Spectrum Brands Holdings Inc (SPB)

[DesertRat1]

Memorandum

To: All Spectrum Employees

From: Kent Hussey

Date: December 4, 2008

I know many of you are concerned about the significant decline in our stock price over the past few months. I believe this is largely a result of external issues substantially unrelated to the fundamentals of our core businesses.

We recently announced results for our fourth quarter and fiscal year 2008. Revenue was up seven percent for the quarter with solid growth in every business unit. Our operating profit for the quarter as measured by EBITDA was down slightly from the prior year, which incidentally was an all-time record quarter for Spectrum Brands, due largely to the negative impact of unprofitable performance in the Growing Products segment of our Home & Garden business, which is now in the process of being shut down. For the full year our EBITDA was $281 Million, up from fiscal year 2007. In the current economic environment I think this is good performance.

So why has the stock dropped so much? No one knows for sure, but we believe there are a number of once in a lifetime external economic factors that may have contributed:

* First and foremost, the global economic crisis has resulted in the shift of investments from any form of risk assets to the safety of zero-risk assets such as U.S. Government Treasuries. Highly leveraged companies, such as ours, have been the most severely impacted.

* Second, margin calls and redemptions from mutual funds and hedge funds caused the forced liquidation of investments at distressed prices to raise cash quickly.

* Third, the scheduled wind down of a T. H. Lee Fund which resulted in the distribution of approximately 25 percent of our shares to their investors. These shares became freely tradable upon distribution and may have contributed to a supply ? demand imbalance.

* Fourth, normal year-end tax selling of securities in a loss position to create tax benefits.

* Fifth, as a result of our reduced market value we have been removed from the S&P 600. This has forced many index-based funds to sell our stock regardless of price as they must replace us in their portfolio.

* And last but not least, a climate of emotion and fear which can overwhelm rational decision making, the continuing unraveling of credit markets and the resulting impacts on global giants like GE, GM, and Citigroup, among others, has investors asking "What's next?"

As you know, the NYSE has advised us that our share price and market capitalization are below their minimums to maintain our NYSE listing. Being de-listed is a very real possibility. If and when this happens there should be no direct impact on our day-to-day business operations. We will continue to be a public company but our trading will take place on a less prominent exchange.

In spite of all of the bad news, including our significant debt obligations and the fact that we are in the middle of the worst recession in decades, I believe our business has a number of positive attributes to help us weather the storm.

Consumers worldwide are changing their shopping habits, looking to make every dollar count. This is resulting in more activity at major discount retailers where we have strong presence and more purchases of value-positioned products where the consumer can save money. We're encouraged by the strong growth in alkaline shipments in North America that we saw during our fiscal 4th quarter and by some key placement wins, including off shelf display space and promotions aimed at showcasing our value positioning. Coming into the holiday season, early POS results of our new Flex 360 Rotary Shaver were up 30 to 40 percent at key retailers over last year, and we were gaining market share in many of our categories as consumers recognize our quality and value. These are just a few examples of why giving the consumer more for their money is a major positive for us in 2009.

And, as always, we are constantly striving to reduce our costs and operate more efficiently. One benefit of the global economic slowdown has been the dramatic drop in the cost of oil which will reduce many of our costs from plastic and packaging materials to ocean shipping and both inbound and outbound freight costs. We have also seen a very recent reversal in the cost increases we experienced in the cost of products produced in China. Many other costs for commodities we use in our products have also dropped to more normal historical levels which should benefit our production costs in 2009.

To keep things in perspective, all of our business units are profitable and generate positive cash flow. We are also investing in new products and technologies to enable us to compete effectively around the world. Remember, cash is king. Our viability as an enterprise is not necessarily dictated by our stock price! More important is our ability to generate cash to pay our bills. We continue to satisfy our cash obligations including the interest on our debt. When you stack us up against many of the current and former financial giants of the world, our operating performance compares favorably.

2009 will be a year of significant challenges for all businesses, including ours. I believe there is significant unrecognized value embedded in our company. In the meantime, execution in the marketplace and outperforming the competition will best position us to hopefully ultimately realize that value.