What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-01 compared with 2025-04-30 · 177 added, 75 removed, 165 unchanged (60% of the section changed)

55 unchanged sentences

significant cumulative inflationary pressures on consumers;

recently announced tariffs by the current U.S.

recently announced and imposed tariffs by the current U.S.

presidential administration and other countries’ retaliatory actions in response to such tariffs;

15 unchanged sentences

These actions were primarily implemented by the end of 2024.

Remaining actions, subject to applicable local law and consultation requirements, are expected to be implemented by the end of fiscal year 2025.

The remaining actions, subject to applicable local law and consultation requirements, are expected to be implemented by the end of fiscal year 2025.

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

12 unchanged sentences

The Company also has a scaled, centralized procurement team that is proficient in sourcing raw materials and finished products from over 50 countries around the world.

The Company is actively working on the deployment of a mitigation strategy to offset the impact of this tariff exposure through a number of actions, including pricing, productivity and in some cases relocation of manufacturing.

Based on the currently announced and imposed tariffs as well as any retaliatory tariffs on U.S.

exports, the Company anticipates an incremental cash tariff cost of approximately $155 million in 2025 prior to any offsetting impact from mitigating actions.

There will be a timing difference between the operating cash outflow and the recognition of cost of products sold arising from the tariffs.

As a result, the Company anticipates recognizing approximately $105 million of incremental costs of products sold (including $10 million in the second quarter) in the Statement of Operations in 2025.

The Company continues to deploy a mitigation strategy designed to offset the impact of this tariff exposure through a number of actions, including pricing, productivity and in some cases relocation of manufacturing.

At this time, it is difficult to predict the rate or duration of these tariffs, and there can be no assurance as to the extent to which the Company will be able to offset the impact through mitigation actions.

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tariffs, retaliatory actions taken by other countries, or failure to effectively deploy the Company’s mitigation plans could have a significant negative impact on the Company.

Debt Issuance and Redemption

In May 2025, the Company completed the offering and sale of $1.25 billion of 8.500% senior notes due 2028 (the “2028 Notes”) and received proceeds of approximately $1.23 billion, net of fees and expenses paid.

The Company used the proceeds of the offering to fully redeem its outstanding 4.200% senior notes due 2026 (the “2026 Notes”) at a redemption price equal to 100.757% of the outstanding aggregate principal amount of the notes, plus accrued unpaid interest to the redemption date.

The total consideration was approximately $1.25 billion.

As a result of the redemption, the Company recorded a loss on debt extinguishment of $13 million.

Debt Rating Downgrades

During the second quarter of 2025, Moody’s Corporation (“Moody’s”) and S&P Global Inc.

(“S&P”) downgraded the Company’s senior unsecured debt rating to “B1” and “B+”, respectively.

As a result, certain of the Company’s outstanding senior notes are subject to an interest rate adjustment of 25 basis points for each downgrade, or 50 basis points in the aggregate, with such adjustments to take effect in the fourth quarter of this year.

The change to the interest rate due to the downgrades will increase the Company’s interest expense by approximately $5 million on an annualized basis (approximately $1 million in 2025).

See Footnote 8 of the Notes to Unaudited Condensed Consolidated Financial Statements for further information on debt issuance and redemption as well as the debt rating downgrades.

Results of Operations

Three Months Ended March 31, 2025 vs.

Three Months Ended March 31, 2024

Three Months Ended June 30, 2025 vs.

Three Months Ended June 30, 2024

Consolidated Operating Results

Three Months Ended March 31,

Three Months Ended June 30,

(in millions) 2025

6 unchanged sentences

Interest expense, net 82 78 4 5.1%

Loss on extinguishment and modification of debt 13 — 13 100.0%

Other expense, net 5 1 4 NM

Income before income taxes 71 84 (13) (15.5)%

Income tax provision 25 39 (14) (35.9)%

Income tax rate 35.2 % 46.4 %

Net income $ 46 $ 45 $ 1 2.2%

Diluted earnings per share $ 0.11 $ 0.11

NM - NOT MEANINGFUL

Net sales for the three months ended June 30, 2025 decreased 5%.

Net sales were unfavorably impacted by continued softness in global demand across all segments and net distribution losses in the H&CS and O&R segments.

These unfavorable factors were partially mitigated by launches of product innovations in the H&CS and L&D segments and to a lesser extent in the O&R segment.

In addition, pricing actions, including actions to mitigate recently announced tariffs, and shipment timing ahead of the back-to-school season in the L&D segment favorably impacted net sales.

Changes in foreign currency unfavorably impacted net sales by $4 million, or less than 1%.

Gross profit decreased 2% compared to the prior year.

Gross margin improved to 35.4% as compared with 34.4% in the prior year.

The improvement in gross margin was driven by gross productivity, pricing actions and lower restructuring-related charges of approximately $6 million, partially offset by the volume impact of lower sales and inflation.

Changes in foreign currency exchange rates favorably impacted gross profit by $2 million, or less than 1%.

Notable items, other than those noted above, impacting operating income for the three months ended June 30, 2025 and 2024 were as follows:

Three Months Ended June 30,

2025 2024 $ Change

Restructuring and restructuring-related costs (See Footnote 3 ) (1)

$ 12 $ 26 $ (14)

Transaction costs and other (2)

(1) For the three months ended June 30, 2025, restructuring-related costs reported in cost of products sold and selling, general and administrative expenses (“SG&A”) were $1 million and $5 million, respectively, and primarily relate to facility closures associated with various discrete initiatives as well as previously disclosed but substantially completed restructuring activities.

For the three months ended June 30, 2024, restructuring-related costs reported in cost of products sold, SG&A and impairment of other assets were $7 million, $3 million and $6 million, respectively, primarily related to facility closures associated with previously disclosed Network Optimization Project and Project Phoenix, as well as the Realignment Plan and other discrete initiatives.

Restructuring costs were $6 million and $10 million for the three months ended June 30, 2025 and 2024, respectively, primarily related to the Realignment Plan.

(2) Transaction costs and other for the three months ended June 30, 2025 primarily related to hyperinflationary currency movements.

For the three months ended June 30, 2024 transaction and other costs related to hyperinflationary currency movements and to accelerated amortization and write-off of other assets associated with integration projects.

Operating income was $171 million as compared to $163 million in the prior year period.

The increase reflects the impact of savings from restructuring actions primarily related to the Realignment Plan, lower restructuring and restructuring-related charges of approximately $8 million and lower advertising and promotion costs of $4 million, partially offset by lower gross profit of $14 million.

Interest expense, net increased by $4 million due to higher interest rates and lower interest income.

The weighted average interest rates for the three months ended June 30, 2025 and 2024 were approximately 6.3% and 6.0%, respectively.

The loss on extinguishment of debt of $13 million is related to the redemption of the Company’s 2026 Notes during June 2025.

See Footnote 8 of the Notes to Unaudited Condensed Consolidated Financial Statements for further information on interest expense and loss on extinguishment of debt.

Other expense, net for the three months ended June 30, 2025 and 2024 includes the following items:

Three Months Ended June 30,

Foreign exchange (gains) losses, net $ 1 $ (1)

Discount on factored receivables and other, net 4 2

The income tax provision for the three months ended June 30, 2025 was $25 million as compared to $39 million for the three months ended June 30, 2024.

The Company’s effective income tax rates for the three months ended June 30, 2025 and 2024 were provision of 35.2% and 46.4% respectively, primarily due to a decrease in the forecasted tax rate for 2025 that was mainly driven by improved forecasted pretax book income year over year.

See Footnote 10 of the Notes to Unaudited Condensed Consolidated Financial Statements for further information.

Business Segment Operating Results

Home and Commercial Solutions

Three Months Ended June 30,

(in millions) 2025 2024 $ Change % Change

Net sales $ 892 $ 962 $ (70) (7.3)%

Operating income 24 48 (24) (50.0)%

Operating margin 2.7 % 5.0 %

H&CS net sales for the three months ended June 30, 2025 decreased 7%, driven by the Kitchen and, to a lesser extent the Commercial business, primarily due to soft global demand and distribution losses.

Business exits across the segment also unfavorably impacted net sales by approximately 1%.

Pricing actions, including actions to mitigate recently announced tariffs, and contributions from new product launches primarily in the Kitchen and Home Fragrance businesses, partially offset these unfavorable factors.

Changes in foreign currency unfavorably impacted net sales by approximately $9 million, or 1%.

Operating income for the three months ended June 30, 2025 was $24 million as compared to $48 million in the prior year.

The decrease in operating income is due to lower gross profit of $19 million, primarily resulting from unfavorable fixed cost leverage associated with the lower sales volume and inflation, as well as approximately $4 million increase in restructuring-related charges.

These unfavorable impacts were partially offset by savings from restructuring actions primarily related to the Realignment Plan.

Learning and Development

Three Months Ended June 30,

(in millions) 2025 2024 $ Change % Change

Net sales $ 809 $ 813 $ (4) (0.5)%

Operating income 202 205 (3) (1.5)%

Operating margin 25.0 % 25.2 %

L&D net sales for the three months ended June 30, 2025 decreased less than 1%.

Net sales in the Writing business increased primarily due to net distribution gains, pricing actions and contributions from launches of product innovations, as well as the timing of back-to-school shipments.

Net sales in the Baby business declined primarily due to soft demand in certain markets and net distribution losses, partially offset by pricing actions, including actions to mitigate recently announced tariffs, and contributions from launches of product innovations.

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

Operating income for the three months ended June 30, 2025 decreased to $202 million as compared to $205 million in the prior-year period.

The decrease in operating income is primarily due to lower gross profit of $7 million, reflecting the impact of lower net sales and inflation, partially offset by gross productivity.

The decrease in gross profit was partially offset by lower advertising and promotion costs of approximately $4 million, as well as savings from restructuring actions primarily related to the Realignment Plan.

Outdoor and Recreation

Three Months Ended June 30,

(in millions) 2025 2024 $ Change % Change

Net sales $ 234 $ 258 $ (24) (9.3)%

Operating income (loss) 8 (11) 19 NM

Operating margin 3.4 % (4.3) %

NM - NOT MEANINGFUL

O&R net sales for the three months ended June 30, 2025 decreased 9% primarily due to distribution losses, soft demand and to a lesser extent, business exits.

These declines were partially offset by pricing actions, including actions to mitigate recently announced tariffs, and contribution from the launches of product innovation.

Changes in foreign currency favorably impacted net sales by approximately $4 million, or 2%.

Operating income for the three months ended June 30, 2025 was $8 million as compared to operating loss of $11 million in the prior-year period.

The improvement in operating performance was mainly due to higher gross profit of $12 million driven primarily by gross productivity, pricing actions and mix.

Savings from restructuring actions also contributed to the improvement in operating performance.

Results of Operations

Six Months Ended June 30, 2025 vs.

Six Months Ended June 30, 2024

Consolidated Operating Results

Six Months Ended June 30,

(in millions) 2025

$ Change % Change

Net sales $ 3,501 $ 3,686 $ (185) (5.0)%

Gross profit 1,188 1,203 (15) (1.2)%

Gross margin 33.9 % 32.6 %

Operating income 192 179 13 7.3%

Operating margin 5.5 % 4.9 %

Interest expense, net 154 148 6 4.1%

Loss on extinguishment and modification of debt 13 1 12 NM

Other expense, net 9 6 3 50.0%

Loss before income taxes (55) (60) 5 8.3%

Income tax benefit (18) (51) 33 64.7%

Income before income taxes 16 24 (8) (33.3)%

Income tax provision (benefit) 7 (12) 19 NM

Income tax rate 43.8 % (50.0) %

Net loss $ (37) $ (9) $ (28) NM

Diluted loss per share $ (0.09) $ (0.02)

Net income $ 9 $ 36 $ (27) (75.0)%

Diluted earnings per share $ 0.02 $ 0.09

NM - NOT MEANINGFUL

Net sales for the three months ended March 31, 2025 decreased 5%.

Net sales were unfavorably impacted by soft global demand and net distribution losses.

Business exits, primarily in the H&CS segment, also unfavorably impacted net sales by approximately $8 million, or less than 1%.

These unfavorable factors were partially mitigated by launches of product innovations in the L&D segment and pricing actions, primarily in international markets to offset inflation and unfavorable foreign currency movement.

Net sales for the six months ended June 30, 2025 decreased approximately 5%.

Net sales were unfavorably impacted by soft global demand across all segments and net distribution losses in the H&CS and O&R segments.

Business exits, primarily in the H&CS and O&R segments also unfavorably impacted net sales.

These unfavorable factors were partially mitigated by launches of product innovations in the H&CS and L&D segments and to a lesser extent in the O&R segment.

In addition, pricing actions and shipment timing ahead of back-to-school season in the L&D segment favorably impacted net sales.

Changes in foreign currency unfavorably impacted net sales by $48 million, or 1%.

Gross profit was essentially flat compared to the prior year.

Gross profit decreased by approximately $15 million, or 1% compared to the prior year.

Gross margin improved to 33.9% as compared with 32.6% in the prior year.

The improvement in gross margin was driven by gross productivity, pricing and lower restructuring-related charges of approximately $5 million, partially offset by the volume impact of lower sales as described above and inflation.

The improvement in gross margin was driven by gross productivity, pricing and lower restructuring-related charges of approximately $11 million, or 1%, partially offset by the volume impact of lower sales and inflation.

Changes in foreign currency exchange rates unfavorably impacted gross profit by $8 million, or 1%.

Notable items, other than those noted above, impacting operating income for the three months ended March 31, 2025 and 2024 were as follows:

Three Months Ended March 31,

Notable items, other than those noted above, impacting operating income for the six months ended June 30, 2025 and 2024 were as follows:

Six Months Ended June 30,

2025 2024 $ Change

2 unchanged sentences

Transaction costs and other (2)

(1) For the three months ended March 31, 2025, restructuring-related costs reported in cost of products sold and selling, general and administrative expenses (“SG&A”) were $3 million and $11 million, respectively, and primarily relate to facility closures associated with various discrete initiatives as well as previously announced but substantially completed restructuring activities.

For the three months ended March 31, 2024, restructuring-related costs reported in cost of products sold and SG&A were $8 million and $5 million, respectively, primarily related to facility closures associated with the Network Optimization Project and Project Phoenix, previously disclosed, and other discrete initiatives.

Restructuring costs were $11 million and $26 million for the three months ended March 31, 2025 and 2024, respectively, primarily related to the Realignment Plan.

(2) Transaction costs and other for the three months ended March 31, 2025 primarily related to hyperinflationary currency movements.

For the three months ended March 31, 2024 transaction and other costs primarily related to a release of a bad debt reserve due to a recovery of a receivable from an international customer.

(1) For the six months ended June 30, 2025, restructuring-related costs reported in cost of products sold and SG&A were $4 million and $16 million, respectively, and primarily relate to facility closures associated with various discrete initiatives as well as previously announced but substantially completed restructuring activities.

For the six months ended June 30, 2024, restructuring-related costs reported in cost of products sold, SG&A and impairment of other assets were $15 million, $8 million and $6 million, respectively, primarily related to facility closures associated with previously disclosed Network Optimization Project and Project Phoenix, as well as the Realignment Plan and other discrete initiatives.

Restructuring costs were $17 million and $36 million for the six months ended June 30, 2025 and 2024, respectively, primarily related to the Realignment Plan.

(2) Transaction costs and other for the six months ended June 30, 2025 primarily related to hyperinflationary currency movements.

For the six months ended June 30, 2024 transaction and other costs primarily related to a release of a bad debt reserve due to a recovery of a receivable from an international customer, hyperinflationary currency movements and accelerated amortization and write-off of other assets associated with integration projects.

Operating income was $192 million as compared to $179 million in the prior year period.

The improvement reflects benefits from gross productivity, savings from restructuring actions primarily related to the Realignment Plan and lower restructuring and restructuring-related charges of $14 million.

These improvements were partially offset by higher advertising and promotion costs of $6 million.

The increase reflects the impact of savings from restructuring actions primarily related to the Realignment Plan, lower restructuring and restructuring-related charges of $17 million and lower amortization of tradenames of $4 million, partially offset by lower gross profit of $15 million.

Interest expense, net increased by $6 million due to higher interest rates and lower interest income.

The weighted average interest rates for the three months ended March 31, 2025 and 2024 were approximately 6.0% and 5.6%, respectively.

See Footnote 8 of the Notes to Unaudited Condensed Consolidated Financial Statements for further information.

Other expense, net for three months ended March 31, 2025 and 2024 includes the following items:

Three Months Ended March 31,

The weighted average interest rates for the six months ended June 30, 2025 and 2024 were approximately 6.2% and 5.8%, respectively.

The loss on extinguishment of debt of $13 million is related to the redemption of the Company’s 2026 Notes during June 2025.

See Footnote 8 of the Notes to Unaudited Condensed Consolidated Financial Statements for further information on interest expense and loss on extinguishment of debt.

Other expense, net for six months ended June 30, 2025 and 2024 includes the following items:

Six Months Ended June 30,

Foreign exchange losses, net $ 2 $ 2

Discount on factored receivables and other, net 7 4

The income tax benefit for the three months ended March 31, 2025 was $18 million as compared to $51 million for the three months ended March 31, 2024.

The Company’s effective income tax rates for the three months ended March 31, 2025 and 2024 were benefits of 32.7% and 85.0%, respectively, due to a decrease in the forecasted tax rate for 2025 that was primarily driven by improved forecasted pretax book income year over year.

The income tax expense for the six months ended June 30, 2025 was $7 million as compared to benefit of $12 million for the six months ended June 30, 2024.

The Company’s effective income tax rates for the six months ended June 30, 2025 and 2024 were expense of 43.8% and benefit of 50.0% respectively, as the decrease in the forecasted rate for 2025 primarily driven by improved forecasted pretax book income was offset by a decrease in discrete benefits in the current year.

See Footnote 10 of the Notes to Unaudited Condensed Consolidated Financial Statements for further information.

1 unchanged sentence

Home and Commercial Solutions

Three Months Ended March 31,

Six Months Ended June 30,

(in millions) 2025 2024 $ Change % Change

Net sales $ 1,704 $ 1,855 $ (151) (8.1)%

Operating income (loss) (2) 16 (18) NM

Operating income 22 64 (42) (65.6)%

Operating margin 1.3 % 3.5 %

NM - NOT MEANINGFUL

H&CS net sales for the three months ended March 31, 2025 decreased 9%, which reflected soft demand across all businesses, as well as net distribution losses.

H&CS net sales for the six months ended June 30, 2025 decreased 8%, which reflected soft global demand across all businesses, primarily in the Kitchen business, as well as net distribution losses.

Business exits also unfavorably impacted net sales by approximately 1%.

Pricing actions partially offset these unfavorable factors.

Pricing actions and contributions from new product launches, partially offset these unfavorable factors.

Changes in foreign currency unfavorably impacted net sales by $37 million, or 2%.

Operating loss for the three months ended March 31, 2025 was $2 million as compared to operating income of $16 million in the prior year.

The decrease in operating income is primarily due to lower gross profit of $15 million resulting from unfavorable fixed cost leverage associated with the lower sales volume, as described above, and inflation, partially offset by gross productivity and lower restructuring and restructuring-related charges of $10 million.

Operating income for the six months ended June 30, 2025 was $22 million as compared to $64 million in the prior year.

The decrease in operating income is primarily due to lower gross profit of $34 million, resulting from unfavorable fixed cost leverage associated with lower sales volume and inflation, partially offset by gross productivity.

The decrease in gross profit was partially offset by savings from restructuring actions primarily related to the Realignment Plan and lower restructuring and restructuring-related charges of $5 million.

Learning and Development

Three Months Ended March 31,

Six Months Ended June 30,

(in millions) 2025 2024 $ Change % Change

2 unchanged sentences

Operating margin 21.7 % 21.8 %

L&D net sales for the three months ended March 31, 2025 increased 2%, as growth in the Baby business, primarily as a result of improved orders from major retailers and launches of product innovations, was partially offset by a decline in the Writing business due to soft demand in certain markets, partially offset by contribution from launches of product innovations.

L&D net sales for the six months ended June 30, 2025 increased approximately 1%.

Both the Baby and Writing businesses increased modestly due to net distribution gains, pricing actions and contributions from launches of product innovations, as well as favorable timing of back-to-school shipments in the Writing business.

Changes in foreign currency unfavorably impacted net sales by $10 million, or 1%.

Operating income for the three months ended March 31, 2025 increased to $98 million as compared to $94 million in the prior-year period.

The increase in operating income is primarily due to higher gross profit of $7 million primarily due to higher net sales and gross productivity, partially offset by inflation and higher advertising and promotion costs of $2 million.

Operating income for the six months ended June 30, 2025 increased to $300 million as compared to $299 million in the prior-year period.

Operating income increased modestly benefiting from gross productivity and pricing, savings from restructuring actions primarily related to the Realignment Plan, as well as lower restructuring and restructuring-related charges of approximately $7 million, partially offset by inflation.

Outdoor and Recreation

Three Months Ended March 31,

Six Months Ended June 30,

(in millions) 2025 2024 $ Change % Change

Net sales $ 416 $ 459 $ (43) (9.4)%

Operating loss (5) (18) 13 72.2%

Operating income (loss) 3 (29) 32 NM

Operating margin 0.7 % (6.3) %

O&R net sales for the three months ended March 31, 2025 decreased 9% as improvements in certain international markets of approximately 11%, were more than offset by declines in the U.S.

of approximately 19%, primarily due to distribution losses.

Changes in foreign currency unfavorably impacted net sales by $5 million, or 2%.

Operating loss for the three months ended March 31, 2025 was $5 million as compared to $18 million in the prior-year period.

The improvement in operating performance was due to higher gross profit of $7 million driven primarily by gross productivity and favorable pricing, as well as lower restructuring-related charges of $2 million and lower amortization of certain tradenames of approximately $2 million.

NM - NOT MEANINGFUL

O&R net sales for the six months ended June 30, 2025 decreased 9% primarily due to net distribution losses, soft global demand and business exits.

These declines were partially offset by pricing actions and contribution from launches of product innovation.

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

Operating income for the six months ended June 30, 2025 was $3 million as compared to operating loss of $29 million in the prior-year period.

The improvement in operating performance was due to higher gross profit of $19 million driven primarily by gross productivity, pricing actions and mix.

Savings from restructuring actions and lower amortization of certain tradenames of approximately $3 million also contributed to the improvement of operating income.

Liquidity and Capital Resources

The Company’s $1.2 billion, 4.200% senior notes will be maturing on April 1, 2026 (the “2026 Notes”).

Following the issuance of these financial statements the Company plans to take additional steps to increase its liquidity, including pursuing a refinancing of all or substantially all of the Company’s 2026 Notes prior to their maturity.

The Company believes it will be able to refinance the 2026 Notes prior to maturity in light of its most recent debt refinancing in November 2024, which was significantly oversubscribed.

However, there can be no assurance that such financing would be available on terms acceptable to the Company, or at all.

Absent such a refinancing;

however, the Company will require additional liquidity to continue its operations over the next twelve months from the issuance of these financial statements.

In the event such refinancing is not available to the Company in full or at all, the Company would need to undertake various actions including:

drawing down up to the full available capacity on the Company’s Credit Revolver;

deferring or eliminating discretionary capital expenditures as well as advertising and promotion expense;

reducing or eliminating future dividends;

and liquidation of certain assets.

The Company believes the aforementioned individual actions or a combination of such actions, its cash generating capability, and available cash and cash equivalents, would provide adequate liquidity to fund its operations, support its growth platforms, pay down debt and debt maturities as they come due, including the 2026 Notes, and execute its ongoing business initiatives over the next twelve months from the issuance of these financial statements.

However, there can be no assurances that the Company will be successful in generating the additional liquidity, through a debt refinancing on terms acceptable to the Company or otherwise, that would be necessary to meet its obligations over the next twelve months from the issuance of these financial statements.

If the Company is unable to make the payment on the 2026 Notes upon maturity, the Company would be in default of such senior notes, which would trigger cross-default provisions within other debt instruments and would have a significant adverse effect on the Company’s business, financial condition and operating results.

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

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Management’s Discussion and Analysis of Financial Condition and Results of Operation s of the Company's most recent Annual Report on Form 10-K, filed on February 14, 2025.

At March 31, 2025, the Company had cash and cash equivalents of approximately $233 million, of which approximately $185 million was held by the Company’s non-U.S.

At June 30, 2025, the Company had cash and cash equivalents of approximately $219 million, of which approximately $185 million was held by the Company’s non-U.S.

subsidiaries.

Cash, cash equivalents and restricted cash increased (decreased) as follows for the three months ended March 31, 2025 and 2024 (in millions):

Cash, cash equivalents and restricted cash increased (decreased) as follows for the six months ended June 30, 2025 and 2024 (in millions):

2025 2024 Increase (Decrease)

6 unchanged sentences

Cash Flows from Operating Activities

The change in net cash used in operating activities reflects a decrease in factored accounts receivable in the current year and higher incentive compensation payments in the current year, partially offset by an increase in accounts payable in the current period and lower restructuring payments.

The change in net cash used in operating activities reflects higher working capital requirements of the Company due to lapping of prior year reductions, decrease in factored accounts receivable and higher incentive compensation payments in the current year, partially offset by lower restructuring payments.

Cash Flows from Investing Activities

The lower cash used in investing activities was primarily due to higher proceeds from sale of assets.

The higher cash used in investing activities was primarily due to higher capital expenditures.

Cash Flows from Financing Activities

The change in net cash provided by financing activities was due to the period-over-period net change in short-term debt.

The change in net cash provided by financing activities was due to higher utilization of the Credit Revolver (defined hereafter) during the current period.

See Footnote 8 of the Notes to the Unaudited Condensed Consolidated Financial Statements for further information.

Capital Resources

Credit Revolver

The Company maintains a $1.00 billion senior secured revolving credit facility (the “Credit Revolver”) maturing in August 2027.

2 unchanged sentences

Other than outstanding borrowings under the Credit Revolver, availability under the Credit Revolver is subject to change in accordance with the terms of the agreement, including in response to changes in the Company’s pledged collateral value or outstanding letters of credit under the Credit Revolver.

At March 31, 2025 there was $870 million of availability based on the value of the pledged collateral prior to giving effect to outstanding borrowings and letters of credit under the Credit Revolver.

At June 30, 2025, there was $989 million of availability under the Credit Revolver, based on the value of the pledged collateral and prior to giving effect to outstanding borrowings and letters of credit.

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, 2025, the Company had approximately $35 million of outstanding standby letters of credit issued against the Credit Revolver and $350 million of outstanding borrowings under the Credit Revolver resulting in a net availability of approximately $485 million.

See Footnote 8 of the Notes to the Unaudited Condensed Consolidated Financial Statements for further information.

On April 14, 2025, Moody’s Corporation (“Moody’s”) downgraded the Company’s senior unsecured debt rating to “B1”.

As a result of Moody’s downgrade, certain of the Company’s outstanding senior notes aggregating to approximately $2.3 billion are subject to an interest rate adjustment of 25 basis points, with such adjustment to take effect in the fourth quarter of this year.

The change to the interest rate due to the downgrade will increase the Company’s interest expense by approximately $6 million on an annualized basis (approximately $2 million in 2025).

The Company was in compliance with all of its debt covenants at March 31, 2025.

At June 30, 2025, the Company had approximately $35 million of outstanding standby letters of credit issued against the Credit Revolver and $495 million of outstanding borrowings under the Credit Revolver resulting in a net availability of approximately $459 million.

In May 2025, the Company completed the offering and sale of the 2028 Notes.

In June 2025, the Company used the proceeds of the offering to fully redeem its 2026 Notes.

Also during the second quarter of 2025, Moody’s and S&P downgraded the Company’s senior unsecured debt rating.

As a result, certain of the Company’s outstanding senior notes were subject to interest rate adjustments, with such adjustments to take effect in the fourth quarter of this year.

See Recent Developments under this Item 2 and Footnote 8 of the Notes to the Unaudited Condensed Consolidated Financial Statements for further information.

The Company was in compliance with all of its debt covenants at June 30, 2025.

Risk Management

8 unchanged sentences

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 2. Management’s Discussion and Analysis