10-K 1 nwl-12312016x10k.htm 10-K Document

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2016
 
COMMISSION FILE NUMBER
1-9608
NEWELL BRANDS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
 
 
DELAWARE
  
36-3514169
(State or other jurisdiction of
  
(I.R.S. Employer
incorporation or organization)
  
Identification No.)
 
 
221 River Street
  
07030
Hoboken, New Jersey
  
(Zip Code)
(Address of principal executive offices)
  
 
Registrant’s telephone number, including area code: (201) 610-6600
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS
Common Stock, $1 par value per share
  
 
NAME OF EACH EXCHANGE
ON WHICH REGISTERED
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  þ    No  ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes  ¨    No  þ
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  þ    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  þ    No  ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer þ
  
Accelerated Filer o
Non-Accelerated Filer o
  
Smaller Reporting Company o
(Do not check if a smaller reporting company)
  
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  ¨    No  þ



There were 482.4 million shares of the Registrant’s Common Stock outstanding (net of treasury shares) as of January 31, 2017. The aggregate market value of the shares of Common Stock (based upon the closing price on the New York Stock Exchange on June 30, 2016) beneficially owned by non-affiliates of the Registrant was approximately $23.1 billion. For purposes of the foregoing calculation only, which is required by Form 10-K, the Registrant has included in the shares owned by affiliates those shares owned by directors and officers of the Registrant, and such inclusion shall not be construed as an admission that any such person is an affiliate for any purpose.
* * *
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Definitive Proxy Statement for its Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K.
 




TABLE OF CONTENTS 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Statement of Computation of Earnings to Fixed Charges
 
Significant Subsidiaries
 
Consent of Independent Registered Public Accounting Firm
 
302 Certification of Chief Executive Officer
 
302 Certification of Chief Financial Officer
 
906 Certification of Chief Executive Officer
 
906 Certification of Chief Financial Officer
 


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PART I
ITEM 1. BUSINESS
“Newell Brands” or the “Company” refers to Newell Brands Inc. (formerly, Newell Rubbermaid Inc.) alone or with its wholly owned subsidiaries, as the context requires. When this report uses the words “we,” “us” or “our,” it refers to the Company and its subsidiaries unless the context otherwise requires. The Company was founded in Ogdensburg, NY in 1903 and is incorporated in Delaware. The Company’s principal executive office is located at 221 River Street, Hoboken, New Jersey 07030, and the Company’s telephone number is 201-610-6600.
Website Access to Securities and Exchange Commission Reports
The Company makes available free of charge on or through its website its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as practicable after the Company files them with, or furnishes them to, the Securities and Exchange Commission. The Company’s Internet website can be found at www.newellbrands.com. The information on the Company’s website is not incorporated by reference into this annual report on Form 10-K.
GENERAL
Newell Brands is a global marketer of consumer and commercial products that help people make life better every day, where they live, learn, work and play. Our products are marketed under a strong portfolio of leading 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®. The Company sells its products in nearly 200 countries around the world and has operations on the ground in nearly 100 of these countries.
This past year was one of the most transformational in its history as the Company more than doubled its size and extended its successful operating model across a broader set of categories acquired through the combination with Jarden Corporation. On April 15, 2016, Jarden Corporation (“Jarden”) became a direct wholly-owned subsidiary of Newell Brands Inc. Jarden is a global consumer products company with brands such as Yankee Candle®, Crock-Pot®, FoodSaver®, Mr. Coffee®, Oster®, Coleman®, First Alert®, Rawlings®, Jostens®, K2®, Marker®, Marmot®, Völkl® and many others. Following the Jarden Acquisition, the Company was renamed Newell Brands Inc.
This transformative transaction created a global consumer goods company with estimated annualized sales for 2016 of $16 billion and a portfolio of leading brands in large, growing, unconsolidated, global markets. The scaled enterprise is expected to accelerate profitable growth over time with leading brands in a global market that exceeds $100 billion, with business and capability development supported by the efficiencies of the combined company.  Management believes the scale of Newell Brands in key categories, channels and geographies creates a much broader opportunity to deploy the Company’s advantaged set of brand development and commercial capabilities for accelerated growth and margin expansion. The Company’s intent is to design a benchmarked, efficient set of structures that support long-term business development.
The Company anticipates significant annualized cost synergies will be realized by Newell Brands, driven by efficiencies of scale and efficiencies in procurement, cost to serve and infrastructure. The Company anticipates incremental annualized cost synergies of at least $500 million over four years, driven by efficiencies of scale and new efficiencies in procurement, cost to serve and infrastructure that the combination unlocks. The Company currently expects to incur approximately $500 million of restructuring and integration-related costs over the same period to generate and unlock the more than $500 million of annualized cost synergies. 
After the completion of the Jarden Acquisition, the Company initiated a comprehensive strategic assessment of the business and in the third quarter of 2016 launched a new corporate strategy that focuses the portfolio, prioritizes investment in the categories with the greatest potential for growth, and extends the Company’s advantaged capabilities in insights, product design, innovation, and e-commerce to the broadened portfolio. The investments in new capabilities are designed to unlock the growth potential of the portfolio and will be funded by a commitment to release cost savings of $800 million through the combination of the completion of Project Renewal and delivery of $500 million in cost synergies associated with the Jarden integration. This new corporate strategy is called the New Growth Game Plan and builds on the successful track record of growth acceleration, margin development, and value creation associated with the transformation of Newell Rubbermaid Inc. from 2011 through 2016.

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The Company has maintained continuity of operations through 2016 by preserving both legacy organizations’ operating segments. The 2016 segment information includes results of operations of Jarden since the acquisition date and are included in the following segments: Branded Consumables, Consumer Solutions, Outdoor Solutions and Process Solutions. The key brands included in each segment are as follows:
Writing: Sharpie®, Paper Mate®, Expo®, Prismacolor®, Mr. Sketch®, Elmer’s®, X-Acto®, Parker®, Waterman® and Dymo® Office
Home Solutions: Rubbermaid®, Contigo®, bubba®, Calphalon® and Goody® 
Tools: Irwin®, Lenox®, hilmorTM and Dymo® Industrial
Commercial Products: Rubbermaid Commercial Products®
Baby & Parenting: Graco®, Baby Jogger®, Aprica® and Teutonia®  
Branded Consumables: Yankee Candle®, Waddington, Ball®, Diamond®, First Alert®, NUK®, Quickie® and Pine Mountain®
Consumer Solutions: Crock-Pot®, FoodSaver®, Holmes®, Mr. Coffee®, Oster®, Rainbow® and Sunbeam® 
Outdoor Solutions: Coleman®, Jostens®, Berkley®, Shakespeare®, Rawlings®, Völkl®, K2® and Marmot® 
Process Solutions: Jarden Plastic Solutions, Jarden Applied Materials and Jarden Zinc Products
During 2016, the Company began the process of driving the New Growth Game Plan into action, announcing a series of portfolio changes. Based on the Company’s strategy to allocate resources to its businesses with the greater right to win in the marketplace, during 2016 the Company divested its Décor business, including Levolor® and Kirsch® window coverings and drapery hardware business, which was included in the Home Solutions segment. Both the divested Décor business and the 2015 divestiture of the Rubbermaid medical cart business, which was included in the Commercial Products segment, did not qualify as discontinued operations pursuant to U.S. Generally Accepted Accounting Principles (“U.S. GAAP”). As a result, the medical cart business was included in the Company’s consolidated results from continuing operations in the Commercial Products segment until it was sold in August 2015, and the Décor business was included in the Company’s consolidated results from continuing operations in the Home Solutions segment until it was sold in June 2016.
During 2016, the Company committed to plans to divest several other businesses and brands to strengthen the portfolio to better align and focus the portfolio for growth and margin development. The affected businesses and brands are as follows: the Tools business, including the Irwin®, Lenox®, and hilmorTM brands in the Tools segment; the Winter Sports business, including the Völkl® and K2® brands and the Zoot® and Squadra® brands in the Outdoor Solutions segment; the heaters, fans, and humidifiers business with related brands in the Consumer Solutions segment; the Rubbermaid® consumer storage totes business in the Home Solutions segment; the Lehigh business, primarily ropes, cordage and chains under the Lehigh® brand and the firebuilding business, including the Pine Mountain® brand in the Branded Consumables segment; and the stroller business under the Teutonia® brand in the Baby and Parenting segment. These divestitures do not qualify as discontinued operations pursuant to U.S. GAAP, and as a result, are and will continue to be included in the Company’s consolidated results from continuing operating in each of the respective segments until the businesses are sold.
In the Company’s 2015 results, the Endicia on-line postage business and the Culinary electrics and retail businesses were classified as discontinued operations based on the Company’s commitment in 2014 to sell these businesses. Endicia was included in the Writing segment and the Culinary businesses were included in the Home Solutions segment. The Company completed the sale of Endicia in November 2015 and ceased operations in its Culinary electrics and retail businesses in the first quarter of 2015.
JARDEN ACQUISITION
On April 15, 2016, Jarden Corporation (“Jarden”) became a direct wholly-owned subsidiary of Newell Brands, as a result of a series of merger transactions (the “Jarden Acquisition”). The Jarden Acquisition was effected pursuant to an Agreement and Plan of Merger, dated as of December 13, 2015 (the “Merger Agreement”) between the Company, Jarden and two wholly-owned subsidiaries of the Company. Following the Jarden Acquisition, the Company was renamed Newell Brands Inc. See Footnote 10 of the Notes to Condensed Consolidated Financial Statements for further information. The Company is committed to maintaining its investment grade credit rating by using strong cash flow from the combined enterprise to prioritize debt reduction in the short term, while simultaneously investing in the Company’s growth platforms and maintaining its dividend per share.
STRATEGIC INITIATIVES
Newell Brands is committed to building leading brands through understanding the needs of consumers and using those insights to create innovative, highly differentiated product solutions that offer superior performance and value. As a result of the Jarden Acquisition, the Company’s advertising and promotion investments in support of its brands increased by $217.1 million compared to 2015, and the Company intends to continue to leverage its portfolio of leading brands to create a margin structure that allows for further increases in brand investment.

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During 2016, the Company launched the New Growth Game Plan, which is its strategy to simplify the organization and free up resources to invest in growth initiatives and strengthened capabilities in support of the Company’s brands. The changes being implemented in the execution of the New Growth Game Plan are considered key enablers to building a bigger, faster-growing, more global and more profitable company.
The New Growth Game Plan encompasses the following strategic elements:
The Newell Brands Vision
The Newell Brands vision for the company is grounded in three core characteristics of the business: its geographic reach with sales in nearly 200 countries and territories, its presence in a broad set of large growing household product categories, and its portfolio of leading brands that make a difference in the lives of consumers every day. The Company asserts that through the broad geographic reach of its business system, through its category presence and leading brands that touch consumers at home, in school, at work, and where they play, that Newell Brands can have a big impact on consumers’ lives. The Company’s vision is that Newell Brands makes life better for hundreds of millions of consumers every day, where they live, learn, work, and play.
The Newell Brands DNA and Ambition
The Newell Brands DNA represents an aspirational set of behaviors that define the culture the company aspires to create. The Newell Brands DNA and Ambition serve as a call to action for the Company’s employees, challenging them to grow, transform, lead, and win. The Company captures our ambition with our employees as follows:
We believe growth and scale benefits drive value creation and we achieve our potential by putting the consumer first in everything that we do. Our portfolio is a powerful collection of leading brands in large, growing, unconsolidated global categories. Over time we are choice-fully building a more international business that reaches the consumer wherever they want to buy our brands. Our strategy is designed to achieve meaningful relative market share advantage in our core categories. We will win by combining Brand Development (insights, product design, innovation, brand communication) with Every Day Great Execution, partnering with our customers to build our categories and maximize reach, availability, and visibility. We are a transformative company in the stretching ambitions we pursue. The clarity of our strategy and the decisive way that we put our choices into action is a distinctive characteristic of our leaders. Money flows to growth and we are true to our entrepreneurial roots by focusing on impact in the market place. This process creates growth missions for our empowered teams. We build our people as we build new business. We expect our people and our ideas to be judged as leaders in our business community. Our brands are better together. We win by acting as one operating company that has the scale and capabilities to outgrow, out execute, and out spend our competition. Our strong financial foundation of cash generation creates a platform for scaling this model through strategic M&A in our core categories.
The Newell Brands Portfolio Roles
Newell Brands allocates resources to the business with the greater growth and market share consolidation potential. There are three portfolio roles that shape performance objectives and resource allocation: Win Bigger, Develop for Growth, and Grow Entrepreneurially.
Win Bigger businesses have innovations and brands that are ready now for investment. Develop for Growth businesses are businesses where investments in insights, design, and innovation can set the stage for future growth acceleration. Both Win Bigger and Develop for Growth businesses are resourced with Brand Development leaders and Commercial Delivery leaders. Grow Entrepreneurially businesses are leaner organizations that leverage the scale of the larger corporation for back office support, but operate as more independent focused organizations.
The Newell Brands Operating Model
As part of the New Growth Game Plan, in late 2016 the Company began to transform from a holding company to an operating company, consolidating its business units into global divisions while investing to extend its design, innovation and brand development capabilities across a broader set of categories. These organization changes were initiated in the third quarter and this major phase of the transformation was completed by year end. These new 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.

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In 2016, the original business units were run in nine operating segments. The Company’s nine business segments and the key brands included in each of the segments are as follows:
Segment
  
Key Brands
 
Description of Primary Products
Writing
 
Sharpie®, Paper Mate®, Expo®, Prismacolor®, Mr. Sketch®, Elmer's®, X-Acto®, Parker®, Waterman®, Dymo® Office
 
Writing instruments, including markers and highlighters, pens and pencils; art products; activity-based adhesive and cutting products; fine writing instruments; labeling solutions
Home Solutions
 
Rubbermaid®, Contigo®, bubba®, Calphalon®, Goody®
 
Indoor/outdoor organization, food storage and home storage products; durable beverage containers; gourmet cookware, bakeware and cutlery; hair care accessories
Tools
 
Irwin®, Lenox®, hilmor, Dymo® Industrial
 
Hand tools and power tool accessories; industrial bandsaw blades; tools for HVAC systems; label makers and printers for industrial use
Commercial Products
 
Rubbermaid
Commercial
Products
®
 
Cleaning and refuse products; hygiene systems; material handling solutions
Baby & Parenting
 
Graco®, Baby Jogger®, Aprica®, Teutonia®
 
Infant and juvenile products such as car seats, strollers, highchairs and playards
Branded Consumables
 
Yankee Candle®, Waddington, Ball®, Diamond®, First Alert®, NUK®, Quickie®, Pine Mountain® 
 
Branded consumer products; consumable and fundamental household staples
Consumer Solutions
 
Crock-Pot®, FoodSaver®, Holmes®, Mr. Coffee®, Oster®, Rainbow®, Sunbeam®
 
Household products, including kitchen appliances and home environment products
Outdoor Solutions
 
Coleman®, Jostens®, Berkley®, Shakespeare®, Rawlings®, Völkl®, K2®, Marmot®
 
Products for outdoor and outdoor-related activities
Process Solutions
 
Jarden Plastic Solutions, Jarden Applied Materials, Jarden Zinc Products
 
Plastic products including container closures, contact lens packaging, medical disposables, plastic cutlery and rigid packaging
Writing
The Company’s Writing segment is comprised of the Writing & Creative Expression business which has market share growth potential by further building strong brands like Sharpie®, Paper Mate®, and Expo® and deploying the portfolio into new geographies, the Elmer’s®, Labeling and Fine Writing businesses that focus investment on innovation and brand support in existing markets. The Writing segment designs, manufactures or sources and distributes writing instruments, adhesives, cutting products and labeling solutions, primarily for use in business and the home. The Segment’s largest writing instrument factory is based in the U.S.A (Tennessee - 2). The segment’s product offerings include markers, highlighters, activity-based adhesives, cutting products and everyday and fine writing instruments and accessories. Permanent/waterbase markers, dry erase markers, highlighters and art supplies are primarily sold under the Sharpie®, Expo®, Sharpie® Accent®, Prismacolor® and Mr. Sketch® trademarks. Ballpoint pens and inks, roller ball pens, mechanical pencils and correction supplies are primarily sold under the Paper Mate®, InkJoy®, Uni-Ball® (used under exclusive license from Mitsubishi Pencil Co. Ltd. and its subsidiaries in North America and certain areas in Latin America), Sharpie®, Mongol® and Liquid Paper® trademarks. Activity-based adhesives and cutting products are primarily sold under the Elmer’s®, Krazy Glue® (a trademark of Toagosei Co. Ltd. used with permission) and X-Acto® trademarks. Fine writing instruments are primarily sold under the Parker®, Waterman® and Rotring® trademarks. The Writing segment’s on-demand labeling solutions are primarily sold under the Dymo® Office trademark.
The Writing segment generally markets its products directly to mass merchants, warehouse clubs, grocery/drug stores, office superstores, office supply stores, contract stationers, travel retail, on-line and other retailers.
Home Solutions
The Company’s Food & Beverage business within the Home Solutions segment is a business with significant growth and geographic expansion opportunities, while the consumer storage and organization, cookware, and hair care accessories businesses within the Home Solutions segment concentrates innovation and investment in the brands in existing markets. The Home Solutions segment

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designs, manufactures or sources and distributes a wide range of consumer products under multiple brand names. The Segment’s largest food storage and cookware factories are based in the U.S.A. (Ohio - 2, Kansas). Indoor/outdoor organization and home storage products are primarily sold under the Rubbermaid® and Roughneck® trademarks. Food storage and on-the-go hydration and thermal bottles are primarily sold under the Rubbermaid®, TakeAlongs®, Contigo®, Avex® and bubba® trademarks. Aluminum and stainless steel cookware and bakeware are sold under the Calphalon® trademark. Hair care accessories and grooming products are marketed primarily under the Goody® trademark.
The Home Solutions segment primarily markets its products directly to mass merchants and specialty, grocery/drug and department stores.
Tools
The Tools segment designs, manufactures or sources and distributes hand tools and power tool accessories, industrial bandsaw blades, tools and industrial labeling solutions. The Segment has two key factories that are based in the U.S.A. (Maine, Massachusetts). Hand tools and power tool accessories are primarily sold under the Irwin® trademark, while industrial bandsaw blades and cutting and drilling accessories are sold under the Lenox® trademark. Heating, ventilation and air conditioning (HVAC) tools are sold under the hilmorTM trademark, and industrial label makers are sold under the Dymo® trademark.
The Tools segment primarily markets its products through distributors and directly to mass merchants, home centers, industrial/construction outlets and other professional customers. During the fourth quarter of 2016, the Company entered into an agreement to sell the Tools business for an estimated price of $1.95 billion, subject to working capital adjustments. The transaction is expected to close in early 2017, subject to certain customary conditions, including regulatory approvals.
Commercial Products
The Company’s Commercial Products segment is a business with higher growth opportunities within the framework of the New Growth Game Plan. The Commercial Products segment designs, manufactures or sources and distributes cleaning and refuse products, hygiene systems and material handling solutions. The Segment’s largest commercial products factory is based in the U.S.A. (Virginia). Rubbermaid Commercial Products® primarily sells its products under the Rubbermaid® and Brute® trademarks.
The Commercial Products segment primarily markets its products through distributors and directly to mass merchants, home centers, commercial products distributors, select contract customers and other professional customers.
Baby & Parenting
The Company’s Baby & Parenting segment focuses on optimizing the business and market share in existing markets and geographies within the framework of the New Growth Game Plan. The Baby & Parenting segment designs and distributes infant and juvenile products such as car seats, strollers, swings, highchairs and playards, and primarily sells its products under the Graco®, Baby Jogger®, City Mini®, City Select®, Aprica® and Teutonia® trademarks. The Baby & Parenting segment sources substantially all of its products.
The Baby & Parenting segment primarily markets its products directly to mass merchants, department stores, distributors and on-line retailers.
Branded Consumables
The Company’s Branded Consumables segment is a legacy Jarden segment that manufactures or sources, markets and distributes a broad line of branded consumer products, many of which are affordable, consumable and fundamental household staples, and primarily sells its products under the Yankee Candle®, Waddington, Ball®, Diamond®, First Alert®, NUK®, Quickie®, Pine Mountain® trademarks. The Segment’s largest candle, playing card, baby nurturing, and plastic cutlery and serve-ware factories are based in the U.S.A. (Massachusetts - 2, Wisconsin, Kentucky). The Company believes the home fragrance business with this segment offers higher growth and geographic expansion opportunities in the New Growth Game Plan, as demonstrated in the January 2017 acquisition of Smith Mountain Industries, a leading provider of premium home fragrance products, primarily under the WoodWick® Candle brand.
The Branded Consumables segment primarily markets its products directly to club, department store, drug/grocery, mass merchant, specialty retailers, casinos and distributors as well as company-operated retail stores and direct to consumer web-based sales for Yankee Candle.



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Consumer Solutions
Consumer Solutions is a legacy Jarden segment that manufactures or sources, markets and distributes a diverse line of household products, including kitchen appliances and home environment products, and primarily sells its products under the Crock-Pot®, FoodSaver®, Holmes®, Mr. Coffee®, Oster®, Rainbow®, and Sunbeam® trademarks. The Consumer Solutions segment also has rights to sell various small appliance products, in substantially all of Europe under the Breville® brand name. The Consumer Solutions segment also utilizes an extensive licensing strategy to extend the reach of the brands across categories, geographies and strategic product extensions. The Consumer Solutions segment focuses investment on innovation and brand support in existing markets within the New Growth Game Plan.
The Consumer Solutions segment primarily markets its products directly to club, department store, drug/grocery, mass merchant, specialty retailers and distributors.
Outdoor Solutions
Outdoor Solutions is a legacy Jarden segment that manufactures or sources, markets and distributes global consumer active lifestyle products for outdoor and outdoor-related activities, and primarily sells its products under the Coleman®, Jostens®, Berkley®, Shakespeare®, Rawlings®, Völkl®, K2®, Marmot® trademarks. The businesses within Outdoor Solutions segment, such as camping, fishing and technical apparel, invest and innovate in brands in existing markets within the New Growth Game Plan.
The Outdoor Solutions segment primarily markets its products directly to club, department store, drug/grocery, mass merchant, sporting goods and specialty retailers and distributors.
Process Solutions
Process Solutions is a legacy Jarden segment that manufactures, markets and distributes a wide variety of plastic products including closures, contact lens packaging, medical disposables, plastic cutlery and rigid packaging. The materials business produces specialty nylon polymers, conductive fibers and monofilament used in various products. We also manufacture a line of industrial zinc products marketed globally for use in the architectural, automotive, construction, electrical component and plumbing markets. The Segment’s largest factory is based in the U.S.A. (South Carolina).
The Process Solutions segment primarily markets its products through distributors and directly to mass merchants, home centers, commercial products distributors, select contract customers and other professional customers. The zinc products business within the Process Solution segment is the sole source supplier of copper-plated zinc penny blanks to the United States Mint and a major supplier to the Royal Canadian Mint, as well as a supplier of brass, bronze and nickel-plated finishes on steel and zinc for coinage to other international markets.
OTHER INFORMATION
Multi-Product Offering
The Company’s broad product offering in multiple categories permits it to more effectively meet the needs of its customers. With families of leading brand names and profitable and innovative new products, the Company can assist volume purchasers in selling a more profitable product mix. As a potential single source for an entire product line, the Company can use program merchandising to improve product presentation, optimize display space for both sales and income, and encourage impulse buying by retail consumers.
Foreign Operations
Information regarding the Company’s 2016, 2015 and 2014 foreign operations and financial information by geographic area is included in Footnote 18 of the Notes to Consolidated Financial Statements and is incorporated by reference herein. Information regarding risks relating to the Company’s foreign operations is set forth in Part I, Item 1A, of this report and is incorporated by reference herein.
Please refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations and Footnote 1 of the Notes to Consolidated Financial Statements for further information regarding the Company’s Venezuelan operations.
Raw Materials and Sourced Finished Goods
The Company has multiple foreign and domestic sources of supply for substantially all of its material requirements. The raw materials and various purchased components required for its products have generally been available in sufficient quantities. The Company’s product offerings require the purchase of resin, corrugate, glass, plastic, expanded polystyrene, extinguisher powder,

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nylon, paper, plastic resin, sawdust, tin plate, wax and wood, natural rubber, electrical components, glass fiber, magnesium, adhesives, various paper-related packaging materials and metals, including steel, stainless steel, aluminum copper and gold.
The Company’s resin purchases principally comprise polyethylene, polypropylene and copolyester. Over the long-term, the Company has experienced inflation in raw material prices, labor and sourced products, and in 2016, inflation in labor and sourced products offset deflation in raw material prices. In 2017, the Company expects continued labor and sourced product inflation and moderate inflation in raw material prices. On an annualized basis, resin and metals consumed as raw materials generally represent 8% to 15% of annual cost of products sold, with neither resin nor metals purchased as raw materials individually representing more than 10% of cost of products sold.
The Company also relies on third-party manufacturers as a source for finished goods.  Historically, the Company has experienced inflation in sourced product costs due to currency fluctuations and increased input and labor costs. For a limited number of product lines, a single manufacturer or a limited number of manufacturers may supply substantially all of the finished goods for a product line. In particular, certain businesses within the Baby & Parenting and Home Solutions segments rely on third-party manufacturers for substantially all of their products. Specifically, the Company’s Baby & Parenting segment has a single source of supply for products that comprise a majority of Baby & Parenting’s sales and which owns the intellectual property for many of those products.
See Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussion.
Backlog
The dollar value of unshipped factory orders is not material.
Seasonal Variations
Sales of the Company’s products tend to be seasonal, with sales, operating income and operating cash flow in the first quarter generally lower than any other quarter during the year, driven principally by reduced volume and the mix of products sold in the first quarter. The seasonality of the Company’s sales volume combined with the accounting for fixed costs, such as depreciation, amortization, rent, personnel costs and interest expense, impacts the Company’s results on a quarterly basis. In addition, the Company tends to generate the majority of its operating cash flow in the second, third and fourth quarters of the year due to seasonal variations in operating results, the timing of annual performance-based compensation payments, customer program payments, working capital requirements and credit terms provided to customers.
Patents and Trademarks
The Company has many patents, trademarks, brand names and trade names that are, in the aggregate, important to its business. The Company’s most significant registered trademarks are Sharpie®, Paper Mate®, Elmer’s®, Parker®, Waterman®, Dymo®, Rubbermaid®, Contigo®, Goody®, Calphalon®, Irwin®, Lenox®, Graco®, Baby Jogger®, Aprica®, Bionaire®, Coleman®, Crock-Pot®, First Alert®, FoodSaver®, Health o Meter®, Holmes®, K2®, Marmot®, Mr. Coffee®, Oster®, Pine Mountain®, Quickie®, Rawlings®, Ride®, Rival®, Shakespeare®, Starterlogg®, Stearns®, Sunbeam® and Völkl®.
Customers/Competition
The Company’s principal customers are large mass merchandisers, such as discount stores, home centers, warehouse clubs, office superstores, craft stores, direct-to-consumer channels, specialty retailers and wholesalers, commercial distributors, e-commerce companies and Yankee Candle retail stores. Additionally we distribute our Jostens and Waddington products through the academic and achievement channel and foodservice channel, respectively. The dominant share of the market represented by large mass merchandisers, together with consumer shopping patterns, contributes to a market environment in which dominant multi-category retailers and e-commerce companies have strong negotiating power with suppliers. This environment may limit the Company’s ability to recover cost increases through selling prices.
Current trends among retailers and e-commerce companies include fostering high levels of competition among suppliers, demanding innovative new products and products tailored to each of their unique requirements and requiring suppliers to maintain or reduce product prices and deliver products with shorter lead times. Other trends, in the absence of a strong new product development effort or strong end-user brands, are for retailers and e-commerce companies to import generic products directly from foreign sources and to source and sell products, under their own private label brands, which compete with the Company’s products. The combination of these market influences has created an intensely competitive environment in which the Company’s principal customers continuously evaluate which product suppliers to use, resulting in downward pricing pressures and the need for big, consumer-meaningful brands, the ongoing introduction and commercialization of innovative new products, continuing improvements in category management and customer service, and the maintenance of strong relationships with large, high-volume purchasers. The Company competes with numerous manufacturers and distributors of consumer products, many of which are large and well-established. Our Yankee Candle retail stores compete primarily with specialty candle and personal care retailers and a

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variety of other retailers, including department stores, gift stores and national specialty retailers that carry candles along with personal care items, giftware and housewares.
The Company’s principal methods of meeting its competitive challenges are creating and maintaining leading brands and differentiated products that deliver superior value and performance; delivering superior customer service and consistent on-time delivery; producing and procuring products at a competitive cost; and experienced management. In addition, the Company focuses on building consumer loyalty and increased consumer demand through increased investment in consumer insights and using those insights to develop innovative products and product features that meet consumers’ needs.
The Company has also positioned itself to respond to the competitive challenges in the retail environment by developing strong relationships with large, high-volume purchasers. The Company markets its strong multi-product offering through virtually every category of high-volume retailers, including discount, drug/grocery and variety chains; warehouse clubs; department, hardware and specialty stores; home centers; office superstores; contract stationers; and e-commerce companies. The Company’s largest customer, Wal-Mart (which includes Sam’s Club), accounted for approximately 13.5%, 10.9% and 10.6% of net sales in 2016, 2015 and 2014, respectively, across substantially all segments. The Company’s top-ten customers in 2016 included (in alphabetical order): amazon, Bed, Bath & Beyond, Costco, Lowe’s, Office Depot, Staples, Target, The Home Depot, Toys ‘R’ Us and Wal-Mart.
Environmental Matters
Information regarding the Company’s environmental matters is included in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of this report and in Footnote 19 of the Notes to Consolidated Financial Statements and is incorporated by reference herein.
Research and Development
The Company’s research and development efforts focus on developing new, differentiated and innovative products to meet consumers’ needs. The Company’s product development efforts begin with consumer insights and the Company has consolidated its consumer marketing and insight capabilities into a global center of excellence and is investing further to strengthen these capabilities. The Company continues to invest to strengthen its product design and research and development capabilities and has consolidated its design and innovation capabilities into a center of excellence. The Company’s enhanced marketing and insight and research and development capabilities have been leveraged to implement a new ideation process throughout the business, resulting in idea fragments that feed the development of product concepts.
Information regarding the Company’s research and development costs for each of the past three years is included in Footnote 1 of the Notes to Consolidated Financial Statements and is incorporated by reference herein.
Employees
As of December 31, 2016, the Company had approximately 53,400 employees worldwide. Approximately 4,500 of the Company’s employees are covered by collective bargaining agreements or are located in countries that have collective arrangements decreed by statute. Management believes that our relationships with our employees and collective bargaining unions are satisfactory.
ITEM 1A. RISK FACTORS
The ownership of the Company’s common stock involves a number of risks and uncertainties. Potential investors should carefully consider the risks and uncertainties described below and the other information in this Annual Report on Form 10-K before deciding whether to invest in the Company’s securities. The Company’s business, financial condition or results of operations could be materially adversely affected by any of these risks. The risks described below are not the only ones facing the Company. Additional risks that are currently unknown to the Company or that the Company currently considers to be immaterial may also impair its business or adversely affect its financial condition or results of operations.
The Company is subject to risks related to its dependence on the strength of retail, commercial and industrial sectors of the economy in various parts of the world.
The Company’s business depends on the strength of the retail, commercial and industrial sectors of the economy in various parts of the world, primarily in North America, and to a lesser extent Europe, Latin America and Asia. These sectors of the economy are affected primarily by factors such as consumer demand and the condition of the retail industry, which, in turn, are affected by general economic conditions. With continuing challenging global economic conditions, particularly outside of the U.S., there has been considerable pressure on consumer demand, and the resulting impact on consumer spending has had and may continue to have an adverse effect on demand for the Company’s products, as well as its financial condition and results of operations. The Company could also be negatively impacted by economic crises in specific countries or regions. Such events could negatively

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impact the Company’s overall liquidity and/or create significant credit risks relative to its local customers and depository institutions. Consumer demand and the condition of these sectors of the economy may also be impacted by other external factors such as war, terrorism, geopolitical uncertainties, public health issues, natural disasters and other business interruptions. The impact of these external factors is difficult to predict, and one or more of these factors could adversely impact the Company’s business.
The Company is subject to intense competition in a marketplace dominated by large retailers and e-commerce companies.
The Company competes with numerous other manufacturers and distributors of consumer and commercial products, many of which are large and well-established. The Company’s principal customers are large mass merchandisers, such as discount stores, home centers, warehouse clubs, office superstores, commercial distributors and e-commerce companies. The dominant share of the market represented by these large mass merchandisers, together with changes in consumer shopping patterns, has contributed to the formation of dominant multi-category retailers and e-commerce companies that have strong negotiating power with suppliers. Current trends among retailers and e-commerce companies include fostering high levels of competition among suppliers, demanding innovative new products and products tailored to each of their unique requirements, requiring suppliers to maintain or reduce product prices in response to competitive, economic or other factors, and requiring product delivery with shorter lead times. Other trends are for retailers and e-commerce companies to import products directly from foreign sources and to source and sell products under their own private label brands, typically at lower prices, that compete with the Company’s products.
The combination of these market influences and retailer consolidation has created an intensely competitive environment in which the Company’s principal customers continuously evaluate which product suppliers to use, resulting in downward pricing pressures and the need for big, consumer-meaningful brands, the ongoing introduction and commercialization of innovative new products, continuing improvements in category management and customer service, and the maintenance of strong relationships with large, high-volume purchasers. The Company also faces the risk of changes in the strategy or structure of its major customers, such as overall store and inventory reductions. The intense competition in the retail and e-commerce sectors, combined with the overall economic environment, may result in a number of customers experiencing financial difficulty, or failing in the future. In particular, a loss of, or a failure by, one of the Company’s large customers could adversely impact the Company’s sales and operating cash flows. To address these challenges, the Company must be able to respond to competitive factors, and the failure to respond effectively could result in a loss of sales, reduced profitability and a limited ability to recover cost increases through price increases.
The Company’s sales are dependent on purchases from several large customers and any significant decline in these purchases or pressure from these customers to reduce prices could have a negative effect on the Company’s future financial performance.
The Company’s customer base is relatively fragmented. Although we have long-established relationships with many customers, the Company generally does not have any long-term supply or binding contracts or guarantees of minimum purchases with its largest customers. Purchases by these customers are generally made using individual purchase orders. As a result, these customers may cancel their orders, change purchase quantities from forecast volumes, delay purchases for a number of reasons beyond the Company’s control or change other terms of the business relationship. Significant or numerous cancellations, reductions, delays in purchases or changes in business practices or by customers could have a material adverse effect on the Company’s business, results of operations and financial condition. In addition, because many of the Company’s costs are fixed, a reduction in customer demand could have an adverse effect on the Company’s gross profit margins and operating income.
The Company depends on a continuous flow of new orders from large, high-volume retail customers; however, the Company may be unable to continually meet the needs of these customers. Retailers are increasing their demands on suppliers to:
reduce lead times for product delivery, which may require the Company to increase inventories and could impact the timing of reported sales;
improve customer service, such as with direct import programs, whereby product is supplied directly to retailers from third-party suppliers; and
adopt new technologies related to inventory management such as Radio Frequency Identification, otherwise known as RFID technology, which may have substantial implementation costs.
The Company cannot provide any assurance that it can continue to successfully meet the needs of its customers. A substantial decrease in sales to any of its major customers could have a material adverse effect on the Company’s business, results of operations and financial condition.
The Company’s customers may further consolidate, which could materially adversely affect its sales and margins.
The Company’s customers have steadily consolidated over the last two decades. The Company expects any customers that consolidate will take actions to harmonize pricing from their suppliers, close retail outlets and rationalize their supply chain, which could adversely affect the Company’s business and results of operations. There can be no assurance that, following consolidation,

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the Company’s large customers will continue to buy from the Company across different product categories or geographic regions, or at the same levels as prior to consolidation, which could negatively impact the Company’s financial results. Further, if the consolidation trend continues, it could result in future pricing and other competitive pressures that could reduce the Company’s sales and margins and have a material adverse effect on the Company’s business, results of operations and financial condition.
The Company’s plans to continue to improve productivity and reduce complexity and costs may not be successful, which would materially adversely affect its ability to compete.
The Company’s success depends on its ability to continuously improve its manufacturing operations to gain efficiencies, reduce supply chain costs and streamline or redeploy nonstrategic selling, general and administrative expenses in order to produce products at a best-cost position and allow the Company to invest in innovation and brand building, including advertising and promotion. The Company is currently in the process of implementing Project Renewal and delivering the cost synergies related to the acquisition of Jarden. Both efforts are global initiatives designed to reduce the complexity of the organization and increase investment in the Company’s most significant growth platforms. Project Renewal and the Company’s cost saving plans associated with the Jarden integration may not be completed substantially as planned, may be more costly to implement than expected, or may not result in, in full or in part, the positive effects anticipated. In addition, such initiatives require the Company to implement a significant amount of organizational change, which could have a negative impact on employee engagement, divert management’s attention from other concerns, and if not properly managed, impact the Company’s ability to retain key employees, cause disruptions in the Company’s day-to-day operations and have a negative impact on the Company’s financial results. It is also possible that other major productivity and streamlining programs may be required in the future.
If the Company is unable to commercialize a continuing stream of new products that create demand, the Company’s ability to compete in the marketplace may be adversely impacted.
The Company’s strategy includes investment in new product development and a focus on innovation. Its long-term success in the competitive retail environment and the industrial and commercial markets depends on its ability to develop and commercialize a continuing stream of innovative new products and line extensions that create demand. New product development and commercialization efforts, including efforts to enter markets or product categories in which the Company has limited or no prior experience, have inherent risks. These risks include the costs involved, such as development and commercialization, product development or launch delays, and the failure of new products and line extensions to achieve anticipated levels of market acceptance or growth in sales or operating income. The Company also faces the risk that its competitors will introduce innovative new products that compete with the Company’s products. In addition, sales generated by new products or line extensions could cause a decline in sales of the Company’s existing products. If new product development and commercialization efforts are not successful, the Company’s financial results could be adversely affected.
If the Company does not continue to develop and maintain leading brands or realize the anticipated benefits of increased advertising and promotion spend, its operating results may suffer.
The Company’s ability to compete successfully also depends increasingly on its ability to develop and maintain leading brands so that the Company’s retailer and other customers will need the Company’s products to meet consumer demand. Leading brands allow the Company to realize economies of scale in its operations. The development and maintenance of such brands require significant investment in brand-building and marketing initiatives. While the Company plans to continue to increase its expenditures for advertising and promotion and other brand-building and marketing initiatives over the long term, the initiatives may not deliver the anticipated results and the results of such initiatives may not cover the costs of the increased investment.
The Company incurred substantial additional indebtedness in connection with the Jarden Acquisition which could materially adversely affect the Company and its financial position, including decreasing its business flexibility and increasing its borrowing costs.
The Company incurred an additional $6.5 billion of debt (excluding approximately $4.1 billion of Jarden debt refinanced in connection with the acquisition) in connection with the completion of the Jarden Acquisition. Following completion of the Jarden Acquisition, the Company substantially increased its debt compared to its recent historical levels. This increased level of debt will increase the Company’s interest expense and could have the effect, among other things, of reducing the Company’s flexibility to respond to changing business and economic conditions. In addition, if the Company is unable to timely reduce its level of indebtedness, the Company will be subject to increased demands on its cash resources, which could increase its total debt-to-capitalization ratios, decrease its interest coverage ratios, result in a breach of covenants or otherwise adversely affect the business and financial results of the Company.



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An increase in interest rates could have a material adverse effect on our business.
While the vast majority of the company’s debt is fixed, fluctuations in interest rates can increase borrowing costs on the portion that is variable and interest rate increases on this portion of the company’s debt could have a material adverse effect on our business. In response to the last global economic recession, extraordinary monetary policy actions of the U.S. Federal Reserve and other central banking institutions, including the utilization of quantitative easing, were taken to create and maintain a low interest rate environment. However, in December 2015, the U.S. Federal Reserve raised its benchmark interest rate by a quarter of a percentage point for the first time since 2006, and in December 2016, the U.S. Federal Reserve again raised its benchmark interest rate by a quarter of a percentage point. While it is unclear whether such action suggests a change in previous monetary policy positions, any such change or market expectation of such change may result in significantly higher long-term interest rates. Such a transition may be abrupt and may, among other things, reduce the availability and/or increase the costs of obtaining new debt and refinancing existing indebtedness.
If the Company is unable to make strategic acquisitions and to integrate its acquired businesses, the Company’s future growth and profitability could be adversely impacted.
The Company’s ability to continue to make strategic acquisitions and to integrate the acquired businesses successfully remain important factors in the Company’s future growth. In December 2016, the Company announced the acquisition of Sistema Plastics, a New Zealand-based provider of food storage containers primarily under the Sistema® brand. In January 2017, the Company completed the acquisition of Smith Mountain Industries, a provider of home fragrance products, primarily under the WoodWick® Candle brand, and in April 2016, the Company completed the acquisition of Jarden Corporation, which had recently acquired Jostens, Inc. and Waddington Group Inc. The Company’s ability to successfully integrate these or any other acquired business is dependent upon its ability to identify suitable acquisition candidates, integrate and manage product lines that have been acquired, obtain anticipated cost savings and operating income improvements within a reasonable period of time, assume unknown liabilities, known contingent liabilities that become realized or known liabilities that prove greater than anticipated, and manage unanticipated demands on the Company’s management, operational resources and financial and internal control systems. Furthermore, the Company’s ability to finance major acquisitions may be adversely affected by the Company’s financial position and access to credit markets. In addition, significant additional borrowings would increase the Company’s borrowing costs and could adversely affect its credit rating and could constrain the Company’s future access to capital. The Company may not successfully manage these or other risks it may encounter in acquiring and integrating a business or product line, which could have a material adverse effect on its business.
Circumstances associated with divestitures and product line exits could adversely affect the Company’s results of operations and financial condition.
The Company continually evaluates the performance and strategic fit of its businesses and products. In June 2016, the Company completed the sale of its Décor business, which comprises its Levolor® and Kirsch® window coverings brands. During 2016, the Company entered into an agreement to sell its Tools business, which comprises the Irwin®, Lenox®, and hilmorTM brands, and announced its intention to divest several other businesses and brands, including its Winter Sports business, including the Völkl® and K2® brands and the Rubbermaid® consumer storage totes business. The Company may decide to sell or discontinue other businesses or products in the future based on an evaluation of performance and strategic fit. A decision to divest or discontinue a business or product may result in asset impairments, including those related to goodwill and other intangible assets, and losses upon disposition, both of which could have an adverse effect on the Company’s results of operations and financial condition. In addition, the Company may encounter difficulty in finding buyers or executing alternative exit strategies at acceptable prices and terms and in a timely manner and prospective buyers may have difficulty obtaining financing. Divestitures and business discontinuations could involve additional risks, including the following:
difficulties in the separation of operations, services, products and personnel;
the diversion of management's attention from other business concerns;
the retention of certain current or future liabilities in order to induce a buyer to complete a divestiture;
the disruption of the Company’s business; and
the potential loss of key employees.
The Company may not be successful in managing these or any other significant risks that it may encounter in divesting or discontinuing a business or exiting product lines, which could have a material adverse effect on its business.
The Company’s operating results can be adversely affected by changes in the cost or availability of raw materials, energy, transportation and other necessary supplies and services.
Pricing and availability of raw materials, energy, transportation and other necessary supplies and services for use in the Company’s businesses can be volatile due to numerous factors beyond its control, including general, domestic and international economic

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conditions, labor costs, production levels, competition, consumer demand, import duties and tariffs and currency exchange rates. This volatility can significantly affect the availability and cost of raw materials, energy, transportation and other supplies and services for the Company, and may, therefore, have a material adverse effect on the Company’s business, results of operations and financial condition.
The Company’s success is dependent, in part, on its continued ability to reduce its exposure to increases in those costs through a variety of programs, including periodic purchases, future delivery purchases, long-term contracts, sales price adjustments and certain derivative instruments, while maintaining and improving margins and market share. Also, the Company relies on third-party manufacturers as a source for its products. These manufacturers are also subject to price volatility and labor cost and other inflationary pressures, which may, in turn, result in an increase in the amount the Company pays for sourced products. During periods of rising prices of raw materials, there can be no assurance that the Company will be able to pass any portion of such increases on to customers. Conversely, when raw material prices decline, customer demands for lower prices could result in lower sale prices and, to the extent the Company has existing inventory, lower margins. As a result, fluctuations in raw material prices could have a material adverse effect on the Company’s business, results of operations and financial condition.
Some of the products we manufacture require particular types of glass, metal, paper, plastic, resin, wax, wood or other materials. Supply shortages for a particular type of material can delay production or cause increases in the cost of manufacturing the Company’s products. This could have a material adverse effect on the Company’s business, results of operations and financial condition.
The Company’s operations are dependent upon third-party vendors and suppliers whose failure to perform adequately could disrupt the Company’s business operations.
The Company currently sources a significant portion of parts and products from third parties. The Company’s ability to select and retain reliable vendors and suppliers who provide timely deliveries of quality parts and products will impact the Company’s success in meeting customer demand for timely delivery of quality products. In many cases, the Company does not enter into long-term contracts with its primary vendors and suppliers, instead buying parts and products on a “purchase order” basis. As a result, the Company may be subject to unexpected changes in pricing or supply of products.
The ability of third-party suppliers to timely deliver finished goods and/or raw materials, and the ability of the Company’s own facilities to timely deliver finished goods, may be affected by events beyond their control, such as inability of shippers to timely deliver merchandise due to work stoppages or slowdowns, or significant weather and health conditions (such as SARS) affecting manufacturers and/or shippers. Any adverse change in the Company’s relationships with its third-party suppliers, the financial condition of third-party suppliers, the ability of third-party suppliers to manufacture and deliver outsourced parts or products on a timely basis, or the Company’s ability to import products from third-party suppliers or its own facilities could have a material adverse effect on the Company’s business, results of operations and financial condition.
In addition, the financial condition of the Company’s vendors and suppliers may be adversely affected by general economic conditions, such as credit difficulties and the uncertain macroeconomic environment in recent years. In addition, in some instances the Company maintains single-source or limited-source sourcing relationships, either because multiple sources are not available or the relationship is advantageous due to performance, quality, support, delivery, capacity or price considerations. For example, the Company’s Baby & Parenting business has a single source of supply for products that comprise a majority of Baby & Parenting’s sales and which owns intellectual property rights in respect of many of those products. Should any of these single source suppliers fail to manufacture sufficient supply, go out of business or discontinue a particular component, the Company may not be able to find alternative vendors and suppliers in a timely manner, if at all. Any inability of the Company’s vendors and suppliers to timely deliver quality parts and products or any unanticipated change in supply, quality or pricing of products could be disruptive and costly to the Company.
The Company cannot assure you that it could quickly or effectively replace any of its suppliers if the need arose, and the Company cannot assure you that it could retrieve tooling and molds possessed by any of its third-party suppliers. The Company’s dependence on these few suppliers could also adversely affect its ability to react quickly and effectively to changes in the market for its products.
Changes in foreign, cultural, political and financial market conditions could impair the Company’s international operations and financial performance.
Some of the Company’s operations are conducted or products are sold in countries where economic growth has slowed, such as Brazil; or where economies have suffered economic, social and/or political instability or hyperinflation; or where the ability to repatriate funds has been significantly delayed or impaired. Current government economic and fiscal policies in these economies, including stimulus measures and currency exchange rates and controls, may not be sustainable and, as a result, the Company’s sales or profits related to those countries may decline. The economies of other foreign countries important to the Company’s operations could also suffer slower economic growth or economic, social and/or political instability or hyperinflation in the future. The Company’s international operations (and particularly its business in emerging markets), including manufacturing and sourcing

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operations (and the international operations of the Company’s customers), are subject to inherent risks which could adversely affect the Company, including, among other things:
protectionist policies restricting or impairing the manufacturing, sales or import and export of the Company’s products;
new restrictions on access to markets;
lack of developed infrastructure;
inflation (including hyperinflation) or recession;
devaluations or fluctuations in the value of currencies;
changes in and the burdens and costs of compliance with a variety of laws and regulations, including the Foreign Corrupt Practices Act, tax laws, accounting standards, trade protection measures and import and export licensing requirements, environmental laws and occupational health and safety laws;
social, political or economic instability;
acts of war and terrorism;
natural disasters or other crises;
reduced protection of intellectual property rights in some countries;
increases in duties and taxation;
restrictions on transfer of funds and/or exchange of currencies;
expropriation of assets or forced relocations of operations; and
other adverse changes in policies, including monetary, tax and/or lending policies, encouraging foreign investment or foreign trade by host countries.
Should any of these risks occur, the Company’s ability to manufacture, source, sell or export its products or repatriate profits could be impaired; the Company could experience a loss of sales and profitability from its international operations; and/or the Company could experience a substantial impairment or loss of assets, any of which could have a material adverse impact on the Company’s business.
The Company has foreign currency translation and transaction risks that may materially adversely affect the Company’s operating results, financial condition and liquidity.
The financial position and results of operations of many of the Company’s international subsidiaries are initially recorded in various foreign currencies and then translated into U.S. Dollars at the applicable exchange rate for inclusion in the Company’s financial statements. The strengthening of the U.S. Dollar against these foreign currencies ordinarily has a negative impact on the Company’s reported sales, operating margin and operating income (and conversely, the weakening of the U.S. Dollar has a positive impact). For the year ended December 31, 2016, foreign currency unfavorably affected reported sales by $113.1 million compared to the year ended December 31, 2015. The volatility of foreign exchange rates may materially adversely affect the Company’s operating results.
The margin impacts from changes in foreign currency are because the Company’s costs for produced and sourced products are largely denominated in U.S. Dollars, and the Company’s international operations generally sell the Company’s products at prices denominated in local currencies. When local currencies decline in value relative to the U.S. Dollar in the regions in which the Company sells products whose costs are denominated in U.S. Dollars, the Company’s international businesses would need to increase the local currency sales prices of the products and/or reduce costs through productivity or other initiatives in order to maintain the same level of profitability. The Company may not be able to increase the selling prices of its products in its international businesses due to market dynamics, competition or otherwise and may not realize cost reductions through productivity or other initiatives. As a result, gross margins and overall operating results of the Company’s international businesses would be adversely affected when the U.S. Dollar strengthens.
The Company has been adversely impacted by developments in Venezuela, including the significant devaluations of the Venezuelan Bolivar that have occurred in recent years, the declining availability of U.S. Dollars and the implementation of pricing and exchange controls in Venezuela. As of December 31, 2015, the Company determined that it no longer could exercise control over the operations of its Venezuela subsidiary. Accordingly, the Company deconsolidated its Venezuela subsidiary on December 31, 2015 and recorded a pretax charge of $172.7 million.
Future government actions, such as currency devaluations, import authorization controls, foreign exchange controls, price or profit controls or expropriation or other forms of government take-over, could adversely impact the Company’s business, results of operations, cash flows and financial condition.
See Management’s Discussion and Analysis of Financial Condition and Results of Operations and Footnote 1 of the Notes to Consolidated Financial Statements for further information.

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A failure of one or more key information technology systems, networks, processes, associated sites or service providers could have a material adverse impact on the Company’s business or reputation.
The Company relies extensively on information technology (IT) systems, networks and services, including Internet sites, data hosting and processing facilities and tools and other hardware, software and technical applications and platforms, some of which are managed, hosted, provided and/or used by third parties or their vendors, to assist in conducting business. The various uses of these IT systems, networks and services include, but are not limited to:
ordering and managing materials from suppliers;
converting materials to finished products;
shipping products to customers;
marketing and selling products to consumers;
collecting and storing customer, consumer, employee, investor and other stakeholder information and personal data;
processing transactions;
summarizing and reporting results of operations;
hosting, processing and sharing confidential and proprietary research, business plans and financial information;
complying with regulatory, legal or tax requirements;
providing data security; and
handling other processes necessary to manage the Company’s business.
Increased IT security threats and more sophisticated computer crime, including advanced persistent threats, pose a potential risk to the security of the Company’s IT systems, networks and services, as well as the confidentiality, availability and integrity of the Company’s data. The Company’s operations, especially its retail operations, involve the storage and transmission of employees’, customers’ and consumers’ proprietary information, such as credit card and bank account numbers. The Company’s payment services may be susceptible to credit card and other payment fraud schemes, including unauthorized use of credit cards, debit cards or bank account information, identity theft or merchant fraud. If the IT systems, networks or service providers relied upon fail to function properly, or if the Company suffers a loss or disclosure of customers’ and consumers’ data, business or stakeholder information, due to any number of causes, ranging from catastrophic events to power outages to security breaches, and business continuity plans do not effectively address these failures on a timely basis, the Company may suffer interruptions in its ability to manage operations, a risk of government enforcement action, litigation and possible liability, and reputational, competitive and/or business harm, which may adversely impact the Company’s results of operations and/or financial condition.
As techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target, the Company may be unable to anticipate these techniques or implement adequate preventative measures. If an actual or perceived breach of the Company’s security occurs, the public perception of the effectiveness of the Company’s security measures could be harmed and the Company could lose customers and consumers, which could adversely affect its business.
Impairment charges could have a material adverse effect on the Company’s financial results.
Future events may occur that would adversely affect the reported value of the Company’s assets and require impairment charges. Such events may include, but are not limited to, strategic decisions made in response to changes in economic and competitive conditions, the impact of the economic environment on the Company’s sales and customer base, the unfavorable resolution of litigation, a material adverse change in the Company’s relationship with significant customers or business partners, or a sustained decline in the Company’s stock price. The Company continues to evaluate the impact of economic and other developments on the Company and its business units to assess whether impairment indicators are present. Accordingly, the Company may be required to perform impairment tests based on changes in the economic environment and other factors, and these tests could result in impairment charges in the future.
The Company’s businesses and operations are subject to regulation in the U.S. and abroad.
Changes in laws, regulations and related interpretations may alter the environment in which the Company does business. This includes changes in environmental, competitive and product-related laws, as well as changes in accounting standards, taxation and other regulations. Accordingly, the Company’s ability to manage regulatory, tax and legal matters (including environmental, human resource, product liability, patent and intellectual property matters), and to resolve pending legal and environmental matters without significant liability could require the Company to record significant reserves in excess of amounts accrued to date or pay significant fines during a reporting period, which could materially impact the Company’s results. In addition, new regulations may be enacted in the U.S. or abroad that may require the Company to incur additional personnel-related, environmental or other costs on an ongoing basis, significantly restrict the Company’s ability to sell certain products, or incur fines or penalties for noncompliance, any of which could adversely affect the Company’s results of operations.

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As a U.S.-based multinational company, the Company is also subject to tax regulations in the U.S. and multiple foreign jurisdictions, some of which are interdependent. For example, certain income that is earned and taxed in countries outside the U.S. is not taxed in the U.S. until those earnings are actually repatriated or deemed repatriated. If these or other tax regulations should change, the Company’s financial results could be impacted.
The Company may incur significant costs in order to comply with environmental remediation obligations.
In addition to operational standards, environmental laws also impose obligations on various entities to clean up contaminated properties or to pay for the cost of such remediation, often upon parties that did not actually cause the contamination. Accordingly, the Company may be liable, either contractually or by operation of law, for remediation costs even if the contaminated property is not presently owned or operated by the Company, is a landfill or other location where it has disposed wastes, or if the contamination was caused by third parties during or prior to the Company’s ownership or operation of the property. Given the nature of the past industrial operations conducted by the Company and others at these properties, there can be no assurance that all potential instances of soil or groundwater contamination have been identified, even for those properties where an environmental site assessment has been conducted. We do not believe that any of the Company’s existing remediation obligations, including at third-party sites where it has been named a potentially responsible party, will have a material adverse effect upon its business, results of operations or financial condition. However, future events, such as changes in existing laws or policies or their enforcement, or the discovery of currently unknown contamination, may give rise to additional remediation liabilities that may be material. See “Environmental Matters” under Footnote 19 of the notes to the Company’s consolidated financial statements in this Annual Report on Form 10-K for the year ended December 31, 2016 for a further discussion of these and other environmental-related matters.
The Company may not be able to attract, retain and develop key personnel.
The Company’s success at implementing Project Renewal, the Growth Game Plan, the integration of Jarden and its future performance depends in significant part upon the continued service of its executive officers and other key personnel. The loss of the services of one or more executive officers or other key employees could have a material adverse effect on the Company’s business, prospects, financial condition and results of operations.  The Company’s success also depends, in part, on its continuing ability to attract, retain and develop highly qualified personnel. Competition for such personnel is intense, and there can be no assurance that the Company can retain its key employees or attract, assimilate and retain other highly qualified personnel in the future.
The resolution of the Company’s tax contingencies may result in additional tax liabilities, which could adversely impact the Company’s cash flows and results of operations.
The Company is subject to income tax in the U.S. and numerous jurisdictions outside the U.S. Significant estimation and judgment are required in determining the Company’s worldwide provision for income taxes. In the ordinary course of the Company’s business, there are many transactions and calculations where the ultimate tax determination is uncertain. The Company is regularly under audit by various worldwide tax authorities. Although the Company believes its tax estimates are reasonable, the final outcome of tax audits and related litigation could be materially different than that reflected in its historical income tax provisions and accruals. There can be no assurance that the resolution of any audits or litigation will not have an adverse effect on future operating results.
The Company’s business involves the potential for product recalls, product liability and other claims against it, which could affect its earnings and financial condition.
As a manufacturer and distributor of consumer products, the Company is subject to the Consumer Products Safety Act of 1972, which empowers the Consumer Products Safety Commission to exclude from the market products that are found to be unsafe or hazardous. Under certain circumstances, the Consumer Products Safety Commission could require the Company to repurchase or recall one or more of its products. Additionally, other laws and agencies, such as the National Highway Transportation Safety Administration, regulate certain consumer products sold by the Company in the United States and abroad, and more restrictive laws and regulations may be adopted in the future. Any repurchase or recall of the Company’s products could be costly and damaging to the Company’s reputation. If the Company were required to remove, or it voluntarily removed, its products from the market, the Company’s reputation could be tarnished and the Company might have large quantities of finished products that it could not sell. The Company also faces exposure to product liability claims in the event that one of its products is alleged to have resulted in property damage, bodily injury or other adverse effects. In addition to the risk of substantial monetary judgments or fines or penalties that may result from any governmental investigations, product liability claims or regulatory actions could result in negative publicity that could harm the Company’s reputation in the marketplace, adversely impact the value of its end-user brands, or result in an increase in the cost of producing the Company’s products.
Although the Company maintains product liability insurance in amounts that it believes are reasonable, that insurance is, in most cases, subject to large self-insured retentions for which the Company is responsible, and the Company cannot assure you that it

17


will be able to maintain such insurance on acceptable terms, if at all, in the future or that product liability claims will not exceed the amount of insurance coverage. Additionally, the Company does not maintain product recall insurance. As a result, product recalls or product liability claims could have a material adverse effect on the Company’s business, results of operations and financial condition. In addition, the Company faces potential other types of litigation arising out of alleged defects in its products or otherwise, such as class action lawsuits. The Company does not maintain insurance against many types of claims involving alleged defects in its products that do not involve personal injury or property damage. The Company spends substantial resources ensuring compliance with governmental and other applicable standards. However, compliance with these standards does not necessarily prevent individual or class action lawsuits, which can entail significant cost and risk. As a result, these types of claims could have a material adverse effect on the Company’s business, results of operations and financial condition.
The Company’s product liability insurance program is an occurrence-based program based on its current and historical claims experience and the availability and cost of insurance. The Company currently either self-insures or administers a high retention insurance program for most product liability risks. Historically, product liability awards have rarely exceeded the Company’s individual per occurrence self-insured retention. The Company cannot assure you, however, that its future product liability experience will be consistent with its past experience or that claims and awards subject to self-insured retention will not be material.
See Footnote 19 of the notes to the consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2016 for a further discussion of these and other regulatory and litigation-related matters.
If the Company fails to adequately protect its intellectual property rights, competitors may manufacture and market similar products, which could adversely affect the Company’s market share and results of operations.
The Company’s success with its proprietary products depends, in part, on its ability to protect its current and future technologies and products and to defend its intellectual property rights, including its patent and trademark rights. If the Company fails to adequately protect its intellectual property rights, competitors may manufacture and market similar products.
The Company holds numerous design and utility patents covering a wide variety of products. The Company cannot be sure that it will receive patents for any of its patent applications or that any existing or future patents that it receives or licenses will provide competitive advantages for its products. The Company also cannot be sure that competitors will not challenge, invalidate or avoid the application of any existing or future patents that the Company receives or licenses. In addition, patent rights may not prevent competitors from developing, using or selling products that are similar or functionally equivalent to the Company’s products.
A reduction in the Company’s credit ratings could materially and adversely affect its business, financial condition and results of operations.
The Company’s credit ratings impact the cost and availability of future borrowings and, accordingly, the Company’s cost of capital. The Company’s credit ratings reflect each rating organization’s opinion of its financial strength, operating performance and ability to meet its debt obligations. The Company cannot be sure that any of its current ratings will remain in effect for any given period of time or that a rating will not be lowered by a rating agency if, in its judgment, circumstances in the future so warrant. A downgrade by Moody’s Investor Services, Inc. (“Moody’s”) or Standard & Poor’s Ratings Services (“Standard & Poor’s”), which would reduce the Company’s senior debt below investment-grade, would increase the Company’s borrowing costs, which would adversely affect the Company’s financial results. Specifically, the interest rate payable on Notes issued in March 2016 are subject to adjustment from time to time if either Moody’s or Standard & Poor’s downgrades (or subsequently upgrades) its rating assigned to the Notes, though the interest on these notes will permanently cease to be subject to any adjustment (notwithstanding any subsequent decrease in ratings by either credit Rating Agency), if such Notes become rated “Baa1” or higher by Moody’s and BBB+ or higher by S&P, in each case with stable or positive outlook. In addition, in the event of a reduction in credit rating, the Company would likely be required to pay a higher interest rate in future financings, and its potential pool of investors and funding sources could decrease. If the Company’s short-term ratings were to be lowered, it would limit, or eliminate entirely, the Company’s access to the commercial paper market. The ratings from credit agencies are not recommendations to buy, sell or hold the Company’s securities, and each rating should be evaluated independently of any other rating.
The level of returns on pension and postretirement plan assets and the actuarial assumptions used for valuation purposes could affect the Company’s earnings and cash flows in future periods. Changes in government regulations could also affect the Company’s pension and postretirement plan expenses and funding requirements.
The funding obligations for the Company’s pension plans are impacted by the performance of the financial markets, particularly the equity markets, and interest rates. Funding obligations are determined under government regulations and are measured each year based on the value of assets and liabilities on a specific date. If the financial markets do not provide the long-term returns that are expected under the governmental funding calculations, the Company could be required to make larger contributions. The equity markets can be, and recently have been, very volatile, and therefore the Company’s estimate of future contribution requirements can change dramatically in relatively short periods of time. Similarly, changes in interest rates and legislation enacted

18


by governmental authorities can impact the timing and amounts of contribution requirements. An adverse change in the funded status of the plans could significantly increase the Company’s required contributions in the future and adversely impact its liquidity.
Assumptions used in determining projected benefit obligations and the fair value of plan assets for the Company’s pension and postretirement benefit plans are determined by the Company in consultation with outside actuaries. In the event that the Company determines that changes are warranted in the assumptions used, such as the discount rate, expected long-term rate of return on assets, expected health care costs, or mortality rates, the Company’s future pension and postretirement benefit expenses could increase or decrease. Due to changing market conditions or changes in the participant population, the assumptions that the Company uses may differ from actual results, which could have a significant impact on the Company’s pension and postretirement liabilities and related costs and funding requirements.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2. PROPERTIES
Our corporate offices are located in leased office space in Hoboken, New Jersey, Atlanta, Georgia, Boca Raton, Florida and in Norwalk, Connecticut. At December 31, 2016, the Company and its subsidiaries lease or own facilities throughout the U.S., some of which have multiple buildings and warehouses, and these U.S. facilities encompass approximately 35.6 million square feet. We lease or own international facilities encompassing approximately 19.4 million square feet primarily in Asia, Canada, Europe and Latin America. Of the U.S. and international manufacturing and warehouse facilities, approximately 26.4 million square feet of space is owned, while the remaining 28.6 million square feet of space is leased. The approximate percentage of the facility square footage used by each segment is as follows: Writing — 7.9%, Home Solutions — 12.1%, Tools — 3.5%, Commercial Products — 3.5%, Baby & Parenting — 0.9%, Branded Consumables — 29.5%, Consumer Solutions — 9.1%, Outdoor Solutions — 24.1%, Process Solutions — 2.3%, and Corporate 7.1%.
In general, our properties are well-maintained, considered adequate and are utilized for their intended purposes. See Note 7 to our consolidated financial statements, Property, Plant and Equipment, which discloses amounts invested in land, buildings and machinery and equipment. Also see Note 12 (Commitments) to our consolidated financial statements, which discloses the Company’s operating lease commitments.
ITEM 3. LEGAL PROCEEDINGS
Information regarding legal proceedings is included in Footnote 19 of the Notes to Consolidated Financial Statements and is incorporated by reference herein.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
SUPPLEMENTARY ITEM — EXECUTIVE OFFICERS OF THE REGISTRANT
Name
 
Age
 
Present Position with the Company
Michael B. Polk
 
56
 
Chief Executive Officer
Mark S. Tarchetti
 
41
 
President
William A. Burke
 
56
 
Executive Vice President, Chief Operating Officer
Ralph J. Nicoletti
 
59
 
Executive Vice President, Chief Financial Officer
Fiona C. Laird
 
55
 
Executive Vice President, Chief Human Resources and Communications Officer
Bradford R. Turner
 
44
 
Chief Legal Officer and Corporate Secretary
Richard B. Davies
 
54
 
Executive Vice President, Chief Development Officer
Michael B. Polk has been the Chief Executive Officer of the Company since April 2016 and served as President and Chief Executive Officer from July 2011 to April 2016. He joined the Company’s Board of Directors in November 2009. Prior to assuming his current role, Mr. Polk was President, Global Foods, Home & Personal Care, Unilever (a consumer packaged goods manufacturer and marketer) since 2010. He joined Unilever in 2003 as Chief Operating Officer, Unilever Foods USA and subsequently became President, Unilever USA in 2005. From 2007 to 2010, he served as President, Unilever Americas. Prior to joining Unilever, he spent 16 years at Kraft Foods Inc. and three years at The Procter & Gamble Company. At Kraft Foods, he was President, Kraft Foods Asia Pacific; President, Biscuits and Snacks Sector; and was a member of the Kraft Foods Management Committee. Mr. Polk also serves as a director of Colgate-Palmolive Company.

19


Mark S. Tarchetti has been President since April 2016. Prior to this role, he served as Executive Vice President from January 2016 to March 2016; and Executive Vice President and Chief Development Officer from January 2013 to December 2015.  From September 2011 to December 2012, Mr. Tarchetti was the Director of Tarchetti & Co. Ltd., a consulting firm he founded where he advised clients, including the Company, on business strategy and change management.  From 1997 to 2011, he served in a variety of senior strategic, business and finance roles at Unilever, including as Head of Corporate Strategy from 2009 to 2011, Vice President of Corporate Strategy in 2008, Finance Director of the UK Home & Personal Care business from 2007 to 2008, and Global Head of Financial Planning & Analysis from 2004 to 2007.
William A. Burke has been Executive Vice President, Chief Operating Officer since January 2017 and served as President, Jarden Group from April 2016 to January 2017. Prior to this role, he served as Executive Vice President from January 2016 to March 2016; Executive Vice President and Chief Operating Officer from October 2012 to December 2015; President, Newell Professional from January 2012 to September 2012; President, Tools, Hardware & Commercial Products from January 2009 through December 2011; and, President, Tools and Hardware from December 2007 to January 2009. Prior to these roles, he was President, North American Tools from 2004 through 2006. He served as President of the Company’s Lenox division from 2003 through 2004. From 1982 through 2002, he served in a variety of positions with The Black & Decker Corporation (a manufacturer and marketer of power tools and accessories), culminating as Vice President and General Manager of Product Service.
Ralph J. Nicoletti has been Executive Vice President and Chief Financial Officer since June 2016. Prior to this role, he served as Executive Vice President and Chief Financial Officer of Tiffany & Company from April 2014 to May 2016. From June 2011 to March 2014, he served as Chief Financial Officer of Cigna Corporation. From February 2007 to May 2011, he served as Executive Vice President and Chief Financial Officer of Alberto Culver. Prior to that time, he held various senior finance positions at Kraft Foods, including Senior Vice President of Finance of Kraft Foods North America.
Fiona C. Laird has been Executive Vice President and Chief Human Resources and Communications Officer since May 2016. Prior to this role, she served as Executive Vice President, Human Resources for Global Categories, Marketing, Communications, and R&D at Unilever from July 2011 to May 2016. From June 2005 to July 2011, she served as Senior Vice President, Human Resources and Communications for Unilever’s North and Latin American geographies. Prior to that, she served in numerous HR, communications, and legal roles at Unilever.
Bradford R. Turner has been Chief Legal Officer and Corporate Secretary since April 2016. Prior to this role, he served as Senior Vice President, General Counsel and Corporate Secretary from March 2015 to March 2016. Mr. Turner joined the Company in 2004 and has served in various legal roles including Vice President and Deputy General Counsel from October 2011 to March 2015, and Group Vice President & General Counsel - Office Products from June 2007 to October 2011.
Richard B. Davies has been Executive Vice President and Chief Development Officer since January 2016 and served as Chief Marketing Officer from December 2012 through December 2015. Prior to these roles, from 1982 to 2012, he held positions of increasing responsibility at Unilever, most recently serving as its Global Senior Vice President - Consumer and Market Insights from 2008 to 2012.

20


PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The Company’s common stock is listed on the New York Stock Exchange (symbol: NWL). As of January 31, 2017, there were 11,012 stockholders of record. The following table sets forth the high and low sales prices of the common stock on the New York Stock Exchange Composite Tape for the calendar periods indicated: 
 
 
2016
 
2015
Quarters
 
High
 
Low
 
High
 
Low
First
 
$
45.57

 
$
33.26

 
$
40.37

 
$
36.33

Second
 
49.49

 
43.11

 
42.00

 
37.95

Third
 
55.45

 
47.07

 
44.51

 
38.17

Fourth
 
53.22

 
44.24

 
50.90

 
39.39

The Company has paid regular cash dividends on its common stock since 1947. For 2016 and 2015, the Company paid a quarterly cash dividend of $0.19 per share in each quarter. The payment of dividends to holders of the Company’s common stock remains at the discretion of the Board of Directors and will depend upon many factors, including the Company’s financial condition, earnings, legal requirements and other factors the Board of Directors deems relevant.
Performance Graph
The following Performance Graph and related information shall not be deemed “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that the Company specifically incorporates it by reference into such filing.
The graph below compares total stockholder return on the Company’s common stock from December 31, 2011 through December 31, 2016 with the cumulative total return of (a) the Standard and Poor’s (“S&P”) 500 Index, and (b) the DJ Consumer Goods Index, assuming a $100 investment made on December 31, 2011. Each of the three measures of cumulative total return assumes reinvestment of dividends, if applicable. The stock performance shown on the graph below is based on historical data and is not indicative of, or intended to forecast, possible future performance of the Company’s common stock.
nwl-1231201_chartx12243.jpg

21


ISSUER PURCHASES OF EQUITY SECURITIES
The following table provides information about the Company’s purchases of equity securities during the quarter ended December 31, 2016:
Calendar Month
Total Number of Shares Purchased(2)
 
Average Price
Paid per Share
 
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)
 
Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(1)
October 2016

 
$

 

 
$
255,912,171

November 2016
5,397

 
47.97

 

 
255,912,171

December 2016
11,136

 
45.64

 

 
255,912,171

Total
16,533

 
$
46.40

 

 


(1)
All shares purchased by the Company during the quarter ended December 31, 2016 were acquired to satisfy employees' tax withholding and payment obligations in connection with the vesting of awards of restricted stock units, which are repurchased by the Company based on their fair market value on the vesting date.
(2)
Under the Company’s share repurchase program (“SRP”), the Company may repurchase its own shares of common stock through a combination of 10b5-1 automatic trading plans, discretionary market purchases or in privately negotiated transactions. The Company suspended its repurchase of shares in the fourth quarter of 2015 due to the cash requirements associated with the Jarden Acquisition, so the Company did not repurchase shares pursuant to the SRP during the three months ended December 31, 2016.

22


ITEM 6. SELECTED FINANCIAL DATA
The following is a summary of certain consolidated financial data relating to the Company as of and for the year ended December 31, (in millions, except per share data). The summary has been derived in part from, and should be read in conjunction with, the Consolidated Financial Statements of the Company included elsewhere in this report and the schedules thereto.
 
 
2016(1)
 
2015(1)
 
2014(1)
 
2013(2)
 
2012(2)
STATEMENTS OF OPERATIONS DATA
 
 
 
 
 
 
 
 
 
 
Net sales
 
$
13,264.0

 
$
5,915.7

 
$
5,727.0

 
$
5,607.0

 
$
5,508.5

Cost of products sold
 
8,865.2

 
3,611.1

 
3,523.6

 
3,482.1

 
3,414.4

Gross profit
 
4,398.8

 
2,304.6

 
2,203.4

 
2,124.9

 
2,094.1

Selling, general and administrative expenses
 
3,221.1

 
1,573.9

 
1,480.5

 
1,399.5

 
1,403.5

Pension settlement charge
 
2.7

 
52.1

 
65.4

 

 

Restructuring costs, net (3)
 
74.9

 
77.2

 
52.8

 
110.3

 
52.9

Operating income
 
1,100.1

 
601.4

 
604.7

 
615.1

 
637.7

Nonoperating (income) expenses:
 
 
 
 
 
 
 
 
 
 
Interest expense, net
 
404.5

 
79.9

 
60.4

 
60.3

 
76.1

Loss related to extinguishment of debt/credit facility
 
47.6

 

 
33.2

 

 
10.9

Venezuela deconsolidation charge
 

 
172.7

 

 

 

Other (income) expense, net
 
(166.5
)
 
11.3

 
49.0

 
18.5

 
(1.3
)
Net nonoperating (income) expenses
 
285.6

 
263.9

 
142.6

 
78.8

 
85.7

Income before income taxes
 
814.5

 
337.5

 
462.1

 
536.3

 
552.0

Income tax expense
 
286.0

 
78.2

 
89.1

 
120.0

 
161.5

Income from continuing operations
 
528.5

 
259.3

 
373.0

 
416.3

 
390.5

(Loss) income from discontinued operations
 
(0.7
)
 
90.7

 
4.8

 
58.3

 
10.8

Net income
 
$
527.8

 
$
350.0

 
$
377.8

 
$
474.6

 
$
401.3

Weighted-average shares outstanding:
 
 
 
 
 
 
 
 
 
 
Basic
 
421.3

 
269.3

 
276.1

 
288.6

 
291.2

Diluted
 
423.1

 
271.5

 
278.9

 
291.8

 
293.6

Earnings (loss) per share:
 
 
 
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
 
 
 
Income from continuing operations
 
$
1.25

 
$
0.96

 
$
1.35

 
$
1.44

 
$
1.34

Income from discontinued operations
 

 
0.34

 
0.02

 
0.20

 
0.04

Net income
 
$
1.25

 
$
1.30

 
$
1.37

 
$
1.64

 
$
1.38

Diluted:
 
 
 
 
 
 
 
 
 
 
Income from continuing operations
 
$
1.25

 
$
0.96

 
$
1.34

 
$
1.43

 
$
1.33

Income from discontinued operations
 

 
0.33

 
0.02

 
0.20

 
0.04

Net income
 
$
1.25

 
$
1.29

 
$
1.35

 
$
1.63

 
$
1.37

Dividends
 
$
0.76

 
$
0.76

 
$
0.66

 
$
0.60

 
$
0.43

BALANCE SHEET DATA
 
 
 
 
 
 
 
 
 
 
Inventories, net
 
$
2,116.0

 
$
721.8

 
$
708.5

 
$
684.4

 
$
696.4

Working capital (4), (5)
 
3,192.5

 
504.9

 
403.6

 
551.9

 
568.3

Total assets (4)
 
33,837.5

 
7,259.5

 
6,564.3

 
5,967.8

 
6,215.6

Short-term debt, including current portion of long-term debt
 
601.9

 
388.8

 
397.4

 
174.8

 
211.9

Long-term debt, net of current portion
 
11,290.9

 
2,669.1

 
2,084.5

 
1,661.6

 
1,706.5

Total stockholders’ equity
 
$
11,384.4

 
$
1,826.4

 
$
1,854.9

 
$
2,075.0

 
$
2,000.2


(1)
Supplemental data regarding 2016, 2015 and 2014 is provided in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

23


(2)
Statements of Operations data for 2013 and 2012 have been adjusted to reclassify the results of operations of the Endicia and Culinary electrics and retail businesses to discontinued operations. Statement of Operations data for 2012 have been adjusted to reclassify the results of operations of the Hardware and Teach businesses to discontinued operations.
(3)
Restructuring costs include asset impairment charges, employee severance and termination benefits, employee relocation costs, and costs associated with exited contractual commitments and other restructuring costs.
(4)
In November 2015, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2015-17, Income Taxes (Topic 740), requiring deferred tax assets and liabilities to be classified as noncurrent assets and liabilities in the balance sheet.  ASU 2015-17 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods.  Early adoption is permitted as of the beginning of an interim or annual reporting period.  The Company adopted ASU 2015-17 retrospectively as of December 31, 2015.  Accordingly, working capital and total assets in the Selected Financial Data have been adjusted to give effect to the retrospective adoption of ASU 2015-17. See Note 16 of the Notes to Consolidated Financial Statements for additional information.
(5)
Working capital is defined as current assets less current liabilities.
Acquisitions of Businesses
On April 15, 2016, the Company acquired Jarden for total consideration of $18.7 billion including cash paid, shares issued and debt assumed, net of cash acquired. Jarden is a leading global consumer products company whose brands include Yankee Candle®, Crock-Pot®, FoodSaver®, Mr. Coffee®, Oster®, Coleman®, First Alert®, Rawlings®, Jostens®, K2®, Marker®, Marmot®, Völkl® and many others. The Jarden Acquisition was accounted for using the purchase method of accounting, and accordingly, Jarden’s results of operations are included in the Company’s results of operations since the acquisition date. Jarden is included in its legacy segments: Branded Consumables, Consumer Solutions, Outdoor Solutions and Process Solutions.
On October 22, 2015, the Company completed the acquisition of Elmer’s Products, Inc. (“Elmer’s”) for a purchase price of $571.4 million, which is net of $16.8 million of cash acquired and is subject to customary working capital adjustments. Elmer’s, whose brands include Elmer’s®, Krazy Glue® (a trademark of Toagosei Co. Ltd. used with permission) and X-Acto®, is a provider of activity-based adhesive and cutting products that inspire creativity in the classroom, at home, in the office, in the workshop and at the craft table. The Acquisition was accounted for using the purchase method of accounting, and accordingly, the results of operations of Elmer’s are included in the Company’s consolidated financial statements beginning October 22, 2015. Elmer’s is included in the Company’s Writing segment.
On December 15, 2014, the Company acquired Baby Jogger Holdings, Inc. (“Baby Jogger”), a designer and marketer of premium infant and juvenile products focused on activity strollers and related accessories. Baby Jogger is headquartered in the U.S. and markets and sells its products in North America, Europe and Asia. The Baby Jogger acquisition gives the Baby & Parenting segment a premium brand and the opportunity to expand its geographic footprint. The Company acquired Baby Jogger for net cash consideration of $210.1 million, a portion of which was used to repay Baby Jogger’s outstanding debt obligations at closing. The acquisition was accounted for using the purchase method of accounting. As a result, the results of operations of Baby Jogger are included in the Company’s consolidated financial statements beginning December 15, 2014.
On October 22, 2014, the Company acquired the assets of bubba brands, inc. (“bubba”) for $82.4 million. bubba is a designer and marketer of durable beverage containers in North America. The acquisition was accounted for using the purchase method of accounting. As a result, the results of operations of bubba are included in the Company’s consolidated financial statements beginning October 22, 2014.
On September 4, 2014, the Company acquired Ignite Holdings, LLC (“Ignite”) for $313.1 million, which is net of $7.2 million of cash acquired. A portion of the purchase price was used to repay Ignite’s outstanding debt obligations at closing. Ignite is a designer and marketer of durable beverage containers sold in North America under the Contigo® and Avex® brands. The acquisition was accounted for using the purchase method of accounting, and accordingly, the results of operations of Ignite are included in the Company’s consolidated financial statements beginning September 4, 2014.
The Ignite and bubba acquisitions give the Company’s Home Solutions segment access to additional channels in the on-the-go hydration and thermal bottle market in North America and fit with the Company’s strategy of accelerating growth by leveraging its capabilities across additional product categories, geographies and channels.
Divestitures and Planned Divestitures
During 2016, the Company committed to plans to divest several businesses and brands to strengthen the portfolio to better align with the long-term growth plan. The affected businesses and brands, which will all be reported in future periods continuing operations until sold, are as follows: the Tools business, including the Irwin®, Lenox®, and hilmorTM brands in the Tools segment; the Winter Sports business, including the Völkl® and K2® brands and the Zoot® and Squadra® brands in the Outdoor Solutions segment; the heaters, fans, and humidifiers business with related brands in the Consumer Solutions segment; the Rubbermaid® consumer storage totes business in the Home Solutions segment; the Lehigh business, primarily ropes, cordage and chains under the Lehigh® brand and the firebuilding business including the Pine Mountain® brand in the Branded Consumables segment; and the stroller business under the Teutonia® brand in the Baby and Parenting segment. The assets and liabilities of these businesses

24


and brands subject to the divestiture, including $1,231.9 million of property, plant and equipment, intangible assets and goodwill, have been classified as current assets held for sale and current liabilities held for sale as of December 31, 2016.
In October 2016, the Company entered into a definitive agreement for the sale of the Tools business for a purchase price of approximately $1.95 billion, subject to working capital adjustments. The transaction is expected to close in early 2017, subject to certain customary conditions, including regulatory approvals.
In June 2016, the Company sold its Levolor® and Kirsch® window coverings brands (“Décor”), which was included in the Company’s Home Solutions segment. The results of operations of the Décor business are included in the Company’s operating results from continuing operations through the date of sale.
In August 2015, the Company sold its Rubbermaid medical cart business, which was included in the Company’s Commercial Products segment. The results of operations of the Rubbermaid medical cart business are included in the Company’s operating results from continuing operations through the date of sale.
Quarterly Summaries
Summarized quarterly data for the last two years is as follows (in millions, except per share data) (unaudited):
Calendar Year
 
1st
 
2nd
 
3rd
 
4th (2)
 
Year
2016
 
 
 
 
 
 
 
 
 
 
Net sales
 
$
1,314.9

 
$
3,858.6

 
$
3,954.6

 
$
4,135.9

 
$
13,264.0

Gross profit
 
$
505.6

 
$
1,095.7

 
$
1,274.8

 
$
1,522.7

 
$
4,398.8

Income from continuing operations
 
$
40.3

 
$
135.8

 
$
186.5

 
$
165.9

 
$
528.5

Income (loss) from discontinued operations
 
$
0.2

 
$
(0.6
)
 
$

 
$
(0.3
)
 
$
(0.7
)
Net income
 
$
40.5

 
$
135.2

 
$
186.5

 
$
165.6

 
$
527.8

Earnings per share(1):
 
 
 
 
 
 
 
 
 
 
Basic
 
 
 
 
 
 
 
 
 
 
Income from continuing operations
 
$
0.15

 
$
0.30

 
$
0.39

 
$
0.34

 
$
1.25

Income from discontinued operations
 

 

 

 

 

Net income
 
$
0.15

 
$
0.30

 
$
0.39

 
$
0.34

 
$
1.25

Diluted
 
 
 
 
 
 
 
 
 
 
Income from continuing operations
 
$
0.15

 
$
0.30

 
$
0.38

 
$
0.34

 
$
1.25

Income from discontinued operations
 

 

 

 

 

Net income
 
$
0.15

 
$
0.30

 
$
0.38

 
$
0.34

 
$
1.25

 
 
 
 
 
 
 
 
 
 
 
Calendar Year
 
1st
 
2nd
 
3rd
 
4th (3)
 
Year
2015
 
 
 
 
 
 
 
 
 
 
Net sales
 
$
1,264.0

 
$
1,560.9

 
$
1,530.0

 
$
1,560.8

 
$
5,915.7

Gross profit
 
$
487.5

 
$
621.0

 
$
598.9

 
$
597.2

 
$
2,304.6

Income (loss) from continuing operations
 
$
56.9

 
$
148.1

 
$
134.0

 
$
(79.7
)
 
$
259.3

(Loss) income from discontinued operations
 
$
(2.8
)
 
$
0.4

 
$
0.2

 
$
92.9

 
$
90.7

Net income
 
$
54.1

 
$
148.5

 
$
134.2

 
$
13.2

 
$
350.0

Earnings (loss) per share(1):
 
 
 
 
 
 
 
 
 
 
Basic
 
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations
 
$
0.21

 
$
0.55

 
$
0.50

 
$
(0.30
)
 
$
0.96

Income (loss) from discontinued operations
 
(0.01
)
 

 

 
0.35

 
0.34

Net income
 
$
0.20

 
$
0.55

 
$
0.50

 
$
0.05

 
$
1.30

Diluted
 
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations
 
$
0.21

 
$
0.55

 
$
0.49

 
$
(0.30
)
 
$
0.96

Income (loss) from discontinued operations
 
(0.01
)
 

 

 
0.35

 
0.33

Net income
 
$
0.20

 
$
0.55

 
$
0.50

 
$
0.05

 
$
1.29

(1)
Earnings per share calculations each quarter are based on weighted average number of shares outstanding each period, and the sum of the quarterly amounts may not necessarily equal the annual earnings per share amounts.

25


( 2)
During the fourth quarter of 2016, the Company recorded deferred tax expense of $164.2 million associated with the book and tax basis difference related to the pending Tools divestiture, partially offset by a deferred tax benefit of $40.0 million due to statutory tax rate changes in France related to Jarden acquired intangible assets.
(3)
During the fourth quarter of 2015, the Company deconsolidated its Venezuelan operations and recorded a pretax charge of $172.7 million. The charge consisted of the write-off of the Venezuelan operations’ net assets of $74.7 million, as well as $58.3 million of Venezuela-related assets held by other subsidiaries, resulting in $133.0 million of total charges associated with the deconsolidation of Venezuela’s net assets. In addition, in accordance with applicable accounting standards for foreign currency and the transition to the cost method for the Company’s Venezuelan operations, the Company wrote-off the currency translation adjustment that arose prior to the application of hyperinflationary accounting in 2010 that was included in other comprehensive income in equity. The write-off of the currency translation adjustment resulted in a pretax charge of $39.7 million.



26


ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of the Company’s consolidated results of operations and financial condition. The discussion should be read in conjunction with the accompanying Consolidated Financial Statements and Notes thereto.
Business Overview
Newell Brands is a global marketer of consumer and commercial products that help people get more out of life every day, where they live, learn, work and play. Our products are marketed under a strong portfolio of leading 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®.
Acquisition of Jarden Corporation
On April 15, 2016, Jarden Corporation (“Jarden”) became a direct wholly-owned subsidiary of Newell Brands, as a result of a series of merger transactions (the “Jarden Acquisition”). The Jarden Acquisition was effected pursuant to an Agreement and Plan of Merger, dated as of December 13, 2015 (the “Merger Agreement”) between the Company, Jarden and two wholly-owned subsidiaries of the Company. Following the Jarden Acquisition, the Company was renamed Newell Brands Inc. Jarden is a leading, global consumer products company with leading brands such as Yankee Candle®, Crock-Pot®, FoodSaver®, Mr. Coffee®, Oster®, Coleman®, First Alert®, Rawlings®, Jostens®, K2®, Marker®, Marmot®, Völkl® and many others.
This transformative transaction created a global consumer goods company named Newell Brands with estimated annual pro forma sales for 2016 of $16 billion and a portfolio of leading brands in large, growing, unconsolidated, global markets. The scaled enterprise is expected to accelerate profitable growth with leading brands in a global market that exceeds $100 billion, with business and capability development supported by the efficiencies of the combined company.  Management believes the scale of Newell Brands in key categories, channels and geographies creates a much broader opportunity to deploy the Company’s advantaged set of brand development and commercial capabilities for accelerated growth and margin expansion. The Company’s intent is to design a benchmarked, efficient set of structures that support long-term business development.
The Company anticipates incremental annualized cost synergies of at least $500 million over four years, driven by efficiencies of scale and new efficiencies in procurement, cost to serve and infrastructure that the combination unlocks. The Company currently expects to incur approximately $500 million of restructuring and integration-related costs over the same period to generate and unlock the more than $500 million of annualized cost synergies. 
Pursuant to the Merger Agreement, each share of Jarden common stock was converted into the right to receive and became exchangeable for merger consideration consisting of (1) 0.862 of a share of the Company’s common stock plus (2) $21.00 in cash. On April 15, 2016, the Company provided for the issuance of up to 189.4 million shares of common stock and the payment of up to $4.6 billion for 100% of the outstanding equity interests of Jarden, which consisted of 219.7 million shares of Jarden common stock outstanding and eligible to receive the merger consideration. Based on the closing price of a share of the Company’s common stock on April 15, 2016 of $44.33 per share and after conversion of substantially all of Jarden’s convertible notes, the total consideration paid or payable for shares of Jarden common stock was approximately $15.3 billion, including $5.4 billion of cash and $9.9 billion of common stock. Stockholders of Newell Rubbermaid and former Jarden stockholders (including holders of Jarden convertible notes) owned 55% and 45%, respectively, of Newell Brands upon completion of the merger.
The Company paid $5.2 billion in addition to $4.1 billion for the repayment of certain Jarden debt, net of $661.9 million of cash acquired. A total of $222.2 million in cash otherwise payable in connection with the acquisition has not been paid as of December 31, 2016, as this amount was payable in respect of shareholders who have exercised their judicial rights of appraisal under Delaware law. The total merger consideration otherwise payable to the dissenting stockholders was approximately $626.5 million based on the Company’s stock price as of the closing date.
The Company financed the $5.4 billion cash portion of the merger consideration and the repayment of $4.1 billion of outstanding Jarden debt with proceeds from the issuance of $8.0 billion of medium-term and long-term notes in March 2016 and $1.5 billion of borrowings under a term loan facility. See Footnote 10 of the Notes to Consolidated Financial Statements for further information. The Company is committed to maintaining its investment grade credit rating by using strong cash flow from the combined enterprise to prioritize debt reduction in the short term, while simultaneously investing in the Company’s growth platforms and maintaining its dividend per share.

27


The Jarden Acquisition was accounted for using the purchase method of accounting, and Jarden’s assets, liabilities and results of operations are included in the Company’s financial statements from the acquisition date of April 15, 2016.
Business Strategy
During 2016, the Company launched the New Growth Game Plan, which is its strategy to simplify the organization and free up resources to invest in growth initiatives and strengthened capabilities in support of the Company’s brands. The changes being implemented in the execution of the New Growth Game Plan are considered key enablers to building a bigger, faster-growing, more global and more profitable company.
As part of the New Growth Game Plan, in late 2016 the Company began to transform from a holding company to an operating company, consolidating its business units into global divisions while investing to extend its design, innovation and brand development capabilities across a broader set of categories. These organization changes were initiated in the third quarter and this major phase of the transformation was completed by year end. These new 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.
Organizational Structure
The Company’s nine business segments and the key brands included in each segment during 2016 are as follows:
Segment
  
Key Brands
 
Description of Primary Products
Writing
 
Sharpie®, Paper Mate®, Expo®, Prismacolor®, Mr. Sketch®, Elmer's®, X-Acto®, Parker®, Waterman®, Dymo® Office
 
Writing instruments, including markers and highlighters, pens and pencils; art products; activity-based adhesive and cutting products; fine writing instruments; labeling solutions
Home Solutions
 
Rubbermaid®, Contigo®, bubba®, Calphalon®, Goody®
 
Indoor/outdoor organization, food storage and home storage products; durable beverage containers; gourmet cookware, bakeware and cutlery; hair care accessories
Tools
 
Irwin®, Lenox®, hilmor, Dymo® Industrial
 
Hand tools and power tool accessories; industrial bandsaw blades; tools for HVAC systems; label makers and printers for industrial use
Commercial Products
 
Rubbermaid
Commercial
Products®
 
Cleaning and refuse products; hygiene systems; material handling solutions
Baby & Parenting
 
Graco®, Baby Jogger®, Aprica®, Teutonia®
 
Infant and juvenile products such as car seats, strollers, highchairs and playards
Branded Consumables
 
Yankee Candle®, Waddington, Ball®, Diamond®, First Alert®, NUK®, Quickie®, Pine Mountain® 
 
Branded consumer products; consumable and fundamental household staples
Consumer Solutions
 
Crock-Pot®, FoodSaver®, Holmes®, Mr. Coffee®, Oster®, Rainbow®, Sunbeam®
 
Household products, including kitchen appliances and home environment products
Outdoor Solutions
 
Coleman®, Jostens®, Berkley®, Shakespeare®, Rawlings®, Völkl®, K2®, Marmot®
 
Products for outdoor and outdoor-related activities
Process Solutions
 
Jarden Plastic Solutions, Jarden Applied Materials, Jarden Zinc Products
 
Plastic products including container closures, contact lens packaging, medical disposables, plastic cutlery and rigid packaging
On April 15, 2016, the Company acquired Jarden for total consideration of $18.7 billion including cash paid, shares issued and debt assumed, net of cash acquired. The Acquisition was accounted for using the purchase method of accounting, and accordingly, Jarden’s results of operations are included in the Company’s results of operations since the acquisition date, including net sales of $7.3 billion for the year ended December 31, 2016. Jarden is included in its legacy segments: Branded Consumables, Consumer Solutions, Outdoor Solutions and Process Solutions.

28


In October 2015, the Company acquired Elmer’s Products, Inc. (“Elmer’s”) for a purchase price of $571.4 million. Elmer’s, whose brands include Elmer’s®, Krazy Glue® (a trademark of Toagosei Co. Ltd. used with permission) and X-Acto®, is a provider of activity-based adhesive and cutting products that inspire creativity in the classroom, at home, in the office, in the workshop and at the craft table. The acquisition was accounted for using the purchase method of accounting, and accordingly, Elmer’s results of operations were included in the Company’s statement of operations since the acquisition date, including net sales of $36.3 million for the year ended December 31, 2015. Elmer’s is reported as part of our Writing segment.
Based on the Company’s strategy to allocate resources to its businesses relative to each business’ growth potential and, in particular, those businesses with the greater right to win in the marketplace, the Company has divested and decided to divest certain businesses as explained in further detail below.
In June 2016, the Company sold its Décor business, including Levolor® and Kirsch® window coverings and drapery hardware, for consideration, net of fees, of $223.5 million. The net assets of the Décor business were $63.3 million, including $19.2 million of goodwill, resulting in a pretax gain of $160.2 million, which is included in other (income) expense, net for the year ended December 31, 2016.
During 2016, the Company committed to plans to divest several businesses and brands to strengthen the portfolio to better align with the long-term growth plan. The affected businesses and brands, which will all be reported in future periods continuing operations, are as follows: the Tools business, including the Irwin®, Lenox®, and hilmorTM brands in the Tools segment; the Winter Sports business, including the Völkl® and K2® brands and the Zoot® and Squadra® brands in the Outdoor Solutions segment; the heaters, fans, and humidifiers business with related brands in the Consumer Solutions segment; the Rubbermaid® consumer storage totes business in the Home Solutions segment; the Lehigh business, primarily ropes, cordage and chains under the Lehigh® brand and firebuilding business, primarily under the Pine Mountain® brand, in the Branded Consumables segment; and the stroller business under the Teutonia® brand in the Baby and Parenting segment.
During October 2016, the Company entered into an agreement to sell the Tools business for an estimated price of $1.95 billion, subject to working capital adjustments. The transaction is expected to close in early 2017, subject to certain customary conditions, including regulatory approvals, and the Company anticipates this will result in a pretax gain of approximately $0.9 billion. The Tools business generated 5.5% and 12.9% of the Company’s consolidated net sales for the year ended December 31, 2016 and 2015, respectively.
During 2015, the Company divested its Rubbermaid medical cart business. The Rubbermaid medical cart business focused on optimizing nurse work flow and medical records processing in hospitals and was included in the Commercial Products segment. The Company sold substantially all of the assets of the Rubbermaid medical cart business in August 2015. The Rubbermaid medical cart business was included in the Company’s consolidated results from continuing operations, including net sales of $26.5 million, until it was sold in August 2015.
The Endicia on-line postage and the Culinary electrics and retail businesses were classified as discontinued operations since 2014 when the Company committed to sell these businesses. Endicia was included in our Writing segment, and the Culinary businesses were included in our Home Solutions segment. During 2015, the Company sold Endicia for a sales price of $208.7 million, subject to customary working capital adjustments. During 2015, the Company ceased operations in its Culinary electrics and retail businesses.
Market and Performance Overview
The Company operates in the consumer and commercial products markets, which are generally impacted by overall economic conditions in the regions in which the Company operates. The following is a summary of the Company’s results for the year ended 2016:
Reported net sales increased 124.2%. Net sales were favorably impacted by volume growth, pricing, the acquisition of Elmer’s, and the Jarden Acquisition, which, contributed a 123.3% increase in net sales. Net sales were adversely impacted by foreign currency, divestitures and the deconsolidation of the Company’s Venezuelan operations on December 31, 2015. Reported net sales increased 125.4%, 180.7%, 57.6% and 93.0% in North America, Europe, Latin America and Asia Pacific, respectively, primarily due to the Jarden Acquisition.
Gross margin was 33.2%, a decline of 580 basis points compared to the prior year period. The decline was primarily due to the negative impact of the $479.5 million inventory step-up for the Jarden Acquisition that is included in cost of products sold for the year ended December 31, 2016, foreign currency, mix from the deconsolidation of Venezuela and mix from acquisitions, including the Jarden Acquisition, which were partially offset by the benefits of synergies, productivity and pricing.

29


Selling, general and administrative expenses (“SG&A”) increased $1,647.2 million to $3,221.1 million, due primarily to the SG&A of the Jarden business from the acquisition date and costs associated with the Jarden Acquisition. SG&A also increased due to increases in advertising and promotion in support of the Company’s brands and innovation, costs associated with increased incentive and other compensation and costs associated with the acquisition and integration of Jarden. These costs were partially offset by a reduction in overhead costs due to Project Renewal initiatives, costs associated with the Graco product recall in the prior year period and the impacts of foreign currency.
The Company’s advertising and promotion strategy is to invest behind innovation, including new product launches, and in building brands. During 2016, the Company increased advertising and promotion investments by $24.5 million (excluding the impacts of the Jarden Acquisition). The Company plans to continue increasing advertising and promotion in support of its brands to drive growth. The Company’s investments in brand-building and consumer demand creation and commercialization activities during the year ended December 31, 2016 included the following:
advertising campaigns supporting Paper Mate® InkJoy® gel pens as well as Prismacolor® and Mr. Sketch® color pencils and markers in art and coloring;
continued advertising support for Sharpie® markers and highlighters, including Sharpie Clear View® highlighters which have a unique, see through tip for more precise highlighting;
advertising campaigns supporting the launch of Rubbermaid® FreshWorksTM, our latest food storage innovation;
advertising support for Calphalon® self-sharpening cutlery with SharpInTM technology, which makes knives stay sharp for a life-time;
advertising for the Graco 4Ever® All-in-One convertible car seat, Extend2FitTM car seat, and Aprica® Fladea car seat; and
advertising for Yankee Candle in the fourth quarter of 2016.
The Company continued the execution of Project Renewal and initiated projects to integrate Elmer’s and merge the legacy Newell Rubbermaid and Jarden operations, resulting in $74.9 million of restructuring costs for the year ended December 31, 2016.
The Company completed the offering and sale of $8.0 billion principal amount of unsecured senior notes in March 2016 and entered into and expanded other financing arrangements during the first half of 2016. The proceeds were used in April 2016 to finance the Jarden Acquisition, which included $5.2 billion for the cash portion of the merger consideration and $4.1 billion to repay certain Jarden debt obligations. As a result of these financing activities, a commitment by Goldman Sachs & Co. to fund the $10.5 billion senior unsecured bridge facility (the “Jarden Bridge Facility”) was terminated during the first half of 2016, and the Company repaid $1.1 billion of the $1.5 billion of borrowings under a term loan facility, resulting in a $47.6 million loss on extinguishment of debt.
The Company completed the divestiture of the Décor business, which resulted in $223.5 million of consideration, net of fees, and a pretax gain on the sale of the business of $160.2 million. The proceeds from the sale of the Décor business were used to repay debt.
The Company reported an effective tax rate of 35.1% for the year ended December 31, 2016, compared to 23.2% in 2015. The tax rate for the year ended December 31, 2016 was impacted by the Jarden Acquisition and the resulting change in the geographical mix in earnings as well as a deferred tax charge of $164.2 million associated with the book and tax basis difference related to the pending Tools divestiture. The tax rate was offset in the current year by a deferred tax benefit of $40.0 million related to statutory tax rate changes in France that primarily affected deferred taxes on Jarden acquired intangible assets and a reduction in the valuation allowance of $17.9 million related to certain deferred tax assets of the Company’s UK operations. The tax rate for the year ended December 31, 2015 was impacted by the geographical mix of earnings, the strengthening of the U.S. Dollar against foreign currencies and the implied tax rate associated with the $7.6 million income tax benefit on the $172.7 million Venezuela deconsolidation charge, which were partially offset by benefits from the impact of increased foreign tax credits. 
The Company added members to the Newell Brands executive management team to lead the combined business, relocated its headquarters to Hoboken, New Jersey and opened its new office building for the Atlanta business hub in Atlanta, Georgia.
On October 3, 2016, the Company and Jarden Receivables, LLC, a wholly-owned subsidiary of the Company (“Jarden Receivables”), entered into a loan and servicing agreement and related receivables sale and contribution agreement and

30


performance undertaking (collectively, the “New Receivables Facility”) in order to, among other things, replace the Company's existing $400.0 million receivables facility (the "Receivables Facility") and Jarden's $500.0 million receivables purchase agreement (the "Jarden Securitization Facility") with a new $950.0 million, three-year securitization program.
On October 12, 2016, the Company entered into an agreement to sell the Tools business for an estimated sale price of $1.95 billion, subject to working capital adjustments. The transaction is expected to close in early 2017, subject to certain customary conditions, including regulatory approvals.
Acquisitions
On April 15, 2016, the Company acquired Jarden for total consideration of $18.7 billion including cash paid, shares issued and debt assumed, net of cash acquired. The Jarden Acquisition was accounted for using the purchase method of accounting, and accordingly, Jarden’s results of operations are included in the Company’s results of operations since the acquisition date, including net sales of $7.3 billion. Jarden is included in the Company’s Branded Consumables, Consumer Solutions, Outdoor Solutions and Process Solutions segments.
In October 2015, the Company acquired Elmer’s for $571.4 million. The acquisition was accounted for using the purchase method of accounting, and accordingly, Elmer’s results of operations were included in the Company’s statement of operations since the acquisition date, including net sales of $36.3 million for 2015. Elmer’s is included in the Writing segment.
During 2014, the Company completed the acquisitions of Ignite Holdings, LLC (“Ignite”) and Baby Jogger Holdings, Inc. (“Baby Jogger”) and acquired the assets of bubba brands, inc. (“bubba”). The Ignite and bubba acquisitions give the Company’s Home Solutions segment access to additional channels in the on-the-go hydration and thermal bottle market in North America and fit with the Company’s strategy of accelerating growth by leveraging its capabilities across additional product categories, geographies and channels. The Baby Jogger acquisition gives the Baby & Parenting segment a premium brand and the opportunity to expand its geographic footprint. The results of operations of Ignite, bubba and Baby Jogger are included in the Company’s consolidated financial statements beginning on the respective acquisition dates of each business in 2014, which included net sales of $51.1 million, $13.4 million and $4.4 million for Ignite, bubba and Baby Jogger, respectively, in 2014.
On September 4, 2014, the Company acquired Ignite for $313.1 million, which is net of $7.2 million of cash acquired. A portion of the purchase price was used to repay Ignite’s outstanding debt obligations at closing. Ignite is a designer and marketer of durable beverage containers in North America sold under the Contigo® and Avex® brands.
On October 22, 2014, the Company acquired the assets of bubba for $82.4 million. bubba is a designer and marketer of durable beverage containers in North America.
On December 15, 2014, the Company acquired Baby Jogger, a designer and marketer of premium infant and juvenile products focused on activity strollers and related accessories, for $210.1 million. Baby Jogger is headquartered in the U.S. and markets and sells its products in North America, Europe and Asia under the Baby Jogger brand and its City Mini® and City Select® sub-brands.
Key Initiatives
Project Renewal
During April 2015, the Company committed to a further expansion of Project Renewal (the “April 2015 Expansion”), a program initially launched in October 2011 to reduce the complexity of the organization and increase investment in growth platforms within the business, funded by a reduction in structural SG&A costs. Project Renewal is designed to simplify and align the business around two key activities — Brand & Category Development and Market Execution & Delivery. Project Renewal encompasses projects centered around five work streams:
Organizational Simplification: The Company de-layered its top structure and further consolidated its businesses from nine Global Business Units (“GBUs”) to three operating groups that manage five operating segments.
EMEA Simplification: The Company is focusing its resources on fewer products and countries, while simplifying go-to-market, delivery and back office support structures.
Best Cost Finance: The Company is delivering a simplified approach to decision support, transaction processing and information management by leveraging SAP and the streamlined business segments to align resources with the Growth Game Plan.

31


Best Cost Back Office: The Company is driving “One Newell” efficiencies in customer and consumer services and sourcing functions.
Supply Chain Footprint: The Company is further optimizing manufacturing and distribution facilities across its global supply chain.
Through Project Renewal, the Company was realigned from a holding company comprised of global business units, each with its own support structure, to an operating company with three operating groups that manage five operating segments. The operating company structure is centered around four primary capabilities: Design; Marketing & Insight; Supply Chain; and Customer Development. The Company has developed centers of excellence in each of these capabilities and has realigned its back office support structure functions (Human Resources, Finance/IT and Legal) to support the four primary capabilities. This realignment has led to efficiencies and cost reductions, allowing the Company to increase investments in its brands and capabilities.  In addition, through Project Renewal, the Company has simplified its go-to-market and back office structures in EMEA which has resulted in significant Project Renewal costs and savings in the EMEA region. 
Pursuant to an expansion of Project Renewal in October 2014, the Company is: (i) further streamlining its supply chain function, including reducing overhead and realigning the supply chain management structure; (ii) investing in value analysis and value engineering efforts to reduce product and packaging costs; (iii) reducing operational and manufacturing complexity in its Writing segment; and (iv) further streamlining its distribution and transportation functions. 
Under the April 2015 Expansion, the Company is implementing additional activities designed to further streamline business partnering functions (e.g., Finance/IT, Legal and Human Resources), optimize global selling and trade marketing functions and rationalize the Company’s real estate portfolio. The April 2015 Expansion is expected to generate annualized incremental overhead cost savings of approximately $150 million when fully implemented by the end of 2017, which includes savings expected to be realized during 2018 from projects completed in 2017. In connection with the April 2015 Expansion, the Company expects to incur approximately $150 million of additional costs, including cash costs of approximately $135 million. The additional costs include pretax restructuring charges in the range of $125 to $135 million, a majority of which are expected to be facility exit costs and employee-related cash costs, including severance, retirement and other termination benefits.
Cumulative costs of the expanded Project Renewal are now expected to be approximately $690 to $725 million pretax, with cash costs of approximately $645 to $675 million. Project Renewal in total is expected to generate annualized cost savings of approximately $620 to $675 million by the end of 2017, which includes savings expected to be realized during 2018 from projects completed in 2017. Through December 31, 2016, the Company has realized annualized savings of approximately $510 million. The majority of these savings have been, and the majority of future savings from Project Renewal initiatives are expected to be, reinvested in the business to strengthen brand building and selling capabilities in priority markets around the world.
Since inception of Project Renewal through December 31, 2016, the Company had incurred $319.7 million and $208.8 million of restructuring and other project-related costs, respectively. The majority of the restructuring costs represent employee-related cash costs, including severance, retirement and other termination benefits and costs. Other project-related costs represent organizational change implementation costs, including advisory and consultancy costs, compensation and related costs of personnel dedicated to transformation projects, and other costs associated with the implementation of Project Renewal. Through December 31, 2016, the Company estimates it has reduced its headcount by approximately 2,900 employees as a result of Project Renewal initiatives.
The following table summarizes the estimated costs and savings relating to Project Renewal, as well as the actual results through December 31, 2016 (amounts in millions):
 
Total Project
 
Through December 31, 2016
 
Remaining through December 31, 2017*
Cost
$690 - $725
 
$529
 
$161- $196
Savings
$620 - $675
 
$510
 
$110 - $165
*    Includes savings expected to be realized during 2018 from projects completed in 2017.
In 2016, the Company has continued to execute existing projects as well as initiate new activities relating to Project Renewal as follows:
Ongoing reconfiguration and consolidation of the Company’s manufacturing footprint and distribution centers to reduce overhead, improve operational efficiencies and better utilize existing assets, including the ongoing implementation of projects to better align the Writing segment’s worldwide supply chain footprint.

32


Ongoing evaluations of the Company’s overhead structure, supply chain organization and processes, customer development organization alignment, and pricing structure to optimize and transform processes, simplify the organization and reduce costs, including the implementation of technology-based solutions to better manage pricing initiatives and merchandising support.
Initiated a project to enhance the Baby & Parenting segment’s route-to-market in certain parts of North America.
Continued implementation of plans to relocate the Company’s Atlanta business hub within Atlanta, Georgia in early 2016. The Company moved into the new building in April 2016.
Foreign Currency - Venezuela
Until December 31, 2015, the Company accounted for its Venezuelan operations using highly inflationary accounting, and therefore, the Company remeasured assets, liabilities, sales and expenses denominated in Bolivar Fuertes (“Bolivars”) into U.S. Dollars using the applicable exchange rate, and the resulting translation adjustments were included in earnings. As of December 31, 2015, the Company determined it could no longer exercise control over its Venezuela operations because the availability of U.S. Dollars had declined significantly over the past several years in each of Venezuela’s three exchange mechanisms. As a result, the Company deconsolidated its Venezuelan operations.
Prior to the deconsolidation of the Venezuela operations on December 31, 2015, the results of the Company’s Venezuelan operations have been included in the Company’s Consolidated Statements of Operations for 2015 and all prior periods. As of December 31, 2015, the Company began accounting for its investment in its Venezuelan operations using the cost method of accounting, and the cost basis was adjusted to nil as of December 31, 2015.
During the years ended December 31, 2015 and 2014, the Venezuelan operations generated 2.2% and 1.4% of consolidated net sales, respectively and $51.1 million and $30.0 million of the Company’s reported annual operating income, respectively.
As a result of deconsolidating its Venezuelan operations, the Company recorded a charge of $172.7 million in 2015. The charge consisted of the write-off of the Company’s Venezuelan operations’ net assets of $74.7 million, as well as $58.3 million of Venezuela receivable-related assets held by other subsidiaries, resulting in $133.0 million of total charges associated with the deconsolidation of Venezuela’s net assets. In addition, in accordance with applicable accounting standards for foreign currency and the transition to the cost method for Venezuela’s operations, the Company was required to write-off the currency translation adjustment that arose prior to the application of hyperinflationary accounting in 2010 that was included in other comprehensive loss in equity. The write-off of the currency translation adjustment resulted in a pre-tax charge of $39.7 million.
The Company plans to continue operating its business in Venezuela. Since the Company holds all of the equity interests but does not have the power to direct the activities that most significantly affect the Venezuela entity’s economic performance, the Company considers the Venezuela entity a variable interest entity for which the Company is not the primary beneficiary. The Company has determined that the Venezuela entity’s assets can only be used to settle its obligations. As of December 31, 2016, the Company has no outstanding exposures or commitments with respect to its Venezuelan operations. Further, dividends and payments for intercompany receivables due from the Company’s Venezuelan operations will be recorded as other income upon receipt.


33


CONSOLIDATED RESULTS OF OPERATIONS
The Company believes the selected data and the percentage relationship between net sales and major categories in the Consolidated Statements of Operations are important in evaluating the Company’s operations. The following table sets forth items from the Consolidated Statements of Operations as reported and as a percentage of net sales for the years ended December 31, (in millions, except percentages):
 
2016
 
2015
 
2014
Net sales
$
13,264.0

 
100.0
 %
 
$
5,915.7

 
100.0
%
 
$
5,727.0

 
100.0
%
Cost of products sold
8,865.2

 
66.8

 
3,611.1

 
61.0

 
3,523.6

 
61.5

Gross profit
4,398.8

 
33.2

 
2,304.6

 
39.0

 
2,203.4

 
38.5

Selling, general and administrative expenses
3,221.1

 
24.3

 
1,573.9

 
26.6

 
1,480.5

 
25.9

Pension settlement charge
2.7

 

 
52.1

 
0.9

 
65.4

 
1.1

Restructuring costs, net
74.9

 
0.6

 
77.2

 
1.3

 
52.8

 
0.9

Operating income
1,100.1

 
8.3

 
601.4

 
10.2

 
604.7

 
10.6

Nonoperating (income) expenses:
 
 
 
 
 
 
 
 
 
 
 
Interest expense, net
404.5

 
3.0

 
79.9

 
1.4

 
60.4

 
1.1

Loss related to extinguishment of debt/credit facility
47.6

 
0.4

 

 

 
33.2

 
0.6

Venezuela deconsolidation charge

 

 
172.7

 
2.9

 

 

Other (income) expense, net
(166.5
)
 
(1.3
)
 
11.3

 
0.2

 
49.0

 
0.9

Net nonoperating expenses
285.6

 
2.2

 
263.9

 
4.5

 
142.6

 
2.5

Income before income taxes
814.5

 
6.1

 
337.5

 
5.7

 
462.1

 
8.1

Income tax expense
286.0

 
2.2

 
78.2

 
1.3

 
89.1

 
1.6

Income from continuing operations
528.5

 
4.0

 
259.3

 
4.4

 
373.0

 
6.5

(Loss) income from discontinued operations
(0.7
)
 

 
90.7

 
1.5

 
4.8

 
0.1

Net income
$
527.8

 
4.0
 %
 
$
350.0

 
5.9
%
 
$
377.8

 
6.6
%
Results of Operations — 2016 vs. 2015
Net sales for the year ended December 31, 2016 were $13,264.0 million, representing an increase of $7,348.3 million, or 124.2%, from $5,915.7 million for the year ended December 31, 2015. The Jarden Acquisition contributed $7,296.9 million of the increase in net sales, or 123.3% of the increase. Net sales were also favorably impacted by volume growth, pricing and the acquisition of Elmer’s. Net sales were adversely impacted by foreign currency, divestitures and the deconsolidation of the Company’s Venezuelan operations on December 31, 2015.
Gross margin, as a percentage of net sales, for the year ended December 31, 2016 was 33.2%, or $4,398.8 million, compared to 39.0%, or $2,304.6 million, for the year ended December 31, 2015. The 580 basis point decline was driven primarily by the negative impact of the $479.5 million charge for the inventory step-up related to the Jarden Acquisition, foreign currency, and mix effect of the Jarden Acquisition and deconsolidation of Venezuela, partially offset by the benefits of productivity, input cost deflation and pricing.
SG&A expenses for the year ended December 31, 2016 were 24.3% of net sales, or $3,221.1 million, versus 26.6% of net sales, or $1,573.9 million, for the year ended December 31, 2015. The $1,647.2 million increase was primarily driven by the SG&A associated with the Jarden business. The increase was also driven by $261.3 million of costs during the year ended December 31, 2016 associated with the acquisition and integration of Jarden and an increase in incentive-related and other compensation costs. These increases were partially offset by overhead cost savings from Project Renewal, $10.0 million of SG&A costs associated with the Graco product recall during the year ended December 31, 2015, a $41.5 million decrease in Project Renewal-related SG&A costs, which decreased from $78.0 million for the year ended December 31, 2015 to $36.5 million for the year ended December 31, 2016, and the impacts of foreign currency.
The Company recorded restructuring costs of $74.9 million and $77.2 million for the years ended December 31, 2016 and 2015, respectively. The restructuring costs for the year ended December 31, 2016 primarily related to the integration of Jarden and Project Renewal and consisted mostly of employee severance, termination benefits and employee relocation costs. The restructuring costs for the year ended December 31, 2015 primarily related to Project Renewal and consisted of $6.7 million of facility and other exit costs, including impairments, $54.9 million of employee severance, termination benefits and employee relocation costs

34


and $15.6 million of exited contractual commitments and other restructuring costs. See Footnote 5 of the Notes to Consolidated Financial Statements for further information.
Operating income for the year ended December 31, 2016 was $1,100.1 million, or 8.3% of net sales, versus $601.4 million, or 10.2% of net sales, for the year ended December 31, 2015. The 190 basis point decrease in operating margin was primarily attributable to the $479.5 million charge for the inventory step-up related to the Jarden Acquisition and the $261.3 million of SG&A costs associated with the acquisition and integration of Jarden.
Net nonoperating expenses for the year ended December 31, 2016 were $285.6 million versus $263.9 million for the year ended December 31, 2015. Interest expense for the year ended December 31, 2016 was $404.5 million, compared to $79.9 million for the year ended December 31, 2015, reflecting the impact of higher overall borrowings used to finance the Jarden Acquisition in April 2016 and the Elmer’s acquisition in the fourth quarter of 2015. Nonoperating expenses for the year ended December 31, 2016 include $47.6 million of costs associated with the termination of the Jarden Bridge Facility and the partial repayment of the term loan facility. This was offset by the gain on the sale of the Décor business of $160.2 million.
The Company reported an effective tax rate of 35.1% for the year ended December 31, 2016, compared to 23.2% in 2015. The tax rate for the year ended December 31, 2016 was impacted by the Jarden Acquisition and the resulting change in the geographical mix in earnings as well as a deferred tax charge of $164.2 million associated with the book and tax basis difference related to the pending Tools divestiture. The tax rate was offset in the current year by a deferred tax benefit of $40.0 million related to statutory tax rate changes in France that primarily affected deferred taxes on Jarden acquired intangible assets and a reduction in the valuation allowance of $17.9 million related to certain deferred tax assets of the Company’s UK operations. The tax rate for the year ended December 31, 2015 was impacted by the geographical mix of earnings, the strengthening of the U.S. Dollar against foreign currencies and the implied tax rate associated with the $7.6 million income tax benefit on the $172.7 million Venezuela deconsolidation charge, which were partially offset by benefits from the impact of increased foreign tax credits. 
Results of Operations — 2015 vs. 2014
Net sales for 2015 were $5,915.7 million, representing an increase of $188.7 million, or 3.3%, from $5,727.0 million for 2014. Acquisitions drove a 4.7% increase in net sales along with growth in North America across all five segments, with strong sales growth in the Writing, Commercial Products and Baby & Parenting segments as well as favorable impacts of additional sell-in in advance of advertising and marketing support planned for 2016. Negative foreign exchange more than offset Latin America’s improved pricing and volumes, EMEA’s growth in Writing, Commercial Products and Tools segments and Asia Pacific’s growth in Baby & Parenting and Commercial Products segments.
Gross margin, as a percentage of net sales, for 2015 was 39.0%, or $2,304.6 million, compared to 38.5%, or $2,203.4 million, for 2014, as the benefits of productivity, pricing, the adverse impact of the Graco product recall on the prior year’s results and lower input costs (including resin) more than offset the impacts of unfavorable foreign currency and sourced product, labor and other input cost inflation.
SG&A expenses for 2015 were 26.6% of net sales, or $1,573.9 million, versus 25.9% of net sales, or $1,480.5 million, for 2014. SG&A expenses increased $93.4 million as a result of a $42.3 million increase in advertising and promotion investments, primarily relating to the Writing segment’s continued investment in advertising in North America, Latin America and Asia Pacific and increased advertising in the Tools, Commercial Products and Baby & Parenting segments. The increase was also driven by a $36.1 million year-over-year increase in Project Renewal related costs, including advisory costs for process transformation and optimization initiatives, which increased from $41.9 million for 2014 to $78.0 million for 2015. The increase was also attributable to $55.5 million of incremental SG&A expenses of Ignite, bubba, Baby Jogger and Elmer’s and a $30.7 million increase in annual incentive compensation expense. These increases were partially offset by the impacts of foreign currency and overhead cost savings from Project Renewal, which includes an estimated $8.0 million of annual costs for personnel that transitioned to the Transformation Office at the beginning of 2015 and are included in Project Renewal related costs in 2015.
In 2015 and 2014, the Company offered certain U.S. pension plan participants who have deferred vested benefits under the Company’s U.S. pension plan the opportunity to make a one-time election to receive a lump sum distribution of the present value of their benefits. Based on participants that accepted the offers, the Company paid $70.6 million and $98.6 million of lump sum distributions from plan assets in 2015 and 2014, respectively, which resulted in $52.1 million and $65.4 million of non-cash settlement charges during the fourth quarters of 2015 and 2014, respectively.
The Company recorded restructuring costs of $77.2 million and $52.8 million for 2015 and 2014, respectively. The year-over-year increase in restructuring costs is primarily a result of larger projects being initiated in North America in 2015 associated with reducing structural overhead costs. The restructuring costs for 2015 primarily related to Project Renewal and consisted of $6.7 million of facility and other exit costs, including impairments, $54.9 million of employee severance, termination benefits and employee relocation costs and $15.6 million of exited contractual commitments and other restructuring costs. The restructuring

35


costs in 2014 primarily related to Project Renewal and consisted of $7.5 million of facility and other exit costs, including impairments, $22.9 million of employee severance, termination benefits and employee relocation costs and $22.4 million of exited contractual commitments and other restructuring costs. See Footnote 5 of the Notes to Consolidated Financial Statements for further information.
Operating income for 2015 was $601.4 million, or 10.2% of net sales, versus $604.7 million, or 10.6% of net sales, for 2014. The 40 basis point decline in operating margin was primarily attributable to a 70 basis point increase in SG&A as a percentage of net sales, which, as explained above, includes the impact of increased advertising and promotion spend, and increased restructuring costs, partially offset by a 50 basis point increase in gross margin.
Net nonoperating expenses for 2015 were $263.9 million versus $142.6 million for 2014. Interest expense for 2015 was $79.9 million, compared to $60.4 million for 2014. The increase is attributable to interest expense incurred during 2015 in connection with the bridge loan related to the acquisition of Elmer’s and the overall impact of higher overall borrowings to finance the acquisition of Elmer’s during the fourth quarter of 2015 and the acquisitions of Ignite, bubba and Baby Jogger in the second half of 2014. Nonoperating expenses in 2015 included a charge of $172.7 million associated with deconsolidating the Company’s Venezuelan operations. These increases in nonoperating expenses were partially offset by the year-over-year decrease in foreign exchange losses associated with the adoption of and declines in the SICAD exchange rate used to remeasure the net monetary assets of the Company’s Venezuelan operations, which declined from $45.6 million during 2014 to $9.2 million during 2015, and the $33.2 million loss on extinguishment of debt incurred in 2014 associated with the repayment of $439.4 million principal amount of medium-term notes.
The Company recognized an effective income tax rate of 23.2% for 2015, which compared to an effective income tax rate of 19.3% for 2014. During 2015, the Company’s effective tax rate was adversely impacted by the geographical mix of earnings, the strengthening of the U.S. Dollar against foreign currencies and the implied tax rate associated with the $7.6 million income tax benefit on the $172.7 million Venezuela deconsolidation charge, which were partially offset by benefits from the impact of increased foreign tax credits. During 2014, the Company recognized discrete income tax benefits of $15.5 million related to the resolution of certain tax contingencies and $18.4 million of net income tax benefits associated with the reduction of valuation allowances on certain international deferred tax assets.
For the year ended December 31, 2015, the Company recorded income of $90.7 million, net of tax, associated with discontinued operations, primarily due to the $95.6 million net gain recognized from the sale of the Endicia business. The Company recorded income of $4.8 million, net of tax, during the year ended December 31, 2015, which primarily relates to the Company’s Hardware, Endicia and Culinary electrics and retail businesses. See Footnote 3 of the Notes to Consolidated Financial Statements for further information.
Business Segment Operating Results:
2016 vs. 2015 Business Segment Operating Results
Net sales by segment were as follows for the years ended December 31, (in millions, except percentages):
 
2016
 
2015
 
% Change    
Writing
$
1,941.9

 
$
1,763.5

 
10.1
 %
Home Solutions
1,568.4

 
1,704.2

 
(8.0
)
Tools
760.7

 
790.0

 
(3.7
)
Commercial Products
776.6

 
809.7

 
(4.1
)
Baby & Parenting
919.5

 
848.3

 
8.4

Branded Consumables
2,839.2

 

 
NMF
Consumer Solutions
1,766.3

 

 
NMF
Outdoor Solutions
2,415.9

 

 
NMF
Process Solutions
275.5

 

 
NMF
Total net sales
$
13,264.0

 
$
5,915.7

 
124.2
 %

36


Operating income (loss) by segment was as follows for the years ended December 31, (in millions, except percentages):
 
2016
 
2015
 
% Change
Writing(1) (2)
$
462.7

 
$
430.8

 
7.4
 %
Home Solutions(1) (3)
179.2

 
238.4

 
(24.8
)
Tools(1) (7)
85.4

 
85.1

 
0.4

Commercial Products(1)
113.1

 
100.8

 
12.2

Baby & Parenting(1) (4)
114.4

 
55.2

 
107.2

Branded Consumables(5) 
330.5

 

 
NMF
Consumer Solutions(5)
147.1

 

 
NMF
Outdoor Solutions(5) 
90.1

 

 
NMF
Process Solutions(5) 
14.8

 

 
NMF
Restructuring costs
(74.9
)
 
(77.2
)
 
3.0

Corporate(1) (6)
(362.3
)
 
(231.7
)
 
(56.4
)
Total operating income
$
1,100.1

 
$
601.4

 
82.9
 %

(1)
Includes Project Renewal-related costs of $15.1 million, $2.8 million, $2.5 million, $1.2 million, $28.3 million and $0.2 million in Writing, Home Solutions, Tools, Commercial Products, Baby & Parenting, and Corporate, respectively, for the year ended December 31, 2016 . Includes Project Renewal-related costs of $3.5 million, $2.3 million, $0.5 million, $4.7 million and $78.9 million in Writing, Home Solutions, Tools, Commercial Products, and Corporate, respectively, for the year ended December 31, 2015.
(2)
For 2016, includes $1.4 million of acquisition and integration costs. For 2015, includes $2.6 million of costs associated with Venezuelan inventory resulting from changes in the exchange rate for the Venezuelan Bolivar and $1.2 million of acquisition and integration costs.
(3)
For 2016, includes $2.1 million of acquisition, integration and divestiture costs. For 2015, $1.5 million of acquisition and integration costs associated with the Ignite and bubba acquisitions.
(4)
Includes $1.7 million for 2015 of acquisition and integration costs associated with the Baby Jogger acquisition and $10.2 million of charges relating to the Graco harness buckle recall for 2015.
(5)
Operating income for the year ended December 31, 2016 includes non-cash charges to cost of sales for the costs associated with the fair value step-up of Jarden inventory for the Branded Consumables, Consumer Solutions, Outdoor Solutions and Process Solutions segments of $137.9 million, $103.4 million, $230.2 million and $8.0 million, respectively.
(6)
For 2016, includes $61.7 million of costs associated with the Jarden Acquisition. For 2015, includes $10.8 million of costs associated with the Jarden Acquisition and a $52.1 million non-cash charge associated with the settlement of U.S. pension liabilities for certain participants with plan assets.
(7)
For 2016, includes $3.5 million of costs associated with the pending Tools divestiture.
Writing
Net sales for the year ended December 31, 2016 were $1,941.9 million, an increase of $178.4 million, or 10.1%, from $1,763.5 million for the year ended December 31, 2015. The increase in net sales reflects double-digit growth in North America attributable to the Elmer’s acquisition, increased advertising and promotion, robust merchandising efforts, overall innovation-led growth, and volume and distribution gains. The acquisition of Elmer’s contributed 11.6% of the increase in net sales, and the deconsolidation of the Venezuelan operations negatively impacted the Writing segment’s net sales by 7.3%. The Writing segment’s net sales were adversely impacted by foreign currency.
Operating income for the year ended December 31, 2016 was $462.7 million, or 23.8% of net sales, an increase of $31.9 million, or 7.4%, from $430.8 million, or 24.4% of net sales, for the year ended December 31, 2015. The 60 basis point decline in operating margin is primarily the result of the mix effect associated with the deconsolidation of Venezuela and the impact of negative foreign currency. SG&A decreased 170 basis points as a percentage of net sales.
Home Solutions
Net sales for the year ended December 31, 2016 were $1,568.4 million, a decrease of $135.8 million, or 8.0%, from $1,704.2 million for the year ended December 31, 2015. The decrease in net sales was due to the timing impact of a transition of a key distribution center in the beverageware business, continued planned contraction of the lower margin Rubbermaid Consumer Storage business and partially offset by continued strong growth in the Rubbermaid food storage and beverageware businesses. The net sales of the Décor business, which was divested on June 30, 2016, declined and negatively impacted the Home Solutions segment’s net sales. The Home Solutions segment’s net sales were adversely impacted by foreign currency.
Operating income for the year ended December 31, 2016 was $179.2 million, or 11.4% of net sales, a decrease of $59.2 million, or 24.8%, from $238.4 million, or 14.0% of net sales, for the year ended December 31, 2015. The 260 basis point decline in operating margin is primarily due to an increase in advertising and promotion investment to support the launches of Rubbermaid® FreshWorksTM and Rubbermaid® Fasten+GoTM partially offset by the benefits of productivity and lower input costs. SG&A increased 150 basis points as a percentage of net sales due to the increased advertising and promotion investment and costs associated with the divestiture of Décor.

37


Tools
Net sales for the year ended December 31, 2016 were $760.7 million, a decrease of $29.3 million, or 3.7%, from $790.0 million for the year ended December 31, 2015. Net sales growth in North America and EMEA were more than offset by a net sales decline in Latin America due to continuing macroeconomic challenges in Brazil. The Tools segment’s net sales were adversely impacted by foreign currency.
Operating income for the year ended December 31, 2016 was $85.4 million, or 11.2% of net sales, an increase of $0.3 million, or 0.4%, from $85.1 million, or 10.8% of net sales, for the year ended December 31, 2015. The 40 basis point increase in operating margin was primarily attributable to reduced advertising and promotion spending and overhead cost savings. SG&A decreased 120 basis points as a percentage of net sales due to reduced advertising and promotion spending and overhead cost savings.
Commercial Products
Net sales for the year ended December 31, 2016 were $776.6 million, a decrease of $33.1 million, or 4.1%, from $809.7 million for the year ended December 31, 2015. The divested Rubbermaid medical cart business negatively impacted the Commercial Products segment’s net sales by 3.3%, and complexity reduction initiatives in the North American distribution channel further contributed to the Commercial Products segment’s net sales decline. The Commercial Products segment’s net sales were also adversely impacted by foreign currency.
Operating income for the year ended December 31, 2016 was $113.1 million, or 14.6% of net sales, an increase of $12.3 million, or 12.2%, from $100.8 million, or 12.4% of net sales, for the year ended December 31, 2015. The 220 basis point increase in operating margin was primarily driven by pricing, productivity, input cost deflation and overhead cost savings from Project Renewal. SG&A decreased 170 basis points as a percentage of net sales due to overhead cost savings.
Baby & Parenting
Net sales for the year ended December 31, 2016 were $919.5 million, an increase of $71.2 million, or 8.4%, from $848.3 million for the year ended December 31, 2015. The increase in net sales was driven by growth in North America and Asia Pacific due to new product launches and advertising and promotion investment. Foreign currency favorably impacted net sales for the Baby & Parenting segment.
Operating income for the year ended December 31, 2016 was $114.4 million, or 12.4% of net sales, an increase of $59.2 million, or 107.2%, from $55.2 million, or 6.5% of net sales, for the year ended December 31, 2015. Baby & Parenting’s operating margin increased by 590 basis points due to the leverage of fixed costs with the increase in net sales, productivity, product mix and Graco product recall and acquisition costs incurred in the prior year period. The leverage of fixed costs and the Graco product recall costs in the prior year period, partially offset by an increase in advertising and promotion investment, contributed to SG&A decreasing 250 basis points as a percentage of net sales.
Branded Consumables
Net sales for the year ended December 31, 2016 were $2,839.2 million. Operating income for the year ended December 31, 2016 was $330.5 million, or 11.6% of net sales. Operating income was unfavorably impacted by $137.9 million of costs of products sold during the year ended December 31, 2016 associated with the fair value step-up of Jarden inventory.
Consumer Solutions
Net sales for the year ended December 31, 2016 were $1,766.3 million driven by strong sales in North America and Latin America. Operating income for the year ended December 31, 2016 was $147.1 million, or 8.3% of net sales. Operating income in the Consumer Solutions segment was unfavorably impacted by $103.4 million of costs of products sold during the year ended December 31, 2016 associated with the fair value step-up of Jarden inventory.
Outdoor Solutions
Net sales for the year ended December 31, 2016 were $2,415.9 million. Operating income for the year ended December 31, 2016 was $90.1 million, or 3.7% of net sales. Operating income in the Outdoor Solutions segment was unfavorably impacted by $230.2 million of costs of products sold during the year ended December 31, 2016 associated with the fair value step-up of Jarden inventory.
Process Solutions
Net sales for the year ended December 31, 2016 were $275.5 million. Operating income for the year ended December 31, 2016 was $14.8 million, or 5.4% of net sales. Operating income in the Process Solutions segment was unfavorably impacted by $8.0 million of costs of products sold during the year ended December 31, 2016 associated with the fair value step-up of Jarden inventory.

38


2015 vs. 2014 Business Segment Operating Results
Net sales by segment were as follows for the years ended December 31, (in millions, except percentages):
 
 
2015
 
2014
 
% Change    
Writing
 
$
1,763.5

 
$
1,708.9

 
3.2
 %
Home Solutions
 
1,704.2

 
1,575.4

 
8.2

Tools
 
790.0

 
852.2

 
(7.3
)
Commercial Products
 
809.7

 
837.1

 
(3.3
)
Baby & Parenting
 
848.3

 
753.4

 
12.6

Total net sales
 
$
5,915.7

 
$
5,727.0

 
3.3
 %
Operating income (loss) by segment was as follows for the years ended December 31, (in millions, except percentages):
 
 
2015
 
2014
 
% Change    
Writing(1)
 
$
430.8

 
$
416.6

 
3.4
 %
Home Solutions(2)
 
238.4

 
196.0

 
21.6

Tools(3)
 
85.1

 
94.6

 
(10.0
)
Commercial Products(4)
 
100.8

 
101.3

 
(0.5
)
Baby & Parenting(5)
 
55.2

 
40.6

 
36.0

Restructuring costs
 
(77.2
)
 
(52.8
)
 
(46.2
)
Corporate(6)
 
(231.7
)
 
(191.6
)
 
(20.9
)
Total operating income
 
$
601.4

 
$
604.7

 
(0.5
)%

(1)
For 2015, includes $3.5 million of project-related costs associated with Project Renewal, $2.6 million of costs associated with Venezuelan inventory resulting from changes in the exchange rate for the Venezuelan Bolivar, and $1.2 million of acquisition and integration costs. For 2014, includes $5.2 million of costs associated with Venezuelan inventory resulting from changes in the exchange rate for the Venezuelan Bolivar.
(2)
For 2015, includes $2.3 million of project-related costs associated with Project Renewal and $1.5 million of acquisition, integration and divestiture costs. For 2014, includes $4.2 million of acquisition and integration costs associated with the Ignite and bubba acquisitions.
(3)
Includes $0.5 million and $1.7 million for 2015 and 2014, respectively, of project-related costs associated with Project Renewal.
(4)
Includes $4.7 million and $0.4 million for 2015 and 2014, respectively, of project-related costs associated with Project Renewal.
(5)
Includes $1.7 million and $1.3 million for 2015 and 2014, respectively, of acquisition and integration costs associated with the Baby Jogger acquisition and $10.2 million and $15.0 million of charges relating to the Graco harness buckle recall for 2015 and 2014, respectively.
(6)
For 2015, includes $78.9 million of project-related costs associated with Project Renewal, $10.8 million of costs associated with the Jarden Acquisition and a $52.1 million non-cash charge associated with the settlement of U.S. pension liabilities for certain participants with plan assets, For 2014, includes $31.7 million of project-related costs associated with Project Renewal, $10.2 million of advisory costs for process transformation and optimization initiatives and a $65.4 million non-cash charge associated with the settlement of U.S. pension liabilities for certain participants with plan assets.
Writing
Net sales for 2015 were $1,763.5 million, an increase of $54.6 million, or 3.2%, from $1,708.9 million for 2014. The Elmer’s acquisition had a favorable impact of 2.2% on net sales along with market share growth in North America attributable to innovation, increased advertising and promotion and merchandising efforts. While Latin America market share growth resulted from strengthened innovation and marketing, broadened core distribution and pricing and EMEA experienced pricing and distribution gains, this was more than offset by unfavorable foreign currency movements.
Operating income for 2015 was $430.8 million, or 24.4% of net sales, an increase of $14.2 million, or 3.4%, from $416.6 million, or 24.4% of net sales, for 2014. Operating margin remained flat year-over-year, as pricing, productivity and overhead cost management were offset by negative foreign currency impacts and increased advertising and promotion spending. The increased advertising and promotion spending resulted in SG&A increasing 80 basis points as a percentage of net sales.
Home Solutions
Net sales for 2015 were $1,704.2 million, an increase of $128.8 million, or 8.2%, from $1,575.4 million for 2014. The Ignite and bubba acquisitions had a favorable impact of 9.9% on net sales for the Home Solutions segment. Growth in the Food & Beverage business was partially offset by planned declines in the lower margin Rubbermaid Consumer Storage business and the absence of prior year new customer pipeline fill and the transition to new product lines on Calphalon. The Décor business’ net sales decline negatively impacted the Home Solutions segment’s net sales by 1.1% along with unfavorable foreign currency movements with the businesses.

39


Operating income for 2015 was $238.4 million, or 14.0% of net sales, an increase of $42.4 million, or 21.6%, from $196.0 million, or 12.4% of net sales, for 2014. The 160 basis point increase in operating margin is primarily a result of the positive mix effect of the Food & Beverage business, input cost deflation (including resin), productivity and Project Renewal savings, partially offset by increased advertising and promotion. Project Renewal savings and overhead cost management offset the increase in advertising and promotion, resulting in SG&A remaining flat as a percentage of net sales.
Tools
Net sales for 2015 were $790.0 million, a decrease of $62.2 million, or 7.3%, from $852.2 million for 2014. This decrease was entirely related to the unfavorable foreign currency. Excluding the impacts of foreign currency, EMEA experienced growth due to innovation, distribution gains and pricing, Latin America continued growth on Irwin® offerings, North America and EMEA grew from the Lenox® industrial tools business, and Asia Pacific increased slightly as Irwin sales growth in Australia was offset by declines in the industrial bandsaw business due to slowing industrial output in China.
Operating income for 2015 was $85.1 million, or 10.8% of net sales, a decrease of $9.5 million, or 10.0%, from $94.6 million, or 11.1% of net sales, for 2014. The 30 basis point decrease in operating margin was primarily attributable to increased advertising and promotion and the impact of negative foreign currency partially offset by Project Renewal-related overhead cost savings. SG&A decreased 70 basis points as a percentage of net sales due to overhead cost savings.
Commercial Products
Net sales for 2015 were $809.7 million, a decrease of $27.4 million, or 3.3%, from $837.1 million for 2014. The divestiture of the Rubbermaid medical cart business in 2015 negatively impacted net sales by 5.1% along with the unfavorable impact of foreign currency. Excluding the impacts of foreign currency, these declines were partially offset by increases in the North America, EMEA and Asia Pacific regions, mainly driven by innovation, marketing support, advertising and promotion and pricing.
Operating income for 2015 was $100.8 million, or 12.4% of net sales, a decrease of $0.5 million, or 0.5%, from $101.3 million, or 12.1% of net sales, for 2014. The 30 basis point increase in operating margin was primarily driven by pricing, productivity and input cost deflation, largely offset by higher advertising and promotion spend and the negative impact of foreign currency. Increased advertising and promotion resulted in SG&A increasing 110 basis points as a percentage of net sales.
Baby & Parenting
Net sales for 2015 were $848.3 million, an increase of $94.9 million, or 12.6%, from $753.4 million for 2014. The acquisition of Baby Jogger had a favorable impact of 10.5% on net sales for the Baby & Parenting segment. Excluding the acquisition, North America high-single digit net sales growth attributable to innovation, advertising and promotion, and the comparison to the prior year period which reflected the impacts of the Graco harness buckle recall, and Asia Pacific sales growth attributable to innovation were partially offset by declines in EMEA resulting from softness across Europe and economic challenges in Russia as well as unfavorable foreign currency impacts.
Operating income for 2015 was $55.2 million, or 6.5% of net sales, an increase of $14.6 million, or 36.0%, from $40.6 million, or 5.4% of net sales, for 2014. The 110 basis point increase in operating margin was largely due to contributions from Baby Jogger and new product development, partially offset by increased advertising and promotion in support of innovation and the negative impact of foreign currency. Operating income for 2015 and 2014 includes $10.2 million and $15.0 million, respectively, of costs associated with the Graco harness buckle recall. The segment’s ability to leverage the increase in net sales associated with base business growth, the addition of Baby Jogger sales and the decrease in Graco harness buckle recall costs more than offset the increase in advertising and promotion, which resulted in SG&A decreasing 100 basis points as a percentage of net sales.
Liquidity and Capital Resources
Cash Flows
Cash and cash equivalents increased (decreased) as follows for the years ended December 31, (in millions):
 
2016
 
2015
 
2014
Cash provided by operating activities
$
1,828.5

 
$
565.8

 
$
634.1

Cash used in investing activities
(8,824.8
)
 
(649.9
)
 
(751.9
)
Cash provided by financing activities
7,340.4

 
172.3

 
119.0

Currency effect on cash and cash equivalents
(31.4
)
 
(12.8
)
 
(28.1
)
Increase in cash and cash equivalents
$
312.7

 
$
75.4

 
$
(26.9
)

40


In the cash flow statement, the changes in operating assets and liabilities are presented excluding the effects of changes in foreign currency exchange rates and the effects of acquisitions, divestitures and reclassifications of assets and liabilities to held for sale. Accordingly, the amounts in the cash flow statement differ from changes in the operating assets and liabilities that are presented in the balance sheets.
Sources
Historically, the Company’s primary sources of liquidity and capital resources have included cash provided by operations, proceeds from divestitures, proceeds from the issuance of debt and the use of available borrowing facilities.
Cash provided by operating activities for 2016 was $1,828.5 million compared to $565.8 million for 2015. The increase in operating cash flow was primarily due to the impact of the operating cash flow attributable to the Jarden Acquisition based on favorable timing of the acquisition during the second quarter, partially offset by higher interest payments associated with higher debt levels resulting from financing the Jarden Acquisition.
Additionally, the Company made payments of $91.2 million during 2016 associated with the settlement of forward-starting interest rate swaps used to hedge benchmark treasury rates for the $8.0 billion public debt issuance in March 2016 used to finance the Jarden Acquisition.
The Company also paid transaction costs associated with the Jarden Acquisition totaling $50.7 million, and $31.8 million of higher annual incentive compensation paid in March 2016 relating to the Company’s 2015 performance.
Cash provided by operating activities for 2015 was $565.8 million compared to $634.1 million for 2014. The decrease in operating cash flow was primarily due to the impact of the following items:
a $70.0 million voluntary contribution to the Company’s primary U.S. pension plan during 2015, which is included in accrued liabilities and other in the Consolidated Statements of Cash Flows;
a $69.6 million year-over-year increase in cash used to build inventories in 2015 compared to 2014, partially attributable to inventory builds in 2015 to support new product launches;
a $45.9 million year-over-year increase in project-related costs associated with Project Renewal and advisory costs for process transformation and optimization, including advisory and consulting costs and personnel costs associated with employees dedicated to Project Renewal initiatives; and
a $67.0 million year-over-year decrease in cash provided by accounts payable, primarily attributable to the timing and management of purchases and payments.
partially offset by:
a $107.1 million year-over-year decrease in cash used for increases in accounts receivable due to the timing of sales in the fourth quarter of 2015 compared to the fourth quarter of 2014; and
a $60.6 million increase in the Company’s income tax liability during 2015, which is included in accrued liabilities and other in the Consolidated Statements of Cash Flows, primarily associated with an estimated $60.0 million income tax payment due in the first quarter of 2016 associated with the gain realized on the sale of the Endicia business.
During 2016, the Company had net payments of $641.4 million related to its short-term borrowing arrangements compared to net payments of $57.0 million related to short-term borrowing arrangements in 2015. The net payments of $57.0 million related to short-term borrowing arrangements in 2015 primarily relates to $50.3 million of issuance costs incurred in connection with a $400 million bridge facility the Company entered into in advance of the Elmer’s acquisition (the “Elmer’s Bridge Facility”), which has since been terminated, and a $10.5 billion bridge facility contemplated by the commitment letter that the Company entered into with Goldman Sachs & Co. in connection with the Jarden Acquisition (the “Jarden Bridge Facility”), which has been terminated. The Company’s short-term borrowings, which include commercial paper and the receivables facility, were $601.9 million at December 31, 2016 compared to $388.8 million at December 31, 2015. During 2014, the Company received net proceeds of $217.3 million on its short-term borrowing arrangements compared to net payments of $35.8 million related to short-term borrowing arrangements in 2013. The Company’s short-term borrowings, which include commercial paper and the receivables facility, were $390.7 million at December 31, 2014 compared to $174.0 million at December 31, 2013. The increase in short-term borrowings in 2014 is primarily due to borrowings to fund the Company’s ongoing share repurchase program and to finance acquisitions.
In March 2016, the Company completed the offering and sale of $8.0 billion principal amount of unsecured senior notes, consisting of $1.0 billion of aggregate principal amount of 2.60% notes due March 2019 (the “2019 Notes”), $1.0 billion of aggregate

41


principal amount of 3.15% notes due April 2021 (the “2021 Notes”), $1.75 billion of aggregate principal amount of 3.85% notes due April 2023 (the “2023 Notes”), $2.0 billion of aggregate principal amount of 4.20% notes due April 2026 (the “2026 Notes”), $500.0 million of aggregate principal amount of 5.375% notes due April 2036 (the “2036 Notes”) and $1.75 billion of aggregate principal amount of 5.50% notes due April 2046 (the “2046 Notes” and together with the 2019 Notes, the 2021 Notes, the 2023 Notes, the 2026 Notes and the 2036 Notes, the “Notes”). In April 2016, the Company borrowed $1.5 billion pursuant to a senior unsecured term loan facility with a syndicate of banks (the “Term Loan Facility”). The aggregate net proceeds from the issuance of the Notes and Term Loan Facility of $9.4 billion were used in April 2016 to pay the cash portion of the merger consideration in the Jarden Acquisition and to repay certain of Jarden’s outstanding debt at closing. The Company repaid $1.1 billion of the Term Loan Facility during 2016.
In October 2015, the Company completed the offering and sale of $600.0 million of medium-term notes, consisting of $300.0 million aggregate principal amount of 2.15% notes due 2018 (the “2018 Notes”) and $300.0 million aggregate principal amount of 3.90% notes due 2025 (the “2025 Notes”). The aggregate net proceeds from the issuance of the medium-term notes were $594.5 million, which were used for the acquisition of Elmer’s and for general corporate purposes. In November 2014, the Company completed the offering and sale of $850.0 million of medium-term notes, consisting of $350.0 million principal amount of 2.875% notes due 2019 (the “2019 Notes”) and $500.0 million principal amount of 4.0% notes due 2024 (the “2024 Notes”). The aggregate net proceeds were $841.8 million and were used to repay $439.4 million principal amount of medium-term notes and to repay short-term borrowings incurred in connection with the acquisitions of Ignite, bubba and Baby Jogger.
During 2016, the Company generated $247.8 million of proceeds from the sale of divested businesses and fixed assets, which primarily represents the $226.3 million of net proceeds, excluding fees, from the divestiture of the Décor business. The proceeds from the sale of the Décor business were used to repay debt.
During 2015, the Company sold its Endicia business for aggregate net proceeds of $208.7 million. The Company recognized a pretax gain of $154.2 million, with related tax expense of $58.6 million. The related tax expense primarily represents an income tax liability which was paid and included as a use of cash in the Company’s cash flow from operating activities in the first quarter of 2016.
During 2016, the Company received $9.6 million in connection with the exercise of employee stock options, which compares to $24.3 million received in 2015 and $76.6 million received in 2014. During 2016, the Company used $22.2 million to repurchase its common stock to satisfy employees’ tax withholding obligations in connection with the vesting of restricted stock units, which compares to $30.0 million and $15.9 million used in 2015 and 2014, respectively.
Uses
Historically, the Company’s primary uses of liquidity and capital resources have included capital expenditures, payments on debt, dividend payments, share repurchases and acquisitions.
Capital expenditures were $441.4 million, $211.4 million and $161.9 million for 2016, 2015 and 2014, respectively. Capital expenditures incurred for capitalized software projects included in capital expenditures were $34.3 million, $38.8 million and $20.8 million for 2016, 2015 and 2014, respectively. The increase in capital expenditures in 2016 was largely attributable to purchases of equipment in the U.S. to support the consolidation of facilities in the Commercial Products segment, investments in assets to improve the Company’s resin manufacturing network in the Home Solutions and Commercial Products segments, the purchase of the Company’s new headquarters building, sales and marketing-related software initiatives and the implementation of SAP in Asia Pacific.
During 2016, the Company completed the Jarden Acquisition. The total consideration consisted of $5.4 billion in cash in addition to $9.9 billion of the Company’s common stock. The Company paid $5.2 billion in addition to $4.1 billion for the repayment of certain Jarden debt, net of $661.9 million