased our product costs and various regions through transactional foreign exchange impact in addition to the unfavorable translation.

Impact on our reported results.

We will cover fourth quarter financial performance and business over you in more detail during Jeremy section.

If I could now have you turn to slide eight.

We have a quick overview of our fiscal 'twenty two results and as I mentioned earlier. This was a very challenging year for the business, where we faced a variety of headwinds that continued to get worse as the year progressed.

Fortunately however, we were proactive with our countermeasures as we initiated multiple rounds of pricing action to offset inflation headwinds. We took further cost reduction actions, including head count reductions back in May as we experienced the demand softening and the related retailer inventory reduction actions.

All of these actions were mitigating some of the EBIT decline from the various macroeconomic headwinds. We are also implementing further price increases around the globe now to help offset the additional pressure from currency movement.

Turning your attention to slide nine the measures that we started to implement in fiscal 'twenty, two but actually put us in a good position as we enter fiscal 'twenty. Three we will continue with those measures and refocus our strategy around four core pillars.

One we are streamlining our organizational structure and Reenergizing, our employee base to we are increasing operational efficiencies everywhere and limiting risk three we are protecting and deleveraging the balance sheet strengthening our liquidity and.

And finally fourth we are transforming the company into a pure play global pet and home and garden business with faster growth and higher margins pro forma.

Starting with the first one we have taken swift action to reduce our operating costs by eliminating certain roles with an eye towards streamlining our operational structure. These reductions required some difficult decisions, including reductions in every segment of the business involving leadership positions and pain.

Full reductions in the C suites.

Along with these reductions we have continued to invest in the future of the business by bringing in new talent with fresh perspective, and best in class operating experience for example, I'm thrilled to welcome our new head of global supply chain, David Gabriel who has joined us from Stanley Black <unk> Decker as well as.

Our new head of our home and garden business.

Your Undrawn eight Martin who joins us with a very strong consumer marketing background and has worked at companies such as P&G Henkel and Reckitt Benckiser.

Second we are reducing costs by simplifying our business model to focus on fewer bigger better initiatives. This includes exiting unprofitable skus and rationalizing our product portfolio. This new approach is allowing us to focus on the opportunities to really accelerate profitability across all.

All our business units, we will continue to look for process simplification and cost out opportunities as we move through the fiscal year.

Thirdly, we will maintain our focus on reducing working capital and strengthening our balance sheet as we prepare for a period of low demand growth and higher interest rates we.

We have truly turned the corner on improving our working capital performance as evidenced by a reduction in inventory by over $100 million during our fourth quarter, including Hai.

And we further plan to reduce our inventory by an additional $200 million plus during this fiscal year.

David Gabriel will be leading the company towards a world class <unk> process, which will further support our goal of driving working capital efficiency and generating more cash.

In addition in a proactive move given the longer than originally anticipated time to close the <unk> sale, we have executed along with our relationship banks and amendment to our credit facility that temporarily increases our net leverage ratio tests.

Lastly, we remain dedicated to our strategic transformation to become a pure play global pet and home and Garden company and to that end. We are committed to closing the <unk> transaction and we expect to win the Doj lawsuit.

We have now we now expect to close this transaction no later than June of 2023, the Hai transaction close will allow us to substantially reduce our debt and return capital to our shareholders. We are confident that equity investors are looking to allocate capital to a faster growing.

Higher margin pure play global Pet and home <unk> Garden business, resulting in a significant re rating of the valuation of our publicly traded shares.

If you move to slide 10, I'd like to give you an overview of our outlook for fiscal 'twenty three.

Our high level fiscal 'twenty three earnings framework is that we will continue to execute on our strategic priorities and we expect to grow the topline in the low single digits, we expect to grow adjusted EBITDA in the low double digits, we expect the cost environment to remain challenging with certain input.

Costs, including labor to continue to increase with some offsets from a decline in the ocean freight rates.

Overall, we expect to experience net inflation, but not nearly as significant as the levels we've seen over the past two years.

We are also implementing additional pricing actions in the first quarter, specifically in our European markets to offset additional inflation from the ongoing war in Ukraine and from the strengthening U S dollar.

We expect this additional pricing to be fully reflected in our results during the second quarter.

The first half of this year will therefore remain challenging from a margin perspective, as we sell down our remaining higher cost inventory levels and get the full benefit of price increases in Europe .

Specifically, we have approximately $55 million of excess capitalized variances on our opening balance sheet that will roll through the income statement in the first half of fiscal 'twenty three predominantly in the first quarter.

Based on our current input costs this negative impact to our earnings will be behind us as we enter the second half of fiscal 'twenty three.

In fiscal 'twenty, three we're committed to strengthening our balance sheet and generating cash to pay down our debt. We will utilize cash from operations inventory reduction and the proceeds from the <unk> transaction to pay down debt and reduce leverage as I mentioned, we are confident that we will receive $4 3 billion.

A cash upon the completion of the <unk> sale. However, just to address some of the questions that we've been receiving in the unlikely event that the <unk> transaction does not close we expect to have cash inflows in excess of $500 million. This year, which includes the.

<unk> break fee in either scenario, we expect to decrease our net leverage to five times or less by the end of fiscal 2023.

Now you'll hear more from Jeremy on the financials and additional business unit insights I'll now turn the call over to you Jeremy.

Thanks, David Good morning, everyone, Let's turn to slide 12 for a review of Q4 results from continuing operations.

Net sales decreased 1%, excluding the impact of $41 million of unfavorable.

Foreign exchange and acquisition sales of $88 million organic net sales decreased seven 3%.

Organic sales were significantly impacted by lower replenishment orders due to higher retail inventory.

Softer demand for certain categories and the unfavorable weather conditions.

Gross profit decreased $19 million and gross margins of 32% decreased 210 basis points driven by fixed cost absorption from the lower volume increased costs from unfavorable impact of foreign currency and continued higher short term supplier related costs.

Price, largely offset the commodity and freight inflation in the quarter.

SG&A expense of $221 $9 million decreased 12, 8% at 29, 6% of net sales with the decrease driven by the impact of cost reduction initiatives.

Sure project spend on integration and lower variable incentive and stock compensation compared to the prior year.

Operating income increased to $16 $4 million driven by the decline in the SG&A I mentioned and a one time $3 5 million re measurement in the contingent consideration associated with the Tri Star business acquisition.

Our GAAP net income and diluted earnings per share decrease due to higher interest costs foreign currency losses, and higher income tax expense.

Adjusted diluted EPS increased 26, 3% due to the increase in operating income.

Adjusted EBITDA decreased five 6%, primarily driven by reduced sales volume and unfavorable currency impact with positive pricing offsetting margin pressure from commodity and freight inflation.

Turning now to slide 13, Q4 interest expense from continuing operations of $27 million increased $6 9 million.

Cash taxes during the quarter of $7 $3 million were $2 2 million higher than last year.

Depreciation and amortization from continuing operations of $22 7 million was $6 9 million lower than the prior year and separately share in incentive based compensation decreased by $8 8 million.

Cash payments towards restructuring optimization and strategic transaction costs.

Were $31 4 million versus $19 4 million last year.

Moving to the balance sheet, the company had a cash balance of $244 million and approximately $342 million available on its $1 $1 billion cash flow revolver.

Debt outstanding was approximately $3 2 billion.

Consisting of approximately $2 billion of senior unsecured notes.

$1 $1 billion of term loans, and revolver draws and $93 million on finance leases and other obligations.

Additionally, pro forma net leverage was five four times at the end of fiscal 'twenty, two which is consistent with the previous quarter.

Capital expenditures were $18 7 million in the quarter versus $17 4 million last year.

Moving to slide 14 for an overview of full year continuing operations results.

Net sales increased four 5%.

Excluding the impact of $94 9 million of unfavorable foreign exchange and acquisition sales of $225 million.

Organic net sales were essentially flat.

The sales performance was driven by poor weather impacting category sales for our home and garden business.

While home and personal care was impacted by a post pandemic category demand softness during the second half of the year and aggressive inventory reduction actions by retailers in response.

This was offset by growth in our global pet care business.

Gross profit decreased by $44 million and gross margins of 31, 6% decreased 290 basis points, driven by commodity and freight inflation and unfavorable currency impact, partially offset by favorable pricing and improved productivity.

Pricing lagged inflation during the first half of the year.

Adjusted EBITDA decreased 27, 7%, primarily driven by the gross margin decline unfavorable currency impact and higher operating expenses due to inflation and increased supply chain costs.

Now, let's get into the review of each business unit to provide detail on the underlying performance drivers of our operational results.

Let's start with home <unk> personal care, which is slide 15.

Reported net sales increased 11, 5%, mainly due to the acquisition of Tri Starr.

Excluding the unfavorable foreign exchange impact of $24 8 million organic.

Net sales decreased 9%.

Organic net sales decrease was driven by category declines from lower consumer demand, particularly in kitchen appliances in retailer inventory reductions sale.

Sales were also lower in personal care appliances, however, garment care posted double digit growth as opposed to pandemic recovery continues and we continue to win market share.

Sales were also helped by favorable price in the quarter.

Although retailers continue to work down inventory it remains higher than targeted.

The slowdown in consumer demand coupled with high inventory are most severely impacting the north American markets as retailers continued to order below Pos.

The EMEA region sales decline was primarily driven by the unfavorable impact of FX.

Net of FX personal care appliances in garment care categories registered growth.

The kitchen appliances category still remains challenged.

On a brighter note our Latin American business continued to show strength and posted double digit growth driven by higher consumer demand and expanded distribution.

The overall macroeconomic environment remains challenging, but our products continue to perform well with consumers compared to our competitors.

In fact, we have gained share in the garment care category as our steamer sales more than doubled versus last year and resulted in a 250 basis point share gain in the U S.

<unk> us to continue to build on our number one U S market share position.

We continue to launch new and innovative products to drive consumer engagement and excitement.

Recent examples of such products include our George Foreman submersible and beyond Grill products.

Remington flexes style range of hair appliances.

Several new air fire products under the Russell Hobbs power.

<unk> XL and Emeril Lagasse brands.

Adjusted EBITDA increased 93, 1% to $28 million due to growth from acquisitions favorable pricing and the impact of synergies and cost reduction actions initiated during the previous quarter.

Inflation and incremental short term demurrage and detention costs continue at a reduced rate, but are now offset by pricing in the quarter.

EBITDA was also negatively impacted by the unfavorable FX impact and volume decline.

As we look forward to our fiscal 2023, we expect retailer inventory and ordering to return to a more consistent trend to Pos starting in the second quarter of fiscal 'twenty three.

This will also help us continue to reduce our inventory throughout the first half of fiscal 'twenty three.

As we sell off some of the higher cost inventory from fiscal 'twenty two during the first quarter, our profitability will be adversely impacted.

Although we are anticipating a challenging first quarter, we expect the business to grow profitability in the second quarter.

The Tri Star business integration is continuing at an accelerated pace and we expect to substantially complete the integration by the end of the end of the fiscal second quarter.

Commercially our focus will be to drive fewer bigger better consumer relevant innovations that enhances our current market position.

Now, let's move to global Pet care, which is on slide 16.

Reported net sales decreased five 2%, while organic net sales increased 2%.

Higher sales in companion animal were offset by continued softness in aquatics, and our SKU rationalization efforts.

Sales were also helped by favorable pricing in the quarter.

With the close of this quarter, we recorded our fourth consecutive year of organic sales growth.

Companion animal sales, particularly consumables continued to show growth across geographies as favorable pricing more than offset unit declines due to slowing category demand.

The Aquatics category experienced a sales decline as we compare to strong Q4 demand last year fueled by new hobbyists that entered the category during the pandemic.

However, consumables products within aquatic saw year over year growth.

Our European sales are negatively impacted by translation FX as the dollar strengthened against the British pound and the euro during the quarter.

Adjusted for FX sales continued to grow in the European markets. Despite pressure on consumers from higher inflation and the impact of the war in Ukraine.

In North America sales were adversely impacted by higher overall inventory, mostly in the pet specialty channel.

Pet specialty retailers carry a much wider assortment of our products and other small animal products and are adjusting to new acquisition rates returning to pre pandemic levels.

Our Latin America business posted strong growth due to new distribution.

Adjusted EBITDA decreased nine 7% driven primarily by the impact of lower volume and unfavorable FX.

Q4, EBITDA benefited from additional North American pricing actions that were implemented in Q3.

With this new pricing, we are now largely offsetting input cost inflation.

EBITDA pressure from volume decline was further mitigated through operating cost reductions, including the benefit of fixed cost reductions initiated during the third quarter.

Overall, we remain bullish that we will continue to experience positive business momentum in fiscal 'twenty three.

The team is particularly excited to see the ongoing growth and share gains in the nutrition based products in the portfolio.

The operating fundamentals within the business have improved greatly as evidenced by North American service levels, reaching their highest levels in two and a half years.

Additionally, we have completely recovered the supply for our critical chews category items after almost a year of disruption of supply from Asia.

The GPC team remains focused on the execution of our long term strategy, which is centered around inspiring more trust through the delivery of unique and innovative products in order to drive demand for our portfolio of leading brands.

Our pet business as a historically recession resistant business with tremendous upside potential which is just another reason why we remain bullish about the continued growth of this business.

Finally, let's turn to home and garden on Slide 17.

Fourth quarter reported net sales decreased 19, 4% showing a decline across repellents driven by a decline in category sales due to consistent unfavorable weather conditions.

Although we paced with the pest control category overall category Pos was a challenge this season.

Controls outpaced the category while household in repellents, we're slightly behind the category.

Sales and household insecticides declined compared to last year, where sales were helped out by out of stock of competitive products.

Retailer inventory was high coming into the fourth quarter due to slower Pos from hot and dry conditions throughout the third quarter.

To help clear out end of season inventory highly targeted conversion tactics, we utilize to help drive Pos sales.

Retailers also experienced lower foot traffic in home centers, which adversely impacted the Pos for cleaning products.

Despite these pressures we saw dollar growth in Q4 versus last year across our top customers for cleaning products.

As for product news, the new flip and go delivery system now available and bug stop bed bug and weed and grass killer varieties ended the season with over $10 million in sales continuing to bring in new millennial households in their respective categories.

In fact, our Spectre side home insect control business is up 29% since the introduction of our flip and go delivery system.

And hotshot had a record year, driven by ant Roach and Spider in Q4, which was up 30% versus last year.

This season cutters line of personal Repellents received several recognition awards from sources like the New York Times wire cutter reviews, Forbes health and Yahoo News.

One of the items are cutter backwards dry aerosol was recognized as best deep base propellant by New York Times wire cutter and best overall Republic from Forbes Health.

Yeah.

Adjusted EBITDA decreased 48% in the corner.

The EBITDA decrease was driven by the lower volumes and related fixed cost absorption impacts.

The business continues to see higher product costs from raw material and freight.

But pricing now covers inflation in the quarter.

Although we are seeing the benefits of fixed cost restructuring and operational cost reduction actions initiated during the previous quarter.

The EBITDA decline from volume is outpacing these savings.

We are initiating initiating limited further price increases in fiscal 'twenty three.

Clearly we are not pleased with the performance of our <unk> business. This last year.

While we remain confident in the long term growth of these categories, our business needs to be more resilient throughout the weather cycles.

We must also further our strategy of growth in the cleaning categories to level out the seasonality and simplify the business overall.

We are confident that our strategy will be successful and the new leadership, we have brought in to execute it.

In addition, while we took meaningful cost actions in the business in the third quarter, we have identified further opportunities to run the business more efficiently and improve profitability.

We are also developing a more robust <unk> process to better manage the seasonality and its impact on our manufacturing footprint.

We are capturing capturing meaningful distribution gains in 2023, and our retail customers continue to stay focused on both cleaning and pest control for the coming years as these consumable categories become more relevant to repeat high velocity purchases.

Let's now move to slide 18, and our expectations for 2023.

As David mentioned, we expect low single digit reported net sales growth in 2023 with foreign exchange expected to have a negative impact based upon current rates.

Adjusted EBITDA is expected to grow low double digits. Despite some inflation headwinds, which are offset by the <unk> of current pricing actions and plan further price increases as well as additional productivity actions and the benefits of our cost reduction actions.

From a phasing perspective, we expect first half and specifically the first quarter to be challenging as the demand continues to settle at a lower post pandemic level and retailers continue to reduce their inventory levels.

First quarter profitability is also negatively impacted as we sell through some of our current higher cost inventory.

Turning to slide 19, depreciation and amortization is expected to be between 110 and $120 million, including stock based compensation of approximately $15 million to $20 million.

Full year interest expense is expected to be 110 between $110 million to $120 million, including approximately $5 million of noncash items.

Cash payments towards restructuring optimization and strategic transaction costs are expected to be between 50 and $55 million.

Capital expenditures are expected to be between 60 and $70 million.

We ended the year with approximately $740 million of usable federal Nols and expect to use substantially all of them to offset the gain on the sale at Hai.

We are projecting to be a U S taxpayer once the <unk> transaction closes.

Cash taxes are expected to be between 30% and $40 million and for adjusted EPS, We use a tax rate of 25% including state taxes.

To end my section I want to thank all of our global employees for their strong efforts. During these challenging economic times and I'm confident that we have the right actions in place to navigate these headwinds.

Now back over to David.

Hey, Thanks, Jeremy and thanks, everybody for joining us today.

Covered a lot and I'd like to take just a couple of minutes to recap the key takeaways and these are found on slide 21.

First of all our fourth quarter financial results conclude a very challenging fiscal 'twenty two for us where we saw sales pressure from changing consumer dynamics short term customer inventory actions, which drove significant top line pressure in the second half of the year.

However, we proactively took swift actions to prepare the company for leaner times as the demand started to slowdown, but the sales decline outpaced our cost actions in the short run as consumer demand declines were compounded by retailer inventory reductions. We expect some of these difficult dynamics to continue in fiscal 'twenty three.

And we are therefore pivoting the operating strategy from expansion and increased investments to running a much leaner company, that's focused on fundamentals free cash flow generation and debt reduction.

Second we have shifted the operating strategy of the company towards a leaner and leaner business built around four key pillars first we are streamlining the organizational structure and Reenergizing our employee base.

We are increasing operational efficiencies and limiting risk third we are protecting and deleveraging our balance sheet and strengthening our liquidity position.

Fourth we are transforming our company into a pure play pet and home and garden business with faster growth and higher margins pro forma.

Third, although we expect a difficult macroeconomic environment to continue in fiscal 'twenty. Three we have taken all the right actions to set ourselves up for success as referenced earlier, we are targeting low single digit net sales growth and low double digit EBIT growth for fiscal 'twenty, three and we expect to reduce our leverage by generating <unk>.

Free cash flow through improved operating performance and working capital management.

Last we expect to win the Doj lawsuit and close the <unk> transaction by no later than June 2023, and collect $4 3 billion of cash.

Despite the short term challenges I remain optimistic about the future of our company and I believe we are well positioned to execute on our operational goals and generate significant cash flows in fiscal 'twenty. Three I'm also confident that we will execute on our strategic goals and deliver significant value to our shareholders for these reasons.

I am very excited about fiscal 'twenty, three and I'm looking forward to updating you guys in subsequent quarters before I close the call I do want to thank all of our employees, who have been working diligently through very difficult times to ensure we have set our company up for long term success I am grateful to all of the sacrifices of our spectrum brands.

Employees and all of the sacrifices you've made to help navigate our company successfully through the past couple of years I. Thank everyone for your time I. Thank you for your continued support I'm now going to turn this call back over to vessel for questions.

Thank you David Michelle we can now go to the question queue. Please.

If you'd like to ask a question. Please press star one.

Our first question comes from Bob <unk> with CJS Securities. Your line is open.

Good morning, Thanks for taking my questions Hey, Bob.

Hi.

So one.

Just to confirm one thought and then I have a question around that but it sounds like obviously theres still impact from inventory restocking issues and all that how long does that take to work through.

Does it imply that that's more of a first half issue and then we should return to more normal.

In the second half roughly.

Yes, I'll take it.

Look as I sit here today.

I'm feeling good because I've got six weeks left in this fiscal Q1 and I've got six weeks left to move out the bulk of this high cost inventory so.

I view it as kind of one time items, because I looked at kind of when in my life as freight gone from kind of 3000 box continuing into 2004 thousand and that stuff had to get attributed and capitalize to the inventory that was acquired and so yes, we've been very deliberate kind of starting in may to really get the <unk>.

Cost structure of our company down take the fixed cost of running the business much lower kind of going into what I believe is in a recession and then frankly, just being pretty aggressive on liquidating the high cost inventory and so we made really good progress with that I hope you can see that it's not just me talking positive on a conference call, we actually got a 100.

Buck so that inventory out.

In the quarter that we just completed in September our fourth quarter.

We're going to make more progress on that this quarter.

That is going to suppress the EBITDA production our earnings are going to be subdued as we liquidate that high cost inventory line.

But I think that that's the right decision to make kind of take the pain on the front end.

Personal perspective is we've already pivoted the balance sheet and so while December as is usually kind of a use of cash it's actually going to produce cash this year, because we're going to get inventories further down.

We believe we pivoted the balance sheet already it will take us until Q2 to really pivot that P&L and get the earnings going in the right direction.

Jeremy you want to yes.

Bob I'd, just add I think.

That is more of an issue just with HBC and with home and garden for different reasons with global pet care Thats less of an issue, perhaps a little bit in pet specialty.

And then I would just add look in three of our top five customers reported this week and my net takeaway from those three earnings reports was positive as it relates to getting through this inventory and getting to a better place. So overall agree with David we're feeling we're feeling pretty decent I think and HBC in particular, it probably takes towards the middle of that.

Fiscal second quarter to see retail inventories more normalize and see that Pos pulled through to replenishment.

Okay, Great no that's super helpful color and I guess kind of just taking a step further from Matt If I did the math real quick you implied guidance given all of these headwinds about a 10% EBITDA margin, which is not.

Normalized margin can you give us a sense of what you think the margin profile will be once we get past this kind of noise.

Look I think let's let's start with our two bigger businesses right. We're trying to become a global pet and home and Garden company.

Both of those businesses should be 20% EBITDA margin businesses. They just shut.

And so we've gone through a lot of turmoil with the pandemic. We've got a lot we've gone through a lot of inflation and then obviously our pricing lags the inflation, which is subduing the margins and now you've got this I call. It it's kind of like the last bit of the backlog from COVID-19, where you've got this high cost inventory, you've just got to move off the books, but I think youll start to see some class.

<unk>.

One real margin improvement in Q2, and then beyond in those businesses I think Jeremy point.

Was very good in terms of look the appliance business is more durable in nature, and it's just going to take a longer time to kind of work that off and see that margin structure rebound.

And obviously, we're in sell mode on <unk>, we're looking forward to winning that Doj lawsuit there.

Okay Super and I guess last one for.

For me I'll jump back in queue.

Obviously, we're talking a lot about kind of the near term stuff just give us a sense in terms of.

How youre looking.

Market share wise and price realization and new product introductions, those kind of things for next year kind of the more traditional.

Focal points for your.

Outlook for the coming year.

Yes, I would say it would start I'll start up price. So I think as you heard in the prepared remarks, we're a little more.

Laser focused in certain areas versus broad based given the lower level of inflation that we expect to have 23.

And.

When we say that is because we have to think about the timing of.

When we've actually incurred that inflation rate most of the inflation that we will recognize in our P&L really all of it in fiscal 'twenty three is actually incurred in Q3, and Q4 and capitalized on the balance sheet at the end of the year. So.

Europe is a challenge transaction FX is a real challenge for both HBC and GPC with the strengthening of the dollar obviously eased a bit here in the last couple of weeks, but it's still a significant year over year headwind.

Lee from translation, but more from transaction. So we have to continue to get additional price there and look for additional cost frankly.

On new product introductions.

Totally agree with you in the broader.

Parts of our markets, particularly in the North American markets, where we've had to take so much price over the last couple of years.

The real opportunity on margin is around new product introductions, and scaling up and how do we move the needle forward on price points with those and that's that's a key part of the strategy and that will continue and I think we have.

A nice set of new product introductions across the businesses that I mentioned a few of them.

In my prepared remarks, but I think we're pleased with.

The progress there, though we have more to do in the future certainly yes.

I think look let me do it just to touch on was recently you have been traveling a lot into the different factories and facilities as we try to get our fixed cost structure down and.

I'm really thrilled to have kind of Dave Gabriel running <unk> and everything we're doing there in working capital as recently in the blocks bird facility and met with the R&D team. There and look we are just a lot of great stuff comment I prefer to kind of just push that to Q2.

And look forward to talking to you there, but we've got a very robust portfolio of brand new products.

I think are wildly complimentary to our existing portfolio, but I'd, rather get closer to them being commercialized and then be able to share that with the investment community, but a lot of good things going on.

Super Alright, thank you so much.

Thanks, Bob.

Our next question comes from Chris Carey with Wells Fargo. Your line is open.

Hi, good morning.

Morning, Chris.

Jeremy can you, perhaps be a bit more specific about the Q1 headwind that youre looking at.

Yes, I guess.

Even looking at the Q4 delivery and appliances and if I just.

Is that going forward, which I know, there's seasonality of that business.

I am getting to potentially an EBITDA that is already in line with your guidance just based on that business alone. So as that business is going to take a real setback in Q1.

The other businesses as well.

I appreciate the commentary on Q1, and the full year, but.

Any sort of like specificity, yet, but it would be helpful sure.

Sure yes so.

Interesting situation with the HBC business it was really.

Around the end of.

The latter parties I should say of Q3 in the first part of Q4, where we were experiencing or most significant inflation, particularly around excess containers, causing detention and demurrage costs as well as our need to get.

Overflow distribution space and so most of those costs and they are significant and they were actually on the balance sheet.

At 930, and there'll be flushed through in Q1, mostly some in Q2 across the whole company I think David mentioned in his prepared remarks, that's about $55 million of capitalized variances that are in excess of our current standard costs that sit on the balance sheet that will flush through the P&L probably about 70.

Percentage of it in Q1.

And most of that and HTC.

And that's why I referenced the sequential.

Reduction in inventory or I'm, sorry in EBITDA and HBC, because I agree that would not be our typical seasonal pattern.

The good news is that is behind US there will be a little bit in Q2, we actually do expect to grow profitability and HTC in Q2.

And unless something big changes from a macro perspective and will be fully behind us in the second half of the year across the businesses.

Okay, I understand and so in excess of that and just to again clarify the drivers and the outlook excuse me that demand.

David mentioned that the phasing is due to demand that lower post pandemic recap retailers continue to reduce inventory and then obviously youre selling through the higher cost inventory.

I'm, just trying to assess visibility here.

The higher cost inventory I appreciate that flows through.

Can you just comment on your visibility for guidance. After Q1, just in the context of demand lower post pandemic tighter inventories at retail do you feel like you're in a place where.

Do you have enough visibility on where retailer inventories are that by Q2, you should be in a better place.

If you could just frame that.

That would be helpful.

Let me take a crack at it and then Jeremy can fill in the blanks.

Look our pet business is predominantly consumption driven business now.

And we continue to see positive Pos there as I sit here today.

And while <unk> adoption.

Is down that installed base from the pandemic is still big.

We're also taking market share.

So what I can tell you is.

Pet is our biggest pro forma business.

While we definitely see.

Things like high priced aquarium fish tanks, and the durable components of it are down.

We believe we can grow through that.

Given that we're more consumption weighted and we've got a lot of new exciting products coming out that we will talk to you about next quarter.

Home and garden.

<unk> had.

I think the perfect storm in to <unk>.

Fiscal 'twenty two is a challenge it is an understatement right I mean.

And so we're very happy to be kind of through.

No warehouses being full product also having to get second and third places to store product to try to just meet the demand from retailers that expense base should shrink as we try to get back into four walls of lower manufacturing footprint, we require less distribution warehousing going to draw.

Five those expenses down but I can also tell you that we gained distribution in home and garden going into this fiscal year and I think we had the worst weather year in a long long time for that business and I know the street hates hearing about is blaming weather, but it really did a recap on that <unk> business.

So.

Im actually pretty bullish about home and garden getting some some nice growth.

In fiscal 'twenty, three as well and obviously the margin structure rebounds, as we shed some of those some of those costs that we incurred trying to meet all the demand from our retail customers.

Jeremy you want to fill in there.

And I think in HBC.

David's comments and then in HBC look I think we we do have good visibility to retailer inventory I mean these are our customers we work with them every day.

Big question, Mark is kind of what happens with the overall, both your European and U S. Economy. So I think we've been fairly cautious in how we forecast on the top line, but we.

We all have not figured out yet whether this is going to be a software a hard landing, we don't know where the war in Ukraine is going and so we think this is prudent what we put out today based on what we're seeing right now and what we can see in retailer inventory and we'll see what happens as the year progresses.

I also listen let me also tell you I think if you look back to OE, we actually were able to grow these businesses.

Home and garden, and pet tend to be pretty recession resilient and so we do take some comfort in that.

Frankly, we see some trade down occurring.

The world's largest retailer I think that actually benefits our appliance business.

Well.

Okay. Thank you both.

Thank you.

Our next question comes from Ian Zaffino with Oppenheimer. Your line is open.

Great. Thank you.

Just on the guide continue.

You talked about pricing versus inflation, but maybe can you talk about what I.

Like absolute pricing.

Is in guidance versus volumes or maybe kind of.

Touch directionally on that end.

Maybe segments I'm, imagining CPC pricing, the highest pricing because of the inflation, but.

Any kind of color there would be really helpful. Thank you.

Yes, I mean, so let's let's think about kind of compare and contrast, the two years right. So F 'twenty two.

We had to we had to get price in the neighborhood of $250 million right and we were able to get that and recognize it in the year.

We are in a different environment now and as I said earlier, it's more targeted so I would actually expect our overall pricing across continuing operations to be low single digits for the full year.

And where in that range of low single digits really will depend on what continues to happen.

With currency.

I feel like from a commodity and freight perspective things have stabilized.

At least much better than they have the last couple of years back to a more normalized pace of change borrowing.

Barring any geopolitical active.

Activities that happen.

That healthy.

No that's very helpful. Thank you and.

HBC and the spin can you maybe give us an update there.

Maintenance timeline, how are you thinking about it is it predicated on getting this deal done.

On.

And you have to wait for it to close and then you proceed how are we thinking about the timeline as it relates to that HBC spend thanks.

Yes, you're definitely correct, we've got to get we've got a focus and closed <unk> and then we've got to deal with HBC after that.

Yes, we continue to work internally to separate the business and be prepared.

Be ready to go when the time comes.

The business the business within the business, we've done a good job there I like the progress, we're making but agree with David will focus on <unk> is our first priority.

Okay. Thank you very much.

Thanks Ian.

Our next question comes from Peter Grom with UBS. Your line is open.

Hey, Hey, good morning, guys hope you're doing well, so hey, Peter can you maybe just can you maybe give us an update on the GCI transaction I'm not really sure what you can share given the situation, but just.

Any thoughts on next steps is there a chance in your view that we're not going to go to trial here just any thoughts around that and then David I know you can remain confident in this deal closing for some time so.

Maybe just help us understand why you remain so confident just kind of given where we are with everything that's going on thanks.

Alright, Thanks Peter.

Look the <unk> deal.

The original deal.

Is a good deal and in my opinion. It is good for the American consumer to have also run this business and so I view the original deal.

Not being anti competitive in and of itself I think the original deal was just fine.

And should have closed.

I think the current construct with the remedies that are being offered.

Increase my confidence in that based on the law.

In this country and so.

My advisors my legal team.

<unk> is very very confident that we will win against the Doj, but.

These things take time and I can't give you.

Great.

Estimate on when that is I can just tell you hey might drop dead date is June and we believe we can get it closed by the end of June or before.

Got it that's helpful and then I guess.

I kind of wanted to ask a follow up to Christy's question earlier just.

On the outlook.

Can you maybe just help us frame.

The confidence is there any sort of conservatism embedded in the outlook.

I think what Chris was alluding to is just kind of the lack of visibility on the two straight quarters.

Missing expectations. So just I think people are trying to understand kind of.

The confidence if you will in this kind of 311 to $3 20.

Sure.

Look I think if I could ask you if I could talk directly to our shareholders Here's what I would tell you I think.

Strategically we are absolutely on the right track to create a stronger faster growing higher margin.

Business called Pet home and Garden, we clearly did not anticipate a doj lawsuit.

If you can when you talk about the quarterly progression actually if you go if you pull your model right now and you look at our earnings over the last four quarters, we actually despite being a little softer because of some FX that I. Originally thought was Q4, we almost comped in line.

EBITDA year over year in the fourth quarter, the fourth quarter. Despite all the problems was actually our stronger quarter in terms of how it relates if you look at Q1, Q2, Q3, and Q4 of fiscal 'twenty two we actually claim closest to the goalposts with the quarter. We just reported despite all the headwinds.

I am Super bullish.

Why I think you should own our shares and buy shares at today's level.

Is because.

Yeah.

I've tried to tell you and I guess the market doesn't seem to price in the fact that <unk> is going to close but.

I've tried to be very transparent that in the event that for some unlikely reason <unk> doesn't close.

We're going to collect cash of over half a billion dollars this year.

So that's over $12 a share guys and cash we're going to collect here in less than 12 months.

So thats I don't think thats horrible and that gets our leverage back down to five or less my base case, which is the highest probability based on the information I have today is it we're going to close HHR and collect $4 3 billion and completely redo our capital structure and so if you do the math.

And you take a market cap of south of $2 billion and you close <unk>.

Youre buying pet EBITDA at somewhere around four times EBIT at four times EBITDA.

And I think thats wildly attractive as a shareholder but I get it until we close the <unk> Jai and we delever the balance sheet and buy back stock.

While I'm in a show me phase, but I think where we are in very deep value security and we have numerous catalysts on the horizon and so I'm actually really excited to put 22 in the rearview mirror and steer us to a much healthier and much profitable more profitable 2023.

And I would add Peter I, just thank you.

You look at the outlook for continuing operations now I always think about it started the year one of my variables on top line and what are my thoughts on variables on the bottom line and as we enter <unk>.

22, clearly we experience significant increase.

Increased cost as the year progressed versus what we expected that by definition I've got $120 million of capitalized variances on my balance sheet at 930 that means that my costs were one.

$120 million per inventory return higher than I expected and that's a huge number.

As we enter 2003 I feel very differently.

Current costs are lower than what's on the balance sheet right now in a more stable than they were a year ago.

With the exception obviously of the currency that I talked about for the businesses that are buying from Asia and selling in pounds and euros. Then you move to the top line I mean, obviously again home and garden HBC in particular.

We experienced significant declines in top line versus what we expected as we started the year.

As we enter this year.

For appliances.

So really the challenge in that market started in.

April may based.

Based on what we heard from our retail customers and so they've kind of been in a darker place from a consumer demand perspective for a while and we're essentially assuming.

A fairly consistent level of consumer and customer demand as we go through the year. We've done the same thing with GPC.

And home and garden, we really have to use our experience based on 20 plus years in the business as a team to figure out what level of moderate recovery. We can see after what is the worst weather year that they've ever had and so none of those are exact sciences, but I think we've taken a prudent approach to to start the year and we.

We'll update you as we always do in any of the changes each quarter as we progress with earnings.

Got it thanks, so much.

Thank you that's all the time, we have for questions I'd like to turn the call back over to phase O'connor for any closing remarks.

With that we've reached the top of the hour. So we will conclude our conference call. Thank you, David and Jeremy and on behalf of spectrum brands. Thank you all for your participation.

Thank you. This concludes the program and you may now disconnect everyone have a great day.

Yeah.

The conference will begin shortly to raise your hand during Q&A you can dial one one.

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Good day and welcome to the Q4 and full year 2020 to spectrum brands Holdings earnings Conference call I would now like to turn the call over to Phase <unk> you may begin.

Thank you.

Good morning, and welcome to spectrum brands Holdings, Q4, and full year 2022 earnings conference call and webcast Im <unk>, Vice President of strategic finance and enterprise reporting and either moderate today's call.

To help you follow our comments, we have placed a slide presentation on the event calendar page in the Investor Relations sections of our website at Www Dot spectrum brand Dot com.

This document will remain there following our call.

Starting with slide two of the presentation, our call will be led by David Maura, Our chairman and Chief Executive Officer, and Jeremy Smelter Chief Financial Officer.

After closing remarks, we will conduct the Q&A.

Turning to slides three and four our comments today include forward looking statements, which are based upon 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 November 18, 2022, and our most recent SEC filings and spectrum brands Holdings'. Most recent annual report on Form 10-K, and quarterly report on Form 10-Q.

We assume no obligation to update any forward looking statement.

Finally, we encourage you to listen to our remarks today alongside with reading spectrum brands press release, and 8-K issued today and our annual reports on Form 10-K. Once it is filed with the SEC.

Now I'll turn the call over to David.

Hey, Thanks, Russell Good morning, everybody and we thank you for joining us today for our fourth quarter fiscal 'twenty two conference call I'm going to kick the call off today with a discussion on the dynamic environment. We are operating in and I'm going to talk about our company's operating and strategic direction.

Jeremy is then going to provide a more detailed financial and operational update with discussion of our specific business unit results. If I could turn your attention to slide six.

We entered fiscal 'twenty, two with very favorable economic conditions, driven by factors such as high COVID-19 demand in and around the whole low interest rates and abundant capital low unemployment and high consumer confidence spur demand for our products. We planned for a growth year based on strong consumer demand.

And retailers ordering high amounts of inventory as they anticipated high sell through rates.

We anticipated headwinds from input cost inflation, including historically high ocean freight costs, but had plan for price increases to offset these margin pressures.

Nick.

And then the macro and economic environment started to change during late in the second quarter.

In Europe , as the Russia, Ukraine was negatively impacted consumer confidence.

Subsequently the U S retail outlook change during our third quarter as consumer demand softened in retailers focused on reducing high inventory levels.

It has become more challenging as the year progressed.

In response, we implemented multiple rounds of pricing to offset some of these cost pressures.

We also reacted quickly and decisively to the declining unit volume late in the year, and we initiated cost out actions, including reductions in head count.

To prepare the company for a more difficult economic outlook in the short term.

If I could now have you turn to slide seven.

Due to the impact of translational FX.

The volume decrease is contributing to the EBIT decline, which has also pressured by high demurrage and detention costs and distribution costs related to supply chain inefficiencies. Some of these pressures were offset by the benefits of cost reduction actions, including headcount elimination that we and we.

<unk> during the previous quarter.

Although pricing now largely offsets inflation, we experienced in the quarter, we face new headwinds from a stronger U S dollar, which directly increased our product costs and various regions through transactional foreign exchange impact. In addition to the unfavorable translation impact on our reported results we will.

Cover fourth quarter financial performance and business over you in more detail during Jeremy section.

If I could now have you turn to slide eight here.

Here, we have a quick overview of our fiscal 'twenty two results and as I mentioned earlier. This was a very challenging year for the business, where we faced a variety of headwinds that continued to get worse as the year progressed.

All of these actions were mitigating some of the EBITDA decline from the various macroeconomic headwinds. We are also implementing further price increases around the globe now to help offset the additional pressure from currency movement.

One we are streamlining our organizational structure and Reenergizing, our employee base to we are increasing operational efficiencies everywhere and limiting risks three we are protecting and deleveraging the balance sheet strengthening our liquidity and finally fourth we are.

Forming the company into a pure play global pet and home and garden business with faster growth and higher margins pro forma.

Painful reductions in the C suites.

As our new head of our home and garden business of year and brought a Martin who joins us with a very strong consumer marketing background and has worked with companies such as P&G Henkel and Reckitt Benckiser.

Business units, we will continue to look for process simplification and cost out opportunities as we move through the fiscal year.

Thirdly, we will maintain our focus on reducing working capital and strengthening our balance sheet as we prepare for a period of low demand growth and higher interest rates.

We have truly turned the corner on improving our working capital performance.

Evidenced by a reduction in inventory by over $100 million.

During our fourth quarter, including <unk> and.

And we further plan to reduce our inventory by an additional $200 million pause during this fiscal year.

David Gabriel will be leading the company towards a world class <unk> process, which will further support our goal of driving working capital efficiency and generating more cash. In addition in a proactive move given the longer than originally anticipated time to close the <unk> sale, we have execute.

Along with our relationship banks and amendment to our credit facility the temporarily increases our net leverage ratio tests.

We have now we now expect to close this transaction no later than June of 2023.

The <unk> transaction close will allow us to substantially reduce our debt and return capital to our shareholders. We are confident that equity investors are looking to allocate capital to a faster growing higher margin pure play global pet and home <unk> Garden business, resulting in a significant re <unk>.

<unk> of the valuation of our publicly traded shares.

If you move to slide 10, I'd like to give you an overview of our outlook for fiscal 'twenty three.

Our high level fiscal 'twenty three earnings framework is that we will continue to execute on our strategic priorities and we expect to grow the top line in the low single digits, we expect to grow adjusted EBITDA in the low double digits.

We expect the cost environment to remain challenging with certain input costs, including labor to continue to increase with some offsets from a decline in the ocean freight rates.

Overall, we expect to experience net inflation, but not nearly as significant as the levels we've seen over the past two years.

We expect this additional pricing to be fully reflected in our results during the second quarter.

But first half of this year will therefore remain challenging from a margin perspective, as we sell down our remaining higher cost inventory levels and get the full benefit of price increases in Europe .

<unk> on our current input costs this negative impact to our earnings will be behind us as we enter the second half of fiscal 'twenty three.

In fiscal 'twenty, three we are committed to strengthening our balance sheet and generating cash to pay down our debt. We will utilize cash from operations inventory reduction and the proceeds from the <unk> transaction to pay down debt and reduce leverage as I mentioned, we are confident that we will receive $4 3 billion.

Hei break fee in either scenario, we expect to decrease our net leverage to five times or less by the end of fiscal 2023.

Now you'll hear more from Jeremy on the financials and additional business unit insights I'll now turn the call over to you Jeremy.

Thanks, David Good morning, everyone, Let's turn to slide 12 for a review of Q4 results from continuing operations.

Net sales decreased 1%, excluding the impact of $41 million of unfavorable foreign exchange and acquisition sales of $88 million organic net sales decreased seven 3%.

Organic sales were significantly impacted by lower replenishment orders due to higher retail inventory <unk>.

Softer demand for certain categories and the unfavorable weather conditions.

Price, largely offset the commodity and freight inflation in the quarter.

SG&A expense of $221 $9 million decreased 12, 8% at 29, 6% of net sales with the decrease driven by the impact of cost reduction initiatives lower project spend on integration and lower variable incentive and stock compensation compared to the prior year.

Our GAAP net income and diluted earnings per share decreased due to higher interest costs foreign currency losses, and higher income tax expense.

Adjusted diluted EPS increased 26, 3% due to the increase in operating income.

Adjusted EBITDA decreased five 6%, primarily driven by reduced sales volume and unfavorable currency impact with positive pricing offsetting margin pressure from commodity and freight inflation.

Turning now to slide 13, Q4 interest expense from continuing operations of $27 million increased $6 9 million.

Cash taxes during the quarter of $7 $3 million were $2 $2 million higher than last year.

Depreciation and amortization from continuing operations of $22 7 million was $6 9 million lower than the prior year and separately share in incentive based compensation decreased by $8 8 million.

Cash payments towards restructuring optimization, and strategic transaction costs were $31 4 million versus $19 4 million last year.

Moving to the balance sheet, the company had a cash balance of $244 million and approximately $342 million available on its $1 $1 billion cash flow revolver.

Debt outstanding was approximately $3 $2 billion.

Consisting of approximately $2 billion of senior unsecured notes.

$1 $1 billion of term loans, and revolver draws and $93 million of finance leases and other obligations.

Additionally, pro forma net leverage was five four times at the end of fiscal 'twenty, two which is consistent with the previous quarter.

Capital expenditures were $18 7 million in the quarter versus $17 4 million last year.

Moving to slide 14 for an overview of full year continuing operations results.

Net sales increased four 5%.

Excluding the impact of $94 9 million of unfavorable foreign exchange and acquisition sales of $225 million.

Organic net sales were essentially flat.

The sales performance was driven by poor weather impacting category sales for our home and garden business.

While home and personal care was impacted by a post pandemic category demand softness during the second half of the year and aggressive inventory reduction actions by retailers in response.

This was offset by growth in our global pet care business.

Pricing lagged inflation during the first half of the year.

Adjusted EBITDA decreased 27, 7%, primarily driven by the gross margin decline unfavorable currency impact and higher operating expenses due to inflation and increased supply chain costs.

Now, let's get into the review of each business unit to provide detail on the underlying performance drivers of our operational results.

Let's start with home <unk> personal care, which is slide 15.

Reported net sales increased 11, 5%, mainly due to the acquisition of Tri Starr.

Excluding the unfavorable foreign exchange impact of $24 8 million organic net sales decreased 9%.

Organic net sales decrease was driven by category declines from lower consumer demand, particularly in kitchen appliances in retailer inventory reductions sale.

Sales were also lower in personal care appliances, however, garment care posted double digit growth as opposed to pandemic recovery continues and we continue to win market share.

Sales were also helped by favorable price in the quarter.

Although retailers continue to work down inventory it remains higher than targeted.

The slowdown in consumer demand coupled with high inventory are most severely impacting the north American markets as retailers continued to order below Pos.

The EMEA region sales decline was primarily driven by the unfavorable impact of FX.

Net of FX personal care appliances in garment care categories registered growth.

The kitchen appliances category still remains challenged.

On a brighter note our Latin American business continued to show strength and posted double digit growth driven by higher consumer demand and expanded distribution.

The overall macroeconomic environment remains challenging, but our products continue to perform well with consumers compared to our competitors.

In fact, we have gained share in the garment care category as our steamer sales more than doubled versus last year and resulted in a 250 basis point share gain in the U S.

<unk> us to continue to build on our number one U S market share position.

We continue to launch new and innovative products to drive consumer engagement and excitement.

Recent examples of such products include our George Foreman submersible and beyond Grill products.

Remington flexes style range of hair appliances.

Several new <unk> products under the Russell hubs.

<unk> XL and Emeril Lagasse brands.

Adjusted EBITDA increased 93, 1% to $28 million due to growth from acquisition favorable pricing and the impact of synergies and cost reduction actions initiated during the previous quarter.

Inflation and incremental short term demurrage and detention costs continue at a reduced rate, but are now offset by pricing in the quarter.

EBITDA was also negatively impacted by the unfavorable FX impact and volume decline.

As we look forward to our fiscal 2023, we expect retailer inventory and ordering to return to a more consistent trend to Pos starting in the second quarter of fiscal 'twenty three.

This will also help us continue to reduce our inventory throughout the first half of fiscal 'twenty three.

As we sell off some of the higher cost inventory from fiscal 'twenty two during the first quarter, our profitability will be adversely impacted.

Although we are anticipating a challenging first quarter, we expect the business to grow profitability in the second quarter.

The <unk> business integration is continuing at an accelerated pace and we expect to substantially complete the integration by the end of the end of the fiscal second quarter.

Commercially our focus will be to drive fewer bigger better consumer relevant innovations that enhances our current market position.

Now, let's move to global Pet care, which is on slide 16.

Reported net sales decreased five 2%, while organic net sales increased 2%.

Higher sales in companion animal were offset by continued softness in aquatics, and our SKU rationalization efforts.

Sales were also helped by favorable pricing in the quarter.

With the close of this quarter, we recorded our fourth consecutive year of organic sales growth.

Companion animal sales, particularly consumables continued to show growth across geographies as favorable pricing more than offset unit declines due to slowing category demand.

The Aquatics category experienced a sales decline as we compared a strong Q4 demand last year fueled by new hobbyists that entered the category during the pandemic.

However, consumables products within aquatic saw year over year growth.

Our European sales are negatively impacted by translation FX as the dollar strengthened against the British pound and the euro during the quarter.

Adjusted for FX sales continued to grow in the European markets. Despite pressure on consumers from higher inflation and the impact of the war in Ukraine.

In North America sales were adversely impacted by higher overall inventory, mostly in the pet specialty channel.

Pet specialty retailers carry a much wider assortment of our products and other small animal products and are adjusting to new patent acquisition rates returning to pre pandemic levels.

Our Latin America business posted strong growth due to new distribution.

<unk> EBITDA decreased nine 7% driven primarily by the impact of lower volume and unfavorable FX.