What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-02-04 compared with 2021-08-06 · 176 added, 309 removed, 253 unchanged (66% of the section changed)

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Business Overview

The Company is a diversified global branded consumer products and home essentials company.

We manage the businesses 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/or 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.

The Company is a diversified global branded consumer products company.

We manage the businesses 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.

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 shared service operations consisting of finance and accounting, information technology, legal, human resources, supply chain and commercial operations.

See Note 20 – Segment Information for more information pertaining to segments of continuing operations.

The following is an overview of the consolidated business, by segment, summarizing product types and brands:

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

Plumbing & Accessories:

Kitchen and bath faucets and accessories.

Builders' Hardware:

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

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

Plumbing & Accessories:

Builders' Hardware:

National Hardware®, FANAL®

Home Appliances:

Small kitchen appliances including toaster ovens, coffeemakers, slow cookers, blenders, hand mixers, grills, food processors, juicers, toasters, bread makers, and irons.

Small kitchen appliances including toaster ovens, coffeemakers, slow cookers, blenders, hand mixers, grills, food processors, juicers, toasters, irons, kettles, and bread makers.

Personal Care:

Hair dryers, flat irons and straighteners, rotary and foil electric shavers, personal groomers, mustache and beard trimmers, body groomers, nose and ear trimmers, women's shavers, haircut kits and intense pulsed light hair removal systems.

Hair dryers, flat irons and straighteners, rotary and foil electric shavers, personal groomers, mustache and beard trimmers, body groomers, nose and ear trimmers, women's shavers, and haircut kits.

Home Appliances:

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Companion Animal:

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®, Digest-eeze®, Good Boy®, Meowee!®, Wildbird®, and Wafcol®

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

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Cutter® and Repel®.

The Company has a trademark license agreement (the "License Agreement") with Stanley Black & Decker ("SBD") pursuant to which we license the Black & Decker® (B&D) brand in North America, Latin America (excluding Brazil) and the Caribbean for four core categories of household appliances within the Company's HPC segment:

beverage products, food preparation products, garment care products and cooking products;

which was set to expire December 31, 2021.

The Company renewed the License Agreement through June 30, 2025, including a sell-off period from April 1, 2025 to June 30, 2025 whereby the Company can continue to sell and distribute but no longer produce products subject to the License Agreement.

Under the terms of the License Agreement, we agree to pay SBD royalties based on a percentage of sales, with minimum annual royalty payments of $15.0 million, with the exception of the minimum annual royalty will no longer be applied effective January 1, 2024 through the expiration of the agreement on June 30, 2025.

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

Subsequent to the completion of the License Agreement, there are no non-competition provisions or restrictions provided following its expiration.

See Note 5 - Revenue Recognition for further detail on revenue concentration from B&D branded products.

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

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.

The Company's assets and liabilities associated with the HHI disposal group have been classified as held for sale and the HHI operations have been classified as discontinued operations for all periods presented and notes to the consolidated financial statements have been updated for all periods presented to exclude information pertaining to discontinued operations and reflect only the continuing operations of the Company.

Refer to Note 2 – Divestitures for more information on the HHI divestiture including the assets and liabilities classified as held for sale and income from discontinued operations.

The Company is engaged with antitrust regulators in the ongoing regulatory review of the transaction and the Company is currently working to respond to such regulators' requests for additional information.

Although the timing and outcome of the regulatory process cannot be predicted, the Company currently expects the merger review process to last for several months.

As such, though there can be no assurance when the transaction will close, if at all, the Company does not expect the transaction to close before June 2022.

SB/RH is a wholly owned subsidiary of SBH.

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The reportable segments of SB/RH are consistent with the segments of SBH.

The COVID-19 pandemic and the resulting regulations and other disruptions to both demand and supply may have a substantial impact on the commercial operations of the Company or impairment of the Company’s net assets.

Such impacts may include, but are not limited to, volatility of demand for our products, disruptions and cost implications in manufacturing and supply arrangements, inability of third parties to meet obligations under existing arrangements, and significant changes to the political and economic environments in which we manufacture, sell, and distribute our products.

As of the date of this report, we continue to be classified as an essential business in the jurisdictions that have mandated closures of non-essential businesses, and therefore have been allowed to remain open and continue to operate to the extent possible under existing regulations with any limitation in production output being short-term in nature.

Despite the supply implications experienced in the prior year, the Company has experienced continued customer demand.

While demand in general for our products remains strong, our teams continue to monitor demand disruption and there can be no assurance as to the level of demand that will prevail throughout the fiscal year.

A large portion of our customers continue to operate and sell our products, with some customers having experienced reduced operations due to closures or reduced store hours.

There have also been changes in consumer needs and spending during the COVID-19 pandemic, which have resulted in a limited number of change orders and reduced spending.

Currently, we have not identified, and will continue to monitor for, any substantive risk attributable to customer credit and have not experienced a significant impact from store closures or retail bankruptcies.

We believe the severity and duration of the COVID-19 pandemic to be uncertain and may contribute to retail volatility and consumer purchase behavior changes.

The magnitude of the financial impact on our quarterly and annual results is highly dependent on the duration of the COVID-19 pandemic and how quickly the U.S.

and global economies resume normal operations.

The COVID-19 pandemic has not had a materially negative impact on the Company’s liquidity position.

The sweeping nature of COVID-19 pandemic makes it extremely difficult to predict the long-term ramifications on our financial condition and results of operations.

However, the likely overall economic impact of the COVID-19 pandemic to the U.S.

and global economies remains uncertain.

We continue to actively monitor our global cash balances and liquidity, and if necessary, could reinitiate mitigating efforts to manage non-critical capital spending and assess operating spend to preserve cash and liquidity.

We continue to generate operating cash flows to meet our short-term liquidity needs, and we expect to maintain access to the capital markets, although there can be no assurance of our ability to do so.

We have also not observed any material impairments due to the COVID-19 pandemic.

We expect the ultimate significance of the impact on our financial condition, results of operations, and cash flows will be dictated by the length of time that such circumstances continue, which will ultimately depend on the unforeseeable duration and severity of the COVID-19 pandemic and any governmental and public actions taken in response.

The Company periodically evaluates strategic transactions that may result in the acquisition of a business or assets that qualify as recognition of a business combination.

Acquisitions may impact the comparability of the consolidated or segment financial information with the inclusion of operating results for the acquired business in periods subsequent to acquisition date, the inclusion of acquired assets, both tangible and intangible (including goodwill), and the related amortization and depreciation of acquired assets.

Moreover, the comparability of consolidated or segment financial information may be impacted by incremental costs to facilitate the transaction and supporting integration activities of the acquired operations with the consolidated group.

The following acquisition activity may have a significant impact on the comparability of the financial results on the condensed consolidated financial statements.

• On May 28, 2021, the Company acquired all ownership interests in For Life Products, LLC ("FLP") for a purchase price of $301.5 million.

FLP is a leading manufacturer of household cleaning, maintenance, and restoration products sold under the Rejuvenate® brand.

The net assets and operating results of FLP are included in the Company’s Condensed Consolidated Statements of Income and reported within the H&G reporting segment for the three and nine month periods ended July 4, 2021, effective the acquisition date of May 28, 2021.

• On October 26, 2020, the Company completed the acquisition of Armitage Pet Care Ltd ("Armitage") for $187.7 million.

Armitage is 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.

The net assets and results of operations of Armitage are included in the Company’s Condensed Consolidated Statements of Income and reported within the GPC reporting segment for the three and nine month periods ended July 4, 2021, effective the acquisition date of October 26, 2020.

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 brand, for a purchase price of approximately $16.9 million.

The results of Omega’s operations are included in the Company’s Condensed Consolidated Statements of Income and reported within the GPC reporting segment for the three and nine month periods ended July 4, 2021 and for the three and nine month periods ended June 28, 2020, effective the acquisition date of March 10, 2020.

The net assets and results of operations of Armitage are included in the Company’s Condensed Consolidated Statements of Income and reported within the GPC reporting segment for the three month period ended January 2, 2022 and the three month period ended January 3, 2021, effective as of the acquisition date of October 26, 2020.

See Note 3 – Acquisitions in the Notes to the Condensed Consolidated Financial Statements, included elsewhere in this Quarterly Report, for more information.

On March 29, 2020, the Company completed the sale of its DCF production facility and distribution center in Coevorden, Netherlands for cash proceeds of $29.0 million received during the year ended September 30, 2020, resulting in a loss on Coevorden Operations held for sale of $26.8 million and impairment of intangible assets of $24.2 million associated with the commercial DCF business following the divestiture during the nine month period ended June 28, 2020.

See Note 2 – Divestitures in the Notes to the Condensed Consolidated Financial Statements, included elsewhere in this Quarterly Report, for more information.

Restructuring Activity

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We have undertaken various initiatives to reduce manufacturing and operating costs, which may have a significant impact on the comparability of financial results on the condensed consolidated financial statements.

The most significant of these initiatives is the Global Productivity Improvement Program , which began during the year ended September 30, 2019 and has continued through the three and nine month periods ended July 4, 2021.

See Note 4 - Restructuring and Related Charges in the Notes to the Condensed Consolidated Financial Statements, included elsewhere in this Quarterly Report for more information.

Refinancing Activity

Refinancing activity has a significant impact on the comparability of financial results of the condensed consolidated financial statements.

On March 3, 2021, the Company completed its offering of $500.0 million aggregate principal amount of its 3.875% Notes and entered into a new Term Loan Facility in the aggregate principal amount of $400.0 million, and redeemed $250.0 million of the 6.125% Notes and $550.0 million of the 5.75% Notes, with a make whole premium of $23.4 million and write-off of unamortized debt issuance costs of $7.9 million recognized as interest expense during the nine month period ended July 4, 2021.

See Note 10 - Debt to the Condensed Consolidated Financial Statements, included elsewhere in this Quarterly Report, for more information.

Financing activity during and between comparable periods may have a significant impact on the comparability of financial results on the condensed consolidated financial statements.

During the year ended September 30, 2021, the Company completed its offering of $500.0 million aggregate principal amount of its 3.875% Notes and entered into a new Term Loan Facility in the aggregate principal amount of $400.0 million on March 3, 2021.

The Company also redeemed $250.0 million of the 6.125% Notes and $550.0 million of the 5.75% Notes, with a call premium of $23.4 million and non-cash write-off of unamortized debt issuance costs of $7.9 million recognized as interest expense.

The COVID-19 pandemic and the resulting regulations continue to cause economic and social disruptions that contribute to ongoing uncertainties and may have an impact on the operations, cash flow and net assets of the Company.

Such impacts may include, but are not limited to, volatility of demand for our products;

disruptions and cost implications in manufacturing and supply arrangements;

inability of third parties to meet obligations under existing arrangements;

and significant changes to the political and economic environments in which we manufacture, sell, and distribute our products.

The Company expects a continuing inflationary environment, marked with higher manufacturing and logistics costs as well as continued constraints with transportation and supply chain disruptions.

Despite the supply implications, the Company has experienced increased demand for our products compared to pre-pandemic levels.

There have also been changes in consumer needs and spending during the COVID-19 pandemic, and while demand for our products remain strong, our teams continue to monitor demand shifts and there can be no assurance as to the level of demand that will prevail throughout the fiscal year.

We believe the severity and duration of the COVID-19 pandemic to be uncertain and may contribute to retail volatility and consumer purchase behavior changes.

The COVID-19 pandemic has not had a materially negative impact on the Company’s liquidity position and we have not observed any material impairments.

We continue to actively monitor our global cash and liquidity, and if necessary, could reinitiate mitigating efforts to manage non-critical spending and assess operating spend to preserve cash and liquidity.

We expect the ultimate significance of the impact on our financial condition, results of operations, and cash flows will be dictated by the length of time that such circumstances continue, which will ultimately depend on the unforeseeable duration and severity of the COVID-19 pandemic, the emergence of variants and the effectiveness of vaccines against these variants, and any governmental and public actions taken in response.

Non-GAAP Measurements

Our consolidated and segment results contain non-GAAP metrics such as organic net sales, and adjusted EBITDA (“Earnings Before Interest, Taxes, Depreciation, Amortization”).

Our consolidated and segment results contain non-GAAP metrics such as organic net sales, and adjusted EBITDA (“Earnings Before Interest, Taxes, Depreciation, Amortization”) and adjusted EBITDA margin.

While we believe organic net sales and adjusted EBITDA are useful supplemental information, such adjusted results are not intended to replace our financial results in accordance with Accounting Principles Generally Accepted in the United States (“GAAP”) and should be read in conjunction with those GAAP results.

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We define organic net sales as net sales excluding the effect of changes in foreign currency exchange rates and impact from acquisitions (when applicable).

We believe this non-GAAP measure provides useful information to investors because it reflects regional and operating segment performance from our activities without the effect of changes in currency exchange rate and acquisitions.

We use organic net sales as one measure to monitor and evaluate our regional and segment performance.

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We exclude net sales from acquired businesses in the current year for which there are no comparable sales in the prior year.

The following is a reconciliation of reported net sales to organic net sales for the three and nine month periods ended July 4, 2021 compared to net sales for the three and nine month periods ended June 28, 2020:

The following is a reconciliation of reported net sales to organic net sales for the three month period ended January 2, 2022 compared to net sales for the three month period ended January 3, 2021:

Three Month Periods Ended

(in millions, except %) July 4, 2021

Effect of Changes in Currency

Net Sales Excluding Effect of Changes in Currency

Effect of Acquisitions

June 28, 2020

$ 419.0 $ (6.0) $ 413.0 $ — $ 413.0 $ 281.6 $ 131.4 46.7 %

274.4 (13.2) 261.2 — 261.2 250.6 10.6 4.2 %

257.3 (6.7) 250.6 (26.4) 224.2 241.5 (17.3) (7.2) %

212.1 — 212.1 (7.9) 204.2 210.6 (6.4) (3.0) %

$ 1,162.8 $ (25.9) $ 1,136.9 $ (34.3) $ 1,102.6 $ 984.3 118.3 12.0 %

Nine Month Periods Ended

(in millions, except %)

(in millions, except %) January 2, 2022

Effect of Changes in Currency

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Effect of Acquisitions

June 28, 2020

$ 1,217.2 $ (10.6) $ 1,206.6 $ — $ 1,206.6 $ 908.4 $ 298.2 32.8 %

January 3, 2021

$ 379.7 $ 5.1 $ 384.8 $ — $ 384.8 $ 378.5 $ 6.3 1.7 %

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Adjusted EBITDA further excludes:

• Stock based and other incentive compensation costs that consist of costs associated with long-term compensation arrangements and other equity based compensation based upon achievement of long-term performance metrics;

and generally consist of non-cash, stock-based compensation.

During the nine month period ended July 4, 2021 and three and nine month periods ended June 28, 2020, other incentive compensation includes certain incentive bridge awards issued due to changes in the Company’s LTIP that allow for cash based payment upon employee election but do not qualify for shared-based compensation.

All bridge awards fully vested in November 2020.

• Stock based compensation costs consist of costs associated with long-term incentive compensation arrangements that generally consist of non-cash, stock-based compensation.

During the three month period ended January 3, 2021, compensation costs included incentive bridge awards previously issued due to changes in the Company’s LTIP that allowed for cash based payment upon employee election but do not qualify for shared-based compensation, which were fully vested in November 2020.

See Note 16 - Share Based Compensation in the Notes to the Condensed Consolidated Financial Statements, included elsewhere in this Quarterly Report, for further details;

• Restructuring and related charges, which consist of project costs associated with the restructuring initiatives across the Company's segments.

• Restructuring and related charges consist of project costs associated with the restructuring initiatives across the Company's segments.

See Note 4 - Restructuring and Related Charges in the Notes to the Condensed Consolidated Financial Statements, included elsewhere in this Quarterly Report, for further details;

• Transaction related charges that consist of (1) transaction costs from qualifying acquisition transactions during the period, or subsequent integration related project costs directly associated with an acquired business;

and (2) divestiture related transaction costs that are recognized in continuing operations and post-divestiture separation costs consisting of incremental costs to facilitate separation of shared operations, including development of transferred shared service operations, platforms and personnel transferred, and exiting of transition service arrangements (TSAs) and reverse TSAs.

• Transaction related charges are attributable to costs from qualifying strategic transaction or business opportunities, including an acquisition or divestiture, whether or not consummated, subsequent integration related project costs, divestiture support and incremental separation costs.

See Note 1 – Basis of Presentation & Significant Accounting Policies in the Notes to the Condensed Consolidated Financial Statements, included elsewhere in this Quarterly Report, for further details;

• Gains and losses attributable to the Company’s investment in Energizer common stock.

During the three month period ended April 4, 2021, the Company sold its remaining shares in Energizer common stock.

• Unallocated shared costs associated with discontinued operations from certain shared and center-led administrative functions the Company's business units excluded from income from discontinued operations as they are not a direct cost of the discontinued business but a result of indirect allocations, including but not limited to, information technology, human resources, finance and accounting, supply chain, and commercial operations.

Amounts attributable to unallocated shared costs would be mitigated through subsequent strategic or restructuring initiatives, TSAs, elimination of extraneous costs, or re-allocations or absorption of existing continuing operations following the completed sale of the discontinued operations.

See Note 2 - Divestitures in Notes to the Condensed Consolidated Financial Statements, included elsewhere in this Quarterly Report for further details;

• Non-cash purchase accounting inventory adjustments recognized in earnings from continuing operations subsequent to an acquisition;

• Non-cash asset impairments or write-offs realized and recognized in earnings from continuing operations;

• Gains attributable to the Company investment in Energizer common stock during the three month period ended January 3, 2021.

which the Company subsequently sold its remaining shares in January 2021.

See Note 13 – Fair Value of Financial Instruments in the Notes to the Condensed Consolidated Financial Statements, included elsewhere in this Quarterly Report, for further details;

• Non-cash purchase accounting inventory adjustments recognized in earnings from continuing operations subsequent to an acquisition (when applicable);

• Non-cash asset impairments or write-offs realized and recognized in earnings from continuing operations (when applicable);

• Gain on extinguishment of the Salus CLO debt due to the discharge of the obligation during the three and nine month period ended June 28, 2020.

• Other adjustments primarily consisting of costs attributable to (1) incremental fines and penalties realized for delayed shipments following the transition of third-party logistics service provider in GPC during the three and nine month period ended July 4, 2021;

(2) proposed settlement on outstanding litigation matters at our H&G division attributable to significant and unusual non-recurring claims with no previous history or precedent realized during the nine month period ended July 4, 2021;

(3) legal costs associated with Salus during the three and nine month periods ended July 4, 2021 and June 28, 2020 as they are not considered a component of the continuing commercial products company;

(4) foreign currency attributable to multicurrency loans for the three and nine month periods ended June 28, 2020, that were entered into with foreign subsidiaries in exchange for receipt of divestiture proceeds by the parent company and the distribution of the respective foreign subsidiaries’ net assets as part of the GBL and GAC divestitures;

(5) expenses and cost recovery for flood damage at Company facilities in Middleton, Wisconsin during the three and nine month periods ended June 28, 2020 and (6) incremental costs for separation of a key executive during the three and nine month periods ended June 28, 2020;

• Incremental reserves for non-recurring litigation or environmental remediation activity including the proposed settlement on outstanding litigation matters at our H&G division attributable to significant and unusual nonrecurring claims with no previous history or precedent recognized during the three month period ended January 3, 2021 and the subsequent remeasurement during the three month period ended January 2, 2022;

• Incremental costs realized under a three-year tolling agreement entered into with the buyer in consideration with the divestiture of the Coevorden Operations on March 29, 2020, for the continued production of dog and cat food products purchased to support the GPC commercial operations and distribution in Europe;

• Other adjustments are primarily attributable to (1) incremental fines and penalties realized for delayed shipments following the transition of third-party logistics service provider in GPC during the three month period ended January 2, 2022;

and (2) costs associated with Salus as they are not considered a component of the continuing commercial products company.

Adjusted EBITDA margin is calculated as Adjusted EBITDA as a percentage of reported net sales for the respective period and segment.

The following is a reconciliation of net income to Adjusted EBITDA for the three month periods ended July 4, 2021 and June 28, 2020 for SBH.

The following is a reconciliation of net income to Adjusted EBITDA for the three month periods ended January 2, 2022 and January 3, 2021 for SBH.

SPECTRUM BRANDS HOLDINGS, INC.

(in millions) HHI HPC GPC H&G Corporate Consolidated

Three Month Period Ended July 4, 2021

(in millions) HPC GPC H&G Corporate Consolidated

Three Month Period Ended January 2, 2022

Net income (loss) from continuing operations $ 19.0 $ 11.7 $ (15.8) $ (45.1) $ (30.2)

Income tax expense — — — — 27.7 27.7

Interest expense — — — — 31.4 31.4

Depreciation and amortization 8.4 11.7 10.4 4.5 3.6 38.6

EBITDA 68.0 9.0 37.7 46.2 (27.3) 133.6

Share and incentive based compensation — — — — 7.5 7.5

Restructuring and related charges — 2.1 3.9 — 4.1 10.1

Transaction related charges — 0.7 4.0 5.8 0.6 11.1

Inventory acquisition step-up — — — 1.3 — 1.3

Other — — 3.6 0.1 0.1 3.8

Adjusted EBITDA $ 68.0 $ 11.8 $ 49.2 $ 53.4 $ (15.0) $ 167.4

Net Sales $ 419.0 $ 274.4 $ 257.3 $ 212.1 $ — $ 1,162.8

Adjusted EBITDA Margin 16.2 % 4.3 % 19.1 % 25.2 % — 14.4 %

Three Month Period Ended June 28, 2020

Net income from continuing operations $ 34.8 $ 12.9 $ 35.8 $ 50.4 $ 3.7 $ 137.6

Income tax expense — — — — 53.6 53.6

Interest expense — — — — 36.1 36.1

Depreciation and amortization 8.5 8.7 9.2 5.1 3.5 35.0

EBITDA 43.3 21.6 45.0 55.5 96.9 262.3

Share and incentive based compensation — — — — 14.2 14.2

Restructuring and related charges 0.3 0.7 2.1 — 9.1 12.2

Transaction related charges — 3.0 2.4 — 0.7 6.1

Gain on Energizer investment — — — — (60.1) (60.1)

Loss on assets held for sale — — 1.1 — — 1.1

Salus CLO debt extinguishment — — — — (76.2) (76.2)

Other — (0.3) — — 5.1 4.8

Adjusted EBITDA $ 43.6 $ 25.0 $ 50.6 $ 55.5 $ (10.3) $ 164.4

Net Sales $ 281.6 $ 250.6 $ 241.5 $ 210.6 $ — $ 984.3

Adjusted EBITDA Margin 15.5 % 10.0 % 21.0 % 26.4 % — 16.7 %

The following is a reconciliation of net income to Adjusted EBITDA for the nine month periods ended July 4, 2021 and June 28, 2020 for SBH.

SPECTRUM BRANDS HOLDINGS, INC.

(in millions) HHI HPC GPC H&G Corporate Consolidated

Nine Month Period Ended July 4, 2021

Net income from continuing operations $ 214.1 $ 46.4 $ 99.9 $ 71.1 $ (285.6) $ 145.9

Income tax expense — — — — 63.3 63.3

Interest expense — — — — 133.7 133.7

Depreciation and amortization 25.5 32.3 29.8 14.4 11.0 113.0

EBITDA 239.6 78.7 129.7 85.5 (77.6) 455.9

Share and incentive based compensation — — — — 24.2 24.2

Restructuring and related charges — 6.2 6.0 — 11.2 23.4

Transaction related charges — 3.2 15.7 5.8 16.7 41.4

Gain on Energizer investment — — — — (6.9) (6.9)

Inventory acquisition step-up — — 3.4 1.3 — 4.7

Other — — 3.7 6.0 — 9.7

Adjusted EBITDA $ 239.6 $ 88.1 $ 158.5 $ 98.6 $ (32.4) $ 552.4

Net Sales $ 1,217.2 $ 950.8 $ 826.3 $ 463.2 $ — $ 3,457.5

Adjusted EBITDA Margin 19.7 % 9.3 % 19.2 % 21.3 % — 16.0 %

Nine Month Period Ended June 28, 2020

Net income from continuing operations $ 130.0 $ 31.5 $ 9.7 $ 64.9 $ (195.3) $ 40.8

Income tax expense — — — — 35.3 35.3

Income tax benefit — — — (16.0) (16.0)

Interest expense — — — 21.8 21.8

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Transaction related charges — 2.4 4.3 8.2 14.9

Loss on Energizer investment — — — — 8.2 8.2

Loss on assets held for sale — — 26.8 — — 26.8

Write-off from impairment of intangible assets — — 24.2 — — 24.2

Salus CLO debt extinguishment — — — — (76.2) (76.2)

Unallocated shared costs — — — 6.8 6.8

Legal and environmental remediation reserves — — (0.5) — (0.5)

Coevorden tolling related charges — 1.5 — — 1.5

Other — 2.5 — 0.1 2.6

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Adjusted EBITDA Margin 7.2 % 12.8 % (9.7) % — 6.5 %

The following is a reconciliation of net income to Adjusted EBITDA for the three month periods ended July 4, 2021 and June 28, 2020 for SB/RH.

SB/RH HOLDINGS, LLC

(in millions) HHI HPC GPC H&G Corporate Consolidated

Three Month Period Ended July 4, 2021

Three Month Period Ended January 3, 2021

Net income (loss) from continuing operations $ 38.2 $ 34.0 $ (0.5) $ (56.0) $ 15.7

Income tax expense — — — — 28.2 28.2

Income tax benefit — — — (4.1) (4.1)

Interest expense — — — 23.1 23.1

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Transaction related charges 1.3 6.0 — 11.7 19.0

Unallocated shared costs — — — 6.7 6.7

Inventory acquisition step-up — 0.8 — — 0.8

Other — — 3.6 0.1 — 3.7

Adjusted EBITDA $ 68.0 $ 11.8 $ 49.2 $ 53.4 $ (14.1) $ 168.3

Net Sales $ 419.0 $ 274.4 $ 257.3 $ 212.1 $ — $ 1,162.8

Adjusted EBITDA Margin 16.2 % 4.3 % 19.1 % 25.2 % — 14.5 %

Three Month Period Ended June 28, 2020

Net income from continuing operations $ 34.8 $ 12.9 $ 35.8 $ 50.4 $ (52.6) $ 81.3

Income tax expense — — — — 35.4 35.4

Interest expense — — — — 36.0 36.0

Depreciation and amortization 8.5 8.7 9.2 5.1 3.5 35.0

EBITDA 43.3 21.6 45.0 55.5 22.3 187.7

Share and incentive based compensation — — — — 13.8 13.8

Restructuring and related charges 0.3 0.7 2.1 — 9.1 12.2

Transaction related charges — 3.0 2.4 — 0.7 6.1

Gain on Energizer investment — — — (6.0) (6.0)

Loss on assets held for sale — — 1.1 — — 1.1

Legal and environmental remediation reserves — — 6.0 — 6.0

Coevorden tolling related charges — 1.6 — — 1.6

Other — — — 0.1 0.1

2 unchanged sentences

Adjusted EBITDA Margin 13.4 % 19.5 % 12.6 % — 14.4 %

The following is a reconciliation of net income to Adjusted EBITDA for the nine month periods ended July 4, 2021 and June 28, 2020 for SB/RH.

The following is a reconciliation of net income to Adjusted EBITDA for the three month periods ended January 2, 2022 and January 3, 2021 for SB/RH.

SB/RH HOLDINGS, LLC

(in millions) HHI HPC GPC H&G Corporate Consolidated

Nine Month Period Ended July 4, 2021

Net income from continuing operations $ 214.1 $ 46.4 $ 99.9 $ 71.1 $ (283.6) $ 147.9

Income tax expense — — — — 63.9 63.9

(in millions) HPC GPC H&G Corporate Consolidated

Three Month Period Ended January 2, 2022

Net income (loss) from continuing operations $ 19.0 $ 11.7 $ (15.8) $ (45.0) $ (30.1)

Income tax benefit — — — (15.8) (15.8)

Interest expense — — — 21.8 21.8

1 unchanged sentence

EBITDA 26.8 20.9 (11.1) (35.3) 1.3

Share based compensation — — — — 23.0 23.0

Share and incentive based compensation — — — 5.6 5.6

Restructuring and related charges 0.6 11.4 — 5.4 17.4

Transaction related charges — 2.4 4.3 8.2 14.9

Gain on Energizer investment — — — — (6.9) (6.9)

Inventory acquisition step-up — — 3.4 1.3 — 4.7

Unallocated shared costs — — — 6.8 6.8

Legal and environmental remediation reserves — — (0.5) — (0.5)

Coevorden tolling related charges — 1.5 — — 1.5

Other — 2.5 — — 2.5

2 unchanged sentences

Adjusted EBITDA Margin 7.2 % 12.8 % (9.7) % — 6.5 %

Nine Month Period Ended June 28, 2020

Three Month Period Ended January 3, 2021

Net income (loss) from continuing operations $ 38.2 $ 34.0 $ (0.5) $ (55.6) $ 16.1

Income tax expense — — — — 18.8 18.8

Income tax benefit — — — (4.0) (4.0)

Interest expense — — — 23.2 23.2

4 unchanged sentences

Transaction related charges 1.3 6.0 — 11.7 19.0

Loss on Energizer investment — — — — 8.2 8.2

Loss on assets held for sale — — 26.8 — — 26.8

Write-off from impairment of intangible assets — — 24.2 — — 24.2

Other — 0.5 0.1 — 4.7 5.3

Unallocated shared costs — — — 6.7 6.7

Inventory acquisition step-up — 0.8 — — 0.8

Gain on Energizer investment — — — (6.0) (6.0)

Legal and environmental remediation reserves — — 6.0 — 6.0

Coevorden tolling related charges — 1.6 — — 1.6

Adjusted EBITDA $ 50.9 $ 53.6 $ 10.4 $ (8.5) $ 106.4

2 unchanged sentences

Consolidated Results of Operations

The following is summarized consolidated results of operations for SBH for the three and nine month periods ended July 4, 2021 and June 28, 2020.

The following is summarized consolidated results of operations for SBH for the three month periods ended January 2, 2022 and January 3, 2021.

(in millions, except %)

Three Month Periods Ended Variance

Nine Month Periods Ended Variance

July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020

January 2, 2022 January 3, 2021

Net sales $ 757.2 $ 736.2 $ 21.0 2.9 %

Gross profit 219.3 252.8 (33.5) (13.3) %

Gross profit margin 35.0 % 35.4 % (40) bps 35.7 % 33.9 % 180 bps

Gross profit margin 29.0 % 34.3 % (530) bps

Operating expenses 243.1 227.0 16.1 7.1 %

Interest expense 21.8 23.1 (1.3) (5.6) %

Other non-operating expense (income), net 3.0 (56.5) 59.5 n/m (4.6) 10.2 (14.8) n/m

Income tax expense 27.7 53.6 (25.9) (48.3) % 63.3 35.3 28.0 79.3 %

Net income from continuing operations 35.9 137.6 (101.7) (73.9) % 145.9 40.8 105.1 257.6 %

(Loss) income from discontinued operations, net of tax (5.2) 8.0 (13.2) n/m (6.6) 12.2 (18.8) n/m

Other non-operating expense (income), net 0.6 (8.9) 9.5 n/m

Income tax benefit (16.0) (4.1) (11.9) 290.2 %

Net (loss) income from continuing operations (30.2) 15.7 (45.9) n/m

Income from discontinued operations, net of tax 38.8 57.2 (18.4) (32.2) %

Net income 8.6 72.9 (64.3) (88.2) %

n/m = not meaningful

The following is a summary of net sales by segment for the three and nine month periods ended July 4, 2021 and June 28, 2020 and the principal components of changes in net sales for the respective periods.

The following is a summary of net sales by segment for the three month periods ended January 2, 2022 and January 3, 2021 and the principal components of changes in net sales for the respective periods.

(in millions, except %)

Three Month Periods Ended Variance

Nine Month Periods Ended Variance

July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020

$ 419.0 $ 281.6 $ 137.4 48.8 % $ 1,217.2 $ 908.4 $ 308.8 34.0 %

January 2, 2022 January 3, 2021

$ 379.7 $ 378.5 $ 1.2 0.3 %

3 unchanged sentences

(in millions)

Three Month Periods Ended Nine Month Periods Ended

Net Sales for the period ended June 28, 2020

$ 984.3 $ 2,793.6

Increase in HHI

Three Month Periods Ended

Net Sales for the period ended January 3, 2021

Increase in GPC

Increase in HPC

(Decrease) Increase in GPC

(Decrease) Increase in H&G (6.4) 59.7

Decrease in H&G (14.7)

Acquisition sales

Foreign currency impact, net

Net Sales for the period ended July 4, 2021

$ 1,162.8 $ 3,457.5

Net Sales for the period ended January 2, 2022

Gross Profit.

Gross profit for the three month period increased due to higher volumes, positive productivity and cost improvements, plus favorable product mix with a decline in gross profit margin due to increased inflation and shipping costs.

Gross profit and gross profit margin for the nine month period increased due to sales volumes, positive productivity and cost improvements, with lower restructuring and depreciation costs due to the exiting GPC facilities in LATAM in the prior year, partially offset by increased inflation and shipping costs and benefits from retrospective tariff exclusions in the prior year.

Gross profit for the three month period decreased primarily due to accelerated freight and input cost inflation pacing ahead of pricing actions, lower volume compared to prior year post-COVID volume growth and product mix, partially offset by lower productivity.

Operating Expenses.

Operating expenses for the three month period increased due to an increase in selling, general and administrative expenses of $50.5 million largely attributable to higher volumes, increased advertising and marketing investments, higher distribution costs, and increased incentive costs plus an increase in transaction related costs of $5.0 million, partially offset by a decrease in restructuring and related charges of $2.7 million.

Operating expenses for the nine month period increased due to an increase in selling and general and administrative expenses of $113.1 million attributable to higher volumes and increased advertising and marketing investments, higher distribution costs and increased incentive costs plus an increase in transaction related costs of $24.0 million;

partially offset by a decrease in restructuring and related charges of $27.4 million and the recognition of a loss on assets held for sale of $26.8 million and $24.2 million write-off from impairment of intangible assets associated with the Coevorden divestiture in the prior year.

See Note 4 – Restructuring and Related Charges in the Notes to the Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for additional detail on restructuring.

See Note 1 - Basis of Presentation and Significant Accounting Policies in the Notes to the Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for additional detail on transaction-related charges.

Operating expenses for the three month period increased due to an increase in selling, general and administrative expenses of $10.9 million from higher distribution costs and operating inefficiencies from labor inflation and turnover with continued investment in marketing and new product development, offset by lower incentive compensation costs, including share based compensation, with an increase in restructuring and related charges of $8.2 million and decrease in transaction related costs of $4.1 million.

Interest Expense.

Interest expense for the three month period decreased due to lower average borrowing rate.

Interest expense for the nine month period increased due to the refinancing activity with a make whole premium of $23.4 million and write-off of unamortized debt issuance costs of $7.9 million recognized as interest expense.

See Note 10 – Debt in the Notes to the Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for additional detail.

Interest expense for the three month period decreased due to a lower average borrowing rate following refinancing activities in the prior year.

Other non-operating income, net.

Other non-operating for the three and nine month periods is due to realized and unrealized gains on our investment in Energizer common stock during the period, which the Company sold its remaining investment in January 2021.

See Note 13 – Fair Value of Financial Instruments in the Notes to the Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for additional detail.

Other non-operating income for the three month period decreased due to realized gains on our investment in Energizer common stock in the prior year which the Company sold its remaining investment in January 2021.

Income Taxes.

Our estimated annual effective tax rate was impacted for the three and nine month periods by income earned outside the U.S.

Our estimated annual effective tax rate was impacted for the three month period by income earned outside the U.S.

that is subject to U.S.

1 unchanged sentence

tax on global intangible low taxed income, certain nondeductible expenses, foreign rates that differ from the US federal statutory rate, and state income taxes.

During the three month period ended July 4, 2021, the Company recorded a $7.6 million deferred tax expense due to the increase in the United Kingdom’s future tax rate and during the nine month period ended July 4, 2021, the Company also recognized a $5.3 million benefit due to favorable Regulations issued during the year.

(Loss) Income From Discontinued Operations.

The income or loss attributable to discontinued operations primarily reflect incremental changes to tax and legal indemnifications associated with the Company's divestitures of its GBL division and GAC divisions to Energizer during the year ended September 30, 2019.

During the three month period ended January 2, 2022, the Company recorded a $3.2 million benefit due to the impact of an amended return filed during the quarter and the Company also recognized an additional $2.5 million benefit due to windfalls associated with the vesting of share compensation during the quarter.

Income From Discontinued Operations.

Income or loss attributable to discontinued operations primarily reflect the income from the discontinued operations of the HHI segment and the incremental changes to tax and legal indemnifications associated with the Company's divestitures of its GBL and GAC divisions to Energizer during the year ended September 30, 2019.

Income from discontinued operations attributable to the HHI segment decreased during the three month period ended January 2, 2022 due to lower sales volume following post pandemic volumes in the prior year, increasing inflationary costs and higher freight spend, partially offset by pricing actions and lower depreciation and amortization while held for sale.

Noncontrolling Interest.

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Such amount varies in relation to such subsidiary’s net income or loss for the period and the percentage interest not owned by SBH.

The following is summarized consolidated results of operations for SB/RH for the three and nine month periods ended July 4, 2021 and June 28, 2020:

The following is summarized consolidated results of operations for SB/RH for the three month periods ended January 2, 2022 and January 3, 2021:

(in millions, except %)

Three Month Periods Ended Variance

Nine Month Periods Ended Variance

July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020

January 2, 2022 January 3, 2021

Net sales $ 757.2 $ 736.2 $ 21.0 2.9 %

Gross profit 219.3 252.8 (33.5) (13.3) %

Gross profit margin 35.0 % 35.4 % (40) bps 35.7 % 33.9 % 180 bps

Gross profit margin 29.0 % 34.3 % (530) bps

Operating expenses 242.8 226.4 16.4 7.2 %

Interest expense 21.8 23.2 (1.4) (6.0) %

Other non-operating expense (income), net 2.9 (56.5) 59.4 n/m (4.6) 10.2 (14.8) n/m

Income tax expense 28.2 35.4 (7.2) (20.3) % 63.9 18.8 45.1 239.9 %

Net income (loss) from continuing operations 36.9 81.3 (44.4) (54.6) % 147.9 (12.2) 160.1 n/m

(Loss) income from discontinued operations, net of tax (5.2) 8.0 (13.2) n/m (6.6) 12.2 (18.8) n/m

Net income 31.7 89.3 (57.6) (64.5) % 141.3 — 141.3 n/m

Other non-operating expense (income), net 0.6 (8.9) 9.5 n/m

Income tax benefit (15.8) (4.0) (11.8) 295.0 %

Net (loss) income from continuing operations (30.1) 16.1 (46.2) n/m

Income from discontinued operations, net of tax 38.8 57.2 (18.4) (32.2) %

Net income 8.7 73.3 (64.6) (88.1) %

n/m = not meaningful

The changes in SB/RH for the three and nine month periods are primarily attributable to the changes in SBH previously discussed.

The changes in SB/RH for the three month periods are primarily attributable to the changes in SBH previously discussed.

Segment Financial Data

Hardware & Home Improvement

(in millions, except %)

Three Month Periods Ended

Nine Month Periods Ended Variance

July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020

$ 419.0 $ 281.6 $ 137.4 48.8 % $ 1,217.2 $ 908.4 $ 308.8 34.0 %

Operating income

61.1 35.0 26.1 74.6 % 219.3 130.5 88.8 68.0 %

Operating income margin

14.6 % 12.4 % 220 bps 18.0 % 14.4 % 360 bps

Adjusted EBITDA

$ 68.0 $ 43.6 $ 24.4 56.0 % $ 239.6 $ 156.0 $ 83.6 53.6 %

Adjusted EBITDA margin

16.2 % 15.5 % 70 bps 19.7 % 17.2 % 250 bps

n/m = not meaningful

Net sales for the three month period increased by growth across all product categories with strong consumer demand and successful promotions and new product introductions.

Security sales experienced growth across retail, e-commerce and new build channels in part driven by prior year COVID-19 supply related disruptions related to temporary government ordered shutdowns.

Organic net sales increased $131.4 million, or 46.7%, excluding favorable foreign exchange impacts.

Net sales for the nine month period increased by growth across all product categories with fulfillment of previously disclosed open orders in the prior year, retail inventory rebuild, strong consumer demand, and commercial activity through promotions and new product introductions, with growth across retail, e-commerce and new build channels;

coupled with prior year COVID-10 supply related disruptions related to temporary government ordered shutdowns.

Organic net sales increased $298.2 million, or 32.8%, excluding favorable foreign exchange impact.

Operating income and adjusted EBITDA for the three month period increased due to increased volumes and productivity improvements, partially offset by higher freight and input cost inflation, and higher marketing investments.

Operating income, adjusted EBITDA and margins for the nine month period increased due to increased volumes, productivity improvements, favorable pricing programs and product mix, partially offset by prior year's benefits from retrospective tariff exclusion, higher freight and input cost inflation, COVID-19 related costs and higher marketing investments.

Home and Personal Care

1 unchanged sentence

Three Month Periods Ended

Nine Month Periods Ended Variance

July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020

January 2, 2022 January 3, 2021

$ 379.7 $ 378.5 $ 1.2 0.3 %

Operating (loss) income (2.4) 11.3 (13.7) n/m 45.8 31.5 14.3 45.4 %

Operating (income) income margin (0.9 %) 4.5 % (540) bps 4.8 % 3.9 % 90 bps

Operating income 20.4 36.7 (16.3) (44.4) %

Operating income margin 5.4 % 9.7 % (430) bps

Adjusted EBITDA

1 unchanged sentence

Adjusted EBITDA margin

4.3 % 10.0 % (570) bps 9.3 % 8.6 % 70 bps

n/m = not meaningful

Net sales for the three month period increased driven by continued growth in small kitchen appliances and personal care categories, driven by growth in the hair care and garment care products.

with growth in LATAM as traditional retail channels begin reopening.

Organic net sales increased $10.6 million, or 4.2%, excluding favorable foreign exchange impact.

Net sales for the nine month period increased driven by strong growth in small appliances and personal care during the holiday season and consumer demand from stay-at-home activity, volume growth through e-commerce channels and new product introductions.

Organic net sales increased $118.0 million, or 14.7%, excluding favorable foreign currency impact.

Operating income, adjusted EBITDA and margins for the three month period decreased due to increasing freight and input cost inflation continued marketing investments, partially offset by pricing actions, increased volume and productivity improvements.

Operating income, adjusted EBITDA and margins for the nine month period increased due to higher volumes, productivity and cost improvements, partially offset by higher inflation and distribution costs with increased marketing investments.

7.2 % 13.4 % (620) bps

Net sales for the three month period increased driven by growth in the LATAM region from expanded distribution and strong holiday volumes, partially offset by product availability issues related to supply chain constraints to match continued demand and comparison to post COVID volume growth from replenishment orders and reopening trends in the prior year.

Organic net sales increased $6.3 million, or 1.7%, excluding unfavorable foreign exchange impact.

Operating income, adjusted EBITDA and margins for the three month period decreased due to accelerated freight and input cost inflation ahead of incremental pricing actions and continued investments in marketing and new product development initiatives, partially offset by productivity improvements.

Global Pet Care

1 unchanged sentence

Three Month Periods Ended Variance

Nine Month Periods Ended Variance

July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020

January 2, 2022 January 3, 2021

$ 302.2 $ 275.4 $ 26.8 9.7 %

Operating income 27.8 36.4 (8.6) (23.6) % 101.8 11.3 90.5 n/m

Operating income margin 10.8 % 15.1 % (430) bps 12.3 % 1.7 % 1,060 bps

Operating income 12.3 34.1 (21.8) (63.9) %

Operating income margin 4.1 % 12.4 % (830) bps

Adjusted EBITDA

1 unchanged sentence

Adjusted EBITDA margin

19.1 % 21.0 % (190) bps 19.2 % 17.8 % 140 bps

n/m = not meaningful

Net sales for the three month period increased due to continued demand mitigated by lower than anticipated fulfillment levels during a distribution center transition to a new third-party logistics service provider in the U.S.

and acquisition sales of $26.4 million from the Armitage acquisition.

Organic net sales decreased $17.3 million, or 7.2%, excluding favorable foreign currency exchange impact and acquisition sales.

Net sales for the nine month period increased due to continued growth in both our aquatic and companion animal categories with broad-based demand across distribution channels led by e-commerce growth, mitigated by lower than anticipated fulfillment levels during a distribution center transition to a new third-party logistics service provider in the U.S.

and acquisition sales of $73.5 million from the Omega and Armitage acquisitions.

Organic net sales increased $51.6 million, or 7.5% excluding favorable foreign exchange impact and acquisition sales.

Operating income, adjusted EBITDA, and margins for the three month period decreased due to the distribution center transition, with lower volumes and incremental operating costs, higher freight and input cost inflation and advertising investments, partially offset by productivity improvements and pricing actions.

Operating income, adjusted EBITDA, and margins for the nine month period increased due to higher volumes and pricing, partially offset by higher freight and input costs, advertising investments, with increases in operating income and margin also attributable to the loss on asset held for sale of $26.8 million and impairment of intangible assets of $24.2 million in the prior year associated with the Coevorden divestiture, along with lower restructuring and distribution costs from exiting LATAM operating facilities in the prior year.

12.8 % 19.5 % (670) bps

Net sales for the three month period increased due to continued volume growth in most product categories across regions with increased demand in dog chews and treats and aquatic consumables primarily within mass market retail, acquisition sales of $8.8 million from Armitage, mitigated by COVID related supply disruptions including temporary shut-down of key supplier manufacturing facilities and continued supply chain constraints negatively impacting product availability.

Organic net sales increased $20.2 million, or 7.3%, excluding unfavorable foreign currency exchange impact and acquisition sales.

Operating income, adjusted EBITDA, and margins for the three month period decreased due to lower volumes and incremental operating costs and inefficiencies from labor inflation and turnover, higher freight and input cost inflation ahead of incremental pricing actions, supply chain constraints, and continued investment in marketing and new product initiatives, partially offset by productivity improvements.

Home and Garden

1 unchanged sentence

Three Month Periods Ended Variance

Nine Month Periods Ended Variance

July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020

January 2, 2022 January 3, 2021

$ 75.3 $ 82.3 $ (7.0) (8.5) %

Operating income 41.7 50.4 (8.7) (17.3) % 71.1 64.8 6.3 9.7 %

Operating income margin 19.7 % 23.9 % (420) bps 15.3 % 16.4 % (110) bps

Operating loss (15.7) (0.5) (15.2) 3,040.0 %

Operating loss margin (20.8) % (0.6) % (2,020) bps

Adjusted EBITDA

$ 53.4 $ 55.5 $ (2.1) (3.8) % $ 98.6 $ 80.6 $ 18.0 22.3 %

$ (7.3) $ 10.4 $ (17.7) n/m

Adjusted EBITDA margin

25.2 % 26.4 % (120) bps 21.3 % 20.4 % 90 bps

(9.7) % 12.6 % (2,230) bps

n/m = not meaningful

Net sales for the three month period increased with acquisition sales of $7.9 million from the Rejuvenate acquisition and repellent growth from distribution gains offset by earlier delivery of seasonal orders and lower volume in other categories from unfavorable weather.

Net sales for the three month period decreased across all product categories due to higher replenishment orders to address lower year-end retailer inventory levels in the prior year coupled with supply chain and transportation challenges in the current period shifting customer product delivery past quarter-end, offset by acquisition sales of $7.7 million from Rejuvenate.

Organic net sales decreased $14.7 million, or 17.9%, excluding acquisition sales.

Net sales for the nine month period increased by growth in all product categories driven by strong early season orders across channels and strong early season POS.

Organic net sales increased $59.7 million or 15.1% excluding acquisition sales.

Operating income, adjusted EBITDA and margins for the three month period decreased due to lower volumes, advertising and marketing investments partially offset by pricing actions and productivity improvements.

Operating income and adjusted EBITDA increased for the nine month period ended due to higher volumes, partially offset by advertising and marketing investments, and higher distribution expenses with operating income and margin being further impacted by incremental transaction related charges and a legal reserve attributable to significant and unusual non-recurring claims.

Operating income, adjusted EBITDA and margins for the three month period decreased due to freight and input cost inflation, continued marketing and product development investments, and product mix shift towards lower margin product, partially offset by pricing actions and productivity improvements.

Liquidity and Capital Resources

The following is a summary of the SBH and SB/RH cash flows from continuing operations for the nine month periods ended July 4, 2021 and June 28, 2020, respectively.

Nine Month Periods Ended (in millions)

July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020

The following is a summary of the SBH and SB/RH cash flows from continuing operations for the three month periods ended January 2, 2022 and January 3, 2021, respectively.

Three Month Periods Ended (in millions)

January 2, 2022 January 3, 2021 January 2, 2022 January 3, 2021

Operating activities

5 unchanged sentences

Cash Flows from Operating Activities

Cash flows from SBH continuing operations decreased $10.6 million primarily due to increased corporate and transaction related charges of $13.3 million, offset by improved cash flow from continuing operations and working capital, coupled with a decrease in cash paid for restructuring of $52.9 million and lower cash paid for taxes of $6.0 million.

Cash flows from operating activities from continuing operations of SB/RH increased $193.4 million primarily due to the items previously discussed above except for an incremental operating cash outflow to its parent company for federal net operating losses under the Company’s tax sharing agreement in the prior year.

Cash flows used in SBH's continuing operations increased $145.1 million primarily due to a decrease in operating results with an increase in cash paid towards working capital for inventory and inflationary costs, coupled with an increase in cash paid for taxes, transaction and restructuring related charges, partially offset by lower cash paid for interest.

Cash flows used in SB/RH continuing operations increased $173.0 million primarily due to the items previously discussed above except for an incremental operating cash outflow to its parent company for federal net operating losses under the Company’s tax sharing agreement in the prior year.

Cash Flows from Investing Activities

Cash flows from investing activities for SBH continuing operations decreased $443.5 million primarily due to increase in cash paid for acquisition business of $412.5 million due to the acquisitions of Rejuvenate and Armitage plus cash proceeds in the prior year from the divestiture of Coevorden Operations of $30.1 million and discontinued operations of $3.6 million, partially offset by net increase in proceeds from the sale of Energizer common stock of $5.1 million.

The Company sold its remaining investment in Energizer common stock in January 2021.

Capital expenditures decreased $1.2 million predominantly due to timing of capital activities as we expect to make investment in capital projects consistent to prior years.

Cash flows from investing activities of SB/RH decreased primarily due to the items previously discussed.

Cash flows used in investing activities for SBH continuing operations decreased $62.8 million primarily due to cash paid for the acquisition of Armitage of $129.8 million net proceeds from the sale of Energizer common stock of $60.5 million in the prior year, with an increase in capital expenditures of $6.5 million predominantly due to incremental investments in updating the Company's enterprise-wide operating system to SAP S/4 HANA.

Cash flows used in investing activities of SB/RH decreased primarily due to the items previously discussed.

Cash Flows from Financing Activities

Cash flows from financing activities for continuing operations increased $221.9 million primarily due lower stock repurchases activity, payment of contingent consideration associated with the GBL divestiture in the prior year;

partially offset by reduced cash inflow from debt financing primarily due to lower borrowings from the Revolver Facility in the current year to support working capital needs.

During the nine month period ended July 4, 2021, the Company realized $997.0 million of proceeds from new Term Loan Facility, Revolver Facility and issuance of senior notes, net discount, with payment of $800.0 million of outstanding principal on senior notes and make whole premiums of $23.4 million using proceeds, plus paydown of assumed debt from the acquisition of Armitage.

Cash flows provided by financing activities for continuing operations increased $430.4 million primarily due to increased borrowings on the Revolver Facility, partially offset by increase in stock repurchase activity and higher share based stock award withholding payments from vesting on LTIP grants.

During the three month period ended January 2, 2022, the Company realized $465.0 million of proceeds from the Revolver Facility with amortizing payments on other outstanding debt of $3.2 million.

Refer to Note 10 - Debt in the Notes to the Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for more information on debt borrowings.

There has been no issuance of common stock, other than through the Company’s share-based compensation plans, with reduced spending on common stock repurchase activity of $312.3 million from the accelerated share repurchase arrangement and open market purchases in the prior year.

During the three month period ended January 2, 2022, the Company repurchased $110.0 million of treasury stock at an average cost of $97.44 with no issuance of common stock, other than through the Company’s share-based compensation plans.

See Note 15 – Shareholders’ Equity in the Notes to the Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for further detail.

During the nine month period ended July 4, 2021 and June 28, 2020, SBH made cash dividend payments of $53.6 million and $57.2 million, or $0.42 per share, respectively.

During the three month periods ended January 2, 2022 and January 3, 2021, SBH made cash dividend payments of $17.3 million and $17.8 million, respectively, or $0.42 per share.

Cash flows from financing activity of SB/RH increased $456.2 million and is highly dependent upon the financing cash flow activities of SBH.

4 unchanged sentences

Additionally, we believe the availability under our credit facility and access to capital markets are sufficient to achieve our longer-term strategic plans.

As of July 4, 2021, the Company had borrowing availability of $478.0 million, net of outstanding letters of credit, under our credit facility.

As of January 2, 2022, the Company had borrowing availability of $116.0 million, net of outstanding letters of credit, under our credit facility.

Liquidity and capital resources of SB/RH are highly dependent upon the cash flow activities of SBH.

9 unchanged sentences

None of the Company’s current borrowings are subject to default or acceleration as a result of a downgrading of credit ratings, although a downgrade of the Company’s credit ratings could increase fees and interest charges on future borrowings.

At July 4, 2021, we were in compliance with all covenants under the Senior Credit Agreement and the indentures governing the 3.875% Notes, 5.00% Notes, 5.50% Notes, 5.75% Notes, and 4.00% Notes.

At January 2, 2022, we were in compliance with all covenants under the Senior Credit Agreement and the indentures governing the 3.875% Notes, 5.00% Notes, 5.50% Notes, 5.75% Notes, and 4.00% Notes.

A portion of our cash balance is located outside the U.S.

12 unchanged sentences

The Company's responsibility is limited to payments on the original terms negotiated with its suppliers, regardless of whether the suppliers sell their receivables to the financial institution, and continue to be recognized as accounts payable on the Company's Condensed Consolidated Balance Sheet with cash flow activity recognized as an operating cash flow.

The COVID-19 pandemic has not, as of the date of this report, materially impacted our operations or demand for our products and has not had a materially negative impact on the Company’s liquidity position, although there can be no assurance that it won't have a material negative impact on us in the future.

Nonetheless, we continue to actively monitor our global cash balances and liquidity, and if necessary, could reinitiate mitigating efforts to manage non-critical capital spend and assess operating spend to preserve cash and liquidity.

During the prior year, we had temporarily suspended treasury repurchase activity, but given the improved economic situation and the Company's liquidity, we may consider opportunistic share repurchases from time-to-time.

However, the continued spread of COVID-19 has led to disruption and volatility in the global capital markets, which, depending on future developments, could impact our capital resources and liquidity in the future.

Off-Balance Sheet Arrangements

The COVID-19 pandemic has not, as of the date of this report, materially impacted our operations and cash flows and has not had a materially negative impact on the Company’s liquidity position, although there can be no assurance that it won't have a material negative impact on us in the future.

Nonetheless, we continue to actively monitor our global cash balances and liquidity, and if necessary, could reinitiate mitigating efforts to manage non-critical spending and assess operating spend to preserve cash and liquidity.

Despite recent inflationary costs and rising freight costs, we continue to generate operating cash flows to meet our short-term liquidity needs, and we expect to maintain access to the capital markets, although there can be no assurance of our ability to do so.

However, the economic and social disruption attributable to the COVID-19 pandemic could lead to disruption and volatility in the global capital markets, which, depending on future developments, could impact our capital resources and liquidity in the future.

During the three month period ended January 2, 2022, there has been no material changes to our debt obligations, lease obligations, employee benefit obligations or other contractual obligations or commercial commitments previously discussed in our Annual Report on Form 10-K for the year ended September 30, 2021.

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Contractual Obligations & Other Commercial Commitments

There has otherwise been no material changes to our contractual obligations & other commercial commitments as discussed in our Annual Report on Form 10-K for the year ended September 30, 2020.

Critical Accounting Policies and Estimates

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Guarantor Statements - SB/RH

SBI has issued the 5.00% Notes under the 2029 Indenture, the 5.50% Notes under the 2030 Indenture, the 5.75% Notes under the 2025 Indenture, the 4.00% Notes under the 2026 Indenture, and the 3.875% Notes under 2031 Indenture (collectively, the “Notes”).

SBI has issued the 5.75% Notes under the 2025 Indenture, the 4.00% Notes under the 2026 Indenture, the 5.00% Notes under the 2029 Indenture, the 5.50% Notes under the 2030 Indenture, and the 3.875% Notes under the 2031 Indentures (collectively, the “Notes”).

The Notes are unconditionally guaranteed, jointly and severally, on a senior unsecured basis by SB/RH and SBI’s domestic subsidiaries.

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Investments in non-guarantor subsidiaries and the earnings or losses from those non-guarantor subsidiaries have been excluded.

Nine Month Period Ended Year Ended

(in millions) July 4, 2021 September 30, 2020

Three Month Period Ended Year Ended

(in millions) January 2, 2022 September 30, 2021

Statements of Operations Data

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Gross profit 79.4 555.5

Operating income 167.3 187.4

Net income (loss) from continuing operations 18.3 (46.8)

Net income (loss) 11.7 (32.8)

Net income (loss) attributable to controlling interest 11.7 (32.8)

Operating loss (83.2) (79.5)

Net loss from continuing operations (84.6) (116.2)

Net (loss) income (66.4) 28.6

Net (loss) income attributable to controlling interest (66.4) 28.6

Statements of Financial Position Data

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Noncurrent Liabilities 3,552.4 2,881.7

The Obligor’s amounts due from, due to the non-guarantor subsidiaries as of July 4, 2021 and September 30, 2020 are as follows:

(in millions) July 4, 2021 September 30, 2020

The Obligor’s amounts due from, due to the non-guarantor subsidiaries as of January 2, 2022 and September 30, 2021 are as follows:

(in millions) January 2, 2022 September 30, 2021

Statements of Financial Position Data

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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-Q

Item 2. Management’s Discussion and Analysis