Spectrum Brands (SPB 26s; B2 Neg/B/BB Neg) 2Q (3m ending March)

The consumer goods co who owns brands including Remington & Russell Hobbs has reported in-line sales & small beats on margins. FY guidance was boosted for on headline sales & EBITDA. Single local line, €425m 4% Oct 26s are unch - its the front maturity for co & reflected in spreads (Z+120, 70bps tighter YTD & well in for ratings). Its at cash price of €99 now limiting par call benefits - a possibility given still net cash position from HHI sale & debt docs (including 26s) force co to use excess cash from the sale not used in Capex or debt paydowns (within a year) to be used in a par offer on the bonds - we see deal close as June 2023 for reference.

• Sales at $719m (c$709m, -1.6% organic yoy/-1.5% net), gross margin at 38.1% (+870bps yoy & +260bps qoq). Attributing margin to lower cost inventory & related expenses & cost improvements.
• Adj. EBITDA at $112m (c$70m, +121%yoy) at margin of 15.6% (+860bps yoy, +500bps qoq) - attributed to gross margins, lower operating expenses & higher investment income.
• BS little changed: cash on hand was $746 with another $500m in short-term investments against $1.4b in debt ($1.3b in bonds & $84m in leases). Net debt was $155m. Its still targeting long-term net leverage at 2-2.5x after HHI sale proceeds (see below). Qtrly dividends continues running at ~$13m a qtr while buybacks have totalled $340m this half ($920m of $1b since HHI sale done).
• FY guidance raised to flat net sales (c-1.4%, previous LSD decline) & adj. EBITDA (excluding investment income) to grow in LDD (c+22%/$324m, prev. HSD increase).