Edgar Filing: Spectrum Brands Holdings, Inc.

20160103 Form 10Q Q1FY16

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended January 3, 2016

☐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.	Name of Registrant, State of Incorporation, Address of Principal Offices, and Telephone No.	IRS Employer Identification No.
001-34757	Spectrum Brands Holdings, Inc. (a Delaware corporation) 3001 Deming Way Middleton, WI 53562 (608) 275-3340 www.spectrumbrands.com	27-2166630
333-192634-03	SB/RH Holdings, LLC (a Delaware limited liability company) 3001 Deming Way Middleton, WI 53562 (608) 275-3340	27-2812840

Indicate by check mark whether the registrants (1) have 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.


Spectrum Brands Holdings, Inc.	Yes	☒	No	☐
SB/RH Holdings, LLC	Yes	☐	No	☒

Indicate by check mark whether the registrants have submitted electronically and posted on their 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).


Spectrum Brands Holdings, Inc.	Yes	☒	No	☐
SB/RH Holdings, LLC	Yes	☒	No	☐

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):


Registrant	Large Accelerated Filer	Accelerated filer	Non-accelerated filer	Smaller reporting company
Spectrum Brands Holdings, Inc.	X
SB/RH Holdings, LLC			X

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


Spectrum Brands Holdings, Inc.	Yes	☐	No	☒
SB/RH Holdings, LLC	Yes	☐	No	☒

As of February 2, 2016, there were outstanding 59,385,539 shares of Spectrum Brands Holdings, Inc.’s common stock, par value $0.01 per share.

SB/RH Holdings, LLC meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this report with a reduced disclosure format as permitted by general instruction H(2).

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Forward-Looking Statements

We have made or implied certain forward-looking statements in this report. All statements, other than statements of historical facts included in this report, including the statements under “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 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 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;

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

our inability to successfully integrate and operate new acquisitions at the level of financial performance anticipated;

the unanticipated loss of key members of senior management;

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; and

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

Some of the above-mentioned factors are described in further detail in the sections entitled “Risk Factors” in our annual and quarterly reports (including this report), as applicable. You should assume the information appearing in this report is accurate only as of the end of the period covered by this report, 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 United States (“U.S.”) and the rules and regulations of the United States Securities and Exchange Commission (“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.

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SPECTRUM BRANDS HOLDINGS, INC.

SB/RH HOLDINGS, LLC

TABLE OF CONTENTS

This report is a combined report of Spectrum Brands Holdings, Inc. and SB/RH Holdings, LLC. The combined notes to the condensed consolidated financial statements include notes representing both Spectrum Brands Holdings, Inc. and SB/RH Holdings, LLC and certain notes related specifically to SB/RH Holdings, LLC.


PART I	FINANCIAL INFORMATION	Page
Item 1.	Financial Statements	1
Spectrum Brands Holdings, Inc. Condensed Consolidated Financial Statements (Unaudited)
	Condensed Consolidated Statements of Financial Position as of January 3, 2016 and September 30, 2015	1
	Condensed Consolidated Statements of Operations for the three month periods ended January 3, 2016 and December 28, 2014	2
	Condensed Consolidated Statements of Comprehensive Income for the three month periods ended January 3, 2016 and December 28, 2014	2
	Condensed Consolidated Statements of Cash Flows for the three month periods ended January 3, 2016 and December 28, 2014	3
SB/RH Holdings, LLC Condensed Consolidated Financial Statements (Unaudited)
	Condensed Consolidated Statements of Financial Position as of January 3, 2016 and September 30, 2015	4
	Condensed Consolidated Statements of Operations for the three month periods ended January 3, 2016 and December 28, 2014	5
	Condensed Consolidated Statements of Comprehensive Income for the three month periods ended January 3, 2016 and December 28, 2014	5
	Condensed Consolidated Statements of Cash Flows for the three month periods ended January 3, 2016 and December 28, 2014	6
Spectrum Brands Holdings, Inc. and SB/RH Holdings, LLC Combined (Unaudited)
	Combined Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	34
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 6.	Exhibits	35
Signatures		36

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SPECTRUM BRANDS HOLDINGS, INC.

Condensed Consolidated Statements of Financial Position

January 3, 2016 and September 30, 2015

(in millions, unaudited)



	January 3, 2016		September 30, 2015
Assets
Current assets:
Cash and cash equivalents	$	162.0	$	247.9
Trade receivables, net		513.8		498.8
Other receivables		85.5		87.9
Inventories		867.7		780.8
Prepaid expenses and other current assets		80.0		72.1
Total current assets		1,709.0		1,687.5
Property, plant and equipment, net		504.4		507.1
Deferred charges and other		39.5		42.2
Goodwill		2,467.4		2,476.7
Intangible assets, net		2,445.3		2,480.3
Total assets	$	7,165.6	$	7,193.8
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt	$	34.5	$	33.8
Accounts payable		420.9		620.6
Accrued wages and salaries		73.2		96.5
Accrued interest		57.7		63.3
Other current liabilities		205.9		212.7
Total current liabilities		792.2		1,026.9
Long-term debt, net of current portion		4,093.2		3,872.1
Deferred income taxes		563.1		572.5
Other long-term liabilities		102.3		115.5
Total liabilities		5,550.8		5,587.0
Commitments and contingencies
Shareholders' equity:
Common stock		0.6		0.6
Additional paid-in capital		2,043.5		2,033.6
Accumulated deficit		(151.6)		(205.5)
Accumulated other comprehensive loss, net of tax		(215.7)		(200.1)
Treasury stock, at cost		(105.8)		(65.5)
Total shareholders' equity		1,571.0		1,563.1
Noncontrolling interest		43.8		43.7
Total equity		1,614.8		1,606.8
Total liabilities and equity	$	7,165.6	$	7,193.8

See accompanying notes to the condensed consolidated financial statements

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SPECTRUM BRANDS HOLDINGS, INC.

Condensed Consolidated Statements of Operations

For the three month periods ended January 3, 2016 and December 28, 2014

(in millions, except per share figures, unaudited)


	January 3, 2016		December 28, 2014
Net sales	$	1,218.8	$	1,067.8
Cost of goods sold		778.0		697.4
Restructuring and related charges		0.1		0.2
Gross profit		440.7		370.2
Selling		187.1		159.8
General and administrative		86.3		68.3
Research and development		13.8		11.2
Acquisition and integration related charges		9.9		8.1
Restructuring and related charges		1.1		7.2
Total operating expenses		298.2		254.6
Operating income		142.5		115.6
Interest expense		58.4		44.4
Other non-operating expense, net		3.5		0.7
Income from operations before income taxes		80.6		70.5
Income tax expense		6.9		20.5
Net income		73.7		50.0
Net income attributable to non-controlling interest		0.1		0.2
Net income attributable to controlling interest	$	73.6	$	49.8
Earnings Per Share
Basic earnings per share	$	1.24	$	0.94
Diluted earnings per share		1.24		0.94
Dividends per share		0.33		0.30
Weighted Average Shares Outstanding
Basic		59.2		52.8
Diluted		59.2		53.1

See accompanying notes to the condensed consolidated financial statements

SPECTRUM BRANDS HOLDINGS, INC.

Condensed Consolidated Statements of Comprehensive Income

For the three month periods ended January 3, 2016 and December 28, 2014

(in millions, unaudited)



	January 3, 2016		December 28, 2014
Net income	$	73.7	$	50.0
Other comprehensive income (loss), net of tax:
Foreign currency translation loss		(20.5)		(34.5)
Unrealized gain on hedging derivatives, net tax of $(0.7) and $(1.0), respectively		3.7		1.9
Defined benefit pension gain, net tax of $(0.3) and $(0.3), respectively		1.1		1.1
Other comprehensive loss, net of tax		(15.7)		(31.5)
Comprehensive income		58.0		18.5
Comprehensive (loss) income attributable to non-controlling interest		(0.1)		0.2
Comprehensive income attributable to controlling interest	$	58.1	$	18.3

See accompanying notes to the condensed consolidated financial statements

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SPECTRUM BRANDS HOLDINGS, INC.

Condensed Consolidated Statements of Cash Flows

For the three month periods ended January 3, 2016 and December 28, 2014

(in millions, unaudited)



	January 3, 2016		December 28, 2014
Cash flows from operating activities
Net income	$	73.7	$	50.0
Adjustments to reconcile net income to net cash used by operating activities:
Amortization of intangible assets		23.6		20.5
Depreciation		23.0		18.4
Share based compensation		10.1		5.6
Non-cash inventory adjustment from acquisitions		—		0.8
Non-cash restructuring and related charges		(0.8)		4.2
Amortization of debt issuance costs		2.1		2.5
Non-cash debt accretion		0.3		—
Deferred tax (benefit) expense		(9.7)		1.7
Net changes in operating assets and liabilities, net of effects of acquisitions		(345.8)		(250.3)
Net cash used by operating activities		(223.5)		(146.6)
Cash flows from investing activities
Purchases of property, plant and equipment		(17.4)		(14.2)
Business acquisitions, net of cash acquired		—		(29.2)
Proceeds from sales of property, plant and equipment		0.1		1.1
Other investing activities		—		(0.9)
Net cash used by investing activities		(17.3)		(43.2)
Cash flows from financing activities
Proceeds from issuance of debt		230.0		443.9
Payment of debt		(5.9)		(1.8)
Payment of debt issuance costs		(1.1)		(6.1)
Payment of cash dividends		(19.5)		(15.9)
Treasury stock purchases		(40.2)		(8.5)
Share based tax withholding payments, net of proceeds upon vesting		(5.3)		(1.7)
Net cash provided by financing activities		158.0		409.9
Effect of exchange rate changes on cash and cash equivalents		(3.1)		(6.3)
Net (decrease) increase in cash and cash equivalents		(85.9)		213.8
Cash and cash equivalents, beginning of period		247.9		194.6
Cash and cash equivalents, end of period	$	162.0	$	408.4
Supplemental disclosure of cash flow information
Cash paid for interest	$	61.6	$	55.6
Cash paid for taxes		10.0		10.6
Non cash investing activities
Acquisition of PPE through capital leases	$	8.4	$	0.4
Non cash financing activities
Issuance of shares through stock compensation plan	$	36.0	$	9.9

See accompanying notes to the condensed consolidated financial statements

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SB/RH HOLDINGS, LLC

Condensed Consolidated Statements of Financial Position

January 3, 2016 and September 30, 2015

(in millions, unaudited)



	January 3, 2016		September 30, 2015
Assets
Current assets:
Cash and cash equivalents	$	148.0	$	247.9
Trade receivables, net		513.8		498.8
Other receivables		86.3		87.9
Inventories		867.7		780.8
Prepaid expenses and other current assets		80.0		72.1
Total current assets		1,695.8		1,687.5
Property, plant and equipment, net		504.4		507.1
Deferred charges and other		39.6		42.1
Goodwill		2,467.4		2,476.7
Intangible assets, net		2,445.3		2,480.3
Total assets	$	7,152.5	$	7,193.7
Liabilities and Shareholder's Equity
Current liabilities:
Current portion of long-term debt	$	34.5	$	68.5
Accounts payable		420.9		620.6
Accrued wages and salaries		73.2		96.5
Accrued interest		57.7		63.3
Other current liabilities		205.5		211.9
Total current liabilities		791.8		1,060.8
Long-term debt, net of current portion		4,093.2		3,872.1
Deferred income taxes		563.1		572.5
Other long-term liabilities		102.3		115.5
Total liabilities		5,550.4		5,620.9
Commitments and contingencies
Shareholder's equity:
Other capital		1,968.7		1,969.9
Accumulated deficit		(200.6)		(246.7)
Accumulated other comprehensive loss, net of tax		(215.7)		(200.1)
Total shareholder's equity		1,552.4		1,523.1
Noncontrolling interest		49.7		49.7
Total equity		1,602.1		1,572.8
Total liabilities and equity	$	7,152.5	$	7,193.7

See accompanying notes to the condensed consolidated financial statements

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SB/RH HOLDINGS, LLC

Condensed Consolidated Statements of Operations

For the three month periods ended January 3, 2016 and December 28, 2014

(in millions, unaudited)



	January 3, 2016		December 28, 2014
Net sales	$	1,218.8	$	1,067.8
Cost of goods sold		778.0		697.4
Restructuring and related charges		0.1		0.2
Gross profit		440.7		370.2
Selling		187.1		159.8
General and administrative		84.5		67.3
Research and development		13.8		11.2
Acquisition and integration related charges		9.9		8.1
Restructuring and related charges		1.1		7.2
Total operating expenses		296.4		253.6
Operating income		144.3		116.6
Interest expense		58.4		44.4
Other non-operating expense, net		3.5		0.7
Income from operations before income taxes		82.4		71.5
Income tax expense		6.9		20.5
Net income		75.5		51.0
Net income attributable to non-controlling interest		0.1		0.2
Net income attributable to controlling interest	$	75.4	$	50.8

See accompanying notes to the condensed consolidated financial statements

SB/RH HOLDINGS, LLC

Condensed Consolidated Statements of Comprehensive Income

For the three month periods ended January 3, 2016 and December 28, 2014

(in millions, unaudited)



	January 3, 2016		December 28, 2014
Net income	$	75.5	$	51.0
Other comprehensive income (loss), net of tax:
Foreign currency translation loss		(20.5)		(34.5)
Unrealized gain on hedging derivatives, net tax of $(0.7) and $(1.0), respectively		3.7		1.9
Defined benefit pension gain, net tax of $(0.3) and $(0.3), respectively		1.1		1.1
Other comprehensive loss, net of tax		(15.7)		(31.5)
Comprehensive income		59.8		19.5
Comprehensive (loss) income attributable to non-controlling interest		(0.1)		0.2
Comprehensive income attributable to controlling interest	$	59.9	$	19.3

See accompanying notes to the condensed consolidated financial statements

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SB/RH HOLDINGS, LLC

Condensed Consolidated Statements of Cash Flows

For the three month periods ended January 3, 2016 and December 28, 2014

(in millions, unaudited)



	January 3, 2016		December 28, 2014
Cash flows from operating activities
Net income	$	75.5	$	51.0
Adjustments to reconcile net income to net cash used by operating activities:
Amortization of intangible assets		23.6		20.5
Depreciation		23.0		18.4
Share based compensation		8.5		4.8
Non-cash inventory adjustment from acquisitions		—		0.8
Non-cash restructuring and related charges		(0.8)		4.2
Amortization of debt issuance costs		2.1		2.5
Non-cash debt accretion		0.3		—
Deferred tax (benefit) expense		(9.7)		1.7
Net changes in operating assets and liabilities, net of effects of acquisitions		(360.7)		(257.2)
Net cash used by operating activities		(238.2)		(153.3)
Cash flows from investing activities
Purchases of property, plant and equipment		(17.4)		(14.2)
Business acquisitions, net of cash acquired		—		(29.2)
Proceeds from sales of property, plant and equipment		0.1		1.1
Other investing activities		—		(0.9)
Net cash used by investing activities		(17.3)		(43.2)
Cash flows from financing activities
Proceeds from issuance of debt		230.0		443.8
Payment of debt		(40.7)		(1.8)
Payment of debt issuance costs		(1.1)		(6.1)
Payment of cash dividends to parent		(29.5)		(15.9)
Share based tax withholding payments, net of proceeds upon vesting		—		(1.7)
Net cash provided by financing activities		158.7		418.3
Effect of exchange rate changes on cash and cash equivalents		(3.1)		(6.3)
Net (decrease) increase in cash and cash equivalents		(99.9)		215.5
Cash and cash equivalents, beginning of period		247.9		192.9
Cash and cash equivalents, end of period	$	148.0	$	408.4
Supplemental disclosure of cash flow information
Cash paid for interest	$	61.6	$	55.6
Cash paid for taxes		10.0		10.6
Non cash investing activities
Acquisition of PPE through capital leases	$	8.4	$	0.4

See accompanying notes to the condensed consolidated financial statements

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SPECTRUM BRANDS HOLDINGS, INC.
SB/RH HOLDINGS, LLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in millions, unaudited)

This report is a combined report of Spectrum Brands Holdings, Inc. (“SBH”) and SB/RH Holdings, LLC (“SB/RH”) (collectively, the “Company”). The notes to the condensed consolidated financial statements that follow include both consolidated SBH and SB/RH notes, unless otherwise indicated below.

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared by the Company and its majority owned subsidiaries in accordance with accounting principles for interim financial information generally accepted in the United States and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and notes necessary for a comprehensive presentation of financial position and results of operations. It is the management’s opinion, however, that all material adjustments have been made which are necessary for a fair financial statement presentation. For further information, refer to the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2015.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. This ASU requires debt issuance costs related to a recognized debt liability to be presented on a balance sheet as a direct deduction from the debt liability, similar to the presentation of debt discounts. Current guidance generally requires entities to capitalize costs paid to third parties that are directly related to issuing debt and that otherwise wouldn’t be incurred, and present those amounts separately as deferred charges. During the three month period ended January 3, 2016, the Company retrospectively applied the adoption of this ASU, resulting in a reclassification of $65.1 million of debt issuance costs as of September 30, 2015.

In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740) – Balance Sheet Classification of Deferred Taxes. The ASU simplifies the presentation of deferred tax assets and liabilities to be classified as noncurrent on a balance sheet. Current guidance requires an entity to separate deferred income tax assets and liabilities into current and noncurrent amounts. The new guidance requires all deferred tax assets and liabilities to be presented as noncurrent as the separate current classification results in little to no benefit to users of the financial statements because the classification does not generally align with the time period in which the recognized deferred tax amounts are expected to be recovered or settled. During the three month period ended January 3, 2016, the Company retrospectively applied the adoption of this ASU, resulting in a reclassification of $44.7 million of current deferred tax assets and $4.6 million of current deferred tax liabilities as of September 30, 2015.

The following is a summary of the reclassifications from the retrospective adoption of the ASUs discussed above, as of September 30, 2015 for SBH and SB/RH, respectively:


	Spectrum Brands Holdings, Inc.						SB/RH Holdings, LLC
Statement of Financial Position (in millions)	As Reported		Reclassification		As Reclassified		As Reported		Reclassification		As Reclassified
Prepaid expenses and other current assets	$	116.8	$	(44.7)	$	72.1	$	116.8	$	(44.7)	$	72.1
Deferred charges and other		101.7		(59.5)		42.2		101.6		(59.5)		42.1
Other current liabilities		(217.3)		4.6		(212.7)		(216.5)		4.6		(211.9)
Long-term debt, net of current portion		(3,937.2)		65.1		(3,872.1)		(3,937.2)		65.1		(3,872.1)
Deferred taxes (noncurrent liability)		(607.0)		34.5		(572.5)		(607.0)		34.5		(572.5)

In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. The ASU simplifies the presentation of provisional amounts recognized in a business combination during the measurement period (one year from the date of acquisition). Current guidance requires retrospective adjustment of prior periods; the new guidance eliminates this requirement. During the three month period ended January 3, 2016 the Company applied the adoption of this ASU, resulting in the recognition of adjustments to goodwill from the Armored AutoGroup (“AAG”) acquisition. See Note 8 for adjustments to goodwill.

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NOTE 3 - ACQUISITIONS

Armored AutoGroup - On May 21, 2015, the Company completed the acquisition of AAG, a consumer products company consisting primarily of Armor All and STP products, two of the most recognizable brands in the automotive aftermarket appearance products and performance chemicals categories, respectively, and the A/C PRO brand of do-it-yourself automotive air conditioner recharge products. The results of AAG’s operations are included in the Company’s Condensed Consolidated Statements of Operations and are reported as a separate segment under Global Auto Care for the three month period ended January 3, 2016. Primary areas of acquisition accounting that are not yet finalized relate to amounts for intangible assets, residual goodwill and income taxes.

Salix - On January 16, 2015, the Company completed the acquisition of Salix, a vertically integrated producer and distributer of premium natural rawhide dog chews, treats and snacks. The results of Salix’s operations are included in the Company’s Condensed Consolidated Statements of Operations and as part of the Global Pet Supplies segment for the three month period ended January 3, 2016.

European IAMS and Eukanuba - On December 31, 2014, the Company completed the acquisition of Procter & Gamble’s European IAMS and Eukanuba pet food business (“European IAMS and Eukanuba”), premium brands for dogs and cats. The results of European IAMS and Eukanuba’s operations are included in the Company’s Condensed Consolidated Statements of Operations and as part of the Global Pet Supplies segment for the three month period ended January 3, 2016.

Tell Manufacturing - On October 1, 2014, the Company completed the acquisition of Tell, a manufacturer and distributor of commercial doors, locks and hardware. The results of Tell’s operations are included in the Company’s Condensed Consolidated Statements of Operations and as part of the Hardware and Home Improvement segment for the three month periods ended January 3, 2016 and December 28, 2014.

Acquisition and Integration Costs

The following table summarizes acquisition and integration related charges incurred by the Company during the three month periods ended January 3, 2016 and December 28, 2014:



(in millions)	January 3, 2016		December 28, 2014
Armored AutoGroup	$	4.5	$	—
HHI Business		2.8		3.1
European IAMS and Eukanuba		1.0		—
Other		1.6		5.0
Total acquisition and integration related charges	$	9.9	$	8.1

NOTE 4 - RESTRUCTURING AND RELATED CHARGES

HHI Business Rationalization Initiatives – During the fourth quarter of the year ended September 30, 2014, the Company implemented a series of initiatives throughout the Hardware & Home Improvement segment to reduce operating costs and exit low margin business outside the U.S. These initiatives included headcount reductions, the exit of certain facilities and the sale of a portion of the global Hardware & Home Improvement operations. Total costs associated with these initiatives are expected to be approximately $15 million, and are anticipated to be incurred through September 30, 2016.

Global Expense Rationalization Initiatives – During the third quarter of the year ended September 30, 2013, the Company implemented a series of initiatives throughout the Company to reduce operating costs. These initiatives consisted of headcount reductions in the Global Batteries & Appliances and Global Pet Supplies segments, and within Corporate. Total costs associated with these initiatives are expected to be approximately $46 million, and are anticipated to be incurred through September 30, 2018.

Other Restructuring Activities – The Company is entering or may enter into small, less significant initiatives and restructuring activities to reduce costs and improve margins. Individually these activities are not substantial, and occur over a shorter time period.

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The following table summarizes restructuring and related charges for the three month periods ended January 3, 2016 and December 28, 2014:


(in millions)	January 3, 2016		December 28, 2014
HHI business rationalization initiatives	$	(0.7)	$	0.2
Global expense rationalization initiatives		1.1		7.2
Other restructuring activities		0.8		—
Total restructuring and related charges	$	1.2	$	7.4
Reported as:
Cost of goods sold	$	0.1	$	0.2
Operating expense		1.1		7.2

The following is a summary of restructuring and related charges for the three month periods ended January 3, 2016 and December 28, 2014 by cost type:


	Termination		Other
(in millions)	Benefits		Costs		Total
For the three months ended January 3, 2016		1.0		0.2		1.2
For the three months ended December 28, 2014		4.9		2.5		7.4
Cumulative costs through January 3, 2016		29.1		28.7		57.8

The following is a rollforward of the accrual related to all restructuring and related activities by cost type for the three month period ended January 3, 2016:


	Termination		Other
(in millions)	Benefits		Costs		Total
Accrual balance at September 30, 2015		4.3		3.9		8.2
Provisions		1.0		0.2		1.2
Cash expenditures		(3.0)		(3.5)		(6.5)
Non-cash items		—		(0.2)		(0.2)
Accrual balance at January 3, 2016	$	2.3	$	0.4	$	2.7

The following summarizes restructuring and related charges by segment for the three month periods ended January 3, 2016 and December 28, 2014, cumulative costs incurred through January 3, 2016 and future expected costs to be incurred by segment:


	Global				Hardware
	Batteries &		Global Pet		& Home
(in millions)	Appliances		Supplies		Improvement		Corporate		Total
For the three months ended January 3, 2016	$	0.3	$	0.8	$	0.1	$	—	$	1.2
For the three months ended December 28, 2014		4.8		2.0		0.2		0.4		7.4
Cumulative costs through January 3, 2016		29.5		11.3		14.9		2.1		57.8
Future costs to be incurred		0.7		2.9		—		0.1		3.7

NOTE 5 - RECEIVABLES AND CONCENTRATION OF CREDIT RISK

The allowance for uncollectible receivables as of January 3, 2016 and September 30, 2015 was $43.6 million and $44.0 million, respectively. 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 customer represents approximately 12% and 16% of the Company’s Trade Receivable, at January 3, 2016 and September 30, 2015, respectively.

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NOTE 6 - INVENTORIES

Inventories consist of the following:



(in millions)	January 3, 2016		September 30, 2015
Raw materials	$	158.6	$	132.4
Work-in-process		42.7		37.9
Finished goods		666.4		610.5
	$	867.7	$	780.8

NOTE 7 – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:


(in millions)	January 3, 2016		September 30, 2015
Land, buildings and improvements	$	189.9	$	190.9
Machinery, equipment and other		494.7		491.9
Capitalized leases		104.3		97.3
Construction in progress		53.5		51.8
Property, plant and equipment	$	842.4	$	831.9
Accumulated depreciation		(338.0)		(324.8)
Property, plant and equipment, net	$	504.4	$	507.1

NOTE 8 - GOODWILL AND INTANGIBLE ASSETS

Goodwill, by segment, consist of the following:



	Global		Hardware &
	Batteries &		Home		Global Pet		Home and		Global
(in millions)	Appliances		Improvement		Supplies		Garden		Auto Care		Total
Balance, as of September 30, 2015		348.5		699.5		299.6		196.5		932.6		2,476.7
Adjustments		—		—		—		—		(2.4)		(2.4)
Foreign currency impact		(2.4)		(2.3)		(2.0)		—		(0.2)		(6.9)
Balance, as of January 3, 2016	$	346.1	$	697.2	$	297.6	$	196.5	$	930.0	$	2,467.4

The carrying value and accumulated amortization for intangible assets subject to amortization are as follows:



	January 3, 2016						September 30, 2015
(in millions)	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
Customer relationships	$	979.9	$	(259.8)	$	720.1	$	985.2	$	(247.4)	$	737.8
Technology assets		238.5		(84.0)		154.5		238.6		(78.1)		160.5
Tradenames		165.4		(77.5)		87.9		165.4		(73.7)		91.7
Total	$	1,383.8	$	(421.3)	$	962.5	$	1,389.2	$	(399.2)	$	990.0

The range and weighted average useful lives for definite-lived intangible assets are as follows:


Asset Type	Range	Weighted Average
Customer relationships	2 - 20 years	18.5 years
Technology assets	4 - 18 years	11.1 years
Tradenames	8 - 17 years	16.2 years

Certain tradename intangible assets have an indefinite life and are not amortized. The balance of tradenames not subject to amortization was $1,482.8 million and $1,490.3 million as of January 3, 2016 and September 30, 2015. There was no impairment loss on indefinite-lived trade names for the three month period ended January 3, 2016 or December 28, 2014.

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Amortization expense from intangible assets for the three month periods ended January 3, 2016 and December 28, 2014 was $23.6 million and $20.5 million, respectively. Excluding the impact of any future acquisitions or changes in foreign currency, the Company estimates annual amortization expense of intangible assets for the next five fiscal years will be as follows:


(in millions)	Amortization
2016	$	93.9
2017		93.0
2018		86.2
2019		85.1
2020		84.9

NOTE 9 - DEBT

Debt consist of the following:

Spectrum Brands Holdings, Inc.

SB/RH Holdings, LLC

January 3, 2016

September 30, 2015

January 3, 2016

September 30, 2015

(in millions)

Amount

Rate

Amount

Rate

Amount

Rate

Amount

Rate

Term Loan, variable rate, due June 23, 2022

1,223.9

3.5