SEC Filings

424B3
SPECTRUM BRANDS, INC. filed this Form 424B3 on 08/03/2016
Entire Document
 
424B3
Table of Contents

Prospectus Supplement No. 3

to Prospectus dated February 2, 2016

Filed pursuant to Rule 424(b)(3)
File No. 333-209020

 

 

LOGO

Spectrum Brands, Inc.

6.375% Senior Notes due 2020 and Related Guarantees

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 February 2, 2016 (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 6.375% Senior Notes due 2020 and Related Guarantees, 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 August 3, 2016 (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 15 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 August 3, 2016.

 


Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

 

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

For the quarterly period ended July 3, 2016

OR

 

¨ 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  x            No  ¨
SB/RH Holdings, LLC    Yes  x            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  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, 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.    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

As of August 1, 2016, there were outstanding 59,404,604 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).

 

 

 


Table of Contents

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 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;

 

    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;

 

    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.


Table of Contents

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

     1   
Spectrum Brands Holdings, Inc. Condensed Consolidated Financial Statements (Unaudited)   
 

Condensed Consolidated Statements of Financial Position as of July 3, 2016 and September 30, 2015

     1   
 

Condensed Consolidated Statements of Operations for the three and nine month periods ended July 3, 2016 and June 28, 2015

     2   
 

Condensed Consolidated Statements of Comprehensive Income for the three and nine month periods ended July 3, 2016 and June 28, 2015

     2   
 

Condensed Consolidated Statements of Cash Flows for the nine month periods ended July 3, 2016 and June 28, 2015

     3   
SB/RH Holdings, LLC Condensed Consolidated Financial Statements (Unaudited)   
 

Condensed Consolidated Statements of Financial Position as of July 3, 2016 and September 30, 2015

     4   
 

Condensed Consolidated Statements of Operations for the three and nine month periods ended July 3, 2016 and June 28, 2015

     5   
 

Condensed Consolidated Statements of Comprehensive Income for the three and nine month periods ended July 3, 2016 and June 28, 2015

     5   
 

Condensed Consolidated Statements of Cash Flows for the nine month periods ended July 3, 2016 and June 28, 2015

     6   
Spectrum Brands Holdings, Inc. and SB/RH Holdings, LLC Combined (Unaudited)   
 

Combined Notes to Condensed Consolidated Financial Statements

     7   
Item 2.  

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

     28   
Item 3.  

Quantitative and Qualitative Disclosures About Market Risk

     42   
Item 4.  

Controls and Procedures

     42   
PART II  

OTHER INFORMATION

  
Item 1.  

Legal Proceedings

     43   
Item 1A.  

Risk Factors

     43   
Item 2.  

Unregistered Sales of Equity Securities and Use of Proceeds

     44   
Item 6.  

Exhibits

     44   
Signatures        45   


Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SPECTRUM BRANDS HOLDINGS, INC.

Condensed Consolidated Statements of Financial Position

July 3, 2016 and September 30, 2015

(in millions, unaudited)

 

     July 3, 2016     September 30, 2015  

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 117.0      $ 247.9   

Trade receivables, net

     588.9        498.8   

Other receivables

     61.2        87.9   

Inventories

     842.3        780.8   

Prepaid expenses and other current assets

     82.2        72.1   
  

 

 

   

 

 

 

Total current assets

     1,691.6        1,687.5   

Property, plant and equipment, net

     523.2        507.1   

Deferred charges and other

     41.2        42.2   

Goodwill

     2,479.7        2,476.7   

Intangible assets, net

     2,399.6        2,480.3   
  

 

 

   

 

 

 

Total assets

   $ 7,135.3      $ 7,193.8   
  

 

 

   

 

 

 

Liabilities and Shareholders’ Equity

    

Current liabilities:

    

Current portion of long-term debt

   $ 35.3      $ 33.8   

Accounts payable

     473.5        620.6   

Accrued wages and salaries

     94.5        96.5   

Accrued interest

     42.0        63.3   

Other current liabilities

     187.8        212.7   
  

 

 

   

 

 

 

Total current liabilities

     833.1        1,026.9   

Long-term debt, net of current portion

     3,840.2        3,872.1   

Deferred income taxes

     552.4        572.5   

Other long-term liabilities

     105.8        115.5   
  

 

 

   

 

 

 

Total liabilities

     5,331.5        5,587.0   

Commitments and contingencies

    

Shareholders’ equity:

    

Common stock

     0.6        0.6   

Additional paid-in capital

     2,063.2        2,033.6   

Accumulated deficit

     (2.6     (205.5

Accumulated other comprehensive loss, net of tax

     (195.5     (200.1

Treasury stock, at cost

     (105.8     (65.5
  

 

 

   

 

 

 

Total shareholders’ equity

     1,759.9        1,563.1   

Noncontrolling interest

     43.9        43.7   
  

 

 

   

 

 

 

Total equity

     1,803.8        1,606.8   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 7,135.3      $ 7,193.8   
  

 

 

   

 

 

 

See accompanying notes to the condensed consolidated financial statements

 

1


Table of Contents

SPECTRUM BRANDS HOLDINGS, INC.

Condensed Consolidated Statements of Operations

For the three and nine month periods ended July 3, 2016 and June 28, 2015

(in millions, except per share figures, unaudited)

 

     Three Month Periods Ended     Nine Month Periods Ended  
     July 3, 2016      June 28, 2015     July 3, 2016      June 28, 2015  

Net sales

   $ 1,361.5       $ 1,247.5      $ 3,790.0       $ 3,382.3   

Cost of goods sold

     830.8         789.5        2,355.5         2,179.0   

Restructuring and related charges

     0.1         —          0.4         0.4   
  

 

 

    

 

 

   

 

 

    

 

 

 

Gross profit

     530.6         458.0        1,434.1         1,202.9   

Selling

     201.7         184.8        578.3         517.7   

General and administrative

     94.2         89.9        276.2         242.5   

Research and development

     14.6         12.9        42.9         36.9   

Acquisition and integration related charges

     8.0         24.2        31.2         44.2   

Restructuring and related charges

     5.4         10.5        7.8         21.9   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total operating expenses

     323.9         322.3        936.4         863.2   
  

 

 

    

 

 

   

 

 

    

 

 

 

Operating income

     206.7         135.7        497.7         339.7   

Interest expense

     59.9         112.9        175.8         206.5   

Other non-operating expense, net

     2.2         1.7        6.5         5.6   
  

 

 

    

 

 

   

 

 

    

 

 

 

Income from operations before income taxes

     144.6         21.1        315.4         127.6   

Income tax expense (benefit)

     42.5         (23.8     46.8         4.8   
  

 

 

    

 

 

   

 

 

    

 

 

 

Net income

     102.1         44.9        268.6         122.8   

Net income attributable to non-controlling interest

     0.2         —          0.4         0.3   
  

 

 

    

 

 

   

 

 

    

 

 

 

Net income attributable to controlling interest

   $ 101.9       $ 44.9      $ 268.2       $ 122.5   
  

 

 

    

 

 

   

 

 

    

 

 

 

Earnings Per Share

          

Basic earnings per share

   $ 1.72       $ 0.79      $ 4.52       $ 2.26   

Diluted earnings per share

     1.71         0.79        4.51         2.26   

Dividends per share

     0.38         0.33        1.09         0.96   

Weighted Average Shares Outstanding

          

Basic

     59.4         56.5        59.3         54.2   

Diluted

     59.6         56.5        59.5         54.3   

See accompanying notes to the condensed consolidated financial statements

SPECTRUM BRANDS HOLDINGS, INC.

Condensed Consolidated Statements of Comprehensive Income

For the three and nine month periods ended July 3, 2016 and June 28, 2015

(in millions, unaudited)

 

     Three Month Periods Ended     Nine Month Periods Ended  
     July 3, 2016     June 28, 2015     July 3, 2016     June 28, 2015  

Net income

   $ 102.1      $ 44.9      $ 268.6      $ 122.8   

Other comprehensive (loss) income, net of tax:

        

Foreign currency translation (loss) gain

     (13.7     9.5        (6.0     (68.6

Unrealized gain (loss) on hedging derivatives, net tax of $(2.9), $3.9, $(0.4) and $2.0, respectively

     7.8        (12.0     8.6        (8.6

Defined benefit pension gain (loss), net tax of $(0.3), $0.2, $(0.5) and $(0.9), respectively

     1.2        (0.6     1.7        2.8   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive (loss) income, net of tax

     (4.7     (3.1     4.3        (74.4
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

     97.4        41.8        272.9        48.4   

Comprehensive (loss) income attributable to non-controlling interest

     (0.2     —          (0.3     0.3   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income attributable to controlling interest

   $ 97.6      $ 41.8      $ 273.2      $ 48.1   
  

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the condensed consolidated financial statements

 

2


Table of Contents

SPECTRUM BRANDS HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

For the nine month periods ended July 3, 2016 and June 28, 2015

(in millions, unaudited)

 

     July 3, 2016     June 28, 2015  

Cash flows from operating activities

    

Net income

   $ 268.6     $ 122.8  

Adjustments to reconcile net income to net cash provided (used) by operating activities:

    

Amortization of intangible assets

     70.5       64.0  

Depreciation

     66.2       58.7  

Share based compensation

     47.4       36.3  

Non-cash inventory adjustment from acquisitions

     —          7.7  

Non-cash restructuring and related charges

     2.8       15.0  

Amortization of debt issuance costs

     8.4       7.7  

Write-off of debt issuance costs on retired debt

     —          11.2  

Non-cash debt accretion

     1.6       1.4  

Write-off of unamortized discount on retired debt

     —          1.7  

Deferred tax benefit

     (3.1     (32.0

Net changes in operating assets and liabilities, net of effects of acquisitions

     (344.5     (453.7
  

 

 

   

 

 

 

Net cash provided (used) by operating activities

     117.9       (159.2

Cash flows from investing activities

    

Purchases of property, plant and equipment

     (59.6     (49.5

Business acquisitions, net of cash acquired

     —          (1,193.2

Proceeds from sales of property, plant and equipment

     0.8       1.3  

Other investing activities

     (1.9     (0.9
  

 

 

   

 

 

 

Net cash used by investing activities

     (60.7     (1,242.3

Cash flows from financing activities

    

Proceeds from issuance of debt

     203.9       3,143.5  

Payment of debt

     (270.2     (2,275.2

Payment of debt issuance costs

     (1.6     (42.7

Payment of cash dividends

     (64.6     (51.0

Treasury stock purchases

     (40.2     (8.4

Payment of contingent consideration

     (3.2     —     

Share based tax withholding payments, net of proceeds upon vesting

     (10.5     (1.9

Net proceeds from issuance of common stock

     —          562.8  
  

 

 

   

 

 

 

Net cash (used) provided by financing activities

     (186.4     1,327.1  

Effect of exchange rate changes on cash and cash equivalents

     (1.7     (13.0
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

     (130.9     (87.4

Cash and cash equivalents, beginning of period

     247.9       194.6  
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 117.0     $ 107.2  
  

 

 

   

 

 

 

Supplemental disclosure of cash flow information

    

Cash paid for interest

   $ 186.8     $ 236.3  

Cash paid for taxes

     30.7       40.0  

Non cash investing activities

    

Acquisition of property, plant and equipment through capital leases

   $ 28.2     $ 2.2  

Non cash financing activities

    

Issuance of shares through stock compensation plan

   $ 47.2     $ 11.0  

See accompanying notes to the condensed consolidated financial statements

 

3


Table of Contents

SB/RH HOLDINGS, LLC

Condensed Consolidated Statements of Financial Position

July 3, 2016 and September 30, 2015

(in millions, unaudited)

 

     July 3, 2016     September 30, 2015  

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 116.9      $ 247.9   

Trade receivables, net

     588.9        498.8   

Other receivables

     61.2        87.9   

Inventories

     842.3        780.8   

Prepaid expenses and other current assets

     82.2        72.1   
  

 

 

   

 

 

 

Total current assets

     1,691.5        1,687.5   

Property, plant and equipment, net

     523.2        507.1   

Deferred charges and other

     34.6        42.1   

Goodwill

     2,479.7        2,476.7   

Intangible assets, net

     2,399.6        2,480.3   
  

 

 

   

 

 

 

Total assets

   $ 7,128.6      $ 7,193.7   
  

 

 

   

 

 

 

Liabilities and Shareholder’s Equity

    

Current liabilities:

    

Current portion of long-term debt

   $ 42.3      $ 68.5   

Accounts payable

     473.5        620.6   

Accrued wages and salaries

     94.5        96.5   

Accrued interest

     42.0        63.3   

Other current liabilities

     187.1        211.9   
  

 

 

   

 

 

 

Total current liabilities

     839.4        1,060.8   

Long-term debt, net of current portion

     3,840.2        3,872.1   

Deferred income taxes

     555.6        572.5   

Other long-term liabilities

     105.8        115.5   
  

 

 

   

 

 

 

Total liabilities

     5,341.0        5,620.9   

Commitments and contingencies

    

Shareholder’s equity:

    

Other capital

     1,991.6        1,969.9   

Accumulated deficit

     (58.3     (246.7

Accumulated other comprehensive loss, net of tax

     (195.5     (200.1
  

 

 

   

 

 

 

Total shareholder’s equity

     1,737.8        1,523.1   

Noncontrolling interest

     49.8        49.7   
  

 

 

   

 

 

 

Total equity

     1,787.6        1,572.8   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 7,128.6      $ 7,193.7   
  

 

 

   

 

 

 

See accompanying notes to the condensed consolidated financial statements

 

4


Table of Contents

SB/RH HOLDINGS, LLC

Condensed Consolidated Statements of Operations

For the three and nine month periods ended July 3, 2016 and June 28, 2015

(in millions, unaudited)

 

     Three Month Periods Ended     Nine Month Periods Ended  
     July 3, 2016      June 28, 2015     July 3, 2016      June 28, 2015  

Net sales

   $ 1,361.5       $ 1,247.5      $ 3,790.0       $ 3,382.3   

Cost of goods sold

     830.8         789.5        2,355.5         2,179.0   

Restructuring and related charges

     0.1         —          0.4         0.4   
  

 

 

    

 

 

   

 

 

    

 

 

 

Gross profit

     530.6         458.0        1,434.1         1,202.9   

Selling

     201.7         184.8        578.3         517.7   

General and administrative

     92.8         88.2        271.7         238.1   

Research and development

     14.6         12.9        42.9         36.9   

Acquisition and integration related charges

     8.0         24.2        31.2         44.2   

Restructuring and related charges

     5.4         10.5        7.8         21.9   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total operating expenses

     322.5         320.6        931.9         858.8   
  

 

 

    

 

 

   

 

 

    

 

 

 

Operating income

     208.1         137.4        502.2         344.1   

Interest expense

     59.9         112.9        175.8         206.5   

Other non-operating expense, net

     2.2         1.7        6.5         5.6   
  

 

 

    

 

 

   

 

 

    

 

 

 

Income from operations before income taxes

     146.0         22.8        319.9         132.0   

Income tax expense

     40.8         (23.8     56.6         4.8   
  

 

 

    

 

 

   

 

 

    

 

 

 

Net income

     105.2         46.6        263.3         127.2   

Net income attributable to non-controlling interest

     0.1         —          0.3         0.2   
  

 

 

    

 

 

   

 

 

    

 

 

 

Net income attributable to controlling interest

   $ 105.1       $ 46.6      $ 263.0       $ 127.0   
  

 

 

    

 

 

   

 

 

    

 

 

 

See accompanying notes to the condensed consolidated financial statements

SB/RH HOLDINGS, LLC

Condensed Consolidated Statements of Comprehensive Income

For the three and nine month periods ended July 3, 2016 and June 28, 2015

(in millions, unaudited)

 

     Three Month Periods Ended     Nine Month Periods Ended  
     July 3, 2016     June 28, 2015     July 3, 2016     June 28, 2015  

Net income

   $ 105.2      $ 46.6      $ 263.3      $ 127.2   

Other comprehensive (loss) income, net of tax:

        

Foreign currency translation (loss) gain

     (13.7     9.5        (6.0     (68.6

Unrealized gain (loss) on hedging derivatives, net tax of $(2.9), $3.9, $(0.4) and $2.0, respectively

     7.8        (12.0     8.6        (8.6

Defined benefit pension gain (loss), net tax of $(0.3), $0.2, $(0.5) and $(0.9), respectively

     1.2        (0.6     1.7        2.8   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive (loss) income, net of tax

     (4.7     (3.1     4.3        (74.4
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

     100.5        43.5        267.6        52.8   

Comprehensive (loss) income attributable to non-controlling interest

     (0.2     —          (0.3     0.2   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income attributable to controlling interest

   $ 100.7      $ 43.5      $ 267.9      $ 52.6   
  

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the condensed consolidated financial statements

 

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Table of Contents

SB/RH HOLDINGS, LLC

Condensed Consolidated Statements of Cash Flows

For the nine month periods ended July 3, 2016 and June 28, 2015

(in millions, unaudited)

 

     July 3, 2016     June 28, 2015  

Cash flows from operating activities

    

Net income

   $ 263.3     $ 127.2  

Adjustments to reconcile net income to net cash provided (used) by operating activities:

    

Amortization of intangible assets

     70.5       64.0  

Depreciation

     66.2       58.7  

Share based compensation

     43.4       32.2  

Non-cash inventory adjustment from acquisitions

     —          7.7  

Non-cash restructuring and related charges

     2.8       15.0  

Amortization of debt issuance costs

     8.4       7.7  

Write-off of debt issuance costs on retired debt

     —          11.2  

Non-cash debt accretion

     1.6       1.4  

Write-off of unamortized discount on retired debt

     —          1.7  

Deferred tax expense (benefit)

     6.6       (32.0

Net changes in operating assets and liabilities, net of effects of acquisitions

     (358.1     (458.4
  

 

 

   

 

 

 

Net cash provided (used) by operating activities

     104.7       (163.6

Cash flows from investing activities

    

Purchases of property, plant and equipment

     (59.6     (49.5

Business acquisitions, net of cash acquired

     —          (1,193.2

Proceeds from sales of property, plant and equipment

     0.8       1.3  

Other investing activities

     (1.9     (0.9
  

 

 

   

 

 

 

Net cash used by investing activities

     (60.7     (1,242.3

Cash flows from financing activities

    

Proceeds from issuance of debt

     217.8       3,177.0  

Payment of debt

     (311.7     (2,281.9

Payment of debt issuance costs

     (1.6     (37.3

Payment of cash dividends to parent

     (74.6     (51.0

Payment of contingent consideration

     (3.2  

Share based tax withholding payments, net of proceeds upon vesting

     —          (1.9

Capital contribution from parent

     —          528.3  
  

 

 

   

 

 

 

Net cash (used) provided by financing activities

     (173.3     1,333.2  

Effect of exchange rate changes on cash and cash equivalents

     (1.7     (13.0
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

     (131.0     (85.7

Cash and cash equivalents, beginning of period

     247.9       192.9  
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 116.9     $ 107.2  
  

 

 

   

 

 

 

Supplemental disclosure of cash flow information

    

Cash paid for interest

   $ 186.8     $ 236.3  

Cash paid for taxes

     30.7       40.0  

Non cash investing activities

    

Acquisition of property, plant and equipment through capital leases

   $ 28.2     $ 2.2  

See accompanying notes to the condensed consolidated financial statements

 

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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, 2015.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The ASU provides for changes to the accounting for share-based payment awards issued to employees; primarily income taxes upon award vest or settlement, cash flow presentations of excess tax benefits and employee withheld taxes paid, as well as an entity forfeiture policy election. The ASU is effective for annual periods beginning after December 15, 2016, and interim period within those annual periods. Early adoption is permitted for any interim or annual period. The Company has elected to early adopt for the three month period ended July 3, 2016, effective as if adopted the first day of the fiscal year, October 1, 2015.

Under the new guidance, all excess tax benefits (“windfalls”) and deficiencies (“shortfalls”) related to employee stock compensation will be recognized within income tax expense. Under prior guidance, windfalls were recognized to additional paid-in capital and shortfalls were only recognized in the extent they exceed the pool of windfall tax benefits. As of September 30, 2015, there was $22.2 million of unrecognized deferred tax assets attributable to excess tax benefits that were not previously recognized as they did not reduce income taxes payable. The cumulative adjustment for the adoption did not have an impact on net equity as the incremental deferred tax assets are fully reserved by an incremental valuation allowance as of September 30, 2015. The adoption of the new standard impacted our previously reported quarterly results for the recognition of excess tax benefits in our provision for income taxes rather than paid in capital. Due to the valuation allowance on deferred taxes, there was no impact to our quarterly results for the three month period ended January 3, 2016. The following summarizes the impact to the three and six months periods ended April 3, 2016:

 

SBH Statements of Operations   Three Month Period Ended April 3, 2016     Six Month Period Ended April 3, 2016  

(in millions, except per share)

  As Reported     Adjustment     As Adjusted     As Reported     Adjustment     As Adjusted  

Income tax expense (benefit)

  $ 14.9     $ (17.4   $ (2.5   $ 21.8     $ (17.4   $ 4.4  

Net income

    75.3       17.4       92.7       149.0       17.4       166.4  

Net income attributable to controlling interest

    75.2       17.4       92.6       148.8       17.4       166.2  

Earnings Per Share

           

Basic earnings per share

  $ 1.27     $ 0.29     $ 1.56     $ 2.51     $ 0.29     $ 2.80  

Diluted earnings per share

  $ 1.26     $ 0.29     $ 1.55     $ 2.50     $ 0.29     $ 2.79  
SB/RH Statements of Operations   Three Month Period Ended April 3, 2016     Six Month Period Ended April 3, 2016  

(in millions)

  As Reported     Adjustment     As Adjusted     As Reported     Adjustment     As Adjusted  

Income tax expense

  $ 19.4      $ (10.4   $ 9.0     $ 26.3      $ (10.4   $ 15.9  

Net income

    72.2        10.4       82.6       147.7        10.4       158.1  

Net income attributable to controlling interest

    72.1        10.4       82.5       147.5        10.4       157.9  

Further, as part of the adoption, the Company elected to account for forfeitures in compensation cost as they occur. The cumulative impact for the change in election was not material and was recognized in the three month period ended July 3, 2016.

 

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Table of Contents

In April 2015, the FASB issued ASU No. 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. This ASU requires debt issuance costs related to a recognized debt liability to be presented on a balance sheet as a direct deduction from the debt liability, similar to the presentation of debt discounts. Current guidance generally requires entities to capitalize costs paid to third parties that are directly related to issuing debt and that otherwise wouldn’t be incurred, and present those amounts separately as deferred charges. During the three month period ended January 3, 2016, the Company retrospectively applied the adoption of this ASU, resulting in a reclassification of $65.1 million of debt issuance costs as of September 30, 2015.

In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740) – Balance Sheet Classification of Deferred Taxes. The ASU simplifies the presentation of deferred tax assets and liabilities to be classified as noncurrent on a balance sheet. Current guidance requires an entity to separate deferred income tax assets and liabilities into current and noncurrent amounts. The new guidance requires all deferred tax assets and liabilities to be presented as noncurrent as the separate current classification results in little to no benefit to users of the financial statements because the classification does not generally align with the time period in which the recognized deferred tax amounts are expected to be recovered or settled. During the three month period ended January 3, 2016, the Company retrospectively applied the adoption of this ASU, resulting in a reclassification of $44.7 million of current deferred tax assets and $4.6 million of current deferred tax liabilities as of September 30, 2015.

The following is a summary of the reclassifications from the retrospective adoption of ASU 2015-03 and ASU 2015-17 discussed above, as of September 30, 2015 for SBH and SB/RH, respectively:

 

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

Statement of Financial Position (in millions)

  As Reported     Reclassification     As Reclassified     As Reported     Reclassification     As Reclassified  

Prepaid expenses and other current assets

  $ 116.8      $ (44.7   $ 72.1      $ 116.8      $ (44.7   $ 72.1   

Deferred charges and other

    101.7        (59.5     42.2        101.6        (59.5     42.1   

Other current liabilities

    (217.3     4.6        (212.7     (216.5     4.6        (211.9

Long-term debt, net of current portion

    (3,937.2     65.1        (3,872.1     (3,937.2     65.1        (3,872.1

Deferred taxes (noncurrent liability)

    (607.0     34.5        (572.5     (607.0     34.5        (572.5

In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. The ASU simplifies the presentation of provisional amounts recognized in a business combination during the measurement period (one year from the date of acquisition). Current guidance requires retrospective adjustment of prior periods; the new guidance eliminates this requirement. The Company applied the adoption of this ASU effective the first day of the year ending September 30, 2016 and all subsequent measurement period adjustments are recorded in the period identified, resulting in the recognition of adjustments to goodwill from the Armored AutoGroup (“AAG”) acquisition. See Note 8 “Goodwill and Intangible Assets”, for adjustments to goodwill.

NOTE 3 - ACQUISITIONS

Armored AutoGroup - On May 21, 2015, the Company completed the acquisition of Armored AutoGroup Parent, Inc. (“AAG”), a consumer products company consisting primarily of Armor All and STP products, two of the most recognizable brands in the automotive aftermarket appearance products and performance chemicals categories, respectively, and the A/C PRO brand of do-it-yourself automotive air conditioner recharge products. The results of AAG’s operations are included in the Company’s Condensed Consolidated Statements of Operations and are reported as a separate segment under Global Auto Care for the three and nine month periods ended July 3, 2016 and June 28, 2015, since the date of acquisition.

Salix - On January 16, 2015, the Company completed the acquisition of Salix, a vertically integrated producer and distributer of premium natural rawhide dog chews, treats and snacks. The results of Salix’s operations are included in the Company’s Condensed Consolidated Statements of Operations and as part of the Global Pet Supplies segment for the three and nine month periods ended July 3, 2016 and June 28, 2015, since the date of acquisition.

European IAMS and Eukanuba - On December 31, 2014, the Company completed the acquisition of Procter & Gamble’s European IAMS and Eukanuba pet food business (“European IAMS and Eukanuba”), premium brands for dogs and cats. The results of European IAMS and Eukanuba’s operations are included in the Company’s Condensed Consolidated Statements of Operations and as part of the Global Pet Supplies segment for the three and nine month periods ended July 3, 2016 and June 28, 2015, since the date of acquisition.

 

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Table of Contents

Acquisition and Integration Costs

The following table summarizes acquisition and integration related charges incurred by the Company for the three and nine month periods ended July 3, 2016 and June 28, 2015:

 

     Three Months Ended      Nine Months Ended  

(in millions)

   July 3, 2016      June 28, 2015      July 3, 2016      June 28, 2015  

Armored AutoGroup

   $ 2.6       $ 17.8       $ 13.2       $ 17.8   

HHI Business

     4.4         2.1         12.0         8.3   

European IAMS and Eukanuba

     0.4         1.0         2.4         6.0   

Salix

     0.2         3.3         1.7         8.4   

Other

     0.4         —           1.9         3.7   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total acquisition and integration related charges

   $ 8.0       $ 24.2       $ 31.2       $ 44.2   
  

 

 

    

 

 

    

 

 

    

 

 

 

NOTE 4 - RESTRUCTURING AND RELATED CHARGES

GAC Business Rationalization Initiatives – During the three month period ended July 3, 2016, the Company implemented a series of initiatives through the Global Auto Care segment to consolidate certain operations and reduce operating costs. These initiatives included headcount reductions and the exit of certain facilities. Total costs associated with these initiatives are expected to be approximately $15 million, of which $3.6 million has been incurred to date, the balance is anticipated to be incurred through September 30, 2017.

HHI Business Rationalization Initiatives – During the three month period ended September 30, 2014, the Company implemented a series of initiatives throughout the Hardware & Home Improvement segment to reduce operating costs and exit low margin business outside the U.S. These initiatives included headcount reductions, the exit of certain facilities and the sale of a portion of the global Hardware & Home Improvement operations. Total costs associated with these initiatives are expected to be approximately $15 million, of which $14.3 million has been incurred to date, the balance is anticipated to be incurred through September 30, 2016.

Global Expense Rationalization Initiatives – During the three month period ended June 30, 2013, the Company implemented a series of initiatives throughout the Company to reduce operating costs. These initiatives consisted of headcount reductions in the Global Batteries & Appliances and Global Pet Supplies segments, and within Corporate. Total costs associated with these initiatives are expected to be approximately $47 million, of which $45.1 million has been incurred to date, the balance is anticipated to be incurred through September 30, 2018.

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). Total costs associated with these initiatives are expected to be approximately $3 million, of which $1.8 million has been incurred to date.

The following table summarizes restructuring and related charges for the three and nine month periods ended July 3, 2016 and June 28, 2015:

 

     Three Months Ended      Nine Months Ended  

(in millions)

   July 3, 2016      June 28, 2015      July 3, 2016      June 28, 2015  

HHI business rationalization initiatives

   $ —         $ 6.3       $ (0.5    $ 7.7   

GAC business rationalization initiatives

     3.6         —           3.6         —     

Global expense rationalization initiatives

     1.1         3.9         3.3         13.9   

Other restructuring activities

     0.8         0.3         1.8         0.7   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total restructuring and related charges

   $ 5.5       $ 10.5       $ 8.2       $ 22.3   
  

 

 

    

 

 

    

 

 

    

 

 

 

Reported as:

           

Cost of goods sold

   $ 0.1       $ —         $ 0.4       $ 0.4   

Operating expense

     5.4         10.5         7.8         21.9   

 

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Table of Contents

The following is a summary of restructuring and related charges for the three and nine month periods ended July 3, 2016 and June 28, 2015 by cost type:

 

(in millions)

   Termination
Benefits
     Other
Costs
     Total  

For the three month period ended July 3, 2016

     1.3         4.2         5.5   

For the three month period ended June 28, 2015

     (1.9      12.4         10.5   

For the nine month period ended July 3, 2016

     3.0         5.2         8.2   

For the nine month period ended June 28, 2015

     6.0         16.3         22.3   

Cumulative costs through July 3, 2016

     31.1         33.7         64.8   

The following is a rollforward of the accrual related to all restructuring and related activities, included within Other Current Liabilities, by cost type for the nine month period ended July 3, 2016:

 

(in millions)

   Termination
Benefits
     Other
Costs
     Total  

Accrual balance at September 30, 2015

     4.3         3.9         8.2   

Provisions

     3.0         5.2         8.2   

Cash expenditures

     (5.6      (7.5      (13.1

Non-cash items

     0.1         (0.2      (0.1
  

 

 

    

 

 

    

 

 

 

Accrual balance at July 3, 2016

   $ 1.8       $ 1.4       $ 3.2   
  

 

 

    

 

 

    

 

 

 

The following summarizes restructuring and related charges by segment for the three and nine month periods ended July 3, 2016 and June 28, 2015, cumulative costs incurred through July 3, 2016 and future expected costs to be incurred by segment:

 

(in millions)

   Global
Batteries &
Appliances
     Global Pet
Supplies
     Hardware
& Home
Improvement
     Global
Auto Care
     Corporate      Total  

For the three month period ended July 3, 2016

   $ 0.6       $ 0.6       $ 0.7         3.6       $ —         $ 5.5   

For the three month period ended June 28, 2015

     1.0         3.2         6.3         —           —           10.5   

For the nine month period ended July 3, 2016

     1.0         2.4         1.2         3.6         —           8.2   

For the nine month period ended June 28, 2015

     6.4         7.8         7.8         —           0.3         22.3   

Cumulative costs through July 3, 2016

     30.2         12.9         16.0         3.6         2.1         64.8   

Future costs to be incurred

     0.5         2.2         0.3         11.5         0.1         14.6   

NOTE 5 - RECEIVABLES AND CONCENTRATION OF CREDIT RISK

The allowance for uncollectible receivables as of July 3, 2016 and September 30, 2015 was $46.0 million and $44.0 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 16% of the Company’s Trade Receivables at July 3, 2016 and September 30, 2015, respectively.

NOTE 6 - INVENTORIES

Inventories consist of the following:

 

(in millions)

   July 3, 2016      September 30, 2015  

Raw materials

   $ 143.1       $ 132.4   

Work-in-process

     59.8         37.9   

Finished goods

     639.4         610.5   
  

 

 

    

 

 

 
   $ 842.3       $ 780.8   
  

 

 

    

 

 

 

 

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Table of Contents

NOTE 7 - PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

 

(in millions)

   July 3, 2016      September 30, 2015  

Land, buildings and improvements

   $ 193.5       $ 190.9   

Machinery, equipment and other

     525.9         491.9   

Capitalized leases

     121.7         97.3   

Construction in progress

     59.5         51.8   
  

 

 

    

 

 

 

Property, plant and equipment

   $ 900.6       $ 831.9   

Accumulated depreciation

     (377.4      (324.8
  

 

 

    

 

 

 

Property, plant and equipment, net

   $ 523.2       $ 507.1   
  

 

 

    

 

 

 

NOTE 8 - GOODWILL AND INTANGIBLE ASSETS

Goodwill, by segment, consists of the following:

 

(in millions)

   Global
Batteries &
Appliances
    Hardware &
Home
Improvement
     Global Pet
Supplies
     Home and
Garden
     Global
Auto Care
    Total  

Balance, as of September 30, 2015

     348.5        699.5         299.6         196.5         932.6        2,476.7   

Adjustments

     —          —           —           —           3.4        3.4   

Foreign currency impact

     (2.8     3.6         0.1         —           (1.3     (0.4
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Balance, as of July 3, 2016

   $ 345.7      $ 703.1       $ 299.7       $ 196.5       $ 934.7      $ 2,479.7   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

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

 

     July 3, 2016      September 30, 2015  

(in millions)

   Gross
Carrying
Amount
     Accumulated
Amortization
    Net      Gross
Carrying
Amount
     Accumulated
Amortization
    Net  

Customer relationships

   $ 984.0       $ (288.7   $ 695.3       $ 985.2       $ (247.4   $ 737.8   

Technology assets

     236.3         (91.0     145.3         238.6         (78.1     160.5   

Tradenames

     165.4         (85.3     80.1         165.4         (73.7     91.7   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 1,385.7       $ (465.0   $ 920.7       $ 1,389.2       $ (399.2   $ 990.0   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

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

   4 - 18 years    11.1 years

Tradenames

   8 - 17 years    16.2 years

Certain tradename intangible assets have an indefinite life and are not amortized. The balance of tradenames not subject to amortization was $1,478.9 million and $1,490.3 million as of July 3, 2016 and September 30, 2015. There was no impairment loss on indefinite-lived trade names for the nine month periods ended July 3, 2016 or June 28, 2015.

Amortization expense from intangible assets for the three month periods ended July 3, 2016 and June 28, 2015 was $23.5 million and $22.3 million, respectively. Amortization expense from intangible assets for the nine month periods ended July 3, 2016 and June 28, 2015 was $70.5 million and $64.0 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  

2016

   $ 93.9   

2017

     93.0   

2018

     86.2   

2019

     85.1   

2020

     84.9   

 

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NOTE 9 - DEBT

Debt consists of the following:

 

     Spectrum Brands Holdings, Inc.     SB/RH Holdings, LLC  
     July 3, 2016     September 30, 2015     July 3, 2016     September 30, 2015  

(in millions)

   Amount     Rate     Amount     Rate     Amount     Rate     Amount     Rate  

Term Loan, variable rate, due June 23, 2022

   $ 1,103.1       3.6   $ 1,226.9       3.9   $ 1,103.1       3.6   $ 1,226.9       3.9

CAD Term Loan, variable rate, due June 23, 2022

     57.4       4.6     55.7       4.4     57.4       4.6     55.7       4.4

Euro Term Loan, variable rate, due June 23, 2022

     116.7       3.5     255.8       3.5     116.7       3.5     255.8       3.5

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

     520.0       6.4     520.0       6.4     520.0       6.4     520.0       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 June 23, 2020

     198.5       3.6     —          —       198.5       3.6     —          —  

Other notes and obligations

     15.4       11.9     11.2       10.2     22.4       8.1     45.9       4.9

Obligations under capital leases

     107.9       5.5     88.2       5.7     107.9       5.5     88.2       5.7
  

 

 

     

 

 

     

 

 

     

 

 

   

Total debt

     3,939.0         3,977.8         3,946.0         4,012.5    

Unamortized discount on debt

     (5.3       (6.8       (5.3       (6.8  

Debt issuance costs

     (58.2       (65.1       (58.2       (65.1  

Less current portion

     (35.3       (33.8       (42.3       (68.5  
  

 

 

     

 

 

     

 

 

     

 

 

   

Long-term debt, net of current portion

   $ 3,840.2       $ 3,872.1       $ 3,840.2       $ 3,872.1    
  

 

 

     

 

 

     

 

 

     

 

 

   

The Term Loans and Revolver Facility are subject to variable interest rates, (i) the USD Term Loan is subject to either adjusted LIBOR (International Exchange London Interbank Offered Rate), subject to a 0.75% floor plus 2.75% per annum, or base rate plus 1.75% per annum, (ii) the CAD Term Loan is subject to either CDOR (Canadian Dollar Offered Rate), subject to a 0.75% floor plus 3.5% per annum, or base rate plus 2.5% 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 2.75% per annum, or base rate plus 1.75% per annum. As a result of borrowings and payments under the Revolver Facility, at July 3, 2016, the Company had borrowing availability of $276.9 million, net outstanding letters of credit of $24.6 million.

Debt held by SB/RH also includes a loan with SBH of $7.1 million and $34.7 million as of July 3, 2016 and September 30, 2015, respectively.

NOTE 10 - DERIVATIVES

Cash Flow Hedges

Interest Rate Swaps. The Company uses interest rate swaps to manage its interest rate risk. The swaps are designated as cash flow hedges with the changes in fair value recorded in Accumulated Other Comprehensive Income (“AOCI”) and as a derivative hedge asset or liability, as applicable. The swaps settle periodically in arrears with the related amounts for the current settlement period payable to, or receivable from, the counterparties included in accrued liabilities or receivables, respectively, and recognized in earnings as an adjustment to interest from the underlying debt to which the swap is designated. At July 3, 2016 and September 30, 2015, the Company had a series of U.S. dollar denominated interest rate swaps outstanding which effectively fix the interest on floating rate debt, exclusive of lender spreads, at 1.36% for a notional principal amount of $300.0 million through April 2017. The derivative net losses estimated to be reclassified from AOCI into earnings over the next 12 months is $1.3 million, net of tax. The Company’s interest rate swap derivative financial instruments at July 3, 2016 and September 30, 2015 are as follows:

 

     July 3, 2016      September 30, 2015  

(in millions)

   Notional Amount      Remaining Years      Notional Amount      Remaining Years  

Interest rate swaps - fixed

   $ 300.0         0.8       $ 300.0         1.5   

 

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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 July 3, 2016, the Company had a series of zinc and brass swap contracts outstanding through September 2017. The derivative net gains estimated to be reclassified from AOCI into earnings over the next 12 months is $0.6 million, net of tax. The Company had the following commodity swap contracts outstanding as of July 3, 2016 and September 30, 2015.

 

     July 3, 2016      September 30, 2015  

(in millions, except notional)

   Notional      Contract Value      Notional      Contract Value  

Zinc swap contracts

     7.2 Tons       $ 13.6         10.8 Tons       $ 22.2   

Brass swap contracts

     1.0 Tons       $ 4.3         1.8 Tons       $ 8.5   

Foreign exchange contracts. The Company periodically enters into forward foreign exchange contracts to hedge 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, Brazilian Reals, Mexican Pesos, 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 Operations. At July 3, 2016, the Company had a series of foreign exchange derivative contracts outstanding through September 2017. The derivative net gains estimated to be reclassified from AOCI into earnings over the next 12 months is $4.1 million, net of tax. At July 3, 2016 and September 30, 2015, the Company had foreign exchange derivative contracts designated as cash flow hedges with a notional value of $224.7 million and $300.6 million, respectively.

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 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 or Australian Dollars. These foreign exchange contracts are fair value 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 July 3, 2016, the Company had a series of forward exchange contracts outstanding through August 2016. At July 3, 2016 and September 30, 2015, the Company had $197.1 million and $126.8 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 July 3, 2016, the Company had a series of commodity swaps outstanding through August 2016. The Company had the following commodity swaps outstanding as of July 3, 2016 and September 30, 2015:

 

     July 3, 2016      September 30, 2015  

(in millions, except notional)

   Notional      Contract Value      Notional      Contract Value  

Silver

     5.0 troy oz.       $ 0.1         25.0 troy oz.       $ 0.4   

 

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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

   July 3, 2016      September 30, 2015  

Derivative Assets

        

Commodity swaps - designated as hedge

  

Receivables—Other

   $ 1.3       $ —     

Commodity swaps - designated as hedge

  

Deferred charges and other

     0.3         —     

Foreign exchange contracts - designated as hedge

  

Receivables—Other

     6.6       $ 5.2   

Foreign exchange contracts - designated as hedge

  

Deferred charges and other

     0.6         0.4   

Foreign exchange contracts - not designated as hedge

  

Receivables—Other

     0.4         0.4   
     

 

 

    

 

 

 

Total Derivative Assets

      $ 9.2       $ 6.0   
     

 

 

    

 

 

 

Derivative Liabilities

        

Interest rate swaps - designated as hedge

  

Other current liabilities

   $ 1.3       $ 1.4   

Interest rate swaps - designated as hedge

  

Accrued interest

     0.5         0.4   

Interest rate swaps - designated as hedge

  

Other long-term liabilities

     —           0.8   

Commodity swaps - designated as hedge

  

Accounts payable

     0.4         4.7   

Commodity swaps - designated as hedge

  

Other long-term liabilities

     —           0.8   

Commodity swaps - not designated as hedge

  

Accounts payable

     —           0.1   

Foreign exchange contracts - designated as hedge

  

Accounts payable

     1.7         1.5   

Foreign exchange contracts - designated as hedge

  

Other long-term liabilities

     0.1         —     

Foreign exchange contracts - not designated as hedge

  

Accounts payable

     0.6         0.1   
     

 

 

    

 

 

 

Total Derivative Liabilities

      $ 4.6       $ 9.8   
     

 

 

    

 

 

 

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 such 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 July 3, 2016 and September 30, 2015.

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 September 30, 2015, there was $3.5 million of posted cash collateral related to such liability positions. As of July 3, 2016, there was no cash collateral outstanding. In addition, as of July 3, 2016 and September 30, 2015, 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.

 

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Table of Contents

The following summarizes the impact of derivative instruments on the accompanying Condensed Consolidated Statement of Operations for the three and nine month periods ended July 3, 2016 and June 28, 2015, pretax:

 

     Effective Portion             
For the three months ended    Gain (Loss)    

Reclassified to Earnings

   

Ineffective portion

 

July 3, 2016 (in millions)

   in OCI    

Line Item

   Gain (Loss)    

Line Item

   Gain (Loss)  

Interest rate swaps

   $ (0.2   Interest expense    $ (0.5   Interest expense    $ —     

Commodity swaps

     2.0      Cost of goods sold      (0.8   Cost of goods sold      0.1   

Foreign exchange contracts

     (0.3   Net sales      —        Net sales      —     

Foreign exchange contracts

     8.0      Cost of goods sold      0.1      Cost of goods sold      —     
  

 

 

      

 

 

      

 

 

 

Total

   $ 9.5         $ (1.2      $ 0.1   
  

 

 

      

 

 

      

 

 

 
     Effective Portion             
For the three months ended    Gain (Loss)    

Reclassified to Earnings

   

Ineffective portion

 

June 28, 2015 (in millions)

   in OCI    

Line Item

   Gain (Loss)    

Line Item

   Gain (Loss)  

Interest rate swaps

   $ (0.5   Interest expense    $ (0.5   Interest expense    $ —     

Commodity swaps

     (0.7   Cost of goods sold      —        Cost of goods sold      —     

Foreign exchange contracts

     0.2      Net sales      —        Net sales      —     

Foreign exchange contracts

     (6.8   Cost of goods sold      8.6      Cost of goods sold      —     
  

 

 

      

 

 

      

 

 

 

Total

   $ (7.8      $ 8.1         $ —     
  

 

 

      

 

 

      

 

 

 
     Effective Portion             
For the nine months ended    Gain (Loss)    

Reclassified to Earnings

   

Ineffective portion

 

July 3, 2016 (in millions)

   in OCI    

Line Item

   Gain (Loss)    

Line Item

   Gain (Loss)  

Interest rate swaps

   $ (0.5   Interest expense    $ (1.4   Interest expense    $ —     

Commodity swaps

     2.9      Cost of goods sold      (3.8   Cost of goods sold      0.1   

Foreign exchange contracts

     (0.4   Net sales      —        Net sales      —     

Foreign exchange contracts

     6.8      Cost of goods sold      5.0      Cost of goods sold      —     
  

 

 

      

 

 

      

 

 

 

Total

   $ 8.8         $ (0.2      $ 0.1   
  

 

 

      

 

 

      

 

 

 
     Effective Portion             
For the nine months ended    Gain (Loss)    

Reclassified to Earnings

   

Ineffective portion

 

June 28, 2015 (in millions)

   in OCI    

Line Item

   Gain (Loss)    

Line Item

   Gain (Loss)  

Interest rate swaps

   $ (2.4   Interest expense    $ (1.4   Interest expense    $ —     

Commodity swaps

     (2.4   Cost of goods sold      0.3      Cost of goods sold      —     

Foreign exchange contracts

     0.1      Net sales      —        Net sales      —     

Foreign exchange contracts

     14.0      Cost of goods sold      21.0      Cost of goods sold      —     
  

 

 

      

 

 

      

 

 

 

Total

   $ 9.3         $ 19.9         $ —     
  

 

 

      

 

 

      

 

 

 

The following summarizes the loss associated with derivative contracts not designated as hedges in the Condensed Consolidated Statements of Operations for the three and nine month periods ended July 3, 2016 and June 28, 2015:

 

          Three Months Ended      Nine Months Ended  

(in millions)

  

Line Item

   July 3, 2016      June 28, 2015      July 3, 2016      June 28, 2015  

Foreign exchange contracts

  

Other non-operating expenses, net

   $ 0.8       $ 5.0       $ 1.6       $ (2.4

 

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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 values of derivative instruments as of July 3, 2016 and September 30, 2015 are as follows:

 

     July 3, 2016      September 30, 2015  

(in millions)

   Carrying
Amount
     Fair Value      Carrying
Amount
     Fair Value  

Derivative Assets

   $ 9.2       $ 9.2       $ 6.0       $ 6.0   

Derivative Liabilities

   $ 4.6       $ 4.6       $ 9.8       $ 9.8   

The carrying values 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 values and fair values for debt as of July 3, 2016 and September 30, 2015 are as follows:

 

     July 3, 2016      September 30, 2015  

(in millions)

   Carrying
Amount
     Fair Value      Carrying
Amount
     Fair Value  

Total debt - Spectrum Brands Holdings, Inc.

   $ 3,875.5       $ 4,045.2       $ 3,905.9       $ 4,085.8   

Total debt - SB/RH Holdings, LLC

   $ 3,882.5       $ 4,052.3       $ 3,940.6       $ 4,120.5   

NOTE 12 - EMPLOYEE BENEFIT PLANS

The net periodic benefit cost for the Company’s pension and deferred compensation plans for the three and nine month periods ended July 3, 2016, and June 28, 2015 were as follows:

 

     U.S. Plans     Non U.S. Plans  

(in millions)

   July 3, 2016     June 28, 2015     July 3, 2016     June 28, 2015  

Three month period ended

        

Service cost

   $ 0.1      $ 0.1      $ 0.7      $ 0.7   

Interest cost

     0.7        0.8        1.5        1.6   

Expected return on assets

     (1.1     (1.1     (1.2     (1.3

Recognized net actuarial loss

     0.1        —          0.4        0.3   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net periodic benefit cost

   $ (0.2   $ (0.2   $ 1.4      $ 1.3   
  

 

 

   

 

 

   

 

 

   

 

 

 

Nine month period ended

        

Service cost

   $ 0.2      $ 0.3      $ 2.0      $ 2.1   

Interest cost

     2.2        2.4        4.6        4.9   

Expected return on assets

     (3.3     (3.3     (3.6     (4.2

Recognized net actuarial loss

     0.4        0.1        1.3        1.0   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net periodic benefit cost

   $ (0.5   $ (0.5   $ 4.3      $ 3.8   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average assumptions

        

Discount rate

     4.25     4.15     1.75 - 13.81     2.00 - 13.50

Expected return on plan assets

     7.25     7.50     1.75 - 4.53     2.00 - 5.26

Rate of compensation increase

     N/A        N/A        2.25 - 5.50     2.25 - 5.50

Company contributions to its pension and deferred compensation plans, including discretionary amounts, for the three months ended July 3, 2016 and June 28, 2015, were $2.2 million and $2.0 million, respectively. Company contributions to its pension and deferred compensation plans, including discretionary amounts, for the nine months ended July 3, 2016 and June 28, 2015, were $8.1 million and $7.5 million, respectively.

 

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Table of Contents

NOTE 13 - SHARE BASED COMPENSATION

Share based compensation expense for SBH during the three month periods ended July 3, 2016 and June 28, 2015 was $15.9 million and $16.9 million respectively. Share based compensation expense for SBH during the nine month periods ended July 3, 2016 and June 28, 2015 was $47.4 million and $36.3 million respectively. The remaining unrecognized pre-tax compensation cost for SBH at July 3, 2016 was $28.6 million.

Share based compensation expense for SB/RH during the three month periods ended July 3, 2016 and June 28, 2015 was $14.6 million and $15.2 million respectively. Share based compensation expense for SB/RH during the nine month periods ended July 3, 2016 and June 28, 2015 was $43.4 million and $32.2 million respectively. The remaining unrecognized pre-tax compensation cost for SB/RH at July 3, 2016 was $25.9 million.

During the three month period ended July 3, 2016, SBH and SB/RH granted less than 0.1 million Restricted Stock Units (“RSUs”). The total market value of the RSUs on the dates of the grants was $1.6 million for SBH and SB/RH.

During the nine month period ended July 3, 2016, SBH and SB/RH granted 0.6 million RSUs, which included 0.2 million units that vested immediately or within 12 months and 0.4 million that are both performance and time-based and vest over a period ranging from one to two years. The total market value of the RSUs on the dates of the grants was $55.7 million and $53.9 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 nine month period ended July 3, 2016 is as follows:

 

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

(in millions, except per share data)

   Shares     Weighted
Average
Grant Date
Fair Value
     Fair
Value
at Grant
Date
    Shares     Weighted
Average
Grant Date
Fair Value
     Fair
Value
at Grant
Date
 

Non-vested RSUs at September 30, 2015

     0.6        87.50       $ 53.2        0.5        87.71       $ 42.1   

Granted

     0.6        94.78         55.7        0.6        94.90         53.9   

Forfeited

     (0.2     94.75         (14.8     (0.2     94.75         (14.8

Vested

     (0.5     86.81         (47.3     (0.5     86.60         (43.8
  

 

 

      

 

 

   

 

 

      

 

 

 

Non-vested RSUs at July 3, 2016

     0.5        94.63       $ 46.8        0.4        96.90       $ 37.4   
  

 

 

      

 

 

   

 

 

      

 

 

 

 

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Table of Contents

NOTE 14 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The changes in the components of AOCI, net of tax, for the nine month period ended July 3, 2016 was as follows:

 

(in millions)

   Foreign
Currency
Translation
     Derivative
Hedging
     Employee
Benefit
Plans
     Total  

Accumulated other comprehensive loss, as of September 30, 2015

     (152.3      (4.0      (43.8      (200.1

Other comprehensive (loss) income before reclassification

     (6.0      8.8        0.4        3.2  

Amounts reclassified from accumulated other comprehensive income (loss)

     —           0.2        1.8        2.0  
  

 

 

    

 

 

    

 

 

    

 

 

 

Other comprehensive (loss) income, nine month period ended July 3, 2016

     (6.0      9.0        2.2        5.2  

Deferred tax effect

     —           (1.4      (0.5      (1.9

Deferred tax valuation allowance

     —           1.0        —           1.0  
  

 

 

    

 

 

    

 

 

    

 

 

 

Other comprehensive income, net of tax

     (6.0      8.6        1.7        4.3  

Other comprehensive loss attributable to non-controlling interest

     (0.3      —           —           (0.3
  

 

 

    

 

 

    

 

 

    

 

 

 

Other comprehensive income attributable to controlling interest

     (5.7      8.6        1.7        4.6  
  

 

 

    

 

 

    

 

 

    

 

 

 

Accumulated other comprehensive (loss) income, as of July 3, 2016

   $ (158.0    $ 4.6      $ (42.1    $ (195.5
  

 

 

    

 

 

    

 

 

    

 

 

 

Amounts reclassified from AOCI associated with employee benefit plan costs and recognized on the Company’s Condensed Consolidated Statements of Operations for the three and nine month periods ended July 3, 2016 and June 28, 2015 were as follows:

 

     Three Month Period Ended      Nine Month Period Ended  

(in millions)

   July 3, 2016      June 28, 2015      July 3, 2016      June 28, 2015  

Cost of goods sold

   $ 0.4      $ 0.2      $ 1.1      $ 0.5  

Selling expenses

     —           —           0.2        0.2  

General and administrative expenses

     0.2        0.1        0.5        0.4  
  

 

 

    

 

 

    

 

 

    

 

 

 

Amounts reclassified from accumulated other comprehensive income

   $ 0.6      $ 0.3      $ 1.8      $ 1.1  
  

 

 

    

 

 

    

 

 

    

 

 

 

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

NOTE 15 - INCOME TAXES

SBH effective tax rate for the three month periods ended July 3, 2016 and June 28, 2015 was 29.4% and (112.8)%, respectively. SB/RH effective tax rate for the three month periods ended July 3, 2016 and June 28, 2015 was 27.9% and (104.4)%, respectively. 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% and the release of valuation allowance on U.S. net operating losses deferred tax assets offsetting tax expense on U.S. pretax income. The effective tax rate for the three month period ended July 3, 2016 was increased due to $25.5 million of income tax expense recognized for a tax contingency reserve for a tax exposure in Germany. SBH effective tax rate also includes $5.3 million of tax benefits from the adoption of ASU No. 2016-09. SBRH effective tax rate includes $9.4 million of tax benefits from the adoption of ASU No. 2016-09. See Note 2, “Significant Accounting Policies”, for additional discussion over the adoption of ASU No. 2016-09.

SBH’s effective tax rate for the nine month periods ended July 3, 2016 and June 28, 2015 was 14.8% and 3.8%, respectively. SB/RH’s effective tax rate for the nine month periods ended July 3, 2016 and June 28, 2015 was 17.7% and 3.6%, respectively. 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% and the release of valuation allowance on U.S. net operating losses deferred tax assets offsetting tax expense on U.S. pretax income. The effective tax rate for the three and nine month period ended July 3, 2016 was increased due to $25.5 million of income tax expense recognized for a tax contingency reserve for a tax exposure in Germany. SBH effective tax rate also includes $22.7 million of tax benefits from the adoption of ASU No. 2016-09 for the nine month period ended July 3, 2016. SBRH effective tax rate includes $19.9 million of tax benefits from the adoption of ASU No. 2016-09 for the nine month period ended July 3, 2016. See Note 2, “Significant Accounting Policies”, for additional discussion over the adoption of ASU No. 2016-09. For the nine month period ended July 3, 2016, the effective tax rate was reduced due to $5.9 million for non-recurring items related to the impact of tax law changes and changes in state deferred tax rates on the Company’s net deferred tax liabilities.

In December 2015, the Company received a ruling from the Internal Revenue Service which resulted in approximately $88 million of U.S. net operating losses being restored. The ruling created additional U.S. deferred tax assets and valuation allowance during the nine month period ended July 3, 2016.

 

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During the nine month period ended July 3, 2016, the Company determined it is more likely than not its U.S. deferred tax assets will be used to reduce taxable income, except for tax attributes subject to ownership change limitations, capital losses, and certain state operating losses and credits that will expire unused. The Company estimates the total unused tax benefits are approximately $211 million. The Company has projected to release approximately $109 million of valuation allowance during the year ending September 30, 2016 based on estimates of taxable income. Approximately $25 million of the valuation allowance release results from additional deferred tax assets created by the adoption of ASU No. 2016-09. For the nine month period ended July 3, 2016, the Company included $95 million of the release in the calculation of the estimated annual effective tax rate for the current fiscal year, and $14 million as a discrete income tax benefit.

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, electric personal care and small appliances businesses; (ii) Hardware & Home Improvement, which consists of the Company’s worldwide hardware, home improvement 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 was established through the AAG acquisition on May 21, 2015 and 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.

Summary statements of operations including net sales to external customers relating to the segments for the three and nine month periods ended July 3, 2016 and June 28, 2015 are as follows:

 

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

Three month periods ended (in millions)

   July 3, 2016      June 28, 2015      July 3, 2016      June 28, 2015  

Consumer batteries

   $ 187.2       $ 178.3       $ 187.2       $ 178.3   

Small appliances

     151.1         161.3         151.1         161.3   

Personal care

     115.8         119.4         115.8         119.4   
  

 

 

    

 

 

    

 

 

    

 

 

 

Global Batteries & Appliances

     454.1         459.0         454.1         459.0   

Hardware & Home Improvement

     328.5         313.5         328.5         313.5   

Global Pet Supplies

     207.1         208.3         207.1         208.3   

Home and Garden

     212.0         202.3         212.0         202.3   

Global Auto Care

     159.8         64.4         159.8         64.4   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net sales

   $ 1,361.5       $ 1,247.5       $ 1,361.5       $ 1,247.5   
  

 

 

    

 

 

    

 

 

    

 

 

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

Nine month periods ended (in millions)

   July 3, 2016      June 28, 2015      July 3, 2016      June 28, 2015  

Consumer batteries

   $ 618.0       $ 600.3       $ 618.0       $ 600.3   

Small appliances

     479.3         536.7         479.3         536.7   

Personal care

     393.0         402.3         393.0         402.3   
  

 

 

    

 

 

    

 

 

    

 

 

 

Global Batteries & Appliances

     1,490.3         1,539.3         1,490.3         1,539.3   

Hardware & Home Improvement

     912.9         874.1         912.9         874.1   

Global Pet Supplies

     619.0         538.8         619.0         538.8   

Home and Garden

     414.7         365.7         414.7         365.7   

Global Auto Care

     353.1         64.4         353.1         64.4   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net sales

   $ 3,790.0       $ 3,382.3       $ 3,790.0       $ 3,382.3   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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During the three month period ended July 3, 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 nine month period ended July 3, 2016, other adjustments consisted of costs associated with the onboarding of a key executive and the involuntary transfer of inventory. During the three and nine month period ended June 28, 2015, other consisted of costs associated with exiting of a key executive, coupled with onboarding a key executive. Segment Adjusted EBITDA in relation to the Company’s reportable segments for the three and nine month periods ended July 3, 2016 and June 28, 2015, is as follows:

 

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

Three month periods ended (in millions)

   July 3, 2016      June 28, 2015      July 3, 2016      June 28, 2015  

Global Batteries & Appliances

   $ 64.3       $ 60.1       $ 64.3       $ 60.1   

Hardware & Home Improvement

     65.2         62.6         65.2         62.6   

Global Pet Supplies

     37.7         38.4         37.7         38.4   

Home and Garden

     67.0         62.4         67.0         62.4   

Global Auto Care

     54.2         19.2         54.2         19.2   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Segment Adjusted EBITDA

     288.4         242.7         288.4         242.7   

Depreciation and amortization

     45.3         43.8         45.3         43.8   

Share-based compensation

     15.9         16.9         14.6         15.2   

Corporate expenses

     9.2         6.5         9.1         6.5   

Purchase accounting inventory adjustment

     —           4.7         —           4.7   

Acquisition and integration related charges

     8.0         24.2         8.0         24.2   

Restructuring and related charges

     5.5         10.5         5.5         10.5   

Interest expense

     59.9         112.9         59.9         112.9   

Other

     —           2.1         —           2.1   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income from operations before income taxes

   $ 144.6       $ 21.1       $ 146.0       $ 22.8   
  

 

 

    

 

 

    

 

 

    

 

 

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

Nine month periods ended (in millions)

   July 3, 2016      June 28, 2015      July 3, 2016      June 28, 2015  

Global Batteries & Appliances

   $ 228.1       $ 229.2       $ 228.1       $ 229.2   

Hardware & Home Improvement

     172.5         160.2         172.5         160.2   

Global Pet Supplies

     98.3         82.4         98.3         82.4   

Home and Garden

     118.3         100.0         118.3         100.0   

Global Auto Care

     122.0         19.2         122.0         19.2   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Segment Adjusted EBITDA

     739.2         591.0         739.2         591.0   

Depreciation and amortization

     136.7         122.7         136.7         122.7   

Share-based compensation

     47.4         36.3         43.4         32.2   

Corporate expenses

     23.3         19.8         22.9         19.5   

Purchase accounting inventory adjustment

     —           7.7         —           7.7   

Acquisition and integration related charges

     31.2         44.2         31.2         44.2   

Restructuring and related charges

     8.2         22.3         8.2         22.3   

Interest expense

     175.8         206.5         175.8         206.5   

Other

     1.2         3.9         1.1         3.9   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income from operations before income taxes

   $ 315.4       $ 127.6       $ 319.9       $ 132.0   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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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 nine month periods ended July 3, 2016 and June 28, 2015 are as follows:

 

     Three Month Periods Ended      Nine Month Periods Ended  

(in millions, except per share amounts)

   July 3, 2016      June 28, 2015      July 3, 2016      June 28, 2015  

Numerator

           

Net income attributable to controlling interest

   $ 101.9       $ 44.9       $ 268.2       $ 122.5   

Denominator

           

Weighted average shares outstanding - basic

     59.4         56.5         59.3         54.2   

Dilutive shares

     0.2         —           0.2         0.1   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average shares outstanding - diluted

     59.6         56.5         59.5         54.3   

Earnings per share

           

Basic earnings per share

   $ 1.72       $ 0.79       $ 4.52       $ 2.26   

Diluted earnings per share

   $ 1.71       $ 0.79       $ 4.51       $ 2.26   

Weighted average number of anti-dilutive shares excluded from denominator

           

Restricted stock units

     0.3         0.3         0.3         0.3   

 

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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 6.375% Notes and the 6.625% Notes under the 2020/2022 Indenture, 6.125% Notes under the 2024 Indenture and the 5.75% Notes under the 2025 Indenture. See Note 9, “Debt” for further information on the 6.375% Notes, 6.625% Notes, 6.125% Notes and 5.75% Notes.

The following consolidating financial statements illustrate the components of the condensed consolidated financial statements of SB/RH. 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 July 3, 2016 (in millions)

   Parent     Subsidiaries     Subsidiaries     Eliminations     Consolidated  

Assets

  

Current assets:

          

Cash and cash equivalents

   $ 3.9      $ 2.5      $ 110.5      $ —        $ 116.9   

Trade receivables, net

     183.2        211.9        193.8        —          588.9   

Intercompany receivables

     —          795.3        215.4        (1,010.7     —     

Other receivables

     —          8.1        56.1        (3.0     61.2   

Inventories

     406.4        132.2        326.5        (22.8     842.3   

Prepaid expenses and other

     43.3        4.8        34.1        —          82.2   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

     636.8        1,154.8        936.4        (1,036.5     1,691.5   

Property, plant and equipment, net

     234.5        74.5        214.2        —          523.2   

Long-term intercompany receivables

     500.2        241.4        13.8        (755.4     —     

Deferred charges and other

     168.8        0.9        40.8        (175.9     34.6   

Goodwill

     912.1        1,154.5        413.1        —          2,479.7   

Intangible assets, net

     1,359.6        633.5        406.5        —          2,399.6   

Investments in subsidiaries

     3,433.9        1,206.7        (2.9     (4,637.7     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 7,245.9      $ 4,466.3      $ 2,021.9      $ (6,605.5   $ 7,128.6   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities and Shareholder’s Equity

          

Current liabilities:

          

Current portion of long-term debt

   $ 23.0      $ 0.4      $ 18.9      $ —        $ 42.3   

Accounts payable

     195.5        75.0        203.0        —          473.5   

Intercompany accounts payable

     1,012.2        —          12.8        (1,025.0     —     

Accrued wages and salaries

     48.3        4.6        41.6        —          94.5   

Accrued interest

     42.0        —          —          —          42.0   

Other current liabilities

     77.5        15.6        97.0        (3.0     187.1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

     1,398.5        95.6        373.3        (1,028.0     839.4   

Long-term debt, net of current portion

     3,794.9        14.6        30.7        —          3,840.2   

Long-term intercompany debt

     14.3        476.7        250.1        (741.1     —     

Deferred income taxes

     203.3        444.1        89.9        (181.7     555.6   

Other long-term liabilities

     33.2        1.4        71.2        —          105.8   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     5,444.2        1,032.4        815.2        (1,950.8     5,341.0   

Shareholder’s equity:

          

Other equity

     2,055.9        151.7        (955.0     739.0        1,991.6   

Accumulated (deficit) earnings

     (58.2     3,457.8        2,282.9        (5,740.8     (58.3

Accumulated other comprehensive (loss) income

     (196.0     (175.6     (171.0     347.1        (195.5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total shareholder’s equity

     1,801.7        3,433.9        1,156.9        (4,654.7     1,737.8   

Non-controlling interest

     —          —          49.8        —          49.8   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

     1,801.7        3,433.9        1,206.7        (4,654.7     1,787.6   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

   $ 7,245.9      $ 4,466.3      $ 2,021.9      $ (6,605.5   $ 7,128.6   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Statement of Financial Position          Guarantor     Nonguarantor              

As of September 30, 2015 (in millions)

   Parent     Subsidiaries     Subsidiaries     Eliminations     Consolidated  

Assets

  

Current assets:

          

Cash and cash equivalents

   $ 13.0      $ 8.6      $ 226.3      $ —        $ 247.9   

Trade receivables, net

     175.8        94.9        228.1        —          498.8   

Intercompany receivables

     152.0        713.8        225.0        (1,090.8     —     

Other receivables

     14.3        11.2        62.4        —          87.9   

Inventories

     410.3        95.7        291.8        (17.0     780.8   

Prepaid expenses and other

     36.1        2.2        33.0        0.8        72.1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

     801.5        926.4        1,066.6        (1,107.0     1,687.5   

Property, plant and equipment, net

     235.2        60.7        211.2        —          507.1   

Long-term intercompany receivables

     2.8        357.7        15.4        (375.9     —     

Deferred charges and other

     154.8        14.1        35.3        (162.1     42.1   

Goodwill

     910.7        1,154.0        412.0        —          2,476.7   

Intangible assets, net

     1,402.4        646.6        431.3        —          2,480.3   

Investments in subsidiaries

     3,150.1        1,095.9        (2.9     (4,243.1     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 6,657.5      $ 4,255.4      $ 2,168.9      $ (5,888.1   $ 7,193.7   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities and Shareholder’s Equity

          

Current liabilities:

          

Current portion of long-term debt

   $ 53.4      $ —        $ 15.1      $ —        $ 68.5   

Accounts payable

     281.1        45.9        293.6        —          620.6   

Intercompany accounts payable

     449.4        —          28.5        (477.9     —     

Accrued wages and salaries

     40.3        10.0        46.2        —          96.5   

Accrued interest

     63.2        —          0.1        —          63.3   

Other current liabilities

     84.5        21.5        106.0        (0.1     211.9   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

     971.9        77.4        489.5        (478.0     1,060.8   

Long-term debt, net of current portion

     3,848.8        —          23.3        —          3,872.1   

Long-term intercompany debt

     16.8        578.7        392.6        (988.1     —     

Deferred income taxes

     202.1        440.5        94.2        (164.3     572.5   

Other long-term liabilities

     33.3        8.8        73.4        —          115.5   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     5,072.9        1,105.4        1,073.0        (1,630.4     5,620.9   

Shareholder’s equity:

          

Other equity

     1,981.7        1,129.2        34.7        (1,175.7     1,969.9   

Accumulated (deficit) earnings

     (246.7     2,139.8        1,176.1        (3,315.9     (246.7

Accumulated other comprehensive (loss) income

     (200.2     (175.1     (171.0     346.2        (200.1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total shareholder’s equity

     1,534.8        3,093.9        1,039.8        (4,145.4     1,523.1   

Non-controlling interest

     49.8        56.1        56.1        (112.3     49.7   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

     1,584.6        3,150.0        1,095.9        (4,257.7     1,572.8   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

   $ 6,657.5      $ 4,255.4      $ 2,168.9      $ (5,888.1   $ 7,193.7   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents
Statement of Operations          Guarantor     Nonguarantor               

Three month period ended July 3, 2016 (in millions)

   Parent     Subsidiaries     Subsidiaries      Eliminations     Consolidated  

Net sales

   $ 615.6      $ 567.6      $ 615.7       $ (437.4   $ 1,361.5   

Cost of goods sold

     412.2        392.9        460.0         (434.3     830.8   

Restructuring and related charges

     —          —          0.1           0.1   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Gross profit

     203.4        174.7        155.6         (3.1     530.6   

Selling

     77.5        40.3        84.0         (0.1     201.7   

General and administrative

     53.1        18.7        21.0         —          92.8   

Research and development

     9.1        1.6        3.9         —          14.6   

Acquisition and integration related charges

     4.4        0.3        3.3         —          8.0   

Restructuring and related charges

     0.6        3.7        1.1         —          5.4   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total operating expense

     144.7        64.6        113.3         (0.1     322.5   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Operating income (loss)

     58.7        110.1        42.3         (3.0     208.1   

Interest expense

     50.7        5.1        4.1         —          59.9   

Other non-operating (income) expense, net

     (129.9     (24.6     2.3         154.4        2.2   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Income from operations before income taxes

     137.9        129.6        35.9         (157.4     146.0   

Income tax expense (benefit)

     32.7        (0.5     8.1         0.5        40.8   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Net income (loss)

     105.2        130.1        27.8         (157.9     105.2   

Net income attributable to non-controlling interest

     —          —          0.1         —          0.1   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Net income (loss) attributable to controlling interest

   $ 105.2      $ 130.1      $ 27.7       $ (157.9   $ 105.1   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
Statement of Operations          Guarantor     Nonguarantor               

Nine month period ended July 3, 2016 (in millions)

   Parent     Subsidiaries     Subsidiaries      Eliminations     Consolidated  

Net sales

   $ 1,821.9      $ 1,167.8      $ 1,956.8       $ (1,156.5   $ 3,790.0   

Cost of goods sold

     1,241.8        805.8        1,457.6         (1,149.7     2,355.5   

Restructuring and related charges

     —          —          0.4         —          0.4   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Gross profit

     580.1        362.0        498.8         (6.8     1,434.1   

Selling

     234.0        91.2        254.1         (1.0     578.3   

General and administrative

     160.5        51.5        59.8         (0.1     271.7   

Research and development

     27.2        4.4        11.3           42.9   

Acquisition and integration related charges

     18.0        3.5        9.7           31.2   

Restructuring and related charges

     1.9        4.0        1.9           7.8   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total operating expense

     441.6        154.6        336.8         (1.1     931.9   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Operating income (loss)

     138.5        207.4        162.0         (5.7     502.2   

Interest expense

     147.0        15.6        13.1         0.1        175.8   

Other non-operating (income) expense, net

     (282.7     (116.7     6.4         399.5        6.5   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Income from operations before income taxes

     274.2        308.5        142.5         (405.3     319.9   

Income tax expense (benefit)

     10.9        24.2        25.1         (3.6     56.6   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Net income (loss)

     263.3        284.3        117.4         (401.7     263.3   

Net income attributable to non-controlling interest

     —          —          0.3         —          0.3   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Net income (loss) attributable to controlling interest

   $ 263.3      $ 284.3      $ 117.1       $ (401.7   $ 263.0   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

24


Table of Contents

Statement of Operations

Three month period ended June 28, 2015 (in millions)

   Parent     Guarantor
Subsidiaries
    Nonguarantor
Subsidiaries
    Eliminations     Consolidated  

Net sales

   $ 577.7      $ 324.1      $ 605.0      $ (259.3   $ 1,247.5   

Cost of goods sold

     397.5        202.8        445.3        (256.1     789.5   

Restructuring and related charges

     —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     180.2        121.3        159.7        (3.2     458.0   

Selling

     69.8        32.1        83.2        (0.3     184.8   

General and administrative

     54.2        15.4        18.6        —          88.2   

Research and development

     8.3        1.0        3.6        —          12.9   

Acquisition and integration related charges

     21.9        0.4        1.9        —          24.2   

Restructuring and related charges

     22.7        0.2        (12.4     —          10.5   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expense

     176.9        49.1        94.9        (0.3     320.6   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     3.3        72.2        64.8        (2.9     137.4   

Interest expense

     99.4        2.7        10.8        —          112.9   

Other non-operating (income) expense, net

     (89.6     (42.7     1.0        133.0        1.7   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations before income taxes

     (6.5     112.2        53.0        (135.9     22.8   

Income tax (benefit) expense

     (53.1     22.2        7.1        —          (23.8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     46.6        90.0        45.9        (135.9     46.6   

Net income (loss) attributable to non-controlling interest

     —          0.1        0.1        (0.2     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to controlling interest

   $ 46.6      $ 89.9      $ 45.8      $ (135.7   $ 46.6   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Statement of Operations

Nine month period ended June 28, 2015 (in millions)

   Parent     Guarantor
Subsidiaries
    Nonguarantor
Subsidiaries
    Eliminations     Consolidated  

Net sales

   $ 1,672.6      $ 529.7      $ 1,875.5      $ (695.5   $ 3,382.3   

Cost of goods sold

     1,163.9        328.9        1,375.2        (689.0     2,179.0   

Restructuring and related charges

     —          —          0.4        —          0.4   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     508.7        200.8        499.9        (6.5     1,202.9   

Selling

     206.3        63.8        248.2        (0.6     517.7   

General and administrative

     156.0        30.8        51.3        —          238.1   

Research and development

     24.3        2.0        10.6        —          36.9   

Acquisition and integration related charges

     33.9        3.0        7.3        —          44.2   

Restructuring and related charges

     30.7        0.3        (9.1     —          21.9   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expense

     451.2        99.9        308.3        (0.6     858.8   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     57.5        100.9        191.6        (5.9     344.1   

Interest expense

     180.8        1.1        24.6        —          206.5   

Other non-operating (income) expense, net

     (175.6     (114.0     4.0        291.2        5.6   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations before income taxes

     52.3        213.8        163.0        (297.1     132.0   

Income tax (benefit) expense

     (74.9     44.3        36.2        (0.8     4.8   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     127.2        169.5        126.8        (296.3     127.2   

Net income (loss) attributable to non-controlling interest

     0.2        0.2        0.2        (0.4     0.2   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to controlling interest

   $ 127.0      $ 169.3      $ 126.6      $ (295.9   $ 127.0   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

25


Table of Contents

Statement of Comprehensive Income

Three month period ended July 3, 2016 (in millions)

   Parent     Guarantor
Subsidiaries
    Nonguarantor
Subsidiaries
    Eliminations     Consolidated  

Net income (loss)

   $ 105.2      $ 130.1      $ 27.8      $ (157.9   $ 105.2   

Other comprehensive income (loss), net of tax:

          

Foreign currency translation (loss) gain

     (13.7     (13.7     (13.7     27.4        (13.7

Unrealized gain (loss) on derivative instruments

     7.8        6.7        6.7        (13.4     7.8   

Defined benefit pension gain (loss)

     1.2        1.1        1.2        (2.3     1.2   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive (loss) income

     (4.7     (5.9     (5.8     11.7        (4.7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

     100.5        124.2        22.0        (146.2     100.5   

Comprehensive income (loss) attributable to non-controlling interest

     —          —          (0.2     —          (0.2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributable to controlling interest

   $ 100.5      $ 124.2      $ 22.2      $ (146.2   $ 100.7   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Statement of Comprehensive Income

Nine month period ended July 3, 2016 (in millions)

   Parent     Guarantor
Subsidiaries
    Nonguarantor
Subsidiaries
    Eliminations     Consolidated  

Net income (loss)

   $ 263.3      $ 284.3      $ 117.4      $ (401.7   $ 263.3   

Other comprehensive income (loss), net of tax:

          

Foreign currency translation (loss) gain

     (6.0     (6.0     (5.9     11.9        (6.0

Unrealized gain (loss) on derivative instruments

     8.6        3.9        3.8        (7.7     8.6   

Defined benefit pension gain (loss)

     1.7        1.7        1.6        (3.3     1.7   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

     4.3        (0.4     (0.5     0.9        4.3   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

     267.6        283.9        116.9        (400.8     267.6   

Comprehensive income (loss) attributable to non-controlling interest

     —          —          (0.3     —          (0.3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributable to controlling interest

   $ 267.6      $ 283.9      $ 117.2      $ (400.8   $ 267.9   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Statement of Comprehensive Income

Three month period ended June 28, 2015 (in millions)

   Parent     Guarantor
Subsidiaries
    Nonguarantor
Subsidiaries
    Eliminations     Consolidated  

Net income (loss)

   $ 46.6      $ 90.0      $ 45.9      $ (135.9   $ 46.6   

Other comprehensive income (loss), net of tax:

          

Foreign currency translation gain (loss)

     9.5        9.5        9.5        (19.0     9.5   

Unrealized (loss) gain on derivative instruments

     (12.0     (11.5     (11.5     23.0        (12.0

Defined benefit pension (loss) gain

     (0.6     (0.6     (0.6     1.2        (0.6
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive (loss) income

     (3.1     (2.6     (2.6     5.2        (3.1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

     43.5        87.4        43.3        (130.7     43.5   

Comprehensive income (loss) attributable to non-controlling interest

     —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributable to controlling interest

   $ 43.5      $ 87.4      $ 43.3      $ (130.7   $ 43.5   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Statement of Comprehensive Income

Nine month period ended June 28, 2015 (in millions)

   Parent     Guarantor
Subsidiaries
    Nonguarantor
Subsidiaries
    Eliminations     Consolidated  

Net income (loss)

   $ 127.2      $ 169.5      $ 126.8      $ (296.3   $ 127.2   

Other comprehensive income (loss), net of tax:

          

Foreign currency translation (loss) gain

     (68.6     (69.2     (69.2     138.4        (68.6

Unrealized (loss) gain on derivative instruments

     (8.6     (5.8     (5.8     11.6        (8.6

Defined benefit pension gain (loss)

     2.8        2.8        2.8        (5.6     2.8   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive (loss) income

     (74.4     (72.2     (72.2     144.4        (74.4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

     52.8        97.3        54.6        (151.9     52.8   

Comprehensive income (loss) attributable to non-controlling interest

     0.2        0.2        0.2        (0.4     0.2   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributable to controlling interest

   $ 52.6      $ 97.1      $ 54.4      $ (151.5   $ 52.6   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

26


Table of Contents

Statement of Cash Flows

Nine month period ended July 3, 2016 (in millions)

   Parent     Guarantor
Subsidiaries
    Nonguarantor
Subsidiaries
    Eliminations     Consolidated  

Net cash (used) provided by operating activities

   $ (272.0   $ 219.5      $ (99.8   $ 257.0      $ 104.7   

Cash flows from investing activities

          

Purchases of property, plant and equipment

     (32.2     (6.0     (21.4     —          (59.6

Proceeds from sales of property, plant and equipment

     0.1        —          0.7        —          0.8   

Other investing activities

     (0.6     (1.3     —          —          (1.9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used by investing activities

     (32.7     (7.3     (20.7     —          (60.7

Cash flows from financing activities

          

Proceeds from issuance of debt

     217.8        —          —          —          217.8   

Payment of debt

     (310.0     —          (1.7     —          (311.7

Payment of debt issuance costs

     (1.6     —          —          —          (1.6

Payment of cash dividends to parent

     (74.6     —          —          —          (74.6

Payment of contingent consideration

     (3.2     —          —          —          (3.2

Advances related to intercompany transactions

     467.2        (218.3     8.1        (257.0     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided (used) by financing activities

     295.6        (218.3     6.4        (257.0     (173.3

Effect of exchange rate changes on cash and cash equivalents

     —          —          (1.7     —          (1.7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (decrease) in cash and cash equivalents

     (9.1     (6.1     (115.8     —          (131.0

Cash and cash equivalents, beginning of period

     13.0        8.6        226.3        —          247.9   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 3.9      $ 2.5      $ 110.5      $ —        $ 116.9   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Statement of Cash Flows

Nine month period ended June 28, 2015 (in millions)

   Parent     Guarantor
Subsidiaries
    Nonguarantor
Subsidiaries
    Eliminations     Consolidated  

Net cash (used) provided by operating activities

   $ (544.1   $ (355.9   $ (1,358.3   $ 2,094.7      $ (163.6

Cash flows from investing activities

           —       

Purchases of property, plant and equipment

     (25.0     (7.3     (17.2     —          (49.5

Business acquisitions, net of cash acquired

     (1,077.5     —          (115.7     —          (1,193.2

Proceeds from sales of property, plant and equipment

     0.1        —          1.2        —          1.3   

Other investing activities

     —          —          (0.9     —          (0.9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used by investing activities

     (1,102.4     (7.3     (132.6     —          (1,242.3

Cash flows from financing activities

          

Proceeds from issuance of debt

     3,177.0        —          —          —          3,177.0   

Payment of debt

     (1,989.8     —          (292.1     —          (2,281.9

Payment of debt issuance costs

     (37.3     —          —          —          (37.3

Payment of cash dividends to parent

     (51.0     —          —          —          (51.0

Share based tax withholding payments, net of proceeds upon vesting

     (1.9     —          —          —          (1.9

Advances related to intercompany transactions

     18.9        369.0        1,706.8        (2,094.7     —     

Capital contribution from parent

     528.3        —          —          —          528.3   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided (used) by financing activities

     1,644.2        369.0        1,414.7        (2,094.7     1,333.2   

Effect of exchange rate changes on cash and cash equivalents

     —          —          (13.0     —          (13.0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     (2.3     5.8        (89.2     —          (85.7

Cash and cash equivalents, beginning of period

     4.8        11.2        176.9        —          192.9   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 2.5      $ 17.0      $ 87.7      $ —        $ 107.2