What changed in this filing

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Item 1. Financial Statements

2022-07-29 compared with 2022-04-29 · 201 added, 111 removed, 596 unchanged (34% of the section changed)

5 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Net sales $ 2,534 $ 2,709 $ 4,922 $ 4,997

6 unchanged sentences

Interest expense, net 55 65 114 132

Other income, net ( 124 ) ( 1 )

Other (income) expense, net 8 ( 3 ) ( 116 ) ( 4 )

Income before income taxes 254 243 536 369

13 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Comprehensive income (loss):

6 unchanged sentences

Comprehensive income 102 238 364 293

Total comprehensive loss attributable to noncontrolling interests — ( 1 )

Total comprehensive income attributable to noncontrolling interests — 3 — 2

Total comprehensive income attributable to parent $ 102 $ 235 $ 364 $ 291

29 unchanged sentences

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)

Treasury stock, at cost ( 25.0 shares and 24.5 shares at March 31, 2022 and December 31, 2021, respectively)

Preferred stock ( 10.0 authorized shares, $ 1.00 par value, no shares issued at June 30, 2022 and December 31, 2021)

Common stock ( 800.0 authorized shares, $ 1.00 par value, 438.6 shares and 450.0 shares issued at June 30, 2022 and December 31, 2021, respectively)

Treasury stock, at cost ( 25.0 shares and 24.5 shares at June 30, 2022 and December 31, 2021, respectively)

( 623 ) ( 609 )

9 unchanged sentences

(Amounts in millions)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

Net income $ 438 $ 286

Adjustments to reconcile net income to net cash used in operating activities:

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation and amortization 147 166

Gain from sale of business ( 130 ) —

(Gain) loss from sale of businesses ( 133 ) 2

Deferred income taxes 309 ( 12 )

1 unchanged sentence

Other, net ( 1 ) ( 3 )

Changes in operating accounts excluding the effects of divestiture:

Changes in operating accounts excluding the effects of divestitures:

Accounts receivable ( 177 ) ( 50 )

2 unchanged sentences

Accrued liabilities and other ( 481 ) ( 7 )

Net cash used in operating activities ( 272 ) ( 25 )

Net cash provided by (used in) operating activities ( 450 ) 76

Cash flows from investing activities:

4 unchanged sentences

Cash flows from financing activities:

Short-term debt, net 372 ( 1 )

Payments on current portion of long-term debt ( 2 ) ( 94 )

2 unchanged sentences

Cash dividends ( 195 ) ( 198 )

Acquisition of noncontrolling interest — ( 4 )

Equity compensation activity and other, net ( 35 ) ( 35 )

13 unchanged sentences

Stock Treasury

Stock Additional Paid-In Capital Retained Earnings (Deficit) Accumulated Other Comprehensive Income (Loss) Total Stockholders' Equity

Stock Additional Paid-In Capital Retained Earnings (Deficit) Accumulated Other Comprehensive Loss Total Stockholders' Equity

Balance at March 31, 2022 $ 441 $ ( 623 ) $ 7,384 $ ( 2,368 ) $ ( 854 ) $ 3,980

Comprehensive income (loss) — — — 204 ( 102 ) 102

Dividends declared on common stock - $ 0.23 per share

— — (95) — — ( 95 )

Equity compensation, net of tax — — 10 — — 10

Common stock purchased and retired ( 2 ) — ( 48 ) — — ( 50 )

Balance at June 30, 2022 $ 439 $ ( 623 ) $ 7,251 $ ( 2,164 ) $ ( 956 ) $ 3,947

Balance at December 31, 2021 $ 450 $ ( 609 ) $ 7,734 $ ( 2,602 ) $ ( 882 ) $ 4,091

Comprehensive income — — — 234 28 262

Comprehensive income (loss) — — — 438 ( 74 ) 364

Dividends declared on common stock - $ 0.46 per share

3 unchanged sentences

Other — — ( 1 ) — — ( 1 )

Balance at March 31, 2022 $ 441 $ ( 623 ) $ 7,384 $ ( 2,368 ) $ ( 854 ) $ 3,980

Balance at June 30, 2022 $ 439 $ ( 623 ) $ 7,251 $ ( 2,164 ) $ ( 956 ) $ 3,947

Stock Treasury

Stock Additional Paid-In Capital Retained Earnings (Deficit) Accumulated Other Comprehensive Loss Stockholders' Equity Attributable to Parent Noncontrolling Interests Total Stockholders' Equity

Stock Additional Paid-In Capital Retained Earnings (Deficit) Accumulated Other Comprehensive Income (Loss) Stockholders' Equity Attributable to Parent Noncontrolling Interests Total Stockholders' Equity

Balance at March 31, 2021 $ 450 $ ( 608 ) $ 7,993 $ ( 3,085 ) $ ( 914 ) $ 3,836 $ 25 $ 3,861

Comprehensive income — — — 197 38 235 3 238

Dividends declared on common stock - $ 0.23 per share

— — ( 99 ) — — ( 99 ) — ( 99 )

Equity compensation, net of tax — ( 1 ) 12 — — 11 — 11

Acquisition of noncontrolling interests — — — — — — ( 3 ) ( 3 )

Other changes attributable to noncontrolling interests — — — — 3 3 — 3

Balance at June 30, 2021 $ 450 $ ( 609 ) $ 7,906 $ ( 2,888 ) $ ( 873 ) $ 3,986 $ 25 $ 4,011

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

Comprehensive income — — — 286 6 292 1 293

Dividends declared on common stock - $ 0.46 per share

1 unchanged sentence

Equity compensation, net of tax 2 ( 11 ) 28 — — 19 — 19

Acquisition of noncontrolling interests — — — — — — ( 3 ) ( 3 )

Other changes attributable to noncontrolling interests — — — — 1 1 1 2

Balance at March 31, 2021 $ 450 $ ( 608 ) $ 7,993 $ ( 3,085 ) $ ( 914 ) $ 3,836 $ 25 $ 3,861

Balance at June 30, 2021 $ 450 $ ( 609 ) $ 7,906 $ ( 2,888 ) $ ( 873 ) $ 3,986 $ 25 $ 4,011

See Notes to Condensed Consolidated Financial Statements (Unaudited).

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GAAP for a complete financial statement.

Certain reclassifications have been made in the Company's financial statements of the prior year to conform to current year presentation.

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.

Use of Estimates and Risks

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.

The Company continues to be impacted by the COVID-19 pandemic, inflationary and supply chain pressures, and the indirect macroeconomic impact of the Russia-Ukraine conflict, 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 results of operations and cash flows that form the basis in developing the fair values utilized in its impairment assessments, its annual effective tax rate and other related reserves.

These estimates also include assumptions as to the timing and amount of demand shifts amongst sales channels, workforce availability and supply chain continuity.

Although management has made its best estimates and assumptions based upon current information, actual results could materially differ and may require future changes to such estimates and assumptions, including reserves, which may result in future expense.

Seasonal Variations

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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

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.

Accordingly, the Company’s results of operations for the three and six months ended June 30, 2022 and cash flows for the six months ended June 30, 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 due to the inflationary and supply chain pressures and the volatility and direction of future consumer demand patterns.

Recent Accounting Pronouncements

9 unchanged sentences

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.

Factored receivables at June 30, 2022 associated with the Company's existing factoring agreement (the “Customer Receivables Purchase Agreement”) were approximately $ 545 million, an increase of approximately $ 45 million from December 31, 2021.

During the second quarter of 2022, the Company amended the Customer Receivables Purchase Agreement to (1) increase the amount of certain customer receivables that may be sold under the agreement, (2) add new customers to the agreement and (3) change the reference rate from LIBOR to Secured Overnight Financing Rate (“SOFR”).

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.

The Company records the discount as other (income) expense, 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.

As a result, during the six months ended June 30, 2022, the Company recorded a pretax gain of $ 133 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 three months ended March 31, 2022 (in millions):

The following table displays the changes in Accumulated Other Comprehensive Income (Loss) (“AOCL”) by component, net of tax, for the six months ended June 30, 2022 (in millions):

Adjustment Pension and

4 unchanged sentences

Amounts reclassified to earnings 6 6 ( 2 ) 10

Net current period other comprehensive income 23 5 — 28

Balance at March 31, 2022 $ ( 552 ) $ ( 287 ) $ ( 15 ) $ ( 854 )

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

Net current period other comprehensive income (loss) ( 97 ) 12 11 ( 74 )

Balance at June 30, 2022 $ ( 672 ) $ ( 280 ) $ ( 4 ) $ ( 956 )

Reclassifications from AOCL to the results of operations for the three and six months ended June 30, 2022 and 2021 were pretax (income) expense of (in millions):

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Cumulative translation adjustment (1)

$ — $ — $ 6 $ —

Pension and postretirement benefit plans (2)

Derivative financial instruments (3)

( 4 ) 7 ( 3 ) 11

(1) See Footnote 2 for further information.

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Foreign currency translation adjustments $ 19 $ ( 3 ) $ 20 $ 9

1 unchanged sentence

Derivative financial instruments 4 1 3 3

Income tax provision related to AOCL $ — $ 15

Income tax provision (benefit) related to AOCL $ 24 $ ( 1 ) $ 24 $ 14

Footnote 4 — Restructuring Costs

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Commercial Solutions $ — $ — $ 1 $ —

3 unchanged sentences

Outdoor and Recreation 2 — 2 1

Accrued restructuring costs activity for the three months ended March 31, 2022 are as follows (in millions):

Corporate 2 1 2 1

$ 4 $ 5 $ 9 $ 10

Accrued restructuring costs activity for the six months ended June 30, 2022 are as follows (in millions):

Balance at December 31, 2021 Restructuring

Costs, Net Payments Balance at

March 31, 2022

June 30, 2022

Severance and termination costs $ 8 $ 8 $ ( 9 ) $ 7

3 unchanged sentences

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

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.

The restructuring costs, which impacted all segments, include employee-related costs such as severance and other termination benefits.

During the three and six months ended June 30, 2021, the Company recorded restructuring charges of $ 4 million and $ 9 million, respectively.

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.

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.

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.

During the three and six months ended June 30, 2022, the Company recorded restructuring charges of $ 4 million and $ 9 million, respectively.

Footnote 5 — Inventories

Inventories are comprised of the following at the dates indicated (in millions):

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Raw materials and supplies $ 327 $ 310

4 unchanged sentences

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

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Land $ 76 $ 82

3 unchanged sentences

$ 1,138 $ 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.

Depreciation expense was $ 47 million and $ 51 million for the three months ended June 30, 2022 and 2021, respectively, and $ 96 million and $ 103 million for the six months ended June 30, 2022 and 2021, respectively.

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

Footnote 7 — Goodwill and Other Intangible Assets, Net

Goodwill activity for the three months ended March 31, 2022 is as follows (in millions):

Goodwill activity for the six months ended June 30, 2022 is as follows (in millions):

Segments Net Book Value at December 31, 2021

Net Book Value at

March 31, 2022

June 30, 2022

Commercial Solutions $ 747 $ — $ 916 $ ( 169 ) $ 747

5 unchanged sentences

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

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Accumulated Amortization

5 unchanged sentences

$ 3,824 $ ( 847 ) $ 2,977 $ 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.

Amortization expense for intangible assets for the three months ended June 30, 2022 and 2021 was $ 24 million and $ 29 million, respectively and $ 51 million and $ 63 million for the six months ended June 30, 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

June 30, 2022 December 31, 2021

Customer accruals $ 678 $ 715

1 unchanged sentence

Accrued self-insurance liabilities, contingencies and warranty 117 125

Accrued interest expense 115 56

Accrued marketing and freight expenses 74 59

Accrued interest expense 53 56

Accrued income taxes 52 43

3 unchanged sentences

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

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

3.85 % senior notes due 2023

6 unchanged sentences

5.50 % senior notes due 2046

Commercial paper 112 —

Receivables facility 260 —

Other debt 2 9

3 unchanged sentences

(“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).

Since the S&P upgrade, the Company has been 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.

During the second quarter of 2022, the Company amended the Securitization Facility.

This amendment (1) reduced the aggregate commitment under the Securitization Facility to $ 375 million from $ 600 million, (2) extended its maturity by one year to October 2023 and (3) changed the reference rate under the Securitization Facility from LIBOR to SOFR.

The Securitization Facility 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.

At June 30, 2022, the Company has $ 260 million outstanding under the Securitization Facility.

Revolving Credit Facility and Commercial Paper

The Company maintains a $ 1.25 billion revolving credit facility that matures in December 2023 (the “Credit Revolver”).

Under the Credit Revolver the Company may borrow funds on a variety of interest rate terms.

Since the Credit Revolver provides the committed backup liquidity required to issue commercial paper, the Company may issue commercial paper up to a maximum of $ 800 million provided there is a sufficient amount available for borrowing under the Credit Revolver.

At June 30, 2022, the Company did not have any amounts outstanding under the Credit Revolver, with a net availability of approximately $ 1.1 billion and approximately $ 112 million outstanding under its commercial paper program.

The Credit Revolver also provides for the issuance of up to $ 100 million of letters of credit, so long as there is sufficient amount available for borrowing under the Credit Revolver.

At June 30, 2022, the Company has approximately $ 22 million of outstanding standby letters of credit issued against the Credit Revolver.

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

June 30, 2022 December 31, 2021

Fair Value Book Value Fair Value Book Value

11 unchanged sentences

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.

At June 30, 2022, the Company had approximately $ 100 million notional amount of interest rate swaps that exchange a fixed rate of interest for a 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.

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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.

During the three months ended June 30, 2022 and 2021, the Company recognized income of $ 6 million and $ 3 million, respectively, and income of $ 11 million and $ 7 million for the six months ended June 30, 2022 and 2021, 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.

At June 30, 2022, the Company had approximately $ 375 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.

At June 30, 2022, the Company had approximately $ 1.5 billion notional amount outstanding of these foreign currency contracts that are not designated as effective hedges for accounting purposes and have maturity dates through May 2023.

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.

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

1 unchanged sentence

Assets (Liabilities)

Balance Sheet Location March 31, 2022 December 31, 2021

Balance Sheet Location June 30, 2022 December 31, 2021

Derivatives designated as effective hedges:

7 unchanged sentences

Cross-currency swaps Prepaid expenses and other current assets 17 18

Cross-currency swaps Other assets 42 —

Cross-currency swaps Other noncurrent liabilities — ( 41 )

4 unchanged sentences

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):

March 31, 2022 Three Months

March 31, 2021

June 30, 2022 Three Months

June 30, 2021

Gain/(Loss) Gain/(Loss)

2 unchanged sentences

(effective portion)

Interest rate swaps Interest expense, net $ — $ ( 1 ) $ — $ ( 1 )

Foreign currency contracts Net sales and cost of products sold 20 5 ( 3 ) ( 6 )

Cross-currency swaps Other (income) expense, net 78 — ( 8 ) —

Total $ 98 $ 4 $ ( 11 ) $ ( 7 )

June 30, 2022 Six Months

June 30, 2021

Gain/(Loss) Gain/(Loss)

Location of gain/(loss) recognized in income Recognized

(effective portion)

Interest rate swaps

3 unchanged sentences

Cross-currency swaps

Other income, net 4 — 36 —

Other (income) expense, net 82 — 28 —

Total $ 101 $ 3 $ 28 $ ( 11 )

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.

At June 30, 2022, net deferred gains of approximately $ 23 million within AOCL are expected to be reclassified to earnings over the next twelve months.

During the three and six months ended June 30, 2022, the Company recognized income of $ 2 million and expense of $ 1 million respectively, and expense of $ 3 million and income of $ 4 million, during the three and six months ended June 30, 2021, respectively, in other (income) expense, 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.

3 unchanged sentences

Pension Benefits

International U.S.

International

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021 2022 2021 2022 2021

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Amortization $ ( 1 ) $ ( 1 ) $ ( 2 ) $ ( 2 )

Total income $ ( 1 ) $ ( 1 ) $ ( 2 ) $ ( 2 )

Defined Benefit Plan Buy-in

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.

1 unchanged sentence

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.

The non-cash settlement charge associated with the transaction is expected to be approximately £ 50 million to £ 70 million.

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.

The Company’s effective income tax rates for the three months ended June 30, 2022 and 2021 were 19.7 % and 18.9 %, respectively and 18.3 % and 22.5 % for the six months ended June 30, 2022 and 2021 respectively, reflecting a low effective income tax rate associated with the sale of the CH&S business.

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 six months ended June 30, 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.

The three and six months ended June 30, 2022 were also impacted by certain discrete items.

Income tax expense for the three months ended June 30, 2022 included a discrete benefit of $ 11 million associated with the reduction in valuation allowance related to the integration of certain Brazilian operations .

The six months ended June 30, 2022 also included a discrete benefit of $ 4 million associated with the approval of certain state tax credits, offset by $ 15 million of income tax expense related to the divestiture of the CH&S business unit .

The three and six months ended June 30, 2021 were also impacted by certain discrete items.

Income tax expense for the three and six months ended June 30, 2021 included a discrete benefit of $ 13 million associated with a reduction in valuation allowance related to the integration of certain U.K.

operations and $ 9 million related to a statute of limitation expiration in France.

During the six months ended June 30, 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.

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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.

Therefore, the Company has not accounted for the effects of the Regulations in its Condensed Consolidated Financial Statements for the period ending June 30, 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.

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Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Basic weighted average shares outstanding 413.8 425.4 417.9 425.1

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Diluted weighted average shares outstanding 415.7 427.8 420.2 427.7

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.

During the six months ended June 30, 2022, the Company granted 1.1 million performance-based restricted stock units (“RSUs”), which had an aggregate grant date fair value of $ 29 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.

During the six months ended June 30, 2022, the Company also granted 0.8 million time-based RSUs with an aggregate grant date fair value of $ 20 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.

During the six months ended June 30, 2022, the Company also granted 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.

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:

The weighted average assumptions used to determine the fair value of stock options granted for the six months ended June 30, 2022, is as follows:

Risk-free interest rates 1.9 %

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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.

Under the SRP, the Company may 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 (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.

During the three months ended June 30, 2022, the Company repurchased approximately $ 50 million of its shares of common stock at an average purchase price of $ 22.01 per share.

At June 30, 2022, the Company has remaining authority to repurchase approximately $ 50 million of its shares of common stock under the SRP.

Footnote 15 — Fair Value Disclosures

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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

June 30, 2022 December 31, 2021

Fair value Asset (Liability) Fair value Asset (Liability)

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Segment Key Brands Description of Primary Products

Commercial Solutions Mapa, Quickie, Rubbermaid Commercial Products and Spontex Commercial cleaning and maintenance solutions;

Commercial Solutions Mapa, Quickie, Rubbermaid, Rubbermaid Commercial Products and Spontex Commercial cleaning and maintenance solutions;

closet and garage organization;

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activity-based adhesive and cutting products and labeling solutions

Outdoor and Recreation Coleman, Contigo, ExOfficio and Marmot Products for outdoor and outdoor-related activities

Outdoor and Recreation Campingaz, Coleman, Contigo, ExOfficio and Marmot Products for outdoor and outdoor-related activities

(1) and Ball® TM of Ball Corporation, used under license.

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Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Net sales (1)

Commercial Solutions (3)

$ 429 $ 493 $ 939 $ 964

Home Appliances 346 394 686 754

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Commercial Solutions (3)

$ 43 $ 43 $ 98 $ 93

Home Appliances 15 13 ( 3 ) 16

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Corporate ( 39 ) ( 69 ) ( 95 ) ( 116 )

March 31, 2022 December 31, 2021

$ 317 $ 305 $ 534 $ 497

2022 December 31, 2021

Segment assets

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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.

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

Three Months Ended March 31, 2022

(3) The change in the Commercial Solutions net sales, operating income and segment assets is primarily due to the sale of the CH&S business at the end of the first quarter of 2022.

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

Three Months Ended June 30, 2022

Commercial Solutions Home

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Commercial $ 429 $ — $ — $ — $ — $ 429

Home Appliances — 346 — — — 346

Food — — 304 — — 304

Home Fragrance — — 163 — — 163

Baby — — — 313 — 313

Writing — — — 552 — 552

Outdoor and Recreation — — — — 427 427

Total $ 429 $ 346 $ 467 $ 865 $ 427 $ 2,534

North America $ 314 $ 156 $ 393 $ 656 $ 237 $ 1,756

International 115 190 74 209 190 778

Total $ 429 $ 346 $ 467 $ 865 $ 427 $ 2,534

Three Months Ended June 30, 2021

Commercial Solutions Home

Appliances Home

Solutions Learning and Development Outdoor and Recreation Total

Commercial $ 401 $ — $ — $ — $ — $ 401

Connected Home Security 92 — — — — 92

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Total $ 493 $ 394 $ 525 $ 844 $ 453 $ 2,709

Three Months Ended March 31, 2021

Six Months Ended June 30, 2022

Commercial Solutions Home

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Total $ 939 $ 686 $ 967 $ 1,515 $ 815 $ 4,922

Six Months Ended June 30, 2021

Commercial Solutions Home

Appliances Home

Solutions Learning and Development Outdoor and Recreation Total

Commercial $ 781 $ — $ — $ — $ — $ 781

Connected Home Security 183 — — — — 183

Home Appliances — 754 — — — 754

Food — — 597 — — 597

Home Fragrance — — 432 — — 432

Baby — — — 600 — 600

Writing — — — 861 — 861

Outdoor and Recreation — — — — 789 789

Total $ 964 $ 754 $ 1,029 $ 1,461 $ 789 $ 4,997

North America $ 708 $ 401 $ 826 $ 1,052 $ 433 $ 3,420

International 256 353 203 409 356 1,577

Total $ 964 $ 754 $ 1,029 $ 1,461 $ 789 $ 4,997

Footnote 17 — Litigation and Contingencies

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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.

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 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.

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 .

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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.

, 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.

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On December 30, 2020, two shareholders filed a putative derivative complaint, Weber, et al.

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.

, 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.

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(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.

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and the extent to which the Company’s, and other parties’, status as PRPs is disputed.

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.

The Company’s estimate of environmental remediation costs associated with these matters at June 30, 2022 was $ 36 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

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.

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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.

At June 30, 2022, the Company had approximately $ 45 million in standby letters of credit primarily related to the Company’s self-insurance programs, including workers’ compensation, product liability and medical expenses.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements