Rayovac 2009 Annual Report Download

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Spectrum Brands, Inc. ( SPEB )
601 RAYOVAC DRIVE
MADISON, WI, 53711
608−275−3340
www.spectrumbrands.com
10−K
Annual report pursuant to section 13 and 15(d)
Filed on 12/29/2009
Filed Period 9/30/2009

Table of contents

  • Page 1
    Spectrum Brands, Inc. 601 RAYOVAC DRIVE MADISON, WI, 53711 608âˆ'275âˆ'3340 www.spectrumbrands.com ( SPEB ) 10âˆ'K Annual report pursuant to section 13 and 15(d) Filed on 12/29/2009 Filed Period 9/30/2009

  • Page 2
    ... of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ⌧ No * For purposes of this calculation only, shares of Spectrum Brands, Inc. Common Stock held by directors and executive officers have been treated as owned by affiliates.

  • Page 3
    ...AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE CONTROLS AND PROCEDURES OTHER INFORMATION PART III...

  • Page 4
    ...Our manufacturing and product development facilities are located in the U.S., Europe, Latin America and Asia. Substantially all of our rechargeable batteries and chargers, shaving and grooming products, personal care products and portable lighting products are manufactured by thirdâˆ'party suppliers...

  • Page 5
    ..., the Company acquired United Industries Corporation ("United") and Tetra Holding GmbH and its affiliates and subsidiaries in the aquatics business ("Tetra") to further diversify its business and leverage its distribution strengths through expansion into the home and garden and pet product markets...

  • Page 6
    ..., as a condition to the termination, we paid the proposed buyer $3 million as a reimbursement of expenses. In November 2008, our board of directors committed to the shutdown of the growing products portion of the Home and Garden Business, which includes the manufacturing and marketing of fertilizers...

  • Page 7
    .... With the exception of Spectrum Jungle Labs Corporation, the related cases of the reorganized debtors were closed as of September 30, 2009. Plan Effective Date On the Effective Date the Plan became effective, and the Debtors emerged from Chapter 11 of the Bankruptcy Code. Pursuant to and by...

  • Page 8
    ... their respective businesses, to otherwise simplify the overall corporate or operational structure of the reorganized Debtors, to achieve corporate or operational efficiencies, or to otherwise improve financial results. On the Effective Date, the board of directors of Spectrum Brands, Inc. approved...

  • Page 9
    ... line of alkaline batteries (AA, AAA, C, D and 9âˆ'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...

  • Page 10
    ... Metal Hydride (NiMH) rechargeable batteries and a variety of battery chargers under the Rayovac and VARTA brands. Our other specialty battery products include camera batteries, lithium batteries, silver oxide batteries, keyless entry batteries and coin cells for use in watches, cameras, calculators...

  • Page 11
    ...group of retailer customers, including, without limitation, Walâˆ'Mart, The Home Depot, Carrefour, Target, Lowe's, PetSmart, Canadian Tire, PetCo and Gigante. Our sales to Walâˆ'Mart Stores, Inc. represented approximately 23% of our consolidated net sales for Fiscal 2009. No other customer accounted...

  • Page 12
    ... products portion of the Home and Garden Business. Substantially all of our rechargeable batteries and chargers, portable lighting products, hair care and other personal care products and our electric shaving and grooming products are manufactured by third party suppliers that are primarily located...

  • Page 13
    ... premium brands. In Latin America, where zinc carbon batteries outsell alkaline batteries, the Rayovac brand is competitively priced. The pet supply product category is highly fragmented with over 500 manufacturers in the U.S. alone, consisting primarily of small companies with limited product lines...

  • Page 14
    ...Financial Statements Products we sell in the household insect control product category through the Home and Garden Business, face competition from S.C. Johnson & Son, Inc. ("S.C. Johnson"), which markets insecticide and repellent products under the Raid and OFF! brands; Scotts Company, which markets...

  • Page 15
    ... to our business or financial condition. Electronic and electrical products that we sell 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...

  • Page 16
    ... our Internet site at www.spectrumbrands.com under "Investor Relations-Corporate Governance." Copies will also be provided to any stockholder upon written request to the Division Vice President, Investor Relations, Spectrum Brands, Inc. at Six Concourse Parkway, Suite 3300, Atlanta, Georgia 30328 or...

  • Page 17
    ... statements in this Annual Report on Form 10âˆ'K. All statements, other than statements of historical facts included in this Annual Report, including the statements under Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations regarding our business strategy...

  • Page 18
    ... Annual Report on Form 10âˆ'K is accurate only as of September 30, 2009 or as otherwise specified, as our business, financial condition, results of operations and prospects may have changed since that date. Except as required by applicable law, including the securities laws of the U.S. and the rules...

  • Page 19
    ... our financial statements prepared after August 30, 2009 will not be comparable to our financial information from prior periods. All conditions required for the adoption of freshâˆ'start reporting were met upon emergence from Chapter 11 of the Bankruptcy Code on the Effective Date. However, in light...

  • Page 20
    ... to fund working capital, capital expenditures, research and development expenditures and other business activities; increasing our vulnerability to general adverse economic and industry conditions; limiting our flexibility in planning for, or reacting to, changes in our business and the industry in...

  • Page 21
    ... limited shelf space based upon brand name recognition, perceived quality, price, performance, product packaging and design innovation, as well as creative marketing, promotion and distribution strategies. Our ability to compete in these consumer product markets may be adversely affected by a number...

  • Page 22
    ... persons who were nominated by Spectrum Brands, Inc.'s then existing directors and effective as of the Effective Date, were appointed, together with Kent J. Hussey, to the board of directors of Spectrum Brands, Inc. In the future, directors may be elected by such holders or their affiliates through...

  • Page 23
    ...very limited group of retailer customers. Because of the importance of these key customers, demands for price reductions or promotions by such customers, reductions in their purchases, changes in their financial condition or loss of their accounts could have a material adverse effect on our business...

  • Page 24
    ... to a number of special risks which could have a material adverse effect on our business, financial condition and results of operations. These risks include, but are not limited to changes in the economic conditions or consumer preferences or demand for our products in these markets; economic and...

  • Page 25
    ..., terminating employees or distributors and closing manufacturing facilities. Increases in our costs as a result of increased regulation, legislation or enforcement could materially and adversely affect our business, results of operations and financial condition. Sales of certain of our products are...

  • Page 26
    ... that impedes our ability to develop and commercialize our products could have a material adverse effect on our business, financial condition and results of operations. Our dependence on a few suppliers and one of our U.S. facilities for certain of our products makes us vulnerable to a disruption in...

  • Page 27
    ... effect on our business, financial condition and results of operations. Spectrum Brands and certain of its officers and directors have been named in the past, and may be named in the future, as defendants of class action and derivative action lawsuits. In the past, Spectrum Brands has also received...

  • Page 28
    ... from such investigative or remedial projects at such facilities may be material. We are also subject to proceedings related to our disposal of industrial and hazardous material at offâˆ'site disposal locations or similar disposals made by other parties for which we are responsible as a result of...

  • Page 29
    ... affect us. We manufacture and market a number of complex chemical products bearing our brands relating to the Home and Garden Business, such as herbicides and pesticides. On occasion, customers and some current or former employees have alleged that some products failed to perform up to expectations...

  • Page 30
    ... analyst and news media coverage and lower market prices than might otherwise be obtained. As a result, holders of shares of the common stock may find it difficult to resell their shares at prices quoted in the market or at all. Furthermore, because of the limited market and generally low volume of...

  • Page 31
    ... other adverse effects, including, without limitation, the loss of confidence in us by current and prospective suppliers, customers, employees and others with whom we have or may seek to initiate business relationships. The market price of Spectrum Brands, Inc.'s common stock is likely to be highly...

  • Page 32
    ... Brands, Inc.'s board of directors may consider relevant, including the ability to do so under Spectrum Brands' credit and other debt agreements. If Spectrum Brands, Inc. does not pay dividends, returns on an investment in its common stock will only occur if the stock price appreciates. Limited...

  • Page 33
    ... distribution centers, sales offices and administrative offices throughout the world in support of our business. We lease our administrative headquarters, located in Atlanta, Georgia, and our primary research and development facility and North America headquarters, located in Madison, Wisconsin...

  • Page 34
    ... material to our business or financial condition. On February 3, 2009, Spectrum Brands, Inc. and its U.S. subsidiaries filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code with the U.S. Bankruptcy Court for the Western District of Texas. The Chapter 11 Cases were jointly...

  • Page 35
    .... Low price reflects the OTC market low bid price during the balance of the quarter. The common stock of reorganized Spectrum Brands, Inc. (the "New Common Stock") began quotation on the OTC Bulletin Board and the Pink Sheet Electronic Quotation Service under the symbol "SPEB" on September 2, 2009...

  • Page 36
    ... Index to Financial Statements The OTC bid prices represent prices between dealers and do not include retail markup, markdown or commission. The historical prices for the Old Common Stock may not be indicative of the anticipated or prospective value or future trading price of or trading market for...

  • Page 37
    ...are included elsewhere in this Annual Report on Form 10âˆ'K. On November 5, 2008, Spectrum Brands, Inc.'s board of directors committed to the shutdown of the growing products portion of the Home and Garden Business, which includes the manufacturing and marketing of fertilizers, enriched soils, mulch...

  • Page 38
    ..." section of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations as well as Note 3(i), Significant Accounting Policies-Intangible Assets, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10âˆ'K for further details on these...

  • Page 39
    ..., of Notes to Consolidated Financial Statements included in this Annual Report on Form 10âˆ'K for further discussion. (8) Fiscal 2006 includes a $7.9 million net gain on the sale of our Bridgeport, CT manufacturing facility, acquired as part of the Remington Products Company, L.L.C. acquisition and...

  • Page 40
    ... development facilities are located in the United States, Europe, Latin America and Asia. Substantially all of our rechargeable batteries and chargers, shaving and grooming products, personal care products and portable lighting products are manufactured by thirdâˆ'party suppliers, primarily located...

  • Page 41
    ... battery and lighting product markets. In 2004, we acquired Microlite, a Brazilian battery company, from VARTA AG and Tabriza Brasil Empreendimentos Ltd. In 2005, we acquired United Industries Corporation ("United") and Tetra Holding GmbH and its affiliates and subsidiaries in the aquatics business...

  • Page 42
    ..., as a condition to the termination, we paid the proposed buyer $3 million as a reimbursement of expenses. In November 2008, our board of directors committed to the shutdown of the growing products portion of the Home and Garden Business, which includes the manufacturing and marketing of fertilizers...

  • Page 43
    ...Official Committee of Equity Security Holders (the "Equity Committee"), which objections centered around assertions that the Proposed Plan, as amended, placed too low a valuation on the reorganized Debtors. On June 24, 2009, during the pendency of such hearing, the Company publicly disclosed that it...

  • Page 44
    ...the related cases of the reorganized debtors were closed as of September 30, 2009. Plan Effective Date On the Effective Date the Plan became effective, and the Debtors emerged from Chapter 11 of the Bankruptcy Code. Pursuant to and by operation of the Plan, on the Effective Date, all of Old Spectrum...

  • Page 45
    ... we adopted freshâˆ'start reporting upon emergence from Chapter 11 of the Bankruptcy Code as of our monthly period ended August 30, 2009 as is reflected in this Annual Report on Form 10âˆ'K. Since the reorganization value of the assets of Old Spectrum immediately before the date of confirmation of...

  • Page 46
    ..., Germany battery plant, transferring private label battery production at our Dischingen, Germany battery plant to our manufacturing facility in China and restructuring the sales, marketing and support functions. As a result, we have reduced headcount in Europe by approximately 350 employees or...

  • Page 47
    ... batteries in cell sizes of AA, AAA, C, D and 9âˆ'volt, and specialty batteries, which include rechargeable batteries, hearing aid batteries, photo batteries and watch/calculator batteries. Most consumer batteries are marketed under one of the following brands: Rayovac/VARTA, Duracell, Energizer...

  • Page 48
    ...shave products and cleaning agents. Electric shavers are marketed primarily under one of the following global brands: Remington, Braun and Norelco. Electric grooming products include beard and mustache trimmers, nose and ear trimmers, body groomers and haircut kits and related accessories. Hair care...

  • Page 49
    ... Financial Statements, included in this Annual Report on Form 10âˆ'K for additional information regarding the shutdown of the growing products portion of the Home and Garden Business and the sale of the Canadian division of the Home and Garden Business. As a result, and unless specifically...

  • Page 50
    ... customer coupled with new distribution. The decreased consumer battery sales in Latin America continues to be a result of a slowdown in economic conditions in all countries and inventory deâˆ'stocking at retailers mainly in Brazil. Zinc carbon batteries decreased $35 million while alkaline battery...

  • Page 51
    ... September 30, 2010 ("Fiscal 2010") to be positively impacted versus our historical results due to this delay. The increases within Europe and Latin America were driven by new product launches, pricing and promotions. Electronic personal care product sales during Fiscal 2009 decreased $20 million...

  • Page 52
    ... the sales and marketing initiatives and financial results for product lines within that segment. Financial information pertaining to our reportable segments is contained in Note 12, Segment Information, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10âˆ'K. 49

  • Page 53
    ...$32 million decrease in zinc carbon batteries is primarily concentrated in Latin America, as Latin American sales were down $35 million in Fiscal 2009 compared to Fiscal 2008 as a result of a slowdown in economic conditions and inventory deâˆ'stocking at retailers mainly in Brazil. Excluding foreign...

  • Page 54
    .... See Note 3(i), Significant Accounting Policies and Practices-Intangible Assets, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10âˆ'K for additional information regarding this impairment charge and the amount attributable to Global Batteries & Personal Care...

  • Page 55
    ... as of September 30, 2008 total approximately $447 million and primarily relate to the acquisitions of Tetra and the United Pet Group division of United. Home and Garden Business 2009 2008 (in millions) Net sales to external customers Segment profit Segment profit as a % of net sales Assets as of...

  • Page 56
    ... Reorganization Under Chapter 11, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10âˆ'K for more information related to freshâˆ'start reporting. Goodwill and intangible assets as of September 30, 2009 total approximately $419 million and are directly a result of...

  • Page 57
    ... all of United's home and garden administrative services, sales and customer service functions into our operations in Madison, Wisconsin; converting all information systems to SAP; consolidating United's home and garden manufacturing and distribution locations in North America; rationalizing the...

  • Page 58
    ... label battery production at our Dischingen, Germany battery plant to our manufacturing facility in China and restructuring Europe's sales, marketing and support functions. In connection with the European Initiatives, we recorded de minimis pretax restructuring and related charges in Fiscal 2009...

  • Page 59
    ...to Consolidated Financial Statements included in this Annual Report on Form 10âˆ'K for additional information regarding our outstanding debt. Reorganization Items. During Fiscal 2009, Old Spectrum, in connection with our reorganization under Chapter 11 of the Bankruptcy Code, recorded Reorganization...

  • Page 60
    ... Revenue Code ("IRC") Section 382, that subject us to U.S. federal and state net operating losses and other tax attributes to certain limitations. The annual limitation is based on a number of factors including the value of our stock (as defined for tax purposes) on the date of the ownership change...

  • Page 61
    ... this Annual Report on Form 10âˆ'K for additional information. Discontinued Operations. On November 5, 2008, the board of directors of Old Spectrum committed to the shutdown of the growing products portion of the Home and Garden Business, which includes the manufacturing and marketing of fertilizers...

  • Page 62
    ... Financial Statements, included in this Annual Report on Form 10âˆ'K for additional information regarding the shutdown of the growing products portion of the Home and Garden Business and the sale of the Canadian division of the Home and Garden Business. As a result, and unless specifically...

  • Page 63
    ... profitable private label battery sales as well as a shift in the timing of shipments, done at the request of certain of our retailers, related to holiday displays and promotions to the fourth quarter of Fiscal 2007 from the first quarter of Fiscal 2008. Sales of portable lighting products in...

  • Page 64
    ... of our Global Batteries & Personal Care European and Latin American manufacturing organizations. See "Restructuring and Related Charges" below, as well as Note 15, Restructuring and Related Charges, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10âˆ'K for...

  • Page 65
    ... and marketing initiatives and financial results for product lines within that segment. Financial information pertaining to our reportable segments is contained in Note 12, Segment Results, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10âˆ'K. Global Batteries...

  • Page 66
    ... as well Note 3(i), Significant Accounting Policies and Practices-Intangible Assets, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10âˆ'K for additional information regarding this impairment charge and the amount attributable to Global Batteries & Personal Care...

  • Page 67
    ... Note 3(i), Significant Accounting Policies and Practices-Intangible Assets, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10âˆ'K for additional information regarding this impairment charge and the amount attributable to the Home and Garden Business. Intangible...

  • Page 68
    ... all of United's home and garden administrative services, sales and customer service functions into our operations in Madison, Wisconsin; converting all information systems to SAP; consolidating United's home and garden manufacturing and distribution locations in North America; rationalizing the...

  • Page 69
    ... at our Ellwangen, Germany packaging center to the Dischingen, Germany battery plant, transferring private label battery production at our Dischingen, Germany battery plant to our manufacturing facility in China and restructuring Europe's sales, marketing and support functions. In connection...

  • Page 70
    ... Global Batteries & Personal Care business segment. Future cash expenditures will not result from these impairment charges. See Note 3(i), Significant Accounting Policies and Practices-Intangible Assets, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10âˆ'K for...

  • Page 71
    ... Statements included in this Annual Report on Form 10âˆ'K for additional information regarding the settlement of the tax examination in Germany. Discontinued Operations. On November 5, 2008, the board of directors of Old Spectrum committed to the shutdown of the growing products portion of the Home...

  • Page 72
    ... benefit. Accordingly, the presentation herein of the results of continuing operations excludes the Canadian division of its Home and Garden Business for all periods presented. See Note 10, Discontinued Operations, of Notes to Consolidated Financial Statements included in this Annual Report on Form...

  • Page 73
    ... the Home and Garden Business of approximately $15 million. We also paid approximately $9 million in performance fees in Fiscal 2009, related to the...Under Chapter 11, included in this Annual Report on Form 10âˆ'K, constituted an event of default under our senior secured term credit facility agreement...

  • Page 74
    ... over market rates of 6.5% for the U.S. Dollar Term B Loan and 7.0% for the Euro Facility, increases to the maximum Senior Secured Leverage Ratio and a shortened maturity date of June 30, 2012. The Senior Credit Agreement contains financial covenants with respect to debt, including, but not limited...

  • Page 75
    ...as swing line loans, in each case subject to the terms and limits described therein, and (b) a supplemental loan (the "Supplemental Loan"), in the form of an asset based revolving loan, in an amount up to $45 million. The Revolving Loans may be drawn, repaid and reborrowed without premium or penalty...

  • Page 76
    ... if cash were not otherwise available for such payments. Interest on the 12% Notes is payable semiâˆ'annually in arrears and interest under the Senior Credit Facilities is payable on various interest payment dates as provided in the Senior Credit Agreement and the ABL Credit Agreement. Interest is...

  • Page 77
    ..., 2009, we granted an aggregate of approximately 0.6 million shares of restricted common stock of New Spectrum to certain employees and nonâˆ'employee directors. All such shares are subject to timeâˆ'based vesting. All vesting dates are subject to the recipient's continued employment, or service as...

  • Page 78
    ... in this Annual Report on Form 10âˆ'K have been prepared in accordance with GAAP and fairly present our financial position and results of operations. We believe the following accounting policies are critical to an understanding of our financial statements. The application of these policies requires...

  • Page 79
    ... Policies and Practices-Intangible Assets, Note 5, Property, Plant and Equipment, Note 6, Assets Held for Sale, Note 7, Goodwill and Intangible Assets, Note 9, Income Taxes, and Note 10, Discontinued Operations, of Notes to Consolidated Financial Statements included in this Annual Report on Form...

  • Page 80
    ... Customers and Employees, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10âˆ'K for more information about our revenue recognition and credit policies. Pensions Our accounting for pension benefits is primarily based on a discount rate, expected and actual return...

  • Page 81
    ... is our fiscal year end. See Note 11, Employee Benefit Plans, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10âˆ'K for a more complete discussion of our employee benefit plans. Restructuring and Related Charges Restructuring charges are recognized and measured...

  • Page 82
    ... this Annual Report on Form 10âˆ'K. The Notes to the Consolidated Financial Statements included in this Annual Report on Form 10âˆ'K contain additional information related to our accounting policies and should be read in conjunction with this discussion. Recently Issued Accounting Standards Business...

  • Page 83
    ... instruments is included in Note 3(r), Significant Accounting Policies and Practicesâˆ'Derivative Financial Instruments, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10âˆ'K. Interest Rate Risk We have bank lines of credit at variable interest rates. The...

  • Page 84
    ... foreign exchange options. The related amounts payable to, or receivable from, the contract counterâˆ'parties are included in accounts payable or accounts receivable. Commodity Price Risk We are exposed to fluctuations in market prices for purchases of zinc used in the manufacturing process. We use...

  • Page 85
    ... time periods specified in applicable SEC rules and forms, and is accumulated and communicated to the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Management's Annual Report...

  • Page 86
    ... Index to Financial Statements PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The following table sets forth the name, age and position with the Company of each of our executive officers and directors as of December 21, 2009: Name Age Position Kent J. Hussey Anthony...

  • Page 87
    ... and our Nominating and Corporate Governance Committee. Mr. Matthews was appointed to our Board of Directors in August 2009. Mr. Matthews has over three decades of experience as a business leader in marketing and merchandising, and is currently an independent business consultant. As former President...

  • Page 88
    ... nominees to Spectrum Brands, Inc.'s board of directors in accordance with the procedures set forth in Spectrum Brands, Inc.'s bylaws and under applicable law. Spectrum Brands, Inc.'s bylaws are included as Exhibit 3.2 to this Annual Report on Form 10âˆ'K. Audit Committee Financial Expert and...

  • Page 89
    ... Spectrum Brands, Inc. Code of Business Conduct and Ethics, a code of ethics that applies to all of our directors, officers and employees. The Spectrum Brands, Inc. Code of Business Conduct and Ethics is publicly available on our website at www.spectrumbrands.com under "Investor Relations-Corporate...

  • Page 90
    ... Index to Financial Statements Compensation Discussion and Analysis The Company's named executive officers for Fiscal 2009 consist of the following persons: Named Executive Position Kent J. Hussey Anthony L. Genito David R. Lumley John A. Heil Amy J. Yoder Chief Executive Officer and Chairman...

  • Page 91
    ... Fiscal 2010, the percentage of annual compensation based on the Company's achievement of performance objectives set by the Compensation Committee is as set forth below for each named executive officer who continues to be employed by the Company: Named Executive % Performance Based Kent J. Hussey...

  • Page 92
    ... by subsequent action by the Compensation Committee. In determining the annual base salary reflected in each named executive officer's employment agreement, the Compensation Committee considered current market conditions, the Company's financial condition at the time such compensation levels...

  • Page 93
    ... Home and Garden Business and 20% on the performance targets established for the Company as a whole. Ms. Yoder was not eligible to participate in the Fiscal 2009 MIP. The target MIP award levels achievable by each of the current named executive officers (that is to say, the amount achievable if 100...

  • Page 94
    ... the date of this report, for purposes of the 2010 MIP, the target award percentages for each participating named executive officer are as follows: Named Executive MIP Target as % of Annual Base Kent J. Hussey Anthony L. Genito David R. Lumley John A. Heil 125% 100% 100% 100% The Fiscal 2010 MIP...

  • Page 95
    ... to Mr. Hussey, his employment agreement provides for an annual grant based on a fixed percentage of the shares initially reserved for issuance under the 2009 Incentive Plan. As of the date hereof, only the current named executive officers have been made grants under the Equity LTIP for Fiscal 2010...

  • Page 96
    ... to do so in light of specific performance circumstances. For Fiscal 2009, the Compensation Committee, taking into account the remaining number of shares authorized to be issued under the 2004 Rayovac Incentive Plan and the thenâˆ'current market value of the Company's stock, modified the equity...

  • Page 97
    ... been or will be paid in December 2009. Named Executive LTIP Award as % of Target Kent J. Hussey Anthony L. Genito David R. Lumley John A. Heil 187.5% 187.5% 193.0% 134.3% In addition, after taking into account the overall performance of the business in the face of a difficult capital structure...

  • Page 98
    ... and Equity Grants The Company emerged from bankruptcy on August 28, 2009. At that time, all of the outstanding capital stock of the Company was extinguished pursuant to the Company's Plan of Reorganization. As a result, (i) all outstanding stock held by any of the named executive officers and (ii...

  • Page 99
    ...heading "Termination and Change in Control Provisions". Perquisites and Benefits The Company provides certain limited perquisites and other special benefits to certain executives, including the named executive officers. Among these benefits are financial planning services, tax planning services, car...

  • Page 100
    ... meetings on the Company's aircraft, in which case the Company received some reimbursement from the companies on whose boards Mr. Hussey served. Timing and Pricing of Stockâˆ'Based Grants Annual grants of restricted stock to our named executive officers are made on the date such grants are approved...

  • Page 101
    ...to be an employee of the Company as of October 8, 2008. For Fiscal 2009, this column reflects oneâˆ'time cash bonuses received by the current named executive officers, among other members of management, in connection with the Company's emergence from Chapter 11 of the Bankruptcy Code. For additional...

  • Page 102
    ... the aggregate aboveâˆ'market increase of the actuarial value of the named executive's benefit under the Company's Supplemental Executive Retirement Plan. See Note 11, Employee Benefit Plans, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10âˆ'K for additional...

  • Page 103
    ... plan. Represents the Company's contribution to each participating named executive officers' SERP account, consisting of annual contribution. In connection with the relocation of the Company's corporate headquarters from Madison, Wisconsin to Atlanta, Georgia, Mr. Hussey was provided a cost...

  • Page 104
    ... was distributed to him in anticipation of the closing of that transaction. The agreement to sell the Global Pet Supplies business segment was later terminated. In connection with the relocation of the Company's corporate headquarters from Madison, Wisconsin to Atlanta, Georgia, Mr. Hussey was...

  • Page 105
    ... sharingâˆ'based contribution. Represents the Company's contribution to each participating named executive officers' SERP account, consisting of annual contribution. In connection with the relocation of the Company's corporate headquarters from Madison, Wisconsin to Atlanta, Georgia, Mr. Hussey...

  • Page 106
    ... Financial Statements included in this Annual Report on Form 10âˆ'K for additional information as to the assumptions used in the valuation of these awards. Represents performanceâˆ'based restricted stock granted to executives pursuant to the Company's 2009 Equity LTIP, granted under the 2004 Rayovac...

  • Page 107
    ... upon the Company's emergence from Chapter 11 of the Bankruptcy Code on the Effective Date. Option Exercises and Stock Vested Information Option Awards Market Number Value Of Shares Realized Exercised Stock Awards Market Shares Value Acquired Realized on Vesting Name Kent J. Hussey Anthony...

  • Page 108
    ... Provisions Awards under the Company's Incentive Plans Each named executive officer other than Ms. Yoder has received and currently holds restricted stock awards under the 2009 Incentive Plan, made pursuant to the Company's 2010 Equity LTIP incentive program. As described above, Mr. Hussey, Mr...

  • Page 109
    ... to such date. The right to receive these benefits was triggered pursuant to Mr. Hussey's employment agreement as then in effect upon his replacement as President and Chief Operating Officer of the Company, prior to the time he was named Chief Executive Officer. Termination of Mr. Hussey for Cause...

  • Page 110
    ...'s employment; provided, however, that the Company will reimburse Mr. Hussey for the excess, if any, of the cost of such benefits to Mr. Hussey over such cost immediately prior to the date of termination. Any outstanding awards made pursuant to the 2009 Incentive Plan that vest based solely on time...

  • Page 111
    ...Disability". The Company may require that Mr. Hussey remain employed by the Company for up to a maximum of 3 months following the change in control. As discussed under the heading "Retention Agreements," Mr. Hussey is also party to a retention agreement between Mr. Hussey and the Company dated as of...

  • Page 112
    ... successor to the Company to assume and agree to perform Mr. Genito's employment agreement. (iv) (v) Change in Control. Under Mr. Genito's employment agreement, Mr. Genito may elect to terminate his employment within 60 days following a change in control (as defined under the 2009 Incentive Plan...

  • Page 113
    ... heading "Retention Agreements," Mr. Genito is also party to a retention agreement between Mr. Genito and the Company dated as of June 9, 2008 ("Mr. Genito's retention agreement"). Mr. Genito's retention agreement provides that in the event that prior to December 31, 2009 (i) Mr. Genito's employment...

  • Page 114
    ... on the closing date of the sale an amount equal to double the sum of (i) such executive's annual base salary and (ii) the target MIP award amount such executive would be eligible to receive if the Company met 100% of the applicable performance goals established by the Board of Directors or, if...

  • Page 115
    ...Statements John A. Heil Mr. Heil is a party to an amended and restated employment agreement between Mr. Heil and the Company dated as of January 16, 2007, as amended on November 10, 2008 ("Mr. Heil's employment agreement"). Mr. Heil's employment agreement contains the following provisions applicable...

  • Page 116
    ... on the closing date of the sale an amount equal to double the sum of (i) such executive's annual base salary and (ii) the target MIP award amount such executive would be eligible to receive if the Company met 100% of the applicable performance goals established by the Board of Directors or, if...

  • Page 117
    ... stock award agreements evidencing the awards of such restricted stock. Upon the Company's emergence from Chapter 11 of the Bankruptcy Code and pursuant to the Company's Plan of Reorganization, all existing equity securities of the Company as of the Effective Date, including all shares referenced...

  • Page 118
    ... Financial Statements Table of Amounts payable upon Termination or Change in Control The following tables set forth (i) the amounts that would have been payable at September 30, 2009 to each of Mr. Hussey, Mr. Genito, Mr. Lumley and Mr. Heil under the various scenarios for termination of employment...

  • Page 119
    ...LTIP award benefit that was earned in Fiscal 2008 but would have been paid in December of 2009. (4) Amount represents the accelerated 2009 Cash LTIP that was earned with respect to performance in Fiscal 2009 but would have been paid half in December of 2009 and the remaining half in November of 2010...

  • Page 120
    ... change in control in relation to the sale of the Batteries and Global Battery Personal Care and provided that the executive continues employment for one year following such sale, the target bonus amount the executive would be eligible to receive if the Company met 100% of the applicable performance...

  • Page 121
    ...good reason or change in control in relation to the sale of the Global Pet Supplies business and provided that the executive continues employment for one year following such sale, the target bonus amount the executive would be eligible to receive if the Company met 100% of the applicable performance...

  • Page 122
    ... of Contents Index to Financial Statements Amy J. Yoder Amy J. Yoder Termination Date Cash Severance Salary Bonus 2008 Bonus (Earned/Paid) 2008 LTIP Cash Unused Vacation Cash Award Equity Awards Unvested Restricted Stock Other Benefits Welfare Benefits Company Car Outplacement Total (1) October...

  • Page 123
    ...to Financial Statements Upon the Company's emergence from Chapter 11 of the Bankruptcy Code and pursuant to the Company's Plan of Reorganization, all of the Company's thenâˆ'serving nonâˆ'employee directors were replaced with the current nonâˆ'employee directors of the Company. For Fiscal 2009 prior...

  • Page 124
    ... common stock and (iv) all directors and named executive officers as a group. Beneficial ownership is determined in accordance with the rules of the SEC. Determinations as to the identity of 5% Shareholders and the number of shares beneficially owned, including shares which may be acquired by them...

  • Page 125
    ... Named Executive Officers Serving at December 21, 2009 Kent J. Hussey Anthony L. Genito John A. Heil David R. Lumley Kenneth C. Ambrecht Eugene I. Davis Marc S. Kirschner Hugh R. Rovit Terry L. Polistina Norman S. Matthews All current directors and named executive officers of the Company as a group...

  • Page 126
    ... of 0 shares; and has shared power to disposer direct the disposition of 8,708,252 shares. Harbinger LLC specifically disclaims beneficial ownership in the shares of Common Stock except to the extent it actually exercises voting or dispositive power with respect to such shares. As of the date of the...

  • Page 127
    ... to and by operation of the Plan, on August 28, 2009, all of the Company's then existing equity securities, including the existing common stock and stock options were extinguished and deemed cancelled, including the shares of Common Stock held by the Company's officers and directors. 124 (4) (5)

  • Page 128
    ... in the Bankruptcy Cases by holders of allowed claims with respect to Old Spectrum's then outstanding senior subordinated notes and by the Bankruptcy Court and ratified on the Effective Date by the Company's postâˆ'emergence Board of Directors. The material features of the 2009 Incentive Plan are...

  • Page 129
    ... Avenue Parties were issued shares of common stock of reorganized Spectrum Brands, Inc. and became holders of the 12% Notes. Pursuant to the Plan and in connection with our Chapter 11 reorganization, Spectrum Brands, Inc. converted from a Wisconsin corporation into a Delaware corporation and adopted...

  • Page 130
    ... Chapter 11 reorganization and in consideration for the support of each of the Harbinger Parties, Laminar and the Avenue Parties of the Plan. The agreements are referenced as Exhibit 4.3 and Exhibit 4.2, respectively, to this Annual Report on Form 10âˆ'K. Director Independence Our common stock does...

  • Page 131
    ... services that are reasonably related to the performance of the audit or review of our financial statements. During Fiscal 2008, such amounts primarily related to the carve out audits of various businesses. "Tax Fees" are fees for tax compliance, tax advice and tax planning, and for both Fiscal 2009...

  • Page 132
    ... of or are included in this Annual Report on Form 10âˆ'K: 1. The financial statements listed in the Index to Consolidated Financial Statements and Financial Statement Schedule, filed as part of this Annual Report on Form 10âˆ'K. 2. The financial statement schedule listed in the Index to Consolidated...

  • Page 133
    ... Contents Index to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE Page Report of Independent Registered Public Accounting Firm Consolidated Statements of Financial Position Consolidated Statements of Operations...

  • Page 134
    ..., "Employers' Accounting for Defined Benefit Pension and other Postretirement Plans". Also discussed in Note 11 to the consolidated financial statements, effective September 30, 2009, the Company adopted the measurement date provision of ASC 715. /s/ KPMG LLP Atlanta, Georgia December 29, 2009 131

  • Page 135
    ...Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES Consolidated Statements of Financial Position September 30, 2009 and 2008 (In thousands, except per share amounts) Successor Company 2009 Predecessor Company 2008 Assets Current assets: Cash and cash equivalents Receivables: Trade accounts...

  • Page 136
    ...Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES Consolidated Statements of Operations (In thousands, except per share amounts) Successor Company One Month Ended September 30, 2009 Eleven Months Ended August 30, 2009 Predecessor Company...,611 1,100,743 ...shares of common stock and equivalents...

  • Page 137
    Table of Contents Index to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES Consolidated Statements of Shareholders' Equity (Deficit) and Comprehensive Income (Loss) (In thousands) Common Stock Additional Paidâˆ'In Capital Shares Amount Accumulated Deficit Accumulated Other Comprehensive ...

  • Page 138
    ... and accumulated other comprehensive income Issuance of new common stock in connection with emergence from Chapter 11 of the Bankruptcy Code Balances at August 30, 2009, Successor Company Balances at August 30, 2009, Successor Company Net loss Adjustment of additional minimum pension liability...

  • Page 139
    Table of Contents Index to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (In thousands) Successor Company One Month Ended September 30, 2009 Cash flows from operating activities: Net (loss) income Income (loss) from discontinued operations (Loss) ...

  • Page 140
    ... utilize manufacturing and product development facilities located in the U.S., Europe, China and Latin America. The Company sells its products in approximately 120 countries through a variety of trade channels, including retailers, wholesalers and distributors, hearing aid professionals, industrial...

  • Page 141
    ... divisions and was engaged in the manufacturing and marketing of lawn and garden and insect control products as well as growing media products. As a result, the Predecessor Company designated certain assets and liabilities related to the Home and Garden Business as held for sale and designated...

  • Page 142
    ... to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) the market on December 22, 2008. The Predecessor Company was advised that the decision to suspend the Predecessor Company's common stock was...

  • Page 143
    ... and deemed cancelled. Spectrum Brands filed a certificate of incorporation authorizing new shares of the common stock. Pursuant to and in accordance with the Plan, on the Effective Date, Successor Company issued a total of 27,030 shares of common stock to holders of allowed claims with respect to...

  • Page 144
    ... Institute of Certified Public Accountants' Statement of Position 90âˆ'7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code ("ASC 852"). ASC 852 does not change the application of GAAP in the preparation of the Company's consolidated financial statements. However, ASC 852...

  • Page 145
    Table of Contents Index to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) Since the Petition Date, and in accordance with ASC 852, the Company ceased accruing interest on its senior ...

  • Page 146
    ... and allowed claims, and the holders of the Predecessor Company's voting shares immediately before confirmation of the Plan received less than 50 percent of the voting shares of the emerging entity. The fourâˆ'column consolidated statement of financial position as of August 30, 2009, included herein...

  • Page 147
    .... The recent transactions of companies in similar industries analysis identified transactions of similar companies giving consideration to lines of business, business risk, scale and capitalization and leverage. The analysis considered the business, financial and market environment for which the...

  • Page 148
    Table of Contents Index to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) • Deferred taxes were reported in conformity with applicable income tax accounting standards, principally ASC Topic...

  • Page 149
    ... SPECTRUM BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) Predecessor Company August 30, 2009 Effects of Plan Freshâˆ'Start Valuation Successor Company August 30, 2009 ASSETS Current assets: Cash and cash equivalents...

  • Page 150
    ... Index to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) Effects of Plan Adjustments (a) The Plan's impact resulted in a net decrease of $25,551 on cash and cash equivalents. The significant...

  • Page 151
    ... respectively, which represents the fair value of the newly issued common stock. The Company issued 30,000 shares at emergence, consisting of 27,030 shares to holders of the Senior Subordinated Notes allowed note holder claims and 2,970 shares in accordance with the terms of the Debtors' debtorâˆ'in...

  • Page 152
    ... market prices of certain debt instruments as of the Effective Date, offset by an increase of $4,343 related to debt instruments not traded which was calculated giving consideration to the terms of the underlying agreements, using a risk adjusted interest rate of 12%. Employee benefit obligations...

  • Page 153
    ...'s goodwill and other intangible assets). The Successor Company's August 30, 2009 statement of financial position reflects the allocation of the business enterprise value to assets and liabilities immediately following emergence as follows: Business enterprise value Add: Fair value of nonâˆ'interest...

  • Page 154
    Table of Contents Index to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) consideration of several factors including industry practices, the existence of licensing agreements (licensing in ...

  • Page 155
    ... for, and the Company's general policy is not to accept, product returns associated with battery sales. The Company does accept returns in specific instances related to its shaving, grooming, personal care, home and garden and pet products. The provision for customer returns is based on historical...

  • Page 156
    ... Index to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) (e) Concentrations of Credit Risk, Major Customers and Employees Trade receivables subject the Company to credit risk. Trade accounts...

  • Page 157
    ... of net assets acquired (goodwill) and indefiniteâˆ'lived intangible assets (certain trade name intangibles) are not amortized. Goodwill is tested for impairment at least annually, at the reporting unit level with such groupings being consistent with the Company's reportable segments. If impairment...

  • Page 158
    ... of the respective reporting unit's goodwill over the implied fair value of such goodwill of which $270,811 related to Global Pet Supplies and $49,801 related to the Home and Garden Business. In connection with the Predecessor Company's annual goodwill impairment testing performed during Fiscal 2007...

  • Page 159
    ...Contents Index to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) such as unexpected adverse business conditions, economic factors, unanticipated technological change or competitive activities...

  • Page 160
    ... of Fiscal 2008. In connection with the Company's strategy to exit operations in Ningbo, China, the Predecessor Company recorded a nonâˆ'cash pretax charge of $16,193 to reduce the carrying value of goodwill related to the Ningbo, China battery manufacturing facility. The recognition of the $34,391...

  • Page 161
    ... TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) discontinued operations to reduce the carrying value of certain assets, principally consisting of goodwill and intangible assets, related to the Canadian Division of the Home and Garden Business in order to...

  • Page 162
    ...conversion of employee stock options awards. As discussed in Note 2, Voluntary Reorganization under Chapter 11, Predecessor Company common stock was cancelled as a result of the Company's emergence from Chapter 11 of the Bankruptcy Code on the Effective Date. The Successor Company common stock began...

  • Page 163
    ...of Contents Index to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) (r) Derivative Financial Instruments Derivative financial instruments are used by the Company principally in the management...

  • Page 164
    ... Consolidated Statements of Operations for the one month period ended September 30, 2009, net of tax (Successor Company): Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) Cost of goods sold Net sales Cost of goods sold...

  • Page 165
    ... Statements of Operations for the eleven month period ended August 30, 2009, net of tax (Predecessor Company): Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) Cost of goods sold Interest expense Net sales Cost of goods...

  • Page 166
    ... Index to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) Derivative Contracts For derivative instruments that are used to economically hedge the fair value of the Company's third party and...

  • Page 167
    ... or liability, as applicable. At the time the sale or purchase is recognized, the fair value of the related hedge is reclassified as an adjustment to Net sales or purchase price variance in Cost of goods sold. During the one month period ended September 30, 2009 (Successor Company) and the eleven...

  • Page 168
    ... 30, 2009, the portion of derivative net losses estimated to be reclassified from AOCI into earnings by the Successor Company over the next 12 months is $(378), net of tax. The Company is exposed to risk from fluctuating prices for raw materials, specifically zinc used in its manufacturing processes...

  • Page 169
    ... exposed to fluctuating prices of raw materials, specifically urea and diâˆ'ammonium phosphates ("DAP"), used in its manufacturing processes in the growing products portion of the Home and Garden Business. During the eleven month period ended August 30, 2009 (Predecessor Company) $(2,116) of pretax...

  • Page 170
    Table of Contents Index to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) month period ended August 30, 2009. As a result, the portion of derivative net losses to be reclassified from AOCI ...

  • Page 171
    ... of Contents Index to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) The Company's derivatives are valued using internal models, which are based on market observable inputs including interest...

  • Page 172
    ...) (3,747) $ - - 431 $ 319 (318) 1,217 $ 982 (6,222) (3,406) (w) Stock Compensation In 1996, the Predecessor Company's board of directors ("Predecessor Board") approved the Rayovac Corporation 1996 Stock Option Plan ("1996 Plan"). Under the 1996 Plan, stock options to acquire up to 2,318 169

  • Page 173
    ...) shares of common stock, in the aggregate, could be granted to select employees and nonâˆ'employee directors of the Predecessor Company under either or both a timeâˆ'vesting or a performanceâˆ'vesting formula at an exercise price equal to the market price of the common stock on the date of grant...

  • Page 174
    ...the Predecessor Board or if the employee was terminated without cause. The fair value of restricted stock is determined based on the market price of the Company's shares on the grant date. A summary of the status of the Successor Company's nonâˆ'vested restricted stock as of September 30, 2009 is as...

  • Page 175
    ..., the FASB issued additional guidance which addresses application issues arising from contingencies in a business combination. The new guidance is effective for the Company's financial statements for the fiscal year that began October 1, 2009. The Company will adopt the new guidance prospectively as...

  • Page 176
    ... October 1, 2010. The Company is in the process of evaluating the impact that the guidance may have on its financial statements and related disclosures. Variable Interest Entities In June 2009, the FASB issued new accounting guidance requiring an enterprise to perform an analysis to determine...

  • Page 177
    ...Assets held for sale in the accompanying Consolidated Statements of Financial Position at September 30, 2009 consisting of certain assets related to the Ningbo, China battery manufacturing facility and a manufacturing facility in Brazil. The Predecessor Company had $7,452 included in Assets held for...

  • Page 178
    ... Index to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) (7) Goodwill and Intangible Assets Intangible assets consist of the following: Global Batteries & Personal Care Home and Garden...

  • Page 179
    ...CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) (A) During the first quarter of Fiscal 2009, the Company reclassified $12,000 of trade names intangible assets not subject to amortization related to the growing products portion of the Home and Garden Business to...

  • Page 180
    ... Contents Index to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) division of the Home and Garden Business in order to reflect the estimated fair value of this business. Approximately $14,122...

  • Page 181
    ... Contents Index to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) (8) Debt Debt consists of the following: Successor Company September 30, 2009 Amount Rate(A) Predecessor Company September 30...

  • Page 182
    ...of Contents Index to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) make a $25,813 interest payment due February 2, 2009 on the Company's 7 3/8 Notes. While the Company's preâˆ'petition asset...

  • Page 183
    ... connection with the Company's emergence from voluntary reorganization under Chapter 11 of the Bankruptcy Code and the Term Credit Amendments, the Company agreed to incur nonâˆ'cash default interest at 1.50% for the pendency of the Bankruptcy Cases. As a result, $8,360 of principal was added to the...

  • Page 184
    Table of Contents Index to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) Company's debtorâˆ'inâˆ'possession credit facility, which was simultaneously repaid using cash on hand generated from...

  • Page 185
    ... SPECTRUM BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) The Company may redeem all or a part of the 12% Notes, upon not less than 30 or more than 60 days notice, beginning August 28, 2012 at specified redemption prices...

  • Page 186
    ... Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) The components of income tax expense (benefit) are as follows: Successor Company One Month Ended September 30, 2009 Predecessor Company Eleven...

  • Page 187
    ... and deferred tax liabilities, are as follows: Successor Predecessor Company Company September 30, 2009 2008 Current deferred tax assets: Employee benefits Restructuring Inventories and receivables Marketing and promotional accruals Foreign currency hedges Other Valuation allowance Total current...

  • Page 188
    ... Index to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) the Company's foreign operations amounting to approximately $156,270 and $357,933 at September 30, 2009 (Successor Company) and...

  • Page 189
    Table of Contents Index to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) and $7,765 respectively that if recognized will affect the effective tax rate. The Company recognizes interest and ...

  • Page 190
    ... Index to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) eleven month period ended August 30, 2009, Fiscal 2008 and Fiscal 2007, the Predecessor Company, as a result of its testing, recorded...

  • Page 191
    ... Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) The presentation herein of the results of continuing operations has been changed to exclude the growing products portion of the Home and Garden Business...

  • Page 192
    ... Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) (11) Employee Benefit Plans Pension Benefits The Company has various defined benefit pension plans covering some of its employees in the United...

  • Page 193
    ...Contents Index to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) The following tables provide additional information on the Company's pension and other postretirement benefit plans: Successor...

  • Page 194
    ...of Contents Index to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) Company's domestic and international plans was approximately 5.5%. The weighted average expected return on plan assets used...

  • Page 195
    ...Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) The Company has established formal investment policies for the assets associated with these plans. Policy objectives include maximizing longâˆ'term return...

  • Page 196
    ... TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) Net sales and Cost of goods sold to other business segments have been eliminated. The gross contribution of intersegment sales is included in the segment selling the product to the external customer. Segment...

  • Page 197
    ...Contents Index to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) (A) (B) Fiscal 2007 does not include depreciation and amortization expense associated with the Home and Garden Business as, in...

  • Page 198
    ...to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) Segment total assets Successor Predecessor Company Company September 30, 2009 2008 Global Batteries & Personal Care Global Pet Supplies Home...

  • Page 199
    ...Chapter 11 of the Bankruptcy Code. The Company and such subsidiaries emerged from bankruptcy on August 28, 2009. With the exception of Spectrum Jungle Labs Corporation, the related cases of the reorganized debtors were closed as of September 30, 2009. The Company continues to analyze proofs of claim...

  • Page 200
    ... Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) file objections with the bankruptcy court to certain of such claims. This process will continue until those claims that the Company determines to address...

  • Page 201
    ... to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) Pursuant to the Plan and in connection with its Chapter 11 reorganization, Spectrum Brands, Inc. converted from a Wisconsin corporation into...

  • Page 202
    ..., 2009 Predecessor Company Eleven Months Ended August 30, 2009 2008 2007 Cost of goods sold: Global Batteries & Personal Care Global Pet Supplies Corporate Total restructuring and related charges in cost of goods sold Operating expense: Global Batteries & Personal Care Global Pet Supplies Home and...

  • Page 203
    ... August 30, 2009 2008 2007 Costs included in cost of goods sold: Breitenbach, France facility closure: Termination benefits Other associated costs United & Tetra integration: Termination benefits Other associated costs European initiatives: Termination benefits Other associated costs Latin America...

  • Page 204
    ... Index to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) 2009 Restructuring Initiatives The Predecessor Company implemented a series of initiatives within the Global Batteries & Personal Care...

  • Page 205
    ...to Financial Statements SPECTRUM BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) 2008 Restructuring Initiatives The Predecessor Company implemented an initiative within the Global Batteries & Personal Care segment in China...

  • Page 206
    ... in three vertically integrated, productâˆ'focused reporting segments; Global Batteries & Personal Care, Global Pet Supplies and the Home and Garden Business. As part of this realignment, the Company's Global Operations organization, previously included in corporate expense, consisting of research...

  • Page 207
    ... at the Ellwangen, Germany packaging center to the Dischingen, Germany battery plant, transferring private label battery production at the Company's Dischingen, Germany battery plant to the Company's manufacturing facility in China and restructuring its sales, marketing and support functions. The...

  • Page 208
    ... of United's home and garden administrative services, sales and customer service functions into the Company's operations in Madison, Wisconsin; converting all information systems to SAP; consolidating United's home and garden manufacturing and distribution locations in North America; rationalizing...

  • Page 209
    ... of the acquired United and Tetra businesses. These costs, which include severance, lease termination costs, inventory disposal costs and other associated costs, relate to the closure of certain acquired Global Pet Supplies and home and garden manufacturing and distribution facilities. Such amounts...

  • Page 210
    ... the 2019 Indenture for the benefit of holders of allowed claims with respect to the Predecessor Company's Senior Subordinated Notes. (See Note 2, Voluntary Reorganization Under Chapter 11, for further details of the chapter 11 cases of Spectrum Brands and its United States subsidiaries and See Note...

  • Page 211
    ... Index to Financial Statements Successor Company Consolidating Statement of Financial Position September 30, 2009 Parent Guarantor Subsidiaries Nonguarantor Subsidiaries Eliminations Consolidated Total ASSETS Current assets: Cash and cash equivalents Receivables: Trade accounts receivables, net...

  • Page 212
    ...Financial Statements Successor Company Consolidating Statement of Operations One Month Period Ended September 30, 2009 Parent Guarantor Subsidiaries Nonguarantor Subsidiaries Eliminations Consolidated Total Net sales Cost of goods sold Restructuring and related... - (10) 36 (100) (14,652) 14,...benefit...

  • Page 213
    ...Financial Statements Predecessor Company Consolidating Statement of Operations Eleven Month Period Ended August 30, 2009 Parent Guarantor Subsidiaries Nonguarantor Subsidiaries Eliminations Consolidated Total Net sales Cost of goods sold Restructuring and related...354 22,611 1,100,743 (86,802)...benefit...

  • Page 214
    Table of Contents Index to Financial Statements Successor Company Consolidating Statement of Cash Flows One Month Period Ended September 30, 2009 Parent Guarantor Subsidiaries Nonguarantor Subsidiaries Eliminations Consolidated Total Net cash (used) provided by operating activities of continuing ...

  • Page 215
    Table of Contents Index to Financial Statements Predecessor Company Consolidating Statement of Cash Flows Eleven Month Period Ended August 30, 2009 Parent Guarantor Subsidiaries Nonguarantor Subsidiaries Eliminations Consolidated Total Net cash (used) provided by operating activities of continuing ...

  • Page 216
    ...: Current maturities of longâˆ'term debt Accounts payable Accrued liabilities: Wages and benefits Income taxes payable Restructuring and related charges Accrued interest Other Total current liabilities Longâˆ'term debt, net of current maturities Employee benefit obligations, net of current portion...

  • Page 217
    ...Financial Statements Predecessor Company Consolidating Statement of Operations Year Ended September 30, 2008 Parent Guarantor Subsidiaries Nonguarantor Subsidiaries Eliminations Consolidated Total Net sales Cost of goods sold Restructuring and related...Income tax expense (benefit) Loss from ...

  • Page 218
    ... of Contents Index to Financial Statements Predecessor Company Consolidating Statement of Cash Flows Year Ended...stock purchases Proceeds (advances related to) from intercompany transactions Net cash provided (used) by financing activities Effect of exchange rate changes on cash and cash equivalents...

  • Page 219
    Table of Contents Index to Financial Statements Predecessor Company Consolidating Statement of Operations Year Ended September 30, 2007 Parent Guarantor Subsidiaries Nonguarantor Subsidiaries Eliminations Consolidated Total Net sales Cost of goods sold Restructuring and related charges Gross profit...

  • Page 220
    ... costs Proceeds from exercise of stock options Stock option income tax benefit Treasury stock purchases (Advances related to) proceeds from intercompany transactions Net cash (used) provided by financing activities Effect of exchange rate changes on cash and cash equivalents Net increase in cash and...

  • Page 221
    ... the elimination of Accounts receivable allowances through freshâˆ'start reporting as a result of the Company's emergence from Chapter 11 of the Bankruptcy Code. The "Other Adjustment" in the period ended September 30, 2007, represents changes in estimates of accounts receivable allowances of...

  • Page 222
    ... date. Signature Title /s/ Kent J. Hussey Kent J. Hussey Chief Executive Officer and Chairman of the Board (Principal Executive Officer) Executive Vice President, Chief Financial Officer and Chief Accounting Officer (Principal Financial Officer and Principal Accounting Officer) Director Director...

  • Page 223
    ... certificate for shares of common stock (filed by incorporation by reference to Exhibit 4.4 to the Current Report on Form 8âˆ'K filed with the SEC on August 31, 2009). Amended and Restated Employment Agreement, dated as of April 1, 2005, by and between Spectrum Brands, Inc. and Kent J. Hussey (filed...

  • Page 224
    ..., 2009.*†Amended and Restated Employment Agreement, entered into as of October 22, 2009, by and between Spectrum Brands, Inc. and Kent J. Hussey (filed by incorporation by reference to Exhibit 10.1 to the Current Report on Form 8âˆ'K filed with the SEC on October 28, 2009). Restricted Stock Award...

  • Page 225
    ... to Exhibit 10.2 to the Current Report on Form 8âˆ'K filed with the SEC on April 4, 2007). Credit Agreement, dated as of August 28, 2009, among Spectrum Brands, Inc., the subsidiaries of Spectrum Brands, Inc. party thereto, General Electric Capital Corporation, as the administrative agent, co...

  • Page 226
    ... to the Quarterly Report on Form 10âˆ'Q for the quarterly period ended March 28, filed with the SEC on May 5, 1998) Restructuring Support Agreement, dated as of February 3, 2009, by and among (i) Spectrum Brands, Inc.; (ii) certain subsidiaries of Spectrum Brands, Inc. party thereto; (iii) Harbinger...

  • Page 227
    ... 24th day of February, 2009 (the "Effective Date"), by and between Spectrum Brands, Inc. ("the "Company") and Kent J. Hussey (the "Executive"). WHEREAS, the Company and the Executive previously entered into an Amended and Restated Employment Agreement, dated April 1, 2005, as amended by that certain...

  • Page 228
    IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. SPECTRUM BRANDS, INC /s/ John T. Wilson By: John T. Wilson, Vice President, Secretary and General Counsel EXECUTIVE: /s/ Kent J. Hussey Name: Kent J. Hussey

  • Page 229
    ... of Fourth Amendment to the Amended and Restated Employment Agreement of Kent J. Hussey, effective as of August 28, 2009 Effective as of August 28, 2009, the board of directors of Spectrum Brands, Inc. reinstated the annual base salary of Kent J. Hussey to $825,000, which reinstatement amended that...

  • Page 230
    ... the 24th day of February 2009 (the "Effective Date"), by and between Spectrum Brands, Inc. (the "Company") and John A. Heil (the "Executive"). WHEREAS, the Company and the Executive previously entered into that certain Amended and Restated Employment Agreement dated January 16, 2007 (the "Agreement...

  • Page 231
    IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. SPECTRUM BRANDS, INC /s/ Kent J. Hussey By: Kent J. Hussey, Chief Executive Officer EXECUTIVE: /s/ John A. Heil Name: John A. Heil

  • Page 232
    ... 10.12 Description of Third Amendment to the Amended and Restated Employment Agreement of John A. Heil, effective as of August 28, 2009 Effective as of August 28, 2009, the board of directors of Spectrum Brands, Inc. reinstated the annual base salary of John A. Heil to $500,000, which reinstatement...

  • Page 233
    ... 24th day of February, 2009 (the "Effective Date"), by and between Spectrum Brands, Inc. (the "Company") and David R. Lumley (the "Executive"). WHEREAS, the Company and the Executive previously entered into that certain Amended and Restated Employment Agreement dated January 16, 2007 (the "Agreement...

  • Page 234
    IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. SPECTRUM BRANDS, INC /s/ Kent J. Hussey By: Kent J. Hussey, Chief Executive Officer EXECUTIVE: /s/ David R. Lumley Name: David R. Lumley

  • Page 235
    Exhibit 10.18 Description of Third Amendment to the Amended and Restated Employment Agreement of David R. Lumley, effective as of August 28, 2009 Effective as of August 28, 2009, the board of directors of Spectrum Brands, Inc. reinstated the annual base salary of David R. Lumley to $600,000, which ...

  • Page 236
    ... of the 24th day of February, 2009 (the "Effective Date"), by and between Spectrum Brands, Inc. (the "Company") and Anthony L. Genito (the "Executive"). WHEREAS, the Company and the Executive previously entered into that certain Employment Agreement dated June 9, 2008 (the "Agreement"); and WHEREAS...

  • Page 237
    IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. SPECTRUM BRANDS, INC /s/ Kent J. Hussey By: Kent J. Hussey, Chief Executive Officer EXECUTIVE: /s/ Anthony L. Genito Name: Anthony L. Genito

  • Page 238
    Exhibit 10.23 Description of Second Amendment to the Employment Agreement of Anthony L. Genito, effective as of August 28, 2009 Effective as of August 28, 2009, the board of directors of Spectrum Brands, Inc. increased the annual base salary of Anthony L. Genito to $425,000, which increase amended ...

  • Page 239
    ... GmbH ROV Holding, Inc. ROV International Finance Company ROVCAL, INC. Schultz Company Spectrum Brands (Hong Kong) Limited Spectrum Brands (Shenzhen) Ltd. Spectrum Brands Asia Germany Brazil Netherlands USA (Hawaii) Guatemala Honduras Mexico Germany Brazil Brazil Mexico China Germany France United...

  • Page 240
    ... Holding Company, LP Spectrum Neptune US Holdco Corporation Tetra (UK) Limited Tetra Aquatic Asia Pacific Private Limited Tetra France S.A.S. Tetra GmbH Tetra Holding (US), Inc. Tetra Holding GmbH Tetra Italia S.r.L. Tetra Japan K.K. United Industries Corporation United Pet Group, Inc. United Pet...

  • Page 241
    ... Registered Public Accounting Firm The Board of Directors Spectrum Brands, Inc.: We consent to the incorporation by reference in the registration statements (No. 333âˆ'162057) on Form Sâˆ'3 and (No. 333âˆ'162505) on Form Sâˆ'8, of Spectrum Brands, Inc. of our report dated December 29, 2009, with...

  • Page 242
    Exhibit 31.1 CERTIFICATIONS I, Kent J. Hussey, Chief Executive Officer, certify that: 1. I have reviewed this annual report on Form 10âˆ'K of Spectrum Brands, Inc. (the "registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a ...

  • Page 243
    ... L. Genito, Chief Financial Officer, certify that: 1. I have reviewed this annual report on Form 10âˆ'K of Spectrum Brands, Inc. (the "registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the...

  • Page 244
    ... connection with the Annual Report on Form 10âˆ'K of Spectrum Brands, Inc. (the "Company") for the fiscal year ended September 30, 2009 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Kent J. Hussey, as Chief Executive Officer of the Company, hereby certify...

  • Page 245
    ... with the Annual Report on Form 10âˆ'K of Spectrum Brands, Inc. (the "Company") for the fiscal year ended September 30, 2009 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Anthony L. Genito, as Chief Financial Officer of the Company, hereby certify...