Newell Rubbermaid today announced solid fourth quarter 2012 results.

“We are pleased with our quarterly and full year 2012 performance,” said President and Chief Executive Officer Michael Polk . “Our solid fourth quarter financial results represent the sixth consecutive quarter of consistent delivery in line with or better than expectations. Full year normalized EPS and operating cash flow both came in above the high end of our guidance range. We increased core sales by 2.2%, a sequential improvement versus last year, and a solid outcome in the face of tough economic conditions in Europe and challenges in our Décor business. Our Win Bigger brands have healthy share momentum and we are generating strong core sales growth in emerging markets, particularly in Latin America. We also returned significant levels of cash to shareholders through our dividend, which nearly doubled in 2012 to the current annualized rate of $0.60, and our ongoing share repurchase program.”

Polk added, “Looking ahead, we continue to be sharply focused on driving structural costs out and accelerating growth through the execution of our Growth Game Plan. The strategic changes we are making to invest behind our Win Bigger businesses will drive accelerated performance and enable us to build a bigger, faster-growing, more global and more profitable Newell Rubbermaid.”

Executive Summary

• Fourth quarter 2012 net sales were $1.52 billion, an increase of 1.6 percent versus prior year results.
• Core sales, which exclude the impact of changes in foreign currency translation, grew 2.2 percent.

• Normalized diluted earnings per share were $0.43 compared with $0.40 in the prior year period; reported diluted earnings per share were $0.35 compared with $0.27 in the year-ago period.

• Operating cash flow in the quarter was $261.3 million. Full year 2012 operating cash flow was $618.5 million, an improvement of $57.2 million versus prior year.
• The company returned $67.8 million to shareholders in the fourth quarter through dividends of $43.5 million and the repurchase of 1.1 million shares at a cost of $24.3 million.
• The company strengthened its balance sheet and reduced ongoing interest expense through the early repayment of $500 million in 5.5% notes due April 2013. The debt was refinanced through the issuance of $350 million in 2.05% notes due 2017, cash on hand and short-term borrowings.
• The company provided 2013 guidance for core sales growth in a range from 2 to 4 percent, normalized operating margin improvement of up to 20 basis points, normalized earnings per share of $1.78 to $1.84 and operating cash flow of $575 to $625 million, which includes an incremental pension plan contribution of $50 million.

Fourth Quarter 2012 Operating Results

Net sales in the fourth quarter were $1.52 billion, an increase of 1.6 percent compared with the prior year. Core sales, which exclude 60 basis points of adverse foreign currency translation, grew 2.2 percent. Sales growth was largely attributable to the Tools, Baby & Parenting and Writing segments and to robust growth in Latin America.

As expected, gross margin of 36.5 percent represented a decline of 70 basis points versus prior year. Normalized gross margin decreased 50 basis points versus prior year to 36.7 percent as the company made incremental investments in customer programs associated with fourth quarter events and stronger 2013 new item sell-in.

Operating margin for the quarter was 10.1 percent, an increase of 170 basis points compared to the prior year. Normalized operating margin was 11.7 percent, a decrease of 10 basis points to the prior year. Lower structural SG&A costs reflecting the benefits of Project Renewal initiatives were offset by higher incentive compensation, customer programs and strategic SG&A spending on sales force expansion in Tools and Commercial Products in Latin America and Rubbermaid Healthcare in North America, and on increased advertising and promotion expenses in Writing.

Fourth quarter reported operating income was $153.8 million versus $125.5 million in the prior year period, and normalized operating income was $177.8 million compared with $176.8 million in the prior year period. Fourth quarter normalized operating income excludes $24.0 million of restructuring and restructuring-related costs incurred primarily in connection with Project Renewal and the European Transformation Plan. In 2011, normalized operating income excluded $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.

The reported tax rate for the quarter was 23.1 percent compared with 19.6 percent in the prior year. The normalized tax rate was 20.7 percent compared with 23.0 percent in the prior year. The year-over-year change in the normalized tax rate was primarily driven by the geographic mix of earnings and utilization of tax attributes.

Net income, as reported, was $101.9 million, or $0.35 per diluted share, for the fourth quarter. This compares with $80.4 million, or $0.27 per diluted share, in the prior year.

Normalized earnings of $0.43 per diluted share compares with prior year normalized results of $0.40 per diluted share. This 7.5 percent improvement was largely driven by lower interest expense and a lower normalized tax rate.

For the fourth quarter 2012, normalized diluted earnings per share exclude $0.06 per diluted share for restructuring and restructuring-related costs associated with Project Renewal and the European Transformation Plan; $0.01 per diluted share related to the extinguishment of debt; and the exclusion of $0.01 per diluted share resulting from tax contingencies. For the fourth quarter 2011, normalized diluted earnings per share excluded $0.12 per diluted share for restructuring and restructuring-related costs associated with the European Transformation Plan and Project Renewal. (A reconciliation of the “as reported” results to “normalized” results is included below.)

The company generated operating cash flow of $261.3 million during the fourth quarter of 2012 compared with $281.5 million in the comparable period last year. Capital expenditures were $47.0 million compared with $71.7 million in the prior year.

The Home Solutions segment net sales for the fourth quarter were $453.1 million, a 0.8 percent increase compared with the prior year quarter. Core sales in the segment increased 0.5 percent. Growth from the Rubbermaid®, Calphalon®, and Goody® brands was partially offset by a decline in Décor largely related to a change in merchandising strategy at a significant retail customer. Operating income in the Home Solutions segment was $64.8 million, or 14.3 percent of sales, as compared with $57.2 million, or 12.7 percent of sales, in the prior year. Normalized operating income in the Home Solutions segment was $67.7 million, or 14.9 percent of sales, compared with $57.2 million, or 12.7 percent of sales, in the prior year. The improvements were driven by Project Renewal-related structural SG&A cost reductions and improved productivity, which more than offset input cost inflation.

Fourth Quarter 2012 Operating Segment Results

The Writing segment net sales for the fourth quarter were $344.5 million, a 2.0 percent increase compared with the prior year quarter. Core sales in the segment increased 2.4 percent. The improvement was largely driven by strong growth in Latin Americaattributable to the launch of Paper Mate® InkJoy® in that region and share gains in North America on Paper Mate, Sharpie®, and Expo®. Operating income in Writing was $55.6 million, or 16.1 percent of sales, compared with $55.5 million, or 16.4 percent of sales, in the prior year. The 30 basis point decline was attributable to favorable mix, offset by input cost inflation and advertising and promotion support behind the launch of Sharpie Metallics, Sharpie’s music partnership with One Direction, and the 125^thanniversary of Parker.

The Tools segment net sales for the fourth quarter were $209.5 million, a 3.6 percent increase compared with the prior year quarter. Core sales in the segment increased 6.0 percent. The improved performance was driven by strong growth in emerging markets, particularly Latin America. Operating income in the Tools segment was $23.8 million, or 11.4 percent of sales, compared with $30.3 million, or 15.0 percent of sales, in the prior year. Improved productivity was more than offset by unfavorable mix, inflation and ongoing investment in sales force expansion in Latin America and an increase in customer programs.

The Commercial Products segment net sales for the fourth quarter were $188.6 million, a 0.9 percent increase compared with the prior year quarter. Core sales in the segment increased 1.3 percent. The improvement was primarily driven by strong performance in North America, particularly in Rubbermaid Healthcare. Operating income in the Commercial Products segment was $22.0 million, or 11.7 percent of sales, compared with $27.8 million, or 14.9 percent of sales, in the prior year. Favorable productivity was more than offset by ongoing investment in sales capabilities in emerging markets and increased merchandising investment in North America behind the Rubbermaid Commercial Products refuse and recycling businesses.

The Baby & Parenting segment net sales for the fourth quarter were $186.2 million, a 4.2 percent increase compared with the prior year quarter. Core sales in the segment increased 5.9 percent. The improvement was driven by Graco®’s strong share gains in North America and continued robust growth of Aprica® in Japan. Operating income in the Baby & Parenting segment was $12.8 million, or 6.9 percent of sales, compared with $13.5 million, or 7.6 percent of sales, in the prior year. The operating margin decline was driven by increased investments in advertising development and increased merchandising activity associated with sell in of 2013 innovation.

The Specialty segment net sales for the fourth quarter were $136.9 million, a 2.2 percent decrease compared with the prior year quarter. Core sales in the segment decreased 1.3 percent. Growth in the Dymo Office Labeling and Endicia businesses were offset by softness in Mimio® and Shur-line®. Operating income was $20.2 million, or 14.8 percent of sales, compared with $15.3 million, or 10.9 percent of sales, in the prior year. The operating margin improvement was attributable to Project Renewal-related cost reductions, which more than offset input cost inflation.

Twelve Month Results

Net sales for the twelve months ended December 31, 2012, increased 0.6 percent to $5.90 billion, compared with $5.86 billion in the prior year. Core sales increased 2.2 percent after excluding the 1.6 percent impact of unfavorable foreign currency translation. Core sales growth increased 40 basis points sequentially versus the 2011 core growth rate.

Both reported and normalized gross margin increased 20 basis points compared with prior year to 37.8 percent, as productivity gains and pricing more than offset the effect of input cost inflation.

Reported operating margin of 11.0 percent improved 660 basis points largely due to the impact of asset impairment charges in last year’s results. Normalized operating margin increased 10 basis points versus prior year to 12.6 percent.

Normalized earnings were $1.70 per diluted share compared with $1.59 per diluted share in the prior year. Net income, as reported, was $401.3 million, or $1.37 per diluted share. This compares with $125.2 million, or $0.42 per diluted share, in the prior year.