UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended ~~September~~March 3031, ~~2014~~2015

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT

For the transition period from TO

Commission file number 333-180736

ARMORED AUTOGROUP INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		27-3620112
(State or Other Jurisdiction of		(I.R.S. Employer Identification No.)
Incorporation or Organization)

44 Old Ridgebury Road, Suite 300
Danbury, Connecticut		06810
(Address of principal executive officers)		(Zip Code)

(203) 205-2900

(Registrant’s Telephone Number, Including Area Code)

Indicate by check whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.05 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer o

Non-accelerated filer x		Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No

The aggregate number of shares of the registrant’s common stock outstanding on ~~November~~May 1, ~~2014~~2015 was 1,000 shares of common stock $.01 par value.

Table of Contents

Armored AutoGroup Inc.

INDEX

	PAGE
PART I — FINANCIAL INFORMATION
Item 1 Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 2014 and December 31, 2013	5
Condensed Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014	1
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Month Periods Ended September 30, 2014 and 2013	6
Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2015 and 2014	2
Condensed Consolidated Statements of Cash Flows for the Nine months Ended September 30, 2014 and 2013	7
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2015 and 2014	3
Notes to Condensed Consolidated Financial Statements	84
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3 Quantitative and Qualitative Disclosures About Market Risk	29
Item 3. Quantitative and Qualitative Disclosures About Market Risk	23
Item 4 Controls and Procedures	29
Item 4. Controls and Procedures	24
PART II — OTHER INFORMATION	3025
Item 1 Legal Proceedings	30
Item 1. Legal Proceedings	25
Item 1A Risk Factors	30
Item 1A.Risk Factors	25
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3 Defaults Upon Senior Securities	30
Item 3. Defaults Upon Senior Securities	25
Item 4 Mine Safety Disclosures	30
Item 4. Mine Safety Disclosures	25
Item 5 Other Information	30
Item 5. Other Information	25
Item 6 Exhibits	31
Item 6. Exhibits	26

Table of Contents

Cautionary Note Regarding Forward-Looking Statements

Some of the statements contained in this Quarterly Report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties, including, in particular, statements about our plans, strategies, prospects and industry estimates. These statements identify prospective information and can generally be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “seeks,” “projects,” “intends,” “plans,” “may,” “~~will~~likely,” “continue to,” “will,” or “should” or, in each case, their negative or other variations or comparable terminology. Examples of forward-looking statements include, but are not limited to, statements we make regarding: (i) our liquidity, including our belief that our existing cash, cash equivalents and anticipated revenues are sufficient to fund our existing operating expenses, capital expenditures and liquidity requirements for at least the next twelve months; (ii) our outlook and expectations including, without limitation, statements made regarding continued market expansion and penetration for our products and (iii) expected new product launch dates and market exclusivity periods. The foregoing is not an exclusive list of all forward-looking statements we make. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. The matters referred to in the forward-looking statements contained in this Quarterly Report may not in fact occur. We caution you therefore against relying on any of these forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national or global political, economic, business, competitive, market and regulatory conditions and the following:

· Our historical financial information may not be indicative of our future financial performance.

· Our operating results and net earnings may not meet expectations.

· Our quarterly results of operations are subject to fluctuations due to the seasonality of our business and other events and, accordingly, period-to-period comparisons should not be relied upon as an indication of future performance.

· Our financial results could suffer if we are unable to implement and successfully manage our core strategic initiatives or if our core strategic initiatives do not achieve the intended results.

· Sales growth may be difficult to achieve.

· We face intense competition in our business, which could lead to reduced profitability if we cannot compete effectively.

· A significant portion of our net sales and net earnings is derived from a few key customers. The loss of any one or more of these customers could cause a material decline in our operating results.

· Changes in marketing distributor relationships that are not managed successfully could result in a disruption in one or more of the affected markets.

· Customer support of our marketing and advertising programs and new product launches is critical for our success.

· Providing price concessions or trade terms that are acceptable to our customers, or the failure to do so, could adversely affect our sales and profitability.

· We may not successfully develop and introduce new products and line extensions.

· Our dependence upon third parties for the manufacture and supply of a substantial portion of our products could prevent us from delivering our products to our customers in the required quantities or within the required timeframe, which could result in order cancellations and decreased net sales.

· Volatility and cost increases in raw materials, energy, shipping and transportation and other necessary supplies or services could harm our financial condition and results of operations.

· We are exposed to commodity fluctuation risk and may not be able to adequately hedge our exposure, if at all.

Table of Contents

· Reliance on a limited base of third party contract manufacturers, logistics, ~~procurement~~ and information systems service providers may result in disruption to our business.

· Our facilities and those of our suppliers, service providers and common use facilities operators such as ports are subject to disruption by events beyond our control.

· We may not be able to hire or retain the number of qualified personnel required for our business, which would harm the development and sales of our products and limit our ability to grow.

· If we lose the services of our key personnel, our business could be adversely affected.

· We may be adversely affected by the current economic environment or future volatility in global economies.

· Global economic conditions may negatively impact the Company’s financial condition and results of operations.

· Operations outside the United States expose us to uncertain conditions and other risks in international markets.

· Because we operate and sell our products in foreign countries, changes in currency exchange rates could adversely affect our operations and financial results.

· Harm to our reputation or the reputation of one or more of our leading brands could have an adverse effect on our business.

· Acquisitions, new venture investments and divestitures may not be successful. We may not be able to attain synergies for our business and the IDQ business following our investment in IDQ Acquisition Corp.

· ~~Acquisitions~~Our substantial indebtedness, ~~new~~including ~~venture~~the ~~investments~~terms of our credit agreement governing the Credit Facilities, (as defined below), and ~~divestitures~~the ~~may~~indenture ~~not~~that begoverns ~~successful~~the Senior Notes, (as defined below), restricts our current and future operations and could adversely affect our ability to raise additional capital to fund our operations or to exploit business opportunities, limit our ability to respond to changes in the economy or our industry and prevent us from making debt service payments.

· ~~Our~~Despite ~~substantial~~our ~~indebtedness,~~current ~~including~~level ~~the terms~~ of ~~our credit agreement governing the Credit Facilities and the indenture that governs the Senior Notes~~indebtedness, ~~restricts~~we ~~our current~~ and ~~future operations and could adversely affect~~ our ~~ability~~subsidiaries tomay ~~raise~~still ~~additional~~be ~~capital~~able to ~~fund~~incur ~~our~~substantially ~~operations~~more ~~or to exploit business opportunities~~indebtedness, ~~limits~~which ~~our~~could ~~ability~~further toexacerbate ~~respond to changes in~~ the ~~economy~~risks orto our ~~industry~~financial ~~and prevents us from making debt service payments~~condition.

· ~~Despite~~We ~~our~~may ~~current~~be ~~level~~unable ofto ~~indebtedness,~~obtain wedebt ~~and~~or ~~our~~other ~~subsidiaries~~financing, ~~may~~including ~~still~~financing beon ~~able~~favorable toterms ~~incur~~or ~~substantially~~at ~~more~~all, ~~indebtedness.~~to ~~This~~replace ~~could~~the ~~further~~Revolving ~~exacerbate~~Credit ~~the~~facility, ~~risks~~which is scheduled to ~~our~~expire ~~financial~~in ~~condition~~November 2015.

· We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

· Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

· Goodwill, intangible and other long lived assets are subject to impairment risk.

· Failure to protect our intellectual property rights could impact our competitiveness, allow our competitors to develop and market products with features similar to our products and demand for our products could decline.

· If we are found to have infringed the intellectual property rights of others or cannot obtain necessary intellectual property rights from others, our competitiveness could be adversely impacted.

· In the ordinary course of business, we may be subject to product liability claims and lawsuits, including potential class actions, alleging that our products have resulted in or could result in unsafe condition or injury.

· We operate under ana Federal Trade Commission (“FTC”) consent order, which requires certain compliance policies and procedures. Should we violate our requirements thereunder, we may face significant fines and penalties.

Table of Contents

· Compliance with environmental law and other government regulations could impose material costs.

· Litigation may adversely affect our business, financial condition and results of operations.

Table of Contents

· Changes in tax laws could adversely affect the taxes we pay and our profitability.

· Our judgments regarding the accounting for tax positions and the resolution of tax disputes may impact the Company’s earnings and cash flow.

· Changes in our effective tax rate may adversely affect our earnings and cash flow.

· A failure of a key information technology system or breaches of our network security could adversely impact our ability to conduct business.

· Our continued growth and expansion and increasing reliance on third party service providers could adversely affect our internal control over financial reporting, which could harm our business and financial results.

· WeIf ~~may~~we ~~incur~~fail ~~increased ongoing costs as a result of being obligated~~ to ~~file~~maintain ~~reports~~adequate ~~with~~internal ~~the~~controls ~~SEC~~over ~~and~~financial reporting, our ~~management~~business ~~may~~could be ~~required~~materially toand ~~devote~~adversely ~~substantial time to new compliance initiatives~~affected.

· We may incur increased ongoing costs as a result of being obligated to file reports with the Securities and Exchange Commission (“SEC”) and our management will be required to devote substantial time to new compliance initiatives.

· Compliance with changing regulations and standards for accounting, corporate governance and public disclosure may result in additional expenses and this could negatively impact the Company’s business, financial condition and results of operations.

· The estimates and assumptions on which our financial statements are based may prove to be inaccurate, which may adversely affect the Company’s financial condition and results of operations.

· We can be adversely affected by the implementation of new, or changes in, ~~accounting principles~~ generally accepted accounting principles in the United States of America (“U.S. GAAP”).

· As an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements.

Any forward-looking statement made by us in this Quarterly Report speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to ~~publicly~~ update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as ~~may be~~ required by law. If we do update one or more forward-looking statements, there should be no inference that we will make additional updates with respect to those or other forward-looking statements.

As used herein, “Company”, “AAG”, “we”, “us” or “our” and similar terms refer to Armored AutoGroup Inc. and its subsidiaries unless the context in which the term is used indicates otherwise.

Table of Contents

PART I FINANCIAL INFORMATION

FINANCIAL INFORMATION

Item 1. Financial Statements

Armored AutoGroup Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS ~~(UNAUDITED)~~

(In thousands, except ~~share and~~ per share amounts)

	September 30, 2014			December 31, 2013
	March 31, 2015			December 31, 2014
	(Unaudited)
ASSETS
Current assets:
Cash	$	1310,~~431~~837		$	2113,~~253~~051
Accounts receivable, net	7391,~~977~~529			6067,~~324~~897
Inventories	4536,~~883~~338			3438,~~043~~591
Other current assets	10,565			11,676
Due from IDQ	88			830
Total current assets	143,856			127,296
Due from Parent	269			—
Property, plant and equipment, net	25,351			28,936
Other current assets	12,001			10,980
Goodwill	358,647			358,826
Total current assets	151,062			131,349
Intangible assets, net	284,380			313,470
Property, plant and equipment, net	24,913			26,245
Investment in affiliate	10,000			—
Goodwill	353,230			356,789
Deferred financing costs and other assets, net	2,363			3,719
Intangible assets, net	254,735			266,448
Total assets	$	824,597		$	832,247
Investment in affiliate	10,000			10,000
Deferred financing costs and other assets, net	1,872			2,158
Total assets	$	795,812		$	792,989
LIABILITIES AND SHAREHOLDER’S EQUITY
Current liabilities:
Accounts payable	$	19,~~365~~857		$	614,~~989~~150
Accrued expenses and other current liabilities	3538,~~554~~485			2430,~~594~~531
Due to Clorox	22			91
Due to Parent	—			29
Due to Parent	251			745
Current portion of long-term debt	3,000			3,000
Current portion of long-term debt, less discount	1,318			71
Total current liabilities	61,342			47,710
Total current liabilities	56,510			32,490
Long-term debt, less discount and current portion	541,464			541,469
Long-term debt, less discount and current portion	543,161			553,511
Other liability	2,500			2,500
Deferred income taxes	8071,~~446~~304			8974,~~610~~420
Total liabilities	~~682~~676,~~617~~610			~~678~~666,~~111~~099
Commitments and contingencies (Note 4)
Shareholder’s Equity:
Common stock ($0.01 par value, one thousand shares authorized, one thousand shares issued and outstanding at September 30, 2014 and December 31, 2013)	—			—
Common stock ($0.01 par value, 1,000 shares authorized, 1,000 shares issued and outstanding at March 31, 2015 and December 31, 2014, respectively)	—			—
Additional paid-in capital	260,200			~~261~~260,~~040~~200
Accumulated deficit	(~~105~~115,~~888~~940		)	(98116,~~955~~210		)
Accumulated other comprehensive (loss)	(12,332		)	(7,949		)
Accumulated other comprehensive loss	(25,058		)	(17,100		)
Total shareholder’s equity	~~141~~119,~~980~~202			~~154~~126,~~136~~890
Total liabilities and shareholder’s equity	$	~~824~~795,~~597~~812		$	~~832~~792,~~247~~989

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

Armored AutoGroup Inc.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~INCOME (~~LOSS) (UNAUDITED)

(In thousands)

	Three months ended September 30,						Nine months ended September 30,
	Three months ended
	2014			2013			2014			2013
	March 31,			March 31,
Net sales	$	70,459		$	71,007		$	232,914		$	225,495
	2015			2014
Cost of products sold	38,756			38,483			125,020			121,307
Net sales	$	82,441		$	80,559
Gross profit	31,703			32,524			107,894			104,188
Cost of products sold	46,838			41,654
Operating expenses:
Gross profit	35,603			38,905
Selling and administrative expenses	9,492			9,854			32,075			29,202
Operating expenses:
Advertising costs	7,028			6,767			21,128			24,487
Selling and administrative expenses	10,507			11,552
Research and development costs	653			626			1,887			1,839
Advertising costs	2,643			5,405
Amortization of acquired intangible assets	9,133			9,175			27,377			27,526
Research and development costs	575			608
Total operating expenses	26,306			26,422			82,467			83,054
Amortization of acquired intangible assets	8,968			9,111
Operating profit	5,397			6,102			25,427			21,134
Total operating expenses	22,693			26,676
Non-operating expenses:
Operating profit	12,910			12,229
Interest expense	11,892			12,049			35,722			35,976
Non-operating expenses:
Other expense (income), net	174			(68		)	(181		)	447
Interest expense	11,793			11,949
Loss before benefit for income taxes	(6,669		)	(5,879		)	(10,114		)	(15,289		)
Other (income) expense, net	205			(421		)
Benefit for income taxes	(2,548		)	(3,604		)	(3,179		)	(7,222		)
Income before income taxes	912			701
Net loss	$	(4,121	)	$	(2,275	)	$	(6,935	)	$	(8,067	)
Provision for income taxes	642			627
Other comprehensive income (loss):
Net income	$	270		$	74
Foreign currency translation gain (loss)	(5,542		)	2,336			(4,383		)	(5,994		)
Other comprehensive loss:
Comprehensive income (loss)	$	(9,663	)	$	61		$	(11,318	)	$	(14,061	)
Foreign currency translation loss	(7,958		)	(1,892		)
Comprehensive loss	$	(7,688	)	$	(1,818	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

Armored AutoGroup Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

	Nine months ended September 30,
	Three months ended
	2014			2013
	March 31,			March 31,
	2015			2014
Cash flows from operating activities:
Net loss	$	(6,935	)	$	(8,067	)
Net income	$	270		$	74
Adjustments to reconcile net loss to net cash provided by operating activities, net of effects of acquisitions:
Adjustments to reconcile net income to net cash provided (used in) by operating activities:
Depreciation and amortization	3511,~~796~~901			3511,~~713~~919
Share-based compensation	~~(840~~—		)	~~216~~27
Other	2			—
Deferred income taxes	(3,116		)	(3,098		)
Deferred income taxes	(9,154		)	(12,996		)
Other	66			2
Cash effect of changes in:
Accounts receivable, net	(1323,~~188~~698		)	1(18,~~778~~730		)
Inventories	~~(11~~2,~~323~~253		)	6(2,~~287~~586		)
Prepaid taxes	~~1,268~~—			32,~~329~~830
Other current assets	(~~130~~1,131		)	(~~1,902~~451		)
Accounts payable and accrued liabilities	2213,~~175~~661			521,~~079~~936
Due to Clorox	(69		)	(134		)
Due from IDQ	742			—
Other	(~~171~~1,489		)	~~(771~~102		)
Net cash provided by operating activities	17,431			28,532
Net cash (used in) provided by operating activities	(541		)	12,025
Cash flows from investing activities:
Capital expenditures	(~~1,519~~545		)	(~~2,894~~328		)
Acquisition, net	(1,797		)	(3,755		)
Investment in affiliate	—			(10,000		)
Investment in affiliate	(10,000		)	—
Net cash used in investing activities	(545		)	(10,328		)
Net cash used in investing activities	(13,316		)	(6,649		)
Cash flows from financing activities:
Borrowings under revolver	11,000			23,000
Principal payments on term loan	(750		)	(9,750		)
Payments on revolver	(11,000		)	(23,000		)
Payment on advance from Parent	—			(50		)
Principal payments on term loan	(11,250		)	(2,250		)
Net cash used in financing activities	(750		)	(9,800		)
Payment on advance from Parent	(494		)	(50		)
Effect of exchange rate changes on cash	(378		)	32
Net cash used in by financing activities	(11,744		)	(2,300		)
Net decrease in cash	(2,214		)	(8,071		)
Effect of exchange rate changes on cash	(193		)	(57		)
Cash at beginning of period	13,051			21,253
Net (decrease) increase in cash	(7,822		)	19,526
Cash at end of period	$	10,837		$	13,182
Cash at beginning of period	21,253			4,206
Cash at end of period	$	13,431		$	23,732
Supplemental cash flow disclosures:
Cash paid for interest	$	264,~~126~~259		$	264,~~567~~695
Cash paid for income taxes	$	4,~~743~~141		$	~~3,226~~555

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

Armored AutoGroup Inc.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1 — The Company and Summary of Significant Accounting Policies

The Company

Armored AutoGroup Inc. is a consumer products company consisting primarily of Armor All® and STP®, two of the most recognizable brands in the automotive aftermarket appearance products and performance chemicals categories, respectively. Armored AutoGroup ~~Inc.~~ delivers its products to distributors, resellers and end customers (collectively, “the customers”) through its direct operations in the United States, Canada, Mexico, Australia, China and the United Kingdom and distributor relationships in approximately 50 countries. The Armor All and STP brands offer multiple automotive appearance and performance chemical products that can be found in most of the major developed countries around the world.

In September 2010, Viking Acquisition Inc., an entity owned by affiliates of Avista Capital Holdings, L.P. (“Avista”), entered into an agreement to acquire the AutoCare Products Business, Armor All, STP and certain other brands from The Clorox Company (“Clorox”) pursuant to the terms of a Purchase and Sale Agreement dated September 21, 2010 (the “Acquisition”). The Acquisition closed on November 5, 2010 and included employees in the United States and other countries dedicated to the Company, related product patent and developed technology and certain other assets, including the manufacturing facilities located in Painesville, Ohio and Wales, ~~United Kingdom~~U. K. Viking Acquisition Inc. was subsequently renamed Armored AutoGroup Inc. (“AAG”). Armored AutoGroup Parent Inc. (“AAG Parent” or “Parent”) indirectly owns all of AAG’s issued and outstanding capital stock through its direct subsidiary and AAG’s direct parent, Armored AutoGroup Intermediate Inc. (“Intermediate”).

Basis of Presentation

The interim condensed consolidated financial statements for the three ~~and nine~~ month periods ended ~~September 30~~March 31, ~~2014~~2015 and ~~2013~~2014 are unaudited but, in the opinion of management, reflect all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the consolidated results of operations, financial position and cash flows of the Company for the periods presented. The preparation of these financial statements in conformity with ~~accounting principles generally accepted in the United States of America (“~~U.S. GAAP”) requires management to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ materially from the estimates and assumptions made. ~~During the quarter ended September 30, 2014, management revised its estimated compensation expense resulting in a reduction of $1.0 million in selling and administrative expense for the quarter.~~ Further, the results for the interim ~~periods~~period ended ~~September 30~~March 31, ~~2014~~2015 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, ~~2014~~2015, or for any future period.

The Company’s business is moderately seasonal and can be impacted by weather. Sales are typically higher in the first half of the calendar year as the Company’s customers in the northern hemisphere purchase inventory for the spring and summer seasons when weather is warmer than in the fall and winter months. This pattern is largely reflective of our customers’ seasonal purchasing patterns, as well as the timing of our promotional activities. Weather can also influence consumer behavior, especially for appearance products. Our appearance products sell best during warm, dry weather, and less strongly if weather is cold and wet. For these reasons, among others, the Company’s results for any quarter are not necessarily indicative of future quarterly results and, accordingly, period-to-period comparisons should not be relied upon as an indication of future performance.

Certain information and ~~footnote~~ disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted or condensed pursuant to the rules and regulations of the ~~Securities and Exchange Commission (“~~SEC”). The information in this report should be read in conjunction with the Company’s Annual Report on Form 10-K filed with the SEC for the fiscal year ended December 31, ~~2013~~2014, which includes a complete set of footnote disclosures, including the Company’s significant accounting policies. The consolidated balance sheet at December 31, ~~2013~~2014 has been derived from the Company’s audited financial statements at that date, but does not include all of the financial information or disclosures required by U.S. GAAP for complete financial statements.

~~Revenue Recognition~~4

Sales are recognized when title to the product, ownership and risk of loss transfer to the customer, which can be on the date of shipment or the date of receipt by the customer and when all of the following have occurred: a firm sales arrangement exists, pricing is fixed and determinable, and collection is reasonably assured. Revenue includes shipping and handling costs, when these costs are included in the list price to the customer. Taxes collected from customers and remitted to

Table of Contents

~~governmental~~Revenue ~~authorities are not included in sales. A provision for payment discounts and product return allowances is recorded as a reduction of sales in the same period that the revenue is recognized.~~Recognition

~~The~~Sales ~~Company~~are ~~routinely~~recognized ~~commits~~when title to ~~trade~~the ~~promotion~~product, ~~programs~~ownership ~~with~~and ~~customers~~risk of loss transfer to the customer, ~~consisting~~which ~~primarily~~can be on the date of ~~customer~~shipment ~~pricing~~or ~~allowances,~~the ~~merchandising~~date ~~funds~~of receipt by the customer and ~~consumer~~when ~~coupons~~all ~~offered~~of ~~through~~the ~~various~~following ~~programs~~have tooccurred: ~~customers~~a firm sales arrangement exists, pricing is fixed and ~~consumers~~determinable, and collection is reasonably assured. ~~Accruals~~Revenue ~~for~~includes ~~expected~~shipping ~~payouts~~and ~~under~~handling ~~these~~costs, ~~programs~~which generally are included asin ~~accrued~~the ~~marketing~~list ~~and~~price ~~promotion~~to in the ~~accrued~~customer. ~~expenses~~Taxes collected from customers and ~~other~~remitted ~~current~~to ~~liabilities~~governmental ~~line~~authorities ~~item~~are not included in ~~the~~sales. ~~Condensed~~A ~~Consolidated~~provision ~~Balance~~for ~~Sheets~~payment discounts and ~~are~~product return allowances is recorded as a reduction of sales in the ~~Condensed~~same ~~Statements~~period ofthat ~~Comprehensive~~the ~~Income~~revenue ~~(Loss)~~is recognized.

~~Amounts~~The ~~received~~Company byroutinely ~~the~~commits ~~Company~~to ~~from~~on-going ~~the~~and ~~licensing~~one-time trade promotion programs with customers, consisting primarily of ~~certain~~customer ~~trademarks~~pricing allowances, merchandising funds and consumer coupons offered through various programs to customers and consumers. Accruals for expected payouts under these programs are ~~recognized~~included as ~~revenue~~accrued onmarketing aand ~~straight-~~promotion in the accrued expenses and other current liabilities line ~~basis~~item ~~over~~in the ~~term~~Condensed ofConsolidated ~~the~~Balance ~~licensing~~Sheets ~~agreement~~and ~~when~~are recorded as a reduction of sales in the ~~underlying~~Condensed ~~royalties~~Statements ~~are~~of ~~earned~~Comprehensive Loss.

Amounts received by the Company from the licensing of certain trademarks are recorded as deferred revenue in the Condensed Consolidated Balance Sheets and are recognized as revenue on a straight-line basis over the term of the licensing agreement when the underlying royalties are earned.

Cost of Products Sold

Cost of products sold is primarily comprised of direct materials and supplies consumed in the manufacturing of product, as well as manufacturing labor, depreciation expense, direct overhead expense necessary to acquire and convert the purchased materials and supplies into finished product, contract manufacturing costs, and provisions for inventory losses (including losses relating to excess and obsolete inventory). Cost of products sold also includes the cost to distribute products to customers, inbound freight costs, internal transfer costs, warehousing costs and other shipping and handling activity, as well as costs associated with developing and designing new packaging.

Income Taxes

The Company uses the asset and liability method to account for income taxes. For purposes of the unaudited interim condensed consolidated financial statements, the Company calculates tax with reference to the anticipated effective tax rate for the annual financial period. Deferred tax assets and liabilities are recognized for the anticipated future tax consequences attributable to the differences between the financial statement amounts and their respective tax bases. Management reviews the Company’s deferred tax assets to determine whether their value can be realized based upon available evidence. A valuation allowance is established when management believes that it is more likely than not that some portion or all of its deferred tax assets will not be realized. Changes in valuation allowances from period to period are included in the Company’s tax provision in the period of change. In addition to valuation allowances, the Company provides for uncertain tax positions when such tax positions do not meet the recognition thresholds or measurement standards prescribed by accounting guidance on the accounting for uncertainty in income taxes. Amounts for uncertain tax positions are adjusted when new information becomes available or when positions are effectively settled.

None of the Company’s goodwill is expected to be deductible for income tax purposes.

The Company files a consolidated federal and certain state income tax returns with its Parent. Income taxes have been prepared on a separate return basis. The Company pays its tax liability on behalf of its Parent.

Foreign Currency Translation

Local currencies are the functional currencies for substantially all of the Company’s foreign operations., ~~When~~with the ~~transactional~~exception ~~currency~~of isthe ~~different~~Company’s ~~than~~United ~~the~~Kingdom (“U.K.”) operation, whose functional currency, ~~transaction~~was ~~gains~~the ~~and~~U.S. ~~losses~~dollar, ~~are~~during ~~included~~2014 asand aprior. ~~component~~Subsequently, ofin ~~other~~early ~~expense~~2015 ~~(income),~~the ~~net~~Company’s U. ~~Assets~~K. ~~and~~entity ~~liabilities~~switched oftheir ~~foreign~~functional ~~operations~~currency ~~are~~from ~~translated~~the ~~into~~ U.S. ~~dollars~~dollar ~~using~~to the ~~exchange~~British ~~rates~~Pound insterling. ~~effect~~An atentity’s ~~the~~functional ~~respective~~currency ~~balance~~is ~~sheet~~the ~~reporting~~currency ~~date.~~of ~~Income~~the ~~and~~primary ~~expenses~~economic ~~are~~environment ~~translated~~in atwhich the ~~average~~entity ~~exchange rate during the period~~operates. ~~Gains~~Management ~~and~~determined ~~losses~~in onearly ~~foreign~~2015 ~~currency~~that ~~translation~~due ~~are~~to ~~reported~~a aschange ain ~~component~~the ofmanner ~~accumulated~~in ~~other~~which ~~comprehensive~~the ~~(loss)~~U.K. ~~Deferred~~entity ~~taxes~~operates, ~~are~~that ~~not~~a ~~provided~~switch onin ~~cumulative~~the ~~translation~~functional ~~adjustments~~currency ~~where~~to the ~~Company~~British ~~expects~~Pound ~~earnings~~sterling offrom athe ~~foreign~~U.S. ~~subsidiary~~dollar towas ~~be indefinitely reinvested~~necessary.

~~Goodwill~~When the transactional currency is different than the functional currency, transaction gains and ~~Intangible~~losses are included as a component of other (income) expense, net. Assets and liabilities of foreign operations are translated into U.S. dollars using the exchange rates in effect at the respective balance sheet reporting date. Income and expenses are translated at the average exchange rate during the period. Gains and losses on foreign currency translation are reported as a component of accumulated other comprehensive (loss) income. Deferred taxes are not provided on cumulative translation adjustments where the Company expects earnings of a foreign subsidiary to be indefinitely reinvested.

~~The~~Finite ~~Company~~Lived ~~tests~~Intangible its goodwill and trademark and brand intangible assets with indefinite lives annually as of October 1st unless there are indications during an interim period that these assets may have become impaired. Goodwill impairment occurs when the carrying amount of one of the Company’s reporting unit’s goodwill exceeds its implied fair value. The Company would then record an impairment charge being the difference between the carrying amount and the implied fair value of the reporting unit’s goodwill. For trademarks and brand intangible assets with indefinite lives, impairment occurs when the carrying amount of an asset is greater than its estimated fair value and an impairment charge is Assets

9Amortization of intangible assets with finite lives (customer relationships and licensing arrangements) is recognized over estimated useful lives ranging from 5 to 10 years, which the Company believes reasonably represents the time period in

Table of Contents

~~recorded~~which ~~for~~ the ~~difference~~economic ~~between~~benefits of the ~~carrying~~intangible ~~amount~~assets ~~and~~are ~~the~~consumed ~~fair~~or ~~value~~otherwise realized. The Company’s ~~estimates~~has ofexperienced ~~fair value are based primarily on~~ a ~~discounted~~negligible ~~cash~~attrition ~~flow~~rate ~~approach as supplemented by a market based approach. Significant judgment is necessary~~ in ~~the~~its ~~preparation~~customer ofbase, ~~assumptions~~ and ~~estimates~~is ~~inherent~~not inable ~~such~~to ~~valuation~~identify ~~approaches,~~a ~~particularly~~reliable ~~with~~pattern ~~respect to the determination~~ of ~~future~~attrition ~~volumes, revenue~~ and ~~expense growth rates~~, ~~changes~~as ~~in working capital use~~such, ~~foreign-exchange~~is ~~rates,~~utilizing ~~inflation,~~ the ~~selection~~straight ofline ~~an appropriate discount rate and the calculation of an average earnings before interest, tax, depreciation and~~ amortization ~~(“EBITDA”)~~method ~~multiple~~to ofamortize acustomer ~~selected~~relationship ~~public-company~~intangible ~~peer group~~assets. InFinite ~~particular,~~lived ~~the~~intangible ~~discount~~assets ~~rates~~are ~~the~~reviewed ~~Company utilizes in these analyses, as well as expectations~~ for ~~future~~possible ~~cash~~impairment ~~flows,~~whenever ~~may~~events beor ~~influenced by such factors as~~ changes in ~~interest~~circumstances ~~rates,~~occur ~~rates~~that ofindicate ~~inflation~~that ~~and changes in regional risk. During~~ the ~~nine~~carrying ~~months~~amount ~~ended~~of ~~September~~an ~~30,~~asset ~~2014,~~may ~~goodwill~~not ~~decreased~~be ~~by $0~~recoverable.2 ~~million~~There ~~due~~have tobeen ~~currency~~no ~~translation~~instances of ~~$2.1~~impairment ~~million and partially offset by the preliminary purchase accounting related to a small acquisition in our international region of $1~~identified.~~9 million.~~

~~Property,~~Indefinite ~~Plant & Equipment and Finite-~~Lived Intangible Assets

~~Property,~~The ~~plant~~Company ~~and~~tests ~~equipment~~its trademarks and ~~finite-lived~~brand ~~intangible~~names ~~assets~~with ~~are~~indefinite ~~stated~~lives atfor ~~cost~~impairment ~~less~~annually ~~accumulated~~on ~~depreciation~~the ~~and~~first ~~amortization.~~day ~~The~~of ~~Company~~the ~~calculates~~fourth ~~depreciation~~quarter ~~and~~unless ~~amortization~~there ~~expense~~are byindications ~~the~~during ~~straight-line~~an ~~method~~interim ~~using~~period ~~estimated~~that ~~useful~~these ~~lives~~assets ofare ~~the~~more ~~related~~likely ~~assets.~~than ~~The~~not ~~Company~~to ~~reviews~~have ~~property,~~become ~~plant~~impaired. ~~and~~For ~~equipment~~trademarks and ~~finite-lived~~brand ~~intangible~~names ~~assets~~with ~~for~~indefinite lives, impairment ~~whenever~~occurs ~~events~~when ~~or changes in circumstances occur that indicate that~~ the carrying amount of an asset oris ~~asset~~greater ~~group~~than ~~may~~its ~~not~~estimated befair ~~recoverable~~value. ~~The~~An ~~Company’s~~ impairment ~~review~~charge is ~~based~~recorded onfor anthe ~~estimate~~difference ofbetween the ~~undiscounted~~carrying ~~cash~~amount ~~flows~~and at the ~~lowest~~fair ~~level~~value. ~~for~~The ~~which~~Company ~~identifiable~~uses ~~cash~~an ~~flows~~income ~~exist~~approach, ~~and~~the ~~impairment~~relief ~~occurs~~from ~~when~~royalty method, to estimate the ~~book~~fair value of ~~the~~its ~~asset~~trademarks ~~group~~and ~~exceeds~~trade ~~the~~names ~~estimated~~with ~~future~~indefinite ~~undiscounted~~lives. ~~cash~~This ~~flows~~method ~~generated~~assumes bythat, ~~the~~in ~~asset~~lieu ~~group.~~of ~~When~~ownership, ~~impairment~~a isthird ~~indicated,~~party would be willing to pay a ~~charge~~royalty isin ~~recorded~~order ~~for~~to obtain the ~~difference~~rights ~~between~~to use the ~~book~~comparable ~~value~~asset. The determination of the ~~asset~~fair ~~group~~values of trademarks and ~~its~~brand ~~fair~~name ~~value.~~assets ~~Depending~~with onindefinite ~~the~~lives ~~asset~~requires orsignificant ~~asset~~judgments ~~group,~~in determining both the assets’ estimated ~~fair~~cash ~~value~~flows ~~may~~as bewell ~~determined~~as ~~either~~the byappropriate ~~use~~discount ofand aroyalty ~~discounted~~rates applied to those cash ~~flow~~flows ~~model~~to ordetermine byfair ~~reference~~value. toChanges ~~estimated~~in ~~selling~~such ~~values~~estimates or the application of ~~assets~~alternative inassumptions acould ~~similar~~produce ~~condition~~different results.

~~Reclassification~~Goodwill

~~Certain~~The ~~reclassifications~~Company ~~have~~tests ~~been~~its ~~made~~goodwill tofor ~~conform~~impairment annually as of the ~~prior~~first day of the fourth quarter unless there are indications during an interim period ~~data~~that these assets are more likely than not to have become impaired. The first step of the ~~current~~goodwill ~~presentation~~impairment test is to compare the fair value of each reporting unit to its carrying amount to determine if there is potential impairment. ~~These~~If ~~reclassifications~~the ~~had~~fair novalue ~~effect~~of onthe ~~reported~~reporting ~~net~~unit ~~loss~~is orless ~~comprehensive~~than ~~(loss)~~its ~~income~~carrying value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss.

~~Recent~~The ~~Accounting~~second ~~Pronouncements~~step of the goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. That is, the fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination at the date of the evaluation and the fair value was the purchase price paid to acquire the reporting unit.

InThe ~~August~~Company ~~2014~~estimates the ~~Financial~~fair ~~Accounting~~value ~~Standards~~of ~~Board~~reporting ~~(“FASB”)~~units ~~issued~~using ~~Accounting~~a ~~Standards~~weighting ~~Update~~of ~~(“ASU”)~~fair ~~No.~~values ~~2014-15—Disclosure~~derived offrom ~~Uncertainties~~an ~~about~~income anapproach ~~Entity’s~~and ~~Ability~~a tomarket ~~Continue~~approach. asDetermining the fair value of a ~~Going~~reporting ~~Concern. The~~unit ~~ASU~~under ~~requires~~the ~~management~~first tostep ~~evaluate~~of ~~whether~~the ~~there~~goodwill ~~are~~impairment ~~conditions~~test and ~~events~~determining ~~that~~the ~~raise~~fair ~~substantial~~value ~~doubt~~of ~~about~~individual ~~the~~assets ~~entity’s~~and ~~ability~~liabilities toof ~~continue~~a asreporting aunit ~~going~~(including ~~concern~~unrecognized ~~within~~intangible ~~one~~assets) ~~year~~under ~~after~~the second step of the ~~financial~~goodwill ~~statements~~impairment ~~are~~test ~~issued~~is ~~and,~~inherently ifsubjective ~~so,~~in tonature ~~disclose~~and ~~that~~often ~~fact. The~~involves ~~ASU~~the ~~requires~~use ~~management~~of tosignificant ~~make~~estimates ~~this~~and ~~evaluation~~assumptions ~~for~~based ~~both~~on ~~the~~known ~~annual~~facts and ~~interim~~circumstances ~~reporting~~at ~~periods,~~the iftime ~~applicable. Management~~the isCompany ~~also~~performs ~~required~~the tovaluation. ~~evaluate~~The ~~and~~use ~~disclose~~of ~~whether~~different ~~its~~assumptions, ~~plans~~inputs ~~alleviate~~and ~~that~~judgments ~~doubt. The~~or ~~ASU~~changes isin ~~effective~~circumstances ~~for~~could ~~annual~~materially ~~periods~~affect ~~ending~~the ~~after~~results ~~December~~of ~~15,~~the ~~2016~~valuation and ~~interim~~could ~~periods~~have ~~within~~a ~~annual~~significant ~~periods~~impact ~~beginning~~on ~~after~~whether ~~December~~or ~~15,~~not ~~2016. The~~an ~~Company~~impairment charge is ~~assessing~~recognized ~~the~~and ~~impact of~~ the ~~adoption~~magnitude of ~~the~~any ~~ASU~~such ~~on its disclosure requirements~~charge.

InIncome ~~June~~approach—To ~~2014~~determine ~~the~~fair ~~FASB~~value, ~~issued~~the ~~ASU~~Company ~~No.~~uses ~~2014-12—Compensation-Stock~~a ~~Compensation. The~~DCF ~~ASU~~approach isfor ~~intended~~each toof ~~resolve~~the ~~diverse~~reporting ~~accounting~~units. ~~treatment~~Under ~~for~~this ~~accounting~~approach, ~~for~~the ~~share-based~~Company ~~payments~~estimates ~~when~~ the ~~terms~~future cash flows of aneach ~~award~~reporting ~~provide~~unit ~~that~~and ~~the~~discounts ~~performance~~these ~~target~~cash ~~could~~flows beat ~~achieved~~a ~~after~~rate ~~the~~of ~~requisite~~return ~~service~~that ~~period~~reflects their relative risk. The ~~amendments~~cash ~~require~~flows ~~that~~used ain ~~performance~~the ~~target~~DCF ~~that~~are ~~affects~~consistent ~~vesting~~with ~~and~~the ~~that~~Company’s ~~could~~long berange ~~achieved~~forecasts, ~~after~~and ~~the~~give ~~requisite~~consideration ~~service~~to ~~period~~historic beand ~~treated~~projected aslong aterm ~~performance~~business ~~condition~~trends and strategies. The ~~amendments~~other inkey ~~this~~estimates ~~update~~and ~~are~~factors ~~effective~~used ~~for~~in ~~annual~~the ~~periods~~DCF ~~and~~include, ~~interim~~but ~~periods~~are ~~within~~not ~~those~~limited ~~annual~~to, ~~periods~~discount ~~beginning~~rates, ~~after~~future ~~December~~sales 15volumes, ~~2015. Earlier~~revenue ~~adoption~~and isexpense ~~permitted. The~~growth ~~Company~~rates, ischanges ~~assessing~~in ~~the~~working ~~impact~~capital, oncapital ~~the~~expenditure ~~adoption~~forecasts, offoreign ~~the~~exchange ~~ASU~~rates, oncurrency ~~its~~devaluation, ~~financial~~inflation, ~~statements~~and a perpetuity growth rate.

InMarket ~~May 2014 the FASB issued ASU No. 2014-09~~approach—~~Revenue from Contracts with Customers.~~ The ~~ASU~~Company ~~clarifies~~uses the ~~principles~~guideline ~~for~~public ~~recognizing~~company ~~revenue~~method ~~and~~to ~~develops~~select areasonably ~~common~~similar/guideline ~~revenue~~publicly ~~standard~~traded companies for ~~U.S.~~each ~~GAAP~~of ~~and~~the ~~International~~Company’s ~~Financial~~reporting ~~Reporting~~units. ~~Standards~~Using ~~(“IFRS”)~~the ~~that~~guideline ~~removes~~public ~~inconsistencies~~company ~~and weaknesses in revenue requirements~~method, ~~provides~~the aCompany ~~more~~calculates ~~robust~~earnings ~~framework~~before ~~for addressing revenue issues~~interest, ~~improves comparability of revenue recognition practices across entities~~taxes, ~~industries,~~depreciation ~~jurisdictions~~ and ~~capital~~amortization ~~markets,~~(“EBITDA”) ~~provides~~multiples ~~more~~for ~~useful~~each ~~information to users~~ of the ~~financial~~public ~~statements~~companies ~~through~~using ~~improved~~both ~~disclosure~~historical ~~requirements~~ and ~~simplifies~~forecasted ~~the~~EBITDA ~~preparation~~figures. ofBy ~~financial~~applying ~~statements~~these bymultiples ~~reducing~~to the ~~number~~appropriate ofhistorical ~~requirements~~and toforecasted ~~which~~EBITDA anfigures ~~entity must refer. The amendments in this update are effective~~ for ~~the~~each ~~annual~~ reporting ~~periods beginning after December 15~~unit, ~~2016,~~fair ~~including~~value ~~interim~~estimates ~~periods~~are ~~within that reporting period~~calculated. Full or modified retrospective adoption is required and early application is not permitted. The Company is assessing the impact of the adoption of the ASU on its financial statements, disclosure requirements and methods of adoption.

10During the three months ended March 31, 2015, goodwill decreased by $3.6 million due to currency translation.

Table of Contents

Recent Accounting Pronouncements

In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU No. 2015-03 — Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability to which they relate, consistent with debt discounts, as opposed to being presented as assets. The ASU is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2015 and requires retrospective application. The adoption of this update on January 1, 2016 is not expected to have a material impact on our consolidated financial statements. As of March 31, 2015 and December 31, 2014, the unamortized deferred financing costs recorded on the Company’s balance sheets were $3.2 million and $3.6 million, respectively.

In February 2015, the FASB issued ASU 2015-02, “Consolidation (Topic 10): Amendments to the Consolidation Analysis” (“ASU 2015-02”). The ASU provides guidance on the consolidation evaluation for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. In accordance with ASU 2015-02, all legal entities are subject to reevaluation under the revised consolidation model. ASU 2015-02 will be effective for the Company in its first quarter of fiscal 2016. The Company is currently evaluating the impact of the pending adoption of the ASU on its consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15—Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The ASU requires management to evaluate whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the financial statements are issued and, if so, to disclose that fact. The ASU requires management to make this evaluation for both the annual and interim reporting periods, if applicable. Management is also required to evaluate and disclose whether its plans alleviate that doubt. The ASU is effective for annual periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016.

In May 2014, the FASB issued ASU No. 2014-09—Revenue from Contracts with Customers. The ASU clarifies the principles for recognizing revenue and develops a common revenue standard for U.S. GAAP and International Financial Reporting Standards (‘‘IFRS’’) that removes inconsistencies and weaknesses in revenue requirements, provides a more robust framework for addressing revenue issues, improves comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets, provides more useful information to users of the financial statements through improved disclosure requirements and simplifies the preparation of financial statements by reducing the number of requirements to which an entity must refer. The amendments in this update are effective for the annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Full or modified retrospective adoption is required and early application is not permitted. The Company is assessing the impact of the adoption of the ASU on its financial statements, disclosure requirements and methods of adoption.

On April 1, 2015, the FASB proposed a one-year deferral of the effective date for its new revenue standard for public and nonpublic entities reporting under U.S. GAAP. Under the proposal, the standard would be effective for public entities for annual reporting periods beginning after December 15, 2017 and interim periods therein. The proposal also would permit a public entity to adopt the standard as early as the original public entity effective date (i.e., annual reporting periods beginning after December 15, 2016 and interim periods therein). Early adoption prior to that date would not be permitted. The FASB has issued an exposure draft on the proposal and expects to seek public comment with a 30-day comment period.

Note 2 — Inventories

Inventories consisted of the following (in thousands):

	September 30, 2014			December 31, 2013
Finished goods	$	38,764		$	28,400
Raw materials and packaging	9,476			7,896
Allowances for obsolescence	(2,357		)	(2,253		)
	$	45,883		$	34,043

Table of Contents

	March 31, 2015			December 31, 2014
	(Unaudited)
Finished goods	$	29,435		$	31,628
Raw materials and packaging	8,392			9,102
Allowances for obsolescence	(1,489		)	(2,139		)
	$	36,338		$	38,591

Note 3 - Fair Value Measurement of Assets and Liabilities

The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value which is intended to increase consistency and comparability and related disclosures. An asset or liability’s classification is based on the lowest level of input that is significant to the fair value measurement and is disclosed in one of the following three categories:

Level 1—Quoted market prices in active markets for identical assets or liabilities.

Level 2—Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3—Unobservable inputs reflecting the reporting entity’s own assumptions.

The Company’s financial instruments consist of cash, trade accounts receivable, trade accounts payable and long-term debt. Due to their short-term maturity, the carrying amounts of cash, trade accounts receivable and trade accounts payable approximate their fair market values. The carrying and fair values of the Company’s long-term debt were as follows (in thousands):

	September 30, 2014				December 31, 2013
	March 31, 2015				December 31, 2014
	Carrying Value		Fair Value		Carrying Value		Fair Value
Term loan	$	275,946	$	279,051	$	285,982	$	291,000
	(Unaudited)		(Unaudited)
Senior notes	268,533		280,500		267,600		267,438
Term loan	$	275,273	$	278,250	$	275,611	$	278,303
Senior notes	269,191		279,125		268,858		273,625

The fair value of the Term Loan and the Senior Notes was determined using broker quotes, ~~which~~(Level ~~use~~2). The ~~discounted~~broker ~~cash~~quotes ~~flows,~~are determined on an ~~income~~anlaysis ~~approach,~~of ~~and~~discounted ~~the~~cash ~~then~~flows togeterh with applicable forward LIBOR rates ~~and, therefore, meets the definition of Level 2 fair value, as defined above~~.

Note 4 — Commitments and Contingencies

Litigation and Other Legal Matters

InThe ~~connection~~Company ~~with~~is ~~the~~subject ~~Acquisition,~~to ~~Clorox~~various ~~retained~~lawsuits ~~liability~~and ~~associated~~claims ~~with~~relating ato ~~potential~~issues such as contract ~~claim~~disputes, ~~and~~product ~~the~~liability, ~~Company~~patents ~~agreed~~and totrademarks, ~~indemnify~~advertising, employee and ~~reimburse~~other ~~Clorox~~matters. ~~for~~Although ~~50%~~the results of ~~the~~claims ~~first~~and ~~$5,000,000~~litigation incannot ~~settlement~~be ~~costs~~predicted ~~related~~with tocertainty, it is the ~~contract~~opinion ~~claim.~~of Asmanagement that the ultimate disposition of ~~September~~these ~~30,~~matters ~~2014~~will ~~and~~not ~~December 31,~~have ~~2013~~a material adverse effect, ~~the~~individually ~~Company~~or ~~has~~in ~~accrued~~the ~~$2.5~~aggregate, ~~million~~on inthe ~~long-term~~Company’s ~~liabilities~~financial ~~related~~position toor ~~this~~results ~~contingency~~of operations.

~~The~~In ~~Company~~connection iswith ~~subject~~the toAcquisition, ~~various~~Clorox ~~lawsuits~~retained ~~and~~liability ~~claims~~associated ~~relating~~with toa ~~issues~~potential ~~such as~~ contract ~~disputes,~~claim ~~product~~and ~~liability,~~the ~~patents~~Company ~~and~~has ~~trademarks,~~agreed ~~advertising,~~to ~~employee~~indemnify and ~~other~~reimburse ~~matters.~~Clorox ~~Although~~for ~~the~~50% ~~results~~ of ~~claims~~the ~~and~~first ~~litigation~~$5.0 ~~cannot~~million bein ~~predicted~~costs ~~with~~related ~~certainty,~~to ~~it is~~ the ~~opinion~~contract ofclaim. ~~management~~As ~~that the ultimate disposition~~ of ~~these matters~~March 31, to2015 ~~the~~and ~~extent~~December 31, ~~not previously provided for~~2014, ~~will~~the ~~not~~Company ~~have~~has aaccrued ~~material~~$2.5 ~~adverse~~million ~~effect, individually or~~ in ~~the~~long-term ~~aggregate,~~liabilities onrelated ~~the~~to ~~Company’s~~this ~~financial statements taken as a whole~~contingency.

Table of Contents

Note 5 — Income taxes

The Company’s effective tax ~~benefit~~ rate was as follows:

	Three months ended September 30,				Nine months ended September 30,
	Three Months Ended
	2014		2013		2014		2013
	March 31, 2015		March 31, 2014
Effective tax benefit rate	38.2	%	61.3	%	31.4	%	47.2	%
	(Unaudited)		(Unaudited)
Effective tax rate	70.4	%	89.4	%

The Company’s effective tax ~~benefit~~ rate for the three month period ended ~~September 30~~March 31, ~~2014~~2015 differs from the statutory tax rate primarily due to U.S. federal manufacturing benefits recognized and state ~~taxes,~~income ~~which both increase the benefit rate~~taxes. Further, the Company’s effective tax ~~benefit~~ rate has decreased for the three month period ended ~~September~~March 31, 302015, ~~2014~~ as compared to the corresponding period in ~~2013,~~2014 primarily as a result of a decrease from the discrete tax ~~benefit~~charge of $0.24 million recorded during the three month period ~~ending~~ended ~~September 30~~March 31, 2014. The discrete tax benefit is primarily the result of a change in the uncertain tax positions recorded by Clorox, for which the Company has recorded a corresponding benefit in income from operations due to the indemnification agreement between the entities, a change in the Company’s blended state tax rate, and true-ups related to the filing of the Company’s 2013 income tax returns.

The Company’s effective tax benefit rate for the nine month period ended September 30, 2014 differs from the statutory tax rate primarily due to U.S. federal manufacturing benefits recognized and state taxes. Further, the Company’s effective tax benefit rate has decreased for the nine month period ended September 30, 2014 as compared to the corresponding period in 2013 primarily as a result of a discrete tax charge of $0.6 million recorded during the nine month period ending September 30, 2014. The discrete tax charge is primarily the result of a change in the uncertain tax positions recorded by Clorox, for which the Company has recorded a corresponding benefit in income from operations due to the indemnification agreement between the entities, a change in the Company’s blended state tax rate, and true-ups related to the filing of the Company’s 2013 income tax returns.8

Table of Contents

The discrete tax charge was primarily the result of an increase in the uncertain tax positions recorded by Clorox, for which the Company has recorded a corresponding benefit in income from operations due to the indemnification agreement between the entities.

Note 6 — Segment Data

The Company manages its business through two geographic segments: North America and International.

· North America—consists of auto-care products marketed and sold in the United States and Canada. Products within this segment include auto-care products primarily under the Armor All and STP brands.

· International—consists of products sold outside North America, including Australia, Europe and other international locations. Products within this segment include auto-care products primarily under the Armor All and STP brands.

The Company does not allocate its amortization of intangible assets or interest expense between its North America and International segments but includes them in the tables below under Corporate in order to reconcile the North America and International segments’ performance to the Company’s Condensed Consolidated Statements of Comprehensive (Loss~~) Income~~. All intersegment sales are eliminated and are not included in the Company’s reportable segments’ net sales.

Table of Contents

The following summarizes the financial performance of the Company’s operating segments (in thousands):

Three months ended September 30, 2014

Three Months Ended March 31, 2015 (Unaudited)

North America

International

Corporate

Consolidated

Net sales

5066,~~503~~383

1916,~~956~~058

—

7082,~~459~~441

Earnings (loss) before income taxes

1420,~~092~~216

~~262~~1,457

(2120,~~023~~761

)

~~(6,669~~912

)

Capital expenditures

~~669~~478

~~138~~67

—

~~807~~545

Depreciation of property, plant and equipment and amortization of intangible assets

1,~~558~~664

~~122~~121

98,~~133~~969

10,~~813~~754

Share based compensation

—

Three months ended September 30, 2013

Three Months Ended March 31, 2014 (Unaudited)

North America

International

Corporate

Consolidated

Net sales

5061,~~886~~567

2018,~~121~~992

—

7180,~~007~~559

Earnings (loss) before income taxes

1118,~~421~~758

3,~~924~~003

(21,~~224~~060

)

~~(5,879~~701

)

Capital expenditures

~~1,049~~276

9552

—

~~1,144~~328

Depreciation of property plant and equipment and amortization of intangible assets

1,~~556~~577

~~127~~122

9,~~175~~111

10,~~858~~810

Share based compensation

—

	Nine months ended September 30, 2014
	North America		International		Corporate			Consolidated
Net sales	$	175,172	$	57,742	$	—		$	232,914
Earnings (loss) before income taxes	49,330		3,653		(63,097		)	(10,114		)
Capital expenditures	1,250		269		—			1,519
Depreciation of property, plant and equipment and amortization of intangible assets	4,720		365		27,377			32,462

	Nine months ended September 30, 2013
	North America		International		Corporate			Consolidated
Net sales	$	169,505	$	55,990	$	—		$	225,495
Earnings (loss) before income taxes	41,724		6,489		(63,502		)	(15,289		)
Capital expenditures	2,652		242		—			2,894
Depreciation of property plant and equipment and amortization of intangible assets	4,577		404		27,525			32,506

Note 7 — Financial Information for the Company and Its Subsidiaries

The Company’s payment obligations under the Senior Notes are guaranteed, jointly and severally, by all of the Company’s wholly owned domestic subsidiaries ~~that~~which guarantee the obligations of the Company under the Credit Facility. These guarantees are full and unconditional, subject, in the case of the subsidiary guarantors, to customary release provisions. The Company conducts substantially all of its business through its subsidiaries. In servicing payments to be made on the Senior Notes and other indebtedness, and to satisfy other liquidity requirements, the Company will rely, in large part, on cash flows from these subsidiaries, mainly in the form of dividends, royalties and advances or payments on account of intercompany loan arrangements. The ability of these subsidiaries to make dividend payments to the Company will be affected by, among other factors, the obligations of these entities to their creditors, requirements of corporate and other law, and restrictions contained in agreements entered into by or relating to these entities.

The following supplemental condensed consolidating financial information sets forth, ~~on a combining basis,~~ balance sheets, statements of comprehensive (loss) income and statements of cash flows for the Company, the guarantor subsidiaries, the non-guarantor subsidiaries and elimination entries necessary to consolidate the Company and its subsidiaries. This information is presented in lieu of separate financial statements and other related disclosures pursuant to Regulation S-X Rule 3-10 of the Securities Exchange Act of 1934, as amended, “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered.”

Table of Contents

separate financial statements and other related disclosures pursuant to Regulation S-X Rule 3-10 of the Securities Exchange Act of 1934, as amended, “Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered.”

The operating and investing activities of the separate legal entities are fully interdependent and integrated. Accordingly, the results of the separate legal entities are not representative of what the operating results would be on a standalone basis.

~~Condensed Consolidating Balance Sheet~~9

September 30, 2014

	Issuer		Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
Cash	$	7,302	$	—		$	6,129		$	—		$	13,431
Accounts receivable, net	—		57,541			16,436			—			73,977
Inventories	—		33,175			12,708			—			45,883
Other current assets	81,798		(74,559		)	3,326			—			10,565
Total current assets	89,100		16,157			38,599			—			143,856
Property, plant and equipment, net	7,264		15,675			2,412			—			25,351
Goodwill	—		310,576			48,071			—			358,647
Intangible assets, net	—		253,820			32,211			(1,651		)	284,380
Investment in subsidiaries	595,664		109,047			—			(704,711		)	—
Investment in affiliate	10,000		—			—			—			10,000
Deferred financing costs and other assets, net	2,276		87			—			—			2,363
Total assets	$	704,304	$	705,362		$	121,293		$	(706,362	)	$	824,597
LIABILITIES AND SHAREHOLDER’S EQUITY
Current liabilities:
Accounts payable	$	933	$	14,418		$	4,014		$	—		$	19,365
Accrued expenses and other current liabilities	17,389		9,976			8,189			—			35,554
Payable to parent	251		—			—			—			251
Due to Clorox	—		23			(1		)	—			22
Current portion of long-term debt, less discount	1,318		—			—			—			1,318
Total current liabilities	19,891		24,417			12,202			—			56,510
Long-term debt, less discount and current portion	543,161		—			—			—			543,161
Other liability	2,500		—			—			—			2,500
Deferred income taxes	5,121		75,281			44			—			80,446
Total liabilities	570,673		99,698			12,246			—			682,617
Shareholder’s equity	133,631		605,664			109,047			(706,362		)	141,980
Total liabilities and shareholder’s equity	$	704,304	$	705,362		$	121,293		$	(706,362	)	$	824,597

Table of Contents

Condensed Consolidating Balance Sheet (Unaudited)

March 31, 2015

	Issuer			Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Current assets:
Cash	$	4,515		$	—		$	6,322	$	—		$	10,837
Accounts receivable, net	—			74,583			16,946		—			91,529
Due from Parent	269			—			—		—			269
Due from IDQ	88			—			—		—			88
Inventories	—			26,459			9,879		—			36,338
Other current assets	84,211			(74,644		)	2,434		—			12,001
Total current assets	89,083			26,398			35,581		—			151,062

Property, plant and equipment, net	6,607			16,295			2,011		—			24,913
Goodwill	—			310,576			42,654		—			353,230
Intangible assets, net	—			231,734			26,043		(3,042		)	254,735
Investment in subsidiaries	581,808			95,268			—		(677,076		)	—
Investment in affiliate	10,000			—			—		—			10,000
Deferred financing costs and other assets, net	1,787			85			—		—			1,872
Total assets	$	689,285		$	680,356		$	106,289	$	(680,118	)	$	795,812
LIABILITIES AND SHAREHOLDER’S EQUITY
Current liabilities:
Accounts payable	$	488		$	15,607		$	3,762	$	—		$	19,857
Accrued expenses and other current liabilities	23,628			7,661			7,196		—			38,485
Current portion of long-term debt	3,000			—			—		—			3,000
Total current liabilities	27,116			23,268			10,958		—			61,342

Long-term debt, less discount and current portion	541,464			—			—		—			541,464
Other liability	2,500			—			—		—			2,500
Deferred income taxes	(4,039		)	75,280			63		—			71,304
Total liabilities	567,041			98,548			11,021		—			676,610
Shareholder’s equity	122,244			581,808			95,268		(680,118		)	119,202
Total liabilities and shareholder’s equity	$	689,285		$	680,356		$	106,289	$	(680,118	)	$	795,812

Table of Contents

Condensed Consolidating Balance Sheet

Year Ended December 31, ~~2013~~2014

	Issuer			Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries			Eliminations			Consolidated Total
ASSETS
Current assets:
Cash	$	147,~~843~~396		$	—		$	65,~~410~~655		$	—		$	2113,~~253~~051
Accounts receivable	—			4351,~~784~~565			16,~~540~~332			—			6067,~~324~~897
Inventory	—			2429,~~553~~320			9,~~490~~271			—			3438,~~043~~591
Other current assets	53,931			(43,971		)	1,716			—			11,676
Due from IDQ	830			—			—			—			830
Total current assets	68,774			24,366			34,156			—			127,296
Other current assets	84,235			(75,081		)	1,826			—			10,980
Property, plant and equipment	8,061			18,037			2,838			—			28,936
Total current assets	92,461			5,804			33,084			—			131,349
Goodwill	—			310,576			48,250			—			358,826
Property, plant and equipment	6,949			17,039			2,257			—			26,245
Intangible assets	—			276,461			38,198			(1,189		)	313,470
Goodwill	—			310,576			46,213			—			356,789
Investment in subsidiaries	647,107			115,394			—			(762,501		)	—
Intangible assets net	—			239,279			29,517			(2,348		)	266,448
Other assets	3,632			87			—			—			3,719
Investment in subsidiaries	583,849			101,430			—			(685,279		)	—
Total assets	$	727,574		$	744,921		$	123,442		$	(763,690	)	$	832,247
Investment in affiliates	10,000			—			—			—			10,000
Deferred financing costs and other assets, net	2,070			88			—			—			2,158
Total assets	$	695,329		$	674,216		$	111,071		$	(687,627	)	$	792,989
LIABILITIES AND SHAREHOLDER’S EQUITY
Current liabilities:
Accounts payable	$	~~169~~296		$	411,~~413~~590		$	2,~~407~~264		$	—		$	614,~~989~~150
Accrued expenses and other current liabilities	1019,~~063~~340			83,~~953~~861			57,~~578~~330			—			2430,~~594~~531
Due to Clorox	69			23			(1		)	—			91
Due to Parent	29			—			—			—			29
Due to Parent	745			—			—			—			745
Current portion of long-term debt	3,000			—			—			—			3,000
Notes payable, current portion	71			—			—			—			71
Total current liabilities	22,665			15,451			9,594						47,710
Total current liabilities	11,117			13,389			7,984						32,490
Long term debt, less discount and current portion	541,469			—			—			—			541,469
Notes payable, less current portion and discount	553,511			—			—			—			553,511
Other liabilities	2,500			—			—			—			2,500
Deferred income taxes	~~5,121~~(543		)	8474,~~425~~916			6447			—			8974,~~610~~420
Total liabilities	~~572~~566,~~249~~091			9790,~~814~~367			89,~~048~~641			—			~~678~~666,~~111~~099
Shareholder’s equity	~~155~~129,~~325~~238			~~647~~583,~~107~~849			~~115~~101,~~394~~430			(~~763~~687,~~690~~627		)	~~154~~126,~~136~~890
Total liabilities and shareholder’s equity	$	~~727~~695,~~574~~329		$	~~744~~674,~~921~~216		$	~~123~~111,~~442~~071		$	(~~763~~687,~~690~~627	)	$	~~832~~792,~~247~~989

1511

Table of Contents

Condensed Consolidating Statement of Comprehensive (Loss) Income (Unaudited)

Three ~~Months~~months ~~Ended~~ended ~~September 30~~March 31, ~~2014~~2015

	Issuer			Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	5872,~~123~~314		$	1917,~~924~~230		$	(7,~~588~~103	)	$	7082,~~459~~441
Cost of products sold	—			3040,~~636~~937			1513,~~708~~004			(7,~~588~~103		)	3846,~~756~~838
Gross profit	—			2731,~~487~~377			4,~~216~~226			—			3135,~~703~~603
Operating expenses:
Selling and administrative expenses	35,~~624~~059			2,~~683~~623			32,~~185~~825			—			910,~~492~~507
Advertising costs	—			51,~~127~~587			1,~~901~~056			—			72,~~028~~643
Research and development costs	—			~~653~~571			—4			—			~~653~~575
Amortization of acquired intangible assets	—			7,~~546~~545			1,~~587~~423			—			98,~~133~~968
Total operating expenses	35,~~624~~059			1612,~~009~~326			65,~~673~~308			—			2622,~~306~~693
Operating (loss) profit	(35,~~624~~059		)	1119,~~478~~051			(21,~~457~~082		)	—			512,~~397~~910
Non-operating expenses:
Interest expense	11,~~888~~790			—			43			—			11,~~892~~793
Other expense, net	66(67		)	—139			~~108~~133			—			~~174~~205
(Loss) earnings before (benefit) provision for income taxes	(15,578		)	11,478			(2,569		)	—			(6,669		)
(Loss) earnings before provision for income taxes	(16,782		)	18,912			(1,218		)	—			912
(Benefit) provision for income taxes	(6,016		)	3,291			177			—			(2,548		)
Provision for income taxes	335			3			304			—			642
Equity earnings of subsidiaries, net of taxes	5,441			(2,746		)	—			(2,695		)	—
Equity earnings (loss) of subsidiaries, net of taxes	17,387			(1,522		)	—			(15,865		)	—
Net (loss) earnings	$	(4,121	)	$	5,441		$	(2,746	)	$	(2,695	)	$	(4,121	)
Net earnings (loss)	$	270		$	17,387		$	(1,522	)	$	(15,865	)	$	270
Other comprehensive loss:
Foreign currency translation	(57,~~542~~958		)	(57,~~542~~958		)	(57,~~542~~958		)	1115,~~084~~916			(57,~~542~~958		)
Comprehensive (loss) income	$	(9,663	)	$	(101	)	$	(8,288	)	$	8,389		$	(9,663	)
Comprehensive loss (income)	$	(7,688	)	$	9,429		$	(9,480	)	$	51		$	(7,688	)

1612

Table of Contents

Condensed Consolidating Statement of Comprehensive (Loss) Income (~~Loss~~Unaudited)

Three months ended ~~September 30~~March 31, ~~2013~~2014

	Issuer			Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries			Eliminations			Consolidated
							Combined
Net sales	$	—		$	57,639		$	19,164		$	(5,796	)	$	71,007
				Combined			Non-
Cost of products sold	—			28,534			15,745			(5,796		)	38,483
				Guarantor			Guarantor
Gross profit	—			29,105			3,419			—			32,524
	Issuer			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	66,428		$	20,359		$	(6,228	)	$	80,559
Cost of products sold	—			33,765			14,117			(6,228		)	41,654
Gross profit	—			32,663			6,242			—			38,905
Operating expenses:
Selling and administrative expenses	45,~~532~~729			2,~~916~~941			2,~~406~~882			—			911,~~854~~552
Advertising costs	—			53,~~396~~924			1,~~371~~481			—			65,~~767~~405
Research and development costs	—			~~625~~608			1—			—			~~626~~608
Amortization of acquired intangible assets	—			7,545			1,~~630~~566			—			9,~~175~~111
Total operating expenses	45,~~532~~729			1615,~~482~~018			5,~~408~~929			—			26,~~422~~676
Operating (loss) profit	(45,~~532~~729		)	1217,~~623~~645			~~(1,989~~313		)	—			612,~~102~~229
Non-operating expenses:
Interest expense	1211,~~044~~949			—			5—			—			1211,~~049~~949
Other expense, net	3(425		)	1—			~~(72~~4		)	—			(68421		)
(Loss) earnings before (benefit) provision for income taxes	(1617,~~579~~253		)	1217,~~622~~645			~~(1,922~~309		)	—			~~(5,879~~701		)
(Benefit) provision for income taxes	(5,360		)	1,255			501			—			(3,604		)
Benefit (provision) for income taxes	6,406			(6,775		)	(258		)	—			(627		)
Equity earnings (loss) of subsidiaries, net of taxes	810,~~944~~921			~~(2,423~~51		)	—			(610,~~521~~972		)	—
Net (loss) earnings	$	(2,275	)	$	8,944		$	(2,423	)	$	(6,521	)	$	(2,275	)
Net earnings (loss)	$	74		$	10,921		$	51		$	(10,972	)	$	74
Other comprehensive loss:
Other comprehensive (loss) income:
Foreign currency translation	2(1,~~336~~892		)	2(1,~~336~~892		)	2(1,~~336~~892		)	(43,~~672~~784		)	2(1,~~336~~892		)
Comprehensive income (loss)	$	61		$	11,280		$	(87	)	$	(11,193	)	$	61
Comprehensive (loss) income	$	(1,818	)	$	9,029		$	(1,841	)	$	(7,188	)	$	(1,818	)

1713

Table of Contents

Condensed Consolidating Statement of ~~Comprehensive~~Cash Flows (~~Loss~~Unaudited) ~~Income~~

~~Nine~~Three months ended ~~September 30~~March 31, ~~2014~~2015

	Issuer			Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	193,967		$	61,123		$	(22,176	)	$	232,914
Cash flows from operating activities:
Cost of products sold	—			102,126			45,070			(22,176		)	125,020
Net earnings (loss)	$	270		$	17,387		$	(1,522	)	$	(15,865	)	$	270
Gross profit	—			91,841			16,053			—			107,894
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Operating expenses:
Depreciation and amortization	1,622			8,628			1,651			—			11,901
Selling and administrative expenses	14,840			8,141			9,094			—			32,075
Deferred income taxes	(3,496		)	364			16			—			(3,116		)
Advertising costs	—			15,804			5,324			—			21,128
Equity earnings of subsidiaries, net of taxes	(17,387		)	1,522			—			15,865			—
Research and development costs	—			1,887			—			—			1,887
Other	—			28			38			—			66
Amortization of acquired intangible assets	—			22,636			4,741			—			27,377
Cash effect of changes in:
Total operating expenses	14,840			48,468			19,159			—			82,467
Accounts receivable, net	—			(23,046		)	(652		)	—			(23,698		)
Operating (loss) profit	(14,840		)	43,373			(3,106		)	—			25,427
Inventories	—			2,861			(608		)	—			2,253
Non-operating expenses (income):
Other current assets	(85		)	(437		)	(609		)	—			(1,131		)
Interest expense	35,713			—			9			—			35,722
Due from/(to) IDQ	742			—			—			—			742
Other expense, net	(402		)	—			221			—			(181		)
Accounts payable and accrued liabilities	4,479			7,820			1,362			—			13,661
(Loss) earnings before (benefit) provision for income taxes	(50,151		)	43,373			(3,336		)	—			(10,114		)
Intercompany and other	11,863			(14,788		)	1,436			—			(1,489		)
(Benefit) provision for income taxes	(18,600		)	14,809			612			—			(3,179		)
Net cash provided by (used in) operating activities:	(1,992		)	339			1,112			—			(541		)
Equity earnings of subsidiaries, net of taxes	24,616			(3,948		)	—			(20,668		)	—
Cash flows from investing activities:
Net (loss) earnings	$	(6,935	)	$	24,616		$	(3,948	)	$	(20,668	)	$	(6,935	)
Capital expenditures	(139		)	(339		)	(67		)	—			(545		)
Other comprehensive (loss) income:
Acquisition, net	—			—			—			—			—
Foreign currency translation	(4,383		)	(4,383		)	(4,383		)	8,766			(4,383		)
Net cash used in investing activities	(139		)	(339		)	(67		)	—			(545		)
Comprehensive (loss) income	$	(11,318	)	$	20,233		$	(8,331	)	$	(11,902	)	$	(11,318	)
Cash flows from financing activities:
Principal payments on term loan	(750		)	—			—			—			(750		)
Payment of advance from Parent	—			—			—			—			—
Net cash used in by financing activities	(750		)	—			—			—			(750		)
Effect of exchange rate changes on cash	—			—			(378		)	—			(378		)
Net increase in cash	(2,881		)	—			667			—			(2,214		)
Cash at beginning of period	7,396			—			5,655			—			13,051
Cash at end of period	$	4,515		$	—		$	6,322		$	—		$	10,837

1814

Table of Contents

Condensed Consolidating Statement of ~~Comprehensive~~Cash Flows (~~Loss~~Unaudited) ~~Income~~Three months ended March 31, 2014

Nine months ended September 30, 2013

							Combined
				Combined			Non-
				Guarantor			Guarantor
	Issuer			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net earnings (loss)	$	74		$	10,921		$	51		$	(10,972	)	$	74
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Depreciation and amortization	1,550			8,577			1,792			—			11,919
Share-based compensation	27			—			—			—			27
Deferred income taxes	(16		)	(3,060		)	(22		)	—			(3,098		)
Equity earnings of subsidiaries, net of taxes	(10,921		)	(51		)	—			10,972			—
Other	—						2						2
Cash effect of changes in:
Accounts receivable	72			(18,215		)	(587		)	—			(18,730		)
Inventories	—			(2,163		)	(423		)	—			(2,586		)
Prepaid taxes	(6,432		)	9,262						—			2,830
Other current assets	(216		)	34			(269		)	—			(451		)
Accounts payable and accrued liabilities	7,537			13,171			1,228			—			21,936
Intercompany and other	18,277			(18,406		)	231			—			102
Net cash provided by operating activities	9,952			70			2,003			—			12,025

Cash flows from investing activities:
Capital expenditures	(206		)	(70		)	(52		)	—			(328		)
Acquisition, net	(10,000		)	—			—			—			(10,000		)
Net cash used in investing activities	(10,206		)	(70		)	(52		)	—			(10,328		)

Cash flows from financing activities:
Principal payments on term loan	(9,750		)										(9,750		)
Prin Payment of advance from Parent	(50		)	—			—			—			(50		)
Net cash provided by financing activities	(9,800		)	—			—			—			(9,800		)

Effect of exchange rate on cash	—			—			32			—			32
Net increase (decrease) in cash	(10,054		)	—			1,983			—			(8,071		)
Cash at beginning of period	14,843			—			6,410			—			21,253
Cash at end of period	$	4,789		$	—		$	8,393		$	—		$	13,182

	Issuer			Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	185,441		$	57,342		$	(17,288	)	$	225,495
Cost of products sold	—			97,799			40,796			(17,288		)	121,307
Gross profit	—			87,642			16,546			—			104,188
Operating expenses:
Selling and administrative expenses	13,020			8,662			7,520			—			29,202
Advertising costs	—			19,310			5,177			—			24,487
Research and development costs	—			1,828			11			—			1,839
Amortization of acquired intangible assets	—			22,636			4,890			—			27,526
Total operating expenses	13,020			52,436			17,598			—			83,054
Operating (loss) profit	(13,020		)	35,206			(1,052		)	—			21,134
Non-operating expenses (income):
Interest expense	35,968			—			8			—			35,976
Other expense, net	119			7			321			—			447
(Loss) earnings before (benefit) provision for income taxes	(49,107		)	35,199			(1,381		)	—			(15,289		)
(Benefit) provision for income taxes	(17,634		)	9,905			507			—			(7,222		)
Equity earnings (loss) of subsidiaries, net of taxes	23,406			(1,888		)	—			(21,518		)	—
Net (loss) earnings	$	(8,067	)	$	23,406		$	(1,888	)	$	(21,518	)	$	(8,067	)
Other comprehensive (loss) income:
Foreign currency translation	(5,994		)	(5,994		)	(5,994		)	11,988			(5,994		)
Comprehensive (loss) income	$	(14,061	)	$	17,412		$	(7,882	)	$	(9,530	)	$	(14,061	)

Table of Contents

Condensed Consolidating Statement of Cash Flows

Nine months ended September 30, 2014

	Issuer			Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net (loss) earnings	$	(6,935	)	$	24,616		$	(3,948	)	$	(20,668	)	$	(6,935	)
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	4,632			25,750			5,414			—			35,796
Share-based compensation	(840		)	—			—			—			(840		)
Deferred income taxes	—			(9,134		)	(20		)	—			(9,154		)
Equity earnings of subsidiaries, net of taxes	(19,173		)	1,204			—			17,969			—
Other	—			—			2			—			2
Cash effect of changes in:
Accounts receivable, net	—			(13,757		)	569			—			(13,188		)
Inventories	—			(8,622		)	(2,701		)	—			(11,323		)
Other current assets	510			865			(1,505		)	—			(130		)
Prepaid taxes	(28,389		)	29,657			—			—			1,268
Accounts payable and accrued liabilities	8,093			11,025			3,057			—			22,175
Due Clorox	(69		)	—			—			—			(69		)
Intercompany and other	56,873			(60,853		)	1,110			2,699			(171		)
Net cash provided by operating activities	14,702			751			1,978			—			17,431
Cash flows from investing activities:
Capital expenditures	(499		)	(751		)	(269		)	—			(1,519		)
Acquisition, net	—			—			(1,797		)	—			(1,797		)
Investment in affiliate	(10,000		)	—			—			—			(10,000		)
Net cash used in investing activities	(10,499		)	(751		)	(2,066		)	—			(13,316		)
Cash flows from financing activities:
Borrowings under revolver	11,000			—			—			—			11,000
Payments on revolver	(11,000		)	—			—			—			(11,000		)
Principal payments on term loan	(11,250		)	—			—			—			(11,250		)
Payment of advance from Parent	(494		)	—			—			—			(494		)
Net cash used in financing activities	(11,744		)	—			—			—			(11,744		)
Effect of exchange rate changes on cash	—			—			(193		)	—			(193		)
Net decrease in cash	(7,541		)	—			(281		)	—			(7,822		)
Cash at beginning of period	14,843			—			6,410			—			21,253
Cash at end of period	$	7,302		$	—		$	6,129		$	—		$	13,431

Table of Contents

Condensed Consolidating Statement of Cash Flows

Nine months ended September 30, 2013

	Issuer			Combined Guarantor Subsidiaries			Combined Non- Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net (loss) earnings	$	(8,067	)	$	23,406		$	(1,888	)	$	(21,518	)	$	(8,067	)
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	4,556			25,553			5,604			—			35,713
Share-based compensation	216			—			—			—			216
Deferred income taxes	—			(13,225		)	229			—			(12,996		)
Equity earnings of subsidiaries, net of taxes	(23,406		)	1,888			—			21,518			—
Cash effect of changes in:
Accounts receivable, net	105			(1,390		)	3,063			—			1,778
Inventories	—			6,157			130			—			6,287
Prepaid taxes	3,329			—			—			—			3,329
Other current assets	(6,134		)	6,798			(2,566		)	—			(1,902		)
Accounts payable and accrued liabilities	3,168			3,442			(1,531		)	—			5,079
Due Clorox	—			—			(134		)	—			(134		)
Intercompany and other	45,277			(50,960		)	4,912			—			(771		)
Net cash provided by operating activities:	19,044			1,669			7,819			—			28,532
Cash flows from investing activities:
Capital expenditures	(1,000		)	(1,669		)	(225		)	—			(2,894		)
Acquisition, net	—			—			(3,755		)	—			(3,755		)
Net cash used in investing activities	(1,000		)	(1,669		)	(3,980		)	—			(6,649		)
Cash flows from financing activities:
Borrowings under revolver	23,000			—			—			—			23,000
Payments on revolver	(23,000		)	—			—			—			(23,000		)
Principal payments on term loan	(2,250		)	—			—			—			(2,250		)
Payment of advance from Parent	(50		)	—			—			—			(50		)
Net cash used in by financing activities	(2,300		)	—			—			—			(2,300		)
Effect of exchange rate changes on cash	—			—			(57		)	—			(57		)
Net increase in cash	15,744			—			3,782			—			19,526
Cash at beginning of period	1,477			—			2,729			—			4,206
Cash at end of period	$	17,221		$	—		$	6,511		$	—		$	23,732

Table of Contents

Note 8 — Investment in Affiliate

On March 17, 2014, the Company paid $10.0 million to acquire a non-controlling equity interest in IDQ Acquisition Corp. (“IDQ”) and also paid $1.2 million in transaction fees and closing costs. The investment is accounted for under the cost method of accounting. The transaction fees and closing costs included $0.3 million paid to a board member for services rendered in connection with the transaction. The transaction fees and closing costs are reported in selling and administrative expenses on the Condensed Consolidated Statements of Comprehensive (Loss~~) Income~~. On the same date, Parent acquired a controlling equity interest in IDQ. In connection with the investment, the Company entered into a Shared Services ~~and Supply~~ Agreement ~~(the “Shared Services Agreement”)~~ with IDQ and Parent pursuant to which certain ~~products and~~ services ~~will~~are be provided by one party to another, as agreed by the Company and IDQ, with the purpose of utilizing the assets and operations of each company to increase sales and lower the combined costs for the mutual benefit of both IDQ and ~~us. On March 11, 2014,~~ the Company. ~~entered~~During ~~into~~the anthree ~~amendment~~months ofended ~~its~~March ~~Credit~~31, ~~Facility~~2015, ~~revising~~the aCompany ~~defined~~charged ~~term,~~IDQ ~~Consolidated EBITDA~~$2. ~~Consolidated~~2 ~~EBITDA~~million isfor ~~used~~shared inservices ~~the~~while ~~calculation~~IDQ ofcharged ~~certain financial condition covenants under~~ the ~~Credit~~Company ~~Facility~~$2. ~~The~~1 ~~revision~~million, toprincipally ~~the~~relating ~~definition~~to ofselling, ~~Consolidated~~general ~~EBITDA~~and ~~excludes~~administrative ~~from~~costs ~~Consolidated EBITDA fees~~ and ~~expenses~~which ~~incurred~~is ~~for~~reflected ~~the~~on ~~Company’s~~a ~~investment~~net basis in ~~IDQ Acquisition Corp.~~selling, ~~the~~general ~~Company’s~~and ~~implementation~~administrative ofexpense ain ~~management services agreement with IDQ Acquisition Corp. and~~ the Company’s ~~pursuit~~Condensed ofConsolidated ~~cost~~Statements ~~savings,~~of ~~expense~~Comprehensive ~~reductions and other operating improvements and synergies related to IDQ~~Loss.

~~Note~~During 9—the ~~Stock~~three ~~Option~~month ~~Modification~~period ended March 31, 2015, the Company made payments of approximately $0.4 million in management fees to Avista Capital Holdings, L.P. for thier consulting, advisory and monitoring services to the Company.

~~Employees~~Note 9 — ofSubsequent the Company participate in the Stock Option Plan of AAG Parent (the “Plan”). On June 23, 2014, AAG Parent modified the stock option grant agreements for certain employees participating in the Plan. In addition, AAG Parent granted additional options covering 2,385,000 shares to employees during the three months ended June 30, 2014 at $1.00 per share. One half of the modified and newly granted options shall vest ratably over a five year period from the date of grant/modification based upon the passage of time (the “Time Award”), while the remaining 50% of the options will vest upon the achievement of specified performance conditions as set forth in the grant agreements. The performance condition can be met each fiscal year if certain EBITDA targets are achieved, subject to certain carry back and carry forward provisions, or if a change of control occurs and the applicable return of capital target is met.Events

InOn April 28, 2015, AAG Parent entered into an Agreement and Plan of Merger (the ~~three~~“Merger ~~month~~Agreement”) ~~period~~with Spectrum ~~ended~~Brands ~~September~~Holdings, Inc. 30(“Spectrum Brands Holdings”), Ignite ~~2014~~Merger Sub, Inc. ~~the~~(“Ignite”), a ~~Company~~direct ~~determined~~wholly ~~that~~owned ~~stock~~subsidiary ~~compensation~~of ~~expense~~Spectrum ~~was~~Brands, Inc., ~~not~~and ~~required~~Avista ~~based~~Capital onPartners II GP, LLC, as representative of the ~~vesting~~stockholders ~~provisions~~and the optionholders of AAG Parent. Under the ~~2010~~Merger ~~Equity~~Agreement, Ignite ~~Incentive~~will ~~Plan~~be merged with and into AAG Parent and AAG Parent will continue as the surviving corporation. The merger consideration ~~From~~is ~~November~~approximately ~~2010~~$1.4 billion (subject to ~~June~~customary ~~2014~~adjustments for cash, debt, net working capital and transaction-related expenses described in the ~~Company~~Merger ~~had~~Agreement), ~~recorded~~which ~~stock~~will ~~compensation~~be ~~expense~~paid ofentirely ~~$1.0~~in ~~million~~cash. As aThe ~~result~~obligations of the ~~Company~~parties to complete the merger are subject to various customary closing conditions, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended and, in the case of Spectrum Brands Holdings’s ~~determination~~obligation to complete the acquisition, ~~selling~~the accuracy of representations and ~~administrative~~warranties, ~~expenses~~material ~~for~~compliance by the ~~three~~AAG Parent with certain preclosing covenants and ~~nine~~no ~~month~~material ~~periods~~adverse ~~ended~~change ~~September~~in 30AAG Parent since the date of the Merger Agreement. The Merger Agreement may be terminated by mutual consent of AAG Parent and Spectrum Brands Holdings and under certain other circumstances, ~~2014~~including ~~are~~by ~~reduced~~AAG Parent or Spectrum Brands Holdings if the closing of the merger has not occurred by $1June 30, 2015.0 ~~million~~The ~~and~~total amount of unrecognized compensation expense for the Company’s employees under the 2010 AAG Parent Option Plan is approximately $02.89 million,. ~~respectively~~This expense is expected to be recorded upon closing of the merger during the second quarter of our fiscal 2015.

22The Company has evaluated events from the balance sheet date through May 11, 2015, the date at which the financial statements were available to be issued, and determined there are no other items to disclose.

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis in conjunction with our financial statements and related notes. This discussion and analysis contains forward-looking statements that are based on management’s current expectations, estimates and projections about our business and operations. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of various factors, including the factors we describe under “Cautionary note regarding forward-looking statements,” elsewhere in this Quarterly Report.

Overview

We are a consumer products company consisting primarily of Armor All and STP, two of the most recognizable brands in the automotive aftermarket appearance products and performance chemical products categories, respectively. The current Armor All product line of protectants, wipes, tire and wheel care products, glass cleaners, leather care products, air fresheners and washes are designed to clean, shine, refresh and protect interior and exterior automobile surfaces. The offering of STP oil and fuel additives, functional fluids and automotive appearance products has a broad customer base ranging from professional racers to car enthusiasts and “Do-it-Yourselfers.” Our brands offer over 200 individual automotive appearance and performance chemical products that can be found in most of the major developed countries around the world. We have a diversified geographic footprint with direct operations in the United States, Canada, Mexico, Australia, the United Kingdom and China and distributor relationships in approximately 50 countries.

Armor All is the most recognized automotive aftermarket appearance product brand in the United States with a comprehensive and competitively priced product line. The Armor All advertising campaigns, such as the “Go ahead. Stare,” “Care for your car”, “Armor All Way” and “A car is a privilege. Respect it.” build on what we believe to be the strong Armor All brand equity established over the business’s 50 year history to maintain a high level of consumer awareness. We further believe that Armor All has distinguished itself as the leader in the automotive aftermarket appearance products category based upon its household name, high quality product formulations, convenient application methods and tradition of innovation.16

~~The~~Table ~~STP brand has been characterized by a commitment to technology, performance and motor sports partnerships for over 50 years. Regular use~~ of STP additives as part of basic maintenance helps engines run better by boosting the cleaning performance of gas and saving gas by keeping fuel intake systems clean. We believe the STP brand fuel and oil additives, functional fluids and Armor All automotive appearance products benefit from a rich heritage in the car enthusiast and racing scenes.Contents

Armor All and STP were launched in 1962 and 1954, respectively. Both brands have leading category shares in the United States, with Armor All having a #1 value share of market in the appearance products category and STP a #3 value share of market in the performance chemicals category, in each case, based on sales volumes in U.S. dollars in the year ended December 31, 2014 as measured by NPD Group, Inc. and Nielsen Holdings, N.V., our primary sources for U.S. third party industry data and forecasts. Armor All’s current product line of protectants, wipes, tire and wheel care products, glass cleaners, leather care products, air fresheners and washes are designed to clean, shine, refresh and protect interior and exterior automobile surfaces. STP’s offering of oil and fuel additives, functional fluids and automotive appearance products has a broad customer base ranging from professional racers to car enthusiasts and “Do-it-Yourselfers.” Our brands offer over 200 individual automotive appearance and performance chemical products that can be found in most of the major developed countries around the world. We have a diversified geographic footprint with direct operations in the United States, Canada, Mexico, Australia, the United Kingdom and China and distributor relationships in approximately 50 countries.

According to a 2014 brand health tracking study by Millward Brown, Armor All is the most recognized automotive aftermarket appearance product brand in the United States with a comprehensive and competitively priced product line. Armor All’s advertising campaigns, such as the “Go ahead. Stare,” “Care for your car”,”Armor All Way” and the current “A car is a privilege. Respect it.” build on what we believe to be the strong Armor All brand equity established over its 50 year history to maintain a high level of consumer awareness. We further believe that Armor All is distinguished as the leader in the automotive aftermarket appearance products category by its household name, high quality product formulations, convenient application methods and tradition of innovation.

The STP brand has been characterized by a commitment to technology, performance and motor sports partnerships for over 60 years. Regular use of STP additives as part of basic maintenance helps engines run better by boosting the cleaning performance of gas and saving gas by keeping fuel systems clean. We believe the STP brand fuel and oil additives, functional fluids and automotive appearance products benefit from a rich heritage in the car enthusiast and racing scenes.

The Company was formerly known as The AutoCare Products Business, excluding the Prestone and YPF licensed brands, a business Clorox operated through various Clorox wholly owned or controlled legal entities throughout the world.

Industry trends

The general economic environment in our primary markets began to stabilize in 2012, allowing for moderate growth in the appearance and performance chemical products categories. We believe the current economic environment and category growth trends are indicative of sustaining trends. We also believe the trend toward an aging car fleet in our primary markets has reached its height and will likely ~~decrease~~stabilize somewhat, as sales of new cars ~~has~~increase, ~~increased~~and as the economy also stabilizes.

We believe innovation is an important contributor to category growth because new product introductions stimulate consumer interest in the category by fulfilling unmet consumer needs and bringing attention to the appearance and performance chemical products categories. Truly innovative products have a history of driving category growth in appearance and performance chemical products. We continue to introduce new products and invest in advertising and promotion to elevate engagement of our customers and consumers with our brands.

Competition remains intense in the categories we serve. Recently, smaller brands in both the appearance and performance chemical products categories ~~continue~~continued to have success gaining market share. ~~The~~ ~~Company~~We ~~continues~~continue to invest significant resources in advertising campaigns and with trade partners on promotional activities for ~~its~~established brands. While we believe our brands and customer relationships are strong, there is no assurance we will be able to maintain or improve our current competitive position.

Table of Contents

Key performance indicators

Management reviews and analyzes several key performance indicators in order to manage our business and assess the quality of, and potential variability of, our earnings and cash flows. These key performance indicators include:

· Net sales—which is an indicator of our overall business growth;

· Gross profit—is a key factor in the relative strength of our brands as gross profits enable us to generate cash to maintain marketing support, and therefore improve brand health; ~~and~~

· Operating expenses—outright and as a percentage of net sales which is an indicator of the efficiency of our business and our ability to manage our business to budget.17

~~· Adjusted~~Table ~~EBITDA—~~of ~~is a measure to calculate certain incentive-based compensation and certain financial covenants related to our Credit Facility and as a factor in our tangible and intangible asset impairment test.~~Contents

· Operating expenses—outright and as a percentage of net sales which is an indicator of the efficiency of our business and our ability to manage our business to plan; and

· Adjusted EBITDA—is a measure used to calculate certain financial covenants related to our Credit Facility and as a basis to calculate certain incentive-based compensation, as well as a factor in our tangible and intangible assets impairment tests.

Results of Operations

Three ~~and nine~~ month ~~periods~~period ended ~~September 30~~March 31, ~~2014~~2015 compared to the corresponding ~~periods~~period in ~~2013~~2014

Financial data for the three ~~and~~months ~~nine month periods~~ ended ~~September 30~~March 31, ~~2014~~2015 and ~~2013~~2014 are as follows (in thousands, except percentages):

	Three months ended September 30,											Nine months ended September 30,
	Three months ended March 31,
	2014			2013			Change			%		2014			2013			Change			%
	2015			2014			Change			%
Net sales	$	7082,~~459~~441		$	7180,~~007~~559		$	~~(548~~1,882	)	(12	)	$	~~232,914~~		$	~~225,495~~		$	~~7,419~~		3
Cost of products sold	3846,~~756~~838			3841,~~483~~654			~~273~~5,184			112		~~125,020~~			~~121,307~~			~~3,713~~			3
Gross profit	3135,~~703~~603			3238,~~524~~905			(~~821~~3,302		)	(38	)	~~107,894~~			~~104,188~~			~~3,706~~			4
Operating expenses:
Selling and administrative expenses	910,~~492~~507			911,~~854~~552			(~~362~~1,045		)	(49	)	~~32,075~~			~~29,202~~			~~2,873~~			10
Advertising costs	72,~~028~~643			65,~~767~~405			~~261~~(2,762		)	4(51	)	~~21,128~~			~~24,487~~			~~(3,359~~		)	~~(14~~	)
Research and development costs	~~653~~575			~~626~~608			27(33		)	4(5	)	~~1,887~~			~~1,839~~			48			3
Amortization of acquired intangible assets	98,~~133~~968			9,~~175~~111			(42143		)	—(2	)	~~27,377~~			~~27,526~~			~~(149~~		)	(1	)
Total operating expenses	2622,~~306~~693			26,~~422~~676			(~~116~~3,983		)	—(15	)	~~82,467~~			~~83,054~~			~~(587~~		)	(1	)
Operating profit	512,~~397~~910			612,~~102~~229			~~(705~~681		)	~~(12~~6	)	~~25,427~~			~~21,134~~			~~4,293~~			20
Non-operating expenses:
Interest expense	11,~~892~~793			1211,~~049~~949			(~~157~~156		)	(1	)	~~35,722~~			~~35,976~~			~~(254~~		)	(1	)
Other expense (income), net	174			(68		)	242			(356	)	(181		)	447			(628		)	(140	)
Other (income) expense, net	205			(421		)	626			(149	)
Loss before benefit for income taxes	(6,669		)	(5,879		)	(790		)	13		(10,114		)	(15,289		)	5,175			(34	)
Income before for income tax provision	912			701			211			30
Benefit for income taxes	(2,548		)	(3,604		)	1,056			(29	)	(3,179		)	(7,222		)	4,043			(56	)
Provision for income taxes	642			627			15			2
Net loss	$	(4,121	)	$	(2,275	)	$	(1,846	)	81		$	(6,935	)	$	(8,067	)	$	1,132		(14	)
Net income	$	270		$	74		$	196		265

~~Net sales~~18

Our sales are typically higher in the first half of the calendar year as our customers purchase stock for the spring and summer seasons when weather is warmer in the northern hemisphere than in the fall and winter months. This pattern is largely reflective of our customers’ seasonal purchasing patterns, as well as the timing of our promotional activities. Weather can also influence consumer behavior, especially for appearance products. Our appearance products sell best during warm, dry weather, and sell less strongly if weather is cold and wet.

Net sales for our North America segment include products marketed and sold to customers in the United States and Canada. Our International segment represents net sales to all other regions outside of the United States and Canada, primarily being Europe, Australia, Latin America and Asia. The following table summarizes our net sales for the three and nine month periods ended September 30, 2014 and 2013 (in thousands, except percentages):

Table of Contents

	Three months ended September 30,				Change					% of Net Sales
	2014		2013		$			%		2014	2013
Net sales
North America:
Armor All products	$	36,908	$	34,684	$	2,224		6		53	49
STP products	11,982		14,350		(2,368		)	(17	)	17	20
Other brands	1,613		1,852		(239		)	(13	)	2	3
Total North America	50,503		50,886		(383		)	(1	)	72	72
International	19,956		20,121		(165		)	(1	)	28	28
Consolidated net sales	$	70,459	$	71,007	$	(548	)	(1	)	100	100

Net sales

	Nine months ended September 30,				Change					% of Net Sales
	2014		2013		$			%		2014	2013
Net sales
North America:
Armor All products	$	131,689	$	121,529	$	10,160		8		57	54
STP products	38,213		42,163		(3,950		)	(9	)	16	19
Other brands	5,270		5,813		(543		)	(9	)	2	3
Total North America	175,172		169,505		5,667			3		75	75
International	57,742		55,990		1,752			3		25	25
Consolidated net sales	$	232,914	$	225,495	$	7,419		3		100	100

Our sales are typically higher in the first half of the calendar year, as our customers purchase stock for the spring and summer seasons, when weather is warmer in the northern hemisphere than in the fall and winter months. This pattern is largely reflective of our customers’ seasonal purchasing patterns, as well as the timing of our promotional activities. Weather can also influence consumer behavior, especially for appearance products. Our appearance products sell best during warm, dry weather, and sell less strongly if weather is cold and wet.

InNet ~~North America, net~~ sales ~~declined~~for ~~during~~our ~~the~~North ~~three~~America ~~month~~segment ~~period~~include ~~ended~~products ~~September~~marketed ~~30,~~and ~~2014~~sold ~~as compared~~ to ~~the~~customers ~~same period~~ in ~~2013~~the ~~driven~~United byStates ~~the~~and ~~STP brand~~Canada. ~~Over~~ ~~the~~Our ~~last~~International ~~several~~segment ~~months,~~represents ~~the~~net ~~performance category has experienced a decline in unit~~ sales ~~and~~to ~~high~~all ~~inventory~~other ~~levels~~regions atoutside ~~some~~of ~~retailers~~the ~~has~~United ~~resulted~~States inand ~~a general slowdown in sales. Additionally~~Canada, aprimarily ~~third~~being ~~quarter STP promotional program featured a product with a lower sales price per unit versus a similar program a year ago~~Europe, ~~impacting~~Australia ~~net~~and ~~sales~~Latin ~~dollars year over year~~America. ~~For~~ ~~the~~The ~~nine~~following ~~month~~table ~~period,~~summarizes ~~STP products decreased due to strong promotional events by~~ our ~~competitors~~net insales ~~the~~for ~~first half of 2014. On~~ the ~~appearance side, Armor All continues to show strong growth in both the~~ three ~~month~~months ~~and~~ended ~~nine~~March 31, ~~month~~2015 ~~periods driven by strong product placement~~ and ~~promotions,~~2014 ~~especially~~ (in ~~wipes and specially packaged products. Additionally~~thousands, ~~Armor~~except ~~All was positively impacted by improved weather conditions compared to 2013.~~percentages):

International net sales for the three month period ended September 30, 2014 showed a slight decline in sales driven by lower sales in Latin America and Asia export of $1.2 million partially offset by the impact of an acquisition made in the United Kingdom in the third quarter of 2013 resulting in increased net sales of $1.0 million. For the nine month period, sales continue to show strong growth versus prior year driven by higher sales in the United Kingdom business of $4.3 million which is primarily the result of an acquisition made in the third quarter of 2013. Partially offsetting this increase were lower sales in Asia export of $2.1 million due to the decline in volume resulting from a stronger dollar.

	Three Months Ended March 31,				Change					% of Net Sales
	2015		2014		$			%		2015	2014
Net sales
North America:
Armor All products	$	49,756	$	45,874	$	3,882		8		60	56
STP products	14,384		13,626		758			6		17	17
Other brands	2,243		2,067		176			9		3	3
Total North America	66,383		61,567		4,816			8		80	76
International	16,058		18,992		(2,934		)	(15	)	20	24
Consolidated net sales	$	82,441	$	80,559	$	1,882		2		100	100

In North America, the increase in net sales during the three months ended March 31, 2015, as compared to the same period in 2014 was driven by additional promotions and improved product placement for both the Armor All brand and the STP brand, as compared to the same period in the prior year.

International net sales for the three month period ended March 31, 2015 decreased as compared to the corresponding period in 2014. The primary casue of the decline was the negative impact of the stronger U.S. dollar on translation of our sales in foreign currency. Additionally, sales were lower in our European business unit, principally due to softness in the Russian and Ukranian markets.

Gross profit

Our gross profit for the three ~~and~~months ~~nine month periods~~ ended ~~September 30~~March 31, ~~2014~~2015 and ~~2013~~2014 are as follows (in thousands, except percentages):

	Three months ended September 30,											Nine months ended September 30,
	Three months ended March 31,
	2014			2013			Change			%		2014			2013			Change		%
	2015			2014			Change			%
Gross profit	$	3135,~~703~~603		$	3238,~~524~~905		$	(~~821~~3,302	)	(38	)	$	~~107,894~~		$	~~104,188~~		$	~~3,706~~	4
Stated as a percentage of net sales	4543.02		%	4548.83		%						~~46.3~~		%	~~46.2~~		%

The ~~lower~~decrease ~~sales~~in ~~volume~~gross ~~discussed~~profit ~~above~~dollars ~~partially~~and ~~contributed~~gross toprofit, ~~our~~as ~~lower~~a ~~gross~~percentage ~~profit~~of ~~dollars~~net sales in the three ~~month~~months ~~period~~ ended ~~September~~March 31, 302015, ~~2014~~ as compared to the ~~corresponding~~same period in ~~2013~~2014 was driven by $1.6 ~~Our~~million ~~gross~~of ~~profit~~costs ~~dollars~~associated with the consolidation of our distribution network, higher trade promotional spend and ~~percentage~~a shift in mix to lower margin displays. Additionally, the unfavorable impact of the strong U.S. dollar on international exchange rates increased the costs of U.S. sourced product for our international operations and negatively impacted the translation of their local currency operations into U.S. dollars.

2519

Table of Contents

of net sales continue to be negatively impacted by the mix of products sold with higher sales of promotional specially packaged products which are generally at a lower gross margin.

For the nine month period ended September 30, 2014 as compared to the corresponding period in 2013, increased sales volume resulted in higher gross profit dollars. The impact of unfavorable product mix discussed above is offset by product cost savings that have helped to maintain gross profit as a percentage of net sales in line with the 2013 rate.

Selling and administrative expense, advertising costs, and research and development costs

Our selling and administrative expenses, advertising costs, and research and development costs for the three ~~and~~months ~~nine month periods~~ ended ~~September 30~~March 31, ~~2014~~2015 and ~~2013~~2014 are as follows (in thousands, except percentages):

	Three months ended September 30,											Nine months ended September 30,
	Three months ended March 31,
	2014			2013			Change			%		2014			2013			Change			%
	2015			2014			Change			%
Selling and administrative expenses	$	910,~~492~~507		$	911,~~854~~552		$	(~~362~~1,045	)	(49	)	$	~~32,075~~		$	~~29,202~~		$	~~2,873~~		10
Advertising costs	72,~~028~~643			65,~~767~~405			~~261~~(2,762		)	4(51	)	~~21,128~~			~~24,487~~			~~(3,359~~		)	~~(14~~	)
Research and development costs	~~653~~575			~~626~~608			27(33		)	4(5	)	~~1,887~~			~~1,839~~			48			3
	$	1713,~~173~~725		$	17,~~247~~565		$	(743,840	)	—(22	)	$	~~55,090~~		$	~~55,528~~		$	~~(438~~	)	(1	)
Stated as a percentage of net sales	2416.46		%	2421.38		%						~~23.7~~		%	~~24.6~~		%

The decrease in our selling and administrative ~~expenses~~expense in the three ~~month~~months ~~period~~ ended ~~September~~March 31, 302015, ~~2014~~ as compared to the corresponding period in ~~2013~~2014 is primarily due to ~~the~~synergies ~~reversal~~related ofto ~~cumulative stock compensation expense of $1.0 million and a reduction in~~ the ~~compensation~~integration ~~expense~~ of ~~$1.0 million, partially offset by IDQ business integration costs which totaled $1.3 million. The increase in~~ our ~~selling~~operations ~~and~~with ~~administrative~~those ~~expenses~~of ~~in the nine month period ended September 30~~IDQ, ~~2014~~as iswell ~~primarily~~as ~~due~~lower toacquisition ~~IDQ business integration costs which totaled $2.9 million and higher salaries~~ related ~~to compensation expense and profit sharing accrual of $1~~charges.~~4 million, partially offset by the reversal of the cumulative stock compensation expense of $1.0 million.~~

The ~~increase~~decrease in our advertising costs in the three month period ended ~~September~~March 31, 302015, ~~2014~~ as compared to the corresponding period in ~~2013~~2014, was primarily due to the timing of ~~consumer~~when ~~marketing~~advertising ~~and~~aired, ~~research~~savings ~~spend from second quarter to third quarter. The decrease~~ in ~~spend~~production inand ~~the~~other ~~nine month period ended September 30~~fees, ~~2014~~ as ~~compared~~well toas ~~2013~~planned ~~was~~reductions ~~a reduction in our North America STP media spending from TV to radio content of approximately $2.0 million~~ and ashifts ~~reduction~~ in ~~discretionary~~ spend ofto ~~certain~~trade ~~consumer and customer marketing programs~~promotions.

Income taxes

Our effective tax ~~benefit~~ rate for the three ~~and~~months ~~nine month periods~~ ended ~~September 30~~March 31, ~~2014~~2015 and ~~2013~~2014 are as follows:

	Three months ended September 30,				Nine months ended September 30,
	Three months ended March 31,
	2014		2013		2014		2013
	2015		2014
Effective tax benefit rate	38.2	%	61.3	%	31.4	%	47.2	%
Effective tax rate	70.4	%	89.4	%

Our effective tax ~~benefit~~ rate for the three ~~and nine~~ month ~~periods~~period ended ~~September 30~~March 31, ~~2014~~2015 ~~differ~~differs from the statutory tax rate primarily due to U.S. federal manufacturing benefits recognized and state ~~taxes,~~income ~~which both increase the benefit rate~~taxes. Further, the Company’s effective tax ~~benefit~~ rate has decreased for the three ~~and nine~~ month ~~periods~~period ended ~~September~~March 31, 302015, ~~2014~~ as compared to the corresponding ~~periods~~period in ~~2013~~2014 primarily as a result of a ~~discrete~~decrease ~~tax~~from ~~benefit of $0.2 million for~~ the ~~the three month period ended September 30, 2014 and a~~ discrete tax charge of $0.64 million recorded during the ~~nine~~three month period ~~ending~~ended ~~September 30~~March 31, 2014. The discrete tax charge iswas primarily the result of aan ~~change~~increase in the uncertain tax positions recorded by Clorox, for which the Company has recorded a corresponding benefit in income from operations due to the indemnification agreement between the entities~~, a change in the Company’s blended state tax rate, and true-ups related to the filing of the Company’s 2013 income tax returns~~.

Table of Contents

Adjusted EBITDA

EBITDA is defined as net earnings before interest expense (net), income taxes, depreciation and amortization including goodwill impairment, and is used by management to measure operating performance of the business. ‘‘Adjusted EBITDA’’ is calculated by adding to or subtracting from EBITDA certain items of expense and income as described below. We ~~also~~ use EBITDA and Adjusted EBITDA as a measure to calculate certain ~~incentive-based compensation and certain~~ financial covenants related to our Credit Facility and as a ~~factor~~basis into ~~our~~calculate ~~tangible~~certain ~~and~~incentive-based ~~intangible~~compensation, ~~asset~~as ~~impairment~~well ~~test.~~as ~~EBITDA~~a ~~and~~factor ~~Adjusted~~in ~~EBITDA are supplemental measures of~~ our ~~performance~~tangible and ~~our~~intangible ~~ability~~asset toimpairment ~~service indebtedness that are not required by, or presented in accordance with, GAAP~~tests. EBITDA and Adjusted EBITDA are ~~not~~supplemental ~~measurements~~measures of our ~~financial~~ performance ~~under GAAP~~ and ~~should not be considered as alternatives to net earnings or other performance measures derived in accordance with GAAP, or as alternatives to cash flow from operating activities as measures of~~ our ~~liquidity.~~ability ~~In addition, our measurements of EBITDA and Adjusted EBITDA may not be comparable~~ to ~~similarly titled measures of other companies. Adjusted EBITDA for the three and nine month periods ended September 30, 2014 and 2013 is calculated as follows:~~service

	Three months ended September 30,											Nine months ended September 30,
	2014			2013			Change			%		2014			2013			Change			%
Net income(loss), as reported	$	(4,121	)	$	(2,275	)	$	(1,846	)	81		$	(6,935	)	$	(8,067	)	$	1,132		(14	)
Interest expense	11,892			12,049			(157		)	(1	)	35,722			35,976			(254		)	(1	)
Income taxes	(2,548		)	(3,604		)	1,056			(29	)	(3,179		)	(7,222		)	4,043			(56	)
Depreciation	1,677			1,762			(85		)	(5	)	5,079			5,225			(146		)	(3	)
Amortization	9,133			9,175			(42		)	0		27,377			27,526			(149		)	(1	)
EBITDA	16,033			17,107			(1,074		)	(6	)	58,064			53,438			4,626			9
Shared based compensation(1)	(1,017		)	74			(1,091		)	(1,480	)	(840		)	216			(1,056		)	(489	)
Loss (Income) on unrestricted(2) subsidiary	144			187			(43		)	(23	)	430			501			(71		)	(14	)
Proforma acquisition adjustment(3)	—			93			(93		)	(100	)	—			673			(673		)	(100	)
State franchise taxes	175			538			(363		)	(67	)	509			664			(155		)	(23	)
Acquisition related charges(4)	1,066			898			168			19		2,099			1,908			191			10
Workforce retention and other transitional charges(5)	135			101			34			34		337			299			38			13
Sponsor monitoring fees(6)	250			250			—			0		750			781			(31		)	(4	)
Non-cash write-off of assets(7)	59			118			(59		)	(50	)	(366		)	348			(714		)	(205	)
Enterprise Resource Planning implementation(8)	260			—			260			—		582			—			582			—
ADJUSTED EBITDA	$	17,105		$	19,366		$	(2,261	)	(12	)	$	61,565		$	58,828		$	2,737		5

(1) Non-cash compensation transactions include share-based compensation expense related to options granted under the Company’s 2010 Stock Option Plan.

(2) Net loss of early stage China subsidiary formed in 2012, earnings of which are excluded from EBITDA as defined in our Credit Facility.

(3) Proforma adjustment for pre-acquisition earnings related to an acquisition in the United Kingdom.

(4) Reflects an adjustment for acquisition-related charges, the incremental cost of transitioning to a stand-alone basis and proforma cost savings.

(5) Reflects one-time retention charges and other one-time compensation costs.

(6) Amounts related to a monitoring agreement with Avista Capital Holdings, L.P.

(7) Reflects amounts for non-cash benefit of indemnity from Clorox.

(8) Reflects one-time non-capitalizable costs related to the implementation of our new Enterprise Resource Planning software.

Table of Contents

indebtedness that are not required by, or presented in accordance with, GAAP. EBITDA and Adjusted EBITDA are not measurements of our financial performance or liquidity under GAAP and should not be considered in isolation or as alternatives to net earnings operating income, cash flows from operations, investing or financing activities or other performance measures derived in accordance with GAAP, or as alternatives to cash flow from operating activities as measures of our liquidity. The items excluded from Adjusted EBITDA are significant components in understanding and evaluating financial performance and liquidity. In addition, our measurements of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies. Adjusted EBITDA for the three months ended March 31, 2015 and 2014 is calculated as follows (in thousands, except percentages):

	Three months ended March 31,
	2015			2014			Change			%
Net income, as reported	$	270		$	74		$	196		265
Interest expense	11,793			11,949			(156		)	(1	)
Income tax provision	642			627			15			2
Depreciation	1,785			1,698			87			5
Amortization	8,969			9,112			(143		)	(2	)
EBITDA	23,459			23,460			(1		)	0
Share based compensation (1)	—			27			(27		)	(100	)
(Gain) loss from unrestricted subsidiary (2)	218			(59		)	277			469
State franchise taxes	172			163			9			6
Acquistion related charges (3)	2,045			757			1,288			170
Sponsor monitoring fees (5)	383			250			133			53
Non-cash gain (loss) from write-off of assets (6)	(73		)	(425		)	352			83
Adjusted EBITDA	$	26,204		$	24,173		$	2,031		8

(1) Non-cash compensation transactions include share-based compensation expense related to options granted under the Company’s 2010 Stock Option Plan.

(2) Net loss of early China subsidiary formed in 2012, earnings of which are excluded form EBITDA as defined in our Credit Facility.

(3) Reflects an adjustment for acquisition and integration related charges in 2014 and consolidation of several distribution centers in fiscal 2015 basis.

(4) Amounts related to a monitoring agreement with Avista Capital Holdings, L.P.

(5) Reflects amounts for non-cash benefit of indemnity from Clorox.

Liquidity and capital resources

Our principal sources of liquidity are our cash of $1310.48 million as of ~~September 30~~March 31, ~~2014~~2015, and our $50.0 million revolving credit ~~loan~~facility, the entirety of which, is undrawn and fully available to us as of ~~September 30~~March 31, ~~2014~~2015. Our principal source of operating cash inflows is from sales of product to customers. Our principal cash outflows relate to the purchase and production of inventory and related costs, advertising, selling and administrative expenses, and capital expenditures. At ~~September 30~~March 31, ~~2014~~2015, $6.13 million of our cash is held by foreign subsidiaries to fund their working capital needs. To date, net cash generated in operations and borrowed funds under our Revolving Credit Facility have been sufficient to service our debts and other obligations and fund seasonal and other cash flow requirements. WeAs ~~believe~~market ~~that~~conditions warrant, aswe ofand ~~September~~our 30sponsor, ~~2014,~~and ~~cash~~its ~~on hand~~affiliates, ~~cash~~may ~~expected~~from time to betime ~~generated~~in ~~from~~the future ~~operating~~redeem ~~activities~~or ~~and~~repurchase ~~cash~~debt ~~available~~securities, ~~under~~in ~~the~~privately ~~Revolving~~negotiated ~~Credit~~or ~~Facility~~open ~~will~~market betransactions, ~~sufficient~~by tender offer, exchange offer or otherwise subject to ~~fund~~the ~~our~~terms ~~operations,~~of ~~including~~applicable contractual ~~obligations~~restrictions. ~~and~~We ~~capital~~cannot ~~expenditures~~give ~~for~~any ~~the~~assurance ~~next~~as ~~12 months.~~to ~~However,~~whether inor ~~the~~when ~~event~~such ~~that~~repurchases ~~funds~~or ~~are~~exchanges ~~not~~may ~~available~~occur ~~from~~and ~~our~~at ~~operating~~what ~~activities~~price such repurchase or ~~from~~exchange ~~the~~may ~~Revolving~~occur.We ~~Credit~~believe ~~Facility~~that, weas ~~may~~of ~~have~~March 31, 2015, cash on hand, cash expected to ~~delay~~be ~~certain~~generated ~~business~~from ~~initiatives~~future operating activities and ~~adjust~~cash ~~our~~available ~~strategy~~under ~~accordingly. As~~the ofRevolving ~~September~~Credit ~~30,~~Facility ~~2014,~~will ~~the~~be ~~Company~~sufficient ~~was~~to infund ~~compliance~~our ~~with~~operations, ~~all~~including ~~covenants~~contractual ~~related~~obligations toand capital expenditures for the ~~Credit~~next ~~Facility~~12 months.

On March 11, 2014, the Company entered into an amendment of its Credit Facility revising a defined term, Consolidated EBITDA, which is equivalent to Adjusted EBITDA in table above. Consolidated EBITDA is used in the calculation of certain financial condition covenants under the Credit Facility. The revision to the definition of Consolidated EBITDA excludes from Consolidated EBITDA fees and expenses incurred for the Company’s investment in IDQ Acquisition Corp., the Company’s implementation of a management services agreement with IDQ Acquisition Corp. and the Company’s pursuit of cost savings, expense reductions and other operating improvements and synergies related to IDQ.21

Table of Contents

As of March 31, 2015, we expect that we will generate cash from the underlying operations of the business and we will be able to obtain needed funds under the Revolving Credit Facility when requested. However, in the event that funds are not available from our operating activities or from the Revolving Credit Facility, we may have to delay certain business initiatives and adjust our strategy accordingly. Our Revolving Credit Facility expires in November 2015. While we expect to be able to renew the Revolving Credit Facility, we cannot guarantee we will be successful in renewing it, which may limit our ability to achieve our corporate operating plan. As of March 31, 2015, we were in compliance with all covenants related to the Credit Facility.

Cash flows

The following table summarizes our cash flows (in thousands):

	Nine Months Ended September 30,
	Three Months Ended March 31,
	2014			2013
	2015			2014
Net cash provided by operating activities	$	17,431		$	28,532
Net cash (used in) provided by operating activities	$	(541	)	$	12,025
Net cash used in investing activities	(~~13,316~~545		)	(610,~~649~~328		)
Net cash used in financing activities	(~~11,744~~750		)	(29,~~300~~800		)

Operating activities

Significant elements of our of $170.45 million net cash ~~provided~~used byin operating activities for the ~~nine~~three months ended ~~September 30~~March 31, ~~2014~~2015 isinclude our net ~~loss~~income of $60.93 million, ~~which~~a ~~includes~~decrease in net operating assets of $9.7 million and non-cash charges of $~~25.~~8.9 million for depreciation and amortization of our long lived, tangible and intangible assets, deferred financing costs, debt discount amortization, ~~share-based compensation~~ and deferred income taxes. Elements of ~~the~~our $2812.5 0 million net cash provided by operating activities for the ~~nine~~three months ended ~~September 30~~March 31, ~~2013~~2014 ~~included~~include our net ~~loss~~income of $80.1 million, ~~and~~ a decrease in net operating assets of $133.71 million, ~~offset~~and by non-cash charges of $228.9 million for depreciation and amortization of our long lived, tangible and intangible assets, deferred financing costs, debt discount amortization, ~~share-based compensation~~ and deferred income taxes. The increase in our operating assets in 2015 included an increase of $23.7 million in accounts receivable and an increase of $13.7 million in accounts payable and accrued liabilities commensurate with our seasonal sales volume during the quarter.

Investing activities

Our cash used in investing activities of $0.5 million for the ~~nine~~three month period ended ~~September 30~~March 31, ~~2014~~2015 was comprised of $10.5 million of capital expenditures~~, a small acquisition in our international region of $1~~.8 ~~million, as well as a $10.0 million investment in an affiliate in the first quarter of 2014.~~ Cash used in investing activities of $610.63 million for the ~~nine~~three month period ended ~~September 30~~March 31, ~~2013~~2014 ~~consisted~~was ofcomprised ~~capital expenditures~~ of a $210.90 million ~~and~~investment ~~an acquisition~~ in ~~the~~an ~~United~~affiliate ~~Kingdom~~and of $~~3.8 million. Capital spending declined to~~ 0.~~7% from 1.~~3% million of ~~net~~capital ~~sales in the nine month period ended September 30, 2014 as compared to the corresponding period in 2013~~expenditures.

Financing activities

Net cash used in financing activities for the ~~nine~~three months ended ~~September~~March 31, 302015 included $0.8 million of principal payments on our term loan. Net cash used in financing activites for the three months ended March 31, 2014 included $20.38 million of principal ~~payments~~payment on our term loan, as well as an additional mandatory prepayment of principal in the amount of $9.0 million due to excess cash generated in the year ended December 31, ~~2013~~2014 pursuant to the Term Loan agreement. ~~Net cash used in financing activities for the nine months ended September 30, 2013 included $2.3 million of principal payments on our term loan.~~

Table of Contents

Indebtedness

We have a significant amount of indebtedness stemming from the November 5, 2010 Acquisition, including a revolving credit loan and a term ~~loan~~Loan under the Credit Facility and Senior Notes. As of ~~September 30~~March 31, ~~2014~~2015 we have aggregate gross amount of indebtedness of approximately $~~554.8~~553 million, exclusive of issuance discounts, including a remaining $~~279~~278.83 million owed on our Term Loan. ~~having~~The term Loan calls for quarterly principal payments of $0.8 million ~~and~~with the remaining principal maturing in November 2016, and $275.0 million in aggregate principal amount of 9.25% Senior Notes due 2018. Our significant indebtedness could affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry and prevent us from making debt service payments. Further, the terms of our credit agreement governing the Credit Facilities and the indenture that governs the Senior Notes contain a number of restrictive covenants that impose significant operating and financial restrictions on our current and future operations, particularly our ability to respond to changes or to take certain actions. Although such encumbrances have not proven unexpectedly burdensome to date, these restrictions may limit our ability to engage in certain financial and operational business activities that may be in our long-term best interest. As of September 30, 2014, the Company was in compliance with all covenants related to the Credit Facility. For additional details related to our debts, see Note 9 of the Notes to the Consolidated Financial Statements, “Debt”, contained in the Company’s Annual Report on Form 10-K filed with the SEC (file number 333-180736) incorporated herein by reference.

Table of Contents

ability to react to changes in the economy or our industry and prevent us from making debt service payments. Further, the terms of our credit agreement governing the Credit Facilities and the indenture that governs the Senior Notes contain a number of restrictive covenants that impose significant operating and financial restrictions on our current and future operations, particularly our ability to respond to changes or to take certain actions. Although such encumbrances have not proven unexpectedly burdensome to date, these restrictions may limit our ability to engage in certain financial and operational business activities that may be in our long-term best interest. As of March 31, 2015, the Company was in compliance with all covenants related to the Credit Facility. For additional details related to our indebtedness, please see Note 9 of the Notes to the Consolidated Financial Statements, “Debt”, contained in the Company’s Annual Report on Form 10-K filed with the SEC (file number 333-180736) incorporated herein by reference.

Commitments and contingencies

For details related to our contractual obligations and other commitments and contingencies, please see (i) Note 4 of the Notes to Condensed Consolidated Financial Statements, “Commitments and Contingencies” included in this Quarterly Report, and (ii) Note 11 of the Notes to the Consolidated Financial Statements for the fiscal year ended December 31, ~~2013~~2014, “Commitments and Contingencies”, and Management’s Discussion and Analysis of Financial Condition and Results of Operations “Certain Information Concerning Contractual Obligations” included in the Company’s Annual Report on Form 10-K filed with the SEC (file number 333-180736) incorporated herein by reference.

Indefinite Lived Intangible Assets

We test our trademarks and brand names with indefinite lives for impairment annually on the first day of the fourth quarter unless there are indications during an interim period that these assets are more likely than not to have become impaired. For trademarks and brand names with indefinite lives, impairment occurs when the carrying amount of an asset is greater than its estimated fair value. An impairment charge is recorded for the difference between the carrying amount and the fair value. We use an income approach, the relief-from-royalty method, to estimate the fair value of its trademarks and trade names with indefinite lives. This method assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to obtain the rights to use the comparable asset. The determination of the fair values of trademarks and brand name assets with indefinite lives requires significant judgments in determining both the assets’ estimated cash flows as well as the appropriate discount and royalty rates applied to those cash flows to determine fair value. Changes in such estimates or the application of alternative assumptions could produce different results.

During the fourth quarter of 2014, we completed our annual indefinite-lived intangible asset impairment assessment and, based on those tests, recorded a non-cash impairment charge of $7.0 million related to the STP trade name. The key factors leading to the impairment charge was a decline in forecasted future results of the brand, as compared with the projections which were made when the brand was acquired from Clorox in 2010. Based upon our analysis as of March 31, 2015, management has concluded there is no indication of further impairment of the STP trade name.

Off-Balance Sheet Arrangements

We currently have no material off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures ~~About~~about Market Risk

For details about our market risk, please see Item 7A., “Quantitative and Qualitative Disclosures About Market Risk”, included in the Company’s Annual Report on Form 10-K filed with the SEC (file number 333-180736) incorporated herein by reference.

Table of Contents

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management team, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of ~~September 30~~March 31, ~~2014~~2015, including controls and procedures to timely alert management to material information relating to the Company and its subsidiaries required to be included in the reports the Company files or submits under the Exchange Act. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were not effective due to a material weakness existing in our internal controls as of December 31, 2014 (as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 and described below), which material weakness had not been fully remediated as of March 31, 2015.

~~There~~Material ~~have~~Weakness ~~not~~Identified ~~been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f)~~ and ~~15d-15(f) under~~Remediation the Exchange Act) during our first fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.Activities

29In connection with the preparation of our financial statements for the year ended December 31, 2014, four significant deficiencies in internal control became evident to management that, in the aggregate, represented a material weakness. None of the deficiencies individually represented a material weakness, and all resulting adjustments, none of which were material, were reflected in our Consolidated Financial Statements for the year ended December 31, 2014.

Our conclusion that we continue to have significant deficiencies that in the aggregate represent a material weakness in our internal control over financial reporting was not based on quantified misstatements in our historical consolidated financial statements or our consolidated financial statements as of and for our fiscal quarter ended March 31, 2015, but instead on the risk that our controls may not prevent or detect on a timely basis potential material errors in our future financial statements. The significant deficiencies identified in our Annual Report and the related remediation steps taken as of March 31, 2015 included:

(i) Inadequate Revenue Recognition Process. There was a lack of communication between operations and finance personnel, as well as an inadequate control design which failed to detect shipments that were delayed in ports on the West coast of the United States, due to the work slowdown of the International Longshore and Warehouse Union during the fourth quarter of 2014. During 2015, management hired a consulting firm to assist in the redesign and implementation of enhanced policies, procedures and controls for reviewing and tracking all shipments placed in transit by the Company or its subsidiaries and these policies, procedures and controls have been implemented.

(ii) Inadequate review of material contracts. The control designed to ensure that all material contracts are reviewed by finance personnel did not operate as intended. Specifically, a contract related to our third party logistics provider was executed during the fourth quarter of 2014 and the required review and accounting assessment was not performed by finance personnel on a timely basis. During 2015, management designed enhanced policies, procedures and controls for the review of all contracts signed during the respective quarterly accounting period and these policies, procedures and controls have been implemented.

(iii) Inadequate Accounting for Shared Services Process. In connection with the acquisition by AAG Parent of IDQ, the Company entered into a Shared Services Agreement with IDQ and AAG Parent, pursuant to which certain services are provided by one party to another, as agreed by the Company, AAG Parent and IDQ, with the purpose of utilizing the assets and operations of each company to increase sales and lower the combined costs for the mutual benefit of both IDQ and the Company. In one instance there was a lack of proper review of invoices to properly attribute costs, assets and liabilities to IDQ, AAG Parent, or the Company. During 2015, management hired a consulting firm to design enhanced policies and procedures for the documentation and review of all intercompany charges processed under the Shared Services Agreement. The policies, procedures and controls are being formalized for implementation and we are continuing our efforts towards remediation of this significant deficiency.

(iv) Inadequate controls around inventory. Procedures and controls were not adequately designed and did not operate effectively related to the inventory process. Specifically, management failed to adequately document the procedures and controls around inventory cycle counts. Additionally, controls around the approval of inventory adjustments, monthly inventory reconciliations, and product cost roll ups, were not consistently performed or documented throughout the year. During 2015, management hired a consulting firm to design enhanced policies and procedures and to retrain employees for the controls around the approval of inventory adjustments, monthly inventory reconciliations, and product cost roll-ups. The policies, procedures and controls are being formalized for implementation and we are continuing our efforts towards remediation of this significant deficiency.

We plan to remediate the material weakness during the remainder of our fiscal year ended December 31, 2015. However, we cannot determine how long it will take to fully and effectively execute our remediation plan, and we cannot provide any assurance that these remediation efforts will be successful or that our internal control over financial reporting will be effective as a result of these efforts.

Changes in Internal Control over Financial Reporting

Except as discussed above, there were not any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our first fiscal quarter of 2015 to which this report relates that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Table of Contents

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

We are involved from time to time in various legal proceedings, regulatory investigations and claims incident to the normal conduct of business, which may include proceedings that are specific to us and others generally applicable to business practices within the industries in which we operate. A substantial legal liability or a significant regulatory action against us could have an adverse effect on our business, financial condition and on the results of operations in a particular quarter or year. As of ~~September 30~~March 31, ~~2014~~2015, we had no material ongoing litigation, regulatory or other proceedings and had no knowledge of any investigations by governmental or regulatory authorities in which we are a target that could have a material adverse effect on our current business.

Item 1A. Risk Factors

Our consolidated financial results of operations, financial condition and cash flows could be adversely affected by various risks. In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed under “Risk Factors” included within ~~Company’s~~our Annual Report on Form 10-K filed with the SEC (file number 333-180736) ~~incorporated herein by reference~~. The risks described in the Annual Report are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. There has been no material changes in our risk factors from those disclosed in the Annual Report referred to above.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

3025

Table of Contents

ITEM 6. EXHIBITS

The following is a list of exhibits filed as part of this Quarterly Report on Form 10-Q.

EXHIBIT NO.		DESCRIPTION
31.1†		~~Certificate~~Certification by Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2†		~~Certificate~~Certification by Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1†		Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2†		Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101		The following financial statements from Armored AutoGroup’s Quarterly Report on Form 10-Q for the quarterly period ended ~~September~~March 3031, ~~2014~~2015, filed with the Securities and Exchange Commission on ~~November~~May 6-, ~~2014~~2015, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations and Comprehensive ~~Income~~Loss; (iii) the Consolidated Statements of Cash Flows; (iv) the Consolidated Statements of Stockholders’ Equity and (iv) the Notes to Consolidated Financial Statements.

† Filed herewith.

3126

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: ~~November 6~~May 11, ~~2014~~2015

ARMORED AUTOGROUP INC. /s/ MICHAEL KLEIN Michael Klein Chief Executive Officer /s/ J.MICHAEL ~~ANDREW~~BAUERSFELD ~~BOLT~~Michael J.Bauersfeld ~~Andrew Bolt~~ Executive Vice President, Chief Financial Officer, and Principal Accounting Officer

3227

Filing Compare · Armored AutoGroup Inc.