Newell Brands(US:NWL)2022-10-27 16:00Financial Performance - Net sales for the three months ended September 30, 2022 decreased by 19% to $2,252 million compared to $2,787 million in the prior year, primarily due to softening global demand and inventory rebalancing by retailers [144]. - Gross profit declined by 23% to $653 million, with a gross margin of 29.0%, down from 30.4% in the prior year, impacted by higher absorption costs and significant input cost inflation [145]. - Operating income fell to $35 million, an 87.5% decrease from $281 million in the prior year, influenced by lower gross profit and non-cash impairment charges [148]. - Net sales for the nine months ended September 30, 2022, decreased by $610 million, or 7.8%, to $7,174 million compared to $7,784 million in the prior year [162]. - Gross profit declined by 10% to $2,218 million, with a gross margin of 30.9%, down from 31.6% in the prior year [163]. - Operating income decreased to $569 million, a decline of 26.9% from $778 million in the prior year, reflecting lower gross profit and non-cash impairment charges [167]. Impairment Charges - Newell Brands recorded a non-cash impairment charge of $148 million during the three and nine months ended September 30, 2022, due to the carrying values exceeding their fair values in specific reporting units [140]. - The Company recorded a non-cash impairment charge of $108 million for the Home Fragrance reporting unit due to a decline in fair value [197]. - An aggregate non-cash impairment charge of $40 million was recorded for indefinite-lived tradenames in the Home Appliances and Baby reporting units [200]. Debt and Financing - The Company entered into a $1.5 billion senior unsecured revolving credit facility on August 31, 2022, maturing in August 2027, refinancing a previous $1.25 billion facility [141]. - The Company redeemed its 3.85% senior notes due April 2023 on October 19, 2022, for a total consideration of approximately $1.09 billion [143]. - As of September 30, 2022, the Company had approximately $22 million of outstanding standby letters of credit against the Credit Revolver, with a net availability of approximately $1.48 billion [189]. - The Company amended its Securitization Facility, reducing the commitment to $375 million from $600 million and extending its maturity to October 2023 [191]. Sales Performance by Segment - Commercial Solutions net sales decreased by 18.3% to $397 million, with operating income increasing by 55.6% to $28 million, driven by pricing actions and improved order fulfillment [152]. - Home Appliances net sales dropped by 31.2% to $305 million, resulting in an operating loss of $20 million, compared to an operating income of $19 million in the prior year [154]. - Home Solutions net sales decreased by 14.7% to $510 million, with an operating loss of $88 million, significantly impacted by a non-cash goodwill impairment charge [156]. - Learning and Development net sales fell by 13.6% to $751 million, with operating income decreasing by 38.5% to $120 million, affected by logistical constraints and supply chain shortages [158]. - Outdoor and Recreation net sales decreased by 26.1% to $289 million, with operating income declining by 70.4% to $8 million, primarily due to softening demand and input cost inflation [160]. - Commercial Solutions net sales decreased by $114 million, or 7.9%, to $1,336 million, impacted by the sale of the CH&S business [171]. - Home Appliances net sales fell by $206 million, or 17.2%, to $991 million, driven by softening global demand and category exits [173]. - Learning and Development net sales decreased by $64 million, or 2.7%, to $2,266 million, reflecting challenges in the Writing and Baby business units [177]. - Outdoor and Recreation net sales decreased by $76 million, or 6.4%, to $1,104 million, primarily due to softening U.S. demand [179]. Operational Challenges - The Company is facing challenges from inflationary pressures, supply chain disruptions, and softening global demand, particularly impacting the Home Appliances and Home Solutions segments [136]. - The Company experienced a significant pullback in retailer orders, impacting sales volume and working capital due to inflationary pressures [184]. - The Company is implementing selective pricing increases and productivity initiatives to mitigate the negative impacts of current macroeconomic conditions [137]. Strategic Initiatives - Project Ovid, a multi-year supply chain initiative, aims to optimize the distribution network and improve customer service levels, with its first phase launched in Q3 2022 [132]. - Newell Brands is focusing on sustainable top-line growth through innovation, brand positioning, and enhancing digital marketing capabilities [133]. - The Company’s turnaround strategy aims to build a next-generation consumer products company while addressing competitive and macroeconomic challenges [131]. Tax and Cash Flow - The effective tax rate for the three months ended September 30, 2022 was 203.3%, compared to 11.6% in the prior year, due to increased discrete tax benefits and pretax losses [150]. - The effective income tax rate for the nine months ended September 30, 2022, was 7.3%, down from 18.5% in the prior year, reflecting discrete tax benefits [169]. - Cash provided by operating activities decreased by $1,057 million, from $490 million in 2021 to $(567) million in 2022 [183]. - Cash provided by investing activities increased by $600 million, from $(180) million in 2021 to $420 million in 2022 [183]. - Cash provided by financing activities decreased by $1,144 million, from $(800) million in 2021 to $344 million in 2022 [183].