Newell Brands Announces Third Quarter Results

Net Sales Growth of 158.5%; Core Sales Growth of 3.0%

New Strategic Plan Transformation into Action

Raises 2016 Guidance to Top Half of Range

Provides 2017 Initial Outlook

HOBOKEN, N.J.–(BUSINESS WIRE)–Newell Brands Inc. (NYSE: NWL) announced its third quarter 2016
financial results today.

Third Quarter 2016 Executive Summary

  • Net sales growth of 158.5 percent to $3.95 billion; core sales growth
    of 3.0 percent.
  • $0.38 reported diluted earnings per share compared with $0.50 diluted
    earnings per share in the prior year, primarily attributable to core
    sales growth, earnings contribution from acquisitions, cost and tax
    synergies related to Jarden acquisition and Project Renewal savings,
    offset by Jarden transaction-related expenses, including a one-time
    inventory step-up charge of $0.19, increased amortization of
    intangibles and higher interest expense, and by a higher share count.
  • $0.78 normalized diluted earnings per share compared with $0.62 in the
    prior year, a 25.8 percent increase driven by core sales growth,
    earnings contribution from acquisitions, cost and tax synergies
    related to the Jarden acquisition and Project Renewal savings, which
    more than offset negative foreign currency impact, increased interest
    expense and higher shares outstanding resulting from the Jarden
    transaction.
  • Operating cash flow was $511.4 million compared with $339.9 million in
    the prior year; gross debt of $12.75 billion, reflecting a $231
    million reduction in debt during the third quarter; net debt of $12.08
    billion.
  • Reported net sales for 2016 are projected to grow between 122.5 and
    128.0 percent and reported earnings per share to be $1.15 to $1.20,
    after absorbing approximately $1.18 of one-time costs related to the
    Jarden and Tools transactions. Raised lower end of both 2016 full year
    guidance ranges to 3.5 to 4.0 percent core sales growth and normalized
    earnings per share of $2.85 to $2.90 from previous guidance of 3 to 4
    percent core sales growth and normalized earnings per share of $2.75
    to $2.90 per share.
  • Initial outlook for 2017 core sales growth is 3 to 4 percent and
    normalized earnings per share is $2.85 to $3.05. 2017 normalized
    earnings per share outlook includes $0.20 of dilution, net of interest
    benefits, related to the planned divestiture of about 10 percent of
    the company’s portfolio.

“We delivered very good performance in the third quarter while
simultaneously driving substantial organization and portfolio change,”
said Newell Brands Chief Executive Officer Michael Polk. “Our third
quarter Writing, Baby, Food, and Appliances growth was once again very
strong, resulting in competitive levels of quarterly core sales growth
and leading levels year to date. Our strong savings and cost synergies
programs are now in full flight, which when coupled with growth in the
underlying business are driving exceptional normalized earnings per
share and operating cash flow growth. With very strong year to date
results, we have raised our 2016 guidance for both core sales growth and
normalized earnings per share into the top half of our previous 2016
guidance ranges.”

Strategy Update – New Growth Game Plan

Newell Brands recently announced an update of its corporate strategy
designed to capture the unique value creation opportunity related to its
new larger portfolio and broader geographic and retail presence. As part
of this new strategy, the company plans to transform Newell Brands from
a holding company to an operating company, consolidating 32 business
units to 16 Global Divisions while investing to extend its design,
innovation and brand development capabilities across a broader set of
categories. The organization changes were initiated in the third quarter
and this major phase of the transformation will be completed by year
end. The 16 Global Divisions will become the key commercial nodes in the
company, including a new Global eCommerce Division, which will have
responsibility for all ecommerce activity across the enterprise. The
Divisions will generally align to the four areas of strategic focus for
the company of Live, Learn, Work, and Play. The new structure will be
effective January 1, 2017.

The new strategy also establishes a sharp set of investment priorities
and portfolio choices. As part of its portfolio optimization, the
company plans to divest businesses representing about $1.5 billion of
annualized revenue. On October 12, 2016 the company announced a
definitive agreement to sell the Tools business for $1.95 billion to
Stanley Black & Decker. The sale is subject to customary conditions,
including regulatory approval, and is expected to close in the first
half of 2017. The company intends to use the available cash proceeds
from divestitures primarily for accelerated debt repayment, with the
goal of achieving the targeted leverage ratio of 3 to 3.5 times, faster
than the original commitment of two to three years from the date of the
Jarden combination.

“Newell Brands is an exciting new company with a portfolio of leading
brands that make life better for hundreds of millions of consumers every
day where they Live, Learn, Work, and Play,” said Polk. “Our new
strategy, the Growth Game Plan, is designed to accelerate performance
and deliver leading levels of growth and returns. We have established a
clear set of investment priorities, strengthened the portfolio by making
sharp choices that we are decisively driving into action, and have begun
to reset the organization for growth by transforming the company from a
holding company to an operating company while simultaneously extending
our design, innovation, ecommerce, and brand development capabilities.
This Growth Game Plan algorithm has a strong and proven track record,
and the combination of Newell Rubbermaid and Jarden creates a unique
opportunity to reapply this transformative value creation formula across
a broader set of categories and geographies.”

Third Quarter 2016 Operating Results

Net sales increased 158.5 percent to $3.95 billion, compared with $1.53
billion in the prior year, primarily due to the inclusion of net sales
from the acquired Jarden business.

Core sales grew 3.0 percent driven by strong results on the Writing,
Baby, Food, and Appliance businesses partially offset by declines in
Commercial Products and Outdoor Solutions.

Reported gross margin was 32.2 percent compared with 39.1 percent in the
prior year, as a result of a $145.8 million charge for the inventory
step-up, a negative mix effect related to the Jarden transaction and the
deconsolidation of Venezuela, and the adverse impact of foreign
currency, only partially offset by the benefits of synergies,
productivity and pricing.

Normalized gross margin was 36.0 percent compared with 39.5 percent in
the prior year, driven by the negative mix effect from the Jarden
acquisition and the deconsolidation of Venezuela, and the impact of
adverse foreign currency, only partially offset by the benefits of
synergies, productivity and pricing.

Reported operating income was $323.9 million compared with $186.6
million in the prior year. Reported operating margin was 8.2 percent of
sales compared with 12.2 percent of sales in the prior year. In addition
to the factors cited in the explanation of gross margin, reported
operating margin was negatively impacted by transaction-related costs,
acquisition-related amortization costs and costs associated with the
integration of the legacy Newell Rubbermaid and Jarden businesses.

Normalized operating income was $608.9 million compared with $232.4
million in the prior year. Normalized operating margin was 15.4 percent
of sales, a 20 basis point improvement compared with prior year, as the
negative mix effect from the Jarden acquisition, the absence of
Venezuela and negative foreign currency was more than offset by Project
Renewal savings and cost.

The reported tax rate for the quarter was 6.8 percent compared with 16.1
percent in the prior year as a result of current year discrete tax
benefits exceeding the prior year. The normalized tax rate was 22.5
percent, compared with 20.0 percent in the prior year, a reflection of
the inclusion of the Jarden business with its historically higher tax
rate, partially offset by tax synergies and certain discrete tax
benefits.

The company reported net income of $186.5 million compared with net
income of $134.2 million in the prior year. Reported diluted earnings
per share were $0.38 compared with diluted earnings per share of $0.50
in the prior year. The operating income contribution from the acquired
Jarden business and strong operating income growth on both legacy
businesses were more than offset by expenses related to the Jarden
transaction, including inventory step-up, increased amortization of
intangibles and increased interest expense, and by a higher share count.

Normalized net income was $376.9 million compared with $168.1 million in
the prior year. Normalized diluted earnings per share increased 25.8
percent to $0.78 compared with $0.62 in the prior year. The improvement
was driven by the contribution from the Jarden and Elmer’s acquisitions,
strong core sales growth on the company’s Writing, Baby, Food, and
Appliance businesses, and strong savings and synergies delivery,
partially offset by negative foreign currency impact, a higher
normalized income tax rate, increased interest expense and increased
shares outstanding.

Operating cash flow was $511.4 million compared with $339.9 million in
the prior year, reflecting the contribution from the Jarden acquisition,
improved operating results and favorable working capital movements.

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

Third Quarter 2016 Operating Segment Results

Writing net sales increased 14.5 percent to $526.3 million, with strong
core sales growth and the benefit of the Elmer’s acquisition partially
offset by the deconsolidation of Venezuelan operations and the negative
impact of foreign currency. Despite the acceleration of approximately
$15 million of net sales from Q3 into Q2 to support Back-to-School
merchandising, Writing core sales increased 7.7 percent, reflecting a
strong Back-to-School season behind innovation such as Paper Mate®
InkJoy™ Gel Pens and increased advertising and promotion support.
Reported operating income was $131.5 million compared with $114.1
million in the prior year. Reported operating margin was 25.0 percent
compared with 24.8 percent in the prior year. Normalized operating
income was $136.7 million versus $116.4 million last year. Normalized
operating margin was 26.0 percent of sales, a 70 basis point increase
versus last year, as volume growth, pricing and productivity more than
offset increased advertising and promotion spending and the negative mix
impact of the deconsolidation of Venezuela.

Home Solutions net sales decreased 19.1 percent to $371.8 million
primarily due to the divestiture of the Décor business. Home Solutions
core sales, which exclude the Rubbermaid consumer storage totes business
that is held for sale, declined 0.5 percent, primarily attributable to
the timing impact of the transition of a key distribution center in the
Beverage business. Reported operating income was $56.1 million compared
with $76.0 million in the prior year, due largely to the divestiture of
the Décor business, lower Beverage volume and unfavorable foreign
currency. Reported operating margin was 15.1 percent of sales, a 140
basis point decrease compared with the prior year. Normalized operating
income was $62.1 million versus $76.5 million last year. Normalized
operating margin was 16.7 percent of sales, flat compared with last year.

Tools net sales declined 5.7 percent to $185.5 million driven by
continued challenges in Brazil and negative foreign currency, partially
offset by growth in Europe. Tools core sales, which exclude the portion
of the business held for sale, increased 4.6 percent. Reported operating
income was $22.1 million compared with $20.5 million in the prior year.
Reported operating margin was 11.9 percent of sales, a 150 basis point
improvement compared with the prior year. Normalized operating income
was $23.2 million versus $20.5 million last year. Normalized operating
margin was 12.5 percent of sales, a 210 basis point increase versus last
year as geographic mix, productivity and pricing more than offset the
challenging growth environment and negative foreign currency impact in
Brazil.

Commercial Products net sales declined 3.7 percent to $199.2 million,
primarily due to the divestiture of the Rubbermaid medical cart
business, the negative impact of foreign currency and softness in the
North American distributive trade channel related to ongoing planned
complexity reduction activity. Core sales decreased 1.8 percent.
Reported operating income was $33.7 million compared with $29.5 million
in the prior year. Reported operating margin was 16.9 percent of sales,
a 260 basis point improvement versus the prior year. Normalized
operating income was $35.2 million versus $31.4 million last year.
Normalized operating margin was 17.7 percent of sales, a 250 basis point
improvement versus last year as pricing and productivity offset the
negative impact of foreign currency.

Baby & Parenting net sales increased 11.3 percent to $231.1 million,
largely due to continued strong sales momentum in North America from
Graco and Baby Jogger. Core sales, which exclude the Teutonia business
that is held for sale, increased 10.6 percent. Reported operating income
was $34.6 million compared with $10.2 million in the prior year.
Reported operating margin was 15.0 percent of sales, a 1000 basis point
increase compared with prior year. Normalized operating income was $36.8
million versus $10.2 million last year. Normalized operating margin was
15.9 percent of sales, an 1100 basis point increase versus last year.
The normalized operating margin improvement was attributable to strong
volume growth, the timing of advertising and promotion spend and
productivity.

Branded Consumables net sales were $957.3 million. On a pro forma basis,
net sales increased 5.2 percent versus prior year. Pro forma core sales,
which exclude the Lehigh Rope and Cordage business which is held for
sale, increased 0.6 percent compared with prior year, as growth at
Waddington, Home & Family in North America and Yankee Candle was
partially offset by weak performance of the Safety & Security business
outside North America. Reported operating income was $122.3 million and
reported operating margin was 12.8 percent, reflecting the positive
impact of product mix and the benefit of synergies, partially offset by
inventory step-up, integration and other costs related to the Jarden
transaction. Normalized operating income was $164.8 million and
normalized operating margin was 17.2 percent of sales.

Consumer Solutions net sales were $650.0 million. On a pro forma basis,
net sales increased 7.9 percent versus prior year. Pro forma core sales,
which exclude the U.S. Heaters, Humidifiers, and Fans business that is
held for sale, increased 9.3 percent compared with prior year, driven by
strong growth in both North America and Latin America. Reported
operating income was $38.0 million and reported operating margin was 5.8
percent, reflecting strong sales growth and fixed cost leverage
partially offset by inventory step-up, integration and other costs
related to the Jarden transaction. Normalized operating income was $92.0
million and normalized operating margin was 14.2 percent of sales.

Outdoor Solutions net sales were $731.9 million. On a pro forma basis,
net sales increased 12.1 percent versus prior year primarily due to the
Jostens acquisition. Pro forma core sales, which exclude the Winter
Sports business that is held for sale, declined 3.2 percent compared
with prior year with growth in Pure Fishing more than offset by declines
on Coleman. The segment had a reported operating loss of $18.7 million,
as solid business performance was more than offset by inventory step-up,
integration and other costs related to the Jarden transaction. Reported
operating margin was not meaningful due to the operating loss.
Normalized operating income was $83.6 million and normalized operating
margin was 11.4 percent of sales.

Process Solutions net sales were $101.5 million. On a pro forma basis,
net sales increased 11.4 percent versus prior year. Pro forma core sales
increased 12.4 percent compared with prior year, due to volume growth
and commodity based pricing. Reported operating income was $7.4 million
and reported operating margin was 7.3 percent. Normalized operating
income was $12.4 million and normalized operating margin was 12.2
percent of sales.

Outlook for the Twelve Months Ending December
31, 2016

Newell Brands raised the lower end of its 2016 full year guidance ranges
for core sales growth and normalized earnings per share versus its
previous earnings guidance of 3 to 4 percent core sales growth and
normalized earnings per share of $2.75 to $2.90. The updated guidance
metrics are as follows:

                   

Updated 2016 Full Year Guidance

 
Reported net sales growth 122.5% to 128.0%
 
Reported earnings per share $1.15 to $1.20
 
Core sales growth 3.5% to 4.0%
 
Normalized earnings per share $2.85 to $2.90
 

As of April 15, 2016, Newell Brands core sales include pro forma core
sales associated with the Jarden transaction as if the combination
occurred April 15, 2015. Core sales exclude the impact of foreign
currency, acquisitions (other than the Jarden acquisition) until their
first anniversary and planned and completed divestitures (including the
deconsolidation of Venezuela). Newell Brands now expects to exit product
lines with annual sales of $75 million to $125 million by the end of
2018, which will be reflected as a negative impact on core sales.
Beginning with the second quarter of 2016, the company is excluding the
amortization of intangible assets associated with acquisitions from its
calculation of normalized earnings per share.

The company now expects the full year weighted average share count to be
approximately 425 million shares and the effective tax rate for 2016 to
be about 27.5 percent.

Outlook for the Twelve Months Ending December
31, 2017

Newell Brands provided 2017 core sales growth and normalized earnings
per share guidance metrics as follows:

                   

2017 Full Year Outlook

 
Core sales growth 3% to 4%
 
Normalized earnings per share $2.85 to $3.05
 

2017 normalized earnings per share outlook includes $0.20 of dilution,
net of interest benefits, related to the planned divestiture of about 10
percent of the company’s portfolio. The 2017 guidance assumes a January
1, 2017 completion of all transactions, the current share count of 488
million shares and a tax rate of 26 to 27 percent.

The company has presented forward-looking statements regarding
normalized earnings per share and core sales growth for 2017, each of
which is a non-GAAP financial measure. These non–GAAP financial measures
are derived by excluding certain amounts, expenses or income and/or
certain impacts, including the impact of foreign exchange or business
portfolio determinations, 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. The unavailable information could have a significant
impact on the company’s full-year 2017 GAAP financial results.

Conference Call

The company’s third quarter 2016 earnings conference call will be held
today, October 28, 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 is 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 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.

Contacts

Investor Contact:
Newell
Brands
Nancy O’Donnell, 770-418-7723
Vice President, Investor
Relations
nancy.odonnell@newellco.com
or
Media
Contacts
:
Newell Brands
Tom Sanford, 973-600-3880
Vice
President, Global Communications
tom.sanford@newellco.com
or
Weber
Shandwick
Liz Cohen, 212-445-8044
liz.cohen@webershandwick.com

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