Newell Brands Announces Fourth Quarter and Full Year 2018 Results

Delivered Sequential Core Sales Improvement in All Segments

Completed Divestitures of Jostens and Pure Fishing

Repaid $2.6 Billion of Debt; Repurchased $1.0 Billion of Shares

HOBOKEN, N.J.–(BUSINESS WIRE)–Newell Brands (NASDAQ: NWL) today announced its fourth quarter and full
year 2018 financial results.

“Newell Brands’ fourth quarter results reflect solid progress as we
continue to execute the Accelerated Transformation Plan (ATP) announced
one year ago,” said Michael Polk, President and Chief Executive Officer
of Newell Brands. “We were encouraged by the sequential improvement in
core sales growth across all segments, the return to growth of our
Learning & Development segment driven by building momentum on Writing,
and solid margin expansion as a result of continued diligent cost
management and pricing. We returned $1.1 billion to our shareholders
through dividends and share repurchases and paid down $2.6 billion in
debt during the quarter, exiting the year at our targeted leverage
ratio. We’ve planned 2019 to be another year of significant portfolio
and organization transformation. We intend to drive the ATP to
completion in 2019, and despite the ongoing negative impact of retailer
bankruptcies, foreign exchange, inflation and tariffs, we expect to
stabilize and then reignite core sales growth, increase margins, and
strengthen the operational and financial performance of the company.”

Fourth Quarter 2018 Executive Summary

  • Net sales from continuing operations were $2.3 billion, a decline of
    6.0 percent compared with $2.5 billion in the prior year period,
    reflecting headwinds from the adoption of the new 2018 revenue
    recognition standard, unfavorable foreign exchange and a decline in
    core sales.
  • Core sales from continuing operations declined 1.2 percent from the
    prior year period. All segments posted improved core sales trends on a
    sequential basis, with the Learning & Development segment returning to
    growth. Three of four regions posted improved core sales growth trends
    on a sequential basis.
  • Reported operating margin was 0.8 percent compared with 5.7 percent in
    the prior year period. Normalized operating margin was 11.4 percent
    compared to 10.7 percent in the prior year period.
  • Reported diluted earnings per share for the total company were $0.46
    compared with $3.38 in the prior year period. Reported diluted
    earnings per share from continuing operations were $0.36 versus $3.07
    in the prior year period.
  • Normalized diluted earnings per share for the total company were
    $0.71, compared with $0.68 in the prior year period. Normalized
    diluted earnings per share from continuing operations were $0.47,
    compared with $0.28 in the prior year period.
  • Operating cash flow was $498 million compared with $990 million in the
    prior year period, with the difference attributable to the absence of
    the operating cash flow contribution from divested businesses,
    increased cash taxes and transaction-related costs, and a change in
    the timing of vendor payments relative to the prior year.
  • Announced and completed divestitures of two businesses, Pure Fishing
    and Jostens, for combined after-tax proceeds of $2.5 billion.
  • Deployed $2.6 billion to debt repayment, $102 million to dividends and
    $996 million to share repurchases.

Fourth Quarter 2018 Operating Results

Net sales were $2.3 billion, compared to $2.5 billion in the prior year
period, a 6.0 percent decline attributable to headwinds from the
adoption of the new 2018 revenue recognition standard, unfavorable
foreign exchange and a decline in core sales.

Reported gross margin was 34.7 percent compared with 32.7 percent in the
prior year period, resulting from pricing, productivity, lower
integration and restructuring costs and the impact of the new revenue
recognition standard, which more than offset the headwinds from foreign
exchange and inflation related to higher input costs, tariffs and
transport costs. Normalized gross margin was 34.7 percent compared with
33.0 percent in the prior year period.

The company recorded a $157 million non-cash impairment charge from
continuing operations primarily associated with intangible assets in
certain acquired businesses. The impairment charge is attributable to
the latest cash flow projections associated with these businesses.

Reported operating income was $17.8 million, or 0.8 percent of sales,
compared with $142 million, or 5.7 percent of sales, in the prior year
period, as improved gross margin and a reduction in overhead,
integration and restructuring costs, were more than offset by the impact
of the non-cash impairment charge and an increase in accrued incentive
compensation. Normalized operating income was $268 million compared with
$267 million in the prior year period. Normalized operating margin was
11.4 percent compared to 10.7 percent in the prior year period.

The company reported a tax benefit of $254 million compared with a
benefit of $1.5 billion in the prior year period, with the difference
primarily attributable to the absence of the $1.4 billion benefit from
tax reform in 2017. The normalized tax rate was negative 30.0 percent,
for a benefit of $49.5 million, compared with 3.7 percent, or a
provision of $5.4 million, in the prior year period.

The company reported net income of $208 million compared with $1.7
billion in the prior year period, with the decline primarily
attributable to the absence of the tax benefit recorded in 2017.
Continuing operations posted net income of $164 million compared with
$1.5 billion in the fourth quarter of last year. Discontinued operations
generated net income of $44.3 million versus $154 million in the
year-ago period. Reported diluted earnings per share for the total
company were $0.46 compared with $3.38 in the prior year period.
Reported diluted earnings per share from continuing operations were
$0.36 versus $3.07 in the prior year period. Reported diluted earnings
per share from discontinued operations were $0.10 compared with $0.31 in
the prior year period.

Normalized net income for the total company was $321 million, or $0.71
per share, compared with $335 million, or $0.68 per share, in the prior
year period. Normalized diluted earnings per share from continuing
operations were $0.47, compared with $0.28 in the prior year period.
Normalized diluted earnings per share from discontinued operations were
$0.24 compared with $0.40 in the prior year period.

Operating cash flow was $498 million compared with $990 million in the
prior year period, with the difference attributable to the absence of
the operating cash flow contribution from divested businesses, increased
cash taxes and transaction-related costs, and a change in the timing of
vendor payments relative to the prior year.

A reconciliation of reported results to normalized results is included
in the tables attached to this release.

Fourth Quarter 2018 Operating Segment Results

The Learning & Development segment generated net sales of $707 million
compared with $730 million in the prior year period, as strong core
sales growth in Writing was more than offset by the negative impacts of
unfavorable foreign exchange, the adoption of the new 2018 revenue
recognition standard and a core sales decline for Baby related to the
continued negative impact of the Toys ‘R’ Us bankruptcy. Core sales grew
1.7 percent as compared with the prior year period, a sequential
improvement versus third quarter results. Reported operating income was
$135 million compared with $97.8 million in the prior year period.
Reported operating margin was 19.2 percent as compared with 13.4 percent
in the prior year period. Normalized operating income was $139 million
versus $103 million in the fourth quarter of last year. Normalized
operating margin was 19.7 percent of sales compared with 14.0 percent in
the prior year period.

The Food & Appliances segment generated net sales of $824 million
compared with $888 million in the prior year period, primarily due to
the adoption of the new 2018 revenue recognition standard, unfavorable
foreign exchange, and a core sales decline of 1.7 percent as compared
with the prior year period, largely attributable to reduced promotional
activity in Food. The core sales trend represents a sequential
improvement versus third quarter results. Reported operating loss was
$19.3 million compared with operating income of $105 million in the
prior year period, largely due to the negative impact of the non-cash
impairment charge. Reported operating margin was negative 2.3 percent as
compared with 11.8 percent in the prior year period. Normalized
operating income was $96.5 million versus $116 million in the fourth
quarter of last year. Normalized operating margin was 11.7 percent of
sales compared with 13.0 percent in the prior year period.

The Home & Outdoor Living segment generated net sales of $809 million
compared with $872 million in the prior year period, with the change
primarily attributable to the adoption of the new 2018 revenue
recognition standard, unfavorable foreign exchange and a core sales
decline of 3.0 percent, largely driven by lost distribution for Coleman
at a key U.S. retailer. These negative impacts were partially offset by
strong growth from Connected Home & Security and a return to growth of
Home Fragrance in Europe. The core sales trend represented a sequential
improvement compared with third quarter results. Reported operating
income was $45.5 million compared with $108 million in the prior year
period, largely due to the negative impact of the non-cash impairment
charge. Reported operating margin was 5.6 percent as compared with 12.4
percent in the prior year period. Normalized operating income was $110
million compared with $131 million in the prior year period. Normalized
operating margin was 13.5 percent of sales compared with 15.0 percent in
the fourth quarter of last year.

Full Year 2018 Results

Net sales for the full year ended December 31, 2018 were $8.6 billion, a
decline of 9.6 percent compared with $9.6 billion in the prior year.
Core sales declined 5.2 percent.

Reported gross margin was 34.9 percent, compared with 34.2 percent in
the prior year. Normalized gross margin was 34.8 percent, in line with
the prior year.

The company reported a full year 2018 operating loss of $7.8 billion
compared with operating income of $386 million in the prior year.
Reported operating margin was negative 90.7 percent compared with 4.0
percent in the prior year. Normalized operating income was $878 million
compared with $1.1 billion in the prior year. Normalized operating
margin was 10.2 percent compared with 11.1 percent in the prior year.

Reported net loss was $6.9 billion compared with net income of $2.7
billion in the prior year. Reported diluted loss per share was $14.60
compared with reported diluted earnings per share of $5.63 in the prior
year. Normalized net income was $1.3 billion, approximately in line with
the prior year. Normalized diluted earnings per share were $2.68
compared with $2.75 in the prior year.

Operating cash flow was $680 million compared to $966 million in the
prior year, reflecting taxes paid in 2018 related to gains from divested
businesses, the absence of cash flow contributions from divested
businesses and unfavorable working capital movements.

The company exited the year with a gross debt leverage ratio of 3.5x.

An explanation of how the gross debt leverage ratio is calculated and a
related reconciliation as well as a reconciliation of reported results
to normalized results is included in the tables attached to this release.

2019 Change to Normalization Practice

In 2019, the company will change its normalization practice. In addition
to its GAAP results, the company has provided and will continue to
provide certain non-GAAP financial measures, referred to as “normalized”
measures, which provide investors supplementary information helpful in
understanding the company’s underlying operating performance. To date,
including the fourth quarter and full year results discussed in this
earnings release, the company has excluded from these normalized results
the cost of its Transformation Office, consisting of employees fully
dedicated to executing the integration of the merger of Newell
Rubbermaid and Jarden Corporation, and other internal and external costs
associated with the integration and start-up of the combined
organization such as advisory costs for process transformation and
optimization initiatives. Beginning in 2019, the company will no longer
exclude these costs from its normalized results, in recognition of the
progress toward completion of the integration. It will continue to
provide supplementary normalized measures which will exclude
acquisition- and divestiture-related costs, debt repayment costs,
restructuring and restructuring-related costs and certain other unusual
or one-time costs.

The company’s outlook for the twelve months ending December 31, 2019
reflects this change, and in the interest of comparability, the company
has provided an adjusted view of its 2018 normalized quarterly and
annual results as they would have appeared had the change in
normalization practice been in place in 2018. This adjusted information
can be found in the appendix to this press release and in the Investors
section of the company’s website, www.newellbrands.com.

Outlook for Full Year and First Quarter 2019

Full Year 2019 Outlook
Net Sales $8.2 to $8.4 billion
Core Sales Low single digit decline
Normalized Operating Margin 20 to 60 bps improvement
Total Company Normalized EPS $1.50 to $1.65
Total Company Operating Cash Flow $300 to $500 million
Q1 2019 Outlook
Net Sales $1.66 to $1.70 billion
Core Sales 2% to 4% decline
Normalized Operating Margin 10 to 50 bps improvement
Total Company Normalized EPS $0.04 to $0.08

The company’s net sales, core sales and normalized operating margin
outlook reflects continuing operations only. Normalized earnings per
share and operating cash flow guidance reflects the total company
outlook. Core sales are calculated on a constant currency basis in line
with industry practice and exclude the impacts of foreign exchange,
acquisitions until their first anniversary, planned and completed
divestitures and certain other items. Full year operating cash flow
guidance assumes approximately $200 million in cash taxes and
transaction costs related to divestitures and more than $200 million of
restructuring and related cash costs.

The company has presented forward-looking statements regarding core
sales, normalized earnings per share for the total company and
normalized operating margin on continuing operations. These non–GAAP
financial measures are derived by excluding certain amounts, expenses or
income from the corresponding financial measures determined in
accordance with GAAP. The determination of the amounts that are excluded
from these non-GAAP financial measures is a matter of management
judgment and depends upon, among other factors, the nature of the
underlying expense or income amounts recognized in a given period. We
are unable to present a quantitative reconciliation of the
aforementioned forward-looking non-GAAP financial measures to their most
directly comparable forward-looking GAAP financial measures because such
information is not available and management cannot reliably predict all
of the necessary components of such GAAP measures without unreasonable
effort or expense. In addition, we believe such reconciliations would
imply a degree of precision that would be confusing or misleading to
investors. The unavailable information could have a significant impact
on the company’s full-year 2019 financial results. These non-GAAP
financial measures are preliminary estimates and are subject to risks
and uncertainties, including, among others, changes in connection with
quarter-end and year-end adjustments. Any variation between the
company’s actual results and preliminary financial data set forth above
may be material.

Conference Call

The company’s fourth quarter 2018 earnings conference call will be held
today, February 15, 2019, at 9:00 a.m. ET. A link to the webcast is
provided under News & Events in the Investors section of Newell Brands’
website at www.newellbrands.com.
A webcast replay will be made available in the Quarterly Earnings
section of the company’s website.

Non-GAAP Financial Measures

This release contains non-GAAP financial measures within the meaning of
Regulation G promulgated by the U.S. Securities and Exchange Commission
and includes a reconciliation of these non-GAAP financial measures to
the most directly comparable financial measures calculated in accordance
with GAAP.

The company uses certain non-GAAP financial measures that are included
in this press release and the additional financial information both to
explain its results to stockholders and the investment community and in
the internal evaluation and management of its businesses. The company’s
management believes that these non-GAAP financial measures and the
information they provide are useful to investors since these measures
(a) permit investors to view the company’s performance using the same
tools that management uses to evaluate the company’s past performance,
reportable business segments and prospects for future performance and
(b) determine certain elements of management’s incentive compensation.

The company’s management believes that core sales provides a more
complete understanding of underlying sales trends by providing sales on
a consistent basis as it excludes the impacts of acquisitions, planned
and completed divestitures, retail store openings and closings, certain
market exits, changes in foreign exchange and the impact of the adoption
of revenue recognition standard ASC 606 as of January 1, 2018, from
year-over-year comparisons. The effect of changes in foreign exchange on
2018 reported sales is calculated by applying the prior year average
monthly exchange rates to the current year local currency sales amounts
(excluding acquisitions and divestitures), with the difference between
the 2018 reported sales and the constant currency sales presented as the
foreign exchange impact increase or decrease in core sales. The
company’s management believes that “normalized” gross margin,
“normalized” SG&A expense, “normalized” operating income, “normalized”
operating margin, “normalized” net income, “normalized” diluted earnings
per share, “normalized” interest and “normalized” tax rates, which
exclude restructuring and other expenses and one-time and other events
such as costs related to certain product recalls, the extinguishment of
debt, certain tax benefits and charges, impairment charges, pension
settlement charges, divestiture costs, costs related to the acquisition,
integration and financing of acquired businesses, amortization of
intangible assets associated with acquisitions, advisory costs for
process transformation and optimization initiatives, costs of personnel
dedicated to integration activities and transformation initiatives and
certain other items, are useful because they provide investors with a
meaningful perspective on the current underlying performance of the
company’s core ongoing operations.

The company determines the tax effect of the items excluded from
normalized diluted earnings per share by applying the estimated
effective rate for the applicable jurisdiction in which the pre-tax
items were incurred, and for which realization of the resulting tax
benefit, if any, is expected. In situations in which an item excluded
from normalized results impacts income tax expense, the company uses a
“with” and “without” approach to determine normalized income tax expense.

While the company believes these non-GAAP financial measures are useful
in evaluating the company’s performance, this information should be
considered as supplemental in nature and not as a substitute for or
superior to the related financial information prepared in accordance
with GAAP. Additionally, these non-GAAP financial measures may differ
from similar measures presented by other companies.

About Newell Brands

Newell Brands (NASDAQ: NWL) is a leading global consumer goods company
with a strong portfolio of well-known brands, including Paper Mate®,
Sharpie®, Dymo®, EXPO®, Parker®, Elmer’s®, Coleman®, Marmot®, Oster®,
Sunbeam®, FoodSaver®, Mr. Coffee®, Graco®, Baby Jogger®, NUK®,
Calphalon®, Rubbermaid®, Contigo®, First Alert®, and Yankee Candle®. For
hundreds of millions of consumers, Newell Brands makes life better every
day, where they live, learn, work and play.

This press release and additional information about Newell Brands are
available on the company’s website, www.newellbrands.com.

Caution Concerning Forward-Looking Statements

Some of the statements in this press release and its exhibits,
particularly those anticipating future financial performance, business
prospects, growth, operating strategies and similar matters, are
forward- looking statements within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995. These statements generally can
be identified by the use of words such as “intend,” “anticipate,”
“believe,” “estimate,” “project,” “target,” “plan,” “expect,” “will,”
“should,” “would” or similar statements. We caution that forward-looking
statements are not guarantees because there are inherent difficulties in
predicting future results. In addition, there are no assurances that we
will complete any or all of the potential transactions or other
initiatives referenced above. Actual results may differ materially from
those expressed or implied in the forward-looking statements. Important
factors that could cause actual results to differ materially from those
suggested by the forward-looking statements include, but are not limited
to:

  • our dependence on the strength of retail, commercial and industrial
    sectors of the economy in various parts of the world;
  • competition with other manufacturers and distributors of consumer
    products;
  • major retailers’ strong bargaining power and consolidation of our
    customers;
  • our ability to improve productivity, reduce complexity and streamline
    operations;
  • future events that could adversely affect the value of our assets
    and/or stock price and require additional impairment charges;
  • our ability to remediate the material weakness in our internal control
    over financial reporting and maintain effective internal control
    reporting
  • our ability to develop innovative new products, to develop, maintain
    and strengthen end-user brands and to realize the benefits of
    increased advertising and promotion spend;
  • risks related to our substantial indebtedness, a potential increase in
    interest rates or changes in our credit ratings;
  • our ability to effectively accelerate our transformation plan and to
    execute our divestitures of the remaining assets held for sale;
  • our ability to complete planned acquisitions and divestitures, to
    integrate acquisitions and to offset unexpected costs or expenses
    associated with acquisitions or dispositions;
  • changes in the prices of raw materials and sourced products and our
    ability to obtain raw materials and sourced products in a timely
    manner;
  • the risks inherent to our foreign operations, including foreign
    exchange fluctuations, exchange controls and pricing restrictions;
  • a failure of one of our key information technology systems, networks,
    processes or related controls or those of our service providers;
  • the impact of United States and foreign regul

Contacts

Investor Contact:
Nancy O’Donnell
SVP,
Investor Relations and Corporate Communications
+1 (201) 610-6857
nancy.odonnell@newellco.com

Media Contact:
Claire-Aude Staraci
Director,
External
Communications
+1 (201) 610-6717
claireaude.staraci@newellco.com

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