Newell Rubbermaid Inc. Reports Operating Results (10-Q)
Newell Rubbermaid Inc. has a market cap of $4.88 billion; its shares were traded at around $17.55 with a P/E ratio of 12.1 and P/S ratio of 0.9. The dividend yield of Newell Rubbermaid Inc. stocks is 1.1%.NWL is in the portfolios of John Rogers of ARIEL CAPITAL MANAGEMENT LLC, David Williams of Columbia Value and Restructuring Fund, Michael Price of MFP Investors LLC, James Barrow of Barrow, Hanley, Mewhinney & Strauss, Paul Tudor Jones of The Tudor Group, John Buckingham of Al Frank Asset Management, Inc., Kenneth Fisher of Fisher Asset Management, LLC, George Soros of Soros Fund Management LLC, Steven Cohen of SAC Capital Advisors, Jeremy Grantham of GMO LLC, David Dreman of Dreman Value Management, John Keeley of Keeley Fund Management.
Highlight of Business Operations: The European Transformation Plan is expected to result in aggregate restructuring and other plan-related costs of $90 to $100 million, to be substantially incurred by the end of 2011. The European Transformation Plan is expected to be completed in 2012 and is expected to result in cumulative restructuring charges totaling between $40 and $45 million, substantially all of which are employee-related cash costs, including severance, retirement, and other termination benefits and relocation costs. The Company also expects to incur an additional $50 to $55 million of selling, general and administrative expenses to implement the European Transformation Plan, of which $8.5 million have been incurred through September 30, 2010 with approximately $15 to $20 million expected to be incurred in the year ending December 31, 2010. The Company expects to realize annual savings of $50 to $60 million (net of tax) upon completion of the implementation of the European Transformation Plan.
The Company expects to have completed implementation of its Project Acceleration restructuring initiative by the end of 2010, and the total costs incurred over the life of the initiative are expected to be between $475 and $500 million, including approximately $250 of employee-related costs, approximately $175 million in non-cash asset-related costs, and approximately $70 million in other associated restructuring costs. Approximately 67% of the total Project Acceleration restructuring costs are expected to be cash charges. The Company expects to incur between $60 and $80 million of costs during the year ending December 31, 2010 to complete Project Acceleration. Cumulative annualized savings expected to be realized from the implementation of Project Acceleration are in excess of $200 million once completed, with more than $180 million in annualized savings realized to date.
The Company began accounting for its Venezuelan operations using highly inflationary accounting in January 2010. Under highly inflationary accounting, the Company remeasures assets, liabilities, sales and expenses denominated in Bolivar Fuertes into U.S. Dollars using the applicable exchange rate, and the resulting translation adjustments are included in earnings. As of September 30, 2010, the Companys Venezuelan subsidiary had approximately $26.2 million of net monetary assets denominated in Bolivar Fuertes. For every $10 million of net monetary assets denominated in Bolivar Fuertes, a 5% increase/(decrease) in the applicable exchange rate would decrease/(increase) the Companys pretax income by $0.5 million.
Net sales for the three months ended September 30, 2010 were $1,487.3 million, representing an increase of $38.3 million, or 2.6%, from $1,449.0 million for the three months ended September 30, 2009. The following table sets forth an analysis of changes in consolidated net sales for the three months ended September 30, 2010 as compared to the three months ended September 30, 2009 (in millions, except percentages):
SG&A expenses for the three months ended September 30, 2010 were 25.3% of net sales, or $376.4 million, versus 24.2% of net sales, or $350.3 million, for the three months ended September 30, 2009. In constant currency, SG&A expenses increased $29.6 million mainly due to the Companys increased spend for brand building and other strategic SG&A activities such as marketing initiatives, advertising and promotions, sales force increases and the implementation of SAP.
The Company recorded restructuring costs of $16.2 million and $27.0 million for the three months ended September 30, 2010 and 2009, respectively. The year-over-year decrease in restructuring costs was largely attributable to lower costs associated with restructuring programs focused on streamlining the organizational structure to reduce structural SG&A costs. The decrease was also due to lower restructuring costs associated with reducing the Companys manufacturing and distribution footprint, as the Company is completing the remaining projects under Project Acceleration prior to the end of 2010. The restructuring costs for the three months ended September 30, 2010 included $3.3 million of facility and other exit costs, $8.0 million of employee severance, termination benefits and employee relocation costs, and $4.9 million of exited contractual commitments and other restructuring costs. The restructuring costs for the three months ended September 30, 2009 included $10.9 million of facility and other exit costs, $9.0 million of employee severance, termination benefits and employee relocation costs, and $7.1 million of exited contractual commitments and other restructuring costs. See Footnote 3 of the Notes to Condensed Consolidated Financial Statements for further information.
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