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Monday, July 17, 2006

Spectrum Brands: Time For Management To Go (SPC)

Spectrum Brands cut guidance for 2006 today, and continued on the biggest debacles in the stock market this year. The share price in the maker of batteries and lawn equipment is down from $39 to $7.85 in the last 52 weeks.

Revenue at the company for the last three quarters (9/30/05, 1/1/06, and 4/2/06) has been fairly flat around $620 million. Operating profit in the April quarter was a little over $38 million. But, the company's long-term debt is nearly $2.3 billion. The only positive statement the company could make about guidance was that "the company anticipates it will be in compliance with its senior credit facility debt covenants for the fiscal third quarter based on its preliminary estimates". That sounds like a "maybe".

With the stock down 26% in one day, and the possibility that the company will have to liquidate some of its holdings to satisfy its debt requirements, it may be time for the board of the company that is famous for Rayovac batteries to find a new management team. With 80% of the company's market cap gone in a year, hiring a banker to sell assets does not seem adequate.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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