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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 March 31, 2022
Commission File Number 1-9608

NEWELL BRANDS INC.
(Exact name of registrant as specified in its charter)
Delaware36-3514169
(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 CLASSTRADING SYMBOLNAME OF EXCHANGE ON WHICH REGISTERED
Common stock, $1 par value per shareNWLNasdaq 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 FilerAccelerated filer
Non-accelerated filerSmaller 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 April 25, 2022: 413.5 million.




1

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NEWELL BRANDS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Amounts in millions, except per share data)
Three Months Ended
 March 31,
20222021
Net sales$2,388 $2,288 
Cost of products sold1,648 1,557 
Gross profit740 731 
Selling, general and administrative expenses518 534 
Restructuring costs, net5 5 
Operating income217 192 
Non-operating expenses:
Interest expense, net59 67 
Other income, net(124)(1)
Income before income taxes282 126 
Income tax provision48 37 
Net income$234 $89 
Weighted average common shares outstanding:
Basic421.9 424.9 
Diluted424.7 427.6 
Earnings per share:
Basic$0.55 $0.21 
Diluted$0.55 $0.21 
See Notes to Condensed Consolidated Financial Statements (Unaudited).
2

NEWELL BRANDS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
(Amounts in millions)
Three Months Ended
March 31,
20222021
Comprehensive income (loss):
Net income$234 $89 
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments23 (44)
Pension and postretirement costs5 5 
Derivative financial instruments 5 
Total other comprehensive income (loss), net of tax28 (34)
Comprehensive income262 55 
Total comprehensive loss attributable to noncontrolling interests  (1)
Total comprehensive income attributable to parent$262 $56 
See Notes to Condensed Consolidated Financial Statements (Unaudited).
3

NEWELL BRANDS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Amounts in millions, except par values)
March 31,
2022
December 31,
2021
Assets:
Cash and cash equivalents$344 $440 
Accounts receivable, net1,421 1,500
Inventories2,297 1,997
Prepaid expenses and other current assets349 325
Total current assets4,4114,262
Property, plant and equipment, net1,144 1,204
Operating lease assets595 558
Goodwill3,486 3,504
Other intangible assets, net3,046 3,370
Deferred income taxes797 814
Other assets725 467
Total assets$14,204 $14,179 
Liabilities:
Accounts payable$1,651 $1,680 
Accrued compensation154 270
Other accrued liabilities1,375 1,364
Short-term debt and current portion of long-term debt3 3
Total current liabilities3,1833,317
Long-term debt4,880 4,883
Deferred income taxes720 405
Operating lease liabilities531 500
Other noncurrent liabilities910 983
Total liabilities10,22410,088
Commitments and contingencies (Footnote 17)
Stockholders’ equity:
Preferred stock (10.0 authorized shares, $1.00 par value, no shares issued at March 31, 2022 and December 31, 2021)
  
Common stock (800.0 authorized shares, $1.00 par value, 440.8 shares and 450.0 shares issued at March 31, 2022 and December 31, 2021, respectively)
441 450 
Treasury stock, at cost (25.0 shares and 24.5 shares at March 31, 2022 and December 31, 2021, respectively)
(623)(609)
Additional paid-in capital7,384 7,734 
Retained deficit(2,368)(2,602)
Accumulated other comprehensive loss(854)(882)
Total stockholders’ equity3,980 4,091 
Total liabilities and stockholders’ equity$14,204 $14,179 
See Notes to Condensed Consolidated Financial Statements (Unaudited).
4

NEWELL BRANDS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Amounts in millions)
Three Months Ended
March 31,
20222021
Cash flows from operating activities:
Net income$234 $89 
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization76 86 
Gain from sale of business(130) 
Deferred income taxes326 1 
Stock based compensation expense14 14 
Other, net(2) 
Changes in operating accounts excluding the effects of divestiture:
Accounts receivable14 122 
Inventories(403)(283)
Accounts payable25 (18)
Accrued liabilities and other(426)(36)
Net cash used in operating activities(272)(25)
Cash flows from investing activities:
Proceeds from sale of divested business620  
Capital expenditures(70)(54)
Other investing activities, net9  
Net cash provided by (used in) investing activities559 (54)
Cash flows from financing activities:
Payments on current portion of long-term debt(1)(94)
Payments on long-term debt (6)
Repurchase of shares of common stock(275) 
Cash dividends(100)(100)
Equity compensation activity and other, net(17)(39)
Net cash used in financing activities(393)(239)
Exchange rate effect on cash, cash equivalents and restricted cash8 (14)
Decrease in cash, cash equivalents and restricted cash(98)(332)
Cash, cash equivalents and restricted cash at beginning of period477 1,021 
Cash, cash equivalents and restricted cash at end of period$379 $689 
Supplemental disclosures:
Restricted cash at beginning of period$37 $40 
Restricted cash at end of period35 7 
See Notes to Condensed Consolidated Financial Statements (Unaudited).
5

NEWELL BRANDS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (Unaudited)
(Amounts in millions)
Common
Stock
Treasury
Stock
Additional Paid-In CapitalRetained Earnings (Deficit)Accumulated Other Comprehensive Income (Loss)Total Stockholders' Equity
Balance at December 31, 2021$450 $(609)$7,734 $(2,602)$(882)$4,091 
Comprehensive income— — — 234 28 262 
Dividends declared on common stock - $0.23 per share
— — (97)— — (97)
Equity compensation, net of tax2 (14)12 — —  
Common stock purchased and retired(11) (264)— — (275)
Other— — (1)— — (1)
Balance at March 31, 2022$441 $(623)$7,384 $(2,368)$(854)$3,980 

Common
Stock
Treasury
Stock
Additional Paid-In CapitalRetained Earnings (Deficit)Accumulated Other Comprehensive LossStockholders' Equity Attributable to ParentNoncontrolling InterestsTotal Stockholders' Equity
Balance at December 31, 2020$448 $(598)$8,078 $(3,174)$(880)$3,874 $26 $3,900 
Comprehensive income (loss)— — — 89 (32)57 (2)55 
Dividends declared on common stock - $0.23 per share
— — (101)— — (101)— (101)
Equity compensation, net of tax2 (10)16 — — 8 — 8 
Other changes attributable to noncontrolling interests— — — — (2)(2)1 (1)
Balance at March 31, 2021$450 $(608)$7,993 $(3,085)$(914)$3,836 $25 $3,861 
See Notes to Condensed Consolidated Financial Statements (Unaudited).
6

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, 2021 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.

On March 31, 2022, the Company sold its Connected Home & Security (“CH&S”) business unit to Resideo Technologies, Inc. See Footnotes 2 and 16 for further information.

Use of Estimates and Risks and Uncertainty of Coronavirus (COVID-19)

Since early 2020, the COVID-19 pandemic resulted in various federal, state and local governments, as well as private entities, mandating restrictions on travel and public gatherings, closure of non-essential commerce, stay at home orders and quarantining of people to limit exposure to the virus. Although restrictions have eased since the first quarter of 2021 in certain areas, the Company's global operations, similar to those of many large, multi-national corporations, were adversely impacted by the COVID-19 pandemic.

The extent of the impact of the COVID-19 pandemic to the Company's future sales, operating results, cash flows, liquidity and financial condition continues to be driven by numerous evolving factors that the Company cannot reasonably predict and which will vary by jurisdiction and market, including the severity and duration of the pandemic, the emergence of new strains and variants of the coronavirus, the likelihood of a resurgence of positive cases, the development and availability of effective treatments and vaccines, especially in areas where conditions have recently worsened and work restrictions, operational or travel bans have been reinstituted, the rate at which vaccines are administered to the general public, the timing and amount of fiscal stimulus and relief programs packages that are available to the general public, the availability and prices of supply chain resources, including materials, products and transportation; and changes in consumer demand patterns for the Company's products as the impact of the global pandemic lessens. These primary drivers are beyond the Company's knowledge and control, and as a result, at this time it is difficult to reasonably predict the cumulative impact, both in terms of severity and duration, COVID-19 will have on its future sales, operating results, cash flows and financial condition.

Management’s application of U.S. GAAP in preparing the Company's consolidated financial statements requires the pervasive use of estimates and assumptions. As discussed above, the world continues to be impacted by the COVID-19 pandemic which has required greater use of estimates and assumptions in the preparation of the consolidated financial statements, more specifically, those estimates and assumptions utilized in the Company’s forecasted cash flows that form the basis in developing the fair values utilized in its impairment assessments as well as its annual effective tax rate. These estimates also include assumptions as to the duration and severity of the pandemic, timing and amount of demand shifts amongst sales channels, workforce availability and supply chain continuity. Although management has made its best estimates based upon current information, actual results could materially differ from those estimates and may require future changes to such estimates and assumptions. If so, the Company may be subject to future incremental impairment charges as well as changes to recorded reserves and valuations.

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 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. Accordingly, the Company’s results of
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operations for the three months ended March 31, 2022 may not necessarily be indicative of the results that may be expected for the year ending December 31, 2022.
The Company's sales and operating results, previously disrupted by the COVID-19 pandemic, reverted back to historical patterns in 2021, however, uncertainty still remains over the volatility and direction of future consumer demand patterns.

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. The Company considers the applicability and impact of all ASUs.

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. ASU 2020-04 may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company is currently evaluating the potential effects of the adoption of ASU 2020-04.

Sales of Accounts Receivables

Factored receivables at March 31, 2022 associated with the Company's existing factoring agreement (the “Customer Receivables Purchase Agreement”) were approximately $535 million, an increase of approximately $35 million from December 31, 2021. 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 in the Condensed Consolidated Statement of Cash Flows. The Company records the discount as other income, net in the Condensed Consolidated Statement of Operations and collections of accounts receivables not yet submitted to the financial institution as a financing cash flow.

Footnote 2 — Divestiture Activity

On March 31, 2022, the Company sold its CH&S business unit to Resideo Technologies, Inc., for approximately $593 million, subject to customary working capital and other post-closing adjustments. As a result, the Company recorded a pretax gain of $130 million, which was included in other income, net in its Condensed Consolidated Statements of Operations.

Footnote 3 — 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 three months ended March 31, 2022 (in millions):

Cumulative
Translation
Adjustment
Pension and 
Postretirement
Costs
Derivative
Financial
Instruments
AOCL
Balance at December 31, 2021$(575)$(292)$(15)$(882)
Other comprehensive income (loss) before reclassifications17 1 (1)17 
Amounts reclassified to earnings6 4 1 11 
Net current period other comprehensive income23 5  28 
Balance at March 31, 2022$(552)$(287)$(15)$(854)

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Reclassifications from AOCL to the results of operations for the three months ended March 31, 2022 and 2021 were pretax expense of (in millions):

Three Months Ended
 March 31,
20222021
Cumulative translation adjustment (1)
$6 $ 
Pension and postretirement benefit plans (2)
4 5 
Derivative financial instruments (3)
1 4 

(1)See Footnote 2 for further information.
(2)See Footnote 11 for further information.
(3)See Footnote 10 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
 March 31,
20222021
Foreign currency translation adjustments$1 $12 
Pension and postretirement benefit costs 1 
Derivative financial instruments(1)2 
Income tax provision related to AOCL$ $15 


Footnote 4 — Restructuring Costs

Restructuring costs, net incurred by reportable business segments for all restructuring activities for the periods indicated are as follows (in millions):

Three Months Ended
 March 31,
20222021
Commercial Solutions$1 $ 
Home Appliances1 1 
Home Solutions1 2 
Learning and Development2 1 
Outdoor and Recreation 1 
$5 $5 

Accrued restructuring costs activity for the three months ended March 31, 2022 are as follows (in millions):
Balance at December 31, 2021Restructuring
Costs, Net
PaymentsBalance at
 March 31, 2022
Severance and termination costs$8 $4 $(5)$7 
Contract termination and other costs2 1 (2)1 
$10 $5 $(7)$8 

2020 Restructuring Plan

The Company’s 2020 restructuring program, which was substantially complete at the end of 2021, was designed to reduce overhead costs, streamline certain underperforming operations and improve future profitability. The restructuring costs, which
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impacted all segments, include employee-related costs such as severance and other termination benefits. During the three months ended March 31, 2021, the Company recorded restructuring charges of $5 million. Any remaining cash payments are expected to be paid within one year of charges incurred.

Other Restructuring and Restructuring-Related Costs

The Company regularly incurs other restructuring and restructuring-related costs in connection with various discrete initiatives, including certain costs associated with Project Ovid. Restructuring-related costs are recorded in cost of products sold and selling, general and administrative expenses (“SG&A”) in the Condensed Consolidated Statements of Operations based on the nature of the underlying costs incurred. During the three months ended March 31, 2022, the Company recorded restructuring charges of $5 million.

Footnote 5 — Inventories
Inventories are comprised of the following at the dates indicated (in millions):
March 31, 2022December 31, 2021
Raw materials and supplies$321 $310 
Work-in-process205 167 
Finished products1,771 1,520 
$2,297 $1,997 

Footnote 6 — Property, Plant and Equipment, Net
Property, plant and equipment, net, is comprised of the following at the dates indicated (in millions):
March 31, 2022December 31, 2021
Land$80 $82 
Buildings and improvements636 678 
Machinery and equipment2,314 2,387 
3,030 3,147 
Less: Accumulated depreciation(1,886)(1,943)
$1,144 $1,204 

Depreciation expense was $49 million and $52 million for the three months ended March 31, 2022 and 2021, respectively.

During the quarter ended March 31, 2022, the Company took possession of a right of use operating lease asset with future obligations of approximately $64 million.

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Footnote 7 — Goodwill and Other Intangible Assets, Net

Goodwill activity for the three months ended March 31, 2022 is as follows (in millions):
Segments
Net Book Value at December 31, 2021
Foreign
Exchange
Gross
Carrying
Amount
Accumulated
Impairment
Charges
Net Book Value at
March 31, 2022
Commercial Solutions$747 $ $916 $(169)$747 
Home Appliances  569 (569) 
Home Solutions164  2,567 (2,403)164 
Learning and Development2,593 (18)3,421 (846)2,575 
Outdoor and Recreation  788 (788) 
$3,504 $(18)$8,261 $(4,775)$3,486 

Other intangible assets, net, are comprised of the following at the dates indicated (in millions):
March 31, 2022December 31, 2021
Gross
Carrying
Amount
Accumulated Amortization
Net Book
Value
Gross
Carrying
Amount
Accumulated
Amortization
Net Book
Value
Trade names — indefinite life$2,028 $— $2,028 $2,219 $— $2,219 
Trade names — other165 (72)93 159 (65)94 
Capitalized software581 (461)120 631 (495)136 
Patents and intellectual property22 (15)7 22 (14)8 
Customer relationships and distributor channels1,082 (284)798 1,216 (303)913 
$3,878 $(832)$3,046 $4,247 $(877)$3,370 

Amortization expense for intangible assets was $27 million and $34 million for the three months ended March 31, 2022 and 2021, respectively.


Footnote 8 — Other Accrued Liabilities
Other accrued liabilities are comprised of the following at the dates indicated (in millions):
March 31, 2022December 31, 2021
Customer accruals$652 $715 
Operating lease liabilities125 122 
Accrued self-insurance liabilities, contingencies and warranty121 125 
Accrued interest expense115 56 
Accrued marketing and freight expenses66 59 
Accrued income taxes54 43 
Other242 244 
$1,375 $1,364 

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Footnote 9 — Debt
Debt is comprised of the following at the dates indicated (in millions):
March 31, 2022December 31, 2021
3.85% senior notes due 2023
$1,087 $1,086 
4.00% senior notes due 2024
200 200 
4.875% senior notes due 2025
495 494 
3.90% senior notes due 2025
47 47 
4.20% senior notes due 2026
1,976 1,975 
5.375% senior notes due 2036
417 417 
5.50% senior notes due 2046
658 658 
Other debt3 9 
Total debt
4,883 4,886 
Short-term debt and current portion of long-term debt(3)(3)
Long-term debt$4,880 $4,883 

Senior Notes

On February 11, 2022, S&P Global Inc. (“S&P”) upgraded the Company’s debt rating to “BBB-” from “BB+” as S&P believed the Company has been able to achieve S&P’s target debt level. As a result of this upgrade, the Company is now in a position to access the commercial paper market, up to a maximum of $800 million, provided there is a sufficient amount available for borrowing under the Credit Revolver (defined hereafter). In addition, the interest rate on the relevant senior notes decreased by 25 basis points due to the upgrade, reducing the Company’s interest expense by approximately $10 million on an annualized basis (approximately $8 million in 2022). However, certain of the Company’s outstanding senior notes aggregating to approximately $4.2 billion are still subject to an interest rate adjustment of 25 basis points in connection with the Moody’s Corporation (“Moody’s”) downgraded debt rating in 2020.

Receivables Facility

The Company maintains an Accounts Receivable Securitization Facility (the “Securitization Facility”). The aggregate commitment under the Securitization Facility is $600 million. The Securitization Facility matures in October 2022 and bears interest at a margin over a variable interest rate. The maximum availability under the Securitization Facility fluctuates based on eligible accounts receivable balances. At March 31, 2022, the Company did not have any amounts outstanding under the Securitization Facility.

Revolving Credit Facility

The Company has a $1.25 billion revolving credit facility that matures in December 2023 (the “Credit Revolver”). At March 31, 2022, the Company did not have any amounts outstanding under the Credit Revolver.

Other

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):
March 31, 2022December 31, 2021
Fair ValueBook ValueFair ValueBook Value
Senior notes$5,010 $4,880 $5,477 $4,877 

The carrying amounts of all other significant debt approximates fair value.

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Footnote 10 —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 cash paid and received from the settlement of interest rate swaps is included in interest expense.
Fair Value Hedges
At March 31, 2022, the Company had approximately $100 million notional amount of interest rate swaps that exchange a fixed rate of interest for variable rate (LIBOR) of interest plus a weighted average spread. These floating rate swaps are designated as fair value hedges against $100 million of principal on the 4.00% senior notes due 2024 for the remaining life of the note. 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 previously entered into three cross-currency swaps, maturing in January 2025, February 2025 and September 2027, respectively, with an aggregate notional amount of $1.3 billion. Each of these cross-currency swaps were 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 fixed rate of Euro-based interest and receives a fixed 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 March 31, 2022 and 2021, the Company recognized income of $5 million and $4 million, 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 and have maturity dates through December 2022. 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 statements of operations as the underlying hedged item. At March 31, 2022, the Company had approximately $467 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 March 31, 2022, the Company had approximately $1.2 billion notional amount outstanding of these foreign currency contracts that are not designated as effective hedges for accounting purposes and have maturity dates through December 2022. Fair market value gains or losses are included in the results of operations and are classified in other income, 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 LocationMarch 31, 2022December 31, 2021
Derivatives designated as effective hedges:
Cash Flow Hedges
Foreign currency contractsPrepaid expenses and other current assets$10 $12 
Foreign currency contractsOther accrued liabilities(6)(2)
Fair Value Hedges
Interest rate swapsOther assets 3 
Interest rate swapsOther accrued liabilities(1) 
Net Investment Hedges
Cross-currency swapsPrepaid expenses and other current assets15 18 
Cross-currency swapsOther noncurrent liabilities(34)(41)
Derivatives not designated as effective hedges:
Foreign currency contractsPrepaid expenses and other current assets16 7 
Foreign currency contractsOther accrued liabilities(21)(14)
Total$(21)$(17)

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
March 31, 2022
Three Months
 Ended
March 31, 2021
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$ $(2)$ $(2)
Foreign currency contracts
Net sales and cost of products sold(1)1 3 (2)
Cross-currency swaps
Other income, net4  36  
Total$3 $(1)$39 $(4)

At March 31, 2022, net deferred gains of approximately $10 million within AOCL are expected to be reclassified to earnings over the next twelve months.

During the three months ended March 31, 2022 and 2021, the Company recognized expense of $3 million and income of $7 million, respectively, in other income, net, 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 derivatives that require collateral to be posted prior to settlement.

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Footnote 11 — 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
Three Months Ended March 31,
2022202120222021
Service cost$ $ $1 $1 
Interest cost6 5 2 2 
Expected return on plan assets(12)(12)(2)(1)
Amortization4 5 1 1 
Total (income) expense$(2)$(2)$2 $3 
Postretirement Benefits
Three Months Ended
March 31,
20222021
Amortization$(1)$(1)
Total income$(1)$(1)

U.K. Defined Benefit Plan Buy-in

In February 2022, the Company entered into an agreement with an insurance company for a bulk annuity purchase or “buy-in” for one of its U.K. defined benefit pension plans, resulting in an exchange of plan assets for an annuity that matches the plan’s future projected benefit obligations to covered participants. The Company anticipates the “buy-out” for the plan to be completed by the end of 2022 or early 2023. The non-cash settlement charge associated with the transaction is expected to be material to the Company's results of operations.

Footnote 12 — Income Taxes

The Company’s effective income tax rate for the three months ended March 31, 2022 and 2021 were 17.0% and 29.4%, respectively, reflecting an increase in discrete tax benefits and a lower effective income tax rate associated with the divestiture of the CH&S business.

The difference between the U.S. federal statutory income tax rate of 21.0% and the Company’s effective income tax rate for the three months ended March 31, 2022 and 2021 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.

The three months ended March 31, 2022 were also impacted by certain discrete items. Income tax expense for the three months ended March 31, 2022 included a discrete benefit of $4 million associated with the approval of certain state tax credits, offset by $14 million of income tax expense related to the divestiture of the CH&S business unit. The three months ended March 31, 2021 were also impacted by $1 million of discrete tax items.

During the three months ended March 31, 2022, the Company amended its 2017 U.S. federal income tax return to carryback foreign tax credits generated in 2018 and capital losses generated in 2018 and 2020. This resulted in an increase in noncurrent income taxes receivable of approximately $261 million, a decrease in income taxes payable of approximately $95 million, and an increase in deferred tax liabilities of approximately $356 million.

The Company’s U.S. federal income tax returns for 2011 to 2015 and 2017 to 2019, as well as certain state and non-U.S. income tax returns for various years, are under examination.

On June 18, 2019, the U.S. Treasury and the Internal Revenue Service (“IRS”) 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. On August 21, 2020, the U.S.
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Treasury and IRS released finalized versions of the Temporary Regulations (collectively with the Temporary Regulations, the “Regulations”). The 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 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 analyzed the Regulations and concluded the relevant Regulations were not validly issued. Therefore, the Company has not accounted for the effects of the Regulations in its Condensed Consolidated Financial Statements for the period ending March 31, 2022. 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 Regulations will be invalidated or that a court of law will rule in favor of the Company. If the Company’s position on the 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 fiscal year 2018 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. On April 4, 2022, in a case not involving the Company, the United States District Court for the District of Colorado granted the taxpayer's motion for summary judgment that the Temporary Regulations were not validly issued on the basis of improper promulgation. The Company is monitoring the impact of this decision and intends to continue to vigorously defend its position.

Footnote 13 — Earnings Per Share
The computations of the weighted average shares outstanding for the periods indicated are as follows (in millions):
Three Months Ended
 March 31,
20222021
Basic weighted average shares outstanding421.9 424.9 
Dilutive securities2.8 2.7 
Diluted weighted average shares outstanding424.7 427.6 
At March 31, 2022 and 2021 dividends and equivalents for share-based awards expected to be forfeited did not have a material impact on net income for basic and diluted earnings per share.

Footnote 14 — Stockholders' Equity and Share-Based Compensation

During the three months ended March 31, 2022, the Company awarded 1.0 million performance-based restricted stock units (“RSUs”), which had an aggregate grant date fair value of $28 million and entitle the recipients to shares of the Company’s common stock primarily at the end of a three-year vesting period. The actual number of shares that will ultimately vest is dependent on the level of achievement of the specified performance conditions.

During the three months ended March 31, 2022, the Company also awarded 0.6 million time-based RSUs with an aggregate grant date fair value of $16 million. These time-based RSUs entitle recipients to shares of the Company’s common stock and primarily vest either at the end of a three-year period or in equal installments over a three-year period.

During the three months ended March 31, 2022, the Company also awarded 2.2 million time-based stock options with an aggregate grant date fair value of $14 million. These stock options entitle recipients to purchase shares of the Company’s common stock at an exercise price equal to the fair market value of the underlying shares as of the grant date and vest in equal installments over a three-year period.

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The weighted average assumptions used to determine the fair value of stock options granted for the three months ended March 31, 2022, is as follows:

Risk-free interest rates1.9 %
Expected volatility42.0 %
Expected dividend yield5.1 %
Expected life (in years)6
Exercise price$25.86

Share Repurchase Program

On February 6, 2022, the Company's Board of Directors authorized a $375 million Share Repurchase Program (“SRP”), effective immediately through the end of 2022. The Company’s common shares may be purchased by the Company in the open market, in negotiated transactions or in other manners, as permitted by federal securities laws and other legal requirements. On February 25, 2022, the Company repurchased $275 million of its shares of common stock beneficially owned by Carl C. Icahn and certain of his affiliates (collectively, “Icahn Enterprises”), at a purchase price of $25.86 per share, the closing price of the Company's common shares on February 18, 2022. At March 31, 2022, the Company has remaining authority to repurchase approximately $100 million of shares of common stock under the SRP.

Footnote 15 — 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):
March 31, 2022December 31, 2021
Fair value Asset (Liability)Fair value Asset (Liability)
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Derivatives:
Assets$ $41 $ $41 $ $40 $ $40 
Liabilities (62) (62)