UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K



ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended September 30, ~~2012~~2013



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file No. 001-13615

SPECTRUM BRANDS, INC.

(Exact name of registrant as specified in its charter)

Delaware		22-2423556
(State or other jurisdiction ofincorporation or organization)		(I.R.S. EmployerIdentification Number)
601 Rayovac Drive, Madison, Wisconsin		53711
3001 Deming Way, Middleton, Wisconsin		53562
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (608) 275-3340

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ý No ¨

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement or amendment to this Annual Report on Form 10-K to be filed within 120 days of September 30, ~~2012~~2013 are incorporated by reference in this Annual Report on Form 10-K in response to Part III, Items 10, 11, 12, 13 and 14.

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TABLE OF CONTENTS

		Page
	PART I
ITEM 1.	BUSINESS	43
ITEM 1A.	RISK FACTORS	1112
ITEM 1B.	UNRESOLVED STAFF COMMENTS	2425
ITEM 2.	PROPERTIES	2426
ITEM 3.	LEGAL PROCEEDINGS	2527
ITEM 4.	MINE SAFETY DISCLOSURES	2627
	PART II
ITEM 5.	MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	2728
ITEM 6.	SELECTED FINANCIAL DATA	2728
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2930
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	5654
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	5755
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	5755
ITEM 9A.	CONTROLS AND PROCEDURES	5755
ITEM 9B.	OTHER INFORMATION	5755
	PART III
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	5756
ITEM 11.	EXECUTIVE COMPENSATION	5856
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	5856
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE	5956
ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	5956
	PART IV
ITEM 15.	EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES	6057
	INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE	6058
	SIGNATURES	~~117~~122
	EXHIBIT INDEX	~~118~~124

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PART I



ITEM 1.	BUSINESS

Forward-Looking Statements

We have made or implied certain forward-looking statements in this Annual Report on Form 10-K. All statements, other than statements of historical facts included in this Annual Report, including the statements under Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations regarding our business strategy, future operations, financial condition, estimated revenues, projected costs, projected synergies, prospects, plans and objectives of management, as well as information concerning expected actions of third parties, are forward-looking statements. When used in this Annual Report, the words “anticipate,” “intend,” “plan,” “estimate,” “believe,” “expect,” “project,” “could,” “will,” “should,” “may” and similar expressions are also intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words.

Since these forward-looking statements are based upon our current expectations of future events and projections and are subject to a number of risks and uncertainties, many of which are beyond our control and some of which may change rapidly, actual results or outcomes may differ materially from those expressed or implied herein, and you should not place undue reliance on these statements. Important factors that could cause our actual results to differ materially from those expressed or implied herein include, without limitation:


•	the impact of our substantial indebtedness on our business, financial condition and results of operations;


•	the impact of restrictions in our debt instruments on our ability to operate our business, finance our capital needs or pursue or expand business strategies;


•	any failure to comply with financial covenants and other provisions and restrictions of our debt instruments;


•	our ability to successfully integrate the HHI Business and achieve the expected synergies from that integration at the expected costs;


•	the impact of expenses resulting from the implementation of new business strategies, divestitures or current and proposed restructuring activities;


•	the impact of fluctuations in commodity prices, costs or availability of raw materials or terms and conditions available from suppliers, including suppliers’ willingness to advance credit;


•	interest rate and exchange rate fluctuations;


•	the loss of, or a significant reduction in, sales to any significant retail customer(s);


•	competitive promotional activity or spending by competitors or price reductions by competitors;


•	the introduction of new product features or technological developments by competitors and/or the development of new competitors or competitive brands;


•	the effects of general economic conditions, including inflation, recession or fears of a recession, depression or fears of a depression, labor costs and stock market volatility or changes in trade, monetary or fiscal policies in the countries where we do business;


•	changes in consumer spending preferences and demand for our products;


•	our ability to develop and successfully introduce new products, protect our intellectual property and avoid infringing the intellectual property of third parties;


•	our ability to successfully implement, achieve and sustain manufacturing and distribution cost efficiencies and improvements, and fully realize anticipated cost savings;


•	the cost and effect of unanticipated legal, tax or regulatory proceedings or new laws or regulations (including environmental, public health and consumer protection regulations);


•	public perception regarding the safety of our products, including the potential for environmental liabilities, product liability claims, litigation and other claims;


•	the impact of pending or threatened litigation;


•	changes in accounting policies applicable to our business;


•	government regulations;


•	the seasonal nature of sales of certain of our products;


•	the effects of climate change and unusual weather activity;


•	the effects of political or economic conditions, terrorist attacks, acts of war or other unrest in international markets;


•	the significant costs expected to be incurred in connection with the integration of us and the HHI Business;


•	the risk that we may become responsible for certain liabilities of the HHI Business;


•	the risk that integrating our business with that of the HHI Business may divert our management’s attention;


•	our dedicating resources of the HHI Business to supply certain products and services to Stanley Black & Decker and its subsidiaries as required following the Hardware Acquisition;


•	general customer uncertainty related to the Hardware Acquisition; and

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•	the limited period of time for which we have the right to use certain Stanley Black & Decker trademarks, brand names and logos.

Some of the above-mentioned factors are described in further detail in the section entitled “Risk Factors” set forth below. You should assume the information appearing in this Annual Report on Form 10-K is accurate only as of September 30, 2013 or as otherwise specified, as our business, financial condition, results of operations and prospects may have changed since that date. Except as required by applicable law, including the securities laws of the U.S. and the rules and regulations of the SEC, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise to reflect actual results or changes in factors or assumptions affecting such forward-looking statements.

General

Spectrum Brands, Inc., a Delaware corporation (“Spectrum Brands” or the “Company”), is a diversified global branded consumer products company. Spectrum Brands ~~Holdings~~, Inc., ~~(“SB~~is ~~Holdings”)~~a ~~was~~wholly ~~created~~owned insubsidiary ~~connection with the combination~~ of Spectrum Brands ~~and Russell Hobbs~~Holdings, Inc. (“Russell Hobbs”), a global branded small appliance company, to form a new combined company (the “Merger”). The Merger was consummated on June 16, 2010. As a result of the Merger, both Spectrum Brands and Russell Hobbs are wholly-owned subsidiaries of "SB Holdings ~~and Russell Hobbs is a wholly-owned subsidiary of Spectrum Brands~~"). SB Holdings' common stock trades on the New York Stock Exchange (the “NYSE”) under the symbol “SPB.”

Unless the context indicates otherwise, the terms the “Company,” “Spectrum,” “we,” “our” or “us” are used to refer to Spectrum Brands and its subsidiaries ~~subsequent to the Merger and Spectrum Brands prior to the Merger~~.

WeOn ~~manufacture~~December ~~and~~17, ~~market alkaline~~2012, ~~zinc~~we ~~carbon~~acquired the residential hardware and ~~hearing~~home ~~aid~~improvement ~~batteries,~~business ~~herbicides,~~(the ~~insecticides~~“HHI ~~and~~Business”) ~~repellants~~from ~~and~~Stanley ~~specialty~~Black ~~pet~~& ~~supplies~~Decker, Inc. We(“Stanley ~~design~~Black ~~and~~& ~~market~~Decker”), ~~rechargeable~~which ~~batteries,~~includes ~~battery-powered~~(i) ~~lighting~~the ~~products,~~equity ~~electric~~interests ~~shavers~~of ~~and~~certain ~~accessories,~~subsidiaries ~~grooming~~of ~~products~~Stanley ~~and~~Black ~~hair~~& ~~care~~Decker ~~appliances.~~engaged ~~With~~in the ~~addition~~business ofand ~~Russell~~(ii) ~~Hobbs~~certain weassets ~~design,~~of ~~market~~Stanley ~~and~~Black ~~distribute~~& aDecker ~~broad~~used ~~range~~or ofheld ~~branded~~for ~~small~~use ~~household~~in ~~appliances~~connection ~~and~~with ~~personal~~the ~~care~~business ~~products.~~(together ~~Our~~the ~~manufacturing~~“Hardware ~~and~~Acquisition”). ~~product~~On ~~development~~April ~~facilities~~8, ~~are~~2013, ~~located~~we incompleted the ~~United~~HHI ~~States~~Business acquisition by acquiring certain assets of Tong Lung Metal Industry Co. Ltd., ~~Europe~~a Taiwan Corporation ("TLM Taiwan”), ~~Latin~~which ~~America~~is ~~and~~involved ~~Asia.~~in ~~Substantially~~the ~~all~~production of ~~our~~residential ~~rechargeable~~locksets. ~~batteries~~For ~~and~~information ~~chargers,~~pertaining ~~shaving~~to ~~and~~the ~~grooming~~Hardware ~~products~~Acquisition, ~~small~~see ~~household~~Note ~~appliances~~15, ~~personal~~“Acquisitions” ~~care~~of ~~products~~Notes ~~and~~to ~~portable~~Consolidated ~~lighting~~Financial ~~products~~Statements, ~~are~~included ~~manufactured~~in bythis ~~third-party~~Annual ~~suppliers,~~Report ~~primarily~~on ~~located~~Form ~~in Asia~~10-K.

We ~~sell~~manufacture ~~our~~and ~~products~~market inalkaline, ~~approximately~~zinc ~~140~~carbon ~~countries~~and ~~through~~hearing aaid ~~variety of trade channels~~batteries, ~~including retailers~~herbicides, ~~wholesalers~~insecticides and ~~distributors,~~repellants ~~hearing~~and ~~aid~~specialty ~~professionals,~~pet ~~industrial~~supplies. ~~distributors~~We design and ~~original~~market ~~equipment~~rechargeable ~~manufacturers~~batteries, ~~(“OEMs”)~~battery-powered lighting products, electric shavers and ~~enjoy~~accessories, ~~strong~~grooming ~~name~~products ~~recognition~~and inhair ~~our~~care ~~markets~~appliances. ~~under~~We ~~the~~also ~~Rayovac~~design, ~~VARTA~~market and ~~Remington~~distribute ~~brands,~~a ~~each~~broad range of ~~which~~branded ~~has~~small ~~been~~household inappliances ~~existence~~and ~~for~~personal ~~more~~care ~~than~~products. 80Our ~~years,~~manufacturing and ~~under~~product ~~the~~development ~~Tetra,~~facilities 8-are located in~~-1,~~ ~~Dingo,~~the ~~Nature's~~United ~~Miracle,~~States ~~Spectracide~~("U.S."), ~~Cutter~~Europe, ~~Hot~~Latin ~~Shot,~~America ~~Black &~~and ~~Decker,~~Asia. ~~George~~Substantially ~~Foreman,~~all ~~Russell~~of ~~Hobbs~~our rechargeable batteries, ~~Farberware~~chargers and portable lighting products, ~~Black~~shaving ~~Flag~~and grooming products, ~~FURminator~~small household appliances and ~~various~~personal ~~other~~care ~~brands~~products are manufactured by third-party suppliers, primarily located in Asia.

~~Our~~With ~~diversified~~the ~~global~~addition ~~branded~~of ~~consumer~~the ~~products~~HHI ~~have~~Business, ~~positions~~we indesign, ~~six~~manufacture, ~~major~~market, ~~product~~distribute ~~categories:~~and ~~consumer~~sell ~~batteries;~~certain ~~pet~~hardware, ~~supplies;~~ home ~~and~~improvement ~~garden control products; electric shaving~~ and ~~grooming~~plumbing products;, ~~small appliances;~~ and ~~electric~~are ~~personal~~a ~~care~~leading ~~products~~U.S. ~~Our~~provider ~~chief~~of ~~operating~~residential ~~decision-maker~~locksets ~~manages~~and ~~the~~builders' ~~businesses~~hardware inand ~~three~~a ~~vertically~~leading ~~integrated,~~provider ~~product-focused~~of ~~reporting~~faucets. ~~segments:~~The ~~(i) Global~~HHI ~~Batteries &~~Business ~~Appliances,~~has ~~which~~a ~~consists~~broad portfolio of ~~our~~recognized ~~worldwide~~brands ~~battery~~names, ~~and~~including ~~portable~~Kwikset, ~~lighting~~Weiser, ~~electric~~Baldwin, ~~shaving~~National ~~and~~Hardware, ~~grooming~~Stanley, ~~electric~~FANAL ~~personal care businesses~~ and ~~small~~Pfister, ~~appliances~~as ~~primarily~~well inas ~~the~~patented ~~kitchen~~technologies ~~and~~such ~~home~~as ~~product~~Smartkey, ~~categories~~a ~~(“Global~~rekeyable ~~Batteries &~~lockset ~~Appliances”); (ii) Global Pet Supplies~~technology, ~~which~~and ~~consists~~Smart ofCode ~~our~~Home ~~worldwide~~Connect. ~~pet~~HHI ~~supplies~~Business ~~business~~customers ~~(“Global~~include ~~Pet~~retailers, ~~Supplies”);~~non-retailers and ~~(iii) Home~~homebuilders. ~~and~~The ~~Garden~~HHI Business, ~~which~~has ~~consists~~sales ofoffices, ~~our~~manufacturing ~~home~~facilities and ~~garden~~distribution ~~and~~centers ~~insect~~in ~~control business (~~the ~~“Home and Garden Business”)~~U. ~~Management reviews our performance based on these segments~~S. ~~For information pertaining to our business segments~~, ~~see Note 11~~Canada, ~~"Segment~~Mexico ~~Information",~~and ~~in Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K~~Asia.

We sell our products in approximately 140 countries through a variety of trade channels, including retailers, wholesalers and distributors, hearing aid professionals, industrial distributors and original equipment manufacturers (“OEMs”) and enjoy strong name recognition in our markets under the Rayovac, VARTA and Remington brands, each of which has been in existence for more than 80 years, and under the Tetra, 8-in-1, Dingo, Nature's Miracle, Spectracide, Cutter, Hot Shot, Black & Decker, George Foreman, Russell Hobbs, Farberware, Black Flag, FURminator, the previously mentioned HHI Business brands and various other brands.

Our diversified global branded consumer products have positions in seven major product categories: consumer batteries; small appliances; pet supplies; electric shaving and grooming; electric personal care; home and garden controls; and hardware and home improvement, which consists of the recently acquired HHI Business. Our chief operating decision-maker manages the businesses in four vertically integrated, product-focused reporting segments: (i) Global Batteries & Appliances, which consists of our worldwide battery, electric shaving and grooming, electric personal care, and small appliances primarily in the kitchen and home product categories (“Global Batteries & Appliances”); (ii) Global Pet Supplies, which consists of our worldwide pet supplies business (“Global Pet Supplies”); (iii) Home and Garden Business, which consists of our home and garden and insect control business (the “Home and Garden Business”); and (iv) Hardware & Home Improvement, which consists of the recently acquired HHI Business (“Hardware & Home Improvement”). Management reviews our performance based on these segments. For information pertaining to our business segments, see Note 11, “Segment Information” of Notes to Consolidated Financial Statements, included in this Annual Report on Form 10-K for further information on our operating segments.

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Global and geographic strategic initiatives and financial objectives are determined at the corporate level. Each business segment is responsible for implementing defined strategic initiatives and achieving certain financial objectives and has a general manager responsible for sales and marketing initiatives and the financial results for all product lines within that business segment.

Our operating performance is influenced by a number of factors including: general economic conditions; foreign exchange fluctuations; trends in consumer markets; consumer confidence and preferences; our overall product line mix, including pricing and gross margin, which vary by product line and geographic market; pricing of certain raw materials and commodities; energy and fuel prices; and our general competitive position, especially as impacted by our competitors’ advertising and promotional activities and pricing strategies.

On October 8, 2012, we entered into an agreement with Stanley Black & Decker, Inc. ("Stanley Black & Decker") to acquire the residential hardware and home improvement business (the "HHI Business") currently operated by Stanley Black & Decker and certain of its subsidiaries for $1.4 billion, consisting of (i) the equity interests of certain subsidiaries of Stanley Black & Decker engaged in the business and (ii) certain assets of Stanley Black & Decker used or held for use in connection with the business (the "Hardware Acquisition"). The Hardware Acquisition includes the purchase of shares and assets of certain subsidiaries of Stanley Black & Decker involved in the HHI Business. The Hardware Acquisition will also include the purchase of certain assets of Tong Lung Metal Industry Co. Ltd., a Taiwan Corporation ("TLM Taiwan"), involved in the production of residential locksets (the "TLM Residential Business"). Stanley Black & Decker is currently in the process of completing the

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acquisition of all of the issued and outstanding shares of TLM Taiwan.

The consummation of the Hardware Acquisition will take place in two separate closing. The first closing (the “First Closing”) will involve the acquisition of the HHI Business. The second closing will involve the acquisition of the TLM Residential Business (the “Second Closing”).

On November 16, 2012, Spectrum Brands Escrow Corp. issued $520 million aggregate principal amount of 6.375% Senior Notes due 2020 (that “2020 Notes”) and $570 million aggregate principal amount of 6.625% Senior Notes due 2022 (the “2022 Notes”). The 2020 Notes and the 2022 Notes will be assumed by Spectrum Brands upon the First Closing. Spectrum Brands intends to use the net proceeds from the offering to fund a portion of the purchase price and related fees and expenses for the Hardware Acquisition. Spectrum Brands intends to finance the remaining portion of the Hardware Acquisition, as well as refinance its existing Term Loan (defined below) with a new $800 million senior secured term loan, which is expected to close concurrently with the First Closing.

Our Products

We compete in ~~six~~seven major product categories: consumer batteries; small appliances; pet supplies; electric shaving and grooming; electric personal care ~~products~~; home and garden ~~control~~controls; ~~products~~ and ~~small~~hardware ~~appliances~~and home improvement. Our broad line of products ~~includes~~include:

• consumer batteries, including alkaline and zinc carbon batteries, rechargeable batteries and chargers, ~~and~~ hearing aid batteries, other specialty batteries and portable lighting products;


•	small appliances, including small kitchen appliances and home product appliances;


•	pet supplies, including aquatic equipment and supplies, dog and cat treats, small animal foods, clean up and training aids, health and grooming products and bedding;

• ~~home~~electric ~~and~~shaving ~~garden control products including household insect controls, insect repellents~~ and ~~herbicides~~grooming devices;

• electric ~~and~~personal ~~wet~~care ~~shaving~~ and ~~grooming~~styling devices;

• ~~small~~home ~~appliances~~and garden control products, including ~~small~~household ~~kitchen~~insect ~~appliances~~controls, ~~and~~insect ~~home~~repellents ~~product~~and ~~appliances~~herbicides; and

• ~~electric~~hardware ~~personal~~and ~~care~~home improvement products, including residential locksets, builders hardware and ~~styling~~plumbing ~~devices~~products.

Net sales of each product category sold, as a percentage of net sales of our consolidated operations, is set forth below.

	Percentage of Total CompanyNet Sales for the Fiscal Year EndedSeptember 30,
	2012		2011		2010
	2013		2012		2011
Consumer batteries	2923	%	3029	%	3830	%
Small appliances	24	%	24	%	9	%
Hardware and home improvement products	21	%	—	%	—	%
Pet supplies	19	%	18	%	22	%
Small appliances	18	%	24	%	24	%
Home and garden control products	12	%	11	%	13	%
Pet supplies	15	%	19	%	18	%
Electric shaving and grooming	8	%	9	%	10	%
Home and garden control products	10	%	12	%	11	%
Electric personal care products	8	%	8	%	8	%
Electric shaving and grooming products	7	%	8	%	9	%
Electric personal care products	6	%	8	%	8	%
	100	%	100	%	100	%

Consumer Batteries

We market and sell a full line of alkaline batteries (AA, AAA, C, D and 9-volt sizes) to both retail and industrial customers. Our alkaline batteries are marketed and sold primarily under the Rayovac and VARTA brands. We also manufacture alkaline batteries for third parties who sell the batteries under their own private labels. Our zinc carbon batteries are also marketed and sold primarily under the Rayovac and VARTA brands and are designed for low and medium drain battery powered devices.

We believe that we are currently the largest worldwide marketer and distributor of hearing aid batteries. We sell our hearing aid batteries through retail trade channels and directly to professional audiologists under several brand names and private labels, including Beltone, Miracle Ear and Starkey.

We also sell Nickel Metal Hydride (NiMH) rechargeable batteries and a variety of battery chargers under the Rayovac and VARTA brands.

Our other specialty battery products include camera batteries, lithium batteries, silver oxide batteries, keyless entry batteries and coin cells for use in watches, cameras, calculators, communications equipment, ~~and~~ medical instruments and on the go charges.

We also offer a broad line of battery-powered, portable lighting products, including flashlights and lanterns for both retail

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We also offer a broad line of battery-powered, portable lighting products, including flashlights and lanterns for both retail and industrial markets. We sell our portable lighting products under the Rayovac and VARTA brand names, under other proprietary brand names and pursuant to licensing arrangements with third parties.

Hardware and Home Improvement Products

In the hardware and home improvement product category we market and sell a broad range of residential locksets and door hardware, including knobs, levers, deadbolts, handlesets and electronics. We offer our security hardware under three main brands, Kwikset, Weiser and Baldwin. On a global basis we are one of the largest producers of tubular residential locksets. Kwikset includes opening to mid-price point residential door hardware sold primarily in the U.S. retail and wholesale channels. Products are offered under the three brands Safe Lock, Kwikset and Kwikset Signature Series. Weiser offers opening to mid-price point residential door hardware sold primarily in the Canadian retail and wholesale channels. Baldwin offers high price point luxury hardware sold globally through the showroom and lumber yard channels.

As a demonstration of our design and engineering team’s ability to innovate, our patented SmartKey technology enables consumers to easily rekey their locks without hiring a locksmith. SmartKey continues to win market share across all channels of distribution and provides opportunities for further growth. Market share gains stemming from our SmartKey products further augment our overall market share in the residential lockset space. Also in security, we are capitalizing on the emerging trend in home automation and have developed further innovation in electronics where we utilize open-platform electronics to build scalable partnerships with technology and access control industry leaders.

We also offer other hardware products that include hinges, security hardware, screen and storm door products, garage door hardware, window hardware and floor protection under the Stanley and National Hardware brand names throughout the U.S. and Canada. Although the product line is largely harmonized between the brands, the dual branding approach has been utilized to protect legacy business with key customers and avoid channel conflict.

Furthermore, we provide kitchen, bath and shower faucets as well as other plumbing products through our Pfister brand. Pfister is recognized for bringing showroom styles to the mass market at affordable prices and offers a lifetime warranty on all of its products. We have combined robust customer collaboration with consumer driven research to drive innovative products that are well-received by the market. With its affordable, quick-to-market and custom designed solutions, Pfister has an established capability to effectively service hospitality and international markets. Pfister seeks to differentiate itself from competition through its breadth of styles and finishes designed to meet consumer, plumber, and builder needs.

Pet Supplies

In the pet supplies product category we market and sell a variety of leading branded pet supplies for fish, dogs, cats, birds and other small domestic animals. We have a broad line of consumer and commercial aquatics products, including integrated aquarium kits, ~~standalone~~stand-alone tanks and stands, filtration systems, heaters, pumps, and other equipment, fish food and water treatment products. Our largest aquatics brands are Tetra, Marineland, Whisper, Jungle and Instant Ocean. We also sell a variety of specialty pet products, including dog and cat treats, small animal food and treats, clean up and training aid products, health and grooming aids, bedding products, and consumable accessories including privacy tents, litter carpets, crystal litter cartridges, charcoal filters, corn-based litter and replaceable waste receptacles. Our largest specialty pet brands include FURminator, 8-in-1, Dingo, ~~Firstrax,~~ Nature’s Miracle, Wild Harvest and Littermaid.

Home and Garden Control Products

In the home, lawn and garden ~~control~~ products category, we currently sell and market ~~several~~a variety of leading ~~home~~insect and ~~garden~~weed ~~care~~control products, including household insecticides, insect ~~repellent~~repellents, ~~herbicides, garden~~ and ~~indoor~~lawn ~~plant~~insect ~~foods~~ and ~~plant~~weed ~~care~~control ~~treatments~~solutions. We offer a broad array of household ~~insecticides~~pest control solutions such as spider, and scorpion killers; roach and ant ~~killer,~~killers; flying insect ~~killer,~~killers; insect foggers,; wasp and hornet ~~killer~~killers; bedbug, flea and tick control products; and roach and ant baits. We also ~~manufacture~~offer ~~and~~powerful ~~market~~rodent atraps ~~complete~~and ~~line~~rodenticides ofwith ~~insect~~discreet ~~repellent~~designs ~~products~~ that ~~provide~~are ~~protection~~easy ~~from~~to ~~insects,~~refill ~~especially mosquitoes. These products include both personal repellents, such as aerosols, pump sprays~~ and ~~wipes as well as area repellents, such as yard sprays, citronella candles and torches~~reuse. Our largest brands in the household insect control and rodenticide category ~~include~~are Hot Shot, ~~Cutter,~~and ~~Repel,~~ Black Flag ~~and TAT~~. Our herbicides brands include Spectracide, Real-Kill and Garden Safe. We have positioned ourselves as the value alternative for consumers who want products that are comparable to, but sold at lower prices than, premium-priced brands.

~~Electric~~Our ~~Shaving~~business segment also manufactures and ~~Grooming~~markets a complete line of insect repellent products that provide protection from various outdoor nuisance pests, especially mosquitoes. These products include both personal repellents available in a variety of formulas (such as aerosols, lotions, pump sprays and wipes) to match consumers’ dynamic needs, as well as area repellents (such as yard sprays, citronella candles and patio lanterns) that let consumers enjoy the outdoors without bothersome pests. Our brands in the insect repellents category are Cutter and Repel.

WeTable ~~market and sell a broad line~~ of electric shaving and grooming products under the Remington brand name, including men’s rotary and foil shavers, beard and mustache trimmers, body trimmers and nose and ear trimmers, women’s shavers and haircut kits.Contents

In addition to providing indoor pest solutions, our line of outdoor insect and weed control solutions allows consumers to conquer bugs and weeds, and tackle their biggest lawn and landscaping projects themselves. From selective and non-selective herbicides to pest-specific solutions, our outdoor products are available in easy-to-use formulations (such as aerosols, granules, ready-to-use or hose-end ready-to-sprays) designed to fulfill a variety of consumer needs. Our outdoor insecticide and herbicide brands include Spectracide and Garden Safe.

We have positioned ourselves as the value alternative for consumers who want products that deliver powerful performance at an exceptional value.

Electric Shaving and Grooming Products

We market and sell a broad line of electric shaving and grooming products under the Remington brand name, including men’s rotary and foil shavers, beard and mustache trimmers, body, nose and ear trimmers, women’s shavers, haircut kits and intense pulsed light hair removal systems.

Small Appliances

We market and sell a broad range of products in the branded small household appliances category under the George Foreman, Black & Decker, Russell Hobbs, Farberware, Juiceman, Breadman and Toastmaster brands, including grills, bread makers, sandwich makers, kettles, toaster ovens, toasters, blenders, juicers, can openers, coffee grinders, coffeemakers, electric knives, deep fryers, food choppers, food processors, hand mixers, rice cookers and steamers. We also market small home product appliances, including hand-held irons, vacuum cleaners, air purifiers, clothes shavers and heaters, primarily under the Black & Decker and Russell Hobbs brands.

Electric Personal Care Products

Our electric personal care products, marketed and sold under the Remington, Russell Hobbs, Carmen and Andrew Collinge brand names, include hand-held dryers, curling irons, straightening irons, brush irons, hair setters, facial brushes, skin appliances, ~~and~~ electric toothbrushes and hair accessories.

Sales and Distribution

We sell our products through a variety of trade channels, including retailers, wholesalers and distributors, hearing aid professionals, industrial distributors and OEMs. Our sales generally are made through the use of individual purchase orders, consistent with industry practice. Retail sales of the consumer products we market have been increasingly consolidated into a small number of regional and national mass merchandisers. This trend towards consolidation is occurring on a worldwide basis. As a result of this consolidation, a significant percentage of our sales are attributable to a very limited group of retailer customers, including Wal-Mart, The Home Depot, Lowe’s, Carrefour, Target, ~~Lowe’s,~~ PetSmart, Canadian Tire, PetCo and Gigante. Our sales to Wal-Mart represented approximately 2318% of our consolidated net sales for the fiscal year ended September 30, ~~2012~~2013. No other customer accounted for more than 10% of our consolidated net sales in the fiscal year ended September 30, ~~2012~~2013.

Segment information as to revenues, profit and total assets as well as information concerning our revenues and long-lived assets by geographic location for the last three fiscal years is set forth in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 11, "Segment Information", in Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.

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Financial Condition and Results of Operations and Note 11, Segment Information, in Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.

Sales and distribution practices in each of our reportable segments are as set forth below.

Global Batteries & Appliances

We manage our Global Batteries & Appliances sales force by geographic region and product group. Our sales team is divided into three major geographic territories, North America, Latin America and Europe and the rest of the world (“Europe/ROW”). Within each major geographic territory, we have additional subdivisions designed to meet our customers’ needs.

We manage our sales force in North America by distribution channel. We maintain separate sales groups to service (i) our retail sales and distribution channel, (ii) our hearing aid professionals channel and (iii) our industrial distributors and OEM sales and distribution channel. In addition, we utilize a network of independent brokers to service participants in selected distribution channels.

We manage our sales force in Latin America by distribution channel and geographic territory. We sell primarily to large retailers, wholesalers, distributors, food and drug chains and retail outlets. In countries where we do not maintain a sales force, we sell to distributors who market our products through all channels in the market.

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The sales force serving our customers in Europe/ROW is supplemented by an international network of distributors to promote the sale of our products. Our sales operations throughout Europe/ROW are organized by geographic territory and the following sales channels: (i) food/retail, which includes mass merchandisers, discounters and drug and food stores; (ii) specialty trade, which includes clubs, consumer electronics stores, department stores, photography stores and wholesalers/distributors; and (iii) industrial, government, hearing aid professionals and OEMs.

Global Pet Supplies

Our Global Pet Supplies sales force is aligned by customer, geographic region and product group. We sell pet supply products to mass merchandisers, grocery and drug chains, pet superstores, independent pet stores and other retailers.

Home and Garden Business

The sales force of the Home and Garden Business is geographically aligned bywith ~~customer~~our key customers. We sell primarily to home improvement centers, mass merchandisers, dollar stores, hardware stores, home and garden distributors, and food and drug retailers in the U.S.

Hardware & Home Improvement

The sales force of the Hardware & Home Improvement is aligned by customer and geographic region. We sell primarily to large retailers, non-retail distributors, home improvement centers, hardware stores, home builders and other retailers.

Manufacturing, Raw Materials and Suppliers

The principal raw materials used in manufacturing our products—zinc ~~powder~~, electrolytic manganese dioxide, ~~powder~~brass and steel—are sourced either on a global or regional basis. The prices of these raw materials are susceptible to price fluctuations due to supply and demand trends, energy costs, transportation costs, government regulations and tariffs, changes in currency exchange rates, price controls, general economic conditions and other unforeseen circumstances. We have regularly engaged in forward purchase and hedging derivative transactions in an attempt to effectively manage the raw material costs we expect to incur over the next 12 to 24 months.

Substantially all of our rechargeable batteries and chargers, portable lighting products, hair care and other personal care products and our electric shaving and grooming products and small appliances are manufactured by third party suppliers that are primarily located in the Asia/Pacific region. We maintain ownership of most of the tooling and molds used by our suppliers.

We continually evaluate our manufacturing facilities’ capacity and related utilization. As a result of such analyses, we have closed a number of manufacturing facilities during the past five years. In general, we believe our existing facilities are adequate for our present and foreseeable needs.

Research and Development

Our research and development strategy is focused on new product development and performance enhancements of our existing products. We plan to continue to use our strong brand names, established customer relationships and significant research and development efforts to introduce innovative products that offer enhanced value to consumers through new designs and improved functionality.

In our fiscal years ended September 30, ~~2012~~2013, ~~2011~~2012 and ~~2010~~2011, we invested $3343.13 million, $3233.91 million and $3132.09 million, respectively, in product research and development.

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Patents and Trademarks

We own or license from third parties a significant number of patents and patent applications throughout the world relating to products we sell and manufacturing equipment we use. We hold a license that expires in March 2022 for certain alkaline battery designs, technology and manufacturing equipment from Matsushita Electrical Industrial Co., Ltd. (“Matsushita”), to whom we pay a royalty.

We also use and maintain a number of trademarks in our business, including ~~DINGO~~RAYOVAC, ~~JUNGLETALK~~REMINGTON, ~~MARINELAND~~VARTA, TETRA, ~~RAYOVAC~~8IN1, ~~REMINGTON~~DINGO, ~~TETRA~~NATURE’S MIRACLE, ~~VARTA~~WILD HARVEST, ~~8IN1~~MARINELAND, FURMINATOR, SPECTRACIDE, CUTTER, HOT SHOT, GARDEN SAFE, ~~NATURE’S MIRACLE,~~ REPEL, ~~SPECTRACIDE, SPECTRACIDE TERMINATE,~~ GEORGE FOREMAN, RUSSELL HOBBS, ~~and~~ BLACK & DECKER, KWIKSET, WEISER, BALDWIN, NATIONAL HARDWARE, FANAL AND PFISTER. We seek trademark protection in the U.S. and in foreign countries by all available means, including registration.

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As a result of the October 2002 sale by VARTA AG of substantially all of its consumer battery business to us and VARTA AG’s subsequent sale of its automotive battery business to Johnson Controls, Inc. (“Johnson Controls”), we acquired rights to the VARTA trademark in the consumer battery category and Johnson Controls acquired rights to the trademark in the automotive battery category. VARTA AG continues to have rights to use the trademark with travel guides and industrial batteries and VARTA Microbattery GmbH has the right to use the trade mark with micro batteries. We are party to a Trademark and Domain Names Protection and Delimitation Agreement that governs ownership and usage rights and obligations of the parties relative to the VARTA trademark.

As a result of the common origins of the Remington Products, L.L.C. (“Remington Products”) business we acquired in September 2003 and the Remington Arms Company, Inc. (“Remington Arms”), the REMINGTON trademark is owned by us and by Remington Arms each with respect to its principal products as well as associated products. Accordingly, we own the rights to use the REMINGTON trademark for electric shavers, shaver accessories, grooming products and personal care products, while Remington Arms owns the rights to use the trademark for firearms, sporting goods and products for industrial use, including industrial hand tools. In addition, the terms of a 1986 agreement between Remington Products and Remington Arms provides for the shared rights to use the REMINGTON trademark on products which are not considered “principal products of interest” for either company. We retain the REMINGTON trademark for nearly all products which we believe can benefit from the use of the brand name in our distribution channels.

We license the Black & Decker brand in North America, Latin America (excluding Brazil) and the Caribbean for four core categories of household appliances: beverage products, food preparation products, garment care products and cooking products. Russell Hobbs has licensed the Black & Decker brand since 1998 for use in marketing various household small appliances. In July 2011, Russell Hobbs and The Black & Decker Corporation (“BDC”) extended the trademark license agreement for a fourth time through December 2015. Under the agreement as extended, Russell Hobbs agreed to pay BDC royalties based on a percentage of sales, with minimum annual royalty payments of $15.0 million from calendar year 2011 through calendar year 2015. The agreement also requires us to comply with maximum annual return rates for products.

If BDC does not agree to renew the license agreement, we have 18 months to transition out of the brand name. No minimum royalty payments will be due during such transition period. BDC has agreed not to compete in the four core product categories for a period of five years after the end of the transition period following termination of the license agreement. Upon request, BDC may elect to extend the license to use the Black & Decker brand to certain additional product categories. BDC has approved several extensions of the license to additional categories and geographies.

Through the Hardware Acquisition, we own the patented SmartKey technology, which enables customers to easily rekey their locks without hiring a locksmith.

On November 8, 2012, we acquired a 56% interest in Shaser Biosciences, Inc. Through this acquisition we acquired patented technology that is used in our i-Light product line.

Competition

In our retail markets, we compete for limited shelf space and consumer acceptance. Factors influencing product sales include brand name recognition, perceived quality, price, performance, product packaging, design innovation, and consumer confidence and preferences as well as creative marketing, promotion and distribution strategies.

The battery product category is highly competitive. Most consumer batteries manufactured throughout the world are sold by one of four global companies: Spectrum Brands (manufacturer/seller of Rayovac and VARTA brands); Energizer Holdings, Inc. (“Energizer”) (manufacturer/seller of the Energizer brand); The Procter & Gamble Company (“Procter & Gamble”) (manufacturer/seller of the Duracell brand); and Matsushita (manufacturer/seller of the Panasonic brand). We also face competition from the private label brands of major retailers, particularly in Europe. The offering of private-label batteries by retailers may create pricing pressure in the consumer battery market. Typically, private-label brands are not supported by advertising or promotion, and retailers sell these private label offerings at prices below competing name-brands. The main barriers to entry for new competitors are investment in technology research, cost of building manufacturing capacity and the expense of building retail distribution channels and consumer brands.

In the U.S. alkaline battery category, the Rayovac brand is positioned as a value brand, which is typically defined as a product that offers comparable performance at a lower price. In Europe, the VARTA brand is competitively priced with other premium brands. In Latin America, where zinc carbon batteries outsell alkaline batteries, the Rayovac brand is competitively priced. Our primary competitors in the portable lighting product category are Energizer and Mag Instrument, Inc.

8Competition within the hardware and home improvement industry varies based on location and product segment. The main source of competition for residential locksets includes other third party manufacturers such as Schlage, a division of

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~~product~~Ingersoll-Rand, ~~that~~and ~~offers~~private ~~comparable~~label ~~performance~~import atbrands asuch ~~lower~~as ~~price~~Defiant and Gatehouse. InMajor ~~Europe,~~competitors ~~the~~for ~~VARTA~~hardware ~~brand~~include isThe ~~competitively~~Hillman ~~priced~~Group, ~~with~~Hampton ~~other~~Hardware, ~~premium~~Crown ~~brands~~Bolt and private label competitors. In ~~Latin America~~plumbing, ~~where~~Pfister’s ~~zinc~~major ~~carbon~~U.S. ~~batteries~~competitors ~~outsell~~are ~~alkaline batteries~~Masco, ~~the~~Fortune ~~Rayovac~~Brands, ~~brand~~Kohler, isand ~~competitively~~American ~~priced.~~Standard, ~~Our~~as ~~primary~~well ~~competitors~~as inGlacier ~~the~~Bay ~~portable~~and ~~lighting~~AquaSource, ~~product~~The ~~category~~Home ~~are~~Depot ~~Energizer~~ and ~~Mag~~Lowe’s ~~Instrument~~private label brands, ~~Inc~~respectively.

The pet ~~supply~~supplies product category is highly fragmented with over 500 manufacturers in the U.S. alone, consisting primarily of small companies with limited product lines. Our largest competitors in this product category are Mars Corporation (“Mars”), The Hartz Mountain Corporation (“Hartz”) and Central Garden & Pet Company (“Central Garden & Pet”). Both Hartz and Central Garden & Pet sell a comprehensive line of pet supplies and compete with a majority of the products we offer. Mars sells primarily aquatics products.

Products we sell in the home and garden product category ~~through the Home and Garden Business~~ face competition from The Scotts Miracle-Gro Company (“Scotts Company”), which markets ~~home~~lawn and garden products under the Scotts, Ortho, Roundup, ~~and~~ Miracle-Gro, and Tomcat brand names; Central Garden & Pet, which markets garden products under the AMDRO and Sevin brand names; and Bayer A.G., which markets home and garden products under the Bayer Advanced brand name.

Products we sell in the household insect control product category ~~through the Home and Garden Business~~ face competition from S.C. Johnson & Son, Inc. (“S.C. Johnson”), which markets insecticide and repellent products under the Raid and OFF! brands; Scotts Company, which markets household insect control products under the Ortho brand; and Henkel KGaA, which markets insect control products under the Combat brand.

Our primary competitors in the electric shaving and grooming product category are Norelco, a division of Koninklijke Philips Electronics NV (“Philips”), which sells and markets rotary shavers, and Braun, a division of Procter & Gamble, which sells and markets foil shavers. Through our Remington brand, we sell both foil and rotary shavers.

Primary competitive brands in the small appliance category include Hamilton Beach, Proctor Silex, Sunbeam, Mr. Coffee, Oster, General Electric, Rowenta, DeLonghi, Kitchen Aid, Cuisinart, Krups, Braun, Rival, Europro, Kenwood, Philips, Morphy Richards, Breville and Tefal. The key competitors of Russell Hobbs in this market in the U.S. and Canada include Jarden Corporation, DeLonghi America, Euro-Pro Operating LLC, Metro Thebe, Inc., d/b/a HWI Breville, NACCO Industries, Inc. (Hamilton Beach) and SEB S.A. In addition, Russell Hobbs competes with retailers who use their own private label brands for household appliances (for example, Wal-Mart).

Our major competitors in the electric personal care product category are Conair Corporation, Wahl Clipper Corporation and Helen of Troy Limited (“Helen of Troy”).

Some of our major competitors have greater resources and greater overall market share than we do. They have committed significant resources to protect their market shares or to capture market share from us and may continue to do so in the future. In some key product lines, our competitors may have lower production costs and higher profit margins than we do, which may enable them to compete more aggressively in advertising and in offering retail discounts and other promotional incentives to retailers, distributors, wholesalers and, ultimately, consumers.

Seasonality

On a consolidated basis our financial results are approximately equally weighted between quarters, however, sales of certain product categories tend to be seasonal. Sales in the consumer battery, electric shaving and grooming and electric personal care product categories, particularly in North America, tend to be concentrated in the December holiday season (Spectrum’s first fiscal quarter). Demand for hardware and home improvement products increases during the spring and summer construction period (Spectrum's third and fourth fiscal quarters). Demand for pet supplies products remains fairly constant throughout the year. Demand for home and garden control products sold though the Home and Garden Business typically peaks during the first six months of the calendar year (Spectrum’s second and third fiscal quarters). Small Appliances peaks from July through December primarily due to the increased demand by customers in the late summer for “back-to-school” sales and in the fall for the holiday season. For a more detailed discussion of the seasonality of our product sales, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—“Seasonal Product Sales.”

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Governmental Regulations and Environmental Matters

Due to the nature of our operations, our facilities are subject to a broad range of federal, state, local and foreign legal and regulatory provisions relating to the environment, including those regulating the discharge of materials into the environment, the handling and disposal of solid and hazardous substances and wastes and the remediation of contamination associated with the releases of hazardous substances at our facilities. We believe that compliance with the federal, state, local and foreign laws and regulations to which we are subject will not have a material effect upon our capital expenditures, financial condition, earnings or competitive position.

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From time to time, we have been required to address the effect of historic activities on the environmental condition of our properties. We have not conducted invasive testing at all facilities to identify all potential environmental liability risks. Given the age of our facilities and the nature of our operations, it is possible that material liabilities may arise in the future in connection with our current or former facilities. If previously unknown contamination of property underlying or in the vicinity of our manufacturing facilities is discovered, we could incur material unforeseen expenses, which could have a material adverse effect on our financial condition, capital expenditures, earnings and competitive position. Although we are currently engaged in investigative or remedial projects at some of our facilities, we do not expect that such projects, taking into account established accruals, will cause us to incur expenditures that are material to our business, financial condition or results of operations; however, it is possible that our future liability could be material.

We have been, and in the future may be, subject to proceedings related to our disposal of industrial and hazardous material at off-site disposal locations or similar disposals made by other parties for which we are held responsible as a result of our relationships with such other parties. In the U.S., these proceedings are under the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”) or similar state laws that hold persons who “arranged for” the disposal or treatment of such substances strictly liable for costs incurred in responding to the release or threatened release of hazardous substances from such sites, regardless of fault or the lawfulness of the original disposal. Liability under CERCLA is typically joint and several, meaning that a liable party may be responsible for all costs incurred in investigating and remediating contamination at a site. As a practical matter, liability at CERCLA sites is shared by all of the viable responsible parties. We occasionally are identified by federal or state governmental agencies as being a potentially responsible party for response actions contemplated at an off-site facility. At the existing sites where we have been notified of our status as a potentially responsible party, it is either premature to determine whether our potential liability, if any, will be material or we do not believe that our liability, if any, will be material. We may be named as a potentially responsible party under CERCLA or similar state laws for other sites not currently known to us, and the costs and liabilities associated with these sites may be material.

It is difficult to quantify with certainty the potential financial impact of actions regarding expenditures for environmental matters, particularly remediation, and future capital expenditures for environmental control equipment. Nevertheless, based upon the information currently available, we believe that our ultimate liability arising from such environmental matters, taking into account established accruals of $5.41 million for estimated liabilities at September 30, ~~2012~~2013 should not be material to our business or financial condition.

Electronic and electrical products that we sell in Europe, particularly products sold under the Remington brand name, VARTA battery chargers, certain portable lighting and all of our batteries, are subject to regulation in European Union (“EU”) markets under three key EU directives. The first directive is the Restriction of the Use of Hazardous Substances in Electrical and Electronic Equipment (“RoHS”) which took effect in EU member states beginning July 1, 2006. RoHS prohibits companies from selling products which contain certain specified hazardous materials in EU member states. We believe that compliance with RoHS will not have a material effect on our capital expenditures, financial condition, earnings or competitive position. The second directive is entitled the Waste of Electrical and Electronic Equipment (“WEEE”). WEEE makes producers or importers of particular classes of electrical goods financially responsible for specified collection, recycling, treatment and disposal of past and future covered products. WEEE assigns levels of responsibility to companies doing business in EU markets based on their relative market share. WEEE calls on each EU member state to enact enabling legislation to implement the directive. To comply with WEEE requirements, we have partnered with other companies to create a comprehensive collection, treatment, disposal and recycling program. As EU member states pass enabling legislation we currently expect our compliance system to be sufficient to meet such requirements. Our current estimated costs associated with compliance with WEEE are not significant based on our current market share. However, we continue to evaluate the impact of the WEEE legislation as EU member states implement guidance and as our market share changes and, as a result, actual costs to our company could differ from our current estimates and may be material to our business, financial condition or results of operations. The third directive is the Directive on Batteries and Accumulators and Waste Batteries, which was adopted in September 2006 and went into effect in September 2008 (the “Battery Directive”). The Battery Directive bans heavy metals in batteries by establishing maximum quantities of those heavy metals in batteries and mandates waste management of batteries, including collection, recycling and disposal systems. The Battery Directive places the costs of such waste management systems on producers and importers of batteries. The Battery Directive calls on each EU member state to enact enabling legislation to implement the directive. We currently believe that compliance with the Battery Directive will not have a material effect on our capital expenditures, financial condition, earnings or competitive position. However, until such time as the EU member states adopt enabling legislation, a full evaluation of these costs cannot be completed. We will continue to evaluate the impact of the Battery Directive and its enabling legislation as EU member states implement guidance.

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~~foreign~~currently ~~and~~believe ~~multinational~~that ~~agencies~~compliance ~~and regulations. For example, in the U.S., all products containing pesticides must be registered~~ with the ~~EPA~~Battery ~~and,~~Directive inwill ~~many~~not ~~cases, similar state and foreign agencies before they can be manufactured or sold. Our inability to obtain or the cancellation of any registration could~~ have ana ~~adverse~~material effect on our ~~business~~capital expenditures, financial condition, ~~and~~earnings ~~results~~or ofcompetitive ~~operations~~position. ~~The~~However, ~~severity~~until ofsuch ~~the~~time ~~effect~~as ~~would~~the ~~depend~~EU onmember ~~which~~states ~~products~~adopt ~~were~~enabling ~~involved~~legislation, ~~whether~~a ~~another~~full ~~product~~evaluation ~~could~~of bethese ~~substituted~~costs ~~and~~cannot ~~whether~~be ~~our competitors were similarly affected~~completed. We ~~attempt~~will continue to ~~anticipate~~evaluate ~~regulatory~~the ~~developments~~impact ~~and maintain registrations~~ of, ~~and~~the ~~access~~Battery ~~to,~~Directive ~~substitute chemicals~~ and ~~other~~its ~~ingredients.~~enabling Welegislation ~~may~~as ~~not~~EU ~~always~~member bestates ~~able~~implement ~~to avoid or minimize these risks~~guidance.

Certain of our products and facilities in each of our business segments are regulated by the United States Environmental Protection Agency (the “EPA”) and the United States Food and Drug Administration (the “FDA”) or other federal consumer protection and product safety agencies and are subject to the regulations such agencies enforce, as well as by similar state, foreign and multinational agencies and regulations. For example, in the U.S., all products containing pesticides must be registered with the EPA and, in many cases, similar state and foreign agencies before they can be manufactured or sold. Our inability to obtain or the cancellation of any registration could have an adverse effect on our business, financial condition and results of operations. The severity of the effect would depend on which products were involved, whether another product could be substituted and whether our competitors were similarly affected. We attempt to anticipate regulatory developments and maintain registrations of, and access to, substitute chemicals and other ingredients. We may not always be able to avoid or minimize these risks.

The Food Quality Protection Act (“FQPA”) established a standard for food-use pesticides, which is that a reasonable certainty of no harm will result from the cumulative effect of pesticide exposures. Under the FQPA, the EPA is evaluating the cumulative effects from dietary and non-dietary exposures to pesticides. The pesticides in certain of our products continue to be evaluated by the EPA as part of this program. It is possible that the EPA or a third party active ingredient registrant may decide that a pesticide we use in our products will be limited or made unavailable to us. We cannot predict the outcome or the severity of the effect of the EPA’s continuing evaluations of active ingredients used in our products.

Certain of our products and packaging materials are subject to regulations administered by the FDA. Among other things, the FDA enforces statutory prohibitions against misbranded and adulterated products, establishes ingredients and manufacturing procedures for certain products, establishes standards of identity for certain products, determines the safety of products and establishes labeling standards and requirements. In addition, various states regulate these products by enforcing federal and state standards of identity for selected products, grading products, inspecting production facilities and imposing their own labeling requirements.

Employees

We had approximately 513,~~850~~500 full-time employees worldwide as of September 30, ~~2012~~2013. Approximately 3316% of our total labor force is covered by collective bargaining agreements. There are ~~three~~4 collective bargaining agreements that will expire during our fiscal year ending September 30, ~~2013~~2014, which cover approximately 6457% of the labor force under collective bargaining agreements, or approximately 219% of our total labor force. We believe that our overall relationship with our employees is good.

Available Information

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are made available free of charge on or through our website at www.spectrumbrands.com as soon as reasonably practicable after such reports are filed with, or furnished to, the United States Securities and Exchange Commission (the “SEC”). You may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains our reports, proxy statements and other information at www.sec.gov . In addition, copies of our (i) Corporate Governance Guidelines, (ii) charters for the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee, (iii) Code of Business Conduct and Ethics and (iv) Code of Ethics for the Principal Executive Officer and Senior Financial Officers are available at our Internet site at www.spectrumbrands.com under “Investor Relations—Corporate Governance.” Copies will also be provided to any stockholder upon written request to the Vice President, Investor Relations & Corporate Communications, Spectrum Brands, Inc. at ~~601~~3001 ~~Rayovac~~Deming ~~Drive~~Way, ~~Madison~~Middleton, Wisconsin ~~53711~~53562 or via electronic mail at investorrelations@spectrumbrands.com, or by contacting the Vice President, Investor Relations & Corporate Communications by telephone at (608) 275-3340.



ITEM 1A.	RISK FACTORS

Forward-Looking Statements

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actual results or outcomes may differ materially from those expressed or implied herein, and you should not place undue reliance on these statements. Important factors that could cause our actual results to differ materially from those expressed or implied herein include, without limitation:

• the impact of our substantial indebtedness on our business, financial condition and results of operations;

• the impact of restrictions in our debt instruments on our ability to operate our business, finance our capital needs or pursue or expand business strategies;

• any failure to comply with financial covenants and other provisions and restrictions of our debt instruments;

• our ability to successfully integrate the business acquired in connection with the combination with the HHI Business and achieve the expected synergies from that integration at the expected costs;

• the impact of expenses resulting from the implementation of new business strategies, divestitures or current and proposed restructuring activities;

• the impact of fluctuations in commodity prices, costs or availability of raw materials or terms and conditions available from suppliers, including suppliers’ willingness to advance credit;

• interest rate and exchange rate fluctuations;

• the loss of, or a significant reduction in, sales to a significant retail customer(s);

• competitive promotional activity or spending by competitors or price reductions by competitors;

• the introduction of new product features or technological developments by competitors and/or the development of new competitors or competitive brands;

• the effects of general economic conditions, including inflation, recession or fears of a recession, depression or fears of a depression, labor costs and stock market volatility or changes in trade, monetary or fiscal policies in the countries where we do business;

• changes in consumer spending preferences and demand for our products;

• our ability to develop and successfully introduce new products, protect our intellectual property and avoid infringing the intellectual property of third parties;

• our ability to successfully implement, achieve and sustain manufacturing and distribution cost efficiencies and improvements, and fully realize anticipated cost savings;

• the cost and effect of unanticipated legal, tax or regulatory proceedings or new laws or regulations (including environmental, public health and consumer protection regulations);

• public perception regarding the safety of our products, including the potential for environmental liabilities, product liability claims, litigation and other claims;

• the impact of pending or threatened litigation;

• changes in accounting policies applicable to our business;

• government regulations;

• the seasonal nature of sales of certain of our products;

• the effects of climate change and unusual weather activity;

• the effects of political or economic conditions, terrorist attacks, acts of war or other unrest in international markets;

• the risk that synergies will not be realized following the consummation of the Hardware Acquisition; and

• the ability to consummate the Hardware Acquisition.

Some of the above-mentioned factors are described in further detail in the section entitled “Risk Factors” set forth below. You should assume the information appearing in this Annual Report on Form 10-K is accurate only as of September 30, 2012 or as otherwise specified, as our business, financial condition, results of operations and prospects may have changed since that date. Except as required by applicable law, including the securities laws of the U.S. and the rules and regulations of the SEC, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise to reflect actual results or changes in factors or assumptions affecting such forward-looking statements.

RISK FACTORS

Any of the following factors could materially and adversely affect our business, financial condition and results of operations and the risks described below are not the only risks that we may face. Additional risks and uncertainties not ~~currently known to us or that we currently view as immaterial may also materially and adversely affect our business, financial condition or results of operations.~~

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currently known to us or that we currently view as immaterial may also materially and adversely affect our business, financial condition or results of operations.

Risks Related To Our Business

Our substantial indebtedness may limit our financial and operating flexibility, and we may incur additional debt, which could increase the risks associated with our substantial indebtedness.

We have, and we expect to continue to have, a significant amount of indebtedness. As of September 30, ~~2012~~2013, we had total indebtedness under our Term Loan and ABL Facility (together the "Senior Secured Facilities"), the 6.375% Notes, the 6.625% Notes, the 6.75% Notes (collectively, the "Notes") and other debt of approximately $3 billion. Our substantial indebtedness has had, and could continue to have, material adverse consequences for our business, and may:

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total indebtedness under our Term Loan, 9.5% Notes and ABL Facility (together the "Senior Secured Facilities"), the 6.75% Notes and other debt of approximately $1.7 billion. Our substantial indebtedness has had, and could continue to have, material adverse consequences for our business, and may:


•	require us to dedicate a large portion of our cash flow to pay principal and interest on our indebtedness, which will reduce the availability of our cash flow to fund working capital, capital expenditures, research and development expenditures and other business activities;


•	increase our vulnerability to general adverse economic and industry conditions;


•	limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;


•	restrict our ability to make strategic acquisitions, dispositions or to exploit business opportunities;


•	place us at a competitive disadvantage compared to our competitors that have less debt; and


•	limit our ability to borrow additional funds (even when necessary to maintain adequate liquidity) or dispose of assets.

Under the Senior Secured Facilities and the ~~indenture~~indentures governing the ~~6.75%~~ Notes (together, the “~~2020 Indenture~~Indentures”), we may incur additional indebtedness. If new debt is added to our existing debt levels, the related risks that we now face would increase.

Furthermore, a substantial portion of our debt bears interest at variable rates. If market interest rates increase, the interest rate on our variable rate debt will increase and will create higher debt service requirements, which would adversely affect our cash flow and could adversely impact our results of operations. While we may enter into agreements limiting our exposure to higher debt service requirements, any such agreements may not offer complete protection from this risk.

Restrictive covenants in the Senior Secured Facilities and the ~~2020~~Indentures ~~Indenture~~ may restrict our ability to pursue our business strategies.

The Senior Secured Facilities and the ~~2020~~Indentures ~~Indenture~~ each restrict, among other things, asset dispositions, mergers and acquisitions, dividends, stock repurchases and redemptions, other restricted payments, indebtedness and preferred stock, loans and investments, liens and affiliate transactions. The Senior Secured Facilities and the ~~2020~~Indentures ~~Indenture~~ also contain customary events of default. These covenants, among other things, limit our ability to fund future working capital and capital expenditures, engage in future acquisitions or development activities, or otherwise realize the value of our assets and opportunities fully because of the need to dedicate a portion of cash flow from operations to payments on debt. In addition, the Senior Secured Facilities contain financial covenants relating to maximum leverage and minimum interest coverage. Such covenants could limit the flexibility of our restricted entities in planning for, or reacting to, changes in the industries in which they operate. Our ability to comply with these covenants is subject to certain events outside of our control. If we are unable to comply with these covenants, the lenders under our Senior Secured Facilities ~~or 6.75% Notes~~ could terminate their commitments and the lenders under our Senior Secured Facilities or ~~6.75%~~the holders of the Notes could accelerate repayment of our outstanding borrowings and, in either case, we may be unable to obtain adequate refinancing of outstanding borrowings on favorable terms or at all. If we are unable to repay outstanding borrowings when due, the lenders under the Senior Secured Facilities ~~or6.75% Notes~~ will also have the right to proceed against the collateral granted to them to secure the indebtedness owed to them. If our obligations under the Senior Secured Facilities ~~and the 6.75% Notes~~ are accelerated, we cannot assure you that our assets would be sufficient to repay in full such indebtedness.

The sale or other disposition by Harbinger Group Inc., the holder of a majority of the outstanding shares of our common stock, to non-affiliates of a sufficient amount of the common stock of SB Holdings would constitute a change of control under the agreements governing Spectrum Brands’ debt.

Harbinger Group Inc. (“HRG”) owns a majority of the outstanding shares of the common stock of SB Holdings. The sale or other disposition by HRG to non-affiliates of a sufficient amount of the common stock of SB Holdings could constitute a change of control under certain of the agreements governing Spectrum Brands' debt, including any foreclosure on or sale of SB Holdings' common stock pledged as collateral by HRG pursuant to the indenture governing HRG's 107.~~625~~875% Senior Secured Notes due ~~2015~~2019. AUnder ~~change~~the inTerm ~~control~~Loan ~~under~~and ~~Spectrum~~the ~~Brands'~~ABL ~~debt~~Revolving ~~could~~Credit ~~also~~Facility, ~~result from~~ a change inof control ofis ~~HRG~~an ~~following~~event ~~the~~of ~~sale~~default orand, ~~other~~if ~~disposition~~a bychange ~~Harbinger~~of ~~Capital~~control ~~Partners~~were ~~Master~~to ~~Fund I~~occur, ~~Ltd.,~~Spectrum ~~Harbinger~~Brands ~~Capital~~would ~~Partners~~be ~~Special~~required ~~Situations~~to ~~Fund, L.P.~~get oran ~~Global~~amendment ~~Opportunities~~to ~~Breakaway~~these ~~Ltd.~~agreements ~~(together the “Harbinger Parties”)~~ to ~~non-affiliates~~avoid of a ~~sufficient amount of the common stock of HRG~~default. ~~Such~~If aSpectrum ~~disposition~~Brands ~~could~~was ~~include~~unable ~~any~~to ~~foreclosure~~get onsuch oran ~~sale~~amendment, ofthe ~~HRG~~lenders ~~common~~could ~~stock~~accelerate ~~pledged as collateral by~~ the ~~Harbinger~~maturity ~~Parties.~~of ~~One~~each of the ~~Harbinger~~Spectrum ~~Parties~~Brands ~~has~~Term ~~pledged~~Loan ~~all~~and of the ~~shares~~ABL ofRevolving ~~HRG~~Credit ~~common~~Facility. ~~stock~~In ~~that~~addition, itunder ~~owns~~the ~~(representing~~indentures agoverning ~~majority of~~ the ~~outstanding~~Notes, ~~common~~upon ~~stock~~a change of ~~HRG),~~control ~~together with securities~~ of ~~other~~SB ~~issuers~~Holdings, toSpectrum ~~secure~~Brands ~~portfolio~~is ~~financing.~~required ~~The~~to ~~2020~~offer ~~Indenture~~to ~~provides~~repurchase asuch ~~different~~notes ~~definition~~from ~~of “Change of Control” than in~~ the ~~Senior~~holders ~~Secured~~at ~~Facilities and~~ a ~~sale~~price byequal ~~Harbinger~~to ~~Capital~~101% of ~~its shares in HRG or a foreclosure on our stock by~~ the ~~HRG~~principal ~~noteholders~~amount ~~would generally not be a change~~ of ~~control. Under~~ the ~~Term~~notes ~~Loan~~plus ~~and~~accrued ~~the~~interest ~~ABL~~or ~~Revolving~~obtain ~~Credit Facility,~~ a ~~change~~waiver of ~~control is an event of~~ default ~~and,~~from ifthe aholders ~~change~~ of ~~control~~such ~~were to occur, Spectrum Brands would be required to get an amendment to these agreements to avoid a default~~notes. If Spectrum Brands was unable to ~~get~~make ~~such an amendment,~~ the ~~lenders~~change ~~could accelerate the maturity~~ of ~~each~~control ofoffer, ~~the~~or ~~Spectrum~~to ~~Brands~~obtain ~~Term~~a ~~Loan~~waiver ~~and~~of ~~the ABL Revolving Credit Facility. In addition~~default, ~~under~~it ~~the~~would ~~indentures~~be an

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governing the 9.5% Notes and the 6.75% Notes, upon a change of control of SB Holdings, Spectrum Brands is required to offer to repurchase such notes from the holders at a price equal to 101% of the principal amount of the notes plus accrued interest or obtain a waiver of default from the holders of such notes. If Spectrum Brands was unable to make the change of control offer, or to obtain a waiver of default, it would be an event of default under the indentures that could allow holders of such notes to accelerate the maturity of the notes.

On June 27, 2012, the United States Securities and Exchange Commission (“SEC”) filed two civil actions in the United States District Court for the Southern District of New York, asserting claims against Harbinger Capital Partners Special Situations GP, L.L.C. (“Harbinger Capital”), Harbinger Capital Partners Offshore Manager, L.L.C., and certain of their current and former affiliated entities and persons, including Philip A. Falcone. Mr. Falcone is the Chief Executive Officer and Chairman of the Board of Directors of HRG, our parent. Investment funds managed by Harbinger Capital are the controlling stockholders of HRG, the majority stockholder of our direct parent company, SB Holdings. One civil action alleges that the defendants violated the anti-fraud provisions of the federal securities laws by engaging in market manipulation in connection with the trading of the debt securities of a particular issuer from 2006 to 2008. The other civil action alleges that the defendants violated the anti-fraud provisions of the federal securities laws in connection with a loan made by Harbinger Capital Partners Special Situations Fund, L.P. to Mr. Falcone in October 2009 and alleges further violations in connection with the circumstances and disclosure regarding alleged preferential treatment of, and agreements with, certain fund investors. Harbinger Capital and certain of its affiliates received "Wells Notices" in December 2011 with respect to the matters addressed by these actions.

We understand that Harbinger Capital and its affiliates deny the charges in the SEC's complaints and intend to vigorously defend against them. It is not possible at this time to predict the outcome of these actions, including whether the matters will result in settlements on any or all of the issues involved. However, in these actions the SEC is seeking a range of remedies, including permanent injunctive relief, disgorgement, civil penalties and pre-judgment interest and an order prohibiting Mr. Falcone from serving as an officer and director of any public company. If, following the outcome of these investigations, Harbinger Capital determines to dispose of the stock of HRG, or HRG determines to dispose of the stock of SB Holdings, this could constitute a change of control under the agreements governing our debt as discussed above.

We face risks related to the current economic environment.

The current economic environment and related turmoil in the global financial system has had and may continue to have an impact on our business and financial condition.

In the U.S., the uncertainty regarding significant mandated tax increases and government spending cuts beginning in January 2013, (the “Fiscal Cliff”) poses a serious risk for the U.S. economy and consumer confidence. In the event that the U.S. federal government is unable to achieve a resolution that would mitigate the impact of the Fiscal Cliff to a meaningful degree, there could be an adverse impact on the U.S. economy with a decrease in consumer spending, which could negatively impact our revenues and earnings. In addition, if the impact of the Fiscal Cliff results in a recessionary environment in the U.S., this could affect the global economy in a manner that negatively affects our international business and financial performance and results.

Global economic conditions have significantly impacted economic markets within certain sectors, with financial services and retail businesses being particularly impacted. Our ability to generate revenue depends significantly on discretionary consumer spending. It is difficult to predict new general economic conditions that could impact consumer and customer demand for our products or our ability to manage normal commercial relationships with our customers, suppliers and creditors. The recent continuation of a number of negative economic factors, including constraints on the supply of credit to households, uncertainty and weakness in the labor market and general consumer fears of a continuing economic downturn could have a negative impact on discretionary consumer spending. If the economy continues to deteriorate or fails to improve, our business could be negatively impacted, including as a result of reduced demand for our products or supplier or customer disruptions. Any weakness in discretionary consumer spending could have a material adverse effect on our revenues, results of operations and financial condition. In addition, our ability to access the capital markets may be restricted at a time when it could be necessary or beneficial to do so, which could have an impact on our flexibility to react to changing economic and business conditions.

InConcern ~~2011~~over ~~and~~continuing ~~2012~~high unemployment, ~~concern~~stagnant ~~over~~economic ~~sovereign~~performance ~~debt~~and ingovernment ~~Greece,~~debt ~~Spain,~~levels ~~Italy~~in ~~and~~many ~~certain other~~ European Union countries has caused significant fluctuations of the Euro relative to other currencies, such as the U.S. Dollar. Criticism of excessive national debt among certain European Union countries has led to credit downgrades of the sovereign debt of several countries in the region, and uncertainty about the future status of the Euro. Destabilization of the European economy could lead to a decrease in consumer confidence, which could cause reductions in discretionary spending and demand for our products. Furthermore, sovereign debt issues could also lead to further significant, and potentially longer-term, economic issues such as reduced economic growth and devaluation of the Euro against the U.S. Dollar, any of which could adversely affect our business, financial conditions and operating results.

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We depend on key personnel and may not be able to retain those employees or recruit additional qualified personnel.

We are highly dependent on the continuing efforts of our senior management team and other key personnel. Our business, financial condition and results of operations could be materially adversely affected if we lose any of these persons and are unable to attract and retain qualified replacements.

We participate in very competitive markets and we may not be able to compete successfully, causing us to lose market share and sales.

The markets in which we participate are very competitive. In the consumer battery market, our primary competitors are Duracell (a brand of Procter & Gamble), Energizer and Panasonic (a brand of Matsushita). In the electric shaving and grooming and electric personal care product markets, our primary competitors are Braun (a brand of Procter & Gamble), Norelco (a brand of Philips), and Vidal Sassoon and Revlon (brands of Helen of Troy). In the pet supplies market, our primary competitors are Mars, Hartz and Central Garden & Pet. In the Home and Garden Business, our principal national competitors are Scotts, Central Garden & Pet and S.C. Johnson. Our principal national competitors within our small appliances product category include Jarden Corporation, DeLonghi America, Euro-Pro Operating LLC, Metro Thebe, Inc., d/b/a HWI Breville, NACCO Industries, Inc. (Hamilton Beach) and SEB S.A. In the hardware and home improvement industry, our principle competitors are Schlage, a division of Ingersoll-Rand, Masco, Fortune Brands, Kohler, and American Standard. In each of these markets, we also face competition from numerous other companies. In addition, in a number of our product lines, we compete with our retail customers, who use their own private label brands, and with distributors and foreign manufacturers of unbranded products. Significant new competitors or increased competition from existing competitors may adversely affect our business, financial condition and results of our operations.

We compete with our competitors for consumer acceptance and limited shelf space based upon brand name recognition, perceived product quality, price, performance, product features and enhancements, product packaging and design innovation, as well as creative marketing, promotion and distribution strategies, and new product introductions. Our ability to compete in these consumer product markets may be adversely affected by a number of factors, including, but not limited to, the following:


•	We compete against many well-established companies that may have substantially greater financial and other resources, including personnel and research and development, and greater overall market share than us.


•	In some key product lines, our competitors may have lower production costs and higher profit margins than us, which may enable them to compete more aggressively in offering retail discounts, rebates and other promotional incentives.

• Product improvements or effective advertising campaigns by competitors may weaken consumer demand for our ~~products.~~

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products.


•	Consumer purchasing behavior may shift to distribution channels where we do not have a strong presence.


•	Consumer preferences may change to lower margin products or products other than those we market.


•	We may not be successful in the introduction, marketing and manufacture of any new products or product innovations or be able to develop and introduce, in a timely manner, innovations to our existing products that satisfy customer needs or achieve market acceptance.

Some competitors may be willing to reduce prices and accept lower profit margins to compete with us. As a result of this competition, we could lose market share and sales, or be forced to reduce our prices to meet competition. If our product offerings are unable to compete successfully, our sales, results of operations and financial condition could be materially and adversely affected.

We may not be able to realize expected benefits and synergies from future acquisitions of businesses or product lines.

We may acquire partial or full ownership in businesses or may acquire rights to market and distribute particular products or lines of products. The acquisition of a business or the rights to market specific products or use specific product names may involve a financial commitment by us, either in the form of cash or equity consideration. In the case of a new license, such commitments are usually in the form of prepaid royalties and future minimum royalty payments. There is no guarantee that we will acquire businesses or product distribution rights that will contribute positively to our earnings. Anticipated synergies may not materialize, cost savings may be less than expected, sales of products may not meet expectations, and acquired businesses may carry unexpected liabilities.

Sales of certain of our products are seasonal and may cause our operating results and working capital requirements to fluctuate.

On a consolidated basis our financial results are approximately equally weighted between quarters, however, sales of certain product categories tend to be seasonal. Sales in the consumer battery, electric shaving and grooming and electric personal care product categories, particularly in North America, tend to be concentrated in the December holiday season (Spectrum’s first fiscal quarter). Demand for hardware and home improvement products increases during the spring and summer construction period (Spectrum's third and fourth fiscal quarters) and demand for pet supplies products remains fairly constant throughout the year. Demand for home and garden control products ~~sold~~typically ~~through~~peaks during the ~~Home~~first six months of the calendar year (Spectrum’s second and ~~Garden~~third ~~Business~~fiscal ~~typically~~quarters). Small Appliances peaks ~~during~~from July through December primarily due to the ~~first~~increased ~~six~~demand ~~months~~by customers in the late summer for “back-to-school” sales and in the fall for the holiday season. As a result of this seasonality, our inventory and working capital needs fluctuate significantly throughout the year. In addition, orders from retailers are often made late in the period preceding the applicable peak season, making forecasting of production schedules and inventory purchases difficult. If we are unable to accurately forecast and prepare for customer orders or our working capital needs, or there is a general downturn in business or economic conditions during these periods, our business, financial condition and results of operations could be materially and adversely affected.

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the calendar year (Spectrum’s second and third fiscal quarters). Small Appliances peaks from July through December primarily due to the increased demand by customers in the late summer for “back-to-school” sales and in the fall for the holiday season. As a result of this seasonality, our inventory and working capital needs fluctuate significantly during the year. In addition, orders from retailers are often made late in the period preceding the applicable peak season, making forecasting of production schedules and inventory purchases difficult. If we are unable to accurately forecast and prepare for customer orders or our working capital needs, or there is a general downturn in business or economic conditions during these periods, our business, financial condition and results of operations could be materially and adversely affected.

We are subject to significant international business risks that could hurt our business and cause our results of operations to fluctuate.

Approximately 4641% of our net sales for the fiscal year ended September 30, ~~2012~~2013 were ~~from~~to customers outside of the U.S. Our pursuit of international growth opportunities may require significant investments for an extended period before returns on these investments, if any, are realized. Our international operations are subject to risks including, among others:

• currency fluctuations, including, without limitation, fluctuations in the foreign exchange rate of the Euro, British Pound, Brazilian Real and the Mexican Peso;


•	changes in the economic conditions or consumer preferences or demand for our products in these markets;


•	the risk that because our brand names may not be locally recognized, we must spend significant amounts of time and money to build brand recognition without certainty that we will be successful;


•	labor unrest;


•	political and economic instability, as a result of terrorist attacks, natural disasters or otherwise;


•	lack of developed infrastructure;


•	longer payment cycles and greater difficulty in collecting accounts;


•	restrictions on transfers of funds;


•	import and export duties and quotas, as well as general transportation costs;


•	changes in domestic and international customs and tariffs;


•	changes in foreign labor laws and regulations affecting our ability to hire and retain employees;


•	inadequate protection of intellectual property in foreign countries;


•	unexpected changes in regulatory environments;

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•	difficulty in complying with foreign law;


•	difficulty in obtaining distribution and support; and


•	adverse tax consequences.

The foregoing factors may have a material adverse effect on our ability to increase or maintain our supply of products, financial condition or results of operations.

Adverse weather conditions during our peak selling season for our home and garden control products could have a material adverse effect on our Home and Garden Business.

Weather conditions in the U.S. have a significant impact on the timing and volume of sales of certain of our lawn and garden and household insecticide and repellent products. ~~Periods~~For example, periods of dry, hot weather can decrease insecticide sales, while periods of cold and wet weather can slow sales of herbicides.

Our products utilize certain key raw materials; any increase in the price of, or change in supply and demand for, these raw materials could have a material and adverse effect on our business, financial condition and profits.

The principal raw materials used to produce our products—including zinc powder, brass, electrolytic manganese dioxide powder, petroleum-based plastic materials, steel, aluminum, copper and corrugated materials (for packaging)—are sourced either on a global or regional basis by us or our suppliers, and the prices of those raw materials are susceptible to price fluctuations due to supply and demand trends, energy costs, transportation costs, government regulations, duties and tariffs, changes in currency exchange rates, price controls, general economic conditions and other unforeseen circumstances. In particular, during 2011, 2012 and ~~2012~~2013, we experienced extraordinary price increases for raw materials, particularly as a result of strong demand from China. Although we may increase the prices of certain of our goods to our customers, we may not be able to pass all of these cost increases on to our customers. As a result, our margins may be adversely impacted by such cost increases. We cannot provide any assurance that our sources of supply will not be interrupted due to changes in worldwide supply of or demand for raw materials or other events that interrupt material flow, which may have an adverse effect on our profitability and results of operations.

We regularly engage in forward purchase and hedging derivative transactions in an attempt to effectively manage and stabilize some of the raw material costs we expect to incur over the next 12 to 24 months;. ~~however~~However, our hedging positions may not be effective, or may not anticipate beneficial trends, in a particular raw material market or may, as a result of changes in our business, no longer be useful for us. In addition, for certain of the principal raw materials we use to produce our products, such as electrolytic manganese dioxide powder, there are no available effective hedging markets. If these efforts are not effective or expose us to above average costs for an extended period of time, and we are unable to pass our raw materials costs on to our customers, our future profitability may be materially and adversely affected. Furthermore, with respect to transportation costs, certain modes of delivery are subject to fuel surcharges which are determined based upon the current cost of diesel fuel in relation to pre-established agreed upon costs. We may be unable to pass these fuel surcharges on to our customers, which may have an adverse effect on our profitability and results of operations.

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business, no longer be useful for us. In addition, for certain of the principal raw materials we use to produce our products, such as electrolytic manganese dioxide powder, there are no available effective hedging markets. If these efforts are not effective or expose us to above average costs for an extended period of time, and we are unable to pass our raw materials costs on to our customers, our future profitability may be materially and adversely affected. Furthermore, with respect to transportation costs, certain modes of delivery are subject to fuel surcharges which are determined based upon the current cost of diesel fuel in relation to pre-established agreed upon costs. We may be unable to pass these fuel surcharges on to our customers, which may have an adverse effect on our profitability and results of operations.

In addition, we have exclusivity arrangements and minimum purchase requirements with certain of our suppliers for the Home and Garden Business, which increase our dependence upon and exposure to those suppliers. Some of those agreements include caps on the price we pay for our supplies and in certain instances, these caps have allowed us to purchase materials at below market prices. When we attempt to renew those contracts, the other parties to the contracts may not be willing to include or may limit the effect of those caps and could even attempt to impose above market prices in an effort to make up for any below market prices paid by us prior to the renewal of the agreement. Any failure to timely obtain suitable supplies at competitive prices could materially adversely affect our business, financial condition and results of operations.

We may not be able to fully utilize our U.S. net operating loss carryforwards.

As of September 30, ~~2012~~2013, ~~Spectrum~~we ~~Brands~~had ~~has~~ U.S. federal and state net operating loss carryforwards of approximately $1,~~304~~502 million and $1,~~340~~538 million, respectively. These net operating loss carryforwards expire through years ending in ~~2032~~2033. As of September 30, ~~2012~~2013, our management determined that it continues to be more likely than not that the U.S. federal and most of the U.S. state net deferred tax asset, excluding certain indefinite-lived assets, will not be realized in the future and as such recorded a full valuation allowance to offset the net U.S. federal and most of the U.S. deferred tax asset, including Spectrum Brands’ net operating loss carryforwards. In addition, Spectrum Brands has had changes of ownership, as defined under Section 382 of the Internal Revenue Code of 1986, as amended (the “IRC”), that continue to subject a significant amount of Spectrum Brands’ U.S. net operating losses and other tax attributes to certain limitations.

As a consequence of the merger of Salton-, Inc. and Applica ~~merger~~Incorporated in December 2007 (which created Russell Hobbs), as well as earlier business combinations and issuances of common stock consummated by both companies, use of the tax benefits of Russell Hobbs’ U.S. loss carryforwards is also subject to limitations imposed by Section 382 of the IRC. We expect that a significant portion of these carryforwards will not be available to offset future taxable income, if any. In addition, use of Russell Hobbs’ net operating loss and credit carryforwards is dependent upon both Russell Hobbs and us achieving profitable results in the future. The Russell Hobbs’ U.S. net operating loss carryforwards are subject to a full valuation allowance at September 30, 2012.

WeTable ~~estimate that approximately $301 million~~ of the Spectrum and Russell Hobbs U.S. federal net operating losses and $385 million of the Spectrum and Russell Hobbs state net operating losses would expire unused even if the Company generates sufficient income to otherwise use all its net operating losses, due to the limitation in Section 382 of the IRC.Contents

tax benefits of Russell Hobbs’ U.S. loss carryforwards is also subject to limitations imposed by Section 382 of the IRC. We expect that a significant portion of these carryforwards will not be available to offset future taxable income, if any. In addition, use of Russell Hobbs’ net operating loss and tax credit carryforwards is dependent upon both Russell Hobbs and us achieving profitable results in the future. The Russell Hobbs’ U.S. net operating loss carryforwards were subject to a full valuation allowance at September 30, 2013.

We estimate that approximately $301 million of the Spectrum and Russell Hobbs U.S. federal net operating losses and $358 million of the Spectrum and Russell Hobbs state net operating losses would expire unused even if the Company generates sufficient income to otherwise use all its net operating losses, due to the limitation in Section 382 of the IRC.

If we are unable to fully utilize our net operating losses, other than those restricted under Section 382 of the IRC, as discussed above, to offset taxable income generated in the future, our results of operations could be materially and negatively impacted.

Consolidation of retailers and our dependence on a small number of key customers for a significant percentage of our sales may negatively affect our business, financial condition and results of operations.

As a result of consolidation of retailers and consumer trends toward national mass merchandisers, a significant percentage of our sales are attributable to a very limited group of customers. Our largest customer accounted for approximately 2318% of our consolidated net sales for the fiscal year ended September 30, ~~2012~~2013. As these mass merchandisers and retailers grow larger and become more sophisticated, they may demand lower pricing, special packaging, or impose other requirements on product suppliers. These business demands may relate to inventory practices, logistics, or other aspects of the customer-supplier relationship. Because of the importance of these key customers, demands for price reductions or promotions, reductions in their purchases, changes in their financial condition or loss of their accounts could have a material adverse effect on our business, financial condition and results of operations.

Although we have long-established relationships with many of our customers, we do not have long-term agreements with them and purchases are generally made through the use of individual purchase orders. Any significant reduction in purchases, failure to obtain anticipated orders or delays or cancellations of orders by any of these major customers, or significant pressure to reduce prices from any of these major customers, could have a material adverse effect on our business, financial condition and results of operations. Additionally, a significant deterioration in the financial condition of the retail industry in general could have a material adverse effect on our sales and profitability.

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In addition, as a result of the desire of retailers to more closely manage inventory levels, there is a growing trend among them to purchase products on a “just-in-time” basis. Due to a number of factors, including (i) manufacturing lead-times, (ii) seasonal purchasing patterns and (iii) the potential for material price increases, we may be required to shorten our lead-time for production and more closely anticipate our retailers’ and customers’ demands, which could in the future require us to carry additional inventories and increase our working capital and related financing requirements. This may increase the cost of warehousing inventory or result in excess inventory becoming difficult to manage, unusable or obsolete. In addition, if our retailers significantly change their inventory management strategies, we may encounter difficulties in filling customer orders or in liquidating excess inventories, or may find that customers are cancelling orders or returning products, which may have a material adverse effect on our business.

Furthermore, we primarily sell branded products and a move by one or more of our large customers to sell significant quantities of private label products, which we do not produce on their behalf and which directly compete with our products, could have a material adverse effect on our business, financial condition and results of operations.

As a result of our international operations, we face a number of risks related to exchange rates and foreign currencies.

Our international sales and certain of our expenses are transacted in foreign currencies. During the fiscal year ended September 30, ~~2012~~2013, approximately 4641% of our net sales and 4655% of our operating expenses were denominated in foreign currencies. We expect that the amount of our revenues and expenses transacted in foreign currencies will increase as our Latin American, European and Asian operations grow and, as a result, our exposure to risks associated with foreign currencies could increase accordingly. Significant changes in the value of the U.S. dollar in relation to foreign currencies will affect our cost of goods sold and our operating margins and could result in exchange losses or otherwise have a material effect on our business, financial condition and results of operations. Changes in currency exchange rates may also affect our sales to, purchases from and loans to our subsidiaries as well as sales to, purchases from and bank lines of credit with our customers, suppliers and creditors that are denominated in foreign currencies.

We source many products from China and other Asian countries. To the extent the Chinese Renminbi (“RMB”) or other currencies appreciate with respect to the U.S. dollar, we may experience fluctuations in our results of operations. Since 2005, the RMB has no longer been pegged to the U.S. dollar at a constant exchange rate and instead fluctuates versus a basket of currencies. Although the People’s Bank of China regularly intervenes in the foreign exchange market to prevent significant short-term fluctuations in the exchange rate, the RMB may appreciate or depreciate within a flexible peg range against the U.S. dollar in the medium to long term. Moreover, it is possible that in the future Chinese authorities may lift restrictions on fluctuations in the RMB exchange rate and lessen intervention in the foreign exchange market.

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the RMB has no longer been pegged to the U.S. dollar at a constant exchange rate and instead fluctuates versus a basket of currencies. Although the People’s Bank of China regularly intervenes in the foreign exchange market to prevent significant short-term fluctuations in the exchange rate, the RMB may appreciate or depreciate within a flexible peg range against the U.S. dollar in the medium to long term. Moreover, it is possible that in the future Chinese authorities may lift restrictions on fluctuations in the RMB exchange rate and lessen intervention in the foreign exchange market.

While we may enter into hedging transactions in the future, the availability and effectiveness of these transactions may be limited, and we may not be able to successfully hedge our exposure to currency fluctuations. Further, we may not be successful in implementing customer pricing or other actions in an effort to mitigate the impact of currency fluctuations and, thus, our results of operations may be adversely impacted.

A deterioration in trade relations with China could lead to a substantial increase in tariffs imposed on goods of Chinese origin, which potentially could reduce demand for and sales of our products.

We purchase a number of our products and supplies from suppliers located in China. China gained Permanent Normal Trade Relations (“PNTR”) with the U.S. when it acceded to the World Trade Organization (“WTO”), effective January 2002. The U.S. imposes the lowest applicable tariffs on exports from PNTR countries to the U.S. In order to maintain its WTO membership, China has agreed to several requirements, including the elimination of caps on foreign ownership of Chinese companies, lowering tariffs and publicizing its laws. China may not meet these requirements and, as a result, it may not remain a member of the WTO, and its PNTR trading status may not be maintained. If China’s WTO membership is withdrawn or if PNTR status for goods produced in China were removed, there could be a substantial increase in tariffs imposed on goods of Chinese origin entering the U.S. which could have a material adverse effect on our sales and gross margin. Furthermore, on October 11, 2011, the U.S. Senate approved a bill to impose sanctions against China for its currency valuation, although the future status of this bill is uncertain. If this or a similar bill is enacted into law, the U.S. government may impose duties on products from China and other countries found to be subsidizing their exports by undervaluing their currencies, which may increase the costs of goods produced in China, or prompt China to retaliate with other tariffs or other actions. Any such series of events could have a material negative adverse effect on our sales and gross margin.

Our international operations may expose us to risks related to compliance with the laws and regulations of foreign countries.

We are subject to three EU Directives that may have a material impact on our business: Restriction of the Use of Hazardous Substances in Electrical and Electronic Equipment; Waste of Electrical and Electronic Equipment and the Directive on Batteries and Accumulators and Waste Batteries, discussed below. Restriction of the Use of Hazardous Substances in Electrical and Electronic Equipment requires us to eliminate specified hazardous materials from products we sell in EU member states. Waste of Electrical and Electronic Equipment requires us to collect and treat, dispose of or recycle certain products we manufacture or import into the EU at our own expense. The EU Directive on Batteries and Accumulators and Waste Batteries bans heavy metals in batteries by establishing maximum quantities of heavy metals in batteries and mandates waste management of these batteries, including collection, recycling and disposal systems, with the costs imposed upon producers and importers such as us. The costs associated with maintaining compliance or failing to comply with the EU Directives may harm our business. For example:

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on Batteries and Accumulators and Waste Batteries, discussed below. Restriction of the Use of Hazardous Substances in Electrical and Electronic Equipment requires us to eliminate specified hazardous materials from products we sell in EU member states. Waste of Electrical and Electronic Equipment requires us to collect and treat, dispose of or recycle certain products we manufacture or import into the EU at our own expense. The EU Directive on Batteries and Accumulators and Waste Batteries bans heavy metals in batteries by establishing maximum quantities of heavy metals in batteries and mandates waste management of these batteries, including collection, recycling and disposal systems, with the costs imposed upon producers and importers such as us. The costs associated with maintaining compliance or failing to comply with the EU Directives may harm our business. For example:


•	Although contracts with our suppliers address related compliance issues, we may be unable to procure appropriate Restriction of the Use of Hazardous Substances in Electrical and Electronic Equipment compliant material in sufficient quantity and quality and/or be able to incorporate it into our product procurement processes without compromising quality and/or harming our cost structure.


•	We may face excess and obsolete inventory risk related to non-compliant inventory that we may hold for which there is reduced demand, and we may need to write down the carrying value of such inventories.


•	We may be unable to sell certain existing inventories of our batteries in Europe.

Many of the developing countries in which we operate do not have significant governmental regulation relating to environmental safety, occupational safety, employment practices or other business matters routinely regulated in the U.S. or may not rigorously enforce such regulation. As these countries and their economies develop, it is possible that new regulations or increased enforcement of existing regulations may increase the expense of doing business in these countries. In addition, social legislation in many countries in which we operate may result in significantly higher expenses associated with labor costs, terminating employees or distributors and closing manufacturing facilities. Increases in our costs as a result of increased regulation, legislation or enforcement could materially and adversely affect our business, results of operations and financial condition.

We may not be able to adequately establish and protect our intellectual property rights, and the infringement or loss of our intellectual property rights could harm our business.

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To establish and protect our intellectual property rights, we rely upon a combination of national, foreign and multi-national patent, trademark and trade secret laws, together with licenses, confidentiality agreements and other contractual arrangements. The measures that we take to protect our intellectual property rights may prove inadequate to prevent third parties from infringing or misappropriating our intellectual property. We may need to resort to litigation to enforce or defend our intellectual property rights. If a competitor or collaborator files a patent application claiming technology also claimed by us, or a trademark application claiming a trademark, service mark or trade dress also used by us, in order to protect our rights, we may have to participate in expensive and time consuming opposition or interference proceedings before the U.S. Patent and Trademark Office or a similar foreign agency. Similarly, our intellectual property rights may be challenged by third parties or invalidated through administrative process or litigation. The costs associated with protecting intellectual property rights, including litigation costs, may be material. Furthermore, even if our intellectual property rights are not directly challenged, disputes among third parties could lead to the weakening or invalidation of our intellectual property rights, or our competitors may independently develop technologies that are substantially equivalent or superior to our technology. Obtaining, protecting and defending intellectual property rights can be time consuming and expensive, and may require us to incur substantial costs, including the diversion of the time and resources of management and technical personnel.

Moreover, the laws of certain foreign countries in which we operate or may operate in the future do not protect, and the governments of certain foreign countries do not enforce, intellectual property rights to the same extent as do the laws and government of the U.S., which may negate our competitive or technological advantages in such markets. Also, some of the technology underlying our products is the subject of nonexclusive licenses from third parties. As a result, this technology could be made available to our competitors at any time. If we are unable to establish and then adequately protect our intellectual property rights, our business, financial condition and results of operations could be materially and adversely affected.

We license various trademarks, trade names and patents from third parties for certain of our products. These licenses generally place marketing obligations on us and require us to pay fees and royalties based on net sales or profits. Typically, these licenses may be terminated if we fail to satisfy certain minimum sales obligations or if we breach the terms of the license. The termination of these licensing arrangements could adversely affect our business, financial condition and results of operations.

In our Global Batteries & Appliances segment, we license the use of the Black & Decker brand for marketing in certain small household appliances in North America, South America (excluding Brazil) and the Caribbean. In July 2011, The Black & Decker Corporation ("BDC") extended the license agreement through December 2015. The failure to renew the license agreement with BDC or to enter into a new agreement on acceptable terms could have a material adverse effect on our financial condition, liquidity and results of operations.

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condition, liquidity and results of operations.

Claims by third parties that we are infringing their intellectual property and other litigation could adversely affect our business.

From time to time in the past we have been subject to claims that we are infringing the intellectual property of others. We currently are the subject of such claims and it is possible that third parties will assert infringement claims against us in the future. An adverse finding against us in these or similar trademark or other intellectual property litigations may have a material adverse effect on our business, financial condition and results of operations. Any such claims, with or without merit, could be time consuming and expensive, and may require us to incur substantial costs, including the diversion of the resources of management and technical personnel, cause product delays or require us to enter into licensing or other agreements in order to secure continued access to necessary or desirable intellectual property. If we are deemed to be infringing a third party’s intellectual property and are unable to continue using that intellectual property as we had been, our business and results of operations could be harmed if we are unable to successfully develop non-infringing alternative intellectual property on a timely basis or license non-infringing alternatives or substitutes, if any exist, on commercially reasonable terms. In addition, an unfavorable ruling in intellectual property litigation could subject us to significant liability, as well as require us to cease developing, manufacturing or selling the affected products or using the affected processes or trademarks. Any significant restriction on our proprietary or licensed intellectual property that impedes our ability to develop and commercialize our products could have a material adverse effect on our business, financial condition and results of operations.

Our dependence on a few suppliers and one of our U.S. facilities for certain of our products makes us vulnerable to a disruption in the supply of our products.

Although we have long-standing relationships with many of our suppliers, we generally do not have long-term contracts with them. An adverse change in any of the following could have a material adverse effect on our business, financial condition and results of operations:


•	our ability to identify and develop relationships with qualified suppliers;

• the terms and conditions upon which we purchase products from our suppliers, including applicable exchange rates, ~~transport costs and other costs, our suppliers’ willingness to extend credit to us to finance our inventory purchases and other factors beyond our control;~~

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transport and other costs, our suppliers’ willingness to extend credit to us to finance our inventory purchases and other factors beyond our control;


•	the financial condition of our suppliers;


•	political instability in the countries in which our suppliers are located;


•	our ability to import outsourced products;


•	our suppliers’ noncompliance with applicable laws, trade restrictions and tariffs; or


•	our suppliers’ ability to manufacture and deliver outsourced products according to our standards of quality on a timely and efficient basis.

If our relationship with one of our key suppliers is adversely affected, we may not be able to quickly or effectively replace such supplier and may not be able to retrieve tooling, molds or other specialized production equipment or processes used by such supplier in the manufacture of our products.

In addition, we manufacture the majority of our foil cutting systems for our shaving product lines, using specially designed machines and proprietary cutting technology, at our Portage, Wisconsin facility. Damage to this facility, or prolonged interruption in the operations of this facility for repairs, as a result of labor difficulties or for other reasons, could have a material adverse effect on our ability to manufacture and sell our foil shaving products which could in turn harm our business, financial condition and results of operations.

We face risks related to our sales of products obtained from third-party suppliers.

We sell a significant number of products that are manufactured by third party suppliers over which we have no direct control. While we have implemented processes and procedures to try to ensure that the suppliers we use are complying with all applicable regulations, there can be no assurances that such suppliers in all instances will comply with such processes and procedures or otherwise with applicable regulations. Noncompliance could result in our marketing and distribution of contaminated, defective or dangerous products which could subject us to liabilities and could result in the imposition by governmental authorities of procedures or penalties that could restrict or eliminate our ability to purchase products from non-compliant suppliers. Any or all of these effects could adversely affect our business, financial condition and results of operations.

Class action and derivative action lawsuits and other investigations, regardless of their merits, could have an adverse effect on our business, financial condition and results of operations.

20We and certain of our officers and directors have been named in the past, and, may be named in the future, as defendants of class action and derivative action lawsuits. In the past, we have also received requests for information from government authorities. Regardless of their subject matter or merits, class action lawsuits and other government investigations may result in significant cost to us, which may not be covered by insurance, may divert the attention of management or may otherwise have an adverse effect on our business, financial condition and results of operations.

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We and certain of our officers and directors of SB Holdings have been named in the past, and may be named in the future, as defendants of class action and derivative action lawsuits. In the past, we have also received requests for information from government authorities. Regardless of their subject matter or merits, class action lawsuits and other government investigations may result in significant cost to us, which may not be covered by insurance, may divert the attention of management or may otherwise have an adverse effect on our business, financial condition and results of operations.

We may be exposed to significant product liability claims which our insurance may not cover and which could harm our reputation.

In the ordinary course of our business, we may be named as a defendant in lawsuits involving product liability claims. In any such proceeding, plaintiffs may seek to recover large and sometimes unspecified amounts of damages and the matters may remain unresolved for several years. Any such matters could have a material adverse effect on our business, results of operations and financial condition if we are unable to successfully defend against or settle these matters or if our insurance coverage is insufficient to satisfy any judgments against us or settlements relating to these matters. Although we have product liability insurance coverage and an excess umbrella policy, our insurance policies may not provide coverage for certain, or any, claims against us or may not be sufficient to cover all possible liabilities. Additionally, we do not maintain product recall insurance. We may not be able to maintain such insurance on acceptable terms, if at all, in the future. Moreover, any adverse publicity arising from claims made against us, even if the claims were not successful, could adversely affect the reputation and sales of our products. In particular, product recalls or product liability claims challenging the safety of our products may result in a decline in sales for a particular product. This could be true even if the claims themselves are ultimately settled for immaterial amounts. This type of adverse publicity could occur and product liability claims could be made in the future.

We may incur material capital and other costs due to environmental liabilities.

We are subject to a broad range of federal, state, local, foreign and multi-national laws and regulations relating to the environment. These include laws and regulations that govern:


•	discharges to the air, water and land;


•	the handling and disposal of solid and hazardous substances and wastes; and

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•	remediation of contamination associated with release of hazardous substances at our facilities and at off-site disposal locations.

Risk of environmental liability is inherent in our business. As a result, material environmental costs may arise in the future. In particular, we may incur capital and other costs to comply with increasingly stringent environmental laws and enforcement policies, such as the EU Directives: Restriction of the Use of Hazardous Substances in Electrical and Electronic Equipment, Waste of Electrical and Electronic Equipment and the Directive on Batteries and Accumulators and Waste Batteries, discussed above. ~~Moreover,~~Our ~~there are proposed~~ international ~~accords~~operations ~~and~~may ~~treaties,~~expose asus ~~well as federal, state and local laws and regulations, that would attempt~~ to ~~control~~risks orrelated limit the causes of climate change, including the effect of greenhouse gas emissions on the environment. In the event that the U.S. government or foreign governments enact new climate change laws or regulations or make changes to ~~existing laws or regulations,~~ compliance with ~~applicable laws or regulations may result in increased manufacturing costs for our products, such as by requiring investment in new pollution control equipment or changing~~ the ways in which certain of our products are made. We may incur some of these costs directly and others may be passed on to us from our third-party suppliers. Although we believe that we are substantially in compliance with applicable environmental laws and regulations at our facilities, we may not always be in compliance with such laws and regulations or any new laws and regulations in the future, which could have a material adverse effect on our business, financial condition and results of ~~operations.~~foreign countries

Moreover, there are proposed international accords and treaties, as well as federal, state and local laws and regulations, that would attempt to control or limit the causes of climate change, including the effect of greenhouse gas emissions on the environment. In the event that the U.S. government or foreign governments enact new climate change laws or regulations or make changes to existing laws or regulations, compliance with applicable laws or regulations may result in increased manufacturing costs for our products, such as by requiring investment in new pollution control equipment or changing the ways in which certain of our products are made. We may incur some of these costs directly and others may be passed on to us from our third-party suppliers. Although we believe that we are substantially in compliance with applicable environmental laws and regulations at our facilities, we may not always be in compliance with such laws and regulations or any new laws and regulations in the future, which could have a material adverse effect on our business, financial condition and results of operations.

From time to time, we have been required to address the effect of historic activities on the environmental condition of our properties or former properties. We have not conducted invasive testing at all of our facilities to identify all potential environmental liability risks. Given the age of our facilities and the nature of our operations, material liabilities may arise in the future in connection with our current or former facilities. If previously unknown contamination of property underlying or in the vicinity of our manufacturing facilities is discovered, we could be required to incur material unforeseen expenses. If this occurs, it may have a material adverse effect on our business, financial condition and results of operations. We are currently engaged in investigative or remedial projects at a few of our facilities and any liabilities arising from such investigative or remedial projects at such facilities may have a material effect on our business, financial condition and results of operations.

We are also subject to proceedings related to our disposal of industrial and hazardous material at off-site disposal locations or similar disposals made by other parties for which we are responsible as a result of our relationship with such other parties. These proceedings are under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") or similar state or foreign jurisdiction laws that hold persons who “arranged for” the disposal or treatment of such substances strictly liable for costs incurred in responding to the release or threatened release of hazardous substances from such sites, regardless of fault or the lawfulness of the original disposal. Liability under CERCLA is typically joint and several, meaning that a liable party may be responsible for all of the costs incurred in investigating and remediating contamination at a site. We occasionally are identified by federal or state governmental agencies as being a potentially responsible party for response actions contemplated at an off-site facility. At the existing sites where we have been notified of our status as a potentially responsible party, it is either premature to determine if our potential liability, if any, will be material or we do not believe that our liability, if any, will be material. We may be named as a potentially responsible party under CERCLA or similar state or foreign jurisdiction laws in the future for other sites not currently known to us, and the costs and liabilities associated with these sites may have a material adverse effect on our business, financial condition and results of operations.

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sites, regardless of fault or the lawfulness of the original disposal. Liability under CERCLA is typically joint and several, meaning that a liable party may be responsible for all of the costs incurred in investigating and remediating contamination at a site. We occasionally are identified by federal or state governmental agencies as being a potentially responsible party for response actions contemplated at an off-site facility. At the existing sites where we have been notified of our status as a potentially responsible party, it is either premature to determine if our potential liability, if any, will be material or we do not believe that our liability, if any, will be material. We may be named as a potentially responsible party under CERCLA or similar state or foreign jurisdiction laws in the future for other sites not currently known to us, and the costs and liabilities associated with these sites may have a material adverse effect on our business, financial condition and results of operations.

Compliance with various public health, consumer protection and other regulations applicable to our products and facilities could increase our cost of doing business and expose us to additional requirements with which we may be unable to comply.

Certain of our products sold through, and facilities operated under, each of our business segments are regulated by the Environmental Protection Agency ("EPA"), the Food and Drug Administration ("FDA") or other federal consumer protection and product safety agencies and are subject to the regulations such agencies enforce, as well as by similar state, foreign and multinational agencies and regulations. For example, in the U.S., all products containing pesticides must be registered with the EPA and, in many cases, similar state and foreign agencies before they can be manufactured or sold. Our inability to obtain, or the cancellation of, any registration could have an adverse effect on our business, financial condition and results of operations. The severity of the effect would depend on which products were involved, whether another product could be substituted and whether our competitors were similarly affected. We attempt to anticipate regulatory developments and maintain registrations of, and access to, substitute chemicals and other ingredients, but we may not always be able to avoid or minimize these risks.

As a distributor of consumer products in the U.S., certain of our products are also subject to the Consumer Product Safety Act, which empowers the U.S. Consumer Product Safety Commission (the “Consumer Commission”) to exclude from the market products that are found to be unsafe or hazardous. Under certain circumstances, the Consumer Commission could require us to repair, replace or refund the purchase price of one or more of our products, or we may voluntarily do so. For example, Russell Hobbs, in cooperation with the Consumer Commission, voluntarily recalled approximately 9,800 units of a thermal coffeemaker sold under the Black & Decker brand in August 2009 and approximately 584,000 coffeemakers in June 2009. Any additional repurchases or recalls of our products could be costly to us and could damage the reputation or the value of our brands. If we are required to remove, or we voluntarily remove our products from the market, our reputation or brands could be tarnished and we may have large quantities of finished products that could not be sold. Furthermore, failure to timely notify the Consumer Commission of a potential safety hazard can result in significant fines being assessed against us. Additionally, laws regulating certain consumer products exist in some states, as well as in other countries in which we sell our products, and more restrictive laws and regulations may be adopted in the future.

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require us to repair, replace or refund the purchase price of one or more of our products, or we may voluntarily do so. Any additional repurchases or recalls of our products could be costly to us and could damage the reputation or the value of our brands. If we are required to remove, or we voluntarily remove our products from the market, our reputation or brands could be tarnished and we may have large quantities of finished products that could not be sold. Furthermore, failure to timely notify the Consumer Commission of a potential safety hazard can result in significant fines being assessed against us. Additionally, laws regulating certain consumer products exist in some states, as well as in other countries in which we sell our products, and more restrictive laws and regulations may be adopted in the future.

The Food Quality Protection Act ("FQPA") established a standard for food-use pesticides, which is that a reasonable certainty of no harm will result from the cumulative effect of pesticide exposures. Under the FQPA, the EPA is evaluating the cumulative effects from dietary and non-dietary exposures to pesticides. The pesticides in certain of our products that are sold through the Home and Garden Business continue to be evaluated by the EPA as part of this program. It is possible that the EPA or a third party active ingredient registrant may decide that a pesticide we use in our products will be limited or made unavailable to us. We cannot predict the outcome or the severity of the effect of the EPA’s continuing evaluations of active ingredients used in our products.

In addition, the use of certain pesticide products that are sold through our Home and Garden Business may, among other things, be regulated by various local, state, federal and foreign environmental and public health agencies. These regulations may require that only certified or professional users apply the product, that users post notices on properties where products have been or will be applied or that certain ingredients may not be used. Compliance with such public health regulations could increase our cost of doing business and expose us to additional requirements with which we may be unable to comply.

Any failure to comply with these laws or regulations, or the terms of applicable environmental permits, could result in us incurring substantial costs, including fines, penalties and other civil and criminal sanctions or the prohibition of sales of our pest control products. Environmental law requirements, and the enforcement thereof, change frequently, have tended to become more stringent over time and could require us to incur significant expenses.

Most federal, state and local authorities require certification by Underwriters Laboratory, Inc. (“UL”), an independent, not-for-profit corporation engaged in the testing of products for compliance with certain public safety standards, or other safety regulation certification prior to marketing electrical appliances. Foreign jurisdictions also have regulatory authorities overseeing the safety of consumer products. Our products may not meet the specifications required by these authorities. A determination that any of our products are not in compliance with these rules and regulations could result in the imposition of fines or an award of damages to private litigants.

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Public perceptions that some of the products we produce and market are not safe could adversely affect us.

On occasion, customers and some current or former employees have alleged that some products failed to perform up to expectations or have caused damage or injury to individuals or property. Public perception that any of our products are not safe, whether justified or not, could impair our reputation, damage our brand names and have a material adverse effect on our business, financial condition and results of operations. In addition, we rely on certain third party trademarks, brand names and logos which we do not have exclusive use of. Public perception that any such third party trademarks, band names and logos used by us, are not safe, whether justified or not, could have a material adverse effect on our business, financial condition and results of operations

If we are unable to negotiate satisfactory terms to continue existing or enter into additional collective bargaining agreements, we may experience an increased risk of labor disruptions and our results of operations and financial condition may suffer.

Approximately 3316% of our total labor force is covered by collective bargaining agreements. There are ~~three~~four collective bargaining agreements that will expire during our fiscal year ending September 30, ~~2013~~2014, which cover approximately 6457% of the labor force under collective bargaining agreements, or approximately 219% of our total labor force. While we currently expect to negotiate continuations to the terms of these agreements, there can be no assurances that we will be able to obtain terms that are satisfactory to us or otherwise to reach agreement at all with the applicable parties. In addition, in the course of our business, we may also become subject to additional collective bargaining agreements. These agreements may be on terms that are less favorable than those under our current collective bargaining agreements. Increased exposure to collective bargaining agreements, whether on terms more or less favorable than our existing collective bargaining agreements, could adversely affect the operation of our business, including through increased labor expenses. While we intend to comply with all collective bargaining agreements to which we are subject, there can be no assurances that we will be able to do so and any noncompliance could subject us to disruptions in our operations and materially and adversely affect our results of operations and financial condition.

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Significant changes in actual investment return on pension assets, discount rates and other factors could affect our results of operations, equity and pension contributions in future periods.

Our results of operations may be positively or negatively affected by the amount of income or expense we record for our defined benefit pension plans. U.S. Generally Accepted Accounting Principles (“GAAP”) requires that we calculate income or expense for the plans using actuarial valuations. These valuations reflect assumptions about financial ~~market~~markets and other economic conditions, which may change based on changes in key economic indicators. The most significant ~~year-end~~ assumptions we ~~used~~use to estimate pension income or expense are the discount rate and the expected long-term rate of return on plan assets. In addition, we are required to make an annual measurement of plan assets and liabilities, which may result in a significant change to equity. Although pension expense and pension funding contributions are not directly related, key economic factors that affect pension expense would also likely affect the amount of cash we would contribute to pension plans as required under the Employee Retirement Income Security Act of 1974, as amended.

If our goodwill, indefinite-lived intangible assets or other long-term assets become impaired, we will be required to record additional impairment charges, which may be significant.

A significant portion of our long-term assets consist of goodwill, other indefinite-lived intangible assets and finite-lived intangible assets recorded as a result of past acquisitions as well as through fresh start reporting. We do not amortize goodwill and indefinite-lived intangible assets, but rather review them for impairment on a periodic basis or whenever events or changes in circumstances indicate that their carrying value may not be recoverable. We consider whether circumstances or conditions exist which suggest that the carrying value of our goodwill and other long-lived intangible assets might be impaired. If such circumstances or conditions exist, further steps are required in order to determine whether the carrying value of each of the individual assets exceeds its fair value. If analysis indicates that an individual asset’s carrying value does exceed its fair value, the next step is to record a loss equal to the excess of the individual asset’s carrying value over its fair value.

The steps required by GAAP entail significant amounts of judgment and subjectivity. Events and changes in circumstances that may indicate that there may be an impairment and which may indicate that interim impairment testing is necessary include, but are not limited to: strategic decisions to exit a business or dispose of an asset made in response to changes in economic, political and competitive conditions; the impact of the economic environment on the customer base and on broad market conditions that drive valuation considerations by market participants; our internal expectations with regard to future revenue growth and the assumptions we make when performing impairment reviews; a significant decrease in the market price of our assets; a significant adverse change in the extent or manner in which our assets are used; a significant adverse change in legal factors or the business climate that could affect our assets; an accumulation of costs significantly in excess of the amount originally expected for the acquisition of an asset; and significant changes in the cash flows associated with an asset. As a result of such circumstances, we may be required to record a significant charge to earnings in our financial statements during the period in which any impairment of our goodwill, indefinite-lived intangible assets or other long-term assets is determined. Any such impairment charges could have a material adverse effect on our business, financial condition and operating results.

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and operating results.

If we are unable to protect the confidentiality of our proprietary information and know-how, the value of our technology, products and services could be harmed significantly.

We rely on trade secrets, know-how and other proprietary information in operating our business. If this information is not adequately protected, then it may be disclosed or used in an unauthorized manner. To the extent that consultants, key employees or other third parties apply technological information independently developed by them or by others to our proposed products, disputes may arise as to the proprietary rights to such information, which may not be resolved in our favor. The risk that other parties may breach confidentiality agreements or that our trade secrets become known or independently discovered by competitors, could harm us by enabling our competitors, who may have greater experience and financial resources, to copy or use our trade secrets and other proprietary information in the advancement of their products, methods or technologies. The disclosure of our trade secrets would impair our competitive position, thereby weakening demand for our products or services and harming our ability to maintain or increase our customer base.

Disruption or failures of our information technology systems could have a material adverse effect on our business.

Our information technology systems are susceptible to security breaches, operational data loss, general disruptions in functionality, and may not be compatible with new technology. We depend on our information technology systems for the effectiveness of our operations and to interface with our customers, as well as to maintain financial records and accuracy. Disruption or failures of our information technology systems could impair our ability to effectively and timely provide our services and products and maintain our financial records, which could damage our reputation and have a material adverse effect on our business.

~~The~~Table ~~consummation~~ of the Hardware Acquisition is subject to certain conditions including, among others, required regulatory approvals, obtaining certain third party consents and other customary closing conditions, some of which are out of our control.Contents

~~The~~Risks ~~closing~~Related ~~of the Hardware Acquisition is subject~~ to certain conditions including, among others, obtaining required regulatory approvals, obtaining certain third party consents and other customary closing conditions, some of which are out of our control. The Second Closing will take place after the completion of the first closing and is subject to certain additional conditions, including among others, obtaining required regulatory approvals, the consummation of the acquisition by Stanley Black & Decker of all of the issued and outstanding shares of TLM Taiwan (with which we have no involvement) and other customary closing conditions, some of which are out of our control. There is no guarantee that these conditions will be satisfied or that the Hardware Acquisition ~~will be consummated.~~

~~Failure~~Significant tocosts ~~complete~~have been incurred in connection with the consummation of the Hardware Acquisition ~~could,~~and ~~under~~are ~~certain~~expected ~~circumstances,~~to ~~result~~be incurred in usconnection ~~being~~with ~~required~~the tointegration ~~pay~~of Spectrum and the HHI Business into a ~~termination~~combined ~~fee~~company, toincluding ~~Stanley~~legal, ~~Black~~accounting, &financial ~~Decker~~advisory and other costs.

~~Stanley~~We ~~Black~~expect &to ~~Decker~~incur ~~has~~one-time ~~certain~~costs ~~termination~~in ~~rights~~connection ~~under~~with integrating the ~~Acquisition Agreement that~~operations, ifproducts ~~exercised~~and bypersonnel ~~Stanley Black & Decker (subject to the satisfaction~~ of ~~certain~~Spectrum ~~specified~~and ~~requirements in~~ the ~~Acquisition~~HHI ~~Agreement),~~Business ~~may~~and ~~result~~TLM inTaiwan ~~the~~acquired ~~payment~~from ~~by us to~~ Stanley Black & Decker ofinto a ~~termination~~combined ~~fee. In the event that the debt financing required to consummate the Hardware Acquisition is not funded at the time the First Closing would otherwise occur pursuant to the Acquisition Agreement~~company, wein ~~may~~addition ~~be required (subject~~ to ~~the~~costs ~~satisfaction~~related ofdirectly ~~certain specified requirements in the Acquisition Agreement)~~ to ~~pay~~completing ~~to Stanley Black & Decker a termination fee of $56 million. In~~ the ~~event that the~~ Hardware Acquisition isdescribed ~~not~~below. ~~consummated~~These ~~due~~costs ~~to certain material breaches of the Acquisition Agreement by us, we~~ may beinclude ~~required~~costs ~~(subject to the satisfaction of certain specified requirements in the Acquisition Agreement) to pay to Stanley Black & Decker a termination fee of $78 million.~~for:

• employee redeployment, relocation or severance;

• integration of information systems;

• combination of research and development teams and processes; and

• reorganization or closures of facilities.

In addition, we expect to incur a number of non-recurring costs associated with combining our operations with those of the HHI Business. Additional unanticipated costs may yet be incurred as we integrate our business with the HHI Business. Although we expect that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of our operations with those of the HHI Business, may offset incremental transaction and transaction-related costs over time, this net benefit may not be achieved in the near term. Additionally, while we expect to benefit from leveraging distribution channels and brand names across both companies, we cannot assure you that we will achieve such benefits.

We may not realize the anticipated benefits of the Hardware Acquisition and may become responsible for certain liabilities.

The Hardware Acquisition involves the integration of two companies that have previously operated independently. The integration of our operations with those of the HHI Business is expected to result in financial and operational benefits, including increased top line growth, margins, revenues and cost savings and be accretive to earnings per share, earnings before interest, taxes, depreciation and amortization and free cash flow before synergies. There can be no assurance, however, regarding when or the extent to which we will be able to realize these increased top line growth, margins, revenues, cost savings or accretions to earnings per share, earnings before interest, taxes, depreciation and amortization or free cash flow or other benefits. Integration may also be difficult, unpredictable, and subject to delay because of possible company culture conflicts and different opinions on technical decisions and product roadmaps. We must integrate or, in some cases, replace, numerous systems, including those involving management information, purchasing, accounting and finance, sales, billing, employee benefits, payroll and regulatory compliance, many of which are dissimilar. In some instances, we and the HHI Business have served the same customers, and some customers may decide that it is desirable to have additional or different suppliers. Difficulties associated with integration could have a material adverse effect on our business.

In addition, in connection with the Hardware Acquisition, we have assumed certain potential liabilities relating to the HHI Business. To the extent we have not identified such liabilities or to the extent the indemnifications obtained from Stanley Black & Decker are insufficient to cover known liabilities, these liabilities could have a material adverse effect on our business.

Integrating our business and the HHI Business may divert our management’s attention away from operations.

Successful integration of our and the HHI Business’ operations, products and personnel may place a significant burden on our management and other internal resources. The diversion of management’s attention, and any difficulties encountered in the transition and integration process, could harm our business, financial conditions and operating results.

We are required to supply certain products and services to Stanley Black & Decker and its subsidiaries pursuant to the terms of certain supply agreements for a period of time after the completion of the Hardware Acquisition. Our provision of products and services under these agreements require us to dedicate resources of the HHI Business and the TLM Residential Business and may result in liabilities to us.

Certain products and services currently used by Stanley Black & Decker are produced and provided using equipment of the HHI Business and the TLM Residential Business that we acquired or certain equipment belonging to Stanley Black & Decker and its subsidiaries that will continue to be located for a period of time after the completion of the Hardware Acquisition at facilities operated by the HHI Business and the TLM Residential Business and maintained by us pursuant to certain specifications. We and Stanley Black & Decker entered into supply agreements (each, a “Supply Agreement”), whereby we provide Stanley Black & Decker and its subsidiaries with certain of these products and services for a period of time. This

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requires us to dedicate resources of the HHI Business and the TLM Residential Business towards the provision of these products and services and may result in liabilities to us. These Supply Agreements are an accommodation to Stanley Black & Decker and its subsidiaries as part of the Hardware Acquisition, and the pricing of the products and services is on terms more favorable to Stanley Black & Decker and its subsidiaries than it would be in the ordinary course of business.

As a result of the Hardware Acquisition, we may not be able to retain key personnel or recruit additional qualified personnel, which could materially affect our business and require us to incur substantial additional costs to recruit replacement personnel.

We are highly dependent on the continuing efforts of our senior management team and other key personnel. As a result of the Hardware Acquisition, our current and prospective employees could experience uncertainty about their future roles. This uncertainty may adversely affect our ability to attract and retain key management, sales, marketing and technical personnel. Any failure to attract and retain key personnel could have a material adverse effect on our business after consummation of the Hardware Acquisition. In addition, we currently do not maintain “key person” insurance covering any member of our management team.

General customer uncertainty related to the Hardware Acquisition could harm us.

Our customers may, in response to the consummation of the Hardware Acquisition, delay or defer purchasing decisions. If our customers delay or defer purchasing decisions, our revenues could materially decline or any anticipated increases in revenue could be lower than expected.

We only have the right to use certain Stanley Black & Decker trademarks, brand names and logos for a limited period of time. If we fail to establish in a timely manner a new, independently recognized brand name with a strong reputation, our revenue and profitability could decline.

In connection with our acquisition of the HHI Business, we received a limited right to use certain Stanley Black & Decker trademarks, brand names and logos in marketing our products and services for only five years. Pursuant to a transitional trademark license agreement, Stanley Black & Decker granted us the right to use the “Stanley” and “Black & Decker” marks and logos, and certain other marks and logos, for up to five years after the completion of the Hardware Acquisition in connection with certain products and services. When our right to use the Stanley Black & Decker trademarks, brand names and logos expires, we may not be able to maintain or enjoy comparable name recognition or status under our new brand. If we are unable to successfully manage the transition of our business to our new brand, our reputation among our customers could be adversely affected, and our revenue and profitability could decline.



ITEM 1B.	UNRESOLVED STAFF COMMENTS

None.

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ITEM 2.	PROPERTIES

The following table lists our principal owned or leased manufacturing, packaging, and distribution facilities at September 30, ~~2012~~2013:



Facility		Function
Global Batteries & Appliances
Fennimore, Wisconsin(1)		Alkaline Battery Manufacturing
Portage, Wisconsin(1)		Zinc Air Button Cell and Lithium Coin Cell Battery, Foil Shaver Component Manufacturing
Deforest, Wisconsin(2)		Distribution/Returns Center
Dischingen, Germany(2)		Alkaline Battery Manufacturing
Washington, UK(2)		Zinc Air Button Cell Battery Manufacturing & Distribution
Guatemala City, Guatemala(1)		Zinc Carbon Battery Manufacturing
Jaboatao, Brazil(1)		Zinc Carbon Battery Manufacturing
Dixon, Illinois(2)		Battery & Lighting Device Packaging & Distribution
Ellwangen-Neunheim, Germany(2)		Battery & Lighting Device, Electric Shaver & Personal Care Product Distribution
Redlands, California(2)		Warehouse, Electric Shaver & Personal Care Product Distribution
Manchester, England(1)		Warehouse and Sales and administrative office
Wolverhampton, England(1)		Warehouse
Wolverhampton, England(2)		Warehouse

Hardware & Home Improvement
Brockville, Canada(2)		Hardware & Home Improvement Distribution
Charlotte, North Carolina(2)		Hardware & Home Improvement Distribution
Cobourg, Canada(1)		Hardware & Home Improvement Distribution
Denison, Texas(1)		Hardware & Home Improvement Manufacturing
Fort Mill, South Carolina(2)		Hardware & Home Improvement Manufacturing
Mexicali, Mexico(2)		Hardware & Home Improvement Manufacturing
Mira Loma, California(2)		Hardware & Home Improvement Distribution
Monterrey, Mexico(1)		Hardware & Home Improvement Manufacturing, Sales and Distribution
Nogales, Mexico(1)		Hardware & Home Improvement Manufacturing
Reading, Pennsylvania(2)		Hardware & Home Improvement Manufacturing
Shenzhen, China		Hardware & Home Improvement Distribution and administrative office
Subic Bay, Philippines(1)		Hardware & Home Improvement Manufacturing
Xiamen, China(2)		Hardware & Home Improvement Manufacturing
Xiaolan, China(1)		Hardware & Home Improvement Manufacturing

Global Pet Supplies
Noblesville, Indiana(1)		Pet Supply Manufacturing & Distribution
Bridgeton, Missouri(2)		Pet Supply Manufacturing
Blacksburg, Virginia(1)		Pet Supply Manufacturing
Melle, Germany(1)		Pet Supply Manufacturing
Melle, Germany(2)		Pet Supply Distribution
Edwardsville, Illinois(2)		Pet Supply Distribution
Phnom Penh, Cambodia(2)		Pet Supply Manufacturing
Roanoke, Virginia(2)		Pet Supply Distribution

Home and Garden Business
Vinita Park, Missouri(2)		Household & Controls and Contract Manufacturing
Earth City, Missouri(2)		Household & Controls Manufacturing

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Facility		Function
Global Batteries & Appliances
Fennimore, Wisconsin(1)		Alkaline Battery Manufacturing
Portage, Wisconsin(1)		Zinc Air Button Cell and Lithium Coin Cell Battery, Foil Shaver Component Manufacturing
Deforest, Wisconsin(2)		Distribution/Returns Center
Dischingen, Germany(1)		Alkaline Battery Manufacturing
Washington, UK(2)		Zinc Air Button Cell Battery Manufacturing & Distribution
Guatemala City, Guatemala(1)		Zinc Carbon Battery Manufacturing
Jaboatao, Brazil(1)		Zinc Carbon Battery Manufacturing
Dixon, Illinois(2)		Battery & Lighting Device Packaging & Distribution
Ellwangen-Neunheim, Germany(2)		Battery & Lighting Device, Electric Shaver & Personal Care Product Distribution
Redlands, California(2)		Warehouse, Electric Shaver & Personal Care Product Distribution
Manchester, England(1)		Warehouse and Sales and administrative office
Wolverhampton, England(1)		Warehouse
Wolverhampton, England(2)		Warehouse
Global Pet Supplies
Noblesville, Indiana(1)		Pet Supply Manufacturing & Distribution
Bridgeton, Missouri(2)		Pet Supply Manufacturing
Blacksburg, Virginia(1)		Pet Supply Manufacturing
Melle, Germany(1)		Pet Supply Manufacturing
Melle, Germany(2)		Pet Supply Distribution
Edwardsville, Illinois(2)		Pet Supply Distribution
Grand Rapids, Michigan(2)		Pet Supply Manufacturing & Distribution
Roanoke, Virginia(2)		Pet Supply Distribution
Home and Garden Business
Vinita Park, Missouri(2)		Household & Controls and Contract Manufacturing
Earth City, Missouri(2)		Household & Controls Manufacturing

(1) Facility is owned.

(2) Facility is leased.

We also own, operate or contract with third parties to operate distribution centers, sales offices and administrative offices throughout the world in support of our business. We lease our administrative headquarters and primary research and development facility located in ~~Madison~~Middleton, Wisconsin and the Hardware & Home Improvement administrative headquarters in Lake Forest, California.

We believe that our existing facilities are suitable and adequate for our present purposes and that the productive capacity in such facilities is substantially being utilized or we have plans to utilize it.



ITEM 3.	LEGAL PROCEEDINGS

Litigation

We are a defendant in various other matters of litigation generally arising out of the ordinary course of business.

We do not believe that any other matters or proceedings presently pending will have a material adverse effect on our results of operations, financial condition, liquidity or cash flows.

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Environmental

We have provided for the estimated costs associated with environmental remediation activities at some of our current and former manufacturing sites. We believe that any additional liability that may result from the resolution of these matters in excess of the amounts provided of approximately $5.41 million, will not have a material adverse effect on our financial condition, results of operations or cash flows.

We are subject to various federal, state and local environmental laws and regulations. We believe we are in substantial compliance with all such environmental laws that are applicable to our operations. See also the discussion captioned “Governmental Regulations and Environmental Matters” under Item 1 above.



ITEM 4.	MINE SAFETY DISCLOSURES

Not applicable.

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PART II



ITEM 5.	MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

We are a wholly-owned subsidiary of SB Holdings. Accordingly, there is no established public trading market for our common stock.

During the fiscal year ended September 30, ~~2012~~2013, Spectrum Brands paid a cash ~~dividend~~dividends of $5189 million to SB Holdings. During the fiscal year ended September 30, ~~2011~~2012, ~~there~~Spectrum ~~were~~Brands nopaid a cash ~~dividends~~dividend ~~distributed~~of $51 million to SB Holdings. Certain restrictive covenants in the 2019 Indenture and the Senior Secured Facilities impose limitations on the payment of dividends to SB Holdings.

There was one record holder of our common stock at November 1925, ~~2012~~2013.



ITEM 6.	SELECTED FINANCIAL DATA

The following selected historical financial data is derived from our audited consolidated financial statements. Only our Consolidated Statements of Financial Position as of September 30, ~~2012~~2013 and ~~2011~~2012 and our Consolidated Statements of Operations, Consolidated Statements of ~~Shareholder's~~Comprehensive ~~Equity~~Income (~~Deficit~~Loss), ~~and~~Consolidated ~~Comprehensive~~Statements ~~Income~~of ~~(Loss)~~Shareholders’ Equity and Consolidated Statements of Cash Flows for the years ended September 30, ~~2012~~2013, ~~2011~~2012 and ~~2010~~2011 are included elsewhere in this Annual Report on Form 10-K. The information presented below as of and for the fiscal ~~years~~year ended September 30, ~~2012,~~2013 ~~2011 and 2010~~ also includes ~~that~~the results of ~~Russell~~the ~~Hobbs~~HHI Business operations since December 17, 2012, and the ~~Merger~~results onof ~~June 16~~TLM Taiwan since April 8, ~~2010~~2013.

The following selected financial data, which may not be indicative of future performance, should be read in conjunction with our consolidated financial statements and notes thereto and the information contained in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere herein.

On February 3, 2009, we and our wholly owned U.S. subsidiaries (the "Debtors") filed petitions under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Western District of Texas. On August 28, 2009 (the "Effective Date"), the Debtors emerged from Chapter 11 of the U.S. Bankruptcy Code. Effective as of the Effective Date and pursuant to the Debtors' confirmed plan of reorganization, we converted from a Wisconsin corporation to a Delaware corporation.

The term "Predecessor Company" refers to Spectrum Brands, our Wisconsin predecessor, and its subsidiaries prior to the Effective Date. The term "Successor Company" refers to Spectrum Brands, the Delaware successor, and its subsidiaries from the Effective Date forward.

Financial information in our financial statements prepared after August 29, 2009 ~~will~~is not be comparable to financial information from prior periods.

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	SuccessorCompany												~~PredecessorCompany~~			PredecessorCompany
	2012			2011			2010			Period fromAugust 31, 2009throughSeptember 30,2009			Period fromOctober 1, 2008throughAugust 30,2009			2008
	2013			2012			2011			2010			Period fromAugust 31, 2009throughSeptember 30,2009			Period fromOctober 1, 2008throughAugust 30,2009
Statement of Operations Data:
Net sales	$	34,~~252~~085.46		$	3,~~186~~252.94		$	23,~~567~~186.09		$	~~219~~2,567.90		$	~~2,010~~219.69		$	2,~~426~~010.6
Gross profit	1,~~115~~390.73			1,~~128~~115.97			~~921~~1,128.49			64921.4			~~751~~64.84			~~920~~751.18
Operating income (loss)(1)	306.1			228.7			169.1			0.1			156.8			(684.6		)
Operating income (1)	352.9			306.1			228.7			169.1			0.1			156.8
Interest expense (12)	192.0			208.5			277.0			17.0			172.9			229.0
Interest expense (11)	369.5			192.0			208.5			277.0			17.0			172.9
Other expense (income), net	03.95			20.59			122.35			(012.83		)	3(0.38		)	13.23
Reorganization items expense (income), net	—			—			~~3.6~~—			43.06			~~(1,142~~4.80		)	—(1,142.8		)
Income (loss) from continuing operations before income taxes	~~113~~(20.2		)	17113.72			~~(123~~17.87		)	(20123.08		)	~~1,123~~(20.40		)	~~(914~~1,123.84		)
Income tax expense (benefit)	60.4			92.3			63.2			51.2			22.6			(9.5		)
Income tax expense	27.4			60.4			92.3			63.2			51.2			22.6
(Loss) income from discontinued operations, net of tax(2)	—			—			~~(2.7~~—		)	0(2.47		)	~~(86~~0.84		)	(2686.28		)
Net income (loss) (3)(4)(5)(6)(7)	52.8			(74.6		)	(189.8		)	(70.8		)	1,013.9			(931.5		)
Net income (loss)(3)(4)(5)(6)(7)	(47.5		)	52.8			(74.6		)	(189.8		)	(70.8		)	1,013.9
Restructuring and related charges—cost of goods sold(8)	$	9.8		$	7.8		$	7.2		$	0.2		$	13.2		$	16.5
Less: Net income (loss) attributable to noncontrolling interest	(0.1		)	—			—			—			—			—
Restructuring and related charges—operating expenses(8)	9.8			20.8			17.0			1.6			30.9			22.8
Net income (loss) attributable to controlling interest	(47.4		)	52.8			(74.6		)	(189.8		)	(70.8		)	1,013.9
Restructuring and related charges—cost of goods sold(8)	10.0			9.8			7.8			7.2			0.2			13.2
Restructuring and related charges—operating expenses(8)	24.0			9.7			20.8			17.0			1.6			30.9
Cash Flow and Related Data:
Net cash provided (used) by operating activities	$	248.7		$	232.2		$	57.3		$	75.0		$	1.6		$	(10.2	)
Net cash provided by operating activities	$	258.2		$	248.7		$	232.2		$	57.3		$	75.0		$	1.6
Capital expenditures(10)	46.8			36.2			40.3			2.7			8.1			18.9
Capital expenditures(9)	82.0			46.8			36.2			40.3			2.7			8.1
Depreciation and amortization (excluding amortization of debt issuance costs)(10)	129.8			134.7			117.3			8.6			58.5			85.0
Depreciation and amortization (excluding amortization of debt issuance costs)(9)	183.8			129.8			134.7			117.3			8.6			58.5
Statement of Financial Position Data (at period end):
Cash and cash equivalents	$	~~157~~198.92		$	~~142~~157.49		$	~~170~~142.64		$	97170.86		$	97.8		$	~~104.8~~
Working capital(11)	454.4			412.0			537.3			323.7						371.5
Working capital(10)	524.4			454.4			412.0			537.3			323.7
Total assets	35,~~753~~619.50			3,~~622~~753.35			3,~~873~~622.73			3,~~020~~873.7			3,020.7			~~2,247.5~~
Total long-term debt, net of current maturities	13,~~652~~115.9			1,~~535~~652.59			1,~~723~~535.15			1,~~530~~723.01			1,530.0			~~2,474.8~~
Total debt	13,~~669~~218.39			1,~~576~~669.63			1,~~743~~576.86			1,~~583~~743.58			1,583.5			~~2,523.4~~
Total shareholder's equity (deficit)	992.7			989.1			1,046.7			660.9						(1,027.2		)
Total shareholders’ equity	933.9			992.7			989.1			1,046.7			660.9

(1) Pursuant to the guidance in Financial Accounting Standards Board Accounting Standards Codification Topic 350: “Intangibles-Goodwill and Other,” we conduct annual impairment testing of goodwill and indefinite-lived intangible assets. As a result of these analyses we recorded non-cash pretax impairment charges of approximately $32 million, ~~$34 million~~ and $~~861~~34 million in Fiscal 2011, and the period from October 1, 2008 through August 30, 2009 ~~and our fiscal year ended September 30~~, ~~2008, ("Fiscal 2008"),~~ respectively. No non-cash impairment charges were recorded during Fiscal 2013, Fiscal 2012, Fiscal 2010 and the period from August 31, 2009 through September 30, 2009. See the “Critical Accounting Policies—Valuation of Assets and Asset Impairment“ section of Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations as well as Note 2~~(i), Significant Accounting Policies—Intangible Assets,~~

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(j), "Significant Accounting Policies—Intangible Assets", of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for further details on impairment charges.

(2) On November 5, 2008, Spectrum Brands’ board of directors committed to the shutdown of the growing products portion of the Home and Garden Business, which ~~includes~~included the manufacturing and marketing of fertilizers, enriched soils, mulch and grass seed, following an evaluation of the historical lack of profitability and the projected input costs and significant working capital demands for the growing product portion of the Home and Garden Business during Fiscal 2009. During the second quarter of Fiscal 2009, we completed the shutdown of the growing products portion of the Home and Garden Business and, accordingly, began reporting the results of operations of this business as discontinued operations. Therefore, the presentation of all historical continuing operations ~~has~~excludes ~~been changed to exclude~~ the growing products portion of the Home and Garden Business. Fiscal 2008 loss from discontinued operations, net of tax, includes a non-cash pretax impairment charge of approximately $8 million to reduce the carrying value of intangible assets relating to the growing products portion of our Home and Garden Business to reflect its estimated fair value.

(3) Fiscal ~~2012~~2013 income tax expense of $6027 million includes a non-cash charge of approximately $1463 million resulting from an increase in the valuation allowance against certain net deferred tax assets, net of a $50 million benefit due to the reversal of $50 million of the valuation allowance in conjunction with the acquisition of the HHI Business.

(4) Fiscal ~~2011~~2012 income tax expense of $9260 million includes a non-cash charge of approximately $6514 million resulting from an increase in the valuation allowance against certain net deferred tax assets, net of a $15 million benefit due to the reversal of $15million of the valuation allowance in conjunction with the acquisition of FURminator.

(5) Fiscal ~~2010~~2011 income tax expense of $6392 million includes a non-cash charge of approximately $9265 million resulting from an increase in the valuation allowance against certain net deferred tax assets.

(6) ~~Included~~Fiscal in2010 ~~the~~income ~~period from August 31, 2009 through September 30, 2009 for the Successor Company is a non-cash~~ tax ~~charge~~expense of $5863 million related to the residual U.S. and foreign taxes on approximately $166 million of actual and deemed distributions of foreign earnings. Income tax expense for the Predecessor Company for the period from October 1, 2008 through August 30, 2009 includes a non-cash ~~adjustment~~charge of approximately $5292 million resulting from aan ~~reduction~~increase in the valuation allowance against certain deferred tax assets. Included in income tax expense for the period from October 1, 2008 through August 30, 2009 for the Predecessor Company is a non-cash charge of $104 million related to the tax effects of the fresh start adjustments. In addition, income tax expense for the Predecessor Company for this period includes the tax effect of the gain on the cancellation of debt from the extinguishment of the then existing senior subordinated notes as well as the modification of the then existing senior term credit facility. The tax effect of these gains increased the Company’s U.S. net deferred tax ~~asset exclusive of indefinite lived intangibles by approximately $124 million. However, due to the Company’s full valuation allowance on the U.S. net deferred tax~~ assets exclusive of indefinite lived intangibles as of August 30, 2009, the tax effect of the gain on the cancellation of debt and the modification of the senior secured credit facility was offset by a corresponding adjustment to increase the valuation allowance for deferred tax assets by $124 million. The tax effect of the fresh start adjustments, the gain on the cancellation of debt and the modification of the senior secured credit facility, net of corresponding adjustments to the valuation allowance, are netted against reorganization items.

(7) ~~Fiscal~~Included ~~2008~~in ~~income~~the period from August 31, 2009 through September 30, 2009 for the Successor Company is a non-cash tax ~~benefit~~charge of $1058 million related to the residual U.S. and foreign taxes on approximately $166 million of actual and deemed distributions of foreign earnings. Income tax expense for the Predecessor Company for the period from October 1, 2008 through August 30, 2009 includes a non-cash ~~charge~~adjustment of approximately $~~189~~52 million resulting from ana ~~increase~~reduction in the valuation allowance against certain deferred tax assets. Included in income tax expense for the period from October 1, 2008 through August 30, 2009 for the Predecessor Company is a non-cash charge of $104 million related to the tax effects of the fresh start adjustments. In addition, income tax expense for the Predecessor Company for this period includes the tax effect of the gain on the cancellation of debt from the extinguishment of the then existing senior subordinated notes as well as the modification of the then existing senior term credit facility. The tax effect of these gains increased the Company’s U.S. net deferred tax asset exclusive of indefinite lived intangibles by approximately $124 million. However, due to the Company’s full valuation allowance on the U.S. net deferred tax assets exclusive of indefinite lived intangibles as of August 30, 2009, the tax effect of the gain on the cancellation of debt and the modification of the senior secured credit facility was offset by a corresponding adjustment to increase the valuation allowance for deferred tax assets by $124 million. The tax effect of the fresh start adjustments, the gain on the cancellation of debt and the modification of the senior secured credit facility, net of corresponding adjustments to the valuation allowance, are netted against reorganization items.

(8) See Note 14, "Restructuring and Related Charges", of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for further discussion.

(9) ~~Diluted~~Amounts ~~average~~reflect ~~shares outstanding for each of Fiscal 2011, Fiscal 2010,~~ the ~~period~~results ~~from August 31, 2009 through September 30, 2009, the period from October 1, 2008 through August 30, 2009 and Fiscal 2008 does not assume the exercise~~ of ~~common~~continuing ~~stock~~operations ~~equivalents as the impact would be antidilutive~~only.

(10) ~~Amounts~~Working ~~reflect~~capital ~~the~~is ~~results~~defined ofas ~~continuing~~current ~~operations~~assets ~~only~~less current liabilities.

(11) ~~Working~~Fiscal ~~capital~~2013 isincludes ~~defined~~a asnon-cash ~~current~~charge ~~assets~~of ~~less~~$16 ~~current~~million ~~liabilities~~related to the write-off of unamortized debt issuance costs and unamortized premiums in connection with the extinguishment and replacement of the Company’s 9.5% Notes and Term Loan in conjunction with the acquisition of the HHI Business. Fiscal 2012 includes a non-cash charge of $2 million related to the write-off of unamortized debt issuance costs and unamortized premiums in connection with the extinguishment and refinancing of the Company’s 12% Notes. Fiscal 2011 includes a non-cash charge of $24 million related to the write-off of unamortized debt issuance costs and unamortized discounts in conjunction with the refinancing of the Company’s Term Debt facility. Fiscal 2010 includes a non-cash charge of $83 million related to the write-off of unamortized debt issuance costs and unamortized discounts and premiums in connection with the extinguishment and refinancing of debt that was completed in conjunction with the merger with Russell Hobbs.

(12) Fiscal 2012 includes a non-cash charge of $2 million related to the write-off of unamortized debt issuance costs and unamortized premiums in connection with the extinguishment and refinancing of the Company’s 12% Notes. Fiscal 2011 includes a non-cash charge of $24 million related to the write-off of unamortized debt issuance costs and unamortized discounts in conjunction with the refinancing of the Company’s Term Debt facility. Fiscal 2010 includes a non-cash charge of $83 million related to the write-off of unamortized debt issuance costs and unamortized discounts and premiums in connection with the extinguishment and refinancing of debt that was completed in conjunction with the Merger.

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ITEM 7.	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 Item 6. Selected Financial Data and our Consolidated Financial Statements and related notes included in this Annual Report on Form 10-K. Certain prior year amounts have been reclassified to conform to the current year presentation. All references to Fiscal ~~2012~~2013, Fiscal ~~2011~~2012 and Fiscal ~~2010~~2011 refer to fiscal year periods ended ~~September 30, 2012, 2011 and 2010, respectively.~~

Spectrum Brands, Inc., a Delaware corporation (“Spectrum Brands” or the “Company”), is a global branded consumer products company. Spectrum Brands Holdings, Inc. (“SB Holdings”) was created in connection with the combination of Spectrum Brands and Russell Hobbs, Inc. (“Russell Hobbs”), a global branded small appliance company, to form a new combined company (the “Merger”). The Merger was consummated on June 16, 2010. As a result of the Merger, both Spectrum Brands and Russell Hobbs are wholly-owned subsidiaries of SB Holdings and Russell Hobbs is a wholly-owned subsidiary of Spectrum Brands. SB Holdings' common stock trades on the New York Stock Exchange (the "NYSE") under the symbol “SPB.”

Unless the context indicates otherwise, the terms “Company,” “Spectrum,” “we,” “our” or “us” are used to refer to Spectrum Brands and its subsidiaries subsequent to the Merger and Spectrum Brands prior to the Merger.

On October 8, 2012, we entered into an agreement with Stanley Black & Decker, Inc. ("Stanley Black & Decker") to acquire the residential hardware and home improvement business (the "HHI Business") currently operated by Stanley Black & Decker and certain of its subsidiaries for $1.4 billion, consisting of (i) the equity interests of certain subsidiaries of Stanley Black & Decker engaged in the business and (ii) certain assets of Stanley Black & Decker used or held for use in connection with the business (the "Hardware Acquisition"). The Hardware Acquisition includes the purchase of shares and assets of certain subsidiaries of Stanley Black & Decker involved in the HHI Business. The Hardware Acquisition will also include the purchase of certain assets of Tong Lung Metal Industry Co. Ltd., a Taiwan Corporation ("TLM Taiwan"), which is involved in the production of residential locksets (the "TLM Residential Business"). Stanley Black & Decker is currently in the process of completing the acquisition of all of the issued and outstanding shares of TLM Taiwan.

The consummation of the Hardware Acquisition will take place in two separate closings. The first closing (the “First Closing”) will involve the acquisition of the HHI Business. The second closing will involve the acquisition of the TLM Residential Business (the “Second Closing”).

On November 16, 2012, Spectrum Brands Escrow Corp., issued $520 million aggregate principal amount of 6.375% Senior Notes due 2020 (that “2020 Notes”) and $570 million aggregate principal amount of 6.625% Senior Notes due 2022 (the “2022 Notes”). The 2020 Notes and the 2022 Notes will be assumed by Spectrum Brands upon the First Closing. Spectrum Brands intends to use the net proceeds from the offering to fund a portion of the purchase price and related fees and expenses for the Hardware Acquisition. Spectrum Brands intends to finance the remaining portion of the Hardware Acquisition, as well as to refinance its existing Term Loan (defined below), with a new $800 million senior secured term loan, which is expected to close concurrently with the First Closing.

Business Overview

We manufacture and market alkaline, zinc carbon and hearing aid batteries, herbicides, insecticides and repellants and specialty pet supplies. We design and market rechargeable batteries, battery-powered lighting products, electric shavers and accessories, grooming products and hair care appliances. With the addition of Russell Hobbs we design, market and distribute a broad range of branded small household appliances and personal care products. Our manufacturing and product development facilities are located in the United States, Europe and Latin America. Substantially all of our rechargeable batteries, chargers and portable lighting products, shaving and grooming products, small household appliances and personal care products are manufactured by third-party suppliers, primarily located in Asia.

Our diversified global branded consumer products have positions in six major product categories: consumer batteries; pet

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supplies; home and garden control products; electric shaving and grooming products; small appliances and electric personal care products. Our chief operating decision-maker manages the businesses in three vertically integrated, product-focused reporting segments: (i)September ~~Global Batteries & Appliances~~30, ~~which consists of our worldwide battery~~2013, ~~electric~~2012 ~~shaving~~ and ~~grooming~~2011, electric personal care, and small appliances primarily in the kitchen and home product categories (“Global Batteries & Appliances”); (ii) Global Pet Supplies, which consists of our worldwide pet supplies business (“Global Pet Supplies”); and (iii) Home and Garden Business, which consists of our home and garden and insect control business (the “Home and Garden Business”)respectively. Management reviews our performance based on these segments. For information pertaining to our business segments, see Note 11, “Segment Information” of Notes to Consolidated Financial Statements, included in this Annual Report on Form 10-K for further information on our operating segments.

Spectrum Brands, Inc., a Delaware corporation (“Spectrum Brands” or the “Company”), is a diversified global branded consumer products company. Spectrum Brands, Inc., is a wholly owned subsidiary of Spectrum Brands Holdings, Inc. ("SB Holdings"). SB Holdings' common stock trades on the New York Stock Exchange (the “NYSE”) under the symbol “SPB.”

Unless the context indicates otherwise, the terms the “Company,” “Spectrum,” “we,” “our” or “us” are used to refer to Spectrum Brands and its subsidiaries.

On December 17, 2012, we acquired the residential hardware and home improvement business (the “HHI Business”) from Stanley Black & Decker, Inc. (“Stanley Black & Decker”), which includes (i) the equity interests of certain subsidiaries of Stanley Black & Decker engaged in the business and (ii) certain assets of Stanley Black & Decker used or held for use in connection with the business (the “Hardware Acquisition”). On April 8, 2013, we completed the acquisition of certain assets of Tong Lung Metal Industry Co. Ltd., a Taiwan Corporation ("TLM Taiwan”), which is involved in the production of residential locksets. For information pertaining to the Hardware Acquisition, see Note 15, “Acquisitions” of Notes to Consolidated Financial Statements, included in this Annual Report on Form 10-K.

Business Overview

We manufacture and market alkaline, zinc carbon and hearing aid batteries, herbicides, insecticides and repellants and specialty pet supplies. We design and market rechargeable batteries, battery-powered lighting products, electric shavers and accessories, grooming products and hair care appliances. We also design, market and distribute a broad range of branded small household appliances and personal care products. Our manufacturing and product development facilities are located in the United States ("U.S."), Europe, Latin America and Asia. Substantially all of our rechargeable batteries, chargers and portable lighting products, shaving and grooming products, small household appliances and personal care products are manufactured by third-party suppliers, primarily located in Asia.

With the addition of the HHI Business, we design, manufacture, market, distribute and sell certain hardware, home improvement and plumbing products, and are a leading U.S. provider of residential locksets and builders' hardware and a leading provider of faucets. The HHI Business has a broad portfolio of recognized brand names, including Kwikset, Weiser, Baldwin, National Hardware, Stanley, FANAL and Pfister, as well as patented technologies such as Smartkey, a rekeyable lockset technology, and Smart Code Home Connect. HHI Business customers include retailers, non-retailers and homebuilders. The HHI Business has sales offices, manufacturing facilities and distribution centers in the U.S., Canada, Mexico and Asia.

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including pricing and gross margin, which vary by product line and geographic market; pricing of certain raw materials and commodities; energy and fuel prices; and our general competitive position, especially as impacted by our competitors’ advertising and promotional activities and pricing strategies.

Cost Reduction Initiatives

We continually seek to improve our operational efficiency, match our manufacturing capacity and product costs to market demand and better utilize our manufacturing resources. We have undertaken various initiatives to reduce manufacturing and operating costs.

Fiscal 2013. To reduce operating costs the Company implemented a series of initiatives throughout the Company which consist of headcount reductions in the Global Batteries & Appliances segment and Corporate (the “Global Expense Rationalization Initiatives”).

Fiscal 2009. In connection with our announcement of a plan to reduce headcount within each of our segments and to exit certain facilities in the U.S. related to the Global Pet Supplies segment, we implemented a number of cost reduction initiatives (the “Global Cost Reduction Initiatives”). These initiatives also included consultation, legal and accounting fees related to the evaluation of our capital structure.

Meeting Consumer Needs through Technology and Development

We continue to focus our efforts on meeting consumer needs for our products through new product development and technology innovations. Research and development efforts associated with our electric shaving and grooming products allow us to deliver to the market unique cutting systems. Research and development efforts associated with our electric personal care products allow us to deliver to our customers products that save them time, provide salon alternatives and enhance their in-home personal care options. We are continuously pursuing new innovations for our shaving, grooming and hair care products including foil and rotary shaver improvements, trimmer enhancements and technologies that deliver skin and hair care benefits.

During Fiscal ~~2012~~2013, inwe ~~our~~introduced ~~Home~~the ~~and~~Kevo ~~Garden~~smart ~~Business~~lock ~~segment,~~under wethe ~~purchased~~Kwikset ~~and~~brand. ~~updated~~This ~~several~~bluetooth ~~Black~~enabled ~~Flag~~technology ~~products~~gives ~~while~~owners ~~also~~the ~~launching~~ability ~~the~~to ~~new~~lock ~~Black~~and ~~Flag~~unlock ~~Flying~~their ~~Insect~~doors ~~Trap,~~with ~~the~~their ~~Wasp~~smartphone, ~~Hornet~~send &electronic ~~Yellow~~keys ~~Jacket~~to ~~Lures~~others and ~~the~~receive ~~Fly~~notifications ~~Lures.~~whenever Wea ~~also~~user ~~introduced~~enters ~~several~~or ~~innovative~~exits ~~products~~their ~~for~~doors. ~~indoor~~We ~~use~~expect ~~such~~to asbegin ~~the~~sales ~~Hot~~of ~~Shot~~Kevo ~~Ant~~products &in ~~Roach~~the ~~Plus~~fiscal ~~Germ~~year ~~Killer~~ending ~~and~~September ~~the~~30, ~~do-it-yourself~~2014. ~~Hot~~Within ~~Shot~~our ~~Bedbug~~Home ~~Mattress~~and &Garden ~~Luggage~~Business ~~Treatment~~segment, ~~Kit. Innovative~~we ~~products~~entered ~~for~~the ~~outdoor~~rodenticide ~~use~~category ~~include~~with the ~~Cutter~~Black ~~Backyard~~Flag ~~Bug~~Rodenticide ~~Control~~product ~~Mosquito~~line. ~~Repellent~~We ~~Lantern~~also ~~and~~introduced ~~Cutter~~several ~~Scented~~innovative ~~Citronella~~products ~~Candles,~~such as the ~~two~~powerful, non-~~in-one~~selective herbicide, Spectracide ~~Bug~~Weed & ~~Weed~~Grass ~~Killer~~Foaming Edger and the ~~Spectracide~~Cutter ~~Fire~~Skinsations ~~Ant~~insect ~~Killer~~repellent ~~Yard Protection Granules~~aerosol. Under the Remington brand we launched the ~~next~~HyperFlex ~~generation~~series ~~Professional~~rotary ~~i-Light intense pulsed light ("IPL") device~~shavers, ~~including~~indestructible ahair ~~full~~clippers and ~~roll-out~~an ofaward ~~the~~winning ~~i-Light~~wax inapplicating ~~North~~system ~~America,~~and ~~successfully~~epilator ~~expanded to a full~~ line. ofAdditionally, ~~hair~~Rayovac ~~care~~launched ~~accessories~~the ~~and~~Ready ~~introduced~~Power ~~Keratin~~10 ~~smart~~year ~~products~~guarantee inacross all ofalkaline ~~our~~portfolios, ~~haircare~~award ~~lines.~~winning ~~Additionally~~emergency in2-Hour ~~consumer~~Power ~~batteries,~~and weback-up ~~launched~~7-Hour ~~the~~Power ~~new~~affordable ~~Indestructible~~portable ~~line~~power ofdevices ~~Rayovac~~and ~~flashlights,~~an ~~developed~~environmentally ~~everyday~~friendly rechargeable ~~batteries~~smart ~~and~~phone ~~the Platinum LCD~~ charger. During Fiscal ~~2012,~~2013 our Global Pet Supplies segment ~~purchased~~introduced ~~the~~Dingo ~~FURminator~~Market ~~business,~~Cuts ~~the~~which ~~patented~~is ~~global~~a ~~leader~~new inline ~~deshedding~~of ~~tools,~~wholesome ~~launched~~Chicken aJerky ~~series~~Fillets ofthat ~~exciting~~are ~~new~~made ~~GloFish products~~ in ~~North~~the ~~America~~U.S. Additionally, ~~and~~a ~~expanded~~new ~~our leading Nature's Miracle~~ line of environmentally friendly stain and odor products were launched under the Nature’s Miracle Green brand.

During Fiscal 2011, we introduced the new Spectracide Easy Action Pump delivery system, which makes application over larger areas quick and easy by providing consumers up to five minutes of continuous spray. We also launched the Cutter Natural and Repel Natural insect repellents that offer highly effective, DEET-free protection and are priced like other repellents. Additionally, under the Remington brand we introduced the Mb Touch, a precision beard trimmer with LED touch screen controls, expanded into a pearl line of hair care accessories and began marketing the i-Light IPL device, which uses cutting edge intense pulsed light technology to remove hair for up to six months and has been approved by the FDA in the United States. Furthermore, we launched coffee machines using new fast brew technology under the Farberware tradename.

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For the North American Aquatic business we launched energy efficient Marineland LED reef capable lights. These LEDs produce a high quality, natural-looking light that shimmers, adding depth and dimension to the aquarium. In the Companion Animal business we expanded the popular Nature’s Miracle product line to include: litter and accessories, shampoo, waste management and pet crates.

During Fiscal 2010, we launched our Rayovac Platinum Nickel Metal Hydride rechargeable batteries. These batteries are ready to use directly out of the package, and stay charged up to 3 times longer than other rechargeable batteries. We also introduced Instant Ocean aquatic food and chemical products and additional products under the Dingo and Nature’s Miracle brands.

During Fiscal 2009, we introduced the Roughneck Flex 360 flashlight. We also launched a long lasting zero-mercury hearing aid battery. This product provides the same long lasting performance as conventional hearing aid batteries, but with an environmentally friendly formula. During Fiscal 2009, we also introduced a line of Tetra marine aquatic products, new dog treat items and enhanced Nature’s Miracle Stain & Odor products.

During Fiscal 2008, we introduced longer lasting alkaline batteries in cell sizes AA and AAA. We also launched several new products targeted at specific niche markets such as Hot Shot Spider Trap, Cutter Mosquito Stakes, Spectracide Destroyer Wasp & Hornet and Spectracide Weed Stop. We also introduced a new line of men’s rotary shavers with “360° Flex & Pivot Technology.” The flex and pivot technology allows the cutting blades to follow the contour of a person’s face and neck. In addition, we added Teflon® coated heads to our blades to reduce redness and irritation from shaving. We also introduced “The Short Cut Clipper.” The product is positioned as the world’s first clipper with exclusive curved cutting technology. We also launched “Shine Therapy,” a hair straightener with vitamin conditioning technology: Vitamin E, Avocado Oil and conditioners infused into the ceramic plates.

Competitive Landscape

We compete in ~~six~~seven major product categories: consumer batteries, hardware and home improvement, pet supplies, home and garden control products, electric shaving and grooming products, small appliances, and electric personal care products.

The consumer battery product category consists of non-rechargeable alkaline or zinc carbon batteries in cell sizes of AA, AAA, C, D and 9-volt, specialty batteries, which include rechargeable batteries, hearing aid batteries, photo batteries and watch/calculator batteries, and portable lighting products. Most consumer batteries are marketed under one of the following brands: Rayovac/VARTA, Duracell, Energizer or Panasonic. In addition, some retailers market private label batteries, particularly in Europe. The majority of consumers in North America and Europe purchase alkaline batteries. The Latin America market consists primarily of zinc carbon batteries but is gradually converting to higher-priced alkaline batteries as household disposable income grows. Our major competitors in the consumer batteries product category are Energizer Holdings, Inc., The Procter & Gamble Company and Matsushita.

We believe that we are the largest worldwide marketer of hearing aid batteries and that we continue to maintain a leading global market position. We believe that our close relationship with hearing aid manufacturers and other customers, as well as our product performance improvements and packaging innovations, position us for continued success in this category.

Our global pet supplies business comprises aquatics equipment (aquariums, filters, pumps, etc.), aquatics consumables (fish food, water treatments and conditioners, etc.) and specialty pet products for dogs, cats, birds and other small domestic animals. The pet supply market is extremely fragmented, with no competitor holding a market share greater than twenty percent. We believe that our brand positioning, including the leading global aquatics brand in Tetra, our diverse array of innovative and attractive products and our strong retail relationships and global infrastructure will allow us to remain competitive in this fast growing industry. Our largest competitors in the pet supplies product category are Mars Corporation, The Hartz Mountain Corporation and Central Garden & Pet Company.

Products in our home and garden category are sold through the Home and Garden Business. The Home and Garden Business manufactures and markets outdoor and indoor insect control products, rodenticides, herbicides and plant foods. The Home and Garden Business operates in the U.S. market under the brand names Spectracide, Hot Shot, Cutter, Real Kill, Black Flag and Garden Safe. The Home and Garden Business’ marketing position is primarily that of a value brand, enhanced and supported by innovative products and packaging to drive sales at the point of purchase. The Home and Garden Business’ primary competitors include The Scotts Miracle-Gro Company, Central Garden & Pet Company and S.C. Johnson & Son, Inc.

We also operate in the shaving and grooming and personal care product category, consisting of electric and wet shavers and accessories, electric grooming products and hair care appliances. Electric shavers include men’s and women’s shavers (both rotary and foil design) and electric shaver accessories consisting of shaver replacement parts (primarily foils and cutters), pre-shave products and cleaning agents. Electric shavers are marketed primarily under our Remington brand. Our primary

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~~competitors~~animals. inThe ~~the~~pet ~~electric~~supply ~~shaving~~market ~~and~~is ~~grooming~~extremely ~~category~~fragmented, ~~are~~with ~~Procter~~no &competitor ~~Gamble,~~holding ~~makers~~a ofmarket ~~Braun,~~share ~~and~~greater ~~Koninklijke~~than ~~Phillips~~twenty ~~Electronics N~~percent.~~V.,~~ ~~makers~~We ofbelieve ~~Norelco.~~that ~~Electric~~our ~~grooming~~brand ~~products~~positioning, ~~include~~including ~~beard~~the ~~and~~leading ~~mustache~~global ~~trimmers,~~aquatics ~~nose~~brand ~~and~~in ~~ear trimmers~~Tetra, ~~body~~our ~~groomers~~diverse ~~and~~array ~~haircut~~of ~~kits~~innovative and ~~related~~attractive ~~accessories.~~products ~~Hair~~and ~~care~~our ~~appliances~~strong ~~include~~retail ~~hair~~relationships ~~dryers, straightening irons, styling irons~~ and ~~hair-setters.~~global ~~Europe~~infrastructure ~~and~~will ~~North~~allow ~~America~~us ~~account~~to ~~for~~remain ~~the~~competitive ~~majority~~in ofthis ~~our~~fast ~~worldwide~~growing ~~electric personal care product category sales~~industry. Our ~~major~~largest competitors in the ~~electric~~pet ~~personal~~supplies ~~care~~ product category are ~~Conair~~Mars Corporation, ~~Wahl~~The ~~Clipper~~Hartz Mountain Corporation and ~~Helen~~Central ofGarden & ~~Troy~~Pet ~~Limited~~Company.

Products in our home and garden category are sold through the Home and Garden Business, which operates in the U.S. market under the major brand names Spectracide, Hot Shot, Cutter, Repel, Black Flag and Garden Safe. The Home and Garden Business manufactures and markets outdoor and indoor insect control products, rodenticides, herbicides, insect repellents and lawn maintenance products. In addition, we produce and market several private-label brands for many major retailers.

The Home and Garden Business’ marketing position is primarily that of a branded value, enhanced and supported by innovative products of outstanding quality and appealing packaging that is designed to drive sales at the point of purchase. Our commitment to quality and value has earned the trust of consumers and the confidence of retailers, who count on us to deliver the fast-selling products, merchandising solutions and quality service they require. The Home and Garden Business’ primary competitors include The Scotts Miracle-Gro Company, Central Garden & Pet Company and S.C. Johnson & Son, Inc.

We also operate in the shaving and grooming and personal care product category, consisting of electric shavers and accessories, electric grooming products and hair care appliances. Electric shavers include men’s and women’s shavers (both rotary and foil design) and electric shaver accessories consisting of shaver replacement parts (primarily foils and cutters), pre-shave products and cleaning agents. Electric shavers are marketed primarily under our Remington brand. Our primary competitors in the electric shaving and grooming category are Procter & Gamble, makers of Braun, and Koninklijke Phillips Electronics N.V., makers of Norelco. Electric grooming products include beard and mustache trimmers, nose and ear trimmers, body groomers and haircut kits and related accessories. Hair care appliances include hair dryers, straightening irons, styling irons and hair-setters. Europe and North America account for the majority of our worldwide electric personal care product category sales. Our major competitors in the electric personal care product category are Conair Corporation, Wahl Clipper Corporation and Helen of Troy Limited.

The Hardware & Home Improvement segment has developed a market-leading franchise with leading brands, making it the most desired manufacturer among top home builders and major retailers. Hardware & Home Improvement is acclaimed as a market leader in the U.S. and Canadian lockset business. Competition within the industry varies based on location as well as product segment. The main source of competition for locks includes other third party manufacturers such as Schlage, a division of Ingersoll-Rand and private label import brands such as Defiant and Gatehouse. The major U.S. competitors of Pfister, the plumbing brand sold by our Hardware & Home Improvement segment, are Masco, Fortune Brands, Kohler, and American Standard. Hardware & Home Improvement also competes with The Home Depot and Lowe’s private label brands.

Products in our small appliances category consist of small electrical appliances primarily in the kitchen and home product categories. Primary competitor brands in the small appliance category include Hamilton Beach, Procter Silex, Sunbeam, Mr. Coffee, Oster, General Electric, Rowenta, DeLonghi, Kitchen Aid, Cuisinart, Krups, Braun, Rival, Europro, Kenwood, Philips, Morphy Richards, Breville and Tefal.

The following factors contribute to our ability to succeed in these highly competitive product categories:


•	Strong Diversified Global Brand Portfolio. We have a global portfolio of well-recognized consumer product brands. We believe that the strength of our brands positions us to extend our product lines and provide our retail customers with strong sell-through to consumers.


•	Strong Global Retail Relationships. We have well-established business relationships with many of the top global retailers, distributors and wholesalers, which have assisted us in our efforts to expand our overall market penetration and promote sales.


•	Expansive Distribution Network. We distribute our products in approximately 140 countries through a variety of trade channels, including retailers, wholesalers and distributors, hearing aid professionals, industrial distributors and Original Equipment Manufacturers.

• Innovative New Products, Packaging and Technologies. We have a long history of product and packaging innovations in each of our ~~six~~seven product categories and continually seek to introduce new products both as extensions of existing product lines and as new product categories.

• Experienced Management Team. Our management team has substantial consumer products experience. On average, each senior management team member has more than 20 years of experience at Spectrum, VARTA, Remington, Russell Hobbs or other branded consumer product companies such as Newell Rubbermaid, ~~H.J. Heinz~~ and Schering-Plough.

Seasonal Product Sales

OnTable ~~a consolidated basis our financial results are approximately equally weighted between quarters, however, sales~~ of certain product categories tend to be seasonal. Sales in the consumer battery, electric shaving and grooming and electric personal care product categories, particularly in North America, tend to be concentrated in the December holiday season (Spectrum’s first fiscal quarter). Demand for pet supplies products remains fairly constant throughout the year. Demand for home and garden control products sold though the Home and Garden Business typically peaks during the first six months of the calendar year (Spectrum’s second and third fiscal quarters). Small Appliances peaks from July through December primarily due to the increased demand by customers in the late summer for “back-to-school” sales and in the fall for the holiday season.Contents

The seasonality of our sales during the last three fiscal years is as follows:

Percentage of Annual Sales

	Fiscal Year EndedSeptember 30,
Fiscal Quarter Ended	~~2012~~2013		~~2011~~2012		~~2010~~2011
December	2621	%	2726	%	2327	%
March	2324	%	2223	%	2122	%
June	2527	%	25	%	25	%
September	2628	%	26	%	3126	%

Fiscal Year Ended September 30, 2013 Compared to Fiscal Year Ended September 30, 2012

Highlights of Consolidated Operating Results

Net Sales. Net sales for Fiscal 2013 increased $834 million to $4,086 million from $3,252 million in Fiscal 2012, a 26% increase. The following table details the principal components of the change in net sales from Fiscal 2012 to Fiscal 2013 (in millions):



	Net Sales
Fiscal 2012 Net Sales	$	3,252
Addition of hardware and home improvement products	870
Increase in pet supplies	12
Increase in electric personal care products	5
Increase in home and garden control products	3
Decrease in electric shaving and grooming products	(1		)
Decrease in consumer batteries	(9		)
Decrease in small appliances	(27		)
Foreign currency impact, net	(19		)
Fiscal 2013 Net Sales	$	4,086

Consolidated net sales by product line for Fiscal 2013 and Fiscal 2012 are as follows (in millions):

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	Fiscal Year
	2013		2012
Product line net sales
Consumer batteries	$	932	$	949
Hardware and home improvement products	870		—
Small appliances	740		772
Pet supplies	622		615
Home and garden control products	390		387
Electric shaving and grooming products	277		279
Electric personal care products	255		250
Total net sales to external customers	$	4,086	$	3,252

Global consumer battery sales decreased $17 million, or 2%, during Fiscal 2013 compared to Fiscal 2012. Excluding the impact of negative foreign exchange of $8 million, global consumer battery sales decreased $9 million. The constant currency decrease in global consumer battery sales was primarily attributable to the non-recurrence of promotions, timing of holiday shipments and inventory management at key customers, tempered by new customer listings and expansion into new channels.

Small appliances sales decreased $32 million, or 4%, during Fiscal 2013 versus Fiscal 2012, primarily attributable to declines in North American sales of $45 million and negative foreign exchange impacts of $4 million, partially offset by a $17 million increase in European small appliance sales. The North American sales declines resulted from the planned exit of certain low margin products. Strong small appliances sales in Europe were driven by market share gains in the United Kingdom, regional expansion in both Eastern and Western Europe and successful new product introductions.

Pet supply sales increased $7 million, or 1%, during Fiscal 2013 versus Fiscal 2012, driven by increased companion animal sales of $16 million, tempered by a $4 million decline in aquatics sales and $5 million of negative foreign currency impacts. Gains in companion animal sales resulted from strong growth in the Dingo and FURminator brands, expansion in Europe, new product launches and the inclusion of FURminator sales during all of Fiscal 2013 as the acquisition was completed on December 22, 2011. The decline in aquatic sales was primarily due to a decline in tropical food and outdoor pond product sales in Europe as a result of a later arrival of the spring season due to cooler temperatures.

Home and garden product sales increased $3 million, or 1%, in Fiscal 2013 versus Fiscal 2012, driven by a $4 million increase in lawn and garden control sales resulting from an extension to the season due to favorable fall weather, combined with reduced returns and more efficient trade spending. The negative impact on household insect control sales due to a late spring season was offset by increased year over year fourth quarter sales driven by the extension of the season due to favorable fall weather and gains in the first quarter of Fiscal 2013 from new retail distribution. Also contributing to the sales gains was the inclusion of Black Flag sales during all of Fiscal 2013, as the acquisition was completed on October 31, 2011, and retail replenishment following strong retail sales in the fourth quarter of Fiscal 2012.

Electric shaving and grooming product sales decreased $2 million, or 1%, during Fiscal 2013 compared to Fiscal 2012, attributable to an $11 million decline in North American sales and $1 million of negative foreign currency impacts, partially offset by an increase of $10 million in European sales and a slight increase in Latin American sales. North American sales declined as a result of labor disruptions at U.S. ports of entry during the peak holiday period in Fiscal 2013, coupled with decreased retail space available for the product category at a major retailer and customer inventory management. European sales gains were driven by successful new product launches and promotions, market growth, increased distribution and customer gains. The gain in Latin American sales was driven by expansion in Brazil due to successful new product launches and distribution gains, tempered by lower sales to customers who export to Venezuela and import restrictions in Argentina.

Electric personal care sales increased $5 million, or 2%, in Fiscal 2013 versus Fiscal 2012, resulting from a sales increase of $8 million in Europe, driven by new innovative products, coupled with additional distribution channels and customer gains. The gains were tempered by a $3 million decline in Latin American sales, resulting from decreased promotions and lower sales to customers who export to Venezuela, partially offset by distribution gains in Brazil and Central America.

Hardware and home improvement sales were $870 million for Fiscal 2013, reflecting the results of the HHI Business, subsequent to the acquisition on December 17, 2012. The results of TLM Taiwan are included in the results of hardware and home improvement sales subsequent to its acquisition on April 8, 2013.

Gross Profit. Gross profit for Fiscal 2013 was $1,390 million versus $1,116 million for Fiscal 2012. The increase in gross

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profit was driven by the acquisition of the HHI Business which contributed $273 million in Gross profit in Fiscal 2013. Our gross profit margin for Fiscal 2013 decreased slightly to 34.0% from 34.3% in Fiscal 2012. The slight decline in gross profit margin was driven by a $31 million increase to cost of goods sold due to the sale of inventory which was revalued in connection with the acquisition of the HHI Business, which offset improvements to gross profit resulting from the exit of low margin products in our small appliances category.

Operating Expenses. Operating expenses for Fiscal 2013 totaled $1,037 million compared to $810 million for Fiscal 2012. The $227 million increase in operating expenses during Fiscal 2013 is primarily attributable to the acquisition of the HHI Business which accounted for $190 million in operating expenses and led to a $17 million increase in Acquisition and integration related charges. Furthermore, we incurred a $14 million increase in Restructuring and related charges primarily related to the Global Expense Rationalization initiatives announced in Fiscal 2013 and an $18 million increase in stock compensation expense. These increases were tempered by $8 million in savings across all segments from our cost reduction initiatives and positive foreign exchange impacts of $4 million.

See Note 2, "Significant Accounting Policies—Acquisition and Integration Related Charges", of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information regarding our Acquisition and integration charges.

See Note 14, "Restructuring and Related Charges", of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information regarding our Restructuring and related charges.

Segment Results. As discussed above, we manage our business in four reportable segments: (i) Global Batteries & Appliances; (ii) Global Pet Supplies; (iii) our Home and Garden Business; and (iv) Hardware & Home Improvement.

The operating segment profits do not include restructuring and related charges, acquisition and integration related charges, interest expense, interest income and income tax expense. Corporate expenses primarily include general and administrative expenses and global long-term incentive compensation plans which are evaluated on a consolidated basis and not allocated to our operating segments. All depreciation and amortization included in income from operations is related to operating segments or corporate expense. Costs are allocated to operating segments or corporate expense according to the function of each cost center.

All capital expenditures are related to operating segments. Variable allocations of assets are not made for segment reporting.

Financial information pertaining to our reportable segments is contained in Note 11, "Segment Information", of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") is a metric used by management and frequently used by the financial community which provides insight into an organization’s operating trends and facilitates 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 can also be a useful measure of a company’s ability to service debt and is one of the measures used for determining our debt covenant compliance. Adjusted EBITDA excludes certain items that are unusual in nature or not comparable from period to period. While we believe that Adjusted EBITDA is useful supplemental information, such adjusted results are not intended to replace our Generally Accepted Accounting Principles’ (“GAAP”) financial results and should be read in conjunction with those GAAP results.

Below are reconciliations of GAAP Net income (loss), as adjusted, to Adjusted Earnings Before Interest and Taxes ("Adjusted EBIT") and to Adjusted EBITDA for each segment and for Consolidated SB Holdings for Fiscal 2013 and Fiscal 2012:

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Fiscal 2013	Global Batteries & Appliances		Global Pet Supplies		Home and Garden Business		Hardware & Home Improvement		Corporate / Unallocated Items^(a)			Consolidated Spectrum Brands
	(in millions)
Net income (loss), as adjusted^(a)	$	214	$	77	$	78	$	75	$	(491	)	$	(47	)
Pre-acquisition earnings of HHI^(b)	—		—		—		30		—			30
Income tax expense	—		—		—		—		27			27
Interest expense	—		—		—		—		370			370
Acquisition and integration related charges	6		2		—		7		33			48
Restructuring and related charges	15		11		1		6		1			34
HHI Business inventory fair value adjustment	—		—		—		31		—			31
Venezuela devaluation	2		—		—		—		—			2
Adjusted EBIT	$	237	$	90	$	79	$	149	$	(60	)	$	495
Depreciation and amortization ^(c)	67		30		11		32		43			183
Adjusted EBITDA	$	304	$	120	$	90	$	181	$	(17	)	$	678



Fiscal 2012	Global Batteries & Appliances		Global Pet Supplies		Home and Garden Business		Hardware & Home Improvement		Corporate / Unallocated Items^(a)			Consolidated Spectrum Brands
	(in millions)
Net income (loss), as adjusted ^(a)	$	221	$	70	$	71	$	—	$	(313	)	$	49
Pre-acquisition earnings of HHI^(b)	—		—		—		183		—			183
Income tax expense	—		—		—		—		60			60
Interest expense	—		—		—		—		192			192
Acquisition and integration related charges	15		5		2		—		9			31
Restructuring and related charges	7		10		1		—		1			19
Adjusted EBIT	$	243	$	85	$	74	$	183	$	(51	)	$	534
Depreciation and amortization ^(c)	64		28		13		—		29			134
Adjusted EBITDA	$	307	$	113	$	87	$	183	$	(22	)	$	668

______________________________


(a)	It is the Company's policy to record Income tax expense and interest expense on a consolidated basis. Accordingly, such amounts are not reflected in the operating results of the operating segments and are presented within Corporate / Unallocated Items.


(b)	The Pre-acquisition earnings of HHI do not include the TLM Taiwan business as stand alone financial data is not available for the periods presented. The TLM Taiwan business is not deemed material to the Company's operating results.


(c)	Included within depreciation and amortization is amortization of unearned restricted stock compensation.

Global Batteries & Appliances



	Fiscal Year
	2013			2012

Net sales to external customers	$	2,204		$	2,250
Segment profit	$	238		$	244
Segment profit as a % of net sales	10.8		%	10.9		%
Segment Adjusted EBITDA	$	304		$	307
Assets as of September 30	$	2,361		$	2,243

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Segment net sales to external customers in Fiscal 2013 decreased $46 million to $2,204 million from $2,250 million during Fiscal 2012, a 2% decrease, driven by a $27 million decrease in small appliance sales, $14 million of negative foreign exchange impacts, a $9 million decrease in global consumer battery sales and a $1 million decrease in electric shaving and grooming sales. These declines were partially offset by an increase of $5 million in electric personal care sales. The decline in small appliance sales was predominately driven by North American sales declines of $45 million, partially offset by European sales gains of $17 million. The decrease in North American sales was driven by management initiatives to exit low margin products, driving an overall increase in profitability as a percentage of net sales for the product category. Gains in European small appliance sales were driven by increased market share in the United Kingdom, regional expansion in Eastern and Western Europe and successful new product lines. The declines in global consumer battery sales of $9 million resulted from the non-recurrence of promotions, inventory management at key vendors and the timing of holiday shipments, tempered by new customer listings and expansion into new channels. The slight decrease in electric shaving and grooming sales was due to an $11 million decrease in North American sales, tempered by a $10 million increase in European sales. The decline in North American shaving and grooming product sales was attributable to labor disruptions at U.S. ports of entry during the peak holiday period, coupled with decreased retail space available for the product category at a major customer and retailer inventory management. Gains in the electric shaving and grooming product category in Europe were driven by successful new product launches and promotions, market growth, increased distributions and customer gains. Electric personal care product sales increased $5 million in Fiscal 2013 compared to Fiscal 2012, due to an increase of $8 million in Europe driven by innovative new product launches coupled with distribution and customer gains, partially offset by a sales decline of $3 million in Latin America. Latin American sales declines were attributable to the non-recurrence of Fiscal 2012 promotions and lower sales to customers who export to Venezuela, partially offset by distribution gains in Brazil and Central America.

Segment profit in Fiscal 2013 decreased to $238 million from $244 million in Fiscal 2012, primarily attributable to unfavorable product mix and pricing pressures in the U.S, coupled with the decrease in sales discussed above. Segment profitability as a percentage of net sales decreased slightly to 10.8% in Fiscal 2013 versus 10.9% in Fiscal 2012, driven by unfavorable mix and pricing pressures in the U.S., which offset gains from the exit of low margin products in the small appliances category.

Segment Adjusted EBITDA in Fiscal 2013 decreased to $304 million from $307 million in Fiscal 2012. The decrease in segment Adjusted EBITDA was driven by the factors discussed above for the decline in segment profit.

Segment assets at September 30, 2013 increased to $2,361 million from $2,243 million at September 30, 2012. The increase is primarily due to the acquisition of Shaser. Goodwill and intangible assets, which are a direct result of the revaluation impacts of fresh-start reporting which occurred during the year ended September 30, 2009 ("Fiscal 2009") and acquisitions, increased to $1,322 million at September 30, 2013 from $1,261 million at September 30, 2012, primarily due to the acquisition of Shaser.

Global Pet Supplies



	Fiscal Year
	2013			2012

Net sales to external customers	$	622		$	615
Segment profit	$	91		$	86
Segment profit as a % of net sales	14.6		%	14.0		%
Segment Adjusted EBITDA	$	120		$	113
Assets as of September 30	$	949		$	956

Segment net sales to external customers in Fiscal 2013 increased $7 million to $622 million compared to $615 million in Fiscal 2012 led by increased companion animal sales of $16 million, driven by growth in the Dingo and FURminator brands, expansion in Europe, new product launches and the full year impact of the FURminator acquisition. The increase in companion animal sales was tempered by a $4 million decline in aquatics sales, primarily due to decreased sales for aquatic nutrition and pond water care products in Europe due to a delayed spring season. Foreign currency exchange negatively impacted pet supply sales in Fiscal 2013 by $5 million.

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Segment profit increased $5 million to $91 million in Fiscal 2013 compared to $86 million in Fiscal 2012. Segment profitability as a percentage of sales in Fiscal 2013 increased to 14.6%, compared to 14.0% in the same period last year. The increase in segment profit and profitability as a percentage of sales was driven by cost improvements and operating expense reductions, which offset increased cost of goods sold and unfavorable product mix in Fiscal 2013 versus Fiscal 2012.

Segment Adjusted EBITDA in Fiscal 2013 increased $7 million, to $120 million, from $113 million in Fiscal 2012. The increase in Adjusted EBITDA was driven by the factors discussed above for segment profit.

Segment assets at September 30, 2013 decreased slightly to $949 million from $956 million at September 30, 2012. Goodwill and intangible assets, which are substantially the result of the revaluation impacts of fresh-start reporting during Fiscal 2009 and acquisitions, decreased to $701 million at September 30, 2013 from $715 million at September 30, 2012 due to amortization of intangible assets, tempered by positive foreign exchange impacts.

Home and Garden Business



	Fiscal Year
	2013			2012

Net sales to external customers	$	390		$	387
Segment profit	$	78		$	74
Segment profit as a % of net sales	20.1		%	19.0		%
Segment Adjusted EBITDA	$	90		$	87
Assets as of September 30	$	501		$	508

Segment net sales to external customers increased $3 million, or 1%, during Fiscal 2013, to $390 million, compared to $387 million in Fiscal 2012, resulting from an increase in lawn and garden control sales driven by warm fall weather during Fiscal 2013 which extended the selling season, combined with reduced returns and more efficient trade spending. Household insect control sales were flat in Fiscal 2013 compared to Fiscal 2012.

Segment profitability in Fiscal 2013 increased $4 million, to $78 million, from $74 million in Fiscal 2012, driven by the increase in lawn and garden control sales and strong expense management. Segment profitability as a percentage of net sales in Fiscal 2013 improved to 20.1%, from 19.0% in Fiscal 2012, as a result of strong expense management.

Segment Adjusted EBITDA improved $3 million to $90 million in Fiscal 2013 compared to segment Adjusted EBITDA of $87 million in Fiscal 2012 driven by the increase in net sales coupled with cost and operating expense improvements.

Segment assets at September 30, 2013 decreased to $501 million from $508 million at September 30, 2012. Goodwill and intangible assets, which are substantially a result of the revaluation impacts of fresh-start reporting during Fiscal 2009 and acquisitions, decreased to $426 million at September 30, 2013, from $433 million at September 30, 2012, driven by amortization of intangible assets.

Hardware & Home Improvement



	Fiscal Year
	2013

Net sales to external customers	$	870
Segment profit	$	89
Segment profit as a % of net sales	10.2		%
Segment Adjusted EBITDA	$	181
Assets as of September 30	$	1,736

Results of the HHI Business, reported as a separate business segment, Hardware & Home Improvement relate to operations subsequent to the acquisition date, December 17, 2012. The results of TLM Taiwan are reflected in the Hardware &

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Home Improvement segment subsequent to its acquisition on April 8, 2013.

Segment net sales to external customers were $870 million in Fiscal 2013. Proforma net sales for Fiscal 2013 and Fiscal 2012 as if the acquisition had occurred at the beginning of both periods were $1,062 million and $974 million, respectively. The Fiscal 2013 sales growth was driven by double-digit improvements in the HHI Business' U.S. residential security and plumbing categories due to the housing market recovery.

Segment profit in Fiscal 2013 was $89 million. Segment profitability as a percentage of sales in Fiscal 2013 was 10.2%. Segment profitability was negatively impacted by a $31 million increase to cost of goods sold due to the sale of inventory which was revalued in connection with the acquisition.

Including pre-acquisition earnings of the HHI Business, segment Adjusted EBITDA was $181 million in Fiscal 2013.

Segment assets at September 30, 2013 were $1,736 million. Goodwill and intangible assets were $1,192 million at September 30, 2013.

See Note 15, “Acquisitions” to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information regarding the HHI Business acquisition.

Corporate Expense. Our corporate expense was $60 million in Fiscal 2013 compared to $52 million in Fiscal 2012. This increase is primarily attributable to a $18 million increase in stock based compensation expense, tempered by operating expense improvements. Corporate expense as a percentage of consolidated net sales for the Fiscal 2013 remained constant at 1.5% for the Fiscal 2012.

Acquisition and Integration Related Charges. Acquisition and integration related charges include, but are not limited to, transaction costs such as banking, legal and accounting professional fees directly related to acquisitions, termination and related costs for transitional and certain other employees, integration related professional fees and other post business combination related expenses associated with our acquisitions. See Note 2, "Significant Accounting Policies—Acquisition and Integration Related Charges", of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information regarding our Acquisition and integration charges.

Restructuring and Related Charges. See Note 14, "Restructuring and Related Charges", to our Consolidated Financial Statements included in this Annual Report on Form 10-K for information regarding our restructuring and related charges.

Interest Expense. Interest expense in Fiscal 2013 was $370 million compared to $192 million in Fiscal 2012. The increase in interest expense in Fiscal 2013 of $178 million is primarily due to costs and expenses related to the extinguishment of our 9.5% Notes and the financing of the acquisition of the HHI Business coupled with higher ongoing interest expense related to the debt issued in connection with that acquisition, partially offset by the non-recurrence of costs and expenses related to the extinguishment of our 12% Notes in Fiscal 2012. We incurred $122 million of costs related to the extinguishment of our 9.5% Notes including cash tender, consent and redemption premium costs totaling $111 million and non-cash costs for the write off of unamortized deferred financing fees less unamortized original issue premium totaling $11 million. We incurred $23 million in costs and expenses related to the acquisition financing for the HHI Business including cash costs of $24 million for bridge financing fees and transaction costs, along with non-cash costs of $5 million related to the write-off of debt issuance costs and original issue discount on the former term loan facility. In addition, we incurred $69 million of ongoing cash interest expense related to the debt incurred for the acquisition of the HHI Business. The higher expense incurred in Fiscal 2013 was partially offset by the non-recurrence of $25 million of cash and $2 million of non-cash costs incurred in connection with the extinguishment of our 12% Notes, savings related to the extinguishments of the 12% Notes and the 9.5% Notes coupled with other items netting to reduced interest of $9 million. See Note 6, "Debt", of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.

Income Taxes. In Fiscal 2013, we recorded income tax expense of $27 million on a pretax loss from continuing operations of $20 million, and in Fiscal 2012, we recorded income tax expense of $60 million on pretax income from continuing operations of $113 million. Our effective tax rate on our loss from continuing operations was approximately (136)% for Fiscal 2013. Our effective tax rate on income from continuing operations was approximately 53% for Fiscal 2012. Our effective tax rates differ from the U.S. federal statutory rate of 35% principally due to: (i) losses in the U.S. and certain foreign jurisdictions for which no tax benefit can be recognized due to full valuation allowances that have been provided on our net operating loss carryforward tax benefits and other deferred tax assets; (ii) deferred income tax expense related to the change in book versus tax basis of indefinite lived intangibles, which are amortized for tax purposes but not for book purposes, and (iii) the reversal in Fiscal 2013 of U.S. valuation allowances of $50 million on deferred tax assets as a result of the acquisition of the HHI Business and the reversal in Fiscal 2012 of U.S. valuation allowances of $15 million on deferred tax assets as a result of the FURminator acquisition. Additionally, in Fiscal 2013, the consolidated pretax income was close to break even, resulting in

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a higher effective tax rate as this rate is calculated by dividing tax expense into pretax income (loss).

In light of our plans to voluntarily pay down our U.S. debt, fund distributions to shareholders, fund U.S. acquisitions, and our ongoing U.S. operational cash flow requirements, in Fiscal 2012 we began recording residual U.S. and foreign taxes on current foreign earnings, which we do not consider to be permanently reinvested, except for locations precluded by local legal restrictions from repatriating earnings. We evaluate annually the available earnings, permanent reinvestment classification, and availability and intent to use alternative mechanisms for repatriation for each jurisdiction in which we do business. As of September 30, 2013, we have provided residual taxes on approximately $46 million of earnings not yet taxed in the U.S. Due to the valuation allowance recorded against U.S. net deferred tax assets, including net operating loss carryforwards, we do not recognize any incremental U.S. tax expense on the expected future repatriation of these foreign earnings. Should the U.S. valuation allowance be released at some future date, the U.S. tax on foreign earnings not considered to be permanently reinvested might have a material effect on our effective tax rate. For Fiscal 2013, we project approximately $3 million of additional tax expense from non-U.S. withholding and other taxes expected to be incurred on repatriation of current earnings.

As of September 30, 2013, we have U.S. federal and state net operating loss carryforwards of approximately $1,502 million and $1,538 million, respectively. These net operating loss carryforwards expire through years ending in 2033. We also have foreign loss carryforwards of approximately $111 million, which will expire beginning in 2014. Certain of the foreign net operating losses have indefinite carryforward periods. We have had multiple changes of ownership, as defined under Internal Revenue Code (“IRC”) Section 382, that subject our U.S. federal and state net operating losses and other tax attributes to certain limitations. The annual limitation on our use of these carryforwards is based on a number of factors including the value of our stock (as defined for tax purposes) on the date of the ownership change, our net unrealized built in gain position on that date, the occurrence of realized built in gains in years subsequent to the ownership change, and the effects of subsequent ownership changes (as defined for tax purposes), if any. In addition, separate return year limitations apply to limit our utilization of the acquired Russell Hobbs U.S. federal and state net operating losses to future income of the Russell Hobbs subgroup. Based on these factors, we estimate that $301 million of the total U.S. federal and $358 million of the state net operating loss would expire unused even if the Company generates sufficient income to otherwise use all its NOLs. In addition, we project that $103 million of the total foreign net operating loss carryforwards will expire unused. We have provided a full valuation allowance against these deferred tax assets as well.

The ultimate realization of our deferred tax assets depends on our ability to generate sufficient taxable income of the appropriate character in the future and in the appropriate taxing jurisdictions. We establish valuation allowances for deferred tax assets when we estimate it is more likely than not that the tax assets will not be realized. We base these estimates on projections of future income, including tax planning strategies, in certain jurisdictions. Changes in industry conditions and other economic conditions may impact our ability to project future income. Accounting Standards Codification ("ASC") Topic 740: “Income Taxes” (“ASC 740”) requires the establishment of a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. In accordance with ASC 740, we periodically assess the likelihood that our deferred tax assets will be realized and determine if adjustments to the valuation allowance are required.

Our total valuation allowance for the tax benefit of deferred tax assets that may not be realized is approximately $449 million at September 30, 2013. Of this amount, approximately $416 million relates to U.S. net deferred tax assets and approximately $33 million relates to foreign net deferred tax assets. Our total valuation allowance was approximately $382 million at September 30, 2012. Of this amount, approximately $347 million related to U.S. net deferred tax assets and approximately $35 million related to foreign net deferred tax assets. As a result of the purchase of the HHI Business, we reversed $50 million of U.S. valuation allowance during Fiscal 2013. As a result of the purchase of FURminator, we released $15 million of U.S. valuation allowance during Fiscal 2012. These releases were attributable to the net deferred tax liabilities recorded on the opening balance sheets of the acquired companies in purchase accounting, which offset other U.S. net deferred tax assets.

ASC 740, which clarifies the accounting for uncertainty in tax positions, requires that we recognize in our financial statements the impact of a tax position if that position is more likely than not to be sustained on audit based on the technical merits of the position. As of September 30, 2013 and September 30, 2012, the total amount of unrecognized tax benefits that, if recognized, would affect the effective income tax rate in future periods was $14 million and $6 million, respectively. See Note 9, "Income Taxes", of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information.

Fiscal Year Ended September 30, 2012 Compared to Fiscal Year Ended September 30, 2011

Highlights of Consolidated Operating Results

Net Sales. Net sales for Fiscal 2012 increased to $3,252 million from $3,187 million in Fiscal 2011, a 2% increase. The following table details the principal components of the change in net sales from Fiscal 2011 to Fiscal 2012 (in millions):

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	Net Sales
Fiscal 2011 Net Sales	$	3,187
Increase in pet supplies	45
Increase in home and garden control products	33
Increase in consumer batteries	31
Increase in electric shaving and grooming products	12
Increase in electric personal care products	9
Increase in small appliances	8
Foreign currency impact, net	(73		)

Fiscal 2012 Net Sales	$	3,252

Consolidated net sales by product line for Fiscal 2012 and Fiscal 2011 are as follows (in millions):



	Fiscal Year
	2012		2011
Product line net sales
Consumer batteries	$	949	$	954
Small appliances	772		778
Pet supplies	615		579
Home and garden control products	387		354
Electric shaving and grooming products	279		274
Electric personal care products	250		248
Total net sales to external customers	$	3,252	$	3,187

Global consumer battery sales during Fiscal 2012 decreased $5 million compared to Fiscal 2011. Excluding negative foreign exchange impacts of $36 million, global consumer battery sales increased $31 million, or 3%. The growth of global consumer battery sales on a constant currency basis was driven by new customer listings as well as increased shelf space at existing customers, coupled with price increases, primarily in Latin America, and geographic expansion.

Small appliances sales decreased $6 million during Fiscal 2012 compared to Fiscal 2011. Excluding negative foreign exchange impacts of $14 million, small appliances sales increased $8 million, or 1%. Latin American and European constant currency sales increases of $16 million and $12 million, respectively, were tempered by a $19 million decrease in North American sales. Latin American sales gains resulted from distribution gains with existing customers as well as price increases. European sales increases were attributable to market share gains in the United Kingdom and expansion of the Russell Hobbs brand throughout Europe. Decreased North American sales were a result of a concerted effort to eliminate certain low margin promotions.

Pet supply product sales during Fiscal 2012 increased $36 million, or 6%, compared to Fiscal 2011, led by increases in companion animal and aquatics sales of $34 million and $11 million, respectively, tempered by $8 million in negative foreign currency impacts. Gains in companion animal sales were due to the FURminator acquisition, distributional gains and growth in the Nature's Miracle brand in the U.S. Aquatics sales gains resulted from increases in North American aquarium starter kits and pond related sales, including new distribution at major retailers, which were tempered by lower European aquatics sales.

Sales of home and garden control products during Fiscal 2012 versus Fiscal 2011 increased $33 million, or 9%, driven by increased household insect controls sales of $30 million resulting from the Black Flag acquisition and strong retail distribution gains with existing customers. Lawn and garden controls sales increased $3 million in Fiscal 2012 compared to Fiscal 2011 due to increased distribution with existing customers.

Electric shaving and grooming product sales during Fiscal 2012 increased $5 million, or 2%, compared to Fiscal 2011 led by a $14 million increase in European sales and a $4 million increase in Latin American sales. These gains were tempered by a $6 million decline in North American sales and negative foreign exchange impacts of $7 million. European sales gains were driven by successful promotions for new product launches, while the increase in Latin American sales was due to distribution and customer gains. North American declines resulted from the elimination of lower margin promotions as well as distribution declines.

34Electric personal care product sales in Fiscal 2012 increased $2 million compared to Fiscal 2011 driven by gains in North

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~~Electric personal care product sales in Fiscal 2012 increased $2 million compared to Fiscal 2011 driven by gains in North~~ America and Latin America of $11 million and $7 million, respectively, which were tempered by a $8 million decline in European sales and negative foreign exchange impacts of $8 million. The gains in North America and Latin America were attributable to the continued success in new product categories and distribution gains in Latin America, whereas the decrease in European sales was a result of declining women's hair straightener sales due to a shift in fashion trends combined with decreased promotions in the fourth quarter of Fiscal 2012.

Gross Profit. Gross profit for Fiscal 2012 was $1,116 million versus $1,129 million during Fiscal 2011, representing a $13 million decrease. Our gross profit margin for Fiscal 2012 decreased to 34.3% from 35.4% in Fiscal 2011. The decrease in gross profit and gross profit margin was driven by $36 million of negative foreign exchange impacts, a $17 million increase in commodity prices and higher costs for sourced goods, primarily from Asia, a $12 million increase in costs due to changes in product mix and a $2 million increase in Restructuring and related charges. These factors contributing to the decline in gross profit were tempered by increased organic sales which contributed $31 million of gross profit and Fiscal 2012 acquisitions which contributed $23 million of gross profit.

Operating Expense. Operating expenses for Fiscal 2012 totaled $~~810~~814 million versus $~~900~~901 million during Fiscal 2011. The $9087 million decrease in operating expenses for Fiscal 2012 versus Fiscal 2011 was driven by synergies recognized subsequent to the Merger of $25 million, decreased asset impairment charges of $32 million, decreased Acquisition and integration charges of $6 million, ~~decreased stock compensation expense of $5 million,~~ positive foreign exchange impacts of $20 million and savings from our cost reduction initiatives. See ~~“Acquisition and Integration Related Charges” below, as well as~~ Note 2, "Significant Accounting Policies—Acquisition and Integration Related Charges", of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information regarding our Acquisition and integration charges.

Operating Income. Operating income was approximately $~~306~~302 million in Fiscal 2012 compared to $~~229~~228 million recognized in Fiscal 2011, representing an increase of $7774 million. The increase is primarily attributable to the decreased operating expenses discussed above, which were slightly offset by the decline in gross profit as detailed above.

Adjusted EBITDA. Management believes that certain non-GAAP financial measures may be useful in certain instances to provide additional meaningful comparisons between current results and results in prior operating periods. Adjusted ~~earnings before interest, taxes, depreciation and amortization (“Adjusted~~ EBITDA”) is a metric used by management and frequently used by the financial community. Adjusted EBITDA provides insight into an organization’s operating trends and facilitates 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 can also be a useful measure of a company’s ability to service debt and is one of the measures used for determining our debt covenant compliance. Adjusted EBITDA excludes certain items that are unusual in nature or not comparable from period to period. While management believes that non-GAAP measurements are useful supplemental information, such adjusted results are not intended to replace our GAAP financial results.

Adjusted EBITDA was $485 million for Fiscal 2012 compared with $457 million for Fiscal 2011.

Segment Results. As discussed under “Business Overview” above we manage our business in three reportable segments: (i) Global Batteries & Appliances, (ii) Global Pet Supplies; and (iii) Home and Garden Business.

Operating segment profits do not include restructuring and related charges, acquisition and integration related charges, interest expense, interest income, impairment charges, reorganization items and income tax expense. Expenses associated with global operations, consisting of research and development, manufacturing management, global purchasing, quality operations and inbound supply chain are included in the determination of operating segment profits. Expenses associated with certain general and administrative functions have been excluded in the determination of reportable segment profits and are included in corporate expenses. These corporate expenses primarily include general and administrative expenses and the costs of global long-term incentive compensation plans which are evaluated on a consolidated basis and not allocated to our operating segments.

All depreciation and amortization included in income from operations is related to operating segments or corporate expense. Costs are allocated to operating segments or corporate expense according to the function of each cost center. All capital expenditures are related to operating segments. Variable allocations of assets are not made for segment reporting.

Global strategic initiatives and financial objectives for each reportable segment are determined at the corporate level. Each reportable segment is responsible for implementing defined strategic initiatives and achieving certain financial objectives and has a general manager responsible for the sales and marketing initiatives and financial results for product lines within that segment. Financial information pertaining to our reportable segments is contained in Note 11, "Segment Information", of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.

35Below are reconciliations of GAAP Net Income (Loss) from Continuing Operations to Adjusted EBIT and Adjusted

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~~Consolidated~~EBITDA ~~Financial~~by ~~Statements~~segment ~~included~~and infor ~~this~~Consolidated ~~Annual~~Spectrum ~~Report~~Brands onfor ~~Form~~Fiscal ~~10-K.~~2012 and Fiscal 2011:

Below are reconciliations of GAAP Net Income (Loss) from Continuing Operations to Adjusted EBIT and Adjusted EBITDA by segment and for Consolidated Spectrum Brands for Fiscal 2012 and Fiscal 2011:



	Fiscal 2012
	Global Batteries & Appliances		Global Pet Supplies		Home and Garden Business		Corporate / Unallocated Items(a)			Consolidated Spectrum Brands
	(in millions)
Net income (loss), as adjusted (a)	$	221	$	70	$	71	$	(313	)	$	49
Income tax expense	—		—		—		60			60
Interest expense	—		—		—		192			192
Acquisition and integration related charges	15		5		2		9			31
Restructuring and related charges	7		10		1		1			19
Adjusted EBIT	$	243	$	85	$	74	$	(51	)	$	351
Depreciation and amortization (d)	64		28		13		29			134
Adjusted EBITDA	$	307	$	113	$	87	$	(22	)	$	485

	Fiscal 2012
	Fiscal 2011
	GlobalBatteries &Appliances			Global PetSupplies		Home andGardenBusiness		Corporate /UnallocatedItems(a)			~~ConsolidatedSpectrumBrands~~Consolidated Spectrum Brands
	(in millions)
Net income (loss), as adjusted (a)	$	~~221~~180		$	7050	$	7162	$	(~~309~~367	)	$	53(75	)
Income tax expense	—			—		—		6092			6092
Interest expense	—			—		—		~~192~~184			~~192~~184
Acquisition and integration related charges	15			5		2		9			31
Write-off unamortized discounts and financing fees (b)	—			—		—		24			24
Restructuring and related charges	76			1017		12		14			1929
Adjusted EBIT	$	243		$	85	$	74	$	(47	)	$	355
Acquisition and integration related charges	31			—		—		6			37
Depreciation and amortization (d)	64			28		13		25			130
Intangible asset impairment	23			8		1		—			32
Adjusted EBITDA	$	307		$	113	$	87	$	(22	)	$	485
Accelerated depreciation and amortization (c)	(1		)	—		—		—			(1		)
Adjusted EBIT	$	239		$	75	$	65	$	(57	)	$	322
Depreciation and amortization (d)	68			24		12		31			135
Adjusted EBITDA	$	307		$	99	$	77	$	(26	)	$	457

	Fiscal 2011
	GlobalBatteries &Appliances			Global PetSupplies		Home andGardenBusiness		Corporate /UnallocatedItems(a)			ConsolidatedSpectrumBrands
	(in millions)
Net income (loss), as adjusted (a)	$	180		$	50	$	62	$	(367	)	$	(75	)
Income tax expense	—			—		—		92			92
Interest expense	—			—		—		184			184
Write-off unamortized discounts and financing fees (b)	—			—		—		24			24
Restructuring and related charges	6			17		2		4			29
Acquisition and integration related charges	31			—		—		6			37
Intangible asset impairment	23			8		1		—			32
Accelerated depreciation and amortization (c)	(1		)	—		—		—			(1		)
Adjusted EBIT	$	239		$	75	$	65	$	(57	)	$	322
Depreciation and amortization (d)	68			24		12		31			135
Adjusted EBITDA	$	307		$	99	$	77	$	(26	)	$	457


(a)	It is our policy to record income tax expense and interest expense on a consolidated basis. Accordingly, such amounts are not reflected in the operating results of the operating segments.


(b)	Adjustment reflects the write-off of unamortized deferred financing fees and discounts related to the refinancing of our Term loan facility.


(c)	Adjustment reflects restricted stock amortization and accelerated depreciation associated with certain restructuring initiatives. Inasmuch as this amount is included within Restructuring and related charges, this adjustment negates the impact of reflecting the add-back of depreciation and amortization.


(d)	Included within depreciation and amortization is amortization of unearned restricted stock compensation.

Global Batteries & Appliances

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	2012			2011
	(in millions)
Net sales to external customers	$	2,250		$	2,254
Segment profit	$	244		$	239
Segment profit as a % of net sales	10.8		%	10.6		%
Segment Adjusted EBITDA	$	307		$	307
Assets as of September 30,	$	2,243		$	2,275

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Segment net sales to external customers in Fiscal 2012 decreased $4 million to $2,250 million from $2,254 million during Fiscal 2011, driven by unfavorable foreign currency exchange translation which impacted Fiscal 2012 net sales by approximately $65 million. Excluding foreign exchange, segment sales increased by $61 million, led by increased consumer batteries sales of $31 million. The growth of global consumer battery sales on a constant currency basis was driven by new customer listings as well as increased shelf space at existing customers, coupled with price increases, primarily in Latin America, and geographic expansion. Excluding foreign exchange, electric shaving and grooming sales increased $12 million, driven by an increase of $14 million due to successful new product launches in Europe and $4 million of distribution gains with existing customers in Latin America, tempered by a $6 million decrease in North American sales. Electric personal care product sales increased $9 million, excluding foreign exchange impacts, led by North American and Latin American sales increases of $11 million and $7 million, respectively, resulting from successful new product introductions and distribution gains in Latin America. The gains in electric personal care product sales were tempered by an $8 million decrease in European sales driven by declining women's hair straightener sales which is attributed to a change in fashion trends combined with decreased promotions in the fourth quarter of Fiscal 2012. Excluding foreign exchange impacts, small appliances sales increased $8 million. Geographically, small appliance sales increased $16 million in Latin America and $12 million in Europe, tempered by a $19 million decrease in North American small appliance sales. Latin American sales gains were attributable to price increases, distribution gains with existing customers and new customer gains, whereas European sales increases resulted from market share gains in the United Kingdom and expansion of the Russell Hobbs brand throughout Europe. The decline in North American small appliances sales resulted from a concerted effort to eliminate certain low margin promotions.

Segment profitability during Fiscal 2012 increased $5 million to $244 million from $239 million in Fiscal 2011. Segment profitability as a percentage of net sales increased slightly to 10.8% in Fiscal 2012 compared to 10.6% in Fiscal 2011. The increase is primarily attributable to favorable changes in product mix, and synergies recognized following the Merger, tempered by decreased sales and increased commodity prices.

Segment Adjusted EBITDA in Fiscal 2012 remained flat at $307 million, due to favorable changes in product mix which were offset by decreased sales and increased commodity costs.

Segment assets at September 30, 2012 decreased to $2,243 million from $2,275 million at September 30, 2011 primarily resulting from the amortization of intangible assets. Goodwill and intangible assets, which are directly a result of the revaluation impacts of fresh-start reporting and subsequent acquisitions, decreased to $1,261 million at September 30, 2012 from $1,295 million at September 30, 2011.

Global Pet Supplies

	2012			2011
	(in millions)
Net sales to external customers	$	~~615~~616		$	579
Segment profit	$	86		$	75
Segment profit as a % of net sales	14.0		%	13.0		%
Segment Adjusted EBITDA	$	113		$	99
Assets as of September 30,	$	956		$	828

Segment sales to external customers in Fiscal 2012 increased to $615 million from $579 million in Fiscal 2011, representing an increase of $36 million or 6%, driven by increased companion animal sales and aquatics sales of $34 million and $11 million, respectively. Companion animal sales increases resulted from the FURminator acquisition in Fiscal 2012, which contributed $30 million in sales, and expansion of the Nature's Miracle brand in the U.S. Strong North American aquarium starter kits and pond related sales drove the increase in aquatics sales, which was tempered by lower European aquatics sales. Foreign exchange negatively impacted Fiscal 2012 pet supplies sales by $8 million.

37Segment profitability increased $11 million in Fiscal 2012 to $86 million from $75 million in Fiscal 2011. Segment profitability as a percentage of sales in Fiscal 2012 also increased to 14.0% from 13.0% during Fiscal 2011. The increase in segment profit is attributable to increased sales and North American pricing improvements in Fiscal 2012, partially offset by negative foreign exchange impacts and a slowing European economy. The higher segment profit as a percentage of sales is primarily a result of the acquisition of FURminator which contributes a higher margin compared to other products within the segment, coupled with savings from our restructuring initiatives. See “Restructuring and Related Charges” below, as well as Note 14, "Restructuring and Related Charges", of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information regarding our restructuring and related charges.

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Segment profitability increased $11 million in Fiscal 2012 to $86 million from $75 million in Fiscal 2011. Segment profitability as a percentage of sales in Fiscal 2012 also increased to 14.0% from 13.0% during Fiscal 2011. The increase in segment profit is attributable to increased sales and North American pricing improvements in Fiscal 2012, partially offset by negative foreign exchange impacts and a slowing European economy. The higher segment profit as a percentage of sales is primarily a result of the acquisition of FURminator which contributes a higher margin compared to other products within the segment, coupled with savings from our restructuring initiatives. See “Restructuring and Related Charges” below, as well as Note 14, Restructuring and Related Charges, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information regarding our restructuring and related charges.

Segment Adjusted EBITDA in Fiscal 2012 increased $14 million, to $113 million, from $99 million in Fiscal 2011. The increase in Adjusted EBITDA is due to the factors driving increased segment profitability discussed above.

Segment assets as of September 30, 2012 increased to $956 million from $828 million at September 30, 2011. Goodwill and intangible assets, which are directly a result of the revaluation impacts of fresh-start reporting and subsequent acquisitions, increased to $715 million at September 30, 2012 from $595 million at September 30, 2011, driven by the goodwill and intangible assets added with the FURminator acquisition.

Home and Garden Business



	2012			2011
	(in millions)
Net sales to external customers	$	387		$	354
Segment profit	$	74		$	65
Segment profit as a % of net sales	19.1		%	18.4		%
Segment Adjusted EBITDA	$	87		$	77
Assets as of September 30,	$	508		$	476

Segment net sales to external customers increased $33 million, or 9%, during Fiscal 2012, to $387 million, compared to $354 million in Fiscal 2011. Household insect control sales increased $30 million in Fiscal 2012 resulting from the Black Flag acquisition, which contributed $24 million in additional sales, coupled with retail distribution gains. Lawn and garden controls sales increased $3 million in Fiscal 2012, compared to Fiscal 2011, driven by increased distribution with existing customers.

Segment profitability in Fiscal 2012 improved $9 million, to $74 million, from $65 million in Fiscal 2011, driven by increased sales in Fiscal 2012. Segment profitability as a percentage of sales increased to 19.1% in Fiscal 2012, from 18.4% in Fiscal 2011. This increase in segment profitability was due to the increased sales for the period, coupled with strong control over operating expenses which positively impacted segment profitability as a percentage of sales.

Segment Adjusted EBITDA was $87 million in Fiscal 2012, an increase of $10 million, compared to segment Adjusted EBITDA of $77 million in Fiscal 2011. The increase in segment Adjusted EBITDA is attributable to the same factors that led to the increase in segment profit discussed above.

Segment assets as of September 30, 2012 increased to $508 million from $476 million at September 30, 2011. Goodwill and intangible assets, which are directly a result of the revaluation impacts of fresh-start reporting and subsequent acquisitions, increased to $433 million at September 30, 2012 from $404 million at September 30, 2011, driven by the Black Flag acquisition.

Corporate Expense. Our corporate expense in Fiscal 2012 decreased to $47 million from $53 million in Fiscal 2011. This decrease is attributable to a $5 million decrease in stock based compensation expense during Fiscal 2012 compared to Fiscal 2011 coupled with savings from expense management. Corporate expense as a percentage of consolidated net sales for Fiscal 2012 was 1.5% compared to 1.7% during Fiscal 2011.

~~Restructuring~~Acquisition and Integration Related Charges. Acquisition and integration related charges include, but are not limited to, transaction costs such as banking, legal and accounting professional fees directly related to acquisitions, termination and related costs for transitional and certain other employees, integration related professional fees and other post business combination related expenses associated with our acquisitions. See Note 142, "~~Restructuring~~Significant Accounting Policies - Acquisition and Integration Related Charges", ~~of Notes~~ to our Consolidated Financial Statements, included in this Annual Report on Form 10-K for ~~additional~~further ~~information~~detail regarding our ~~restructuring~~Acquisition and integration related charges.

~~The~~Restructuring ~~following~~and ~~table~~Related ~~summarizes~~Charges. ~~all~~See ~~restructuring~~Note 14, “Restructuring and ~~related~~Related ~~charges~~Charges” weto ~~incurred~~our Consolidated Financial Statements included in ~~Fiscal~~this ~~2012~~Annual ~~and~~Report ~~Fiscal~~on ~~2011~~Form ~~(in~~10-K ~~millions):~~for information regarding our restructuring and related charges.

38Goodwill and Intangibles Impairment. Accounting standards require companies to test goodwill and indefinite-lived intangible assets for impairment annually, or more often if an event or circumstance indicates that an impairment loss may have been incurred. In Fiscal 2012 and Fiscal 2011, we tested our goodwill and indefinite-lived intangible assets as required. As a result of this testing, no impairment was identified in Fiscal 2012 while we recorded a non-cash pretax impairment charge of $32 million in Fiscal 2011. The $32 million non-cash pretax impairment charge incurred in Fiscal 2011 reflects trade name intangible asset impairments of the following: $23 million related to the Global Batteries and Appliances segment; $8 million

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	2012		2011
Costs included in cost of goods sold:
Global Cost Reduction Initiatives:
Termination benefits	$	2.9	$	1.6
Other associated costs	6.9		5.9
Other Cost Reduction Initiatives:
Other associated costs	—		0.3
Total included in cost of goods sold	$	9.8	$	7.8
Costs included in operating expenses:
Global Cost Reduction Initiatives:
Termination benefits	3.1		10.2
Other associated costs	5.8		7.8
Other Cost Reduction Initiatives:
Termination benefits	—		0.9
Other associated costs	0.9		1.9
Total included in operating expenses	$	9.8	$	20.8
Total restructuring and related charges	$	19.6	$	28.6

related to Global Pet Supplies; and $1 million related to the Home and Garden Business. See Note 2(j), "Significant Accounting Policies and Practices—Intangible Assets", of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for further details on goodwill and intangibles impairment charges.

In connection with the Global Cost Reduction Initiatives, we recorded $19 million and $25 million of pretax restructuring and related charges during Fiscal 2012 and Fiscal 2011, respectively. Costs associated with these initiatives, which are expected to be incurred through January 31, 2015, are projected at approximately $89 million, approximately $83 million of which had been incurred through September 30, 2012.

Acquisition and integration related charges. Acquisition and integration related charges reflected in Operating expenses include, but are not limited to, transaction costs such as banking, legal and accounting professional fees directly related to both consummated acquisitions and acquisition targets, employee termination charges, integration related professional fees and other post business combination related expenses.

We incurred $31 million of Acquisition and integration related charges during Fiscal 2012 primarily in connection with the Merger and the acquisitions of Black Flag and FURminator, and the expected acquisition of the HHI Business, which consisted of: (i) $16 million of integration costs; (ii) $6 million of employee termination charges; and (iii) $9 million of legal and professional fees. We incurred $37 million of Acquisition and integration related charges during Fiscal 2011, which consisted of the following: (i) $23 million of integration costs; (ii) $8 million of employee termination charges; and (iii) $6 million of legal and professional fees.

Goodwill and Intangibles Impairment. Accounting standards require companies to test goodwill and indefinite-lived intangible assets for impairment annually, or more often if an event or circumstance indicates that an impairment loss may have been incurred. In Fiscal 2012 and Fiscal 2011, we tested our goodwill and indefinite-lived intangible assets as required. As a result of this testing, no impairment was identified in Fiscal 2012 while we recorded a non-cash pretax impairment charge of $32 million in Fiscal 2011. The $32 million non-cash pretax impairment charge incurred in Fiscal 2011 reflects trade name intangible asset impairments of the following: $23 million related to the Global Batteries and Appliances segment; $8 million related to Global Pet Supplies; and $1 million related to the Home and Garden Business. See Note 2(i), "Significant Accounting Policies and Practices—Intangible Assets", of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for further details on goodwill and intangibles impairment charges.

Interest Expense. Interest expense in Fiscal 2012 decreased to $192 million from $208 million in Fiscal 2011. The decrease in interest expense was primarily attributable to lower expense from the replacement of our 12% Notes with our 6.75% Notes in Fiscal 2012, reduced principal and lower effective interest rates related to our Term Loan and lower expenses for interest rate swaps and other fees and expenses. The cost savings were tempered by higher expense from increased principal primarily related to our 9.5% Notes, and expenses related to the refinancing of our 12% Notes and the amendment of our ABL Revolving Credit Facility. See Note 6, “Debt,” to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information regarding our outstanding debt.

Income Taxes. In Fiscal 2012, we recorded income tax expense of $60 million on pretax income from continuing operations of $113 million, and in Fiscal 2011, we recorded income tax expense of $92 million on a pretax loss from continuing operations of $18 million. Our effective tax rate on income from continuing operations was approximately 53% for Fiscal 2012. Our effective tax rate on our loss from continuing operations was approximately 522% for Fiscal 2011. There are four significant factors impacting our book income tax rate. First, we are profitable in the foreign jurisdictions in which we operate and therefore must provide foreign income taxes even while we have a book loss in the United States. Our book loss in the U.S. is the result of substantially all of our debt and restructuring costs being incurred in our U.S. entities. Second, since there is a valuation allowance against U.S. deferred tax assets, we are unable to record any financial statement benefit related to our U.S. domestic losses. This impact is further exacerbated by the tax amortization of certain domestic indefinite lived intangible assets. The deferred tax liabilities created by the tax amortization of these intangibles cannot be used to offset corresponding increases in net operating loss deferred tax assets in determining the Company's domestic valuation allowance. This results in additional net domestic tax expense despite the U.S. domestic book losses. Third, in Fiscal 2012, we recognized a $14 million tax benefit from the release of a portion of our U.S. valuation allowance, as discussed below, in connection with the purchase of FURminator. Finally, in Fiscal 2011, our consolidated pretax income was close to break even, which created a high effective tax rate as this rate is calculated by dividing tax expense into pretax income (loss).

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Our effective tax rate on our loss from continuing operations was approximately 522% for Fiscal 2011. There are four significant factors impacting our book income tax rate. First, we are profitable in the foreign jurisdictions in which we operate and therefore must provide foreign income taxes even while we have a book loss in the United States. Our book loss in the U.S. is the result of substantially all of our debt and restructuring costs being incurred in our U.S. entities. Second, since there is a valuation allowance against U.S. deferred tax assets, we are unable to record any financial statement benefit related to our U.S. domestic losses. This impact is further exacerbated by the tax amortization of certain domestic indefinite lived intangible assets. The deferred tax liabilities created by the tax amortization of these intangibles cannot be used to offset corresponding increases in net operating loss deferred tax assets in determining the Company's domestic valuation allowance. This results in additional net domestic tax expense despite the U.S. domestic book losses. Third, in Fiscal 2012, we recognized a $14 million tax benefit from the release of a portion of our U.S. valuation allowance, as discussed below, in connection with the purchase of FURminator. Finally, in Fiscal 2011, our income was close to break even, which created a high effective tax rate as this rate is calculated by dividing tax expense into pre-tax income (loss) from operations.

As of September 30, 2012, we have U.S. federal and state net operating loss carryforwards of approximately $1,304 million and $1,340 million, respectively. These net operating loss carryforwards expire through years ending in 2032. We also have foreign loss carryforwards of approximately $119 million, which will expire beginning in 2016. Certain of the foreign net operating losses have indefinite carryforward periods. We have had multiple changes of ownership, as defined under Internal Revenue Code (“IRC”) Section 382, that subject our U.S. federal and state net operating losses and other tax attributes to certain limitations. The annual limitation on our use of these carryforwards is based on a number of factors including the value of our stock (as defined for tax purposes) on the date of the ownership change, our net unrealized built in gain position on that date, the occurrence of realized built in gains in years subsequent to the ownership change, and the effects of subsequent ownership changes (as defined for tax purposes), if any. In addition, separate return year limitations apply to limit our utilization of the acquired Russell Hobbs U.S. federal and state net operating losses to future income of the Russell Hobbs subgroup. Based on these factors, we estimate that $301 million of the total U.S. federal and $385 million of the state net operating loss would expire unused even if the Company generates sufficient income to otherwise use all its NOLs. In addition, we project that $111 million of the total foreign net operating loss carryforwards will expire unused. We have provided a full valuation allowance against these deferred tax assets as well.

Our total valuation allowance for the tax benefit of deferred tax assets that may not be realized is approximately $382 million at September 30, 2012. Of this amount, approximately $347 million relates to U.S. net deferred tax assets and approximately $35 million relates to foreign net deferred tax assets. Our total valuation allowance was approximately $374 million at September 30, 2011. Of this amount, approximately $339 million related to U.S. net deferred tax assets and approximately $35 million related to foreign net deferred tax assets. As a result of the purchase of FURminator, we were able to release $15 million of U.S. valuation allowance during Fiscal 2012. The release was attributable to $15 million of net deferred tax liabilities recorded on the FURminator opening balance sheet that offset other U.S. net deferred tax assets. During Fiscal 2011, we also determined that a valuation allowance is required against deferred tax assets related to net operating losses in ~~Brazil and thus recorded a $26 million charge.~~

ASC 740, which clarifies the accounting for uncertainty in tax positions, requires that we recognize in our financial statements the impact of a tax position if that position is more likely than not to be sustained on audit based on the technical merits of the position. As of September 30, 2012 and September 30, 2011, the total amount of unrecognized tax benefits that, if recognized, would affect the effective income tax rate in future periods was $6 million and $9 million, respectively. See Note 9, "Income Taxes", of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information.

Fiscal Year Ended September 30, 2011 Compared to Fiscal Year Ended September 30, 2010

Highlights of Consolidated Operating Results

Year over year historical comparisons are influenced by the acquisition of Russell Hobbs, which is included in our Fiscal 2010 Consolidated Statements of Operations from June 16, 2010, the date of the Merger, through the end of the period. See

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~~Note~~Brazil ~~15,~~and ~~Acquisitions,~~thus ofrecorded ~~Notes~~a to$26 ~~Consolidated~~million ~~Financial Statements, included in this Annual Report on Form 10-K for supplemental pro forma information providing additional year over year comparisons of the impact of the acquisition~~charge.

~~Net~~ASC ~~Sales.~~740, ~~Net~~which ~~sales~~clarifies ~~for~~the ~~Fiscal~~accounting ~~2011~~for ~~increased~~uncertainty toin $3tax positions,~~187~~ ~~million~~requires ~~from~~that ~~$2,567~~we ~~million~~recognize in ~~Fiscal~~our ~~2010,~~financial statements the impact of a ~~24.2%~~tax ~~increase~~position if that position is more likely than not to be sustained on audit based on the technical merits of the position. ~~The~~As ~~following~~of ~~table~~September 30, ~~details~~2012 and September 30, 2011, the ~~principal~~total ~~components~~amount of unrecognized tax benefits that, if recognized, would affect the ~~change~~effective income tax rate in ~~net~~future ~~sales~~periods ~~from~~was ~~Fiscal~~$6 ~~2010~~million and $9 million, respectively. See Note 9, "Income Taxes", of Notes to ~~Fiscal~~Consolidated ~~2011~~Financial (Statements included in ~~millions):~~this Annual Report on Form 10-K for additional information.

	Net Sales
Fiscal 2010 Net Sales	$	2,567
Addition of Russell Hobbs—small appliances	548
Addition of Russell Hobbs—pet supplies	7
Addition of Russell Hobbs—home and garden control products	4
Increase in electric personal care products	28
Increase in electric shaving and grooming products	13
Increase in home and garden control products	7
Decrease in pet supplies	(3		)
Decrease in consumer batteries	(12		)
Foreign currency impact, net	28
Fiscal 2011 Net Sales	$	3,187

Consolidated net sales by product line for Fiscal 2011 and Fiscal 2010 are as follows (in millions):

	Fiscal Year
	2011		2010
Product line net sales
Consumer batteries	$	954	$	954
Small appliances	778		231
Pet supplies	579		566
Home and garden control products	354		343
Electric shaving and grooming products	274		257
Electric personal care products	248		216
Total net sales to external customers	$	3,187	$	2,567

Global consumer battery sales during Fiscal 2011 were flat compared to Fiscal 2010, primarily driven by decreased sales in Latin America of $41 million, which were tempered by increased sales in North America and Europe of $24 million and $5 million, respectively, coupled with favorable foreign exchange impacts of $12 million. Sales decreases in Latin America were driven by decreased alkaline battery sales of $11 million, zinc carbon battery sales of $26 million and portable lighting sales of $4 million primarily due to decreased volumes in Brazil as a result of competitive pressures in the region. North American sales increased as a result of strong holiday sales during our first fiscal quarter, distribution gains throughout the year, incremental sales due to strong weather patterns during Fiscal 2011 and a successful new product line launch at a major customer. The sales increases in Europe were primarily attributable to the successful promotion of our Varta value sub-brands as well as customer gains.

Pet product sales during Fiscal 2011 increased $13 million, or 2%, compared to Fiscal 2010. The increase of $13 million is attributable to increased companion animal product sales of $15 million, $7 million of which was a direct result of the Merger, with the remaining $8 million being driven by the Birdola acquisition, successful product launches and continued expansion in Europe. Favorable foreign exchange impacted sales by $8 million. These gains were partially offset by decreased aquatics sales of $10 million resulting from overall global macroeconomic conditions.

Sales of home and garden control products during Fiscal 2011 versus Fiscal 2010 increased $11 million, or 3%. This increase is a result of increased household insect controls sales of $14 million, of which $4 million related to the Merger. The remaining growth in household insect control sales was driven by increased distribution and product placements with major customers. These gains were partially offset by a $3 million decrease in lawn and garden control sales due to unseasonable weather conditions in the U.S. which negatively impacted the lawn and garden season.

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Electric shaving and grooming product sales during Fiscal 2011 increased $17 million, or 7%, compared to Fiscal 2010 due to increased sales within North America, Europe and Latin America of $6 million, $4 million and $3 million, respectively, coupled with favorable foreign exchange translation of $4 million. North American and European sales increases were driven by distribution and customer gains and increased online sales. Latin American sales increases were driven by distribution gains.

Electric personal care product sales during Fiscal 2011 increased $32 million, or 15%, when compared to Fiscal 2010. The increase of $32 million during Fiscal 2011 was attributable to increases in North America, Europe and Latin America of $12 million, $14 million and $2 million, respectively, coupled with favorable foreign exchange impacts of $4. The increases in North American and European sales were a result of successful new product launches, distribution and customer gains and increased online sales, while increases in Latin American sales were driven by distribution gains.

Small appliances contributed $778 million or 24% of total net sales for Fiscal 2011 compared to $231 million or 9% of sales in Fiscal 2010. This represents a full year of sales related to Russell Hobbs during Fiscal 2011 as compared to Fiscal 2010 in which we realized sales of the acquired business from the date of the Merger, June 16, 2010, through September 30, 2010, the close of our Fiscal 2010.

Gross Profit. Gross profit for Fiscal 2011 was $1,129 million versus $921 million during Fiscal 2010, representing a $208 million increase. Our gross profit margin for Fiscal 2011 decreased slightly to 35.4% from 35.9% in Fiscal 2010. The increase in gross profit is primarily attributable to increased sales coupled with the non-recurrence of a $34 million increase in cost of goods sold that resulted from the sale of inventory that was revalued in connection with our adoption of fresh-start reporting upon emergence from Chapter 11 of the Bankruptcy Code, that we recognized during the first quarter of Fiscal 2010. The increased sales due to the Merger accounted for a gross profit increase of $152 million during Fiscal 2011 as compared to Fiscal 2010. The decrease in gross profit margin is attributable to the change in overall product mix as a result of the Merger as well as increasing commodity prices during Fiscal 2011.

Operating Expense. Operating expenses for Fiscal 2011 totaled $900 million versus $752 million during Fiscal 2010. The $148 million increase in operating expenses for Fiscal 2011 versus Fiscal 2010 was driven by the Merger, which accounted for $111 million of the increase, coupled with the Fiscal 2011 impairment charge of $32 million and increased stock compensation expense of $13 million. These increases were tempered by savings from our integration and global cost reduction initiatives. See “Restructuring and Related Charges” below, as well as Note 14, Restructuring and Related Charges, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information regarding our restructuring and related charges.

Operating Income. Operating income of approximately $229 million was recognized in Fiscal 2011 compared to $169 million recognized in Fiscal 2010, representing an increase of $60 million. The Merger accounted for a $41 million increase in operating income. Additionally, savings from our integration efforts, our global cost reduction initiatives and favorable foreign exchange translation impacted operating income by $17 million, $16 million and $11 million, respectively. These profit improvements were partially offset by a $32 million impairment charge, $13 million increase in stock compensation expense and increased commodity costs during Fiscal 2011.

Adjusted EBITDA. Management believes that certain non-GAAP financial measures may be useful in certain instances to provide additional meaningful comparisons between current results and results in prior operating periods. Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) is a metric used by management and frequently used by the financial community. Adjusted EBITDA provides insight into an organization’s operating trends and facilitates 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 can also be a useful measure of a company’s ability to service debt and is one of the measures used for determining our debt covenant compliance. Adjusted EBITDA excludes certain items that are unusual in nature or not comparable from period to period. While management believes that non-GAAP measurements are useful supplemental information, such adjusted results are not intended to replace the Company’s GAAP financial results.

Adjusted EBITDA, which includes the results of Russell Hobbs’ businesses as if it was combined with Spectrum for all periods presented (see reconciliation of GAAP Net Income (Loss) from Continuing Operations to Adjusted EBIT and to Adjusted EBITDA by .segment below) was $457 million for Fiscal 2011 compared with $432 million for Fiscal 2010.

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and inbound supply chain are included in the determination of operating segment profits. In connection with the realignment of reportable segments discussed above, expenses associated with certain general and administrative functions necessary to reflect the operating segments on a standalone basis, have been excluded in the determination of reportable segment profits. The costs associated with these functions were previously reflected in operating segment profits. Corporate expenses primarily include general and administrative expenses and the costs of global long-term incentive compensation plans which are evaluated on a consolidated basis and not allocated to our operating segments.

Global strategic initiatives and financial objectives for each reportable segment are determined at the corporate level. Each reportable segment is responsible for implementing defined strategic initiatives and achieving certain financial objectives and has a general manager responsible for the sales and marketing initiatives and financial results for product lines within that segment. Financial information pertaining to our reportable segments is contained in Note 11, Segment Information, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for further information relating to our operating segments.

Below are reconciliations of GAAP Net Income (Loss) from Continuing Operations to Adjusted EBIT and Adjusted EBITDA by segment and for Consolidated Spectrum Brands for Fiscal 2011 and Fiscal 2010:

	Fiscal 2011
	GlobalBatteries &Appliances			Global PetSupplies		Home andGardenBusiness		Corporate /UnallocatedItems(a)			ConsolidatedSpectrumBrands
	(in millions)
Net income (loss), as adjusted (a)	$	180		$	50	$	62	$	(367	)	$	(75	)
Income tax expense	—			—		—		92			92
Interest expense	—			—		—		184			184
Write-off unamortized discounts and financing fees (b)	—			—		—		24			24
Restructuring and related charges	6			17		2		4			29
Acquisition and integration related charges	31			—		—		6			37
Intangible asset impairment	23			8		1		—			32
Accelerated depreciation and amortization (c)	(1		)	—		—		—			(1		)
Adjusted EBIT	$	239		$	75	$	65	$	(57	)	$	322
Depreciation and amortization (d)	68			24		12		31			135
Adjusted EBITDA	$	307		$	99	$	77	$	(26	)	$	457

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	Fiscal 2010
	GlobalBatteries &Appliances			Global PetSupplies		Home andGardenBusiness			Corporate /UnallocatedItems(a)			ConsolidatedSpectrumBrands
	(in millions)
Net income (loss), as adjusted (a)	$	143		$	51	$	40		$	(424	)	$	(190	)
Loss from discontinued operations, net of tax	—			—		3			—			3
Income tax expense	—			—		—			63			63
Interest expense	—			—		—			195			195
Write-off unamortized discounts and financing fees (e)	—			—		—			82			82
Pre-acquisition earnings	61			4		1			—			66
Restructuring and related charges	4			7		8			5			24
Acquisition and integration related charges	15			—		—			24			39
Reorganization items	—			—		—			3			3
Accelerated depreciation and amortization (c)	—			—		(1		)	(2		)	(3		)
Fresh-start inventory fair value adjustment	18			14		2			—			34
Russell Hobbs inventory fair value adjustment	3			—		—			—			3
Brazilian IPI credit/other	(5		)	—		—			—			(5		)
Adjusted EBIT	$	239		$	76	$	53		$	(54	)	$	314
Depreciation and amortization (d)	58			28		15			17			118
Adjusted EBITDA	$	297		$	104	$	68		$	(37	)	$	432

(a) It is our policy to record income tax expense and interest expense on a consolidated basis. Accordingly, such amounts are not reflected in the operating results of the operating segments.

(b) Adjustment reflects the write-off of unamortized deferred financing fees and discounts related to the refinancing of our Term loan facility.

(c) Adjustment reflects restricted stock amortization and accelerated depreciation associated with certain restructuring initiatives. Inasmuch as this amount is included within Restructuring and related charges, this adjustment negates the impact of reflecting the add-back of depreciation and amortization.

(d) Included within depreciation and amortization is amortization of unearned restricted stock compensation.

(e) Adjustment reflects the following: (i) $61 million write-off of unamortized deferred financing fees and discounts associated with our restructured capital structure, refinanced on June 16, 2010; (ii) $17 million related to the termination of interest rate swaps and commitment fees; and (iii) $4 million related to pre-payment premiums associated with the paydown of our old asset based revolving credit facility and supplemental loan extinguished on June 16, 2010.

Global Batteries & Appliances

	2011			2010
	(in millions)
Net sales to external customers	$	2,254		$	1,658
Segment profit	$	239		$	171
Segment profit as a % of net sales	10.6		%	10.3		%
Segment Adjusted EBITDA	$	307		$	297
Assets as of September 30,	$	2,275		$	2,477

Segment sales to external customers in Fiscal 2011 increased $596 million to $2,254 million from $1,658 million during Fiscal 2010, representing a 36% increase. The Merger accounted for $547 million of the increase due to a full year of small appliances sales of $778 million in Fiscal 2011 compared to $231 million during Fiscal 2010, which only includes sales after the Merger. Favorable foreign currency exchange translation impacted sales in Fiscal 2011 by approximately $37 million when

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compared to Fiscal 2010.

Consumer battery sales for Fiscal 2011 remained flat at $954 million. The decrease is attributable to a decline in specialty battery sales of $24 million, which was tempered by increased alkaline battery sales of $9 million, increased portable lighting sales of $4 million and favorable foreign exchange translation of $11 million. The $24 million decrease in specialty battery sales was driven by a decrease in Latin American sales of $26 million, primarily due to decreased volume in Brazil as a result of competitive pressures in the region tempered by increased sales of $3 million in North America, predominantly driven by distribution gains. The $9 million increase in alkaline sales is primarily attributable to increased sales in North America of $14 million resulting from distribution gains, strong holiday sales in the first quarter of Fiscal 2011 and incremental sales due to severe weather during the year coupled with increased European sales of $6 million driven by successful promotions and customer gains in the region. The alkaline battery sales growth in these regions was tempered by a decline of $11 million in Latin America due to decreased volumes in Brazil as a result of competitive pressures. The portable lighting product $4 million sales increase was primarily driven by increased sales in North America of $7 million, which were attributable to distribution gains, including multiple online retailers, and a successful new product line launch at a major customer, coupled with favorable foreign exchange of $1 million. These gains were tempered by decreased sales in Latin America of $4 million driven by competitive pressures in the region.

Sales of electric shaving and grooming products in Fiscal 2011 increased by $17 million, a 7% increase, compared to Fiscal 2010. This increase was driven by increases of $6 million in North America, $4 million in Europe, $3 million in Latin America and favorable foreign exchange translation of $4 million. The increases Latin America resulted from distribution gains, whereas the increases in European and North American sales were driven by increased online sales and distribution gains.

Electric personal care sales increased by $32 million to $248 million an increase of 15% over Fiscal 2010 sales. The $32 million Fiscal 2011 sales growth was attributable to increased North American and European sales of $12 million and $14 million, respectively, as well as modest sales increases in Latin America coupled with favorable foreign exchange impacts of $4 million. The sales increases in North America and Europe were both due to a combination of successful new product launches, distribution gains in each region and increased online sales.

Segment profitability during Fiscal 2011 increased $68 million to $239 million from $171 million in Fiscal 2010. The Merger accounted for a $42 million increase in segment profit. The remaining increase in segment profitability during Fiscal 2011 was attributable to increased sales which contributed $12 million of profit, cost saving from integration and cost reduction initiatives of $12 million, favorable foreign exchange of $11 million and the non-recurrence of a $18 million increase in cost of goods sold that resulted from the sale of inventory that was revalued in connection with our adoption of fresh-start reporting upon emergence from Chapter 11 of the Bankruptcy Code, that we recognized during the first quarter of Fiscal 2010. Partially offsetting these increases to segment profitability was a $29 million decrease in margins resulting from higher commodity costs and product mix. Segment profitability as a percentage of sales increased slightly to 10.6% in Fiscal 2011 compared to 10.3% in Fiscal 2010. See “Restructuring and Related Charges” below, as well as Note 14, Restructuring and Related Charges, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information regarding our restructuring and related charges.

Segment Adjusted EBITDA in Fiscal 2011 was $307 million compared to $297 million in Fiscal 2010, an increase of $10 million. The increase in Adjusted EBITDA is mainly driven the increased sales, cost savings and foreign exchange impacts mentioned above, tempered by the decreased margins mentioned above.

Segment assets at September 30, 2011 increased to $2,275 million from $2,477 million at September 30, 2010. Goodwill and intangible assets, which are directly a result of the revaluation impacts of fresh-start reporting and subsequent acquisitions, decreased to $1,295 million at September 30, 2011 from $1,355 million at September 30, 2010. The decrease is due to a $23 million intangible impairment as well as amortization of definite lived intangible assets of $33 million and foreign exchange impacts of $3 million.

Foreign Currency Translation—Venezuela Impacts

The Global Batteries & Appliances segment does business in Venezuela through a Venezuelan subsidiary. At January 4, 2010, the beginning of our second quarter of Fiscal 2010, we determined that Venezuela met the definition of a highly inflationary economy under GAAP. As a result, beginning January 4, 2010, the U.S. dollar became the functional currency for our Venezuelan subsidiary. Accordingly, currency remeasurement adjustments for this subsidiary’s financial statements and other transactional foreign exchange gains and losses are reflected in earnings from January 4, 2010. Through January 3, 2010, prior to being designated as highly inflationary, translation adjustments related to the Venezuelan subsidiary were reflected in Shareholder's equity as a component of AOCI.

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The designation of our Venezuela entity as a highly inflationary economy and the devaluation of the Bolivar fuerte resulted in a $1 million reduction to our operating income during Fiscal 2010. We also reported a foreign exchange loss in Other expense (income), net, of $10 million during Fiscal 2010.

As of September 30, 2011, we are no longer exchanging our Bolivar Fuertes for U.S. dollars through the SITME mechanism and the SITME is no longer the most likely method of exchanging our Bolivar fuertes for U.S. dollars. Therefore, we changed the rate used to remeasure Bolivar fuerte denominated transactions as of September 30, 2011 from the 5.3 SITME rate to the 4.3 official exchange rate as it is the expected rate at which exchanges of our Bolivar fuertes to U.S. dollars will be settled. We reported a foreign exchange gain in Other expense (income), net, of $(1) million during Fiscal 2011 related to the change to the official exchange rate.

Global Pet Supplies

	2011			2010
	(in millions)
Net sales to external customers	$	579		$	566
Segment profit	$	75		$	58
Segment profit as a % of net sales	13.0		%	10.2		%
Segment Adjusted EBITDA	$	99		$	104
Assets as of September 30,	$	828		$	839

Segment sales to external customers in Fiscal 2011 increased to $579 million from $566 million in Fiscal 2010, representing an increase of $13 million or 2%. The increase of $13 million is attributable to increased companion animal product sales of $15 million, $7 million of which was a direct result of the Merger, with the remaining $8 million being driven by successful product launches and continued expansion in Europe, coupled with $8 million of favorable foreign exchange. These gains were partially offset by decreased aquatics sales of $10 million resulting from overall global macroeconomic conditions.

Segment profitability in Fiscal 2011 increased to $75 million from $58 million in Fiscal 2010. Segment profitability as a percentage of sales in Fiscal 2011 also increased to 13.0% from 10.2% during Fiscal 2010. The increase in segment profitability and profitability margin was primarily attributable to cost savings of $12 million related to integration and cost reduction initiatives, in addition to the non-recurrence of a $14 million increase in cost of goods sold that resulted from the sale of inventory that was revalued in connection with our adoption of fresh-start reporting upon emergence from Chapter 11 of the Bankruptcy Code, that we recognized during the first quarter of Fiscal 2010. These gains were slightly offset by decreased margins primarily due to closeout sales during the fourth quarter of Fiscal 2011. See “Restructuring and Related Charges” below, as well as Note 14, Restructuring and Related Charges, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information regarding our restructuring and related charges.

Segment Adjusted EBITDA in Fiscal 2011 was $99 million compared to $104 million in Fiscal 2010. The decrease in Adjusted EBITDA was driven by a lower EBITDA realized from products acquired in the Merger, as Fiscal 2010 Adjusted EBITDA includes preacquisition earnings.

Segment assets as of September 30, 2011 decreased to $828 million from $839 million at September 30, 2010. Goodwill and intangible assets, which are directly a result of the revaluation impacts of fresh-start reporting and subsequent acquisitions, decreased to $595 million at September 30, 2011 from $602 million at September 30, 2010. The decrease is due to a $9 million intangible impairment as well as amortization of definite lived intangible assets of $16 million, slightly offset by increases due to acquisitions that resulted in increased goodwill and intangible assets of $17 million.

Home and Garden Business

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	2011			2010
	(in millions)
Net sales to external customers	$	354		$	343
Segment profit	$	65		$	51
Segment profit as a % of net sales	18.4		%	14.9		%
Segment Adjusted EBITDA	$	77		$	68
Assets as of September 30,	$	476		$	496

Segment sales to external customers of home and garden control products during Fiscal 2011 increased $11 million, or 3% versus Fiscal 2010, driven by increased household insect controls sales of $14 million, of which $4 million related to the Merger. The remaining growth in household insect control sales was driven by increased distribution and product placements with major customers. These gains were partially offset by a $3 million decrease in lawn and garden control sales due to unseasonable weather conditions in the U.S., which negatively impacted the lawn and garden season.

Segment profitability in Fiscal 2011 increased to $65 million compared to $51 million in Fiscal 2010. This increase in segment profitability was attributable to increased sales as well as savings from our global cost reduction initiatives announced in Fiscal 2009 in addition to the non-recurrence of a $2 million increase in cost of goods sold that resulted from the sale of inventory that was revalued in connection with our adoption of fresh-start reporting upon emergence from Chapter 11 of the Bankruptcy Code, that we recognized during the first quarter of Fiscal 2010. Segment profitability as a percentage of sales in Fiscal 2011 increased to 18.4% from 14.9% in Fiscal 2010. The increase in segment profitability was also due to the factors mentioned above, as well as margin improvements as a result of expense management. See “Restructuring and Related Charges” below, as well as Note 14, Restructuring and Related Charges, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information regarding our restructuring and related charges.

Segment Adjusted EBITDA in Fiscal 2011 was $77 million compared to $68 million in Fiscal 2010. The increase in Adjusted EBITDA during Fiscal 2011 was mainly driven by product distribution gains, cost improvement initiatives and expense management as mentioned above.

Segment assets as of September 30, 2011 decreased to $476 million from $496 million at September 30, 2010. Goodwill and intangible assets, which are directly a result of the revaluation impacts of fresh-start reporting and subsequent acquisitions, decreased to $404 million at September 30, 2011 from $413 million at September 30, 2010. The decrease of $9 million is driven by amortization associated with definite lived intangible assets of $9 million and an intangible asset impairment of $1 million slightly tempered by additions due to acquisitions.

Corporate Expense. Our corporate expense in Fiscal 2011 increased to $54 million from $49 million in Fiscal 2010. This increase is attributable to a $14 million increase in stock based compensation expense during Fiscal 2011 compared to Fiscal 2010, partially offset by savings resulting from the relocation of the corporate office back to Madison, Wisconsin, as well as synergies realized from the Merger. Corporate expense as a percentage of consolidated net sales for Fiscal 2011 was 1.7% compared to 1.9% during Fiscal 2010.

Restructuring and Related Charges. See Note 14, "Restructuring and Related Charges", of Notes to Consolidated Financial Statements, included in this Annual Report on Form 10-K for additional information regarding our restructuring and related charges.

The following table summarizes all restructuring and related charges we incurred in Fiscal 2011 and Fiscal 2010 (in millions):

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	2011			2010
Costs included in cost of goods sold:
Global Realignment Initiatives:
Termination benefits	$	—		$	0.2
Other associated costs	—			(0.1		)
Ningbo Exit Plan:
Other associated costs	0.3			2.1
Global Cost Reduction Initiatives:
Termination benefits	1.6			2.6
Other associated costs	5.9			2.3
Total included in cost of goods sold	$	7.8		$	7.1
Costs included in operating expenses:
European Initiatives:
Termination benefits	$	(0.3	)	$	(0.1	)
Global Realignment Initiatives:
Termination benefits	1.2			5.4
Other associated costs	1.9			(1.9		)
Global Cost Reduction Initiatives:
Termination benefits	10.2			4.3
Other associated costs	7.8			9.3
Total included in operating expenses	$	20.8		$	17.0
Total restructuring and related charges	$	28.6		$	24.1

We have implemented a series of initiatives in the Global Batteries & Personal Care segment in Europe to reduce operating costs and rationalize our manufacturing structure (the “European Initiatives”). In connection with the European Initiatives, which are substantially complete, we implemented a series of initiatives within the Global Batteries & Personal Care segment in Europe to reduce operating costs and rationalize our manufacturing structure. These initiatives included the relocation of certain operations at our Ellwangen, Germany packaging center to our Dischingen, Germany battery plant, transferring private label battery production at our Dischingen, Germany battery plant to our manufacturing facility in China and restructuring Europe’s sales, marketing and support functions. In connection with the European Initiatives, we recorded de minimis pretax restructuring and related charges during Fiscal 2011 and Fiscal 2010, representing the true-up of reserve balances.

In Fiscal 2007, we began managing our business in three vertically integrated, product-focused reporting segments; Global Batteries & Personal Care, Global Pet Supplies and the Home and Garden Business. As part of this realignment, our global operations organization, consisting of research and development, manufacturing management, global purchasing, quality operations and inbound supply chain, was transferred to the operating segments. In connection with these changes we undertook a number of cost reduction initiatives, primarily headcount reductions at the corporate and operating segment levels (the “Global Realignment Initiatives”). We recorded approximately $3 million and $4 million of pretax restructuring and related charges during Fiscal 2011 and Fiscal 2010, respectively, in connection with the Global Realignment Initiatives. Costs associated with these initiatives, which are expected to be incurred through June 30, 2013, relate primarily to severance and are projected at approximately $92 million.

During Fiscal 2008, we implemented an initiative within the Global Batteries & Personal Care segment to reduce operating costs and rationalize our manufacturing structure. These initiatives, which are substantially complete, include the exit of our battery manufacturing facility in Ningbo Baowang China (“Ningbo”) (the “Ningbo Exit Plan”). We recorded de minimis pretax restructuring and related charges during Fiscal 2011 and $2 million of pretax restructuring and related charges during Fiscal 2010, in connection with the Ningbo Exit Plan. We have recorded pretax restructuring and related charges of approximately $30 million since the inception of the Ningbo Exit Plan.

During Fiscal 2009, we implemented a series of initiatives within the Global Batteries & Personal Care segment and the Global Pet Supplies segment to reduce operating costs as well as evaluate our opportunities to improve our capital structure (the “Global Cost Reduction Initiatives”). These initiatives included headcount reductions within all our segments and the exit of certain facilities in the U.S. related to the Global Pet Supplies segment. These initiatives also included expenditures for banking and legal and accounting consultation fees related to the evaluation of our capital structure. We recorded $25 million

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and $18 million of pretax restructuring and related charges during Fiscal 2011 and Fiscal 2010, respectively, related to the Global Cost Reduction Initiatives. Costs associated with these initiatives, which are expected to be incurred through January 31, 2015, are projected at approximately $78 million.

Acquisition and integration related charges. Acquisition and integration related charges reflected in Operating expenses include, but are not limited to, transaction costs such as banking, legal and accounting professional fees directly related to acquisitions, employee termination charges, integration related professional fees and other post business combination related expenses.

We incurred $37 million of Acquisition and integration related charges during Fiscal 2011 primarily in connection with the Merger, which consisted of: (i) $23 million of integration costs; (ii) $8 million of employee termination charges; and (iii) $6 million of legal and professional fees. We incurred $38 million of Acquisition and integration related charges during Fiscal 2010, which consisted of the following: (i) $25 million of legal and professional fees; (ii) $10 million of employee termination charges; and (iii) $4 million of integration costs.

Goodwill and Intangibles Impairment. Accounting standards require companies to test goodwill and indefinite-lived intangible assets for impairment annually, or more often if an event or circumstance indicates that an impairment loss may have been incurred. In Fiscal 2011 and 2010, we tested our goodwill and indefinite-lived intangible assets as required. As a result of this testing, we recorded a non-cash pretax impairment charge of $32 million in Fiscal 2011. The $32 million non-cash pretax impairment charge incurred in Fiscal 2011 reflects trade name intangible asset impairments of the following: $23 million related to the Global Batteries and Appliances segment; $8 million related to Global Pet Supplies; and $1 million related to the Home and Garden Business. See Note 2(i), "Significant Accounting Policies and Practices—Intangible Assets", of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for further details on this impairment charge.

Interest Expense. Interest expense in Fiscal 2011 decreased to $208 million from $277 million in Fiscal 2010. The decrease was driven primarily by lower unusual items in Fiscal 2011 of $29 million compared to $78 million in Fiscal 2010, and lower effective interest rates on outstanding debt. Unusual items in Fiscal 2011 included (i) $15 million related to the write off of unamortized debt issuance costs related to our former term loan that was refinanced on February 1, 2011, a non-cash charge; (ii) a $9 million write off of unamortized original issue discount related to the refinanced term loan facility, a non-cash charge; and (iii) a prepayment premium of $5 million related to the refinanced term loan facility. Unusual items for Fiscal 2010 included (i) $55 million representing the write-off of the unamortized portion of discounts and premiums related to debt that was paid off in conjunction with our refinancing on June 16, 2010, a non-cash charge; (ii) a $9 million cash charge related to bridge commitment fees we paid while we were refinancing our debt; (iii) $6 million representing the write-off of the unamortized debt issuance costs related to debt that was paid off, a non-cash charge; (iv) $4 million cash charge related to a prepayment premium; and (v) $3 million of cash charges related to the termination of a Euro-denominated interest rate swap.

Reorganization Items. During Fiscal 2010, we, in connection with our reorganization under Chapter 11 of the Bankruptcy Code, recorded Reorganization items expense (income), net of approximately $4 million, which primarily consisted of legal and professional fees.

Income Taxes. In Fiscal 2011, we recorded income tax expense of $92 million on pretax income from continuing operations of $18 million, and in Fiscal 2010, we recorded income tax expense of $63 million on a pretax loss from continuing operations of $124 million. Our effective tax rate on income from continuing operations was approximately 522% for Fiscal 2011. Our effective tax rate on our loss from continuing operations was approximately (50.9)% for Fiscal 2010. There are four significant factors impacting our book income tax rate. First, we are profitable in the foreign jurisdictions in which we operate and therefore must provide foreign income taxes even while we have a book loss in the United States. Our book loss in the U.S. is the result of substantially all of our debt and restructuring costs being incurred in our U.S. entities. Second, since there is a valuation allowance against US deferred tax assets, we are unable to book any financial statement benefit related to our U.S. domestic losses. This impact is further exacerbated by the tax amortization of certain domestic indefinite lived intangible assets. The deferred tax liabilities created by the tax amortization of these intangibles cannot be used to offset corresponding increases in net operating loss deferred tax assets in determining the Company’s domestic valuation allowance. This results in additional net domestic tax expense despite the US domestic book losses. Third, we recorded a valuation allowance against NOLs in Brazil during fiscal 2011 of $26 million. Fourth, the closer we are to break even, the higher the effective tax rate becomes as the taxes are divided by a lower book income. In addition to these recurring factors, our income tax provision for the year ended September 30, 2011 reflects the correction of a prior period error which increases our income tax provision by approximately $5 million. Our income tax provision for the year ended September 30, 2010 reflected the correction of a prior period error which increased our income tax provision by approximately $6 million.

As of September 30, 2011, we have U.S. federal and state net operating loss carryforwards of approximately $1,163 million and $1,197 million, respectively. These net operating loss carryforwards expire through years ending in 2032. We also

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have foreign loss carryforwards of approximately $140 million, which will expire beginning in 2012. Certain of the foreign net operating losses have indefinite carryforward periods. We have had multiple changes of ownership, as defined under Internal Revenue Code (“IRC”) Section 382, that subject our U.S. federal and state net operating losses and other tax attributes to certain limitations. The annual limitation on our use of these carryforwards is based on a number of factors including the value of our stock (as defined for tax purposes) on the date of the ownership change, our net unrealized built in gain position on that date, the occurrence of realized built in gains in years subsequent to the ownership change, and the effects of subsequent ownership changes (as defined for tax purposes), if any. In addition, separate return year limitations apply to limit our utilization of the acquired Russell Hobbs U.S. federal and state net operating losses to future income of the Russell Hobbs subgroup. Based on these factors, we estimate that $302 million of the total U.S. federal and $385 million of the state net operating loss would expire unused even if the Company generates sufficient income to otherwise use all its NOLs. In addition, we project that $35 million of the total foreign net operating loss carryforwards will expire unused. We have provided a full valuation allowance against these deferred tax assets as well.

The ultimate realization of our deferred tax assets depends on our ability to generate sufficient taxable income of the appropriate character in the future and in the appropriate taxing jurisdictions. We establish valuation allowances for deferred tax assets when we estimate it is more likely than not that the tax assets will not be realized. We base these estimates on projections of future income, including tax planning strategies, in certain jurisdictions. Changes in industry conditions and other economic conditions may impact our ability to project future income. ASC Topic 740: “Income Taxes” (“ASC 740”) requires the establishment of a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. In accordance with ASC 740, we periodically assess the likelihood that our deferred tax assets will be realized and determine if adjustments to the valuation allowance are required.

Our total valuation allowance for the tax benefit of deferred tax assets that may not be realized is approximately $374 million at September 30, 2011. Of this amount, approximately $339 million relates to U.S. net deferred tax assets and approximately $35 million relates to foreign net deferred tax assets. During Fiscal 2011, we also determined that a valuation allowance is required against deferred tax assets related to net operating losses in Brazil and thus recorded a $26 million charge. Our total valuation allowance was approximately $331 million at September 30, 2010. Of this amount, approximately $300 million related to U.S. net deferred tax assets and approximately $31 million related to foreign net deferred tax assets.

ASC 740, which clarifies the accounting for uncertainty in tax positions, requires that we recognize in our financial statements the impact of a tax position, if that position is more likely than not to be sustained on audit, based on the technical merits of the position. As of September 30, 2011 and September 30, 2010, the total amount of unrecognized tax benefits that, if recognized, would affect the effective income tax rate in future periods was $9 million and $13 million, respectively. See Note 9, "Income Taxes", of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information.

Liquidity and Capital Resources

Operating Activities. Cash provided by operating activities totaled $~~249~~258 million during Fiscal 2012 compared to $~~232~~253 million during Fiscal 2011. The $175 million increase in cash provided by operating activities was primarily due to:

• ~~Higher income before income tax expense, interest expense and impairment charges of $42 million and;~~

• ~~Lower~~Cash ~~cash~~generated ~~acquisition~~from higher adjusted EBITDA of $163 million, ~~integration~~primarily ~~and~~due ~~restructuring~~to ~~related~~the ~~costs~~post-acquisition operating results of ~~$12~~the ~~million~~HHI ~~and~~Business;

•Offset ~~Lower cash payments for interest of $11 million (See Note 6, "Debt", of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K), partially offset~~ by;

• A $32100 million use of cash from working capital and other items driven by higher ~~inventories,~~accounts ~~partially~~receivable ~~offset~~and bychanges ~~lower~~in ~~accounts~~deferred ~~receivable,~~income ~~higher accounts payable~~taxes, ~~higher~~partially ~~accrued~~offset ~~salaries~~by ~~and~~an ~~employee~~increase ~~benefit~~in ~~obligations~~accounts ~~and~~payable;

• Higher cash payments for ~~income~~interest ~~taxes~~ of $240 million, ~~and~~excluding payments related to the tender of our 9.5% Notes (See Note 6, "Debt", of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K);

• ~~Other~~Higher ~~items~~cash ~~totaling~~payments afor ~~use~~income taxes of $1411 million.; and

We• ~~expect~~Higher ~~to fund our~~ cash ~~requirements~~acquisition, ~~including~~integration ~~capital expenditures, interest~~ and ~~principal~~restructuring ~~payments~~related ~~due~~costs ~~in our fiscal year ending September 30, 2013 ("Fiscal 2013"); including if the Hardware Acquisition is completed, through a combination~~ of ~~cash~~$7 ~~on hand, cash flow from operations and funds available for borrowings under our ABL Revolving Credit Facility~~million. Going forward, our ability to satisfy financial and other covenants in our senior credit agreements and senior unsecured indenture and to make scheduled payments or prepayments on our debt and other financial obligations will depend on our future financial and operating performance. There can be no assurances that our business will generate sufficient cash flows from operations or that future borrowings under our ABL Revolving Credit Facility will be available in an amount sufficient to satisfy our debt maturities or to fund our other liquidity needs.

We ~~are~~expect ~~not~~to ~~treating~~fund ~~Fiscal~~our ~~2012~~cash requirements, including capital expenditures, interest and ~~future~~principal ~~earnings~~payments asdue ~~permanently~~in ~~reinvested. At~~Fiscal ~~September 30~~2014, ~~2012,~~through ~~there~~a ~~are~~combination noof ~~significant~~cash ~~foreign~~on hand, cash ~~balances~~flow from operations and funds available for ~~repatriation~~borrowings under our ABL Revolving Credit Facility. ~~For~~ ~~Fiscal~~Going ~~2013~~forward, weour ~~expect~~ability to ~~generate~~satisfy ~~between~~financial ~~$60~~and ~~million~~other covenants in our senior credit agreements and ~~$90~~senior unsecured indenture and to make scheduled payments or prepayments on our debt and other financial obligations will depend on our future financial and operating performance. There can be no assurances that our business will generate sufficient cash flows from operations or that future borrowings under our ABL Revolving Credit Facility will be available in an amount sufficient to satisfy our debt maturities or to fund our other liquidity needs.

50We are not treating Fiscal 2012 and future earnings as permanently reinvested. At September 30, 2013, there are no significant foreign cash balances available for repatriation. For Fiscal 2014, we expect to generate between $60 million and $90 million of foreign cash that will be repatriated for general corporate purposes.

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million of foreign cash, which does not include the HHI Business, that will be repatriated for general corporate purposes.

See Item 1A. Risk Factors, for further discussion of the risks associated with our ability to service all of our existing indebtedness, our ability to maintain compliance with financial and other covenants related to our indebtedness and the impact of the current economic crisis.

Investing Activities. Net cash used by investing activities was $~~231~~1,483 million ~~during~~for Fiscal ~~2012~~2013 compared to ~~a net cash use of~~ $46231 million ~~during~~for Fiscal ~~2011~~2012. The $~~185~~1,252 million increase in cash used by investing activities in Fiscal ~~2012~~2013 is driven by an increase in cash used for acquisitions of $~~172~~1,217 million, which related to the $~~139~~1,351 million purchase, net of cash acquired, ~~purchase~~ of ~~FURminator~~the HHI Business, and the $4449 million ~~acquisition~~purchase, net of ~~Black~~cash ~~Flag~~acquired, ~~which~~of ~~was~~Shaser, ~~partially~~versus ~~offset by~~ the $11139 million ~~acquisition of Seed Resources~~, ~~Inc.,~~ net of cash acquired, inpurchase ~~Fiscal~~of ~~2011. Also~~FURminator ~~contributing~~and to the ~~increase~~$44 inmillion ~~cash~~acquisition ~~used~~of inBlack ~~investing~~Flag ~~activities~~ in Fiscal 2012. ~~was~~The anremaining $1035 million increase in ~~capital~~cash ~~expenditures~~used ~~and~~by ~~the~~investing ~~non-recurrence~~activities ofwas adue ~~$7 million cash inflow related~~ to ~~the~~an ~~sale~~increase ~~of assets held for sale~~ in ~~Fiscal~~capital ~~2011,~~expenditures ~~partially~~from ~~offset~~the byaddition ~~a decrease in other investing activity~~ of ~~approximately~~the $4HHI ~~million in Fiscal 2012 compared to Fiscal 2011~~Business.

We expect to, ~~including if the Hardware Acquisition is completed, to~~ make investments in capital projects similar to historical levels, as well as incremental investments in high return cost reduction projects slightly above historical levels.

Financing Activities

Debt Financing

At September 30, ~~2012~~2013, we had the following debt instruments: (i) a senior secured term loan (the “Term Loan”) pursuant to a senior credit agreement (the “Senior Credit Agreement”) ; (ii) 96.575% ~~secured~~unsecured notes (the “96.575% Notes”); (iii) 6.75375% unsecured notes (the “6.75375% Notes”); (iv) 6.625% unsecured notes (the “6.625% Notes”); and (ivv) a $~~300~~400 million asset based lending revolving credit facility (the “ABL Facility,” and, together with the Term Loan, ~~the 9.5% Notes and the 6.75% Notes,~~ (the “Senior Credit Facilities”).

At September 30, ~~2012~~2013, the aggregate amount of principal outstanding under our debt instruments was as follows: (i) $~~370~~1,745 million under the Term Loan, with $850 million maturing ~~June 17~~September 4, ~~2016;~~2017, ~~(ii)~~ $~~950~~300 million ~~under~~maturing ~~the~~September ~~9.5% Notes~~4, 2019 and $595 million maturing ~~June~~December 1517, ~~2018~~2019; (~~iii~~ii) $~~300~~520 million under the 6.75375% Notes, maturing ~~March~~ November 15, 2020; ~~and (iv) $0 million under the ABL Revolving Credit Facility, expiring May 3, 2016.~~

AtTable ~~September 30,~~of 2012, we were in compliance with all covenants under the Senior Credit Agreement, the indenture governing the 9.5% Notes, the indenture governing the 6.75% Notes and the credit agreement governing the ABL Revolving Credit Facility (the "ABL Credit Agreement").Contents

~~On November 16, 2012, Spectrum Brands Escrow Corp. issued~~ (ii) $~~520 million aggregate principal amount of 2020 Notes and $~~570 million ~~aggregate~~under ~~principal~~the ~~amount of 2022 Notes~~6.625% ~~The 2020~~ Notes, ~~and~~maturing ~~the~~November 15, 2022; ~~Notes~~(iii) $300 ~~will~~million beunder ~~assumed by Spectrum Brands upon~~ the ~~First Closing~~6.75% ~~Spectrum~~Notes, ~~Brands~~maturing ~~intends~~March 15, to2020; ~~use the net proceeds from the offering to fund a portion of the purchase price~~ and ~~related~~(iv) $0 ~~fees~~million ~~and~~under ~~expenses for~~ the ~~Hardware~~ABL ~~Acquisition. Spectrum~~Revolving ~~Brands~~Credit ~~intends to finance the remaining portion of the Hardware Acquisition~~Facility, asexpiring ~~well~~May ~~as refinance its existing Term Loan with a new $800 million senior secured term loan~~3, ~~which is expected to close concurrently with the First Closing~~2016.

~~See~~At ~~Note 17~~September 30, ~~“Subsequent Events~~2013,~~” to~~ ~~our~~we ~~Consolidated~~were ~~Financial~~in ~~Statements~~compliance ~~included~~with inall ~~this~~covenants ~~Annual~~under ~~Report~~the onSenior ~~Form~~Credit ~~10-K~~Agreement, ~~for~~the ~~additional~~indenture ~~information~~governing ~~regarding~~both ~~our~~the ~~2020~~6.375% Notes and ~~2022~~the 6.625% Notes, the indenture governing the 6.75% Notes and the credit agreement governing the ABL Revolving Credit Facility (the "ABL Credit Agreement").

From time to time we may repurchase our existing indebtedness, including outstanding securities of Spectrum ~~Brand~~Brands or its subsidiaries, in the open market or otherwise.

See Note 6, “Debt,” to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information regarding our outstanding debt.

Financing Activities. Net cash provided by financing activities was $1,263 million for Fiscal 2013 compared to net cash used of $5 million for Fiscal 2012.

The Fiscal 2013 cash proceeds consisted of the following: (i) proceeds related to the issuance $1,936 of Term Debt; (ii) proceeds related to issuance of $570 million of 6.625% Notes and $520 million of 6.375% Notes;(iii) a use of $1,061 million to extinguish $950 million of our 9.5% Notes, which included tender and call premium of $111 million; (iv) a use of $571 million to repay debt under the Senior Credit Facilities; (v) a use to pay $61 million of debt issuance costs; (vi) a use to pay $89 million of dividends; (vii) a use to pay share-based tax withholdings of employees for vested stock awards of $20 million; (viii) proceeds from a $28 million contribution from our parent; and (ix) $11 million proceeds from other financing activities. The primary use of the proceeds was to fund the acquisitions discussed within “Liquidity and Capital Resources - Investing Activities.”

The Fiscal 2012 cash use consisted of the following: (i) proceeds related to issuance of $300 million of 6.75% Notes; (ii) proceeds related to an addition issuance of $200 million of 9.5% Notes and a premium related to the issuance of $17 million; (iii) a use of $270 million to extinguish $231 million of our 9.5% Notes, which included tender and call premium of $39 million; (iv) a use of $155 million to repay debt under the Senior Credit Facilities; (v) a use to pay $11 million of debt issuance costs; (vi) a use to pay $51 million of dividends; (vii) a use to pay share-based tax withholdings of employees for vested stock awards of $4 million; (viii) a use of $31 million for treasury stock purchases; (ix) and a $5 million use from other financing activities.

Interest Payments and Fees

In addition to principal payments on our ~~Senior~~debt ~~Credit~~obligations ~~Facilities~~mentioned above, we have annual interest payment obligations of approximately $~~129~~155 million in the aggregate. This includes interest under our 96.5375% Notes of approximately $9033 million, interest under our 6.625% Notes of approximately $38 million and interest under our 6.75% Notes of approximately $20 million~~. Based~~ and, based on principal amounts currently outstanding under these facilities, and using market interest rates and foreign exchange rates in effect at September 30, ~~2012~~2013, this also includes interest under our Term ~~Loan~~Loans and ABL Facility of approximately $1964 million. ~~Additionally,~~Interest ~~upon~~on ~~issuance~~our ofdebt is payable in cash. Interest on the ~~2020~~6.375% Notes, the 6.625% Notes and the ~~2022~~6.75% Notes, weis ~~will~~payable ~~have~~semi-annually ~~annual~~in ~~interest~~arrears ~~payments~~and ofinterest ~~approximately~~under ~~$34~~the ~~million~~Term Loan and ~~$38~~the ~~million,~~ABL ~~respectively.~~Facility ~~Such~~is payable on various interest ~~obligations~~payment ~~would~~dates ~~increase~~as ~~borrowings~~provided ~~under~~in the Senior Credit Agreement and the ABL ~~Facility~~Credit ifAgreement. ~~cash~~We ~~were~~are ~~not~~required ~~otherwise~~to ~~available~~pay ~~for~~certain ~~such~~fees ~~payments.~~in ~~Interest~~connection onwith our outstanding debt isobligations. ~~payable~~Such infees ~~cash.~~include ~~Interest~~a onquarterly ~~the~~commitment ~~9.5%~~fee ~~Notes~~of ~~and~~up ~~interest~~to 0.375% on the ~~6.75%~~unused ~~Notes~~portion isof ~~payable~~the ~~semi-annually~~ABL inFacility ~~arrears~~ and ~~interest~~certain ~~under~~additional ~~the~~fees ~~Term~~with ~~Loan~~respect ~~and~~to the ~~ABL~~letter ~~Facility~~of iscredit ~~payable~~sub-facility onunder the ABL Facility.

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various interest payment dates as provided in the Senior Credit Agreement and the ABL Credit Agreement. We are required to pay certain fees in connection with the Senior Credit Facilities. Such fees include a quarterly commitment fee of up to 0.375% on the unused portion of the ABL Facility and certain additional fees with respect to the letter of credit sub-facility under the ABL Facility.

Equity Financing Activities

During Fiscal ~~2012~~2013, we granted approximately ~~0.7~~678 ~~million~~thousand shares of restricted stock units to our employees and our directors. All vesting dates are subject to the recipient’s continued employment with us, except as otherwise permitted by our Board of Directors or in certain cases if the employee is terminated without cause. The total market value of the restricted shares on the date of grant was approximately 20$31 million, which represented unearned restricted stock compensation. ~~Unearned~~Such unearned compensation is amortized to expense over the appropriate vesting period.

From time to time we may repurchase our outstanding shares of Common Stock in the open market or otherwise.

Off-Balance Sheet Arrangements

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.

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Contractual Obligations & Other Commercial Commitments

Contractual Obligations

The following table summarizes our contractual obligations as of September 30, ~~2012~~2013 and the effect such obligations are expected to have on our liquidity and cash flow in future periods (in millions):

	Contractual Obligations
	Payments due by Fiscal Year
	2013		2014		2015		2016		2017		Thereafter		Total
	2014		2015		2016		2017		2018		Thereafter		Total
Debt:
Debt, excluding capital lease obligations	$	99	$	74	$	73	$	668	$	9	$	2,240	$	3,163
Debt, excluding capital lease obligations(1)	$	13	$	10	$	6	$	359	$	—	$	1,250	$	1,638
Interest payments excluding capital lease obligations	160		155		153		151		127		317		1,063
Capital lease obligations(2)	3		3		2		2		2		15		27
Capital lease obligations(1)	8		9		8		7		6		71		109
	$	16	$	13	$	8	$	361	$	2	$	1,265	$	1,665
Operating lease obligations	40		33		28		23		15		34		173
Employee benefit obligations(3)	10		9		9		9		10		56		103
Employee benefit obligations(2)	9		9		10		10		11		63		112
Operating lease obligations	33		28		22		21		17		43		164
Total Contractual Obligations(3)	$	316	$	280	$	272	$	859	$	168	$	2,725	$	4,620
Other liabilities	—		2		1		1		1		7		12
Total Contractual Obligations(4)	$	59	$	52	$	40	$	392	$	30	$	1,371	$	1,944

(1) OnCapital ~~November~~lease ~~16,~~payments ~~2012,~~due ~~Spectrum Brands Escrow Corp. issued $520 million aggregate principal amount of 2020 Notes and $570 million aggregate principal amount of 2022 Notes, which will be assumed~~ by ~~Spectrum~~fiscal ~~Brands~~year ~~upon~~include ~~the~~executory ~~First~~costs ~~Closing. The net proceeds from the offering will be used to fund a portion of the purchase price~~ and ~~related~~imputed ~~fees~~interest ~~and~~not ~~expenses~~reflected ~~for~~in the ~~Hardware~~Consolidated ~~Acquisition.~~Statements ~~Spectrum Brands intends to finance the remaining portion~~ of the Hardware Acquisition, as well as refinance its existing Term Loan with a new $800 million senior secured term loan, which is expected to close concurrently with the First Closing. See Note 17, “Subsequent Events,” to our Consolidated Financial ~~Statements~~Position included in this Annual Report on Form 10-K ~~for additional information regarding our 2020 Notes and 2022 Notes~~.

(2) ~~Capital~~Employee ~~lease~~benefit ~~payments~~obligations ~~due~~represent bythe ~~fiscal~~sum ~~year~~of ~~include~~our ~~executory~~estimated ~~costs~~future minimum required funding for our qualified defined benefit plans based on actuarially determined estimates and ~~imputed~~projected ~~interest~~future ~~not~~benefit ~~reflected~~payments infrom ~~the~~our ~~Consolidated~~unfunded ~~Statements~~postretirement plans. For additional information about our employee benefit obligations, see Note 10, "Employee Benefit Plans", of Notes to Consolidated Financial ~~Position~~Statements, included in this Annual Report on Form 10-K.

(3) ~~Employee~~At ~~benefit~~September ~~obligations~~30, ~~represent~~2013, ~~the sum of~~ our ~~estimated~~consolidated ~~future~~balance ~~minimum~~sheet ~~required~~includes ~~funding~~tax reserves for ~~our~~uncertain ~~qualified~~tax ~~defined~~positions. ~~benefit~~However, ~~plans~~it ~~based~~is onnot ~~actuarially~~possible ~~determined~~to ~~estimates~~predict ~~and~~or ~~projected~~estimate ~~future~~the ~~benefit~~timing of payments ~~from~~for ~~our~~these ~~unfunded~~obligations. ~~postretirement~~The ~~plans.~~Company ~~For~~cannot ~~additional~~predict ~~information~~the ~~about~~ultimate ~~our~~outcome ~~employee~~of ~~benefit~~income ~~obligations,~~tax ~~see~~audits ~~Note~~currently ~~10,~~in ~~"Employee~~progress ~~Benefit~~for ~~Plans",~~certain of ~~Notes~~our tocompanies; ~~Consolidated~~however, ~~Financial~~it ~~Statements~~is reasonably possible that during the next 12 months, ~~included~~some inportion ~~this~~of ~~Annual~~our ~~Report~~unrecognized ontax ~~Form~~benefits ~~10-K~~could be recognized.

(4) At September 30, 2012, our consolidated balance sheet includes tax reserves for uncertain tax positions. However, it is not possible to predict or estimate the timing of payments for these obligations. The Company cannot predict the ultimate outcome of income tax audits currently in progress for certain of our companies; however, it is reasonably possible that during the next 12 months some portion of our unrecognized tax benefits could be recognized.

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Other Commercial Commitments

The following table summarizes our other commercial commitments as of September 30, ~~2012~~2013, consisting entirely of standby letters of credit that back the performance of certain of our entities under various credit facilities, insurance policies and lease arrangements (in millions):

	Other Commercial Commitments
	Amount of Commitment Expiration by Fiscal Year
	2013		2014		2015		2016		2017		Thereafter		Total
	2014		2015		2016		2017		2018		Thereafter		Total
Letters of credit	$	1932	$	75	$	—	$	—	$	—	$	—	$	2637
Total Other Commercial Commitments	$	1932	$	75	$	—	$	—	$	—	$	—	$	2637

Critical Accounting Policies

Our Consolidated Financial Statements included in this Annual Report on Form 10-K have been prepared in accordance with U.S. GAAP and fairly present our financial position and results of operations. We believe the following accounting policies are critical to an understanding of our financial statements. The application of these policies requires management’s judgment and estimates in areas that are inherently uncertain.

Valuation of Assets and Asset Impairment

We evaluate certain long-lived assets to be held and used, such as property, plant and equipment and definite-lived intangible assets for impairment based on the expected future cash flows or earnings projections associated with such assets. Impairment reviews are conducted at the judgment of management when it believes that a change in circumstances in the business or external factors warrants a review. Circumstances such as the discontinuation of a product or product line, a sudden or consistent decline in the sales forecast for a product, changes in technology or in the way an asset is being used, a history of operating or cash flow losses or an adverse change in legal factors or in the business climate, among others, may trigger an impairment review. An asset’s value is deemed impaired if the discounted cash flows or earnings projections generated do not support the carrying value of the asset. The estimation of such amounts requires management’s judgment with respect to revenue and expense growth rates, changes in working capital and selection of an appropriate discount rate, as applicable. The use of different assumptions would increase or decrease discounted future operating cash flows or earnings projections and could, therefore, change impairment determinations.

ASC 350 requires companies to test goodwill and indefinite-lived intangible assets for impairment annually, or more often if an event or circumstance indicates that an impairment loss may have been incurred. In Fiscal 2012, Fiscal 2011 and Fiscal 2010, we tested our goodwill and indefinite-lived intangible assets as required. As a result of this testing, we recorded no impairment charges in Fiscal 2012 and Fiscal 2010, and non-cash pretax impairment charges of approximately $32 million in Fiscal 2011. The $32 million impairment charge incurred in Fiscal 2011 reflects an impairment of trade name intangible assets consisting of the following: (i) $23 million related to Global Batteries and Appliances; (ii) $8 million related to Global Pet Supplies; and (iii) $1 million related to the Home and Garden Business.

We used a discounted estimated future cash flows methodology, third party valuations and negotiated sales prices to determine the fair value of our reporting units (goodwill). Fair value of indefinite-lived intangible assets, which represent trade names, was determined using a relief from royalty methodology. Assumptions critical to our fair value estimates were: (i) the present value factors used in determining the fair value of the reporting units and trade names or third party indicated fair values for assets expected to be disposed; (ii) royalty rates used in our trade name valuations; (iii) projected average revenue growth rates used in the reporting unit and trade name models; and (iv) projected long-term growth rates used in the derivation of terminal year values. We also tested the aggregate estimated fair value of our reporting unites for reasonableness by comparison to our total market capitalization, which includes both our equity and debt securities. These and other assumptions are impacted by economic conditions and expectations of management and will change in the future based on period specific facts and circumstances.

As of September 30, 2012 the fair value of our Global Batteries & Appliances, Global Pet Supplies and Home and Garden Business reporting units, which are also our segments, exceeded their carry values by 71%, 55% and 30%, respectively, as of the date of our latest annual impairment testing.

See Note 2(h), "Significant Accounting Policies and Practices—Property, Plant and Equipment", Note 2(i), "Significant Accounting Policies and Practices—Intangible Assets"; Note 4, "Property, Plant and Equipment"; Note 5, "Goodwill and Intangible Assets"; and Note 16, "Discontinued Operations", of Notes to Consolidated Financial Statements included in this

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~~Annual~~support ~~Report~~the oncarrying ~~Form~~value ~~10-K~~of ~~for~~the ~~more~~asset. ~~information~~The ~~about~~estimation ~~these~~of ~~assets~~such amounts requires management’s judgment with respect to revenue and expense growth rates, changes in working capital and selection of an appropriate discount rate, as applicable. The use of different assumptions would increase or decrease discounted future operating cash flows or earnings projections and could, therefore, change impairment determinations.

ASC 350 requires companies to test goodwill and indefinite-lived intangible assets for impairment annually, or more often if an event or circumstance indicates that an impairment loss may have been incurred. In Fiscal 2013, Fiscal 2012 and Fiscal 2011, we tested our goodwill and indefinite-lived intangible assets as required. As a result of this testing, we recorded no impairment charges in Fiscal 2013 and Fiscal 2012, and non-cash pretax impairment charges of approximately $32 million in Fiscal 2011. The $32 million impairment charge incurred in Fiscal 2011 reflects an impairment of trade name intangible assets consisting of the following: (i) $23 million related to Global Batteries and Appliances; (ii) $8 million related to Global Pet Supplies; and (iii) $1 million related to the Home and Garden Business.

We used a discounted estimated future cash flows methodology, third party valuations and negotiated sales prices to determine the fair value of our reporting units (goodwill). Fair value of indefinite-lived intangible assets, which represent trade names, was determined using a relief from royalty methodology. Assumptions critical to our fair value estimates were: (i) the present value factors used in determining the fair value of the reporting units and trade names or third party indicated fair values for assets expected to be disposed; (ii) royalty rates used in our trade name valuations; (iii) projected average revenue growth rates used in the reporting unit and trade name models; and (iv) projected long-term growth rates used in the derivation of terminal year values. We also tested the aggregate estimated fair value of our reporting units for reasonableness by comparison to our total market capitalization, which includes both our equity and debt securities. These and other assumptions are impacted by economic conditions and expectations of management and will change in the future based on period specific facts and circumstances.

The fair values of our Global Batteries & Appliances, Hardware & Home Improvement, Global Pet Supplies and Home and Garden Business reporting units, which are also our segments, exceeded their carry values by 74%, 17%, 83% and 80%, respectively, as of the date of our latest annual impairment testing.

See Note 2(i), "Significant Accounting Policies and Practices—Property, Plant and Equipment", Note 2(j), "Significant Accounting Policies and Practices—Intangible Assets"; Note 4, "Property, Plant and Equipment"; and Note 5, "Goodwill and Intangible Assets," of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for more information about these assets.

Revenue Recognition and Concentration of Credit Risk

We recognize revenue from product sales generally upon delivery to the customer or the shipping point in situations where the customer picks up the product or where delivery terms so stipulate. This represents the point at which title and all risks and rewards of ownership of the product are passed, provided that: there are no uncertainties regarding customer acceptance; there is persuasive evidence that an arrangement exists; the price to the buyer is fixed or determinable; and collectibility is deemed reasonably assured. We are generally not obligated to allow for, and our general policy is not to accept, product returns for battery sales. We do accept returns in specific instances related to our hardware and home improvement, electric shaving and grooming, electric personal care, home and garden, small appliances and pet supply products. The provision for customer returns is based on historical sales and returns and other relevant information. We estimate and accrue the cost of returns, which are treated as a reduction of net sales.

We enter into various promotional arrangements, primarily with retail customers, including arrangements entitling such retailers to cash rebates from us based on the level of their purchases, which require us to estimate and accrue the costs of the promotional programs. These costs are generally treated as a reduction of net sales.

We also enter into promotional arrangements that target the ultimate consumer. Such arrangements are treated as either a reduction ofin net sales or an increase in cost of sales, based on the type of promotional program. The income statement presentation of our promotional arrangements complies with ASC Topic 605: “Revenue Recognition.” Cash consideration, or an equivalent thereto, given to a customer is generally classified as a reduction of net sales. If we provide a customer anything other than cash, the cost of the consideration is classified as an expense and included in cost of sales.

For all types of promotional arrangements and programs, we monitor our commitments and use statistical measures and past experience to determine the amounts to be recorded for the estimate of the earned, but unpaid, promotional costs. The terms of our customer-related promotional arrangements and programs are tailored to each customer and are generally documented through written contracts, correspondence or other communications with the individual customers.

We also enter into various arrangements, primarily with retail customers, which require us to make an upfront cash, or “slotting” payment, to secure the right to distribute through such customer. We capitalize slotting payments, provided the payments are supported by a time or volume based arrangement with the retailer, and amortize the associated payment over the appropriate time or volume based term of the arrangement. The amortization of slotting payments is treated as a reduction in net sales and a corresponding asset is reported in Deferred charges and other in our Consolidated Statements of Financial Position included in this Annual Report on Form 10-K.

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“slotting” payment, to secure the right to distribute through such customer. We capitalize slotting payments, provided the payments are supported by a time or volume based arrangement with the retailer, and amortize the associated payment over the appropriate time or volume based term of the arrangement. The amortization of slotting payments is treated as a reduction in net sales and a corresponding asset is reported in Deferred charges and other in our Consolidated Statements of Financial Position included in this Annual Report on Form 10-K.

Our trade receivables subject us to credit risk which is evaluated based on changing economic, political and specific customer conditions. We assess these risks and make provisions for collectibility based on our best estimate of the risks presented and information available at the date of the financial statements. The use of different assumptions may change our estimate of collectibility. We extend credit to our customers based upon an evaluation of the customer’s financial condition and credit history and generally do not require collateral. Our credit terms generally range between 30 and 90 days from invoice date, depending upon the evaluation of the customer’s financial condition and history. We monitor our customers’ credit and financial condition in order to assess whether the economic conditions have changed and adjust our credit policies with respect to any individual customer as we determine appropriate. These adjustments may include, but are not limited to, restricting shipments to customers, reducing credit limits, shortening credit terms, requiring cash payments in advance of shipment or securing credit insurance.

See Note 2(bc), "Significant Accounting Policies and Practices—Revenue Recognition"; Note 2(cd), "Significant Accounting Policies and Practices—Use of Estimates" and Note 2(ef), "Significant Accounting Policies and Practices—Concentrations of Credit Risk and Major Customers and Employees"; of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for more information about our revenue recognition and credit policies.

Pensions

Our accounting for pension benefits is primarily based on a discount rate, expected and actual return on plan assets and other assumptions made by management, and is impacted by outside factors such as equity and fixed income market performance. Our pension liability is principally the estimated present value of future benefits, net of plan assets. In calculating the estimated present value of future benefits, net of plan assets, we used discount rates of 41.08% to 13.50% in Fiscal ~~2012~~2013 and of 4.20% to 13.65% in Fiscal ~~2011~~2012. In adjusting the discount rates from Fiscal ~~2011~~2012 to ~~2012~~Fiscal 2013, we considered the change in the general market interest rates of debt and solicited the advice of our actuary. We believe the discount rates used are reflective of the rates at which the pension benefits could be effectively settled.

54Pension expense is principally the sum of interest and service cost of the plan, less the expected return on plan assets and the amortization of the difference between our assumptions and actual experience. The expected return on plan assets is calculated by applying an assumed rate of return to the fair value of plan assets. We used expected returns on plan assets of 3.6% to 7.8% in Fiscal 2013 and 4.0% to 7.8% in Fiscal 2012. Based on the advice of our independent actuary, we believe the expected rates of return are reflective of the long-term average rate of earnings expected on the funds invested. If such expected returns were overstated, it would ultimately increase future pension expense and required funding contributions. Similarly, an understatement of the expected return would ultimately decrease future pension expense and required funding contributions. If plan assets decline due to poor performance by the markets and/or interest rates decline resulting in a lower discount rate, our pension liability will increase, ultimately increasing future pension expense and required funding contributions.

~~Table~~See Note 10, "Employee Benefit Plans," of ~~Contents~~Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for a more complete discussion of our employee benefit plans.

Pension expense is principally the sum of interest and service cost of the plan, less the expected return on plan assets and the amortization of the difference between our assumptions and actual experience. The expected return on plan assets is calculated by applying an assumed rate of return to the fair value of plan assets. We used expected returns on plan assets of 4.0% to 7.8% in Fiscal 2012 and 3.0% to 7.8% in Fiscal 2011. Based on the advice of our independent actuary, we believe the expected rates of return are reflective of the long-term average rate of earnings expected on the funds invested. If such expected returns were overstated, it would ultimately increase future pension expense and required funding contributions. Similarly, an understatement of the expected return would ultimately decrease future pension expense and required funding contributions. If plan assets decline due to poor performance by the markets and/or interest rates decline resulting in a lower discount rate, our pension liability will increase, ultimately increasing future pension expense and required funding contributions.

See Note 10, "Employee Benefit Plans", of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for a more complete discussion of our employee benefit plans.

Restructuring and Related Charges

Restructuring charges are recognized and measured according to the provisions of ASC Topic 420: “Exit or Disposal Cost Obligations,” (“ASC 420”). Under ASC 420, restructuring charges include, but are not limited to, termination and related costs consisting primarily of severance costs and retention bonuses, and contract termination costs consisting primarily of lease termination costs. Related charges, as defined by us, include, but are not limited to, other costs directly associated with exit and integration activities, including impairment of property and other assets, departmental costs of full-time incremental integration employees, and any other items related to the exit or integration activities. Costs for such activities are estimated by us after evaluating detailed analyses of the cost to be incurred. We present restructuring and related charges on a combined basis.

Liabilities from restructuring and related charges are recorded for estimated costs of facility closures, significant organizational adjustments and measures undertaken by management to exit certain activities. Costs for such activities are estimated by management after evaluating detailed analyses of the costs to be incurred. Such liabilities could include amounts for items such as severance costs and related benefits (including settlements of pension plans), impairment of property and equipment and other current or long term assets, lease termination payments and any other items directly related to the exit activities. While the actions are carried out as expeditiously as possible, restructuring and related charges are estimates. ~~Changes in estimates resulting in an increase to or a reversal of a previously recorded liability may be required as management executes a restructuring plan.~~

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Changes in estimates resulting in an increase to or a reversal of a previously recorded liability may be required as management executes a restructuring plan.

We report restructuring and related charges associated with manufacturing and related initiatives in cost of goods sold. Restructuring and related charges reflected in cost of goods sold include, but are not limited to, termination and related costs associated with manufacturing employees, asset impairments relating to manufacturing initiatives and other costs directly related to the restructuring initiatives implemented.

We report restructuring and related charges associated with administrative functions in operating expenses, such as initiatives impacting sales, marketing, distribution or other non-manufacturing related functions. Restructuring and related charges reflected in operating expenses include, but are not limited to, termination and related costs, any asset impairments relating to the administrative functions and other costs directly related to the initiatives implemented.

See Note 14, "Restructuring and Related Charges"," of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for a more complete discussion of our restructuring initiatives and related costs.

Acquisition and Integration Related Charges

The costs of plans to (i) exit an activity of an acquired company, (ii) involuntarily terminate employees of an acquired company or (iii) relocate employees of an acquired company are measured and recorded in accordance with the provisions of the ASC 805. Under ASC 805, if certain conditions are met, such costs are recognized as a liability assumed as of the consummation date of the purchase business combination and included in the allocation of the acquisition cost. Costs related to terminated activities or employees of the acquired company that do not meet the conditions prescribed in ASC 805 are treated as acquisition and integration related charges and expensed as incurred.

See Note 2(w), "Significant Accounting Policies and Practices - Acquisition and Integration Related Charges" of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K .

Accounting for Acquisitions

Accounting for acquisitions requires us to recognize and measure identifiable assets acquired, liabilities assumed and any non-controlling interest in the acquired entity. Our accounting for acquisitions involves significant judgments and estimates, including the fair value of certain forms of consideration, the fair value of acquired intangible assets, which involve projections of future revenues, cash flows and terminal value, which are then either discounted at an estimated discount rate or measured at an estimated royalty rate, and the fair value of other acquired assets and assumed liabilities, including potential contingencies, and the useful lives of the assets. The projections are developed using internal forecasts, available industry and market data and estimates of long-term rates of growth for our business. The impact of prior or future acquisitions on our financial position or results of operations may be materially impacted by the change in or initial selection of assumptions and estimates.

See Note 15, "Acquisitions" of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for further discussion of ASC 805 purchase accounting valuation assumptions.

Deferred Income Tax Asset and Other Tax Reserves

We assess our deferred tax asset and record a valuation allowance, when necessary, to reduce our deferred tax asset to the amount that is more likely than not to be realized. We have considered future taxable income, taxable temporary differences and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance. Should we determine that we would not be able to realize all or part of our net deferred tax asset in the future, an adjustment to the deferred tax asset would be charged to income in the period we made that determination.

We establish reserves when, despite our belief that our tax returns are fully supportable, we believe that certain positions may be challenged and ultimately modified. We adjust the reserves in light of changing facts and circumstances. Our effective tax rate includes the impact of income tax related reserve positions and changes to income tax reserves that we consider appropriate. A number of years may elapse before a particular matter for which we have established a reserve is finally resolved. Unfavorable settlement of any particular issue may require the use of cash or a reduction in our net operating loss carryforwards. Favorable resolution would be recognized as a reduction to the effective rate in the year of resolution. Tax reserves are presented on the balance sheet in other liabilities.

See Note 9, "Income Taxes" of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.

Loss Contingencies

Loss contingencies are recorded as liabilities when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. The outcome of existing litigation, the impact of environmental matters and pending or potential examinations by various taxing authorities are examples of situations evaluated as loss contingencies. Estimating the probability and magnitude of losses is often dependent upon management’s judgment of potential actions by third parties and regulators. It is possible that changes in estimates or an increased probability of an unfavorable outcome could materially affect

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See further discussion in Item 3, Legal Proceedings, and Note 12, "Commitments and Contingencies"," of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.

Other Significant Accounting Policies

Other significant accounting policies, primarily those with lower levels of uncertainty than those discussed above, are also critical to understanding the Consolidated Financial Statements included in this Annual Report on Form 10-K. The Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K contain additional information related to our accounting policies, including recent accounting pronouncements, and should be read in conjunction with this discussion.



ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk Factors

We have market risk exposure from changes in interest rates, foreign currency exchange rates and commodity prices. We, when appropriate, use derivative financial instruments ~~for purposes other than trading~~ to mitigate the risk from such exposures.

A discussion of our accounting policies for derivative financial instruments is included in Note 7, "Derivative Financial Instruments", ~~of Notes~~ to our Consolidated Financial Statements included in this Annual Report on Form 10-K.

Interest Rate Risk

A substantial portion of our debt bears interest at variable rates. If market interest rates increase, the interest rate on our variable rate debt will increase and will create higher debt service requirements, which would adversely affect our cash flow and could adversely impact our results of operations. We also have bank lines of credit at variable interest rates. The general level of U.S. and Canadian interest rates, LIBOR, CDOR and ~~EURIBOR~~Euro LIBOR affect interest expense. We ~~have~~periodically ~~historically~~use ~~used~~ interest rate swaps to manage such risk. The net amounts to be paid or received under interest rate swap agreements are accrued as interest rates change, and are recognized over the life of the swap agreements as an adjustment to interest expense from the underlying debt to which the swap is designated. The related amounts payable to, or receivable from, the contract counter-parties are included in accrued liabilities or accounts receivable. AsAt of September 30, ~~2012~~2013, there were no outstanding interest rate derivative instruments.

Foreign Exchange Risk

We are subject to risk from sales and loans to and from our subsidiaries as well as sales to, purchases from and bank lines of credit with, third-party customers, suppliers and creditors, ~~respectively,~~ denominated in foreign currencies. Foreign currency sales and purchases are made primarily in Euro, Pounds Sterling, Mexican Pesos, Canadian Dollars, Australian Dollars and Brazilian Reals. We manage our foreign exchange exposure from anticipated sales, accounts receivable, intercompany loans, firm purchase commitments, accounts payable and credit obligations through the use of naturally occurring offsetting positions (borrowing in local currency), forward foreign exchange contracts, foreign exchange rate swaps and foreign exchange options. The related amounts payable to, or receivable from, the contract counter-parties are included in accounts payable or accounts receivable.

Commodity Price Risk

We are exposed to fluctuations in market prices for purchases of zinc and brass used in ~~the~~our manufacturing ~~process~~processes. We use commodity swaps and calls to manage such risk. The maturity of, and the quantities covered by, the contracts are closely correlated to our anticipated purchases of the ~~commodities~~commodity. The cost of calls ~~are~~is amortized over the life of the contracts and ~~are~~ recorded in cost of goods sold, along with the effects of the swap and call contracts. The related amounts payable to, or receivable from, the counter-parties are included in accounts payable or accounts receivable.

Sensitivity Analysis

The analysis below is hypothetical and should not be considered a projection of future risks. Earnings projections are ~~before tax.~~

As of September 30, 2012, there were no outstanding interest rate derivative instruments.

As of September 30, 2012, the potential change in fair value of outstanding foreign exchange derivative instruments, assuming a 10% unfavorable change in the underlying exchange rates, would be a loss of $36.2 million. The net impact on reported earnings, after also including the effect of the change in the underlying foreign currency-denominated exposures, would be a net gain of $18.1 million.

As of September 30, 2012, the potential change in fair value of outstanding commodity price derivative instruments,

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~~assuming~~before ~~a 10% unfavorable change in the underlying commodity prices, would be a loss of $3~~tax.1 million. The net impact on reported earnings, after also including the reduction in cost of one year’s purchases of the related commodities due to the same change in commodity prices, would be a net loss of $0.7 million.

At September 30, 2013, assuming a 1 percent unfavorable shift in interest rates of our variable rate Term Loan, there would be no financial impact as the underlying interest rates are currently greater than 1 percent below the floor of our variable rate Term Loan. At September 30, 2013, there were no outstanding interest rate derivative instruments.

At September 30, 2013, the potential change in fair value of outstanding foreign exchange derivative instruments, assuming a 10% unfavorable change in the underlying exchange rates, would be a loss of $35 million. The net impact on reported earnings, after also including the effect of the change in the underlying foreign currency-denominated exposures, would be a net gain of $17 million.

At September 30, 2013, the potential change in fair value of outstanding commodity price derivative instruments, assuming a 10% unfavorable change in the underlying commodity prices, would be a loss of $2 million. The net impact on reported earnings, after also including the reduction in cost of one year’s purchases of the related commodities due to the same change in commodity prices, would be a gain of $1 million.



ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required for this Item is included in this Annual Report on Form 10-K within Item 15, Exhibits, Financial Statements and Schedules, inclusive and is incorporated herein by reference.



ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.



ITEM 9A.	CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) pursuant to Rule 13a-15(b) under the Exchange Act as of the end of the period covered by this Annual Report on Form 10-K. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable SEC rules and forms, and is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting. The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). The Company’s management assessed the effectiveness of its internal control over financial reporting as of September 30, ~~2012~~2013. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in the Internal Control- Integrated Framework (1992). The Company’s management has concluded that, as of September 30, ~~2012~~2013, its internal control over financial reporting is effective based on these criteria. The Company's management excluded the residential hardware and home improvement business (the HHI Business) from its assessment of the effectiveness of internal control over financial reporting, as the Company may omit an assessment of an acquired business's internal control over financial reporting from its assessment of the registrant's internal control; however, such exclusion may not extend beyond one year from the date of the acquisition, nor may such assessment be omitted from more than one annual management report on internal control over financial reporting. The total assets of $1,736 million and total net sales of $870 million associated with the HHI Business are included in the consolidated financial statements of the Company as of and for the year ended September 30, 2013.

Changes in Internal Control Over Financial Reporting. There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) that occurred during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls. The Company’s management, including our Chief Executive Officer and Chief Financial Officer, does not expect that the Company’s disclosure controls and procedures or the Company’s internal controls over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

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controls over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.



ITEM 9B.	OTHER INFORMATION

None.

~~PART~~Part III



ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by Item 401 of Regulation S-K concerning the directors of Spectrum Brands, Inc. (“Spectrum Brands”) and the nominees for re-election as directors of Spectrum Brands at the Annual Meeting of Shareholders to be held on January 2928, ~~2013~~2014 (the “~~2013~~2014 Annual Meeting”) is incorporated herein by reference from the ~~disclosure~~disclosures which will be included under the ~~caption~~captions “BOARD OF DIRECTORS,” “PROPOSAL ~~NUMBER~~ 1-ELECTION OF DIRECTORS,” and “EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS” in SB Holdings' definitive Proxy Statement relating to the ~~2013~~2014 Annual Meeting (the “SB Holdings Definitive Proxy Statement”), which will be filed not later than 120 days after the end of SB Holdings' fiscal year ended September 30, 2013.

57Audit Committee and Audit Committee Financial Expert

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Annual Meeting (the “SB Holdings Definitive Proxy Statement”), which will be filed not later than 120 days after the end of SB Holdings' fiscal year ended September 30, 2012.

Audit Committee Financial Expert and Audit Committee

The information required by Items 407(d)(4) and 407(d)(5) of Regulation S-K is incorporated herein by reference from the disclosure which will be included under the caption “BOARD ACTIONS; BOARD MEMBER INDEPENDENCE; COMMITTEES OF THE BOARD OF DIRECTORS - Committees Established by Our Board of Directors - Audit Committee” in the SB Holdings Definitive Proxy Statement.

Section 16(a) Beneficial Ownership Reporting Compliance

The information required by Item 405 of Regulation S-K is incorporated herein by reference from the disclosure which will be included under the caption “SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE” in the SB Holdings Definitive Proxy Statement.

Code of Ethics

We have adopted the Code of Ethics for the Principal Executive Officer and Senior Financial Officers, a code of ethics that applies to our Chief Executive Officer, Chief Financial Officer and other senior finance organization employees. The Code of Ethics for the Principal Executive Officer and Senior Financial Officers is publicly available on our website at www.spectrumbrands.com under “Investor Relations—Corporate Governance.” We intend to disclose amendments to, and, if applicable, waivers of, this code of ethics on that section of our website.

We have also adopted the Spectrum Brands Code of Business Conduct and Ethics, a code of ethics that applies to all of our directors, officers and employees. 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.



ITEM 11.	EXECUTIVE COMPENSATION

Compensation Committee Interlocks and Insider Participation

The information required by Item 407(e)(4) of Regulation S-K is incorporated herein by reference from the disclosure which will be included under the caption “EXECUTIVE COMPENSATION-Compensation Committee Interlocks and Insider Participation” in the SB Holdings Definitive Proxy Statement.

Report of the Compensation Committee of the Board of Directors

The information required by Item 407(e)(54) of Regulation S-K is incorporated herein by reference from the disclosure ~~which will be included under caption “COMPENSATION COMMITTEE REPORT” in SB Holdings Definitive Proxy Statement.~~

~~Compensation~~Table ~~Discussion~~of ~~and Analysis~~Contents

~~The information required by Item 402 of Regulation S-K is incorporated herein by reference from disclosures~~ which will be included under the ~~captions~~caption “EXECUTIVE COMPENSATION - ~~Report of the~~ Compensation Committee ofInterlocks ~~the~~and ~~Board~~Insider ~~of Directors~~Participation” in the SB Holdings Definitive Proxy Statement.

Executive Compensation

The information required by Item 402 of Regulation S-K is incorporated herein by reference from the disclosures which will be included under the caption “EXECUTIVE COMPENSATION” in the SB Holdings Definitive Proxy Statement.

Compensation Committee Interlocks and Insider Participation

The information required by Item 407(e)(4) of Regulation S-K is incorporated herein by reference from the disclosure which will be included under the caption “EXECUTIVE COMPENSATION - Compensation Committee Interlocks and Insider Participation” in the SB Holdings Definitive Proxy Statement.



ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Ownership of Common Shares of Spectrum Brands Holdings, Inc.

The information required by Item 403 of Regulation S-K is incorporated herein by reference from the disclosure which will be included under the caption “SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS” in the SB Holdings Definitive Proxy Statement.

58Securities Authorized for Issuance under Equity Compensation Plans

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Equity Compensation Plan Information

The information required by Item 201(d) of Regulation S-K is incorporated herein by reference from the disclosure which will be included under the caption “EQUITY COMPENSATION PLAN INFORMATION” in the SB Holdings Definitive Proxy Statement.



ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

Certain Relationships and Related Person Transactions

The information required by Item 404 of Regulation S-K is incorporated herein by reference from the disclosures which will be included under the caption “CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE” in the SB Holdings Definitive Proxy Statement.

Director Independence

The information required by Item 407(a) of Regulation S-K is incorporated herein by reference from the disclosures which will be included under the captions “CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTORS INDEPENDENCE - Director Independence” and “BOARD ACTIONS; BOARD MEMBER INDEPENDENCE; COMMITTEES OF THE BOARD OF DIRECTORS” in the SB Holdings Definitive Proxy Statement.



ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this Item 14 is incorporated herein by reference from the disclosures which will be included under the captions “PROPOSAL 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL ~~2013~~2014 - Independent Auditor Fees” and “Pre-Approval of Independent Auditor Services and Fees” in the SB Holdings Definitive Proxy Statement.

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PART IV



ITEM 15.	EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES


(a)	The following documents are filed as part of or are included in this Annual Report on Form 10-K:

1. The financial statements listed in the Index to Consolidated Financial Statements and Financial Statement Schedule, filed as part of this Annual Report on Form 10-K.

2. The financial statement schedule listed in the Index to Consolidated Financial Statements and Financial Statement Schedule, filed as part of this Annual Report on Form 10-K.

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

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SPECTRUM BRANDS, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

	Page
Report of Independent Registered Public Accounting Firm	60
Reports of Independent Registered Public Accounting Firm	60
Consolidated Statements of Financial Position	6160
Consolidated Statements of Operations	6261
Consolidated Statements of Shareholder's Equity (Deficit) and Comprehensive Income (Loss)	63
Consolidated Statements of Comprehensive Income (Loss)	63
Consolidated Statements of Shareholders’ Equity	63
Consolidated Statements of Cash Flows	64
Notes to Consolidated Financial Statements	66
Schedule II Valuation and Qualifying Accounts	~~116~~121

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Report of Independent Registered Public Accounting Firm

The Board of Directors

Spectrum Brands, Inc.:

We have audited the accompanying consolidated statements of financial position of Spectrum Brands, Inc. and subsidiaries (the Company) as of September 30, ~~2012~~2013 and ~~2011~~2012, and the related consolidated statements of operations, ~~shareholder's equity (deficit) and~~ comprehensive income (loss), shareholders’ equity, and cash flows for each of the years in the three-year period ended September 30, ~~2012~~2013. In connection with our audits of the consolidated financial statements, we have also audited the financial statement schedule II. These consolidated financial statements and financial statement schedule are the responsibility of the Company'’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Spectrum Brands, Inc. and subsidiaries as of September 30, ~~2012~~2013 and ~~2011~~2012, and the results of their operations and their cash flows for each of the years in the three-year period ended September 30, ~~2012~~2013, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Note 2 to the consolidated financial statements, the Company has elected to change its method of presenting tax withholdings for share-based payment awards paid to a taxing authority on behalf of an employee from an operating activity to a financing activity within the consolidated statements of cash flows for all periods presented.

/s/ KPMG LLP

Milwaukee, Wisconsin

November 21 27, ~~2012~~ 2013

61SPECTRUM BRANDS, INC.

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SPECTRUM BRANDS, INC. AND SUBSIDIARIES

Consolidated Statements of Financial Position

September 30, ~~2012~~2013 and September 30, ~~2011~~2012

(InAmounts in thousands)

		2012				2011
	September 30, 2013				September 30, 2012
Assets
Current assets:
Cash and cash equivalents	$	$198,219	~~157,872~~		$	$157,872	~~142,414~~
Receivables:
Trade accounts receivable, net of allowances of $21,870 and $14,128, respectively		335,301				356,605
Trade accounts receivable, net of allowances of $37,376 and $21,870, respectively	481,313				335,301
Other	67,081	~~40,067~~			40,067	~~33,235~~
Inventories	632,923	~~452,633~~			452,633	~~434,630~~
Deferred income taxes		28,143				28,170
Deferred income taxes, net	32,959				28,143
Prepaid expenses and other	62,781	~~49,273~~			49,273	~~48,792~~
Total current assets	1,475,276	~~1,063,289~~			1,063,289	~~1,043,846~~
Property, plant and equipment, net	412,551	~~214,017~~			214,017	~~206,389~~
Deferred charges and other	26,050	~~27,711~~			27,711	~~36,824~~
Goodwill	1,476,672	~~694,245~~			694,245	~~610,338~~
Intangible assets, net	2,163,166	~~1,714,929~~			1,714,929	~~1,683,909~~
Debt issuance costs	65,329	~~39,320~~			39,320	~~40,957~~
Total assets	$	$5,619,044	~~3,753,511~~		$	$3,753,511	~~3,622,263~~
Liabilities and Shareholder's Equity
Liabilities and Shareholders’ Equity
Current liabilities:
Current maturities of long-term debt	$	$102,921	~~16,414~~		$	$16,414	~~41,090~~
Accounts payable	525,519	~~325,023~~			325,023	~~323,171~~
Accrued liabilities:
Wages and benefits	82,056	~~82,119~~			82,119	~~70,945~~
Income taxes payable	32,613	~~30,272~~			30,272	~~31,606~~
Accrued interest	36,731	~~30,473~~			30,473	~~30,467~~
Other	171,074	~~124,597~~			124,597	~~134,565~~
Total current liabilities	950,914	~~608,898~~			608,898	~~631,844~~
Long-term debt, net of current maturities	3,115,942	~~1,652,886~~			1,652,886	~~1,535,522~~
Employee benefit obligations, net of current portion	96,612	~~89,994~~			89,994	~~83,802~~
Deferred income taxes		377,465				337,336
Deferred income taxes, net	492,774				377,465
Other	28,879	~~31,578~~			31,578	~~44,637~~
Total liabilities	4,685,121	~~2,760,821~~			2,760,821	~~2,633,141~~
Commitments and contingencies
Shareholder's equity:
Shareholders’ equity:
Other capital		1,359,946				1,338,734
Additional paid-in capital	1,393,124				1,359,946
Accumulated deficit	(469,886	~~(333,821~~	)	)	(333,821	~~(335,166~~	)	)
Accumulated other comprehensive loss	(38,521	~~(33,435~~	)	)	(33,435	~~(14,446~~	)	)
Total shareholder's equity		992,690				989,122
Total shareholders' equity	884,717				992,690
Total liabilities and shareholder's equity		$	3,753,511			$	3,622,263
Noncontrolling interest	49,206				—
Total equity	933,923				992,690
Total liabilities and equity	$	5,619,044			$	3,753,511

See accompanying notes which are an integral part of these consolidated financial statements.

~~See~~SPECTRUM ~~accompanying~~BRANDS, ~~notes to consolidated financial statements~~INC.

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SPECTRUM BRANDS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

Years ended September 30, ~~2012~~2013, ~~2011~~2012 and ~~2010~~2011

(InAmounts in thousands)

		2012			2011				2010
	2013			2012				2011
Net sales	$	$4,085,581	~~3,252,435~~	$	$3,252,435	~~3,186,916~~		$	$3,186,916	~~2,567,011~~
Cost of goods sold	2,685,285	~~2,126,922~~		2,126,922	~~2,050,208~~			2,050,208	~~1,638,451~~
Restructuring and related charges	9,984	~~9,835~~		9,835	~~7,841~~			7,841	~~7,150~~
Gross profit	1,390,312	~~1,115,678~~		1,115,678	~~1,128,867~~			1,128,867	~~921,410~~
Operating expenses:
Selling	636,958			521,191				536,535
Selling		521,191			536,535				466,813
General and administrative	284,673			214,522				240,923
General and administrative		214,522			240,923				199,034
Research and development	43,334			33,087				32,901
Research and development		33,087			32,901				31,013
Acquisition and integration related charges	48,445			31,066				36,603
Acquisition and integration related charges		31,066			36,603				38,452
Restructuring and related charges	24,028			9,756				20,803
Restructuring and related charges		9,756			20,803				16,968
Intangible asset impairment	—			—				32,450
Intangible asset impairment		—			32,450				—
Total operating expenses	1,037,438			809,622				900,215
		809,622			900,215				752,280
Operating income	352,874			306,056				228,652
Operating income		306,056			228,652				169,130
Interest expense	369,519			191,998				208,492
Interest expense		191,998			208,492				277,015
Other expense, net	3,506			878				2,491
Other expense, net		878			2,491				12,300
(Loss) income from continuing operations before income taxes	(20,151		)	113,180				17,669
Income (loss) from continuing operations before reorganization items and income taxes		113,180			17,669				(120,185		)
Income tax expense	27,359			60,385				92,295
Reorganization items expense, net		—			—				3,646
Net (loss) income	(47,510		)	52,795				(74,626		)
Income (loss) from continuing operations before income taxes		113,180			17,669				(123,831		)
Less: Net loss attributable to noncontrolling interest, net of tax	(140		)	—				—
Income tax expense		60,385			92,295				63,189
Net (loss) income attributable to controlling interest	$	(47,370	)	$	52,795			$	(74,626	)
Income (loss) from continuing operations		52,795			(74,626		)		(187,020		)
Loss from discontinued operations, net of tax		—			—				(2,735		)
Net income (loss)		$	52,795		$	(74,626	)		$	(189,755	)

See accompanying notes towhich are an integral part of these consolidated financial statements.

63SPECTRUM BRANDS, INC.

~~Table~~Consolidated Statements of ~~Contents~~Comprehensive Income (Loss)

Years ended September 30, 2013, 2012 and 2011

(Amounts in thousands)



	2013			2012			2011
Net (loss) income	$	(47,510	)	$	52,795		$	(74,626	)
Other comprehensive (loss) income, net of tax:
Foreign currency translation	(6,622		)	(8,602		)	(10,607		)
Unrealized (loss) gain on cash flow hedges	(2,509		)	1,545			4,428
Defined benefit pension gain (loss)	4,248			(11,932		)	(770		)
Other comprehensive loss, net of tax	(4,883		)	(18,989		)	(6,949		)
Comprehensive (loss) income	(52,393		)	33,806			(81,575		)
Less: Comprehensive income attributable to noncontrolling interest	63			—			—
Comprehensive (loss) income attributable to controlling interest	$	(52,456	)	$	33,806		$	(81,575	)

See accompanying notes which are an integral part of these consolidated financial statements.

SPECTRUM BRANDS, INC. AND SUBSIDIARIES

Consolidated Statements of ~~Shareholder's~~Shareholders’ Equity ~~(Deficit) and Comprehensive Income (Loss)~~

Years ended September 30, ~~2012~~2013, ~~2011~~2012 and ~~2010~~2011

(In thousands)



	Additional Paid-In/ Other			Accumulated			Accumulated Other Comprehensive Income (Loss),			Total Shareholders’ Equity		Non-controlling Interest		Total Equity (Deficit)
	Capital			Deficit			net of tax			Total Shareholders’ Equity		Non-controlling Interest		Total Equity (Deficit)
Balances at September 30, 2010	$	1,314,768		$	(260,540	)	$	(7,497	)	1,046,731		—		$	(268,037	)
Net loss	—			(74,626		)	—			(74,626	)	—		(74,626		)
Other comprehensive loss	—			—			(6,949		)	(6,949	)	—		(6,949		)
Amortization of unearned compensation	29,969			—			—			29,969		—		29,969
Restricted stock units surrendered	(6,003		)	—			—			(6,003	)	—		(6,003		)
Balances at September 30, 2011	$	1,338,734		$	(335,166	)	$	(14,446	)	989,122		—		$	989,122
Net loss	—			52,795			—			52,795		—		52,795
Other comprehensive loss	—			—			(18,989		)	(18,989	)	—		(18,989		)
Vesting of restricted stock units	25,208			—			—			25,208		—		25,208
Restricted stock units surrendered	(3,996		)	—			—			(3,996	)	—		(3,996		)
Amortization of unearned compensation	—			(51,450		)	—			(51,450	)	—		(51,450		)
Balances at September 30, 2012	$	1,359,946		$	(333,821	)	$	(33,435	)	992,690		—		$	992,690
Net income	—			(47,370		)	—			(47,370	)	(140	)	(47,510		)
Other comprehensive (loss) income	$	—		—			(5,086		)	(5,086	)	203		(4,883		)
Contribution from parent	28,562			—			—			28,562		—		28,562
Amortization of unearned compensation	30,775			—			—			30,775		—		30,775
Restricted stock units surrendered	(20,050		)	—			—			(20,050	)	—		(20,050		)
Dividend declared	—			(88,695		)	—			(88,695	)	—		(88,695		)
Parent ownership interest - Shaser	(6,109		)	—			—			(6,109	)	—		(6,109		)
Noncontrolling interest				—			—			—		49,143		49,143
Balances at September 30, 2013	$	1,393,124		$	(469,886	)	$	(38,521	)	884,717		49,206		$	933,923

	Common Stock					AdditionalPaid-InCapital/Other			Accumulated			AccumulatedOtherComprehensiveIncome (Loss),			TotalShareholder'sEquity
	Shares		Amount			Capital			Deficit			net of tax			(Deficit)
Balances at September 30, 2009	30,000		$	300		$	724,796		$	(70,785	)	$	6,568		$	660,879
Net loss	—		—			—			(189,755		)	—			(189,755		)
Adjustment of additional minimum pension liability	—		—			—			—			(17,773		)	(17,773		)
Valuation allowance adjustment	—		—			—			—			(2,398		)	(2,398		)
Translation adjustment	—		—			—			—			12,596			12,596
Other unrealized loss	—		—			—			—			(6,490		)	(6,490		)
Comprehensive loss															(203,820		)
Extinguishment of Spectrum Brands common stock, pursuant to the Merger	(30,000	)	(300		)	(724,796		)	—			—			(725,096		)
Issuance of restricted stock	—		—			(9		)	—			—			(9		)
Amortization of unearned compensation	—		—			16,574			—			—			16,574
Other capital	—		—			1,298,203			—			—			1,298,203
Balances at September 30, 2010	—		$	—		$	1,314,768		$	(260,540	)	$	(7,497	)	$	1,046,731
Net loss	—		—			—			(74,626		)	—			(74,626		)
Adjustment of additional minimum pension liability	—		—			—			—			(4,299		)	(4,299		)
Valuation allowance adjustment	—		—			—			—			2,706			2,706
Translation adjustment	—		—			—			—			(10,115		)	(10,115		)
Other unrealized gains	—		—			—			—			4,759			4,759
Comprehensive loss															(81,575		)
Amortization of unearned compensation	—		—			29,969			—			—			29,969
Restricted stock units surrendered	—		—			(6,003		)	—			—			(6,003		)
Balances at September 30, 2011	—		$	—		$	1,338,734		$	(335,166	)	$	(14,446	)	$	989,122
Net income	—		—			—			52,795			—			52,795
Adjustment of additional minimum pension liability	—		—			—			—			(11,150		)	(11,150		)
Valuation allowance adjustment	—		—			—			—			126			126
Translation adjustment	—		—			—			—			(8,602		)	(8,602		)
Other unrealized gains	—		—			—			—			637			637
Comprehensive income															33,806
Amortization of unearned compensation	—		—			25,208			—			—			25,208
Restricted stock units surrendered	—		—			(3,996		)	—			—			—
Dividend declared and paid to parent	—		—			—			(51,450		)	—			—
Balances at September 30, 2012	—		$	—		$	1,359,946		$	(333,821	)	$	(33,435	)	$	992,690

See accompanying notes which are an integral part of these consolidated financial statements.

~~See~~SPECTRUM ~~accompanying~~BRANDS, ~~notes to consolidated financial statements~~INC.

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SPECTRUM BRANDS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years ended September 30, ~~2012~~2013, ~~2011~~2012 and ~~2010~~2011

(InAmounts in thousands)

		2012				2011				2010
	2013				2012				2011
Cash flows from operating activities:
Net income (loss)		$	52,795			$	(74,626	)		$	(189,755	)
Net (loss) income	$	(47,510	)		$	52,795			$	(74,626	)
Loss from discontinued operations, net of tax		—				—				(2,735		)
Adjustments to reconcile net (loss) income to net cash used by operating activities:
Income (loss) from continuing operations		52,795				(74,626		)		(187,020		)
Depreciation	62,114				40,950				47,065
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization of intangibles	77,779				63,666				57,695
Depreciation		40,950				47,065				54,822
Amortization of unearned restricted stock compensation	43,098				25,208				29,969
Amortization of intangibles		63,666				57,695				45,920
Amortization of debt issuance costs	13,241				9,922				13,198
Amortization of unearned restricted stock compensation		25,208				29,969				16,574
Non-cash increase to cost of goods sold from sale of HHI Business acquisition inventory	31,000				—				—
Amortization of debt issuance costs		9,922				13,198				9,030
Intangible asset impairment	—				—				32,450
Intangible asset impairment		—				32,450				—
Write-off of unamortized (premium) / discount on retired debt	(5,178		)		(466		)		8,950
Administrative related reorganization items		—				—				3,646
Write-off of debt issuance costs	21,574				2,946				15,420
Payments for administrative related reorganization items		—				—				(47,173		)
Non-cash restructuring and related charges	23,245				5,195				15,143
Non-cash increase to cost of goods sold due to fresh-start reporting inventory valuation		—				—				34,865
Non-cash debt accretion	2,482				722				4,773
Non-cash interest expense on 12% Notes		—				—				24,555
Note retirement tender, call premium and related costs	111,307				25,400				—
Write off of unamortized (premium) discount on retired debt		(466		)		8,950				59,162
Changes in assets and liabilities, net of effects of acquisitions:
Write off of debt issuance costs		2,946				15,420				6,551
Accounts receivable	(62,316		)		16,498				17,412
Non-cash restructuring and related charges		5,195				15,143				16,359
Inventories	(2,707		)		(11,642		)		96,406
Non-cash debt accretion		722				4,773				18,302
Prepaid expenses and other current assets	(3,727		)		561				815
Changes in assets and liabilities:
Accounts payable and accrued liabilities	(621		)		5,360				(58,091		)
Accounts receivable		16,498				17,412				12,600
Deferred taxes	(21,655		)		22,633				57,314
Inventories		(11,642		)		96,406				(66,127		)
Other changes in assets and liabilities	16,047				(7,082		)		(29,170		)
Prepaid expenses and other current assets		561				815				2,025
Net cash provided by operating activities	258,173				252,666				234,723
Accounts payable and accrued liabilities		1,424				(60,573		)		86,247
Cash flows from investing activities:
Deferred taxes and other		40,951				28,144				(21,779		)
Purchases of property, plant and equipment	(81,976		)		(46,809		)		(36,160		)
Net cash provided by operating activities of continuing operations		248,730				232,241				68,559
Acquisition of Shaser, net of cash acquired	(42,561		)		—				—
Net cash used by operating activities of discontinued operations		—				—				(11,221		)
Acquisition of the HHI Business, net of cash acquired	(1,351,008		)		—				—
Net cash provided by operating activities		248,730				232,241				57,338
Acquisition of Black Flag	—				(43,750		)		—
Cash flows from investing activities:
Acquisition of FURminator, net of cash acquired	—				(139,390		)		—
Purchases of property, plant and equipment		(46,809		)		(36,160		)		(40,316		)
Acquisition of Seed Resources, net of cash acquired	—				—				(11,053		)
Acquisition of Black Flag		(43,750		)		—				—
Proceeds from sale of assets held for sale	—				—				6,997
Acquisition of FURminator, net of cash acquired		(139,390		)		—				—
Other investing activities	(1,179		)		(1,545		)		(5,480		)
Acquisition of Seed Resources, net of cash acquired		—				(11,053		)		—
Net cash used by investing activities	(1,476,724		)		(231,494		)		(45,696		)
Proceeds from sale of assets held for sale		—				6,997				—
Cash flows from financing activities:
Other investing activity		(1,545		)		(5,480		)		(2,189		)
Proceeds from issuance of Term Loan, net of discount	1,936,250				—				—
Proceeds from issuance of 6.375% Notes	520,000				—				—
Proceeds from issuance of 6.625% Notes	570,000				—				—
Payment of 9.5% Notes, including tender and call premium	(1,061,307		)		—				—
Proceeds from issuance of 6.75% Notes	—				300,000				—
Payment of 12% Notes, including tender and call premium	—				(270,431		)		—
Proceeds from issuance of 9.5% Notes, including premium	—				217,000				—
Payment of Senior Credit Facilities, excluding ABL revolving credit facility	(571,093		)		(155,061		)		(224,763		)
Prepayment penalty of term loan facility	—				—				(5,653		)
Debt issuance costs	(60,850		)		(11,231		)		(12,616		)
Other debt financing, net	11,941				392				30,788
Reduction of other debt	(1,251		)		(29,112		)		—
Capital contribution from parent	28,562				—				—
Cash dividends paid to parent	(88,695		)		(51,450		)		—
Treasury stock purchases	—				—				(3,409		)
Net proceeds from equity offering	—				—				—
Share based award tax withholding payments	(20,141		)		(3,936		)		(2,482		)
Other financing activities	—				(953		)		—
Net cash provided (used) by financing activities	1,263,416				(4,782		)		(218,135		)
Effect on cash and cash equivalents due to Venezuela devaluation	(1,871		)		—				—
Effect of exchange rate changes on cash and cash equivalents - other	(2,647		)		(932		)		908
Net increase (decrease) in cash and cash equivalents	40,347				15,458				(28,200		)
Cash and cash equivalents, beginning of year	157,872				142,414				170,614
Cash and cash equivalents, end of year	$	198,219			$	157,872			$	142,414
Supplemental disclosure of cash flow information:
Cash paid for interest	$	336,798			$	185,634			$	171,577
Cash paid for taxes	$	49,638			$	39,173			$	37,171

65See accompanying notes which are an integral part of these consolidated financial statements.

Table of Contents

Net cash used by investing activities	(231,494		)	(45,696		)	(42,505		)
Cash flows from financing activities:
Proceeds from issuance of 6.75% Notes	300,000			—			—
Payment of 12% Notes, including tender and call premium	(270,431		)	—			—
Proceeds from issuance of 9.5% Notes, including premium	217,000			—			—
Proceeds from senior credit facilities, excluding ABL revolving credit facility, net of discount	—			—			1,474,755
Payment of senior credit facilities, excluding ABL revolving credit facility	(155,061		)	(224,763		)	(1,278,760		)
Prepayment penalty of term loan facility	—			(5,653		)	—
Reduction of other debt	(29,112		)	—			(8,456		)
Other debt financing, net	392			30,788			13,688
Debt issuance costs, net of refund	(11,231		)	(12,616		)	(55,024		)
ABL revolving credit facility, net	—			—			(33,225		)
Payments of supplemental loan	—			—			(45,000		)
Cash dividends paid to parent	(51,450		)	—			—
Treasury stock purchases	—			(3,409		)	(2,207		)
Other financing activities	(953		)	—			—
Net cash (used) provided by financing activities	(846		)	(215,653		)	65,771
Effect of exchange rate changes on cash and cash equivalents due to Venezuela hyperinflation	—			—			(8,048		)
Effect of exchange rate changes on cash and cash equivalents	(932		)	908			258
Net increase (decrease) in cash and cash equivalents	15,458			(28,200		)	72,814
Cash and cash equivalents, beginning of period	142,414			170,614			97,800
Cash and cash equivalents, end of period	$	157,872		$	142,414		$	170,614
Supplemental disclosure of cash flow information:
Cash paid for interest	$	185,634		$	171,577		$	136,429
Cash paid for income taxes, net	39,173			37,171			36,951

SPECTRUM BRANDS, INC.

See accompanying notes to consolidated financial statements.

Table of Contents

SPECTRUM BRANDS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(InAmounts ~~thousands,~~in ~~except per share amounts~~thousands)

(1) ~~Description~~DESCRIPTION ofOF ~~Business~~BUSINESS

Unless the context indicates otherwise, the term the “Company,” is used to refer to Spectrum Brands and its subsidiaries subsequent to the Merger and Spectrum Brands prior to the Merger.

The Company’s operations include the worldwide manufacturing and marketing of alkaline, zinc carbon and hearing aid batteries, as well as aquariums and aquatic health supplies and the designing and marketing of rechargeable batteries, battery-powered lighting products, electric shavers and accessories, grooming products and hair care appliances. The Company’s operations also include the manufacturing and marketing of specialty pet supplies. The Company also manufactures and markets herbicides, insecticides and insect repellents in North America. The Company also designs, markets and distributes a broad range of branded small appliances and personal care products. The Company’s operations utilize manufacturing and product development facilities located in the United States ("U.S."), Europe, Latin America and Asia.

~~The~~On ~~Company~~December ~~sells~~17, ~~its~~2012, ~~products~~the inCompany ~~approximately~~acquired ~~140~~the ~~countries~~residential ~~through~~hardware aand ~~variety~~home ofimprovement ~~trade~~business ~~channels,~~(the ~~including~~“HHI ~~retailers,~~Business”) ~~wholesalers~~from ~~and~~Stanley ~~distributors~~Black & Decker, ~~hearing~~Inc. ~~aid~~(“Stanley ~~professionals~~Black & Decker”), ~~industrial~~which ~~distributors~~includes ~~and~~(i) ~~original~~the ~~equipment~~equity ~~manufacturers~~interests ~~and~~of ~~enjoys~~certain ~~name~~subsidiaries ~~recognition~~of inStanley ~~its~~Black ~~markets~~& ~~under~~Decker ~~the~~engaged ~~Rayovac,~~in ~~VARTA~~the business and ~~Remington~~(ii) ~~brands,~~certain ~~each~~assets of ~~which~~Stanley ~~has~~Black ~~been~~& inDecker ~~existence~~used or held for ~~more~~use ~~than~~in 80connection ~~years,~~with ~~and~~the ~~under~~business (the ~~Tetra~~“Hardware Acquisition”). The HHI Business has a broad portfolio of recognized brand names, ~~8-in-1~~including Kwikset, ~~Dingo~~Weiser, ~~Nature's Miracle~~Baldwin, ~~Spectracide~~National Hardware, ~~Cutter~~Stanley, ~~Hot~~FANAL ~~Shot~~and Pfister, ~~Black &~~as ~~Decker~~well as patented technologies such as Smartkey, ~~George~~a ~~Foreman~~rekeyable lockset technology, ~~Russell~~and ~~Hobbs~~Smart Code Home Connect. On April 8, ~~Farberware~~2013, ~~Black~~the ~~Flag~~Company completed the Hardware Acquisition with the closing of the purchase of certain assets of Tong Lung Metal Industry Co. Ltd., ~~FURminator~~a ~~and~~Taiwan ~~various~~Corporation ~~other~~("TLM ~~brands~~Taiwan”), which is involved in the production of residential locksets. For information pertaining to the Hardware Acquisition, see Note 15, “Acquisitions.”

The Company’s ~~global~~sells ~~branded~~its ~~consumer~~ products ~~have positions~~ in ~~six~~approximately ~~major~~140 ~~product~~countries ~~categories:~~through ~~consumer~~a ~~batteries;~~variety ~~small~~of ~~appliances;~~trade ~~pet supplies; electric shaving and grooming; electric personal care; and home and garden controls. Effective October 1~~channels, ~~2010,~~including ~~the Company’s chief operating decision-maker manages the businesses of the Company in three vertically integrated~~retailers, ~~product-focused~~wholesalers ~~reporting~~and ~~segments: (i) Global Batteries & Appliances~~distributors, ~~which~~hearing ~~consists~~aid ~~of the Company’s worldwide battery~~professionals, ~~electric~~industrial ~~shaving~~distributors and ~~grooming,~~original ~~electric~~equipment ~~personal~~manufacturers ~~care~~ and ~~small~~enjoys ~~appliances~~name ~~primarily~~recognition in ~~the~~its ~~kitchen~~markets ~~and~~under ~~home~~the ~~product categories (“Global Batteries & Appliances”); (ii) Global Pet Supplies~~Rayovac, ~~which~~VARTA ~~consists of the Company’s worldwide pet supplies business (“Global Pet Supplies”);~~ and ~~(iii) Home~~Remington ~~and Garden Business~~brands, ~~which~~each ~~consists~~ of ~~the~~which ~~Company’s~~has ~~home~~been ~~and~~in ~~garden~~existence ~~and~~for ~~insect~~more ~~control~~than ~~business~~80 ~~(the~~years, ~~“Home~~ and ~~Garden~~under ~~Business”). The current reporting segment structure reflects~~ the ~~combination of the former Global Batteries & Personal Care segment (“Global Batteries & Personal Care”)~~Tetra, ~~which consisted of the worldwide battery~~8-in-1, ~~electric shaving and grooming and electric personal care products~~Dingo, ~~with~~Nature's ~~substantially all of the former Small Appliances segment (“Small Appliances”)~~Miracle, ~~which consisted of the Russell Hobbs business acquired on June 16~~Spectracide, ~~2010~~Cutter, toHot ~~form~~Shot, ~~the Global Batteries~~Black & ~~Appliances~~Decker, ~~segment.~~George ~~In addition~~Foreman, ~~certain~~Russell ~~pest~~Hobbs, ~~control~~Farberware, ~~and~~Black ~~pet products included in the former Small Appliances segment have been reclassified into the Home and Garden Business and Global Pet Supplies segments~~Flag, respectively. Management reviews the performance of the Company based on these segments. The presentation of all historical segment data herein has been changed to conform to this segment reporting structureFURminator, ~~which reflects~~ the ~~manner~~previously inmentioned ~~which~~HHI ~~the~~Business ~~Company’s~~brands ~~management monitors performance~~ and ~~allocates~~various ~~resources.~~other ~~For information pertaining to our business segments, see Note 11, “Segment Information”~~brands.

OnThe ~~October 8, 2012, the~~ Company's ~~entered~~global ~~into~~branded anconsumer ~~agreement~~products ~~with~~have ~~Stanley~~positions ~~Black~~in &seven ~~Decker,~~major ~~Inc.~~product ~~("Stanley~~categories: ~~Black~~consumer &batteries; ~~Decker")~~small toappliances; ~~acquire~~pet ~~the~~supplies; ~~residential~~electric ~~hardware~~shaving and ~~home~~grooming; ~~improvement~~electric ~~business~~personal ~~(the~~care; ~~"HHI~~home ~~Business")~~and ~~currently~~garden ~~operated~~controls; byand ~~Stanley~~hardware ~~Black & Decker~~ and ~~certain~~home ~~of its subsidiaries for $1~~improvement,~~400,000,~~ ~~consisting~~which ofconsists ~~(i) the equity interests~~ of ~~certain subsidiaries of Stanley Black & Decker engaged in~~ the ~~business~~recently ~~and~~acquired (ii) certain assets of Stanley Black & Decker used or held for use in connection with the business (the "Hardware Acquisition"). The Hardware Acquisition, when completed, will include the purchase of shares and assets of certain subsidiaries of Stanley Black & Decker involved in the HHI Business. Furthermore, the Hardware Acquisition, when completed, will also include the purchase of certain assets of Tong Lung Metal Industry Co. Ltd., a Taiwan Corporation ("TLM Taiwan"), which is involved in the production of residential locksets. For further information pertaining to this transaction, see Note 17, "Subsequent Events".

67The Company manages the businesses in four vertically integrated, product-focused reporting segments: (i) Global Batteries & Appliances, which consists of the Company's worldwide battery, electric shaving and grooming, electric personal care and small appliances primarily in the kitchen and home product categories (“Global Batteries & Appliances”); (ii) Global Pet Supplies, which consists of the Company's worldwide pet supplies business (“Global Pet Supplies”); (iii) Home and Garden Business, which consists of the Company's home and garden and insect control business (the “Home and Garden Business”); and (iv) Hardware & Home Improvement, which consists of the recently acquired HHI Business (“Hardware & Home Improvement”). Management reviews the performance of the Company based on these segments, which also reflect the manner in which the Company's management monitors performance and allocates resources. For information pertaining to our business segments, see Note 11, “Segment Information”.

(2) Significant Accounting Policies and Practices

(a) Principles of Consolidation and Fiscal Year End

The consolidated financial statements include the financial statements of Spectrum Brands and its majority owned subsidiaries and have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). All intercompany transactions have been eliminated. The Company’s fiscal year ends September 30. References herein to Fiscal 2013, Fiscal 2012 and Fiscal 2011 refer to the fiscal years ended September 30, 2013, 2012 and 2011, respectively.

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SPECTRUM BRANDS, INC.

~~Notes~~NOTES toTO ~~Condensed~~CONSOLIDATED ~~Consolidated~~FINANCIAL ~~Financial~~STATEMENTS ~~Statements~~- – (~~Continued~~CONTINUED)

(Amounts in thousands, except per share figures)

(2b) ~~Significant~~Change in Accounting ~~Policies and Practices~~Principle

(During Fiscal 2013, the Company made a) ~~Principles~~change in accounting principle to present tax withholdings for share-based payment awards paid to taxing authorities on behalf of ~~Consolidation~~employees ~~and~~as ~~Fiscal~~a ~~Year~~financing ~~End~~activity within the Consolidated Statements of Cash Flows. Such amounts were previously presented within operating activities. The Company believes this change is preferable as the predominant characteristic of the transaction is a financing activity. The Company has reclassified the following amounts within its previously reported Consolidated Statements of Cash Flows on a retrospective basis to reflect this change in accounting principle:

The consolidated financial statements include the financial statements of Spectrum Brands, Inc. and its subsidiaries and are prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). All intercompany transactions have been eliminated. The Company’s fiscal year ends September 30. References herein to Fiscal 2012, 2011 and 2010 refer to the fiscal years ended September 30, 2012, 2011 and 2010, respectively.



	Fiscal 2012			Fiscal 2011
Net cash used by operating activities - Accounts payable and accrued liabilities:
As previously reported	$	1,424		$	(60,573	)
Reclassification of share based award tax withholding payments	3,936			2,482
As reclassified	$	5,360		$	(58,091	)
Net cash used by financing activities - Share based award tax withholding payments:
As previously reported	$	—		$	—
Reclassification of share based award tax withholding payments	(3,936		)	(2,482		)
As reclassified	$	(3,936	)	$	(2,482	)

(bc) Revenue Recognition

The Company recognizes revenue from product sales generally upon delivery to the customer orat the shipping point in situations where the customer picks up the product or where delivery terms so stipulate. This represents the point at which title and all risks and rewards of ownership of the product are passed, provided that: there are no uncertainties regarding customer acceptance; there is persuasive evidence that an arrangement exists; the price to the buyer is fixed or determinable; and collectibility is deemed reasonably assured. The Company is generally not obligated to allow for, and its general policy is not to accept, product returns for battery sales. The Company does accept returns in specific instances related to its shaving, grooming, personal care, home and garden, small appliances and pet products. The provision for customer returns is based on historical sales and returns and other relevant information. The Company estimates and accrues the cost of returns, which are treated as a reduction of Net sales.

The Company enters into various promotional arrangements, primarily with retail customers, including arrangements entitling such retailers to cash rebates from the Company based on the level of their purchases, which require the Company to estimate and accrue the estimated costs of the promotional programs. These costs are treated as a reduction of Net sales.

The Company also enters into promotional arrangements that target the ultimate consumer. The costs associated with such arrangements are treated as either a reduction ofin Net sales or an increase ofin Cost of goods sold, based on the type of promotional program. The income statement presentation of the Company’s promotional arrangements complies with Accounting Standards Codification ("ASC") Topic 605: “Revenue Recognition.” For all types of promotional arrangements and programs, the Company monitors its commitments and uses various measures, including past experience, to determine amounts to be recorded for the estimate of the earned, but unpaid, promotional costs. The terms of the Company’s customer-related promotional arrangements and programs are tailored to each customer and are documented through written contracts, correspondence or other communications with the individual customers.

The Company also enters into various arrangements, primarily with retail customers, which require the Company to make upfront cash, or “slotting” payments, in order to secure the right to distribute through such customers. The Company capitalizes slotting payments; provided the payments are supported by a time or volume based arrangement with the retailer, and amortizes the associated payment over the appropriate time or volume based term of the arrangement. The amortization of slotting payments is treated as a reduction in Net sales and a corresponding asset is reported in Deferred charges and other in the accompanying Consolidated Statements of Financial Position.

(cd) Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial ~~statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.~~

(d) Cash Equivalents

For purposes of the accompanying Consolidated Statements of Financial Position and Consolidated Statements of Cash Flows, the Company considers all highly liquid debt instruments purchased with original maturities of three months or less to be cash equivalents.

(e) Concentrations of Credit Risk and Major Customers

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SPECTRUM BRANDS, INC.

~~Notes~~NOTES toTO ~~Condensed~~CONSOLIDATED ~~Consolidated~~FINANCIAL ~~Financial~~STATEMENTS ~~Statements~~- – (~~Continued~~CONTINUED)

(Amounts in thousands, except per share figures)

~~receivables~~statements ~~are~~and ~~determined based on ongoing evaluations of~~ the ~~Company’s~~reported ~~receivables,~~amounts ~~principally on the basis~~ of ~~historical~~revenues ~~collection experience~~ and ~~evaluations~~expenses ofduring the ~~risks~~reporting ofperiod. ~~nonpayment~~Actual ~~for~~results acould ~~given~~differ ~~customer~~from those estimates.

~~The~~(e) ~~Company~~Cash has a broad range of customers including many large retail outlet chains, one of which accounts for a significant percentage of its sales volume. This major customer represented approximately 23%, 24% and 22% of the Company’s Net sales during Fiscal 2012, Fiscal 2011 and Fiscal 2010. This major customer also represented approximately 13% and 16% of the Company’s Trade accounts receivable, net as of September 30, 2012 and September 30, 2011, respectively.Equivalents

~~Approximately~~For ~~46%,~~purposes ~~44% and 44%~~ of the ~~Company’s~~accompanying ~~Net~~Consolidated ~~sales~~Statements ~~during Fiscal 2012, Fiscal 2011 and Fiscal 2010, respectively, occurred outside~~ of ~~the~~Financial ~~United~~Position ~~States. These sales~~ and ~~related~~Consolidated ~~receivables~~Statements ~~are subject to varying degrees~~ of ~~credit,~~Cash ~~currency~~Flows, ~~and~~the ~~political~~Company ~~and~~considers ~~economic~~all ~~risk.~~highly ~~The~~liquid ~~Company~~debt ~~monitors~~instruments ~~these~~purchased ~~risks~~with ~~and~~original ~~makes~~maturities ~~appropriate~~of ~~provisions~~three ~~for~~months ~~collectibility~~or ~~based~~less onto anbe ~~assessment~~cash ~~of the risks present~~equivalents.

(f) ~~Displays~~Concentrations of Credit Risk and ~~Fixtures~~Major Customers

Trade receivables subject the Company to credit risk. Trade accounts receivable are carried at net realizable value. The Company extends credit to its customers based upon an evaluation of the customer’s financial condition and credit history, but generally does not require collateral. The Company monitors its customers’ credit and financial condition based on changing economic conditions and will make adjustments to credit policies as required. Provisions for losses on uncollectible trade receivables are determined based on ongoing evaluations of the Company’s receivables, principally on the basis of historical collection experience and evaluations of the risks of nonpayment for a given customer.

The Company has a broad range of customers including many large retail outlet chains, one of which accounts for a significant percentage of its sales volume. This major customer represented approximately 18%, 23% and 24% of the Company’s Net sales during Fiscal 2013, Fiscal 2012 and Fiscal 2011, respectively. This major customer also represented approximately 11% and 13% of the Company’s Trade accounts receivable, net as of September 30, 2013 and September 30, 2012, respectively.

Approximately 41%, 46% and 44% of the Company’s Net sales during Fiscal 2013, Fiscal 2012 and Fiscal 2011, respectively, occurred outside of the United States. These sales and related receivables are subject to varying degrees of credit, currency, and political and economic risk. The Company monitors these risks and makes appropriate provisions for collectibility based on an assessment of the risks present.

(g) Displays and Fixtures

Temporary displays are generally disposable cardboard displays shipped to customers to facilitate display of the Company’s products. Temporary displays are generally disposed of after a single use by the customer.

Permanent fixtures are more ~~permanent~~lasting in nature, are generally made from wire or other longer-lived materials, and are shipped to customers for use in displaying the Company’s products. These permanent fixtures are restocked with the Company’s product multiple times over the fixture’s useful life.

The costs of both temporary and permanent displays are capitalized as a prepaid asset until shipped to the customer and are included in Prepaid expenses and other in the accompanying Consolidated Statements of Financial Position. The costs of temporary displays are expensed in the period in which they are shipped to customers and the costs of permanent fixtures are amortized over an estimated useful life of one to two years from the date they are shipped to customers. ~~and~~The ~~are~~unamortized cost of permanent fixtures is reflected in Deferred charges and other in the accompanying Consolidated Statements of Financial Position.

(gh) Inventories

The Company’s inventories are valued at the lower of cost or net realizable value. Cost of inventories is determined using the first-in, first-out (FIFO) method.

(hi) Property, Plant and Equipment

Property, plant and equipment are recorded at cost or at fair value if acquired in a purchase business combination. Depreciation on plant and equipment is calculated on the straight-line method over the estimated useful lives of the assets. Depreciable lives by major classification are as follows:

Plant and equipment held under capital leases are amortized on a straight-line basis over the shorter of the lease term or estimated useful life of the asset and is included in depreciation expense.

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company evaluates recoverability of assets to be held and used by comparing the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

(i) Intangible Assets

Intangible assets are recorded at cost or at fair value if acquired in a purchase business combination. In connection with fresh-

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SPECTRUM BRANDS, INC.

~~Notes~~NOTES toTO ~~Condensed~~CONSOLIDATED ~~Consolidated~~FINANCIAL ~~Financial~~STATEMENTS ~~Statements~~- – (~~Continued~~CONTINUED)

(Amounts in thousands, except per share figures)

~~start~~Plant ~~reporting, Intangible Assets were recorded at their estimated fair value on August 30, 2009. Customer lists, proprietary technology~~ and ~~certain~~equipment ~~trade~~held ~~name~~under ~~intangibles~~capital leases are amortized, ~~using~~on ~~the~~a straight-line ~~method,~~basis over ~~their~~the ~~estimated~~shorter ~~useful lives~~ of ~~approximately~~the 1lease toterm 20or ~~years.~~estimated ~~Excess~~useful oflife ~~cost over fair value~~ of ~~net assets acquired (goodwill) and indefinite-lived intangible assets (certain trade name intangibles) are not amortized. Goodwill is tested for impairment at least annually, at~~ the ~~reporting~~asset; ~~unit level with~~ such ~~groupings~~amortization ~~being consistent with the Company’s reportable segments. If impairment~~ is ~~indicated,~~included a write-down to fair value (normally measured by discounting estimated future cash flows) is recorded. Indefinite-lived trade name intangibles are tested for impairment at least annually by comparing the fair value, determined using a relief from royalty methodology, with the carrying value. Any excess of carrying value over fair value is recognized as an impairment loss in ~~income~~depreciation ~~from operations~~expense.

(j) Intangible Assets

Intangible assets are recorded at cost or at fair value if acquired in a purchase business combination. In connection with fresh-start reporting, Intangible Assets were recorded at their estimated fair value on August 30, 2009. Customer lists, proprietary technology and certain trade name intangibles are amortized, using the straight-line method, over their estimated useful lives of up to 20 years. Excess of cost over fair value of net assets acquired (goodwill) and indefinite-lived intangible assets (certain trade name intangibles) are not amortized. Goodwill is tested for impairment at least annually, at the reporting unit level with such groupings being consistent with the Company’s reportable segments. If impairment is indicated, a write-down to fair value (normally measured by discounting estimated future cash flows) is recorded. Indefinite-lived trade name intangibles are tested for impairment at least annually by comparing the fair value, determined using a relief from royalty methodology, with the carrying value. Any excess of carrying value over fair value is recognized as an impairment loss in income from operations.

ASC Topic 350: “Intangibles-Goodwill and Other,” (“ASC 350”) requires that goodwill and indefinite-lived intangible assets be tested for impairment annually, or more often if an event or circumstance indicates that an impairment loss may have been incurred. The Company’s management uses its judgment in assessing whether assets may have become impaired between annual impairment tests. Indicators such as unexpected adverse business conditions, economic factors, unanticipated technological change or competitive activities, loss of key personnel, and acts by governments and courts may signal that an asset has become impaired.

During Fiscal ~~2012~~2013, Fiscal ~~2011~~2012 and Fiscal ~~2010~~2011, the Company’s goodwill and trade name intangibles were tested for impairment as of the Company’s August financial period end, the Company’s annual testing date, as well as in certain interim periods where an event or circumstance occurred that indicated an impairment loss may have been incurred.

Intangibles with Indefinite Lives

In accordance with ASC 350, the Company conducts impairment testing on the Company’s goodwill. To determine fair value during Fiscal ~~2012~~2013, Fiscal ~~2011~~2012 and Fiscal ~~2010~~2011, the Company used the discounted estimated future cash flows methodology ~~and third party valuations~~. Assumptions critical to the Company’s fair value estimates under the discounted estimated future cash flows methodology are: (i) the present value factors used in determining the fair value of the reporting units and trade names; (ii) projected average revenue growth rates used in estimating future cash flows for the reporting unit; and (iii) projected long-term growth rates used in the derivation of terminal year values. These and other assumptions are impacted by economic conditions and expectations of management and will change in the future based on period specific facts and circumstances. The Company also tested the aggregate estimated fair value of its reporting units for reasonableness by comparison to the total market capitalization of the Company, which includes both its equity and debt securities.

In addition, in accordance with ASC 350, as part of the Company’s annual impairment testing, the Company tested its indefinite-lived trade name intangible assets for impairment by comparing the carrying amount of such trade names to their respective fair values. Fair value was determined using a relief from royalty methodology. Assumptions critical to the Company’s fair value estimates under the relief from royalty methodology were: (i) royalty rates, (ii) projected average revenue growth rates, and (iii) applicable discount rates.

In connection with the Company’s annual goodwill impairment testing performed during Fiscal ~~2012~~2013, Fiscal ~~2011~~2012 and Fiscal ~~2010~~2011, the first step of such testing indicated that the fair value of the Company’s reporting segments were in excess of their carrying amounts and, accordingly, no further testing of goodwill was required.

During Fiscal ~~2012~~2013, the Company concluded that the fair value of its intangible assets exceeded their carrying value. Additionally, during Fiscal 2012 the Company reclassified $3,450 of certain trade names from indefinite lived to definite lived. These trade names are being amortized over the remaining useful lives, which have been estimated to be 1-3 years.

ADuring ~~triggering event occurred in~~ Fiscal ~~2011 which required the Company to test its indefinite-lived intangible assets for impairment between annual impairment dates. As more fully discussed above in Note 1~~2012, ~~Description of Business, on October 1, 2010,~~ the Company ~~realigned~~concluded ~~its~~that ~~operating segments into three vertically integrated, product-focused reporting segments. The realignment of~~ the ~~Company’s operating segments constituted a triggering event for impairment testing. In connection with this interim test, the Company compared the~~ fair value of its ~~reporting~~intangible ~~segments~~assets toexceeded their carrying ~~amounts~~value. ~~both~~Additionally, ~~before~~during ~~and~~Fiscal ~~after~~2012 the ~~change~~Company inreclassified ~~segment composition~~$3,450 ~~and determined the fair values were in excess~~ of ~~their~~certain ~~carrying~~trade ~~amounts~~names ~~and,~~from ~~accordingly, no further testing of goodwill was required. The Company also tested the recoverability of its identified~~ indefinite- lived ~~intangibles~~to indefinite ~~connection with the realignment of its operating segments and concluded that the fair values of these assets exceeded their carrying values~~lived.

In connection with its annual impairment testing of indefinite-lived intangible assets during Fiscal 2011, the Company concluded that the fair values of certain trade name intangible assets were less than the carrying amounts of those assets. As a

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SPECTRUM BRANDS, INC.

~~Notes~~NOTES toTO ~~Condensed~~CONSOLIDATED ~~Consolidated~~FINANCIAL ~~Financial~~STATEMENTS ~~Statements~~- – (~~Continued~~CONTINUED)

(Amounts in thousands, except per share figures)

~~result,~~These ~~during~~trade ~~Fiscal~~names ~~2011~~are ~~the~~being ~~Company~~amortized ~~recorded~~over atheir ~~non-cash~~remaining ~~pretax~~useful ~~intangible asset impairment charge of approximately $32~~lives,~~450~~ which ~~was~~have ~~equal~~been estimated to ~~the~~be ~~excess of the carrying amounts of the intangible assets over the fair value of such assets. This non~~1-~~cash~~3 ~~impairment of trade name intangible assets has been recorded as a separate component of Operating expenses~~years. ~~During Fiscal 2010 the Company concluded that the fair value of its intangible assets exceeded their carrying value.~~

~~The~~In ~~above~~connection with its annual impairment testing of indefinite-lived intangible assets during Fiscal 2011, the Company concluded that the fair values of certain trade name intangible assets were less than the carrying amounts of those assets. As a result, during Fiscal 2011 the Company recorded a non-cash pretax intangible asset impairment charge of approximately $32,450 which was equal to the excess of the carrying amounts of the intangible assets over the fair value of such assets. This non-cash impairment of trade name intangible assets has been recorded as a separate component of Operating expenses. This impairment of trade name intangible assets was primarily attributed to lower ~~current and~~ forecasted profits, reflecting more conservative growth rates versus those originally assumed by the Company at the time of acquisition or upon adoption of fresh start reporting.

A triggering event occurred in Fiscal 2011 which required the Company to test its indefinite-lived intangible assets for impairment between annual impairment dates. On October 1, 2010, the Company realigned its operating segments, which constituted a triggering event for impairment testing. In connection with this interim test, the Company compared the fair value of its reporting segments to their carrying amounts both before and after the change in segment composition, and determined the fair values were in excess of their carrying amounts and, accordingly, no further testing of goodwill was required. The Company also tested the recoverability of its identified indefinite-lived intangibles in connection with the realignment of its operating segments and concluded that the fair values of these assets exceeded their carrying values.

Intangibles with Definite or Estimable Useful Lives

The Company assesses the recoverability of intangible assets with definite or estimable useful lives whenever an event or circumstance occurs that indicates an impairment loss may have been incurred. The Company assesses the recoverability of these intangible assets by determining whether their carrying value can be recovered through projected undiscounted future cash flows. If projected undiscounted future cash flows indicate that the carrying value of the assets will not be recovered, an adjustment would be made to reduce the carrying value to an amount equal to estimated fair value determined based on projected future cash flows discounted at the Company’s incremental borrowing rate. The cash flow projections used in estimating fair value are based on historical performance and management’s estimate of future performance, giving consideration to existing and anticipated competitive and economic conditions.

Impairment reviews are conducted at the judgment of management when it believes that a change in circumstances in the business or external factors warrants a review. Circumstances such as the discontinuation of a product or product line, a sudden or consistent decline in the sales forecast for a product, changes in technology or in the way an asset is being used, a history of operating or cash flow losses, or an adverse change in legal factors or in the business climate, among others, may trigger an impairment review.

(jk) Debt Issuance Costs

Debt issuance costs are capitalized and amortized to interest expense using the effective interest method over the lives of the related debt agreements.

(kl) Accounts Payable

Included in accounts payable are book overdrafts, net of deposits on hand, on disbursement accounts that are replenished when checks are presented for payment.

(lm) Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. Accrued interest expense and penalties related to uncertain tax positions are recorded in Income tax expense.

~~(m)~~The ~~Foreign~~Company ~~Currency~~recognizes ~~Translation~~the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in income tax expense in the period in which the change in judgment occurs. Accrued interest expense and penalties related to uncertain tax positions are recorded in Income tax expense.

Local currencies are considered the functional currencies for most of the Company’s operations outside the United States. Assets and liabilities of the Company’s foreign subsidiaries are translated at the rate of exchange existing at year-end, with revenues, expenses, and cash flows translated at the average of the monthly exchange rates. Adjustments resulting from translation of the financial statements are recorded as a component of Accumulated other comprehensive income (loss) (“AOCI”). Also included in AOCI are the effects of exchange rate changes on intercompany balances of a long-term nature.

As of September 30, 2012 and September 30, 2011, accumulated (losses) gains related to foreign currency translation adjustments of $(225) and $8,377, respectively, were reflected in the accompanying Consolidated Statements of Financial Position in AOCI.

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SPECTRUM BRANDS, INC.

~~Notes~~NOTES toTO ~~Condensed~~CONSOLIDATED ~~Consolidated~~FINANCIAL ~~Financial~~STATEMENTS ~~Statements~~- – (~~Continued~~CONTINUED)

(Amounts in thousands, except per share figures)

Foreign currency transaction gains and losses related to assets and liabilities that are denominated in a currency other than the functional currency are reported in the Consolidated Statements of Operations in the period they occur. Exchange losses on foreign currency transactions aggregating $1,654, $3,370 and $13,336 for Fiscal 2012, Fiscal 2011 and Fiscal 2010, respectively, are included in Other expense (~~income~~n), ~~net,~~Foreign inCurrency ~~the accompanying Consolidated Statements of Operations.~~ Translation

Local currencies are considered the functional currencies for most of the Company’s operations outside the United States. Assets and liabilities of the Company’s foreign subsidiaries are translated at the rate of exchange existing at year-end, with revenues, expenses, and cash flows translated at the average of the monthly exchange rates. Adjustments resulting from translation of the financial statements are recorded as a component of Accumulated other comprehensive income (nloss) ~~Shipping~~(“AOCI”). ~~and~~Also ~~Handling~~included ~~Costs~~in AOCI are the effects of exchange rate changes on intercompany balances of a long-term nature.

~~The~~As ~~Company incurred shipping and handling costs~~ of ~~$198~~September 30,~~152,~~ ~~$201,480~~2013 and ~~$161~~September 30,~~148~~ ~~during Fiscal~~ 2012, ~~Fiscal~~accumulated ~~2011~~(losses) ~~and~~gains ~~Fiscal~~related ~~2010,~~to ~~respectively.~~foreign ~~Shipping~~currency ~~and~~translation ~~handling~~adjustments ~~costs~~of $(7,050) ~~which~~and ~~are~~$(225), ~~included~~respectively, inwere ~~Selling~~reflected ~~expenses~~ in the accompanying Consolidated Statements of ~~Operations,~~Financial ~~include~~Position ~~costs~~in incurred with third-party carriers to transport products to customers and salaries and overhead costs related to activities to prepare the Company’s products for shipment at the Company’s distribution facilitiesAOCI.

~~(o)~~Foreign ~~Advertising~~currency ~~Costs~~transaction gains and losses related to assets and liabilities that are denominated in a currency other than the functional currency are reported in the Consolidated Statements of Operations in the period they occur. Exchange losses on foreign currency transactions aggregating $9,388, $1,654 and $3,370 for Fiscal 2013, Fiscal 2012 and Fiscal 2011, respectively, are included in Other expense, net, in the accompanying Consolidated Statements of Operations.

~~The~~(o) ~~Company~~Shipping ~~incurred advertising costs of $20,706, $30,673~~ and ~~$37,520~~Handling during Fiscal 2012, Fiscal 2011 and Fiscal 2010, respectively. Such advertising costs are included in Selling expenses in the accompanying Consolidated Statements of Operations and include agency fees and other costs to create advertisements, as well as costs paid to third parties to print or broadcast the Company’s advertisements.Costs

~~(p)~~The ~~Research~~Company incurred shipping and ~~Development~~handling ~~Costs~~costs of $246,090, $198,152 and $201,480 during Fiscal 2013, Fiscal 2012 and Fiscal 2011, respectively. Shipping and handling costs, which are included in Selling expenses in the accompanying Consolidated Statements of Operations, include costs incurred with third-party carriers to transport products to customers and salaries and overhead costs related to activities to prepare the Company’s products for shipment at the Company’s distribution facilities.

(p) Advertising Costs

The Company incurred advertising costs of $22,971, $20,706 and $30,673 during Fiscal 2013, Fiscal 2012 and Fiscal 2011, respectively. Such advertising costs are included in Selling expenses in the accompanying Consolidated Statements of Operations and include agency fees and other costs to create advertisements, as well as costs paid to third parties to print or broadcast the Company’s advertisements.

(q) Research and Development Costs

Research and development costs are charged to expense in the period they are incurred.

(qr) Environmental Expenditures

Environmental expenditures that relate to current ongoing operations or to conditions caused by past operations are expensed or capitalized as appropriate. The Company determines its liability for environmental matters on a site-by-site basis and records a liability at the time when it is probable that a liability has been incurred and such liability can be reasonably estimated. The estimated liability is not reduced for possible recoveries from insurance carriers. Estimated environmental remediation expenditures are included in the determination of the net realizable value recorded for assets held for sale.

(rs) Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation. These reclassifications had no effect on previously reported results of cash flows, operations or accumulated deficit.

(st) Comprehensive (Loss) Income

Comprehensive (loss) income includes foreign currency translation gains and losses on assets and liabilities of foreign subsidiaries, effects of exchange rate changes on intercompany balances of a long-term nature and transactions designated as a hedge of a net investment in a foreign subsidiary, deferred gains and losses on derivative financial instruments designated as cash flow hedges and ~~additional~~amortization ~~minimum~~of ~~pension~~deferred ~~liabilities~~gains and losses associated with the Company’s pension plans. The foreign currency translation gains and losses for Fiscal 2013, Fiscal 2012 and Fiscal 2011 were primarily attributable to the impact of translation of the net assets of the Company’s European and Latin American operations, which primarily have functional currencies in Euros, Pounds Sterling, Mexican Peso and Brazilian Real. Except for gains and losses resulting from exchange rate changes on intercompany balances of a long-term nature, and prior to September 30, 2011, the Company did not provide income taxes on currency translation adjustments, as earnings from international subsidiaries were considered to be permanently reinvested. As of the beginning of Fiscal 2012, the Company is no longer permanently reinvested on current and future earnings from international subsidiaries, except for locations precluded by certain restrictions from repatriating earnings.

The following is a roll forward of the amounts recorded in AOCI:

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SPECTRUM BRANDS, INC.

~~Notes~~NOTES toTO ~~Condensed~~CONSOLIDATED ~~Consolidated~~FINANCIAL ~~Financial~~STATEMENTS ~~Statements~~- – (~~Continued~~CONTINUED)

(Amounts in thousands, except per share figures)

	Unrealized Gains (Losses)			Adjustment of minimum pension liability			Translation Adjustments			Total
Balance at September 30, 2009	$	851		$	(190	)	$	5,907		$	6,568
Gross change before reclassification adjustment	(15,621		)	(28,032		)	11,511			(32,142		)
Net reclassification adjustment for losses (gains) included in earnings	6,356			1,355			—			7,711
Gross change after reclassification adjustment	$	(9,265	)	$	(26,677	)	$	11,511		$	(24,431	)
Deferred tax effect	2,775			8,904			1,085			12,764
Deferred tax valuation allowance	(116		)	(2,763		)	481			(2,398		)
Net adjustment to AOCI	$	(6,606	)	$	(20,536	)	$	13,077		$	(14,065	)
Balance at September 30, 2010	$	(5,755	)	$	(20,726	)	$	18,984		$	(7,497	)
Gross change before reclassification adjustment	(5,992		)	(6,344		)	(12,857		)	(25,193		)
Net reclassification adjustment for losses (gains) included in earnings	13,422			8			—			13,430
Gross change after reclassification adjustment	$	7,430		$	(6,336	)	$	(12,857	)	$	(11,763	)
Deferred tax effect	(2,671		)	2,037			2,742			2,108
Deferred tax valuation allowance	(331		)	3,529			(492		)	2,706
Net adjustment to AOCI	$	4,428		$	(770	)	$	(10,607	)	$	(6,949	)
Balance at September 30, 2011	$	(1,327	)	$	(21,496	)	$	8,377		$	(14,446	)
Gross change before reclassification adjustment	(1,824		)	(15,682		)	(8,602		)	(26,108		)
Net reclassification adjustment for losses (gains) included in earnings	3,097			900			—			3,997
Gross change after reclassification adjustment	$	1,273		$	(14,782	)	$	(8,602	)	$	(22,111	)
Deferred tax effect	(636		)	3,632			—			2,996
Deferred tax valuation allowance	908			(782		)	—			126
Net adjustment to AOCI	$	1,545		$	(11,932	)	$	(8,602	)	$	(18,989	)
Balance at September 30, 2012	$	218		$	(33,428	)	$	(225	)	$	(33,435	)

permanently reinvested. As of the beginning of Fiscal 2012, the Company is no longer considering current and future earnings from international subsidiaries to be permanently reinvested, except for in locations where the Company is precluded by certain restrictions from repatriating earnings.

~~(t)~~For ~~Stock~~information ~~Compensation~~pertaining to the reclassification of unrealized gains and losses on derivative instruments, see Note 7, “Derivative Financial Instruments.”

The ~~Company~~following ~~measures~~is ~~the~~a ~~cost~~roll offorward ~~its stock-based compensation plans, which include restricted stock awards and restricted stock units, based on the fair value~~ of ~~its employee stock awards at~~ the ~~date~~amounts ofrecorded ~~grant~~in ~~and recognizes these costs over the requisite service period of the awards.~~AOCI:

In September 2009, SB Holdings’ board of directors (the “Board”) adopted the 2009 Spectrum Brands Inc. Incentive Plan (the “2009 Plan”). In conjunction with the Merger the 2009 Plan was assumed by SB Holdings. Prior to October 21, 2010, up to 3,333 shares of common stock, net of forfeitures and cancellations, could have been issued under the 2009 Plan. After October 21, 2010, no further awards may be made under the 2009 Plan.



	Fiscal 2013			Fiscal 2012			Fiscal 2011
Foreign Currency Translation Adjustments:
Beginning balance	$	(225	)	$	8,377		$	18,984
Gross change before reclassification adjustment	(6,622		)	(8,602		)	(12,857		)
Gross change after reclassification adjustment	$	(6,622	)	$	(8,602	)	$	(12,857	)
Deferred tax effect	—			—			2,742
Deferred tax valuation allowance	—			—			(492		)
Other Comprehensive Loss	$	(6,622	)	$	(8,602	)	$	(10,607	)
Noncontrolling interest	203			—			—
Ending balance	$	(7,050	)	$	(225	)	$	8,377

Unrealized Gains (Losses) on Cash Flow Hedges:
Beginning balance	$	218		$	(1,327	)	$	(5,755	)
Gross change before reclassification adjustment	(2,013		)	(1,824		)	(5,992		)
Net reclassification adjustment for (gains) losses included in earnings	(920		)	3,097			13,422
Gross change after reclassification adjustment	$	(2,933	)	$	1,273		$	7,430
Deferred tax effect	(234		)	(636		)	(2,671		)
Deferred tax valuation allowance	658			908			(331		)
Other Comprehensive Income	$	(2,509	)	$	1,545		$	4,428
Ending balance	$	(2,291	)	$	218		$	(1,327	)

Defined Benefit Pension Plans:
Beginning balance	$	(33,428	)	$	(21,496

Large accelerated filer

Accelerated filer

Non-accelerated filer

x (Do not check if a smaller reporting company)

Smaller reporting company

Filing Compare · Spectrum Brands, Inc.