Newell Brands Inc.

10/31/2025 | Press release | Distributed by Public on 10/31/2025 14:01

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of Newell Brands Inc.'s ("Newell Brands," the "Company," "we," "us" or "our") consolidated financial condition and results of operations. The discussion should be read in conjunction with the accompanying condensed consolidated financial statements and notes thereto.
Forward-Looking Statements
This report contains forward-looking statements within the meaning of the federal securities law. These statements generally can be identified by the use of words such as "intend," "anticipate," "believe," "estimate," "project," "target," "plan," "expect," "setting up," "beginning to," "will," "should," "would," "could," "resume," "are confident that," "remain optimistic that," "seek to," or similar statements. The Company cautions that forward-looking statements are not guarantees because there are inherent difficulties in predicting future results. Actual results may differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results to differ materially from those suggested by the forward-looking statements include, but are not limited to:
•the Company's ability to optimize costs and cash flow and mitigate the impact of soft global demand and retailers' inventory rebalancing through discretionary and overhead spend management, advertising and promotion expense optimization, demand forecast and supply plan adjustments and actions to improve working capital;
•the Company's dependence on the strength of retail and consumer demand and commercial and industrial sectors of the economy in various countries around the world;
•the Company's ability to improve productivity, reduce complexity and streamline operations;
•risks related to the Company's substantial indebtedness, potential increases in interest rates or changes in the Company's credit ratings including the failure to maintain financial covenants which if breached could subject us to cross-default and acceleration provisions in our debt documents;
•the impact on the Company's operations and financial condition resulting from the current global macroeconomic environment, including the impact of tariffs imposed by the U.S. and retaliatory tariffs imposed by foreign countries, and the Company's ability to effectively execute its mitigation plans;
•competition with other manufacturers and distributors of consumer products;
•major retailers' strong bargaining power and consolidation of the Company's customers;
•supply chain and operational disruptions in the markets in which we operate, including as a result of geopolitical and macroeconomic conditions and any global military conflicts including those between Russia and Ukraine and in the Middle East;
•changes in the prices and availability of labor, transportation, raw materials and sourced products, including significant inflation, and the Company's ability to offset cost increases through pricing and productivity in a timely manner;
•the Company's ability to effectively execute its turnaround plan, including the Realignment Plan and other restructuring and cost saving initiatives;
•the Company's ability to develop innovative new products, to develop, maintain and strengthen end-user brands and to realize the benefits of increased advertising and promotion spend;
•the risks inherent to the Company's foreign operations, including currency fluctuations, exchange controls and pricing restrictions;
•future events that could adversely affect the value of the Company's assets and/or stock price and require additional impairment charges;
•unexpected costs or expenses associated with dispositions;
•the cost and outcomes of governmental investigations, inspections, lawsuits, legislative requests or other actions by third parties, including but not limited to those described in Footnote 14 of the Notes to Unaudited Condensed Consolidated Financial Statements, the potential outcomes of which could exceed policy limits, to the extent insured;
•the Company's ability to maintain effective internal control over financial reporting;
•risk associated with the use of artificial intelligence in the Company's operations and the Company's ability to properly manage such use;
•a failure or breach of one of the Company's key information technology systems, networks, processes or related controls or those of the Company's service providers;
•the impact of U.S. and foreign regulations on the Company's operations, including environmental remediation costs and legislation and regulatory actions related to product safety, data privacy and climate change;
•the potential inability to attract, retain and motivate key employees;
•changes in tax laws and the resolution of tax contingencies resulting in additional tax liabilities;
•product liability, product recalls or related regulatory actions;
•the Company's ability to protect its intellectual property rights;
•the impact of climate change and the increased focus of governmental and non-governmental organizations and customers on sustainability issues, as well as external expectations related to environmental, social and governance considerations;
•significant increases in the funding obligations related to the Company's pension plans; and
•other factors listed from time to time in our SEC filings, including but not limited to our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q and other filings.
The information contained in this Report is as of the date indicated. The Company assumes no obligation to update any forward-looking statements contained in this Report as a result of new information or future events or developments. In addition, there can be no assurance that the Company has correctly identified and assessed all of the factors affecting the Company or that the publicly available and other information the Company receives with respect to these factors is complete or correct.
Overview
Newell Brands Inc. is a leading global consumer goods company with a strong portfolio of well-known brands, including Rubbermaid, Sharpie, Graco, Coleman, Rubbermaid Commercial Products, Yankee Candle, Paper Mate, FoodSaver, Dymo, EXPO, Elmer's, Oster, NUK, Spontex and Campingaz. Newell Brands is focused on delighting consumers by lighting up everyday moments. The Company sells its products in over 150 countries around the world and has operations on the ground in over 40 of these countries, excluding third-party distributors. The Company has three operating segments: Home and Commercial Solutions ("H&CS"), Learning and Development ("L&D") and Outdoor and Recreation ("O&R").
Business Strategy
In 2023, the Company initiated a multi-year turnaround plan based on a comprehensive capability assessment and a clear set of "where to play" and "how to win" strategic choices with the goal of improving the Company's top line, expanding margins and improving cash flow. During 2024, the Company fully deployed its strategy, transitioned to a new operating model, rebuilt its front-end capabilities and continued with its simplification agenda.
The Company is implementing this strategy while continuing to address key global challenges such as shifting consumer preferences and behaviors; a highly competitive operating environment; a rapidly changing retail and consumer landscape; continued macroeconomic and geopolitical volatility; a soft macro backdrop; significant cumulative inflationary pressures on consumers; recently announced and imposed tariffs by the current U.S. presidential administration and other countries' retaliatory actions in response to such tariffs; and an evolving regulatory landscape.
In order to successfully navigate these challenges and deliver strong performance, the Company intends to continue creating and leveraging scale to unlock the full potential of the Company's portfolio of leading brands through maintaining a disciplined approach and executing with excellence on the Company's key priorities for 2025 including:
•Returning to profitable top line growth through product and commercial innovation, distribution expansion and international market penetration;
•Expanding gross and operating margin, building on the significant gains achieved in 2024;
•Further deleveraging the balance sheet and improving cash flow efficiency;
•Driving operational excellence through complexity reduction, technology standardization and continued stock-keeping unit ("SKU") optimization; and
•Strengthening our high-performance culture, emphasizing accountability, innovation and inclusion.
The Company is deeply committed to sustaining its turnaround momentum and driving long-term profitable growth.
Execution of these strategic imperatives, in combination with other initiatives aimed to build operational excellence, will better position the Company for long-term sustainable growth. One such initiative is the organizational realignment ("Realignment Plan"), which was designed 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" strategies the Company initiated in 2023. In addition to improving accountability, the Realignment Plan was designed to unlock operational efficiencies and cost savings, reduce complexity and free up funds for reinvestment. As part of the Realignment Plan, the Company has made several operating model changes, which entailed: 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 has also further optimized the Company's real estate footprint and pursued other cost reduction initiatives. These actions were primarily implemented by the end of 2024. The remaining actions, subject to applicable local law and consultation requirements, are expected to be implemented by the end of fiscal year 2025.
In addition, the Company continues to review its operating footprint and non-core brands, which will result in future restructuring and restructuring-related charges.
Recent Developments
Update on Tariffs
The current U.S. presidential administration has announced and/or imposed a series of new tariffs on foreign imports into the U.S., including without limitation significant tariffs on products manufactured in China. Tariffs on imports into the U.S., most significantly from China, and any retaliatory tariffs on exports from the U.S. to other countries, will increase costs for the Company and could impact the level of trade between the U.S. and its various trading partners around the globe in general.
We believe that the Company is well positioned to respond to the current tariff environment, primarily because the Company maintains a significant U.S. manufacturing presence of 15 production facilities and manufactures, in the U.S. and two of its facilities in Mexico, products representing over half of the Company's U.S. revenues that are not presently subject to the recently announced U.S. tariffs. This manufacturing presence is expected to provide a competitive advantage to the Company in certain categories where its competitors are exposed to import tariffs. The Company also has a scaled, centralized procurement team that is proficient in sourcing raw materials and finished products from over 50 countries around the world.
Based on the currently announced and imposed tariffs as well as any retaliatory tariffs on U.S. exports, the Company anticipates an incremental cash tariff cost of approximately $180 million in 2025 prior to any offsetting impact from mitigating actions. There will be a timing difference between the operating cash outflow and the recognition of cost of products sold arising from the tariffs. As a result, the Company anticipates recognizing approximately $115 million of incremental costs of products sold (including $10 million in the second quarter and $55 million in the third quarter) in the Consolidated Statement of Operations in 2025. The Company continues to deploy a mitigation strategy designed to offset the impact of this tariff exposure through a number of actions, including pricing, productivity and in some cases relocation of manufacturing. At this time, it is difficult to predict the rate or duration of these tariffs, and there can be no assurance as to the extent to which the Company will be able to offset the impact through mitigation actions. Additional tariffs or further increases to the U.S. tariffs, retaliatory actions taken by other countries, or failure to effectively deploy the Company's mitigation plans could have a significant negative impact on the Company.
Sale of Equity Interest in Joint Venture
In August 2025, the Company sold its equity interest in a joint venture for approximately $22 million, subject to customary working capital and other post-closing adjustments, and recorded a pretax gain of approximately $12 million, which was included in other (income) expense, net in the Condensed Consolidated Statements of Operations.
Results of Operations
Three Months Ended September 30, 2025 vs. Three Months Ended September 30, 2024
Consolidated Operating Results
Three Months Ended September 30,
(in millions)
2025
2024
$ Change % Change
Net sales $ 1,806 $ 1,947 $ (141) (7.2)%
Gross profit 616 679 (63) (9.3)%
Gross margin 34.1 % 34.9 %
Operating income (loss) 119 (121) 240 NM
Operating margin 6.6 % (6.2) %
Interest expense, net 83 75 8 10.7%
Other (income) expense, net (6) 9 (15) NM
Income (loss) before income taxes 42 (205) 247 NM
Income tax provision (benefit) 21 (7) 28 NM
Income tax rate 50.0 % 3.4 %
Net income (loss) $ 21 $ (198) $ 219 NM
Diluted earnings (loss) per share $ 0.05 $ (0.48)
NM - NOT MEANINGFUL
Net sales for the three months ended September 30, 2025 decreased 7%. Net sales were unfavorably impacted primarily by continued softness in global demand in the H&CS segment. In addition, net sales were unfavorably impacted by reduced retailer inventory levels primarily in the L&D segment and to a lesser extent in the H&CS segment. These unfavorable factors were partially mitigated by launches of product innovations in the H&CS and L&D segments. Changes in foreign currency favorably impacted net sales by $11 million, or less than 1%.
Gross profit decreased 9% compared to the prior year. Gross margin declined to 34.1% as compared with 34.9% in the prior year. The impact of lower sales volume, additional tariffs of approximately $55 million, inflation and approximately $6 million of costs associated with a product recall in the H&CS segment, were partially offset by gross productivity, pricing actions and lower restructuring-related charges of approximately $13 million. Changes in foreign currency exchange rates favorably impacted gross profit by $2 million, or less than 1%.
Notable items, other than those noted above, impacting operating income (loss) for the three months ended September 30, 2025 and 2024 were as follows (in millions):
Three Months Ended September 30,
2025 2024 $ Change
Impairment of intangible assets (1)
$ - $ 260 $ (260)
Restructuring and restructuring-related costs (2)
8 22 (14)
Transaction costs and other (3)
11 6 5
(1)The three months ended September 30, 2024 includes non-cash impairment charges of $190 million and $70 million for certain indefinite-lived tradenames in the H&CS and L&D segments, respectively. See Footnote 6 of the Notes to Unaudited Condensed Consolidated Financial Statements for further information.
(2)For the three months ended September 30, 2025, restructuring-related costs reported in selling, general and administrative expenses ("SG&A") were $3 million and primarily relate to facility closures associated with various discrete initiatives as well as previously disclosed but substantially completed restructuring activities. For the three months ended September 30, 2024, restructuring-related costs reported in cost of products sold and SG&A were $13 million and $5 million, respectively, primarily related to facility closures associated with previously disclosed Network Optimization Project and Project Phoenix, as well as the Realignment Plan and other discrete initiatives. Restructuring costs were $5 million and $4 million for the three months ended September 30, 2025 and 2024, respectively, primarily related to the Realignment Plan. See Footnote 3 of the Notes to Unaudited Condensed Consolidated Financial Statements for further information.
(3)Transaction costs and other for the three months ended September 30, 2025 includes expenses for certain legal proceedings and completed divestitures, costs of a product recall (see Footnote 14 of the Notes to Unaudited Condensed Consolidated Financial Statements for further information), fire-related losses and hyperinflationary currency movements. For the three months ended September 30, 2024 transaction and other costs related to hyperinflationary currency movements and to accelerated amortization and write-off of other assets associated with integration projects.
Operating income was $119 million as compared to operating loss of $121 million in the prior year period. The operating results in the prior year period included non-cash impairment charges of $260 million for certain indefinite-lived tradenames in the H&CS and L&D segments. The improvement in the current period also reflects the impact of savings from restructuring actions primarily related to the Realignment Plan and lower incentive compensation expense of approximately $36 million, partially offset by lower gross profit of $63 million and higher advertising and promotion costs of $6 million.
Interest expense, net increased by $8 million due to higher interest rates and lower interest income. The weighted average interest rates for the three months ended September 30, 2025 and 2024 were approximately 6.6% and 5.8%, respectively. See Footnote 8 of the Notes to Unaudited Condensed Consolidated Financial Statementsfor further information.
Other (income) expense, net for the three months ended September 30, 2025 and 2024 includes the following items (in millions):
Three Months Ended September 30,
2025 2024
Foreign exchange losses, net $ 6 $ 6
(Gain) loss on disposition of businesses and investments (12) 2
Discount on factored receivables and other, net - 1
$ (6) $ 9
During the three months ended September 30, 2025, the Company sold its equity interest in a joint venture and realized a pretax gain of $12 million.
The income tax provision for the three months ended September 30, 2025 was $21 million as compared to benefit of $7 million for the three months ended September 30, 2024. The Company's effective income tax rates for the three months ended September 30, 2025 and 2024 were provision of 50.0% and benefit of 3.4% respectively. The increase in the tax rate is primarily due to a decrease in discrete benefits in the current period and lower forecasted pretax book income for 2025. In periods where forecasted pretax income is relatively low, the proportional impact of these items on the effective rate may be significant. See Footnote 10 of the Notes to Unaudited Condensed Consolidated Financial Statementsfor further information.
Business Segment Operating Results
Home and Commercial Solutions
Three Months Ended September 30,
(in millions) 2025 2024 $ Change % Change
Net sales $ 942 $ 1,047 $ (105) (10.0)%
Operating income (loss) 40 (94) 134 NM
Operating margin 4.2 % (9.0) %
NM - NOT MEANINGFUL
H&CS net sales for the three months ended September 30, 2025 decreased 10%. The net sales decrease in H&CS was driven by soft global demand in the Kitchen business and distribution losses in the Commercial business, as well as the timing of retailer orders for relaunched Home Fragrance products and a decrease in the Company's retail store sales. In addition, business exits primarily in the Kitchen business unfavorably impacted net sales by approximately 1%. These unfavorable factors were partially mitigated by launches of product innovations. Changes in foreign currency favorably impacted net sales by approximately $5
million, or less than 1%.
Operating income for the three months ended September 30, 2025 was $40 million as compared to operating loss of $94 million in the prior year. The improvement in operating results is primarily due to the absence of $190 million of non-cash impairment charge for an indefinite-lived tradename in the prior year and savings from restructuring actions mostly related to the Realignment Plan, partially offset by lower gross profit of $53 million, primarily due to the impact of lower sales volume, additional tariffs and inflation.
Learning and Development
Three Months Ended September 30,
(in millions) 2025 2024 $ Change % Change
Net sales $ 681 $ 717 $ (36) (5.0)%
Operating income 124 75 49 65.3%
Operating margin 18.2 % 10.5 %
L&D net sales for the three months ended September 30, 2025 decreased 5%. Net sales in the Writing business decreased primarily due to softer international demand and to a lesser extent, a shift of certain order activity to the second quarter, partially offset by contributions from launches of product innovations. Net sales in the Baby business declined primarily due to retailer inventory actions, including delivery preferences shifting away from direct import, partially offset by contributions from launches of product innovations. Changes in foreign currency favorably impacted net sales by approximately $4 million, or 1%.
Operating income for the three months ended September 30, 2025 increased to $124 million as compared to $75 million in the prior-year period. The increase in operating income is primarily due to the absence of $70 million of non-cash impairment charge for an indefinite-lived tradename in the prior year as well as savings from restructuring actions primarily related to the Realignment Plan. These favorable drivers were partially offset by lower gross profit of $19 million, reflecting the impact of lower net sales, additional tariffs and inflation.
Outdoor and Recreation
Three Months Ended September 30,
(in millions) 2025 2024 $ Change % Change
Net sales $ 183 $ 183 $ - -%
Operating loss (8) (23) 15 65.2%
Operating margin (4.4) % (12.6) %
O&R net sales for the three months ended September 30, 2025 remained relatively unchanged compared to the same period last year, as soft global demand and business exits were partially offset by contributions from product innovations. Changes in foreign currency favorably impacted net sales by approximately $2 million, or 1%.
Operating loss for the three months ended September 30, 2025 was $8 million as compared to $23 million in the prior-year period. The improvement in operating performance was mainly due to higher gross profit of $9 million driven primarily by gross productivity, pricing actions and mix. Savings from restructuring actions also contributed to the improvement in operating performance.
Results of Operations
Nine Months Ended September 30, 2025 vs. Nine Months Ended September 30, 2024
Consolidated Operating Results
Nine Months Ended September 30,
(in millions)
2025
2024
$ Change % Change
Net sales $ 5,307 $ 5,633 $ (326) (5.8)%
Gross profit 1,804 1,882 (78) (4.1)%
Gross margin 34.0 % 33.4 %
Operating income 311 58 253 NM
Operating margin 5.9 % 1.0 %
Interest expense, net 237 223 14 6.3%
Loss on extinguishment and modification of debt 13 1 12 NM
Other expense, net 3 15 (12) (80.0)%
Income (loss) before income taxes 58 (181) 239 NM
Income tax provision (benefit) 28 (19) 47 NM
Income tax rate 48.3 % 10.5 %
Net income (loss) $ 30 $ (162) $ 192 NM
Diluted earnings (loss) per share $ 0.07 $ (0.39)
NM - NOT MEANINGFUL
Net sales for the nine months ended September 30, 2025 decreased approximately 6%. Net sales were unfavorably impacted by soft global demand across all segments. Business exits, primarily in the H&CS segment also unfavorably impacted net sales. In addition, net sales were also unfavorably impacted by reduced retailer inventory levels primarily in the L&D segment. These unfavorable factors were partially mitigated by launches of product innovations in the H&CS and L&D segments and to a lesser extent in the O&R segment. Changes in foreign currency unfavorably impacted net sales by $37 million, or 1%.
Gross profit decreased by approximately $78 million, or 4% compared to the prior year. Gross margin improved to 34.0% as compared with 33.4% in the prior year. The improvement in gross margin was driven by gross productivity, pricing and lower restructuring-related charges of approximately $24 million, partially offset by the volume impact of lower sales, additional tariffs of approximately $65 million and inflation. Changes in foreign currency exchange rates unfavorably impacted gross profit by $6 million, or less than 1%.
Notable items, other than those noted above, impacting operating income for the nine months ended September 30, 2025 and 2024 were as follows (in millions):
Nine Months Ended September 30,
2025 2024 $ Change
Impairment of intangible assets (1)
$ - $ 260 $ (260)
Restructuring and restructuring-related costs (2)
45 87 (42)
Transaction costs and other (3)
15 7 8
(1)The nine months ended September 30, 2024 includes non-cash impairment charges of $190 million and $70 million for certain indefinite-lived tradenames in the H&CS and L&D segments, respectively. See Footnote 6 of the Notes to Unaudited Condensed Consolidated Financial Statements for further information.
(2)For the nine months ended September 30, 2025, restructuring-related costs reported in cost of products sold and SG&A were $4 million and $19 million, respectively, and primarily relate to facility closures associated with various discrete initiatives as well as previously announced but substantially completed restructuring activities. For the nine months ended September 30, 2024, restructuring-related costs reported in cost of products sold, SG&A and impairment of other assets were $28 million, $13 million and $6 million, respectively, primarily related to facility closures associated with previously disclosed Network Optimization Project and Project Phoenix, as well as the Realignment Plan and other discrete initiatives. Restructuring costs were $22 million and $40 million for the nine months ended September 30, 2025 and 2024, respectively, primarily related to the Realignment Plan. See Footnote 3 of the Notes to Unaudited Condensed Consolidated Financial Statements for further information.
(3)Transaction costs and other for the nine months ended September 30, 2025 includes expenses for certain legal proceedings and completed divestitures, costs of a product recall (see Footnote 14 of the Notes to Unaudited Condensed Consolidated Financial Statements for further information), fire-related losses and hyperinflationary currency movements. For the nine months ended September 30, 2024 transaction and other costs primarily related to a release of a bad debt reserve due to a recovery of a receivable from an international customer, hyperinflationary currency movements and accelerated amortization and write-off of other assets associated with integration projects.
Operating income was $311 million as compared to $58 million in the prior year period. The operating results in the prior year period included non-cash impairment charges of $260 million for certain indefinite-lived tradenames in the H&CS and L&D segments. The improvement also reflects the impact of savings from restructuring actions primarily related to the Realignment Plan, lower incentive compensation expense of approximately $53 million, lower restructuring and restructuring-related charges of $18 million and lower amortization of tradenames of $5 million, partially offset by lower gross profit of $78 million and higher advertising and promotion costs of $5 million.
Interest expense, net increased by $14 million due to higher interest rates and lower interest income. The weighted average interest rates for the nine months ended September 30, 2025 and 2024 were approximately 6.3% and 5.8%, respectively.
The loss on extinguishment of debt of $13 million is related to the redemption of the Company's 4.200% senior notes due 2026 (the "2026 Notes") during June 2025.
See Footnote 8 of the Notes to Unaudited Condensed Consolidated Financial Statementsfor further information on interest expense and loss on extinguishment of debt.
Other expense, net for nine months ended September 30, 2025 and 2024 includes the following items (in millions):
Nine Months Ended September 30,
2025 2024
Foreign exchange losses, net $ 8 $ 8
Gain on disposition of businesses and investments (12) (1)
Discount on factored receivables and other, net 7 8
$ 3 $ 15
During the nine months ended September 30, 2025, the Company sold its equity interest in a joint venture and realized a pretax gain of $12 million.
The income tax provision for the nine months ended September 30, 2025 was $28 million as compared to benefit of $19 million for the nine months ended September 30, 2024. The Company's effective income tax rates for the nine months ended September 30, 2025 and 2024 were provision of 48.3% and benefit of 10.5% respectively. The increase in the tax rate was primarily driven by decrease in discrete benefits in the current year and lower forecasted pretax book income for 2025. In periods where forecasted pretax income is relatively low, the proportional impact of these items on the effective rate may be significant. See Footnote 10 of the Notes to Unaudited Condensed Consolidated Financial Statementsfor further information.
Business Segment Operating Results
Home and Commercial Solutions
Nine Months Ended September 30,
(in millions) 2025 2024 $ Change % Change
Net sales $ 2,646 $ 2,902 $ (256) (8.8)%
Operating income (loss) 62 (30) 92 NM
Operating margin 2.3 % (1.0) %
NM - NOT MEANINGFUL
H&CS net sales for the nine months ended September 30, 2025 decreased 9%, which reflected soft global demand across all businesses. In addition, net sales were unfavorably impacted by distribution losses in the Commercial business, as well as the timing of retailer orders for relaunched Home Fragrance products and a decrease in the Company's retail store sales. Business exits also unfavorably impacted net sales by approximately 1%. These unfavorable factors were partially mitigated by launches of product innovations. Changes in foreign currency unfavorably impacted net sales by $32 million, or 1%.
Operating income for the nine months ended September 30, 2025 was $62 million as compared to operating loss of $30 million in the prior year. The improvement in operating results is primarily due to the absence of $190 million of non-cash impairment charge for an indefinite-lived tradename in the prior year and savings from restructuring actions mostly related to the Realignment Plan. These favorable drivers were partially offset by lower gross profit of $87 million, resulting from unfavorable fixed cost leverage associated with lower sales volume, additional tariffs and inflation, partially offset by gross productivity.
Learning and Development
Nine Months Ended September 30,
(in millions) 2025 2024 $ Change % Change
Net sales $ 2,062 $ 2,089 $ (27) (1.3)%
Operating income 424 374 50 13.4%
Operating margin 20.6 % 17.9 %
L&D net sales for the nine months ended September 30, 2025 decreased approximately 1%. Net sales in the Writing business decreased primarily due to softer demand, which was partially offset by contributions from launches of product innovations. Changes in foreign currency unfavorably impacted net sales by $6 million, or less than 1%.
Operating income for the nine months ended September 30, 2025 increased to $424 million as compared to $374 million in the prior-year period. The increase in operating income is primarily due to the absence of $70 million of non-cash impairment charge for an indefinite-lived tradename in the prior year as well as savings from restructuring actions primarily related to the Realignment Plan. These favorable drivers were partially offset by lower gross profit of approximately $19 million, primarily due to additional tariffs and inflation, partially offset by gross productivity and pricing.
Outdoor and Recreation
Nine Months Ended September 30,
(in millions) 2025 2024 $ Change % Change
Net sales $ 599 $ 642 $ (43) (6.7)%
Operating loss (5) (52) 47 90.4%
Operating margin (0.8) % (8.1) %
O&R net sales for the nine months ended September 30, 2025 decreased 7% primarily due to net distribution losses, soft global demand and business exits. These declines were partially offset by contribution from launches of product innovation. Changes in foreign currency favorably impacted net sales by $1 million, or less than 1%.
Operating loss for the nine months ended September 30, 2025 was $5 million as compared to $52 million in the prior-year period. The improvement in operating performance was due to higher gross profit of $28 million driven primarily by gross productivity, pricing actions and mix. Savings from restructuring actions and lower amortization of certain tradenames of approximately $5 million also contributed to the improvement of operating income.
Liquidity and Capital Resources
Liquidity
The Company regularly assesses its cash requirements and the available sources to fund these needs. The Company believes the extent of the impact of this rapidly changing retail and consumer landscape, which reflects major retailers' focus on tight control over their inventory levels, fluctuating interest rates and indirect macroeconomic impacts from geopolitical conflicts as well as recently imposed tariffs by the current U.S. presidential administration, including those most recently announced reciprocal
tariffs, some of which are currently delayed, and countries' retaliatory actions in response to such tariffs, will continue to be driven by numerous evolving factors the Company cannot accurately predict and which will vary.
For further information, refer to Risk Factors in Part I - Item 1A and Recent Developments in Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company's most recent Annual Report on Form 10-K, filed on February 14, 2025.
At September 30, 2025, the Company had cash and cash equivalents of approximately $229 million, of which approximately $205 million was held by the Company's non-U.S. subsidiaries.
Cash, cash equivalents and restricted cash increased (decreased) as follows for the nine months ended September 30, 2025 and 2024 (in millions):
2025 2024 Increase (Decrease)
Cash provided by operating activities $ 103 $ 346 $ (243)
Cash used in investing activities (115) (107) (8)
Cash provided by (used in) financing activities 59 (64) 123
Exchange rate effect on cash, cash equivalents and restricted cash 3 (15) 18
Increase in cash, cash equivalents and restricted cash $ 50 $ 160 $ (110)
The Company has historically generated 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.
Cash Flows from Operating Activities
The change in net cash provided by operating activities reflects higher working capital requirements of the Company due to lapping of prior year reductions, the cash impact of additional tariffs and higher incentive compensation payments in the current year, partially offset by lower restructuring payments.
Cash Flows from Investing Activities
The change in net cash used in investing activities was primarily due to $14 million increase in capital expenditures, partially offset by higher proceeds from the sale of divested businesses and investments.
Cash Flows from Financing Activities
The change in net cash provided by financing activities was primarily due to higher utilization of the Credit Revolver (defined hereafter) during the current period. SeeFootnote 8 of the Notes to the Unaudited Condensed Consolidated Financial Statementsfor further information.
Capital Resources
Credit Revolver
The Company maintains a $1.00 billion senior secured revolving credit facility (the "Credit Revolver") maturing in August 2027. Under the Credit Revolver, the Company may borrow funds on a variety of interest terms. The Credit Revolver agreement (i) requires the Company to satisfy financial covenants testing the Company's Collateral Coverage Ratio and Total Net Leverage Ratio (each further defined in the Credit Revolver, as amended), (ii) requires the Company and certain of its domestic and foreign subsidiaries (the "Guarantors") to guaranty Company obligations under the Credit Revolver and (iii) requires the Company and other Guarantors to grant a lien and security interest in certain assets consisting of eligible accounts receivables, eligible inventory, eligible equipment and eligible intellectual property, and all products and proceeds of the foregoing, subject to certain limitations. Other than outstanding borrowings under the Credit Revolver, availability under the Credit Revolver is subject to change in accordance with the terms of the agreement, including in response to changes in the Company's pledged collateral value or outstanding letters of credit under the Credit Revolver. At September 30, 2025, there was $932 million of availability
under the Credit Revolver, based on the value of the pledged collateral and prior to giving effect to outstanding borrowings and letters of credit.
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 September 30, 2025, the Company had approximately $35 million of outstanding standby letters of credit issued against the Credit Revolver and $190 million of outstanding borrowings under the Credit Revolver resulting in a net availability of approximately $707 million.
Senior Notes
In May 2025, the Company completed the offering and sale of 8.500% senior notes due 2028. In June 2025, the Company used the proceeds of the offering to fully redeem its 2026 Notes.
Also during the second quarter of 2025, Moody's and S&P downgraded the Company's senior unsecured debt rating. As a result, certain of the Company's outstanding senior notes were subject to interest rate adjustments, with such adjustments to take effect in the fourth quarter of this year.
SeeFootnote 8 of the Notes to the Unaudited Condensed Consolidated Financial Statements for further information.
The Company was in compliance with all of its debt covenants at September 30, 2025.
Risk Management
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.
See Footnote 9 of the Notes to Unaudited Condensed Consolidated Financial Statements for further information on the Company's derivative instruments.
Significant Accounting Policies and Critical Estimates
For further information on significant accounting policies and critical estimates, refer to the Company's most recent Annual Report on Form 10-K, filed on February 14, 2025 and Footnote 1 of the Notes to Unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.
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