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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
for the Quarterly Period Ended March 31, 2022
Commission File Number 1-9608

NEWELL BRANDS INC.
(Exact name of registrant as specified in its charter)
Delaware 36-3514169
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
6655 Peachtree Dunwoody Road,
Atlanta, Georgia 30328
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (770) 418-7000
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS TRADING SYMBOL NAME OF EXCHANGE ON WHICH REGISTERED
Common stock, $1 par value per share NWL Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act:    None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large Accelerated Filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 
Number of shares of common stock outstanding (net of treasury shares) as of April 25, 2022: 413.5 million.




1

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NEWELL BRANDS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Amounts in millions, except per share data)
Three Months Ended
 March 31,
2022 2021
Net sales $ 2,388  $ 2,288 
Cost of products sold 1,648  1,557 
Gross profit 740  731 
Selling, general and administrative expenses 518  534 
Restructuring costs, net
Operating income 217  192 
Non-operating expenses:
Interest expense, net 59  67 
Other income, net (124) (1)
Income before income taxes 282  126 
Income tax provision 48  37 
Net income $ 234  $ 89 
Weighted average common shares outstanding:
Basic 421.9  424.9 
Diluted 424.7  427.6 
Earnings per share:
Basic $ 0.55  $ 0.21 
Diluted $ 0.55  $ 0.21 
See Notes to Condensed Consolidated Financial Statements (Unaudited).
2

NEWELL BRANDS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
(Amounts in millions)
Three Months Ended
March 31,
2022 2021
Comprehensive income (loss):
Net income $ 234  $ 89 
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments 23  (44)
Pension and postretirement costs
Derivative financial instruments — 
Total other comprehensive income (loss), net of tax 28  (34)
Comprehensive income 262  55 
Total comprehensive loss attributable to noncontrolling interests —  (1)
Total comprehensive income attributable to parent $ 262  $ 56 
See Notes to Condensed Consolidated Financial Statements (Unaudited).
3

NEWELL BRANDS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Amounts in millions, except par values)
March 31,
2022
December 31,
2021
Assets:
Cash and cash equivalents $ 344  $ 440 
Accounts receivable, net 1,421  1,500
Inventories 2,297  1,997
Prepaid expenses and other current assets 349  325
Total current assets 4,411 4,262
Property, plant and equipment, net 1,144  1,204
Operating lease assets 595  558
Goodwill 3,486  3,504
Other intangible assets, net 3,046  3,370
Deferred income taxes 797  814
Other assets 725  467
Total assets $ 14,204  $ 14,179 
Liabilities:
Accounts payable $ 1,651  $ 1,680 
Accrued compensation 154  270
Other accrued liabilities 1,375  1,364
Short-term debt and current portion of long-term debt 3
Total current liabilities 3,183 3,317
Long-term debt 4,880  4,883
Deferred income taxes 720  405
Operating lease liabilities 531  500
Other noncurrent liabilities 910  983
Total liabilities 10,224 10,088
Commitments and contingencies (Footnote 17)
Stockholders’ equity:
Preferred stock (10.0 authorized shares, $1.00 par value, no shares issued at March 31, 2022 and December 31, 2021)
—  — 
Common stock (800.0 authorized shares, $1.00 par value, 440.8 shares and 450.0 shares issued at March 31, 2022 and December 31, 2021, respectively)
441  450 
Treasury stock, at cost (25.0 shares and 24.5 shares at March 31, 2022 and December 31, 2021, respectively)
(623) (609)
Additional paid-in capital 7,384  7,734 
Retained deficit (2,368) (2,602)
Accumulated other comprehensive loss (854) (882)
Total stockholders’ equity 3,980  4,091 
Total liabilities and stockholders’ equity $ 14,204  $ 14,179 
See Notes to Condensed Consolidated Financial Statements (Unaudited).
4

NEWELL BRANDS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Amounts in millions)
Three Months Ended
March 31,
2022 2021
Cash flows from operating activities:
Net income $ 234  $ 89 
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization 76  86 
Gain from sale of business (130) — 
Deferred income taxes 326 
Stock based compensation expense 14  14 
Other, net (2) — 
Changes in operating accounts excluding the effects of divestiture:
Accounts receivable 14  122 
Inventories (403) (283)
Accounts payable 25  (18)
Accrued liabilities and other (426) (36)
Net cash used in operating activities (272) (25)
Cash flows from investing activities:
Proceeds from sale of divested business 620  — 
Capital expenditures (70) (54)
Other investing activities, net — 
Net cash provided by (used in) investing activities 559  (54)
Cash flows from financing activities:
Payments on current portion of long-term debt (1) (94)
Payments on long-term debt —  (6)
Repurchase of shares of common stock (275) — 
Cash dividends (100) (100)
Equity compensation activity and other, net (17) (39)
Net cash used in financing activities (393) (239)
Exchange rate effect on cash, cash equivalents and restricted cash (14)
Decrease in cash, cash equivalents and restricted cash (98) (332)
Cash, cash equivalents and restricted cash at beginning of period 477  1,021 
Cash, cash equivalents and restricted cash at end of period $ 379  $ 689 
Supplemental disclosures:
Restricted cash at beginning of period $ 37  $ 40 
Restricted cash at end of period 35 
See Notes to Condensed Consolidated Financial Statements (Unaudited).
5

NEWELL BRANDS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)
(Amounts in millions)
Common
Stock
Treasury
Stock
Additional Paid-In Capital Retained Earnings (Deficit) Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity
Balance at December 31, 2021 $ 450  $ (609) $ 7,734  $ (2,602) $ (882) $ 4,091 
Comprehensive income —  —  —  234  28  262 
Dividends declared on common stock - $0.23 per share
—  —  (97) —  —  (97)
Equity compensation, net of tax (14) 12  —  —  — 
Common stock purchased and retired (11) —  (264) —  —  (275)
Other —  —  (1) —  —  (1)
Balance at March 31, 2022 $ 441  $ (623) $ 7,384  $ (2,368) $ (854) $ 3,980 

Common
Stock
Treasury
Stock
Additional Paid-In Capital Retained Earnings (Deficit) Accumulated Other Comprehensive Loss Stockholders' Equity Attributable to Parent Noncontrolling Interests Total Stockholders' Equity
Balance at December 31, 2020 $ 448  $ (598) $ 8,078  $ (3,174) $ (880) $ 3,874  $ 26  $ 3,900 
Comprehensive income (loss) —  —  —  89  (32) 57  (2) 55 
Dividends declared on common stock - $0.23 per share
—  —  (101) —  —  (101) —  (101)
Equity compensation, net of tax (10) 16  —  —  — 
Other changes attributable to noncontrolling interests —  —  —  —  (2) (2) (1)
Balance at March 31, 2021 $ 450  $ (608) $ 7,993  $ (3,085) $ (914) $ 3,836  $ 25  $ 3,861 
See Notes to Condensed Consolidated Financial Statements (Unaudited).
6

NEWELL BRANDS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Footnote 1 — Basis of Presentation and Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements of Newell Brands Inc. (collectively with its subsidiaries, the “Company”) have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) and do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. In the opinion of management, the unaudited condensed consolidated financial statements include all adjustments (including normal recurring accruals) considered necessary for a fair statement of the financial position and the results of operations of the Company. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements, and the footnotes thereto, included in the Company’s most recent Annual Report on Form 10-K. The Condensed Consolidated Balance Sheet at December 31, 2021 has been derived from the audited financial statements as of that date, but it does not include all the information and footnotes required by U.S. GAAP for a complete financial statement.

On March 31, 2022, the Company sold its Connected Home & Security (“CH&S”) business unit to Resideo Technologies, Inc. See Footnotes 2 and 16 for further information.

Use of Estimates and Risks and Uncertainty of Coronavirus (COVID-19)

Since early 2020, the COVID-19 pandemic resulted in various federal, state and local governments, as well as private entities, mandating restrictions on travel and public gatherings, closure of non-essential commerce, stay at home orders and quarantining of people to limit exposure to the virus. Although restrictions have eased since the first quarter of 2021 in certain areas, the Company's global operations, similar to those of many large, multi-national corporations, were adversely impacted by the COVID-19 pandemic.

The extent of the impact of the COVID-19 pandemic to the Company's future sales, operating results, cash flows, liquidity and financial condition continues to be driven by numerous evolving factors that the Company cannot reasonably predict and which will vary by jurisdiction and market, including the severity and duration of the pandemic, the emergence of new strains and variants of the coronavirus, the likelihood of a resurgence of positive cases, the development and availability of effective treatments and vaccines, especially in areas where conditions have recently worsened and work restrictions, operational or travel bans have been reinstituted, the rate at which vaccines are administered to the general public, the timing and amount of fiscal stimulus and relief programs packages that are available to the general public, the availability and prices of supply chain resources, including materials, products and transportation; and changes in consumer demand patterns for the Company's products as the impact of the global pandemic lessens. These primary drivers are beyond the Company's knowledge and control, and as a result, at this time it is difficult to reasonably predict the cumulative impact, both in terms of severity and duration, COVID-19 will have on its future sales, operating results, cash flows and financial condition.

Management’s application of U.S. GAAP in preparing the Company's consolidated financial statements requires the pervasive use of estimates and assumptions. As discussed above, the world continues to be impacted by the COVID-19 pandemic which has required greater use of estimates and assumptions in the preparation of the consolidated financial statements, more specifically, those estimates and assumptions utilized in the Company’s forecasted cash flows that form the basis in developing the fair values utilized in its impairment assessments as well as its annual effective tax rate. These estimates also include assumptions as to the duration and severity of the pandemic, timing and amount of demand shifts amongst sales channels, workforce availability and supply chain continuity. Although management has made its best estimates based upon current information, actual results could materially differ from those estimates and may require future changes to such estimates and assumptions. If so, the Company may be subject to future incremental impairment charges as well as changes to recorded reserves and valuations.

Seasonal Variations

Sales of the Company’s products tend to be seasonal, with sales, operating income and operating cash flow in the first quarter generally lower than any other quarter during the year, driven principally by reduced volume and the mix of products sold in the first quarter. The seasonality of the Company’s sales volume combined with the accounting for fixed costs, such as depreciation, amortization, rent, personnel costs and interest expense, impacts the Company’s results on a quarterly basis. In addition, the Company typically tends to generate the majority of its operating cash flow in the third and fourth quarters of the year due to seasonal variations in operating results, the timing of annual performance-based compensation payments, customer program payments, working capital requirements and credit terms provided to customers. Accordingly, the Company’s results of
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operations for the three months ended March 31, 2022 may not necessarily be indicative of the results that may be expected for the year ending December 31, 2022.
The Company's sales and operating results, previously disrupted by the COVID-19 pandemic, reverted back to historical patterns in 2021, however, uncertainty still remains over the volatility and direction of future consumer demand patterns.

Recent Accounting Pronouncements

Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification. The Company considers the applicability and impact of all ASUs.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” In January 2021, the FASB clarified the scope of this guidance with the issuance of ASU 2021-01, Reference Rate Reform: Scope. ASU 2020-04 provides optional expedients and exceptions to account for contracts, hedging relationships and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate if certain criteria are met. ASU 2020-04 may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company is currently evaluating the potential effects of the adoption of ASU 2020-04.

Sales of Accounts Receivables

Factored receivables at March 31, 2022 associated with the Company's existing factoring agreement (the “Customer Receivables Purchase Agreement”) were approximately $535 million, an increase of approximately $35 million from December 31, 2021. Transactions under this agreement are accounted for as sales of accounts receivable, and the receivables sold are removed from the Condensed Consolidated Balance Sheet at the time of the sales transaction. The Company classifies the proceeds received from the sales of accounts receivable as an operating cash flow in the Condensed Consolidated Statement of Cash Flows. The Company records the discount as other income, net in the Condensed Consolidated Statement of Operations and collections of accounts receivables not yet submitted to the financial institution as a financing cash flow.

Footnote 2 — Divestiture Activity

On March 31, 2022, the Company sold its CH&S business unit to Resideo Technologies, Inc., for approximately $593 million, subject to customary working capital and other post-closing adjustments. As a result, the Company recorded a pretax gain of $130 million, which was included in other income, net in its Condensed Consolidated Statements of Operations.

Footnote 3 — Accumulated Other Comprehensive Income (Loss)

The following table displays the changes in Accumulated Other Comprehensive Income (Loss) (“AOCL”) by component, net of tax, for the three months ended March 31, 2022 (in millions):

Cumulative
Translation
Adjustment
Pension and 
Postretirement
Costs
Derivative
Financial
Instruments
AOCL
Balance at December 31, 2021 $ (575) $ (292) $ (15) $ (882)
Other comprehensive income (loss) before reclassifications 17  (1) 17 
Amounts reclassified to earnings 11 
Net current period other comprehensive income 23  —  28 
Balance at March 31, 2022 $ (552) $ (287) $ (15) $ (854)

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Reclassifications from AOCL to the results of operations for the three months ended March 31, 2022 and 2021 were pretax expense of (in millions):

Three Months Ended
 March 31,
2022 2021
Cumulative translation adjustment (1)
$ $ — 
Pension and postretirement benefit plans (2)
Derivative financial instruments (3)

(1)See Footnote 2 for further information.
(2)See Footnote 11 for further information.
(3)See Footnote 10 for further information.

The income tax provision (benefit) allocated to the components of AOCL for the periods indicated are as follows (in millions):

Three Months Ended
 March 31,
2022 2021
Foreign currency translation adjustments $ $ 12 
Pension and postretirement benefit costs — 
Derivative financial instruments (1)
Income tax provision related to AOCL $   $ 15 


Footnote 4 — Restructuring Costs

Restructuring costs, net incurred by reportable business segments for all restructuring activities for the periods indicated are as follows (in millions):

Three Months Ended
 March 31,
2022 2021
Commercial Solutions $ $ — 
Home Appliances
Home Solutions
Learning and Development
Outdoor and Recreation — 
$ 5  $ 5 

Accrued restructuring costs activity for the three months ended March 31, 2022 are as follows (in millions):
Balance at December 31, 2021 Restructuring
Costs, Net
Payments Balance at
 March 31, 2022
Severance and termination costs $ $ $ (5) $
Contract termination and other costs (2)
$ 10  $ 5  $ (7) $ 8 

2020 Restructuring Plan

The Company’s 2020 restructuring program, which was substantially complete at the end of 2021, was designed to reduce overhead costs, streamline certain underperforming operations and improve future profitability. The restructuring costs, which
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impacted all segments, include employee-related costs such as severance and other termination benefits. During the three months ended March 31, 2021, the Company recorded restructuring charges of $5 million. Any remaining cash payments are expected to be paid within one year of charges incurred.

Other Restructuring and Restructuring-Related Costs

The Company regularly incurs other restructuring and restructuring-related costs in connection with various discrete initiatives, including certain costs associated with Project Ovid. Restructuring-related costs are recorded in cost of products sold and selling, general and administrative expenses (“SG&A”) in the Condensed Consolidated Statements of Operations based on the nature of the underlying costs incurred. During the three months ended March 31, 2022, the Company recorded restructuring charges of $5 million.

Footnote 5 — Inventories
Inventories are comprised of the following at the dates indicated (in millions):
March 31, 2022 December 31, 2021
Raw materials and supplies $ 321  $ 310 
Work-in-process 205  167 
Finished products 1,771  1,520 
$ 2,297  $ 1,997 

Footnote 6 — Property, Plant and Equipment, Net
Property, plant and equipment, net, is comprised of the following at the dates indicated (in millions):
March 31, 2022 December 31, 2021
Land $ 80  $ 82 
Buildings and improvements 636  678 
Machinery and equipment 2,314  2,387 
3,030  3,147 
Less: Accumulated depreciation (1,886) (1,943)
$ 1,144  $ 1,204 

Depreciation expense was $49 million and $52 million for the three months ended March 31, 2022 and 2021, respectively.

During the quarter ended March 31, 2022, the Company took possession of a right of use operating lease asset with future obligations of approximately $64 million.

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Footnote 7 — Goodwill and Other Intangible Assets, Net

Goodwill activity for the three months ended March 31, 2022 is as follows (in millions):
Segments
Net Book Value at December 31, 2021
Foreign
Exchange
Gross
Carrying
Amount
Accumulated
Impairment
Charges
Net Book Value at
March 31, 2022
Commercial Solutions $ 747  $ —  $ 916  $ (169) $ 747 
Home Appliances —  —  569  (569) — 
Home Solutions 164  —  2,567  (2,403) 164 
Learning and Development 2,593  (18) 3,421  (846) 2,575 
Outdoor and Recreation —  —  788  (788) — 
$ 3,504  $ (18) $ 8,261  $ (4,775) $ 3,486 

Other intangible assets, net, are comprised of the following at the dates indicated (in millions):
March 31, 2022 December 31, 2021
Gross
Carrying
Amount
Accumulated Amortization
Net Book
Value
Gross
Carrying
Amount
Accumulated
Amortization
Net Book
Value
Trade names — indefinite life $ 2,028  $ —  $ 2,028  $ 2,219  $ —  $ 2,219 
Trade names — other 165  (72) 93  159  (65) 94 
Capitalized software 581  (461) 120  631  (495) 136 
Patents and intellectual property 22  (15) 22  (14)
Customer relationships and distributor channels 1,082  (284) 798  1,216  (303) 913 
$ 3,878  $ (832) $ 3,046  $ 4,247  $ (877) $ 3,370 

Amortization expense for intangible assets was $27 million and $34 million for the three months ended March 31, 2022 and 2021, respectively.


Footnote 8 — Other Accrued Liabilities
Other accrued liabilities are comprised of the following at the dates indicated (in millions):
March 31, 2022 December 31, 2021
Customer accruals $ 652  $ 715 
Operating lease liabilities 125  122 
Accrued self-insurance liabilities, contingencies and warranty 121  125 
Accrued interest expense 115  56 
Accrued marketing and freight expenses 66  59 
Accrued income taxes 54  43 
Other 242  244 
$ 1,375  $ 1,364 

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Footnote 9 — Debt
Debt is comprised of the following at the dates indicated (in millions):
March 31, 2022 December 31, 2021
3.85% senior notes due 2023
$ 1,087  $ 1,086 
4.00% senior notes due 2024
200  200 
4.875% senior notes due 2025
495  494 
3.90% senior notes due 2025
47  47 
4.20% senior notes due 2026
1,976  1,975 
5.375% senior notes due 2036
417  417 
5.50% senior notes due 2046
658  658 
Other debt
Total debt
4,883  4,886 
Short-term debt and current portion of long-term debt (3) (3)
Long-term debt $ 4,880  $ 4,883 

Senior Notes

On February 11, 2022, S&P Global Inc. (“S&P”) upgraded the Company’s debt rating to “BBB-” from “BB+” as S&P believed the Company has been able to achieve S&P’s target debt level. As a result of this upgrade, the Company is now in a position to access the commercial paper market, up to a maximum of $800 million, provided there is a sufficient amount available for borrowing under the Credit Revolver (defined hereafter). In addition, the interest rate on the relevant senior notes decreased by 25 basis points due to the upgrade, reducing the Company’s interest expense by approximately $10 million on an annualized basis (approximately $8 million in 2022). However, certain of the Company’s outstanding senior notes aggregating to approximately $4.2 billion are still subject to an interest rate adjustment of 25 basis points in connection with the Moody’s Corporation (“Moody’s”) downgraded debt rating in 2020.

Receivables Facility

The Company maintains an Accounts Receivable Securitization Facility (the “Securitization Facility”). The aggregate commitment under the Securitization Facility is $600 million. The Securitization Facility matures in October 2022 and bears interest at a margin over a variable interest rate. The maximum availability under the Securitization Facility fluctuates based on eligible accounts receivable balances. At March 31, 2022, the Company did not have any amounts outstanding under the Securitization Facility.

Revolving Credit Facility

The Company has a $1.25 billion revolving credit facility that matures in December 2023 (the “Credit Revolver”). At March 31, 2022, the Company did not have any amounts outstanding under the Credit Revolver.

Other

The fair value of the Company’s senior notes are based upon prices of similar instruments in the marketplace and are as follows (in millions):
March 31, 2022 December 31, 2021
Fair Value Book Value Fair Value Book Value
Senior notes $ 5,010  $ 4,880  $ 5,477  $ 4,877 

The carrying amounts of all other significant debt approximates fair value.

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Footnote 10 —Derivatives
From time to time, the Company enters into derivative transactions to hedge its exposures to interest rate, foreign currency rate and commodity price fluctuations. The Company does not enter into derivative transactions for trading purposes.
Interest Rate Contracts
The Company manages its fixed and floating rate debt mix using interest rate swaps. The Company may use fixed and floating rate swaps to alter its exposure to the impact of changing interest rates on its consolidated results of operations and future cash outflows for interest. Floating rate swaps would be used, depending on market conditions, to convert the fixed rates of long-term debt into short-term variable rates. Fixed rate swaps would be used to reduce the Company’s risk of the possibility of increased interest costs. The cash paid and received from the settlement of interest rate swaps is included in interest expense.
Fair Value Hedges
At March 31, 2022, the Company had approximately $100 million notional amount of interest rate swaps that exchange a fixed rate of interest for variable rate (LIBOR) of interest plus a weighted average spread. These floating rate swaps are designated as fair value hedges against $100 million of principal on the 4.00% senior notes due 2024 for the remaining life of the note. The effective portion of the fair value gains or losses on these swaps is offset by fair value adjustments in the underlying debt.
Cross-Currency Contracts

The Company uses cross-currency swaps to hedge foreign currency risk on certain financing arrangements. The Company previously entered into three cross-currency swaps, maturing in January 2025, February 2025 and September 2027, respectively, with an aggregate notional amount of $1.3 billion. Each of these cross-currency swaps were designated as net investment hedges of the Company's foreign currency exposure of its net investment in certain Euro-functional currency subsidiaries with Euro-denominated net assets, and the Company pays a fixed rate of Euro-based interest and receives a fixed rate of U.S. dollar interest. The Company has elected the spot method for assessing the effectiveness of these contracts. During the three months ended March 31, 2022 and 2021, the Company recognized income of $5 million and $4 million, respectively, in interest expense, net, related to the portion of cross-currency swaps excluded from hedge effectiveness testing.

Foreign Currency Contracts

The Company uses forward foreign currency contracts to mitigate the foreign currency exchange rate exposure on the cash flows related to forecasted inventory purchases and sales and have maturity dates through December 2022. The derivatives used to hedge these forecasted transactions that meet the criteria for hedge accounting are accounted for as cash flow hedges. The effective portion of the gains or losses on these derivatives is deferred as a component of AOCL until it is recognized in earnings at the same time that the hedged item affects earnings and is included in the same caption in the statements of operations as the underlying hedged item. At March 31, 2022, the Company had approximately $467 million notional amount outstanding of forward foreign currency contracts that are designated as cash flow hedges of forecasted inventory purchases and sales.

The Company also uses foreign currency contracts, primarily forward foreign currency contracts, to mitigate the foreign currency exposure of certain other foreign currency transactions. At March 31, 2022, the Company had approximately $1.2 billion notional amount outstanding of these foreign currency contracts that are not designated as effective hedges for accounting purposes and have maturity dates through December 2022. Fair market value gains or losses are included in the results of operations and are classified in other income, net in the Company's Condensed Consolidated Statement of Operations.

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The following table presents the fair value of derivative financial instruments at the dates indicated (in millions):

Fair Value of Derivatives
Assets (Liabilities)
Balance Sheet Location March 31, 2022 December 31, 2021
Derivatives designated as effective hedges:
Cash Flow Hedges
Foreign currency contracts Prepaid expenses and other current assets $ 10  $ 12 
Foreign currency contracts Other accrued liabilities (6) (2)
Fair Value Hedges
Interest rate swaps Other assets — 
Interest rate swaps Other accrued liabilities (1) — 
Net Investment Hedges
Cross-currency swaps Prepaid expenses and other current assets 15  18 
Cross-currency swaps Other noncurrent liabilities (34) (41)
Derivatives not designated as effective hedges:
Foreign currency contracts Prepaid expenses and other current assets 16 
Foreign currency contracts Other accrued liabilities (21) (14)
Total $ (21) $ (17)

The following table presents gain and (loss) activity (on a pretax basis) related to derivative financial instruments designated or previously designated, as effective hedges (in millions):
Three Months
 Ended
March 31, 2022
Three Months
 Ended
March 31, 2021
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 (1) (2)
Cross-currency swaps
Other income, net —  36  — 
Total $ 3  $ (1) $ 39  $ (4)

At March 31, 2022, net deferred gains of approximately $10 million within AOCL are expected to be reclassified to earnings over the next twelve months.

During the three months ended March 31, 2022 and 2021, the Company recognized expense of $3 million and income of $7 million, respectively, in other income, net, related to derivatives that are not designated as hedging instruments. Gains and losses on these derivatives are mostly offset by foreign currency movement in the underlying exposure.

The Company is not a party to any derivatives that require collateral to be posted prior to settlement.

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Footnote 11 — Employee Benefit and Retirement Plans

The components of pension and postretirement benefit (income) expense for the periods indicated, are as follows (in millions):
Pension Benefits
U.S. International
Three Months Ended March 31,
2022 2021 2022 2021
Service cost $ —  $ —  $ $
Interest cost
Expected return on plan assets (12) (12) (2) (1)
Amortization
Total (income) expense $ (2) $ (2) $ 2  $ 3 
Postretirement Benefits
Three Months Ended
March 31,
2022 2021
Amortization $ (1) $ (1)
Total income $ (1) $ (1)

U.K. Defined Benefit Plan Buy-in

In February 2022, the Company entered into an agreement with an insurance company for a bulk annuity purchase or “buy-in” for one of its U.K. defined benefit pension plans, resulting in an exchange of plan assets for an annuity that matches the plan’s future projected benefit obligations to covered participants. The Company anticipates the “buy-out” for the plan to be completed by the end of 2022 or early 2023. The non-cash settlement charge associated with the transaction is expected to be material to the Company's results of operations.

Footnote 12 — Income Taxes

The Company’s effective income tax rate for the three months ended March 31, 2022 and 2021 were 17.0% and 29.4%, respectively, reflecting an increase in discrete tax benefits and a lower effective income tax rate associated with the divestiture of the CH&S business.

The difference between the U.S. federal statutory income tax rate of 21.0% and the Company’s effective income tax rate for the three months ended March 31, 2022 and 2021 were impacted by a variety of factors, primarily resulting from the geographic mix of where the income was earned as well as certain taxable income inclusion items in the U.S. based on foreign earnings.

The three months ended March 31, 2022 were also impacted by certain discrete items. Income tax expense for the three months ended March 31, 2022 included a discrete benefit of $4 million associated with the approval of certain state tax credits, offset by $14 million of income tax expense related to the divestiture of the CH&S business unit. The three months ended March 31, 2021 were also impacted by $1 million of discrete tax items.

During the three months ended March 31, 2022, the Company amended its 2017 U.S. federal income tax return to carryback foreign tax credits generated in 2018 and capital losses generated in 2018 and 2020. This resulted in an increase in noncurrent income taxes receivable of approximately $261 million, a decrease in income taxes payable of approximately $95 million, and an increase in deferred tax liabilities of approximately $356 million.

The Company’s U.S. federal income tax returns for 2011 to 2015 and 2017 to 2019, as well as certain state and non-U.S. income tax returns for various years, are under examination.

On June 18, 2019, the U.S. Treasury and the Internal Revenue Service (“IRS”) released temporary regulations under IRC Section 245A (“Section 245A”) as enacted by the 2017 U.S. Tax Reform Legislation (“2017 Tax Reform”) and IRC Section 954(c)(6) (the “Temporary Regulations”) to apply retroactively to the date the 2017 Tax Reform was enacted. On August 21, 2020, the U.S.
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Treasury and IRS released finalized versions of the Temporary Regulations (collectively with the Temporary Regulations, the “Regulations”). The Regulations seek to limit the 100% dividends received deduction permitted by Section 245A for certain dividends received from controlled foreign corporations and to limit the applicability of the look-through exception to foreign personal holding company income for certain dividends received from controlled foreign corporations. Before the retroactive application of the Regulations, the Company benefited in 2018 from both the 100% dividends received deduction and the look-through exception to foreign personal holding company income. The Company analyzed the Regulations and concluded the relevant Regulations were not validly issued. Therefore, the Company has not accounted for the effects of the Regulations in its Condensed Consolidated Financial Statements for the period ending March 31, 2022. The Company believes it has strong arguments in favor of its position and believes it has met the more likely than not recognition threshold that its position will be sustained. However, due to the inherent uncertainty involved in challenging the validity of regulations, as well as a potential litigation process, there can be no assurances that the relevant Regulations will be invalidated or that a court of law will rule in favor of the Company. If the Company’s position on the Regulations is not sustained, the Company would be required to recognize an income tax expense of approximately $180 million to $220 million related to an income tax benefit from fiscal year 2018 that was recorded based on regulations in existence at the time. In addition, the Company may be required to pay any applicable interest and penalties. On April 4, 2022, in a case not involving the Company, the United States District Court for the District of Colorado granted the taxpayer's motion for summary judgment that the Temporary Regulations were not validly issued on the basis of improper promulgation. The Company is monitoring the impact of this decision and intends to continue to vigorously defend its position.

Footnote 13 — Earnings Per Share
The computations of the weighted average shares outstanding for the periods indicated are as follows (in millions):
Three Months Ended
 March 31,
2022 2021
Basic weighted average shares outstanding 421.9  424.9 
Dilutive securities 2.8  2.7 
Diluted weighted average shares outstanding 424.7  427.6 
At March 31, 2022 and 2021 dividends and equivalents for share-based awards expected to be forfeited did not have a material impact on net income for basic and diluted earnings per share.

Footnote 14 — Stockholders' Equity and Share-Based Compensation

During the three months ended March 31, 2022, the Company awarded 1.0 million performance-based restricted stock units (“RSUs”), which had an aggregate grant date fair value of $28 million and entitle the recipients to shares of the Company’s common stock primarily at the end of a three-year vesting period. The actual number of shares that will ultimately vest is dependent on the level of achievement of the specified performance conditions.

During the three months ended March 31, 2022, the Company also awarded 0.6 million time-based RSUs with an aggregate grant date fair value of $16 million. These time-based RSUs entitle recipients to shares of the Company’s common stock and primarily vest either at the end of a three-year period or in equal installments over a three-year period.

During the three months ended March 31, 2022, the Company also awarded 2.2 million time-based stock options with an aggregate grant date fair value of $14 million. These stock options entitle recipients to purchase shares of the Company’s common stock at an exercise price equal to the fair market value of the underlying shares as of the grant date and vest in equal installments over a three-year period.

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The weighted average assumptions used to determine the fair value of stock options granted for the three months ended March 31, 2022, is as follows:

Risk-free interest rates 1.9  %
Expected volatility 42.0  %
Expected dividend yield 5.1  %
Expected life (in years) 6
Exercise price $25.86

Share Repurchase Program

On February 6, 2022, the Company's Board of Directors authorized a $375 million Share Repurchase Program (“SRP”), effective immediately through the end of 2022. The Company’s common shares may be purchased by the Company in the open market, in negotiated transactions or in other manners, as permitted by federal securities laws and other legal requirements. On February 25, 2022, the Company repurchased $275 million of its shares of common stock beneficially owned by Carl C. Icahn and certain of his affiliates (collectively, “Icahn Enterprises”), at a purchase price of $25.86 per share, the closing price of the Company's common shares on February 18, 2022. At March 31, 2022, the Company has remaining authority to repurchase approximately $100 million of shares of common stock under the SRP.

Footnote 15 — Fair Value Disclosures
Recurring Fair Value Measurements
The following table presents the Company’s non-pension financial assets and liabilities, which are measured at fair value on a recurring basis (in millions):
March 31, 2022 December 31, 2021
Fair value Asset (Liability) Fair value Asset (Liability)
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Derivatives:
Assets $ —  $ 41  $ —  $ 41  $ —  $ 40  $ —  $ 40 
Liabilities —  (62) —  (62) —  (57) —  (57)
Investment securities, including mutual funds
13  —  —  13  13  —  —  13 

For publicly traded investment securities, including mutual funds, fair value is determined on the basis of quoted market prices and, accordingly, such investments are classified as Level 1. The Company determines the fair value of its derivative instruments using standard pricing models and market-based assumptions for all significant inputs, such as yield curves and quoted spot and forward exchange rates. Accordingly, the Company’s derivative instruments are classified as Level 2.

Financial Instruments

The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable, derivative instruments, notes payable and short and long-term debt. The carrying values for current financial assets and liabilities, including cash and cash equivalents, accounts receivable, accounts payable and short-term debt approximate fair value due to the short maturity of such instruments. The fair values of the Company’s debt and derivative instruments are disclosed in Footnote 9 and Footnote 10, respectively.

Nonrecurring Fair Value Measurements

The Company’s nonfinancial assets, which are measured at fair value on a nonrecurring basis, include property, plant and equipment, goodwill, intangible assets and certain other assets.

In connection with the Company's annual impairment testing at December 1, 2021, a tradename within the Learning and Development segment was fair valued at $47 million on a non-recurring basis.

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Footnote 16 — Segment Information

On March 31, 2022, the Company sold its CH&S business unit to Resideo Technologies, Inc. The results of operations for CH&S continued to be reported in the Condensed Consolidated Statements of Operations as part of the Commercial Solutions segment through March 31, 2022.

The Company's five primary reportable segments are:

Segment Key Brands Description of Primary Products
Commercial Solutions Mapa, Quickie, Rubbermaid Commercial Products and Spontex Commercial cleaning and maintenance solutions; closet and garage organization; hygiene systems and material handling solutions
Home Appliances Calphalon, Crockpot, Mr. Coffee, Oster and Sunbeam Household products, including kitchen appliances
Home
Solutions
Ball(1), Calphalon, Chesapeake Bay Candle, FoodSaver, Rubbermaid, Sistema, WoodWick and Yankee Candle
Food and home storage products; fresh preserving products; vacuum sealing products; gourmet cookware, bakeware and cutlery and home fragrance products
Learning and 
Development
Aprica, Baby Jogger, Dymo, Elmer’s, EXPO, Graco, Mr. Sketch, NUK, Paper Mate, Parker, Prismacolor, Sharpie, Tigex, Waterman and X-Acto Baby gear and infant care products; writing instruments, including markers and highlighters, pens and pencils; art products; activity-based adhesive and cutting products and labeling solutions
Outdoor and Recreation Coleman, Contigo, ExOfficio and Marmot Products for outdoor and outdoor-related activities

(1) nwl-20220331_g1.gif and Ball® TM of Ball Corporation, used under license.

This structure reflects the manner in which the chief operating decision maker (“CODM”) regularly assesses information for decision-making purposes, including the allocation of resources. The Company also provides general corporate services to its segments which is reported as a non-operating segment, Corporate.


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Selected information by segment is presented in the following tables (in millions):

Three Months Ended
 March 31,
2022 2021
 Net sales (1)
Commercial Solutions $ 510  $ 471 
Home Appliances 340  360 
Home Solutions 500  504 
Learning and Development 650  617 
Outdoor and Recreation 388  336 
$ 2,388  $ 2,288 
 Operating income (loss) (2)
Commercial Solutions $ 55  $ 50 
Home Appliances (18)
Home Solutions 61  61 
Learning and Development 130  110 
Outdoor and Recreation 45  15 
Corporate (56) (47)
$ 217  $ 192 
March 31, 2022 December 31, 2021
Segment assets
Commercial Solutions (3)
$ 1,973  $ 2,522 
Home Appliances 1,081  1,055 
Home Solutions 3,130  3,109 
Learning and Development 4,454  4,401 
Outdoor and Recreation 1,029  907 
Corporate 2,537  2,185 
$ 14,204  $ 14,179 
(1)All intercompany transactions have been eliminated.
(2)Operating income (loss) by segment is net sales less cost of products sold, SG&A, restructuring and impairment of goodwill, intangibles and other assets. Certain Corporate expenses of an operational nature are allocated to business segments primarily on a net sales basis. Corporate depreciation and amortization is allocated to the segments on a percentage of net sales basis and included in segment operating income.
(3)The reduction in the Commercial Solutions segment assets is primarily due to the sale of the CH&S business.

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The following tables disaggregates revenue by major product grouping source and geography for the periods indicated (in millions):

Three Months Ended March 31, 2022
Commercial Solutions Home
Appliances
Home
Solutions
Learning and Development Outdoor and Recreation Total
Commercial $ 401  $ —  $ —  $ —  $ —  $ 401 
Connected Home Security 109  —  —  —  —  109 
Home Appliances —  340  —  —  —  340 
Food —  —  302  —  —  302 
Home Fragrance —  —  198  —  —  198 
Baby —  —  —  291  —  291 
Writing —  —  —  359  —  359 
Outdoor and Recreation —  —  —  —  388  388 
Total $ 510  $ 340  $ 500  $ 650  $ 388  $ 2,388 
North America $ 396  $ 178  $ 401  $ 468  $ 210  $ 1,653 
International 114  162  99  182  178  735 
Total $ 510  $ 340  $ 500  $ 650  $ 388  $ 2,388 
Three Months Ended March 31, 2021
Commercial Solutions Home
Appliances
Home
Solutions
Learning and Development Outdoor and Recreation Total
Commercial $ 380  $ —  $ —  $ —  $ —  $ 380 
Connected Home Security 91  —  —  —  —  91 
Home Appliances —  360  —  —  —  360 
Food —  —  274  —  —  274 
Home Fragrance —  —  230  —  —  230 
Baby —  —  —  281  —  281 
Writing —  —  —  336  —  336 
Outdoor and Recreation —  —  —  —  336  336 
Total $ 471  $ 360  $ 504  $ 617  $ 336  $ 2,288 
North America $ 344  $ 195  $ 401  $ 426  $ 177  $ 1,543 
International 127  165  103  191  159  745 
Total $ 471  $ 360  $ 504  $ 617  $ 336  $ 2,288 

Footnote 17 — Litigation and Contingencies

The Company is subject to various claims and lawsuits in the ordinary course of business, including from time to time, contractual disputes, employment and environmental matters, product and general liability claims, claims that the Company has infringed on the intellectual property rights of others, and consumer and employment class actions. Some of the legal proceedings include claims for punitive as well as compensatory damages. In the ordinary course of business, the Company is also subject to legislative requests, regulatory and governmental examinations, information requests and subpoenas, inquiries, investigations, and threatened legal actions and proceedings. In connection with such formal and informal inquiries, the Company receives numerous requests, subpoenas, and orders for documents, testimony and information in connection with various aspects of its activities. The Company previously disclosed that it had received a subpoena and related informal document requests from the SEC primarily relating to its sales practices and certain accounting matters for the time period beginning from January 1, 2016. The Company
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has cooperated with the SEC in connection with its investigation and ongoing requests for documents, testimony and information and intends to continue to do so. The Company cannot predict the timing or outcome of this investigation. Further, on June 30, 2021, the Company received a subpoena from the SEC requesting the production of documents related to its disclosure of the potential impact of the U.S. Treasury regulations described in Footnote 12 - Income Taxes.

Securities Litigation

Certain of the Company’s current and former officers and directors have been named in shareholder derivative lawsuits. On October 29, 2018, a shareholder filed a putative derivative complaint, Streicher v. Polk, et al., in the United States District Court for the District of Delaware (the “Streicher Derivative Action”), purportedly on behalf of the Company against certain of the Company's current and former officers and directors. On October 30, 2018, another shareholder filed a putative derivative complaint, Martindale v. Polk, et al., in the United States District Court for the District of Delaware (the “Martindale Derivative Action”), asserting substantially similar claims purportedly on behalf of the Company against the same defendants. The complaints allege, among other things, violations of the federal securities laws, breaches of fiduciary duties, unjust enrichment, and waste of corporate assets. The factual allegations underlying these claims are similar to the factual allegations made in the In re Newell Brands, Inc. Securities Litigation that was previously pending in the United States District Court for the District of New Jersey. That matter was dismissed by the District Court on January 10, 2020, and the dismissal was affirmed by the United States District Court of Appeals for the Third Circuit on December 1, 2020. The complaints seek damages and restitution for the Company from the individual defendants, the payment of costs and attorneys’ fees, and that the Company be directed to reform certain governance and internal procedures. The Streicher Derivative Action and the Martindale Derivative Action have been consolidated and the case is now known as In re Newell Brands Inc. Derivative Litigation (the “Newell Brands Derivative Action”), which is pending in the United States District Court for the District of Delaware. On March 22, 2021, the United States District Court for the District of Delaware stayed the Newell Brands Derivative Action pending the resolution of any motions for summary judgment filed in Oklahoma Firefighters Pension and Retirement System v. Newell Brands Inc., et al. (described below). On December 30, 2020, two shareholders filed a putative derivative complaint, Weber, et al. v. Polk, et al., in the United States District Court for the District of Delaware (the “Weber Derivative Action”), purportedly on behalf of the Company against certain of the Company’s current and former officers and directors. The complaint in the Weber Derivative Action alleges, among other things, breaches of fiduciary duty and waste of corporate assets. The factual allegations underlying these claims are similar to the factual allegations made in the Newell Brands Derivative Action. On March 19, 2021, the United States District Court for the District of Delaware stayed the Weber Derivative Action pending final disposition of Oklahoma Firefighters Pension and Retirement System v. Newell Brands Inc., et al. (described below).

The Company and certain of its current and former officers and directors have been named as defendants in a putative securities class action lawsuit filed in the Superior Court of New Jersey, Hudson County, on behalf of all persons who acquired Company common stock pursuant or traceable to the S-4 registration statement and prospectus issued in connection with the April 2016 acquisition of Jarden (the “Registration Statement”). The action was filed on September 6, 2018 and is captioned Oklahoma Firefighters Pension and Retirement System v. Newell Brands Inc., et al., Civil Action No. HUD-L-003492-18. The operative complaint alleges certain violations of the securities laws, including, among other things, that the defendants made certain materially false and misleading statements and omissions in the Registration Statement regarding the Company’s financial results, trends, and metrics. The plaintiff seeks compensatory damages and attorneys’ fees and costs, among other relief. The Company is currently unable to predict the ultimate timing or outcome of this litigation or reasonably estimate the range of possible losses. The Company maintains insurance intended to cover losses arising out of this litigation up to specified limits (subject to deductibles, coverage limits and other terms and conditions), but any losses may exceed our current coverage levels, which could have an adverse impact on our financial results.

Environmental Matters

The Company is involved in various matters concerning federal and state environmental laws and regulations, including matters in which the Company has been identified by the U.S. Environmental Protection Agency (“U.S. EPA”) and certain state environmental agencies as a potentially responsible party (“PRP”) at contaminated sites under the Comprehensive Environmental Response Compensation and Liability Act (“CERCLA”) and equivalent state laws. In assessing its environmental response costs, the Company has considered several factors, including the extent of the Company’s volumetric contribution at each site relative to that of other PRPs; the kind of waste; the terms of existing cost sharing and other applicable agreements; the financial ability of other PRPs to share in the payment of requisite costs; the Company’s prior experience with similar sites; environmental studies and cost estimates available to the Company; the effects of inflation on cost estimates; and the extent to which the Company’s, and other parties’, status as PRPs is disputed.

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The Company’s estimate of environmental remediation costs associated with these matters at March 31, 2022 was $37 million which is included in other accrued liabilities and other noncurrent liabilities in the Condensed Consolidated Balance Sheets. No insurance recovery was taken into account in determining the Company’s cost estimates or reserves, nor do the Company’s cost estimates or reserves reflect any discounting for present value purposes, except with respect to certain long-term operations and maintenance CERCLA matters. Because of the uncertainties associated with environmental investigations and response activities, the possibility that the Company could be identified as a PRP at sites identified in the future that require the incurrence of environmental response costs and the possibility that sites acquired in business combinations may require environmental response costs, actual costs to be incurred by the Company may vary from the Company’s estimates.

Lower Passaic River Matter

Background

The U.S. EPA has issued General Notice Letters to over 100 entities, including the Company and its subsidiary, Berol Corporation (together, the “Company Parties”), alleging that they are PRPs at the Diamond Alkali Superfund Site (“Site”) pursuant to the CERCLA. The Site is the subject of investigation and remedial activities (the “CERCLA Administrative Actions”) and related settlement negotiations with the U.S. EPA. In addition, the Company Parties are defendants in related litigation, and the Site is also subject to a Natural Resource Damage Assessment.

CERCLA Administrative Actions

The Site is divided into four “operable units,” and the Company Parties have received General Notice Letters in connection with operable unit 2, which comprises the lower 8.3 miles of the Lower Passaic River and its tributaries (“Unit 2”), and operable unit 4, which comprises a 17-mile stretch of the Lower Passaic River and its tributaries (“Unit 4”). Unit 2 is geographically subsumed within Unit 4.

Unit 4 Investigation

The Company received its first general notice letter pertaining to Unit 4 in 2003. Beginning in 2004, the Company Parties, together with numerous other PRPs, entered into several administrative agreements with the U.S. EPA to fund and perform various investigation and clean-up activities in Unit 4. Pursuant to a 2007 Administrative Order on Consent, over 70 PRPs, including the Company Parties, have been performing or funding the remedial investigation and feasibility study for Unit 4. The parties performing the remedial investigation and feasibility study submitted the results of their remedial investigation to the U.S. EPA in July 2019. They also submitted an interim remedy feasibility study focused on the upper 9 miles of Unit 4 in September 2021. Activity under the remedial investigation and feasibility study for Unit 4 is not yet complete and remains underway.

In October 2021, the U.S. EPA issued a Record of Decision for an interim remedy for the upper 9 miles of Unit 4, selecting a combination of dredging and capping as the remedial alternative, which the U.S. EPA estimates will cost $441 million in the aggregate.

Unit 2 Investigation

Concurrent with activities under the remedial investigation and feasibility study for Unit 4, the U.S. EPA performed a Source Control Early Action Focused Feasibility Study for Unit 2, which culminated in a Record of Decision in 2016. The U.S. EPA estimates that the selected remedy for Unit 2 set forth in its Record of Decision will cost $1.4 billion in the aggregate. The U.S. EPA then issued a General Notice Letter for Unit 2 to the Company Parties and over 100 other entities, including those that received a General Notice Letter in connection with Unit 4. The Unit 2 General Notice Letter requested that Occidental Chemical Corporation (“OCC”) perform the remedial design for Unit 2, which OCC subsequently agreed to perform. The General Notice Letter indicated that, following execution of a remedial design consent decree, the U.S. EPA would begin negotiating a remedial action consent decree for Unit 2 with OCC and other major PRPs.

2016 Record of Decision and 2021 Record of Decision Remedy Performance

In March 2022, U.S. EPA issued a Notice of Potential Liability and Notice of Consent Decree Negotiations to OCC and several other entities, excluding the Company Parties, encouraging those parties to finance and perform the remedies selected in the 2016 and 2021 Records of Decision. The U.S. EPA specifically identified OCC and four other companies as “work parties” in connection with Units 2 and 4. The Company Parties were not recipients of this notice and were not identified as work parties.

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The U.S. EPA Settlement

In September 2017, the U.S. EPA announced an allocation process involving roughly 80 Unit 2 General Notice Letter recipients, with the intent of offering cash-out settlements to a number of parties (the “U.S. EPA Settlement”). The PRPs responsible for release of dioxin, furans, and/or polychlorinated biphenyls would be expected to perform the remedial action for Unit 2 and would be excluded from the U.S. EPA Settlement. The allocation process has concluded. In February 2022, the U.S. EPA and certain parties to the allocation, including the Company Parties, reached an agreement in principle concerning a cash-out settlement for both Unit 2 and Unit 4. The agreement in principle remains subject to the negotiation and court entry of a consent decree finalizing the U.S. EPA Settlement.

The OCC Litigation

In June 2018, OCC sued over 100 parties, including the Company Parties, in the U.S. District Court in New Jersey pursuant to CERCLA, requesting cost recovery, contribution, and a declaratory judgement. The defendants, in turn, filed claims against 42 third-party defendants, and filed counterclaims against OCC (collectively, the “OCC Litigation”). The primary focus of the OCC Litigation has been certain past and future costs for investigation, design and remediation of Units 2 and 4. However, OCC has stated that it anticipates asserting claims against defendants regarding Newark Bay, which is also part of the Site, after the U.S. EPA has selected the Newark Bay remedy. OCC has also stated that it may broaden its claims in the future after completion of the Natural Resource Damage Assessment described below.

In a Motion for Stay of Proceedings filed in January 2022, certain defendants and all third-party defendants in the OCC Litigation moved to stay the case for a six-month period to allow the final stage of the parallel allocation proceedings and resulting settlement negotiations in the U.S. EPA Settlement to conclude. The U.S. District Court denied the motion in March 2022.

The Company Parties continue to vigorously defend the OCC Litigation. At this time, the Company cannot predict the eventual outcome.

The Natural Resource Damage Assessment

In 2007, the National Oceanic and Atmospheric Administration (“NOAA”), acting as the lead administrative trustee on behalf of itself and the U.S. Department of the Interior, issued a Notice of Intent to Perform a Natural Resource Damage Assessment to the Company Parties, along with numerous other entities, identifying the recipients as PRPs. The federal trustees (who now include the United States Department of Commerce, represented by NOAA, and the Department of the Interior, represented by the United States Fish and Wildlife Service) are presently undertaking the Natural Resource Damage Assessment.

As of the date of filing of this Quarterly Report, based on the agreement in principle noted above, the Company does not expect that its allocation in the U.S. EPA Settlement relating to Unit 2 and Unit 4, if the settlement is finalized, will be material to the Company. With respect to the OCC Litigation and Natural Resource Damage Assessment, the Company is currently unable to reasonably estimate the range of possible losses.

Based on currently known facts and circumstances, the Company does not believe that the Lower Passaic River matter is reasonably likely to have a material impact on the Company’s results of operations. However, in the event of one or more adverse determinations related to this matter, it is possible that the ultimate liability resulting from this matter and the impact on the Company’s results of operations could be material.

Because of the uncertainties associated with environmental investigations and response activities, the possibility that the Company could be identified as a PRP at sites identified in the future that require the incurrence of environmental response costs and the possibility that sites acquired in business combinations may require environmental response costs, actual costs to be incurred by the Company may vary from the Company’s estimates.

Other Matters

In the normal course of business and as part of its acquisition and divestiture strategy, the Company may provide certain representations and indemnifications related to legal, environmental, product liability, tax or other types of issues. Based on the nature of these representations and indemnifications, it is not possible to predict the maximum potential payments under all of these agreements due to the conditional nature of the Company’s obligations and the unique facts and circumstances involved in each particular agreement. Historically, payments made by the Company under these agreements did not have a material effect on the Company’s business, financial condition or results of operations. In connection with the 2018 sale of The Waddington Group,
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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. In the year ended December 31, 2021 the Company recorded an immaterial reserve to continuing operations in its Consolidated Financial Statements based on its best estimate of probable loss associated with this matter. Further, in connection with the Company’s sale of The United States Playing Card Company (“USPC”), Cartamundi, Inc. and Cartamundi España, S.L., (the “Buyers”) have notified the Company of their contention that certain representations and warranties in the Stock Purchase Agreement, dated June 4, 2019, were inaccurate and/or breached, and have sought indemnification to the extent that the Buyers are required to pay related damages arising out of a third party lawsuit that was recently filed against USPC.

Although management of the Company cannot predict the ultimate outcome of other proceedings with certainty, it believes that the ultimate resolution of the Company’s proceedings, including any amounts it may be required to pay in excess of amounts reserved, will not have a material effect on the Company’s Condensed Consolidated Financial Statements, except as otherwise described in this Footnote 17.

At March 31, 2022, the Company had approximately $48 million in standby letters of credit primarily related to the Company’s self-insurance programs, including workers’ compensation, product liability and medical expenses.


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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of Newell Brands Inc.’s (“Newell Brands,” the “Company,” “we,” “us” or “our”) consolidated financial condition and results of operations. The discussion should be read in conjunction with the accompanying condensed consolidated financial statements and notes thereto.

Forward-Looking Statements

Forward-looking statements in this Report are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements generally can be identified by the use of words such as “intend,” “anticipate,” “believe,” “estimate,” “project,” “target,” “plan,” “expect,” “setting up,” “beginning to,” “will,” “should,” “would,” “could,” “resume,” “are confident that,” “remain optimistic that,” “seek to,” or similar statements. The Company cautions that forward-looking statements are not guarantees because there are inherent difficulties in predicting future results. Actual results may differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results to differ materially from those suggested by the forward-looking statements include, but are not limited to:
the Company's ability to manage the demand, supply and operational challenges with the actual or perceived effects of the COVID-19 pandemic, including as a result of any additional variants of the virus or the efficacy and distribution of vaccines;
the Company’s dependence on the strength of retail and consumer demand, commercial and industrial sectors of the economy in various countries around the world;
competition with other manufacturers and distributors of consumer products;
major retailers’ strong bargaining power and consolidation of the Company’s customers;
changes in the prices and availability of labor, transportation, raw materials and sourced products, including significant inflation, and the Company's ability to obtain them in a timely manner and to offset cost increases through pricing and productivity;
the Company’s ability to improve productivity, reduce complexity and streamline operations;
the cost and outcomes of governmental investigations, inspections, lawsuits, legislative requests or other actions by third parties, including but not limited to those described in Footnote 17 of the Notes to the Unaudited Condensed Consolidated Financial Statements, the potential outcomes of which could exceed policy limits, to the extent insured;
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;
the Company's ability to consistently maintain effective internal control over financial reporting;
risks related to the Company’s substantial indebtedness, potential increases in interest rates or changes in the Company’s credit ratings;
future events that could adversely affect the value of the Company’s assets and/or stock price and require additional impairment charges;
the Company's ability to complete planned divestitures, and other unexpected costs or expenses associated with dispositions;
our ability to effectively execute our turnaround plan;
the risks inherent to the Company’s foreign operations, including currency fluctuations, exchange controls and pricing restrictions;
a failure or breach of one of the Company’s key information technology systems, networks, processes or related controls or those of the Company’s service providers;
the impact of United States and foreign regulations on the Company’s operations, including the impact of tariffs and environmental remediation costs and legislation and regulatory actions related to climate change;
the potential inability to attract, retain and motivate key employees;
changes in tax laws and the resolution of tax contingencies resulting in additional tax liabilities;
product liability, product recalls or related regulatory actions;
the Company’s ability to protect its intellectual property rights;
significant increases in the funding obligations related to the Company’s pension plans; and
other factors listed from time to time in our SEC filings, including but not limited to our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.

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 as a result of new information or future events or developments. In addition, there can be no assurance that the Company has correctly identified and assessed all of the factors affecting the Company or that the publicly available and other information the Company receives with respect to these factors is complete or correct.
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Overview

Newell Brands is a leading global consumer goods company with a strong portfolio of well-known brands, including Rubbermaid, FoodSaver, Calphalon, Sistema, Sharpie, Paper Mate, Dymo, EXPO, Elmer’s, Yankee Candle, Graco, NUK, Rubbermaid Commercial Products, Spontex, Coleman, Campingaz, Contigo, Oster, Sunbeam and Mr. Coffee. Newell Brands' beloved brands enhance and brighten consumers lives at home and outside by creating moments of joy, building confidence and providing peace of mind. The Company sells its products in nearly 200 countries around the world and has operations on the ground in over 40 of these countries, excluding third-party distributors.

Business Strategy

The Company is continuing to execute on its turnaround strategy of building a global, next generation consumer products company that can unleash the full potential of its brands in a fast-moving omni-channel environment. The strategy, developed in 2019, is designed to:

Drive sustainable top line growth by focusing on innovation, sharpening brand positioning, strengthening the international businesses, enhancing digital marketing and omni-channel capabilities, and building customer relationships;
Improve operating margins by driving productivity and overhead savings, while reinvesting in the business;
Accelerate cash conversion cycle by focusing on cash efficiency and improving key working capital metrics;
Strengthen the portfolio by investing in attractive categories that are aligned with its capabilities and strategy and optimizing product mix; and
Strengthen organizational capabilities and employee engagement by building a winning team and focusing the best people on the right things.

The Company is implementing this strategy while addressing key challenges such as shifting consumer preferences and behaviors; a highly competitive operating environment; a rapidly changing retail landscape; continued macroeconomic and geopolitical volatility; significant inflationary and supply chain pressures, and an evolving regulatory landscape. The coronavirus (COVID-19) pandemic and its impact to the Company’s business resulted in the acceleration of the turnaround initiatives in many respects.

Continued execution of these strategic imperatives, in combination with new initiatives aimed to build operational excellence, will better position the Company for long-term sustainable growth. One such initiative that was announced in the third quarter of 2021 is Project Ovid, a multi-year, customer centric supply chain initiative to transform the Company's go-to-market capabilities in the U.S., improve customer service levels and drive operational efficiencies. This initiative is expected to leverage technology to further simplify the organization by harmonizing and automating processes. Project Ovid is designed to optimize the Company’s distribution network by creating a single integrated supply chain from 23 business-unit-centric supply chains. The initiative is intended to reduce administrative complexity, improve inventory and invoicing workflow for our customers and enhance product availability for consumers through omni-channel enablement. This new operating model is also expected to drive efficiencies by better utilizing the Company's transportation and distribution network.
















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Organizational Structure

On March 31, 2022, the Company sold its Connected Home & Security (“CH&S”) business unit to Resideo Technologies, Inc. The results of operations for CH&S continued to be reported in the Condensed Consolidated Statements of Operations as part of the Commercial Solutions segment through March 31, 2022.

The Company's five primary reportable segments are the following:

Segment Key Brands Description of Primary Products
Commercial Solutions Mapa, Quickie, Rubbermaid Commercial Products and Spontex Commercial cleaning and maintenance solutions; closet and garage organization; hygiene systems and material handling solutions
Home Appliances Calphalon, Crockpot, Mr. Coffee, Oster and Sunbeam Household products, including kitchen appliances
Home
Solutions
Ball(1), Calphalon, Chesapeake Bay Candle, FoodSaver, Rubbermaid, Sistema, WoodWick and Yankee Candle
Food and home storage products; fresh preserving products; vacuum sealing products; gourmet cookware, bakeware and cutlery and home fragrance products
Learning and 
Development
Aprica, Baby Jogger, Dymo, Elmer’s, EXPO, Graco, Mr. Sketch, NUK, Paper Mate, Parker, Prismacolor, Sharpie, Tigex, Waterman and X-Acto Baby gear and infant care products; writing instruments, including markers and highlighters, pens and pencils; art products; activity-based adhesive and cutting products and labeling solutions
Outdoor and Recreation Coleman, Contigo, ExOfficio and Marmot Products for outdoor and outdoor-related activities
(1)nwl-20220331_g1.gif and Ball® TM of Ball Corporation, used under license.

This structure reflects the manner in which the chief operating decision maker regularly assesses information for decision-making purposes, including the allocation of resources. The Company also provides general corporate services to its segments which is reported as a non-operating segment, Corporate. See Footnote 16 of the Notes to the Unaudited Condensed Consolidated Financial Statements for further information.

Recent Developments

The COVID-19 pandemic, which began in late 2019, has continued to disrupt the Company’s global operations, similar to those of many large, multi-national corporations in three primary areas:

Supply chain. The Company continues to face significant product, supply and labor shortages, capacity constraints and logistical challenges across its businesses, including port congestion, constrained shipping container availability and delays in carrier pickup, which have negatively impacted the Company's ability to satisfy demand for its products, creating order backlog in a number of categories. The Company also continues to face significantly higher than expected inflation for commodities, including resin and metals, sourced finished goods, transportation and labor, which had a negative high-single-digit-percentage impact to costs of products sold in the first quarter of 2022. These various disruptions are expected to persist, at least in the near-term. To help mitigate the negative impact of inflation to the operating performance of its businesses, the Company has secured selective pricing increases, accelerated productivity initiatives and deployed overhead cost containment efforts.

Retail. While the Company’s largest retail customers experienced a surge in sales as their stores remained open, a number of secondary customers, primarily in the specialty and department store channels, temporarily closed their brick-and-mortar doors in March 2020, and began to reopen in certain regions where conditions improved towards the end of the second quarter of 2020. These dynamics, in combination with some retailers’ prioritization of essential items, have had a meaningful impact on the Company's traditional order patterns. In addition, the Company temporarily closed its Yankee Candle retail stores in North America as of mid-March of 2020 due to COVID-19. These stores reopened by the end of the third quarter of 2020 and have remained open since.
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Consumer demand patterns. During the quarantine phase of the pandemic in 2020, consumer purchasing behavior strongly shifted to certain focused categories. At that time, certain of the Company’s product categories benefited from this shift, primarily in Food, Commercial and Home Appliances. Some of the Company’s other businesses were negatively impacted but experienced a surge in demand post lockdowns, in particular Writing, Baby and Home Fragrance. While the seasonality of the Company's businesses reverted back to historical trends in 2021, uncertainty still remains over the volatility and direction of future consumer demand patterns as certain of its businesses are lapping the prior-year surge in demand.

The Company believes the extent of the impact of the COVID-19 pandemic on the Company's future sales, operating results, cash flows, liquidity and financial condition will continue to be driven by numerous evolving factors that the Company cannot accurately predict and which will vary by jurisdiction and market, including severity and duration of the pandemic, the emergence of new strains and variants of the coronavirus, the likelihood of a resurgence of positive cases or hospitalizations, the development and availability of effective treatments and vaccines, especially in areas where conditions have recently worsened and work restrictions, operational or travel bans have been reinstituted, the rate at which vaccines are administered to the general public, the timing and amount of fiscal stimulus and relief programs packages that may become available to the general public in the future, and any changes in consumer demand patterns for the Company's products as the impact of the global pandemic lessens.

With the spread of new strains and variants of the coronavirus, the Company continues to monitor developments, including government requirements and recommendations at the national, state, and local level on whether to reinstate and/or extend certain initiatives previously implemented to help contain the spread of COVID-19, and the Company has mandated vaccinations for its U.S. professional and office-based employees.

Sale of Connected Home & Security

On March 31, 2022, the Company sold its CH&S business unit to Resideo Technologies, Inc., for approximately $593 million, subject to customary working capital and other post-closing adjustments. As a result, the Company recorded a pretax gain of $130 million, which was included in other income, net in its Condensed Consolidated Statements of Operations.

Share Repurchase Program

On February 6, 2022, the Company's Board of Directors authorized a $375 million Share Repurchase Program (“SRP”), effective immediately through the end of 2022. The Company’s common shares may be purchased by the Company in the open market, in negotiated transactions or in other manners, as permitted by federal securities laws and other legal requirements. On February 25, 2022, the Company repurchased $275 million of its shares of common stock beneficially owned by Carl C. Icahn and certain of his affiliates (collectively, “Icahn Enterprises”), at a purchase price of $25.86 per share, the closing price of the Company's common shares on February 18, 2022. At March 31, 2022, the Company has remaining authority to repurchase approximately $100 million of shares of common stock under the SRP.

Debt Ratings

On February 11, 2022, S&P Global Inc. (“S&P”) upgraded the Company’s debt rating to “BBB-” from “BB+” as S&P believed the Company has been able to achieve S&P’s target debt level. As a result of this upgrade, the Company is now in a position to access the commercial paper market, up to a maximum of $800 million provided there is a sufficient amount available for borrowing under the Company's $1.25 billion revolving credit facility maturing in December 2023 (the “Credit Revolver”). In addition, the interest rate on the relevant senior notes decreased by 25 basis points due to the upgrade, reducing the Company’s interest expense by approximately $10 million on an annualized basis (approximately $8 million in 2022). However, certain of the Company’s outstanding senior notes aggregating to approximately $4.2 billion are still subject to an interest rate adjustment of 25 basis points in connection with the Moody’s Corporation (“Moody’s”) downgraded debt rating in 2020.

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Three Months Ended March 31, 2022 vs. Three Months Ended March 31, 2021

Consolidated Operating Results
Three Months Ended
March 31,
(in millions)
2022
2021
$ Change % Change
Net sales $ 2,388  $ 2,288  $ 100  4.4%
Gross profit 740  731  1.2%
Gross margin 31.0  % 31.9  %
Operating income 217  192  25  13.0%
Operating margin 9.1  % 8.4  %
Interest expense, net 59  67  (8) (11.9)%
Other income, net (124) (1) (123) NM
Income before income taxes 282  126  156  NM
Income tax provision 48  37  11  29.7%
Income tax rate 17.0  % 29.4  %
Net income $ 234  $ 89  $ 145  NM
Diluted earnings per share attributable to common shareholders $ 0.55  $ 0.21 
NM - NOT MEANINGFUL

Net sales increased 4%, driven by growth in the Commercial Solutions, Learning and Development and Outdoor and Recreation segments, partially offset by declines in the Home Appliances and Home Solutions segments, which lapped the prior year impact of a surge in consumer demand. This growth primarily reflects pricing actions by the Company as well as customer inventory replenishment, partially offset by softening consumption in certain categories in the U.S. and certain category exits in the Outdoor and Recreation and Home Appliances segments. As result of the ongoing supply chain constraints, the first quarter results benefited from a shift in customer orders normally placed in the second quarter of the year. Changes in foreign currency unfavorably impacted net sales by $41 million, or 2%.

Gross profit increased slightly compared to prior year. Gross profit margin declined to 31.0% as compared with 31.9% in the prior year period. The decrease in gross margin was driven by significant input cost inflation for commodities, primarily resin, sourced finished goods, transportation and labor, which had a negative high-single-digit-percentage impact to costs of products sold. The gross margin decline was partially offset by favorable net pricing and gross productivity. Changes in foreign currency exchange rates unfavorably impacted gross profit by $16 million, or 2%.

In addition to the change in gross profit noted above, notable items impacting operating income for the three months ended March 31, 2022 and 2021 are as follows:
Three Months Ended
 March 31,
2022 2021 $ Change
Restructuring (See Footnote 4) and restructuring-related costs (a)
$ 11  $ 13  $ (2)
Transactions and other costs (b)
(a)Restructuring-related costs reported in cost of goods sold and selling, general and administrative expenses (“SG&A”) for the three months ended March 31, 2022 were $5 million and $1 million, respectively, and primarily relate to facility closures. For the three months ended March 31, 2021, restructuring-related costs reported in cost of sales and SG&A were $5 million and $3 million, respectively, and primarily relate to facility closures. Restructuring costs were $5 million for both the three months ended March 31, 2022 and 2021.
(b)Transactions and other costs for the three months ended March 31, 2022 and 2021 primarily relate to completed divestitures and fees for certain legal proceedings.

Operating income increased to $217 million as compared to $192 million in the prior year period. The improvement in the operating results reflects lower overhead spending.
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Interest expense, net decreased primarily due to lower long-term debt levels and higher interest income. The weighted average interest rates for the three months ended March 31, 2022 and 2021 were approximately 4.5% and 4.8%, respectively. See Footnote 9 of the Notes to the Unaudited Condensed Consolidated Financial Statements for further information.

Other income, net for three months ended March 31, 2022 and 2021 includes the following items:
Three Months Ended
 March 31,
2022 2021
Foreign exchange losses, net $ $ — 
Gain on disposition of business (See Footnote 2)
(130) — 
Other (gains) losses, net —  (1)
$ (124) $ (1)

The income tax provision for the three months ended March 31, 2022 was $48 million as compared to an income tax provision for the three months ended March 31, 2021 of $37 million. The effective tax rate for the three months ended March 31, 2022 was 17.0% as compared to 29.4% for the three months ended March 31, 2021. The income tax provision for the three months ended March 31, 2022 included a discrete benefit of $4 million associated with the approval of certain state tax credits, offset by $14 million of income tax expense related to the divestiture of the CH&S business unit. The three months ended March 31, 2021 were also impacted by $1 million of discrete tax items.

See Footnote 12 of the Notes to the Unaudited Condensed Consolidated Financial Statements for information regarding income taxes, including the inherent uncertainty associated with the Company's position on recently enacted U.S. Treasury Regulations.

Business Segment Operating Results

Commercial Solutions

Three Months Ended
March 31,
(in millions) 2022 2021 $ Change % Change
Net sales $ 510  $ 471  $ 39  8.3%
Operating income 55  50  10.0%
Operating margin 10.8  % 10.6  %

Commercial Solutions net sales for the three months ended March 31, 2022 increased 8%, which reflected sales growth in both the Commercial and Connected Home and Security business units. The Commercial business unit performance primarily reflected the impact of pricing actions. The increase in net sales in the Connected Home and Security business unit was primarily due to increased demand from the contractor channel and improved product availability. Changes in foreign currency unfavorably impacted net sales by $8 million, or 2%.

Operating income for the three months ended March 31, 2022 was $55 million as compared to $50 million in the prior year. The increase in operating income is due to gross profit leverage, gross productivity and lower advertising and promotion costs and overhead spending, partially offset by input cost inflation, particularly for resin, transportation, labor and sourced finished goods.

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Home Appliances
Three Months Ended
March 31,
(in millions) 2022 2021 $ Change % Change
Net sales $ 340  $ 360  $ (20) (5.6)%
Operating income (loss) (18) (21) NM
Operating margin (5.3) % 0.8  %
NM - NOT MEANINGFUL

Home Appliances net sales for the three months ended March 31, 2022 decreased approximately 6%, which reflects softening demand in the U.S., as the business lapped the prior-year surge in consumer demand due to the COVID-19 pandemic, and certain category exits, partially offset by pricing actions and strong demand in Latin America. Changes in foreign currency unfavorably impacted net sales by $5 million, or 1%.

Operating loss for the three months ended March 31, 2022 was $18 million as compared to an operating income of $3 million in the prior year period. The decline in operating result is primarily due to lower gross profit leverage, higher advertising and promotional costs, and input cost inflation, particularly for sourced finished goods and transportation.

Home Solutions

Three Months Ended
March 31,
(in millions) 2022 2021 $ Change % Change
Net sales $ 500  $ 504  $ (4) (0.8)%
Operating income 61  61  —  —%
Operating margin 12.2  % 12.1  %

Home Solutions net sales for the three months ended March 31, 2022 decreased 1%. Strong sales performance in the Food business unit was more than offset by the decline in the Home Fragrance business unit. The increase in Food business unit sales primarily reflected pricing actions. The decline in Home Fragrance business unit sales reflected softening demand, primarily in the U.S. as the business lapped the prior year surge in consumer demand due to the COVID-19 pandemic, as well as the exit of approximately 38 underperforming Yankee Candle retail stores during the first quarter of 2022. Changes in foreign currency unfavorably impacted net sales by $4 million, or 1%.

Operating income for the three months ended March 31, 2022 was flat as compared to the prior-year period. This performance reflected gross productivity and lower compensation expense, offset by significant input cost inflation for commodities, primarily metals and wax, transportation, labor and sourced finished goods, as well as higher advertising and promotional costs.

Learning and Development
Three Months Ended
March 31,
(in millions) 2022 2021 $ Change % Change
Net sales $ 650  $ 617  $ 33  5.3%
Operating income 130  110  20  18.2%
Operating margin 20.0  % 17.8  %

Learning and Development net sales for the three months ended March 31, 2022 increased 5% due to strong sales performance in the Baby and Writing business units. The Baby business unit performance reflected pricing actions and improved product availability. The Writing unit performance reflected strong sales driven by pricing actions, improved return to in-person learning
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and gradual reopening of more offices and earlier back to school sales to certain retailers, partially offset by supply chain shortages, particularly in labeling, and logistical constraints. Changes in foreign currency unfavorably impacted net sales by $11 million, or 2%.

Operating income for the three months ended March 31, 2022 increased to $130 million as compared to $110 million in the prior-year period. The increase in operating income is primarily due to gross profit leverage, gross productivity, and lower compensation and advertising and promotional costs, partially offset by significant input cost inflation for sourced finished goods, transportation and labor.

Outdoor and Recreation
Three Months Ended
March 31,
(in millions) 2022 2021 $ Change % Change
Net sales $ 388  $ 336  $ 52  15.5%
Operating income 45  15  30  NM
Operating margin 11.6  % 4.5  %
NM - NOT MEANINGFUL

Outdoor and Recreation net sales for the three months ended March 31, 2022 increased 15% primarily due to pricing actions, customer inventory replenishment and order timing ahead of the outdoor season and improved product availability. Changes in foreign currency unfavorably impacted net sales by $13 million or 4%.

Operating income for the three months ended March 31, 2022 was $45 million as compared to $15 million in the prior-year period. This improvement was primarily due to gross profit leverage and lower overhead spending, partially offset by input cost inflation for commodities, primarily resin, sourced finished goods and transportation, and higher advertising and promotional costs.

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Liquidity and Capital Resources
Liquidity

The Company believes that its cash generating capability, together with its borrowing capacity and available cash and cash equivalents, provide continued financial viability and adequate liquidity to fund its operations, support its growth platforms, pay down debt and debt maturities as they come due and execute its ongoing business initiatives. The Company regularly assesses its cash requirements and the available sources to fund these needs. At March 31, 2022, the Company had cash and cash equivalents of approximately $344 million, of which approximately $233 million was held by the Company’s non-U.S. subsidiaries.

The Company believes the extent of the impact of the COVID-19 pandemic to its future sales, operating results, cash flows, liquidity and financial condition will continue to be driven by numerous evolving factors that the Company is not able to accurately predict and which will vary by jurisdiction and market. For further information regarding the impact of COVID-19 on the Company, refer to Risk Factors in Part I - Item 1A and Recent Developments in Part II - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company's most recent Annual Report on Form 10-K, filed on February 14, 2022.
Cash, cash equivalents and restricted cash increased (decreased) as follows for the three months ended March 31, 2022 and 2021 (in millions):
2022 2021 Increase (Decrease)
Cash used in operating activities $ (272) $ (25) $ (247)
Cash provided by (used in) investing activities 559  (54) 613 
Cash used in financing activities (393) (239) (154)
Exchange rate effect on cash, cash equivalents and restricted cash (14) 22 
Decrease in cash, cash equivalents and restricted cash $ (98) $ (332) $ 234 

The Company tends to generate the majority of its operating cash flow in the third and fourth quarters of the year due to seasonal variations in operating results, the timing of annual performance-based compensation payments, customer program payments, working capital requirements and credit terms provided to customers.

Cash Flows from Operating Activities

The change in net cash used in operating activities reflects inventory build to support forecasted demand and higher annual incentive compensation payments, partially offset by benefits from higher accounts receivable sold under the Customer Receivables Purchase Agreement in the current year. See Capital Resources for further information.

Cash Flows from Investing Activities

The change in cash provided by investing activities was primarily due to proceeds from divestiture of CH&S and sale of property, plant and equipment, partially offset by higher capital expenditures.

Cash Flows from Financing Activities

The change in net cash used in financing activities was primarily due to repurchase of shares of the Company's common stock in the current-year period, partially offset by debt repayments in the prior-year period. See Footnotes 1, 9 and 14 of the Notes to the Unaudited Condensed Consolidated Financial Statements for further information.

Capital Resources

The Company has the ability to borrow under its existing Credit Revolver and its Accounts Receivable Securitization Facility (the “Securitization Facility”). Under the Company's Credit Revolver, the interest rate is London Interbank Offered Rate (“LIBOR”) rate plus 105.0 basis points. The Credit Revolver 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 Credit Revolver. At March 31, 2022 there were approximately $22 million of outstanding standby letters of credit issued against the Credit Revolver, with a net availability of approximately $1.23 billion. There were no borrowings outstanding under the Credit Revolver or commercial paper borrowings at March 31, 2022.
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The Credit Revolver requires the maintenance of certain financial covenants. A failure to maintain our financial covenants would impair our ability to borrow under the Credit Revolver. In addition, if economic conditions caused by the COVID-19 pandemic do not improve or otherwise worsen, our earnings and operating cash flows could be negatively impacted, which could impact our ability to maintain compliance with our financial covenants and require us to seek amendments to the Credit Revolver. The Company was in compliance with all of its debt covenants at March 31, 2022.

The aggregate commitment under the Securitization Facility is $600 million. The Securitization Facility matures in October 2022 and bears interest at a margin over a variable interest rate. The maximum availability under the Securitization Facility fluctuates based on eligible accounts receivable balances. At March 31, 2022, the Company did not have any amounts outstanding under the Securitization Facility.

Factored receivables at the end of the first quarter of 2022 associated with the existing factoring agreement (the “Customer Receivables Purchase Agreement”) were approximately $535 million, an increase of approximately $35 million from December 31, 2021. Transactions under this agreement are accounted for as sales of accounts receivable, and the receivables sold are removed from the Condensed Consolidated Balance Sheet at the time of the sales transaction. The Company classifies the proceeds received from the sales of accounts receivable as an operating cash flow in the Condensed Consolidated Statement of Cash Flows. The Company records the discount as other income, net in the Condensed Consolidated Statement of Operations and collections of accounts receivables not yet submitted to the financial institution as a financing cash flow.
Risk Management
From time to time, the Company enters into derivative transactions to hedge its exposures to interest rate, foreign currency rate and commodity price fluctuations. The Company does not enter into derivative transactions for trading purposes.
Interest Rate Contracts
The Company manages its fixed and floating rate debt mix using interest rate swaps. The Company may use fixed and floating rate swaps to alter its exposure to the impact of changing interest rates on its consolidated results of operations and future cash outflows for interest. Floating rate swaps would be used, depending on market conditions, to convert the fixed rates of long-term debt into short-term variable rates. Fixed rate swaps would be used to reduce the Company’s risk of the possibility of increased interest costs. The cash paid and received from the settlement of interest rate swaps is included in interest expense.

Fair Value Hedges
At March 31, 2022, the Company had approximately $100 million notional amount of interest rate swaps that exchange a fixed rate of interest for variable rate (LIBOR) of interest plus a weighted average spread. These floating rate swaps are designated as fair value hedges against $100 million of principal on the 4.00% senior notes due 2024 for the remaining life of the note. The effective portion of the fair value gains or losses on these swaps is offset by fair value adjustments in the underlying debt.
Cross-Currency Contracts

The Company uses cross-currency swaps to hedge foreign currency risk on certain financing arrangements. The Company previously entered into three cross-currency swaps, maturing in January 2025, February 2025 and September 2027, respectively, with an aggregate notional amount of $1.3 billion. Each of these cross-currency swaps were designated as net investment hedges of the Company's foreign currency exposure of its net investment in certain Euro-functional currency subsidiaries with Euro-denominated net assets, and the Company pays a fixed rate of Euro-based interest and receives a fixed rate of U.S. dollar interest. The Company has elected the spot method for assessing the effectiveness of these contracts. During the three months ended March 31, 2022 and 2021, the Company recognized income of $5 million and $4 million, respectively, in interest expense, net, related to the portion of cross-currency swaps excluded from hedge effectiveness testing.
Foreign Currency Contracts

The Company uses forward foreign currency contracts to mitigate the foreign currency exchange rate exposure on the cash flows related to forecasted inventory purchases and sales and have maturity dates through December 2022. The derivatives used to hedge these forecasted transactions that meet the criteria for hedge accounting are accounted for as cash flow hedges. The effective portion of the gains or losses on these derivatives is deferred as a component of AOCL until it is recognized in earnings at the same time that the hedged item affects earnings and is included in the same caption in the statements of operations as the
34

underlying hedged item. At March 31, 2022, the Company had approximately $467 million notional amount outstanding of forward foreign currency contracts that are designated as cash flow hedges of forecasted inventory purchases and sales.

The Company also uses foreign currency contracts, primarily forward foreign currency contracts, to mitigate the foreign currency exposure of certain other foreign currency transactions. At March 31, 2022, the Company had approximately $1.2 billion notional amount outstanding of these foreign currency contracts that are not designated as effective hedges for accounting purposes and have maturity dates through December 2022. Fair market value gains or losses are included in the results of operations and are classified in other income, net in the Company's Condensed Consolidated Statement of Operations.

The following table presents the net fair value of derivative financial instruments (in millions):
March 31,
2022
Asset
(Liability)
Derivatives designated as effective hedges:
Cash flow hedges:
Foreign currency contracts
$
Fair value hedges:
Interest rate swaps
(1)
Net investment hedges:
Cross-currency swaps
(19)
Derivatives not designated as effective hedges:
Foreign currency contracts
(5)
Total
$ (21)

Significant Accounting Policies and Critical Estimates

Goodwill and Indefinite-Lived Intangibles

Goodwill and indefinite-lived intangibles are tested and reviewed for impairment annually during the fourth quarter (on December 1), or more frequently if facts and circumstances warrant.

Goodwill

Goodwill is tested for impairment at a reporting unit level, and all of the Company’s goodwill is assigned to its reporting units. Reporting units are determined based upon the Company’s organizational structure in place at the date of the goodwill impairment testing and generally one level below the operating segment level. The Company’s operations are comprised of seven reporting units, within its five primary operating segments.

The quantitative goodwill impairment testing requires significant use of judgment and assumptions, such as the identification of reporting units; the assignment of assets and liabilities to reporting units; and the estimation of future cash flows, business growth rates, terminal values, discount rates and total enterprise value. The income approach used is the discounted cash flow methodology and is based on five-year cash flow projections. The cash flows projected are analyzed on a debt-free basis (before cash payments to equity and interest-bearing debt investors) in order to develop an enterprise value from operations for the reporting unit. A provision is made, based on these projections, for the value of the reporting unit at the end of the forecast period, or terminal value. The present value of the finite-period cash flows and the terminal value are determined using a selected discount rate. The Company estimated the fair values of its reporting units based on discounted cash flow methodology reflecting its latest projections which included, among other things, the impact of significant input cost inflation for commodities, primarily resin, sourced finished goods, transportation and labor on its operations at the time the Company performed its impairment testing.

See Footnotes 1 and 7 of the Notes to Unaudited Condensed Consolidated Financial Statements for further information.

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Indefinite-lived intangibles

The testing of indefinite-lived intangibles (primarily trademarks and tradenames) under established guidelines for impairment also requires significant use of judgment and assumptions (such as cash flow projections, royalty rates, terminal values and discount rates). An indefinite-lived intangible asset is impaired by the amount its carrying value exceeds its estimated fair value. For impairment testing purposes, the fair value of indefinite-lived intangibles is determined using either the relief from royalty method or the excess earnings method. The relief from royalty method estimates the value of a tradename by discounting the hypothetical avoided royalty payments to their present value over the economic life of the asset. The excess earnings method estimates the value of the intangible asset by quantifying the residual (or excess) cash flows generated by the asset and discounts those cash flows to the present. The excess earnings methodology requires the application of contributory asset charges. Contributory asset charges typically include assumed payments for the use of working capital, tangible assets and other intangible assets. Changes in forecasted operations and other assumptions could materially affect the estimated fair values. Changes in business conditions could potentially require adjustments to these asset valuations.

The Company believes the circumstances and global disruption caused by COVID-19 may continue to affect its businesses, future
operating results, cash flows and financial condition and that the scope and duration of the pandemic is highly uncertain. In addition, some of the other inherent estimates and assumptions used in determining fair value of the reporting units are outside the control of management, including interest rates, cost of capital, tax rates, industry growth, credit ratings and foreign exchange rates. Given the uncertainty of these factors, as well as the inherent difficulty in predicting the severity and duration of the COVID-19 global pandemic and associated recovery and the uncertainties regarding the potential financial impact on the Company's business and the overall economy as discussed further in Footnote 1, there can be no assurance that the Company's estimates and assumptions will prove to be accurate predictions of the future.

Although management has made its best estimates based upon current information, actual results could materially differ from those estimates and may require future changes to such estimates and assumptions. If so, the Company may be subject to future incremental impairment charges as well as changes to recorded reserves and valuations.

See Footnotes 1 and 7 of the Notes to the Unaudited Condensed Consolidated Financial Statements for further information.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes from the information previously reported under Part II, Item 7A. in the Company’s Annual Report on Form 10-K for the fiscal year ended.
Item 4. Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to provide reasonable assurance that information, which is required to be disclosed by the issuer in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported, within the time periods specified in the SEC’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.

As required by Rule 13a-15(b) of the Exchange Act, the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, have 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 were effective as of March 31, 2022.

Changes in Internal Control Over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting during the quarter ended March 31, 2022, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.


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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Information required under this Item is contained above in Part I. Financial Information, Item 1 and is incorporated herein by reference.
Item 1A. Risk Factors

There have been no material changes in our risk factors from those disclosed in Part I, Item 1A. of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
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, 2022:
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
Maximum
Approximate Dollar Value of
Shares that May Yet Be Purchased
Under the Plans or Programs (1)
January —  $ —  —  $ 375,000,000 
February 11,151,364  25.86  10,634,184  $ 100,000,001 
March —  —  —  $ 100,000,001 
Total 11,151,364  $ 25.86  10,634,184 
(1)On February 6, 2022, the Company's Board of Directors authorized a $375 million Share Repurchase Program (“SRP”), effective immediately through the end of 2022. The Company’s common shares may be purchased by the Company in the open market, in negotiated transactions or in other manners, as permitted by federal securities laws and other legal requirements. See Footnote 14 of the Notes to the Unaudited Condensed Consolidated Financial Statements for further information on shares repurchased during the three months ended March 31, 2022.
(2)Shares purchased during the three months ended March 31, 2022, includes both the number of shares purchased as part of the publicly announced SRP as well as shares acquired to satisfy employees’ tax withholding and payment obligations in connection with the vesting of awards of restricted stock units and were purchased by the Company based on their fair market value on the vesting date.

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