NEWELL BRANDS INC. [NWL] Filings

10-Q 1 nwl-20240630.htm 10-Q nwl-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the Quarterly Period Ended June 30, 2024

Commission File Number 1-9608

NEWELL BRANDS INC.

(Exact name of registrant as specified in its charter)


Delaware						36-3514169
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

6655 Peachtree Dunwoody Road,

Atlanta, Georgia 30328

(Address of principal executive offices)

(Zip Code)

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 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 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post 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 an 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 Exchange Act). Yes ☐ No ☒

Number of shares of common stock outstanding (net of treasury shares) as of July 22, 2024: 416.0 million.

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TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION			2
Item 1. Financial Statements			2
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			26
Item 3. Quantitative and Qualitative Disclosures about Market Risk			37
Item 4. Controls and Procedures			37
PART II. OTHER INFORMATION			38
Item 1. Legal Proceedings			38
Item 1A. Risk Factors			38
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities			38
Item 5. Other Information			38
Item 6. Exhibits			39
SIGNATURES			40

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NEWELL BRANDS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Unaudited)

(Amounts in millions, except per share amounts)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net sales	$	2,033	$	2,204	$	3,686	$	4,009
Cost of products sold	1,334		1,575		2,483		2,898
Gross profit	699		629		1,203		1,111
Selling, general and administrative expenses	520		476		982		956
Restructuring costs, net	10		22		36		60
Impairment of goodwill, intangibles and other assets	6		11		6		11
Operating income	163		120		179		84
Non-operating expenses:
Interest expense, net	78		76		148		144
Loss on extinguishment and modification of debt	—		—		1		—
Other expense, net	1		9		6		21
Income (loss) before income taxes	84		35		24		(81)
Income tax provision (benefit)	39		17		(12)		3
Net income (loss)	$	45	$	18	$	36	$	(84)

Weighted average common shares outstanding:
Basic	415.2		414.2		415.0		414.0
Diluted	418.2		415.3		417.9		414.0

Earnings (loss) per share:
Basic	$	0.11	$	0.04	$	0.09	$	(0.20)
Diluted	$	0.11	$	0.04	$	0.09	$	(0.20)




COMPREHENSIVE INCOME (LOSS):
Net income (loss)	$	45	$	18	$	36	$	(84)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(35)		(10)		(59)		8
Pension and postretirement costs	—		—		8		(1)
Derivative financial instruments	7		(7)		14		(17)
Total other comprehensive loss, net of tax	(28)		(17)		(37)		(10)




Total comprehensive income (loss)	$	17	$	1	$	(1)	$	(94)

See Notes to Condensed Consolidated Financial Statements (Unaudited).

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NEWELL BRANDS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(Amounts in millions, except par values)


	June 30, 2024		December 31, 2023
Assets:
Cash and cash equivalents	$	382	$	332
Accounts receivable, net	1,072		1,195
Inventories	1,639		1,531
Prepaid expenses and other current assets	332		296

Total current assets	3,425		3,354
Property, plant and equipment, net	1,153		1,212
Operating lease assets	481		515
Goodwill	3,055		3,071
Other intangible assets, net	2,412		2,488
Deferred income taxes	757		806
Other assets	765		717
Total assets	$	12,048	$	12,163

Liabilities:
Accounts payable	$	1,079	$	1,003

Other accrued liabilities	1,440		1,565
Short-term debt and current portion of long-term debt	983		329

Total current liabilities	3,502		2,897
Long-term debt	4,059		4,575
Deferred income taxes	236		241
Operating lease liabilities	414		446
Other noncurrent liabilities	757		892
Total liabilities	8,968		9,051
Commitments and contingencies (Footnote 16)
Stockholders’ equity:
Preferred stock (10.0 authorized shares, $1.00 par value, no shares issued at June 30, 2024 and December 31, 2023)	—		—
Common stock (800.0 authorized shares, $1.00 par value, 441.2 shares and 439.6 shares issued at June 30, 2024 and December 31, 2023, respectively)	441		440
Treasury stock, at cost (25.8 shares and 25.3 shares at June 30, 2024 and December 31, 2023, respectively)	(631)		(627)
Additional paid-in capital	6,887		6,915
Retained deficit	(2,690)		(2,726)
Accumulated other comprehensive loss	(927)		(890)


Total stockholders’ equity	3,080		3,112
Total liabilities and stockholders’ equity	$	12,048	$	12,163

See Notes to Condensed Consolidated Financial Statements (Unaudited).

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NEWELL BRANDS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Amounts in millions)


	Six Months Ended June 30,
	2024		2023
Cash flows from operating activities:
Net income (loss)	$	36	$	(84)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	164		159
Impairment of goodwill, intangibles and other assets	6		11

Deferred income taxes	14		4
Stock based compensation expense	33		20
Pension settlement charge	—		5

Other, net	(8)		(34)
Changes in operating accounts:
Accounts receivable	84		(14)
Inventories	(139)		282
Accounts payable	80		(54)
Accrued liabilities and other, net	(206)		(18)
Net cash provided by operating activities	64		277
Cash flows from investing activities:
Capital expenditures	(112)		(142)

Swap proceeds	17		23
Other investing activities, net	11		25
Net cash used in investing activities	(84)		(94)
Cash flows from financing activities:
Payments on short-term debt, net	(52)		(23)

Proceeds from short-term debt with original maturities greater than 90 days	431		—
Payments on short-term debt with original maturities greater than 90 days	(225)		—
Payments on current portion of long-term debt	—		(1)


Cash dividends	(60)		(126)


Equity compensation activity and other, net	(16)		(8)
Net cash provided by (used in) financing activities	78		(158)
Exchange rate effect on cash, cash equivalents and restricted cash	(14)		2
Increase in cash, cash equivalents and restricted cash	44		27
Cash, cash equivalents and restricted cash at beginning of period	361		303
Cash, cash equivalents and restricted cash at end of period	$	405	$	330

Supplemental disclosures:
Restricted cash at beginning of period	$	29	$	16
Restricted cash at end of period	23		13

See Notes to Condensed Consolidated Financial Statements (Unaudited).

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NEWELL BRANDS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)

(Amounts in millions, except per share amounts)


	Common Stock		Treasury Stock		Additional Paid-In Capital		Retained Earnings (Deficit)		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
Balance at March 31, 2024	$	441	$	(631)	$	6,900	$	(2,735)	$	(899)	$	3,076
Comprehensive income (loss)	—		—		—		45		(28)		17
Dividends declared on common stock - $0.07 per share	—		—		(29)		—		—		(29)
Equity compensation, net of tax	—		—		16		—		—		16





Balance at June 30, 2024	$	441	$	(631)	$	6,887	$	(2,690)	$	(927)	$	3,080

Balance at December 31, 2023	$	440	$	(627)	$	6,915	$	(2,726)	$	(890)	$	3,112
Comprehensive income (loss)	—		—		—		36		(37)		(1)
Dividends declared on common stock - $0.14 per share	—		—		(59)		—		—		(59)
Equity compensation, net of tax	1		(4)		31		—		—		28





Balance at June 30, 2024	$	441	$	(631)	$	6,887	$	(2,690)	$	(927)	$	3,080


	Common Stock		Treasury Stock		Additional Paid-In Capital		Retained Earnings (Deficit)		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
Balance at March 31, 2023	$	439	$	(627)	$	6,965	$	(2,440)	$	(1,004)	$	3,333
Comprehensive income (loss)	—		—		—		18		(17)		1
Dividends declared on common stock - $0.07 per share	—		—		(30)		—		—		(30)
Equity compensation, net of tax	1		—		10		—		—		11



Balance at June 30, 2023	$	440	$	(627)	$	6,945	$	(2,422)	$	(1,021)	$	3,315

Balance at December 31, 2022	$	439	$	(623)	$	7,052	$	(2,338)	$	(1,011)	$	3,519
Comprehensive loss	—		—		—		(84)		(10)		(94)
Dividends declared on common stock - $0.30 per share	—		—		(126)		—		—		(126)
Equity compensation, net of tax	1		(4)		19		—		—		16





Balance at June 30, 2023	$	440	$	(627)	$	6,945	$	(2,422)	$	(1,021)	$	3,315

See Notes to Condensed Consolidated Financial Statements (Unaudited).

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NEWELL BRANDS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Footnote 1 — Basis of Presentation and Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements of Newell Brands Inc. (collectively with its subsidiaries, the “Company”) have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) and do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. In the opinion of management, the unaudited condensed consolidated financial statements include all adjustments (including normal recurring accruals) considered necessary for a fair statement of the financial position and the results of operations of the Company. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements, and the footnotes thereto, included in the Company’s most recent Annual Report on Form 10-K. The Condensed Consolidated Balance Sheet at December 31, 2023 has been derived from the audited financial statements as of that date, but it does not include all the information and footnotes required by U.S. GAAP for a complete financial statement. Certain prior year amounts have been reclassified to conform to the current year presentation.

Use of Estimates and Risks

Management’s application of U.S. GAAP in preparing the Company’s condensed consolidated financial statements requires the pervasive use of estimates and assumptions. The Company continues to be impacted by inflationary pressures, soft global demand, major retailers’ focus on tight control over inventory levels, elevated interest rates and indirect macroeconomic impacts from geopolitical conflicts. These collective macroeconomic trends, the duration or severity of which are highly uncertain, are still changing the retail and consumer landscape and are expected to continue to negatively impact the Company’s operating results, cash flows and financial condition during the current year. As consumers continue to face widespread increases in prices and elevated interest rates, their discretionary spending and purchase patterns may continue to be unfavorably impacted. The high level of uncertainty of these factors has resulted in estimates and assumptions that have the potential for more variability and are more subjective. In addition, some of the other inherent estimates and assumptions used in the Company’s forecasted results of operations and cash flows that form the basis of the determination of the fair value of the reporting units for goodwill and indefinite-lived intangible asset impairment testing are outside the control of management, including interest rates, cost of capital, tax rates, industry growth, credit ratings, foreign exchange rates and labor inflation. Although management has made its best estimates and assumptions based upon current information, actual results could materially differ given the uncertainty of these factors and may require future changes to such estimates and assumptions, including reserves, which may result in future expense or impairment charges.

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. Also, the Company typically 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. In addition, uncertainty still remains over the volatility and direction of future consumer and customer demand patterns, as well as inflationary pressures. Accordingly, the Company’s results of operations and cash flows for the three and six months ended June 30, 2024 may not necessarily be indicative of the results that may be expected for the year ending December 31, 2024.

Recent Accounting Pronouncements

Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification (“ASC”). The Company considers the applicability and impact of recently issued and proposed ASUs.

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” The amendments in this update require that a public entity disclose on an annual and interim basis significant segment expenses that are regularly provided to the entity’s chief operating decision maker (the “CODM”), nature and amount of other financial information by reportable segment and any additional measures of a segment’s profit or loss used by the CODM in assessing segment performance and deciding allocation of resources. The amendments in ASU 2023-07 are effective for fiscal

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years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company does not expect the adoption of ASU 2023-07 to have a material impact on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The standard requires all entities subject to income taxes to disclose disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The new requirement will be effective for annual periods beginning after December 15, 2024. The guidance will be applied on a prospective basis with the option to apply the standard retrospectively. Early adoption is permitted. The Company does not expect the adoption of ASU 2023-09 to have a material impact on the consolidated financial statements.

Adoption of New Accounting Guidance

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” In January 2021, the FASB clarified the scope of this guidance with the issuance of ASU 2021-01, Reference Rate Reform: Scope. ASU 2020-04 provides optional expedients and exceptions to account for contracts, hedging relationships and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate if certain criteria are met. This ASU was further updated with the issuance of ASU 2022-06, Reference Rate Reform: Deferral of the Sunset Date of Topic 848, which extends the sunset date of the guidance. The Company adopted ASU 2020-04 and it did not have a material impact on its consolidated financial statements.

In October 2022, the FASB issued ASU 2022-04, “Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations.” This ASU requires that a buyer in a supplier finance program disclose sufficient information about the program to allow a user of financial statements to better consider the effect of the programs on an entity’s working capital, liquidity and cash flows. This ASU is effective for fiscal years beginning after December 15, 2022, except for the amendment on roll forward information which is effective for fiscal years beginning after December 15, 2023. The Company adopted ASU 2022-04 which did not have a material impact on its consolidated financial statements. See disclosure hereafter for further information.

Sales of Accounts Receivables

Factored receivables at June 30, 2024 associated with the Company’s existing factoring agreement for certain customer receivables (the “Customer Receivables Purchase Agreement”) were approximately $360 million, an increase of approximately $120 million from December 31, 2023. Transactions under this agreement are accounted for as sales of accounts receivable, and the receivables sold are removed from the Condensed Consolidated Balance Sheet at the time of the sales transaction. The Company classifies the proceeds received from the sales of accounts receivable as an operating cash flow and collections of accounts receivables not yet submitted to the financial institution as a financing cash flow in the Condensed Consolidated Statement of Cash Flows. The Company records the discount as other expense, net in the Condensed Consolidated Statement of Operations.

In addition, the Company, through a wholly-owned special purpose entity (“SPE”) has a three-year agreement with a financial institution to sell up to $225 million, between February and April of each year and up to $275 million at all other times, of certain other customer receivables without recourse on a revolving basis (the “Receivables Facility”). Under the Receivables Facility, certain of the Company’s subsidiaries continuously sell their accounts receivables originating in the U.S. to the SPE and the SPE sells the receivables to the financial institution. The SPE is a variable interest entity for which the Company is considered to be the primary beneficiary. The SPE’s sole business consists of the purchase of receivables from certain subsidiaries of the Company and the subsequent transfer of such receivables to the financial institution. Although the SPE is consolidated in the Company’s condensed consolidated financial statements, it is a separate legal entity with separate creditors. The assets of the SPE are not available to pay creditors of the Company or its subsidiaries. The fair value of these servicing arrangements as well as the fees earned were immaterial. The Company accounts for receivables sold from the SPE to the financial institution as a sale of financial assets and derecognizes the trade receivables from the Company’s Condensed Consolidated Balance Sheet. The balance of outstanding accounts receivables sold to the financial institution as of June 30, 2024 was $145 million, an increase of approximately $100 million from December 31, 2023. Cash received under the Receivables Facility is classified as an operating cash flow and collections of accounts receivables not yet submitted to the financial institution as a financing cash flow in the Condensed Consolidated Statement of Cash Flows. The Company records the discount as other expense, net in the Condensed Consolidated Statement of Operations.

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Supplier Finance Program Obligations

In June 2024, the Company entered into an arrangement with a third-party vendor which provides a service for the Company’s suppliers, at their sole discretion, to sell their receivables due from the Company with various financial institutions, who at their sole discretion, contract with the third-party vendor to participate in the supplier finance program (the “New SCF Program”).

The Company and its suppliers agree on contractual terms for the goods and services procured, including prices, quantities and payment terms, regardless of whether the supplier elects to participate in the New SCF Program. The suppliers sell goods or services, as applicable, to the Company and issue the associated invoices to the Company based on the agreed-upon contractual terms. Suppliers that participate in the New SCF Program, at their sole discretion, determine which invoices, if any, they want to sell to the third-party vendor. The suppliers’ voluntary inclusion of invoices in the New SCF Program does not change the Company’s existing contractual terms with its suppliers. The Company does not provide any guarantees or collateral under the New SCF Program, nor does it have any economic interest in a supplier’s decision to participate in the New SCF Program. Amounts due under the New SCF Program will be included in accounts payable in the Condensed Consolidated Balance Sheets and as operating cash flows in the Condensed Consolidated Statement of Cash Flows.

Prior to the New SCF Program, a global financial institution offered a voluntary supply chain finance program (the “Former SCF Program”) which similarly enabled suppliers, at their sole discretion, to sell their receivables due from the Company to the financial institution on a non-recourse basis. Pursuant to the Second Amendment (defined hereafter), a lender under the Credit Revolver (defined hereafter) that also participated in the Former SCF Program secured its related financing pursuant to the terms of the Credit Revolver. See Footnote 8 for further information. In April 2024, the Company exercised its right to terminate the Former SCF Program with the financial institution.

The Company continued to reflect invoices participating in the Former SCF Program as current liabilities in the Condensed Consolidated Balance Sheet and cash flows from operating activities in the Condensed Consolidated Statement of Cash Flows as of and for the six months ended June 30, 2024, respectively. Supplier payment terms for those participating in the program average approximately 129 days. The termination did not materially impact the Company’s operating results, financial condition or liquidity.

While the Company has entered into the New SCF Program to offer its vendors another supply chain financing option after the termination of the Former SCF program, there has been no activity under the New SCF Program at and during the period ending June 30, 2024. As such, the following table sets forth the outstanding payment obligations due to the financial institution and activities related to the suppliers who participated in the Former SCF Program:


Balance at December 31, 2023	$	96
Invoices participating in the Former SCF Program	111
Invoices paid to the financial institution	(180)
Balance at June 30, 2024	$	27

Footnote 2 — Accumulated Other Comprehensive Income (Loss)

The following table displays the changes in Accumulated Other Comprehensive Income (Loss) (“AOCL”) by component, net of tax, for the six months ended June 30, 2024 (in millions):


	Cumulative Translation Adjustment		Pension and Postretirement Costs		Derivative Financial Instruments		AOCL
Balance at December 31, 2023	$	(668)	$	(196)	$	(26)	$	(890)
Other comprehensive income (loss) before reclassifications	(59)		9		7		(43)
Amounts reclassified to earnings	—		(1)		7		6
Net current period other comprehensive income (loss)	(59)		8		14		(37)
Balance at June 30, 2024	$	(727)	$	(188)	$	(12)	$	(927)

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Reclassifications from AOCL to the results of operations for the three and six months ended June 30, 2024 and 2023 were pretax (income) expense of (in millions):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

Pension and postretirement benefit plans (1)	$	—	$	5	$	(1)	$	5
Derivative financial instruments (2)	5		1		9		(8)

(1)See Footnote 10 for further information.

(2)See Footnote 9 for further information.

The income tax provision (benefit) allocated to the components of AOCL for the periods indicated are as follows (in millions):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Foreign currency translation adjustments	$	4	$	(12)	$	16	$	(18)
Pension and postretirement benefit costs	(1)		1		2		1
Derivative financial instruments	3		(2)		5		(5)
Income tax provision (benefit) related to AOCL	$	6	$	(13)	$	23	$	(22)

Footnote 3 — Restructuring

To better align its resources with its strategy and operating model and to reduce the cost structure of its global operations, the Company commits to restructuring plans as necessary and as follows:

Organizational Realignment Plan

In January 2024, the Company announced an organizational realignment, which is expected to strengthen the Company’s front-end commercial capabilities, such as consumer understanding and brand communication, in support of the “where to play” and “how to win” strategy choices the Company unveiled in June of 2023 (the “Realignment Plan”). In addition to improving accountability, the Realignment Plan is designed to unlock operational efficiencies and cost savings, reduce complexity and free up funds for reinvestment. As part of the Realignment Plan, the Company is making several operating model changes, which entail: standing up a cross-functional brand management organization, realigning business unit finance to fully support the new global brand management model, further simplifying and standardizing regional go-to-market organizations, and centralizing domestic retail sales teams, the digital technology team, business-aligned accounting personnel, the Manufacturing Quality team, and the Human Resources functions into the appropriate center-led teams to drive standardization, efficiency and scale with a One Newell approach. The Company will also further optimize the Company’s real estate footprint and pursue other cost reduction initiatives. These actions are expected to be substantially implemented by the end of 2024, subject to local law and consultation requirements. Restructuring and restructuring-related charges associated with these actions are estimated to be in the range of $75 million to $90 million and are expected to be substantially incurred by the end of 2024. This estimate of charges consists primarily of $60 million to $70 million related to cash severance payments and other termination benefits, $11 million to $16 million associated with office space reduction and consolidation and approximately $4 million of other charges. The Company expects the majority of the aggregate charges will be cash expenditures.

The Company commenced organizational realignment activities during the first quarter of 2024. During the three and six months ended June 30, 2024, the Company recorded restructuring charges of $9 million and $31 million, respectively. During the three and six months ended June 30, 2024, the Company also recorded restructuring-related charges of $8 million in connection with the Realignment Plan. The Company has incurred aggregate charges of $39 million since inception in connection with the Realignment Plan.

In June 2024, as part of optimizing the Company’s real estate footprint, the Company entered into a lease agreement for a new location of its Corporate headquarters in Atlanta, Georgia, which will allow it to consolidate five different facilities and bring together employees in the area into a single location. See Footnote 5 for further information. Also in June 2024, the Company entered into an agreement with an unrelated third party to sell and leaseback its current headquarters facility, which is expected to close during the third quarter of fiscal year 2024. The Company intends to occupy the current facility while waiting to build-out

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the new facility, which is anticipated to be completed during the first half of fiscal year 2025. Management concluded the sale of the current headquarters facility satisfied the criteria to be classified as held for sale at June 30, 2024. As such, the Company wrote down the carrying value of the assets held for sale to their fair value less cost to sell. During the second quarter of 2024, the Company recorded a net charge of $6 million inclusive of a fair market value adjustment related to the below market rental payments associated with the sale leaseback transaction, which was recorded within impairment of goodwill, intangibles and other assets in the Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2024. The underlying assets held for sale were classified within prepaid expenses and other current assets in the Condensed Consolidated Balance Sheet as of June 30, 2024.

Network Optimization Project

In May 2023, the Company announced a restructuring and cost savings initiative that is intended to simplify and streamline its North American distribution network (the “Network Optimization Project”) in order to improve the Company’s cost structure and operating margins while maintaining focus on customer and consumer fulfillment. The Company initiated implementation of the Network Optimization Project during the second quarter of 2023 and expects it to be substantially implemented by the end of fiscal year 2024. The Network Optimization Project incorporates a variety of initiatives, including a reduction in the overall number of distribution centers, an optimization of distribution by location, and completion of select automation investments intended to further streamline the Company’s cost structure and to maximize operating performance. The Company currently estimates that it will incur approximately $37 million to $49 million in restructuring and restructuring-related charges associated with execution of the Network Optimization Project and expects that the charges incurred will be substantially complete by the end of 2024. This estimate of charges consists primarily of $8 million to $11 million related to cash severance payments and other termination benefits and approximately $29 million to $38 million associated with industrial site reductions. The Company expects approximately $35 million to $44 million of the aggregate charges will be cash expenditures.

In connection with the Network Optimization Project, the Company recorded restructuring and restructuring-related charges for the periods indicated as follows (in millions):


	Three Months Ended June 30,				Six Months Ended June 30,				Incurred since inception
	2024		2023		2024		2023
Restructuring charges	$	—	$	2	$	3	$	2	$	10
Restructuring-related charges	6		8		8		8		24
Total	$	6	$	10	$	11	$	10	$	34

Project Phoenix

In January 2023, the Company announced a restructuring and savings initiative (“Project Phoenix”) that was intended to strengthen the Company by leveraging its scale to further reduce complexity, streamline its operating model and drive operational efficiencies. Project Phoenix was substantially implemented by the end of 2023 and incorporated a variety of initiatives designed to simplify the organizational structure, streamline the Company’s real estate portfolio, centralize the Company’s supply chain functions, which included manufacturing, distribution, transportation and customer service, transition to a unified One Newell go-to-market model in key international geographies, and reduce overhead costs. The Company estimates that it will incur approximately $100 million to $130 million in restructuring and restructuring-related charges in connection with Project Phoenix. These charges consist primarily of $80 million to $105 million in charges related to severance payments and other termination benefits; $15 million to $20 million in charges associated with office space reductions; and approximately $5 million of other charges, including those associated with employee transition and legal costs. The Company expects approximately $95 million to $120 million of the aggregate charges will be cash expenditures. While the program was mostly complete by the end of 2023, charges will continue to be recognized as the Company completes remaining actions in accordance with local regulations and consultation requirements. All cash payments are expected to be paid within one year of charges incurred.

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In connection with Project Phoenix, the Company recorded restructuring and restructuring-related charges for the periods indicated as follows (in millions):


	Three Months Ended June 30,				Six Months Ended June 30,				Incurred since inception
	2024		2023		2024		2023
Restructuring costs	$	—	$	17	$	1	$	53	$	79
Restructuring-related costs	2		4		5		10		24
Total	$	2	$	21	$	6	$	63	$	103

Restructuring charges, net and restructuring-related charges incurred from inception for the Realignment Plan, Network Optimization Project and Project Phoenix (collectively, the “Plans”) were as follows (in millions):


	Severance and termination costs		Contract termination and other costs		Total restructuring costs		Restructuring-related costs		Total costs
Realignment Plan	$	30	$	1	$	31	$	8	$	39
Network Optimization Project	6		4		10		24		34
Project Phoenix	77		2		79		24		103
	$	113	$	7	$	120	$	56	$	176

Other Restructuring and Restructuring-Related Charges

The Company also incurs other restructuring and restructuring-related charges in connection with various discrete initiatives. The Company recorded $1 million of other restructuring costs for both the three and six months ended June 30, 2024 and $3 million and $5 million, during the three and six months ended June 30, 2023, respectively.

Restructuring-related charges are recorded in cost of products sold, selling, general and administrative expenses (“SG&A”) and impairment of other assets in the Condensed Consolidated Statements of Operations based on the nature of the underlying charges incurred. During the three months ended June 30, 2024 and 2023, the Company recorded immaterial and $5 million, respectively of other restructuring-related charges. During the six months ended June 30, 2024 and 2023, the Company recorded other restructuring-related charges of $8 million and $12 million, respectively.

Restructuring charges, net incurred by reportable business segments for all restructuring activities for the periods indicated and the total charges since inception for the Plans are as follows (in millions):


	Three Months Ended June 30,				Six Months Ended June 30,				Total incurred since inception of Plans
	2024		2023		2024		2023
Home and Commercial Solutions	$	3	$	11	$	10	$	27	$	52
Learning and Development	3		6		8		11		23
Outdoor and Recreation	2		2		3		8		14
Corporate	2		3		15		14		31
	$	10	$	22	$	36	$	60	$	120

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Accrued restructuring costs for the six months ended June 30, 2024 were as follows (in millions):


	Balance at December 31, 2023		Restructuring Costs, Net		Payments		Balance at June 30, 2024
Severance and termination costs	$	30	$	32	$	(44)	$	18
Contract termination and other costs	—		4		(4)		—
	$	30	$	36	$	(48)	$	18

Accrued restructuring costs for the six months ended June 30, 2023 were as follows (in millions):


	Balance at December 31, 2022		Restructuring Costs, Net		Payments		Foreign Currency and Other		Balance at June 30, 2023
Severance and termination costs	$	7	$	57	$	(48)	$	—	$	16
Contract termination and other costs	—		3		(1)		(1)		1
	$	7	$	60	$	(49)	$	(1)	$	17

Footnote 4 — Inventories

Inventories are comprised of the following (in millions):


	June 30, 2024		December 31, 2023
Raw materials and supplies	$	203	$	214
Work-in-process	158		173
Finished products	1,278		1,144
	$	1,639	$	1,531

Footnote 5 — Property, Plant and Equipment, Net

Property, plant and equipment, net, is comprised of the following (in millions):


	June 30, 2024		December 31, 2023
Land	$	67	$	75
Buildings and improvements	643		678
Machinery and equipment	2,479		2,517
	3,189		3,270
Less: Accumulated depreciation	(2,036)		(2,058)
	$	1,153	$	1,212

Depreciation expense was $44 million and $51 million for the three months ended June 30, 2024 and 2023, respectively, and $95 million and $105 million for the six months ended June 30, 2024 and 2023, respectively.

In June 2024, the Company entered into an agreement for a right of use operating lease, for its Corporate headquarters in Atlanta, Georgia, with an initial lease term of 14.5 years. The Company has not yet taken possession of the facility; therefore it has not reflected the right of use asset and lease liability in the Condensed Consolidated Balance Sheet at June 30, 2024. The gross minimum contractual aggregate lease payments are approximately $106 million. See Footnote 3 for additional information.

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Footnote 6 — Goodwill and Other Intangible Assets, Net

Goodwill activity for the six months ended June 30, 2024 is as follows (in millions):


					June 30, 2024
Segments	Net Book Value at December 31, 2023		Foreign Exchange		Gross Carrying Amount		Accumulated Impairment Charges		Net Book Value
Home and Commercial Solutions	$	747	$	—	$	4,052	$	(3,305)	$	747
Learning and Development	2,324		(16)		3,395		(1,087)		2,308
Outdoor and Recreation	—		—		788		(788)		—
	$	3,071	$	(16)	$	8,235	$	(5,180)	$	3,055

Other intangible assets, net, are comprised of the following (in millions):


	June 30, 2024						December 31, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
Tradenames — indefinite life (1)	$	1,199	$	—	$	1,199	$	1,535	$	—	$	1,535
Tradenames — other (1)	549		(126)		423		232		(105)		127
Capitalized software	639		(528)		111		628		(512)		116
Patents and intellectual property	22		(21)		1		22		(20)		2
Customer relationships and distributor channels	1,070		(392)		678		1,078		(370)		708

	$	3,479	$	(1,067)	$	2,412	$	3,495	$	(1,007)	$	2,488

(1)In alignment with the Company’s strategy, the Company determined that certain tradenames with aggregate carrying values of $322 million no longer met the criteria to be classified as indefinite-lived tradenames effective January 1, 2024. The estimated useful lives range from 10 to 15 years, which will increase the Company’s annual amortization expense by $25 million, approximately $6 million quarterly (approximately $0.01 net loss per share per quarter).

Amortization expense for intangible assets was $35 million and $27 million for the three months ended June 30, 2024 and 2023, respectively, and $69 million and $54 million for the six months ended June 30, 2024 and 2023, respectively.

During the second quarter of 2023, the Company concluded that a triggering event had occurred for an indefinite-lived tradename in the Home Fragrance reporting unit in the Home and Commercial Solutions segment and for the goodwill associated with the Baby reporting unit in the Learning and Development segment, as a result of a downward revision of forecasted cash flows due to softening global demand, primarily caused by continued inflationary pressure that is impacting discretionary spending behavior of consumers, as well as rising interest rates. The Company performed a quantitative impairment test and determined that the indefinite-lived tradename in the Home and Commercial Solutions segment was impaired. During the three and six months ended June 30, 2023, the Company recorded an aggregate non-cash impairment charge of $8 million, as the carrying value of the tradename exceeded its fair value. The Company concluded that the Baby reporting unit goodwill was not impaired during the second quarter of 2023.

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Footnote 7 — Other Accrued Liabilities

Other accrued liabilities are comprised of the following (in millions):


	June 30, 2024		December 31, 2023
Customer accruals	$	628	$	659
Accrued compensation	159		190
Operating lease liabilities	117		122
Accrued self-insurance liabilities, contingencies and warranty	87		92
Accrued interest expense	80		74
Accrued marketing and freight expenses	63		71
Accrued income taxes	61		89
Other	245		268
	$	1,440	$	1,565

Footnote 8 — Debt

Debt is comprised of the following at the dates indicated (in millions):


	June 30, 2024		December 31, 2023
4.00% senior notes due 2024 (1) (2)	$	199	$	198
4.875% senior notes due 2025 (1)	499		498
3.90% senior notes due 2025	47		47
4.20% senior notes due 2026	1,981		1,980
6.375% senior notes due 2027	480		488
6.625% senior notes due 2029	474		486
5.375% senior notes due 2036	417		417
5.50% senior notes due 2046	658		658
Revolving credit facility (1)	285		131


Other debt	2		1
Total debt	5,042		4,904
Short-term debt and current portion of long-term debt	(983)		(329)
Long-term debt	$	4,059	$	4,575

(1)Included in short-term debt and current portion of long-term debt at June 30, 2024.

(2)Included in short-term debt and current portion of long-term debt at December 31, 2023.

Senior Notes

On February 9, 2024, Moody’s Corporation (“Moody’s”) downgraded the Company’s senior unsecured debt rating to “Ba3”. As a result of Moody’s downgrade, certain of the Company’s outstanding senior notes currently aggregating to approximately $3.1 billion (the “Coupon-Step Notes”) were subject to an interest rate increase of 25 basis points. The change to the interest rate due to the downgrade will increase the Company’s interest expense by approximately $8 million on an annualized basis (approximately $6 million in 2024).

On February 14, 2024, S&P Global Inc. (“S&P”) downgraded the Company’s debt rating to “BB-”. As a result of the S&P downgrade, the Coupon-Step Notes were subject to an additional interest rate increase of 25 basis points. The change to the interest rate due to the downgrade will increase the Company’s interest expense by approximately $8 million on an annualized basis (approximately $6 million in 2024).

The S&P and Moody’s downgrades will collectively increase the Company’s interest expense by approximately $16 million in the aggregate on an annualized basis (approximately $12 million in 2024).

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Revolving Credit Facility

The Company had a $1.5 billion senior unsecured revolving credit facility (the “Credit Revolver”) maturing in August 2027. On March 27, 2023, the Company entered into an amendment (the “First Amendment”) to (i) include non-cash expenses resulting from grants of stock awards among the items that may be added to Consolidated Net Income when calculating Consolidated Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), as defined in the First Amendment, and (ii) lower the Interest Coverage Ratio, as defined in the First Amendment, for the fiscal quarters ending on June 30, 2023, September 30, 2023, December 31, 2023 and March 31, 2024.

On February 7, 2024, the Company, certain of its subsidiaries, as subsidiary borrowers, and certain of its subsidiaries, as subsidiary guarantors, entered into a second amendment to the Credit Revolver agreement (the “Second Amendment”). The Second Amendment, among other things, (i) reduced the commitments of the lenders from $1.5 billion to $1.0 billion, (ii) replaced the Company’s existing financial covenants with new financial covenants testing the Company’s Collateral Coverage Ratio and Total Net Leverage Ratio (each further defined in the Second Amendment), (iii) required the Company and certain of the Company’s domestic and foreign subsidiaries (collectively the “Guarantors”) to guarantee all obligations under the Credit Revolver including, without limitation, obligations in respect of extensions of credit to any of the borrowers, certain hedging obligations, certain cash management obligations, and certain supply chain financing obligations, and (iv) required the Company and the other Guarantors to grant a lien and security interest in certain of its assets consisting of eligible accounts receivable, eligible inventory, eligible equipment and eligible intellectual property, and all products and proceeds of the foregoing, subject to certain limitations. See Footnote 1 for further information with respect to the Company’s SCF Programs.

The Credit Revolver provides for the issuance of up to $150 million of letters of credit, so long as there is sufficient availability for borrowing under the Credit Revolver. At June 30, 2024, the Company had $285 million of outstanding borrowings under the Credit Revolver and approximately $20 million of outstanding standby letters of credit issued against the Credit Revolver, with a net availability of approximately $695 million.

Other

The indentures governing the Company’s senior notes contain usual and customary nonfinancial covenants. The Company’s borrowing arrangements other than the senior notes contain usual and customary nonfinancial covenants and certain financial covenants, including minimum collateral coverage and net leverage ratios.

Weighted average interest rates are as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Total debt	6.0	%	5.3	%	5.8	%	5.1	%
Short-term debt	7.5	%	6.8	%	7.8	%	6.5	%

The fair value of the Company’s senior notes are based upon prices of similar instruments in the marketplace and are as follows (in millions):


	June 30, 2024				December 31, 2023
	Fair Value		Book Value		Fair Value		Book Value
Senior notes	$	4,610	$	4,755	$	4,633	$	4,772

The carrying amounts of all other debt approximates fair value.

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Footnote 9 —Derivatives

From time to time, the Company enters into derivative transactions to hedge its exposures to interest rate, foreign currency rate and commodity price fluctuations. The Company does not enter into derivative transactions for trading purposes.

Interest Rate Contracts

The Company manages its fixed and floating rate debt mix using interest rate swaps. The Company may use fixed and floating rate swaps to alter its exposure to the impact of changing interest rates on its consolidated results of operations and future cash outflows for interest. Floating rate swaps would be used, depending on market conditions, to convert the fixed rates of long-term debt into short-term variable rates. Fixed rate swaps would be used to reduce the Company’s risk of the possibility of increased interest costs. The settlement of interest rate swaps is included in interest expense.

Fair Value Hedges

At June 30, 2024, the Company had approximately $1.1 billion notional amount of interest rate swaps that exchange a fixed rate of interest for a variable rate of interest plus a weighted average spread. These floating rate swaps are designated as fair value hedges against $500 million of principal on the 6.375% senior notes due 2027, $500 million of principal on the 6.625% senior notes due 2029 and $100 million of principal on the 4.000% senior notes due 2024 for the remaining life of the notes. The benchmark interest rate for the $100 million floating swap and associated fair value hedge was amended for a change in benchmark interest rate from LIBOR to Secured Overnight Financing Rate (“SOFR”), effective June 1, 2023, accounted for in accordance with ASC 848. See Footnote 1 for further information. The effective portion of the fair value gains or losses on these swaps is offset by fair value adjustments in the underlying debt.

Cross-Currency Contracts

The Company uses cross-currency swaps to hedge foreign currency risk on certain financing arrangements. The Company has three cross-currency swaps, maturing in January 2025, February 2025 and September 2027, with an aggregate notional amount of $1.3 billion. Each of these cross-currency swaps was designated as a net investment hedge of the Company’s foreign currency exposure of its net investment in certain Euro-functional currency subsidiaries with Euro-denominated net assets, and the Company pays a fixed rate of Euro-based interest and receives a fixed rate of U.S. dollar interest. The Company has two additional cross-currency swaps, maturing in September 2027 and September 2029, with an aggregate notional amount of $1.0 billion. These swaps were also designated as net investment hedges of the Company’s foreign currency exposure of its net investment in certain Euro-functional currency subsidiaries with Euro-denominated net assets, and the Company pays a floating rate of Euro-based interest and receives a floating rate of U.S. dollar interest. The Company has elected the spot method for assessing the effectiveness of these contracts. During the three months ended June 30, 2024 and 2023, the Company recognized income of $9 million and $10 million, respectively and income of $18 million and $21 million for the six months ended June 30, 2024 and 2023, respectively, in interest expense, net, related to the portion of cross-currency swaps excluded from hedge effectiveness testing.

Foreign Currency Contracts

The Company uses forward foreign currency contracts to mitigate the foreign currency exchange rate exposure on the cash flows related to forecasted inventory purchases and sales with maturity dates through December 2024. The derivatives used to hedge these forecasted transactions that meet the criteria for hedge accounting are accounted for as cash flow hedges. The effective portion of the gains or losses on these derivatives is deferred as a component of AOCL until it is recognized in earnings at the same time that the hedged item affects earnings and is included in the same caption in the Company’s Condensed Consolidated Statement of Operations as the underlying hedged item. At June 30, 2024, the Company had approximately $256 million notional amount outstanding of forward foreign currency contracts that are designated as cash flow hedges of forecasted inventory purchases and sales.

The Company also uses foreign currency contracts, primarily forward foreign currency contracts, to mitigate the foreign currency exposure of certain other foreign currency transactions. At June 30, 2024, the Company had approximately $886 million notional amount outstanding of these foreign currency contracts that are not designated as effective hedges for accounting purposes and have maturity dates through June 2025. Fair market value gains or losses are included in the results of operations and are classified in other expense, net in the Company’s Condensed Consolidated Statement of Operations.

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The following table presents the fair value of derivative financial instruments at the dates indicated (in millions):


		Fair Value of Derivatives
		Assets (Liabilities)
	Balance Sheet Location	June 30, 2024		December 31, 2023
Derivatives designated as effective hedges:
Cash Flow Hedges
Foreign currency contracts	Prepaid expenses and other current assets	$	3	$	1
Foreign currency contracts	Other accrued liabilities	(2)		(13)
Fair Value Hedges

Interest rate swaps	Other accrued liabilities	(16)		(15)
Interest rate swaps	Other noncurrent liabilities	(23)		(4)
Net Investment Hedges
Cross-currency swaps	Prepaid expenses and other current assets	32		22
Cross-currency swaps	Other assets	25		15
Cross-currency swaps	Other noncurrent liabilities	(73)		(119)

Derivatives not designated as effective hedges:
Foreign currency contracts	Prepaid expenses and other current assets	11		7
Foreign currency contracts	Other accrued liabilities	(2)		(14)

Total		$	(45)	$	(120)

The following table presents gain and (loss) activity (on a pretax basis) related to derivative financial instruments designated or previously designated, as effective hedges (in millions):


		Three Months Ended June 30, 2024				Three Months Ended June 30, 2023
		Gain/(Loss)				Gain/(Loss)
	Location of gain /(loss) recognized in income	Recognized in OCI (effective portion)		Reclassified from AOCL to Income		Recognized in OCI (effective portion)		Reclassified from AOCL to Income
Interest rate swaps	Interest expense, net	$	—	$	(2)	$	—	$	(1)
Foreign currency contracts	Net sales and cost of products sold	5		(3)		(9)		—

Cross-currency swaps	Other expense, net	18		—		(49)		—
Total		$	23	$	(5)	$	(58)	$	(1)

		Six Months Ended June 30, 2024				Six Months Ended June 30, 2023
		Gain/(Loss)				Gain/(Loss)
	Location of gain (loss) recognized in income	Recognized in OCI (effective portion)		Reclassified from AOCL to Income		Recognized in OCI (effective portion)		Reclassified from AOCL to Income
Interest rate swaps	Interest expense, net	$	—	$	(3)	$	—	$	(2)
Foreign currency contracts	Net sales and cost of products sold	10		(6)		(14)		10

Cross-currency swaps	Other expense, net	66		—		(70)		—
Total		$	76	$	(9)	$	(84)	$	8

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At June 30, 2024, net deferred gains of approximately $2 million within AOCL are expected to be reclassified to earnings over the next twelve months.

During the three months ended June 30, 2024 and 2023, the Company recognized in other expense, net, income of $10 million and $8 million, respectively and income of $9 million and $18 million during the six months ended June 30, 2024 and 2023, respectively, related to derivatives that are not designated as hedging instruments. Gains and losses on these derivatives are mostly offset by foreign currency movement in the underlying exposure.

The Company is not a party to any derivative agreements that require collateral to be posted prior to settlement. See Footnote 8 for further information describing the guarantee of certain hedging obligations granted pursuant to the Second Amendment of the Credit Revolver.

Footnote 10 — Employee Benefit and Retirement Plans

The components of pension and postretirement benefit (income) expense for the periods indicated, are as follows (in millions):


	Pension Benefits
	U.S.				International				U.S.				International
	Three Months Ended June 30,								Six Months Ended June 30,
	2024		2023		2024		2023		2024		2023		2024		2023
Service cost	$	—	$	—	$	1	$	1	$	—	$	—	$	2	$	2
Interest cost	9		12		2		4		17		23		4		8
Expected return on plan assets	(12)		(14)		(2)		(3)		(23)		(28)		(3)		(6)
Amortization	—		1		—		—		—		2		—		1
Settlements	—		—		1		5		—		—		1		5
Total (income) expense	$	(3)	$	(1)	$	2	$	7	$	(6)	$	(3)	$	4	$	10


	Postretirement Benefits
	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023


Amortization	(1)		(1)		$	(2)	$	(3)
Total income	$	(1)	$	(1)	$	(2)	$	(3)

Other

In January 2024, the Company received a court ruling with respect to determining the benefits certain pensioners related to an international subsidiary were entitled to receive upon converting their defined benefit to a defined contribution. As the legal proceeding is concluded, the Company reduced its underlying pension obligation by approximately $11 million, with a corresponding offset to AOCL.

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Footnote 11 — Income Taxes

The Company’s effective income tax rates for the three months ended June 30, 2024 and 2023 were a provision of 46.4% and 48.6%, respectively, and benefit of 50.0% and provision of 3.7% for the six months ended June 30, 2024 and 2023, respectively.

The differences between the U.S. federal statutory income tax rate of 21.0% and the Company’s effective income tax rate for the three and six months ended June 30, 2024 and 2023 were impacted by a variety of factors, primarily resulting from the geographic mix of where the income was earned, as well as certain taxable income inclusion items in the U.S. based on foreign earnings. For the three and six months ended June 30, 2024 these items increased the tax rate more than the prior period due to the lower forecasted pretax book income. In periods where forecasted pretax income is low, the proportional impact of these items on the effective tax rate may be significant.

The three and six months ended June 30, 2024 were impacted by certain discrete items. Income tax expense for the three months ended June 30, 2024 included a discrete benefit of $64 million associated with a reduction in liabilities for unrecognized tax benefits, as the tax authorities’ examination of its U.S. tax returns for the years 2011 to 2015, as further described hereafter, and its Brazil tax returns for the years 2015 to 2017 have been completed, offset by $7 million of additional tax related to withholding taxes associated with certain previously taxed earnings that are no longer indefinitely reinvested. The six months ended June 30, 2024 also included certain discrete items totaling $4 million of additional income tax expense.

The three and six months ended June 30, 2023 were also impacted by certain discrete items. Income tax expense for the three months ended June 30, 2023 included a discrete expense of $6 million associated with a tax basis adjustment on a prior disposition. The six months ended June 30, 2023 also included certain discrete items totaling $4 million of additional income tax expense.

On May 14, 2024, the Company received a Statutory Notice of Deficiency (“Notice”) from the Internal Revenue Service (“IRS”) for the tax years 2011 to 2015. The Company agreed to certain adjustments raised by the IRS through the Notice. Accordingly, the Company has concluded that various income tax positions taken by the Company have been effectively settled, with the exception of the matter the Company intends to dispute as further described hereafter. The Company will pay the IRS approximately $22 million for additional income taxes and interest. As a result, the Company has reduced its liability for unrecognized tax benefits for this amount, recorded in other noncurrent liabilities in the Condensed Consolidated Balance Sheets, with a corresponding increase to its current income tax liability.

On July 19, 2024, the Company filed a petition in the U.S. Tax Court disputing the proposed assessment of $80 million in additional taxes plus $34 million in penalties plus the additional interest calculated upon final settlement related to the transfer pricing of services performed by certain of the Company’s foreign affiliates for the tax years 2011 to 2015. The Company believes that adequate amounts have been reserved for any adjustments that may ultimately result. If the IRS prevails in the assessment of additional tax, interest and penalties in excess of the Company’s current reserves, such outcome could have a material adverse effect on the Company’s financial position and results.

The Company files numerous consolidated and separate income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company’s U.S. federal income tax returns for 2017 to 2020, as well as certain state and non-U.S. income tax returns for various years, are under examination. The statute of limitations for the Company’s U.S. federal income tax returns has expired for years prior to 2011 and for 2016. With few exceptions, the Company is no longer subject to other income tax examinations for years before 2016.

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Footnote 12 — Weighted Average Shares Outstanding

The computations of the weighted average shares outstanding for the periods indicated are as follows (in millions):


	Three Months Ended June 30,		Six Months Ended June 30,
	2024	2023	2024	2023


Basic weighted average shares outstanding	415.2	414.2	415.0	414.0
Dilutive securities (1)	3.0	1.1	2.9	—
Diluted weighted average shares outstanding	418.2	415.3	417.9	414.0

(1)The six months ended June 30, 2023 excludes 1.2 million of potentially dilutive share-based awards as their effect would be anti-dilutive.

At June 30, 2024, there were 0.7 million potentially dilutive stock awards with performance-based targets that were not met and as such, have been excluded from the computation of diluted earnings per share.

Footnote 13 — Share-Based Compensation

During the six months ended June 30, 2024, primarily in connection with its annual grant, the Company granted 1.7 million performance-based restricted stock units (“RSUs”), with an aggregate grant date fair value of $13 million. These performance-based RSUs entitle the recipients to shares of the Company’s common stock and vest primarily at the end of a three-year period, subject to continued employment. The actual number of shares that will ultimately be paid upon vesting is dependent on the level of achievement of the specified performance conditions.

During the six months ended June 30, 2024, primarily in connection with its annual grant, the Company also granted 5.6 million time-based RSUs with an aggregate grant date fair value of $43 million. These time-based RSUs entitle recipients to shares of the Company’s common stock and primarily vest in annual installments over a one to three-year period, subject to continued employment.

Footnote 14 — Fair Value Disclosures

Recurring Fair Value Measurements

The following table presents the Company’s non-pension financial assets and liabilities, which are measured at fair value on a recurring basis (in millions):


	June 30, 2024								December 31, 2023
	Fair value Asset (Liability)								Fair value Asset (Liability)
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Derivatives:
Assets	$	—	$	71	$	—	$	71	$	—	$	45	$	—