What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-02-21 compared with 2023-02-15 · 299 added, 321 removed, 354 unchanged (64% of the section changed)

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This section should be read along with the relevant portions of this Annual Report on Form 10-K for a complete discussion of the events and items summarized below.

Newell Brands is a leading global consumer goods company with a strong portfolio of well-known brands, including Rubbermaid, FoodSaver, Calphalon, Sistema, Sharpie, Paper Mate, Dymo, EXPO, Elmer’s, Yankee Candle, Graco, NUK, Rubbermaid Commercial Products, Spontex, Coleman, Campingaz, Contigo, Oster, Sunbeam and Mr.

Newell Brands' beloved brands enhance and brighten consumers lives at home and outside by creating moments of joy, building confidence and providing peace of mind.

The Company sells its products in nearly 200 countries around the world and has operations on the ground in over 40 of these countries, excluding third-party distributors.

Newell Brands is a leading global consumer goods company with a strong portfolio of well-known brands, including Rubbermaid, Sharpie, Graco, Coleman, Rubbermaid Commercial Products, Yankee Candle, Paper Mate, FoodSaver, Dymo, EXPO, Elmer’s, Oster, NUK, Spontex and Campingaz.

Newell Brands is focused on delighting consumers by lighting up everyday moments.

The Company sells its products in over 150 countries around the world and has operations on the ground in over 40 of these countries, excluding third-party distributors.

Business Strategy

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

The strategy, developed in 2019, is designed to:

• Drive sustainable top line growth by focusing on innovation, sharpening brand positioning, strengthening the international businesses, enhancing digital marketing and omni-channel capabilities, and building customer relationships;

• Improve operating margins by driving productivity and overhead savings, while reinvesting in the business;

• Accelerate the cash conversion cycle by focusing on cash efficiency and improving key working capital metrics;

• Strengthen the portfolio by investing in attractive categories that are aligned with its capabilities and strategy and optimizing product mix;

• Strengthen organizational capabilities and employee engagement by building a winning team and focusing the best people on the right things.

The Company is implementing this strategy while addressing key challenges such as shifting consumer preferences and behaviors;

Following a comprehensive assessment of key capabilities, starting in the second quarter of 2023, the leadership team began implementing an integrated set of new “where to play” and “how to win” strategies designed to enable the Company to leverage the scale of the portfolio, while further building upon its operational foundation and strengthening its front-end capabilities.

As part of its strategy, the Company is focused on:

• Driving meaningful improvement in front-end capabilities, including consumer understanding, brand management, brand communications, innovation and go-to-market execution;

• Disproportionately investing in the Company’s largest and most profitable brands, fastest-growing channels and key geographies;

• Turning the Company’s scale into a competitive advantage, enabling cost savings that provide fuel for reinvestment;

• Transitioning to a high-performance organization as the Company transforms its culture.

The Company is implementing this strategy while continuing to address key challenges such as shifting consumer preferences and behaviors;

a highly competitive operating environment;

a rapidly changing retail landscape;

a rapidly changing retail and consumer landscape;

continued macroeconomic and geopolitical volatility;

a softening macro backdrop;

significant inflationary and supply chain pressures, and an evolving regulatory landscape.

Continued execution of these strategic imperatives, in combination with new initiatives aimed to build operational excellence, will better position the Company for long-term sustainable growth.

a soft macro backdrop;

significant inflationary pressures on consumers and an evolving regulatory landscape.

Execution of these strategic imperatives, in combination with other initiatives aimed to build operational excellence, will better position the Company for long-term sustainable growth.

One such initiative is Project Ovid, a multi-year, customer centric supply chain initiative to transform the Company’s go-to-market capabilities in the U.S., improve customer service levels and drive operational efficiencies.

This initiative, which commenced its first phase go-live during the third quarter of 2022 and its second phase go-live in February 2023, is expected to leverage technology to further simplify the organization by harmonizing and automating processes.

Project Ovid is designed to optimize the Company’s distribution network by creating a single integrated supply chain from 23 business-unit-centric supply chains.

The initiative is intended to reduce administrative complexity, improve inventory and invoicing workflow for our customers and enhance product availability for consumers through omni-channel enablement.

This new operating model is also expected to drive efficiencies by better utilizing the Company's transportation and distribution network.

This initiative, which completed its first phase go-live during the third quarter of 2022 and its second phase go-live during the first quarter of 2023, leveraged technology to further simplify the organization by harmonizing and automating processes.

Project Ovid was designed to optimize the Company’s distribution network by creating a single integrated supply chain from 23 business-unit-centric supply chains.

The initiative was intended to reduce administrative complexity, improve inventory and invoicing workflow for our customers and enhance product availability for consumers through omni-channel enablement.

This new operating model was also expected to drive efficiencies by better utilizing the Company’s transportation and distribution network and consolidating the number of overall distribution sites.

In May 2023, the Company announced a restructuring and cost 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 the execution of the Network Optimization Project.

The Company also expects to incur $30 million to $40 million in capital expenditures related to the Network Optimization Project.

In January 2023, the Company announced a restructuring and savings initiative (“Project Phoenix”) that was intended to strengthen the Company by leveraging its scale to further reduce complexity, streamline its operating model and drive operational efficiencies.

Project Phoenix was substantially implemented by the end of 2023 and incorporated 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 included 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 during the first quarter of 2023, with most of these actions completed by the end of 2023.

The Company estimates that it will incur approximately $100 million to $130 million in restructuring and restructuring-related charges in connection with Project Phoenix.

In January 2024, the Company announced an organizational realignment, which is expected to strengthen the Company’s front-end commercial capabilities, such as consumer understanding and brand communication, in support of the “where to play” and “how to win” strategies the Company unveiled in June of 2023.

In addition to improving accountability, the Company’s organizational realignment is designed to unlock operational efficiencies and cost savings, reduce complexity and free up funds for reinvestment.

As part of the organizational realignment, the Company is making several operating model changes, which entail:

standing up a cross-functional brand management organization, realigning business unit finance to fully support the new global brand management model, further simplifying and standardizing regional go-to-market organizations, and centralizing domestic retail sales teams, the digital technology team, business-aligned accounting personnel, the Manufacturing Quality team, and the Human Resources functions into the appropriate center-led teams to drive standardization, efficiency and scale with a One Newell approach.

The Company will also further optimize the Company’s real estate footprint and pursue other cost reduction initiatives.

These actions are expected to be substantially implemented by the end of 2024, subject to local law and consultation requirements.

The Company estimates that it will incur approximately $75 million to $90 million in restructuring and restructuring-related charges in connection with the organizational realignment.

In addition, the Company continues to review its operating footprint and non-core brands, which will likely result in future restructuring charges.

Organizational Structure

The Company’s five primary operating segments are as follows:

The Company’s three primary operating segments are as follows:

Segment Key Brands Description of Primary Products

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

Home and Commercial Solutions Ball (1) , Calphalon, Crockpot, FoodSaver, Mapa, Mr.

Coffee, Oster, Rubbermaid, Rubbermaid Commercial Products, Sistema, Spontex, Sunbeam, WoodWick and Yankee Candle

Commercial cleaning and maintenance solutions;

closet and garage organization;

hygiene systems and material handling solutions;

Home Appliances Calphalon, Crockpot, Mr.

Coffee, Oster and Sunbeam Household products, including kitchen appliances

Home Solutions Ball (1) , Calphalon, Chesapeake Bay Candle, FoodSaver, Rubbermaid, Sistema, WoodWick and Yankee Candle

household products, including kitchen appliances;

food and home storage products;

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gourmet cookware, bakeware and cutlery and home fragrance products

Learning and Development Aprica, Baby Jogger, Dymo, Elmer’s, EXPO, Graco, Mr.

Sketch, NUK, Paper Mate, Parker, Prismacolor, Sharpie, Tigex, Waterman and X-Acto Baby gear and infant care products;

Learning and Development Dymo, Elmer’s, EXPO, Graco, NUK, Paper Mate, Parker and Sharpie Baby gear and infant care products;

writing instruments, including markers and highlighters, pens and pencils;

art products;

activity-based adhesive and cutting products and labeling solutions

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

activity-based products and labeling solutions

Outdoor and Recreation Campingaz, Coleman, Contigo and Marmot Active lifestyle products for outdoor and outdoor-related activities;

technical apparel and on-the-go beverageware

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

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The Company also provides general corporate services to its segments which is reported as a non-operating segment, Corporate.

Beginning in January 2023, the Company will combine its previously reported Commercial Solutions, Home Appliances and Home Solutions operating segments into one operating segment, Home and Commercial Solutions.

This change by the CODM was driven by the implementation of a new operating model which is intended to drive further simplification and unlock additional efficiencies and synergies within the Company.

The Learning and Development and Outdoor and Recreation operating segments will remain as the Company’s other two operating segments.

The Company will recast prior period comparable results in its first quarter 2023 reporting to conform to this operating segment change.

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, 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.

Prior period comparable results have been reclassified to conform to the operating segment change.

See Footnote 17 of the Notes to Consolidated Financial Statements for further information.

On March 31, 2022, the Company sold its Connected Home and Security (“CH&S”) business to Resideo Technologies, Inc.

The results of operations for CH&S continued to be reported in the Consolidated Statement of Operations as part of the Home and Commercial Solutions segment through March 31, 2022.

Recent Developments

Current Macroeconomic Conditions

The Company, which has been impacted in recent years by inflationary and supply chain pressures, labor shortages, and logistical challenges across its businesses, and more recently by the indirect macroeconomic impact of the Russia-Ukraine conflict, is also experiencing additional headwinds due to softening global demand and an increased focus by retailers to rebalance inventory levels in light of continued inflationary pressures on consumers.

While all of the Company's segments have been negatively impacted to varying degrees by the softening global demand, the Home Appliances and Home Solutions segments have been the most impacted.

These collective macroeconomic trends, the duration and severity of which are highly uncertain, are rapidly changing the retail landscape and have impacted the Company’s operating results, cash flows and financial condition in 2022 and are expected to persist into 2023.

To help mitigate the negative impact of these conditions on the operating performance of its businesses, the Company has secured selective pricing increases, accelerated productivity initiatives, optimized advertising and promotion expenses, deployed overhead cost containment efforts, adjusted demand forecasts and supply plans and taken actions designed to improve working capital.

The Company continues to be impacted by soft global demand, focus by major retailers on rebalancing of inventory levels, inflationary pressures, rising interest rates and indirect impacts from geopolitical conflicts.

These collective macroeconomic trends, the duration or severity of which are highly uncertain, are rapidly changing the retail and consumer landscape and negatively impacted the Company’s operating results, cash flows and financial condition during 2023 and are mostly expected to persist into 2024.

To help mitigate the negative impact of these conditions to the operating performance of its businesses, the Company has secured selective pricing increases, accelerated productivity initiatives, optimized advertising and promotion expenses, deployed overhead cost containment efforts, adjusted demand forecasts and supply plans, and taken actions designed to improve working capital.

The Company will continue to evaluate other opportunities to improve its financial performance both in the short and long term.

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.

Russia-Ukraine Conflict

The global economy has been negatively impacted by the military conflict between Russia and Ukraine.

While the Company does not expect the conflict to have a material impact on its results of operations, it has experienced shortages in raw materials and increased costs for transportation, energy, and commodities due in part to the negative impact of the Russia-Ukraine military conflict on the global economy.

Further escalation of geopolitical tensions related to the conflict, including increased trade barriers and restrictions on global trade, could result in, among other things, supply disruptions, lower consumer demand, and changes to foreign exchange rates and financial markets, any of which may adversely affect our business and supply chain.

Additionally, if the military conflict escalates beyond its current scope, the Company could be negatively impacted by an economic recession in certain neighboring European countries or globally.

Geopolitical Conflicts

The global economy has been negatively impacted by military conflicts, such as the Russia-Ukraine conflict and the conflicts in the Middle East.

While the Company does not expect these conflicts to have a material impact on its results of operations, it has experienced supply chain disruptions, shortages in raw materials and increased costs for transportation, energy and commodities due in part to the negative impact of these conflicts on the global economy.

Further escalation of geopolitical tensions, including

increased trade barriers and restrictions on global trade, could result in, among other things, supply disruptions, lower consumer demand, and changes to foreign exchange rates and financial markets, any of which may adversely affect our business and supply chain.

Additionally, if these military conflicts escalate beyond their current scope, the Company could be negatively impacted by localized or global economic recessions.

See Results of Operations, Critical Accounting Estimates and Footnote 1 of the Notes to Consolidated Financial Statements for further information.

Network Optimization Project

During the year ended December 31, 2023, the Company recorded restructuring and restructuring-related charges of $7 million and $16 million, respectively in connection with the project.

Project Phoenix

In January 2023, the Company announced a restructuring and savings initiative (“Project Phoenix”) that aims to strengthen the Company by leveraging its scale to further reduce complexity by streamlining its operating model and driving operational efficiencies.

Project Phoenix is expected to be substantially completed by the end of 2023.

It incorporates a variety of initiatives designed to simplify the organizational structure, streamline the company’s real estate, centralize its 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.

During the year ended December 31, 2023, the Company recorded restructuring and restructuring-related charges of $78 million and $19 million, respectively in connection with the project.

See Risk Factors in Item 1A .

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Goodwill and Other Indefinite-Lived Intangible Asset Impairments

During the fourth quarter of 2022, as a result of the Company's annual impairment testing, the Company recorded a non-cash impairment charge to write-off the remaining $56 million of goodwill for its Home Fragrance reporting unit, in the Home Solutions segment, as the carrying value exceeded its fair value.

The Company also recorded an aggregate impairment charge of $270 million to certain tradenames in the Home Fragrance and Food reporting units, in the Home Solutions segment, and the Baby reporting unit, in the Learning and Development segment, as the carrying values for each tradename exceeded their fair values.

During the fourth quarter of 2023, as a result of the Company's annual impairment testing, the Company recorded a non-cash impairment charge of $68 million related to two tradenames in the Home and Commercial Solutions segment, as the carrying values of the tradenames exceeded their fair values.

See Critical Accounting Estimates and Footnotes 1 and 7 of the Notes to Consolidated Financial Statements for further information.

Debt Redemption

On October 19, 2022, the Company redeemed its 3.85% senior notes due April 2023 at a redemption price equal to 100.002% of the outstanding aggregate principal amount of the notes, plus accrued and unpaid interest to the date of the redemption.

The total consideration was approximately $1.09 billion, and the Company recorded a debt extinguishment loss of $1 million.

Debt Rating Downgrades

On February 9, 2024, Moody’s Corporation (“Moody’s”) downgraded the Company’s senior unsecured debt rating to “Ba3”, subjecting certain of the Company’s outstanding senior notes currently aggregating to approximately $3.1 billion (the “Coupon-Step Notes”) to an additional 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 $6 million in 2024).

On February 14, 2024, S&P Global Inc.

(“S&P”) downgraded the Company’s debt ratings to “BB-”, subjecting the Company’s Coupon-Step Notes to an additional interest rate adjustment of 25 basis points, which will increase interest expense by approximately $8 million on an annualized basis (approximately $6 million in 2024).

See Footnote 9 of the Notes to Consolidated Financial Statements for further information.

Amendments to Credit Revolver

As of December 31, 2023, the Company maintained a $1.5 billion senior unsecured revolving credit facility (the “Credit Revolver”) maturing in August 2027.

On March 27, 2023, the Company entered into an amendment to its Credit Revolver (the “First 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 First Amendment, and (ii) lower the Interest Coverage Ratio, as defined in the First Amendment, for the fiscal quarters ending on June 30, 2023, September 30, 2023, December 31, 2023 and March 31, 2024.

See Footnote 9 of the Notes to Consolidated Financial Statements for further information.

On February 7, 2024, the Company, certain of its subsidiaries, as subsidiary borrower, and certain of its subsidiaries, as subsidiary guarantors, entered into a second amendment to the Credit Revolver (the “Second Amendment”).

The Second Amendment, among other things, (i) reduces the commitments of the lenders from $1.5 billion to $1.0 billion (ii) replaces the Company’s financial covenants with new financial covenants testing the Company’s Collateral Coverage Ratio and Total Net Leverage Ratio (each further defined in the Second Amendment), (iii) requires the Company and certain of the Company’s domestic and foreign subsidiaries (collectively the “Guarantors”) to guarantee all obligations under the Credit Revolver including, without limitation, obligations in respect of extensions of credit to any of the borrowers, certain hedging obligations, certain cash management obligations, and certain supply chain financing obligations, and (iv) requires the Company and the other Guarantors to grant a lien and security interest in certain of its assets consisting of eligible accounts receivable, eligible inventory,

eligible equipment and eligible intellectual property, and all products and proceeds of the foregoing.

See Footnote 9 of the Notes to Consolidated Financial Statements for further information.

New Accounts Receivables Facility

On October 2, 2023, the Company, through a wholly-owned special purpose entity (“SPE”) entered into a three-year agreement with a financial institution to sell up to $225 million, between February and April of each year and up to $275 million at all other times, of certain customer receivables without recourse on a revolving basis (the “New Receivables Facility”).

Under the New Receivables Facility, certain of the Company’s subsidiaries continuously sell their accounts receivables, originated in the U.S., to the SPE and the SPE sells the receivables to the financial institution.

The SPE is a variable interest entity for which the Company is considered to be the primary beneficiary.

The SPE’s sole business consists of the purchase of receivables from certain subsidiaries of the Company and the subsequent transfer of such receivables to the financial institution.

Although the SPE is included in the Company’s consolidated financial statements, it is a separate legal entity with separate creditors.

The assets of the SPE are not available to pay creditors of the Company or its subsidiaries.

The fair value of these servicing arrangements as well as the fees earned was immaterial.

The Company accounts for receivables sold from the SPE to the financial institution as a sale of financial assets and derecognizes the trade receivables from the Company’s Consolidated Balance Sheet.

The balance of outstanding accounts receivables sold to the financial institution as of December 31, 2023 was $45 million.

Cash received under the New Receivables Facility is included in cash from operating activities in the Consolidated Statements of Cash Flows.

See Footnote 1 of the Notes to Consolidated Financial Statements for further information.

Results of Operations

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Gross margin 28.9 % 30.0 %

Operating income 312 1,013 (701) (69.2)%

Operating income (loss) (85) 312 (397) NM

Operating margin (1.0) % 3.3 %

Interest expense, net 283 235 48 20.4%

Loss on extinguishment of debt 1 5 (4) (80.0)%

Other income, net (81) (8) (73) NM

Income before income taxes 157 760 (603) (79.3)%

Income tax provision (benefit) (40) 138 (178) NM

Other (income) expense, net 175 (81) 256 NM

Income (loss) before income taxes (543) 157 (700) NM

Income tax benefit (155) (40) (115) NM

Income tax rate 28.5 % (25.5) %

Net income $ 197 $ 622 (425) (68.3)%

Diluted earnings per share - attributable to common shareholders $ 0.47 $ 1.45

Net income (loss) $ (388) $ 197 (585) NM

Diluted earnings (loss) per share $ (0.94) $ 0.47

NM — NOT MEANINGFUL

Net sales decreased 11%, as pricing actions by the Company were more than offset by softening global demand, as retailers significantly pulled back on orders in an effort to rebalance inventory, a negative 3% impact to net sales related to the sale of the CH&S business at the end of the first quarter of 2022 and category exits in the Home Appliances and Outdoor and Recreation segments.

The net sales performance also reflected the lapping of elevated levels of demand in certain categories during the prior year.

Changes in foreign currency unfavorably impacted net sales by $300 million, or 3%.

Gross profit decreased 16% and gross margin declined to 30.0% as compared with 31.8% in the prior year period.

The decrease in gross margin reflected higher absorption costs associated with a lower sales volume, higher sales promotional activities to reduce elevated inventory levels, as well as significant input cost inflation for commodities, sourced finished goods, transportation and labor, which had a negative high-single-digit-percentage impact to costs of products sold.

The gross margin decline was partially offset by favorable net pricing and gross productivity.

The gross profit decline also reflected the unfavorable impact of the sale of the CH&S business.

Net sales decreased 14%.

Net sales were unfavorably impacted by soft global demand, distribution losses and category exits, primarily in the Home and Commercial Solutions segment, partially offset by pricing actions by the Company.

The sale of the CH&S business at the end of the first quarter of 2022, negatively impacted net sales by approximately 1%.

Changes in foreign currency unfavorably impacted net sales by $38 million, or less than 1%.

Gross profit decreased 17% compared to prior year.

Gross margin declined to 28.9% as compared with 30.0% in the prior year.

The decline in gross margin reflected higher absorption cost associated with lower sales volume, higher sales promotional activities to reduce elevated inventory levels, inflation and higher restructuring-related charges, partially offset by favorable pricing and productivity.

The gross profit decline also reflected the unfavorable impact of the sale of the CH&S business in the prior year.

Changes in foreign currency exchange rates unfavorably impacted gross profit by $38 million, or 1%.

Notable items impacting operating income for 2022 and 2021 are as follows:

Notable items impacting operating income (loss) for 2023 and 2022 are as follows:

Years Ended December 31,

(in millions) 2023 2022 $ Change

Impairment of goodwill and intangible assets ( See Footnote 7)

Impairment of goodwill and intangible assets ( See Footnotes 1 and 7)

$ 339 $ 474 $ (135)

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Restructuring costs for 2023 and 2022 were $95 million and $15 million, respectively.

(b) Transaction and other costs for 2022 primarily related to completed divestitures, expenses associated with certain legal proceedings, an indirect tax reserve for an international entity and an incremental bad debt reserve for an international customer.

Transaction and other costs for 2021 primarily related to completed divestitures and costs associated with certain legal proceedings.

Operating income decreased to $312 million in 2022 as compared to $1.01 billion in 2021.

The decline reflects the impact of lower gross profit, partially offset by gross productivity, as well as lower incentive compensation expense, advertising and promotion costs and overhead spending.

Operating income was also negatively impacted by higher current year non-cash impairment charges relating to goodwill and indefinite-lived tradenames.

Interest expense, net decreased primarily due to lower long-term debt levels during the first half of 2022 and higher interest income.

(b) Transaction and other costs for 2023 primarily relate to completed divestitures, expenses associated with certain legal proceedings and inventory reserve due to change in raw material regulation.

Transaction and other costs for 2022 primarily relate to completed divestitures, expenses associated with certain legal proceedings, an indirect tax reserve for an international entity and an incremental bad debt reserve for an international customer.

Operating loss was $85 million as compared to operating income of $312 million in the prior year period.

The decline reflects the impact of lower gross profit, higher restructuring and restructuring-related charges, primarily in connection with Project Phoenix, the Network Optimization Project and other on-going facility closures and higher incentive compensation expense, partially offset by lower non-cash impairment charges, lower advertising and promotion costs, savings from restructuring actions and an employee retention credit in connection with the CARES Act.

Interest expense, net increased primarily due to higher interest rates, partially offset by higher interest income.

The weighted average interest rates for 2023 and 2022 were approximately 5.2% and 4.3%, respectively.

See Footnote 9 of the Notes to Consolidated Financial Statements for further information.

The loss on the extinguishment of debt of $1 million and $5 million for 2022 and 2021, respectively, are related to the Company’s redemption of certain of its senior notes.

See Footnote 9 of the Notes to the Consolidated Financial Statements for further information.

Other income, net, for 2022 and 2021 include the following items:

Other (income) expense, net for 2023 and 2022 include the following items:

Years Ended December 31,

(in millions) 2023 2022

Foreign exchange losses, net (See Footnotes 10 and 19 )

Gain on disposition of businesses, net (See Footnote 2 )

Other (gains) losses, net 8 (12)

The income tax benefit for 2022 was $40 million as compared to provision of $138 million in 2021.

The effective tax rate for 2022 was (25.5)%, reflecting an increase in discrete tax benefits, as compared to 18.2% for 2021.

The year ended December 31, 2022 included discrete benefits of $58 million associated with a change in the Company's indefinite reinvestment assertion regarding certain earnings within its Irish operations, $28 million associated with the reduction in valuation allowance related to the integration of certain Brazilian and Luxembourg operations and $6 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 .

Income tax expense for the year ended December 31, 2021 included a discrete benefit of $37 million associated with a reduction in valuation allowance related to the integration of certain Luxembourg operations, $13 million associated with a reduction of in valuation allowance related to the integration of certain U.K.

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

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

Treasury Regulations enacted in 2020.

Pension settlement and non-service costs, net (See Footnote 11 )

Gain on disposition of businesses (See Footnote 2 )

Foreign exchange losses, net (See Footnote 10 )

Discount on factored receivables and other, net 28 8

The income tax benefit for 2023 was $155 million as compared to benefit of $40 million in 2022.

The effective tax rate for 2023 was 28.5%, resulting from the combination of pretax book losses and discrete tax benefits of $112 million due to the effects of certain legal entity reorganizations in the U.S.

and Luxembourg and $10 million due to the filing of tax returns in various jurisdictions.

The year ended December 31, 2022 included discrete benefits of $58 million associated with a change in the Company’s indefinite reinvestment assertion regarding certain earnings within its Irish operations, $28 million associated with the reduction in valuation allowance related to the integration of certain Brazilian and Luxembourg operations and $6 million associated with the approval of certain state tax credits, offset by $14 million of income tax expense related to the divestiture of CH&S.

See Footnote 12 of the Notes to Consolidated Financial Statements for further information on income taxes.

Business Segment Operating Results 2023 vs.

Commercial Solutions

Years Ended December 31,

(in millions) 2022 2021 $ Change % Change

Net sales $ 1,691 $ 1,953 $ (262) (13.4)%

Operating income 143 159 (16) (10.1)%

Operating margin 8.5 % 8.1 %

Notable items impacting operating income comparability:

Impairment of intangible assets (See Footnote 7 )

Commercial Solutions net sales for 2022 decreased 13%, which primarily reflected the sale of the CH&S business at the end of the first quarter of 2022, which unfavorably impacted net sales by approximately 16%, partially offset by growth in the Commercial business unit primarily driven by pricing actions and improved order fulfillment resulting from the easing of supply chain constraints.

Changes in foreign currency unfavorably impacted net sales by $57 million, or 3%.

Operating income for 2022 decreased to $143 million as compared to $159 million in 2021.

The decrease in operating results is due to lower gross profit, due to significant input cost inflation, primarily resin, energy and metals, sourced finished goods, transportation and labor, as well as the unfavorable impact of the CH&S sale.

The decrease in operating results were partially offset by gross productivity, lower compensation expense and the lapping of the prior-year non-cash impairment charge of an indefinite-lived intangible asset.

Home Appliances

Years Ended December 31,

(in millions) 2022 2021 $ Change % Change

Net sales $ 1,390 $ 1,738 $ (348) (20.0) %

Operating income (loss) (47) 70 (117) NM

Operating margin (3.4) % 4.0 %

Notable items impacting operating income (loss) comparability:

Impairment of intangible assets (See Footnote 7 )

Indirect tax reserve 23 — 23

Bad debt reserve 8 — 8

NM — NOT MEANINGFUL

Home Appliances net sales for 2022 decreased 20%, which reflects softening global demand, certain category exits and the lapping of elevated levels of demand during the prior year, partially offset by pricing actions.

Changes in foreign currency unfavorably impacted net sales by $26 million, or 2%.

Operating loss for 2022 was $47 million as compared to operating income of $70 million in 2021.

The decline in operating results is primarily due to lower gross profit leverage, higher absorption costs associated with lower sales volume, higher sales promotional activities to reduce elevated inventory levels and significant input cost inflation associated with transportation costs and sourced finished goods, partially offset by gross productivity, lower incentive compensation expense and lower advertising and promotion expense.

The operating results were also negatively impacted by the non-cash impairment charge related to an indefinite-lived asset, indirect tax reserve related to an international entity and incremental bad debt reserve for an international customer.

Home Solutions

Home and Commercial Solutions

Years Ended December 31,

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Notable items impacting operating income (loss) comparability:

Impairment of goodwill and other intangible assets (See Footnote 7 )

Home Solutions net sales for 2022 decreased 11%, reflecting decreases in both the Food and Home Fragrance business units.

The Food business unit decline reflects softening global demand and lost distribution in one product line at a key customer, partially offset by pricing actions.

The decline in Home Fragrance business unit sales reflects softening global demand, as well as the exit of approximately 43 Yankee Candle retail stores during the year, partially offset by pricing actions.

The net sales performance for the segment also reflected the lapping of elevated demand during the prior year.

Changes in foreign currency unfavorably impacted net sales by $50 million, or 2%.

Operating loss for 2022 was $308 million as compared to operating income of $337 million in 2021.

The decrease in operating results is primarily due to the non-cash impairment charges in both the Food and Home Fragrance reporting units, lower gross profit leverage, higher absorption costs associated with lower sales volume, higher sales promotional activities to reduce elevated inventory levels and significant input cost inflation for commodities, primarily metals and wax, transportation, labor and sourced finished goods.

This decrease was partially offset by gross productivity and lower incentive compensation expense.

Impairment of goodwill and intangible assets (See Footnotes 1 and 7 )

Home and Commercial Solutions net sales for 2023 decreased 15%, which reflected soft demand across all businesses, the sale of the CH&S business at the end of the first quarter of 2022, which unfavorably impacted net sales by approximately 2%, as well as certain category exits and distribution losses, primarily in the Kitchen business, partially offset by pricing actions.

Changes in foreign currency unfavorably impacted net sales by $14 million.

Operating income for 2023 was $37 million as compared to operating loss of $212 million in the prior year.

The improvement in operating results is primarily due to gross productivity, pricing actions, lower non-cash impairment charges and advertising and promotional costs, as well as savings from restructuring actions, partially offset by lower gross profit reflecting higher absorption costs associated with lower sales volume, as well as higher restructuring and restructuring-related charges in connection with Project Phoenix.

The sale of CH&S business in the prior year also unfavorably impacted the operating results.

Learning and Development

5 unchanged sentences

Notable items impacting operating income comparability:

Impairment of intangible assets (See Footnote 7 )

Learning and Development net sales for 2022 decreased 3%, reflecting decreases in both the Writing and Baby business units.

The Writing business unit performance reflects logistical constraints and supply chain shortages, particularly in labelling, and softening demand in certain categories in the U.S., partially offset by pricing actions.

The Baby business unit performance reflects softening demand in certain categories in the U.S., as the business lapped elevated levels of demand during the prior year, partially offset by pricing actions.

Changes in foreign currency unfavorably impacted net sales by $96 million, or 3%.

Impairment of goodwill and intangible assets (See Footnotes 1 and 7 )

Learning and Development net sales for 2023 decreased 8%, primarily due to a decline in the Baby business.

The Writing business declined slightly due to soft demand in certain categories, partially offset by pricing actions and innovation.

Pricing actions in the Baby business were more than offset by soft demand in certain categories and lower sales to a customer that declared bankruptcy.

Changes in foreign currency unfavorably impacted net sales by $10 million.

Operating income for 2023 decreased to $213 million as compared to $593 million in the prior-year period.

The decrease in operating income is primarily due to significant input cost inflation for sourced finished goods, transportation and labor, partially offset by gross productivity and lower compensation costs.

The improvement in operating margin primarily reflects net pricing performance.

The decrease in operating income is primarily due to lower gross profit reflecting higher absorption costs associated with lower sales volume and inflation, as well as higher charges for non-cash goodwill impairment, restructuring and restructuring-related charges in connection with Project Phoenix and advertising and promotion costs, partially offset by gross productivity, favorable pricing and savings from restructuring actions.

Outdoor and Recreation

2 unchanged sentences

Net sales $ 999 $ 1,315 $ (316) (24.0)%

Operating income 86 90 (4) (4.4)%

Operating income (loss) (83) 86 (169) NM

Operating margin (8.3) % 6.5 %

Outdoor and Recreation segment net sales for 2022 decreased 11% primarily due to softening U.S.

demand and certain category exits, partially offset by pricing actions and improved product availability.

The net sales performance for this segment also reflects the lapping of elevated levels of demand in the prior year.

Notable items impacting operating income (loss) comparability:

Impairment of goodwill and intangible assets (See Footnotes 1 and 7 )

Outdoor and Recreation net sales for 2023 decreased 24% primarily reflecting soft global demand and distribution losses, partially offset by pricing actions.

Changes in foreign currency unfavorably impacted net sales by $14 million or 1%.

Operating income for 2022 was $86 million as compared to $90 million in the prior year period.

This performance was primarily due to input cost inflation for commodities, sourced finished goods and transportation, and higher advertising and promotional costs, partially offset by lower overhead spending and incentive compensation costs.

The improvement in operating margin primarily reflects net pricing performance and the exit from certain low margin product categories.

Operating loss for 2023 was $83 million as compared to operating income of $86 million in the prior-year period.

The decline was primarily due to lower gross profit caused by unfavorable fixed cost leverage associated with lower sales volume, inflation, higher sales promotional activities to reduce elevated inventory levels, non-cash impairment charge related to an indefinite-lived tradename and higher restructuring and restructuring-related charges in connection with Project Phoenix, partially offset by gross productivity, favorable pricing, savings from restructuring actions and lower advertising costs.

Consolidated Operating Results 2022 vs.

4 unchanged sentences

Gross margin 30.0 % 31.8 %

Operating income (loss) 1,013 (629) 1,642 NM

Operating income 312 1,013 (701) (69.2)%

Operating margin 3.3 % 9.6 %

Interest expense, net 235 256 (21) (8.2)%

Loss on extinguishment of debt 5 20 (15) (75.0)%

Other (income) expense, net (8) 78 (86) NM

Income (loss) before income taxes 760 (1,001) 1,761 NM

Other income, net (81) (8) (73) NM

Income before income taxes 157 760 (603) (79.3)%

Income tax provision (benefit) (40) 138 (178) NM

Income tax rate (25.5) % 18.2 %

Net income (loss) $ 622 $ (766) $ 1,388 NM

Diluted earnings (loss) per share - attributable to common shareholders $ 1.45 $ (1.81)

Net income $ 197 $ 622 $ (425) (68.3)%

Diluted earnings per share $ 0.47 $ 1.45

NM — NOT MEANINGFUL

Net sales for 2021 increased 13%, with all segments and major geographic regions showing growth.

This growth reflects favorable net pricing (including lower promotion spending with customers), as well as strong demand for the hand protection, garage and outdoor organization, kitchen appliance, fresh preserving, cookware, bakeware, scented candle, baby gear, writing, labeling, and outdoor categories.

Net sales growth was negatively impacted by supply chain shortages and logistical challenges which continued into 2022.

Changes in foreign currency favorably impacted net sales by $101 million, or 1%.

Gross profit for 2021 increased 9% and gross profit margin declined to 31.8% as compared with 32.9% in the prior year period.

The increase in gross profit was driven by gross volume leverage, gross productivity and favorable net pricing, partially offset by significant input cost inflation for commodities, primarily resin, sourced finished goods, transportation and labor, which had a negative high-single-digit-percentage impact to costs of products sold.

The gross margin decline reflected, in part, a timing lag between inflation and the full impact of responsive pricing actions.

Changes in foreign currency exchange rates favorably impacted gross profit by $30 million, or 1%.

Notable items impacting operating income (loss) for 2021 and 2020 are as follows:

Net sales decreased 11%, as pricing actions by the Company were more than offset by softening global demand, category exits in the Home and Commercial Solutions and Outdoor and Recreation segments and a negative 3% impact to net sales related to the sale of CH&S at the end of the first quarter of 2022.

The net sales performance also reflected the lapping of elevated levels of demand in certain categories during the prior year.

Changes in foreign currency unfavorably impacted net sales by $300 million, or 3%.

Gross profit decreased 16% and gross margin declined to 30.0% as compared with 31.8% in the prior year period.

The gross margin decline was partially offset by favorable net pricing and gross productivity.

The gross profit decline also reflected the unfavorable impact of the sale of CH&S.

Changes in foreign currency exchange rates unfavorably impacted gross profit by $105 million, or 3%.

Notable items impacting operating income for 2022 and 2021 are as follows:

Years Ended December 31,

(in millions) 2022 2021 $ Change

Impairment of goodwill and intangible assets (See Footnote 7 )

Impairment of goodwill and intangible assets (See Footnotes 1 and 7 )

$ 474 $ 60 $ 414

1 unchanged sentence

Transactions and other costs (b)

(a) Restructuring-related costs reported in cost of products sold and SG&A for 2021 were $22 million and $8 million, respectively, and primarily related to facility closures.

Restructuring-related costs for 2020 were $4 million reported in cost of products sold and $19 million reported in SG&A and primarily relate to accelerated depreciation associated with restructuring activities.

(a) Restructuring-related costs reported in cost of products sold and SG&A for 2022 were $22 million and $2 million, respectively, and primarily relate to facility closures.

Restructuring-related costs reported in cost of products sold and SG&A for 2021 were $22 million and $8 million, respectively, and primarily relate to facility closures.

Restructuring costs for 2022 and 2021 were $15 million and $16 million, respectively.

(b) Transaction and other costs for 2021 and 2020 primarily relate to completed divestitures and costs associated with certain legal proceedings.

Operating income increased to $1.01 billion in 2021 as compared to an operating loss of $629 million in 2020.

The operating results in 2020 included $1.5 billion of non-cash impairment charges of goodwill and certain indefinite-lived intangibles and other assets.

The 2021 performance reflected the gross profit performance noted above and cost savings from Yankee Candle retail store closures, partially offset by higher incentive compensation expense and advertising and promotional costs.

The year-over-year comparison of the Company's operating results to the prior year reflects the impact of the most depressed consumption levels resulting from the COVID-19 related lockdowns which occurred in the second quarter of 2020, and the lapping of the improved operating performance in the second half of 2020, as the Company's manufacturing sites and Yankee Candle stores were reopened, other retail stores were reopened, and consumer demand for certain categories returned.

In addition, the Company's operating results for 2021 were impacted by the volatility and uncertainty of the direction of demand patterns, as well as inflation and supply chain shortages and logistical challenges which continued into 2022.

Interest expense, net for 2021 decreased primarily due to lower debt levels.

(b) Transaction and other costs for 2022 primarily relate to completed divestitures, expenses associated with certain legal proceedings, an indirect tax reserve for an international entity and an incremental bad debt reserve for an international customer.

Transaction and other costs for 2021 primarily relate to completed divestitures and costs associated with certain legal proceedings.

Operating income decreased to $312 million in 2022 as compared to $1.0 billion in 2021.

The decline reflects the impact of lower gross profit, as well as lower incentive compensation expense, advertising and promotion costs and overhead spending.

Operating income was also negatively impacted by higher current year non-cash impairment charges relating to goodwill and indefinite-lived tradenames.

Interest expense, net decreased primarily due to lower long-term debt levels during the first half of 2022 and higher interest income.

The weighted average interest rates for 2022 and 2021 were approximately 4.3% and 4.7%, respectively.

See Footnote 9 of the Notes to Consolidated Financial Statements for further information.

The loss on the extinguishment of debt of $5 million and $20 million for 2021 and 2020, respectively, were related to the Company’s tender offer of certain of its senior notes and debt redemptions.

See Footnote 9 of the Notes to Consolidated Financial Statements for further information.

Other (income) expense, net for 2021 and 2020 include the following items:

The loss on the extinguishment of debt of $1 million and $5 million for 2022 and 2021, respectively, are related to the Company’s redemption of certain of its senior notes.

See Footnote 9 of the Notes to the Consolidated Financial Statements for further information.

Other income, net for 2022 and 2021 include the following items:

Years Ended December 31,

(in millions) 2022 2021

Pension-related non-service costs, net (See Footnote 11 )

Gain on disposition of businesses (See Footnote 2 )

$ (136) $ (4)

Foreign exchange losses, net (See Footnote 10 )

(Gain) loss on disposition of businesses (See Footnote 2 )

Other gains, net (12) (1)

Income tax provision for 2021 was $138 million as compared to a benefit of $235 million in 2020.

The effective tax rate for 2021 was 18.2% as compared to 23.5% in 2020.

The change in effective tax provision is driven primarily by the impact of goodwill impairment charges in the prior-year, the geographic mix of where income was earned as well as certain taxable income inclusion items in the U.S.

based on foreign earnings and certain discrete items.

The income tax provision for the year ended December 31, 2021 included a net valuation allowance decrease of $27 million, primarily related to net operating losses in the U.K.

and Luxembourg, and other miscellaneous changes in the U.S., state and non-U.S.

valuation allowances related to ongoing operations.

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

Treasury Regulations enacted in 2020.

Discount on factored receivables and other, net 8 (12)

The income tax benefit for 2022 was $40 million as compared to provision of $138 million in 2021.

The effective tax rate for 2022 was a benefit of 25.5%, reflecting an increase in discrete tax benefits, as compared to provision of 18.2% for 2021.

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

See Footnote 12 of the Notes to Consolidated Financial Statements for further information on income taxes.

Business Segment Operating Results 2022 vs.

Commercial Solutions

Years Ended December 31,

(in millions) 2021 2020 $ Change % Change

Net sales $ 1,953 $ 1,859 $ 94 5.1%

Operating income (loss) 159 (89) 248 NM

Operating margin 8.1 % (4.8) %

Notable items impacting operating income (loss) comparability:

Impairment of intangible assets (See Footnote 7 )

NM — NOT MEANINGFUL

Commercial Solutions net sales for 2021 increased 5% which reflected sales growth in both the Commercial and Connected Home and Security business units.

The Commercial business unit performance reflected the impact of favorable net pricing as well as increased demand in the hand protection and garage and outdoor organization categories, partially offset by a decline in demand for consumable washroom products as well as supply chain shortages and logistical constraints.

The increase in net sales in the Connected Home and Security business unit was primarily due to higher demand from retail and contractor channels, partially offset by supply chain shortages and logistical constraints.

The increase in net sales in the Connected Home and Security business also reflected the lapping of the prior-year impact of lower demand and store closures.

Changes in foreign currency favorably impacted net sales by $12 million, or 1%.

Operating income for 2021 increased to $159 million as compared to operating loss of $89 million in 2020.

The improvement in operating results is primarily due to the lapping of prior year non-cash impairment charges of certain indefinite-lived intangible assets, as well as gross profit leverage, including the lapping of the prior-year absorption impact associated with the temporary closure of a key Connected Home and Security manufacturing facility in Mexico, as a result of the COVID-19 pandemic, gross productivity and pricing.

The increase in operating income was partially offset by significant input cost inflation for commodities, primarily resin, sourced finished goods, transportation and labor.

The operating margin in 2021 was negatively impacted by a timing lag between inflation and the full impact of responsive pricing actions.

Home Appliances

Years Ended December 31,

(in millions) 2021 2020 $ Change % Change

Net sales $ 1,738 $ 1,539 $ 199 12.9%

Operating income (loss) 70 (238) 308 NM

Operating margin 4.0 % (15.5) %

Notable items impacting operating income (loss) comparability:

Impairment of goodwill and other intangible assets (See Footnote 7 )

NM — NOT MEANINGFUL

Home Appliances net sales for 2021 increased 13%, which reflects net pricing and strong sales growth, primarily in North America and Latin America, partially offset by supply chain shortages and logistical constraints.

Changes in foreign currency favorably impacted net sales by $11 million, or 1%.

Operating income for 2021 increased to $70 million as compared to operating loss of $238 million in 2020.

The improvement in operating results is primarily due to the lapping of prior year non-cash impairment charges of goodwill and certain indefinite-lived intangible assets, as well as gross profit leverage, most notably from North America and Latin America, gross productivity and pricing, partially offset by significant input cost inflation associated with sourced finished goods and transportation, as well as higher labor costs and advertising and promotional costs.

Home Solutions

Home and Commercial Solutions

Years Ended December 31,

4 unchanged sentences

Notable items impacting operating income (loss) comparability:

Impairment of goodwill and other intangible assets (See Footnote 7 )

Impairment of goodwill and intangible assets (See Footnotes 1 and 7 )

NM — NOT MEANINGFUL

Home Solutions net sales for 2021 increased 12% due to strong sales performance in the Food and Home Fragrance business units.

The increase in Food business unit sales reflected the impact of favorable net pricing as well as increased demand across the fresh preserving, and cookware and bakeware categories, partially offset by supply chain shortages and logistical constraints.

The increase in Home Fragrance sales was primarily due to increases in the retail channel in the U.S.

and Europe, as well as in Yankee Candle retail stores, partially offset by supply chain shortages, logistical constraints and permanent Yankee Candle retail store closures in the prior year.

The increase in net sales in the Home Fragrance business also reflected the lapping of the prior-year impact of temporary retail store closures and supply chain disruptions resulting from temporary closure of its key manufacturing facility in Massachusetts, both resulting from the COVID-19 pandemic.

Changes in foreign currency favorably impacted net sales by $33 million, or 1%.

Operating income for 2021 increased to $337 million as compared to operating loss of $4 million in 2020.

The increase in operating income is primarily due to the lapping of prior year non-cash impairment charges of goodwill, certain indefinite-lived intangible assets and other assets, gross profit leverage, including the lapping of the prior year absorption impact associated with the temporary closure of a key Home Fragrance manufacturing facility in Massachusetts, gross productivity and pricing.

The increase in operating income also reflected savings from Yankee Candle retail store closures and the exiting of its fundraising business in 2020.

The increase in operating income was partially offset by significant input cost inflation for commodities, primarily resin, sourced finished goods, transportation and labor.

The operating margin in 2021 was negatively impacted by a timing lag between inflation and the full impact of responsive pricing actions.

Home and Commercial Solutions net sales for 2022 decreased 15% which reflected softening global demand in the Kitchen and Home Fragrance business units, category exits and lost distribution in one product line at a key customer in the Kitchen business unit, as well as the exit of 43 Yankee Candle retail stores during the year.

Net sales performance of the Kitchen and Home Fragrance business units also reflected the lapping of elevated demand during 2021.

The sale of CH&S at the end of the first quarter of 2022, also negatively impacted net sales by 5%.

Pricing actions taken by the Company, as well as improved order fulfillment in the Commercial business unit resulting from easing of supply chain constraints, partially offset the decline in net sales.

Changes in foreign currency unfavorably impacted net sales by $133 million, or 2%.

Operating loss for 2022 was $212 million as compared to operating income of $566 million in 2021.

The decline in operating results is primarily due to the non-cash impairment charges in the Kitchen and Home Fragrance business units;

lower gross profit leverage;

higher absorption costs associated with lower sales volume, significant input cost inflation associated with raw materials, sourced finished goods and transportation;

higher sales promotional activities to reduce elevated inventory levels and an indirect tax reserve related to an international entity.

The sale of CH&S at the end of the first quarter of 2022 had a negative impact of 4%.

The decline in operating results was partially offset by gross productivity and lower incentive compensation expense.

Learning and Development

5 unchanged sentences

Notable items impacting operating income comparability:

Impairment of intangible assets (See Footnote 7 )

Learning and Development net sales for 2021 increased 18% primarily due to strong sales performance in the Baby and Writing business units as they lapped the negative prior-year impact of shifting consumer demand, temporary store closures and supply chain disruption resulting from the COVID-19 pandemic.

The Baby business unit performance reflected favorable net pricing as well as increased demand in the baby gear and infant care categories, driven in part by government-related stimulus spending in the U.S.

The Writing business unit performance reflected favorable net pricing as well as strong demand in the pens, markers, fine writing and labeling categories, driven by return to in-person learning and gradual reopening of more offices, partially offset by previous divestitures and business exits as well as supply chain shortages and logistical constraints.

Changes in foreign currency favorably impacted net sales by $29 million, or 1%.

Operating income for 2021 increased to $600 million as compared to $364 million in the prior year period.

The increase in operating income is primarily due to the lapping of non-cash impairment charges of certain indefinite-lived intangible assets in 2020, pricing, gross productivity and gross profit leverage, including the prior year absorption impact of certain temporary manufacturing closures,

partially offset by higher tariff costs, significant input cost inflation for commodities, primarily resin, sourced finished goods, transportation and labor, as well as higher advertising and promotional costs.

Impairment of goodwill and intangible assets (See Footnotes 1 and 7 )

Learning and Development net sales for 2022 decreased 3%, reflecting decreases in both the Writing and Baby business units.

The Writing business unit performance reflected logistical constraints and supply chain shortages, particularly in labelling, and softening demand in certain categories in the U.S., partially offset by pricing actions.

The Baby business unit performance reflected softening demand in certain categories in the U.S., as the business lapped elevated levels of demand during the prior year, partially offset by pricing actions.

Changes in foreign currency unfavorably impacted net sales by $96 million, or 3%.

Operating income for 2022 decreased to $593 million as compared to $600 million in the prior year period.

The improvement in operating margin primarily reflects net pricing

Outdoor and Recreation

2 unchanged sentences

Net sales $ 1,315 $ 1,484 $ (169) (11.4)%

Operating income (loss) 90 (418) 508 NM

Operating income 86 90 (4) (4.4)%

Operating margin 6.5 % 6.1 %

Notable items impacting operating income (loss) comparability:

Impairment of intangible assets (See Footnote 7 )

NM — NOT MEANINGFUL

Outdoor and Recreation segment net sales for 2021 increased 15% primarily due to favorable net pricing and improvement in consumer purchasing patterns for outdoor equipment, partially offset by supply chain shortages and logistical constraints.

The increase in net sales also reflected the lapping of the negative prior-year impact of lower demand and temporary store closures resulting from the COVID-19 pandemic.

Changes in foreign currency exchange rates favorably impacted net sales by $16 million, or 1%.

Operating income for 2021 was $90 million as compared to operating loss of $418 million in the prior year period.

This improvement was primarily due to the lapping of prior year non-cash impairment charges of certain indefinite-lived intangible assets, gross profit leverage, pricing and gross productivity, partially offset by significant input cost inflation for commodities, primarily resin, sourced finished goods and transportation.

The operating margin in 2021 was negatively impacted by a timing lag between inflation and the full impact of responsive pricing actions.

Outdoor and Recreation segment net sales for 2022 decreased 11% primarily due to softening U.S.

demand and certain category exits, partially offset by pricing actions and improved product availability.

Net sales for this segment also reflected the lapping of elevated levels of demand in the prior year.

Changes in foreign currency unfavorably impacted net sales by $71 million, or 5%.

Operating income for 2022 was $86 million as compared to $90 million in the prior year period.

This performance was primarily due to input cost inflation for commodities, sourced finished goods and transportation and higher advertising and promotional costs, partially offset by lower overhead spending and incentive compensation costs.

The improvement in operating margin primarily reflects net benefit from pricing actions and the exit from certain low margin product categories.

Liquidity and Capital Resources

The Company believes that its cash generating capability, together with its borrowing capacity and available cash and cash equivalents, provide continued financial viability and adequate liquidity to fund its operations, support its growth platforms, pay down debt and debt maturities as they come due and execute its ongoing business initiatives.

The Company believes the extent of the impact of the rapidly changing retail and consumer landscape, which reflects an increased focus by retailers to rebalance inventory levels, inflationary pressures and uncertainty over the volatility and direction of future demand patterns on the Company’s future sales, operating results, cash flows, liquidity and financial condition will continue to be driven by numerous evolving factors the Company cannot accurately predict and which will vary.

As noted in Business Strategy and Recent Developments, the Company has taken actions to further strengthen its financial position and balance sheet, and maintain financial liquidity and flexibility, including amending certain terms of its Credit Revolver and entering into the New Receivables Facility.

The Company believes these actions and its cash generating capability, together with its borrowing capacity and available cash and cash equivalents, provide adequate liquidity to fund its operations, support its growth platforms, pay down debt and debt maturities as they come due and execute its ongoing business initiatives.

The Company regularly assesses its cash requirements and the available sources to fund these needs.

For further information, refer to Item 1A .

Risk Factors – Financial Risks in Part I.

At December 31, 2023, the Company had cash and cash equivalents of approximately $332 million, of which approximately $298 million was held by the Company’s non-U.S.

subsidiaries.

The Company believes the extent of the impact of the rapidly changing retail landscape, which reflects an increased focus by retailers to rebalance inventory levels in light of continued inflationary pressures on consumers, as well as supply chain disruptions, inflationary pressures and uncertainty over the volatility and direction of future demand patterns, on the Company's future sales, operating results, cash flows, liquidity and financial condition will continue to be driven by numerous evolving factors the Company cannot accurately predict and which will vary by jurisdiction and market.

Any such material adverse impacts could result in the Company's inability to satisfy financial maintenance covenants and could limit the ability to make future borrowings under existing debt instruments.

Risk Factors - Financial Risks , for further information.

The table below summarizes the Company's cash activity for 2023, 2022 and 2021 (in millions):

8 unchanged sentences

Cash Flows from Operating Activities

The change in net cash used in operating activities for 2022 primarily reflects lower operating income and the impact of the Company's adjustment to its supply and demand forecasted purchases in the back half of the year in response to significantly greater than expected pullback in retailer orders, as retailers rebalance inventory in the light of continued inflationary pressures on consumers, which resulted in lower sales volume and unfavorable working capital associated with higher inventory levels.

The change in net cash provided by operating activities reflects a reduction of working capital and lower incentive compensation payments in 2023, partially offset by impact of the operating loss and higher restructuring payments.

The change in net cash used in operating activities for 2022 primarily reflects lower operating income and the impact of the Company’s adjustment to its supply and demand forecasted purchases in the back half of the year.

This was in response to significantly greater than expected pullback in retailer orders, as retailers rebalanced inventory in light of continued inflationary pressures on consumers.

This also resulted in lower sales volume and unfavorable working capital associated with higher inventory levels.

The change also reflected the negative impact of lower accounts receivable sold under the Customer Receivables Purchase Agreement.

The change in net cash provided by operating activities for 2021 reflects inventory build to support forecasted demand, including the impact of significant input cost inflation, supply chain shortages and logistical challenges, as well as higher annual incentive compensation payments, partially offset by benefits from extension of payment terms for goods and services with vendors and higher accounts receivable sold under the Customer Receivables Purchase Agreement in the current year.

In addition, this performance reflects the impact of the COVID-19 pandemic in the prior year, which included lower operating results and favorable working capital performance.

See Capital Resources for further information.

Cash Flows from Investing Activities

The change in cash used in investing activities for 2023 was primarily due to proceeds from the sale of the CH&S business in the prior year.

The change in net cash provided by investing activities for 2022 was primarily due to proceeds from the sale of CH&S and other property, plant and equipment, partially offset by higher capital expenditures, primarily associated with Project Ovid.

See Footnote 2 of the Notes to Consolidated Financial Statements for further information.

The change in net cash used in investing activities for 2021 was primarily due to higher capital expenditures.

Cash Flows from Financing Activities

The change in net cash used in financing activities for 2022 was primarily due to the period-over-period change in debt, offset by repurchase of shares of the Company's common stock in the current year.

The change in net cash used in financing activities for 2021 was primarily due to proceeds from the issuance of senior notes in 2020 and payments of long-term debt in 2021 as well as the acquisition of noncontrolling interests.

The change in net cash used in financing activities was primarily due to the period-over-period change in debt, a reduction of the quarterly dividend payment in 2023, that commenced with the second quarter payment, and repurchase of shares of the Company’s common stock in the prior year.

The change in net cash used in financing activities for 2022 was primarily due to the period-over-period change in debt, offset by repurchase of shares of the Company’s common stock.

See Footnotes 1,9 and 14 of the Notes to Consolidated Financial Statements for further information.

Capital Resources

On October 19, 2022, the Company redeemed its 3.85% senior notes due April 2023 (the “April 2023 Notes”) at a redemption price equal to 100.002% of the outstanding aggregate principal amount of the notes, plus accrued and unpaid interest to the date of the redemption.

The total consideration was approximately $1.09 billion, and the Company recorded a debt extinguishment loss of $1 million.

On September 14, 2022, the Company completed a registered public offering of $500 million principal amount of 6.375% senior notes that mature in September 2027 (the “September 2027 Notes”) and $500 million principal amount of 6.625% senior notes that mature in September 2029 (the “September 2029 Notes”).

The Company received proceeds of approximately $989 million, net of

fees and expenses paid.

The September 2027 Notes and the September 2029 Notes are subject to similar restrictive and financial covenants as the Company's existing senior notes, however, they are not subject to the interest rate adjustment or coupon step up provisions of certain other notes described below.

The September 2027 Notes and the September 2029 Notes are redeemable in whole or in part, at the option of the Company (i) at any time prior to three months before the stated maturity dates at a redemption price equal to or greater of (a) the principal amount of the notes being redeemed or (b) the sum of the present values of the remaining scheduled payments of principal and interest on the notes being redeemed, discounted to the redemption date on a semi-annual basis, plus the applicable make-whole amount of 50 basis points, plus in each case, accrued and unpaid interest on the notes being redeemed to, but not including, the redemption date;

or (ii) at any time on or after three months prior to respective maturity dates, at a redemption price equal to 100% of the principal amount of the notes being redeemed plus accrued and unpaid interest to the redemption dates.

The Company used the net proceeds from the September 2027 and September 2029 Notes, together with available cash, to redeem the April 2023 Notes during the fourth quarter of 2022.

On August 31, 2022, the Company entered into a $1.5 billion senior unsecured revolving credit facility (the “Credit Revolver”) that matures in August 2027.

The Credit Revolver refinanced the Company’s previous $1.25 billion senior unsecured revolving credit facility that was scheduled to mature in December 2023.

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

The Credit Revolver provides committed back-up liquidity for the issuance of commercial paper, in each case, to the extent there is sufficient availability for borrowing under the Credit Revolver.

At December 31, 2022, the Company has $225 million of outstanding borrowings under the Credit Revolver and $359 million in commercial paper borrowings.

As of December 31, 2023, the Company maintained a $1.5 billion Credit Revolver maturing in August 2027.

The Credit Revolver requires compliance with certain financial covenants.

A failure to maintain the Company’s financial covenants and to subsequently remedy a default would impair its ability to borrow under the Credit Revolver and potentially subject the Company to cross-default and acceleration provisions in its debt documents.

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 December 31, 2022, the Company had approximately $22 million of outstanding standby letters of credit issued against the Credit Revolver, with a net availability of approximately $1.25 billion.

The Company was in compliance with all of its debt covenants at December 31, 2022.

At December 31, 2023, the Company had $131 million of outstanding borrowings under the Credit Revolver and approximately $20 million of outstanding standby letters of credit issued against the Credit Revolver, with a net availability of approximately $1.3 billion.

On February 7, 2024, the Company, certain of its subsidiaries, as subsidiary borrowers, and certain of its subsidiaries, as subsidiary guarantors, entered into a Second Amendment to the Credit Revolver.

The Second Amendment among other things, reduces the commitments of the lenders from $1.5 billion to $1.0 billion, replaces the Company’s existing financial covenants with new financial covenants, requires the Company and the Guarantors to guarantee all obligations under the Credit Revolver, and requires the Company and the other Guarantors to grant a lien and security interest in certain of its assets.

See Footnote 9 of the Notes to Consolidated Financial Statements for further information.

Factored receivables at December 31, 2023 associated with the Company’s existing factoring agreement (the “Customer Receivables Purchase Agreement”) were approximately $240 million, a decrease of approximately $180 million from December 31, 2022.

During the second quarter of 2022, the Company amended the Customer Receivables Purchase Agreement to (i) increase the amount of certain customer receivables that may be sold under the agreement, (ii) add new customers to the agreement and (iii) change the reference rate from London Interbank Offered Rate (“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 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 Consolidated Statement of Cash Flows.

The Company records the discount as other (income) expense, net in the Consolidated Statement of Operations and collections of accounts receivables not yet submitted to the financial institution as a financing cash flow.

The Company maintains an Accounts Receivable Securitization Facility (the “Securitization Facility”).

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

This amendment (i) reduced the aggregate commitment under the Securitization Facility to $375 million from $600 million, (ii) extended its maturity by one year to October 2023 and (iii) 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 December 31, 2022, the Company had $35 million outstanding under the Securitization Facility.

On November 1, 2019, S&P Global Inc.

(“S&P”) downgraded the Company’s debt rating to “BB+” as S&P believed the Company would fail to meet S&P’s target debt level for 2019.

In addition, on March 9, 2020, Moody’s Corporation (“Moody’s”) downgraded the Company’s debt rating to “Ba1” based on a view that the Company would fail to meet Moody's target debt level for 2020.

As a result of the S&P and Moody's downgrades, certain of the Company’s outstanding senior notes currently aggregating to approximately $3.1 billion were subject to an interest rate adjustment of 25 basis points for each downgrade, totaling 50 basis points.

In addition, the Company’s ability to borrow from the commercial paper market on terms it deemed acceptable or favorable was eliminated and its cost of borrowing increased.

The Company’s ability to borrow under the Credit Revolver was not affected by the downgrades.

On February 11, 2022, 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 again in a position to access the commercial paper market, up to a maximum of $1.5 billion provided there is a sufficient amount available for borrowing under the Credit Revolver.

In addition, the interest rates on certain of the Company’s outstanding senior notes aggregating to approximately $3.1 billion decreased by 25 basis points, reducing the Company’s interest expense by approximately $8 million on an annualized basis (approximately $7 million in 2022) as a result of the S&P upgrade.

However, these senior notes will remain subject to the interest rate adjustment of 25 basis points resulting from the 2020 debt rating downgrade by Moody’s, which has an annualized impact on

interest expense of approximately $8 million.

Furthermore, the Company may be required to pay higher interest rates in future financings, and its potential pool of investors and funding sources could decrease, as a result of any future downgrades.

On February 14, 2023, Fitch Ratings downgraded the Company’s debt rating to “BB”.

This downgrade does not impact the interest rates on any of the Company's senior notes.

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 Consolidated Statement of Cash Flows.

The Company records the discount as other (income) expense, net in the Consolidated Statement of Operations.

Under the New Receivables Facility, certain of the Company’s subsidiaries continuously sell their accounts receivables, originated in the U.S., to the SPE and

the SPE sells the receivables to the financial institution.

The SPE is a variable interest entity for which the Company is considered to be the primary beneficiary.

The SPE’s sole business consists of the purchase of receivables from certain subsidiaries of the Company and the subsequent transfer of such receivables to the financial institution.

Although the SPE is included in the Company’s consolidated financial statements, it is a separate legal entity with separate creditors.

The assets of the SPE are not available to pay creditors of the Company or its subsidiaries.

The fair value of these servicing arrangements as well as the fees earned was immaterial.

The balance of outstanding accounts receivables sold to the financial institution as of December 31, 2023 was $45 million.

Cash received under the New Receivables Facility is included in cash from operating activities in the Consolidated Statements of Cash Flows.

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.

On February 14, 2023, Fitch Ratings downgraded the Company’s Long-Term Issuer Default Rating to “BB”, then to “B+” on November 1, 2023.

These downgrades did not impact the interest rates on any of the Company’s senior notes.

On August 21, 2023, Moody’s downgraded the Company’s debt ratings to “Ba2”.

As a result of Moody’s downgrade, the Company’s Coupon-Step Notes 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 February 9, 2024, Moody’s downgraded the Company’s senior unsecured debt rating to “Ba3”, subjecting the Coupon-Step Notes to an additional interest rate adjustment of 25 basis points.

The change to the interest rate due to the downgrade will further increase the Company’s interest expense by approximately $8 million on an annualized basis (approximately $6 million in 2024).

On August 3, 2023, S&P downgraded the Company’s debt ratings to “BB”.

In March 2023, S&P had also downgraded the Company’s debt ratings to “BB+”.

As a result of the S&P downgrades, the Company’s Coupon-Step Notes 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, 2024, S&P downgraded the Company’s debt ratings to “BB-”, subjecting the Company’s Coupon-Step Notes to an additional interest rate adjustment of 25 basis points, which will increase interest expense by approximately $8 million on an annualized basis (approximately $6 million in 2024).

The Company currently believes its capital structure and cash resources will continue to support the funding of future dividends and the Company will continue to evaluate all actions to strengthen its financial position and balance sheet, and to maintain its financial liquidity, flexibility and capital allocation strategy.

The Company was in compliance with all of its debt covenants at December 31, 2023.

Risk Management

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At December 31, 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.

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 4.000% 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 London Interbank Offered Rate (“LIBOR”) to Secured Overnight Financing Rate (“SOFR”), effective June 1, 2023, accounted for in accordance with ASC 848 (see Footnote 1 of the Notes to Consolidated Financial Statements 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.

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The Company previously entered into three cross-currency swaps, maturing in January 2025, February 2025 and September 2027, respectively, with an aggregate notional amount of $1.3 billion.

Each of these cross-currency swaps were designated as net investment hedges of the Company's foreign currency exposure of its net investment in certain Euro-functional currency subsidiaries with Euro- denominated net assets, and the Company pays a fixed rate of Euro-based interest and receives a fixed rate of U.S.

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 two cross-currency swaps with notional amounts of $500 million each, one maturing in September 2027 and the other in September 2029.

During the third quarter of 2022, the Company entered into two 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.

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The effective portion of the gains or losses on these derivatives is deferred as a component of accumulated other comprehensive income (loss) (“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 December 31, 2022, the Company had approximately $379 million notional amount outstanding of forward foreign currency contracts that are designated as cash flow hedges of forecasted inventory

purchases and sales.

At December 31, 2023, the Company had approximately $348 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 December 31, 2022, the Company had approximately $926 million notional amount outstanding of these foreign currency contracts that are not designated as effective hedges for accounting purposes and have maturity dates through August 2023.

At December 31, 2023, the Company had approximately $1.3 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 Consolidated Statement of Operations.

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Foreign currency contracts (7)

Total $ (120)

Contractual Obligations, Commitments and Off-Balance Sheet Arrangements

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$ 8,557 $ 1,591 $ 3,311 $ 898 $ 2,757

(1) Amounts represent contractual obligations based on the earliest date that the obligation may become due, including finance leases, excluding interest, based on borrowings outstanding at December 31, 2022.

(1) Amounts represent contractual obligations based on the earliest date that the obligation may become due, excluding interest, based on borrowings outstanding as of December 31, 2023.

For further information relating to these obligations, see Footnote 9 of the Notes to Consolidated Financial Statements .

(2) Amounts represent estimated interest payable on borrowings outstanding at December 31, 2022, excluding the impact of fixed to floating rate interest rate swaps.

Interest on floating-rate debt was estimated using the rate in effect at December 31, 2022.

(2) Amounts represent estimated interest payable on borrowings outstanding as of December 31, 2023, excluding the impact of fixed to floating rate interest rate swaps.

Interest on floating-rate debt was estimated using the rate in effect as of December 31, 2023.

For further information, see Footnote 9 of the Notes to Consolidated Financial Statements .

(3) Amounts represent lease liabilities on operating leases at December 31, 2022.

(3) Amounts represent lease liabilities on operating leases as of December 31, 2023.

See Footnote 13 of the Notes to Consolidated Financial Statements .

(4) Primarily consists of purchase commitments with suppliers entered into at December 31, 2022, for the purchase of materials, packaging and other components and services.

(4) Primarily consists of purchase commitments with suppliers entered into as of December 31, 2023, for the purchase of materials, packaging and other components and services.

These purchase commitment amounts represent only those items which are based on agreements that are legally enforceable and that specify all significant terms including minimum quantity, price and term and do not represent total anticipated purchases.

(5) Represents the future cash payments related to 2017 Tax Reform, for the one-time provisional transition tax on the Company’s previously untaxed foreign earnings.

(6) Total does not include contractual obligations reported on the December 31, 2022 balance sheet as current liabilities, except for current portion of long-term debt, short-term debt and accrued interest.

(6) Total does not include contractual obligations reported as of December 31, 2023 balance sheet as current liabilities, except for current portion of long-term debt, short-term debt and accrued interest.

The Company also has liabilities for uncertain tax positions and unrecognized tax benefits.

The Company is under audit from time-to-time by the IRS and other taxing authorities, and it is possible that the amount of the liability for uncertain tax positions and unrecognized tax benefits could change in the coming year.

The Company is under audit from time-to-time by the Internal Revenue Service (“IRS”) and other taxing authorities, and it is possible that the amount of the liability for uncertain tax positions and unrecognized tax benefits could change in the coming year.

While it is possible that one or more of these examinations may be resolved in the next year, the Company is not able to reasonably estimate the timing or the amount by which the liability will be settled over time;

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Future events and their effects cannot be determined with absolute certainty.

Therefore, the determination of estimates requires the exercise of judgment.

Therefore, the determination

of estimates requires the exercise of judgment.

Actual results will differ from those estimates, and such differences may be material to the Consolidated Financial Statements.

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Reporting units are determined based upon the Company’s organizational structure in place at the date of the goodwill impairment testing and generally one level below the operating segment level.

The Company’s operations are comprised of seven reporting units, within its five primary operating segments.

The Company’s operations are comprised of six reporting units, within its three primary operating segments.

The quantitative goodwill impairment testing requires significant use of judgment and assumptions, such as the identification of reporting units;

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The present value of the finite-period cash flows and the terminal value are determined using a selected discount rate.

The Company estimated the fair values of its reporting units based on discounted cash flow methodology reflecting its latest projections which included, among other things, the impact of significant input cost inflation for commodities, primarily resin, sourced finished goods

transportation and labor on its operations at the time the Company performed its impairment testing.

See Footnotes 1 and 7 of the Notes to Consolidated Financial Statements for further information associated with non-cash goodwill

impairment charges resulting from its annual test and triggering events during 2022.

The Company estimated the fair values of its reporting units based on discounted cash flow methodology reflecting its latest projections which included, among other things, the impact of significant input cost inflation at the time the Company performed its impairment testing.

During the fourth quarter of 2023, in conjunction with its annual impairment testing, the Baby reporting unit in the Learning and Development segment, had a fair value within the 10% of its associated carrying value.

A hypothetical 10% reduction in forecasted earnings before interest, taxes, depreciation and amortization used in the discounted cash flows to estimate the fair value to the Baby reporting unit would have resulted in an impairment charge of approximately $99 million against its goodwill carrying value of $415 million.

The Company has experienced headwinds due to soft global demand and an increased focus by retailers to rebalance inventory levels in light of continued inflationary pressures on consumers that impacted the Baby business within the Learning and Development segment.

Further declines in anticipated consumer spending or an inability to achieve expected margin improvements on sales of Baby products could result in declines in the fair value of the business that may result in goodwill impairment charges.

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

Indefinite-lived intangibles

The testing of indefinite-lived intangibles (primarily trademarks and tradenames) under established guidelines for impairment also requires significant use of judgment and assumptions (such as cash flow projections, royalty rates, terminal values and discount rates).

An indefinite-lived intangible asset is impaired by the amount its carrying value exceeds its estimated fair value.

An indefinite-lived intangible asset is impaired by the amount by which its carrying value exceeds its estimated fair value.

For impairment testing purposes, the fair value of indefinite-lived intangibles is determined using either the relief from royalty method or the excess earnings method.

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Changes in business conditions could potentially require adjustments to these asset valuations.

During the fourth quarter of 2023, in conjunction with its annual impairment testing, the Company recorded aggregate non-cash impairment charges of $68 million associated with two tradenames in the Home and Commercial Solutions segments, as the carrying values exceeded their fair values.

A hypothetical 10% reduction in the forecasted revenue and residual (excess) cash flows used in the excess earnings method applied in determining the fair value of a tradename and in the relief from royalty method applied in determining the fair value of the other tradename would have resulted in an incremental impairment charge on the Home and Commercial Solutions segment of $54 million.

During the fourth quarter of 2023, in conjunction with its annual impairment testing, one tradename in the Learning and Development segment and two tradenames in the Outdoor and Recreation segment, had fair values within 10% of their associated carrying values of $135 million, $35 million and $9 million, respectively.

A hypothetical 10% reduction in the forecasted revenue used in the relief from royalty method in determining the fair values of the tradenames would have resulted in an impairment charge of $12 million in the Learning and Development segment and $2 million in the Outdoor and Recreation segment.

The Company has experienced headwinds due to soft global demand and an increased focus by retailers to rebalance inventory levels in light of continued inflationary pressures on consumers.

The Company expects that current market contraction is reflective of a reset of demand levels.

If the demand continues to contract or the business fails to regain lost distribution, additional declines in the fair value of certain tradenames may occur resulting in an impairment charge.

Additional impairment testing may be required based on further deterioration of global demand and/or the macroeconomic environment, continued disruptions to the Company’s business, further declines in operating results of the Company’s reporting units and/or tradenames, further sustained deterioration of the Company’s market capitalization, and other factors, which may necessitate changes to estimates or valuation assumptions used in the fair value of the reporting units for goodwill and indefinite-lived intangible tradenames.

Although management cannot predict when improvements in macroeconomic conditions will occur, if consumer confidence and consumer spending continue to decline significantly in the future or if commercial and industrial economic activity experiences a sustained deterioration from current levels, the Company may be required to record further impairment charges in the future.

See Footnotes 1 and 7 of the Notes to Consolidated Financial Statements for further information associated with non-cash indefinite-lived intangibles impairment charges resulting from its annual test and triggering events during 2023.

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The Company continuously evaluates whether impairment indicators related to its property, plant and equipment, operating leases and other long-lived assets are present.

These impairment indicators may include a significant decrease in the market price of a long-lived asset or asset group, early termination of an operating lease, a significant adverse change to the extent or manner in which a long-lived asset or asset group is being used or in its physical condition, or a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group.

a long-lived asset or asset group is being used or in its physical condition, or a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group.

If impairment indicators are present, the Company estimates the future cash flows for the asset or group of assets.

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In general, the Company’s target asset allocations are as follows:

global equities approximately 10% to 30%;

global equities approximately zero to 20%;

fixed income approximately 80% to 100%;

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Actual asset allocations may vary from the targeted allocations for various reasons, including market conditions and the timing of transactions.

For 2022, 2021 and 2020, the actual return on plan assets for the Company’s U.S.

For 2023, 2022 and 2021, the actual return (loss) on plan assets for the Company’s U.S.

pension plan assets was approximately $57 million, $(220) million and $48 million, respectively, versus an expected return on plan assets of approximately $52 million, $47 million and $51 million, respectively.

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The Company’s non-U.S.

businesses accounted for approximately 35% of net sales for 2022 and 2021, and 33% for 2020 (see Footnote 17 of the Notes to Consolidated Financial Statements ).

businesses accounted for approximately 37% of net sales for 2023 and 35% of net sales for 2022 and 2021 (see Footnote 17 of the Notes to Consolidated Financial Statements ).

Forward-Looking Statements

Forward-looking statements in this Report are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

This report contains forward-looking statements within the meaning of the federal securities law.

These statements generally can be identified by the use of words such as “intend,” “anticipate,” “believe,” “estimate,” “project,” “target,” “plan,” “expect,” “setting up,” “beginning to,” “will,” “should,” “would,” “could,” “resume,” “are confident that,” “remain optimistic that,” “seek to,” or similar statements.

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Important factors that could cause actual results to differ materially from those suggested by the forward-looking statements include, but are not limited to:

• the Company’s ability to optimize costs and cash flow and mitigate the impact of retailer inventory rebalancing through discretionary and overhead spend management, advertising and promotion expense optimization, demand forecast and supply plan adjustments and actions to improve working capital;

• the Company’s ability to optimize costs and cash flow and mitigate the impact of soft global demand and retailer inventory rebalancing through discretionary and overhead spend management, advertising and promotion expense optimization, demand forecast and supply plan adjustments and actions to improve working capital;

• the Company’s dependence on the strength of retail and consumer demand and commercial and industrial sectors of the economy in various countries around the world;

• the Company’s ability to improve productivity, reduce complexity and streamline operations;

• the Company's ability to manage the actual or perceived effects of the COVID-19 pandemic, including as a result of any additional variants of the virus or the efficacy and distribution of vaccines;

• risks related to the Company’s substantial indebtedness, potential increases in interest rates or changes in the Company’s credit ratings including the failure to maintain financial covenants which if breached could subject us to cross-default and acceleration provisions in our debt documents;

• competition with other manufacturers and distributors of consumer products;

• major retailers’ strong bargaining power and consolidation of the Company’s customers;

• supply chain and operational disruptions in the markets in which we operate, whether as a result of the actual or perceived effects of the COVID-19 pandemic or broader geopolitical and macroeconomic conditions, including the military conflict between Russia and Ukraine;

• supply chain and operational disruptions in the markets in which we operate, including as a result of geopolitical and macroeconomic conditions and any global military conflicts including those between Russia and Ukraine and in the Middle East;

• changes in the prices and availability of labor, transportation, raw materials and sourced products, including significant inflation, and the Company’s ability to offset cost increases through pricing and productivity in a timely manner;

• the cost and outcomes of governmental investigations, inspections, lawsuits, legislative requests or other actions by third parties, including but not limited to those described in Footnote 18 of the Notes to Consolidated Financial Statements , the potential outcomes of which could exceed policy limits, to the extent insured;

• the Company's ability to effectively execute its turnaround plan, including Project Ovid, Project Phoenix, the Network Optimization Project and the Organizational Realignment;

• the Company’s ability to develop innovative new products, to develop, maintain and strengthen end-user brands and to realize the benefits of increased advertising and promotion spend;

• the Company's ability to consistently maintain effective internal control over financial reporting;

• the risks inherent to the Company’s foreign operations, including currency fluctuations, exchange controls and pricing restrictions;

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• unexpected costs or expenses associated with dispositions;

• the Company's ability to effectively execute its turnaround plan, including Project Ovid and Project Phoenix;

• risks related to the Company’s substantial indebtedness, potential increases in interest rates or changes in the Company’s credit ratings;

• the Company’s ability to remediate the material weaknesses in internal control over financial reporting and to maintain effective internal control over financial reporting;

• a failure or breach of one of the Company’s key information technology systems, networks, processes or related controls or those of the Company’s service providers;

• the impact of United States and foreign regulations on the Company’s operations, including the impact of tariffs and environmental remediation costs and legislation and regulatory actions related to data privacy and climate change;

• the potential inability to attract, retain and motivate key employees;

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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-K

Item 7. Management’s Discussion and Analysis