Rayovac 2013 Annual Report Download

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Table of contents

  • Page 1

  • Page 2
    ... diversified consumer products company with market-leading, high-performance and value-based brands. Our fiscal 2013 net sales were $4.28 billion on a pro forma basis including the Hardware & Home Improvement Group (HHI) which was acquired in December 2012. Headquartered in Middleton, Wisconsin, we...

  • Page 3

  • Page 4
    ... Our brands are widely trusted, enduring and generally carry a low cash register ring. We have a good retailer customer balance globally. This gives us timely and clear insight into consumer trends and needs with our everyday, replacement product portfolio. There are many cross-selling opportunities...

  • Page 5
    ... annual reduction in their cost of goods sold. This continuous improvement, or CI, focus enables us to overcome product cost increases and other inflationary pressures, as well as invest in new products cts and product enhancements. Cost improvement is a part of Spectrum Brands' "DNA". Using cross...

  • Page 6
    ...-discretionary products used by consumers worldwide in their everyday lives. Innovative umbrella or hero products launching around the world are adding a new dimension to market growth. Regional and local market expansion will be driven by a mix of more retailers, more countries, more listings, more...

  • Page 7
    ...are useful supplemental information, such adjusted results are not intended to replace the Company's GAAP financial results and should be read in conjunction with those GAAP results. Terry L. Polistina Former President, Global Appliances, Spectrum Brands Holdings, Inc. Age 50; Director since 2009...

  • Page 8
    ... MiracleGro Company, Stanley Black & Decker, Inc., and Tupperware Brands Corporation. There has been no change in our peer group between Fiscal 2012 and Fiscal 2013. The comparison below assumes that $100 was invested in (i) the Common Stock of SBI (the "SBI Common Stock") from September 2, 2009...

  • Page 9
    ... days of September 30, 2013 are incorporated by reference in this Annual Report on Form 10-K in response to Part III, Items 10, 11, 12, 13 and 14. * For purposes of this calculation only, shares of the registrant's Common Stock, par value $0.01 per share, held by directors and executive officers and...

  • Page 10
    ... OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS ...CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE ...PRINCIPAL ACCOUNTING FEES AND SERVICES ...PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES ...INDEX TO CONSOLIDATED...

  • Page 11
    ...to any significant retail customer(s); competitive promotional activity or spending by competitors or price reductions by competitors; the introduction of new product features or technological developments by competitors and/or the development of new competitors or competitive brands; the effects of...

  • Page 12
    ...Delaware corporation ("SB Holdings" or the "Company"), is a diversified global branded consumer products company. Spectrum Brands, Inc. ("Spectrum Brands"), is a wholly owned subsidiary of SB Holdings. SB Holdings' common stock trades on the New York Stock Exchange (the "NYSE") under the symbol "SPB...

  • Page 13
    ... on Form 10-K. We manufacture and market alkaline, zinc carbon and hearing aid batteries, herbicides, insecticides and repellants and specialty pet supplies. We design and market rechargeable batteries, battery-powered lighting products, electric shavers and accessories, grooming products and hair...

  • Page 14
    ... batteries (AA, AAA, C, D and 9-volt sizes) to both retail and industrial customers. Our alkaline batteries are marketed and sold primarily under the Rayovac and VARTA brands. We also manufacture alkaline batteries for third parties who sell the batteries under their own private labels. Our zinc...

  • Page 15
    ... silver oxide batteries, keyless entry batteries and coin cells for use in watches, cameras, calculators, communications equipment, medical instruments and on the go charges. We also offer a broad line of battery-powered, portable lighting products, including flashlights and lanterns for both retail...

  • Page 16
    ... also market small home product appliances, including hand-held irons, vacuum cleaners, air purifiers, clothes shavers and heaters, primarily under the Black & Decker and Russell Hobbs brands. Electric Personal Care Products Our electric personal care products, marketed and sold under the Remington...

  • Page 17
    ... limited group of retailer customers, including Wal-Mart, The Home Depot, Lowe's, Carrefour, Target, PetSmart, Canadian Tire, PetCo and Gigante. Our sales to Wal-Mart represented approximately 18% of our consolidated net sales for the fiscal year ended September 30, 2013. No other customer accounted...

  • Page 18
    ... March 2022 for certain alkaline battery designs, technology and manufacturing equipment from Matsushita Electrical Industrial Co., Ltd. ("Matsushita"), to whom we pay a royalty. We also use and maintain a number of trademarks in our business, including RAYOVAC, REMINGTON, VARTA, TETRA, 8IN1, DINGO...

  • Page 19
    ... brand). We also face competition from the private label brands of major retailers, particularly in Europe. The offering of private-label batteries by retailers may create pricing pressure in the consumer battery market. Typically, private-label brands are not supported by advertising or promotion...

  • Page 20
    ... offers comparable performance at a lower price. In Europe, the VARTA brand is competitively priced with other premium brands. In Latin America, where zinc carbon batteries outsell alkaline batteries, the Rayovac brand is competitively priced. Our primary competitors in the portable lighting product...

  • Page 21
    ... promotional incentives to retailers, distributors, wholesalers and, ultimately, consumers. Seasonality On a consolidated basis our financial results are approximately equally weighted between quarters, however, sales of certain product categories tend to be seasonal. Sales in the consumer battery...

  • Page 22
    ... in Europe, particularly products sold under the Remington brand name, VARTA battery chargers, certain portable lighting and all of our batteries, are subject to regulation in European Union ("EU") markets under three key EU directives. The first directive is the Restriction of the Use of Hazardous...

  • Page 23
    ... President, Investor Relations & Corporate Communications, Spectrum Brands, Inc. at 3001 Deming Way, Middleton, Wisconsin 53562 or via electronic mail at [email protected], or by contacting the Vice President, Investor Relations & Corporate Communications by telephone at (608) 275...

  • Page 24
    ... known to us or that we currently view as immaterial may also materially and adversely affect our business, financial condition or results of operations. Risks Related To Our Business We are a parent company and our primary source of cash is and will be distributions from our subsidiaries. We are...

  • Page 25
    ... economic markets within certain sectors, with financial services and retail businesses being particularly impacted. Our ability to generate revenue depends significantly on discretionary consumer spending. It is difficult to predict new general economic conditions that could impact consumer and...

  • Page 26
    ...of these markets, we also face competition from numerous other companies. In addition, in a number of our product lines, we compete with our retail customers, who use their own private label brands, and with distributors and foreign manufacturers of unbranded products. Significant new competitors or...

  • Page 27
    ... may enable them to compete more aggressively in offering retail discounts, rebates and other promotional incentives. Product improvements or effective advertising campaigns by competitors may weaken consumer demand for our products. Consumer purchasing behavior may shift to distribution channels...

  • Page 28
    ... limitation, fluctuations in the foreign exchange rate of the Euro, British Pound, Brazilian Real and the Mexican Peso; changes in the economic conditions or consumer preferences or demand for our products in these markets; the risk that because our brand names may not be locally recognized, we...

  • Page 29
    ... 30, 2013. We estimate that approximately $301 million of the Spectrum and Russell Hobbs U.S. federal net operating losses and $358 million of the Spectrum and Russell Hobbs state net operating losses would expire unused even if the Company generates sufficient income to otherwise use all its...

  • Page 30
    ... quantities of private label products, which we do not produce on their behalf and which directly compete with our products, could have a material adverse effect on our business, financial condition and results of operations. As a result of our international operations, we face a number of risks...

  • Page 31
    ... Electronic Equipment requires us to collect and treat, dispose of or recycle certain products we manufacture or import into the EU at our own expense. The EU Directive on Batteries and Accumulators and Waste Batteries bans heavy metals in batteries by establishing maximum quantities of heavy metals...

  • Page 32
    ... condition and results of operations. In our Global Batteries & Appliances segment, we license the use of the Black & Decker brand for marketing in certain small household appliances in North America, South America (excluding Brazil) and the Caribbean. In July 2011, The Black & Decker Corporation...

  • Page 33
    ... by such supplier in the manufacture of our products. In addition, we manufacture the majority of our foil cutting systems for our shaving product lines, using specially designed machines and proprietary cutting technology, at our Portage, Wisconsin facility. Damage to this facility, or prolonged...

  • Page 34
    ... of our business, we may be named as a defendant in lawsuits involving product liability claims. In any such proceeding, plaintiffs may seek to recover large and sometimes unspecified amounts of damages and the matters may remain unresolved for several years. Any such matters could have a material...

  • Page 35
    ... have a material effect on our business, financial condition and results of operations. We are also subject to proceedings related to our disposal of industrial and hazardous material at off-site disposal locations or similar disposals made by other parties for which we are responsible as a result...

  • Page 36
    ... not, could impair our reputation, damage our brand names and have a material adverse effect on our business, financial condition and results of operations. In addition, we rely on certain third party trademarks, brand names and logos which we do not have exclusive use of. Public perception that any...

  • Page 37
    ...expense we record for our defined benefit pension plans. U.S. Generally Accepted Accounting Principles ("GAAP") requires that we calculate income or expense for the plans using actuarial valuations. These valuations reflect assumptions about financial markets and other economic conditions, which may...

  • Page 38
    ... combined company, including legal, accounting, financial advisory and other costs. We expect to incur one-time costs in connection with integrating the operations, products and personnel of Spectrum and the HHI Business and TLM Taiwan acquired from Stanley Black & Decker into a combined company, in...

  • Page 39
    ... of possible company culture conflicts and different opinions on technical decisions and product roadmaps. We must integrate or, in some cases, replace, numerous systems, including those involving management information, purchasing, accounting and finance, sales, billing, employee benefits, payroll...

  • Page 40
    ... the Hardware Acquisition in connection with certain products and services. When our right to use the Stanley Black & Decker trademarks, brand names and logos expires, we may not be able to maintain or enjoy comparable name recognition or status under our new brand. If we are unable to successfully...

  • Page 41
    ...has been relatively low when compared with larger companies listed on the NYSE or other stock exchanges. Because of this, it may be more difficult for stockholders to sell a substantial number of shares for the same price at which stockholders could sell a smaller number of shares. We cannot predict...

  • Page 42
    ... under which shares of SB Holdings could be issued, the 2009 Spectrum Brands Inc. Incentive Plan (the "2009 Plan") and the Spectrum Brands Holdings, Inc. 2007 Omnibus Equity Award Plan (the "RH Plan"). On October 21, 2010, SB Holdings' Board of Directors adopted the Spectrum Brands Holdings, Inc...

  • Page 43
    ..., Germany(2) ...Alkaline Battery Manufacturing Washington, UK(2) ...Zinc Air Button Cell Battery Manufacturing & Distribution Guatemala City, Guatemala(1) ...Zinc Carbon Battery Manufacturing Jaboatao, Brazil(1) ...Zinc Carbon Battery Manufacturing Dixon, Illinois(2) ...Battery & Lighting Device...

  • Page 44
    ...research and development facility located in Middleton, Wisconsin and the Hardware & Home Improvement administrative headquarters in Lake Forest, California. We believe that our existing facilities are suitable and adequate for our present purposes and that the productive capacity in such facilities...

  • Page 45
    ...4 holders of record based upon data provided by the transfer agent for the SBH Common Stock. We believe the number of beneficial holders of our Common Stock is significantly in excess of this amount. The following table sets forth the reported high and low bid prices per share of SBH Common Stock as...

  • Page 46
    ... Debtors emerged from Chapter 11 of the U.S. Bankruptcy Code. Effective as of the Effective Date and pursuant to the Debtors' confirmed plan of reorganization, we converted from a Wisconsin corporation to a Delaware corporation. The term "Predecessor Company" refers to Spectrum Brands, our Wisconsin...

  • Page 47
    ... Financial Accounting Standards Board Accounting Standards Codification Topic 350: "Intangibles-Goodwill and Other," we conduct annual impairment testing of goodwill and indefinite-lived intangible assets. As a result of these analyses we recorded non-cash pretax impairment charges of approximately...

  • Page 48
    ... included in this Annual Report on Form 10-K for further details on impairment charges. On November 5, 2008, Spectrum Brands' board of directors committed to the shutdown of the growing products portion of the Home and Garden Business, which included the manufacturing and marketing of fertilizers...

  • Page 49
    (12) Fiscal 2013 includes a non-cash charge of $16 million related to the write-off of unamortized debt issuance costs and unamortized premiums in connection with the extinguishment and replacement of the Company's 9.5% Notes and Term Loan in conjunction with the acquisition of the HHI Business. ...

  • Page 50
    ... Report on Form 10-K. Business Overview We manufacture and market alkaline, zinc carbon and hearing aid batteries, herbicides, insecticides and repellants and specialty pet supplies. We design and market rechargeable batteries, battery-powered lighting products, electric shavers and accessories...

  • Page 51
    ... continuously pursuing new innovations for our shaving, grooming and hair care products including foil and rotary shaver improvements, trimmer enhancements and technologies that deliver skin and hair care benefits. During Fiscal 2013, we introduced the Kevo smart lock under the Kwikset brand. This...

  • Page 52
    ...in cell sizes of AA, AAA, C, D and 9-volt, specialty batteries, which include rechargeable batteries, hearing aid batteries, photo batteries and watch/calculator batteries, and portable lighting products. Most consumer batteries are marketed under one of the following brands: Rayovac/VARTA, Duracell...

  • Page 53
    ... our products in approximately 140 countries through a variety of trade channels, including retailers, wholesalers and distributors, hearing aid professionals, industrial distributors and Original Equipment Manufacturers. Innovative New Products, Packaging and Technologies. We have a long history of...

  • Page 54
    ...follows (in millions): Fiscal Year 2013 2012 Product line net sales Consumer batteries ...Hardware and home improvement products ...Small appliances ...Pet supplies ...Home and garden control products ...Electric shaving and grooming products ...Electric personal care products ...Total net sales to...

  • Page 55
    ... ports of entry during the peak holiday period in Fiscal 2013, coupled with decreased retail space available for the product category at a major retailer and customer inventory management. European sales gains were driven by successful new product launches and promotions, market growth, increased...

  • Page 56
    ... cost reduction initiatives and positive foreign exchange impacts of $4 million. See Note 2, "Significant Accounting Policies-Acquisition and Integration Related Charges", of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information regarding...

  • Page 57
    ... Home and Hardware & Garden Home Business Improvement (in millions) Corporate / Unallocated Items(a) Consolidated SB Holdings Fiscal 2013 Net income (loss), as adjusted(a) ...Pre-acquisition earnings of HHI(b) ...Income tax expense ...Interest expense ...Acquisition and integration related charges...

  • Page 58
    ... in European small appliance sales were driven by increased market share in the United Kingdom, regional expansion in Eastern and Western Europe and successful new product lines. The declines in global consumer battery sales of $9 million resulted from the non-recurrence of promotions, inventory...

  • Page 59
    ... customers in Fiscal 2013 increased $7 million to $622 million compared to $615 million in Fiscal 2012 led by increased companion animal sales of $16 million, driven by growth in the Dingo and FURminator brands, expansion in Europe, new product launches and the full year impact of the FURminator...

  • Page 60
    ... 15, "Acquisitions" to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information regarding the HHI Business acquisition. Corporate Expense. Our corporate expense was $62 million in Fiscal 2013 compared to $52 million in Fiscal 2012. This increase is...

  • Page 61
    ...unamortized original issue premium ...Annual Report on Form 10-K. Income Taxes. In Fiscal 2013, we recorded...2013, the consolidated pretax income was close to break even, resulting in a higher effective tax rate as this rate is calculated by dividing tax expense into pretax income (loss). In light...

  • Page 62
    ... defined under Internal Revenue Code ("IRC") Section 382, that subject our U.S. federal and state net operating losses and other tax attributes to certain limitations. The annual limitation on our use of these carryforwards is based on a number of factors including the value of our stock (as defined...

  • Page 63
    ... as price increases. European sales increases were attributable to market share gains in the United Kingdom and expansion of the Russell Hobbs brand throughout Europe. Decreased North American sales were a result of a concerted effort to eliminate certain low margin promotions. Pet supply product...

  • Page 64
    ...integration charges of $6 million, positive foreign exchange impacts of $20 million and savings from our cost reduction initiatives. See Note 2, "Significant Accounting Policies-Acquisition and Integration Related Charges", of Notes to Consolidated Financial Statements included in this Annual Report...

  • Page 65
    ... in this Annual Report on Form 10-K. Below are reconciliations of GAAP Net Income (Loss) from Continuing Operations to Adjusted EBIT and Adjusted EBITDA by segment and for Consolidated Spectrum Brands for Fiscal 2012 and Fiscal 2011: Fiscal 2012 Global Home and Corporate / Batteries & Global Pet...

  • Page 66
    ... foreign exchange, segment sales increased by $61 million, led by increased consumer batteries sales of $31 million. The growth of global consumer battery sales on a constant currency basis was driven by new customer listings as well as increased shelf space at existing customers, coupled with price...

  • Page 67
    ...and new customer gains, whereas European sales increases resulted from market share gains in the United Kingdom and expansion of the Russell Hobbs brand throughout Europe. The decline in North American small appliances sales resulted from a concerted effort to eliminate certain low margin promotions...

  • Page 68
    ... employees, integration related professional fees and other post business combination related expenses associated with our acquisitions. See Note 2, "Significant Accounting Policies-Acquisition and Integration Related Charges" to our Consolidated Financial Statements included in this Annual Report...

  • Page 69
    ... defined under Internal Revenue Code ("IRC") Section 382, that subject our U.S. federal and state net operating losses and other tax attributes to certain limitations. The annual limitation on our use of these carryforwards is based on a number of factors including the value of our stock (as defined...

  • Page 70
    ... tax liabilities recorded on the FURminator opening balance sheet ...accounts payable; Higher cash payments for interest of $40 million, excluding payments related to the tender of our 9.5% Notes (See Note 6, "Debt", of Notes to Consolidated Financial Statements included in this Annual Report on Form...

  • Page 71
    ... our existing indebtedness, including outstanding securities of Spectrum Brands or its subsidiaries, in the open market or otherwise. See Note 6, "Debt," to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information regarding our outstanding...

  • Page 72
    ... currently outstanding under these facilities, and using market interest rates and foreign exchange rates in effect at September 30, 2013, this also includes interest under our Term Loans and ABL Facility of approximately $64 million. Interest on our debt is payable in cash. Interest on the 6.375...

  • Page 73
    ... Commitment Expiration by Fiscal Year 2014 2015 2016 2017 2018 Thereafter Total Letters of credit ...Total Other Commercial Commitments ... $32 $32 $5 $5 $- $- $- $- $- $- $- $- $37 $37 Critical Accounting Policies Our Consolidated Financial Statements included in this Annual Report on Form...

  • Page 74
    ...growth rates used in the reporting unit and trade name models; and (iv) projected long-term growth rates used in the derivation of terminal year values. We also tested the aggregate estimated fair value of our reporting units for reasonableness by comparison to our total market capitalization, which...

  • Page 75
    ..."; Note 2(d), "Significant Accounting Policies and Practices-Use of Estimates" and Note 2(f), "Significant Accounting Policies and Practices-Concentrations of Credit Risk and Major Customers and Employees"; of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for...

  • Page 76
    ... calculated by applying an assumed rate of return to the fair value of plan assets. We used expected returns on plan assets of 3.6% to 7.8% in Fiscal 2013 ...Annual Report on Form 10-K for a more complete discussion of our employee benefit plans. Restructuring and Related Charges Restructuring charges...

  • Page 77
    ... of other acquired assets and assumed liabilities, including potential contingencies, and the useful lives of the assets. The projections are developed using internal forecasts, available industry and market data and estimates of long-term rates of growth for our business. The impact of prior or...

  • Page 78
    ... Annual Report on Form 10-K contain additional information related to our accounting policies, including recent accounting pronouncements, and should be read in conjunction with this discussion. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market Risk Factors We have market...

  • Page 79
    ... reduction in cost of one year's purchases of the related commodities due to the same change in commodity prices, would be a gain of $1 million. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required for this Item is included in this Annual Report on Form 10-K within Item 15...

  • Page 80
    ... in the consolidated financial statements of the Company as of and for the year ended September 30, 2013. The Company's independent registered public accounting firm, KPMG LLP, has issued an audit report on the Company's internal control over financial reporting, which is included herein. Changes in...

  • Page 81
    ... of ethics on that section of our website. We have also adopted the Spectrum Brands Code of Business Conduct and Ethics, a code of ethics that applies to all of our directors, officers and employees. The Spectrum Brands Code of Business Conduct and Ethics is publicly available on our website at www...

  • Page 82
    ..." in the SB Holdings Definitive Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Ownership of Common Shares of Spectrum Brands Holdings, Inc. The information required by Item 403 of Regulation S-K is incorporated herein by...

  • Page 83
    ...this Annual Report on Form 10-K. 2. The financial statement schedule listed in the Index to Consolidated Financial Statements and Financial Statement Schedule, filed as part of this Annual Report on Form 10-K. 3. The exhibits listed in the Exhibit Index filed as part of this Annual Report on Form 10...

  • Page 84
    SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE Page Reports of Independent Registered Public Accounting Firm ...Consolidated Statements of Financial Position ...Consolidated Statements of Operations ...Consolidated ...

  • Page 85
    Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders Spectrum Brands Holdings, Inc.: We have audited the accompanying consolidated statements of financial position of Spectrum Brands Holdings, Inc. and subsidiaries (the Company) as of September 30, 2013 and...

  • Page 86
    ... Accounting Firm The Board of Directors and Stockholders Spectrum Brands Holdings, Inc.: We have audited Spectrum Brands Holdings, Inc. and subsidiaries (the Company) internal control over financial reporting as of September 30, 2013, based on criteria established in Internal Control-Integrated...

  • Page 87
    ... financial statement schedule. Our report on the consolidated financial statements refers to a change in accounting principle related to the presentation of tax withholdings on share-based payments in the consolidated statements of cash flows. /s/ KPMG LLP Milwaukee, Wisconsin November 27, 2013 77

  • Page 88
    SPECTRUM BRANDS HOLDINGS, INC. Consolidated Statements of Financial Position September 30, 2013 and September 30, 2012 (Amounts in thousands, except per share figures) September 30, 2013 September 30, 2012 Assets Current assets: Cash and cash equivalents ...Receivables: Trade accounts receivable, ...

  • Page 89
    SPECTRUM BRANDS HOLDINGS, INC. Consolidated Statements of Operations Years ended September 30, 2013, 2012 and 2011 (Amounts in thousands, except per share figures) 2013 2012 2011 Net sales ...Cost of goods sold ...Restructuring and related charges ...Gross profit ...Selling ...General and ...

  • Page 90
    SPECTRUM BRANDS HOLDINGS, INC. Consolidated Statements of Comprehensive Income (Loss) Years ended September 30, 2013, 2012 and 2011 (Amounts in thousands) 2013 2012 2011 Net (loss)...) $(60,332) $ 29,583 See accompanying notes which are an integral part of these consolidated financial statements. 80

  • Page 91
    SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES Consolidated Statements of Shareholders' Equity Years ended September 30, 2013, 2012 and 2011 (In thousands) Accumulated Other Comprehensive Total NonTotal Common Stock Additional Paid-In Accumulated Income (Loss), Treasury Shareholders' controlling ...

  • Page 92
    ...paid ...Treasury stock purchases ...Net proceeds from equity offering ...Share based award tax withholding payments ...Other financing activities ...Net cash provided (used) by financing activities ...Effect on cash and cash equivalents due to Venezuela devaluation ...Effect of exchange rate changes...

  • Page 93
    ... products in approximately 140 countries through a variety of trade channels, including retailers, wholesalers and distributors, hearing aid professionals, industrial distributors and original equipment manufacturers and enjoys name recognition in its markets under the Rayovac, VARTA and Remington...

  • Page 94
    ... the fiscal years ended September 30, 2013, 2012 and 2011, respectively. (b) Change in Accounting Principle During Fiscal 2013, the Company made a change in accounting principle to present tax withholdings for sharebased payment awards paid to taxing authorities on behalf of employees as a financing...

  • Page 95
    ... arrangements complies with Accounting Standards Codification ("ASC") Topic 605: "Revenue Recognition." For all types of promotional arrangements and programs, the Company monitors its commitments and uses various measures, including past experience, to determine amounts to be recorded for the...

  • Page 96
    .... In connection with fresh-start reporting, Intangible Assets were recorded at their estimated fair value on August 30, 2009. Customer lists, proprietary technology and certain trade name intangibles are amortized, using the straightline method, over their estimated useful lives of up to 20...

  • Page 97
    ... value of its reporting units for reasonableness by comparison to the total market capitalization of the Company, which includes both its equity and debt securities. In addition, in accordance with ASC 350, as part of the Company's annual impairment testing, the Company tested its indefinite-lived...

  • Page 98
    ... an impairment review. (k) Debt Issuance Costs Debt issuance costs are capitalized and amortized to interest expense using the effective interest method over the lives of the related debt agreements. (l) Accounts Payable Included in accounts payable are book overdrafts, net of deposits on hand, on...

  • Page 99
    ... Consolidated Statements of Operations and include agency fees and other costs to create advertisements, as well as costs paid to third parties to print or broadcast the Company's advertisements. (q) Research and Development Costs Research and development costs are charged to expense in the period...

  • Page 100
    ... between the number of shares used in the calculations of basic and diluted net (loss) income per share is due to the effects of restricted stock and assumed conversion of employee stock unit awards. Net (loss) income per common share is calculated based upon the following shares: Fiscal 2013 Fiscal...

  • Page 101
    SPECTRUM BRANDS HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (Amounts in thousands, except per share figures) considering current and future earnings from international subsidiaries to be permanently reinvested, except for in locations where the Company is precluded by ...

  • Page 102
    ... these costs over the requisite service period of the awards. In September 2009, SB Holdings' board of directors (the "Board") adopted the 2009 Spectrum Brands Inc. Incentive Plan (the "2009 Plan"). Prior to October 21, 2010, up to 3,333 shares of common stock, net of forfeitures and cancellations...

  • Page 103
    SPECTRUM BRANDS HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (Amounts in thousands, except per share figures) A summary of the Company's restricted stock and restricted stock unit award activity for Fiscal 2013 and Fiscal 2012, and the non-vested awards outstanding as of ...

  • Page 104
    ... in thousands, except per share figures) The following table summarizes acquisition and integration related charges incurred by the Company during Fiscal 2013, Fiscal 2012 and Fiscal 2011: 2013 2012 2011 Russell Hobbs Integration costs ...Employee termination charges ...Legal and professional fees...

  • Page 105
    ... in connection with acquisitions and from the application of fresh-start reporting in the fiscal year ended September 20, 2009. The useful lives of the Company's intangible assets subject to amortization are 9 to 17 years for proprietary technology assets associated with the Global Batteries & 95

  • Page 106
    SPECTRUM BRANDS HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (Amounts in thousands, except per share figures) Appliances segment, 8 to 9 years for proprietary technology assets related to the Hardware & Home Improvement segment, 4 to 9 years for proprietary technology assets...

  • Page 107
    ...Credit Facilities"). Term Loan On December 17, 2012, Spectrum Brands entered into a senior term loan facility, maturing December 17, 2019, which provides for borrowings in an aggregate principal amount of $800,000, with $100,000 in Canadian dollar equivalents (the "HHI Term Loan") in connection with...

  • Page 108
    ... by Spectrum Brands' parent company, SB/RH Holdings, LLC, as well as by existing and future domestic restricted subsidiaries. The Company may redeem all or a part of the 6.375% Notes and the 6.625% Notes, upon not less than 30 or more than 60 days notice, at specified redemption prices. Further...

  • Page 109
    ... Notes accepted those funds in trust for the benefit of the holders of the 9.5% Notes and has acknowledged the satisfaction and discharge of the 9.5% Notes and the indenture governing the 9.5% Notes. In connection with the Tender Offer, the Company recorded $105,640 of fees and expenses as a cash...

  • Page 110
    SPECTRUM BRANDS HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (Amounts in thousands, except per share figures) with the increase and extension, the Company incurred $323 of fees during Fiscal 2013. The fees are classified as Debt issuance costs within the accompanying ...

  • Page 111
    SPECTRUM BRANDS HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (Amounts in thousands, except per share figures) The fair value of the Company's outstanding derivative contracts recorded as liabilities in the accompanying Consolidated Statements of Financial Position are as ...

  • Page 112
    ...are used to economically hedge the fair value of the Company's third party and intercompany foreign currency payments, commodity purchases and interest rate payments, the gain (loss) associated with the derivative contract is recognized in earnings in the period of change. During Fiscal 2013, Fiscal...

  • Page 113
    ... net of tax benefit of $565. At September 30, 2013, the portion of derivative net loss estimated to be reclassified from AOCI into earnings over the next 12 months is $2,248, net of tax. The Company is exposed to risk from fluctuating prices for raw materials, specifically zinc and brass used in its...

  • Page 114
    ...through of market prices for silver used in manufacturing purchased watch batteries. The Company hedges a portion of the risk associated with these materials through the use of commodity swaps. The swap contracts are designated as economic hedges with the unrealized gain or loss recorded in earnings...

  • Page 115
    SPECTRUM BRANDS HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (Amounts in thousands, except per share figures) terms and risks. Modeling techniques assume market correlation and volatility, such as using prices of one delivery point to calculate the price of the contract's ...

  • Page 116
    ... The carrying values of cash and cash equivalents, accounts and notes receivable, accounts payable and short term debt approximate fair value. The fair values of long-term publicly traded debt are based on unadjusted quoted market prices (Level 1) and derivative financial instruments are generally...

  • Page 117
    ... rate of 35%, with the Company's recognized income tax expense: 2013 2012 2011 Statutory federal income tax (benefit) expense ...$ (9,784) $ 38,135 $ 5,994 Permanent items ...10,104 8,595 8,654 Exempt foreign income ...(5,921) (5,760) (380) Foreign statutory rate vs. U.S. statutory rate ...(19,182...

  • Page 118
    ...2013 2012 Current deferred tax assets: Employee benefits ...Restructuring ...Inventories and receivables ...Marketing and promotional...$(803,764) $(659,534) $(492,774) $(377,465) $(459,815) $(349,322) In Fiscal 2012, the Company began recording residual U.S. and foreign taxes on foreign earnings as ...

  • Page 119
    ... indefinite carryforward periods. The Company is subject to an annual limitation on the use of its net operating losses that arose prior to its emergence from bankruptcy. The Company has had multiple changes of ownership, as defined under Section 382 of the Internal Revenue Code of 1986, as amended...

  • Page 120
    ... tax assets related to net operating losses in Brazil, and thus recorded a $25,877 increase in the valuation allowance. The total amount of unrecognized tax benefits on the Company's Consolidated Statements of Financial Position at September 30, 2013 and September 30, 2012 are $13,807 and $5,877...

  • Page 121
    ... years ended September 30, 2009 and prior are subject to Internal Revenue Service ("IRS") examination until the year that such net operating loss carryforwards are utilized and those years are closed for audit. The Company's fiscal years ended September 30, 2010, 2011, 2012 and 2013 remain open...

  • Page 122
    SPECTRUM BRANDS HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (Amounts in thousands, except per share figures) The following tables provide additional information on the Company's pension and other postretirement benefit plans: Pension and Deferred Compensation Benefits 2013 ...

  • Page 123
    ... return on plan assets used for the Company's domestic plans was approximately 7.8% and approximately 5.4% for its international plans. Pension and Deferred Compensation Benefits 2013 2012 2011 Other Benefits 2013 2012 2011 Components of net periodic benefit cost Service cost ...Interest cost...

  • Page 124
    ... to the plan performance. The Company's Other portfolio consists of all pension assets, primarily insurance contracts, in the United Kingdom and Germany. The Company's expected future pension benefit payments for Fiscal 2014 through its fiscal year 2023 are as follows: 2014 ...2015 ...2016 ...2017...

  • Page 125
    ... for Fiscal 2013, Fiscal 2012 and Fiscal 2011 were $11,095, $1,935 and $4,999, respectively. (11) Segment Information The Company manages its business in four vertically integrated, product-focused reporting segments: (i) Global Batteries & Appliances; (ii) Global Pet Supplies; (iii) Home and Garden...

  • Page 126
    ...-(CONTINUED) (Amounts in thousands, except per share figures) Segment information for the Company for Fiscal 2013, Fiscal 2012 and Fiscal 2011, is as follows: Net sales to external customers 2013 2012 2011 Consumer batteries ...Small appliances ...Electric shaving and grooming ...Electric personal...

  • Page 127
    ... $3,751,649 Segment long-lived assets (A) September 30, 2013 2012 Global Batteries & Appliances ...Global Pet Supplies ...Home and Garden Business ...Hardware & Home Improvement ...Total segments ...Corporate ...Long-lived assets at year end ...(A) Includes all of the Company's non-current assets...

  • Page 128
    ... $3,252,435 $1,780,127 1,406,789 $3,186,916 Geographic Disclosures-Long-lived assets (A) September 30, 2013 2012 United States ...Outside the United States ...Long-lived assets at year end ...(A) Includes all of the Company's non-current assets. (12) Commitments and Contingencies $3,218,523 925...

  • Page 129
    ... of Spectrum Brands (other than the Harbinger Parties) owned approximately 36% of the outstanding SB Holdings common stock. On January 7, 2011, the Harbinger Parties contributed 27,757 shares of SB Holdings common stock to Harbinger Group Inc. ("HRG") and received in exchange for such shares an...

  • Page 130
    ... of the Share Exchange, HRG became a party to the SB Holdings Registration Rights Agreement, entitled to the rights and subject to the obligations of a holder thereunder. (14) RESTRUCTURING AND RELATED CHARGES The Company reports restructuring and related charges associated with manufacturing and...

  • Page 131
    ... Batteries & Appliances segment and Corporate. Costs associated with these initiatives, which are expected to be incurred through September 30, 2015, are currently projected to total approximately $15,500. The Company recorded $11,317 of pretax restructuring and related charges during Fiscal 2013...

  • Page 132
    ... initiatives, which are expected to be incurred through January 31, 2015, are projected to total approximately $102,400. The Company recorded $16,352, $18,690 and $25,484 of pretax restructuring and related charges during Fiscal 2013, Fiscal 2012 and Fiscal 2011, respectively, related to the Global...

  • Page 133
    ...Global Cost Reduction Initiatives by operating segment: Global Batteries & Appliances Global Pet Supplies Home and Garden Business Corporate Total Restructuring and related charges during Fiscal 2013 ...Restructuring and related charges since initiative inception ...Total future restructuring and...

  • Page 134
    ...and Smart Code Home Connect. Customers of the HHI Business include retailers, non-retail distributors and homebuilders. Headquartered in Lake Forest, California, the HHI Business has a global sales force and operates manufacturing and distribution facilities in the U.S., Canada, Mexico and Asia. The...

  • Page 135
    ... with greater product diversity, stronger relationships with core retail partners, cross-selling opportunities in all channels and a new platform for potential future global growth using the Company's existing international infrastructure, most notably in Europe. The majority of goodwill recorded is...

  • Page 136
    SPECTRUM BRANDS HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (Amounts in thousands, except per share figures) Since the preliminary valuation on December 30, 2012, the Company recorded $45,649 to goodwill related to the acquisition of TLM Taiwan on April 8, 2013, and ...

  • Page 137
    ...period as demonstrated by the sustained use of each subject trademark. In estimating the fair value of the trademarks and trade names, Net sales for significant trade names and trademarks were estimated to grow at a rate of 2.5%-5% annually with a terminal year growth rate of 2.5%. Income taxes were...

  • Page 138
    ... for the periods presented. The TLM Taiwan business is not deemed material to the operating results of the Company. (2) Included in Reported Net (loss) income for Fiscal 2013, is an adjustment of $49,848 to record the income tax benefit resulting from the reversal of U.S. valuation allowances...

  • Page 139
    ...to Acquisition and integration related charges, see Note 2, "Significant Accounting Policies-Acquisition and Integration Related Charges." (4) For Fiscal 2013, the Company has not assumed the exercise of common stock equivalents as the impact would be antidilutive due to the loss reported. Shaser On...

  • Page 140
    ... as of the acquisition date. Accordingly, the Company has recorded its best estimates for these contingencies as part of the purchase accounting for Shaser. Valuation Adjustments The Company performed a valuation of the acquired proprietary technology assets, the non-controlling interest and the...

  • Page 141
    ...are not available to be used at the reporting date to settle additional income taxes, and the entity does not intend to use them for this purpose. The new accounting guidance is consistent with how the Company has historically accounted for unrecognized tax benefits in its Consolidated Statements of...

  • Page 142
    SPECTRUM BRANDS HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (Amounts in thousands, except per share figures) (17) Quarterly Results (unaudited) Fiscal 2013: Quarter Ended September 30, 2013 June 30, 2013 March 31, 2013 December 30, 2012 Net sales ...Gross profit ...Net (...

  • Page 143
    SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS For the years ended September 30, 2013, September 30, 2012 and September 30, 2011 (In thousands) Column A Column B Balance at Beginning of Period Column C Additions Charged to Costs and Expenses Column D ...

  • Page 144
    ...its behalf by the undersigned thereunto duly authorized. SPECTRUM BRANDS HOLDINGS, INC. By: /s/ David R. Lumley David R. Lumley Chief Executive Officer and Director DATE: November 27, 2013 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the...

  • Page 145
    ... By-Laws of Spectrum Brands Holdings, Inc., effective as of March 7, 2013 (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed with the SEC by Spectrum Brands Holdings, Inc. on March 7, 2013). Specimen certificate for shares of common stock (filed by incorporation...

  • Page 146
    ... 10.2 to the Current Report on Form 8-k filed with the SEC by Spectrum Brands, Inc. on September 4, 2013). New Term Loan Commitment Agreement No. 1 dated August 13, 2013 among Spectrum Brands, SB/RH Holdings, LLC, the lenders party thereto, and Deutsche Bank AG New York Branch, as administrative...

  • Page 147
    ...10.23 to the Annual Report on Form 10-K filed with the SEC by Spectrum Brands, Inc. on December 14, 2010). Joinder and Supplement to Intercreditor Agreement dated as of December 17, 2012, by and among ROV International Holdings LLC, Kwikset Corporation, Price Pfister, Inc., National Manufacturing Co...

  • Page 148
    ... L. Genito (filed by incorporation by reference to Exhibit 10.22 to the Annual Report on Form 10-K for the fiscal year ended September 30, 2010, filed with the SEC by Spectrum Brands, Inc. on December 29, 2009). Description of Second Amendment to the Employment Agreement, effective as of August 28...

  • Page 149
    ...2013 between Spectrum Brands, Inc. and Terry Polistina (filed by incorporation by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on September 20, 2013). Subsidiaries of Registrant.* Consent of Independent Registered Public Accounting...the Securities and Exchange Act of ...

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  • Page 153
    ... to our Annual Report on Form 10-K for the year ended September 30, 2013. STOCK EXCHANGE The common shares of Spectrum Brands Holdings, Inc. trade on the New York Stock Exchange under the ticker symbol SPB. Our Company is a member of the Russell 2000 Index. BUSINESS UNIT WEB SITES www.rayovac.com...

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