Rayovac 2012 Annual Report Download - page 3

In December 2012, Spectrum Brands completed the accretive
acquisition of the Hardware & Home Improvement Group
(HHI) from Stanley Black & Decker for $1.4 billion in cash. HHI
is a major manufacturer and supplier of residential locksets,
residential builders’ hardware and faucets in key North
American markets and with a portfolio of renowned brands,
including Kwikset®, Weiser®, Baldwin®, National Hardware®,
Stanley®, FANAL®, Pfister™ and EZSET®. HHI, which
becomes Spectrum Brands’ fourth operating segment, is a
leader in its markets with number-one positions
in U.S. residential locksets (Kwikset®), Canadian
residential locksets (Weiser®), U.S. luxury
locksets (Baldwin®), and U.S. builders’ hardware
(National Hardware® and Stanley®), and a top
five position in U.S. faucets (Pfister™).
HHI generated net sales of approximately
$985 million and adjusted EBITDA of $188
million for the 12 months ended June 30, 2012.
Approximately 85 percent of HHI’s annual
revenues are generated in North America, with
more than 40 percent coming through U.S. home
improvement centers.
The HHI acquisition includes certain assets of
Tong Lung Metal Industry Co. Ltd., a Taiwanese
manufacturer of residential and commercial
locksets with facilities in Taiwan and the
Philippines. The Tong Lung manufacturing assets will provide
expanded sales platform capabilities, allowing for accelerated
expansion in international markets. The Tong Lung assets
acquisition is expected to occur by no later than March 31, 2013.
HHI will enhance Spectrum Brands’ top-line growth, margins
and free cash flow profile and be immediately accretive to
earnings per share, adjusted EBITDA and free cash flow before
synergies. EPS accretion pro forma for a full year of results
is expected to be between $0.75 to $0.80 per share in fiscal
2013 and EPS accretion in fiscal 2014 is expected to exceed
$1.00 per share, excluding one-time transaction and integration
costs and including synergies. HHI should add more than an
incremental $90 million of free cash flow in the first two years
after the closing of the acquisition in December 2012.
HHI has a number of exciting growth opportunities in North
America and internationally. The scale and expanded product
offering provided by HHI further balances our Company’s
sales profile and offers compelling cross-
selling opportunities from higher sales of
Spectrum Brands’ products to major U.S.
home improvement centers and increasing HHI
sales to leading global mass merchants and
other Spectrum Brands retailers. By leveraging
Spectrum Brands’ large U.S. merchandising
team capabilities, HHI will be able to increase
its in-store presence with customers. Spectrum
Brands’ and HHI’s product lines are
completely complementary, resulting in a
significant expansion of our Company’s
portfolio of products.
HHI offers a new platform for global growth
using Spectrum Brands’ existing international
infrastructure, most notably in Europe.
Additionally, HHI provides an entry into the
growing market of integrated residential
security, fire and lighting categories, and the light commercial
business, from key investments in patented innovations such as
its Smart Key re-keyable lockset technology and Smart Code
Home Connect products. From a cost, product line and market
share standpoint, HHI also is strongly positioned to benefit from
the U.S. housing market recovery.
HARDWARE &
HOME IMPROVEMENT
FY2012 Net Sales
(Prior to purchase of HHI)
Pro Forma FY2012
Net Sales
(Post purchase of HHI)
12% Home
and Garden
69% Global Batteries
& Appliances
19% Global
Pet Supplies
FY2012 Net Sales ($ in millions) FY2012 Adjusted EBITDA ($ in millions)
Prior to purchase of HHI: :Prior to purchase of HHI
*Post purchase of HHI: :Post purchase of HHI*
$3,252 $485
$4,237 $678
9% Home
and Garden
53% Global Batteries
& Appliances
15% Global
Pet Supplies
23% HHI
30%
40%
*Pro Forma