Newell Rubbermaid Reports Solid Second Quarter 2012 Results and Reaffirms Full Year Guidance
ATLANTA, Jul 27, 2012 (BUSINESS WIRE) --
Copyright Business Wire 2012
--Reported EPS of $0.38, Down $0.11 compared with Prior Year Quarter, Reflecting $0.11 Higher Non-Cash Tax Expense
Newell Rubbermaid (NYSE: NWL) today announced solid second quarter 2012
results and reaffirmed full-year core sales, normalized operating
margin, normalized EPS and operating cash flow guidance.
"Our solid second quarter results build on the momentum established in
the first quarter, resulting in a good first half of 2012. During the
first half, we reported 2.5 percent core sales growth, normalized
operating margin expansion of 20 basis points, and normalized earnings
per share increase of 8.1 percent," said Michael Polk, Newell
Rubbermaid's President and CEO. "This performance was driven by strong
core sales growth in our Professional and Baby & Parenting segments and
double-digit core sales growth in emerging markets. We generated over
$70 million more operating cash flow in the first half of 2012 than
prior year, continued to improve our capital structure by initiating the
refinancing of $437 million of convertible securities on more favorable
terms, and returned $95 million to our shareholders in the form of
dividends and share repurchases. We're encouraged by the first half
results, and we believe our portfolio is well positioned to meet our
financial and strategic goals for the year."
Second Quarter Executive Summary
Second quarter 2012 net sales were $1.52 billion, a decrease of 1.9
percent versus prior year results. Core sales, which exclude the
impact of changes in foreign currency translation, grew by 0.4
percent. Adjusted for an estimated timing shift in customer orders
from the second quarter to the first quarter related to the company's
European SAP conversion, core sales in the quarter rose 2.3 percent
over the year-ago quarter. Net sales for the first six months were
$2.85 billion, an increase of 1.0 percent versus prior year first half
Normalized diluted earnings per share were $0.47 compared with $0.45
in the prior year period; reported diluted earnings per share were
$0.38 compared with $0.49 in the year-ago period.
Operating cash flow in the quarter was $103.1 million, an improvement
of $10.3 million compared with the year-ago period.
During the quarter, the company issued $500 million of medium term
notes in two tranches of $250 million, with 3 and 10 year maturities.
Subsequent to quarter end, the proceeds were used to redeem $437
million in outstanding junior convertible subordinated debentures
resulting in annualized interest expense savings of approximately
$0.02 per diluted share.
The company paid $24.9 million to repurchase 1.4 million shares under
its authorized $300 million share repurchase plan.
The company reaffirmed its 2012 guidance for core sales growth in a
range from 2 to 3 percent, normalized operating margin improvement of
up to 20 basis points, normalized diluted earnings per share growth of
about 3 to 6 percent, or $1.63 to $1.69, and operating cash flow of
$550 to $600 million.
Second Quarter 2012 Operating Results
Net sales in the second quarter were $1.52 billion, a decline of 1.9
percent compared with the prior year. Excluding 230 basis points of
adverse foreign currency translation, core sales grew 0.4 percent. The
company estimates the timing shift in customer orders related to its
European SAP conversion reduced the reported core sales increase in the
quarter by 1.9 percentage points. The underlying core sales growth of
2.3 percent was driven by strong performance in the Newell Professional
and Baby & Parenting segments and continued growth in emerging markets.
Gross margin of 38.3 percent expanded 50 basis points versus the prior
year as pricing and productivity more than offset the negative impact of
input cost inflation.
Operating margin for the quarter on a normalized basis was 13.7 percent,
up 40 basis points from the prior year, driven by gross margin expansion
and lower structural SG&A expense. On a reported basis, operating margin
for the quarter was 12.2 percent, a 50 basis point decline from the
prior year due to an increase in restructuring and restructuring-related
Second quarter operating income on a normalized basis was $207.1 million
compared with $205.9 million in the prior year period, and reported
operating income was $185.5 million compared to $195.9 million in the
prior year period. Second quarter normalized operating income excludes
$21.6 million of restructuring and restructuring-related costs incurred
primarily in connection with the European Transformation Plan and
Project Renewal. In 2011, normalized operating income excluded $10.0
million in restructuring and restructuring-related costs incurred in
connection with the European Transformation Plan.
The normalized tax rate for the quarter was 25.8 percent compared with
26.0 percent in the prior year. The reported tax rate for the quarter
was 32.0 percent compared with15.0 percent in the prior year. The
year-over-year change in the reported tax rate was primarily driven by
certain discrete items recorded in each of the quarters. In the second
quarter of 2012, certain tax contingencies and other non-cash tax
charges related to the European Transformation Plan increased the
effective tax rate. In the second quarter of 2011, the effective tax
rate was lowered as a result of the reversal of certain tax
contingencies due to expiration of various worldwide statutes of
Net income, as reported, was $111.8 million, or $0.38 per diluted share,
for the second quarter. This compares with net income of $146.7 million,
or $0.49 per diluted share, in the prior year.
Normalized earnings of $0.47 per diluted share compares against prior
year normalized results of $0.45 per diluted share. The improvement was
driven by gross margin expansion and lower structural SG&A expense.
For the second quarter 2012, normalized diluted earnings per share
exclude $0.05 per diluted share for restructuring and
restructuring-related costs associated with the European Transformation
Plan and Project Renewal; and income tax charges of $0.04 per diluted
share attributable to certain tax contingencies and other non-cash tax
charges associated with the European Transformation Plan. For the second
quarter 2011, normalized diluted earnings per share exclude $0.03 per
diluted share for restructuring and restructuring-related costs
associated with the European Transformation Plan; a $0.07 per diluted
share benefit resulting from the reversal of certain tax contingencies
due to the expiration of various worldwide statutes of limitation; as
well as the impact on net income from discontinued operations of $1.3
million. (A reconciliation of the "as reported" results to "normalized"
results is included below.)
The company generated operating cash flow of $103.1 million during the
second quarter of 2012, compared with $92.8 million in the comparable
period last year. Capital expenditures were $36.7 million in the second
quarter compared with $51.2 million in the prior year.
A reconciliation of the second quarter 2012 and 2011 results is as
Second Quarter 2012 Operating Segment Results
The Newell Consumer segment's net sales for the second quarter were
$808.4 million, a 3.0 percent decline compared with the prior year
quarter. Core sales in the segment decreased 0.3 percent after adjusting
for the estimated effects of the European SAP pre-buy. The decline was
primarily due to macro-driven softness in Fine Writing in Western
Europe, as well as improving but continued weak performance in Decor
within the Home Organization & Style global business unit. Operating
income in the Newell Consumer segment was $145.6 million, or 18.0
percent of sales, compared with $143.5 million, or 17.2 percent of
sales, in the prior year. The operating margin improvement was driven by
gross margin expansion, as productivity and pricing more than offset
inflation and the impact of operational challenges in Decor.
The Newell Professional segment posted second quarter net sales of
$525.4 million, a 2.0 percent decline from the prior year. Core sales
growth for the segment was 4.6 percent after excluding the estimated
effects of the European SAP pre-buy. Strong performances from the
Construction Tools & Accessories and Industrial Products & Services
global business units drove the growth. The segment's operating income
was $63.6 million, or 12.1 percent of sales, as compared with $69.6
million, or 13.0 percent of sales, in the prior year. The decline in
operating margin was attributable to lower sales volume associated with
the SAP pre-buy in combination with slightly higher SG&A spending to
support selling capabilities.
Second quarter net sales in the Baby & Parenting segment were $182.4
million, a 4.1 percent improvement over the prior year. Excluding the
estimated effect of the European SAP pre-buy, core sales increased 7.3
percent driven primarily by improved performance by the Graco(R)
brand in North America and continued strong performance of the Aprica(R)
brand in Japan. Second quarter operating income was $19.2 million, or
10.5 percent of sales, compared with $13.0 million, or 7.4 percent of
sales, in the prior year, with the operating margin improvement
primarily driven by the increase in sales volume, improved mix, and
Six Month Results
Net sales for the six months ended June 30, 2012 increased 1.0 percent
to $2.85 billion, compared with $2.82 billion in the prior year. Core
sales increased 2.5 percent for the six months with foreign currency
translation adversely impacting net sales by 1.5 percent.
Gross margin was 38.3 percent, a 40 basis point expansion compared to
the prior year, as productivity gains and pricing more than offset the
effect of input cost inflation.
Normalized operating margin of 12.4% was an increase of 20 basis points
compared with 12.2% in the prior year. Reported operating margin
declined by 60 basis points due to higher restructuring and
restructuring-related costs primarily related to Project Renewal.
Normalized earnings were $0.80 per diluted share compared with $0.74 per
diluted share in the prior year. For the six months ended June 30, 2012,
normalized diluted earnings per share exclude $0.11 per diluted share
for restructuring and restructuring-related costs associated with the
European Transformation Plan and Project Renewal and income tax charges
of $0.04 per diluted share attributable to certain tax contingencies and
other non-cash tax charges associated with the European Transformation
Plan. For the six months ended June 30, 2011, normalized diluted
earnings per share exclude $0.06 per diluted share for restructuring and
restructuring-related costs associated with the European Transformation
Plan; a $0.07 per diluted share benefit resulting from the reversal of
certain tax contingencies due to the expiration of various worldwide
statutes of limitation; a $0.01 per diluted share loss related to the
retirement of convertible notes; as well as the impact on net income
from discontinued operations of $3.1 million, or $0.01 per diluted
share. (A reconciliation of the "as reported" results to "normalized"
results is included below.)
Net income, as reported, was $191.1 million, or $0.65 per diluted share.
This compares to $222.4 million, or $0.75 per diluted share, in the
The company generated operating cash flow of $55.7 million during the
first six months of 2012 compared to a use of $15.5 million in the prior
year. Capital expenditures were $85.0 million, compared to $96.1 million
in the prior year.
A reconciliation of the first six months 2012 and 2011 results is as
2012 Full Year Outlook
The company reaffirmed its full year expectation for core sales growth
of 2 to 3 percent. It revised its expectation for the projected negative
impact on net sales from currency to approximately 2 percentage points,
from its previous expectation of between 1 and 2 percentage points. Net
sales are now projected to be flat to up 1 percent.
The company continues to expect 2012 normalized operating margin
improvement of up to 20 basis points and 2012 normalized diluted
earnings per share of between $1.63 and $1.69.
The company's 2012 normalized EPS expectation excludes between $110 and
$130 million of restructuring and restructuring-related costs associated
with the company's European Transformation Plan and Project Renewal. It
also excludes approximately $0.06 in certain tax contingencies and other
non-cash tax charges associated with the European Transformation Plan.
(A reconciliation to normalized results is included below.)
The company is on track to realize cumulative annualized profitability
improvement of $55 to $65 million related to the European Transformation
Plan, the majority of which was reflected in 2011 results. The Project
Renewal annualized cost savings of approximately $90 to $100 million are
expected to be realized by the first half of 2013 and are intended to
fund increased investments to strengthen brand building and selling
capabilities in priority markets around the world.
Operating cash flow outlook is unchanged at between $550 and $600
million for the full year, including approximately $110 to $120 million
in restructuring and restructuring-related cash payments. The company
anticipates capital expenditures of $200 to $225 million during the year.
A reconciliation of the 2012 earnings outlook is as follows:
The company's second quarter 2012 earnings conference call is scheduled
for today, July 27, 2012, at 8:30 am ET. To listen to the webcast, use
the link provided under Events & Presentations in the Investor Relations
section of Newell Rubbermaid's Web site at www.newellrubbermaid.com.
The webcast will be available for replay for 30 days. A brief supporting
slide presentation will be available prior to the call under Quarterly
Earnings in the Investor Relations section on the company's Web site.
Non-GAAP Financial Measures
This release contains non-GAAP financial measures within the meaning of
Regulation G promulgated by the Securities and Exchange Commission.
Included in this release is a reconciliation of these non-GAAP financial
measures to the most directly comparable financial measures calculated
in accordance with GAAP.
The Company uses certain financial measures that are included in this
press release and the additional financial information both in
explaining its results to stockholders and the investment community and
in its internal evaluation and management of its businesses. The
Company's management believes that these measures -- including those that
are "non-GAAP financial measures" -- and the information they provide are
useful to investors since these measures (a) permit investors to view
the Company's performance using the same tools that Company management
uses to evaluate the Company's past performance, reportable business
segments and prospects for future performance and (b) determine certain
elements of management's incentive compensation.
The Company's management believes that free cash flow, defined by the
Company as cash generated from operations less capital expenditures, is
useful to investors because it is an indication of amounts of cash flow
that may be available for dividends, repurchases of common stock,
repayment of debt and further investment in future growth initiatives.
The Company's management believes that core sales, as reflected in the
Currency Analysis, is useful to investors because it demonstrates the
effect of foreign currency translation on reported sales. The effect of
foreign currency translation on reported sales is determined by applying
the current year and prior year monthly exchange rates to the local
currency sales amounts in the current year period, with the difference
in these two amounts being the currency impact from last year to this
year and the residual representing changes attributable to core sales.
The Company's management believes that "Normalized" operating income is
useful because it provides investors with a meaningful perspective on
the current underlying performance of the Company's core ongoing
operations. The Company's management believes that "Normalized" earnings
per share, which excludes restructuring and restructuring-related
charges and one-time events such as losses related to the
extinguishments of debt, tax benefits and charges, impairment charges,
discontinued operations and certain other items, is useful to investors
because it permits investors to better understand year-over-year changes
in underlying operating performance. The Company uses both core sales
and normalized earnings per share as two of the three performance
criteria in its management cash bonus plan.
The Company determined the tax effect of the items excluded from
normalized diluted earnings per share by applying the estimated
effective rate for the applicable jurisdiction in which the pre-tax
items were incurred, and for which realization of the resulting tax
benefit, if any, is expected.
While the Company believes that these non-GAAP financial measures are
useful in evaluating the Company's performance, this information should
be considered as supplemental in nature and not as a substitute for or
superior to the related financial information prepared in accordance
with GAAP. Additionally, these non-GAAP financial measures may differ
from similar measures presented by other companies.
About Newell Rubbermaid
Newell Rubbermaid Inc., an S&P 500 company, is a global marketer of
consumer and commercial products with 2011 sales of approximately $5.9
billion and a strong portfolio of leading brands, including Rubbermaid(R),
Sharpie(R), Graco(R), Calphalon(R), Irwin(R),
Lenox(R), Levolor(R), Paper Mate(R), Dymo(R),
Waterman(R), Parker(R), Goody(R), Rubbermaid
Commercial Products(R) and Aprica(R).
This press release and additional information about Newell Rubbermaid
are available on the company's Web site, www.newellrubbermaid.com.
Caution Concerning Forward-Looking Statements
Statements in this press release that are not historical in nature
constitute forward-looking statements. These forward-looking statements
relate to information or assumptions about the effects of sales,
income/(loss), earnings per share, operating income, operating margin or
gross margin improvements or declines, the European Transformation Plan,
Project Renewal, capital and other expenditures, cash flow, dividends,
restructuring and restructuring-related costs, costs and cost savings,
inflation or deflation, particularly with respect to commodities such as
oil and resin, debt ratings, and management's plans, projections and
objectives for future operations and performance. These statements are
accompanied by words such as "anticipate," "expect," "project," "will,"
"believe," "estimate" and similar expressions. Actual results could
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, our dependence on the strength of
retail, commercial and industrial sectors of the economy in light of the
continuation or escalation of the global economic slowdown or regional
sovereign debt issues; currency fluctuations; competition with other
manufacturers and distributors of consumer products; major retailers'
strong bargaining power; changes in the prices of raw materials and
sourced products and our ability to obtain raw materials and sourced
products in a timely manner from suppliers; our ability to develop
innovative new products and to develop, maintain and strengthen our
end-user brands; our ability to expeditiously close facilities and move
operations while managing foreign regulations and other impediments; our
ability to implement successfully information technology solutions
throughout our organization; our ability to improve productivity and
streamline operations; changes to our credit ratings; significant
increases in the funding obligations related to our pension plans due to
declining asset values, declining interest rates or otherwise; the
imposition of tax liabilities greater than our provisions for such
matters; the risks inherent in our foreign operations and those factors
listed in the company's most recently filed Quarterly Report on Form
10-Q and Exhibit 99.1 thereto, filed with the Securities and Exchange
Commission. Changes in such assumptions or factors could produce
significantly different results. The information contained in this news
release is as of the date indicated. The company assumes no obligation
to update any forward-looking statements contained in this news release
as a result of new information or future events or developments.
SOURCE: Newell Rubbermaid