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Consolidating Financial Statements

9 Months Ended

Jul. 03, 2011

17	CONSOLIDATING FINANCIAL STATEMENTS

On the Effective Date, pursuant to the Plan, Spectrum Brands, with its domestic subsidiaries as guarantors, issued the 12% Notes under the 2019 Indenture for the benefit of holders of allowed claims with respect to the Predecessor Company's then-existing senior subordinated notes. See Note 2, Voluntary Reorganization Under Chapter 11, in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2010, for further details of the Bankruptcy Cases. In connection with the Merger, Spectrum Brands, with its domestic subsidiaries and SB/RH Holdings, LLC as guarantors, issued the 9.5% Notes under the 2018 Indenture. (See Note 6, Debt, for further information on the 12% Notes and the 2019 Indenture and the 9.5% Notes under the 2018 Indenture.)

The following consolidating financial statements illustrate the components of the consolidated financial statements of the Company. Investments in subsidiaries are accounted for using the equity method for purposes of illustrating the consolidating presentation. Earnings of subsidiaries are therefore reflected in the Company's and guarantor subsidiaries' investment accounts and earnings. The elimination entries presented herein eliminate investments in subsidiaries and intercompany balances and transactions. Separate consolidated financial statements of the guarantor subsidiaries are not presented because management has determined that such financial statements would not be material to investors.

SPECTRUM BRANDS, INC. AND SUBSIDIARIES

Condensed Consolidating Statement of Financial Position

July 3, 2011

(Unaudited)

(Amounts in thousands)


	Parent			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated Total
ASSETS
Current assets:
Cash and cash equivalents	$	17,427		$	3,999		$	66,952		$	—		$	88,378
Receivables:
Trade accounts receivables, net of allowances		41,752			121,177			196,738			—			359,667
Intercompany receivables		554,495			920,157			1,305,003			(2,779,165	)		490
Other		3,135			5,140			43,306			—			51,581
Inventories		90,047			235,345			227,304			(4,320	)		548,376
Deferred income taxes		3,747			11,908			16,606			427			32,688
Prepaid expenses and other		17,894			8,278			30,617			—			56,789

Total current assets		728,497			1,306,004			1,886,526			(2,783,058	)		1,137,969
Property, plant and equipment, net		58,964			44,976			112,583			—			216,523
Long term intercompany receivables		189,910			183,152			(62,306	)		(310,756	)		—
Deferred charges and other		12,759			5,600			31,288			—			49,647
Goodwill		67,722			354,482			199,703			—			621,907
Intangible assets, net		528,019			747,615			476,178			—			1,751,812
Debt issuance costs		45,411			—			—			—			45,411
Investments in subsidiaries		4,778,480			3,475,918			2,819,857			(11,074,255	)		—

Total assets	$	6,409,762		$	6,117,747		$	5,463,829		$	(14,168,069	)	$	3,823,269

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt	$	6,931		$	1,012		$	18,734			—		$	26,677
Accounts payable		1,130,528			636,755			1,179,170			(2,641,070	)		305,383
Accrued liabilities:
Wages and benefits		16,622			7,637			34,162			—			58,421
Income taxes payable		(2,002	)		327			46,141			—			44,466
Restructuring and related charges		6,058			1,088			8,709			—			15,855
Accrued interest		18,109			—			99			—			18,208
Other		10,443			45,357			58,392			—			114,192

Total current liabilities		1,186,689			692,176			1,345,407			(2,641,070	)		583,202
Long-term debt, net of current maturities		1,688,115			385,920			495,478			(847,594	)		1,721,919
Employee benefit obligations, net of current portion		12,235			4,824			74,499			—			91,558
Deferred income taxes		11,384			252,554			48,851			—			312,789
Other		33,625			3,793			23,677			—			61,095

Total liabilities		2,932,048			1,339,267			1,987,912			(3,488,664	)		2,770,563
Shareholders' equity:
Other equity		1,348,391			2,940,448			3,551,252			(6,508,652	)		1,331,439
Accumulated deficit (retained earnings)		(758,310	)		(327,296	)		(108,301	)		892,520			(301,387	)
Accumulated other comprehensive income (deficit)		2,887,632			2,165,328			32,967			(5,063,273	)		22,654

Total shareholders' equity (deficit)		3,477,713			4,778,480			3,475,918			(10,679,405	)		1,052,706

Total liabilities and shareholders' equity	$	6,409,761		$	6,117,747		$	5,463,830		$	(14,168,069	)	$	3,823,269

SPECTRUM BRANDS, INC. AND SUBSIDIARIES

Condensed Consolidating Statement of Financial Position

September 30, 2010

(Unaudited)

(Amounts in thousands)


	Parent			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated Total
ASSETS
Current assets:
Cash and cash equivalents	$	52,580		$	2,723		$	115,311		$	—		$	170,614
Receivables:
Trade accounts receivables, net of allowances		44,793			117,195			203,014			—			365,002
Intercompany receivables		315,682			1,495,366			1,196,559			(3,007,607	)		—
Other		6,676			6,217			28,655			—			41,548
Inventories		101,855			212,348			219,555			(3,416	)		530,342
Deferred income taxes		5,360			17,620			12,327			428			35,735
Prepaid expenses and other		13,709			8,338			34,527			—			56,574

Total current assets		540,655			1,859,807			1,809,948			(3,010,595	)		1,199,815
Property, plant and equipment, net		56,588			47,060			97,516			—			201,164
Long term intercompany receivables		180,623			190,104			(168,682	)		(202,045	)		—
Deferred charges and other		10,594			3,019			32,739			—			46,352
Goodwill		67,722			365,899			166,434			—			600,055
Intangible assets, net		535,851			771,013			462,496			—			1,769,360
Debt issuance costs		52,836			4,125			—			—			56,961
Investments in subsidiaries		5,333,056			4,031,401			2,945,431			(12,309,888	)		—

Total assets	$	6,777,925		$	7,272,428		$	5,345,882		$	(15,522,528	)	$	3,873,707

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt	$	14,194		$	1,263		$	11,788		$	(6,535	)	$	20,710
Accounts payable		737,575			1,413,382			411,844			(2,230,570	)		332,231
Accrued liabilities:
Wages and benefits		34,363			18,276			41,332			—			93,971
Income taxes payable		(80	)		1,470			35,728			—			37,118
Restructuring and related charges		8,428			4,104			11,261			—			23,793
Accrued interest		31,509			—			143			—			31,652
Other		14,800			42,821			65,427			—			123,048

Total current liabilities		840,789			1,481,316			577,523			(2,237,105	)		662,523
Long-term debt, net of current maturities		1,707,386			244,406			582,104			(810,839	)		1,723,057
Employee benefit obligations, net of current portion		13,106			5,074			74,545			—			92,725
Deferred income taxes		22,808			208,700			46,335			—			277,843
Other		36,978			(124	)		33,974			—			70,828

Total liabilities		2,621,067			1,939,372			1,314,481			(3,047,944	)		2,826,976
Shareholders' equity:
Other equity		1,314,769			2,972,200			4,311,375			(7,283,576	)		1,314,768
Accumulated deficit (retained earnings)		(812,948	)		(541,431	)		(287,686	)		1,381,525			(260,540	)
Accumulated other comprehensive income (deficit)		3,655,037			2,902,287			7,712			(6,572,533	)		(7,497	)

Total shareholders' equity (deficit)		4,156,858			5,333,056			4,031,401			(12,474,584	)		1,046,731

Total liabilities and shareholders' equity	$	6,777,925		$	7,272,428		$	5,345,882		$	(15,522,528	)	$	3,873,707

SPECTRUM BRANDS, INC. AND SUBSIDIARIES

Condensed Consolidating Statement of Operations

Three Month Period Ended July 3, 2011

(Unaudited)

(Amounts in thousands)


	Parent			Guarantor Subsidiaries			Nonguarantor Subsidiaries		Eliminations			Consolidated Total
Net sales	$	148,415		$	351,078		$	334,300	$	(29,158	)	$	804,635
Cost of goods sold		102,603			231,020			204,438		(29,405	)		508,656
Restructuring and related charges		124			1,877			313		(29	)		2,285

Gross profit		45,688			118,181			129,549		276			293,694
Operating expenses:
Selling		18,274			46,433			68,623		(143	)		133,187
General and administrative		18,504			21,670			19,832		—			60,006
Research and development		5,628			2,529			1,035		—			9,192
Acquisition and integration related charges		2,517			2,995			1,932		—			7,444
Restructuring and related charges		1,389			2,780			612		—			4,781

		46,312			76,407			92,034		(143	)		214,610
Operating (loss) income		(624	)		41,774			37,515		419			79,084
Interest expense		35,188			452			4,756		2			40,398
Other (income) expense, net		(59,459	)		(28,897	)		288		88,838			770

Income (loss) from continuing operations before income taxes		23,647			70,219			32,471		(88,421	)		37,916
Income tax expense (benefit)		(33,533	)		32,997			9,479		52			8,995

Net income (loss)	$	57,180		$	37,222		$	22,992	$	(88,473	)	$	28,921

SPECTRUM BRANDS, INC. AND SUBSIDIARIES

Condensed Consolidating Statement of Operations

Three Month Period Ended July 4, 2010

(Unaudited)

(Amounts in thousands)


	Parent			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated Total
Net sales	$	96,769		$	331,447		$	260,225		$	(34,955	)	$	653,486
Cost of goods sold		54,786			225,214			153,049			(34,322	)		398,727
Restructuring and related charges		67			705			1,118			—			1,890

Gross profit		41,916			105,528			106,058			(633	)		252,869
Operating expenses:
Selling		16,441			38,836			57,126			(23	)		112,380
General and administrative		(27,058	)		59,078			21,599			—			53,619
Research and development		4,089			2,108			881			—			7,078
Acquisition and integration related charges		15,479			1,490			33			—			17,002
Restructuring and related charges		2,935			(148	)		167			—			2,954

		11,886			101,364			79,806			(23	)		193,033
Operating income (loss)		30,030			4,164			26,252			(610	)		59,836
Interest expense		132,804			(5,898	)		5,309			23			132,238
Other (income) expense, net		(22,210	)		5,494			(427	)		18,586			1,443

(Loss) income before income taxes		(80,564	)		4,568			21,370			(19,219	)		(73,845	)
Income tax expense (benefit)		9,997			(3,264	)		5,582			145			12,460

Net (loss) income	$	(90,561	)	$	7,832		$	15,788		$	(19,364	)	$	(86,305	)

SPECTRUM BRANDS, INC. AND SUBSIDIARIES

Condensed Consolidating Statement of Operations

Nine Month Period Ended July 3, 2011

(Unaudited)

(Amounts in thousands)


	Parent			Guarantor Subsidiaries			Nonguarantor Subsidiaries		Eliminations			Consolidated Total
Net sales	$	358,931		$	1,008,198		$	1,116,250	$	(123,793	)	$	2,359,586
Cost of goods sold		214,537			725,437			688,962		(122,653	)		1,506,283
Restructuring and related charges		124			4,424			413		(29	)		4,932

Gross profit		144,270			278,337			426,875		(1,111	)		848,371
Operating expenses:
Selling		54,662			130,577			218,955		(426	)		403,768
General and administrative		54,387			60,182			64,530		—			179,099
Research and development		14,379			8,508			2,670		—			25,557
Acquisition and integration related charges		6,857			15,912			8,718		—			31,487
Restructuring and related charges		4,022			7,696			1,128		—			12,846

		134,307			222,875			296,001		(426	)		652,757
Operating income (loss)		9,963			55,462			130,874		(685	)		195,614
Interest expense		149,126			1,219			15,561		17			165,923
Other (income) expense, net		(187,735	)		(101,461	)		504		290,064			1,372

Income (loss) from continuing operations before income taxes		48,572			155,704			114,809		(290,766	)		28,319
Income tax expense (benefit)		(12,384	)		52,682			28,833		38			69,169

Net income (loss)	$	60,956		$	103,022		$	85,976	$	(290,804	)	$	(40,850	)

Condensed Consolidating Statement of Operations

Nine Month Period Ended July 4, 2010

(Unaudited)

(Amounts in thousands)


	Parent			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated Total
Net sales	$	293,539		$	766,766		$	814,995		$	(97,288	)	$	1,778,012
Cost of goods sold		171,877			561,388			487,755			(95,449	)		1,125,571
Restructuring and related charges		3,390			2,892			(752	)		—			5,530

Gross profit		118,272			202,486			327,992			(1,839	)		646,911
Operating expenses:
Selling		53,175			95,544			179,213			(100	)		327,832
General and administrative		16,221			74,592			48,950			—			139,763
Research and development		13,372			5,148			2,826			—			21,346
Acquisition and integration		20,950			1,490			32			—			22,472
Restructuring and related charges		2,566			8,329			237			—			11,132

		106,284			185,103			231,258			(100	)		522,545
Operating income (loss)		11,988			17,383			96,734			(1,739	)		124,366
Interest expense		208,408			4,539			17,123			60			230,130
Other (income) expense, net		(64,102	)		1,954			5,951			64,624			8,427

(Loss) income from continuing operations before reorganization items, net and income taxes		(132,318	)		10,890			73,660			(66,423	)		(114,191	)
Reorganization items expense, net		4,482			(836	)		—			—			3,646

(Loss) income from continuing operations before income taxes		(136,800	)		11,726			73,660			(66,423	)		(117,837	)
Income tax expense (benefit)		34,931			(11,652	)		21,755			(18	)		45,016

(Loss) income from continuing operations		(171,731	)		23,378			51,905			(66,405	)		(162,853	)
Loss from discontinued operations, net of tax		—			(2,735	)		—			—			(2,735	)

Net (loss) income	$	(171,731	)	$	20,643		$	51,905		$	(66,405	)	$	(165,588	)

SPECTRUM BRANDS, INC. AND SUBSIDIARIES

Condensed Consolidating Statement of Cash Flows

Nine Month Period Ended July 3, 2011

(Unaudited)

(Amounts in thousands)


	Parent			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated Total
Net cash (used) provided by operating activities of continuing operations	$	269,638		$	(85,536	)	$	732,612		$	(918,555	)	$	(1,841	)
Net cash used by operating activities of continuing operations		—			(291	)		—			—			(291	)

Net cash (used) provided by operating activities		269,638			(85,827	)		732,612			(918,555	)		(2,132	)
Cash flows from investing activities:
Purchases of property, plant and equipment		(11,544	)		(7,555	)		(8,334	)		—			(27,433	)
Proceeds from sale of property, plant and equipment		—			95			93			—			188
Acquisition, net of cash		—			(10,278	)		—			—			(10,278	)
Proceeds from sale of assets - Ningbo		—			—			6,997			—			6,997
Other investing		—			(1,530	)		—			—			(1,530	)

Net cash used by investing activities		(11,544	)		(19,268	)		(1,244	)		—			(32,056	)
Cash flows from financing activities:
Payment of Senior Credit Facilities		(93,400	)		—			—			—			(93,400	)
Prepayment penalty of extinguished term loan facility		(7,500	)		—			—			—			(7,500	)
ABL Revolving Credit Facility, net		55,000			—			—			—			55,000
Reduction of other debt		—			—			(905	)		—			(905	)
Proceeds from debt financing		15,349			—			—			—			15,349
Debt issuance costs		(10,769	)		—			—			—			(10,769	)
Treasury stock purchases		(3,409	)		—			—			—			(3,409	)
Proceeds from (advances related to) intercompany transactions		(248,518	)		106,371			(776,408	)		918,555			—

Net cash provided (used) by financing activities		(293,247	)		106,371			(777,313	)		918,555			(45,634	)
Effect of exchange rate changes on cash and cash equivalents		—			—			(2,414	)		—			(2,414	)

Net increase in cash and cash equivalents		(35,153	)		1,276			(48,359	)		—			(82,236	)
Cash and cash equivalents, beginning of period		52,580			2,723			115,311			—			170,614

Cash and cash equivalents, end of period	$	17,427		$	3,999		$	66,952		$	—		$	88,378

SPECTRUM BRANDS, INC. AND SUBSIDIARIES

Condensed Consolidating Statement of Cash Flows

Nine Month Period Ended July 4, 2010

(Unaudited)

(Amounts in thousands)


	Parent			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated Total
Net cash (used) provided by operating activities of continuing operations	$	(117,262	)	$	(911,395	)	$	653,828		$	331,102		$	(43,727	)
Net cash used by operating activities of discontinued operations		—			(9,812	)		—			—			(9,812	)

Net cash (used) provided by operating activities		(117,262	)		(921,207	)		653,828			331,102			(53,539	)
Cash flows from investing activities:
Purchases of property, plant and equipment		(7,874	)		(4,064	)		(5,454	)		—			(17,392	)
Acquisitions		(2,577	)		—			—			—			(2,577	)
Intercompany investments		(174,319	)		174,319			—			—			—
Proceeds from sale of property, plant and equipment and investments		—			216			44			—			260

Net cash used by investing activities		(184,770	)		170,471			(5,410	)		—			(19,709	)
Cash flows from financing activities:
Proceeds from new Senior Credit Facilities, excluding new ABL Revolving Credit Facility, net of discount		1,474,755			—			—			—			1,474,755
Payments of extinguished senior credit facilities, excluding old ABL credit facility		(1,278,760	)		—			—			—			(1,278,760	)
Debt issuance costs		(55,135	)		—			—			—			(55,135	)
Proceeds from debt financing		13,085			—			16,764			—			29,849
Reduction of other debt		(8,039	)		—			(327	)		—			(8,366	)
New ABL Revolving Credit Facility, net		22,000			—			—			—			22,000
Extinguished old ABL Credit Facility, net		(33,225	)		—			—			—			(33,225	)
Refund of debt issuance costs		204			—			—			—			204
Payments of extinguished supplemental loan		(45,000	)		—			—			—			(45,000	)
Treasury stock purchases for SB Holdings		(2,207	)		—			—			—			(2,207	)
Proceeds from (advances related to) intercompany transactions		215,570			750,212			(634,679	)		(331,103	)		—

Net cash provided (used) by financing activities		303,248			750,212			(618,242	)		(331,103	)		104,115
Effect of exchange rate changes on cash and cash equivalents		—			—			(7,086	)		—			(7,086	)
Effect of exchange rate changes on cash and cash equivalents due to Venezuela hyperinflation		—			—			(5,640	)		—			(5,640	)

Net increase in cash and cash equivalents		1,216			(524	)		17,450			(1	)		18,141
Cash and cash equivalents, beginning of period		1,450			3,364			92,986			—			97,800

Cash and cash equivalents, end of period	$	2,666		$	2,840		$	110,436		$	(1	)	$	115,941