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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended December 29, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to           

\

Picture 1

Commission File No.

Name of Registrant, State of Incorporation,

Address of Principal Offices, and Telephone No.

IRS Employer Identification No.

1-4219

Spectrum Brands Holdings, Inc.

(a Delaware corporation)

3001 Deming Way

Middleton, WI 53562

(608) 275-3340

www.spectrumbrands.com

74-1339132

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

x

No

SB/RH Holdings, LLC

Yes

x

No

Indicate by check mark whether the registrants have submitted electronically 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

x

No

SB/RH Holdings, LLC

Yes

x

No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth 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.

X

SB/RH Holdings, LLC

X

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

x

SB/RH Holdings, LLC

Yes

No

x

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

x

SB/RH Holdings, LLC

Yes

No

x

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

Securities registered pursuant to Section 12(b) of the Exchange Act:

Registrant

Title of Each Class

Trading Symbol

Name of Exchange On Which Registered

Spectrum Brands Holdings, Inc.

Common Stock, $0.01 par value

SPB

New York Stock Exchange

As of January 31, 2020, there were 45,894,687 shares outstanding 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 effect of the general economic conditions, including the impact of, and changes to tariffs and trade policies, inflation, recession or fears of a recession, depression or fears of a depression, labor costs and stock market volatility or monetary or fiscal policies in the countries where we do business;

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;

the loss of, significant reduction in, or dependence upon, 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 impact of actions taken by significant stockholders;

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 identify, implement, achieve and sustain productivity improvements (including our Global Productivity Plan), cost efficiencies (including at our manufacturing and distribution operations), and cost savings;

the seasonal nature of sales of certain of our products;

the effects of climate change and unusual weather activity;

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 products that we manufacture and sell, including the potential for environmental liabilities, product liability claims, litigation and other claims related to products manufactured by us and third parties;

the impact of existing, pending or threatened litigation, regulation or other requirements or operating standards applicable to our business;

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

changes in accounting policies applicable to our business;

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

government regulations;

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

our ability to successfully implement further acquisitions or dispositions and the impact of any such transactions on our financial performance;

the unanticipated loss of key members of senior management and the transition of new members of our management teams to their new roles; 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.

PART I

FINANCIAL INFORMATION

Page

Item 1.

Financial Statements

2

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

Condensed Consolidated Statements of Financial Position as of December 29, 2019 and September 30, 2019

2

Condensed Consolidated Statements of Income for the three month periods ended December 29, 2019 and December 30, 2018

3

Condensed Consolidated Statements of Comprehensive Income for the three month periods ended December 29, 2019 and December 30, 2018

4

Condensed Consolidated Statement of Shareholders’ Equity for the three month periods ended December 29, 2019 and December 30, 2018

5

Condensed Consolidated Statements of Cash Flows for the three month periods ended December 29, 2019 and December 30, 2018

6

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

Condensed Consolidated Statements of Financial Position as of December 29, 2019 and September 30, 2019

7

Condensed Consolidated Statements of Income for the three month periods ended December 29, 2019 and December 30, 2018

8

Condensed Consolidated Statements of Comprehensive Income for the three month periods ended December 29, 2019 and December 30, 2018

9

Condensed Consolidated Statement of Shareholder’s Equity for the three month periods ended December 29, 2019 and December 30, 2018

10

Condensed Consolidated Statements of Cash Flows for the three month periods ended December 29, 2019 and December 30, 2018

11

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

Combined Notes to Condensed Consolidated Financial Statements

13

Item 2.

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

34

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

44

Item 4.

Controls and Procedures

44

PART II

OTHER INFORMATION

Item 1.

Legal Proceedings

45

Item 1A.

Risk Factors

45

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

45

Item 5.

Other Information

45

Item 6.

Exhibits

45

Signatures

46

1


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SPECTRUM BRANDS HOLDINGS, INC.

Condensed Consolidated Statements of Financial Position

As of December 29, 2019, and September 30, 2019

(unaudited)

(in millions)

December 29, 2019

September 30, 2019

Assets

Cash and cash equivalents

$

142.2 

$

627.1 

Trade receivables, net

510.0 

356.7 

Other receivables

54.7 

74.2 

Inventories

627.8 

548.4 

Prepaid expenses and other current assets

62.0 

53.5 

Current assets of business held for sale

29.0 

Total current assets

1,425.7 

1,659.9 

Property, plant and equipment, net

403.4 

452.9 

Operating lease assets

98.5 

Investments

269.3 

230.8 

Deferred charges and other

52.1 

51.7 

Goodwill

1,321.5 

1,328.1 

Intangible assets, net

1,472.6 

1,507.1 

Total assets

$

5,043.1 

$

5,230.5 

Liabilities and Shareholders' Equity

Current portion of long-term debt

$

13.9 

$

136.9 

Accounts payable

471.0 

456.8 

Accrued wages and salaries

48.0 

72.1 

Accrued interest

36.7 

29.3 

Indemnification payable to Energizer

231.1 

230.8 

Other current liabilities

191.0 

216.0 

Current liabilities of business held for sale

9.3 

Total current liabilities

1,001.0 

1,141.9 

Long-term debt, net of current portion

2,324.3 

2,214.4 

Long-term operating lease liabilities

85.6 

Deferred income taxes

50.8 

55.9 

Other long-term liabilities

108.1 

112.0 

Total liabilities

3,569.8 

3,524.2 

Commitments and contingencies (Note 18)

 

 

Shareholders' equity

Common stock

0.5 

0.5 

Additional paid-in capital

2,007.6 

2,031.1 

Accumulated earnings

144.9 

201.2 

Accumulated other comprehensive loss, net of tax

(249.1)

(273.6)

Treasury stock

(439.6)

(260.9)

Total shareholders' equity

1,464.3 

1,698.3 

Noncontrolling interest

9.0 

8.0 

Total equity

1,473.3 

1,706.3 

Total liabilities and equity

$

5,043.1 

$

5,230.5 

See accompanying notes to the condensed consolidated financial statements


2


SPECTRUM BRANDS HOLDINGS, INC.

Condensed Consolidated Statements of Income

For the three month periods ended December 29, 2019 and December 30, 2018

(unaudited)

Three Month Periods Ended

(in millions, except per share)

December 29, 2019

December 30, 2018

Net Sales

$

871.5

$

880.3 

Cost of goods sold

592.5

573.7 

Restructuring and related charges

9.9

0.9 

Gross profit

269.1

305.7 

Selling

146.1

155.6 

General and administrative

80.4

99.3 

Research and development

9.9

11.1 

Restructuring and related charges

17.5

8.2 

Transaction related charges

4.1

6.3 

Write-off from impairment of intangible assets

24.2

Loss on assets held for sale

32.8

Total operating expenses

315.0

280.5 

Operating (loss) income

(45.9)

25.2 

Interest expense

34.8

57.0 

Other non-operating (income) expense, net

(43.7)

0.7 

Loss from continuing operations before income taxes

(37.0)

(32.5)

Income tax expense (benefit)

0.7

(3.4)

Net loss from continuing operations

(37.7)

(29.1)

Income (loss) from discontinued operations, net of tax

2.8

(83.2)

Net loss

(34.9)

(112.3)

Net income attributable to non-controlling interest

0.9

0.2 

Net loss attributable to controlling interest

$

(35.8)

$

(112.5)

Amounts attributable to controlling interest

Net loss from continuing operations attributable to controlling interest

$

(38.6)

$

(29.3)

Net income (loss) from discontinued operations attributable to controlling interest

2.8

(83.2)

Net loss attributable to controlling interest

$

(35.8)

$

(112.5)

Earnings Per Share

Basic earnings per share from continuing operations

$

(0.81)

$

(0.56)

Basic earnings per share from discontinued operations

0.06

(1.55)

Basic earnings per share

$

(0.75)

$

(2.11)

Diluted earnings per share from continuing operations

$

(0.81)

$

(0.56)

Diluted earnings per share from discontinued operations

0.06

(1.55)

Diluted earnings per share

$

(0.75)

$

(2.11)

Dividend per share

$

0.42

$

0.42 

Weighted Average Shares Outstanding

Basic

47.7

53.4 

Diluted

47.7

53.4 

See accompanying notes to the condensed consolidated financial statements


3


SPECTRUM BRANDS HOLDINGS, INC

Condensed Consolidated Statements of Comprehensive Income

For the three month periods ended December 29, 2019 and December 30, 2018

(unaudited)

Three Month Periods Ended

(in millions)

December 29, 2019

December 30, 2018

Net loss

$

(34.9)

$

(112.3)

Foreign currency translation gain (loss)

26.6 

(9.8)

Deferred tax effect

(0.1)

(2.1)

Net unrealized gain (loss) on foreign currency translation

26.5 

(11.9)

Unrealized gain (loss) on derivative instruments

Unrealized (loss) gain on hedging activity before reclassification

(6.2)

5.5 

Net reclassification for gain to income from continuing operations

(2.6)

(2.9)

Net reclassification for gain to income from discontinued operations

(0.1)

Unrealized (loss) gain on hedging instruments after reclassification

(8.8)

2.5 

Deferred tax effect

2.6 

(3.1)

Net unrealized loss on hedging derivative instruments

(6.2)

(0.6)

Defined benefit pension gain

Defined benefit pension gain before reclassification

2.9 

1.1 

Net reclassification for loss to income from continuing operations

1.0 

0.5 

Net reclassification for loss to income from discontinued operations

0.2 

Defined benefit pension gain after reclassification

3.9 

1.8 

Deferred tax effect

0.1 

(0.3)

Net defined benefit pension gain

4.0 

1.5 

Net change to derive comprehensive income (loss) for the periods

24.3 

(11.0)

Comprehensive loss

(10.6)

(123.3)

Comprehensive income attributable to non-controlling interest

0.1 

Comprehensive loss attributable to controlling interest

$

(10.7)

$

(123.3)

See accompanying notes to the condensed consolidated financial statements

4




SPECTRUM BRANDS HOLDINGS, INC

Condensed Consolidated Statements of Shareholder’s Equity

For the three month periods ended December 29, 2019 and December 30, 2018

(unaudited)

Accumulated

Additional