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Newell Rubbermaid Reports Strong Third Quarter Results

The following excerpt is from the company's SEC filing.

5.9% Core Sales Growth and Normalized EPS of $0.62

3.1% Net Sales Growth and Reported EPS of $0.50

» Increases 2015 Core Sales Guidance and Reaffirms 2015 Normalized EPS

» Provides Initial Outlook for 2016

Third Quarter Executive Summary

5.9 percent core sales growth, which excludes a 340 basis point net contribution from acquisitions and planned/completed divestitures and a 620 basis point negative impact from foreign currency; 3.1 percent net sales growth

39.5 percent normalized gross margin, a 30 basis point improvement compared to the prior year; 39.1 percent repo rted gross margin, a 30 basis point improvement compared to the prior year

15.2 percent normalized operating margin, a 90 basis point improvement compared to the prior year; 12.2 percent reported operating margin, a 50 basis point improvement compared to the prior year

$0.62 normalized EPS compared to $0.58 in the prior year, a 6.9 percent increase despite a $0.14 negative impact from foreign currency; $0.50 reported EPS compared to $0.44 in the prior year, a 13.6 percent increase

Acquisition of Elmer’s Products, Inc. was completed in October

Repurchased 1.0 million shares at a cost of $42.3 million

Increased core sales growth guidance to 5.0 to 5.5 percent and reaffirmed 2015 guidance for normalized earnings per share of $2.14 to $2.20

Provided 2016 financial outlook for core sales growth of 5 to 6 percent and normalized EPS of $2.35 to $2.44. Excluding Venezuela, core sales growth of 4 to 5 percent and normalized EPS of $2.21 to $2.30

- Newell Rubbermaid Inc. (NYSE: NWL) announced its third quarter 2015 financial results today.

“We delivered another very good quarter with core sales growth of 5.9 percent driven by strengthened innovation, sustained high investment in our brands and outstanding commercial execution,” said Michael Polk, President and Chief Executive Officer. “All five segments and all four regions grew core sales, led by Writing growth of 11 percent and Baby growth of over 8 percent. Our Win Bigger businesses grew nearly 9 percent. This strong growth was complemented by good gross and operating margin expansion resulting in nearly 7 percent normalized earnings per share growth, despite unprecedented foreign exchange challenges.

“We have delivered three consecutive quarters of very competitive results and our brand and innovation led operating model is working to accelerate growth while simultaneously expanding margins. In 2016, we expect to deliver another year of strong core sales and earnings growth, with core sales growth of 5 to 6 percent and normalized earnings per share of $2.35 to $2.44.”

3 Glenlake Parkway | Atlanta, GA 30328 | Phone +1 (770) 418-7000 | www.newellrubbermaid.com | NYSE: NWL

Third Quarter 2015 Operating Results

Net sales in the third quarter were $1.53 billion compared with $1.48 billion in the prior year. Core sales grew 5.9 percent. The net contribution from acquisitions and planned/completed divestitures was 340 basis points and foreign currency had a negative impact of 620 basis points.

Reported gross margin was 39.1 percent, a 30 basis point improvement versus prior year.

Normalized gross margin also expanded by 30 basis points to 39.5 percent, as benefits from productivity and pricing more than offset the negative impacts of foreign currency and mix from acquisitions.

Third quarter reported operating margin was 12.2 percent and operating income was $186.6 million, compared with 11.7 percent and $173.2 million, respectively, in the prior year.

Normalized operating margin was 15.2 percent, a 90 basis point improvement compared with the prior year. Normalized operating income was $232.4 million compared with $212.9 million in the prior year, fueled by increased gross margin and reduced overheads.

The reported tax rate for the quarter was 16.1 percent compared with 18.7 percent in the prior year. The normalized tax rate was 20.0 percent compared with 19.5 percent in the prior year.

Normalized net income was $168.1 million compared with $159.2 million in the prior year. Normalized diluted earnings per share were $0.62, an increase of 6.9 percent versus $0.58 in the prior year. The improvement in normalized diluted earnings per share was primarily attributable to the increase in core sales, the contribution from prior year acquisitions, gross margin expansion, lower overhead costs and the positive impact of fewer outstanding shares, which more than offset negative foreign currency impacts and increased interest expense related to borrowing in support of prior year acquisitions.

Reported diluted earnings per share were $0.50, compared with $0.44 per diluted share in the prior year. Reported net income was $134.2 million, compared with $122.3 million in the prior year. In addition to the factors cited in the explanation of normalized diluted earnings per share, reported diluted earnings per share benefited from a lower tax rate, though were negatively impacted by higher incremental restructuring and other Project Renewal transformation costs.

Operating cash flow was $339.9 million compared with $339.2 million in the prior year period.

A reconciliation of the “as reported” results to “normalized” results is included in the appendix.

Third Quarter 2015 Operating Segment Results

Writing net sales for the third quarter were $459.5 million, a 1.4 percent increase compared to the prior year, with strong core sales growth largely offset by a negative 960 basis point impact from foreign currency. Writing core sales increased 11.0 percent, with growth in all four regions driven by strong Back-to-School performance and market share growth, excellent innovation, broadened core distribution, strengthened marketing support and pricing in Latin America. Normalized operating income was $116.4 million compared with $109.4 million in the prior year. Normalized operating margin was 25.3 percent compared with 24.1 percent in the prior year as the benefits from pricing and productivity more than offset negative foreign currency impacts.

Home Solutions net sales were $459.4 million, a 10.2 percent increase compared to the prior year, driven by the positive 1150 basis point impact of the Contigo and bubba brand acquisitions and continued strong growth on Rubbermaid Food Storage, partially offset by a negative 180 basis point impact from foreign currency and a negative 30 basis point impact from the planned divestiture of the Décor business. Core sales, which exclude the Décor business, increased 0.8 percent, with Food & Beverage growth largely offset by the planned contraction of the lower margin Rubbermaid Consumer Storage business. Normalized operating income was $76.5 million versus $64.0 million in the prior year. Normalized operating margin expanded by 140 basis points to 16.7 percent primarily due to the positive mix effect from Food & Beverage growth, input cost deflation and strong productivity.

Tools net sales were $196.7 million, an 8.4 percent decline compared to the prior year driven by a negative 1150 basis point impact from foreign currency. Core sales grew 3.1 percent, with growth in all four regions driven by innovation and pricing, partially offset by the impact of soft market conditions on the company’s industrial bandsaw business. Normalized operating income was $20.5 million, or 10.4 percent of sales, versus $23.5 million, or 10.9 percent of sales, in the prior year. The impact of negative foreign currency and increased advertising and promotion spending was only partially offset by pricing and productivity.

Commercial Products net sales were $206.8 million, a 5.1 percent decline compared to the prior year driven by a negative 330 basis point impact from foreign currency and a negative 550 basis point impact from the divestiture of the Rubbermaid medical carts business during the quarter. Core sales, which exclude the medical carts business, increased 3.7 percent driven by innovation and pricing in North America and EMEA. Normalized operating income was $31.4 million compared with $27.5 million in the prior year. Normalized operating margin was 15.2 percent, compared with 12.6 percent in the prior year, primarily driven by pricing, productivity and input cost deflation, partially offset by the impact of negative foreign currency.

Baby & Parenting net sales were $207.6 million, a 14.4 percent increase compared to the prior year, driven primarily by the acquisition of Baby Jogger and strong core sales growth, partially offset by a negative 510 basis point impact from foreign currency. Core sales grew 8.1 percent driven by strong innovation-led growth in the U.S. and Japan. Normalized operating income was $10.2 million, or 4.9 percent of sales, compared to $10.6 million, or 5.8 percent of sales, in the prior year, as favorable product and geographic mix was more than offset by a significant increase in advertising and promotion spend in the U.S. and Japan and the impact of negative foreign currency.

2015 Full Year Outlook

Newell Rubbermaid reaffirmed its 2015 normalized EPS guidance and raised its 2015 core sales growth guidance as follows:

2015 Outlook

Core sales growth

5.0% to 5.5%

Currency impact

(5.5%) to (6.0%)

Acquisitions net of planned/completed divestitures

3.5% to 4.0%

Net sales growth

3.0% to 3.5%

$2.14 to $2.40

Overall, the company expects foreign currency to have a negative impact of about $0.41 to $0.44 per diluted share on 2015 normalized EPS driven by the stronger U.S. dollar to most currencies. Venezuela is expected to contribute about 1.3 percentage points of the 2015 full year core sales growth guidance range of 5.0 to 5.5 percent and about $0.12 to the company’s 2015 normalized EPS guidance range of $2.14 to $2.20.

The 2015 normalized EPS guidance range excludes between $140 and $160 million of Project Renewal restructuring and other Project Renewal transformation costs, discontinued operations, foreign currency losses and other costs associated with the devaluation of the Venezuelan Bolivar, acquisition and integration costs, non-cash pension settlement costs and costs associated with the Graco recall. A reconciliation of “expected reported” results to “normalized” results is included in the appendix.

Cumulative costs of Project Renewal are expected to be $690 to $725 million pretax, with cash costs of $645 to $675 million. Project Renewal is expected to generate annualized cost savings of approximately $620 to $675 million by the end of 2017. The majority of these savings will be reinvested in new capabilities and incremental brand building investment for accelerated growth in the company’s home markets and the geographic deployment of its Win Bigger portfolio into the faster growing emerging markets.

2016 Full Year Outlook

Newell Rubbermaid provided 2016 core sales growth and normalized EPS...


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