Spectrum Brands, Inc.

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424B3


Prospectus Supplement No. 2				Filed pursuant to Rule 424(b)(3)
to Prospectus dated January 4, 2017				File No. 333-209020

LOGO

Spectrum Brands, Inc.

6.625% Senior Notes due 2022 and Related Guarantees

6.125% Senior Notes due 2024 and Related Guarantees

5.750% Senior Notes due 2025 and Related Guarantees

This prospectus supplement relates to the prospectus dated January 4, 2017 (for use by our affiliate Jefferies LLC or any of its affiliates (collectively referred to as “Jefferies”) in connection with offers and sales by Jefferies of our 6.625% Senior Notes due 2022 and Related Guarantees, 6.125% Senior Notes due 2024 and Related Guarantees and 5.750% Senior Notes due 2025 and Related Guarantees (the “Notes”) in market-making transactions effected from time to time).

This prospectus supplement is being filed to update, amend and supplement the information previously included in the prospectus with the information contained in SB/RH Holdings, LLC’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 2, 2017 (the “10-Q”). Accordingly, we have attached the 10-Q to this prospectus supplement. You should read this prospectus supplement together with the prospectus, which is to be delivered with this prospectus supplement.

An investment in the Notes involves risks. Please refer to the section in the prospectus entitled “Risk Factors” commencing on page 12 of the prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if the prospectus or this prospectus supplement is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus supplement is May 3, 2017.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 2, 2017

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

LOGO


Commission File No.	Name of Registrant, State of Incorporation, Address of Principal Offices, and Telephone No.	IRS Employer Identification No.

001-34757	Spectrum Brands Holdings, Inc. (a Delaware corporation) 3001 Deming Way Middleton, WI 53562 (608) 275-3340 www.spectrumbrands.com	27-2166630

333-192634-03	SB/RH Holdings, LLC (a Delaware limited liability company) 3001 Deming Way Middleton, WI 53562 (608) 275-3340	27-2812840

Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


Spectrum Brands Holdings, Inc.	Yes	☒	No	☐
SB/RH Holdings, LLC	Yes	☒	No	☐

Indicate by check mark whether the registrants have submitted electronically and posted on their corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).


Spectrum Brands Holdings, Inc.	Yes	☒	No	☐
SB/RH Holdings, LLC	Yes	☒	No	☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Registrant

Large Accelerated Filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Spectrum Brands Holdings, Inc.

SB/RH Holdings, LLC

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


Spectrum Brands Holdings, Inc.	Yes	☐	No	☒
SB/RH Holdings, LLC	Yes	☐	No	☒

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§232.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).


Spectrum Brands Holdings, Inc.	Yes	☐	No	☒
SB/RH Holdings, LLC	Yes	☐	No	☒

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.


		Spectrum Brands Holdings, Inc.				☐
		SB/RH Holdings, LLC				☐

As of April 28, 2017, there were outstanding 58,828,866 shares of Spectrum Brands Holdings, Inc.’s common stock, par value $0.01 per share.

SB/RH Holdings, LLC meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this report with a reduced disclosure format as permitted by general instruction H(2).

Forward-Looking Statements

We have made or implied certain forward-looking statements in this report. All statements, other than statements of historical facts included in this report, including the statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding 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 report, the words anticipate, intend, plan, estimate, believe, expect, project, could, will, should, may and similar expressions are also intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words.

Since these forward-looking statements are based upon our current expectations of future events and projections and are subject to a number of risks and uncertainties, many of which are beyond our control and some of which may change rapidly, actual results or outcomes may differ materially from those expressed or implied herein, and you should not place undue reliance on these statements. Important factors that could cause our actual results to differ materially from those expressed or implied herein include, without limitation:

•

the impact of our indebtedness on our business, financial condition and results of operations;

•

the impact of restrictions in our debt instruments on our ability to operate our business, finance our capital needs or pursue or expand business strategies;

•

any failure to comply with financial covenants and other provisions and restrictions of our debt instruments;

•

the impact of actions taken by significant shareholders;

•

the impact of expenses resulting from the implementation of new business strategies, divestitures or current and proposed restructuring activities;

•

our inability to successfully integrate and operate new acquisitions at the level of financial performance anticipated;

•

the unanticipated loss of key members of senior management;

•

the impact of fluctuations in commodity prices, costs or availability of raw materials or terms and conditions available from suppliers, including suppliers’ willingness to advance credit;

•

interest rate and exchange rate fluctuations;

•

our ability to utilize our net operating loss carry-forwards to offset tax liabilities from future taxable income;

•

the loss of, or a significant reduction in, sales to any significant retail customer(s);

•

competitive promotional activity or spending by competitors, or price reductions by competitors;

•

the introduction of new product features or technological developments by competitors and/or the development of new competitors or competitive brands;

•

the effects of general economic conditions, including inflation, recession or fears of a recession, depression or fears of 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 property and avoid infringing the intellectual property of third parties;

•

our ability to successfully implement, achieve and sustain manufacturing and distribution cost efficiencies and improvements, and fully realize anticipated cost savings;

•

the cost and effect of unanticipated legal, tax or regulatory proceedings or new laws or regulations (including environmental, public health and consumer protection regulations);

•

public perception regarding the safety of our products, including the potential for environmental liabilities, product liability claims, litigation and other claims;

•

the impact of pending or threatened litigation;

•

the impact of cyber security breaches or our actual or perceived failure to protect company and personal data;

•

changes in accounting policies applicable to our business;

•

government regulations;

•

the seasonal nature of sales of certain of our products;

•

the effects of climate change and unusual weather activity; and

•

the effects of political or economic conditions, terrorist attacks, acts of war or other unrest in international markets.

Some of the above-mentioned factors are described in further detail in the sections entitled “Risk Factors” in our annual and quarterly reports (including this report), as applicable. You should assume the information appearing in this report is accurate only as of the end of the period covered by this report, or as otherwise specified, as our business, financial condition, results of operations and prospects may have changed since that date. Except as required by applicable law, including the securities laws of the United States (“U.S.”) and the rules and regulations of the United States Securities and Exchange Commission (“SEC”), we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, to reflect actual results or changes in factors or assumptions affecting such forward-looking statements.

SPECTRUM BRANDS HOLDINGS, INC.

SB/RH HOLDINGS, LLC

TABLE OF CONTENTS

This report is a combined report of Spectrum Brands Holdings, Inc. and SB/RH Holdings, LLC. The combined notes to the condensed consolidated financial statements include notes representing Spectrum Brands Holdings, Inc. and SB/RH Holdings, LLC and certain notes related specifically to SB/RH Holdings, LLC.


		Page

PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements		2

*Spectrum Brands Holdings, Inc. Condensed Consolidated Financial Statements (Unaudited)*

	Condensed Consolidated Statements of Financial Position as of April 2, 2017 and September 30, 2016		2

	Condensed Consolidated Statements of Income for the three and six month periods ended April 2, 2017 and April 3, 2016		3

	Condensed Consolidated Statements of Comprehensive Income for the three and six month periods ended April 2, 2017 and April 3, 2016		3

	Condensed Consolidated Statements of Cash Flows for the six month periods ended April 2, 2017 and April 3, 2016		4

*SB/RH Holdings, LLC Condensed Consolidated Financial Statements (Unaudited)*

	Condensed Consolidated Statements of Financial Position as of April 2, 2017 and September 30, 2016		5

	Condensed Consolidated Statements of Income for the three and six month periods ended April 2, 2017 and April 3, 2016		6

	Condensed Consolidated Statements of Comprehensive Income for the three and six month periods ended April 2, 2017 and April 3, 2016		6

	Condensed Consolidated Statements of Cash Flows for the six month periods ended April 2, 2017 and April 3, 2016		7

*Spectrum Brands Holdings, Inc. and SB/RH Holdings, LLC Combined (Unaudited)*

	Combined Notes to Condensed Consolidated Financial Statements		8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		27

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		39

Item 4.	Controls and Procedures		40

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings		41

Item 1A.	Risk Factors		41

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		43

Item 6.	Exhibits		43

Signatures			44

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SPECTRUM BRANDS HOLDINGS, INC.

Condensed Consolidated Statements of Financial Position

April 2, 2017 and September 30, 2016

(in millions, unaudited)


	April 2, 2017			September 30, 2016
Assets
Current assets:
Cash and cash equivalents	$	137.2		$	275.3
Trade receivables, net		528.5			482.6
Other receivables		44.3			55.6
Inventories		836.3			740.6
Prepaid expenses and other current assets		88.8			78.8

Total current assets		1,635.1			1,632.9
Property, plant and equipment, net		660.8			542.1
Deferred charges and other		47.2			43.2
Goodwill		2,473.8			2,478.4
Intangible assets, net		2,312.5			2,372.5

Total assets	$	7,129.4		$	7,069.1

Liabilities and Shareholders’ Equity
Current liabilities:
Current portion of long-term debt	$	35.0		$	164.0
Accounts payable		525.0			580.1
Accrued wages and salaries		64.6			122.9
Accrued interest		37.2			39.3
Other current liabilities		176.3			189.3

Total current liabilities		838.1			1,095.6
Long-term debt, net of current portion		3,745.8			3,456.2
Deferred income taxes		577.7			532.7
Other long-term liabilities		131.2			140.6

Total liabilities		5,292.8			5,225.1
Commitments and contingencies
Shareholders’ equity:
Common Stock		0.6			0.6
Additional paid-in capital		2,100.0			2,073.6
Accumulated earnings		139.9			63.6
Accumulated other comprehensive loss, net of tax		(236.1	)		(229.4	)
Treasury stock, at cost		(211.3	)		(108.3	)

Total shareholders’ equity		1,793.1			1,800.1
Noncontrolling interest		43.5			43.9

Total equity		1,836.6			1,844.0

Total liabilities and equity	$	7,129.4		$	7,069.1

See accompanying notes to the condensed consolidated financial statements

SPECTRUM BRANDS HOLDINGS, INC.

Condensed Consolidated Statements of Income

For the three and six month periods ended April 2, 2017 and April 3, 2016

(in millions, except per share figures, unaudited)


	Three Months Ended						Six Months Ended
	April 2, 2017			April 3, 2016			April 2, 2017			April 3, 2016
Net sales	$	1,169.9		$	1,209.6		$	2,381.7		$	2,428.4
Cost of goods sold		710.6			746.6			1,471.2			1,524.6
Restructuring and related charges		4.1			0.2			5.3			0.3

Gross profit		455.2			462.8			905.2			903.5
Selling		187.4			189.5			377.2			376.6
General and administrative		99.4			95.6			187.9			181.9
Research and development		15.1			14.5			29.5			28.3
Acquisition and integration related charges		5.1			13.3			9.2			23.2
Restructuring and related charges		4.1			1.4			6.2			2.5

Total operating expenses		311.1			314.3			610.0			612.5

Operating income		144.1			148.5			295.2			291.0
Interest expense		50.6			57.5			106.4			115.9
Other non-operating expense, net		1.8			0.8			0.8			4.3

Income from operations before income taxes		91.7			90.2			188.0			170.8
Income tax expense (benefit)		33.1			(2.5	)		64.1			4.4

Net income		58.6			92.7			123.9			166.4
Net (loss) income attributable to non-controlling interest		(0.2	)		0.1			(0.2	)		0.2

Net income attributable to controlling interest	$	58.8		$	92.6		$	124.1		$	166.2

Earnings Per Share
Basic earnings per share	$	1.00		$	1.56		$	2.10		$	2.80
Diluted earnings per share		1.00			1.55			2.09			2.79
Dividends per share		0.42			0.38			0.80			0.71
Weighted Average Shares Outstanding
Basic		58.8			59.4			59.1			59.3
Diluted		59.0			59.5			59.3			59.4

See accompanying notes to the condensed consolidated financial statements

SPECTRUM BRANDS HOLDINGS, INC.

Condensed Consolidated Statements of Comprehensive Income

For the three and six month periods ended April 2, 2017 and April 3, 2016

(in millions, unaudited)


	Three Months Ended						Six Months Ended
	April 2, 2017			April 3, 2016			April 2, 2017			April 3, 2016
Net income	$	58.6		$	92.7		$	123.9		$	166.4
Other comprehensive income (loss), net of tax:
Foreign currency translation gain (loss), net tax of $(0.4), $0, $3.5 and $0, respectively		21.7			28.2			(24.4	)		7.7
Unrealized (loss) gain on hedging activity, net tax of $4.5, $3.2, $(9.7) and $2.5, respectively		(9.7	)		(2.9	)		14.5			0.8
Defined benefit pension (loss) gain, net tax of $0.1, $0.1, $(1.1) and $(0.2), respectively		(0.3	)		(0.6	)		3.0			0.5

Other comprehensive income (loss), net of tax		11.7			24.7			(6.9	)		9.0

Comprehensive income		70.3			117.4			117.0			175.4
Comprehensive income (loss) attributable to non-controlling interest		0.1			—			(0.2	)		(0.1	)

Comprehensive income attributable to controlling interest	$	70.2		$	117.4		$	117.2		$	175.5

See accompanying notes to the condensed consolidated financial statements

SPECTRUM BRANDS HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

For the six month periods ended April 2, 2017 and April 3, 2016

(in millions, unaudited)


	April 2, 2017			April 3, 2016
Cash flows from operating activities
Net income	$	123.9		$	166.4
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Amortization of intangible assets		47.1			47.0
Depreciation		46.6			44.4
Share based compensation		23.0			31.6
Amortization of debt issuance costs		3.6			4.1
Write-off of debt issuance costs		1.9			—
Non-cash debt accretion		0.4			0.5
Deferred tax expense (benefit)		33.6			(19.3	)
Net changes in operating assets and liabilities		(250.0	)		(419.2	)

Net cash provided (used) by operating activities		30.1			(144.5	)
Cash flows from investing activities
Purchases of property, plant and equipment		(51.3	)		(38.7	)
Proceeds from sales of property, plant and equipment		0.8			0.8
Other investing activities		(1.2	)		—

Net cash used by investing activities		(51.7	)		(37.9	)
Cash flows from financing activities
Proceeds from issuance of debt		216.1			175.0
Payment of debt		(151.6	)		(13.3	)
Payment of debt issuance costs		(2.7	)		(1.6	)
Payment of cash dividends		(47.3	)		(42.0	)
Treasury stock purchases		(103.1	)		(40.2	)
Share based tax withholding payments, net of proceeds upon vesting		(23.9	)		(9.8	)

Net cash (used) provided by financing activities		(112.5	)		68.1
Effect of exchange rate changes on cash and cash equivalents		(4.0	)		(0.3	)

Net decrease in cash and cash equivalents		(138.1	)		(114.6	)
Cash and cash equivalents, beginning of period		275.3			247.9

Cash and cash equivalents, end of period	$	137.2		$	133.3

Supplemental disclosure of cash flow information
Cash paid for interest	$	97.1		$	120.5
Cash paid for taxes	$	19.0		$	23.9
Non cash investing activities
Acquisition of property, plant and equipment through capital leases	$	122.2		$	28.3
Non cash financing activities
Issuance of shares through stock compensation plan	$	53.5		$	45.8

See accompanying notes to the condensed consolidated financial statements

SB/RH HOLDINGS, LLC

Condensed Consolidated Statements of Financial Position

April 2, 2017 and September 30, 2016

(in millions, unaudited)


	April 2, 2017			September 30, 2016
Assets
Current assets:
Cash and cash equivalents	$	137.1		$	270.8
Trade receivables, net		528.5			482.6
Other receivables		42.8			55.6
Inventories		836.3			740.6
Prepaid expenses and other current assets		88.8			78.8

Total current assets		1,633.5			1,628.4
Property, plant and equipment, net		660.8			542.1
Deferred charges and other		33.5			32.1
Goodwill		2,473.8			2,478.4
Intangible assets, net		2,312.5			2,372.5

Total assets	$	7,114.1		$	7,053.5

Liabilities and Shareholder’s Equity
Current liabilities:
Current portion of long-term debt	$	35.0		$	164.0
Accounts payable		525.0			580.1
Accrued wages and salaries		64.6			122.9
Accrued interest		37.2			39.3
Other current liabilities		174.1			188.3

Total current liabilities		835.9			1,094.6
Long-term debt, net of current portion		3,745.8			3,456.2
Deferred income taxes		577.5			532.7
Other long-term liabilities		131.2			140.6

Total liabilities		5,290.4			5,224.1
Commitments and contingencies
Shareholder’s equity:
Other capital		2,028.8			2,000.9
Accumulated (deficit) earnings		(18.4	)		8.1
Accumulated other comprehensive loss, net of tax		(236.1	)		(229.4	)

Total shareholder’s equity		1,774.3			1,779.6
Noncontrolling interest		49.4			49.8

Total equity		1,823.7			1,829.4

Total liabilities and equity	$	7,114.1		$	7,053.5

See accompanying notes to the condensed consolidated financial statements

SB/RH HOLDINGS, LLC

Condensed Consolidated Statements of Income

For the three and six month periods ended April 2, 2017 and April 3, 2016

(in millions, unaudited)


	Three Months Ended					Six Months Ended
	April 2, 2017			April 3, 2016		April 2, 2017			April 3, 2016
Net sales	$	1,169.9		$	1,209.6	$	2,381.7		$	2,428.4
Cost of goods sold		710.6			746.6		1,471.2			1,524.6
Restructuring and related charges		4.1			0.2		5.3			0.3

Gross profit		455.2			462.8		905.2			903.5
Selling		187.4			189.5		377.2			376.6
General and administrative		95.9			94.2		183.3			178.7
Research and development		15.1			14.5		29.5			28.3
Acquisition and integration related charges		5.1			13.3		9.2			23.2
Restructuring and related charges		4.1			1.4		6.2			2.5

Total operating expenses		307.6			312.9		605.4			609.3

Operating income		147.6			149.9		299.8			294.2
Interest expense		50.7			57.5		106.7			115.9
Other non-operating expense, net		1.8			0.8		0.8			4.3

Income from operations before income taxes		95.1			91.6		192.3			174.0
Income tax expense		34.3			9.0		66.5			15.9

Net income		60.8			82.6		125.8			158.1
Net (loss) income attributable to non-controlling interest		(0.2	)		0.1		(0.2	)		0.2

Net income attributable to controlling interest	$	61.0		$	82.5	$	126.0		$	157.9

See accompanying notes to the condensed consolidated financial statements

SB/RH HOLDINGS, LLC

Condensed Consolidated Statements of Comprehensive Income

For the three and six month periods ended April 2, 2017 and April 3, 2016

(in millions, unaudited)


	Three Months Ended						Six Months Ended
	April 2, 2017			April 3, 2016			April 2, 2017			April 3, 2016
Net income	$	60.8		$	82.6		$	125.8		$	158.1
Other comprehensive income (loss), net of tax:
Foreign currency translation gain (loss), net tax of $(0.4), $0, $3.5 and $0, respectively		21.7			28.2			(24.4	)		7.7
Unrealized (loss) gain on hedging activity, net tax of $4.5, $3.2, $(9.7) and $2.5, respectively		(9.7	)		(2.9	)		14.5			0.8
Defined benefit pension (loss) gain, net tax of $0.1, $0.1, $(1.1) and $(0.2), respectively		(0.3	)		(0.6	)		3.0			0.5

Other comprehensive income (loss), net of tax		11.7			24.7			(6.9	)		9.0

Comprehensive income		72.5			107.3			118.9			167.1
Comprehensive income (loss) attributable to non-controlling interest		0.1			—			(0.2	)		(0.1	)

Comprehensive income attributable to controlling interest	$	72.4		$	107.3		$	119.1		$	167.2

See accompanying notes to the condensed consolidated financial statements

SB/RH HOLDINGS, LLC

Condensed Consolidated Statements of Cash Flows

For the six month periods ended April 2, 2017 and April 3, 2016

(in millions, unaudited)


	April 2, 2017			April 3, 2016
Cash flows from operating activities
Net income	$	125.8		$	158.1
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Amortization of intangible assets		47.1			47.0
Depreciation		46.6			44.4
Share based compensation		21.3			28.8
Amortization of debt issuance costs		3.6			4.1
Write-off of debt issuance costs		1.9			—
Non-cash debt accretion		0.4			0.5
Deferred tax expense (benefit)		36.0			(7.8	)
Net changes in operating assets and liabilities		(270.0	)		(438.8	)

Net cash provided (used) by operating activities		12.7			(163.7	)
Cash flows from investing activities
Purchases of property, plant and equipment		(51.3	)		(38.7	)
Proceeds from sales of property, plant and equipment		0.8			0.8
Other investing activities		(1.2	)		—

Net cash used by investing activities		(51.7	)		(37.9	)
Cash flows from financing activities
Proceeds from issuance of debt		216.1			188.9
Payment of debt		(151.6	)		(48.1	)
Payment of debt issuance costs		(2.7	)		(1.6	)
Payment of cash dividends to parent		(152.5	)		(52.0	)

Net cash (used) provided by financing activities		(90.7	)		87.2
Effect of exchange rate changes on cash and cash equivalents		(4.0	)		(0.3	)

Net decrease in cash and cash equivalents		(133.7	)		(114.7	)
Cash and cash equivalents, beginning of period		270.8			247.9

Cash and cash equivalents, end of period	$	137.1		$	133.2

Supplemental disclosure of cash flow information
Cash paid for interest	$	97.1		$	120.5
Cash paid for taxes	$	19.0		$	23.9
Non cash investing activities
Acquisition of property, plant and equipment through capital leases	$	122.2		$	28.3

See accompanying notes to the condensed consolidated financial statements

SPECTRUM BRANDS HOLDINGS, INC.

SB/RH HOLDINGS, LLC

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in millions, unaudited)

This report is a combined report of Spectrum Brands Holdings, Inc. (“SBH”) and SB/RH Holdings, LLC (“SB/RH”) (collectively, the “Company”). The notes to the condensed consolidated financial statements that follow include both consolidated SBH and SB/RH notes, unless otherwise indicated below.

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared by the Company and its majority owned subsidiaries in accordance with accounting principles for interim financial information generally accepted in the United States and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and notes necessary for a comprehensive presentation of financial position and results of operations. It is management’s opinion, however, that all material adjustments have been made which are necessary for a fair financial statement presentation. For further information, refer to the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2016.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. This ASU requires revenue recognition to depict the transfer of goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new revenue recognition model requires identifying the contract and performance obligations, determining the transaction price, allocating the transaction price to performance obligations and recognizing the revenue upon satisfaction of performance obligations. This ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. This ASU can be applied either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the updates recognized at the date of the initial application along with additional disclosures. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606) Deferral of the Effective Date, which amends the previously issued ASU to provide for a one year deferral from the original effective date. As a result, the ASU will become effective for us beginning in the first quarter of our fiscal year ending September 30, 2019, with early adoption available to us beginning in the first quarter of our fiscal year ending September 30, 2018. We are assessing the impact this pronouncement will have on the consolidated financial statements of the Company and have not determined the materiality or method of adoption.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which supersedes the lease requirements in ASC 840, Leases. This ASU requires lessees to recognize lease assets and liabilities on the balance sheet, as well as disclosing key information about leasing arrangements. Although the ASU requires both operating and finance leases to be disclosed on the balance sheet, a distinction between the two types still exists. The ASU can be applied using a modified retrospective approach, with optional practical expedients that entities may elect to apply, relating to the identification and classification of leases that commenced before the effective date, along with the ability to use hindsight in the evaluation of lease decisions. The ASU will become effective for us beginning in the first quarter of our fiscal year ending September 30, 2020, with early adoption available. We are assessing the impact this pronouncement will have on the consolidated financial statements of the Company and have not determined the materiality or method of adoption.

In March 2017, the FASB issued ASU No. 2017-07, Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which requires an employer to disaggregate the service cost component from the other components of net periodic pension costs within the statement of income. The amendment provides guidance requiring the service cost component to be recognized consistent with other compensation costs arising from service rendered by employees during the period, and all other components to be recognized separately outside of the subtotal of income from operations. The ASU is applied on a retrospective basis, and will become effective for us in the first quarter of the year ending September 30, 2019; with early adoption available to us in the first quarter of the year ending September 30, 2018. The net periodic benefit cost for the year ended September 30, 2016 was $4.5 million; of which the service cost component was $2.9 million and other components were $1.6 million. The net periodic benefit cost for the year ending September 30, 2017 will be $7.6 million, of which the service cost component is $3.9 million and other cost components are $3.8 million.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the test for goodwill impairment by removing Step 2 from the goodwill impairment test. If goodwill impairment is realized, the amount recognized will be the amount by which the carrying amount exceeds the reporting unit’s fair value; however the loss recognized cannot exceed the total amount of goodwill allocated to that reporting unit. The ASU must be applied on a prospective basis and will become effective for us beginning in the first quarter of the year ended September 30, 2021, with early adoption available. We chose to adopt the standard immediately, with no impact to the condensed consolidated financial statements.

NOTE 3 – ACQUISITION AND INTEGRATION COSTS

The following summarizes acquisition and integration related charges for the three and six month periods ended April 2, 2017 and April 3, 2016:


	Three Months Ended				Six Months Ended
(in millions)	April 2, 2017		April 3, 2016		April 2, 2017		April 3, 2016
Armored AutoGroup	$	0.7	$	6.1	$	2.4	$	10.6
HHI Business		2.0		4.8		3.8		7.6
Other		2.4		2.4		3.0		5.0

Total acquisition and integration related charges	$	5.1	$	13.3	$	9.2	$	23.2

NOTE 4 - RESTRUCTURING AND RELATED CHARGES

Pet Rightsizing Initiative – During the second quarter of the year ending September 30, 2017, the Company implemented a rightsizing initiative within the PET segment to streamline certain operations and reduce operating costs. The initiative includes headcount reductions and the rightsizing of certain facilities. Total costs associated with this initiative is expected to be approximately $5 million, of which $0.6 million has been incurred to date. The balance is anticipated to be incurred through December 31, 2017.

HHI Distribution Center Consolidation – During the second quarter of the year ending September 30, 2017, the Company implemented an initiative within the HHI segment to consolidate certain operations and reduce operating costs. The initiative includes headcount reductions and the exit of certain facilities. Total costs associated with the initiative are expected to be approximately $11 million, of which $1.2 million has been incurred to date. The balance is anticipated to be incurred through September 30, 2019.

GAC Business Rationalization Initiative – During the third quarter of the year ended September 30, 2016, the Company implemented an initiative in the GAC segment to consolidate certain operations and reduce operating costs. The initiative includes headcount reductions and the exit of certain facilities. Total costs associated with the initiative are expected to be approximately $28 million, of which $12.3 million has been incurred to date. The balance is anticipated to be incurred through September 30, 2017.

Other Restructuring Activities – The Company is entering or may enter into small, less significant initiatives and restructuring activities to reduce costs and improve margins throughout the organization. Individually these activities are not substantial, and occur over a shorter time period (less than 12 months).

The following summarizes restructuring and related charges for the three and six month periods ended April 2, 2017 and April 3, 2016:


	Three Months Ended				Six Months Ended
(in millions)	April 2, 2017		April 3, 2016		April 2, 2017		April 3, 2016
HHI distribution center consolidation	$	1.2	$	—	$	1.2	$	—
GAC business rationalization initiative		5.5		—		7.0		—
PET rightsizing initiative		0.6		—		0.6		—
HHI business rationalization initiative		—		0.3		—		(0.4	)
Other restructuring activities		0.9		1.3		2.7		3.2

Total restructuring and related charges	$	8.2	$	1.6	$	11.5	$	2.8

Reported as:
Cost of goods sold	$	4.1	$	0.2	$	5.3	$	0.3
Operating expense		4.1		1.4		6.2		2.5

The following is a summary of restructuring and related charges for the three and six month periods ended April 2, 2017 and April 3, 2016 and cumulative costs for current restructuring initiatives as of April 2, 2017, by cost type:


	Termination		Other
(in millions)	Benefits		Costs		Total
For the three months ended April 2, 2017		1.4		6.8		8.2
For the three months ended April 3, 2016		0.7		0.9		1.6
For the six months ended April 2, 2017		3.3		8.2		11.5
For the six months ended April 3, 2016		1.7		1.1		2.8
Cumulative costs through April 2, 2017		3.6		13.2		16.8
Future costs to be incurred		10.3		18.8		29.1

The following is a roll-forward of the accrual related to all restructuring and related activities, included within Other Current Liabilities, by cost type for the six month period ended April 2, 2017:


	Termination			Other
(in millions)	Benefits			Costs			Total
Accrual balance at September 30, 2016		1.6			1.0			2.6
Provisions		3.3			8.2			11.5
Cash expenditures		(2.5	)		(7.0	)		(9.5	)
Non-cash items		1.2			(1.4	)		(0.2	)

Accrual balance at April 2, 2017	$	3.6		$	0.8		$	4.4

The following summarizes restructuring and related charges by segment for the three and six month periods ended April 2, 2017 and April 3, 2016, cumulative costs incurred through April 2, 2017, and future expected costs to be incurred by segment:


(in millions)	GBA		PET		HHI		GAC		Total
For the three months ended April 2, 2017	$	0.3	$	1.0	$	1.4	$	5.5	$	8.2
For the three months ended April 3, 2016		0.1		1.1		0.4		—		1.6
For the six months ended April 2, 2017		1.3		1.6		1.6		7.0		11.5
For the six months ended April 3, 2016		0.4		1.9		0.5		—		2.8
Cumulative costs through April 2, 2017		1.3		1.6		1.6		12.3		16.8
Future costs to be incurred		0.5		4.5		8.7		15.4		29.1

NOTE 5 - RECEIVABLES AND CONCENTRATION OF CREDIT RISK

The allowance for uncollectible receivables as of April 2, 2017 and September 30, 2016 was $45.3 million and $46.8 million, respectively. The Company has a broad range of customers including many large retail outlet chains, one of which accounts for a significant percentage of its sales volume. This customer represents approximately 17% and 15% of the Company’s Trade Receivables at April 2, 2017 and September 30, 2016, respectively.

NOTE 6 - INVENTORIES

Inventories consist of the following:


(in millions)	April 2, 2017		September 30, 2016
Raw materials	$	147.1	$	127.5
Work-in-process		54.9		43.6
Finished goods		634.3		569.5

	$	836.3	$	740.6

NOTE 7 – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:


(in millions)	April 2, 2017			September 30, 2016
Land, buildings and improvements	$	196.6		$	195.8
Machinery, equipment and other		565.6			550.6
Capitalized leases		249.7			130.0
Construction in progress		79.1			57.7

Property, plant and equipment	$	1,091.0		$	934.1
Accumulated depreciation		(430.2	)		(392.0	)

Property, plant and equipment, net	$	660.8		$	542.1

NOTE 8 - GOODWILL AND INTANGIBLE ASSETS

Goodwill, by segment, consists of the following:


(in millions)	GBA			HHI		PET			H&G		GAC			Total
As of September 30, 2016		345.1			702.8		299.8			196.5		934.2			2,478.4
Foreign currency impact		(2.5	)		0.1		(2.1	)		—		(0.1	)		(4.6	)

As of April 2, 2017	$	342.6		$	702.9	$	297.7		$	196.5	$	934.1		$	2,473.8

The carrying value and accumulated amortization for intangible assets subject to amortization are as follows:


	April 2, 2017							September 30, 2016
(in millions)	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
Customer relationships	$	976.8	$	(327.2	)	$	649.6	$	984.8	$	(302.9	)	$	681.9
Technology assets		238.2		(107.9	)		130.3		237.2		(96.7	)		140.5
Tradenames		165.8		(96.9	)		68.9		165.7		(89.1	)		76.6

Total	$	1,380.8	$	(532.0	)	$	848.8	$	1,387.7	$	(488.7	)	$	899.0

The range and weighted average useful lives for definite-lived intangible assets are as follows:


Asset Type	Range		Weighted Average
Customer relationships		2 - 20 years		18.5 years
Technology assets		5 - 18 years		11.2 years
Tradenames		5 - 13 years		11.4 years

Certain tradename intangible assets have an indefinite life and are not amortized. The balance of tradenames not subject to amortization was $1,463.7 million and $1,473.5 million as of April 2, 2017 and September 30, 2016, respectively. There was no impairment loss on indefinite-lived trade names for the three and six month periods ended April 2, 2017 and April 3, 2016.

Amortization expense from intangible assets for the three month periods ended April 2, 2017 and April 3, 2016 was $23.4 million and $23.4 million respectively. Amortization expense from intangible assets for the six month periods ended April 2, 2017 and April 3, 2016 was $47.1 million and $47.0 million respectively. Excluding the impact of any future acquisitions or changes in foreign currency, the Company estimates annual amortization expense of intangible assets for the next five fiscal years will be as follows:


(in millions)	Amortization
2017	$	91.9
2018		85.7
2019		85.4
2020		85.2
2021		81.9

NOTE 9 - DEBT

Debt consists of the following:


	SBH												SB/RH
	April 2, 2017						September 30, 2016						April 2, 2017						September 30, 2016
(in millions)	Amount			Rate			Amount			Rate			Amount			Rate			Amount			Rate
Term Loan, variable rate, due June 23, 2022	$	1,000.4			2.9	%	$	1,005.5			3.6	%	$	1,000.4			2.9	%	$	1,005.5			3.6	%
CAD Term Loan, variable rate, due June 23, 2022		53.8			4.5	%		54.9			4.6	%		53.8			4.5	%		54.9			4.6	%
Euro Term Loan, variable rate, due June 23, 2022		59.7			3.5	%		63.0			3.5	%		59.7			3.5	%		63.0			3.5	%
4.00% Notes, due October 1, 2026		453.7			4.0	%		477.0			4.0	%		453.7			4.0	%		477.0			4.0	%
5.75% Notes, due July 15, 2025		1,000.0			5.8	%		1,000.0			5.8	%		1,000.0			5.8	%		1,000.0			5.8	%
6.125% Notes, due December 15, 2024		250.0			6.1	%		250.0			6.1	%		250.0			6.1	%		250.0			6.1	%
6.375% Notes, due November 15, 2020		—			—	%		129.7			6.4	%		—			—	%		129.7			6.4	%
6.625% Notes, due November 15, 2022		570.0			6.6	%		570.0			6.6	%		570.0			6.6	%		570.0			6.6	%
Revolver Facility, variable rate, expiring March 6, 2022		201.5			3.3	%		—			—	%		201.5			3.3	%		—			—	%
Other notes and obligations		20.5			9.6	%		16.8			9.8	%		20.5			9.6	%		16.8			9.8	%
Obligations under capital leases		229.9			5.7	%		114.7			5.5	%		229.9			5.7	%		114.7			5.5	%

Total debt		3,839.5						3,681.6						3,839.5						3,681.6
Unamortized discount on debt		(4.2	)					(4.5	)					(4.2	)					(4.5	)
Debt issuance costs		(54.5	)					(56.9	)					(54.5	)					(56.9	)
Less current portion		(35.0	)					(164.0	)					(35.0	)					(164.0	)

Long-term debt, net of current portion	$	3,745.8					$	3,456.2					$	3,745.8					$	3,456.2

On October 6, 2016, the Company entered into the first amendment to the credit agreement under its Term Loans and Revolver Facility (the “Credit Agreement”) reducing the interest rate margins applicable to the USD Term Loans to either adjusted LIBOR (International Exchange London Interbank Offered Rate), subject to a 0.75% floor plus margin of 2.50% per annum, or base rate with a 1.75% floor plus margin of 1.50% per annum. The Company recognized $1.0 million of costs in connection with amending the Credit Agreement that has been recognized as interest expense. On March 6, 2017, the Company entered into a second amendment to the Credit Agreement expanding the overall capacity of the Revolver Facility to $700 million, reducing the interest rate margin to either adjusted LIBOR plus margin ranging from 1.75% to 2.25%, or base rate plus margin ranging from 0.75% to 1.25%, reducing the commitment fee to 35bps, and extending the maturity to March 2022. The Company recognized $2.6 million of costs in connection with amending the cash revolver that has been deferred as debt issuance costs. Subsequent to the six months ended April 2, 2017, on April 7, 2017, the Company entered into a third amendment to the credit agreement under its Term Loans reducing the interest rate margins applicable to the USD Term Loans to either adjusted LIBOR plus margin of 2.00% per annum, or base rate plus margin of 1.00%.

Subsequent to the amendments to the Credit Agreement discussed above, the Term Loans and Revolver Facility are subject to variable interest rates, (i) the USD Term Loan is subject to either adjusted LIBOR, subject to a 0.75% floor plus margin of 2.00% per annum, or base rate with a 1.75% floor plus margin of 1.00% per annum, (ii) the CAD Term Loan is subject to either CDOR (Canadian Dollar Offered Rate), subject to a 0.75% floor plus 3.50% per annum, or base rate with a 1.75% floor plus 2.50% per annum, (iii) the Euro Term Loan is subject to either EURIBOR (Euro Interbank Offered Rate), subject to a 0.75% floor plus 2.75% per annum, with no base rate option available and (iv) the Revolver Facility is subject to either adjusted LIBOR plus margin ranging from 1.75% to 2.25% per annum, or base rate plus margin ranging from 0.75% to 1.25% per annum. As a result of borrowings and payments under the Revolver Facility, at April 2, 2017, the Company had borrowing availability of $472.3 million, net outstanding letters of credit of $24.7 million and a $1.5 million amount allocated to a foreign subsidiary.

The Credit Agreement, solely with respect to the Revolver Facility, contains a financial covenant test on the last day of each fiscal quarter on the maximum total leverage ratio. This is calculated as the ratio of (i) the principal amount of third party debt for borrowed money (including unreimbursed letter of credit drawings), capital leases and purchase money debt, at period-end, less cash and cash equivalents, to (ii) adjusted EBITDA for the trailing twelve months. The maximum total leverage ratio should be no greater than 6.0 to 1.0. Additionally, as of April 2, 2017, we were in compliance with all other covenants under the Credit Agreement and the indentures governing the 6.625% Notes, the 6.125% Notes, the 5.75% Notes, and the 4.00% Notes.

On October 20, 2016, the Company redeemed the remaining outstanding aggregate principal on the 6.375% Notes of $129.7 million with a make whole premium of $4.6 million recognized as interest expense for the six month period ended April 2, 2017 in connection with the issuance of the €425 million aggregate principal amount 4.00% unsecured notes due 2026 (the “4.00% Notes”) and repurchase of the 6.375% Notes on September 20, 2016. The Company recognized $1.9 million in interest expense for previously deferred debt issuance costs associated with the 6.375% notes.

NOTE 10 - DERIVATIVES

Cash Flow Hedges

Commodity Swaps. The Company is exposed to risk from fluctuating prices for raw materials, specifically zinc and brass used in its manufacturing processes. The Company hedges a portion of the risk associated with the purchase of these materials through the use of commodity swaps. The hedge contracts are designated as cash flow hedges with the fair value changes recorded in AOCI and as a hedge asset or liability, as applicable. The unrecognized changes in fair value of the hedge contracts are reclassified from AOCI into earnings when the hedged purchase of raw materials also affects earnings. The swaps effectively fix the floating price on a specified quantity of raw materials through a specified date. At April 2, 2017, the Company had a series of zinc and brass swap contracts outstanding through August 2018. The derivative net gains estimated to be reclassified from AOCI into earnings over the next 12 months is $2.6 million, net of tax. The Company had the following commodity swap contracts outstanding as of April 2, 2017 and September 30, 2016.

April 2, 2017

September 30, 2016

(in millions, except notional)

Notional

Contract Value

Notional

Contract Value

Zinc swap contracts

6.8 Tons

15.7

6.7 Tons

12.8

Brass swap contracts

1.4 Tons

6.1

1.0 Tons

4.0

Foreign exchange contracts. The Company periodically enters into forward foreign exchange contracts to hedge a portion of the risk from forecasted foreign currency denominated third party and intercompany sales or payments. These obligations generally require the Company to exchange foreign currencies for U.S. Dollars, Euros, Pounds Sterling, Australian Dollars, Canadian Dollars or Japanese Yen. These foreign exchange contracts are cash flow hedges of fluctuating foreign exchange related to sales of product or raw material purchases. Until the sale or purchase is recognized, the fair value of the related hedge is recorded in AOCI and as a derivative hedge asset or liability, as applicable. At the time the sale or purchase is recognized, the fair value of the related hedge is reclassified as an adjustment to Net Sales or purchase price variance in Cost of Goods Sold on the Condensed Consolidated Statements of Income. At April 2, 2017, the Company had a series of foreign exchange derivative contracts outstanding through September 2018. The derivative net gains estimated to be reclassified from AOCI into earnings over the next 12 months is $2.2 million, net of tax. At April 2, 2017 and September 30, 2016, the Company had foreign exchange derivative contracts designated as cash flow hedges with a notional value of $252.9 million and $224.8 million, respectively.

Net Investment Hedge

On September 20, 2016, SBI issued €425 million aggregate principal amount of 4.00% Notes. The 4.00% Notes are denominated in Euros and were designated as a net investment hedge of the translation of the Company’s net investments in Euro denominated subsidiaries at the time of issuance. As a result, the translation of the Euro denominated debt is recognized as AOCI with any ineffective portion recognized as foreign currency translation gains or losses on the statement of income when the aggregate principal exceeds the net investment in its Euro denominated subsidiaries. Net gains or losses from the net investment hedge are reclassified from AOCI into earnings upon a liquidation event or deconsolidation of Euro denominated subsidiaries. As of April 2, 2017, the hedge was fully effective and no ineffective portion was recognized in earnings.

Derivative Contracts Not Designated as Hedges for Accounting Purposes

Foreign exchange contracts. The Company periodically enters into forward and swap foreign exchange contracts to economically hedge a portion of the risk from third party and intercompany payments resulting from existing obligations. These obligations generally require the Company to exchange foreign currencies for U.S. Dollars, Canadian Dollars, Euros, Pounds Sterling, Taiwanese Dollars, Hong Kong Dollars or Australian Dollars. These foreign exchange contracts are economic hedges of a related liability or asset recorded in the accompanying Condensed Consolidated Statements of Financial Position. The gain or loss on the derivative hedge contracts is recorded in earnings as an offset to the change in value of the related liability or asset at each period end. At April 2, 2017, the Company had a series of forward exchange contracts outstanding through December 2017. At April 2, 2017 and September 30, 2016, the Company had $202.4 million and $131.4 million, respectively, of notional value of such foreign exchange derivative contracts outstanding.

Commodity Swaps. 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 hedges a portion of the risk associated with these materials through the use of commodity swaps. The swap contracts are designated as economic hedges with the unrealized gain or loss recorded in earnings and as an asset or liability at each period end. The unrecognized changes in the fair value of the hedge contracts are adjusted through earnings when the realized gains or losses affect earnings upon settlement of the hedges. The swaps effectively fix the floating price on a specified quantity of silver through a specified date. At April 2, 2017, the Company had a series of commodity swaps outstanding through September 2017. The Company had the following commodity swaps outstanding as of April 2, 2017 and September 30, 2016:

April 2, 2017

September 30, 2016

(in millions, except notional)

Notional

Contract Value

Notional

Contract Value

Silver

10.4 troy oz.

0.2

31.0 troy oz.

0.6

Fair Value of Derivative Instruments

The fair value of the Company’s outstanding derivative contracts recorded in the Condensed Consolidated Statements of Financial Position is as follows:


(in millions)	Line Item	April 2, 2017		September 30, 2016
Derivative Assets
Commodity swaps - designated as hedge	Receivables—Other	$	4.1	$	2.9
Commodity swaps - designated as hedge	Deferred charges and other		0.2		—
Foreign exchange contracts - designated as hedge	Receivables—Other		4.1	$	5.5
Foreign exchange contracts - designated as hedge	Deferred charges and other		0.1		0.1
Foreign exchange contracts - not designated as hedge	Receivables—Other		0.4		0.2

Total Derivative Assets		$	8.9	$	8.7

Derivative Liabilities
Interest rate swaps - designated as hedge	Other current liabilities	$	—	$	0.7
Interest rate swaps - designated as hedge	Accrued interest		—		0.4
Commodity swaps - designated as hedge	Accounts payable		0.1		0.1
Foreign exchange contracts - designated as hedge	Accounts payable		1.3		1.7
Foreign exchange contracts - designated as hedge	Other long-term liabilities		0.2		0.1
Foreign exchange contracts - not designated as hedge	Accounts payable		0.6		0.2

Total Derivative Liabilities		$	2.2	$	3.2

The Company is exposed to the risk of default by the counterparties with which it transacts and generally does not require collateral or other security to support financial instruments subject to credit risk. The Company monitors counterparty credit risk on an individual basis by periodically assessing each counterparty’s credit rating exposure. The maximum loss due to credit risk equals the fair value of the gross asset derivatives that are concentrated with certain domestic and foreign financial institution counterparties. The Company considers these exposures when measuring its credit reserve on its derivative assets, which was less than $0.1 million as of April 2, 2017 and September 30, 2016.

The Company’s standard contracts do not contain 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. As of April 2, 2017 and September 30, 2016, there was no cash collateral outstanding. In addition, as of April 2, 2017 and September 30, 2016, the Company had no posted standby letters of credit related to such liability positions. The cash collateral is included in Other Receivables in the Condensed Consolidated Statements of Financial Position.

The following summarizes the impact of derivative instruments on the accompanying Condensed Consolidated Statements of Income for the three and six month periods ended April 2, 2017 and April 3, 2016, pretax:


	Effective Portion
For the three month period ended	Gain (Loss)			Reclassified to Earnings				Ineffective portion
April 2, 2017 (in millions)	in OCI			Line Item	Gain (Loss)			Line Item		Gain (Loss)
Interest rate swaps	$	(0.4	)	Interest expense	$	(0.7	)		Interest expense	$	—
Commodity swaps		2.4		Cost of goods sold		1.7			Cost of goods sold		—
Net investment hedge		(9.1	)	Other non-operating expense		—			Other non-operating expense		—
Foreign exchange contracts		(0.1	)	Net sales		—			Net sales		—
Foreign exchange contracts		(4.4	)	Cost of goods sold		2.8			Cost of goods sold		—

Total	$	(11.6	)		$	3.8				$	—


	Effective Portion
For the three month period ended	Gain (Loss)			Reclassified to Earnings				Ineffective portion
April 3, 2016 (in millions)	in OCI			Line Item	Gain (Loss)			Line Item		Gain (Loss)
Interest rate swaps	$	(0.7	)	Interest expense	$	(0.5	)		Interest expense	$	—
Commodity swaps		1.8		Cost of goods sold		(1.6	)		Cost of goods sold		—
Foreign exchange contracts		(6.6	)	Cost of goods sold		2.8			Cost of goods sold		—

Total	$	(5.5	)		$	0.7				$	—


	Effective Portion
For the six month period ended	Gain (Loss)			Reclassified to Earnings				Ineffective portion
April 2, 2017 (in millions)	in OCI			Line Item	Gain (Loss)			Line Item		Gain (Loss)
Interest rate swaps	$	(0.3	)	Interest expense	$	(1.0	)		Interest expense	$	—
Commodity swaps		3.8		Cost of goods sold		2.5			Cost of goods sold		—
Net investment hedge		23.3		Other non-operating expense		—			Other non-operating expense		—
Foreign exchange contracts		0.1		Net sales		—			Net sales		—
Foreign exchange contracts		5.9		Cost of goods sold		7.1			Cost of goods sold		—

Total	$	32.8			$	8.6				$	—


	Effective Portion
For the six month period ended	Gain (Loss)			Reclassified to Earnings				Ineffective portion
April 3, 2016 (in millions)	in OCI			Line Item	Gain (Loss)			Line Item		Gain (Loss)
Interest rate swaps	$	(0.3	)	Interest expense	$	(1.0	)		Interest expense	$	—
Commodity swaps		0.8		Cost of goods sold		(3.0	)		Cost of goods sold		—
Foreign exchange contracts		(0.1	)	Net sales		—			Net sales		—
Foreign exchange contracts		(1.2	)	Cost of goods sold		4.9			Cost of goods sold		—

Total	$	(0.8	)		$	0.9				$	—

The following summarizes the loss associated with derivative contracts not designated as hedges in the Condensed Consolidated Statements of Income for the three and six month periods ended April 2, 2017 and April 3, 2016:


		Three Months Ended					Six Months Ended
(in millions)	Line Item	April 2, 2017			April 3, 2016		April 2, 2017			April 3, 2016
Commodity swaps	Cost of goods sold	$	—		$	—	$	0.1		$	—
Foreign exchange contracts	Other non-operating expenses, net		(2.1	)		2.9		(1.4	)		0.8

Total		$	(2.1	)	$	2.9	$	(1.3	)	$	0.8

NOTE 11 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company has not changed the valuation techniques used in measuring the fair value of any financial assets and liabilities during the year. The Company’s derivative portfolio contains Level 2 instruments. See Note 10, “Derivatives” for additional detail. The fair value of derivative instruments as of April 2, 2017 and September 30, 2016 are as follows:


	April 2, 2017				September 30, 2016
	Carrying				Carrying
(in millions)	Amount		Fair Value		Amount		Fair Value
Derivative Assets	$	8.9	$	8.9	$	8.7	$	8.7
Derivative Liabilities	$	2.2	$	2.2	$	3.2	$	3.2

The carrying value of cash and cash equivalents, receivables, accounts payable and short term debt approximate fair value based on the short-term nature of these assets and liabilities.

The fair value measurements of the Company’s debt are valued at quoted input prices that are directly observable or indirectly observable through corroboration with observable market data (Level 2). The carrying value and fair value for debt as of April 2, 2017 and September 30, 2016 are as follows:


	April 2, 2017				September 30, 2016
	Carrying				Carrying
(in millions)	Amount		Fair Value		Amount		Fair Value
Total debt - SBH	$	3,780.8	$	3,974.6	$	3,620.2	$	3,865.1
Total debt - SB/RH	$	3,780.8	$	3,974.6	$	3,620.2	$	3,865.1

NOTE 12 - EMPLOYEE BENEFIT PLANS

The net periodic benefit cost for the Company’s pension and deferred compensation plans for the three and six month periods ended April 2, 2017, and April 3, 2016 are as follows:


	U.S. Plans						Non U.S. Plans
(in millions)	April 2, 2017			April 3, 2016			April 2, 2017			April 3, 2016
*Three month period ended*
Service cost	$	0.1		$	0.1		$	0.8		$	0.7
Interest cost		0.6			0.7			1.0			1.5
Expected return on assets		(1.1	)		(1.1	)		(1.0	)		(1.2	)
Recognized net actuarial loss		0.4			0.1			1.0			0.4

Net periodic benefit cost	$	—		$	(0.2	)	$	1.8		$	1.4

*Six month period ended*
Service cost	$	0.2		$	0.1		$	1.7		$	1.3
Interest cost		1.3			1.5			2.1			3.1
Expected return on assets		(2.2	)		(2.2	)		(2.0	)		(2.4	)
Recognized net actuarial loss		0.8			0.3			1.9			0.9

Net periodic benefit cost	$	0.1		$	(0.3	)	$	3.7		$	2.9

Weighted average assumptions
Discount rate		3.50	%		4.25	%		1.00 - 13.50	%		1.75 - 13.81	%
Expected return on plan assets		7.00	%		7.25	%		2.25 - 7.00	%		1.75 - 4.53	%
Rate of compensation increase		N/A			N/A			1.00 - 3.70	%		2.25 - 5.50	%

Company contributions to its pension and deferred compensation plans, including discretionary amounts, for the three month periods ended April 2, 2017 and April 3, 2016, were $2.1 million and $2.3 million, respectively. Company contributions to its pension and deferred compensation plans, including discretionary amounts, for the six month periods ended April 2, 2017 and April 3, 2016, were $3.4 million and $5.9 million, respectively.

NOTE 13 - SHARE BASED COMPENSATION

Share based compensation expense for SBH during the three month periods ended April 2, 2017 and April 3, 2016 was $14.3 million and $21.5 million respectively. Share based compensation expense for SBH during the six month periods ended April 2, 2017 and April 3, 2016 was $23.0 million and $31.6 million respectively. The remaining unrecognized pre-tax compensation cost for SBH at April 2, 2017 was $43.9 million.

Share based compensation expense for SB/RH during the three month periods ended April 2, 2017 and April 3, 2016 was $13.5 million and $20.2 million respectively. Share based compensation expense for SB/RH during the six month periods ended April 2, 2017 and April 3, 2016 was $21.3 million and $28.8 million respectively. The remaining unrecognized pre-tax compensation cost for SB/RH at April 2, 2017 was $42.7 million.

During the six month period ended April 2, 2017, SBH and SB/RH granted 0.7 million and 0.6 million Restricted Stock Units (“RSUs”) respectively. The total market value of the RSUs on the dates of the grants was $87.5 million and $86.0 million for SBH and SB/RH respectively. The fair value of RSUs is determined based on the market price of the Company’s shares of common stock on the grant date. A summary of the activity in the Company’s RSUs during the six month period ended April 2, 2017 is as follows:


	SBH								SB/RH
				Weighted		Fair						Weighted		Fair
				Average		Value						Average		Value
				Grant Date		at Grant						Grant Date		at Grant
(in millions, except per share data)	Shares			Fair Value		Date			Shares			Fair Value		Date
At September 30, 2016		0.6			94.97	$	54.8			0.5			96.92	$	45.3
Granted		0.7			126.96		87.5			0.6			126.81		86.0
Forfeited		—			116.13		(0.8	)		—			116.13		(0.8	)
Vested		(0.5	)		109.09		(53.5	)		(0.4	)		112.13		(47.4	)

At April 2, 2017		0.8			114.46	$	88.0			0.7			116.08	$	83.1

NOTE 14 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The changes in the components of AOCI, net of tax, for the six month period ended April 2, 2017 was as follows:


	Foreign						Employee
	Currency			Hedging			Benefit
(in millions)	Translation			Activity			Plans			Total
Accumulated other comprehensive (loss) income, as of September 30, 2016	$	(160.5	)	$	3.1		$	(72.0	)	$	(229.4	)
Other comprehensive (loss) income before reclassification		(27.9	)		32.8			1.5			6.4
Amounts reclassified from accumulated other comprehensive income (loss)		—			(8.6	)		2.6			(6.0	)

Other comprehensive (loss) income		(27.9	)		24.2			4.1			0.4
Deferred tax effect		3.5			(9.7	)		(1.1	)		(7.3	)
Deferred tax valuation allowance		—			—			—			—

Other comprehensive (loss) income, net of tax		(24.4	)		14.5			3.0			(6.9	)
Other comprehensive loss attributable to non-controlling interest		(0.2	)		—			—			(0.2	)

Other comprehensive (loss) income attributable to controlling interest		(24.2	)		14.5			3.0			(6.7	)

Accumulated other comprehensive (loss) income, as of April 2, 2017	$	(184.7	)	$	17.6		$	(69.0	)	$	(236.1	)

Amounts reclassified from AOCI associated with employee benefit plan costs and recognized on the Company’s Condensed Consolidated Statements of Income for the three and six month periods ended April 2, 2017 and April 3, 2016 were as follows:


	Three Month Period Ended				Six Month Period Ended
(in millions)	April 2, 2017		April 3, 2016		April 2, 2017		April 3, 2016
Cost of goods sold	$	0.8	$	0.4	$	1.6	$	0.7
Selling expenses		0.2		0.1		0.4		0.2
General and administrative expenses		0.3		0.1		0.6		0.3

Amounts reclassified from accumulated other comprehensive income	$	1.3	$	0.6	$	2.6	$	1.2

See Note 10 “Derivatives”, for amounts reclassified from AOCI from the Company’s derivative hedging activity.

NOTE 15 - INCOME TAXES

The effective tax rate for the three and six month periods ended April 2, 2017 and April 3, 2016 is as follows:


	Three Months Ended						Six Months Ended
	April 2, 2017			April 3, 2016			April 2, 2017			April 3, 2016
SBH		36.1	%		(2.8	)%		34.1	%		2.6	%
SB/RH		36.1	%		9.8	%		34.6	%		9.1	%

The estimated annual effective tax rate applied to these periods differs from the U.S. federal statutory rate of 35% principally due to income earned outside the U.S. that is subject to statutory rates lower than 35% net of U.S. and non-U.S. taxes provided on income earned outside the U.S. that is not permanently reinvested. For the three and six month periods ended April 3, 2016, the effective tax rate was reduced for the release of valuation allowance on U.S. net deferred tax assets. For the six month period ended April 3, 2016, the effective tax rate was also reduced by $5.9 million for non-recurring items related to the impact of tax law changes in state deferred tax rates on the Company’s net deferred tax liabilities.

NOTE 16 - SEGMENT INFORMATION

The Company identifies its segments based upon the internal organization that is used by management for making operating decisions and assessing performance as the source of the Company’s reportable segments. The Company manufactures, markets and/or distributes multiple product lines through various distribution networks, and in multiple geographic regions. The Company manages its business in five vertically integrated, product-focused reporting segments: (i) Global Batteries & Appliances, which consists of the Company’s worldwide battery and lighting products, electric personal care and small appliances businesses; (ii) Hardware & Home Improvement, which consists of the Company’s worldwide hardware, security and plumbing business; (iii) Global Pet Supplies, which consists of the Company’s worldwide pet supplies business; (iv) Home and Garden, which consists of the Company’s home and garden and insect control business and (v) Global Auto Care, which consists of the Company’s automotive appearance and performance products. Global strategic initiatives and financial objectives for each reportable segment are determined at the corporate level. Each segment is responsible for implementing defined strategic initiatives and achieving certain financial objectives, and has a general manager responsible for the sales and marketing initiatives and financial results for product lines within the segment.

Net sales relating to the segments for the three and six month periods ended April 2, 2017 and April 3, 2016 are as follows:


	SBH				SB/RH
Three month periods ended (in millions)	April 2, 2017		April 3, 2016		April 2, 2017		April 3, 2016
Consumer batteries	$	185.2	$	178.2	$	185.2	$	178.2
Small appliances		123.6		138.3		123.6		138.3
Personal care		104.7		108.4		104.7		108.4

Global Batteries & Appliances		413.5		424.9		413.5		424.9
Hardware & Home Improvement		313.7		301.7		313.7		301.7
Global Pet Supplies		191.8		208.5		191.8		208.5
Home and Garden		131.9		155.0		131.9		155.0
Global Auto Care		119.0		119.5		119.0		119.5

Net sales	$	1,169.9	$	1,209.6	$	1,169.9	$	1,209.6


	SBH				SB/RH
Six month periods ended (in millions)	April 2, 2017		April 3, 2016		April 2, 2017		April 3, 2016
Consumer batteries	$	445.7	$	430.8	$	445.7	$	430.8
Small appliances		310.0		328.2		310.0		328.2
Personal care		267.3		277.2		267.3		277.2

Global Batteries & Appliances		1,023.0		1,036.2		1,023.0		1,036.2
Hardware & Home Improvement		602.5		584.3		602.5		584.3
Global Pet Supplies		386.0		411.9		386.0		411.9
Home and Garden		181.7		202.7		181.7		202.7
Global Auto Care		188.5		193.3		188.5		193.3

Net sales	$	2,381.7	$	2,428.4	$	2,381.7	$	2,428.4

During the third quarter of the year ended September 30, 2016, the Company changed its performance metric to adjusted EBITDA to better reflect how the Chief Operating Decision Maker is currently evaluating the business and making operating decisions. All amounts for prior periods have been recast to reflect current presentation. EBITDA is calculated by excluding the Company’s income tax expense, interest expense, depreciation expense and amortization expense (from intangible assets) from net income. Adjusted EBITDA further excludes: (1) share based compensation expense as it is a non-cash based compensation cost; (2) acquisition and integration costs that consist of transaction costs from acquisition transactions during the period, or subsequent integration related project costs directly associated with the acquired business; (3) restructuring and related costs, which consist of project costs associated with restructuring initiatives across the segments; (4) non-cash purchase accounting inventory adjustments recognized in earnings subsequent to an acquisition; (5) non-cash asset impairments or write-offs realized; (6) and other. During the three and six month periods ended April 2, 2017, other adjustments consist of professional fees associated with non-acquisition based strategic initiatives of the Company. During the three and six month periods ended April 3, 2016, other adjustments consists of costs associated with the exiting of a key executive, coupled with onboarding a key executive. The following is a reconciliation of net income to adjusted EBITDA for the three and six month periods ended April 2, 2017 and April 3, 2016, respectively:


	SBH				SB/RH
Three month periods ended (in millions)	April 2, 2017		April 3, 2016		April 2, 2017		April 3, 2016
Global Batteries & Appliances	$	59.9	$	58.3	$	59.9	$	58.3
Hardware & Home Improvement		56.6		53.6		56.6		53.6
Global Pet Supplies		31.9		31.4		31.9		31.4
Home and Garden		35.6		44.2		35.6		44.2
Global Auto Care		45.4		48.6		45.4		48.6

Total Segment Adjusted EBITDA		229.4		236.1		229.4		236.1
Depreciation and amortization		47.6		44.7		47.6		44.7
Share-based compensation		14.3		21.5		13.5		20.2
Corporate expenses		9.3		6.5		9.2		6.3
Acquisition and integration related charges		5.1		13.3		5.1		13.3
Restructuring and related charges		8.2		1.6		8.2		1.6
Interest expense		50.6		57.5		50.7		57.5
Other		2.6		0.8		—		0.9

Income from operations before income taxes	$	91.7	$	90.2	$	95.1	$	91.6


	SBH				SB/RH
Six month periods ended (in millions)	April 2, 2017		April 3, 2016		April 2, 2017		April 3, 2016
Global Batteries & Appliances	$	168.9	$	163.8	$	168.9	$	163.8
Hardware & Home Improvement		115.8		107.3		115.8		107.3
Global Pet Supplies		62.7		60.6		62.7		60.6
Home and Garden		41.3		51.3		41.3		51.3
Global Auto Care		65.2		67.8		65.2		67.8

Total Segment Adjusted EBITDA		453.9		450.8		453.9		450.8
Depreciation and amortization		93.7		91.4		93.7		91.4
Share-based compensation		23.0		31.6		21.3		28.8
Corporate expenses		19.5		14.1		19.2		13.5
Acquisition and integration related charges		9.2		23.2		9.2		23.2
Restructuring and related charges		11.5		2.8		11.5		2.8
Interest expense		106.4		115.9		106.7		115.9
Other		2.6		1.0		—		1.2

Income from operations before income taxes	$	188.0	$	170.8	$	192.3	$	174.0

NOTE 17 - EARNINGS PER SHARE - SBH

The reconciliation of the numerator and denominator of the basic and diluted earnings per share calculation and the anti-dilutive shares for the three and six month periods ended April 2, 2017 and April 3, 2016 are as follows:


	Three months ended				Six months ended
(in millions, except per share amounts)	April 2, 2017		April 3, 2016		April 2, 2017		April 3, 2016
Numerator
Net income attributable to controlling interest	$	58.8	$	92.6	$	124.1	$	166.2
Denominator
Weighted average shares outstanding - basic		58.8		59.4		59.1		59.3
Dilutive shares		0.2		0.1		0.2		0.1

Weighted average shares outstanding - diluted		59.0		59.5		59.3		59.4
Earnings per share
Basic earnings per share	$	1.00	$	1.56	$	2.10	$	2.80
Diluted earnings per share	$	1.00	$	1.55	$	2.09	$	2.79
Weighted average number of anti-dilutive shares excluded from denominator
Restricted stock units		0.4		0.4		0.4		0.4

NOTE 18 - GUARANTOR STATEMENTS – SB/RH

Spectrum Brands, Inc. (“SBI”) with SB/RH as a parent guarantor (collectively, the “Parent”), with SBI’s domestic subsidiaries as subsidiary guarantors, has issued the 6.625% Notes under the 2022 Indenture, the 6.125% Notes under the 2024 Indenture, the 5.75% Notes under the 2025 Indenture and the 4.00% Notes under the 2026 Indenture.

The following consolidating financial statements illustrate the components of the condensed consolidated financial statements of SB/RH Holdings, LLC. The ‘Parent’ consists of the financial statements of Spectrum Brands, Inc. as the debt issuer, with SB/RH Holdings, LLC as a parent guarantor, without consolidated entities. SB/RH Holdings, LLC financial information is not presented separately as there are no independent assets or operations and therefore determined to not be material. Investments in subsidiaries are accounted for using the equity method for purposes of illustrating the consolidating presentation. The elimination entries presented herein eliminate investments in subsidiaries and intercompany balances and transactions.


Statement of Financial Position				Guarantor			Nonguarantor
As of April 2, 2017 (in millions)	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	5.1		$	0.1		$	131.9		$	—		$	137.1
Trade receivables, net		190.7			132.0			205.8			—			528.5
Intercompany receivables		—			810.6			238.1			(1,048.7	)		—
Other receivables		7.0			2.6			33.8			(0.6	)		42.8
Inventories		383.0			186.5			287.0			(20.2	)		836.3
Prepaid expenses and other		41.4			9.0			38.3			0.1			88.8

Total current assets		627.2			1,140.8			934.9			(1,069.4	)		1,633.5
Property, plant and equipment, net		329.2			112.2			219.4			—			660.8
Long-term intercompany receivables		210.0			114.5			12.9			(337.4	)		—
Deferred charges and other		210.6			0.9			42.3			(220.3	)		33.5
Goodwill		912.1			1,154.5			407.2			—			2,473.8
Intangible assets, net		1,312.0			619.7			380.8			—			2,312.5
Investments in subsidiaries		3,562.6			1,287.9			(2.9	)		(4,847.6	)		—

Total assets	$	7,163.7		$	4,430.5		$	1,994.6		$	(6,474.7	)	$	7,114.1

Liabilities and Shareholder’s Equity
Current liabilities:
Current portion of long-term debt	$	13.3		$	1.3		$	20.4		$	—		$	35.0
Accounts payable		202.7			103.9			218.4			—			525.0
Intercompany accounts payable		1,056.9			—			—			(1,056.9	)		—
Accrued wages and salaries		23.8			2.8			38.0			—			64.6
Accrued interest		37.2			—			—			—			37.2
Other current liabilities		65.1			15.5			94.1			(0.6	)		174.1

Total current liabilities		1,399.0			123.5			370.9			(1,057.5	)		835.9
Long-term debt, net of current portion		3,662.6			50.1			33.1			—			3,745.8
Long-term intercompany debt		11.7			200.6			116.7			(329.0	)		—
Deferred income taxes		236.0			487.4			79.9			(225.8	)		577.5
Other long-term liabilities		18.8			6.3			106.1			—			131.2

Total liabilities		5,328.1			867.9			706.7			(1,612.3	)		5,290.4
Shareholder’s equity:
Other capital		2,090.8			140.1			(963.3	)		761.2			2,028.8
Accumulated (deficit) earnings		(18.4	)		3,650.0			2,422.5			(6,072.5	)		(18.4	)
Accumulated other comprehensive (loss) income		(236.8	)		(227.5	)		(220.7	)		448.9			(236.1	)

Total shareholder’s equity		1,835.6			3,562.6			1,238.5			(4,862.4	)		1,774.3
Non-controlling interest		—			—			49.4			—			49.4

Total equity		1,835.6			3,562.6			1,287.9			(4,862.4	)		1,823.7

Total liabilities and equity	$	7,163.7		$	4,430.5		$	1,994.6		$	(6,474.7	)	$	7,114.1


Statement of Financial Position				Guarantor			Nonguarantor
As of September 30, 2016 (in millions)	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	98.6		$	3.1		$	169.1		$	—		$	270.8
Trade receivables, net		179.5			68.7			234.4			—			482.6
Intercompany receivables		—			909.1			233.4			(1,142.5	)		—
Other receivables		—			5.5			56.3			(6.2	)		55.6
Inventories		372.8			104.3			281.1			(17.6	)		740.6
Prepaid expenses and other		42.8			4.4			32.1			(0.5	)		78.8

Total current assets		693.7			1,095.1			1,006.4			(1,166.8	)		1,628.4
Property, plant and equipment, net		241.1			77.6			223.4			—			542.1
Long-term intercompany receivables		365.4			187.3			13.7			(566.4	)		—
Deferred charges and other		180.5			0.9			41.5			(190.8	)		32.1
Goodwill		912.1			1,154.5			411.8			—			2,478.4
Intangible assets, net		1,341.5			628.5			402.5			—			2,372.5
Investments in subsidiaries		3,497.8			1,258.1			(2.9	)		(4,753.0	)		—

Total assets	$	7,232.1		$	4,402.0		$	2,096.4		$	(6,677.0	)	$	7,053.5

Liabilities and Shareholder’s Equity
Current liabilities:
Current portion of long-term debt	$	143.6		$	1.4		$	19.9		$	(0.9	)	$	164.0
Accounts payable		257.5			58.4			264.2			—			580.1
Intercompany accounts payable		1,157.0			—			—			(1,157.0	)		—
Accrued wages and salaries		63.9			6.6			52.4			—			122.9
Accrued interest		39.3			—			—			—			39.3
Other current liabilities		88.0			11.0			95.5			(6.2	)		188.3

Total current liabilities		1,749.3			77.4			432.0			(1,164.1	)		1,094.6
Long-term debt, net of current portion		3,402.5			20.5			33.2			—			3,456.2
Long-term intercompany debt		12.8			346.1			192.6			(551.5	)		—
Deferred income taxes		189.0			459.2			80.3			(195.8	)		532.7
Other long-term liabilities		39.5			1.0			100.1			—			140.6

Total liabilities		5,393.1			904.2			838.2			(1,911.4	)		5,224.1
Shareholder’s equity:
Other capital		2,060.9			152.3			(954.0	)		741.7			2,000.9
Accumulated earnings (deficit)		8.0			3,551.6			2,362.1			(5,913.6	)		8.1
Accumulated other comprehensive (loss) income		(229.9	)		(206.1	)		(199.7	)		406.3			(229.4	)

Total shareholder’s equity		1,839.0			3,497.8			1,208.4			(4,765.6	)		1,779.6
Non-controlling interest		—			—			49.8			—			49.8

Total equity		1,839.0			3,497.8			1,258.2			(4,765.6	)		1,829.4

Total liabilities and equity	$	7,232.1		$	4,402.0		$	2,096.4		$	(6,677.0	)	$	7,053.5


Statement of Income				Guarantor			Nonguarantor
Three month period ended April 2, 2017 (in millions)	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Net sales	$	579.7		$	400.1		$	585.3		$	(395.2	)	$	1,169.9
Cost of goods sold		387.4			277.9			436.6			(391.3	)		710.6
Restructuring and related charges		0.3			3.8			—						4.1

Gross profit		192.0			118.4			148.7			(3.9	)		455.2
Selling		79.9			30.4			77.8			(0.7	)		187.4
General and administrative		58.0			18.1			19.8			—			95.9
Research and development		9.7			2.1			3.3			—			15.1
Acquisition and integration related charges		3.6			0.2			1.3			—			5.1
Restructuring and related charges		2.3			1.5			0.3			—			4.1

Total operating expense		153.5			52.3			102.5			(0.7	)		307.6

Operating income (loss)		38.5			66.1			46.2			(3.2	)		147.6
Interest expense		44.5			4.1			2.1			—			50.7
Other non-operating (income) expense, net		(66.7	)		(35.8	)		(0.7	)		105.0			1.8

Income from operations before income taxes		60.7			97.8			44.8			(108.2	)		95.1
Income tax (benefit) expense		(0.1	)		25.3			9.7			(0.6	)		34.3

Net income (loss)		60.8			72.5			35.1			(107.6	)		60.8
Net loss attributable to non-controlling interest		—			—			(0.2	)		—			(0.2	)

Net income (loss) attributable to controlling interest	$	60.8		$	72.5		$	35.3		$	(107.6	)	$	61.0


Statement of Income				Guarantor			Nonguarantor
Six month period ended April 2, 2017 (in millions)	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Net sales	$	1,212.6		$	592.8		$	1,296.8		$	(720.5	)	$	2,381.7
Cost of goods sold		805.0			415.4			967.6			(716.8	)		1,471.2
Restructuring and related charges		0.3			4.9			0.1			—			5.3

Gross profit		407.3			172.5			329.1			(3.7	)		905.2
Selling		161.2			51.4			165.7			(1.1	)		377.2
General and administrative		106.7			32.3			44.3			—			183.3
Research and development		18.8			3.8			6.9			—			29.5
Acquisition and integration related charges		6.4			0.3			2.5			—			9.2
Restructuring and related charges		2.8			1.9			1.5			—			6.2

Total operating expense		295.9			89.7			220.9			(1.1	)		605.4

Operating income		111.4			82.8			108.2			(2.6	)		299.8
Interest expense		93.9			8.1			4.7			—			106.7
Other non-operating (income) expense, net		(127.6	)		(81.2	)		(1.6	)		211.2			0.8

Income from operations before income taxes		145.1			155.9			105.1			(213.8	)		192.3
Income tax expense		19.3			27.1			20.5			(0.4	)		66.5

Net income (loss)		125.8			128.8			84.6			(213.4	)		125.8
Net loss attributable to non-controlling interest		—			—			(0.2	)		—			(0.2	)

Net income (loss) attributable to controlling interest	$	125.8		$	128.8		$	84.8		$	(213.4	)	$	126.0


Statement of Income				Guarantor			Nonguarantor
Three month period ended April 3, 2016 (in millions)	Parent			Subsidiaries			Subsidiaries		Eliminations			Consolidated
Net sales	$	574.3		$	409.3		$	606.9	$	(380.9	)	$	1,209.6
Cost of goods sold		393.6			276.9			454.6		(378.5	)		746.6
Restructuring and related charges		—			—			0.2		—			0.2

Gross profit		180.7			132.4			152.1		(2.4	)		462.8
Selling		80.6			29.8			79.6		(0.5	)		189.5
General and administrative		55.2			18.1			20.9		—			94.2
Research and development		9.5			1.4			3.6		—			14.5
Acquisition and integration related charges		7.1			2.5			3.7		—			13.3
Restructuring and related charges		0.5			0.3			0.6		—			1.4

Total operating expense		152.9			52.1			108.4		(0.5	)		312.9

Operating income (loss)		27.8			80.3			43.7		(1.9	)		149.9
Interest expense		48.0			5.1			4.4		—			57.5
Other non-operating (income) expense, net		(80.8	)		(44.9	)		0.5		126.0			0.8

Income from operations before income taxes		60.6			120.1			38.8		(127.9	)		91.6
Income tax (benefit) expense		(22.0	)		28.5			6.7		(4.2	)		9.0

Net income (loss)		82.6			91.6			32.1		(123.7	)		82.6
Net income attributable to non-controlling interest		—			—			0.1		—			0.1

Net income (loss) attributable to controlling interest	$	82.6		$	91.6		$	32.0	$	(123.7	)	$	82.5


Statement of Income				Guarantor			Nonguarantor
Six month period ended April 3, 2016 (in millions)	Parent			Subsidiaries			Subsidiaries		Eliminations			Consolidated
Net sales	$	1,206.3		$	600.2		$	1,341.1	$	(719.2	)	$	2,428.4
Cost of goods sold		829.7			412.8			997.6		(715.5	)		1,524.6
Restructuring and related charges		—			—			0.3		—			0.3

Gross profit		376.6			187.4			343.2		(3.7	)		903.5
Selling		156.6			50.8			170.1		(0.9	)		376.6
General and administrative		107.2			32.7			38.8		—			178.7
Research and development		18.1			2.8			7.4		—			28.3
Acquisition and integration related charges		13.5			3.3			6.4		—			23.2
Restructuring and related charges		1.3			0.4			0.8		—			2.5

Total operating expense		296.7			90.0			223.5		(0.9	)		609.3

Operating income (loss)		79.9			97.4			119.7		(2.8	)		294.2
Interest expense		96.3			10.5			9.0		0.1			115.9
Other non-operating (income) expense, net		(152.8	)		(92.1	)		4.1		245.1			4.3

Income from operations before income taxes		136.4			179.0			106.6		(248.0	)		174.0
Income tax (benefit) expense		(21.7	)		24.7			17.0		(4.1	)		15.9

Net income (loss)		158.1			154.3			89.6		(243.9	)		158.1
Net income attributable to non-controlling interest		—			—			0.2		—			0.2

Net income (loss) attributable to controlling interest	$	158.1		$	154.3		$	89.4	$	(243.9	)	$	157.9


Statement of Comprehensive Income				Guarantor			Nonguarantor
Three month period ended April 2, 2017 (in millions)	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	60.8		$	72.5		$	35.1		$	(107.6	)	$	60.8
Other comprehensive income (loss), net of tax:
Foreign currency translation gain (loss)		21.7			26.4			26.9			(53.3	)		21.7
Unrealized (loss) gain on derivative instruments		(9.7	)		(5.1	)		(5.2	)		10.3			(9.7	)
Defined benefit pension (loss) gain		(0.3	)		(0.4	)		(0.3	)		0.7			(0.3	)

Other comprehensive income (loss)		11.7			20.9			21.4			(42.3	)		11.7

Comprehensive income (loss)		72.5			93.4			56.5			(149.9	)		72.5
Comprehensive income attributable to non-controlling interest		—			—			0.1			—			0.1

Comprehensive income (loss) attributable to controlling interest	$	72.5		$	93.4		$	56.4		$	(149.9	)	$	72.4


Statement of Comprehensive Income				Guarantor			Nonguarantor
Six month period ended April 2, 2017 (in millions)	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	125.8		$	128.8		$	84.6		$	(213.4	)	$	125.8
Other comprehensive income (loss), net of tax:
Foreign currency translation (loss) gain		(24.4	)		(23.5	)		(23.0	)		46.5			(24.4	)
Unrealized gain (loss) on derivative instruments		14.5			(0.9	)		(0.8	)		1.7			14.5
Defined benefit pension gain (loss)		3.0			3.0			3.0			(6.0	)		3.0

Other comprehensive (loss) income		(6.9	)		(21.4	)		(20.8	)		42.2			(6.9	)

Comprehensive income (loss)		118.9			107.4			63.8			(171.2	)		118.9
Comprehensive loss attributable to non-controlling interest		—			—			(0.2	)		—			(0.2	)

Comprehensive income (loss) attributable to controlling interest	$	118.9		$	107.4		$	64.0		$	(171.2	)	$	119.1


Statement of Comprehensive Income				Guarantor			Nonguarantor
Three month period ended April 3, 2016 (in millions)	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	82.6		$	91.6		$	32.1		$	(123.7	)	$	82.6
Other comprehensive income (loss), net of tax:
Foreign currency translation gain (loss)		28.2			28.3			28.3			(56.6	)		28.2
Unrealized (loss) gain on derivative instruments		(2.9	)		(5.5	)		(5.6	)		11.1			(2.9	)
Defined benefit pension (loss) gain		(0.6	)		(0.6	)		(0.6	)		1.2			(0.6	)

Other comprehensive income (loss)		24.7			22.2			22.1			(44.3	)		24.7

Comprehensive income (loss)		107.3			113.8			54.2			(168.0	)		107.3
Comprehensive income attributable to non-controlling interest		—			—			—			—			—

Comprehensive income (loss) attributable to controlling interest	$	107.3		$	113.8		$	54.2		$	(168.0	)	$	107.3


Statement of Comprehensive Income			Guarantor			Nonguarantor
Six month period ended April 3, 2016 (in millions)	Parent		Subsidiaries			Subsidiaries			Eliminations			Consolidated
Net income (loss)	$	158.1	$	154.3		$	89.6		$	(243.9	)	$	158.1
Other comprehensive income (loss), net of tax:
Foreign currency translation gain (loss)		7.8		7.8			7.8			(15.7	)		7.7
Unrealized gain (loss) on derivative instruments		0.7		(2.8	)		(2.8	)		5.7			0.8
Defined benefit pension gain (loss)		0.5		0.5			0.5			(1.0	)		0.5

Other comprehensive income (loss)		9.0		5.5			5.5			(11.0	)		9.0

Comprehensive income (loss)		167.1		159.8			95.1			(254.9	)		167.1
Comprehensive loss attributable to non-controlling interest		—		—			(0.1	)		—			(0.1	)

Comprehensive income (loss) attributable to controlling interest	$	167.1	$	159.8		$	95.2		$	(254.9	)	$	167.2


Statement of Cash Flows				Guarantor			Nonguarantor
Six month period ended April 2, 2017 (in millions)	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Net cash (used) provided by operating activities	$	171.4		$	227.2		$	211.8		$	(597.7	)	$	12.7
Cash flows from investing activities
Purchases of property, plant and equipment		(22.5	)		(10.8	)		(18.0	)		—			(51.3	)
Proceeds from sales of property, plant and equipment		—			0.2			0.6			—			0.8
Other investing activities		—			(1.2	)		—			—			(1.2	)

Net cash used by investing activities		(22.5	)		(11.8	)		(17.4	)		—			(51.7	)
Cash flows from financing activities
Proceeds from issuance of debt		216.1			—			—			—			216.1
Payment of debt		(140.8	)		—			(10.8	)		—			(151.6	)
Payment of debt issuance costs		(2.7	)		—			—			—			(2.7	)
Payment of cash dividends to parent		(152.5	)		—			—			—			(152.5	)
Advances related to intercompany transactions		(162.5	)		(218.4	)		(216.8	)		597.7			—

Net cash (used) provided by financing activities		(242.4	)		(218.4	)		(227.6	)		597.7			(90.7	)
Effect of exchange rate changes on cash and cash equivalents		—			—			(4.0	)		—			(4.0	)

Net decrease in cash and cash equivalents		(93.5	)		(3.0	)		(37.2	)		—			(133.7	)
Cash and cash equivalents, beginning of period		98.6			3.1			169.1			—			270.8

Cash and cash equivalents, end of period	$	5.1		$	0.1		$	131.9		$	—		$	137.1


Statement of Cash Flows				Guarantor			Nonguarantor
Six month period ended April 3, 2016 (in millions)	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Net cash (used) provided by operating activities	$	(557.4	)	$	146.2		$	(346.4	)	$	593.9		$	(163.7	)
Cash flows from investing activities											—
Purchases of property, plant and equipment		(20.1	)		(6.4	)		(12.2	)		—			(38.7	)
Proceeds from sales of property, plant and equipment		0.1			—			0.7			—			0.8

Net cash used by investing activities		(20.0	)		(6.4	)		(11.5	)		—			(37.9	)
Cash flows from financing activities
Proceeds from issuance of debt		188.9			—			—			—			188.9
Payment of debt		(47.0	)		—			(1.1	)		—			(48.1	)
Payment of debt issuance costs		(1.6	)		—			—			—			(1.6	)
Payment of cash dividends to parent		(52.0	)		—			—			—			(52.0	)
Advances related to intercompany transactions		480.4			(147.5	)		261.0			(593.9	)		—

Net cash provided (used) by financing activities		568.7			(147.5	)		259.9			(593.9	)		87.2
Effect of exchange rate changes on cash and cash equivalents		—			—			(0.3	)		—			(0.3	)

Net decrease in cash and cash equivalents		(8.7	)		(7.7	)		(98.3	)		—			(114.7	)
Cash and cash equivalents, beginning of period		13.0			8.6			226.3			—			247.9

Cash and cash equivalents, end of period	$	4.3		$	0.9		$	128.0		$	—		$	133.2

NOTE 19 – SUBSEQUENT EVENT

On April 26, 2017, the Company entered into a definitive purchase agreement for the acquisition of Petmatrix LLC, a manufacturer and marketer of rawhide-free dog chews, with a cash purchase price of approximately $255 million. The acquisition is expected to close by the end of May 2017 and will be integrated as part of our PET segment.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

The following is management’s discussion of the financial results, liquidity and other key items related to our performance and should be read in conjunction with the Condensed Consolidated Financial Statements and related notes included in Item 1 of this Quarterly Report on Form 10-Q. Unless the context indicates otherwise, the term the “Company,” “Spectrum,” “we,” “our,” or “us” are used to refer to Spectrum Brands Holdings, Inc. and its subsidiaries and SB/RH Holdings, LLC and its subsidiaries, collectively.

Business Overview

We are a diversified global branded consumer products company. The Company manufactures, markets and/or distributes its products in approximately 160 countries in the North America (“NA”), Europe, Middle East & Africa (“EMEA”), Latin America (“LATAM”) and Asia-Pacific (“APAC”) 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 recognition of our various brands and patented technologies. Our diversified global branded consumer products have positions in several product categories and types. We manage the businesses in five vertically integrated, product-focused segments: (i) Global Batteries & Appliances (“GBA”), (ii) Global Pet Supplies (“PET”), (iii) Home and Garden (“H&G”), (iv) Hardware & Home Improvement (“HHI”) and (v) Global Auto Care (“GAC”). Global and geographic strategic initiatives and financial objectives are determined at the corporate level. Each segment is responsible for implementing defined strategic initiatives and achieving certain financial objectives and has a general manager responsible for sales and marketing initiatives and the financial results for all product lines within that segment. See Note 16, “Segment Information” of Notes to the Condensed Consolidated Financial Statements, included elsewhere in this Quarterly Report for more information pertaining to segments. The following table summarizes the respective product types, brands, and regions for each of the segments:


Segment	Products	Brands	Regions
GBA	Consumer batteries: Alkaline, zinc carbon, and NiMH rechargeable batteries; hearing aid and other specialty battery products; battery powered portable lighting products. Small appliances: Small kitchen and home appliances. Personal care: Electric shaving and grooming products, hair care appliances and accessories.	Consumer batteries: Rayovac^® , VARTA^®. Small appliances: Black & Decker^®, George Foreman^®, Russell Hobbs^®, Juiceman^®, Breadman^®, Farberware^® and Toastmaster^®. Personal care: Remington^®.	NA EMEA LATAM APAC

HHI	Hardware: Hinges, security hardware, screen and storm door products, garage door hardware, window hardware and floor protection. Security: Residential locksets and door hardware including knobs, levers, deadbolts, handlesets and electronics. Commercial doors, locks, and hardware. Plumbing: Kitchen, bath and shower faucets and plumbing products.	Hardware: National Hardware^®, Stanley^® and FANAL^®. Security: Kwikset^®, Weiser^®, Baldwin^®, EZSET^® and Tell^®. Plumbing: Pfister^®.	NA EMEA LATAM APAC

PET	Companion Animal: Dog, cat and small animal food and treats; clean-up and training aid products and accessories; pet health and grooming products. Aquatics: Aquariums and aquatic health supplies.	Companion Animal: 8-in-1^®, Dingo^®, Nature’s Miracle^®, Wild Harvest^®, Littermaid^®, Jungle^®, Excel^®, FURminator^®, IAMS^®, Eukanuba^®, Healthy-Hide^®, ProSense^®, Perfect Coat^®, eCOTRITION^®, Birdola^® and Digest-eeze^®. Aquatics: Tetra^®, Marineland^®, Whisper^® and Instant Ocean^®.	NA EMEA LATAM APAC

H&G	Controls: Outdoor insect and weed control solutions, animal repellents. Household: Household insecticides and pest controls. Repellents: Personal use pesticides and insect repellent products.	Controls: Spectracide^®, Garden Safe^®, Liquid Fence^®, and EcoLogic^®. Household: Hot Shot^®, Black Flag^®, Real Kill^®, Ultra Kill^®, The Ant Trap^® (TAT), and Rid-a-Bug^®. Repellents: Cutter^® and Repel^®.	NA LATAM

GAC	Appearance: Protectants, wipes, tire and wheel care products, glass cleaners, leather care products, air fresheners and washes. Performance: Automotive fuel and oil additives, and functional fluids. A/C Recharge: Do-it-yourself air conditioner recharge products, refrigerant and oil recharge kits, sealants and accessories.	Appearance: Armor All^®. Performance: STP^®. A/C Recharge: A/C PRO^®.	NA EMEA LATAM APAC

Refinancing Activity

See Note 9, “Debt” in the Notes to the Condensed Consolidated Financial Statements, included elsewhere within this Quarterly Report, for additional detail regarding debt. The following recent financing activity has a significant impact on the comparability of financial results on the condensed consolidated financial statements.

On October 6, 2016, the Company entered into the first amendment to the credit agreement under its Term Loans, reducing the interest rate margins applicable to the USD Term Loan to adjusted LIBOR subject to a 0.75% floor plus margin of 2.50% per annum, or base rate with a 1.75% floor plus margin of 1.50% per annum. On March 6, 2017, the Company entered into a second amendment to the Credit Agreement expanding the overall capacity of the Revolver Facility to $700 million, reducing the interest rate margin to either adjusted LIBOR plus margin ranging from 1.75% to 2.25%, or base rate plus margin ranging from 0.75% to 1.25%, reducing the commitment fee to 35bps, and extending the maturity to March 2022.

On September 20, 2016, we issued €425 million aggregate principal amount of 4.00% unsecured notes due 2026 (the “4.00% Notes”). The proceeds from the 4.00% Notes and draws on the Revolver were used to repay our outstanding 6.375% unsecured notes due 2020 (the “6.375% Notes”) and pay fees and expenses in connection with the refinancing. The Company repurchased $390.3 million aggregate principal amount of the 6.375% Notes through a cash tender offer on September 20, 2016, with the remaining outstanding aggregate principal amount of $129.7 million subsequently redeemed by the Company during the three month period ended January 1, 2017.

Restructuring Activity

We continually seek to improve our operational efficiency, match our manufacturing capacity and product costs to market demand and better utilize our manufacturing resources. We have undertaken various initiatives to reduce manufacturing and operating costs, which may have a significant impact on the comparability of financial results on the condensed consolidated financial statements. The most significant of these initiatives are the GAC Business Rationalization Initiative, which began in the three month period ended July 3, 2016 and anticipated to be incurred through September 30, 2017; and the HHI Distribution Center Consolidation, which began in the three month period ended April 2, 2017 and is anticipated to be incurred through December 31, 2019. See Note 4, “Restructuring and Related Charges” in the Notes to the Condensed Consolidated Financial Statements, included elsewhere within this Quarterly report for additional detail.

Non-GAAP Measurements

Our consolidated and segment results contain non-GAAP metrics such as organic net sales, and adjusted EBITDA (“Earnings Before Interest, Taxes, Depreciation, Amortization”). While we believe organic net sales and adjusted EBITDA are useful supplemental information, such adjusted results are not intended to replace our financial results in accordance with Accounting Principles Generally Accepted in the United States (“GAAP”) and should be read in conjunction with those GAAP results.

Organic Net Sales. We define organic net sales as net sales excluding the effect of changes in foreign currency exchange rates and/or impact from acquisitions (when applicable). We believe this non-GAAP measure provides useful information to investors because it reflects regional and operating segment performance from our activities without the effect of changes in currency exchange rate and/or acquisitions. We use organic net sales as one measure to monitor and evaluate our regional and segment performance. Organic growth is calculated by comparing organic net sales to net sales in the prior year. The effect of changes in currency exchange rates is determined by translating the period’s net sales using the currency exchange rates that were in effect during the prior comparative period. Net sales are attributed to the geographic regions based on the country of destination. We exclude net sales from acquired businesses in the current year for which there are no comparable sales in the prior period. The following is a reconciliation of reported net sales to organic net sales for the three and six month periods ended April 2, 2017 compared to net sales for the three and six month periods ended April 3, 2016, respectively:

April 2, 2017

Three Month Period Ended

(in millions, except %)

Net Sales

Effect of Changes in
Currency

Organic
Net Sales

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