UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) March 12, 2001
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NEWELL RUBBERMAID INC.
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(Exact Name of Registrant as Specified in Charter)
Delaware 1-9608 36-3514169
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(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
29 East Stephenson Street, Freeport, Illinois 61032-0943
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (815) 235-4171
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ITEM 5. OTHER EVENTS.
Newell Rubbermaid Inc. (the "Company") is filing herewith as
Exhibit 99.1 Consolidated Financial Statements and the Management's
Discussion and Analysis of Financial Condition and Results of
Operations of Newell Rubbermaid Inc. for the fiscal year ended
December 31, 2000.
The Company is also filing herewith as Exhibit 99.2 the current
Newell Safe Harbor Statement for Forward-Looking Statements.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of KPMG LLP.
99.1 Newell Rubbermaid Inc. Consolidated Financial
Statements and Management's Discussion and
Analysis of Financial Condition and Results of
Operations for the Year Ended December 31, 2000.
99.2 Newell Rubbermaid Inc. Safe Harbor Statement for
Forward-Looking Statements.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
NEWELL RUBBERMAID INC.
(Registrant)
/s/ Andrea L. Horne
Date: March 12, 2001 By: ------------------------------
Andrea L. Horne
Vice President Corporate
Development
EXHIBIT INDEX
Exhibit
No. Description
------- -----------
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of KPMG LLP.
99.1 Newell Rubbermaid Inc. Consolidated Financial
Statements and Management's Discussion and
Analysis of Financial Condition and Results of
Operations for the Year Ended December 31, 2000.
99.2 Newell Rubbermaid Inc. Safe Harbor Statement for
Forward-Looking Statements.
EXHIBIT 23.1
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[ARTHUR ANDERSEN LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference of our report dated January 25, 2001,
included in this Form 8-K, into the Company's previously filed Form
S-8 Registration Statements File Nos. 33-24447, 33-25196, 33-40641,
33-67632, 33-62047, and 333-38621, Form S-3 Registration Statements
File Nos. 33-46208, 33-64225, 333-47261, 333-53039, and 333-82829, and
Post-Effective Amendment No. 1 on Form S-8 to Form S-4 Registration
Statement File No. 33-44957.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
March 12, 2001
EXHIBIT 23.2
------------
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Newell Rubbermaid Inc.:
We consent to the incorporation by reference in Newell Rubbermaid
Inc.'s previously filed Form S-8 Registration Statements (File Nos.
33-24447, 33-25196, 33-40641, 33-62047, 33-67632, and 333-38621), and
Form S-3 Registration Statements (File Nos. 33-46208, 33-64225,
333-47261, 333-53039, and 333-82829), and Post Effective Amendment No.
1 on Form S-8 to Form S-4 Registration Statement (File No. 33-44957)
of our report dated February 5, 1999, except as to Note 15, which is
as of March 24, 1999, with respect to the consolidated balance sheets
of Rubbermaid Incorporated and subsidiaries as of January 1, 1999, and
the related consolidated statements of earnings, shareholder's equity
and comprehensive income, and cash flows for the year then ended.
/s/ KPMG LLP
Cleveland, Ohio
March 12, 2001
EXHIBIT 99.1
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MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
The management of Newell Rubbermaid Inc. is responsible for the
accuracy and internal consistency of all information contained in this
annual report, including the consolidated financial statements.
Management has followed those generally accepted accounting principles
which it believes to be most appropriate to the circumstances of the
Company, and has made what it believes to be reasonable and prudent
judgments and estimates where necessary.
Newell Rubbermaid Inc. operates under a system of internal
accounting controls designed to provide reasonable assurance that its
financial records are accurate, that the assets of the Company are
protected and that the financial statements fairly present the
financial position and results of operations of the Company. The
internal accounting control system is tested, monitored and revised as
necessary.
Four directors of the Company, not members of management, serve
as the Audit Committee of the Board of Directors and are the principal
means through which the Board supervises the performance of the
financial reporting duties of management. The Audit Committee meets
with management and the Company's independent auditors several times a
year to review the results of external audits of the Company and to
discuss plans for future audits. At these meetings, the Audit
Committee also meets privately with the independent auditors to assure
its free access to them.
The Company's independent auditors, Arthur Andersen LLP, audited
the financial statements prepared by the management of Newell
Rubbermaid Inc. Their opinion on these statements is presented below.
William T. Alldredge Jeffrey J. Burbach
President - Corporate Development Vice President - Corporate
& Chief Financial Officer Controller
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Newell Rubbermaid Inc.:
We have audited the accompanying consolidated balance sheets of
Newell Rubbermaid Inc. (a Delaware corporation) and subsidiaries as of
December 31, 2000, 1999 and 1998 and the related consolidated
statements of income, stockholders' equity and comprehensive income
and cash flows for each of the three years in the period ended
December 31, 2000. We did not audit the financial statements of
Rubbermaid Incorporated for the year and period ended December 31,
1998. Rubbermaid was acquired on March 24, 1999 in a transaction
accounted for as a pooling of interests, as discussed in note 1 to the
consolidated financial statements. Such statements are included in the
consolidated financial statements of Newell Rubbermaid Inc. and
subsidiaries and reflect total assets and total revenues of 34 percent
and 40 percent, respectively, in 1998 of the related consolidated
totals. These statements were audited by other auditors whose report
has been furnished to us and our opinion, insofar as it relates to the
amounts included for Rubbermaid Incorporated, is based solely upon the
report of the other auditors. These consolidated financial statements
are the responsibility of Newell Rubbermaid Inc.'s management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits and the
report of the other auditors provide a reasonable basis for our
opinion.
In our opinion, based on our audits and the report of other
auditors, the financial statements referred to above present fairly,
in all material respects, the financial position of Newell Rubbermaid
Inc. and subsidiaries as of December 31, 2000, 1999 and 1998 and the
results of their operations and their cash flows for each of the three
years in the period ended December 31, 2000, in conformity with
accounting principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
January 25, 2001
INDEPENDENT AUDITORS' REPORT
Shareholders and Board of Directors
Rubbermaid Incorporated:
We have audited the consolidated balance sheets of Rubbermaid
Incorporated and subsidiaries (the Company) as of January 1, 1999, and
the related consolidated statements of earnings, shareholders' equity
and comprehensive income, and cash flows for the year then ended (the
consolidated financial statements are not included herein). These
consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of Rubbermaid Incorporated and subsidiaries as of January 1, 1999, and
the results of their operations and their cash flows for the year then
ended, in conformity with accounting principles generally accepted in
the United States of America.
KPMG LLP
Cleveland, Ohio
February 5, 1999, except as to note 15,
which is as of March 24, 1999
NEWELL RUBBERMAID INC.
CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 2000 1999 1998
---------------------- ---- ---- ----
(In thousands, except per share data)
Net sales $6,934,747 $6,711,768 $6,493,172
Cost of products sold 5,103,152 4,970,569 4,670,358
--------- --------- ---------
Gross Income 1,831,595 1,741,199 1,822,814
Selling, general and administrative expenses 899,424 1,104,491 967,916
Restructuring costs 48,561 246,381 115,154
Goodwill amortization and other 51,930 46,722 59,405
--------- --------- ---------
Operating Income 831,680 343,605 680,339
Nonoperating expenses (income):
Interest expense 130,033 100,021 100,514
Other, net 16,160 12,645 (237,148)
--------- --------- ---------
Net Nonoperating Expenses (Income) 146,193 112,666 (136,634)
--------- --------- ---------
Income Before Income Taxes 685,487 230,939 816,973
Income taxes 263,912 135,502 335,139
--------- --------- ---------
Net Income $421,575 $95,437 $481,834
========= ========= =========
Earnings per share:
Basic $1.57 $0.34 $1.72
Diluted $1.57 $0.34 $1.70
Weighted average shares outstanding:
Basic 268,437 281,806 280,731
Diluted 278,365 281,806 291,883
See notes to consolidated financial statements.
NEWELL RUBBERMAID INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2000 1999 1998
----------------------- ---- ---- ----
(In thousands)
OPERATING ACTIVITIES
Net income $421,575 $95,437 $481,834
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 292,576 271,731 263,804
Deferred income taxes 59,800 (9,600) 81,734
Income tax savings from employee stock plans 997 2,269 1,377
Net (gains) losses on:
Marketable equity securities - 700 (116,800)
Sales of businesses - - (24,529)
Non-cash restructuring charges 18,452 100,924 45,800
Write-off of assets - - 4,288
Other 1,947 51,748 24,075
Changes in current accounts, excluding the effects of
acquisitions:
Accounts receivable 36,301 (16,137) 39,619
Inventories (100,495) 52,662 (37,142)
Other current assets 6,598 (41,793) (29,906)
Accounts payable (45,606) 14,617 (72,020)
Accrued liabilities and other (68,658) 31,393 (183,367)
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 623,487 553,951 478,767
INVESTING ACTIVITIES
Acquisitions, net (597,847) (345,934) (654,591)
Expenditures for property, plant and equipment (316,564) (200,066) (318,731)
Purchase of marketable equity securities - - (26,056)
Sales of businesses, net of taxes paid - - 224,487
Sales of marketable securities, net of taxes paid - 14,328 303,869
Disposals of non-current assets and other 5,119 720 9,773
-------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES (909,292) (530,952) (461,249)
FINANCING ACTIVITIES
Proceeds from issuance of debt 1,265,051 803,298 676,759
Payments on notes payable and long-term debt (428,211) (608,573) (546,603)
Common stock repurchase (402,962) - -
Cash dividends (225,083) (225,774) (212,486)
Proceeds from exercised stock options and other 1,263 27,411 2,712
-------- -------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 210,058 (3,638) (79,618)
Exchange rate effect on cash (3,892) (3,751) (1,477)
-------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (79,639) 15,610 (63,577)
Cash and cash equivalents at beginning of year 102,164 86,554 150,131
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $22,525 $102,164 $86,554
======== ======== ========
Supplemental cash flow disclosures -
Cash paid during the year for:
Income taxes $152,787 $194,351 $272,239
Interest 145,455 98,536 103,831
See notes to consolidated financial statements.
NEWELL RUBBERMAID INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 1999 1998
------------ ---- ---- ----
(In thousands)
ASSETS
Current Assets
Cash and cash equivalents $22,525 $102,164 $86,554
Accounts receivable, net 1,183,363 1,178,423 1,078,530
Inventories, net 1,262,551 1,034,794 1,033,488
Deferred income taxes 231,875 250,587 108,192
Prepaid expenses and other 196,338 172,601 143,885
--------- ---------- ----------
TOTAL CURRENT ASSETS 2,896,652 2,738,569 2,450,649
Marketable Equity Securities 9,215 10,799 19,317
Other Long-Term Investments 72,763 65,905 57,967
Other Assets 336,344 335,699 267,073
Property, Plant and Equipment, Net 1,756,903 1,548,191 1,627,090
Trade Names and Goodwill, Net 2,189,948 2,024,925 1,867,059
---------- ---------- ----------
TOTAL ASSETS $7,261,825 $6,724,088 $6,289,155
========== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable $23,492 $97,291 $94,634
Accounts payable 342,406 376,596 322,080
Accrued compensation 126,970 113,373 110,471
Other accrued liabilities 781,122 892,481 610,618
Income taxes 73,122 - 26,744
Current portion of long-term debt 203,714 150,142 7,334
---------- ---------- ----------
TOTAL CURRENT LIABILITIES 1,550,826 1,629,883 1,171,881
Long-Term Debt 2,314,774 1,455,779 1,393,865
Other Non-Current Liabilities 352,633 354,107 374,293
Deferred Income Taxes 93,165 85,655 4,527
Minority Interest 1,788 1,658 857
Company-Obligated Mandatorily Redeemable
Convertible Preferred Securities of a
Subsidiary Trust 499,998 500,000 500,000
Stockholders' Equity
Common Stock, $1 per share par value, with
authorized shares of 800.0 million in 2000
and 1999; 400.0 million in 1998 282,174 282,026 281,747
Outstanding shares:
2000 - 282.2 million
1999 - 282.0 million
1998 - 281.7 million
Treasury Stock, at cost (407,456) (2,760) (21,607)
Shares held:
2000 - 15.6 million
1999 - 0.1 million
1998 - 0.6 million
Additional paid-in capital 215,911 213,112 204,709
Retained earnings 2,530,864 2,334,609 2,465,064
Accumulated other comprehensive loss (172,852) (129,981) (86,181)
---------- ---------- ----------
TOTAL STOCKHOLDERS' EQUITY 2,448,641 2,697,006 2,843,732
---------- ---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $7,261,825 $6,724,088 $6,289,155
========== ========= =========
See notes to consolidated financial statements.
NEWELL RUBBERMAID INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
ACCUMULATED CURRENT
OTHER YEAR
ADDITIONAL COMPRE- COMPRE-
COMMON TREASURY PAID-IN RETAINED HENSIVE HENSIVE
STOCK STOCK CAPITAL EARNINGS INCOME INCOME
------ -------- ---------- -------- ---------- -------
(In thousands, except per share data)
BALANCE AT DECEMBER 31, 1997 $281,338 $(34,667) $199,509 $2,195,716 $19,521
Net income 481,834 $481,834
Other comprehensive income:
Unrealized gain on securities available
for sale, net of $23.5 million tax 33,850 33,850
Reclassification adjustment for gains
realized in net income, net of $74.7
million tax (116,800) (116,800)
Foreign currency translation adjustments (22,752) (22,752)
--------
Total comprehensive income $376,132
========
Cash dividends:
Common Stock $0.76 per share (212,486)
Exercise of stock options 409 13,013 9,877
Other 47 (4,677)
------- ------- ------- --------- -------
BALANCE AT DECEMBER 31, 1998 281,747 (21,607) 204,709 2,465,064 (86,181)
Net income 95,437 $95,437
Other comprehensive income:
Unrealized gain on securities available
for sale, net of $2.3 million tax 3,545 3,545
Reclassification adjustment for losses
realized in net income, net of $0.4
million tax 700 700
Foreign currency translation adjustments (48,045) (48,045)
-------
Total comprehensive income $51,637
=======
Cash dividends:
Common Stock $0.80 per share (225,774)
Exercise of stock options 279 16,316 7,699
Other 2,531 704 (118)
------- ------- ------- --------- -------
BALANCE AT DECEMBER 31, 1999 282,026 (2,760) 213,112 2,334,609 (129,981)
Net income 421,575 $421,575
Other comprehensive income:
Unrealized loss on securities available
for sale, net of $(0.7) million tax (1,201) (1,201)
Foreign currency translation adjustments (41,670) (41,670)
-------
Total comprehensive income $378,704
Cash dividends:
Common Stock $0.84 per share (225,083)
Exercise of stock options 148 (190) 1,495
Common Stock repurchase (402,962)
Other (1,544) 1,304 (237)
------- ------- ------- ------- -------
BALANCE AT DECEMBER 31, 2000 $282,174 $(407,456) $215,911 $2,530,864 $(172,852)
======== ======== ======== ========= =========
NEWELL RUBBERMAID INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000, 1999,
1998
1. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial
statements include the accounts of Newell Rubbermaid Inc. and its
majority owned subsidiaries (the "Company") after elimination of
intercompany accounts and transactions.
On March 24, 1999, Newell Co. ("Newell") completed a merger with
Rubbermaid Incorporated ("Rubbermaid") in which Rubbermaid became a
wholly owned subsidiary of Newell. Simultaneously with the
consummation of the merger, Newell changed its name to Newell
Rubbermaid Inc. The merger was accounted for as a pooling of interests
and the financial statements have been restated to combine
retroactively Rubbermaid's financial statements with those of Newell
as if the merger had occurred at the beginning of the earliest period
presented.
USE OF ESTIMATES: The preparation of these financial statements
required the use of certain estimates by management in determining the
Company's assets, liabilities, revenue and expenses and related
disclosures. Actual results could differ from those estimates.
RECLASSIFICATIONS: Certain 1999 and 1998 amounts have been
reclassified to conform with the 2000 presentation.
REVENUE RECOGNITION: Sales of merchandise are recognized upon
shipment to customers and when all substantial risks of ownership
change.
In December 1999, the Securities and Exchange Commission issued
Staff Accounting Bulletin ("SAB") No. 101, which clarified the
existing accounting rules for revenue recognition. SAB No. 101 (as
modified by SAB No. 101 A and B) was adopted by the Company in the
first quarter of 2000. The Company's revenue recognition policy did
not change with the adoption of SAB No. 101.
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS: The
following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
LONG-TERM DEBT: The fair value of the Company's long-term debt
issued under the medium-term note program is estimated based on
quoted market prices which approximate cost. All other
significant long-term debt is pursuant to floating rate
instruments whose carrying amounts approximate fair value.
COMPANY-OBLIGATED MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED
SECURITIES OF A SUBSIDIARY TRUST: The fair value of the $500.0
million company-obligated mandatorily redeemable convertible
preferred securities of a subsidiary trust was $328.1 million at
December 31, 2000 based on quoted market prices.
CASH AND CASH EQUIVALENTS: Cash and highly liquid short-term
investments having a maturity of three months or less.
ALLOWANCES FOR DOUBTFUL ACCOUNTS: Allowances for doubtful
accounts at December 31 totaled $36.1 million in 2000, $41.9 million
in 1999 and $34.2 million in 1998.
INVENTORIES: Inventories are stated at the lower of cost or
market value. Cost of certain domestic inventories (approximately 64%,
72% and 72% of total inventories at December 31, 2000, 1999 and 1998,
respectively) was determined by the "last-in, first-out" ("LIFO")
method; for the balance, cost was determined using the "first-in,
first-out" ("FIFO") method. If the FIFO inventory valuation method had
been used exclusively, inventories would have increased by $15.9
million, $11.4 million and $14.2 million at December 31, 2000, 1999
and 1998, respectively. Inventory reserves (excluding LIFO reserves)
at December 31 totaled $114.6 million in 2000, $119.4 million in 1999
and $113.8 million in 1998. The components of inventories, net of the
LIFO reserve, were as follows:
DECEMBER 31, 2000 1999 1998
------------ ---- ---- ----
(In millions)
Materials and supplies $244.8 $240.0 $223.8
Work in process 165.3 149.5 137.2
Finished products 852.5 645.3 672.5
-------- -------- --------
$1,262.6 $1,034.8 $1,033.5
======== ======== ========
OTHER LONG-TERM INVESTMENTS: The Company has a 49% ownership
interest in American Tool Companies, Inc., a manufacturer of hand
tools and power tool accessory products marketed primarily under the
Vise-Grip{R} and Irwin{R} trademarks. This investment is accounted for
on the equity method with a net investment of $72.8 million at
December 31, 2000.
LONG-TERM MARKETABLE EQUITY SECURITIES: Long-term marketable
equity securities classified as available for sale are carried at fair
value with adjustments to fair value reported separately, net of tax,
as a component of accumulated other comprehensive income (and excluded
from earnings). Gains and losses on the sales of long-term marketable
equity securities are based upon the average cost of securities sold.
On March 8, 1998, the Company sold 7,862,300 shares it held in The
Black & Decker Corporation. The Black & Decker transaction resulted in
net proceeds of approximately $378.3 million and a net pre-tax gain,
after fees and expenses, of approximately $191.5 million. Long-term
marketable equity securities are summarized as follows:
DECEMBER 31, 2000 1999 1998
------------ ---- ---- ----
(In millions)
Aggregate market value $9.2 $10.8 $19.3
Aggregate cost 11.0 10.6 26.0
----- ----- -----
Unrealized pre-tax (loss) gain $(1.8) $0.2 $(6.7)
===== ===== =====
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment
consisted of the following:
DECEMBER 31, 2000 1999 1998
------------ ---- ---- ----
(In millions)
Land $ 60.7 $ 63.4 $ 62.1
Buildings and improvements 736.1 691.3 721.9
Machinery and equipment 2,421.6 2,200.7 2,166.9
------- ------- -------
3,218.4 2,955.4 2,950.9
Accumulated depreciation (1,461.5) (1,407.2) (1,323.8)
------- ------- -------
$1,756.9 $1,548.2 $1,627.1
======= ======= =======
Replacements and improvements are capitalized. Expenditures for
maintenance and repairs are charged to expense. The components of
depreciation are provided by annual charges to income calculated to
amortize, principally on the straight-line basis, the cost of the
depreciable assets over their depreciable lives. Estimated useful
lives determined by the Company are: buildings and improvements (5-40
years) and machinery and equipment (2-15 years).
TRADE NAMES AND GOODWILL: The cost of trade names and goodwill
represents the excess of cost over identifiable net assets of
businesses acquired. The Company does not allocate such excess cost to
trade names separate from goodwill. In addition, the Company may
allocate excess cost to other identifiable intangible assets and
record such intangible assets in Other Assets (long-term). Trade names
and goodwill are amortized over 40 years and other identifiable
intangible assets are amortized over 5 to 40 years. Trade names and
goodwill and other identifiable intangible assets, respectively,
consisted of the following:
NET TRADE NAMES AND GOODWILL
DECEMBER 31, 2000 1999 1998
------------ ---- ---- ----
(In millions)
Cost $2,485.8 $2,270.5 $2,068.7
Accumulated amortization (295.9) (245.6) (201.6)
------- ------- -------
$2,189.9 $2,024.9 $1,867.1
======= ======= =======
NET OTHER IDENTIFIABLE INTANGIBLE ASSETS<1>
December 31 2000 1999 1998
----------- ---- ---- ----
(In millions)
Cost $96.1 $93.0 $131.2
Accumulated amortization (34.7) (34.3) (37.6)
------ ------ ------
$61.4 $58.7 $93.6
====.- ====== ======
<1> Recorded in Other Assets
LONG-LIVED ASSETS: Subsequent to an acquisition, the Company
periodically evaluates whether later events and circumstances have
occurred that indicate the remaining estimated useful life of long-
lived assets may warrant revision or that the remaining balance of
long-lived assets may not be recoverable. If factors indicate that
long-lived assets should be evaluated for possible impairment, the
Company would use an estimate of the relevant business' undiscounted
net cash flow over the remaining life of the long-lived assets in
measuring whether the carrying value is recoverable. An impairment
loss would be measured by reducing the carrying value to fair value,
based on a discounted cash flow analysis.
ACCRUED LIABILITIES: Accrued liabilities included the following:
DECEMBER 31, 2000 1999 1998
------------ ---- ---- ----
(In millions)
Customer accruals $240.7 $296.6 $190.2
Accrued self-insurance liability 99.9 92.0 80.2
Customer accruals are promotional allowances and rebates given to
customers in exchange for their selling efforts. The self-insurance
accrual is primarily for workers' compensation and product liability
and is estimated based upon historical claim experience.
FOREIGN CURRENCY TRANSLATION: Foreign currency balance sheet
accounts are translated into U.S. dollars at the rates of exchange in
effect at fiscal year end. Income and expenses are translated at the
average rates of exchange in effect during the year. The related
translation adjustments are made directly to accumulated other
comprehensive income. International subsidiaries operating in highly
inflationary economies translate non-monetary assets at historical
rates, while net monetary assets are translated at current rates, with
the resulting translation adjustment included in net income as other
nonoperating (income) expenses. Foreign currency transaction gains and
losses were immaterial in 2000, 1999 and 1998.
ADVERTISING COSTS: The company expenses advertising costs as
incurred, including cooperative advertising programs with customers.
Total advertising expense was $289.2 million, $285.3 million and
$281.5 million for 2000, 1999 and 1998, respectively. Cooperative
advertising is recorded in the financial statements as a reduction of
sales because it is viewed as part of the negotiated price of
products. All other advertising costs are charged to selling, general
and administrative expenses.
RESEARCH AND DEVELOPMENT COSTS: Research and development costs
relating to both future and present products are charged to selling,
general and administrative expenses as incurred. These costs
aggregated $49.4 million, $49.9 million and $44.5 million in 2000,
1999 and 1998, respectively.
EARNINGS PER SHARE: The earnings per share amounts are computed
based on the weighted average monthly number of shares outstanding
during the year. "Basic" earnings per share is calculated by dividing
net income by weighted average shares outstanding. "Diluted" earnings
per share is calculated by dividing net income by weighted average
shares outstanding, including the assumption of the exercise and/or
conversion of all potentially dilutive securities ("in the money"
stock options and company-obligated mandatorily redeemable convertible
preferred securities of a subsidiary trust).
A reconciliation of the difference between basic and diluted
earnings per share for the years ended December 31, 2000, 1999 and
1998, respectively, is shown below (in millions, except per share
data):
"IN THE CONVERTIBLE
BASIC MONEY" PREFERRED DILUTED
2000 METHOD STOCK OPTIONS SECURITIES METHOD
---- ------ ------------- ----------- -------
Net income $421.6 - $16.4 $438.0
Weighted average shares outstanding 268.4 0.1 9.9 278.4
Earnings per share $1.57 $1.57
"IN THE CONVERTIBLE
BASIC MONEY" PREFERRED DILUTED
1999<1> METHOD STOCK OPTIONS SECURITIES METHOD
---- ------ ------------- ---------- -------
Net income $95.4 - - $95.4
Weighted average shares outstanding 281.8 - - 281.8
Earnings per share $0.34 $0.34
"IN THE CONVERTIBLE
BASIC MONEY" PREFERRED DILUTED
1998 METHOD STOCK OPTIONS SECURITIES METHOD
---- ------ ------------- ---------- -------
Net income $481.8 - $15.7 $497.5
Weighted average shares outstanding 280.7 1.3 9.9 291.9
Earnings per share $1.72 $1.70
<1> Diluted earnings per share for 1999 exclude the impact of "in the money"
stock options and convertible preferred securities because they are antidilutive.
COMPREHENSIVE INCOME: Comprehensive income and accumulated other
comprehensive income encompass net income, net after-tax unrealized
gains on securities available for sale and foreign currency
translation adjustments in the Consolidated Statements of
Stockholders' Equity and Comprehensive Income.
The following table displays the components of accumulated other
comprehensive income:
AFTER-TAX ACCUMULATED
UNREALIZED FOREIGN OTHER
GAINS/(LOSSES) CURRENCY COMPREHENSIVE
ON SECURITIES TRANSLATION INCOME/(LOSSES)
-------------- ----------- ---------------
(In millions)
Balance at Dec. 31, 1997 $78.8 $(59.3) $19.5
Current year change (82.9) (22.8) (105.7)
----- ----- -----
Balance at Dec. 31, 1998 (4.1) (82.1) (86.2)
Current year change 4.2 (48.0) (43.8)
----- ----- -----
Balance at Dec. 31, 1999 0.1 (130.1) (130.0)
Current year change (1.2) (41.7) (42.9)
----- ----- -----
Balance at Dec. 31, 2000 $(1.1) $(171.8) $(172.9)
===== ======= =======
ACCOUNTING PRONOUNCEMENTS: Since June 1998, the Financial
Accounting Standards Board ("FASB") has issued SFAS Nos. 133, 137 and
138 related to "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS No. 133, as amended" or "Statements"). These
Statements establish accounting and reporting standards requiring that
every derivative instrument be recorded on the balance sheet as either
an asset or liability measured at its fair value. The Statements
require that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are
met, in which case the gains or losses would offset the related
results of the hedged item. These Statements require that, as of the
date of initial adoption, the impact of adoption be recorded as a
cumulative effect of a change in accounting principle. To the extent
that these amounts are recorded in other comprehensive income, they
will be reversed into earnings in the period in which the hedged
transaction occurs. The impact of adopting these Statements on January
1, 2001 resulted in a cumulative after-tax gain of approximately $13.0
million recorded in accumulated other comprehensive income and had no
material impact on net income. The adoption resulted in an increase in
assets and liabilities of approximately $99.0 million and $86.0
million, respectively.
In May 2000, the Emerging Issues Task Force ("EITF"), a
subcommittee of the FASB, issued EITF No. 00-10 "Accounting for
Shipping and Handling Fees and Costs." EITF No. 00-10 requires that
amounts billed to customers related to shipping and handling costs be
classified as revenue and all expenses related to shipping and
handling be classified as a cost of products sold. Historically, these
revenues and costs have been netted together and deducted from gross
sales to arrive at net sales. The net sales and cost of products sold
have been restated for this change. The impact of this change
increased net sales and costs of products sold by $286.1 million,
$298.7 million and $309.5 million for the years ended December 2000,
1999 and 1998, respectively. There is no impact on gross income
resulting from this change.
Also in May 2000, the EITF issued EITF No. 00-14 "Accounting for
Certain Sales Incentives." The EITF subsequently amended the
transition provisions of this issue in November 2000. EITF No. 00-14
prescribes guidance regarding timing of recognition and income
statement classification of costs incurred for certain sales incentive
programs. This guidance requires certain coupons, rebate offers and
free products offered concurrently with a single exchange transaction
to be recognized when incurred, and reported as a reduction of
revenue.
In January 2001, the EITF issued EITF No. 00-22 "Accounting for
Points' and Certain Other Time-Based or Volume-Based Sales Incentive
Offers, and Offers for Free Products or Services to Be Delivered in
the Future." EITF No. 00-22 prescribes guidance regarding timing of
recognition and income statement classification of costs incurred in
connection with offers of "free" products or services that are
exercisable by an end consumer as a result of a single exchange
transaction with the retailer which will not be delivered by the
vendor until a future date. This guidance requires certain rebate
offers and free products that are delivered subsequent to a single
exchange transaction to be recognized when incurred, and reported as a
reduction of revenue.
The effective dates of EITF No. 00-14 and EITF No. 00-22 are
March 31, 2001 and June 30, 2001, respectively. The Company's adoption
of both EITF No. 00-14 and EITF No. 00-22 on December 31, 2000 did not
impact the results of operations, because the Company's past and
current accounting policy is to report such costs as reductions in
revenue.
2. ACQUISITIONS OF BUSINESSES
2000
----
The Company acquired Mersch SA on January 24, 2000 and Brio on
May 24, 2000. Both are manufacturers and suppliers of picture frames
in Europe, and now operate as part of Newell Photo Fashion Europe.
The Company acquired the stationery products business of The
Gillette Company ("Paper Mate/Parker") on December 29, 2000. The U.S.
and Canadian operations were merged into Sanford North America, while
all other operations were consolidated into Sanford International.
For these and for other minor acquisitions, the Company paid
$582.7 million in cash and assumed $15.5 million of debt. The
transactions were accounted for as purchases; therefore, results of
operations are included in the accompanying consolidated financial
statements since their respective acquisition dates. The acquisition
costs were allocated on a preliminary basis to the fair market value
of the assets acquired and liabilities assumed and resulted in trade
names and goodwill of approximately $241.3 million.
The Company's finalized integration plans may include exit costs
for certain plants and product lines and employee terminations
associated with the integration of Mersch and Brio into Newell Photo
Fashion Europe and Paper Mate/Parker into Sanford North America and
Sanford International. The final adjustments to the purchase price
allocations are not expected to be material to the consolidated
financial statements.
The unaudited consolidated results of operations for the years
ended December 31, 2000 and 1999 on a pro forma basis, as though the
Mersch, Brio and Paper Mate/Parker businesses (as well as the 1999
acquisitions of Ateliers, Reynolds, McKechnie and Ceanothe) had been
acquired on January 1, 1999, are as follows (unaudited):
YEAR ENDED DECEMBER 31, 2000 1999
----------------------- ---- ----
(In millions, except per share amounts)
Net sales $7,489.7 $7,688.8
Net income 390.2 83.3
Earnings per share (basic) $1.45 $0.30
1999
----
On April 2, 1999, the Company purchased Ateliers 28, a
manufacturer and marketer of decorative and functional drapery
hardware in Europe. Ateliers operates as part of Newell Window
Fashions Europe.
On October 18, 1999, the Company purchased a controlling interest
in Reynolds S.A., a manufacturer and marketer of writing instruments
in Europe. Reynolds operates as part of Sanford International. By
December 31, 1999, the Company owned 100% of Reynolds.
On October 29, 1999, the Company acquired the consumer products
division of McKechnie plc, a manufacturer and marketer of drapery
hardware and window furnishings, shelving and storage products,
cabinet hardware and functional trims. The drapery hardware and window
furnishings portion of McKechnie operates as part of Newell Window
Fashions Europe; the remaining portion of McKechnie operates as Newell
Hardware Europe.
On December 29, 1999, the Company acquired Ceanothe Holding, a
manufacturer of picture frames and photo albums in Europe. Ceanothe
operates as part of Newell Photo Fashion Europe.
For these and for other minor acquisitions, the Company paid
$400.1 million in cash and assumed $45.1 million of debt. The
transactions were accounted for as purchases; therefore, results of
operations are included in the accompanying consolidated financial
statements since their respective dates of acquisition. The
acquisition costs were allocated on a preliminary basis to the fair
market value of the assets acquired and liabilities assumed and
resulted in trade names and goodwill of approximately $296.7 million.
The Company began to formulate integration plans for these
acquisitions as of their respective acquisition dates. The integration
plans for these acquisitions were finalized during 2000 and resulted
in total integration liabilities of $37.6 million for exit costs and
employee terminations. As of December 31, 2000, $9.7 million of
reserves remain for the restructuring charges recorded in 1999.
1998
----
On January 21, 1998, the Company acquired Curver Consumer
Products. Curver is a manufacturer and marketer of plastic housewares
products in Europe and operates as part of Rubbermaid Europe.
On March 27, 1998, the Company acquired Swish Track and Pole from
Newmond plc. Swish is a manufacturer and marketer of decorative and
functional window furnishings in Europe and operates as part of Newell
Window Fashions Europe.
On May 19, 1998, the Company acquired certain assets of Century
Products. Century is a manufacturer and marketer of infant products
such as car seats, strollers and infant carriers and operates as part
of the Graco/Century division.
On June 30, 1998, the Company purchased Panex S.A. Industria e
Comercio, a manufacturer and marketer of aluminum cookware products
based in Brazil. Panex operates as part of the Mirro division.
On August 31, 1998, the Company purchased the Gardinia Group, a
manufacturer and supplier of window treatments based in Germany.
Gardinia operates as part of Newell Window Fashions Europe.
On September 30, 1998, the Company purchased the Rotring Group, a
manufacturer and supplier of writing instruments, drawing instruments,
art materials and color cosmetic products based in Germany. The
writing and drawing instruments portion of Rotring operates as part of
Sanford International. The art materials portion of Rotring operates
as part of Sanford North America. The color cosmetic products portion
of Rotring operates as a separate U.S. division, Cosmolab.
For these and for other minor acquisitions, the Company paid
$615.7 million in cash and assumed $99.5 million of debt. The
transactions were accounted for as purchases; therefore, results of
operations are included in the accompanying consolidated financial
statements since their respective dates of acquisition. The
acquisition costs were allocated on a preliminary basis to the fair
market value of the assets acquired and liabilities assumed and
resulted in trade names and goodwill of approximately $387.1 million.
The Company began to formulate integration plans for these and
other minor acquisitions as of their respective acquisition dates. The
integration plans for these acquisitions were finalized during 1999
and resulted in total integration liabilities of $84.7 million for
exit costs and employee terminations. As of December 31, 2000, no
reserves remain for the restructuring charges recorded in 1998.
MERGERS
On May 7, 1998, a subsidiary of the Company merged with Calphalon
Corporation, a manufacturer and marketer of gourmet cookware. The
Company issued approximately 3.1 million shares of Common Stock for
all of the Common Stock of Calphalon. This transaction was accounted
for as a pooling of interests; therefore, prior financial statements
were restated to reflect this merger. Calphalon now operates as a
separate division of the Company.
On March 24, 1999, the Company completed the Rubbermaid merger.
The merger qualified as a tax-free exchange and was accounted for as a
pooling of interests. Newell issued .7883 Newell Rubbermaid shares for
each outstanding share of Rubbermaid Common Stock. A total of 119.0
million shares (adjusted for fractional and dissenting shares) of the
Company's Common Stock were issued as a result of the merger, and
Rubbermaid's outstanding stock options were converted into options to
purchase approximately 2.5 million Newell Rubbermaid common shares.
No adjustments were made to the net assets of the combining
companies to adopt conforming accounting practices or fiscal years
other than adjustments to eliminate the accounting effects related to
Newell's purchase of Rubbermaid's office products business ("Eldon")
in 1997. Because the Newell Rubbermaid merger was accounted for as a
pooling of interests, the accounting effects of Newell's purchase of
Eldon have been eliminated as if Newell had always owned it.
The following table presents a reconciliation of net sales and
net income (loss) for Newell, Rubbermaid and Calphalon individually to
those presented in the accompanying consolidated financial statements:
YEAR ENDED DECEMBER 31, 1999 1998
----------------------- ---- ----
(In millions)
Net sales:
Newell $4,022.2 $3,747.5
Rubbermaid 2,565.0 2,637.4
Calphalon 124.6 108.3
-------- --------
$6,711.8 $6,493.2
======== ========
Net income (loss):
Newell $273.1 $405.9
Rubbermaid (189.8) 82.9
Calphalon 12.1 (7.0)
-------- --------
$95.4 $481.8
======== ========
DIVESTITURES
On April 29, 1998, the Company sold its Decora decorative
coverings product line. On August 21, 1998, the Company sold its
Stuart Hall school supplies and stationery business. On September 9,
1998, the Company sold its Newell Plastics plastic storage and
serveware business. The pre-tax net gain on the sales of these
businesses was $59.8 million, which was primarily offset by
nondeductible goodwill, resulting in a net after-tax gain of $15.1
million. Sales for these businesses prior to their divestitures were
approximately $136 million in 1998.
3. RESTRUCTURING COSTS
2000
----
During 2000, the Company recorded pre-tax restructuring charges
of $48.6 million ($29.9 million after taxes) related primarily to the
continued Rubbermaid integration and plant closures in the Home Decor
segment. The Company incurred employee severance and termination
benefit costs of $26.8 million related to approximately 700 employees
terminated in 2000. Such costs included $10.2 million of severance and
government mandated settlements for facility closures at Rubbermaid
Europe, $6.7 million of change in control payments made to former
Rubbermaid executives, $6.3 million for employee terminations at the
domestic Rubbermaid divisions and $3.6 million in severance at the
Home Decor segment. The Company incurred merger transaction costs of
$11.2 million related primarily to legal settlements for Rubbermaid's
1998 sale of a former division and other merger related contingencies
resolved in 2000. Additionally, the Company incurred facility and
product line exit costs of $10.6 million related primarily to the
closure of five European Rubbermaid facilities, three window
furnishings facilities and the exit of various Rubbermaid product
lines.
As of December 31, 2000, $21.9 million of reserves remain for
restructuring charges recorded during 2000, 1999 and 1998. These
reserves consist of $11.4 million for facility and product line exit
costs, $4.6 million in contractual future maintenance costs on
abandoned Rubbermaid computer software, $3.3 million for employee
severance and termination benefits, and $2.6 million in other merger
transaction costs.
1999
----
During 1999, the Company recorded pre-tax restructuring charges
of $246.4 million ($195.7 million after tax) related primarily to the
integration of the Rubbermaid businesses into Newell. Merger
transaction costs of $39.9 million related primarily to investment
banking, legal and accounting costs for the Newell/Rubbermaid merger.
Employee severance and termination benefits of $101.9 million related
to approximately 750 employees terminated in 1999. Such costs include
$80.9 million of change in control payments made to former Rubbermaid
executives and $21.0 million in severance and termination costs at
Rubbermaid's former headquarters ($5.5 million), Rubbermaid Home
Products division ($6.9 million), Rubbermaid Europe division ($4.0
million), Little Tikes division ($2.7 million), Rubbermaid Commercial
Products division ($0.7 million) and Newell divisions ($1.2 million).
Facility and product line exit costs totaled $104.6 million,
representing $72.0 million of impaired Rubbermaid centralized computer
software (abandoned as a result of converting Rubbermaid onto existing
Newell centralized computer software) and $32.6 million in costs
related to discontinued product lines ($4.8 million), the closure of
seven Rubbermaid facilities ($10.2 million), write-off of assets
associated with abandoned projects ($10.3 million) and impaired assets
($5.7 million) and other exit costs ($1.6 million).
1998
----
During January 1998, Rubbermaid announced a series of
restructuring initiatives to establish a central global procurement
organization and to consolidate, automate and/or relocate its
worldwide manufacturing and distribution operations. During 1998,
Rubbermaid recorded pre-tax charges of $115.2 million ($74.9 million
after tax). The 1998 restructuring charge included $16.0 million
relating to employee severance and termination benefits for
approximately 600 sales and administrative employees, $53.4 million
for costs to exit business activities at five facilities and $45.8
million to write-down impaired long-lived assets to their fair value.
The $53.4 million charge for costs to exit business activities related
to exit plans for the closure of a plastics houseware molding and
warehouse operation in the State of New York, the closure of a
commercial play systems warehouse and manufacturing facility in
Australia, the closure of a cleaning products manufacturing operation
in North Carolina, the elimination of Rubbermaid's Asia Pacific
regional headquarters and the related joint venture in Japan and the
closure of a distribution facility in France. The exiting of the
operations described above necessitated a revaluation of cash flows
related to those operations, resulting in a $45.8 million charge to
write-down $26.0 million of fixed assets and $19.8 million of goodwill
to fair value. Rubbermaid determined that the future cash flows on an
undiscounted basis (before taxes and interest) were not sufficient to
cover the carrying value of the long-lived assets affected by those
decisions. Management determined the fair value of these assets using
discounted cash flows.
4. CREDIT ARRANGEMENTS
The Company has short-term foreign and domestic committed and
uncommitted lines of credit with various banks which are available for
short-term financing. Borrowings under the Company's uncommitted lines
of credit are subject to the discretion of the lender. The Company's
lines of credit do not have a material impact on the Company's
liquidity. Borrowings under these lines of credit at December 31, 2000
totaled $23.5 million. The following is a summary of borrowings under
foreign and domestic lines of credit:
DECEMBER 31, 2000 1999 1998
------------ ---- ---- ---
(In millions)
Notes payable to banks:
Outstanding at year-end
- borrowing $23.5 $97.3 $94.6
- weighted average interest rate 8.6% 6.8% 5.8%
Average for the year
- borrowing $61.1 $59.1 $144.7
- weighted average interest rate 7.7% 9.9% 6.1%
Maximum outstanding during the year $178.0 $97.3 $205.1
The Company can also issue commercial paper (as described in note
5 to the consolidated financial statements), as summarized below:
DECEMBER 31, 2000 1999 1998
------------ ---- ---- ----
(In millions)
Commercial paper:
Outstanding at year-end
- borrowing $1,503.7 $718.5 $500.2
- average interest rate 6.6% 5.9% 5.5%
Average for the year
- borrowing $987.5 $534.9 $620.4
- average interest rate 6.3% 5.2% 5.5%
Maximum outstanding during the year $1,503.7 $807.0 $1,028.8
5. LONG-TERM DEBT
The following is a summary of long-term debt:
DECEMBER 31, 2000 1999 1998
------------ ---- ---- ----
(In millions)
Medium-term notes $1,012.5 $859.5 $883.5
Commercial paper 1,503.7 718.5 500.2
Other long-term debt 2.3 27.9 17.5
-------- -------- --------
2,518.5 1,605.9 1,401.2
Current portion (203.7) (150.1) (7.3)
-------- -------- --------
$2,314.8 $1,455.8 $1,393.9
======== ======== ========
The Company has a revolving credit agreement of $1,300.0 million
that will terminate in August 2002. During 2000, the Company entered
into a new 364-day revolving credit agreement in the amount of $700.0
million. This revolving credit agreement will terminate in October
2001. At December 31, 2000, there were no borrowings under these
revolving credit agreements.
In lieu of borrowings under the Company's revolving credit
agreements, the Company may issue up to $2,000.0 million of commercial
paper. The Company's revolving credit agreements provide the committed
backup liquidity required to issue commercial paper. Accordingly,
commercial paper may only be issued up to the amount available for
borrowing under the Company's revolving credit agreements. At December
31, 2000, $1,503.7 million (principal amount) of commercial paper was
outstanding. Of this amount, $1,300.0 million is classified as long-
term debt and the remainder of $203.7 million is classified as current
portion of long-term debt.
The revolving credit agreements permit the Company to borrow
funds on a variety of interest rate terms. These agreements require,
among other things, that the Company maintain a certain Total
Indebtedness to Total Capital Ratio, as defined in the agreements. As
of December 31, 2000, the Company was in compliance with these
agreements.
The Company had outstanding at December 31, 2000 a total of
$1,012.5 million (principal amount) of medium-term notes. The
maturities on the Company's medium-term notes range from 3 to 30 years
at an average interest rate of 6.34%.
A universal shelf registration statement became effective in July
1999. As of December 31, 2000, $449.5 million of Company debt and
equity securities may be issued under the shelf.
The aggregate maturities of long-term debt outstanding are as
follows:
DECEMBER 31, Aggregate Maturities
------------ --------------------
(In millions)
2001 $203.7
2002 1,400.0
2003 415.5
2004 -
2005 22.0
Thereafter 477.3
--------
$2,518.5
========
6. COMPANY-OBLIGATED MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED
SECURITIES OF A SUBSIDIARY TRUST
In 1997, a wholly owned trust of the Company issued 10.0 million
of 5.25% convertible quarterly income preferred securities ("Preferred
Securities") to certain institutional buyers. Each of the Preferred
Securities represents an undivided beneficial interest in the assets
of the trust, is convertible at the option of the holder into shares
of the Company's Common Stock at the rate of 0.9865 shares of Common
Stock (equivalent to the approximate conversion price of $50.685 per
share of Common Stock), subject to adjustment in certain circum-
stances, has a $50 liquidation preference and is entitled to a
quarterly cash distribution at the annual rate of $2.625 per share.
The Preferred Securities are guaranteed by the Company and are
callable initially at 103.15% of the liquidation preference beginning
in December 2001 and decreasing over time to 100% in December 2007.
The trust invested the proceeds of the Preferred Securities in
$500.0 million Company 5.25% Junior Convertible Subordinated
Debentures due 2027 ("Debentures"). The Debentures are the sole assets
of the trust, mature on December 1, 2027, bear interest at the annual
rate of 5.25%, payable quarterly, and are redeemable by the Company
beginning in December 2001. The Company may defer interest payments on
the Debentures, but has no current intention to, for a period of up to
20 consecutive quarters during which distribution payments on the
Preferred Securities are also deferred. Under this circumstance, the
Company may not declare or pay any cash distributions with respect to
its capital stock or debt securities that do not rank senior to the
Debentures.
7. DERIVATIVE FINANCIAL INSTRUMENTS
The Company has only limited involvement with derivative
financial instruments and does not use them for trading purposes. They
are used to manage certain interest rate and foreign currency risks.
The Company has entered into several interest rate swap
agreements as a means of converting certain floating rate debt
instruments into fixed rate debt. Cash flows related to these interest
rate swap agreements are included in interest expense over the terms
of the agreements, which range from three to seven years in maturity.
At December 31, 2000, the Company had an outstanding notional
principal amount of $912.6 million, with a net accrued interest
receivable of $3.4 million. The termination value of these contracts
is not included in the consolidated financial statements since these
contracts represent the hedging of long-term activities to be
amortized in future reporting periods.
The Company utilizes forward exchange contracts to manage foreign
exchange risk related to both known and anticipated intercompany and
third-party commercial transaction exposures of one year duration or
less.
The Company also utilizes cross-currency swaps to hedge long-term
intercompany transactions. The maturities on these cross-currency
swaps range from three to five years.
The following table summarizes the Company's forward exchange
contracts, foreign currency swaps and long-term cross-currency swaps
in U.S. dollars by major currency and contractual amount. The "buy"
amounts represent the U.S. equivalent of commitments to purchase
foreign currencies, and the "sell" amounts represent the U.S.
equivalent of commitments to sell foreign currencies according to
local needs in foreign subsidiaries. The contractual amounts of
significant forward exchange contracts, foreign currency swaps and
long-term cross-currency swaps and their fair value were as follows:
DECEMBER 31, 2000 1999
------------ ---------- ----------
(In millions)
BUY SELL BUY SELL
--- ---- --- ----
Australian dollars $ - $ 8.6 $ - $ -
British pounds 1.6 165.2 1.1 172.8
Canadian dollars 149.4 24.0 71.1 -
Euro 0.2 350.2 4.9 490.8
Japanese yen - - - 4.1
Swedish krona - - - 12.5
Swiss francs - - 8.0 -
------ ------ ------ ------
$151.2 $548.0 $ 85.1 $680.2
====== ====== ====== ======
Fair Value $146.9 $508.4 $ 84.5 $665.7
====== ====== ====== ======
The Company's forward exchange contracts, foreign currency swaps
and long-term cross-currency swaps do not subject the Company to risk
due to foreign exchange rate movement, since gains and losses on these
contracts generally offset losses and gains on the assets, liabilities
and other transactions being hedged. The Company does not obtain
collateral or other security to support derivative financial
instruments subject to credit risk but monitors the credit standing of
the counterparties.
Gains and losses related to qualifying hedges of commercial and
intercompany transactions are deferred and included in the basis of
the underlying transactions. Derivatives used to hedge intercompany
loans are marked to market with the corresponding gains or losses
included in the consolidated statements of income.
8. LEASES
The Company leases manufacturing and warehouse facilities, real
estate, transportation, data processing and other equipment under
leases which expire at various dates through the year 2018. Rent
expense was $102.9 million, $91.9 million and $79.7 million in 2000,
1999 and 1998, respectively. Future minimum rental payments for
operating leases with initial or remaining terms in excess of one year
are as follows:
YEAR ENDING DECEMBER 31, Minimum Payments
------------------------ ----------------
(In millions)
2001 $51.9
2002 35.6
2003 25.0
2004 14.4
2005 10.0
Thereafter 12.0
-----
$148.9
======
9. EMPLOYEE BENEFIT RETIREMENT PLANS
The Company and its subsidiaries have noncontributory pension and
profit sharing plans covering substantially all of their foreign and
domestic employees. Pension plan benefits are generally based on years
of service and/or compensation. The Company's funding policy is to
contribute not less than the minimum amounts required by the Employee
Retirement Income Security Act of 1974 or local statutes to assure
that plan assets will be adequate to provide retirement benefits. The
Company's Common Stock comprised $46.7 million, $48.7 million and
$69.3 million of pension plan assets at December 31, 2000, 1999 and
1998, respectively.
Total expense under all profit sharing plans was $14.5 million,
$12.3 million and $25.0 million for the years ended December 31, 2000,
1999 and 1998, respectively.
In addition to the Company's pension and profit sharing plans,
several of the Company's subsidiaries currently provide retiree health
care benefits for certain employee groups.
The following provides a reconciliation of benefit obligations,
plan assets and funded status of the plans within the guidelines of
SFAS No. 132:
Pension Benefits Other Postretirement Benefits
-------------------------------- --------------------------------
DECEMBER 31, 2000 1999 1998 2000 1999 1998
------------ ---- ---- ---- ---- ---- ----
(In millions)
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at January 1 $709.1 $691.1 $578.0 $196.3 $184.0 $175.2
Service cost 29.0 25.4 20.2 3.6 3.5 3.2
Interest cost 48.9 50.1 43.9 12.9 12.6 12.8
Amendments 3.8 6.5 2.2 - (0.5) -
Actuarial (gain)/loss (0.7) (59.6) 34.3 (31.4) 11.9 7.8
Acquisitions - 50.4 51.3 - 1.7 -
Currency exchange (2.2) (5.0) (0.3) - - -
Benefits paid from plan assets (47.0) (49.8) (38.5) (14.7) (16.9) (15.0)
------ ------ ------ ------ ------ ------
Benefit obligation at December 31 $740.9 $709.1 $691.1 $166.7 $196.3 $184.0
====== ====== ====== ====== ====== ======
CHANGE IN PLAN ASSETS
Fair value of plan assets at January 1 $858.6 $713.8 $738.4 $- $ - $ -
Actual return on plan assets 76.4 119.5 (5.9) - - -
Acquisitions - 62.3 14.1 - - -
Contributions 3.1 11.6 6.5 14.7 16.9 15.0
Currency exchange (2.8) 1.2 (0.8) - - -
Benefits paid from plan assets (47.0) (49.8) (38.5) (14.7) (16.9) (15.0)
------ ------ ------ ------ ------ ------
Fair value of plan assets at December 31 $888.3 $858.6 $713.8 $ - $ - $ -
====== ====== ====== ==== ====== ======
Pension Benefits Other Postretirement Benefits
-------------------------------- -------------------------------
DECEMBER 31, 2000 1999 1998 2000 1999 1998
---- ---- ----- ---- ---- ----
(In millions )
FUNDED STATUS
Funded status at December 31 $147.4 $149.5 $22.7 $(166.7) $(196.3) $(184.0)
Unrecognized net gain (110.7) (118.9) (7.9) (38.6) (8.0) (20.2)
Unrecognized prior service cost 3.4 (0.9) (2.0) - (0.2) 0.2
Unrecognized net asset (2.2) (3.3) (5.0) - - -
------ ------ ------ ------ ------ -------
Net amount recognized $37.9 $26.4 $7.8 $(205.3) $(204.5) $(204.0)
====== ====== ====== ====== ====== ======
AMOUNTS RECOGNIZED IN THE CONSOLIDATED
BALANCE SHEETS
Prepaid benefit cost <1> $110.0 $102.9 $71.8 $- $- $-
Accrued benefit cost <2> (78.2) (80.9) (67.9) (205.3) (204.5) (204.0)
Intangible asset <1> 6.1 4.4 3.9 - - -
------ ------ ------ ------ ------ ------
Net amount recognized $37.9 $26.4 $7.8 $(205.3) $(204.5) $(204.0)
====== ====== ====== ====== ====== ======
ASSUMPTIONS AS OF DECEMBER 31
Discount rate 7.5% 7.5% 7.0% 7.5% 7.5% 6.8-7.0%
Long-term rate of return on plan assets 10.0% 10.0% 10.0% - - -
Long-term rate of compensation increase 5.0% 5.0% 5.0% - - -
Health care cost trend rate - - - 6.0% 7.0-9.0% 7.0-8.0%
<1> Recorded in Other Non-current Assets
<2> Recorded in Other Non-current Liabilities
Net pension (income) expenses and other postretirement benefit
expenses include the following components:
Pension Benefits Other Postretirement Benefits
----------------------------- -----------------------------
YEAR ENDED DECEMBER 31, 2000 1999 1998 2000 1999 1998
----------------------- ---- ---- ---- ---- ---- ----
(In millions)
Service cost-benefits earned
during the year $29.2 $30.9 $19.3 $3.6 $3.5 $3.3
Interest cost on projected
benefit obligation 49.5 50.9 46.6 12.9 12.6 12.9
Expected return on plan assets (82.8) (76.7) (59.0) - - -
Amortization of:
Transition asset (1.9) (1.2) (1.1) (1.1) (0.2) (0.5)
Prior service cost recognized (0.5) (0.4) (0.3) - - (0.4)
Actuarial (gain)/loss (1.3) 0.8 (1.8) - - -
----- ----- ----- ----- ----- -----
Net pension (income) expense $(7.8) $4.3 $3.7 $15.4 $15.9 $15.3
===== ===== ===== ===== ===== =====
The projected benefit obligation, accumulated benefit obligation
and fair value of plan assets for the pension plans with accumulated
benefit obligations in excess of plan assets are as follows:
DECEMBER 31, 2000 1999 1998
------------ ---- ---- ----
(In millions)
Projected benefit obligation $103.7 $145.2 $147.1
Accumulated benefit obligation 85.3 131.0 127.5
Fair value of plan assets - 50.8 52.1
The health care cost trend rate significantly affects the reported
postretirement benefit costs and obligations. A one percentage point
change in the assumed rate would have the following effects:
1% Increase 1% Decrease
----------- -----------
(In millions)
Effect on total of service and $1.8 $(1.6)
interest cost components
Effect on postretirement benefit 11.9 (11.0)
obligations
10. STOCKHOLDERS' EQUITY
At December 31, 2000, the Company's Common Stock consists of
800.0 million authorized shares with a par value of $1 per share.
On February 7, 2000, the Company announced a stock repurchase
program of up to $500.0 million of the Company's outstanding Common
Stock. During 2000, the Company repurchased 15.5 million shares of its
Common Stock at an average price of $26 per share, for a total cash
price of $403.0 million under the program. The repurchase program
remained in effect until December 31, 2000 and was financed through
the use of working capital and commercial paper.
Each share of Common Stock includes a stock purchase right (a
"Right"). Each Right will entitle the holder, until the earlier of
October 31, 2008 or the redemption of the Rights, to buy the number of
shares of Common Stock having a market value of two times the exercise
price of $200, subject to adjustment under certain circumstances. The
Rights will be exercisable only if a person or group acquires 15% or
more of voting power of the Company or announces a tender offer after
which it would hold 15% or more of the Company's voting power. The
Rights held by the 15% stockholder would not be exercisable in this
situation.
Furthermore, if, following the acquisition by a person or group
of 15% or more of the Company's voting stock, the Company was acquired
in a merger or other business combination or 50% or more of its assets
were sold, each Right (other than Rights held by the 15% stockholder)
would become exercisable for that number of shares of Common Stock of
the Company (or the surviving company in a business combination)
having a market value of two times the exercise price of the Right.
The Company may redeem the Rights at $0.001 per Right prior to
the occurrence of an event that causes the Rights to become
exercisable for Common Stock.
11. STOCK OPTIONS
The Company's stock option plans are accounted for under
Accounting Principles Board Opinion No. 25. As a result, the Company
grants fixed stock options under which no compensation cost is
recognized. Had compensation cost for the plans been determined
consistent with FASB Statement No. 123, the Company's net income and
earnings per share would have been reduced to the following pro forma
amounts:
YEAR ENDED DECEMBER 31, 2000 1999 1998
----------------------- ---- ---- ----
(In millions, except per share data)
Net income:
As reported $421.6 $95.4 $481.8
Pro forma 410.5 88.2 477.5
Diluted earnings per share:
As reported $1.57 $0.34 $1.70
Pro forma 1.53 0.31 1.69
Because the FASB Statement No. 123 method of accounting has not
been applied to options granted prior to January 1, 1995, the
resulting pro forma compensation cost may not be representative of
that to be expected in future years.
The Company has authorized 16.3 million shares of Common Stock to
be issued under various stock option plans. Under the Company's
primary plan (1993 Stock Option Plan) the Company may grant options
for up to 14.1 million shares, of which the Company has granted 7.7
million options, and canceled 1.1 million options through December 31,
2000. Under this plan, the option exercise price equals the Common
Stock's closing price on the date of the grant, and options vest over
a five-year period and expire after ten years.
The following summarizes the changes in the number of shares of
Common Stock under option, including options to acquire Common Stock
resulting from the conversion of options under pre-merger Rubbermaid
option plans:
Weighted
Average
2000 Shares Exercise Price
---- ------ --------------
Outstanding at beginning of year 5,819,824 $35
Granted 3,485,263 28
Exercised (97,005) 17
Canceled (1,162,583) 36
----------
Outstanding at end of year 8,045,499 32
Exercisable at end of year 3,215,464 33
==========
Weighted average fair value of
options granted during the year $ 9
==========
OPTIONS OUTSTANDING AT DECEMBER 31, 2000
Weighted
Range of Number Weighted Average
Exercise Outstanding at Average Remaining
Prices December 31, 2000 Exercise Price Contractual Life
-------- ----------------- -------------- ----------------
$13-25 614,579 $20 3
26-35 5,209,505 30 8
36-45 2,062,615 42 8
46-50 158,800 48 8
---------
$13-50 8,045,499 32 8
=========
OPTIONS EXERCISABLE AT DECEMBER 31, 2000
Range of Number Weighted
Exercise Exercisable at Average
Prices December 31, 2000 Exercise Price
-------- ----------------- --------------
$13-25 539,579 $20
26-35 1,708,291 32
36-45 910,074 41
46-50 57,520 48
---------
$13-50 3,215,464 33
=========
Weighted
Average
1999 Exercise
---- Shares Price
------ --------
Outstanding at beginning of year 4,353,147 $32
Granted 2,498,980 39
Exercised (842,288) 30
Canceled (190,015) 35
---------
Outstanding at end of year 5,819,824 35
=========
Exercisable at end of year 2,622,352 30
=========
Weighted average fair value of
options granted during the year $ 15
=========
1998
----
Weighted
Average
Exercise
Shares Price
------ ---------
Outstanding at beginning of year 3,720,301 $28
Granted 1,576,467 38
Exercised (753,261) 23
Canceled (190,360) 30
---------
Outstanding at end of year 4,353,147 32
=========
Exercisable at end of year 3,189,309 30
=========
Weighted average fair value of
options granted during the year $ 13
=========
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option pricing model with the following
assumptions used for grants in 2000, 1999 and 1998, respectively:
risk-free interest rate of 6.5%, 6.6% and 4.1-6.4%; expected dividend
yields of 3.0%, 2.0%, and 1.6-2.0%; expected lives of 9.0, 9.0 and
5.0-9.9 years; and expected volatility of 28%, 25% and 20-34%.
12. INCOME TAXES
The provision for income taxes consists of the following:
YEAR ENDED DECEMBER 31, 2000 1999 1998
----------------------- ---- ---- ----
(In millions)
Current:
Federal $154.8 $120.6 $217.1
State 14.9 6.3 26.0
Foreign 34.4 18.2 10.3
----- ----- -----
204.1 145.1 253.4
Deferred 59.8 (9.6) 81.7
----- ----- -----
$263.9 $135.5 $335.1
===== ===== =====
The non-U.S. component of income before income taxes was $84.7
million in 2000, $56.3 million in 1999 and $19.1 million in 1998.
The components of the net deferred tax asset are as follows:
DECEMBER 31, 2000 1999 1998
------------ ---- ---- ----
(In millions)
Deferred tax assets:
Accruals not currently deductible
for tax purposes $158.7 $198.0 $132.9
Postretirement liabilities 81.8 80.5 78.5
Inventory reserves 42.2 28.4 25.3
Self-insurance liability 32.1 29.5 44.1
Amortizable intangibles 9.6 27.2 13.6
Other 9.7 8.7 2.9
----- ----- -----
334.1 372.3 297.3
Deferred tax liabilities:
Accelerated depreciation (139.6) (157.5) (152.1)
Prepaid pension asset (38.8) (33.7) (27.1)
Other (17.0) (16.2) (14.4)
----- ----- -----
(195.4) (207.4) (193.6)
----- ----- -----
Net deferred tax asset $138.7 $164.9 $103.7
===== ===== =====
The net deferred tax asset is classified in the consolidated
balance sheets as follows:
DECEMBER 31, 2000 1999 1998
------------ ---- ---- ----
(In millions)
Current net deferred income tax asset $231.9 $250.6 $108.2
Non-current deferred income tax
liability (93.2) (85.7) (4.5)
------ ------ ------
$138.7 $164.9 $103.7
====== ====== ======
A reconciliation of the U.S. statutory rate to the effective
income tax rate is as follows:
YEAR ENDED DECEMBER 31, 2000 1999 1998
----------------------- ---- ---- ----
(In percent)
Statutory rate 35.0% 35.0% 35.0%
Add (deduct) effect of:
State income taxes, net of
federal income tax effect 2.2 2.7 3.2
Nondeductible trade names and
goodwill amortization 1.3 4.2 1.3
Nondeductible transaction costs - 19.7 -
Tax basis differential on sales
of businesses - - 2.7
Other - (2.9) (1.2)
---- ---- ----
Effective rate 38.5% 58.7% 41.0%
==== ==== ====
No U.S. deferred taxes have been provided on the undistributed
non-U.S. subsidiary earnings which are considered to be permanently
invested. At December 31, 2000, the estimated amount of total
unremitted non-U.S. subsidiary earnings is $18.9 million.
13. OTHER NONOPERATING EXPENSES (INCOME)
Total other nonoperating expenses (income) consist of the following:
Year Ended December 31, 2000 1999 1998
----------------------- ---- ---- ----
(In millions)
Equity earnings <1> $(8.0) $(8.1) $(7.1)
Interest income (5.5) (9.9) (14.8)
Dividend income (0.1) (0.3) (0.1)
(Gain)/loss on sale of marketable
equity securities - 1.1 (191.5)
Gain on sales of businesses - - (59.8)
Minority interest in income of
subsidiary trust<2> 26.7 26.8 26.7
Currency translation loss 1.9 1.1 6.0
Other 1.2 1.9 3.5
----- ----- ------
$16.2 $12.6 $(237.1)
===== ===== =====.-
<1> Primarily relates to the Company's investment in American Tool
Companies, Inc., in which the Company has a 49% interest.
<2> Expense from Convertible Preferred Securities (see note 6).
14. OTHER OPERATING INFORMATION
INDUSTRY SEGMENT INFORMATION
The Company operates in six reportable operating segments:
Storage, Organization & Cleaning, Home Decor, Office Products,
Infant/Juvenile Care & Play, Food Preparation, Cooking & Serving and
Hardware & Tools.
NET SALES <1> <2>
YEAR ENDED DECEMBER 31, 2000 1999 1998
----------------------- ---- ---- ----
(In millions)
Storage, Organization & Cleaning $1,833.0 $1,899.5 $2,047.0
Home Decor 1,392.4 1,370.4 1,242.9
Office Products 1,288.0 1,218.0 1,078.6
Infant/Juvenile Care & Play 921.0 834.7 751.3
Food Preparation, Cooking & Serving 774.4 782.2 790.0
Hardware & Tools 725.9 607.0 583.4
-------- -------- --------
$6,934.7 $6,711.8 $6,493.2
======== ======== ========
<1> Sales to Wal-Mart Stores, Inc. and subsidiaries amounted to
approximately 15% of consolidated net sales in 2000 and 1999, and
14% in 1998. Sales to no other customer exceeded 10% of
consolidated net sales.
<2> All intercompany transactions have been eliminated.
OPERATING INCOME <3>
Year Ended December 31, 2000 1999 1998
----------------------- ---- ---- ----
(In millions)
Storage, Organization & Cleaning $202.9 $63.3 $208.6
Home Decor 168.2 193.7 191.8
Office Products 249.3 218.3 212.3
Infant/Juvenile Care & Play 104.2 16.2 70.2
Food Preparation, Cooking & Serving 112.0 128.3 97.9
Hardware & Tools 120.2 103.7 98.4
Corporate (76.5) (133.5) (83.7)
------ ------ ------
$880.3 $590.0 $795.5
Restructuring Costs (48.6) (246.4) (115.2)
------ ------ ------
$831.7 $343.6 $680.3
====== ====== ======
<3> Operating income is net sales less cost of products sold and SG&A
expenses. Certain headquarters expenses of an operational nature
are allocated to business segments and geographic areas primarily
on a net sales basis. Trade names and goodwill amortization is
considered a corporate expense and not allocated to business
segments.
IDENTIFIABLE ASSETS
DECEMBER 31, 2000 1999 1998
------------ ---- ---- ----
(In millions)
Storage, Organization & Cleaning $1,145.4 $1,155.3 $956.7
Home Decor 815.4 818.0 727.3
Office Products 1,050.9 720.8 643.0
Infant/Juvenile Care & Play 497.1 433.9 758.8
Food Preparation, Cooking & Serving 524.4 539.8 550.0
Hardware & Tools 366.9 376.5 268.5
Corporate<4> 2,861.7 2,679.8 2,384.9
------- ------- -------
$7,261.8 $6,724.1 $6,289.2
======= ======= =======
<4> Corporate assets primarily include trade names and goodwill,
equity investments and deferred tax assets.
CAPITAL EXPENDITURES
Year Ended December 31, 2000 1999 1998
----------------------- ---- ---- ----
(In millions)
Storage, Organization & Cleaning $144.4 $90.8 $126.5
Home Decor 17.4 21.1 26.5
Office Products 42.2 24.9 24.9
Infant/Juvenile Care & Play 45.0 9.5 39.3
Food Preparation, Cooking & Serving 36.0 38.0 47.7
Hardware & Tools 9.4 10.9 12.6
Corporate 22.2 4.9 41.2
------ ------ ------
$316.6 $200.1 $318.7
====== ====== ======
DEPRECIATION AND AMORTIZATION
YEAR ENDED DECEMBER 31, 2000 1999 1998
----------------------- ---- ---- ----
(In millions)
Storage, Organization & Cleaning $78.9 $89.8 $81.9
Home Decor 17.8 18.2 18.0
Office Products 33.9 35.7 28.7
Infant/Juvenile Care & Play 27.7 26.5 33.6
Food Preparation, Cooking & Serving 36.5 32.3 35.0
Hardware & Tools 20.0 12.3 13.2
Corporate 77.8 56.9 53.4
------ ------ ------
$292.6 $271.7 $263.8
====== ====== ======
GEOGRAPHIC AREA INFORMATION
NET SALES
Year Ended December 31, 2000 1999 1998
----------------------- ---- ---- ----
(In millions)
United States $5,191.5 $5,135.4 $5,081.5
Canada 308.9 275.6 279.7
------- ------- -------
North America 5,500.4 5,411.0 5,361.2
Europe 1,112.5 1,015.3 894.0
Central and South America <5> 289.0 253.8 208.2
All other 32.8 31.7 29.8
------- ------- -------
$6,934.7 $6,711.8 $6,493.2
======= ======= =======
<5> Includes Argentina, Brazil, Colombia, Mexico and Venezuela.
OPERATING INCOME
YEAR ENDED DECEMBER 31, 2000 1999 1998
----------------------- ---- ---- ----
(In millions)
United States $643.4 $276.6 $617.0
Canada 54.5 22.6 16.6
------ ------ ------
North America 697.9 299.2 633.6
Europe 77.2 4.5 24.0
Central and South America 53.2 43.6 41.2
All other 3.4 (3.7) (18.5)
------ ------ ------
$831.7 $343.6 $680.3
====== ====== ======
IDENTIFIABLE ASSETS <6>
DECEMBER 31, 2000 1999 1998
------------ ---- ---- ----
(In millions)
United States $5,048.8 $4,813.3 $4,648.2
Canada 139.9 157.1 207.0
------- ------- -------
North America 5,188.7 4,970.4 4,855.2
Europe 1,746.4 1,459.8 1,135.2
Central and South America 290.2 273.2 276.7
All other 36.5 20.7 22.1
------- ------- -------
$7,261.8 $6,724.1 $6,289.2
======= ======= =======
<6> Transfers of finished goods between geographic areas are not
significant.
15. LITIGATION
The Company is subject to certain legal proceedings and claims,
including the environmental matters described below, that have arisen
in the ordinary conduct of its business or have been assumed by the
Company when it purchased certain businesses. Although management of
the Company cannot predict the ultimate outcome of these matters with
certainty, it believes that their ultimate resolution, including any
amounts it may be required to pay in excess of amounts reserved, will
not have a material effect on the Company's consolidated financial
statements.
As of December 31, 2000, the Company was involved in various
matters concerning federal and state environmental laws and
regulations, including matters in which the Company has been
identified by the U.S. Environmental Protection Agency and certain
state environmental agencies as a potentially responsible party
("PRP") at contaminated sites under the Federal Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA") and
equivalent state laws.
In assessing its environmental response costs, the Company has
considered several factors, including: the extent of the Company's
volumetric contribution at each site relative to that of other PRPs;
the kind of waste; the terms of existing cost sharing and other
applicable agreements; the financial ability of other PRPs to share in
the payment of requisite costs; the Company's prior experience with
similar sites; environmental studies and cost estimates available to
the Company; the effects of inflation on cost estimates; and the
extent to which the Company's and other parties' status as PRPs is
disputed.
Based on information available to it, the Company's estimate of
environmental response costs associated with these matters as of
December 31, 2000 ranged between $15.7 million and $21.6 million. As
of December 31, 2000, the Company had a reserve equal to $20.0 million
for such environmental response costs in the aggregate. No insurance
recovery was taken into account in determining the Company's cost
estimates or reserve, nor do the Company's cost estimates or reserve
reflect any discounting for present value purposes, except with
respect to two long term (30 years) operation and maintenance CERCLA
matters which are estimated at present value.
Because of the uncertainties associated with environmental
investigations and response activities, the possibility that the
Company could be identified as a PRP at sites identified in the future
that require the incurrence of environmental response costs and the
possibility of additional sites as a result of businesses acquired,
actual costs to be incurred by the Company may vary from the Company's
estimates.
Subject to difficulties in estimating future environmental
response costs, the Company does not expect that any amount it may be
required to pay in connection with environmental matters in excess of
amounts reserved will have a material adverse effect on its
consolidated financial statements.
Eight complaints were filed against the Company and certain of
its officers and directors in the U.S. District Court for the Northern
District of Illinois on behalf of a purported class consisting of
persons who purchased Common Stock of the Company, Newell Co. or
Rubbermaid Incorporated during the period from October 21, 1998
through September 3, 1999 or exchanged shares of Rubbermaid Common
Stock for the Company's Common Stock as part of the Newell Rubbermaid
merger. The complaints alleged that during this time period the
defendants violated federal securities laws by issuing false and
misleading statements concerning the Company's financial condition and
results of operations. After the cases were consolidated before a
single judge, the court appointed lead plaintiffs for the uncertified
class. Plaintiffs then filed a consolidated amended class action
complaint consisting of six counts asserting claims under Sections 11,
12(a)(2) and 15 of the Securities Act and Sections 10(b) and 20(a) of
the Securities Exchange Act. All defendants moved to dismiss that
amended complaint. On October 2, 2000, the court dismissed the amended
complaint for failure to state a claim upon which relief may be
granted and on November 14, 2000 rejected the plaintiffs' motion for
reconsideration of the prior dismissal. The court dismissed the
action, and the time for filing an appeal expired with no appeal
having been filed. The case is therefore terminated in favor of the
Company and the other defendants.
NEWELL RUBBERMAID INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding of
the Company's consolidated results of operations and financial
condition. The discussion should be read in conjunction with the
consolidated financial statements and notes thereto.
RESULTS OF OPERATIONS
The following table sets forth for the period indicated items
from the Consolidated Statements of Income as a percentage of net
sales:
Year Ended December 31, 2000 1999 1998
----------------------- ---- ---- ----
Net sales 100.0% 100.0% 100.0%
Cost of products sold 73.6 74.1 71.9
----- ----- -----
GROSS INCOME 26.4 25.9 28.1
Selling, general and
administrative expenses 13.0 16.4 14.9
Restructuring costs 0.7 3.7 1.8
Goodwill amortization
and other 0.7 0.7 0.9
----- ----- -----
OPERATING INCOME 12.0 5.1 10.5
Nonoperating
expenses (income):
Interest expense 1.9 1.5 1.5
Other, net 0.2 0.2 (3.6)
----- ----- -----
NET NONOPERATING
EXPENSES (INCOME) 2.1 1.7 (2.1)
----- ----- -----
INCOME BEFORE
INCOME TAXES 9.9 3.4 12.6
Income taxes 3.8 2.0 5.2
----- ----- -----
NET INCOME 6.1% 1.4% 7.4%
===== ===== =====
2000 vs. 1999
-------------
Net sales for 2000 were $6,934.7 million, representing an
increase of $222.9 million or 3.3% from $6,711.8 million in 1999. Net
sales for each of the Company's segments (and the primary reasons for
the year-to-year changes) were as follows, in millions:
YEAR ENDED DECEMBER 31, 2000 1999 % Change
----------------------- ---- ---- --------
Storage, Organization & Cleaning $1,833.0 $1,899.5 (3.5)%
Home Decor 1,392.4 1,370.4 1.6%
Office Products<1> 1,288.0 1,218.0 5.7%
Infant/Juvenile Care & Play<2> 921.0 834.7 10.3%
Food Preparation, Cooking & Serving 774.4 782.2 (0.1)%
Hardware & Tools<3> 725.9 607.0 19.6%
------- -------
$6,934.7 $6,711.8 3.3%
======= =======
PRIMARY REASONS FOR CHANGES:
<1> 4% internal growth* plus sales from the Reynolds acquisition+
(October 1999).
<2> Internal growth.
<3> 6% internal growth plus sales from the McKechnie acquisition
(October 1999).
* Internal growth is defined by the Company as growth from its core
businesses, which include continuing businesses owned more than
two years and minor acquisitions.
+ Acquisitions and divestitures are described in note 2 to the
consolidated financial statements.
Gross income as a percent of net sales in 2000 was 26.4% or
$1,831.6 million versus 25.9% or $1,741.2 million in 1999. Excluding
costs associated with the Rubbermaid merger and certain realignment
and other charges of $2.4 million and $106.2 million in 2000 and 1999,
respectively, gross income as a percent of net sales was 26.4% in 2000
versus 27.5% in 1999. This decrease in gross margins in 2000 was
primarily attributable to lower than anticipated sales volume and
higher than expected material costs.
Selling, general and administrative expenses ("SG&A") in 2000
were 13.0% of net sales or $899.4 million versus 16.4% or $1,104.5 in
1999. Excluding costs associated with the Rubbermaid merger and
certain realignment and other charges of $8.7 million and $178.8
million in 2000 and 1999, respectively, SG&A as a percent of net sales
was 12.8% or $890.7 million in 2000 versus 13.8% or $925.6 million in
1999. The decrease in SG&A expenses is primarily the result of
integration cost savings at Rubbermaid Home Products, Rubbermaid
Europe and Little Tikes and tight spending control throughout the rest
of the Company's core businesses.
The Company recorded restructuring charges of $48.6 million in
2000 and $246.4 million in 1999. See note 3 to the consolidated
financial statements for a review of the charges.
Goodwill amortization and other as a percentage of net sales was
0.7% in 2000 and 1999.
Operating income in 2000 was 12.0% of net sales or $831.7 million
versus 5.1% of net sales or $343.6 million in 1999. Excluding
restructuring and other charges of $59.7 million in 2000 and $531.4
million in 1999, operating income was $891.4 or 12.9% of net sales in
2000 versus $875.0 million or 13.0% of net sales in 1999.
Other nonoperating expenses in 2000 were 2.1% of net sales or
$146.2 million versus 1.7% or $112.7 million in 1999. The increased
expenses in 2000 are a result of the Company's increased level of debt
and higher interest rates.
For 2000 and 1999 the effective tax rates were 38.5% and 58.7%,
respectively. The higher rate in 1999 was primarily due to
nondeductible transaction costs associated with the Rubbermaid merger.
See note 12 to the consolidated financial statements for an
explanation of the effective tax rate.
Net income for 2000 was $421.6 million, representing an increase
of $326.2 million from 1999. Basic and diluted earnings per share in
2000 increased to $1.57 versus $0.34 in 1999. Excluding 2000 pre-tax
charges of $59.7 million ($36.7 million after taxes) as discussed
above, net income in 2000 was $458.3 million. Excluding 1999 pre-tax
charges of $531.4 million ($369.6 million after taxes), net income in
1999 was $465.0 million. Diluted earnings per share, calculated on the
same basis, increased 3.6% to $1.71 in 2000 versus $1.65 in 1999. The
decrease in net income for 2000 was primarily due to increased raw
material costs and softer than expected sales volume, offset partially
by Rubbermaid integration cost savings, tight spending control at
other core businesses and internal growth. Diluted earnings per share
increased in 2000 versus 1999 as a result of the lower share base due
to the stock repurchase program.
1999 vs. 1998
-------------
Net sales for 1999 were $6,711.8 million, representing an
increase of $218.6 million or 3.4% from $6,493.2 million in 1998. Net
sales for each of the Company's segments (and the primary reasons for
the year-to-year changes) were as follows, in millions:
YEAR ENDED DECEMBER 31, 1999 1998 % Change
----------------------- ---- ---- --------
Storage, Organization & Cleaning<1> $1,899.5 $2,047.0 (7.2)%
Home Decor<2> 1,370.4 1,242.9 10.3%
Office Products<3> 1,218.0 1,078.6 12.9%
Infant/Juvenile Care & Play<4> 834.7 751.3 11.1%
Food Preparation, Cooking & Serving 782.2 790.0 (1.0)%
Hardware & Tools 607.0 583.4 4.0%
-------- --------
$6,711.8 $6,493.2 3.4%
PRIMARY REASONS FOR CHANGES:
<1> 1998 Decora (April 1998) and Newell Plastics (September 1998)
divestitures and weak sales performance at Rubbermaid Home
Products, offset partially by strong sales at Rubbermaid
Commercial Products.
<2> Swish (March 1998), Gardinia (August 1998) and Ateliers (April
1999) acquisitions.
<3> 7% Internal growth and Rotring (September 1998) and Reynolds
(October 1999) acquisitions offset partially by Stuart Hall
(August 1998) divestiture.
<4> Century (May 1998) acquisition.
Gross income as a percent of net sales in 1999 was 25.9% or
$1,741.2 million versus 28.1% or $1,822.8 million in 1998. Excluding
costs associated with the Rubbermaid and Calphalon mergers and certain
realignment and other charges of $106.2 million and $27.9 million in
1999 and 1998, respectively, gross income as a percent of net sales
was 27.5% in 1999 versus 28.5% in 1998. This decrease in gross margins
in 1999 was primarily attributable to promotional commitments made
prior to the Rubbermaid merger, which affected first half 1999 results
at Rubbermaid Home Products, higher than expected resin and other
material costs, which affected second half 1999 results, and operating
inefficiencies at certain glassware and window treatments facilities.
Selling, general and administrative expenses ("SG&A") in 1999
were 16.4% of net sales or $1,104.5 million versus 14.9% or $967.9
million in 1998. Excluding costs associated with the Rubbermaid and
Calphalon mergers and certain realignment and other charges of $178.8
million and $23.6 million in 1999 and 1998, respectively, SG&A as a
percent of net sales was 13.8% or $925.7 million versus 14.5% or
$944.3 million in 1998. This decrease in SG&A expenses is primarily
due to SG&A savings as a result of integrating Rubbermaid into Newell.
The Company recorded restructuring charges of $246.4 million in
1999 and $115.2 million in 1998. See note 3 to the consolidated
financial statements for a review of the charges.
Goodwill amortization and other as a percentage of net sales was
0.7% in 1999 and 0.9% in 1998. Excluding charges of $15.0 million in
1998 (which included write-offs of intangible assets), goodwill
amortization and other was 0.7% of net sales.
Operating income in 1999 was 5.1% of net sales or $343.6 million
versus 10.5% or $680.3 million in 1998. Excluding charges as discussed
above of $531.4 million in 1999 and $181.7 million 1998, operating
income was $875.0 million or 13.0% in 1999 versus $862.0 million or
13.3% in 1998.
Other nonoperating expenses in 1999 were 1.7% of net sales or
$112.7 million versus other nonoperating income of 2.1% or $136.6
million in 1998. The $249.3 million difference was due primarily to a
1998 net pre-tax gain of $191.5 million on the sale of the Company's
stake in The Black & Decker Corporation and 1998 net pre-tax gains of
$59.8 million on the divestitures of Stuart Hall, Newell Plastics and
Decora. This was offset partially by $3.7 million of Rubbermaid merger
transaction costs in 1998.
For 1999 and 1998, the effective tax rates were 58.7% and 41.0%,
respectively. The increase in 1999 was primarily due to nondeductible
transaction costs related to the Rubbermaid merger. See note 12 to the
consolidated financial statements for an explanation of the effective
tax rate.
Net income for 1999 was $95.4 million, representing a decrease of
$386.4 million or 80.2% from 1998. Basic earnings per share in 1999
decreased 80.2% to $0.34 versus $1.72 in 1998; diluted earnings per
share in 1999 decreased 80.0% to $0.34 versus $1.70 in 1998. Excluding
1999 pre-tax charges of $531.4 million ($369.6 million after taxes) as
discussed above, net income in 1999 was $465.0 million. Excluding 1998
pre-tax charges of $185.4 million ($119.4 million after taxes), the
net pre-tax gain on the sale of Black & Decker Common Stock of $191.5
million ($116.8 million after taxes) and net pre-tax gains of $59.8
million ($15.1 million after taxes) on the sales of businesses as
discussed above, net income in 1998 was $469.3 million.
LIQUIDITY AND CAPITAL RESOURCES
Sources
-------
The Company's primary sources of liquidity and capital resources
include cash provided from operations and use of available borrowing
facilities.
Cash provided by operating activities in 2000 was $623.5 million,
representing an increase of $69.5 million from $554.0 million for
1999.
The Company has short-term foreign and domestic committed and
uncommitted lines of credit with various banks which are available for
short-term financing. Borrowings under the Company's uncommitted lines
of credit are subject to discretion of the lender. The Company's lines
of credit do not have a material impact on the Company's liquidity.
Borrowings under the Company's lines of credit at December 31, 2000
totaled $23.5 million.
The Company has a revolving credit agreement of $1,300.0 million
that will terminate in August 2002. During 2000, the Company entered
into a new 364-day revolving credit agreement in the amount of $700.0
million. This revolving credit agreement will terminate in October
2001. At December 31, 2000, there were no borrowings under these
revolving credit agreements.
In lieu of borrowings under the Company's revolving credit
agreements, the Company may issue up to $2,000.0 million of commercial
paper. The Company's revolving credit agreements provide the committed
backup liquidity required to issue commercial paper. Accordingly,
commercial paper may only be issued up to the amount available for
borrowing under the Company's revolving credit agreements. At December
31, 2000, $1,503.7 million (principal amount) of commercial paper was
outstanding. Of this amount, $1,300.0 million is classified as
long-term debt and the remaining $203.7 million is classified as
current portion of long-term debt.
The revolving credit agreements permit the Company to borrow
funds on a variety of interest rate terms. These agreements require,
among other things, that the Company maintain a certain Total
Indebtedness to Total Capital Ratio, as defined in the agreements. As
of December 31, 2000, the Company was in compliance with these
agreements.
The Company had outstanding at December 31, 2000 a total of
$1,012.5 million (principal amount) of medium-term notes. The
maturities on these notes range from 3 to 30 years at an average
interest rate of 6.34%.
A universal shelf registration statement became effective in July
1999. As of December 31, 2000, $449.5 million of Company debt and
equity securities may be issued under the shelf.
Uses
----
The Company's primary uses of liquidity and capital resources
include acquisitions, dividend payments and capital expenditures.
In 2000, the Company acquired Mersch, Brio and Paper Mate/Parker
and made other minor acquisitions for cash purchase prices totaling
$582.7 million. In 1999, the Company acquired Ateliers, Reynolds,
McKechnie, Ceanothe and made other minor acquisitions for cash
purchase prices totaling $400.1 million. In 1998, the Company acquired
Curver, Swish, Century, Panex, Gardinia and Rotring and made other
minor acquisitions for cash purchase prices totaling $615.7 million.
Capital expenditures were $316.6 million, $200.1 million and
$318.7 million in 2000, 1999 and 1998, respectively. Aggregate
dividends paid during 2000, 1999 and 1998 were $225.1 million, $225.8
million and $212.5 million, respectively.
On February 7, 2000, the Company announced a stock repurchase
program of up to $500.0 million of the Company's outstanding Common
Stock. During 2000, the Company repurchased 15.5 million shares of its
Common Stock at an average price of $26 per share, for a total cash
price of $403.0 million under the program. The repurchase program
remained in effect until December 31, 2000 and was financed through
the use of working capital and commercial paper.
Retained earnings increased in 2000 by $196.3 million and
decreased in 1999 by $130.5 million. The difference between 2000 and
1999 was primarily due to restructuring costs and other pre-tax
charges relating to recent acquisitions of $59.7 million ($36.7
million after tax) in 2000 versus $531.4 million ($369.6 million after
tax) in 1999. The dividend payout ratio to common stockholders in
2000, 1999 and 1998 was 54%, 235%, and 45%, respectively (represents
the percentage of diluted earnings per share paid in cash to
stockholders).
Working capital at December 31, 2000 was $1,345.8 million
compared to $1,108.7 million at December 31, 1999 and $1,278.8 million
at December 31, 1998. The current ratio at December 31, 2000 was
1.87:1 compared to 1.68:1 at December 31, 1999 and 2.09:1 at December
31, 1998.
Total debt to total capitalization (total debt is net of cash and
cash equivalents, and total capitalization includes total debt,
company-obligated mandatorily redeemable convertible preferred
securities of a subsidiary trust and stockholders' equity) was .46:1
at December 31, 2000, .33:1 at December 31, 1999 and .30:1 at December
31, 1998.
The Company believes that cash provided from operations and
available borrowing facilities will continue to provide adequate
support for the cash needs of existing businesses; however, certain
events, such as significant acquisitions, could require additional
external financing.
LEGAL AND ENVIRONMENTAL MATTERS
The Company is subject to certain legal proceedings and claims,
including various environmental matters, that have arisen in the
ordinary conduct of its business or have been assumed by the Company
when it purchased certain businesses. Such matters are more fully
described in note 15 to the Company's consolidated financial
statements. Although management of the Company cannot predict the
ultimate outcome of these matters with certainty, it believes that
their ultimate resolution, including any amounts it may have to pay in
excess of amounts reserved, will not have a material effect on the
Company's consolidated financial statements.
INTERNATIONAL OPERATIONS
The Company's non-U.S. business is growing at a faster pace than
its business in the United States. This growth outside the U.S. has
been fueled by recent international acquisitions, primarily in Europe.
For the year ended December 31, 2000, the Company's non-U. S. business
accounted for approximately 25% of net sales (see note 14 to the
consolidated financial statements). Growth of both U.S. and non-U.S.
businesses is shown below:
YEAR ENDED DECEMBER 31, 2000 1999 % Change
----------------------- ---- ---- --------
(In millions)
Net sales:
- U.S. $5,191.5 $5,135.4 1.1%
- Non-U.S. 1,743.2 1,576.4 10.6
------- -------
$6,934.7 $6,711.8 3.3%
======= =======
YEAR ENDED DECEMBER 31, 1999 1998 % Change
---------------------- ---- ---- --------
(In millions)
Net sales:
- U.S. $5,135.4 $5,081.5 1.1%
- Non-U.S. 1,576.4 1,411.7 11.7
------- -------
$6,711.8 $6,493.2 3.4%
======= =======
MARKET RISK
The Company's market risk is impacted by changes in interest
rates, foreign currency exchange rates and certain commodity prices.
Pursuant to the Company's policies, natural hedging techniques and
derivative financial instruments may be utilized to reduce the impact
of adverse changes in market prices. The Company does not hold or
issue derivative instruments for trading purposes.
The Company's primary market risk is interest rate exposure,
primarily in the United States. The Company manages interest rate
exposure through its conservative debt ratio target and its mix of
fixed and floating rate debt. Interest rate exposure was reduced
significantly in 1997 from the issuance of $500.0 million 5.25%
Company-Obligated Mandatorily Redeemable Convertible Preferred
Securities of a Subsidiary Trust, the proceeds of which reduced
commercial paper. Interest rate swaps may be used to adjust interest
rate exposures when appropriate based on market conditions, and, for
qualifying hedges, the interest differential of swaps is included in
interest expense.
The Company's foreign exchange risk management policy emphasizes
hedging anticipated intercompany and third-party commercial
transaction exposures of one year duration or less. The Company
focuses on natural hedging techniques of the following form:
* offsetting or netting of like foreign currency cash flows,
* structuring foreign subsidiary balance sheets with
appropriate levels of debt to reduce subsidiary net
investments and subsidiary cash flows subject to conversion
risk,
* converting excess foreign currency deposits into U.S.
dollars or the relevant functional currency and
* avoidance of risk by denominating contracts in the
appropriate functional currency.
In addition, the Company utilizes forward contracts and purchased
options to hedge commercial and intercompany transactions. Gains and
losses related to qualifying hedges of commercial and intercompany
transactions are deferred and included in the basis of the underlying
transactions. Derivatives used to hedge intercompany loans are marked
to market with the corresponding gains or losses included in the
consolidated statements of income.
Due to the diversity of its product lines, the Company does not
have material sensitivity to any one commodity. The Company manages
commodity price exposures primarily through the duration and terms of
its vendor contracts.
The amounts shown below represent the estimated potential
economic loss that the Company could incur from adverse changes in
either interest rates or foreign exchange rates using the
value-at-risk estimation model. The value-at-risk model uses
historical foreign exchange rates and interest rates to estimate the
volatility and correlation of these rates in future periods. It
estimates a loss in fair market value using statistical modeling
techniques and including substantially all market risk exposures
(specifically excluding equity-method investments). The fair value
losses shown in the table below have no impact on results of
operations or financial condition as they represent economic not
financial losses.
Time Confidence
Amount Period Level
------ ------ ----------
(In millions)
Interest rates $7.4 1 day 95%
Foreign exchange $1.9 1 day 95%
The 95% confidence interval signifies the Company's degree of
confidence that actual losses would not exceed the estimated losses
shown above. The amounts shown here disregard the possibility that
interest rates and foreign currency exchange rates could move in the
Company's favor. The value-at-risk model assumes that all movements in
these rates will be adverse. Actual experience has shown that gains
and losses tend to offset each other over time, and it is highly
unlikely that the Company could experience losses such as these over
an extended period of time. These amounts should not be considered
projections of future losses, since actual results may differ
significantly depending upon activity in the global financial markets.
EURO CURRENCY CONVERSION
On January 1, 1999, the "Euro" became the common legal currency
for 11 of the 15 member countries of the European Union. On that date,
the participating countries fixed conversion rates between their
existing sovereign currencies ("legacy currencies") and the Euro. On
January 4, 1999, the Euro began trading on currency exchanges and
became available for non-cash transactions, if the parties elected to
use it. The legacy currencies will remain legal tender through
December 31, 2001. Beginning January 1, 2002, participating countries
will introduce Euro-denominated bills and coins, and effective July 1,
2002, legacy currencies will no longer be legal tender.
After the dual currency phase, all businesses in participating
countries must conduct all transactions in the Euro and must convert
their financial records and reports to be Euro-based. The Company has
commenced an internal analysis of the Euro conversion process to
prepare its information technology systems for the conversion and
analyze related risks and issues, such as the benefit of the decreased
exchange rate risk in cross-border transactions involving
participating countries and the impact of increased price transparency
on cross-border competition in these countries.
The Company believes that the Euro conversion process will not
have a material impact on the Company's businesses or financial
condition on a consolidated basis.
FORWARD-LOOKING STATEMENTS
Forward-looking statements in this Report are made in reliance
upon the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements may relate to, but
are not limited to, such matters as sales, income, earnings per share,
return on equity, capital expenditures, dividends, capital structure,
free cash flow, debt to capitalization ratios, interest rates,
internal growth rates, the Euro conversion plan and related risks,
legal proceedings and claims (including environmental matters), future
economic performance, management's plans, goals and objectives for
future operations and growth or the assumptions relating to any of the
forward-looking information. The Company cautions that forward-looking
statements are not guarantees since there are inherent difficulties in
predicting future results. Actual results could differ materially from
those expressed or implied in the forward-looking statements. Factors
that could cause actual results to differ include, but are not limited
to, those matters set forth in this Report and Exhibit 99 to this
Report.
EXHIBIT 99.2
------------
NEWELL RUBBERMAID INC. SAFE HARBOR STATEMENT
---------------------------------------------
The Company has made statements in its Current Report on Form 8-K
that constitute forward-looking statements, as defined by the Private
Securities Litigation Reform Act of 1995. These statements are subject
to risks and uncertainties. The statements relate to, and other
forward-looking statements that may be made by the Company may relate
to, information or assumptions about sales, income, earnings per
share, return on equity, return on invested capital, capital
expenditures, working capital, dividends, capital structure, free cash
flow, debt to capitalization ratios, interest rates, internal growth
rates, Euro conversion plans and related risks, pending legal
proceedings and claims (including environmental matters), future
economic performance, operating income improvements, synergies,
management's plans, goals and objectives for future operations and
growth. These statements generally are accompanied by words such as
"intend," "anticipate," "believe," "estimate," "project," "expect,"
"should" or similar statements. You should understand that
forward-looking statements are not guarantees since there are inherent
difficulties in predicting future results. Actual results could
differ materially from those expressed or implied in the
forward-looking statements. The factors that are discussed below, as
well as the matters that will be set forth generally in the Company s
Annual Report on Form 10-K for the year ended December 31, 2000, and
the documents that are incorporated by reference therein could cause
actual results to differ. Some of these factors are described as
criteria for success. Our failure to achieve, or limited success in
achieving, these objectives could result in actual results differing
materially from those expressed or implied in the forward-looking
statements. In addition, there can be no assurance that we have
correctly identified and assessed all of the factors affecting the
Company or that the publicly available and other information we
receive with respect to these factors is complete or correct.
Retail Economy
--------------
Our business depends on the strength of the retail economies in
various parts of the world, primarily in North America and to a lesser
extent Europe, Central and South America and Asia.
These retail economies are affected primarily by such factors as
consumer demand and the condition of the consumer products retail
industry. In recent years, the consumer products retail industry in
the U.S. and, increasingly, elsewhere has been characterized by
intense competition and consolidation among both product suppliers and
retailers.
Nature of the Marketplace
-------------------------
We compete with numerous other manufacturers and distributors of
consumer products, many of which are large and well-established. Our
principal customers are large mass merchandisers, such as discount
stores, home centers, warehouse clubs and office superstores. The
rapid growth of these large mass merchandisers, together with changes
in consumer shopping patterns, have contributed to a significant
consolidation of the consumer products retail industry and the
formation of dominant multi-category retailers, many of which have
strong bargaining power with suppliers. This environment
significantly limits our ability to recover cost increases through
selling prices. Other trends among retailers are to foster high
levels of competition among suppliers, to demand that manufacturers
supply innovative new products and to require suppliers to maintain or
reduce product prices and deliver products with shorter lead times.
Another trend, in the absence of a strong new product development
effort or strong end-user brands, is for the retailer to import
generic products directly from foreign sources.
The combination of these market influences has created an
intensely competitive environment in which our principal customers
continuously evaluate which product suppliers to use, resulting in
pricing pressures and the need for strong end-user brands, the ongoing
introduction of innovative new products and continuing improvements in
customer service.
New Product Development
-----------------------
Our long-term success in this competitive retail environment
depends on our consistent ability to develop innovative new products
that create consumer demand for our products. Although many of our
businesses have had notable success in developing new products, we
need to continuously improve our new product development capability.
There are numerous uncertainties inherent in successfully developing
and introducing innovative new products on a consistent basis.
End-User Brands
---------------
Our competitive success also depends increasingly on our ability
to develop, maintain and strengthen our end-user brands so that our
retailer customers will need our products to meet consumer demand. We
will need to devote more marketing resources to this objective on a
cost-effective basis.
Cost Control
------------
Our success also depends on our ability to control and reduce our
costs, while maintaining consistently high customer service levels and
investing in new product development and in marketing our end-user
brands. Our objective is to become our retailer customers' low-cost
provider and global supplier of choice. To do this, we will need to
continuously improve our manufacturing efficiencies and develop
alternative sources of supply on a world-wide basis.
Acquisition Integration
-----------------------
The acquisition of companies that sell name brand, staple
consumer product lines to volume purchasers has historically been one
of the foundations of our growth strategy. Over time, our ability to
continue to make sufficient strategic acquisitions at reasonable
prices and to integrate the acquired businesses successfully,
obtaining anticipated cost savings and operating income improvements
within a reasonable period of time, will be important factors in our
future growth. Having completed substantially the integration of
Rubbermaid Incorporated, we now need to complete the integration of
the Paper Mate/Parker businesses, which we acquired at the end of
2000.
Foreign Operations
------------------
Foreign operations, which include manufacturing and/or sourcing
in many countries in Europe, Asia, Central and South American and
Canada, are increasingly important to our business. Foreign
operations can be affected by factors such as currency devaluation,
other currency fluctuations and the Euro currency conversion, tariffs,
nationalization, exchange controls, interest rates, limitations on
foreign investment in local business and other political, economic and
regulatory risks and difficulties.
