SEC Filing | Newell Brands

View:

nwl-20230930

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 September 30, 2023

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 October 23, 2023: 414.2 million.

Table of Contents


TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION			2
Item 1. Financial Statements			2
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			28
Item 3. Quantitative and Qualitative Disclosures about Market Risk			42
Item 4. Controls and Procedures			42
PART II. OTHER INFORMATION			43
Item 1. Legal Proceedings			43
Item 1A. Risk Factors			43
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities			43
Item 5. Other Information			43
Item 6. Exhibits			44
SIGNATURES			45

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NEWELL BRANDS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Unaudited)

(Amounts in millions, except per share amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net sales	$	2,048	$	2,252	$	6,057	$	7,174
Cost of products sold	1,427		1,594		4,325		4,940
Gross profit	621		658		1,732		2,234
Selling, general and administrative expenses	501		467		1,457		1,489
Restructuring costs, net	16		3		76		12
Impairment of goodwill, intangibles and other assets	263		148		274		148
Operating income (loss)	(159)		40		(75)		585
Non-operating expenses:
Interest expense, net	69		57		213		171

Other (income) expense, net	70		24		91		(73)
Income (loss) before income taxes	(298)		(41)		(379)		487
Income tax provision (benefit)	(80)		(60)		(77)		41
Net income (loss)	$	(218)	$	19	$	(302)	$	446

Weighted average common shares outstanding:
Basic	414.2		413.6		414.1		416.4
Diluted	414.2		414.6		414.1		418.3

Earnings (loss) per share:
Basic	$	(0.53)	$	0.05	$	(0.73)	$	1.07
Diluted	$	(0.53)	$	0.05	$	(0.73)	$	1.07




Comprehensive income (loss):
Net income (loss)	$	(218)	$	19	$	(302)	$	446
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(16)		(94)		(8)		(172)
Pension and postretirement costs	53		8		52		20
Derivative financial instruments	9		8		(8)		19
Total other comprehensive income (loss), net of tax	46		(78)		36		(133)




Total comprehensive income (loss)	$	(172)	$	(59)	$	(266)	$	313

See Notes to Condensed Consolidated Financial Statements (Unaudited).

Table of Contents

NEWELL BRANDS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(Amounts in millions, except par values)


	September 30, 2023		December 31, 2022
Assets:
Cash and cash equivalents	$	396	$	287
Accounts receivable, net	1,212		1,250
Inventories	1,778		2,203
Prepaid expenses and other current assets	362		312

Total current assets	3,748		4,052
Property, plant and equipment, net	1,202		1,184
Operating lease assets	521		578
Goodwill	3,049		3,298
Other intangible assets, net	2,550		2,649
Deferred income taxes	783		810
Other assets	719		691
Total assets	$	12,572	$	13,262

Liabilities:
Accounts payable	$	1,084	$	1,062
Accrued compensation	150		123
Other accrued liabilities	1,409		1,272
Short-term debt and current portion of long-term debt	376		621

Total current liabilities	3,019		3,078
Long-term debt	4,737		4,756
Deferred income taxes	393		520
Operating lease liabilities	458		512
Other noncurrent liabilities	839		877
Total liabilities	9,446		9,743
Commitments and contingencies (Footnote 17)
Stockholders’ equity:
Preferred stock (10.0 authorized shares, $1.00 par value, no shares issued at September 30, 2023 and December 31, 2022)	—		—
Common stock (800.0 authorized shares, $1.00 par value, 439.5 shares and 438.6 shares issued at September 30, 2023 and December 31, 2022, respectively)	440		439
Treasury stock, at cost (25.3 shares and 25.0 shares at September 30, 2023 and December 31, 2022, respectively)	(627)		(623)
Additional paid-in capital	6,928		7,052
Retained deficit	(2,640)		(2,338)
Accumulated other comprehensive loss	(975)		(1,011)


Total stockholders’ equity	3,126		3,519
Total liabilities and stockholders’ equity	$	12,572	$	13,262

See Notes to Condensed Consolidated Financial Statements (Unaudited).

Table of Contents

NEWELL BRANDS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Amounts in millions)


	Nine Months Ended September 30,
	2023		2022
Cash flows from operating activities:
Net income (loss)	$	(302)	$	446
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	240		222
Impairment of goodwill, intangibles and other assets	274		148
Gain from sale of business	—		(136)
Deferred income taxes	(108)		215
Stock based compensation expense	32		8
Pension settlement charge	66		—

Other, net	3		(2)
Changes in operating accounts excluding the effects of divestiture:
Accounts receivable	26		(165)
Inventories	411		(754)
Accounts payable	31		(143)
Accrued liabilities and other	6		(406)
Net cash provided by (used in) operating activities	679		(567)
Cash flows from investing activities:
Proceeds from sale of divested business	—		616
Capital expenditures	(209)		(221)

Other investing activities, net	62		25
Net cash provided by (used in) investing activities	(147)		420
Cash flows from financing activities:
Net payments of short-term debt	(244)		—
Net proceeds from issuance of long-term debt	—		990
Payments on current portion of long-term debt	(2)		(2)


Repurchase of shares of common stock	—		(325)
Cash dividends	(155)		(290)


Equity compensation activity and other, net	(4)		(29)
Net cash provided by (used in) financing activities	(405)		344
Exchange rate effect on cash, cash equivalents and restricted cash	(8)		(13)
Increase in cash, cash equivalents and restricted cash	119		184
Cash, cash equivalents and restricted cash at beginning of period	303		477
Cash, cash equivalents and restricted cash at end of period	$	422	$	661

Supplemental disclosures:
Restricted cash at beginning of period	$	16	$	37
Restricted cash at end of period	26		25

See Notes to Condensed Consolidated Financial Statements (Unaudited).

Table of Contents

NEWELL BRANDS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)

(Amounts in millions, except per share amounts)


	Common Stock		Treasury Stock		Additional Paid-In Capital		Retained Deficit		Accumulated Other Comprehensive Income (Loss)		Total Stockholders' Equity
Balance at June 30, 2023	$	440	$	(627)	$	6,945	$	(2,422)	$	(1,021)	$	3,315
Comprehensive income (loss)	—		—		—		(218)		46		(172)
Dividends declared on common stock - $0.07 per share	—		—		(29)		—		—		(29)
Equity compensation, net of tax	—		—		12		—		—		12





Balance at September 30, 2023	$	440	$	(627)	$	6,928	$	(2,640)	$	(975)	$	3,126

Balance at December 31, 2022	$	439	$	(623)	$	7,052	$	(2,338)	$	(1,011)	$	3,519
Comprehensive income (loss)	—		—		—		(302)		36		(266)
Dividends declared on common stock - $0.37 per share	—		—		(155)		—		—		(155)
Equity compensation, net of tax	1		(4)		31		—		—		28





Balance at September 30, 2023	$	440	$	(627)	$	6,928	$	(2,640)	$	(975)	$	3,126


	Common Stock		Treasury Stock		Additional Paid-In Capital		Retained Earnings (Deficit)		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
Balance at June 30, 2022	$	439	$	(623)	$	7,251	$	(2,108)	$	(937)	$	4,022
Comprehensive income (loss)	—		—		—		19		(78)		(59)
Dividends declared on common stock - $0.23 per share	—		—		(93)		—		—		(93)
Equity compensation, net of tax	—		—		(15)		—		—		(15)



Balance at September 30, 2022	$	439	$	(623)	$	7,143	$	(2,089)	$	(1,015)	$	3,855

Balance at December 31, 2021	$	450	$	(609)	$	7,734	$	(2,535)	$	(882)	$	4,158
Comprehensive income (loss)	—		—		—		446		(133)		313
Dividends declared on common stock - $0.69 per share	—		—		(285)		—		—		(285)
Equity compensation, net of tax	2		(14)		7		—		—		(5)
Common stock purchased and retired	(13)		—		(312)		—		—		(325)



Other	—		—		(1)		—		—		(1)
Balance at September 30, 2022	$	439	$	(623)	$	7,143	$	(2,089)	$	(1,015)	$	3,855

See Notes to Condensed Consolidated Financial Statements (Unaudited).

Table of Contents

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, 2022 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.

The condensed consolidated financial statements for all comparable prior periods presented have been retrospectively adjusted to reflect the following:

•Effective January 1, 2023, as a result of the implementation of a new operating model intended to drive further simplification and unlock additional efficiencies and synergies within the Company, the chief operating decision maker (“CODM”) now reviews the businesses as three operating segments: Home and Commercial Solutions, Learning and Development and Outdoor and Recreation. The Home and Commercial Solutions operating segment represents the combination of the previously reported Commercial Solutions, Home Appliances and Home Solutions operating segments. See Footnote 16 for further information;

•A prior-year change in method of accounting for certain inventory in the U.S. from the last-in, first-out method to the first-in, first-out method resulted in a $5 million and $16 million reduction of cost of products sold and corresponding increase to operating income and income before income taxes, additional income tax provision of $1 million and $4 million and increase of $4 million and $12 million to net income in the Company's previously issued unaudited Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2022, respectively;

•A revision associated with an incorrect change in functional currency designation in the prior year resulted in additional expense to record mark to market adjustments of $16 million and $35 million in other (income) expense, net in the Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2022, respectively, and a reclassification between Accumulated Other Comprehensive Loss and Retained Deficit in the Condensed Consolidated Statement of Stockholder’s Equity of $35 million at September 30, 2022. Refer to Footnote 19 of the Company's most recent Annual Report on Form 10-K, filed on February 15, 2023.

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

Use of Estimates and Risks

Management’s application of U.S. GAAP in preparing the Company's condensed consolidated financial statements requires the pervasive use of estimates and assumptions. The Company continues to be impacted by inflationary pressures, softening global demand, focus by major retailers on the rebalancing of inventory levels, rising interest rates and indirect macroeconomic impacts from the Russia-Ukraine conflict. These collective macroeconomic trends, the duration or severity of which are highly uncertain, are rapidly changing the retail and consumer landscape and are expected to continue to negatively impact the Company’s operating results, cash flows and financial condition during the current year. As consumers continue to face widespread increases in prices and interest rates, their discretionary spending and purchase patterns may continue to be unfavorably impacted. The high level of uncertainty of these factors has resulted in estimates and assumptions that have the potential for more variability and are more subjective. In addition, some of the other inherent estimates and assumptions used in the Company’s forecasted results of operations and cash flows that form the basis of the determination of the fair value of the reporting units for goodwill and indefinite-lived intangible asset impairment testing are outside the control of management, including interest rates, cost of capital, tax rates, industry growth, credit ratings, foreign exchange rates and labor inflation. Although management has made its best estimates and assumptions based upon current information, actual results could materially differ given the uncertainty of these factors and may require future changes to such estimates and assumptions, including reserves, which may result in future expense or impairment charges.

Table of Contents

During the third quarter of 2023, the Company concluded that a triggering event had occurred for the goodwill associated with the Baby reporting unit in the Learning and Development segment, and for an indefinite-lived tradename in the Outdoor and Recreation segment, as a result of a downward revision of forecasted cash flows due to market conditions, as well as rising interest rates. The Company performed a quantitative impairment test and determined that the Baby reporting unit goodwill and the indefinite-lived tradename in the Outdoor and Recreation segment were impaired. During the third quarter of 2023, the Company recorded a non-cash impairment charge of $241 million for the Baby reporting unit goodwill and $22 million for the indefinite-lived tradename in the Outdoor and Recreation segment, as the carrying values exceeded their fair values. See Footnote 7 for further information.

During the second quarter of 2023, the Company concluded that a triggering event had occurred for an indefinite-lived tradename in the Home Fragrance reporting unit in the Home and Commercial Solutions segment and for the goodwill associated with the Baby reporting unit in the Learning and Development segment, as a result of a downward revision of forecasted cash flows due to softening global demand, primarily caused by continued inflationary pressure that is impacting discretionary spending behavior of consumers, as well as rising interest rates. The Company performed a quantitative impairment test and determined that the indefinite-lived tradename in the Home and Commercial Solutions segment was impaired. During the second quarter of 2023, the Company recorded a non-cash impairment charge of $8 million, as the carrying value of the tradename exceeded its fair value. The Company concluded that the Baby reporting unit goodwill was not impaired during the second quarter of 2023. See Footnote 7 for further information.

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. Also, 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. In addition, uncertainty still remains over the volatility and direction of future consumer and customer demand patterns, as well as inflationary and supply chain pressures. Accordingly, the Company’s results of operations and cash flows for the three and nine months ended September 30, 2023 may not necessarily be indicative of the results that may be expected for the year ending December 31, 2023.

Adoption of New Accounting Guidance

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 London Interbank Offered Rate (“LIBOR”) or another reference rate if certain criteria are met. This ASU was further updated with the issuance of ASU 2022-06, Reference Rate Reform: Deferral of the Sunset Date of Topic 848, which extends the sunset date of the guidance. ASU 2020-04 may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2024. The Company adopted ASU 2020-04 and it did not have a material impact on its Consolidated Financial Statements.

In October 2022, the FASB issued ASU 2022-04, “Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations.” This ASU requires that a buyer in a supplier finance program disclose sufficient information about the program to allow a user of financial statements to better consider the effect of the programs on an entity’s working capital, liquidity, and cash flows. This ASU is effective for fiscal years beginning after December 15, 2022, except for the amendment on roll forward information which is effective for fiscal years beginning after December 15, 2023. See disclosures hereafter for further information.

Table of Contents

Sales of Accounts Receivables

Factored receivables at September 30, 2023 associated with the Company's existing factoring agreement (the “Customer Receivables Purchase Agreement”) were approximately $345 million, a decrease of approximately $75 million from December 31, 2022. 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 and collections of accounts receivables not yet submitted to the financial institution as a financing cash flow in the Condensed Consolidated Statement of Cash Flows. The Company records the discount as other (income) expense, net in the Condensed Consolidated Statement of Operations. As further described in Footnote 18, in October 2023, the Company entered into a new accounts receivable facility pursuant to which receivables of certain subsidiaries are sold or pledged.

Supplier Finance Program Obligations

The Company has worked with its suppliers of goods and services over the past several years to revisit terms and conditions, including the extension of payment terms. Additionally, a global financial institution offers a voluntary supply chain finance program (the “SCF Program”) which enables suppliers, at their sole discretion, to sell their receivables from the Company to the financial institution on a non-recourse basis.

The Company and its suppliers agree on contractual terms for the goods and services procured, including prices, quantities and payment terms, regardless of whether the supplier elects to participate in the SCF Program. Payments terms average approximately 125 days. The suppliers sell goods or services, as applicable, to the Company and issue the associated invoices to the Company based on the agreed-upon contractual terms. Suppliers that participate in the SCF Program, at their sole discretion, determine which invoices, if any, they want to sell to the financial institution. The suppliers’ voluntary inclusion of invoices in the SCF Program does not change the Company’s existing contractual terms with its suppliers. The Company does not provide any guarantees under the SCF Program, nor does it have any economic interest in a supplier’s decision to participate in the SCF Program.

Amounts due under the SCF Program are included in accounts payable in the Condensed Consolidated Balance Sheets and as operating cash flows in the Condensed Consolidated Statement of Cash Flows. At September 30, 2023 and December 31, 2022, outstanding payment obligations under the SCF Program were approximately $100 million for both periods.

Footnote 2 — Divestiture Activity

On March 31, 2022, the Company sold its CH&S business to Resideo Technologies, Inc., for approximately $593 million, subject to customary working capital and other post-closing adjustments. As a result, during the nine months ended September 30, 2022, the Company recorded a pretax gain of $136 million, which was included in other (income) expense, 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 nine months ended September 30, 2023 (in millions):


	Cumulative Translation Adjustment		Pension and Postretirement Costs		Derivative Financial Instruments		AOCL
Balance at December 31, 2022	$	(688)	$	(309)	$	(14)	$	(1,011)
Other comprehensive loss before reclassifications	(8)		(1)		(6)		(15)
Amounts reclassified to earnings	—		53		(2)		51
Net current period other comprehensive income (loss)	(8)		52		(8)		36
Balance at September 30, 2023	$	(696)	$	(257)	$	(22)	$	(975)

Table of Contents

Reclassifications from AOCL to the results of operations for the three and nine months ended September 30, 2023 and 2022 were pretax (income) expense of (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Cumulative translation adjustment (1)	$	—	$	—	$	—	$	6
Pension and postretirement benefit plans (2)	64		4		69		11
Derivative financial instruments (3)	5		(7)		(3)		(10)

(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 September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Foreign currency translation adjustments	$	21	$	26	$	3	$	46
Pension and postretirement benefit costs	15		1		16		2
Derivative financial instruments	3		3		(2)		6
Income tax provision related to AOCL	$	39	$	30	$	17	$	54

Footnote 4 — Restructuring

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Home and Commercial Solutions	$	10	$	1	$	37	$	4
Learning and Development	3		1		14		3
Outdoor and Recreation	—		1		8		3
Corporate	3		—		17		2
	$	16	$	3	$	76	$	12

Accrued restructuring costs activity for the nine months ended September 30, 2023 was as follows (in millions):


	Balance at December 31, 2022		Restructuring Costs, Net		Payments		Foreign Currency and Other		Balance at September 30, 2023
Severance and termination costs	$	7	$	71	$	(57)	$	—	$	21
Contract termination and other costs	—		5		(4)		(1)		—
	$	7	$	76	$	(61)	$	(1)	$	21

Table of Contents

Project Phoenix

In January 2023, the Company announced a restructuring and savings initiative (“Project Phoenix”) that is intended to strengthen the Company by leveraging its scale to further reduce complexity, streamlining its operating model and driving operational efficiencies. Project Phoenix is expected to be substantially implemented by the end of 2023 and incorporates a variety of initiatives designed to simplify the organizational structure, streamline the Company’s real estate portfolio, centralize the Company’s supply chain functions, which include manufacturing, distribution, transportation and customer service, transition to a unified One Newell go-to-market model in key international geographies, and otherwise reduce overhead costs. The Company commenced reducing headcount in the first quarter of 2023, with most of these actions expected to be completed by the end of 2023, subject to local law and consultation requirements. The Company currently estimates that it will incur approximately $100 million to $130 million in restructuring and restructuring-related charges in connection with Project Phoenix, substantially all of which are expected to be incurred by the end of 2023. These charges consist primarily of $80 million to $105 million in charges related to severance payments and other termination benefits; $15 million to $20 million in charges associated with office space reductions; and approximately $5 million of other charges, including those associated with employee transition and legal costs. The Company expects approximately $95 million to $120 million of the total aggregate charges will be cash expenditures. All cash payments are expected to be paid within one year of charges incurred.

During the three and nine months ended September 30, 2023, the Company recorded restructuring charges of $10 million and $63 million, respectively, in connection with Project Phoenix.

Network Optimization Project

In May 2023, the Company announced a restructuring and savings initiative that is intended to simplify and streamline its North American distribution network (the “Network Optimization Project”) in order to improve the Company’s cost structure and operating margins while maintaining focus on customer and consumer fulfillment. The Company initiated implementation of the Network Optimization Project during the second quarter of 2023 and expects it to be substantially implemented by the end of fiscal year 2024. The Network Optimization Project incorporates a variety of initiatives, including a reduction in the overall number of distribution centers, an optimization of distribution by location, and completion of select automation investments intended to further streamline the Company’s cost structure and to maximize operating performance. The Company currently estimates that it will incur approximately $37 million to $49 million in restructuring and restructuring-related charges associated with execution of the Network Optimization Project and expects that the costs incurred will be substantially complete by the end of 2024. This estimate of charges consists primarily of $8 million to $11 million related to cash severance payments and other termination benefits and approximately $29 million to $38 million associated with industrial site reductions. The Company expects approximately $35 million to $44 million of the total aggregate charges will be cash expenditures.

During the three and nine months ended September 30, 2023, the Company recorded restructuring charges of $3 million and $5 million, respectively, in connection with the project.

Other Restructuring and Restructuring-Related Charges

The Company regularly incurs other restructuring and restructuring-related costs in connection with various discrete initiatives, including certain costs associated with Project Ovid, the 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 and costs associated with the optimization of manufacturing sites. 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 September 30, 2023 and 2022, the Company recorded other restructuring charges of $3 million for both periods, and $8 million and $12 million for the nine months ended September 30, 2023 and 2022, respectively.

Table of Contents

Footnote 5 — Inventories

Inventories are comprised of the following (in millions):


	September 30, 2023		December 31, 2022
Raw materials and supplies	$	237	$	285
Work-in-process	181		218
Finished products	1,360		1,700
	$	1,778	$	2,203

Footnote 6 — Property, Plant and Equipment, Net

Property, plant and equipment, net, is comprised of the following (in millions):


	September 30, 2023		December 31, 2022
Land	$	72	$	76
Buildings and improvements	662		648
Machinery and equipment	2,457		2,349
	3,191		3,073
Less: Accumulated depreciation	(1,989)		(1,889)
	$	1,202	$	1,184

Depreciation expense was $53 million and $50 million for the three months ended September 30, 2023 and 2022, respectively, and $158 million and $146 million for the nine months ended September 30, 2023 and 2022, respectively.

Footnote 7 — Goodwill and Other Intangible Assets, Net

Goodwill activity for the nine months ended September 30, 2023 is as follows (in millions):


Segments	Net Book Value at December 31, 2022		Impairment Charges		Foreign Exchange		Gross Carrying Amount		Accumulated Impairment Charges		Net Book Value at September 30, 2023
Home and Commercial Solutions	$	747	$	—	$	—	$	4,052	$	(3,305)	$	747
Learning and Development	2,551		(241)		(8)		3,389		(1,087)		2,302
Outdoor and Recreation	—		—		—		788		(788)		—
	$	3,298	$	(241)	$	(8)	$	8,229	$	(5,180)	$	3,049

During the third quarter of 2023, the Company concluded that a triggering event had occurred for the goodwill associated with the Baby reporting unit in the Learning and Development segment as a result of a downward revision of forecasted cash flows due to lower volume and profitability expectations, as well as rising interest rates. The Company performed a quantitative impairment test and determined that the Baby reporting unit goodwill was impaired. During the third quarter of 2023, the Company recorded a non-cash impairment charge of $241 million as the carrying value of the reporting unit exceeded its fair value.

During the third quarter of 2022, the Company concluded that a triggering event had occurred for the Home Fragrance reporting unit in the Home and Commercial Solutions segment, as a result of a downward revision of forecasted cash flows due to softening global demand, as retailers significantly pulled back on orders in an effort to rebalance inventory, and rising interest rates. The decline in global demand is driven primarily by inflationary pressures which are impacting the discretionary spending behavior of consumers. The Company performed a quantitative impairment test and determined that the Home Fragrance reporting unit goodwill was impaired. During the third quarter of 2022, the Company recorded a non-cash impairment charge of $108 million, as the carrying value of the reporting unit exceeded its fair value.

Table of Contents

Other intangible assets, net, are comprised of the following (in millions):


	September 30, 2023						December 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
Tradenames — indefinite life (1)	$	1,581	$	—	$	1,581	$	1,689	$	—	$	1,689
Tradenames — other (1)	230		(97)		133		160		(79)		81
Capitalized software	619		(504)		115		602		(481)		121
Patents and intellectual property	22		(18)		4		22		(17)		5
Customer relationships and distributor channels	1,073		(356)		717		1,072		(319)		753

	$	3,525	$	(975)	$	2,550	$	3,545	$	(896)	$	2,649

(1)In connection with the operating model changes associated with Project Phoenix, the Company determined that six tradenames with aggregate carrying values of $70 million no longer met indefinite-lived criteria and were reclassified during the first quarter as finite-lived tradenames, with useful lives ranging from five to ten years.

Amortization expense for intangible assets was $28 million and $25 million for the three months ended September 30, 2023 and 2022, respectively and $82 million and $76 million for the nine months ended September 30, 2023 and 2022, respectively.

During the third quarter of 2023, the Company concluded that a triggering event had occurred for an indefinite-lived tradename in the Outdoor and Recreation segment, as a result of a downward revision of forecasted cash flows due to market conditions, as well as rising interest rates. The Company performed a quantitative impairment test and determined that the indefinite-lived tradename in the Outdoor and Recreation segment was impaired. During the third quarter of 2023, the Company recorded a non-cash impairment charge of $22 million for the indefinite-lived tradename in the Outdoor and Recreation segment, as the carrying value of the tradename exceeded its fair value.

During the second quarter of 2023, the Company concluded that a triggering event had occurred for indefinite-lived tradename in the Home Fragrance reporting unit in the Home and Commercial Solutions segment as a result of a downward revision of forecasted cash flows due to softening global demand, primarily caused by continued inflationary pressure that is impacting discretionary spending behavior of consumers, as well as rising interest rates. The Company performed a quantitative impairment test and determined that the indefinite-lived tradename in the Home and Commercial Solutions segment was impaired. During the second quarter of 2023, the Company recorded a non-cash impairment charge of $8 million, as the carrying value of the tradename exceeded its fair value.

During the third quarter of 2022, the Company concluded that a triggering event had occurred for indefinite-lived tradenames in the Kitchen and Home Fragrance reporting units in the Home and Commercial Solutions segment, as a result of a downward revision of forecasted cash flows due to softening global demand, as retailers significantly pulled back on orders in an effort to rebalance inventory and rising interest rates. The decline in global demand was driven primarily by inflationary pressures which impacted the discretionary spending behavior of consumers. The Company also concluded that a triggering event had occurred for two indefinite-lived tradenames in the Baby reporting unit, in the Learning and Development segment, as a result of rising interest rates and inflationary pressures. The Company performed a quantitative impairment test and determined that the indefinite-lived tradename in the Kitchen reporting unit and two indefinite-lived tradenames in the Baby reporting unit were impaired. During the third quarter of 2022, the Company recorded an aggregate non-cash impairment charge of $40 million, as the carrying values of these tradenames exceeded their fair values.

Table of Contents

Footnote 8 — Other Accrued Liabilities

Other accrued liabilities are comprised of the following (in millions):


	September 30, 2023		December 31, 2022
Customer accruals	$	702	$	636
Operating lease liabilities	119		121
Accrued self-insurance liabilities, contingencies and warranty	105		99
Accrued interest expense	97		63
Accrued income taxes	79		53
Accrued marketing and freight expenses	72		73
Other	235		227
	$	1,409	$	1,272

Footnote 9 — Debt

Debt is comprised of the following at the dates indicated (in millions):


	September 30, 2023		December 31, 2022
4.00% senior notes due 2024	$	197	$	196
4.875% senior notes due 2025	497		496
3.90% senior notes due 2025	47		47
4.20% senior notes due 2026	1,979		1,978
6.375% senior notes due 2027	474		483
6.625% senior notes due 2029	467		481
5.375% senior notes due 2036	417		417
5.50% senior notes due 2046	658		658
Revolving credit facility	375		225
Commercial paper	—		359
Receivables facility	—		35
Other debt	2		2
Total debt	5,113		5,377
Short-term debt and current portion of long-term debt	(376)		(621)
Long-term debt	$	4,737	$	4,756

Senior Notes

On August 21, 2023, Moody's Corporation (“Moody's”) downgraded the Company's debt rating to “Ba2”. As a result of Moody's downgrade, certain of the Company's outstanding senior notes currently aggregating to approximately $3.1 billion are subject to an interest rate adjustment of 25 basis points. The change to the interest rate due to the downgrade will increase the Company's interest expense by approximately $8 million on an annualized basis (approximately $2 million in 2023).

On August 3, 2023, S&P Global Inc. (“S&P”) downgraded the Company's debt rating to “BB”. In March 2023, S&P had also downgraded the Company’s debt rating to “BB+”. As a result of the S&P downgrades, certain of the Company’s outstanding senior notes currently aggregating to approximately $3.1 billion are subject to an aggregated interest rate adjustment of 50 basis points. The change to the interest rate due to the downgrade will increase the Company’s interest expense by approximately $15 million on an annualized basis (approximately $8 million in 2023). Furthermore, as a result of the March S&P downgrade, the Company's ability to borrow from the commercial paper market on terms it deems acceptable or favorable was eliminated.

On February 14, 2023, Fitch Ratings downgraded the Company's debt rating to “BB”. This downgrade did not impact the interest rates on any of the Company's senior notes.

Table of Contents

Receivables Facility

The Company maintained an Accounts Receivable Securitization Facility (the “Securitization Facility”). The aggregate commitment under the Securitization Facility was $375 million. The Securitization Facility matured on October 2, 2023 and was terminated thereafter. At September 30, 2023, the Company had no outstanding borrowing under the Securitization Facility.

See Footnote 18 for details related to the new accounts receivable facility.

Revolving Credit Facility

The Company has a $1.5 billion senior unsecured revolving credit facility (the “Credit Revolver”) that matures in August 2027. On March 27, 2023, the Company entered into an amendment to its Credit Revolver (the “Amendment”) to (i) include non-cash expenses resulting from grants of stock awards among the items that may be added to Consolidated Net Income when calculating Consolidated Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), as defined in the Amendment, and (ii) lower the Interest Coverage Ratio, as defined in the Amendment, for the fiscal quarters ending on June 30, 2023, September 30, 2023, December 31, 2023 and March 31, 2024.

The Credit Revolver provides for the issuance of up to $150 million of letters of credit, so long as there is sufficient availability for borrowing under the Credit Revolver. At September 30, 2023, the Company had $375 million of outstanding borrowings under the Credit Revolver and approximately $21 million of outstanding standby letters of credit issued against the Credit Revolver, with a net availability of approximately $1.1 billion.

Other

The indentures governing the Company’s senior notes contain usual and customary nonfinancial covenants. The Company’s borrowing arrangements other than the senior notes contain usual and customary nonfinancial covenants and certain financial covenants, including minimum interest coverage and maximum debt-to-total-capitalization ratios.

Weighted average interest rates are as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Total debt	5.1	%	4.1	%	5.1	%	4.3	%
Short-term debt	7.7	%	3.8	%	6.8	%	3.0	%

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):


	September 30, 2023				December 31, 2022
	Fair Value		Book Value		Fair Value		Book Value
Senior notes	$	4,395	$	4,736	$	4,511	$	4,756

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

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 settlement of interest rate swaps is included in interest expense.

Table of Contents

Fair Value Hedges

At September 30, 2023, the Company had approximately $1.1 billion notional amount of interest rate swaps that exchange a fixed rate of interest for a variable rate of interest plus a weighted average spread. These floating rate swaps are designated as fair value hedges against $500 million of principal on the 6.375% senior notes due 2027, $500 million of principal on the 6.625% senior notes due 2029 and $100 million of principal on the 4.00% senior notes due 2024 for the remaining life of the notes. The benchmark interest rate for the $100 million floating swap and associated fair value hedge was amended for a change in benchmark interest rate from LIBOR to Secured Overnight Financing Rate (“SOFR”), effective June 1, 2023, accounted for in accordance with ASC 848 (see Footnote 1 for further information). 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 was designated as a net investment hedge 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. During the third quarter of 2022, the Company entered into additional cross-currency swaps with notional amounts of $500 million each, with one maturing in September 2027 and one in September 2029. These swaps were also 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 floating rate of Euro-based interest and receives a floating 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 September 30, 2023 and 2022, the Company recognized income of $9 million and $8 million, respectively, and income of $30 million and $19 million for the nine months ended September 30, 2023 and 2022, 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 with maturity dates through September 2024. 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 September 30, 2023, the Company had approximately $293 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 September 30, 2023, 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 July 2024. Fair market value gains or losses are included in the results of operations and are classified in other (income) expense, net in the Company's Condensed Consolidated Statement of Operations.

Table of Contents

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	September 30, 2023		December 31, 2022
Derivatives designated as effective hedges:
Cash Flow Hedges
Foreign currency contracts	Prepaid expenses and other current assets	$	4	$	5
Foreign currency contracts	Other accrued liabilities	(6)		(9)
Fair Value Hedges

Interest rate swaps	Other accrued liabilities	(23)		(14)
Interest rate swaps	Other noncurrent liabilities	(31)		(16)
Net Investment Hedges
Cross-currency swaps	Prepaid expenses and other current assets	26		28
Cross-currency swaps	Other assets	50		45
Cross-currency swaps	Other noncurrent liabilities	(62)		(75)

Derivatives not designated as effective hedges:
Foreign currency contracts	Prepaid expenses and other current assets	19		19
Foreign currency contracts	Other accrued liabilities	(6)		(10)

Total		$	(29)	$	(27)

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 September 30, 2023				Three Months Ended September 30, 2022
		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	6		(3)		20		9

Cross-currency swaps	Other (income) expense, net	86		—		108		—
Total		$	92	$	(5)	$	128	$	7

		Nine Months Ended September 30, 2023				Nine Months Ended September 30, 2022
		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	$	—	$	(4)	$	—	$	(5)
Foreign currency contracts	Net sales and cost of products sold	(8)		7		39		15

Cross-currency swaps	Other (income) expense, net	16		—		190		—
Total		$	8	$	3	$	229	$	10

Table of Contents

At September 30, 2023, net deferred losses of approximately $7 million within AOCL are expected to be reclassified to earnings over the next twelve months.

During the three months ended September 30, 2023 and 2022, the Company recognized in other (income) expense, net, income of $15 million and expense of $6 million, respectively, and expense of $3 million and $7 million during the nine months ended September 30, 2023 and 2022, respectively, 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.

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				U.S.				International
	Three Months Ended September 30,								Nine Months Ended September 30,
	2023		2022		2023		2022		2023		2022		2023		2022
Service cost	$	—	$	—	$	—	$	1	$	—	$	—	$	2	$	3
Interest cost	11		6		5		1		34		19		13		6
Expected return on plan assets	(13)		(12)		(3)		(1)		(41)		(36)		(9)		(4)
Amortization	1		4		4		1		3		12		5		2
Settlements	—		—		61		—		—		—		66		—
Total (income) expense	$	(1)	$	(2)	$	67	$	2	$	(4)	$	(5)	$	77	$	7


	Postretirement Benefits
	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022

Interest cost	$	1	$	—	$	1	$	—
Amortization	(2)		(1)		(5)		(3)
Total income	$	(1)	$	(1)	$	(4)	$	(3)

U.K. Defined Benefit Plan

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 (“U.K. Plan”), resulting in an exchange of plan assets for an annuity that matches the plan’s future projected benefit obligations (“PBO”) to covered participants.

In April 2023, the Company completed a “buy-out” of approximately 7% of the U.K. Plan's PBO. The “buy-out” was completed by the execution of a Deed Poll Agreement and a Deed of Assignment with an insurance company. In September 2023, the Company completed the “buy-out” of the remaining PBO of the aforementioned plan through the execution of a Deed Poll Agreement and a Deed of Assignment with an insurance company. In connection with these transactions, during the three and nine months ended September 30, 2023, the Company recorded a pretax settlement loss of $61 million and $66 million, respectively, in other (income) expense, net, in the Company's Condensed Consolidated Statement of Operations, related to the recognition of previously unrecognized actuarial losses reclassified from AOCL to losses.

Retiree Annuity Buyout

In October 2023, the Company entered into an agreement with an insurance company to purchase a group annuity contract to settle approximately $160 million to $175 million of projected benefit obligations for approximately 55% of the retirees in one of its U.S. defined benefit pension plans. The transaction for the transfer of the pension liability to the insurance company will be funded with the plan’s existing assets. The Company will record a pretax loss in connection with this transaction to reclassify approximately $60 million to $70 million into earnings from AOCL.

Table of Contents

Footnote 12 — Income Taxes

The Company’s effective income tax rates for the three months ended September 30, 2023 and 2022 was a benefit of 26.8% and 146.3%, respectively, resulting from increased discrete tax benefits combined with increased pretax losses, and benefit of 20.3% and provision of 8.4% for the nine months ended September 30, 2023 and 2022, respectively, resulting from more discrete tax benefits combined with year to date pretax losses.

The differences between the U.S. federal statutory income tax rate of 21.0% and the Company’s effective income tax rate for the three and nine months ended September 30, 2023 and 2022 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 and nine months ended September 30, 2023 were impacted by certain discrete items. Income tax expense for the three months ended September 30, 2023 included discrete tax benefits of $71 million due to the release of a deferred tax liability related to a U.S. legal entity reorganization, $10 million due to the filing of tax returns in various jurisdictions, $16 million associated with impairment charges and $18 million due to the settlement of the U.K. pension plan. The nine months ended September 30, 2023 also included certain discrete items totaling $10 million of additional income tax expense.

The three and nine months ended September 30, 2022 were also impacted by certain discrete items. Income tax expense for the three months ended September 30, 2022 included a discrete benefit of $58 million associated with a change in the Company's indefinite reinvestment assertion regarding certain earnings within its Irish operations, $6 million associated with tradename impairments, $4 million associated with the reduction of a valuation allowance related to operations in the state of Georgia and $2 million associated with the approval of certain state tax credits. The nine months ended September 30, 2022 also included a discrete benefit of $11 million associated with the reduction in valuation allowance related to the integration of certain Brazilian operations and $4 million associated with the approval of certain state tax credits, offset by $16 million of tax expense related to the divestiture of the CH&S business.

The Company’s U.S. federal income tax returns for 2011 to 2015 and 2017 to 2020, as well as certain state and non-U.S. income tax returns for various years, are under examination.

Footnote 13 — Weighted Average Shares Outstanding

The computations of the weighted average shares outstanding for the periods indicated are as follows (in millions):


	Three Months Ended September 30,		Nine Months Ended September 30,
	2023	2022	2023	2022


Basic weighted average shares outstanding	414.2	413.6	414.1	416.4
Dilutive securities (1)	—	1.0	—	1.9
Diluted weighted average shares outstanding	414.2	414.6	414.1	418.3

(1)The three and nine months ended September 30, 2023 excludes 2.1 million and 1.5 million, respectively, of potentially dilutive share-based awards as their effect would be anti-dilutive.

At September 30, 2023 and 2022, there were 0.8 million and 0.1 million, respectively, potentially dilutive restricted stock awards with performance-based targets that were not met and as such, have been excluded from the computation of diluted earnings per share.

Footnote 14 — Stockholders' Equity and Share-Based Compensation

During the three and nine months ended September 30, 2023, the Company granted 4.4 million and 6.0 million, respectively, performance-based restricted stock units (“RSUs”), which had an aggregate grant date fair value of $39 million and $61 million, respectively, including awards granted under the Special Incentive Plan (the “SIP”) on July 5, 2023. These performance-based RSUs entitle the recipients to shares of the Company’s common stock primarily over a two to three-year vesting period, subject to continued employment. The actual number of shares that will ultimately be paid upon vesting is dependent on the level of achievement of the specified performance conditions.

Table of Contents

During the three and nine months ended September 30, 2023, the Company also granted 1.4 million and 4.3 million, respectively, time-based RSUs with an aggregate grant date fair value of $12 million and $53 million, respectively, including awards granted under the SIP on July 5, 2023. These time-based RSUs entitle recipients to shares of the Company’s common stock and primarily vest in annual installments over a one to three-year period, subject to continued employment.

During the nine months ended September 30, 2023, the Company also granted 0.5 million time-based stock options with an aggregate grant date fair value of $2 million. These stock options entitle the 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 dates and vest on the specified anniversaries of the grant dates, subject to continued employment.

The weighted average assumptions used to determine the fair value of stock options granted for the nine months ended September 30, 2023, were as follows:


Risk-free interest rates	3.6	%
Expected volatility	42.1	%
Expected dividend yield	4.4	%
Expected life (in years)	6.9
Exercise price	$12.86

Share Repurchase Program

On February 6, 2022, the Company's Board of Directors authorized a $375 million Share Repurchase Program (“SRP”), effective through its expiration date of December 31, 2022. Under the SRP, the Company was permitted to purchase its common shares 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, at a purchase price of $25.86 per share, the closing price of the Company's common shares on February 18, 2022. During the three months ended June 30, 2022, the Company repurchased approximately $50 million of its shares of common stock at an average price of $22.01 per share. The Company did not repurchase any of its shares of common stock during the three months ended September 30, 2022.

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):


	September 30, 2023								December 31, 2022
	Fair value Asset (Liability)								Fair value Asset (Liability)
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Derivatives:
Assets	$	—	$	99	$	—	$	99	$	—	$	97	$	—	$	97
Liabilities	—		(128)		—		(128)		—		(124)		—		(124)
Investment securities, including mutual funds	15		—		—		15		14		—		—		14

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.

Table of Contents

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.

The Company’s goodwill and indefinite-lived intangibles are fair valued using discounted cash flows. Goodwill impairment testing requires significant use of judgment and assumptions including 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 and discount rates. The testing of indefinite-lived intangibles under established guidelines for impairment also requires significant use of judgment and assumptions, such as the estimation of cash flow projections, terminal values, royalty rates, contributory cross charges, where applicable, and discount rates. Accordingly, these fair value measurements fall in Level 3 of the fair value hierarchy. These assets and certain liabilities are measured at fair value on a nonrecurring basis as part of the Company’s annual impairment testing and as circumstances require.

At September 30, 2023, the goodwill of the Baby reporting unit in the Learning and Development segment and an indefinite-lived tradename in the Outdoor and Recreation segment were recorded at fair values based upon the Company’s impairment testing. The most significant unobservable inputs (Level 3) used to estimate the fair values of the Company's reporting unit goodwill and intangible assets are discount rates. The discount rates used in the measurements were 8.5% for the Baby reporting unit and 11.5% for the Outdoor and Recreation indefinite-lived tradename.

At September 30, 2023, goodwill for the Baby reporting unit in the Learning and Development segment and an indefinite-lived tradename within the Outdoor and Recreation segment were fair valued at $415 million and $35 million, respectively, on a non-recurring basis in connection with triggering events that occurred during the third quarter of 2023. See Footnotes 1 and 7 for further information.

Table of Contents

Footnote 16 — Segment Information

Effective January 1, 2023, as a result of the implementation of a new operating model intended to drive further simplification and unlock additional efficiencies and synergies within the Company, the CODM now reviews the businesses as three operating segments: Home and Commercial Solutions,