Q4 2023 Spectrum Brands Holdings Inc Earnings Call

November 17, 2023

Okay.

Good day and thank you for standing by welcome to the fourth quarter 2023 Spectrum Brands Holdings, Inc. Earnings Conference call. At this time, all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone.

You will then hear an automated message advising you that your hand is raised to withdraw your question. Please press star one again, please be advised today's conference is being recorded.

I'd now like to hand, the conference over to your speaker today Feisal Clutter. Please go ahead.

Welcome to spectrum brands Holdings, Q4, and full year 2023 earnings conference call and webcast I'm fast on Qatar, Vice President of strategic Finance and enterprise reporting and I will 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 Dotcom.

This document will remain there following our call.

Starting with slide two of the presentation.

The call will be led by David Maura, Our chairman and Chief Executive Officer, and Jeremy Smeltzer, Our Chief Financial Officer.

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

Turning to slide 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 17, 2023, and our most recent SEC filings and spectrum brands Holdings'. Most recent annual report on Form 10-K, and quarterly reports on Form 10-Q.

Yes, you have no obligation to update any forward looking statements.

Also please note we will discuss certain non-GAAP financial measures in this call a reconciliation on a GAAP basis for these measures are included in today's press release and 8-K filings.

We are.

Which are both available on our website in the Investor Relations section.

Finally, we encourage you to listen to our remarks today alongside with leading 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.

Great. Thank you first of all good morning, everybody and thank you guys for joining us today.

As we wrap up a very challenging and rewarding year for our company I'd like to start this call March brushing my gratitude to every member of our global team for.

For in helping navigate our business through some very difficult times in fiscal 'twenty three.

I would also like to thank our investor base for their confidence and trust over the past two years as we battled through and overcame operational and M&A regulatory challenges.

Moving to slide six we started fiscal 'twenty three with the challenging macroeconomic environment with consumer demand declining from the height of the pandemic.

In our retail customers' inventory strategies driving significant demand volatility.

Our margin structure was still under pressure from the inflation hangover in our inventory that was acquired in fiscal 'twenty two.

Our leverage ratio is very high with declining EBITDA and higher working capital commitments at the same time.

We were facing very and we're also facing the legal challenge to the Doj.

It was trying to borrow the sale of our <unk> business.

In the face of these challenges our company is not just significantly not just successfully navigated these obstacles.

Now also beginning to turn a corner.

We have successfully defended against the legal challenge when we closed the <unk> deal for $4 $3 billion in cash.

With the close of this transaction, we have now become a net debt free company as we ended the year with $1 $9 billion of cash and short term investments against a total debt position of $1 6 billion.

On the working capital side, we've made great progress and we reduced our inventory by over $300 million since the beginning of the fiscal year, while also importantly, improving our fill rates across all businesses.

We have also been now unwinding any early pay and factoring programs across North America.

Which used approximately $250 million of our cash during the year.

We have now completed the exit of all early paying factoring programs in North America with the remaining cash flow impact from those exits extending into the first quarter of this fiscal year fiscal 'twenty four.

We have also improved the margin structure of our businesses and have started to invest back in our brands.

Our most recent quarter marks the beginning of a strategic pivot from defending against the various headwinds that were presented to us in fiscal 'twenty three to now leaning into the opportunities that our strong balance sheet and improving margins present for us as we enter fiscal 'twenty four.

Our retail partners are enthusiastic about the partnership potential in the future and the team is energized to embrace this new reality.

We have recently hosted fireside chats sales and marketing meetings and product relaunches around the globe to Reenergize, our teams and to play more aggressively ahead of what we perceive to be deteriorating global macroeconomic conditions.

With that context. So have you now turn your attention to slide number seven.

For a quick overview of fiscal 'twenty threes results.

As I mentioned earlier this was a challenging year for the business, we faced a variety of headwinds the difficult consumer environment and retailers focus on excess inventory reduction impacted our results across the board and our net sales declined by six 8% compared to fiscal 'twenty two.

We continue to experience these pressures in the fourth quarter, but the pace of the sales decline has slowed down considerably with fourth quarter net sales decreasing by just one 2%.

Fortunately, we were proactive with our counter measures earlier in the fiscal year and we initiated further cost savings following some cost out actions during the second half of fiscal 'twenty two.

Including fixed cost reduction through the elimination of permanent lease salaried head count as well as a reduction in our advertising and promotional spend all of these actions were mitigating some of the EBIT decline from the various economic headwinds.

With the <unk> transaction now closed at our balance sheet strengthened we have started to invest back in our businesses during the fourth quarter and we expect to continue this investment throughout fiscal 'twenty four.

Our fourth quarter saw increases in our opex, driven by renewed advertising and promotional spend.

Jeremy will cover the fourth quarter results, including business unit performance in more detail in his section.

Moving now to slide eight.

The actions we've taken in fiscal 'twenty three to put us in a great position for this fiscal year. We are now operating from a position of strength with a strong balance sheet healthier margins in a much better inventory profile.

During our fourth quarter, we have started the pivot of our business for managing this company for cash to now focusing on driving long term growth all of our business units driving operational efficiencies at the very same time.

Our plan for fiscal 'twenty, four we will build on this strategic shift and focus on three key elements.

One we are investing behind our people to improve our commercial capabilities and drive a culture of accountability to we're investing behind our brands and our new product Roadmaps as we continue to focus on bringing fewer but bigger and better innovations to the market.

Three we're investing in our operations to drive efficiency and to reduce cost.

Starting with the first element, we recently made a number of key hire in senior sales roles in marketing positions across the company as we are leaning into investing in our people and upgrading our talent.

We are making a conscious effort to materially bolster our commercial operations innovation sales and marketing capabilities, we are being intentional in post the sale of <unk> to invest in our culture and our people with the goal of shifting the mindset of organization from one of defense to one of offerings.

Coming to our second key area of focus we are investing behind our brands and products, we have materially increased our advertising and marketing spend in the fourth quarter and we're going to continue to invest behind our brands and new innovations going forward. This includes expanding into adjacent categories. As was recently demonstrated with our patented <unk>.

<unk>.

And good and tasty catch reached launched during fiscal 'twenty three.

Expanding new innovations across several products as we've done with our spectra side, one shop platform and getting behind new products in a big way as we've just done with our first ever Global Remington launched earlier this week in New York City with our innovative Remington one range of products.

Third we're investing in our operations, we want to drive efficiencies and reduce costs. These investments will come in the form of new equipment, better tools and improved capabilities with a focus on speed and automation that will allow us to drive manufacturing and supply chain efficiencies. The goal is simple to lower our COO.

So we can continue to remain competitive in the marketplace today.

Moving to slide nine and our high level fiscal 'twenty four earnings framework.

We expect continued suppressed demand in our home and personal care appliance segment, particularly within kitchen appliances with the outlook for home appliances, and our decision to rationalize our product portfolio. We expect the top line to decline low single digits from an operating EBIT perspective. However, we are.

Target and growth in the high single digits, driven primarily from lower cost inventory as compared to fiscal 'twenty three offset by increased investments in our brands as I described earlier as well as increased investments in our people to bring us.

US build a stronger faster higher growth company.

We expect the cost environment to continue to ease mainly from lower ocean freight costs, but these are offset somewhat by other inflation inputs, including labor material and FX.

We also we also expect some pricing pressure in the home and personal care space is the competition for shelf space. There is going to remain fierce.

As we set the earnings framework for fiscal 'twenty. Four we are keenly aware of our need to regain investor confidence and to deliver on our commitments. We believe the fiscal 'twenty four earnings framework provides for challenging but achievable financial goals as we head into a time of greater economic uncertainty.

Now Youll hear more from Jeremy on the financials and the business units updates and I'll be back for closing remarks over to you Jeremy.

Thanks, David and good morning, everyone, Let's turn to slide 11, and look at our Q4 results.

Getting with net sales.

Net sales decreased one 2% excluding the.

The impact of $11 $3 million of favorable foreign exchange organic net sales declined two 7%.

Organic net sales were lower primarily due to lower consumer demand for the kitchen appliances category and the impact of our decision to exit several nonstrategic categories and Skus in our global pet care business.

Gross profit increased $4 9 million and gross margins of 33% increased 100 basis points, driven by favorable pricing compared to last year and the favorable impact of cost improvement actions, partially offset by unfavorable transaction FX.

Excuse me.

SG&A expense of $222 million was flat at 30% of net sales.

Driven by increased marketing and advertising investment in the business.

All set by reduction in distribution costs related to prior year disruptions.

Operating income was essentially flat at $6 $16 2 million.

Our GAAP net income and diluted earnings per share increase due to interest income.

Lower interest costs and income tax benefit and a lower share count.

Adjusted diluted EPS increased 183% due to the higher adjusted EBITDA lower interest expense and a lower share count.

Adjusted EBITDA increased 52% driven by gross profit improvements in interest income.

Turning to slide 12, Q4 interest expense of $23 million decreased nearly $4 million.

Cash taxes during the quarter of $3 9 million or $3 $4 million lower than last year.

Depreciation and amortization of $23 6 million was.

It was $900000 higher than last year.

And separately.

Share based compensation increased by $6 million.

Cash payments towards restructuring optimization, and a strategic transaction costs were $18 4 million down from $40 3 million last year.

Moving to the balance sheet, the company had a cash balance of $754 million plus.

Plus $1 $1 billion of short term investments.

And approximately $587 million available on our $600 million cash flow revolver.

Debt outstanding was approximately $1 6 billion consistent.

Consistent consisting of approximately $1 5 billion of senior unsecured notes and $86 million of finance leases and other obligations.

Additionally, as mentioned earlier, we once again ended the quarter at a net positive cash position.

In October we refinanced our revolver, reducing the total facility to $500 million.

To reflect the smaller size of our company after the <unk> sale and we extended the maturity to 2028.

Capital expenditures were $14 $7 million in the quarter versus $18 7 million last year.

Let's turn now to slide 13 for an overview of our full year results net sales decreased six 8%, excluding the impact of $51 million of unfavorable foreign exchange and acquisition sales of $89 9 million.

Organic net sales decreased eight 1%.

The sales performance was driven by the retailers focus on aggressive reduction in inventory, leading to lower replenishment orders for our home and garden business.

While home and personal care was impacted by continued post pandemic category demand softness in kitchen appliances as well as continued inventory reduction actions by our retailers.

The global Pet care business sales were only slightly lower despite category declines in aquatics, and our decision to exit certain unproductive skus.

As companion animals showed resilience and posted another year of growth.

Full year gross profit decreased by $66 million and gross margins of 31, 7% increased 10 basis points.

While the second half of the year gross margin of 34, 4% increased by 150 basis points compared to last year as we continue to improve our margin structure across all businesses.

Adjusted EBITDA increased 7%. Despite the sales decline primarily driven by interest income gross margin improvement and a reduction in operating expenses.

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

Okay.

As you turn to slide 14, we will look at global Pet care.

Reported net sales increased one 6%, while organic net sales decreased <unk>, 7%.

Higher sales in our core companion animal categories were offset by the impact of portfolio rationalization.

As we exit from non strategic categories as well as softness in Aquatics.

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

The Aquatics category sales remained challenged compared to last year as consumer demand continues to reset from pandemic highs.

However, the Aquatics category grew sequentially compared to the third quarter, providing some positive momentum.

Sales in the EMEA region grew despite continued pressure on consumers from inflation and is reduced from recent months, but it's still above historic trends.

Growth in EMEA came from our companion animal category, driven by double digit growth in the dog and cat food business.

From an innovation perspective, our new patented in the OE and good and tasty cat treats are performing well.

We launched these products during the fourth quarter.

First on <unk> Dot Com, and then expanded to Amazon with more new distribution coming this quarter.

Our <unk> are truly unique in the market and have already garnered a strong consumer reviews and subscription uptake.

And the aquatic space, we launched our tetra stem kit in the U S.

More than 65% of adults with aquariums had an aquarium of the child. So the Sten kits are a perfect way to capitalize on the educational segment to engage young consumers by bringing them into the category, helping them succeed and hopefully become lifelong aquatic synthes, yes.

We plan to introduce additional stem products in the coming months.

Adjusted EBITDA increased 10, 5% to $53 5 million.

Driven primarily by the impact of net positive price.

Including the incremental pricing actions in the EMEA region earlier in the year.

Q4, EBITDA also benefited from favorable mix due to the exit of low margin Skus and our continued focus on cost reduction measures.

Including the fixed cost restructuring from the first half of the year.

This was partially offset by advertising investments in the business focused on driving short and long term volume growth.

We feel great about the margin profile of business and believe that the business is in a strong position as evidenced by the adjusted EBITDA of over $50 million for a second consecutive quarter.

However, we are preparing for low sales and EBITDA growth in the short run as we have the continued impact of our SKU rationalization efforts in the first half of 2024 and as we continue to improve our overall inventory health and sell off aging and other discontinued inventory at a discount.

Although we are closely monitoring consumer behavior and trends, particularly as it relates to discretionary spending patterns within the pet space.

We remain confident about our position in the market with improved margin structure and the strength of our brands.

We are shifting our focus to strategically investing more in advertising and trade promotion to engage consumers drive consumption in topline growth and increase our share.

Overall, we expect the positive trends in companion animal consumables categories to continue, albeit at a slower growth rate and remain cautious about certain categories within the pet specialty channels, such as aquatic environments as the rates of new entrants settled two at or even below pre pandemic levels.

With the continued slow aquatics recovery and additional carryover impact of the exit of unproductive Skus and categories. We expect fiscal 'twenty four to be at a lower top line growth than our long term target for global pet care.

Now, we'll take a look at home and garden, which is on slide 15.

Fourth quarter reported net sales increased seven 2% driven by investment in advertising and marketing along with favorable weather conditions.

Pls for both controls and household categories showed growth versus last year, while the personal repellent category Pos declined during the quarter.

Controls outpaced the category as spectrum <unk> experienced double digit Pos growth and continued to gain share.

Our hotshot brand also posted double digit Pos growth during the quarter.

We increased our advertising investment and utilized highly targeted conversion tactics to help drive Pos.

Some of the increased advertising and promotional spend was focused on spectre side.

Floor care and restoration Pos remained below last year and below our expectations as demand for cleaning products continues to decline post COVID-19.

We did see improvement sequentially as we increased investment in the category.

We will leverage the positive momentum in our brands as we see consumers continue to recognize the efficacy and strong value of our products.

We expect to continue to invest behind the rejuvenate brand to drive consumer engagement higher Pos and eventually expanded listings.

As I mentioned earlier the shift in retailer strategy to maintain significantly lower inventory levels compared to 2022 continued to play out in our results.

We believe that the impact of retailer inventory reduction is largely behind us and we expect retailer orders to be much more in line with Pos during fiscal 'twenty four.

We are continuing with the commercialization of our recent innovations and plan to significantly increase our investment behind promoting our innovations and our core brands.

And controls this investment will support our based products as well as strong innovation in spectra side.

And repellents are new zone, Mosquito repellent, repellant devices cutter eclipse and repel realm continued to gain traction with consumers.

We expect to significantly expand distribution and make it available across multiple channels in 2024.

Adjusted EBITDA increased 60% in the quarter to $21 million.

The EBITDA increase was driven by higher volume and related fixed cost absorption impact positive pricing and benefits of fixed cost restructuring and cost improvement initiatives undertaken earlier in the year.

We experienced higher product costs for raw materials and labor in line with our expectations.

Fiscal 'twenty three was a challenging year for the <unk> business, mainly due to the retailer inventory strategy, which led to a disappointing top line performance.

Despite these headwinds we were able to focus on margin performance and are pleased with the margin improvement in the fourth quarter.

We believe that the fundamentals of the consumer market remains strong and that the <unk> business is set up well for success in the future.

As we look forward to fiscal 'twenty four we expect our retailers to build inventory later in the season, which will pressure, our first quarter and possibly second quarter sales that we are confident that we have the right manufacturing strategy to support that later inventory build.

We are working closely with our retail partners to understand consumer demand expectations and how it translates into our production and shipment plans.

Now finally home <unk> personal care, which is on slide 16.

Reported net sales decreased six 3%.

Excluding the favorable foreign exchange impact of $4 8 million.

Organic net sales decreased seven 7%.

The organic net sales decrease was driven by category declines from lower consumer demand mainly in kitchen appliances.

Although the majority of the retailer inventory reductions are behind us.

There continues to be excess retail inventory for air Fryers in the U S market, but a significant decline in consumer demand for pandemic highs.

Overall kitchen appliance sales experienced double digit declines in the quarter, but were partially offset by growth in personal care and double digit growth in garment care.

North American sales grew in personal care garment care and kitchen appliance categories with the exception of power XL, which is significantly impacted by lower air Fryer sales.

Sales in EMEA, APAC and Latin America were all up double digits with strong e-commerce growth and expansion of the power XL brand internationally.

Adjusted EBITDA decreased 27, 5% to $23 million due.

Due to volume declines from kitchen appliances, and the unfavorable impact of transaction FX.

This was partially offset by lower ocean freight rates and savings from various cost improvement initiatives.

Including the fixed cost restructuring, we undertook over the past two years.

The overall macroeconomic environment remains challenging, but our efforts to fix the profitability of the business are showing results.

In fact, the gross profit margin for the business increased 600 basis points from the first half to the second half of the fiscal year.

Earlier this week, we delivered our first ever global Remington launched to support our innovative Remington one collection of multipurpose styling tools that deliver both convenience and performance.

The range includes a two in one flatiron and curler.

Multi style drier and a shave and groom multi tool.

The brand generated significant reach and engagement via exposure on the ABC Super sign on times square.

Our radio and social media campaign.

Of branded taxis in New York City and culminated in a launch event hosted by Eye Heart Radio and Z 100 talent, where we welcomed retail partners celebrities Influencers and media.

As we look forward to fiscal 'twenty, four we expect softer consumer demand, particularly in the air Fryer and toaster oven categories to continue and expect a continued challenging competitive environment in North America.

We have also exited certain tri Starr skus in fiscal 'twenty three after assessing among among other things performance and quality standards and the business risks associated with the continued support and distribution of these skus.

Due to the difficult consumer environment and the exit of multiple products, we expect <unk> sales to be down in fiscal 'twenty four, particularly in the first half of the year.

However, despite the top line challenges, we expect continued improvement in profitability as we benefit from various cost improvement initiatives and comparison to prior year higher cost inventory.

Turning to slide 17, and our expectations for 2024.

We expect net sales to decline low single digits, driven by HBC with foreign exchange expected to have a negative impact based on current rates.

Adjusted EBITDA, excluding investment income is expected to grow in the high single digits drew.

Driven primarily from lower cost inventory as compared to fiscal 'twenty, three offset by our investments in brands and people.

As mentioned earlier, we expect the cost environment to continue to ease mainly from lower ocean freight while other input inflation remains relatively mild.

We also expect some pricing pressure in the home and personal care space as the competition competition for shelf space as expected is expected to remain fierce.

From a phasing perspective, we expect the impact of demand pressure in the home and personal care segment to be more pronounced in the first half and particularly in the first quarter of fiscal 'twenty four.

Our home center customers for the home and Garden business are also expected to wait until spring to take on inventory in preparation for the summer season.

These factors along with the product portfolio rationalization impact and the global pet care business will pressure top line comparisons to last year in the first half.

Turning to slide 18.

Depreciation and amortization is expected to be between 115 and $125 million.

Including stock based compensation of approximately $15 million to $20 million.

Cash payments towards restructuring optimization and strategic transaction costs are expected to be approximately $40 million down from $85 million in fiscal 'twenty three.

Capital expenditures are expected to be between 75 and $85 million.

Cash taxes are expected to be between 45 and $55 million.

And for adjusted EPS, we are using a tax rate of 25% including state taxes.

As a reminder, we are projecting to be a U S taxpayer in fiscal 'twenty four.

To end my section I want to Echo David's opening comments and thank all the members of our global team for their strong efforts during some very challenging times for spectrum brands during fiscal 'twenty three.

I am confident that we have the right actions in place to make fiscal 'twenty for us.

A successful year for us.

But before I turn the call back to David I would like to let our investment community know that we are transitioning our investor relations responsibilities from vessel to Joanne <unk>, our senior Vice president of tax and Treasury.

<unk> been doing IR for the last two years I know, we've all enjoyed getting to Nuomi has done a great job and Joanne is going to do the same for us it's a great opportunity for our finance leaders to meet our investment community as well as you guys get to see the talent that we have in our company. So thanks to both of them. So this quarter on your calls over the next week Festival lead and Julian will be shadowing and next quarter we.

Will reverse.

Bill anywhere he is going to get back to his day job of strategic reporting enterprise finance and supporting our global pet care business.

Over to you David.

Thank you Jeremy.

Thanks for joining us again at.

At this point, let's take a couple of minutes and just recap some of the key takeaways I think you'll find that on slide 20.

First our fourth quarter financial results conclude a very challenging fiscal 'twenty three we.

We saw sales pressure from continued declining consumer demand for goods and expanding inventory.

Customer inventory auctions, which drove significant top line pressure for US. However, we proactively took swift action to reduce costs and implemented strict spending controls to get through the leaner times, we believe with our balance sheet strengthened and our margin profile improved we are beginning to turn a corner.

Secondly, our business is well positioned and the time is right to start investing back in the business to fire up our growth engine.

We are focused on bolstering our commercial operations innovation sales and marketing capabilities and we're leaning into investing in our people and upgrading our talent.

We also remain focused on launching fewer bigger better initiatives and truly fueling them are investing resources behind the initiatives for successful commercialization.

Third we are investing in our operations driving efficiencies and reducing costs, we will invest in our facilities and our supply chain capabilities to lower our product cost to remain competitive in today's marketplace.

Lastly, we expect low single digit net sales decline for fiscal 'twenty. Four however, we do expect adjusted EBITDA to grow in the high single digits during the year.

Without considering the impact of our investment income, we expect fiscal 2000, and Florida continue to be in a challenging environment, but we believe we've got the right strategy to succeed in the times ahead.

Although we've had a tough couple of years I believe we're very well positioned to improve our operating performance in fiscal 'twenty four.

Fiscal 'twenty three was all about repelling or legal challenges and recapitalizing our balance sheet.

Today, we are now reinvesting in our people and our brands with the goal of rebuilding our P&L. We are optimistic that fiscal 'twenty four will show returns on these investments and we believe our operating performance should accelerate into fiscal 'twenty five I remain very optimistic about the future of our company I believe we are well positioned to execute.

Cute on our operational goals deliver improved business performance and deliver significant value to all of our stakeholders.

We can now go back to tussle for questions.

Thank you David.

Operator, we can go to the questions you are now.

Thank you as a reminder to ask a question at this time. Please press star one on your telephone and wait for your name to be announced <unk>. Your question. Please press star one again, please standby, while we compile our Q&A roster.

Okay.

And our first question is going to come from the line of Nik Modi with RBC RBC. Your line is open. Please go ahead.

Thank you and good morning, everyone.

Nick.

Good morning, Dave I was wondering if you usually have a pretty good handle on the big picture on the macro so just wanted to get your stated union on the shape of how you think things will evolve in.

In 2024.

There's a lot of moving pieces and it's very uncertain, but would just love your take today and then.

Just a little bit more.

Granular can you just give us any context on the discontinued products and.

And how much that has impacted the business and how we should think about that at least through the first half of the year and if I. If I have it right I do believe a a retail customer.

Did the Aquatics business during 2023, do I have that right and when will we lapped that in 2024.

Yeah. So I'll go in reverse I think there was some discussion about a retail customer exiting the quad X I think that went slower than plan I think we've stated in the business longer than planned.

I'll, let Jeremy and fell so correct me if I'm wrong on any of that.

And then one piece you had in there were discontinuing a bunch of Skus look 'twenty three we dealt with a numerous amount of operational challenges.

I really wanted to get into 'twenty, four and a very healthy manner and so are pressured all business units to really kind of clean themselves up.

If we have certain margin thresholds werent being made of certain inventory returns werent being achieved we want we want to exit those things.

Again I'll, let the good the team tell me if I get anything wrong, we exited I think a thousand skus in Pat.

And Theres a tale piece of that is bleeding into Q1 of this year, but.

It's part and parcel with.

Just wanting to put the sins of the past behind us.

Inventory was superheavy.

At retail and we suffered with that and I don't want to bring any of that stuff into fiscal 'twenty four with US and then we made significant new hires.

In our working capital that's no P processes, just over a year ago, and we've been very deliberate on making sure that the inventory, we carry as a and b stuff that moves fast and it's got good margins and started vitality and we're going to continue to improve.

The quality of our inventory as we go through through 'twenty four in terms of macro economic stuff I'm definitely not in the commerce economists I appreciate your confidence in me, but I've been dead wrong, Nick I really thought that the feds options would have resulted in a much slower economy by now.

Mortgage rates cost of mortgages being 253% in getting up to eight.

As we exited the summer into the fall here in the U S. I really put that will put the brakes on things in.

We've had an amazingly resilient consumer here in the U S.

Our businesses have continued to do well in Europe as well so look maybe.

Now is the time when things cool off I certainly my personal view is that they.

There wont be as many American tourists in making those next summer as there were in the summer of 'twenty, three and I think some of that experience and travel expenditure will come off and hopefully that'll benefit us.

Frankly, this company has got a history of making really great products at a great value.

Definitely trying to get back to our roots and hotshot in a number of areas, where we're investing heavily in productivity to make sure. Those unit costs are down and so we want to be the optically obvious value choice for consumers as we get into spring of next year and hopefully people are in and around the horn a little bit more in calendar 'twenty four and they were in 'twenty, three and maybe that benefits us but.

I definitely see a.

Weakening of the consumer market.

And I think it's just prudent to plan on that continuing to get a little bit worse.

As we look out over the next 12 months.

I would just add Nick to get granular on the modeling question.

Consistent with Q3, GPC SKU rationalization is kind of circa $10 million per quarter hit to the topline in Q4 should continue in the first half of 'twenty forward about that level, and then it'll it'll wind down and HBC, probably in Q1 and Q2 is about a similar level that's the <unk>.

Wind in the first half.

Excellent. Thank you so much guys.

Take care.

Thank you and one moment as we move on to our next question.

And our next question is going to come from the line of Bob <unk> with CJS Securities. Your line is open. Please go ahead.

Good morning, Thanks for taking our questions.

Good morning, Bob.

Hey, so I wanted to start obviously.

Got through a difficult fiscal 'twenty three as you described and this year fiscal 'twenty four is.

<unk> to rebound investment in brands and people et cetera can you give us a sense of how much was the investment in brands in fiscal 'twenty, three and whats the expected investment to be.

In fiscal 'twenty four how do we how do we view the difference in the increase in investment.

Yes, I mean, we're not going to give absolute dollars.

Kind of a rapidly go down by business and by brand, but I would tell you that in 'twenty four depending how the year turns out on the top line from an external perspective, we will probably spend between $40 and $50 million more on brand investments between.

Advertising marketing R&D and some incremental investments in those areas.

Okay, Great and then so how do you determine the right amount to spend is fiscal 'twenty four right or fiscal 'twenty five is going to be higher and what's the form of investment.

<unk> is higher this year than in the expected ROI on that.

Well I think let me, let me hit a couple of just broad points.

No.

It's very recent history right, but we only closed the deal and got liquid in June.

This year.

And running the business a year ago.

Leverage was 665 times running a business for cash.

We took a lot of fixed cost out of the company.

Two of the three remaining businesses, we've replaced the entire leadership team I mean brand new leaders.

We've got new sales person to start in home and Garden recently, just hired a new marketing person there just put in north American lead into the appliance business. We've got a brand new president there that's taken over from Europe.

I mean, you are talking about a business.

Just didn't get a lot of capital to it.

Because of the leverage situation and the pressure from the Doj challenging this elevated your job and it's a brand new day.

We've got $1 billion in the JAK NHL and we think the markets are going to deteriorate, we want to play offense and I just think that's the best way to.

Get get after it is to jumpstart this thing with some real investments in people talent.

And we want to make a lot of noise and bring the consumers.

Really great product here and create a base of earnings that is sustainable and global.

Into the future so.

Look I think we're putting a lot of money on marketing, there's a lot of money going into E. Comm doing a lot of real time testing test and learn we call it.

On the Dot Com partners, then thats all the way from Chewy, Amazon Walmart Dot Com you name it.

We really want to drive the business.

To a much healthier level and then be able to compound from there as we get healthy I would say, we're going to get healthy in 'twenty, four and I'm going to try to accelerate done 25 with what we're doing here with these investments today.

Okay Super I will jump back in queue. Thank you.

Thanks, Bob.

And one moment as we move on to our next question.

And our next question is going to come from the line of Brian Mcnamara with Canaccord Genuity. Your line is open. Please go ahead.

Good morning, guys. Thanks for taking our questions.

First question is regarding that.

My first question is regarding the HBC business. There is a large player in the space that recently went public and appears to be the exception to that rule in terms of growing the topline in this tough market with your outlook for increased pressure on 2024, particularly in kitchen appliances. I guess one is this competitor doing differently that the rest of the industry appears to be struggling.

With.

Yes, I think that that particular entity has been particularly good at innovating, but then spending very large amounts of money advertising.

50, <unk> hundred hundred hundreds of millions of dollars and we clearly don't have the size or scale.

But.

That was kind of the thesis behind what we're trying to do with Directv in DTC with the studio we've got through Tri Starr.

And that's part of what we're trying to do here with fewer bigger better bets and it's part of what we're trying to do here with the new Remington launched we just did here in New York City on Monday.

So its get product, that's driven by consumer insight.

<unk>.

Test that product try to make it a fatter pitch and then put real money behind it.

So that's definitely a strategy that has worked for them.

We're going to try that playbook, where we think it can work for us.

Alright, that's helpful. And then secondly, what are your capital allocation priorities. This year, particularly share buybacks as you move towards your target net leverage the leverage ratio of two to two five times.

Yes, we're in the middle of completing a $500 million repurchase program now and that'll wrap up soon.

We're going to get off this call and see where the world is next week, but I.

I think if we can continue to shrink our float and grow our earnings I think good things tend to happen. If you can do that consistently so.

We've obviously got some bonds outstanding and theirs.

There is an obligation there June July of next year, if we don't do an acquisition.

But I think we really want to invest in our organic businesses.

Never say never if there is there is some tuck in out there that is a slam dunk.

For pet our home and garden with probably.

We look at it but right now I just want to continue to buy in shares that I think are undervalued and.

Get our earnings stream growing.

Great. Thanks, a lot best of luck guys.

Thank you.

Thank you and one moment as we move on to our next question.

And our next question is going to come from the line of Chris Carey with Wells Fargo Securities. Your line is open. Please go ahead.

Hey, everyone. Thanks for the question.

Can I start on card and please.

So the outlook for retailers to build inventories later in the season.

With pressure in Q1 than that continuing.

Into Q2.

Is that based on you have these conversations with the retailers by this point being so late in the calendar year.

And there's a lot of visibility into that comment or is that a level of conservatism given what's happened in the category. This year uncertainty on whether in the certain things I'm trying to balance the two.

Yes, I think it's a little bit of both Chris I think obviously, we're coming off of two tough seasons.

Particularly this last year, where I think our retailer customers behave differently than we expected. So I do think our connectivity and understanding of their strategies is much better than it was a year ago. I think their strategy is frankly have stabilized I think their strategy has changed a lot as the year progressed.

Last year so.

It's a bit of knowledge from them. They understand that we have limited manufacturing for our business at some seasonal so they have to be very communicative to us to make sure that they have the product when the consumer arrive. So it has to be a really tight partnership.

But I also think it does make sense to start the year conservatively given the past couple of years that said, we're really encouraged by Q4, where.

Stronger Pos and both we and the retailers expected because of the late one season continued to season longer and because of the lower inventory levels that they have now we immediately saw replenishment orders and really kind of outperformed where we thought we would be in Q4. So I think that's a good sign that our strategy.

And right as we head into 2024.

Yes.

Just.

Given two years of organic sales growth declines one would think inventories are much cleaner by this point specifically at POS was better. So is this excess inventories going into next year or retailers, managing a tighter inventory load than what they typically done.

Yes, honestly I mean, I think that's a possible outcome I think it could be much better if we have a strong season, but again I do think it makes sense to start the year thinking about it prudently.

And recognizing that that business has changed a bit over the past couple of years like it changed a bit during the couple of years of the pandemic being.

Being cautious on the forecast to David's earlier point.

Sure that we're putting out numbers that we know we can we can achieve and we can satisfy our shareholders. I think that is the right thing to do as we start fiscal 'twenty four.

Okay that makes sense just one last one then I'll hop back yet.

Outlook for sale. This year can you just maybe give some context on your expectations.

For pricing relative to volume.

Imagine going down but.

Give us give you don't disclose that line item.

Maybe any additional context, there would be helpful.

Yes, I think as you look at pricing for 24 kind of across the businesses and regions I actually think that we're going to be relatively flat I think theres going to be some areas, where the competitive situation will require us to give some price and I think theres going to be some strategic areas.

And revenue growth management, where we can take a little bit of price, but net net I think it's going to be a neutral year. So we're really looking for.

Predominantly a volume for the low single digit sales decline that we're calling in again predominantly coming from the <unk> business.

Okay. Thank you Bob.

Thank you.

Thank you and one moment as we move on to our next question.

And our next question is going to come from the line of Peter Grom with UBS. Your line is open. Please go ahead.

Thanks, operator, and good morning, everyone. So.

Maybe just to start David and Jeremy how would you characterize the degree of conservatism embedded in the outlook.

And then Jeremy just a lot of commentary suggest that.

Despite our confidence in the full year, you're going to be a tough first half retail ordering patterns and <unk> to start and GBC weaker one have an ACC can you maybe put a finer point in terms of how we should think about the phasing from an EBITDA perspective.

And I guess just building on that what drives the confidence that the second half will show improved.

Improvement in that seem to be a pretty tough first half year.

Yes.

Yes, I mean, I think first we start with where do we see our markets in Q4 quarter. We just came off of what are we hearing from consumers. What are we hearing from our retail customers and I think essentially we have baked that environment into what we think for 'twenty four probably with an additional level of conservative conservatism based on expectation.

We have as David said earlier there.

At economic conditions globally, but particularly in the U S will likely get a little bit worse than they've been in the last couple of quarters in fiscal 'twenty. Four so we take all those things into account and that's really how we built our forecast I think our comments around the first half are very specific to situational issues not necessarily Mac.

Crow issues in our specific categories and businesses that we just want to point out that will impact how the first half plays versus the second half.

But as you look to this year, what we don't have as some step function change quarter to quarter and expectations for consumer demand <unk> margins.

We expect it to be more steady than what we've experienced the last couple of years and we don't have the significant.

Roller coaster ride of inflation going up a deflation going down to worry about so.

Think it's a year of stability as David talked about earlier.

Year to start investing back into the brands in a material way.

Sequentially from what we've done in the last few years, which has been quite low I think it will be a great year for us to deliver EBITDA growth in all three businesses to do that to track the return on those investments well and springboard hopefully into a better economic situation in 'twenty five.

Thanks, So much I'll pass it on.

Thanks Peter.

Thank you and one moment as we move on to our next question.

And our next question is going to come from the line of Ian Zaffino with Oppenheimer. Your line is open. Please go ahead.

Great. Thank you very much.

And.

How are you guys.

Yes.

You too you too.

I wanted to ask you on HBC, how are you thinking about potential.

Separation of that business.

I know you had talked about in the past, obviously forces have kind of changed a little bit there.

What do you need to maybe get a separation back on track.

And then.

Just as far as.

I guess fundamentals, but any M&A in that area as well because I know you talked a little bit about M&A again mentioned HBC. So.

Just wanted to kind of see how your squaring that thanks.

Yeah look we continue to want to stand that up and build a separate appliance business.

But right now we're trying to get it back to health and.

We're making some improvements there.

Just had a 600 basis point expansion in the profitability of it in the back half versus the first half.

We got a lot of work to do there. We just relaunched Remington globally, you have got some new talent in that business and I'm optimistic about and I think the I think that.

While I think competition remains fierce.

I think theres going to be some rationalization to we've seen a bank group, we've seen a bankruptcy in the space.

I think that retailers are going to want what we are preparing to get them on which is fewer bigger better innovations. We typically are brands that have good value price points, because I think people are going to watch their spending on durable goods there'd be tighter with that spending will probably look for value price point product.

And so I think if we can put a couple of quarters of better operating momentum together, then I think that that improves our odds of accomplishing our goal.

I have not been shy about expressing my view that I do like the idea of a combination thats synergistic and brings scale and allows us to get additional upside as shareholders. We've certainly been down that road in the past.

Unsuccessfully and we'll just have to see how that plays out but I think as current owners of the business. It behooves us to get that thing in a better financial state and get some real earnings growth and operating momentum under it and then the options available to us should improve.

Okay, and then I don't mean to put you on the spot here, but when you think about earnings potential of that business.

I think you threw out something along the lines of like 100 $120 million or something along those lines is that how you still feel about that business has anything changed there.

Just kind of given the environment that <unk> seen recently, yes, yes look let me hit it head on look.

Put me on the spot at all look our Pep business is run rating over $200 million, but are now where you saw 53 print in the quarter.

Home and garden had a very good quarter, we just reported.

But we haven't seen a great home and garden selling season.

On three years, so we don't want to get over our skis on that let's see how March and April plays out one of the earlier questions. There we had a big retailer dedicated a lot of space to electronics.

Battery operated landscape equipment I'm not sure that was awesome, but.

Maybe we get some space back there so.

Let's just see how that goes but I think we can rebuild the earnings power at home and Garden. Your specific question around appliances.

Look we've got 1 billion two business and this business used to be able to do high single digit low double digit EBITDA margins. It's just I believe you're seeing so much distortion in that industry. Because you had this giant demand caused by Covid again, because the retailer couldnt get enough product from us or anybody else they bought from anybody.

So I think you had a lot of fly by night guys get involved in the business Hawken product from China at little to no margins with tons of recalls and it's really damage the economics of the space.

Is that Rationalises and people go bankrupt and consolidation happens and retailers understand hey, guys like us are in it to win it we're here to stick around and be here for the long term, we gained back margin structure and I think if we can through better talent and global marketing operations like we just demonstrated with Remington one launch in New York.

Sure.

You can start to rebuild that margin structure.

Clearly a 10% margin on $1 billion to our revenues. That's the number you just quoted so I don't think we're going to get here in 'twenty four.

But I think we can lay the foundation for it in 'twenty four and may be set up to it in 'twenty five 'twenty six yes.

Alright, great. Thank you very much.

Thanks Ian.

Thank you and one moment as we move on to our next question.

Yes.

Our next question comes from the line of Olivia Tong with Raymond James Your line is open. Please go ahead.

Great. Thank you.

First question is just in terms of marketing spend and whether you could talk about sort of short and long term cost.

Obviously, you have the capacity and more nowadays.

Above the category to regain some lost ground, a little quicker or sort of more in line and bill just want to understand your thought process and reinvestment back into business.

Hello.

Yes, I mean, obviously, we've spent under the average category.

For where we play over the past few years.

The strategy is a little bit different.

By business and even within the business, sometimes by brand we have some premium brands and our global pet care business that play at the high end of the price points in their various subcategories.

That's the type of business, where youre not doing the traditional advertising that costs as much as.

What you do in some other CPG categories. So the spend is relatively modest but it has led us to be successful in growing at or above category for a number of years.

I think when you look at the home and garden business.

It's bit of a different story, we have a value proposition play.

As part of our brand strategy. So we don't want to spend it zero, but youre not going to see us spend at 4% of sales that just doesn't make sense for what we do and who we're trying to be for our consumers.

And in HBC, we have brands really.

Across.

The price points.

Reality is we have a fairly significant amount of revenue at opening the mid price point with the brands that we have and so again, while we want to invest more than we did in 'twenty, two and 'twenty three and we intend to actually we've already started.

Again, we don't need to be at 3% or 4% of sales I think 152% of sales I think even coming out of our business units I think they would tell you that sufficient blended for what we're trying to be brand by brand within our businesses.

Got it and then just in terms of thinking about profitability by Division if you compare this to.

EBITDA margin pre COVID-19 levels by segment.

We're still quite a bit to allow participants.

Oh, my God, but that's actually not that different so as you think about rebuilding that EBITDA can you talk about the divisions, where where do you see sort of.

Greater progression early on versus those that will take a little bit longer.

Right.

Sure Yeah, I mean I think.

David just hit it and the last question on HBC right. We're we've gotten down into this lower single digit level and we'd like to be back in the high single digit low double digit level over the coming couple of years and I think thats, probably all the level of margin that the combination of those categories and our brands and where we play well.

Well I think youre spot on on global Pet care, I think thats really directionally, the right margin level and the key focus is on actually growing the top line and dropping it down to the bottom line and continuing to invest in the brands and new products.

And then in home and Garden look structurally I don't think theres anything different inside our business other than the fact that we have had to absorb the inflation that we have like everybody else has.

And had to price for it and the impact it's having on our consumers, but the last two years.

Overall production and our sales to our retail customers is lower than we think a normal season will be in that naturally will leverage up in Q4 is a great example of that as I talked about earlier Q4 came in stronger because of the late weather.

Particular categories and both our net sales and our margins over delivered expectations in the quarter. So I think that's what we'd like to see as we get to a normal more normalized season whenever that might happen.

Got it and then just last question around Easter.

Uses of cash and tear apart kit.

Obviously nice to see the move there, but as we think about sort of continuing to deploy the cash.

Why shouldn't we expect you to continue to buyback shares if presumably right. Now you are still looking to put cash to work your focus right now and certainly paying any more internally than looking to add assets.

So just if you could talk a little bit about share repurchase and thoughts about cash allocation that'd be great.

Yeah look I think we did a study we've returned about $3 billion of cash to shareholders in the last five years.

We've just returned $5.500 billion.

Almost wrapping that up we've got a dividend out there so.

We're turning a lot of cash to shareholders this calendar year.

We continue to think we're materially undervalued and.

So you can probably expect us to continue to buy shares but we've got to finish this current $500 million ASR and we'll update you when that is done.

Got it thank you.

Thanks, Olivia. Thank you and this does conclude today's question and answer session and I would like to turn the conference back over to final quarter for any further remarks.

Thank you with that we've reached the top of the hour. So we will conclude our conference call.

David and Jeremy and on behalf of spectrum brands. Thank you all for your participation.

This concludes today's conference call. Thank you for participating you may now disconnect.

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Good day and thank you for standing by welcome to the first quarter 2023 Spectrum Brands Holdings, Inc. Earnings Conference call. At this time, all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone.

You will then hear an automated message advising you that your hand this race.

Your question. Please press Star one again, please advise for today's conference is being recorded I would now like to hand, the conference over to your speaker today sizable. Please go ahead.

Welcome to spectrum brands Holdings, Q4, and full year 2020 earnings conference call and webcast.

I am <unk>, Vice President of strategic Finance and enterprise reporting and I will moderate today's call.

If you follow our comments, we have placed a slide presentation on the event calendar page in the Investor Relations section 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.

I would call them that by David Maura, Our chairman and Chief Executive Officer, and Jeremy smelter, our Chief Financial Officer.

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

Turning to slide 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.

We assume no obligation to update any forward looking statements.

Also please note we will discuss certain non-GAAP financial measures in this call a reconciliation on a GAAP basis for these measures are included in today's press release and 8-K filings.

We are.

Which are both available on our website in the Investor Relations section.

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

Now I'll turn the call over to David.

Hey, Thank you first of all good morning, everybody and thank you guys for joining us today as.

As we wrap up a very challenging and rewarding year for our company I'd like to start this call by expressing my gratitude to every member of our global team for.

For in helping navigate our business through some very difficult times in fiscal 'twenty three.

I would also like to thank our investor base for their confidence and trust over the past two years as we battled through and overcame operational and M&A regulatory challenges.

Moving to slide six we started fiscal 'twenty three with the challenging macroeconomic environment with consumer demand declining from the height of the pandemic and our retail customers inventory strategies driving significant demand volatility.

Our margin structure was still under pressure from the inflation hangover in our inventory that was acquired in fiscal 'twenty two.

And our leverage ratio was very high with declining EBITDA and higher working capital commitments at the same time.

We were facing very and we're also facing the legal challenge to the Doj.

There was trying to borrow the sale of our <unk> business.

In the face of these challenges our company is not just significantly not just successfully navigated these obstacles, but we're now also beginning to turn a corner.

We have successfully defended against the legal challenge when we closed the <unk> deal for $4 3 billion in cash with.

We have also been now unwinding any early pay and factoring programs across North America.

Which used approximately $250 million of our cash during the year.

We are also improve the margin structure of our businesses and have started to invest back in our brands.

Our retail partners are enthusiastic about the partnership potential in the future and the team is energized to embrace this new reality.

With that context. So have you now turn your attention to slide number seven.

For a quick overview of fiscal 'twenty threes results.

We continue to experience these pressures in the fourth quarter with the pace of the sales decline has slowed down considerably with fourth quarter net sales decreasing by just one 2%.

Fortunately, we were proactive with our counter measures earlier in the fiscal year and we initiated further cost savings following some cost out actions during the second half of fiscal 'twenty two.

With the <unk> transaction that are closed and our balance sheet strengthened we have started to invest back in our businesses during the fourth quarter and we expect to continue this investment throughout fiscal 'twenty four.

Our fourth quarter saw increases in our opex, driven by renewed advertising and promotional spend.

Jeremy will cover the fourth quarter results, including business unit performance in more detail in his section.

Moving now to slide eight.

Our plan for fiscal 'twenty, four we will build on this strategic shift and focus on three key elements.

One we're investing behind our people to improve our commercial capabilities and drive a culture of accountability to we're investing behind our brands and our new product Roadmaps as we continue to focus on bringing fewer but bigger and better innovations to the market.

Three we're investing in our operations to drive efficiency and to reduce cost.

And good and tasty catch reached launched during fiscal 'twenty three.

Expanding new innovations across several products as we have done with our spectra side, one shop platform and getting behind new products in a big way as we've just done with our first ever Global Remington launched earlier this week in New York City with our innovative Remington one range of products.

So we can continue to remain competitive in the marketplace today.

Moving to slide nine and our high level fiscal 'twenty four earnings framework.

From an operating EBIT perspective, however, we are targeting growth in the high single digits, driven primarily from lower cost inventory as compared to fiscal 'twenty three offset by increased investments in our brands as I described earlier as well as increased investments in our people to bring us to help us build a stronger fat.

After higher growth company.

We expect the cost environment to continue to ease mainly from lower ocean freight costs, but these were offset somewhat by other inflation inputs, including labor material and FX.

We also we also expect some pricing pressure in the home and personal care space is the competition for shelf space. There is going to remain fierce.

Now you'll hear more from Jeremy on the financials and the business unit updates and I'll be back for closing remarks over to you Jeremy.

Thanks, David and good morning, everyone, Let's turn to slide 11, and look at our Q4 results.

Getting with net sales.

Net sales decreased one 2% excluding.

Excluding the impact of $11 $3 million of favorable foreign exchange organic net sales declined two 7%.

Excuse me.

SG&A expense of $222 million was flat at 30% of net sales.

Driven by increased marketing and advertising investment in the business.

Offset by reduction in distribution costs related to prior year disruptions.

Operating income was essentially flat at $6 $16 2 million.

Our GAAP net income and diluted earnings per share increase due to interest income lower.

Lower interest costs and income tax benefit and a lower share count.

Adjusted diluted EPS increased 183% due to the higher adjusted EBITDA lower interest expense and a lower share count.

Adjusted EBITDA increased 52% driven by gross profit improvements in interest income.

Turning to slide 12, Q4 interest expense of $23 million decreased nearly $4 million.

Cash taxes during the quarter of $3 9 million or $3 $4 million lower than last year.

Depreciation and amortization of $23 $6 million was $900000 higher than last year.

And separately.

Share based compensation increased by $6 million.

Cash payments towards restructuring optimization, and a strategic transaction costs were $18 4 million down from $40 3 million last year.

Moving to the balance sheet, the company had a cash balance of $754 million.

Plus $1 1 billion of short term investments.

And approximately $587 million available on our $600 million cash flow revolver.

Debt outstanding was approximately $1 6 billion.

Consistent consisting of approximately $1 5 billion of senior unsecured notes and $86 million of finance leases and other obligations.

Additionally, as mentioned earlier, we once again ended the quarter at a net positive cash position.

In October we refinanced our revolver, reducing the total facility to $500 million.

To reflect a smaller size of our company after the <unk> sale and we extended the maturity to 2028.

Capital expenditures were $14 7 million in the quarter versus $18 7 million last year.

Net sales decreased eight 1%.