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Item 9A. Controls and Procedures

2024-11-15 compared with 2023-11-21 · 736 added, 1284 removed, 1475 unchanged (58% of the section changed)

CONTROLS AND PROCEDURES

Spectrum Brands Holdings, Inc.

Evaluation of Disclosure Controls and Procedures.

An evaluation was performed under the supervision and participation of SBH’s management, including the Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of SBH’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act), as of September 30, 2023.

Based on that evaluation, SBH’s management, including the Principal Executive Officer and Principal Financial Officer, concluded that as of September 30, 2023, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in this Annual Report on Form 10-K was reported within the time periods specified by SEC rules and regulations, and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding the required disclosures.

Notwithstanding the foregoing, there can be no assurance that SBH's controls and procedures will detect or uncover all failures of persons within SBH to disclose material information otherwise required to be set forth in SBH's periodic reports.

There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and circumvention or overriding of the controls and procedures.

Accordingly, even effective disclosure controls and procedures can only provide reasonable, not absolute, assurance of achieving their control objectives.

Management’s Annual Report on Internal Control over Financial Reporting .

SBH’s management is responsible for establishing and maintaining adequate internal control over financial reporting for SBH, as such term is defined in Exchange Act Rule 13a-15(f).

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Internal control over financial reporting includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of SBH’s assets;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only with proper authorizations;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of SBH’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

These inherent limitations are an intrinsic part of the financial reporting process.

Therefore, although SBH's management is unable to eliminate this risk, it is possible to develop safeguards to reduce it.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

SBH’s management, under the oversight of the principal executive and principal financial officers, and Board of Directors, conducted an assessment of the effectiveness of our internal control over financial reporting based upon the framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013) (COSO 2013 Framework).

Based on this assessment, management has concluded that its internal control over financial reporting was effective as of September 30, 2023 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S.

SBH's internal control over financial reporting as of September 30, 2023 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in its attestation report, which is included herein.

Changes in Internal Control Over Financial Reporting .

The Company is in the process of implementing a new global enterprise resource planning ("ERP") system, which will replace our existing operating and financial systems which will be implemented over the next several years.

The implementation began with the pilot deployment in the fourth quarter of fiscal year 2023 and was limited to our GPC operations in Canada and Noblesville, Indiana.

The implementation in other locations will continue over subsequent years.

As the project continues, the Company continues to emphasize the maintenance of effective internal controls and assessment of the design and operating effectiveness of key control activities throughout development and deployment of each phase.

Except as described above, there have been no changes in SBH's internal control over financial reporting (as defined in Rules 13a15(f) and 15d-15(f) under the Securities Exchange Act of 1934 as amended) that occurred during our fiscal fourth quarter that has materially affected, or is reasonably likely to materially affect, SBH's internal control over financial reporting.

SB/RH Holdings, LLC

Evaluation of Disclosure Controls and Procedures.

An evaluation was performed under the supervision and participation of SB/RH’s management, including the Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of SB/RH’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act), as of September 30, 2023.

Based on that evaluation, SB/RH’s management, including the Principal Executive Officer and Principal Financial Officer, concluded that as of September 30, 2023 our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in this Annual Report on Form 10-K was reported within the time periods specified by SEC rules and regulations, and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding the required disclosures.

Notwithstanding the foregoing, there can be no assurance that SB/RH's controls and procedures will detect or uncover all failures of persons within SB/RH to disclose material information otherwise required to be set forth in SB/RH's periodic reports.

An evaluation was performed under the supervision and participation of the Company’s management, including the Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act), as of September 30, 2024.

Based on that evaluation, the Company’s management, including the Principal Executive Officer and Principal Financial Officer, concluded that as of September 30, 2024, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in this Annual Report on Form 10-K was reported within the time periods specified by SEC rules and regulations, and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding the required disclosures.

Notwithstanding the foregoing, there can be no assurance that the Company's controls and procedures will detect or uncover all failures of persons within the Company to disclose material information otherwise required to be set forth in the Company's periodic reports.

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Management’s Annual Report on Internal Control over Financial Reporting .

SB/RH’s management is responsible for establishing and maintaining adequate internal control over financial reporting for SB/RH, as such term is defined in Exchange Act Rule 13a-15(f).

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company, as such term is defined in Exchange Act Rule 13a-15(f).

Internal control over financial reporting includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of SB/RH’s assets;

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of SB/RH’s assets that could have a material effect on the financial statements.

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

These inherent limitations are an intrinsic part of the financial reporting process.

Therefore, although SB/RH's management is unable to eliminate this risk, it is possible to develop safeguards to reduce it.

Therefore, although the Company's management is unable to eliminate this risk, it is possible to develop safeguards to reduce it.

SB/RH’s management, under the oversight of the principal executive and principal financial officers, and Board of Directors, conducted an assessment of the effectiveness of our internal control over financial reporting based upon the framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013) (COSO 2013 Framework).

The Company’s management, under the oversight of the principal executive and principal financial officers, and Board of Directors, conducted an assessment of the effectiveness of our internal control over financial reporting based upon the framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013) (COSO 2013 Framework).

Based on this assessment, management has concluded that its internal control over financial reporting was effective as of September 30, 2024, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S.

The Company's internal control over financial reporting as of September 30, 2024, has been audited by KPMG LLP, an independent registered public accounting firm, as stated in its attestation report, which is included herein.

Changes in Internal Control Over Financial Reporting .

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Except as described above, there have been no changes in SB/RH's internal control over financial reporting (as defined in Rules 13a15(f) and 15d-15(f) under the Securities Exchange Act of 1934 as amended) that occurred during our fiscal fourth quarter that has materially affected, or is reasonably likely to materially affect, SB/RH's internal control over financial reporting.

Except as described above, there have been no changes in the Company's internal control over financial reporting (as defined in Rules 13a15(f) and 15d-15(f) under the Securities Exchange Act of 1934 as amended) that occurred during our fiscal fourth quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

OTHER INFORMATION

During the three month period ended September 30, 2024, none of our officers or directors adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1” trading agreement.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by Item 401 of Regulation S-K concerning the directors and executive officers of SBH is incorporated herein by reference to the disclosures which will be included in in a subsequent amendment to the Form 10-K, which will be filed no later than 120 days after the end of the SBH’s fiscal year ended September 30, 2023.

The information required by Items 401 and Item 407(c)(3) of Regulation S-K concerning the directors and executive officers of the Company is incorporated herein by reference to the disclosures which will be included in a subsequent amendment to the Form 10-K, which will be filed no later than 120 days after the end of the Company’s fiscal year ended September 30, 2024.

Audit Committee and Audit Committee Financial Expert

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The Spectrum Brands Code of Business Conduct and Ethics is publicly available on our website at www.spectrumbrands.com under “Investor Relations—Corporate Governance.” Any amendments to this code of ethics or any waiver of this code of ethics for executive officers or directors may be made only by our Board of Directors as a whole or our Audit Committee and will be promptly disclosed to our shareholders via that section of our website.

Insider Trading Policy

The information required by Item 408(b) of Regulation S-K is incorporated herein by reference from the disclosure which will be included in a subsequent amendment to the Form 10-K.

We have adopted the Securities Holding and Trading Policy for Spectrum Brands Holdings, Inc.

governing the purchase, sale and/or other dispositions of our securities by our directors, officers, employees or us, that we believe is reasonably designed to promote compliance with insider trading laws, rules and regulations and the listing standards of the New York Stock Exchange.

The foregoing summary of the Securities Holding and Trading Policy does not purport to be complete and is qualified in its entirety by reference to the full text of the Securities Holding and Trading Policy attached to this Annual Report as Exhibit 19.1 and incorporated herein by reference.

EXECUTIVE COMPENSATION

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Ownership of Common Shares of Spectrum Brands Holdings, Inc.

The information required by Item 404 of Regulation S-K is incorporated herein by reference from the disclosures which will be included in a subsequent amendment to the Form 10-K.

The information required by Items 201(d) and 403 of Regulation S-K are incorporated herein by reference from the disclosures which will be included in a subsequent amendment to the Form 10-K.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

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Total $ 8.7 $ 8.4

In the above table, in accordance with the SEC’s definition and rules, “Audit Fees” are fees paid to KPMG LLP for professional services for the audits of SBH and SB/RH, and our consolidated financial statements included in our Form 10-K and the review of our financial statements included in Forms 10-Q, or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements, such as issuance of comfort letters and statutory audits required for certain of our foreign subsidiaries.

In the above table, in accordance with the SEC’s definition and rules, “Audit Fees” are fees paid to KPMG LLP for professional services for the audits of the Company, and our consolidated financial statements included in our Form 10-K and the review of our financial statements included in Forms 10-Q, or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements, such as issuance of comfort letters and statutory audits required for certain of our foreign subsidiaries.

“Audit-Related Fees” are fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements, including the due diligence activities relating to mergers and acquisitions and the audit of standalone carve-out financial statements as required.

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The financial statements of Spectrum Brands Holdings, Inc.

and SB/RH Holdings, LLC listed in the Index to Consolidated Financial Statements, filed as part of this Annual Report on Form 10-K.

listed in the Index to Consolidated Financial Statements, filed as part of this Annual Report on Form 10-K.

The exhibits listed in the Exhibit Index filed as part of this Annual Report on Form 10-K.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

This report is a combined report of Spectrum Brands Holdings, Inc.

(“SBH”) and SB/RH Holdings, LLC (“SB/RH”).

The notes to the consolidated financial statements include consolidated SBH footnotes and certain footnotes related to SB/RH.

Reports of Independent Registered Public Accounting Firm (PCAOB ID 185 )

Spectrum Brands Holdings, Inc.

Consolidated Financial Statements

Consolidated Statements of Financial Position

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Consolidated Statements of Cash Flows

SB/RH Holdings, LLC Consolidated Financial Statements

Consolidated Statements of Financial Position

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

Consolidated Statements of Shareholder’s Equity

Consolidated Statements of Cash Flows

Spectrum Brands Holdings, Inc.

and SB/RH Holdings, LLC Combined

Combined Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Assessment of goodwill impairment for the Home and Personal Care (HPC) reporting unit

As discussed in Note 2 to the consolidated financial statements, the Company assesses goodwill for impairment on an annual basis for each reporting unit and more frequently if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value.

If the carrying value of the reporting unit is more likely than not greater than the fair value of the reporting unit, a quantitative assessment is performed to determine the reporting unit fair value and measure the impairment.

The fair value of the HPC reporting unit was estimated using an income approach and a market approach.

The income approach is a discounted cash flow methodology which required estimation of future revenues, expenses, and capital expenditures and assumptions about the weighted average cost of capital and perpetuity growth rate.

The market approach is a guideline public company method that assessed the value of the reporting unit based upon market multiples derived from financial results of selected comparable companies.

As discussed in Note 11, the Company recorded an impairment charge of $111.1 million related to the HPC reporting unit for the year ended September 30, 2023

We identified the assessment of goodwill impairment in the HPC reporting unit as a critical audit matter.

Our evaluation of certain assumptions used in the income approach, specifically the determination of (1) the discrete and long-term revenue growth rates used to estimate future revenues and (2) the discount rate, required a high degree of auditor judgment as they were based on subjective determinations of future market and economic conditions.

Changes to these assumptions could have had a significant effect on the Company's assessment of the fair value of the reporting unit and the amount of impairment recorded.

Additionally, the audit effort associated with the evaluation of the long-term growth rate and discount rate required specialized skill and knowledge.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over the goodwill impairment assessment process, including controls over the determination of discrete and long-term revenue growth rates and the discount rate.

We evaluated the Company's discrete revenue growth rate for the HPC reporting unit by comparing such rate to the Company's historical revenue growth rates and industry analyst reports.

In addition, we involved valuation professionals with specialized skill and knowledge, who assisted in evaluating the Company's selection of the long-term revenue growth rate and discount rate by:

• comparing the long-term revenue growth rate to long-term economic growth expectations using publicly available third-party data

• comparing the discount rate determined by the Company to a discount rate range that was independently developed using publicly available market data

• performing a sensitivity analysis to assess the impact of possible changes to the discount rate.

Assessment of impairment of the Rejuvenate and PowerXL tradenames

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of the Rejuvenate Tradename

As discussed in Note 2 to the consolidated financial statements, the Company assesses indefinite lived intangible assets for impairment at least annually.

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As discussed in Note 10, the indefinite lived intangible asset balance, consisting primarily of tradenames, was $749.6 million as of September 30, 2024.

As a result of triggering events that occurred during the year ended September 30, 2023, impairment charges of $56.0 million and $45.0 million were recorded for the Rejuvenate and PowerXL tradenames, respectively.

We identified the assessment of impairment of the Rejuvenate and PowerXL tradenames as a critical audit matter.

A high degree of challenging auditor judgment was required to evaluate the future revenues and discount rates used to estimate the fair value of these tradenames.

Specifically the determination of (1) the discrete and long-term revenue growth rates used to estimate future revenues and (2) the discount rates included subjective determinations of future market and economic conditions.

Changes to these assumptions could have a significant effect on the Company's assessment of the fair value of Rejuvenate and PowerXL tradenames.

In addition, specialized skill and knowledge were needed to evaluate the long-term revenue growth rates and discount rates.

As a result of a triggering event that occurred during the year ended September 30, 2024, an impairment charge of $39 million was recorded for the Rejuvenate tradename.

We identified the valuation of the Rejuvenate tradename as a critical audit matter.

A high degree of challenging auditor judgment was required to evaluate the future revenues and discount rate used to estimate the fair value of the tradename.

Specifically, the determination of (1) the discrete and long-term revenue growth rates used to estimate future revenues and (2) the discount rate included subjective determinations of future market and economic conditions.

Changes to these assumptions could have a significant effect on the Company’s assessment of the fair value of the Rejuvenate tradename.

In addition, specialized skill and knowledge were needed to evaluate the long-term revenue growth rate and discount rate.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Rejuvenate and PowerXL tradename impairment process, including controls over the determination of discrete and long-term revenue growth rates and discount rates.

We evaluated the Company's discrete revenue growth rates by comparing such rates for each tradename to the Company's historical revenue growth rates and industry analyst reports.

We involved valuation professionals with specialized skill and knowledge, who assisted in evaluating the Company's long-term revenue growth rates and discount rates by:

• comparing the long-term revenue growth rates to long-term economic growth expectations using publicly available third-party data

• comparing the discount rates to discount rate ranges that were independently developed using publicly available market data for comparable entities

• performing a sensitivity analysis to assess the impact of possible changes to the discount rates.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Rejuvenate tradename impairment process, including controls over the determination of discrete and long-term revenue growth rates and discount rate.

We evaluated the Company’s discrete revenue growth rate by comparing the rate for the tradename to the Company’s historical revenue growth rate and industry analyst reports.

We involved valuation professionals with specialized skill and knowledge, who assisted in evaluating the Company’s long-term revenue growth rate and discount rate by:

• comparing the long-term revenue growth rate to long-term economic growth expectations using publicly available third-party data

• comparing the discount rate to discount rate ranges that were independently developed using publicly available market data for comparable entities

• performing a sensitivity analysis to assess the impact of possible changes to the discount rate.

We have served as the Company’s auditor since 2011.

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Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

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November 15, 2024

Report of Independent Registered Public Accounting Firm

To the Shareholder and Board of Directors

SB/RH Holdings, LLC:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statements of financial position of SB/RH Holdings, LLC and subsidiaries (the Company) as of September 30, 2023 and 2022, the related consolidated statements of income, comprehensive income, shareholder’s equity, and cash flows for each of the years in the three-year period ended September 30, 2023, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended September 30, 2023, in conformity with U.S.

generally accepted accounting principles.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.