NOTE 19 - SEGMENT INFORMATION

Spectrum identifies its segments based upon the internal organization that is used by management for making operating decisions and assessing performance as the source of the Company’s reportable segments. As of the date of the merger effective July 13, 2018, the Company changed its operating and reporting segments to be consistent with the segment reporting of Spectrum. The Company manufactures, markets and/or distributes multiple product lines through various distribution networks, and in multiple geographic regions. The Company manages its business in four vertically integrated, product-focused reporting segments: (i) Hardware & Home Improvement, which consists of the Company’s worldwide hardware, home improvement and plumbing businesses; (ii) Global Pet Supplies, which consists of the Company’s worldwide pet supplies business; (iii) Home and Garden, which consists of the Company’s home and garden and insect control businesses; and (iv) Global Auto Care, and consists of the Company’s automotive appearance and performance products. 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 responsible for the sales and marketing initiatives and financial results for product lines within the segment. Net sales attributable to foreign countries are determined based on the domiciled country of the customer.

Net sales relating to the segments of the Company for the years ended September 30, 2018, 2017 and 2016 are as follows:


(in millions)	2018		2017		2016
HHI	$	1,377.7	$	1,276.1	$	1,241.0
PET		820.5		793.2		825.7
H&G		482.2		493.3		509.0
GAC		465.5		446.9		453.7
Net sales	$	3,145.9	$	3,009.5	$	3,029.4

The Chief Operating Decision Maker 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:

Share based compensation expense as it is a non-cash based compensation cost, see Note 17 - Share Based Compensation to the Consolidated Financial Statements for further details;

Acquisition and integration charges that consist of transaction costs from acquisition transactions during the period or subsequent integration related project costs directly associated with the acquired business, see Note 4 – Acquisitions to the Consolidated Financial Statements for further details;

Restructuring and related charges, which consist of project costs associated with restructuring initiatives across the segments, see Note 5 - Restructuring and Related Charges to the Consolidated Financial Statements for further details;

Non-cash purchase accounting inventory adjustments recognized in earnings subsequent to an acquisition (when applicable);

Non-cash asset impairments or write-offs realized on goodwill, intangible assets, and property plant and equipment (when applicable). See Note 10 – Goodwill and Intangible Assets for further details;

Incremental costs associated with a safety recall in PET. See Note 18 – Commitments and Contingencies to the Consolidated Financial Statements for further details;

Transactions costs directly associated with the Spectrum Merger. See Note 4 – Acquisitions to the Consolidated Financial Statements for further details;

Non-recurring HRG net operating costs 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 will ultimately be eliminated following the transaction; including a one-time cost for the termination of a legacy HRG pension plan of $1.2 million and one-time lease termination cost for the HRG New York based corporate office of $3.1 million during the year ended September 30, 2018.

Net operating results of Salus as they are not considered a component of the continuing commercial products company; and

Other adjustments as further discussed.

During the fiscal year ended September 30, 2018, other adjustments consist of incremental costs for separation of key senior executives and costs attributable to flood damage at the Company’s corporate headquarters in Wisconsin. During the fiscal year ended September 30, 2017, other adjustments consists of an adjustment for the devaluation of cash and cash equivalents denominated in Venezuelan currency. During the fiscal year ended September 30, 2016, other adjustments consist of onboarding costs of a key executive.

Segment Adjusted EBITDA in relation to the Company’s reportable segments for SBH and SB/RH for the years ended September 30, 2018, 2017 and 2016, is as follows:


SBH (in millions)	2018		2017		2016
HHI	$	254.7	$	254.4	$	241.6
PET		136.7		142.7		140.1
H&G		107.5		133.0		138.3
GAC		99.3		148.4		153.4
Total Segment Adjusted EBITDA		598.2		678.5		673.4
Corporate expenses		36.3		39.3		31.9
Interest expense		264.6		309.9		334.5
Depreciation and amortization		131.7		132.2		120.4
Share-based compensation		11.8		52.9		70.8
Acquisition and integration related charges		14.3		15.6		34.1
Restructuring and related charges		92.8		60.4		14.0
Write-off from impairment of intangible assets		20.3		16.3		2.7
Write-off from impairment of goodwill		92.5		—		—
Inventory acquisition step-up		0.8		3.3		—
Pet safety recall		18.9		35.8		—
Spectrum merger related transaction charges		45.9		7.6		—
Non-recurring HRG operating costs		18.9		31.9		72.5
Salus		1.1		4.0		(17.4)
Venezuela devaluation		—		0.4		—
Other		4.6		—		0.7
(Loss) income from operations before income taxes	$	(156.3)	$	(31.1)	$	9.2


SBRH (in millions)	2018		2017		2016
HHI	$	254.7	$	254.4	$	241.6
PET		136.7		142.7		140.1
H&G		107.5		133.0		138.3
GAC		99.3		148.4		153.4
Total Segment Adjusted EBITDA		598.2		678.5		673.4
Corporate expenses		37.2		38.5		31.4
Interest expense		167.6		161.3		182.0
Depreciation and amortization		131.0		131.6		119.7
Share-based compensation		8.7		44.9		52.1
Acquisition and integration related charges		14.3		15.6		34.1
Restructuring and related charges		92.8		60.4		14.0
Write-off from impairment of intangible assets		20.3		16.3		2.7
Write-off from impairment of goodwill		92.5		—		—
Inventory acquisition step-up		0.8		3.3		—
Pet safety recall		18.9		35.8		—
Venezuela devaluation		—		0.4		—
Other		4.6		—		0.7
Income from continuing operations before income taxes	$	9.5	$	170.4	$	236.7

Other financial information relating to the segments of SBH and SB/RH are as follows for the years ended September 30, 2018, 2017 and 2016 and as of September 30, 2018 and 2017:


	SBH						SB/RH

Depreciation and amortization (in millions)	2018		2017		2016		2018		2017		2016
HHI		40.0		38.3		35.4		40.0		38.3		35.4
PET		42.3		43.1		42.7		42.3		43.1		42.7
H&G		18.8		17.6		15.2		18.8		17.6		15.2
GAC		16.3		21.1		17.5		16.3		21.1		17.5
Total segments		117.4		120.1		110.8		117.4		120.1		110.8
Corporate		14.3		12.1		9.6		13.6		11.5		8.9
Total depreciation and amortization	$	131.7	$	132.2	$	120.4	$	131.0	$	131.6	$	119.7


	SBH						SB/RH
Capital expenditures (in millions)	2018		2017		2016		2018		2017		2016
HHI		15.6		25.4		22.3		15.6		25.4		22.3
PET		24.3		20.2		14.2		24.3		20.2		14.2
H&G		6.4		6.5		6.9		6.4		6.5		6.9
GAC		5.9		13.9		2.0		5.9		13.9		2.0
Total segment capital expenditures		52.2		66.0		45.4		52.2		66.0		45.4
Corporate		12.5		11.8		15.6		12.5		11.8		15.3
Total capital expenditures	$	64.7	$	77.8	$	61.0	$	64.7	$	77.8	$	60.7


	SBH				SB/RH
Segment total assets (in millions)	2018		2017		2018		2017
HHI		1,641.1		1,698.2		1,641.1		1,698.2
PET		1,367.1		1,395.5		1,367.1		1,395.5
H&G		526.7		546.0		526.7		546.0
GAC		1,422.8		1,520.3		1,422.8		1,520.3
Total segment assets		4,957.7		5,160.0		4,957.7		5,160.0
Corporate		831.8		383.6		714.3		264.0
Total assets	$	5,789.5	$	5,543.6	$	5,672.0	$	5,424.0

Net sales SBH and SB/RH for the years ended September 30, 2018, 2017 and 2016 and long-lived asset information as of September 30, 2018 and 2017 by geographic area are as follows:


Net sales to external parties - Geographic Disclosure (in millions)	2018		2017		2016
United States	$	2,561.1	$	2,417.8	$	2,410.2
Europe/MEA		251.0		270.7		300.0
Latin America		92.8		90.3		109.9
North America - Other		154.6		144.7		129.8
Asia-Pacific		86.4		86.0		79.5
Net sales	$	3,145.9	$	3,009.5	$	3,029.4


	SBH				SB/RH
Long-lived assets - Geographic Disclosure (in millions)	2018		2017		2018		2017
United States	$	355.5	$	361.9	$	355.5	$	361.1
Europe/MEA		77.8		71.8		77.8		71.8
Latin America		20.8		25.4		20.8		25.4
North America - Other		1.4		1.9		1.4		1.9
Asia-Pacific		39.4		42.9		39.4		42.9
Total long-lived assets	$	494.9	$	503.9	$	494.9	$	503.1