Rayovac 2015 Annual Report Download

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Table of contents

  • Page 1

  • Page 2
    ...non-premium priced, home-related, replacement packaged goods used by consumers daily. We are headquartered in Middleton, Wisconsin and have approximately 15,500 employees in 50 countries. Our manufacturing and product development facilities are located in the United States, Europe, Latin America and...

  • Page 3
    ... alkaline battery brand. Rayovac® is the number-three brand in North America with a well-defined value proposition. Throughout Latin America, the Rayovac® brand is the battery market leader. Our product portfolio, which offers more power for the money, features high-performance consumer batteries...

  • Page 4
    ... evolution. Spectrum Brands reported a sixth consecutive year of record performance, completed four accretive acquisitions including the transformational Global Auto Care (GAC), transitioned to new executive leadership, and introduced a Spectrum First strategic initiative to advance our Company to...

  • Page 5
    ...everyday use compete in multiple, large and stable categories with attractive growth prospects. New products, new customers, market share gains, increased cross-selling, geographic expansion and cost savings are the key factors that should drive Spectrum Brands to another record year in fiscal 2016...

  • Page 6
    ... key stakeholder groups. • For customers, this means being the preferred and top-of-mind partner for any challenge or opportunity they face. • For consumers, this means they trust our Company's brands to provide products that offer superior performance at their respective price points. • For...

  • Page 7
    ... opportunities in Europe, Latin America and the Pacific Rim while leveraging growth opportunities in our home North American market. Our market leadership with top three global positions across our key product categories facilitates both retailer and consumer acceptance of new product offerings...

  • Page 8
    ..., among many advantages, brings channel and brand differentiation for our North American Dingo business, along with revenue opportunities in Europe and Latin America. CEO and, frankly, we forged a great partnership. The Spectrum Value Model and shared services platform were developed in this era...

  • Page 9
    ... since 2009 Andreas Rouvé Chief Executive Officer, Spectrum Brands Holdings, Inc. Age 54; Director since 2015 Hugh R. Rovit 1 Chief Executive Officer, Ellery Homestyles Age 55; Director since 2009 Joseph S. Steinberg Non-GAAP Measurements Within this annual report, reference is made to adjusted...

  • Page 10
    ... 30, 2010 until September 30, 2015. The comparison is based upon the closing price of our Common Stock, and assumes the reinvestment of all dividends, if any. The returns of each of the companies in our peer group are weighted according to the respective company's stock market capitalization at the...

  • Page 11
    ...company) 3001 Deming Way Middleton, WI 53562 (608) 275-3340 Securities registered pursuant to Section 12(b) of the Act: 27-2812840 Registrant Title of each class Name of each exchange on which registered Spectrum Brands Holdings, Inc. SB/RH Holdings, LLC Common Stock, Par Value $0.01 None New...

  • Page 12
    ... price on the last business day of the registrant's most recently completed second fiscal quarter (March 29, 2015). As of November 17, 2015, there were outstanding 59,087,918 shares of Spectrum Brands Holdings, Inc.'s Common Stock, par value $0.01 per share. SB/RH Holdings, LLC meets the conditions...

  • Page 13
    ... 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 GOVERNANCE ...EXECUTIVE...

  • Page 14
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  • Page 15
    ...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 16
    ...a depression, labor costs and stock market volatility or changes in trade, monetary or fiscal policies in the countries where we do business; changes in consumer spending preferences and demand for our products; our ability to develop and successfully introduce new products, protect our intellectual...

  • Page 17
    ... North America, Europe, Middle East & Africa ("MEA"), Latin America and Asia-Pacific regions through a variety of trade channels, including retailers, wholesalers and distributors, original equipment manufacturers ("OEMs"), construction companies and hearing aid professionals. We enjoy strong name...

  • Page 18
    ...Products Brands Regions Global Auto Care(1) Auto care: Aftermarket appearance products; performance chemicals & additives; do-ityourself air conditioner recharge products. Auto care: Armor All, STP, A/C PRO. North America Europe/MEA Latin America Asia-Pacific (1) On May 21, 2015, the Company...

  • Page 19
    ...silver oxide batteries, keyless entry batteries and coin cells for use in watches, cameras, calculators, communications equipment, medical instruments and on the go chargers. We also offer a broad line of battery-powered, portable lighting products, including flashlights and lanterns for both retail...

  • Page 20
    .... We also market small home product appliances, including hand-held irons, vacuum cleaners, air purifiers, clothes shavers and heaters, primarily under the Black & Decker and Russell Hobbs brands. The Black and Decker brand debuted a new look in 2014 and continues to release new lines of products to...

  • Page 21
    ... to fulfill a variety of consumer needs. Our outdoor insecticide and herbicide brands include Spectracide, Garden Safe and Liquid Fence. Continuing our pursuit of innovation, we started offering the Mulch-Lock Ready-to-Use and Mulch-Lock Concentrate, which are versatile landscaping tools that can be...

  • Page 22
    ..., 2015. Sales and Distribution We sell our products through a variety of trade channels, including retailers, wholesalers and distributors, hearing aid professionals, construction companies and OEMs. Our sales generally are made through the use of individual purchase orders, consistent with industry...

  • Page 23
    .... 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 Asia-Pacific region...

  • Page 24
    ... 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 and Decker brand in North America, Latin America (excluding Brazil) and the Caribbean...

  • Page 25
    ... rechargeable batteries, hearing aid batteries, photo batteries and watch/calculator batteries; and portable lighting products. The battery product category is highly competitive. Most consumer batteries manufactured throughout the world are sold by one of four global companies: Spectrum Brands...

  • Page 26
    ... 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, we compete with retailers who use their own private label brands for household appliances (for...

  • Page 27
    ... The Hillman Group, Hampton Hardware, Crown Bolt and private label competitors. In plumbing, Pfister's major U.S. competitors are Masco, Fortune Brands, Kohler, and American Standard, as well as Glacier Bay and AquaSource, and the private label brands of The Home Depot and Lowe's. Global Auto Care...

  • Page 28
    ...period from March to June (Spectrum's second and third fiscal quarters) based upon historical customer seasonal purchasing patterns and timing of promotional activities. Information about our sales by quarter as a percentage of annual sales during the years ended September 30, 2015, 2014 and 2013 is...

  • Page 29
    ... and electrical products that we sell in Europe, particularly products sold under the Remington brand name, VARTA battery chargers, certain portable lighting and all of our batteries, are subject to regulation in European Union ("EU") markets under three key EU directives. The first directive is...

  • Page 30
    ...employees is good. Available Information Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports... Vice President, Investor Relations & Corporate Communications, Spectrum Brands, Inc. at 3001 Deming Way, Middleton, Wisconsin 53562 or via...

  • Page 31
    ... of our cash flow to fund working capital, capital expenditures, research and development expenditures and other business activities; increase our vulnerability to general adverse economic and industry conditions; limit our flexibility in planning for, or reacting to, changes in our business and the...

  • Page 32
    ... and revolver facility. In addition, under the Indentures, upon a change of control of the Company, the Company is required to offer to repurchase such notes from the holders at a price equal to 101% of the principal amount of the notes plus accrued interest or obtain a waiver of default from the...

  • Page 33
    ... Turtle Wax, Black Magic and Store brands. In each of these markets, we also face competition from numerous other companies. In addition, in a number of our product lines, we compete with our retail customers, who use their own private label brands, and with distributors and foreign manufacturers of...

  • Page 34
    .... Sales in the consumer battery, electric shaving and grooming and electric personal care product categories, particularly in North America, tend to be concentrated in the December holiday season (the Company's first fiscal quarter). Demand for hardware and home improvement products increases during...

  • Page 35
    ...rate of the Euro, British Pound, Brazilian Real, Canadian Dollar, Australian Dollar, Japanese Yen and the Mexican Peso; changes in the economic conditions or consumer preferences or demand for our products in these markets; the risk that because our brand names may not be locally recognized, we must...

  • Page 36
    ...limitations. As of September 30, 2015, we estimate that approximately $272.9 million of the total U.S. federal NOLs with a federal tax benefit of $95.5 million and tax benefits of $16.7 million related to state NOLs would expire unused even if the Company generates sufficient income to otherwise use...

  • Page 37
    ... 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 38
    ... Electrical and Electronic Equipment requires us to collect and treat, dispose of or recycle certain products we manufacture or import into the EU at our own expense. The EU Directive on Batteries and Accumulators and Waste Batteries bans heavy metals in batteries by establishing maximum quantities...

  • Page 39
    ... effect on our financial condition, liquidity and results of operations. Additionally, in connection with our acquisition of the HHI Business, we received a limited right to use certain Stanley Black and Decker trademarks, brand names and logos in marketing our products and services for only five...

  • Page 40
    ... 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 over which we have no direct control. While we have...

  • Page 41
    ... and enforcement policies, such as the EU Directives: Restriction of the Use of Hazardous Substances in Electrical and Electronic Equipment, Waste of Electrical and Electronic Equipment and the Directive on Batteries and Accumulators and Waste Batteries, discussed above. Our international operations...

  • Page 42
    ... in increased manufacturing costs for our products, such as by requiring investment in new pollution control equipment or changing the ways in which certain of our products are made. We may incur some of these costs directly and others may be passed on to us from our third-party suppliers. Although...

  • Page 43
    ... technology (IT) systems, networks and services, including internet sites, data hosting and processing facilities and tools and other hardware, software and technical applications and platforms, some of which are managed, hosted, provided and/or used by third-parties or their vendors, to assist in...

  • Page 44
    ...not, could impair our reputation, damage our brand names and have a material adverse effect on our business, financial condition and results of operations. In addition, we rely on certain third party trademarks, brand names and logos over which we do not have exclusive use of. Public perception that...

  • Page 45
    ... base and on broad market conditions that drive valuation considerations by market participants; our internal expectations with regard to future revenue growth and the assumptions we make when performing impairment reviews; a significant decrease in the market price of our assets; a significant...

  • Page 46
    ... our services and products and maintain our financial records, which could damage our reputation and have a material adverse effect on our business. Our acquisition and expansion strategy may not be successful. Our growth strategy is based in part on growth through acquisitions, which poses a number...

  • Page 47
    ...related costs over time, this net benefit may not be achieved in the near term. Additionally, while we expect to benefit from leveraging distribution channels and brand names among the Company...significant burden on our management and other internal resources. The diversion of management's attention, ...

  • Page 48
    ... 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 and Decker are produced and provided using equipment of the HHI Business which includes the acquired Tong Lung Metal Industry Co. Ltd. (the...

  • Page 49
    ... of sales and product distribution through high volume distributors, retailers, super centers and mass merchandisers. Currently, neither we nor AAG have long-term supply agreements with a substantial number of our retail customers, including our largest customers. These high-volume stores and mass...

  • Page 50
    ... of its stockholders. HRG may also delay or prevent a change in control of the Company. See "Risks Related to our Business-The sale or other disposition by HRG Group, Inc., the holder of a majority of the outstanding shares of our common stock, to non-affiliates of a sufficient amount of the common...

  • Page 51
    ... of the limited market and generally low volume of trading in the Company's 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...

  • Page 52
    ...the shareholders on March 1, 2011, called the Spectrum Brands Holdings, Inc. 2011 Omnibus Equity Award Plan (the "2011 Equity Plan"), 4,625,676 shares of common stock of the Company, net of cancellations, were authorized to be issued. At the 2014 annual shareholders meeting, the 2011 Equity Plan was...

  • Page 53
    ... and distribution facilities at September 30, 2015: Global Batteries and Appliances Location Function / Use Owned / Leased U.S. Locations Fennimore, Wisconsin ...Portage, Wisconsin ...Dixon, Illinois ...Redlands, California ...Non-U.S. Locations Dischingen, Germany ...Washington, UK ...Guatemala...

  • Page 54
    ... Manufacturing Distribution Manufacturing Manufacturing Manufacturing Manufacturing Manufacturing Owned Leased Owned Leased Leased Owned Leased Leased Owned Leased Leased Leased Function / Use Owned /Leased U.S. Locations St. Louis, Missouri ...Edwardsville, Illinois ...Global Auto Care Location...

  • Page 55
    ...of our current and former manufacturing sites. We believe that any ...additional liability that may result from the resolution of these matters in excess of the amounts provided of approximately $4.4 million will not have a material adverse effect on our financial condition...

  • Page 56
    ... the Board of Directors of the Company approved a $200 million common stock repurchase program. The authorization was effective for 24 months. The following table reflects all shares repurchased under the plan: Total Approximate Number of Average Total Number of Dollar Value Shares Price Paid Shares...

  • Page 57
    ...on July 28, 2015, the Board of Directors of the Company approved a $300 million common stock repurchase program to replace the previous $200 million common stock repurchase program previously discussed. The authorization is effective for 36 months. The following table reflects all shares repurchased...

  • Page 58
    2015(1) 2014(2) 2013(3) 2012(4) (in millions, except per share data) 2011 Cash Flow and Related Data: Net cash provided by operating activities ...Capital expenditures ...Depreciation and amortization ...Statement of Financial Position Data (at September 30): Cash and cash equivalents ...Working ...

  • Page 59
    ... of FURminator. During the year ended September 30, 2011, there was a non-cash charge of approximately $68.6 million from an increase in the valuation allowance against net deferred tax assets. (8) Working capital is defined as current assets less current liabilities per the consolidated statements...

  • Page 60
    ...Selected Financial Data included in Item 6 and our Consolidated Financial Statements and related notes included in Item 8 of this Annual Report on Form 10-K. Unless the context indicates otherwise, the terms the "Company," "Spectrum," "we," "our" or "us" are used to refer to Spectrum Brands Holdings...

  • Page 61
    ... Company's capital structure. Costs associated with the initiative, which was completed during the year ended September 30, 2015, were $101.8 million. See Note 4, "Restructuring and Related Charges" in the Notes to the Consolidated Financial Statements, included elsewhere within this Annual Report...

  • Page 62
    ... of the change in net sales from the year ended September 30, 2014 to the year ended September 30, 2015: 2014 2015 (in millions) Consumer batteries ...Small appliances ...Personal care ...Global Batteries & Appliances ...Hardware & Home Improvement ...Global Pet Supplies ...Home and Garden...

  • Page 63
    ... volume at existing retailers and private label customers; increases of $2.4 million in specialty batteries due to new customers and higher sales volume of hearing aid batteries and $2.6 million in lights as a result of new products and increased promotional activity. Small appliance sales increased...

  • Page 64
    ... home and garden was a result of distribution gains, strong point of sale activity driving replenishment orders at existing customers and market share gains on certain brands. Net sales from auto care products relate to the acquired AAG business subsequent to the acquisition date of May 21, 2015...

  • Page 65
    ... respectively, partially offset by a decrease in North American consumer battery sales of $5.7 million. The increases in European and Latin American sales were a result of retailer distribution gains, new customers and products, successful promotion activities and geographic expansion. The decrease...

  • Page 66
    ... million decline in North American sales. The gains in Europe were due to innovative new product launches, promotional activities and expansion into new channels. Latin America sales gains were attributable to volume expansion in Colombia, successful hair care accessories product launches throughout...

  • Page 67
    ... and integration related charges include, but are not limited to, transaction costs such as banking, legal and accounting professional fees directly related to acquisitions, termination and related costs for transitional and certain other employees, integration related professional fees and...

  • Page 68
    Segment Financial Data The Company manages its business in five vertically integrated, product-focused reporting segments: (i) Global Batteries & Appliances, (ii) Global Pet Supplies, (iii) Home and Garden, (iv) Hardware & Home Improvement and (v) Global Auto Care. See Note 18, "Segment Information"...

  • Page 69
    ... Adjusted EBITDA for each segment and the consolidated Spectrum Brands Holdings, Inc. group for the years ended September 30, 2015, 2014 and 2013: Global Hardware & Corporate / Batteries & Home Global Pet Home and Global Auto Unallocated Appliances Improvement Supplies Garden Care Items Consolidated...

  • Page 70
    ... EBITDA for each segment and the consolidated SB/RH Holdings, LLC group for the years ended September 30, 2015, 2014 and 2013: Global Hardware & Corporate / Batteries & Home Global Pet Home and Global Auto Unallocated Appliances Improvement Supplies Garden Care Items Consolidated (in millions) SB...

  • Page 71
    ...(1) The Company's policy is to record income tax expense and interest expense on a consolidated basis. Accordingly, such amounts are not reflected in the operating results of the operating segments and are presented within Corporate/Unallocated Items. (2) For the year ended September 30, 2015, other...

  • Page 72
    ...driven by the factors discussed above. Hardware & Home Improvement 2015 2014 2013 Net Sales ...Segment Profit ...Segment...September 30, 2013. Results of the HHI Business relate to operations subsequent to the acquisition of the ... $31.5 million cost of goods sold charge during the year ended September ...

  • Page 73
    ..., 2015. Segment... manufacturing...mix discussed above. Home and Garden Business 2015 2014 2013 Net...changes in net sales. Segment profit for the year ended September 30, 2015... ended September 30, 2015 compared to 20.7%... 30, 2015, increase of...Liquid Fence during...improvements. Global Auto Care 2015 Net Sales ...

  • Page 74
    ... by investing activities ...$(1,279.7) $ (93.5) $(1,483.0) Net cash provided (used) by financing activities ...$ 918.4 $(343.5) $ 1,280.2 Effect of exchange rate changes on cash and cash equivalents ...$ (29.7) $ (8.3) $ (4.5) Spectrum Brands Holdings, Inc. Net cash provided by operating activities...

  • Page 75
    ...2015 and the year ended September 30, 2014, respectively, are primarily attributable to the Spectrum Brands Holdings, Inc. factors discussed above. Net cash used... of $77.0 million; (iv) payment of share-based tax withholdings of employees for vested stock awards of $24.9 million; and (v) payment of...

  • Page 76
    ... of credit ratings, although a downgrade of the Company's credit ratings could increase fees and interest charges on future borrowings. Equity During the year ended September 30, 2015, SBH granted 0.6 million shares of restricted stock units to our employees and our directors. All vesting dates are...

  • Page 77
    ... July 28, 2015, the Board of Directors approved a $300.0 million common stock repurchase program. The authorization is effective for 36 months. During the years ended September 30, 2015 and 2014, SBH repurchased 230,000 and 71,752 shares, respectively. Liquidity Outlook The Company's ability to make...

  • Page 78
    ... postretirement plans. For additional information about our employee benefit obligations, see Note 12, "Employee Benefit Plans," of Notes to Consolidated Financial Statements, included elsewhere in this Annual Report. (4) At September 30, 2015, our Consolidated Statements of Financial Position...

  • Page 79
    ... statement risk in the event that business or economic conditions unexpectedly decline and impairment is realized. Pensions The Company recognizes amounts on the consolidated financial statements related to defined benefit pension plans using a September 30 measurement date. The accounting for these...

  • Page 80
    ...included elsewhere in this Annual Report for further discussion of our acquisition and valuation assumptions. Restructuring and Related Charges Restructuring charges include, but are not limited to, termination and related costs consisting primarily of one-time termination benefits such as severance...

  • Page 81
    ... are reported 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, asset impairments relating to manufacturing initiatives and other costs directly related to...

  • Page 82
    ... benefit. We estimate that $118.6 million of valuation allowance related to domestic deferred tax assets cannot be released regardless of the amount of domestic operating income generated due to prior period ownership changes that limit the amount of NOLs we can use and legal limitations on the use...

  • Page 83
    ...statements of the Company. In April 2015, the FASB issued ASU No. 2015-05, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic ... reporting entities must disclose going-concern uncertainties in their financial statements. The new standard requires management to perform interim and annual ...

  • Page 84
    ... exchange rate swaps and foreign exchange options. The related amounts payable to, or receivable from, the contract counter-parties are included in accounts payable or accounts receivable. At September 30, 2015, we had $350.0 million equivalent of debt denominated in foreign currencies. Other than...

  • Page 85
    ... in cost of one year's purchases of the related commodities due to the same change in commodity prices, would be a gain of $0.6 million. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required for this Item is included in this Annual Report on Form 10-K within Item 15, Exhibits...

  • Page 86
    ... and address the deficiencies. Limitations 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...

  • Page 87
    ... AAG are included in the consolidated financial statements of the Company as of and for the year ended September 30, 2015. Changes in Internal Control Over Financial Reporting. There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the...

  • Page 88
    ...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." Any amendments to this code...Proxy Statement. Report of the Compensation Committee of the Board of Directors ...

  • Page 89
    ... OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Ownership of Common Shares of Spectrum Brands Holdings, Inc. The ...rules, "Audit Fees" are fees paid to KPMG LLP for professional services for the audit of SB/RH and our consolidated financial statements included in our Form 10-K and the review...

  • Page 90
    ...2015. In accordance with the Audit Committee's Pre-Approval Policy, the Audit Committee has pre-approved other specified audit, non-audit, tax, and other services...delegated to its Chairman the authority to pre-approve any other specific audit or specific non-audit service which was not previously pre...

  • Page 91
    ...SB/RH Holdings, LLC listed in the 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 of Spectrum Brands Holdings, Inc. and SB/RH Holdings, LLC listed in the Index to Consolidated Financial...

  • Page 92
    ... STATEMENTS AND FINANCIAL STATEMENT SCHEDULE This report is a combined report of Spectrum Brands Holdings, Inc. and SB/RH Holdings, LLC. The notes to the consolidated financial statements include consolidated Spectrum Brands Holdings Inc. footnotes and certain footnotes related to SB/RH Holdings...

  • Page 93
    ... Firm The Board of Directors and Shareholders Spectrum Brands Holdings, Inc.: We have audited the accompanying consolidated statements of financial position of Spectrum Brands Holdings, Inc. and subsidiaries (the Company) as of September 30, 2015 and 2014, and the related consolidated statements...

  • Page 94
    ... of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, Spectrum Brands Holdings, Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of September 30, 2015, based...

  • Page 95
    ... and 2014, and the related consolidated statements of operations, comprehensive income (loss), shareholders' equity, and cash flows for each of the years in the three-year period ended September 30, 2015, and our report dated November 20, 2015 expressed an unqualified opinion on those consolidated...

  • Page 96
    Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholder SB/RH Holdings, LLC: We have audited the accompanying consolidated statements of financial position of SB/RH Holdings, LLC and subsidiaries (the Company) as of September 30, 2015 and 2014, and the related ...

  • Page 97
    SPECTRUM BRANDS HOLDINGS, INC. Consolidated Statements of Financial Position September 30, 2015 and 2014 (In millions, except per share figures) 2015 2014 Assets Current assets: Cash and cash equivalents ...Trade receivables, net ...Other receivables ...Inventories ...Prepaid expenses and other ...

  • Page 98
    SPECTRUM BRANDS HOLDINGS, INC. Consolidated Statements of Operations Years ended September 30, 2015, 2014 and 2013 (In millions, except per share figures) 2015 2014 2013 Net sales ...Cost of goods sold ...Restructuring and related charges ...Gross profit ...Operating expenses: Selling ...General ...

  • Page 99
    SPECTRUM BRANDS HOLDINGS, INC. Consolidated Statements of Comprehensive Income (Loss) Years ended September 30, 2015, 2014 and 2013 (In millions) 2015 2014 2013 Net income (loss) ...Other comprehensive income (loss), net of tax: Foreign currency translation loss ...Unrealized (loss) gain on hedging...

  • Page 100
    SPECTRUM BRANDS HOLDINGS, INC. Consolidated Statements of Shareholders' Equity Years ended September 30, 2015, 2014 and 2013 (In millions) Accumulated Other Total NonCommon Stock Additional Paid-in Accumulated Comprehensive Treasury Shareholders' controlling Total Shares Amount Capital Deficit Loss ...

  • Page 101
    ...issuance of common stock, net of issuance costs ...Treasury stock purchases ...Share based tax withholding payments, net of proceeds upon vesting ...Net cash provided (used) by financing activities ...Effect of exchange rate changes on cash and cash equivalents due to Venezuela devaluation ...Effect...

  • Page 102
    ... (In millions) 2015 2014 Assets Current assets: Cash and cash equivalents ...Trade receivables, net ...Other receivables ...Inventories ...Prepaid expenses and other current assets ...Total current assets ...Property, plant and equipment, net ...Deferred charges and other ...Goodwill ...Intangible...

  • Page 103
    ...2015, 2014 and 2013 (In millions, except per share figures) 2015 2014 2013 Net sales ...Cost of goods sold ...Restructuring and related charges....5 271.9 8.9 199.7 43.9 155.8 0.4 $ 155.4 $4,429.1 2,856.5 3.7 1,568.9 678.2 319.0 47.9 20.1 19.2 1,084.4 484.5 202.1 6.3 276.1 59.0 217.1 0.3 $ 216.8 $4,...

  • Page 104
    ... (In millions) 2015 2014 2013 Net income (loss) ...Other comprehensive income (loss), net of tax: Foreign currency translation loss ...Unrealized (loss) gain on hedging derivatives, net tax of $3.0, $4.2 and $(0.4), respectively ...Defined benefit pension (loss) gain, net tax of $0.5, $(1.6) and...

  • Page 105
    ... ...Other comprehensive loss, net of tax ...Contribution from parent ...Restricted stock issued and related tax withholdings ...Share based compensation ...Dividends declared ...Balances at September 30, 2015 ... $1,359.9 - - 28.6 (20.1) 30.8 - (6.1) - 1,393.1 - - (25.0) 45.7 - 1,413.8 - - 570.6 (38...

  • Page 106
    ...Capital contribution from parent ...Share based tax withholding payments, net of proceeds upon vesting ...Net cash provided (used) by financing activities ...Effect of exchange rate changes on cash and cash equivalents due to Venezuela devaluation ...Effect of exchange rate changes on cash and cash...

  • Page 107
    ... North America, Europe, Middle East & Africa ("MEA"), Latin America and Asia-Pacific regions through a variety of trade channels, including retailers, wholesalers and distributors, original equipment manufacturers ("OEMs"), construction companies and hearing aid professionals. We enjoy strong name...

  • Page 108
    ..., Liquid Fence, Hot Shot, Black Flag. North America Europe/MEA Latin America Asia-Pacific Home and Garden North America Latin America Global Auto Care(1) Auto care: Armor All, STP, A/C PRO. North America Europe/MEA Latin America Asia-Pacific (1) On May 21, 2015, the Company acquired Armored...

  • Page 109
    ...Company monitors its customers' credit and financial condition based on changing economic conditions and will make adjustments to credit policies..., plant and equipment are recorded at cost. Depreciation is calculated on the straight-line basis over the estimated useful lives of the assets. Plant...

  • Page 110
    ...deemed at risk of impairment. As a result of the AAG acquisition in the third quarter of the year ended September 30, 2015, a new reporting unit and segment was established, Global Auto Care. Due to the recent closing of the acquisition and the measurement of the net assets acquired at fair value in...

  • Page 111
    ... assets are recorded at cost or at estimated fair value if acquired in a business combination. Customer lists, proprietary technology and certain trade name intangibles are amortized, using the straight-line method, over their estimated useful lives. The range and weighted average useful lives for...

  • Page 112
    ... of returns, which are treated as a reduction of Net Sales. The Company enters into promotional arrangements, primarily with retail customers, that entitle such retailers to earn cash rebates from the Company. These arrangements require the Company to estimate and accrue the costs of these programs...

  • Page 113
    ... are recorded 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, asset impairments relating to manufacturing initiatives and other costs directly related to...

  • Page 114
    ...related charges include, but are not limited to, transaction costs such as banking, legal, accounting and other professional fees directly related to both consummated acquisitions and acquisition targets, termination and related costs for transitional and certain other employees, integration related...

  • Page 115
    ... recharge products. The results of AAG's operations since May 21, 2015 are included in the Company's Consolidated Statements of Operations and reported as a separate segment under Global Auto Care for the year ended September 30, 2015. The Company has recorded an allocation of the purchase price...

  • Page 116
    ... several factors, including prior transactions, related trademarks and trade names, other similar trademark licensing and transaction agreements and the relative profitability and perceived contribution of the trade names. Technology-The Company valued technology using an income approach, the relief...

  • Page 117
    SPECTRUM BRANDS HOLDINGS, INC. SB/RH HOLDINGS, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) asset are then discounted to their present value. Only expected sales from current customers were used, which are estimated using annual expected growth rates of 2.0% to 12.1%. The Company ...

  • Page 118
    ... 98% of the property, plant and equipment. The sales comparison approach was used to estimate the fair value of the remaining 2% of the property, plant and equipment. Tradenames-The Company valued indefinite-lived trade names using an income approach, the relief from royalty method. Under this...

  • Page 119
    ... cats. The results of European IAMS and Eukanuba's operations since December 31, 2014 are included in the Company's Consolidated Statements of Operations and as part of the Global Pet Supplies segment for the year ended September 30, 2015. The Company has recorded an allocation of the purchase price...

  • Page 120
    ..., plant and equipment-The market approach was used to estimate the fair value of land. The direct cost approach was used to estimate the fair value of property, plant and equipment. Tradenames-The Company valued indefinite-lived trade names using an income approach, the relief from royalty method...

  • Page 121
    ... factors, including prior transactions, related trademarks and trade names, other similar trademark licensing and transaction agreements and the relative profitability and perceived contribution of the trade names. • Technology-The Company valued technology using an income approach, the relief...

  • Page 122
    ... prior transactions of Tell, related trademarks and trade names, other similar trademark licensing and transaction agreements and the relative profitability and perceived contribution of the trade names. Customer relationships-The Company valued customer relationships using an income approach, the...

  • Page 123
    ... of Liquid Fence's operations since January 2, 2014 are included in the Company's Consolidated Statements of Operations and as part of the Home and Garden segment for the years ended September 30, 2015 and 2014. The Company has recorded an allocation of the purchase price to the Company's tangible...

  • Page 124
    ...name was not owned. Royalty rates were selected based on consideration of several factors, including prior transactions, related trademarks and tradenames, other similar trademark... to be generated. Customer relationships-The Company valued customer relationships using the distributor approach. Under...

  • Page 125
    SPECTRUM BRANDS HOLDINGS, INC. SB/RH HOLDINGS, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) Acquisition and Integration Costs The following table summarizes acquisition and integration related charges incurred by the Company during the years ended September 30, 2015, 2014 and 2013:...

  • Page 126
    SPECTRUM BRANDS HOLDINGS, INC. SB/RH HOLDINGS, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) 2014 by type and cumulative costs incurred through September 30, 2015. All costs reflected are within the Hardware and Home Improvement segment. Termination Other Benefits Costs (in millions...

  • Page 127
    ... and total future expected costs to be incurred related to this initiative by reporting segment. Global Batteries & Appliances Global Pet Supplies Corporate (in millions) Total Restructuring and related charges: For the year ended September 30, 2015 ...For the year ended September 30, 2014 ...For...

  • Page 128
    ..., and the cumulative amount incurred through September 30, 2015 by reporting segment. Global Batteries & Appliances Global Pet Supplies Home and Garden (in millions) Corporate Total Restructuring and related charges: For the year ended September 30, 2015 ...For the year ended September 30, 2014...

  • Page 129
    ...minimize the use of unobservable inputs. The Company's derivatives are valued on a recurring basis using internal models, which are based on market observable inputs including interest rate curves and both forward and spot prices for currencies and commodities, which are generally based on quoted or...

  • Page 130
    ... quoted input prices that are directly observable or indirectly observable through corroboration with observable market data (Level 2). NOTE 6-INVENTORY Inventories as of September 30, 2015 and 2014 consist of the following: 2015 2014 (in millions) Raw materials ...Work-in-process ...Finished goods...

  • Page 131
    ...264.5) $ 428.9 NOTE 8-GOODWILL AND INTANGIBLE ASSETS Changes in the carrying amount of goodwill by reporting segment was as follows: Global Batteries & Appliances Hardware & Home Improvement Global Pet Supplies (in millions) Home and Garden Global Auto Care Total Balance, as of September 30, 2013...

  • Page 132
    ... the Company anticipates the annual amortization for each of the next five years to be the following: Amortization (in millions) 2016 ...2017 ...2018 ...2019 ...2020 ...NOTE 9-DEBT Debt as of September 30, 2015 and 2014 consists of the following: $93.9 93.0 86.2 85.1 84.9 Spectrum Brands Holdings...

  • Page 133
    ...a loan with SBH of $34.7 million and $15.8 million as of September 30, 2015 and 2014, respectively. The Company's aggregate scheduled maturities of debt and capital lease obligations are as follows: Spectrum Brands Holdings, Inc. SB/RH Holdings, LLC Capital Lease Capital Lease Obligations Debt Total...

  • Page 134
    ...the 5.75% Notes (the "2025 Indenture") requires SBI to make an offer, in cash, to repurchase all or a portion of the applicable outstanding notes for a specified redemption price, including a redemption premium, upon the occurrence of a change of control of SBI, as defined in the 2025 Indenture. The...

  • Page 135
    SPECTRUM BRANDS HOLDINGS, INC. SB/RH HOLDINGS, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) The Company recorded $19.7 million of fees in connection with the offering of the 5.75% Notes during the year ended September 30, 2015, which have been capitalized as debt issuance costs and...

  • Page 136
    ... offer, in cash, to repurchase all or a portion of the applicable outstanding notes for a specified redemption price, including a redemption premium, upon the occurrence of a change of control of the Company, as defined in such indenture. The 2020/22 Indenture contains customary covenants that limit...

  • Page 137
    ... 2015 Notional Amount Remaining Notional Years Amount (in millions) 2014 Remaining Years Interest rate swaps-fixed ... $300.0 1.5 $300.0 2.5 Commodity Swaps. The Company is exposed to risk from fluctuating prices for raw materials, specifically zinc and brass used in its manufacturing processes...

  • Page 138
    ... 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 hedges a portion of the risk associated with these materials through the...

  • Page 139
    SPECTRUM BRANDS HOLDINGS, INC. SB/RH HOLDINGS, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) Fair Value of Derivative Instruments The fair value of the Company's outstanding derivative instruments in the Consolidated Statements of Financial Position are as follows: Line Item 2015 ...

  • Page 140
    SPECTRUM BRANDS HOLDINGS, INC. SB/RH HOLDINGS, LLC ...2016 is $2.8 million. The following table summarizes the gain (loss) associated with derivative contracts not designated at hedges in the Consolidated Statements of Operations for the years ended September 30, 2015, 2014 and 2013. Line Item 2015...

  • Page 141
    SPECTRUM BRANDS HOLDINGS, INC. SB/RH HOLDINGS, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) NOTE 12-EMPLOYEE BENEFIT PLANS Pension Benefits The Company has various defined benefit pension plans covering some of its employees in the United States and certain employees in other ...

  • Page 142
    ... Other Comprehensive Loss associated with employee benefit plan costs and recognized on the Company's Consolidated Statements of Operations for the years ended September 30, 2015, 2014 and 2013 were as follows: 2015 2014 2013 (in millions) Cost of goods sold ...Selling expenses ...General and...

  • Page 143
    ... 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. The expected return on plan assets is based on the Company's expectation...

  • Page 144
    ...) 2016 ...2017 ...2018 ...2019 ...2020 ...2021-2025 ...Other Postretirement Benefits $ 3.9 3.8 4.0 4.2 4.2 21.5 $ 5.4 5.7 6.1 6.9 6.8 39.4 Under the Rayovac postretirement plan, the Company provides certain health care and life insurance benefits to eligible retired employees. Participants...

  • Page 145
    ... to Section 401(k) of the Internal Revenue Code. The Company also sponsors defined contribution pension plans for employees of certain foreign subsidiaries. Company contributions charged to operations, including discretionary amounts, for the years ended September 30, 2015, 2014 and 2013 were $11...

  • Page 146
    ... tax rate of 35%, with the Company's recognized income tax expense: Spectrum Brands Holdings, Inc. SB/RH Holdings, LLC 2015 2014 2013 2015 2014 2013 (in millions) U.S. Statutory federal income tax expense (benefit) ...Permanent items ...Foreign statutory rate vs. U.S. statutory rate ...State income...

  • Page 147
    ... as of September 30, 2015 and 2014 are as follows: Spectrum Brands SB/RH Holdings, Holdings, Inc. LLC 2015 2014 2015 2014 (in millions) Deferred tax assets Employee benefits ...Restructuring ...Inventories and receivables ...Marketing and promotional accruals ...Prepaid royalty ...Property...

  • Page 148
    ....5 million and $16.7 million of the tax benefit related to state NOLs will expire unused even if the Company generates sufficient income to otherwise use all of its NOLs. In addition, separate return year limitations apply to limit the Company's utilization of the acquired Russell Hobbs U.S. federal...

  • Page 149
    ... tax assets. During the year ended September 30, 2015, the Company recorded valuation allowances of $17.0 million against the deferred tax assets of various Latin America entities as it is more likely than not that the Company will not obtain tax benefits from these assets. During the year ended...

  • Page 150
    ... 2010, the Board adopted the Spectrum Brands Holdings, Inc. 2011 Omnibus Equity Award Plan (the "Equity Plan"). During the year ended September 30, 2014, the Equity Plan was amended to increase the number of shares issuable under the Equity Plan to 5,626 shares of common stock of the Company, net of...

  • Page 151
    ... these costs on a straight line basis over the requisite service period of the awards. The fair value of the RSUs is determined based on the market price of the Company's shares of common stock on the grant date. During the year ended September 30, 2015, the Company granted 0.6 million RSUs, which...

  • Page 152
    SPECTRUM BRANDS HOLDINGS, INC. SB/RH HOLDINGS, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) NOTE 16-ACCUMULATED OTHER COMPREHENSIVE INCOME The changes in the components of accumulated other comprehensive income (loss), net of taxes, was as follows: Foreign Employee...30, 2015 ...(113...

  • Page 153
    ... lines within the segment. Net sales relating to the segments for the years ended September 30, 2015, 2014 and 2013 are as follows: Net sales to external customers Spectrum Brands Holdings, Inc. SB/RH Holdings, LLC 2015 2014 2013 2015 2014 2013 (in millions) Consumer batteries ...Small appliances...

  • Page 154
    ... profit in relation to the Company's reportable segments for the years ended September 30, 2015, 2014 and 2013 is as follows: Segment Profit Spectrum Brands Holdings, Inc. SB/RH Holdings, LLC 2015 2014 2013 2015 2014 2013 (in millions) Global Batteries & Appliances ...Hardware & Home Improvement...

  • Page 155
    ....3 196.0 207.7 $4,429.1 $2,404.4 910.0 389.7 192.3 189.2 $4,085.6 Long-lived assets-Geographic Disclosure Spectrum Brands SB/RH Holdings, Inc. Holdings, LLC 2015 2014 2015 2014 (in millions) United States ...Europe/MEA ...Latin America ...North America-Other ...Asia-Pacific ...Total long-lived...

  • Page 156
    ... restricted stock units. The Company uses the treasury stock method to reflect dilution of restricted stock units. The reconciliation of the numerator and denominator of the basic and diluted earnings per share calculation and the anti-dilutive shares for the years ended September 30, 2015, 2014...

  • Page 157
    SPECTRUM BRANDS HOLDINGS, INC. SB/RH HOLDINGS, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) illustrating the consolidating presentation. The elimination entries...402.4 3,150.1 $ 8.6 94.9 713.8 11.2 95.7 15.7 939.9 60.7 357.7 0.6 1,154.0 646.6 1,095.9 $ 226.3 228.1 225.0 62.4 291.8...

  • Page 158
    SPECTRUM BRANDS HOLDINGS... assets: Cash and cash equivalents ...Trade receivables, net ...Intercompany...115.3 107.3 1,030.7 1,151.7 (118.0) 1,278.9 $ 176.9 233.1 587.0 65.7 240.4 41.0 1,344.1 175.9 41.6 371.2 445.7 33.4 0.4 $2,412.3 $ - - (1,631.2) - (6.6) 1.4 (1,636.4) - (149.6) - - - (5,355.6) $...

  • Page 159
    ...2015 Parent Guarantor Subsidiaries Nonguarantor Subsidiaries (in millions) Eliminations Consolidated Net sales ...Cost of goods sold ...Restructuring and related charges... - - - - (1.0) (10.4) - 362.7 (373.1) (0.9) (372.2) (1.8) $(370.4) $4,690.4 3,018.0 2.1 1,670.3 720.7 332.4 51.3 58.8 26.6 1,189...

  • Page 160
    ... 626.7 Cost of goods sold ...447.7 Restructuring and related charges ...- Gross profit .......4 $(788.3) (788.3) - - (0.7) - - - - (0.7) 0.7 - 379.9 (379.2) 0.3 (379.5) (0.6) $(378.9) $4,429.1 2,856.5 3.7 1,568.9 678.2 319.0 47.9 20.1 19.2 1,084.4 484.5 202.1 6.3 276.1 59.0 217.1 0.3 $ 216.8 146

  • Page 161
    ....7 Cost of goods sold ...463.9 Restructuring and related charges ...- Gross profit...benefit) ...Net income (loss) ...Net income (loss) attributable to non-controlling interest ...Net income (loss) attributable to controlling interest ...Statement of Comprehensive Income Year ended September 30, 2015...

  • Page 162
    SPECTRUM BRANDS HOLDINGS, INC. SB/RH HOLDINGS, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS...Foreign currency translation gain (loss) ...Unrealized gain (loss) on derivative instruments ...Defined benefit pension gain (loss) ...Other comprehensive income (loss) ...Comprehensive income (loss) ......

  • Page 163
    ... contribution from parent ...Share based tax withholding payments, net of proceeds upon vesting ...Advances related to intercompany transactions ...Net cash provided (used) by financing activities ...Effect of exchange rate changes on cash and cash equivalents due to Venezuela devaluation ...Effect...

  • Page 164
    ... of cash dividends to parent ...Share based tax withholding payments, net of proceeds upon vesting ...Advances related to intercompany transactions ...Net cash (used) provided by financing activities ...Effect of exchange rate changes on cash and cash equivalents ...Net increase (decrease) in cash...

  • Page 165
    ... contribution from parent ...Share based tax withholding payments, net of proceeds upon vesting ...Advances related to intercompany transactions ...Net cash provided (used) by financing activities ...Effect of exchange rate changes on cash and cash equivalents due to Venezuela devaluation ...Effect...

  • Page 166
    ... HOLDINGS, LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED) Spectrum Brands Holdings, Inc. 2014 September 30, 2014 Quarter Ended June 29, March 30, December 29, 2014 2014 2013 (in millions, except per share) Net sales ...Gross profit ...Net income attributable to controlling interest...

  • Page 167
    ...1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SPECTRUM BRANDS HOLDINGS, INC. By: /s/ Andreas Rouvé Andreas Rouvé Chief Executive Officer and Director DATE: November 20, 2015 Pursuant to the requirements of the Securities...

  • Page 168
    ... duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SB/RH HOLDINGS, LLC By: Spectrum Brands Holdings, Inc., its Sole Member By: /s/ Andreas Rouvé Andreas Rouvé Chief Executive Officer and Director DATE: November 20, 2015 Pursuant to the requirements...

  • Page 169
    ... to Exhibit 2.1 to the Current Report on Form 8-K filed with the SEC by Spectrum Brands, Inc. on October 12, 2012). Agreement and Plan of Merger Acquisition Agreement, dated as of April 28, 2015 between Spectrum Brands Holdings, Inc., Armored AutoGroup Parent Inc., Ignite Merger Sub, Inc. and Avista...

  • Page 170
    ....1 to the Current Report on Form 8-K filed with the SEC by SB/RH Holdings, LLC on June 23, 2015). Security Agreement, dated as of June 23, 2015, by and among Spectrum Brands, Inc., SB/RH Holdings, LLC, the subsidiary guarantors party thereto from time to time and Deutsche Bank AG New York Branch, as...

  • Page 171
    ... as of August 27, 2007, by and between Andreas Rouve and Rayovac Europe GmbH, as amended on October 1, 2007 (filed by incorporation by reference to Exhibit 99.2 to the Current Report on Form 8-K filed with the SEC by Spectrum Brands Holdings, Inc. on February 11, 2014). Separation Agreement dated...

  • Page 172
    ...Exhibit 10.2 to the Quarterly Report on Form 10-Q filed with the SEC by Spectrum Brands Holdings, Inc. on May 1, 2015). 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...

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  • Page 175
    ...Annual Report on Form 10-K for the year ended September 30, 2015. STOCK EXCHANGE The common shares of Spectrum Brands Holdings, Inc. trade on the New York Stock Exchange under the ticker symbol SPB. Our Company is a member of the Russell 2000 Index. BUSINESS UNIT WEBSITES www.rayovac.com www.varta...

  • Page 176
    © 2015 Spectrum Brands, Inc. • Spectrum Brands is an Equal Opportunity/Affirmative Action Employer