What changed in this filing

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Item 1. Business

2021-11-23 compared with 2020-11-18 · 92 added, 86 removed, 139 unchanged (56% of the section changed)

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SB/RH is a wholly-owned subsidiary of SBH and represents substantially all of its assets, liabilities, revenues, expenses and operations.

SB/RH is the parent guarantor for certain debt of Spectrum Brands, Inc., a wholly-owned subsidiary of SB/RH ("SBI"), and represents all of SBI assets, liabilities, revenues, expenses, and operations.

Thus, all information contained in this report relates to, and is filed by, SBH.

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The SEC also maintains a website that contains our reports, proxy statements and other information at www.sec.gov.

In addition, copies of our (i) Corporate Governance Guidelines, (ii) charters for the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee, (iii) Code of Business Conduct and Ethics and (iv) Code of Ethics for the Principal Executive Officer and Senior Financial Officers are available on our website at www.spectrumbrands.com under “Investor Relations—Corporate Governance.” Copies will also be provided to any stockholder upon written request to the Investor Relations and Corporate Communications, Spectrum Brands, Inc.

at 3001 Deming Way, Middleton, Wisconsin 53562 or via electronic mail at investorrelations@spectrumbrands.com, or by contacting the Division Vice President (DVP), Investor Relations & Corporate Communications by telephone at (608) 278-6148.

at 3001 Deming Way, Middleton, Wisconsin 53562 or via electronic mail at investorrelations@spectrumbrands.com, or by telephone at (608) 275-4917.

General Overview

We are a diversified global branded consumer products and home essentials company.

We manage the business in four vertically integrated, product focused segments:

(i) Hardware & Home Improvement (“HHI”), (ii) Home and Personal Care (“HPC”), (iii) Global Pet Care (“GPC”), and (iv) Home and Garden (“H&G”).

The Company manufactures, markets and distributes its products globally in the North America (“NA”), Europe, Middle East & Africa (“EMEA”), Latin America (“LATAM”) and Asia-Pacific (“APAC”) regions through a variety of trade channels, including retailers, wholesalers and distributors, original equipment manufacturers (“OEMs”), and construction companies.

We manage the business in three vertically integrated, product focused segments:

(i) Home and Personal Care (“HPC”), (ii) Global Pet Care (“GPC”), and (iii) Home and Garden (“H&G”).

We enjoy strong name recognition in our regions under our various brands and patented technologies across multiple product categories.

Global and geographic strategic initiatives and financial objectives are determined at the corporate level.

Each segment is responsible for implementing defined strategic initiatives and achieving certain financial objectives and has a president or general manager responsible for sales and marketing initiatives and the financial results for all product lines within that segment.

SB/RH is a wholly owned subsidiary of SBH.

Spectrum Brands, Inc., a wholly-owned subsidiary of SB/RH (“SBI”) incurred certain debt guaranteed by SB/RH and domestic subsidiaries of SBI.

The following is an overview of the consolidated business showing the net sales by segment and geographic region sold (based upon destination) as a percentage of consolidated net sales for the year ended September 30, 2020.

Each segment is responsible for implementing defined strategic initiatives and achieving certain financial objectives and has a president responsible for sales and marketing initiatives and the financial results for all product lines within that segment.

The segments are supported through center-led corporate shared service operations consisting of finance and accounting, information technology, legal and human resources, supply chain and commercial operations.

The following is an overview of the consolidated business showing net sales by segment and geographic region sold (based upon destination) as a percentage of consolidated net sales for the year ended September 30, 2021.

Our operating performance is influenced by a number of factors including:

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See Management’s Discussion and Analysis of Financial Condition and Results of Operations , included in Item 7 to this Annual Report, for further discussion of the consolidated operating results and segment operating results.

Hardware and Home Improvement (HHI)

The following is an overview of net sales by product category and geographic region sold (based upon destination) for the year ended September 30, 2020

Product Category

Residential locksets and door hardware including knobs, levers, deadbolts, handle sets, including electronic and connected locks

Kwikset®, Weiser®, Baldwin®, Tell Manufacturing®, and EZSET®

Plumbing Kitchen and bath faucets and accessories

Hardware Hinges, metal shapes, security hardware, track and sliding door hardware, gate hardware

National Hardware®, FANAL®

In some cases, we supply product to customers who have private label brand offerings.

We also have supply and brand licensing arrangements used for some smaller lines of business and brands such as FANAL®.

Certain of our residential lockset products incorporate patented SmartKey® technology that provides advanced security and easy re-keying.

The sales force of the HHI business is aligned by brands, customers, and geographic regions.

We have strong partnerships with a variety of customers including large home improvement centers, wholesale distributors, home builders, plumbers, home automation providers, and commercial contractors.

A significant percentage of our sales are attributable to a limited group of retailer customers, including Home Depot and Lowe’s, which represented approximately 42% of segment sales for the fiscal year ended September 30, 2020.

Primary competitors in security include Allegion (Schlage), Assa Abloy (Emtek, Yale) and private label brands such as Defiant.

Primary competitors for plumbing include Masco (Delta), Fortune Brands (Moen), Kohler, American Standard and private label brands such as Glacier Bay.

Primary competitors for hardware include The Hillman Group, Hampton Products, Koch (Lehigh) and private label brands such as Crown Bolt.

Sales in our HHI segment primarily increase during the spring and summer periods (the Company’s third and fourth fiscal quarters).

During the year ended September 30, 2020, HHI realized lower sales during the third quarter and incremental sales in the fourth quarter due to supply constraints and government mandated shutdowns attributable to the COVID-19 pandemic.

Segment sales by quarter as a percentage of annual net sales during the years ended September 30, 2020, 2019 and 2018 are as follows:

2020 2019 2018

First Quarter

22 % 23 % 24 %

Second Quarter

25 % 24 % 23 %

Third Quarter

21 % 26 % 27 %

Fourth Quarter

32 % 27 % 26 %

The principal raw materials used in manufacturing include brass, zinc, and steel that are sourced either on a global or regional basis.

The prices of these raw materials are susceptible to fluctuations due to supply and demand trends, energy costs, transportation costs, government regulations and tariffs, changes in currency exchange rates, price controls, general economic conditions and other unforeseen circumstances.

We have regularly engaged in forward purchase and hedging derivative transactions in an attempt to effectively manage certain raw material costs we expect to incur over the next 12 to 24 months.

Substantially all of our Pfister products are manufactured by third-party suppliers that are primarily located in the APAC region.

We maintain ownership of most of the tooling used by our suppliers.

We continually evaluate our manufacturing facilities’ capacity and related utilization.

In general, we believe our existing facilities are adequate for our present and foreseeable needs.

We continuously monitor and evaluate our supplier network for quality, cost, and manufacturing capacity.

Our research and development strategy is focused on new product development and performance enhancements of our existing products.

We plan to continue to use our brand names, customer relationships and research and development efforts to introduce innovative products that offer enhanced value to consumers through new designs and improved functionality.

On September 8, 2021, SBI entered into a definitive Asset and Stock Purchase Agreement with ASSA ABLOY AB to sell the Company's Hardware and Home Improvement ("HHI") segment.

As a result, the Company's assets and liabilities associated with the HHI segment have been classified as held for sale, and the respective operations of the HHI segment classified as discontinued operations and reported separately for all periods presented as the planned disposition represents a strategic shift that will have a major effect on the Company's operations and financial results.

Home and Personal Care (HPC)

The following is an overview of net sales by product category and geographic region sold (based upon destination) for the year ended September 30, 2020

The following is an overview of net sales by product category and geographic region sold by destination for the year ended September 30, 2021.

Product Category

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Remington®, LumaBella®

We license the Black & Decker® brand (“BDC”) in North America, Latin America (excluding Brazil) and the Caribbean for four core categories of household appliances:

beverage products, food preparation products, garment care products and cooking products through a trademark license agreement with BDC through December 2021.

Under the agreement, we agree to pay BDC royalties based on a percentage of sales, with minimum annual royalty payments of $15.0 million.

The agreement also requires us to comply with maximum annual return rates for products.

If BDC does not agree to renew the license agreement, we have 18 months to transition out of the brand name with no minimum royalty payments during such transition period and BDC has agreed to not compete in the four categories for five years after the end of the transition period.

Upon request, BDC may elect to extend the license to use the Black & Decker® brand to certain additional product categories.

BDC has approved several extensions of the license to additional categories and geographies.

We have a trademark license agreement (the "License Agreement") with Stanley Black & Decker ("BDC") pursuant to which we license the Black & Decker® brand in North America, Latin America (excluding Brazil) and the Caribbean for four core categories of household appliances:

beverage products, food preparation products, garment care products and cooking products through December 31, 2021.

Under the terms of the License Agreement, we agree to pay BDC royalties based on a percentage of sales, with minimum annual royalty payments of $15.0 million.

The License Agreement also requires us to comply with maximum annual return rates for products.

Total revenue under the License Agreement was $400.2 million for the year ended September 30, 2021.

As of the date of this report, we are in discussions with BDC to replace the current License Agreement with a new multi-year trademark license agreement, but there can be no assurances that we will be able to do so.

In the event that we cannot reach a new agreement, we believe the current License Agreement, provides us until June 30, 2023 to transition out of the BDC brand and prohibits BDC from competing in the four categories for five years after the end of the transition period.

BDC has asserted that it believes the transition period and non-competition provisions in the License Agreement are no longer applicable.

For additional information please see our Risk Factors set forth in this Annual Report, including the risk factor entitled " We may not be able to adequately establish and protect our intellectual property rights, and the infringement or loss of our intellectual property rights could harm our business."

We own the right to use the Remington® trademark for electric shavers, shaver accessories, grooming products and personal care products;

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Our sales generally are made through the use of individual purchase orders.

A significant percentage of our sales are attributable to a limited group of retailer customers, including Wal-Mart and Amazon, which represent approximately 34% of segment sales for the fiscal year ended September 30, 2020.

A significant percentage of our sales are attributable to a limited group of retailer customers, including Walmart and Amazon, which represent approximately 35% of segment sales for the year ended September 30, 2021.

Primary competitors for home appliances include Newell Brands (Sunbeam, Mr.

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(Philips), Glen Dimplex (Morphy Richards) and private label brands for major retailers.

Primary competitors in personal care include are Koninklijke Philips Electronics N.V.

Primary competitors in personal care include Koninklijke Philips Electronics N.V.

(Norelco), The Procter & Gamble Company (Braun), Conair Corporation, Wahl Clipper Corporation, and Helen of Troy Limited.

Sales from electric personal care product categories tend to increase during the December holiday season (the Company’s first fiscal quarter), while small appliances sales increase from July through December primarily due to the increased demand by customers in the late summer for “back-to-school” sales (the Company’s fourth fiscal quarter) and in December for the holiday season.

Sales from electric personal care product categories tend to increase during the December holiday season (the Company's fiscal first quarter), while small appliances sales typically increase from July through December primarily due to the increased demand by customers in the late summer for “back-to-school” sales (the Company's fiscal fourth quarter) and in December for the holiday season.

Our sales by quarter as a percentage of annual net sales during the years ended September 30, 2021, 2020, and 2019 are as follows:

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Global Pet Care (GPC)

The following is an overview of GPC net sales by product category and geographic region sold (based upon destination) for the year ended September 30, 2020

The following is an overview of GPC net sales by product category and geographic region sold by destination for the year ended September 30, 2021.

Product Category

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Rawhide chews, dog and cat clean-up, training, health and grooming products, small animal food and care products, rawhide-free dog treats, and wet and dry pet food for dogs and cats

8IN1® (8-in-1), Dingo®, Nature's Miracle®, Wild Harvest™, Littermaid®, Jungle®, Excel®, FURminator®, IAMS® (Europe only), Eukanuba® (Europe only), Healthy-Hide®, DreamBone®, SmartBones®, ProSense®, Perfect Coat®, eCOTRITION®, Birdola® and Digest-eeze®.

Consumer and commercial aquarium kits, stand-alone tanks;

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and aquatics consumables such as fish food, water management and care

Tetra®, Marineland®, Whisper® and Instant Ocean®, GloFish®, OmegaOne® and OmegaSea®

Tetra®, Marineland®, Whisper®, Instant Ocean®, GloFish®, OmegaOne® and OmegaSea®.

We sell primarily to large retailers, pet superstores, online retailers, food and drug chains, warehouse clubs and other specialty retail outlets.

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Live fish under our GloFish® brand are produced, marketed, and sold by independent third-party breeders through a supply and licensing agreement with the Company.

On March 10, 2020, the Company entered into an asset purchase agreement with Omega Sea, LLC (“Omega”), a manufacturer and marketer of premium fish foods and consumable goods for the home and commercial aquarium markets, primarily consisting of the Omega One® brand.

A significant percentage of our sales are attributable to a limited group of retailer customers, including Wal-Mart, Amazon and PetSmart (including PetSmart's majority share ownership in Chewy), which represent approximately 46% of segment sales for the fiscal year ended September 30, 2020.

Primary competitors are Mars Corporation, the Hartz Mountain Corporation, and Central Garden & Pet Company which all sell a comprehensive line of pet supplies that compete across our product categories.

The pet supplies product category is highly fragmented with no competitor holding a substantial market share and consists of small companies with limited product lines.

On October 26, 2020, the Company completed the acquisition of Armitage Pet Care Ltd.

("Armitage"), a premium pet treats and toys business in Nottingham, United Kingdom including a portfolio of brands that include Armitage's dog treats brand, Good Boy®, cat treats brand, Meowee!®, and Wildbird® bird feed products, among others, that are predominantly sold within the United Kingdom.

A significant percentage of our sales are attributable to a limited group of retailer customers, including Walmart and Amazon, which represent approximately 32% of segment sales for the fiscal year ended September 30, 2021.

Primary competitors are Mars Corporation, the Hartz Mountain Corporation, and Central Garden & Pet Company all of which sell a comprehensive line of pet supplies that compete across our product categories.

The pet supplies product category is highly fragmented with no competitor holding a substantial market share and consists of small companies with limited product lines, including private label products and suppliers.

Sales remain fairly consistent throughout the year with little variation.

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27 % 29 % 26 %

Rawhide products and certain Companion Animal products are produced at third-party suppliers in the APAC region.

During the fiscal year ended September 30, 2020, GPC closed its Rawhide manufacturing facilities in the LATAM region and in Cambodia.

Alternative rawhide products are manufactured by third-party suppliers located in the APAC region and Mexico.

Rawhide products and certain companion animal products are produced at third-party suppliers in the APAC region and Mexico.

Aquatics products are produced in our manufacturing plants located in the U.S.

and Germany and are also produced at third-party suppliers in the APAC region.

On March 29, 2020, the Company completed the sale of its dog and cat food (“DCF”) production facility and distribution center in Coevorden, Netherlands (the “Coevorden Operations”) pursuant to an agreement with United Petfood Producers NV (“UPP”).

The Company entered into a third-party manufacturing agreement with UPP to produce DCF products sold and distributed in EMEA under the IAMS® and Eukanuba® brands.

On March 29, 2020, the Company sold its dog and cat food (“DCF”) production facility and distribution center in Coevorden, Netherlands (the “Coevorden Operations”) pursuant to an agreement with United Petfood Producers NV (“UPP”) that continues to produce DCF products for the Company sold and distributed in EMEA under the IAMS® and Eukanuba® brands.

We maintain ownership of most of the tooling and molds used by third-party suppliers.

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Home and Garden (H&G)

The following is an overview of H&G net sales by product category and geographic region sold (based upon destination) for the year ended September 30, 2020

The following is an overview of H&G net sales by product category and geographic region sold by destination for the year ended September 30, 2021.

Product Category

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Cutter® and Repel®.

We sell primarily to large retailers, home improvement centers, dollar stores, hardware stores, home and garden distributors, and food and drug retailers.

Cleaning Household surface cleaning, maintenance, and restoration products, including bottled liquids, mops, wipes, and markers.

We sell primarily to large retailers, home improvement centers, mass merchants, dollar stores, hardware stores, lawn and garden distributors, food and drug retailers, and e-commerce.

We sell primarily in the U.S.

with some distribution in LATAM and the Caribbean.

On May 28, 2021, the Company acquired 100% of the membership interest in For Life Products, LLC ("FLP");

a leading manufacturer of household cleaning, maintenance, and restoration sold under the Rejuvenate® brand, expanding the product categories provided by the H&G segment.

Our sales generally are made through the use of individual purchase orders.

A significant percentage of our sales are attributable to a limited group of retailer customers, including Wal-Mart, Home Depot and Lowe’s, which represent approximately 64% segment sales for the fiscal year ended September 30, 2020.

Primary competitors are The Scotts Miracle-Gro Company (Scotts, Ortho, Roundup, Miracle-Gro, Tomcat);

Central Garden & Pet (AMDRO, Sevin), SBM Company (BioAdvanced), S.C.

A significant percentage of our sales are attributable to a limited group of retailer customers, including Lowe’s, Home Depot, and Walmart, which represent approximately 65% segment sales for the year ended September 30, 2021.

Primary competitors include The Scotts Miracle-Gro Company (Ortho, Roundup, Tomcat), S.C.

Johnson & Son, Inc.

(Raid, OFF!);

and Henkel AG & Co.

(Raid, OFF!), Central Garden & Pet (AMDRO, Sevin), SBM Company (BioAdvanced), and Henkel AG & Co.

KGaA (Combat).

Sales typically peak during the first six months of the calendar year (the Company’s second and third fiscal quarters) due to customer seasonal purchasing patterns and timing of promotional activities.

Sales typically peak during the first six months of the calendar year (the Company’s second and third fiscal quarters) and are lowest in the last three months of the calendar year (the Company's first quarter) due to customer purchasing patterns, and timing of promotional activities.

Our sales by quarter as a percentage of annual net sales during the years ended September 30, 2021, 2020, and 2019 are as follows:

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H&G currently produces the majority of its products in one facility in St.

Louis, Missouri, with production primarily consisting of liquids and aerosols, and the remaining portion of products being produced by various third-party manufacturers, consisting of candles, baits & traps, and wipes.

Products produced for the Rejuvenate business are primarily provided by third-party manufacturers.

The main raw materials purchased are plastic bottles, steel aerosol cans, corrugate, active ingredients, and bulk chemicals.

The prices of these raw materials are susceptible to fluctuations due to supply and demand trends, energy costs, transportation costs, government regulations, and tariffs.

The prices of these raw materials are susceptible to fluctuations due to supply and demand trends, energy costs, transportation costs, inflation, government regulations, and tariffs.

We continuously monitor and evaluate our supplier network for quality, cost, and manufacturing capacity.

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Discontinued Operations

Hardware and Home Improvement ("HHI")

On September 8, 2021, the Company entered into a definitive Asset and Stock Purchase Agreement (the "Purchase Agreement") with ASSA ABLOY AB ("ASSA") to sell its HHI segment for cash proceeds of $4.3 billion, subject to customary purchase price adjustments.

The Company's assets and liabilities associated with HHI have been classified as held for sale, and the respective operations have been classified as discontinued operations and reported separately for all periods presented.

HHI consists of residential locksets and door hardware, including knobs, levers, deadbolts, handle sets, and electronic and connected locks under the Kwikset®, Weiser®, Baldwin®, Tell Manufacturing®, and EZSET® brands;

kitchen and bath faucets and accessories under the Pfister® brand;

and builders' hardware consisting of hinges, metal shapes, security hardware, rack and sliding door hardware, and gate hardware under the National Hardware® and FANAL® brands.

Refer to Note 3 - Divestitures to the Consolidated Financial Statements, included elsewhere in this Annual Report, for further discussion pertaining the HHI divestiture.

Global Batteries and Lighting (“GBL”)

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Global Auto Care (“GAC”)

On January 28, 2019, the Company completed the sale of its GAC business pursuant to the GAC acquisition agreement with Energizer for $938.7 million in cash proceeds and $242.1 million in stock consideration of common stock of Energizer, resulting in the write-down of net assets held for sale of $111.0 million, during the year ended September 30, 2019, including the estimated settlement of customary purchase price adjustments for working capital and assumed indebtedness, and recognition of tax and legal indemnifications in accordance with the GAC acquisition agreement.

On January 28, 2019, the Company completed the sale of its GAC business pursuant to the GAC acquisition agreement with Energizer for $938.7 million in cash proceeds and $242.1 million in stock consideration of common stock of Energizer, resulting in a loss on sale of business of $111.0 million, during the year ended September 30, 2019, including the estimated settlement of customary purchase price adjustments for working capital and assumed indebtedness, and recognition of tax and legal indemnifications in accordance with the GAC acquisition agreement.

The Company’s assets and liabilities associated with GAC have been classified as held for sale and the respective operations have been classified as discontinued operations;

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Refer to Note 3 – Divestitures to the Consolidated Financial Statements, included elsewhere in this Annual Report, for further discussion pertaining to the GAC divestiture.

Other Information

We have approximately 12,100 full-time employees worldwide as of September 30, 2020 associated with our continuing operations.

Approximately 34% of our total labor force is covered by collective bargaining agreements, which has increased for temporary workers to enhance the supply chain in response to increased consumer demand following the COVID-19 pandemic.

We believe that our overall relationship with our employees is good.

Human Resources

Employee Profile

At Spectrum Brands, we are led by our values of trust, accountability, and collaboration to serve others through this common mission:

We Make Living Better at Home.

We strive to live our core values of trust, accountability and collaboration every day by serving our customers, consumers, and communities.

Our workplace culture is centered around practices that support our communities and promote sustainable practices and a diverse, equitable, and inclusive workforce.

Employee Wellness

We encourage our employees to “Speak Up,” “Be Accountable,” “Take Action,” and “Grow Talent,” promote innovation, trust, accountability and collaboration.

The result is a work environment that encourages the well being of our employees wholistically - mind and body.

Employee Health and Safety

We are committed to the Environmental Health and Safety (EHS) safety of our employees.

We continuously strive to maintain our strong safety performance as we continue to grow our business around the globe.

The keys to our EHS success are a workforce that is engaged, a management team who supports and invests in employee safety, and the leadership of our skilled EHS team.

In the last several years, the team has added dedicated EHS professionals to individual sites to train employees and ensure compliance with applicable safety standards and regulations.

The team hosts regular meetings to share information and discuss best practices across plants.

Talent Development

Spectrum Brands is committed to developing our future leaders at every level.

Our talent processes start with understanding what current and future talent is needed to deliver business goals, followed by a talent review process to assist managers with evaluating talent.

Learning and development is a critical part of creating Spectrum Brands’ culture of high performance, innovation, and inclusion.

We believe on-the-job experience is an outstanding way to learn, and performance and development plans ensure that managers and employees have conversations about career aspirations, mobility, developmental goals and interests.

Employee Communication and Feedback

In an ongoing effort to understand our employees needs, and deliver on our values of trust, accountability and collaboration, we listen.

We regularly host company-wide and business unit town halls to offer employees an opportunity to ask questions about Company activities and policies that impact them.

We solicit and receive questions and feedback from our employees through this process.

COVID-19 Response

In response to COVID-19, our Company took swift and effective action to protect the health and safety of our global employees.

The Company implemented a number of robust COVID-19 safety practices, including, by way of example:

• Temperature screenings and masks were required at all sites prior to admittance;

• Weekly audits using a list of safety requirements, including social distancing, personal protective equipment, sanitation, hygiene education, etc.;

• Guidelines and procedures for the deep cleaning of HVAC systems to prevent the spread of germs;

• Contact tracing practices with mandatory quarantine for individuals with confirmed close contact cases;

• Requirement that all non-essential employees to work from home;

• Suspension of travel restrictions for all unnecessary travel.

Our Company also began producing and selling Cutter® Hand Sanitizer during the initial peak of the pandemic, which were eventually sent to employee homes for personal use and donated to health facilities.

Diversity, Equity and Inclusion

Spectrum Brands is committed to fostering a diverse, equitable, and inclusive workplace for employees of every race, color, gender identity, sexual orientation, age, physical or mental ability and background.

At Spectrum Brands, we strive to make our employees feel valued and respected and given the opportunity to thrive as their authentic selves.

To further that objective we have implemented a diversity, equity, and inclusion program.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business