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Basis of Presentation and Significant Accounting Policies | 6 Months Ended
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Jun. 30, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Description of Business and Significant Accounting Policies | Basis of Presentation and Significant Accounting Policies The accompanying unaudited condensed consolidated financial statements of Newell Brands Inc. (formerly, Newell Rubbermaid Inc., and 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 presentation of the financial position and the results of operations of the Company. It is recommended that these unaudited condensed consolidated financial statements 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 as of December 31, 2018, 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 complete financial statements. Certain reclassifications have been made in the Company’s financial statements of the prior year to conform to the current year presentation. Discontinued Operations During 2018, the Company implemented the Accelerated Transformation Plan, which was designed in part to rationalize the organization and its portfolio of products. Pursuant to the Accelerated Transformation Plan, a number of the Company’s businesses were designated for disposal. These businesses have been classified as discontinued operations as these businesses together represent a strategic shift that has a major effect on the Company’s operations and financial results (see Footnotes 2 and 19). Prior periods have been reclassified to conform with the current presentation. Seasonal Variations Sales of the Company’s products tend to be seasonal, with sales, operating income and operating cash flow in the first quarter generally lower than any other quarter during the year, driven principally by reduced volume and the mix of products sold in the first quarter. The seasonality of the Company’s sales volume combined with the accounting for fixed costs, such as depreciation, amortization, rent, personnel costs and interest expense, impacts the Company’s results on a quarterly basis. In addition, the Company tends to generate the majority of its operating cash flow in the third and fourth quarters of the year due to seasonal variations in operating results, the timing of annual performance-based compensation payments, customer program payments, working capital requirements and credit terms provided to customers. Accordingly, the Company’s results of operations for the three and six months ended June 30, 2019 may not necessarily be indicative of the results that may be expected for the year ending December 31, 2019. 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 August 2018, the FASB issued ASU 2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” This new guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU 2018-15 is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2019, with early adoption permitted. ASU 2018-15 may be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company is currently assessing the impact, including early adoption, that adoption of ASU 2018-15 will have on its consolidated financial statements. The Company is designing processes and the appropriate internal controls to ensure its readiness for adoption. The Company is currently evaluating certain global strategic business decisions within its procurement and sales functions including engaging software solution implementation partners, which will require the Company to incur costs associated with cloud computing arrangements as early as the third quarter of fiscal 2019. At this time, it is too early to determine the amount of fees that would qualify to be capitalized pursuant to ASU 2018-15. In August 2018, the FASB issued ASU 2018-14, “Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans.” ASU 2018-14 modifies disclosure requirements for defined benefit pension and other postretirement plans. ASU 2018-14 is effective for fiscal years ending after December 15, 2020, and early adoption is permitted. Since ASU 2018-14 only impacts the disclosure requirements related to defined benefit pension and other postretirement plans, the adoption of ASU 2018-14 will not have a material impact on the Company’s consolidated financial statements. Adoption of New Accounting Guidance The Company’s accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements included in our 2018 Annual Report on Form 10-K. Such significant accounting policies are applicable for periods prior to the adoption of the following new accounting standards and updated accounting policies. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” which requires lessees to recognize a right-of-use asset and lease liability for all leases with terms of more than 12 months. Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease. The Company adopted ASU 2016-02 prospectively starting on January 1, 2019. As part of the adoption, the Company elected the package of practical expedients permitted under the transition guidance that includes not to reassess historical lease classification, and not to recognize short-term leases on our balance sheet, nor separate lease and non-lease components for all its leases. In addition, the Company used hindsight to determine the lease term and applied its incremental borrowing rate based on the remaining term of the lease as of the adoption date. The impact upon adoption, related to operating leases in continuing operations, as of January 1, 2019, resulted in the recognition of right-of-use assets of approximately $629 million, lease liabilities of approximately $687 million and a cumulative-effect adjustment on retained deficit of approximately $0.5 million the Company's condensed consolidated balance sheet. In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” ASU 2017-12 amends existing guidance to better align an entity’s risk management activities and financial reporting for hedging relationships. ASU 2017-12 also expands and refines hedge accounting for both nonfinancial and financial risk components and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. ASU 2017-12 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those annual periods. The adoption of ASU 2017-12 did not have a material impact on the Company’s consolidated financial statements. Updated Significant Accounting Policies Since the 2018 Annual Report on Form 10-K Goodwill and Other Indefinite-Lived Intangible Assets The Company has historically performed its annual goodwill and indefinite-lived intangible assets assessment as of the first day of the third fiscal quarter of each year (July 1). During the second quarter of fiscal 2019, the Company decided to change the date of its annual impairment assessment from July 1 to December 1. The Company evaluates goodwill for impairment annually at the reporting unit level. The Company also tests for impairment if events and circumstances indicate that it is more likely than not that the fair value of a reporting unit is below its carrying amount. If the carrying amount of the reporting unit is greater than the fair value, impairment will be present. The Company assesses the fair value of each reporting unit for its goodwill impairment test based on a discounted cash flow model. Estimates critical to the Company’s fair value estimates under the discounted cash flow model include projected financial performance and cash flows of the reporting unit, the discount rate, long-term sales growth rate, product and overhead costs and the working capital investment required. The Company measures the amount of any goodwill impairment by comparing the fair value to the carrying value of the reporting unit. An impairment charge is recognized to the extent the carrying value of the reporting unit exceeds the fair value. The Company evaluates indefinite-lived intangible assets (primarily trademarks and trade names) for impairment annually. The Company also tests for impairment if events and circumstances indicate that it is more likely than not that the fair value of an indefinite-lived intangible asset is below its carrying amount. Estimates critical to the Company’s evaluation of indefinite-lived intangible assets for impairment include the discount rate, royalty rates and assumptions on excess earnings, where applicable, used in its evaluation of trade names, projected average revenue growth and projected long-term growth rates in the determination of terminal values. An impairment charge is recorded if the carrying amount of an indefinite-lived intangible asset exceeds the estimated fair value on the measurement date. See Footnote 7 for additional detail on goodwill and other intangible assets. Sales of Accounts Receivables In June 2019, the Company entered into a new factoring agreement with a financial institution to sell certain customer receivables at a more attractive discount rate than its previous cash discount terms offered to these customers (the “Customer Receivables Purchase Agreement”). The Company received approximately $201 million under the new agreement during the second quarter of 2019. Transactions under this agreement are accounted for as sales of accounts receivable, and the receivables are removed from the 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 expense (income), net in the Condensed Consolidated Statement of Operations. Revisions of Previously Issued Financial Statements During the first quarter of 2019, the Company identified that it did not utilize an accurate estimate of fair value and expected form of sale in its fourth quarter 2018 impairment assessment for one of its five disposal groups classified as held for sale. The Company did not appropriately account for the disposal group as a stock sale. Consequently, certain income tax account balances (primarily related to deferred tax liabilities) were not classified as assets and liabilities held for sale in the Company’s Consolidated Balance Sheet as of December 31, 2018. As a result, the Company determined its book-over-tax outside basis differences and measured the tax effects of such difference, which resulted in an income tax expense of approximately $12.6 million. In addition, the Company did not use an accurate estimate of fair value in its 2018 impairment assessment. Collectively, the estimate of fair value and expected form of sale resulted in adjustments to the estimated fair value and carrying value of the held for sale business utilized in the Company’s 2018 impairment assessment. These changes resulted in an additional impairment charge of approximately $12.0 million to write-down the carrying value of the net assets of the held for sale business to its estimated fair value at December 31, 2018. In addition, as part of the presentation of discontinued operations, the Company periodically has to reclassify the prior period presentation to conform to the current year presentation. These adjustments are reflected in the Reclassification column below. The following table presents the effect to the Company’s previously reported Consolidated Balance Sheet at December 31, 2018 and Consolidated Statement of Operations for the year ended December 31, 2018:
| As of December 31, 2018
| As Previously Reported |  | Revision |  | As Revised |  | Reclassification |  | As Re-classed
Prepaid expenses and other | $ | 278.0 |  |  | $ | (2.4 | ) |  | $ | 275.6 |  |  | $ | — |  |  | $ | 275.6 |
Current assets held for sale | 3,541.3 |  |  | (6.1 | ) |  | 3,535.2 |  |  | — |  |  | 3,535.2 |
Total current assets | 7,748.8 |  |  | (8.5 | ) |  | 7,740.3 |  |  | — |  |  | 7,740.3 |
Deferred income taxes (noncurrent assets) | 165.2 |  |  | 14.5 |  |  | 179.7 |  |  | — |  |  | 179.7 |
Total assets | 17,716.4 |  |  | 6.0 |  |  | 17,722.4 |  |  | — |  |  | 17,722.4 |
Other accrued liabilities | 1,182.3 |  |  | (0.8 | ) |  | 1,181.5 |  |  | (0.8 | ) |  | 1,180.7 |
Current liabilities held for sale | 650.4 |  |  | 100.4 |  |  | 750.8 |  |  | (16.0 | ) |  | 734.8 |
Total current liabilities | 3,330.0 |  |  | 99.6 |  |  | 3,429.6 |  |  | (16.8 | ) |  | 3,412.8 |
Deferred income taxes (liabilities) | 1,041.8 |  |  | (66.7 | ) |  | 975.1 |  |  | 15.9 |  |  | 991.0 |
Other noncurrent liabilities | 1,370.5 |  |  | (2.3 | ) |  | 1,368.2 |  |  | 0.9 |  |  | 1,369.1 |
Total liabilities | 12,438.6 |  |  | 30.6 |  |  | 12,469.2 |  |  | — |  |  | 12,469.2 |
Retained deficit | (2,486.7 | ) |  | (24.6 | ) |  | (2,511.3 | ) |  | — |  |  | (2,511.3 | )
Stockholders’ equity attributable to parent | 5,243.0 |  |  | (24.6 | ) |  | 5,218.4 |  |  | — |  |  | 5,218.4 |
Total stockholders’ equity | 5,277.8 |  |  | (24.6 | ) |  | 5,253.2 |  |  | — |  |  | 5,253.2 |
Total liabilities and stockholders’ equity | 17,716.4 |  |  | 6.0 |  |  | 17,722.4 |  |  | — |  |  | 17,722.4 |
|  | For the year ended December 31, 2018
Income Statement Classification |  | As Previously Reported |  | Revision |  | As Revised
Income (loss) from discontinued operations, net of tax |  | $ | (128.3 | ) |  | $ | (24.6 | ) |  | $ | (152.9 | )
Net income (loss) |  | (6,917.9 | ) |  | (24.6 | ) |  | (6,942.5 | )
Earnings per share: |  |  |  |  |  |
Basic: |  |  |  |  |  |
Income (loss) from continuing operations |  | $ | (14.33 | ) |  | $ | — |  |  | $ | (14.33 | )
Income (loss) from discontinued operations |  | (0.27 | ) |  | (0.05 | ) |  | (0.32 | )
Net income (loss) |  | $ | (14.60 | ) |  | $ | (0.05 | ) |  | $ | (14.65 | )
Diluted: |  |  |  |  |  |
Income (loss) from continuing operations |  | $ | (14.33 | ) |  | $ | — |  |  | $ | (14.33 | )
Income (loss) from discontinued operations |  | (0.27 | ) |  | (0.05 | ) |  | (0.32 | )
Net income (loss) |  | $ | (14.60 | ) |  | $ | (0.05 | ) |  | $ | (14.65 | )
The Company concluded the above referenced effects were not material to its previously issued Consolidated Statement of Operations for the year ended December 31, 2018 and Consolidated Balance Sheet as of December 31, 2018 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 4, 2019. As such, the Company will revise its Consolidated Statement of Operations, Consolidated Statement of Comprehensive Income (Loss), Consolidated Statement of Cash Flows and Consolidated Statement of Stockholders’ Equity for the year ended December 31, 2018 and Consolidated Balance Sheet at December 31, 2018 in the Company’s 2019 Annual Report on Form 10-K. The adjustments will not result in a change to net cash provided by operating activities in the Company’s Consolidated Statement of Cash Flows for the year ending December 31, 2018. In addition, the Company has revised the Condensed Consolidated Balance Sheet at December 31, 2018 for the above adjustments including the effects to the Company’s retained deficit and total stockholders’ equity within this Quarterly Report on Form 10-Q. Other Items At June 30, 2019, the Company held a 23.4% investment in FireAngel Safety Technology Group PLC (formerly known as Sprue Aegis PLC) (“FireAngel”), which the Company accounts for under the equity method of accounting. During the three months ended March 31, 2019, the Company recorded an other-than-temporary-impairment of approximately $11.7 million. Prior to the other-than-temporary impairment FireAngel experienced a decline in its share price. In addition, during March of 2019, FireAngel publicly disclosed its intentions to raise capital through a public offering at a price per share below our investment’s basis. The Company concluded these facts were indicative of an other-than-temporary-impairment and recorded the charge within other expense (income), net in the Condensed Consolidated Statement of Operations for the six months ended June 30, 2019. During the second quarter of 2019, the Company participated in FireAngel’s public offering to maintain its equity interest. The Company’s carrying value of its investment in FireAngel was $4.6 million as of June 30, 2019. On March 3, 2018, the Company terminated its distribution agreement with FireAngel. During the three and six months ended June 30, 2018, the Company’s related party sales to FireAngel were nil and $7.5 million, respectively. There have been no related party sales since the termination of the distribution agreement.

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