Spectrum Brands Holdings Inc (SPB) 2008 Q3 法說會逐字稿

Good afternoon. My name is Eric,, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Spectrum Brands third quarter fiscal 2008 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' prepared remarks there'll be a question-and-answer period. (OPERATOR INSTRUCTIONS). As a reminder, ladies and gentlemen, this conference is being recorded, today, August 7, 2008. Thank you.

I would now like to introduce Ms. Carey Skinner, DVP of investor relations. Ms. Skinner, you may begin your conference.

Thanks, Eric. Good afternoon, everyone, and welcome to the Spectrum Brands third quarter conference call. With me today are Kent Hussey, our Chief Executive Officer, and Tony Genito, our Chief Financial Officer. Before we begin let me remind you that our comments today include forward-looking statements, which based on managements 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 and in our most-recent Forms 10-K and 10-Q. We assume no obligation to update any forward-looking statements.

Additionally, please note that we will discuss certain non-GAAP financial measures during our remarks, including adjusted diluted earnings per share, adjusted EBITDA, adjusted gross profit margin and net sales, excluding foreign exchange translation. Spectrum Brands management uses adjusted diluted earnings per share as one means of analyzing the Company's current and future financial performance and identifying trends in its financial condition and results of operation. Management believes that adjusted diluted earnings per share is a useful measure for providing further insight into our operating performance because it eliminates the effects of certain item that is are not comparable from one period to the next.

Adjusted EBITDA is a metric used by management and frequently used by the financial community, which provides insight into an organization operating ne -- I'm sorry, trends and facilitates comparison between peer companies, since interest, taxes depreciation and amortization can differ greatly between organizations as a result of differing capital structures and tax strategies. Adjusted EBITDA can also be a useful measure of a company's ability to service debt and is one of the measures used for determining the company's debt covenant and compliance. Adjusted EBITDA excludes certain items that are unusual in nature and not comparable from period to period.

Adjusted gross profit margin is a measure of gross margin that excludes restructuring and related charges that management uses as a tool to allow it to evaluate the underlying performance of the Company in a manner that is comparable over time and which management believes is a useful tool for investors in making the same evaluations. Net sales, excluding foreign exchange translation, is a measure that management believes provides useful information to management and investors on the impact of foreign exchange translation on Spectrum Brands overall net sales results.

Spectrum Brands provides this information to investors to assist in comparisons of past, present and future operating results and to assist in highlighting the results of on-going operations. While Spectrum Brands management feel that adjusted diluted earnings per share, adjusted EBITDA, adjusted gross profit margin, and net sales adjusted for foreign exchange translation are useful supplemental information, such adjusted results are not intended to replace the Company's GAAP financial results and should be read in conjunction with those GAAP results. In table three of our press release we provide reconciliations of diluted earnings per share on a GAAP basis to adjusted diluted earnings per share. In table 4 of our press release, we provide reconciliations of GAAP income or loss from continuing operations to adjusted EBITDA for the fiscal third quarters of 2008 and 2007. That press release is available on our website.

Also posted on our website are historical quarterly reconciliations of GAAP income or loss from continuing operations to adjusted EBITDA on a consolidated basis and for each segment for all four quarters of fiscal 2007 and the first three quarters of fiscal 2008 and on a consolidated basis for the fourth quarter of fiscal 2006, in the investor relations section of our website at www.spectrumbrands.com, by which GAAP income or loss from continuing operations to adjusted EBITDA for the latest 12 months ended June 29, 2008 and June 30, 2007 may be reconciled. Within this discussion today we will include reconciliations of gross profit margin to adjusted gross profit margin and net sales, excluding foreign exchange translations. As a final note, during the course of our comments today, unless we say otherwise, any reference to prior year results are for the fiscal third quarter 2007.

Thank you for your attention. At this point I'll turn the call over to Kent.

Thanks, Carey. That was a mouthful. (LAUGHTER) Hopefully all of you on the call and investors in general will find some of the supplemental information helpful in really understanding the true operating performance of the Company. Good afternoon to everybody and welcome to our third quarter conference call. I'm pleased to report that revenue this quarter increased by 11%, with strong top-line growth in all of our business units. I believe this reflects the strength of our new product offerings and marketing programs, as well as the consumer shift toward value brands. However, adjusted EBITDA declined by 7% as a result of the unprecedented cost increases in the fertilizer operations of our Home & Garden segment. This decline offset strong year-over-year adjusted EBITDA growth in our Global Batteries & Personal Care and Global Pet Supply businesses.

As is the norm this afternoon I'll discuss the performance of each of our business units and the Company as a whole for the third quarter. Tony will get into more of the financial metrics, including a discussion of the impairment charges we booked, and then we'll open the call to your questions. Before getting into the details I'd like to echo many of the things you're hearing from industry in general.

First, in spite of government statistics that say our economy continues to grow, all be it at a much slower pace, the impact of the housing and credit crisis, pervasive inflation and rising unemployment are impacting the consumer. Indications are that foot traffic is down in many retail channels and same-store sales growth varies significantly from retailer to retailer, with some channels experiencing significant declines. As a partial offset consumers are being very selective in their purchasing decisions, looking for better values than ever before. We think that our value positioning of providing quality products at a lower price has and will continue to benefit from this trend.

Second, retailers are focused on inventory management more than ever before, driving their weeks on hand in many categories to record lows. This has resulted in sale in well below sale through in spite of excellent POS results in many categories. The ability of sophisticated suppliers to forecast demand, carry the right inventory of finished goods and meet the challenging service demands of retailers has enabled this trend. This is one of our core competencies that has and will allow us to compete effectively in these challenging times.

Finally, we, like everyone else in industry, are experiencing significant inflation our a raw material input costs, in finished -- purchased finished goods from the Far East, and in energy and transportation costs. While we have priced up in all of our businesses and will continue to do so in an effort to protect margins, the lag between input costs increases and pricing actions has impacted all of our businesses. Particular to note is the impact on our Home & Garden business where input costs for fertilizer spiked unexpectedly this year, especially during the third quarter. As I mentioned, this was the one segment of our business that underperformed profit expectations this quarter.

Returning to our top line, as I said revenue increased by 11% over 2007, with sales of $730 million. Excluding favorable exchange of $29 million, revenue was up a solid 6%, with gains in all three business units; Global Batteries & Personal Care was up 12%, Global Pet Supplies was up 10%, and Home & Garden sales improved by 9%. All in all a very solid performance in a difficult economy, not only here but in Europe, as well, and we'll take a more detailed look at each business unit, starting with our Global Battery & Personal Care business.

With good growth across all product lines, sales in our Global Battery & Personal Care segment increased by 12% to $344 million. Excluding exchange, revenues were up 5%. Global Battery sales were $217 million, up 12% over last year, primarily due to better performance in North America in both our alkaline and specialty batteries. Alkaline sales in North America were up over 20%, as we have steadily regained the share we lost earlier in the year and have returned to our historical 11% share of dollars. This improvement has been driven by our new packaging, improved and more effective promotional programs and some distribution gains. We think that our value proposition, offering the same power and performance as our competition for less, is resonating with consumers, as well. We also think our distribution in mass, where more and more consumers are turning for their staple purchases, benefits us.

European battery sales were up 10%, benefiting from foreign exchange and sales increases in both branded alkaline and specialty batteries. As previously discussed, we believe the shift to private label has peaked and is, in fact, waning due to significant cost increases in product source from the Far East ,as well as increased shipping costs. Private label has actually decreased in Germany by almost three share points in the last year. We continue to exit unprofitable private label business and are seeing growing interest in our value position for the branded product. In fact we have gained branded market share in Germany over the past 12 months to our highest level in two years. Our brand share of alkaline in Germany now stands at 42%.

Additionally. during the quarter, as a result of higher transportation costs and new labor tax legislation in increasing our cost to do business there, as well as the continuing appreciation of the yuan, we made the strategic decision to shut down our battery manufacturing facility in Ningbo, China. Consistent with our efforts to maximize the efficiencies of our facilities worldwide, the bulk of this plant's annual production of 200 million batteries will be moved to our existing facilities in Germany and Wisconsin. This phased shut down should be complete early in calendar year 20'09 and should result in an annual savings of over $2 million. as well as improvements in working capital by producing more batteries just in time and carrying less inventory on the water in transport. Tony will cover other accounting impacts of this strategic decision in a minute. Latin America battery sales were up 5%, due mainly to favorable foreign exchange.

Now turning to our Personal Care business. Remington sales were $105 million, up 16%, including about $6 million of foreign exchange benefits. With rapid expansion in our women's hair care products. including nearly 40% sales growth in both Europe and North America, both shaving and grooming, as well as women's hair care contributed equality to this quarter's total sales at Remington. We now the fastest growing electrical hair care brand in North America. Our growth in this product category has been driven by a continuous stream of innovative and/or value-positioned new products, as well as outstanding packaging, point of sale and marketing programs. We expect our momentum to continue, as our category-leading Wet 2 Straight hair straighteners are launched this fall. North American point of sale for Remington hair care and for our straighteners is up 25% and 39% respectively over the last 12 months.

Shaving and grooming sales were up slightly for the quarter. benefiting from positive exchange impacts, as well as double-digit growth in Europe and Latin America, partially offset by a single-digit decline in North America. Our third quarter in the US was impacted by our transition out of our old shaving SKUs into our new Flex 360 rotary models, which were launched during the quarter. This innovative shaver, for which several patents are pending, has been designed for the closest and most comfortable Remington shave ever. POS has been up dramatically. In fact, over 40% in some accounts since this product was introduced. We believe the Flex 360 will appeal to the traditional value-conscious Remington consumer and will result in recapture the market share we lost last two years. In the fast-growing grooming category we have just launched our PG-350, an improved version of our PG-250 personal grooming kit, which is the number one selling grooming item in America. Overall, Remington grew in all geographic regions, with North America up 7% and Europe up 28%, benefiting from both foreign exchange and continuing strong gains in eastern Europe.

Turning to our Global Pet business, despite some enormous distractions during the past several months related to the now terminated sales process, sales grew 10% over the year to $149 million. Favorable exchange contributed about $6 million. Even after excluding exchange, both our companion animal and aquatics product categories were up over last year, including double-digit gains in companion animal due to market share growth and expanded distribution, as well as benefits from pricing implemented earlier in the year. Sales in North American companion animal were up 9% on the strength of our brands and extensive product offerings. However, we saw a 2% decline in North American aquatics.

While our aquatic sales in North America were down this is a significant improvement over the last four quarters where sales were all high single digits. Our decline is a result of category softness and not share loss. Most of the impact is due to lower equipment sales, which carry lower-than-average gross margins. While it's difficult to measure category performance precisely we do believe we are out-performing the industry. We've also anniversaried the impact of the removal of live fish from certain stores at one of our key customer. Total pet sales in Europe and the Pacific Rim were up 29% and 26% respectively, driven by the dynamic expansion in eastern Europe, the companion animal rollout in Europe, and continuing strength in aquatics in both Europe and Asia, as well as favorable foreign exchange. We expect our global pet supply business to continue to expand for the balance of 2008 as a result of category growth in many segments, pricing, and new product rollouts in all geographies, including a new line of health and beauty aids for dogs and cats under the Propet label endorsed by Dr. Jeff Werber, a refound veterinarian.

Moving on to our Home & Garden segment. First, on a macroeconomic basis we believe the entire Home & Garden category has been depressed for the past two two years as a result of the dramatic slump in both new home sales and resales of existing homes. Our research indicates the consumers tend to spend more outside, as well as inside their homes when they move to a new home. In fact, we now believe housing activity may be as important as weather in influencing overall category activity. Given the severe slump in the housing industry, and significantly less foot traffic in same-store sales for major do-it-yourself retailers we're actually pleased with our point-of-sale performance and share gains in many of our Home & Garden product offerings. Revenue in the Home & Garden business increased 9% to $237 million in the third quarter compared to last year, with growth in both units and dollars. The largest contributors to this growth were fertilizers and growing media, which were up 17%, as well as low single-digit increases in repellants and pesticides.

POS of Spectrum products was up about 12.5% this quarter, with gains in many segments. Fertilizer increased 17%, which was driven by two successful new product launches, including Sta-Green Phos-Free at Lowe's. This product provides premium consumer benefits at a value price and we strongly believe that once the consumer tries our products he will not switch back to the premium brand. With the return to more normal weather conditions this year, POS of our Spectracide insecticide products are up almost 9% compared to last year. As we enter the height of the mosquito season we're beginning to see positive POS for our Cutter family of personal insect repellants, as well. One of the factors contributing to the point-of-sale growth was our decision to spend behind our national brands, like Spectracide and Cutter. We increased selling, marketing and advertising this year to revitalize these brands and reconnect with the consumer. The good new is that our Ninja TV spots for Spectracide were extremely effective, with a 28% point-of-sale lift in the markets where we ran the media. The bad news is that we were unable to overcome the industry weakness and deliver enough incremental margin to meet our overall profit objectives for the quarter.

While we led the industry with pricing last fall and again early this year, the unanticipated and unprecedented increase in raw material and transportation costs significantly eroded margins in our growing products category, which includes fertilizer, enriched soil, mulch and grass seed. While this segment of our business has grown steadily over the past few years, cost creep during that time and the skyrocketing cost of urea, dap and potash this year have caused this product category to be a significant drag on Home & Gardens' profitability. Given the illiquid nature of the hedging markets for these commodities at times when we were forced into the spot market, which as you are aware was extremely volatile and at record highs. Gross margin in this overall product category declined over 300 basis points in spite of two rounds of pricing. Fertilizer margins were the most severely impacted, declined by over 800 basis points year over year as a result of $24 million of cost increases over 2007.

As a result we're implementing significant changes in our Home & Garden business to rebuild margins and restore profitability. First, like our competition we plan on pricing in the 30% range for our fertilizer products for 2009. In addition, for fertilizers SKUs, which are most impacted by commodity price increases, we've implemented a quarterly pricing program to pass on future raw material cost increases. While one can hope that the speculative bubble in these commodities will deflate, as we're now seeing in oil and corn futures, our planning and pricing for 2009 assumes no moderation in the current record levels of urea, dap or potash. Second, we're evaluating changes to our product formulation and offerings to reduce input costs without sacrificing quality or performance.

Third, we're fixing our mix by reducing our low-margin product offerings and emphasizing our value-added products, such as phosphorous-free fertilizers, which deliver excellent performance while protecting the environment. In fact, in many areas of the country there have been or they are considering regulations concerning the application of fertilizers containing phosphorous, so we currently expect continued strong growth of these value-added products. Fourth, we're replanning the service area for our soils and mulch products from our manufacturing facilities and in some cases adding co-packer locations to reduce our freight expenses. The dramatic increase in the cost to transport has eroded the margin on these heavy, low dollar-value products when we ship them over excessive distances. And finally, we're reviewing our organization and infrastructure to make the necessary changes to reduce our operating costs and SG&A as a percentage of sales. With the changes already implemented or in process, we currently expect to return to profitability in our growing products segment in 2009.

With that let me turn the call over to Tony to discuss some of the details of our financial results. When he's finished I'll come back and provide concluding remarks.

Thanks, Kent. Good afternoon, everyone. I'd like to start off with a review of a number of unusual items we recorded this quarter, which have been excluded in our calculation of adjusted earnings per share. Table three in our press release provides a full reconciliation of our GAAP loss per share to our adjusted diluted earnings per share. First, as you can see from a review of our press release we recorded a charge of $253.7 million, net of tax, reflecting the impairment of goodwill and certain of our indefinite lived intangible assets. This impairment charge, which is a noncash charge, relates to three separate. $82.6 million of this charge relates to our Home & Garden, representing the impairment of goodwill and certain of the trade name intangibles associated with this business. This impairment was triggered by a reduction in future forecasted operating profitability of this business as a result of the significant current and projected cost increases of the raw material inputs for fertilizer and growing products.

The second piece of this charge was a $154.9 impairment of the goodwill related to our Global Pet Supplies business. GAAP require that is the along with that it is because we recover when ever events or circumstances indicate that the carrying value of an asset may not be recoverable; or put another way, when an assets carrying value is in excess of its fair market value. One such event or circumstance as defined by GAAP is -- and I quote -- "the current expectation that it is more likely than not that a long-lived asset will be sold or disposed." Accordingly, in connection with the terminated sale of our pet business we estimated the fair market value of this business to be the sales price that we had -- that had been negotiated. I should also note that this determination of fair value assumed the market value of the Spectrum subordinated debt that would have been tendered by the buyer, as opposed to its par value, thereby increasing the amount of the impairment charge.

Finally, $16.2 million of this charge relates to the impairment of goodwill associated with our strategy to exit Ningbo, our Chinese battery manufacturing facility. As Kent mentioned earlier, due to higher transportation and new labor and tax in China increasing the cost to do business there, coupled with continuing appreciation of the Chinese yuan, we made the strategic decision to shut down the battery manufacturing operations in Ningbo. The second item relates to net tax adjustments of $19.1 million to exclude the effect of certain adjustments made to our valuation allowance against deferred taxes and other tax related items. Third, we recorded $19.9 million of restructuring and related charges during the quarter, primarily related to our decision to exit our Ningbo manufacturing facility in China and other Company-wide cost reduction initiatives. Fourth, our general and administrative expenses this quarter included a $2.9 million, net of tax, representing professional fees incurred in connection with the terminated sale of the Company's Global Pet Supplies business. And finally, during the third quarter we had a benefit associated with expiring taxes and penalties in our Brazilian subsidiary of $2.8 million. This benefit has been excluded for purposes of calculating adjusted earnings -- fully-diluted earnings per share.

Also before we move on I would like to discuss the average number of shares outstanding used to calculate adjusted diluted earnings per share. For GAAP earnings per share the basic share count of 50.9 million shares was used for both basic and fully-diluted earnings per share, as we incurred a GAAP loss. However, once adjusted for the items just discussed our GAAP loss turns into income, and therefore we used our fully-diluted share count of 53.3 million shares to calculate our adjusted fully-diluted earnings per share.

Now with those items out of the way, let's move on to our income statement. Our third quarter adjusted diluted earnings per share, which again exclude the amounts I just covered, was $0.06 per share compared to $0.12 per share last year. Gross profit for quarter was $261.4 million, up 3% from last year's level of $253.9 million. Gross profit margin for the quarter was 35.8% as compared to 38.5% last year. Within cost of sales we incurred restructuring and related charges of approximately $13.9 million, which negatively impact this quarter's margin by 190 basis points, and it was primarily related to our strategy to exit the Ningbo manufacturing facility. So the third quarter of fiscal 2007 cost of sales included $4.1 million of restructuring and related charges. Excluding restructuring and related charges from both periods our adjusted gross profit margin was 37.7% this year compared to 39.1% last year. Reduction in adjusted gross profit margin was primarily driven by significant inflation in our raw material input costs, which was primarily in our Home & Garden business, as well as increases in freight end costs.

Operating expenses for the third quarter were $521.2 million, which included the noncash goodwill and impairment charge of $303.3 million and restructuring and related charges of $6 million. Last year operating expenses for third quarter were $208.3 million, which included restructuring-related charges of $26.8 million. So if you do the math after considering those items, operating expenses increased $30 million year over year. However, I think it's important to spend a little time to better understand what drove this increase in operating expenses. $10 million of this increase was due to the impact of foreign exchange translation. Remember, as the dollar weakens exchange increases the dollar value of foreign sales, but also increases the dollar value of foreign expenses.

$5 million of this increase represented cost incurred during the quarter in connection with the business units sales efforts, which were terminated. $4 million relates to depreciation and amortization expense related to our Home & Garden business, which was not included in last year's expense, as that business was reflected as a discontinued operation and hence, per GAAP, we stopped recording D&A for that business. The remaining $11 million reflects higher marketing, selling and advertising expense of $5 million, and that's principally related to our Home & Garden business. $ 3 million of higher distribution expense in our Pet and Home & Garden businesses, which, of course, was driven by higher fuel costs, and $3 million of increased infrastructure costs incurred by Home & Garden to make it a stand-alone business. As Kent mentioned previously, we are reviewing that organization to determine the changes necessary to lower our operating costs there.

Turning now to profitability, as Kent mentioned, raw material input and transportation costs, as well as the cost of sourced goods, have been on the rise, which resulted in mixed profitability results for us this quarter. We saw a year-over-year adjusted EBITDA growth in all but one of our major businesses, including double-digit gains in our Global Battery & Personal Care and Pet businesses, which we consider remarkable in this current economic environment. Consistent with what you've heard from our competitors the one area whee we saw a decline in EBITDA was in our Home & Garden segment, where the cost structure of the industry has taken a tremendous hit in recent quarters due to the rapid, unprecedented increase in commodity costs. So despite widespread gains in market share, as consumers in this tough economy opted for our value brands and the pricing actions we took earlier in the year, unfortunately with the spike in input costs, coupled with the selling and marketing investments we made in this segment and the increases in infrastructure we made to make it a stand-alone business, the adjusted EBITDA of our Home & Garden business declined compared to the same period last year.

Consolidated adjusted EBITDA for the quarter was $81.2 million versus $87.7 million last year. However, as I said, when we looked across our segments. both Global Batteries & Personal Care and our Pet Supply segment had strong year-over-year growth. Also I'd like to make a point here that our LTM adjusted EBITDA as of the third quarter of 2008 was $290 million versus $242 million as of the third quarter 2007, representing a 20% increase. Our Global Batteries & Personal Care segment contributed to EBITDA of 37.9 million dollars as compared with $30.2 million of segment level adjusted EBITDA contribution during the third quarter of last year. This represents the sixth straight quarter of year-over-year adjusted EBITDA improvements in this segment. GBPC generated segment profits of $33.2 million during the quarter. That's an impressive 21% increase over last year's results, primarily resulting from the cost savings we achieved as part of our global realignment initiatives and improvements in the operations at manufacturing plants,

Before moving on to our other segments I should note that we currently have 78% hedged of our zinc need for all of fiscal 2008 at an average price of $3,245 per metric ton. The current price spot price for zinc is now at about $1,800 per metric ton, thankfully lower than it has been for most of the past couple of years. We have also hedged about 61% of our 2009 needs for zinc at about 24% of our 2010 needs. Our ongoing hedging program will allow us to continue to average down as zinc prices remain at current levels. Obviously the lower zinc prices will have a greater impact in 2009 and 2010 than we saw this year. Another point I'd like to make is the -- that despite the relatively lower zinc prices in recent months there's another input in our battery category, that's manganese ore, which is on the rise. As a result, and order to maintain margins, we are following the lead of our competitors and are in the process of implementing pricing in North America, which should benefit us in 2009.

Our Global Pet Supply segment generated adjusted EBITDA for the quarter of $22.4 million, which was held by pricing taken -- which was taken earlier in the year and was up 11.4% from last year's adjust ted EBITDA level of $20.1 million. We anticipate taking further pricing in fiscal 2009 in an effort to maintain our margins. The Global Pet Supply segment generated segment profits of $16.8 million as compared with $14.4 million last year, which represents an increase of 17%.

Home & Garden, as discussed before, faced extreme input cost increases, which resulted in a decline in segment level adjusted EBITDA year over year. For Q3 '08 Home & Garden adjusted EBITDA was $29.4 million versus $41.9 million last year. The Home & Garden segment generated profits of $25.9 million for the quarter compared with $42.3 million last year. Keep in mind that the $42.3 million in segment profits generated last year did not include approximately $4 million of D&A, as the Home & Garden was reflected as discontinued operations at that time.

Moving on, third quarter corporate expenses were $12.4 million, which included $4.5 million in professional fees associated with the sales process. Last year corporate expenses were $7.6 million. Interest expense for the quarter was $57.1 million compared to $59.4 million last year. For full-year fiscal 2008 we anticipate total interest expense of approximately $236 million and the average interest rate for the year to be approximately 8.6%. Third quarter depreciation and amortization expense was $17.4 million, which includes D&A of $7.8 million for Global Batteries & Personal Care, $5.8 million for Global Pet, and $3.5 million for Home & Garden, and about $300,000 at corporate.

Turning now to cash flow, through the end of this third quarter our year-to-date cash flow from operating activity was a use of $130.1 million, which is normal, as the working capital investment in our Home & Garden business is just coming off its peak. We've made capital expenditures of $15.3 million for the nine-month period and have received proceeds from the sale of our Canadian Home & Garden business of $15 million. Turning to our balance sheet and liquidity position, at the end of the quarter we had $72.7 million of cash on hand and our ABL facility was drawn down by $144 million. As you have probably noted we've been carrying higher operating cash balances than our historical level, which has approximated about $30 million. This increase in cash is primarily related to higher cash balances at our foreign subsidiaries, which represents a substitution for various overdraft and other credit lines that we previously had in place prior to our refinancing last years. In addition, there's delays in Venezuela's central bank exchange processing, which should continue to cause us to carry more cash in that profitable subsidiary. We expect this trend of higher cash balances to continue into the foreseeable future.

Let's talk about cash flow. Full-year cash flow is now expected to be a use of approximately $50 million to $60 million. While our business -- businesses are delivering on our previously internal performance expectations which gave rise to a neutral to slightly negative cash flow for the year, this use of cash is being driven by what I would refer to as extraneous factor. These factors include cash settlements and margin deposits we have made on our FX and zinc hedges. These cash settlements and deposits, which is are projected to total between $20 million and $25 million for the year, are a result of the US dollar weakening against currencies we have hedged and the falling market price of zinc during fiscal 2008. While we previously expected the cash impact of these FX hedge settlements and zinc margin deposits to reverse themselves during 2008 we now expect that reversal to occur in 2009.

Also contributing to this use of cash during fiscal 2008 are approximately $10 million of cost relate to the terminated business sale efforts we undertook during the year, approximately $10 million reflecting the delay of some planned miscellaneous asset sales, and a $5 million anticipated cash payment pursuant to the earn-out provisions associated with our acquisition of [Mecroletay]. Let me reiterate that we are still anticipating cash interest of approximately $226 million, cash taxes of $20 million, cash restructuring will be slightly higher than previously planned, as it is now projected at $39 million, which is somewhat offset by lower than previously estimated capital expenditures of $26 million. As a result of our cash flow being less than previously expected, coupled with the higher projected operating cash balances that we'll be carrying, year-end utilization of our ABL facility is expected to be higher than previously planned. For fiscal 2009 we expect to generate $40 million to $50 million of free cash flow, including cash from continuing operations of $75 million to $85 million less $35 million of capital expenditures, as we anticipate significantly-reduced cash restructuring costs and improvements in our working capital management.

Outstanding debt at quarter end was approximately $2.56 billion, -- I'm sorry, $2.56 billion. Foreign exchange has increased the dollar value of our euro-denominated debt by approximately $41 million at quarter end. Our senior leverage ratio, which represents only -- our only significant financial covenant was 5.1 times, well within the 6.25 times maximum ratio allowed under the terms of our senior credit facility. As an aside, the maximum ratio allowed under our senior credit facility will continue at 6.25 times for the remainder of this fiscal year, and it then drops to 5.7 times for fiscal 2009 before dropping to five times for fiscal 2010 and thereafter. We currently do not foresee -- excuse me -- any issues. Excuse me. We currently do not foresee any issues with maintaining compliance with this covenant. Total leverage at the end of our third quarter was 8.5 times.

So in summary, despite the continuous pressures we've been seeing -- we've seen in the previous quarters including tight inventory controls at retailers, low levels of foot traffic, the rising input costs and a weak economy, except for our short fall in select parts of our Home & Garden segment, which I hope you picked up from the comment that Kent made that we are actively addressing, we're pleased with our results for the third quarter. Across the board consumers are realizing the value of buying Spectrum brand products, particularly in these harsh economic times. Both Global Batteries & Personal Care and Global Pet Supply segments saw improved levels of adjusted EBITDA and are gaining market share, as well as expanding distribution. We feel good about where these businesses are headed.

With that I'll now turn it back over the Kent for his concluding remarks.

Thanks, Tony. While there's no question that all of our business units are facing challenges related to the weak economic environment and pervasive inflationary pressures we're taking action on a number of fronts to mitigate the impact wherever possible. First, in order to combat rising costs we have and will continue to implement pricing where possible to protect and/or restore margins. As you heard in recent weeks, most all consumer product companies have no choice but to price up to pass through rising input, energy and transportation costs. Each of our businesses operates in a different competitive set, so there's no one size fits all approach to this difficult but necessary action. We will continue to be sensitive to our price positioning vis-a-vis our competitors and the needs of our consumers and the ultimate consumer. We believe our value proposition in many of our businesses will work in our favor in the quarters to come and intend to maintain or enhance that positioning. Pricing has been announced up to as much as 25% to 30% by major consumer product companies. We expect to implement pricing ranging from low single digits to well in excess of 30%, with the biggest increases in our growing products business where input costs have skyrocketed.

Second, we'll continue to focus on cost improvements, productivity enhancements, organization simplification and capital expenditures with immediate impact on operating costs. While we do not have a single massive home run program that can deliver the $50 million we saved when we reorganized the Company in early 2007 we do believe we have lots of singles and doubles that are underway, and in total could match that figure over the next 24 months. These initiatives are underway in every business unit, in every geographic area and in every functional area. An example of cost improvement is at Remington, where our focus on designed cost targets for new product development has the goal to expand gross margin on every new product with full awareness of the tactical price points we must hit. Our new Flex 360 rotary is a prime example, where margins will be up several points over the older models.

Third, we'll continue to focus on growing our profitability. That means continuing to exit unprofitable business, including products or product lines that don't deliver satisfactory margins or returns on invested capital. SKU reduction has been and will continue to be a primary focus. During the past year we've reduced the worldwide SKU count of Remington products by over 30%, with more planned going forward,. and all the while delivered outstanding growth. In Europe we've exited over $30 million of unprofitable private label business, parting ways with some long-time customers. And in Home & Garden we've reduced our price position fertilizer product offerings from 22 to five and will continue to prune the product offerings, as required. Our goal is to maximize profit not sales.

Fourth and most importantly, it's ultimately about driving sell-through of our products by connecting with the consumer. We believe that reorganization of our business into three product-focused units, the elimination of the integration, deintegration and sales processes distractions and the revitalization of our marketing programs positions us to do well going forward. Our goal is to win the consumer at the shelf. Great packaging and POS materials, clear communication of features and benefits, alignment with our retail partners, and the right price have been the keys to our success in the past and all of these competencies have been revitalized this year. If recent trends continue we should continue to go through the holiday season.

I'll now open the call to your questions.

(OPERATOR INSTRUCTIONS). Your first question's from Bill Chappell with SunTrust Robinson Humphrey.

Good afternoon.

Hey, Bill.

Two questions. First, can you give us any indications that you've had from retailers going into the holiday season in terms of battery orders or inventory levels they're comfortable with?

Battery inventories at some of our key customers are truly at record lows, so we're optimistic, with a number of promotional programs that we have planned for the holidays, that we are optimistic that we'll have a relatively good sales performance during the holiday season.

And on the same, do you feel like it remains stable in the whole battery category or have you seen any real changes or maybe you're going to swing back over the pendulum?

Well, as I said earlier, I think we're beginning to see in a number of our key customers a shift toward our value proposition or value-positioned batteries.

Then I guess on the, the lawn and garden side, what are you forecasting or what are you expecting in terms of volumes with the price increases that are going through? Do you think you will see greater trade down or do you think you're going to end up pricing consumers out of the category all together.

No, I think you're going to see two things. Clearly, with prices going up pretty significantly from all the suppliers, there will be some unit volume decline in the industry, I think that's clear. What we're hoping for is an offset to that for us as consumers begin trading down to, again, our value proposition products.

Have you heard any -- have you had any push back from the retailers in terms of the quarterly commodity pricing structure?

I think we understand that the volatility of the raw materials here puts the manufacturer, the supplier in a squeeze in the middle and you just can't -- we can't continue to absorb the significant price increases without -- if our commodity price increases without being able to pass those through, so I think they understand the situation that we're as a key supplier.

Got it. Thank you.

Your next question is from Karru Martinson with Deutsche Bank.

Good afternoon. Just wanted to start with your liquidity profile, with a peak to trough working capital time need of $150 million cash burn here, how do you feel about your liquidity profile going into 2009 as you start to build for the lawn and garden season?

We've got a whole series of initiatives built into our, call it planning for year and we've laid those out in our business planning and we believe we have sufficient liquidity to operate all of our businesses.

I couldn't help but hear that there is some minor assets you're look at selling, as well. If you could provide a little color on that, kind of the magnitude there are?

Yes, this is Tony, Karru. How you doing?

I'm good.

Good, good. That was about $10 million in magnitude and what it represents is really -- when we built our expectations for this year, we anticipated that we would have these minor -- small assets sold by the end of the year. It looks like that's probably going to be delayed. And they're just -- typically you got a company that's $2.8 million and just assets that are excess asset that are idle, really very low book value and they're -- basically we're just looking to -- we had those inside our cash flow forecast and they're being delayed beyond 2008 probably into 2009. So that's -- it's $10 million and really doesn't move the needle that much. But it's part of the -- when it starts accumulating to the, what we said before, neutral to slightly negative cash flow for the year and now $50 million to $60 million, as I said, it's a -- it's just another one of those components that added to it, but it's a timing issue.

Okay. In terms of the big picture here with the pet asset sale falling through, what are the next steps in management's commitment to deleveraging the Company.

We're stepping back. Management and the board are having active dialogue about a variety of different options. The reality is that the current state of the credit markets, on the one hand, our and relatively-low equity price on the other hand make a number of what I would call options very unattractive right now. So we're somewhat hopeful over time that we 'l see improvements in one or both of those things that would make some of the refinancing activities more attractive. We are not actively trying to sell the Pet business now. We thought it was a good transaction. Unfortunately, with the demands of some of the senior lenders it would have increased our borrowing cost significantly over the remainder of our credit facility and when we ran the numbers it really had a significant negative impact on the economics of the Pet deal. We think it's a great business, the buyer thought it was a great business and we believe it will just continue to grow in value over time. So we are basically patiently waiting for the right opportunity and we'll see what happens in the future.

Okay. And I'm sorry to ask a housekeeping question here, but could you go over the FX cash hedges that you were referencing in terms of the deposits that you're making, wen would those flow through your numbers?

We would expect those two to flow through in 2009.

So those are going to come through in 2009.

Yes.

So that was included in your $40 million to$ 50 million positive free cash flow.

Incorrectly, yes.

Okay, thank you very much, guys.

Got it.

Your next question is from Bob Wetenhall with Royal Bank of Canada.

Thanks for taking the question. Tony I just was looking for a little clarification. The earn out is a one-time use of cash, that's $5 million. Your efforts to sale the pet business, that's a $10 million cash charge?

Well, it is not just the pet business though. We had -- if you recall we had a strategy back at the beginning of the year when we were looking at other -- all assets were on the table effectively and we incurred some professional fees; legal fees and accounting fees.. For instance, we embarked upon getting carve-out financial statements. Those fees --

For several of the businesses.

For several of the business units, so it's a combination. But that $10 million number, Bob, includes the costs that we incurred this quarter. And keep in mind, we have a $3 million payment that went out the fourth quarter as a -- the termination fee that we paid to (inaudible) and as I said it's just a combination of these other professional fees that we had.

Got it. And the cash restructuring charges, the R39 million includes the closure of the battery business in China; correct?

Correct. Yes, and it also includes-- we made some minor tweaks in the European management structure back in the beginning of the year and we have included it in that. If you recall I believe the number that I'd thrown out earlier was a $33 million number for $30 million to $33 million and it's picked up for the -- for those items that we -- basically those are (inaudible) drivers.

So a lot of cash,, it sounds like that's getting eaten up, like the margin call on your FX --

Absolutely.

-- this sale earn out, this is one time and you're kind of front loading it and taking the hit now.

That's -- yes, exactly. When you look at that, basically we'v got $20 million to $25 million of cost associated with the margin deposits and the FX payments. We've got the $10 million of fees for the various asset sales that we're no longer pursuing at this point in time because of the credit market. So those are obviously big numbers that are one-time type of items.

Excluding your FX, is net working capital, receivables and inventory less payables, going be a source or use for the full year.

It's going to be a slight source and net of FX.

And your FX does flow into working capital?

Yes, it does.

Okay. Great, guys. Thanks a lot.

Thank you, Bob.

Your next question is from Connie Maneaty with BMO Capital Markets.

Hi.

Hi, Connie.

Let's see.

Oh, oh, that sounds dangerous.

Let's see. How far out -- have you started hedging your [rei] up for next year?

No, we have not. With the recent, call it backing down on some of the commodities. particularly corn and wheat as we end the growing season, we're already anticipating that you're going to see some softening in those markets so rather than rushing in we're just going to watch for a little while. We're at the low point in production of that product. we don't really begin ramping up until about November and so we're taking a wait and see attitude right now.

Normally how hedged would you at this point?

Not much. Hardly any. There's not really robust markets for some of these commodities. The only one that's fairly reasonable is urea and that's even a fairly short window that you can hedge in. You typically have to wait into the fall to start hedging.

Typically, the urea market, Connie, we were hedging about six months forward and that's because that's kind of what the market allowed us to do. That was about as liquid as it was. And I believe at this point in time last year, we had -- if not zero darn close to zero, it was a very low, low number if any hedged.

Okay. Do you use mainly prill or granular urea?

You're talking to somebody who's not --

Connie, I'm a bean counter so I don't --

Yes, we don't know. (LAUGHTER)

On the -- because the price of urea has doubled since the end of March. I guess my question is if your -- how did your margin go down 800 basis points in this business if your fertilizer was only -- fertilizer was only 25% --

Now I'm only talking about fertilizer margin, not the entire business.

No, but the home --

If you take our Home & Garden business and break it into two pieces, half of it are what we control products and personal repellents, household insecticides. The other half is what we call growing products, and that's a combination of fertilizer, rich soils, grass seeds and mulches. Fertilizer is about $150 million?

Of -- when you say how much urea do we use?

That's right, but you just mentioned urea spiked, but not only urea. Dap and potash, I think, tripled in value the last six months.

If I can site some numbers as to where -- I can't say where they were in the last six months, but I can tell you that, for instance, potash or dap, dap is a good one, $276 a ton in 2007. It's now at over $400. The price of potash -- for some reason I don't have the '07 number for potash. but that has gone up significantly ,as well. Those are -- I think that was over $1,000 one time, but the point is -- it wasn't -- they more than doubled.

Yes.

Sometimes they tripled.

And the reality is it's significant of the purchases we made during height of the season were at spot prices. So fertilizer itself, while we did price during the year, that huge increase in the input costs drove the margin down from 29% to about 20% on fertilizer, or 28% to 20%, something like that. It still generates gross margin, but it took a heck of a hit: so the 800 basis point is strictly the fertilizer product line.

Connie, this is Tony. I apologize, I misspoke before. The 387 was the '08 price for dap. Dap was $276 in 2007 a ton. Now it's $1,100 a ton, so that's more than quadruple that.

That's dap, right?

That's dap, yes. I don't have the current spot for -- well actually, I don't believe potash can be hedged, so there's no known spot for it.

So even with the price increases you're taking, how can the profitability of this business be better in '09 than it was in '08 given what has gone on with commodities?

Well, the pricing will be well in excess -- we took the big hit in terms of the increase in the input cost this year. We're forecasting next year to be, call it flat with where it -- the input costs are currently running and we are, in fact, taking very significant pricing that will be in excess of the cost increase, so we are expanding margins again next year.

So you're expecting next year's Home & Garden EBITDA to be flat with this year, is that what you just said?

No. I'm saying in the fertilizer portion of our business we do expect to expand the gross profit margins.

Okay. In battery, with the price increase you're taking and the decline in zinc, do they offset the increase in manganese ore?

Yes, manganese is actually up slightly more than the decrease in zinc and that's really what's driving the need for the industry to price up.

Great. On Ningbo, how are you getting out of this? Are you just closing it down or are you selling it?

No, we're actually phasing down. We're finishing up production to use up the raw materials, so gradually phasing down and then we're going to sell the -- some of the equipment is being actually returned to our other facilities and then we are selling the facility and the remaining equipment, so we're not selling an on going business.

Okay. A question on the sale of the Pet business. I have to ask this. I'm sorry. So, how is it that the bankers -- your lenders didn't -- how is it they didn't buy into it before the press release was put out about the sale?

Well, you enter into a purchase agreement first. You have to have a deal in hand before you go to the lenders to ask for their consent. So we had to get the deal done first and once you ink a contract we are obligated to make a public disclosure. I would just tell you that at the time we signed the contract we certainly didn't anticipate that we would have the issue that we did and so we were not, call it aware of how challenging the market for consents has been in the recent several months. And as I've learned along the way we're not the only ones that were faced with some extremely onerous demands by the holders of the senior secured debt. They're not banks. They're hedge funds.

Okay. All right. Thank you very much.

Thanks.

Your next question is from Reza Vahabzadeh with Lehman Brothers.

Good afternoon.

Hi, Reza.

Just a couple of housekeeping items. In terms of POS or consumption at retail, how did you fair during the quarter in the battery business in North America?

POS was up 20%.

So POS was up basically in line with your sales?

Yes.

We had some good promotional programs going during the season and POS, -- yes, it was up about 20%.

Okay. And would you expect this kind of a promotional support and therefore POS to continue in the second half of this calendar year?

Well, I think -- you have to look at it on a retailer by retailer basis. Every retailer has its schedule of promotional activities that they plan to run during the holiday season. We've already entered into agreements with our key retailers and we feel relatively optimistic that, with our knowledge of what is going to happen that we should maintain or perhaps even slightly expand our share during the Holiday season.

Okay. But is the category healthy still as far as overall consumption?

Unit consumption's been relatively flat. I think the category has grown strictly because of the pricing that's taken place.

Okay. Got it. And then, as far as the cost for the Home & Garden that rose, I would have thought that a lot of the costs that you would have had tremendous visibility for a lot of these costs in Home & Garden preceding the June quarter because I would have thought you would have purchased a lot of these input costs and even manufactured a good bit of them. So I'm just surprised that the cost became a bit of a surprise, given the nature of how you manufacture it and ship these products?

There actually is not a huge lag time between when you take delivery of the material and you end up -- you call it manufacturing but it's really more of a blending, packaging activity and then it's shipped directly out to the retailers. So, if you look at how rapidly during the last three to six months some of these commodities have skyrocketed and the fact that we only had less than half -- I'm not sure exactly how much of each of one of these were actually hedged where we knew what we were going pay -- we were stung with some very significant increases that were not anticipated.

I see. So you had visibility on about half of your input costs, give or take, and it was the rest at --?

Was basically at spot.

Got it. Okay. And as far as working capital use or source in this quarter how did you fair, Tony.

For this quarter?

Yes.

Yes, it was definitely a use because of the peak requirements of the Home & Garden season. This is the quarter, but if you can bear with me for -- I don't really focus on quarterly cash flow because we're [always] looking on the -- either year-to-date or a full year basis for projections -- hold on a second. Just to confirm that, yes, working capital overall was a use., slight use. It wasn't as bad as was anticipated.

So how do we expect to fair on working capital for the year?

As I mentioned for full year we will be slightly positive and that will include exchange -- net of the exchange impact, because keep in mind, the exchange impact is going to have a negative impact on working capital but net-net we will be slightly favorable.

Okay. And then your companion pet business is doing well in the US, aquatic's is still soft. What is the total pet business in the US doing. Is it still up slightly or is it down?

It's positive.

It's positive?

Yes, definitely.

I think it is up 9% in the US.

Animals up 9% and aquatics was down -- North America aquatics is down about 2.5%, a little less than 2.5%.

Right, so on a combined basis what's the number?

Combine basis, I don't look at it that way but I would guess it to be -- based on the relative proportion I'd say it's probably about -- North American pet, it's probably about 6% to 7%.

Okay. And do you think --

Keep in mind that aquatics is two-thirds of our business and one-third is companion animal, but on the other hand, when you look North America, North America is where right now about 99% of our companion animal. So it is probably close to the 7% or 8%.

I see. Do you think the strength of the companion animal is due new products, distribution gains, pricing, what's the driving --?

All of the above.

All of the above.

Okay. Thank you.

Eric?

Your next question -- I'm sorry -- is from Joe Altobello with Oppenheimer.

Hey guys, good afternoon. Just staying on Home & Garden for a second, very quickly the working capital on to business was a source in the quarter; correct?

In that business?

In Home & Garden in particular, yes.

It -- I really don't look at it by business, Joe, so I don't have that at my fingertips right now.

It normally is a use.

Well, in the third quarter, though, we were starting to --

Starting to collect, but the season was late this year.

The season was late. I guess it could be probably a use if I -- and I can get back to you on that just for the Home & Garden business. But again I have it, but I just don't have it front of me.

One of the things that we saw and I think you've heard this from other people, the season did break a little later than usual. We've also seen retailers now be very cautious about when they place orders, and so they wait until the last minute. And we actually saw -- as the weather improved as we went through quarter, the third month of the quarter was relatively strong so we had significant receivables at the end of the quarter.

Got it. In terms of the input cost pressures in the quarter, how much of that was actually urea and other input and how much of that was transportation and diesel?

The overwhelming majority was the raw material input. It's maybe a couple million dollars worth of transportation because we spend a lot of money, both on inbound freight and on store door delivery, particularly in the fertilizer and growing media. Our actual transportation costs in that segment run, depending upon the SKU we're shipping, anywhere from 8% to 15%, so the run up in diesel costs over $5 a gal really did have a big impact in that business.

Okay. And then moving on to the closing of the Ningbo facility. This is interesting because you're actually one of the first company's to start to move operations out of China to Germany and Wisconsin, for example, and it seems like you just actually moved some capacity from Germany to there. So if you can give us some insight into what's going on and how the labor costs advantages in China are (inaudible) getting overwhelmed by transportation and other issues?

We actually got into that business four years ago and we did move a line from Germany there. At the time that we got involved in that facility, the actual landed cost of a battery out of China into the US or into Europe was roughly 30% below our western manufacturing costs and you've seen cost increases across multiple fronts there, including significant increase in the labor costs, there were actually increases in raw material input costs. We're seeing increases in energy costs, and you are seeing a significant reduction in the back tax refunds that the government is allowing the manufacturers who export products to enjoy. That's been pretty significant. And then you couple all of that with the strengthening of the Chinese currency it has gone from -- it was like close to --

It was about eight.

Eight and now it's about 6.7.

And the smart money is talking about it going even further down --

Down 6.2 within the next year. And then you couple that with a doubling of container costs out of the Far East and suddenly the current costs of delivering product out of China is equal to or greater than our cost in our western plants. Then you couple that with the fact you have significant working capital investment in the inventory in that plant and on the ocean and batteries -- we have enough capacity here that we can actually produce batteries almost just in time for our customers both in North America and in Europe. So it is a significant cost saving for us to make that decision and we decided to just go ahead and do it instead of waiting.

Okay. So that is not unique to batteries it sounds like those issues will impact with pet supplies, for example?

To a much lesser extent, It varies by the product that you're manufacturing. We are seeing some of those actually increases in our Remington products, which are all sourced from the Far East. Now we haven't seen as much of an increase in cost there as we did in the battery business but we are beginning to see cost pressures from the suppliers of the small electrical appliances.

Okay. Got it. Thank you.

Today's last question is from Jason Gere with Wachovia.

Thanks. I guess life would be really good if Home & Garden was treated as discontinued operation again. (LAUGHTER) Just a couple of questions. One, if you look at -- and clearly you are starting to see some of the trade down there and your HPC peers haven't seen the value play coming. I was wondering if you could talk a little bit about Europe, which we've been hearing through the earnings season is a bit tougher right now, in particular with the Varta brand, which is a higher-end priced battery than obviously what you have in the US. I was wondering if you could talk about that and maybe Remington? And then I'll have a question on the North American battery. Thanks, guys.

Europe has definitely slowed. Germany in particular is seeing a slowing of their economy. Their consumers have always been a little bit more conservative than our somewhat free-spending American consumers. But the Varta private label is something that we have exited.. We have spent a lot of time explaining to some of the key retailers there that actually working with a branded product, while it may not rotate as quickly actually generates more profits for them. And so because we sell across a large number of different channels of distribution we tend to put the premium batteries in select channels and we have actually launched what we call a value-position Varta brand that doesn't perform as well as our premium products as an alternative to private label and it's actually beginning to do quite well. So as I said on the call a little bit earlier we have actually seen the beginnings of a decline in private label and an increase in branded batteries. Obviously most of the increase is coming at the value end of our product offerings but that's a significant improvement over where we were even a year ago.

Okay. And then as we turn to North America you were talking about some distribution gains that you got in the quarter. I assume that would be the mass channel or can you just provide a little bit more color which channels you might have seen a bit more of those gains?

Actually it wasn't in mass, it was in some of the other channels where we have relatively small distribution. There's nothing earth shattering, it's just some wins here and there with various different retailers.

Okay. Because clearly your trends were much better than some of the higher-price competitors, so I was just -- and I appreciate the color you gave us on, I think, Bill Chappell's question about the holiday season, but I was just wondering how do you think your competitors are going to respond to some of the share gains that you've been getting? Over the last couple of years, as you know you guys have been the source of share gains by the two other player out there, so I was just wondering from more of an in-store merchandising activity or how do you think the competition's going to react and how are you going to counteract that so you maintain that double-digit share you're back to?

If you look over a long period of time we have averaged around 11%. As I've told a lot of people, the reason the US share is so low is that we have such narrow distribution compared to our two premium brands that basically are sold everywhere. So you don't find much of our product in grocery or drug or the clubs or places like that, so we have much narrower distribution. The good news is where we are in distribution and we have, call it reasonable shelf placement, reasonable share of the shelf, our product sells at much, much higher percentage of the overall battery category.

We talked about the fact that we got away from our value positioning. We weren't offering the retailer significant -- or let's put it this way, better penny profits and over the last year and a half or so we've overtime changed our pricing, we changed our positioning, we believe we're offering -- really continuing to offer compelling value to the consumer and we're back in the mode of trying to provide our retail customers with equal to or better than profits by selling our batteries. And so they are more incented, they're more motivated to give us better space in the store because we're actually helping them go their category right now. As you can see we're outperforming the category and then growing their profitability. Batteries has been a top categories in terms of revenue and profitability for major retailers and they have suffered a little bit in the last year or two. So maybe we think our time has finally come here in terms of being in the right place at the right time with if good value proposition.

Okay. The last question I is a housekeeping. What is the -- what would be adjusted EPS number for the fourth quarter? Clearly with your press releases there's a lot of recalculations to go through, so I was just wondering what should we be looking -- what's the true number to compare to for last year and do you think now that lawn and garden in a lower profitable quarter, in the fourth quarter we should be seeing acceleration from that?

Yes, I just think -- if you go to the website we have endeavored here because we have confused a lot of people with things in discontinued ops and out of discontinued ops and restructuring charges and we have provided, I think, unprecedented granularity and visibility into the performance of each of our business units over the last two years. So let me suggest you go take a look at what's out there. I think you'll find it to be very helpful and then if you still need more information just give Tony or Carey a call.

Will do. Thanks.

All right.

Thanks, Jason.

Well, thanks, everybody. It's Kent again. It's a long call. We kind of -- Carey, Tony and I all rambled on quite a bit today, but our objective was to give you some real insight into what's really happening in the business. Again, very good top-line performance. That is very encouraging to me that our products are selling well everywhere in the world and at all of our businesses. We had one issue in our growing products segment of our Home & Garden business where we, like everybody else in the industry were tremendously impacted this quarter. The rest of our businesses performed exceptionally well, and we have action plans in place to address the issues that is we experienced this year which are unprecedented.

It was like what happened in the battery industry three years ago when zinc skyrocketed from $1,000 a ton to over $4,500 a ton and we all scrambled to price to catch up and now zinc is back down to $1,800 a ton. Hopefully we'll see that same curve over time, although for right now we are not assuming we're going to see any reduction in the cost of the raw material inputs to our fertilizer business and we're pricing them appropriately, assuming that that's going to be the case. But we do know it is a cyclical industry and we do believe that the -- call it the speculative bubble will burst, like you've seen in oil, like you're seeing in wheat, like you're seeing in corn and a lot of other commodities. So we hopefully will have, call it an opportunity going forward there for some moderation in those input costs.

Anyway, the business is healthy, it's doing well. We're optimistic about the holiday season as we go through the next quarter leading up to the holiday season. Again if you look at the performance of batteries, Remington pet and even the balance of our Home & Garden business I think we're doing very well, and again especially when you take into consideration the challenging times that we're operating in. So we thank you all for your time. I know we went kind of long today. Go to the website. I think you'll find a lot of interesting, useful information there. We look forward to talking to you at the end of the fiscal year. Thanks a lot.

Take care, everyone..

This does conclude today's conference call. You may now disconnect.