Newell Brands (NYSE: NWL) today announced its second quarter 2018 financial results. Newell Brands reported discontinued operations for the business divestitures completed in 2018 (Waddington and Rawlings) and planned (Jostens, Pure Fishing, Consumer & Commercial Solutions, Process Solutions, Goody and U.S. Playing Cards). Under generally accepted accounting principles (GAAP), all overhead costs and interest expense not directly related to discontinued operations may not be allocated to discontinued operations and thus are allocated to continuing operations, which has a negative effect on margins and profitability. The company has initiated cost actions to fully offset the stranded overhead and plans to deleverage quickly to reduce the interest expense burden.
Net sales were $2.2 billion, compared to $2.5 billion in the prior year, largely attributable to the new revenue recognition standard, lost sales from divestitures completed in 2017, and the transitory but significant volume declines in Baby related to the Toys ‘R’ Us liquidation of U.S. stores and in Writing related to significant inventory destocking in the office superstore and distributive trade channels. Total company core sales declined 6.2 percent, driven largely by a 14.5 percent decline in the Learning & Development Segment (Writing and Baby) and softness in the coolers, tents and fresh preserving businesses related to the late start to Spring in most of the U.S. For the second quarter 2018, total company core sales include the Waddington and Rawlings businesses prior to divestiture.
Reported gross margin was 35.2 percent compared with 34.7 percent in the prior year, as the benefit from cost savings, synergies and lower integration and acquisition-related costs more than offset the impact of input cost inflation and the negative mix effect of lower Writing sales. Normalized gross margin was 35.1 percent compared with 35.6 percent in the prior year.
Reported operating income was $84.2 million, or 3.8 percent of sales, compared with $92.3 million, or 3.7 percent of sales, in the prior year, reflecting the impact of synergies, cost savings and lower integration and acquisition-related costs, offset by input cost inflation and negative mix associated with lower Writing sales. Normalized operating income was $239 million compared with $313 million in the prior year. Normalized operating margin was 10.9 percent compared to 12.4 percent in the prior year.
The reported tax expense for the quarter was $53.0 million compared with a benefit of $71.5 million in the prior year, primarily driven by prior year tax benefits associated with integration of certain legal entities. The normalized tax rate was 4.6 percent, compared with 5.5 percent in the prior year.
The company reported total net income of $132 million compared with $223 million in the prior year. Continuing operations posted a net loss of $76.1 million compared with net income of $16.6 million last year, with the decline primarily attributable to the transitory but significant sales volume decline on Baby and Writing, and $53.0 million in tax expense as compared with a benefit of $71.5 million in the prior year, partially offset by significant costs savings and a reduction in integration and restructuring charges. Discontinued operations contributed net income of $208 million, including a $598 million gain related to the sale of the Waddington business, an impairment charge of $454 million related to the Process Solutions business and a loss of $136 million related to the sale of the Rawlings business, compared with $206 million in the year-ago period. Reported diluted earnings per share for the total company were $0.27 compared with $0.46 in the prior year. Normalized net income for the total company was $401 million, or $0.82 per share, compared with $422 million, or $0.87 per share, in the prior year.
Operating cash flow was $11.2 million, compared with $56.8 million in the prior year as prior year results included a significant one-time working capital benefit related to a business divested in 2017. Current year results were driven by positive working capital movements, lower cash restructuring costs and lower cash taxes.