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Spectrum Brands Holdings is a global and diversified consumer products company with market-leading, high-performance and value-based brands. Our fiscal 2013 net sales were $4.28 billion on a pro forma basis including the Hardware & Home Improvement Group (HHI) which was acquired in December 2012. Headquartered in Middleton, Wisconsin, we are a leading worldwide supplier of consumer batteries, residential locksets, residential builders’ hardware, faucets, shaving and grooming products, personal care products, small household appliances, specialty pet supplies, lawn and garden and home pest control products, and personal insect repellents. Our products are well-known, widely trusted, sold by the world’s top 25 retailers, and available in more than one million stores in approximately 140 countries on six continents. Our brands are largely non-discretionary, non- premium priced, home-related, replacement packaged goods used by consumers on a daily basis. Our reporting segments are Global Batteries & Appliances (Personal Care and Home Appliances); Global Pet Supplies; Home and Garden; and Hardware & Home Improvement (HHI). We have approximately 13,500 employees in 55 countries. Our manufacturing and product development facilities are located in the United States, Europe, Latin America and Asia. Spectrum Value Model Q&A David R. Lumley Anthony L. Genito Chief Executive Officer Chief Financial Officer pectrum Brands reported its fourth consecutive year What are the priority uses of your free cash flow? Sof record performance in fiscal 2013 with results that met Genito: Our top priority is debt retirement and reducing our total leverage. or exceeded financial guidance. Our Company expects fiscal 2014 to be We plan to pay down at least $250 million of term debt in fiscal 2014. a fifth consecutive year of record results, including an increase in free We have a quarterly dividend currently at $0.25 per share to service. cash flow to at least $350 million, or about $7 per share, a significant Our Board recently authorized a $200 million common stock repurchase improvement from a record $254 million in fiscal 2013 and $208 million in program effective over 24 months. It will be used in conjunction with our fiscal 2012. Our Company’s fiscal 2013 adjusted EBITDA margin of 15.8 debt reduction goals and especially when our share value trades below percent was meaningfully greater than our peer group average. our view of “intrinsic value” based upon our free cash flow metrics. Finally, we continue to look for accretive, bolt-on acquisitions. With the significant In this annual report communication to shareholders, Chief Executive increase we expect in our fiscal 2014 free cash flow, we have a lot more Officer Dave Lumley and Chief Financial Officer Tony Genito answer flexibility and options. many frequently asked questions from analysts and investors. Just what is the Spectrum Value Model? What is Spectrum Brands’ strategy? Lumley: It is the heart of our Company – a game changer redefining Lumley: We focus on and drive high cash-generating, consumer products the value proposition for retailers and consumers and helping to provide businesses by maximizing our Spectrum Value Model and our global stability and sustainable earnings. It is a go-to-market strategy that delivers new product development and shared services infrastructures, increasing genuine value to retailers and consumers with products that work as well distribution/shelf space at key retailers, adding new retail customers, and as, or better than, our competitors – and for a lower cost. It provides higher expanding internationally. In fiscal 2014, we are launching “umbrella” margins and lower acquisition costs to our retail customers, with retail products in all divisions to help increase sales and distribution. Some of category growth, market share gains and excellent category management them are shown in this annual report. And, we will maintain a continuous and merchandising. We concentrate on winning at point of sale and not improvement culture, a lean and efficient operating structure, and strong through brand advertising. So we can invest in product performance, R&D expense controls. and cost improvement. That’s our model and it is working. Our products What are the advantages of having such a diverse group of are performance-driven brands. This allows us to benefit from consumers’ increasing focus on value and openness to trial and brand conversion businesses and brands? against often slower-selling, and sometimes declining, premium-priced Lumley: Our Company is well-balanced seasonally and geographically. products. What’s the takeaway? Value is winning in the marketplace with We have diverse, valued-based, market-leading and largely non- today’s smart shoppers. We think Spectrum Brands is a very attractive discretionary products that compete in multiple, large and stable partner/leverage for retailers and a compelling option for consumers. categories with attractive growth prospects. Our brands are widely trusted, enduring and generally carry a low cash register ring. We have Why do you like your consumer battery business? a good retailer customer balance globally. This gives us timely and clear Lumley: It is our principal global platform for the growth of our many insight into consumer trends and needs with our everyday, replacement product lines and the historic foundation for our brand strength, product product portfolio. There are many cross-selling opportunities across the quality, customer value proposition, solid retailer relationships, consistent businesses by geography and by retailer. We have a very experienced profitability and strong cash flow. Its unit growth tends to track GDP rates. and proven senior management team with a record of achievement not Simply put, it is a strong EBITDA-producing, cash flow generator with only here at Spectrum Brands but also in previous executive roles at other steady performance year-in and year-out. We like that. leading consumer companies. Genito: It is important to note that our battery business, like our small What is your acquisition approach? appliances and personal care division, generates significant free cash flow Lumley: As our Black Flag and FURminator acquisitions in late 2011 that we can deploy in a number of ways to enhance shareholder value, showed, we look for accretive, tuck-in acquisitions primarily in our Pet and such as debt reduction or investing in our higher-margin businesses. Home and Garden divisions that bring quick and major manufacturing and SG&A cost synergies, along with commercial benefits such as new customer channels and geographies. Think of these as like What does the retail customer profile look like? businesses for like retailers. Lumley: We have long-term relationships with a diverse and Genito: Given its size, our accretive HHI acquisition was loyal base of customers, some over 20 years in fact. In recent transformational in nature, adding a major new leg to our years, we have added a number of new customers here and platform of businesses and giving us increased scale, diversity, abroad. Our largest customer in fiscal 2013 was about 17 margins and free cash flow from brands with largely number- percent of our total sales, and the rest of our top 10 customers one market shares. We think it was the right acquisition at the accounted for about 18 percent. We pride ourselves on right time, and we now have identified bolt-on opportunities providing the best retailer margin and outstanding category for HHI as well. Our approach to acquisitive growth is patient management and merchandising to strengthen and extend and disciplined, no matter what the size of the target candidate our retailer partnerships. We are strongly aligning with our might be. retailer partners to accelerate their e-commerce sales of our products. This is a big opportunity. So there is a real place in Can you talk about Spectrum Brands’ track record today’s world for best value, performance-based, home-related for acquisitions, integration, leverage reduction, products. That’s us. and margin enhancement? Genito: In our skills set, we think we are a proven integrator. What are the biggest risks to Spectrum Brands? Lumley: It is a question every company assesses. Risk We exceeded our synergy goals in the 2010 Russell Hobbs management is ongoing. But because of our product and acquisition, rapidly integrated our FURminator and Black geographic mix and balance, and the predictability and strength Flag tuck-in purchases, and have integrated our large HHI of our cash flows, we really do not see major, overriding risks. acquisition smoothly and ahead of schedule. Our strong free We are seeing erratic competitive responses to the success of cash flow generation, enhanced by our $1.2 billion of usable our value-based market share growth – increased discounting NOLs in the U.S., has been used primarily to reduce debt, and promotional activity generally from slower-selling, specifically $580 million of term loan repayments since the premium-priced brands which may be declining. But we are start of fiscal 2011 to further reduce interest expense. Our total ready for that and are meeting it head-on. Value is our weapon, leverage declined from 5.4 times in fiscal 2009 to 3.4 times and, again, it is a winner in today’s market. in fiscal 2012. Our target total leverage range is 2.5 times to 3.5 times. Our cost of debt has fallen from over 9 percent in How will Spectrum Brands keep growing? fiscal 2010 to below 5 percent today, and annual cash interest Lumley: We enjoy steady, high cash flow generating payments have declined significantly from 3 refinancings in platforms in batteries and appliances, with their powerful recent years. We have a relatively low appetite for capital brands, joined with higher-margin, expanding pet supplies expenditures, and more than two-thirds of our spending is for and home and garden businesses. Now add to that HHI with new product development and cost reductions.

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