Newell Brands Announces First Quarter 2019 Results

Delivers Significant Operating Margin Improvement and Strengthened
Operating Cash Flow

Completed Divestitures of Process Solutions and Rexair Businesses

Reaffirms 2019 Full Year Guidance

HOBOKEN, N.J.–(BUSINESS WIRE)–Newell Brands (NASDAQ: NWL) today announced its first quarter 2019
financial results.

“We have had a good start to the year and are encouraged by the
improvement in results in the first quarter,” said Michael Polk, Newell
Brands President and Chief Executive Officer. “Sales were at the
higher-end of our expectations, operating margins increased as a result
of disciplined cost management, normalized EPS was well ahead of our
expectations, and operating cash flow was significantly improved versus
last year. We have taken decisive action to strengthen performance and
those actions are beginning to yield results. As expected, U.S. retailer
headwinds associated with the Toys ‘R’ Us bankruptcy and the Writing
industry retailer landscape have begun to moderate as we exit the first
quarter, setting up what we believe will be a more constructive
environment for the balance of 2019.”

First Quarter 2019 Executive Summary

  • Net sales from continuing operations were $1.7 billion, a decline of
    5.5 percent compared with $1.8 billion in the prior year period,
    primarily reflecting the impact of unfavorable foreign exchange and a
    decline in core sales.
  • Core sales from continuing operations declined 2.4 percent from the
    prior year period.
  • Reported operating margin was 0.9 percent compared with negative 1.5
    percent in the prior year period. Normalized operating margin was 4.3
    percent compared to 2.5 percent in the prior year period.
  • Reported diluted loss per share for the total company was $0.36
    compared with reported diluted earnings per share of $0.11 in the
    prior year period.
  • Normalized diluted earnings per share for the total company were
    $0.14, compared with $0.28 in the prior year period.
  • Operating cash flow was a use of $200 million, an improvement of $202
    million versus a year ago.
  • The company announced divestitures of two businesses, Process
    Solutions and Rexair, for combined after-tax proceeds of approximately
    $735 million, both of which were completed on May 1, 2019.

First Quarter 2019 Operating Results

Net sales were $1.7 billion, compared to $1.8 billion in the prior year
period, a 5.5 percent decline primarily attributable to the impact of
foreign exchange and a decline in core sales.

Reported gross margin was 31.8 percent compared with 33.4 percent in the
prior year period, as pricing, productivity, and lower restructuring
costs were more than offset by the headwinds from foreign exchange,
tariffs and inflation. Normalized gross margin was 31.9 percent compared
with 33.3 percent in the prior year period.

Reported operating income was $15.0 million, or 0.9 percent of net
sales, compared with a reported operating loss of $26.4 million, or
negative 1.5 percent of net sales, in the prior year period, as the
benefit from a reduction in overhead costs more than offset the negative
impact of foreign exchange, tariffs and inflation. Normalized operating
income was $73.0 million compared with $44.8 million in the prior year
period. Normalized operating margin was 4.3 percent compared to 2.5
percent in the prior year period.

The company reported a tax benefit of $16.7 million, compared with a
benefit of $86.4 million in the prior year period. The normalized tax
benefit was $6.8 million compared with a benefit of $69.9 million in the
prior year period.

The company recorded a $175 million pre-tax non-cash impairment charge
in discontinued operations primarily related to the write-down of the
carrying value of the net assets of certain held for sale businesses
based on their estimated fair value.

The company reported a net loss of $151 million compared with net
earnings of $53.3 million in the prior year period. Reported diluted
loss per share for the total company was $0.36 compared with diluted
earnings per share of $0.11 in the prior year period.

Normalized net income for the total company was $60.9 million, or $0.14
diluted earnings per share, compared with $138 million, or $0.28 diluted
earnings per share, in the prior year period.

Operating cash flow was a use of $200 million compared with a use of
$402 million in the prior year period.

An explanation of non-GAAP measures and a reconciliation of these
non-GAAP results to GAAP measures is included in the tables attached to
this release.

First Quarter 2019 Operating Segment Results

The Learning & Development segment generated net sales of $581 million
compared with $607 million in the prior year period, as strong core
sales growth in the Writing division was more than offset by the impact
of unfavorable foreign exchange and a core sales decline for the Baby
division related to the continued impact of the Toys ‘R’ Us liquidation,
which was announced in March 2018. Core sales declined 1.5 percent as
compared with the prior year period. The company generated approximately
$40 million in sales at Toys ‘R’ Us in the first quarter of 2018.
Reported operating income was $88.5 million compared with $66.2 million
in the prior year period. Reported operating margin was 15.2 percent
compared with 10.9 percent in the prior year period. Normalized
operating income was $94.0 million versus $90.2 million in the year-ago
period. Normalized operating margin was 16.2 percent compared with 14.9
percent in the prior year period.

The Food & Appliances segment generated net sales of $504 million
compared with $534 million in the prior year period, primarily due to
the impact of unfavorable foreign exchange and a core sales decline of
2.7 percent, largely attributable to reduced promotional activity and a
comparison with the prior year’s sell-in associated with an SAP
implementation in Latin America. Reported operating income was $9.3
million compared with $13.4 million in the prior year period. Reported
operating margin was 1.8 percent compared with 2.5 percent in the prior
year period. Normalized operating income was $21.0 million versus $21.7
million in the prior year period. Normalized operating margin was 4.2
percent compared with 4.1 percent in the prior year period.

The Home & Outdoor Living segment generated net sales of $627 million
compared with $670 million in the prior year period, with the change
primarily attributable to the impact of unfavorable foreign exchange,
the exit of approximately 60 underperforming Yankee Candle retail stores
and a core sales decline of 2.9 percent, largely driven by lost
distribution for Coleman at a key U.S. retailer and declines in the
remaining home fragrance retail stores. The segment reported an
operating loss of $1.5 million compared with operating income of $7.8
million in the prior year period. Reported operating margin was a
negative 0.2 percent compared with 1.2 percent in the prior year period.
Normalized operating income was $12.3 million compared with $20.9
million in the prior year period. Normalized operating margin was 2.0
percent compared with 3.1 percent in the prior year.

Outlook for Full Year and Second Quarter 2019

The company reaffirmed its full year outlook and initiated its second
quarter outlook as follows:

     

Full Year 2019 Outlook

Net Sales $8.2 to $8.4 billion
Core Sales Low single digit decline
Normalized Operating Margin 20 to 60 bps improvement
Total Company Normalized EPS $1.50 to $1.65
Total Company Operating Cash Flow $300 to $500 million
 
                       

Q2 2019 Outlook

Net Sales $2.1 to $2.15 billion
Core Sales flat to down 2%
Normalized Operating Margin flat to down 60 bps
Total Company Normalized EPS $0.34 to $0.38
 

The company’s net sales, core sales and normalized operating margin
outlook reflects expected results from continuing operations only.
Normalized earnings per share and operating cash flow guidance reflects
the total company outlook. Full year operating cash flow guidance
continues to assume approximately $200 million in cash taxes and
transaction costs related to divestitures and more than $200 million of
restructuring and related cash costs.

The company has presented forward-looking statements regarding core
sales, normalized earnings per share for the total company and
normalized operating margin on continuing operations. These non–GAAP
financial measures are derived by excluding certain amounts, expenses or
income from the corresponding financial measures determined in
accordance with GAAP. The determination of the amounts that are excluded
from these non-GAAP financial measures is a matter of management
judgment and depends upon, among other factors, the nature of the
underlying expense or income amounts recognized in a given period. We
are unable to present a quantitative reconciliation of forward-looking
full year core sales, normalized earnings per share for the total
company or normalized operating margin on continuing operations to their
most directly comparable forward-looking GAAP financial measures because
such information is not available and management cannot reliably predict
all of the necessary components of such GAAP measures without
unreasonable effort or expense. In addition, we believe such
reconciliations would imply a degree of precision that would be
confusing or misleading to investors. The unavailable information could
have a significant impact on the company’s full-year 2019 financial
results. These non-GAAP financial measures are preliminary estimates and
are subject to risks and uncertainties, including, among others, changes
in connection with quarter-end and year-end adjustments. Any variation
between the company’s actual results and preliminary financial data set
forth above may be material.

Conference Call

The company’s first quarter 2019 earnings conference call will be held
today, May 3, 2019, at 8:30 a.m. ET. A link to the webcast is provided
under Events & Presentations in the Investors section of Newell Brands’
website at www.newellbrands.com.
A webcast replay will be made available in the Quarterly Earnings
section of the company’s website.

Non-GAAP Financial Measures

This release contains non-GAAP financial measures within the meaning of
Regulation G promulgated by the U.S. Securities and Exchange Commission
and includes a reconciliation of these non-GAAP financial measures to
the most directly comparable financial measures calculated in accordance
with GAAP.

The company uses certain non-GAAP financial measures that are included
in this press release and the additional financial information both to
explain its results to stockholders and the investment community and in
the internal evaluation and management of its businesses. The company’s
management believes that these non-GAAP financial measures and the
information they provide are useful to investors since these measures
(a) permit investors to view the company’s performance using the same
tools that management uses to evaluate the company’s past performance,
reportable business segments and prospects for future performance and
(b) determine certain elements of management’s incentive compensation.

The company’s management believes that core sales provides a more
complete understanding of underlying sales trends by providing sales on
a consistent basis as it excludes the impacts of acquisitions, planned
and completed divestitures, retail store openings and closings, certain
market exits, and changes in foreign exchange from year-over-year
comparisons. The effect of changes in foreign exchange on 2019 reported
sales is calculated by applying the prior year average monthly exchange
rates to the current year local currency sales amounts (excluding
acquisitions and divestitures), with the difference between the 2019
reported sales and the constant currency sales presented as the foreign
exchange impact increase or decrease in core sales. The company’s
management believes that “normalized” gross margin, “normalized” SG&A
expense, “normalized” operating income, “normalized” operating margin,
“normalized” net income, “normalized” diluted earnings per share,
“normalized” interest and “normalized” tax rates, which exclude
restructuring and restructuring-related expenses and one-time and other
events such as costs related to the extinguishment of debt, certain tax
benefits and charges, impairment charges, pension settlement charges,
divestiture costs, costs related to the acquisition, integration and
financing of acquired businesses, amortization of intangible assets
associated with acquisitions and certain other items, are useful because
they provide investors with a meaningful perspective on the current
underlying performance of the company’s core ongoing operations.

The company determines the tax effect of the items excluded from
normalized diluted earnings per share by applying the estimated
effective rate for the applicable jurisdiction in which the pre-tax
items were incurred, and for which realization of the resulting tax
benefit, if any, is expected. In situations in which an item excluded
from normalized results impacts income tax expense, the company uses a
“with” and “without” approach to determine normalized income tax expense.

While the company believes these non-GAAP financial measures are useful
in evaluating the company’s performance, this information should be
considered as supplemental in nature and not as a substitute for or
superior to the related financial information prepared in accordance
with GAAP. Additionally, these non-GAAP financial measures may differ
from similar measures presented by other companies.

About Newell Brands

Newell Brands (NASDAQ: NWL) is a leading global consumer goods company
with a strong portfolio of well-known brands, including Paper Mate®,
Sharpie®, Dymo®, EXPO®, Parker®, Elmer’s®, Coleman®, Marmot®, Oster®,
Sunbeam®, FoodSaver®, Mr. Coffee®, Graco®, Baby Jogger®, NUK®,
Calphalon®, Rubbermaid®, Contigo®, First Alert® and Yankee Candle®. For
hundreds of millions of consumers, Newell Brands makes life better every
day, where they live, learn, work and play.

This press release and additional information about Newell Brands are
available on the company’s website, www.newellbrands.com.

Caution Concerning Forward-Looking Statements

Some of the statements in this press release and its exhibits,
particularly those anticipating future financial performance, business
prospects, growth, operating strategies and similar matters, are
forward- looking statements within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995. These statements generally can
be identified by the use of words and phrases such as “intend,”
“anticipate,” “believe,” “estimate,” “project,” “target,” “plan,”
“expect,” “setting up,” beginning to,” “will,” “should,” “would” or
similar statements. We caution that forward-looking statements are not
guarantees because there are inherent difficulties in predicting future
results. In addition, there are no assurances that we will complete any
or all of the potential transactions or other initiatives referenced
above. 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:

  • our dependence on the strength of retail, commercial and industrial
    sectors of the economy in various parts of the world;
  • competition with other manufacturers and distributors of consumer
    products;
  • major retailers’ strong bargaining power and consolidation of our
    customers;
  • our ability to improve productivity, reduce complexity and streamline
    operations;
  • future events that could adversely affect the value of our assets
    and/or stock price and require additional impairment charges;
  • our ability to remediate the material weakness in our internal control
    over financial reporting and maintain effective internal control
    reporting;
  • our ability to develop innovative new products, to develop, maintain
    and strengthen end-user brands and to realize the benefits of
    increased advertising and promotion spend;
  • risks related to our substantial indebtedness, a potential increase in
    interest rates or changes in our credit ratings;
  • our ability to effectively accelerate our transformation plan and to
    execute our divestitures of the remaining assets held for sale;
  • our ability to complete planned acquisitions and divestitures, to
    integrate acquisitions and to offset unexpected costs or expenses
    associated with acquisitions or dispositions;
  • changes in the prices of raw materials and sourced products and our
    ability to obtain raw materials and sourced products in a timely
    manner;
  • the risks inherent to our foreign operations, including foreign
    exchange fluctuations, exchange controls and pricing restrictions;
  • a failure of one of our key information technology systems, networks,
    processes or related controls or those of our service providers;
  • the impact of United States and foreign regulations on our operations,
    including the escalation of tariffs on imports into the U.S. and
    exports to Canada, China and the European Union and environmental
    remediation costs;
  • the potential inability to attract, retain and motivate key employees;
  • the resolution of tax contingencies resulting in additional tax
    liabilities;
  • product liability, product recalls or related regulatory actions;
  • our ability to protect intellectual property rights;
  • significant increases in the funding obligations related to our
    pension plans; and
  • other factors listed from time to time in our filings with the
    Securities and Exchange Commission, including, but not limited to, our
    Annual Report on Form 10-K.

The information contained in this press release and the tables is as of
the date indicated. The company assumes no obligation to update any
forward-looking statements as a result of new information, future events
or developments.

                 
NEWELL BRANDS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Amounts in millions, except per share data)
 
 
For the three months ended March 31,
  2019     2018   % Change
 
Net sales $ 1,712.1 $ 1,811.5 (5.5 )%
Cost of products sold   1,168.3     1,206.2  
GROSS PROFIT 543.8 605.3 (10.2 )%
% of sales 31.8 % 33.4 %
 
Selling, general and administrative expenses 517.9 626.3 (17.3 )%
30.2 % 34.6 %
 
Restructuring costs, net 10.9 5.4
   
OPERATING INCOME (LOSS) 15.0 (26.4 ) 156.8 %
% of sales 0.9 % (1.5 )%
 
Nonoperating expenses:
Interest expense, net 80.2 116.1
Other (income) expense, net   23.3     (1.4 )
103.5 114.7
   
LOSS BEFORE INCOME TAXES   (88.5 )   (141.1 ) 37.3 %
% of sales (5.2 )% (7.8 )%
 
Income tax benefit (16.7 ) (86.4 )
Effective rate 18.9 % 61.2 %
   
LOSS FROM CONTINUING OPERATIONS   (71.8 )   (54.7 ) (31.3 )%
% of sales (4.2 )% (3.0 )%
 
Income (loss) from discontinued operations, net of tax (79.4 ) 108.0
   
NET INCOME (LOSS) $ (151.2 ) $ 53.3   (383.7 )%
% of sales (8.8 )% 2.9 %
 
Weighted average common shares outstanding:
Basic 423.0 486.0
Diluted 423.0 486.0
 
Earnings (loss) per share:
Basic:
Loss from continuing operations $ (0.17 ) $ (0.11 )
Income (loss) from discontinued operations   (0.19 )   0.22  
NET INCOME (LOSS) $ (0.36 ) $ 0.11 (427.3 )%
 
Diluted:
Loss from continuing operations $ (0.17 ) $ (0.11 )
Income (loss) from discontinued operations   (0.19 )   0.22  
NET INCOME (LOSS) $ (0.36 ) $ 0.11 (427.3 )%
 
Dividends per share $ 0.23 $ 0.23
 
                             
NEWELL BRANDS INC.
RECONCILIATION OF GAAP AND NON-GAAP INFORMATION (UNAUDITED)
CERTAIN LINE ITEMS
(Amounts in millions, except per share data)
 
For the three months ended March 31, 2019
GAAP Measure Restructuring Acquisition Transactions Non-GAAP Measure
and restructuring amortization and Other Percentage
Reported related costs [1] and impairment [2] related costs [3] items [4] Normalized* of Sales
 
Net sales $ 1,712.1 $ ─ $ ─ $ ─ $ ─ $ 1,712.1
 
Cost of products sold 1,168.3 (1.2) (0.6) 1,166.5 68.1 %
 
Gross profit 543.8 1.2 0.6 545.6 31.9 %
 
Selling, general and administrative expenses 517.9 (5.2) (33.0) (6.4) (0.7) 472.6 27.6 %
 
Restructuring costs, net 10.9 (10.9)
 
Operating income 15.0 17.3 33.0 6.4 1.3 73.0 4.3 %
 
Non-operating (income) expenses, net 103.5 (17.9) 85.6
 
Income (loss) before income taxes (88.5) 17.3 33.0 6.4 19.2 (12.6)
 
Income tax provision (benefit) [5] (16.7) 3.1 6.2 1.2 (0.6) (6.8)
 
Income (loss) from continuing operations (71.8) 14.2 26.8 5.2 19.8 (5.8)
 
Income (loss) from discontinued operations, net of tax (79.4) 0.3 147.0 (3.8) 2.6 66.7
 
Net income (loss) $ (151.2) $ 14.5 $ 173.8 $ 1.4 $ 22.4 $ 60.9
 
Diluted earnings per share** $ (0.36) $ 0.03 $ 0.41 $ ─ $ 0.05 $ 0.14
 
* Normalized results are financial measures that are not in
accordance with GAAP and exclude the above normalized adjustments.
See below for a discussion of each of these adjustments.
**Adjustments and normalized earnings per share are calculated
based on diluted weighted average shares of 423.4 million shares for
the three months ended March 31, 2019.
Totals may not add due to rounding.
 
[1] Restructuring and restructuring related costs of $17.6 million
($0.3 million of which is reported in discontinued operations).
 
[2] Acquisition amortization costs of $33.0 million; impairment
charges of $174.7 million (reported in discontinued operations)
related to goodwill and other intangible assets of businesses held
for sale.
 
[3] Divestiture costs of $8.4 million ($3.4 million of which is
reported in discontinued operations) primarily related to the
planned divestitures of The United States Playing Cards Company,
Process Solutions and Commercial and Consumer Solutions businesses
and acquisition related costs of $1.4 million; net gain on
disposition of $5.2 million (reported in discontinued operations)
for working capital adjustments related to the sale of the
Waddington, Jostens and Fishing businesses.
 
[4] Loss of $17.1 million due to changes in the fair value of
certain investments; Argentina hyperinflationary adjustment of $4.5
million ($3.0 million of which is reported in discontinued
operations); $0.6 million of other charges, primarily related to
fees for certain legal proceedings and tax adjustment of $4.3
million primarily related to foreign and state tax impacts of
offshore earnings.
 
[5] The Company determined the tax effect of the items excluded from
normalized results by applying the estimated effective rate for the
applicable jurisdiction in which the pre-tax items were incurred,
and for which realization of the resulting tax benefit, if any, is
expected. In certain situations in which an item excluded from
normalized results impacts income tax expense, the Company uses a
“with” and “without” approach to determine normalized income tax
expense.
 
                           
NEWELL BRANDS INC.
RECONCILIATION OF GAAP AND NON-GAAP INFORMATION (UNAUDITED)
CERTAIN LINE ITEMS
(Amounts in millions, except per share data)
 
For the three months ended March 31, 2018
GAAP Measure Restructuring Acquisition Transactions Non-GAAP Measure
and restructuring amortization and Other Percentage
Reported related costs [1] and impairment [2] related costs [3] items [4] Normalized* of Sales
 
Net sales $ 1,811.5 $ ─ $ ─ $ ─ $ ─ $ 1,811.5
 
Cost of products sold 1,206.2 2.8 1,209.0 66.7 %
 
Gross profit 605.3 (2.8) 602.5 33.3 %
 
Selling, general and administrative expenses 626.3 (33.5) (7.5) (27.6) 557.7 30.8 %
 
Restructuring costs, net 5.4 (5.4)
 
Operating income (loss) (26.4) 5.4 33.5 7.5 24.8 44.8 2.5 %
 
Non-operating (income) expenses, net 114.7 0.6 (0.2) 115.1
 
Income (loss) before income taxes (141.1) 5.4 33.5 6.9 25.0 (70.3)
 
Income tax provision (benefit) [5] (86.4) 1.0 8.0 1.6 5.9 (69.9)
 
Income (loss) from continuing operations (54.7) 4.4 25.5 5.3 19.1 (0.4)
 
Income from discontinued operations, net of tax 108.0 3.9 24.1 2.2 0.1 138.3
 
Net income $ 53.3 $ 8.3 $ 49.6 $ 7.5 $ 19.2 $ 137.9
 
Diluted earnings per share** $ 0.11 $ 0.02 $ 0.10 $ 0.02 $ 0.04 $ 0.28
 

Contacts

Investor Contact:
Nancy
O’Donnell
SVP, Investor Relations and
Corporate Communications
+1
(201) 610-6857
[email protected]

Media
Contact:

Claire-Aude Staraci
Director, External
Communications
+1
(201) 610-6717
[email protected]

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