Spectrum Brands Holdings, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Q3 2020 Spectrum Brand Holdings, Inc. earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require further assistance, please press star zero. I would now like to turn the conference over to your speaker today, Kevin Kim, DVP of Investor Relations. Thank you. Please go ahead.

Great. Thank you, Angie. Welcome to Spectrum Brands Holdings Q3 2020 Earnings Conference Call and Webcast. I'm Kevin Kim, DVP of Investor Relations and moderator for today's call. To help you follow our comments, we have placed a slide presentation on the event calendar page in the IR section of our website at www.spectrumbrands.com. This document will remain there following our call. Starting with slide two of the presentation, our call will be led by David Maura, Chairman and Chief Executive Officer, Jeremy Smeltzer, Chief Financial Officer, and Randy Lewis, Chief Operating Officer. After their opening remarks, we will conduct the Q&A. Turning to slides three and four, Our comments today include forward-looking statements which are based upon management's 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 data today, July 31, 2020, and our most recent SEC filings and Spectrum Brands Holdings' most recent annual report on Form 10-K, and Quarterly Report on Form 10Q. We assume no obligation to update any forward-looking statements. Also, please note we will discuss certain non-GAAP financial measures in this call. Reconciliations on a GAAP basis for these measures are included in today's press release and 8K filing, which are both available on our website in the Investor Relations section. I will now turn the call over to David.

Hey, thank you, Kevin. Good morning, everybody. Thanks for joining us today for our third quarter call. Before we turn our attention to the company's third quarter results, I want to say again thank you to all of our employees. We've got 11,000 plus employees around the world. And to all of our frontline workers in our factories and distribution centers, I'd like to say thank you. You guys are the true heroes of our company. Your sacrifices are allowing Spectrum Brands to embrace our new identity as a true home essentials company. Because of you, we are innovating, marketing, and we're bringing joy and happiness to our consumers worldwide, whether it's in the kitchen, the yard, around the house, or with your pets. We are delighted to make life better and more enjoyable for our consumers of our products and services throughout the planet. Turning to slide six, Our results this quarter reflected strong demand that accelerated throughout the course of the quarter. Simply put, we have embraced our position as a home essentials business, and instead of pulling back in the face of the COVID-19 challenges, we are continuing our drive to add talent, create new innovative products, and improve our operating model. In addition, just in the last 60 days and ramping up in the current quarter, We have committed to significant increases in our advertising investments to meaningfully accelerate the long-term organic growth of our company. The actions of our Spectrum Brands family reflect resilience and operational excellence in this ever-evolving environment. This includes adopting safety protocols in response to COVID-19, navigating temporary government-mandated factory closures that have impacted Hardware and Home Improvement Businesses, and balancing strong underlying demand, including large mix shifts. The temporary COVID-19 related supply disruptions from our HHI division negatively impacted results this quarter, but we believe the situation is largely resolved and supply is expected to be caught up by our first fiscal quarter. Furthermore, Our Global Productivity Improvement Plan savings positively impacted each of our four businesses in the third quarter. As we indicated earlier in the year, these savings are now beginning to outweigh the headwinds from the annualization of tariffs, which we expect to be an incremental $70 million in this fiscal year. We continue to expect GPIP to generate at least $100 million of full run rate cost savings over the next To be frank, I continue to be very excited about our global productivity improvement programs. The impact of this critical strategic initiative is evidenced more and more every day with our employees and increasingly more with our customers and investors. The savings across procurement initiatives and operating model improvements are driving real benefits, aiding our commitment to deliver sustainable organic growth Faisal Qadir, Ehsan Zargar, Jennifer Schultz Aided by our commercial operations team, or what we call ComOps, we've quickly pivoted to ensure our new products and incremental advertising investments resonate with consumers finding themselves spending more time at the home. Since the initial change in consumer behavior back in March, our ComOps and business units worked together as one to recognize, adapt, and lean into the spike in at-home trends that is positively impacting every one of our businesses. We believe this trend is a sustainable tailwind to drive growth and repeat purchases as consumers spend more time on the home front. Starting in our home and garden division along with our home and personal care unit and expanding during the July 4th holiday across all the other business units, we have approved about $20 million of incremental advertising spend that will continue into the first half of 2021. We expect these investments to drive returns from the George Foreman Smokeless Grill to the SpectraSide U-Haul just to point out a couple. Again, instead of pulling back, the company is leaning in. We are investing and we are expanding. From a balance sheet perspective, we continue to be focused on liquidity and a strong balance sheet. On June 30th, we strategically refinanced our existing $890 million cash flow revolver, and we replaced it with a new five-year $600 million cash flow revolver and a $300 million 10-year senior unsecured notes, which are due in 2030. This leverage-neutral transaction allowed us to maintain a very strong liquidity position while extending the maturity profile of our debt and locking in favorable pricing. Also during the quarter, we did opportunistically sell 1.1 million shares of our Energizer Common Stock Holdings for proceeds of about $50 million, and we ended the quarter with a 3.1 million share position in Energizer. If I could have you turn to slide seven now, please. The third quarter results represent that three of our four business units during the third quarter actually generated healthy organic growth and despite COVID-19 related challenges, our global team generated financial performance that was consistent with the prior year. Importantly, our e-commerce business continued to generate exceptional growth across all the businesses with sales up 44% compared to the prior year and now representing approximately 16% of our base business. Total demand remains strong with July net sales up across all business units. Our future is bright. As a home essentials company, we believe we remain well positioned financially and operationally to drive long-term sustainable organic growth. Turning to slide eight, I'd like to take just a few moments to look back just over the past 90 days to some comments from our last earnings call. If you remember, I concluded my second quarter prepared remarks indicating our plans to Realign our supply chain to better reflect and accommodate new demand patterns, plans to continue to execute on our global productivity improvement programs, and to embrace a more consumer-driven mindset. We delivered on those expectations in the third quarter by achieving better-than-expected results in the midst of a very challenging environment. Taking another step back, in the face of incremental tariffs, and COVID-19 challenges, so far this year we have grown organic sales and adjusted EBITDA despite significant supply chain issues. While our teams are focused on finishing the year strong, our recent results demonstrate our resilience as a leading consumer staples company. We believe our laser focus on operational excellence, driving efficiencies through our global productivity improvement plans, and investing back in the business to drive long-term sustainable organic growth continues to point the way to a very bright future. If I could have you turn to slide nine in the presentation. Our employees are the absolute heroes of this story. They continue to demonstrate servant leadership across the businesses and this includes our work to launch timely new products. The team has innovated by introducing Cutter Hand Sanitizer and more recently Nature's Miracle Disinfectant. Our plants in Blacksburg, Virginia, Melee, Germany, continue to designate part of their facilities to produce hand sanitizer and help combat the spread of COVID-19. Given the continued needs, we continue to donate these products, and so far we've donated to many organizations, some of which include the St. Louis Area Food Bank, the Northwest Arkansas Food Bank, and New York City Relief, as well as many, many organizations around the country and the world. These products are also available now for purchase on several e-commerce sites. Turning our attention now to slide 10, just as a reminder, our Spectrum 2020 guiding principles remain vision, clarity, and focus as we create the faster, smarter, stronger Spectrum brands of the future. Our vision is being a strong innovator of great products supported by consumer insights and marketed with excellence. We are bringing clarity to our organization by continuing to simplify our business, streamlining our go-to-market strategies, and becoming a much more productive and efficient company. Our unwavering focus on best-in-class customer service This is our pathway to consumer-driven mindsets across the businesses, and we accept nothing but outstanding quality and service while increasing innovation and marketing investments to drive our brands and the long-term growth of our businesses. I continue to believe the best days are ahead of this company as we work to deliver significant long-term value creation to our shareholders and produce sustainable growth going forward. Now you'll hear much more from Jeremy on the financials, and Randy will walk you through the additional business unit insights. I'll now turn the call over to Jeremy.