Reaffirms Second Quarter Guidance and Updates Full Year 2008 Outlook
ATLANTA, July 15, 2008 /PRNewswire-FirstCall/ -- Newell Rubbermaid
(NYSE: NWL) today announced it is implementing a number of strategic
initiatives designed to reduce the company's exposure to volatile commodity
markets, including a restructuring of the company's product portfolio and
aggressive pricing mechanisms.
"In recent weeks, input cost inflation has accelerated dramatically,
especially in resin, which is the largest single component of our cost of
goods," stated Mark Ketchum, president and chief executive officer of
Newell Rubbermaid. "Unfortunately we don't see this situation reversing
course. In categories where resin is a high percentage of cost of goods
sold and the consumer's willingness to pay for innovation is low, the
economics are no longer viable. In the face of these radically changed
market conditions, we are taking a number of proactive steps to reduce our
exposure to volatile commodity markets, protect our margins and
profitability, and strengthen our portfolio."
The company expects to rationalize its portfolio by divesting,
downsizing or exiting approximately $500 million in sales of selected
consumer product categories. While details of the plans will be made
available when finalized, a significant percentage of the rationalization
will be focused on the company's most resin-intensive product categories.
Additionally, in the areas of its business most impacted by cost
inflation, the company plans to implement more aggressive pricing in the
back half of 2008, with increases in some product categories as high as 22
percent. It is also initiating a new quarterly price adjustment mechanism
within the company's resin-intensive businesses in North America, effective
January 1, 2009. This quarterly adjustment will be based on independent
industry raw material indices as well as actual changes in raw material,
processing and transportation costs.
Once these initiatives are completed, the company expects the following
annual benefits:
-- a gross margin increase in excess of 200 basis points; and
-- an EPS increase of $.05 - $.10.
Ketchum commented, "We have made considerable progress over the past
several years in reducing the portion of our portfolio that is
commodity-like. However, in light of the raw material hyperinflation we are
experiencing, it is imperative we move rapidly to address additional
product categories that cannot be differentiated sufficiently through
strategic brand building to fit our business model. Our objective is to
make resin inflation an ordinary issue to manage rather than the
extraordinary issue it has been at various times in our history, especially
recently. Put simply, the forecast for dramatically higher ongoing energy
costs means that the world has changed, and we must change with it in order
to maintain a healthy portfolio."
The company's ongoing Project Acceleration will be significantly
expanded to include a number of actions related to the new initiatives.
Restructuring costs associated with these actions, including asset
impairments, are expected to fall within a range of between $80 million and
$100 million ($68 million to $85 million net of tax). Approximately 45
percent of the restructuring costs are expected to be cash charges. The
actions are expected to be completed within twelve months. The cumulative
costs of the expanded Project Acceleration are now expected to fall within
a range between $475 million and $500 million ($405 million to $425 million
net of tax), with cash costs representing approximately 67 percent of the
charges. Annual savings from Project Acceleration are now projected at
between $175 million and $200 million once fully implemented by 2010.
"The initiatives announced today represent very difficult decisions,
particularly since we expect many of the affected product categories to be
associated with our iconic Rubbermaid brand," concluded Ketchum. "We are
committed to taking a thoughtful, deliberate approach in executing our
plans, one that is sensitive to the transition needs of affected employees,
customers and suppliers. However, we strongly believe that these steps are
critical to Newell Rubbermaid's long-term health and prosperity. Our
shareholders have sent us a clear signal that additional change is needed.
Today, we are responding with actions that, when completed, will position
us as a less volatile and more profitable company, and enable us to focus
on the continuing transformation of Newell Rubbermaid into a best-in-class
global company of Brands That Matter."
Reaffirmation of Second Quarter Guidance and Update of Full Year
Outlook
Newell Rubbermaid stated that preliminary estimates indicate net sales
will be approximately $1.8 billion, up seven to eight percent compared to
the previously provided guidance of six to seven percent, and internal
sales are estimated to increase slightly above the high end of the
previously provided guidance of two to three percent. Normalized earnings
per share are expected to be in line with the previously provided guidance
of $0.47 to $0.50.
The company also reaffirmed its outlook for full year 2008 net sales
growth of six to eight percent. However, it now expects 2008 normalized
earnings per share to fall within the range of $1.40 to $1.60. The change
in outlook is attributable primarily to significantly higher expectations
for cost inflation, particularly resin. The guidance range is wider than
has been the case historically, reflecting the highly volatile and
unpredictable resin, oil and natural gas markets. The low end of the new
guidance range anticipates a continuation of difficult trends through the
back half of the year, including oil approaching $200 per barrel and
further deterioration of economic conditions.
A reconciliation of the second quarter and full year 2008 earnings
outlook is as follows:
Q2 2008 FY 2008
Diluted earnings per share from
continuing operations (as reported) $0.24 to $0.27 $0.68 to $0.88
Project Acceleration restructuring costs $0.22 to $0.25 $0.53 to $0.69
Diluted earnings per share from
continuing operations (excluding charges) $0.47 to $0.50 $1.27 to $1.47
One-time event - $0.13
"Normalized" EPS: $0.47 to $0.50 $1.40 to $1.60
"One-time event" reflects the net of tax impact of the company's third
quarter purchase of a call option with respect to its $250 million of 6.35%
Reset notes due 2028 for approximately $52 million. The call option holder
had the right to remarket these notes in July 2008 and again in July 2018.
The company will utilize its commercial paper program to fund the purchase
of the call option and the redemption of the notes in order to pursue more
favorable financing terms.
Second Quarter Earnings Call on July 31
Newell Rubbermaid will provide further details regarding today's
announcement as well as a discussion of second quarter 2008 earnings on
Thursday, July 31. Final financial results will be released prior to the
market open and will be followed by a webcast at 9:00 am ET. To listen to
the webcast, please visit Events & Presentations in the Investor Relations
section of Newell Rubbermaid's Web site at http://www.newellrubbermaid.com. The
webcast will be available for replay for two weeks.
Caution Concerning Forward-Looking Statements
The 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 Project
Acceleration, sales, income/(loss), earnings per share, operating income or
gross margin improvements, capital and other expenditures, cash flow,
dividends, restructuring costs, costs and cost savings, debt ratings, and
management's plans, projections and objectives for future operations and
performance. These statements are accompanied by words such as
"anticipate," "expect," "intend," "project," "will," "believes," "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 economies; competition with other
manufacturers and distributors of consumer products; major retailers'
strong bargaining power; changes in the prices of raw materials and sourced
products; 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; the risks inherent in our foreign
operations and those factors listed in the company's 2007 Annual Report on
Form 10-K and most recent quarterly report on Form 10-Q, 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.
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.
About Newell Rubbermaid
Newell Rubbermaid Inc., an S&P 500 company, is a global marketer of
consumer and commercial products with sales of over $6 billion and a strong
portfolio of 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), Bernzomatic(R) and Amerock(R). The
company is headquartered in Atlanta, Ga., and has approximately 22,500
employees worldwide.
This press release and additional information about Newell Rubbermaid
are available on the company's Web site, http://www.newellrubbermaid.com.
SOURCE Newell Rubbermaid
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CONTACT:
Nancy O'Donnell, Vice President, Investor
Relations, +1-770-407-3994, or David Doolittle, Vice President,
Corporate Communications, +1-770-407-3613
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