Good morning. My name is Heidi and I will be your conference Operator today. At this time I would like to welcome everyone to the Spectrum Brands Fiscal 2016 Third Quarter Earnings Conference Call. [Operator Instructions] Thank you. I would now like to introduce Mr. David Prichard, Vice President of Investor Relations for Spectrum Brands. Mr. Prichard, you may begin.

Thank you, Operator and good morning and welcome to Spectrum Brands Holdings fiscal 2016 third quarter earnings conference call and web cast. 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 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 go to the presentation and start with Slide 2, you will see that our call will be led today by Andreas Rouve, our Chief Executive Officer and Doug Martin, our Chief Financial Officer. Andreas and Doug will deliver opening remarks and then conduct a Q&A session. Now, if we turn to Slide 3 and 4, please note that our comments today include forward-looking statements, including our outlook for fiscal 2016 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 July 28, 2016 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. Reconciliations on a GAAP bases for these measures are included in today's press release and also this morning's 8K filing which are both available on our website in the Investor Relations section. So, with that, I am now very pleased to turn the call over to our Chief Executive Officer Andreas Rouve.

Thanks, Dave and thank you all for joining us. Turning to slide six. We reported solid third quarter sales and earnings growth, together with a strong first half, we continued the momentum required to deliver a seventh consecutive year of record performance in fiscal 2016. Despite continuing but moderating currency head winds, we grew our third quarter adjusted EBITDA as reported by $43 million or 18%. If we exclude the benefits of our Global Auto Care acquisition which is $28 million, our legacy business grew adjusted EBITDA by $50 million, despite a negative currency impact of $15 million. In constant currency, our organic EBITDA growth rate was a strong 13%. Our sequential growth in adjusted EBITDA from Q1 to Q2 and now to Q3, is consistent with a quarterly EBITDA pacing we shared with you on our February call. We said then that Q3 is our largest quarter due to the seasonality of our Home and Garden and Global Auto Care business, along with Hardware and Home Improvement, stronger June and September quarters. Our performance in Q3 was marked by solid organic sales growth of 3.7%, despite mixed weather in the U.S. and also in Europe that impacted POS and triggered retail inventory adjustment programs. Nevertheless, Home and Garden and Hardware and Home Improvement turned in record results. We also saw excellent factory growth in the U.S. as well as in Europe and Latin America on a constant currency basis. However, our personal care and small appliance sales fell on a constant currency basis from intense competition, category softness and retailer inventory tightening. Also our [indiscernible] were challenged in Q3 by lower sales in Europe and there the outdoor aquatic business suffered from the cool weather. We changed our go to market approach and exited a non-strategic private label contract.…

Thanks Andreas and good morning, everyone. Turning to Slide 9, let's review Q3 results beginning with net sales. Third quarter reported net sales of $1.36 billion increased 9.1% versus last year. Excluding the negative impact of $15.8 million of foreign currency and acquisition-related net sales of $84.1 million organic net sales increased 3.7%. Record sales in HHI and Home and Garden, strong global battery results and solid regional performances in the U.S. as well as Europe, Latin America and Canada on an FX neutral basis, more than offset lower results in our small appliances and pet businesses. Reported gross margin of 39% increased 230 basis points from 36.7% last year, primarily due to the Global Auto Care acquisition, improved mix and strong productivity, partially offset by FX. Reported SG&A expense of $295.9 million or 21.7% of sales improved by 30 basis points versus 22% last year. Reported operating margin of 15.2% increased by 430 basis points compared to 10.9% last year. Largely driven by expanding gross margin, SG&A leverage and lower restructuring and acquisition and integration spending. On a reported basis, higher Q3 earnings per share of $1.71 compared to $0.79 last year primarily due to the impact of the Global Auto Care acquisition, volume, improved mix, reduced acquisition and restructuring activity, one-time debt refinancing cost and a change in income tax provisions from the prior period. Adjusted EPS of $1.73 increased from $1.42 last year primarily as a result of the Global Auto Care acquisition, volume and improved mix, partially offset by higher common shares outstanding. Turning to Slide 10. Third quarter interest expense of $60 million decreased $53 million from last year driven by non-recurring acquisition financing and capital structure refinancing items in 2015. Cash interest payments of $66 million were $88 million below last year. Recall the…

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

[Operator Instructions]. Your first question comes from the line of Olivia Tong from Bank of America Merrill Lynch. Please go ahead.

My first question is just around organic sales. Growth has obviously been very solid this year. How do you think about consumption and inventory levels at retail? Particularly in GBA, specifically batteries and then also Home and Garden, especially given your comments last quarter about some pre buying but I think that might have just been in auto care? And then just on battery, is battery that much healthier and if so, what's your assessment on why this is happening? Is this all in international or did the U.S. contribute as well? Thanks so much.

Let me first go to the inventory. I think we have to realize that all major retailers have implemented new warehouse management systems and as a consequence and this has started probably over nine months ago and they have rolled it out step by step to the different categories and therefore as a consequence we're seeing that inventory reduction effects across the division. This quarter it was strongest actually in our appliance category, both in personal care and in home appliances, but also Home and Garden was affected at one of their major retailers in the U.S. So, therefore we see that as very strong reduction in inventory at the retailers. Now, talking about more [indiscernible] products, here simply we have to take into account that we had this year a little bit of kind of unusual weather pattern where we had in our second quarter which is the quarter from January to March, a very mild spring and therefore you saw, for instance in Home and Garden, a very strong sales in that quarter for us as the retailers pulled in inventory earlier. And then April/May was a bit colder, consumption slowed down and as a consequence, our replenishment orders to the retailers have also slowed and that's why the sales of Home and Garden in the third quarter was not as strong as in the second quarter; however, then in June the picture has turned around. POS has picked up very nicely again. And we continue to see that momentum now in July. So, again, of course, it is an open question how the weather is going to develop in the next couple of weeks but the forecasts all are indicating a very hot summer. So we feel rather confident on that. Now, on the second question, on the battery growth, battery is a product which you can buy nearly everywhere, so therefore it is really one of the core elements where we have developed the more, more, more strategy. That means expanding into more customers, more channels, more countries. And the reason that this was not done as much in the U.S. is that we have here in the U.S. a very concentrated retailer structure and in the past, Spectrum Brands had focused its sales organization in batteries on those few key accounts and we have [indiscernible] collected the rest of the market. And we're stepping up our activities. We're adding more salespeople. We're broadening our product offerings so that we can play an intelligent multi-channel strategy, also in the battery category, in North America. In Europe and Latin America, the battery trends were always healthy and strong, so therefore I would say now North America is getting on board with our more, more, more strategy and we're seeing those benefits.

If I could turn to cash flow, similar to prior years, you are obviously looking for the majority of free cash flow to get realized in Q4. So can you talk about the drivers of that? And what could potentially impact realization of that? Because the net income contribution obviously doesn't swing around quite that dramatically.

As you know, our working capital cycle is heavier weighted to the really, the third and even more so the fourth quarter of the year. And that's driven in part by the seasonality of some of our businesses and some of our more profitable business, to be honest. So a lot of cash comes in beginning in May and accelerating through the end of the year. So we had a strong quarter of working capital conversion. We're spending a little less than we had original planned on CapEx year-to-date. And expect some of that benefit to carry to the year, to your question of what could happen between now and year end. We clearly have a lot of confidence in the cash flow delivery this year because we made $250 million of term loan payments and that's helped us make good strides toward our target year end leverage ratio below four times. So this is normal for us. It's something that comes in the fourth quarter for us and very consistent with prior years.

And then just lastly on leverage, on track to get below four times by year-end. In past periods of delevering, when do you start getting more aggressive in terms of looking at potential uses of your balance sheet again? When do you start doing more diligence and how would you characterize the deal environment right now?

We have an active filter of opportunities across the portfolio that we would like to invest in or acquire in or bolt-on in and when those assets become available, is almost always something that we cannot control. So we're always on the look, always filtering and I would say that that has continued. We haven't been aggressively pursuing anything this year because we have committed to do averaging, but we have been maintaining those relationships and when the right time comes, you can expect us to get back into the market.

Your next question comes from the line of Kevin Grundy from Jefferies. Please go ahead, sir.

So, Doug, fair to say that you guys are comfortable at the higher end of the revenue guidance of up high single digits? Because if my math is right, it implies about 2.5% to 4.5% organic sales growth for the year, you're up 4.9% year-to-date and the midpoint then for 4Q would imply sort of flattish organic sales growth which seems unlikely, so I was hoping you could comment on that?

Those are all good numbers. I don't disagree with any of those. And the conclusion is probably pretty accurate. You know, the one area that we want to be and have been a little cautious on is what will the weather be like and what will [indiscernible] look like, especially in the Home and Garden and Global Auto Care businesses as we finish out the year but we obviously are pretty confident in the year's growth.

One more and then I'll pass it on. Andreas, can you comment on the different dynamics? This is getting back to batteries now. The different competitive dynamics or competitive intensity in scan channels versus non scan? So you guys are appropriately taking the strategy go where you're trying to go down the path of expanding channels which is clearly sensible. But your market share performance is quite a bit worse in scan channels and I sense that's en masse. And I also see, too, you guys are taking down promotion levels pretty significantly based on the Nielsen data. Can you comment a little bit on that and then when perhaps some of the market share performance will get a little bit better in the Nielsen channels? Thanks.

The point about [indiscernible] some of our bigger competitors, they are very closely tracking Nielsen and therefore, of course, the competition is the most intense in those Nielsen channels. And it's always, to be very honest, sometimes the toughest fight is not worth it. And that's why, as was mentioned also, we're taking our promotional intensity down. If you compare our promotional intensity to other competitors, we're below average and really we hope that we're going to lead sooner or later to more rational behavior in the category because one of the learnings in the battery categories, no consumer is going to use more batteries because they're on a promotion. So you are basically just shifting consumption from bun day to another day, but the total marketing is not going to be impacted by it. So, to a certain extent, promotional intensity is just a destruction of value and doesn't help the category long term. And that's why we're trying to walk away from it, but at the same time and Doug mentioned and if you look at the chart, we have launched now a new segmentation in our battery category where we're trying to offer the consumer different offers at different price points, so that, again, we can serve more the value shopper, the premium shopper, go after different channels. And that's, again, our strategy which we have applied rather successfully in Europe over many years and which to a certain extent we're now also going to apply here in the U.S.

How long is the runway in non-scan channels here in the U.S.? To use the baseball analogy, what inning are we in, in terms of the opportunity there in batteries? Thank you.

A little bit simplified. You can say that in the past we have not served about half of the market. If you look at the total markets for our batteries in North America, about half of all the channels where batteries are sold were not even called on by us. And I would say it's going to be pretty long, because in the first step, we have to also establish the relationships with those buyers. We have to establish the trust with the retailers that we're a strong performing brand and that our POS are going to be as strong or potentially even better than some of our competitors. And this takes some time and here again we're focusing on long term growth and long term EBITDA growth and that's why, you know, we're not rushing it, we're not trying to take any shortcuts and we believe that we have there quite a nice long term opportunity.

Your next question comes from the line of Jason Gere from KeyBanc Capital Markets.

I just have one bigger question and just a couple of smaller questions. I guess the bigger one Andreas, now that you've been here in the U.S., I guess and focusing more on the U.S. over the last year, I know you've talked about some of the points of distribution where you're not and so you guys are obviously under index. So as you look at the opportunity over the next couple of years and obviously we're trying to look at the organic sales composition, this year is a very strong year, you know, historically speaking, you guys have been, I probably would say, a 1% to 2% grower. Can you kind of break down between how you see the next couple years between maybe same-store sales of existing businesses versus incremental distribution? How much that could contribute to the growth over the next couple of years?

I think the answer may be a little bit boring because I'm coming back to our more, more, more strategy. And I think this more, more, more is going to allow us to grow long term. We believe, twice as fast as the market grows. And if right now we have just done a kind of market analysis, we believe that the market is growing in average across all our categories, 2%. So we're quite upbeat that we can grow twice as fast as the market. Now, how are we doing that? Yes, the one element is pushing into more channels here in the U.S. But at the same time and you're going to see that coming over the next quarters, we're also expanding into an adjacent categories. That means we're going to utilize our retailer relations to also push more categories where we're not playing in. A nice example, for instance, in Remington, the personal beauty segment which is not only about hair but it's also about skin and other features of beauty where our brands are going to play very strong and we're having a lot of projects in the pipelines be it in the Home and Garden category, in the auto care category and, so it really is in every category. But then the third element which also we should not forget and you mentioned my increased focus on the U.S., we're also putting continuously a strong focus on international growth. We believe that long term we will also grow faster outside of the U.S. than in the U.S. It is just now over the last two years that this growth has been hampered because of currency. Therefore, if you would have looked at our sales composition in constant currency over the last two years, you would have seen that our international success is really very strong and we will continue to drive that. And that was also one of the reasons why we have just implemented a new organization for the Asia-Pacific region, because in all fairness, that's one of our weakest regions. We have a very strong team in Australia, we have in other pockets of the region also strong market share, like, for instance, with pets in Japan and we're going to stronger leverage those resources across the region so that we can accelerate to grow also in that part of the world.

Okay. So that was definitely not a boring answer. That was a good answer. Okay. So the two other questions and thank you for that response. So, lawn and garden, I know you've said that, hey, the Zika stuff that we saw in the first half, it's a small piece of kind of what's out there, but I know with your products, I understand that you guys got fast tracked with EPA for Zika prevention. You can't change the packaging, obviously, at this point where we're and clearly the September quarter is a key critical month. So can you talk maybe what you're doing with some of your DIY channels, the retailers out there, in terms of bringing awareness to your products in terms of driving some of that growth? Because I do think that there is definitely some fear over there, on Zika and other parts of the country but it could be a great way for you to merchandise your product a little more in terms of the efficacy.

Again, I think the Zika awareness has grown, but then the cool spring has slowed down. And if you look again at Nielsen, even if Nielsen may not be the right picture for the entire market, you will see that in insecticides, actually the market was down, if you look at the quarter. And that's clearly an indication of the weather. The point is, again, we need to have consumers be informed and then they buy the product. That's why yes, POS is important, we have to get the product in front of them. We're working with all retailers and also for instance a nice success in our cross listing strategy. We got with insect repellant into the auto channel. So we're nicely utilizing the strong relationship that we have with auto care in the auto channel and we got there, you know, insect repellent's at the checkout so there, again, the impulse purchase, the consumers in the auto channel, they also are exposed to insect and need those repellent's. That's a nice momentum. And I would say as soon as the weather continues to be encouraging outdoor activity, we're very confident that consumption will come back and grow again.

Okay. Jason, this is Doug. I would just add to that, we were down in St. Louis actually the last few days for the Board meeting and a business review with the Home and Garden team and they, just a micro example, they have a rapid response team in place that they put in place a couple months ago between sales and supply chain and marketing and really the whole organization, to make sure we had the right off shelf displays in shippable format, easy to pull out and execute in many places throughout the retail environment today, so that our products are available as consumers walk the stores. And I think it's just a testament to the flexibility and nimbleness of that Home and Garden business.

And then the last question, you mentioned auto so I guess the one question obviously was a tale of kind of two halves of the quarter, the weather impacting the first half when it was part of acquisition, the second half when it came into the organic calculation, it was pretty nice. I know you're saying that you have to see how the weather kind of plays out but I guess the one part I was curious about was AC pro. I guess how that performed in the quarter and if I recall, in the September quarter last year, the trends were pretty negative. So do you have an easy comparison there? And I would think that part of the business, especially with a very hot summer in parts of the country, that business should do well. So I was just wondering if you can kind of maybe lay a little bit of context of that scenario?

Sure. Similar as to what Andreas mentioned earlier, we did have three kind of seasonal impacts already in the year. A little bit of an early cold when we had a relatively warm late winter and early spring, cool wet weather in much of the country impact that uses the AC product in particular in the April and May time frame. And then pretty strong sales at the end of June. And you can just imagine how tied to weather that is. If you recall Memorial Day weekend across most of the Midwest and northeast, it all of a sudden turned warm and people got outside and they were washing their cars and treating their lawns and doing all of the things that we like to see during that time of year. If the weather stays good, we should have a solid finish to the year. AC performed really well in June.

And it continues to perform very strong also in July.

Your next question comes from the line of Ian Zaffino from Oppenheimer. Please, go ahead.

Okay. Just wanted to drill down a little bit more on the pet business. You know, this has been in turnaround. And I guess recently you've been talking about the turnaround kind of catching hold and putting new management in place and operating well. Was this quarter somewhat of a setback from that or is it just you're realizing this might just take a little bit longer to turn around? Just, maybe give us an update there.

I think the turnaround is really proceeding as we expected. The one thing which was unexpected was the cold weather which did hurt us quite significantly in Europe in the [indiscernible] business because the outdoor aquatics is a rather important element, especially in the European aquatics business. So that was an unexpected element. But then again, I mentioned we walked away from a private label business. This was part of the [indiscernible] acquisition and they were supplying a retailer source product as private label. So it was not filling our factory. We make more or less no margin on it. We had working capital tied up in it, all kind of inventory risks. And therefore we decided that's not worth it, that's not cost. We will do private label, but only to fill our own factories. For source products, a private label is a distraction and an unnecessary tie-up of working capital. So what we should see typically is a pickup in EBITDA because, again, we're walking away from unprofitable business and we're growing in our core categories. However, EBITDA was not up because we're stepping up quite significantly our activities both on the R&D side but also on the marketing side. Not to mention, for instance, in Europe where we have launched now after the IAMS acquisition over one year ago, we have launched now a new organics range. We're broadening our product portfolio to go after different price points so we're playing intelligently. The IAMS brand, the [indiscernible] one brand to go after different price points. So we're stepping up significantly marketing activities and as a consequence year-over-year our expenses were significantly up in pet but this is, again, preparing the ground for the future growth.

Your next question comes from the line of Joe Altobello from Raymond James. Please, go ahead.

Just the first question I wanted to talk about the top line for 2017. You guys mentioned earlier. Market growth about 2% and you're pretty confident you can grow about twice that. So I guess we're looking for another fourish organic number for next year. So on that I wanted to kind of tease out, what you're expecting in terms of order magnitude from product line exits next year, as well as probably the continuation of the retailer inventory tightening that you're seeing so far this year?

Let me just cover the inventory tightening. Again, our customer mix is relatively broad. We have a few major customers in the [indiscernible] channel and in the home improvement channel. Those have all implemented those tools this year. And therefore we really don't see a major impact of that going forward. It may be a little bit here and there, but really no major. Now, with regard to those exits, also there we're going to anniversary it relatively soon. That means the fourth quarter, we will still have a small impact on that, but then again as we have mentioned before, it really has no impact on EBITDA, it's just going to be a little bit of impact on top line. And then from next year onwards, we should have anniversary' d at. There may be the one or other small element like what I mentioned is private label at [indiscernible] which we decided to exit, so there may be the one or other but no major impact.

And in terms of FX, if you use today's spot rate what type of head wind with re-looking at in terms of next year for the top line?

We're not ready to give guidance Joe on next year overall but what I would say around FX is, the environment is relatively stable in Europe now, after the last 30 days or so. And the biggest head winds that we'll continue to see will come out of our Latin America currency, our Latin America environment which has, you know, we have a pretty solid business there. Now, the good news is, you also have better pricing opportunities in Latin America than we do in most other regions in the world.

And then just one last one on Zika, obviously it's been a pretty nice driver on Home and Garden. Is it a huge, sort of tough comp next year or something that you guys are not overly worried about at this point?

No and, again, it is difficult and we have to hope that it's not going to spread in the U.S. But that really depends on how business is going to spread and therefore it may be an upside, it may be flattish. But I think the overall, the consumer has become more aware of the dangers. Therefore, I think it's becoming more natural to protect yourself if you are outdoors; therefore, long term we don't believe it's going to be a negative effect. In opposite, it may continue to be positive depending on what happens now in the U.S.

Your next question comes from the line of [indiscernible] from Deutsche Bank. Please go ahead.

I just wanted to ask about HHI. It looks like your organic comp was pretty easy, but then last quarter was really good, so I'm wondering if there was any sort of timing of shipments issues there? And then, I think you've lapped sort of all of these, you know, planned exits this quarter so I just wanted to confirm if there are any other planned exits going forward? And then, just generally your outlook for HHI for this quarter and then for next year?

I think the one element and I mentioned it earlier, that all major customers in the [indiscernible] channel but also in the home improvement channel have implemented new warehouse management systems. And that, of course, has also an impact on our HHI business here in the U.S. where one of the big customers reduced inventory. And that did happen in the quarter also negative impact on that. I think with regard to those exits, as mentioned before, in the next quarter we still have an impact, but it's not going to have a major impact. And I think overall our focus is there really to drive continued profitable growth. We will have also more opportunities internationally so we do see the continued further growth opportunities.

Your next question comes from the line of Zack Fadem from Wells Fargo. Please go ahead.

Can you talk a little bit more about the warehouse consolidation, particularly for auto and pet? What's the timeline for completion there? And do you care to take a crack at just potential margin impact there?

Yes, let me just explain why we have done that. You know, we had in the past a warehouse down in the south, you know, for auto care in Texas and one up in the north, so, you know, in the north of Ohio and basically we were shipping to customers from both warehouses. So we had to replenish both warehouses across the country. That means any product which were produced in Texas we shipped all the way to Ohio, then to ship it back to a customer which was somewhere in the middle. And there we had a lot of inefficient supply chain. Also, it led to the fact we had excess inventory. As a consequence, we decided to consolidate it and we did it in the first step in our old warehouse in the north of Ohio. But at the same time we started to do a kind of center of gravity study where our customer base is located. And there we have identified the state of Ohio facility which is the perfect location and we're going to develop that into our center of excellence where we're going to have not only our central U.S. warehouse, but also our [indiscernible] manufacturing. We're going to in-source part of the other items which we're currently sourcing from third parties. We're going to have our R&D there. So it is going to be our center of excellence going forward. Now, the timing of that, the first step we have actually done in this quarter, that means we have shut down our warehouse in Texas. But the Ohio facility, that's going to be more in early 2017, calendar 2017 completion date. So the project is on the way, but probably until it's completed, will be early 2017.

Okay. And just to clarify one more time on the portfolio pruning, of the $5 million of business exits in the quarter, how much of that was incremental this quarter versus how much was already announced?

It was pretty much steady state. It's been steady for the last several quarters.

Okay, so there was nothing incremental in the quarter?

Yes, it's a little bit of [indiscernible] private label which we exited in Europe. That was a little bit incremental.

Your next question comes from the line of Robert Labick from CJS Securities. Please, go ahead.

This is Chris Moore for Robert. Just one question on Home and Garden. Talking about international expansion, can you describe the process for regulatory approvals where you stand and kind of the opportunity there?

Yes. We're working very hard on it and our prime market, we can say openly, it's Latin America, especially on the insect repellant side. And there again, because there is the biggest opportunity, also now with the Zika awareness. Therefore, we're working on it, but unfortunately it is a pretty time-consuming process. So we have increased our headcount internally which is working on the project. We have also, we're relying on external support. But this is going to be at least 12 to 18 months project before we're going to see the benefits of that.

Your next question comes from the line of Karru Martinson from Jefferies. Please go ahead.

When you guys talk about modernizing of the Rayovac brand here and clearer price, when you think about the average price GAAP to your competitors, is that changing as part of that or is this more simplistic than I'm thinking it through?

I think the challenge in the battery category, for the consumer, it is very difficult to see a difference. However, based not only on the chemical content, but then also on what kind of version you have, the battery may be working perfectly in low drain devices like, you know, remote control or a clock. However, if you try to put that into a high drain device, like, you know, toys, flashlights and so on, they could perform very poorly. And this is exactly what we're going to do or what we're doing, we're flagging what those perfect applications are for. Therefore, leading the consumer which has a low drain device, he can pick the cheaper battery. He doesn't have to buy a $6 blister, he can buy a cheaper product. But then those which are looking for those high drain batteries, they better buy a good battery and have to pay the high prices because otherwise they come home and are going to be disappointed with the performance of that battery and this is not only applying to our products, that's exactly applying to competitor products equally. And I think our shift, of course, with more emphasizing our premium range, diffusion segment. We do see some very nice trade-up, also, in our alkaline category, generating healthier margins, reaching higher price points. And we will continue to push that, especially as we go into other channels where, again, the price competition may not be as intense as in the [indiscernible] channels.

Okay of the and when you guys look at the M&A environment, you mentioned your multiples going up here, but in context, are any parts of your portfolio that you would look at in terms of divestiture's?

That's an interesting question. I think Spectrum brand is about long term growth. And in all fairness, we believe we're living in an extremely competitive environment where both retailers are getting more purchasing power and putting more pressures on us, but also where we have global over capacity in most categories. And therefore, we strongly believe in this leverage of our shared infrastructure. Where we have a common infrastructure and can leverage more brands. That means go after more categories, more channels, more markets. And therefore, divesting a category would leave us with a lot of stranded overhead, dis-synergy's and therefore, this is really nothing which we're currently looking at.

Your next question comes from the line of Kevin Ziets from Citi. Please, go ahead.

If I'm calculating leverage right, I think you're right around four times now. So with the 4Q cash flow I would think you'd come down pretty aggressively below your comfort range. But my question is, if you don't find that significant acquisition out there to act on, would you consider some sort of capital return in the interim to kind of get you into that range and then use future cash flow for acquisitions?

The only near term plans we have would be to continue our modest share repurchase program to offset equity compensation and, of course, continue our dividend. We'd expect the dividend to increase every year with earnings. Now, beyond that, we have opportunity to continue to delever into a lower range, lower multiples, before we could consider any kind of major share repurchase or anything like that. As you know, we have a $300 million program and we've got about $250 million or so available on that and that would be the limit that we expect to use over the next several years. So the answer is no. We're patient. We have a lot of relationships. Our Executive Chairman in particular has a lot of relationships in the categories where we would like to continue to do bolt-on acquisitions and we think we can get those at good multiples, fair multiples. So that's the most likely use of our capital going forward.

And then I guess along those lines, I think the six and three-eighths were callable later this year, do you think you'll maybe take advantage of the markets and look to refinance those?

Well, we're obviously reviewing those as well and have for the last several months and in this low rate environment, we keep hearing that rates can never go lower and I turn on the TV every morning and rates are lower. So definitely we're looking at those and our bias right now is a fixed bias across the debt portfolio. We like where long term interest rates are and want to take advantage of those while we can.

And on the business side, just on the retailer inventory reductions, are you seeing any moves away from the appliance category in general in terms of shelf space or is it really just the tight inventory controls within the existing space?

I think overall, retailers are of course always trying to optimize their assortment and trying also to optimize their product offerings, so there will be retailers either, they call it clarity or whatever which try to exit certain categories. However, that typically also offers upside opportunity, especially with our focus on more innovation combined with superior value. We continue to gain in such environments. So therefore, we don't see that as a major headwind.

And then lastly, on batteries, in the non-scan channels where you're picking up share, who are you displacing? I assume the category isn't growing at this 7% rate nationally, even if you could track all the channels. So who do you think is getting displaced in these other channels? Is it more private label or is it your traditional brand of competitors?

I hope you will understand that we don't want to talk about specific competitors.

Of course.

Equally, as we don't talk about specific customers. So, therefore, I'm sorry that I can't answer that question.

Okay. And then if I could just get one more and then on the pet business. I say the pet business but it could be your other businesses, is there anything with regard to Brexit in terms of your selling from U.K. into the continent or vice-versa that sort of complicates your strategies there?

It will have to be proven and seen how they agree on that rate relationship going forward. However, I think the trade relations are so close that I really hope that common sense is going to prevail and that those two blocks will agree on common sense which will not hurt us. But you are right, the trade is going for us in both directions, so we have a strong factory in the U.K. where we're supplying continental Europe and vice-versa. So should we end up in a situation with trade [indiscernible] yes, that definitely would hurt us, but in all centers, I hope that common sense will prevail.

Thanks, Kevin and thanks to everybody. With that, we have actually reached the top of the hour so we will conclude our conference call. I certainly want to thank both Andreas and Doug. And on behalf of Spectrum Brands, all of us thank you for participating in our fiscal 2016 third quarter earnings call. Have a good day.

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