Spectrum Brands Holdings, Inc. · NYSE:SPB

Spectrum Brands — Debt Investor Presentation (October 2012)

51 slides from Spectrum Brands's debt investor presentation, Oct 22, 2012

  1. Slide 1: Public Lenders Presentation

    October 22, 2012 Public Lenders Presentation

  2. Slide 2: Preliminary Nature of Results

    Preliminary Nature of Results 2 We have not yet finalized our financial results for our fiscal 2012 year ended September 30, 2012. The preliminary estimated fi nancial results described herein are unaudited and subject to revision pending the completion of the accounting and financial reporting proc

  3. Slide 3: Forward-Looking Statements

    Forward - Looking Statements 3 Certain matters discussed in this presentation and other oral and written statements by representatives of Spectrum Brands Ho ldi ngs, Inc. (“Spectrum Brands Holdings”) regarding matters such as the Spectrum Brands Holdings’ estimates of its unaudited fiscal 2012 r esu

  4. Slide 4: Agenda

    Agenda 4 ▪ Transaction Overview Marco Habert Deutsche Bank ▪ Spectrum Brands Company Overview Tony Genito Chief Financial Officer ▪ HHI Overview Dave Lumley Chief Executive Officer ▪ Acquisition Highlights David Lumley Chief Executive Officer ▪ Credit Highlights Tony Genito Chief Financial Officer ▪

  5. Slide 5: Transaction Overview

    © Spectrum | Transaction BRANDS Overview

  6. Slide 6: Transaction Overview

    6 Transaction Overview ▪ On October 9, 2012, Spectrum Brands, Inc. announced that it signed a definitive agreement to acquire the Hardware & Home Improvement Group ("HHI") of Stanley Black & Decker, Inc. (“Stanley") – HHI is the #1 U.S. provider of residential locksets and builders’ hardware, and a

  7. Slide 7: Sources and Uses and Pro Forma Capitalization

    Sources and Uses and Pro Forma Capitalization 7 ($ in millions) Sources of funds Uses of funds New Term Loans $800 Purchase equity $1,394 New Senior Unsecured Notes 1,040 Repay existing Spectrum debt 370 Acquired cash 16 Estimated fees, expenses, and OID 75 Cash to balance sheet 17 Total sources $1,

  8. Slide 8: Spectrum Brands Company Overview

    Spectrum Brands Company Overview

  9. Slide 9: Spectrum's Diverse Portfolio of Unrivaled Brands

    Spectrum’s Diverse Portfolio of Unrivaled Brands 9 Global Batteries Personal Care Small Appliances Global Batteries & Appliances FY2012 Net Sales $2.25B; EBITDA $308M Global Pet Supplies FY2012 Net Sales $616M; EBITDA $113M Home & Garden FY2012 Net Sales $387M; EBITDA $87M Spectrum’s portfolio inclu

  10. Slide 10: Spectrum Brands – Providing Quality and Value to Retailers and Consumers Worldwide

    10 10 Global Batteries & Appliances 69% Global Pet Supplies 19% Home & Garden 12% Global Batteries & Appliances 61% Global Pet Supplies 22% Home & Garden 17% Spectrum Brands – Providing Quality and Value to Retailers and Consumers Worldwide ▪ FY2012 net sales and adjusted EBITDA of $3,252 million an

  11. Slide 11: Global Batteries & Appliances Segment Adjusted EBITDA Performance

    11 11 Global Batteries & Appliances Segment Adjusted EBITDA Performance - GBA $165 $185 $200 $212 $307 $308 $75 $84 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 Spectrum Brands Russell Hobbs $275 $297 11% 13% 16% 17% 17% 18% CY2007 CY2008 CY2009 CY2010 CY2011 9/30/2012 (a) Nielsen FDM including Walmart

  12. Slide 12: Global Pet Supplies Segment

    $93 $92 $93 $98 $99 $113 $5 $6 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 Pet Russell Hobbs $98 $104 Aquatics 58% Companion Animal 42% ▪ Attractive industry trends (e.g., increasing pet ownership / spending per pet, low seasonality) ▪ North American aquatics business showing continued improvement / p

  13. Slide 13: Home & Garden Segment Delivering Robust Growth

    $41 $53 $55 $67 $1 $1 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 Home & Garden Russell Hobbs Committed to value model of providing same performance at less price ▪ Strong financial results – Attractive margins – Low CapEx requirements ▪ Attractive industry trends – Outdoor living explosion – Strong u

  14. Slide 14: Strong Financial Performance Despite a Challenged Consumer

    14 14 $272 $297 $391 $432 $457 $485 11.7% 12.2% 13.0% 13.9% 14.3% 14.9% FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 $2,333 $2,427 $3,009 $3,111 $3,187 $3,252 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 Strong Financial Performance Despite a Challenged Consumer Spectrum has generated robust sales and adj

  15. Slide 15: HHI Overview

    () Spectrum | HI Overview BRANDS

  16. Slide 16: HHI Group Overview

    16 16 Residential Locksets 58% Faucets 19% Residential Hardware 18% Tong Lung 5% U.S. 74% Canada 11% Latin America 8% RoW 7% Revenue by Segment ( LTM 6/30) Revenue by Geography ( LTM 6/30 ) HHI Group Overview Est. 1946 Est. 1904 Est. 1946 Est. 1843 Est. 1901 Est. 1947 Est. 1910 Est. 1910 Est. 1946 E

  17. Slide 17: Introduction to HHI

    17 17 Introduction to HHI Business Description Product Overview ▪ HHI is a leading provider of residential locksets, builders’ hardware, and faucets - #1 U.S. lockset and #1 Canadian lockset, #1 U.S. luxury hardware, #1 U.S. builders’ hardware, # 4 U.S. faucets - Largest global tubular lock manufact

  18. Slide 18: Recognized and Established Brands

    Recognized and Established Brands 18 Residential Locksets Builders’ Hardware Plumbing Brand Established 1946 1904 1946 1843 / 1901 1947 1910 Market Position #1 in U.S. Locksets #1 in Canada Locksets #1 in U.S. Luxury Locksets #1 in U.S. Builders’ Hardware #2 in Mexico Hardware #4 U.S. in Faucets (#3

  19. Slide 19: Strong Distribution and Channel Penetration

    Strong Distribution and Channel Penetration 19 Home Centers Builders, Distributors, Showrooms Residential new home construction Repair and Remodel DIY Co - Op and 2 - Step Est. 1910 Est. 1946 Est. 1904 Est. 1946 Est. 1843 Est. 1901 Est. 1947 Est. 1910 Est. 1946 Est. 1904 Est. 1946 Est. 1843 Est. 190

  20. Slide 20: Leading Market Position

    20 20 Leading Market Position HHI Market Shares ▪ Largest tubular lock manufacturer globally ▪ #1 U.S. lockset ▪ #1 Canadian lockset ▪ #1 U.S. luxury hardware ▪ #1 U.S. builders’ hardware ▪ #4 U.S. faucets ▪ Large scale and excellent channel management leading to #1 position with major retailers and

  21. Slide 21: Excellent Customer Relationships

    21 21 Excellent Customer Relationships Customer Description of Relationship Value Proposition ▪ Won Home Depot Vendor of the Year in 2011 ▪ Supply chain and fill rate management ▪ Mix management and merchandising ▪ In - store support and training ▪ Wins during recent line reviews ▪ Install base ▪ Br

  22. Slide 22: Investment in Innovation

    Investment in Innovation 22 Year 2009 2010 2011 Index % 34% 36% 32% New Product Vitality (a) Track record of NPI success with new focus on functional innovation delivering market share gains and profit improvement ▪ Group New Product Introduction (NPI) vitality 30% plus ▪ 2008 investment in advanced

  23. Slide 23: Acquisition Highlights

    23 23 Acquisition Highlights

  24. Slide 24: Acquisition Highlights

    24 24 x Transaction significantly increases Spectrum’s scale, product breadth and geographic diversification x HHI adds a portfolio of well - known brands to Spectrum’s existing strong and attractive brand line - up x Spectrum has the ability to grow HHI by leveraging the Company’s global infrastruc

  25. Slide 25: Transaction Significantly Increases Scale

    25 25 $3,252 $4,237 Standalone Combined Transaction Significantly Increases Scale… ▪ The transaction adds an established, growing and profitable hardware and home products business dedicated to innovative product design and technology ▪ HHI adds approximately $1 billion of sales, and almost $200 mil

  26. Slide 26: Product Breadth and Geographic Diversification

    26 26 United States 56% RoW 44% United States 61% RoW 39% Global Batteries & Appliances 53% Global Pet Supplies 15% Home & Garden 9% HHI 23% Global Batteries & Appliances 69% Global Pet Supplies 19% Home & Garden 12% …Product Breadth and Geographic Diversification ▪ Diversifies product portfolio wit

  27. Slide 27: HHI Adds a Portfolio of Well-known Brands

    HHI Adds a Portfolio of Well - known Brands to an Already Strong and Attractive Lineup 27 Spectrum’s additions to its diverse brand portfolio Segment Brands Highlights Residential locksets ▪ #1 U.S. lockset ▪ #1 Canadian lockset ▪ Total security solutions across price points and channels ▪ Dominant

  28. Slide 28: Growing HHI Internationally Using Global Infrastructure

    28 28 Spectrum has the Ability to Grow HHI Internationally by Leveraging the Company’s Global Infrastructure and Business Model ▪ Revenue opportunities to cross - sell each others’ products – Utilize one company’s particular strengths (brand awareness, distribution capabilities) to market the others

  29. Slide 29: Improved Customer Mix and Deeper Home Center Penetration

    The Acquisition Improves Customer Mix and Provides Deeper Penetration in Key Home Center Accounts 29 Spectrum HHI Combined ▪ The addition of HHI will expand Spectrum’s relationships with major retailers such as home center customers ▪ Reduces reliance on #1 customer Note: Figures based on FY2012 rev

  30. Slide 30: HHI Brings Global Growth Opportunities

    HHI Brings Excellent Global Growth Opportunities and Entry Into the Residential and Light Commercial Businesses 30 ▪ HHI has a diversified existing product portfolio that is complemented by outstanding new product innovation and execution ▪ Opportunity to grow market share in the mechanical security

  31. Slide 31: Robust Combined Business with Solid Free Cash Flow Profile

    $ 175 $5 SPB HHI Synergies PF SPB $618 $438 Robust Combined Business with Solid Free Cash Flow Profile and Enhanced Margins 31 ▪ Transaction immediately increases Spectrum margins to 16% with further expansion expected ▪ Adds $90m in incremental free cash flow in first two years and also accelerates

  32. Slide 32: Credit Highlights

    © specerum Credit BRANDS Highlights

  33. Slide 33: Credit Highlights

    33 33 Credit Highlights 33 x Large, market leading, well positioned product portfolio x Leading market share and competitive brands x Strong performance throughout recent business cycle x Robust free cash flow profile with enhanced EBITDA margins x Diverse and loyal customer base x Focus on providin

  34. Slide 34: Large, Market Leading, Well Positioned Product Portfolio

    Global Batteries & Appliances 53% Global Pet Supplies 15% Home & Garden 9% HHI 23% $678 $485 $846 $826 $334 $117 Combined (a) FY2012 Revenue based on FY2012 Spectrum revenue of $3,252 million and LTM 6/30/12 HHI revenue ($939 million HHI and $46 mil lion Tong Lung). Tong Lung figures as of LTM 12/31

  35. Slide 35: Leading Market Share and Competitive Brands

    Category Select Key Brands Market Position Consumer Batteries #3 (North America / fast growing) #2 (Europe) #1 (Latin America) Electric shaving and grooming #2 (North America, UK, Australia) #2 / #3 (Continental Europe) Electrical personal care products #1 (Australia) #2 (Europe) #3 (North America)

  36. Slide 36: Strong Performance Throughout Recent Business Cycle

    Strong Performance Throughout Recent Business Cycle $2,333 $2,427 $3,009 $3,111 $3,187 $3,252 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 2007A 2008A 2009A 2010A 2011A 2012A $272 $297 $391 $432 $457 $485 11.7% 12.2% 13.0% 13.9% 14.3% 14.9% 10.0% 12.0% 14.0% 16.0% 18.0% $0 $100 $200 $300 $400 $

  37. Slide 37: Robust Free Cash Flow Profile with Enhanced EBITDA Margins

    16.0% 14.9% 18.5% 12.4% 11.6% 6.9% Average = 13.1% (a) Combined 14.6% 13.5% 16.1% 10.3% 9.3% 4.7% Average = 11.0% (a) Combined Robust Free Cash Flow Profile with Enhanced EBITDA margins CY2012E (EBITDA – Capex ) / Sales CY2012E Adjusted EBITDA Margin (b) ▪ The acquisition of HHI adds a higher adjust

  38. Slide 38: Diverse and Loyal Customer Base

    Diverse and Loyal Customer Base Spectrum HHI Combined ▪ Spectrum’s largest customer is currently ~23% of sales, with the remainder of its top 10 customers accounting for ~18% ▪ The addition of HHI reduces the largest customer to ~17% of combined while significantly increasing the next two largest ho

  39. Slide 39: Focus on Innovative Products and Leading Retailer Metrics

    Focus on Providing Innovative Products and Leading Retailer Metrics Spectrum has a proven ability to develop new products ▪ Spectrum plans to continue to use its strong brand names, established customer relationships and significant research and development efforts to introduce innovative products t

  40. Slide 40: Strong FCF and Commitment to Reduce Debt

    Spectrum’s strong FCF and commitment to reduce debt have provided enhanced shareholder value ▪ Track record of using strong free cash flow generation to reduce debt ▪ Proven Integrator: management team successfully integrated Russell Hobbs, exceeding synergy goals as well as more recent add - ons Fu

  41. Slide 41: Experienced and Proven Management Team

    Experienced and Proven Management Team 41 Spectrum Management Name / Position Years with company Background David R. Lumley CEO & President 6 ▪ CEO since March 2010 ▪ Served as Co - COO and President, Global Batteries, Personal Care and Home and Garden segments since January 2007 ▪ Previously served

  42. Slide 42: Spectrum Financial Overview

    Or Spectrum Financial BRANDS Overview

  43. Slide 43: Historical Spectrum Brands Financials

    $908 $939 $1,085 $1,140 $1,137 $1,126 38.9% 38.7% 36.1% 36.6% 35.7% 34.6% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 2007A 2008A 2009A 2010A 2011A 2012A Before RH $22 $22 $12 $40 $36 $47 0.9% 0.9% 0.4% 1.3% 1.1% 1.4% 0.0% 2.0% $0 $5 $10 $15 $20 $25

  44. Slide 44: 2012 Performance Update

    44 44 2012 Performance Update Fourth Quarter 2012 Fiscal Year End 2012 ▪ Net sales increased 0.7% as - reported and 7.4% on a constant currency basis. Home and Garden and Global Pet Supplies segments both reported higher revenue in the fourth quarter which included $19 million sales from the Black F

  45. Slide 45: Historical HHI Performance

    $245 $303 $296 28.9% 32.2% 31.5% 20.0% 30.0% 40.0% 50.0% $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 2010A 2011A 6/30/12 LTM $15 $23 $13 1.7% 2.4% 1.4% 0.0% 10.0% $0 2010A 2011A 6/30/12 LTM $181 $185 $181 21.3% 19.6% 19.2% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% $0 $50 $100 $150 $200 2010A 2011A 6/30/

  46. Slide 46: Superior Performance Through Operational Excellence

    Superior Performance Through Operational Excellence 46 Note: 2006 financials unaudited. Manufacturing square feet reduction 29% Distribution square feet reduction 22% Fixed costs reduction 22% Head count reduction 42% Working capital turns increase 63% Major Transformation Elements ▪ From 2003 to 20

  47. Slide 47: Closing Remarks and Q&A

    Closing Ce Spectrum Remarks and OO) BRANDS Q&A

  48. Slide 48: Appendix

    © specerum Appendix BRANDS

  49. Slide 49: Spectrum Adjusted EBITDA Reconciliation

    49 49 Spectrum Adjusted EBITDA Reconciliation 9/30 FY2007 9/30 FY2008 9/30 FY2009 9/30 FY2010 9/30 FY2011 9/30 FY2012 Net income ($597) ($932) $943 ($190) ($75) $49 Income tax expense 56 (10) 74 63 92 60 Interest expense 256 229 190 277 208 192 Depreciation and amortization 77 85 67 118 135 134 Unad

  50. Slide 50: HHI Adjusted EBITDA Reconciliation

    50 50 HHI Adjusted EBITDA Reconciliation 12/31 FY2010 12/31 FY 2011 LTM 6/30/12 Net Income (loss), adjusted ($3) $36 $41 Income tax expense (1) 12 14 Interest expense 46 42 37 Restructuring and related charges 12 20 24 Corporate allocations/ affiliate transactions 9 11 15 Net affiliate currency gain

  51. Slide 51: Tong Lung Adjusted EBITDA Reconciliation

    51 51 Tong Lung Adjusted EBITDA Reconciliation 12/31 FY 2011 Net Income (loss), adjusted $5 Income tax expense 1 Other 1 EBIT 6 Depreciation and amortization 2 EBITDA contribution for Tong Lung business to be retained by seller (1) Adjusted EBITDA $7

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