Spectrum Brands Holdings, Inc. (SPB) Q1 2014 Earnings Report, Transcript and Summary

Good morning. My name is Chris, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Spectrum Brands First Quarter 2014 Earnings Conference Call. [Operator Instructions] As a reminder, ladies and gentlemen, this conference is being recorded today, January 29, 2014. I would now like to introduce Mr. David Prichard, Vice President of Investor Relations. Mr. Prichard, you may begin your conference.

Thank you, operator, and good afternoon, and welcome to Spectrum Brands Holdings' fiscal 2014 first quarter earnings conference call and webcast. I'm Dave Prichard, Vice President of Investor Relations for Spectrum Brands, and I'll be your moderator for today's call. Now, to help you follow along with our comments this afternoon, as we've done in the past quarters, we have placed a brief slide presentation. It's on the Event Calendar page in the Investor Relations section of our website at www.spectrumbrands.com. Now, this document will remain there following our call. Now, let's start with Slide 2 of the presentation for those of you who are following along with the slides. Our call will be led again today by Dave Lumley, our Chief Executive Officer; and Tony Genito, our Chief Financial Officer, who will both provide opening comments and then conduct the Q&A session. Joining us again this quarter for the Q&A session is Andreas Rouve, President, International. Now, let's turn to Slides 3 and 4. Our comments today include forward-looking statements, including our outlook for fiscal 2014 and beyond. Now, these statements are based upon management's current expectations, projections and assumptions and are, by nature, uncertain. The actual results may differ materially. So, due to that risk, Spectrum Brands encourages all of you to review the risk factors and cautionary statements outlined in our press release dated today, January 29, 2014, and our most recent SEC filings and Spectrum Brands Holdings' most recent 10-K. We assume no obligation to update any forward-looking statement. Also, please note that we will discuss certain non-GAAP financial measures in this call. The reconciliations on a GAAP basis for these measures are included in this afternoon's press release and 8-K filing, which are both available on our website in the Investor Relations section. Now, for the first quarter of fiscal 2014, Spectrum Brands swung to net income of $54.3 million or $1.03 diluted income per share on average shares and common stock equivalents outstanding of 52.7 million. This compares to a net loss of $13.4 million or $0.26 diluted loss per share last year on average shares and common stock equivalents outstanding of 51.8 million. Quickly by segment for the first quarter of 2014, the Global Batteries & Appliances segment reported net income, as adjusted, of $93.1 million versus $92 million a year ago. The Global Pet Supplies segment reported net income, as adjusted, of $12.5 million versus net income, as adjusted, of $10.1 million in fiscal 2013. The Home and Garden business segment reported a much smaller net loss, as adjusted, of only $1.2 million versus a net loss, as adjusted, of $4.5 million last year. And finally, the Hardware & Home Improvement segment reported net income, as adjusted, of $35.7 million this year versus a net loss, as adjusted, of $3.5 million a year ago. So, with that, I am very pleased once again to turn the call over to our Chief Executive Officer, Dave Lumley. Dave?

Thanks, Dave, and thanks for joining us all this afternoon. Let's turn to Slide 6. You'll see there we reported a record first quarter, which includes Hardware & Home Improvement, or what we call HHI, on a pro forma basis for last year. This record performance gives us a strong start on delivering a fifth consecutive year of record financial performance from our legacy business and, with HHI included for all of last year, a higher 2014 versus 2013 across all key financial metrics. The first quarter was highlighted by particularly solid performances from HHI and Home and Garden, a resumption of growth in our Remington personal care business, strong European results, solid margin improvements, adjusted EPS and EBITDA growth and an all-time high fiscal first quarter level of continuous improvement savings across all divisions. Let's turn to Slide 7. Including HHI for all of last year's first quarter, our net sales increased 3.6% or 3.8% excluding the negative impact of foreign exchange. HHI, Home and Garden and Remington personal care all had sales increases. As expected, the slight decline in Battery division sales was entirely due to the approximately $10 million of incremental sales last year that we got from the impact of Hurricane Sandy in North America. Our adjusted earnings per share of $1.09 grew a strong 40%. Adjusted EBITDA increased 11% or 3x the rate of our net sales increase, and we were pleased to see our adjusted EBITDA margin increase to 16.2% in the quarter compared to 15.1% last year. Our legacy business delivered its 13th consecutive quarter of year-over-year adjusted EBITDA growth in the first quarter, up 1.4%, with the margin increasing 50 basis points to 15.7% versus 15.2% in fiscal 2013. So we do believe we have started strong toward another record year, both…

Hey, thanks, Dave, and good afternoon, everybody. If we could first start to turn to Slide 16, I'd like to comment on our gross profit and margin in the first quarter. Including HHI on a pro forma basis in the prior-year quarter, our gross profit and gross profit margin of $381 million and 34.6% compared to $363 million and 34.2% a year ago. The margin improvement was primarily driven by higher sales and improved product mix. Excluding HHI, the gross profit margin in the first quarter of fiscal 2014 was 34.2% for Spectrum Brands' legacy business versus 34.1% in fiscal 2013. First quarter SG&A expenses, including HHI, were $237 million versus $229 million last year. The increase was due to higher amortization expense and incentive compensation programs related to HHI. Legacy business SG&A in the first quarter was unchanged from a year ago. First quarter interest expense of $57 million decreased $13 million from $70 million last year. The reduction was primarily due to the non-recurrence of $29 million of costs related to the financing of the HHI acquisition and savings of $14 million from the refinancing of our 9.5% notes last September. This was partially offset by $11 million of costs from refinancing the term loan in the first quarter and inclusion of a full quarter of interest related to the HHI financing this year versus a partial period in last year's first quarter. Our effective tax rate was 19% in the first quarter versus an unusual 325% benefit in the first quarter a year ago, due primarily to a reduction of the tax amortization of our indefinite lived intangibles, as these assets have been fully amortized. Our 2014 effective tax rate is expected to be 25% to 30%. Let me highlight a few more key items in our…

Thank you very much, Dave and Tony. Operator, with that, let's now begin the Q&A session, please.

[Operator Instructions] Your first question comes from the line of Bill Schmidt from Deutsche Bank.

I don't want to pin you to try to give segment guidance. But obviously, HHI was amazing this quarter. Like, can you, like, just give us a guess at like kind of what the sort of momentum in the business would suggest in terms of top line and EBITDA growth? Because I obviously don't want to mis-model, I know this is a great quarter.

This is Dave Lumley. We don't really do that. I think that it would be fair to say that we gave guidance saying that we should grow at GDP and EBITDA should grow at twice that. I think you'll see HHI do better than GDP, and I think that's where we have to leave it because the way things go, we just don't know. It looks good. They have good products coming out. They are continuing to move forward on cost improvement, as well as new introductions. So I think they'll do better than we in our -- than the legacy business will do.

Okay. And then...

We'd rather talk to you as we know more.

Oh yes. No, that's fine. And then, if you look at some of the point-of-sale data from Nielsen, like, you look at the kitchen appliance business, for instance, and it shows, like, massive market share and massive growth. And then you look at reported numbers and they're different, and I think you kind of see that either up or down across the sort of categories. I mean, I ask this every quarter, but it kind of makes my head spin because it seems like there's no correlation between the POS and reported stuff.

Well, okay, that's a really good question, and I'm going to go as fast as I can to answer it in 3 parts. One, Nielsen is just a segment of the market, okay? And this is especially true in a lot of our businesses as we have very strong businesses that are not Nielsen-reported in the home centers and a lot of the other outlets of industrial and [indiscernible] and that, so that's one thing. Two is POS is what's selling out. It doesn't necessarily mean the retailers have brought any more in from shipments. So great POS will be way ahead of shipments in today's world, in the just-in-time world, okay? And three, in some cases, remember, take appliances, we exited some things and now, we're getting them back. And there's also, Bill, a shift that I've been talking about for years, too. We sell nondiscretionary replacement products that are value-branded, have good performance. So you're seeing a shift to those. We sell things for a little less sale price too, right? So we sell more units. So I don't know if that answers it as clearly as you would like, but that's kind of what's going on.

Your next question comes from the line of Michael Dahl from Crédit Suisse.

It's actually Will Alexis on for Mike. I have a question on the competitor discounting in the small appliances segment. How are you thinking about, going forward, responding to that discounting? And how is that -- I guess, can you give a little bit of color on how that's potentially impacting the product introductions that you're planning in that platform over the course of the year?

Good question. There's primarily 1 competitor that has taken their prices down dramatically, and they'll get some unit sales from that, but we've been down that road 2 years ago. They almost create -- they'll almost be in a position now like private label pricing, which is always in this business, the small appliances. Why we're bringing out new products -- so first part is I don't think that's sustainable. Two, we have a whole breadth of product line through Black & Decker, George Foreman, where we have different price points and we're ready for it, okay? But more importantly, our new products are priced higher than these very low prices that you're seeing in the market price with much better products; so better pricing, better margin. In fact, the whole thing about our appliance business it's steadily improved its EBITDA margin every year, every quarter. So I think you'll see that flush out, and I would think more about what you're worried about as just another version of private label, and they only have about 20% of market.

Yes. Well, this is Tony. If I could just add to what Dave said. If you look at our business on a consolidated basis, we've taken our EBITDA margin from 15.2% to 16.2%. And clearly, our focus is on higher-margin businesses. And clearly, with the appliance business, we've done, I think, a very good job and we continue to do that to grow the margin of that business. As we said in our prepared remarks, last year, we exited about $45 million of no or low-margin business, which allowed us to gain about 400 basis points in gross margin last year. We saw a continuation of that this quarter without the elimination of products because of our continuous improvement efforts and we picked up close to 200 basis points, as we said again in the prepared remarks. So, again, the focus of our business is to improve the margin of the business, and I think that we've demonstrated that and we're going to continue to demonstrate that.

Okay. That was very helpful. And then...

Thanks, Will.

And then, shifting over to the Remington business, can you talk about the new product introductions that you have planned? They sound very exciting. I know it's a good opportunity…

Yes, we are. The Remington brand built its business on men's shave and groom. And frankly, we were probably a year late with our new shaver line, but we wanted to get it right. We wanted to get the value in there. We wanted everyone to win in that; first, the consumer then the retailer and, of course, ourselves and our supplier partner. So our new HyperFlex line has already been reviewed by major magazines, rating us top value, great performance. It's really a great line of shavers. They're just setting now in the marketplace. So I think you'll see a return to the strength of what Remington has always been in the men's category. And with, frankly, the -- all the news about men growing beards, that really hurts wet shave. But frankly, it helps our grooming products because we actually have products, including our shavers and groomers, specifically designed to give you that look that somehow, I guess, the women love. So that's great. We like that.

Until they kiss you.

Then -- but it goes beyond that. We have very exciting products as well on the women's side, a whole series of driers and straighteners and things we call big air. Our new i-LIGHT facial product's going to ship in Europe. This is a handheld unit, less money, better performing to intense pulsed light. We're waiting for final approvals to bring that forward in the United States. It's already in Latin America. So we're excited about that. Our women's hair care accessories, you got to be [indiscernible] all excited about, I'll try to go faster. We've built a good business there, competing with basically 2 people and we've kind of taken the fashion angle and been embraced by large retailers. That's expanding worldwide and really helping the Remington brand name. So when you think of i-LIGHT at the top and the women's hair care accessories at a $2 to $3 weigh in, it really enhances the whole Remington brand name, Bill. And then, with the new products, I think you're going to see Remington just continue to go forward in the year ahead.

Yes, that's good color. I meant to ask more in terms of shelf space for the new product. Those sound like very good opportunities. But as you're introducing them, is it going to be within existing shelf space at retailers, particularly in North America? Or is there an opportunity to place these products on additional shelf space at retailers?

Very, very good question. We will be gaining shelf space in every one of these products. And full disclosure, we lost some shelf space in the last 2 years. So we're getting that back, and we've gotten extra shelf space. But more importantly, we've won a lot of big promotions, as retailers are seeing that they can't eliminate this category and that if they promote it right, they can make some good money at 2x or 3x of the year, which is typically holiday, Mother's, Father's Day and back-to-school. So we will gain distribution and shelf space. And on the women's side, as I reported, we've already gained that shelf space in 3 of 6 categories.

Your next question comes from the line of Connie Maneaty from BMO Capital.

I have a question, I hope it's not splitting hairs, but we're wondering about the language in your outlook. It now says that sales, you expect your sales to grow at the rate of GDP. And the last time you made a comment, it was GDP or better. So I'm just wondering, are you noticing a change in the external environment in either GDP or FX, or is there a slight change in your own business?

The answer is no, and we're now going to take a look to Dave Prichard for [indiscernible]. No, I'm just kidding. No, we typically aim at GDP or better. We don't see any change right now in that. Again, our products, the value products that we sell, slightly priced below or the same as competitors are doing very well, gaining shelf space. We're very pleased about that sales growth in an environment where we have some very good high-margin businesses. Home and Garden is 23%. We have got HHI, 18% to 20%; Pet, 18% to 20%. In fact, even Batteries are in that category, and you heard about the others. So high-margin businesses, where we can invest to get more sales this year, and that's what we're doing. So, to answer your question, there's no hair on that GDP.

Your next question comes from the line of Bob Labick from CJS Securities.

Wanted to go back to the HHI. You obviously blew away expectations. Can you talk a little more about Kevo and the reception? And were there any initial stocking sales in the quarter related to that? And how big do you think the opportunity can be?

Well, to answer your question, Kevo exceeded their expectations in the first quarter. And you're right, you're very intuitive, half the sales were initial stocking, but they got into channels they had never been in before, electronics stores, even the Apple stores. They've done very well on online. And now, it's just going to the customers. So their sales expectations on that were a little -- $10 million to $15 million. We think they're going to do a lot better than that this year so far with that product. We won a lot of awards at the CES Show and we haven't even got it out to international. But more importantly, what that product has done, it has dramatically raised the awareness of the SmartKey technology, which is in all their locks -- not all their locks but a lot of the Kwikset locks at a much better price point that isn't part of Bluetooth and that's really helping their business as well. So Kevo's been...

Kind of a halo.

A halo, what we call the umbrella product and a dual win, and it's a high-technology product. So it's pretty exciting.

Okay. That's fantastic. And then, just following up on that, there was an article recently in the Wall Street Journal about SmartKey technology, Bluetooth technology at hotels. I know you guys are residential, but how would that relate to Kevo? And is there an opportunity there for you in the future?

It directly relates, and it's an opportunity and I can tell you that we are working on it, both with our -- inside our own place and with key suppliers. And again, one of the great opportunities for HHI, besides just its current business, is its ability to move into what we call semi-commercial applications, not only with security, but with plumbing and hardware. So, again, that's another upside opportunity to the business. In fact -- no, no, I was going to say so that's at the high end. I was going to ask Andreas Rouve to tell you that even in Europe we have launched even padlocks and we're -- and going after their business in Latin America and Asia incorporated into our platform. Andreas, maybe you'd like to talk about that for a moment.

Yes. Thank you, Dave. Basically, it's the strategy that we are using our existing infrastructure to launch more of our global product portfolio, and there, we are making nice progress of launching now HHI padlocks into Europe. And also in Asia, we are very successful in expanding into more countries.

That sounds great. Certainly supports the greater-than-GDP growth for HHI this year; sounds terrific.

Your next question comes from the line of Ian Zaffino from Oppenheimer. Ian A. Zaffino - Oppenheimer & Co. Inc., Research Division: So the question would be on the free cash flow and, I guess, the delevering. There's about $100 million delta I guess. Probably 2/3 of that is made up by the dividend. And again, not to nitpick, but what's sort of that other $30 million, $40 million that's left? Is that for Liquid Fence? Is that intentions to do another kind of roll -- small tuck-in? How do we think about that?

Keep in mind that, yes, we just purchased the Liquid Fence business, which is, as we said, a very -- it's an immediately accretive business with great margins. And, yes, we leaned into our revolver to do that. The impact on debt payment, we're still shooting to, as we said, approximately $250 million. We think we're going to be able to reach that target. We've got the dividend. But to get into each of the elements, I mean, there's -- we've gone through the major components of the cash flow and the impact from EBITDA of -- from our bridge down to get to the $350 million. I mean there's ins and outs within the balance sheet, but basically, we can maybe take this offline, but our cash flow is pretty solid at the, at least, $350 million level. Ian A. Zaffino - Oppenheimer & Co. Inc., Research Division: Okay. And then, the other question is I know you have those aspirational goals out there on the EBITDA line, and I think you're sort of about 715-ish or so on a run-rate basis on one of the weakest quarters of the year. How do you feel about those aspirational goals? And what would be out there, as you see right now, now that you sort of have 1 quarter down? What are you seeing as far as maybe headwinds or sided [ph]? I know you've, kind of, commented about raw materials being flat. So how do we think about that?

This is Dave Lumley, and I'll let Tony jump in. It's only 1 quarter out of 4. Every day the world seems to change. We still look at the bank models on currencies and maybe they're not there yet, but they still stay volatile. We are very enthused about our first quarter, and we're cautiously optimistic that, that can continue to go forward. On the headwind side, you're right about commodities. But the consumer right now is...

Let's say challenged.

Is challenged, and brick and mortar is experiencing quite a change as they watch Internet sales come in and out. Now, we're very enthusiastic from our standpoint because we tend to be the value-price product that's as good as the premium for less money. So, as the consumer has less money to spend, we tend to be considered and get more trial. So we're enthusiastic about it. I think I'd like to see how this quarter goes before I talk about can we get any better than what we've been seeing.

Yes. And if I can jump in, Ian, this is Tony. You're absolutely right. The -- when the board -- our Board of Directors approved the $750 million EBITDA program last year, that is an aspirational target. And so, you used the appropriate words. We're going to do everything in our power to try to achieve that or at least come as close as we can. If you go back to the program that the board set 4 years ago at the end of this fiscal year with Spectrum 500. And if you recall, we had come very close to that, but we did not reach 500, but it gave us an aspirational target to reach for and to claw for. So, as we've said in the past, we're going to continue to do everything in our power to get there. Whether or not we get there, that'll be -- ultimately, it will be decided to share. We do feel good about the cash flow elements of that...

Which is our #1 priority.

And that is...

With the [ph] free cash flow.

EBITDA growth and cash flow, obviously. But to the extent that we don't reach it, it's -- I can ensure you that we're going to do everything in our power to get as close to it, if not, reach and exceed that target.

Your next question comes from the line of Kevin Grundy from Jefferies.

A housekeeping question: Tony, I apologize if I missed this, did you explicitly say what is implied from an EBITDA growth perspective as we're kind of trying to get to the free cash flow number for the year? Have you guys guided to that?

No, no, no we have not. The guidance we've given is that our sales would grow in line with GDP, and that's primarily the legacy business. We have said that the -- that we would expect a slightly higher growth coming out of HHI. Nothing on EBITDA.

But you have all the cash items that you'd use for the bridge, the only one is...

EBITDA.

And working capital.

Right, right.

The -- one of the items.

Yes. Understood, understood. I just wanted to make sure I was clear on that. And then, back to HHI for a second, I guess, with some of the U.S. home data starting to worsen a bit, like existing home sales and homebuilder confidence, et cetera, can you help us sort of bridge that and how we should think about that? Clearly, you guys aren't seeing it in your business now. But can you talk a bit about the lag and what you're sort of planning for the remainder of the year without explicitly giving guidance?

We'll try to do that. In fact, we're sitting right here in Lake Forest, California where we had our board meeting yesterday in HHI. We just went through a great review with them and the board and our principal shareholder yesterday, and they reminded us that only 25% of their sales and EBITDA is even dependent on new housing starts with the lag. But they have built a plan with us together that they're really not dependent on new housing this year to make their plan because of the lag, and we went into it. So these are exciting opportunities rather than -- and the housing's helpful, don't get me wrong, but this is a business that really runs on replacement and better technology to give you a reason to replace it. Think of Kevo for what it will do or SmartKey lock never having to rekey again and with some of their technology and their hardware and their plumbing. The hidden part of this business is their plumbing and faucets has done extremely well, great fashion and all that, so...

At a great value.

At a great value. We don't want to use brand names. But I mean, they're fighting 3 big guys and doing quite well at it. So I would feel very good about the strengths of this business on a daily basis and not think of it as just "Oh, gosh, if housing goes up, they're going to go up." Tony, I don't know if you want to…

I think you're absolutely right. I think the housing clearly helps. However, the amount of investment that's been made in this business over the years, we are very, very proud of the team and what they've done with SmartKey over the years and with Kevo and with the whole Home Connect. And it's those innovative products that are really driving the business. Obviously, as Dave said, to the extent that housing rises the tide and all boats rise, then we'll take that benefit as well. But we're focused on delivering quality, value products that make the consumers' life a better life.

Good. Just to stick with this for a second, I just want to -- and this might be a difficult question to answer. You guys clearly have a lot of upside here from distribution and from a selling perspective. Based on the categories that you're in and the geographies where you're playing, what do you think the industry growth is? So you guys just put up a huge number for the quarter. What do you think that the industry is doing? So, in other words, how sustainable do you think this growth is?

Well, it's typically been in the mid-single digits.

Right, yes.

In the last year, right? And I think you got to remember, here at HHI, that they are huge market share in security locks on the residential side, so -- and they have better technology straight up than their competition. So they're going to grow better than the industry. They have -- when HHI came into Spectrum, they're now also benefiting from our Home and Garden merchandising forces. It's extremely strong in Depot and Lowe's, and that helps that situation. Like I said, their plumbing business has been growing really well, really well and better than the industry and that industry's actually grown more than single, double digits, higher towards single digits, higher towards double digits. And they have some unique products there, like the universal trim, where you can just put in a shower, 80% of them, and it'll work. You don't have to go behind the wall. Their hardware business, they have straightened out, another merchandising business, and that's in the 2-step where we're very strong with Home and Garden in batteries and light. So I think we should -- we have a good chance of doing very well against the industry numbers.

Great. One last one. That's helpful. Tony, did you want to jump in there? I'm sorry. I didn't mean to cut you off, if you did.

No, no, no, that's fine.

Okay. Tony, this one's for you. One last one, if I may, guys. Just with the dividend increase now, where do you want that to go over time? And are you benchmarking yourselves against traditional staples companies, which are, like, close to like a 50% dividend payout ratio? How are you thinking about that longer term? Because you guys could pay significant dividend once you get the leverage ratio to where you want it to be. How are you thinking about it?

Well, what we're thinking about right now is that we want to reward the shareholders, as we initiated the quarterly dividend last year and we've raised that. As we said, we would raise it as our cash -- free cash flow rises, and we'll continue to reward our shareholders. Our primary focus is deleveraging. We believe that every dollar of debt that we reduce is a dollar value accretion to the equity holders. And I guess, when we cross that bridge, when we get to -- if we were to get to below our 2.5x to 3.5x, which we said may actually happen if there was nothing out there, we'll look to see what is the best use of our capital allocation. But at this point in time, we'll continue to reward the equity holders through, hopefully, future increases in the dividend. We don't have any particular metric that we peg to at this point in time. And we think that when you're getting $350 million and, as I mentioned in my prepared remarks, a pathway, we see today to get to $400 million of free cash flow with virtually no growth in the business and just adjusting for the normalization of the elements within our cash flow statement today, we can do quite a lot with $400 million.

Your next question comes from the line of Jim Chartier from Monness, Crespi, Hardt. James Andrew Chartier - Monness, Crespi, Hardt & Co., Inc., Research Division: Just on HHI, how much of the growth in this quarter was a function of an easy comparison last year? I think, pro forma, you were down like 2% or 3% revenue for HHI last year.

That's a good question. If you were to have all their numbers and you were to look at their average for the quarter, you're right; it would be higher than the last one. But they still outpaced that average or their highest quarter ever quite well. So it's real. They've done very well.

Yes. We had a $50 million quarter this year, and that was a record quarter in absolute dollars.

Yes. No matter how you look at it. But it's a good question. James Andrew Chartier - Monness, Crespi, Hardt & Co., Inc., Research Division: Okay. And then, the cost synergies for HHI, how much of those did you realize in 2013? And is that $10 million net of the investments that you made in the business last year?

Well, what we've done with respect to the synergies that we talked about when we did the deal, as you recall, we said $10 million over 2 calendar years. Last year, we got about half of those synergies, and it was really through the elimination of TSA agreements, primarily cost TSA agreements between ourselves and Stanley Black & Decker as we exited those. We were able to provide the services at a lower cost. So we're right on track to be on or slightly exceed, in all honesty, the $10 million target. But as I've said before, even overachieving that target by 20%, let's not get too excited because it would only be $2 million. That being said, we see, quite honestly, a bigger opportunity with respect to, as Dave said in his prepared remarks, the synergies that would be available through the -- bringing the -- our HHI business into the shared services network through IT savings, the back office, the D&T. So very similar, if you will, to the profile that existed within businesses like our Home and Garden business or our Battery business or any other business that we have in the Spectrum legacy fold. So there is the opportunity. Now that's not going to be happening immediately, but it's going to be probably out, say, a year to 24 months because the key element in this is implementing SAP. Our HHI business is not an SAP shop. Stanley Black & Decker used a different ERP system. Once we convert to SAP, which we will, then we'll be able to really turbocharge the savings and be able to get those very quickly at that point in time.

Okay? So is that good? James Andrew Chartier - Monness, Crespi, Hardt & Co., Inc., Research Division: Yes. One last question; the Battery business, excluding the $10 million benefit last year, was up about 1%. Did you gain any distribution in North America in first quarter?

First of all, we thought this would be our first earnings call where no one asked about batteries. We almost made it. God bless you. God bless you. God bless you. Thank you very much for asking the question.

Dave was starting to feel alone.

I used to be the battery guy a long time ago. Hey, we're very excited about -- though it's almost all flashlights, actually, we grew our alkaline share in the low-single digits in North America. We grew alkaline over 5% globally the last quarter. We're very excited about what we're doing in batteries. We've got the new on-the-go products, these ones that power phones. There's a lot of good batteries out there to power your phone for $80. There's not a lot out there for $2 and $7. So we're excited about that. So, as I told all the other battery question guys, our model's working and it's starting to really turn now. So we're cautiously optimistic about the Battery business. And that's -- it's a good EBITDA business, too, just like Home and Garden, HHI and Pet, all 18% to 23%. So it's something that we feel good about in what has become an extremely competitive market, batteries.

And with that, operator, I think we've used up all the questions that we have, and we'll close down the call. We've reached the hour, and we want to thank all of you for participating on behalf of Dave Lumley, Tony Genito and Andreas Rouve. And so, with that, we thank you for taking part in our fiscal '14 first quarter earnings call. Have a good evening, and we'll talk to you next quarter. Thank you very much.

This concludes today's conference call. You may now disconnect.