Newell Rubbermaid today announced fourth quarter 2011 results with core and net sales growth of 3.7 percent and normalized earnings per share of $0.40, a 21.2 percent improvement versus prior year. Reported diluted earnings per share of $0.27 represents an 8.0% improvement compared with the prior year.

"Newell Rubbermaid's fourth quarter results were solid in a continuing tough environment," said President and Chief Executive Officer, Michael Polk. "Our fourth quarter core sales growth of 3.7 percent was the strongest quarter of the year. Our EPS delivery was very good and full year operating cash flow was at the high end of our guidance range."

"In 2012, we expect to sustain our momentum delivering sequentially improved core sales growth versus our full year 2011 results, despite the weak developed world macroeconomic environment. We will continue to invest in our company's future by further strengthening our brand building and selling capabilities as we build Newell Rubbermaid into a bigger, faster growing, more profitable, more global company. In this context, we now expect to increase our full year core sales growth rate from 1.8 percent in 2011 to between 2 and 3 percent in 2012; increase normalized operating margin by up to 20 basis points; increase normalized EPS by about 3 to 6 percent, or $1.63 to $1.69 per share; and deliver operating cash flow of $550 to $600 million."

Fourth Quarter Executive Summary

• Fourth quarter 2011 net sales were $1.50 billion, an increase of 3.7 percent versus prior year results. Core sales also grew 3.7 percent.

• Normalized diluted earnings per share increased 21.2 percent to $0.40 compared with $0.33 in the prior year period.
• Operating cash flow was $281.5 million, an increase of 37.5 percent compared with the year-ago period.
• The company reduced debt by $137.8 million and repurchased 1.5 million shares, at a cost of $21.7 million.
• The company issued 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.

Fourth Quarter 2011 Operating Results

Net sales in the fourth quarter were $1.50 billion, an increase of 3.7 percent over the prior year. Core sales growth, defined as sales excluding foreign currency translation, was also 3.7 percent. Strong performance from emerging markets, new product pipeline fill, as well as distribution and share gains in North America, were the primary growth drivers. Foreign currency had a nominal impact on net sales in the quarter, a significant change from the first three quarters' cumulative positive 250 basis point impact.

Fourth quarter gross margin of 37.2 percent represented a slight decrease of 10 basis points versus the prior year as pricing and productivity largely offset the negative impact of input cost inflation and costs associated with operational issues at the Décor global business unit.

Normalized operating margin for the fourth quarter was 11.8 percent, up 150 basis points versus the prior year. The improvement in normalized operating margin was mainly driven by a reduction in SG&A expense. Brand building and other strategic SG&A spending, in absolute dollars, were essentially flat in the quarter, while structural SG&A decreased by approximately $9 million.

Fourth quarter operating income on a normalized basis was $176.8 million compared with $149.1 million in the prior year period. Fourth quarter normalized operating income excludes $49.4 million of restructuring and restructuring-related costs incurred in connection with the European Transformation Plan and Project Renewal and $1.9 million in incremental costs associated with the company's CEO transition. In 2010, normalized operating income excluded $30.8 million in Project Acceleration restructuring costs and restructuring-related costs incurred in connection with the European Transformation Plan.

The normalized tax rate for the quarter was 23.0 percent compared with 20.8 percent in the prior year. The year-over-year change in tax rate was primarily driven by the geographical mix in earnings and certain discrete items in the prior year.

Normalized earnings were $0.40 per diluted share compared with prior year normalized results of $0.33 per diluted share. The improvement was attributable to the increase in sales and lower structural SG&A costs, partially offset by the impact of input cost inflation and a higher effective tax rate.

For the fourth quarter 2011, normalized diluted earnings per share exclude $0.12 per diluted share for restructuring and restructuring-related costs associated with the European Transformation Plan and Project Renewal, as well as the impact of a net loss from discontinued operations of $1.3 million, or less than $0.01 per diluted share. For the fourth quarter 2010, normalized diluted earnings per share exclude $0.08 per diluted share for restructuring and restructuring-related costs as well as the net income from discontinued operations of $2.3 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 $80.4 million, or $0.27 per diluted share, for the fourth quarter. This compares with net income of $75.7 million, or $0.25 per diluted share, in the prior year.

The company generated operating cash of $281.5 million during the fourth quarter, compared with $204.7 million in the comparable period last year. The improvement was primarily related to a reduction in the company's inventory position in the quarter. Capital expenditures were $71.7 million in the fourth quarter compared with $56.6 million in the prior year.

Fourth Quarter 2011 Operating Segment Results

The Home & Family segment's net sales for the fourth quarter were $628.3 million, a 1.2 percent increase compared with the prior year quarter. Core sales in the segment increased 0.9 percent driven by a return to growth in Baby & Parenting and a strong performance by Culinary Lifestyles, offset by weak results in Décor. Operating income in the Home & Family segment was $70.7 million, or 11.3 percent of sales, compared with the 2010 fourth quarter income of $61.2 million, or 9.9 percent of sales. The profitability improvement was largely the result of lower structural SG&A costs.

The Office Products segment posted fourth quarter net sales of $439.1 million, a 3.7 percent increase over last year. Core sales growth was 3.8 percent with all businesses contributing to the improvement. The Office Products segment's operating income was $72.1 million, or 16.4 percent of sales, as compared with $51.9 million, or 12.3 percent of sales, in the prior year. Pricing, productivity and lower structural SG&A costs more than offset input cost inflation in the quarter.

Fourth quarter net sales in the Tools, Hardware & Commercial Products segment were $427.8 million, a 7.7 percent improvement over the prior year. Core sales increased 8.0 percent driven by strong results from Commercial Products, Construction Tools & Accessories and Industrial Products & Services. Fourth quarter operating income was $56.8 million, or 13.3 percent of sales, compared with $57.4 million, or 14.4 percent of sales, in the prior year. SG&A expense increased over the prior year as the company invested to build capabilities and strengthen performance in faster growing emerging markets.

Full Year Results

Net sales for the year ended December 31, 2011 increased 3.6 percent to $5.86 billion, compared with $5.66 billion in the prior year. Core sales increased 1.8 percent for the full year.

Gross margin was 37.6 percent, a 40 basis point decline versus the prior year, primarily due to higher input cost inflation, partially offset by pricing and productivity.

Normalized earnings were $1.59 per diluted share compared with $1.50 per diluted share in the prior year. In 2011, normalized earnings exclude $1.03 per diluted share for impairment charges, primarily related to goodwill write-downs; $0.24 per diluted share for restructuring and restructuring-related costs associated with the European Transformation Plan and Project Renewal; $0.02 per diluted share related to the incremental costs associated with the company's CEO transition; $0.01 per diluted share for a loss related to the retirement of convertible notes; and the benefits of $0.17 per diluted share resulting from the reversal of certain tax contingencies due to the expiration of various statutes of limitation. In addition, the company recorded a net loss from discontinued operations of $9.4 million, or $0.03 per share, reflecting the income from discontinued operations and the loss on disposal of the hand torch and solder business, which has also been excluded from normalized earnings. In 2010, normalized earnings exclude $0.24 per diluted share for restructuring and restructuring-related costs; $0.10 per diluted share of dilution related to the conversion feature of the convertible notes issued in March 2009 and the impact of associated hedge transactions; $0.44 per diluted share in charges and other impacts associated with the Capital Structure Optimization Plan; a benefit of $0.21 reflecting the favorable resolution of a tax examination; $0.02 per diluted share reflecting the income from discontinued operations of the hand torch and solder business, which has been excluded from normalized earnings; and a benefit of $0.01 per diluted share related to hyperinflationary accounting for the company's Venezuelan operations. (A reconciliation of the "as reported" results to "normalized" results is included below.)

Net income, as reported, was $125.2 million, or $0.42 per diluted share. This compares to $292.8 million, or $0.96 per diluted share, in the prior year.

The company generated operating cash flow of $561.3 million during 2011 compared with $582.6 million in the prior year. The year-over-year change is primarily driven by a decrease in accrued liabilities. Capital expenditures were $222.9 million, compared with $164.7 million in the prior year.

2012 Full Year Outlook

The company's initial outlook for full year 2012 core sales growth is an increase of 2 to 3 percent, which excludes a projected negative impact on net sales of approximately 2 percentage points from currency.

The company expects 2012 normalized operating margin improvement of up to 20 basis points and 2012 normalized earnings per diluted share to be 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 with Project Renewal. (A reconciliation of the "as reported" results to "normalized" results is included below.)

The company is on track to realize cumulative annualized net income improvement of $55 to $65 million related to the European Transformation Plan, the majority of which is reflected in the 2011 base. 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 markets around the world.

Operating cash flow is expected to be between $550 and $600 million for the full year, including approximately $110 to $120 million in restructuring and restructuring related cash payments. The company plans to fund capital expenditures of $200 to $225 million during the year.