Rayovac 2012 Annual Report Download

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Table of contents

  • Page 1

  • Page 2
    ... 25 retailers, and available in more than one million stores in approximately 140 countries. Our brands are largely non-discretionary, non-premium priced, replacement packaged goods used by consumers on a daily basis. Our reporting segments are Global Batteries & Appliances (Personal Care and Home...

  • Page 3
    ... of our Company's portfolio of products. HHI offers a new platform for global growth using Spectrum Brands' existing international infrastructure, most notably in Europe. Additionally, HHI provides an entry into the growing market of integrated residential security, fire and lighting categories, and...

  • Page 4
    ... were fully and quickly integrated, ahead of schedule and above initial synergy targets. They will remain significant contributors in fiscal 2013 and beyond. We believe our performance underscores the strength of Spectrum Brands' largely non-discretionary, non-premium priced products, and the value...

  • Page 5
    ...or low-margin product lines, select pricing actions, and retention of stringent cost control programs. Our target remains for each division to achieve a three to five percent savings in its annual cost of goods sold. Spectrum Brands reached a milestone last year when our Board of Directors approved...

  • Page 6
    ... future global growth using Spectrum Brands' existing international infrastructure. As a fourth operating segment, HHI has compelling growth opportunities in North America and abroad, and is well-positioned - from a cost, product line and market share standpoint - to benefit from the U.S. housing...

  • Page 7
    2012 DIRECTORS AND OFFICERS BOARD OF DIRECTORS David M. Maura* ² David R. Lumley Executive Vice President and Director, Harbinger Group Inc. Age 40; Director since 2010 Omar M. Asali** ³ Chief Executive Officer and President, Global Batteries and President, Home and Garden, Spectrum Brands ...

  • Page 8
    ... of the Merger, our Common Stock from June 16, 2010 until September 30, 2012. The comparison is based upon the closing price of the SBI Common Stock or our Common Stock, as applicable, and assumes the reinvestment of all dividends, if any. The returns of each of the companies in our peer group are...

  • Page 9
    ...Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 27-2166630 (I.R.S. Employer Identification Number) 601 Rayovac Drive, Madison, Wisconsin (Address of principal executive offices) 53711 (Zip Code) Registrant's telephone...

  • Page 10
    ... FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ...CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE ... ITEM 9A. CONTROLS AND PROCEDURES ...ITEM 9B. OTHER INFORMATION ...PART III ITEM 10. ITEM 11. ITEM 12. ITEM 13. ITEM 14. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE...

  • Page 11
    ... retailers, wholesalers and distributors, hearing aid professionals, industrial distributors and original equipment manufacturers ("OEMs") and enjoy strong name recognition in our markets under the Rayovac, VARTA and Remington brands, each of which has been in existence for more than 80 years...

  • Page 12
    ... care products; home and garden control products and small appliances. Our broad line of products includes consumer batteries, including alkaline and zinc carbon batteries, rechargeable batteries and chargers and hearing aid batteries, other specialty batteries and portable lighting products; pet...

  • Page 13
    ... and Starkey. We also sell Nickel 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...

  • Page 14
    ... limited group of retailer customers, including Wal-Mart, The Home Depot, Carrefour, Target, Lowe's, PetSmart, Canadian Tire, PetCo and Gigante. Our sales to Wal-Mart represented approximately 23% of our consolidated net sales for the fiscal year ended September 30, 2012. No other customer accounted...

  • Page 15
    ... material costs we expect to incur over the next 12 to 24 months. 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 and small appliances are manufactured by third party...

  • Page 16
    ... considered "principal products of interest" for either company. We retain the REMINGTON trademark for nearly all products which we believe can benefit from the use of the brand name in our distribution channels. We license the Black & Decker brand in North America, Latin America (excluding Brazil...

  • Page 17
    ... 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 18
    ... U.S. and Canada include Jarden Corporation, DeLonghi America, Euro-Pro Operating LLC, Metro Thebe, Inc., d/b/a HWI Breville, NACCO Industries, Inc. (Hamilton Beach) and SEB S.A. In addition, Russell Hobbs competes with retailers who use their own private label brands for household appliances (for...

  • Page 19
    ... at September 30, 2012 should not be material 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...

  • Page 20
    ... President, Investor Relations & Corporate Communications, Spectrum Brands, Inc. at 601 Rayovac Drive, Madison, Wisconsin 53711 or via electronic mail at [email protected], or by contacting the Vice President, Investor Relations & Corporate Communications by telephone at (608) 275...

  • Page 21
    ... strategy, future operations, financial condition, estimated revenues, projected costs, projected synergies, prospects, plans and objectives of management, as well as information concerning expected actions of third parties, are forward-looking statements. When used in this Annual Report, the words...

  • Page 22
    ...the information appearing in this Annual Report on Form 10-K is accurate only as of September 30, 2012 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...

  • Page 23
    ...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 a parent company with limited business operations of our own. Our main asset is the capital stock of...

  • Page 24
    ...non-affiliates of a sufficient amount of the common stock of SB Holdings would constitute a change of control under the agreements governing Spectrum Brands' debt. Harbinger Group Inc. ("HRG") owns a majority of the outstanding shares of the common stock of SB Holdings. The sale or other disposition...

  • Page 25
    ... economy in a manner that negatively affects our international business and financial performance and results. Global economic conditions have significantly impacted economic markets within certain sectors, with financial services and retail businesses being particularly impacted. Our ability to...

  • Page 26
    ... brand name recognition, perceived product quality, price, performance, product features and enhancements, product packaging and design innovation, as well as creative marketing, promotion and distribution strategies, and new product introductions. Our ability to compete in these consumer product...

  • Page 27
    ... or may acquire rights to market and distribute particular products or lines of products. The acquisition of a business or the rights to market specific products or use specific product names may involve a financial commitment by us, either in the form of cash or equity consideration. In the...

  • Page 28
    ..., financial condition or results of operations. Adverse weather conditions during our peak selling season for our home and garden control products could have a material adverse effect on our Home and Garden Business. Weather conditions in the U.S. have a significant impact on the timing and volume...

  • Page 29
    ... amount of Spectrum Brands' U.S. net operating losses and other tax attributes to certain limitations. As a consequence of the Salton-Applica merger, as well as earlier business combinations and issuances of common stock consummated by both companies, use of the tax benefits of Russell Hobbs...

  • Page 30
    ... in relation to foreign currencies will affect our cost of goods sold and our operating margins and could result in exchange losses or otherwise have a material effect on our business, financial condition and results of operations. Changes in currency exchange rates may also affect our sales to...

  • Page 31
    ... currencies, which may increase the costs of goods produced in China, or prompt China to retaliate with other tariffs or other actions. Any such series of events could have a material negative adverse effect on our sales and gross margin. Our international operations may expose us to risks related...

  • Page 32
    ... 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 ("BDC") extended...

  • Page 33
    ... 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 interruption in the operations of this facility for repairs, as a result of labor...

  • Page 34
    ..., could have an adverse effect on our business, financial condition and results of operations. We and certain of our 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, we have also received...

  • Page 35
    ... us, and the costs and liabilities associated with these sites may have a material adverse effect on our business, financial condition and results of operations. Compliance with various public health, consumer protection and other regulations applicable to our products and facilities could increase...

  • Page 36
    ... the Consumer Commission, voluntarily recalled approximately 9,800 units of a thermal coffeemaker sold under the Black & Decker brand in August 2009 and approximately 584,000 coffeemakers in June 2009. Any additional repurchases or recalls of our products could be costly to us and could damage the...

  • Page 37
    .... Our results of operations may be positively or negatively affected by the amount of income or 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...

  • Page 38
    ... of costs significantly in excess of the amount originally expected for the acquisition of an asset; and significant changes in the cash flows associated with an asset. As a result of such circumstances, we may be required to record a significant charge to earnings in our financial statements during...

  • Page 39
    ... the agreements governing Spectrum Brands' debt." In addition, because, as of the date HRG and the Harbinger Parties own more than 50% of the voting power of SB Holdings, SB Holdings is considered a controlled company under the NYSE listing standards. As such, the NYSE corporate governance rules...

  • Page 40
    ...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 41
    ... under which shares of the Company 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, the Company's Board of Directors adopted the Spectrum Brands Holdings, Inc...

  • Page 42
    ... Zinc Air Button Cell and Lithium Coin Cell Battery, Foil Shaver Component Manufacturing Distribution/Returns Center Alkaline Battery Manufacturing Zinc Air Button Cell Battery Manufacturing & Distribution Zinc Carbon Battery Manufacturing Zinc Carbon Battery Manufacturing Battery & Lighting...

  • Page 43
    ... adverse effect on our results of operations, financial condition, liquidity or cash flows. Environmental We have provided for the estimated costs associated with environmental remediation activities at some of our current and former manufacturing sites. We believe that any additional liability...

  • Page 44
    ...the fiscal year ended September 30, 2012. On October 18, 2011 the Board of Directors approved a $30 million common stock repurchase program, which was completed in the second quarter of Fiscal 2012. Total Number of Maximum Number Total Shares Purchased as of Shares that may Number of Average Part of...

  • Page 45
    ... are included elsewhere in this Annual Report on Form 10-K. The information presented below as of and for the fiscal years ended September 30, 2012, 2011 and 2010 also includes that of Russell Hobbs since the Merger on June 16, 2010. The following selected financial data, which may not be indicative...

  • Page 46
    ... provided (used) by operating activities ...Capital expenditures(10) ...Depreciation and amortization (excluding amortization of debt issuance costs)(10) ...Statement of Financial Position Data (at period end): Cash and cash equivalents ...Working capital(11) ...Total assets ...Total long-term debt...

  • Page 47
    ...-Intangible Assets, of Notes to Consolidated Financial Statements 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...

  • Page 48
    ... the Company's Term Debt facility. Fiscal 2010 includes a non-cash charge of $83 million related to the write-off of unamortized debt issuance costs and unamortized discounts and premiums in connection with the extinguishment and refinancing of debt that was completed in conjunction with the Merger...

  • Page 49
    ... Financial Data and our Consolidated Financial Statements and related notes included in this Annual Report on Form 10-K. Certain prior year amounts have been reclassified to conform to the current year presentation. All references to Fiscal 2012, Fiscal 2011 and Fiscal 2010 refer to fiscal year...

  • Page 50
    ... retailers, wholesalers and distributors, hearing aid professionals, industrial distributors and original equipment manufacturers ("OEMs") and enjoy strong name recognition in our markets under the Rayovac, VARTA and Remington brands, each of which has been in existence for more than 80 years...

  • Page 51
    ...a full line of hair care accessories and introduced Keratin smart products in all of our haircare lines. Additionally in consumer batteries, we launched the new Indestructible line of Rayovac flashlights, developed everyday rechargeable batteries and the Platinum LCD charger. During Fiscal 2012, our...

  • Page 52
    ...consumer battery product category consists of non-rechargeable alkaline or zinc carbon batteries 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...

  • Page 53
    ... penetration and promote sales. Expansive Distribution Network. We distribute 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...

  • Page 54
    ... 2011 are as follows (in millions): Fiscal Year 2012 2011 Product line net sales Consumer batteries ...Small appliances ...Pet supplies ...Home and garden control products ...Electric shaving and grooming products ...Electric personal care products ...Total net sales to external customers ... $ 949...

  • Page 55
    ... and Integration Related Charges, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information regarding our Acquisition and integration charges. Operating Income. Operating income was approximately $302 million in Fiscal 2012 compared...

  • Page 56
    ... 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: Global Batteries & Appliances Fiscal 2012 Home and Corporate / Garden...

  • Page 57
    .... 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 increases, primarily in Latin America, and geographic expansion. Excluding foreign exchange, electric shaving and...

  • Page 58
    ... compared to other products within the segment, coupled with savings from our restructuring initiatives. See "Restructuring and Related Charges" below, as well as Note 14, Restructuring and Related Charges, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for...

  • Page 59
    .... Corporate expense as a percentage of consolidated net sales for Fiscal 2012 was 1.6% compared to 1.7% during Fiscal 2011. Restructuring and Related Charges. See Note 14, "Restructuring and Related Charges", of Notes to Consolidated Financial Statements, included in this Annual Report on Form 10...

  • Page 60
    ... Batteries and Appliances segment; $8 million related to Global Pet Supplies; and $1 million related to the Home and Garden Business. See Note 2(i), "Significant Accounting Policies and Practices-Intangible Assets", of Notes to Consolidated Financial Statements included in this Annual Report on Form...

  • Page 61
    .... See Note 6, "Debt," to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information regarding our outstanding debt. Income Taxes. In Fiscal 2012, we recorded income tax expense of $60 million on pretax income from continuing operations of $109...

  • Page 62
    ... of Operations from June 16, 2010, the date of the Merger, through the end of the period. See Note 15, Acquisitions, of Notes to Consolidated Financial Statements, included in this Annual Report on Form 10-K for supplemental pro forma information providing additional year over year comparisons of...

  • Page 63
    ... by increased sales in North America and Europe of $24 million and $5 million, respectively, coupled with favorable foreign exchange impacts of $12 million. Sales decreases in Latin America were driven by decreased alkaline battery sales of $11 million, zinc carbon battery sales of $26 million and...

  • Page 64
    ... tempered by savings from our integration and global cost reduction initiatives. See "Restructuring and Related Charges" below, as well as Note 14, Restructuring and Related Charges, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information...

  • Page 65
    ... for product lines within that segment. Financial information pertaining to our reportable segments is contained in Note 11, Segment Information, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for further information relating to our operating segments...

  • Page 66
    ... $7 million, which were attributable to distribution gains, including multiple online retailers, and a successful new product line launch at a major customer, coupled with favorable foreign exchange of $1 million. These gains were tempered by decreased sales in Latin America of $4 million driven by...

  • Page 67
    ... in Fiscal 2011 compared to 10.3% in Fiscal 2010. See "Restructuring and Related Charges" below, as well as Note 14, Restructuring and Related Charges, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information regarding our restructuring and...

  • Page 68
    ... and Related Charges, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information regarding our restructuring and related charges. Segment Adjusted EBITDA in Fiscal 2011 was $99 million compared to $104 million in Fiscal 2010. The decrease...

  • Page 69
    ...Merger. Corporate expense as a percentage of consolidated net sales for Fiscal 2011 was 1.7% compared to 1.9% during Fiscal 2010. Restructuring and Related Charges. See Note 14, "Restructuring and Related Charges", of Notes to Consolidated Financial Statements, included in this Annual Report on Form...

  • Page 70
    ...charges during Fiscal 2011 and Fiscal 2010, representing the true-up of reserve balances. In Fiscal 2007, we began managing our business in three vertically integrated, product-focused reporting segments; Global Batteries & Personal Care, Global Pet Supplies and the Home and Garden Business. As part...

  • Page 71
    ... Batteries and Appliances segment; $8 million related to Global Pet Supplies; and $1 million related to the Home and Garden Business. See Note 2(i), "Significant Accounting Policies and Practices-Intangible Assets", of Notes to Consolidated Financial Statements included in this Annual Report on Form...

  • Page 72
    ... of ownership, as 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...

  • Page 73
    ..., integration and restructuring related costs of $12 million and; Lower cash payments for interest of $11 million (See Note 6, "Debt", of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K), partially offset by; A $21 million use of cash from working capital...

  • Page 74
    ... Events," to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information regarding our 2020 Notes and 2022 Notes. From time to time we may repurchase our existing indebtedness, including outstanding securities of Spectrum Brand or its subsidiaries, in...

  • Page 75
    ... due by Fiscal Year 2015 2016 2017 Thereafter 2013 2014 Total Debt: Debt, excluding capital lease obligations(1) ...Capital lease obligations(2) ... $ 13 3 $ 16 Employee benefit obligations(3) ...10 Operating lease obligations ...33 Other liabilities ...- Total Contractual Obligations(4) ...$ 59...

  • Page 76
    ... Expiration by Fiscal Year 2013 2014 2015 2016 2017 Thereafter Total Letters of credit ...Total Other Commercial Commitments ...Critical Accounting Policies $19 $19 $7 $7 $- $- $- $- $- $- $- $- $26 $26 Our Consolidated Financial Statements included in this Annual Report on Form 10-K have...

  • Page 77
    ...Equipment", Note 2(i), "Significant Accounting Policies and Practices-Intangible Assets"; Note 4, "Property, Plant and Equipment"; Note 5, "Goodwill and Intangible Assets"; and Note 16, "Discontinued Operations", of Notes to Consolidated Financial Statements included in this Annual Report on Form 10...

  • Page 78
    ... of Credit Risk and Major Customers and Employees"; of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for more information about our revenue recognition and credit policies. Pensions Our accounting for pension benefits is primarily based on a discount rate...

  • Page 79
    ...Related Charges", of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for a more complete discussion of our restructuring initiatives and related costs. Acquisition and Integration Related Charges The costs of plans to (i) exit an activity of an acquired company...

  • Page 80
    ...such exposures. A discussion of our accounting policies for derivative financial instruments is included in Note 7, Derivative Financial Instruments, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K. Interest Rate Risk We have bank lines of credit at variable...

  • Page 81
    ... the reduction in cost of one year's purchases of the related commodities due to the same change in commodity prices, would be a net loss of $0.7 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...

  • Page 82
    ... on the Effectiveness of Controls. The Company's management, including our Chief Executive Officer and Chief Financial Officer, does not expect that the Company's disclosure controls and procedures or the Company's internal controls over financial reporting will prevent all errors and all fraud...

  • Page 83
    ...-Corporate Governance." We intend to disclose amendments to, and, if applicable, waivers of, this code 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...

  • Page 84
    ... RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTORS INDEPENDENCE-Director Independence" and "BOARD ACTIONS; BOARD MEMBER INDEPENDENCE; COMMITTEES OF THE BOARD OF DIRECTORS" in the SB Holdings Definitive Proxy Statement. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information required by...

  • Page 85
    ...Index to Consolidated Financial Statements and Financial Statement Schedule, filed as part of 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...

  • Page 86
    .... 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 Statements of Shareholders' Equity...

  • Page 87
    ...statement schedule based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free...

  • Page 88
    ... 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, 2012, based on criteria established in Internal Control-Integrated...

  • Page 89
    ..., plant and equipment, net ...Deferred charges and other ...Goodwill ...Intangible assets, net ...Debt issuance costs ...Total assets ...Liabilities and Shareholders' Equity Current liabilities: Current maturities of long-term debt ...Accounts payable ...Accrued liabilities: Wages and benefits...

  • Page 90
    SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES Consolidated Statements of Operations Years ended September 30, 2012, 2011 and 2010 (In thousands, except per share amounts) 2012 2011 2010 Net sales ...Cost of goods sold ...Restructuring and related charges ...Gross profit ...Operating expenses: ...

  • Page 91
    ... Statements of Shareholders' Equity (Deficit) and Comprehensive Income (Loss) Years ended September 30, 2012, 2011 and 2010 (In thousands) Accumulated Other Total Comprehensive Shareholders' Accumulated Income (Loss), Treasury Equity Deficit net of tax Stock (Deficit) Common Stock Shares...

  • Page 92
    ... Statements of Shareholders' Equity (Deficit) and Comprehensive Income (Loss)-Continued Years ended September 30, 2012, 2011 and 2010 (In thousands) Accumulated Other Total Comprehensive Shareholders' Accumulated Income (Loss), Treasury Equity Deficit net of tax Stock (Deficit) Common Stock Shares...

  • Page 93
    ... to cost of goods sold due to fresh-start reporting inventory valuation ...Non-cash interest expense on 12% Notes ...Write off of unamortized (premium) discount on retired debt ...Write off of debt issuance costs ...Non-cash restructuring and related charges ...Non-cash debt accretion ...Changes in...

  • Page 94
    ... ("U.S."), Europe, Latin America and Asia. The Company sells its 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...

  • Page 95
    ... BRANDS HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (In thousands, except per share amounts) On October 8, 2012, the Company entered into an agreement with Stanley Black & Decker, Inc. ("Stanley Black & Decker") to acquire the residential hardware and home...

  • Page 96
    ... NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (In thousands, except per share amounts) The Company also enters into various arrangements, primarily with retail customers, which require the Company to make upfront cash, or "slotting" payments, in order to secure the right to distribute...

  • Page 97
    ...20 years. Excess of cost over fair value of net assets acquired (goodwill) and indefinite-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...

  • Page 98
    ... 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 trade name...

  • Page 99
    ... SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (In thousands, except per share amounts) In connection with its annual impairment testing of indefinite-lived intangible assets during Fiscal 2011, the Company concluded that the fair values of certain trade name intangible assets...

  • Page 100
    ...37,520 during Fiscal 2012, Fiscal 2011 and Fiscal 2010, respectively. Such advertising costs are included in Selling expenses in the accompanying 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...

  • Page 101
    SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (In thousands, except per share amounts) (loss) per common share does not consider the effect of dilutive common stock equivalents. As long as their effect is not anti-dilutive, diluted net income ...

  • Page 102
    ... of its employee stock awards at the date of grant and recognizes 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"). In conjunction with the Merger the...

  • Page 103
    ... the 2007 RH Plan. On October 21, 2010, SB Holdings' Board of Directors adopted the Spectrum Brands Holdings, Inc. 2011 Omnibus Equity Award Plan (the "2011 Plan"), which was approved at the Annual Meeting of Stockholders on March 1, 2011. Up to 4,626 shares of common stock of SB Holdings, net of...

  • Page 104
    SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (In thousands, except per share amounts) The fair value of restricted stock and restricted stock unit awards is determined based on the market price of the Company's shares on the grant date. A ...

  • Page 105
    ... charges incurred by the Company during Fiscal 2012, Fiscal 2011 and Fiscal 2010: 2012 2011 2010 Russell Hobbs Integration costs ...Employee termination charges ...Legal and professional fees ...Merger related Acquisition and integration related charges ...FURminator ...Black Flag ...Other ...Total...

  • Page 106
    ... NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (In thousands, except per share amounts) (5) Goodwill and Intangible Assets Intangible assets consist of the following: Global Batteries & Appliances Global Pet Supplies Home and Garden Business Total Goodwill: Balance at September 30, 2010...

  • Page 107
    ... SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (In thousands, except per share amounts) the Global Batteries & Appliances segment, 15 to 20 years for customer relationships of the Global Batteries & Appliances segment, 20 years for customer relationships of the Home and Garden...

  • Page 108
    ... BRANDS HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (In thousands, except per share amounts) (6) Debt Debt consists of the following: September 30, 2012 Amount Rate September 30, 2011 Amount Rate Term Loan, U.S. Dollar, expiring June 17, 2016 ...9.5% Notes...

  • Page 109
    ...Fiscal 2012. The fees are classified as Debt issuance costs within the accompanying Consolidated Statements of Financial Position and are amortized as an adjustment to interest expense over the remaining life of the Term Loan. In connection with the amendments, the Company also recorded cash charges...

  • Page 110
    SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (In thousands, except per share amounts) 9.5% Notes On November 2, 2011, the Company offered $200,000 aggregate principal amount of 9.5% Notes at a price of 108.5% of the par value; these notes are...

  • Page 111
    SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (In thousands, except per share amounts) of certain investments, expansion into unrelated businesses, creation of liens on assets, merger or consolidation with another company, transfer or sale of ...

  • Page 112
    ... SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (In thousands, except per share amounts) The amended facility carries an interest rate at the option of the Company, which is subject to change based on availability under the facility, of either: (a) the base rate plus (currently...

  • Page 113
    SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (In thousands, except per share amounts) assesses, both at the inception and at least quarterly thereafter, whether the financial instruments that are used in hedging transactions are effective at ...

  • Page 114
    ... NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (In thousands, except per share amounts) Changes in AOCI from Derivative Instruments For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported...

  • Page 115
    SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (In thousands, except per share amounts) The following table summarizes the impact of derivative instruments on the accompanying Consolidated Statements of Operations for Fiscal 2010: Location of ...

  • Page 116
    SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (In thousands, except per share amounts) Credit Risk The Company is exposed to the risk of default by the counterparties with which it transacts and generally does not require collateral or other ...

  • Page 117
    ... 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. At September 30, 2012 the Company had a series of foreign exchange derivative contracts...

  • Page 118
    SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (In thousands, except per share amounts) These foreign exchange contracts are economic hedges of a related liability or asset recorded in the accompanying Consolidated Statements of Financial ...

  • Page 119
    SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (In thousands, except per share amounts) The Company's derivatives are valued on a recurring basis using internal models, which are based on market observable inputs including interest rate curves ...

  • Page 120
    SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (In thousands, except per share amounts) The carrying amounts and fair values of the Company's financial instruments are summarized as follows ((liability)/asset): September 30, 2012 Carrying ...

  • Page 121
    ... FINANCIAL STATEMENTS-(CONTINUED) (In thousands, except per share amounts) The following reconciles the total income tax expense, based on the Federal statutory income tax rate of 35%, with the Company's recognized income tax expense: 2012 2011 2010 Statutory federal income tax expense (benefit...

  • Page 122
    ... deferred tax assets: Employee benefits ...Restructuring and purchase accounting ...Net operating loss and credit carry forwards ...Prepaid royalty ...Property, plant and equipment ...Unrealized losses ...Long-term debt ...Intangibles ...Other ...Valuation allowance ...Total noncurrent deferred tax...

  • Page 123
    ... NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (In thousands, except per share amounts) September 30, 2011, to support management's plans to voluntarily accelerate pay down of U.S. debt, fund distributions to shareholders, fund U.S. acquisitions, and satisfy ongoing U.S. operational...

  • Page 124
    ... on the Consolidated Statement of Operations for Fiscal 2010 was a net increase to income tax expense of $1,527. In connection with the Merger, the Company recorded additional unrecognized tax benefits of approximately $3,299 as part of purchase accounting. As of September 30, 2012, certain of the...

  • Page 125
    ...and certain employees in other countries, primarily the United Kingdom and Germany. Plans generally provide benefits of stated amounts for each year of service. The Company funds its U.S. pension plans in accordance with the requirements of the defined benefit pension plans and, where applicable, in...

  • Page 126
    SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (In thousands, except per share amounts) Other Benefits Under the Rayovac postretirement plan, the Company provides certain health care and life insurance benefits to eligible retired employees. ...

  • Page 127
    ... NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (In thousands, except per share amounts) At September 30, 2012, the Company's total pension and deferred compensation benefit obligation of $240,806 consisted of $75,580 associated with U.S. plans and $165,226 associated with international...

  • Page 128
    SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (In thousands, except per share amounts) class. Specific asset class targets are based on the results of periodic asset/liability studies. The investment policies permit variances from the targets ...

  • Page 129
    SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (In thousands, except per share amounts) (11) Segment Information The Company manages its business in three vertically integrated, product-focused reporting segments: (i) Global Batteries & ...

  • Page 130
    ... NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (In thousands, except per share amounts) Segment profit 2012 2011 2010 Global Batteries & Appliances ...Global Pet Supplies ...Home and Garden Business ...Total segments ...Corporate expenses ...Acquisition and integration related charges...

  • Page 131
    ... Fiscal 2011 related to the change to the official exchange rate. Segment total assets September 30, 2012 2011 Global Batteries & Appliances ...Global Pet Supplies ...Home and Garden Business ...Total segments ...Corporate ...Total assets at year end ...Segment long-lived assets (A) $2,243,472 956...

  • Page 132
    ... AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (In thousands, except per share amounts) Geographic Disclosures-Long-lived assets (A) September 30, 2012 2011 United States ...Outside the United States ...Long-lived assets at year end ...(A) Includes all of the Company's non...

  • Page 133
    ...stock noted above, HRG owned approximately 57% of the Company's common stock, and the Harbinger Parties owned less than 1 percent of the Company's common stock. In August 2012, HRG announced a share repurchase program of up to 1,000 shares of the Company's common stock. In connection with the Merger...

  • Page 134
    SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (In thousands, except per share amounts) • the Harbinger Parties will be granted certain access and informational rights with respect to SB Holdings and its subsidiaries. Pursuant to a joinder ...

  • Page 135
    ...: 2012 2011 2010 Cost of goods sold: Global Batteries & Appliances ...Global Pet Supplies ...Home and Garden Business ...Total restructuring and related charges in cost of goods sold ...Operating expense: Global Batteries & Appliances ...Global Pet Supplies ...Home and Garden Business ...Corporate...

  • Page 136
    ...AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (In thousands, except per share amounts) Global Cost Reduction Initiatives Summary During the fiscal year ended September 30, 2009, the Company implemented a series of initiatives within the Global Batteries & Appliances segment...

  • Page 137
    ... of recognized brand names, including Black & Decker, George Foreman, Russell Hobbs, Toastmaster, LitterMaid, Farberware, Breadman and Juiceman. Russell Hobbs' customers include mass merchandisers, specialty retailers and appliance distributors primarily in North America, South America, Europe and...

  • Page 138
    SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (In thousands, except per share amounts) Black Flag On October 31, 2011, the Company completed the $43,750 cash acquisition of the Black Flag and TAT trade names from The Homax Group, Inc. ("Black ...

  • Page 139
    SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (In thousands, except per share amounts) transaction agreements and the relative profitability and perceived contribution of the trademarks and trade names. Royalty rates used in the determination ...

  • Page 140
    SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (In thousands, except per share amounts) The Company performed a valuation of the assets and liabilities of FURminator at December 22, 2011. Significant matters related to the determination of the ...

  • Page 141
    ... International Financial Reporting Standards. This amended guidance was effective for the Company beginning in the second quarter of its fiscal year ended September 30, 2012. The new accounting guidance did not have a material effect on the Company's consolidated financial statements. Presentation...

  • Page 142
    SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (In thousands, except per share amounts) Decker engaged in the business and (ii) certain assets of Stanley Black & Decker used or held for use in connection with the business. The acquisition, when...

  • Page 143
    SPECTRUM BRANDS, INC. AND SUBSIDIARIES SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS For the years ended September 30, 2012, September 30, 2011 and September 30, 2010 (In thousands) Column A Column B Balance at Beginning of Period Column C Additions Charged to Costs and Expenses Column D Deductions ...

  • Page 144
    ... 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 21, 2012 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following...

  • Page 145
    ..., Inc., Battery Merger Corp., Grill Merger Corp., Spectrum Brands, Inc., and Russell Hobbs, Inc. (filed by incorporation by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC by Spectrum Brands, Inc. on May 3, 2010). Acquisition Agreement, dated October 8, 2012, by and...

  • Page 146
    ... to Exhibit 4.8 to the Annual Report on Form 10-K filed with the SEC by Spectrum Brands, Inc. on December 14, 2010). Indenture governing Spectrum Brands, Inc.'s 6.75% Senior Notes due 2020, dated as of March 20, 2012, among Spectrum Brands, Inc., the guarantors named therein and US Bank National...

  • Page 147
    ... the Annual Report on Form 10-K filed with the SEC by Spectrum Brands, Inc. on December 14, 2010). Loan and Security Agreement dated as of June 16, 2010, by and among Spectrum Brands, Inc. and certain of its domestic subsidiaries, as borrowers, the lenders party thereto and Bank of America, N.A., as...

  • Page 148
    ...filed by incorporation by reference to Exhibit 10.23 to the Annual Report on Form 10-K filed with the SEC by Spectrum Brands, Inc. on December 14, 2010). Trademark Security Agreement dated as of June 16, 2010, by and among the loan parties party thereto and Wells Fargo Bank, National Association, as...

  • Page 149
    ... reference to Exhibit 10.29 to the Annual Report on Form 10-K filed with the SEC by Spectrum Brands, Inc. on December 14, 2010). Patent Security Agreement dated as of December 13, 2010, by and among Seed Resources, L.L.C. and Bank of America, N.A., as collateral agent and administrative agent (filed...

  • Page 150
    ... Annual Report on Form 10-K filed with the SEC by Spectrum Brands, Inc. on November 21, 2012). Subsidiaries of Registrant.* Consent of Independent Registered Public Accounting Firm.* Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities and Exchange...

  • Page 151
    ... of the Chief Financial Officer pursuant to 18 ...U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* XBRL Instance Document** XBRL Taxonomy Extension Schema Document** XBRL Taxonomy Extension Calculation...Annual Report on Form 10-K shall...

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  • Page 153
    ... CORPORATE HEADQUARTERS Spectrum Brands Holdings, Inc. 601 Rayovac Drive Madison, WI 53711 608.275.3340 608.288.4518 fax www.spectrumbrands.com COMPANY INFORMATION Copies of the Annual Report, the Annual Report on Form 10-K and quarterly reports on Form 10-Q may be obtained, without charge...

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