##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-K







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

For the Fiscal Year Ended September 30, 2010.

OR



| ̈ | 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. 001-34757





SPECTRUM BRANDS HOLDINGS, INC.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Delaware                                                       |  | 27-2166630                             
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer Identification Number)
|                                                               | 
|601 Rayovac Drive, Madison, Wisconsin                          |  | 53711                                  
|(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:



|                            
|----------------------------
|Title of each class         
|Common Stock, Par Value $.01





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

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  x

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  x    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   ̈    No   ̈

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):

Large accelerated filer   ̈    Accelerated
filer  x    Non-accelerated filer (Do not check if a smaller reporting company)  ̈
        Smaller reporting company   ̈

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

The aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $484,943,967 based upon the
closing price on the last business day of the registrants (or its predecessors) most recently completed second fiscal quarter (April 1, 2010).* As of December 10, 2010, there were outstanding 51,020,426 shares of the
registrants Common Stock, par value $0.01 per share.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrants definitive proxy statement to be filed within 120 days of September 30, 2010 are incorporated by
reference in this Annual Report on Form 10-K in response to Part III, Items 10, 11, 12, 13 and 14.



|* | For purposes of this calculation only, shares of the registrants Common Stock, par value $0.01 per share, held by directors and executive officers and by
Harbinger Capital Partners Master Fund I, Ltd., Harbinger Capital Partners Special Situations Fund, L.P. and Global Opportunities Breakaway Ltd. have been treated as owned by affiliates.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------









---

##### Table of Contents

TABLE OF CONTENTS



|         |  |                                                                                                                   |  |      |     | 
|-------- |  | ----------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|         |  |                                                                                                                   |  | Page |    
|         |  | PART I                                                                                                            |  |      |     | 
|ITEM 1.  |  | BUSINESS                                                                                                          |  |      | 1   | 
|         |  |                                                                                                                  
|ITEM 1A. |  | RISK FACTORS                                                                                                      |  |      | 13  | 
|         |  |                                                                                                                  
|ITEM 1B. |  | UNRESOLVED STAFF COMMENTS                                                                                         |  |      | 33  | 
|         |  |                                                                                                                  
|ITEM 2.  |  | PROPERTIES                                                                                                        |  |      | 34  | 
|         |  |                                                                                                                  
|ITEM 3.  |  | LEGAL PROCEEDINGS                                                                                                 |  |      | 35  | 
|         |  |                                                                                                                  
|ITEM 4.  |  | (REMOVED AND RESERVED)                                                                                            |  |      | 36  | 
|         |  |                                                                                                                  
|         |  | PART II                                                                                                           |  |      |     | 
|         |  |                                                                                                                  
|ITEM 5.  |  | MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
 SECURITIES |  |      | 37  | 
|         |  |                                                                                                                  
|ITEM 6.  |  | SELECTED FINANCIAL DATA                                                                                           |  |      | 39  | 
|         |  |                                                                                                                  
|ITEM 7.  |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS                             |  |      | 42  | 
|         |  |                                                                                                                  
|ITEM 7A. |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                        |  |      | 84  | 
|         |  |                                                                                                                  
|ITEM 8.  |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                                       |  |      | 85  | 
|         |  |                                                                                                                  
|ITEM 9.  |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE                              |  |      | 85  | 
|         |  |                                                                                                                  
|ITEM 9A. |  | CONTROLS AND PROCEDURES                                                                                           |  |      | 85  | 
|         |  |                                                                                                                  
|ITEM 9B. |  | OTHER INFORMATION                                                                                                 |  |      | 86  | 
|         |  |                                                                                                                  
|         |  | PART III                                                                                                          |  |      |     | 
|         |  |                                                                                                                  
|ITEM 10. |  | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE                                                            |  |      | 87  | 
|         |  |                                                                                                                  
|ITEM 11. |  | EXECUTIVE COMPENSATION                                                                                            |  |      | 87  | 
|         |  |                                                                                                                  
|ITEM 12. |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS                    |  |      | 88  | 
|         |  |                                                                                                                  
|ITEM 13. |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE                                          |  |      | 88  | 
|         |  |                                                                                                                  
|ITEM 14. |  | PRINCIPAL ACCOUNTING FEES AND SERVICES                                                                            |  |      | 88  | 
|         |  |                                                                                                                  
|         |  | PART IV                                                                                                           |  |      |     | 
|         |  |                                                                                                                  
|ITEM 15. |  | EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES                                                                      |  |      | 89  | 
|         |  |                                                                                                                  
|         |  | INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE                                       |  |      | 90  | 
|         |  |                                                                                                                  
|         |  | SIGNATURES                                                                                                        |  |      | 169 | 
|         |  |                                                                                                                  
|         |  | EXHIBIT INDEX                                                                                                     |  |      | 170 | 



---

##### Table of Contents

PART I



|ITEM 1. | BUSINESS
|------- | --------

General

Spectrum Brands Holdings, Inc., a Delaware corporation (SB Holdings), is a global branded consumer products company and was
created in connection with the combination of Spectrum Brands, Inc. (Spectrum Brands), a global branded consumer products company and Russell Hobbs, Inc. (Russell Hobbs), a small appliance brand 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 SB Holdings and its subsidiaries
subsequent to the Merger and Spectrum Brands prior to the Merger, as well as both before and on and after the Effective Date, as defined below. The term Old Spectrum, refers only to Spectrum Brands, our Wisconsin predecessor, and its
subsidiaries prior to the Effective Date.

In connection with the Merger, we refinanced Spectrum Brands existing senior
debt, except for Spectrum Brands 12% Senior Subordinated Toggle Notes due 2019 (the 12% Notes), which remain outstanding, and a portion of Russell Hobbs existing senior debt through a combination of a new $750 million Term
Loan due June 16, 2016 (the Term Loan), new $750 million 9.5% Senior Secured Notes maturing June 15, 2018 (the 9.5% Notes) and a new $300 million ABL revolving facility due June 16, 2014 (the ABL
Revolving Credit Facility and together with the Term Loan, the Senior Credit Facilities and the Senior Credit Facilities together with the 9.5% Notes, the Senior Secured Facilities).

As further described below, on February 3, 2009, we and our wholly owned United States (U.S.) subsidiaries
(collectively, the Debtors) filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code (the Bankruptcy Code), in the U.S. Bankruptcy Court for the Western District of Texas (the Bankruptcy Court). On
August 28, 2009 (the Effective Date), the Debtors emerged from Chapter 11 of the Bankruptcy Code. Effective as of the Effective Date and pursuant to the Debtors confirmed plan of reorganization, Spectrum Brands converted from
a Wisconsin corporation to a Delaware corporation.

Financial information included in our financial statements prepared after
August 30, 2009 will not be comparable to financial information from prior periods. See Item 1A. Risk FactorsRisks Related To Our Emergence From Bankruptcy for more information.

We are a global branded consumer products company with positions in seven major product categories: consumer batteries; small appliances;
pet supplies; electric shaving and grooming; electric personal care; portable lighting; and home and garden control products.

We manage our business in four reportable segments: (i) Global Batteries & Personal Care, which consists of our worldwide
battery, shaving and grooming, personal care and portable lighting business (Global Batteries & Personal Care); (ii) Global Pet Supplies, which consists of our worldwide pet supplies business (Global Pet
Supplies); (iii) the Home and Garden Business, which consists of our home and garden control product offerings, including household insecticides, repellants and herbicides (the Home and Garden Business); and (iv) Small
Appliances, which consists of small electrical appliances primarily in the kitchen and home product categories (Small Appliances).

We manufacture and market alkaline, zinc carbon and hearing aid batteries, herbicides, insecticides and repellants and specialty pet supplies. We design, market and distribute rechargeable batteries,
battery-powered lighting products, electric shavers and accessories, grooming products, hair care appliances, small household



1



---

##### Table of Contents

appliances and personal care products. Our manufacturing and product development facilities are located in the U.S., Europe, Latin America and Asia. Substantially all of our rechargeable
batteries and chargers, shaving and grooming products, small household appliances, personal care products and portable lighting products are manufactured by third-party suppliers, primarily located in Asia.

We sell our products in approximately 120 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, Spectracide, Cutter, Black & Decker, George Foreman, Russell Hobbs, Farberware and various other brands.

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.

In November 2008, our board of directors committed to the shutdown of the growing products portion of the Home and Garden Business, which
includes 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
products portion of the Home and Garden Business for our fiscal year ended September 30, 2009 (Fiscal 2009). We believe the shutdown was consistent with what we have done in other areas of our business to eliminate unprofitable
products from our portfolio. As of March 29, 2009, we completed the shutdown of the growing products portion of the Home and Garden Business. Accordingly, the presentation herein of the results of continuing operations excludes the growing
products portion of the Home and Garden Business for all periods presented. See Note 9, Discontinued Operations, to our Consolidated Financial Statements included in this Annual Report on Form 10-K for further details on the disposal of the growing
products portion of the Home and Garden Business.

On December 15, 2008, prior to our Bankruptcy Filing, as defined
below, Old Spectrum was advised that its common stock would be suspended from trading on the NYSE prior to the opening of the market on December 22, 2008. It was advised that the decision to suspend its common stock was reached in view of the
fact that it had recently fallen below the NYSEs continued listing standard regarding average global market capitalization over a consecutive 30 trading day period of not less than $25 million, the minimum threshold for listing on the NYSE.
Old Spectrums common stock was delisted from the NYSE effective January 23, 2009.

On March 18, 2010, the
common stock of Spectrum Brands was listed on the NYSE. In connection with the consummation of the Merger, on June 16, 2010 the common stock of Spectrum Brands was delisted from the NYSE and the common stock of SB Holdings succeeded to its
listing status under the symbol SPB.

As a result of our Bankruptcy Filing, we were able to significantly reduce
our indebtedness. As a result of the Merger, we were able to further reduce our outstanding debt leverage ratio. However, we continue to have a significant amount of indebtedness relative to our competitors and paying down outstanding indebtedness
continues to be a priority for us. The Bankruptcy Filing is discussed in more detail under Chapter 11 Proceedings.



2



---

##### Table of Contents

Chapter 11 Proceedings

On February 2, 2009, the Company did not make a $25.8 million interest payment due February 2, 2009 on the
Companys 73/8% Senior Subordinated Notes due 2015 (the 73/8Notes), triggering a default with respect to the notes. On
February 3, 2009, we announced that we had reached agreements with certain noteholders, representing, in the aggregate, approximately 70% of the face value of our then outstanding senior subordinated notes, to pursue a refinancing that, if
implemented as proposed, would significantly reduce our outstanding debt. As a result of its substantial leverage, the Company determined that, absent a financial restructuring, it would be unable to achieve future profitability or positive cash
flows on a consolidated basis solely from cash generated from operating activities or to satisfy certain of its payment obligations as the same may become due and be at risk of not satisfying the leverage ratios to which it was subject under its
then existing senior secured term loan facility, which ratios became more restrictive in future periods. Accordingly, the Debtors filed voluntary petitions under Chapter 11 of the Bankruptcy Code, in the Bankruptcy Court (the Bankruptcy
Filing) and filed with the Bankruptcy Court a proposed plan of reorganization (the Proposed Plan) that detailed the Debtors proposed terms for the refinancing. The Chapter 11 cases were jointly administered by the
Bankruptcy Court as Case No. 09-50455 (the Bankruptcy Cases). The Bankruptcy Court entered a written order (the Confirmation Order) on July 15, 2009 confirming the Proposed Plan (as so confirmed, the
Plan).

On the Effective Date the Plan became effective, and the Debtors emerged
from Chapter 11 of the Bankruptcy Code. Pursuant to and by operation of the Plan, on the Effective Date, all of Old Spectrums existing equity securities, including the existing common stock and stock options, were extinguished and deemed
cancelled. Reorganized Spectrum Brands, Inc. filed a certificate of incorporation authorizing new shares of common stock. Pursuant to and in accordance with the Plan, on the Effective Date, reorganized Spectrum Brands, Inc. issued a total of
27,030,000 shares of common stock and approximately $218 million in aggregate principal amount of the 12% Notes to holders of allowed claims with respect to Old Spectrums 81/2% Senior Subordinated Notes due 2013 (the
81/2Notes), the 73/8% Notes and Variable Rate Toggle Senior Subordinated Notes due 2013
(the Variable Rate Notes) (collectively, the Senior Subordinated Notes). For a further discussion of the 12% Notes see Debt Financing Activities12% Notes.Also on the Effective Date, reorganized
Spectrum Brands, Inc. issued a total of 2,970,000 shares of common stock to supplemental and sub-supplemental debtor-in-possession credit facility participants in respect of the equity fee earned under the Debtors debtor-in-possession credit
facility.

Our Products

We compete in seven major product categories: consumer batteries; pet supplies; electric shaving and grooming; electric personal care products; home and garden control products; small appliances and
portable lighting. Our broad line of products includes:



| |  |  | consumer batteries, including alkaline and zinc carbon batteries, rechargeable batteries and chargers and hearing aid batteries and other specialty
batteries;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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 and garden control products including household insect controls, insect repellents and herbicides;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | electric shaving and grooming devices;
| | - |  | --------------------------------------



| |  |  | small appliances, including small kitchen appliances and home product appliances;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | electric personal care and styling devices; and
| | - |  | -----------------------------------------------



| |  |  | portable lighting.
| | - |  | ------------------



3



---

##### Table of Contents

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, |    
|                                 |  | 2010                                                                         |     |   | 2009 |  |     | 2008 | 
|Consumer batteries               |  |                                                                              | 34  | % |      |  | 37  | %    |  |  | 38  | %
|Pet supplies                     |  |                                                                              | 22  |   |      |  | 26  |      |  |  | 25  |  
|Home and garden control products |  |                                                                              | 13  |   |      |  | 14  |      |  |  | 14  |  
|Electric shaving and grooming    |  |                                                                              | 10  |   |      |  | 10  |      |  |  | 10  |  
|Small appliances                 |  |                                                                              | 9   |   |      |  |    |      |  |  |    |  
|Electric personal care products  |  |                                                                              | 8   |   |      |  | 9   |      |  |  | 9   |  
|Portable lighting                |  |                                                                              | 4   |   |      |  | 4   |      |  |  | 4   |  
|                                 |  |                                                                              |     |   |      |  |     |      |  |  |     |  
|                                 |  |                                                                              | 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.

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 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, and bedding products. Our largest specialty pet brands include 8-in-1, Dingo, Firstrax, Natures Miracle and Wild Harvest.

Home and Garden Control Products

In the home and garden control products
category we currently sell and market several leading home and garden care products, including household insecticides, insect repellent, herbicides, garden and indoor plant foods and plant care treatments. We offer a broad array of household
insecticides such as spider, roach and ant killer, flying insect killer, insect foggers, wasp and hornet killer, flea and tick control products and roach and ant baits. We also manufacture and market a complete line of insect repellent products that
provide protection from



4



---

##### Table of Contents

insects, 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. Our largest brands in the insect control category include Hot Shot, Cutter and Repel. Our herbicides, garden and indoor plant foods and plant care treatment 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 Shaving and Grooming

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 trimmers and nose
and ear trimmers, womens shavers and haircut kits.

Small Appliances

In the small appliances category, we market and sell a broad range of products in three major product categories: branded small household
appliances, pet and pest products, and personal care products. We market a broad line of small kitchen appliances 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. Pet products include cat litter boxes sold under the
LitterMaid brand. The consumable accessories including privacy tents, litter carpets, crystal litter cartridges, charcoal filters, corn-based litter and replaceable waste receptacles. The pest control products include pest control and repelling
devices that use ultra-sonic sound waves to control insects and rodents, primarily in homes. Russell Hobbs personal care products in the small appliances category include hand-held dryers, curling irons, straightening irons, brush irons, air
brushes, hair setters, facial brushes, skin appliances and electric toothbrushes, which are primarily marketed under the Russell Hobbs, Carmen and Andrew Collinge brands.

Electric Personal Care Products

Our electric personal care products,
marketed and sold under the Remington brand name, include hair dryers, straightening irons, styling irons and hair setters.

Portable
Lighting

We 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.

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, Carrefour, Target, Lowes, PetSmart, Canadian Tire, PetCo and Gigante. Our sales to Wal-Mart represented approximately 22% of our consolidated net sales for the fiscal year ended September 30, 2010. No
other customer accounted for more than 10% of our consolidated net sales in the fiscal year ended September 30, 2010.



5



---

##### Table of Contents

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 Results, 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 & Personal Care

We manage our Global Batteries & Personal Care 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.

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 aligned by customer. We sell primarily to home improvement centers, mass merchandisers,
hardware stores, lawn and garden distributors, and food and drug retailers in the U.S.

Small Appliances

In the small appliances category, Russell Hobbs products are sold principally by internal sales staff located in North America,
Latin America, Europe, Australia and New Zealand. Russell Hobbs also uses independent sales representatives, primarily in Central America and the Caribbean. Russell Hobbs distributes most of its small appliance products to retailers, including mass
merchandisers, department stores, home improvement stores, warehouse clubs, drug chains, catalog stores and discount and variety stores. In addition to directing its marketing efforts toward retailers, Russell Hobbs sells certain of its products
directly to consumers through infomercials and its Internet websites.



6



---

##### Table of Contents

Manufacturing, Raw Materials and Suppliers

The principal raw materials used in manufacturing our productszinc powder, electrolytic manganese dioxide powder 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, 2010, 2009 and 2008, we invested $31.0 million, $24.4 million and $25.3 million,
respectively, in product research and development.

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, JUNGLETALK, MARINELAND,
RAYOVAC, REMINGTON, TETRA, VARTA, 8IN1, CUTTER, HOT SHOT, GARDEN SAFE, NATURES MIRACLE, REPEL, SPECTRACIDE, SPECTRACIDE TERMINATE, GEORGE FOREMAN, RUSSELL HOBBS and BLACK & DECKER. We seek trademark protection in the U.S. and in
foreign countries by all available means, including registration.

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



7



---

##### Table of Contents

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 December 2007, Russell Hobbs and The Black & Decker Corporation (BDC) extended the trademark license agreement for a third time through December 2012, with an automatic
extension through December 2014 if certain milestones are met regarding sales volume and product return. Under the agreement as extended, Russell Hobbs agreed to pay BDC royalties based on a percentage of sales, with minimum annual royalty payments
as follows:



| |  |  | Calendar year 2010: $14.5 million
| | - |  | ---------------------------------



| |  |  | Calendar year 2011: $15.0 million
| | - |  | ---------------------------------



| |  |  | Calendar year 2012: $15.0 million
| | - |  | ---------------------------------

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 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.

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.



8



---

##### Table of Contents

The pet supply 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 lawn and garden product category through the Home and Garden Business face competition from The Scotts
Miracle-Gro Company (Scotts Company), which markets lawn and garden products under the Scotts, Ortho, Roundup and Miracle-Gro brand names; Central Garden & Pet, which markets garden products under the AMDRO and Sevin brand
names; and Bayer A.G., which markets lawn 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).

Our primary competitors in the portable lighting product category are Energizer and Mag
Instrument, Inc.

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 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



9



---

##### Table of Contents

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.

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.

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 $9.6 million for estimated liabilities at September 30, 2010 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



10



---

##### Table of Contents

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.

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 6,100 full-time employees worldwide as of September 30, 2010. Approximately 20% of our total labor force is
covered by collective bargaining agreements. There is one collective bargaining



11



---

##### Table of Contents

agreement that will expire during our fiscal year ending September 30, 2011, which covers approximately 12% of the labor force under collective bargaining agreements, or approximately 2% 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 Holdings, Inc. at 601 Rayovac Drive, Madison, Wisconsin 53711 or via electronic mail at
investorrelations@spectrumbrands.com, or by contacting the Vice President, Investor Relations & Corporate Communications by telephone at (608) 275-3340.



12



---

##### Table of Contents

|ITEM 1A. | RISK FACTORS
|-------- | ------------

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 business acquired in connection with the combination with Russell Hobbs 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);
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



13



---

##### Table of Contents



| |  |  | 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 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, 2010 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 statement.



14



---

##### Table of Contents

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.

Risks Related to the Merger

Significant costs have been incurred in connection with the consummation of the Merger and are expected to be incurred in connection with the integration of Spectrum Brands and Russell Hobbs into a
combined company, including legal, accounting, financial advisory and other costs.

We expect to incur one-time costs
of approximately $23 million in connection with integrating the operations, products and personnel of Spectrum Brands and Russell Hobbs into a combined company, in addition to costs related directly to completing the Merger described below. These
costs may include costs 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 Russell Hobbs, which cannot be estimated accurately at this time. We incurred
approximately $85 million of transaction fees and other costs related to the Merger. Additional unanticipated costs may yet be incurred as we integrate our business with that of Russell Hobbs. 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 Russell Hobbs, may offset incremental transaction and transaction-related costs over time, this net benefit may not be achieved in the
near term, or at all. There can be no assurance that we will be successful in our integration efforts. In addition, 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 Merger.

The Merger involved the integration of two companies that previously operated independently. The integration of our operations with those
of Russell Hobbs is expected to result in financial and operational benefits, including increased revenues and cost savings. There can be no assurance, however, regarding when or the extent to which we will be able to realize these increased
revenues, cost savings 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 Russell Hobbs 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, financial
condition and operating results.

Integrating our business with that of Russell Hobbs may divert our managements
attention away from operations.

Successful integration of our and Russell Hobbs 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.



15



---

##### Table of Contents

Risks Related To Our Emergence From Bankruptcy

Because our consolidated financial statements are required to reflect fresh-start reporting adjustments to be made upon emergence
from bankruptcy, financial information in our financial statements prepared after August 30, 2009 will not be comparable to our financial information from prior periods.

All conditions required for the adoption of fresh-start reporting were met upon emergence from Chapter 11 of the Bankruptcy Code on the
Effective Date. However, in light of the proximity of that date to our accounting period close immediately following the Effective Date, which was August 30, 2009, we elected to adopt a convenience date of August 30, 2009 for recording
fresh-start reporting. We adopted fresh-start reporting in accordance with the Accounting Standards Codification (ASC) Topic 852: Reorganizations, pursuant to which our reorganization value, which is intended to
reflect the fair value of the entity before considering liabilities and approximate the amount a willing buyer would pay for the assets of the entity immediately after the reorganization, was allocated to the fair value of assets in conformity with
Statement of Financial Accounting Standards No. 141, Business Combinations, using the purchase method of accounting for business combinations. We stated liabilities, other than deferred taxes, at a present value of amounts
expected to be paid. The amount remaining after allocation of the reorganization value to the fair value of identified tangible and intangible assets was reflected as goodwill, which is subject to periodic evaluation for impairment. In addition,
under fresh-start reporting the accumulated deficit was eliminated. Thus, our future statements of financial position and results of operations are not be comparable in many respects to statements of financial position and consolidated statements of
operations data for periods prior to the adoption of fresh-start reporting. The lack of comparable historical information may discourage investors from purchasing our securities. Additionally, the financial information included in this Annual Report
on Form 10-K may not be indicative of future financial information.

Risks Related To Our Business

We are a parent company and our primary source of cash is and will be distributions from our subsidiaries.

We are a parent company with limited business operations of our own. Our main asset is the capital stock of our subsidiaries. We conduct
most of our business operations through our direct and indirect subsidiaries. Accordingly, our primary sources of cash are dividends and distributions with respect to our ownership interests in our subsidiaries that are derived from their earnings
and cash flow. Our subsidiaries might not generate sufficient earnings and cash flow to pay dividends or distributions in the future. Our subsidiaries payments to us will be contingent upon their earnings and upon other business
considerations. In addition, our senior credit facilities, the indentures governing our notes and other agreements limit or prohibit certain payments of dividends or other distributions to us. We expect that future credit facilities will contain
similar restrictions.

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, 2010, we had total indebtedness under our Senior Secured Facilities, the 12% Notes and other debt of approximately $1.8 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;
| | - |  | --------------------------------------------------------------------------------------------------------------------



16



---

##### Table of Contents



| |  |  | restrict our ability to make strategic acquisitions, dispositions or exploiting 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 governing the 12% Notes (the 2019 Indenture), 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 2019 Indenture may restrict our ability to pursue our business strategies.

The Senior Secured Facilities and the 2019 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 2019 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 12% Notes could terminate their commitments and the lenders under our Senior Secured Facilities or 12% Notes could accelerate repayment of our outstanding borrowings, and, in either case, we may be unable to obtain adequate
refinancing outstanding borrowings on favorable terms. If we are unable to repay outstanding borrowings when due, the lenders under the Senior Secured Facilities or 12% 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 12% Notes are accelerated, we cannot assure you that our assets would be sufficient to repay in full such indebtedness.

Assuming consummation of a pending transaction by which Harbinger Group, Inc. (HRG) would acquire a majority of the
outstanding shares of our common stock, any sale or other disposition by HRG 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.

HRG and Harbinger Capital Partners Master Fund I, Ltd. (Harbinger Master Fund), Harbinger Capital Partners
Special Situations Fund, L.P and Global Opportunities Breakaway Ltd. (collectively, the Harbinger Parties) are parties to a Contribution and Exchange Agreement (the Exchange Agreement), pursuant to the terms of which the
Harbinger Parties will contribute 27,756,905 shares of SB Holdings common stock to HRG and received in exchange for such shares an aggregate of 119,909,830 shares of HRG common stock (the Share Exchange). Immediately following the
consummation of the Share Exchange, HRG will own approximately 54.4% of our common stock and the Harbinger Parties will own approximately 12.7% of the outstanding shares of our common stock. The Harbinger Parties will own approximately 93.3% of the
outstanding HRG common stock.



17



---

##### Table of Contents

Following consummation of the Share Exchange, any 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 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 $350 million 10.625% Senior Secured Notes due 2015. Under the Term Loan and the ABL Revolving Credit Facility, a change of control is an event of default and, if a change of
control were to occur, Spectrum Brands would be required to get an amendment to these agreements to avoid a default. If Spectrum Brands was unable to get such an amendment, the lenders could accelerate the maturity of each of the Spectrum Brands
Term Loan and the ABL Revolving Credit Facility. In addition, under the indentures governing the 9.5% Notes and the 12% 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 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 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. See Risks Related to SB Holdings Common StockThe Harbinger Parties and, following the Share
Exchange, HRG, will exercise significant influence over us and their interests in our business may be different from the interest of our stockholders.

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. 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.

In 2010, concern over sovereign debt in Greece, Ireland and certain other European
Union countries caused significant fluctuations of the Euro relative to other currencies, such as the U.S. Dollar. 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.

We may
not be able to retain key personnel or recruit additional qualified personnel whether as a result of the Merger or otherwise, 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 Merger, 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, whether as a result of the Merger or otherwise, could have a material adverse effect on our business. In addition, we currently do not maintain key person insurance covering any member of
our management team.



18



---

##### Table of Contents

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 segment
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 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.
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | 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 of 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



19



---

##### Table of Contents

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 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.
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 44% of our net sales for the fiscal year ended September 30, 2010 were from 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;
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | 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;
| | - |  | ----------------------------------------------



20



---

##### Table of Contents



| |  |  | 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 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, 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 2007 and 2008, and to date in 2010, 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, 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.

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.



21



---

##### Table of Contents

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

As of September 30, 2010, Spectrum Brands had U.S. federal and state net operating loss carryforwards of
approximately $1,087 million and $936 million, respectively. These net operating loss carryforwards expire through years ending in 2031. As of September 30, 2010, our management determined that it continues to be more likely than not that the
net U.S. deferred tax asset, excluding certain indefinite lived intangibles, will not be realized in the future and as such recorded a full valuation allowance to offset the net 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. We estimate that approximately $296 million of our federal and $463 million of our state net operating losses will expire unused due to the limitation
in Section 382 of the IRC.

As a consequence of the Salton-Applica Merger, as well as earlier business combinations and
issuances of common stock consummated by both companies, use of the tax benefits of Russell Hobbs loss carryforwards is also subject to limitations imposed by Section 382 of the IRC. The determination of the limitations is complex and
requires significant judgment and analysis of past transactions. Our analysis to determine what portion of Russell Hobbs carryforwards are restricted or eliminated by that provision is ongoing and, pursuant to such analysis, 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 net operating loss carryforwards are subject to a full valuation allowance at September 30, 2010.

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 22% of our consolidated net sales for the fiscal year ended September 30, 2010. 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.

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



22



---

##### Table of Contents

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, 2010, approximately 44% of both our net sales and 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, and sell many products in, 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.

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, 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 negative adverse
effect on our sales and gross margin.



23



---

##### Table of Contents

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. Complying 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 continue to hold in fiscal 2010 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.

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. For example, our Small Appliances segment has spent several million dollars on protecting
its patented automatic litter box business over the last few years. 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



24



---

##### Table of Contents

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 Small 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. Sales of Black & Decker branded products represented approximately 53% of the total consolidated revenue of our Small Appliances
segment in both Fiscal 2010 and Fiscal 2009. In December 2007, BDC extended the license agreement through December 2012, with an automatic extension through December 2014 if certain milestones are met regarding sales volume and
product return. 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.

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.



25



---

##### Table of Contents

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;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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.

We 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.



26



---

##### Table of Contents

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
| | - |  | ---------------------------------------------------------------------------



| |  |  | 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, 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.



27



---

##### Table of Contents

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 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.

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 EPA, 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, 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.

The 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.



28



---

##### Table of Contents

In addition, the use of certain pesticide and fertilizer products that are sold through our
global pet supplies business and through the 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.

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.

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 20% of our total labor force is employed under collective bargaining agreements. One of these
agreements, which covers approximately 12% of the labor force under collective bargaining agreements, or approximately 2% of our total labor force, is scheduled to expire on September 30, 2011. 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 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.

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. GAAP requires that we calculate income or expense for the plans



29



---

##### Table of Contents

using actuarial valuations. These valuations reflect assumptions about financial market and other economic conditions, which may change based on changes in key economic indicators. The most
significant year-end assumptions we used 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. 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 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 market value. If analysis indicates that an individual assets carrying value does exceed its fair market 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 is 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.

Risks Related to SB Holdings Common Stock

The Harbinger
Parties and, following the Share Exchange, HRG, will exercise significant influence over us and their interests in our business may be different from the interests of our stockholders.

As a result of the consummation of the Merger and other transactions, as of the date hereof, the Harbinger Parties beneficially owned
approximately 67% of our outstanding common stock. Upon consummation of the Share Exchange, HRG will own approximately 54% of our outstanding common stock and the remaining Harbinger Parties will own approximately 13% of our outstanding common
stock. The Harbinger Parties will own approximately 93% of the outstanding common stock of HRG. The Harbinger Parties and, assuming the consummation of the Share Exchange, HRG, both separately and in conjunction with the Harbinger Parties, will have
the ability to influence the outcome of any corporate action by us, which requires stockholder approval, including, but not limited to, the election of directors, approval of merger transactions and the sale of all or substantially all of our
assets. In addition, we are a party to a stockholder agreement with HRG and the Harbinger Parties.



30



---

##### Table of Contents

This influence and actual control may have the effect of discouraging offers to acquire SB
Holdings because any such consummation would likely require the consent of HRG and perhaps HRG and the Harbinger Parties. HRG and the Harbinger Parties may also delay or prevent a change in control of SB Holdings. See Risks Related to our
BusinessAssuming consummation of a pending transaction by which Harbinger Group, Inc. (HRG) would acquire a majority of the outstanding shares of our common stock, any sale or other disposition by HRG to non-affiliates of a
significant amount of the common stock of SB Holdings would constitute a change of control under the agreements governing Spectrum Brands debt.

In addition, because, as of the date hereof the Harbinger Parties owned, and, assuming the consummation of the Share Exchange, HRG and the Harbinger Parties will own more than 50% of the voting power of
SB Holdings, SB Holdings is considered a controlled company under the NYSE listing standards. As such, the NYSE corporate governance rules requiring that a majority of SB Holdings board of directors and SB Holdings entire compensation
committee be independent do not apply. As a result, the ability of SB Holdings independent directors to influence its business policies and affairs may be reduced.

If HRG and/or the Harbinger Parties sell substantial amounts of SB Holdings common stock in the public market, or investors perceive that these sales could occur, the market price of SB
Holdings common stock could be adversely affected. SB Holdings has entered into a registration rights agreement (the Registration Rights Agreement) with HRG, the Harbinger Parties and certain other stockholders. If requested
properly under the terms of the Registration Rights Agreement, these stockholders have the right to require SB Holdings to register all or some of such shares for sale under the Securities Act in certain circumstances and also have the right to
include those shares in a registration initiated by SB Holdings. If SB Holdings is required to include the shares of its common stock held by these stockholders pursuant to these registration rights in a registration initiated by SB Holdings, sales
made by such stockholders may adversely affect the price of SB Holdings common stock and SB Holdings ability to raise needed capital. In addition, if these stockholders exercise their demand registration rights and cause a large number
of shares to be registered and sold in the public market or demand that SB Holdings register their shares on a shelf registration statement, such sales or shelf registration may have an adverse effect on the market price of SB Holdings common
stock.

The interests of HRG and the Harbinger Parties, which have investments in other companies, may from time to time
diverge from the interests of other SB Holdings stockholders and from each other, particularly with regard to new investment opportunities. Neither HRG nor the Harbinger Parties are restricted from investing in other businesses involving or related
to the marketing or distribution of household products, pet and pest products and personal care products. Both HRG and the Harbinger Parties may also engage in other businesses that compete or may in the future compete with SB Holdings.

Even though SB Holdings common stock is currently traded on the NYSE, it has less liquidity than many other stocks quoted on
a national securities exchange.

The trading volume in SB Holdings common stock on the NYSE has been relatively
low when compared with larger companies listed on the NYSE or other stock exchanges. Because of this, it may be more difficult for stockholders to sell a substantial number of shares for the same price at which stockholders could sell a smaller
number of shares. We cannot predict the effect, if any, that future sales of SB Holdings common stock in the market, or the availability of shares of its common stock for sale in the market, will have on the market price of SB Holdings
common stock. We can give no assurance that sales of substantial amounts of SB Holdings common stock in the market, or the potential for large amounts of sales in the market, would not cause the price of SB Holdings common stock to
decline or impair SB Holdings future ability to raise capital through sales of its common stock. Furthermore, because of the limited market and generally low volume of trading in SB Holdings common stock that could occur, the share price
of its common stock could be more likely to be affected by broad market fluctuations, general market conditions, fluctuations in our operating results, changes in the markets perception of our business, and announcements made by SB Holdings,
its competitors or parties with whom SB Holdings has business relationships. The lack of liquidity in SB Holdings common stock may



31



---

##### Table of Contents

also make it difficult for us to issue additional securities for financing or other purposes, or to otherwise arrange for any financing we may need in the future. In addition, we may experience
other adverse effects, including, without limitation, the loss of confidence in us by current and prospective suppliers, customers, employees and others with whom we have or may seek to initiate business relationships.

The market price of SB Holdings common stock is likely to be highly volatile and could fluctuate widely in price in response
to various factors, many of which are beyond our control.

Factors that may influence the price of the common stock
include, without limitation, the following:



| |  |  | loss of any of our key customers or suppliers;
| | - |  | ----------------------------------------------



| |  |  | additions or departures of key personnel;
| | - |  | -----------------------------------------



| |  |  | sales of the common stock;
| | - |  | --------------------------



| |  |  | our ability to execute our business plan;
| | - |  | -----------------------------------------



| |  |  | operating results that fall below expectations;
| | - |  | -----------------------------------------------



| |  |  | additional issuances of the common stock;
| | - |  | -----------------------------------------



| |  |  | low volume of sales due to concentrated ownership of the common stock;
| | - |  | ----------------------------------------------------------------------



| |  |  | intellectual property disputes;
| | - |  | -------------------------------



| |  |  | industry developments;
| | - |  | ----------------------



| |  |  | economic and other external factors;
| | - |  | ------------------------------------



| |  |  | period-to-period fluctuations in our financial results; and
| | - |  | -----------------------------------------------------------



| |  |  | market concerns with respect to the potential indirect impact of matters not directly involving SB Holdings but impacting HRG or the Harbinger Parties.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, the securities markets have from time to time experienced significant price and volume
fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of the common stock. You should also be aware that price volatility might be
worse if the trading volume of shares of the common stock is low.

Additional issuances of SB Holdings common
stock may result in dilution to its existing stockholders.

As of September 30, 2010, we had two active equity
incentive plans under which shares of the Company could be issued, the 2009 Spectrum Brands Inc. Incentive Plan (the 2009 Plan) and the Spectrum Brands Holdings, Inc. 2007 Omnibus Equity Award Plan (the RH Plan). On
October 21, 2010, the our Board of Directors adopted the Spectrum Brands Holdings, Inc. 2011 Omnibus Equity Award Plan (2011 Plan), subject to shareholder approval prior to October 21, 2011 and we intend to submit the 2011 Plan
for shareholder approval in connection with our next Annual Meeting. Upon such shareholder approval, no further awards will be granted under the 2009 Plan and the 2007 RH Plan. 4,625,676 shares of our common stock of the Company, net of
cancellations, may be issued under the 2011 Plan. While we have begun granting awards under the 2011 Plan, the 2011 Plan (and awards granted thereunder) are subject to the approval by a majority of the holders of our common stock eligible to vote
thereon prior to October 21, 2011. As December 10, 2010, we have issued 667,933 restricted shares and 1,694,048 restricted stock units under the 2009 Plan, the RH Plan and the 2011 Plan and are authorized to issue up to a total of
3,202,590 shares of our common stock, or options or restricted stock units exercisable for shares of common stock.

In
addition, our board of directors has the authority to issue additional shares of capital stock to provide additional financing or for other purposes in the future. The issuance of any such shares or exercise of any such



32



---

##### Table of Contents

options may result in a reduction of the book value or market price of the outstanding shares of common stock. If we do issue any such additional shares or any such options are exercised, such
issuance or exercise also will cause a reduction in the proportionate ownership and voting power of all other stockholders. As a result of such dilution, the proportionate ownership interest and voting power of a holder of shares of common stock
could be decreased. Further, any such issuance or exercise could result in a change of control. Under our certificate of incorporation, holders of 5% or more of the outstanding common stock or capital stock into which any shares of common stock may
be converted have certain rights to purchase their pro rata share of certain future issuances of securities.

Spectrum
Brands has historically not paid dividends on its public common stock and we do not anticipate paying dividends on our public common stock in the foreseeable future, and, therefore, any return on investment may be limited to the value of the common
stock.

Spectrum Brands, prior to the Merger had not declared or paid dividends on its common stock since the stock
commenced public trading in 1997, we have not declared or paid dividends on our common stock since the stock commenced public trading in 2010, and while we continue to evaluate the potential payment of dividends, we do not currently anticipate
paying dividends in the foreseeable future. The payment of dividends on outstanding common stock will depend on earnings, financial condition and other business and economic factors affecting us at such time as our board of directors may consider
relevant, including the ability to do so under our credit and other debt agreements. If we do not pay dividends, returns on an investment in our common stock will only occur if the stock price appreciates.



|ITEM 1B. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------

None.



33



---

##### Table of Contents



|ITEM 2. | PROPERTIES
|------- | ----------

The following table
lists our principal owned or leased manufacturing, packaging, and distribution facilities at September 30, 2010:



|                                 |  |                                                                                        
|-------------------------------- |  | ---------------------------------------------------------------------------------------
|Facility                         |  | Function                                                                               
|Global Batteries & Personal Care |  |                                                                                        
|Fennimore, Wisconsin(1)          |  | Alkaline Battery Manufacturing                                                         
|Portage, Wisconsin(1)            |  | Zinc Air Button Cell and Lithium Coin Cell Battery, Foil Shaver Component Manufacturing
|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                                                      
|Manizales, Colombia(1)           |  | Zinc Carbon Battery Manufacturing                                                      
|Dixon, Illinois(2)               |  | Battery & Lighting Device Packaging & Distribution                                     
|Visalia, California(2)           |  | Electric Shaver & Personal Care Product Distribution                                   
|Ellwangen-Neunheim, Germany(2)   |  | Battery & Lighting Device, Electric Shaver & Personal Care Product Distribution        
|                                 | 
|Global Pet Supplies              |  |                                                                                        
|Mentor, Ohio(3)                  |  | Aquatics Manufacturing                                                                 
|Noblesville, Indiana(1)          |  | Aquatics Manufacturing                                                                 
|Moorpark, California(2)          |  | Aquatics Manufacturing                                                                 
|Bridgeton, Missouri(2)           |  | Pet Supply Manufacturing (shared with the Home and Garden Business)                    
|Blacksburg, Virginia(1)          |  | Pet Supply Manufacturing, Assembly & Distribution                                      
|Melle, Germany(1)                |  | Pet Food & Pet Care Manufacturing                                                      
|Melle, Germany(2)                |  | Pet Food & Pet Care Distribution                                                       
|Edwardsville, Illinois(2)        |  | Pet Supply Product Distribution                                                        
|                                 | 
|Home and Garden Business         |  |                                                                                        
|Vinita Park, Missouri(2)         |  | Household & Controls and Contract Manufacturing                                        
|Bridgeton, Missouri(2)           |  | Household & Controls Manufacturing (shared with Global Pet)                            
|                                 | 
|Small Appliances                 |  |                                                                                        
|Redlands, California(2)          |  | Warehouse                                                                              
|Wolverhampton, England(1)        |  | Warehouse                                                                              
|Manchester, England(1)           |  | Warehouse and Sales and administrative office                                          
|Wolverhampton, England(2)        |  | Warehouse                                                                              



|(1) | Facility is owned.
|--- | ------------------

|(2) | Facility is leased.
|--- | -------------------

|(3) | Exited the facility in October 2010.
|--- | ------------------------------------

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, Wisconsin.

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.



34



---

##### Table of Contents



|ITEM 3. | LEGAL PROCEEDINGS
|------- | -----------------

Litigation

In December 2009, San Francisco Technology, Inc. filed an action in the Federal District Court for the Northern District of California
against the Company, as well as a number of unaffiliated defendants, claiming that each of the defendants had falsely marked patents on certain of its products in violation of Article 35, Section 292 of the U.S. Code and seeking to have civil
fines imposed on each of the defendants for such claimed violations. The Company is reviewing the claims and intends to vigorously defend this matter but, as of the date of this Annual Report on Form 10-K, cannot estimate any possible losses.

In May 2010, Herengrucht Group, LLC (Herengrucht) filed an action in the U.S. District Court for the Southern
District of California against the Company claiming that the Company had falsely marked patents on certain of its products in violation of Article 35, Section 292 of the U.S. Code and seeking to have civil fines imposed on each of the
defendants for such claimed violations. Herengrucht dismissed its claims without prejudice in September 2010.

Applica
Consumer Products, Inc. (Applica), a subsidiary of the Company, is a defendant in NACCO Industries, Inc. et al. v. Applica Incorporated et al., Case No. C.A. 2541-VCL, which was filed in the Court of Chancery of the State of Delaware in
November 2006.

The original complaint in this action alleged a claim for, among other things, breach of contract against
Applica and a number of tort claims against certain entities affiliated with the Harbinger Parties. The claims against Applica related to the alleged breach of the merger agreement between Applica and NACCO Industries, Inc. (NACCO) and
one of its affiliates, which agreement was terminated following Applicas receipt of a superior merger offer from the HCP Funds. On October 22, 2007, the plaintiffs filed an amended complaint asserting claims against Applica for, among
other things, breach of contract and breach of the implied covenant of good faith relating to the termination of the NACCO merger agreement and asserting various tort claims against Applica and the HCP Funds. The original complaint was filed in
conjunction with a motion preliminarily to enjoin the HCP Funds acquisition of Applica. On December 1, 2006, plaintiffs withdrew their motion for a preliminary injunction. In light of the consummation of Applicas merger with
affiliates of the HCP Funds in January 2007 (Applica is currently a subsidiary of Russell Hobbs), the Company believes that any claim for specific performance is moot. Applica filed a motion to dismiss the amended complaint in December 2007. Rather
than respond to the motion to dismiss the amended complaint, NACCO filed a motion for leave to file a second amended complaint, which was granted in May 2008. Applica moved to dismiss the second amended complaint, which motion was granted in part
and denied in part in December 2009.

The trial is currently scheduled for February 2011. The Company intends to vigorously
defend the action, but may be unable to resolve the disputes successfully or without incurring significant costs and expenses. As a result, Russell Hobbs and Harbinger Master Fund have entered into an indemnification agreement, dated as of
February 9, 2010, by which Harbinger Master Fund has agreed, effective upon the consummation of the Merger, to indemnify Russell Hobbs, its subsidiaries and any entity that owns all of the outstanding voting stock of Russell Hobbs against any
out-of-pocket losses, costs, expenses, judgments, penalties, fines and other damages in excess of $3 million incurred with respect to this litigation and any future litigation or legal action against the indemnified parties arising out of or
relating to the matters which form the basis of this litigation.

Applica is a defendant in three asbestos lawsuits in which
the plaintiffs have alleged injury as the result of exposure to asbestos in hair dryers distributed by that subsidiary over 20 years ago. Although Applica never manufactured such products, asbestos was used in certain hair dryers distributed by it
prior to 1979. The Company believes that these actions are without merit and intends to vigorously defend the action, but may be unable to resolve the disputes successfully without incurring significant expenses. As of the date of this Annual Report
on Form 10-K, the Company cannot estimate any possible losses. At this time, the Company does not believe it has coverage under its insurance policies for the asbestos lawsuits.



35



---

##### Table of Contents

The Company is a defendant in various matters of litigation generally arising out of the
ordinary course of business.

Environmental

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. | (REMOVED AND RESERVED)
|------- | ----------------------



36



---

##### Table of Contents

PART II



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

SB Holdings is a global consumer products company and was created in connection with the combination of Spectrum Brands and Russell Hobbs
to form a new combined company, on June 16, 2010. SB Holdings common stock (the SBH Common Stock) is traded on the NYSE under the symbol SPB. Prior to June 16, 2010, Spectrum Brands common stock was
traded on the NYSE under the symbol SPB. The SBH Common Stock has a par value of $0.01 per share.

The common
stock of reorganized Spectrum Brands (the New Common Stock) began quotation on the OTC Bulletin Board and the Pink Sheet Electronic Quotation Service under the symbol SPEB on September 2, 2009. The New Common Stock began
trading on the NYSE under the new ticker symbol SPB on March 18, 2010. In connection with the consummation of the Merger, the New Common Stock was delisted from the NYSE and the SBH Common Stock succeeded to its listing status under
the symbol SPB.

As of December 10, 2010, there were approximately 21 holders of record based upon data
provided by the transfer agent for the SBH Common Stock. We believe the number of beneficial holders of our New Common Stock is significantly in excess of this amount. The transfer agent for the SBH Common Stock is Mellon Investor Services LLC.

The following table sets forth the reported high and low bid prices per share of (i) for the period from August 30,
2009 through March 17, 2010, the New Common Stock as reported on the Pink Sheet Electronic Quotation Service; (ii) for the period from March 18, 2010 through June 15, 2010, the New Common Stock as reported on the NYSE Composite
Transaction Tape; and (iii) for the period from June 16, 2010, the SBH Common Stock thereafter as reported on the NYSE Composite Transaction Tape since March 18, 2010 for the fiscal period indicated:



|                                                                             |  |      |       |  |     |   |       | 
|---------------------------------------------------------------------------- |  | ---- | ----- |  | --- | - | ----- | 
|                                                                             |  | High |       |  | Low |  
|Fiscal 2010                                                                  |  |      |       |  |     |   |       | 
|Quarter ended September 30, 2010                                             |  | $    | 29.88 |  |     | $ | 22.86 | 
|Quarter ended July 4, 2010                                                   |  | $    | 30.95 |  |     | $ | 23.70 | 
|Quarter ended April 4, 2010                                                  |  | $    | 33.00 |  |     | $ | 22.00 | 
|Quarter ended January 3, 2010                                                |  | $    | 23.50 |  |     | $ | 21.05 | 
|                                                                             |  |     
|Fiscal 2009                                                                  |  |      |       |  |     |   |       | 
|Quarter ended September 30, 2009 (from August 30 through September 30, 2009) |  | $    | 25.00 |  |     | $ | 12.50 | 

From
November 21, 1997, the day the Old Common Stock commenced trading, to December 22, 2008, our common stock, par value $0.01 per share (the Old Common Stock) was traded on the NYSE under the symbol SPC.

On December 15, 2008, we were advised that our Old Common Stock would be suspended from trading on the NYSE prior to the opening of
the market on December 22, 2008. We were advised that the decision to suspend our Old Common Stock was reached in view of the fact that we had recently fallen below the NYSEs continued listing standard regarding average global market
capitalization over a consecutive 30 trading day period of not less than $25 million, the minimum threshold for listing on the NYSE. Our Old Common Stock was delisted from the NYSE effective January 23, 2009. Our Old Common Stock was then
quoted on the Pink Sheet Electronic Quotation Service under the symbol SPCB until August 28, 2009 when the Old Common Stock was cancelled pursuant to the Plan in our Chapter 11 reorganization.



37



---

##### Table of Contents

The following table sets forth the reported high and low prices per share of the Old Common
Stock as reported on the NYSE Composite Transaction Tape and the Pink Sheet Electronic Quotation Service for the fiscal periods indicated:



|                                                           |  |      |      |     |     |   |      |    
|---------------------------------------------------------- |  | ---- | ---- | --- | --- | - | ---- | ---
|                                                           |  | High |      |     | Low |  
|Fiscal 2009                                                |  |      |      |     |     |   |      |    
|Quarter ended September 30, 2009 (through August 27, 2009) |  | $    | 0.05 | (1) |     | $ | 0.01 | (1)
|Quarter ended June 28, 2009                                |  | $    | 0.30 | (1) |     | $ | 0.04 | (1)
|Quarter ended March 29, 2009                               |  | $    | 0.17 | (1) |     | $ | 0.01 | (1)
|Quarter ended December 28, 2008                            |  | $    | 1.86 | (2) |     | $ | 0.08 | (2)



|(1) | Represents market prices while Spectrum Brands operated during the Chapter 11 reorganization for periods subsequent to February 2, 2009.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------

|(2) | High price reflects the high sales price on NYSE prior to Old Spectrums suspension from trading on December 15, 2008. Low price reflects the OTC market low
bid price during the balance of the quarter.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The OTC bid prices represent prices between dealers and do not
include retail markup, markdown or commission.

The historical prices for the Old Common Stock and the New Common Stock may
not be indicative of the anticipated or prospective value or future trading price of or trading market for the SBH Common Stock.

Spectrum Brands did not declare or pay any cash dividends on our Old Common Stock at any time since it commenced public trading in 1997 through its delisting in connection with the Merger on June 16,
2010, and we did not declare or pay cash dividends on the SBH Common Stock at any time since it commenced public trading on June 16, 2010, and while we continue to evaluate the potential payment of dividends, we do not currently anticipate
paying cash dividends on the SBH Common Stock in the foreseeable future, but currently intend to retain any future earnings for reinvestment in our business or use such future earnings to pay down our outstanding indebtedness. In addition, the terms
of our Senior Secured Facilities and the 2019 Indenture restrict our ability to pay dividends to our stockholders. Any future determination to pay cash dividends will be at the discretion of our board of directors and will be dependent upon our
financial condition, results of operations, capital requirements, contractual restrictions and such other factors as the board of directors deems relevant.

Information regarding our equity compensation plans is set forth in Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters-Equity Compensation Plan
Information.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

We did not repurchase any of our own securities during the last quarter of the fiscal year ended September 30, 2010, and we do not
have any publicly announced repurchase plan. The following table reflects open market purchases of our common stock made by the Harbinger Parties, who may be considered affiliated purchasers (as defined in Rule 10b-18(a)(3) of the
Securities Exchange Act of 1934, as amended).



|                                     |  |                               |         |  |                            |   |       |                                                                              |  |  |                                                                            |  |  |  |   | 
|------------------------------------ |  | ----------------------------- | ------- |  | -------------------------- | - | ----- | ---------------------------------------------------------------------------- |  |  | -------------------------------------------------------------------------- |  |  |  | - | 
|Period                               |  | TotalNumber ofSharesPurchased |         |  | AveragePrice PaidPer Share |   |       | Total Number ofShares Purchased asPart of PubliclyAnnounced
Plansor Programs |  |  | Maximum Numberof Shares that mayYet Be PurchasedUnder the
Plansor Programs | 
|Quarter Ended September 30, 2010     |  |                               |         |  |                            |   |       |                                                                              |  |  |                                                                            |  |  |  |   | 
|July 5, 2010  August 1, 2010        |  |                               | 600,000 |  |                            | $ | 27.01 |                                                                              |  |  | 600,000                                                                    |  |  |  |  | 
|August 2, 2010  August 29, 2010     |  |                               | 300,200 |  |                            | $ | 28.80 |                                                                              |  |  | 300,200                                                                    |  |  |  |  | 
|August 30, 2010  September 30, 2010 |  |                               | 87,620  |  |                            | $ | 25.09 |                                                                              |  |  | 87,620                                                                     |  |  |  |  | 
|                                     |  |                               |         |  |                            |   |       |                                                                              |  |  |                                                                            |  |  |  |   | 
|Total                                |  |                               | 987,820 |  |                            | $ | 27.38 |                                                                              |  |  | 987,820                                                                    |  |  |  |  | 



38



---

##### Table of Contents

|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, 2010 and 2009 and our Consolidated Statements of Operations,
Consolidated Statements of Shareholders Equity (Deficit) and Comprehensive Income (Loss) and Consolidated Statements of Cash Flows for the years ended September 30, 2010, 2009 and 2008 are included elsewhere in this Annual Report on Form
10-K. The information presented below as of and for the fiscal year ended September 30, 2010 also includes that of Russell Hobbs since the Merger on June 16, 2010.

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 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 the growing products
portion of the Home and Garden Business as discontinued operations. As of October 1, 2005, we began reporting the results of operations of Nu-Gro Pro and Tech as discontinued operations. We also began reporting the results of operations of the
Canadian division of the Home and Garden Business as discontinued operations as of October 1, 2006, which business was sold on November 1, 2007. Therefore, the presentation of all historical continuing operations has been changed to
exclude the growing products portion of the Home and Garden Business, the Nu-Gro Pro and Tech and the Canadian division of the Home and Garden Business but to include the remaining control products portion of the Home and Garden Business. The
following selected financial data 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.

The financial information indicated may not be indicative of future performance.
This financial information and other data should be read in conjunction with our consolidated financial statements, including the notes thereto, and Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations.



39



---

##### Table of Contents



|                                                                                  |  |                  |         |   |                                                    |   |         |                                                 |  |   |         |   |  |      |          |   |      |   |         |   |  |   |         |  
|--------------------------------------------------------------------------------- |  | ---------------- | ------- | - | -------------------------------------------------- | - | ------- | ----------------------------------------------- |  | - | ------- | - |  | ---- | -------- | - | ---- | - | ------- | - |  | - | ------- | -
|                                                                                  |  | SuccessorCompany |         |   | PredecessorCompany                                 |  
|                                                                                  |  | 2010(14)         |         |   | Period fromAugust 31, 2009throughSeptember 30,2009 |   |         | Period fromOctober 1, 2008throughAugust 30,2009 |  |   | 2008    |   |  | 2007 |          |   | 2006 |  
|Statement of Operations Data:                                                     |  |                  |         |   |                                                    |   |         |                                                 |  |   |         |   |  |      |          |   |      |   |         |   |  |   |         |  
|Net sales                                                                         |  | $                | 2,567.0 |   |                                                    | $ | 219.9   |                                                 |  | $ | 2,010.6 |   |  | $    | 2,426.6  |   |      | $ | 2,332.7 |   |  | $ | 2,228.5 |  
|Gross profit                                                                      |  |                  | 921.4   |   |                                                    |   | 64.4    |                                                 |  |   | 751.8   |   |  |      | 920.1    |   |      |   | 876.7   |   |  |   | 871.2   |  
|Operating income (loss)(1)                                                        |  |                  | 168.7   |   |                                                    |   | 0.1     |                                                 |  |   | 156.8   |   |  |      | (684.6   | ) |      |   | (251.8  | ) |  |   | (289.1  | )
|(Loss) income from continuing operations before income taxes                      |  |                  | (124.2  | ) |                                                    |   | (20.0   | )                                               |  |   | 1,123.4 |   |  |      | (914.8   | ) |      |   | (507.2  | ) |  |   | (460.9  | )
|(Loss) income from discontinued operations, net of tax(2)                         |  |                  | (2.7    | ) |                                                    |   | 0.4     |                                                 |  |   | (86.8   | ) |  |      | (26.2    | ) |      |   | (33.7   | ) |  |   | (2.5    | )
|Net (loss) income(3)(4)(5)(6)(7)                                                  |  |                  | (190.1  | ) |                                                    |   | (70.8   | )                                               |  |   | 1,013.9 |   |  |      | (931.5   | ) |      |   | (596.7  | ) |  |   | (434.0  | )
|Restructuring and related chargescost of goods sold(8)                           |  | $                | 7.1     |   |                                                    | $ | 0.2     |                                                 |  | $ | 13.2    |   |  | $    | 16.5     |   |      | $ | 31.3    |   |  | $ | 21.1    |  
|Restructuring and related chargesoperating expenses(8)                           |  |                  | 17.0    |   |                                                    |   | 1.6     |                                                 |  |   | 30.9    |   |  |      | 22.8     |   |      |   | 66.7    |   |  |   | 33.6    |  
|Other expense (income), net(9)                                                    |  |                  | 12.3    |   |                                                    |   | (0.8    | )                                               |  |   | 3.3     |   |  |      | 1.2      |   |      |   | (0.3    | ) |  |   | (4.1    | )
|Interest expense (13)                                                             |  | $                | 277.0   |   |                                                    | $ | 17.0    |                                                 |  | $ | 172.9   |   |  | $    | 229.0    |   |      | $ | 255.8   |   |  | $ | 175.9   |  
|Per Share Data:                                                                   |  |                  |         |   |                                                    |   |         |                                                 |  |   |         |   |  |      |          |   |      |   |         |   |  |   |         |  
|Net (loss) income per common share:                                               |  |                  |         |   |                                                    |   |         |                                                 |  |   |         |   |  |      |          |   |      |   |         |   |  |   |         |  
|Basic                                                                             |  | $                | (5.28   | ) |                                                    | $ | (2.36   | )                                               |  | $ | 19.76   |   |  | $    | (18.29   | ) |      | $ | (11.72  | ) |  | $ | (8.77   | )
|Diluted                                                                           |  |                  | (5.28   | ) |                                                    | $ | (2.36   | )                                               |  |   | 19.76   |   |  |      | (18.29   | ) |      |   | (11.72  | ) |  |   | (8.77   | )
|Average shares outstanding:                                                       |  |                  |         |   |                                                    |   |         |                                                 |  |   |         |   |  |      |          |   |      |   |         |   |  |   |         |  
|Basic                                                                             |  |                  | 36.0    |   |                                                    |   | 30.0    |                                                 |  |   | 51.3    |   |  |      | 50.9     |   |      |   | 50.9    |   |  |   | 49.5    |  
|Diluted(10)                                                                       |  |                  | 36.0    |   |                                                    |   | 30.0    |                                                 |  |   | 51.3    |   |  |      | 50.9     |   |      |   | 50.9    |   |  |   | 49.5    |  
|Cash Flow and Related Data:                                                       |  |                  |         |   |                                                    |   |         |                                                 |  |   |         |   |  |      |          |   |      |   |         |   |  |   |         |  
|Net cash provided (used) by operating activities                                  |  | $                | 57.3    |   |                                                    | $ | 75.0    |                                                 |  | $ | 1.6     |   |  | $    | (10.2    | ) |      | $ | (32.6   | ) |  | $ | 44.5    |  
|Capital expenditures(11)                                                          |  |                  | 40.3    |   |                                                    |   | 2.7     |                                                 |  |   | 8.1     |   |  |      | 18.9     |   |      |   | 23.2    |   |  |   | 55.6    |  
|Depreciation and amortization (excluding amortization of debt issuance costs)(11) |  |                  | 117.4   |   |                                                    |   | 8.6     |                                                 |  |   | 58.5    |   |  |      | 85.0     |   |      |   | 77.4    |   |  |   | 82.6    |  
|Statement of Financial Position Data (at period end):                             |  |                  |         |   |                                                    |   |         |                                                 |  |   |         |   |  |      |          |   |      |   |         |   |  |   |         |  
|Cash and cash equivalents                                                         |  | $                | 170.6   |   |                                                    | $ | 97.8    |                                                 |  |   |         |   |  | $    | 104.8    |   |      | $ | 69.9    |   |  | $ | 28.4    |  
|Working capital(12)                                                               |  |                  | 536.9   |   |                                                    |   | 323.7   |                                                 |  |   |         |   |  |      | 371.5    |   |      |   | 370.2   |   |  |   | 397.2   |  
|Total assets                                                                      |  |                  | 3,873.6 |   |                                                    |   | 3,020.7 |                                                 |  |   |         |   |  |      | 2,247.5  |   |      |   | 3,211.4 |   |  |   | 3,549.3 |  
|Total long-term debt, net of current maturities                                   |  |                  | 1,723.1 |   |                                                    |   | 1,530.0 |                                                 |  |   |         |   |  |      | 2,474.8  |   |      |   | 2,416.9 |   |  |   | 2,234.5 |  
|Total debt                                                                        |  |                  | 1,743.8 |   |                                                    |   | 1,583.5 |                                                 |  |   |         |   |  |      | 2,523.4  |   |      |   | 2,460.4 |   |  |   | 2,277.2 |  
|Total shareholders equity (deficit)                                              |  |                  | 1,046.4 |   |                                                    |   | 660.9   |                                                 |  |   |         |   |  |      | (1,027.2 | ) |      |   | (103.8  | ) |  |   | 452.2   |  



|(1) | During Fiscal 2010, 2009, 2008, 2007 and 2006, pursuant to the Financial Accounting Standards Board Codification Topic 350: Intangibles-Goodwill and
Other, we conducted our 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 $34 million, $861 million, $362 million and
$433 million in the period from October 1, 2008 through August 30, 2009, Fiscal 2008, Fiscal 2007 and our fiscal year ended September 30, 2006 (Fiscal 2006), respectively. 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 3(i), Significant Accounting
PoliciesIntangible Assets, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for further details on these impairment charges.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



40



---

##### Table of Contents

|(2) | Fiscal 2007 loss from discontinued operations, net of tax, includes a non-cash pretax impairment charge of approximately $45 million to reduce the carrying value of
certain assets, principally consisting of goodwill and intangible assets, relating to our Canadian Division of the Home and Garden Business in order to reflect the estimated fair value of this 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 our growing products portion of the Home and Garden Business in order to reflect the estimated fair
value of this business. See Note 9, Discontinued Operations, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for information relating to these impairment charges.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Fiscal 2010 income tax expense of $63 million includes a non-cash charge of approximately $91.9 million which increased the valuation allowance against certain net
deferred tax assets.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Included in the period from August 31, 2009 through September 30, 2009 for the Successor Company is a non-cash tax charge of $58 million related to the
residual U.S. and foreign taxes on approximately $166 million of actual and deemed distributions of foreign earnings. The period from October 1, 2008 through August 30, 2009 income tax expense includes a non-cash adjustment of
approximately $52 million which reduced the valuation allowance against certain deferred tax assets.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Included in
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, Predecessor Company includes the tax effect on
the gain on the cancellation of debt from the extinguishment of the senior subordinated notes as well as the modification of the senior term credit facility resulting in approximately $124 million reduction in the U.S. net deferred tax asset
exclusive of indefinite lived intangibles. Due to the Companys full valuation allowance position as of August 30, 2009 on the U.S. net deferred tax asset exclusive of indefinite lived intangibles, the tax effect of the gain on the
cancellation of debt and the modification of the senior secured credit facility is offset by a corresponding adjustment to the valuation allowance of $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.

|(5) | Fiscal 2008 income tax benefit of $10 million includes a non-cash charge of approximately $222 million which increased the valuation allowance against certain net
deferred tax assets.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Fiscal 2007 income tax expense of $56 million includes a non-cash charge of approximately $180 million which increased the valuation allowance against certain net
deferred tax assets.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Fiscal 2006 income tax benefit of $29 million includes a non-cash charge of approximately $29 million which increased the valuation allowance against certain net
deferred tax assets.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(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) | Fiscal 2006 includes a $8 million net gain on the sale of our Bridgeport, CT manufacturing facility, acquired as part of the Remington Products Company, L.L.C.
acquisition and subsequently closed in Fiscal 2004, and our Madison, WI packaging facility, which was closed in our fiscal year ended September 30, 2003.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(10) | Each of Fiscal 2010, the period from August 31, 2009 through September 30, 2009, the period from October 1, 2008 through August 30, 2009, Fiscal
2008, 2007 and 2006 does not assume the exercise of common stock equivalents as the impact would be antidilutive.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(11) | Amounts reflect the results of continuing operations only.
|---- | ----------------------------------------------------------

|(12) | Working capital is defined as current assets less current liabilities.
|---- | ----------------------------------------------------------------------

|(13) | Fiscal 2010 includes a non-cash charge of $83 million related to the write off of unamortized debt issuance costs and the write off of unamortized discounts and
premiums related to the extinguishment of debt that was refinanced in conjunction with the Merger.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(14) | Fiscal 2010, includes the results of Russell Hobbs operations since June 16, 2010. Russell Hobbs contributed $238 million in Net Sales and recorded operating
income of $1 million for the period from June 16, 2010 through September 30, 2010, which includes $13 million of acquisition and integration related charges. In addition, Fiscal 2010 includes $26 million of Acquisition and integration
related charges associated with the Merger.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



41



---

##### Table of Contents

|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 2010, 2009 and 2008 refer to fiscal year periods ended September 30, 2010, 2009 and 2008, respectively.

Spectrum Brands Holdings, Inc., a Delaware corporation (SB Holdings), is a global branded consumer products
company and was created in connection with the combination of Spectrum Brands, Inc. (Spectrum Brands), a global branded consumer products company 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.

In connection with the Merger, we refinanced Spectrum Brands existing senior debt (except for the 12% Notes, which remain outstanding) and a portion of Russell Hobbs existing senior debt
through a combination of a new $750 million U.S. Dollar Term Loan due June 16, 2016, new $750 million 9.5% Senior Secured Notes maturing June 15, 2018 and a new $300 million ABL revolving facility due June 16, 2014.

As further described below, on February 3, 2009, we and our wholly owned United States (U.S.) subsidiaries
(collectively, the Debtors) filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code (the Bankruptcy Code), in the U.S. Bankruptcy Court for the Western District of Texas (the Bankruptcy Court). On
August 28, 2009 (the Effective Date), the Debtors emerged from Chapter 11 of the 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.

Unless the context indicates otherwise, the terms the Company,
Spectrum, we, our or us are used to refer to SB Holdings and its subsidiaries subsequent to the Merger and Spectrum Brands prior to the Merger, as well as both before and on and after the Effective
Date. The term New Spectrum, however, refers only to Spectrum Brands, Inc., our Delaware successor, and its subsidiaries after the Effective Date, and the term Old Spectrum, refers only to Spectrum Brands, our Wisconsin
predecessor, and its subsidiaries prior to the Effective Date.

Business Overview

We are a global branded consumer products company with positions in seven major product categories: consumer batteries; pet supplies; home
and garden control products; electric shaving and grooming; small appliances; electric personal care; and portable lighting.

We manage our business in four reportable segments: (i) Global Batteries & Personal Care, which consists of the
Companys worldwide battery, shaving and grooming, personal care and portable lighting business (Global Batteries & Personal Care); (ii) Global Pet Supplies, which consists of our worldwide pet supplies business
(Global Pet Supplies); (iii) the Home and Garden Business, which consists of our home and garden control product offerings, including household insecticides, repellants and herbicides (the Home and Garden Business); and
(iv) Small Appliances, which consists of small electrical appliances primarily in the kitchen and home product categories (Small Appliances).

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



42



---

##### Table of Contents

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, Latin America and Asia. Substantially all of our rechargeable batteries and chargers, shaving and
grooming products, small household appliances, personal care products and portable lighting products are manufactured by third-party suppliers, primarily located in Asia.

We sell our products in approximately 120 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, Spectracide, Cutter,
Black & Decker, George Foreman, Russell Hobbs, Farberware and various other brands.

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.

During the second quarter of Fiscal 2008, we determined that in view of the difficulty in
predicting the timing or probability of a sale of the remaining U.S. portion of the Home and Garden Business, the requirements of Generally Accepted Accounting Principles (GAAP) necessary to classify the remaining U.S. portion of the
Home and Garden Business as discontinued operations were no longer met and that it was appropriate to present the remaining U.S. portion of the Home and Garden Business as held and used in the Companys continuing operations as of our second
quarter of Fiscal 2008 and going forward. The presentation herein of the results of continuing operations includes the Home and Garden Business excluding the Canadian division, which was sold on November 1, 2007, for all periods presented.

In the third quarter of Fiscal 2008, we entered into a definitive agreement, subject to the consent of our lenders under our
senior credit facilities, to sell the assets related to Global Pet Supplies. We were unable to obtain the consent of the lenders, and on July 13, 2008, we entered into a termination agreement regarding the agreement to sell the assets related
to Global Pet Supplies. Pursuant to the termination agreement, as a condition to the termination, we paid the proposed buyer $3 million as a reimbursement of expenses.

In November 2008, our board of directors committed to the shutdown of the growing products portion of the Home and Garden Business, which includes 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 products portion of the Home and Garden Business for Fiscal 2009. We
believe the shutdown was consistent with what we have done in other areas of our business to eliminate unprofitable products from our portfolio. As of March 29, 2009, we completed the shutdown of the growing products portion of the Home and
Garden Business. Accordingly, the presentation herein of the results of continuing operations excludes the growing products portion of the Home and Garden Business for all periods presented. See Note 9, Discontinued Operations, to our Consolidated
Financial Statements included in this Annual Report on Form 10-K for further details on the disposal of the growing products portion of the Home and Garden Business.

On December 15, 2008, we were advised that our common stock would be suspended from trading on the NYSE prior to the opening of the market on December 22, 2008. We were advised that the decision
to suspend



43



---

##### Table of Contents

our common stock was reached in view of the fact that we had recently fallen below the NYSEs continued listing standard regarding average global market capitalization over a consecutive 30
trading day period of not less than $25 million, the minimum threshold for listing on the NYSE. Our common stock was delisted from the NYSE effective January 23, 2009.

As a result of our Bankruptcy Filing, we were able to significantly reduce our indebtedness. As a result of the Merger, we were able to further reduce our outstanding debt leverage ratio. However, we
continue to have a significant amount of indebtedness relative to our competitors and paying down outstanding indebtedness continues to be a priority for us. The Bankruptcy Filing is discussed in more detail under Chapter 11 Proceedings.

Chapter 11 Proceedings

As a result of its substantial leverage, the Company determined that, absent a financial restructuring, it would be unable to achieve future profitability or positive cash flows on a consolidated basis
solely from cash generated from operating activities or to satisfy certain of its payment obligations as the same may become due and be at risk of not satisfying the leverage ratios to which it was subject under its then existing senior secured term
loan facility, which ratios became more restrictive in future periods. Accordingly, on February 3, 2009, we announced that we had reached agreements with certain noteholders, representing, in the aggregate, approximately 70% of the face value
of our then outstanding senior subordinated notes, to pursue a refinancing that, if implemented as proposed, would significantly reduce our outstanding debt. On the same day, the Debtors filed voluntary petitions under Chapter 11 of the Bankruptcy
Code, in the Bankruptcy Court (the Bankruptcy Filing) and filed with the Bankruptcy Court a proposed plan of reorganization (the Proposed Plan) that detailed the Debtors proposed terms for the refinancing. The
Chapter 11 cases were jointly administered by the Bankruptcy Court as Case No. 09-50455 (the Bankruptcy Cases). The Bankruptcy Court entered a written order (the Confirmation Order) on July 15, 2009 confirming
the Proposed Plan (as so confirmed, the Plan).

On the Effective Date the Plan became
effective, and the Debtors emerged from Chapter 11 of the Bankruptcy Code. Pursuant to and by operation of the Plan, on the Effective Date, all of Old Spectrums existing equity securities, including the existing common stock and stock options,
were extinguished and deemed cancelled. Reorganized Spectrum Brands, Inc. filed a certificate of incorporation authorizing new shares of common stock. Pursuant to and in accordance with the Plan, on the Effective Date, reorganized Spectrum Brands,
Inc. issued a total of 27,030,000 shares of common stock and approximately $218 million in aggregate principal amount of 12% Senior Subordinated Toggle Notes due 2019 (the 12% Notes) to holders of allowed claims with respect to Old
Spectrums 81/2% Senior Subordinated
Notes due 2013 (the 81/2Notes), 73/8% Senior Subordinated Notes due 2015 (the
73/8Notes) and Variable Rate Toggle
Senior Subordinated Notes due 2013 (the Variable Rate Notes) (collectively, the Senior Subordinated Notes). For a further discussion of the 12% Notes see Debt Financing Activities12% Notes.Also on
the Effective Date, reorganized Spectrum Brands, Inc. issued a total of 2,970,000 shares of common stock to supplemental and sub-supplemental debtor-in-possession credit facility participants in respect of the equity fee earned under the
Debtors debtor-in-possession credit facility.

Accounting for Reorganization

Subsequent to the Petition Date, our financial statements are prepared in accordance with ASC Topic 852:
Reorganizations, (ASC 852). ASC 852 does not change the application of GAAP in the preparation of our financial statements. However, ASC 852 does require that financial statements, for periods including and subsequent
to the filing of a Chapter 11 petition, distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. In accordance with ASC 852 we have done the following:



| |  |  | On our Consolidated Statements of Financial Position included in this Annual Report on Form 10-K, we have separated liabilities that are subject to
compromise from liabilities that are not subject to compromise;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



44



---

##### Table of Contents



| |  |  | On our Consolidated Statements of Operations included in this Annual Report on Form 10-K, we have distinguished transactions and events that are
directly associated with the reorganization from the ongoing operations of the business;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On our Consolidated Statements of Cash Flows included in this Annual Report on Form 10-K, we have separately disclosed Reorganization items expense
(income), net;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Ceased accruing interest on the Senior Subordinated Notes; and
| | - |  | --------------------------------------------------------------

Fresh-Start Reporting

As required by ASC 852 we adopted fresh-start
reporting upon emergence from Chapter 11 of the Bankruptcy Code as of our monthly period ended August 30, 2009 as is reflected in this Annual Report on Form 10-K.

Since the reorganization value of the assets of Old Spectrum immediately before the date of confirmation of the Plan was less than the total of all post-petition liabilities and allowed claims and the
holders of Old Spectrums voting shares immediately before confirmation of the Plan received less than 50 percent of the voting shares of the emerging entity the Company adopted fresh-start reporting as of the close of business on
August 30, 2009 in accordance with ASC 852. The Consolidated Statement of Financial Position as of August 30, 2009 gives effect to allocations to the carrying value of assets or amounts and classifications of liabilities that were
necessary when adopting fresh-start reporting.

We analyzed the transactions that occurred during the two-day period from
August 29, 2009, the day after the Effective Date, through August 30, 2009, the fresh-start reporting date, and concluded that such transactions were not material individually or in the aggregate as they represented less than one-percent
of the total Net sales for the entire fiscal year ended September 30, 2009. As such, we determined that August 30, 2009, would be an appropriate fresh-start reporting date to coincide with our normal financial period close for the month of
August 2009. Upon adoption of fresh-start reporting, the recorded amounts of assets and liabilities were adjusted to reflect their estimated fair values. Accordingly, the reported historical financial statements of Old Spectrum prior to the adoption
of fresh-start reporting for periods ended prior to August 30, 2009 are not comparable to those of New Spectrum.

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 2009.In connection with our announcement to reduce our headcount within each of our segments and the exit of 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.

Fiscal 2008. In connection with our decision to exit our zinc carbon and alkaline battery manufacturing and distribution facility
in Ninghai, China, we undertook cost reduction initiatives (the Ningbo Exit Plan). These initiatives include fixed cost savings by integrating production equipment into our remaining production facilities and headcount reductions.

Fiscal 2007. In connection with our announcement that we would manage our business in three vertically integrated,
product-focused reporting segments our costs related to research and development, manufacturing management, global purchasing, quality operations and inbound supply chain, which had previously been included in our corporate reporting segment are now
included in each of the operating segments on a direct as



45



---

##### Table of Contents

incurred basis. 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), including a headcount reduction of approximately 200 employees.

We also
implemented a series of initiatives within our Global Batteries & Personal Care business segment in Latin America to reduce operating costs (the Latin America Initiatives). These initiatives include the reduction of certain
manufacturing operations in Brazil and the restructuring of management, sales, marketing and support functions. As a result, we reduced headcount in Latin America by approximately 100 employees.

Fiscal 2006. As a result of our continued concern regarding the European economy and the continued shift by consumers from branded
to private label alkaline batteries, we announced 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). These initiatives include the reduction of certain operations at our Ellwangen, Germany packaging center and relocating those operations 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 the sales, marketing and support functions. As a result, we have reduced headcount in Europe by approximately 350 employees or 24%.

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 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.

During Fiscal 2007, advancements in shaver blade coatings continued to be significant with further introductions of Titanium, Nano-Diamond, Nano-Silver and Tourmaline on a variety of products, which
allowed us to continue to launch new products or product enhancements into the market place.



46



---

##### Table of Contents

During Fiscal 2006, in the lawn and garden category, we introduced the only termite killing
stakes product for the do-it-yourself market.

Competitive Landscape

We compete in seven major product categories: consumer batteries; pet supplies; home and garden control products; electric shaving and
grooming; small appliances; electric personal care; and portable lighting.

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, and specialty batteries, which include rechargeable batteries, hearing aid batteries, photo batteries and watch/calculator batteries. 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.

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.

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, Cutter 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 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 one of the following global brands: Remington, Braun
and 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 product category sales. Our major competitors in the electric personal care product category are Conair Corporation, Wahl Clipper Corporation and Helen of Troy Limited.

Products in our small appliances category consist of small electrical appliances primarily in the kitchen and home product
categories. Primary competitive 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.



47



---

##### Table of Contents

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 120 countries through a variety of trade channels, including
retailers, wholesalers and distributors, hearing aid professionals, industrial distributors and OEMs.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Innovative New Products, Packaging and Technologies.We have a long history of product and packaging innovations in each of our 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 manager 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

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 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.

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 |  | 2010                           |    |   | 2009 |  |    | 2008 | 
|December             |  |                                | 23 | % |      |  | 25 | %    |  |  | 24 | %
|March                |  |                                | 21 | % |      |  | 23 | %    |  |  | 22 | %
|June                 |  |                                | 25 | % |      |  | 26 | %    |  |  | 26 | %
|September            |  |                                | 31 | % |      |  | 26 | %    |  |  | 28 | %

Fiscal Year Ended September 30,
2010 Compared to Fiscal Year Ended September 30, 2009

Fiscal 2009, when referenced within this Managements
Discussion and Analysis of Financial Condition and Results of Operations included in this Annual Report on Form 10-K, includes the combined results of Old Spectrum for the period from October 1, 2008 through August 30, 2009 and New
Spectrum for the period from August 31, 2009 through September 30, 2009.



48



---

##### Table of Contents

Highlights of Consolidated Operating Results

We have presented the growing products portion of the Home and Garden Business as discontinued operations. The board of directors of Old
Spectrum committed to the shutdown of the growing products portion of the Home and Garden Business in November 2008 and the shutdown was completed during the second quarter of our Fiscal 2009. See Note 9, Discontinued Operations of Notes to
Consolidated Financial Statements, included in this Annual Report on Form 10-K for additional information regarding the shutdown of the growing products portion of the Home and Garden Business. As a result, and unless specifically stated, all
discussions regarding Fiscal 2010 and Fiscal 2009 only reflect results from our continuing operations.

Year over year
historical comparisons are influenced by the acquisition of Russell Hobbs, which is included in our Fiscal 2010 Consolidated Financial Statements of Operations from June 16, 2010, the date of the Merger, through the end of the period. The
results of Russell Hobbs are not included in our Fiscal 2009 Consolidated Financial Statements of Operations. See Note 16, Acquisition of Notes to Consolidated 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.

Net Sales.Net sales for Fiscal 2010 increased to $2,567 million from $2,231 million in Fiscal 2009, a 15.1% increase. The following table details the principal components of the change in net sales from Fiscal 2009 to Fiscal 2010 (in millions):



|                                                        |  |           |       |  
|------------------------------------------------------- |  | --------- | ----- | -
|                                                        |  | Net Sales |      
|Fiscal 2009 Net Sales                                   |  | $         | 2,231 |  
|Addition of small appliances                            |  |           | 238   |  
|Increase in consumer battery sales                      |  |           | 33    |  
|Increase in electric shaving and grooming product sales |  |           | 27    |  
|Increase in home and garden control product sales       |  |           | 19    |  
|Increase in lighting product sales                      |  |           | 6     |  
|Increase in electric personal care product sales        |  |           | 2     |  
|Decrease in pet supplies sales                          |  |           | (16   | )
|Foreign currency impact, net                            |  |           | 27    |  
|                                                        |  |           |       |  
|Fiscal 2010 Net Sales                                   |  | $         | 2,567 |  
|                                                        |  |           |       |  

Consolidated net sales by product line for Fiscal 2010 and 2009 are as follows (in millions):



|                                       |  |             |       |  |      |   |       | 
|-------------------------------------- |  | ----------- | ----- |  | ---- | - | ----- | 
|                                       |  | Fiscal Year |      
|                                       |  | 2010        |       |  | 2009 |  
|Product line net sales                 |  |             |       |  |      |   |       | 
|Consumer batteries                     |  | $           | 866   |  |      | $ | 819   | 
|Pet supplies                           |  |             | 561   |  |      |   | 574   | 
|Home and garden control products       |  |             | 341   |  |      |   | 322   | 
|Electric shaving and grooming products |  |             | 257   |  |      |   | 225   | 
|Small appliances                       |  |             | 238   |  |      |   |      | 
|Electric personal care products        |  |             | 216   |  |      |   | 211   | 
|Portable lighting products             |  |             | 88    |  |      |   | 80    | 
|                                       |  |             |       |  |      |   |       | 
|Total net sales to external customers  |  | $           | 2,567 |  |      | $ | 2,231 | 
|                                       |  |             |       |  |      |   |       | 

Global consumer battery sales during Fiscal 2010 increased $47 million, or 6%, compared to Fiscal 2009,
primarily driven by favorable foreign exchange impacts of $15 million coupled with increased sales in North America and Latin America. The sales increase in North America was driven by increased volume with a major customer and the increased sales
in Latin America were a result of increased specialty battery sales, driven by the



49



---

##### Table of Contents

successfully leveraging our value proposition, that is, products that work as well as or better than our competitors, at a lower price. These gains were partially offset by decreased consumer
battery sales of $22 million in Europe, primarily due to our continued exit of low margin private label battery sales.

Pet
product sales during Fiscal 2010 decreased $13 million, or 2%, compared to Fiscal 2009. The decrease of $13 million is attributable to decreased aquatics sales of $11 million and decreased specialty pet products of $6 million. These decreases were
partially offset by favorable foreign exchange impacts of $3 million. The $11 million decrease in aquatic sales is due to decreases within the United States and Pacific Rim of $6 million and $5 million, respectively, as a result of reduction in
demand in this product category due to the macroeconomic slowdown as we maintained our market share in the category. The $6 million decrease in companion animal sales is due to $9 million decline in the United States, primarily driven by a
distribution loss of at a major retailer of certain dog shampoo products and the impact of a product recall, which was tempered by increases of $3 million in Europe.

Sales of home and garden control products during Fiscal 2010 versus Fiscal 2009 increased $19 million, or 6%. This increase is a result of additional sales to major customers that was driven by incentives
to retailers and promotional campaigns during the year in both lawn and garden control products and household control products.

Electric shaving and grooming product sales during Fiscal 2010 increased $32 million, or 14%, compared to Fiscal 2009 primarily due
to increased sales within Europe of $25 million coupled with favorable foreign exchange translation of $5 million. The increase in Europe sales is a result of new product launches, pricing and promotions.

Electric personal care product sales during Fiscal 2010 increased $5 million, or 2%, when compared to Fiscal 2009. The increase of $5
million during Fiscal 2010 was attributable to favorable foreign exchange impacts of $2 million coupled with modest sales increases within Latin America and North America of $3 million and $1 million, respectively. These sales increases were
partially offset by modest declines in Europe of $2 million.

Sales of portable lighting products in Fiscal 2010 increased $8
million, or 10%, compared to Fiscal 2009 as a result of increases in North America of $3 million coupled with favorable foreign exchange translation of $2 million. Sales of portable lighting products also increased modestly in both Europe and Latin
America.

Small appliances contributed $238 million or 9% of total net sales for Fiscal 2010. This represents sales related to
Russell Hobbs from the date of the consummation of the merger, June 16, 2010 through the close of the Fiscal 2010.

Gross Profit. Gross profit for Fiscal 2010 was $921 million versus $816 million for Fiscal 2009. Our gross profit margin
for Fiscal 2010 decreased to 35.9% from 36.6% in Fiscal 2009. The decrease in our gross profit margin is primarily a result of our adoption of fresh-start reporting upon emergence from Chapter 11 of the Bankruptcy Code. Upon the adoption of
fresh-start reporting, in accordance with Statement of Financial Accounting Standards No. 141, Business Combinations, (SFAS 141), inventory balances were revalued at August 30, 2009 resulting in an increase
in such inventory balances of $49 million. As a result of the inventory revaluation, we recognized $34 million in additional cost of goods sold during Fiscal 2010 compared to $15 million of additional cost of goods sold recognized in Fiscal 2009.
The impact of the inventory revaluation was offset by lower Restructuring and related charges in Cost of goods sold during Fiscal 2010, which included $7 million of Restructuring and related charges whereas Fiscal 2009 included $13 million of
Restructuring and related charges. The Restructuring and related charges incurred in Fiscal 2010 were primarily associated with cost reduction initiatives announced in 2009. The $13 million of Restructuring and related charges incurred in Fiscal
2009 primarily related to the shutdown of our Ningbo, China battery manufacturing facility. See Restructuring and Related Charges below, as well as Note 14, Restructuring and Related Charges, to our Consolidated Financial
Statements included in this Annual Report on Form 10-K for additional information regarding our restructuring and related charges.



50



---

##### Table of Contents

Operating Expense. Operating expenses for Fiscal 2010 totaled $753 million
versus $659 million for Fiscal 2009. The $94 million increase in operating expenses for Fiscal 2010 versus Fiscal 2009 was partially driven by $38 million of Acquisition and integration related charges as a result of our combination with Russell
Hobbs pursuant to the Merger. During Fiscal 2010 we also incurred $36 million of selling expense and $16 million of general and administrative expense incurred by Russell Hobbs, which is included in the Small Appliances segment, subsequent to the
acquisition on June 16, 2010. Also included in Operating expenses for Fiscal 2010 was additional depreciation and amortization as a result of the revaluation of our long lived assets in connection with our adoption of fresh-start reporting upon
emergence from Chapter 11 of the Bankruptcy Code and unfavorable foreign exchange translation of $7 million. This increase was partially offset by the non-recurrence of the non-cash impairment charge to certain long lived intangible assets of $34
million in Fiscal 2009 and lower Restructuring and related charges of approximately $15 million as $17 million of such charges were incurred in Fiscal 2010 compared to $32 million in Fiscal 2009. See Restructuring and Related
Charges below, as well as Note 14, Restructuring and Related Charges, to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information regarding our restructuring and related charges.

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 the
Companys debt covenant compliance. Adjusted EBITDA excludes certain items that are unusual in nature or not comparable from period to period. While the Companys 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 EBITDA by segment below) was $432 million
for Fiscal 2010 compared with $391 million for Fiscal 2009.

Operating Income.Operating income of approximately
$169 million was recognized in Fiscal 2010 compared to Fiscal 2009 operating income of $157 million. The increase in operating income is attributable to Small Appliances income of $13 million, increased sales in our remaining segments and the
non-reoccurrence of the previously discussed non-cash impairment charge of $34 million in Fiscal 2009. This was partially offset by $39 million Acquisition and integration related charges incurred in Fiscal 2010 related to the Merger.

Segment Results. As discussed above in Item 1, Business, we manage our business in four reportable segments:
(i) Global Batteries & Personal Care, (ii) Global Pet Supplies; (iii) Home and Garden Business; and (iv) Small Appliances.

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. In addition, certain general and administrative expenses necessary to reflect the operating segments on a standalone basis have been included in the determination of operating segment profits. Corporate expenses include primarily
general and administrative expenses associated with corporate overhead and global long-term incentive compensation plans.

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



51



---

##### Table of Contents

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.

Below is a reconciliation of GAAP Net Income (Loss) from Continuing Operations to Adjusted EBITDA by segment for Fiscal 2010 and Fiscal
2009:



|                                                      |  |                                |     |   |                    |   |    |                        |  |   |                 |   |  |                                |    |  |                         |   |      |   |  |   |      |  
|----------------------------------------------------- |  | ------------------------------ | --- | - | ------------------ | - | -- | ---------------------- |  | - | --------------- | - |  | ------------------------------ | -- |  | ----------------------- | - | ---- | - |  | - | ---- | -
|                                                      |  | Fiscal 2010                    |    
|                                                      |  | GlobalBatteries &Personal Care |     |   | Global PetSupplies |   |    | Home andGardenBusiness |  |   | SmallAppliances |   |  | Corporate /UnallocatedItems(a) |    |  | ConsolidatedSB Holdings |  
|                                                      |  | (in millions)                  |    
|Net Income (loss)                                     |  | $                              | 137 |   |                    | $ | 49 |                        |  | $ | 40              |   |  | $                              |   |  |                         | $ | (416 | ) |  | $ | (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(b) |  |                                |    |   |                    |   |   |                        |  |   |                |   |  |                                |   |  |                         |   | 82   |   |  |   | 82   |  
|Pre-acquisition earnings                              |  |                                |    |   |                    |   |   |                        |  |   |                |   |  |                                | 66 |  |                         |   |     |   |  |   | 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                                         |  | $                              | 154 |   |                    | $ | 70 |                        |  | $ | 52              |   |  | $                              | 84 |  |                         | $ | (46  | ) |  | $ | 314  |  
|Depreciation and amortization                         |  |                                | 52  |   |                    |   | 28 |                        |  |   | 15              |   |  |                                | 6  |  |                         |   | 17   |   |  |   | 118  |  
|Adjusted EBITDA                                       |  | $                              | 206 |   |                    | $ | 98 |                        |  | $ | 67              |   |  | $                              | 90 |  |                         | $ | (29  | ) |  | $ | 432  |  



52



---

##### Table of Contents



|                                                      |  |                                |     |   |                    |   |    |                        |  |   |                 |   |  |                                |    |  |                         |   |        |   |  |   |        |  
|----------------------------------------------------- |  | ------------------------------ | --- | - | ------------------ | - | -- | ---------------------- |  | - | --------------- | - |  | ------------------------------ | -- |  | ----------------------- | - | ------ | - |  | - | ------ | -
|                                                      |  | Fiscal 2009                    |    
|                                                      |  | GlobalBatteries &Personal Care |     |   | Global PetSupplies |   |    | Home andGardenBusiness |  |   | SmallAppliances |   |  | Corporate /UnallocatedItems(a) |    |  | ConsolidatedSB Holdings |  
|                                                      |  | (in millions)                  |    
|Net Income (loss)                                     |  | $                              | 126 |   |                    | $ | 41 |                        |  | $ | (52             | ) |  | $                              |   |  |                         | $ | 828    |   |  | $ | 943    |  
|Loss from discontinued operations, net of tax         |  |                                |    |   |                    |   |   |                        |  |   | 87              |   |  |                                |   |  |                         |   |       |   |  |   | 87     |  
|Income tax expense                                    |  |                                |    |   |                    |   |   |                        |  |   |                |   |  |                                |   |  |                         |   | 74     |   |  |   | 74     |  
|Interest expense                                      |  |                                |    |   |                    |   |   |                        |  |   |                |   |  |                                |   |  |                         |   | 190    |   |  |   | 190    |  
|Pre-acquisition earnings                              |  |                                |    |   |                    |   |   |                        |  |   |                |   |  |                                | 81 |  |                         |   |       |   |  |   | 81     |  
|Restructuring and related charges                     |  |                                | 21  |   |                    |   | 6  |                        |  |   | 6               |   |  |                                |   |  |                         |   | 13     |   |  |   | 46     |  
|Reorganization items                                  |  |                                |    |   |                    |   |   |                        |  |   |                |   |  |                                |   |  |                         |   | (1,139 | ) |  |   | (1,139 | )
|Intangibles impairment                                |  |                                | 15  |   |                    |   | 19 |                        |  |   |                |   |  |                                |   |  |                         |   |       |   |  |   | 34     |  
|Fresh-start inventory and other fair value adjustment |  |                                | 10  |   |                    |   | 5  |                        |  |   | 1               |   |  |                                |   |  |                         |   | 1      |   |  |   | 17     |  
|Accelerated depreciation and amortization(c)          |  |                                | (3  | ) |                    |   |   |                        |  |   | (1              | ) |  |                                |   |  |                         |   |       |   |  |   | (4     | )
|Brazilian IPI credit/other                            |  |                                | (5  | ) |                    |   |   |                        |  |   |                |   |  |                                |   |  |                         |   |       |   |  |   | (5     | )
|                                                      |  |                                |     |   |                    |  
|Adjusted EBIT                                         |  | $                              | 164 |   |                    | $ | 71 |                        |  | $ | 41              |   |  | $                              | 81 |  |                         | $ | (33    | ) |  | $ | 324    |  
|Depreciation and amortization                         |  |                                | 29  |   |                    |   | 22 |                        |  |   | 13              |   |  |                                |   |  |                         |   | 3      |   |  |   | 67     |  
|Adjusted EBITDA                                       |  | $                              | 193 |   |                    | $ | 93 |                        |  | $ | 54              |   |  | $                              | 81 |  |                         | $ | (30    | ) |  | $ | 391    |  



|(a) | It is our policy to record Income tax expense (benefit) 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 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) $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; and
(iii) $17 million related to the termination of interest swaps and commitment fees.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(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.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Global Batteries & Personal Care



|                                   |  |               |       |   |      |   |       |  
|---------------------------------- |  | ------------- | ----- | - | ---- | - | ----- | -
|                                   |  | 2010          |       |   | 2009 |  
|                                   |  | (in millions) |      
|Net sales to external customers    |  | $             | 1,428 |   |      | $ | 1,335 |  
|Segment profit                     |  | $             | 153   |   |      | $ | 165   |  
|Segment profit as a % of net sales |  |               | 10.7  | % |      |   | 12.4  | %
|Segment Adjusted EBITDA            |  | $             | 206   |   |      | $ | 193   |  
|Assets as of September 30,         |  | $             | 1,629 |   |      | $ | 1,608 |  

Segment net sales to
external customers in Fiscal 2010 increased $93 million to $1,428 million from $1,335 million during Fiscal 2009, representing a 7% increase. Favorable foreign currency exchange translation impacted net sales in Fiscal 2010 by approximately $24
million in comparison to Fiscal 2009. Consumer battery sales for Fiscal 2010 increased to $866 million when compared to Fiscal 2009 sales of $819 million, primarily due to increased specialty battery sales of $26 million and increased alkaline
battery sales of $6 million, coupled with favorable foreign exchange translation of $15 million. The $26 million increase in specialty battery sales is



53



---

##### Table of Contents

driven by growth in Latin America driven by the successfully leveraging our value proposition, that is, products that work as well as or better than our competitors, at a lower price. The $6
million increase in alkaline sales is driven by the increased sales in North America, attributable to an increase in market share, as consumers opt for our value proposition during the weakening economic conditions in the U.S, which was tempered by
a decline in alkaline battery sales in Europe as we continued efforts to exit from unprofitable or marginally profitable private label battery sales, as well as certain second tier branded battery sales. We are continuing our efforts to promote
profitable growth and therefore, expect to continue to exit certain low margin business as appropriate to create a more favorable mix of branded versus private label products. Net sales of electric shaving and grooming products in Fiscal 2010
increased by $32 million, a 14% increase, compare to Fiscal 2009. This increase was primarily due to an increase of $25 million in Europe, excluding foreign exchange translation, as a result of successful promotions and operational execution.
Positive foreign exchange translation impacted net sales of electric shaving and grooming products in Fiscal 2010 by $5 million. Electric personal care sales increased by $5 million, an increase of 3%, over Fiscal 2009. Favorable foreign exchange
translation impacted net sales by approximately $3 million. Excluding favorable foreign exchange, we experienced modest electric personal care product sales increases within all geographic regions. Net sales of portable lighting products for Fiscal
2010 increased to $88 million as compared to sales of $80 million for Fiscal 2009, an increase of 10%. The portable lighting product sales increase was primarily driven by favorable foreign exchange impact of $2 million, coupled with increased sales
in North America of $3 million, driven by increased sales with a major customer as a result of new product introductions.

Segment profitability during Fiscal 2010 decreased to $153 million from $165 million in Fiscal 2009. Segment profitability as a
percentage of net sales decreased to 10.7% in Fiscal 2010 compared to 12.4% in Fiscal 2009. The decrease in segment profitability during Fiscal 2010 was mainly attributable to a $19 million increase in cost of goods sold due to the revaluation of
inventory coupled with approximately a $16 million increase in intangible asset amortization due to our adoption of fresh-start reporting upon our emergence from Chapter 11 of the Bankruptcy Code. Offsetting this decrease to segment profitability
was higher sales, as discussed above, and savings from our restructuring and related initiatives announced in Fiscal 2009. See Restructuring and Related Charges below, as well as Note 14, Restructuring and Related Charges, to our
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 2010 was $206 million compared to $193 million in Fiscal 2009. The increase in Adjusted EBITDA is mainly driven by the efficient cost structure now in place from our cost
reduction initiatives announced in Fiscal 2009 coupled with increases in market share in certain of our product categories.

Segment assets at September 30, 2010 increased to $1,629 million from $1,608 million at September 30, 2009. Goodwill and
intangible assets, which are directly a result of the revaluation impacts of fresh-start reporting, at September 30, 2010 decreased to $881 million from $909 million at September 30, 2009. The decrease is mainly due to amortization of
definite lived intangible assets of $18 million and foreign exchange impacts of $10 million.

Foreign Currency
TranslationVenezuela Impacts

The Global Batteries & Personal Care 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 meets the definition of a highly inflationary economy under GAAP. As a result, beginning January 4,
2010, the U.S. dollar is the functional currency for our Venezuelan subsidiary. Accordingly, going forward, currency remeasurement adjustments for this subsidiarys financial statements and other transactional foreign exchange gains and losses
are reflected in earnings. Through January 3, 2010, prior to being designated as highly inflationary, translation adjustments related to the Venezuelan subsidiary were reflected in Shareholders equity as a component of AOCI.



54



---

##### Table of Contents

In addition, on January 8, 2010, the Venezuelan government announced its intention to
devalue its currency, the Bolivar fuerte, relative to the U.S. dollar. The official exchange rate for imported goods classified as essential, such as food and medicine, changed from 2.15 to 2.6 to the U.S. dollar, while payments for other
non-essential goods moved to an exchange rate of 4.3 to the U.S. dollar. Some of our imported products fall into the essential classification and qualify for the 2.6 rate; however, our overall results in Venezuela were reflected at the 4.3
rate expected to be applicable to dividend repatriations beginning in the second quarter of Fiscal 2010. As a result, we remeasured the local statement of financial position of our Venezuela entity during the second quarter of Fiscal 2010 to reflect
the impact of the devaluation. Based on actual exchange activity, we determined on September 30, 2010 that the most likely method of exchanging its Bolivar fuertes for U.S. dollars will be to formally apply with the Venezuelan government to
exchange through commercial banks at the SITME rate specified by the Central Bank of Venezuela. The SITME rate as of September 30, 2010 was quoted at 5.3 Bolivar fuerte per U.S. dollar. Therefore, we changed the rate used to remeasure Bolivar
fuerte denominated transactions as of September 30, 2010 from the official non-essentials exchange rate to the 5.3 SITME rate in accordance with ASC 830, Foreign Currency Matters as it is the expected rate that exchanges of Bolivar
fuerte to U.S. dollars will be settled. There is also an immaterial ongoing impact related to measuring our Venezuelan statement of operations at the new exchange rate of 5.3 to the U.S. dollar.

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.

Global Pet Supplies



|                                   |               |      |     |   |      |   |      |  
|---------------------------------- | ------------- | ---- | --- | - | ---- | - | ---- | -
|                                   |               | 2010 |     |   | 2009 |  
|                                   | (in millions) |     
|Net sales to external customers    |               | $    | 561 |   |      | $ | 574  |  
|Segment profit                     |               | $    | 56  |   |      | $ | 65   |  
|Segment profit as a % of net sales |               |      | 9.9 | % |      |   | 11.3 | %
|Segment Adjusted EBITDA            |               | $    | 98  |   |      | $ | 93   |  
|Assets as of September 30,         |               | $    | 826 |   |      | $ | 867  |  

Segment net sales to
external customers in Fiscal 2010 decreased to $561 million from $574 million in Fiscal 2009, representing a decrease of $13 million or 2%. The $13 million decrease was attributable to lower aquatics sales of $11 million, lower specialty pet product
sales of $6 million and favorable foreign exchange impacts of $3 million. The decrease in aquatics sales was primarily due to general softness in this category. The decrease in specialty pet product sales was driven by a distribution loss at a major
retailer of certain dog shampoo products and the impact of a product recall.

Segment profitability in Fiscal 2010 decreased
to $56 million from $65 million in Fiscal 2009. Segment profitability as a percentage of sales in Fiscal 2010 also decreased to 9.9% from 11.3% during Fiscal 2009. This decrease in segment profitability and profitability margin was primarily
attributable to an increase in cost of goods sold due to the revaluation of inventory and the increase in intangible asset amortization in accordance with SFAS 141, as was required when we adopted fresh-start reporting upon our emergence from
Chapter 11 of the Bankruptcy Code. The decrease in Fiscal 2010 segment profitability was tempered by improved pricing and lower manufacturing and operating costs as a result of our global cost reduction initiatives announced in Fiscal 2009. See
Restructuring and Related Charges below, as well as Note 14, Restructuring and Related Charges, to our 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 2010 was $98 million compared to $93 million in Fiscal
2009. Despite decreased net sales during Fiscal 2010 of $13 million, our successful efforts to create a lower cost structure including the closure and consolidation of some of our pet facilities, and improved product mix, resulted in



55



---

##### Table of Contents

Adjusted EBITDA increase of $5 million. See Restructuring and Related Charges below, as well as Note 14, Restructuring and Related Charges, to our Consolidated Financial
Statements included in this Annual Report on Form 10-K, for further detail on our Fiscal 2009 initiatives.

Segment assets as
of September 30, 2010 decreased to $826 million from $867 million at September 30, 2009. Goodwill and intangible assets, which are directly a result of the revaluation impacts of fresh-start reporting, decreased to $589 million at
September 30, 2010 from $618 million at September 30, 2009. The decrease is mainly due to amortization of definite lived intangible assets of $15 million and foreign exchange impacts of $14 million.

Home and Garden Business



|                                   |               |      |      |   |      |   |      |  
|---------------------------------- | ------------- | ---- | ---- | - | ---- | - | ---- | -
|                                   |               | 2010 |      |   | 2009 |  
|                                   | (in millions) |     
|Net sales to external customers    |               | $    | 341  |   |      | $ | 322  |  
|Segment profit                     |               | $    | 51   |   |      | $ | 42   |  
|Segment profit as a % of net sales |               |      | 14.9 | % |      |   | 13.0 | %
|Segment Adjusted EBITDA            |               | $    | 67   |   |      | $ | 54   |  
|Assets as of September 30,         |               | $    | 494  |   |      | $ | 504  |  

Segment net sales to
external customers of home and garden control products during Fiscal 2010 versus Fiscal 2009 increased $19 million, or 6%, was driven by incentives to retailers and promotional campaigns during the year in both lawn and garden control products and
household control products.

Segment profitability in Fiscal 2010 increased to $51 million compared to $42 million in Fiscal
2009. Segment profitability as a percentage of sales in Fiscal 2010 increased to 14.9% from 13.0% in Fiscal 2009. This increase in segment profitability was attributable to savings from our global cost reduction initiatives announced in Fiscal 2009.
See Restructuring and Related Charges below, as well as Note 14, Restructuring and Related Charges, to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information regarding our
restructuring and related charges. The increase in profitability during Fiscal 2010 was tempered by a $2 million increase in cost of goods sold due to the revaluation of inventory and increased intangible asset amortization due to the revaluation of
our customer relationships in accordance with SFAS 141 as was required when we adopted fresh-start reporting upon our emergence from Chapter 11 of the Bankruptcy Code.

Segment Adjusted EBITDA in Fiscal 2010 was $67 million compared to $54 million in Fiscal 2009. The increase in Adjusted EBITDA during Fiscal 2010 was mainly driven by expanded promotions at our top
retailers and strong sales growth.

Segment assets as of September 30, 2010 decreased to $494 million from $504 million
at September 30, 2009. Goodwill and intangible assets, which are directly a result of the revaluation impacts of fresh-start reporting, at September 30, 2010 decreased to $410 million from $419 million at September 30, 2009. The
decrease of $9 million is driven by amortization associated with definite lived intangible assets.

Small Appliances



|                                   |               |      |     |   |      |   |    | 
|---------------------------------- | ------------- | ---- | --- | - | ---- | - | -- | 
|                                   |               | 2010 |     |   | 2009 |  
|                                   | (in millions) |     
|Net sales to external customers    |               | $    | 238 |   |      | $ |   | 
|Segment profit                     |               | $    | 13  |   |      | $ |   | 
|Segment profit as a % of net sales |               |      | 5.5 | % |      |   |   | 
|Segment Adjusted EBITDA            |               | $    | 90  |   |      | $ | 81 | 
|Assets as of September 30,         |               | $    | 863 |   |      | $ |   | 



56



---

##### Table of Contents

Segment net sales to external customers in Fiscal 2010 were $238 million. This represents
sales related to Russell Hobbs from the date of the consummation of the Merger, June 16, 2010, through the close of Fiscal 2010.

Segment profitability in Fiscal 2010 was $13 million, which includes an increase to Cost of goods sold as a result of the inventory write-up in conjunction with the Merger in accordance with ASC Topic
805: Business Combinations, (ASC 805). This represents segment profit from the operations of Russell Hobbs from the date of the consummation of the Merger, June 16, 2010 through the close of Fiscal 2010.

Segment Adjusted EBITDA in Fiscal 2010 was $90 million compared to $81 million in Fiscal 2009. The $9 million increase in
Fiscal 2010 is mainly driven by Russell Hobbs voluntarily exiting certain non-profitable brands and stock keeping units and implementing cost reduction initiatives.

ASC 805 requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. Accordingly, the Company performed a valuation of the
assets and liabilities of Russell Hobbs at June 16, 2010. See Note 15, Acquisitions, of Notes to Consolidated Financial Statements, included in this Annual Report on Form 10-K for additional information regarding the assets acquired in the
Merger. Segment assets at September 30, 2010 were $863 million. At September 30, 2010 goodwill and intangible assets recorded in connection with the Merger totaled $489 million.

Corporate Expense.Our corporate expense in Fiscal 2010 increased to $41 million from $34 million in Fiscal 2009. Our
corporate expense as a percentage of consolidated net sales in Fiscal 2010 increased slightly to 1.6% from 1.5%. The increase is primarily due to stock compensation expense of $17 million in Fiscal 2010 compared to $3 million of stock compensation
expense in Fiscal 2009.

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.



57



---

##### Table of Contents

The following table summarizes all restructuring and related charges we incurred in Fiscal
2010 and Fiscal 2009 (in millions):



|                                        |  |      |      |   |      |   |      | 
|--------------------------------------- |  | ---- | ---- | - | ---- | - | ---- | 
|                                        |  | 2010 |      |   | 2009 |  
|Costs included in cost of goods sold:   |  |      |      |   |      |   |      | 
|Latin America Initiatives:              |  |      |      |   |      |   |      | 
|Termination benefits                    |  | $    |     |   |      | $ | 0.2  | 
|Global Realignment Initiatives:         |  |      |      |   |      |   |      | 
|Termination benefits                    |  |      | 0.2  |   |      |   | 0.3  | 
|Other associated costs                  |  |      | (0.1 | ) |      |   | 0.9  | 
|Ningbo Exit Plan:                       |  |      |      |   |      |   |      | 
|Termination benefits                    |  |      |     |   |      |   | 0.9  | 
|Other associated costs                  |  |      | 2.1  |   |      |   | 8.6  | 
|Global Cost Reduction Initiatives:      |  |      |      |   |      |   |      | 
|Termination benefits                    |  |      | 2.6  |   |      |   | 0.2  | 
|Other associated costs                  |  |      | 2.3  |   |      |   | 2.3  | 
|                                        |  |      |      |   |      |   |      | 
|Total included in cost of goods sold    |  | $    | 7.1  |   |      | $ | 13.4 | 
|                                        |  |     
|Costs included in operating expenses:   |  |      |      |   |      |   |      | 
|United & Tetra integration:             |  |      |      |   |      |   |      | 
|Termination benefits                    |  | $    |     |   |      | $ | 2.3  | 
|Other associated costs                  |  |      |     |   |      |   | 0.3  | 
|European Initiatives:                   |  |      |      |   |      |   |      | 
|Termination benefits                    |  |      | (0.1 | ) |      |   |     | 
|Global Realignment Initiatives:         |  |      |      |   |      |   |      | 
|Termination benefits                    |  |      | 5.4  |   |      |   | 7.1  | 
|Other associated costs                  |  |      | (1.9 | ) |      |   | 3.5  | 
|Ningbo Exit Plan:                       |  |      |      |   |      |   |      | 
|Other associated costs                  |  |      |     |   |      |   | 1.3  | 
|Global Cost Reduction Initiatives:      |  |      |      |   |      |   |      | 
|Termination benefits                    |  |      | 4.3  |   |      |   | 6.6  | 
|Other associated costs                  |  |      | 9.3  |   |      |   | 11.3 | 
|                                        |  |      |      |   |      |   |      | 
|Total included in operating expenses    |  | $    | 17.0 |   |      | $ | 32.4 | 
|                                        |  |      |      |   |      |   |      | 
|Total restructuring and related charges |  | $    | 24.1 |   |      | $ | 45.8 | 
|                                        |  |      |      |   |      |   |      | 

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, which had previously been included in corporate expense, consisting of
research and development, manufacturing management, global purchasing, quality operations and inbound supply chain, is now included in each of 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 $4 million and $11 million of pretax restructuring and related charges during
Fiscal 2010 and Fiscal 2009, respectively, in connection with the Global Realignment Initiatives. Costs associated with these initiatives, which are expected to be incurred through June 30, 2011, relate primarily to severance and are projected
at approximately $89 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 approximately $2 million and $11 million of pretax restructuring and related charges during Fiscal 2010 and Fiscal 2009, respectively, in connection with the Ningbo Exit Plan. We have recorded pretax
and restructuring and related charges of approximately $29 million since the inception of the Ningbo Exit Plan.



58



---

##### Table of Contents

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
include 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 consultation, legal and accounting fees related to the evaluation of our
capital structure. We recorded $18 million and $20 million of pretax restructuring and related charges during Fiscal 2010 and Fiscal 2009, respectively, related to the Global Cost Reduction Initiatives. Costs associated with these initiatives, which
are expected to be incurred through March 31, 2014, are projected at approximately $65 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 the
acquisition, termination and related costs for transitional and certain other employees, integration related professional fees and other post business combination related expenses associated with the Merger of Russell Hobbs. 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.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 2010 and 2009, we tested our goodwill and indefinite-lived intangible assets. As a result of
this testing, we recorded a non-cash pretax impairment charge of $34 million in Fiscal 2009. The $34 million non-cash pretax impairment charge incurred in Fiscal 2009 reflects trade name intangible asset impairments of the following: $18 million
related to Global Pet Supplies; $15 million related to the Global Batteries and Personal Care segment; and $1 million related to the Home and Garden Business. See Note 3(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 2010 increased to $277 million from $190 million in Fiscal 2009. The increase was driven primarily by the following unusual items: (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, a non-cash charge; (ii) $13 million related to bridge commitment fees while we were
refinancing our debt; (iii) $7 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 related to a prepayment premium; and (v) $3 million 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. During Fiscal 2009 Old Spectrum
recorded Reorganization items expense (income), net, which represents a gain of approximately $(1,143) million. Reorganization items expense (income), net included the following: (i) gain on cancellation of debt of $(147) million;
(ii) gains in connection with fresh-start reporting adjustments of $(1,088) million; (iii) legal and professional fees of $75 million; (iv) write off deferred financing costs related to the Senior Subordinated Notes of $11 million;
and (v) a provision for rejected leases of $6 million. During Fiscal 2009, New Spectrum recorded Reorganization items expense (income), net which represents expense of $4 million related to professional fees. See Note 2, Voluntary
Reorganization Under Chapter 11, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for more information related to our reorganization under Chapter 11 of the Bankruptcy Code.

Income Taxes. Our effective tax rate on income from continuing operations was approximately (50.9)% for Fiscal 2010. Our
effective tax rate on losses from continuing operations is approximately 2.0% for Old Spectrum and (256)% for New Spectrum during Fiscal 2009. The primary drivers of the effective rate as compared to the U.S. statutory rate of 35% for Fiscal
2010 include tax expense recorded for an increase in the valuation allowance associated with our net U.S. deferred tax asset.



59



---

##### Table of Contents

As of September 30, 2010, we have U.S. federal and state net operating loss
carryforwards of approximately $1,087 million and $936 million, respectively. These net operating loss carryforwards expire through years ending in 2031, and we have foreign loss carryforwards of approximately $195 million, which will expire
beginning in 2011. Certain of the foreign net operating losses have indefinite carryforward periods. We are subject to an annual limitation on the use of our U.S. net operating losses that arose prior to our emergence from bankruptcy. 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 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 project that $296 million of the total U.S. federal and $463 million of the state net operating loss will expire unused. In addition, we project that $38 million of
the total foreign net operating loss carryforwards will expire unused. We have provided a full valuation allowance against these deferred tax assets.

We recognized income tax expense of approximately $124 million related to the gain on the settlement of liabilities subject to compromise and the modification of the senior secured credit facility in the
period from October 1, 2008 through August 30, 2009. This adjustment, net of a change in valuation allowance is embedded in Reorganization items expense (income), net. We have, in accordance with the IRC Section 108 reduced our net
operating loss carryforwards for cancellation of debt income that arose from our emergence from Chapter 11 of the Bankruptcy Code under IRC Section 382 (1)(6).

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 appropriate.

Our total valuation allowance established for the tax benefit of deferred tax assets
that may not be realized is approximately $331 million at September 30, 2010. Of this amount, approximately $300 million relates to U.S. net deferred tax assets and approximately $31 million relates to foreign net deferred tax assets. In
connection with the Merger, we established an additional valuation allowance of approximately $104 million related to acquired net deferred tax assets as part of acquisition accounting. In 2009, Old Spectrum recorded a reduction in the valuation
allowance against the U.S. net deferred tax asset exclusive of indefinite lived intangible assets primarily as a result of utilizing net operating losses to offset the gain on settlement of liabilities subject to compromise and the impact of the
fresh start reporting adjustments. New Spectrum recorded a reduction in the domestic valuation allowance of $47 million as a reduction to goodwill as a result of New Spectrum income. Our total valuation allowance established for the tax benefit of
deferred tax assets that may not be realized is approximately $133 million at September 30, 2009. Of this amount, approximately $109 million relates to U.S. net deferred tax assets and approximately $24 million relates to foreign net deferred
tax assets. We recorded a non-cash deferred income tax charge of approximately $257 million related to a valuation allowance against U.S. net deferred tax assets during Fiscal 2008. Included in the total is a non-cash deferred income tax charge of
approximately $4 million related to an increase in the valuation allowance against our net deferred tax assets in China in connection with the Ningbo Exit Plan. We also determined that a valuation allowance was no longer required in Brazil and thus
recorded a $31 million benefit to reverse the valuation allowance previously established. Our total valuation allowance, established for the tax benefit of deferred tax assets that may not be



60



---

##### Table of Contents

realized, is approximately $496 million at September 30, 2008. Of this amount, approximately $468 million relates to U.S. net deferred tax assets and approximately $28 million relates to
foreign net deferred tax assets.

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. During Fiscal 2009 we recorded a non- cash pretax impairment charge of approximately $34 million. The tax impact, prior to
consideration of the current year valuation allowance, of the impairment charges was a deferred tax benefit of approximately $13 million. See Goodwill and Intangibles Impairment above, as well as Note 3(c), Significant Accounting
Policies and PracticesIntangible Assets, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information regarding these non-cash impairment charges.

In addition, our income tax provision for the year ended September 30, 2010 reflects the correction of a prior period error which
increases our income tax provision by approximately $6 million.

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 of being sustained on audit, based on the technical merits of the position. As a result, we recognized no
cumulative effect adjustment at the time of adoption. As of September 30, 2010 and September 30, 2009, the total amount of unrecognized tax benefits that, if recognized, would affect the effective income tax rate in future periods was $13
million and $8 million, respectively. See Note 8, Income Taxes, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information.

Discontinued Operations. On November 5, 2008, the board of directors of Old Spectrum committed to the shutdown of the
growing products portion of the Home and Garden Business, which 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. We believe the shutdown is consistent with what we have done in other areas of our business to eliminate unprofitable
products from our portfolio. We completed the shutdown of the growing products portion of the Home and Garden Business during the second quarter of Fiscal 2009. Accordingly, the presentation herein of the results of continuing operations excludes
the growing products portion of the Home and Garden Business for all periods presented. See Note 9, Discontinued Operations, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for further details on the
disposal of the growing products portion of the Home and Garden Business. The following amounts related to the growing products portion of the Home and Garden Business have been segregated from continuing operations and are reflected as discontinued
operations during Fiscal 2010 and Fiscal 2009, respectively (in millions):



|                                                      |  |      |      |   |      |   |       |  
|----------------------------------------------------- |  | ---- | ---- | - | ---- | - | ----- | -
|                                                      |  | 2010 |      |   | 2009 |  
|Net sales                                             |  | $    |     |   |      | $ | 31.3  |  
|                                                      |  |      |      |   |      |   |       |  
|Loss from discontinued operations before income taxes |  | $    | (2.5 | ) |      | $ | (90.9 | )
|Provision for income tax benefit                      |  |      | 0.2  |   |      |   | (4.5  | )
|                                                      |  |      |      |   |      |   |       |  
|Loss from discontinued operations, net of tax         |  | $    | (2.7 | ) |      | $ | (86.4 | )
|                                                      |  |      |      |   |      |   |       |  

Fiscal Year Ended September 30, 2009 Compared to Fiscal Year Ended September 30, 2008

Fiscal 2009, when referenced within this Managements Discussion and Analysis of Financial Condition and Results of Operations
included in this Annual Report on Form 10-K, includes the combined results of Old Spectrum for the period from October 1, 2008 through August 30, 2009 and New Spectrum for the period from August 31, 2009 through September 30,
2009.



61



---

##### Table of Contents

Highlights of consolidated operating results

During Fiscal 2009 and Fiscal 2008, we have presented the growing products portion of the Home and Garden Business as discontinued
operations. During Fiscal 2008 we have presented the Canadian division of the Home and Garden Business as discontinued operations. Our board of directors of Old Spectrum committed to the shutdown of the growing products portion of the Home and
Garden Business in November 2008 and the shutdown was completed during the second quarter of our Fiscal 2009. The Canadian division of the Home and Garden Business was sold on November 1, 2007. See Note 9, Discontinued Operations of Notes to
Consolidated Financial Statements, included in this Annual Report on Form 10-K for additional information regarding the shutdown of the growing products portion of the Home and Garden Business and the sale of the Canadian division of the Home and
Garden Business. As a result, and unless specifically stated, all discussions regarding Fiscal 2009 and Fiscal 2008 only reflect results from our continuing operations.

Net Sales.Net sales for Fiscal 2009 decreased to $2,231 million from $2,427 million in Fiscal 2008, an 8.1% decrease. The following table details the principal components of the change in
net sales from Fiscal 2008 to Fiscal 2009 (in millions):



|                                                        |  |           |       |  
|------------------------------------------------------- |  | --------- | ----- | -
|                                                        |  | Net Sales |      
|Fiscal 2008 Net Sales                                   |  | $         | 2,427 |  
|Increase in electric personal care product sales        |  |           | 4     |  
|Decrease in consumer battery sales                      |  |           | (27   | )
|Decrease in pet supplies sales                          |  |           | (14   | )
|Decrease in lighting product sales                      |  |           | (14   | )
|Decrease in home and garden product sales               |  |           | (13   | )
|Decrease in electric shaving and grooming product sales |  |           | (3    | )
|Foreign currency impact, net                            |  |           | (129  | )
|                                                        |  |           |       |  
|Fiscal 2009 Net Sales                                   |  | $         | 2,231 |  
|                                                        |  |           |       |  

Consolidated net sales by product line for Fiscal 2009 and 2008 are as follows (in millions):



|                                       |  |             |       |  |      |   |       | 
|-------------------------------------- |  | ----------- | ----- |  | ---- | - | ----- | 
|                                       |  | Fiscal Year |      
|                                       |  | 2009        |       |  | 2008 |  
|Product line net sales                 |  |             |       |  |      |   |       | 
|Consumer batteries                     |  | $           | 819   |  |      | $ | 916   | 
|Pet supplies                           |  |             | 574   |  |      |   | 599   | 
|Home and garden control products       |  |             | 322   |  |      |   | 334   | 
|Electric shaving and grooming products |  |             | 225   |  |      |   | 247   | 
|Electric personal care products        |  |             | 211   |  |      |   | 231   | 
|Portable lighting products             |  |             | 80    |  |      |   | 100   | 
|                                       |  |             |       |  |      |   |       | 
|Total net sales to external customers  |  | $           | 2,231 |  |      | $ | 2,427 | 
|                                       |  |             |       |  |      |   |       | 

Global consumer battery sales during Fiscal 2009 decreased $97 million, or 11%, compared to Fiscal 2008,
primarily driven by unfavorable foreign exchange impacts of $70 million coupled with decreased consumer battery sales of $50 million and $15 million in Latin America and Europe, respectively. These declines were partially offset by increased
consumer battery sales, mainly alkaline batteries, in North America of $38 million. The alkaline battery sales increase in North America is mainly due to higher volume at a major customer coupled with new distribution. The decreased consumer battery
sales in Latin America continues to be a result of a slowdown in economic conditions in all countries and inventory de-stocking at retailers mainly in Brazil. Zinc carbon batteries decreased $35 million while alkaline battery sales are down $15
million in Latin America. The decreased consumer battery sales within Europe are primarily attributable to the decline in alkaline battery sales due to a slowdown in economic conditions and our continued efforts to exit unprofitable or marginally
profitable private label battery sales.



62



---

##### Table of Contents

Pet supplies product sales during Fiscal 2009 decreased $25 million, or 4%, compared to
Fiscal 2008. The decrease of $25 million is primarily attributable to decreased aquatics sales of $27 million coupled with unfavorable foreign exchange impacts of $11 million. These decreases were partially offset by increases of $13 million within
specialty pet products. The decrease in aquatics sales of $27 million during Fiscal 2009 was attributable to declines in the U.S., Europe and Pacific Rim of $14 million, $10 million and $3 million, respectively. The declines in the U.S. were a
result of decreased sales of large equipment, such as aquariums, driven by softness in this product category due to the macroeconomic slowdown as we maintained our market share in the category. The declines in Europe were due to inventory
de-stocking at retailers and weak filtration product sales, both a result of the slowdown in economic conditions. The declines the Pacific Rim were also a result of the slowdown in economic conditions. The increase of $13 million in specialty pet
products is a result of increased sales of our Dingo brand dog treats coupled with price increases on select products, primarily in the U.S.

Sales of home and garden control products during Fiscal 2009 versus Fiscal 2008 decreased $12 million, or 4%, primarily due to our retail customers managing their inventory levels to unprecedented low
levels, combined with such retailers ending their outdoor lawn and garden control season six weeks early as compared to prior year seasons and our decision to exit certain unprofitable or marginally profitable products. This decrease in sales within
lawn and garden control products was partially offset by increased sales of household insect control products.

Electric
shaving and grooming product sales during Fiscal 2009 decreased $22 million, or 9%, compared to Fiscal 2008 primarily due to unfavorable foreign exchange translation of $19 million. The decline of $3 million, excluding unfavorable foreign
exchange, was due to a $7 million decrease of sales within North America, which was partially offset by slight increases within Europe and Latin America of $3 million and $1 million, respectively. The decreased sales of electric shaving and grooming
products within North America were a result of delayed inventory stocking at certain of our major customers for the 2009 holiday season which in turn resulted in a delay of our product shipments that historically would have been recorded during the
fourth quarter of our fiscal year. We anticipate the first quarter sales of Fiscal 2010 to be positively impacted versus our historical results due to this delay. The increases within Europe and Latin America were driven by new product launches,
pricing and promotions.

Electric personal care product sales during Fiscal 2009 decreased $20 million, or 9%, when compared
to Fiscal 2008. The decrease of $20 million during Fiscal 2009 was attributable to unfavorable foreign exchange impacts of $24 million and declines in North America of $7 million. These decreases were partially offset by increases within Europe and
Latin America of $8 million and $3 million, respectively. Similar to our electric shaving and grooming products sales, the decreased sales of electric personal care products within North America was a result of delayed holiday inventory stocking by
our customers which in turn resulted in a delay of our product shipments that historically would have been recorded during the fourth quarter of our fiscal year. We expect the first quarter sales of Fiscal 2010 to be positively impacted versus our
historical results due to this delay. The increased sales within Europe and Latin America were a result of successful product launches, mainly in womens hair care.

Sales of portable lighting products in Fiscal 2009 decreased $20 million, or 20%, compared to Fiscal 2008 as a result of unfavorable foreign exchange impacts of $5 million coupled with declines in North
America, Latin America and Europe of $9 million, $3 million and $1 million, respectively. The decreases across all regions are a result of the slowdown in economic conditions and decreased market demand.

Gross Profit. Gross profit for Fiscal 2009 was $817 million versus $920 million for Fiscal 2008. Our gross profit margin
for Fiscal 2009 decreased slightly to 36.6% from 37.9% in Fiscal 2008. Gross profit was lower in Fiscal 2009 due to unfavorable foreign exchange impacts of $58 million. As a result of our adoption of fresh-start reporting upon emergence from Chapter
11 of the Bankruptcy Code, in accordance with SFAS No. 141, Business Combinations, (SFAS 141), inventory balances were revalued as of August 30, 2009 resulting in



63



---

##### Table of Contents

an increase in such inventory balances of $49 million. As a result of the inventory revaluation, New Spectrum recognized $16 million in additional cost of goods sold in Fiscal 2009. The remaining
$33 million of the inventory revaluation was recorded during the first quarter of Fiscal 2010. These inventory revaluation adjustments are non-cash charges. In addition, in connection with our adoption of fresh-start reporting, and in accordance
with ASC 852, we revalued our property, plant and equipment as of August 30, 2009 which resulted in an increase to such assets of $34 million. As a result of the revaluation of property, plant and equipment, during Fiscal 2009 we incurred an
additional $2 million of depreciation charges within cost of goods sold. We anticipate higher cost of goods sold in future years as a result of the revaluation of our property, plant and equipment. Furthermore, as a result of emergence from Chapter
11 of the Bankruptcy Code, we anticipate lower interest costs in future years which should enable us to invest more in capital expenditures into our business and, as a result, such higher future capital spending would also increase our depreciation
expense in future years. See Note 2, Voluntary Reorganization Under Chapter 11, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for more information related to our reorganization under Chapter 11 of the
Bankruptcy Code and fresh-start reporting. Offsetting the unfavorable impacts to our gross margin, we incurred $13 million of Restructuring and related charges, within Costs of goods sold, during Fiscal 2009, compared to $16 million in Fiscal 2008.
The $13 million in Fiscal 2009 primarily related to the 2009 Cost Reduction Initiatives and the Ningbo Exit Plan, while the Fiscal 2008 charges were primarily related to the Ningbo Exit Plan. See Restructuring and Related Charges
below, as well as Note 15, 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 Expense. Operating expenses for Fiscal 2009 totaled $659 million versus $1,605 million for Fiscal 2008. This $946
million decrease in operating expenses for Fiscal 2009 versus Fiscal 2008 was primarily driven by lower impairment charges recorded in Fiscal 2009 versus Fiscal 2008. During Fiscal 2009 we recorded non-cash impairment charges of $34 million versus
$861 million of non-cash impairment charges recorded in Fiscal 2008. The Fiscal 2009 impairment charges related to the write down of the carrying value of indefinite-lived intangible assets to fair value while the Fiscal 2008 impairment charges
related to the write down of the carrying value of goodwill and indefinite-lived intangible assets to fair value. These impairment charges were recorded in accordance with both ASC Topic 350: Intangibles-Goodwill and Other,
(ASC 350) and ASC Topic 360: Property, Plant and Equipment, (ASC 360). See Goodwill and Intangibles Impairment below, as well as Note 3(c), Significant Accounting Policies and
PracticesIntangible Assets, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information regarding these non-cash impairment charges. The decrease in operating expenses in Fiscal 2009
versus Fiscal 2008 is also attributable to the positive impact related to foreign exchange of $37 million in Fiscal 2009 coupled with the non-recurrence of a charge in Fiscal 2008 of $18 million associated with the depreciation and amortization
related to the assets of the Home and Garden Business incurred as a result of our reclassification of the Home and Garden Business from discontinued operations to continuing. See Introduction above and Segment
ResultsHome and Garden below, as well as Note 1, Description of Business, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information regarding the reclassification of
the Home and Garden Business. Tempering the decrease in operating expenses from Fiscal 2008 to Fiscal 2009 was an increase in restructuring and related charges. Restructuring and related charges included in operating expenses were $32 million in
Fiscal 2009 and $23 million in Fiscal 2008. The Fiscal 2009 Restructuring and related charges are primarily attributable to the 2009 Cost Reduction Initiatives, while the Fiscal 2008 charges are primarily attributable to various cost reduction
initiatives in connection with our global realignment announced in January 2007. See Restructuring and Related Charges below, as well as Note 15, 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 (Loss).Operating income of approximately $157 million was recognized in Fiscal 2009 compared to an
operating loss in Fiscal 2008 of $685 million. The change in operating income (loss) is directly attributable to the impact of the previously discussed non-cash impairment charge of $34 million in Fiscal 2009 compared to the non-cash impairment
charge of $861 million during Fiscal 2008.



64



---

##### Table of Contents

Segment Results. Operating segment profits do not include restructuring and
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. In addition, certain general and administrative expenses necessary to reflect the operating segments on a standalone basis have
been included in the determination of operating segment profits. Corporate expenses include primarily general and administrative expenses associated with corporate overhead and global long-term incentive compensation plans.

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 12, Segment Information, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.

Global Batteries & Personal Care



|                                   |  |               |       |   |      |   |       |  
|---------------------------------- |  | ------------- | ----- | - | ---- | - | ----- | -
|                                   |  | 2009          |       |   | 2008 |  
|                                   |  | (in millions) |      
|Net sales to external customers    |  | $             | 1,335 |   |      | $ | 1,494 |  
|Segment profit                     |  | $             | 165   |   |      | $ | 163   |  
|Segment profit as a % of net sales |  |               | 12.4  | % |      |   | 10.9  | %
|Assets as of September 30,         |  | $             | 1,608 |   |      | $ | 1,183 |  

Segment net sales to
external customers in Fiscal 2009 decreased $159 million to $1,335 million from $1,494 million during Fiscal 2008, representing an 11% decrease. Unfavorable foreign currency exchange translation impacted net sales in Fiscal 2009 by approximately
$118 million in comparison to Fiscal 2008. Consumer battery sales for Fiscal 2009 decreased to $819 million when compared to Fiscal 2008 sales of $916 million, principally due to a negative foreign currency impact of $70 million coupled with a
decline in zinc carbon battery sales of $32 million. The $32 million decrease in zinc carbon batteries is primarily concentrated in Latin America, as Latin American sales were down $35 million in Fiscal 2009 compared to Fiscal 2008 as a result of a
slowdown in economic conditions and inventory de-stocking at retailers mainly in Brazil. Excluding the impact of foreign currency exchange translation, sales of alkaline batteries increased $5 million as we experienced gains in North America of $37
million, which were offset by declines within Europe and Latin America of $17 million and $15 million, respectively. The increased alkaline battery sales in North America were driven by an increase in market share, as consumers opt for our value
proposition during the weakening economic conditions in the U.S. The decreased alkaline battery sales in Europe were the result of our continued efforts to exit from unprofitable or marginally profitable private label battery sales, as well as
certain second tier branded battery sales. We are continuing our efforts to promote profitable growth and therefore, expect to continue to exit certain low margin business as appropriate to create a more favorable mix of branded versus private label
products. The decrease in Latin American alkaline battery sales was again due to the slowdown in economic activity coupled with inventory de-stocking at retailers mainly in Brazil. Net sales of electric shaving and grooming products in Fiscal 2009
decreased by $21 million, or 8%, primarily as a result of negative foreign exchange impacts of $19 and declines in North America of $7 million. These declines were partially offset by increases within Europe and Latin America of $3 million and $2
million, respectively. The declines within North America are primarily attributable to delayed inventory stocking at certain of our major customers for the 2009 holiday season which in turn resulted in a delay of our product shipments that
historically would have been



65



---

##### Table of Contents

recorded during the fourth quarter of our fiscal year. The slight increases in Europe and Latin America are a result of successful new product launches. Electric personal care sales decreased by
$20 million, a decrease of 9% over Fiscal 2008. Unfavorable foreign exchange translation impacted net sales by approximately $24 million. Excluding unfavorable foreign exchange, we experienced an increase of $4 million within electric personal care
products. Europe and Latin America increased $8 million and $3 million, respectively, while North American electric personal care product sales decreased $8 million. Similar to our electric shaving and grooming products sales, the decreased sales of
electric personal care products within North America was a result of delayed holiday inventory stocking at certain of our customers which in turn has resulted in a delay of our product shipments that historically would have been recorded during the
fourth quarter of our fiscal year. The increased sales within Europe and Latin America were due to strong growth in our womens hair care products. Net sales of portable lighting products for Fiscal 2009 decreased to $80 million as compared to
sales of $100 million for Fiscal 2008. The portable lighting product sales decrease was driven by unfavorable foreign exchange impact of $5 million, coupled with declines in sales in North America, Europe and Latin America of $9 million, $3 million
and $2 million, respectively. The decrease across all regions was driven by softness in the portable lighting products category as a result of the global economic slowdown.

Segment profitability in Fiscal 2009 increased slightly to $165 million from $163 million in Fiscal 2008. Segment profitability as a percentage of net sales increased to 12.4% in Fiscal 2009 as compared
with 10.9% in Fiscal 2008. The increase in segment profitability during Fiscal 2009 was primarily the result of cost savings from the Ningbo Exit Plan and our global realignment announced in January 2007. See Restructuring and Related
Charges below, as well as Note 15, 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. Tempering the increase in segment profitability were decreased sales during Fiscal 2009 as compared to Fiscal 2008 which was primarily driven by unfavorable foreign exchange and softness in certain product categories due to the global
economic slowdown. In addition, as a result of our adoption of fresh-start reporting upon emergence from Chapter 11 of the Bankruptcy Code, in accordance with SFAS 141, inventory balances were revalued as of August 30, 2009 resulting in an
increase in such Global Batteries & Personal Care inventory balances of $27 million. As a result of the inventory revaluation, Global Batteries & Personal Care recognized $10 million in additional cost of goods sold in Fiscal 2009.
The remaining $17 million of the inventory revaluation was recorded during the first quarter of Fiscal 2010. See Net Sales above for further discussion on our Fiscal 2009 sales.

Segment assets at September 30, 2009 increased to $1,608 million from $1,183 million at September 30, 2008. The increase is
primarily a result of the revaluation impacts of fresh-start reporting. See Note 2, Voluntary Reorganization Under Chapter 11, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information
related to fresh-start reporting. Partially offsetting this increase in assets was a non-cash impairment charge of certain intangible assets in Fiscal 2009 of $15 million. See Note 3(i), Significant Accounting Policies and PracticesIntangible
Assets, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information regarding this impairment charge and the amount attributable to Global Batteries & Personal Care. Goodwill and
intangible assets at September 30, 2009 totaled approximately $909 million and are directly a result of the revaluation impacts of fresh-start reporting. Goodwill and intangible assets at September 30, 2008 total approximately $416 million
and primarily relate to the ROV Ltd., VARTA AG, Remington Products Company, L.L.C. (Remington Products) and Microlite S.A. (Microlite) acquisitions.

Global Pet Supplies



|                                   |  |               |      |   |      |   |      |  
|---------------------------------- |  | ------------- | ---- | - | ---- | - | ---- | -
|                                   |  | 2009          |      |   | 2008 |  
|                                   |  | (in millions) |     
|Net sales to external customers    |  | $             | 574  |   |      | $ | 599  |  
|Segment profit                     |  | $             | 65   |   |      | $ | 69   |  
|Segment profit as a % of net sales |  |               | 11.3 | % |      |   | 11.5 | %
|Assets as of September 30,         |  | $             | 867  |   |      | $ | 700  |  



66



---

##### Table of Contents

Segment net sales to external customers in Fiscal 2009 decreased to $574 million from $599
million in Fiscal 2008, representing a decrease of $25 million, or 4%. Unfavorable foreign currency exchange translation impacted net sales in Fiscal 2009 compared to Fiscal 2008 by approximately $11 million. Worldwide aquatic sales for Fiscal 2009
decreased to $360 million when compared to sales of $398 million in Fiscal 2008. The decrease in worldwide aquatic sales was a result of unfavorable foreign exchange impacts of $11 million coupled with declines of $14 million, $10 million and $3
million in the United States, Europe and the Pacific Rim, respectively. The declines in the U.S. were a result of decreased sales of large equipment, primarily aquariums, due to the slowdown in economic conditions. The declines in Europe were due to
inventory de-stocking at retailers and the poor weather season, which impacted our outdoor pond product sales. The declines the Pacific Rim were as a result of the slowdown in economic conditions. Companion animal net sales increased to $214 million
in Fiscal 2009 compared to $201 million in Fiscal 2008, an increase of $13 million, or 6%. We continued to see strong growth, and foresee further growth in Fiscal 2010, in companion animal related product sales in the U.S., driven by our Dingo brand
dog treats, coupled with increased volume in Europe and the Pacific Rim associated with the continued introductions of companion animal products.

Segment profitability in Fiscal 2009 decreased slightly to $65 million from $69 million in Fiscal 2008. Segment profitability as a percentage of sales in Fiscal 2009 also decreased slightly to 11.3% from
11.5% during Fiscal 2008. This decrease in segment profitability and profitability margin was primarily due to decreased sales, as discussed above, coupled with increases in cost of goods sold driven by higher input costs, which negatively impacted
margins, as price increases lagged behind such cost increases. Tempering the decrease in profitability and profitability margin were lower operating expenses, principally selling related expenses. In addition, as a result of our adoption of
fresh-start reporting upon emergence from Chapter 11 of the Bankruptcy Code, in accordance with SFAS 141, inventory balances were revalued as of August 30, 2009 resulting in an increase in such Global Pet Supplies inventory balances of $19
million. As a result of the inventory revaluation, Global Pet Supplies recognized $5 million in additional cost of goods sold in Fiscal 2009. The remaining $14 million of the inventory revaluation was recorded during the first quarter of Fiscal
2010.

Segment assets as of September 30, 2009 increased to $867 million from $700 million at September 30, 2008.
The increase is primarily a result of the revaluation impacts of fresh-start reporting. See Note 2, Voluntary Reorganization Under Chapter 11, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for more
information related to fresh-start reporting. Partially offsetting this increase in assets was a non-cash impairment charge of certain intangible assets in Fiscal 2009 of $19 million. See Note 3(i), Significant Accounting Policies and
PracticesIntangible Assets, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information regarding this impairment charge and the amount attributable to Global Pet Supplies. Goodwill and
intangible assets as of September 30, 2009 total approximately $618 million and are directly a result of the revaluation impacts of fresh-start reporting. Goodwill and intangible assets as of September 30, 2008 total approximately $447
million and primarily relate to the acquisitions of Tetra and the United Pet Group division of United.

Home and Garden Business



|                                   |  |               |      |   |      |   |     |  
|---------------------------------- |  | ------------- | ---- | - | ---- | - | --- | -
|                                   |  | 2009          |      |   | 2008 |  
|                                   |  | (in millions) |     
|Net sales to external customers    |  | $             | 322  |   |      | $ | 334 |  
|Segment profit                     |  | $             | 42   |   |      | $ | 29  |  
|Segment profit as a % of net sales |  |               | 13.0 | % |      |   | 8.7 | %
|Assets as of September 30,         |  | $             | 504  |   |      | $ | 290 |  

Segment net sales to
external customers of home and garden control products during Fiscal 2009 versus Fiscal 2008 decreased $12 million, or 4%, primarily due to our retail customers managing their inventory levels to unprecedented low levels, combined with such
retailers ending their outdoor lawn and garden control season six weeks early as compared to prior year seasons and our decision to exit certain unprofitable or marginally



67



---

##### Table of Contents

profitable products. This decrease in sales within lawn and garden control products were partially offset by increased sales of household insect control products, driven by increased sales to a
major customer.

Segment profitability in Fiscal 2009 increased to $42 million from $29 million in Fiscal 2008. Segment
profitability as a percentage of sales in Fiscal 2009 increased to 13.0% from 8.7% in Fiscal 2008. The increase in segment profit for Fiscal 2009 was the result of declining commodity costs associated with our lawn and garden control products and
the non-recurrence of a charge incurred during Fiscal 2008 of approximately $11 million that related to depreciation and amortization expense related to Fiscal 2007. From October 1, 2006 through December 30, 2007, the Home and Garden
Business was designated as discontinued operations. In accordance with generally excepted accounting principles, while designated as discontinued operations we ceased recording depreciation and amortization expense associated with the assets of this
business. As a result of our reclassification of that business to a continuing operation we recorded a catch-up of depreciation and amortization expense, which totaled $14 million, for the five quarters during which this business was designated as
discontinued operations. In addition, as a result of our adoption of fresh-start reporting upon emergence from Chapter 11 of the Bankruptcy Code, in accordance with SFAS 141, inventory balances were revalued as of August 30, 2009 resulting in
an increase in such Home and Garden inventory balances of $3 million. As a result of the inventory revaluation, Home and Garden recognized $1 million in additional cost of goods sold in Fiscal 2009. The remaining $2 million of the inventory
revaluation was recorded during the first quarter of Fiscal 2010.

Segment assets as of September 30, 2009 increased to
$504 million from $290 million at September 30, 2008. The increase is primarily a result of the revaluation impacts of fresh-start reporting. See Note 2, Voluntary Reorganization Under Chapter 11, of Notes to Consolidated Financial Statements
included in this Annual Report on Form 10-K for more information related to fresh-start reporting. Goodwill and intangible assets as of September 30, 2009 total approximately $419 million and are directly a result of the revaluation impacts of
fresh-start reporting. Intangible assets as of September 30, 2008 total approximately $115 million and primarily relate to the acquisition of the United Industries division of United.

Corporate Expense.Our corporate expense in Fiscal 2009 decreased to $34 million from $45 million in Fiscal 2008. Our
corporate expense as a percentage of consolidated net sales in Fiscal 2009 decreased to 1.5% from 1.9%. The decrease in expense is partially a result of the non-recurrence of a $9 million charge incurred in Fiscal 2008 to write off professional fees
incurred in connection with the termination of substantive negotiations with a potential purchaser of our Global Pet Supplies business.

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.



68



---

##### Table of Contents

The following table summarizes all restructuring and related charges we incurred in 2009 and
2008 (in millions):



|                                        |  |      |      |  |      |   |      |  
|--------------------------------------- |  | ---- | ---- |  | ---- | - | ---- | -
|                                        |  | 2009 |      |  | 2008 |  
|Costs included in cost of goods sold:   |  |      |      |  |      |   |      |  
|United & Tetra integration:             |  |      |      |  |      |   |      |  
|Other associated costs                  |  |      |     |  |      |   | 0.3  |  
|European initiatives:                   |  |      |      |  |      |   |      |  
|Termination benefits                    |  |      |     |  |      |   | (0.8 | )
|Other associated costs                  |  |      |     |  |      |   | 0.1  |  
|Latin America initiatives:              |  |      |      |  |      |   |      |  
|Termination benefits                    |  |      | 0.2  |  |      |   |     |  
|Other associated costs                  |  |      |     |  |      |   | 0.3  |  
|Global Realignment initiatives:         |  |      |      |  |      |   |      |  
|Termination benefits                    |  |      | 0.3  |  |      |   | 0.1  |  
|Other associated costs                  |  |      | 0.9  |  |      |   | 0.1  |  
|Ningbo Exit Plan:                       |  |      |      |  |      |   |      |  
|Termination benefits                    |  |      | 0.9  |  |      |   | 1.2  |  
|Other associated costs                  |  |      | 8.6  |  |      |   | 15.2 |  
|Global Cost Reduction Initiatives:      |  |      |      |  |      |   |      |  
|Termination benefits                    |  |      | 0.2  |  |      |   |     |  
|Other associated costs                  |  |      | 2.3  |  |      |   |     |  
|                                        |  |      |      |  |      |   |      |  
|Total included in cost of goods sold    |  | $    | 13.4 |  |      | $ | 16.5 |  
|                                        |  |     
|Costs included in operating expenses:   |  |      |      |  |      |   |      |  
|United & Tetra integration:             |  |      |      |  |      |   |      |  
|Termination benefits                    |  | $    | 2.3  |  |      | $ | 2.0  |  
|Other associated costs                  |  |      | 0.3  |  |      |   | 0.9  |  
|Latin America initiatives:              |  |      |      |  |      |   |      |  
|Termination benefits                    |  |      |     |  |      |   | 0.1  |  
|Global Realignment:                     |  |      |      |  |      |   |      |  
|Termination benefits                    |  |      | 7.1  |  |      |   | 12.3 |  
|Other associated costs                  |  |      | 3.5  |  |      |   | 7.5  |  
|Ningbo Exit Plan:                       |  |      |      |  |      |   |      |  
|Other associated costs                  |  |      | 1.3  |  |      |   |     |  
|Global Cost Reduction Initiatives:      |  |      |      |  |      |   |      |  
|Termination benefits                    |  |      | 6.6  |  |      |   |     |  
|Other associated costs                  |  |      | 11.3 |  |      |   |     |  
|                                        |  |      |      |  |      |   |      |  
|Total included in operating expenses    |  | $    | 32.4 |  |      | $ | 22.8 |  
|                                        |  |      |      |  |      |   |      |  
|Total restructuring and related charges |  | $    | 45.8 |  |      | $ | 39.3 |  
|                                        |  |      |      |  |      |   |      |  

In connection with the acquisitions of United and Tetra in Fiscal 2005, we implemented a series of
initiatives to optimize the global resources of the combined companies. These initiatives included: integrating all of Uniteds home and garden administrative services, sales and customer service functions into our operations in Madison,
Wisconsin; converting all information systems to SAP; consolidating Uniteds home and garden manufacturing and distribution locations in North America; rationalizing the North America supply chain; and consolidating administrative,
manufacturing and distribution facilities at our Global Pet Supplies business. In addition, certain corporate functions were shifted to our global headquarters in Atlanta, Georgia. We have recorded approximately $(1) million of restructuring and
related charges during Fiscal 2009, to adjust prior estimates and eliminate the accrual, and no charges during Fiscal 2008.



69



---

##### Table of Contents

Effective October 1, 2006, we suspended initiatives to integrate the activities of the
Home and Garden Business into our operations in Madison, Wisconsin. We recorded $1 million of restructuring and related charges during Fiscal 2009 and de minimis restructuring and related charges in Fiscal 2008 in connection with the integration of
the United home and garden business.

Integration activities within Global Pet Supplies were substantially complete as of
September 30, 2007. Global Pet Supplies integration activities consisted primarily of the rationalization of manufacturing facilities and the optimization of our distribution network. As a result of these integration initiatives, two pet
supplies facilities were closed in 2005, one in Brea, California and the other in Hazleton, Pennsylvania, one pet supply facility was closed in 2006, in Hauppauge, New York and one pet supply facility was closed in 2007 in Moorpark, California. We
recorded approximately $2 million and $3 million of pretax restructuring and related charges during Fiscal 2009 and Fiscal 2008, respectively.

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 include 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 in Fiscal 2009 and approximately $(1) million in pretax restructuring and related charges, representing the true-up of reserve balances, during Fiscal 2008.

We have implemented a series of initiatives within our Global Batteries & Personal Care business segment in Latin America to reduce operating costs (the Latin American Initiatives).
In connection with the Latin American Initiatives, which are substantially complete, we implemented a series of initiatives within the Global Batteries & Personal Care segment in Latin America to reduce operating costs. The initiatives
include the reduction of certain manufacturing operations in Brazil and the restructuring of management, sales, marketing and support functions. We recorded de minimis pretax restructuring and related charges during both Fiscal 2009 and Fiscal 2008
in connection with the Latin American Initiatives.

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, which had previously been included
in corporate expense, consisting of research and development, manufacturing management, global purchasing, quality operations and inbound supply chain, is now included in each of the operating segments. See also Note 12, Segment Results, of Notes to
Consolidated Financial Statements included in this Annual Report on Form 10-K for additional discussion on the realignment of our 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 $11 million and $20 million of pretax restructuring and related charges during Fiscal 2009 and Fiscal
2008, respectively, in connection with the Global Realignment Initiatives. Costs associated with these initiatives relate primarily to severance.

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).

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 include headcount



70



---

##### Table of Contents

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 consultation, legal and accounting
fees related to the evaluation of our capital structure.

Goodwill and Intangibles Impairment.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 2009 and 2008, we tested our goodwill and
indefinite-lived intangible assets. As a result of this testing, we recorded a non-cash pretax impairment charge of $34 million and $861 million in Fiscal 2009 and Fiscal 2008, respectively. The $34 million non-cash pretax impairment charge incurred
in Fiscal 2009 reflects trade name intangible asset impairments of the following: $18 million related to Global Pet Supplies; $15 million related to the Global Batteries and Personal Care segment; and $1 million related to the Home and Garden
Business. The $861 million non-cash pretax impairment charge incurred in Fiscal 2008 reflects $602 million related to the impairment of goodwill and $265 million related to the impairment of trade name intangible assets. Of the $602 million goodwill
impairment; $426 million was associated with our Global Pet Supplies segment, $160 million was associated with the Home and Garden Business and $16 million was associated with our Global Batteries and Personal Care segment. Of the $265 million trade
name intangible assets impairment; $98 million was within our Global Pet Supplies segment, $86 million was within our Global Batteries and Personal Care segment and $81 million was within the Home and Garden segment. See Note 3(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 these impairment charges.

Interest Expense. Interest expense in Fiscal 2009 decreased to $190 million from $229 million in Fiscal 2008. The decrease
in Fiscal 2009 is primarily due to ceasing the accrual of interest on Old Spectrums Senior Subordinated Notes, partially offset by the accrual of the default interest on our U.S. Dollar Term B Loan and Euro facility and ineffectiveness
related to interest rate derivative contracts. Contractual interest not accrued on the Senior Subordinated Notes during Fiscal 2009 was $56 million. See Liquidity and Capital ResourcesDebt Financing Activities and Note 8, Debt, of Notes to
Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information regarding our outstanding debt.

Reorganization Items.During Fiscal 2009, Old Spectrum, in connection with our reorganization under Chapter 11 of the Bankruptcy Code, recorded Reorganization items expense (income), net,
which represents a gain of approximately $(1,143) million. Reorganization items expense (income), net included the following: (i) gain on cancellation of debt of $(147) million; (ii) gains in connection with fresh-start reporting
adjustments of $(1,088) million; (iii) legal and professional fees of $75 million; (iv) write off deferred financing costs related to the Senior Subordinated Notes of $11 million; and (v) a provision for rejected leases of $6 million.
During Fiscal 2009, New Spectrum recorded Reorganization items expense (income), net which represents expense of $4 million related to professional fees. See Note 2, Voluntary Reorganization Under Chapter 11, of Notes to Consolidated Financial
Statements included in this Annual Report on Form 10-K for more information related to our reorganization under Chapter 11 of the Bankruptcy Code.

Income Taxes.Our effective tax rate on losses from continuing operations is approximately 2.0% for Old Spectrum and (256)% for New Spectrum during Fiscal 2009. Our effective tax rate
on income from continuing operations was approximately 1.0% for Fiscal 2008. The primary drivers of the change in our effective rate for New Spectrum for Fiscal 2009 as compared to Fiscal 2008 relate to residual income taxes recorded on the actual
and deemed distribution of foreign earnings in Fiscal 2009. The change in the valuation allowance related to these dividends was recorded against goodwill as an adjustment for release of valuation allowance. The primary drivers for Fiscal 2008
include tax expense recorded for an increase in the valuation allowance associated with our net U.S. deferred tax asset and the tax impact of the impairment charges.

As of September 30, 2009, we had U.S. federal and state net operating loss carryforwards of approximately $598 and $643 million, respectively, which will expire between 2010 and 2029, and we have
foreign net



71



---

##### Table of Contents

operating loss carryforwards of approximately $138 million, which will expire beginning in 2010. Certain of the foreign net operating losses have indefinite carryforward periods. As of
September 30, 2008 we had U.S. federal, foreign and state net operating loss carryforwards of approximately $960, $854 and $142 million, respectively, which, at that time, were scheduled to expire between 2009 and 2028. Certain of the foreign
net operating losses have indefinite carryforward periods. We are subject to an annual limitation on the use of our net operating losses that arose prior to its emergence from bankruptcy. We have had multiple changes of ownership, as defined under
Internal Revenue Code (IRC) Section 382, that subject us to U.S. federal and state net operating losses and other tax attributes to certain limitations. The annual limitation 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. Based on these factors, we project that $149 million of the total U.S. federal and $311 million of the state net operating loss will expire unused. We have provided a full valuation allowance
against the deferred tax asset.

We recognized income tax expense of approximately $124 million related to the gain on the
settlement of liabilities subject to compromise and the modification of the senior secured credit facility in the period from October 1, 2008 through August 30, 2009. This adjustment, net of a change in valuation allowance is embedded in
Reorganization items expense (income), net. We intend to reduce our net operating loss carryforwards for any cancellation of debt income in accordance with IRC Section 108 that arises from our emergence from Chapter 11 of the Bankruptcy Code
under IRC Section 382 (1)(6).

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 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 appropriate. In 2009, Old Spectrum recorded a reduction in the valuation allowance against the U.S. net deferred tax asset exclusive of indefinite lived intangible
assets primarily as a result of utilizing net operating losses to offset the gain on settlement of liabilities subject to compromise and the impact of the fresh start reporting adjustments. New Spectrum recorded a reduction in the domestic valuation
allowance of $47 million as a reduction to goodwill as a result of the recognition of pre-fresh start deferred tax assets to offset New Spectrum income. Our total valuation allowance established for the tax benefit of deferred tax assets that may
not be realized was approximately $133 million at September 30, 2009. Of this amount, approximately $109 million relates to U.S. net deferred tax assets and approximately $24 million related to foreign net deferred tax assets. We recorded a
non-cash deferred income tax charge of approximately $257 million related to a valuation allowance against U.S. net deferred tax assets during Fiscal 2008. Included in the total is a non-cash deferred income tax charge of approximately $4 million
related to an increase in the valuation allowance against our net deferred tax assets in China in connection with the Ningbo Exit Plan. We also determined that a valuation allowance was no longer required in Brazil and thus recorded a $31 million
benefit to reverse the valuation allowance previously established. Our total valuation allowance, established for the tax benefit of deferred tax assets that may not be realized, was approximately $496 million at September 30, 2008. Of this
amount, approximately $468 million related to U.S. net deferred tax assets and approximately $28 million related to foreign net deferred tax assets.

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. During Fiscal 2009 and Fiscal 2008, we recorded non- cash pretax impairment charges of approximately $34 million and $861 million, respectively. The tax impact, prior to consideration of the current year valuation allowance, of the
impairment charges was a deferred tax benefit of approximately $13 million and $143 million, respectively. See



72



---

##### Table of Contents

Goodwill and Intangibles Impairment above, as well as Note 3(c), Significant Accounting Policies and PracticesIntangible Assets, of Notes to Consolidated Financial
Statements included in this Annual Report on Form 10-K for additional information regarding these non-cash impairment charges.

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 of being sustained on audit, based on the technical merits of the position. We adopted this provision on October 1, 2007. As a result of the adoption, we recognized no
cumulative effect adjustment. As of September 30, 2009, August 30, 2009 and September 30, 2008, the total amount of unrecognized tax benefits that, if recognized, would affect the effective income tax rate in future periods is $8
million, $8 million and $7 million, respectively. See Note 8, Income Taxes, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information.

Discontinued Operations. On November 5, 2008, the board of directors of Old Spectrum committed to the shutdown of the
growing products portion of the Home and Garden Business, which includes 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. We believe the shutdown is consistent with what we have done in other areas of our business to eliminate unprofitable
products from our portfolio. We completed the shutdown of the growing products portion of the Home and Garden Business during the second quarter of Fiscal 2009. Accordingly, the presentation herein of the results of continuing operations excludes
the growing products portion of the Home and Garden Business for all periods presented. See Note 9, Discontinued Operations, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for further details on the
disposal of the growing products portion of the Home and Garden Business. The following amounts related to the growing products portion of the Home and Garden Business have been segregated from continuing operations and are reflected as discontinued
operations during Fiscal 2009 and Fiscal 2008, respectively (in millions):



|                                                      |  |      |       |   |      |   |       |  
|----------------------------------------------------- |  | ---- | ----- | - | ---- | - | ----- | -
|                                                      |  | 2009 |       |   | 2008 |  
|Net sales                                             |  | $    | 31.3  |   |      | $ | 261.4 |  
|                                                      |  |      |       |   |      |   |       |  
|Loss from discontinued operations before income taxes |  | $    | (90.9 | ) |      | $ | (27.1 | )
|Provision for income tax benefit                      |  |      | (4.5  | ) |      |   | (2.1  | )
|                                                      |  |      |       |   |      |   |       |  
|Loss from discontinued operations, net of tax         |  | $    | (86.4 | ) |      | $ | (25.0 | )
|                                                      |  |      |       |   |      |   |       |  

In accordance with ASC 360, long-lived assets to be disposed of are recorded at the lower of their carrying
value or fair value less costs to sell. During Fiscal 2008, we recorded a non-cash pretax charge of $6 million in discontinued operations to reduce the carrying value of intangible assets related to the growing products portion of the Home and
Garden Business in order to reflect the estimated fair value of this business.

On November 1, 2007, we sold the Canadian
division of the Home and Garden Business, which operated under the name Nu-Gro, to a new company formed by RoyCap Merchant Banking Group and Clarke Inc. Cash proceeds received at closing, net of selling expenses, totaled approximately $15 million
and was used to reduce outstanding debt. These proceeds are included in net cash provided by investing activities of discontinued operations in our Consolidated Statements of Cash Flows included in this Annual Report on Form 10-K. On
February 5, 2008, we finalized the contractual working capital adjustment in connection with this sale which increased our received proceeds by approximately $1 million. As a result of the finalization of the contractual working capital
adjustments we recorded a loss on disposal of approximately $1 million, net of tax benefit. Accordingly, the presentation herein of the results of continuing operations excludes the Canadian division of the Home and Garden Business for all periods
presented. See Note 9, Discontinued Operations, of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for further details on the sale of the Canadian division of the Home and Garden Business.



73



---

##### Table of Contents

The following amounts related to the Canadian division of the Home and Garden Business have
been segregated from continuing operations and are reflected as discontinued operations during Fiscal 2008:



|                                                      |  |         |      |  
|----------------------------------------------------- |  | ------- | ---- | -
|                                                      |  | 2008(A) |     
|Net sales                                             |  | $       | 4.7  |  
|                                                      |  |         |      |  
|Loss from discontinued operations before income taxes |  | $       | (1.9 | )
|Provision for income tax benefit                      |  |         | (0.7 | )
|                                                      |  |         |      |  
|Loss from discontinued operations, net of tax         |  | $       | (1.2 | )
|                                                      |  |         |      |  



|(A) | Fiscal 2008 represents results from discontinued operations from October 1, 2007 through November 1, 2007, the date of sale. Included in the Fiscal 2008 loss
is a loss on disposal of approximately $1 million, net of tax benefit.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Liquidity and Capital Resources

Operating Activities.Net cash provided by operating activities was $57 million during Fiscal 2010 compared to $77 million
during Fiscal 2009. Cash provided by operating activities from continuing operations was $69 million during Fiscal 2010 compared to $98 million during Fiscal 2009. The $29 million decrease in cash provided by operating activities was primarily due
to payments of $47 million related to professional fees from our Bankruptcy Filing and $25 million of payments related to the Merger. This was partially offset by an increase in income from continuing operations after adjusting for non-cash items of
$40 million in Fiscal 2010 compared to Fiscal 2009. Cash used by operating activities from discontinued operations was $11 million in Fiscal 2010 compared to a use of $22 million in Fiscal 2009. The operating activities of discontinued operations
were related to the growing products portion of the Home and Garden Business. See Discontinued Operations, above, as well as Note 9, Discontinued Operations, of Notes to Consolidated Financial Statements included in this Annual
Report on Form 10-K for further details on the disposal of the growing products portion of the Home and Garden Business.

We
expect to fund our cash requirements, including capital expenditures, interest and principal payments due in Fiscal 2010 through a combination of cash on hand and cash flows from operations and available borrowings under our ABL Revolving Credit
Facility. Going forward our ability to satisfy financial and other covenants in our senior credit agreements and senior subordinated 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 the ABL Revolving Credit Facility will be available in an amount
sufficient to satisfy our debt maturities or to fund our other liquidity needs. In addition, the current economic crisis could have a further negative impact on our financial position, results of operations or cash flows. 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 $43 million for Fiscal 2010.
For Fiscal 2009 investing activities used cash of $20 million. The $23 million increase in cash used in Fiscal 2010 was primarily due to a $30 million increase of capital expenditures during Fiscal 2010 and payments related to the Russell Hobbs
Merger, net of cash acquired from Russell Hobbs. These items were partially offset by $9 million of cash paid in Fiscal 2009 related to performance fees from the Microlite acquisition.

Debt Financing Activities

In connection with the Merger, we
(i) entered into a new senior secured term loan pursuant to a new senior credit agreement (the Senior Credit Agreement) consisting of the $750 million Term Loan, (ii) issued $750



74



---

##### Table of Contents

million in aggregate principal amount of 9.5% Notes and (iii) entered into the $300 million ABL Revolving Credit Facility. The proceeds from the Senior Secured Facilities were used to repay
our then-existing senior term credit facility (the Prior Term Facility) and our then-existing asset based revolving loan facility, to pay fees and expenses in connection with the refinancing and for general corporate purposes.

The 9.5% Notes and 12% Notes were issued by Spectrum Brands. SB/RH Holdings, LLC, a wholly-owned subsidiary of SB Holdings,
and the wholly owned domestic subsidiaries of Spectrum Brands are the guarantors under the 9.5% Notes. The wholly owned domestic subsidiaries of Spectrum Brands are the guarantors under the 12% Notes. SB Holdings is not an issuer or guarantor of the
9.5% Notes or the 12% Notes. SB Holdings is also not a borrower or guarantor under the Companys Term Loan or the ABL Revolving Credit Facility. Spectrum Brands is the borrower under the Term Loan and its wholly owned domestic subsidiaries
along with SB/RH Holdings, LLC are the guarantors under that facility. Spectrum Brands and its wholly owned domestic subsidiaries are the borrowers under the ABL Revolving Credit Facility and SB/RH Holdings, LLC is a guarantor of that facility.

Senior Term Credit Facility

The Term Loan has a maturity date of June 16, 2016. Subject to certain mandatory prepayment events, the Term Loan is subject to repayment according to a scheduled amortization, with the final payment
of all amounts outstanding, plus accrued and unpaid interest, due at maturity. Among other things, the Term Loan provides for a minimum Eurodollar interest rate floor of 1.5% and interest spreads over market rates of 6.5%.

The Senior Credit Agreement contains financial covenants with respect to debt, including, but not limited to, a maximum leverage ratio
and a minimum interest coverage ratio, which covenants, pursuant to their terms, become more restrictive over time. In addition, the Senior Credit Agreement contains customary restrictive covenants, including, but not limited to, restrictions on our
ability to incur additional indebtedness, create liens, make investments or specified payments, give guarantees, pay dividends, make capital expenditures and merge or acquire or sell assets. Pursuant to a guarantee and collateral agreement, we and
our domestic subsidiaries have guaranteed their respective obligations under the Senior Credit Agreement and related loan documents and have pledged substantially all of their respective assets to secure such obligations. The Senior Credit Agreement
also provides for customary events of default, including payment defaults and cross-defaults on other material indebtedness.

The Term Loan was issued at a 2.00% discount and was recorded net of the $15 million amount incurred. The discount will be amortized as
an adjustment to the carrying value of principal with a corresponding charge to interest expense over the remaining life of the Senior Credit Agreement. During Fiscal 2010, we recorded $26 million of fees in connection with the Senior Credit
Agreement. The fees are classified as Debt issuance costs and will be amortized as an adjustment to interest expense over the remaining life of the Senior Credit Agreement.

At September 30, 2010, the aggregate amount outstanding under the Term Loan totaled $750 million.

At September 30, 2009, the aggregate amount outstanding under the Prior Term Facility totaled a U.S. Dollar equivalent of $1,391 million, consisting of principal amounts of $973 million under
the U.S. Dollar Term B Loan, 255 million under the Euro Facility ($372 million at September 30, 2009) as well as letters of credit outstanding under the L/C Facility totaling $46 million.

At September 30, 2010, we were in compliance with all covenants under the Senior Credit Agreement.

9.5% Notes

At
September 30, 2010, we had outstanding principal of $750 million under the 9.5% Notes maturing June 15, 2018.



75



---

##### Table of Contents

We may redeem all or a part of the 9.5% Notes, upon not less than 30 or more than 60 days
notice at specified redemption prices. Further, the indenture governing the 9.5% Notes (the 2018 Indenture) requires us to make an offer, in cash, to repurchase all or a portion of the applicable outstanding notes for a specified
redemption price, including a redemption premium, upon the occurrence of a change of control, as defined in such indenture.

The 2018 Indenture contains customary covenants that limit, among other things, the incurrence of additional indebtedness, payment of
dividends on or redemption or repurchase of equity interests, the making of certain investments, expansion into unrelated businesses, creation of liens on assets, merger or consolidation with another company, transfer or sale of all or substantially
all assets, and transactions with affiliates.

In addition, the 2018 Indenture provides for customary events of default,
including failure to make required payments, failure to comply with certain agreements or covenants, failure to make payments on or acceleration of certain other indebtedness, and certain events of bankruptcy and insolvency. Events of default under
the 2018 Indenture arising from certain events of bankruptcy or insolvency will automatically cause the acceleration of the amounts due under the 9.5% Notes. If any other event of default under the 2018 Indenture occurs and is continuing, the
trustee for the 2018 Indenture or the registered holders of at least 25% in the then aggregate outstanding principal amount of the 9.5% Notes may declare the acceleration of the amounts due under those notes.

At September 30, 2010, we were in compliance with all covenants under the 2018 Indenture.

The 9.5% Notes were issued at a 1.37% discount and were recorded net of the $10 million amount incurred. The discount will be amortized
as an adjustment to the carrying value of principal with a corresponding charge to interest expense over the remaining life of the 9.5% Notes. During Fiscal 2010, we recorded $21 million of fees in connection with the issuance of the 9.5% Notes. The
fees are classified as Debt issuance costs and will be amortized as an adjustment to interest expense over the remaining life of the 9.5% Notes.

12% Notes

On August 28, 2009, in connection with emergence from the
voluntary reorganization under Chapter 11 and pursuant to the Plan, we issued $218 million in aggregate principal amount of 12% Notes maturing August 28, 2019. Semiannually, at our option, we may elect to pay interest on the 12% Notes in cash
or as payment in kind, or PIK. PIK interest would be added to principal upon the relevant semi-annual interest payment date. Under the Prior Term Facility, we agreed to make interest payments on the 12% Notes through PIK for the first
three semi-annual interest payment periods. As a result of the refinancing of the Prior Term Facility we are no longer required to make interest payments as payment in kind after the semi-annual interest payment date of August 28, 2010.
Effective with the payment date of August 28, 2010 we gave notice to the trustee that the interest payment due February 28, 2011 would be made in cash. During Fiscal 2010, we reclassified $27 million of accrued interest from Other long
term liabilities to principal in connection with the PIK provision of the 12% Notes.

We may redeem all or a part of the 12%
Notes, upon not less than 30 or more than 60 days notice, beginning August 28, 2012 at specified redemption prices. Further, the indenture governing the 12% Notes requires us to make an offer, in cash, to repurchase all or a portion of the
applicable outstanding notes for a specified redemption price, including a redemption premium, upon the occurrence of a change of control, as defined in such indenture.

At September 30, 2010 and September 30, 2009, we had outstanding principal of $245 million and $218 million, respectively, under the 12% Notes.

The indenture governing the 12% Notes (the 2019 Indenture), contains customary covenants that limit, among other things, the
incurrence of additional indebtedness, payment of dividends on or redemption or repurchase of equity interests, the making of certain investments, expansion into unrelated businesses, creation of



76



---

##### Table of Contents

liens on assets, merger or consolidation with another company, transfer or sale of all or substantially all assets, and transactions with affiliates.

In addition, the 2019 Indenture provides for customary events of default, including failure to make required payments, failure to comply
with certain agreements or covenants, failure to make payments on or acceleration of certain other indebtedness, and certain events of bankruptcy and insolvency. Events of default under the indenture arising from certain events of bankruptcy or
insolvency will automatically cause the acceleration of the amounts due under the 12% Notes. If any other event of default under the 2019 Indenture occurs and is continuing, the trustee for the indenture or the registered holders of at least 25% in
the then aggregate outstanding principal amount of the 12% Notes may declare the acceleration of the amounts due under those notes.

At September 30, 2010, we were in compliance with all covenants under the 12% Notes. We, however, are subject to certain limitations as a result of our Fixed Charge Coverage Ratio under the 2019
Indenture being below 2:1. Until the test is satisfied, we and certain of our subsidiaries are limited in our ability to make significant acquisitions or incur significant additional senior credit facility debt beyond the Senior Credit Facilities.
We do not expect our inability to satisfy the Fixed Charge Coverage Ratio test to impair our ability to provide adequate liquidity to meet the short-term and long-term liquidity requirements of our existing businesses, although no assurance can be
given in this regard.

In connection with the Merger, we obtained the consent of the note holders to certain amendments to the
2019 Indenture (collectively, the Supplemental Indenture). The Supplemental Indenture became effective upon the closing of the Merger. Among other things, the Supplemental Indenture amended the definition of change in control to exclude
Harbinger Master Fund and Harbinger Capital Partners Special Situations Fund, L.P. (Harbinger Special Fund) and, together with Harbinger Master Fund, the HCP Funds) and Global Opportunities Breakaway Ltd. (together with the
HCP Funds, the Harbinger Parties), and their affiliates, including Harbinger Group Inc., and increased the Companys ability to incur indebtedness up to $1,850 million.

During Fiscal 2010 we recorded $3 million of fees in connection with the consent. The fees are classified as Debt issuance costs and will
be amortized as an adjustment to interest expense over the remaining life of the 12% Notes effective with the closing of the Merger.

ABL
Revolving Credit Facility

The ABL Revolving Credit Facility is governed by a credit agreement (the ABL Credit
Agreement) with Bank of America as administrative agent (the Agent). The ABL Revolving Credit Facility consists of revolving loans (the Revolving Loans), with a portion available for letters of credit and a portion
available as swing line loans, in each case subject to the terms and limits described therein.

The Revolving Loans may be
drawn, repaid and reborrowed without premium or penalty. The proceeds of borrowings under the ABL Revolving Credit Facility are to be used for costs, expenses and fees in connection with the ABL Revolving Credit Facility, for working capital
requirements of us and our subsidiaries, restructuring costs, and other general corporate purposes.

The ABL Revolving
Credit Facility carries an interest rate, at our option, which is subject to change based on availability under the facility, of either: (a) the base rate plus currently 2.75% per annum or (b) the reserve- adjusted LIBOR rate (the
Eurodollar Rate) plus currently 3.75% per annum. No amortization will be required with respect to the ABL Revolving Credit Facility. The ABL Revolving Credit Facility will mature on June 16, 2014.

The ABL Credit Agreement contains various representations and warranties and covenants, including, without limitation, enhanced
collateral reporting, and a maximum fixed charge coverage ratio. The ABL Credit



77



---

##### Table of Contents

Agreement also provides for customary events of default, including payment defaults and cross-defaults on other material indebtedness.

At September 30, 2010, we were in compliance with all covenants under the ABL Credit Agreement.

During Fiscal 2010 we recorded $10 million of fees in connection with the ABL Revolving Credit Facility. The fees are classified as Debt
issuance costs and will be amortized as an adjustment to interest expense over the remaining life of the ABL Revolving Credit Facility.

As a result of borrowings and payments under the ABL Revolving Credit Facility at September 30, 2010, we had aggregate borrowing availability of approximately $225 million, net of lender reserves of
$29 million.

At September 30, 2010, we had an aggregate amount outstanding under the ABL Revolving Credit Facility of
$37 million for outstanding letters of credit of $37 million.

At September 30, 2009, we had an aggregate amount
outstanding under our then-existing asset based revolving loan facility of $84 million which included a supplemental loan of $45 million and $6 million in outstanding letters of credit.

Interest Payments and Fees

In addition to principal payments on our Senior
Credit Facilities, we have annual interest payment obligations of approximately $71 million in the aggregate under our 9.5% Notes and annual interest payment obligations of approximately $29 million in the aggregate under our 12% Notes. We also
incur interest on our borrowings under the Senior Credit Facilities and such interest would increase borrowings under the ABL Revolving Credit Facility if cash were not otherwise available for such payments. Interest on the 9.5% Notes and interest
on the 12% Notes is payable semi-annually in arrears and interest under the Senior Credit Facilities is payable on various interest payment dates as provided in the Senior Credit Agreement and the ABL Credit Agreement. Interest is payable in cash,
except that interest under the 12% Notes is required to be paid by increasing the aggregate principal amount due under the subject notes unless we elect to make such payments in cash. Effective with the payment date of August 28, 2010, we
elected to make the semi-annual interest payment scheduled for February 28, 2011 in cash. Thereafter, we may make the semi-annual interest payments for the 12% Notes either in cash or by further increasing the aggregate principal amount due
under the notes subject to certain conditions. Based on amounts currently outstanding under the Senior Credit Facilities, and using market interest rates and foreign exchange rates in effect at September 30, 2010, we estimate annual interest
payments of approximately $61 million in the aggregate under our Senior Credit Facilities would be required assuming no further principal payments were to occur and excluding any payments associated with outstanding interest rate swaps. We are
required to pay certain fees in connection with the Senior Credit Facilities. Such fees include a quarterly commitment fee of up to 0.75% on the unused portion of the ABL Revolving Credit Facility and certain additional fees with respect to the
letter of credit subfacility under the ABL Revolving Credit Facility.

Equity Financing Activities. During
Fiscal 2010, we granted approximately 0.9 million shares of restricted stock. Of these grants, 0.3 million restricted stock units were granted in conjunction with the Merger and are time-based and vest over a one year period. The remaining
0.6 million shares are restricted stock grants primarily vest over a two year period. The total market value of the restricted shares on the date of the grant was approximately $23 million. During Fiscal 2009, Old Spectrum granted approximately
0.2 million shares of restricted stock. Of these grants, approximately 18% of the shares were time-based and vest on a pro rata basis over a three year period and 82% of the shares were performance-based and vest upon achievement of
certain performance goals. All vesting dates were subject to the recipients continued employment with us. The total market value of the restricted stock on the date of the grant was approximately $0.1 million which has been recorded as
unearned restricted stock compensation. On the Effective Date, all of the existing common stock of Old Spectrum was extinguished and deemed cancelled. Subsequent to September 30, 2009, we granted an



78



---

##### Table of Contents

aggregate of approximately 0.6 million shares of restricted common stock of New Spectrum to certain employees and non-employee directors. All such shares are subject to time-based vesting.
All vesting dates are subject to the recipients continued employment, or service as a director, with us.

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.

Contractual Obligations & Other Commercial Commitments

Contractual Obligations

The following table summarizes our
contractual obligations as of September 30, 2010 and the effect such obligations are expected to have on our liquidity and cash flow in future periods. The table excludes other obligations we have reflected on our Consolidated Statements of
Financial Position included in this Annual Report on Form 10-K, such as pension obligations. 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 (in millions):



|                                          |                             |                         |    |      |  |   |      |  |  |      |    |  |      |   |    |            |  |   |       |  |  |   |       |  |  |   |       | 
|----------------------------------------- | --------------------------- | ----------------------- | -- | ---- |  | - | ---- |  |  | ---- | -- |  | ---- | - | -- | ---------- |  | - | ----- |  |  | - | ----- |  |  | - | ----- | 
|                                          |                             | Contractual Obligations |   
|                                          | Payments due by Fiscal Year |                        
|                                          | 2011                        |                         |    | 2012 |  |   | 2013 |  |  | 2014 |    |  | 2015 |   |    | Thereafter |  |   | Total | 
|Debt:                                     |                             |                         |    |      |  |   |      |  |  |      |    |  |      |   |    |            |  |   |       |  |  |   |       |  |  |   |       | 
|Debt, excluding capital lease obligations |                             | $                       | 20 |      |  | $ | 35   |  |  | $    | 39 |  |      | $ | 39 |            |  | $ | 39    |  |  | $ | 1,587 |  |  | $ | 1,759 | 
|Capital lease obligations(1)              |                             |                         | 1  |      |  |   | 1    |  |  |      | 1  |  |      |   | 1  |            |  |   | 1     |  |  |   | 7     |  |  |   | 12    | 
|                                          |                             |                         |    |      |  |   |      |  |  |      |    |  |      |   |    |            |  |   |       |  |  |   |       |  |  |   |       | 
|                                          |                             |                         | 21 |      |  |   | 36   |  |  |      | 40 |  |      |   | 40 |            |  |   | 40    |  |  |   | 1,594 |  |  |   | 1,771 | 
|Operating lease obligations               |                             |                         | 35 |      |  |   | 33   |  |  |      | 27 |  |      |   | 19 |            |  |   | 15    |  |  |   | 49    |  |  |   | 178   | 
|                                          |                             |                         |    |      |  |   |      |  |  |      |    |  |      |   |    |            |  |   |       |  |  |   |       |  |  |   |       | 
|Total Contractual Obligations             |                             | $                       | 56 |      |  | $ | 69   |  |  | $    | 67 |  |      | $ | 59 |            |  | $ | 55    |  |  | $ | 1,643 |  |  | $ | 1,949 | 
|                                          |                             |                         |    |      |  |   |      |  |  |      |    |  |      |   |    |            |  |   |       |  |  |   |       |  |  |   |       | 



|(1) | Capital lease payments due by fiscal year include executory costs and imputed interest not reflected in the Consolidated Statements of Financial Position included in
this Annual Report on Form 10-K.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Other Commercial Commitments

The following table summarizes our other commercial commitments as of September 30, 2010, 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 |                             
|                                   | 2011                                           |                              |    | 2012 |  |   | 2013 |  |  | 2014 |   |  | 2015 |   |   | Thereafter |  |   | Total | 
|Letters of credit                  |                                                | $                            | 48 |      |  | $ | 2    |  |  | $    |  |  |      | $ |  |            |  | $ |      |  |  | $ | 3 |  |  | $ | 53 | 
|                                   |                                                |                              |    |      |  |   |      |  |  |      |   |  |      |   |   |            |  |   |       |  |  |   |   |  |  |   |    | 
|Total Other Commercial Commitments |                                                | $                            | 48 |      |  | $ | 2    |  |  | $    |  |  |      | $ |  |            |  | $ |      |  |  | $ | 3 |  |  | $ | 53 | 
|                                   |                                                |                              |    |      |  |   |      |  |  |      |   |  |      |   |   |            |  |   |       |  |  |   |   |  |  |   |    | 

Critical Accounting Policies

Our Consolidated Financial Statements included in this Annual Report on Form 10-K have been prepared in accordance with 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.



79



---

##### Table of Contents

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
substantiate 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 2010, Fiscal 2009 and Fiscal 2008, we tested our goodwill and indefinite-lived intangible assets. As a result of this testing, we recorded no impairment charges in
Fiscal 2010 and non-cash pretax impairment charges of $34 million and $861 million in Fiscal 2009 and Fiscal 2008, respectively. The $34 million impairment charge incurred in Fiscal 2009 reflects an impairment of trade name intangible assets
consisting of the following: (i) $18 million related to the Global Pet Supplies Business; (ii) $15 million related to the Global Batteries and Personal Care segment; and (iii) $1 million related to the Home and Garden Business. The
$861 million impairment charge incurred in Fiscal 2008 reflects impaired goodwill of $602 million and impaired trade name intangible assets of $265 million. The $602 million of impaired goodwill consisted of the following: (i) $426 million
associated with our Global Pet Supplies reportable segment; (ii) $160 million associated with the Home and Garden Business; and (iii) $16 million related to our Global Batteries & Personal Care reportable segment. The $265 million
of impaired trade name intangible assets consisted of the following: (i) $86 million related to our Global Batteries & Personal Care reportable segment; (ii) $98 million related to Global Pet Supplies; and (iii) $81 million
related to the Home and Garden Business. Future cash expenditures will not result from these impairment charges.

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 fair value 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. In light of a sustained decline in market capitalization coupled with the decline of the fair value of our debt securities, we
also considered these factors in the Fiscal 2008 annual impairment testing.

In accordance with ASC 740, 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, by individual tax
jurisdictions. Changes in industry and economic conditions and the competitive environment may impact the accuracy of our projections. In accordance with ASC 740, during each reporting period we assess the likelihood that our deferred tax assets
will be realized and determine if adjustments to the valuation allowance are appropriate. As a result of this assessment, during Fiscal 2009 we recorded a reduction in the valuation allowance of approximately $363 million. Of the $363 million



80



---

##### Table of Contents

total, $314 million was recorded as a non-cash deferred income tax benefit and $49 million as a reduction to goodwill. During Fiscal 2008 we recorded a non-cash deferred income tax charge of
approximately $200 million related to increasing the valuation allowance against our net deferred tax assets.

The fair value
of our Global Batteries & Personal Care, Global Pet Supplies, Small Appliances and Home and Garden Business reporting units, which are also our segments, exceeded their carry values by 52%, 49%, 13% and 10%, respectively, as of the date of our
latest annual impairment testing.

See Note 3(h), Significant Accounting Policies and PracticesProperty, Plant and
Equipment, Note 3(i), Significant Accounting Policies and PracticesIntangible Assets, Note 5, Property, Plant and Equipment, Note 6, Goodwill and Intangible Assets, Note 8, Income Taxes, and Note 9, Discontinued Operations, 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 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 of 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.



81



---

##### Table of Contents

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 3(b), Significant
Accounting Policies and PracticesRevenue Recognition, Note 3(c), Significant Accounting Policies and PracticesUse of Estimates and Note 3(e), 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. 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 4.2 to 13.6% in Fiscal 2010 and 5.0 to 11.8% in Fiscal 2009. In adjusting the discount rates from
Fiscal 2009 to 2010, 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.

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 4.5% to 7.8% in Fiscal 2010 and 4.5% to 8.0% in Fiscal 2009. 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. Similarly, an understatement of the expected return would ultimately decrease future pension expense. If plan assets decline due to poor performance by
the markets and/or interest rate declines our pension liability will increase, ultimately increasing future pension expense.

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.



82



---

##### Table of Contents

Liabilities from restructuring and related charges are recorded for estimated costs of
facility closures, significant organizational adjustment and measures undertaken by management to exit certain activities. Costs for such activities are estimated by management after evaluating detailed analyses of the cost 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.

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.

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 restructuring and related charges and expensed as incurred.

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

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
our business, financial condition or results of operations.

See further discussion in Item 3, Legal Proceedings, and
Note 12, Commitments and Contingencies, of Notes to the 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.



83



---

##### Table of Contents



|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 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 3(r), Significant Accounting Policies and Practices-Derivative Financial Instruments, of Notes to
Consolidated Financial Statements included in this Annual Report on Form 10-K.

Interest Rate Risk

We have bank lines of credit at variable interest rates. The general level of U.S. interest rates, LIBOR and EURIBOR affect interest
expense. We use 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.

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, 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 used in the manufacturing process. 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. The cost of calls are 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, 2010, the potential change in fair value of outstanding interest rate derivative instruments,
assuming a 1 percentage point unfavorable shift in the underlying interest rates would result in a loss of $0.3 million. The net impact on reported earnings, after also including the reduction in one years interest expense on the related debt
due to the same shift in interest rates, would be a net loss of $0.3 million. As of September 30, 2009, there were no interest rate derivative instruments outstanding.



84



---

##### Table of Contents

As of September 30, 2010, 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 $63.4 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 $8.9 million. The same hypothetical shift in exchange rates as of September 30, 2009, would have resulted in a loss of $10.8 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 $10.8 million.

As of September 30, 2010, 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 $3.3 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 $0.3 million. The same
hypothetical shift in commodity prices as of September 30, 2009 would have resulted in a loss of $1.5 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 gain of $0.8 million.



|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- | -------------------------------------------

The information required for this Item is included in this Annual Report on Form 10-K on pages 70 through 133, 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, 2010. 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 Internal
Control-Integrated Framework. The Companys management has concluded that, as of September 30, 2010, its internal control over financial reporting is effective based on these criteria. The Companys management excluded Russell
Hobbs 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, it may not extend beyond one year from the date of acquisition, nor may such assessment be omitted from more than one annual management report on internal control over financial reporting. The total assets of $863 million
and total net sales of $238 million associated with Russell Hobbs are included in the consolidated financial



85



---

##### Table of Contents

statements of the Company as of and for the year ended September 30, 2010. The Companys independent registered public accounting firm, KPMG LLP, has issued an audit report on the
Companys internal control over financial reporting, which is included herein.

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.



|ITEM 9B. | OTHER INFORMATION
|-------- | -----------------

None.



86



---

##### Table of Contents

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 Holdings, Inc. (SB Holdings) and the nominees for re-election as directors of SB
Holdings at the Annual Meeting of Shareholders to be held on March 1, 2011 (the 2011 Annual Meeting) is incorporated herein by reference from the disclosure which will be included under the caption PROPOSAL NUMBER
1ELECTION OF DIRECTORS in SB Holdings definitive Proxy Statement relating to the 2011 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, 2010.

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 MEETINGS AND COMMITTEES OF THE BOARDCommittees of the Board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
|-------- | ----------------------

Report of the
Compensation Committee of the Board of Directors

The information required by Item 407(e)(5) 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 Discussion and Analysis

The information required by
Item 402 of Regulation S-K is incorporated herein by reference from disclosures which will be included under the captions EXECUTIVE COMPENSATION and NON-EMPLOYEE DIRECTOR COMPENSATION in SB Holdings Definitive Proxy
Statement.



87



---

##### Table of Contents

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 Compensation Committee Interlocks and Insider Participation in 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 BENEFICIAL OWNERSHIP OF SECURITIES OF THE COMPANY in the SB Holdings Definitive
Proxy Statement.

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 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 CORPORATE
GOVERNANCEDirector Independence and MEETINGS AND COMMITTEES OF THE BOARD in 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 AUDIT COMMITTEE MATTERSFees of the Independent
Registered Public Accounting Firm and AUDIT COMMITTEE MATTERSPre-Approval of Services Performed by the Independent Registered Public Accounting Firm in the SB Holdings Definitive Proxy Statement.



88



---

##### Table of Contents

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.



89



---

##### Table of Contents

SPECTRUM BRANDS, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE



|                                                                                          |  |      |     | 
|----------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                          |  | Page |    
|Reports of Independent Registered Public Accounting Firm                                  |  |      | 91  | 
|Consolidated Statements of Financial Position                                             |  |      | 93  | 
|Consolidated Statements of Operations                                                     |  |      | 94  | 
|Consolidated Statements of Shareholders Equity (Deficit) and Comprehensive Income
(Loss) |  |      | 95  | 
|Consolidated Statements of Cash Flows                                                     |  |      | 97  | 
|Notes to Consolidated Financial Statements                                                |  |      | 98  | 
|Schedule II Valuation and Qualifying Accounts                                             |  |      | 168 | 



90



---

##### Table of Contents

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Spectrum Brands Holdings, Inc.:

We have audited the accompanying consolidated statements of
financial position of Spectrum Brands Holdings, Inc. and subsidiaries (the Company) as of September 30, 2010 and September 30, 2009 (Successor Company), and the related consolidated statements of operations, shareholders equity
(deficit) and comprehensive income (loss), and cash flows for the year ended September 30, 2010, the period August 31, 2009 to September 30, 2009 (Successor Company), the period October 1, 2008 to August 30, 2009 and the
year ended September 30, 2008 (Predecessor Company). In connection with our audits of the consolidated financial statements, we have also audited the financial statement schedule II. These consolidated financial statements are the
responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We 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. An audit also includes 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 the Spectrum
Brands Holdings, Inc. and subsidiaries as of September 30, 2010 and September 30, 2009 (Successor Company), and the results of their operations and their cash flows for the year ended September 30, 2010, the period August 31,
2009 to September 30, 2009 (Successor Company), the period October 1, 2008 to August 30, 2009 and the year ended September 30, 2008 (Predecessor Company) in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Companys
internal control over financial reporting as of September 30, 2010, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our
report dated December 14, 2010 expressed an unqualified opinion on the effectiveness of the Companys internal control over financial reporting.

As discussed in Note 2 to the consolidated financial statements, the Predecessor Company filed a petition for reorganization under Chapter 11 of the United States Bankruptcy Code on February 3, 2009.
The Companys plan of reorganization became effective and the Company emerged from bankruptcy protection on August 28, 2009. In connection with their emergence from bankruptcy, the Successor Company Spectrum Brands, Inc. adopted
fresh-start reporting in conformity with ASC Topic 852, Reorganizations formerly America Institute of Certified Public Accountants Statement of Position 90-7, Financial Reporting by Entities in Reorganization under the
Bankruptcy Code, effective as of August 30, 2009. Accordingly, the Successor Companys consolidated financial statements prior to August 30, 2009 are not comparable to its consolidated financial statements for periods on
after August 30, 2009.

As discussed in Note 10 to the consolidated financial statements, effective September 30, 2009, the
Successor Company adopted the measurement date provision of ASC 715, Compensation-Retirement Benefits formerly FAS 158, Employers Accounting for Defined Benefit Pension and other Postretirement Plans.

/s/ KPMG LLP

Atlanta, Georgia

December 14, 2010



91



---

##### Table of Contents

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Spectrum Brands Holdings, Inc.:

We have
audited Spectrum Brands Holdings, Inc. and subsidiaries (the Company) internal control over financial reporting as of September 30, 2010, based on criteria established inInternal ControlIntegrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). The Companys management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over
financial reporting, included in the accompanying Managements Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Companys internal control over financial reporting based on our
audit.

We conducted our audit 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 effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A
companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Spectrum Brands Holdings, Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting
as of September 30, 2010, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited the accompanying consolidated statements of financial position of Spectrum Brands Holdings, Inc. and subsidiaries as of
September 30, 2010 and September 30, 2009 (Successor Company), and the related consolidated statements of operations, shareholders equity (deficit) and comprehensive income (loss), and cash flows for the year ended September 30,
2010, the period August 31, 2009 to September 30, 2009 (Successor Company), the period October 1, 2008 to August 30, 2009 and the year ended September 30, 2008 (Predecessor Company), along with the financial statement
schedule II, and our report dated December 14, 2010 expressed an unqualified opinion on those consolidated financial statements.

The Company
acquired Russell Hobbs, Inc. and its subsidiaries (Russell Hobbs) on June 16, 2010. Management excluded Russell Hobbs from its assessment of the effectiveness of internal control over financial reporting and the associated total assets of
$863,282,000 and total net sales of $237,576,000 included in the consolidated financial statements of the Company as of and for the year ended September 30, 2010. Our audit of internal control over financial reporting of the Company as of
September 30, 2010 also excluded Russell Hobbs.

/s/ KPMG LLP

Atlanta, Georgia

December 14, 2010



92



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Financial Position

September 30, 2010 and 2009

(In thousands, except per share
amounts)



|                                                                                                                               |  |                  |           |   |      |   |           |  
|------------------------------------------------------------------------------------------------------------------------------ |  | ---------------- | --------- | - | ---- | - | --------- | -
|                                                                                                                               |  | SuccessorCompany |          
|                                                                                                                               |  | 2010             |           |   | 2009 |  
|Assets                                                                                                                         |  |                  |           |   |      |   |           |  
|Current assets:                                                                                                                |  |                  |           |   |      |   |           |  
|Cash and cash equivalents                                                                                                      |  | $                | 170,614   |   |      | $ | 97,800    |  
|Receivables:                                                                                                                   |  |                  |           |   |      |   |           |  
|Trade accounts receivable, net of allowances of $4,351 and $1,011, respectively                                                |  |                  | 365,002   |   |      |   | 274,483   |  
|Other                                                                                                                          |  |                  | 41,445    |   |      |   | 24,968    |  
|Inventories                                                                                                                    |  |                  | 530,342   |   |      |   | 341,505   |  
|Deferred income taxes                                                                                                          |  |                  | 35,735    |   |      |   | 28,137    |  
|Assets held for sale                                                                                                           |  |                  | 12,452    |   |      |   | 11,870    |  
|Prepaid expenses and other                                                                                                     |  |                  | 44,122    |   |      |   | 39,973    |  
|                                                                                                                               |  |                  |           |   |      |   |           |  
|Total current assets                                                                                                           |  |                  | 1,199,712 |   |      |   | 818,736   |  
|Property, plant and equipment, net                                                                                             |  |                  | 201,164   |   |      |   | 212,361   |  
|Deferred charges and other                                                                                                     |  |                  | 46,352    |   |      |   | 34,934    |  
|Goodwill                                                                                                                       |  |                  | 600,055   |   |      |   | 483,348   |  
|Intangible assets, net                                                                                                         |  |                  | 1,769,360 |   |      |   | 1,461,945 |  
|Debt issuance costs                                                                                                            |  |                  | 56,961    |   |      |   | 9,422     |  
|                                                                                                                               |  |                  |           |   |      |   |           |  
|Total assets                                                                                                                   |  | $                | 3,873,604 |   |      | $ | 3,020,746 |  
|                                                                                                                               |  |                  |           |   |      |   |           |  
|Liabilities and Shareholders Equity                                                                                           |  |                  |           |   |      |   |           |  
|Current liabilities:                                                                                                           |  |                  |           |   |      |   |           |  
|Current maturities of long-term debt                                                                                           |  | $                | 20,710    |   |      | $ | 53,578    |  
|Accounts payable                                                                                                               |  |                  | 332,231   |   |      |   | 186,235   |  
|Accrued liabilities:                                                                                                           |  |                  |           |   |      |   |           |  
|Wages and benefits                                                                                                             |  |                  | 93,971    |   |      |   | 88,443    |  
|Income taxes payable                                                                                                           |  |                  | 37,118    |   |      |   | 21,950    |  
|Restructuring and related charges                                                                                              |  |                  | 23,793    |   |      |   | 26,203    |  
|Accrued interest                                                                                                               |  |                  | 31,652    |   |      |   | 8,678     |  
|Other                                                                                                                          |  |                  | 123,297   |   |      |   | 109,981   |  
|                                                                                                                               |  |                  |           |   |      |   |           |  
|Total current liabilities                                                                                                      |  |                  | 662,772   |   |      |   | 495,068   |  
|Long-term debt, net of current maturities                                                                                      |  |                  | 1,723,057 |   |      |   | 1,529,957 |  
|Employee benefit obligations, net of current portion                                                                           |  |                  | 92,725    |   |      |   | 55,855    |  
|Deferred income taxes                                                                                                          |  |                  | 277,843   |   |      |   | 227,498   |  
|Other                                                                                                                          |  |                  | 70,828    |   |      |   | 51,489    |  
|                                                                                                                               |  |                  |           |   |      |   |           |  
|Total liabilities                                                                                                              |  |                  | 2,827,225 |   |      |   | 2,359,867 |  
|Commitments and contingencies                                                                                                  |  |                  |           |   |      |   |           |  
|Shareholders equity:                                                                                                          |  |                  |           |   |      |   |           |  
|Common stock, $.01 par value, authorized 200,000 shares; issued 51,020 shares; outstanding 51,020 shares at September 30,
2010 |  |                  | 514       |   |      |   |          |  
|Common stock, $.01 par value, authorized 150,000 shares; issued 30,000 shares; outstanding 30,000 shares at September 30,
2009 |  |                  |          |   |      |   | 300       |  
|Additional paid-in capital                                                                                                     |  |                  | 1,316,461 |   |      |   | 724,796   |  
|Accumulated deficit                                                                                                            |  |                  | (260,892  | ) |      |   | (70,785   | )
|Accumulated other comprehensive (loss) income                                                                                  |  |                  | (7,497    | ) |      |   | 6,568     |  
|                                                                                                                               |  |                  |           |   |      |   |           |  
|                                                                                                                               |  |                  | 1,048,586 |   |      |   | 660,879   |  
|Less treasury stock, at cost, 81 and 0 shares, respectively                                                                    |  |                  | (2,207    | ) |      |   |          |  
|                                                                                                                               |  |                  |           |   |      |   |           |  
|Total shareholders equity                                                                                                     |  |                  | 1,046,379 |   |      |   | 660,879   |  
|                                                                                                                               |  |                  |           |   |      |   |           |  
|Total liabilities and shareholders equity                                                                                     |  | $                | 3,873,604 |   |      | $ | 3,020,746 |  
|                                                                                                                               |  |                  |           |   |      |   |           |  

See accompanying notes to consolidated financial statements.



93



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(In thousands, except per share amounts)



|                                                                             |  |                             |           |   |                                                    |   |         |                                                 |  |   |                             |   |  |   |           |  
|---------------------------------------------------------------------------- |  | --------------------------- | --------- | - | -------------------------------------------------- | - | ------- | ----------------------------------------------- |  | - | --------------------------- | - |  | - | --------- | -
|                                                                             |  | SuccessorCompany            |           |   | Predecessor Company                                |  
|                                                                             |  | Year
EndedSeptember 30,2010 |           |   | Period fromAugust 31, 2009throughSeptember 30,2009 |   |         | Period fromOctober 1, 2008throughAugust 30,2009 |  |   | Year EndedSeptember 30,2008 |  
|Net sales                                                                    |  | $                           | 2,567,011 |   |                                                    | $ | 219,888 |                                                 |  | $ | 2,010,648                   |   |  | $ | 2,426,571 |  
|Cost of goods sold                                                           |  |                             | 1,638,451 |   |                                                    |   | 155,310 |                                                 |  |   | 1,245,640                   |   |  |   | 1,489,971 |  
|Restructuring and related charges                                            |  |                             | 7,150     |   |                                                    |   | 178     |                                                 |  |   | 13,189                      |   |  |   | 16,499    |  
|                                                                             |  |                             |           |   |                                                    |   |         |                                                 |  |   |                             |   |  |   |           |  
|Gross profit                                                                 |  |                             | 921,410   |   |                                                    |   | 64,400  |                                                 |  |   | 751,819                     |   |  |   | 920,101   |  
|Operating expenses:                                                          |  |                             |           |   |                                                    |   |         |                                                 |  |   |                             |   |  |   |           |  
|Selling                                                                      |  |                             | 466,813   |   |                                                    |   | 39,136  |                                                 |  |   | 363,106                     |   |  |   | 506,365   |  
|General and administrative                                                   |  |                             | 199,386   |   |                                                    |   | 20,578  |                                                 |  |   | 145,235                     |   |  |   | 188,934   |  
|Research and development                                                     |  |                             | 31,013    |   |                                                    |   | 3,027   |                                                 |  |   | 21,391                      |   |  |   | 25,315    |  
|Acquisition and integration related charges                                  |  |                             | 38,452    |   |                                                    |   |        |                                                 |  |   |                            |   |  |   |          |  
|Restructuring and related charges                                            |  |                             | 16,968    |   |                                                    |   | 1,551   |                                                 |  |   | 30,891                      |   |  |   | 22,838    |  
|Goodwill and intangibles impairment                                          |  |                             |          |   |                                                    |   |        |                                                 |  |   | 34,391                      |   |  |   | 861,234   |  
|                                                                             |  |                             |           |   |                                                    |   |         |                                                 |  |   |                             |   |  |   |           |  
|                                                                             |  |                             | 752,632   |   |                                                    |   | 64,292  |                                                 |  |   | 595,014                     |   |  |   | 1,604,686 |  
|                                                                             |  |                             |           |   |                                                    |   |         |                                                 |  |   |                             |   |  |   |           |  
|Operating income (loss)                                                      |  |                             | 168,778   |   |                                                    |   | 108     |                                                 |  |   | 156,805                     |   |  |   | (684,585  | )
|Interest expense                                                             |  |                             | 277,015   |   |                                                    |   | 16,962  |                                                 |  |   | 172,940                     |   |  |   | 229,013   |  
|Other expense (income), net                                                  |  |                             | 12,300    |   |                                                    |   | (816    | )                                               |  |   | 3,320                       |   |  |   | 1,220     |  
|                                                                             |  |                             |           |   |                                                    |   |         |                                                 |  |   |                             |   |  |   |           |  
|Loss from continuing operations before reorganization items and income taxes |  |                             | (120,537  | ) |                                                    |   | (16,038 | )                                               |  |   | (19,455                     | ) |  |   | (914,818  | )
|Reorganization items expense (income), net                                   |  |                             | 3,646     |   |                                                    |   | 3,962   |                                                 |  |   | (1,142,809                  | ) |  |   |          |  
|                                                                             |  |                             |           |   |                                                    |   |         |                                                 |  |   |                             |   |  |   |           |  
|(Loss) income from continuing operations before income taxes                 |  |                             | (124,183  | ) |                                                    |   | (20,000 | )                                               |  |   | 1,123,354                   |   |  |   | (914,818  | )
|Income tax expense (benefit)                                                 |  |                             | 63,189    |   |                                                    |   | 51,193  |                                                 |  |   | 22,611                      |   |  |   | (9,460    | )
|                                                                             |  |                             |           |   |                                                    |   |         |                                                 |  |   |                             |   |  |   |           |  
|(Loss) income from continuing operations                                     |  |                             | (187,372  | ) |                                                    |   | (71,193 | )                                               |  |   | 1,100,743                   |   |  |   | (905,358  | )
|(Loss) income from discontinued operations, net of tax                       |  |                             | (2,735    | ) |                                                    |   | 408     |                                                 |  |   | (86,802                     | ) |  |   | (26,187   | )
|                                                                             |  |                             |           |   |                                                    |   |         |                                                 |  |   |                             |   |  |   |           |  
|Net (loss) income                                                            |  | $                           | (190,107  | ) |                                                    | $ | (70,785 | )                                               |  | $ | 1,013,941                   |   |  | $ | (931,545  | )
|                                                                             |  |                             |           |   |                                                    |   |         |                                                 |  |   |                             |   |  |   |           |  
|Basic net (loss) income per common share:                                    |  |                             |           |   |                                                    |   |         |                                                 |  |   |                             |   |  |   |           |  
|(Loss) income from continuing operations                                     |  | $                           | (5.20     | ) |                                                    | $ | (2.37   | )                                               |  | $ | 21.45                       |   |  | $ | (17.78    | )
|(Loss) income from discontinued operations                                   |  |                             | (0.08     | ) |                                                    |   | 0.01    |                                                 |  |   | (1.69                       | ) |  |   | (0.51     | )
|                                                                             |  |                             |           |   |                                                    |   |         |                                                 |  |   |                             |   |  |   |           |  
|Net (loss) income                                                            |  | $                           | (5.28     | ) |                                                    | $ | (2.36   | )                                               |  | $ | 19.76                       |   |  | $ | (18.29    | )
|                                                                             |  |                             |           |   |                                                    |   |         |                                                 |  |   |                             |   |  |   |           |  
|Weighted average shares of common stock outstanding                          |  |                             | 36,000    |   |                                                    |   | 30,000  |                                                 |  |   | 51,306                      |   |  |   | 50,921    |  
|Diluted net (loss) income per common share:                                  |  |                             |           |   |                                                    |   |         |                                                 |  |   |                             |   |  |   |           |  
|(Loss) income from continuing operations                                     |  | $                           | (5.20     | ) |                                                    | $ | (2.37   | )                                               |  | $ | 21.45                       |   |  | $ | (17.78    | )
|(Loss) income from discontinued operations                                   |  |                             | (0.08     | ) |                                                    |   | 0.01    |                                                 |  |   | (1.69                       | ) |  |   | (0.51     | )
|                                                                             |  |                             |           |   |                                                    |   |         |                                                 |  |   |                             |   |  |   |           |  
|Net (loss) income                                                            |  | $                           | (5.28     | ) |                                                    | $ | (2.36   | )                                               |  | $ | 19.76                       |   |  | $ | (18.29    | )
|                                                                             |  |                             |           |   |                                                    |   |         |                                                 |  |   |                             |   |  |   |           |  
|Weighted average shares of common stock and equivalents outstanding          |  |                             | 36,000    |   |                                                    |   | 30,000  |                                                 |  |   | 51,306                      |   |  |   | 50,921    |  

See accompanying notes
to consolidated financial statements.



94



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Shareholders Equity (Deficit) and Comprehensive Income (Loss)

(In thousands)



|                                                                                                  |  |              |         |   |                          |   |      |                    |  |   |                                                       |   |  |               |            |   |                                   |   |         |   |  |   |         |   |  |   |            |  
|------------------------------------------------------------------------------------------------- |  | ------------ | ------- | - | ------------------------ | - | ---- | ------------------ |  | - | ----------------------------------------------------- | - |  | ------------- | ---------- | - | --------------------------------- | - | ------- | - |  | - | ------- | - |  | - | ---------- | -
|                                                                                                  |  | Common Stock |         |   | AdditionalPaid-InCapital |   |      | AccumulatedDeficit |  |   | AccumulatedOtherComprehensiveIncome (Loss),net of tax |   |  | TreasuryStock |            |   | TotalShareholdersEquity(Deficit) |  
|                                                                                                  |  | Shares       |         |   | Amount                   |   |      |                    |  |   |                                                      
|Balances at September 30, 2007, Predecessor Company                                               |  |              | 52,765  |   |                          | $ | 690  |                    |  | $ | 669,274                                               |   |  | $             | (763,370   | ) |                                   | $ | 65,664  |   |  | $ | (76,086 | ) |  | $ | (103,828   | )
|Net loss                                                                                          |  |              |        |   |                          |   |     |                    |  |   |                                                      |   |  |               | (931,545   | ) |                                   |   |        |   |  |   |        |   |  |   | (931,545   | )
|Adjustment of additional minimum pension liability                                                |  |              |        |   |                          |   |     |                    |  |   |                                                      |   |  |               |           |   |                                   |   | 2,459   |   |  |   |        |   |  |   | 2,459      |  
|Valuation allowance adjustment                                                                    |  |              |        |   |                          |   |     |                    |  |   |                                                      |   |  |               |           |   |                                   |   | (4,060  | ) |  |   |        |   |  |   | (4,060     | )
|Translation adjustment                                                                            |  |              |        |   |                          |   |     |                    |  |   |                                                      |   |  |               |           |   |                                   |   | 5,236   |   |  |   |        |   |  |   | 5,236      |  
|Other unrealized gains and losses                                                                 |  |              |        |   |                          |   |     |                    |  |   |                                                      |   |  |               |           |   |                                   |   | 146     |   |  |   |        |   |  |   | 146        |  
|                                                                                                  |  |              |         |   |                          |   |      |                    |  |   |                                                       |   |  |               |            |   |                                   |   |         |   |  |   |         |   |  |   |            |  
|Comprehensive loss                                                                                |  |              |         |   |                          |   |      |                    |  |   |                                                       |   |  |               |            |   |                                   |   |         |   |  |   |         |   |  |   | (927,764   | )
|Issuance of restricted stock                                                                      |  |              | 408     |   |                          |   | 4    |                    |  |   | (4                                                    | ) |  |               |           |   |                                   |   |        |   |  |   |        |   |  |   |           |  
|Forfeiture of restricted stock                                                                    |  |              | (268    | ) |                          |   | (2   | )                  |  |   | 2                                                     |   |  |               |           |   |                                   |   |        |   |  |   |        |   |  |   |           |  
|Treasury shares surrendered                                                                       |  |              | (130    | ) |                          |   |     |                    |  |   |                                                      |   |  |               |           |   |                                   |   |        |   |  |   | (744    | ) |  |   | (744       | )
|Amortization of unearned compensation                                                             |  |              |        |   |                          |   |     |                    |  |   | 5,098                                                 |   |  |               |           |   |                                   |   |        |   |  |   |        |   |  |   | 5,098      |  
|                                                                                                  |  |              |         |   |                          |   |      |                    |  |   |                                                       |   |  |               |            |   |                                   |   |         |   |  |   |         |   |  |   |            |  
|Balances at September 30, 2008, Predecessor Company                                               |  |              | 52,775  |   |                          | $ | 692  |                    |  | $ | 674,370                                               |   |  | $             | (1,694,915 | ) |                                   | $ | 69,445  |   |  | $ | (76,830 | ) |  | $ | (1,027,238 | )
|Net income                                                                                        |  |              |        |   |                          |   |     |                    |  |   |                                                      |   |  |               | 1,013,941  |   |                                   |   |        |   |  |   |        |   |  |   | 1,013,941  |  
|Adjustment of additional minimum pension liability                                                |  |              |        |   |                          |   |     |                    |  |   |                                                      |   |  |               |           |   |                                   |   | (1,160  | ) |  |   |        |   |  |   | (1,160     | )
|Valuation allowance adjustment                                                                    |  |              |        |   |                          |   |     |                    |  |   |                                                      |   |  |               |           |   |                                   |   | 5,104   |   |  |   |        |   |  |   | 5,104      |  
|Translation adjustment                                                                            |  |              |        |   |                          |   |     |                    |  |   |                                                      |   |  |               |           |   |                                   |   | (2,650  | ) |  |   |        |   |  |   | (2,650     | )
|Other unrealized gains and losses                                                                 |  |              |        |   |                          |   |     |                    |  |   |                                                      |   |  |               |           |   |                                   |   | 9,817   |   |  |   |        |   |  |   | 9,817      |  
|                                                                                                  |  |              |         |   |                          |   |      |                    |  |   |                                                       |   |  |               |            |   |                                   |   |         |   |  |   |         |   |  |   |            |  
|Comprehensive income                                                                              |  |              |         |   |                          |   |      |                    |  |   |                                                       |   |  |               |            |   |                                   |   |         |   |  |   |         |   |  |   | 1,025,052  |  
|Issuance of restricted stock                                                                      |  |              | 230     |   |                          |   | (1   | )                  |  |   | 1                                                     |   |  |               |           |   |                                   |   |        |   |  |   |        |   |  |   |           |  
|Forfeiture of restricted stock                                                                    |  |              | (82     | ) |                          |   |     |                    |  |   |                                                      |   |  |               |           |   |                                   |   |        |   |  |   |        |   |  |   |           |  
|Treasury shares surrendered                                                                       |  |              | (185    | ) |                          |   |     |                    |  |   |                                                      |   |  |               |           |   |                                   |   |        |   |  |   | (61     | ) |  |   | (61        | )
|Amortization of unearned compensation                                                             |  |              |        |   |                          |   |     |                    |  |   | 2,636                                                 |   |  |               |           |   |                                   |   |        |   |  |   |        |   |  |   | 2,636      |  
|Cancellation of Predecessor Company common stock                                                  |  |              | (52,738 | ) |                          |   | (691 | )                  |  |   | (677,007                                              | ) |  |               |           |   |                                   |   |        |   |  |   | 76,891  |   |  |   | (600,807   | )
|Elimination of Predecessor Company accumulated deficit and accumulated other comprehensive income |  |              |        |   |                          |   |     |                    |  |   |                                                      |   |  |               | 680,974    |   |                                   |   | (80,556 | ) |  |   |        |   |  |   | 600,418    |  
|Issuance of new common stock in connection with emergence from Chapter 11 of the Bankruptcy Code  |  |              | 30,000  |   |                          |   | 300  |                    |  |   | 724,796                                               |   |  |               |           |   |                                   |   |        |   |  |   |        |   |  |   | 725,096    |  
|                                                                                                  |  |              |         |   |                          |   |      |                    |  |   |                                                       |   |  |               |            |   |                                   |   |         |   |  |   |         |   |  |   |            |  
|Balances at August 30, 2009, Successor Company                                                    |  |              | 30,000  |   |                          | $ | 300  |                    |  | $ | 724,796                                               |   |  | $             |           |   |                                   | $ |        |   |  | $ |        |   |  | $ | 725,096    |  
|                                                                                                  |  |              |         |   |                          |   |      |                    |  |   |                                                       |   |  |               |            |   |                                   |   |         |   |  |   |         |   |  |   |            |  

See accompanying notes to consolidated financial statements.



95



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Shareholders Equity (Deficit) and Comprehensive Income (Loss)Continued

(In thousands)



|                                                           |  |              |        |   |                          |   |     |                    |  |   |                                                       |   |  |               |          |   |                                   |   |         |   |  |   |        |   |  |   |           |  
|---------------------------------------------------------- |  | ------------ | ------ | - | ------------------------ | - | --- | ------------------ |  | - | ----------------------------------------------------- | - |  | ------------- | -------- | - | --------------------------------- | - | ------- | - |  | - | ------ | - |  | - | --------- | -
|                                                           |  | Common Stock |        |   | AdditionalPaid-InCapital |   |     | AccumulatedDeficit |  |   | AccumulatedOtherComprehensiveIncome (Loss),net of tax |   |  | TreasuryStock |          |   | TotalShareholdersEquity(Deficit) |  
|                                                           |  | Shares       |        |   | Amount                   |   |     |                    |  |   |                                                      
|Balances at August 30, 2009, Successor Company             |  |              | 30,000 |   |                          | $ | 300 |                    |  | $ | 724,796                                               |   |  | $             |         |   |                                   | $ |        |   |  | $ |       |   |  | $ | 725,096   |  
|Net loss                                                   |  |              |       |   |                          |   |    |                    |  |   |                                                      |   |  |               | (70,785  | ) |                                   |   |        |   |  |   |       |   |  |   | (70,785   | )
|Adjustment of additional minimum pension liability         |  |              |       |   |                          |   |    |                    |  |   |                                                      |   |  |               |         |   |                                   |   | 576     |   |  |   |       |   |  |   | 576       |  
|Valuation allowance adjustment                             |  |              |       |   |                          |   |    |                    |  |   |                                                      |   |  |               |         |   |                                   |   | (755    | ) |  |   |       |   |  |   | (755      | )
|Translation adjustment                                     |  |              |       |   |                          |   |    |                    |  |   |                                                      |   |  |               |         |   |                                   |   | 5,896   |   |  |   |       |   |  |   | 5,896     |  
|Other unrealized gains and losses                          |  |              |       |   |                          |   |    |                    |  |   |                                                      |   |  |               |         |   |                                   |   | 851     |   |  |   |       |   |  |   | 851       |  
|                                                           |  |              |        |   |                          |   |     |                    |  |   |                                                       |   |  |               |          |   |                                   |   |         |   |  |   |        |   |  |   |           |  
|Comprehensive loss                                         |  |              |        |   |                          |   |     |                    |  |   |                                                       |   |  |               |          |   |                                   |   |         |   |  |   |        |   |  |   | (64,217   | )
|                                                           |  |              |        |   |                          |   |     |                    |  |   |                                                       |   |  |               |          |   |                                   |   |         |   |  |   |        |   |  |   |           |  
|Balances at September 30, 2009, Successor Company          |  |              | 30,000 |   |                          | $ | 300 |                    |  | $ | 724,796                                               |   |  | $             | (70,785  | ) |                                   | $ | 6,568   |   |  | $ |       |   |  | $ | 660,879   |  
|Net loss                                                   |  |              |       |   |                          |   |    |                    |  |   |                                                      |   |  |               | (190,107 | ) |                                   |   |        |   |  |   |       |   |  |   | (190,107  | )
|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 gains and losses                          |  |              |       |   |                          |   |    |                    |  |   |                                                      |   |  |               |         |   |                                   |   | (6,490  | ) |  |   |       |   |  |   | (6,490    | )
|                                                           |  |              |        |   |                          |   |     |                    |  |   |                                                       |   |  |               |          |   |                                   |   |         |   |  |   |        |   |  |   |           |  
|Comprehensive income                                       |  |              |        |   |                          |   |     |                    |  |   |                                                       |   |  |               |          |   |                                   |   |         |   |  |   |        |   |  |   | (204,172  | )
|Issuance of common stock                                   |  |              | 20,433 |   |                          |   | 205 |                    |  |   | 574,998                                               |   |  |               |         |   |                                   |   |        |   |  |   |       |   |  |   | 575,203   |  
|Issuance of restricted stock                               |  |              | 939    |   |                          |   | 9   |                    |  |   | (9                                                    | ) |  |               |         |   |                                   |   |        |   |  |   |       |   |  |   |          |  
|Unvested restricted stock units, not issued or outstanding |  |              | (271   | ) |                          |   |    |                    |  |   |                                                      |   |  |               |         |   |                                   |   |        |   |  |   |       |   |  |   |          |  
|Treasury shares surrendered                                |  |              | (81    | ) |                          |   |    |                    |  |   |                                                      |   |  |               |         |   |                                   |   |        |   |  |   | (2,207 | ) |  |   | (2,207    | )
|Amortization of unearned compensation                      |  |              |       |   |                          |   |    |                    |  |   | 16,676                                                |   |  |               |         |   |                                   |   |        |   |  |   |       |   |  |   | 16,676    |  
|                                                           |  |              |        |   |                          |   |     |                    |  |   |                                                       |   |  |               |          |   |                                   |   |         |   |  |   |        |   |  |   |           |  
|Balances at September 30, 2010, Successor Company          |  |              | 51,020 |   |                          | $ | 514 |                    |  | $ | 1,316,461                                             |   |  | $             | (260,892 | ) |                                   | $ | (7,497  | ) |  | $ | (2,207 | ) |  | $ | 1,046,379 |  
|                                                           |  |              |        |   |                          |   |     |                    |  |   |                                                       |   |  |               |          |   |                                   |   |         |   |  |   |        |   |  |   |           |  

See accompanying notes to consolidated financial statements.



96



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)



|                                                                                                         |  |                             |            |   |                                                     |   |         |                                                  |  |   |                             |   |  |   |          |  
|-------------------------------------------------------------------------------------------------------- |  | --------------------------- | ---------- | - | --------------------------------------------------- | - | ------- | ------------------------------------------------ |  | - | --------------------------- | - |  | - | -------- | -
|                                                                                                         |  | SuccessorCompany            |            |   | Predecessor Company                                 |  
|                                                                                                         |  | Year EndedSeptember 30,2010 |            |   | Period fromAugust 31, 2009throughSeptember 30, 2009 |   |         | Period fromOctober 1, 2008throughAugust 30, 2009 |  |   | Year EndedSeptember 30,2008 |  
|Cash flows from operating activities:                                                                    |  |                             |            |   |                                                     |   |         |                                                  |  |   |                             |   |  |   |          |  
|Net (loss) income                                                                                        |  | $                           | (190,107   | ) |                                                     | $ | (70,785 | )                                                |  | $ | 1,013,941                   |   |  | $ | (931,545 | )
|Income (loss) from discontinued operations                                                               |  |                             | (2,735     | ) |                                                     |   | 408     |                                                  |  |   | (86,802                     | ) |  |   | (26,187  | )
|                                                                                                         |  |                             |            |   |                                                     |   |         |                                                  |  |   |                             |   |  |   |          |  
|(Loss) income from continuing operations                                                                 |  |                             | (187,372   | ) |                                                     |   | (71,193 | )                                                |  |   | 1,100,743                   |   |  |   | (905,358 | )
|Adjustments to reconcile net (loss) income to net cash provided by operating activities:                 |  |                             |            |   |                                                     |   |         |                                                  |  |   |                             |   |  |   |          |  
|Depreciation                                                                                             |  |                             | 54,822     |   |                                                     |   | 5,158   |                                                  |  |   | 36,745                      |   |  |   | 52,236   |  
|Amortization of intangibles                                                                              |  |                             | 45,920     |   |                                                     |   | 3,513   |                                                  |  |   | 19,099                      |   |  |   | 27,687   |  
|Amortization of debt issuance costs                                                                      |  |                             | 9,030      |   |                                                     |   | 314     |                                                  |  |   | 13,338                      |   |  |   | 8,387    |  
|Amortization of unearned restricted stock compensation                                                   |  |                             | 16,676     |   |                                                     |   |        |                                                  |  |   | 2,636                       |   |  |   | 5,098    |  
|Impairment of goodwill and intangibles                                                                   |  |                             |           |   |                                                     |   |        |                                                  |  |   | 34,391                      |   |  |   | 861,234  |  
|Non-cash goodwill adjustment due to release of valuation allowance                                       |  |                             |           |   |                                                     |   | 47,443  |                                                  |  |   |                            |   |  |   |         |  
|Fresh-start reporting adjustments                                                                        |  |                             |           |   |                                                     |   |        |                                                  |  |   | (1,087,566                  | ) |  |   |         |  
|Gain on cancelation of debt                                                                              |  |                             |           |   |                                                     |   |        |                                                  |  |   | (146,555                    | ) |  |   |         |  
|Administrative related reorganization items                                                              |  |                             | 3,646      |   |                                                     |   | 3,962   |                                                  |  |   | 91,312                      |   |  |   |         |  
|Payments for administrative related reorganization items                                                 |  |                             | (47,173    | ) |                                                     |   |        |                                                  |  |   |                            |   |  |   |         |  
|Deferred income taxes                                                                                    |  |                             | 51,731     |   |                                                     |   | 3,498   |                                                  |  |   | 22,046                      |   |  |   | (37,237  | )
|Non-cash increase to cost of goods sold due to inventory valuations                                      |  |                             | 34,865     |   |                                                     |   |        |                                                  |  |   |                            |   |  |   |         |  
|Non-cash interest expense on 12% Notes                                                                   |  |                             | 24,555     |   |                                                     |   |        |                                                  |  |   |                            |   |  |   |         |  
|Write off of unamortized discount on retired debt                                                        |  |                             | 59,162     |   |                                                     |   |        |                                                  |  |   |                            |   |  |   |         |  
|Write off of debt issuance costs                                                                         |  |                             | 6,551      |   |                                                     |   |        |                                                  |  |   | 2,358                       |   |  |   |         |  
|Non-cash restructuring and related charges                                                               |  |                             | 16,359     |   |                                                     |   | 1,299   |                                                  |  |   | 28,368                      |   |  |   | 29,726   |  
|Non-cash debt accretion                                                                                  |  |                             | 18,302     |   |                                                     |   | 2,861   |                                                  |  |   |                            |   |  |   |         |  
|Changes in assets and liabilities:                                                                       |  |                             |            |   |                                                     |   |         |                                                  |  |   |                             |   |  |   |          |  
|Accounts receivable                                                                                      |  |                             | 12,702     |   |                                                     |   | 5,699   |                                                  |  |   | 68,203                      |   |  |   | 8,655    |  
|Inventories                                                                                              |  |                             | (66,127    | ) |                                                     |   | 48,995  |                                                  |  |   | 9,004                       |   |  |   | 12,086   |  
|Prepaid expenses and other current assets                                                                |  |                             | 2,025      |   |                                                     |   | 1,256   |                                                  |  |   | 5,131                       |   |  |   | 13,738   |  
|Accounts payable and accrued liabilities                                                                 |  |                             | 86,497     |   |                                                     |   | 22,438  |                                                  |  |   | (80,463                     | ) |  |   | (62,165  | )
|Other assets and liabilities                                                                             |  |                             | (73,612    | ) |                                                     |   | (6,565  | )                                                |  |   | (88,996                     | ) |  |   | (18,990  | )
|                                                                                                         |  |                             |            |   |                                                     |   |         |                                                  |  |   |                             |   |  |   |          |  
|Net cash provided (used) by operating activities of continuing operations                                |  |                             | 68,559     |   |                                                     |   | 68,678  |                                                  |  |   | 29,794                      |   |  |   | (4,903   | )
|Net cash provided (used) by operating activities of discontinued operations                              |  |                             | (11,221    | ) |                                                     |   | 6,273   |                                                  |  |   | (28,187                     | ) |  |   | (5,259   | )
|                                                                                                         |  |                             |            |   |                                                     |   |         |                                                  |  |   |                             |   |  |   |          |  
|Net cash provided (used) by operating activities                                                         |  |                             | 57,338     |   |                                                     |   | 74,951  |                                                  |  |   | 1,607                       |   |  |   | (10,162  | )
|Cash flows from investing activities:                                                                    |  |                             |            |   |                                                     |   |         |                                                  |  |   |                             |   |  |   |          |  
|Purchases of property, plant and equipment                                                               |  |                             | (40,316    | ) |                                                     |   | (2,718  | )                                                |  |   | (8,066                      | ) |  |   | (18,928  | )
|Proceeds from sale of property, plant and equipment                                                      |  |                             | 388        |   |                                                     |   | 71      |                                                  |  |   | 379                         |   |  |   | 285      |  
|Payments for acquisitions, net of cash acquired                                                          |  |                             | (2,577     | ) |                                                     |   |        |                                                  |  |   | (8,460                      | ) |  |   |         |  
|                                                                                                         |  |                             |            |   |                                                     |   |         |                                                  |  |   |                             |   |  |   |          |  
|Net cash used by investing activities of continuing operations                                           |  |                             | (42,505    | ) |                                                     |   | (2,647  | )                                                |  |   | (16,147                     | ) |  |   | (18,643  | )
|Net cash (used) provided by investing activities of discontinued operations                              |  |                             |           |   |                                                     |   |        |                                                  |  |   | (855                        | ) |  |   | 12,376   |  
|                                                                                                         |  |                             |            |   |                                                     |   |         |                                                  |  |   |                             |   |  |   |          |  
|Net cash used by investing activities                                                                    |  |                             | (42,505    | ) |                                                     |   | (2,647  | )                                                |  |   | (17,002                     | ) |  |   | (6,267   | )
|Cash flows from financing activities:                                                                    |  |                             |            |   |                                                     |   |         |                                                  |  |   |                             |   |  |   |          |  
|Proceeds from new Senior Credit Facilities, excluding new ABL Revolving Credit Facility, net of discount |  |                             | 1,474,755  |   |                                                     |   |        |                                                  |  |   |                            |   |  |   |         |  
|Payment of extinguished senior credit facilities, excluding old ABL revolving credit facility            |  |                             | (1,278,760 | ) |                                                     |   |        |                                                  |  |   |                            |   |  |   |         |  
|Reduction of other debt                                                                                  |  |                             | (8,456     | ) |                                                     |   | (4,603  | )                                                |  |   | (120,583                    | ) |  |   | (425,073 | )
|Proceeds from other debt financing                                                                       |  |                             | 13,688     |   |                                                     |   |        |                                                  |  |   |                            |   |  |   | 477,759  |  
|Debt issuance costs, net of refund                                                                       |  |                             | (55,024    | ) |                                                     |   | (287    | )                                                |  |   | (17,199                     | ) |  |   | (152     | )
|Extinguished ABL Revolving Credit Facility                                                               |  |                             | (33,225    | ) |                                                     |   | (31,775 | )                                                |  |   | 65,000                      |   |  |   |         |  
|(Payments of) proceeds on supplemental loan                                                              |  |                             | (45,000    | ) |                                                     |   |        |                                                  |  |   | 45,000                      |   |  |   |         |  
|Treasury stock purchases                                                                                 |  |                             | (2,207     | ) |                                                     |   |        |                                                  |  |   | (61                         | ) |  |   | (744     | )
|                                                                                                         |  |                             |            |   |                                                     |   |         |                                                  |  |   |                             |   |  |   |          |  
|Net cash (used) provided by financing activities                                                         |  |                             | 65,771     |   |                                                     |   | (36,665 | )                                                |  |   | (27,843                     | ) |  |   | 51,790   |  
|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                                             |  |                             | 258        |   |                                                     |   | 1,002   |                                                  |  |   | (376                        | ) |  |   | (441     | )
|                                                                                                         |  |                             |            |   |                                                     |   |         |                                                  |  |   |                             |   |  |   |          |  
|Net increase (decrease) in cash and cash equivalents                                                     |  |                             | 72,814     |   |                                                     |   | 36,641  |                                                  |  |   | (43,614                     | ) |  |   | 34,920   |  
|Cash and cash equivalents, beginning of period                                                           |  |                             | 97,800     |   |                                                     |   | 61,159  |                                                  |  |   | 104,773                     |   |  |   | 69,853   |  
|                                                                                                         |  |                             |            |   |                                                     |   |         |                                                  |  |   |                             |   |  |   |          |  
|Cash and cash equivalents, end of period                                                                 |  | $                           | 170,614    |   |                                                     | $ | 97,800  |                                                  |  | $ | 61,159                      |   |  | $ | 104,773  |  
|                                                                                                         |  |                             |            |   |                                                     |   |         |                                                  |  |   |                             |   |  |   |          |  
|Supplemental disclosure of cash flow information:                                                        |  |                             |            |   |                                                     |   |         |                                                  |  |   |                             |   |  |   |          |  
|Cash paid for interest                                                                                   |  | $                           | 136,429    |   |                                                     | $ | 5,828   |                                                  |  | $ | 158,380                     |   |  | $ | 227,290  |  
|Cash paid for income taxes, net                                                                          |  |                             | 36,951     |   |                                                     |   | 1,336   |                                                  |  |   | 18,768                      |   |  |   | 16,999   |  

See accompanying notes
to consolidated financial statements.



97



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(1) Description of Business

Spectrum Brands Holdings, Inc., a Delaware corporation (SB Holdings or the Company), is a global branded consumer products company
and was created in connection with the combination of Spectrum Brands, Inc. (Spectrum Brands), a global branded consumer products company, 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 trades on the New York Stock Exchange under the symbol SPB.

In connection with the Merger, Spectrum Brands refinanced its existing senior debt and a portion of Russell Hobbs existing senior
debt through a combination of a new $750,000 United States (U.S.) Dollar Term Loan due June 16, 2016, new $750,000 9.5% Senior Secured Notes maturing June 15, 2018 and a new $300,000 ABL revolving facility due June 16,
2014. (See also Note 7, Debt, for a more complete discussion of the Companys outstanding debt.)

On February 3,
2009, Spectrum Brands, at the time a Wisconsin corporation, and each of its wholly owned U.S. subsidiaries (collectively, the Debtors) filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code (the Bankruptcy
Code), in the U.S. Bankruptcy Court for the Western District of Texas (the Bankruptcy Court). On August 28, 2009 (the Effective Date), the Debtors emerged from Chapter 11 of the Bankruptcy Code. As of the Effective
Date and pursuant to the Debtors confirmed plan of reorganization, Spectrum Brands converted from a Wisconsin corporation to a Delaware corporation.

Unless the context indicates otherwise, the term Company is used to refer to both Spectrum Brands and its subsidiaries prior to the Merger and SB Holdings and its subsidiaries subsequent to
the Merger. The term Predecessor Company refers only to the Company prior to the Effective Date and the term Successor Company refers to the Company subsequent to the Effective Date. The Companys fiscal year ends
September 30. References herein to Fiscal 2010, Fiscal 2009 and Fiscal 2008 refer to the fiscal years ended September 30, 2010, 2009 and 2008, respectively.

Prior to and including August 30, 2009, all operations of the business resulted from the operations of the Predecessor Company. In accordance with ASC Topic 852: Reorganizations,(ASC 852) the Company determined that all conditions required for the adoption of fresh-start reporting were met upon emergence from Chapter 11 of the Bankruptcy Code on the Effective Date. However in light of the proximity of that
date to the Companys August accounting period close, which was August 30, 2009, the Company elected to adopt a convenience date of August 30, 2009, (the Fresh-Start Adoption Date) for recording fresh-start reporting. The
Company analyzed the transactions that occurred during the two-day period from August 29, 2009, the day after the Effective Date, and August 30, 2009, the Fresh-Start Adoption Date, and concluded that such transactions represented less
than one-percent of the total net sales during Fiscal 2009. As a result, the Company determined that August 30, 2009 would be an appropriate Fresh-Start Adoption Date to coincide with the Companys normal financial period close for the
month of August 2009. As a result, the fair value of the Predecessor Companys assets and liabilities became the new basis for the Successor Companys Consolidated Statement of Financial Position as of the Fresh-Start Adoption Date, and
all operations beginning August 31, 2009 are related to the Successor Company. Financial information of the Companys financial statements prepared for the Predecessor Company will not be comparable to financial information for the
Successor Company. The Company is a global branded consumer products company with positions in seven major product categories: consumer batteries; small appliances; pet supplies; electric shaving and grooming; electric personal care; portable
lighting; and home and garden control.



98



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



The Company manages its business in four reportable segments: (i) Global
Batteries & Personal Care, which consists of the Companys worldwide battery, shaving and grooming, personal care and portable lighting business (Global Batteries & Personal Care); (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 lawn and garden and insect control businesses (the Home and
Garden Business); and (iv) Small Appliances, which resulted from the acquisition of Russell Hobbs and consists of small electrical appliances primarily in the kitchen and home product categories (Small Appliances).

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 repellents in North America. With the addition of Russell Hobbs the Company 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 U.S., Europe, Asia and Latin America.

The Company sells its products in approximately 120 countries through a variety of trade channels, including retailers, wholesalers and
distributors, hearing aid professionals, industrial distributors and original equipment manufacturers and enjoys name recognition in its markets under the Rayovac, VARTA and Remington brands, each of which has been in existence for more than 80
years, and under the Tetra, 8in1, Spectracide, Cutter, Black & Decker, George Foreman, Russell Hobbs, Farberware and various other brands.

(2) Voluntary Reorganization Under Chapter 11

On February 3, 2009, the Predecessor
Company announced that it had reached agreements with certain noteholders, representing, in the aggregate, approximately 70% of the face value of the Companys then outstanding senior subordinated notes, to pursue a refinancing that, if
implemented as proposed, would significantly reduce the Predecessor Companys outstanding debt. On the same day, the Debtors filed voluntary petitions under Chapter 11 of the Bankruptcy Code, in the Bankruptcy Court (the Bankruptcy
Filing) and filed with the Bankruptcy Court a proposed plan of reorganization (the Proposed Plan) that detailed the Debtors proposed terms for the refinancing. The Chapter 11 cases were jointly administered by the Bankruptcy
Court as Case No. 09-50455 (the Bankruptcy Cases).

The Bankruptcy Court entered a written order (the
Confirmation Order) on July 15, 2009 confirming the Proposed Plan (as so confirmed, the Plan).

Plan Effective
Date

On the Effective Date the Plan became effective, and the Debtors emerged from Chapter 11 of the
Bankruptcy Code. Pursuant to and by operation of the Plan, on the Effective Date, all of Predecessor Companys existing equity securities, including the existing common stock and stock options, were extinguished and deemed cancelled. Spectrum
Brands filed a certificate of incorporation authorizing new shares of common stock. Pursuant to and in accordance with the Plan, on the Effective Date, Successor Company issued a total of 27,030 shares of common stock and $218,076 of 12% Senior
Subordinated Toggle Notes due 2019 (the 12% Notes) to holders of allowed claims with respect to Predecessor Companys 81/2% Senior Subordinated Notes due 2013 (the 81/2Notes), 73/8% Senior Subordinated Notes due 2015 (the 73/8Notes) and Variable Rate Toggle Senior Subordinated Notes due 2013 (the Variable Rate Notes) (collectively, the
Senior Subordinated Notes). (See also Note 7, Debt, for a more complete discussion of the 12% Notes.) Also on the Effective Date,



99



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



Successor Company issued a total of 2,970 shares of common stock to supplemental and sub-supplemental debtor-in-possession facility participants in respect of the equity fee earned under the
Debtors debtor-in-possession credit facility.

Accounting for Reorganization

Subsequent to the date of the Bankruptcy Filing (the Petition Date), the Companys financial statements are prepared in
accordance with ASC 852. ASC 852 does not change the application of U.S. Generally Accepted Accounting Principles (GAAP) in the preparation of the Companys consolidated financial statements. However, ASC 852 does require that
financial statements, for periods including and subsequent to the filing of a Chapter 11 petition, distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. In
accordance with ASC 852 the Company has done the following:



| |  |  | On the four column consolidated statement of financial position as of August 30, 2009, which is included in this Note 2, Voluntary Reorganization
Under Chapter 11, separated liabilities that are subject to compromise from liabilities that are not subject to compromise;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On the accompanying Consolidated Statements of Operations, distinguished transactions and events that are directly associated with the reorganization
from the ongoing operations of the business;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On the accompanying Consolidated Statements of Cash Flows, separately disclosed Reorganization items expense (income), net, consisting of the
following: (i) Fresh-start reporting adjustments; (ii) Gain on cancelation of debt; and (iii) Administrative related reorganization items; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Ceased accruing interest on the Predecessor Companys then outstanding senior subordinated notes.
| | - |  | -------------------------------------------------------------------------------------------------

Liabilities Subject to Compromise

Liabilities subject to compromise refer to known liabilities incurred prior to the Bankruptcy Filing by those entities that filed for Chapter 11 bankruptcy. These liabilities are considered by the
Bankruptcy Court to be pre-petition claims. However, liabilities subject to compromise exclude pre-petition claims for which the Company has received the Bankruptcy Courts approval to pay, such as claims related to active employees and
retirees and claims related to certain critical service vendors. Liabilities subject to compromise are subject to future adjustments that may result from negotiations, actions by the Bankruptcy Court and developments with respect to disputed claims
or matters arising out of the proof of claims process whereby a creditor may prove that the amount of a claim differs from the amount that the Company has recorded.

Since the Petition Date, and in accordance with ASC 852, the Company ceased accruing interest on its senior subordinated notes, as such debt and interest would be an allowed claim by the Bankruptcy Court.
The Predecessor Companys contractual interest on the Senior Subordinated Notes in excess of reported interest was approximately $55,654 for the period from October 1, 2008 through August 30, 2009.

Liabilities subject to compromise as of August 30, 2009 for the Predecessor Company were as follows:



|                                              |  |                |            |    
|--------------------------------------------- |  | -------------- | ---------- | ---
|                                              |  | August 30,2009 |           
|Senior Subordinated Notes                     |  | $              | 1,049,885  |    
|Accrued interest on Senior Subordinated Notes |  |                | 40,497     |    
|Other accrued liabilities                     |  |                | 15,580     | (A)
|                                              |  |                |            |    
|Predecessor Company Balance                   |  | $              | 1,105,962  |    
|Effects of Plan                               |  |                | (1,105,962 | )  
|                                              |  |                |            |    
|Successor Company Balance                     |  | $              |           |    
|                                              |  |                |            |    



100



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)





|(A) | As discussed below in the four column consolidated statement of financial position as of August 30, 2009 Effects of Plan Adjustments, note (f), the
$15,580 relates to rejected lease obligations that are to be paid by the Successor Company in subsequent periods.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Reorganization Items

In
accordance with ASC 852, reorganization items are presented separately in the accompanying Consolidated Statements of Operations and represent expenses, income, gains and losses that the Company has identified as directly relating to the Bankruptcy
Cases. Reorganization items expense (income), net during Fiscal 2010 and during the period from August 31, 2009 through September 30, 2009 and the period from October 1, 2008 through August 30, 2009 are summarized as follows:



|                                            |                             |                   |       |                                                    |                     |   |                                                 |  |  |   |            |  
|------------------------------------------- | --------------------------- | ----------------- | ----- | -------------------------------------------------- | ------------------- | - | ----------------------------------------------- |  |  | - | ---------- | -
|                                            |                             | Successor Company |       |                                                    | Predecessor Company |  
|                                            | Year EndedSeptember 30,2010 |                   |       | Period fromAugust 31,2009 throughSeptember 30,2009 |                     |   | Period fromOctober 1,2008 throughAugust 30,2009 | 
|Legal and professional fees                 |                             | $                 | 3,536 |                                                    |                     | $ | 3,962                                           |  |  | $ | 74,624     |  
|Deferred financing costs                    |                             |                   |      |                                                    |                     |   |                                                |  |  |   | 10,668     |  
|Provision for rejected leases               |                             |                   | 110   |                                                    |                     |   |                                                |  |  |   | 6,020      |  
|                                            |                             |                   |       |                                                    |                     |   |                                                 |  |  |   |            |  
|Administrative related reorganization items |                             | $                 | 3,646 |                                                    |                     | $ | 3,962                                           |  |  | $ | 91,312     |  
|Gain on cancellation of debt                |                             |                   |      |                                                    |                     |   |                                                |  |  |   | (146,555   | )
|Fresh-start reporting adjustments           |                             |                   |      |                                                    |                     |   |                                                |  |  |   | (1,087,566 | )
|                                            |                             |                   |       |                                                    |                     |   |                                                 |  |  |   |            |  
|Reorganization items expense (income), net  |                             | $                 | 3,646 |                                                    |                     | $ | 3,962                                           |  |  | $ | (1,142,809 | )
|                                            |                             |                   |       |                                                    |                     |   |                                                 |  |  |   |            |  

Fresh-Start Reporting

The Company, in accordance with ASC 852, adopted fresh-start reporting as of the close of business on August 30, 2009 since the reorganization value of the assets of the Predecessor Company
immediately before the date of confirmation of the Plan was less than the total of all post-petition liabilities and allowed claims, and the holders of the Predecessor Companys voting shares immediately before confirmation of the Plan received
less than 50 percent of the voting shares of the emerging entity. The four-column consolidated statement of financial position as of August 30, 2009, included herein, applies effects of the Plan and fresh-start reporting to the carrying values
and classifications of assets or liabilities that were necessary.

The Company analyzed the transactions that occurred during
the two-day period from August 29, 2009, the day after the Effective Date, and August 30, 2009, the fresh-start reporting date, and concluded that such transactions were not material individually or in the aggregate as such transactions
represented less than one-percent of the total net sales for the fiscal year ended September 30, 2009. As a result, the Company determined that August 30, 2009, would be an appropriate fresh-start reporting date to coincide with the
Companys normal financial period close for the month of August 2009. Upon adoption of fresh-start reporting, the recorded amounts of assets and liabilities were adjusted to reflect their estimated fair values. Accordingly, the reported
historical financial statements of the Predecessor Company prior to the adoption of fresh-start reporting for periods ended on or prior to August 30, 2009 are not comparable to those of the Successor Company.



101



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



The four-column consolidated statement of financial position as of August 30, 2009
reflects the implementation of the Plan as if the Plan had been effective on August 30, 2009. Reorganization adjustments have been recorded within the consolidated statement of financial position as of August 30, 2009 to reflect effects of
the Plan, including the discharge of Liabilities subject to compromise and the adoption of fresh-start reporting in accordance with ASC 852. The Bankruptcy Court confirmed the Plan based upon a reorganization value of the Company between $2,200,000
and $2,400,000, which was estimated using various valuation methods including: (i) publicly traded company analysis, (ii) discounted cash flow analysis; and (iii) a review and analysis of several recent transactions of companies in
similar industries to the Company. These three valuation methods were equally weighted in determining the final range of reorganization value as confirmed by the Bankruptcy Court. Based upon the factors used in determining the range of
reorganization value, the Company concluded that $2,275,000 should be used for fresh-start reporting purposes as it most closely approximated fair value.

The basis of the discounted cash flow analysis used in developing the reorganization value was based on Company prepared projections which included a variety of estimates and assumptions. While the
Company considers such estimates and assumptions reasonable, they are inherently subject to significant business, economic and competitive uncertainties, many of which are beyond the Companys control and, therefore, may not be realized.
Changes in these estimates and assumptions may have had a significant effect on the determination of the Companys reorganization value. The assumptions used in the calculations for the discounted cash flow analysis included projected revenue,
costs, and cash flows, for the fiscal years ending September 30, 2009, 2010, 2011, 2012 and 2013 and represented the Companys best estimates at the time the analysis was prepared. The Companys estimates implicit in the cash flow
analysis included net sales growth of approximately 1.5% for the fiscal year ending September 30, 2010 and 4.0% per year for each of the fiscal years ending September 30, 2011, 2012 and 2013. In addition, selling, general and
administrative expenses, excluding depreciation and amortization, were projected to grow at rates relative to net sales, however, certain expense categories for each of the fiscal years ending September 30, 2010, 2011, 2012 and 2013 were
reduced for the projected impact of various cost reduction initiatives implemented by the Company during Fiscal 2009 which included lower trade spending, salary freezes, reduced marketing expenses, furloughs, suspension of the Companys match
to its 401(k) and reductions in salaries of certain members of management. The analysis also included anticipated levels of reinvestment in the Companys operations through capital expenditures of approximately $25,000 per year. The Company did
not include in its estimates the potential effects of litigation, either on the Company or the industry. The foregoing estimates and assumptions are inherently subject to uncertainties and contingencies beyond the control of the Company.
Accordingly, there can be no assurance that the estimates, assumptions, and values reflected in the valuations will be realized, and actual results could vary materially.

The publicly traded company analysis identified a group of comparable companies giving consideration to lines of business, business risk, scale and capitalization and leverage. This analysis involved the
selection of the appropriate earnings before interest, taxes, depreciation and amortization (EBITDA) market multiples by segment deemed to be the most relevant when analyzing the peer group. A range of valuation multiples was then
identified and applied to the Companys Fiscal 2009 and Fiscal 2010 projections by segment to determine an estimate of reorganization values. The market multiple ranges used by segment were as follows: (i) Global Batteries and Personal
Care used a range of 7.0x-8.0x for Fiscal 2009 and 6.5x-7.5x for Fiscal 2010; (ii) Global Pet Supplies used a range of 7.5x-8.5x for Fiscal 2009 and 7.0x-8.0x for Fiscal 2010; and (iii) the Home and Garden Business used a range of
9.0x-10.0x for Fiscal 2009 and 8.0x-9.0x for Fiscal 2010. Theses multiples were based on estimated EBITDA adjusted for certain non-recurring initiatives, as mentioned above.



102



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



The recent transactions of companies in similar industries analysis identified
transactions of similar companies giving consideration to lines of business, business risk, scale and capitalization and leverage. The analysis considered the business, financial and market environment for which the transactions took place,
circumstances surrounding the transaction including the financial position of the buyers and the perceived synergies and benefits that the buyers could obtain from the transaction. This analysis involved the determination of historical acquisition
EBITDA multiples by examining public merger and acquisition transactions. A range of valuation multiples was then identified and applied to historical EBITDA by segment to determine an estimate of reorganization values. The multiple ranges used by
segment were as follows: (i) Global Batteries and Personal Care used a range of 6.5x-7.5x; (ii) Global Pet Supplies used a range of 9.5x-10.5x; and (iii) the Home and Garden Business used a range of 8.0x-9.0x. These multiples were
based on Fiscal 2009 estimated EBITDA adjusted for certain non-recurring initiatives, as mentioned above.

Fresh-start
adjustments reflect the allocation of fair value to the Successor Companys long-lived assets and the present value of liabilities to be paid as calculated by the Company.

In applying fresh-start reporting, the Company followed these principles:



| |  |  | The reorganization value of the entity was allocated to the entitys assets in conformity with the procedures specified by SFAS No. 141,
Business Combinations(SFAS 141). The reorganization value exceeded the sum of the amounts assigned to assets and liabilities. This excess was recorded as Successor Company goodwill as of August 30, 2009.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Each liability existing as of the fresh-start reporting date, other than deferred taxes, has been stated at the present value of the amounts to be
paid, determined at appropriate risk adjusted interest rates.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Deferred taxes were reported in conformity with applicable income tax accounting standards, principally ASC Topic 740: Income Taxes,
formerly SFAS No. 109, Accounting for Income Taxes (ASC 740). Deferred tax assets and liabilities have been recognized for differences between the assigned values and the tax basis of the recognized assets and
liabilities.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Adjustment of all of the property, plant and equipment assets to fair value and eliminating all of the accumulated depreciation.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | Adjustment of the Companys pension plans projected benefit obligation by recognition of all previously unamortized actuarial gains and losses.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



103



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



The following four-column consolidated statement of financial position table identifies
the adjustments recorded to the Predecessor Companys August 30, 2009 consolidated statement of financial position as a result of implementing the Plan and applying fresh-start reporting:



|                                                     |                 |                    |            |                 |  |   |                      |      |  |                 |                  |      |  |   |           | 
|---------------------------------------------------- | --------------- | ------------------ | ---------- | --------------- |  | - | -------------------- | ---- |  | --------------- | ---------------- | ---- |  | - | --------- | 
|                                                     |                 | PredecessorCompany |            |                 |  |   |                      |      |  |                 | SuccessorCompany |     
|                                                     | August 30, 2009 |                    |            | Effects of Plan |  |   | Fresh-StartValuation |      |  | August 30, 2009 |                 
|ASSETS                                               |                 |                    |            |                 |  |   |                      |      |  |                 |                  |      |  |   |           | 
|Current assets:                                      |                 |                    |            |                 |  |   |                      |      |  |                 |                  |      |  |   |           | 
|Cash and cash equivalents                            |                 | $                  | 86,710     |                 |  | $ | (25,551              | )(a) |  | $               |                 |      |  | $ | 61,159    | 
|Receivables:                                         |                 |                    |            |                 |  |   |                      |      |  |                 |                  |      |  |   |           | 
|Trade accounts receivable                            |                 |                    | 270,657    |                 |  |   |                     |      |  |                 |                 |      |  |   | 270,657   | 
|Other                                                |                 |                    | 34,594     |                 |  |   |                     |      |  |                 |                 |      |  |   | 34,594    | 
|Inventories                                          |                 |                    | 341,738    |                 |  |   |                     |      |  |                 | 48,762           | (m)  |  |   | 390,500   | 
|Deferred income taxes                                |                 |                    | 12,644     |                 |  |   | 1,707                | (h)  |  |                 | 9,330            | (n)  |  |   | 23,681    | 
|Assets held for sale                                 |                 |                    | 10,813     |                 |  |   |                     |      |  |                 | 1,978            | (m)  |  |   | 12,791    | 
|Prepaid expenses and other                           |                 |                    | 40,448     |                 |  |   |                     |      |  |                 | (116             | )(m) |  |   | 40,332    | 
|                                                     |                 |                    |            |                 |  |   |                      |      |  |                 |                  |      |  |   |           | 
|Total current assets                                 |                 |                    | 797,604    |                 |  |   | (23,844              | )    |  |                 | 59,954           |      |  |   | 833,714   | 
|Property, plant and equipment, net                   |                 |                    | 178,786    |                 |  |   |                     |      |  |                 | 34,699           | (m)  |  |   | 213,485   | 
|Deferred charges and other                           |                 |                    | 42,068     |                 |  |   |                     |      |  |                 | (6,046           | )(m) |  |   | 36,022    | 
|Goodwill                                             |                 |                    | 238,905    |                 |  |   |                     |      |  |                 | 289,155          | (o)  |  |   | 528,060   | 
|Intangible assets, net                               |                 |                    | 677,050    |                 |  |   |                     |      |  |                 | 782,450          | (o)  |  |   | 1,459,500 | 
|Debt issuance costs                                  |                 |                    | 18,457     |                 |  |   | 8,949                | (b)  |  |                 | (17,957          | )(p) |  |   | 9,449     | 
|                                                     |                 |                    |            |                 |  |   |                      |      |  |                 |                  |      |  |   |           | 
|Total assets                                         |                 | $                  | 1,952,870  |                 |  | $ | (14,895              | )    |  | $               | 1,142,255        |      |  | $ | 3,080,230 | 
|                                                     |                 |                    |            |                 |  |   |                      |      |  |                 |                  |      |  |   |           | 
|LIABILITIES AND SHAREHOLDERS EQUITY                 |                 |                    |            |                 |  |   |                      |      |  |                 |                  |      |  |   |           | 
|Current liabilities:                                 |                 |                    |            |                 |  |   |                      |      |  |                 |                  |      |  |   |           | 
|Current maturities of long-term debt                 |                 | $                  | 93,313     |                 |  | $ | (3,445               | )(c) |  | $               | (4,329           | )(m) |  | $ | 85,539    | 
|Accounts payable                                     |                 |                    | 159,370    |                 |  |   | (204                 | )(d) |  |                 |                 |      |  |   | 159,166   | 
|Accrued liabilities:                                 |                 |                    |            |                 |  |   |                      |      |  |                 |                  |      |  |   |           | 
|Wages and benefits                                   |                 |                    | 80,247     |                 |  |   |                     |      |  |                 |                 |      |  |   | 80,247    | 
|Income taxes payable                                 |                 |                    | 20,059     |                 |  |   |                     |      |  |                 |                 |      |  |   | 20,059    | 
|Restructuring and related charges                    |                 |                    | 26,100     |                 |  |   |                     |      |  |                 |                 |      |  |   | 26,100    | 
|Accrued interest                                     |                 |                    | 59,724     |                 |  |   | (59,581              | )(e) |  |                 |                 |      |  |   | 143       | 
|Other                                                |                 |                    | 118,949    |                 |  |   | 9,133                | (f)  |  |                 | (3,503           | )(m) |  |   | 124,579   | 
|                                                     |                 |                    |            |                 |  |   |                      |      |  |                 |                  |      |  |   |           | 
|Total current liabilities                            |                 |                    | 557,762    |                 |  |   | (54,097              | )    |  |                 | (7,832           | )    |  |   | 495,833   | 
|Long-term debt, net of current maturities            |                 |                    | 1,329,047  |                 |  |   | 271,806              | (g)  |  |                 | (75,329          | )(m) |  |   | 1,525,524 | 
|Employee benefit obligations, net of current portion |                 |                    | 41,385     |                 |  |   |                     |      |  |                 | 18,712           | (m)  |  |   | 60,097    | 
|Deferred income taxes                                |                 |                    | 106,853    |                 |  |   | 1,707                | (h)  |  |                 | 114,211          | (n)  |  |   | 222,771   | 
|Other                                                |                 |                    | 45,982     |                 |  |   |                     |      |  |                 | 4,927            | (m)  |  |   | 50,909    | 
|                                                     |                 |                    |            |                 |  |   |                      |      |  |                 |                  |      |  |   |           | 
|Total liabilities                                    |                 |                    | 2,081,029  |                 |  |   | 219,416              |      |  |                 | 54,689           |      |  |   | 2,355,134 | 
|Liabilities subject to compromise                    |                 |                    | 1,105,962  |                 |  |   | (1,105,962           | )(i) |  |                 |                 |      |  |   |          | 
|Commitments and contingencies                        |                 |                    |            |                 |  |   |                      |      |  |                 |                  |      |  |   |           | 
|Shareholders (deficit) equity:                      |                 |                    |            |                 |  |   |                      |      |  |                 |                  |      |  |   |           | 
|Common stock-Old (Predecessor Company)               |                 |                    | 691        |                 |  |   | (691                 | )(j) |  |                 |                 |      |  |   |          | 
|Common stock-New (Successor Company)                 |                 |                    |           |                 |  |   | 300                  | (j)  |  |                 |                 |      |  |   | 300       | 
|Additional paid-in capital                           |                 |                    | 677,007    |                 |  |   | 47,789               | (j)  |  |                 |                 |      |  |   | 724,796   | 
|Accumulated (deficit) equity                         |                 |                    | (1,915,484 | )               |  |   | 747,362              | (k)  |  |                 | 1,168,122        | (q)  |  |   |          | 
|Accumulated other comprehensive income               |                 |                    | 80,556     |                 |  |   |                     |      |  |                 | (80,556          | )(q) |  |   |          | 
|                                                     |                 |                    |            |                 |  |   |                      |      |  |                 |                  |      |  |   |           | 
|                                                     |                 |                    | (1,157,230 | )               |  |   | 794,760              |      |  |                 | 1,087,566        |      |  |   | 725,096   | 
|Less treasury stock                                  |                 |                    | (76,891    | )               |  |   | 76,891               | (l)  |  |                 |                 |      |  |   |          | 
|                                                     |                 |                    |            |                 |  |   |                      |      |  |                 |                  |      |  |   |           | 
|Total shareholders (deficit) equity                 |                 |                    | (1,234,121 | )               |  |   | 871,651              |      |  |                 | 1,087,566        |      |  |   | 725,096   | 
|                                                     |                 |                    |            |                 |  |   |                      |      |  |                 |                  |      |  |   |           | 
|Total liabilities and shareholders (deficit) equity |                 | $                  | 1,952,870  |                 |  | $ | (14,895              | )    |  | $               | 1,142,255        |      |  | $ | 3,080,230 | 
|                                                     |                 |                    |            |                 |  |   |                      |      |  |                 |                  |      |  |   |           | 



104



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)





Effects of Plan Adjustments



|(a) | The Plans impact resulted in a net decrease of $25,551 on cash and cash equivalents. The significant sources and uses of cash were as follows:
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------



|                                                                                   |  |   |         |  
|---------------------------------------------------------------------------------- |  | - | ------- | -
|Sources:                                                                           |  |   |         |  
|Amounts borrowed under the exit facility                                           |  | $ | 65,000  |  
|Amounts borrowed under new supplemental loan agreement                             |  |   | 45,000  |  
|                                                                                   |  |   |         |  
|Total Sources                                                                      |  | $ | 110,000 |  
|                                                                                   |  |   |         |  
|Uses:                                                                              |  |   |         |  
|Repayment of un-reimbursed letters of credit                                       |  | $ | 20,005  |  
|Repayment of supplemental loans                                                    |  |   | 45,000  |  
|Repayment of certain amounts under the term loan agreement, current portion        |  |   | 3,440   |  
|Repayment of certain amounts under the term loan agreement, net of current portion |  |   | 3,440   |  
|Payment of pre-petition foreign exchange contracts recorded in accounts payable    |  |   | 204     |  
|Payment of lender cure payments, terminated derivative contracts and other         |  |   | 48,066  |  
|Payment of debt issuance costs on exit facility                                    |  |   | 8,949   |  
|Payment of other accrued liabilities                                               |  |   | 6,447   |  
|                                                                                   |  |   |         |  
|Total Uses                                                                         |  | $ | 135,551 |  
|                                                                                   |  |   |         |  
|Net Cash Uses                                                                      |  | $ | (25,551 | )
|                                                                                   |  |   |         |  



|(b) | The Company incurred $8,949 of debt issuance costs under the exit facility. These debt issuance costs are classified as long-term assets and are amortized over the life
of the exit facility.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) | The adjustment to current maturities of long-term debt reflects the $20,005 payment of the Predecessor Companys un-reimbursed letters of credit, the $45,000
repayment of the Predecessor Companys supplemental loan, and the $3,440 payment of certain amounts under the term loan agreement. The adjustment to current maturities of long-term debt also reflects the $65,000 funding from the exit facility.
The adjustment to the current maturities of long-term debt are:
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                            |  |   |         |  
|--------------------------------------------------------------------------- |  | - | ------- | -
|Repayment of unreimbursed letters of credit                                 |  | $ | 20,005  |  
|Repayment of supplemental loan                                              |  |   | 45,000  |  
|Repayment of certain amounts under the term loan agreement, current portion |  |   | 3,440   |  
|Amounts borrowed under the exit facility                                    |  |   | (65,000 | )
|                                                                            |  |   |         |  
|                                                                            |  | $ | 3,445   |  
|                                                                            |  |   |         |  

|(d) | Reflects payment of $204 related to pre-petition foreign exchange derivative contracts.
|--- | ---------------------------------------------------------------------------------------

|(e) | Total adjustment of $59,581 reflects term lender cure payments of $33,995, terminated interest rate swap derivative contract payments of $12,068 and other accrued
interest of $2,003. Additionally, this adjustment includes $11,515 of accrued default interest as provided in the August 2009 amendment of the Senior Term Credit Facility, which was assumed by the Successor Company and included in the principal
balance of the loans at emergence (See Note 7, Debt, for additional information).
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(f) | Reflects the payment of professional fees related to the reorganization in the amount of $6,447 offset by the reclassification of $15,580 related to rejected lease
obligations previously recorded as liabilities subject to compromise (see note(i)). These rejected lease obligations were paid by the Successor Company in subsequent periods. As of September 30, 2009, the Companys rejected lease
obligation was reduced to $6,181.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



105



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



|(g) | The adjustment to long-term debt represents the issuance of the 12% Notes at a fair value of $218,731 (face value of $218,076) used, in part, to extinguish the Senior
Subordinated Notes of the debtors that were recorded in liabilities subject to compromise (see note (i)), the issuance of the new supplemental loan in the amount of $45,000, offset by the payment of the non-current portion of the term loan in the
amount of $3,440 (see note (a)). The excess of fair value over face value of the 12% Notes is recorded in long-term debt and will be accreted as a reduction to interest expense over the life of the note.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                                   |  |   |         |  
|---------------------------------------------------------------------------------- |  | - | ------- | -
|Issuance of the 12% Notes (fair value)                                             |  | $ | 218,731 |  
|Amounts borrowed under the new supplemental loan agreement                         |  |   | 45,000  |  
|Accrued default interest                                                           |  |   | 11,515  |  
|Repayment of certain amounts under the term loan agreement, net of current portion |  |   | (3,440  | )
|                                                                                   |  |   |         |  
|                                                                                   |  | $ | 271,806 |  
|                                                                                   |  |   |         |  

|(h) | Gain on the cancellation of debt from the extinguishment of the senior subordinated notes as well as the modification of the senior term credit facility, for tax
purposes, resulted in a $124,054 reduction in the U.S. net deferred tax asset, exclusive of indefinite-lived intangibles. Due to the Companys full valuation allowance position as of August 30, 2009 on the U.S. net deferred tax asset,
exclusive of indefinite-lived intangibles, the tax effect of these items is offset by a corresponding adjustment to the valuation allowance of $124,054. Due to changes in the relative current versus non-current deferred tax asset balances and the
corresponding allocation of the domestic valuation allowance, a net $1,707 deferred tax balance reclassification occurred between current and non-current as a result of the effects of the Plan.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(i) | The adjustment to liabilities subject to compromise relates to the extinguishment of the Senior Subordinated Notes balance of $1,049,885 and the accrued interest of
$40,497 associated with the Senior Subordinated Notes. Additionally, rejected lease obligations of $15,580 were reclassified to other current liabilities (see note (f)).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(j) | Pursuant to the Plan, the debtors common stock was canceled and new common stock of the reorganized debtors was issued. The adjustments eliminated Predecessor
Companys common stock and additional paid-in capital of $691 and $677,007, respectively, and recorded Successor Companys common stock and additional paid-in capital of $300 and $724,796, respectively, which represents the fair value of
the newly issued common stock. The fair value of the newly issued common stock was not separately valued. A fair value of $725,096 was determined by subtracting the fair value of net debt (total debt less cash and cash equivalents), or $1,549,904
from the enterprise value of $2,275,000. The Company issued 30,000 shares at emergence, consisting of 27,030 shares to holders of the Senior Subordinated Notes allowed note holder claims and 2,970 shares in accordance with the terms of the
Debtors debtor-in-possession credit facility.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(k) | As a result of the Plan, the adjustment to accumulated (deficit) equity recorded the elimination of the Predecessor Companys common stock, additional paid in
capital and treasury stock in the amount of $600,807 and recorded the pre-tax gain on the cancellation of debt in the amount of $146,555. The elimination of the Predecessor Companys common stock, additional paid in capital and treasury stock
was calculated as follows:
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                               |  |   |         |  
|------------------------------------------------------------------------------ |  | - | ------- | -
|Elimination of Predecessor Companys common stock (see note (j))               |  | $ | 691     |  
|Elimination of Predecessor Companys additional paid in capital (see note (j)) |  |   | 677,007 |  
|Elimination of Predecessor Companys treasury stock (see note (l))             |  |   | (76,891 | )
|                                                                               |  |   |         |  
|Elimination of Predecessor Companys common stock                              |  | $ | 600,807 |  
|                                                                               |  |   |         |  



106



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



The pre-tax gain on the cancellation of debt was calculated as follows:



|                                                                                    |  |   |           |  
|----------------------------------------------------------------------------------- |  | - | --------- | -
|Extinguishment of Predecessor Company senior subordinated notes                     |  | $ | 1,049,885 |  
|Extinguishment of Predecessor Company accrued interest on senior subordinated notes |  |   | 40,497    |  
|Issuance of Successor Company 12% Notes (fair value)                                |  |   | (218,731  | )
|Issuance of Successor Company common stock                                          |  |   | (725,096  | )
|                                                                                    |  |   |           |  
|Pre-tax gain on the cancellation of debt                                            |  | $ | 146,555   |  
|                                                                                    |  |   |           |  



|(l) | Pursuant to the Plan, the adjustment eliminates treasury stock of $76,891 of the Predecessor Company.
|--- | -----------------------------------------------------------------------------------------------------

Fresh-Start Valuation Adjustments



|(m) | Reflects the adjustment of assets and liabilities to estimated fair value, or other measurement specified by SFAS 141, in conjunction with the adoption of fresh-start
reporting. Significant adjustments are summarized as followed:
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Inventories An adjustment of $48,762 was recorded to adjust inventory to fair value. Raw materials were valued at current replacement
cost, work-in-process was valued at estimated selling prices of finished goods less the sum of costs to complete, cost of disposal and a reasonable profit allowance for completing and selling effort based on profit for similar finished goods.
Finished goods were valued at estimated selling prices less the sum of costs of disposal and a reasonable profit allowance for the selling effort.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Property, plant and equipment, net An adjustment of $34,699 was recorded to adjust the net book value of property, plant and equipment to
fair value giving consideration to their highest and best use. Key assumptions used in the valuation of the Companys property, plant and equipment were based on a combination of the cost or market approach, depending on whether market data was
available.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Current maturities of long-term debt and Long-term debt, net of current maturities  An adjustment of $79,658 ($4,329 to Current maturities
of long-term debt and $75,329 to Long-term debt, net of current maturities) was recorded to adjust the book value of debt to fair value. This adjustment included a decrease of $84,001 which was based on quoted market prices of certain debt
instruments as of the Effective Date, offset by an increase of $4,343 related to debt instruments not traded which was calculated giving consideration to the terms of the underlying agreements, using a risk adjusted interest rate of 12%.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Employee benefit obligations, net of current portion  An adjustment of $18,712 was recorded to measure the employee benefit obligations as
of the Effective Date. This adjustment primarily reflects the difference between the expected return on plan assets as compared to the fair value of the plan assets as of the Effective Date and the change in the duration weighted discount rate
associated with the payment of the benefit obligations from the prior measurement date and the Effective Date. The weighted average discount rate change from 6.75% at September 30, 2008 to 5.75% at August 30, 2009.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(n) | Reflects the tax effects of the fresh-start adjustments at statutory tax rates applicable to such adjustments, net of adjustments to the valuation allowance.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------



107



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)





|(o) | Adjustment eliminated the balance of goodwill and other unamortized intangible assets of the Predecessor Company and records Successor Company intangible assets,
including reorganization value in excess of amounts allocated to identified tangible and intangible assets, also referred to as Successor Company goodwill. (See Note 6, Goodwill and Intangible Assets, for additional information regarding the
Companys goodwill and other intangible assets). The Successor Companys August 30, 2009 statement of financial position reflects the allocation of the business enterprise value to assets and liabilities immediately following
emergence as follows:
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                                                                                        |  |   |            |  
|--------------------------------------------------------------------------------------------------------------------------------------- |  | - | ---------- | -
|Business enterprise value                                                                                                               |  | $ | 2,275,000  |  
|Add: Fair value of non-interest bearing liabilities (non-debt liabilities)                                                              |  |   | 744,071    |  
|Less: Fair value of tangible assets, excluding cash                                                                                     |  |   | (1,031,511 | )
|Less: Fair value of identified intangible assets                                                                                        |  |   | (1,459,500 | )
|                                                                                                                                        |  |   |            |  
|Reorganization value of assets in excess of amounts allocated to identified tangible and intangible assets (Successor Company
goodwill) |  | $ | 528,060    |  
|                                                                                                                                        |  |   |            |  

The following represent the methodologies and significant assumptions used in determining the fair value of
intangible assets, other than goodwill.

Certain indefinite-lived intangible assets which include trade names, trademarks and
technology, were valued using a relief from royalty methodology. Customer relationships were valued using a multi-period excess earnings method. Certain intangible assets are subject to sensitive business factors of which only a portion are within
control of the Companys management. A summary of the key inputs used in the valuation of these assets are as follows:



| |  |  | The Company valued customer relationships using the income approach, specifically the multi-period excess earnings method. In determining the fair
value of the customer relationship, the multi-period excess earnings approach values the intangible asset at the present value of the incremental after-tax cash flows attributable only to the customer relationship after deducting contributory asset
charges. The incremental after-tax cash flows attributable to the subject intangible asset are then discounted to their present value. Only expected sales from current customers were used which included an expected growth rate of 3%. The Company
assumed a customer retention rate of 95% which was supported by historical retention rates. Income taxes were estimated at a rate of 35% and amounts were discounted using rates between 12%-14%. The customer relationships were valued at $708,000
under this approach.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company valued trade names and trademarks using the income approach, specifically the relief from royalty method. Under this method, the asset
values were determined by estimating the hypothetical royalties that would have to be paid if the trade name was not owned. Royalty rates were selected based on consideration of several factors, including consumer product industry practices, the
existence of licensing agreements (licensing in and licensing out), and importance of the trademark and trade name and profit levels, among other considerations. Royalty rates used in the determination of the fair values of trade names and
trademarks ranged from 1% to 5% of expected net sales related to the respective trade names and trademarks. The Company anticipates using the majority of the trade names and trademarks for an indefinite period. In estimating the fair value of the
trademarks and trade names, nets sales were estimated to grow at a rate of (7)%-10% annually with a terminal year growth rate of 2%-6%. Income taxes were estimated at a rate of 35% and amounts were discounted using rates between 12%-14%. Trade name
and trademarks were valued at $688,000 under this approach.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



108



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)





| |  |  | The Company valued technology using the income approach, specifically the relief from royalty method. Under this method, the asset value was determined
by estimating the hypothetical royalties that would have to be paid if the technology was not owned. Royalty rates were selected based on consideration of several factors including industry practices, the existence of licensing agreements (licensing
in and licensing out), and importance of the technology and profit levels, among other considerations. Royalty rates used in the determination of the fair values of technologies ranged from 7%-8% of expected net sales related to the respective
technology. The Company anticipates using these technologies through the legal life of the underlying patent and therefore the expected life of these technologies was equal to the remaining legal life of the underlying patents ranging from 8 to 17
years. In estimating the fair value of the technologies, nets sales were estimated to grow at a rate of 0%-14% annually. Income taxes were estimated at 35% and amounts were discounted using rates between 12%-13%. The technology assets were valued at
$63,500 under this approach.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(p) | The fresh-start adjustment of $17,957 eliminates the debt issuance costs related to assumed debt, that is, the (senior secured term credit facility).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------

|(q) | The Predecessor Companys accumulated deficit and accumulated other comprehensive income is eliminated in conjunction with the adoption of fresh-start reporting.
The Predecessor Company recognized a gain of $1,087,566 related to the fresh-start reporting adjustments as follows:
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                             |  |                                         |           |  
|------------------------------------------------------------ |  | --------------------------------------- | --------- | -
|                                                             |  | Gain on fresh-startreportingadjustments |          
|Establishment of Successor Companys goodwill                |  | $                                       | 528,060   |  
|Elimination of Predecessor Companys goodwill                |  |                                         | (238,905  | )
|Establishment of Successor Companys other intangible assets |  |                                         | 1,459,500 |  
|Elimination of Predecessor Companys other intangible assets |  |                                         | (677,050  | )
|Debt fair value adjustments                                  |  |                                         | 79,658    |  
|Elimination of debt issuance costs                           |  |                                         | (17,957   | )
|Property, plant and equipment fair value adjustment          |  |                                         | 34,699    |  
|Deferred tax adjustment                                      |  |                                         | (104,881  | )
|Inventory fair value adjustment                              |  |                                         | 48,762    |  
|Employee benefit obligations fair value adjustment           |  |                                         | (18,712   | )
|Other fair value adjustments                                 |  |                                         | (5,608    | )
|                                                             |  |                                         |           |  
|                                                             |  | $                                       | 1,087,566 |  
|                                                             |  |                                         |           |  

(3) Significant Accounting Policies and Practices

(a) Principles of Consolidation and Fiscal Year End

The consolidated financial statements
include the financial statements of Spectrum Brands Holdings, Inc. and its subsidiaries and are prepared in accordance with GAAP. All intercompany transactions have been eliminated. The Companys fiscal year ends September 30. References
herein to Fiscal 2010, 2009 and 2008 refer to the fiscal years ended September 30, 2010, 2009 and 2008, respectively.

(b) Revenue
Recognition

The Company recognizes 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



109



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



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 not obligated to allow for, and the Companys general policy is not to accept, product returns associated with 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. Such
arrangements are treated as either a reduction of Net sales or an increase of Cost of goods sold, based on the type of promotional program. The income statement presentation of the Companys promotional arrangements complies with 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, 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.

(c) 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 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, Major Customers and Employees

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



110



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



credit and financial condition based on changing economic conditions and will make adjustments to credit policies as required. Provision for losses on uncollectible trade receivables are
determined principally on the basis of past collection experience applied to ongoing evaluations of the Companys receivables 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 22% and 23% of the Successor Companys Net sales during Fiscal 2010 and the period from August 31, 2009 through September 30, 2009, respectively, and approximately 23%
and 20% of Net sales during the Predecessor Companys period from October 1, 2008 through August 30, 2009 and Fiscal 2008, respectively. This major customer also represented approximately 15% and 14% of the Successor Companys
Trade account receivables, net as of September 30, 2010 and September 30, 2009, respectively.

Approximately 44% and
48% of the Successor Companys Net sales during Fiscal 2010 and the period from August 31, 2009 through September 30, 2009, respectively, occurred outside of the United States and approximately 42% and 48% of the Predecessor
Companys Net sales during the period from October 1, 2008 through August 30, 2009 and Fiscal 2008, 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.

(f) 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 permanent in nature, generally made from wire or other permanent racking, which are shipped to customers for display of 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 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 once they are shipped to customers and are reflected in Deferred charges and other in the accompanying Consolidated Statements
of Financial Position.

(g) Inventories

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

(h) 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:



|                               |  |  |             | 
|------------------------------ |  |  | ----------- | 
|Building and improvements      |  |  | 20-40 years | 
|Machinery, equipment and other |  |  | 2-15 years  | 



111



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



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.

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-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
approximately 4 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. During Fiscal 2010, the period from October 1, 2008 through August 30, 2009 and Fiscal 2008, the Companys goodwill and trade name intangibles
were tested for impairment as of the Companys August financial period end, the annual testing date for the Company, as well as 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 2010, the period from October 1, 2008 through August 30,
2009 and Fiscal 2008 the Company used the discounted estimated future cash flows methodology, third party valuations and negotiated sales prices. 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 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 fair value 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; and (ii) projected average revenue growth rates.



112



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



In connection with the Companys annual goodwill impairment testing performed
during Fiscal 2010 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.

In connection with the Predecessor Companys annual goodwill impairment testing performed during Fiscal 2009, which was completed on
the Predecessor Company before applying fresh-start reporting, the first step of such testing indicated that the fair value of the Predecessor Companys reporting segments were in excess of their carrying amounts and, accordingly, no further
testing of goodwill was required.

In connection with its annual goodwill impairment testing in Fiscal 2008 the Predecessor
Company first compared the fair value of its reporting units with their carrying amounts, including goodwill. This first step indicated that the fair value of the Predecessor Companys Global Pet Supplies and Home and Garden Business was less
than the Predecessor Companys carrying amount of those reporting units and, accordingly, further testing of goodwill was required to determine the impairment charge required by ASC 350. Accordingly, the Predecessor Company then compared the
carrying amount of the Global Pet Supplies and the Home and Garden Business goodwill to the respective implied fair value of their goodwill. The carrying amounts of the Global Pet Supplies and the Home and Garden Business goodwill exceeded their
implied fair values and, therefore, during Fiscal 2008 the Predecessor Company recorded a non-cash pretax impairment charge equal to the excess of the carrying amount of the respective reporting units goodwill over the implied fair value of
such goodwill of which $270,811 related to Global Pet Supplies and $49,801 related to the Home and Garden Business.

Furthermore, during Fiscal 2010 the Company, in connection with its annual impairment testing, concluded that the fair value of its
intangible assets exceeded is carrying value. During the period from October 1, 2008 through August 30, 2009 and Fiscal 2008, in connection with its annual impairment testing, 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 the period from October 1, 2008 through August 30, 2009 and Fiscal 2008 the Company recorded non-cash pretax impairment charges of
approximately $34,391 and $224,100, respectively, equal to the excess of the carrying amounts of the intangible assets over the fair value of such assets.

In accordance with ASC 360, Property, Plant and Equipment (ASC 360) and ASC 350, in addition to its annual impairment testing the Company conducts goodwill and trade name
intangible asset impairment testing if an event or circumstance (triggering event) occurs that indicates 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. Several triggering events occurred during Fiscal 2008 which required the Company to test its indefinite-lived intangible assets for impairment between annual impairment test dates. On May 20, 2008, the
Predecessor Company entered into a definitive agreement for the sale of Global Pet Supplies, which was subsequently terminated. The Companys intent to dispose of Global Pet Supplies constituted a triggering event for impairment testing. The
Company estimated the fair value of Global Pet Supplies, and the resultant estimated impairment charge of goodwill, based on the negotiated sales price of Global Pet Supplies, which management deemed the best indication of fair value at that time.
Accordingly, the Company recorded a non-cash pretax charge of $154,916 to reduce the carrying value of goodwill related to Global Pet Supplies to reflect the estimated fair value of the business during the third quarter of Fiscal 2008. Goodwill and
trade name intangible assets of the Home and Garden Business were tested during the third quarter of Fiscal 2008, as a result of lower forecasted profits from this business. This decrease in profitability was primarily due to significant cost
increases in certain raw materials used in the production of many of the lawn



113



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



fertilizer and growing media products manufactured by the Company at that time as well as more conservative growth rates to reflect the current and expected future economic conditions for this
business. The Company first compared the fair value of this reporting unit with its carrying amounts, including goodwill. This first step indicated that the fair value of the Home and Garden Business was less than the Companys carrying amount
of this reporting unit and, accordingly, further testing of goodwill was required to determine the impairment charge. Accordingly, the Company then compared the carrying amount of the Home and Garden Business goodwill against the implied fair value
of such goodwill. The carrying amount of the Home and Garden Business goodwill exceeded its implied fair value and, therefore, during Fiscal 2008 the Company recorded a non-cash pretax impairment charge equal to the excess of the carrying amount of
the reporting units goodwill over the implied fair value of such goodwill of approximately $110,213. In addition, during the third quarter of Fiscal 2008, the Company concluded that the implied fair values of certain trade name intangible
assets related to the Home and Garden Business were less that the carrying amounts of those assets and, accordingly, during Fiscal 2008 recorded a non-cash pretax impairment charge of $22,000. Goodwill and trade name intangibles of the Home and
Garden Business were tested during the first quarter of Fiscal 2008 in conjunction with the Companys reclassification of that business from an asset held for sale to an asset held and used. The Company first compared the fair value of this
reporting unit with its carrying amounts, including goodwill. This first step indicated that the fair value of the Home and Garden Business was in excess of its carrying amounts and, accordingly, no further testing of goodwill was required. In
addition, during the first quarter of Fiscal 2008, the Company concluded that the implied fair values of certain trade name intangible assets related to the Home and Garden Business were less than the carrying amounts of those assets and,
accordingly, during Fiscal 2008 recorded a non-cash pretax impairment charge of $12,400.

The above impairments of goodwill
and trade name intangible assets was primarily attributed to lower current and forecasted profits, reflecting more conservative growth rates versus those assumed by the Company at the time of acquisition, as well as due to a sustained decline in the
total market capitalization of the Company.

During the third quarter of Fiscal 2008, the Company developed and initiated a
plan to phase down, and ultimately curtail, manufacturing operations at its Ningbo, China battery manufacturing facility. The Company completed the shutdown of Ningbo during the fourth quarter of Fiscal 2008. In connection with the Companys
strategy to exit operations in Ningbo, China, the Predecessor Company recorded a non-cash pretax charge of $16,193 to reduce the carrying value of goodwill related to the Ningbo, China battery manufacturing facility.

The recognition of the $34,391 and $861,234 non-cash impairment of goodwill and trade name intangible assets during the period from
October 1, 2008 through August 30, 2009 and Fiscal 2008, respectively, has been recorded as a separate component of Operating expenses and has had a material negative effect on the Predecessor Companys financial condition and results
of operations during the period from October 1, 2008 through August 30, 2009 and Fiscal 2008. These impairments will not result in future cash expenditures.

Intangibles with Definite or Estimable Useful Lives

The triggering
events discussed above under ASC 350 also indicated a triggering event in accordance with ASC 360. Management conducted an analysis in accordance with ASC 360 of intangibles with definite or estimable useful lives in conjunction with the ASC 350
testing of intangibles with indefinite lives.

The Company assesses the recoverability of intangible assets with definite or
estimable useful lives in accordance with ASC 360 by determining whether the carrying value can be recovered through projected undiscounted future cash flows. If projected undiscounted future cash flows indicate that the unamortized carrying value
of intangible assets with finite useful lives will not be recovered, an adjustment would be made to reduce the carrying value to an amount equal to projected future cash flows discounted at the Companys



114



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



incremental borrowing rate. The cash flow projections used are based on trends of 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. The Companys initial impairment
review to determine if an impairment test is required is based on an undiscounted cash flow analysis for asset groups at the lowest level for which identifiable cash flows exist. The analysis requires management judgment with respect to changes in
technology, the continued success of product lines and future volume, revenue and expense growth rates, and discount rates.

In accordance with ASC 360, long-lived assets to be disposed of are recorded at the lower of their carrying value or fair value less
costs to sell. During Fiscal 2008, the Predecessor Company recorded a non-cash pretax charge of $5,700 in discontinued operations to reduce the carrying value of intangible assets related to the growing products portion of the Home and Garden
Business in order to reflect the estimated fair value of this business. (See also Note 9, Discontinued Operations, for additional information regarding this impairment charge).

(j) 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.

(k) Accounts Payable

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

(l) 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 carry forwards. 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 of the enactment date.

(m) Foreign Currency Translation

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.



115



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



As of September 30, 2010 and September 30, 2009, foreign currency translation
adjustment balances of $18,492 and $5,896, respectively, were reflected in the accompanying Consolidated Statements of Financial Position in AOCI.

Successor Company exchange losses (gains) on foreign currency transactions aggregating $13,336 and $(726) for Fiscal 2010 and the period from August 31, 2009 through September 30, 2009,
respectively, are included in Other expense (income), net, in the accompanying Consolidated Statements of Operations. Predecessor Company exchange losses (gains) on foreign currency transactions aggregating $4,440 and $3,466 for the period from
October 1, 2008 through August 30, 2009 and Fiscal 2008, respectively, are included in Other expense (income), net, in the accompanying Consolidated Statements of Operations.

(n) Shipping and Handling Costs

The Successor Company incurred shipping and handling costs
of $161,148 and $12,866 during Fiscal 2010 and the period from August 31, 2009 through September 30, 2009, respectively. The Predecessor Company incurred shipping and handling costs of $135,511 and $183,676 during the period from
October 1, 2008 through August 30, 2009 and Fiscal 2008, 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.

(o) Advertising Costs

The Successor
Company incurred advertising costs of $37,520 and $3,166 during Fiscal 2010 and the period from August 31, 2009 through September 30, 2009, respectively. The Predecessor Company incurred expenses for advertising of $25,813 and
$46,417during the period from October 1, 2008 through August 30, 2009 and Fiscal 2008, respectively. Such advertising costs are included in Selling expenses in the accompanying Consolidated Statements of Operations.

(p) Research and Development Costs

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

(q) Net (Loss) Income Per Common Share

Basic net (loss) income per common share is
computed by dividing net (loss) income available to common shareholders by the weighted-average number of common shares outstanding for the period. Basic net (loss) income per common share does not consider common stock equivalents. Diluted net
(loss) income per common share reflects the dilution that would occur if employee stock options and restricted stock awards were exercised or converted into common shares or resulted in the issuance of common shares that then shared in the net
(loss) income of the entity. The computation of diluted net (loss) income per common share uses the if converted and treasury stock methods to reflect dilution. The difference between the basic and diluted number of shares is
due to the effects of restricted stock and assumed conversion of employee stock options awards.

As discussed in Note 2,
Voluntary Reorganization under Chapter 11, the Predecessor Company common stock was cancelled as a result of the Companys emergence from Chapter 11 of the Bankruptcy Code on the Effective Date. The Successor Company common stock began trading
on September 2, 2009. As such, the earnings per share information for the Predecessor Company is not meaningful to shareholders of the Successor Companys common shares, or to potential investors in such common shares.



116



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



Net (loss) income per common share is calculated based upon the following shares:



|                                                                   |  |                   |        |  |                    |  |        |                |  |  |                   |  |  |  |        | 
|------------------------------------------------------------------ |  | ----------------- | ------ |  | ------------------ |  | ------ | -------------- |  |  | ----------------- |  |  |  | ------ | 
|                                                                   |  | SuccessorCompany  |        |  | PredecessorCompany | 
|                                                                   |  | September 30,2010 |        |  | September 30,2009  |  |        | August 30,2009 |  |  | September 30,2008 | 
|Basic                                                              |  |                   | 36,000 |  |                    |  | 30,000 |                |  |  | 51,306            |  |  |  | 50,921 | 
|Effect of restricted stock and assumed conversion of stock options |  |                   |       |  |                    |  |       |                |  |  |                  |  |  |  |       | 
|                                                                   |  |                   |        |  |                    |  |        |                |  |  |                   |  |  |  |        | 
|Diluted                                                            |  |                   | 36,000 |  |                    |  | 30,000 |                |  |  | 51,306            |  |  |  | 50,921 | 
|                                                                   |  |                   |        |  |                    |  |        |                |  |  |                   |  |  |  |        | 

The Successor Company for Fiscal 2010 and the period from August 31, 2009 through September 30,
2009, and the Predecessor Company for the period from October 1, 2008 through August 30, 2009 and Fiscal 2008 has not assumed the exercise of common stock equivalents as the impact would be antidilutive.

On June 16, 2010, the Company issued 20,433 shares of its common stock in conjunction with the Merger. Additionally, all shares of
its wholly owned subsidiary Spectrum Brands, were converted to shares of SB Holdings on June 16, 2010. (See also, Note 15, Acquisition, for a more complete discussion of the Merger.)

(r) Derivative Financial Instruments

Derivative financial instruments are used by the
Company principally in the management of its interest rate, foreign currency and raw material price exposures. The Company does not hold or issue derivative financial instruments for trading purposes. When hedge accounting is elected at inception,
the Company formally designates the financial instrument as a hedge of a specific underlying exposure if such criteria are met, and documents both the risk management objectives and strategies for undertaking the hedge. The Company formally
assesses, both at the inception and at least quarterly thereafter, whether the financial instruments that are used in hedging transactions are effective at offsetting changes in the forecasted cash flows of the related underlying exposure. Because
of the high degree of effectiveness between the hedging instrument and the underlying exposure being hedged, fluctuations in the value of the derivative instruments are generally offset by changes in the forecasted cash flows of the underlying
exposures being hedged. Any ineffective portion of a financial instruments change in fair value is immediately recognized in earnings. For derivatives that are not designated as cash flow hedges, or do not qualify for hedge accounting
treatment, the change in the fair value is also immediately recognized in earnings.

Effective December 29, 2008, the
Company adopted ASC Topic 815: Derivatives and Hedging, (ASC 815). ASC 815 amends the disclosure requirements for derivative instruments and hedging activities. Under the revised guidance entities are required to
provide enhanced disclosures for derivative and hedging activities.



117



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



The fair value of outstanding derivative contracts recorded as assets in the
accompanying Consolidated Statements of Financial Position were as follows:



|                                                                        |  |  |                            |  |                   |   |       |                   |  |   |       | 
|----------------------------------------------------------------------- |  |  | -------------------------- |  | ----------------- | - | ----- | ----------------- |  | - | ----- | 
|Asset Derivatives                                                       |  |  |                            |  | September 30,2010 |   |       | September 30,2009 | 
|Derivatives designated as hedging instruments under ASC 815:            |  |  |                            |  |                   |   |       |                   |  |   |       | 
|Commodity contracts                                                     |  |  | ReceivablesOther          |  |                   | $ | 2,371 |                   |  | $ | 2,861 | 
|Commodity contracts                                                     |  |  | Deferred charges and other |  |                   |   | 1,543 |                   |  |   | 554   | 
|Foreign exchange contracts                                              |  |  | ReceivablesOther          |  |                   |   | 20    |                   |  |   | 295   | 
|Foreign exchange contracts                                              |  |  | Deferred charges and other |  |                   |   | 55    |                   |  |   |      | 
|                                                                        |  |  |                            |  |                   |   |       |                   |  |   |       | 
|Total asset derivatives designated as hedging instruments under ASC 815 |  |  |                            |  |                   | $ | 3,989 |                   |  | $ | 3,710 | 
|                                                                        |  |  |                            |  |                   |   |       |                   |  |   |       | 
|Derivatives not designated as hedging instruments under ASC 815:        |  |  |                            |  |                   |   |       |                   |  |   |       | 
|Foreign exchange contracts                                              |  |  | ReceivablesOther          |  |                   |   |      |                   |  |   | 75    | 
|                                                                        |  |  |                            |  |                   |   |       |                   |  |   |       | 
|Total asset derivatives                                                 |  |  |                            |  |                   | $ | 3,989 |                   |  | $ | 3,785 | 
|                                                                        |  |  |                            |  |                   |   |       |                   |  |   |       | 

The fair value of outstanding derivative contracts recorded as liabilities in the accompanying Consolidated
Statements of Financial Position were as follows:



|                                                                            |  |  |                             |  |                   |   |        |                   |  |   |       | 
|--------------------------------------------------------------------------- |  |  | --------------------------- |  | ----------------- | - | ------ | ----------------- |  | - | ----- | 
|Liability Derivatives                                                       |  |  |                             |  | September 30,2010 |   |        | September 30,2009 | 
|Derivatives designated as hedging instruments under ASC 815:                |  |  |                             |  |                   |   |        |                   |  |   |       | 
|Interest rate contracts                                                     |  |  | Accounts payable            |  |                   | $ | 3,734  |                   |  |   |      | 
|Interest rate contracts                                                     |  |  | Accrued interest            |  |                   |   | 861    |                   |  |   |      | 
|Interest rate contracts                                                     |  |  | Other long term liabilities |  |                   |   | 2,032  |                   |  |   |      | 
|Foreign exchange contracts                                                  |  |  | Accounts payable            |  |                   |   | 6,544  |                   |  |   | 1,036 | 
|Foreign exchange contracts                                                  |  |  | Other long term liabilities |  |                   |   | 1,057  |                   |  |   |      | 
|                                                                            |  |  |                             |  |                   |   |        |                   |  |   |       | 
|Total liability derivatives designated as hedging instruments under ASC 815 |  |  |                             |  |                   | $ | 14,228 |                   |  | $ | 1,036 | 
|                                                                            |  |  |                             |  |                   |   |        |                   |  |   |       | 
|Derivatives not designated as hedging instruments under ASC 815:            |  |  |                             |  |                   |   |        |                   |  |   |       | 
|Foreign exchange contracts                                                  |  |  | Accounts payable            |  |                   |   | 9,698  |                   |  |   | 131   | 
|Foreign exchange contracts                                                  |  |  | Other long term liabilities |  |                   |   | 20,887 |                   |  |   |      | 
|                                                                            |  |  |                             |  |                   |   |        |                   |  |   |       | 
|Total liability derivatives                                                 |  |  |                             |  |                   | $ | 44,813 |                   |  | $ | 1,167 | 
|                                                                            |  |  |                             |  |                   |   |        |                   |  |   |       | 

Cash Flow Hedges

For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of AOCI and reclassified into
earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are
recognized in current earnings.



118



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



The following table summarizes the impact of derivative instruments on the accompanying
Consolidated Statements of Operations for Fiscal 2010 (Successor Company):



|                                                       |  |                                                                        |         |   |                                                                            |  |                    |                                                                          |  |   |                                                                                                                         |   |  |                                                                                                                        |                    |  |  |   |        |     
|------------------------------------------------------ |  | ---------------------------------------------------------------------- | ------- | - | -------------------------------------------------------------------------- |  | ------------------ | ------------------------------------------------------------------------ |  | - | ----------------------------------------------------------------------------------------------------------------------- | - |  | ---------------------------------------------------------------------------------------------------------------------- | ------------------ |  |  | - | ------ | ----
|Derivatives in ASC 815 Cash Flow
Hedging Relationships |  | Amount ofGain (Loss)Recognized
inAOCI onDerivatives(Effective Portion) |         |   | Location ofGain (Loss)Reclassified fromAOCI into
Income(Effective Portion) |  |                    | Amount ofGain (Loss)Reclassified
fromAOCI into Income(Effective Portion) |  |   | Location
ofGain (Loss)Recognized inIncome onDerivative(Ineffective Portionand AmountExcluded fromEffectiveness Testing) |   |  | Amount ofGain (Loss)Recognized inIncome onDerivatives(Ineffective
Portionand AmountExcluded fromEffectiveness Testing) |                   
|Commodity contracts                                    |  | $                                                                      | 3,646   |   |                                                                            |  | Cost of goods sold |                                                                          |  | $ | 719                                                                                                                     |   |  |                                                                                                                        | Cost of goods sold |  |  | $ | (1     | )   
|Interest rate contracts                                |  |                                                                        | (13,059 | ) |                                                                            |  | Interest expense   |                                                                          |  |   | (4,439                                                                                                                  | ) |  |                                                                                                                        | Interest expense   |  |  |   | (6,112 | )(A)
|Foreign exchange contracts                             |  |                                                                        | (752    | ) |                                                                            |  | Net Sales          |                                                                          |  |   | (812                                                                                                                    | ) |  |                                                                                                                        | Net sales          |  |  |   |       |     
|Foreign exchange contracts                             |  |                                                                        | (4,560  | ) |                                                                            |  | Cost of goods sold |                                                                          |  |   | 2,481                                                                                                                   |   |  |                                                                                                                        | Cost of goods sold |  |  |   |       |     
|                                                       |  |                                                                        |         |   |                                                                            |  |                    |                                                                          |  |   |                                                                                                                         |   |  |                                                                                                                        |                    |  |  |   |        |     
|Total                                                  |  | $                                                                      | (14,725 | ) |                                                                            |  |                    |                                                                          |  | $ | (2,051                                                                                                                  | ) |  |                                                                                                                        |                    |  |  | $ | (6,113 | )   
|                                                       |  |                                                                        |         |   |                                                                            |  |                    |                                                                          |  |   |                                                                                                                         |   |  |                                                                                                                        |                    |  |  |   |        |     



|(A) | Includes $(4,305) reclassified from AOCI associated with the refinancing of the senior credit facility. (See also Note 7, Debt, for a more complete discussion of the
Companys refinancing of its senior credit facility.)
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table summarizes the impact of
derivative instruments on the accompanying Consolidated Statements of Operations for the period from August 31, 2009 through September 30, 2009 (Successor Company):



|                                                       |  |                                                                        |      |   |                                                                            |                    |                                                                          |   |   |                                                                                                                         |  |                                                                                                                        |  |   |   | 
|------------------------------------------------------ |  | ---------------------------------------------------------------------- | ---- | - | -------------------------------------------------------------------------- | ------------------ | ------------------------------------------------------------------------ | - | - | ----------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------- |  | - | - | 
|Derivatives in ASC 815 Cash Flow
Hedging Relationships |  | Amount ofGain (Loss)Recognized
inAOCI onDerivatives(Effective Portion) |      |   | Location ofGain (Loss)Reclassified
fromAOCI into Income(Effective Portion) |                    | Amount ofGain (Loss)Reclassified
fromAOCI into Income(Effective Portion) |   |   | Location
ofGain (Loss)Recognized inIncome onDerivative(Ineffective Portionand AmountExcluded fromEffectiveness Testing) |  | Amount ofGain (Loss)Recognized inIncome onDerivatives(Ineffective
Portionand AmountExcluded fromEffectiveness Testing) | 
|Commodity contracts                                    |  | $                                                                      | 530  |   |                                                                            | Cost of goods sold |                                                                          | $ |  |                                                                                                                         |  | Cost of goods sold                                                                                                     |  | $ |  | 
|Foreign exchange contracts                             |  |                                                                        | (127 | ) |                                                                            | Net Sales          |                                                                          |   |  |                                                                                                                         |  | Net sales                                                                                                              |  |   |  | 
|Foreign exchange contracts                             |  |                                                                        | (418 | ) |                                                                            | Cost of goods sold |                                                                          |   |  |                                                                                                                         |  | Cost of goods sold                                                                                                     |  |   |  | 
|                                                       |  |                                                                        |      |   |                                                                            |                    |                                                                          |   |   |                                                                                                                         |  |                                                                                                                        |  |   |   | 
|Total                                                  |  | $                                                                      | (15  | ) |                                                                            |                    |                                                                          | $ |  |                                                                                                                         |  |                                                                                                                        |  | $ |  | 
|                                                       |  |                                                                        |      |   |                                                                            |                    |                                                                          |   |   |                                                                                                                         |  |                                                                                                                        |  |   |   | 

The following table summarizes the impact of derivative instruments designated as cash flow hedges on the
accompanying Consolidated Statements of Operations for the period from October 1, 2008 through August 30, 2009 (Predecessor Company):



|                                                      |  |                                                                        |        |   |                                                                            |                         |                                                                          |   |         |                                                                                                                         |  |                                                                                                                        |  |   |         |     
|----------------------------------------------------- |  | ---------------------------------------------------------------------- | ------ | - | -------------------------------------------------------------------------- | ----------------------- | ------------------------------------------------------------------------ | - | ------- | ----------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------- |  | - | ------- | ----
|Derivatives in ASC 815 Cash FlowHedging Relationships |  | Amount ofGain (Loss)Recognized inAOCI
onDerivatives(Effective Portion) |        |   | Location ofGain (Loss)Reclassified
fromAOCI into Income(Effective Portion) |                         | Amount
ofGain (Loss)Reclassified fromAOCI into Income(Effective Portion) |   |         | Location ofGain (Loss)Recognized
inIncome onDerivative(Ineffective Portionand AmountExcluded fromEffectiveness Testing) |  | Amount ofGain (Loss)Recognized inIncome onDerivatives(Ineffective
Portionand AmountExcluded fromEffectiveness Testing) | 
|Commodity contracts                                   |  | $                                                                      | (4,512 | ) |                                                                            | Cost of goods sold      |                                                                          | $ | (11,288 | )                                                                                                                       |  | Cost of goods sold                                                                                                     |  | $ | 851     |     
|Interest rate contracts                               |  |                                                                        | (8,130 | ) |                                                                            | Interest expense        |                                                                          |   | (2,096  | )                                                                                                                       |  | Interest expense                                                                                                       |  |   | (11,847 | )(A)
|Foreign exchange contracts                            |  |                                                                        | 1,357  |   |                                                                            | Net Sales               |                                                                          |   | 544     |                                                                                                                         |  | Net sales                                                                                                              |  |   |        |     
|Foreign exchange contracts                            |  |                                                                        | 9,251  |   |                                                                            | Cost of goods sold      |                                                                          |   | 9,719   |                                                                                                                         |  | Cost of goods sold                                                                                                     |  |   |        |     
|Commodity contracts                                   |  |                                                                        | (1,313 | ) |                                                                            | Discontinued operations |                                                                          |   | (2,116  | )                                                                                                                       |  | Discontinued operations                                                                                                |  |   | (12,803 | )   
|                                                      |  |                                                                        |        |   |                                                                            |                         |                                                                          |   |         |                                                                                                                         |  |                                                                                                                        |  |   |         |     
|Total                                                 |  | $                                                                      | (3,347 | ) |                                                                            |                         |                                                                          | $ | (5,237  | )                                                                                                                       |  |                                                                                                                        |  | $ | (23,799 | )   
|                                                      |  |                                                                        |        |   |                                                                            |                         |                                                                          |   |         |                                                                                                                         |  |                                                                                                                        |  |   |         |     



119



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)





|(A) | Included in this amount is $(6,191), reflected in the Derivatives Not Designated as Hedging Instruments Under ASC 815 table below, as a result of the de-designation of
a cash flow hedge as described below.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table summarizes the impact of derivative instruments
designated as cash flow hedges on the accompanying Consolidated Statements of Operations for Fiscal 2008 (Predecessor Company):



|                                                      |  |                                                                        |         |   |                                                                            |  |                         |                                                                          |  |   |                                                                                                                         |   |  |                                                                                                                        |                         |  |  |   |      |  
|----------------------------------------------------- |  | ---------------------------------------------------------------------- | ------- | - | -------------------------------------------------------------------------- |  | ----------------------- | ------------------------------------------------------------------------ |  | - | ----------------------------------------------------------------------------------------------------------------------- | - |  | ---------------------------------------------------------------------------------------------------------------------- | ----------------------- |  |  | - | ---- | -
|Derivatives in ASC 815 Cash FlowHedging Relationships |  | Amount ofGain (Loss)Recognized inAOCI
onDerivatives(Effective Portion) |         |   | Location ofGain (Loss)Reclassified fromAOCI into
Income(Effective Portion) |  |                         | Amount
ofGain (Loss)Reclassified fromAOCI into Income(Effective Portion) |  |   | Location ofGain (Loss)Recognized
inIncome onDerivative(Ineffective Portionand AmountExcluded fromEffectiveness Testing) |   |  | Amount ofGain (Loss)Recognized inIncome onDerivatives(Ineffective
Portionand AmountExcluded fromEffectiveness Testing) |                        
|Commodity contracts                                   |  | $                                                                      | (15,949 | ) |                                                                            |  | Cost of goods sold      |                                                                          |  | $ | (10,521                                                                                                                 | ) |  |                                                                                                                        | Cost of goods sold      |  |  | $ | (433 | )
|Interest rate contracts                               |  |                                                                        | (5,304  | ) |                                                                            |  | Interest expense        |                                                                          |  |   | 772                                                                                                                     |   |  |                                                                                                                        | Interest expense        |  |  |   |     |  
|Foreign exchange contracts                            |  |                                                                        | 752     |   |                                                                            |  | Net Sales               |                                                                          |  |   | (1,729                                                                                                                  | ) |  |                                                                                                                        | Net sales               |  |  |   |     |  
|Foreign exchange contracts                            |  |                                                                        | 2,627   |   |                                                                            |  | Cost of goods sold      |                                                                          |  |   | (9,293                                                                                                                  | ) |  |                                                                                                                        | Cost of goods sold      |  |  |   |     |  
|Commodity contracts                                   |  |                                                                        | 4,669   |   |                                                                            |  | Discontinued operations |                                                                          |  |   | 8,925                                                                                                                   |   |  |                                                                                                                        | Discontinued operations |  |  |   | (177 | )
|                                                      |  |                                                                        |         |   |                                                                            |  |                         |                                                                          |  |   |                                                                                                                         |   |  |                                                                                                                        |                         |  |  |   |      |  
|Total                                                 |  | $                                                                      | (13,205 | ) |                                                                            |  |                         |                                                                          |  | $ | (11,846                                                                                                                 | ) |  |                                                                                                                        |                         |  |  | $ | (610 | )
|                                                      |  |                                                                        |         |   |                                                                            |  |                         |                                                                          |  |   |                                                                                                                         |   |  |                                                                                                                        |                         |  |  |   |      |  

Derivative Contracts

For derivative instruments that are used to economically hedge the fair value of the Companys third party and intercompany payments and interest rate payments, the gain (loss) is recognized in
earnings in the period of change associated with the derivative contract.

During Fiscal 2010 the Successor Company recognized
the following respective gains (losses) on derivative contracts:



|                           |  |                                                          |         |   |                                                                |                            
|-------------------------- |  | -------------------------------------------------------- | ------- | - | -------------------------------------------------------------- | ---------------------------
|                           |  | Amount of Gain 
(Loss)Recognized inIncome on Derivatives |         |   | Location of Gain or (Loss) Recognized in Income on Derivatives
|Commodity contracts        |  | $                                                        | 153     |   |                                                                | Cost of goods sold         
|Foreign exchange contracts |  |                                                          | (42,039 | ) |                                                                | Other (income) expense, net
|                           |  |                                                          |         |   |                                                                |                            
|Total                      |  | $                                                        | (41,886 | ) |                                                                |                            
|                           |  |                                                          |         |   |                                                                |                            

During the period from August 31, 2009 through September 30, 2009 (Successor Company)
and the period from October 1, 2008 through August 30, 2009 (Predecessor Company), the Company recognized the following respective gains (losses) on derivative contracts:



|                                                                |                                                    |                                                         |        |                                                 |  |   |                                                               |   |  |                            
|--------------------------------------------------------------- | -------------------------------------------------- | ------------------------------------------------------- | ------ | ----------------------------------------------- |  | - | ------------------------------------------------------------- | - |  | ---------------------------
|Derivatives Not Designated as
Hedging Instruments Under ASC 815 |                                                    | Amount of Gain (Loss)Recognized inIncome on Derivatives |        |                                                 | 
|                                                                | SuccessorCompany                                   |                                                         |        | PredecessorCompany                              |  |   |                                                              
|                                                                | Period fromAugust 31, 2009throughSeptember 30,2009 |                                                         |        | Period fromOctober 1, 2008throughAugust 30,2009 |  |   | Location of Gain or (Loss)Recognized
in Income on Derivatives
|Interest rate contracts(A)                                      |                                                    | $                                                       |       |                                                 |  | $ | (6,191                                                        | ) |  | Interest expense           
|Foreign exchange contracts                                      |                                                    |                                                         | (1,469 | )                                               |  |   | 3,075                                                         |   |  | Other (income) expense, net
|                                                                |                                                    |                                                         |        |                                                 |  |   |                                                               |   |  |                            
|Total                                                           |                                                    | $                                                       | (1,469 | )                                               |  | $ | (3,116                                                        | ) |  |                            
|                                                                |                                                    |                                                         |        |                                                 |  |   |                                                               |   |  |                            



120



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)





|(A) | Amount represents portion of certain future payments related to interest rate contracts that were de-designated as cash flow hedges during the pendency of the
Bankruptcy Cases.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

During Fiscal 2008 the Predecessor Company recognized the following respective gains (losses)
on derivative contracts:



|                           |  |                                                         |        |   |                                                                |                            
|-------------------------- |  | ------------------------------------------------------- | ------ | - | -------------------------------------------------------------- | ---------------------------
|                           |  | Amount of Gain (Loss)Recognized inIncome on Derivatives |        |   | Location of Gain or (Loss) Recognized in Income on Derivatives
|Foreign exchange contracts |  |                                                         | (9,361 | ) |                                                                | Other (income) expense, net
|                           |  |                                                         |        |   |                                                                |                            
|Total                      |  | $                                                       | (9,361 | ) |                                                                |                            
|                           |  |                                                         |        |   |                                                                |                            

Credit Risk

The Company is exposed to the default risk of the counterparties with which the Company transacts. The Company monitors counterparty credit risk on an individual basis by periodically assessing each such
counterpartys credit rating exposure. The maximum loss due to credit risk equals the fair value of the gross asset derivatives which are primarily concentrated with a foreign financial institution counterparty. The Company considers these
exposures when measuring its credit reserve on its derivative assets, which was $75 and $32, respectively, at September 30, 2010 and September 30, 2009. Additionally, the Company does not require collateral or other security to support
financial instruments subject to credit risk.

The Companys standard contracts do not contain credit risk related
contingencies whereby the Company would be required to post additional cash collateral as a result of a credit event. However, as a result of the Companys current credit profile, the Company is typically required to post collateral in the
normal course of business to offset its liability positions. At September 30, 2010 and September 30, 2009, the Company had posted cash collateral of $2,363 and $1,943, respectively, related to such liability positions. In addition, at
September 30, 2010 and September 30, 2009, the Successor Company had posted standby letters of credit of $4,000 and $0, respectively, related to such liability positions. The cash collateral is included in ReceivablesOther within the
accompanying Consolidated Statements of Financial Position.

Derivative Financial Instruments

Cash Flow Hedges

The
Company uses interest rate swaps to manage its interest rate risk. The swaps are designated as cash flow hedges with the changes in fair value recorded in AOCI and as a derivative hedge asset or liability, as applicable. The swaps settle
periodically in arrears with the related amounts for the current settlement period payable to, or receivable from, the counter-parties included in accrued liabilities or receivables, respectively, and recognized in earnings as an adjustment to
interest expense from the underlying debt to which the swap is designated. At September 30, 2010, the Company had a portfolio of U.S. dollar-denominated interest rate swaps outstanding which effectively fixes the interest on floating rate debt,
exclusive of lender spreads as follows: 2.25% for a notional principal amount of $300,000 through December 2011 and 2.29% for a notional principal amount of $300,000 through January 2012 (the U.S. dollar swaps). During Fiscal 2010, in
connection with the refinancing of its senior credit facilities, the Company terminated a portfolio of Euro-denominated interest rate swaps at a cash loss of $3,499 which was recognized as an adjustment to interest expense. The derivative net (loss)
on the U.S. dollar swaps contracts recorded in AOCI by the Company at September 30, 2010 was $(2,675), net of tax benefit of $1,640.



121



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



The derivative net gain (loss) on these contracts recorded in AOCI by the Company at September 30, 2009 was $0. The derivative net (loss) on these contracts recorded in AOCI by the
Predecessor Company at September 30, 2008 was $(3,604), net of tax benefit of $2,209. At September 30, 2010, the portion of derivative net (losses) estimated to be reclassified from AOCI into earnings by the Successor Company over the next
12 months is $(1,416), net of tax.

In connection with the Companys merger with Russell Hobbs and the refinancing of the
Companys existing senior credit facilities associated with the closing of the Merger, the Company assessed the prospective effectiveness of its interest rate cash flow hedges during fiscal 2010. As a result, during fiscal 2010, the Company
ceased hedge accounting and recorded a loss of ($1,451) as an adjustment to interest expense for the change in fair value of its U.S. dollar swaps from the date of de-designation until the U.S. dollar swaps were re-designated. The Company also
evaluated whether the amounts recorded in AOCI associated with the forecasted U.S. dollar swap transactions were probable of not occurring and determined that occurrence of the transactions was still reasonably possible. Upon the refinancing of the
existing senior credit facility associated with the closing of the Merger, the Company re-designated the U.S. dollar swaps as cash flow hedges of certain scheduled interest rate payments on the new $750,000 U.S. Dollar Term Loan expiring
June 16, 2016. At September 30, 2010, the Company believes that all forecasted interest rate swap transactions designated as cash flow hedges are probable of occurring.

The Companys interest rate swap derivative financial instruments at September 30, 2010, September 30, 2009 and
September 30, 2008 are summarized as follows:



|                          |  |                |         |  |               |  |            |                |  |   |                |  |  |               |         |  |  |  |            | 
|------------------------- |  | -------------- | ------- |  | ------------- |  | ---------- | -------------- |  | - | -------------- |  |  | ------------- | ------- |  |  |  | ---------- | 
|                          |  | 2010           |         |  | 2009          |  |            | 2008           | 
|                          |  | NotionalAmount |         |  | RemainingTerm |  |            | NotionalAmount |  |   | NotionalAmount |  |  | RemainingTerm |        
|Interest rate swaps-fixed |  | $              | 300,000 |  |               |  | 1.28 years |                |  | $ |               |  |  | $             | 267,029 |  |  |  | 0.07 years | 
|Interest rate swaps-fixed |  | $              | 300,000 |  |               |  | 1.36 years |                |  | $ |               |  |  | $             | 170,000 |  |  |  | 0.11 years | 
|Interest rate swaps-fixed |  | $              |        |  |               |  |           |                |  | $ |               |  |  | $             | 225,000 |  |  |  | 1.52 years | 
|Interest rate swaps-fixed |  | $              |        |  |               |  |           |                |  | $ |               |  |  | $             | 80,000  |  |  |  | 1.62 years | 

The Company
periodically enters into forward foreign exchange contracts to hedge the risk from forecasted foreign denominated third party and intercompany sales or payments. These obligations generally require the Company to exchange foreign currencies for U.S.
Dollars, Euros, Pounds Sterling, Australian Dollars, Brazilian Reals, Canadian Dollars or Japanese Yen. These foreign exchange contracts are cash flow hedges of fluctuating foreign exchange related to sales or product or raw material purchases.
Until the sale or purchase is recognized, the fair value of the related hedge is recorded in AOCI and as a derivative hedge asset or liability, as applicable. At the time the sale or purchase is recognized, the fair value of the related hedge is
reclassified as an adjustment to Net sales or purchase price variance in Cost of goods sold.

At September 30, 2010 the
Successor Company had a series of foreign exchange derivative contracts outstanding through June 2012 with a contract value of $299,993. At September 30, 2009 the Successor Company had a series of foreign exchange derivative contracts
outstanding through September 2010 with a contract value of $92,963. At September 30, 2008 the Predecessor Company had a series of such derivative contracts outstanding through September 2010 with a contract value of $144,776. The derivative
net (loss) on these contracts recorded in AOCI by the Successor Company at September 30, 2010 was $(5,322), net of tax benefit of $2,204. The derivative net (loss) on these contracts recorded in AOCI by the Successor Company at
September 30, 2009 was $(378), net of tax benefit of $167. The derivative net gain on these contracts recorded in AOCI by the Predecessor Company at September 30, 2008 was $3,591, net of tax expense of $1,482. At September 30, 2010,
the portion of derivative net (losses) estimated to be reclassified from AOCI into earnings by the Company over the next 12 months is $(4,596), net of tax.



122



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



The Company is exposed to risk from fluctuating prices for raw materials, specifically
zinc used in its manufacturing processes. The Company hedges a portion of the risk associated with these materials through the use of commodity swaps. The hedge contracts are designated as cash flow hedges with the fair value changes recorded in
AOCI and as a hedge asset or liability, as applicable. The unrecognized changes in fair value of the hedge contracts are reclassified from AOCI into earnings when the hedged purchase of raw materials also affects earnings. The swaps effectively fix
the floating price on a specified quantity of raw materials through a specified date. At September 30, 2010 the Successor Company had a series of such swap contracts outstanding through September 2012 for 15 tons with a contract value of
$28,897. At September 30, 2009 the Successor Company had a series of such swap contracts outstanding through September 2011 for 8 tons with a contract value of $11,830. At September 30, 2008, the Predecessor Company had a series of such
swap contracts outstanding through September 2010 for 13 tons with a contract value of $31,030. The derivative net gain on these contracts recorded in AOCI by the Successor Company at September 30, 2010 was $2,256, net of tax expense of $1,201.
The derivative net gain on these contracts recorded in AOCI by the Successor Company at September 30, 2009 was $347, net of tax expense of $183. The derivative net (loss) on these contracts recorded in AOCI by the Successor Company at
September 30, 2008 was $(5,396), net of tax benefit of $2,911. At September 30, 2010, the portion of derivative net gains estimated to be reclassified from AOCI into earnings by the Company over the next 12 months is $1,251, net of tax.

The Company was also exposed to fluctuating prices of raw materials, specifically urea and di-ammonium phosphates
(DAP), used in its manufacturing processes in the growing products portion of the Home and Garden Business. During the period from October 1, 2008 through August 30, 2009 (Predecessor Company) $(2,116) of pretax derivative
gains (losses) were recorded as an adjustment to Loss from Discontinued operations, net of tax, for swap or option contracts settled at maturity. During Fiscal 2008, $8,925 of pretax derivative gains were recorded as an adjustment to Loss from
discontinued operations, by the Predecessor Company for swap or option contracts settled at maturity. The hedges are generally highly effective; however, during the period from October 1, 2008 through August 30, 2009 and Fiscal 2008,
$(12,803) and $(177), respectively, of pretax derivative gains (losses), were recorded as an adjustment to Loss from discontinued operations, net of tax, by the Predecessor Company. The amount recorded during the period from October 1, 2008
through August 30, 2009, was due to the shutdown of the growing products portion of the Home and Garden Business and a determination that the forecasted transactions were probable of not occurring. The Successor Company had no such swap
contracts outstanding as of September 30, 2009 and no related gain (loss) recorded in AOCI.

Derivative Contracts

The Company periodically enters into forward and swap foreign exchange contracts to economically hedge the risk from third party and
intercompany payments resulting from existing obligations. These obligations generally require the Company to exchange foreign currencies for U.S. Dollars, Euros or Australian Dollars. These foreign exchange contracts are economic hedges of a
related liability or asset recorded in the accompanying Consolidated Statements of Financial Position. The gain or loss on the derivative hedge contracts is recorded in earnings as an offset to the change in value of the related liability or asset
at each period end. At September 30, 2010 and September 30, 2009 the Company had $333,562 and $37,478, respectively, of such foreign exchange derivative notional value contracts outstanding.

During the Predecessor Companys eleven month period ended August 30, 2009, as a result of the Bankruptcy Cases, the Company
determined that previously designated cash flow hedge relationships associated with interest rate swaps became ineffective as of the Companys Petition Date. Further, the Companys senior secured term credit agreement was amended in
connection with the implementation of the Plan, and accordingly



123



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



the underlying transactions did not occur as originally forecasted. As a result, the Predecessor Company reclassified approximately $(6,191), pretax, of (losses) from AOCI as an adjustment to
Interest expense during the period from October 1, 2008 through August 30, 2009. As a result, the portion of derivative net losses to be reclassified from AOCI into earnings over the next 12 months was $0. The Predecessor Companys
related derivative contracts were terminated during the pendency of the Bankruptcy Cases and settled at a loss on the Effective Date.

(s)
Fair Value of Financial Instruments

ASC Topic 820: Fair Value Measurements and Disclosures, (ASC 820),
establishes a new framework for measuring fair value and expands related disclosures. Broadly, the ASC 820 framework requires fair value to be determined based on the exchange price that would be received for an asset or paid to transfer a liability
(an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. ASC 820 establishes market or observable inputs as the preferred source of values, followed by assumptions
based on hypothetical transactions in the absence of market inputs. The Company utilizes valuation techniques that attempt to maximize the use of observable inputs and minimize the use of unobservable inputs. The determination of the fair values
considers various factors, including closing exchange or over-the-counter market pricing quotations, time value and credit quality factors underlying options and contracts. The fair value of certain derivative financial instruments is estimated
using pricing models based on contracts with similar terms and risks. Modeling techniques assume market correlation and volatility, such as using prices of one delivery point to calculate the price of the contracts different delivery point.
The nominal value of interest rate transactions is discounted using applicable forward interest rate curves. In addition, by applying a credit reserve which is calculated based on credit default swaps or published default probabilities for the
actual and potential asset value, the fair value of the Companys derivative financial instruments assets reflects the risk that the counterparties to these contracts may default on the obligations. Likewise, by assessing the requirements of a
reserve for non-performance which is calculated based on the probability of default by the Company, the Company adjusts its derivative contract liabilities to reflect the price at which a potential market participant would be willing to assume the
Companys liabilities. The Company has not changed its valuation techniques in measuring the fair value of any financial assets and liabilities during the year.

The valuation techniques required by ASC 820 are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect
market assumptions made by the Company. These two types of inputs create the following fair value hierarchy:



|        |  |                                                                                                                                                                                                                                                        
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        | 
|Level 1 |  | Unadjusted quoted prices for identical instruments in active markets.                                                                                                                                                                                  
|        | 
|Level 2 |  | Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs
are observable or whose significant value drivers are observable.
|        | 
|Level 3 |  | Significant inputs to the valuation model are unobservable.                                                                                                                                                                                            

The Company maintains policies and procedures to value instruments using the best and most relevant data available. In certain cases, the inputs used to measure fair value may fall into different levels
of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls must be determined based on the lowest level input that is significant to the fair value measurement. The
Companys assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. In addition, the Company has risk management teams that
review valuation, including independent price validation for certain instruments. Further, in other instances, the Company retains independent pricing vendors to assist in valuing certain instruments.



124



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



The Companys derivatives are valued on a recurring basis using internal models,
which are based on market observable inputs including interest rate curves and both forward and spot prices for currencies and commodities.

The Companys net derivative portfolio as of September 30, 2010, contains Level 2 instruments and represents commodity, interest rate and foreign exchange contracts.



|                                |  |         |   |  |         |   |         |         |  |   |       |  |  |   |         |  
|------------------------------- |  | ------- | - |  | ------- | - | ------- | ------- |  | - | ----- |  |  | - | ------- | -
|                                |  | Level 1 |   |  | Level 2 |   |         | Level 3 |  |   | Total | 
|Assets:                         |  |         |   |  |         |   |         |         |  |   |       |  |  |   |         |  
|Commodity contracts             |  | $       |  |  |         | $ | 3,914   |         |  | $ |      |  |  | $ | 3,914   |  
|                                |  |         |   |  |         |   |         |         |  |   |       |  |  |   |         |  
|Total Assets                    |  | $       |  |  |         | $ | 3,914   |         |  | $ |      |  |  | $ | 3,914   |  
|                                |  |         |   |  |         |   |         |         |  |   |       |  |  |   |         |  
|Liabilities:                    |  |         |   |  |         |   |         |         |  |   |       |  |  |   |         |  
|Interest rate contracts         |  | $       |  |  |         | $ | (6,627  | )       |  | $ |      |  |  | $ | (6,627  | )
|Foreign exchange contracts, net |  |         |  |  |         |   | (38,111 | )       |  | $ |      |  |  |   | (38,111 | )
|                                |  |         |   |  |         |   |         |         |  |   |       |  |  |   |         |  
|Total Liabilities               |  | $       |  |  |         | $ | (44,738 | )       |  | $ |      |  |  | $ | (44,738 | )
|                                |  |         |   |  |         |   |         |         |  |   |       |  |  |   |         |  

The Companys net derivative portfolio as of September 30, 2009, contains Level 2 instruments and
represents commodity and foreign exchange contracts.



|                                |  |         |   |  |         |   |       |         |  |   |       |  |  |   |       |  
|------------------------------- |  | ------- | - |  | ------- | - | ----- | ------- |  | - | ----- |  |  | - | ----- | -
|                                |  | Level 1 |   |  | Level 2 |   |       | Level 3 |  |   | Total | 
|Assets:                         |  |         |   |  |         |   |       |         |  |   |       |  |  |   |       |  
|Commodity contracts             |  | $       |  |  |         | $ | 3,415 |         |  | $ |      |  |  | $ | 3,415 |  
|                                |  |         |   |  |         |   |       |         |  |   |       |  |  |   |       |  
|Total Assets                    |  | $       |  |  |         | $ | 3,415 |         |  | $ |      |  |  | $ | 3,415 |  
|                                |  |         |   |  |         |   |       |         |  |   |       |  |  |   |       |  
|Liabilities:                    |  |         |   |  |         |   |       |         |  |   |       |  |  |   |       |  
|Foreign exchange contracts, net |  | $       |  |  |         | $ | (797  | )       |  | $ |      |  |  | $ | (797  | )
|                                |  |         |   |  |         |   |       |         |  |   |       |  |  |   |       |  
|Total Liabilities               |  | $       |  |  |         | $ | (797  | )       |  | $ |      |  |  | $ | (797  | )
|                                |  |         |   |  |         |   |       |         |  |   |       |  |  |   |       |  

The carrying values of cash and cash equivalents, accounts and notes receivable, accounts payable and
short-term debt approximate fair value. The fair values of long-term debt and derivative financial instruments are generally based on quoted or observed market prices.

Goodwill, intangible assets and other long-lived assets are also tested annually or if a triggering event occurs that indicates an impairment loss may have been incurred using fair value measurements with
unobservable inputs (Level 3). The Company did not record any impairment charges related to goodwill, intangible assets or other long-lived assets during Fiscal 2010. (See also Note 3(i), Significant Accounting PoliciesIntangible Assets, for
further details on impairment testing.)

The carrying amounts and fair values of the Companys financial instruments are
summarized as follows ((liability)/asset):



|                                     |  |                    |            |   |                    |   |            |                |  |   |            |   |  |   |            |  
|------------------------------------ |  | ------------------ | ---------- | - | ------------------ | - | ---------- | -------------- |  | - | ---------- | - |  | - | ---------- | -
|                                     |  | September 30, 2010 |            |   | September 30, 2009 |  
|                                     |  | CarryingAmount     |            |   | Fair Value         |   |            | CarryingAmount |  |   | Fair Value |  
|Total debt                           |  | $                  | (1,743,767 | ) |                    | $ | (1,868,754 | )              |  | $ | (1,583,535 | ) |  | $ | (1,592,987 | )
|Interest rate swap agreements        |  |                    | (6,627     | ) |                    |   | (6,627     | )              |  |   |           |   |  |   |           |  
|Commodity swap and option agreements |  |                    | 3,914      |   |                    |   | 3,914      |                |  |   | 3,415      |   |  |   | 3,415      |  
|Foreign exchange forward agreements  |  |                    | (38,111    | ) |                    |   | (38,111    | )              |  |   | (797       | ) |  |   | (797       | )

(t) 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 on a site-by-site basis and



125



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



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.

(u) 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 operations or accumulated deficit.

(v)
Comprehensive Income

Comprehensive income includes foreign currency translation of 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 net foreign investments, derivative financial instruments designated as cash flow hedges and additional minimum pension liabilities
associated with the Companys pension. Except for the currency translation impact of the Companys intercompany debt of a long-term nature, the Company does not provide income taxes on currency translation adjustments, as earnings from
international subsidiaries are considered to be permanently reinvested.

Amounts recorded in AOCI on the accompanying
Consolidated Statements of Shareholders Equity (Deficit) and Comprehensive Income (Loss) for Fiscal 2010, Fiscal 2009 and Fiscal 2008 are net of the following tax (benefit) expense amounts:



|                           |  |                   |        |   |                 |   |        |                       |  |   |        |   |  |   |         |  
|-------------------------- |  | ----------------- | ------ | - | --------------- | - | ------ | --------------------- |  | - | ------ | - |  | - | ------- | -
|                           |  | PensionAdjustment |        |   | CashFlow Hedges |   |        | TranslationAdjustment |  |   | Total  |  
|2010 (Successor Company)   |  | $                 | (6,141 | ) |                 | $ | (2,659 | )                     |  | $ | (1,566 | ) |  | $ | (10,366 | )
|2009 (Successor Company)   |  | $                 | 247    |   |                 | $ | 16     |                       |  | $ | 319    |   |  | $ | 582     |  
|2009 (Predecessor Company) |  | $                 | (497   | ) |                 | $ | 5,286  |                       |  | $ | (40    | ) |  | $ | 4,749   |  
|2008 (Predecessor Company) |  | $                 | (1,139 | ) |                 | $ | (4,765 | )                     |  | $ | (318   | ) |  | $ | (6,222  | )

(w) Stock Compensation

In 1996, the Predecessor Companys board of directors (Predecessor Board) approved the Rayovac Corporation 1996 Stock Option Plan
(1996 Plan). Under the 1996 Plan, stock options to acquire up to 2,318 shares of common stock, in the aggregate, could be granted to select employees and non-employee directors of the Predecessor Company under either or both a
time-vesting or a performance-vesting formula at an exercise price equal to the market price of the common stock on the date of grant. The 1996 Plan expired on September 12, 2006.

In 1997, the Predecessor Board adopted the 1997 Rayovac Incentive Plan (1997 Plan). Under the 1997 Plan, the Predecessor
Company could grant to employees and non-employee directors stock options, stock appreciation rights (SARs), restricted stock, and other stock-based awards, as well as cash-based annual and long-term incentive awards. Accelerated
vesting will occur in the event of a change in control, as defined in the 1997 Plan. Up to 5,000 shares of common stock could have been issued under the 1997 Plan. The 1997 Plan expired in August 31, 2007.

In 2004, the Predecessor Board adopted the 2004 Rayovac Incentive Plan (2004 Plan). The 2004 Plan supplements the 1997 Plan.
Under the 2004 Plan, the Predecessor Company could grant to employees and



126



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



non-employee directors stock options, SARs, restricted stock, and other stock-based awards, as well as cash-based annual and long-term incentive awards. Accelerated vesting would occur in the
event of a change in control, as defined in the 2004 Plan. Up to 3,500 shares of common stock, net of forfeitures and cancellations, could have been issued under the 2004 Plan. The 2004 Plan would have expired on July 31, 2014.

On the Effective Date all of the existing common stock of the Predecessor Company was extinguished and deemed cancelled. The Successor
Company had no stock options, SARs, restricted stock or other stock-based awards outstanding as of September 30, 2009.

In September 2009, the Successor Companys 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. As of September 30, 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, provided that a majority of the holders of the common stock of the Company eligible to vote thereon approve the Spectrum Brands Holdings, Inc. 2011
Omnibus Equity Award Plan (2011 Plan) prior to October 21, 2011.

In conjunction with the Merger, the Company
adopted the Spectrum Brands Holdings, Inc. 2007 Omnibus Equity Award Plan (formerly known as the Russell Hobbs Inc. 2007 Omnibus Equity Award Plan, as amended on June 24, 2008) (the 2007 RH Plan). As of September 30, 2010, up
to 600 shares of common stock, net of forfeitures and cancellations, could have been issued under the RH Plan. After October 21, 2010, no further awards may be made under the 2007 RH Plan, provided that a majority of the holders of the common
stock of the Company eligible to vote thereon approve the 2011 Plan prior to October 21, 2011.

On October 21, 2010,
the Companys Board of Directors adopted the 2011 Plan, subject to shareholder approval prior to October 21, 2011 and the Company intends to submit the 2011 Plan for shareholder approval in connection with its next Annual Meeting. Upon
such shareholder approval, no further awards will be granted under the 2009 Plan and the 2007 RH Plan. 4,626 shares of common stock of the Company, net of cancellations, may be issued under the 2011 Plan. While the Company has begun granting awards
under the 2011 Plan, the 2011 Plan (and awards granted thereunder) are subject to the approval by a majority of the holders of the common stock of the Company eligible to vote thereon prior to October 21, 2011.

Under ASC Topic 718: Compensation-Stock Compensation, (ASC 718), the Company is required to recognize expense
related to the fair value of its employee stock awards.

Total stock compensation expense associated with restricted stock
awards recognized by the Successor Company during Fiscal 2010 was $16,676 or $10,839, net of taxes. The amounts before tax are included in General and administrative expenses and Restructuring and related charges in the accompanying
Consolidated Statements of Operations, of which $2,141 or $1,392 net of taxes, was included in Restructuring and related charges primarily related to the accelerated vesting of certain awards related to terminated employees. The Successor Company
recorded no stock compensation expense during the period from August 31, 2009 through September 30, 2009.

Total
stock compensation expense associated with both stock options and restricted stock awards recognized by the Predecessor Company during the period from October 1, 2008 through August 30, 2009 and Fiscal 2008 was $2,636 and $5,098 or $1,642
and $3,141, net of taxes, respectively. The amounts before tax are included in General and administrative expenses and Restructuring and related charges in the accompanying Consolidated Statements of Operations, of which $0 and $433 or $0 and
$267, net of taxes, was included in Restructuring and



127



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



related charges during the period from October 1, 2008 through August 30, 2009 and Fiscal 2008, respectively, primarily related to the accelerated vesting of certain awards related to
terminated employees.

The Successor Company granted approximately 939 shares of restricted stock during Fiscal 2010. Of these
grants, 271 restricted stock units were granted in conjunction with the Merger and are time-based and vest over a one year period. The remaining 668 shares are restricted stock grants that are time based and vest as follows: (i) 18 shares vest
over a one year period; (ii) 611 shares vest over a two year period; and (iii) 39 shares vest over a three year period. The total market value of the restricted shares on the date of the grant was approximately $23,299.

The Predecessor Company granted approximately 229 shares of restricted stock during Fiscal 2009. Of these grants, 42 were time-based and
would vest on a pro rata basis over a three year period and 187 shares were purely performance-based and would vest only upon achievement of certain performance goals. All vesting dates were subject to the recipients continued employment with
the Company, except as otherwise permitted by the Predecessor Board or if the employee was terminated without cause. The total market value of the restricted shares on the date of grant was approximately $150. Upon the Effective Date, by
operation of the Plan, the restricted stock granted by the Predecessor Company was extinguished and deemed cancelled.

The
Predecessor Company granted approximately 408 shares of restricted stock during Fiscal 2008. Of these grants, 158 shares were time-based and would vest on a pro rata basis over a three year period and 250 were purely performance-based and would vest
only upon achievement of certain performance goals. All vesting dates were subject to the recipients continued employment with the Company, except as otherwise permitted by the Predecessor Board or if the employee was terminated without
cause. The total market value of the restricted shares on the date of grant was approximately $2,165. Upon the Effective Date, by operation of the Plan, the restricted stock granted by the Predecessor Company was extinguished and deemed
cancelled.

The fair value of restricted stock is determined based on the market price of the Companys shares on the
grant date. A summary of the status of the Successor Companys non-vested restricted stock as of September 30, 2010 is as follows:



|                                       |  |        |      |   |                                     |   |       |            |  |   |        |  
|-------------------------------------- |  | ------ | ---- | - | ----------------------------------- | - | ----- | ---------- |  | - | ------ | -
|Restricted Stock                       |  | Shares |      |   | WeightedAverageGrant DateFair Value |   |       | Fair Value | 
|Restricted stock at September 30, 2009 |  |        |     |   |                                     | $ |      |            |  | $ |       |  
|Granted                                |  |        | 939  |   |                                     |   | 24.82 |            |  |   | 23,299 |  
|Vested                                 |  |        | (244 | ) |                                     |   | 23.59 |            |  |   | (5,763 | )
|                                       |  |        |      |   |                                     |   |       |            |  |   |        |  
|Restricted stock at September 30, 2010 |  |        | 695  |   |                                     | $ | 25.23 |            |  | $ | 17,536 |  
|                                       |  |        |      |   |                                     |   |       |            |  |   |        |  

(x) 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 one-time termination benefits such as severance costs and retention bonuses, and contract termination costs consisting primarily of lease termination
costs. Related charges, as defined by the Company, 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 management after evaluating detailed analyses of the cost to be incurred. The



128



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



Company presents restructuring and related charges on a combined basis. (See also Note 14, Restructuring and Related Charges, for a more complete discussion of restructuring initiatives and
related costs).

(y) 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
the acquisition, termination and related costs for transitional and certain other employees, integration related professional fees and other post business combination related expenses associated with the Merger of Russell Hobbs.

The following table summarizes acquisition and integration related charges incurred by the Company during Fiscal 2010:



|                                                  |  |      |        | 
|------------------------------------------------- |  | ---- | ------ | 
|                                                  |  | 2010 |       
|Legal and professional fees                       |  | $    | 24,962 | 
|Employee termination charges                      |  |      | 9,713  | 
|Integration costs                                 |  |      | 3,777  | 
|                                                  |  |      |        | 
|Total Acquisition and integration related charges |  | $    | 38,452 | 
|                                                  |  |      |        | 

(z) Adoption of New Accounting Pronouncements

Business Combinations

In December 2007, the Financial
Accounting Standards Board (the FASB) issued new accounting guidance on business combinations and noncontrolling interests in consolidated financial statements. The objective is to improve the relevance, representational faithfulness and
comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. The guidance applies to all transactions or other events in which an entity (the acquirer) obtains
control of one or more businesses (the acquiree), including those sometimes referred to as true mergers or mergers of equals and combinations achieved without the transfer of consideration. The guidance, among
other things, requires companies to provide disclosures relating to the gross amount of goodwill and accumulated goodwill impairment losses. In April 2009, the FASB issued additional guidance which addresses application issues arising from
contingencies in a business combination. The Company adopted the new guidance beginning October 1, 2009. The Company merged with Russell Hobbs during Fiscal 2010. (See Note 15, Acquisition, for information relating to the Merger with Russell
Hobbs.)

Employers Disclosures about Postretirement Benefit Plan Assets

In December 2008, the FASB issued new accounting guidance on employers disclosures about assets of a defined benefit pension or
other postretirement plan. It requires employers to disclose information about fair value measurements of plan assets. The objectives of the disclosures are to provide an understanding of: (a) how investment allocation decisions are made,
including the factors that are pertinent to an understanding of investment policies and strategies; (b) the major categories of plan assets; (c) the inputs and valuation techniques used to measure the fair value of plan assets;
(d) the effect of fair value measurements using significant unobservable inputs on changes in plan assets for the period; and (e) significant concentrations of risk within plan assets. The Company adopted this new guidance at
September 30, 2010, the fair value measurement date of its defined benefit pension and retiree medical plans. (See Note 10, Employee Benefit Plans, for the applicable disclosures.)



129



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



Revenue RecognitionMultiple-Element Arrangements

In October 2009, the FASB issued new accounting guidance addressing the accounting for multiple-deliverable
arrangements to enable entities to account for products or services (deliverables) separately rather than as a combined unit. The provisions establish the accounting and reporting guidance for arrangements under which the entity will perform
multiple revenue-generating activities. Specifically, this guidance addresses how to separate deliverables and how to measure and allocate arrangement consideration to one or more units of accounting. The provisions are effective for the
Companys financial statements for the fiscal year that began October 1, 2010. The Company is in the process of evaluating the impact that the guidance may have on its financial statements and related disclosures.

aa) Subsequent Events

ASC 855, Subsequent Events, (ASC 855). ASC 855 establishes general standards of accounting and disclosures of
events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The adoption of ASC 855 requires the Company to evaluate all subsequent events that occur after the balance sheet date through
the date and time the Companys financial statements are issued. The Company has evaluated subsequent events through December 14, 2010, which is the date these financial statements were issued.

(4) Inventory

Inventories consist of
the following:



|                |  |               |         |  |      |   |         | 
|--------------- |  | ------------- | ------- |  | ---- | - | ------- | 
|                |  | September 30, |        
|                |  | 2010          |         |  | 2009 |  
|Raw materials   |  | $             | 62,857  |  |      | $ | 64,314  | 
|Work-in-process |  |               | 28,239  |  |      |   | 27,364  | 
|Finished goods  |  |               | 439,246 |  |      |   | 249,827 | 
|                |  |               |         |  |      |   |         | 
|                |  | $             | 530,342 |  |      | $ | 341,505 | 
|                |  |               |         |  |      |   |         | 

(5) Property, Plant and Equipment

Property, plant and equipment consist of the following:



|                                 |  |               |         |  |      |   |         | 
|-------------------------------- |  | ------------- | ------- |  | ---- | - | ------- | 
|                                 |  | September 30, |        
|                                 |  | 2010          |         |  | 2009 |  
|Land, buildings and improvements |  | $             | 79,935  |  |      | $ | 75,997  | 
|Machinery, equipment and other   |  |               | 157,172 |  |      |   | 135,639 | 
|Construction in progress         |  |               | 24,037  |  |      |   | 6,231   | 
|                                 |  |               |         |  |      |   |         | 
|                                 |  |               | 261,144 |  |      |   | 217,867 | 
|Less accumulated depreciation    |  |               | 59,980  |  |      |   | 5,506   | 
|                                 |  |               |         |  |      |   |         | 
|                                 |  | $             | 201,164 |  |      | $ | 212,361 | 
|                                 |  |               |         |  |      |   |         | 



130



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



(6) Goodwill and Intangible Assets

Intangible assets consist of the following:



|                                                                       |  |                                 |         |   |                         |   |         |                    |  |   |                 |   |  |       |         |   |  |   |           |  
|---------------------------------------------------------------------- |  | ------------------------------- | ------- | - | ----------------------- | - | ------- | ------------------ |  | - | --------------- | - |  | ----- | ------- | - |  | - | --------- | -
|                                                                       |  | Global Batteries &Personal Care |         |   | Home and GardenBusiness |   |         | Global PetSupplies |  |   | SmallAppliances |   |  | Total |        
|Goodwill:                                                              |  |                                 |         |   |                         |   |         |                    |  |   |                 |   |  |       |         |   |  |   |           |  
|Balance at September 30, 2008 (Predecessor Company)                    |  | $                               | 117,649 |   |                         | $ |        |                    |  | $ | 117,819         |   |  | $     |        |   |  | $ | 235,468   |  
|Additions                                                              |  |                                 | 2,762   |   |                         |   |        |                    |  |   |                |   |  |       |        |   |  |   | 2,762     |  
|Effect of translation                                                  |  |                                 | 369     |   |                         |   |        |                    |  |   | 306             |   |  |       |        |   |  |   | 675       |  
|                                                                       |  |                                 |         |   |                         |   |         |                    |  |   |                 |   |  |       |         |   |  |   |           |  
|Balance at August 30, 2009 (Predecessor Company)                       |  | $                               | 120,780 |   |                         | $ |        |                    |  | $ | 118,125         |   |  | $     |        |   |  | $ | 238,905   |  
|Fresh-start adjustments                                                |  |                                 | 60,029  |   |                         |   | 187,887 |                    |  |   | 41,239          |   |  |       |        |   |  |   | 289,155   |  
|                                                                       |  |                                 |         |   |                         |   |         |                    |  |   |                 |   |  |       |         |   |  |   |           |  
|Balance at August 30, 2009 (Successor Company)                         |  | $                               | 180,809 |   |                         | $ | 187,887 |                    |  | $ | 159,364         |   |  | $     |        |   |  | $ | 528,060   |  
|Adjustments for release of valuation allowance                         |  |                                 | (30,363 | ) |                         |   | (17,080 | )                  |  |   |                |   |  |       |        |   |  |   | (47,443   | )
|Effect of translation                                                  |  |                                 | 1,847   |   |                         |   |        |                    |  |   | 884             |   |  |       |        |   |  |   | 2,731     |  
|                                                                       |  |                                 |         |   |                         |   |         |                    |  |   |                 |   |  |       |         |   |  |   |           |  
|Balance at September 30, 2009 (Successor Company)                      |  | $                               | 152,293 |   |                         | $ | 170,807 |                    |  | $ | 160,248         |   |  | $     |        |   |  | $ | 483,348   |  
|Additions due to Russell Hobbs Merger                                  |  |                                 |        |   |                         |   |        |                    |  |   |                |   |  |       | 120,079 |   |  |   | 120,079   |  
|Effect of translation                                                  |  |                                 | (2,715  | ) |                         |   |        |                    |  |   | (2,892          | ) |  |       | 2,235   |   |  |   | (3,372    | )
|                                                                       |  |                                 |         |   |                         |   |         |                    |  |   |                 |   |  |       |         |   |  |   |           |  
|Balance at September 30, 2010 (Successor Company)                      |  | $                               | 149,578 |   |                         | $ | 170,807 |                    |  | $ | 157,356         |   |  | $     | 122,314 |   |  | $ | 600,055   |  
|                                                                       |  |                                 |         |   |                         |   |         |                    |  |   |                 |   |  |       |         |   |  |   |           |  
|Intangible Assets:                                                     |  |                                 |         |   |                         |   |         |                    |  |   |                 |   |  |       |         |   |  |   |           |  
|Trade names Not Subject to Amortization                                |  |                                 |         |   |                         |   |         |                    |  |   |                 |   |  |       |         |   |  |   |           |  
|Balance at September 30, 2008 (Predecessor Company)                    |  | $                               | 286,260 |   |                         | $ | 57,000  |                    |  | $ | 218,345         |   |  | $     |        |   |  | $ | 561,605   |  
|Reclassification(A)                                                    |  |                                 |        |   |                         |   | (12,000 | )                  |  |   |                |   |  |       |        |   |  |   | (12,000   | )
|Impairment charge                                                      |  |                                 | (15,391 | ) |                         |   | (500    | )                  |  |   | (18,500         | ) |  |       |        |   |  |   | (34,391   | )
|Effect of translation                                                  |  |                                 | (240    | ) |                         |   |        |                    |  |   | (214            | ) |  |       |        |   |  |   | (454      | )
|                                                                       |  |                                 |         |   |                         |   |         |                    |  |   |                 |   |  |       |         |   |  |   |           |  
|Balance at August 30, 2009 (Predecessor Company)                       |  | $                               | 270,629 |   |                         | $ | 44,500  |                    |  | $ | 199,631         |   |  | $     |        |   |  | $ | 514,760   |  
|Fresh-start adjustments                                                |  |                                 | 130,371 |   |                         |   | 31,500  |                    |  |   | 10,869          |   |  |       |        |   |  |   | 172,740   |  
|                                                                       |  |                                 |         |   |                         |   |         |                    |  |   |                 |   |  |       |         |   |  |   |           |  
|Balance at August 30, 2009 (Successor Company)                         |  | $                               | 401,000 |   |                         | $ | 76,000  |                    |  | $ | 210,500         |   |  | $     |        |   |  | $ | 687,500   |  
|Effect of translation                                                  |  |                                 | 983     |   |                         |   |        |                    |  |   | 1,753           |   |  |       |        |   |  |   | 2,736     |  
|                                                                       |  |                                 |         |   |                         |   |         |                    |  |   |                 |   |  |       |         |   |  |   |           |  
|Balance at September 30, 2009 (Successor Company)                      |  | $                               | 401,983 |   |                         | $ | 76,000  |                    |  | $ | 212,253         |   |  | $     |        |   |  | $ | 690,236   |  
|Additions due to Russell Hobbs Merger                                  |  |                                 |        |   |                         |   |        |                    |  |   |                |   |  |       | 170,930 |   |  |   | 170,930   |  
|Effect of translation                                                  |  |                                 | (3,878  | ) |                         |   |        |                    |  |   | (6,920          | ) |  |       | 7,110   |   |  |   | (3,688    | )
|                                                                       |  |                                 |         |   |                         |   |         |                    |  |   |                 |   |  |       |         |   |  |   |           |  
|Balance at September 30, 2010 (Successor Company)                      |  | $                               | 398,105 |   |                         | $ | 76,000  |                    |  | $ | 205,333         |   |  | $     | 178,040 |   |  | $ | 857,478   |  
|                                                                       |  |                                 |         |   |                         |   |         |                    |  |   |                 |   |  |       |         |   |  |   |           |  
|Intangible Assets Subject to Amortization                              |  |                                 |         |   |                         |   |         |                    |  |   |                 |   |  |       |         |   |  |   |           |  
|Balance at September 30, 2008, net (Predecessor Company)               |  | $                               | 11,829  |   |                         | $ | 58,357  |                    |  | $ | 111,018         |   |  | $     |        |   |  | $ | 181,204   |  
|Additions(A)                                                           |  |                                 | 500     |   |                         |   | 12,000  |                    |  |   | 32              |   |  |       |        |   |  |   | 12,532    |  
|Disposals(B)                                                           |  |                                 |        |   |                         |   | (11,595 | )                  |  |   |                |   |  |       |        |   |  |   | (11,595   | )
|Amortization during period                                             |  |                                 | (975    | ) |                         |   | (6,297  | )                  |  |   | (11,827         | ) |  |       |        |   |  |   | (19,099   | )
|Effect of translation                                                  |  |                                 | (129    | ) |                         |   |        |                    |  |   | (623            | ) |  |       |        |   |  |   | (752      | )
|                                                                       |  |                                 |         |   |                         |   |         |                    |  |   |                 |   |  |       |         |   |  |   |           |  
|Balance at August 30, 2009, net (Predecessor Company)                  |  | $                               | 11,225  |   |                         | $ | 52,465  |                    |  | $ | 98,600          |   |  | $     |        |   |  | $ | 162,290   |  
|Fresh-start adjustments                                                |  |                                 | 342,775 |   |                         |   | 120,535 |                    |  |   | 146,400         |   |  |       |        |   |  |   | 609,710   |  
|                                                                       |  |                                 |         |   |                         |   |         |                    |  |   |                 |   |  |       |         |   |  |   |           |  
|Balance at August 30, 2009, net (Successor Company)                    |  | $                               | 354,000 |   |                         | $ | 173,000 |                    |  | $ | 245,000         |   |  | $     |        |   |  | $ | 772,000   |  
|Amortization during period                                             |  |                                 | (1,528  | ) |                         |   | (729    | )                  |  |   | (1,256          | ) |  |       |        |   |  |   | (3,513    | )
|Effect of translation                                                  |  |                                 | 1,961   |   |                         |   |        |                    |  |   | 1,261           |   |  |       |        |   |  |   | 3,222     |  
|                                                                       |  |                                 |         |   |                         |   |         |                    |  |   |                 |   |  |       |         |   |  |   |           |  
|Balance at September 30, 2009, net (Successor Company)                 |  | $                               | 354,433 |   |                         | $ | 172,271 |                    |  | $ | 245,005         |   |  | $     |        |   |  | $ | 771,709   |  
|Additions due to Russell Hobbs Merger                                  |  |                                 |        |   |                         |   |        |                    |  |   |                |   |  |       | 192,397 |   |  |   | 192,397   |  
|Amortization during period                                             |  |                                 | (17,755 | ) |                         |   | (8,750  | )                  |  |   | (14,861         | ) |  |       | (4,554  | ) |  |   | (45,920   | )
|Effect of translation                                                  |  |                                 | (3,562  | ) |                         |   |        |                    |  |   | (3,876          | ) |  |       | 1,134   |   |  |   | (6,304    | )
|                                                                       |  |                                 |         |   |                         |   |         |                    |  |   |                 |   |  |       |         |   |  |   |           |  
|Balance at September 30, 2010, net (Successor Company)                 |  | $                               | 333,116 |   |                         | $ | 163,521 |                    |  | $ | 226,268         |   |  | $     | 188,977 |   |  | $ | 911,882   |  
|                                                                       |  |                                 |         |   |                         |   |         |                    |  |   |                 |   |  |       |         |   |  |   |           |  
|Total Intangible Assets, net at September 30, 2010 (Successor Company) |  | $                               | 731,221 |   |                         | $ | 239,521 |                    |  | $ | 431,601         |   |  | $     | 367,017 |   |  | $ | 1,769,360 |  
|                                                                       |  |                                 |         |   |                         |   |         |                    |  |   |                 |   |  |       |         |   |  |   |           |  



131



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)





|(A) | During the first quarter of Fiscal 2009, the Company reclassified $12,000 of trade names intangible assets not subject to amortization related to the growing products
portion of the Home and Garden Business to intangible assets subject to amortization as such trade names had been assigned a useful life through the term of the shutdown period. The Company completed the shutdown of the growing products portion of
the Home and Garden Business during the second quarter of Fiscal 2009. (See Note 9, Discontinued Operations, for further details on the shutdown of the growing products portion of the Home and Garden Business).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(B) | During the second quarter of Fiscal 2009, the Company reclassified the growing products portion of the Home and Garden Business to discontinued operations as the
Company completed the shutdown of the business during that period. The Company disposed of all intangible assets related to the growing products portion of the Home and Garden Business. (See Note 9, Discontinued Operations, for further details on
the shutdown of the growing products portion of the Home and Garden Business).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Intangible assets subject to
amortization include proprietary technology, customer relationships and certain trade names. The carrying value of technology assets was $60,792, net of accumulated amortization of $6,305 at September 30, 2010 and $62,985, net of accumulated
amortization of $515 at September 30, 2009. The Company trade names subject to amortization relate to the valuation under fresh-start reporting and the Merger with Russell Hobbs. The carrying value of these trade names was $145,939, net of
accumulated amortization of $3,750 at September 30, 2010 and $490, net of accumulated amortization of $10 at September 30, 2009. Remaining intangible assets subject to amortization include customer relationship intangibles. The carrying
value of customer relationships was $705,151, net of accumulated amortization of $35,865 at September 30, 2010 and $708,234, net of accumulated amortization of $2,988 at September 30, 2009. The useful life of the Companys intangible
assets subject to amortization are 8 years for technology assets related to the Global Pet Supplies segment, 9 to 11 years for technology assets related to the Small Appliances segment, 17 years for technology assets associated with the Global
Batteries & Personal Care segment, 20 years for customer relationships of Global Batteries & Personal Care, Home and Garden and Global Pet Supplies, 15 years for Small Appliances customer relationships, 12 years for a trade name
within the Small Appliances segment and 4 years for a trade name within the Home and Garden segment.

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. During Fiscal 2010, the period from October 1, 2008
through August 30, 2009 and Fiscal 2008 the Company conducted impairment testing of goodwill and indefinite-lived intangible assets. As a result of this testing the Company recorded non-cash pretax impairment charges of approximately $34,391
and $861,234 in the period from October 1, 2008 through August 30, 2009 and Fiscal 2008, respectively. The $34,391 recorded during the period from October 1, 2008 through August 30, 2009 related to impaired trade name intangible
assets. Of the Fiscal 2008 impairment, approximately $601,934 of the charge related to impaired goodwill and $259,300 related to impaired trade name intangible assets. (See also Note 3(i), Significant Accounting PoliciesIntangible Assets, for
further details on the impairment charges).

The Company has designated the growing products portion of the Home and Garden
Business and the Canadian division of the Home and Garden Business as discontinued operations. In accordance with ASC 360, long-lived assets to be disposed are recorded at the lower of their carrying value or fair value less costs to sell. During
Fiscal 2008, the Company recorded a non-cash pretax charge of $5,700 in discontinued operations to reduce the carrying value of intangible assets related to the growing products portion of the Home and Garden Business in order to reflect the
estimated fair value of this business. (See also Note 9, Discontinued Operations, for additional information relating to this impairment charge).



132



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



The amortization expense related to intangibles subject to amortization for the
Successor Company for Fiscal 2010 and the period from August 31, 2009 through September 30, 2009, and the Predecessor Company for the period from October 1, 2008 through August 30, 2009 and Fiscal 2008 is as follows:



|                                    |  |                  |        |  |                                                    |   |       |                                                  |  |   |         |  |  |   |        | 
|----------------------------------- |  | ---------------- | ------ |  | -------------------------------------------------- | - | ----- | ------------------------------------------------ |  | - | ------- |  |  | - | ------ | 
|                                    |  | SuccessorCompany |        |  | Predecessor Company                                |  
|                                    |  | 2010             |        |  | Period fromAugust 31, 2009throughSeptember 30,2009 |   |       | Period fromOctober 
1, 2008throughAugust 30,2009 |  |   | 2008(A) | 
|Proprietary technology amortization |  | $                | 6,305  |  |                                                    | $ | 515   |                                                  |  | $ | 3,448   |  |  | $ | 3,934  | 
|Customer list amortization          |  |                  | 35,865 |  |                                                    |   | 2,988 |                                                  |  |   | 14,920  |  |  |   | 23,327 | 
|Trade names amortization            |  |                  | 3,750  |  |                                                    |   | 10    |                                                  |  |   | 731     |  |  |   | 426    | 
|                                    |  |                  |        |  |                                                    |   |       |                                                  |  |   |         |  |  |   |        | 
|                                    |  | $                | 45,920 |  |                                                    | $ | 3,513 |                                                  |  | $ | 19,099  |  |  | $ | 27,687 | 
|                                    |  |                  |        |  |                                                    |   |       |                                                  |  |   |         |  |  |   |        | 



|(A) | Fiscal 2008 includes amortization expense related to the year ended September 30, 2007 (Fiscal 2007), as a result of the reclassification of the Home
and Garden Business as a continuing operation during Fiscal 2008. (See also Note 11, Segment Results, for further details on amortization expense related to the Home and Garden Business).
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company estimates annual amortization expense for the next five fiscal years will approximate $55,630 per year.

(7) Debt

Debt consists of the
following:



|                                                                     |  |                    |           |   |                    |  |      |        |  |   |           |   |  |  |      |  
|-------------------------------------------------------------------- |  | ------------------ | --------- | - | ------------------ |  | ---- | ------ |  | - | --------- | - |  |  | ---- | -
|                                                                     |  | September 30, 2010 |           |   | September 30, 2009 | 
|                                                                     |  | Amount             |           |   | Rate               |  |      | Amount |  |   | Rate      |  
|Term Loan, U.S. Dollar, expiring June 16, 2016                       |  | $                  | 750,000   |   |                    |  | 8.1  | %      |  | $ |          |   |  |  |     |  
|9.5% Senior Secured Notes, due June 15, 2018                         |  |                    | 750,000   |   |                    |  | 9.5  | %      |  |   |          |   |  |  |     |  
|Term Loan B, U.S. Dollar                                             |  |                    |          |   |                    |  |     |        |  |   | 973,125   |   |  |  | 8.1  | %
|Term Loan, Euro                                                      |  |                    |          |   |                    |  |     |        |  |   | 371,874   |   |  |  | 8.6  | %
|12% Notes, due August 28, 2019                                       |  |                    | 245,031   |   |                    |  | 12.0 | %      |  |   | 218,076   |   |  |  | 12.0 | %
|ABL Revolving Credit Facility, expiring June 16, 2014                |  |                    |          |   |                    |  | 4.1  | %      |  |   |          |   |  |  |     |  
|Old ABL revolving credit facility                                    |  |                    |          |   |                    |  |     |        |  |   | 33,225    |   |  |  | 6.6  | %
|Supplemental Loan                                                    |  |                    |          |   |                    |  |     |        |  |   | 45,000    |   |  |  | 17.7 | %
|Other notes and obligations                                          |  |                    | 13,605    |   |                    |  | 10.8 | %      |  |   | 5,919     |   |  |  | 6.2  | %
|Capitalized lease obligations                                        |  |                    | 11,755    |   |                    |  | 5.2  | %      |  |   | 12,924    |   |  |  | 4.9  | %
|                                                                     |  |                    |           |   |                    |  |      |        |  |   |           |   |  |  |      |  
|                                                                     |  |                    | 1,770,391 |   |                    |  |      |        |  |   | 1,660,143 |   |  |  |      |  
|Original issuance discounts on debt                                  |  |                    | (26,624   | ) |                    |  |      |        |  |   |          |   |  |  |      |  
|Fair value adjustment as a result of fresh-start reporting valuation |  |                    |          |   |                    |  |      |        |  |   | (76,608   | ) |  |  |      |  
|Less current maturities                                              |  |                    | 20,710    |   |                    |  |      |        |  |   | 53,578    |   |  |  |      |  
|                                                                     |  |                    |           |   |                    |  |      |        |  |   |           |   |  |  |      |  
|Long-term debt                                                       |  | $                  | 1,723,057 |   |                    |  |      |        |  | $ | 1,529,957 |   |  |  |      |  
|                                                                     |  |                    |           |   |                    |  |      |        |  |   |           |   |  |  |      |  



133



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



The Successor Companys aggregate scheduled maturities of debt as of
September 30, 2010 are as follows:



|           |  |   |           | 
|---------- |  | - | --------- | 
|2011       |  | $ | 20,710    | 
|2012       |  |   | 35,254    | 
|2013       |  |   | 39,902    | 
|2014       |  |   | 39,907    | 
|2015       |  |   | 39,970    | 
|Thereafter |  |   | 1,594,648 | 
|           |  |   |           | 
|           |  | $ | 1,770,391 | 
|           |  |   |           | 

The Companys aggregate capitalized lease obligations included in the amounts above are payable in
installments of $990 in 2011, $745 in 2012, $725 in 2013, $740 in 2014, $803 in 2015 and $7,752 thereafter.

In connection
with the combination of Spectrum Brands and Russell Hobbs, Spectrum Brands (i) entered into a new senior secured term loan pursuant to a new senior credit agreement (the Senior Credit Agreement) consisting of a $750,000
U.S. Dollar Term Loan due June 16, 2016 (the Term Loan), (ii) issued $750,000 in aggregate principal amount of 9.5% Senior Secured Notes maturing June 15, 2018 (the 9.5% Notes) and (iii) entered into
a $300,000 U.S. Dollar asset based revolving loan facility due June 16, 2014 (the ABL Revolving Credit Facility and together with the Senior Credit Agreement, the Senior Credit Facilities and the Senior Credit
Facilities together with the 9.5% Notes, the Senior Secured Facilities). The proceeds from the Senior Secured Facilities were used to repay Spectrum Brands then-existing senior term credit facility (the Prior Term
Facility) and Spectrum Brands then-existing asset based revolving loan facility, to pay fees and expenses in connection with the refinancing and for general corporate purposes.

The 9.5% Notes and 12% Notes were issued by Spectrum Brands. SB/RH Holdings, LLC, a wholly-owned subsidiary of SB Holdings, and the
wholly owned domestic subsidiaries of Spectrum Brands are the guarantors under the 9.5% Notes. The wholly owned domestic subsidiaries of Spectrum Brands are the guarantors under the 12% Notes. SB Holdings is not an issuer or guarantor of the 9.5%
Notes or the 12% Notes. SB Holdings is also not a borrower or guarantor under the Companys Term Loan or the ABL Revolving Credit Facility. Spectrum Brands is the borrower under the Term Loan and its wholly owned domestic subsidiaries along
with SB/RH Holdings, LLC are the guarantors under that facility. Spectrum Brands and its wholly owned domestic subsidiaries are the borrowers under the ABL Revolving Credit Facility and SB/RH Holdings, LLC is a guarantor of that facility.

Senior Term Credit Facility

The Term Loan has a maturity date of June 16, 2016. Subject to certain mandatory prepayment events, the Term Loan is subject to repayment according
to a scheduled amortization, with the final payment of all amounts outstanding, plus accrued and unpaid interest, due at maturity. Among other things, the Term Loan provides for a minimum Eurodollar interest rate floor of 1.5% and interest spreads
over market rates of 6.5%.

The Senior Credit Agreement contains financial covenants with respect to debt, including, but not
limited to, a maximum leverage ratio and a minimum interest coverage ratio, which covenants, pursuant to their terms, become more restrictive over time. In addition, the Senior Credit Agreement contains customary restrictive covenants, including,
but not limited to, restrictions on the Companys ability to incur additional indebtedness, create liens, make investments or specified payments, give guarantees, pay dividends, make capital expenditures



134



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



and merge or acquire or sell assets. Pursuant to a guarantee and collateral agreement, the Company and its domestic subsidiaries have guaranteed their respective obligations under the Senior
Credit Agreement and related loan documents and have pledged substantially all of their respective assets to secure such obligations. The Senior Credit Agreement also provides for customary events of default, including payment defaults and
cross-defaults on other material indebtedness.

The Term Loan was issued at a 2.00% discount and was recorded net of the
$15,000 amount incurred. The discount will be amortized as an adjustment to the carrying value of principal with a corresponding charge to interest expense over the remaining life of the Senior Credit Agreement. During Fiscal 2010, the Company
recorded $25,968 of fees in connection with the Senior Credit Agreement. The fees are classified as Debt issuance costs within the accompanying Consolidated Statement of Financial Position as of September 30, 2010 and will be amortized as an
adjustment to interest expense over the remaining life of the Senior Credit Agreement.

At September 30, 2010, the
aggregate amount outstanding under the Term Loan totaled $750,000.

At September 30, 2009, the aggregate amount
outstanding under the Prior Term Facility totaled a U.S. Dollar equivalent of $1,391,459, consisting of principal amounts of $973,125 under the U.S. Dollar Term B Loan, 254,970 under the Euro Facility (USD $371,874 at
September 30, 2009) as well as letters of credit outstanding under the L/C Facility totaling $46,460.

9.5% Notes

At September 30, 2010, the Company had outstanding principal of $750,000 under the 9.5% Notes maturing June 15, 2018.

The Company may redeem all or a part of the 9.5% Notes, upon not less than 30 or more than 60 days notice at specified redemption prices.
Further, the indenture governing the 9.5% Notes (the 2018 Indenture) requires the Company to make an offer, in cash, to repurchase all or a portion of the applicable outstanding notes for a specified redemption price, including a
redemption premium, upon the occurrence of a change of control of the Company, as defined in such indenture.

The 2018
Indenture contains customary covenants that limit, among other things, the incurrence of additional indebtedness, payment of dividends on or redemption or repurchase of equity interests, the making of certain investments, expansion into unrelated
businesses, creation of liens on assets, merger or consolidation with another company, transfer or sale of all or substantially all assets, and transactions with affiliates.

In addition, the 2018 Indenture provides for customary events of default, including failure to make required payments, failure to comply with certain agreements or covenants, failure to make payments on
or acceleration of certain other indebtedness, and certain events of bankruptcy and insolvency. Events of default under the 2018 Indenture arising from certain events of bankruptcy or insolvency will automatically cause the acceleration of the
amounts due under the 9.5% Notes. If any other event of default under the 2018 Indenture occurs and is continuing, the trustee for the 2018 Indenture or the registered holders of at least 25% in the then aggregate outstanding principal amount of the
9.5% Notes may declare the acceleration of the amounts due under those notes.

The 9.5% Notes were issued at a 1.37% discount
and were recorded net of the $10,245 amount incurred. The discount will be amortized as an adjustment to the carrying value of principal with a corresponding charge to



135



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



interest expense over the remaining life of the 9.5% Notes. During Fiscal 2010, the Company recorded $20,823 of fees in connection with the issuance of the 9.5% Notes. The fees are classified as
Debt issuance costs within the accompanying Consolidated Statement of Financial Position as of September 30, 2010 and will be amortized as an adjustment to interest expense over the remaining life of the 9.5% Notes.

12% Notes

On August 28, 2009, in
connection with emergence from the voluntary reorganization under Chapter 11 and pursuant to the Plan, the Company issued $218,076 in aggregate principal amount of 12% Notes maturing August 28, 2019. Semiannually, at its option, the Company may
elect to pay interest on the 12% Notes in cash or as payment in kind, or PIK. PIK interest would be added to principal upon the relevant semi-annual interest payment date. Under the Prior Term Facility, the Company agreed to make
interest payments on the 12% Notes through PIK for the first three semi-annual interest payment periods. As a result of the refinancing of the Prior Term Facility the Company is no longer required to make interest payments as payment in kind after
the semi-annual interest payment date of August 28, 2010. Effective with the payment date of August 28, 2010 the Company gave notice to the trustee that the interest payment due February 28, 2011 would be made in cash. During Fiscal
2010, the Company reclassified $26,955 of accrued interest from Other long term liabilities to principal in connection with the PIK provision of the 12% Notes.

The Company may redeem all or a part of the 12% Notes, upon not less than 30 or more than 60 days notice, beginning August 28, 2012 at specified redemption prices. Further, the indenture governing
the 12% Notes require the Company to make an offer, in cash, to repurchase all or a portion of the applicable outstanding notes for a specified redemption price, including a redemption premium, upon the occurrence of a change of control of the
Company, as defined in such indenture.

At September 30, 2010 and September 30, 2009, the Company had outstanding
principal of $245,031 and $218,076, respectively, under the 12% Notes.

The indenture governing the 12% Notes (the 2019
Indenture), contains customary covenants that limit, among other things, the incurrence of additional indebtedness, payment of dividends on or redemption or repurchase of equity interests, the making of certain investments, expansion into
unrelated businesses, creation of liens on assets, merger or consolidation with another company, transfer or sale of all or substantially all assets, and transactions with affiliates.

In addition, the 2019 Indenture provides for customary events of default, including failure to make required payments, failure to comply
with certain agreements or covenants, failure to make payments on or acceleration of certain other indebtedness, and certain events of bankruptcy and insolvency. Events of default under the indenture arising from certain events of bankruptcy or
insolvency will automatically cause the acceleration of the amounts due under the 12% Notes. If any other event of default under the 2019 Indenture occurs and is continuing, the trustee for the indenture or the registered holders of at least 25% in
the then aggregate outstanding principal amount of the 12% Notes may declare the acceleration of the amounts due under those notes.

The Company is subject to certain limitations as a result of the Companys Fixed Charge Coverage Ratio under the 2019 Indenture being below 2:1. Until the test is satisfied, Spectrum Brands and
certain of its subsidiaries are limited in their ability to make significant acquisitions or incur significant additional senior credit facility debt beyond the Senior Credit Facilities. The Company does not expect its inability to satisfy the Fixed
Charge Coverage Ratio test to impair its ability to provide adequate liquidity to meet the short-term and long-term liquidity requirements of its existing businesses, although no assurance can be given in this regard.



136



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



In connection with the Merger, the Company obtained the consent of the note holders to
certain amendments to the 2019 Indenture (the Supplemental Indenture). The Supplemental Indenture became effective upon the closing of the Merger. Among other things, the Supplemental Indenture amended the definition of change in control
to exclude the Harbinger Capital Partners Master Fund I, Ltd. (Harbinger Master Fund) and Harbinger Capital Partners Special Situations Fund, L.P. (Harbinger Special Fund) and, together with Harbinger Master Fund, the
HCP Funds) and Global Opportunities Breakaway Ltd. (together with the HCP Funds, the Harbinger Parties) and increased the Companys ability to incur indebtedness up to $1,850,000.

During Fiscal 2010 the Company recorded $2,966 of fees in connection with the consent. The fees are classified as Debt issuance costs
within the accompanying Consolidated Statement of Financial Position as of September 30, 2010 and will be amortized as an adjustment to interest expense over the remaining life of the 12% Notes effective with the closing of the Merger.

ABL Revolving Credit Facility

The ABL Revolving Credit Facility is governed by a credit agreement (the ABL Credit Agreement) with Bank of America as administrative agent
(the Agent). The ABL Revolving Credit Facility consists of revolving loans (the Revolving Loans), with a portion available for letters of credit and a portion available as swing line loans, in each case subject to the terms
and limits described therein.

The Revolving Loans may be drawn, repaid and reborrowed without premium or penalty. The
proceeds of borrowings under the ABL Revolving Credit Facility are to be used for costs, expenses and fees in connection with the ABL Revolving Credit Facility, for working capital requirements of the Company and its subsidiaries,
restructuring costs, and other general corporate purposes.

The ABL Revolving Credit Facility carries an interest rate, at the
Companys option, which is subject to change based on availability under the facility, of either: (a) the base rate plus currently 2.75% per annum or (b) the reserve-adjusted LIBOR rate (the Eurodollar Rate) plus
currently 3.75% per annum. No amortization will be required with respect to the ABL Revolving Credit Facility. The ABL Revolving Credit Facility will mature on June 16, 2014. Pursuant to the credit and security agreement, the obligations
under the ABL credit agreement are secured by certain current assets of the guarantors, including, but not limited to, deposit accounts, trade receivables and inventory.

The ABL Credit Agreement contains various representations and warranties and covenants, including, without limitation, enhanced collateral reporting, and a maximum fixed charge coverage ratio. The ABL
Credit Agreement also provides for customary events of default, including payment defaults and cross-defaults on other material indebtedness.

During Fiscal 2010 the Company recorded $9,839 of fees in connection with the ABL Revolving Credit Facility. The fees are classified as Debt issuance costs within the accompanying Consolidated Statement
of Financial Position as of September 30, 2010 and will be amortized as an adjustment to interest expense over the remaining life of the ABL Revolving Credit Facility.

As a result of borrowings and payments under the ABL Revolving Credit Facility at September 30, 2010, the Company had aggregate borrowing availability of approximately $225,255, net of lender
reserves of $28,972.

At September 30, 2010, the Company had outstanding letters of credit of $36,969 under the ABL
Revolving Credit Facility.



137



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



At September 30, 2009, the Company had an aggregate amount outstanding under its
then-existing asset based revolving loan facility of $84,225 which included a supplemental loan of $45,000 and $6,000 in outstanding letters of credit.

(8) Income Taxes

Income tax (benefit) expense was calculated based upon the following
components of (loss) income from continuing operations before income tax:



|                           |  |                  |          |   |                                                    |   |         |                                                 |  |   |           |  |  |   |          |  
|-------------------------- |  | ---------------- | -------- | - | -------------------------------------------------- | - | ------- | ----------------------------------------------- |  | - | --------- |  |  | - | -------- | -
|                           |  | SuccessorCompany |          |   | Predecessor Company                                |  
|                           |  | 2010             |          |   | Period
fromAugust 31, 2009throughSeptember 30,2009 |   |         | Period
fromOctober 1, 2008throughAugust 30,2009 |  |   | 2008      | 
|Pretax (loss) income:      |  |                  |          |   |                                                    |   |         |                                                 |  |   |           |  |  |   |          |  
|United States              |  | $                | (230,262 | ) |                                                    | $ | (28,043 | )                                               |  | $ | 936,379   |  |  | $ | (654,003 | )
|Outside the United States  |  |                  | 106,079  |   |                                                    |   | 8,043   |                                                 |  |   | 186,975   |  |  |   | (260,815 | )
|                           |  |                  |          |   |                                                    |   |         |                                                 |  |   |           |  |  |   |          |  
|Total pretax (loss) income |  | $                | (124,183 | ) |                                                    | $ | (20,000 | )                                               |  | $ | 1,123,354 |  |  | $ | (914,818 | )
|                           |  |                  |          |   |                                                    |   |         |                                                 |  |   |           |  |  |   |          |  

The components of income tax expense (benefit) are as follows:



|                             |  |                  |        |   |                                                    |   |        |                                                  |  |   |        |   |  |   |         |  
|---------------------------- |  | ---------------- | ------ | - | -------------------------------------------------- | - | ------ | ------------------------------------------------ |  | - | ------ | - |  | - | ------- | -
|                             |  | SuccessorCompany |        |   | Predecessor Company                                |  
|                             |  | 2010             |        |   | Period
fromAugust 31, 2009throughSeptember 30,2009 |   |        | Period fromOctober 1, 
2008throughAugust 30,2009 |  |   | 2008   |  
|Current:                     |  |                  |        |   |                                                    |   |        |                                                  |  |   |        |   |  |   |         |  
|Foreign                      |  |                  | 44,481 |   |                                                    | $ | 3,111  |                                                  |  | $ | 24,159 |   |  | $ | 20,964  |  
|State                        |  |                  | 2,907  |   |                                                    |   | 282    |                                                  |  |   | (364   | ) |  |   | 2,089   |  
|                             |  |                  |        |   |                                                    |   |        |                                                  |  |   |        |   |  |   |         |  
|Total current                |  |                  | 47,388 |   |                                                    |   | 3,393  |                                                  |  |   | 23,795 |   |  |   | 23,053  |  
|Deferred:                    |  |                  |        |   |                                                    |   |        |                                                  |  |   |        |   |  |   |         |  
|Federal                      |  |                  | 22,119 |   |                                                    |   | 49,790 |                                                  |  |   | (1,599 | ) |  |   | 27,109  |  
|Foreign                      |  |                  | (6,514 | ) |                                                    |   | (1,266 | )                                                |  |   | 1,581  |   |  |   | (63,064 | )
|State                        |  |                  | 196    |   |                                                    |   | (724   | )                                                |  |   | (1,166 | ) |  |   | 3,442   |  
|                             |  |                  |        |   |                                                    |   |        |                                                  |  |   |        |   |  |   |         |  
|Total deferred               |  |                  | 15,801 |   |                                                    |   | 47,800 |                                                  |  |   | (1,184 | ) |  |   | (32,513 | )
|                             |  |                  |        |   |                                                    |   |        |                                                  |  |   |        |   |  |   |         |  
|Income tax (benefit) expense |  | $                | 63,189 |   |                                                    | $ | 51,193 |                                                  |  | $ | 22,611 |   |  | $ | (9,460  | )
|                             |  |                  |        |   |                                                    |   |        |                                                  |  |   |        |   |  |   |         |  



138



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



The following reconciles the Federal statutory income tax rate with the Companys
effective tax rate:



|                                                                |  |                  |       |    |                                                    |  |        |                                                  |  |  |       |   |  |  |       |  
|--------------------------------------------------------------- |  | ---------------- | ----- | -- | -------------------------------------------------- |  | ------ | ------------------------------------------------ |  |  | ----- | - |  |  | ----- | -
|                                                                |  | SuccessorCompany |       |    | Predecessor Company                                | 
|                                                                |  | 2010             |       |    | Period
fromAugust 31, 2009throughSeptember 30,2009 |  |        | Period fromOctober 1, 
2008throughAugust 30,2009 |  |  | 2008  |  
|Statutory federal income tax rate                               |  |                  | 35.0  | %  |                                                    |  | 35.0   | %                                                |  |  | 35.0  | % |  |  | 35.0  | %
|Permanent items                                                 |  |                  | (2.1  | )  |                                                    |  | 5.9    |                                                  |  |  | 1.0   |   |  |  | (0.7  | )
|Foreign statutory rate vs. U.S. statutory rate                  |  |                  | 8.1   |    |                                                    |  | 3.6    |                                                  |  |  | (0.8  | ) |  |  | (1.8  | )
|State income taxes, net of federal benefit                      |  |                  | 4.0   |    |                                                    |  | 3.9    |                                                  |  |  | (0.6  | ) |  |  | 1.4   |  
|Net nondeductible (deductible) interest expense                 |  |                  |      |    |                                                    |  |       |                                                  |  |  |      |   |  |  | 0.2   |  
|ASC 350 Impairment                                              |  |                  |      |    |                                                    |  |       |                                                  |  |  |      |   |  |  | (11.2 | )
|Fresh-start reporting valuation adjustment(A)                   |  |                  |      |    |                                                    |  |       |                                                  |  |  | (33.9 | ) |  |  |      |  
|Gain on settlement of liabilities subject to compromise         |  |                  |      |    |                                                    |  |       |                                                  |  |  | 4.5   |   |  |  |      |  
|Professional fees incurred in connection with Bankruptcy Filing |  |                  |      |    |                                                    |  |       |                                                  |  |  | 1.4   |   |  |  |      |  
|Residual tax on foreign earnings                                |  |                  | (7.5  | )  |                                                    |  | (284.7 | )                                                |  |  |      |   |  |  | (0.5  | )
|Valuation allowance(B)                                          |  |                  | (73.3 | )  |                                                    |  | (7.4   | )                                                |  |  | (4.6  | ) |  |  | (23.5 | )
|Reorganization items                                            |  |                  | (6.1  | )  |                                                    |  |       |                                                  |  |  |      |   |  |  |      |  
|Unrecognized tax benefits                                       |  |                  | (2.6  | )  |                                                    |  | (9.3   | )                                                |  |  |      |   |  |  | (0.1  | )
|Inflationary adjustments                                        |  |                  | (2.7  | )  |                                                    |  | (1.1   | )                                                |  |  |      |   |  |  |      |  
|Deferred tax correction of immaterial prior period error        |  |                  | (4.8  | )  |                                                    |  |       |                                                  |  |  |      |   |  |  |      |  
|Other                                                           |  |                  | 1.1   |    |                                                    |  | (1.9   | )                                                |  |  |      |   |  |  | 2.2   |  
|                                                                |  |                  |       |    |                                                    |  |        |                                                  |  |  |       |   |  |  |       |  
|                                                                |  |                  | (50.9 | )% |                                                    |  | (256.0 | )%                                               |  |  | 2.0   | % |  |  | 1.0   | %
|                                                                |  |                  |       |    |                                                    |  |        |                                                  |  |  |       |   |  |  |       |  



|(A) | Includes the adjustment to the valuation allowance resulting from fresh-start reporting.
|--- | ----------------------------------------------------------------------------------------

|(B) | Includes the adjustment to the valuation allowance resulting from the Plan.
|--- | ---------------------------------------------------------------------------



139



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



The tax effects of temporary differences, which give rise to significant portions of the
deferred tax assets and deferred tax liabilities, are as follows:



|                                                    |  |                  |          |   |      |   |          |  
|--------------------------------------------------- |  | ---------------- | -------- | - | ---- | - | -------- | -
|                                                    |  | SuccessorCompany |         
|                                                    |  | September 30,    |         
|                                                    |  | 2010             |          |   | 2009 |  
|Current deferred tax assets:                        |  |                  |          |   |      |   |          |  
|Employee benefits                                   |  | $                | 21,770   |   |      | $ | 20,908   |  
|Restructuring                                       |  |                  | 6,486    |   |      |   | 11,396   |  
|Inventories and receivables                         |  |                  | 13,484   |   |      |   | 9,657    |  
|Marketing and promotional accruals                  |  |                  | 5,783    |   |      |   | 5,458    |  
|Other                                               |  |                  | 22,712   |   |      |   | 13,107   |  
|Valuation allowance                                 |  |                  | (28,668  | ) |      |   | (16,413  | )
|                                                    |  |                  |          |   |      |   |          |  
|Total current deferred tax assets                   |  |                  | 41,567   |   |      |   | 44,113   |  
|Current deferred tax liabilities:                   |  |                  |          |   |      |   |          |  
|Inventory                                           |  |                  | (1,947   | ) |      |   | (11,560  | )
|Other                                               |  |                  | (3,885   | ) |      |   | (4,416   | )
|                                                    |  |                  |          |   |      |   |          |  
|Total current deferred tax liabilities              |  |                  | (5,832   | ) |      |   | (15,976  | )
|                                                    |  |                  |          |   |      |   |          |  
|Net current deferred tax assets                     |  | $                | 35,735   |   |      | $ | 28,137   |  
|                                                    |  |                  |          |   |      |   |          |  
|Noncurrent deferred tax assets:                     |  |                  |          |   |      |   |          |  
|Employee benefits                                   |  | $                | 17,599   |   |      | $ | 3,564    |  
|Restructuring and purchase accounting               |  |                  | 20,541   |   |      |   | 26,921   |  
|Marketing and promotional accruals                  |  |                  | 1,311    |   |      |   | 845      |  
|Net operating loss and credit carry forwards        |  |                  | 513,779  |   |      |   | 291,642  |  
|Prepaid royalty                                     |  |                  | 9,708    |   |      |   | 14,360   |  
|Property, plant and equipment                       |  |                  | 3,207    |   |      |   | 2,798    |  
|Unrealized losses                                   |  |                  | 4,202    |   |      |   |         |  
|Other                                               |  |                  | 14,335   |   |      |   | 17,585   |  
|Valuation allowance                                 |  |                  | (302,268 | ) |      |   | (116,275 | )
|                                                    |  |                  |          |   |      |   |          |  
|Total noncurrent deferred tax assets                |  |                  | 282,414  |   |      |   | 241,440  |  
|Noncurrent deferred tax liabilities:                |  |                  |          |   |      |   |          |  
|Property, plant, and equipment                      |  |                  | (13,862  | ) |      |   | (19,552  | )
|Unrealized gains                                    |  |                  |         |   |      |   | (15,275  | )
|Intangibles                                         |  |                  | (544,478 | ) |      |   | (430,815 | )
|Other                                               |  |                  | (1,917   | ) |      |   | (3,296   | )
|                                                    |  |                  |          |   |      |   |          |  
|Total noncurrent deferred tax liabilities           |  |                  | (560,257 | ) |      |   | (468,938 | )
|                                                    |  |                  |          |   |      |   |          |  
|Net noncurrent deferred tax liabilities             |  | $                | (277,843 | ) |      | $ | (227,498 | )
|                                                    |  |                  |          |   |      |   |          |  
|Net current and noncurrent deferred tax liabilities |  | $                | (242,108 | ) |      | $ | (199,361 | )
|                                                    |  |                  |          |   |      |   |          |  

During Fiscal 2010, the Company recorded residual U.S. and foreign taxes on approximately $26,600 of
distributions of foreign earnings resulting in an increase in tax expense of approximately $9,312. The distributions were primarily non-cash deemed distributions under U.S. tax law. During the period from August 31, 2009 through
September 30, 2009, the Successor Company recorded residual U.S. and foreign taxes



140



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



on approximately $165,937 of actual and deemed distributions of foreign earnings resulting in an increase in tax expense of approximately $58,295. The Company made these distributions, which were
primarily non-cash, to reduce the U.S. tax loss for Fiscal 2009 as a result of Section 382 considerations. Remaining undistributed earnings of the Companys foreign operations amounting to approximately $302,447 and $156,270 at
September 30, 2010 and September 2009, respectively, are intended to remain permanently invested. Accordingly, no residual income taxes have been provided on those earnings at September 30, 2010 and September 30, 2009. If at some
future date, these earnings cease to be permanently invested the Company may be subject to U.S. income taxes and foreign withholding and other taxes on such amounts. If such earnings were not considered permanently reinvested, a deferred tax
liability of approximately $109,189 would be required.

The Company, as of September 30, 2010, has U.S. federal and state
net operating loss carryforwards of approximately $1,087,489 and $936,208, respectively. These net operating loss carryforwards expire through years ending in 2031. The Company has foreign loss carryforwards of approximately $195,456 which will
expire beginning in 2011. Certain of the foreign net operating losses have indefinite carryforward periods. The Company is subject to an annual limitation on the use of its net operating losses that arose prior to its emergence from bankruptcy. The
Company has had multiple changes of ownership, as defined under IRC Section 382, that subject the Companys U.S. federal and state net operating losses and other tax attributes to certain limitations. The annual limitation is based on a
number of factors including the value of the Companys stock (as defined for tax purposes) on the date of the ownership change, its 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. Based on these factors, the Company projects that $296,160 of the total U.S. federal and $462,837 of the state net operating
loss carryforwards will expire unused. In addition, separate return year limitations apply to limit the Companys utilization of the acquired Russell Hobbs U.S. federal and state net operating losses to future income of the Russell Hobbs
subgroup. The Company also projects that $37,542 of the total foreign loss carryforwards will expire unused. The Company has provided a full valuation allowance against these deferred tax assets.

The Predecessor Company recognized income tax expense of approximately $124,054 related to the gain on the settlement of liabilities
subject to compromise and the modification of the senior secured credit facility in the period from October 1, 2008 through August 30, 2009. The Company, has, in accordance with the IRC Section 108 reduced its net operating loss
carryforwards for cancellation of debt income that arose from its emergence from Chapter 11 of the Bankruptcy Code, under IRC Section 382(1)(6).

A valuation allowance is recorded when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets depends on
the ability of the Company to generate sufficient taxable income of the appropriate character in the future and in the appropriate taxing jurisdictions. As of September 30, 2010 and September 30, 2009, the Companys valuation
allowance, established for the tax benefit that may not be realized, totaled approximately $330,936 and $132,688, respectively. As of September 30, 2010 and September 30, 2009, approximately $299,524 and $108,493, respectively related to
U.S. net deferred tax assets, and approximately $31,412 and $24,195, respectively, related to foreign net deferred tax assets. The increase in the allowance during Fiscal 2010 totaled approximately $198,248, of which approximately $191,031 related
to an increase in the valuation allowance against U.S. net deferred tax assets, and approximately $7,217 related to a decrease in the valuation allowance against foreign net deferred tax assets. In connection with the Merger, the Company established
additional valuation allowance of approximately $103,790 related to acquired net deferred tax assets as part of purchase accounting. This amount is included in the $198,248 above.

The total amount of unrecognized tax benefits on the Successor Companys Consolidated Statements of Financial Position at
September 30, 2010 and September 30, 2009 are $12,808 and $7,765, respectively, that if recognized will affect the effective tax rate. The Company recognizes interest and penalties related to uncertain



141



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



tax positions in income tax expense. The Successor Company as of September 30, 2009 and September 30, 2010 had approximately $3,021 and $5,860, respectively, of accrued interest and
penalties related to uncertain tax positions. The impact related to interest and penalties on the Consolidated Statements of Operations for the period from October 1, 2008 through August 30, 2009 (Predecessor Company) and the period from August
31, 2009 through September 30, 2009 (Successor Company) was not material. The impact related to interest and penalties on the Consolidated Statement of Operations for Fiscal 2010 was a net increase to income tax expense of $1,527. In connection
with the Merger, the Company recorded additional unrecognized tax benefits of approximately $3,299 as part of purchase accounting.

As of September 30, 2010, certain of the Companys Canadian, German, and Hong Kong legal entities are undergoing tax audits. The Company cannot predict the ultimate outcome of the examinations;
however, it is reasonably possible that during the next 12 months some portion of previously unrecognized tax benefits could be recognized.

The following table summarizes the changes to the amount of unrecognized tax benefits of the Predecessor Company for the period from October 1, 2008 through August 30, 2009 and the Successor
Company for the period from August 31, 2009 through September 30, 2009 and Fiscal 2010:



|                                                                      |  |   |        |  
|--------------------------------------------------------------------- |  | - | ------ | -
|Unrecognized tax benefits at September 30, 2008 (Predecessor Company) |  | $ | 6,755  |  
|Gross increase  tax positions in prior period                        |  |   | 26     |  
|Gross decrease  tax positions in prior period                        |  |   | (11    | )
|Gross increase  tax positions in current period                      |  |   | 1,673  |  
|Lapse of statutes of limitations                                      |  |   | (807   | )
|                                                                      |  |   |        |  
|Unrecognized tax benefits at August 30, 2009 (Predecessor Company)    |  | $ | 7,636  |  
|Gross decrease  tax positions in prior period                        |  |   | (15    | )
|Gross increase  tax positions in current period                      |  |   | 174    |  
|Lapse of statutes of limitations                                      |  |   | (30    | )
|                                                                      |  |   |        |  
|Unrecognized tax benefits at September 30, 2009 (Successor Company)   |  | $ | 7,765  |  
|Russell Hobbs acquired unrecognized tax benefits                      |  |   | 3,251  |  
|Gross decrease  tax positions in prior period                        |  |   | (904   | )
|Gross increase  tax positions in current period                      |  |   | 3,390  |  
|Lapse of statutes of limitations                                      |  |   | (694   | )
|                                                                      |  |   |        |  
|Unrecognized tax benefits at September 30, 2010 (Successor Company)   |  | $ | 12,808 |  
|                                                                      |  |   |        |  

The Company files income tax returns in the U.S. federal jurisdiction and various state, local and foreign
jurisdictions and is subject to ongoing examination by the various taxing authorities. The Companys major taxing jurisdictions are the U.S., United Kingdom, and Germany. In the U.S., federal tax filings for years prior to and including the
Companys fiscal year ended September 30, 2006 are closed. However, the federal net operating loss carryforwards from the Companys fiscal years ended September 30, 2006 and prior are subject to Internal Revenue Service
(IRS) examination until the year that such net operating loss carryforwards are utilized and those years are closed for audit. The Companys fiscal years ended September 30, 2007, 2008 and 2009 remain open to examination by the
IRS. Filings in various U.S. state and local jurisdictions are also subject to audit and to date no significant audit matters have arisen.

In the U.S., federal tax filings for years prior to and including Russell Hobbs year ended June 30, 2008 are closed. However, the federal net operating loss carryforward for Russell Hobbs fiscal year
ended June 30, 2008 is subject to examination by the IRS until the year that such net operating losses are utilized and those years are closed for audit.



142



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



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. During the period from October 1, 2008 through August 30, 2009 and Fiscal 2008, the Predecessor Company, as a result
of its testing, recorded non-cash pre tax impairment charges of $34,391 and $861,234, respectively. The tax impact, prior to consideration of the current year valuation allowance, of the impairment charges was a deferred tax benefit of $12,965 and
$142,877 during the period from October 1, 2008 through August 30, 2009 and Fiscal 2008, respectively, as a result of a significant portion of the impaired assets not being deductible for tax purposes in 2008.

During Fiscal 2010 we recorded the correction of an immaterial prior period error in our consolidated financial statements related to
deferred taxes in certain foreign jurisdictions. We believe the correction of this error to be both quantitatively and qualitatively immaterial to our annual results for fiscal 2010 or to any of our previously issued financial statements. The impact
of the correction was an increase to income tax expense and a decrease to deferred tax assets of approximately $5,900.

(9) Discontinued
Operations

On November 1, 2007, the Predecessor Company sold the Canadian division of the Home and Garden Business, which operated
under the name Nu-Gro, to a new company formed by RoyCap Merchant Banking Group and Clarke Inc. Cash proceeds received at closing, net of selling expenses, totaled $14,931 and were used to reduce outstanding debt. These proceeds are included in net
cash provided by investing activities of discontinued operations in the accompanying Consolidated Statements of Cash Flows. On February 5, 2008, the Predecessor Company finalized the contractual working capital adjustment in connection with
this sale which increased proceeds received by the Predecessor Company by $500. As a result of the finalization of the contractual working capital adjustments the Predecessor Company recorded a loss on disposal of $1,087, net of tax benefit.

On November 11, 2008, the Predecessor Board approved the shutdown of the growing products portion of the Home and Garden
Business, which included the manufacturing and marketing of fertilizers, enriched soils, mulch and grass seed. The decision to shutdown the growing products portion of the Home and Garden Business was made only after the Predecessor Company was
unable to successfully sell this business, in whole or in part. The shutdown of the growing products portion of the Home and Garden Business was completed during the second quarter of Fiscal 2009.

The presentation herein of the results of continuing operations has been changed to exclude the growing products portion of the Home and
Garden Business for all periods presented. The following amounts have been segregated from continuing operations and are reflected as discontinued operations for Fiscal 2010, the period from August 31, 2009 through September 30, 2009, the
period from October 1, 2008 through August 30, 2009 and Fiscal 2008, respectively:



|                                                               |  |                  |        |   |                                                    |   |     |                                                 |  |   |         |   |  |   |         |  
|-------------------------------------------------------------- |  | ---------------- | ------ | - | -------------------------------------------------- | - | --- | ----------------------------------------------- |  | - | ------- | - |  | - | ------- | -
|                                                               |  | SuccessorCompany |        |   | PredecessorCompany                                 |  
|                                                               |  | 2010             |        |   | Period FromAugust 31, 2009throughSeptember 30,2009 |   |     | Period fromOctober 1, 2008throughAugust 30,2009 |  |   | 2008    |  
|Net sales                                                      |  | $                |       |   |                                                    | $ |    |                                                 |  | $ | 31,306  |   |  | $ | 261,439 |  
|                                                               |  |                  |        |   |                                                    |   |     |                                                 |  |   |         |   |  |   |         |  
|Income (loss) from discontinued operations before income taxes |  | $                | (2,512 | ) |                                                    | $ | 408 |                                                 |  | $ | (91,293 | ) |  | $ | (27,124 | )
|Provision for income tax expense (benefit)                     |  |                  | 223    |   |                                                    |   |    |                                                 |  |   | (4,491  | ) |  |   | (2,182  | )
|                                                               |  |                  |        |   |                                                    |   |     |                                                 |  |   |         |   |  |   |         |  
|Income (loss) from discontinued operations, net of tax         |  | $                | (2,735 | ) |                                                    | $ | 408 |                                                 |  | $ | (86,802 | ) |  | $ | (24,942 | )
|                                                               |  |                  |        |   |                                                    |   |     |                                                 |  |   |         |   |  |   |         |  



143



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



The presentation herein of the results of continuing operations has been changed to
exclude the Canadian division of the Home and Garden Business for all periods presented. The following amounts have been segregated from continuing operations and are reflected as discontinued operations for Fiscal 2008:



|                                                                                             |  |                    |        |  
|-------------------------------------------------------------------------------------------- |  | ------------------ | ------ | -
|                                                                                             |  | PredecessorCompany |       
|                                                                                             |  | 2008               |       
|Net sales                                                                                    |  | $                  | 4,732  |  
|                                                                                             |  |                    |        |  
|Loss from discontinued operations before income taxes                                        |  | $                  | (1,896 | )
|Provision for income tax benefit                                                             |  |                    | (651   | )
|                                                                                             |  |                    |        |  
|Loss from discontinued operations (including loss on disposal of $1,087 in 2008), net of tax |  | $                  | (1,245 | )
|                                                                                             |  |                    |        |  

In accordance with ASC 360, long-lived assets to be disposed of by sale are recorded at the lower of their
carrying value or fair value less costs to sell. During Fiscal 2008 the Predecessor Company recorded a non-cash pretax charge of $5,700 in discontinued operations to reduce the carrying value of intangible assets related to the growing products
portion of the Home and Garden Business in order to reflect such intangible assets at their estimated fair value.

(10) Employee Benefit
Plans

Pension Benefits

The Company has various defined benefit pension plans covering some of its employees in the United States and certain employees in other countries,
primarily the United Kingdom and Germany. Plans generally provide benefits of stated amounts for each year of service. The Company funds its U.S. pension plans in accordance with the requirements of the defined benefit pension plans and, where
applicable, in amounts sufficient to satisfy the minimum funding requirements of applicable laws. Additionally, in compliance with the Companys funding policy, annual contributions to non-U.S. defined benefit plans are equal to the actuarial
recommendations or statutory requirements in the respective countries.

The Company also sponsors or participates in a number
of other non-U.S. pension arrangements, including various retirement and termination benefit plans, some of which are covered by local law or coordinated with government-sponsored plans, which are not significant in the aggregate and therefore are
not included in the information presented below. The Company also has various nonqualified deferred compensation agreements with certain of its employees. Under certain of these agreements, the Company has agreed to pay certain amounts annually for
the first 15 years subsequent to retirement or to a designated beneficiary upon death. It is managements intent that life insurance contracts owned by the Company will fund these agreements. Under the remaining agreements, the Company has
agreed to pay such deferred amounts in up to 15 annual installments beginning on a date specified by the employee, subsequent to retirement or disability, or to a designated beneficiary upon death.

Other Benefits

Under the Rayovac
postretirement plan the Company provides certain health care and life insurance benefits to eligible retired employees. Participants earn retiree health care benefits after reaching age 45 over the next 10 succeeding years of service and remain
eligible until reaching age 65. The plan is contributory; retiree



144



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



contributions have been established as a flat dollar amount with contribution rates expected to increase at the active medical trend rate. The plan is unfunded. The Company is amortizing the
transition obligation over a 20-year period.

Under the Tetra U.S. postretirement plan the Company provides postretirement
medical benefits to full-time employees who meet minimum age and service requirements. The plan is contributory with retiree contributions adjusted annually and contains other cost-sharing features such as deductibles, coinsurance and copayments.

The recognition and disclosure provisions of ASC Topic 715: Compensation-Retirement Benefits, (ASC
715) requires recognition of the overfunded or underfunded status of defined benefit pension and postretirement plans as an asset or liability in the statement of financial position, and to recognize changes in that funded status in AOCI in
the year in which the adoption occurs. The measurement date provisions of ASC 715, became effective during Fiscal 2009 and the Company now measures all of its defined benefit pension and postretirement plan assets and obligations as of
September 30, which is the Companys fiscal year end.

The following tables provide additional information on the
Companys pension and other postretirement benefit plans:



|                                                   |  |                                           |            |   |                |   |            |      |  |   |      |   |  |   |      |  
|-------------------------------------------------- |  | ----------------------------------------- | ---------- | - | -------------- | - | ---------- | ---- |  | - | ---- | - |  | - | ---- | -
|                                                   |  | Pension and DeferredCompensation Benefits |            |   | Other Benefits |  
|                                                   |  | 2010                                      |            |   | 2009           |   |            | 2010 |  |   | 2009 |  
|Change in benefit obligation                       |  |                                           |            |   |                |   |            |      |  |   |      |   |  |   |      |  
|Benefit obligation, beginning of year              |  | $                                         | 132,752    |   |                | $ | 112,444    |      |  | $ | 476  |   |  | $ | 402  |  
|Obligations assumed from Merger with Russell Hobbs |  |                                           | 54,468     |   |                |   |           |      |  |   |     |   |  |   |     |  
|Service cost                                       |  |                                           | 2,479      |   |                |   | 2,279      |      |  |   | 9    |   |  |   | 6    |  
|Interest cost                                      |  |                                           | 8,239      |   |                |   | 7,130      |      |  |   | 26   |   |  |   | 26   |  
|Actuarial (gain) loss                              |  |                                           | 25,140     |   |                |   | 17,457     |      |  |   | 25   |   |  |   | 51   |  
|Participant contributions                          |  |                                           | 495        |   |                |   | 334        |      |  |   |     |   |  |   |     |  
|Benefits paid                                      |  |                                           | (6,526     | ) |                |   | (6,353     | )    |  |   | (9   | ) |  |   | (9   | )
|Foreign currency exchange rate changes             |  |                                           | (2,070     | ) |                |   | (539       | )    |  |   |     |   |  |   |     |  
|                                                   |  |                                           |            |   |                |   |            |      |  |   |      |   |  |   |      |  
|Benefit obligation, end of year                    |  | $                                         | 214,977    |   |                | $ | 132,752    |      |  | $ | 527  |   |  | $ | 476  |  
|                                                   |  |                                           |            |   |                |   |            |      |  |   |      |   |  |   |      |  
|Change in plan assets                              |  |                                           |            |   |                |   |            |      |  |   |      |   |  |   |      |  
|Fair value of plan assets, beginning of year       |  | $                                         | 78,345     |   |                | $ | 70,412     |      |  | $ |     |   |  | $ |     |  
|Assets acquired from Merger with Russell Hobbs     |  |                                           | 38,458     |   |                |   |           |      |  |   |     |   |  |   |     |  
|Actual return on plan assets                       |  |                                           | 7,613      |   |                |   | 1,564      |      |  |   |     |   |  |   |     |  
|Employer contributions                             |  |                                           | 6,234      |   |                |   | 9,749      |      |  |   | 9    |   |  |   | 9    |  
|Employee contributions                             |  |                                           | 2,127      |   |                |   | 3,626      |      |  |   |     |   |  |   |     |  
|Benefits paid                                      |  |                                           | (6,526     | ) |                |   | (6,353     | )    |  |   | (9   | ) |  |   | (9   | )
|Plan expenses paid                                 |  |                                           | (237       | ) |                |   | (222       | )    |  |   |     |   |  |   |     |  
|Foreign currency exchange rate changes             |  |                                           | (448       | ) |                |   | (431       | )    |  |   |     |   |  |   |     |  
|                                                   |  |                                           |            |   |                |   |            |      |  |   |      |   |  |   |      |  
|Fair value of plan assets, end of year             |  | $                                         | 125,566    |   |                | $ | 78,345     |      |  | $ |     |   |  | $ |     |  
|                                                   |  |                                           |            |   |                |   |            |      |  |   |      |   |  |   |      |  
|Accrued Benefit Cost                               |  | $                                         | (89,411    | ) |                | $ | (54,407    | )    |  | $ | (527 | ) |  | $ | (476 | )
|                                                   |  |                                           |            |   |                |   |            |      |  |   |      |   |  |   |      |  
|Weighted-average assumptions:                      |  |                                           |            |   |                |   |            |      |  |   |      |   |  |   |      |  
|Discount rate                                      |  |                                           | 4.2%-13.6% |   |                |   | 5.0%-11.8% |      |  |   | 5.0% |   |  |   | 5.5% |  
|Expected return on plan assets                     |  |                                           | 4.5%-8.8%  |   |                |   | 4.5%-8.0%  |      |  |   | N/A  |   |  |   | N/A  |  
|Rate of compensation increase                      |  |                                           | 0%-5.5%    |   |                |   | 0%-4.6%    |      |  |   | N/A  |   |  |   | N/A  |  



145



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



The net underfunded status as of September 30, 2010 and September 30, 2009 of
$89,411 and $54,407, respectively, is recognized in the accompanying Consolidated Statements of Financial Position within Employee benefit obligations, net of current portion. Included in the Successor Companys AOCI as of September 30,
2010 and September 30, 2009 are unrecognized net (losses) gains of $(17,197), net of tax benefit (expense) of $5,894 and $576 net of tax benefit (expense) of $(247), respectively, which have not yet been recognized as components of net periodic
pension cost. The net loss in AOCI expected to be recognized during Fiscal 2011 is $(388).

At September 30, 2010, the
Companys total pension and deferred compensation benefit obligation of $214,977 consisted of $62,126 associated with U.S. plans and $152,851 associated with international plans. The fair value of the Companys assets of $125,566 consisted
of $44,284 associated with U.S. plans and $81,282 associated with international plans. The weighted average discount rate used for the Companys domestic plans was approximately 5% and approximately 4.8% for its international plans. The
weighted average expected return on plan assets used for the Companys domestic plans was approximately 7.5% and approximately 3.3% for its international plans.

At September 30, 2009, the Companys total pension and deferred compensation benefit obligation of $132,752 consisted of $44,842 associated with U.S. plans and $87,910 associated with
international plans. The fair value of the Companys assets of $78,345 consisted of $33,191 associated with U.S. plans and $45,154 associated with international plans. The weighted average discount rate used for the Companys domestic and
international plans was approximately 5.5%. The weighted average expected return on plan assets used for the Companys domestic plans was approximately 8.0% and approximately 5.4% for its international plans.



|                                        |  |                                            |        |   |                                                    |   |      |                                                 |  |   |                     |   |  |      |        |   |                                                    |   |     |                                                 |  |   |      |   |  |   |     |   |  |   |     |  
|--------------------------------------- |  | ------------------------------------------ | ------ | - | -------------------------------------------------- | - | ---- | ----------------------------------------------- |  | - | ------------------- | - |  | ---- | ------ | - | -------------------------------------------------- | - | --- | ----------------------------------------------- |  | - | ---- | - |  | - | --- | - |  | - | --- | -
|                                        |  | Pension and Deferred Compensation Benefits |        |   | Other Benefits                                     |  
|                                        |  | SuccessorCompany                           |        |   | Predecessor Company                                |   |      | SuccessorCompany                                |  |   | Predecessor Company |  
|                                        |  | 2010                                       |        |   | Period fromAugust 31, 2009throughSeptember 30,2009 |   |      | Period fromOctober 1, 2008throughAugust 30,2009 |  |   | 2008                |   |  | 2010 |        |   | Period fromAugust 31, 2009throughSeptember 30,2009 |   |     | Period fromOctober 1, 2008throughAugust 30,2009 |  |   | 2008 |  
|Components of net periodic benefit cost |  |                                            |        |   |                                                    |   |      |                                                 |  |   |                     |   |  |      |        |   |                                                    |   |     |                                                 |  |   |      |   |  |   |     |   |  |   |     |  
|Service cost                            |  | $                                          | 2,479  |   |                                                    | $ | 211  |                                                 |  | $ | 2,068               |   |  | $    | 2,616  |   |                                                    | $ | 9   |                                                 |  | $ | 1    |   |  | $ | 8   |   |  | $ | 13  |  
|Interest cost                           |  |                                            | 8,239  |   |                                                    |   | 612  |                                                 |  |   | 6,517               |   |  |      | 6,475  |   |                                                    |   | 26  |                                                 |  |   | 2    |   |  |   | 24  |   |  |   | 27  |  
|Expected return on assets               |  |                                            | (5,774 | ) |                                                    |   | (417 | )                                               |  |   | (4,253              | ) |  |      | (4,589 | ) |                                                    |   |    |                                                 |  |   |     |   |  |   |    |   |  |   |    |  
|Amortization of prior service cost      |  |                                            | 535    |   |                                                    |   |     |                                                 |  |   | 202                 |   |  |      | 371    |   |                                                    |   |    |                                                 |  |   |     |   |  |   |    |   |  |   |    |  
|Amortization of transition obligation   |  |                                            | 207    |   |                                                    |   |     |                                                 |  |   |                    |   |  |      |       |   |                                                    |   |    |                                                 |  |   |     |   |  |   |    |   |  |   |    |  
|Curtailment loss                        |  |                                            |       |   |                                                    |   |     |                                                 |  |   | 300                 |   |  |      | 11     |   |                                                    |   |    |                                                 |  |   |     |   |  |   |    |   |  |   |    |  
|Recognized net actuarial loss (gain)    |  |                                            | 613    |   |                                                    |   |     |                                                 |  |   | 37                  |   |  |      | 136    |   |                                                    |   | (58 | )                                               |  |   | (5   | ) |  |   | (53 | ) |  |   | (61 | )
|                                        |  |                                            |        |   |                                                    |   |      |                                                 |  |   |                     |   |  |      |        |   |                                                    |   |     |                                                 |  |   |      |   |  |   |     |   |  |   |     |  
|Net periodic cost (benefit)             |  | $                                          | 6,299  |   |                                                    | $ | 406  |                                                 |  | $ | 4,871               |   |  | $    | 5,020  |   |                                                    | $ | (23 | )                                               |  | $ | (2   | ) |  | $ | (21 | ) |  | $ | (21 | )
|                                        |  |                                            |        |   |                                                    |   |      |                                                 |  |   |                     |   |  |      |        |   |                                                    |   |     |                                                 |  |   |      |   |  |   |     |   |  |   |     |  

The discount rate is used to calculate the projected benefit obligation. The discount rate used is based on
the rate of return on government bonds as well as current market conditions of the respective countries where such plans are established.



146



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



Below is a summary allocation of all pension plan assets along with expected long-term
rates of return by asset category as of the measurement date.



|                        |  |                            |       |   |        |  |     |      |  |  |     |  
|----------------------- |  | -------------------------- | ----- | - | ------ |  | --- | ---- |  |  | --- | -
|                        |  | Weighted AverageAllocation |      
|                        |  | Target                     |       |   | Actual | 
|Asset Category          |  | 2010                       |       |   | 2010   |  |     | 2009 | 
|Equity Securities       |  |                            | 0-60  | % |        |  | 43  | %    |  |  | 46  | %
|Fixed Income Securities |  |                            | 0-40  | % |        |  | 22  | %    |  |  | 16  | %
|Other                   |  |                            | 0-100 | % |        |  | 35  | %    |  |  | 38  | %
|                        |  |                            |       |   |        |  |     |      |  |  |     |  
|Total                   |  |                            | 100   | % |        |  | 100 | %    |  |  | 100 | %
|                        |  |                            |       |   |        |  |     |      |  |  |     |  

The weighted average expected long-term rate of return on total assets is 6.5%.

The Company has established formal investment policies for the assets associated with these plans. Policy objectives include maximizing
long-term return at acceptable risk levels, diversifying among asset classes, if appropriate, and among investment managers, as well as establishing relevant risk parameters within each asset class. Specific asset class targets are based on the
results of periodic asset liability studies. The investment policies permit variances from the targets within certain parameters. The weighted average expected long-term rate of return is based on a Fiscal 2010 review of such rates. The plan assets
currently do not include holdings of SB Holdings common stock.

The Companys Fixed Income Securities portfolio is
invested primarily in commingled funds and managed for overall return expectations rather than matching duration against plan liabilities; therefore, debt maturities are not significant to the plan performance.

The Companys Other portfolio consists of all pension assets, primarily insurance contracts, in the United Kingdom, Germany and the
Netherlands.

The Companys expected future pension benefit payments for Fiscal 2011 through its fiscal year 2020 are as
follows:



|             |  |   |        | 
|------------ |  | - | ------ | 
|2011         |  | $ | 6,979  | 
|2012         |  |   | 7,384  | 
|2013         |  |   | 7,716  | 
|2014         |  |   | 8,009  | 
|2015         |  |   | 8,366  | 
|2016 to 2020 |  |   | 50,826 | 



147



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



The following table sets forth the fair value of the Companys pension plan assets
as of September 30, 2010 segregated by level within the fair value hierarchy (See Note 3(s), Significant Accounting PoliciesFair Value of Financial Instruments, for discussion of the fair value hierarchy and fair value principles):



|                                                |  |         |   |  |         |   |        |         |  |   |       |  |  |   |        | 
|----------------------------------------------- |  | ------- | - |  | ------- | - | ------ | ------- |  | - | ----- |  |  | - | ------ | 
|                                                |  | Level 1 |   |  | Level 2 |   |        | Level 3 |  |   | Total | 
|U.S. Defined Benefit Plan Assets:               |  |         |   |  |         |   |        |         |  |   |       |  |  |   |        | 
|Common collective trustequity                  |  | $       |  |  |         | $ | 28,168 |         |  | $ |      |  |  | $ | 28,168 | 
|Common collective trustfixed income            |  |         |  |  |         |   | 16,116 |         |  |   |      |  |  |   | 16,116 | 
|                                                |  |         |   |  |         |   |        |         |  |   |       |  |  |   |        | 
|Total U.S. Defined Benefit Plan Assets          |  | $       |  |  |         | $ | 44,284 |         |  | $ |      |  |  | $ | 44,284 | 
|                                                |  |         |   |  |         |   |        |         |  |   |       |  |  |   |        | 
|International Defined Benefit Plan Assets:      |  |         |   |  |         |   |        |         |  |   |       |  |  |   |        | 
|Common collective trustequity                  |  | $       |  |  |         | $ | 28,090 |         |  | $ |      |  |  | $ | 28,090 | 
|Common collective trustfixed income            |  |         |  |  |         |   | 9,325  |         |  |   |      |  |  |   | 9,325  | 
|Insurance contractsgeneral fund                |  |         |  |  |         |   | 40,347 |         |  |   |      |  |  |   | 40,347 | 
|Other                                           |  |         |  |  |         |   | 3,120  |         |  |   |      |  |  |   | 3,120  | 
|                                                |  |         |   |  |         |   |        |         |  |   |       |  |  |   |        | 
|Total International Defined Benefit Plan Assets |  | $       |  |  |         | $ | 81,282 |         |  | $ |      |  |  | $ | 81,282 | 
|                                                |  |         |   |  |         |   |        |         |  |   |       |  |  |   |        | 

The Company sponsors a defined contribution pension plan for its domestic salaried employees, which allows
participants to make contributions by salary reduction pursuant to Section 401(k) of the Internal Revenue Code. Prior to April 1, 2009 the Company contributed annually from 3% to 6% of participants compensation based on age or
service, and had the ability to make additional discretionary contributions. The Company suspended all contributions to its U.S. subsidiaries defined contribution pension plans effective April 1, 2009 through December 31, 2009. Effective
January 1, 2010 the Company reinstated its annual contribution as described above. The Company also sponsors defined contribution pension plans for employees of certain foreign subsidiaries. Successor Company contributions charged to
operations, including discretionary amounts, for Fiscal 2010 and the period from August 31, 2009 through September 30, 2009 were $3,464 and $44, respectively. Predecessor Company contributions charged to operations, including discretionary
amounts, for the period from October 1, 2008 through August 30, 2009 and Fiscal 2008 were $2,623 and $5,083, respectively.

(11)
Segment Information

The Company manages its business in four vertically integrated, product-focused reporting segments; (i) Global
Batteries & Personal Care; (ii) Global Pet Supplies; (iii) the Home and Garden Business; and (iv) Small Appliances.

On June 16, 2010, the Company completed the Merger with Russell Hobbs. The results of Russell Hobbs operations since June 16, 2010 are in included in the Companys Consolidated Statement of
Operations . The financial results are reported as a separate business segment, Small Appliances.

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.



148



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



Net sales and Cost of goods sold to other business segments have been eliminated. The
gross contribution of intersegment sales is included in the segment selling the product to the external customer. Segment net sales are based upon the segment from which the product is shipped.

The operating segment profits do not include restructuring and related charges, acquisition and integration related charges, interest
expense, interest income, impairment charges and income tax expense. Corporate expenses include primarily general and administrative expenses associated with corporate overhead and global long-term incentive compensation plans. All depreciation and
amortization included in income from operations is related to operating segments or corporate expense. Costs are identified 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.

Segment information for the Successor Company for Fiscal 2010 and the period from August 31, 2009 through
September 30, 2009 and the Predecessor Company for the period from October 1, 2008 through August 30, 2009 and Fiscal 2008 is as follows:

Net sales to external customers



|                                 |  |                  |           |  |                                                    |   |         |                                                 |  |   |           |  |  |   |           | 
|-------------------------------- |  | ---------------- | --------- |  | -------------------------------------------------- | - | ------- | ----------------------------------------------- |  | - | --------- |  |  | - | --------- | 
|                                 |  | SuccessorCompany |           |  | Predecessor Company                                |  
|                                 |  | 2010             |           |  | Period
fromAugust 31, 2009throughSeptember 30,2009 |   |         | Period
fromOctober 1, 2008throughAugust 30,2009 |  |   | 2008      | 
|Global Batteries & Personal Care |  | $                | 1,427,870 |  |                                                    | $ | 146,139 |                                                 |  | $ | 1,188,902 |  |  | $ | 1,493,736 | 
|Global Pet Supplies              |  |                  | 560,501   |  |                                                    |   | 56,270  |                                                 |  |   | 517,601   |  |  |   | 598,618   | 
|Home and Garden Business         |  |                  | 341,064   |  |                                                    |   | 17,479  |                                                 |  |   | 304,145   |  |  |   | 334,217   | 
|Small Appliances                 |  |                  | 237,576   |  |                                                    |   |        |                                                 |  |   |          |  |  |   |          | 
|                                 |  |                  |           |  |                                                    |   |         |                                                 |  |   |           |  |  |   |           | 
|Total segments                   |  | $                | 2,567,011 |  |                                                    | $ | 219,888 |                                                 |  | $ | 2,010,648 |  |  | $ | 2,426,571 | 
|                                 |  |                  |           |  |                                                    |   |         |                                                 |  |   |           |  |  |   |           | 

Depreciation and amortization



|                                    |  |                  |         |  |                                                    |   |       |                                                  |  |   |        |  |  |   |        | 
|----------------------------------- |  | ---------------- | ------- |  | -------------------------------------------------- | - | ----- | ------------------------------------------------ |  | - | ------ |  |  | - | ------ | 
|                                    |  | SuccessorCompany |         |  | Predecessor Company                                |  
|                                    |  | 2010             |         |  | Period
fromAugust 31, 2009throughSeptember 30,2009 |   |       | Period fromOctober 
1, 2008throughAugust 30,2009 |  |   | 2008   | 
|Global Batteries & Personal Care    |  | $                | 51,374  |  |                                                    | $ | 4,728 |                                                  |  | $ | 21,933 |  |  | $ | 32,535 | 
|Global Pet Supplies                 |  |                  | 28,303  |  |                                                    |   | 2,580 |                                                  |  |   | 19,832 |  |  |   | 22,891 | 
|Home and Garden Business(A)         |  |                  | 14,418  |  |                                                    |   | 1,320 |                                                  |  |   | 11,073 |  |  |   | 21,636 | 
|Small Appliances                    |  |                  | 6,418   |  |                                                    |   |      |                                                  |  |   |       |  |  |   |       | 
|                                    |  |                  |         |  |                                                    |   |       |                                                  |  |   |        |  |  |   |        | 
|Total segments                      |  |                  | 100,513 |  |                                                    |   | 8,628 |                                                  |  |   | 52,838 |  |  |   | 77,062 | 
|Corporate                           |  |                  | 16,905  |  |                                                    |   | 43    |                                                  |  |   | 5,642  |  |  |   | 7,959  | 
|                                    |  |                  |         |  |                                                    |   |       |                                                  |  |   |        |  |  |   |        | 
|Total Depreciation and amortization |  | $                | 117,418 |  |                                                    | $ | 8,671 |                                                  |  | $ | 58,480 |  |  | $ | 85,021 | 
|                                    |  |                  |         |  |                                                    |   |       |                                                  |  |   |        |  |  |   |        | 



149



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)





|(A) | Fiscal 2008 includes depreciation and amortization expense of $10,821 related to Fiscal 2007 as a result of the reclassification of the Home and Garden Business as a
continuing operation during Fiscal 2008.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Segment profit



|                                                                         |  |                  |          |   |                                                    |   |         |                                                 |  |   |         |   |  |   |          |  
|------------------------------------------------------------------------ |  | ---------------- | -------- | - | -------------------------------------------------- | - | ------- | ----------------------------------------------- |  | - | ------- | - |  | - | -------- | -
|                                                                         |  | SuccessorCompany |          |   | Predecessor Company                                |  
|                                                                         |  | 2010             |          |   | Period fromAugust 31, 2009throughSeptember 30,2009 |   |         | Period fromOctober 1, 2008throughAugust 30,2009 |  |   | 2008    |  
|Global Batteries & Personal Care                                         |  | $                | 152,757  |   |                                                    | $ | 5,675   |                                                 |  | $ | 159,400 |   |  | $ | 162,889  |  
|Global Pet Supplies                                                      |  |                  | 55,646   |   |                                                    |   | 3,178   |                                                 |  |   | 61,455  |   |  |   | 68,885   |  
|Home and Garden Business(A)                                              |  |                  | 50,881   |   |                                                    |   | (4,573  | )                                               |  |   | 46,458  |   |  |   | 29,458   |  
|Small Appliances                                                         |  |                  | 13,081   |   |                                                    |   |        |                                                 |  |   |        |   |  |   |         |  
|                                                                         |  |                  |          |   |                                                    |   |         |                                                 |  |   |         |   |  |   |          |  
|Total segments                                                           |  |                  | 272,365  |   |                                                    |   | 4,280   |                                                 |  |   | 267,313 |   |  |   | 261,232  |  
|Corporate expenses                                                       |  |                  | 41,017   |   |                                                    |   | 2,442   |                                                 |  |   | 32,037  |   |  |   | 45,246   |  
|Acquisition and integration related charges                              |  |                  | 38,452   |   |                                                    |   |        |                                                 |  |   |        |   |  |   |         |  
|Restructuring and related charges                                        |  |                  | 24,118   |   |                                                    |   | 1,729   |                                                 |  |   | 44,080  |   |  |   | 39,337   |  
|Goodwill and intangibles impairment                                      |  |                  |         |   |                                                    |   |        |                                                 |  |   | 34,391  |   |  |   | 861,234  |  
|Interest expense                                                         |  |                  | 277,015  |   |                                                    |   | 16,962  |                                                 |  |   | 172,940 |   |  |   | 229,013  |  
|Other (income) expense, net                                              |  |                  | 12,300   |   |                                                    |   | (815    | )                                               |  |   | 3,320   |   |  |   | 1,220    |  
|                                                                         |  |                  |          |   |                                                    |   |         |                                                 |  |   |         |   |  |   |          |  
|Loss from continuing operations before reorganization items income taxes |  | $                | (120,537 | ) |                                                    | $ | (16,038 | )                                               |  | $ | (19,455 | ) |  | $ | (914,818 | )
|                                                                         |  |                  |          |   |                                                    |   |         |                                                 |  |   |         |   |  |   |          |  



|(A) | Fiscal 2008 includes depreciation and amortization expense of $10,821 related to Fiscal 2007 as a result of the reclassification of the Home and Garden Business from a
discontinued operation to a continuing operation during Fiscal 2008.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Global Batteries & Personal
Care segment does business in Venezuela through a Venezuelan subsidiary. At January 4, 2010, the beginning of the Companys second quarter of Fiscal 2010, the Company determined that Venezuela meets the definition of a highly inflationary
economy under GAAP. As a result, beginning January 4, 2010, the U.S. dollar is the functional currency for the Companys Venezuelan subsidiary. Accordingly, going forward, currency remeasurement adjustments for this subsidiarys
financial statements and other transactional foreign exchange gains and losses are reflected in earnings. Through January 3, 2010, prior to being designated as highly inflationary, translation adjustments related to the Venezuelan
subsidiary were reflected in Shareholders equity as a component of AOCI.

In addition, on January 8, 2010, the
Venezuelan government announced its intention to devalue its currency, the Bolivar fuerte, relative to the U.S. dollar. The official exchange rate for imported goods classified as essential, such as food and medicine, changed from 2.15 to 2.6
to the U.S. dollar, while payments for other non-essential goods moved to an exchange rate of 4.3 to the U.S. dollar. Some of the Companys imported products fall into the essential classification and qualify for the 2.6
rate; however, the Companys overall results in Venezuela were reflected at the 4.3 rate expected to be applicable to dividend repatriations beginning in the second quarter of Fiscal 2010. As a result, the Company remeasured the local
statement of financial position of its Venezuela entity during the second quarter of Fiscal 2010 to reflect the impact of the devaluation. Based on



150



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



actual exchange activity, the Company determined on September 30, 2010 that the most likely method of exchanging its Bolivar fuertes for U.S. dollars will be to formally apply with the
Venezuelan government to exchange through commercial banks at the SITME rate specified by the Central Bank of Venezuela. The SITME rate as of September 30, 2010 was quoted at 5.3 Bolivar fuerte per U.S. dollar. Therefore, the Company changed
the rate used to remeasure Bolivar fuerte denominated transactions as of September 30, 2010 from the official non-essentials exchange rate to the 5.3 SITME rate in accordance with ASC 830, Foreign Currency Matters as it is the
expected rate that exchanges of Bolivar fuerte to U.S. dollars will be settled. There is also an ongoing immaterial impact related to measuring the Companys Venezuelan statement of operations at the new exchange rate of 5.3 to the U.S.
dollar.

The designation of the Companys Venezuela entity as a highly inflationary economy and the devaluation of the
Bolivar fuerte resulted in a $1,486 reduction to the Companys operating income during Fiscal 2010. The Company also reported a foreign exchange loss in Other expense (income), net, of $10,102 during Fiscal 2010.

Segment total assets



|                                 |  |               |           |  |      |   |           | 
|-------------------------------- |  | ------------- | --------- |  | ---- | - | --------- | 
|                                 |  | September 30, |          
|                                 |  | 2010          |           |  | 2009 |  
|Global Batteries & Personal Care |  | $             | 1,629,250 |  |      | $ | 1,608,269 | 
|Global Pet Supplies              |  |               | 826,382   |  |      |   | 866,901   | 
|Home and Garden Business         |  |               | 493,511   |  |      |   | 504,448   | 
|Small Appliances                 |  |               | 863,282   |  |      |   |          | 
|                                 |  |               |           |  |      |   |           | 
|Total segments                   |  |               | 3,812,425 |  |      |   | 2,979,618 | 
|Corporate                        |  |               | 61,179    |  |      |   | 41,128    | 
|                                 |  |               |           |  |      |   |           | 
|Total assets at year end         |  | $             | 3,873,604 |  |      | $ | 3,020,746 | 
|                                 |  |               |           |  |      |   |           | 

Segment long-lived assets



|                                 |  |               |           |  |      |   |           | 
|-------------------------------- |  | ------------- | --------- |  | ---- | - | --------- | 
|                                 |  | September 30, |          
|                                 |  | 2010          |           |  | 2009 |  
|Global Batteries & Personal Care |  | $             | 1,042,670 |  |      | $ | 1,052,907 | 
|Global Pet Supplies              |  |               | 641,934   |  |      |   | 679,009   | 
|Home and Garden Business         |  |               | 421,891   |  |      |   | 432,200   | 
|Small Appliances                 |  |               | 511,282   |  |      |   |          | 
|                                 |  |               |           |  |      |   |           | 
|Total segments                   |  |               | 2,617,777 |  |      |   | 2,164,116 | 
|Corporate                        |  |               | 56,115    |  |      |   | 37,894    | 
|                                 |  |               |           |  |      |   |           | 
|Long-lived assets at year end    |  | $             | 2,673,892 |  |      | $ | 2,202,010 | 
|                                 |  |               |           |  |      |   |           | 



151



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



Capital expenditures



|                                 |  |                  |        |  |                                                    |   |       |                                                  |  |   |       |  |  |   |        | 
|-------------------------------- |  | ---------------- | ------ |  | -------------------------------------------------- | - | ----- | ------------------------------------------------ |  | - | ----- |  |  | - | ------ | 
|                                 |  | SuccessorCompany |        |  | Predecessor Company                                |  
|                                 |  | 2010             |        |  | Period
fromAugust 31, 2009throughSeptember 30,2009 |   |       | Period fromOctober 
1, 2008throughAugust 30,2009 |  |   | 2008  | 
|Global Batteries & Personal Care |  | $                | 25,015 |  |                                                    | $ | 2,311 |                                                  |  | $ | 6,642 |  |  | $ | 8,198  | 
|Global Pet Supplies              |  |                  | 7,920  |  |                                                    |   | 288   |                                                  |  |   | 1,260 |  |  |   | 8,231  | 
|Home and Garden Business         |  |                  | 3,890  |  |                                                    |   | 119   |                                                  |  |   | 164   |  |  |   | 2,102  | 
|Russell Hobbs                    |  |                  | 3,481  |  |                                                    |   |      |                                                  |  |   |      |  |  |   |       | 
|                                 |  |                  |        |  |                                                    |   |       |                                                  |  |   |       |  |  |   |        | 
|Total segments                   |  |                  | 40,306 |  |                                                    |   | 2,718 |                                                  |  |   | 8,066 |  |  | $ | 18,531 | 
|Corporate                        |  |                  | 10     |  |                                                    |   |      |                                                  |  |   |      |  |  |   | 397    | 
|                                 |  |                  |        |  |                                                    |   |       |                                                  |  |   |       |  |  |   |        | 
|Total Capital expenditures       |  | $                | 40,316 |  |                                                    | $ | 2,718 |                                                  |  | $ | 8,066 |  |  | $ | 18,928 | 
|                                 |  |                  |        |  |                                                    |   |       |                                                  |  |   |       |  |  |   |        | 

Geographic DisclosuresNet sales to external customers



|                                      |  |                  |           |  |                                                    |   |         |                                                 |  |   |           |  |  |   |           | 
|------------------------------------- |  | ---------------- | --------- |  | -------------------------------------------------- | - | ------- | ----------------------------------------------- |  | - | --------- |  |  | - | --------- | 
|                                      |  | SuccessorCompany |           |  | Predecessor Company                                |  
|                                      |  | 2010             |           |  | Period fromAugust 31, 2009throughSeptember 30,2009 |   |         | Period
fromOctober 1, 2008throughAugust 30,2009 |  |   | 2008      | 
|United States                         |  | $                | 1,444,779 |  |                                                    | $ | 113,407 |                                                 |  | $ | 1,166,920 |  |  | $ | 1,272,100 | 
|Outside the United States             |  |                  | 1,122,232 |  |                                                    |   | 106,481 |                                                 |  |   | 843,728   |  |  |   | 1,154,471 | 
|                                      |  |                  |           |  |                                                    |   |         |                                                 |  |   |           |  |  |   |           | 
|Total net sales to external customers |  | $                | 2,567,011 |  |                                                    | $ | 219,888 |                                                 |  | $ | 2,010,648 |  |  | $ | 2,426,571 | 
|                                      |  |                  |           |  |                                                    |   |         |                                                 |  |   |           |  |  |   |           | 

Geographic DisclosuresLong-lived assets



|                              |  |                  |           |  |                    |   |           | 
|----------------------------- |  | ---------------- | --------- |  | ------------------ | - | --------- | 
|                              |  | SuccessorCompany |           |  | PredecessorCompany |  
|                              |  | September 30,    |          
|                              |  | 2010             |           |  | 2009               |  
|United States                 |  | $                | 1,884,995 |  |                    | $ | 1,410,459 | 
|Outside the United States     |  |                  | 788,897   |  |                    |   | 791,551   | 
|                              |  |                  |           |  |                    |   |           | 
|Long-lived assets at year end |  | $                | 2,673,892 |  |                    | $ | 2,202,010 | 
|                              |  |                  |           |  |                    |   |           | 

(12) Commitments and Contingencies

The Company has provided for the estimated costs associated with environmental remediation activities at some of its current and former manufacturing sites. The Company believes that any additional
liability in excess of the amounts provided of approximately $9,648, which may result from resolution of these matters, will not have a material adverse effect on the financial condition, results of operations or cash flows of the Company.



152



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



In December 2009, San Francisco Technology, Inc. filed an action in the Federal District
Court for the Northern District of California against the Company, as well as a number of unaffiliated defendants, claiming that each of the defendants had falsely marked patents on certain of its products in violation of Article 35,
Section 292 of the U.S. Code and seeking to have civil fines imposed on each of the defendants for such claimed violations. The Company is reviewing the claims but is unable to estimate any possible losses at this time.

In May 2010, Herengrucht Group, LLC (Herengrucht) filed an action in the U.S. District Court for the Southern District of
California against the Company claiming that the Company had falsely marked patents on certain of its products in violation of Article 35, Section 292 of the U.S. Code and seeking to have civil fines imposed on each of the defendants for such
claimed violations. Herengrucht dismissed its claims without prejudice in September 2010.

Applica Consumer Products, Inc., a
subsidiary of the Company is a defendant in NACCO Industries, Inc. et al. v. Applica Incorporated et al., Case No. C.A. 2541-VCL, which was filed in the Court of Chancery of the State of Delaware in November 2006. The original complaint in this
action alleged a claim for, among other things, breach of contract against Applica and a number of tort claims against certain entities affiliated with the Harbinger Master Fund and Harbinger Special Fund and, together with Harbinger Master Fund,
the HCP Funds. The claims against Applica related to the alleged breach of the merger agreement between Applica and NACCO Industries, Inc. (NACCO) and one of its affiliates, which agreement was terminated following Applicas receipt
of a superior merger offer from the HCP Funds. On October 22, 2007, the plaintiffs filed an amended complaint asserting claims against Applica for, among other things, breach of contract and breach of the implied covenant of good faith relating
to the termination of the NACCO merger agreement and asserting various tort claims against Applica and the HCP Funds. The original complaint was filed in conjunction with a motion preliminarily to enjoin the HCP Funds acquisition of Applica.
On December 1, 2006, plaintiffs withdrew their motion for a preliminary injunction. In light of the consummation of Applicas merger with affiliates of the HCP Funds in January 2007 (Applica is currently a subsidiary of Russell Hobbs), the
Company believes that any claim for specific performance is moot. Applica filed a motion to dismiss the amended complaint in December 2007. Rather than respond to the motion to dismiss the amended complaint, NACCO filed a motion for leave to file a
second amended complaint, which was granted in May 2008. Applica moved to dismiss the second amended complaint, which motion was granted in part and denied in part in December 2009.

The trial is currently scheduled for February 2011. The Company may be unable to resolve the disputes successfully or without incurring
significant costs and expenses. As a result, Russell Hobbs and Harbinger Master Fund have entered into an indemnification agreement, dated as of February 9, 2010, by which Harbinger Master Fund has agreed, effective upon the consummation of the
Merger, to indemnify Russell Hobbs, its subsidiaries and any entity that owns all of the outstanding voting stock of Russell Hobbs against any out-of-pocket losses, costs, expenses, judgments, penalties, fines and other damages in excess of $3,000
incurred with respect to this litigation and any future litigation or legal action against the indemnified parties arising out of or relating to the matters which form the basis of this litigation. The Company is reviewing the claims but is unable
to estimate any possible losses at this time.

Applica is a defendant in three asbestos lawsuits in which the plaintiffs have
alleged injury as the result of exposure to asbestos in hair dryers distributed by that subsidiary over 20 years ago. Although Applica never manufactured such products, asbestos was used in certain hair dryers distributed by it prior to 1979. The
Company believes that these actions are without merit, but may be unable to resolve the disputes successfully without incurring significant expenses which we are unable to estimate at this time. At this time, the Company does not believe it has
coverage under its insurance policies for the asbestos lawsuits.



153



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



The Company is a defendant in various other matters of litigation generally arising out
of the ordinary course of business.

The Company does not believe that any other matters or proceedings presently pending will
have a material adverse effect on its results of operations, financial condition, liquidity or cash flows.

The Companys
minimum rent payments under operating leases are recognized on a straight-line basis over the term of the lease. Future minimum rental commitments under non-cancelable operating leases, principally pertaining to land, buildings and equipment, are as
follows:



|                             |  |   |         | 
|---------------------------- |  | - | ------- | 
|2011                         |  | $ | 34,665  | 
|2012                         |  |   | 32,824  | 
|2013                         |  |   | 27,042  | 
|2014                         |  |   | 19,489  | 
|2015                         |  |   | 15,396  | 
|Thereafter                   |  |   | 48,553  | 
|                             |  |   |         | 
|Total minimum lease payments |  | $ | 177,969 | 
|                             |  |   |         | 

All of the leases expire between Fiscal 2011 through January 2030. Successor Companys total rent
expense was $30,218 and $2,351 during Fiscal 2010 and the period from August 31, 2009 through September 30, 2009, respectively. Predecessor Companys total rent expense was $22,132 and $37,068 for the period from October 1, 2008
through August 30, 2009 and Fiscal 2008, respectively.

(13) Related Party Transactions

Merger Agreement and Exchange Agreement

On June 16, 2010 (the Closing Date), SB Holdings completed a business combination transaction pursuant to the Agreement and Plan of Merger (the Mergers), dated as of
February 9, 2010, as amended on March 1, 2010, March 26, 2010 and April 30, 2010, by and among SB Holdings, Russell Hobbs, Spectrum Brands, Battery Merger Corp., and Grill Merger Corp. (the Merger
Agreement). As a result of the Mergers, each of Spectrum Brands and Russell Hobbs became a wholly-owned subsidiary of SB Holdings. At the effective time of the Mergers, (i) the outstanding shares of Spectrum Brands common stock were
canceled and converted into the right to receive shares of SB Holdings common stock, and (ii) the outstanding shares of Russell Hobbs common stock and preferred stock were canceled and converted into the right to receive shares of SB Holdings
common stock.

Pursuant to the terms of the Merger Agreement, on February 9, 2010, Spectrum Brands entered into support
agreements with Harbinger Capital Partners Master Fund I, Ltd. (Harbinger Master Fund), Harbinger Capital Partners Special Situations Fund, L.P. and Global Opportunities Breakaway Ltd. (collectively, the Harbinger
Parties) and Avenue International Master, L.P. and certain of its affiliates (the Avenue Parties), in which the Harbinger Parties and the Avenue Parties agreed to vote their shares of Spectrum Brands common stock acquired before
the date of the Merger Agreement in favor of the Mergers and against any alternative proposal that would impede the Mergers.

Immediately following the consummation of the Mergers, the Harbinger Parties owned approximately 64% of the outstanding SB Holdings
common stock and the stockholders of Spectrum Brands (other than the



154



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



Harbinger Parties) owned approximately 36% of the outstanding SB Holdings common stock. Harbinger Group, Inc. (HRG) and the Harbinger Parties are parties to a Contribution and
Exchange Agreement (the Exchange Agreement), pursuant to the terms of which the Harbinger Parties will contribute 27,757 shares of SB Holdings common stock to HRG and received in exchange for such shares an aggregate of 119,910 shares of
HRG common stock (the Share Exchange). Immediately following the consummation of the Share Exchange, (i) HRG will own 27,757 shares of SB Holdings common stock and the Harbinger Parties will own 6,500 shares of SB Holdings common
stock, approximately 54.4% and 12.7% of the outstanding shares of SB Holdings common stock, respectively, and (ii) the Harbinger Parties will own 129,860 shares of HRG common stock, or approximately 93.3% of the outstanding HRG common stock.

In connection with the Mergers, the Harbinger Parties and SB Holdings entered into a stockholder agreement, dated
February 9, 2010 (the Stockholder Agreement), which provides for certain protective provisions in favor of minority stockholders and provides certain rights and imposes certain obligations on the Harbinger Parties, including:



| |  |  | for so long as the Harbinger Parties own 40% or more of the outstanding voting securities of SB Holdings, the Harbinger Parties and HRG will vote their
shares of SB Holdings common stock to effect the structure of the SB Holdings board of directors as described in the Stockholder Agreement;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Harbinger Parties will not effect any transfer of equity securities of SB Holdings to any person that would result in such person and its
affiliates owning 40% or more of the outstanding voting securities of SB Holdings, unless specified conditions are met; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Harbinger Parties will be granted certain access and informational rights with respect to SB Holdings and its subsidiaries.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------

On September 10, 2010, the Harbinger Parties and HRG entered into a joinder to the Stockholder
Agreement, pursuant to which, effective upon the consummation of the Share Exchange, HRG will become a party to the Stockholder Agreement, subject to all of the covenants, terms and conditions of the Stockholder Agreement to the same extent as the
Harbinger Parties were bound thereunder prior to giving effect to the Share Exchange.

Certain provisions of the Stockholder
Agreement terminate on the date on which the Harbinger Parties or HRG no longer constitutes a Significant Stockholder (as defined in the Stockholder Agreement). The Stockholder Agreement terminates when any person (including the Harbinger Parties or
HRG) acquires 90% or more of the outstanding voting securities of SB Holdings.

Also in connection with the Mergers, the
Harbinger Parties, the Avenue Parties and SB Holdings entered into a registration rights agreement, dated as of February 9, 2010 (the SB Holdings Registration Rights Agreement), pursuant to which the Harbinger Parties and the Avenue
Parties have, among other things and subject to the terms and conditions set forth therein, certain demand and so-called piggy back registration rights with respect to their shares of SB Holdings common stock. On September 10, 2010,
the Harbinger Parties and HRG entered into a joinder to the SB Holdings Registration Rights Agreement, pursuant to which, effective upon the consummation of the Share Exchange, HRG will become a party to the SB Holdings Registration Rights
Agreement, entitled to the rights and subject to the obligations of a holder thereunder.

Other Agreements

On August 28, 2009, in connection with Spectrum Brands emergence from Chapter 11 reorganization proceedings, Spectrum Brands
entered into a registration rights agreement with the Harbinger Parties, the



155



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



Avenue Parties and D.E. Shaw Laminar Portfolios, L.L.C. (D.E. Shaw), pursuant to which the Harbinger Parties, the Avenue Parties and D.E. Shaw have, among other things and subject to
the terms and conditions set forth therein, certain demand and so-called piggy back registration rights with respect to their Spectrum Brands 12% Senior Subordinated Toggle Notes due 2019.

In connection with the Mergers, Russell Hobbs and Harbinger Master Fund entered into an indemnification agreement, dated as of
February 9, 2010 (the Indemnification Agreement), by which Harbinger Master Fund agreed, among other things and subject to the terms and conditions set forth therein, to guarantee the obligations of Russell Hobbs to pay (i) a
reverse termination fee to Spectrum Brands under the merger agreement and (ii) monetary damages awarded to Spectrum Brands in connection with any willful and material breach by Russell Hobbs of the Merger Agreement. The maximum amount payable
by Harbinger Master Fund under the Indemnification Agreement was $50,000 less any amounts paid by Russell Hobbs or the Harbinger Parties, or any of their respective affiliates as damages under any documents related to the Mergers. No such amounts
became due under the Indemnification Agreement. Harbinger Master Fund also agreed to indemnify Russell Hobbs, SB Holdings and their subsidiaries for out-of-pocket costs and expenses above $3,000 in the aggregate that become payable after the
consummation of the Mergers and that relate to the litigation arising out of Russell Hobbs business combination transaction with Applica Incorporated.

(14) Restructuring and Related Charges

The Company reports 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 or integration initiatives implemented.

The Company reports restructuring and related charges relating to 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 functional areas described above, and other costs directly
related to the initiatives implemented as well as consultation, legal and accounting fees related to the evaluation of the Predecessor Companys capital structure incurred prior to the Bankruptcy Filing.



156



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



The following table summarizes restructuring and related charges incurred by segment:



|                                                              |  |                  |        |  |                                                    |   |       |                                                  |  |   |        |  |  |   |        | 
|------------------------------------------------------------- |  | ---------------- | ------ |  | -------------------------------------------------- | - | ----- | ------------------------------------------------ |  | - | ------ |  |  | - | ------ | 
|                                                              |  | SuccessorCompany |        |  | Predecessor Company                                |  
|                                                              |  | 2010             |        |  | Period
fromAugust 31, 2009throughSeptember 30,2009 |   |       | Period fromOctober 1, 
2008throughAugust 30,2009 |  |   | 2008   | 
|Cost of goods sold:                                           |  |                  |        |  |                                                    |   |       |                                                  |  |   |        |  |  |   |        | 
|Global Batteries & Personal Care                              |  | $                | 3,275  |  |                                                    | $ | 173   |                                                  |  | $ | 11,857 |  |  | $ | 16,159 | 
|Global Pet Supplies                                           |  |                  | 3,837  |  |                                                    |   | 5     |                                                  |  |   | 1,332  |  |  |   | 340    | 
|Home and Garden Business                                      |  |                  | 38     |  |                                                    |   |      |                                                  |  |   |       |  |  |   |       | 
|                                                              |  |                  |        |  |                                                    |   |       |                                                  |  |   |        |  |  |   |        | 
|Total restructuring and related charges in cost of goods sold |  |                  | 7,150  |  |                                                    |   | 178   |                                                  |  |   | 13,189 |  |  |   | 16,499 | 
|Operating expense:                                            |  |                  |        |  |                                                    |   |       |                                                  |  |   |        |  |  |   |        | 
|Global Batteries & Personal Care                              |  |                  | 251    |  |                                                    |   | 370   |                                                  |  |   | 8,393  |  |  |   | 12,012 | 
|Global Pet Supplies                                           |  |                  | 2,917  |  |                                                    |   | 35    |                                                  |  |   | 4,411  |  |  |   | 2,702  | 
|Home and Garden Business                                      |  |                  | 8,419  |  |                                                    |   | 993   |                                                  |  |   | 5,323  |  |  |   | 3,770  | 
|Corporate                                                     |  |                  | 5,381  |  |                                                    |   | 153   |                                                  |  |   | 12,764 |  |  |   | 4,354  | 
|                                                              |  |                  |        |  |                                                    |   |       |                                                  |  |   |        |  |  |   |        | 
|Total restructuring and related charges in operating expense  |  |                  | 16,968 |  |                                                    |   | 1,551 |                                                  |  |   | 30,891 |  |  |   | 22,838 | 
|                                                              |  |                  |        |  |                                                    |   |       |                                                  |  |   |        |  |  |   |        | 
|Total restructuring and related charges                       |  | $                | 24,118 |  |                                                    | $ | 1,729 |                                                  |  | $ | 44,080 |  |  | $ | 39,337 | 
|                                                              |  |                  |        |  |                                                    |   |       |                                                  |  |   |        |  |  |   |        | 



157



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



The following table summarizes restructuring and related charges incurred by type of
charge:



|                                        |  |                  |        |   |                                                    |   |       |                                                  |  |   |        |   |  |   |        |  
|--------------------------------------- |  | ---------------- | ------ | - | -------------------------------------------------- | - | ----- | ------------------------------------------------ |  | - | ------ | - |  | - | ------ | -
|                                        |  | SuccessorCompany |        |   | Predecessor Company                                |  
|                                        |  | 2010             |        |   | Period
fromAugust 31, 2009throughSeptember 30,2009 |   |       | Period fromOctober 1, 
2008throughAugust 30,2009 |  |   | 2008   |  
|Costs included in cost of goods sold:   |  |                  |        |   |                                                    |   |       |                                                  |  |   |        |   |  |   |        |  
|United & Tetra integration:             |  |                  |        |   |                                                    |   |       |                                                  |  |   |        |   |  |   |        |  
|Termination benefits                    |  | $                |       |   |                                                    | $ |      |                                                  |  | $ | 6      |   |  | $ | 30     |  
|Other associated costs                  |  |                  |       |   |                                                    |   |      |                                                  |  |   |       |   |  |   | 299    |  
|European initiatives:                   |  |                  |        |   |                                                    |   |       |                                                  |  |   |        |   |  |   |        |  
|Termination benefits                    |  |                  |       |   |                                                    |   |      |                                                  |  |   |       |   |  |   | (830   | )
|Other associated costs                  |  |                  |       |   |                                                    |   | 7     |                                                  |  |   | 11     |   |  |   | 88     |  
|Latin America initiatives:              |  |                  |        |   |                                                    |   |       |                                                  |  |   |        |   |  |   |        |  
|Termination benefits                    |  |                  |       |   |                                                    |   |      |                                                  |  |   | 207    |   |  |   |       |  
|Other associated costs                  |  |                  |       |   |                                                    |   |      |                                                  |  |   |       |   |  |   | 253    |  
|Global Realignment initiatives:         |  |                  |        |   |                                                    |   |       |                                                  |  |   |        |   |  |   |        |  
|Termination benefits                    |  |                  | 187    |   |                                                    |   |      |                                                  |  |   | 333    |   |  |   | 106    |  
|Other associated costs                  |  |                  | (102   | ) |                                                    |   |      |                                                  |  |   | 869    |   |  |   | 154    |  
|Ningbo Exit Plan:                       |  |                  |        |   |                                                    |   |       |                                                  |  |   |        |   |  |   |        |  
|Termination benefits                    |  |                  | 14     |   |                                                    |   |      |                                                  |  |   | 857    |   |  |   | 1,230  |  
|Other associated costs                  |  |                  | 2,148  |   |                                                    |   | 165   |                                                  |  |   | 8,461  |   |  |   | 15,169 |  
|Global Cost Reduction initiatives:      |  |                  |        |   |                                                    |   |       |                                                  |  |   |        |   |  |   |        |  
|Termination benefits                    |  |                  | 2,630  |   |                                                    |   |      |                                                  |  |   | 200    |   |  |   |       |  
|Other associated costs                  |  |                  | 2,273  |   |                                                    |   | 6     |                                                  |  |   | 2,245  |   |  |   |       |  
|                                        |  |                  |        |   |                                                    |   |       |                                                  |  |   |        |   |  |   |        |  
|Total included in cost of goods sold    |  |                  | 7,150  |   |                                                    |   | 178   |                                                  |  |   | 13,189 |   |  |   | 16,499 |  
|Costs included in operating expenses:   |  |                  |        |   |                                                    |   |       |                                                  |  |   |        |   |  |   |        |  
|Breitenbach, France facility closure:   |  |                  |        |   |                                                    |   |       |                                                  |  |   |        |   |  |   |        |  
|Other associated costs                  |  |                  |       |   |                                                    |   |      |                                                  |  |   | (7     | ) |  |   |       |  
|United & Tetra integration:             |  |                  |        |   |                                                    |   |       |                                                  |  |   |        |   |  |   |        |  
|Termination benefits                    |  |                  |       |   |                                                    |   |      |                                                  |  |   | 2,297  |   |  |   | 1,954  |  
|Other associated costs                  |  |                  |       |   |                                                    |   | (132  | )                                                |  |   | 427    |   |  |   | 883    |  
|European initiatives:                   |  |                  |        |   |                                                    |   |       |                                                  |  |   |        |   |  |   |        |  
|Termination benefits                    |  |                  | (92    | ) |                                                    |   |      |                                                  |  |   |       |   |  |   |       |  
|Other associated costs                  |  |                  |       |   |                                                    |   |      |                                                  |  |   |       |   |  |   | 35     |  
|Latin America initiatives:              |  |                  |        |   |                                                    |   |       |                                                  |  |   |        |   |  |   |        |  
|Termination benefits                    |  |                  |       |   |                                                    |   |      |                                                  |  |   |       |   |  |   | 64     |  
|Global Realignment:                     |  |                  |        |   |                                                    |   |       |                                                  |  |   |        |   |  |   |        |  
|Termination benefits                    |  |                  | 5,361  |   |                                                    |   | 94    |                                                  |  |   | 6,994  |   |  |   | 12,338 |  
|Other associated costs                  |  |                  | (1,841 | ) |                                                    |   | 45    |                                                  |  |   | 3,440  |   |  |   | 7,564  |  
|Ningbo Exit Plan:                       |  |                  |        |   |                                                    |   |       |                                                  |  |   |        |   |  |   |        |  
|Termination benefits                    |  |                  |       |   |                                                    |   |      |                                                  |  |   |       |   |  |   |       |  
|Other associated costs                  |  |                  |       |   |                                                    |   |      |                                                  |  |   | 1,334  |   |  |   |       |  
|Global Cost Reduction initiatives:      |  |                  |        |   |                                                    |   |       |                                                  |  |   |        |   |  |   |        |  
|Termination benefits                    |  |                  | 4,268  |   |                                                    |   | 866   |                                                  |  |   | 5,690  |   |  |   |       |  
|Other associated costs                  |  |                  | 9,272  |   |                                                    |   | 678   |                                                  |  |   | 10,716 |   |  |   |       |  
|                                        |  |                  |        |   |                                                    |   |       |                                                  |  |   |        |   |  |   |        |  
|Total included in operating expenses    |  |                  | 16,968 |   |                                                    |   | 1,551 |                                                  |  |   | 30,891 |   |  |   | 22,838 |  
|                                        |  |                  |        |   |                                                    |   |       |                                                  |  |   |        |   |  |   |        |  
|Total restructuring and related charges |  | $                | 24,118 |   |                                                    | $ | 1,729 |                                                  |  | $ | 44,080 |   |  | $ | 39,337 |  
|                                        |  |                  |        |   |                                                    |   |       |                                                  |  |   |        |   |  |   |        |  



158



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



2009 Restructuring Initiatives

The Company implemented a series of initiatives within the Global Batteries & Personal Care segment, the Global Pet Supplies
segment and the Home and Garden segment to reduce operating costs as well as evaluate the Companys opportunities to improve its capital structure (the Global Cost Reduction Initiatives). These initiatives include headcount
reductions within each of the Companys segments and the exit of certain facilities in the U.S. related to the Global Pet Supplies segment. These initiatives also included consultation, legal and accounting fees related to the evaluation of the
Predecessor Companys capital structure. The Successor Company recorded $18,443 and $1,550 of pretax restructuring and related charges during Fiscal 2010 and the period from August 31, 2009 through September 30, 2009, respectively.
The Predecessor Company recorded $18,850 of pretax restructuring and related charges during the period from October 1, 2008 through August 30, 2009 related to the Global Cost Reduction Initiatives. Costs associated with these initiatives
since inception, which are expected to be incurred through March 31, 2014, are projected at approximately $65,500.

Global Cost Reduction Initiatives Summary

The following table summarizes the remaining accrual balance associated with the Global Cost Reduction Initiatives and activity that occurred during Fiscal 2010:



|                                      |  |                     |        |   |            |   |        |       |  |   |        |  
|------------------------------------- |  | ------------------- | ------ | - | ---------- | - | ------ | ----- |  | - | ------ | -
|                                      |  | TerminationBenefits |        |   | OtherCosts |   |        | Total | 
|Accrual balance at September 30, 2009 |  | $                   | 4,180  |   |            | $ | 84     |       |  | $ | 4,264  |  
|Provisions                            |  |                     | 5,101  |   |            |   | 5,107  |       |  |   | 10,208 |  
|Cash expenditures                     |  |                     | (3,712 | ) |            |   | (1,493 | )     |  |   | (5,205 | )
|Non-cash items                        |  |                     | 878    |   |            |   | 307    |       |  |   | 1,185  |  
|                                      |  |                     |        |   |            |   |        |       |  |   |        |  
|Accrual balance at September 30, 2010 |  | $                   | 6,447  |   |            | $ | 4,005  |       |  | $ | 10,452 |  
|                                      |  |                     |        |   |            |   |        |       |  |   |        |  
|Expensed as incurred(A)               |  | $                   | 1,796  |   |            | $ | 6,439  |       |  | $ | 8,235  |  



|(A) | Consists of amounts not impacting the accrual for restructuring and related charges.
|--- | ------------------------------------------------------------------------------------

The following table summarizes the expenses incurred by the Successor Company during Fiscal 2010, the cumulative amount incurred from
inception of the initiative through September 30, 2010 and the total future expected costs to be incurred associated with the Global Cost Reduction Initiatives by operating segment:



|                                                                                 |  |                                  |       |  |                    |   |        |                |  |   |           |  |  |       |       |  |  |   |        | 
|-------------------------------------------------------------------------------- |  | -------------------------------- | ----- |  | ------------------ | - | ------ | -------------- |  | - | --------- |  |  | ----- | ----- |  |  | - | ------ | 
|                                                                                 |  | GlobalBatteries andPersonal Care |       |  | Global PetSupplies |   |        | Home andGarden |  |   | Corporate |  |  | Total |      
|Restructuring and related charges during Fiscal 2010                             |  | $                                | 2,437 |  |                    | $ | 6,754  |                |  | $ | 9,252     |  |  | $     |      |  |  | $ | 18,443 | 
|Restructuring and related charges since initiative inception                     |  | $                                | 7,039 |  |                    | $ | 10,210 |                |  | $ | 14,004    |  |  | $     | 7,591 |  |  | $ | 38,844 | 
|Total future estimated restructuring and related charges expected to be incurred |  | $                                |      |  |                    | $ | 20,300 |                |  | $ | 6,500     |  |  | $     |      |  |  | $ | 26,800 | 

2008 Restructuring Initiatives

The Company implemented an initiative within the Global Batteries & Personal Care segment in China to reduce
operating costs and rationalize the Companys manufacturing structure. These initiatives, which are



159



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



complete, include the plan to exit the Companys Ningbo battery manufacturing facility in China (the Ningbo Exit Plan). The Successor Company recorded $2,162 and $165 of pretax
restructuring and related charges during Fiscal 2010 and the period from August 31, 2009 through September 30, 2009, respectively. The Predecessor Company recorded $10,652 and $16,399 of pretax restructuring and related charges during the
period from October 1, 2008 through August 30, 2009 and Fiscal 2008, respectively, in connection with the Ningbo Exit Plan. The Company has recorded pretax restructuring and related charges of $29,378 since the inception of the Ningbo Exit
Plan.

The following table summarizes the remaining accrual balance associated with the Ningbo Exit Plan and activity that
occurred during Fiscal 2010:

Ningbo Exit Plan Summary



|                                      |  |             |       |  
|------------------------------------- |  | ----------- | ----- | -
|                                      |  | Other Costs |      
|Accrual balance at September 30, 2009 |  | $           | 308   |  
|Provisions                            |  |             | 461   |  
|Cash expenditures                     |  |             | (278  | )
|                                      |  |             |       |  
|Accrual balance at September 30, 2010 |  | $           | 491   |  
|                                      |  |             |       |  
|Expensed as incurred(A)               |  | $           | 1,701 |  



|(A) | Consists of amounts not impacting the accrual for restructuring and related charges.
|--- | ------------------------------------------------------------------------------------

2007 Restructuring Initiatives

The Company has implemented a series of
initiatives within the Global Batteries & Personal Care segment in Latin America to reduce operating costs (the Latin American Initiatives). These initiatives, which are substantially complete, include the reduction of certain
manufacturing operations in Brazil and the restructuring of management, sales, marketing and support functions. The Successor Company recorded no pretax restructuring and related charges during Fiscal 2010 and the period from August 31, 2009
through September 30, 2009 related to the Latin American Initiatives. The Predecessor Company recorded $207 and $317 of pretax restructuring and related charges during the period from October 1, 2008 through August 30, 2009 and Fiscal
2008, respectively, in connection with the Latin American Initiatives. The Company has recorded pretax restructuring and related charges of $11,447 since the inception of the Latin American Initiatives.

The following table summarizes the accrual balance associated with the Latin American Initiatives and activity that occurred during
Fiscal 2010:

Latin American Initiatives Summary



|                                      |  |                     |      |   |            |   |      |       |  |   |      |  
|------------------------------------- |  | ------------------- | ---- | - | ---------- | - | ---- | ----- |  | - | ---- | -
|                                      |  | TerminationBenefits |      |   | OtherCosts |   |      | Total | 
|Accrual balance at September 30, 2009 |  | $                   | (282 | ) |            | $ | 613  |       |  | $ | 331  |  
|Non-cash items                        |  |                     | 282  |   |            |   | (613 | )     |  |   | (331 | )
|                                      |  |                     |      |   |            |   |      |       |  |   |      |  
|Accrual balance at September 30, 2010 |  | $                   |     |   |            | $ |     |       |  | $ |     |  
|                                      |  |                     |      |   |            |   |      |       |  |   |      |  

In Fiscal 2007, the Company began managing its business in three vertically integrated, product-focused
reporting segments; Global Batteries & Personal Care, Global Pet Supplies and the Home and Garden Business.



160



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



As part of this realignment, the Companys Global Operations organization, previously included in corporate expense, consisting of research and development, manufacturing management, global
purchasing, quality operations and inbound supply chain, is now included in each of the operating segments. In connection with these changes the Company undertook a number of cost reduction initiatives, primarily headcount reductions, at the
corporate and operating segment levels (the Global Realignment Initiatives). The Successor Company recorded $3,605 and $138 of restructuring and related charges during Fiscal 2010 and the period from August 31, 2009 through
September 30, 2009, respectively. The Predecessor Company recorded $11,635 and $20,161 of pretax restructuring and related charges during the period from October 1, 2008 through August 30, 2009 and Fiscal 2008, respectively, related
to the Global Realignment Initiatives. Costs associated with these initiatives since inception, which are expected to be incurred through June 30, 2011, relate primarily to severance and are projected at approximately $89,000, the majority of
which are cash costs.

The following table summarizes the remaining accrual balance associated with the Global Realignment
Initiatives and activity that have occurred during Fiscal 2010:

Global Realignment Initiatives Summary



|                                      |  |                     |        |   |            |   |        |       |  |   |        |  
|------------------------------------- |  | ------------------- | ------ | - | ---------- | - | ------ | ----- |  | - | ------ | -
|                                      |  | TerminationBenefits |        |   | OtherCosts |   |        | Total | 
|Accrual balance at September 30, 2009 |  | $                   | 14,581 |   |            | $ | 3,678  |       |  | $ | 18,259 |  
|Provisions                            |  |                     | 1,720  |   |            |   | (1,109 | )     |  |   | 611    |  
|Cash expenditures                     |  |                     | (7,657 | ) |            |   | (319   | )     |  |   | (7,976 | )
|Non-cash items                        |  |                     | 77     |   |            |   | 31     |       |  |   | 108    |  
|                                      |  |                     |        |   |            |   |        |       |  |   |        |  
|Accrual balance at September 30, 2010 |  | $                   | 8,721  |   |            | $ | 2,281  |       |  | $ | 11,002 |  
|                                      |  |                     |        |   |            |   |        |       |  |   |        |  
|Expensed as incurred(A)               |  | $                   | 3,828  |   |            | $ | (834   | )     |  | $ | 2,994  |  



|(A) | Consists of amounts not impacting the accrual for restructuring and related charges.
|--- | ------------------------------------------------------------------------------------

The following table summarizes the expenses incurred by the Successor Company during Fiscal 2010, the cumulative amount incurred from
inception of the initiative through September 30, 2010 and the total future expected costs to be incurred associated with the Global Realignment Initiatives by operating segment:



|                                                             |  |                                  |        |   |                |   |       |           |  |   |        |  |  |   |        | 
|------------------------------------------------------------ |  | -------------------------------- | ------ | - | -------------- | - | ----- | --------- |  | - | ------ |  |  | - | ------ | 
|                                                             |  | GlobalBatteries andPersonal Care |        |   | Home andGarden |   |       | Corporate |  |   | Total  | 
|Restructuring and related charges during Fiscal 2010         |  | $                                | (981   | ) |                | $ | (796  | )         |  | $ | 5,382  |  |  | $ | 3,605  | 
|Restructuring and related charges since initiative inception |  | $                                | 46,669 |   |                | $ | 6,762 |           |  | $ | 35,156 |  |  | $ | 88,587 | 
|Total future restructuring and related charges expected      |  | $                                |       |   |                | $ |      |           |  | $ | 350    |  |  | $ | 350    | 

2006 Restructuring Initiatives

The Company implemented a series of initiatives within the Global Batteries & Personal Care segment in Europe to
reduce operating costs and rationalize the Companys manufacturing structure (the European Initiatives). These initiatives, which are substantially complete, include the relocation of certain operations at the Ellwangen, Germany
packaging center to the Dischingen, Germany battery plant, transferring private label battery production at the Companys Dischingen, Germany battery plant to the Companys manufacturing facility in China and restructuring its sales,
marketing and support functions. The Company recorded $(92) and $7 of pretax restructuring and related charges during Fiscal 2010 and the period from August 31, 2009 through



161



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



September 30, 2009, respectively. The Predecessor Company recorded $11 and $(707) during the period from October 1, 2008 through August 30, 2009 and Fiscal 2008, respectively,
related to the European Initiatives. The Company has recorded pretax restructuring and related charges of $26,965 since the inception of the European Initiatives.

The following table summarizes the remaining accrual balance associated with the 2006 initiatives and activity that have occurred during Fiscal 2010:

European Initiatives Summary



|                                      |  |                     |       |   |            |   |      |       |  |   |       |  
|------------------------------------- |  | ------------------- | ----- | - | ---------- | - | ---- | ----- |  | - | ----- | -
|                                      |  | TerminationBenefits |       |   | OtherCosts |   |      | Total | 
|Accrual balance at September 30, 2009 |  | $                   | 2,623 |   |            | $ | 319  |       |  | $ | 2,942 |  
|Provisions                            |  |                     | (92   | ) |            |   |     |       |  |   | (92   | )
|Cash expenditures                     |  |                     | (528  | ) |            |   | (251 | )     |  |   | (779  | )
|Non-cash items                        |  |                     | (202  | ) |            |   | (21  | )     |  |   | (223  | )
|                                      |  |                     |       |   |            |   |      |       |  |   |       |  
|Accrual balance at September 30, 2010 |  | $                   | 1,801 |   |            | $ | 47   |       |  | $ | 1,848 |  
|                                      |  |                     |       |   |            |   |      |       |  |   |       |  

(15) Acquisition

On June 16, 2010, the Company merged with Russell Hobbs. Headquartered in Miramar, Florida, Russell Hobbs is a designer, marketer and distributor of a broad range of branded small household
appliances. Russell Hobbs markets and distributes small kitchen and home appliances, pet and pest products and personal care products. Russell Hobbs has a broad portfolio of recognized brand names, including Black & Decker, George Foreman,
Russell Hobbs, Toastmaster, LitterMaid, Farberware, Breadman and Juiceman. Russell Hobbs customers include mass merchandisers, specialty retailers and appliance distributors primarily in North America, South America, Europe and Australia.

The results of Russell Hobbs operations since June 16, 2010 are included in the Companys Consolidated Statements
of Operations. The financial results of Russell Hobbs are reported as a separate business segment, Small Appliances. Russell Hobbs contributed $237,576 in Net sales, and recorded Operating loss of $320 for the period from June 16, 2010 through
the period ended September 30, 2010, which includes $13,400 of Acquisition and integration related charges.

In
accordance with ASC Topic 805, Business Combinations(ASC 805), the Company accounted for the Merger by applying the acquisition method of accounting. The acquisition method of accounting requires that the
consideration transferred in a business combination be measured at fair value as of the closing date of the acquisition. After consummation of the Merger, the stockholders of Spectrum Brands, inclusive of Harbinger, own approximately 60% of SB
Holdings and the stockholders of Russell Hobbs own approximately 40% of SB Holdings. Inasmuch as Russell Hobbs is a private company and its common stock was not publicly traded, the closing market price of the Spectrum Brands common stock at
June 15, 2010 was used to calculate the purchase price. The total purchase price of Russell Hobbs was approximately $597,579 determined as follows:



|                                                                      |  |   |         | 
|--------------------------------------------------------------------- |  | - | ------- | 
|Spectrum Brands closing price per share on June 15, 2010              |  | $ | 28.15   | 
|                                                                      | 
|Purchase priceRussell Hobbs allocation20,704 shares(1)(2)           |  | $ | 575,203 | 
|Cash payment to pay off Russell Hobbs North American credit facility |  |   | 22,376  | 
|                                                                      |  |   |         | 
|Total purchase price of Russell Hobbs                                 |  | $ | 597,579 | 
|                                                                      |  |   |         | 



162



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)





|(1) | Number of shares calculated based upon conversion formula, as defined in the Merger Agreement, using balances as of June 16, 2010.
|--- | ----------------------------------------------------------------------------------------------------------------------------------

|(2) | The fair value of 271 shares of unvested restricted stock units as they relate to post combination services will be recorded as operating expense over the remaining
service period and were assumed to have no fair value for the purchase price.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Preliminary Purchase Price Allocation

The total purchase price for Russell Hobbs was allocated to the preliminary net tangible and intangible assets based
upon their preliminary fair values at June 16, 2010 as set forth below. The excess of the purchase price over the preliminary net tangible assets and intangible assets was recorded as goodwill. The preliminary allocation of the purchase price
was based upon a valuation for which the estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date). The primary areas of the preliminary purchase price allocation that are not yet
finalized relate to the certain legal matters, amounts for income taxes including deferred tax accounts, amounts for uncertain tax positions, and net operating loss carryforwards inclusive of associated limitations, and the final allocation of
goodwill. The Company expects to continue to obtain information to assist it in determining the fair values of the net assets acquired at the acquisition date during the measurement period. The preliminary purchase price allocation for Russell Hobbs
is as follows:



|                              |  |   |         | 
|----------------------------- |  | - | ------- | 
|Current assets                |  | $ | 307,809 | 
|Property, plant and equipment |  |   | 15,150  | 
|Intangible assets             |  |   | 363,327 | 
|Goodwill (A)                  |  |   | 120,079 | 
|Other assets                  |  |   | 15,752  | 
|                              |  |   |         | 
|Total assets acquired         |  | $ | 822,117 | 
|Current liabilities           |  |   | 142,046 | 
|Total debt                    |  |   | 18,970  | 
|Long-term liabilities         |  |   | 63,522  | 
|                              |  |   |         | 
|Total liabilities assumed     |  | $ | 224,538 | 
|                              |  |   |         | 
|Net assets acquired           |  | $ | 597,579 | 
|                              |  |   |         | 



| | (A) | Consists of $25,426 of tax deductible Goodwill.
| | --- | -----------------------------------------------

Preliminary Pre-Acquisition Contingencies Assumed

The Company has evaluated and continues to evaluate pre-acquisition contingencies relating to Russell Hobbs that existed as of the acquisition date. Based on the evaluation to date, the Company has
preliminarily determined that certain pre-acquisition contingencies are probable in nature and estimable as of the acquisition date. Accordingly, the Company has preliminarily recorded its best estimates for these contingencies as part of the
preliminary purchase price allocation for Russell Hobbs. The Company continues to gather information relating to all pre-acquisition contingencies that it has assumed from Russell Hobbs. Any changes to the pre-acquisition contingency amounts
recorded during the measurement period will be included in the purchase price allocation. Subsequent to the end of the measurement period any adjustments to pre-acquisition contingency amounts will be reflected in the Companys results of
operations.



163



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



Certain estimated values are not yet finalized and are subject to change, which could be
significant. The Company will finalize the amounts recognized as it obtains the information necessary to complete its analysis during the measurement period. The following items are provisional and subject to change:



| |  |  | amounts for legal contingencies, pending the finalization of the Companys examination and evaluation of the portfolio of filed cases;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  |  | amounts for income taxes including deferred tax accounts, amounts for uncertain tax positions, and net operating loss carryforwards inclusive of
associated limitations; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the final allocation of Goodwill.
| | - |  | ---------------------------------

ASC 805 requires, among other things, that most assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. Accordingly, the Company performed a preliminary
valuation of the assets and liabilities of Russell Hobbs at June 16, 2010. Significant adjustments as a result of that preliminary valuation are summarized as followed:



| |  |  | InventoriesAn adjustment of $1,721 was recorded to adjust inventory to fair value. Finished goods were valued at estimated selling prices less
the sum of costs of disposal and a reasonable profit allowance for the selling effort.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Deferred tax liabilities, netAn adjustment of $43,086 was recorded to adjust deferred taxes for the preliminary fair value allocations.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Property, plant and equipment, netAn adjustment of $(455) was recorded to adjust the net book value of property, plant and equipment to fair
value giving consideration to their highest and best use. Key assumptions used in the valuation of the Companys property, plant and equipment were based on the cost approach.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Certain indefinite-lived intangible assets were valued using a relief from royalty methodology. Customer relationships and certain definite-lived
intangible assets were valued using a multi-period excess earnings method. Certain intangible assets are subject to sensitive business factors of which only a portion are within control of the Companys management. The total fair value of
indefinite and definite lived intangibles was $363,327 as of June 16, 2010. A summary of the significant key inputs were as follows:
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company valued customer relationships using the income approach, specifically the multi-period excess earnings method. In determining the fair
value of the customer relationship, the multi-period excess earnings approach values the intangible asset at the present value of the incremental after-tax cash flows attributable only to the customer relationship after deducting contributory asset
charges. The incremental after-tax cash flows attributable to the subject intangible asset are then discounted to their present value. Only expected sales from current customers were used which included an expected growth rate of 3%. The Company
assumed a customer retention rate of approximately 93% which was supported by historical retention rates. Income taxes were estimated at 36% and amounts were discounted using a rate of 15.5%. The customer relationships were valued at $38,000 under
this approach.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company valued trade names and trademarks using the income approach, specifically the relief from royalty method. Under this method, the asset
value was determined by estimating the hypothetical royalties that would have to be paid if the trade name was not owned. Royalty rates
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



164



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



| | were selected based on consideration of several factors, including prior transactions of Russell Hobbs related trademarks and trade names, other similar trademark licensing and transaction
agreements and the relative profitability and perceived contribution of the trademarks and trade names. Royalty rates used in the determination of the fair values of trade names and trademarks ranged from 2.0% to 5.5% of expected net sales related
to the respective trade names and trademarks. The Company anticipates using the majority of the trade names and trademarks for an indefinite period as demonstrated by the sustained use of each subjected trademark. In estimating the fair value of the
trademarks and trade names, Net sales for significant trade names and trademarks were estimated to grow at a rate of 1%-14% annually with a terminal year growth rate of 3%. Income taxes were estimated at a range of 30%-38% and amounts were
discounted using rates between 15.5%-16.5%. Trade name and trademarks were valued at $170,930 under this approach.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company valued a trade name license agreement using the income approach, specifically the multi-period excess earnings method. In determining the
fair value of the trade name license agreement, the multi-period excess earnings approach values the intangible asset at the present value of the incremental after-tax cash flows attributable only to the trade name license agreement after deducting
contributory asset charges. The incremental after-tax cash flows attributable to the subject intangible asset are then discounted to their present value. In estimating the fair value of the trade name license agreement net sales were estimated to
grow at a rate of (3)%-1% annually. The Company assumed a twelve year useful life of the trade name license agreement. Income taxes were estimated at 37% and amounts were discounted using a rate of 15.5%. The trade name license agreement was valued
at $149,200 under this approach.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company valued technology using the income approach, specifically the relief from royalty method. Under this method, the asset value was determined
by estimating the hypothetical royalties that would have to be paid if the technology was not owned. Royalty rates were selected based on consideration of several factors including prior transactions of Russell Hobbs related licensing agreements and
the importance of the technology and profit levels, among other considerations. Royalty rates used in the determination of the fair values of technologies were 2% of expected net sales related to the respective technology. The Company anticipates
using these technologies through the legal life of the underlying patent and therefore the expected life of these technologies was equal to the remaining legal life of the underlying patents ranging from 9 to 11 years. In estimating the fair value
of the technologies, net sales were estimated to grow at a rate of 3%-12% annually. Income taxes were estimated at 37% and amounts were discounted using the rate of 15.5%. The technology assets were valued at $4,100 under this approach.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



165



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)



Supplemental Pro Forma Information (unaudited)

The following reflects the Companys pro forma results had the results of Russell Hobbs been included for all periods beginning after
September 30, 2007.



|                                                                          |  |                   |           |   |                                                    |   |         |                                                 |  |   |           |   |  |   |           |  
|------------------------------------------------------------------------- |  | ----------------- | --------- | - | -------------------------------------------------- | - | ------- | ----------------------------------------------- |  | - | --------- | - |  | - | --------- | -
|                                                                          |  | Successor Company |           |   | Predecessor Company                                |  
|                                                                          |  | 2010              |           |   | Period
fromAugust 31, 2009throughSeptember 30,2009 |   |         | Period fromOctober 1, 2008throughAugust 30,2009 |  |   | 2008      |  
|Net sales:                                                                |  |                   |           |   |                                                    |   |         |                                                 |  |   |           |   |  |   |           |  
|Reported Net sales                                                        |  | $                 | 2,567,011 |   |                                                    | $ | 219,888 |                                                 |  | $ | 2,010,648 |   |  | $ | 2,426,571 |  
|Russell Hobbs adjustment                                                  |  |                   | 543,952   |   |                                                    |   | 64,641  |                                                 |  |   | 711,046   |   |  |   | 909,426   |  
|                                                                          |  |                   |           |   |                                                    |   |         |                                                 |  |   |           |   |  |   |           |  
|Pro forma Net sales                                                       |  | $                 | 3,110,963 |   |                                                    | $ | 284,529 |                                                 |  | $ | 2,721,694 |   |  | $ | 3,335,997 |  
|                                                                          |  |                   |           |   |                                                    |   |         |                                                 |  |   |           |   |  |   |           |  
|(Loss) income from continuing operations:                                 |  |                   |           |   |                                                    |   |         |                                                 |  |   |           |   |  |   |           |  
|Reported (Loss) income from continuing operations                         |  | $                 | (187,372  | ) |                                                    | $ | (71,193 | )                                               |  | $ | 1,100,743 |   |  | $ | (905,358  | )
|Russell Hobbs adjustment                                                  |  |                   | (5,504    | ) |                                                    |   | (2,284  | )                                               |  |   | (25,121   | ) |  |   | (43,480   | )
|                                                                          |  |                   |           |   |                                                    |   |         |                                                 |  |   |           |   |  |   |           |  
|Pro forma Loss from continuing operations                                 |  | $                 | (192,876  | ) |                                                    | $ | (73,477 | )                                               |  | $ | 1,075,622 |   |  | $ | (948,838  | )
|                                                                          |  |                   |           |   |                                                    |   |         |                                                 |  |   |           |   |  |   |           |  
|Basic and Diluted earnings per share from continuing operations(A) :      |  |                   |           |   |                                                    |   |         |                                                 |  |   |           |   |  |   |           |  
|Reported Basic and Diluted earnings per share from continuing operations  |  | $                 | (5.20     | ) |                                                    | $ | (2.37   | )                                               |  | $ | 21.45     |   |  | $ | (17.78    | )
|Russell Hobbs adjustment                                                  |  |                   | (0.16     | ) |                                                    |   | (0.08   | )                                               |  |   | (0.49     | ) |  |   | (0.85     | )
|                                                                          |  |                   |           |   |                                                    |   |         |                                                 |  |   |           |   |  |   |           |  
|Pro forma basic and diluted earnings per share from continuing operations |  | $                 | (5.36     | ) |                                                    | $ | (2.45   | )                                               |  | $ | 20.96     |   |  | $ | (18.63    | )
|                                                                          |  |                   |           |   |                                                    |   |         |                                                 |  |   |           |   |  |   |           |  



|(A) | The Company has not assumed the exercise of common stock equivalents as the impact would be antidilutive.
|--- | ---------------------------------------------------------------------------------------------------------

(16) Quarterly Results (unaudited)



|                                  |  |                   |         |   |             |   |         |              |  |   |                |   |  |   |         |  
|--------------------------------- |  | ----------------- | ------- | - | ----------- | - | ------- | ------------ |  | - | -------------- | - |  | - | ------- | -
|                                  |  | Successor Company |        
|                                  |  | Quarter Ended     |        
|                                  |  | September 30,2010 |         |   | July 4,2010 |   |         | April 4,2010 |  |   | January 3,2010 |  
|Net sales                         |  | $                 | 788,999 |   |             | $ | 653,486 |              |  | $ | 532,586        |   |  | $ | 591,940 |  
|Gross profit                      |  |                   | 274,499 |   |             |   | 252,869 |              |  |   | 209,580        |   |  |   | 184,462 |  
|Net loss                          |  |                   | (24,317 | ) |             |   | (86,507 | )            |  |   | (19,034        | ) |  |   | (60,249 | )
|Basic net loss per common share   |  | $                 | (0.48   | ) |             | $ | (2.53   | )            |  | $ | (0.63          | ) |  | $ | (2.01   | )
|Diluted net loss per common share |  | $                 | (0.48   | ) |             | $ | (2.53   | )            |  | $ | (0.63          | ) |  | $ | (2.01   | )



166



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(In thousands, except per share amounts)





|                                           |  |                                                    |         |              |                                               |   |               |               |  |                  |         |   |  |   |         |   |  |   |          |  
|------------------------------------------ |  | -------------------------------------------------- | ------- | ------------ | --------------------------------------------- | - | ------------- | ------------- |  | ---------------- | ------- | - |  | - | ------- | - |  | - | -------- | -
|                                           |  | Successor Company                                  |         |              | Predecessor Company                           |  
|                                           |  | Period fromAugust 31,
2009throughSeptember 30,2009 |         |              | Period
fromJune 29, 2009throughAugust 30,2009 |   |               | Quarter Ended | 
|                                           |  |                                                    |         | June 28,2009 |                                               |   | March 29,2009 |               |  | December 28,2008 |        
|Net sales                                  |  | $                                                  | 219,888 |              |                                               | $ | 369,522       |               |  | $                | 589,361 |   |  | $ | 503,262 |   |  | $ | 548,503  |  
|Gross profit                               |  |                                                    | 64,400  |              |                                               |   | 146,817       |               |  |                  | 230,297 |   |  |   | 184,834 |   |  |   | 189,871  |  
|Net (loss) income                          |  |                                                    | (70,785 | )            |                                               |   | 1,223,568     |               |  |                  | (36,521 | ) |  |   | (60,449 | ) |  |   | (112,657 | )
|Basic net (loss) income per common share   |  | $                                                  | (2.36   | )            |                                               | $ | 23.85         |               |  | $                | (0.71   | ) |  | $ | (1.18   | ) |  | $ | (2.19    | )
|Diluted net (loss) income per common share |  | $                                                  | (2.36   | )            |                                               | $ | 23.85         |               |  | $                | (0.71   | ) |  | $ | (1.18   | ) |  | $ | (2.19    | )



167



---

##### Table of Contents

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

For the year ended September 30, 2010, the period from August 31, 2009 through September 30, 2009, the period from October 1, 2008 through August 30, 2009 and the year ended
September 30, 2008 (In thousands)



|                                          |  |                              |        |  |                             |   |       |                     |  |   |                     |  |  |                        |        |  |  |   |        | 
|----------------------------------------- |  | ---------------------------- | ------ |  | --------------------------- | - | ----- | ------------------- |  | - | ------------------- |  |  | ---------------------- | ------ |  |  | - | ------ | 
|Column A                                  |  | Column B                     |        |  | Column C Additions          |   |       | Column D Deductions |  |   | Column E            | 
|Descriptions                              |  | Balance atBeginningof Period |        |  | Charged toCosts
andExpenses |   |       | Deductions          |  |   | OtherAdjustments(A) |  |  | Balance atEnd ofPeriod |       
|September 30, 2010 (Successor Company):   |  |                              |        |  |                             |   |       |                     |  |   |                     |  |  |                        |        |  |  |   |        | 
|Accounts receivable allowances            |  | $                            | 1,011  |  |                             | $ | 3,340 |                     |  | $ |                    |  |  | $                      |       |  |  | $ | 4,351  | 
|September 30, 2009 (Successor Company):   |  |                              |        |  |                             |   |       |                     |  |   |                     |  |  |                        |        |  |  |   |        | 
|Accounts receivable allowances            |  | $                            |       |  |                             | $ | 1,011 |                     |  | $ |                    |  |  | $                      |       |  |  | $ | 1,011  | 
|August 30, 2009 (Predecessor Company):    |  |                              |        |  |                             |   |       |                     |  |   |                     |  |  |                        |        |  |  |   |        | 
|Accounts receivable allowances            |  | $                            | 18,102 |  |                             | $ | 1,763 |                     |  | $ | 3,848               |  |  | $                      | 16,017 |  |  | $ |       | 
|September 30, 2008 (Predecessor Company): |  |                              |        |  |                             |   |       |                     |  |   |                     |  |  |                        |        |  |  |   |        | 
|Accounts receivable allowances            |  | $                            | 17,196 |  |                             | $ | 1,368 |                     |  | $ | 462                 |  |  | $                      |       |  |  | $ | 18,102 | 



|(A) | The Other Adjustment in the period from October 1, 2008 through August 30, 2009, represents the elimination of Accounts receivable allowances
through fresh-start reporting as a result of the Companys emergence from Chapter 11 of the Bankruptcy Code.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

See accompanying Report of Independent Registered Public Accounting Firm



168



---

##### Table of Contents

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly authorized.



SPECTRUM BRANDS HOLDINGS, INC.By:

/s/    David R. LumleyDavid R. LumleyChief Executive Officer


DATE:
December 14, 2010

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below
by the following persons on behalf of the registrant and in the capacities indicated and on the above-stated date.



|                                               |  |                                                                                                                                              
|---------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|Signature                                      |  | Title                                                                                                                                        
|                                               | 
|/s/    David R.
Lumley David R. Lumley         |  | Chief Executive Officer
(Principal Executive Officer)                                                                                        
|                                               | 
|/s/    Anthony L.
Genito Anthony L. Genito     |  | Executive Vice President, Chief Financial Officer and Chief Accounting Officer (Principal Financial Officer and
Principal Accounting Officer)
|                                               | 
|/s/    David M.
Maura David M. Maura           |  | Chairman of the Board                                                                                                                        
|                                               | 
|/s/    Kenneth C.
Ambrecht Kenneth C. Ambrecht |  | Director                                                                                                                                     
|                                               | 
|/s/    Eugene I.
Davis Eugene I. Davis         |  | Director                                                                                                                                     
|                                               | 
|/s/    Marc S.
Kirschner Marc S. Kirschner     |  | Director                                                                                                                                     
|                                               | 
|/s/    Norman S.
Matthews Norman S. Matthews   |  | Director                                                                                                                                     
|                                               | 
|/s/    Terry L.
Polistina Terry L. Polistina   |  | Director                                                                                                                                     
|                                               | 
|/s/    Hugh R.
Rovit Hugh R. Rovit             |  | Director                                                                                                                                     
|                                               | 
|/s/    Robin
Roger Robin Roger                 |  | Director                                                                                                                                     
|                                               | 
|/s/    Virginia A.
Kamsky Virginia A. Kamsky   |  | Director                                                                                                                                     



169



---

##### Table of Contents

EXHIBIT INDEX



|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                         
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit 2.1 |  | Purchase Agreement, dated February 21, 2004, by and among Rayovac Corporation, ROV Holding, Inc., VARTA AG, Interelectrica Adminstração e
Participações Ltda., and Tabriza Brasil Empreendimentos Ltda. (filed by incorporation by reference to Exhibit 2.1 to Spectrum Brands, Inc.s Current Report on Form 8-K filed with the SEC by Spectrum Brands, Inc. on June 14,
2004).                                        
|            | 
|Exhibit 2.2 |  | Joint Plan of Reorganization of Spectrum Jungle Labs Corporation, et al., Debtors (filed by incorporation by reference to Exhibit 99.T3E.2 to Spectrum Brands, Inc.s Form T-3,
filed with the SEC by Spectrum Brands, Inc. on April 28, 2009).                                                                                                                                                                         
|            | 
|Exhibit 2.3 |  | First Modification to Joint Plan of Reorganization (filed by incorporation by reference to Exhibit 99.2 to Spectrum Brands, Inc.s Current Report on Form 8-K, filed with
the SEC by Spectrum Brands, Inc. on July 16, 2009).                                                                                                                                                                                           
|            | 
|Exhibit 2.4 |  | Second Modification to Joint Plan of Reorganization (filed by incorporation by reference to Exhibit 99.3 to Spectrum Brands, Inc.s Current Report on Form 8-K, filed with the
SEC by Spectrum Brands, Inc. on July 16, 2009).                                                                                                                                                                                          
|            | 
|Exhibit 2.5 |  | Agreement and Plan of Merger by and among SB/RH Holdings, Inc., Battery Merger Corp., Grill Merger Corp., Spectrum Brands, Inc. and Russell Hobbs, Inc. dated as of February 9,
2010 (filed by incorporation by reference to Exhibit 2.1 to the Current Report on Form 8-K filed with the SEC by Spectrum Brands, Inc. on February 12, 2010).                                                                           
|            | 
|Exhibit 2.6 |  | Amendment to Agreement and Plan of Merger dated as of March 1, 2010 by and among SB/RH Holdings, Inc., Battery Merger Corp., Grill Merger Corp., Spectrum Brands, and Russell Hobbs,
Inc. (filed by incorporation by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC by Spectrum Brands, Inc. on March 2, 2010).                                                                         
|            | 
|Exhibit 2.7 |  | Second Amendment to Agreement and Plan of Merger dated as of March 26, 2010 by and among Spectrum Brands Holdings, Inc., Battery Merger Corp., Grill Merger Corp.,
Spectrum Brands, Inc., and Russell Hobbs, Inc. (filed by incorporation by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC by Spectrum Brands, Inc. on March 29, 2010).                                                
|            | 
|Exhibit 2.8 |  | Third Amendment to Agreement and Plan of Merger dated as of April 30, 2010 by and among Spectrum Brands Holdings, Inc., Battery Merger Corp., Grill Merger Corp.,
Spectrum Brands, Inc., and Russell Hobbs, Inc. (filed by incorporation by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC by Spectrum Brands, Inc. on May 3, 2010).                                                    
|            | 
|Exhibit 3.1 |  | Restated Certificate of Incorporation of Spectrum Brands Holdings, Inc., dated June 16, 2010 (incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-8
filed with the SEC on June 16, 2010).                                                                                                                                                                                                  
|            | 
|Exhibit 3.2 |  | Amended and Restated Bylaws of Spectrum Brands Holdings, Inc., adopted as of June 16, 2010 (incorporated by reference to the Registration Statement on Form S-8 filed with the SEC on
June 16, 2010).                                                                                                                                                                                                                   
|            | 
|Exhibit 4.1 |  | Specimen certificate for shares of common stock (filed by incorporation by reference to Exhibit 4.1 to the Registration Statement on Form 8-A filed with the SEC on May 27,
2010).                                                                                                                                                                                                                                      
|            | 
|Exhibit 4.2 |  | Indenture governing Spectrum Brands, Inc.s 12% Senior Subordinated Toggle Notes due 2019, dated as of August 28, 2009, among Spectrum Brands, Inc., certain subsidiaries of
Spectrum Brands, Inc., as guarantors, and U.S. Bank National Association, as trustee (filed by incorporation by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC by Spectrum Brands, Inc. on August 31,
2009).



170



---

##### Table of Contents

|             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit 4.3  |  | Supplemental Indenture, dated March 15, 2010, to the Indenture governing Spectrum Brands, Inc.s 12% Senior Subordinated Toggle Notes due 2019, dated August 28, 2009,
by and among Spectrum Brands, Inc. the guarantors named therein and U.S. Bank National Association, as trustee (filed by incorporation by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC by Spectrum Brands, Inc. on
March 16, 2010).           
|             | 
|Exhibit 4.4  |  | Second Supplemental Indenture, dated June 15, 2010, to the Indenture governing Spectrum Brands, Inc.s 12% Senior Subordinated Toggle Notes due 2019, dated as of August 28,
2009, by and among Spectrum Brands, Inc., Battery Merger Corp. and U.S. Bank National Association, as trustee (filed by incorporation by reference to Exhibit 4.4 to the Quarterly Report on Form 10-Q filed with the SEC by Spectrum Brands, Inc. on
August 18, 2010).  
|             | 
|Exhibit 4.5  |  | Third Supplemental Indenture, dated June 16, 2010, to the Indenture governing Spectrum Brands, Inc.s 12% Senior Subordinated Toggle Notes due 2019, dated as of
August 28, 2009, by and among Spectrum Brands, Inc., Russell Hobbs, Inc. and U.S. Bank National Association, as trustee (filed by incorporation by reference to Exhibit 4.5 to the Quarterly Report on Form 10-Q filed with the SEC by Spectrum
Brands, Inc. on August 18, 2010).    
|             | 
|Exhibit 4.6  |  | Fourth Supplemental Indenture, dated December 13, 2010, to the Indenture governing Spectrum Brands, Inc.s 12% Senior Subordinated Toggle Notes due 2019, dated as of August 28,
2009, by and among Spectrum Brands, Inc., Russell Hobbs, Inc. and U.S. Bank National Association, as trustee (filed by incorporation by reference to Exhibit 4.6 to the Annual Report on Form 10-K filed with the SEC by Spectrum Brands, Inc. on
December 14, 2010).
|             | 
|Exhibit 4.7  |  | Indenture governing Spectrum Brands, Inc.s 9.5% Senior Secured Notes due 2018, dated as of June 16, 2010, among Spectrum Brands, Inc., the guarantors named therein and US
Bank National Association, as trustee (filed by incorporation by reference to Exhibit 4.6 to the Quarterly Report on Form 10-Q filed with the SEC by Spectrum Brands, Inc. on August 18, 2010).                                                                           
|             | 
|Exhibit 4.8  |  | Supplemental Indenture, dated December 13, 2010, to the Indenture governing Spectrum Brands, Inc.s 9.5% Senior Secured Notes due 2018, dated as of June 16, 2010, among
Spectrum Brands, Inc., the guarantors named therein and US Bank National Association, as trustee (filed by incorporation by reference to Exhibit 4.8 to the Annual Report on Form 10-K filed with the SEC by Spectrum Brands, Inc. on December 14,
2010).                    
|             | 
|Exhibit 10.1 |  | Amended and Restated Employment Agreement, entered into as of October 22, 2009, by and between Spectrum Brands, Inc. and Kent J. Hussey (filed by incorporation by reference to
Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC by Spectrum Brands, Inc. on October 28, 2009).                                                                                                                                                      
|             | 
|Exhibit 10.2 |  | 2009 Spectrum Brands, Inc. Incentive Plan (filed by incorporation by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC by Spectrum Brands, Inc. on
August 31, 2009).                                                                                                                                                                                                                                                     
|             | 
|Exhibit 10.3 |  | Registration Rights Agreement, dated as of August 28, 2009, by and among Spectrum Brands, Inc. and the investors listed on the signature pages thereto, with respect to Spectrum
Brands Inc.s 12% Senior Subordinated Toggle Notes due 2019 (filed by incorporation by reference to Exhibit 4.2 to the Current Report on Form 8-K filed with the SEC by Spectrum Brands, Inc. on August 31, 2009).                                                   
|             | 
|Exhibit 10.4 |  | Registration Rights Agreement, dated as of August 28, 2009, by and among Spectrum Brands, Inc. and the investors listed on the signature pages thereto, with respect to Spectrum
Brands, Inc.s equity (filed by incorporation by reference to Exhibit 4.3 to the Current Report on Form 8-K filed with the SEC by Spectrum Brands, Inc. on August 31, 2009).                                                                                         
|             | 
|Exhibit 10.5 |  | Form of Spectrum Brands, Inc. Restricted Stock Award Agreement under the 2009 Incentive Plan (filed by incorporation by reference to Exhibit 10.2 to the Current Report on Form 8-K
filed with the SEC by Spectrum Brands, Inc. on October 28, 2009).                                                                                                                                                                                                 



171



---

##### Table of Contents

|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit 10.6  |  | Support Agreement, dated as of February 9, 2010 by and among Avenue International Master, L.P., Avenue Investments, L.P., Avenue Special Situations Fund IV, L.P., Avenue
Special Situations Fund V, L.P., Avenue-CDP Global Opportunities Fund, L.P. and Spectrum Brands, Inc. (filed by incorporation by reference to Exhibit 10.1 to the Current Report on form 8-K filed with the SEC by Spectrum Brands, Inc. on February 12,
2010).                                                                                                                                                                                  
|              | 
|Exhibit 10.7  |  | Support Agreement, dated as of February 9, 2010 by and among Harbinger Capital Partners Master Fund I, Ltd., Harbinger Capital Partners Special Situations Fund, L.P., Global
Opportunities Breakaway Ltd. and Spectrum Brands, Inc. (filed by incorporation by reference to Exhibit 10.2 to the Current Report on form 8-K filed with the SEC by Spectrum Brands, Inc. on February 12, 2010).                                                                                                                                                                                                                             
|              | 
|Exhibit 10.8  |  | Stockholder Agreement, dated as of February 9, 2010, by and among Harbinger Capital Partners Master Fund I, Ltd., Harbinger Capital Partners Special Situations Funds, L.P., Global
Opportunities Breakaway Ltd., and SB/RH Holdings, Inc. (filed by incorporation by reference to Exhibit 10.5 to the Current Report on form 8-K filed with the SEC by Spectrum Brands, Inc. on February 12, 2010).                                                                                                                                                                                                                       
|              | 
|Exhibit 10.9  |  | Registration Rights Agreement, dated as of February 9, 2010, by and among Spectrum Brands Holdings, Inc., Harbinger Capital Partners Master Fund I, Ltd., Harbinger Capital
Partners Special Situations Fund, L.P., Global Opportunities Breakaway Ltd., Avenue International Master, L.P., Avenue Investments, L.P., Avenue Special Situations Fund IV, L.P., Avenue Special Situations Fund V, L.P. and Avenue-CDP Global
Opportunities Fund, L.P. (filed by incorporation by reference to Exhibit 4.1 to the Registration Statement on Form S-4 filed with the SEC by Spectrum Brands Holdings, Inc. on March 29, 2010).
|              | 
|Exhibit 10.10 |  | Letter Agreement dated as of March 1, 2010 by and among Harbinger Capital Partners Master Fund I, Ltd., Harbinger Capital Partners Special Situations Fund, L.P., Global
Opportunities Breakaway Ltd., and Spectrum Brands (filed by incorporation by reference to Exhibit 10.1 to the Current Report on form 8-K filed with the SEC by Spectrum Brands, Inc. on March 2, 2010).                                                                                                                                                                                                                                           
|              | 
|Exhibit 10.11 |  | Separation and Consulting Agreement between Spectrum Brands, Inc. and Kent J. Hussey, dated April 14, 2010 (filed by incorporation by reference to Exhibit 10.1 to the Current Report
on form 8-K filed with the SEC by Spectrum Brands, Inc. on April 15, 2010).                                                                                                                                                                                                                                                                                                                                                          
|              | 
|Exhibit 10.12 |  | Credit Agreement dated as of June 16, 2010, by and among Spectrum Brands, Inc. and certain of its domestic subsidiaries, as borrowers, the lenders party thereto and Credit Suisse
AG, as administrative agent (filed by incorporation by reference to Exhibit 10.12 to the Quarterly Report on Form 10-Q filed with the SEC by Spectrum Brands, Inc. on August 18, 2010).                                                                                                                                                                                                                                                 
|              | 
|Exhibit 10.13 |  | Subsidiary Guaranty dated as of June 16, 2010, by and among the subsidiaries of Spectrum Brands, Inc. party thereto, certain additional subsidiary guarantors described therein
and Credit Suisse AG, as administrative agent (filed by incorporation by reference to Exhibit 10.13 to the Quarterly Report on Form 10-Q filed with the SEC by Spectrum Brands, Inc. on August 18, 2010).                                                                                                                                                                                                                                  
|              | 
|Exhibit 10.14 |  | Subsidiary Guaranty Supplement dated as of December 13, 2010, by and among Seed Resources, L.L.C. and Credit Suisse AG, as administrative agent (filed by incorporation by reference
to Exhibit 10.14 to the Annual Report on Form 10-K filed with the SEC by Spectrum Brands, Inc. on December 14, 2010).                                                                                                                                                                                                                                                                                                                 
|              | 
|Exhibit 10.15 |  | Guaranty dated as of June 16, 2010, by and among SB/RH Holdings, LLC and Credit Suisse AG, as administrative agent (filed by incorporation by reference to Exhibit 10.14 to the
Quarterly Report on Form 10-Q filed with the SEC by Spectrum Brands, Inc. on August 18, 2010).                                                                                                                                                                                                                                                                                                                                             



172



---

##### Table of Contents

|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit 10.16 |  | Security Agreement dated as of June 16, 2010, by and among Spectrum Brands, Inc., SB/RH Holdings, LLC, the other grantors party thereto and Wells Fargo Bank, National Association,
as collateral trustee (filed by incorporation by reference to Exhibit 10.15 to the Quarterly Report on Form 10-Q filed with the SEC by Spectrum Brands, Inc. on August 18, 2010).                                                                                                                                 
|              | 
|Exhibit 10.17 |  | Security Agreement Supplement dated as of December 13, 2010, by and among Seed Resources, L.L.C. and Wells Fargo Bank, National Association, as collateral trustee (filed by
incorporation by reference to Exhibit 10.17 to the Annual Report on Form 10-K filed with the SEC by Spectrum Brands, Inc. on December 14, 2010).                                                                                                                                                                         
|              | 
|Exhibit 10.18 |  | Loan and Security Agreement dated as of June 16, 2010, by and among Spectrum Brands, Inc. and certain of its domestic subsidiaries, as borrowers, the lenders party thereto and Bank
of America, N.A., as administrative agent (filed by incorporation by reference to Exhibit 10.16 to the Quarterly Report on Form 10-Q filed with the SEC by Spectrum Brands, Inc. on August 18, 2010).                                                                                                            
|              | 
|Exhibit 10.19 |  | Joinder Agreement to Loan and Security Agreement and Other Loan Documents dated as of December 13, 2010, by and among Seed Resources, L.L.C., Spectrum Brands, Inc., Russell Hobbs,
Inc., the subsidiaries of Spectrum Brands, Inc. party to the Loan and Security Agreement as borrowers, SB/RH Holdings, LLC and Bank of America, N.A. (filed by incorporation by reference to Exhibit 10.19 to the Annual Report on Form 10-K filed with
the SEC by Spectrum Brands, Inc. on December 14, 2010).   
|              | 
|Exhibit 10.20 |  | Guaranty dated as of June 16, 2010, by and among the guarantors described therein and Bank of America, N.A., as administrative agent (filed by incorporation by reference to
Exhibit 10.17 to the Quarterly Report on Form 10-Q filed with the SEC by Spectrum Brands, Inc. on August 18, 2010).                                                                                                                                                                                                      
|              | 
|Exhibit 10.21 |  | Collateral Trust Agreement dated as of June 16, 2010, by and among Spectrum Brands, Inc., SB/RH Holdings, LLC, the other grantors party thereto, Credit Suisse AG, Cayman Islands
Branch, as administrative agent, U.S. Bank National Association, as indenture trustee, and Wells Fargo Bank, National Association, as collateral trustee (filed by incorporation by reference to Exhibit 10.18 to the Quarterly Report on Form 10-Q filed
with the SEC by Spectrum Brands, Inc. on August 18, 2010).
|              | 
|Exhibit 10.22 |  | Intercreditor Agreement dated as of June 16, 2010, by and among Spectrum Brands, Inc., SB/RH Holdings, LLC, the other grantors party thereto, Bank of America, N.A., as ABL agent,
and Wells Fargo Bank, National Association, as term/notes agent (filed by incorporation by reference to Exhibit 10.19 to the Quarterly Report on Form 10-Q filed with the SEC by Spectrum Brands, Inc. on August 18, 2010).                                                                                        
|              | 
|Exhibit 10.23 |  | Joinder and Supplement to Intercreditor Agreement dated as of December 13, 2010, by and among Seed Resources, L.L.C., Spectrum Brands, Inc., Bank of America, N.A., as collateral
agent and administrative agent, and Wells Fargo Bank, National Association, as collateral agent and trustee (filed by incorporation by reference to Exhibit 10.23 to the Annual Report on Form 10-K filed with the SEC by Spectrum Brands, Inc. on
December 14, 2010).                                              
|              | 
|Exhibit 10.24 |  | Trademark Security Agreement dated as of June 16, 2010, by and among the loan parties party thereto and Wells Fargo Bank, National Association, as collateral trustee (filed by
incorporation by reference to Exhibit 10.20 to the Quarterly Report on Form 10-Q filed with the SEC by Spectrum Brands, Inc. on August 18, 2010).                                                                                                                                                                     
|              | 
|Exhibit 10.25 |  | Trademark Security Agreement dated as of December 13, 2010, by and among Seed Resources, L.L.C. and Wells Fargo Bank, National Association, as collateral trustee (filed by
incorporation by reference to Exhibit 10.25 to the Annual Report on Form 10-K filed with the SEC by Spectrum Brands, Inc. on December 14, 2010).                                                                                                                                                                          



173



---

##### Table of Contents

|              |  |                                                                                                                                                                                                                                                                                                                                                                    
|------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit 10.26 |  | Trademark Security Agreement dated as of December 13, 2010, by and among Seed Resources, L.L.C. and Bank of America, N.A., as collateral agent and administrative agent (filed by
incorporation by reference to Exhibit 10.26 to the Annual Report on Form 10-K filed with the SEC by Spectrum Brands, Inc. on December 14, 2010).                                 
|              | 
|Exhibit 10.27 |  | Copyright Security Agreement dated as of June 16, 2010, by and among the loan parties party thereto and Wells Fargo Bank, National Association, as collateral trustee (filed by
incorporation by reference to Exhibit 10.21 to the Quarterly Report on Form 10-Q filed with the SEC by Spectrum Brands, Inc. on August 18, 2010).                                  
|              | 
|Exhibit 10.28 |  | Patent Security Agreement dated as of June 16, 2010, by and among the loan parties party thereto and Wells Fargo Bank, National Association, as collateral trustee (filed by
incorporation by reference to Exhibit 10.22 to the Quarterly Report on Form 10-Q filed with the SEC by Spectrum Brands, Inc. on August 18, 2010).                                     
|              | 
|Exhibit 10.29 |  | Patent Security Agreement dated as of December 13, 2010, by and among Seed Resources, L.L.C. and Wells Fargo Bank, National Association, as collateral trustee (filed by
incorporation by reference to Exhibit 10.29 to the Annual Report on Form 10-K filed with the SEC by Spectrum Brands, Inc. on December 14, 2010).                                          
|              | 
|Exhibit 10.30 |  | Patent Security Agreement dated as of December 13, 2010, by and among Seed Resources, L.L.C. and Bank of America, N.A., as collateral agent and administrative agent (filed by
incorporation by reference to Exhibit 10.30 to the Annual Report on Form 10-K filed with the SEC by Spectrum Brands, Inc. on December 14, 2010).                                    
|              | 
|Exhibit 10.31 |  | Amended and Restated Employment Agreement, entered into as of August 11, 2010, by and among Spectrum Brands, Inc., Spectrum Brands Holdings, Inc. and David R. Lumley (filed by
incorporation by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC by Spectrum Brands Holdings, Inc. on August 17, 2010).                             
|              | 
|Exhibit 10.32 |  | First Amendment, dated as of November 16, 2010, to the Employment Agreement, dated as of August 11, 2010, by and among Spectrum Brands, Inc., Spectrum Brands Holdings, Inc. and
David R. Lumley (filed by incorporation by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC by Spectrum Brands Holdings, Inc. on November 22, 2010).
|              | 
|Exhibit 10.33 |  | Retention Agreement, entered into as of August 11, 2010, by and between Spectrum Brands, Inc. and Anthony Genito (filed by incorporation by reference to Exhibit 10.2 to the Current
Report on Form 8-K filed with the SEC by Spectrum Brands Holdings, Inc. on August 17, 2010).                                                                                  
|              | 
|Exhibit 10.34 |  | Employment Agreement, effective June 9, 2008, by and between Spectrum Brands, Inc. and Anthony L. Genito (filed by incorporation by reference to Exhibit 10.15 to the Quarterly
Report on Form 10-Q for the quarterly period ended June 29, 2008, filed with the SEC by Spectrum Brands, Inc. on August 8, 2008).                                                  
|              | 
|Exhibit 10.35 |  | Amendment to the Employment Agreement, effective as of February 24, 2009, by and between Spectrum Brands, Inc. and Anthony L. Genito (filed by incorporation by reference to Exhibit
10.22 to the Annual Report on Form 10-K for the fiscal year ended September 30, 2009, filed with the SEC by Spectrum Brands, Inc. on December 29, 2009).                      
|              | 
|Exhibit 10.36 |  | Description of Second Amendment to the Employment Agreement, effective as of August 28, 2009, by and between Spectrum Brands, Inc. and Anthony L. Genito (filed by incorporation by
reference to Exhibit 10.23 to the Annual Report on Form 10-K filed with the SEC by Spectrum Brands, Inc. on December 29, 2009).                                                
|              | 
|Exhibit 10.37 |  | Third Amendment, dated as of November 16, 2010, to the Employment Agreement, dated as of June 9, 2008, by and among Spectrum Brands, Inc. and Anthony L. Genito (filed by
incorporation by reference to Exhibit 10.3 to the Current Report on Form 8-K filed with the SEC by Spectrum Brands Holdings, Inc. on November 22, 2010).                                 



174



---

##### Table of Contents

|              |  |                                                                                                                                                                                                                                                                                                                                                        
|------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit 10.38 |  | Employment Agreement, entered into as of August 16, 2010, by and between Spectrum Brands, Inc. and Terry L. Polistina (filed by incorporation by reference to Exhibit 10.25 to the
Quarterly Report on Form 10-Q filed with the SEC by Spectrum Brands Holdings, Inc. on August 18, 2010).                                                             
|              | 
|Exhibit 10.39 |  | First Amendment, dated as of November 16, 2010, to the Employment Agreement, dated as of August 16, 2010, by and among Spectrum Brands, Inc. and Terry L. Polistina (filed by
incorporation by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC by Spectrum Brands Holdings, Inc. on November 22, 2010).                 
|              | 
|Exhibit 10.40 |  | Amended and Restated Employment Agreement, effective as of January 16, 2007, by and between Spectrum Brands, Inc. and John A. Heil (filed by incorporation by reference to Exhibit
10.1 to the Current Report on Form 8-K filed with the SEC by Spectrum Brands, Inc. on January 19, 2007).                                                            
|              | 
|Exhibit 10.41 |  | Amendment to the Amended and Restated Employment Agreement, dated as of November 10, 2008, by and between Spectrum Brands, Inc. and John A. Heil (filed by incorporation by reference
to Exhibit 10.7 to the Annual Report on Form 10-K filed with the SEC by Spectrum Brands, Inc. on December 10, 2008).                                             
|              | 
|Exhibit 10.42 |  | Second Amendment to the Amended and Restated Employment Agreement, effective as of February 24, 2009, by and between Spectrum Brands, Inc. and John A. Heil (filed by incorporation
by reference to Exhibit 10.11 to the Annual Report on Form 10-K filed with the SEC by Spectrum Brands, Inc. on December 29, 2009).                                 
|              | 
|Exhibit 10.43 |  | Description of Third Amendment to the Amended and Restated Employment Agreement of John A. Heil, effective as of August 28, 2009 (filed by incorporation by reference to
Exhibit 10.12 to the Annual Report on Form 10-K filed with the SEC by Spectrum Brands, Inc. on December 29, 2009).                                                            
|              | 
|Exhibit 10.44 |  | Fourth Amendment, dated as of November 16, 2010, to the Amended and Restated Employment Agreement, dated as of January 16, 2007, by and among Spectrum Brands, Inc. and
John A. Heil (filed by incorporation by reference to Exhibit 10.4 to the Current Report on Form 8-K filed with the SEC by Spectrum Brands Holdings, Inc. on November 22, 2010).
|              | 
|Exhibit 10.45 |  | Spectrum Brands Holdings, Inc. 2007 Omnibus Equity Award Plan (formerly known as the Russell Hobbs, Inc. 2007 Omnibus Equity Award Plan) (filed by incorporation by reference to
Exhibit 10.1 to the Registration Statement on Form S-8 filed with the SEC by Spectrum Brands Holdings, Inc. on June 16, 2010).                                        
|              | 
|Exhibit 21.1  |  | Subsidiaries of Registrant.*                                                                                                                                                                                                                                                                                                                           
|              | 
|Exhibit 23.1  |  | Consent of Independent Registered Public Accounting Firm.*                                                                                                                                                                                                                                                                                             
|              | 
|Exhibit 31.1  |  | Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*                                                                                                                                               
|              | 
|Exhibit 31.2  |  | Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 the
Sarbanes-Oxley Act of 2002.*                                                                                                                                                  
|              | 
|Exhibit 32.1  |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                                                                                    
|              | 
|Exhibit 32.2  |  | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                                                                                



|* | Filed herewith
|- | --------------



175