Spectrum Brands Holdings, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Introduction The following is management’s discussion of the financial results, liquidity and other key items related to our performance and should be read in conjunction with the Condensed Consolidated Financial Statements and related notes included in Item 1 of this Quarterly Report on Form 10-Q ("the Quarterly Report") and our Annual Report on Form 10-K for the fiscal year ended September 30, 2024 filed with the SEC on November 15, 2024 (the "2024 Annual Report"). The following discussion may contain forward-looking statements that reflect our plans, estimates, and beliefs and involve risks, uncertainties, and assumptions. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contributed these differences include those discussed within "Forward Looking Statements" included elsewhere in this Quarterly Report, and in Item 1A. Risk Factors and "Forward-Looking Statements" included within our 2024 Annual Report. Unless the context indicates otherwise, the term the "Company," "we," "us," or "our" are used to refer to Spectrum Brands Holdings, Inc. and its subsidiaries collectively. Non-GAAP Measurements Our consolidated and segment results contain non-GAAP metrics such as organic net sales, adjusted EBITDA and adjusted EBITDA margin. While we believe organic net sales and adjusted EBITDA are useful supplemental information, such adjusted results are not intended to replace our financial results in accordance with Accounting Principles Generally Accepted in the United States (“GAAP”) and should be read in conjunction with those GAAP results. Organic Net Sales. We define organic net sales as net sales excluding the effect of changes in foreign currency exchange rates and impact from acquisitions (where applicable). We believe this non-GAAP measure provides useful information to investors because it reflects regional and operating segment performance from our activities without the effect of changes in currency exchange rates and acquisitions. We use organic net sales as one measure to monitor and evaluate our regional and segment performance. Organic growth is calculated by comparing organic net sales to net sales in the prior year. The effect of changes in currency exchange rates is determined by translating the current period net sales using the currency exchange rates that were in effect during the prior comparative period. Net sales are attributed to the geographic regions based on the country of destination. We exclude net sales from acquired businesses in the current year for which there are no comparable sales in the prior period. The following is a reconciliation of reported net sales to organic net sales for the three and six month period ended March 30, 2025 compared to net sales for the three and six month period ended March 31, 2024: Three Month Periods Ended (in millions, except %) March 30, 2025 Net Sales Effect of Changes in Currency Organic Net Sales Net Sales March 31, 2024 Variance GPC $ 269.2 $ 2.4 $ 271.6 $ 289.9 $ (18.3) (6.3) % H&G 152.3 — 152.3 160.7 (8.4) (5.2) % HPC 254.2 7.7 261.9 267.9 (6.0) (2.2) % Total $ 675.7 $ 10.1 $ 685.8 $ 718.5 (32.7) (4.6) % Six Month Periods Ended (in millions, except %) March 30, 2025 Net Sales Effect of Changes in Currency Organic Net Sales Net Sales March 31, 2024 Variance GPC $ 529.2 $ 1.6 $ 530.8 $ 566.8 $ (36.0) (6.4) % H&G 244.4 — 244.4 232.7 11.7 5.0 % HPC 602.3 13.6 615.9 611.2 4.7 0.8 % Total $ 1,375.9 $ 15.2 $ 1,391.1 $ 1,410.7 (19.6) (1.4) % Adjusted EBITDA and Adjusted EBITDA Margin. Adjusted EBITDA and adjusted EBITDA margin are non-GAAP metrics used by management, which we believe are useful to investors to measure the operational strength and performance of our business. These metrics provide investors additional information about our operating profitability for certain non-cash items, non-routine items we do not expect to continue at the same level in the future, as well as other items not core to our continuing operations. By providing these measures, together with a reconciliation of the most directly comparable GAAP measure, we believe we are enhancing investors' understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives, as securities analysts and other interested parties use such calculations as a measure of financial performance and debt service capabilities, and they are regularly used by management and our board of directors for internal purposes in evaluating our business performance, making budgeting decisions, and comparing our performance against other peer companies using similar measures. They facilitate comparisons between peer companies since interest, taxes, depreciation, and amortization can differ greatly between organizations as a result of differing capital structures and tax strategies. Adjusted EBITDA is also used for determining compliance with the Company’s debt covenants. 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 also excludes certain non-cash adjustments including share based compensation (see Note 11 - Share Based Compensation in the Notes to the Condensed Consolidated Financial Statements for further detail); impairment charges on property, plant and equipment, right of use lease assets, and goodwill and other intangible assets, (See Note 5- Property, Plant and Equipment and Note 6 - Goodwill and Intangible Assets in the Notes to the Condensed Consolidated Financial Statements for further detail, as applicable); gain or loss from the early extinguishment of debt through the repurchase or early redemption of debt (See Note 7 - Debt in the Notes to the Condensed Consolidated Financial Statements for further detail, as applicable); and purchase accounting adjustments recognized in income subsequent to an acquisition attributable to the step-up in value on assets acquired, including, but not limited to, inventory or lease assets. Additionally, the Company will further recognize adjustments from adjusted EBITDA for other costs, gains and losses that are considered significant, non-recurring, or otherwise not supporting the continuing operations and revenue generating activity of the segment or Company, including but not limited to, exit and disposal activities, or incremental costs associated with strategic transactions, restructuring and optimization initiatives such as the acquisition or divestiture of a business, related integration or separation costs, or the development and implementation of strategies to optimize or restructure the Company and its operations. Adjusted EBITDA margin is adjusted EBITDA as a percentage of reported net sales. 22 Table of Contents The following is a reconciliation of Net Income From Continuing Operations to Adjusted EBITDA and Adjusted EBITDA margin for the three and six month periods ended March 30, 2025 and March 31, 2024. Three Month Periods Ended Six Month Periods Ended (in millions, except %) March 30, 2025 March 31, 2024 March 30, 2025 March 31, 2024 Net income from continuing operations $ 1.8 $ 49.9 $ 26.4 $ 67.4 Income tax expense 9.6 25.5 21.4 37.9 Interest expense 7.5 16.9 13.7 36.1 Depreciation 14.0 14.3 28.0 28.8 Amortization 10.5 11.1 21.0 22.2 Share based compensation 5.2 4.5 9.9 8.4 Non-cash impairment charges 15.7 39.5 15.7 43.5 Non-cash purchase accounting adjustments — 0.5 — 0.9 Gain from early extinguishment of debt — — — (4.7) Exit and disposal costs 3.5 0.7 4.0 1.0 HHI separation costs 1 0.3 0.8 1.1 2.1 HPC separation initiatives 1 (0.3) 2.8 1.0 3.1 Global ERP transformation 1 2.3 3.9 4.8 6.9 HPC product recall 2 — 6.7 — 6.0 Representation and warranty insurance proceeds 3 — (65.0) — (65.0) Litigation costs 4 0.8 0.2 1.6 1.5 Other 5 0.4 — 0.5 0.5 Adjusted EBITDA $ 71.3 $ 112.3 $ 149.1 $ 196.6 Net sales $ 675.7 $ 718.5 $ 1,375.9 $ 1,410.7 Net income from continuing operations margin 0.3 % 6.9 % 1.9 % 4.8 % Adjusted EBITDA margin 10.6 % 15.6 % 10.8 % 13.9 % ________________________________________ 1 Incremental costs associated with strategic transactions, restructuring and optimization initiatives, including, but not limited to, the acquisition or divestiture of a business, related integration or separation costs, or the development and implementation of strategies to optimize or restructure operations. Refer to Strategic Transactions, Restructuring and Optimization Initiatives discussion within the Business Overview section for further detail. 2 Incremental net costs from product recalls in the HPC segment. See Note 14 - Commitments and Contingencies in the Notes to the Condensed Consolidated Financial Statements for further detail. 3 Gain from the receipt of insurance proceeds on representation and warranty policies during the prior year associated with the Tristar Business acquisition. See Note 14 - Commitments and Contingencies in the Notes to the Condensed Consolidated Financial Statements for further detail. 4 Litigation costs associated with the Tristar Business acquisition. See Note 14 - Commitments and Contingencies in the Notes to the Condensed Consolidated Financial Statements for further detail. 5 Other is attributable to other project costs associated with distribution center transitions and key executive severance and one-time compensatory costs. Overview For additional discussion and overview of the business, please refer to Item 1. Business and Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2024 Annual Report. Recent Developments U.S. Tariffs and Global Macro-Economic Environment The recent changes to U.S. trade policy with the introduction of new U.S. tariffs on imported goods, especially on Chinese imports, are expected to have a significant impact to our operations, increasing costs for sourced products, materials and components, and thus raising cost of goods sold and pressuring profit margins. To mitigate this, the Company is adjusting prices to pass on some costs to customers, and is actively managing its supply chain and engaging suppliers to support cost sharing or expand supply chain diversification, which can further impact our ability to supply customers timely during periods of such transitions. With the incremental tariffs on Chinese imports announced early April 2025, we have temporarily paused virtually all finished goods imports out of China, The changing tariff policies impact all segments to varying degrees, most significantly with the HPC segment as most all products supporting the U.S. business are imported from southeast Asia, with the majority coming from China. The HPC business is actively pursuing sourcing alternatives and moving production out of China to diversify its supply chain and more effectively manage risk. Over 60% of net sales in the HPC segment are driven through international markets and are not directly impacted by U.S. tariffs. With the temporary pause of Chinese imports, the U.S. business in the HPC segment will be predominantly limited to its current and in-transit inventory in the near term, which will substantially diminish its ability to supply and our ability to meet customer demand until further supply chain alternatives are realized or there are reductions to the existing tariff structure. The GPC business has certain aquatic equipment and chews & treats products that are sourced out of China, but have a higher degree of diversity within their product sourcing with major suppliers outside of China and will allow us to move production more swiftly to alternative supply for the majority of our GPC Chinese sourced products. GPC finished goods imports from China have been temporarily paused and expect the impact from tariffs on sourced products elsewhere other than China will be mitigated primarily through pricing adjustments. GPC also manufactures aquatics nutrition products at its facility in EMEA and imports such products into the U.S. which are also subject to the enacted tariffs which the Company anticipates to mitigate the impact through pricing adjustments and cost management. The H&G segment is predominantly manufactured and sold within the U.S. but will also be impacted, to a lesser degree, with certain affected material costs and a small portfolio of products, such as baits, traps and mops, that are internationally sourced and being evaluated for alternative sourcing strategies. Due to the limited impact on the H&G segment and seasonal supply for its products, the impact from tariffs will not substantially impact near term operating results, with anticipated impacts mitigated through pricing adjustments and vendor cost management. 23 Table of Contents The Company has intensified its focus on operational efficiencies by optimizing production processes, reducing waste, and leveraging technology to enhance productivity, aiming to offset cost increases and protect margins. With the most recent implemented tariff changes, there is an expected impact on operating results and we are closely monitoring impacts to our projections and forecasts. The Company has managed cash flow and secured its balance sheet to support the ongoing business through the evolving changes in U.S. trade policy and potential impacts to the global-macro economic environment. The Company is focused on supply chain diversification, operational efficiency, and strategic investments for sustaining growth and profitability amid ongoing trade uncertainties. Strategic transactions, restructuring and optimization initiatives The Company periodically evaluates and enters into strategic transactions that may result in the acquisition or divestiture of a business which impacts the comparability of the financial results of the consolidated group and or segments. Additionally, we develop and enter into restructuring and optimization initiatives to improve efficiencies and utilization to reduce costs, increase revenues and improve margins, which may have a significant impact on the comparability of financial results on the condensed consolidated financial statements. These changes and updates are inherently difficult and our ability to achieve the anticipated cost savings and other benefits from such operating strategies may be affected by a number of other macro-economic factors, or inflation and increased interest rates, many of which are beyond our control. Moreover, the comparability of financial information may be impacted by incremental amounts attributable to such strategic transactions, restructuring and optimization initiatives. The following is a summary of costs attributable to strategic transactions and business development costs that are considered as potentially having a significant impact on the comparability of the financial results on the consolidated financial statements and segment financial information, for the respective projects during the three and six month periods ended March 30, 2025 and March 31, 2024: Three month periods ended Six Month Periods Ended (in millions) March 30, 2025 March 31, 2024 March 30, 2025 March 31, 2024 HHI separation costs 1 $ 0.3 $ 0.8 $ 1.1 $ 2.1 HPC separation initiatives 2 (0.3) 2.8 1.0 3.1 Global ERP transformation 3 2.3 3.9 4.8 6.9 Other project costs 4 0.3 — 0.5 — Total $ 2.6 $ 7.5 $ 7.4 $ 12.1 Reported as: Selling, general & administrative $ 2.6 $ 7.5 $ 7.4 $ 12.1 ________________________________________ 1 Costs attributable to the HHI divestiture consisting of subsequent costs to facilitate separation and transition of systems and processes subject to transition services agreements (“TSAs”). Costs are expected to be incurred through the transition period of up to 24 months following the close of the transaction in June 2023 as the Company exits TSAs. 2 Costs attributable to efforts to facilitate a strategic separation of the HPC segment either through a spin, merger or sale, consisting of legal and professional fees to facilitate transaction opportunities and diligence, consult on tax and compliance implications, legal entity restructurings, system and process segregation, carve-out financials and the confidential filing of a Form 10 registration statement in July 2024. Costs are expected to be incurred until a transaction is realized. 3 Costs attributable to a multi-year transformation project to upgrade and implement our enterprise-wide operating systems to SAP S/4 HANA on a global basis, including project management and professional services for planning, design, and business process review that do not qualify as software configuration and implementation costs recognized as capital expenditures or deferred costs under applicable accounting principles. Costs are anticipated to be incurred through various deployments through calendar year 2025. 4 Other project costs are attributable to distribution center transitions. Exit and Disposal Activity The Company periodically recognizes exit and disposal costs primarily consisting of severance and contract termination costs that may be attributable to a reorganization or restructuring of the Company, cost savings initiatives, or in consideration of a recent strategic transaction. Such actions result in the recognition of costs to the Company that are considered incremental and not reflective of the continuing operating costs of the business and may impact the comparability of the consolidated company and its segments. See Note 2 - Exit and Disposal Activities in the Notes to the Condensed Consolidated Financial Statements for further discussion. Refinancing Activity Financing activity during and between comparable periods may have a significant impact on the comparability of financial results on the condensed consolidated financial statements. • On May 23, 2024, the Company completed its offering of $350.0 million principal amount of 3.375% Exchangeable Senior Notes due June 1, 2029 (the “Exchangeable Notes”), recognizing $11.8 million of fees and expenses which were capitalized as debt issuance costs and will be amortized over the term of the Exchangeable Notes. • Concurrent with the issuance of the Exchangeable Notes, the Company completed a tender offer on the aggregate outstanding principal balance of the 4.00% Senior Notes due 2026 (the “2026 Notes”), the 5.00% Senior Notes due 2029, the 5.50% Senior Notes due 2030, and the 3.875% Senior Notes due 2031 (the “2031 Notes”) (collectively, the “Tendered Notes”) and redeemed the remaining outstanding principal balance of the 2026 Notes, resulting in the reduction of the principal debt balance of $1,174.4 million and recognition of a loss on early extinguishment of $2.2 million during the third quarter of the prior year. • During the year ended September 30, 2024, the Company repurchased outstanding bonds in the open market at a discount resulting in the recognition of a gain on extinguishment of $4.7 million in the six month period ended March 31, 2024. 24 Table of Contents Consolidated Results of Operations The following is summarized consolidated results of operations for the three and six month periods ended March 30, 2025 and March 31, 2024. (in millions, except %) Three Month Periods Ended Variance Six Month Periods Ended Variance March 30, 2025 March 31, 2024 March 30, 2025 March 31, 2024 Net sales $ 675.7 $ 718.5 $ (42.8) (6.0) % $ 1,375.9 $ 1,410.7 $ (34.8) (2.5) % Gross profit 253.4 273.4 (20.0) (7.3) % 511.2 518.4 (7.2) (1.4) % Selling, general & administrative 218.2 223.5 (5.3) (2.4) % 431.3 439.4 (8.1) (1.8) % Impairment of intangible assets 15.7 39.0 (23.3) (59.7) % 15.7 43.0 (27.3) (63.5) % Representation and warranty insurance proceeds — (65.0) 65.0 n/m — (65.0) 65.0 n/m Interest expense 7.5 16.9 (9.4) (55.6) % 13.7 36.1 (22.4) (62.0) % Interest income (0.4) (17.5) 17.1 n/m (3.0) (40.9) 37.9 n/m Gain from early extinguishment of debt — — — n/m — (4.7) 4.7 n/m Other non-operating expense, net 1.0 1.1 (0.1) (9.1) % 5.7 5.2 (0.1) (9.1) % Income tax expense 9.6 25.5 (15.9) (62.4) % 21.4 37.9 (16.5) (43.5) % Net income from continuing operations 1.8 49.9 (48.1) (96.4) % 26.4 67.4 (41.0) (60.8) % (Loss) income from discontinued operations, net of tax (0.6) 11.0 (11.6) n/m (1.4) 22.7 (24.1) n/m Net income 1.2 60.9 (59.7) (98.0) % 25.0 90.1 (65.1) (72.3) % n/m = not meaningful Net Sales. The following is a summary of net sales by segment for the three and six month periods ended March 30, 2025 and March 31, 2024, and the principal components of changes in net sales between the respective periods. (in millions, except %) Three Month Periods Ended Variance Six Month Periods Ended Variance March 30, 2025 March 31, 2024 March 30, 2025 March 31, 2024 GPC $ 269.2 $ 289.9 $ (20.7) (7.1) % $ 529.2 $ 566.8 $ (37.6) (6.6) % H&G 152.3 160.7 (8.4) (5.2) % 244.4 232.7 11.7 5.0 % HPC 254.2 267.9 (13.7) (5.1) % 602.3 611.2 (8.9) (1.5) % Net Sales $ 675.7 $ 718.5 (42.8) (6.0) % $ 1,375.9 $ 1,410.7 (34.8) (2.5) % Three month periods ended (in millions, except %) GPC H&G HPC Total Amount Percent Amount Percent Amount Percent Amount Percent Volume $ (16.7) (5.8) % $ (9.5) (5.9) % $ (3.4) (1.3) % $ (29.6) (4.1) % Price (1.6) (0.6) % 1.1 0.7 % (2.6) (1.0) % (3.1) (0.4) % Foreign Currency (2.4) (0.8) % — — % (7.7) (2.9) % (10.1) (1.4) % Total $ (20.7) (7.1) % $ (8.4) (5.2) % $ (13.7) (5.1) % $ (42.8) (6.0) % Organic $ (18.3) (6.3) % $ (8.4) (5.2) % $ (6.0) (2.2) % $ (32.7) (4.6) % Six month periods ended (in millions, except %) GPC H&G HPC Total Amount Percent Amount Percent Amount Percent Amount Percent Volume $ (32.3) (5.7) % $ 7.5 3.2 % $ 4.5 0.7 % $ (20.3) (1.4) % Price (3.7) (0.7) % 4.2 1.8 % 0.2 — % 0.7 — % Foreign Currency (1.6) (0.3) % — — % (13.6) (2.2) % (15.2) (1.1) % Total $ (37.6) (6.6) % $ 11.7 5.0 % $ (8.9) (1.5) % $ (34.8) (2.5) % Organic $ (36.0) (6.4) % $ 11.7 5.0 % $ 4.7 0.8 % $ (19.6) (1.4) % Refer to the Segment Financial Data section below for further discussion on net sales results. 25 Table of Contents Gross Profit. The following is a summary of the gross profit and gross profit margin for the three and six month periods ended March 30, 2025 and March 31, 2024, respectively, and the principal factors contributing to the change between the respective periods. Three Month Periods Ended Six Month Periods Ended (in millions, except %) March 30, 2025 March 31, 2024 Variance March 30, 2025 March 31, 2024 Variance Gross profit $ 253.4 $ 273.4 $ (20.0) (7.3) % $ 511.2 $ 518.4 $ (7.2) (1.4) % Gross profit margin 37.5 % 38.1 % (60) bps 37.2 % 36.7 % 50 bps Three Month Period Ended Six Month Periods Ended (in millions, except margin) Gross Profit Margin Gross Profit Margin Price $ (4.4) (40) bps $ (0.5) — bps Mix (9.1) (130) bps (7.3) (60) bps Volume (12.4) (20) bps (9.4) (10) bps Cost changes 3.0 40 bps 3.7 30 bps Product recalls 5.6 80 bps 4.8 30 bps Foreign exchange rates (2.7) 10 bps 1.5 60 bps Total $ (20.0) (60) bps $ (7.2) 50 bps Gross profit for the three month period decreased due to lower sales volumes with a margin decrease from unfavorable mix and higher trade promotions, with cost improvements and prior year recall costs offsetting the expiration of tariff exemptions for certain products and higher freight costs compared to the prior year. Gross profit for the six month period decreased due to lower sales volumes with a margin increase from cost improvements and prior year recall costs with favorable foreign currency translation offset by unfavorable mix. Selling, General & Administrative. The following summarizes the selling, general & administrative costs for the three and six month periods ended March 30, 2025 and March 31, 2024, respectively, including amounts as a percentage of net sales for each respective period. Three month periods ended (in millions, except %) March 30, 2025 % of Net Sales March 31, 2024 % of Net Sales Variance Sales, marketing & advertising $ 79.2 11.7 % $ 76.0 10.6 % $ 3.2 4.2 % Distribution 61.7 9.1 % 64.4 9.0 % (2.7) (4.2) % General & administrative 65.2 9.6 % 68.8 9.6 % (3.6) (5.2) % Research & development 5.9 0.9 % 6.2 0.9 % (0.3) (4.8) % Strategic transaction, restructuring and optimization 6.2 0.9 % 8.1 1.1 % (1.9) (23.5) % Total selling, general & administrative $ 218.2 32.3 % $ 223.5 31.1 % (5.3) (2.4) % Six month periods ended (in millions, except %) March 30, 2025 % of Net Sales March 31, 2024 % of Net Sales Variance Sales, marketing & advertising $ 158.6 11.5 % $ 147.9 10.5 % $ 10.7 7.2 % Distribution 121.8 8.9 % 127.7 9.1 % (5.9) (4.6) % General & administrative 127.8 9.3 % 138.9 9.8 % (11.1) (8.0) % Research & development 11.6 0.8 % 11.7 0.8 % (0.1) (0.9) % Strategic transaction, restructuring and optimization 11.5 0.8 % 13.2 0.9 % (1.7) (12.9) % Total selling, general & administrative $ 431.3 31.3 % $ 439.4 31.1 % (8.1) (1.8) % Selling, general & administrative expenses decreased for the three and six month periods due to reduced overhead from cost savings initiatives offset by higher costs on marketing and advertising initiatives. Sales, marketing and advertising costs increased for the three and six month periods due to the Company's investment towards brand focused marketing and advertising initiatives. Distribution costs decreased for the three and six month periods due to cost reduction and optimization in our distribution operations and supply chain. General & administrative costs decreased for the three and six month periods due to lower overhead costs from cost improvement initiatives. Research & development costs were consistent between periods for the three and six month periods. Strategic transaction, restructuring and optimization costs, inclusive of exit & disposal costs, decreased for the three and six month periods due to lower costs towards HPC separation initiatives offset by higher exit and disposal costs within the three month period. See Note 2 - Exit and Disposal Activities in the Notes to the Condensed Consolidated Financial Statements for further discussion. Impairment of Intangible Assets . During three and six month period ended March 30, 2025, the Company recognized an impairment charge on its PowerXL® tradename in response to a triggering event identified during the three month period ended March 30, 2025. See Note 6 - Goodwill and Intangible Assets in the Notes to the Condensed Consolidated Financial Statements for further discussion. During the three and six month period ended March 31, 2024, the Company recognized an impairment on its Rejuvenate® tradename and a non-core strategic tradename in response to a triggering event. Representation and Warranty Insurance Proceeds . During the three and six month period ended March 31, 2024, the Company recognized a non-recurring gain of $65.0 million from its representation and warranty insurance policy associated with the Tristar Business acquisition. See Note 14 - Commitments and Contingencies in the Notes to the Condensed Consolidated Financial Statements for further discussion. There is no comparable activity during the three and six month period ended March 30, 2025. Interest Expense. Interest expense decreased during the three and six month periods due to reduced debt borrowings following previously discussed refinancing activity in the prior year. Interest Income. Interest income decreased during the three and six due to lower balances in term deposits following the use of funds towards previously discussed refinancing activity in the prior year. 26 Table of Contents Gain From Early Extinguishment of Debt. During the six month period ended March 31, 2024, the Company recognized a net gain from extinguishment of debt associated with previously discussed refinancing activity. There was no comparable activity during the three and six month periods ended March 30, 2025. Other Non-Operating Expense, Net. Other non-operating expense is primarily due to changes in foreign currency compared to the prior year. Income Taxes. Our estimated annual effective tax rate was impacted by income earned outside the U.S. that is subject to U.S. tax, including the U.S. tax on global intangible low taxed income, and certain nondeductible expenses. See Note 13 - Income Tax in the Notes to the Condensed Consolidated Financial Statements for further discussion on the effective tax rate for the three and six month periods. Income From Discontinued Operations. Income from discontinued operations primarily reflect changes to indemnifications associated with divested businesses. Loss from discontinued operations during the three and six month periods ended March 31, 2024 were attributable to a tax related indemnification settlement and reduction in previously accrued transaction related costs associated previous divestitures. During the three and six month periods ended March 30, 2025 there were no comparable substantive updates or changes. Noncontrolling Interest. The net income attributable to noncontrolling interest reflects the share of the net income of our subsidiaries, which are not wholly-owned, attributable to the accounting interest. Such amount varies in relation to such a subsidiary’s net income or loss for the period and the percentage interest not owned by the Company. Segment Financial Data Global Pet Care (in millions, except %) Three Month Periods Ended Variance Six Month Periods Ended Variance March 30, 2025 March 31, 2024 March 30, 2025 March 31, 2024 Net sales $ 269.2 $ 289.9 $ (20.7) (7.1) % $ 529.2 $ 566.8 $ (37.6) (6.6) % Adjusted EBITDA 50.0 62.3 (12.3) (19.7) % 101.5 115.1 (13.6) (11.8) % Adjusted EBITDA margin 18.6 % 21.5 % (290) bps 19.2 % 20.3 % (110) bps Net sales for the three month period decreased with an organic net sales decrease of $18.3 million, or 6.3%, excluding an unfavorable foreign currency impact of $2.4 million, from lower North America (“NA”) volumes due to category softness in both companion animal and aquatics product categories as the consumer environment grew increasingly cautious looking for value or lower cost options, especially with premium products of the companion animal portfolio, and slower replenishment within the e-commerce channel due to slower reorder patterns and fulfillment center capacity constraints with an e-commerce retailer that appear normalized by the end of the period. Sales within Europe, Middle East and Africa (“EMEA”) and rest of world were relatively flat, excluding negative impacts from foreign currency with positive volume growth in the companion animal category from expanded distribution of Good Boy® in continental Europe offset by decrease in the aquatics category primarily driven by an unfavorable foreign currency impact. Net sales for the six month period decreased with an organic net sales decrease of $36.0 million, or 6.4%, excluding an unfavorable foreign currency impact of $1.6 million, from lower NA volumes due to category softness and slower replenishment within the e-commerce channel offset by an increase in EMEA volumes with the expansion of the Good Boy® brand and new product introduction with positive Dog and Cat Food product category distribution in e-commerce. Adjusted EBITDA for the three month period decreased with a margin decrease due to the decrease in sales volume, incremental programming and trade spend, unfavorable mix, inflationary cost pressure predominantly on ocean freight and higher brand-focused investments, offset by operational productivity. Adjusted EBITDA for the six month period decreased with a margin decrease due to sales volume decrease, unfavorable mix with increased ocean freight and higher brand-focused investment, offset by operational productivity and cost improvements. Home & Garden (in millions, except %) Three Month Periods Ended Variance Six Month Periods Ended Variance March 30, 2025 March 31, 2024 March 30, 2025 March 31, 2024 Net sales $ 152.3 $ 160.7 $ (8.4) (5.2) % $ 244.4 $ 232.7 $ 11.7 5.0 % Adjusted EBITDA 26.7 29.2 (2.5) (8.6) % 36.0 28.5 7.5 26.3 % Adjusted EBITDA margin 17.5 % 18.2 % (70) bps 14.7 % 12.2 % 250 bps Net sales and organic net sales for the three month period decreased due to decreased volume with earlier seasonal inventory build up with retailers in the prior quarter, primarily with Controls products, pull forward of sales into prior quarter in anticipation of the S4/Hana ERP implementation in January 2025, and decline in the Cleaning category from prior year distribution losses, partially offset by incremental volume from new distribution and placement of Repellent and Household pest control products. Net sales and organic net sales for the six month period increased with the build up of seasonal inventory for expected seasonal demand with retailers, improved placement and retail display strategy, primarily within our Controls and Repellent product categories, plus an increase in sales of Household pest control products from a relatively warmer fall season extending retailer and consumer demand at the beginning of the fiscal year. Adjusted EBITDA for the three month period decreased with a margin decrease due to lower sales volumes, increased investment in brand-building advertising, unfavorable mix and some inflationary cost pressures within the period, partially offset by cost improvements. Adjusted EBITDA for the six month period increased with a margin increase from higher volumes and favorable trade variances and cost improvements offset by an increase in brand-focused advertising and some inflation. Home and Personal Care (in millions, except %) Three Month Periods Ended Variance Six Month Periods Ended Variance March 30, 2025 March 31, 2024 March 30, 2025 March 31, 2024 Net sales $ 254.2 $ 267.9 $ (13.7) (5.1) % $ 602.3 $ 611.2 $ (8.9) (1.5) % Adjusted EBITDA 7.3 17.8 (10.5) (59.0) % 34.0 44.5 (10.5) (23.6) % Adjusted EBITDA margin 2.9 % 6.6 % (370) bps 5.6 % 7.3 % (170) bps Net sales for the three month period decreased with an organic net sales decrease of $6.0 million, or 2.2%, excluding an unfavorable foreign currency impact of $7.7 million primarily from NA sales volumes decreasing for both home appliance and personal care product categories due to lower category demand and retailer reorder patterns as consumer confidence levels impacted overall category sales. EMEA sales remained flat excluding negative foreign currency, with positive volumes in personal care offset by negative volumes in home appliances with European consumer confidence becoming more cautious in the current geopolitical environment and reduced home appliance category placement opportunities with certain grocery retailers. Net sales were benefited by continued growth in LATAM markets for both product categories with new product listings and market expansion. Net sales for the six month period decreased with volume decrease in NA for both product categories offset by volume growth in EMEA through e-commerce and new product listings, plus LATAM growth through new product listings and distribution wins. Adjusted EBITDA for the three month period decreased with a margin decrease from lower sales volumes, higher trade spend and programming, unfavorable mix with inflationary cost pressures in ocean freight and the expiration of tariff exclusions on certain products, offset by cost improvements and savings initiatives, lower brand-focused investments and foreign currency. Adjusted EBITDA for the six month period decreased from lower sales volumes, higher trade spend and programming, unfavorable mix with higher costs towards brand-focused investment and inflationary cost pressures in ocean freight and expiration of tariff exclusions on certain products, offset by cost improvements and savings initiatives. Liquidity and Capital Resources The following is a summary of cash flow from continuing operations for the six month periods ended March 30, 2025 and March 31, 2024, respectively. (in millions) March 30, 2025 March 31, 2024 Operating activities $ (48.6) $ 80.7 Investing activities (15.2) 544.1 Financing activities (195.0) (553.8) Cash Flows from Operating Activities Cash flows from operating activities used by continuing operations decreased $129.3 million, due to increased cash flow used in working capital, primarily attributable to inventory build up in H&G, lower interest income and the recognition of $50 million of cash receipts in the prior year from representation and warranty insurance proceeds associated with the Tristar Business, offset by lower spending on strategic transaction, restructuring and optimization initiatives and lower cash interest. Cash Flows from Investing Activities Cash flows from investing activities for continuing operations decreased $559.3 million due to the decreased short term investment activity from the reduction of term deposits following previously discussed funding of refinancing activity in the prior year. Cash Flows from Financing Activities Cash flows from financing activities used by continuing operations increased $358.8 million primarily from lower debt repayment and share repurchases activity. During the six month periods ended March 30, 2025 and March 31, 2024, the Company made cash dividend payments of $25.3 million, or $0.47 per share, and $26.8 million, or $0.42 per share, respectively, which decreased due to the lower outstanding shares following treasury share repurchase activity. Liquidity Outlook Our ability to generate cash flow from operating activities coupled with our expected ability to access the credit markets, enables us to execute our growth strategies and return value to our shareholders. Our ability to make principal and interest payments on borrowings under our debt agreements and our ability to fund planned capital expenditures will depend on the ability to generate cash in the future, which, to a certain extent, is subject to general economic, financial, competitive, regulatory and other conditions. Based upon our current and anticipated level of operations, existing cash balances, and availability under our credit facility, we expect cash flows from operations to be sufficient to meet our operating and capital expenditure requirements for at least the next 12 months. It is not unusual for our business to experience negative operating cash flow during the first quarter of the fiscal year due to the operating calendar with our customers and the seasonality of our working capital. Additionally, we believe the availability under our credit facility and access to capital markets are sufficient to achieve our longer-term strategic plans. As of March 30, 2025, the Company had a total cash and cash equivalents of $96.0 million and borrowing availability of $408.6 million, net of outstanding letters of credit of $8.4 million, under our credit facility with a total liquidity of $504.6 million. We maintain a capital structure that we believe provides us with sufficient access to credit markets. When combined with strong levels of cash flow from operations, our capital structure has provided the flexibility necessary to pursue strategic growth opportunities and return value to our shareholders. The Company’s access to capital markets and financing costs may depend on the Company’s credit ratings. None of the Company’s current borrowings are subject to default or acceleration as a result of a downgrading of credit ratings, although a downgrade of the Company’s credit ratings could increase fees and interest charges on future borrowings. As of March 30, 2025, we were in compliance with all covenants under the Credit Agreement and the indentures governing the 3.375% Notes, due June 1, 2029 and the 3.875% Notes, due March 15, 2031. Short-term financing needs primarily consist of working capital requirements, capital spending, periodic principal and interest payments on our long-term debt, and initiatives to support restructuring, integration or other strategic projects. Long-term financing needs depend largely on potential growth opportunities including acquisition activity, repayment or refinancing of our long-term obligations, and share repurchase activity, amongst others. Our long-term liquidity may be influenced by our ability to borrow additional funds, renegotiate existing debt, and raise equity under terms that are favorable to us. We also have long-term obligations associated with defined benefit plans with expected minimum required contributions that are not considered significant to the consolidated group. 27 Table of Contents The Company substantially decreased its outstanding debt with the receipt of proceeds from the completion of the HHI divestiture in June 2023 through various redemptions and repurchase transactions. The Company may make additional repayments on its remaining outstanding debt obligations in the future, which may include repayments, redemptions, repurchases, refinancing or exchanges of its outstanding Senior Notes, any of which will be dependent on various factors, including market conditions. Any such repurchases may be effected through a variety of means, including privately negotiated transactions, market transactions, tender offers, redemptions or as otherwise required or permitted by the instruments covering the Company's outstanding indebtedness. The Company has continued to repurchase shares of common stock as further detailed in Note 10 – Shareholders’ Equity in the Notes to the Condensed Consolidated Financial Statements . We may, from time to time, seek to repurchase additional shares of our common stock and any further repurchase activity will be dependent on prevailing market conditions, liquidity requirements and other factors. A portion of our cash balance is located outside the U.S. given our international operations. We manage our worldwide cash requirements centrally by reviewing available cash balances across our worldwide group and the cost effectiveness with which this cash can be accessed. We generally repatriate cash from non-U.S. subsidiaries, provided the cost of the repatriation is not considered material. The counterparties that hold our deposits consist of major financial institutions. The majority of our business is not considered seasonal with a year round selling cycle that is overall consistent during the fiscal year with the exception of our H&G segment. H&G sales typically peak during the first six months of the calendar year (the Company's second and third fiscal quarters) due to customer seasonal purchasing patterns and the timing of promotional activity. This seasonality requires the Company to ship large quantities of products ahead of peak consumer buying season that can impact cash flow demands to meet manufacturing and inventory requirements earlier in the fiscal year, as well as extended credit terms and/or promotional discounts throughout the peak season. From time to time the Company enters into factoring agreements and customers' supply chain financing arrangements to provide for the sale of certain trade receivables to unrelated third-party financial institutions. The factored receivables are accounted for as a sale without recourse, and the balance of the receivables sold are removed from the Condensed Consolidated Balance Sheet at the time of the sales transaction, with the proceeds received recognized as an operating cash flow. Amounts received from customers for factored receivables are recognized as a payable and remitted to the factor based upon terms of the factoring agreements. The Company discontinued its receivable factoring activity in the prior year but may factor receivables in the future which will be dependent on various factors. Additionally, the Company facilitates a voluntary supply chain financing program to provide certain of its suppliers with the opportunity to sell receivables due from the Company (the Company's trade payables) to an unrelated third-party financial institution under the sole discretion of the supplier and the participating financial institution. There are no guarantees provided by the Company or its subsidiaries and we do not enter into any agreements with the suppliers regarding their participation. The Company's responsibility is limited to payments on the original terms negotiated with its suppliers, regardless of whether the suppliers sell their receivables to the financial institution and continue to be recognized as Accounts Payable on the Company's Condensed Consolidated Balance Sheet with cash flow activity recognized as an operating cash flow. We do not believe the level of supplier based financing to be material. Other than the changes to debt obligations previously noted, there have been no material changes to our debt obligations, lease obligations, employee benefit obligations, or other contractual obligations or commercial commitments previously disclosed. We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. Critical Accounting Policies and Estimates There have been no material changes to our critical accounting estimates as discussed in our 2024 Annual Report. New Accounting Pronouncements See Note 1 – Basis of Presentation and Significant Accounting Policies in the Notes to the Condensed Consolidated Financial Statements for information about accounting pronouncements that are newly adopted and recent accounting pronouncements not yet adopted. Guarantor Statements Spectrum Brands, Inc. (“SBI”) has issued the 3.375% Notes, due June 1, 2029, under the 2029 Indenture and the 3.875% Exchangeable Notes, due March 15, 2031, under the 2031 Indentures (collectively, the “Notes”). The Notes are unconditionally guaranteed, jointly and severally, on a senior unsecured basis by Spectrum Brands Holdings, Inc., as parent guarantor, and SBI’s domestic subsidiaries. The Notes and the related guarantees rank equally in right of payment with all of SBI and the guarantors’ existing and future senior indebtedness and rank senior in right of payment to all of SBI and the guarantors’ future indebtedness that expressively provide for its subordination to the Notes and the related guarantees. Non-guarantor subsidiaries primarily consist of SBI’s foreign subsidiaries. See Note 11 - Debt within the Notes to the Consolidated Financial Statements within the 2024 Annual Report. 28 Table of Contents The following financial information consists of summarized financial information of the Obligor, presented on a combined basis. The “Obligor” consists of the financial statements of SBI as the debt issuer, Spectrum Brands Holdings, Inc. as the parent guarantor, and the domestic subsidiaries of SBI as subsidiary guarantors. Intercompany balances and transactions between SBI and the guarantors have been eliminated. Investments in non-guarantor subsidiaries and the earnings or losses from those non-guarantor subsidiaries have been excluded. Six Month Period Ended Year Ended (in millions) March 30, 2025 September 30, 2024 Statements of Operations Data Third party net sales $ 797.2 $ 1,829.4 Intercompany net sales to non-guarantor subsidiaries 25.0 22.8 Net sales 822.2 1,852.2 Gross profit 295.0 662.3 Operating (loss) income (10.6) 22.2 Net loss from continuing operations (63.2) (23.6) Net loss (64.6) (6.1) Net loss attributable to controlling interest (64.0) (6.1) Statements of Financial Position Data Current Assets $ 949.2 $ 1,228.0 Noncurrent Assets 3,931.9 3,989.6 Current Liabilities 712.4 901.6 Noncurrent Liabilities 997.7 930.9 The Obligor’s amounts due from, due to the non-guarantor subsidiaries as of March 30, 2025 and September 30, 2024 are as follows: (in millions) March 30, 2025 September 30, 2024 Statements of Financial Position Data Current receivables from non-guarantor subsidiaries $ 121.4 $ 124.3 Current note receivables from non-guarantor subsidiaries 18.9 227.1 Long-term note receivables from non-guarantor subsidiaries 21.4 30.7 Current payables to non-guarantor subsidiaries 9.2 58.6 Current debt with non-guarantor subsidiaries 361.2 435.3 Long-term debt with non-guarantor subsidiaries 17.9 20.2 29 Table of Contents