What changed in this filing

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Item 1. Financial Statements

2024-07-26 compared with 2024-04-26 · 222 added, 115 removed, 585 unchanged (37% of the section changed)

5 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Net sales $ 2,033 $ 2,204 $ 3,686 $ 4,009

3 unchanged sentences

Restructuring costs, net 10 22 36 60

Operating income (loss) 16 ( 36 )

Impairment of goodwill, intangibles and other assets 6 11 6 11

Operating income 163 120 179 84

Non-operating expenses:

2 unchanged sentences

Other expense, net 1 9 6 21

Loss before income taxes ( 60 ) ( 116 )

Income tax benefit ( 51 ) ( 14 )

Net loss $ ( 9 ) $ ( 102 )

Income (loss) before income taxes 84 35 24 ( 81 )

Income tax provision (benefit) 39 17 ( 12 ) 3

Net income (loss) $ 45 $ 18 $ 36 $ ( 84 )

Weighted average common shares outstanding:

1 unchanged sentence

Diluted 418.2 415.3 417.9 414.0

Loss per share:

Earnings (loss) per share:

Basic $ 0.11 $ 0.04 $ 0.09 $ ( 0.20 )

1 unchanged sentence

COMPREHENSIVE INCOME (LOSS):

Net loss $ ( 9 ) $ ( 102 )

Net income (loss) $ 45 $ 18 $ 36 $ ( 84 )

Other comprehensive income (loss), net of tax:

2 unchanged sentences

Derivative financial instruments 7 ( 7 ) 14 ( 17 )

Total other comprehensive income (loss), net of tax ( 9 ) 7

Total comprehensive loss $ ( 18 ) $ ( 95 )

Total other comprehensive loss, net of tax ( 28 ) ( 17 ) ( 37 ) ( 10 )

Total comprehensive income (loss) $ 17 $ 1 $ ( 1 ) $ ( 94 )

See Notes to Condensed Consolidated Financial Statements (Unaudited).

27 unchanged sentences

Stockholders’ equity:

Preferred stock ( 10.0 authorized shares, $ 1.00 par value, no shares issued at March 31, 2024 and December 31, 2023)

Common stock ( 800.0 authorized shares, $ 1.00 par value, 440.9 shares and 439.6 shares issued at March 31, 2024 and December 31, 2023, respectively)

Treasury stock, at cost ( 25.8 shares and 25.3 shares at March 31, 2024 and December 31, 2023, respectively)

Preferred stock ( 10.0 authorized shares, $ 1.00 par value, no shares issued at June 30, 2024 and December 31, 2023)

Common stock ( 800.0 authorized shares, $ 1.00 par value, 441.2 shares and 439.6 shares issued at June 30, 2024 and December 31, 2023, respectively)

Treasury stock, at cost ( 25.8 shares and 25.3 shares at June 30, 2024 and December 31, 2023, respectively)

( 631 ) ( 627 )

9 unchanged sentences

(Amounts in millions)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

Net loss $ ( 9 ) $ ( 102 )

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

Net income (loss) $ 36 $ ( 84 )

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

Depreciation and amortization 164 159

Impairment of goodwill, intangibles and other assets 6 11

Deferred income taxes 14 4

Stock based compensation expense 33 20

Pension settlement charge — 5

Other, net ( 8 ) ( 34 )

3 unchanged sentences

Accounts payable 80 ( 54 )

Accrued liabilities and other ( 146 ) ( 108 )

Net cash provided by (used in) operating activities 32 ( 77 )

Accrued liabilities and other, net ( 206 ) ( 18 )

Net cash provided by operating activities 64 277

Cash flows from investing activities:

4 unchanged sentences

Cash flows from financing activities:

Proceeds from (payments on) short-term debt, net ( 131 ) 232

Payments on short-term debt, net ( 52 ) ( 23 )

Proceeds from short-term debt with original maturities greater than 90 days 431 —

Payments on short-term debt with original maturities greater than 90 days ( 225 ) —

Payments on current portion of long-term debt — ( 1 )

Cash dividends ( 60 ) ( 126 )

Equity compensation activity and other, net ( 16 ) ( 8 )

Net cash provided by financing activities 60 128

Net cash provided by (used in) financing activities 78 ( 158 )

Exchange rate effect on cash, cash equivalents and restricted cash ( 14 ) 2

Increase (decrease) in cash, cash equivalents and restricted cash 39 ( 18 )

Increase in cash, cash equivalents and restricted cash 44 27

Cash, cash equivalents and restricted cash at beginning of period 361 303

9 unchanged sentences

Stock Treasury

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

Balance at December 31, 2023 $ 440 $ ( 627 ) $ 6,915 $ ( 2,726 ) $ ( 890 ) $ 3,112

Comprehensive loss — — — ( 9 ) ( 9 ) ( 18 )

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

Balance at March 31, 2024 $ 441 $ ( 631 ) $ 6,900 $ ( 2,735 ) $ ( 899 ) $ 3,076

Comprehensive income (loss) — — — 45 ( 28 ) 17

Dividends declared on common stock - $ 0.07 per share

1 unchanged sentence

Equity compensation, net of tax — — 16 — — 16

Balance at March 31, 2024 $ 441 $ ( 631 ) $ 6,900 $ ( 2,735 ) $ ( 899 ) $ 3,076

Stock Treasury

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

Balance at June 30, 2024 $ 441 $ ( 631 ) $ 6,887 $ ( 2,690 ) $ ( 927 ) $ 3,080

Balance at December 31, 2023 $ 440 $ ( 627 ) $ 6,915 $ ( 2,726 ) $ ( 890 ) $ 3,112

3 unchanged sentences

Equity compensation, net of tax 1 ( 4 ) 31 — — 28

Balance at June 30, 2024 $ 441 $ ( 631 ) $ 6,887 $ ( 2,690 ) $ ( 927 ) $ 3,080

Stock Treasury

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

Balance at March 31, 2023 $ 439 $ ( 627 ) $ 6,965 $ ( 2,440 ) $ ( 1,004 ) $ 3,333

Comprehensive income (loss) — — — 18 ( 17 ) 1

Dividends declared on common stock - $ 0.07 per share

— — ( 30 ) — — ( 30 )

Equity compensation, net of tax 1 — 10 — — 11

Balance at June 30, 2023 $ 440 $ ( 627 ) $ 6,945 $ ( 2,422 ) $ ( 1,021 ) $ 3,315

Balance at December 31, 2022 $ 439 $ ( 623 ) $ 7,052 $ ( 2,338 ) $ ( 1,011 ) $ 3,519

Comprehensive loss — — — ( 84 ) ( 10 ) ( 94 )

Dividends declared on common stock - $ 0.30 per share

— — ( 126 ) — — ( 126 )

Equity compensation, net of tax 1 ( 4 ) 19 — — 16

Balance at June 30, 2023 $ 440 $ ( 627 ) $ 6,945 $ ( 2,422 ) $ ( 1,021 ) $ 3,315

See Notes to Condensed Consolidated Financial Statements (Unaudited).

26 unchanged sentences

In addition, uncertainty still remains over the volatility and direction of future consumer and customer demand patterns, as well as inflationary pressures.

Accordingly, the Company’s results of operations and cash flows for the three months ended March 31, 2024 may not necessarily be indicative of the results that may be expected for the year ending December 31, 2024.

Accordingly, the Company’s results of operations and cash flows for the three and six months ended June 30, 2024 may not necessarily be indicative of the results that may be expected for the year ending December 31, 2024.

Recent Accounting Pronouncements

Changes to U.S.

GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification.

GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification (“ASC”).

The Company considers the applicability and impact of recently issued and proposed ASUs.

16 unchanged sentences

Deferral of the Sunset Date of Topic 848 , which extends the sunset date of the guidance.

ASU 2020-04 may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2024.

The Company adopted ASU 2020-04 and it did not have a material impact on its consolidated financial statements.

2 unchanged sentences

This ASU is effective for fiscal years beginning after December 15, 2022, except for the amendment on roll forward information which is effective for fiscal years beginning after December 15, 2023.

The Company adopted ASU 2022-04 and it did not have a material impact on its consolidated financial statements.

The Company adopted ASU 2022-04 which did not have a material impact on its consolidated financial statements.

See disclosure hereafter for further information.

Sales of Accounts Receivables

Factored receivables at March 31, 2024 associated with the Company’s existing factoring agreement for certain customer receivables (the “Customer Receivables Purchase Agreement”) were approximately $ 300 million, an increase of approximately $ 60 million from December 31, 2023.

Factored receivables at June 30, 2024 associated with the Company’s existing factoring agreement for certain customer receivables (the “Customer Receivables Purchase Agreement”) were approximately $ 360 million, an increase of approximately $ 120 million from December 31, 2023.

Transactions under this agreement are accounted for as sales of accounts receivable, and the receivables sold are removed from the Condensed Consolidated Balance Sheet at the time of the sales transaction.

1 unchanged sentence

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

In addition, the Company, through a wholly-owned special purpose entity (“SPE”) has 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 other 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, originating in the U.S.

Under the Receivables Facility, certain of the Company’s subsidiaries continuously sell their accounts receivables originating in the U.S.

to the SPE and the SPE sells the receivables to the financial institution.

5 unchanged sentences

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 Condensed Consolidated Balance Sheet.

The balance of outstanding accounts receivables sold to the financial institution as of March 31, 2024 was $ 110 million, an increase of approximately $ 65 million from December 31, 2023.

Cash received under the New Receivables Facility is classified as an operating cash flow and collections of accounts receivables not yet submitted to the financial institution as a financing cash flow in the Condensed Consolidated Statement of Cash Flows.

The balance of outstanding accounts receivables sold to the financial institution as of June 30, 2024 was $ 145 million, an increase of approximately $ 100 million from December 31, 2023.

Cash received under the Receivables Facility is classified as an operating cash flow and collections of accounts receivables not yet submitted to the financial institution as a financing cash flow in the Condensed Consolidated Statement of Cash Flows.

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

Supplier Finance Program Obligations

The Company has worked with its suppliers of goods and services over the past several years to revisit terms and conditions, including the extension of payment terms.

Additionally, a global financial institution offers a voluntary supply chain finance program (the “SCF Program”) which enables suppliers, at their sole discretion, to sell their receivables due from the Company to the financial institution on a non-recourse basis.

The Company and its suppliers agree on contractual terms for the goods and services procured, including prices, quantities and payment terms, regardless of whether the supplier elects to participate in the SCF Program.

Supplier payments terms average approximately 128 days.

In June 2024, the Company entered into an arrangement with a third-party vendor which provides a service for the Company’s suppliers, at their sole discretion, to sell their receivables due from the Company with various financial institutions, who at their sole discretion, contract with the third-party vendor to participate in the supplier finance program (the “New SCF Program”).

The suppliers sell goods or services, as applicable, to the Company and issue the associated invoices to the Company based on the agreed-upon contractual terms.

Suppliers that participate in the SCF Program, at their sole discretion, determine which invoices, if any, they want to sell to the financial institution.

The suppliers’ voluntary inclusion of invoices in the SCF Program does not change the Company’s existing contractual terms with its suppliers.

The Company does not provide any guarantees or collateral directly under the SCF Program, nor does it have any economic interest in a supplier’s decision to participate in the SCF Program.

Pursuant to the Second Amendment (defined hereafter), a lender under the Credit Revolver (defined hereafter) that also participates in the SCF Program secured its related financing pursuant to the terms of the Credit Revolver.

Suppliers that participate in the New SCF Program, at their sole discretion, determine which invoices, if any, they want to sell to the third-party vendor.

The suppliers’ voluntary inclusion of invoices in the New SCF Program does not change the Company’s existing contractual terms with its suppliers.

The Company does not provide any guarantees or collateral under the New SCF Program, nor does it have any economic interest in a supplier’s decision to participate in the New SCF Program.

Amounts due under the New SCF Program will be included in accounts payable in the Condensed Consolidated Balance Sheets and as operating cash flows in the Condensed Consolidated Statement of Cash Flows.

Prior to the New SCF Program, a global financial institution offered a voluntary supply chain finance program (the “Former SCF Program”) which similarly enabled suppliers, at their sole discretion, to sell their receivables due from the Company to the financial institution on a non-recourse basis.

Pursuant to the Second Amendment (defined hereafter), a lender under the Credit Revolver (defined hereafter) that also participated in the Former SCF Program secured its related financing pursuant to the terms of the Credit Revolver.

See Footnote 8 for further information.

In April 2024, the Company exercised its right to terminate the SCF Program with the current financial institution.

The Company continued to reflect invoices participating in the SCF Program as current liabilities in the Condensed Consolidated Balance Sheet and cash flows from operating activities in the Condensed Consolidated Statement of Cash Flows as of and for the three months ended March 31, 2024, respectively.

The termination will not materially impact the Company’s operating results, financial condition or liquidity.

The following table sets forth the outstanding payment obligations due to the financial institution and activities related to the suppliers who participated in the SCF Program:

In April 2024, the Company exercised its right to terminate the Former SCF Program with the financial institution.

The Company continued to reflect invoices participating in the Former SCF Program as current liabilities in the Condensed Consolidated Balance Sheet and cash flows from operating activities in the Condensed Consolidated Statement of Cash Flows as of and for the six months ended June 30, 2024, respectively.

Supplier payment terms for those participating in the program average approximately 129 days.

The termination did not materially impact the Company’s operating results, financial condition or liquidity.

While the Company has entered into the New SCF Program to offer its vendors another supply chain financing option after the termination of the Former SCF program, there has been no activity under the New SCF Program at and during the period ending June 30, 2024.

As such, the following table sets forth the outstanding payment obligations due to the financial institution and activities related to the suppliers who participated in the Former SCF Program:

Balance at December 31, 2023

Invoices participating in the SCF Program 86

Invoices participating in the Former SCF Program 111

Invoices paid to the financial institution ( 180 )

Balance at March 31, 2024

Balance at June 30, 2024

Footnote 2 — Accumulated Other Comprehensive Income (Loss)

The following table displays the changes in Accumulated Other Comprehensive Income (Loss) (“AOCL”) by component, net of tax, for the three months ended March 31, 2024 (in millions):

The following table displays the changes in Accumulated Other Comprehensive Income (Loss) (“AOCL”) by component, net of tax, for the six months ended June 30, 2024 (in millions):

Adjustment Pension and

5 unchanged sentences

Net current period other comprehensive income (loss) ( 59 ) 8 14 ( 37 )

Balance at March 31, 2024 $ ( 692 ) $ ( 188 ) $ ( 19 ) $ ( 899 )

Reclassifications from AOCL to the results of operations for the three months ended March 31, 2024 and 2023 were pretax (income) expense of (in millions):

Balance at June 30, 2024 $ ( 727 ) $ ( 188 ) $ ( 12 ) $ ( 927 )

Reclassifications from AOCL to the results of operations for the three and six months ended June 30, 2024 and 2023 were pretax (income) expense of (in millions):

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Pension and postretirement benefit plans (1)

$ — $ 5 $ ( 1 ) $ 5

Derivative financial instruments (2)

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Foreign currency translation adjustments $ 4 $ ( 12 ) $ 16 $ ( 18 )

15 unchanged sentences

The Company commenced organizational realignment activities during the first quarter of 2024.

During the three months ended March 31, 2024, the Company recorded restructuring charges of $ 22 million and nominal restructuring-related charges in connection with the Realignment Plan.

During the three and six months ended June 30, 2024, the Company recorded restructuring charges of $ 9 million and $ 31 million, respectively.

During the three and six months ended June 30, 2024, the Company also recorded restructuring-related charges of $ 8 million in connection with the Realignment Plan.

The Company has incurred aggregate charges of $ 39 million since inception in connection with the Realignment Plan.

In June 2024, as part of optimizing the Company’s real estate footprint, the Company entered into a lease agreement for a new location of its Corporate headquarters in Atlanta, Georgia, which will allow it to consolidate five different facilities and bring together employees in the area into a single location.

See Footnote 5 for further information.

Also in June 2024, the Company entered into an agreement with an unrelated third party to sell and leaseback its current headquarters facility, which is expected to close during the third quarter of fiscal year 2024.

The Company intends to occupy the current facility while waiting to build-out

the new facility, which is anticipated to be completed during the first half of fiscal year 2025.

Management concluded the sale of the current headquarters facility satisfied the criteria to be classified as held for sale at June 30, 2024.

As such, the Company wrote down the carrying value of the assets held for sale to their fair value less cost to sell.

During the second quarter of 2024, the Company recorded a net charge of $ 6 million inclusive of a fair market value adjustment related to the below market rental payments associated with the sale leaseback transaction, which was recorded within impairment of goodwill, intangibles and other assets in the Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2024.

The underlying assets held for sale were classified within prepaid expenses and other current assets in the Condensed Consolidated Balance Sheet as of June 30, 2024.

Network Optimization Project

2 unchanged sentences

The Network Optimization Project incorporates a variety of initiatives, including a reduction in the overall number of distribution centers, an optimization of distribution by location, and completion of select automation investments intended to further streamline the Company’s cost structure and to maximize operating performance.

The Company currently estimates that it will incur approximately $ 37 million to $ 49 million in restructuring and restructuring-related charges associated with execution of the Network Optimization Project and expects that the costs incurred will be substantially complete by the end of 2024.

The Company currently estimates that it will incur approximately $ 37 million to $ 49 million in restructuring and restructuring-related charges associated with execution of the Network Optimization Project and expects that the charges incurred will be substantially complete by the end of 2024.

This estimate of charges consists primarily of $ 8 million to $ 11 million related to cash severance payments and other termination benefits and approximately $ 29 million to $ 38 million associated with industrial site reductions.

The Company expects approximately $ 35 million to $ 44 million of the aggregate charges will be cash expenditures.

In connection with the Network Optimization Project, the Company recorded restructuring charges of $ 3 million during the three months ended March 31, 2024, and has incurred $ 10 million since inception.

In addition, the Company incurred $ 2 million of restructuring-related charges during the three months ended March 31, 2024, and has incurred $ 18 million since inception.

In connection with the Network Optimization Project, the Company recorded restructuring and restructuring-related charges for the periods indicated as follows (in millions):

Three Months Ended

June 30, Six Months Ended

June 30, Incurred since inception

2024 2023 2024 2023

Restructuring charges $ — $ 2 $ 3 $ 2 $ 10

Restructuring-related charges 6 8 8 8 24

Total $ 6 $ 10 $ 11 $ 10 $ 34

Project Phoenix

6 unchanged sentences

The Company expects approximately $ 95 million to $ 120 million of the aggregate charges will be cash expenditures.

The Company commenced reducing headcount in the first quarter of 2023, and while the program was mostly complete by the end of 2023, charges will continue to be recognized as the Company completes remaining actions in accordance with local regulations and consultation requirements.

While the program was mostly complete by the end of 2023, charges will continue to be recognized as the Company completes remaining actions in accordance with local regulations and consultation requirements.

All cash payments are expected to be paid within one year of charges incurred.

During the three months ended March 31, 2024 and 2023, the Company recorded restructuring charges of $ 1 million and $ 36 million, respectively, in connection with Project Phoenix, and has incurred $ 79 million since inception.

Also, during the three months ended March 31, 2024 and 2023, the Company recorded restructuring-related charges of $ 3 million and $ 6 million, respectively, in connection with Project Phoenix, and has incurred $ 22 million since inception.

Restructuring costs, net and restructuring-related costs incurred from inception for the Realignment Plan, Network Optimization Project and Project Phoenix (collectively, the “Plans”) were as follows (in millions):

In connection with Project Phoenix, the Company recorded restructuring and restructuring-related charges for the periods indicated as follows (in millions):

Three Months Ended

June 30, Six Months Ended

June 30, Incurred since inception

2024 2023 2024 2023

Restructuring costs $ — $ 17 $ 1 $ 53 $ 79

Restructuring-related costs 2 4 5 10 24

Total $ 2 $ 21 $ 6 $ 63 $ 103

Restructuring charges, net and restructuring-related charges incurred from inception for the Realignment Plan, Network Optimization Project and Project Phoenix (collectively, the “Plans”) were as follows (in millions):

Severance and termination costs Contract termination and other costs Total restructuring

charges Restructuring-related

charges Total charges

costs Restructuring-related

costs Total costs

Realignment Plan $ 30 $ 1 $ 31 $ 8 $ 39

3 unchanged sentences

Other Restructuring and Restructuring-Related Charges

The Company also incurs other restructuring and restructuring-related costs in connection with various discrete initiatives.

During the three months ended March 31, 2024 and 2023, the Company recorded nominal and $ 2 million of other restructuring charges, respectively.

Restructuring-related costs are recorded in cost of products sold and selling, general and administrative expenses (“SG&A”) in the Condensed Consolidated Statements of Operations based on the nature of the underlying costs incurred.

During the three months ended March 31, 2024 and 2023, the Company recorded other restructuring-related charges of $ 8 million and $ 7 million, respectively.

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

The Company also incurs other restructuring and restructuring-related charges in connection with various discrete initiatives.

The Company recorded $ 1 million of other restructuring costs for both the three and six months ended June 30, 2024 and $ 3 million and $ 5 million, during the three and six months ended June 30, 2023, respectively.

Restructuring-related charges are recorded in cost of products sold, selling, general and administrative expenses (“SG&A”) and impairment of other assets in the Condensed Consolidated Statements of Operations based on the nature of the underlying charges incurred.

During the three months ended June 30, 2024 and 2023, the Company recorded immaterial and $ 5 million, respectively of other restructuring-related charges.

During the six months ended June 30, 2024 and 2023, the Company recorded other restructuring-related charges of $ 8 million and $ 12 million, respectively.

Restructuring charges, net incurred by reportable business segments for all restructuring activities for the periods indicated and the total charges since inception for the Plans are as follows (in millions):

Three Months Ended

March 31, Total charges from inception of Plans

June 30, Six Months Ended

June 30, Total incurred since inception of Plans

2024 2023 2024 2023

Home and Commercial Solutions $ 3 $ 11 $ 10 $ 27 $ 52

3 unchanged sentences

$ 10 $ 22 $ 36 $ 60 $ 120

Accrued restructuring costs activity for the three months ended March 31, 2024 was as follows (in millions):

Accrued restructuring costs for the six months ended June 30, 2024 were as follows (in millions):

Balance at December 31, 2023 Restructuring

Costs, Net Payments Balance at

March 31, 2024

June 30, 2024

Severance and termination costs $ 30 $ 32 $ ( 44 ) $ 18

1 unchanged sentence

$ 30 $ 36 $ ( 48 ) $ 18

Accrued restructuring costs activity for the three months ended March 31, 2023 was as follows (in millions):

Accrued restructuring costs for the six months ended June 30, 2023 were as follows (in millions):

Balance at December 31, 2022 Restructuring

1 unchanged sentence

and Other Balance at

March 31, 2023

June 30, 2023

Severance and termination costs $ 7 $ 57 $ ( 48 ) $ — $ 16

3 unchanged sentences

Inventories are comprised of the following (in millions):

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Raw materials and supplies $ 203 $ 214

4 unchanged sentences

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

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Land $ 67 $ 75

3 unchanged sentences

$ 1,153 $ 1,212

Depreciation expense was $ 51 million and $ 54 million for the three months ended March 31, 2024 and 2023, respectively .

Depreciation expense was $ 44 million and $ 51 million for the three months ended June 30, 2024 and 2023, respectively, and $ 95 million and $ 105 million for the six months ended June 30, 2024 and 2023, respectively.

In June 2024, the Company entered into an agreement for a right of use operating lease, for its Corporate headquarters in Atlanta, Georgia, with an initial lease term of 14.5 years.

The Company has not yet taken possession of the facility;

therefore it has not reflected the right of use asset and lease liability in the Condensed Consolidated Balance Sheet at June 30, 2024.

The gross minimum contractual aggregate lease payments are approximately $ 106 million.

See Footnote 3 for additional information.

Footnote 6 — Goodwill and Other Intangible Assets, Net

Goodwill activity for the three months ended March 31, 2024 is as follows (in millions):

March 31, 2024

Goodwill activity for the six months ended June 30, 2024 is as follows (in millions):

June 30, 2024

Segments Net Book Value at December 31, 2023

5 unchanged sentences

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

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Accumulated Amortization

9 unchanged sentences

The estimated useful lives range from 10 to 15 years, which will increase the Company’s annual amortization expense by $ 25 million, approximately $ 6 million quarterly (approximately $ 0.01 net loss per share per quarter).

Amortization expense for intangible assets was $ 34 million and $ 27 million for the three months ended March 31, 2024 and 2023, respectively.

Amortization expense for intangible assets was $ 35 million and $ 27 million for the three months ended June 30, 2024 and 2023, respectively, and $ 69 million and $ 54 million for the six months ended June 30, 2024 and 2023, respectively.

During the second quarter of 2023, the Company concluded that a triggering event had occurred for an indefinite-lived tradename in the Home Fragrance reporting unit in the Home and Commercial Solutions segment and for the goodwill associated with the Baby reporting unit in the Learning and Development segment, as a result of a downward revision of forecasted cash flows due to softening global demand, primarily caused by continued inflationary pressure that is impacting discretionary spending behavior of consumers, as well as rising interest rates.

The Company performed a quantitative impairment test and determined that the indefinite-lived tradename in the Home and Commercial Solutions segment was impaired.

During the three and six months ended June 30, 2023, the Company recorded an aggregate non-cash impairment charge of $ 8 million, as the carrying value of the tradename exceeded its fair value.

The Company concluded that the Baby reporting unit goodwill was not impaired during the second quarter of 2023.

Footnote 7 — Other Accrued Liabilities

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

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Customer accruals $ 628 $ 659

1 unchanged sentence

Operating lease liabilities 117 122

Accrued interest expense 106 74

Accrued self-insurance liabilities, contingencies and warranty 87 92

Accrued interest expense 80 74

Accrued marketing and freight expenses 63 71

4 unchanged sentences

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

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

4.00 % senior notes due 2024 (1) (2)

10 unchanged sentences

Long-term debt $ 4,059 $ 4,575

(1) Included in short-term debt and current portion of long-term debt

(1) Included in short-term debt and current portion of long-term debt at June 30, 2024.

(2) Included in short-term debt and current portion of long-term debt at December 31, 2023.

On February 9, 2024, Moody’s Corporation (“Moody’s”) downgraded the Company’s senior unsecured debt rating to “Ba3”.

11 unchanged sentences

The Second Amendment, among other things, (i) reduced the commitments of the lenders from $ 1.5 billion to $ 1.0 billion, (ii) replaced the Company’s existing 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) required 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) required 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, subject to certain limitations.

See Footnote 1 for further information with respect to the Company’s SCF Program.

See Footnote 1 for further information with respect to the Company’s SCF Programs.

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 March 31, 2024, the Company had $ 231 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 $ 749 million.

At June 30, 2024, the Company had $ 285 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 $ 695 million.

The indentures governing the Company’s senior notes contain usual and customary nonfinancial covenants.

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Total debt 6.0 % 5.3 % 5.8 % 5.1 %

1 unchanged sentence

The fair value of the Company’s senior notes are based upon prices of similar instruments in the marketplace and are as follows (in millions):

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Fair Value Book Value Fair Value Book Value

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Fair Value Hedges

At March 31, 2024, 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.

At June 30, 2024, 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 4.000 % senior notes due 2024 for the remaining life of the notes.

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The Company has elected the spot method for assessing the effectiveness of these contracts.

During the three months ended March 31, 2024 and 2023, the Company recognized income of $ 9 million and $ 11 million, respectively, in interest expense, net, related to the portion of cross-currency swaps excluded from hedge effectiveness testing.

During the three months ended June 30, 2024 and 2023, the Company recognized income of $ 9 million and $ 10 million, respectively and income of $ 18 million and $ 21 million for the six months ended June 30, 2024 and 2023, respectively, in interest expense, net, related to the portion of cross-currency swaps excluded from hedge effectiveness testing.

Foreign Currency Contracts

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The effective portion of the gains or losses on these derivatives is deferred as a component of AOCL until it is recognized in earnings at the same time that the hedged item affects earnings and is included in the same caption in the Company’s Condensed Consolidated Statement of Operations as the underlying hedged item.

At March 31, 2024, the Company had approximately $ 331 million notional amount outstanding of forward foreign currency contracts that are designated as cash flow hedges of forecasted inventory purchases and sales.

At June 30, 2024, the Company had approximately $ 256 million notional amount outstanding of forward foreign currency contracts that are designated as cash flow hedges of forecasted inventory purchases and sales.

The Company also uses foreign currency contracts, primarily forward foreign currency contracts, to mitigate the foreign currency exposure of certain other foreign currency transactions.

At March 31, 2024, the Company had approximately $ 1.5 billion notional amount outstanding of these foreign currency contracts that are not designated as effective hedges for accounting purposes and have maturity dates through January 2025.

At June 30, 2024, the Company had approximately $ 886 million notional amount outstanding of these foreign currency contracts that are not designated as effective hedges for accounting purposes and have maturity dates through June 2025.

Fair market value gains or losses are included in the results of operations and are classified in other expense, net in the Company’s Condensed Consolidated Statement of Operations.

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Assets (Liabilities)

Balance Sheet Location March 31, 2024 December 31, 2023

Balance Sheet Location June 30, 2024 December 31, 2023

Derivatives designated as effective hedges:

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The following table presents gain and (loss) activity (on a pretax basis) related to derivative financial instruments designated or previously designated, as effective hedges (in millions):

March 31, 2024 Three Months

March 31, 2023

June 30, 2024 Three Months

June 30, 2023

Gain/(Loss) Gain/(Loss)

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(effective portion)

Interest rate swaps Interest expense, net $ — $ ( 2 ) $ — $ ( 1 )

Foreign currency contracts Net sales and cost of products sold 5 ( 3 ) ( 9 ) —

Cross-currency swaps Other expense, net 18 — ( 49 ) —

Total $ 23 $ ( 5 ) $ ( 58 ) $ ( 1 )

June 30, 2024 Six Months

June 30, 2023

Gain/(Loss) Gain/(Loss)

Location of gain (loss) recognized in income Recognized

(effective portion)

Interest rate swaps

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Total $ 76 $ ( 9 ) $ ( 84 ) $ 8

At March 31, 2024, net deferred losses of approximately $ 6 million within AOCL are expected to be reclassified to earnings over the next twelve months.

During the three months ended March 31, 2024 and 2023, the Company recognized in other expense, net, expense of $ 1 million and $ 10 million, respectively, related to derivatives that are not designated as hedging instruments.

At June 30, 2024, net deferred gains of approximately $ 2 million within AOCL are expected to be reclassified to earnings over the next twelve months.

During the three months ended June 30, 2024 and 2023, the Company recognized in other expense, net, income of $ 10 million and $ 8 million, respectively and income of $ 9 million and $ 18 million during the six months ended June 30, 2024 and 2023, respectively, related to derivatives that are not designated as hedging instruments.

Gains and losses on these derivatives are mostly offset by foreign currency movement in the underlying exposure.

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Pension Benefits

International U.S.

International

Three Months Ended March 31,

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

2024 2023 2024 2023 2024 2023 2024 2023

3 unchanged sentences

Amortization — 1 — — — 2 — 1

Settlements — — 1 5 — — 1 5

Total (income) expense $ ( 3 ) $ ( 1 ) $ 2 $ 7 $ ( 6 ) $ ( 3 ) $ 4 $ 10

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Amortization ( 1 ) ( 1 ) $ ( 2 ) $ ( 3 )

Total income $ ( 1 ) $ ( 1 ) $ ( 2 ) $ ( 3 )

In January 2024, the Company received a court ruling with respect to determining the benefits pensioners should have received upon converting their defined benefit to a defined contribution.

In January 2024, the Company received a court ruling with respect to determining the benefits certain pensioners related to an international subsidiary were entitled to receive upon converting their defined benefit to a defined contribution.

As the legal proceeding is concluded, the Company reduced its underlying pension obligation by approximately $ 11 million, with a corresponding offset to AOCL.

Footnote 11 — Income Taxes

The Company’s effective income tax rates for the three months ended March 31, 2024 and 2023 were a benefit of 85.0 % and 12.1 %, respectively, due to an increased forecasted annual tax rate driven primarily by lower forecasted pretax book income.

The Company’s effective income tax rates for the three months ended June 30, 2024 and 2023 were a provision of 46.4 % and 48.6 %, respectively, and benefit of 50.0 % and provision of 3.7 % for the six months ended June 30, 2024 and 2023, respectively.

The differences between the U.S.

federal statutory income tax rate of 21.0 % and the Company’s effective income tax rate for the three months ended March 31, 2024 and 2023 were impacted by a variety of factors, primarily resulting from the geographic mix of where the income was earned, as well as certain taxable income inclusion items in the U.S.

federal statutory income tax rate of 21.0 % and the Company’s effective income tax rate for the three and six months ended June 30, 2024 and 2023 were impacted by a variety of factors, primarily resulting from the geographic mix of where the income was earned, as well as certain taxable income inclusion items in the U.S.

based on foreign earnings.

For the period ended March 31, 2024 these items increased the tax rate more than the prior period due to the lower forecasted pretax book income.

For the three and six months ended June 30, 2024 these items increased the tax rate more than the prior period due to the lower forecasted pretax book income.

In periods where forecasted pretax income is low, the proportional impact of these items on the effective tax rate may be significant.

The three months ended March 31, 2024 were impacted by certain discrete items totaling $ 4 million of additional income tax expense.

The three months ended March 31, 2023 were also impacted by certain discrete items totaling $ 4 million of additional income tax expense.

The three and six months ended June 30, 2024 were impacted by certain discrete items.

Income tax expense for the three months ended June 30, 2024 included a discrete benefit of $ 64 million associated with a reduction in liabilities for unrecognized tax benefits, as the tax authorities’ examination of its U.S.

tax returns for the years 2011 to 2015, as further described hereafter, and its Brazil tax returns for the years 2015 to 2017 have been completed, offset by $ 7 million of additional tax related to withholding taxes associated with certain previously taxed earnings that are no longer indefinitely reinvested.

The six months ended June 30, 2024 also included certain discrete items totaling $ 4 million of additional income tax expense.

The three and six months ended June 30, 2023 were also impacted by certain discrete items.

Income tax expense for the three months ended June 30, 2023 included a discrete expense of $ 6 million associated with a tax basis adjustment on a prior disposition.

The six months ended June 30, 2023 also included certain discrete items totaling $ 4 million of additional income tax expense.

On May 14, 2024, the Company received a Statutory Notice of Deficiency (“Notice”) from the Internal Revenue Service (“IRS”) for the tax years 2011 to 2015.

T he Company agreed to certain adjustments raised by the IRS through the Notice.

Accordingly, the Company has concluded that various income tax positions taken by the Company have been effectively settled, with the exception of the matter the Company intends to dispute as further described hereafter.

The Company will pay the IRS approximately $ 22 million for additional income taxes and interest.

As a result, the Company has reduced its liability for unrecognized tax benefits for this amount, recorded in other noncurrent liabilities in the Condensed Consolidated Balance Sheets, with a corresponding increase to its current income tax liability.

On July 19, 2024, the Company filed a petition in the U.S.

Tax Court disputing the proposed assessment of $ 80 million in additional taxes plus $ 34 million in penalties plus the additional interest calculated upon final settlement related to the transfer pricing of services performed by certain of the Company’s foreign affiliates for the tax years 2011 to 2015.

The Company believes that adequate amounts have been reserved for any adjustments that may ultimately result.

If the IRS prevails in the assessment of additional tax, interest and penalties in excess of the Company’s current reserves, such outcome could have a material adverse effect on the Company’s financial position and results.

The Company files numerous consolidated and separate income tax returns in the U.S.

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The Company’s U.S.

federal income tax returns for 2011 to 2015 and 2017 to 2020, as well as certain state and non-U.S.

federal income tax returns for 2017 to 2020, as well as certain state and non-U.S.

income tax returns for various years, are under examination.

5 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Basic weighted average shares outstanding 415.2 414.2 415.0 414.0

Dilutive securities (1)

3.0 1.1 2.9 —

Diluted weighted average shares outstanding 418.2 415.3 417.9 414.0

(1) The three months ended March 31, 2024 and 2023 excludes 2.8 million and 1.3 million, respectively, of potentially dilutive share-based awards as their effect would be anti-dilutive.

At March 31, 2024, there were 0.7 million potentially dilutive stock awards with performance-based targets that were not met and as such, have been excluded from the computation of diluted earnings per share.

(1) The six months ended June 30, 2023 excludes 1.2 million of potentially dilutive share-based awards as their effect would be anti-dilutive.

At June 30, 2024, there were 0.7 million potentially dilutive stock awards with performance-based targets that were not met and as such, have been excluded from the computation of diluted earnings per share.

Footnote 13 — Share-Based Compensation

During the three months ended March 31, 2024, in connection with its annual grant, the Company granted 1.7 million performance-based restricted stock units (“RSUs”), which had an aggregate grant date fair value of $ 13 million, which entitles the recipients to shares of the Company’s common stock primarily over a three -year vesting period, subject to continued employment.

During the six months ended June 30, 2024, primarily in connection with its annual grant, the Company granted 1.7 million performance-based restricted stock units (“RSUs”), with an aggregate grant date fair value of $ 13 million.

These performance-based RSUs entitle the recipients to shares of the Company’s common stock and vest primarily at the end of a three -year period, subject to continued employment.

The actual number of shares that will ultimately be paid upon vesting is dependent on the level of achievement of the specified performance conditions.

During the three months ended March 31, 2024, primarily in connection with its annual grant, the Company also granted 5.1 million time-based RSUs with an aggregate grant date fair value of $ 39 million.

During the six months ended June 30, 2024, primarily in connection with its annual grant, the Company also granted 5.6 million time-based RSUs with an aggregate grant date fair value of $ 43 million.

These time-based RSUs entitle recipients to shares of the Company’s common stock and primarily vest in annual installments over a one to three-year period, subject to continued employment.

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The following table presents the Company’s non-pension financial assets and liabilities, which are measured at fair value on a recurring basis (in millions):

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

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

47 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Net sales (1)

9 unchanged sentences

$ 163 $ 120 $ 179 $ 84

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Segment assets

10 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2024 2023 2024 2023

Commercial $ 349 $ 378 $ 673 $ 726

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Home and Commercial Solutions 962 1,058 1,855 2,029

Baby 251 251 471 468

Writing 562 562 901 909

1 unchanged sentence

Outdoor and Recreation 258 333 459 603

TOTAL $ 1,653 $ 1,805

$ 2,033 $ 2,204 $ 3,686 $ 4,009

The following table disaggregates revenue by geography for the periods indicated (in millions):

Three Months Ended March 31,

Three Months Ended June 30,

America International TOTAL North

4 unchanged sentences

$ 1,389 $ 644 $ 2,033 $ 1,495 $ 709 $ 2,204

Six Months Ended June 30,

America International TOTAL North

America International TOTAL

Home and Commercial Solutions $ 1,201 $ 654 $ 1,855 $ 1,341 $ 688 $ 2,029

Learning and Development 1,021 351 1,372 1,004 373 1,377

Outdoor and Recreation 243 216 459 334 269 603

$ 2,465 $ 1,221 $ 3,686 $ 2,679 $ 1,330 $ 4,009

Footnote 16 — Litigation and Contingencies

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

The Company’s estimate of environmental remediation costs associated with these matters at March 31, 2024 was $ 38 million which is included in other accrued liabilities and other noncurrent liabilities in the Condensed Consolidated Balance Sheets.

No insurance recovery was taken into account in determining the Company’s cost estimates or reserves, nor do the Company’s cost estimates or reserves reflect any discounting for present value purposes, except with respect to certain long-term operations and maintenance CERCLA matters.

The Company’s estimate of environmental remediation costs associated with these matters at June 30, 2024 was $ 37 million which is included in other accrued liabilities and other noncurrent liabilities in the Condensed Consolidated Balance Sheets.

maintenance CERCLA matters.

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

1 unchanged sentence

EPA has issued General Notice Letters to over 100 entities, including the Company and its subsidiary, Berol Corporation (together, the “Company Parties”), alleging that they are PRPs at the Diamond Alkali Superfund Site (the “Site”) pursuant to CERCLA.

The Site is the subject of investigation and remedial activities and related settlement negotiations with the

The Site is the subject of investigation and remedial activities and related settlement negotiations with the U.S.

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

40 unchanged sentences

The Buyer generally alleged that the Company fraudulently breached certain representations in the Equity Purchase Agreement between the Company and Buyer, dated May 2, 2018, resulting in an inflated purchase price for The Waddington Group.

year ended December 31, 2021, the Company recorded an immaterial reserve to continuing operations in its Consolidated Financial Statements based on its best estimate of probable loss associated with this matter.

In the year ended December 31, 2021, the Company recorded an immaterial reserve to continuing operations in its Consolidated Financial Statements based on its best estimate of probable loss associated with this matter.

Further, in connection with the Company’s sale of The United States Playing Card Company (“USPC”), Cartamundi, Inc.

4 unchanged sentences

Although the Company cannot predict the ultimate outcome of other proceedings with certainty, it believes that the ultimate resolution of the Company’s proceedings, including any amounts it may be required to pay in excess of amounts reserved, will not have a material effect on the Company’s Condensed Consolidated Financial Statements, except as otherwise described in this Footnote 16 .

At March 31, 2024, the Company had approximately $ 39 million in standby letters of credit primarily related to the Company’s self-insurance programs, including workers’ compensation, product liability and medical expenses.

At June 30, 2024, the Company had approximately $ 42 million in standby letters of credit primarily related to the Company’s self-insurance programs, including workers’ compensation, product liability and medical expenses.

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

What changed 10-Q

Item 1. Financial Statements