Spectrum Brands Holdings Inc (SPB) 2008 Q1 法說會逐字稿

Good morning. My name is April and I'll be your conference operator today.

At this time, I want to welcome everyone to the Spectrum Brands first-quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. (OPERATOR INSTRUCTIONS) I would now like to turn the call over to Vice President of Investor Relations, Nancy O'Donnell.

Ma'am, you may begin your conference.

Thank you. Good morning, everyone. Welcome to the Spectrum Brands first-quarter conference call.

Joining me today are Kent Hussey, Chief Executive Officer of Spectrum Brands, and Tony Genito, our Chief Financial Officer.

Before we begin, I want to remind everyone that our comments this morning include forward-looking statements. These forward-looking statements are based on management's current projections and assumptions and contain an element of uncertainty. 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 and in our most recent Form 10-K and 10-Q. We assume no obligation to update any forward-looking statement we make today.

In addition, please note that we discussed certain non-GAAP financial measures during our remarks, including adjusted diluted earnings per share and adjusted EBITDA. The term adjusted EBITDA refers to a number that comprises EBITDA contributions from both continuing operations and discontinued operations, and excludes certain elements of earnings that management believes are unusual in nature or not comparable between periods.

In management's opinion, these non-GAAP metrics provide incremental valuable information about our results of operation, and serve as one additional means to analyze our financial performance.

In addition, adjusted EBITDA can be a useful measure of a company's ability to service debt and in fact, is one of the measures used for determining debt covenant compliance under the terms of our senior credit facility. Non-GAAP metrics, while useful supplemental information, are not intended to replace the Company's GAAP results and should be read in conjunction with those GAAP results. In table 4 of our press release, we provided a reconciliation of adjusted diluted EPS and adjusted EBITDA to GAAP results. We'll also make that reconciliation available on our website.

Thanks for your attention to these details. At this point, I'll turn the call over to Kent.

Thanks, Nancy. That was quite a bit of detail. Well, good morning, everyone, from rain-soaked and beautiful Atlanta, Georgia. Thanks for joining us on today's call.

I characterize our 2008 first quarter as one of good progress in an overall challenging retail environment.

They told you in our last call, my primary focus this year will be on improving the profitability of our business, and as measured by adjusted EBITDA, we delivered nicely on this goal this quarter, with EBITDA improvement versus the first quarter of 2007 of $8 million, or 19%, when you include our Home and Garden business.

Our top line performance trends, which appear anemic, can be a little difficult to interpret from our reported results. Please recall as I discussed in our last earnings call, Q1 sales would be impacted by early holiday shipments, which I'll discuss in more detail in a moment, and by some intentional selective calling of sales in our Battery business.

But overall, the long-term trends are positive. We believe we are making good progress on a number of fronts. I expect further improvement in our financial results for the full year '08.

We reported net sales of $561 million from continuing operations, 1% decline as compared with 2007. Adjusted diluted earnings per share from continuing operations before restructuring and other charges were $0.6 compared to $0.12 last year.

Tony will discuss some of the tax complexities that are having a significant and often times confusing impact on our reported net income and earnings per share. EBITDA is a better indicator of our business' health and trajectory. First quarter adjusted EBITDA from continuing operations was $68 million, a 15% improvement over last year.

When you include our Home and Garden business, which generates a seasonal loss in the fiscal first quarter, adjusted EBITDA was $49 million versus $41 million last year. That's a 19% improvement. Our latest 12-month adjusted EBITDA, including Home and Garden, is $285 million, which is a 20% increase over where we stood just nine months ago. This is also our third consecutive quarter of double-digit adjusted EBITDA year-over-year growth. Now let's take a look at some of the details by business unit.

First, Global Batteries and Personal Care, where sales declined 2% during Q1. You will recall that last quarter this segment generated 16% growth, which we told you at the time was not a representative growth rate. As we said on our last call, that 16% growth was influenced by the fact that some of our key customers moved to their holiday sets earlier than usual this past season, and as a result, we began shipping in for the holiday early as well.

If you look at Global Batteries and Personal Care sales growth over the past two quarters, sales growth averaged 6%, which I think is more representative of the holiday season results, and which is a number we're pretty happy with given the retail environment today.

Global Battery sales were flat in the first quarter versus last year and grew approximately 4% on average over the last two quarters compared to the prior year. North American Batteries declined by 2% in Q1, but were up 1% for the six months. Rayovac, alkaline battery sales at retail were down about 3% due to a competitor's aggressive promotional activity at a very low price point. Our dollar share improved modestly on a sequential basis to 10.2%, not where we had hoped, but an improvement nonetheless.

However, looking at the general battery category, which includes heavy duty and rechargeable batteries, as well as alkaline, our point of sale was up 8% compared to growth of 5% in the category. So reasonably good performance. Battery inventories at retail are gauged to be slightly over targeted levels. European Battery sales were down 2% in the quarter.

About half of the first-quarter sales declines attributable to our intentional exit from unprofitable or marginally profitable private label, as well as, some second-tier branded business. This reflects our strategy of making this region more profitable. In fact, the profitability of our European business improved significantly in 2007 and this continued into the first quarter of 2008. This comes as a result of focusing on our most profitable customer relationships and products, instead of chasing volume for volume's sake. And also as a result of cost savings from our global realignment. We are satisfied that we're making solid progress on our profitability goals here.

Latin America generated battery sales growth of 8%, largely driven by currency. We've taken aggressive pricing in this region over the past 12 to 18 months to recover the dramatic input cost increases we experienced over the past two years. In fact, gross margins expanded over 200 basis points during 2007.

The region continues to enjoy relative economic stability, and we currently anticipate this will continue through 2008. Worldwide demand for oil and other raw materials produced in Latin America should sustain this period of prosperity. Turning to Remington, Q1 global sales declined by 6% year-over-year.

Remember, however, that in the fourth quarter of 2007, Remington sales increased 35%, so what we believe is a more representative look at the season is to consider the 6-month average, which comes out to growth of about 10% worldwide versus the 6-month period last year.

In general, Women's Hair Care continues to be the star of this category, with very strong double-digit sales growth worldwide, while Shaving and Grooming is less robust with growth in the low-single digits, driven entirely by Grooming. Remington sales in North America declined this quarter and were basically flat over the 6-month period. As the Men's Shaving category was down this holiday season. A lack of retailer promotional support compared to 2007 contributed to the decline.

Remington did, however, maintain share in Men's Shaving and Grooming, and is still the number one brand in units and the number two brand in dollars behind Norelle. Both Grooming and Women's Hair Care point of sale showed strong double-digit growth, outpacing the category in North America. International Remington sales are very encouraging, growing at an 11% rate this quarter, or 20% for the six months.

Favorable currency translation was a contributor, but even on a local currency basis, Remington continues to grow internationally in the high single digits driven by increased market share and shelf space at existing customers, and the continuing role of the Remington lineup across eastern Europe.

We are now the number two brand in Women's Hair Care with a 17% market share in western Europe. Global Pet had another good quarter generating key 1 sales growth of 3%. The Companion Animal side of the business continues to be a strong growth driver, although it slowed a bit this quarter to around 6%. Retailers were cautious on selling during the quarter, but sell-through remained healthy, up about 5%.

So we think Companion Animal prospects for the rest of 2008 remain positive. Aquatic sales grew 2% on a global basis. North American Aquatics was soft, declining about 5% in line with industry trends. But this decline was more than offset by robust aquatic he is results in Europe or Asia, where our TETRA business grew in double digits. International growth is attributed to strong demand for new products in both Indoor and Outdoor Fish Keeping and Water Conditioning, assisted by strong currencies in Europe and Japan.

Our Home and Garden business reported in discontinued ops, saw Q1 net sales decline of $6.8 million.

However, as mentioned in our release, 2008 only included one month's revenue from our Canadian Home and Garden business, which was sold on November 1, 2007 compared to three months last year. Excluding Canadian sales from both periods, our U.S. business was down slightly for the period.

As you know, the first fiscal quarter represents only 7 to 10% of annual sales for this highly seasonal business, so we don't believe Q1 sales are predictive of the year. Retailers are moving towards a more consumption-based inventory model and this impacted early season selling.

However, POS at our top retailers during Q1 grew in the mid single-digit range in virtually all categories and all counts, so the consumer is definitely purchasing Home and Garden products. Overall, our relationships with our retailers are very strong.

As one example, we were recently awarded Vendor of the Year in the Lawn and Garden category at Ace Hardware, one of our top 5 accounts. We have year over year growth in listings and displays across all retailers and all of our seasonal marketing programs and promotions are ready for execution in Q2 and Q3.

For the most part, our customers are telling us that they are supportive of and cautiously optimistic about this category this year, that is barring further weather issues. Effective January 1, we took price increases in the teens for fertilizer and other growing products and low single-digit increases in outdoor control products. While there's some potential exposure from raw material prices this year, we think our pricing initiative should be sufficient to offset anticipated increases and will assist in improving gross margin levels.

As you know, the Home and Garden business was hit by a double whammy last year. Horrible weather in much of the country in April and drought covering a large portion of the southeast during the Summer and Fall. Not about to try and predict what Mother Nature is up to this year, but I can say the southeast seems to be returning to a more normal weather pattern, with regular rain across much of the region.

As a matter of fact, in some very welcome news just yesterday, Georgia's governor announced an easing of outdoor watering restrictions in the state. To be clear, restrictions have not been totally lifted, but this is a positive first step. Assuming a more normal season in terms of weather this year, we expect to see top line growth and demonstrable EBITDA improvement from Home and Garden in fiscal '08.

To summarize, our Q1 sales performance was not what we had hoped for this quarter, but when examined in light of some of the timing issues between this quarter and last quarter, we think we're on track to deliver on our plan for the full year. Like everyone else, we're feeling a little cautious about consumer spending and the overall sluggish economic environment. We are seeing retailers very focused on their own inventory levels and cash flow, more so, perhaps, than I've seen in my career.

We feel reasonably confident that we are well positioned to generate modest top line growth in fiscal '08, despite these challenges, through a mixture of selective pricing, geographic expansion, and new product introductions.

However, as I've tried to emphasize in our conversations on previous calls, although growing sales is an important priority, our number one goal for fiscal '08 is to make Spectrum Brands a more profitable entity. To that end, I'm feeling confident.

Profitability this quarter measured by adjusted EBITDA improved by 19%. On a trailing 12-month basis, EBITDA of $285 million represents a 14 improvement over year-ago results and 20% improvement, since the second quarter of 2007.

We're optimistic that we'll see year over year EBITDA improvement for full year fiscal '08 as well.

At this point, I'll turn the call over to Tony to discuss the financial details.

Thank you, Kent, and good morning, everybody.

Moving our attention to the rest of the income statement, our continuing operations generated gross profit of $208.2 million during Q1. Within the cost of sales, we incurred restructuring and related charges of about $100,000 related to headcount reductions taken as part of our 2007 global realignment.

In Q1 of last year, we incurred $6 million of restructured and relating charges. Excluding these charges from both years, gross margin this quarter was 37.2%, as compared with 38.1% in Q1 of last year. The impact of negative product mix changes within the Remington product lineup accounted for most of this difference.

Operating expenses in the quarter were $153 million, excluding restructuring and related charges or 27.3% of sales as compared with an adjusted $170 million, or 30.1% of sales last year. We reduced selling, advertising, research and development and G&A expense, that saw increases in marketing and distribution. Distribution expense was up due to increased fuel prices, as well as increased container costs from Asia.

Reported operating income from continuing operations of $51.7 million, compares with a reported $37.5 million last year. Excluding restructuring and related charges from both years, adjusted operating income is $56 million this quarter, or 9.9% of sales compared with $45 million, or 8% of sales last year. This represents a 24% improvement.

We expect improvement in operating income for full year 2008 as well as -- as well, fueled by the remaining cost savings related to the global reorganization initiatives implemented last year, and improving mix in our business, as we exit unprofitable or marginally profitable SKUs or counts and some modest organic growth. Moving on to segment profitability, our Global Batteries and Personal Care segment generated profits of $47.1 million, and 18% increase over last year's results. There were two major drivers for this improvement.

The first is the cost savings from our global realignment initiatives. In addition, we made a tactical decision to reduce our television advertising spend this year in the Men's Shaving segment. We did this because our early read on category sales told us results were down. We are convinced we made the right decision.

Just as a side note, one of our competitors launched a major new shaving product this season with significant advertising behind it, and we understand that results at retail were very disappointing.

Remember, our goal is not just growth, but profitable growth. The benefit of these cost reductions was offset to some extent by the lower sales volume recorded this quarter.

However, the positive impact of the cost savings initiatives on operating income is evident and we believe it represents a sustainable improvement to the profitability of this business segment. Looking forward to the rest of the year, we have hedged about 75% of our forecasted zinc consumption needs at an average price of $3250 per metric ton.

This fiscal year '07's average zinc price was around $3200 per metric ton, so we have very little in the way of head winds from commodity costs this year. As a matter of fact, we think we should begin to benefit from lower year-over-year comparisons by the fourth quarter of this year. The current spot price is about $2400 per metric ton for zinc. Should zinc stay at this level, we will have good news on the input cost front in 2009.

We have already begun to layer in hedges for fiscal '09 and at this point are approximately 45% hedged at approximately $2700 per metric ton. Our Global Pet Supply segment generated profits of $16.8 million, representing 11.8% of sales, compared with last year's $18.3 million, or 13.3% of sales.

You may remember that last year, we recorded a $2.7 million gain from the termination of a post retirement benefit at one of the acquired companies in this segment. Absent that gain, the prior year profitability margin of 13.3% would have been 11.3% and the year-over-year increase in our reported profitability margin would have been about 50 basis points.

First quarter corporate expense was $8.4 million versus last year's $13.2 million. This improvement is associated with cost savings across the board. Primarily driven by headcount reductions and effective cost controls across the organization.

First quarter interest expense from continuing operations was $45.7 million compared to $31.7 million last year, in part due to the change in the allocation of interest expense between continuing and discontinued operations.

As you will recall, in connection with the impairment charges we took in fiscal 2007 and the resulting change in the asset carrying values of our Home and Garden business, we increased the quarterly allocation of interest expense to continuing operations by around $4 million.

Total interest expense, including both continuing and discontinued operations was $57 million this quarter versus $49 million last year. The increase is a result of higher interest rates and slightly higher debt levels than we had a year ago.

Remember, our major debt refinancing last year took place at the end of the second quarter, so we have not yet anniversaried that event. Our fiscal 2008 average interest rate is projected at approximately 9%.

We anticipate full year 2008 interest expense on a consolidated basis of approximately $230 million, or -- I'm sorry, of which $44 million will be allocated to discontinued operations. Cash interest should be approximately $225 million. First quarter depreciation and amortization expense was $16.2 million. D&A should come in around the $60 million mark for the full year. Our discontinued Home and Garden operations showed a loss of $33 million in Q1 versus $22 million last year.

As Kent noted, sales were down primarily as a result of the sale of our Canadian Home and Garden business, which occurred early in the quarter.

Remember, the December quarter represents a very small portion of annual sales, thus we don't assign much predictive value to the Q1 results.

Home and Garden generated a EBITDA loss of $19 million this quarter versus a loss of $18 million last year, so there really has been very little measurable change in the operations of this business at this early point in the season. The reason for the increased loss in discontinued operations relates almost solely to taxes.

Last year, we recorded a tax benefit of about $13 million. However, at year end 2007, you will remember that we recorded a valuation allowance against deferred tax asset associated with our North American business and as a result, we recorded no U.S. tax benefit against our H&G loss in this fiscal first quarter of 2008. Although this has no cash impact, the year-over-year P&L impact was a negative $13 million.

Turning to cash flow, including Home and Garden, our Q1 operating cash outflow was $92 million, defined as EBITDA, adjusted for working capital changes, less cash interest of $53 million, cash taxes of $5 million, and $14 million in cash restructuring costs. At quarter end, we had $85 million in cash-on-hand and our $225 million ABL facility was drawn down by $105 million, resulting in a net draw of only $20 million.

We believe, we will continue to have adequate liquidity to fund the working capital build for the Home and Garden season during the next three months, after which our cash position turns positive in the final two quarters of the year. We expect to end the year with no draw on our ABL.

We have not changed our expectation that full year cash flow will be neutral to slightly negative, after cash interest of $225 million, cash restructuring of $30 million, CapEx of $30 million, and cash taxes of $20 million.

Another way to look at this is that once we get beyond the restructuring payments this year, we are generating positive cash flow from operations of at least $20 to $25 million. Outstanding net debt at quarter end was approximately $2.5 billion. Our senior leverage ratio was 5.04 times, well within the 6.25 times maximum ratio allowed under the terms of our credit facility. We spent $7 million in capital spending this quarter. CapEx for the year should come in at around $30 million.

We still anticipate full year cash restructuring costs of $30 million and 2008 cash payment -- cash tax payments of around $20 million.

In summary, our first quarter results were, as Kent said, very good in the context of a tough environment, once you understand some of the ins and outs behind the numbers. Cash flow of negative $92 million beat our internal plan by a significant margin and puts us in good position to fund the Home and Garden inventory build over the next few months.

We showed solid improvement from an EBITDA standpoint, a 19% increase over the prior year and I am very confident we are doing the hard work we need to do to continue the trend of EBITDA improvement, as long as consumer spending continues at a reasonable pace.

I'll turn it now over to Kent at this point for his concluding comments.

Thank you.

Before I conclude, I think it important to reiterate that we continue to have a desire to sell a strategic asset to reduce our debt and leverage and move to a more comfortable capital structure.

As you're more than aware, Capital Markets have not recovered and are perhaps more challenging now than they were last year. We don't know when things will get better, but I think we know they all will at some point in time.

In the meantime, we will continue to execute our business plan, drive towards improved profitability, and ultimately increased value in each business unit at a consolidated enterprise.

We believe we're doing the right things to improve the profitability of our business model.

We're confident we're on track to achieve that in fiscal 2008 and we lo forward to updating you on our progress next quarter.

With that, I'll turn the call back to our operator and we'll take your questions.

Hello, operator?

(OPERATOR INSTRUCTIONS) Your first question comes from Grant Jordan with Wachovia Securities.

Good morning.

Hello?

Yes, can you hear me?

Yes, I can hear you now. Good morning.

Good morning.

You gave us some color on Home and Garden business, but I was just somewhat surprised given kind of where you were last year that we didn't see more improvement in the overall profitability.

I know this is a tough quarter to get a read on, but were there any sort of unusual items in the negative $19 million EBITDA number that we should be thinking about?

Tony?

Yes, actually, Grant, there was a $1 million tax-related charge, property tax and real property tax item that we reported this quarter, and that was unexpected.

We had, you know, it relates, it relates to some distribution center property taxes that we had.

The good news behind this is that we were applying for a rebate for a significant portion of those taxes, of the 1 million, we should get at least half, if not slightly more than half of that back.

So we'll see that later on in the second, you know, in the second or third quarters of this year.

Yes, let me jump in and say, I think you probably recall that we said last year in the first quarter, we had some unusual costs that flowed in from 2006 and one would on the surface expect, that since that did not recur, that we would see a nice pickup this year. I'll just make two comments.

One is during the year, we deliberately expanded the organization structure of the Home and Garden business to make it a fully independent stand-alone business, so we've given it its own general manager in Amy Yoder.

They have their own finance department, own IT, et cetera, et cetera. So we have invested some dollars in building an infrastructure, so the business is capable of being fully functional on its own. So there's an increase in that cost versus the prior period.

Second thing, I think if you look at the mix as we shift in the quarter, it wasn't quite as favorable as we had in the prior year.

Again, we don't see anything that says that we have a problem going forward this year, and in fact, we're pretty confident with the SKU lineup that we have planned for the season, that we're on track to hit our numbers for the year.

Great. That's helpful. That was kind of where I was headed with that.

Yes.

My next question, I think you were giving us good color on this in the past, but just the whole European Battery market, did you see any further shift to private label? Do you feel like that's continuing to be stable in your view?

Yes, I think it's relatively stable.

I think as we said, we have made the decision to exit unprofitable and marginally profitable -- and when I say marginally profitable, I'm talking about gross margins in the single digits, which if you really allocate some of the overhead to it is probably all unprofitable business.

That was probably, I think on the order of about 6 to $7 million during the quarter.

The other thing that impacted us negatively, is we had some quality problems in our plant in China, so we actually missed shipments to some of our customers, but if you look at the branded business over there, that has stabilized. Our share is relatively stable. We think we're at a point in Europe that what we have seen over the last 6 to 9 months is continuing.

We're optimistic that we've reached an equilibrium point. In Germany, which is our home market where we had the most dramatic impact on our business in the last two years. You know, private label is well over 50% of the market now, and we're seeing an interesting trend at some of the retailers who rushed to private label in Europe, are beginning to recognize that it's not necessarily as profitable a business as they had hoped, and they are actually considering bringing branded product in along with private label.

We'll see how that unfolds in the future, but I think we are at a stable point this year.

Great. Then my last question, on the last call you talked to some about your new promotions on the Battery side with Disney.

Has that helped you with any additional sell-in going into the next quarter?

Yes, the only thing in Q1 was we offered that, the Disney package product through Wal-Mart. I think that was a positive for us in the quarter.

As I mentioned, one of our major competitors had a very, very aggressive promotion, which I think blunted our business. We're the small guy in the category when the big gorilla decides to do something aggressive. He gained a lot of share in the quarter and the other two guys lost some share.

The good news, though, is that we are just now beginning to place that product in a number of other retailers, and we are using it as a door opener in accounts where we don't currently have distribution. And then finally, we're just beginning to shift that product actually to the Disney properties, the theme parks and the hotels.

So we think that the contribution to our Battery business in North America will increase as we go through this year.

Great, thank you. That's all I had.

Your next question comes from Connie [Mannie] with BMO Capital Markets.

Thanks.

Good morning, Connie.

Let's see, on the discontinued ops, a couple of questions.

What was the dollar amount of Canadian sales that is going to have an impact on this year and what was it in the first quarter?

The amount that came out? You mean the year-over-year comparison? I think we were down about $5 million out of the total shortfall.

Yeah, in the, in fiscal 2007 first quarter, Canadian sales were slightly over $9 million, $9.1 million.

In fiscal 2008 first quarter, they were $4.7 million. So resulting in a change of about $4 million, 4 to $5 million.

And the Canadian sales for the full year, what were they in fiscal '07?

About 80 million. Again, it's a very seasonal business. It's even more seasonal than North America.

Yes, the Canadian business was more seasonal than the, than the U.S. business because they are basically a month behind us with respect to the season and the season being shorter.

We'll see something like 30 to 40 million change in sales in the next couple of quarters, just from the exit of Canada?

That's right, absolutely.

That's correct, but remember, Canada was not a profit contributor.

Right, right. Okay. The tax, the tax penalty that you suffered in discontinued ops, do we see that every quarter, or was it a one-time thing?

Well, as long as we have U.S. losses, now, in the overall -- from a consolidated standpoint, keep in mind that our North American business is where all of the -- when I say North America, our domestic tax entity, is where all of the debt resides and hence the interest burden is there. So we generate losses in the U.S.

Of course we're a global company and overseas we're generating profit. So what's happening is we're, on a consolidated basis, what you're going to continue to see is earnings over - and outside of the U.S., being taxed and then where we used to offset that tax expense with a tax benefit in the U.S., since we have a valuation allowance against our deferred tax assets, we do not benefit that loss in the U.S, So we end up with a tax expense that, you know -- that's going to be on a consolidated basis, very unusual for what we have seen in the past.

Reality is that not only do we have to take a valuation allowance against what we had on the balance sheet, we're no longer able to record any additional benefit until we demonstrate to our friends at the IRS that our North American entity is a profit generator and we can begin to use these benefits.

Correct.

Correct?

Correct. Now, couple of points as to what I just said, first, we said it in our prepared remarks and we said it last quarter as well. This valuation allowance impact is a noncash event. There's no cash associated with it.

In addition, in no way shape or form does it change our belief that we will ultimately utilize the deferred tax assets, IE, the net operating losses that we generated, because they expire effectively for the U.S. 20 years from the date that they were incurred.

So the first expiration period is 2024, since the first loss is generated in 2004. Specifically Connie, as to your question to discontinued operations. The first quarter, because we always -- the seasonality of the business we incur a loss, I think it was much more pronounced in this quarter because of that loss. Again, no tax benefit associated with it.

Going forward, we should see profitability in this business because of the season, and therefore, from a discontinued operations standpoint, we're not going to see that order of magnitude that we saw in the first quarter.

Okay.

Have we confused everybody really well at this point?

Well, I can say I'm confused. I'll follow up on that in a bit. But just another question on Lawn and Garden.

I mean what are the rules for showing something as a discontinued operation if a sale of that property is not likely in the near term? I mean how many -- how much longer can Home and Garden be shown as a discontinued op?

Well, you're actually right. There's a specific criteria within, you know, U.S. accounting literature that specifies whether or not you can, or can put, or can't put an asset into discontinued operations.

Specifically this is something that we assess every quarter and based on the first quarter, we met the criteria of the accounting pronouncements and hence properly reflected this as a discontinued operation. So I'll just say it's something that we continue to assess every quarter.

Do you think the best presentation of earnings from the sell side should be on a continuing operations basis or consolidated? And from what you see the sell side producing, are we all using the same kind of presentation, or are we apples and oranges?

I think there's a lot of apples and oranges relative to our business. It's very unfortunate that, you know, GAAP sometimes is how we have to do things.

As I said at the beginning of the call, I think for us in the current evolution of our business, EBITDA is the most meaningful measure and because until a business is sold, it is our business, we own it, we operate it, we operate it as if we're going to own it forever, even though it is for sale. I think looking at us on a consolidated basis for right now makes more sense.

Okay. I have a lot more questions, but I'll come back in queue. Thanks.

Okay.

Your next question comes from Jason Gere with Wachovia Capital Markets.

Yeah, hi. It's Jason Gere with Wachovia. Just two questions.

One, I guess can you just kind of go through each -- I guess thinking about the inventory levels where we stand right now. Obviously battery sounds like there's much more tougher comparisons.

We've heard from some of your competitors make the March quarter will probably be -- sounds a little bit lighter because of the inventory levels.

And then also maybe Lawn and Garden, in Remington with a softer North America, you know, can you just I guess touch upon - where - how you're looking about it into the March quarter as well?

Home and Garden, retailers have been extremely cautious. They traditionally would set bringing inventory four to five weeks in advance of when they felt the season would break.

They are now doing it literally two weeks before the season, so their inventory levels are very lean at the moment, and we have just seen recently the flood gates are opening now in terms of orders coming in, shipments to get the stores set.

So, you know, we think they are operating on, as we said, in the comments on more of a consumption model. They are relying on their sophisticated suppliers to have the inventory on hand and to have a supply chain capability to get it there quickly. And we have that capability.

We're one of only two people I think that really excels at that, us and our major competitor from Ohio. So I think we're very well positioned there.

Again, if consumption picks up, which we think it will this year, you know, we'll be pumping in that product to meet consumer demand. In Remington, the only part of our business worldwide that was disappointing was Men's Shaving in North America. Obviously, the results were less than we anticipated.

We actually funneled money as we got towards the end of the holiday period into trade marketing, promotion money, to move the inventory out, and I think we felt pretty good by the end of the quarter. We were successful at driving inventory levels down as a result of that. So we don't see an issue with Remington as well. Battery inventory kind of -- it kind of varies by SKU. Our read is it's probably slightly higher than where inventory levels were driven down to last year.

Battery inventory levels got down to levels where we were literally running out of stock at some point in time because of the very tight controls, and so we backed up a little bit from that, but I don't see it as a huge issue for us.

Okay, and then another question, just on -- can you talk about into a slowing U.S. economy here, you know, the balance of your marketing spending between advertising, promotional spending, especially some new innovation coming out as well.

You know, how you can convince the U.S. consumer that your price points, which are typically much lower than some of your competitors out there, how they are getting the bang for the buck?

Yeah, we are, in many of our categories, Batteries, Remington, and even in Home and Garden, primarily the value position player here. Our value proposition is a product as good or better than the competition for less, and in many cases, the way we operate is at the point of sale. We don't spend extensively on TV advertising.

We can't afford to do that versus our much larger competitors. Where we excel is the quality of the packaging, the quality of our displays, getting extra display, in-aisle displays and doing excellent job of merchandising and communicating with the consumer at the store level. So I think that's where we continue to focus.

We continue to focus with our key retailers on in-store promotional activity it, on circulars and ads that bring consumers in looking for the product and we have found that in our business model to be the most effective way, cost effective way to connect with consumers. You know, we believe that in most of our categories, while the economy, you know, appears to be slowing, you know, we're not dealing in $50,000 SUVs and $25,000 kitchen remodelings and, you know, $5000 flat screen TVs. We're selling bags of fertilizer, AA batteries, fish food, et cetera, et cetera.

So, you know, we're hopeful that we will be less impacted by an economic slowdown than some other categories and then as being the value alternative as consumers are trying to watch their pennies, we think they may pay more attention to our value proposition.

Okay, and then just a last question and I'll jump off. Of the 35 million cost savings that you are anticipating for this year, how much was realized in the first quarter?

I don't have a number for you, but we are tracking on delivering that number for the full year, so assume there's probably 7 or 8.

Okay, thank you.

Your next question comes from Bill Schmitz with Deutsche Bank.

Can you just run through those cash flow assumptions again? It was a little quick and I didn't catch them all for 2008 for the fiscal year.

Ready, set, go.

Yeah.

Okay. Well, we talked about CapEx. We said that that would be about $30 million.

Okay.

Cash restructuring, about 30 million. We said cash interest should be about 225 million.

Okay.

Cash taxes, again, we generate NOLs in the U.S., but we pay taxes from some state taxes in the states, but as well as internationally. That's, that tax number should be about $20 million.

Okay, thanks very much. Can you break down both the U.S. and international, what the battery growth split was between alkaline and zinc carbon. It looks like you got a lot of zinc carbon distribution this quarter.

Yes, we did. Actually in the U.S., we said that our alkaline battery dollar sales were down about 3% versus the category was up about 4 and I talked about, you know, the fact that one of our competitors ran a really, really aggressive promotion that probably hurt us.

Some of our key retailers, I think anticipating kind of the recessionary environment have put heavy duty back into distribution in order to hit lower price points.

We have had very strong double-digit growth in heavy duty and also for the first time in a few quarters, we're actually seeing a resurgence because of some new product in the rechargeable category as well.

So as I said, when you looked at POS for the quarter, alkaline down slightly, but general batteries we were actually up about 8% in dollars versus the category. It was up about 5%.

Okay, great, thanks. In terms of receivable days, I know there's a big shipment last quarter, but looks like days are actually up year-over-year in the fourth quarter.

Why is that happening?

Must be just the mix of customers.

Well, customer mix, and also keep in mind that while we get a benefit on exchange in our top line in sales, I would also increases the value of our receivables in Europe, our European, or international receivables so that there is an exchange impact on that.

Right, but don't you manufacture on local currency, too,--

Yeah, we do.

Okay.

There's nothing out of the ordinary there. It's just mix of customers, I think.

So what does that mean, you're selling more to customers that pay later, is that fair?

Yeah, we have terms that range from 30 to 60, and some international jurisdictions as much as 90 days.

Okay.

Okay. So it's -- there's nothing out of the ordinary going on there.

Got you. How long does it take for like a battery to go through the supply chain, so we can kind of get a feel for what you get the zinc price reduction coming through, even with the hedges?

You know, batteries, the production cycle actually is relatively short. It's a couple of days to make batteries and package them.

We then have them in inventory and the actual supply chain, you know, you know, assuming that had you no inventory and we got an order from start to finish actually making the battery, packaging and delivering it, you're talking a matter of a couple of weeks. Now, we do have the work in process inventory. We build what's called a battery bank.

We build batteries to a forecast. We package somewhat to a forecast. We also have raw materials on hand in all of our plants around the world, so we're actually predicting there should be -- again, we're hedged for most of this year, 75% of our requirements are hedged, so you probably won't see any benefit from the lower zinc until probably the last three or four months of the year.

Okay, and then so is there like a number for how long it takes a spot zinc price to kind of work through the P&L?

Well, it really depends on--

How much is hedged.

When and how much was hedged. Again, our hedging program is very disciplined. It's form like in nature, where we put in layers -

Every quarter.

Every quarter, and so there's a stepdown approach, but just to give you a sense, you know, I, I would say that based on where the current spots are today, we could probably see somewhere between 2 and $4 million of benefit at those spots were to hold. Sometime as Kent said, occurring in the last three to four, five months of the year.

That's called the second half of the year, but keep in mind this quarter, for instance, zinc negatively impacted us by about $2 million because that hedging that we did last year when the prices were high, that was in there sort of at the full (Inaudible), if you will. So we're actually negative $2 million in this quarter, but then we'll see some offsets as the year trends forward.

Great. Then one quick last one, because the retail supply chain in Lawn and Garden seems to be shrinking, they are taking inventory closer to sell-through. Is that going to help the seasonal working capital going forward?

Yeah, slightly.

Okay.

There will be some benefit to that.

Okay, thank you.

The next question comes from Karru Martison with Deutsche Bank.

In terms of the asset sale progress, I mean what is your comfort level that you can get a deal done when markets return kind of as multiples have contracted? Is this still going to be a deleveraging event in your mind?

That's our objective. Two things, one is the businesses I think are improving every day.

We've said that. We expect all of our businesses to deliver improved EBITDA in 2008 versus 2007, so that's a good thing.

Secondly, you know, there continues to be good active interest in the assets, but the people who are interested are all suffering as most people in the acquisition world are, from the terrible conditions in credit markets. And so I think both sides are awaiting for that, that condition to improve.

So if I was to characterize that, that is people calling you guys and saying hey, we're still interested, we're just waiting on the markets?

Yes, that is correct. Actually we -- people know we have publicly stated we intend to sell strategic assets. I get regular call calls and letters from people logging in inquiries on things that we haven't even talked about as, expressing interest in other segments of our business.

So there's, there's a fair amount of interest in the portfolio of brands and businesses that we have, and as I have said before, we have no intention of just cherry picking off little pieces of the business. Our goal is to do a large business unit transaction that has a significant impact on debt and is a deleveraging transaction.

And in terms of those debt levels, what's the peak to trough kind of draw on the ABL here?

About 150 million.

That's, that's -- about 150 is the peak draw on the ABL, driven by the Home and Garden business.

So we'll be hitting that sometime here in the near future as we build up these inventories, correct?

See it in March and April.

During this quarter.

And then in terms of the product mix in Home and Garden, that kind of hurt the profit margin, what was the difference this year versus last?

We actually shipping some soils and grass seed that are relatively lower margin. The controls business, which is the highest margin business, really begins to take off as we're shipping in for the summer season.

Okay, and in terms of the, kind of your response to the promotional activity on alkaline battery, I mean what can you do to kind of control your destiny there?

Batteries are still very much an impulse purchase item. We've said before, probably 85% of sales actually are impulse at retail, and so for us I think we have plans to offer some very attractive promotions.

For example, Disney, all we were able to do, because of the late-breaking consummation of that agreement was put Disney characters on the package. What really makes that licensing agreement more exciting is when we can begin to promote, along with the various Disney movies and other activities.

So there is a whole range of call it trade - or consumer promotional activity surrounding Disney, for example, that will be rolled out as we go through the balance of the year.

But I will be first to say that, you know, if the gorilla decides to do something dramatic, like he did in Q4, it's very hard for us to counter that, just because of the strength of their brand and the breadth of their distribution. But trade promotion, consumer promotion is the key thing that really attracts the consumer. We have a lot of that for the balance of 2008.

Then just lastly, in terms of your cash expectations, what kind of LIBOR rates are you baking into those numbers, and are you adjusting for the recent decline?

I think we've left them pretty constant at this stage.

Yeah, I think we kept them relatively constant, but, you know, we -- if I can get you an exact number here.

Bear with me for a moment. I thought it was 4--

4.5?

Yeah, we've actually -- when we built our plan, it was about 4.5. We've taken it down by about 50 basis points, so about just slightly over 4%, 4.1, 4.2%.

It's now what, 3.5?

Yeah, so we've got some potential upside. Keep in mind that we do hedge our interest to fix the interest rate on our floating debt, so, you know, that's--

Not a lot of opportunity there.

Not a lot of opportunity this year, but there will be some.

Some of it.

Thank you very much, guys.

Your next question comes from Bob Whitenhal with Royal Bank of Canada.

Wanted to ask a few questions about working capital, if you expect it to be a source or use of cash in '08.

You know, it's relatively -- got to be careful there. You give too many data points and you guys can get certain numbers. I think we had a plan of a slight use of cash.

That's correct.

I think we built a relatively conservative plan and I would say internally that we certainly hope that that will not be the case.

Okay, great. And relevant to that as well, I guess the sale of new grow means that you freeze up, what, probably 20 million of working capital investment?

Absolutely. I think the average, or let's call it the trough to peak for them, was about $30 million, so that's 30 million less we have to pump into a business that wasn't generating a return.

Got it, and I assume you also got cash proceeds from the asset sale during the first quarter.

Yeah, that was, that was recorded.

Yes.

And that's what, approximately 25 million?

That was actually about 15 million.

Okay. Does your free cash flow-neutral forecast for '08, you were kind enough to reiterate CapEx and interest expense, does that also factor working capital and--

Yes.

Yes.

It's everything.

Okay, great. So essentially you're -- if you're saving $30 million in working capital this year, that's through the sale of new grow and you received 15 million in asset sale proceeds, that's contributing in total $45 million of additional cash?

Well, we've got $15 million of cash being generated in proceeds. The working capital--

You got to remember the working capital all comes back to this business in September.

Right.

It's a seasonal peak and we get it all back. So we don't get that $30 million of working capital as a gain for the year. It's, it's a timing issue. We basically get in our pocket $15 million from the sale of the asset.

That's my point.

Got it. But at the same time you don't have to reinvest that money into that business during the seasonal--

During the year. During the season, that's correct.

But as Kent said, it's timing, and keep in mind, Bob, the timing that's new grow Canada, the buildup of that peak was about a month later than what we had experienced in the U.S., so that peak was in the month of May.

Got it, and I saw your cash balances approximately $85 million.

Yes.

Is that typically higher than normal?

Yes. Yeah, what happened was, because of the year end, the holiday season, a lot of collections came in, got trapped in lock boxes and they were not able to be applied.

That's right. The ABL was drawn 105. If we had actually applied it as we normally would, you know, the ABL would have been, you know, like 20-ish, 20 to 30-ish. There is always some cash floating in the Sam that you can't apply to the ABL.

Sure. Your total net debt outstanding is -- doesn't -- your net reflect reflects but not your gross debt, the fact that your cash balance is high because--

Yeah, it's -- I believe our gross debt was 2570 -two billion, five hundred and seventy million gross and $85 million of cash. So our net debt would be, you know, just slightly below 2.5 billion.

Good, okay. And so you're still on track then cash from operations minus cash from investing to be neutral for the year, it sounds like.

That's correct.

That's what we're looking at. As we said in the last call, we ended last year, fiscal year September 30 at $2.4 billion worth of debt and that's where we plan on ending, you know, at this point in time. '08.

And your assumption that you could generate net-free cash of 25 to 30 million in '09 is based on the absence of restructuring charges from that year, correct?

That's correct.

That's right, that's correct.

Okay. It's really helpful. Thank you very much.

All right.

Thanks, Bob.

Bye-bye.

Your next question comes from Alice Longley with Buckingham Research.

Just looking for an update on the mix of some of your businesses. Could you tell us in the Battery business roughly what on an annual basis what percent is Europe, U.S., Latin America?

Europe and Batteries, Europe and the U.S. are about the same size.

So, you know, if you look at battery sales as being 100%, you're maybe slightly bigger than the U.S. at this stage of the game actually, so it's probably -- then Latin America's about 20% of the total.

Yeah.

Okay, and within Europe now what percentage of your business is private label?

It's over 50%.

Even after you terminated some of those?

Yeah, that's relatively small compared to the total business, the amount that we've walked away from, but, you know, we got out of some last year.

We're continuing to step away from unprofitable business and the challenge for us is to replace those sales with profitable sales. So that's what we're working on.

So you don't want to stop making private label precipitously, because you hope to replace shelf space of private label with branded?

Correct. You know, in Europe, Alice, as you're aware, there's a huge amount of segmentation in price points, including in Europe, as many as three different provides points for private label, starting with junk and going to value private label and then premium private label and then you get to branded product.

And so we're moving out of trying to compete for the low end of private label, which is truly a commodity, and trying to appeal to the retailers there, that if they do carry private label, they need to carry a reasonably quality product, where both of us can make some kind of a return.

Okay, and then moving over to Remington, what percentage of Remington is U.S. versus Europe now?

I'm guessing two-thirds and a third.

Two-thirds is which?

U.S.

Okay.

Maybe 60/40. Everybody's scurrying to look up the numbers.

I think it's closer to 60/40 now.

60/40 because Europe has grown pretty dramatically. It has.

Yeah, that's what I was thinking. And then pet, what's the mix now in pet?

Pet is--

Two-thirds.

Probably two-thirds domestic and about a third international.

Yeah.

And what percentage of pet is aquatics now?

Still two-thirds aquatics and one third's companion.

Excellent. Thank you very much.

You're welcome.

Your next question comes from Chris Ferrara with Merrill Lynch.

Hi, guys. I want to talk about batteries in the U.S. and I guess with respect to zinc carbon, I thought people kind of understood, or the consumer understood that zinc carbon isn't a high value proposition for them. So, do retailers come to you and request zinc carbon or is that something that you come to them and say hey, I think this will fit your plan?

No, basically retailers like to carry it. Couple years ago -- we tried to convince them that all that did was trade consumers down from alkaline to lower price point, lower margins in carbon and consumers don't necessarily understand the proper application and use of zinc carbon, and so that leads to potential consumer dissatisfaction. So we're not proponents of it, particularly in the North American market.

However, for competitive reasons, a variety of retailers want to carry that as part of their assortment because it's a relatively low-cost, opening price point kind of a product. And there has been a resurgence of heavy duty product here in North America in the last six or nine months.

Got it, thanks.

And just on Home and Garden, and I know, again, it's a seasonally small quarter and you never really know what to conclude in the December quarter, but I mean the numbers you guys are talking about in Home and Garden, obviously don't compare very favorably to what your big Ohio competitor said in the quarter for the quarter. Their take away and sell in were double digits.

So I mean what do you make of that? Like what conclusions, if any, can you draw from that? I mean if they are selling in at a greater rate and their take away's at a greater rate, is there a shelf space for them and if it is--?

It's -- to a certain extent we have a different product portfolio than they do. We're probably much heavier weighted in controls. They are the big gun in fertilizer and soils.

And so, you know, perhaps their product assortment, you know, is shipping in a little earlier than ours. Remember, they are two-thirds of the fertilizer market. We're 20%. They are three quarters of the soils market. We're 15%.

And so -- but when you get into the controls business, that's half of our business, and so I think it's a function of the mix and the seasonality of the mix of products. I'm not reading anything more than that into where we're at at this stage of the game.

Okay, great.

And then, you know, I guess bigger picture, how do you balance sort of what you're trying to do, which is lean down the businesses, I guess to, you know, to show more favorable cost structure for any potential buyer with, I guess what almost inevitably has to become sort of second priority, which is getting innovation and getting the top line up.

How do you strike that balance as you go through this year and know that the end game is a sale?

I think, you know, a number of things. I keep harping on the fact that we're looking for profitable growth, not growth. We're looking to eliminate unprofitable accounts, unprofitable SKUs. We're going through massive SKU reduction here.

The company got -- shouldn't use these words - but somewhat out of control in terms of its quest to generate sales, which led to huge complexity and an explosion of the number of SKUs in a lot of different parts of our business. All of which when you really look at it were not contributing significantly to profitability. So we skinnied down the organization. We have centralized our Global Battery and Personal Care business, instead of running it as three independent systems, we're now running it on a global basis.

We're eliminating a lot of activity that was not generating profitability, and so we are applying highly motivated resources that are very focused in a very disciplined fashion to bring to market those products that we think will generate the highest level of return for the company. So I think it's, it's a different mindset. It's a different discipline, and it's something that I think world-class companys do extremely well and we're trying to emulate those kinds of people. So I - I don't think that there is a -- it's a mutually exclusive activity.

I think by getting more focused, by having the right structure now where people are experts in business or experts in Shaving and Grooming or experts in Home and Garden, we're totally 100% focused on executing a business plan in an area where they have expertise. We're able to operate much more effectively.

We have eliminated this hugely confusing matrix structure, where we had a totally autonomous global operations group that was leading to a lot of inefficiency, a lot of poor communication, a lot of dropped hand-offs, et cetera, et cetera.

Now the guys running these businesses have their arms around all the resources and everything it takes for them to execute their business plan.

So we really feel good that we've taken a lot of cost out. We've taken layers out. We've taken inefficiency out. We're very focused now and able to execute on the things we think will really drive the profitability of the business.

And I think that when buyers come in and look at us this year and later this year, they are going to see a much better asset than they would have seen a year or two ago in terms of its structure and its ability to execute.

So I feel very good about where we're at. I have absolutely no qualms that the cost cutting has had a negative impact on the business.

In fact, I think the converse is true.

Got it. And then just one other quick one.

I thought you guys had said that the cash performance for you guys this quarter was better than you had expected.

That's right.

I get the sense that the sales performance is not. So why was cash better even in light of the sales not being better?

Working capital management.

We're really controlling -- again, you start -- think about this. If you've got 2000 SKUs, you've got to carry some inventory on 2000 SKUs, just for the sake of simplicity say you were to reduce it to 1000 SKUs.

You've taken a huge amount of inventory out of the system. You may carry more of the high selling SKUs, but you've got eliminating a lot of stuff that maybe wasn't contributing any value.

So this whole focusing the organization now really understanding where the profit pulls and the profit drivers are, you know, has a huge benefit not only in terms of the cost of operating the business, but it has a huge benefit in terms of the working capital, particularly in inventory.

But are you pacing ahead of where you thought you would be, considering you're saying cash flow's better than you thought it would be?

Yeah.

Thank you.

Your next question comes from [Razara Bahosday], Lehman Brother

Good morning.

Good morning.

Just a couple of housekeeping items, and by the way, thanks for all the information you've provided this morning.

Advertising spending, you mentioned you brought it down because you didn't think you were going to get the bang for the buck.

What was the sort of magnitude of the reduction in advertising spending?

Year-over-year, it was something in excess of $10 million, but about -- I can't tell you the exact amount.

A significant chunk of that was channeled into promotional dollars to drive the inventory out at retail, of the Remington Products.

Okay. So the net reduction, if any, of the advertising/promotion would have been maybe, I don't know, single-digit kind of million dollars, or--

Yeah, single digit.

Okay.

After you offset it with the amount that we rechanneled into -- markdown money and promotional money to make sure the inventory at retail did sell through, and we're very successful at doing that.

Got it. And are you going to reinvest the remaining, you know, let's just say 4 to $6 million into your business in the next, you know, three quarters, or is that going to be, you know--

Absolutely, we've got, particularly in Remington, and you know, Remington, as we've said over and over again, is a category that's really driven by hot, innovative products.

We've had some huge winners in the last few years, like wet to straight. We've had some bombs like our -- Schaffer last year.

But I think we've got some very exciting product hitting retailer shelves starting actually this quarter, and then through the, the Summer and Fall time period. So we will put advertising behind those products to make sure that we connect with consumers.

Got it, and as far as inventory levels that you mentioned were a little higher than targeted levels--

No, inventory is lower.

Lower, okay.

Talking about battery inventory at retail?

Right.

We didn't sell through as much as we had hoped through the holiday season, so there's a little bit of an overhang there.

Okay, and do you see that correction taking place here in the, you know, March quarter, or is that going--

Yeah, yeah. I think it will be back to normal by the end of this quarter.

Okay, and when you mention at the beginning, the challenging retail environment, I mean - how would you say that is going to manifest itself in your, you know, top line or bottom line results as we go through the year, if at all?

I -- just in the sense that I think retailers are being cautious in their ordering patterns, and they are watching their POS very, very carefully.

So they are trying to control their inventory levels down to - what I would call historically low levels of weeks on hand and that's fairly common in the retail trade right now.

Got it, and then aquatics in the U.S. business, was that down or up? I couldn't tell.

Aquatics in the U.S. was down. That was the only segment of our Pet business that was down. It was down about 5%, which is pretty much in line with the category, but we are hopeful that I think we'll do a little bit better here in the back half of the year, because we'll be anniversarying the loss of some of the business, the Live Fish business at Wal-Mart.

Got it, and in the European business, I thought you said this quarter was negative 2. Last quarter was plus 11. Is the difference primarily the rationalization of SKUs, or is there something else as well?

In Europe, the biggest single factor is exiting unprofitable business -- unprofitable private label business, where we literally chose not to bid on new contracts and have actually negotiated to exit certain business with customers where we were losing money.

That is the biggest single thing that impacted the business this quarter.

Got it, and then lastly, the inefficiencies that you had in prior year impacting the Home and Garden EBITDA, is that still something that you expect to reverse this year as you go through the course of the year?

Yeah, we have reversed that.

You have, okay.

Yeah.

And so the P&L will benefit from that as we go into the next couple quarters?

I think a lot of the inefficiency that carried into 2007 is behind us. Our plants are operating properly now, so a lot of the, call it manufacturing inefficiencies that were flowing through cost of sales are behind us.

Our plants now have settled down. They are operating, you know, at standards for the most part, so, you know, as we go through this ramp-up period here of building inventory for the season, plants are operating very efficiently.

Got it, thank you.

At this time, we have one more question from Joe (Inaudible)

Hey, Joe.

With Oppenheimer.

Good morning. Just a couple quick ones.

I know this call has gone on for a while here, but first in Lawn and Garden, are you guys contemplating any mid season price increases given the run-up in urea?

We have done a little bit of that.

Can you give us a sense of how much?

Just low single digits, because urea, as you know, spiked to about $430 a ton. It has recently backed down to about 375. But the -- when it was over 400, you know, when it's up in this range, it was above what we had contemplated. And so we - we did decide to go out and, and implement a small, low single-digit price increase on fertilizer.

Okay, and then secondly, on the marketing line, I think Tony said that marketing spend this quarter was up year-over-year. Is that the case?

Yeah, as I said, we diverted some money from advertising to promotional activity that shows up in the marketing line.

Got you, okay. Because that was my next question, because last quarter --or the year before, I thought it included about a $15 million incremental spend on marketing.

Yeah, it did. We spent very heavily.

Deliberately we're going to throttle that back somewhat because I think we realized that we overspent, particularly in Europe last year to try and build distribution. And then as we saw the season unfold, major retailers didn't run circulars and promotional ads during November and December, as they had last year. And so we actually pulled back the original campaign that we had planned for the holiday season. As I said, we diverted some of that money, the advertising dollars over to markdown and promotional funds.

So with selling down 14 million and promo up, seems like advertising was down pretty significantly.

Over $10 million, that's correct.

Okay, perfect. Thank you.

At this time, we have no further questions. Ms. O'Donnell, do we have any closing remarks?

Yes, let me make a couple comments here if I could.

I know our business is very complex and hard to understand. Unfortunately, that is the circumstance of, you know, where this business is, at its stage of evolution. But I want to reiterate again, I think that we are - we are doing all the right things to improve the profitability of the business.

There's an awful lot of activity under way within our three business units we're focused on driving top line growth.

We are not satisfied with Q1, but we think the programs we have if place for the rest of the year should stimulate some modest top line growth, which we think is essential and hopefully as we get into 2009, even better growth prospects.

And again, when it comes to asset sales, I think our businesses are getting healthier every day.

They are improving in terms of their profitability, so the value is increasing, and when the credit markets allow us to, I think we'll be able to successfully consummate the sale that we have been contemplating now for some period of time.

So with that, hope we have your continued support and we look forward to continuing to delivering good news to you as we go through 2008.

So have a good day. Thanks.

This concludes the Spectrum Brands first-quarter earnings conference call. You may now disconnect.