Rayovac 2014 Annual Report Download

Download and view the complete annual report

Please find the complete 2014 Rayovac annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 148

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148

Table of contents

  • Page 1

  • Page 2
    ...top 25 retailers, and available in more than one million stores in approximately 160 countries on six continents. Our brands are largely non-discretionary, non-premium priced, home-related, replacement packaged goods used by consumers on a daily basis. Our reporting segments are Global Batteries and...

  • Page 3

  • Page 4
    ...debt was reduced by approximately $250 million, resulting in lower our Spectrum Value Model, global new product development and shared services infrastructures to minimize operating costs, increase distribution/shelf space at key retailers, add new retail customers, expand e-commerce, leverage cross...

  • Page 5
    ... Doug Martin as our new Chief Financial Officer. Doug joins us after a 27-year career with consumer products company Newell Rubbermaid. Their strong leadership skills, deep operating experience and extensive industry knowledge are evident across the organization. The Spectrum Brands family joins me...

  • Page 6
    ...consumers through new designs, improved functionality and adjacent category offerings. Increasing annual continuous improvement savings help our Company invest in new products and product enhancements with the use of cross-functional teams and an emphasis on global product platforms. Spectrum Brands...

  • Page 7
    ... product listings with major retailers as well as maintain strong brand awareness and image among consumers. In addition, the market position facilitates both retailer and consumer acceptance of new product offerings. Most Spectrum Brands products are positioned as value brands, enabling our Company...

  • Page 8
    ...our new CFO. Doug comes to us after a long and successful career with Newell Rubbermaid, where he had been CFO since 2012. He is a high integrity person who shares my passion to take Spectrum Brands to the next level. Doug is a true believer in the ownership and accountability culture of our Company...

  • Page 9
    ... the Company's Periodic Report on Form 8-K filed with the SEC on November 20, 2014 within Exhibit 99.1 thereto. Adjusted EBITDA is a metric used by management and frequently used by the financial community which provides insight into an organization's operating trends and facilitates comparisons...

  • Page 10
    ... Skin Enterprises, Inc., The Scotts MiracleGro Company, Stanley Black & Decker, Inc., and Tupperware Brands Corporation. There has been no change in our peer group between Fiscal 2013 and Fiscal 2014. The comparison below assumes that $100 was invested in (i) the Common Stock of SBI (the "SBI Common...

  • Page 11
    ..., Wisconsin (Address of principal executive offices) 53562 (Zip Code) Registrant's telephone number, including area code: (608) 275-3340 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, Par Value $0.01 New...

  • Page 12
    ...DISCLOSURES ...PART II ITEM 5. ITEM 6. ITEM 7. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES ...SELECTED FINANCIAL DATA ...MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ... 35 36 38 65 66 66 66...

  • Page 13
    ...our business 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...

  • Page 14
    .... We manufacture and market alkaline, zinc carbon and hearing aid batteries, herbicides, insecticides and repellants and specialty pet supplies. We design and market rechargeable batteries, battery-powered lighting products, electric shavers and accessories, grooming products and hair care...

  • Page 15
    ... line of products includes consumer batteries, including alkaline and zinc carbon batteries, rechargeable batteries and chargers, hearing aid batteries, other specialty batteries and portable lighting products; small appliances, including small kitchen appliances and home product appliances; pet...

  • Page 16
    ... and finishes designed to meet consumer, plumber and builder needs. Consumer Batteries We market and sell a full line of alkaline batteries (AA, AAA, C, D and 9-volt sizes) to both retail and industrial customers. Our alkaline batteries are marketed and sold primarily under the Rayovac and VARTA 4

  • Page 17
    ... 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 18
    ..., facial brushes, skin appliances, electric toothbrushes and hair accessories. Sales and Distribution We sell our products through a variety of trade channels, including retailers, wholesalers and distributors, hearing aid professionals, industrial distributors and OEMs. Our sales generally are made...

  • Page 19
    ... 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 suppliers that are primarily located in the...

  • Page 20
    ... 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 21
    ... the private label brands of major retailers, particularly in Europe. The offering of private-label batteries by retailers may create pricing pressure in the consumer battery market. Typically, private-label brands are not supported by advertising or promotion, and retailers sell these private label...

  • Page 22
    ... Hobbs in this market in the 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...

  • Page 23
    ...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 regulation in European Union...

  • Page 24
    ... Information Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), are made available free of charge on or through...

  • Page 25
    ...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 Vice President, Investor Relations & Corporate Communications, Spectrum Brands, Inc. at 3001 Deming Way, Middleton, Wisconsin 53562...

  • Page 26
    ... currently view as immaterial may also materially and adversely affect our business, financial condition or results of operations. Risks Related To Our Business Our substantial indebtedness may limit our financial and operating flexibility, and we may incur additional debt, which could increase the...

  • Page 27
    ...demand for our products or supplier or customer disruptions. Any weakness in discretionary consumer spending could have a material adverse effect on our revenues, results of operations and financial condition. In addition, our ability to access the capital markets may be restricted at a time when it...

  • Page 28
    ...our retail customers, who use their own private label brands, and with distributors and foreign manufacturers of unbranded products. Significant new competitors or increased competition from existing competitors may adversely affect our business, financial condition and results of our operations. We...

  • Page 29
    ... for home and garden control products typically peaks, could have a material adverse effect on our home and garden business and our financial results during such period. We are subject to significant international business risks that could hurt our business and cause our results of operations to...

  • Page 30
    ... or results of operations. Our products utilize certain key raw materials; any significant increase in the price of, or change in supply and demand for, these raw materials could have a material and adverse effect on our business, financial condition and profits. The principal raw materials used to...

  • Page 31
    ...our dependence on a small number of key customers for a significant percentage of our sales may negatively affect our business, financial condition and results of operations. As a result of consolidation of retailers and consumer trends toward national mass merchandisers, a significant percentage of...

  • Page 32
    ... of private label products, which we do not produce on their behalf and which directly compete with our products, could have a material adverse effect on our business, financial condition and results of operations. As a result of our international operations, we face a number of risks related to...

  • Page 33
    ... also used by us, in order to protect our rights, we may have to participate in expensive and time consuming opposition or interference proceedings before the U.S. Patent and Trademark Office or a similar foreign agency. Similarly, our intellectual property rights may be challenged by third parties...

  • Page 34
    ... condition and results of operations. In our Global Batteries & Appliances segment, we license the use of the Black & Decker brand for marketing in certain small household appliances in North America, South America (excluding Brazil) and the Caribbean. In July 2014, The Black & Decker Corporation...

  • Page 35
    ... door locks and home and garden products which could in turn harm our business, financial condition and results of operations. We face risks related to our sales of products obtained from third-party suppliers. We sell a significant number of products that are manufactured by third party suppliers...

  • Page 36
    ..., financial condition and results of operations. We may be exposed to significant product liability claims which our insurance may not cover and which could harm our reputation. In the ordinary course of our business, we may be named as a defendant in lawsuits involving product liability claims. In...

  • Page 37
    ... cases, similar state and foreign agencies before they can be manufactured or sold. Our inability to obtain, or the cancellation of, any registration could have an adverse effect on our business, financial condition and results of operations. The severity of the effect would depend on which products...

  • Page 38
    ...material adverse effect on our business, financial condition and results of operations. In addition, we rely on certain third party trademarks, brand names and logos which we do not have exclusive use of. Public perception that any such third party trademarks, band names and logos used by us are not...

  • Page 39
    ...expense we record for our defined benefit pension plans. U.S. Generally Accepted Accounting Principles ("GAAP") requires that we calculate income or expense for the plans using actuarial valuations. These valuations reflect assumptions about financial markets and other economic conditions, which may...

  • Page 40
    ... into a combined company, including legal, accounting, financial advisory and other costs. We expect to incur one-time costs in connection with integrating the operations, products and personnel of Spectrum and acquired businesses into a combined company, in addition to costs related directly to...

  • Page 41
    ..., products and personnel with us may place a significant burden on our management and other internal resources. The diversion of management's attention, and any difficulties encountered in the transition and integration process, could harm our business, financial condition and operating results...

  • Page 42
    ... require us to dedicate resources of the HHI Business and may result in unfavorable results to us. Certain products and services currently used by Stanley Black & Decker are produced and provided using equipment of the HHI Business which includes the acquired Tong Lung Metal Industry Co. Ltd. (the...

  • Page 43
    ... generally low volume of trading in SB Holdings' common stock that could occur, the share price of its common stock could be more likely to be affected by broad market fluctuations, general market conditions, fluctuations in our operating results, changes in the market's perception of our business...

  • Page 44
    ... board of directors has the authority to issue additional shares of capital stock to provide additional financing or for other purposes in the future. The issuance of any such shares or exercise of any such options may result in a reduction of the book value or market price of the outstanding shares...

  • Page 45
    ...(2) ...Home and Garden Business St. Louis, Missouri(2) ...Edwardsville, Illinois(3) ... Battery Manufacturing Battery Manufacturing Battery Manufacturing Battery Manufacturing & Distribution Battery Manufacturing Battery Manufacturing Distribution Distribution Distribution Distribution Distribution...

  • Page 46
    ...suitable and adequate for our present purposes and that the productive capacity in such facilities is substantially being utilized or we ...business. We do not believe that any matters or proceedings presently pending will have a material adverse effect on our results of operations, financial condition...

  • Page 47
    ...4 holders of record based upon data provided by the transfer agent for the SBH Common Stock. We believe the number of beneficial holders of our Common Stock is significantly in excess of this amount. The following table sets forth the reported high and low bid prices per share of SBH Common Stock as...

  • Page 48
    ...in this Annual Report on Form 10-K. The information presented below as of and for the fiscal year ended September 30, 2013 also includes the results of the HHI Business operations since December 17, 2012, and the results of TLM Taiwan since April 8, 2013. The following selected financial data, which...

  • Page 49
    ... resulting from an increase in the valuation allowance against certain net deferred tax assets. (4) On November 5, 2008, Spectrum Brands' board of directors committed to the shutdown of the growing products portion of the Home and Garden Business, which included the manufacturing and marketing...

  • Page 50
    ... 30, 2015 ("Fiscal 2015"). Business Overview We manufacture and market alkaline, zinc carbon and hearing aid batteries, herbicides, insecticides and repellants and specialty pet supplies. We design and market rechargeable batteries, battery-powered lighting products, electric shavers and accessories...

  • Page 51
    ... initiatives and the financial results for all product lines within that business segment. Our operating performance is influenced by a number of factors including: general economic conditions; foreign exchange fluctuations; trends in consumer markets; consumer confidence and preferences; our...

  • Page 52
    ... rechargeable batteries, hearing aid batteries, photo batteries and watch/calculator batteries; and portable lighting products. Most consumer batteries are marketed under one of the following brands: Rayovac/VARTA, Duracell, Energizer or Panasonic. In addition, some retailers market private label...

  • Page 53
    ... Black Flag and Garden Safe. The Home and Garden Business manufactures and markets outdoor and indoor insect control products, rodenticides, herbicides, insect repellents and lawn maintenance products. In addition, we produce and market several private-label brands for many major retailers. The Home...

  • Page 54
    ... more than 20 years of experience at Spectrum, VARTA, Remington, Russell Hobbs or other branded consumer product companies such as Newell Rubbermaid and Schering-Plough. Seasonal Product Sales On a consolidated basis our financial results are approximately equally weighted between quarters, however...

  • Page 55
    ... Latin American sales were a result of retailer distribution gains, new customers and products, successful promotion activities and geographic expansion. The decrease in North America was primarily driven by the non-recurrence of approximately $10 million of flashlight sales in North America related...

  • Page 56
    .... The plumbing product category increased due to growth in the U.S. from both retail and non-retail channels. Also contributing to the Fiscal 2014 sales increase were sales related to the Tong Lung Metal Industry Co. Ltd., a Taiwan Corporation (the "TLM Business"), as prior year results did not...

  • Page 57
    ... Hardware & Corporate / Batteries & Global Pet Home and Home Unallocated Consolidated Appliances Supplies Garden Improvement Items(a) SB Holdings (in millions) Fiscal 2014 Net income (loss), as adjusted(a) ...Income tax expense ...Interest expense ...Acquisition and integration related charges...

  • Page 58
    ... of HHI do not include the TLM Taiwan business as stand alone financial data is not available for the periods presented. The TLM Taiwan business is not deemed material to the Company's operating results. Global Batteries & Appliances Fiscal Year 2014 2013 Net sales to external customers ...Segment...

  • Page 59
    ... assets at September 30, 2014 decreased to $1,629 million from $1,736 million at September 30, 2013. The decrease of $107 million is primarily due to the transfer of $35 million in cash and cash equivalents from our Hardware and Home Improvement segment to Corporate, coupled with a decrease in...

  • Page 60
    ... fees and other post business combination related expenses associated with our acquisitions. See Note 2, "Significant Accounting Policies-Acquisition and Integration Related Charges," of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information...

  • Page 61
    ... fees and original issue discount, and the inclusion of a full year of interest related to the HHI Business financing in Fiscal 2014 versus a partial period in Fiscal 2013. See Note 6, "Debt," of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K. Income Taxes. In...

  • Page 62
    ... consumer battery sales decreased $9 million. The constant currency decrease in global consumer battery sales was primarily attributable to the nonrecurrence of promotions, timing of holiday shipments and inventory management at key customers, tempered by new customer listings and expansion into new...

  • Page 63
    ... resulted from the planned exit of certain low margin products. Strong small appliances sales in Europe were driven by market share gains in the United Kingdom, regional expansion in both Eastern and Western Europe and successful new product introductions. Electric shaving and grooming product...

  • Page 64
    ...in this Annual Report on Form 10-K for additional information regarding our Restructuring and related charges. Segment Results. As discussed above, we manage our business in four reportable segments: (i) Global Batteries & Appliances; (ii) Global Pet Supplies; (iii) Home and Garden Business; and (iv...

  • Page 65
    ... do not include the TLM Taiwan business as stand alone financial data is not available for the periods presented. The TLM Taiwan business is not deemed material to the Company's operating results. (c) Included within depreciation and amortization is amortization of stock based compensation. Global...

  • Page 66
    ... 10.2% - % $ 181 $- $1,736 $- Results of the HHI Business, reported as a separate business segment, Hardware & Home Improvement, relate to operations subsequent to the acquisition date, December 17, 2012. The results of TLM Taiwan are reflected in the Hardware & Home Improvement segment subsequent...

  • Page 67
    ... discussed above and the addition of the HHI Business during Fiscal 2013. Acquisition and Integration Related Charges. Acquisition and integration related charges include, but are not limited to, transaction costs such as banking, legal and accounting professional fees directly related to 55

  • Page 68
    ... fees and other post business combination related expenses associated with our acquisitions. See Note 2, "Significant Accounting Policies-Acquisition and Integration Related Charges," of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information...

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

  • Page 70
    ... used for acquisitions of $1,372 million, which related to the $1,351 million purchase, net of cash acquired, of the HHI Business, and the $49 million purchase, net of cash acquired, of Shaser in Fiscal 2013, compared to a $28 million purchase, net of cash acquired, of Liquid Fence in Fiscal 2014...

  • Page 71
    ... Agreement"). From time to time we may repurchase our existing indebtedness, including outstanding securities of SB/RH Holdings, LLC or its subsidiaries, in the open market or otherwise. See Note 6, "Debt," of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for...

  • Page 72
    ... postretirement plans. For additional information about our employee benefit obligations, see Note 10, "Employee Benefit Plans," of Notes to Consolidated Financial Statements, included in this Annual Report on Form 10-K. (3) At September 30, 2014, our Consolidated Statements of Financial Position...

  • Page 73
    ... policy is not to accept, product returns for battery sales. We do accept returns in specific instances related to our hardware and home improvement, electric shaving and grooming, electric personal care, home and garden, small appliances and pet supply products. The provision for customer returns...

  • Page 74
    ...;" 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, expected and actual return on plan assets and...

  • Page 75
    ... Plans," of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for a more complete discussion of our employee benefit plans. Restructuring and Related Charges Restructuring charges are recognized and measured in accordance with the provisions of ASC Topic 420...

  • Page 76
    ... the assets. The projections are developed using internal forecasts, available industry and market data and estimates of long-term rates of growth for our business. The impact of prior or future acquisitions on our financial position or results of operations may be materially impacted by the change...

  • Page 77
    ... are not available to be used at the reporting date to settle additional income taxes, and the entity does not intend to use them for this purpose. The new accounting guidance is consistent with how we historically accounted for unrecognized tax benefits in our Consolidated Statements of...

  • Page 78
    ...exchange options. The related amounts payable to, or receivable from, the contract counter-parties are included in accounts payable or accounts receivable. Commodity Price Risk We are exposed to fluctuations in market prices for purchases of zinc and brass used in our manufacturing processes. We use...

  • Page 79
    ... us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the 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...

  • Page 80
    ... Spectrum Brands Code of Business Conduct and Ethics, a code of ethics that applies to all of our directors, officers and employees. The Spectrum Brands Code of Business Conduct and Ethics is publicly available on our website at www.spectrumbrands.com under "Investor Relations-Corporate Governance...

  • Page 81
    ...the SB Holdings Definitive Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Ownership of Common Shares of Spectrum Brands Holdings, Inc. The information required by Item 403 of Regulation S-K is incorporated herein by reference...

  • Page 82
    ...this Annual Report on Form 10-K. 2. The financial statement schedule listed in the Index to Consolidated Financial Statements and Financial Statement Schedule, filed as part of this Annual Report on Form 10-K. 3. The exhibits listed in the Exhibit Index filed as part of this Annual Report on Form 10...

  • Page 83
    SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE Page Reports of Independent Registered Public Accounting Firm ...Consolidated Statements of Financial Position ...Consolidated Statements of Operations ...Consolidated ...

  • Page 84
    ..., in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of September 30, 2014, based on criteria established in Internal Control-Integrated Framework (1992) issued by the Committee of Sponsoring...

  • Page 85
    ... 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, 2014, based on criteria established in Internal Control-Integrated...

  • Page 86
    SPECTRUM BRANDS HOLDINGS, INC. Consolidated Statements of Financial Position September 30, 2014 and September 30, 2013 (Amounts in thousands, except per share figures) September 30, 2014 September 30, 2013 Assets Current assets: Cash and cash equivalents ...Receivables: Trade accounts receivable, ...

  • Page 87
    ...per share figures) 2014 2013 2012 Net sales ...Cost of goods sold ...Restructuring and related charges ...Gross profit ...Selling ...General and administrative ...Research and development ...Acquisition and integration related charges ...Restructuring and related charges ...Total operating expenses...

  • Page 88
    ... in thousands) 2014 2013 2012 Net income (loss) ...$214,506 $(55,313) $ 48,572 Other comprehensive loss, net of tax: Foreign currency translation loss ...(32,528) (6,622) (8,602) Unrealized gain (loss) on derivative hedging instruments ...11,531 (2,509) 1,545 Defined benefit pension gain (loss...

  • Page 89
    SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES Consolidated Statements of Shareholders' Equity Years ended September 30, 2014, 2013 and 2012 (In thousands) Accumulated Other Comprehensive Total NonCommon Stock Additional Paid-in Accumulated Income (Loss), Treasury Shareholders' controlling Shares ...

  • Page 90
    ... restricted stock compensation ...Amortization of debt issuance costs ...Non-cash increase to cost of goods sold due to HHI acquisition inventory step up ...Write off unamortized discount / (premium) on retired debt ...Write off of debt issuance costs ...Non-cash restructuring and related charges...

  • Page 91
    ... Company's operations include the worldwide manufacturing and marketing of alkaline, zinc carbon and hearing aid batteries, as well as aquariums and aquatic health supplies and the designing and marketing of rechargeable batteries, battery-powered lighting products, electric shavers and accessories...

  • Page 92
    ... general policy is not to accept, product returns for battery sales. The Company does accept returns in specific instances related to its shaving, grooming, personal care, home and garden, small appliances, hardware and home improvement and pet products. The provision for customer returns is based...

  • Page 93
    SPECTRUM BRANDS HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (Amounts in thousands, except per share figures) (e) Concentrations of Credit Risk and Major Customers Trade receivables subject the Company to credit risk. Trade accounts receivable are carried at net realizable ...

  • Page 94
    ... impacted by economic conditions and expectations of management and will change in the future based on period specific facts and circumstances. The Company also tested the aggregate estimated fair value of its reporting units for reasonableness by comparison to the total market capitalization of the...

  • Page 95
    ... a product, changes in technology or in the way an asset is being used, a history of operating or cash flow losses or an adverse change in legal factors or in the business climate, among others, may trigger an impairment review. The fair values of our Global Batteries & Appliances, Hardware & Home...

  • Page 96
    ... of Operations, include costs incurred with third-party carriers to transport products to customers and salaries and overhead costs related to activities to prepare the Company's products for shipment at the Company's distribution facilities. (o) Advertising Costs The Company incurred advertising...

  • Page 97
    ... 2013, the Company has not assumed the exercise of common stock equivalents as the impact would be antidilutive due to the net loss reported. (r) Environmental Expenditures Environmental expenditures that relate to current ongoing operations or to conditions caused by past operations are expensed or...

  • Page 98
    SPECTRUM BRANDS HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (Amounts in thousands, except per share figures) The following is a roll forward of the amounts recorded in AOCI: Fiscal 2014...$ 1,545 $ (2,291) $ 218 Defined Benefit Pension Plans: Beginning balance ...$(29,180) $(...

  • Page 99
    ... October 21, 2010, up to 600 shares of common stock, net of forfeitures and cancellations, could have been issued under the RH Plan. After October 21, 2010, no further awards may be made under the RH Plan. On October 21, 2010, the Board adopted the Spectrum Brands Holdings, Inc. 2011 Omnibus Equity...

  • Page 100
    ... costs of full-time incremental integration employees, and any other items related to the exit or integration activities. Costs for such activities are estimated by management after evaluating detailed analyses of the costs to be incurred. The Company presents restructuring and related charges on...

  • Page 101
    ... The Company reports restructuring and related charges associated with manufacturing and related initiatives in cost of goods sold. Restructuring and related charges reflected in cost of goods sold include, but are not limited to, termination and related costs associated with manufacturing employees...

  • Page 102
    ..., except per share figures) The following table summarizes acquisition and integration related charges incurred by the Company during Fiscal 2014, Fiscal 2013 and Fiscal 2012: 2014 2013 2012 Russell Hobbs Legal and professional fees ...Integration costs ...Employee termination charges ...Russell...

  • Page 103
    ... with acquisitions and from the application of fresh-start reporting in the fiscal year ended September 20, 2009. The useful lives for proprietary technology assets associated with the Global Batteries & Appliances segment, the Hardware & Home Improvement segment and the Global Pet Supplies segment...

  • Page 104
    SPECTRUM BRANDS HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (Amounts in thousands, except per share figures) The carrying value and accumulated amortization for intangible assets subject to amortization are as follows: September 30, 2014 September 30, 2013 Technology ...

  • Page 105
    ... 81,397 513,312 - 520,000 570,000 300,000 - 28,468 67,402 3.0% 3.6% 5.1% 4.6% - % 6.4% 6.6% 6.8% 5.7% 8.5% 6.2% $3,230,579 (11,716) (102,921) $3,115,942 The Company's aggregate scheduled maturities of debt and capital lease obligations as of September 30, 2014 are as follows: 2015 ...2016 ...2017...

  • Page 106
    SPECTRUM BRANDS HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (Amounts in thousands, except per share figures) equivalents (the "HHI Term Loan") in connection with the acquisition of the residential hardware and home improvement business (the "HHI Business"). A portion of the...

  • Page 107
    ... value, due November 15, 2022 (the "6.625% Notes"), previously issued by Spectrum Brands Escrow Corporation. The 6.375% Notes and the 6.625% Notes are unsecured and guaranteed by Spectrum Brands' parent company, SB/RH Holdings, LLC, as well as by existing and future domestic restricted subsidiaries...

  • Page 108
    SPECTRUM BRANDS HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (Amounts in thousands, except per share figures) 6.75% Notes On March 15, 2012 the Company offered $300,000 aggregate principal amount of 6.75% Notes at a price of 100% of the par value. The 6.75% Notes are ...

  • Page 109
    ...rate, foreign currency exchange rate and raw material price exposures. The Company does not hold or issue derivative financial instruments for trading purposes. Derivative instruments are reported at fair value in the Consolidated Statements of Financial Position. When hedge accounting is elected at...

  • Page 110
    ... exchange derivative contracts outstanding. The Company periodically enters into commodity swap contracts to economically hedge the risk from fluctuating prices for raw materials, specifically the pass-through of market prices for silver used in manufacturing purchased watch batteries. The Company...

  • Page 111
    SPECTRUM BRANDS HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (Amounts in thousands, except per share figures) outstanding through September 2015 for 25 troy ounces with a contract value of $445. At September 30, 2013, the Company had a series of such swap contracts ...

  • Page 112
    SPECTRUM BRANDS HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (Amounts in thousands, except per share figures) Changes... Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing) Derivatives in ASC 815 Cash Flow Hedging Relationships Amount of...

  • Page 113
    ... credit risk related contingent features whereby the Company would be required to post additional cash collateral as a result of a credit event. However, the Company is typically required to post collateral in the normal course of business to offset its liability positions. At September 30, 2014 and...

  • Page 114
    ...inputs. The Company utilizes valuation techniques that attempt to maximize the use of observable inputs and minimize the use of unobservable inputs. The determination of the fair values considers various factors, including closing exchange or over-thecounter market pricing quotations, time value and...

  • Page 115
    ...values of cash and cash equivalents, accounts and notes receivable, accounts payable and short term debt approximate fair value based on the short-term nature of these assets and liabilities. The fair values of long-term publicly traded debt are based on unadjusted quoted market prices (Level 1) and...

  • Page 116
    SPECTRUM BRANDS HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (Amounts in thousands, except per share figures) The carrying amounts and fair values of the Company's financial instruments are summarized as follows ((liability)/ asset): September 30, 2014 Carrying Amount Fair ...

  • Page 117
    ...tax on foreign earnings ...FURminator purchase accounting benefit ...HHI Business purchase accounting benefit ...Valuation allowance ...Unrecognized tax expense (benefit) ...Inflationary adjustments ...Foreign tax law changes ...Nondeductible share compensation ...Return to provision adjustments and...

  • Page 118
    ...2014 2013 Current deferred tax assets: Employee benefits ...Restructuring ...Inventories and receivables ...Marketing and promotional...,815) In Fiscal 2012, the Company began recording residual U.S. and foreign taxes on undistributed foreign earnings as a result of its change in position regarding ...

  • Page 119
    ... not yet taxed in the U.S. resulting in a Fiscal 2012 increase in tax expense, net of a corresponding adjustment to the Company's domestic valuation allowance, of approximately $3,278. During Fiscal 2014, $178,716 of the distributions related to one-time internal restructuring and external debt...

  • Page 120
    ...132 related to an increase in the valuation allowance against foreign net deferred tax assets. As a result of the one time internal restructuring and debt refinancing activities, the Company reversed $62,551 of U.S. valuation allowance during Fiscal 2014. As a result of the purchase of HHI Business...

  • Page 121
    ... and prior are subject to Internal Revenue Service ("IRS") examination until the year that such net operating loss carryforwards are utilized and those years are closed for audit. The Company's fiscal years ended September 30, 2011, 2012, 2013 and 2014 remain open to examination by the IRS. Filings...

  • Page 122
    ...upon death. Other Benefits Under the Rayovac postretirement plan, the Company provides certain health care and life insurance benefits to eligible retired employees. Participants earn retiree health care benefits after reaching age 40 over the next 10 succeeding years of service, and remain eligible...

  • Page 123
    SPECTRUM BRANDS HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (Amounts in thousands, except per share figures) The following tables provide additional information on the Company's pension and other postretirement benefit plans: Pension and Deferred Compensation Benefits 2014 ...

  • Page 124
    ... $ 18 $ 9 22 - - - 8 $ 12 27 - - - (54) $ (15) $ 39 The discount rate is used to calculate the projected benefit obligation. The discount rate used is based on the rate of return on government bonds as well as current market conditions of the respective countries where the plans are established...

  • Page 125
    SPECTRUM BRANDS HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) (Amounts in thousands, except per share figures) The Company...Real estate ...Life insurance contracts ...Other ...Foreign cash & cash equivalents ...Total Defined Benefit Plan Assets ... $18,497 10,792 2,279 - - 1,...

  • Page 126
    ... in four vertically integrated, product-focused reporting segments: (i) Global Batteries & Appliances; (ii) Global Pet Supplies; (iii) Home and Garden; and (iv) Hardware & Home Improvement. The results of the HHI Business are included in the Company's Consolidated Statement of Operations as of and...

  • Page 127
    ... - $104,616 Segment profit 2014 2013 2012 Global Batteries & Appliances ...Hardware & Home Improvement ...Global Pet Supplies ...Home and Garden ...Total segments ...Corporate expense ...Acquisition and integration related charges ...Restructuring and related charges ...Interest expense ...Other...

  • Page 128
    ...,629 948,832 500,559 5,545,753 80,920 $5,626,673 2014 2013 2012 Global Batteries & Appliances ...Hardware & Home Improvement ...Global Pet Supplies ...Home and Garden Business ...Total segments ...Corporate ...Total Capital expenditures ...Geographic Disclosures-Net sales to external customers...

  • Page 129
    ...ordinary course of business. The Company does not believe that any of the matters or proceedings presently pending will have a material adverse effect on its results of operations, financial condition, liquidity or cash flows. The Company's minimum rent payments under operating leases are recognized...

  • Page 130
    ... to the obligations of a holder thereunder. (14) RESTRUCTURING AND RELATED CHARGES The Company reports restructuring and related charges associated with manufacturing and related initiatives in Cost of goods sold. Restructuring and related charges reflected in Cost of goods sold include, but are not...

  • Page 131
    ... During the fourth quarter of Fiscal 2014, the Company implemented a series of initiatives throughout the Hardware & Home Improvement business segment to reduce operating costs and exit low margin business outside the U.S. (the "HHI Business Rationalization Initiatives"). These initiatives include...

  • Page 132
    ... Summary During the fiscal year ended September 30, 2009, the Company implemented a series of initiatives within the Global Batteries & Appliances segment, the Global Pet Supplies segment and the Home and Garden Business segment to reduce operating costs, and to evaluate opportunities to improve the...

  • Page 133
    ... HHI Business On December 17, 2012, the Company completed the cash acquisition of the HHI Business from Stanley Black & Decker. A portion of the HHI Business, consisting of the purchase of certain assets of TLM Taiwan, closed on April 8, 2013. The HHI Business is a major manufacturer and supplier of...

  • Page 134
    ...a result of the HHI Business acquisition. For information pertaining to Acquisition and integration related charges, see Note 2, "Significant Accounting Policies-Acquisition and Integration Related Charges." (4) For Fiscal 2013, the Company has not assumed the exercise of common stock equivalents as...

  • Page 135
    ... ...Working capital adjustment ...Purchase price ...$24,800 9,500 1,500 45 $35,845 The promissory note will be paid in four semi-annual installments over 24 months from the close of the transaction. The results of Liquid Fence's operations since January 2, 2014 are included in the Company...

  • Page 136
    ...thousands, except per share figures) the Company has recorded its best estimates for these contingencies as part of the purchase accounting for Liquid Fence. Further adjustments to pre-acquisition contingency amounts will be reflected in the Company's results of operations. Valuation Adjustments The...

  • Page 137
    ... & Gamble's European pet food business, consisting of premium brands for dogs and cats. The acquisition is expected to close in the second quarter of Fiscal 2015. The Company will account for this acquisition in accordance with ASC 805. On November 3, 2014, the Company announced an expansion to its...

  • Page 138
    SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS For the years ended September 30, 2014, September 30, 2013 and September 30, 2012 (In thousands) Column A Column B Balance at Beginning of Period Column C Additions Charged to Costs and Expenses Column D ...

  • Page 139
    ... 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, 2014 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following...

  • Page 140
    ...(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 August 31, 2009). Form of Spectrum Brands, Inc. Restricted Stock Award Agreement under the 2009 Incentive Plan (filed by incorporation by reference to Exhibit 10.2 to...

  • Page 141
    ...SB/RH Holdings, LLC, Spectrum Brands Canada, Inc., as Canadian Borrower, Spectrum Brands Europe GmbH, as German Borrower, Deutsche Bank AG New York Branch, as Administrative Agent and the lenders party thereto from time to time (incorporated by reference to Exhibit 10.1 to the Current Report on Form...

  • Page 142
    ...10.23 to the Annual Report on Form 10-K filed with the SEC by Spectrum Brands, Inc. on December 14, 2010). Joinder and Supplement to Intercreditor Agreement dated as of December 17, 2012, by and among ROV International Holdings LLC, Kwikset Corporation, Price Pfister, Inc., National Manufacturing Co...

  • Page 143
    ... 28, 2012 between Spectrum Brands, Inc. and John Heil (filed by incorporation by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on January 3, 2012). Registered Director's Agreement, dated as of August 27, 2007, by and between Andreas Rouve and Rayovac Europe GmbH, as...

  • Page 144
    ...Spectrum Brands, Inc. and Terry Polistina (filed by incorporation by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on September 20, 2013). Subsidiaries of Registrant.* Consent of Independent Registered Public Accounting Firm.* Certification of Chief Executive Officer...

  • Page 145
    [THIS PAGE INTENTIONALLY LEFT BLANK]

  • Page 146
    [THIS PAGE INTENTIONALLY LEFT BLANK]

  • Page 147
    ...Form 10-Q may be obtained, without charge, by writing to Investor Relations at the corporate headquarters address, by calling 608.275.3340, by email at [email protected] or by visiting our Company's website at www.spectrumbrands.com. NEW YORK STOCK EXCHANGE COMPLIANCE On February 17, 2014...

  • Page 148