Fitch Affirms SC Johnson's IDR at 'A-'; Outlook Stable

NEW YORK--()--Fitch Ratings has affirmed S.C. Johnson & Son, Inc.'s (SCJ) Issuer Default Rating (IDR) at 'A-'. The ratings apply to approximately $1.6 billion of total outstanding debt. The Rating Outlook is Stable. A full list of affirmed ratings follows at the end of this release.

KEY RATING DRIVERS

Brand, Geographic Diversity

SCJ is a privately held household products company with wide portfolio of leading brands such as Glade for air care, Raid in pest control, Windex in home cleaning, Ziploc in home storage solutions, and Kiwi in shoe care. Products are sold in more than 100 countries. While the U.S. accounts for a moderate portion of operations, the company is not dependent on any one product or region.

Improved Operating Performance

Revenue growth has been, and should remain, in line with the household and personal care sectors organic range of 1% to 6%. However, foreign exchange translation could hamper reported growth given significant negative exchange rate movements in developing markets, which has recently caused multinational peer companies such as Procter & Gamble to lower its all-in sales and earnings growth.

Product mix and margins have improved with accretive bolt-on acquisitions and disposal of lower-than-corporate average brands or businesses. Additionally, SCJ has a strong focus on cost reduction. As a result, SCJ's EBITDA margins have shown sequential improvement in each of the past five years. Fitch expects modest to flat margin accretion in 2014 barring sudden escalations in key commodities such as resin and packaging.

Limited Capital Market Access

The company intends to maintain its current private company structure which limits access to the equity capital markets. Nonetheless, SCJ will maintain strong access to various debt markets into the foreseeable future.

Significant Liquidity, Modest Maturities

Much of the company's liquidity is generated internally and back-up facilities are just a moderate portion of SCJ's total liquidity. Free cash flow (FCF) has improved and stabilized at significantly higher levels in the past three years. Fitch anticipates moderate increases in FCF in 2014 with good working capital management.

Debt is expected to remain near the current $1.6 billion level. Virtually all of SCJ's debt is unsecured. The majority has change of control puts and of these, several, including the credit agreement that matures in 2017, have leverage covenants. One note has very modest amortization through 2018. However, there is no significant debt maturity for the next four years.

Leverage should decline modestly in the next two years as EBITDA increases and debt balances remain relatively flat. Nonetheless, given the company's comfortable cushion in this metric, it could increase debt in the $500 million range with minimal impact to current ratings, as long as its financial performance remains within Fitch's expectations.

RATING SENSITIVITIES

What Could Trigger a Rating Action:

Future developments that may, individually or collectively, lead to a positive rating action or Outlook revision include:

--If SCJ commits to operating with leverage half a turn less than current levels while continuing its current business momentum and strong cash flow generation.

Future developments that may, individually or collectively, lead to a negative rating action include:

--If the company engages in a large leveraged acquisition or materially increases its leverage for other reasons that signal a change in its financial strategy. This is not expected.

Fitch affirms SCJ's rating as follows:

--Issuer Default Rating (IDR) at 'A-';

--Short-term IDR at 'F2';

--Commercial paper at 'F2';

--Senior unsecured notes at 'A-';

--Bank credit facility at 'A-'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (August 2013).

Applicable Criteria and Related Research:

Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715139

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=820554

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Contacts

Fitch Ratings, New York
Media Relations
Brian Bertsch, +1-212-908-0549
brian.bertsch@fitchratings.com
or
Primary Analyst
Director
Grace Barnett, +1-212-908-0718
or
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Senior Director
Michael Zbinovec, +1-312-368-3164
or
Committee Chairperson
Senior Director
Monica Aggarwal, +1-212-908-0282

Sharing

Contacts

Fitch Ratings, New York
Media Relations
Brian Bertsch, +1-212-908-0549
brian.bertsch@fitchratings.com
or
Primary Analyst
Director
Grace Barnett, +1-212-908-0718
or
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Senior Director
Michael Zbinovec, +1-312-368-3164
or
Committee Chairperson
Senior Director
Monica Aggarwal, +1-212-908-0282