Spectrum Brands Holdings, Inc.

Previous wording

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 the Condensed Consolidated Financial Statements and related notes included in Item 1 of this Quarterly Report on Form 10-Q (the "Quarterly Report") and our Annual Report on Form 10-K for the fiscal year ended September 30, 2025 filed with the SEC on November 18, 2025 (the "2025 Annual Report"). The following discussion may contain forward-looking statements that reflect our plans, estimates, and beliefs and involve risks, uncertainties, and assumptions. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those discussed within "Forward-Looking Statements" included elsewhere in this Quarterly Report, and in Item 1A. Risk Factors and "Forward-Looking Statements" included within our 2025 Annual Report. Unless the context indicates otherwise, the term the "Company," "we," "us," or "our" are used to refer to Spectrum Brands Holdings, Inc. and its subsidiaries collectively.

Current wording

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 the Condensed Consolidated Financial Statements and related notes included in Item 1 of this Quarterly Report on Form 10-Q (the "Quarterly Report") and our Annual Report on Form 10-K for the fiscal year ended September 30, 2025 filed with the SEC on November 18, 2025 (the "2025 Annual Report"). The following discussion may contain forward-looking statements that reflect our plans, estimates, and beliefs and involve risks, uncertainties, and assumptions. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those discussed within "Forward-Looking Statements" included elsewhere in this Quarterly Report, and in Item 1A. Risk Factors and "Forward-Looking Statements" included within our 2025 Annual Report. Unless the context indicates otherwise, the terms the "Company," "we," "us," or "our" are used to refer to Spectrum Brands Holdings, Inc. and its subsidiaries collectively.

Previous wording

The following is a reconciliation of reported net sales to organic net sales for the three month period ended December 28, 2025 compared to net sales for the three month period ended December 29, 2024:

Current wording

The following is a reconciliation of reported net sales to organic net sales for the three and six month period ended March 29, 2026 compared to net sales for the three and six month period ended March 30, 2025:

Previous wording

The following is a reconciliation of Net Income From Continuing Operations to Adjusted EBITDA and Adjusted EBITDA margin for the three month periods ended December 28, 2025 and December 29, 2024, respectively.

Current wording

The following is a reconciliation of Net Income From Continuing Operations to Adjusted EBITDA and Adjusted EBITDA margin for the three and six month periods ended March 29, 2026 and March 30, 2025, respectively.

Previous wording

3 Other is attributable to other project costs associated with previous strategic separation initiatives and distribution center transitions, plus certain non-recurring key executive severance costs in the prior year.

Current wording

3 Other is attributable to other project costs associated with strategic separation initiatives and distribution center transitions, plus certain non-recurring key executive severance costs in the prior year.

Previous wording

The changes to U.S. trade policy including the introduction of incremental U.S. tariffs on imported goods in the prior year have had a significant impact to our operations, increasing costs for sourced products, materials and components, and thus raising cost of goods sold and pressuring profit margins. The changes to tariffs were introduced midway through our prior fiscal year, impacting our operating results primarily during the second half of the prior fiscal year. Our mitigation strategies included adjusting pricing and actively managing supply chain by engaging suppliers to support cost sharing or expanding supply chain diversification. The changing tariff policies impacted our reporting segments to varying degrees, most significantly with HPC, as most all of its products supporting the U.S. business are imported from southeast Asia. HPC has actively pursued sourcing alternatives and has been moving production to diversify its supply chain and more effectively manage risk. Over 60% of net sales in HPC are driven through international markets and were not directly impacted by U.S. tariffs. Comparatively, our other segments were less affected. GPC has certain aquatic equipment and chews & treats products that were sourced primarily from China, but have a higher degree of sourcing diversity with major suppliers elsewhere, which has allowed it to move production more swiftly to alternative supply. GPC also manufactures aquatics nutrition products at its facility in Germany and imports them into the U.S., but such tariff-related costs have been predominantly mitigated through pricing adjustments and cost management. The H&G segment products are predominantly manufactured and sold within the U.S. with only certain material costs and a small portfolio of products, such as baits, traps and mops, that are internationally sourced and affected by U.S. tariffs, with such costs having been mitigated through pricing adjustments and vendor cost management.

Current wording

The changes to U.S. trade policy including the introduction of incremental U.S. tariffs on imported goods in the prior year have had a significant impact to our operations, increasing costs for sourced products, materials and components, and thus raising cost of goods sold and pressuring profit margins. The changes to tariffs were introduced midway through our prior fiscal year, impacting our operating results primarily during the second half of the prior fiscal year. Our mitigation strategies included adjusting pricing and actively managing supply chain by engaging suppliers to support cost sharing or expanding supply chain diversification. The changing tariff policies impacted our segments to varying degrees, most significantly with HPC, as most all of its products supporting the U.S. business are imported from southeast Asia. HPC has actively pursued sourcing alternatives and has been moving production to diversify its supply chain and more effectively manage risk. Over 60% of net sales in HPC are driven through international markets and were not directly impacted by U.S. tariffs. Comparatively, our other segments were less affected. GPC has certain aquatic equipment and chews & treats products that were sourced primarily from China, but have a higher degree of sourcing diversity with major suppliers elsewhere, which has allowed it to move production more swiftly to alternative supply. GPC also manufactures aquatics nutrition products at its facility in Germany and imports them into the U.S., but such tariff-related costs have been predominantly mitigated through pricing adjustments and cost management. The H&G segment products are predominantly manufactured and sold within the U.S. with only certain material costs and a small portfolio of products, such as baits, traps and mops, that are internationally sourced and affected by U.S. tariffs, with such costs having been mitigated through pricing adjustments and vendor cost management.

Previous wording

We have continued our focus on operational efficiencies by optimizing production processes, reducing waste, and leveraging technology to enhance productivity, with the aim of offsetting cost increases and protecting margins. With the trade policy and tariff changes realized in the prior fiscal year, we believe our mitigation strategies have been successful in protecting our profitability and minimizing the impact in comparability of our operating performance. Regardless, we continue to closely monitor the trade environment for impacts to our projections and forecasts. We have managed cash flow and secured our balance sheet to support the ongoing business through the evolving changes in U.S. trade policy and potential impacts to the global-macro economic environment. We are focused on supply chain diversification, operational efficiency, and strategic investments for sustaining growth and profitability amid trade uncertainties.

Current wording

We continue to closely monitor the trade environment for impacts on our projections and forecasts. We have managed cash flow and secured our balance sheet to support the ongoing business through the evolving changes in U.S. trade policy and potential impacts on the global-macro economic environment. We are focused on supply chain diversification, operational efficiency, and strategic investments for sustaining growth and profitability amid trade uncertainties.

Previous wording

We periodically evaluate and enter into strategic transactions that may result in the acquisition or divestiture of a business which impacts the comparability of the financial results of the consolidated group and or certain reporting segments. Additionally, we enter into internal restructuring and optimization initiatives to improve efficiencies and utilization to reduce costs, increase revenues and improve margins, which may have a significant impact on the comparability of financial results on the condensed consolidated financial statements. These changes and updates are inherently difficult and our ability to achieve the anticipated cost savings and other benefits from such operating strategies may be affected by a number of other macro-economic factors, such as inflation and increased interest rates, which are beyond our control. Moreover, the comparability of financial information may be impacted by incremental amounts attributable to such strategic transactions, restructuring and optimization initiatives. The following is a summary of costs attributable to strategic transactions and business development costs that are considered as potentially having a significant impact on the comparability of the financial results on the consolidated financial statements and segment financial information, for each of the projects during the three month periods ended December 28, 2025 and December 29, 2024, respectively:

Current wording

We periodically evaluate and enter into strategic transactions that may result in the acquisition or divestiture of a business which impacts the comparability of the financial results of the consolidated group and/or certain reporting segments. Additionally, we enter into internal restructuring and optimization initiatives to improve efficiencies and utilization to reduce costs, increase revenues and improve margins, which may have a significant impact on the comparability of financial results on the condensed consolidated financial statements. These changes and updates are inherently difficult and our ability to achieve the anticipated cost savings and other benefits from such operating strategies may be affected by a number of other macro-economic factors, such as inflation and increased interest rates, which are beyond our control. Moreover, the comparability of financial information may be impacted by incremental amounts attributable to such strategic transactions, restructuring and optimization initiatives. The following is a summary of costs attributable to strategic transactions and business development costs that are considered as potentially having a significant impact on the comparability of our financial results as reflected on the consolidated financial statements and segment financial information, for each of the projects during the three and six month periods ended March 29, 2026 and March 30, 2025, respectively:

Previous wording

1 Costs attributable to a multi-year transformation project to upgrade and implement our enterprise-wide operating systems to SAP S/4 HANA on a global basis, including project management and professional services for planning, design, and business process review that do not qualify as software configuration and implementation costs recognized as capital expenditures or deferred costs under applicable accounting principles. The Company had recently extended the project to include its HPC segment and anticipates costs to be incurred through further deployments through calendar year 2026.

Current wording

1 Costs attributable to a multi-year transformation project to upgrade and implement our enterprise-wide operating systems to SAP S/4 HANA on a global basis, including project management and professional services for planning, design, and business process review that do not qualify as software configuration and implementation costs recognized as capital expenditures or deferred costs under applicable accounting principles. The Company has extended the project to include its HPC segment and anticipates costs to be incurred through further deployments through calendar year 2026.

Previous wording

We periodically recognize exit and disposal costs primarily consisting of severance and contract termination costs that may be attributable to a reorganization or restructuring of the Company, cost savings initiatives, or in consideration of a recent strategic transaction. Such actions result in the recognition of costs to us that are considered incremental and not reflective of the continuing operating costs of the business and may impact the comparability of the consolidated company and its segments.

Current wording

We periodically recognize exit and disposal costs primarily consisting of severance and contract termination costs that may be attributable to a reorganization or restructuring of the Company, cost savings initiatives, or in consideration of a recent strategic transaction. Such actions result in the recognition of costs to us that are considered incremental and not reflective of the continuing operating costs of the business and may impact the comparability of the consolidated company and its segments' results of operations.

Previous wording

The following is a summary of consolidated results of operations for the three month periods ended December 28, 2025 and December 29, 2024, respectively.

Current wording

The following is a summary of consolidated results of operations for the three and six month periods ended March 29, 2026 and March 30, 2025, respectively.

Previous wording

Net Sales. The following is a summary of net sales by segment for the three month periods ended December 28, 2025 and December 29, 2024, respectively, and the principal components of changes in net sales between the respective periods.

Current wording

Net Sales. The following is a summary of net sales by segment for the three and six month periods ended March 29, 2026 and March 30, 2025, respectively, and the principal components of changes in net sales between the respective periods.

Previous wording

Gross Profit. The following is a summary of the gross profit and gross profit margin for the three month periods ended December 28, 2025 and December 29, 2024, respectively, and the principal factors contributing to the change between the respective periods.

Current wording

Gross Profit. The following is a summary of the gross profit and gross profit margin for the three and six month periods ended March 29, 2026 and March 30, 2025, respectively, and the principal factors contributing to the change between the respective periods.

Previous wording

Gross profit for the three month period decreased due to lower volumes and higher costs, with a margin decrease from higher comparable costs from tariffs and inflation partially mitigated through positive pricing adjustments, with higher trade spend and unfavorable mix, partially offset by favorable foreign currency.

Current wording

Gross profit for the three month period increased with a margin increase due to positive pricing adjustments to address higher comparable costs from tariffs and inflationary costs with higher trade spend, increased volumes and favorable foreign currency. Gross profit for the six month period increased with a margin decrease due to positive pricing adjustments and favorable foreign currency mitigating higher costs from higher comparable costs, with higher trade spend, unfavorable mix and lower overall volume.

Previous wording

Selling, General & Administrative. The following is a summary of the selling, general & administrative costs for the three month periods ended December 28, 2025 and December 29, 2024, respectively, including amounts as a percentage of net sales for each respective period.

Current wording

Selling, General & Administrative. The following is a summary of the selling, general & administrative costs for the three and six month periods ended March 29, 2026 and March 30, 2025, respectively, including amounts as a percentage of net sales for each respective period.

Previous wording

Selling, general and administrative expenses increased for the three month periods due to higher general and administrative costs. Sales, marketing and advertising costs were consistent between periods for the three month period and relative to sales volumes between periods. Distribution costs were consistent between periods for the three month periods and relative to sales volumes between periods. General & administrative costs increased for the three month periods due to higher overhead costs following the expiration of transition service agreements associated with the HHI divestiture in the prior year in June 2025. Research & development costs were consistent between periods. Strategic transaction, restructuring and optimization costs, inclusive of exit & disposal costs, decreased for the three month periods due to lower costs towards HPC separation initiatives and the expiration of transition service agreements associated with the HHI divestiture in the prior year.

Current wording

Selling, general and administrative expenses increased for the three and six month periods primarily due to higher general and administrative costs. Sales, marketing and advertising costs decreased between periods and relative to net sales which was primarily attributable to cost management and timing and partially offset by an increase in distribution costs between periods for the three and six month periods. General & administrative costs increased for the three and six month periods due to higher overhead costs following the expiration of transition service agreements associated with the HHI divestiture in June 2025. Research & development costs were consistent between periods. Strategic transaction, restructuring and optimization costs, inclusive of exit & disposal costs, increased for the three and six month periods due to incremental initiatives during the three month period plus additional costs towards HPC separation initiatives and the expiration of transition service agreements associated with the HHI divestiture in the prior year.

Previous wording

Interest Expense. Interest expense increased during the three month period due to higher finance leases compared to the prior period.

Current wording

Interest Expense. Interest expense during the three and six month periods was consistent to the prior period.

Previous wording

Interest Income. Interest income decreased during the three month period due to lower cash balances held in term deposits compared to the prior period.

Current wording

Interest Income. Interest income during the three month period was consistent to the prior period, whereas interest income during the six month period decreased due to higher cash balances held in term deposits in the first quarter of the prior period.

Previous wording

Other Non-Operating Expense, Net. Other non-operating expense is primarily due to changes in foreign currency compared to the prior period.

Current wording

Other Non-Operating (Income) Expense, Net. Other non-operating expense is primarily due to changes in foreign currency compared to the prior period.

Previous wording

Income Taxes. Our estimated annual effective tax rate was impacted by income earned outside the U.S. that is subject to U.S. tax, including the U.S. tax on global intangible low taxed income, and certain nondeductible expenses. See Note 11 - Income Tax in the Notes to the Condensed Consolidated Financial Statementsfor further discussion on the effective tax rate for the three month periods.

Current wording

Income Taxes. Our estimated annual effective tax rate was impacted by income earned outside the U.S. that is subject to U.S. tax, including the U.S. tax on global intangible low taxed income, and certain nondeductible expenses. See Note 12 - Income Taxes in the Notes to the Condensed Consolidated Financial Statementsfor further discussion on the effective tax rate for the three and six month periods.

Previous wording

Net sales for the three month period increased with an organic net sales increase of $15.2 million, or 5.8%, excluding a favorable foreign currency impact of $6.4 million. Increase in North America sales with the strategic shift of orders by retail customers out of the prior year in preparation of a system implementation, coupled with positive tariff-related pricing actions and strong category performance for Companion Animal products compared to the prior period. EMEA sales were positively impacted by favorable foreign currency as EMEA sales decreased excluding foreign currency impacts, primarily due to lower dog and cat food volumes from the transition and timing for new promotional brand launch, partially offset by further expansion of GoodBoy® in continental Europe and organic net sales growth from aquatics from Tetra® and softer prior year comparison. Adjusted EBITDA and adjusted EBITDA margin for the three month period decreased due to margin pressures from higher tariff costs, and inflation in excess of pricing adjustments and cost improvements, with higher trade spend further impacting margin, despite improved volumes.

Current wording

Net sales for the three month period increased with an organic net sales increase of $20.4 million, or 7.6%, excluding a favorable foreign currency impact of $9.7 million. The increase was driven by better-than-anticipated volumes in North America from e-commerce channels, predominantly within the companion animal category and brands, combined with positive pricing adjustments from inflationary costs, with consistent year-over-year sales in the aquatics category from improved pricing offsetting category decline. EMEA volumes were positively impacted by continued market growth for companion animal with further expansion of the GoodBoy® brand across continental Europe and sustained market in the United Kingdom, with further benefit from increased orders in advance of a planned system implementation. Net sales for the six month period increased with an organic net sales increase of $35.6 million or 6.7%, excluding a favorable foreign currency impact of $16.1 million. The increase was attributable to the increase in North America due to the shift of orders out of the prior year in preparation of a system implementation, coupled with positive pricing adjustments and positive e-commerce distribution for Companion Animal products. EMEA sales were positively impacted by favorable foreign currency plus increased volumes due to further expansion of GoodBoy® in continental Europe and orders in advance of planned system implementation. Adjusted EBITDA and adjusted EBITDA margin for the three month period increased due to higher sales volumes, pricing and cost improvement actions partially offset by higher input costs with inflation and higher trade and investment spend impacting margin. Adjusted EBITDA for the six month period increased due to higher sales volumes and favorable mix offset by higher input costs with inflation in excess of pricing adjustments and cost improvements, and higher trade spend resulting in lower adjusted EBITDA margin.

Previous wording

Net sales for the three month period decreased with an organic net sales decrease of $38.7 million, or 11.1%, excluding a favorable foreign currency impact of $12.1 million. Decrease in EMEA sales were attributable to softness in both Personal Care and Home Appliance product categories due to distribution timing and higher retail inventory following weaker than anticipated holiday sales reducing replenishment orders. North America sales decreased in both product categories were adversely impacted by overall consumer softness in light of increased product cost from tariffs and SKU rationalization actions in response to changes in trade policy to ensure overall profitability. LATAM sales increased with new product launches and improved volumes from successful holiday campaigns. Adjusted EBITDA and Adjusted EBITDA margins for the three month period decreased due to lower volumes, with higher tariff costs mostly mitigated through pricing adjustments and cost improvements, reduced investment spend, and favorable foreign currency.

Current wording

Net sales for the three month period decreased with an organic net sales decrease of $27.2 million, or 10.7%, excluding a favorable foreign currency impact of $13.1 million. The decrease was driven by lower net sales in both Personal Care and Home Appliance categories with overall decreased sales in both North America and EMEA. The decrease in EMEA sales was impacted by higher levels of retailer inventory following softness in consumer demand amid increased competition within the market, resulting in lower replenishment orders. North America sales decreased in the Home Appliances category, partially offset by increased sales in the Personal Care category, as consumer demand is adversely impacted by overall consumer softness in light of tariff pricing adjustments, SKU rationalization actions to address change in trade policy to ensure overall profitability, and customer inventory management actions. LATAM sales volume increased with new product launches and distribution. Net sales for the six month period decreased with an organic net sales decrease of $65.9 million, or 10.9%, excluding a favorable foreign currency impact of $25.2 million. The decrease was driven by lower net sales in both product categories in North America and EMEA. The decrease in EMEA sales was attributable to distribution timing and higher retail inventory following weaker than anticipated holiday sales reducing replenishment orders. North America sales decreased in both product categories as it was impacted by overall consumer softness due to increased pricing from tariffs and SKU rationalization actions in response to changes in trade policy to ensure overall profitability. LATAM sales increased with new product launches and improved volumes from successful holiday campaigns. Adjusted EBITDA and adjusted EBITDA margins for the three month period increased due to pricing, reduced investment spend, cost improvement initiatives, and favorable foreign currency partially offset by lower volumes and higher tariff costs. Adjusted EBITDA and adjusted EBITDA margins for the six month period decreased due to lower volumes, with higher costs mostly mitigated through pricing adjustments and cost improvements, reduced investment spend, and favorable foreign currency.

Previous wording

The following is a summary of cash flow from continuing operations for the three month periods ended December 28, 2025 and December 29, 2024, respectively.

Current wording

The following is a summary of cash flow from continuing operations for the six month periods ended March 29, 2026 and March 30, 2025, respectively.

Previous wording

Cash flows provided by operating activities from continuing operations increased $139.6 million, due to lower investment in working capital with decreased volumes in H&G and HPC, improved collections on receivables, lower cash paid towards income taxes, and reduced spending on restructuring and separation initiatives.

Current wording

Cash flows provided by operating activities from continuing operations increased $126.5 million, due to higher sales and improved profitability, lower investment in working capital and improved collections on receivables, lower cash paid towards income taxes, and reduced spending on restructuring and separation initiatives.

Previous wording

Cash flows used in financing activities decreased $39.7 million due to lower cash dividends and treasury share repurchase activity. During the three month periods ended December 28, 2025 and December 29, 2024, the Company made cash dividend payments of $0.47 per share, with total dividend payments decreasing due to fewer outstanding shares following treasury share repurchase activity.

Current wording

Cash flows used in financing activities decreased $137.0 million due to lower cash dividends and treasury share repurchase activity. During the six month periods ended March 29, 2026 and March 30, 2025, the Company made quarterly cash dividend payments of $0.47 per share, with total dividend payments decreasing due to fewer outstanding shares following treasury share repurchase activity.

Previous wording

Our ability to generate cash flows from operating activities, coupled with our expected ability to access the credit markets, enables us to execute our growth strategies and return value to our shareholders. Our ability to make principal and interest payments on borrowings under our debt agreements and our ability to fund planned capital expenditures will depend on our ability to generate cash in the future, which, to a certain extent, is subject to general economic, financial, competitive, regulatory and other conditions. Based upon our current and anticipated level of operations, existing cash balances, and availability under our credit facility, we expect cash flows from operations to be sufficient to meet our operating and capital expenditure requirements for at least the next 12 months. It is not unusual for our business to experience negative operating cash flow during the first quarter of the fiscal year due to the operating calendar with our retail customers and the seasonality of our working capital. Additionally, we believe the availability under our credit facility and access to capital markets are sufficient to achieve our longer-term strategic plans. As of December 28, 2025, the Company had total cash and cash equivalents of $126.6 million and borrowing availability of $492.2 million under our credit facility with a total liquidity of $618.8 million.

Current wording

We believe our ability to generate cash flows from operating activities, coupled with our expected ability to access the credit markets, enables us to execute our growth strategies and return value to our shareholders. Our ability to make principal and interest payments on borrowings under our debt agreements and our ability to fund planned capital expenditures will depend on our ability to generate cash in the future, which, to a certain extent, is subject to general economic, financial, competitive, regulatory and other conditions. Based upon our current and anticipated level of operations, existing cash balances, and availability under our credit facility, we expect cash flows from operations to be sufficient to meet our operating and capital expenditure requirements for at least the next 12 months. It is not unusual for our business to experience negative operating cash flow during the first quarter of the fiscal year due to the operating calendar with our retail customers and the seasonality of our working capital. Additionally, we believe the availability under our credit facility and access to capital markets are sufficient to achieve our longer-term strategic plans. As of March 29, 2026, the Company had total cash and cash equivalents of $125.1 million and borrowing availability of $470.8 million under our credit facility with a total liquidity of $595.9 million.

Previous wording

The Company has continued to repurchase shares of common stock as further detailed in Note 9 – Shareholders’ Equity in the Notes to the Condensed Consolidated Financial Statements. We may, from time to time, seek to repurchase additional shares of our common stock and any further repurchase activity will be dependent on prevailing market conditions, liquidity requirements and other factors.

Current wording

The Company has repurchased shares of common stock as further detailed in Note 10 – Shareholders’ Equity in the Notes to the Condensed Consolidated Financial Statements. We may, from time to time, seek to repurchase additional shares of our common stock, including through 10b5-1 plans, and any further repurchase activity will be dependent on prevailing market conditions, liquidity requirements and other factors.