Newell Brands Announces Strong First Quarter Results

Accelerated Growth and Earnings Momentum

Jarden Transaction Completed

Provides 2016 Newell Brands Guidance

First Quarter 2016 Executive Summary

  • 5.6 percent core sales growth, with core growth in all five business
    segments and all four regions; 4.0 percent net sales growth to $1.31
    billion compared to $1.26 billion in the prior year
  • 100 basis point increase in normalized operating margin compared to
    the prior year, while simultaneously increasing advertising and
    promotion investment by 40 basis points; 170 basis point increase in
    reported operating margin compared to the prior year
  • $0.40 normalized earnings per share compared to $0.36 in the prior
    year, an 11.1 percent increase despite a negative impact from foreign
    currency of $0.04 per share; normalized earnings per share increased
    17.6 percent excluding the prior year $0.02 contribution from
    Venezuelan operations
  • $0.15 reported earnings per share compared to $0.20 in the prior year,
    a 25.0 percent decline attributable to interest and other expenses
    incurred in connection with the Jarden Corporation (“Jarden”)
    transaction, including costs associated with $8 billion in notes
    placed prior to the closing of the transaction on April 15, 2016
  • Operating cash flow was a use of $270.9 million compared to a use of
    $154.3 million in the prior year reflecting divestiture-related tax
    payments, Jarden transaction-related payments and an increase in
    annual incentive compensation payments related to strong 2015 results
  • Successfully completed $8 billion public debt offering with weighted
    average effective interest rate of 4.38% and weighted average maturity
    of 12.8 years
  • Newell Brands’ guidance for the twelve months ending December 31, 2016
    is 3 to 4 percent core sales growth and normalized EPS of $2.75 to
    $2.90 at a full year weighted average diluted share count of
    approximately 430 million shares

ATLANTA–(BUSINESS WIRE)–Newell Brands Inc. (NYSE: NWL) announced its first quarter 2016
financial results today.

“We are extremely pleased with our growth and financial results this
quarter,” said Newell Brands Chief Executive Officer Michael Polk. “The
Newell playbook, which couples increased innovation activity together
with increased brand investment, delivered 5.6 percent core sales growth
as we continue to win market share, particularly in our fastest growing
channels. Simultaneously, we increased operating margins and drove over
eleven percent normalized EPS growth. Importantly, our performance was
broad-based with core sales growth in all five business segments and in
all four regions.”

“We delivered these strong results while completing the most
transformative transaction in our history. The new Newell Brands more
than doubles our size in key strategic retailers, channels and
geographies. We expect scale to enable accelerated growth over time
through broadened channel cross-sell, accelerated international
deployment and strengthened category leadership as we extend the best
capabilities from both companies across the full portfolio. Our growth
acceleration will be fueled by working to make the new company leaner
and more efficient and by focusing our investments on the businesses
with the greatest potential. We expect to unlock the financial capacity
for growth and margin development through delivery of at least $500
million in cost synergies and $300 million in Project Renewal savings
over the next three to four years. We remain fully committed and are on
track to reach our target leverage ratio of 3.0 to 3.5 times within two
to three years. With the transaction now complete, we have begun our
work and are energized by this unique opportunity to create
extraordinary value for our shareholders through the creation of Newell
Brands.”

First Quarter 2016 Operating Results

Core sales grew 5.6 percent, with growth in all five segments and all
four regions.

Net sales grew 4.0 percent to $1.31 billion compared with $1.26 billion
in the prior year. Net sales benefited from a 240 basis point net
contribution from acquisitions and planned and completed divestitures,
but were adversely affected by a 230 basis point negative impact from
foreign currency and a 170 basis point negative impact from the
deconsolidation of Venezuelan operations as of December 31, 2015.

Normalized gross margin was 38.6 percent, a 20 basis point decline
versus prior year, as the negative impact of foreign currency, mix from
the deconsolidation of Venezuela, and mix from acquisitions was only
partially offset by the benefits of productivity, input cost deflation
and pricing.

Reported gross margin was 38.5 percent compared with 38.6 percent in the
prior year.

First quarter normalized operating margin increased 100 basis points to
13.1 percent of sales, despite a 40 basis point increase in advertising
and promotion investment. Normalized operating income increased 12.6
percent to $171.8 million compared with $152.6 million in the prior year.

Reported operating margin increased 170 basis points to 9.5 percent of
sales. Operating income increased 27.7 percent to $125.4 million
compared with $98.2 million in the prior year.

The normalized tax rate was 27.2 percent, unchanged from the prior year.
The reported tax rate for the quarter was 21.9 percent, compared with
27.9 percent in the prior year.

Normalized net income increased 11.0 percent to $107.7 million compared
with $97.0 million in the prior year. Normalized diluted earnings per
share increased 11.1 percent to $0.40 compared with $0.36 in the prior
year. The improvement in normalized diluted earnings per share was
attributable to increased core sales, strong operating margin
improvement as a result of reduced overhead expenses and the positive
impact of fewer outstanding shares, which more than offset an increase
in advertising and promotion support, negative foreign currency impact
and the absence of income from Venezuelan operations.

Reported net income decreased 25.1 percent to $40.5 million compared
with $54.1 million in the prior year. Reported diluted earnings per
share decreased 25.0 percent to $0.15 compared with $0.20 in the prior
year. In addition to the factors cited in the explanation of normalized
diluted earnings per share, reported diluted earnings per share were
negatively impacted by $49.9 million in interest expense and other
acquisition-related costs incurred prior to the closing of the Jarden
acquisition offset by lower restructuring and other Project Renewal
costs.

Operating cash flow was a use of $270.9 million compared with a use of
$154.3 million in the prior year period, reflecting a $58.0 million tax
payment associated with the gain on the sale of Endicia, a $92.1 million
payment associated with pre-issuance interest rate hedge positions taken
in advance of the company’s recent $8 billion public debt placement,
$12.0 million of payments for acquisition and integration related fees
and $31.8 million in higher management incentive payments for strong
2015 performance, which were partially offset by the absence of the
prior year voluntary pension contribution of $70 million.

A reconciliation of the “as reported” results to “normalized” results is
included in the appendix.

First Quarter 2016 Operating Segment Results

Writing net sales increased 10.8 percent to $378.8 million, with strong
core sales growth and the benefit of the Elmer’s acquisition partially
offset by the deconsolidation of Venezuelan operations and negative
impact of foreign currency. Writing core sales increased 8.8 percent,
driven by double-digit core growth in North America and Latin America
attributable to strong innovation, including the North American launch
of Paper Mate InkJoy Gel Pens, increased advertising and promotion
support and pricing. Normalized operating income was $86.2 million
compared with $83.0 million in the prior year. Normalized operating
margin was 22.8 percent compared with 24.3 percent in the prior year as
pricing, productivity and cost management were more than offset by
increased advertising and promotion spending and the negative mix impact
of both the deconsolidation of Venezuela and the Elmer’s acquisition.

Home Solutions net sales increased 2.1 percent to $372.1 million. Core
sales increased 3.6 percent, attributable to continued strong Beverage
growth and the introduction of Rubbermaid FreshWorks and Rubbermaid
Fasten&Go, partially offset by continued contraction of the lower margin
Rubbermaid Consumer Storage business. Normalized operating income was
$38.0 million versus $38.6 million in the prior year. Normalized
operating margin was 10.2 percent of sales compared to 10.6 percent in
the prior year as the positive mix effect of Rubbermaid Food Storage and
input cost deflation were more than offset by higher advertising and
promotion expenses to support new product launches.

Tools net sales declined 0.4 percent to $179.7 million, driven by a 440
basis point negative impact due to foreign currency. Core sales grew 4.0
percent with strong growth in North America, Europe and Asia Pacific
partially offset by continued weakness in Brazil. Normalized operating
income was $19.4 million versus $22.2 million in the prior year.
Normalized operating margin was 10.8 percent of sales compared with 12.3
percent of sales in the prior year. The normalized operating margin
contraction was primarily driven by continuing growth- and negative
foreign currency- related challenges in Brazil partially offset by
productivity and pricing.

Commercial Products net sales declined 5.8 percent to $174.5 million,
driven by the divestiture of the Rubbermaid medical cart business in
August 2015 and the negative impact of foreign currency. Core sales
increased 0.9 percent due primarily to good growth in EMEA offset by
timing-related declines in North America. Normalized operating income
was $22.6 million compared to $17.6 million in the prior year.
Normalized operating margin was 13.0 percent of sales compared with 9.5
percent of sales in the prior year. The increase in normalized operating
margin reflects the benefits of productivity, pricing and input cost
deflation.

Baby & Parenting net sales increased 9.2 percent to $209.8 million. Core
sales grew 9.3 percent, driven by strong car seat and mobility
innovation by Graco, Aprica and Baby Jogger. Normalized operating income
was $23.1 million compared to $12.3 million in the prior year.
Normalized operating margin was 11.0 percent of sales compared with 6.4
percent of sales in the prior year. The normalized operating margin
improvement was due to strong volume growth, the positive product mix
effect of Baby Jogger and Aprica growth and the timing of advertising
and promotion spending in support of innovation.

Outlook for the Twelve Months Ending December 31, 2016

Newell Brands provided 2016 full year core sales growth and normalized
EPS guidance metrics to reflect the Jarden transaction that was
completed on April 15, 2016. The company currently projects financial
metrics as follows:

     

2016 Full Year Guidance

 
Core sales growth 3.0% to 4.0%
 
Normalized EPS $2.75 to $2.90
 

As of April 15, 2016, Newell Brands core sales will include pro forma
core sales associated with the Jarden transaction as if the combination
occurred April 15, 2015. Core sales excludes the impact of foreign
currency, all acquisitions until their first anniversary and all planned
and completed divestitures (which includes the deconsolidation of
Venezuela), but includes the negative impact of planned product line
exits. The company’s core sales growth guidance assumes legacy Newell
Rubbermaid core sales growth of 4 to 5 percent and legacy Jarden core
sales growth of 2 to 4 percent, which includes the negative impact of
planned product line exits. Jarden core sales growth of 2 to 4 percent
is roughly in line with Jarden’s pre-transaction long term “organic
growth” target of 3 to 5 percent. Newell Brands expects to exit product
lines with annual sales of $250 million to $300 million across both
legacy businesses over the next two to three years.

For the full year 2016, Newell Brands expects normalized EPS of $2.75 to
$2.90 assuming a 2016 weighted average diluted share count of
approximately 430 million shares. The company’s normalized EPS guidance
range assumes a share count for Newell Brands of approximately 497
million shares from April 15, 2016 onward, which given the transaction
completion date will result in Newell Brands 2016 full year weighted
average diluted share count of approximately 430 million shares.
Beginning with the second quarter of 2016, the company will exclude the
amortization of intangible assets associated with acquisitions
(including the Jarden acquisition) from its calculation of normalized
EPS. The company expects the effective tax rate for 2016 to be 29 to 30
percent.

Conference Call

The company’s first quarter 2016 earnings conference call will be held
today, April 29, 2016, at 8:30 a.m. ET. A link to the webcast is
provided under Events & Presentations in the Investor Relations section
of Newell Brands’ website at www.newellbrands.com.
A webcast replay and a supporting slide presentation will be made
available in the Investor Relations section on the company’s website
under Quarterly Earnings.

Non-GAAP Financial Measures

This release contains non-GAAP financial measures within the meaning of
Regulation G promulgated by the 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 in
explaining its results to stockholders and the investment community and
in its 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 (other
than the Jarden acquisition, which will be included in core sales on a
pro forma basis starting in the second quarter of 2016), planned or
completed divestitures, the deconsolidation of the company’s Venezuelan
operations and changes in foreign currency from year-over-year
comparisons. As reflected in the Currency Analysis, the effect of
foreign currency on reported sales is determined by applying a fixed
exchange rate, calculated as the 12-month average in the prior year, to
the current and prior year local currency sales amounts (excluding
acquisitions and planned and completed divestitures), with the
difference in these two amounts being the increase or decrease in core
sales, and the difference between the change in as reported sales and
the change in constant currency sales reported as the currency impact.
The company’s management believes that “normalized” gross margin,
“normalized” SG&A expense, “normalized” operating income, “normalized”
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, discontinued operations, costs
related to the acquisition, integration and financing of acquired
businesses, amortization of intangible assets associated with
acquisitions (beginning in the second quarter of 2016), advisory costs
for process transformation and optimization initiatives, costs of
personnel dedicated to integration activities and transformation
initiatives under Project Renewal 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 certain 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 that 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 (NYSE: 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®, Jostens®, Marmot®,
Rawlings®, Irwin®, Lenox®, Oster®, Sunbeam®, FoodSaver®, Mr. Coffee®,
Rubbermaid Commercial Products®, Graco®, Baby Jogger®, NUK®, Calphalon®,
Rubbermaid®, Contigo®, First Alert®, Waddington and Yankee Candle®.
Driven by a sharp focus on the consumer, leading investment in
innovation and brands, and a performance-driven culture, Newell Brands
helps consumers achieve more 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

Statements in this press release that are not historical in nature
constitute forward-looking statements. These forward-looking statements
relate to information or assumptions about the effects of sales, income,
earnings per share, operating income, operating margin or gross margin
improvements or declines, Project Renewal, capital and other
expenditures, cash flow, dividends, restructuring and other project
costs, costs and cost savings, inflation or deflation, particularly with
respect to commodities such as oil and resin, debt ratings, changes in
exchange rates, expected benefits and financial results from the Jarden
transaction and other recently completed acquisitions and planned
divestitures and management’s plans, projections and objectives for
future operations and performance. These statements are accompanied by
words such as “anticipate,” “expect,” “project,” “will,” “believe,”
“estimate” and similar expressions. Actual results could 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 light of the
continuation or escalation of the global economic slowdown or regional
sovereign debt issues; currency fluctuations; competition with other
manufacturers and distributors of consumer products; major retailers’
strong bargaining power and consolidation of our retail customers;
changes in the prices of raw materials and sourced products and our
ability to obtain raw materials and sourced products in a timely manner
from suppliers; our ability to develop innovative new products and to
develop, maintain and strengthen our end-user brands, including the
ability to realize anticipated benefits of increased advertising and
promotion spend; product liability, product recalls or regulatory
actions; our ability to expeditiously close facilities and move
operations while managing foreign regulations and other impediments; a
failure of one of our key information technology systems or related
controls; our ability to attract, retain and motivate key employees;
future events that could adversely affect the value of our assets and
require impairment charges; our ability to improve productivity and
streamline operations; changes to our credit ratings; significant
increases in the funding obligations related to our pension plans due to
declining asset values, declining interest rates or otherwise; the
imposition of tax liabilities greater than our provisions for such
matters; the risks inherent in our foreign operations, including
exchange controls and pricing restrictions; our ability to complete
planned divestitures; our ability to successfully integrate acquired
businesses, including the recently acquired Jarden business; our ability
to realize the expected benefits and financial results from our recently
acquired businesses and planned divestitures; and those factors listed
in our most recently filed Annual Report on Form 10-K filed with the
Securities and Exchange Commission. Changes in such assumptions or
factors could produce significantly different results. The information
contained in this news release is as of the date indicated. The company
assumes no obligation to update any forward-looking statements contained
in this news release as a result of new information or future events or
developments.

 
Newell Brands Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in millions, except per share data)
 
 
                   
Three Months Ended March 31,      
        YOY
2016 2015 % Change
 
Net sales $ 1,314.9 $ 1,264.0 4.0 %
Cost of products sold   809.3     776.5  
 
GROSS MARGIN 505.6 487.5 3.7 %
% of sales 38.5 % 38.6 %
 

Selling, general & administrative expenses

362.5 362.0 0.1 %
% of sales 27.6 % 28.6 %
 
Restructuring costs   17.7     27.3  
 
OPERATING INCOME 125.4 98.2 27.7 %
% of sales 9.5 % 7.8 %
 
Nonoperating expenses:
Interest expense, net 29.4 19.2
Loss on termination of credit facility 45.9
Other (income) expense, net   (1.5 )   0.1  
  73.8     19.3   282.4 %
 
INCOME BEFORE INCOME TAXES 51.6 78.9 (34.6 )%
% of sales 3.9 % 6.2 %
 
Income taxes 11.3 22.0 (48.6 )%
Effective rate   21.9 %   27.9 %
 
NET INCOME FROM CONTINUING OPERATIONS 40.3 56.9 (29.2 )%
% of sales 3.1 % 4.5 %
 
Income (loss) from discontinued operations, net of tax 0.2 (2.8 )
   
NET INCOME $ 40.5   $ 54.1   (25.1 )%
3.1 % 4.3 %
 
EARNINGS PER SHARE:
Basic
Income from continuing operations $ 0.15 $ 0.21
Income (loss) from discontinued operations $ $ (0.01 )
Net income $ 0.15 $ 0.20
 
Diluted
Income from continuing operations $ 0.15 $ 0.21
Income (loss) from discontinued operations $ $ (0.01 )
Net income $ 0.15 $ 0.20
 
AVERAGE SHARES OUTSTANDING:
Basic 268.7 270.5
Diluted 270.1 272.7
 
 
Newell Brands Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in millions)
 
      March 31,     March 31,
Assets: 2016 2015
 
Cash and cash equivalents $ 8,180.9 $ 215.4
Accounts receivable, net 1,187.7 1,053.2
Inventories, net 875.2 852.3
Prepaid expenses and other 146.0 179.2
Assets held for sale   102.8  
 
Total Current Assets 10,492.6 2,300.1
 
Property, plant and equipment, net 624.5 563.3
Goodwill 2,801.6 2,474.6
Other intangible assets, net 1,085.9 877.2
Other assets 331.9 268.7
   
Total Assets $ 15,336.5 $ 6,483.9
 
Liabilities and Stockholders’ Equity:
 
Accounts payable $ 660.8 $ 615.6
Accrued compensation 98.7 99.8
Other accrued liabilities 613.2 586.3
Short-term debt 762.8 733.9
Current portion of long-term debt 5.9 6.5
Liabilities held for sale   44.7  
 
Total Current Liabilities 2,186.1 2,042.1
 
Long-term debt 10,619.1

2,078.7

Deferred income taxes 203.9 127.9
Other noncurrent liabilities 548.7 536.2
 
Stockholders’ Equity – Parent 1,775.2 1,695.5
Stockholders’ Equity – Noncontrolling Interests   3.5   3.5
 
Total Stockholders’ Equity 1,778.7 1,699.0
   
Total Liabilities and Stockholders’ Equity $ 15,336.5 $

6,483.9

 

Contacts

Newell Brands Inc.
Investor Contact:
Nancy
O’Donnell, +1-770-418-7723
Vice President, Investor Relations
nancy.odonnell@newellco.com
or
Media
Contacts
:
Racquel White, +1-770-418-7643
Vice
President, Global Communications
racquel.white@newellco.com
or
Weber
Shandwick
Liz Cohen, +1-212-445-8044
liz.cohen@webershandwick.com

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