Spectrum to talk with lenders as second quarter numbers seen falling below expectations

By Sara Rosenberg

New York, April 6 - Spectrum Brands plans to enter into discussions with its lenders due to anticipated lower-than-expected second quarter results, according to a company news release.

Currently, the company expects second quarter fully diluted earnings per share in the range of $0.03 to $0.06 and pro forma diluted earnings per share in the range of $0.00 to $0.05. By comparison, in January, the company had offered guidance for second quarter pro forma fully diluted earnings per share in the range of $0.35 to $0.40.

The company attributed the shortfall primarily to ongoing challenges in its consumer battery business.

In addition, the company cited commodity cost pressures, saying that spot prices of zinc, a primary component in the manufacture of batteries, have doubled over the last 12 months and have increased more than 10% in the last month.

However, Spectrum Brands is focusing on a number of initiatives to streamline operations and improve profitability.

In Europe, these initiatives include the closure of the Ellwangen, Germany, packaging center and the relocation of operations to the Dischingen, Germany, battery plant, the transfer of private label battery production to the company's manufacturing facility in China, and the previously announced resizing and restructuring of sales, marketing and support functions. As a result of these measures, headcount in Europe will be reduced by 350, or about 24%. Total annualized savings are projected at $33 million, when all actions are completed by the end of fiscal 2006.

The company's North American sales and marketing organization has also been restructured, flattening the reporting structure and rightsizing several support functions. These new actions are expected to generate an incremental $7 million of annualized savings.

Spectrum Brands is an Atlanta-based consumer products company and a supplier of batteries and portable lighting, lawn and garden care products, specialty pet supplies, shaving and grooming and personal care products, and household insecticides.

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