Jarden Earnings Call Nuggets: Organic Growth Targets and Incremental Compensation Charges

Jarden Corporation (NYSE:JAH) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.

Organic Growth Targets

William Chappell – SunTrust Robinson Humphrey: Can you just talk little bit about kind of organic growth targets and especially looking back, I mean 3.5% is obviously fine in the fourth quarter, but doing only two for the full-year was below kind of your evergreen target. Help us understand how we bridge the gap from two to get back to that 3% to 5%, and what you are seeing in terms of near-term order patterns out of retailers to get you comfortable there.

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Ian G. H. Ashken – VC and CFO: Obviously we were challenged in the third quarter of this year, because of the last year – of 2012, because of the challenge with snow in 2011, 2012, but if you look back at Jarden over the last 3 years, our average organic growth was 4.3% and so the 3% to 5% is always kind of for an on average performance over the long haul and I think we are right in line and towards the high side of that. And so the things we dealt with last year were weather related, they weren’t operationally related and so we feel good about the direction we are headed in 2013 and beyond. And just believe that was anomaly to winter that we knew rolled out.

William Chappell – SunTrust Robinson Humphrey: So, the thought is with normalized kind of weather trends we go into this year that should get you back to the 3% to 5%?

Ian G. H. Ashken – VC and CFO: We are planning 3% to 5% for this year. I think a lot of people have talked about the winter weather and winter doesn’t get solved on December 31, it’s really kind of an 18 month pattern that we work ourselves through. So, we have a relatively conservative outlook for winter sports heading into 2013. We still see some challenges, snow is late, but that’s embedded in our 3% to 5% outlook for the year.

William Chappell – SunTrust Robinson Humphrey: Just on Venezuela, just want to make sure, I’m doing that right, you are saying it’s a $0.10 hit which is reflected in the guidance of $4.55 to $4.70 for this year.

Ian G. H. Ashken – VC and CFO: That’s correct.

William Chappell – SunTrust Robinson Humphrey: And that will all be reflected in the first quarter.

Ian G. H. Ashken – VC and CFO: Yes.

William Chappell – SunTrust Robinson Humphrey: Then just one other thing…

Ian G. H. Ashken – VC and CFO: Hold on, the charge I spoke to you – the charge will be reflected in the first quarter. Obviously, the reduction in EBITDA will be spread out through the year. The profitability of that business when you convert the bull or bears in the lower exchange rate just goes down.

William Chappell – SunTrust Robinson Humphrey: I have just forgotten, but the Venezuela business is largely appliances or is it more third, fourth quarter weighted?

Ian G. H. Ashken – VC and CFO: It’s 80% in the appliance category. Mother’s Day is actually a big deal in Latin America, so it’s a Q2, Q4 business rating, but I think if you model it pretty flat across the full quarters and that business today is less than a $100 million for our post evaluation. So, hopefully, this will be the last time we are discussing Venezuela.

William Chappell – SunTrust Robinson Humphrey: Hopefully. Ian, last question just on the SG&A front as we are look in this year, are you looking forward to stay flat on a percentage basis or can you actually see some margin improvement?

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Ian G. H. Ashken – VC and CFO: Well, for us, the SG&A is really the balancing number because obviously we – certainly over the last three years, we’ve been investing percentage wise more in our business. We are not anticipating that. So, the overall percentage obviously a bit difference as I said in the prepared remarks, we expect to take approximately half of what we do at the gross margin level to the bottom line. So, depending on where that comes out. SG&A, it will be up or down within sort of 10 basis points.

Incremental Compensation Charges

Lauren Lieberman – Barclays Capital: Just I wanted to check the moving piece is right for this year in terms of the guidance. So, Venezuela which Bill just covered it’s about a $0.10 hit. The tax rate is about a $0.15 benefit and then the incremental compensation charges about $0.10. Is that right?

Ian G. H. Ashken – VC and CFO: Well, the incremental, if you’re taking it from $33.5 million up to $61 million it’s more than that in terms of the impact from the non-cash compensation charges.

Lauren Lieberman – Barclays Capital: Okay. So it’s not just thinking about it as a $3 million per quarter. That’s what I was using.

Ian G. H. Ashken – VC and CFO: No.

Lauren Lieberman – Barclays Capital: Okay. So what were those numbers again, I’m sorry Ian, it was…

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Ian G. H. Ashken – VC and CFO: The charge in ’12 was $33.5 million that went through the as-adjusted numbers. The charge in ’13 that goes through the as-adjusted numbers will be, approximately, $61 million. And so we’re absorbing that in the guidance. We’re absorbing the Venezuela, and obviously there is a benefit from the tax, which you just commented, that’s correct.

Lauren Lieberman – Barclays Capital: Okay. So then what was – I think you said there was something though in the incentive comp that was $3 million per quarter?

Ian G. H. Ashken – VC and CFO: Yes, that is the – what we call the 2010 awards. So of the increase from $33.5 million to $61 million, approximately, $11 million of that will just be in 2013 and then it will go back to a lower level after that in 2014. But we’re including that in the guidance.

Lauren Lieberman – Barclays Capital: Okay. Then on JCS can you guys talk a little bit about just how holiday was – fourth quarter, where you think inventory levels are heading into this year and just the overall read for that, because that category has been a little bit lumpy and I think in the U.S. pretty soft overall, even though Latin America has been great, so just an update on that business would be good.

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James E. Lillie – CEO: So, as I said, the performance met our expectations for the quarter. Going to the consumer, the takeaway beginning in and around Black Friday was actually pretty healthy. We had a level of reorders above the prior year in the month of December, and I think inventories are at a rational level. They are not under-stocked, they are not over-stocked, they are really where they want to be with all retailers focusing on their working capital numbers and their year-end of January 31, taking kind of a low inventory position in January which we fully expected in the business. As you look out in the Q1 of 2013, we expect the business on a global basis to be performing in line with our expectations and we are expecting incremental growth from JCS this year as we move into new countries and new opportunities with distribution. So, all in all not losing any sleep about inventory positions or consumer takeaway, I think across all our businesses, if you look at our weighted average price points, and recognizing that we sell seasonal staples, and we have products people both want and need. I feel very good about overall inventory positions and POS coming out of the fourth quarter with expected dips in inventory in January as I said earlier, but POS performance in line with expectations.

A Closer Look: Jarden Earnings Cheat Sheet>>