Good morning. My name is Mariama, and I will be your conference operator today. At this time, I would like to welcome everyone to the Spectrum Brands Fiscal 2017 Fourth Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. As a reminder, ladies and gentlemen, this conference is being recorded today, Thursday, November 16. Thank you. I would now like to introduce Mr. David Prichard, Vice President of Investor Relations for Spectrum Brands. Mr. Prichard, you may begin your conference.

Thank you, operator. Good morning, and welcome to Spectrum Brands Holdings fiscal 2017 fourth 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 our call today. Now, to help you follow along with our comments, we have placed a slide presentation on the Event Calendar page in the Investor Relations section of our website at spectrumbrands.com. This document will remain there following our call. Now if we start with slide 2 of the presentation, you'll note that our call will be led by Andreas Rouvé, our Chief Executive Officer; and Doug Martin, our Chief Financial Officer. Andreas and Doug will deliver opening remarks, and then they will conduct the Q&A session. Now, let's turn to slide 3 and also slide 4. Our comments today include forward-looking statements, including our outlook for fiscal 2018 and beyond. These statements are based upon management's current expectations, projections and assumptions and are, by nature, uncertain. Actual results may differ materially. Now, due to that risk, Spectrum Brands encourages you to review the risk factors and cautionary statements outlined in our press release dated November 16, 2017, 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 today's press release and 8-K filing, which are both available on our website in the Investor Relations section. With that, I'm very pleased now to turn the call over to our Chief Executive Officer, Andreas Rouvé. Andreas Rouvé - Spectrum Brands Holdings, Inc.: Thanks, Dave, and thank you all for joining us. Turning to slide 6,…

Thanks, Andreas, and good morning, everyone. Turning to slide 9, let's review Q4 results beginning with net sales. Fourth quarter reported net sales of $1.32 billion increased 5.8% versus last year. Excluding the favorable impact of $12.4 million of foreign currency and acquisition sales of $20.8 million, organic net sales grew 3.1%, our best quarterly result in 2017. This increase included the negative impacts of planned unprofitable business exits of approximately $14 million, or 1.1%. HHI and Home & Garden delivered record fourth quarter performances, along with strong performances from Global Auto Care and Personal Care. Reported gross margin of 37.5% decreased 140 basis points from 38.9% last year, primarily due to unfavorable mix, the negative impact of the rawhide recall and operating startup inefficiencies primarily in Edgerton, Kansas. Reported SG&A expense of $322.1 million, or 24.4% of revenue, compared to $294.4 million last year, or 23.6%, primarily due to acquisitions, higher share-based compensation expense and increased marketing investments to support new product launches. Reported operating margin of 8.2% decreased 450 basis points versus 12.7% in the prior year, largely driven by increased marketing investment, restructuring charges and impairments. On a reported basis, Q4 diluted earnings per share of $1.63 increased compared to $1.49 last year, primarily due to reduced interest expense, a larger income tax benefit and lower average shares outstanding. Adjusted EPS of $1.35 improved 3.1% versus $1.31 last year. Q4 reported a tax benefit of 77.7%, which has improved from an 8.4% benefit last year, primarily due to a discrete tax benefit recorded in the quarter to reverse a previously recorded tax liability for the anticipated repatriation of non-U.S. earnings. Turning to slide 10, reported interest expense in fiscal 2017 of $211 million decreased $39 million from $250 million last year, driven by the benefits of our…

Thank you, Andreas and Doug. Operator, with that you may now begin the Q&A session please.

Your first question comes from Faiza Alwy with Deutsche Bank. Your line is open.

Yes. Hi. Thank you. Andreas Rouvé - Spectrum Brands Holdings, Inc.: Good morning.

Good morning. So I guess my first question is just on the categories. What are you anticipating the categories are going to grow in fiscal 2018 and perhaps what did they grow in fiscal 2017? Andreas Rouvé - Spectrum Brands Holdings, Inc.: Yeah. Let me first start with the question on the category growth. I think overall, we expect all categories to grow somewhere in the low single-digits, with probably the strongest growth in the Hardware & Home Improvement where we have the strong tailwind from the U.S. housing market. We also expect some benefits here – long-term benefits coming from the hurricanes, so therefore that is probably the category growing fastest. Now on the other extreme, it's probably going to be on the section of home appliances where again the growth is quite often driven by innovation, which leads to a peak in market demand, and then that slows down. And then right now, for instance, the home appliance category is slightly shrinking. We estimate it, based on market data, shrinking by about 0.5%. And the other categories are somewhere in between. Now, if you look at 2017, I would say that was overall very similar. So, there was really no dramatic shift. The only really difference is that in the Global Auto Care where we have the AC business, which is a very strong, weather-dependent business, there we saw this year a decline in the category of about 5%, but this was really purely driven by cooler summer weather in our core U.S. market. And again, we believe that's not a long-term indication. It's just a short-term weather impact. Similarly, we had in our Home & Garden division, our personal repellent business where, again, as I mentioned earlier, we had in 2016 the exceptional strong demand coming from the Zika virus, whereas now in 2017, both retailers but also consumers had pretty much their household equipped with personal repellents, so the category was also down. But again, we believe this was a kind of two-year up and down. So, overall, we believe that also those categories will continue to grow in the low single-digit rates.

Okay. And then if I may just ask a second question regarding your two new projects, Alpha and Ignite, if you could maybe give us just a little bit more detail on what the $20 million will be spent on, how these projects will be managed. How do you determine the ROI on these projects? Sort of just what adjacent market segments are you targeting? Just any more detail that you can provide on those two will be really helpful. Andreas Rouvé - Spectrum Brands Holdings, Inc.: Yes. Very good. The background is really that Spectrum Brands, as you know, based in 2009, we recovered from bankruptcy, and we still had a little bit, as part of our corporate culture, a relatively short-term thinking. That means we pursued projects which had more or less a self-funding principle. That means we invested not more than what we were expecting as a payback, so that the year one impact was neutral to positive. However, what we are doing now is we are investing more into innovation to expand into adjacencies, and when we then launch such innovation, we are going to invest more into the marketing to drive growth in those categories. To a certain extent, our step with the Wash and Wax Wipes in Armor All is a good example. This is, in 2017, net, if we consider our marketing investment, a loss. However, we have established the brand. We have gained strong retail distribution, it is aware in the consumer mind and now we can continue to earn the fruit in 2018 and beyond. And a similar approach we are going to drive now in other categories and examples would be, for instance, here in the U.S., we are relatively strong in home appliances with the BLACK+DECKER brand more, let me say, in mid price point, lower price point. And there, we are going to leverage our innovative higher-priced products from Europe under the Russell Hobbs brand, we are going to enter it but, of course, we will have to invest into the respective marketing means to drive it. Now you asked about the return on investment. It is still a very compelling return. Payback is typically in the range of one and a half years. So therefore, this is not going to be a long-term drag. It's the kind of start-up investment to get it going, and then we are going to reap the benefits in the future.

Okay. Great. And just quickly, Doug, like is this $20 million excluded or included in your free cash flow guidance?

It's included in the free cash flow guidance.

Great. Thank you.

Thank you.

Your next question comes from Bob Labick with CJS Securities. Your line is open.

Good morning.

Hi, Bob. Andreas Rouvé - Spectrum Brands Holdings, Inc.: Good morning.

Hi. Just wanted to talk a little bit about the shifting retail landscape, and can you talk about how your go-to-market strategy has evolved? And please talk also about your online strategy. You mentioned the 50% growth online, which is fantastic. Maybe talk a little about where you are now in terms of online sales and where you expect to be in three years. Andreas Rouvé - Spectrum Brands Holdings, Inc.: Okay, that's a complex question. I think the first point is online or, let me say, multichannel, because it's also a combination where you order online, you pick up in store, and all those kind of options. It is one of many channels. And if you look at the total market, well, we are still somewhere in the 25% and less of the respective market channel. So therefore it is an important, very rapidly growing channel which we are fully exploiting. However, we have to realize that the majority of the demand is still in other channels. And that can be the mass, that can be specialty, that can be discount channel, so there are a multitude of other channels. And the key challenge really going forward is to avoid the channel conflict because, of course, the online is driving huge price transparency, and therefore the biggest challenge in our online growth is really minimizing channel conflict. Therefore having meaningful product differentiation features and those kind of specifics is going to be key. Now, if we look at our growth strategy, of course, there are certain categories which are more prominent online and really the highest online share is in the Personal Care category, where it's in the high-20s already for us today, and we expect that to continue to grow. And I can tell you openly that, for instance, in Europe, the biggest online retailer is also our biggest customer in Europe already. So, therefore we are developing here very well and very fast. Other categories, it is less prominent, but also here, we are investing because online is not only the shopping, it is also increasingly an information search, a validation, a comparison of competitors. So, it's also kind of information-building process and that's why we are increasing our investment also into digital marketing.

And Bob, just to be a little more specific on what we currently sell online, as we can measure it anyway, because as Andreas said, it's multi-channel. So, sometimes we may sell online but a consumer converts at a brick-and-mortar location, and we don't necessarily have visibility to that. But what we can measure, which is fairly direct e-commerce, would be about 6% across the entire portfolio.

Okay. Fantastic. And then just following up on that, I mean, do you have any idea where you would want that to be in three to five years? Is it even knowable? What's the thought process to drive it higher and do you have a goal? Andreas Rouvé - Spectrum Brands Holdings, Inc.: Again, it depends very much on the category. Like for instance, I think Doug mentioned it earlier, as we are launching Russell Hobbs in the UK (sic) [U.S.], we are launching it exclusive online because, again, it's the easiest way to reach many consumers fast. You can highlight the features, the superior value proposition very fast. But really, I would say it's difficult to now pick a number. So we want to continue to grow faster than the category. And again, if we assume, for instance, that the category grew online in the mid-20s, we grew about twice as fast as the category, and that continues to be our objective.

Okay. Super. Thanks. And then if I can, just shifting gears completely, any update you can give us on the HRG situation, where that stands right now, and possible timing of any outcomes or resolutions? Andreas Rouvé - Spectrum Brands Holdings, Inc.: Unfortunately, we can't have too much details for you. The board, as we have communicated earlier, has formed a special committee where we have all our independent directors represented. And this special committee is representing the interest of all our shareholders, and they are in direct discussions with HRG. And unfortunately, there are no more specifics which we can share today with you, but we will keep you updated as soon as something materializes.

Great. Thank you very much.

Your next question comes from Joe Altobello with Raymond James. Your line is open. Krystyna Metcalf - Raymond James & Associates, Inc.: Hi. Good morning. This is Krystyna on for Joe. My first question is I believe you had an extra shipping day in the quarter versus the base period, and I was just wondering what the impact was on organic growth.

There would have been no material impact on that, certainly for the entire year, it all balanced out. So, I wouldn't call out a number on that for one day. Krystyna Metcalf - Raymond James & Associates, Inc.: Okay. Not even just for fiscal 4Q?

No. Krystyna Metcalf - Raymond James & Associates, Inc.: Okay. And then, can you give us an update on the pricing environment in the U.S. consumer battery market? Andreas Rouvé - Spectrum Brands Holdings, Inc.: It's a tough question. I think there are two distinct trends. The one trend is that there is an upgrade to higher-quality, higher-featured and higher-priced products. So there is an upgrade in the market which is supporting the price. However, in all fairness, we have to – or at least we are seeing it, that the retailers are increasingly leveraging their purchasing power. And therefore, you have also seen, in our case, that we had, in the quarter, a decline, especially in our U.S. market. So therefore, it's still a very profitable category. It is growing. There are positive trends in the category, but it remains a very competitive market. Krystyna Metcalf - Raymond James & Associates, Inc.: Okay, great. Thank you so much.

Your next question comes from Sam Reid, Wells Fargo. Your line is open.

Hey, guys. Thanks so much for taking the question and congrats on the quarter. I had a quick question on the Auto Care segment. I guess if you could talk to where you're seeing the tighter inventory levels that you mentioned. Is it primarily on the specialty side or are you seeing it in mass as well? And then, I guess to sort of piggyback off of that question, how rationalized are retailer Auto Care inventories at this point in time? And do you think the pendulum could actually swing the other way and we actually see some restocking if weather trends are favorable this year? Andreas Rouvé - Spectrum Brands Holdings, Inc.: Well, I think the biggest impact we saw this year was really in our two seasonal categories in Home & Garden and Auto Care. And if you look at it, we had partly, in the past years, actually product returns coming at the end of the season. So retailers had stocked more inventory during the peak season, but then also were pretty hard in returning it at the end of the season. So we have not seen that this year. And if you think, for instance, at the biggest retailer in the U.S., they have implemented, in parallel with this inventory reduction, a scheme which they call On-Time In-Full. That means improving the cooperation with their suppliers where they get delivery in-time and in-full. And this again allows the retailer and the manufacturers to take total inventory levels out of the supply chain. So we believe that we are today at a much healthier level than we were last year. But in all transparency, we believe that it will remain a core point. And again, coming back to this biggest retailer in the world, I think they are announcing it publicly that they will continue to focus on further inventory reduction, and I think we are well-positioned. We don't see the big impacts coming in the future as we had seen it this year, but there will be some minor twists and tweaks in different categories.

Got you. No, that's super helpful. And I guess a slightly different question here, the builder channel, I know you guys have mentioned that as a growth opportunity. Kind of when should we see some of the moves that you've made into that channel start to flow through in HHI in 2018?

Well, that's actually beginning right now. So we had a nice win with a very large homebuilder in the latter part of this summer, and we loaded up their showrooms and are beginning to ship into that channel right now.

Got you. Thank you so much. I really appreciate it.

Thank you.

Your next question comes from Olivia Tong with Bank of America. Your line is open.

Hi, guys. This is actually Chris Carey on for Olivia.

Hi, Chris. Andreas Rouvé - Spectrum Brands Holdings, Inc.: Chris.

Hey. How are you? So I guess a little bit of a change of language on the businesses that are growing above category growth to now most, not all. So I guess can you provide some perspective on what that means for the total company and maybe how you think about Project Alpha contributing to the ability to get some of those categories where you don't expect – or the businesses where you don't expect them to grow in line with the category or above the category, how Project Alpha's going to help you do that?

Yeah. Let me start in the beginning and then I'll turn it over to Andreas for Alpha. On the tone, Chris, we actually changed that earlier in 2017 to communicate that most of our categories will grow most quarters above category rate. That's what we're intending to communicate, which allows some volatility by category within the year. That's all we're trying to do there. And we expect every one of our businesses to – and plan for every one of our businesses to grow faster than their categories every year. Andreas Rouvé - Spectrum Brands Holdings, Inc.: Yeah. And again, I think, really, no dramatic change in our strategy with Project Alpha. Our core strategy to grow faster than the market is the more, more, more approach. That means expanding into more categories, expanding into more channels and expanding into more countries. And let me give you there some nice examples. I mentioned earlier launching Russell Hobbs here in the U.S. to capture higher price points, different featured products. At the same time, we are expanding now with Home & Garden products into Latin America. We are going to launch Auto Care in Brazil where we are a very strong leading brand with batteries, where we have a fantastic distribution footprint, strong retailer relations. So we are going to leverage that to launch Auto Care into Brazil. And these are the kind of initiatives where we said, yes, we are going to launch into new channels, categories, countries and we are going to support it so that we are going to have a fast, impactful growth instead of slowly, marginally growing it in a self-funding way.

Okay. Understood. That makes sense. And then just one follow-up on gross margins. Can you disaggregate the impacts in Q4? I'm specifically trying to get a sense of mix given that the gross margin trend has trended down over the course of fiscal 2017 and just trying to get a sense of how to think about that going into fiscal 2018. Thank you.

Yeah. Thank you, Chris, and I think some of the drivers in gross margin this year from a reported basis, which is what I'll speak to, include some of the start-up inefficiencies related to those major footprint decisions we made in Dayton, Ohio around Global Auto Care, which, as you'll recall, is five locations into one, between manufacturing and distribution sites , as well as moving in our R&D facility into a greenfield operation. So you would have an expectation, and we did have an expectation, of some normal start-up inefficiencies there. And that's – had been a little bit of a drag on gross margin in the year. And similarly in Kansas where we're moving two DCs into one, another greenfield operation and some consolidation and start-up inefficiencies in that location as well having an impact on gross margin this year. The pet recall is another major driver in gross margin. And then across the company, beginning in the fourth quarter, we've begun to see some input cost pressures from commodities that we haven't seen for a couple years.

Okay. Thanks for that.

Your next question comes from Majid Khan with Tourbillion. Your line is open.

Hi, guys. Good morning.

Good morning.

Thank you for taking my question. First of all, congratulations on the quarter. It's nice to see the fundamentals have turned the corner and you expect that strength to continue into next year, especially given the very difficult macro backdrop for the sector. I know you haven't commented on the potential HRG deal but I just wanted to highlight that with your free cash flow guide of $650 million-ish at the midpoint, ex the additional growth spend, the stock is trading almost at an 11% free cash flow yield, and it's, by far, the cheapest stock in the group and, by far, the cheapest the stock has been for many years. And I think even Energizer's trading at an 8% free cash flow yield. And as you're aware, we've communicated that we're obviously in favor of an accretive deal with HRG, but with your stock at these prices, and clearly there's an overhang from the lack of resolution of the HRG issue weighing on the shares, I think any Spectrum shareholder, at this point, would be supportive of tabling an HRG deal in favor of doing a buyback. Between this quarter and the next four, you're going to generate over $1.1 billion of free cash flow and your entire float is only $2.3 billion. And even if you repurchase stock at the prices you paid last quarter, almost 20% from where it was trading yesterday, you can retire over 40% of your float and exit, I think, fiscal 2018, earning almost $13 of free cash flow per share. And that's on your guided midpoint of the free cash flow guide and that's after retiring almost 9 million shares. And obviously, you could always do a deal with HRG sometime in the future, and I'm just wondering if you've considered this alternative versus negotiating a deal with HRG while your stock is on its lows.

Majid, thank you. Yes, one point of clarity before we get in. The midpoint of our guidance next year is $630 million, not $650 million, so $620 million to $640 million's the range. But you're right, we're very bullish on our ability to generate cash flow on a sustainable basis, high-quality cash flow as a company, and that is currently and has been a focus of ours for a long time. And then beyond that, you can rest assure that the special committee continues to think about different alternatives and different options, and that's their role and they'll continue to do this. And as I mentioned in my prepared remarks, we continue to be very – believe our stock is undervalued, and we've continued to buy into it. I understand what you're saying from a bigger perspective, but those are decisions for the board to make.

Fair enough. Thank you and congratulations again. Good job.

Thank you. Yeah. Thanks.

Your next question comes from Jim Chartier, Monness, Crespi, Hardt. Your line is open. Jim A. Chartier - Monness, Crespi, Hardt & Co., Inc.: Good morning. Thanks for taking my question.

Hi. Andreas Rouvé - Spectrum Brands Holdings, Inc.: Jim. Jim A. Chartier - Monness, Crespi, Hardt & Co., Inc.: Hi, guys. First, I want to touch on the impact of the rawhide recall in fourth quarter. Doug, can you quantify what the impact was on fourth quarter sales? And then you mentioned that it would continue to be a drag in the first quarter, how much of an impact you expect it to be. And then kind of net for 2018, does it become a positive swing factor for you this year? Andreas Rouvé - Spectrum Brands Holdings, Inc.: Well, the impact actually in the quarter was relatively limited, less than $5 million on top line. The point, of course, is we do see a recovery as we are now replenishing the retailer inventories. However, in all transparency, we did face a couple of challenges, especially in private label contracts, which we have been supplying. So it will take some time to regain those contracts which were lost in the meantime. But overall, we have learned from this process, we have established best-in-class processes now and really, I think, it's going to be, long term, a clear competitive advantage. Jim A. Chartier - Monness, Crespi, Hardt & Co., Inc.: Great. And then next on the HHI supply chain disruption, have you guys fulfilled the backlog that you had at the end of last quarter, and if not, when do you expect that'll be fully worked through?

We did make some progress on the backlog in the quarter. But interestingly enough, and positively, we had very strong order inflow during the quarter. So we didn't take the backlog down as much as we might have wanted to, but it wasn't because we weren't making progress in the facility, it was more because the order flow continued to be strong. So that's good news for us, we think, going into 2018. We can continue to impact that backlog as we complete the transition. Jim A. Chartier - Monness, Crespi, Hardt & Co., Inc.: Great. And then in terms of the margin improvement this year, up until 2017, you guys had some good EBITDA margin improvement. So in light of kind of Project Alpha, do you expect your margin improvement to be a little bit depressed this year, and then does it kind of rebound in 2019 and beyond?

I would say – we've historically said that our objective is to grow EBITDA margin 20 to 50 basis points a year, and we would stick with that. I would say that you should factor in the Alpha investments, though. Jim A. Chartier - Monness, Crespi, Hardt & Co., Inc.: Great. Thanks and best of luck. Andreas Rouvé - Spectrum Brands Holdings, Inc.: Thank you.

Your next question comes from Karru Martinson with Jefferies. Your line is open.

Good morning. Just on the front on the Alpha investments, you talked about Project Ignite possibly offsetting some of those. I mean, how should we think about the magnitude of savings that you can kind of get from operational improvements?

Yeah, we're not ready to lay those out yet at this point. This is early stages on the initiative. But I think you can think about it in the way we approach continuous improvement across the company, which has largely been focused on the cost of goods sold and supply chain parts of our P&L. Project Ignite will take us above that in the gross to net customer rebate areas. And it's really about – in the first instance anyway – and it's really about identifying the effectiveness and productivity of our spend and making sure that we're spending with customers that helps drive profitable growth for us and prioritizing where we spent; so against innovation is a really good place for us to put new dollars, it helps the entire brand portfolio while launching new products and, potentially, in new categories or new channels. And then making sure that the investments that we make across SG&A are also aligned with those priorities for growth.

Okay. And when we look at Project Alpha, I think, historically, the mantra has always been, we offer you the same or better quality than our competitors at a much better price. I mean as you go into line extensions and innovations, are you looking at kind of a new competitive landscape or is the goal still to kind of adhere to that core message? Andreas Rouvé - Spectrum Brands Holdings, Inc.: We prefer to talk about superior value. That means that the product performance, price ratio is superior compared to competition. And that can apply to lower priced products, but that can also apply to premium higher-priced products. And that is a slight shift and that's really supported by Alpha, especially if you launch innovative new products, if you enter new categories, you have to educate the consumer. You have to tell the consumer that you're doing this offering, that you are an option available. And that's really, I would say, the biggest change that we are going to invest more to support those market launches in a more aggressive way, using digital, social media to really reach our target consumer and convince them about our superior value proposition.

And when you guys think about the robust cash flow that you have, I mean, what are your thoughts in terms of growing these innovations organically versus going out and acquiring perhaps some smaller start-ups who might have some additions that you want to put into the portfolio? Andreas Rouvé - Spectrum Brands Holdings, Inc.: As you have seen with the acquisition of PetMatrix, GloFish, we remain open if there are the right acquisition opportunities which are a nice complement to our strategic priorities, we will continue to pursue that. However, we believe that even if you're doing a very attractive deal, you're easily in a 10 time multiple, we believe that if we invest organically and even if it's a two-year payback, it's a much more compelling offer. So we believe that is also going to help, long term, the company grow organic sales and EBITDA also in a very attractive way if you think about return on assets, those kind of metrics.

Thank you very much, guys. Appreciate it.

Thank you.

Okay. Operator, with that, we have no further questions at this time. So we will go ahead and conclude our conference call. With that, I certainly want to thank Andreas and Doug. And on behalf of all us here at Spectrum Brands, we want to thank you for participating in our fiscal 2017 fourth quarter earnings call. Have a good day. Thank you.

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