SEGMENT INFORMATION |
SEGMENT INFORMATION The Company identifies its segments based upon the internal organization that is used by management for making operating decisions and assessing performance as the source of its reportable segments. The Company manages its continuing operations in four vertically integrated, product-focused reporting segments: (i) HHI, which consists of the Company’s worldwide hardware, security and plumbing business; (ii) GPC, which consists of the Company’s worldwide pet care business; (iii) H&G, which consists of the Company’s home and garden and insect control business and (iv) HPC, which consists of the Company’s worldwide small kitchen and personal care appliances businesses. Global strategic initiatives and financial objectives for each reportable segment are determined at the corporate level. Each segment is responsible for implementing defined strategic initiatives and achieving certain financial objectives and has a president or general manager responsible for the sales and marketing initiatives and financial results for product lines within the segment. Net sales relating to the segments for the years ended September 30, 2020, 2019 and 2018 are as follows: | | | | | | | | | | | | | | | | | | | | | (in millions) | | 2020 | | 2019 | | 2018 | HHI | | $ | 1,342.1 | | | $ | 1,355.7 | | | $ | 1,377.7 | | HPC | | 1,107.6 | | | 1,068.1 | | | 1,110.4 | | GPC | | 962.6 | | | 870.2 | | | 820.5 | | H&G | | 551.9 | | | 508.1 | | | 500.1 | | Net sales | | $ | 3,964.2 | | | $ | 3,802.1 | | | $ | 3,808.7 | |
The Chief Operating Decision Maker of the Company uses Adjusted EBITDA as the primary operating metric in evaluating the business and making operating decisions. EBITDA is calculated by excluding the Company’s income tax expense, interest expense, depreciation expense and amortization expense (from intangible assets) from net income. Adjusted EBITDA further excludes: •Stock based and other incentive compensation costs that consist of costs associated with long-term compensation arrangements and other equity based compensation based upon achievement of long-term performance metrics; and generally consist of non-cash, stock-based compensation. See Note 19 - Share Based Compensation for further details. Additionally, the Company issued certain incentive bridge awards due to changes in the Company’s long-term compensation plans that allow for cash based payment upon employee election which have been included in the adjustment but do not qualify for shared-based compensation.; •Restructuring and related charges, which consist of project costs associated with the restructuring initiatives across the Company's segments. See Note 5 - Restructuring and Related Charges for further details; •Transaction related charges that consist of (1) transaction costs from qualifying acquisition transactions during the period, or subsequent integration related project costs directly associated with an acquired business; and (2) divestiture related transaction costs that are recognized in continuing operations and post-divestiture separation costs consisting of incremental costs to facilitate separation of shared operations, including development of transferred shared service operations, platforms and personnel transferred as part of the divestitures and exiting of transition service arrangements (TSAs) and reverse TSAs. See Note 2 – Significant Accounting Policies and Practices for further details; •Gains and losses attributable to the Company’s investment in Energizer common stock, acquired as part of consideration received from the Company’s sale and divestiture of GAC during the year ended September 30, 2019. See Note 3 – Divestitures and Note 7 – Fair Value of Financial Instruments for further details; •Non-cash asset impairments or write-offs realized and recognized in earnings from continuing operations (when applicable); •Non-cash purchase accounting inventory adjustments recognized in earnings from continuing operations after an acquisition (when applicable); •Foreign currency gains and losses attributable to multicurrency loans for the years ended September 30, 2020 and 2019, that were entered into with foreign subsidiaries in exchange for the receipt of divestiture proceeds by the parent company and the distribution of the respective foreign subsidiaries’ net assets as part of the GBL and GAC divestitures. The Company has entered into various hedging arrangements to mitigate the volatility of foreign exchange risk associated with such loans; •Incremental reserves associated with environmental remediation activity of legacy properties and former manufacturing sites assumed by the organization which had previously been exited by the Company, plus legal settlement costs associated with retained litigation from the Company's divested GAC operations realized during the year ended September 30, 2019. See Note 20 – Commitments and Contingencies for further discussion; •Legal and litigation costs associated with Salus during the years ended September 30, 2020, 2019, and 2018 as it is not considered a component of the continuing commercial products company, but continues to be consolidated by the Company after completion of the Spectrum Merger until the Salus operations can be wholly dissolved and/or deconsolidated; •Gain on extinguishment of the Salus CLO debt due to the discharge of the obligation during the year ended September 30, 2020. See Note 12 - Debt for further details; •Incremental costs directly associated with the Spectrum Merger during the year ended September 30, 2018; •Non-recurring HRG net operating costs incurred during the year ended September 30, 2018 considered to be redundant or duplicative as a result of the Spectrum Merger and not considered a component of the continuing commercial products company post-merger, including compensation and benefits, directors fees, professional fees, insurance, public company costs, amongst others, and including interest and other non-recurring income that was eliminated following the transaction; and •Other adjustments primarily consisting of costs attributable to (1) expenses and cost recovery for flood damage at the Company's facilities in Middleton, Wisconsin recognized during the years ended September 30, 2020, 2019, and 2018; (2) incremental costs for separation of a key executives during the years ended September 30, 2020, 2019, and 2018; (3) operating margin on H&G sales to GAC discontinued operations during the year ended September 30, 2019 and 2018; (4) certain fines and penalties for delayed shipments following the completion of a GPC distribution center consolidation in EMEA during the year ended September 30, 2019. Segment Adjusted EBITDA in relation to the Company’s reportable segments for SBH and SB/RH for the years ended September 30, 2020, 2019 and 2018, is as follows: | | | | | | | | | | | | | | | | | | | | | SBH (in millions) | | 2020 | | 2019 | | 2018 | HHI | | $ | 256.3 | | | $ | 253.7 | | | $ | 254.7 | | HPC | | 92.2 | | | 87.2 | | | 118.8 | | GPC | | 172.0 | | | 142.6 | | | 136.6 | | H&G | | 112.1 | | | 105.5 | | | 107.5 | | Total Segment Adjusted EBITDA | | 632.6 | | | 589.0 | | | 617.6 | | Corporate | | 52.4 | | | 22.0 | | | 36.3 | | Interest expense | | 144.5 | | | 222.1 | | | 264.0 | | Depreciation and amortization | | 148.5 | | | 180.8 | | | 125.3 | | Share and incentive based compensation | | 43.6 | | | 53.7 | | | 11.9 | | Restructuring and related charges | | 72.6 | | | 65.7 | | | 75.6 | | Transaction related charges | | 23.1 | | | 21.8 | | | 30.2 | | Loss on assets held for sale | | 26.8 | | | — | | | — | | Write-off from impairment of goodwill | | — | | | 116.0 | | | — | | Write-off from impairment of intangible assets | | 24.2 | | | 35.4 | | | 20.3 | | Loss on Energizer investment | | 16.8 | | | 12.1 | | | — | | Foreign currency loss on multicurrency divestiture loans | | 3.8 | | | 36.2 | | | — | | Legal and environmental remediation reserves | | — | | | 10.0 | | | — | | Inventory acquisition step-up | | — | | | — | | | 0.8 | | GPC safety recall | | — | | | 0.7 | | | 18.9 | | Spectrum merger related transaction charges | | — | | | — | | | 45.9 | | Non-recurring HRG operating costs | | — | | | — | | | 18.9 | | Salus | | 0.6 | | | 1.6 | | | 1.1 | | Salus CLO debt extinguishment | | (76.2) | | | — | | | — | | Other | | (3.5) | | | 4.7 | | | 4.1 | | Income (loss) from operations before income taxes | | $ | 155.4 | | | $ | (193.8) | | | $ | (35.7) | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | SB/RH (in millions) | | 2020 | | 2019 | | 2018 | HHI | | $ | 256.3 | | | $ | 253.7 | | | $ | 254.7 | | HPC | | 92.2 | | | 87.2 | | | 118.8 | | GPC | | 172.0 | | | 142.6 | | | 136.6 | | H&G | | 112.1 | | | 105.5 | | | 107.5 | | Total Segment Adjusted EBITDA | | 632.6 | | | 589.0 | | | 617.6 | | Corporate | | 47.4 | | | 20.7 | | | 35.9 | | Interest expense | | 144.0 | | | 162.0 | | | 167.0 | | Depreciation and amortization | | 148.5 | | | 180.8 | | | 124.6 | | Share and incentive based compensation | | 42.3 | | | 52.1 | | | 8.8 | | Restructuring and related charges | | 72.6 | | | 65.7 | | | 75.6 | | Transaction related charges | | 23.1 | | | 21.8 | | | 30.2 | | Loss on assets held for sale | | 26.8 | | | — | | | — | | Write-off from impairment of goodwill | | — | | | 116.0 | | | — | | Write-off from impairment of intangible assets | | 24.2 | | | 35.4 | | | 20.3 | | Loss on Energizer investment | | 16.8 | | | 12.1 | | | — | | Foreign currency loss on multicurrency divestiture loans | | 3.8 | | | 36.2 | | | — | | Legal and environmental remediation reserves | | — | | | 10.0 | | | — | | Inventory acquisition step-up | | — | | | — | | | 0.8 | | GPC safety recall | | — | | | 0.7 | | | 18.9 | | Other | | (3.5) | | | 4.7 | | | 5.4 | | Income (loss) from operations before income taxes | | $ | 86.6 | | | $ | (129.2) | | | $ | 130.1 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | SBH | | SB/RH | Depreciation and amortization (in millions) | | 2020 | | 2019 | | 2018 | | 2020 | | 2019 | | 2018 | HHI | | $ | 33.9 | | | $ | 33.5 | | | $ | 40.0 | | | $ | 33.9 | | | $ | 33.5 | | | $ | 40.0 | | HPC | | 35.2 | | | 64.6 | | | 8.8 | | | 35.2 | | | 64.6 | | | 8.8 | | GPC | | 44.4 | | | 48.8 | | | 42.3 | | | 44.4 | | | 48.8 | | | 42.3 | | H&G | | 20.4 | | | 19.3 | | | 18.8 | | | 20.4 | | | 19.3 | | | 18.8 | | Total segments | | 133.9 | | | 166.2 | | | 109.9 | | | 133.9 | | | 166.2 | | | 109.9 | | Corporate and shared operations | | 14.6 | | | 14.6 | | | 15.4 | | | 14.6 | | | 14.6 | | | 14.7 | | Total depreciation and amortization | | $ | 148.5 | | | $ | 180.8 | | | $ | 125.3 | | | $ | 148.5 | | | $ | 180.8 | | | $ | 124.6 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | SBH | | SB/RH | Capital expenditures (in millions) | | 2020 | | 2019 | | 2018 | | 2020 | | 2019 | | 2018 | HHI | | $ | 16.9 | | | $ | 18.0 | | | $ | 15.6 | | | $ | 16.9 | | | $ | 18.0 | | | $ | 15.6 | | HPC | | 10.7 | | | 11.0 | | | 14.8 | | | 10.7 | | | 11.0 | | | 14.8 | | GPC | | 14.5 | | | 16.0 | | | 24.6 | | | 14.5 | | | 16.0 | | | 24.6 | | H&G | | 3.5 | | | 5.9 | | | 6.4 | | | 3.5 | | | 5.9 | | | 6.4 | | Total segment capital expenditures | | 45.6 | | | 50.9 | | | 61.4 | | | 45.6 | | | 50.9 | | | 61.4 | | Corporate and shared operations | | 15.4 | | | 7.5 | | | 14.5 | | | 15.4 | | | 7.5 | | | 14.5 | | Total capital expenditures | | $ | 61.0 | | | $ | 58.4 | | | $ | 75.9 | | | $ | 61.0 | | | $ | 58.4 | | | $ | 75.9 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | SBH | | SB/RH | Segment total assets (in millions) | | 2020 | | 2019 | | 2020 | | 2019 | HHI | | $ | 1,786.5 | | | $ | 1,611.0 | | | $ | 1,786.5 | | | $ | 1,611.0 | | HPC | | 825.3 | | | 833.6 | | | 825.3 | | | 833.6 | | GPC | | 1,200.4 | | | 1,275.4 | | | 1,200.4 | | | 1,275.4 | | H&G | | 546.1 | | | 538.6 | | | 546.1 | | | 538.6 | | Total segment assets | | 4,358.3 | | | 4,258.6 | | | 4,358.3 | | | 4,258.6 | | Corporate and shared operations | | 749.0 | | | 987.4 | | | 826.0 | | | 1,032.6 | | Total assets | | $ | 5,107.3 | | | $ | 5,246.0 | | | $ | 5,184.3 | | | $ | 5,291.2 | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | SBH and SB/RH | Net sales to external parties - Geographic Disclosure (in millions) | | 2020 | | 2019 | | 2018 | United States | | $ | 2,822.5 | | | $ | 2,649.5 | | | $ | 2,627.2 | | Europe/MEA | | 683.9 | | | 656.6 | | | 669.4 | | Latin America | | 182.3 | | | 205.4 | | | 212.1 | | North America - Other | | 171.2 | | | 168.5 | | | 173.9 | | Asia-Pacific | | 104.3 | | | 122.1 | | | 126.1 | | Net sales | | $ | 3,964.2 | | | $ | 3,802.1 | | | $ | 3,808.7 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | SBH | | SB/RH | Long-lived assets - Geographic Disclosure (in millions) | | 2020 | | 2019 | | 2020 | | 2019 | United States | | $ | 354.7 | | | $ | 308.3 | | | $ | 354.7 | | | $ | 308.3 | | Europe/MEA | | 58.3 | | | 83.0 | | | 58.3 | | | 83.0 | | Latin America | | 15.1 | | | 19.3 | | | 15.1 | | | 19.3 | | North America - Other | | 3.5 | | | 1.1 | | | 3.5 | | | 1.1 | | Asia-Pacific | | 68.7 | | | 41.2 | | | 68.7 | | | 41.2 | | Total long-lived assets | | $ | 500.3 | | | $ | 452.9 | | | $ | 500.3 | | | $ | 452.9 | |
Long-lived assets as of September 30, 2020 includes both property, plant, and equipment and ROU operating lease assets with the adoption of Topic 842. See Note 2 - Significant Accounting Policies and Practices for further discussion.
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