Spectrum Brands Holdings Inc (SPB) 2010 Q2 法說會逐字稿

Good morning, my name is Maria and I will be your conference operator today. At this time, I would like to welcome everyone to the Spectrum Brand, second quarter, fiscal 2010 earnings conference call. (Operator Instructions) As a reminder ladies and gentlemen this conference is being recorded today May 5, 2010. Thank you. I would now like to introduce Ms. Carey Phelps, DVP of Investor Relations, Ms. Phelps you may now begin your conference.

Thank you. Good morning and welcome to our second quarter of fiscal 2010 earnings call. With me today are Dave Lumley, our Chief Executive Officer, and Tony Genito, our Chief Financial Officer. John Heil, President of Global Pet Supplies, is also here today and is available to answer questions.

Before we begin let me remind you that our comments this morning include forward looking statements including our outlook for the full year of fiscal 2010 and beyond. These statements are made from 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 dated May 5, 2010, and in our most recent Form 10-K. 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 earnings per share, adjusted EBITDA and net sales excluding foreign exchange translations.

Spectrum Brands management uses these metrics because it believes that they one, provide a means of analyzing the Company's current and future performance in identifying trends and two, provides further insight into our operating performance because they eliminate certain items that are not comparable either from one period to the next or from one company to another. Additionally, I should point out that adjusted EBITDA can also be a useful measure of the Company's ability to service debt and is one of the measures used for determining the Company's debt covenant compliance.

While Spectrum Brands management believes that these non-GAAP financial measures I just mentioned 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. I would like to caution the audience that although net income is the GAAP measure from which adjusted EBITDA is derived, projected adjusted EBITDA results discussed during this call may differ significantly from net income results due to factors not included in the calculation of adjusted EBITDA. For completed quarter we provided reconciliations of adjusted EBITDA for comparable GAAP measures in table four of our press release dated May 5, 2010, which has been furnished on a Form 8-K filed with the SEC. A copy of the 8-K is available on our website, www.spectrumbrands.com, under the investor relations section.

We'll provide reconciliations of net sales excluding foreign exchange during this call. As a reminder, in connection with the Company's emergence from Chapter 11 on August 28, 2009, we adopted Fresh Start reporting on August 30, 2009. At that time the recorded amount of the Company's assets and liabilities were adjusted to reflect their fair value. As a result reported historical financial statements for the predecessor company are not comparable to those of the successor Company whose results encompass the results of operations on and after August 30, 2009. During the course of our comments today, unless we say otherwise, current year results relate to the fiscal second quarter of 2010 while any references to prior year results are for the fiscal second quarter of 2009.

As a final note, during today's call we will make some comments regarding the proposed business accommodation of all the Spectrum Brands and Russell Hobbs. We urge investors to read the registration statement on Form S-4 that includes the preliminary proxy statement of Spectrum Brands and it will constitute a prospectus of Spectrum Brands holdings when it becomes available. As it will contain important information about the transactions. Investors may obtain a free copy of the joint proxy statement/prospectus when available as well as other documents filed by Spectrum Brands on the SEC's website at www.sec.gov or on Spectrum Brand's website, at www.spectrumbrands.com.

Spectrum Brands, Russell Hobbs and the respective directors, executive officers and certain other employees may be deemed under SEC rules to be participants in the solicitation of proxies in connection with proposed transactions. Information regarding Spectrum Brands, directors and officers can be found on its Form 10-K filed with the SEC on December 29, 2009. Additional information regarding assistance and the proxy solicitation and a description of their direct and indirect interest in transactions by security holdings or otherwise will be contained in joint proxy statement/prospectus and other relevant materials to be filed with the SEC when they become available. Thank you for your attention to these details. At this point I will turn the call over to Dave Lumley.

Thank you, Carey. Good morning. Thank you for joining us.

As you are likely aware, following the retirement of Kent Hussey and in recognition of the strong results, our teams have delivered over the past several years I was asked to accept the role of CEO of Spectrum Brands, which I proudly accepted. During his tenure Kent did a good job of turning this Company around and getting us back on the right track. I want to thank Kent for his efforts and wish him the best in his future endeavors.

With regards to myself, I have been with Spectrum Brand since January 2006 and led the global batteries and personal care, and home and garden segments. Before joining the Company, I held various leadership positions at Newell Rubbermaid, Brunswick and Wilson's Sporting Goods. I'm very pleased to be taking on this new role here at Spectrum as we launch the next phase of our value model. Since my arrival here at Spectrum, even during the times of our balance sheet challenges, our businesses have continued to improve.

Our results for this past quarter, which Tony will review with you in a moment, were very strong, with all three business units reporting increased sales and profits. I'm confident that each segment is moving in the right direction. We are achieving market share gains in many key product lines showing solid recovery in the Latin American market. Expanding our distribution to new retailers into new regions of the world and enjoying the success of a significantly reduced cost structure combined with top line growth. While we remain somewhat cautious due to the continuing uncertain economy, rising commodity prices, fluctuations in foreign exchange impacts and increasing distribution costs, I believe Spectrum Brands is well on its way this year to delivering sales growth of 3% to 5% over fiscal 2009 and adjusted EBITDA that I expect to be $335 million to $345 million for fiscal 2010 for 8% to 11% above fiscal 2009.

This is quite remarkable when we all consider where this Company was a year ago. It is also a testament to the talented team of professionals we have at this Company and the superior value products and brands we offer. Before going any further let me pass the call to Tony to let him go through the strong results we delivered in the second quarter. I will wrap up after Tony's complete with his discussion.

Thanks, Dave. Well, it was another outstanding quarter for Spectrum Brands. With year over year top line growth in each of our three operating segments including double digit growth in Remington's shaving and grooming category, consolidated net sales for the quarter were $532.6 million up 5.8% over the same period last year. This increase included $15.9 million of positive impacts from foreign exchange.

For the quarter, we reported a GAAP net loss of $19 million or $0.63 per share, which includes a number of items which we believe are not indicative of the Company's ongoing normalized operations. These net of tax items include a $13.2 million adjustment to income tax expense to exclude the impact of a valuation allowance against deferred taxes and other tax related items in order to reflect a normalized ongoing effective tax rate. Restructuring and related charges of $3.5 million related to several previously announced restructuring initiatives and $2 million in transaction costs related to the pending transaction with Russell Hobbs.

Including the items I just mentioned and with strong double digit year over year adjusted EBITDA growth in all three of our business segments we reported consolidated adjusted EBITDA of $75.2 million for the fiscal second quarter up 19.8% over the same period last year. Foreign exchange negatively impacted consolidated adjusted EBITDA by $800,000. The extent of cost cutting and SKU rationalization initiatives we have undertaken in recent years now us allow us to directly see the benefits to our bottom line of our growing market shares. Additionally, as Dave mentioned, while we continue to face a cautious consumer and some cost head winds, we have seen promising momentum in each of our three business segments which I will discuss now.

I'll start with our largest and most profitable segment, global batteries and personal care. With growth in all three of our major geographic regions including solid improvement in Europe and Latin America the global batteries and personal care segment delivered net sales of $308.3 million for the second quarter up 7.2% from the same period last year. Excluding positive foreign exchange impacts of $13.7 million, segment sales were up 2.5% for the quarter. Global battery sales were $190.4 million for the quarter, up 3.5% for the same period last year. Foreign exchange benefited these results by $8.8 million.

By region, coming out of a strong holiday season in North America, Ray-O-Vac continued to gain share during the second quarter is the fastest growing brand of batteries in the United States. North American battery sales for the second quarter $71.3 million which was down certainly from the same period last year as we counted aggressive, competitive, promotional activity. Attempts by our competitors to copy our more battery strategy have produced a zero sum gain result at retail and have pushed category sales negative while not impacting our share of the markets.

We continue to believe our value proposition is resonating with consumers and are encouraged by the repeat purchase behavior we are observing. In addition, we continue to see growth opportunities in non-Nielsen monitored channels including home centers and clubs. With a 17% dollar share of the general battery category in the US as defined by Nielsen research for the 13 weeks ended March 27, 2010, we are very encouraged by the solid results we are achieving. This market share is up from 15.6% for the same quarter of last year and is the highest share Ray-O-Vac has captured in the past decade in the US market. Across the Atlantic our European battery sales for the quarter were $73.7 million, down 2% from the same period last year. Foreign exchange benefited these results by $5.2 million for the quarter.

The sales decline is a result of our strategy to exit nonprofitable private label business and focus on our core branded business which saw some improvement over the second quarter of fiscal year 2009. Turning now to Latin America I'm pleased to say the recovery we started to see last quarter continued in earnest this quarter with a 23% increase in sales for the second quarter over the same period last year. Latin America's $45.3 million in battery sales for the second quarter included the benefits of $3 million in favorable foreign exchange. Even without this favorable impact sales were up nearly [15%] (see press release) over the same period last year. After a down year in fiscal year 2009 we believe we now have the right people and the right strategy in place.

As it has in North America the value proposition appears to be resonating with the Latin American consumer. Although we believe we are well on the road to recovery in Latin America, I should note that at the beginning of the quarter in accordance with GAAP and consistent with common practice we designated Venezuela as the highly inflationary economy and changed its functional currency from the Venezuelan local currency to the US dollar. This change resulted in a decrease of $9 million in segment level adjusted EBITDA for the quarter. Turning now to our personal care products, Remington delivered strong results for the quarter. Net sales for Remington worldwide were $96.3 million up 12.1% over the same period last year. Benefiting these results were $4.1 million of favorable foreign exchange.

After surpassing Braun as the number one foil brand shaver in the US during the holiday season, our shaving and grooming products performed very well for the second quarter and achieved double digit sales growth over the second quarter of fiscal 2009. We're proud of the innovations we made in this category and believe our designs best fit the needs and desires of consumers. Women's hair care is also achieving strong market share gain over last year. The Remington branded hair care has outpaced the category in all geographic regions evidenced by our number one ranking in Australia, number two in Europe and now approaching number two in the United States.

Overall, the positive momentum we've seen in our global batteries and personal care segment, during the recent quarters, continued right through the holiday season and into the second quarter of fiscal 2010. The highly efficient cost structure now in place in this segment coupled with increases in market share and certain of our product categories has led to direct benefit to the bottom line. Adjusted EBITDA for the global batteries and personal care segment for the second quarter was $41.1 million up 12.6% over the same period last year. As mentioned earlier, the change we made to the functional currency for Venezuela negatively impacted adjusted EBITDA for the quarter by $9 million.

Overall for this segment, foreign exchange impacts benefited adjusted EBITDA by $1 million for the quarter. Excluding that benefit adjusted EBITDA was up 9.9%. Turning now to the global pet supply segment with a stabilized and aquatics category and continuing strong sales of DINGO, Nature's Miracle, and Tetra branded products. The global pet supply segment delivered net sales of $148.2 million up 4.3% over the same period last year. Foreign exchange impact benefited pet sales by $2.2 million for the quarter. While companion animal sales were essentially flat in the sales during the second quarter of fiscal quarter of 2009.

Aquatic sales increased 6.9% over the period due to a strong pond season in Europe, stabilizing trends and growth in North American aquatics and some positive impacts on foreign exchange. Adjusted EBITDA for the global pet supply segment improved a strong 30.3% for the quarter up to $26.4 million with only a very slight benefit of $100,000 from positive foreign exchange. This division expense with favorable mix and products sold as well as a favorable geographic mix as the international unit that tend to have have higher margins outperform the 2009 second quarter results.

In addition, global pet supplies benefited from increased pricing, reduced input costs such as fuel and lower operating cost as the Company shut down two facilities last year. as part of its manufacturing consolidation. Now, let me move to our home and garden segment. Despite the unseasonably cold temperatures in much of the US going January, February, and part of March, we're off to a strong start in our home and garden business.

Without the distraction we faced during the second quarter of fiscal 2009 as we completed the shut down of our growing products business, our sales teams have been able to aggressively go after new business. As a result, and as warmer temperatures have returned net sales for the second quarter were $76.1 million up 3.4% over the same period last year. Adjusted EBITDA for the quarter in the home and garden segment was $14.5 million up 23.1% over the same period last year when we delivered $11.7 million. As I said, although our two typically largest months in the home and garden business still lie before us, we believe we are off to a strong start for the season. Going to April, all three of our largest customers were running at least one national ad featuring one of our brands.

In addition in an effort to drive volume and increase share we have a number of price promotions underway at retailers we serve. Our POS (inaudible) was the strongest we've seen in over a decade. We have stepped up our merchandising efforts in some of the nation's largest retailers. We're optimistic we'll be able to report to you solid results for the 2010 home and garden season. Before turning the call over to Dave for his closing remarks let me address a few of the key details in our financial segments.

With improving market share in some of our key product categories and some favorable cost trends, the Company's gross profit for the quarter improved to $209.6 million up 13.4% over the same period last year. Operating expenses for the second quarter were $163.8 million up from the $151.6 million for the same period last year. The increase of $12.2 million was driven by several items including $5.4 million of negative foreign exchange impacts, $6 million of increased amortization which was associated with the revaluation of intangible assets in connection with our adoption of Fresh Start reporting.

$2.1 million of incremental restricted stock amortization, $3 million of legal and professional fees associated with the Russell Hobbs transaction, and approximately $9 million of increased expenses due to increased volume coupled with a return for more normal SG&A spending levels and R&D expenditures as we make focused reinvestments in our businesses. Offsetting these increases were $3.2 million in distribution savings associated with our cost reduction initiatives announced in fiscal 2010. $10 million in decreased restructuring and related charges which primarily related to legal and professional fees incurred in fiscal 2009 to evaluate the Company's capital structure prior to our Chapter 11 filing. Corporate expenses for the quarter increased to $12.4 million compared with $7.9 million for the same period last year.

This increase of $4.5 million was primarily due to the previously mentioned $2.1 million of incremental restricted stock amortization recorded during the second quarter of fiscal 2010 coupled with $3 million of legal and professional fees associated with the pending transaction with Russell Hobbs. These items were offset by lower spending as we continued to keep a strong focus on cost control and containment. Interest expense for the second quarter was $48.4 million compared with $47.5 million for the same period last year. We continue to expect approximately $200 million in interest expense and approximately $130 million in cash interest for the full fiscal year 2010. I went through the reasons for the variance in these numbers during our last call. Tax expense for the quarter was $10 million compared with $8.3 million for the same period last year. Cash taxes for the quarter were $11 million compared with $4 million for the second quarter of fiscal 2009.

And as I've said previously, based on a level of NOLs we expect to be able to utilize we do not anticipate being a US Federal tax payer for at least the next five years. We will, however, continue to incur some state and foreign taxes. For fiscal 2010 we expect our cash taxes to be approximately $37 million. These cash taxes primarily relate to our foreign tax jurisdictions. For 2011 and beyond due to the timing of some fiscal 2010 payment we expect this number to be closer to $30 million annually. As a side note we expect for the Russell Hobbs business to add approximately $50 million in annual cash taxes. Like Spectrum, due to the NOLs at Russell Hobbs, these cash taxes primarily relate that company's foreign tax jurisdiction.

Let me turn to our liquidity. We ended the second quarter with $55 million in cash. At the end of the quarter approximately $1.355 billion was outstanding under our senior term credit facility and letters of credit. Approximately $117 million was drawn under our $242 million ADL facility which as you know, consists of a $197 million revolving loan and $45 million supplemental loan. As I mentioned on our last call, this year's free cash-flow generation will be limited by several factors. The first is what I referred to as the hangover related to our Chapter 11 filing from last year which includes $21 million of precondition payables and $46 million in bankruptcy related professional fees both of which were paid in fiscal 2010. In addition we now expect to incur approximately $14 million in legal and professional fees related to the pending Russell Hobbs transaction.

Despite these additional fees related to the Russell Hobbs transaction, based on the strong performances of our businesses to date, I still expect 2010 free cash-flow to be $25 million to $35 million calculated by assuming $60 million to $70 million in cash from operations, that's approximately $35 million in capital expenditures. Because none of these items other than CapEx are expected to repeat in 2011 going forward we expect our businesses to generate free cash-flow in excess of $100 million annually. In summary, I'm very pleased the results of our operations for the second quarter. I believe the Company is on the right track and is in the best financial shape I've seen in my six years here. We continue the strong momentum we experienced during the holiday season and continue to gain market share in some of our key product categories while maintaining and efficient and low cost operations. These trends bode very well for the quarters ahead. At this point I'll turn the call back over to Dave.

Thanks, Tony. You now heard all the numbers. I think you now understand why we believe this Company is back on track. Despite some tough headwinds such as the increased competitive activity, indications of rising commodity and distribution costs, fluctuations of foreign exchange rates, and a still cautious consumer, we have a lot to be excited about. As we are experiencing many successes and seeing many promising trends in all three of our business segments.

In global batteries and personal care you've seen us report consistent year over year market share growth over the last eight quarters in North America batteries where we now hold a 17% dollar share of the general battery category. This is the highest share we have held in the past decade. As Tony said we're growing faster than any of our competitors. In addition we're building on our market share leadership position again in Latin America. We're also expanding the capacity of our battery manufacturing facility by adding a AA and AAA line in our plant in Wisconsin.. Both of our alkaline plants, one in Wisconsin the other in Germany are running 24/7. We're doing that to meet the growing demands of the retailers which is consistent with our strategy of local supply and full plan.

We are committed to maintaining our value position in the battery business. Ray-O-Vac and (inaudible) batteries last as long or longer than our competitors and we intend to continue to win at point of sale. At Remington, after delivering strong growth in women's hair care over the past couple of years, the team is now demonstrating an impressive recovery in the shaving and grooming category where we've replaced previously introduced, poorly received models of shavers. In fact, we now have captured the top market share spot in North America for foil shavers. Our women's hair care business has also catapulted to the number two or number three position globally and is driving our success. Over all, Remington is on its way to a record adjusted EBITDA year business for that business.

At global pet supplies, the teams here have done a remarkable job of building the largest pet supply business in the world. And, are the only true global player in the space with adjusted EBITDA margins between 15% and 17% as well as the continuing strong performance of some of our key brands including Dingo, Nature's Miracle and Tetra. I'm looking to this business to continue to expand its top line in adjusted EBITDA in the years ahead. This could be achieved through some strategic bolt on acquisitions that fit well into our portfolio and our plans to rationalize our manufacturing and distribution footprint. As Tony mentioned while it's still a little early to talk about the home and garden season I'm extremely encouraged by what we're seeing so far. Teams here have done a tremendous job of refocusing this business following the shutdown of the growing products portion of the business last year. Weather patterns are good.

Major retailers are using our brands to bring customers into their stores. While threats from our competitors put us on the defense during the bankruptcy process, this year we have taken the offensive. As a result we are off to a great start and are optimistic about the results this team will be able to deliver by the end of the season. All of our businesses are built on the promise to provide quality and value to consumers with many of our product lines utilizing the same performance less price model, which has been so successful during the recent economic times. We are focused on retailers. Their point of sale and our supply chain efficiency which we believe will lead to consistent returns for our shareholders. As the Company previously announced we intend to add the Russell Hobbs portfolio of well recognized small kitchen appliance brands to our operating structure within the next few months.

Like Spectrum, Russell Hobbs has completed a painstaking transformation over the recent years. Significantly reducing it's SKUs, brands, head count, and overall cost. Their collection of small appliance brands which operates under the same sourcing model as our Remington business will be a valuable addition to Spectrum Brands and one that should result in $25 million to $30 million of cost savings synergy. Upon shareholder approval and satisfaction of the closing additions we currently expect this transaction to close in June or July of this year. As a reminder as part of this transaction, the combined Companies received commitments from Credit Suisse, Bank of America, and Deutsche Bank for approximately $1.8 billion in financing in order to refinance our existing senior debt through a combination of term loans, new senior notes and a new $300 million ABL revolving facility

Preparations are currently being made for us to be on the road to market this new debt later this month. This new debt structure with maturities extended to 2016 and beyond will provide an enhanced long term capital structure to support the combined Company's strategic business objectives. While we are currently working to finalize our S-4 which is filed under the name Spectrum Brands Holdings and expected to become effective shortly, while the day of the special need to approve the merger has not been finalized we'd expect it to occur in early June. All holders of shares as of today, which is the record day, will receive voting documents over the next couple of weeks.

Once this transaction closes we'll have formed a new global consumer products Company with expected annual revenues of $3 billion, which will include a collection of well-known and highly respected brand names including, Ray-O-Vac, Varda, Remington, DINGO, Tetra, Nature Miracle, Spectracide, Cutter, Black & Decker, George Foreman and many others. Also, as previously disclosed we expect for the combined Company to deliver adjusted EBITDA of $430 million to $440 million for fiscal 2010. Notwithstanding the unusual and nonrecurring factors limiting Spectrums free cash flow for fiscal 2010 which Tony detailed for you earlier for fiscal 2011.

I expect for the combined Company to deliver free cash-flow of approximately $200 million. Going forward I expect the structure to combine businesses into four business units, the three you see today plus Russell Hobbs. We have identified the opportunities to create savings through shared services and by adding Russell Hobbs inspections to existing global new product development supply chain structure.

Sales marketing and customer touch points will remain separate at each business unit, which is evidence we are committed to avoiding any repeat of mistakes made in the past. Our mission is not changed we intend to be a global valued proposition leader in our space offering the same performance better price or better performance same price model in most of our product categories. We intend to be first class category managers for our customers providing them with the best data we can offer.

Additionally, we will demonstrate to our customers how they can most effectively promote their products, develop their planograms, create point of sale and how they can best make money. In short, we intend to make ourselves invaluable to our customers. We will use our money to boost retailers point of sale as we merchandise and promote our products. Operations excellence remain a cornerstone to the way we do business. We have created a very effective and efficient cost structure which I intend to build upon.

We will focus our investments in R&D, new products, cost improvement and growing our market share. I'm proud of what we've accomplished over the last few years. Built a solid foundation for the years ahead. It's time now to launch the next phase of our value model. For fiscal 2010 our businesses are poised to deliver improved sales and profits over fiscal 2009. I believe we're in a strong position to build on that success as we look to 2011 and beyond. I look forward to working with you and sharing our triumphs in the future quarters and years. With that, let's turn the call over to the operator and do some questions.

(Operator Instructions) Our first question comes from Mary Gilbert of Imperial Capital. Your line is now open.

Good morning. With the good results that you've achieved in the first half, why is the guidance still at for EBITDA for the Spectrum Brand business loan $335 million to $345.million

That's a very good question. I know you can calculate the LTM at this point. It's a strong number. However, we do have quite a few headwinds that are facing us in the second half of this year. We alluded to several of those in our prepared remarks. But we can flush those out as we get into the Q&A here. Obviously, more than 50% of our business is a foreign driven, so offshore we are looking at a tracing dollar-- the dollar as of last night was to the Euro was at $1.29.

And we see that,, possibly continuing so we're concerned with that. But we do hedge our foreign exchange exposures to an extent we do have a very disciplined hedging policy as we discussed in the past that, we are exposed to an extent to foreign exchange an obviously when it comes to the translation of financial statements, we can't hedge for that.

In addition commodities, we receive commodities increase for instance while it's about $2,300 a metric ton right now, which is, higher than where it was a year ago rather significantly and we see other key inputs in our processes that we use our increasing, of course, oil which is another commodity that is, we rely quite a bit packaging or distribution we're faced with increases there as well. And that side let me get it back to Dave.

That's a good question. Besides the, full impact of currency and commodities that is not of the first half. and those aer now being baked into the second half. You've got a very changing market in China where they're starting to reprice their goods as well not only in containers and fuel, but I think a very significant thing is that, and I read all the other battery companies' calls as well. Full impacted as battery discounting is not going to take full affect until the third and fourth quarter. It's pretty significant across the board. That will come in in the third and fourth quarter. Now, frankly we'd love to do better than this. In light of all the news we're getting in FX, commodities, battery discounting and the fact that the consumer -- while the stock market is higher the consumer and unemployment is only buying a value. Why it's helping us, we're going to be a little cautious in the back half. That's why you have what you have.

Okay. That's helpful So the battery discounting you said was really going to impact you in the second half? Is it a way that you could quantify or,give us a little more granularity on that.

Well, I can't speak for the other companies or detail. But I can tell you it's pretty simple if you had eight batteries and you add two batteries free you've increased your cost of goods by 25%. And that's basically what a lot of (inaudible) companies have done. on those packs And as long as that stays where it is, as Tony said, we've seen an industry sales go down because more batteries are being given for less price and the cost to goods go up. There's been no pricing in the marketplace. It's pretty easy to figure out if you follow that approach.

Plus the zinc effect too. So you have two things going on, you have the 25% hits on the pricing in effect because you're giving away two extra batteries plus the zinc , right?, Your hedged to a certain extent but not

And the other thing is without getting into a lesson batteries there's a lot more chemicals (inaudible) and a lot of those chemicals are pretty pricey right now.

Okay. That's very helpful. Also with regard to the $200 million in free cash-flow that you were discussing, is that after all of your cash cost, so that would be free and clear of everything, $200 million, you know, look out to 2011?

That's correct.

Okay. Do you have any metrics on how the Russell Hobbs businesses are performing and any granularity n their business and what's driving the growth there or the opportunities there?

Unfortunately, Mary, we can't speak to that right now. But obviously as we get -- we can provide to the public, we will be issuing that.

Okay. And then one last question, on the cash restructuring cost, the whole $101 million of cash cost that you're going to be occurring this year that are essentially nonrecurring, how much has been incurred in the first half?

Let me -- actually with respect to the bankruptcy, the cost I told you about the $21 million preposition payables and $46 million in professional fees, there's been incurred with the exception of $1 million that's all behind us.

Okay.

With respect to the operations, the business cash-flow is coming in, obviously we're benefiting from the results of the stronger results from the Company and just going through, as I said from the reorganization structure we've got the $21 million and $46 million behind us.

The deal cost associated with Russell Hobbs, we've incurred about $5 million of that so we've got a little bit more than I'll call it $8 million to $9 million left on that and of course the restructure and related charges that we've incurred related to those past initiatives that we implemented we're right on track with those. We're about,, halfway through that $20 million that we've incurred.

Thank you so much.

Sure.

Next question comes from the line from [Ressa] from Barclay's Capital, your line is now open.

Good morning.

Good morning.

Just to go through some of the head winds that you were talking about. What portion of your revenues are denominated in Euros in round numbers.

It's probably about 340, 350 million.

Yes somewhere between 350 million and 400 million for the batteries plus side 500 million.

Total?

Yes.

Got it. So when the Euro translates at a lower level or if it does that although the comparisons are hard in your second half, is there a metric that you use that for one penny change in EURO that there's an X amount of impact on EBIT or EBITDA (inaudible) basis.

We really don't have that because we get impacted by the relation impact or transaction impact as well.

Right.

Because while -- if you think of a situation with the weakening of a strengthening dollar which we're experiencing right now, for instance, we're going to have the impact of negative translation as we translate our foreign entity financial statements into US dollars. In addition to that our European sister companies that are purchasing products in dollars which include our Remmington business as well as our key inputs for battery, they're going to be paying more Euros with those (inaudible) -- i.e., translated into more dollars. They're not translation negative impacts on that, which is primarily impacting global batteries and personal care segment.

Obviously our home and garden business is a domestic business. When you look at Pet which is a global business, we've got a foreign -- we've got our fish food manufacturer in Mele, Germany, which is selling to the US in dollars. So we have a natural hedge there. While we get a translation impact in that example where it's negatively impacting us. It's minimized impact on the bottom line because there's a natural hedge for the (inaudible) as in our cost of sales.

Okay. What portion of your Euro exposure if any have you hedged?

As I said, we have a very disciplined hedging policy. Right now for the remainder of this year we're about 50% hedged in our transactions however decline value of 70% in the third quarter and 35% in the fourth quarter.

You're -- how much in third and fourth.

70% hedge in the third quarter and 35% hedged in the fourth quarter it averages out to about 50% that's for the mixed fourth quarters out.

Okay. And so you have negative pricing in the US and you have the translation issue you just referenced. On the other hand you gained some shares and obviously Latin America looks to be strong for you, so I mean what does that all mean for your global batteries an personal care EBITDA in the second half. Did the headwinds more than offset some of the tail winds you reference.

This day, we will be about last to a little bit down when you average all that in even though our market share gains are making up a lot for negative pricing and extra batteries and commodities and transportation. The overall industry will be down until we see a return of more rational pricing. We've been extreemly aggressive on our position in the extra battery. When they added two batteries we added three. We're going to continue to do that for as long as this takes.

Right. I guess what I'm saying, the FX head winds that we just discussed in negative pricing in the US out lying market which looks to be almost 9% per unit and zinc costs are somewhat higher, what do you have to offset those head winds.

That would be driven by quite honestly cost improvements in our organization. Dave has done a tremendous job in identifying opportunities within the manufacturing process as well as with our distribution network in trying to rationalize wherever possible and create a more efficient cost structure going forward. Plus obviously you've got the mix impact as we mentioned in our prepared remarks that are impacting us as well.

The also -- the new AA, AAA lines we're putting in is much faster, more efficient than our older existing lines.. One thing to remember we were unable to put the right capital spend over the last several years into cost improvement efficiency in the battery business, which is highly negative. And frankly all of the business if when you look at our capital expenditures even this year, you'll see they're up getting closer back to norms. This is also helping us offset those costs. offset.

What Dave is referring to if you look at capital spending historically, we've been spending around the $15 million mark on average, which is really our requirement for maintenance and on going normal spend, I'll say, but what we did do because preceding and during the Chapter 11 filing and through Chapter 11 filing was rationalize our cash wherever possible. So we had -- and we mentioned some in last call.

We had a plethora of projects that had very strong pay backs defined as a year to two year pay backs which obviously most companies would jump at those opportunities. We're now implementing those because of our stronger, much stronger liquidity position and, we're looking at -- we're headed going forward. And because of that, we're able to implement those projects and they are paying significant dividends in allowing us to reduce our cost and drop value to bottom line.

And then my last question is really on the shaving and grooming business, the sales growth was impressive. Is that all consumption or is that a fill in of a new product or fill in for some shelf space gains because I don't see any metric that would show that the category is growing at those levels.

When we talked about glowing the women's side of that business and you're right the metrics are wide or relatively flat ito down as women are not buying as many devices. (inaudible) But we have gained share worldwide and remember this is relatively new business for us, we've entered new market in eastern Europe and Latin America where we're doing pretty well.

Got it.

I know you were saying shaving as well. Shading until recently we were barred on the rotary side of any countries due to some trademark issues which are no longer there so we've entered in those markets. In our new shaver line that we talked about has been very successful on rotary and foil through a more global approach to that product and its cost.

Right. Sorry, one last question, Tony, are you still buying about 20-tons of zinc a year? Metric tons?

No. It's lower than that. We haven't disclosed in the past. I know the metric you're speaking of 20,000-tons is an amount that we used to purchase in years passed. We're actually purchasing less zinc than that currently.

Okay. Thank you.

Sure.

(Operator Instructions) your next question comes from Bill Chappell from SunTrust. Your line is open.

Good morning.

Good morning.

Couple quick questions first on the home and garden, I mean, can you give me an idea of what you've see on sell through for the month of April, have you seen a pretty good figure. I know a lot of your products are later seasoned with bug and weed controls I want to see what you're seeing in the acceleration.

Hi, Bill, Dave Lumley . The sales due in April has been tremendous and I know you've heard that from our other two competitors and it, the early road well. If we could extrapolate these results for 12 months it would be wonderful. But as we know weather comes and goes. But April has been a record month for us.

I'm sure it has been for the other people. The numbers are all double digit and very high. So, it's been very good. We'll see now what happens in May and June as weather tends to catch up.. We believe we'll be better that the quarter will be better than last year. Remember last year there were a lot of other problems besides the different weather. Home centers didn't have much. And they are seen they are seeing a return to the consumer to Depots and Lowes and Wal-Mart to take care of their lawns and so that's aiding that as

Sure. In terms of the battery business, have you seen any further developments in terms of competitive pricing. It seems at least from the store checks I've done, that the pack sizes have expanded beyond the eight and I guess eight and 16 pack and some other packs that have been up sized. On the other side PG the other day said this was just a promotional short term type trend and might not be your permanent pack size change. How are you looking at that for the remainder of the year.

We? We also see large packs, There's 40 packs out there, 50 packs out there. 48 pack out there. We've had a 30 by 30 pack. So -- you're right. I read the same comment and I think we have to assume that we're -- you're running a business that you're going to have all those packs for the whole year. Now that was the change, then everyone would react accordingly.

But I think you've got a good grasp for it. I think everyone was trying a lot of different things and how it will see where we go next. The next big area will be holiday. That's being decided now by the big retailers. I'm not sure that any retailer enjoys having category go down.

So would you have an idea on the kind of holiday sets after the next quarter and that's typically the right time frame.

We should know that in the next couple of months. Yes that's true most of our business for the holiday.

One just last question just out of pure curiosity, what drives a strong pond season?

I'll let John Heil answer that.

Pond season is very much like home and garden. It's weather driven. Last year in Europe it was very cold all the way through April. This year the weather broke earlier so on a year over year basis we had an earlier start in pond and aquatics in Europe is about (inaudible).

But overall , it sounds like you're pretty comfortable that aquatics is stabilized if not actually

We had a good quarter bill and I'll take it one quarter at a time. It was a good quarter and we were very pleased with that.

Great. Thanks so much.

And your final question today comes from the line of [Connie Vernetti,] from BMO Financial . Your line is

Good morning. Good morning Connie. What do you calculate do current price gap to be between Ray-O-Vac batteries and Energizer and Duracel

Okay, it's Dave, I'll take that. I don't want to be evasive. It depends on the pack size, okay. But in general we offer our basic strategy in North America is that we're going to offer 50% more batteries than competitors at the same price. That usually translates somewhere between 20 -- - depending on the pack size because it's not always the same, up to a 25% to 33% gap. Now there's some packs that are 15%. There are some packs that are 33%.

This has been our strategy. We believe in this strategy. We believe when you have a battery that last just as long as the premium product, you can provide that value to consumer. Obviously we also believe that that the consumer should have the right to have choice in batteries. So we think it's a good strategy. It's part of our valued model. So I don't -- that's the best way to answer that question. Does that answer your --

It does. So that this this 25% to 33% price gap, has it been maintained with all the changes in pack sizes or is this a wider gap now than what you've seen in prior years?

No. No. That's what I was seeing earlier, that we maintain the same balance that we always have. If competitors added two batteries we added three.

Okay.

And we can go either way. We tend to price with batteries or we can price the product less. It's kind of a moving target. Each retailer likes to take a different approach as well.

With the increase in all this competitive activity, as your sales have grown, have your profits grown or is this, it's a zero some game at retail, what does it do for your profits.

Well you saw our results, they're up.

I'm sorry. Not in the office right now. Sorry about that. I guess the final question, we've seen events like this in the past and what's to say that at some point Proctor just doesn't say, all right, enough already and they whole a lot of money at retailers they get back to that they belief is is their rightful share, whatever that is, and all all of a sudden, why shouldn't this, this activity end the way the last one did like in 2003.

Well, first of all Proctor & Gamble is great company and great brand and they're very smart people. They just did throw everything with value category with promotions. So we see what happened. What they will do long term is obviously up to them. Our state is valued, we will defend it to the last battery we sell.

Okay. And one final question, your -- I think you said your over all market share in general batteries was 17%.

Right.

But your strength is in the mass market. What's your pass market share?

That is our -- that is our total share as measured by Nielson and Wal-Mart. So you have the number. I would tell you that our strength is not necessarily just in the mass market. We've done pretty well in the industrial side. As you may or may not know, we're the leading hearing aid battery seller in the world.

So total share all outlet including Wal-Mart, club stores.

Right.

So things that are not measured as well.

Correct.

Thanks so much.

All right.

There are no further questions at this time, we'd like to thank everyone for joining our conference today. You may now disconnect

Thank you.