Ladies and gentlemen, thank you for standing by. Welcome to the Q1 2020 Spectrum Brands Holdings, Inc. Earnings Conference Call. At this time, all participants' lines are in a listen-only mode. After the speaker's presentation, there will be a question- and- answer session. To ask a question during that session, you will need to press star one on your touch-tone telephone. Please be advised that today's conference is being recorded, and if you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Kevin Kim. Thank you, and please go ahead, sir.
Thank you, Chris. Welcome to Spectrum Brands Holdings Fiscal 2020 Q1 Earnings Conference Call and Webcast. I'm Kevin Kim, Divisional VP of Investor Relations and moderator for today's call. To help you follow our comments, we've placed a slide presentation on the events calendar page of the investor relations 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 Smeltser, Chief Financial Officer, and Randy Lewis, our Chief Operating Officer. After their opening remarks, we will conduct a Q&A session. Now, our comments today include forward-looking statements, including our outlook for fiscal 2020 and beyond. These statements 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 dated January 30th, 2020, and our most recent SEC filings and Spectrum Brands Holdings most recent annual report on Form 10-K and quarterly reports on Form 10-Q. We assume no obligation to update any forward-looking statement. Please note, we will discuss certain non-GAAP financial measures on this call. 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. Now, let me turn the call over to David Maura.
Hey, good morning. Thanks, Kevin. Good morning, everybody. Thanks for joining us today for our first quarter conference call. As I stated on our last earnings call at the fourth quarter of fiscal 2019, we expected to have a divot in our first quarter performance, starting in 2020, and then to regain momentum in the balance of the year. In this quarter, we just reported organic sales were essentially flat, with our adjusted EBITDA down 11.4%. The first quarter decline in adjusted EBITDA was in line with our expectations as tariffs exceeded the ramp-up of our productivity improvements. We expect to resume sales growth this quarter. Additionally, our Global Productivity Improvement Plan is expected to catch up to our tariff headwinds. On the top line, we did experience organic growth in our Home & Personal Care divisions and in pet.
While timing issues in our Home & Garden and HHI segments drove us flat overall, we continue to expect net sales, adjusted EBITDA, and free cash flow growth in 2020. If I could have you turn to slide seven. We are executing on our strategic plan, and delivering full-year revenue growth is a top priority for each of our teams. For example, in our Home & Personal Care division, we had an outstanding quarter. This quarter, our appliance unit reported its first quarterly growth in over a year. We're particularly pleased to see this positive inflection point in our appliance business as it fuels our confidence as a management team that the investments that we're making to streamline our businesses, launch new products, invest in innovation, R&D, and marketing are beginning to bear fruit.
We experienced top and bottom-line growth from Home and Personal Care, demonstrating tremendous progress from the new leadership team there, led by Dave Albert. Additionally, this quarter represents the fifth consecutive quarter top-line growth in our Global Pet Care unit. This was driven by a combination of continued growth in our dog chews and treats category, but more importantly, continued innovation and market share gains. This quarter also represented the third consecutive quarter of bottom-line growth for our Global Pet Care business. We continue to make progress on a number of fronts this quarter. First, we entered into an agreement for the sale of our dog and cat food manufacturing assets in Culemborg in the Netherlands for a price of approximately $33 million. Spectrum will continue to operate the commercial dog and cat food assets with the Iams and Eukanuba brands in Europe for the time being.
This action represents progress against our plan in Global Pet Care to exit non-core assets and focus on our core brands. Secondly, we continue to reward shareholders by executing a $125 million accelerated share repurchase program, and we did repurchase 1.3 million shares of our common stock for approximately $81 million through open market repurchases during the quarter. Third, we made significant progress on our plans to generate over $100 million of run rate savings from our Global Productivity Improvement Plan over the next 15-18 months. Much of these savings will be redirected to reinvest in our base businesses and to drive future growth, as well as offset additional tariff costs that we're experiencing in fiscal 2020.
There's much more work to be done this fiscal year as we execute on our productivity improvement plans and we embrace a more customer-driven mindset. I'm confident that our best days are ahead of us again, as we work to deliver significant long-term value creation and produce sustainable growth going forward. Our Spectrum 2020 guiding principles remain vision, and our vision is to be a strong innovator of great products, marketed with excellence and supported by consumer insights. Clarity, which means we're continuing to simplify our businesses by streamlining our go-to-market strategies and becoming a much more productive and efficient company. Focus. Focus is our relentless focus on our best-in-class customer service attributes. This is our pathway to a consumer-driven mindset, accepting nothing but outstanding quality and service while increasing innovation, marketing investments, et cetera, behind our brands.
These actions are evidenced in our Home & Personal Care business this quarter. We are driving a culture of greater accountability, much quicker decision-making with an experienced and energized leadership team that's been refreshed with new talent and focused on operational excellence as we position our company for improved sales, earnings, and sustainable free cash flow growth. Now you'll hear more from Jeremy on the financials, and Randy will give you an update and some additional business insights from the different business units. Let me turn the call over to Jeremy.
Thanks, David. Good morning, everyone. If you will, turn to slide nine. I will start with a review of Q1 results from continuing operations, beginning with net sales. Net sales decreased 1%, but excluding the impact of $6.3 million of unfavorable foreign exchange, organic net sales were essentially flat, with growth in HPC and Global Pet Care offset by declines in Home & Garden and HHI. Gross profit fell 12%, gross margin of 30.9% decreased 380 basis points as higher tariff costs, timing of capitalized manufacturing variances, and GPIP restructuring costs were partially offset by productivity and positive pricing. SG&A expense of $226.5 million decreased 11.1% at 26% of net sales this year compared to 29% a year ago, driven by higher non-cash depreciation and amortization charges recorded last year in HPC due to the reclass back into continuing operations in the period.
The operating loss was driven by the recognition of a loss on the asset sale and impairment charges in Global Pet Care, associated with the Kibble and dog and cat food manufacturing operations and higher GPIP restructuring costs, partially offset by lower depreciation and amortization. Operating income was also negatively impacted this quarter by $8.5 million of higher stock compensation from more normalized long-term incentive compensation compared to a timing delay last year. This will normalize on an annual basis. Adjusted EBITDA decreased 11.4%. Growth in Global Pet Care and Home & Personal Care were offset by declines in Hardware and Home Improvement and Home & Garden. Adjusted EBITDA margin declined 140 basis points, driven primarily by higher tariff costs, timing of capitalized manufacturing variances, and stranded costs, partially offset by productivity and positive pricing.
If we turn to slide 10, you can see Q1 interest expense from continuing operations of $34.8 million, decreased $22.2 million, driven by our lower debt levels. Cash taxes during the quarter of $14.5 million were $4.5 million higher than last year, driven by a tax audit settlement that was paid in the quarter. Depreciation and amortization for continuing operations of $41.7 million decreased from $66 million last year, primarily due to the impact of HPC depreciation and amortization in the prior year that I mentioned earlier. Separately, the share-based compensation increased from $6 million last year to $15 million this year. As I mentioned earlier, this will normalize on a full year basis. Cash payments for transaction-related charges were $4.6 million, down from $20 million last year. Restructuring and related charges for Q1, GPIP, and including discontinued operations were $38.6 million versus $9.9 million last year.
The higher cash spend was driven solely by GPIP. Moving to the balance sheet, we completed Q1 in a strong liquidity position, including $678 million available on our $800 million cash flow revolver and a cash balance of $142 million. Debt outstanding was $2.4 billion, down 50% from $4.8 billion at the same time last year. As compared to the prior year quarter, first quarter ending inventory was lower by $95 million as our operating teams continue to drive more discipline and improved process into our working capital management, enabled by our continued investments in capacity and automation. In addition, in January this year, we paid the previously disclosed payment to Energizer in connection with the divestiture of the Varta business. In addition, we continue to hold 5.3 million shares in Energizer, currently valued at approximately $250 million. CapEx in the quarter was $18.7 million versus $13.5 million last year.
Turning to slide 11 now on our 2020 guidance. We are reaffirming our 2020 guidance for net sales, adjusted EBITDA, and adjusted free cash flow. We still expect low single-digit reported net sales growth, with foreign exchange expected to have a slightly negative impact based on current rates. Adjusted EBITDA is still expected to be between $570 million and $590 million. This guidance includes GPIP benefits and the impact of tariffs that are currently in place. Fiscal 2020 adjusted free cash flow from continuing operations are still expected to be between $240 million and $260 million. Depreciation and amortization is expected to be between $145 million and $150 million, excluding stock-based compensation of approximately $55 million - $60 million, relatively consistent with last year. Full year interest expense is expected to be between $140 million and $150 million, including approximately $10 million of non-cash items.
Cash interest payments are expected to be between $130 million and $140 million. Restructuring and transaction-related cash spending is expected to be between $90 million and $100 million. CapEx also is expected in the $90 million-$100 million range. Cash taxes are still expected to be between $45 million and $55 million, and we do not anticipate being a significant U.S. federal cash taxpayer during fiscal 2020, as we continue to use net operating loss carryforwards. We started this year with approximately $800 million of usable federal NOLs. For adjusted EPS, we continue to use a tax rate of 25%, including state taxes. Now I'll turn it over to Randy for a more detailed look at our business unit performance.
Thanks, Jeremy. Good morning, everyone, and thank you all for joining us today. At this point, I'll walk through the results of each of our business units. Turning to slide 13 and Hardware and Home Improvement. First quarter reported net sales, organic sales decreased 2.4% and 2.5% respectively. The lower net sales were driven by residential security and builder's hardware categories, partially offset by growth in the plumbing category. Decline in residential security was driven by lower builder volume, and builder's hardware was driven by timing of orders from two large customers. Adjusted EBITDA decreased 23%, driven by incremental tariff costs and lower manufacturing volumes in the quarter, partially offset by higher pricing and lower distribution expenses. We remain excited about the outlook in this category, the electronic deadbolt and smart locks in 2020, given the relatively low but fast-growing U.S. residential adoption rates.
As an example of this, earlier this month, the Kwikset team introduced the Halo Touch Wi-Fi Smart Lock at the Consumer Electronics Show in Las Vegas, further innovating the Halo smart locks by providing homeowners access to their homes via fingerprint. This is the first in the industry to have this technology. We are very pleased that this innovation was given a best home tech product award by several different outlets. In this space, we continue to use our proprietary cloud-based platform and new mobile application as a competitive advantage for launching new product introductions in this space. Additionally, our strategy in the plumbing segment is expected to deliver significant new wins in this segment, and we look forward to updating you on that in our next quarter up call.
We believe our long-term growth will be driven by our robust electronics product roadmap and the new introductions our teams are bringing to market this year. To Home & Personal Care, which is slide 14. We are very happy to report that the first quarter reported net sales increased 1.5%. Organic net sales grew a solid 3.2%, adjusted EBITDA grew 4%. Net sales were driven by growth in Europe in both personal care and small appliances, and net sales in the U.S. declined slightly compared to prior year, driven by the performance in department stores and specialty channels. As David alluded to earlier, these results demonstrate remarkable progress in our road to recovery with the new appliance leadership team rebalancing its cost structure with the objective of accelerating profitable growth for our trusted brands through compelling and innovative products.
Our consumer-driven mindset in Europe continues to pay dividends with top-line growth. For example, over the last year, strong growth from new product innovation in Remington men's grooming is far outpacing category growth rates. Additionally, Russell Hobbs has achieved significant share gains, especially in the U.K. home market. We believe this renewed focus on supporting our strategic brands and investing behind fewer, bigger, better products will lead to continued growth in 2020 and beyond. Moving to Global Pet Care, which is slide 15. First quarter reported net sales increased 0.5% and adjusted EBITDA increased by 8.2%. Excluding currency, sales grew 1.1% in the quarter. Higher net sales were attributed to continued growth in the U.S. companion animal segment as we overcome a decline in U.S. aquatics. In Europe, sales grew both in aquatics and companion animal segments.
We experienced continued growth in the companion animal sales in Q1 in the U.S., despite lapping a double-digit increase in the market from the prior year. Our pet team remains committed to exiting non-core assets and activities to invest more time and resources into our targeted top growth brands. As David highlighted earlier, we demonstrated this commitment by exiting our rawhide manufacturing facilities in Latin America and agreeing to exit our Coevorden dog and cat food operations in the Netherlands. Given positive category growth projections for increasing participation rates and passionate pet owners, we continue to be pleased with our innovative product roadmap and strategy for growth in pet business. During the holiday season, SmartBones was listed as a Top Seller Award Winner by our largest online retailer.
Dog chews and treats growth in Canada and Latin America benefited from new listings for our Good & Fun brand and SmartBones brands at several major retailers. We are also encouraged by our continued partnership developments in the U.S. pet specialty channel, where multiple new product listings are expected to start shipping later this year. Turning to Home & Garden, which is slide 16. First quarter reported net sales decreased 13.9%, and adjusted EBITDA decreased $6.4 million. While Q1 revenue and EBITDA were below prior year, keep in mind that Q1 represents the smallest quarter of the year. Sales were impacted by higher than normal inventories of customers as a result of unfavorable weather in 2019. As we exit the quarter, we believe our customers have a much-improved inventory position as POS has been very positive through the beginning of Q2.
In the quarter, EBITDA was also impacted by the timing of manufacturing costs due to a planned later seasonal inventory build, as well as higher advertising investments as we committed to. In the last 12 months, we've continued to grow market share in all three business segments of Home & Garden: repellents, household insect, and outdoor controls. Going forward, we continue to be encouraged by our seasonal planning with our retail customers, our consumer promotion plans, and the weather outlook for this spring. We are confident that our solid brand equities, investment in product development and marketing will drive growth. Turning to 17. We also want to provide excuse me, an update. Excuse me. We also want to provide an update on our Global Productivity Improvement Plan. This program continues to be our most important strategic initiative for delivering sustainable organic growth.
As we focus on quicker, more globally aligned decision-making within each of our businesses, driving more focused and relevant product innovation via enhanced consumer analytics and R&D processes. Since our last call, we have successfully closed the Latin American rawhide facilities in Global Pet Care, and in late November, entered into the sale agreement we discussed about the Coevorden dog and cat food manufacturing operations. We have continued to lock in significant savings from new center-led sourcing processes. We continue to expect the gross annualized savings from the various work streams of GPIP to deliver at least $100 million annually, and that these savings will be at full run rate within the next 15 - 18 months. Much of these savings will be reinvested back into growth initiatives and consumer insights, R&D, and marketing across each of the businesses.
One of the most exciting developments in the quarter was the launching of our center-led commercial operations team. The formation of this team will enable a centralized approach to consumer insights, digital asset development, e-commerce operation, and revenue and profit management for each of the business units to marry with their individual brand, product, and channel strategies. This group is being led by one of our strongest internal leaders and will be a major step forward in how we efficiently harvest, analyze, and deploy data to drive long-term organic growth. We look forward to continuing to provide more updates and details on our very exciting GPIP benefits on our future calls. Now back to David.
Thanks so much, Randy. Thanks, Randy. Thanks, Jeremy, Kevin. Thanks, everybody, for joining us this morning on the call. With our first quarter, as I call it, the first quarter divot behind us, we're pleased to begin realizing additional benefits from the Global Productivity Improvement Programs, which Randy's described in detail, and returning our company to growth in the second quarter and for the balance of this fiscal year. I'd like to thank all of our teams for the progress in revitalizing our company and driving change for our future success. We do have a strong balance sheet and healthy liquidity. We are now setting our sights on accelerated growth. We also continue to believe that our share price continues to be materially undervalued. We will repurchase our stock opportunistically from time to time.
The team and I are proud that we were able to deliver on our financial commitments for 2019, which has only strengthened our resolve to deliver our 2020 financial guidance of low single-digit sales growth, adjusted EBITDA of $570 million-$590 million, and adjusted free cash flow of $240 million-$260 million. Going forward, we expect to drive material further growth in our free cash flow generation from there. Now I'll turn it back to Kevin to take any of your questions.
Thanks, David. Chris, let's just jump right into Q&A.
As a reminder, to ask questions, you will need to press star one on your touch-tone telephone, and to withdraw your question, please press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from the line of Bob Labick with CJS Securities. Your line is now open.
Good morning. Thanks for taking my questions.
Morning, Bob.
Morning, Bob.
Hi. On prior calls, we've talked about part of your growth and an expected re-acceleration in growth is driven by consumer-centric new products. You've alluded to it a little bit on the call already, but could you talk more about the pipeline of new products and maybe the new product introduction capabilities and process, now versus a year or two ago and where that's going to go?
I'll let Randy handle that one.
Yeah. Good morning, Bob . That's a major component of our GPIP. We talk about GPIP, and we talk a lot about it being kind of savings front-loaded, but really behind the scenes, the heavy lifting is in redesigning that innovation process, and we're working with some world-class experts to help guide us through that. It starts with this commercial operations team that I discussed in the prepared remarks, where we tend to want to centralize all of the generalized functions of scraping and harvesting data of what's happening within categories, macro, micro, internal, external, and then vending that back into a disciplined innovation process within each of the businesses that's aligned with the brand strategies, the channels, and the products. Those new product development processes are embedded in each of the business units, and they tend to be at a little different stages of development.
As an example, HHI being first to market with a fingerprint Wi-Fi lock that we continue to be able to hang on our own security cloud is just the tip of the iceberg of being able to launch a whole line of products in that space. When we look at our appliance business, very happy with the progress we've made there in the last year, and it's not been short-term minded. From the very beginning, David was committed to revamping that business with a focus for growth, and we could have turned around bottom-line numbers much quicker if we weren't committed to the long term. We've got a great NPI engine there, and we're doing a lot there to focus that on fewer, better, stronger. We've got a number of new and exciting products coming out in that space within the next couple of quarters.
We'll be launching a George Foreman smokeless contact grill in the U.S. that will start shipping later this quarter, and exciting new products in Remington wet style, Black & Decker air fry toaster ovens, et cetera. That's evidence there. A little bit longer timeline in Home & Garden, you'll start seeing products that we'll be launching out of that process later this year. Does that help, Bob?
Yeah, absolutely. No, that's super color. I really appreciate that. I don't know if it's in the earnings slide deck today, I don't think, but in recent slide decks, you've discussed that 15 of your brands make up about 80% of your sales. You've also talked about divesting non-core businesses. Can you talk a little bit about, is it other brands or where the portfolio optimization stands? Might there be other small sales like the European divestiture of dog and cat food mentioned today, or where's that process?
Yeah, I think we've been pretty open about it. We want to feed the winners and starve the losers. I think most of the streamlining is done. Quite frankly, our global footprint in pet, thanks to that team for bearing down hard. We'll have probably four facilities down from 10. We'll be actually growing our sales pretty nicely, resuming pretty good growth there in the second quarter on pet, much better than what you saw this quarter. Again, everything's about productivity. Everything is about getting greater yield. The design is what I'm really excited about. Everything here is built on getting data to make sure that as we allocate capital internally, we're doing it much more efficiently and getting a higher return on those dollars.
Look, yeah, there's no question things like Coevorden are a little bit disrupting, and they cause some noise in the quarter, and we're still not done, but I think we're down to little pieces of it. Yeah, that business, it's nice to get $33 million on an asset that quite frankly was dormant, and we weren't making a profit on it. We've got a good partner there to take that asset over and give our people employment. Quite frankly, there'll be a synergistic partner there. Look, most of the teams have already jumped on board with the whole mantra of vision, clarity, focus, and I think everybody knows what they stand for, where they're going, and what their hero brands are and what to support at this point. Randy, you disagree with that, or?
No, I think that's exactly right. As we've transitioned from a more, more, more strategy, which led to a lack of global prioritization, we've focused very heavily on realigning the businesses on global brand strategies. Bob, there's not a lot of large assets that we're talking about, but we have literally dozens of smaller brands and product categories that have kind of emerged around the globe, and they just become distracting on resources. A lot of effort going into making sure that we're focusing within each of our businesses on those strategic brands, and those brands will get the investment, they'll get the NPI, they'll get the top talent, and that's where a lot of the growth is going to come from.
Great. That's super. Thank you so much.
Thanks, Bob.
Thank you. Our next question comes from the line of Ian Zaffino with Oppenheimer. Your line is now open.
Okay, great. Thank you very much. Just kind of keying in on your comments about the return to growth in the second quarter. What in particular is driving that? What particularly are you particularly excited about? Give us a little more color there. Thanks.
Growth in the second quarter, I think as we talked about in appliances and pet, we expect that growth to continue. As we mentioned on our fourth quarter and guidance call, we expected growth in all four businesses, top line and EBITDA. I think Randy's talked about new products coming down the pipeline, which will help accelerate that growth from first quarter on through the rest of the year. Particularly in Q2, some of the challenges we had around the seasonal side of the Home & Garden business, we expect to improve sequentially.
Yeah, Ian.
Go on.
I was just going to add a little bit of color for the team as far as the Home & Garden business for the season. While we're bullish on the year and we've got good weather forecasts for the spring, it is important to understand that we're seeing a different strategic approach to the category from some of our top retailers. Actually seeing a heightened strategic focus that is exciting to us, but the timing is going to be different. Many retailers really loaded up front last year, and so the pacing of revenue over the course of that business this year is going to change to be a little bit more back-end loaded than what it was before. Overall, Jeremy's right. It's the timing of new product introductions in each of the businesses.
Okay. Just one other question on the tariff side. What should we expect for the remainder of the year? Just tell us what the impact would be, given the kind of a lot of moving parts, tariffs may be going away, et cetera. Thanks.
Look, I think we've disclosed in the past the headwinds we're facing. Look, obviously Phase One, I think a lot of people expect that to be massively beneficial. We would tell you it's slightly beneficial. My main takeaway on Phase One is we're not getting hit in the face anymore. We will pick up a little bit of incremental benefit there, but it's immaterial. The best thing I think that's occurred is there's some clarity and certainty in the marketplace where our retail customers, you could see stuff where people would get nervous about tariffs getting more out of control and do some pre-buys. Now I think with certainty with phase I, I think our customers are resuming to more normal trading patterns, and that also gives us fuel for our confidence in Q2 growth.
Okay. Thank you very much.
Thanks, Ian.
Thank you. Our next question comes from the line of Olivia Tong with Bank of America. Your line is now open.
Great. Thanks. Good morning. Wanted to talk a little bit more about sales because you guys had been pretty explicit about EBITDA expectations to start the year. Sales was quite a bit lower than what the market was expecting. Relative to your expectations, what didn't go as expected? Just specifically on HHI for a minute, that was particularly surprising given the strength in housing data, both new remodels, et cetera. You mentioned a few things on the timing. Have those orders that you expected in the December quarter now come through? If you could talk about the decline in residential locks, too. Thanks.
Yeah. Good morning, Olivia. With regards to the quarter, we talked about Home & Garden being a little bit of timing. As we got closer to the season, we're seeing that several large retailers are taking a more measured approach to the feed in, and therefore, some of the things we might have expected to ship at the end of December are coming in in Q2. With regards to HHI, it was kind of mainly three areas where we had a hit with two large customers who took inventory out of their system over the course of the quarter, we believe related to potentially de-stocking patterns, as David alluded to before. We did have a material Black Friday event that we had last year in the quarter that didn't anniversary this year.
We were in the final quarter of lapping two material losses of low margin items from a year ago. That's the main drivers of HHI. We're continuing to watch it closely. The category, as you said, the metrics, the market is pretty solid, and we expect that to turn back to growth and to deliver good numbers for the year.
Got it. If I can just ask specifically on residential locks, because that's obviously a business where you alluded to quite a bit of the innovation, and obviously the tailwinds. The business that you lost there, I would assume is lower margin relative to HHI average?
Yes. It was lower margin, and it was older technology, and it was where we were not willing to go chase pricing, and was kind of related way back to outcomes from the challenges we had in supply chain execution 18 months ago.
Got it. If I could just follow up on market share positions across the portfolio, because HPC seems like that's now stabilizing, but HHI has some losses. H&G, at least you underperformed your closest competitor. If you could talk through what's going to drive that improvement there, because you mentioned the retailer excitement around, but also pushing out orders, which seems a bit at odds with each other.
If you're comparing our Home & Garden business to a large competitor, there's a big gap in the lineup there. When you look at our product categories versus another competitor there's about a 11%-12% overlap of revenue. We don't compete in many of the categories, and the trend lines tend to diverge. As we look at the categories that we compete in being insect repellents, indoor insecticides, and outdoor controls, our data would show that we've taken share, especially at the home centers in each of those segments over the last 12 months. As far as the timing goes, it's not super concerning to us there. As long as the inventory is available and we've got the capabilities. Last year, we were able to meet expectations of our retailers when they accelerated purchases and was not a problem.
As they delay those orders, I'm still not worried about that.
Got it. Thank you.
Thanks, Olivia.
Thank you. Our next question comes from the line of Faiza Alwy with the Deutsche Bank. Your line is now open.
Yes. Hi, good morning. A couple questions from me. Just first on HHI, just wanted to go back on the timing of orders. I don't think you quantified the impact from that. I'd love to hear how much the impact was just on the timing of orders on the Builders' Hardware piece. I believe Builders' Hardware is where you might be competitively disadvantaged due to tariffs because you'd consolidated your manufacturing in China. I wonder if there's been a little bit of impact from that. Is there sort of a pricing component there? Are you seeing any volume impact from that pricing?
On Builders' Hardware specifically, we're taking material actions internally to get more efficient there, to lower our cost structure, and to improve our profitability materially in the current fiscal year. All I'll say on HHI is back to Randy's remarks, we are resuming the growth in Q2, and we expect a very good finish for hardware for the balance of the year. I think I'd like to go back to the Home & Garden piece a bit. It was $46 million revenue, I believe. I know we live in a short-term world, but every other quarter in Home & Garden is typically $150 million or $200 million a year, so I wouldn't get overly concerned about Home & Garden.
No, I completely agree. I think Home & Garden is pretty irrelevant for this quarter. I was more concerned about HHI and the Builders' Hardware piece. Also, I was wondering if I could get more color on the pet segment, because you've done really well on the treat side of that business. Comps do get a lot tougher. How are you thinking about growth for that segment, for the remainder of the year? Then I just want to understand the mechanics of the sale of these facilities. It sounds like you're keeping those brands, so those businesses aren't really going away. You're just going to be outsourcing the manufacturing. Is that really what's happening?
Yeah. Let me try and take those questions. Maybe I'll do it in reverse order. With regards to the pet facility, the mechanics of it is the fact that we are working with a synergistic partner who will take over the operations. This will be one of many facilities that they operate in the European continent, and so they bring a ready-made understanding about how to operate with high degrees of efficiency and cost improvements. They will be able to instantly add capacity to an underutilized facility, thus improving the absorption and freeing us to focus on the commercial aspects and the brand management. We'll continue to look for strategic options for the remainder of that business. Overall, it's going to be a net positive for us from an operation of, again, freeing up those resources.
With regards to the future comps in pet, we're feeling good about that because Bob asked a question earlier about the NPI process, and pet is where that cycle is the shortest, and consequently, it's where the fruit of our work a year ago, 18 months ago, has really started hitting the market and has been evidenced since last summer. We continue to see a higher vitality rate. I mentioned in prepared remarks that we are returning to positive relationship building with U.S. Pet Specialty, and for anyone who's followed us for a while, you know that's a major advantage for us. Innovation coming in the aquatic space. We had a major U.S. retailer who decided to exit live fish, and that's having an impact on the category, but we're actually being able to counterbalance that much better than we anticipated.
Our GloFish business is a key piece of that. Being able to bring innovation into a somewhat stagnant category is really exciting. We continue to launch new species and new colors. If you haven't heard, we'll be launching the world's first ever GloBetta later this quarter. We've received FDA approval three weeks ago, later in this quarter, we will be launching with three species in the first color. That's driving a lot of excitement in those spaces. These are fish that will retail for up to $29 each. They're really exciting, and they target a whole new category where a betta fish can be kept singularly in a small desktop tank, and it really broadens the appeal to the entry point of that category.
It's those types of things that have us feeling confident about continued pet growth.
Understood. Thank you.
Thank you. Our next question comes from the line of Jim Chartier with Monness, Crespi, Hardt. Your line is now open.
Hi. Thanks for taking my question. I just want to talk about some of the marketing investments you guys have made over the last 18 months. Any color you can give us there on what kind of returns you're seeing? Are you seeing the lift in the products you're investing behind? Specifically on Manchester United, is that partnership fully activated and what are you seeing there? Thanks.
Thanks, Jim. I don't think we're going to go into the detailed specifics of the ROIs by brand investments. Overall, we are measuring the ramp-up of those investments to be more focused and more aligned with the brand strategies that I discussed earlier, being more aligned globally. One of the aspects of the commercial operations team that we announced this past couple weeks is exactly that. It's putting additional external resources around ensuring that we've got visibility to those ROIs, and we can make better, faster decisions in that space. With regards to Manchester United, fully executed and seeing really positive impacts there. I don't have those data points with me in front of me.
What was the growth rate in Remington Europe this last quarter?
We'll have to find that number. It's buried in my deck here, but you can definitely see it in Remington, both from the standpoint of Europe but also in Asia-Pacific also.
Great. On the smart locks, you guys have highlighted your in-house cloud platform. Do your competitors have in-house platforms themselves? I guess, what kind of advantage does your platform provide versus the rest of the industry?
Well, we believe our platform is unique within the major providers. What is really important about this is back before smart locks, the key was controlling the key, and the lock and the key combination was the key to that category. As we move to smart locks, it's all about controlling the credentialing of whatever you're using to replace the key in that interface, both from a standpoint of technology, reliability, speed, and security. Being on our own cloud greatly improves our overall security of the product. It greatly improves the operation and consumer experience because everything is done locally, so much faster reaction times. On top of that, you don't have to rely upon a home hub network.
You can connect directly into your Wi-Fi system, so it takes an additional step, an additional cost, an additional unreliable step out of the process in smart home development.
I thought that, just back to the Remington thing, I'd ask the team, but I believe we grew 9% with Remington in Europe, and that's based on fully loaded Manchester United programs. I just want to give you some color. While we don't want to go into ROIs on everything, but the teams are continuing to do what's hard, right? What's hard is when you have a quarter like this for Home & Garden, where you guys are clearly depressed that the top line's down, we keep spending on advertising. We keep building those brands. We're doing what is right for the base businesses long term.
Again, I'm personally thrilled that after nine months, we now have the top line and bottom lines growing on our appliance units, and it's up to us to maintain the discipline that no matter what the quarterly headwind is or the tariff headwind, that we keep investing for growth. That's despite the category over in Europe being down 1.3%. We're swimming upstream pretty fast.
Great. Thanks for the color.
Thank you. Our next question comes from the line of William Reuter with Bank of America. Your line is now open.
Good morning. I know most of the tariff for you guys were list three issues, given that the list four has been both pushed off and eliminated, is the $80 million-$85 million of incremental tariffs still the right number, or should it be lower than that?
I think you still have a good ballpark. I think net-net, we probably have a couple million dollar small something. We got a small benefit, $2 million-$3 million, something like that. That's all we want to disclose at this time.
Okay. I guess in terms of price increases that you implemented this year, do you have a sense for what percent of that $80-$85 you may have pushed through in price at this point?
Yeah. William, I won't go into specifics, but we did get well over 50% of the tariff cost impacts in pricing, but that varied dramatically by business and by category and by channel, depending upon a number of factors, as you can imagine. It was roughly maybe 60% across the portfolio, but there was a wide spread.
That's useful. Just lastly for me, when you last updated us, your leverage target was three and a half times. Given the rapid share repurchases, you guys are a little bit above that right now. I guess, do you continue to have that as your target, I guess how should we think about that in the context of share repurchases going forward?
Yeah, here's how you should think about it. Three and a half to four times leverage is where I want to steer the ship. The company is materially undervalued at the moment. I'm happy to take leverage above that for a short period of time because we're running the business for the long term, and we are steering toward a $7 per share free cash flow business in 2021. With shares trading at these multiples, we will be buying stock.
Sounds good. That's all for me. Thank you.
Thank you. Our next question comes from the line of Carla Casella with JPMorgan. Your line is now open
Hi, just one follow-on on the tariff. You talked about mitigation and it coming through back half of the year. How much of that is moving the sourcing? Pro forma, by the end of this year, where do you expect to be in terms of your amount of goods, percentage of goods, however you want to look at it, sourced from China?
I think our appliance unit will remain sourced out of Asia, China. We are making some changes to footprints in other parts of the businesses to become less reliant on China and to push things into neighboring countries. Don't want to go into specifics on that yet. Yeah, absolutely, we continue to move the supply chain around to benefit the company, and we'll continue to do so. Look, I think what we want to hopefully get across to you guys today is that the divot in Q1 was expected from Q4. We've basically taken the pain, and we expect productivity to now catch that up in Q2. Going forward, we're hoping to be through with this whole discussion on tariff and get back to materially growing the business and also reinvesting in a much healthier manner, to propel the top line.
Okay, great. Just one more. You talked about a couple of plants, one closing and one potential. Are there other opportunities there? On the flip side, you're talking about investing in the business. Is any of the additional CapEx you'll need for plant investment beyond kind of what you guided to this year, or are you in a good spot after you complete the process you're in now?
My answer is we're in a good spot, but I'll defer to Randy.
Yeah, just a little color, Carla. We had four manufacturing locations throughout Latin America that produced dog chews and treats. Those are the four that we announced that we have closed in the course of the quarter. Also the manufacturing facility in the Netherlands, which we will divest. There may be other changes in the future, not significantly more. We are in a good spot with our manufacturing footprint. We will continue to use kind of the run rate, maybe less in total on CapEx going forward to drive efficiencies and automation. You should not be thinking that there's a big hump in the CapEx to adjust to this. That's not connected.
Great. Thank you so much.
Thank you. Our last question comes from the line of Karru Martinson with Jefferies. Your line is now open.
Good morning. Just on the Chinese virus that's in the headlines, is that affecting any of your production capabilities, and what's the impact there?
We're definitely taking less flights to the mainland. Look, our contract manufacturers are there. It's potential we could get, like, a week delay on some of the shipments coming into the L.A. ports, but we don't expect any material interruptions.
Okay. When you look at your stock price versus acquisitions out there, do you feel that you have the right footprint, or are there bolt-ons that you would like to add, or is it just that your stock price is too compelling at this point?
I can't find anything to buy cheaper than my own stock.
Okay. Just a clarification, when does the GloBetta data come out? My son's in the market after a friend killed his other fish.
Well, Karru, I think you should be looking at U.S. Pet Specialty in the latter part of March. We'd be glad to send you the information.
I appreciate it. Thank you.
Thank you.
Thank you. This concludes today's question and answer session. I would now like to turn the call back to Kevin Kim for any closing remarks.
Great. Thank you, David, Jeremy, and Randy. On behalf of Spectrum Brands, thank you for your participation.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.