Item 1. Financial Statements
Item 1. Financial Statements
SPECTRUM BRANDS HOLDINGS, INC.
Condensed Consolidated Statements of Financial Position
As of March 31, 2024 and September 30, 2023
(unaudited)
(in millions)
March 31, 2024 September 30, 2023
Assets
Cash and cash equivalents $ 745.7 $ 753.9
Short term investments 500.0 1,103.3
Trade receivables, net 601.3 477.1
Other receivables 113.5 84.5
Inventories 454.3 462.8
Prepaid expenses and other current assets 45.9 44.3
Total current assets 2,460.7 2,925.9
Property, plant and equipment, net 269.5 275.1
Operating lease assets 119.2 110.8
Deferred charges and other 46.6 31.8
Goodwill 858.3 854.7
Intangible assets, net 1,002.3 1,060.1
Total assets $ 4,756.6 $ 5,258.4
Liabilities and Shareholders' Equity
Current portion of long-term debt $ 9.0 $ 8.6
Accounts payable 375.5 396.6
Accrued wages and salaries 48.1 46.1
Accrued interest 19.0 20.6
Income tax payable 33.3 114.5
Other current liabilities 174.0 178.4
Total current liabilities 658.9 764.8
Long-term debt, net of current portion 1,374.4 1,546.9
Long-term operating lease liabilities 101.3 95.6
Deferred income taxes 189.6 174.8
Other long-term liabilities 174.9 158.0
Total liabilities 2,499.1 2,740.1
Commitments and contingencies (Note 15)
Shareholders' equity
Common stock 0.5 0.5
Additional paid-in capital 1,998.1 1,920.8
Accumulated earnings 2,158.8 2,096.0
Accumulated other comprehensive loss, net of tax ( 231.2 ) ( 249.4 )
Treasury stock ( 1,669.3 ) ( 1,250.3 )
Total shareholders' equity 2,256.9 2,517.6
Non-controlling interest 0.6 0.7
Total equity 2,257.5 2,518.3
Total liabilities and equity $ 4,756.6 $ 5,258.4
See accompanying notes to the condensed consolidated financial statements
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SPECTRUM BRANDS HOLDINGS, INC.
Condensed Consolidated Statements of Income
For the three and six month periods ended March 31, 2024 and April 2, 2023
(unaudited)
Three Month Periods Ended Six Month Periods Ended
(in millions, except per share)
March 31, 2024 April 2, 2023 March 31, 2024 April 2, 2023
Net sales $ 718.5 $ 729.2 $ 1,410.7 $ 1,442.5
Cost of goods sold 445.1 514.7 892.3 1,026.1
Gross profit 273.4 214.5 518.4 416.4
Selling, general & administrative 223.5 224.5 439.4 448.1
Impairment of intangible assets 39.0 67.0 43.0 67.0
Representation and warranty insurance proceeds ( 65.0 ) — ( 65.0 ) —
Gain from remeasurement of contingent consideration liability — — — ( 1.5 )
Total operating expenses 197.5 291.5 417.4 513.6
Operating income (loss) 75.9 ( 77.0 ) 101.0 ( 97.2 )
Interest expense 16.9 31.6 36.1 65.0
Interest income ( 17.5 ) ( 0.2 ) ( 40.9 ) ( 0.4 )
Gain from debt repurchase — — ( 4.7 ) —
Other non-operating expense, net 1.1 1.4 5.2 0.1
Income (loss) from continuing operations before income taxes 75.4 ( 109.8 ) 105.3 ( 161.9 )
Income tax expense (benefit) 25.5 ( 34.8 ) 37.9 ( 46.9 )
Net income (loss) from continuing operations 49.9 ( 75.0 ) 67.4 ( 115.0 )
Income from discontinued operations, net of tax 11.0 21.4 22.7 40.9
Net income (loss) 60.9 ( 53.6 ) 90.1 ( 74.1 )
Net (loss) income from continuing operations attributable to non-controlling interest ( 0.2 ) 0.1 ( 0.1 ) 0.3
Income from discontinued operations attributable to non-controlling interest, net of tax — — — 0.2
Net income (loss) attributable to controlling interest $ 61.1 $ ( 53.7 ) $ 90.2 $ ( 74.6 )
Amounts attributable to controlling interest
Net income (loss) from continuing operations attributable to controlling interest $ 50.1 $ ( 75.1 ) $ 67.5 $ ( 115.3 )
Income from discontinued operations attributable to controlling interest, net of tax 11.0 21.4 22.7 40.7
Net income (loss) attributable to controlling interest $ 61.1 $ ( 53.7 ) $ 90.2 $ ( 74.6 )
Earnings Per Share
Basic earnings per share from continuing operations $ 1.66 $ ( 1.83 ) $ 2.10 $ ( 2.82 )
Basic earnings per share from discontinued operations 0.37 0.52 0.71 1.00
Basic earnings per share $ 2.03 $ ( 1.31 ) $ 2.81 $ ( 1.82 )
Diluted earnings per share from continuing operations $ 1.65 $ ( 1.83 ) $ 2.09 $ ( 2.82 )
Diluted earnings per share from discontinued operations 0.36 0.52 0.71 1.00
Diluted earnings per share $ 2.01 $ ( 1.31 ) $ 2.80 $ ( 1.82 )
Dividend per share $ 0.42 $ 0.42 $ 0.84 $ 0.84
Weighted Average Shares Outstanding
Basic 30.2 41.0 32.1 40.9
Diluted 30.4 41.0 32.2 40.9
See accompanying notes to the condensed consolidated financial statements
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SPECTRUM BRANDS HOLDINGS, INC
Condensed Consolidated Statements of Comprehensive Income
For the three and six month periods ended March 31, 2024 and April 2, 2023
(unaudited)
Three Month Periods Ended
Six Month Periods Ended
(in millions)
March 31, 2024 April 2, 2023 March 31, 2024 April 2, 2023
Net income (loss) $ 60.9 $ ( 53.6 ) $ 90.1 $ ( 74.1 )
Other comprehensive income
Foreign currency translation adjustment
Foreign currency translation (loss) gain ( 12.0 ) 27.1 24.8 87.6
Unrealized income (loss) from net investment hedge 11.6 ( 12.5 ) ( 9.7 ) ( 46.4 )
Foreign currency translation adjustment before tax ( 0.4 ) 14.6 15.1 41.2
Deferred tax effect ( 2.9 ) 3.7 2.7 12.5
Foreign currency translation adjustment, net ( 3.3 ) 18.3 17.8 53.7
Unrealized gain (loss) on derivative instruments
Unrealized gain (loss) on derivative instruments before reclassification 1.4 ( 7.1 ) ( 9.2 ) ( 32.5 )
Net reclassification for loss to income from continuing operations 4.8 4.9 9.9 2.4
Net reclassification for gain to income from discontinued operations — ( 0.1 ) — ( 0.1 )
Unrealized gain (loss) on derivative instruments after reclassification 6.2 ( 2.3 ) 0.7 ( 30.2 )
Deferred tax effect ( 1.6 ) 0.7 ( 0.1 ) 7.8
Net unrealized gain (loss) on derivative instruments 4.6 ( 1.6 ) 0.6 ( 22.4 )
Defined benefit pension gain (loss)
Defined benefit pension gain (loss) before reclassification 0.3 0.1 ( 0.9 ) ( 2.1 )
Net reclassification for loss (gain) to income from continuing operations 0.2 ( 0.7 ) 0.4 0.2
Defined benefit pension gain (loss) after reclassification 0.5 ( 0.6 ) ( 0.5 ) ( 1.9 )
Deferred tax effect 0.1 0.1 0.3 1.3
Net defined benefit pension gain (loss) 0.6 ( 0.5 ) ( 0.2 ) ( 0.6 )
Net change to derive comprehensive income for the period 1.9 16.2 18.2 30.7
Comprehensive income (loss) 62.8 ( 37.4 ) 108.3 ( 43.4 )
Comprehensive (loss) income from continuing operations attributable to non-controlling interest ( 0.1 ) 0.1 — 0.3
Comprehensive income from discontinued operations attributable to non-controlling interest — 0.1 — 0.2
Comprehensive income (loss) attributable to controlling interest $ 62.9 $ ( 37.6 ) $ 108.3 $ ( 43.9 )
See accompanying notes to the condensed consolidated financial statements
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SPECTRUM BRANDS HOLDINGS, INC
Condensed Consolidated Statements of Shareholders' Equity
For the six month period ended March 31, 2024
(unaudited)
Common Stock Additional
Paid-in
Capital Accumulated
Earnings Accumulated
Other
Comprehensive
Loss Treasury
Stock Total
Shareholders'
Equity Non-
controlling
Interest Total
Equity
(in millions) Shares Amount
Balances at September 30, 2023 35.3 $ 0.5 $ 1,920.8 $ 2,096.0 $ ( 249.4 ) $ ( 1,250.3 ) $ 2,517.6 $ 0.7 $ 2,518.3
Net income from continuing operations — — — 17.4 — — 17.4 0.1 17.5
Income from discontinued operations, net of tax — — — 11.7 — — 11.7 — 11.7
Other comprehensive income, net of tax — — — — 16.2 — 16.2 0.1 16.3
Accelerated share repurchase ( 1.3 ) — 83.2 — — ( 83.2 ) — — —
Treasury stock repurchases ( 3.3 ) — — — — ( 243.0 ) ( 243.0 ) — ( 243.0 )
Excise tax on net share repurchases — — — — — ( 3.1 ) ( 3.1 ) — ( 3.1 )
Restricted stock issued and related tax withholdings 0.1 — ( 14.3 ) — — 8.9 ( 5.4 ) — ( 5.4 )
Share based compensation — — 3.9 — — — 3.9 — 3.9
Dividends declared — — — ( 14.5 ) — — ( 14.5 ) — ( 14.5 )
Balances as of December 31, 2023 30.8 0.5 1,993.6 2,110.6 ( 233.2 ) ( 1,570.7 ) 2,300.8 0.9 2,301.7
Net income (loss) from continuing operations — — — 50.1 — — 50.1 ( 0.2 ) 49.9
Income from discontinued operations, net of tax — — — 11.0 — — 11.0 — 11.0
Other comprehensive income (loss), net of tax — — — — 2.0 — 2.0 ( 0.1 ) 1.9
Treasury stock repurchases ( 1.2 ) — — — — ( 97.6 ) ( 97.6 ) — ( 97.6 )
Excise tax on net share repurchases — — — — — ( 1.0 ) ( 1.0 ) — ( 1.0 )
Share based compensation — — 4.5 — — — 4.5 — 4.5
Dividends declared — — — ( 12.9 ) — — ( 12.9 ) — ( 12.9 )
Balances as of March 31, 2024 29.6 $ 0.5 $ 1,998.1 $ 2,158.8 $ ( 231.2 ) $ ( 1,669.3 ) $ 2,256.9 $ 0.6 $ 2,257.5
See accompanying notes to the condensed consolidated financial statements
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SPECTRUM BRANDS HOLDINGS, INC
Condensed Consolidated Statements of Shareholders' Equity
For the six month period ended April 2, 2023
(unaudited)
Common Stock Additional
Paid-in
Capital Accumulated
Earnings Accumulated
Other
Comprehensive
Loss Treasury
Stock Total
Shareholders'
Equity Non-
controlling
Interest Total
Equity
(in millions) Shares Amount
Balances at September 30, 2022 40.8 $ 0.5 $ 2,032.5 $ 362.1 $ ( 303.1 ) $ ( 828.8 ) $ 1,263.2 $ 5.9 $ 1,269.1
Net (loss) income from continuing operations — — — ( 40.3 ) — — ( 40.3 ) 0.3 ( 40.0 )
Income from discontinued operations, net of tax — — — 19.4 — — 19.4 0.1 19.5
Other comprehensive income, net of tax — — — — 14.2 — 14.2 0.3 14.5
Restricted stock issued and related tax withholdings 0.2 — ( 25.1 ) — — 14.6 ( 10.5 ) — ( 10.5 )
Share based compensation — — 4.1 — — — 4.1 — 4.1
Dividends declared — — — ( 17.3 ) — — ( 17.3 ) — ( 17.3 )
Balances as of January 1, 2023 41.0 $ 0.5 2,011.5 323.9 ( 288.9 ) ( 814.2 ) 1,232.8 6.6 1,239.4
Net (loss) income from continuing operations — — — ( 75.1 ) — — ( 75.1 ) 0.1 ( 75.0 )
Income from discontinued operations, net of tax — — — 21.4 — — 21.4 — 21.4
Other comprehensive income, net of tax — — — — 16.0 — 16.0 0.2 16.2
Share based compensation — — 4.7 — — — 4.7 — 4.7
Dividends declared — — — ( 17.6 ) — — ( 17.6 ) — ( 17.6 )
Balances as of April 2, 2023 41.0 $ 0.5 $ 2,016.2 $ 252.6 $ ( 272.9 ) $ ( 814.2 ) $ 1,182.2 $ 6.9 $ 1,189.1
See accompanying notes to the condensed consolidated financial statements
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SPECTRUM BRANDS HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
For the six month periods ended March 31, 2024 and April 2, 2023
(unaudited)
Six Month Periods Ended
(in millions) March 31, 2024 April 2, 2023
Cash flows from operating activities
Net income (loss) $ 90.1 $ ( 74.1 )
Income from discontinued operations, net of tax 22.7 40.9
Net income (loss) from continuing operations 67.4 ( 115.0 )
Adjustments to reconcile net income (loss) from continuing operations to net cash provided by operating activities from continuing operations:
Depreciation 28.8 24.1
Amortization 22.2 20.9
Share based compensation 8.4 7.7
Impairment of intangible assets 43.0 67.0
Impairment of property, plant and equipment and operating lease assets 0.5 4.5
Gain from debt repurchase ( 4.7 ) —
Non-cash purchase accounting adjustments 0.9 0.9
Non-cash accrual for representation and warranty proceeds ( 15.0 ) —
Amortization of debt issuance costs and debt discount 1.7 4.0
Write-off of unamortized discount and debt issuance costs 0.3 —
Gain from remeasurement of contingent consideration liability — ( 1.5 )
Deferred tax benefit 10.9 ( 62.0 )
Net changes in operating assets and liabilities ( 83.7 ) 198.0
Net cash provided by operating activities from continuing operations 80.7 148.6
Net cash (used) provided by operating activities from discontinued operations ( 81.5 ) 29.0
Net cash (used) provided by operating activities ( 0.8 ) 177.6
Cash flows from investing activities
Purchases of property, plant and equipment ( 20.9 ) ( 25.9 )
Purchases of short term investments ( 700.0 ) —
Proceeds from sale of short term investments 1,292.0 —
Purchase price settlement from sale of HHI ( 26.9 ) —
Other investing activity ( 0.1 ) —
Net cash provided (used) by investing activities from continuing operations 544.1 ( 25.9 )
Net cash used by investing activities from discontinued operations — ( 7.9 )
Net cash provided (used) by investing activities 544.1 ( 33.8 )
Cash flows from financing activities
Payment of debt ( 177.9 ) ( 21.7 )
Payment of debt issuance costs ( 3.2 ) ( 2.3 )
Treasury stock purchases ( 340.5 ) —
Dividends paid to shareholders ( 26.8 ) ( 34.4 )
Share based award tax withholding payments, net of proceeds upon vesting ( 5.4 ) ( 10.5 )
Net cash used by financing activities from continuing operations ( 553.8 ) ( 68.9 )
Net cash used by financing activities from discontinued operations — ( 0.7 )
Net cash used by financing activities ( 553.8 ) ( 69.6 )
Effect of exchange rate changes on cash and cash equivalents 2.3 9.7
Net change in cash, cash equivalents and restricted cash in continuing operations ( 8.2 ) 83.9
Cash, cash equivalents, and restricted cash, beginning of period 753.9 243.9
Cash, cash equivalents, and restricted cash, end of period $ 745.7 $ 327.8
Supplemental disclosure of cash flow information
Cash paid for interest associated with continued operations $ 35.9 $ 56.8
Cash paid for interest associated with discontinued operations — 29.9
Cash paid for taxes associated with continued operations 17.8 11.7
Cash paid for taxes associated with discontinued operations 59.1 13.5
Non cash investing activities
Acquisition of property, plant and equipment through finance leases $ 1.8 $ 2.4
Non cash financing activities
Issuance of shares through stock compensation plan $ 14.0 $ 27.2
See accompanying notes to the condensed consolidated financial statements
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SB/RH HOLDINGS, LLC
Condensed Consolidated Statements of Financial Position
As of March 31, 2024 and September 30, 2023
(unaudited)
(in millions) March 31, 2024 September 30, 2023
Assets
Cash and cash equivalents $ 744.6 $ 752.7
Short term investments 500.0 1,103.3
Trade receivables, net 601.3 477.1
Other receivables 113.6 84.5
Receivable due from parent 180.3 90.1
Inventories 454.3 462.8
Prepaid expenses and other current assets 45.9 44.3
Total current assets 2,640.0 3,014.8
Property, plant and equipment, net 269.5 275.1
Operating lease assets 119.2 110.8
Deferred charges and other 46.5 31.8
Goodwill 858.3 854.7
Intangible assets, net 1,002.3 1,060.1
Total assets $ 4,935.8 $ 5,347.3
Liabilities and Shareholder's Equity
Current portion of long-term debt $ 9.0 $ 8.6
Accounts payable 375.5 396.7
Accrued wages and salaries 48.0 46.0
Accrued interest 19.0 20.6
Income tax payable 33.3 36.8
Other current liabilities 164.0 172.2
Total current liabilities 648.8 680.9
Long-term debt, net of current portion 1,374.4 1,546.9
Long-term operating lease liabilities 101.3 95.6
Deferred income taxes 191.0 176.3
Other long-term liabilities 174.9 157.9
Total liabilities 2,490.4 2,657.6
Commitments and contingencies (Note 15)
Shareholder's equity
Other capital 2,171.4 2,168.9
Accumulated earnings 502.9 767.8
Accumulated other comprehensive loss, net of tax ( 231.1 ) ( 249.3 )
Total shareholder's equity 2,443.2 2,687.4
Non-controlling interest 2.2 2.3
Total equity 2,445.4 2,689.7
Total liabilities and equity $ 4,935.8 $ 5,347.3
See accompanying notes to the condensed consolidated financial statements
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SB/RH HOLDINGS, LLC
Condensed Consolidated Statements of Income
For the three and six month periods ended March 31, 2024 and April 2, 2023
(unaudited)
Three Month Periods Ended Six Month Periods Ended
(in millions) March 31, 2024 April 2, 2023 March 31, 2024 April 2, 2023
Net sales $ 718.5 $ 729.2 $ 1,410.7 $ 1,442.5
Cost of goods sold 445.1 514.7 892.3 1,026.1
Gross profit 273.4 214.5 518.4 416.4
Selling, general and administrative 222.9 223.8 438.4 447.4
Impairment of intangible assets 39.0 67.0 43.0 67.0
Representation and warranty insurance proceeds ( 65.0 ) — ( 65.0 ) —
Gain from remeasurement of contingent consideration liability — — — ( 1.5 )
Total operating expenses 196.9 290.8 416.4 512.9
Operating income (loss) 76.5 ( 76.3 ) 102.0 ( 96.5 )
Interest expense 16.9 31.7 36.1 65.1
Interest income ( 17.5 ) ( 0.2 ) ( 40.9 ) ( 0.4 )
Gain from debt repurchase — — ( 4.7 ) —
Other non-operating expense, net 1.1 1.4 5.2 0.1
Income (loss) from continuing operations before income taxes 76.0 ( 109.2 ) 106.3 ( 161.3 )
Income tax expense (benefit) 25.6 ( 34.0 ) 37.8 ( 46.3 )
Net income (loss) from continuing operations 50.4 ( 75.2 ) 68.5 ( 115.0 )
Income from discontinued operations, net of tax 11.0 21.9 22.7 41.4
Net income (loss) 61.4 ( 53.3 ) 91.2 ( 73.6 )
Net (loss) income from continuing operations attributable to non-controlling interest ( 0.2 ) 0.1 ( 0.1 ) 0.3
Income from discontinued operations attributable to non-controlling interest, net of tax — — — 0.2
Net income (loss) attributable to controlling interest $ 61.6 $ ( 53.4 ) $ 91.3 $ ( 74.1 )
Amounts attributable to controlling interest
Net income (loss) from continuing operations attributable to controlling interest $ 50.6 $ ( 75.3 ) $ 68.6 $ ( 115.3 )
Income from discontinued operations attributable to controlling interest, net of tax 11.0 21.9 22.7 41.2
Net income (loss) attributable to controlling interest $ 61.6 $ ( 53.4 ) $ 91.3 $ ( 74.1 )
See accompanying notes to the condensed consolidated financial statements
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SB/RH HOLDINGS, LLC
Condensed Consolidated Statements of Comprehensive Income
For the three and six month periods ended March 31, 2024 and April 2, 2023
(unaudited)
Three Month Periods Ended
Six Month Periods Ended
(in millions)
March 31, 2024 April 2, 2023 March 31, 2024 April 2, 2023
Net income (loss) $ 61.4 $ ( 53.3 ) $ 91.2 $ ( 73.6 )
Other comprehensive income
Foreign currency translation adjustment
Foreign currency translation (loss) gain ( 12.0 ) 27.1 24.8 87.6
Unrealized income (loss) from net investment hedge 11.6 ( 12.5 ) ( 9.7 ) ( 46.4 )
Foreign currency translation adjustment before tax ( 0.4 ) 14.6 15.1 41.2
Deferred tax effect ( 2.9 ) 3.7 2.7 12.5
Foreign currency translation adjustment, net ( 3.3 ) 18.3 17.8 53.7
Unrealized gain (loss) on derivative instruments
Unrealized gain (loss) on derivative instruments before reclassification 1.4 ( 7.1 ) ( 9.2 ) ( 32.5 )
Net reclassification for loss to income from continuing operations 4.8 4.9 9.9 2.4
Net reclassification for gain to income from discontinued operations — ( 0.1 ) — ( 0.1 )
Unrealized gain (loss) on derivative instruments after reclassification 6.2 ( 2.3 ) 0.7 ( 30.2 )
Deferred tax effect ( 1.6 ) 0.7 ( 0.1 ) 7.8
Net unrealized gain (loss) on derivative instruments 4.6 ( 1.6 ) 0.6 ( 22.4 )
Defined benefit pension gain (loss)
Defined benefit pension gain (loss) before reclassification 0.3 0.1 ( 0.9 ) ( 2.1 )
Net reclassification for loss (gain) to income from continuing operations 0.2 ( 0.7 ) 0.4 0.2
Defined benefit pension gain (loss) after reclassification 0.5 ( 0.6 ) ( 0.5 ) ( 1.9 )
Deferred tax effect 0.1 0.1 0.3 1.3
Net defined benefit pension gain (loss) 0.6 ( 0.5 ) ( 0.2 ) ( 0.6 )
Net change to derive comprehensive income for the period 1.9 16.2 18.2 30.7
Comprehensive income (loss) 63.3 ( 37.1 ) 109.4 ( 42.9 )
Comprehensive (loss) income from continuing operations attributable to non-controlling interest ( 0.1 ) 0.1 — 0.3
Comprehensive income from discontinued operations attributable to non-controlling interest — 0.1 — 0.2
Comprehensive income (loss) attributable to controlling interest $ 63.4 $ ( 37.3 ) $ 109.4 $ ( 43.4 )
See accompanying notes to the condensed consolidated financial statements
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SB/RH HOLDINGS, LLC
Condensed Consolidated Statements of Shareholder's Equity
For the six month period ended March 31, 2024
(unaudited)
(in millions) Other
Capital Accumulated
Earnings
Accumulated
Other
Comprehensive
Loss Total
Shareholder's
Equity Non-
controlling
Interest Total Equity
Balances at September 30, 2023 $ 2,168.9 $ 767.8 $ ( 249.3 ) $ 2,687.4 $ 2.3 $ 2,689.7
Net income from continuing operations — 18.1 — 18.1 0.1 18.2
Income from discontinued operations, net of tax — 11.7 — 11.7 — 11.7
Other comprehensive income, net of tax — — 16.2 16.2 0.1 16.3
Restricted stock issued and related tax withholdings ( 5.4 ) — — ( 5.4 ) — ( 5.4 )
Share based compensation 3.8 — — 3.8 — 3.8
Dividends paid to parent — ( 246.1 ) — ( 246.1 ) — ( 246.1 )
Balances as of December 31, 2023 2,167.3 551.5 ( 233.1 ) 2,485.7 2.5 2,488.2
Net income (loss) from continuing operations — 50.6 — 50.6 ( 0.2 ) 50.4
Income from discontinued operations, net of tax — 11.0 — 11.0 — 11.0
Other comprehensive income (loss), net of tax — — 2.0 2.0 ( 0.1 ) 1.9
Share based compensation 4.1 — — 4.1 — 4.1
Dividends paid to parent — ( 110.2 ) — ( 110.2 ) — ( 110.2 )
Balances as of March 31, 2024 $ 2,171.4 $ 502.9 $ ( 231.1 ) $ 2,443.2 $ 2.2 $ 2,445.4
See accompanying notes to the condensed consolidated financial statements
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SB/RH HOLDINGS, LLC
Condensed Consolidated Statements of Shareholder's Equity
For the six month period ended April 2, 2023
(unaudited)
(in millions) Other
Capital Accumulated
Deficit Accumulated
Other
Comprehensive
Loss Total
Shareholder's
Equity Non-
controlling
Interest Total Equity
Balances at September 30, 2022 $ 2,164.6 $ ( 736.0 ) $ ( 303.0 ) $ 1,125.6 $ 7.5 $ 1,133.1
Net (loss) income from continuing operations — ( 40.1 ) — ( 40.1 ) 0.3 ( 39.8 )
Income from discontinued operations, net of tax — 19.4 — 19.4 0.1 19.5
Other comprehensive income, net of tax — — 14.2 14.2 0.3 14.5
Restricted stock issued and related tax withholdings ( 10.5 ) — — ( 10.5 ) — ( 10.5 )
Share based compensation 3.9 — — 3.9 — 3.9
Dividends paid to parent — ( 17.1 ) — ( 17.1 ) — ( 17.1 )
Balances as of January 1, 2023 2,158.0 ( 773.8 ) ( 288.8 ) 1,095.4 8.2 1,103.6
Net (loss) income from continuing operations — ( 75.3 ) — ( 75.3 ) 0.1 ( 75.2 )
Income from discontinued operations, net of tax — 21.9 — 21.9 — 21.9
Other comprehensive income, net of tax — — 16.0 16.0 0.2 16.2
Share based compensation 4.4 — — 4.4 4.4
Dividends paid to parent — ( 17.2 ) — ( 17.2 ) — ( 17.2 )
Balances as of April 2, 2023 $ 2,162.4 $ ( 844.4 ) $ ( 272.8 ) $ 1,045.2 $ 8.5 $ 1,053.7
See accompanying notes to the condensed consolidated financial statements
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SB/RH HOLDINGS, LLC
Condensed Consolidated Statements of Cash Flows
For the six month periods ended March 31, 2024 and April 2, 2023
(unaudited)
Six Month Periods Ended
(in millions) March 31, 2024 April 2, 2023
Cash flows from operating activities
Net income (loss) $ 91.2 $ ( 73.6 )
Income from discontinued operations, net of tax 22.7 41.4
Net income (loss) from continuing operations 68.5 ( 115.0 )
Adjustments to reconcile net income (loss) from continuing operations to net cash provided by operating activities from continuing operations:
Depreciation 28.8 24.1
Amortization 22.2 20.9
Share based compensation 7.8 7.1
Impairment of intangible assets 43.0 67.0
Impairment of property, plant and equipment and operating lease assets 0.5 4.5
Gain from debt repurchase ( 4.7 ) —
Non-cash purchase accounting adjustments 0.9 0.9
Non-cash accrual for representation and warranty proceeds ( 15.0 ) —
Amortization of debt issuance costs and debt discount 1.7 4.0
Write-off of unamortized discount and debt issuance costs 0.3 —
Gain from remeasurement of contingent consideration liability — ( 1.5 )
Deferred tax benefit 10.8 ( 61.3 )
Net changes in operating assets and liabilities ( 100.4 ) 187.5
Net cash provided by operating activities from continuing operations 64.4 138.2
Net cash (used) provided by operating activities from discontinued operations ( 81.5 ) 29.0
Net cash (used) provided by operating activities ( 17.1 ) 167.2
Cash flows from investing activities
Purchases of property, plant and equipment ( 20.9 ) ( 25.9 )
Purchases of short term investments ( 700.0 ) —
Proceeds from sale of short term investments 1,292.0 —
Purchase price settlement from sale of HHI ( 26.9 ) —
Other investing activities ( 0.1 ) —
Net cash provided (used) by investing activities from continuing operations 544.1 ( 25.9 )
Net cash used by investing activities from discontinued operations — ( 7.9 )
Net cash provided (used) by investing activities 544.1 ( 33.8 )
Cash flows from financing activities
Payment of debt ( 177.9 ) ( 21.7 )
Payment of debt issuance costs ( 3.2 ) ( 2.3 )
Payment of cash dividends to parent ( 356.3 ) ( 34.4 )
Net cash used by financing activities from continuing operations ( 537.4 ) ( 58.4 )
Net cash used by financing activities from discontinued operations — ( 0.7 )
Net cash used by financing activities ( 537.4 ) ( 59.1 )
Effect of exchange rate changes on cash and cash equivalents 2.3 9.7
Net change in cash, cash equivalents and restricted cash ( 8.1 ) 84.0
Cash, cash equivalents, and restricted cash, beginning of period 752.7 242.6
Cash, cash equivalents, and restricted cash, end of period $ 744.6 $ 326.6
Supplemental disclosure of cash flow information
Cash paid for interest associated with continued operations $ 35.9 $ 56.8
Cash paid for interest associated with discontinued operations — 29.9
Cash paid for taxes associated with continued operations 17.8 11.7
Cash paid for taxes associated with discontinued operations 59.1 13.5
Non cash investing activities
Acquisition of property, plant and equipment through finance leases $ 1.8 $ 2.4
See accompanying notes to the condensed consolidated financial statements
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SPECTRUM BRANDS HOLDINGS, INC.
SB/RH HOLDINGS, LLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, unaudited)
This report is a combined report of Spectrum Brands Holdings, Inc. (“SBH”) and SB/RH Holdings, LLC (“SB/RH”) (collectively, the “Company”). The notes to the condensed consolidated financial statements that follow include both consolidated SBH and SB/RH Notes, unless otherwise indicated below.
NOTE 1– BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Fiscal Period-End
The accompanying unaudited condensed consolidated financial statements have been prepared by the Company and its majority owned subsidiaries in accordance with accounting principles for interim financial information generally accepted in the United States and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and notes necessary for a comprehensive presentation of financial position and results of operations. It is management’s opinion, however, that all material adjustments have been made which are necessary for a fair financial statement presentation. For further information, refer to the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023.
SBH’s and SB/RH’s fiscal year ends on September 30 and the Company reports its results using fiscal quarters whereby each three month quarterly reporting period is approximately thirteen weeks in length and ends on a Sunday. The exceptions are the first quarter, which begins on October 1, and the fourth quarter, which ends on September 30. As a result, the fiscal period end date for the three and six month periods included within this Quarterly Report for the Company are March 31, 2024 and April 2, 2023, respectively.
Newly Adopted Accounting Standards
In September 2022, the FASB issued ASU 2022-04, Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations to enhance transparency about the use of supplier finance programs. Under the ASU, the buyer in a supplier finance program is required to disclose information about the key terms of the program, outstanding confirmed amounts as of the end of the period, a roll-forward of such amounts during each annual period, and a description of where in the financial statements outstanding amounts are presented. The amendments in ASU 2022-04 are effective for all entities for fiscal years beginning after December 15, 2022, including interim periods within those financial years, except for the disclosure of roll-forward information, which is effective for fiscal years beginning after December 15, 2023. We adopted the ASU during the year ended September 30, 2023, except for the disclosure of roll-forward information, which was adopted during the first quarter of fiscal 2024. The following table summarizes the roll-forward of the supplier finance program for the six month period ended March 31, 2024:
(in millions)
Amount
Outstanding payment obligations as of September 30, 2023
$ 17.9
Invoices confirmed during the period 36.5
Confirmed invoices paid during the period ( 38.4 )
Outstanding payment obligations as of March 31, 2024
$ 16.0
The outstanding payment obligations under the supplier finance program are included in Accounts Payable in the Company's Condensed Statement of Financial Position.
Recently Issued Accounting Standards
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which provides updates to qualitative and quantitative reportable segment disclosure requirements, including enhanced disclosures about significant segment expenses and increased interim disclosure requirements, among others. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted, and the amendments should be applied retrospectively. This ASU will be effective for our Form 10-K for the year ending September 30, 2025 and our Form 10-Q for the first quarter of the year ending September 30, 2026. We are currently evaluating the impact this ASU may have on our consolidated financial statement disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which provides qualitative and quantitative updates to the rate reconciliation and income taxes paid disclosures, among others, in order to enhance the transparency of income tax disclosures, including consistent categories and greater disaggregation of information in the rate reconciliation and disaggregation by jurisdiction of income taxes paid. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments should be applied prospectively; however, retrospective application is also permitted. This ASU will be effective for our Form 10-K for the year ending September 30, 2026. We are currently evaluating the impact this ASU may have on our consolidated financial statement disclosures.
In March 2024, the U.S. Securities and Exchange Commission ("SEC") adopted final rules under SEC Release Nos. 33-11275 and 34-99678, The Enhancement and Standardization of Climate-Related Disclosures for Investors , which requires registrants to disclose certain climate-related information in registration statements and annual reports. The final rules include requirements to disclose material climate-related risks, activities to mitigate or adapt to such risks, information about the board of directors' oversight of climate-related risks and management's role in managing material climate-related risks, and information on any climate-related targets or goals that are material to the registrant's business, results of operations, or financial condition. In addition, the rules would require certain climate-related disclosure as it relates to severe weather events and other natural conditions and carbon offsets and renewable energy credits. Certain large registrants are also required to disclose Scope 1 and Scope 2 greenhouse gas ("GHG") emissions when material. While the SEC voluntarily stayed the rules due to pending judicial review, the rules in their current form would be effective for the Company beginning in our Form 10-K for the year ending September 30, 2026. The Company is currently assessing the impact that these rules may have on the Company's consolidated financial statements.
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SPECTRUM BRANDS HOLDINGS, INC.
SB/RH HOLDINGS, LLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, unaudited)
NOTE 2 – DIVESTITURES
The following table summarizes the components of Income from Discontinued Operations, Net of Tax in the Condensed Consolidated Statements of Income for the three and six month periods ended March 31, 2024 and April 2, 2023:
Three Month Periods Ended Six Month Periods Ended
(in millions) March 31, 2024 April 2, 2023 March 31, 2024 April 2, 2023
Income from discontinued operations before income taxes – HHI $ 15.2 $ 59.5 $ 15.2 $ 104.4
(Loss) income from discontinued operations before income taxes – Other — ( 1.4 ) 10.3 ( 2.0 )
Interest expense on corporate debt allocated to discontinued operations — 17.8 — 34.0
Income from discontinued operations before income taxes 15.2 40.3 25.5 68.4
Income tax expense from discontinued operations 4.2 18.9 2.8 27.5
Income from discontinued operations, net of tax 11.0 21.4 22.7 40.9
Income from discontinued operations attributable to noncontrolling interest, net of tax — — — 0.2
Income from discontinued operations attributable to controlling interest, net of tax $ 11.0 $ 21.4 $ 22.7 $ 40.7
Interest from corporate debt allocated to discontinued operations in the prior year includes interest expense from Term Loans, which was paid down following the close of the HHI divestiture on June 20, 2023, and interest expense from corporate debt not directly attributable to or related to other operations based on the ratio of net assets of the disposal group held for sale to the consolidated net assets of the Company plus consolidated debt, excluding debt assumed in the transaction, required to be repaid, or directly attributable to other operations of the Company.
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. On June 20, 2023, the Company completed its divestiture of its HHI segment. The Company and ASSA have made customary representations and warranties and have agreed to customary covenants relating to the acquisition. The Company and ASSA have agreed to indemnify each other for losses arising from certain breaches of the Purchase Agreement and for certain other matters. In particular, the Company has agreed to indemnify ASSA for certain liabilities relating to the assets retained by the Company, and ASSA has agreed to indemnify the Company for certain liabilities assumed by ASSA, in each case as described in the Purchase Agreement. The Company and ASSA have agreed to enter into related agreements ancillary to the acquisition that became effective upon the consummation of the acquisition, including a customary transition services agreements ("TSA") and providing for both forward and reverse transition services. The consummation of the acquisition was not subject to any financing condition.
During the three and six month period ended March 31, 2024, the Company recognized $ 15.2 million in income from discontinued operations before income taxes - HHI related to a gain realized by a subsequently agreed reduction on accrued fees associated with the transaction that was previously recognized as a component of the gain on sale when the transaction closed in the prior year.
The following table summarizes the components of income from discontinued operations before income taxes associated with the HHI divestiture for the three and six month period ended April 2, 2023:
Three Month Period Ended
Six Month
Period Ended
(in millions)
April 2, 2023 April 2, 2023
Net sales $ 383.3 $ 746.1
Cost of goods sold 253.3 498.0
Gross profit 130.0 248.1
Operating expenses 68.9 140.0
Operating income 61.1 108.1
Interest expense 0.8 1.7
Other non-operating expense, net 0.8 2.0
Income from discontinued operations before income taxes $ 59.5 $ 104.4
Interest expense consists of interest from debt directly attributable to HHI operations that primarily consist of interest from finance leases. The following table presents significant non-cash items and capital expenditures of discontinued operations from the HHI divestiture for the three and six month period ended April 2, 2023:
Three Month Period Ended
Six Month
Period Ended
(in millions)
April 2, 2023 April 2, 2023
Share based compensation $ 0.3 $ 1.1
Purchases of property, plant and equipment 4.4 8.0
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SPECTRUM BRANDS HOLDINGS, INC.
SB/RH HOLDINGS, LLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, unaudited)
NOTE 2 – DIVESTITURES (continued)
The Company and ASSA entered into customary TSAs that became effective upon the consummation of the transaction. The TSAs support various shared back office administrative functions, including finance, sales and marketing, information technology, human resources, real estate and supply chain, customer service and procurement; supporting both the transferred HHI operations and the continuing operations of the Company. Charges associated with TSAs are recognized as bundled service costs under a fixed fee structure by the respective service or function and also include one time pass-through charges including warehousing, freight, among others. TSA charges are settled periodically between the Company and ASSA on a net basis. Charges to ASSA are recognized as a reduction of the respective operating expense incurred and charges from ASSA are recognized as an operating expense depending upon the function supported by ASSA. The TSAs have an overall expected time period of 12 months following the close of the transaction with variability in expiration dependent upon the completed transition of the respective service or function, and may provide up to 12 additional months for a total duration of up to 24 months following the close of the transaction. The Company recognized net income of $ 7.9 million and $ 15.9 million associated with TSA charges during the three and six month periods ended March 31, 2024, respectively. Additionally, the Company and ASSA will receive cash and make payments on behalf of the respective counterparty's operations as part of the shared administrative functions, resulting in cash flow being commingled with the operating cash flow of the Company. The Company also maintains a net payable or receivable with ASSA for net working capital attributable to commingled cash flow during the transaction period. As of March 31, 2024 and September 30, 2023, the Company had a net receivable of $ 25.0 million and $ 4.0 million, respectively, included in Other Receivables on the Company's Condensed Consolidated Statement of Financial Position consisting of amounts due from ASSA for commingled cash flow and net TSA charges, including amounts subject to repayment by the Company.
The Company has also recognized net payables to ASSA for outstanding settlements associated with the Purchase Agreement, including tax indemnifications for outstanding settlements with tax authorities and uncertain tax benefit obligations, among others. As of March 31, 2024, the Company recognized $ 2.7 million, included with Other Long-Term Liabilities, on the Company's Condensed Consolidated Statements of Financial Position. As of September 30, 2023, the Company recognized $ 27.3 million, included within Accounts Payable, and $ 2.6 million, included within Other Long-Term Liabilities, on the Company’s Condensed Consolidated Statements of Financial Position. During the three month period ended March 31, 2024, the Company paid $ 26.9 million to complete the purchase price settlement in accordance with the Purchase Agreement.
Other
Income from discontinued operations before income taxes – other includes incremental pre-tax gain for changes to tax and legal indemnifications and other agreed-upon funding under the acquisition agreements for the sale and divestiture of the Global Batteries & Lighting ("GBL") and Global Auto Care ("GAC") divisions to Energizer Holdings, Inc. ("Energizer") during the year ended September 30, 2019. During the six month period ended March 31, 2024, the Company realized a gain attributable to a proposed settlement on outstanding tax audits that were previously recognized as uncertain tax benefit obligations at the time of sale and indemnified in accordance with the acquisition agreement. As of March 31, 2024, the Company recognized $ 14.4 million related to indemnification payables in accordance with the acquisition agreements, primarily attributable to uncertain tax benefit obligations and outstanding settlements with tax authorities that were transferred, included within Other Current Liabilities on the Company's Condensed Consolidated Statements of Financial Position. As of September 30, 2023, the Company recognized $ 25.3 million, including $ 8.6 million within Other Current Liabilities and $ 16.7 million, within Other Long-Term Liabilities on the Company’s Condensed Consolidated Statements of Financial Position.
NOTE 3 – REVENUE RECOGNITION
The Company generates all of its revenue from contracts with customers. The following table disaggregates our revenue for the three and six month periods ended March 31, 2024 and April 2, 2023, by the Company’s key revenue streams, segments and geographic region (based upon destination):
Three Month Period Ended March 31, 2024 Three Month Period Ended April 2, 2023
(in millions)
GPC
H&G
HPC
Total
GPC
H&G
HPC
Total
Product Sales
NA
$ 179.2 $ 158.5 $ 105.1 $ 442.8 $ 186.4 $ 151.3 $ 121.6 $ 459.3
EMEA
97.8 — 101.0 198.8 94.4 — 99.2 193.6
LATAM
2.9 1.5 44.8 49.2 4.5 1.5 38.8 44.8
APAC
6.5 — 15.1 21.6 7.4 — 17.4 24.8
Licensing
2.2 0.7 1.8 4.7 2.6 0.5 1.9 5.0
Service and other 1.3 — 0.1 1.4 1.4 — 0.3 1.7
Total Revenue
$ 289.9 $ 160.7 $ 267.9 $ 718.5 $ 296.7 $ 153.3 $ 279.2 $ 729.2
Six Month Period Ended March 31, 2024 Six Month Period Ended April 2, 2023
(in millions) GPC H&G HPC Total GPC H&G
HPC Total
Product Sales
NA $ 348.0 $ 228.4 $ 240.1 $ 816.5 $ 360.8 $ 220.2 $ 286.1 $ 867.1
EMEA 193.0 — 245.2 438.2 181.0 — 236.5 417.5
LATAM 5.8 3.2 88.1 97.1 7.7 3.5 80.6 91.8
APAC 12.7 — 33.9 46.6 16.9 — 35.2 52.1
Licensing 4.7 1.1 3.6 9.4 5.0 0.9 4.3 10.2
Service and other 2.6 — 0.3 2.9 2.9 — 0.9 3.8
Total Revenue $ 566.8 $ 232.7 $ 611.2 $ 1,410.7 $ 574.3 $ 224.6 $ 643.6 $ 1,442.5
The Company has a broad range of customers, including many large retail customers. During the three month periods ended March 31, 2024 and April 2, 2023, there were two large retail customers, each exceeding 10% of consolidated Net Sales and representing 33.5 % of consolidated Net Sales in each period. During the six month periods ended March 31, 2024 and April 2, 2023, there were two large retail customers exceeding 10% of consolidated Net Sales and representing 35.8 % and 34.8 % of consolidated Net Sales, respectively. All segments sell products to the two large retail customers exceeding 10% of consolidated Net Sales.
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SPECTRUM BRANDS HOLDINGS, INC.
SB/RH HOLDINGS, LLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, unaudited)
NOTE 3 – REVENUE RECOGNITION (continued)
A significant portion of our product sales from our HPC segment are subject to the continued use and access to the Black & Decker® ("B+D") brand through a trademark license agreement with Stanley Black and Decker ("SBD"). Net sales from B+D product sales consisted of $ 78.6 million , or 10.9 % of consolidated net sales, and $ 85.1 million, or 11.7 % of consolidated Net Sales, for the three month periods ended March 31, 2024 and April 2, 2023, respectively. Net sales from B+D product sales consisted of $ 172.5 million, or 12.2 %, and $ 171.9 million, or 11.9 %, of consolidated Net Sales for the six month periods ended March 31, 2024 and April 2, 2023, respectively. All other significant brands and tradenames used in the Company’s commercial operations are directly owned and not subject to further restrictions. The Company recently entered into a new trademark license agreement with SBD for the B+D brand during the subsequent period, see Note 18 - Subsequent Event for further detail .
In the normal course of business, the Company may allow customers to return products or take credit for product returns per the provisions in a sale agreement. Estimated product returns are recorded as a reduction in reported revenues at the time of sale based upon historical product return experience, adjusted for known trends, to arrive at the amount of consideration expected to be received. The allowance for product returns as of March 31, 2024 and September 30, 2023 was $ 15.3 million and $ 12.8 million, respectively. The increase in the allowance for product returns are attributable to the additional returns estimated for the recently re-issued product recalls with the HPC segment in collaboration with the U.S. Consumer Product Safety Commission ("CPSC"), further discussed in Note 15 - Commitments and Contingencies .
NOTE 4 – RECEIVABLES AND CONCENTRATION OF CREDIT RISK
The allowance for credit losses on the Company's trade receivables as of March 31, 2024 and September 30, 2023 was $ 7.0 million and $ 7.7 million, respectively.
The Company has a broad range of customers, including many large retail customers. As of March 31, 2024 and September 30, 2023, there were two large retail customers exceeding 10% of consolidated Net Trade Receivables and representing 43.7 % and 39.8 % of the Company's consolidated Net Trade Receivables, respectively.
NOTE 5 – INVENTORIES
Inventories consist of the following:
(in millions)
March 31, 2024 September 30, 2023
Raw materials
$ 53.8 $ 55.8
Work-in-process
6.7 6.2
Finished goods
393.8 400.8
Inventories $ 454.3 $ 462.8
NOTE 6 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
(in millions) March 31, 2024 September 30, 2023
Land, buildings and improvements $ 84.8 $ 83.4
Machinery, equipment and other 337.0 330.1
Computer software 139.5 136.2
Finance leases 138.4 136.9
Construction in progress 24.5 18.1
Property, plant and equipment 724.2 704.7
Accumulated depreciation ( 454.7 ) ( 429.6 )
Property, plant and equipment, net $ 269.5 $ 275.1
Depreciation expense from property, plant, and equipment for the three month periods ended March 31, 2024 and April 2, 2023, was $ 14.3 million and $ 11.9 million, respectively; and for the six month periods ended March 31, 2024 and April 2, 2023 was $ 28.8 million and $ 24.1 million, respectively.
NOTE 7 – GOODWILL AND INTANGIBLE ASSETS
Goodwill consists of the following:
(in millions)
GPC
H&G
Total
As of September 30, 2023 $ 512.1 $ 342.6 $ 854.7
Foreign currency impact 3.6 — 3.6
As of March 31, 2024 $ 515.7 $ 342.6 $ 858.3
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SPECTRUM BRANDS HOLDINGS, INC.
SB/RH HOLDINGS, LLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, unaudited)
NOTE 7 - GOODWILL AND INTANGIBLE ASSETS (continued)
The carrying value and accumulated amortization of intangible assets are as follows:
March 31, 2024 September 30, 2023
(in millions) Gross Carrying Amount Accumulated Amortization Net Gross Carrying Amount Accumulated Amortization Net
Amortizable intangible assets:
Customer relationships $ 637.5 $ ( 431.9 ) $ 205.6 $ 635.0 $ ( 412.9 ) $ 222.1
Technology assets 75.3 ( 38.5 ) 36.8 75.3 ( 35.9 ) 39.4
Tradenames 28.8 ( 9.7 ) 19.1 27.6 ( 7.4 ) 20.2
Total amortizable intangible assets 741.6 ( 480.1 ) 261.5 737.9 ( 456.2 ) 281.7
Indefinite-lived intangible assets – tradenames 740.8 — 740.8 778.4 — 778.4
Total Intangible Assets $ 1,482.4 $ ( 480.1 ) $ 1,002.3 $ 1,516.3 $ ( 456.2 ) $ 1,060.1
During the three month period ended March 31, 2024, the Company and H&G segment identified a triggering event for our Rejuvenate® tradename attributable to a loss of a key distribution expansion opportunity resulting in a significant shift in the projected distribution strategy that reduced the anticipated near-term sales opportunities and expectations, resulting in the recognition of a $ 39.0 million impairment on the indefinite lived intangible asset.
During the six month period ended March 31, 2024, the Company and the HPC segment identified a triggering event attributable to a change in brand strategy for a non-core tradename, resulting in recognition of a $ 4.0 million impairment on the indefinite intangible assets.
Amortization expense from the intangible assets for the three month periods ended March 31, 2024 and April 2, 2023 was $ 11.1 million and $ 10.5 million, respectively; and for the six month periods ended March 31, 2024 and April 2, 2023 was $ 22.2 million and $ 20.9 million, respectively.
Excluding the impact of any future acquisitions, dispositions or changes in foreign currency, the Company estimates annual amortization expense of intangible assets for the next five fiscal years will be as follows:
(in millions) Amortization
2024 $ 44.4
2025 41.3
2026 39.7
2027 39.7
2028 37.9
NOTE 8 – DEBT
Debt with external lenders consists of the following:
March 31, 2024 September 30, 2023
(in millions) Amount Rate Amount Rate
Spectrum Brands Inc. ("SBI")
4.00 % Notes, due October 1, 2026
$ 458.5 4.0 % $ 448.8 4.0 %
5.00 % Notes, due October 1, 2029
289.1 5.0 % 297.2 5.0 %
5.50 % Notes, due July 15, 2030
155.7 5.5 % 288.5 5.5 %
3.875 % Notes, due March 15, 2031
413.7 3.9 % 453.0 3.9 %
Obligations under finance leases 83.5 5.3 % 86.4 5.3 %
Total Spectrum Brands, Inc. debt 1,400.5 1,573.9
Debt issuance costs ( 17.1 ) ( 18.4 )
Less current portion ( 9.0 ) ( 8.6 )
Long-term debt, net of current portion $ 1,374.4 $ 1,546.9
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SPECTRUM BRANDS HOLDINGS, INC.
SB/RH HOLDINGS, LLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, unaudited)
NOTE 8 - DEBT (continued)
Credit Agreement
On October 19, 2023, SBI and SB/RH entered into the Second Amended and Restated Credit Agreement (the “Credit Agreement”), by and among the Company, SB/RH Holdings, Royal Bank of Canada, as the administrative agent, and the lenders party thereto from time to time. The proceeds of the Credit Agreement will be used for working capital needs and other general corporate purposes. The Credit Agreement refinanced the Company’s previous credit agreement and includes certain modified terms from the previous Credit Agreement, including extending the maturity to October 19, 2028, and the reduction of the Revolver Facility to $ 500.0 million (with a U.S. dollar tranche and a multicurrency tranche). The Credit Agreement contains customary affirmative and negative covenants, including, but not limited to, restrictions on SBI and its restricted subsidiaries' ability to incur indebtedness, create liens, make investments, pay dividends or make certain other distributions, and merge or consolidate or sell assets, in each case subject to certain expectations set forth in the Credit Agreement.
The aggregate commitment amount with respect to (a) the U.S. dollar tranche of the Revolving Facility is $ 400 million and (b) the multi-currency tranche of the Revolving Facility is $ 100 million. The commitment fee rate is equal to 0.20 % of the unused commitments under the Revolving Facility (which may be increased to a maximum rate equal to 0.40 % based on certain total net leverage ratios specified in the Credit Agreement).
All outstanding amounts under the U.S. dollar tranche (if funded in U.S. dollars) will bear interest, at the option of the Company, at a rate per annum equal to (x) Term SOFR, plus a margin ranging between 1.00 % to 2.00 % per annum (based on certain total net leverage ratios specified in the Credit Agreement) or (y) the Alternate Base Rate (as defined in the Credit Agreement), plus a margin ranging between 0.00 % to 1.00 % per annum (based on certain total net leverage ratios specified in the Credit Agreement).
The multi-currency tranche (if funded in Euros) will bear interest at a rate per annum equal to the EURIBOR Rate, plus a margin ranging between 1.00 % to 2.00 % per annum (based on certain total net leverage ratios specified in the Credit Agreement). The multi-currency tranche (if funded in Canadian dollars) will bear interest, at the option of the Company, at a rate per annum equal to (x) Term CORRA (Canadian Overnight Repo Rate Average), plus a margin ranging between 1.00 % to 2.00 % per annum (based on certain total net leverage ratios specified in the Credit Agreement) or (y) the Canadian Prime Rate, plus a margin ranging between 0.00 % to 1.00 % per annum (based on certain total net leverage ratios specified in the Credit Agreement). The multi-currency tranche (if funded in Pounds Sterling) will bear interest at a rate per annum equal to the SONIA, plus a margin ranging between 1.00 % to 2.00 % per annum (based on certain total net leverage ratios specified in the Credit Agreement).
During the six month period ended March 31, 2024, the Company incurred $ 4.0 million in fees in connection with the closing of the Credit Agreement, with $ 3.2 million in fees capitalized and amortized as debt issuance costs over the term of the Credit Agreement. As of March 31, 2024, the Company's Revolver Facility has a borrowing availability of $ 490.3 million, net of outstanding letters of credit of $ 9.7 million.
Debt Repurchase
During the six month period ended March 31, 2024, the Company repurchased Senior Notes on the open market, at a discount, which are ultimately retired upon receipt. The repurchase of the Company's debt obligations are treated as an extinguishment, with any realized discount recognized as a gain from debt repurchase on the Company's Condensed Consolidated Statements of Income, net any write-off of related deferred financing costs. For the six month period ended March 31, 2024, the Company repurchased $ 180.1 million of outstanding Senior Notes, consisting of $ 8.1 million of the 5.00 % Senior Notes due October 1, 2029, $ 132.8 million of the 5.50 % Senior Notes due July 15, 2030, and $ 39.2 million of the 3.875 % Senior Notes, due March 15, 2031. As a result of repurchasing outstanding debt notes during the six month period ended March 31, 2024, there was a gain of $ 4.7 million related to realized gain on the settlement of the obligations recorded, net write-off from associated deferred issuance costs.
NOTE 9 – DERIVATIVES
Derivative financial instruments are used by the Company principally in the management of its foreign currency exchange rates. The Company does not hold or issue derivative financial instruments for trading purposes.
Cash Flow Hedges
The Company periodically enters into forward foreign exchange contracts to hedge a portion of the risk from forecasted foreign currency denominated third party and intercompany sales or payments. These obligations generally require the Company to exchange foreign currencies for Australian Dollars, Canadian Dollars, Euros, Japanese Yen, Mexican Pesos, Pound Sterling, or U.S. Dollars. These foreign exchange contracts are cash flow hedges of fluctuating foreign exchange related to inventory purchases or the sale of product. Until the purchase or sale is recognized, the fair value of the related hedge is recorded in Accumulated Other Comprehensive Income ("AOCI") and as a derivative hedge asset or liability, as applicable. At the time the sale or purchase is recognized, the fair value of the related hedge is reclassified as an adjustment to purchase price variance in Cost of Goods Sold or Net Sales on the Condensed Consolidated Statements of Income. At March 31, 2024, the Company had a series of foreign exchange derivative contracts outstanding through September 2025. The derivative net loss estimated to be reclassified from AOCI into earnings over the next 12 months is $ 4.1 million, net of tax. At March 31, 2024 and September 30, 2023, the Company had foreign exchange derivative contracts designated as cash flow hedges with a notional value of $ 324.8 million and $ 320.2 million, respectively.
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SPECTRUM BRANDS HOLDINGS, INC.
SB/RH HOLDINGS, LLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, unaudited)
NOTE 9 – DERIVATIVES (continued)
The following table summarizes the impact of designated cash flow hedges and the pre-tax gain (loss) recognized in the Condensed Consolidated Statements of Income for the three and six month periods ended March 31, 2024 and April 2, 2023, respectively:
Unrealized Gain (Loss) in OCI Before Reclassification Reclassified Gain (Loss) to Continuing Operations
For the three month periods ended (in millions)
March 31, 2024 April 2, 2023 Line Item March 31, 2024 April 2, 2023
Foreign exchange contracts $ — $ 0.1 Net sales $ 0.1 $ —
Foreign exchange contracts 1.4 ( 7.5 ) Cost of goods sold ( 4.9 ) ( 4.9 )
Total $ 1.4 $ ( 7.4 ) $ ( 4.8 ) $ ( 4.9 )
Unrealized Gain (Loss) in OCI Before Reclassification Reclassified Gain (Loss) to Continuing Operations
For the six month periods ended (in millions)
March 31, 2024 April 2, 2023 Line Item March 31, 2024 April 2, 2023
Foreign exchange contracts $ — $ 0.1 Net sales $ 0.1 $ 0.1
Foreign exchange contracts ( 9.2 ) ( 33.2 ) Cost of goods sold ( 10.0 ) ( 2.5 )
Total $ ( 9.2 ) $ ( 33.1 ) $ ( 9.9 ) $ ( 2.4 )
Derivative Contracts Not Designated as Hedges for Accounting Purposes
The Company periodically enters into foreign exchange forward contracts to economically hedge a portion of the risk from third party and intercompany payments resulting from existing obligations. These obligations generally require the Company to exchange foreign currencies for, among others, Canadian Dollars, Colombian Peso, Euros, Hungarian Forint, Czech Koruna, Japanese Yen, Mexican Pesos, Pounds Sterling, Singapore Dollar, Swiss Franc, Turkish Lira, or U.S. Dollars. These foreign exchange contracts are fair value hedges of a related liability or asset recorded in the accompanying Condensed Consolidated Statements of Financial Position. The gain or loss on the derivative hedge contracts is recorded in earnings as an offset to the change in value of the related liability or asset at each period end. At March 31, 2024, the Company had a series of forward exchange contracts outstanding through April 2024. At March 31, 2024 and September 30, 2023, the Company had $ 690.8 million and $ 671.5 million, respectively, of notional value of such foreign exchange derivative contracts outstanding.
The following summarizes the gain (loss) realized from derivative instruments not designated as hedges for accounting purposes on the accompanying Condensed Consolidated Statements of Income for the three and six month periods ended March 31, 2024 and April 2, 2023, pre-tax:
Three Month Periods Ended Six Month Periods Ended
(in millions) Line Item March 31, 2024 April 2, 2023 March 31, 2024 April 2, 2023
Foreign exchange contracts Other non-operating expense, net $ 5.5 $ ( 0.1 ) $ ( 7.6 ) $ ( 22.3 )
Fair Value of Derivative Instruments
The fair value of the Company’s outstanding derivative contracts recorded in the Condensed Consolidated Statements of Financial Position is as follows:
(in millions) Line Item March 31, 2024 September 30, 2023
Derivative Assets
Foreign exchange contracts – designated as hedge Other receivables $ 0.8 $ 1.4
Foreign exchange contracts – designated as hedge Deferred charges and other 0.1 0.1
Foreign exchange contracts – not designated as hedge Other receivables 2.5 1.8
Total Derivative Assets $ 3.4 $ 3.3
Derivative Liabilities
Foreign exchange contracts – designated as hedge Accounts payable $ 6.4 $ 8.1
Foreign exchange contracts – designated as hedge Other long term liabilities 0.4 —
Foreign exchange contracts – not designated as hedge Accounts payable 11.0 0.9
Total Derivative Liabilities $ 17.8 $ 9.0
The Company is exposed to the risk of default by the counterparties with which it transacts and generally does not require collateral or other security to support financial instruments subject to credit risk. The Company monitors counterparty credit risk on an individual basis by periodically assessing each counterparty’s credit rating exposure. The maximum loss due to credit risk equals the fair value of the gross asset derivatives that are concentrated with certain domestic and foreign financial institution counterparties. The Company considers these exposures when measuring its credit reserve on its derivative assets, which were not significant as of March 31, 2024.
The Company’s standard contracts do not contain credit risk related contingent features whereby the Company would be required to post additional cash collateral because of a credit event. However, the Company is typically required to post collateral in the normal course of business to offset its liability positions. As of March 31, 2024 and September 30, 2023, there was no cash collateral outstanding and no posted standby letters of credit related to such liability positions.
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SPECTRUM BRANDS HOLDINGS, INC.
SB/RH HOLDINGS, LLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, unaudited)
NOTE 9 – DERIVATIVES (continued)
Net Investment Hedge
Spectrum Brands, Inc. has € 425.0 million aggregate principal amount of 4.00 % Notes designated as a non-derivative economic hedge, or net investment hedge, of the translation of the Company’s net investments in Euro denominated subsidiaries at the time of issuance. The hedge effectiveness is measured on the beginning balance of the net investment and re-designated every three months. Any gains and losses attributable to the translation of the Euro denominated debt designated as net investment hedge are recognized as a component of foreign currency translation within AOCI, and gains and losses attributable to the translation of the undesignated portion are recognized as foreign currency translation gains or losses within Other Non-Operating Expense (Income). Net gains or losses from the net investment hedge are reclassified from AOCI into earnings upon a liquidation event or deconsolidation of Euro denominated subsidiaries. As of March 31, 2024, the full principal amount was designated as a net investment hedge and considered fully effective. The following summarizes the unrealized gain (loss) from the net investment hedge recognized in Other Comprehensive Income for the three and six month periods ended March 31, 2024 and April 2, 2023, pre-tax:
Three Month Periods Ended Six Month Periods Ended
Unrealized Gain (Loss) in OCI (in millions) March 31, 2024 April 2, 2023 March 31, 2024 April 2, 2023
Net investment hedge $ 11.6 $ ( 12.5 ) $ ( 9.7 ) $ ( 46.4 )
NOTE 10 – FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has not changed the valuation techniques used in measuring the fair value of any financial assets and liabilities during the year. The carrying value and estimated fair value of financial instruments as of March 31, 2024 and September 30, 2023 according to the fair value hierarchy are as follows:
March 31, 2024 September 30, 2023
(in millions) Level 1 Level 2 Level 3 Fair Value Carrying
Amount Level 1 Level 2 Level 3 Fair Value Carrying
Amount
Derivative Assets $ — $ 3.4 $ — $ 3.4 $ 3.4 $ — $ 3.3 $ — $ 3.3 $ 3.3
Derivative Liabilities — 17.8 — 17.8 17.8 — 9.0 — 9.0 9.0
Debt — 1,368.1 — 1,368.1 1,383.4 — 1,418.6 — 1,418.6 1,555.5
The fair value measurements of the Company’s debt represent non-active market exchanged traded securities which are valued at quoted input prices that are directly observable or indirectly observable through corroboration with observable market data (Level 2). The Company's derivative instruments are valued on a recurring basis using internal models, which are based on market observable inputs, including both forward and spot prices for currencies, which are generally based on quoted or observed market prices (Level 2). See Note 8 – Debt for additional detail on outstanding debt. See Note 9 – Derivatives for additional detail on derivative assets and liabilities.
The carrying values of goodwill, intangible assets and other long-lived assets are tested annually or more frequently if an event occurs that indicates an impairment loss may have been incurred, using fair value measurements with unobservable inputs (Level 3). See Note 7 - Goodwill and Intangible Assets for additional detail.
The carrying values of cash and cash equivalents, short term investments, receivables, accounts payable and short term debt approximate fair value based on the short-term nature of these assets and liabilities.
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SPECTRUM BRANDS HOLDINGS, INC.
SB/RH HOLDINGS, LLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, unaudited)
NOTE 11 – SHAREHOLDERS' EQUITY
Share Repurchases
The following summarizes the activity of common stock repurchases for the three and six month periods ended March 31, 2024. There was no repurchase activity for the three and six month periods ended April 2, 2023.
March 31, 2024
Three Month Periods Ended
(in millions except per share data)
Number of
Shares
Repurchased
Average
Price
Per Share
Amount
Open Market Purchases 1.2 $ 80.62 $ 97.6
March 31, 2024
Six Month Periods Ended (in millions except per share data) Number of
Shares
Repurchased Average
Price
Per Share Amount
Open Market Purchases 4.5 $ 75.41 $ 340.5
ASR 1.3 65.84 83.2
Total Purchases 5.8 73.32 $ 423.7
During the six month period ended March 31, 2024, SBH entered into a $ 200.0 million rule 10b5-1 repurchase plan to facilitate daily market share repurchases through November 15, 2024, until the cap is reached or until the plan is terminated. As of March 31, 2024, there has been $ 108.7 million repurchased pursuant to the 10b5-1 repurchase plan.
On June 20, 2023, the Company entered into an accelerated share repurchase agreement (the “ASR Agreement”) with a third-party financial institution to repurchase an aggregate of $ 500.0 million of the Company’s common stock, par value $ 0.01 per share. The Company funded the share repurchases under the ASR Agreement, which are being made pursuant to the Company’s new $ 1.0 billion share repurchase program, with cash on-hand following the closing of the sale of the Company’s HHI segment. Pursuant to the agreement, the Company paid $ 500.0 million to the financial institution at inception of the agreement and took delivery of 5.3 million shares, which represented 80 % of the total shares the company expected to receive based on the market price at the time of the initial delivery. The transaction was accounted for as an equity transaction. The fair value of the initial shares received of $ 400.0 million were recorded as a treasury stock transaction, with the remainder of $ 100.0 million recorded as a reduction to additional paid-in capital. Upon initial receipt of the shares, there was an immediate reduction in the weighted average common shares calculation for basic and diluted earnings per share. On November 21, 2023, the Company closed and settled the ASR resulting in an additional delivery of 1.3 million shares, with a fair value of $ 83.2 million. The total number of shares repurchased under the ASR program was 6.6 million at an average cost per share of $ 75.67 , based on the volume-weighted average share price of the Company’s common stock during the calculation period of the ASR program, less the applicable contractual discount.
NOTE 12 – SHARE BASED COMPENSATION
The following is a summary of share based compensation expense included in Selling, General & Administrative on the Company's Condensed Consolidated Statements of Income for the three and six month periods ended March 31, 2024 and April 2, 2023 for SBH and SB/RH, respectively.
Three Month Periods Ended Six Month Periods Ended
(in millions) March 31, 2024 April 2, 2023 March 31, 2024 April 2, 2023
SBH $ 4.5 $ 4.5 $ 8.4 $ 7.7
SB/RH 4.1 4.0 7.8 7.1
The Company recognizes share based compensation expense from the issuance of Restricted Stock Units (“RSUs”), primarily under its Long-Term Incentive Plan ("LTIP"). RSUs granted under the LTIP include time-based grants and performance-based grants. The Company regularly issues annual RSU grants under its LTIP during the first quarter of the fiscal year. Compensation cost is based on the fair value of the awards, as determined by the market price of the Company’s shares of common stock on the designated grant date and recognized on a straight-line basis over the requisite service period of the awards. Time-based RSU awards provide for either three year cliff vesting or graded vesting depending upon the vesting conditions and forfeitures provided by the grant. Performance-based RSU awards are dependent upon achieving specified financial metrics (adjusted EBITDA, return on adjusted equity, and/or adjusted free cash flow) by the end of the three year vesting period. The Company assesses the probability of achievement of the performance conditions and recognizes expense for the awards based on the probable achievement of such metrics. Additionally, the Company regularly issues individual RSU awards under its equity plan to its Board members and individual employees for recognition, incentive, or retention purposes, when needed, which are primarily conditional upon time-based service conditions, valued based on the fair value of the awards as determined by the market price of the Company's share of common stock on the designated grant price date and recognized as a component of share-based compensation on a straight-line basis over the requisite service period of the award. RSUs are subject to forfeiture if employment terminates prior to vesting with forfeitures recognized as they occur. RSUs have dividend equivalents credited to the recipient and are paid only to the extent the RSU vests and the related stock is issued. Shares issued upon exercise of RSUs are sourced from treasury shares when available.
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SPECTRUM BRANDS HOLDINGS, INC.
SB/RH HOLDINGS, LLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, unaudited)
NOTE 12 – SHARE BASED COMPENSATION (continued)
The following is a summary of RSU grants issued during the six month period ended March 31, 2024:
SBH SB/RH
(in millions, except per share data) Units Weighted
Average
Grant Date
Fair Value Fair
Value
at Grant
Date Units Weighted
Average
Grant Date
Fair Value Fair
Value
at Grant
Date
Time-based grants
Vesting in less than 12 months 0.05 $ 66.80 $ 3.6 0.03 $ 67.17 $ 2.2
Vesting in more than 12 months 0.15 66.73 9.8 0.15 66.73 9.8
Total time-based grants 0.20 66.75 13.4 0.18 66.81 12.0
Performance-based grants 0.24 66.90 16.1 0.24 66.90 16.1
Total grants 0.44 66.83 $ 29.5 0.42 66.86 $ 28.1
NOTE 13 – ACCUMULATED OTHER COMPREHENSIVE INCOME
The change in the components of AOCI for the six month period ended March 31, 2024, was as follows:
(in millions) Foreign Currency Translation Derivative Instruments Defined Benefit Pension Total
Balance at September 30, 2023
$ ( 216.1 ) $ 1.4 $ ( 34.7 ) $ ( 249.4 )
Other comprehensive income (loss) before reclassification 15.4 ( 10.6 ) ( 1.1 ) 3.7
Net reclassification for loss to income from continuing operations — 5.1 0.2 5.3
Other comprehensive income (loss) before tax 15.4 ( 5.5 ) ( 0.9 ) 9.0
Deferred tax effect 5.6 1.5 0.2 7.3
Other comprehensive income (loss), net of tax 21.0 ( 4.0 ) ( 0.7 ) 16.3
Less: other comprehensive income from continuing operations attributable to non-controlling interest 0.1 — — 0.1
Other comprehensive income (loss) attributable to controlling interest 20.9 ( 4.0 ) ( 0.7 ) 16.2
Balance at December 31, 2023 ( 195.2 ) ( 2.6 ) ( 35.4 ) ( 233.2 )
Other comprehensive (loss) income before reclassification ( 0.4 ) 1.4 0.3 1.3
Net reclassification for loss to income from continuing operations — 4.8 0.2 5.0
Other comprehensive (loss) income before tax ( 0.4 ) 6.2 0.5 6.3
Deferred tax effect ( 2.9 ) ( 1.6 ) 0.1 ( 4.4 )
Other comprehensive (loss) income , net of tax ( 3.3 ) 4.6 0.6 1.9
Less: other comprehensive loss from continuing operations attributable to non-controlling interest ( 0.1 ) — — ( 0.1 )
Other comprehensive (loss) income attributable to controlling interest ( 3.2 ) 4.6 0.6 2.0
Balance at March 31, 2024 $ ( 198.4 ) $ 2.0 $ ( 34.8 ) $ ( 231.2 )
The following table presents reclassifications of the gain (loss) on the Condensed Consolidated Statements of Income from AOCI for the periods indicated:
(in millions) Three Month Period Ended March 31, 2024 Six Month Period Ended March 31, 2024
Derivative Instruments Defined Benefit Pension Total Derivative Instruments Defined Benefit Pension Total
Net Sales $ 0.1 $ — $ 0.1 $ 0.1 $ — $ 0.1
Cost of goods sold ( 4.9 ) — ( 4.9 ) ( 10.0 ) — ( 10.0 )
Other non-operating expense (income), net — ( 0.2 ) ( 0.2 ) — ( 0.4 ) ( 0.4 )
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SPECTRUM BRANDS HOLDINGS, INC.
SB/RH HOLDINGS, LLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, unaudited)
NOTE 13 – ACCUMULATED OTHER COMPREHENSIVE INCOME (continued)
The change in the components of AOCI for the six month period ended April 2, 2023, was as follows:
(in millions) Foreign Currency Translation Derivative Instruments Defined Benefit Pension Total
Balance at September 30, 2022
$ ( 285.9 ) $ 16.8 $ ( 34.0 ) $ ( 303.1 )
Other comprehensive income (loss) before reclassification 26.6 ( 25.4 ) ( 2.3 ) ( 1.1 )
Net reclassification for (gain) loss to income from continuing operations — ( 2.5 ) 0.9 ( 1.6 )
Other comprehensive income (loss) before tax 26.6 ( 27.9 ) ( 1.4 ) ( 2.7 )
Deferred tax effect 8.8 7.2 1.2 17.2
Other comprehensive income (loss), net of tax 35.4 ( 20.7 ) ( 0.2 ) 14.5
Less: other comprehensive income from continuing operations attributable to non-controlling interest 0.2 — — 0.2
Less: other comprehensive income from discontinued operations attributable to non-controlling interest 0.1 — — 0.1
Other comprehensive income (loss) attributable to controlling interest 35.1 ( 20.7 ) ( 0.2 ) 14.2
Balance at January 1, 2023 ( 250.8 ) ( 3.9 ) ( 34.2 ) ( 288.9 )
Other comprehensive income (loss) before reclassification 14.6 ( 7.1 ) 0.1 7.6
Net reclassification for loss (gain) to income from continuing operations — 4.9 ( 0.7 ) 4.2
Net reclassification for gain to income from discontinued operations — ( 0.1 ) — ( 0.1 )
Other comprehensive income (loss) before tax 14.6 ( 2.3 ) ( 0.6 ) 11.7
Deferred tax effect 3.7 0.7 0.1 4.5
Other comprehensive income (loss), net of tax 18.3 ( 1.6 ) ( 0.5 ) 16.2
Less: other comprehensive income from continuing operations attributable to non-controlling interest 0.1 — — 0.1
Less: other comprehensive income from discontinued operations attributable to non-controlling interest 0.1 — — 0.1
Other comprehensive income (loss) attributable to controlling interest 18.1 ( 1.6 ) ( 0.5 ) 16.0
Balance at April 2, 2023 $ ( 232.7 ) $ ( 5.5 ) $ ( 34.7 ) $ ( 272.9 )
The following table presents reclassifications of the gain (loss) on the Condensed Consolidated Statements of Income from AOCI for the periods indicated:
(in millions) Three Month Period Ended April 2, 2023 Six Month Period Ended April 2, 2023
Derivative Instruments Defined Benefit Pension Total Derivative Instruments Defined Benefit Pension Total
Net Sales $ — $ — $ — $ 0.1 $ — $ 0.1
Cost of goods sold ( 4.9 ) — ( 4.9 ) ( 2.5 ) — ( 2.5 )
Other non-operating expense (income), net — 0.7 0.7 — ( 0.2 ) ( 0.2 )
Income from discontinued operations, net of tax 0.1 — 0.1 0.1 — 0.1
NOTE 14 – INCOME TAXES
The effective tax rate for the three and six month periods ended March 31, 2024 and April 2, 2023, was as follows:
Three Month Periods Ended Six Month Periods Ended
Effective tax rate March 31, 2024 April 2, 2023 March 31, 2024 April 2, 2023
SBH 33.8 % 31.7 % 36.0 % 29.0 %
SB/RH 33.7 % 31.2 % 35.5 % 28.7 %
The estimated annual effective tax rate applied to the three and six month periods ended March 31, 2024, differs from the US federal statutory rate of 21 % principally due to income earned outside the U.S. that is subject to U.S. tax, including the U.S. tax on global intangible low taxed income (“GILTI”), state income taxes, and certain nondeductible expenses. The Company is projecting a U.S. net operating loss ("NOL") for Fiscal 2024, which does not allow it to take advantage of the foreign-derived intangible income deduction or foreign tax credits on its GILTI income. The Company’s federal effective tax rate on GILTI was therefore 21 %.
As of March 31, 2024 and September 30, 2023, there was $ 88.7 million and $ 77.8 million of U.S. federal income taxes receivable from its parent company on the SB/RH Condensed Consolidated Statements of Financial Position, calculated as if SB/RH were a separate taxpayer.
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SPECTRUM BRANDS HOLDINGS, INC.
SB/RH HOLDINGS, LLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, unaudited)
NOTE 15 – COMMITMENTS AND CONTINGENCIES
The Company is a defendant in various litigation matters generally arising out of the ordinary course of business. Based on information currently available, the Company does not believe that any additional matters or proceedings presently pending will have a material adverse effect on its results of operations, financial condition, liquidity or cash flows.
Environmental Liability. The Company has realized commitments attributable to environmental remediation activities primarily associated with former manufacturing sites of the Company's HPC segment. In coordination with local and federal regulatory agencies, we have conducted testing on certain sites, which have resulted in the identification of contamination that has been attributed to historical activities at the properties, resulting in the realization of incremental costs to be assumed by the Company towards the remediation of these properties and the recognition of an environmental remediation liability. We have not conducted invasive testing at all sites and locations and have identified an environmental remediation liability to the extent such remediation requirements have been identified and are considered estimable.
As of March 31, 2024, there was an environmental remediation liability of $ 4.9 million, with $ 1.1 million included in Other Current Liabilities and $ 3.8 million included in Other Long-Term Liabilities on the Condensed Consolidated Statements of Financial Position. As of September 30, 2023, there was an environmental remediation liability of $ 5.4 million, with $ 1.5 million included in Other Current Liabilities and $ 3.9 million included in Other Long-Term Liabilities on the Condensed Consolidated Statements of Financial Position. The Company believes that any additional liability in excess of the amounts provided that may result from resolution of these matters will not have a material adverse effect on the consolidated financial condition, results of operations, or cash flows of the Company.
Product Liability. The Company may be named as a defendant in lawsuits involving product liability claims. The Company has recorded and maintains an estimated liability in the amount of management’s estimate for aggregate exposure for such liabilities based upon probable loss from loss reports, individual cases, and losses incurred but not reported. As of March 31, 2024 and September 30, 2023, the Company recognized $ 2.6 million and $ 3.0 million, respectively, in product liability, included in Other Current Liabilities on the Condensed Consolidated Statements of Financial Position. The Company believes that any additional liability in excess of the amounts provided that may result from resolution of these matters will not have a material adverse effect on the consolidated financial condition, results of operations or cash flows of the Company.
Product Warranty . The Company recognizes an estimated liability for standard warranties on certain products when we recognize revenue on the sale of the warranted products. Estimated warranty costs incorporate replacement parts, products and delivery, and are recorded as a cost of goods sold at the time of product shipment based on historical and projected warranty claim rates, claims experience and any additional anticipated future costs on previously sold products. The Company recognized $ 0.2 million and $ 0.3 million of warranty accruals as of March 31, 2024 and September 30, 2023, included in Other Current Liabilities on the Condensed Consolidated Statements of Financial Position.
Product Safety Recalls. During the years ended September 30, 2022 and 2023, the Company and its HPC segment initiated voluntary product safety recalls in collaboration with the U.S. Consumer Product Safety Commission (" CPSC") for specific products, suspending sales of the affected products and issuing a stop sale with its customers. The Company has assessed the incremental costs attributable to the recall, including the anticipated returns of retail inventory from customers, write-off of affected inventory, and other costs to facilitate the recall such as notification, shipping and handling, consumer refunds, and rework and destruction of affected products, as needed, and evaluated the probability of redemption. Certain products were remediated through the issuance of replacement parts and did not require a full recall of the affected product, with costs included to facilitate the remediation, rework and related shipping and handling. During the three month period ended March 31, 2024, the Company was required by the CPSC to reissue a recall that was previously remediated through the issuance of a replacement part in accordance with previously agreed-up remediation plans with the CPSC, expanding the requirements to issue a complete recall of the affected product. As a result, the reissued recall resulted in the recognition of incremental costs and reserves to address inventory returns from customers, write-off of the affected inventory, consumer refunds and other costs to facilitate the reissued recall. As a result, the Company recognized $ 6.2 million and $ 6.0 million as of March 31, 2024 and September 30, 2023, respectively, in Other Current Liabilities on the Consolidated Statement of Financial Position associated with the estimated costs for the recalls. Additionally, for certain products affected by the recalls, the Company has indemnification provisions that are contractually provided by third parties for the affected products and as a result the Company has also recognized $ 6.7 million and $ 7.1 million as of March 31, 2024 and September 30, 2023, respectively, in Other Receivables on the Condensed Consolidated Statement of Financial Position related to recovery from such indemnification provisions.
Representation and Warranty Insurance Proceeds. On February 18, 2022, the Company acquired all of the membership interests in HPC Brands, LLC, which consist of the home appliances and cookware business of Tristar Products, Inc. (the "Tristar Business") pursuant to a Membership Interest Purchase agreement dated February 3, 2022 (the "Acquisition Agreement"). During the year ended September 30, 2023, the Company submitted a claim under its representation and warranty insurance policies, seeking coverage for losses resulting from breaches of certain representations and warranties in the Acquisition Agreement. During the three and six month periods ended March 31, 2024, the Company recognized a gain of $ 65.0 million on the Condensed Consolidated Statement of Income attributable to insurance proceeds received from its representation and warranty insurance policies. As of March 31, 2024, the Company has recognized cash receipts of $ 50.0 million associated with the insurance proceeds and $ 15.0 million as Other Receivables on the Condensed Statement of Financial Position based on the settlement agreement for the remaining portion which was received in April 2024.
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SPECTRUM BRANDS HOLDINGS, INC.
SB/RH HOLDINGS, LLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, unaudited)
NOTE 16 – SEGMENT INFORMATION
Net sales relating to the segments for the three and six month periods ended March 31, 2024 and April 2, 2023, are as follows:
Three Month Periods Ended Six Month Periods Ended
(in millions) March 31, 2024 April 2, 2023 March 31, 2024 April 2, 2023
GPC $ 289.9 $ 296.7 $ 566.8 $ 574.3
H&G
160.7 153.3 232.7 224.6
HPC 267.9 279.2 611.2 643.6
Net sales $ 718.5 $ 729.2 $ 1,410.7 $ 1,442.5
The Chief Operating Decision Maker of the Company uses Adjusted EBITDA as the primary operating metric in evaluating the business and making operating decisions. EBITDA is calculated by excluding the Company’s income tax expense, interest expense, depreciation expense and amortization expense (from intangible assets) from net income. Adjusted EBITDA further excludes
• Share based compensation costs consist of costs associated with long-term incentive compensation arrangements that generally consist of non-cash, stock-based compensation. See Note 12 – Share Based Compensation for further details;
• Incremental project costs associated with strategic transactions, restructuring and optimization initiatives including, but not limited to, the acquisition or divestitures of a business, costs to effect and facilitate a transaction, including such cost to integrate or separate the respective business, development and implementation of strategies to optimize operations, reduce costs, increase revenues, improve profit margins, including recognition of one-time exit or disposal costs. These amounts are excluded from our performance metrics as they are reflective of incremental investment by the Company towards strategic initiatives and business development activities. Incremental costs directly attributable to such initiatives are not considered recurring or reflective of the continuing ongoing operations of the consolidated group or segments. Refer to the Strategic transactions, restructuring and optimization initiatives discussion within the Overview section, included elsewhere in this Quarterly Report, for further discussion;
• Non-cash purchase accounting adjustments recognized in earnings from continuing operations subsequent to an acquisition, including, but not limited to, the costs attributable to the step-up in inventory value, and the incremental value in operating lease assets with below market rent, among others. During the three and six month periods ended March 31, 2024 and April 2, 2023, the Company recognized non-cash expense due to the incremental value recognized as part of the Tristar Business acquisition on right of use operating leases with below market rent;
• Non-cash asset impairments or write-offs realized and recognized in earnings from continuing operations, including impairments from property, plant and equipment, operating and finance leases, and goodwill and other intangible assets, when applicable. During the three and six month period ended March 31, 2024, the Company recognized impairments of its Rejuvenate® and a non-core HPC tradename indefinite lived intangible assets, along with an impairment charge on a right of use operating lease asset associated with an HPC facility that was exited prior to end of its term. See Note 7 - Goodwill and Intangibles, for further details. During the three and six month period ended April 2, 2023, the Company recognized impairment of indefinite lived intangible assets for its Rejuvenate® and PowerXL® indefinite lived tradenames, along with an impairment on idle equipment associated with the early exit of a GPC warehouse lease and impairments on right of use operating lease assets associated with GPC and HPC facilities that were exited prior to the end of their term;
• Gain realized from proceeds received on the representation and warranties insurance policies associated with the Tristar Business acquisition. Refer to Note 15 - Commitment and Contingencies in the Notes to the Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for further details;
• Incremental reserves for non-recurring litigation or environmental remediation activity attributable to significant and unusual nonrecurring matters with no previous history or precedent. During the three and six month periods ended March 31, 2024, such costs were directly attributable to legal costs incurred for the proceeds received from the representation and warranties insurance policies associated with the Tristar Business acquisition. Refer to Note 15 - Commitment and Contingencies for further details;
• Non-cash gain realized from the repurchase of debt obligations at a discount, net deferred financing costs, during the three and six month periods ended March 31, 2024;
• Incremental costs associated with the recognition of product recall costs incurred by the HPC segment in collaboration with the CPSC, initiated at the end of the year ended September 30 2022 and during the year ended September 30, 2023, resulting in the accrual and recognition of incremental costs for the recall, product returns from customers, write-off of inventory on hand, and other costs such as notification, shipping and handling, rework and destruction of affected products, and consumer refunds, as needed. Such costs are not recurring and directly attributable to the recall event, excluding all other costs associated with product warranty and returns. During the three month period ended March 31, 2024, the Company was required by the CPSC to reissue a previously issued recall to provide a cash refund to customers, resulting in the recognition of incremental costs and reserves See Note 15 - Commitments and Contingencies for further details;
• Unallocated shared costs reflect the costs associated with certain shared and center-led administrative functions such as information technology, human resources, finance and accounting, supply chain and commercial operations, supporting the HHI business during the period the Company owned and operated the business through the close of the HHI divestiture on June 20, 2023. Such costs are excluded from income from discontinued operations as they are not a direct cost of the discontinued business but a result of indirect allocations in accordance of US GAAP, but reflected as part of income from continuing operations for all periods presented, and requiring retroactive adjustment for all periods presented. HHI was previously a segment of the consolidated group and was excluded from the consolidated Adjusted EBITDA since being recognized as discontinued operations. As a result, for all periods in which HHI was owned and operated by the Company, including comparable periods requiring retroactive adjustment, the adjustment is recognized to reconcile net income from continuing operations to Adjusted EBITDA of the remaining segments of the consolidated group. With the close of the HHI divestiture on June 20, 2023, there is no adjustment recognized as such shared costs are mitigated through income from TSAs during the transition period post-separation, with subsequent restructuring initiatives to rightsize extraneous costs. See Note 2 – Divestitures in Notes to the Condensed Consolidated Financial Statements, included elsewhere in this Quarterly Report for further details;
• Non-cash gain from the remeasurement in the contingent consideration liability associated with the Tristar Business acquisition during the six month period ended March 31, 2023;
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SPECTRUM BRANDS HOLDINGS, INC.
SB/RH HOLDINGS, LLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, unaudited)
NOTE 16 - SEGMENT INFORMATION (continued)
• For the three and six month periods ended April 2, 2023, the impact from the early settlement of foreign currency cash flow hedges during the year ended September 30, 2022, resulting in assumed losses at the original stated maturities of foreign currency cash flow hedges in our EMEA region that were settled early due to changes in the Company's legal entity organizational structure and forecasted purchasing strategy of HPC finished goods inventory within the region, resulting in excluded gains intended to mitigate costs during the year ending September 30, 2023; and
• Other adjustments are attributable to: (1) key executive severance and other one-time compensatory costs; and (2) non-recurring unusual insurable losses, including any the receipt of insurance proceeds or recovery realized.
Segment Adjusted EBITDA for the reportable segments for SBH for the three and six month periods ended March 31, 2024 and April 2, 2023, are as follows:
Three Month Periods Ended Six Month Periods Ended
(in millions)
March 31, 2024 April 2, 2023 March 31, 2024 April 2, 2023
GPC $ 62.3 $ 46.3 $ 115.1 $ 83.5
H&G 29.2 15.1 28.5 12.8
HPC 17.8 ( 1.9 ) 44.5 11.3
Total segment adjusted EBITDA 109.3 59.5 188.1 107.6
Corporate ( 3.0 ) 8.5 ( 8.5 ) 16.8
Interest expense 16.9 31.6 36.1 65.0
Depreciation 14.3 11.9 28.8 24.1
Amortization 11.1 10.5 22.2 20.9
Share based compensation 4.5 4.5 8.4 7.7
HHI divestiture and separation costs 0.8 1.4 2.1 2.9
HPC separation initiatives 2.8 1.1 3.1 3.5
Tristar integration — 4.0 — 9.7
Fiscal 2023 and 2022 restructuring 0.4 4.6 0.9 5.1
Global ERP transformation 3.9 3.3 6.9 4.9
Russia closing initiative — ( 0.1 ) — 2.8
Other project costs 0.1 6.5 0.1 11.9
Non-cash purchase accounting adjustments 0.5 0.5 0.9 0.9
Impairment of equipment and operating lease assets 0.5 4.2 0.5 4.5
Impairment of intangible assets 39.0 67.0 43.0 67.0
Representation and warranty insurance proceeds ( 65.0 ) — ( 65.0 ) —
Legal and environmental 0.3 — 1.5 —
Gain from debt repurchase — — ( 4.7 ) —
HPC product recall 6.7 1.6 6.0 1.9
Unallocated shared costs — 6.3 — 12.5
Early settlement of foreign currency cash flow hedges — 1.3 — 3.9
Gain from remeasurement of contingent consideration liability — — — ( 1.5 )
Other 0.1 0.6 0.5 5.0
Income (loss) from continuing operations before income taxes $ 75.4 $ ( 109.8 ) $ 105.3 $ ( 161.9 )
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SPECTRUM BRANDS HOLDINGS, INC.
SB/RH HOLDINGS, LLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, unaudited)
NOTE 16 - SEGMENT INFORMATION (continued)
Segment Adjusted EBITDA for reportable segments for SB/RH for the three and six month periods ended March 31, 2024 and April 2, 2023, are as follows:
Three Month Periods Ended Six Month Periods Ended
(in millions)
March 31, 2024 April 2, 2023 March 31, 2024 April 2, 2023
GPC $ 62.3 $ 46.3 $ 115.1 $ 83.5
H&G 29.2 15.1 28.5 12.8
HPC 17.8 ( 1.9 ) 44.5 11.3
Total segment adjusted EBITDA 109.3 59.5 188.1 107.6
Corporate ( 3.2 ) 8.3 ( 9.0 ) 16.7
Interest expense 16.9 31.7 36.1 65.1
Depreciation 14.3 11.9 28.8 24.1
Amortization 11.1 10.5 22.2 20.9
Share based compensation 4.1 4.0 7.8 7.1
HHI divestiture and separation costs 0.8 1.4 2.1 2.9
HPC separation initiatives 2.8 1.1 3.1 3.5
Tristar integration — 4.0 — 9.7
Fiscal 2023 and 2022 restructuring 0.4 4.6 0.9 5.1
Global ERP transformation 3.9 3.3 6.9 4.9
Russia closing initiative — ( 0.1 ) — 2.8
Other project costs 0.1 6.5 0.1 11.9
Non-cash purchase accounting adjustments 0.5 0.5 0.9 0.9
Impairment of equipment and operating lease assets 0.5 4.2 0.5 4.5
Impairment of intangible assets 39.0 67.0 43.0 67.0
Representation and warranty insurance proceeds ( 65.0 ) — ( 65.0 ) —
Legal and environmental 0.3 — 1.5 —
Gain from debt repurchase — — ( 4.7 ) —
HPC product recall 6.7 1.6 6.0 1.9
Unallocated shared costs — 6.3 — 12.5
Early settlement of foreign currency cash flow hedges — 1.3 — 3.9
Gain from remeasurement of contingent consideration liability — — — ( 1.5 )
Other 0.1 0.6 0.6 5.0
Income (loss) from continuing operations before income taxes $ 76.0 $ ( 109.2 ) $ 106.3 $ ( 161.3 )
NOTE 17 – EARNINGS PER SHARE – SBH
The reconciliation of the numerator and denominator of the basic and diluted earnings per share calculation and the anti-dilutive shares for the three and six month periods ended March 31, 2024 and April 2, 2023, are as follows:
Three Month Periods Ended Six Month Periods Ended
(in millions, except per share amounts)
March 31, 2024 April 2, 2023 March 31, 2024 April 2, 2023
Numerator
Net income (loss) from continuing operations attributable to controlling interest $ 50.1 $ ( 75.1 ) $ 67.5 $ ( 115.3 )
Income from discontinued operations attributable to controlling interest, net of tax 11.0 21.4 22.7 40.7
Net income (loss) attributable to controlling interest $ 61.1 $ ( 53.7 ) $ 90.2 $ ( 74.6 )
Denominator
Weighted average shares outstanding – basic 30.2 41.0 32.1 40.9
Dilutive shares 0.2 — 0.1 —
Weighted average shares outstanding – diluted 30.4 41.0 32.2 40.9
Earnings per share
Basic earnings per share from continuing operations $ 1.66 $ ( 1.83 ) $ 2.10 $ ( 2.82 )
Basic earnings per share from discontinued operations 0.37 0.52 0.71 1.00
Basic earnings per share $ 2.03 $ ( 1.31 ) $ 2.81 $ ( 1.82 )
Diluted earnings per share from continuing operations $ 1.65 $ ( 1.83 ) $ 2.09 $ ( 2.82 )
Diluted earnings per share from discontinued operations 0.36 0.52 0.71 1.00
Diluted earnings per share $ 2.01 $ ( 1.31 ) $ 2.80 $ ( 1.82 )
Weighted average number of anti-dilutive shares excluded from denominator — 0.1 — 0.1
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SPECTRUM BRANDS HOLDINGS, INC.
SB/RH HOLDINGS, LLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, unaudited)
NOTE 18 – SUBSEQUENT EVENT
In May 2024, the Company and its HPC segment entered into a new trademark license agreement (the "License Agreement") with SBD which terminates the previous arrangement, with an effective date of January 1, 2024. Pursuant to the License Agreement, the Company will license the B+D brand in North America, Latin America (excluding Brazil) and the Caribbean for four categories of household appliance: beverage products, food preparation products, garment care products and cooking products. The License Agreement has an initial four-year term ending December 31, 2027, with two subsequent four-year renewal rights each based upon meeting certain sales targets at the end of each renewal period, extending the total contract term to December 31, 2035. The License Agreement does not renew if these targets are not satisfied. Under the terms of the License Agreement, the Company agrees to pay SBD royalties based on a percentage of sales, with a minimum annual royalty payment of $ 11.7 million for the first year in the initial term, with decreases in subsequent years in the initial term down to $ 10.2 million and is subject to adjustment with each renewal period. The License Agreement also requires us to comply with maximum annual returns rates for products and promotional spending commitments, See Note 3 - Revenue Recognition for further detail on revenue concentration from B+D products.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.