2020
| 36-3514169 | ||||||||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
221 River Street
Hoboken, New Jersey 07030
(770) 418-7000
TITLE OF EACH CLASS | TRADING SYMBOL | NAME OF EXCHANGE ON WHICH REGISTERED | ||||||||||||
| Common stock, $1 par value per share | NWL | Nasdaq Stock Market LLC | ||||||||||||
| Large | ☒ | Accelerated filer | ☐ | |||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||||||||||
| Emerging growth company | ☐ | |||||||||||||
TABLE OF CONTENTS | ||||||||
Net sales Cost of products sold Gross profit Selling, general and administrative expenses Restructuring costs, net Operating income (loss) Non-operating expenses: Interest expense, net Other expense (income), net Loss before income taxes Income tax benefit Loss from continuing operations Income (loss) from discontinued operations, net of tax Net income (loss) Weighted average shares outstanding: Basic Diluted Earnings (loss) per share: Basic: Loss from continuing operations Income (loss) from discontinued operations Net income (loss) Diluted: Loss from continuing operations Income (loss) from discontinued operations Net income (loss) Three Months Ended
March 31, 2019 2018 $ 1,712.1 $ 1,811.5 1,168.3 1,206.2 543.8 605.3 517.9 626.3 10.9 5.4 15.0 (26.4 ) 80.2 116.1 23.3 (1.4 ) (88.5 ) (141.1 ) (16.7 ) (86.4 ) (71.8 ) (54.7 ) (79.4 ) 108.0 $ (151.2 ) $ 53.3 423.0 486.0 423.0 486.0 $ (0.17 ) $ (0.11 ) (0.19 ) 0.22 $ (0.36 ) $ 0.11 $ (0.17 ) $ (0.11 ) (0.19 ) 0.22 $ (0.36 ) $ 0.11 Three Months Ended
March 31,2020 2019 Net sales $ 1,886 $ 2,042 Cost of products sold 1,269 1,387 Gross profit 617 655 Selling, general and administrative expenses 548 569 Restructuring costs, net 2 11 Impairment of goodwill, intangibles and other assets 1,475 63 Operating income (loss) (1,408) 12 Non-operating expenses: Interest expense, net 63 80 Other expense, net 12 26 Loss before income taxes (1,483) (94) Income tax benefit (204) (20) Loss from continuing operations (1,279) (74) Loss from discontinued operations, net of tax — (77) Net loss $ (1,279) $ (151) Weighted average common shares outstanding: Basic 423.8 423.0 Diluted 423.8 423.0 Loss per share: Basic: Loss from continuing operations $ (3.02) $ (0.18) Loss from discontinued operations — (0.18) Net loss $ (3.02) $ (0.36) Diluted: Loss from continuing operations $ (3.02) $ (0.18) Loss from discontinued operations — (0.18) Net loss $ (3.02) $ (0.36)
| Three Months Ended March 31, | ||||||||
| 2019 | 2018 | |||||||
Comprehensive income (loss): | ||||||||
Net income (loss) | $ | (151.2 | ) | $ | 53.3 | |||
Other comprehensive income (loss), net of tax: | ||||||||
Foreign currency translation adjustments | (2.1 | ) | 64.1 | |||||
Unrecognized pension and postretirement costs | (13.2 | ) | (16.3 | ) | ||||
Derivative financial instruments | (8.4 | ) | 3.6 | |||||
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Total other comprehensive income (loss), net of tax | (23.7 | ) | 51.4 | |||||
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Comprehensive income (loss) | $ | (174.9 | ) | $ | 104.7 | |||
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| Three Months Ended March 31, | |||||||||||||||||||||||||||||
| 2020 | 2019 | ||||||||||||||||||||||||||||
| Comprehensive loss: | |||||||||||||||||||||||||||||
| Net loss | $ | (1,279) | $ | (151) | |||||||||||||||||||||||||
| Other comprehensive loss, net of tax | |||||||||||||||||||||||||||||
| Foreign currency translation adjustments | (156) | (2) | |||||||||||||||||||||||||||
| Unrecognized pension and postretirement costs | (5) | (13) | |||||||||||||||||||||||||||
| Derivative financial instruments | 26 | (9) | |||||||||||||||||||||||||||
| Total other comprehensive loss, net of tax | (135) | (24) | |||||||||||||||||||||||||||
| Comprehensive loss | $ | (1,414) | $ | (175) | |||||||||||||||||||||||||
| March 31, 2019 | December 31, 2018 | |||||||
Assets: | ||||||||
Cash and cash equivalents | $ | 364.1 | $ | 495.7 | ||||
Accounts receivable, net | 1,606.1 | 1,850.7 | ||||||
Inventories | 1,799.0 | 1,583.1 | ||||||
Prepaid expenses and other | 290.8 | 275.6 | ||||||
Current assets held for sale | 3,456.1 | 3,535.2 | ||||||
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Total current assets | 7,516.1 | 7,740.3 | ||||||
Property, plant and equipment, net | 930.7 | 925.6 | ||||||
Operating lease assets, net | 619.3 | — | ||||||
Goodwill | 2,958.3 | 2,970.2 | ||||||
Other intangible assets, net | 5,536.4 | 5,579.6 | ||||||
Deferred income taxes | 216.0 | 179.7 | ||||||
Other assets | 329.3 | 327.0 | ||||||
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Total assets | $ | 18,106.1 | $ | 17,722.4 | ||||
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Liabilities: | ||||||||
Accounts payable | $ | 934.9 | $ | 1,019.5 | ||||
Accrued compensation | 121.6 | 159.1 | ||||||
Other accrued liabilities | 1,174.4 | 1,180.6 | ||||||
Short-term debt and current portion of long-term debt | 573.6 | 318.7 | ||||||
Current liabilities held for sale | 747.1 | 734.1 | ||||||
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Total current liabilities | 3,551.6 | 3,412.0 | ||||||
Long-term debt | 6,694.6 | 6,696.3 | ||||||
Deferred income taxes | 1,000.7 | 992.7 | ||||||
Long-term operating lease liabilities | 547.6 | — | ||||||
Other noncurrent liabilities | 1,328.5 | 1,368.2 | ||||||
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Total liabilities | 13,123.0 | 12,469.2 | ||||||
Commitments and contingencies (Footnote 18) | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock (10.0 authorized shares, $1.00 par value, no shares issued at March 31, 2019 and December 31, 2018) | — | — | ||||||
Common stock (800 authorized shares, $1.00 par value 446.5 shares and 446.1 shares issued at March 31, 2019 and December 31, 2018, respectively) | 446.5 | 446.1 | ||||||
Treasury stock, at cost (23.4 and 23.3 shares at March 31, 2019 and December 31, 2018, respectively) | (587.7 | ) | (584.7 | ) | ||||
Additionalpaid-in capital | 8,688.1 | 8,781.1 | ||||||
Retained deficit | (2,662.0 | ) | (2,511.3 | ) | ||||
Accumulated other comprehensive loss | (936.5 | ) | (912.8 | ) | ||||
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Stockholders’ equity attributable to parent | 4,948.4 | 5,218.4 | ||||||
Stockholders’ equity attributable to noncontrolling interests | 34.7 | 34.8 | ||||||
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Total stockholders’ equity | 4,983.1 | 5,253.2 | ||||||
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Total liabilities and stockholders’ equity | $ | 18,106.1 | $ | 17,722.4 | ||||
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| March 31, 2020 | December 31, 2019 | ||||||||||
| Assets: | |||||||||||
| Cash and cash equivalents | $ | 476 | $ | 349 | |||||||
| Accounts receivable, net | 1,398 | 1,842 | |||||||||
| Inventories | 1,700 | 1,606 | |||||||||
| Prepaid expenses and other | 343 | 313 | |||||||||
| Total current assets | 3,917 | 4,110 | |||||||||
| Property, plant and equipment, net | 1,123 | 1,155 | |||||||||
| Operating lease assets, net | 561 | 615 | |||||||||
| Goodwill | 3,483 | 3,709 | |||||||||
| Other intangible assets, net | 3,567 | 4,916 | |||||||||
| Deferred income taxes | 873 | 776 | |||||||||
| Other assets | 379 | 361 | |||||||||
| Total assets | $ | 13,903 | $ | 15,642 | |||||||
| Liabilities: | |||||||||||
| Accounts payable | $ | 1,036 | $ | 1,102 | |||||||
| Accrued compensation | 124 | 204 | |||||||||
| Other accrued liabilities | 1,152 | 1,340 | |||||||||
| Short-term debt and current portion of long-term debt | 639 | 332 | |||||||||
| Total current liabilities | 2,951 | 2,978 | |||||||||
| Long-term debt | 5,375 | 5,391 | |||||||||
| Deferred income taxes | 498 | 625 | |||||||||
| Long-term operating lease liabilities | 503 | 541 | |||||||||
| Other noncurrent liabilities | 1,097 | 1,111 | |||||||||
| Total liabilities | 10,424 | 10,646 | |||||||||
| Commitments and contingencies (Footnote 18) | |||||||||||
| Stockholders’ equity: | |||||||||||
| Preferred stock (10.0 authorized shares, $1.00 par value, 0 shares issued at March 31, 2020 and December 31, 2019) | — | — | |||||||||
| Common stock (800.0 authorized shares, $1.00 par value, 448.0 shares and 447.1 shares issued at March 31, 2020 and December 31, 2019) | 448 | 447 | |||||||||
| Treasury stock, at cost (23.9 shares and 23.6 shares issued at March 31, 2020 and December 31, 2019) | (596) | (590) | |||||||||
| Additional paid-in capital | 8,340 | 8,430 | |||||||||
| Retained deficit | (3,683) | (2,404) | |||||||||
| Accumulated other comprehensive loss | (1,055) | (920) | |||||||||
| Stockholders’ equity attributable to parent | 3,454 | 4,963 | |||||||||
| Stockholders’ equity attributable to noncontrolling interests | 25 | 33 | |||||||||
| Total stockholders’ equity | 3,479 | 4,996 | |||||||||
| Total liabilities and stockholders’ equity | $ | 13,903 | $ | 15,642 | |||||||
| Three Months Ended March 31, | ||||||||
| 2019 | 2018 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | (151.2 | ) | $ | 53.3 | |||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
Depreciation and amortization | 86.9 | 149.8 | ||||||
Impairment of goodwill, intangibles and other assets | 174.7 | — | ||||||
Net gain from sale of businesses | (5.2 | ) | (0.6 | ) | ||||
Deferred income taxes | (46.9 | ) | (94.4 | ) | ||||
Stock-based compensation expense | 4.9 | 10.1 | ||||||
Loss on change in fair value of investments | 16.7 | — | ||||||
Other, net | 1.6 | 0.8 | ||||||
Changes in operating assets and liabilities, excluding the effects of acquisitions and divestitures: | ||||||||
Accounts receivable | 245.7 | 255.9 | ||||||
Inventories | (258.7 | ) | (308.8 | ) | ||||
Accounts payable | (106.9 | ) | (285.8 | ) | ||||
Accrued liabilities and other | (162.0 | ) | (182.0 | ) | ||||
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Net cash used in operating activities | (200.4 | ) | (401.7 | ) | ||||
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Cash flows from investing activities: | ||||||||
Capital expenditures | (58.2 | ) | (95.1 | ) | ||||
Other investing activities | (17.5 | ) | (10.2 | ) | ||||
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Net cash used in investing activities | (75.7 | ) | (105.3 | ) | ||||
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Cash flows from financing activities: | ||||||||
Net short-term debt | 521.4 | 602.8 | ||||||
Payments on current portion long-term debt | (268.2 | ) | — | |||||
Payments on long-term debt | (4.6 | ) | (0.7 | ) | ||||
Cash dividends | (97.7 | ) | (112.6 | ) | ||||
Debt issuance and extinguishment costs | (2.7 | ) | — | |||||
Equity compensation activity and other, net | (2.6 | ) | (14.8 | ) | ||||
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Net cash provided by financing activities | 145.6 | 474.7 | ||||||
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Exchange rate effect on cash and cash equivalents | (1.1 | ) | 5.6 | |||||
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Decrease in cash and cash equivalents | (131.6 | ) | (26.7 | ) | ||||
Cash and cash equivalents at beginning of period | 495.7 | 485.7 | ||||||
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Cash and cash equivalents at end of period | $ | 364.1 | $ | 459.0 | ||||
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Supplemental disclosures: | ||||||||
Net cash provided by discontinued operating activities | $ | 11.9 | $ | 35.9 | ||||
Net cash used in discontinued investing activities | (11.9 | ) | (35.7 | ) | ||||
Capital expenditures for discontinued operations | (12.5 | ) | (35.9 | ) | ||||
| Three Months Ended March 31, | |||||||||||||||||
| 2020 | 2019 | ||||||||||||||||
| Cash flows from operating activities: | |||||||||||||||||
| Net loss | $ | (1,279) | $ | (151) | |||||||||||||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||||||||||||
| Depreciation and amortization | 91 | 87 | |||||||||||||||
| Impairment of goodwill, intangibles and other assets | 1,475 | 175 | |||||||||||||||
| Gain from sale of businesses, net | (1) | (5) | |||||||||||||||
| Deferred income taxes | (234) | (47) | |||||||||||||||
| Stock based compensation expense | 8 | 5 | |||||||||||||||
| Loss on change in fair value of investments | 3 | 17 | |||||||||||||||
| Other, net | 1 | 1 | |||||||||||||||
| Changes in operating accounts excluding the effects of acquisitions and divestitures: | |||||||||||||||||
| Accounts receivable | 369 | 246 | |||||||||||||||
| Inventories | (142) | (259) | |||||||||||||||
| Accounts payable | (49) | (107) | |||||||||||||||
| Accrued liabilities and other | (219) | (162) | |||||||||||||||
| Net cash provided by (used in) operating activities | 23 | (200) | |||||||||||||||
| Cash flows from investing activities: | |||||||||||||||||
| Capital expenditures | (58) | (58) | |||||||||||||||
| Other investing activities, net | 2 | (18) | |||||||||||||||
| Net cash used in investing activities | (56) | (76) | |||||||||||||||
| Cash flows from financing activities: | |||||||||||||||||
| Net receipts of short term debt | 305 | 521 | |||||||||||||||
| Payments on current portion of long-term debt | — | (268) | |||||||||||||||
| Payments on long-term debt | (16) | (5) | |||||||||||||||
| Loss on extinguishment of debt | — | (3) | |||||||||||||||
| Cash dividends | (99) | (98) | |||||||||||||||
| Equity compensation activity and other, net | (17) | (2) | |||||||||||||||
| Net cash provided by financing activities | 173 | 145 | |||||||||||||||
| Exchange rate effect on cash, cash equivalents and restricted cash | (24) | (1) | |||||||||||||||
| Increase (decrease) in cash, cash equivalents and restricted cash | 116 | (132) | |||||||||||||||
| Cash, cash equivalents and restricted cash at beginning of period | 371 | 496 | |||||||||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 487 | $ | 364 | |||||||||||||
| Supplemental disclosures: | |||||||||||||||||
| Restricted cash at beginning of period | $ | 22 | $ | — | |||||||||||||
| Restricted cash at end of period | 11 | — | |||||||||||||||
| Net cash provided by discontinued operating activities | — | 8 | |||||||||||||||
| Net cash used in discontinued investing activities | — | (8) | |||||||||||||||
| Capital expenditures for discontinued operations | — | 8 | |||||||||||||||
| Common Stock | Treasury Stock | Additional Paid-In Capital | Retained Deficit | Accumulated Other Comprehensive Loss | Stockholders’ Equity Attributable to Parent | Non-controlling Interests | Total Stockholders’ Equity | |||||||||||||||||||||||||
Balance at December 31, 2018 | $ | 446.1 | $ | (584.7 | ) | $ | 8,781.1 | $ | (2,511.3 | ) | $ | (912.8 | ) | $ | 5,218.4 | $ | 34.8 | $ | 5,253.2 | |||||||||||||
Comprehensive income (loss) | — | — | — | (151.2 | ) | (23.7 | ) | (174.9 | ) | — | (174.9 | ) | ||||||||||||||||||||
Dividends declared on common stock | — | — | (97.7 | ) | — | — | (97.7 | ) | — | (97.7 | ) | |||||||||||||||||||||
Equity compensation, net of tax | 0.4 | (3.0 | ) | 4.7 | — | — | 2.1 | — | 2.1 | |||||||||||||||||||||||
Impact of adoption due to change in accounting standard (see Footnote 1) | — | — | — | 0.5 | — | 0.5 | — | 0.5 | ||||||||||||||||||||||||
Portion of net (income) loss attributable tonon-controlling interests | — | — | — | — | — | — | (0.1 | ) | (0.1 | ) | ||||||||||||||||||||||
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Balance at March 31, 2019 | $ | 446.5 | $ | (587.7 | ) | $ | 8,688.1 | $ | (2,662.0 | ) | $ | (936.5 | ) | $ | 4,948.4 | $ | 34.7 | $ | 4,983.1 | |||||||||||||
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| Common Stock | Treasury Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Stockholders’ Equity Attributable to Parent | Non-controlling Interests | Total Stockholders’ Equity | |||||||||||||||||||||||||
Balance at December 31, 2017 | $ | 508.1 | $ | (573.5 | ) | $ | 10,362.0 | $ | 4,611.2 | $ | (763.1 | ) | $ | 14,144.7 | $ | 36.6 | $ | 14,181.3 | ||||||||||||||
Comprehensive income | — | — | — | 53.3 | 51.4 | 104.7 | — | 104.7 | ||||||||||||||||||||||||
Dividends declared on common stock | — | — | — | (112.5 | ) | — | (112.5 | ) | — | (112.5 | ) | |||||||||||||||||||||
Equity compensation, net of tax | 0.7 | (6.7 | ) | 9.5 | — | — | 3.5 | — | 3.5 | |||||||||||||||||||||||
Impact of adoption due to change in accounting standard | — | — | — | (9.5 | ) | — | (9.5 | ) | — | (9.5 | ) | |||||||||||||||||||||
Portion of net (income) loss attributable tonon-controlling interests | — | — | — | — | — | — | (0.2 | ) | (0.2 | ) | ||||||||||||||||||||||
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Balance at March 31, 2018 | $ | 508.8 | $ | (580.2 | ) | $ | 10,371.5 | $ | 4,542.5 | $ | (711.7 | ) | $ | 14,130.9 | $ | 36.4 | $ | 14,167.3 | ||||||||||||||
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| Common Stock | Treasury Stock | Additional Paid-In Capital | Retained Deficit | Accumulated Other Comprehensive Loss | Stockholders' Equity Attributable to Parent | Noncontrolling Interest | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2019 | $ | 447 | $ | (590) | $ | 8,430 | $ | (2,404) | $ | (920) | $ | 4,963 | $ | 33 | $ | 4,996 | |||||||||||||||||||||||||||||||
| Comprehensive loss | — | — | — | (1,279) | (135) | (1,414) | — | (1,414) | |||||||||||||||||||||||||||||||||||||||
| Dividends declared on common stock | — | — | (97) | — | — | (97) | — | (97) | |||||||||||||||||||||||||||||||||||||||
| Equity compensation, net of tax | 1 | (6) | 7 | — | — | 2 | — | 2 | |||||||||||||||||||||||||||||||||||||||
| Distribution to non-controlling interests holder | — | — | — | — | — | — | (3) | (3) | |||||||||||||||||||||||||||||||||||||||
| Other | — | — | — | — | — | — | (5) | (5) | |||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2020 | $ | 448 | $ | (596) | $ | 8,340 | $ | (3,683) | $ | (1,055) | $ | 3,454 | $ | 25 | $ | 3,479 | |||||||||||||||||||||||||||||||
| Common Stock | Treasury Stock | Additional Paid-In Capital | Retained Deficit | Accumulated Other Comprehensive Loss | Stockholders' Equity Attributable to Parent | Noncontrolling Interest | Total Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2018 | $ | 446 | $ | (585) | $ | 8,781 | $ | (2,511) | $ | (913) | $ | 5,218 | $ | 35 | $ | 5,253 | |||||||||||||||||||||||||||||||
| Comprehensive loss | — | — | — | (151) | (24) | (175) | — | (175) | |||||||||||||||||||||||||||||||||||||||
| Dividends declared on common stock | — | — | (98) | — | — | (98) | — | (98) | |||||||||||||||||||||||||||||||||||||||
| Equity compensation, net of tax | 1 | (3) | 5 | — | — | 3 | — | 3 | |||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2019 | $ | 447 | $ | (588) | $ | 8,688 | $ | (2,662) | $ | (937) | $ | 4,948 | $ | 35 | $ | 4,983 | |||||||||||||||||||||||||||||||
Discontinued Operations
During 2018,
circumstances continue to exist for a prolonged period of time.
2020.
In August 2018, the FASB issuedASU 2018-14,“Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans.”ASU 2018-14 modifies disclosure requirements for defined benefit pension and other postretirement plans.ASU 2018-14 is effective for fiscal years ending after December 15, 2020, and early adoption is permitted. Since ASU2018-14 only impacts the disclosure requirements related to defined benefit pension and other postretirement plans, the adoption of ASU2018-14 will not have a material impact on the Company’s consolidated financial statements.
Adoption of New Accounting Guidance
The Company’s accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements included in our 2018 Annual Report on Form10-K. Such significant accounting policies are applicable for periods prior to the adoption of the following new accounting standards.
In February 2016, the FASB issued ASU2016-02, “Leases (Topic 842),” which requires lessees to recognize aright-of-use asset and lease liability for all leases with terms of more than 12 months. Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease. The Company adopted ASU2016-02 prospectively starting on January 1, 2019. As part of the adoption, the Company elected the package of practical expedients permitted under the transaction guidance that includes not to reassess historical lease classification, not to recognize short-term leases on our balance sheet, nor separate lease andnon-lease components for all its leases. In addition, the Company used hindsight to determine the lease term and applied its incremental borrowing rate based on the remaining term of the lease as of the adoption date. The impact upon adoption, as of January 1, 2019, related to operating leases in continuing operations resulted in the recognition ofright-of-use assets of approximately $629 million, lease liabilities of approximately $687 million and a cumulative-effect adjustment on retained deficit of approximately $0.5 million on its condensed consolidated balance sheet.
In August 2017, the FASB issued ASU2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” ASU2017-12 amends existing guidance to better align an entity’s risk management activities and financial reporting for hedging relationships. ASU2017-12 also expands and refines hedge accounting for both nonfinancial and financial risk components and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. ASU2017-12 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those annual periods.2020. The adoption of ASU2017-12 2018-15 did not have a material impact on the Company’s consolidated financial statements.
Revisions
During the first quarter of 2019, the Company identified that it did not utilize an accurate estimate of fair value and expected form of sale in its fourth quarter 2018 impairment assessment for one of its five disposal groups classified as held for sale. The Company did not appropriately account for the disposal group as a stock sale. Consequently, certain income tax account balances (primarily related to deferred tax liabilities) were not classified as assets and liabilities held for sale in the Company’s Consolidated Balance Sheet as of December 31, 2018. As a result, the Company determined itsbook-over-tax outside basis differences and measured the tax effects of such difference, which resulted in an income tax expense of approximately $12.6 million. In addition, the Company did not use an accurate estimate of fair value in its 2018 impairment assessment. Collectively, the estimate of fair value and expected form of sale resulted in adjustments to the estimated fair value and carrying value of the held for sale business utilized in the Company’s 2018 impairment assessment. These changes resulted in an additional impairment charge of approximately $12.0 million to write-down the carrying value of the net assets of the held for sale business to its estimated fair value at December 31, 2018. In addition, as part of the presentation of discontinued operations, the Company periodically has to reclassify the prior period presentation to conform to the current year presentation. These adjustments are reflected in the Reclassification column below. The following table presents the effect to the Company’s previously reported Consolidated Balance Sheet at December 31, 2018 and Consolidated Statement of Operations for the year ended December 31, 2018:
| As of December 31, 2018 | ||||||||||||||||
| As Previously Reported | Revision | Reclassification | As Revised | |||||||||||||
Prepaid expenses and other | $ | 278.0 | $ | (2.4 | ) | $ | — | $ | 275.6 | |||||||
Current assets held for sale | 3,541.3 | (6.1 | ) | — | 3,535.2 | |||||||||||
Total current assets | 7,748.8 | (8.5 | ) | — | 7,740.3 | |||||||||||
Deferred income taxes (noncurrent assets) | 165.2 | 14.5 | — | 179.7 | ||||||||||||
Total assets | 17,716.4 | 6.0 | — | 17,722.4 | ||||||||||||
Other accrued liabilities | 1,182.3 | (0.8 | ) | (0.9 | ) | 1,180.6 | ||||||||||
Current liabilities held for sale | 650.4 | 100.4 | (16.7 | ) | 734.1 | |||||||||||
Total current liabilities | 3,330.0 | 99.6 | (17.6 | ) | 3,412.0 | |||||||||||
Deferred income taxes (liabilities) | 1,041.8 | (66.7 | ) | 17.6 | 992.7 | |||||||||||
Other noncurrent liabilities | 1,370.5 | (2.3 | ) | — | 1,368.2 | |||||||||||
Total liabilities | 12,438.6 | 30.6 | — | 12,469.2 | ||||||||||||
Retained deficit | (2,486.7 | ) | (24.6 | ) | — | (2,511.3 | ) | |||||||||
Stockholders’ equity attributable to parent | 5,243.0 | (24.6 | ) | — | 5,218.4 | |||||||||||
Total stockholders’ equity | 5,277.8 | (24.6 | ) | — | 5,253.2 | |||||||||||
Total liabilities and stockholders’ equity | 17,716.4 | 6.0 | — | 17,722.4 | ||||||||||||
| For the year ended December 31, 2018 | ||||||||||||
Income Statement Classification | As Previously Reported | Revision | As Revised | |||||||||
Income (loss) from discontinued operations, net of tax | $ | (128.3 | ) | $ | (24.6 | ) | $ | (152.9 | ) | |||
Net income (loss) | (6,917.9 | ) | (24.6 | ) | (6,942.5 | ) | ||||||
Earnings per share: | ||||||||||||
Basic: | ||||||||||||
Income (loss) from continuing operations | $ | (14.33 | ) | $ | — | $ | (14.33 | ) | ||||
Income (loss) from discontinued operations | (0.27 | ) | (0.05 | ) | (0.32 | ) | ||||||
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Net income (loss) | $ | (14.60 | ) | $ | (0.05 | ) | $ | (14.65 | ) | |||
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Diluted: | ||||||||||||
Income (loss) from continuing operations | $ | (14.33 | ) | $ | — | $ | (14.33 | ) | ||||
Income (loss) from discontinued operations | (0.27 | ) | (0.05 | ) | (0.32 | ) | ||||||
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Net income (loss) | $ | (14.60 | ) | $ | (0.05 | ) | $ | (14.65 | ) | |||
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The Company concluded the above referenced effects were not material to its previously issued Consolidated Statement of Operations for the year ended December 31, 2018 and Consolidated Balance Sheet as of December 31, 2018 included in the Company’s Annual Report on Form10-K filed with the SEC on March 4, 2019. As such, the Company will revise its Consolidated Statement of Operations, Consolidated Statement of Comprehensive Income (Loss), Consolidated Statement of Cash Flows and Consolidated Statement of Stockholders’ Equity for the year ended December 31, 2018 and Consolidated Balance Sheet at December 31, 2018 in the Company’s 2019 Annual Report on Form10-K. The adjustments will not result in a change to net cash provided by operating activities in the Company’s Consolidated Statement of Cash Flows for the year ending December 31, 2018. In addition, the Company has revised the Condensed Consolidated Balance Sheet at December 31, 2018 for the above adjustments including the effects to the Company’s retained deficit and total stockholders’ equity within this Quarterly Report on Form10-Q.
Other Items
At March 31, 2019, the Company held a 23.4% investment in FireAngel Safety Technology Group PLC (formerly known as Sprue Aegis PLC) (“FireAngel”), which the Company accounts for under the equity method of accounting.
During the three months ended March 31, 2018, the Company’s related party sales to FireAngel were $7.5 million. On March 31, 2018, the Company terminated its distribution agreement with FireAngel.
financial institution as a financing cash flow.
As part of the Company’s Accelerated Transformation Plan, during 2018, the Company announced it was exploring strategic options for its industrial and commercial product assets, including The Waddington Group, Process Solutions, Rubbermaid Commercial Products, Rexair and Mapa/Spontex businesses, as well asnon-core consumer businesses, including Jostens, Pure Fishing, Rawlings, Rubbermaid Outdoor, Closet, Refuse and Garage, Goody Products and U.S. Playing Cards businesses. These businesses are classified as discontinued operations. Prior periods have been reclassified to conform with the current presentation. During 2018, the Company sold Goody Products, Inc. (“Goody”), Jostens, Inc. (“Jostens”), Pure Fishing, Inc. (“Pure Fishing”), the Rawlings Sporting Goods Company, Inc. (“Rawlings”) and Waddington Group, Inc. (“Waddington”) and other related subsidiaries as part of the Accelerated Transformation Plan.
three months ended March 31, 2020. The following table provides a summary of amounts included in discontinued operations for the periodsperiod indicated (in millions):
| Three Months Ended March 31, | ||||||||
| 2019 | 2018 | |||||||
Net sales | $ | 540.9 | $ | 1,205.9 | ||||
Cost of products sold | 378.8 | 805.8 | ||||||
Selling, general and administrative expenses | 76.7 | 254.1 | ||||||
Restructuring costs, net | — | 2.5 | ||||||
Impairment of goodwill, intangibles and other assets | 174.7 | — | ||||||
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Operating income (loss) | (89.3 | ) | 143.5 | |||||
Non-operating expense (income) | (3.2 | ) | 0.4 | |||||
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Income (loss) before income taxes | (86.1 | ) | 143.1 | |||||
Income tax expense (benefit) | (6.7 | ) | 35.1 | |||||
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Net income (loss) | $ | (79.4 | ) | $ | 108.0 | |||
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Held for Sale
The following table presents information related to the major classes of assets and liabilities that were classified as assets and liabilities held for sale in the condensed consolidated balance sheets as of the dates indicated (in millions):
| March 31, 2019 | December 31, 2018(1) | |||||||
Accounts receivable, net | $ | 413.8 | $ | 411.7 | ||||
Inventories | 378.2 | 338.7 | ||||||
Prepaid expenses and other | 37.4 | 42.8 | ||||||
Property, plant and equipment, net | 510.8 | 515.9 | ||||||
Operating lease assets | 74.3 | — | ||||||
Goodwill | 877.4 | 942.4 | ||||||
Other intangible assets, net | 1,150.6 | 1,270.8 | ||||||
Other assets | 13.6 | 12.9 | ||||||
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Current assets held for sale | $ | 3,456.1 | $ | 3,535.2 | ||||
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Accounts payable | $ | 240.7 | $ | 256.7 | ||||
Accrued compensation | 49.3 | 57.0 | ||||||
Other accrued liabilities | 146.5 | 154.4 | ||||||
Deferred income taxes | 219.6 | 250.0 | ||||||
Operating lease liabilities | 78.9 | — | ||||||
Other liabilities | 12.1 | 16.0 | ||||||
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Current liabilities held for sale | $ | 747.1 | $ | 734.1 | ||||
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| Three Months Ended March 31, 2019 | ||||||||||||||
| Net sales | $ | 211 | ||||||||||||
| Cost of products sold | 160 | |||||||||||||
| Gross profit | 51 | |||||||||||||
| Selling, general and administrative expenses | 25 | |||||||||||||
| Impairment of goodwill, intangibles and other assets | 112 | |||||||||||||
| Operating loss | (86) | |||||||||||||
| Non-operating income, net | (5) | |||||||||||||
| Loss before income taxes | (81) | |||||||||||||
| Income tax benefit | (4) | |||||||||||||
| Net loss | $ | (77) | ||||||||||||
Divestitures
2018 Activity
On June 29, 2018, the Company sold Rawlings, its Team Sports business, to a fund managed by Seidler Equity Partners with aco-investment of Major League Baseball for approximately $400 million, subject to customary working capital and other post-closing adjustments.
On June 29, 2018, the Company sold Waddington to Novolex Holdings LLC for approximately $2.3 billion, subject to customary working capital and other post-closing adjustments
On August 31, 2018, the Company sold its Goody business, to a fund managed by ACON Investments, L.L.C. for approximately $109 million, subject to customary working capital and other post-closing adjustments.
On December 21, 2018, the Company sold Jostens to a fund managed by Platinum Equity, LLC for approximately $1.3 billion, subject to customary working capital and other post-closing adjustments.
On December 21, 2018, the Company sold Pure Fishing to a fund managed by Sycamore Partners L.P for approximately $1.3 billion, subject to customary working capital and other post-closing adjustments.
| Cumulative Translation Adjustment | Pension and Postretirement Costs | Derivative Financial Instruments | AOCL | |||||||||||||
Balance at December 31, 2018 | $ | (492.6 | ) | $ | (398.1 | ) | $ | (22.1 | ) | $ | (912.8 | ) | ||||
Other comprehensive loss income before reclassifications | (2.1 | ) | (14.8 | ) | (5.1 | ) | (22.0 | ) | ||||||||
Amounts reclassified to earnings | — | 1.6 | (3.3 | ) | (1.7 | ) | ||||||||||
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Net current period other comprehensive loss | (2.1 | ) | (13.2 | ) | (8.4 | ) | (23.7 | ) | ||||||||
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Balance at March 31, 2019 | $ | (494.7 | ) | $ | (411.3 | ) | $ | (30.5 | ) | $ | (936.5 | ) | ||||
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| Cumulative Translation Adjustment | Pension and Postretirement Costs | Derivative Financial Instruments | AOCL | ||||||||||||||||||||
| Balance at December 31, 2019 | $ | (479) | $ | (399) | $ | (42) | $ | (920) | |||||||||||||||
| Other comprehensive income (loss) before reclassifications | (156) | (9) | 25 | (140) | |||||||||||||||||||
| Amounts reclassified to earnings | — | 4 | 1 | 5 | |||||||||||||||||||
| Net current period other comprehensive income (loss) | (156) | (5) | 26 | (135) | |||||||||||||||||||
| Balance at March 31, 2020 | $ | (635) | $ | (404) | $ | (16) | $ | (1,055) | |||||||||||||||
| Three Months Ended March, 31, | ||||||||
| 2019 | 2018 | |||||||
Foreign currency translation adjustments | $ | (0.2 | ) | $ | 7.9 | |||
Unrecognized pension and postretirement costs | 3.8 | 4.0 | ||||||
Derivative financial instruments | 2.3 | (0.2 | ) | |||||
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Income tax benefit related to AOCL | $ | 5.9 | $ | 11.7 | ||||
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| Three Months Ended March 31, | |||||||||||||||||||||||||||||
| 2020 | 2019 | ||||||||||||||||||||||||||||
| Foreign currency translation adjustments | $ | (7) | $ | — | |||||||||||||||||||||||||
| Unrecognized pension and postretirement costs | 3 | 4 | |||||||||||||||||||||||||||
| Derivative financial instruments | (9) | 2 | |||||||||||||||||||||||||||
| Income tax (expense) benefit related to AOCL | $ | (13) | $ | 6 | |||||||||||||||||||||||||
Other Restructuring
In addition to the Accelerated Transformation Plan, the Company has incurred restructuring costs, for various other restructuring activities.
Restructuring Costs
Restructuring costsnet incurred by reportable business segments for all restructuring activities in continuing operations for the periods indicated are as follows (in millions):
| Three Months Ended March 31, | ||||||||
| 2019 | 2018 | |||||||
Food and Appliances | $ | 1.8 | $ | 0.6 | ||||
Home and Outdoor Living | 2.5 | 0.8 | ||||||
Learning and Development | 3.8 | 2.1 | ||||||
Corporate | 2.8 | 1.9 | ||||||
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| $ | 10.9 | $ | 5.4 | |||||
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Restructuring costs incurred during the three months ended March 31, 2019 and 2018 primarily relate to the Accelerated Transformation Plan.
| Three Months Ended March 31, | |||||||||||||||||||||||||||||
| 2020 | 2019 | ||||||||||||||||||||||||||||
| Food and Commercial | $ | — | $ | 1 | |||||||||||||||||||||||||
| Home and Outdoor Living | 1 | 3 | |||||||||||||||||||||||||||
| Learning and Development | 1 | 4 | |||||||||||||||||||||||||||
| Corporate | — | 3 | |||||||||||||||||||||||||||
| $ | 2 | $ | 11 | ||||||||||||||||||||||||||
| Balance at December 31, 2018 | Restructuring Costs, Net | Payments | Reclassification (1) | Foreign Currency and Other | Balance at March 31, 2019 | |||||||||||||||||||
Employee severance, termination benefits and relocation costs | $ | 20.6 | $ | 7.0 | $ | (11.3 | ) | $ | — | $ | (0.5 | ) | $ | 15.8 | ||||||||||
Exited contractual commitments and other | 46.6 | 3.9 | (7.9 | ) | (12.9 | ) | (0.8 | ) | 28.9 | |||||||||||||||
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| $ | 67.2 | $ | 10.9 | $ | (19.2 | ) | $ | (12.9 | ) | $ | (1.3 | ) | $ | 44.7 | ||||||||||
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| Balance at December 31, 2019 | Restructuring Costs, Net | Payments | Balance at March 31, 2020 | ||||||||||||||||||||||||||||||||
| Employee severance and termination benefits | $ | 10 | $ | 1 | $ | (4) | $ | 7 | |||||||||||||||||||||||||||
| Exited contractual commitments and other | 12 | 1 | (5) | 8 | |||||||||||||||||||||||||||||||
| $ | 22 | $ | 2 | $ | (9) | $ | 15 | ||||||||||||||||||||||||||||
| March 31, 2019 | December 31, 2018 | |||||||
Raw materials and supplies | $ | 224.1 | $ | 215.5 | ||||
Work-in-process | 152.8 | 130.7 | ||||||
Finished products | 1,422.1 | 1,236.9 | ||||||
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| $ | 1,799.0 | $ | 1,583.1 | |||||
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| March 31, 2020 | December 31, 2019 | ||||||||||
| Raw materials and supplies | $ | 254 | $ | 231 | |||||||
| Work-in-process | 153 | 135 | |||||||||
| Finished products | 1,293 | 1,240 | |||||||||
| $ | 1,700 | $ | 1,606 | ||||||||
| March 31, 2019 | December 31, 2018 | |||||||
Land | $ | 69.2 | $ | 69.9 | ||||
Buildings and improvements | 478.5 | 479.1 | ||||||
Machinery and equipment | 1,604.6 | 1,575.1 | ||||||
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| 2,152.3 | 2,124.1 | |||||||
Less: Accumulated depreciation | (1,221.6 | ) | (1,198.5 | ) | ||||
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| $ | 930.7 | $ | 925.6 | |||||
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| March 31, 2020 | December 31, 2019 | ||||||||||
| Land | $ | 82 | $ | 86 | |||||||
| Buildings and improvements | 633 | 641 | |||||||||
| Machinery and equipment | 2,146 | 2,151 | |||||||||
| 2,861 | 2,878 | ||||||||||
| Less: Accumulated depreciation | (1,738) | (1,723) | |||||||||
| $ | 1,123 | $ | 1,155 | ||||||||
Footnote 7 — Goodwill and Other Intangible Assets, Net
| March 31, 2019 | ||||||||||||||||||||
Segment | Net Book Value at December 31, 2018 | Foreign Exchange | Gross Carrying Amount | Accumulated Impairment Charges | Net Book Value | |||||||||||||||
Food and Appliances | $ | 211.2 | $ | 0.1 | $ | 2,097.5 | $ | (1,886.2 | ) | $ | 211.3 | |||||||||
Home and Outdoor Living | 163.8 | — | 2,148.8 | (1,985.0 | ) | 163.8 | ||||||||||||||
Learning and Development | 2,595.2 | (12.0 | ) | 3,429.2 | (846.0 | ) | 2,583.2 | |||||||||||||
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| $ | 2,970.2 | $ | (11.9 | ) | $ | 7,675.5 | $ | (4,717.2 | ) | $ | 2,958.3 | |||||||||
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| March 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segments | Net Book Value at December 31, 2019 | Impairment Charges | Foreign Exchange and Other | Gross Carrying Amount | Accumulated Impairment Charges | Net Book Value | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Appliances and Cookware | $ | 212 | $ | (212) | $ | — | $ | 744 | $ | (744) | $ | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Food and Commercial | 747 | — | — | 2,266 | (1,519) | 747 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Home and Outdoor Living | 164 | — | — | 2,155 | (1,991) | 164 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Learning and Development | 2,586 | — | (14) | 3,418 | (846) | 2,572 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| $ | 3,709 | $ | (212) | $ | (14) | $ | 8,583 | $ | (5,100) | $ | 3,483 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| March 31, 2019 | December 31, 2018 | |||||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Book Value | Gross Carrying Amount | Accumulated Amortization | Net Book Value | Amortization Periods (in years) | ||||||||||||||||||||
Trade names — indefinite life | $ | 4,089.4 | $ | — | $ | 4,089.4 | $ | 4,093.0 | $ | — | $ | 4,093.0 | N/A | |||||||||||||
Trade names — other | 170.3 | (39.9 | ) | 130.4 | 170.5 | (36.5 | ) | 134.0 | 2-15 | |||||||||||||||||
Capitalized software | 529.0 | (363.7 | ) | 165.3 | 520.0 | (348.1 | ) | 171.9 | 3–12 | |||||||||||||||||
Patents and intellectual property | 134.1 | (83.4 | ) | 50.7 | 136.4 | (79.2 | ) | 57.2 | 3–14 | |||||||||||||||||
Customer relationships and distributor channels | 1,269.8 | (196.9 | ) | 1,072.9 | 1,269.7 | (180.9 | ) | 1,088.8 | 3–30 | |||||||||||||||||
Other | 109.0 | (81.3 | ) | 27.7 | 109.0 | (74.3 | ) | 34.7 | 3–5 | |||||||||||||||||
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| $ | 6,301.6 | $ | (765.2 | ) | $ | 5,536.4 | $ | 6,298.6 | $ | (719.0 | ) | $ | 5,579.6 | |||||||||||||
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| March 31, 2020 | December 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Book Value | Gross Carrying Amount | Accumulated Amortization | Net Book Value | Amortization Periods (in years) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Trade names — indefinite life | $ | 2,270 | $ | — | $ | 2,270 | $ | 3,560 | $ | — | $ | 3,560 | N/A | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Trade names — other | 158 | (49) | 109 | 169 | (50) | 119 | 2-15 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Capitalized software | 590 | (445) | 145 | 587 | (435) | 152 | 3-12 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Patents and intellectual property | 135 | (106) | 29 | 135 | (102) | 33 | 3-14 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Customer relationships and distributor channels | 1,308 | (294) | 1,014 | 1,328 | (283) | 1,045 | 3-30 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other | 109 | (109) | — | 109 | (102) | 7 | 3-5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| $ | 4,570 | $ | (1,003) | $ | 3,567 | $ | 5,888 | $ | (972) | $ | 4,916 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended March 31, 2020 | ||||||||||||||
| Impairment of indefinite-lived intangibles assets | ||||||||||||||
| Appliances and Cookware | $ | 87 | ||||||||||||
| Home and Outdoor Living | 1,092 | |||||||||||||
| Learning and Development | 78 | |||||||||||||
| $ | 1,257 | |||||||||||||
2020 will prove to be accurate predictions of the future.
| March 31, 2019 | December 31, 2018 | |||||||
Customer accruals | $ | 437.7 | $ | 535.8 | ||||
Accruals for manufacturing, marketing and freight expenses | 37.0 | 34.3 | ||||||
Accrued self-insurance liabilities, contingencies and warranty | 132.4 | 123.3 | ||||||
Operating lease liability | 137.8 | — | ||||||
Derivative liabilities | 13.0 | 4.9 | ||||||
Accrued income taxes | 92.9 | 165.2 | ||||||
Accrued interest expense | 128.9 | 72.9 | ||||||
Other | 194.7 | 244.2 | ||||||
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| $ | 1,174.4 | $ | 1,180.6 | |||||
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March 31, 2020 December 31, 2019 Customer accruals $ 476 $ 605 Operating lease liabilities 126 132 Accrued interest expense 107 63 Accrued self-insurance liabilities, contingencies and warranty 103 124 Accrued income taxes 100 114 Accruals for manufacturing, marketing and freight expenses 37 50 Other 203 252 $ 1,152 $ 1,340
| March 31, 2019 | December 31, 2018 | |||||||
2.60% senior notes due 2019 | $ | — | $ | 267.3 | ||||
4.70% senior notes due 2020 | 304.7 | 304.6 | ||||||
3.15% senior notes due 2021 | 93.5 | 97.5 | ||||||
3.75% senior notes due 2021 | 344.6 | 353.2 | ||||||
4.00% senior notes due 2022 | 249.1 | 249.0 | ||||||
3.85% senior notes due 2023 | 1,741.3 | 1,740.8 | ||||||
5.00% senior notes due 2023 | 309.5 | 310.0 | ||||||
4.00% senior notes due 2024 | 496.6 | 496.4 | ||||||
3.90% senior notes due 2025 | 90.4 | 90.3 | ||||||
4.20% senior notes due 2026 | 1,984.9 | 1,984.5 | ||||||
5.375% senior notes due 2036 | 415.9 | 415.8 | ||||||
5.50% senior notes due 2046 | 657.2 | 657.2 | ||||||
Commercial paper | 258.9 | — | ||||||
Receivables facility | 269.0 | — | ||||||
Other debt | 52.6 | 48.4 | ||||||
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Total debt | 7,268.2 | 7,015.0 | ||||||
Short-term debt and current portion of long-term debt | (573.6 | ) | (318.7 | ) | ||||
|
|
|
| |||||
Long-term debt | $ | 6,694.6 | $ | 6,696.3 | ||||
|
|
|
| |||||
| March 31, 2020 | December 31, 2019 | ||||||||||
| 4.70% senior notes due 2020 | $ | 305 | $ | 305 | |||||||
| 3.15% senior notes due 2021 | 94 | 94 | |||||||||
| 3.75% senior notes due 2021 | 336 | 342 | |||||||||
| 4.00% senior notes due 2022 | 249 | 249 | |||||||||
| 3.85% senior notes due 2023 | 1,388 | 1,388 | |||||||||
| 4.00% senior notes due 2024 | 200 | 199 | |||||||||
| 3.90% senior notes due 2025 | 47 | 47 | |||||||||
| 4.20% senior notes due 2026 | 1,972 | 1,986 | |||||||||
| 5.375% senior notes due 2036 | 416 | 416 | |||||||||
| 5.50% senior notes due 2046 | 657 | 657 | |||||||||
| Commercial paper | 40 | 25 | |||||||||
| Receivables facilities | 289 | — | |||||||||
| Other debt | 21 | 15 | |||||||||
| Total debt | 6,014 | 5,723 | |||||||||
| Short-term debt and current portion of long-term debt | (639) | (332) | |||||||||
| Long-term debt | $ | 5,375 | $ | 5,391 | |||||||
31, 2020, the Company drew down the maximum net availability under the Securitization Facility, which fluctuates based on eligible accounts receivable balances. In March 2020, the Company amended its Securitization Facility with respect to certain customer receivables and to remove an originator from the Securitization Facility.
| March 31, 2020 | December 31, 2019 | ||||||||||||||||||||||||||||||||||
| Fair Value | Book Value | Fair Value | Book Value | ||||||||||||||||||||||||||||||||
| Senior notes | $ | 5,724 | $ | 5,664 | $ | 5,990 | $ | 5,683 | |||||||||||||||||||||||||||
Revolving Credit Facility and Commercial Paper
The Company maintains a $1.25 billion revolving credit facility that matures in December 2023 (the “Facility”). Under the Facility, the Company may borrow funds on a variety of interest rate terms. Since the Facility provides the committed backup liquidity required to issue commercial paper, the Company may issue commercial paper up to a maximum of $800 million provided there is a sufficient amount available for borrowing under the Facility. The Facility also provides for the issuance of up to $100 million of letters of credit, so long as there is a sufficient amount available for borrowing under the Facility.
Receivables Facility
The Company maintains a $950 million receivables purchase agreement that matures in October 2019 (the “Securitization Facility”) and bears interest at a margin over a variable interest rate. At March 31, 2019, the borrowing rate margin and the unused line fee on the Securitization Facility were 0.80% and 0.40% per annum, respectively.
Other
The fair values of the Company’s senior notes are based on quoted market prices and are as follows (in millions):
| March 31, 2019 | December 31, 2018 | |||||||||||||||
| Fair Value | Book Value | Fair Value | Book Value | |||||||||||||
Senior notes | $ | 6,518.2 | $ | 6,687.7 | $ | 6,911.2 | $ | 6,966.6 | ||||||||
The carrying amounts of all other significant debt approximates fair value.
spot method for assessing the effectiveness of these contracts.
Commodity Contracts
To a lesser extent, the Company also enters into commodity-based derivatives in order to mitigate the risk that the rising price of these commodities could have on the cost of certain of the Company’s raw materials. These commodity-based derivatives provide the Company with cost certainty. At March 31, 2019, the Company had approximately $10 million notional amount outstanding of commodity-based derivatives that are designated as effective hedges for accounting purposes and approximately $3 million notional amount outstanding of commodity-based derivatives that are not designated as effective hedges for accounting purposes. These commodity-based derivatives have expiration dates through January 2020.
The following table presents the fair value of derivative financial instruments as ofat the dates indicated (in millions):
| March 31, 2019 | December 31, 2018 | |||||||||||||||
| Fair Value of Derivatives | Fair Value of Derivatives | |||||||||||||||
| Asset (a) | Liability (a) | Asset (a) | Liability (a) | |||||||||||||
Derivatives designated as effective hedges: | ||||||||||||||||
Cash flow hedges: | ||||||||||||||||
Foreign currency contracts | $ | 7.9 | $ | 3.6 | $ | 13.3 | $ | 0.7 | ||||||||
Fair value hedges: | ||||||||||||||||
Interest rate swaps | — | 6.0 | — | 11.5 | ||||||||||||
Derivatives not designated as effective hedges: | ||||||||||||||||
Foreign currency contracts | 8.6 | 8.2 | 12.9 | 4.2 | ||||||||||||
Commodity contracts | — | 1.3 | — | 0.9 | ||||||||||||
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| |||||||||
Total | $ | 16.5 | $ | 19.1 | $ | 26.2 | $ | 17.3 | ||||||||
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| |||||||||
(a) Consolidated balance sheet location: | ||||||||||||||||
Asset: Prepaid expenses and other, and othernon-current assets | ||||||||||||||||
Liability: Other accrued liabilities, and current andnon-current liabilities | ||||||||||||||||
| March 31, 2020 | December 31, 2019 | ||||||||||||||||||||||||||||||||||
| Fair Value of Derivatives | Fair Value of Derivatives | ||||||||||||||||||||||||||||||||||
| Asset (a) | Liability (a) | Asset (a) | Liability (a) | ||||||||||||||||||||||||||||||||
| Derivatives designated as effective hedges: | |||||||||||||||||||||||||||||||||||
| Cash flow hedges: | |||||||||||||||||||||||||||||||||||
| Foreign currency contracts | $ | 23 | $ | 2 | $ | 1 | $ | 13 | |||||||||||||||||||||||||||
| Fair value hedges: | |||||||||||||||||||||||||||||||||||
| Interest rate swaps | 8 | — | 2 | 1 | |||||||||||||||||||||||||||||||
| Net investment hedges: | |||||||||||||||||||||||||||||||||||
| Cross-currency swaps | 21 | — | — | — | |||||||||||||||||||||||||||||||
| Derivatives not designated as effective hedges: | |||||||||||||||||||||||||||||||||||
| Foreign currency contracts | 32 | 16 | 10 | 4 | |||||||||||||||||||||||||||||||
| Total | $ | 84 | $ | 18 | $ | 13 | $ | 18 | |||||||||||||||||||||||||||
| (a) Consolidated balance sheet location: | |||||||||||||||||||||||||||||||||||
| Asset: Prepaid expenses and other, and other noncurrent assets | |||||||||||||||||||||||||||||||||||
| Liability: Other accrued liabilities, and current and noncurrent liabilities | |||||||||||||||||||||||||||||||||||
Location of gain/ | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | ||||||||||||||||
| Gain/(Loss) | Gain/(Loss) | |||||||||||||||||
| Recognized in OCI (a) (effective portion) | Reclassified from AOCL to Income | Recognized in OCI (a) (effective portion) | Reclassified from AOCL to Income | |||||||||||||||
Interest rate swaps | Interest expense, net | $ | — | $ | (1.5 | ) | $ | — | $ | (1.9 | ) | |||||||
Foreign currency contracts | Net sales and cost of products sold | (6.1 | ) | 5.7 | (5.3 | ) | (6.4 | ) | ||||||||||
Commodity contracts | Cost of products sold | (0.6 | ) | — | — | — | ||||||||||||
Cross-currency swaps | Other expense (income), net | — | — | (3.4 | ) | (4.8 | ) | |||||||||||
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| |||||||||||
Total | $ | (6.7 | ) | $ | 4.2 | $ | (8.7 | ) | $ | (13.1 | ) | |||||||
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| Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | ||||||||||||||||||||||||||||||||||||||||
| Gain/(Loss) | Gain/(Loss) | ||||||||||||||||||||||||||||||||||||||||
| Location of gain/(loss) recognized in income | Recognized in OCI (effective portion) | Reclassified from AOCL to Income | Recognized in OCI (effective portion) | Reclassified from AOCL to Income | |||||||||||||||||||||||||||||||||||||
| Interest rate swaps | Interest expense, net | $ | — | $ | (2) | $ | — | $ | (2) | ||||||||||||||||||||||||||||||||
| Foreign currency contracts | Net sales and cost of products sold | 35 | 1 | (6) | 6 | ||||||||||||||||||||||||||||||||||||
| Commodity contracts | Cost of products sold | — | — | (1) | — | ||||||||||||||||||||||||||||||||||||
| Cross-currency swaps | Other expense, net | 21 | — | — | — | ||||||||||||||||||||||||||||||||||||
| Total | $ | 56 | $ | (1) | $ | (7) | $ | 4 | |||||||||||||||||||||||||||||||||
| ||||||||||||||
| Pension Benefits | ||||||||||||||||
| Three Months Ended March 31, | ||||||||||||||||
| U.S. | International | |||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
Service cost | $ | 0.1 | $ | 0.2 | $ | 1.5 | $ | 1.4 | ||||||||
Interest cost | 12.3 | 11.6 | 3.2 | 3.3 | ||||||||||||
Expected return on plan assets | (14.8 | ) | (16.9 | ) | (3.3 | ) | (4.0 | ) | ||||||||
Amortization, net | 3.8 | 5.4 | 0.6 | 0.6 | ||||||||||||
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| |||||||||
Net periodic pension cost | $ | 1.4 | $ | 0.3 | $ | 2.0 | $ | 1.3 | ||||||||
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| Postretirement Benefits | ||||||||
| Three Months Ended March 31, | ||||||||
| 2019 | 2018 | |||||||
Service cost | $ | — | $ | 0.1 | ||||
Interest cost | 0.5 | 0.5 | ||||||
Amortization, net | (2.4 | ) | (2.6 | ) | ||||
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| |||||
Net periodic postretirement cost | $ | (1.9 | ) | $ | (2.0 | ) | ||
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| Pension Benefits | |||||||||||||||||||||||||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||||||||
| U.S. | International | ||||||||||||||||||||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||
| Service cost | $ | — | $ | — | $ | 1 | $ | 2 | |||||||||||||||||||||||||||||||||
| Interest cost | 9 | 12 | 2 | 3 | |||||||||||||||||||||||||||||||||||||
| Expected return on plan assets | (15) | (15) | (2) | (3) | |||||||||||||||||||||||||||||||||||||
| Amortization, net | 6 | 4 | 1 | — | |||||||||||||||||||||||||||||||||||||
| Settlements | 1 | — | — | — | |||||||||||||||||||||||||||||||||||||
| Total expense | $ | 1 | $ | 1 | $ | 2 | $ | 2 | |||||||||||||||||||||||||||||||||
| Postretirement Benefits | ||||||||||||||||||||||||||||||||
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
| 2020 | 2019 | |||||||||||||||||||||||||||||||
| Service cost | $ | — | $ | — | ||||||||||||||||||||||||||||
| Interest cost | — | — | ||||||||||||||||||||||||||||||
| Amortization, net | (1) | (2) | ||||||||||||||||||||||||||||||
| Total income | $ | (1) | $ | (2) | ||||||||||||||||||||||||||||
The Company’s reportedincome tax rate for the three months ended March 31, 2020 and 2019 was 13.8% and 2018 was a benefit of 18.9% and 61.2%21.3%, respectively. The difference from the statutoryCompany’s effective income tax rate tofluctuates based on, among other factors, the reportedgeographic mix of income.
The Company’s lease portfolio mainly consists of retail stores, warehouses, distribution centers, office space, and, to a lesser extent, equipment. The Company’s accounting for finance leases (previously called capital leases) remains substantially unchanged. Finance leases are generally those leases that allow the Company to substantially utilize or pay for the entire asset over its estimated life. Assets acquired under finance leases are recorded in property, plant and equipment, net. All other leases are categorized as operating leases. Operating lease assets represent the Company’s right to use an underlying asset for the lease term whereas lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. These rates are assessed on a quarterly basis. The operating lease assets also include any lease payments made less lease incentives. Leases with an initial term of 12 months or less are not recorded on the balance sheet. For operating leases, expense is recognized on a straight-line basis over the lease term. For finance leases, the Company recognizes a front-loaded pattern of total lease expense recognition due to the accretion of the lease liability and the straight-line amortization of the leased asset.
Many leases include one or more options to renew, with renewal terms that can extend the lease term for three years or more. The exercise of lease renewal options is at the Company’s sole discretion. Certain leases also include options to purchase the leased assets. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.
The Company also has lease agreements with lease andnon-lease components, which are accounted as a single lease component. Additionally, for certainnon-real estate leases, the portfolio approach is used to effectively account for the operating lease assets and liabilities.
Supplemental condensed consolidated balance sheetCondensed Consolidated Balance Sheet information related to leases for the period indicated, is as follows (in millions):
Classification | March 31, 2019 | |||||
Assets | ||||||
Operating leases | Operating lease assets, net | $ | 619.3 | |||
Finance leases | Property, plant and equipment, net (1) | 18.6 | ||||
|
| |||||
Total lease assets | $ | 637.9 | ||||
|
| |||||
Liabilities | ||||||
Current | ||||||
Operating leases | Other accrued liabilities | $ | 137.8 | |||
Finance leases | Short-term debt and current portion of long-term debt | 3.4 | ||||
Noncurrent | ||||||
Operating leases | Long-term operating lease liabilities | 547.6 | ||||
Finance leases | Long-term debt | 11.9 | ||||
|
| |||||
Total lease liabilities | $ | 700.7 | ||||
|
| |||||
|
| Classification | March 31, 2020 | December 31, 2019 | |||||||||||||||
| Assets | |||||||||||||||||
| Operating leases | Operating lease assets, net (1) | $ | 561 | $ | 615 | ||||||||||||
| Finance leases | Property, plant and equipment, net (2) | 14 | 15 | ||||||||||||||
| Total lease assets | $ | 575 | $ | 630 | |||||||||||||
| Liabilities | |||||||||||||||||
| Current | |||||||||||||||||
| Operating leases | Other accrued liabilities | $ | 126 | $ | 132 | ||||||||||||
| Finance leases | Short-term debt and current portion of long-term debt | 3 | 3 | ||||||||||||||
| Noncurrent | |||||||||||||||||
| Operating leases | Long-term operating lease liabilities | 503 | 541 | ||||||||||||||
| Finance leases | Long-term debt | 9 | 10 | ||||||||||||||
| Total lease liabilities | $ | 641 | $ | 686 | |||||||||||||
| Three Months Ended March 31, 2019 | ||||
Operating lease cost: | ||||
Operating lease cost (1) | $ | 48.2 | ||
Variable lease costs (2) | 6.0 | |||
Finance lease cost: | ||||
Amortization of leased assets | 1.1 | |||
Interest on lease liabilities | 0.2 | |||
|
|
| Three Months Ended March 31, | |||||||||||||||||
| 2020 | 2019 | ||||||||||||||||
| Operating lease cost: | |||||||||||||||||
| Operating lease cost (1) | $ | 48 | $ | 53 | |||||||||||||
| Variable lease costs (2) | 6 | 6 | |||||||||||||||
| Finance lease cost: | |||||||||||||||||
| Amortization of leased assets | 1 | 1 | |||||||||||||||
| March 31, | |||||||||||||||||||
| |||||||||||||||||||
Operating leases | 7 | ||||||||||||||||||
Finance leases | 3 | ||||||||||||||||||
| |||||||||||||||||||
Operating leases | 4.3% | ||||||||||||||||||
Finance leases | 3.5% | ||||||||||||||||||
| Three Months Ended March 31, 2019 | ||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||
Operating cash flows from operating leases | $ | 39.5 | ||
Operating cash flows from finance leases | 0.2 | |||
Financing cash flows from finance leases | 0.7 | |||
Right of use assets obtained in exchange for lease liabilities: | ||||
Operating leases | 26.5 | |||
Finance leases | 6.7 | |||
Three Months Ended
March 31,2020 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 47 $ 42 Financing cash flows from finance leases 1 1 Right of use assets obtained in exchange for lease liabilities: Operating leases 7 27 Finance leases — 7
| Operating Leases | Finance Leases | |||||||
2019 (Excludes three months ended March 31, 2019) | $ | 124.7 | $ | 3.3 | ||||
2020 | 136.2 | 4.3 | ||||||
2021 | 113.5 | 4.2 | ||||||
2022 | 97.8 | 3.3 | ||||||
2023 | 73.8 | 1.5 | ||||||
Thereafter | 264.6 | 0.4 | ||||||
|
|
|
| |||||
Total lease payments | 810.6 | 17.0 | ||||||
Less: imputed interest | (125.2 | ) | (1.7 | ) | ||||
|
|
|
| |||||
Present value of lease liabilities | $ | 685.4 | $ | 15.3 | ||||
|
|
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| |||||
See Footnote 2 for information on lease liabilities included in discontinued operations and held for sale.
Future minimum rental payments for operating leases, prior to the adoption of the new lease standard, with initial or remaining terms in excess of one year at December 31, 2018 for the consolidated Company are as follows:
| Operating Leases | ||||
2019 | $ | 180.0 | ||
2020 | 144.0 | |||
2021 | 117.8 | |||
2022 | 97.7 | |||
2023 | 74.0 | |||
Thereafter | 263.9 | |||
|
| |||
Total lease payments | $ | 877.4 | ||
|
| |||
Rent expense under operating leases for continuing operations was $52.7 million during the three months ended March 31, 2018.
follows (in millions):
Operating Leases | Finance Leases | ||||||||||
| 2020 (Excludes three months ended March 31, 2020) | $ | 123 | $ | 4 | |||||||
| 2021 | 139 | 4 | |||||||||
| 2022 | 114 | 3 | |||||||||
| 2023 | 86 | 1 | |||||||||
| 2024 | 69 | — | |||||||||
| Thereafter | 214 | — | |||||||||
| Total lease payments | 745 | 12 | |||||||||
| Less: imputed interest | (116) | — | |||||||||
| Present value of lease liabilities | $ | 629 | $ | 12 | |||||||
| Three Months Ended March 31, | ||||||||
| 2019 | 2018 | |||||||
Weighted-average shares outstanding | 422.8 | 485.4 | ||||||
Share-based payment awards classified as participating securities (1) | 0.2 | 0.6 | ||||||
|
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| |||||
Basic weighted-average shares outstanding | 423.0 | 486.0 | ||||||
Dilutive securities (2) | — | — | ||||||
|
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| |||||
Diluted weighted-average shares outstanding | 423.0 | 486.0 | ||||||
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| |||||
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|
| Three Months Ended March 31, | |||||||||||||||||||||||||||||
| 2020 | 2019 | ||||||||||||||||||||||||||||
| Weighted average shares outstanding | 423.8 | 422.8 | |||||||||||||||||||||||||||
| Share-based payment awards classified as participating securities (1) | — | 0.2 | |||||||||||||||||||||||||||
| Basic weighted average shares outstanding | 423.8 | 423.0 | |||||||||||||||||||||||||||
| Dilutive securities (2) | — | — | |||||||||||||||||||||||||||
| Diluted weighted average shares outstanding | 423.8 | 423.0 | |||||||||||||||||||||||||||
At March 31, 2019, there were approximately 2.5 million shares
Compensation
On June 11, 2018, the Company announced that its Board of Directors authorized a $2.5 billion increase in the then available amount under its existing Stock Repurchase Program (“SRP”). Under the Company’s Stock Repurchase Program (“SRP”), the Company is authorized to repurchase up to approximately $3.6 billion of its outstanding shares through the end of 2019. The repurchase of additional shares in the future will depend upon many factors, including the Company’s financial condition, liquidity and legal requirements.
For the three months ended March 31, 2019 and 2018 dividends per share were $0.23.
Other
On March 14, 2019,2020, the Company announced that Michael B. Polk, the Company’s President and Chief Executive Officer and memberalso awarded 1.0 million time-based stock options with an aggregate grant date fair value of $6 million. These stock options entitle recipients to shares of the Company’s Board of Directors (the “Board”), will retire from the Company at the end of the second quarter of 2019.
In connection with Mr. Polk’s retirement from the Company, on June 28, 2019 (the “Retirement Date”), the Companycommon stock and Mr. Polk entered into a Retirement Agreement and General Release (the “Retirement Agreement”), pursuant to which, Mr. Polk agreed to a customary release and restrictive covenants. Pursuant to certain terms and conditions Mr. Polk’s unexercised 2011 stock options will remain exercisable until expiration in July 2021 consistent with the terms of the underlying option agreement. Additionally, Mr. Polk’s unvested performance-based RSUs awarded in February 2018 will continue toprimarily vest in February 2021 (subjectequal installments over a three-year period.
Furthermore, Mr. Polk forfeited his unvested performance-based RSUs awarded in February 2017. The Company accounted for the treatment of his 2018 and 2019 awards as modification of his initial awards based on the terms and conditions of such awards. As such, the cumulative compensation expense of his 2017, 2018 and 2019 awards were reversed during the first quarter of 2019 whiledetermine the fair value of stock options granted for the modified awards will be recognized as compensation expense over the contractual service period. During the first quarter of 2019, the Company recorded a net benefit of approximately $9.3 million based on the aforementioned terms and conditions of the Retirement Agreement. As ofthree months ended March 31, 2019,2020, is as follows:
| Risk-free interest rates | 1.4 | % | |||
| Expected volatility | 41.3 | % | |||
| Expected dividend yield | 3.9 | % | |||
| Expected life (in years) | 6.2 | ||||
| Exercise price | $ | 20.02 | |||
| Intrinsic value | $ | — | |||
three months ended March 31, 2020 and 2019.
Measurement
s| March 31, 2019 | December 31, 2018 | |||||||||||||||||||||||||||||||
| Fair Value Asset (Liability) | Fair Value Asset (Liability) | |||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
Derivatives: | ||||||||||||||||||||||||||||||||
Assets | $ | — | $ | 16.5 | $ | — | $ | 16.5 | $ | — | $ | 26.2 | $ | — | $ | 26.2 | ||||||||||||||||
Liabilities | — | (19.1 | ) | — | (19.1 | ) | — | (17.3 | ) | — | (17.3 | ) | ||||||||||||||||||||
Investment securities, including mutual funds | 12.9 | 6.3 | — | 19.2 | — | 1.9 | — | 1.9 | ||||||||||||||||||||||||
| March 31, 2020 | December 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair value Asset (Liability) | Fair value Asset (Liability) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivatives: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Assets | $ | — | $ | 84 | $ | — | $ | 84 | $ | — | $ | 13 | $ | — | $ | 13 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Liabilities | — | (18) | — | (18) | — | (18) | — | (18) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investment securities, including mutual funds | 6 | 1 | — | 7 | 10 | 1 | — | 11 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
During the first quarter of 2019, the Company acquired an equity investment for $18.3$18 million, which is traded on an active exchange and therefore has a readily determinable fair value. At March 31, 2019,2020, the fair value of the equity investment was $12.9$6 million. For equity investments with readily determinable fair values held at March 31, 2019, we2020, the Company recorded $5.4$3 million and $5 million of unrealized losses within other expense, (income), net in the Condensed Consolidated Statement of Operations for the three-monththree months period ended March 31, 2019.
Nonrecurring Fair Value Measurements
The Company’s nonfinancial assets that are measured at fair value on a nonrecurring basis include property, plant2020 and equipment, operating lease assets, goodwill, intangible assets and certain other assets. In the absence2019, respectively.
| March 31, 2020 | December 31, 2019 | ||||||||||
| Indefinite-lived intangible assets | $ | 796 | $ | 1,365 | |||||||
The carrying value See Footnotes 6 and estimated fair value measurement of assets held13, respectively, for sale are classified as Level 3, as the fair values utilize significant unobservable inputs (see Footnote 2).
further information.
qualitative characteristics. There were no changes to its other reportable segments.
Segment | Key Brands | Description of Primary Products | ||||||||||||
| Household products, including kitchen appliances, gourmet cookware, bakeware and cutlery | ||||||||||||||
| Food and Commercial | Ball® (1), FoodSaver®, Rubbermaid®, Rubbermaid Commercial Products®, Sistema®, Mapa®, Quickie® and Spontex® | Food storage and home storage products, | ||||||||||||
| Home and Outdoor Living | Chesapeake Bay Candle®, Coleman®, Contigo®, ExOfficio®, First Alert®, | Products for outdoor and outdoor-related activities, home fragrance products and connected home and security | ||||||||||||
| Learning and Development | Aprica®, Baby Jogger®, Dymo®, Elmer’s®, | Writing instruments, including markers and highlighters, pens and pencils; art products; activity-based adhesive and cutting products; labeling solutions; baby gear and infant care products | ||||||||||||
Segment
| Three Months Ended March 31, 2019 | ||||||||||||||||||||||||||||
| Food and Appliances | Home and Outdoor Living | Learning and Development | Other | Corporate | Restructuring Costs | Consolidated | ||||||||||||||||||||||
Net sales (1) | $ | 504.1 | $ | 626.6 | $ | 581.4 | $ | — | $ | — | $ | — | $ | 1,712.1 | ||||||||||||||
Operating income (loss) (2) | 9.3 | (1.5 | ) | 88.5 | — | (70.4 | ) | (10.9 | ) | 15.0 | ||||||||||||||||||
Other segment data: | ||||||||||||||||||||||||||||
Total segment assets | 4,127.9 | 4,374.2 | 4,907.0 | — | 1,240.9 | — | 14,650.0 | |||||||||||||||||||||
| Three Months Ended March 31, 2018 | ||||||||||||||||||||||||||||
| Food and Appliances | Home and Outdoor Living | Learning and Development | Other | Corporate | Restructuring Costs | Consolidated | ||||||||||||||||||||||
Net sales (1) | $ | 534.2 | $ | 669.7 | $ | 607.0 | $ | 0.6 | $ | — | $ | — | $ | 1,811.5 | ||||||||||||||
Operating income (loss) (2) | 13.4 | 7.8 | 66.2 | 0.9 | (109.3 | ) | (5.4 | ) | (26.4 | ) | ||||||||||||||||||
|
|
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
| 2020 | 2019 | |||||||||||||||||||||||||||||||
| Net sales (1) | ||||||||||||||||||||||||||||||||
| Appliances and Cookware | $ | 291 | $ | 330 | ||||||||||||||||||||||||||||
| Food and Commercial | 520 | 504 | ||||||||||||||||||||||||||||||
| Home and Outdoor Living | 547 | 627 | ||||||||||||||||||||||||||||||
| Learning and Development | 528 | 581 | ||||||||||||||||||||||||||||||
| $ | 1,886 | $ | 2,042 | |||||||||||||||||||||||||||||
| Operating income (loss) (2) | ||||||||||||||||||||||||||||||||
| Appliances and Cookware | $ | (308) | $ | (4) | ||||||||||||||||||||||||||||
| Food and Commercial | 84 | 1 | ||||||||||||||||||||||||||||||
| Home and Outdoor Living | (1,121) | (2) | ||||||||||||||||||||||||||||||
| Learning and Development | 5 | 89 | ||||||||||||||||||||||||||||||
| Corporate | (66) | (61) | ||||||||||||||||||||||||||||||
| Restructuring | (2) | (11) | ||||||||||||||||||||||||||||||
| $ | (1,408) | $ | 12 | |||||||||||||||||||||||||||||
| March 31, 2020 | December 31, 2019 | |||||||||||||||||||||||||||||||
| Segment assets | ||||||||||||||||||||||||||||||||
| Appliances and Cookware | $ | 1,064 | $ | 1,468 | ||||||||||||||||||||||||||||
| Food and Commercial | 3,780 | 3,795 | ||||||||||||||||||||||||||||||
| Home and Outdoor Living | 2,802 | 3,833 | ||||||||||||||||||||||||||||||
| Learning and Development | 5,007 | 4,800 | ||||||||||||||||||||||||||||||
| Corporate | 1,250 | 1,746 | ||||||||||||||||||||||||||||||
| $ | 13,903 | $ | 15,642 | |||||||||||||||||||||||||||||
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
| 2020 | 2019 | |||||||||||||||||||||||||||||||
| Impairment of goodwill and indefinite-lived intangibles assets (3) | ||||||||||||||||||||||||||||||||
| Appliances and Cookware | $ | 299 | $ | — | ||||||||||||||||||||||||||||
| Food and Commercial | — | 63 | ||||||||||||||||||||||||||||||
| Home and Outdoor Living | 1,092 | — | ||||||||||||||||||||||||||||||
| Learning and Development | 78 | — | ||||||||||||||||||||||||||||||
| $ | 1,469 | $ | 63 | |||||||||||||||||||||||||||||
| Three Months Ended March 31, 2019 | ||||||||||||||||||||
| Food and Appliances | Home and Outdoor Living | Learning and Development | Other | Total | ||||||||||||||||
Appliances and Cookware | $ | 329.5 | $ | — | $ | — | $ | — | $ | 329.5 | ||||||||||
Food | 174.6 | — | — | — | 174.6 | |||||||||||||||
Connected Home and Security | — | 84.1 | — | — | 84.1 | |||||||||||||||
Home Fragrance | — | 196.7 | — | — | 196.7 | |||||||||||||||
Outdoor and Recreation | — | 345.8 | — | — | 345.8 | |||||||||||||||
Baby and Parenting | — | — | 236.2 | — | 236.2 | |||||||||||||||
Writing | — | — | 345.2 | — | 345.2 | |||||||||||||||
Other | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 504.1 | $ | 626.6 | $ | 581.4 | $ | — | $ | 1,712.1 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
North America | $ | 353.5 | $ | 439.7 | $ | 390.6 | $ | — | $ | 1,183.8 | ||||||||||
International | 150.6 | 186.9 | 190.8 | — | 528.3 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 504.1 | $ | 626.6 | $ | 581.4 | $ | — | $ | 1,712.1 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| Three Months Ended March 31, 2018 | ||||||||||||||||||||
| Food and Appliances | Home and Outdoor Living | Learning and Development | Other | Total | ||||||||||||||||
Appliances and Cookware | $ | 368.3 | $ | — | $ | — | $ | — | $ | 368.3 | ||||||||||
Food | 165.9 | — | — | — | 165.9 | |||||||||||||||
Connected Home and Security | — | 90.0 | — | — | 90.0 | |||||||||||||||
Home Fragrance | — | 212.4 | — | — | 212.4 | |||||||||||||||
Outdoor and Recreation | — | 367.3 | — | — | 367.3 | |||||||||||||||
Baby and Parenting | — | — | 272.5 | — | 272.5 | |||||||||||||||
Writing | — | — | 334.5 | — | 334.5 | |||||||||||||||
Other | — | — | — | 0.6 | 0.6 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 534.2 | $ | 669.7 | $ | 607.0 | $ | 0.6 | $ | 1,811.5 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
North America | $ | 356.6 | $ | 469.8 | $ | 394.4 | $ | 0.6 | $ | 1,221.4 | ||||||||||
International | 177.6 | 199.9 | 212.6 | — | 590.1 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 534.2 | $ | 669.7 | $ | 607.0 | $ | 0.6 | $ | 1,811.5 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Three Months Ended March 31, 2020 Appliances and Cookware Food and Commercial Home and
Outdoor LivingLearning and Development Total Appliances and Cookware $ 291 $ — $ — $ — $ 291 Food — 184 — — 184 Commercial — 336 — — 336 Connected Home and Security — — 77 — 77 Home Fragrance — — 163 — 163 Outdoor and Recreation — — 307 — 307 Baby and Parenting — — — 244 244 Writing — — — 284 284 Total $ 291 $ 520 $ 547 $ 528 $ 1,886 North America $ 184 $ 374 $ 387 $ 374 $ 1,319 International 107 146 160 154 567 Total $ 291 $ 520 $ 547 $ 528 $ 1,886
| Three Months Ended March 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Appliances and Cookware | Food and Commercial | Home and Outdoor Living | Learning and Development | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Appliances and Cookware | $ | 330 | $ | — | $ | — | $ | — | $ | 330 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Food | — | 175 | — | — | 175 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial Products | — | 329 | — | — | 329 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Connected Home and Security | — | — | 84 | — | 84 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Home Fragrance | — | — | 197 | — | 197 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Outdoor and Recreation | — | — | 346 | — | 346 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Baby and Parenting | — | — | — | 236 | 236 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Writing | — | — | — | 345 | 345 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 330 | $ | 504 | $ | 627 | $ | 581 | $ | 2,042 | |||||||||||||||||||||||||||||||||||||||||||||||||
| North America | $ | 214 | $ | 363 | $ | 440 | $ | 391 | $ | 1,408 | |||||||||||||||||||||||||||||||||||||||||||||||||
| International | 116 | 141 | 187 | 190 | 634 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 330 | $ | 504 | $ | 627 | $ | 581 | $ | 2,042 | |||||||||||||||||||||||||||||||||||||||||||||||||
On January 31, 2020, the Company received a subpoena from the U.S. Securities and Exchange Commission (the “SEC”) primarily relating to its sales practices and certain accounting matters during the period from January 1, 2016 to the date of the subpoena. The subpoena followed various informal document requests from the SEC staff, including several requests primarily related to the impairment of goodwill and other intangible assets. The Company has cooperated in providing documents and information to the SEC in connection with its requests and intends to continue to do so in connection with the subpoena. The Company cannot predict the timing or outcome of this investigation.
On January 10, 2020, the court in In re Newell Brands Inc. Securities Litigation entered a dismissal with prejudice after granting the Company’s motion to dismiss. On February 7, 2020, the plaintiffs filed an appeal to the United States Court of Appeals for the Third Circuit.
of Delaware), and Merion Capital LP v. Jarden Corporation, CaseNo. 12456-VCS (Court of Chancery of the State of Delaware), respectively, were filed on June 14, 2016 by a total of ten purported Jarden stockholders seeking an appraisal of the fair value of their shares of Jarden common stock pursuant to Section 262 of the DGCL. A third appraisal petition, Fir Tree Value Master Fund, LP v. Jarden Corporation, CaseNo. 12546-VCS (Court of Chancery of the State of Delaware), was filed on July 8, 2016 by two2 purported Jarden stockholders seeking an appraisal of the fair value of their shares of Jarden common stock pursuant to Section 262 of the DGCL. A fourth appraisal petition, Veritian Partners Master Fund LTP v. Jarden Corporation, CaseNo. 12650-VCS (Court of Chancery of the State of Delaware), was filed on August 12, 2016 by two2 purported Jarden stockholders seeking an appraisal of the fair value of their shares of Jarden common stock pursuant to Section 262 of the DGCL. On or about October 3, 2016, the foregoing petitions were consolidated for joint prosecution under CaseNo. 12456-VCS, and, except as provided below, the litigation is ongoing. The holders of a total of approximately 10.6 million former Jarden shares were represented in these actions initially.
2020, net of recoveries from a third-party manufacturer.
30 years, with its preferred alternative carrying an estimated cost of approximately $1.7 billion plus an additional $1.6approximately $2 million in annual maintenance costs for 30 years. In February 2015, the participating parties submitted to the U.S. EPA a draft RI, followed by submission of a draft FS in April 2015. The draft FS sets forth various alternatives for remediating the lower 17 miles of the Passaic River, ranging from a “no action” alternative, to targeted remediation of locations along the entire lower 17 mile stretch of the river, to remedial actions consistent with U.S. EPA’s preferred alternative as setsets forth in the FFS for the lower 8.3 miles coupled with monitored natural recovery and targeted remediation in the upper 9 miles. The cost estimates for these alternatives rangeranged from approximately $28.0$28 million to $2.7 billion, including related operation, maintenance and monitoring costs. The participating parties have been discussing the draft RI and FS reports with U.S. EPA and are preparing revised reports.
U.S. EPA issued its finala conditional approval of the RI report in June 2019.
OCC stated in a subsequent filing that it “anticipates” asserting additional claims against the defendants “regarding Newark Bay,” which is also part of the Diamond Alkali Superfund Site, after U.S. EPA has decided the Newark Bay remedy.
Frederick County, Virginia
In February 2019, Rubbermaid Commercial Products LLC, a subsidiary
As In connection with the 2018 sale of The Waddington Group, Novolex Holdings, Inc. (the “Buyer”) filed suit against the Company in October 2019 in the Superior Court of Delaware. The Buyer generally alleged that the Company fraudulently breached certain representations in the Equity Purchase Agreement between the Company and Buyer, dated May 2, 2018, resulting in an inflated purchase price for The Waddington Group. The Company intends to defend the litigation vigorously.
Footnote 19 — Subsequent Events
On May 1, 2019, the Company completed the sales
these countries. focusing the best people on the right things. Segment Key Brands Description of Primary ProductsBusiness leading global marketer of consumer goods company withand commercial products that make life better every day for consumers, where they live, learn, work and play. Our products are marketed under a strong portfolio of well-knownleading brands, including Paper Mate®, Sharpie®, Dymo®, EXPO®, Parker®, Elmer’s®, Coleman®, Marmot®, Oster®, Sunbeam®, FoodSaver®, Mr. Coffee®, Rubbermaid Commercial Products®, Graco®, Baby Jogger®, NUK®, Calphalon®, Rubbermaid®, Contigo®, First Alert®, Mapa®, Spontex®, Quickie® and Yankee Candle®. For hundreds of millions of consumers, Newell Brands makes life better every day, where they live, learn, work and play.Business StrategyIn 2018, Newell Brands announced its Accelerated Transformation Plan, designed to accelerate value creation and more rapidly transform the portfolio to one best positioned to leverage the company’s advantaged capabilities in innovation, design ande-commerce. The Accelerated Transformation Plan is designed to significantly increase shareholder value through both meaningful returns of capital to shareholders and strengthened operational and financial performance, while simultaneously deleveraging the balance sheet.As part of the Company’s Accelerated Transformation Plan, during 2018, the Company announced it was exploring strategic options for its industrial and commercial product assets, including The Waddington Group, Process Solutions, Rubbermaid Commercial Products, Rexair and Mapa/Spontex businesses, as well asnon-core consumer businesses, including Jostens, Pure Fishing, Rawlings, Rubbermaid Outdoor, Closet, Refuse and Garage, Goody Products and U.S. Playing Cards businesses. These businesses are classified as discontinued operations. Prior periods have been reclassified to conform with the current presentation. During 2018, the Company sold Goody Products, Inc. (“Goody”), Jostens, Inc. (“Jostens”), Pure Fishing, Inc. (“Pure Fishing”), the Rawlings Sporting Goods Company, Inc. (“Rawlings”) and Waddington Group, Inc. (“Waddington”) and other related subsidiaries as part of the Accelerated Transformation Plan. The Company currently expects to completesells its products in nearly 200 countries around the remaining divestitures byworld and has operations on the endground in nearly 100 of 2019.The Company expects to incur costs and expenses in connection with the transformation of the portfolio of businesses as part of the Accelerated Transformation Plan.Organizational Structurereportingcurrently executing a turnaround strategy, with the vision of building a global, next generation consumer products company that can unleash the full potential of its financial resultsbrands in four segmentsa fast moving omni-channel environment. These strategies are designed to address key challenges facing the Company, including: shifting consumer preferences and behaviors; a highly competitive operating environment; a rapidly changing retail landscape, including the growth in e-commerce; continued macroeconomic and political volatility; and an evolving regulatory landscape.Foodwell as growth in digital marketing, e-commerce and Appliances, Homeits international businesses;Outdoor Living, Learningoverhead savings to reinvest into the business; DevelopmentOther.threefour primary operatingreportable segments are as follows:FoodAppliances and AppliancesCookwareBall®Calphalon®, Calphalon®,Crock-Pot®, FoodSaver®, Mr. Coffee®, Oster®, Rubbermaid®, Sistema® and Sunbeam®Household products, including kitchen appliances, gourmet cookware, bakeware and cutlery foodFood and Commercial Ball® (1), FoodSaver®, Rubbermaid®, Rubbermaid Commercial Products®, Sistema®, Mapa®, Quickie® and Spontex® Food storage and home storage products, and fresh preserving products, vacuum sealing products, commercial cleaning and maintenance solutions, hygiene systems and material handling solutionsHome and
Outdoor LivingChesapeake Bay Candle®, Coleman®, Contigo®, ExOfficio®, First Alert®, Marmot®, WoodWick® and Yankee Candle® Products for outdoor and outdoor-related activities, home fragrance products and connected home and security productsLearning and
DevelopmentAprica®, Baby Jogger®, Dymo®, Elmer’s®, Expo®EXPO®, Graco®, Mr. Sketch®, NUK®, Paper Mate®, Parker®, Prismacolor®, Sharpie®, Tigex® Waterman® andX-Acto®Writing instruments, including markers and highlighters, pens and pencils; art products; activity-based adhesive and cutting products; labeling solutions; baby gear and infant care products Divestitures2019 ActivityOn May 1, 2019,soldtemporarily closed its Rexair businessYankee Candle retail stores in North America as of mid-March.investment funds affiliated with Rhône Capital for approximately $235 million, subjectcertain focused categories. While certain of the Company’s businesses have benefited from this shift, including Food and Commercial, others have seen significant slowing.customary working capital and other post-closing adjustments.
On May 1, 2019,the COVID-19 pandemic, the Company soldhas focused on three priorities: protecting the health and well-being of its Process Solutions Businessemployees; maintaining financial viability and business continuity; and keeping manufacturing facilities and distribution centers operating, where deemed prudent, to provide products to our consumers. The Company has established internal protocols including the establishment of a COVID-19 task force to monitor the situation, as well as communications and guidance issued by foreign, federal, state and local governments. In the first quarter 2020, the Company instituted mandatory work-from-home policies for employees able to work from home in various locations around the world and implemented a number of precautionary measures at its manufacturing plants, warehouses, distribution centers and R&D centers to reduce person to person contact and improve the personal safety for our front-line employees. Furthermore, beginning in mid-March 2020, the Company began temporarily closing all of the world-wide retail stores within its Home and Outdoor Living segment. While most of the Company’s manufacturing and distribution sites remain open, the Company has also experienced temporary closure of certain key operating facilities in the Home and Outdoor Living and Learning & Development segments, and additional COVID-19 related closures could further disrupt the Company’s supply chain. The Company continues to monitor developments, including government requirements and recommendations at the national, state, and local level to evaluate possible cessation or extensions to all or part of such initiatives. As part of the Company's efforts to contain costs and maintain financial liquidity and flexibility, it has taken certain actions including: instituting a hiring freeze for non-essential roles, furloughed all field-based and most corporate retail employees in North America, effective April 1, 2020, tightened discretionary spending as well as reducing and optimizing advertising and promotional expenses.
determined that certain of its indefinite-lived intangible assets in the Appliances and Cookware, Home and Outdoor Living and Learning and Development segments were impaired.
During the three months ended March 31,2018 Activity
On June 29, 2018, the Company sold Rawlings, its Team Sports business, to a fund managed by Seidler Equity Partners with aco-investment of Major League Baseball for approximately $400 million, subject to customary working capital and other post-closing adjustments.
On June 29, 2018, the Company sold Waddington to Novolex Holdings LLC for approximately $2.3 billion, subject to customary working capital and other post-closing adjustments.
On August 31, 2018, the Company sold its Goody business, to a fund managed by ACON Investments, L.L.C. for approximately $109 million, subject to customary working capital and other post-closing adjustments.
On December 21, 2018, the Company sold Jostens to a fund managed by Platinum Equity, LLC for approximately $1.3 billion, subject to customary working capital and other post-closing adjustments.
On December 21, 2018, the Company sold Pure Fishing to a fund managed by Sycamore Partners L.P. for approximately $1.3 billion, subject to customary working capital and other post-closing adjustments.
Ongoing Restructuring Initiatives
Accelerated Transformation Plan
The Company’s Accelerated Transformation Plan, which was initiated during the first quarter of 2018, was designed in part, to divest the Company’s industrial and commercial product assets andnon-core consumer businesses. The Accelerated Transformation Plan also focuses on the realignment of the Company’s management structure and overall cost structureshort term as a result of the completeddowngrades. At March 31, 2020, the Company had $40 million outstanding under its commercial paper program, which was subsequently repaid in April when the Company accessed $125 million under the Credit Revolver. At March 31, 2020, the Company did not have any amounts outstanding under the Credit Revolver. Subsequently on April 15, 2020, Fitch Ratings ("Fitch")
interest rates on any of the Company's senior notes.
2019
| Three Months Ended March 31, | ||||||||||||||||
(in millions) | 2019 | 2018 | Increase (Decrease) | % Change | ||||||||||||
Net sales | $ | 1,712.1 | $ | 1,811.5 | $ | (99.4 | ) | (5.5 | )% | |||||||
Cost of products sold | 1,168.3 | 1,206.2 | (37.9 | ) | (3.1 | ) | ||||||||||
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| |||||||||||
Gross profit | 543.8 | 605.3 | (61.5 | ) | (10.2 | ) | ||||||||||
Selling general and administrative expenses (“SG&A”) | 517.9 | 626.3 | (108.4 | ) | (17.3 | ) | ||||||||||
Restructuring costs, net | 10.9 | 5.4 | 5.5 | 101.9 | ||||||||||||
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| |||||||||||
Operating income (loss) | 15.0 | (26.4 | ) | 41.4 | 156.8 | |||||||||||
Interest expense, net | 80.2 | 116.1 | (35.9 | ) | (30.9 | ) | ||||||||||
Other expense (income), net | 23.3 | (1.4 | ) | 24.7 | NMF | |||||||||||
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Loss before income taxes | $ | (88.5 | ) | $ | (141.1 | ) | $ | 52.6 | 37.3 | |||||||
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NMF –
| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||||||||
| (in millions) | 2020 | 2019 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||
| Net sales | $ | 1,886 | $ | 2,042 | $ | (156) | (7.6)% | ||||||||||||||||||||||||||||||||||
| Gross profit | 617 | 655 | (38) | (5.8)% | |||||||||||||||||||||||||||||||||||||
| Gross margin | 32.7 | % | 32.1 | % | |||||||||||||||||||||||||||||||||||||
| Operating income (loss) | (1,408) | 12 | (1,420) | NM | |||||||||||||||||||||||||||||||||||||
| Operating margin | (74.7) | % | 0.6 | % | |||||||||||||||||||||||||||||||||||||
| Interest expense, net | 63 | 80 | (17) | (21.3)% | |||||||||||||||||||||||||||||||||||||
| Other expense, net | 12 | 26 | (14) | (53.8)% | |||||||||||||||||||||||||||||||||||||
| Loss before income taxes | (1,483) | (94) | (1,389) | NM | |||||||||||||||||||||||||||||||||||||
| Income tax benefit | (204) | (20) | (184) | NM | |||||||||||||||||||||||||||||||||||||
| Income tax rate | 13.8 | % | 21.3 | % | |||||||||||||||||||||||||||||||||||||
| Diluted loss per share - continuing operations | $ | (3.02) | $ | (0.18) | |||||||||||||||||||||||||||||||||||||
| Diluted earnings (loss) per share - discontinued operations | — | (0.18) | |||||||||||||||||||||||||||||||||||||||
| Diluted loss per share - attributable to common shareholders | $ | (3.02) | $ | (0.36) | |||||||||||||||||||||||||||||||||||||
The decrease in net
The decrease in cost of products sold
Changes in foreign currency exchange rates unfavorably impacted gross profit by $11 million, or 2%. As ment
ioned above, the Company has already begun experiencing disruption at certain of its operating facilities, as approximately 20 have been temporarily closed, in line with government guidelines or due to other conditions. TheThe restructuring costsfollows:
| Three Months Ended March 31, | |||||||||||||||||||||||||||||
| 2020 | 2019 | $ Change | |||||||||||||||||||||||||||
| Impairment of goodwill and intangible assets (see Footnote 7) | $ | 1,469 | $ | 63 | $ | 1,406 | |||||||||||||||||||||||
| Restructuring (see Footnote 4) and restructuring-related costs | 6 | 18 | (12) | ||||||||||||||||||||||||||
Consolidated operating income (loss) as a percentage of net sales$12 million in the prior year period. Operating loss for the three months ended March 31, 20192020 included non-cash impairment charges of goodwill and 2018certain indefinite-lived intangible assets of $1.5 billion as compared to $63 million in the prior-year period, which included non-cash impairment charges of goodwill for businesses previously classified as held for sale. Operating income was approximately 0.9% and (1.5%), respectively. The change is primarilyalso unfavorably impacted due to benefits derived from cost savings initiatives and a reductionthe decline in overhead costs,sales mentioned above. This performance was partially offset by continued productivity improvement from various initiatives commenced in the unfavorable impactprior year as well as lower restructuring and restructuring-related charges and lower transaction and related costs associated with the completion of lower sales, inflation related to input costs and tariffs.
The decreasethe Company's Accelerated Transformation Plan in interestthe prior year.
| Three Months Ended March 31, | |||||||||||||||||
| 2020 | 2019 | ||||||||||||||||
| Foreign exchange (gains) losses | $ | 11 | $ | 9 | |||||||||||||
| Fair value equity adjustments (see Footnote 16) | 3 | 17 | |||||||||||||||
| Other gains, net | (2) | — | |||||||||||||||
| $ | 12 | $ | 26 | ||||||||||||||
| Net Sales | Operating Income (Loss) | |||||||||||||||||||||||||||||||
| Three Months Ended March 31, | Three Months Ended March 31, | |||||||||||||||||||||||||||||||
(in millions) | 2019 | 2018 | Increase (Decrease) | % Change | 2019 | 2018 | Increase (Decrease) | % Change | ||||||||||||||||||||||||
Food and Appliances | $ | 504.1 | $ | 534.2 | $ | (30.1 | ) | (5.6 | )% | $ | 9.3 | $ | 13.4 | $ | (4.1 | ) | (30.6 | )% | ||||||||||||||
Home and Outdoor Living | 626.6 | 669.7 | (43.1 | ) | (6.4 | ) | (1.5 | ) | 7.8 | (9.3 | ) | (119.2 | ) | |||||||||||||||||||
Learning and Development | 581.4 | 607.0 | (25.6 | ) | (4.2 | ) | 88.5 | 66.2 | 22.3 | 33.7 | ||||||||||||||||||||||
Other | — | 0.6 | (0.6 | ) | NMF | — | 0.9 | (0.9 | ) | (100.0 | ) | |||||||||||||||||||||
Corporate | — | — | — | — | (70.4 | ) | (109.3 | ) | 38.9 | 35.6 | ||||||||||||||||||||||
Restructuring | — | — | — | — | (10.9 | ) | (5.4 | ) | (5.5 | ) | (101.9 | ) | ||||||||||||||||||||
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| $ | 1,712.1 | $ | 1,811.5 | $ | (99.4 | ) | (5.5 | ) | $ | 15.0 | $ | (26.4 | ) | $ | 41.4 | 156.8 | ||||||||||||||||
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Food
| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||||||||
| (in millions) | 2020 | 2019 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||
| Net sales | $ | 291 | $ | 330 | $ | (39) | (11.8)% | ||||||||||||||||||||||||||||||||||
| Operating loss | (308) | (4) | (304) | NM | |||||||||||||||||||||||||||||||||||||
| Operating margin | (105.8) | % | (1.2) | % | |||||||||||||||||||||||||||||||||||||
| Notable items impacting operating loss comparability: | |||||||||||||||||||||||||||||||||||||||||
| Impairment of goodwill and other intangible assets (See Footnote 7) | $ | 299 | $ | — | |||||||||||||||||||||||||||||||||||||
The decrease in and Cookware net sales for the three months ended March 31, 2019 was2020 decreased 12%, primarily due to lower promotional activity, unfavorable changesthe temporary closures of department and specialty stores in North America and EMEA, as well as the impact resulting from government imposed country-wide shutdowns, notably in Latin America, as a result of the ongoing COVID-19 pandemic. The Company anticipates such downward trend in net sales will worsen sequentially in the second quarter and potentially beyond. The decline in net sales also includes the continued loss in domestic market share in North America for certain appliance categories driven by the success of newly launched competitive products. Changes in foreign currency and weaknessunfavorably impacted net sales by $11 million, or 4%.
certain indefinite-lived intangible assets. Operating income (loss) as a percentagewas also unfavorably impacted due to the decline in sales mentioned above. See Footnote 7 of the Notes to the Unaudited Condensed Consolidated Financial Statements and Significant Accounting Policies and Critical Estimates for information.
| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||||||||
| (in millions) | 2020 | 2019 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||
| Net sales | $ | 520 | $ | 504 | $ | 16 | 3.2% | ||||||||||||||||||||||||||||||||||
| Operating income | 84 | 1 | 83 | NM | |||||||||||||||||||||||||||||||||||||
| Operating margin | 16.2 | % | 0.2 | % | |||||||||||||||||||||||||||||||||||||
| Notable items impacting operating income comparability: | |||||||||||||||||||||||||||||||||||||||||
| Impairment of goodwill (See Footnote 7) | $ | — | $ | 63 | |||||||||||||||||||||||||||||||||||||
the carrying values of Mapa/Spontex and Quickie while these businesses were classified as held for sale. In addition, manufacturing facilities for this segment in New Zealand, France and Malaysia have been temporarily closed as a result of the COVID-19 pandemic, which the Company anticipates will continue to impact the segment's performance through the second quarter of 2020.
The decrease in
| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||||||||
| (in millions) | 2020 | 2019 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||
| Net sales | $ | 547 | $ | 627 | $ | (80) | (12.8)% | ||||||||||||||||||||||||||||||||||
| Operating loss | (1,121) | (2) | (1,119) | NM | |||||||||||||||||||||||||||||||||||||
| Operating margin | (204.9) | % | (0.3) | % | |||||||||||||||||||||||||||||||||||||
| Notable items impacting operating loss comparability: | |||||||||||||||||||||||||||||||||||||||||
| Impairment of intangible assets (See Footnote 7) | $ | 1,092 | $ | — | |||||||||||||||||||||||||||||||||||||
stores within our Home Fragrance business. Changes in foreign currency unfavorably impacted net sales by $5 million, or 1%.
| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||||||||
| (in millions) | 2020 | 2019 | $ Change | % Change | |||||||||||||||||||||||||||||||||||||
| Net sales | $ | 528 | $ | 581 | $ | (53) | (9.1)% | ||||||||||||||||||||||||||||||||||
| Operating income | 5 | 89 | (84) | (94.4)% | |||||||||||||||||||||||||||||||||||||
| Operating margin | 0.9 | % | 15.3 | % | |||||||||||||||||||||||||||||||||||||
| Notable items impacting operating income comparability: | |||||||||||||||||||||||||||||||||||||||||
| Impairment of intangible assets (See Footnote 7) | $ | 78 | $ | — | |||||||||||||||||||||||||||||||||||||
Learningdemand in the Baby business unit. Given adverse changes in shifting consumer demands late in the first quarter and Development
The decreasecontinuing into the second quarter, the Company anticipates net sales to decline in the Baby business unit in the second quarter of 2020. Changes in foreign currency unfavorably impacted net sales by $7 million, or 1%.
Operating income (loss) as a percentage of net sales for the three months ended March 31, 2019 and 2018 was approximately 15.2% and 10.9%, respectively. The increase was due to a decrease in SG&A and productivity savings, partially offset by the gross profit impact of lower salesthe closures of its operating facilities. However, such actions may not be sufficient to mitigate the entire impact. The Company will continue to monitor developments, including government requirements and a slight decrease in gross profit margin.
recommendations to evaluate possible further cessation or extensions of its operations. See Footnote 7 of the Notes to the Unaudited Condensed Consolidated Financial Statements and Significant Accounting Policies and Critical Accounting Estimates for further information.
Cash and cash equivalents increased (decreased) as follows for the three months ended March 31, 20192020 and 20182019 (in millions):
Continuing Operations | 2019 | 2018 | Increase (Decrease) | |||||||||
Cash used in operating activities | $ | (212.3 | ) | $ | (437.6 | ) | $ | 225.3 | ||||
Cash used in investing activities | (63.8 | ) | (69.6 | ) | 5.8 | |||||||
Cash provided by financing activities | 145.6 | 474.9 | (329.3 | ) | ||||||||
Discontinued Operations | ||||||||||||
Cash provided by operating activities | $ | 11.9 | $ | 35.9 | $ | (24.0 | ) | |||||
Cash used in investing activities | (11.9 | ) | (35.7 | ) | 23.8 | |||||||
Cash used in financing activities | — | (0.2 | ) | 0.2 | ||||||||
Total Company | ||||||||||||
Cash used in operating activities | $ | (200.4 | ) | $ | (401.7 | ) | $ | 201.3 | ||||
Cash used in investing activities | (75.7 | ) | (105.3 | ) | 29.6 | |||||||
Cash provided by financing activities | 145.6 | 474.7 | (329.1 | ) | ||||||||
Currency effect on cash and cash equivalents | (1.1 | ) | 5.6 | (6.7 | ) | |||||||
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Decrease in cash and cash equivalents | $ | (131.6 | ) | $ | (26.7 | ) | $ | (104.9 | ) | |||
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| 2020 | 2019 | Increase (Decrease) | |||||||||||||||
| Cash provided by (used in) operating activities | $ | 23 | $ | (200) | $ | 223 | |||||||||||
| Cash used in investing activities | (56) | (76) | 20 | ||||||||||||||
| Cash provided by financing activities | 173 | 145 | 28 | ||||||||||||||
| Exchange rate effect on cash, cash equivalents and restricted cash | (24) | (1) | (23) | ||||||||||||||
| Increase (decrease) in cash, cash equivalents and restricted cash | $ | 116 | $ | (132) | $ | 248 | |||||||||||
in the current period. See Capital Resources for further information.
Activitie
sCash Flows from Financing Activities
The change in net cash provided by financing activities from continuing operations was primarily due2019.
CAPITAL RESOURCES
Theextinguishment, the Company maintains arecorded an immaterial loss.
Statement of Cash Flows. The Company records the discount as other expense (income), net in the Condensed Consolidated Statement of Operations.
certain customer receivables and to remove an originator from the Securitization Facility.
At March 31, 2018, there were approximately 2.5 million shares2020.
value of their shares, plus interest accruing from the date of the Jarden Acquisition, payable in cash. However, it is possible that the Company could issue a consent to or reach agreement with one or more of these shareholders resulting in the issuance of Company shares (in lieu of or along with the payment of cash) in settlement of the dissenters’ claims. (See Footnote 18 of the Notes to Condensed Consolidated Financial Statements). At March 31, 2019, the Company has accrued approximately $171 million of unpaid consideration related to these former shares of Jarden common stock.
Subsequent Events
On May 1, 2019, the Company completed the sales of its Process Solutions and Rexair businesses for approximately $735 million in the aggregate, subject to customary working capital and other post-closing adjustments. The Company used some of the cash proceeds received on disposal to pay down short term debt including approximately $269 million outstanding at March 31, 2019 under the Company’s Securitization Facility.
Risk Management
effectiveness of these contracts.
| March 31, 2019 | ||||
| Asset (Liability) | ||||
Derivatives designated as effective hedges: | ||||
Cash flow hedges: | ||||
Foreign currency contracts | $ | 4.3 | ||
Fair value hedges: | ||||
Interest rate swaps | (6.0 | ) | ||
Derivatives not designated as effective hedges: | ||||
Foreign currency contracts | 0.4 | |||
Commodity contracts | (1.3 | ) | ||
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Total | $ | (2.6 | ) | |
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Forward-Looking Statements
Forward-Looking Statements
Forward-looking statements in this Quarterly Report on Form10-Q (this “Quarterly Report”)
| March 31, 2020 | |||||
| Asset (Liability) | |||||
| Derivatives designated as effective hedges: | |||||
| Cash flow hedges: | |||||
| Foreign currency contracts | $ | 21 | |||
| Fair value hedges: | |||||
| Interest rate swaps | 8 | ||||
| Net investment hedges: | |||||
| Cross-currency swaps | 21 | ||||
| Derivatives not designated as effective hedges: | |||||
| Foreign currency contracts | 16 | ||||
| Total | $ | 66 | |||
the Company’s dependence on the strength of retail, commercial and industrial sectors of the economy in various parts of the world;
competition with other manufacturers and distributors of consumer products;
major retailers’ strong bargaining power and consolidation of our customers;
the Company’s ability to improve productivity, reduce complexity and streamline operations;
future events that could adversely affect the value of our assets and/or stock price andestimated fair values. Changes in business conditions could potentially require additional impairment charges;
the Company’s abilityadjustments to remediate the material weakness in our internal control over financial reporting and maintain effective internal control reporting;
the Company’s ability to develop innovative new products, to develop, maintain and strengthen end-user brands and to realize the benefits of increased advertising and promotion spend;
risks related to our substantial indebtedness, a potential increase in interest rates or changes in our credit ratings;
the Company’s ability to effectively accelerate our transformation plan and to execute our divestitures of the remaining assets held for sale;
the Company’s ability to complete planned acquisitions and divestitures, to integrate acquisitions and to offset unexpected costs or expenses associated with acquisitions or dispositions;
changes in the prices of raw materials and sourced products and our ability to obtain raw materials and sourced products in a timely manner;
the risks inherent to our foreign operations, including foreign exchange fluctuations, exchange controls and pricing restrictions;
a failure of one of our key information technology systems, networks, processes or related controls or those of our service providers;
the impact of United States and foreign regulations on our operations, including the escalation of tariffs on imports into the U.S. and exports to Canada, China and the European Union and environmental remediation costs;
the potential inability to attract, retain and motivate key employees;
the resolution of tax contingencies resulting in additional tax liabilities;
product liability, product recalls or related regulatory actions;
the Company’s ability to protect intellectual property rights;
significant increases in the funding obligations related to our pension plans; and
other factors listed from time to time in our filings with the Securities and Exchange Commission, including, but not limited to, our Annual Report on Form 10-K.
The information contained in this Report is as of the date indicated. The Company assumes no obligation to update any forward-looking statements contained in this Report asAs a result of new information or future events or developments.the impairment testing performed in connection with the COVID-19 global pandemic triggering event, the Company determined that certain of its indefinite-lived intangible assets in the Appliances and Cookware, Home and Outdoor Living and Learning and Development segments were impaired. During the three months ended March 31, 2020, the Company recorded an aggregate non-cash charge of $1.3 billion to reflect impairment of these indefinite-lived trade names as their carrying values exceeded their fair values.
| Calendar Month | Total Number of Shares Purchased (2) | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) | Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) | |||||||||||||||||||
| January | — | $ | — | — | $ | — | |||||||||||||||||
| February | 291,310 | 20.04 | — | — | |||||||||||||||||||
| March | — | — | — | — | |||||||||||||||||||
| Total | 291,310 | $ | 20.04 | — | |||||||||||||||||||
December 31, 2018.
Commission’sSEC’s rules and forms, and that such information is accumulated and communicated to management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating such controls and procedures, the Company recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.hashave evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this Quarterly Report. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are not effective as ofat March 31 2019,2020, due to the material weakness in internal control over financial reporting described below.a material weaknessweaknesses in our internal control over financial reporting as disclosed in Management’s Assessment ofAnnual Report on Internal Control over Financial Reporting in Item 9A., Controls and Procedures, of our Annual Report onForm 10-K for the year ended December 31, 20182019 (the“Form “Form 10-K”) in that the Company didhas not designdesigned and maintainmaintained effective controls over the accounting for the impact of the divestitures. Specifically, the Company did not design and maintain effective controls to ensure that deferred taxes were included completely and accurately in the carrying values of assets held for sale and that the intraperiod tax allocation between continuing and discontinued operations was accurate. In addition, the Company did not design and maintain effective controls to ensure that the current and noncurrent classification of assets and liabilities held for sale was accurate.assessmentstests prior to filing the 2018 Form 10-K.thisthe material weakness,weaknesses, management concluded that the Company did not maintain effective internal control over financial reporting as ofat March 31, 2019.2020.
Remediation Plan
enhancing
supplementing•Supplemented the review of deferred tax balances by legal entity and account to ensure proper presentation for financial
enhancing•Enhanced the review of the intraperiod tax allocation between continuing and discontinued operations;
enhancing•Enhanced the review and approval process for the underlying data utilized in determining the estimated fair value and expected form of sale reflected in the Company’s impairment assessment.
The
appropriate.
There have been no material changesourthis report, you should carefully consider the risk set forth below and the risk factors from those discloseddescribed in Part I, Item 1A.1A of the Company’sCompany's Annual Report on Form10-K for the fiscal year ended December 31, 2018.2019, which could materially affect our business, liquidity, financial condition or future results. The risk described below, and the risks described in our 2019 Annual Report on Form 10-K are not the only risks the Company faces. Additional risks and uncertainties not currently known or that the Company currently deems to be immaterial also may materially and adversely affect its business, liquidity, financial condition or operating results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
The following table provides information about the Company’s purchases of equity securities during the three months ended March 31, 2019:
Calendar Month | Total Number of Shares Purchased (2) | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) | Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) | ||||||||||||
January | — | $ | — | — | $ | 2,096,216,000 | ||||||||||
February | 131,469 | 21.64 | — | $ | 2,096,216,000 | |||||||||||
March | 4,656 | 21.46 | — | $ | 2,096,216,000 | |||||||||||
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Total | 136,125 | $ | 21.63 | — | ||||||||||||
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*Filed herewith†Represents management contracts and compensatory plans and arrangements.
* Filed herewith
| NEWELL BRANDS INC. | ||||||||||||||||
Registrant | ||||||||||||||||
| Date: | May | 1, 2020 | /s/ Christopher H. Peterson | |||||||||||||
| Christopher H. Peterson | ||||||||||||||||
| Date: | May | 1, 2020 | /s/ Robert A. Schmidt | |||||||||||||
| Robert A. Schmidt | ||||||||||||||||
| Senior Vice President, Chief Accounting Officer | ||||||||||||||||