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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
COMMISSION FILE NUMBER
December 31, 2019
1-9608
___________________
NEWELL BRANDS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
___________________
Delaware
36-3514169
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
6655 Peachtree Dunwoody Road,
30328
Atlanta,
Georgia
(Zip Code)
(Address of principal executive offices)
 
Registrant’s telephone number, including area code: (770) 418-7000
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS
TRADING SYMBOL
NAME OF EACH EXCHANGE ON WHICH REGISTERED
Common Stock, $1 par value per share
NWL
Nasdaq Stock Market LLC
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  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
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      No    
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
Accelerated Filer
Non-Accelerated Filer
 
Smaller Reporting Company
 
 
 
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes      No  
There were 423.5 million shares of the Registrant’s Common Stock outstanding (net of treasury shares) at January 31, 2020. The aggregate market value of the shares of Common Stock on June 30, 2019 (based upon the share count and closing price on the Nasdaq Stock Exchange on such date) beneficially owned by non-affiliates of the Registrant was approximately $6.5 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.
 


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TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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PART I
ITEM 1. BUSINESS

“Newell Brands” or the “Company” refers to Newell Brands 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, New York in 1903 and is incorporated in Delaware.

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 (the “Exchange Act”) as soon as practicable after the Company files them with, or furnishes them to, the U.S. Securities and Exchange Commission (“SEC”). 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 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®, Marmot®, Oster®, Sunbeam®, FoodSaver®, Mr. Coffee®, Rubbermaid Commercial Products®, Graco®, Baby Jogger®, NUK®, Calphalon®, Rubbermaid®, Contigo®, First Alert®, Mapa®, Spontex®, Quickie® 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.

BUSINESS STRATEGY

The Company is currently executing a turnaround strategy, with the vision of building a global, next generation consumer products company that can unleash the full potential of its brands in a fast moving omni-channel environment. These strategies are designed to address key challenges facing the Company, including: shifting consumer preferences and behaviors; a highly competitive operating environment; a rapidly changing retail landscape, including the growth in e-commerce; continued macroeconomic and political volatility; and an evolving regulatory landscape.

The Company has identified the following strategic imperatives to address and adapt to these challenges during its turnaround period:
Strengthen the portfolio by investing in attractive categories aligned with its capabilities and strategy;
Sustainable profitable growth by focusing on innovation, as well as growth in digital marketing, e-commerce and its international businesses;
Attractive margins by driving productivity and overhead savings to reinvest into the business;
Cash efficiency by improving key working capital metrics, resulting in a lower cash conversion cycle; and
Build a winning team through engagement and focusing the best people on the right things.
Execution on these strategic imperatives will better position the Company for long-term sustainable growth in order to achieve its short-to-near-term goals of:
Growing core sales;
Improving operating margins;
Accelerating cash conversion cycle; and
Strengthening organizational capability and employee engagement.
Accelerated Transformation Plan

On December 31, 2019, the Company completed the sale of its Playing Cards business to Cartamundi Inc. and Cartamundi España S.L. for approximately $220 million, subject to adjustment for working capital and other items, and recorded a pre-tax loss of $5.0 million, which completed its previously announced Accelerated Transformation Plan (the “ATP”), which was designed to accelerate value creation and more rapidly transform the portfolio to one best positioned to leverage the Company’s advantaged capabilities in innovation, design and e-commerce. The ATP was also designed to significantly increase shareholder value through both meaningful returns of capital to shareholders and strengthened operational and financial performance, while simultaneously deleveraging the balance sheet.

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In connection with the ATP, the Company completed the sale of several businesses during 2018 and 2019. In 2018, the Company sold: Goody Products, Inc. (“Goody”), Jostens, Inc. (“Jostens”), Pure Fishing, Inc. (“Pure Fishing”), the Rawlings Sporting Goods Company, Inc. (“Rawlings”), Waddington Group, Inc. (“Waddington”) and other related subsidiaries. In 2019, the Company sold: its Process Solutions business, Rexair Holdings Inc. (“Rexair”), The United States Playing Card Company and other related subsidiaries. As a result of these transactions, the Company recorded aggregate pre-tax gains of $7.3 million and $831 million in 2019 and 2018, respectively, and received gross proceeds of $996 million and $5.1 billion in 2019 and 2018, respectively. At December 31, 2019, the Company’s total debt was $5.7 billion and cash and cash equivalents were $349 million.

In July 2019, the Company announced its decision to no longer pursue the sale of the majority of the Rubbermaid Outdoor, Closet, Refuse, Garage and Cleaning businesses (“Commercial Products”). The decision to keep Commercial Products was based on the strength of the brand, its competitive position in a large and growing category, and track record of cash flow generation, revenue growth and margin expansion. Management believes that retaining this business will further enhance the value creation opportunity for the Company. In October 2019, the Company decided to no longer pursue the sale of the Mapa/Spontex and Quickie businesses. The decision to keep these businesses was based on their financial profile, relative to expected sales proceeds.

At December 31, 2019, the Rubbermaid Outdoor, Closet, Refuse, Garage and Cleaning businesses and the Mapa/Spontex and Quickie businesses (the “Commercial Business”) are no longer classified as held for sale in the Consolidated Financial Statements and are reported in the Food and Commercial segment (see below) for all periods presented. During 2019, the Company recorded a cumulative catch-up adjustment of depreciation and amortization expense of $56.6 million to reflect the amounts that would have been recorded had these businesses been continuously classified as held and used.

See Footnote 3 of the Notes to Consolidated Financial Statements for further information.

Organizational Structure

The Company’s four primary operating segments are as follows:

Segment
 
Key Brands
 
Description of Primary Products
Appliances and Cookware
 
Calphalon®, Crock-Pot®, Mr. Coffee®, Oster® and Sunbeam®
 
Household products, including kitchen appliances, gourmet cookware, bakeware and cutlery
Food and Commercial
 
Ball®, FoodSaver®, Rubbermaid®, Sistema®, Rubbermaid Commercial Products®, Mapa®, Quickie® and Spontex®

 
Food storage and home storage products, fresh preserving products, vacuum sealing products, commercial cleaning and maintenance solutions, hygiene systems and material handling solutions
Home and Outdoor Living
 
Chesapeake Bay Candle®, Coleman®, Contigo®, ExOfficio®, First Alert®, Marmot®, WoodWick® and Yankee Candle®
 
Products for outdoor and outdoor-related activities, home fragrance products and connected home and security
Learning and Development
 
Aprica®, Baby Jogger®, Dymo®, Elmer’s®, EXPO®, Graco®, Mr. Sketch®, NUK®, Paper Mate®, Parker®, Prismacolor®, Sharpie®, Tigex® Waterman® and X-Acto®
 
Writing instruments, including markers and highlighters, pens and pencils; art products; activity-based adhesive and cutting products; labeling solutions; baby gear and infant care products

This new structure reflects the manner in which the chief operating decision maker regularly assesses information for decision-making purposes, including the allocation of resources. The Company also provides general corporate services to its segments which is reported as a non-operating segment, Corporate. See Footnote 18 of the Notes to the Consolidated Financial Statements for further information.

Appliances and Cookware

The Appliances and Cookware segment designs, manufactures, sources, markets and distributes a diverse line of household products. Kitchen appliances are primarily sold under the Crock-Pot®, Mr. Coffee®, Oster® and Sunbeam® trademarks. Aluminum and stainless-steel cookware and bakeware are sold under the Calphalon® trademark. The Appliances and Cookware segment also has rights to sell various small appliance products in substantially all of Europe under the Breville® brand name.


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The Appliances and Cookware segment primarily markets its products directly to club, department store, drug/grocery, home centers, mass merchant, specialty retailers, distributors and e-commerce companies.

Food and Commercial

The Food and Commercial segment designs, manufactures, sources, markets and distributes a diverse line of household products. Food storage products are sold primarily under the FoodSaver®, Rubbermaid® and Sistema® trademarks. The Company also sells certain food storage products under the Ball® trademark, pursuant to a license from Ball Corporation. The Commercial Business designs, manufactures or sources and distributes cleaning and refuse products, hygiene systems and material handling solutions primarily under the Quickie®, Mapa®, Rubbermaid®, Rubbermaid Commercial Products® and Spontex® trademarks.

The Food and Commercial segment primarily markets its products directly to club, department store, drug/grocery, home centers, commercial products distributors, mass merchant, specialty retailers, distributors, e-commerce companies, select contract customers and other professional customers.

Home and Outdoor Living

The Home and Outdoor Living segment designs, manufactures, sources, markets and distributes home fragrance and home security products, as well as global consumer active lifestyle products for outdoor and outdoor-related activities. Home fragrance products are sold primarily under the Chesapeake Bay Candle®, WoodWick® and Yankee Candle® trademarks. Home security products are primarily sold under the First Alert® trademark. Active lifestyle products are sold primarily under the Coleman®, Contigo®, ExOfficio® and Marmot® trademarks.

The Home and Outdoor Living segment primarily markets its products directly to club, department store, drug/grocery, home centers, mass merchant, sporting goods and specialty retailers, distributors and e-commerce companies, as well as direct to consumers on-line and in Yankee Candle retail stores.

Learning and Development

The Learning and Development segment designs, manufactures, sources, markets and distributes writing instruments, including markers and highlighters, pens and pencils; art products; activity-based adhesive and cutting products; labeling solutions; baby gear and infant care products. Writing instruments, activity-based adhesive and cutting products and labeling solutions products are sold primarily under the Dymo®, Elmer’s®, EXPO®, Mr. Sketch®, Paper Mate®, Parker®, Prismacolor®, Sharpie®, Waterman® and X-Acto® trademarks. Baby gear and infant care and health products are sold primarily under the Baby Jogger®, Graco®, NUK® and Tigex® trademarks.

The Learning and Development segment primarily markets its products directly to mass merchants, warehouse clubs, drug/grocery stores, office superstores, office supply stores, contract stationers, travel retail, distributors and e-commerce companies, and direct to consumers on-line.

See Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report on Form 10-K for further discussion.

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.


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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, 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 and copper. The Company’s resin purchases are principally comprised of polyethylene, polypropylene and copolyester.

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 the finished goods for a product line. In particular, certain businesses within the Company’s Learning and Development segment rely on third-party manufacturers for substantially all of their products. Specifically, the Baby business unit has a single source of supply for products that comprise a majority of its sales and which owns the intellectual property for many of those products.

Backlog

The dollar value of unshipped 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 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 tradenames that are, in the aggregate, important to its business. The Company’s most significant registered trademarks include Aprica®, Baby Jogger®, Calphalon®, Campingaz®, Coleman®, Contigo®, Crock-Pot®, Dymo®, Elmer’s®, EXPO®, First Alert®, FoodSaver®, Graco®, Mapa®, Marmot®, Mr. Coffee®, NUK®, Oster®, Paper Mate®, Parker®, Quickie®, Rubbermaid Commercial Products®, Rubbermaid®, Sistema®, Spontex®, Sunbeam®, WoodWick®, Sharpie® and Yankee Candle®.

Customers/Competition

The Company’s principal customers are large mass merchandisers, such as discount stores, home centers, warehouse clubs, office superstores, direct-to-consumer channels, specialty retailers and wholesalers, commercial distributors and e-commerce companies. 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 pricing.

Current trends among retailers and e-commerce companies include fostering high levels of competition among suppliers, reducing current inventory levels, 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 variety of other retailers, including department stores, gift stores and national specialty retailers that sells candles.

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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 and producing and procuring products at a competitive cost. In addition, the Company has experienced management that 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, Walmart Inc. and subsidiaries (“Walmart”), accounted for approximately 14.6%, 14.6% and 14.8% of net sales in 2019, 2018 and 2017, respectively. The Company’s top-ten customers in 2019 included (in alphabetical order): Amazon, Bed, Bath & Beyond, Costco, Lowe’s, Kroger, Office Depot, Staples, Target, The Home Depot and Walmart.

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 Annual Report on Form 10-K 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. The Company continues to invest to strengthen its product design, research and development capabilities and has consolidated its design and innovation capabilities and consumer marketing and insight capabilities into a global center of excellence to further strengthen these capabilities. Product development efforts begin with enhanced marketing and insight and research and development capabilities, which have been leveraged to implement a new ideation process throughout the business, resulting in idea fragments that feed the development of product concepts.

Employees

At December 31, 2019, the Company had approximately 30,000 employees worldwide, a portion of which are covered by collective bargaining agreements or are located in countries that have collective arrangements decreed by statute. Management believes that its relationships with its employees and collective bargaining unions are satisfactory.
   
ITEM 1A. RISK FACTORS

The ownership of the Company’s securities 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 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, can be affected by specific events or general economic conditions, including worldwide or country-specific economic instability.

For example, uncertainty over the terms of the United Kingdom’s departure from the European Union, commonly known as Brexit, has caused political and economic uncertainty in the United Kingdom and the rest of Europe, which could harm consumer demand and ultimately adversely impact the Company’s business. Continuing challenging global economic conditions, particularly outside of the U.S., and potential volatility in domestic and/or foreign equity markets, may result in considerable pressure on consumer demand, which may 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

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could negatively 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. A proliferation of digitally native brands has further intensified the competitive landscape. The Company’s principal customers are large mass merchandisers, such as discount stores, home centers, warehouse clubs, office superstores, direct-to-consumer channels, specialty retailers and wholesalers, commercial distributors and e-commerce companies. The dominant share of the market represented by these large retailers, 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, reducing inventory levels, 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 may result in a number of customers experiencing financial difficulty or failing in the future. For example, the Company’s results in 2018 were impacted negatively by the bankruptcy and liquidation of Toys ‘R’ Us. In particular, a loss of, or a failure by, another 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 the Company has 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 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 due to decreased sales to end customers could have an adverse effect on the Company’s gross profit margins and operating income. The retail landscape in many of the Company’s markets continues to be impacted by the rapid growth of e-commerce retailers, changing consumer preferences (as consumers increasingly shop on-line) and the emergence of alternative retail channels, such as subscription services and direct-to-consumer businesses. The rapid growth in e-commerce and emergence of alternative retail channels may adversely affect the Company’s relationships with its key retailers, whereby the number of products it sells will no longer be a reliable indicator of the amount of future business the Company can expect.

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

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adopt 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 or that customer demand will remain consistent. A substantial decrease in sales to any of its major customers and an inability to adapt to the emergence of alternative retail channels 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 the Company’s 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, reduce inventory, 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, 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.

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. The Company’s ability to quickly innovate in order to adapt its products to meet changing consumer demands is essential, especially in light of e-commerce significantly reducing the barriers for even small competitors to quickly introduce new brands and products directly to consumers. 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 retail 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 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.

Circumstances associated with divestitures and product line exits could adversely affect the Company’s results of operations and financial condition.

Although the ATP is now completed, the Company may decide to sell or discontinue other businesses or products in the future based on an evaluation of performance and strategic fit. Divestitures or discontinuations of businesses or products 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. Past and future divestitures and business discontinuations also involve additional risks, including the following:


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difficulties in the separation of operations, services, products and personnel;
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;
the potential loss of key employees; and
disputes or litigation with the buyers.

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.

Failure to grow the Company’s e-commerce business, and the cost of its increasing e-commerce investments, may materially adversely affect the Company’s market position, net sales and financial performance.

The retail industry is rapidly evolving and consumers are increasingly embracing shopping on-line and through mobile commerce applications. As a result, the portion of total consumer expenditures with retailers occurring through digital platforms is increasing and the pace of this increase could accelerate. At the same time, the portion of retail business at traditional “brick and mortar” stores and shopping centers is decreasing.

The Company’s strategy includes investments in e-commerce, and investments in technology initiatives. If these investments fail to adequately or effectively allow the Company to grow its e-commerce business, maintain or grow its overall market position or otherwise benefit the Company, the Company’s market position, net sales and financial performance could be adversely affected. In addition, a greater concentration of e-commerce sales could result in a reduction in the amount of sales by the Company’s other customers, which could, if not offset by a greater increase in e-commerce sales, materially adversely affect the business of the Company.

Furthermore, the cost of certain e-commerce and technology investments may adversely impact the Company’s financial performance in the short-term and may adversely impact its financial performance over the longer term. There can be no assurance that investments in e-commerce infrastructure and technology will result in increased sales, through e-commerce or otherwise.

Failure to maintain effective internal control over financial reporting could result in material misstatements in our financial statements, and our failure to meet our reporting and financial obligations, which in turn could have a negative impact on our financial condition.

As further detailed in Item 9A below, management has identified material weaknesses in its internal control over financial reporting. One material weakness was disclosed in the Company’s 2018 Annual Report on Form 10-K, filed on March 4, 2019 and subsequent quarterly reports on Form 10-Q, related to accounting for the impact of divestitures. The Company also discovered a material weakness in December 2019 related to accounting for certain tax matters. These control deficiencies could have resulted in a misstatement of accounts and disclosures that would result in a material misstatement of the annual or interim consolidated financial statements that would not be prevented or detected. Accordingly, the Company’s management has determined that these control deficiencies constitute material weaknesses.

Under standards established by the Public Company Accounting Oversight Board (the “PCAOB”), a material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

To remediate the material weakness in accounting for divestitures, the Company has completed the documentation and testing of the following corrective actions:

Enhanced the level of review of deferred tax balances for each business that is categorized as held for sale considering the form of divestiture transaction;
Supplemented the review of deferred tax balances by legal entity and account to ensure proper presentation for financial reporting purposes;
Enhanced the review of the intra-period tax allocation between continuing and discontinued operations;
Enhanced the review of the calculation of historical and current tax basis utilized in the gain/loss calculation;
Enhanced the held for sale footnote reconciliation process; and
Enhanced the review and approval process for the underlying data utilized in determining the estimated fair value and expected form of sale reflected in the Company’s impairment test.

Though management has effectively and successfully operated the non-tax components of the aforementioned remediation plan for three consecutive quarters in 2019, this material weakness will not be considered remediated until each component of

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management’s remedial actions operate for a sufficient period of time and management has concluded, through testing of divestiture transactions or otherwise, that these controls are operating effectively.

During the course of 2019, management made certain changes as part of the remediation of the material weakness related to accounting for divestitures, which relate to the material weakness for accounting for income taxes and which the Company believes will contribute to the remediation efforts of the material weakness. These changes include:

Hiring experienced resources with substantive backgrounds in accounting for income taxes as well as U.S. multinational public company experience; and
Engaging a third party to review the Company’s tax provision processes, identify inefficiencies, and recommend process enhancements.

Subsequent to the identification of the material weakness for accounting for income taxes, management began to implement a tax reporting software solution that has enhanced our visibility of uncertain tax positions in order to remediate the material weakness.

The Company plans to implement the following additional steps to remediate the material weakness for accounting for income taxes:

Implementing enhancements and process improvements to the quarterly and annual provision with respect of uncertain tax positions and state income taxes; and
Undertaking extensive training for key personnel in each reporting jurisdiction on tax reporting requirements and our redesigned processes; and
Implementing a tax reporting software solution that will enhance our state income tax reporting capabilities.

While management believes that it now has the requisite personnel to operate the controls in the tax function and the remediation actions described above should remediate the material weakness with respect to accounting for income taxes, as management continues the remediation process, it may determine certain additional enhancements may be necessary. This material weakness will not be considered remediated until the applicable remediated controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. The Company will monitor the effectiveness of its remediation plan and will refine its remediation plan as appropriate.

Any failure to remediate the material weaknesses, or the identification of new material weaknesses in our internal control over financial reporting, could result in material misstatements in our financial statements that may continue undetected, negatively impact the public perception of the Company and our securities and cause us to fail to meet our reporting and financial obligations or incur significant additional costs to remediate the material weakness, each of which could harm our ability to raise capital on favorable terms in the future or otherwise have a negative impact on our financial condition.

The Company has substantial indebtedness, which could materially and adversely affect the Company and its financial position, including decreasing its business flexibility, impacting its ratings and increasing its borrowing costs.

At December 31, 2019, the Company had $5.7 billion in outstanding debt, reflecting a reduction of approximately $1.3 billion versus the end of 2018. The Company’s substantial indebtedness has had, and could continue to have, important consequences for the Company, including:

requiring the Company to dedicate a substantial portion of its cash flow from operations to payments on its indebtedness, which reduces the availability of its cash flow to fund working capital requirements, capital expenditures, future acquisitions, dividends, repurchases of the Company’s common stock and other general corporate purposes;
limiting the Company’s flexibility in planning for, or reacting to, adverse business and economic conditions or changes in the Company’s business and the industries in which it operates;
placing the Company at a competitive disadvantage compared to its competitors that have less debt; and
limiting, along with the financial and non-financial covenants in the Company’s debt documents, its ability to borrow additional funds.

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, lower its credit ratings, result in a breach of covenants or otherwise adversely affect the business and financial results of the Company going forward.


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An increase in interest rates could have a material adverse effect on the Company’s 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 the Company’s business. Indeed, increases in interest rates would increase the cost of servicing our debt and could reduce our profitability and cash flows. 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, the U.S. Federal Reserve raised its benchmark interest rate nine times since December 2015, including four times in 2018, each time by a quarter of a percentage point, before reducing interest rates in 2019 three times. Any change in the fiscal policies or stated target interest rates of the U.S. Federal Reserve or other central banking institutions, or market expectations of such change, are difficult to predict and 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.

An increase in interest rates may also occur from changes in regulatory standards or industry practices, such as the contemplated transition away from the London Interbank Offered Rate (“LIBOR”) as a benchmark reference for short-term interest rates. Such a transition may result in the usage of a higher reference rate for our variable rate debt. The U.S. Federal Reserve has sponsored the Alternative Reference Rates Committee (“ARRC”), which serves as a forum to coordinate and track planning as market participants currently using LIBOR consider (a) transitioning to alternative reference rates where it is deemed appropriate and (b) addressing risks in legacy contracts language given the possibility that LIBOR might stop. On April 3, 2018, the U.S. Federal Reserve began publishing three new reference rates, including the Secured Overnight Financing Rate (“SOFR”). ARRC has recommended SOFR as the alternative to LIBOR and published fallback interest rate consultations for public comment and a Paced Transition Plan to SOFR use. The Financial Stability Board has taken an interest in LIBOR and possible replacement indices as a matter of risk management. The International Organisation of Securities Commissions, or IOSCO, has been active in this area and is expected to call on market participants to have backup options if a reference rate, such as LIBOR, ceases publication. The International Swaps and Derivatives Association has published guidance on interest rate benchmarks and alternatives in July and August 2018. It cannot be predicted whether SOFR or another index or indices will become a market standard that replaces LIBOR, and if so, the effects on our customers, or our future results of operations or financial condition.

Governmental investigations or actions by other third parties could have a material adverse effect on management and the Company’s business operations.

The Company is subject to various federal, state and foreign laws and regulations. In the ordinary course of business, the Company is also subject to formal and informal regulatory and governmental examinations, subpoenas, requests for documents, testimony or information, inquiries, investigations, threatened legal actions and proceedings. In particular, on January 31, 2020, the Company received a subpoena from the SEC primarily relating to its sales practices and certain accounting matters. See Footnote 19 of the Notes to the Consolidated Financial Statements for further information. Responding to governmental investigations, voluntary document requests, subpoenas or actions by regulatory bodies may be time-consuming, expensive and disruptive to the Company’s operations and could divert the attention of management and key personnel from the Company’s business operations. The impact of these inquiries and other investigations and lawsuits could have a material adverse effect on the Company’s financial position and results of operations.

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, data privacy, 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.

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. may not be 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.

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On June 18, 2019, the U.S. Treasury and the Internal Revenue Service released temporary regulations under IRC Section 245A (“Section 245A”) as enacted by the 2017 U.S. Tax Reform Legislation (“2017 Tax Reform”) and IRC Section 954(c)(6) (the “Temporary Regulations”) to apply retroactively to the date the 2017 Tax Reform was enacted. The Temporary Regulations seek to limit the 100% dividends received deduction permitted by Section 245A for certain dividends received from controlled foreign corporations and to limit the applicability of the look-through exception to foreign personal holding company income for certain dividends received from controlled foreign corporations. Before the retroactive application of the Temporary Regulations, the Company benefited in 2018 from both the 100% dividends received deduction and the look-through exception to foreign personal holding company income. The Company has analyzed the Temporary Regulations and concluded that the relevant Temporary Regulations were not validly issued. Therefore, the Company has not accounted for the effects of the Temporary Regulations in its Consolidated Financial Statements for the period ending December 31, 2019. The Company believes it has strong arguments in favor of its position and believes it has met the more likely than not recognition threshold that its position will be sustained. However, due to the inherent uncertainty involved in challenging the validity of regulations, as well as a potential litigation process, there can be no assurances that the relevant Temporary Regulations will be invalidated or that a court of law will rule in favor of the Company. If the Company’s position on the Temporary Regulations is not sustained, the Company would be required to recognize an income tax expense of approximately $180 million to $220 million related to an income tax benefit from the 2018 year that was recorded based on regulations in existence at the time. In addition, the Company may be required to pay any applicable interest and penalties. The Company intends to vigorously defend its position.

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, as well as the impact of tariffs.

The Company’s success is dependent, in part, on its continued ability to reduce its exposure to increases in the cost of raw materials, energy, transportation and other necessary supplies and services 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 the Company manufactures 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. Pricing and availability of finished goods, 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 conditions, natural disasters, labor costs, production levels, competition, consumer demand, import duties and tariffs and currency exchange rates.

Specifically, evolving trade policies could continue to make sourcing products from foreign countries difficult and costly, as the Company sources a significant amount of its products from outside of the United States. Considerable political uncertainty exists in the United States and abroad that could result in continuing changes to the national and international trade policies around which the Company has built its sourcing practices and operations. Given the Company's reliance upon non-domestic suppliers, any significant changes to the United States trade policies (and those of other countries in response) may cause a material adverse effect on its ability to source products from other countries or significantly increase the costs of obtaining such products, which could result in a material adverse effect on our financial results. For example, in March 2018, the current presidential administration-imposed tariffs of 25% on steel imports and 10% on aluminum imports. These tariffs, which remain in effect, apply to imported steel and aluminum products from most of the world. In addition, the current presidential administration imposed additional tariffs of 25% on many Chinese-origin goods effective July 6, 2018 and August 23, 2018, and imposed additional tariffs of 10% on a substantial number of additional Chinese-origin goods (“List 3 Products”) effective September 24, 2018 (the 10% tariff on List 3 Products increased to 25% on May 10, 2019). The current presidential administration also imposed 15% tariffs on additional Chinese-origin goods, List 4a, on September 1, 2019. The Phase 1 agreement signed on January 15, 2020, reduced List 4a from 15% to 7.5% (effective February 14, 2020) and suspended tariffs under List 4b at 15%, which was due to go into effect on December 15, 2019. In addition to tariffs on Chinese-origin goods, on October 18, 2019, the current presidential administration imposed additional tariffs on certain products imported into the United States from the European Union. Any extension of tariffs to additional categories of goods or to additional importers or exporters or additional countries of origin could significantly increase the cost of some our products and reduce our margins. The Company will continue to work to mitigate the tariff exposure, in part through pricing, productivity and in some cases relocation. However, there can be no assurance these mitigation efforts will be successful.

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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 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, certain businesses in the Baby business unit have a single source of supply for products that comprise a majority of their 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 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, including tariffs and countermeasures;
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;
increases in duties and taxation;

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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.

In addition, our global operations expose us to risks associated with public health crises, such as pandemics and epidemics, which could harm our business and cause our operational results to suffer. For example, in December 2019 and January 2020, an outbreak of a new strain of Coronavirus in Wuhan, China, has resulted in travel disruption and an impact on corporate operations in China. At this point, the exact extent to which the Coronavirus may impact our supply chain or results of operations is uncertain; however, our revenues may be impacted in the first half of 2020.

Further, on June 23, 2016, the United Kingdom held a referendum in which voters approved the withdrawal of the United Kingdom from the European Union. Because of the referendum, the British government began negotiating the terms of the United Kingdom’s future relationship with the European Union. While the European Union and United Kingdom reached an agreement on Brexit in October 2019, and the United Kingdom exited the European Union on January 31, 2020, details of the new trade and regulatory relationship are still to be finalized. There may be greater restrictions on imports and exports between the United Kingdom and European Union countries and increased regulatory complexities in the future. These changes could cause disruptions to trade and free movement of goods, services, and people to and from the United Kingdom, disruptions to the workforce or the workforce of the Company’s suppliers or business partners, increased foreign exchange volatility with respect to the British pound and additional legal, political, and economic uncertainty. The foregoing could create uncertainty surrounding the Company’s business and the business of existing and future customers and suppliers, which could increase the cost of some of the Company’s products, thereby reducing its margins. Further, the foregoing risks could have a significant adverse impact on the Company’s ability to commercialize its products on a competitive basis in international markets and may have a material adverse effect on its business, financial condition, and results of operations. The Company’s small sales volume in some countries, relative to some multinational and local competitors, could exacerbate such risks. Depending on the extent to which the Company may be required to make material changes to its European operations beyond those currently planned, the Company’s results of operations and business prospects could be negatively affected.

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 is exposed to both foreign currency translation and transaction risks that may materially adversely affect the Company’s operating results, financial condition and liquidity.

The reporting currency for the Company’s financial statements is the U.S. dollar and it has substantial assets, liabilities, revenues and costs denominated in currencies other than U.S. dollars. The preparation of the Company’s Consolidated Financial Statements requires translation of those assets, liabilities, revenues and expenses into U.S. dollars at then-applicable exchange rates. Consequently, increases and decreases in the value of the U.S. dollar versus other currencies will affect the amount of these items in the Company’s Consolidated Financial Statements, even if their value has not changed in their original currency. These translations could result in significant changes to the Company’s results of operations from period to period. Although the Company may employ, at times, a variety of techniques to mitigate the impact of exchange rate fluctuations, including foreign currency hedging activities, it cannot guarantee that such risk management strategies will be effective, and its financial condition or results of operations could be adversely impacted.
In addition, foreign currency transaction risk arises when the Company and its subsidiaries enter into transactions where the settlement occurs in a currency other than its functional currency. Exchange differences (gains and losses) arising on the settlement of monetary items or on translation of monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements are recognized in the Consolidated Statement of Operations in the period in which they arise. Although the Company may employ, at times, a variety of techniques to mitigate the impact of foreign currency transaction risk, including the hedging of forecasted cash inflows and outflows, it cannot guarantee that such risk management strategies will be effective, and its financial condition or results of operations could be adversely impacted.
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 cyber-attack or 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, including data that may be subject to the General Data Protection Regulation of the European Union or the California Consumer Privacy Act;
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 cyber-crime, including advanced persistent threats, computer viruses, ransomware, other types of malicious code, hacking, phishing and social engineering schemes designed to provide access to the Company’s networks or data, 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. Cyber threats are becoming more sophisticated, are constantly evolving and are being made by groups and individuals with a wide range of expertise and motives, and this increases the difficulty of detecting and successfully defending against them. 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. Furthermore, the Company’s relationships with, and access provided to, third parties and their vendors may create difficulties in anticipating and implementing adequate preventative measures or fully mitigating harms after an attack or breach occurs.

The Company cannot guarantee that its security efforts will prevent attacks and resulting breaches or breakdowns of the Company’s, or its third-party service providers’, databases or systems. 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. In addition, if the Company’s service providers, suppliers or customers experience a breach or unauthorized disclosure or system failure, their businesses could be disrupted or otherwise negatively affected, which may result in a disruption in the Company’s supply chain or reduced customer orders or other business operations, which would adversely affect the Company.

The Company is subject to laws of various countries where it operates or does business related to solicitation, collection, processing, transferring, storing or use of consumer, customer, vendor or employee information or related data, including the European Union’s General Data Protection Regulation (“GDPR”), which went into effect in May 2018, and the California Consumer Privacy Act of 2018 (“CCPA”), which goes into effect on January 1, 2020. The changes introduced by the GDPR and the CCPA increase the complexity of regulations enacted to protect business and personal data, subject the Company to additional costs and have required, and may in the future require, costly changes to the Company’s security systems, policies, procedures and practices.


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Continued declines in the future expected cash flows for the Company’s businesses or changes to underlying assumptions used to calculate fair value could result in additional impairment charges, which could have a material adverse effect on the Company’s financial results of operations.

The Company is required under U.S. GAAP to review its amortizable intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable, and are also required to conduct impairment tests on goodwill and other indefinite-lived intangible assets annually or more frequently, if circumstances indicate that the carrying value may not be recoverable or that an other-than-temporary impairment exists.
During the years ended December 31, 2019 and 2018, the Company recorded non-cash impairment charges related to goodwill and indefinite lived intangibles of $1.2 billion and $8.3 billion, respectively, in continuing operations and $112.1 million and $1.5 billion, respectively, in discontinued operations. Future events or factors may occur that would adversely affect the fair value of the Company’s assets and require impairment charges. Such events or factors may include, but are not limited to, divestitures of certain businesses, 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, 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. In the event any such impairment indicators become known or are present, 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. Given the Company’s impairment charges in 2019 and 2018, there is minimal difference between the estimated fair values and the carrying values of some of the Company’s reporting units and intangible assets, increasing the possibility of future impairment charges.
Unfavorable shifts in industry-wide demand for the Company’s products could result in inventory valuation risk.
The Company evaluates its ending inventories for excess quantities, impairment of value, and obsolescence. This evaluation includes analysis of sales levels by product and projections of future demand based upon input received from our customers, sales team, and management. If inventories on hand are in excess of demand or slow moving, appropriate write-downs may be recorded. In addition, the Company writes off inventories that are considered obsolete based upon changes in customer demand, product design changes that result in existing inventory obsolescence, or new product introductions, which eliminate demand for existing products. Remaining inventory balances are adjusted to approximate net realizable market value.
If future demand or market conditions are less favorable than the Company’s estimates, inventory write-downs may be required. The Company cannot be certain that obsolete or excess inventories, which may result from unanticipated changes in the estimated total demand for its products, will not affect it beyond the inventory charges that have already been recorded.

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 of 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. The Company does 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” in Footnote 19 of the Notes to Consolidated Financial Statements 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 ability to successfully implement its turnaround plan 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. In 2019, the Company hired a new President & Chief Executive Officer and a new Chief Human Resources Officer, and the current Chief Financial Officer and Chief Accounting Officer joined the Company in December 2018 and March 2019, respectively. 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.

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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 internationally. 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 U.S. Consumer Products Safety Act of 1972, as amended by the Consumer Product Safety Improvement Act of 2008, which empowers the U.S. Consumer Products Safety Commission to exclude from the market products that are found to be unsafe or hazardous, and similar laws under foreign jurisdictions. Under certain circumstances, the Consumer Products Safety Commission or a comparable foreign agency could require the Company to repurchase or recall one or more of its products. Additionally, other laws and agencies, such as the National Highway Traffic 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. From time to time, the Company has announced voluntary recalls of its products where it has identified potential product safety concerns. For example, in 2019 the Company announced a voluntary recall of the Contigo Gizmo product due to a concern over the silicone spout detaching from the nylon base, which resulted in significant product returns and other costs. 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. Similar to product liability claims, the Company faces exposure to class action lawsuits related to the performance, safety or advertising of its products. Such class action suits could result in substantial monetary judgments, injunctions related to the sale of products and potentially tarnish the Company’s reputation.

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 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. 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. Additionally, the Company does not maintain product recall insurance and may not have insurance coverage for claims asserted in class action lawsuits. As a result, product recalls, product liability claims and other product-related claims could have a material adverse effect on the Company’s business, results of operations and financial condition. 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 give assurance, 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 for a further discussion of these and other regulatory and litigation-related matters.


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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.

If the Company is found to have infringed the intellectual property rights of others or cannot obtain necessary intellectual property rights from others, its competitiveness could be negatively impaired.

If the Company is found to have violated the trademark, trade secret, copyright, patent or other intellectual property rights of others, directly or indirectly, through the use of third-party marks, ideas, or technologies, such a finding could result in the need to cease use of such trademark, trade secret, copyrighted work or patented invention in the Company’s business, as well as the obligation to pay for past infringement. If rights holders are willing to permit the Company to continue to use such intellectual property rights, they could require a payment of a substantial amount for continued use of those rights. Either ceasing use or paying such amounts could cause the Company to become less competitive and could have a material adverse effect on the Company’s business, financial condition, and results of operations.

Even if the Company is not found to infringe a third party’s intellectual property rights, claims of infringement could adversely affect the Company’s business. The Company could incur significant legal costs and related expenses to defend against such claims, and the Company could incur significant costs associated with discontinuing to use, provide, or manufacture certain products, services or trademarks even if it is ultimately found not to have infringed such rights.

Reductions 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 credit ratings assigned to the Company also impact the interest rates paid on short- and long-term financing.

On February 20, 2019, Fitch downgraded the Company’s long-term issuer default Rating from “BBB-” to BB+ and the short-term issuer default rating to “B” from “F3.” Further, on November 1, 2019, Standard and Poor’s Rating Services (“Standard & Poor’s”) reduced the Company’s long-term issuer credit rating to “BB+” from “BBB-,” resulting in a reduction of the Company’s senior debt below investment grade. This resulted in an increase in the cost of short-term and long-term borrowing for the Company, including a twenty-five-basis point increase in the interest rate payable on approximately $4.5 billion of the Company’s Senior Notes issued in March 2016, for which the interest rates payable are subject to adjustment from time to time if either Moody’s or Standard & Poor’s downgrades (or subsequently upgrades) the rating assigned to such Notes. While 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 Standard & Poor’s Financial Services LLC, in each case with stable or positive outlook, the Company cannot be sure that any of its current ratings will be upgraded in the near future, or that, in the alternative, such ratings will not be further lowered by a rating agency if, in its judgment, circumstances in the future so warrant.

Any downgrade by Moody’s Investor Services, Inc. (“Moody’s”) which would further reduce the Company’s senior debt below investment-grade and would further increase the Company’s borrowing costs would continue to adversely affect the Company’s financial results. In addition, in the event of a future 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 further lowered, it would limit, or eliminate entirely, the Company’s access to the commercial paper market. If the Company’s access to commercial paper markets were to become limited, or eliminated entirely, and it were required to obtain short-term funding under its revolving credit facility or its other credit facilities, the Company would face increased exposure to variable interest rates.


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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.

See "Factors Affecting Liquidity" in Liquidity and Capital Resources in Management's Discussion and Analysis of Financial Condition and Results of Operations.

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 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 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.

Damage to the Company’s reputation could have an adverse effect on the Company’s business.

Maintaining the Company’s strong reputation with consumers and suppliers worldwide is critical to the Company’s continued success. Adverse publicity about the Company, its brands, corporate practices, or any other issue that may be associated with the Company, whether or not deserved, could jeopardize that reputation. Such adverse publicity could come from traditional sources such as government investigations or public or private litigation, but may also arise from negative comments on social media regarding the Company or its brands.

Additionally, due to the scale and scope of our business, we must rely on relationships with third parties, including our suppliers, distributors, contractors, and other external business partners, for certain functions. While we have policies and procedures for managing these relationships, they inherently involve a lesser degree of control over business operations, governance, and compliance, thereby potentially increasing our reputational and legal risk.

Further, third parties sell counterfeit versions of our products, which are inferior or may pose safety risks. As a result, consumers of our brands could confuse our products with these counterfeit products, which could cause them to refrain from purchasing our brands in the future and in turn could impair our brand equity and adversely affect our business, results of operations, cash flows, and financial condition.

Finally, there has been an increased focus from certain investors, customers, consumers, employees, and other stakeholders concerning corporate citizenship and sustainability matters. From time to time, the Company announces certain initiatives regarding its focus areas, which may include environmental matters, packaging, responsible sourcing and social investments. The Company could fail, or be perceived to fail, in its achievement of such initiatives or it could fail in accurately reporting its progress on such initiatives and goals. In addition, the Company could be criticized for the scope of such initiatives or perceived as not acting responsibly in connection with these matters. The Company’s reputation and business could be negatively impacted by such developments.

Damage to the Company’s reputation or a loss of consumer confidence in the Company’s brands could adversely affect the Company’s business, results of operations, cash flows and financial condition, as well as, require resources to repair the harm.

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A deterioration in labor relations could adversely impact the Company’s global business.

At December 31, 2019, the Company had approximately 30,000 employees worldwide, a portion of which are covered by collective bargaining agreements or are located in countries that have collective arrangements decreed by statute. The Company periodically negotiates with certain unions and labor representatives and may be subject to work stoppages or may be unable to renew such collective bargaining agreements on the same or similar terms, or at all, all of which may have a material adverse effect on the business of the Company.

The Company’s plans to integrate its acquired businesses, improve productivity and reduce complexity and costs may not be successful, which would materially adversely affect its financial results.

The Company has pursued and may continue to pursue acquisitions of brands, businesses, or technologies from third parties. The Company’s success depends on its ability to integrate such acquired brands, businesses, or technologies, to continuously improve its manufacturing operations to gain efficiencies, to reduce supply chain costs and to streamline and 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. Future acquisitions could result in substantial additional debt, exposure to contingent liabilities, such as litigation or earn-out obligations, the potential impairment of goodwill or other intangible assets, or significant integration and transaction costs. Any of these risks, should they materialize, could adversely impact our business, results of operations, cash flows, and financial condition. Further, the Company is in the midst of implementing various plans to reduce costs and improve cash flows. These efforts are designed to reduce the complexity of the organization, improve the Company’s cash conversion cycle and increase investment in the Company’s most significant growth platforms. These initiatives are further designed to reduce costs associated with direct materials, indirect expenses, and distribution and logistics, among other things. These global initiatives 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. Other major productivity, streamlining and divestment programs may also be required in the future. Such initiatives may 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.

The Company’s business could be negatively impacted as a result of stockholder activism or an unsolicited takeover proposal or a proxy contest.

In recent years, proxy contests and other forms of stockholder activism have been directed against numerous public companies, including the Company. During 2018, the Company was the target of a proxy contest by a stockholder activist, which resulted in significant costs to the Company. If a similar proposal were to be made again, the Company would likely incur significant costs, which could have an adverse effect on the Company’s financial condition and results of operations. Such proposals may disrupt the Company’s business and divert the attention of the Company’s management and employees, and any perceived uncertainties as to the Company’s future direction resulting from such a situation could result in the loss of potential business opportunities, the perception that the Company needs a change in the direction of its business, or the perception that the Company is unstable or lacks continuity, which may be exploited by our competitors, cause concern to our current or potential customers, and make it more difficult for the Company to attract and retain qualified personnel and business partners, which could adversely affect the Company’s business. In addition, actual or perceived actions of activist stockholders may cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.

ITEM 2. PROPERTIES

The Company's primary corporate offices are located in an owned office space in Atlanta, Georgia and a leased office space in Norwalk, Connecticut. At December 31, 2019, the Company's global physical presence included approximately 55 manufacturing facilities (20 in the U.S.), approximately 85 regional distribution centers and warehouses (45 in the U.S.), approximately 145 offices for sales, research and development and administrative purposes (40 in the U.S.), as well as approximately 520 retail stores (490 in the U.S.) primarily related to Yankee Candle. Approximately 90% of our global properties are leased (95% in the U.S.), which primarily reflect the Yankee Candle retail stores.


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In general, the Company's properties are well-maintained, considered adequate and are utilized for their intended purposes. See Footnote 7 of the Notes to Consolidated Financial Statements for amounts invested in land, buildings and machinery and equipment. Also, see Footnote 12 of the Notes to Consolidated Financial Statements for information about the Company’s operating leases.
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
 
Title
Ravichandra K. Saligram
 
63
 
President and Chief Executive Officer
Christopher H. Peterson
 
53
 
Chief Financial Officer & President, Business Operations
Bradford R. Turner
 
47
 
Chief Legal and Administrative Officer and Corporate Secretary
Russell Torres
 
48
 
Group President
Laurel M. Hurd
 
50
 
Segment President, Learning and Development
Stephen B. Parsons
 
55
 
Chief Human Resources Officer

Ravichandra K. Saligram has served as President, Chief Executive Officer, and a member of the Board of Directors since October 2019. Prior to joining Newell Brands, Mr. Saligram was Chief Executive Officer and a member of the Board of Directors of Ritchie Bros. Auctioneers Incorporated, the world’s largest onsite industrial equipment auctioneer, from July 2014 until July 2019. From November 2010 to November 2013, Mr. Saligram was Chief Executive Officer, President, and a member of the Board of Directors of OfficeMax Inc., an omnichannel provider of workplace products, services and solutions. From 2003 through November 2010, Mr. Saligram served in executive management positions with ARAMARK, a global food services company, including President of ARAMARK International, Chief Globalization Officer and Executive Vice President of ARAMARK. From 1994 through 2002, Mr. Saligram served in various capacities for the InterContinental Hotels Group, a global hospitality company, including President of Brands and Franchise for North America; Chief Marketing Officer and Managing Director, Global Strategy; President, International; and President, Asia Pacific. Earlier in his career, Mr. Saligram held various general and brand management roles at S.C. Johnson & Son, Inc., a consumer products company, in the United States and overseas. Mr. Saligram currently serves on the Board of Directors for Church & Dwight Co., Inc., a consumer products company.

Christopher H. Peterson has been the Executive Vice President, Chief Financial Officer of Newell Brands since December 2018 and President, Business Operations since February 2020. He also served as Interim Chief Executive Officer from June 28, 2019 until October 2, 2019. From April 2018 to August 2018, Mr. Peterson served as the Executive Vice President and Chief Operating Officer, Operations of Revlon, Inc., a global beauty company. Before that, Mr. Peterson served as both Revlon’s Chief Operating Officer, Operations and Chief Financial Officer from June 2017 until March 2018, and leading into that, he held the title of Chief Operating Officer, Operations from April 2017 until June 2017. Prior to his positions at Revlon, Mr. Peterson held several senior management roles at Ralph Lauren Corporation, a designer, marketer, and distributor of premium lifestyle products, including serving as President, Global Brands from April 2015 to May 2016, Executive Vice President, Chief Administrative Officer & Chief Financial Officer from November 2013 to March 2015, and Senior Vice President and Chief Financial Officer from September 2012 to November 2013. Previously, Mr. Peterson held several financial management positions at The Procter & Gamble Company, a global consumer products company, from 1992 to 2012. Mr. Peterson serves on the Board of Directors of BJ’s Wholesale Club Holdings, Inc.

Bradford R. Turner has been Chief Legal and Administrative Officer and Corporate Secretary since August 2017 and served as Chief Legal Officer and Corporate Secretary from April 2016 to August 2017. 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.


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Russell Torres has served as Group President since May 2018. Previously, Mr. Torres joined the Company in May 2016 as Chief Transformation Officer, and he was responsible for integration and cost reduction efforts, as well as for the Company’s formerly held Waddington business. Prior to joining the Company, Mr. Torres was a partner at Bain & Company where he led large scale consumer products transformations and merger integrations from June 2013 to April 2016. From June 2011 to June 2013, Mr. Torres was a senior executive at Mondelez International in its North American Business Unit.

Laurel Hurd has served as Segment President, Learning and Development, leading both Newell Brands' Baby and Writing businesses since February 2019. Previously, Ms. Hurd was the Division CEO for the Company’s Writing division starting in February 2018. From 2016 to February 2019, she served as CEO of the Company’s Baby division. From May 2014 until 2016, Ms. Hurd was President of Baby and Parenting, leading the acquisition of Baby Jogger and later assuming leadership of the Home and Baby segment, including the Calphalon®, Goody®, and Rubbermaid® consumer brands. From 2012 to 2014, Ms. Hurd was Vice President, Global Development, leading both Marketing and Research & Development for the Graco®, Aprica®, and Teutonia® brands globally.

Steve Parsons has served as Chief Human Resources Officer of the Company since October 2019. Prior to joining the Company, Mr. Parsons served as Global Operating Partner, Z Capital Partners, the private equity fund management arm of Z Capital Group since 2016. Prior to that, he served as Chief Human Resources Officer at Stage Stores, Inc. from 2014 to 2016 and as Global Chief Human Resources Officer at OfficeMax from 2011 to 2014. Earlier in his career, Mr. Parsons held a variety of senior human resources roles at Rite Aid Corporation, Sears Holdings Corporation and Whirlpool Corporation.




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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 Nasdaq Stock Market (symbol: NWL). At January 31, 2020 there were 9,811 stockholders of record.

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, 2014 through December 31, 2019 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, 2014. 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.
chart-031b38a2db56f3650c1.jpg

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ISSUER PURCHASES OF EQUITY SECURITIES
The following table provides information about the Company’s purchases of equity securities during the quarter ended December 31, 2019:
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
 
Maximum
Approximate
Dollar Value of
Shares that May
Yet Be Purchased
Under the Plans
or Programs (1)
October
 

 
$

 

 
$
2,096,216,000

November
 
33,968

 
20.33

 

 
$
2,096,216,000

December
 
18,314

 
18.63

 

 
$

Total
 
52,282

 
19.74

 

 
 

(1)
Under the Company’s then existing share repurchase program (“SRP”), which expired on December 31, 2019 and was not extended, the Company could repurchase up to approximately $3.6 billion of its outstanding common stock through a combination of 10b5-1 automatic trading plans, discretionary market purchases or in privately negotiated transactions.
(2)
All shares purchased during the three months ended December 31, 2019, were acquired to satisfy employees’ tax withholding and payment obligations in connection with the vesting of awards of restricted stock units, which were purchased by the Company based on their fair market value on the vesting date.


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ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data 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. The selected financial data as of and for the years ended December 31, 2016 and 2015 were derived and updated to reflect discontinued operations from audited consolidated financial statements of the Company not included in this report.
 
 
As of and for the Years Ended December 31,
(in millions, except per share data)
 
2019 (1)
 
2018 (1)
 
2017 (1)
 
2016
 
2015
STATEMENTS OF OPERATIONS DATA (2) (3)
 
 
 
 
 
 
 
 
 
 
Net sales
 
$
9,714.9

 
$
10,154.0

 
$
11,170.4

 
$
10,680.4

 
$
5,777.1

Gross profit
 
3,219.4

 
3,517.7

 
3,810.5

 
3,578.2

 
2,237.8

Operating income (loss)
 
(481.7
)
 
(7,554.0
)
 
706.8

 
801.6

 
547.2

Income (loss) before income taxes
 
(851.6
)
 
(7,991.7
)
 
919.3

 
520.5

 
283.6

Income (loss) from continuing operations
 
186.1

 
(6,632.8
)
 
2,434.3

 
334.3

 
226.2

Income (loss) income from discontinued operations
 
(79.5
)
 
(309.7
)
 
314.5

 
193.5

 
123.8

Net income (loss)
 
$
106.6

 
$
(6,942.5
)
 
$
2,748.8

 
$
527.8

 
$
350.0

Earnings (loss) per share:
 
 
 
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations
 
$
0.44

 
$
(14.00
)
 
$
5.00

 
$
0.79

 
$
0.84

Income (loss) from discontinued operations (3)
 
(0.19
)
 
(0.65
)
 
0.65

 
0.46

 
0.46

Net income (loss)
 
$
0.25

 
$
(14.65
)
 
$
5.65

 
$
1.25

 
$
1.30

Diluted:
 
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations
 
$
0.44

 
$
(14.00
)
 
$
4.99

 
$
0.79

 
$
0.83

Income (loss) from discontinued operations
 
(0.19
)
 
(0.65
)
 
0.64

 
0.46

 
0.46

Net income (loss)
 
$
0.25

 
$
(14.65
)
 
$
5.63

 
$
1.25

 
$
1.29

Dividends
 
$
0.92

 
$
0.92

 
$
0.88

 
$
0.76

 
$
0.76

BALANCE SHEET DATA
 
 
 
 
 
 
 
 
 
 
Inventories
 
$
1,606.7

 
$
1,760.7

 
$
1,855.8

 
$
1,547.5

 
$
701.8

Working capital (4)
 
1,131.9

 
2,655.0

 
5,822.6

 
8,901.1

 
506.4

Total assets
 
15,642.0

 
17,722.4

 
33,135.5

 
33,834.8

 
7,211.4

Short-term debt and current portion of long-term debt
 
332.4

 
318.7

 
661.8

 
600.8

 
388.8

Long-term debt
 
5,391.3

 
6,696.3

 
9,889.1

 
11,286.9

 
2,621.0

Total stockholders’ equity
 
4,996.0

 
5,253.2

 
14,181.3

 
11,384.4

 
1,826.4

(1)
Supplemental data regarding 2019, 2018 and 2017 is provided in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations. During 2019 and 2018, the Company recorded non-cash impairment charges related to goodwill and indefinite-lived intangibles of $1.2 billion and $8.3 billion, respectively, in continuing operations and $112 million and $1.5 billion, respectively, in discontinued operations (see Footnotes 3 and 8 of the Notes to the Consolidated Financial Statements).
(2)
The results of Chesapeake Bay Candle, Sistema Plastics, Smith Mountain Industries, Jarden Corporation and Elmer’s Products, Inc., are included from their dates of acquisition of September 2017, April 2017, January 2017, April 2016 and October 2015, respectively.
(3)
The results of the Company’s Rubbermaid® medical cart business, Décor business, Tools business and Winter Sports business were included in continuing operations up until their dates of disposition of August 2015, June 2016, March 2017 and July 2017, respectively. Also, at various dates during 2017, the Company sold a number of smaller businesses, including its Rubbermaid® consumer storage totes business, its Teutonia® stroller business, its Lehigh business, its Firebuilding business and its triathlon apparel business, the results of which, were included in continuing operations up until their respective dates of disposition. The results of the Company’s Playing Cards business, Process Solutions business, Rexair business, Jostens business, Pure Fishing business, Goody business, Team Sports business and Waddington business, were included in discontinued operations up until their dates of disposition of December 2019, May 2019, May 2019, December 2018, December 2018, August 2018, June 2018 and June 2018, respectively.
(4)
Working capital is defined as current assets less current liabilities.

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Selected Quarterly Financial Data (Unaudited)
(in millions, except per share amounts)
 
First
Quarter (2)
 
Second
Quarter (2)
 
Third
Quarter (2)
 
Fourth
Quarter (2)
 
Total
2019
 
 
 
 
 
 
 
 
 
 
Net sales
 
$
2,041.8

 
$
2,480.6

 
$
2,568.6

 
$
2,623.9

 
$
9,714.9

Gross profit
 
654.6

 
865.4

 
846.9

 
852.5

 
3,219.4

Income (loss) from continuing operations
 
(74.2
)
 
123.0

 
(640.9
)
 
778.2

 
186.1

Income (loss) from discontinued operations
 
(77.0
)
 
(33.2
)
 
15.1

 
15.6

 
(79.5
)
Net income (loss)
 
$
(151.2
)
 
$
89.8

 
$
(625.8
)
 
$
793.8

 
$
106.6

Earnings (loss) per share (1):
 
 
 
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations
 
$
(0.18
)
 
$
0.29

 
$
(1.51
)
 
$
1.84

 
$
0.44

Income (loss) from discontinued operations
 
(0.18
)
 
(0.08
)
 
0.03

 
0.04

 
(0.19
)
Net income (loss)
 
$
(0.36
)
 
$
0.21

 
$
(1.48
)
 
$
1.88

 
$
0.25

Diluted:
 
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations
 
$
(0.18
)
 
$
0.29

 
$
(1.51
)
 
$
1.83

 
$
0.44

Income (loss) from discontinued operations
 
(0.18
)
 
(0.08
)
 
0.03

 
0.04

 
(0.19
)
Net income (loss)
 
$
(0.36
)
 
$
0.21

 
$
(1.48
)
 
$
1.87

 
$
0.25

 
 
 
 
 
 
 
 
 
 
 
 
 
First
Quarter
 
Second
Quarter (3)
 
Third
Quarter (3)
 
Fourth
Quarter (3)
 
Total
2018
 
 
 
 
 
 
 
 
 
 
Net sales
 
$
2,173.3

 
$
2,603.9

 
$
2,670.0

 
$
2,706.8

 
$
10,154.0

Gross profit
 
718.1

 
909.2

 
952.9

 
937.5

 
3,517.7

Income (loss) from continuing operations
 
(13.9
)
 
29.8

 
(6,715.2
)
 
66.5

 
(6,632.8
)
Income (loss) from discontinued operations
 
67.2

 
101.9

 
(595.8
)
 
117.0

 
(309.7
)
Net income (loss)
 
$
53.3

 
$
131.7

 
$
(7,311.0
)
 
$
183.5

 
$
(6,942.5
)
Earnings (loss) per share (1):
 
 
 
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations
 
$
(0.03
)
 
$
0.06

 
$
(14.26
)
 
$
0.15

 
$
(14.00
)
Income (loss) from discontinued operations
 
0.14

 
0.21

 
(1.26
)
 
0.26

 
(0.65
)
Net income (loss)
 
$
0.11

 
$
0.27

 
$
(15.52
)
 
$
0.41

 
$
(14.65
)
Diluted:
 
 
 
 
 
 
 
 
 
 
Income (loss) from continuing operations
 
$
(0.03
)
 
$
0.06

 
$
(14.26
)
 
$
0.15

 
$
(14.00
)
Income (loss) from discontinued operations
 
0.14

 
0.21

 
(1.26
)
 
0.26

 
(0.65
)
Net income (loss)
 
$
0.11

 
$
0.27

 
$
(15.52
)
 
$
0.41

 
$
(14.65
)
(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.
(2)
The results of operations for the first, second, third and fourth quarters of 2019 include non-cash charges for $63.0 million, $13.9 million, $1.1 billion and $74.7 million, respectively, for the impairment of goodwill, intangibles and other assets in continuing operations. Additionally, a non-cash charge of $112 million is included for the first quarter of 2019 for the impairment of goodwill and intangibles in discontinued operations (see Footnotes 3 and 8 of the Notes to the Consolidated Financial Statements).
(3)
The results of operations for the second, third and fourth quarters of 2018 include non-cash charges of $31.6 million, $8.1 billion and $170 million, respectively, related to the impairment of goodwill, intangibles and other assets in continuing operations. Additionally, non-cash charges include $454 million, $627 million and $383 million for the second, third and fourth quarters of 2018, respectively, for the impairment of goodwill and intangibles in discontinued operations (see Footnotes 3 and 8 of the Notes to the Consolidated Financial Statements).

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management's Discussion and Analysis of Financial Condition and Results of Operations section should be read in conjunction with “Financial Statements and Supplementary Data” included in Part II, Item 8 of this 2019 Annual Report, “Selected Financial Data” included in Part II, Item 6 of this 2019 Annual Report, and the Company's audited Consolidated Financial Statements and Notes thereto included elsewhere in this 2019 Annual Report. The following “Business Strategy” and "Recent Developments" sections below is a brief presentation of our business and certain significant items addressed in this section or elsewhere in this 2019 Annual Report. This section should be read along with the relevant portions of this 2019 Annual Report for a complete discussion of the events and items summarized below.

Overview

Newell Brands is a global marketer of consumer and commercial products that 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®, Marmot®, Oster®, Sunbeam®, FoodSaver®, Mr. Coffee®, Rubbermaid Commercial Products®, Graco®, Baby Jogger®, NUK®, Calphalon®, Rubbermaid®, Contigo®, First Alert®, Mapa®, Spontex®, Quickie® 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.
Business Strategy

The Company is currently executing a turnaround strategy, with the vision of building a global, next generation consumer products company that can unleash the full potential of its brands in a fast moving omni-channel environment. These strategies are designed to address key challenges facing the Company, including: shifting consumer preferences and behaviors; a highly competitive operating environment; a rapidly changing retail landscape, including the growth in e-commerce; continued macroeconomic and political volatility; and an evolving regulatory landscape.

The Company has identified the following strategic imperatives to address and adapt to these challenges during its turnaround period:
Strengthen the portfolio by investing in attractive categories aligned with its capabilities and strategy;
Sustainable profitable growth by focusing on innovation, as well as growth in digital marketing, e-commerce and its international businesses;
Attractive margins by driving productivity and overhead savings to reinvest into the business;
Cash efficiency by improving key working capital metrics, resulting in a lower cash conversion cycle; and
Build a winning team through engagement and focusing the best people on the right things.
Execution on these strategic imperatives will better position the Company for long-term sustainable growth in order to achieve its short-to-near-term goals of:
Growing core sales;
Improving operating margins;
Accelerating cash conversion cycle; and
Strengthening organizational capability and employee engagement.
Accelerated Transformation Plan

On December 31, 2019, the Company completed the sale of its Playing Cards business to Cartamundi Inc. and Cartamundi España S.L. for approximately $220 million, subject to adjustment for working capital and other items, and recorded a pre-tax loss of $5.0 million, which completed its previously announced ATP, which was designed to accelerate value creation and more rapidly transform the portfolio to one best positioned to leverage the Company’s advantaged capabilities in innovation, design and e-commerce. The ATP was also designed to significantly increase shareholder value through both meaningful returns of capital to shareholders and strengthened operational and financial performance, while simultaneously deleveraging the balance sheet.

In connection with the ATP, the Company completed the sale of several businesses during 2018 and 2019. In 2018, the Company sold: Goody, Jostens, Pure Fishing, Rawlings, Waddington and other related subsidiaries. In 2019, the Company sold: its Process Solutions business, Rexair, The United States Playing Card Company and other related subsidiaries. As a result of these transactions,

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the Company recorded aggregate pre-tax gains of $7.3 million and $831 million in 2019 and 2018, respectively, and received gross proceeds of $996 million and $5.1 billion in 2019 and 2018, respectively. At December 31, 2019, the Company’s total debt was $5.7 billion and cash and cash equivalents were $349 million.

In July 2019, the Company announced its decision to no longer pursue the sale of the majority of Commercial Products. The decision to keep Commercial Products was based on the strength of the brand, its competitive position in a large and growing category, and track record of cash flow generation, revenue growth and margin expansion. Management believes that retaining this business will further enhance the value creation opportunity for the Company. In October 2019, the Company decided to no longer pursue the sale of the Mapa/Spontex and Quickie businesses. The decision to keep these businesses was based on their financial profile, relative to expected sales proceeds.

At December 31, 2019, the Commercial Business is no longer classified as held for sale in the Consolidated Financial Statements and is reported in the Food and Commercial segment (see below) for all periods presented. During 2019, the Company recorded a cumulative catch-up adjustment of depreciation and amortization expense of $56.6 million to reflect the amounts that would have been recorded had these businesses been continuously classified as held and used.

See Footnote 3 of the Notes to Consolidated Financial Statements for further information.
Organizational Structure

The Company’s four primary operating segments are as follows:
Segment
  
Key Brands
  
Description of Primary Products
Appliances and Cookware
  
Calphalon®, Crock-Pot®, Mr. Coffee®, Oster® and Sunbeam®
  
Household products, including kitchen appliances, gourmet cookware, bakeware and cutlery
Food and Commercial
 
Ball®, FoodSaver®, Rubbermaid®, Sistema®, Rubbermaid Commercial Products®, Mapa®, Quickie® and Spontex®

 
Food storage and home storage products, fresh preserving products, vacuum sealing products, commercial cleaning and maintenance solutions, hygiene systems and material handling solutions
Home and Outdoor Living
  
Chesapeake Bay Candle®, Coleman®, Contigo®, ExOfficio®, First Alert®, Marmot®, WoodWick® and Yankee Candle®
  
Products for outdoor and outdoor-related activities, home fragrance products and connected home and security
Learning and Development
  
Aprica®, Baby Jogger®, Dymo®, Elmer’s®, EXPO®, Graco®, Mr. Sketch®, NUK®, Paper Mate®, Parker®, Prismacolor®, Sharpie®, Tigex® Waterman® and X-Acto®
  
Writing instruments, including markers and highlighters, pens and pencils; art products; activity-based adhesive and cutting products; labeling solutions; baby gear and infant care products

This new structure reflects the manner in which the chief operating decision maker regularly assesses information for decision-making purposes, including the allocation of resources. The Company also provides general corporate services to its segments which is reported as a non-operating segment, Corporate. All prior periods have been reclassified to conform to this reporting structure. See Footnote 18 of the Notes to Consolidated Financial Statements for further information.

Recent Developments

Annual Goodwill and Other Indefinite-Lived Intangible Asset Impairments

During the third quarter, management historically performs its annual goodwill and indefinite-lived intangible asset impairment testing. During the second quarter of 2019, the Company changed the date of its annual impairment test from July 1 to December 1. The change was made to more closely align the impairment test date with the Company’s annual planning and budgeting process, as well as its long-term planning and forecasting process. Pursuant to the authoritative accounting literature, in 2019 the Company was required to perform an annual impairment test as of the first day of its third quarter of 2019 (July 1) and also on December 1 to ensure that the change in impairment testing date would not delay or avoid an impairment charge. There were no goodwill impairment charges as a result of the Company's 2019 annual goodwill impairment testing performed in the third quarter at July 1, 2019, or in the fourth quarter, at December 1, 2019.

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During the third quarter impairment testing, the Company recorded impairment charges of $607 million within the Appliances and Cookware segment. The carrying value of certain Appliances and Cookware tradenames exceeded their fair value primarily due to the recently announced tariffs on Chinese imports at the time of the third quarter impairment testing, as well as a decline in sales volume due to a loss in market share for certain appliance categories from newly launched competitive products. Both of these factors resulted in downward revisions to forecasted results. In addition, in the Home and Outdoor Living segment, impairment charges of $151 million and $65.8 million were recorded within the Home Fragrance and Outdoor and Recreation reporting units, respectively. The carrying value of certain Home and Outdoor Living tradenames exceeded their fair value primarily within the Home Fragrance reporting unit. The reporting unit has begun to experience a shift in product mix that is expected to continue into the future, which resulted in a downward revision to forecasted results for one of its tradenames.

During the fourth quarter of 2019 impairment testing, the Company recorded impairment charges of $52.4 million within the Home and Outdoor Living segment. The carrying value of certain tradenames in the Outdoor and Recreation reporting unit exceeded their fair value primarily due to downward revisions to forecasted results subsequent to the third quarter impairment testing. In addition, in the Learning and Development segment, impairment charges of $24.2 million were recorded as the carrying value of a tradename in the Writing reporting unit exceeded its fair value primarily due to a faster than anticipated deterioration in sales for slime-related adhesive products, which resulted in a downward revision to forecasted results for one of its tradenames.

In addition to the charges recorded as a result of the annual impairment testing in 2019, the Company recorded in continuing operations approximately $311 million of additional impairment charges, which reflect the decreases in carrying values of goodwill and indefinite-lived intangible assets for Mapa and Quickie while these businesses were classified as held for sale. In 2019, the Company also recorded an impairment charge of approximately $11.5 million in continuing operations in connection with an overstatement of the Company's state income tax receivable, partially offset by a $8.8 million benefit in continuing operations related to change in uncertain tax position. Additional impairment charges of $112 million were recorded in discontinued operations for businesses divested in 2019.

See “Critical Accounting Estimates,” Footnote 1 and Footnote 8 of the Notes to Consolidated Financial Statements for further information.

Tender Offer and Debt Redemptions

In November 2019, the Company redeemed the entire $300 million aggregate principal of its 5.00% senior notes due 2023 for total consideration, excluding accrued interest, of approximately $308 million. In August 2019, the Company commenced cash tender offers (the “Tender Offers”) totaling approximately $700 million for up to a maximum aggregate principal amount of certain series of its senior notes. In August 2019, pursuant to the Tender Offers, the Company repurchased approximately $357 million aggregate principal amount of its 3.85% senior notes due 2023, $299 million of its 4.00% senior notes due 2024 and $44 million of its 3.90% senior notes due 2025 for total consideration, excluding accrued interest, of approximately $728 million. As a result of the aforementioned debt extinguishments, the Company recorded losses on the extinguishment of debt of $28.3 million during 2019.

See Footnote 10 of the Notes to Consolidated Financial Statements for further information.
Jarden Acquisition - Dissenting Shareholders Settlement

On July 19, 2019, the Court issued an order in the appraisal rights proceeding brought by certain former Jarden Corporation shareholders. The Court determined that the fair value of the remaining Jarden shares to be paid to the remaining dissenting shareholders as of the date of the Merger was $48.31 per share and ordered the payment of accrued interest, compounded quarterly, and accruing from the date of closing to the date of payment. On October 4, 2019, the Company paid the judgment in the amount of approximately $177 million, which cut off interest accumulation on the judgment amount. The dissenting shareholders have appealed the judgment. The Company reflected $171 million and $6 million as a financing cash outflow and operating cash outflow, respectively, within the Company’s Consolidated Statement of Cash Flows for the year ended December 31, 2019.

See Footnote 19 of the Notes to Consolidated Financial Statements for further information.

Impact of Tariffs

The United States Trade Representative (“USTR”) has imposed increased tariffs on some Chinese goods imported into the United States, resulting in increased costs for the Company. The Company has been successful at securing from the USTR exemptions and exclusions for some of our products, with the most notable exemptions being for our baby gear, which represents a substantial

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portion of the Company’s tariff exposure. The Company’s gross tariff exposure from the existing tariffs on Chinese goods was approximately $70 million for 2019. The Company has largely mitigated its tariff exposure, in part through pricing, productivity and, in some cases, relocation. The Phase 1 agreement signed on January 15, 2020 with China reduced tariffs under List 4a from 15% to 7.5% (effective February 14, 2020) and suspended tariffs under List 4b at 15%, which was due to go into effect on December 15, 2019. The terms of the agreement significantly reduced the estimated impact on tariffs for 2020. In spite of the agreement, a full year of previously implemented tariffs, could have a material impact on the Company's operating results and cash flows, with an estimated gross impact of approximately $90 million in 2020, primarily relating to our Appliances and Cookware, Consumer and Commercial, and Outdoor and Recreation businesses. The Company will continue to monitor the trade negotiations and deploy mitigation efforts to offset the gross exposure. However, there can be no assurance that the Company will be successful in its mitigation efforts.

New Treasury Regulations

On June 18, 2019, the U.S. Treasury and the Internal Revenue Service released temporary regulations under Section 245A as enacted by the 2017 Tax Reform and the Temporary Regulations to apply retroactively to the date the 2017 Tax Reform was enacted. The Temporary Regulations seek to limit the 100% dividends received deduction permitted by Section 245A for certain dividends received from controlled foreign corporations and to limit the applicability of the look-through exception to foreign personal holding company income for certain dividends received from controlled foreign corporations. Before the retroactive application of the Temporary Regulations, the Company benefited in 2018 from both the 100% dividends received deduction and the look-through exception to foreign personal holding company income. The Company has analyzed the Temporary Regulations and concluded that the relevant Temporary Regulations were not validly issued. Therefore, the Company has not accounted for the effects of the Temporary Regulations in its Consolidated Financial Statements for the period ending December 31, 2019. The Company believes it has strong arguments in favor of its position and believes it has met the more likely than not recognition threshold that its position will be sustained. However, due to the inherent uncertainty involved in challenging the validity of regulations, as well as a potential litigation process, there can be no assurances that the relevant Temporary Regulations will be invalidated or that a court of law will rule in favor of the Company. If the Company’s position on the Temporary Regulations is not sustained, the Company would be required to recognize an income tax expense of approximately $180 million to $220 million related to an income tax benefit from the 2018 year that was recorded based on regulations in existence at the time. In addition, the Company may be required to pay any applicable interest and penalties. The Company intends to vigorously defend its position.

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